{"ATO_ID_Number": "ATO ID 2010/115", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Mining withholding tax: withholding from mining payment - GST inclusive basis", "Issue": "Is an entity required to calculate the amount to be withheld from the payment on a goods and services tax (GST) inclusive basis where the entity is required to withhold an amount from a mining payment in accordance with section 12-320 of Schedule 1 to the Taxation Administration Act 1953 (TAA), and the payment is given as consideration for a taxable supply for GST purposes?", "Decision": "Yes. The amount to be withheld from the mining payment in accordance with section 12-320 of Schedule 1 to the TAA should be calculated on a GST inclusive basis.", "Facts": "A mining company made payments to an Aboriginal Land Council (ALC) under an agreement in relation to the use of the aboriginal land for mining and exploration. The payments under the agreement are mining payments within the meaning of the term in paragraph 128U(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936). The ALC is a statutory authority formed under section 21 of the Aboriginal Land Rights (Northern Territory) Act 1976 and is exempt from all forms of taxation except fringe benefits tax and GST. The ALC makes a taxable supply to the mining company for the use of the land in accordance with the A New Tax System (Goods and Services Tax) Act 1999 . The mining payments are consideration for this taxable supply. The agreement between the mining company and the ALC does not contain a clause that specifically refers to GST in relation to these payments. The mining company calculates the mining withholding tax attributable to the payment and remits this to the Tax Office. The mining company wishes to know the appropriate basis on which to calculate the amount to be withheld from the mining payment.", "Reasons_for_Decision": "Summary: An entity is required to withhold an amount from a mining payment that it makes to another entity: subsection 12-320(1) of Schedule 1 to the TAA. The amount to be withheld from the mining payment is 4% of the amount of the payment: see regulation 43 of the Taxation Administration Regulations 1976. The amount withheld under section 12-320 of Schedule 1 to the TAA is credited against the liability for income tax imposed under subsection 128V(1) of the ITAA 1936. Mining withholding tax is defined as income tax payable under section 128V of the ITAA 1936. Mining payment is defined in subsection 128U(1) of the ITAA 1936. There is no provision which specifies whether this amount is GST inclusive or exclusive. Payment is defined in The Macquarie Dictionary as '\"that which is paid\" compensation; recompense'. In White v. Elmdene Estates Ltd [1960] 1 QB 1 at 16 it was stated that: the word 'payment' in itself is one which, in an appropriate context, may cover many ways of discharging obligations. In the context of a contract, a 'payment' discharges one party's contractual obligations to the other. Payment is consideration for the thing that is provided by the other party. Consideration for goods and services comprises everything that must be paid to the deliverer, regardless of its description, before the goods or services will be delivered. On this basis, the mining payment in this context would include the entire amount of the payment made to the ALC including the GST component. In other words, the mining withholding tax would be calculated on the payment inclusive of GST.", "Date_of_Decision": "5 May 2010", "Year_of_Income": "Year ended 2009-10 and later income years", "Legislative_References": "Aboriginal Land Rights (Northern Territory) Act 1976 section 21", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/9 | Taxation Ruling TR 2006/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST Mining withholding tax PAYG withholding", "Case_References": "White v Elmdene Estates Ltd [1960] 1 QB 1 [1959] 2 All ER 605", "Other_References": "The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010115", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2002/9 Taxation Ruling TR 2006/12 | Keywords GST Mining withholding tax PAYG withholding"}
{"ATO_ID_Number": "ATO ID 2003/872", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reconsideration of a reviewable decision", "Issue": "Can the Regulator make a decision with respect to a 'reviewable decision' under section 344 of the Superannuation Industry (Supervision) Act 1993 (SISA) once the sixty-day period allowed to review the decision by subsection 344(5) of the SISA has lapsed?", "Decision": "No, the Regulator cannot make a decision with respect to a 'reviewable decision' under section 344 of the SISA once the sixty day period allowed to review the decision by subsection 344(5) of the SISA has lapsed.", "Facts": "The trustee requested that the Regulator reconsider a reviewable decision pursuant to subsection 344(1) of the SISA. The Regulator did not respond to the request for a review within the sixty-day period allowed by subsection 344(5) of the SISA.", "Reasons_for_Decision": "Summary: Subsection 344(1) of the SISA allows a person who is dissatisfied with a decision of the Regulator to request a review of the decision. Subsection 344(1) of the SISA states: 'A person who is affected by a reviewable decision of the Regulator may, if dissatisfied with the decision, request the Regulator to reconsider the decision.' For the purposes of subsection 344(1) of the SISA the Regulator includes the Commissioner of Taxation. The term 'reviewable decision' is defined in subsection 10(1) of the SISA. Subsection 344(5) of the SISA provides that where the Regulator does not confirm, vary or revoke a decision within sixty days of receiving a request for a review, the Regulator is taken to have confirmed the original decision. The Regulator has no power to extend the period for reviewing a decision beyond the sixty-day period. Under subsection 344(8) of the SISA, a person affected by the Regulator's decision, including a decision arising as a result of the application of subsection 344(5) of the SISA, may apply to the Administrative Review Tribunal (ART) for a review of that decision. The time for applying to the ART commences on the date the decision is made and ends on the twenty-eighth day after the date of the decision as per subsection 344(9) of the SISA (now repealed). Former subsection 344(9) has been replaced by section 18 of the Administrative Review Tribunal Act 2024 and rule 5 of the Administrative Review Tribunal Rules 2024 .", "Date_of_Decision": "22 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 Subsection 10(1) Section 344 Subsection 344(1) Subsection 344(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "SMSF trustee", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003872", "Unmatched_Content": "Corrected typing error and changed AAT to ART and updating repealed legislation | Corrected typing error in final paragraph."}
{"ATO_ID_Number": "ATO ID 2011/86", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PAYG Withholding: penalty for failure to withhold - liability to general interest charge", "Issue": "Does the date for calculating an entity's liability for general interest charge (GIC) in relation to a failure to withhold penalty imposed prior to 22 June 2006 commence from the time set under former subsection 16-30(2) of Schedule 1 to the Taxation Administration Act 1953 (TAA)?", "Decision": "Yes. The entity's liability to GIC commences from the time set by former subsection 16-30(2) of Schedule 1 to the TAA, as this provision has continuing effect for penalties imposed prior to 22 June 2006.", "Facts": "An entity made a payment to a non-resident company after 1 July 2000 but before 22 June 2006. The payment was in the nature of a royalty and was subject to pay as you go withholding under section 12-280 of Schedule 1 to the TAA. The payer did not withhold an amount from the royalty it paid to the non-resident company. After 22 June 2006, the ATO commenced an audit of the payer's affairs. The Commissioner identified that the payer failed to withhold from the royalty payment as required and notified the payer of their liability for a penalty under section 16-30 of Schedule 1 to the TAA.", "Reasons_for_Decision": "Summary: Under former subsection 16-30(1) of Schedule 1 to the TAA, an entity that failed to withhold an amount as required by Division 12 of Schedule 1 to the TAA is liable to pay to the Commissioner a penalty equal to that amount. Under former subsection 16-30(2) of Schedule 1 to the TAA the penalty amount was due at the time when the entity would have had to pay to the Commissioner the amount it should have withheld. Under former section 16-50 of Schedule 1 to the TAA, if the penalty under former subsection 16-30(1) of Schedule 1 to the TAA remains unpaid after it is due, the entity is liable to pay the GIC on the unpaid amount for each day in the period that: Amendments were made to Division 16 of Schedule 1 to the TAA by the Tax Laws Amendment (2006 Measures No.2) Act 2006 (TLAA 2006) with effect from 22 June 2006. These amendments repealed section 16-50 and section 16-30 of Schedule 1 to the TAA, and substituted with the current section 16-30. In addition, the TLAA 2006 extended the application of the machinery provisions for administrative penalties in Subdivision 298-A of Schedule 1 to the TAA to penalties imposed under Division 16 of Schedule 1 to the TAA. The amendments mean that, with effect from 22 June 2006, section 298-15 of Schedule 1 to the TAA sets the due date for payment of the penalty as the date specified in the notice required to be given to the entity under section 298-10 of Schedule 1 to the TAA. This date must be at least 14 days after the notice is given to the entity. The effect of the amendments is that both former subsection 16-30(2) and Subdivision 298-A of Schedule 1 to the TAA can apply where the penalty is imposed before 22 June 2006 and the Commissioner notifies the entity of the liability to penalty after 22 June 2006. However, as the payment in question was made before 22 June 2006, penalty is imposed under former subsection 16-30(1) of Schedule 1 to the TAA. Consequently, former subsection 16-30(2) of Schedule 1 to the TAA had already set the due date for the penalty. We therefore consider that the due date set by former subsection 16-30(2) of Schedule 1 to the TAA is not overridden by the later provision (section 298-15 of Schedule 1 to the TAA) which sets a different due date. The entity's liability to pay the GIC can arise under both former section 16-50 of Schedule 1 to the TAA and section 298-25 of Schedule 1 to the TAA. Under both provisions, the liability to GIC commences from the day the penalty was due to be paid. As such, under either provision, the start date for the liability to GIC will be based on the due date set by former subsection 16-30(2) of Schedule 1 to the TAA, which is the time the entity would have had to pay the amount that should have been withheld. This means that an entity's liability to pay GIC on a failure to withhold penalty that is imposed prior to 22 June 2006 commences when the entity would have had to pay the amount that was to be withheld from the payment.", "Date_of_Decision": "4 August 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Tax Laws Amendment (2006 Measures No.2) Act 2006 The Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/65", "Subject_References": "Failure to withhold General interest charge PAYG system PAYG withholding Tax administration", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201186", "Unmatched_Content": "Related ATO Interpretative Decisions | ATO ID 2009/133 has been removed as it has been withdrawn | Keywords Failure to withhold General interest charge PAYG system PAYG withholding Tax administration"}
{"ATO_ID_Number": "ATO ID 2006/176", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and GST returns where company ownership changes from 1 July 2006", "Issue": "Is the entity, a company, required to submit a GST return under subsection 31-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the ownership of the entity changes before the end of the tax period?", "Decision": "No, the entity is not required to submit a GST return under subsection 31-5(1) of the GST Act when the ownership of the entity changes before the end of the tax period. The entity is required to submit one GST return at the end of the tax period covering the whole of the tax period.", "Facts": "The entity is a company that is registered under the Corporations Act 2001 . It is registered for goods and services tax (GST) and lodges its GST returns quarterly. The ownership of the company changed part way through a tax period.", "Reasons_for_Decision": "Summary: Subsection 31-5(1) of the GST Act provides that an entity that is registered or required to be registered, must give to the Commissioner a GST return for each tax period. For GST purposes, subsection 184-1(1) of the GST Act defines 'entity' to include a body corporate and other unincorporated association or body of persons. Section 195-1 of the GST Act defines a company to mean a body corporate or any other unincorporated association or body of persons. The entity is a company that is registered under the Corporations Act. Accordingly, the entity (the company) is an 'entity' for GST purposes. Section 27-5 of the GST Act provides that the tax periods which apply are each period of three months ending on 31 March, 30 June, 30 September or 31 December in each year. As the entity lodges its GST returns quarterly, it must lodge one return for each of the above tax periods. Although the ownership of the entity has changed, the entity remains an 'entity' for GST purposes. The entity does not submit a GST return part way through the tax period when ownership of the entity (the company) changes. Therefore, at the end of the tax period, the entity must submit a GST return under subsection 31-5(1) of the GST Act covering the whole of the tax period.", "Date_of_Decision": "5 July 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 27-5 subsection 31-5(1) subsection 184-1 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST returns, payments & refunds GST returns GST body corporates GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006176", "Unmatched_Content": "Keywords Goods & services tax GST returns, payments & refunds GST returns GST body corporates GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/506", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation obligations of company administrators", "Issue": "Does section 254 of the Income Tax Assessment Act 1936 (ITAA 1936) apply to make an administrator appointed under Part 5.3A of the Corporations Act 2001 (Corporations Act), personally liable for income tax assessed to the company in relation to which they are appointed?", "Decision": "Yes. An administrator is a trustee of the company for the purposes of section 254 of the ITAA 1936. An administrator is personally liable under paragraph 254(1)(e) for the tax payable in respect of income, or profits or gains of a capital nature derived by virtue of that representative capacity. However, the administrator is only liable to the extent of the amount of money that the administrator has retained or should have retained under the authority and requirement to do so in paragraph 254(1)(d) of the ITAA 1936.", "Facts": "An administrator is appointed under the Corporations Act Part 5.3A and income is derived during the company's administration.", "Reasons_for_Decision": "Summary: Section 254 of the ITAA 1936 applies to an entity that is an agent or trustee for the purposes of the ITAA 1936 and 1997. Section 254 contains provisions which describe the duties and obligations of persons who act as the agents or trustees of taxpayers. 'Trustee' is defined in subsection 6(1) of the ITAA 1936 as follows: \"trustee\" in addition to every person appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law, includes: (a) an executor or administrator, guardian, committee, receiver, or liquidator; and (b) every person having or taking upon himself the administration or control of income affected by any express or implied trust, or acting in any fiduciary capacity , or having the possession, control or management of the income of a person under any legal or other disability [emphasis added] Paragraph (b) of the definition of 'trustee' refers to 'every person ... acting in any fiduciary capacity'. In James v. Deputy Federal Commissioner of Taxation (1988) 19 ATR 1752; 88 ATC 4812 the Court held that a scheme manager appointed under a Scheme of arrangement was a trustee for the purposes of section 221P of the ITAA 1936 as he was acting in a fiduciary capacity within paragraph 6(1)(b) of the definition of trustee in the ITAA 1936. An administrator appointed under Part 5.3A of the Corporations Act is also acting in a fiduciary capacity. In exercising the powers given to an administrator under section 437A of the Corporations Act, the administrator does not exercise the powers, nor are the powers given to the administrator, for personal benefit, but for the benefit of the company. The administrator is consequently acting in a fiduciary capacity and is a trustee for the purposes of the ITAA 1936 including section 254. Paragraph (a) of subsection 254(1) of the ITAA 1936 provides that a trustee is answerable as taxpayer 'for the payment of tax' on the income, or any profits or gains of a capital nature, derived by him in his representative capacity. Paragraph (b) of subsection 254(1) provides that a trustee is assessed on that income or those profits or gains 'but in his representative capacity only'. In Fermanis v. Cheshire Holdings Pty Ltd (1989) 20 ATR 1862; 90 ATC 4201 Murray J held at ATR 1865; ATC 4203 in relation to section 254: What is clear about that provision is that it creates of itself no tax liability, which is to be otherwise derived from the provisions of the Act, so that if a tax liability is not otherwise to be drawn from the statute, none will be created by sec 254 . . . It is clear, I think, that the provision operates as a machinery provision to facilitate tax collection in relation to liable trust income when the liability is otherwise imposed than by sec. 254. Therefore, section 254 of the ITAA 1936 does not create a personal responsibility in the administrator for tax assessed to the company. However, it makes the administrator liable to pay tax on income, profits or gains of a capital nature derived by the administrator in their capacity as trustee (for tax purposes) of the company. Paragraph 254(1)(d) of the ITAA 1936, to that end, authorises and requires a trustee to retain out of any money that is received in that representative capacity, an amount sufficient to pay that tax. The administrator is then under paragraph 254(1)(e) of the ITAA 1936 made personally liable for the tax assessed in respect of the income, profits or gains resulting from the administration to the extent that money has been retained or should have been retained. Consequently, the administrator has a personal liability to pay income tax as an administrator for a particular company. However, that liability only extends to money that has come to the administrator in that representative capacity and which the administrator has been authorised and required to retain, and which has been retained or should have been retained for the purpose of paying the income tax.", "Date_of_Decision": "16 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 254 subsection 254(1) paragraph 254(1)(b) paragraph 254(1)(d) paragraph 254(1)(e) section 221P", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/257", "Subject_References": "Administrative law Voluntary administration Liquidation Trustees", "Case_References": "James v. Deputy Federal Commissioner of Taxation (1988) 19 ATR 1752 88 ATC 4812", "Other_References": "", "Business_Line": "PGH", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003506", "Unmatched_Content": "Related ATO Interpretative Decisions | Updated Related ATO Interpretative Decisions to ATO ID 2005/257 | Keywords Administrative law Voluntary administration Liquidation Trustees"}
{"ATO_ID_Number": "ATO ID 2013/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Shipping activities income: exclusion from instalment income", "Issue": "Can ordinary income derived by a taxpayer be excluded from instalment income for the purposes of section 45-120 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) to the extent that it is from shipping activities that relate to a vessel in respect of which the taxpayer expects to be issued with a shipping exempt income certificate under section 8 of the Shipping Reform (Tax Incentives) Act 2012 (SRTIA 2012)?", "Decision": "Yes, ordinary income derived by a taxpayer can be excluded from instalment income for the purposes of section 45-120 of Schedule 1 to the TAA 1953 to the extent that it is from shipping activities that relate to a vessel in respect of which the taxpayer expects to be issued with a shipping exempt income certificate under section 8 of the SRTIA 2012.", "Facts": "The taxpayer is a corporation which derives ordinary income during an income year (relevant income year) from shipping activities that relate to a vessel. The vessel meets the requirements of section 10 of the SRTIA 2012. The taxpayer has been given an instalment rate by the Commissioner through a written notice under section 45-15 of Schedule 1 to the TAA 1953. The taxpayer is liable to pay instalments for instalment quarters during the relevant income year under subsection 45-50(1) of Schedule 1 to the TAA 1953. The taxpayer will apply after the end of the relevant income year for a certificate for the vessel issued under section 8 of the SRTIA 2012. The certificate will set out each day of the relevant income year that the taxpayer met the requirement in paragraph 8(1)(a) of the SRTIA 2012 and the vessel met the requirements of paragraphs 8(1)(b) and 8(1)(c) of the SRTIA 2012. In addition to the above, the certificate will also set out each day of the relevant income year that the taxpayer had management arrangements which satisfied paragraph 8(2)(a) of the SRTIA 2012 and training arrangements which satisfied paragraph 8(2)(b) of the SRTIA 2012. The certificate is a shipping exempt income certificate for the purpose of subsection 9(2) of the SRTIA 2012.", "Reasons_for_Decision": "Summary: Section 45-15 of Schedule 1 to the TAA 1953 establishes a general liability to pay instalments if the Commissioner issues an instalment rate to a taxpayer. Subsection 45-50(1) of Schedule 1 to the TAA 1953 establishes a specific liability to pay an instalment for an instalment quarter in an income year if at the end of that instalment quarter the taxpayer is either a quarterly payer who pays 4 instalments annually on the basis of GDP-adjusted notional tax or a quarterly payer who pays on the basis of instalment income. However, this is subject to subsection 45-50(4) of Schedule 1 to the TAA 1953, which states that such a liability only arises in respect of an instalment quarter if the Commissioner has issued the taxpayer with an instalment rate that has not subsequently been withdrawn before the end of the relevant quarter. The meaning of an instalment quarter is found in section 45-60 to Schedule 1 of the TAA 1953 which sets out four instalment quarters for the income year consisting of three months. The end of each quarter for an entity with an income year ending 30 June is 30 September, 31 December, 31 March and 30 June respectively. Subsection 45-110(1) of Schedule 1 to the TAA 1953 provides that the amount of an instalment for an instalment quarter for a quarterly payer who pays on the basis of instalment income is worked out by multiplying the instalment rate issued by the Commissioner by the instalment income for that quarter. Subsection 45-120(1) of Schedule 1 to the TAA 1953 provides that your instalment income for a period includes your ordinary income derived during that period, but only to the extent that it is assessable income of the income year that is or includes that period. Subsection 51-100(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that an entity's ordinary income derived during an income year (the present year), or statutory income for the present year, is exempt from income tax to the extent that it is from shipping activities that: Section 11 of the SRTIA 2012 enables an entity to apply for a certificate issued under section 8 of the SRTIA 2012, after the end of an income year, but at least 30 days before the entity is required to lodge its income tax return for the income year. A timing issue arises for a taxpayer that is a corporation which is liable to pay an instalment for an instalment quarter in an income year and which derives ordinary income from shipping activities that are related to a vessel for which they will apply for a shipping exempt income certificate after the end of the income year. In calculating the amount of an instalment for an instalment quarter a taxpayer must multiply the instalment rate issued by the Commissioner by the instalment income for that period. Instalment income for a period includes ordinary income derived during that period, but only to the extent that it is assessable income of the income year that includes that quarterly period. Ordinary income derived from shipping activities that are related to a vessel would normally be included as instalment income for a period for the purposes of calculating the amount of an instalment. However, if a taxpayer is issued with a shipping exempt income certificate after the end of the income year for that vessel then ordinary income which is derived from shipping activities related to that vessel on each day to which the certificate applies will be exempt income for that income year under subsection 51-100(1) of the ITAA 1997. Where a taxpayer expects to be issued with a shipping exempt income certificate for a vessel after applying for such a certificate after the end of the income year, the ordinary income which is derived from shipping activities related to that vessel on each day to which the certificate will apply will be considered to be exempt income. Therefore such income can be excluded from instalment income for the purposes of subsection 45-120(1) of Schedule 1 to the TAA 1953.", "Date_of_Decision": "30 July 2013", "Year_of_Income": "Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 subsection 51-100(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "PAYG Instalment PAYG instalment income Shipping income", "Case_References": "", "Other_References": "", "Business_Line": "Interpretative Assistance, Large Business & International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201345", "Unmatched_Content": "Keywords PAYG Instalment PAYG instalment income Shipping income"}
{"ATO_ID_Number": "ATO ID 2006/295", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PAYG instalment rate: varying the rate upwards and the general interest charge", "Issue": "Will the company be liable for the general interest charge (GIC) under section 45-230 of Schedule 1 to the Taxation Administration Act 1953 (TAA) if it varies its pay as you go (PAYG) instalment rate upwards and it is less than 85% of its benchmark instalment rate for the income year?", "Decision": "Yes. The company will be liable for the GIC under section 45-230 of Schedule 1 to the TAA if it varies its PAYG instalment rate upwards and it is less than 85% of its benchmark instalment rate for the income year. However, in the circumstances it is appropriate for the Commissioner to exercise his discretion to remit the whole of the GIC payable under section 45-240 of Schedule 1 to the TAA because it is fair and reasonable to do so.", "Facts": "The company was notified by the Commissioner on 28 April 2006 that its PAYG instalment rate with effect from 1 April 2006 was 0%. Previously, the company was notified by Commissioner on 28 April 2005 that its PAYG instalment rate with effect from 1 April 2005 was also 0%. On 28 April 2006, the company varied its PAYG instalment rate upwards pursuant to section 45-205 of Schedule 1 to the TAA. The company then paid PAYG instalment amounts for the March and June quarters based on the varied rate. The company's income tax return year ended 30 June 2006 is due to be lodged in February 2007. Due to a recent business decision, the company is anticipating that it will now pay a greater amount of tax when it lodges its income tax return. As a result, it is expected that its varied rate will be less than 85% of its benchmark instalment rate for the year ended 30 June 2006. The company did not vary its instalment rate downwards at any time during the year. The company is not part of a consolidated group for income tax purposes.", "Reasons_for_Decision": "Summary: Under subsection 45-230(1) of Schedule 1 to the TAA, an entity is liable to pay the GIC if: The company has varied its instalment rate upwards. However its varied rate is expected to be less than 85% of its benchmark instalment rate. GIC is payable on the amount worked out using the formula in subsection 45-230(2) of Schedule 1 to the TAA: [Rate discrepancy * Your *instalment income for the variation quarter] + Credit Adjustment 'Rate discrepancy' means the difference between the varied rate and the lesser of: • the most recent instalment rate given to the entity by the Commissioner before the end of the variation quarter; and • the entity's benchmark instalment rate for that income year. 'Rate discrepancy' means the difference between the varied rate and the lesser of: The most recent instalment rate given to the company by the Commissioner before the end of the variation quarter was 0%. As the Commissioner's notified rate is 0%, this will always be less than the company's benchmark instalment rate for the income year. Therefore, the rate discrepancy will be the difference between the company's varied rate and 0%. The wording of section 45-230 of Schedule 1 to the TAA indicates that a taxpayer will be liable to GIC whenever the varied rate differs from the instalment rate worked out by the Commissioner, irrespective of whether the difference favours the taxpayer or not. As 'difference' is not defined in the TAA or the Explanatory Memorandum to the A New Tax System (Pay As You Go) Bill 1999, it is appropriate to consider its ordinary meaning. 'Difference' is defined as ' Mathematics the amount by which one quantity is greater or less than another' ( Macquarie Dictionary 2001 , rev. 3rd edn, The Macquarie Library Pty Ltd, NSW). Although the varied rate is greater than the Commissioner's notified rate, the 'difference' is an absolute value. The rate discrepancy is the amount by which the varied rate is greater or lesser than the Commissioner's rate of 0%. If for example the varied rate was 10%, the rate discrepancy would be 10%. Therefore, the company is liable to pay the GIC under subsection 45-230(1) of Schedule 1 to the TAA. However, the Commissioner may remit the GIC under 45-240 of Schedule 1 to the TAA. Remission of GIC The Commissioner may remit the GIC under section 45-240 of Schedule 1 to the TAA if he is satisfied that because special circumstances exist, it would be fair and reasonable to do so. A decision by the Commissioner to remit GIC because it is fair and reasonable must be considered in view of the intent of the PAYG instalment system. Not only must the exercise of the power to remit be fair to the entity concerned, it must be fair to the whole community. In other words, an entity should not be given an advantage over those taxpayers who organise their affairs to ensure they pay correct instalment liabilities. An entity will need to demonstrate that it is fair and reasonable to remit the GIC, having regard to the nature of the specific event or decision. The General Outline in the Explanatory Memorandum to the A New Tax System (Pay As You Go) Bill 1999 provides an overview of the intent of the PAYG instalment system. Broadly, this includes: The company was not required to vary its instalment rate but chose to do so. By varying its instalment rate upwards, the company paid greater PAYG instalments than it otherwise would have. Even though the varied rate is expected to be less than 85% of its benchmark rate, if the company had not varied its instalment rate it would not have paid any instalment amounts, as its notified rate was 0%. The company's actions were consistent with the overall intent of the PAYG instalment system. That is, it made payments that reflected its current trading and investment conditions, thereby eliminating large end-of-year tax bills and ensuring that Government had the revenue needed during the year to provide benefits and services. The company does not have an unfair advantage over other taxpayers who will pay the correct instalment liabilities. It appears that an unintended outcome of subdivision 45-G of Schedule 1 to the TAA is that an entity that only varies its rate upwards but not high enough, is liable for the GIC. It is fair and reasonable for the Commissioner to remit the GIC in these circumstances.", "Date_of_Decision": "6 October 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Taxation Administration Act 1953 section 3AA subsection 3AA(3) section 45-205 Subdivision 45-G subsection 45-230(1) subsection 45-230(2) section 45-240 Subdivision 45-K", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "PAYG system PAYG instalments Calculating PAYG instalments PAYG instalment rate Varying PAYG instalment rates Tax administration General interest charge Penalties Remission of penalties", "Case_References": "", "Other_References": "Explanatory Memorandum to the A New Tax System (Pay As You Go) Bill 1999 Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW PS LA 2007/21", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": true, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006295", "Unmatched_Content": "Correct reference from Division 45-K to Subdivision 45-K | Insert reference to PS LA 2011/12 and removed reference to archived ATO Receivables Policy | Update to highlight that the discount on the rights is assessable income. | Updated to take into account the repeal of Division 13A of the ITAA 1936 and its replacement with Division 83A of the ITAA 1997. | Keywords PAYG system PAYG instalments Calculating PAYG instalments PAYG instalment rate Varying PAYG instalment rates Tax administration General interest charge Penalties Remission of penalties"}
{"ATO_ID_Number": "ATO ID 2005/237", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PAYG Instalment Income and Employee Share Scheme", "Issue": "Is the discount that a taxpayer receives, as an employee, on a qualifying right that the taxpayer acquires under an employee share acquisition scheme included in the taxpayer's PAYG instalment income if the taxpayer does not make an election under subsection 139E(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No, the discount that the taxpayer, an employee receives, on a qualifying right that the taxpayer acquires under an employee acquisition share scheme is not included in the taxpayer's PAYG instalment income if the taxpayer does not make an election under subsection 139E(1) of the ITAA 1936.", "Facts": "The taxpayer is an employee who is granted rights to acquire shares at a discount under an employee share acquisition scheme. The right has an expiration date of a number of years from the date of granting the right. The rights are qualifying rights for the purposes of Division 13A of the ITAA 1936. The taxpayer has not made an election under subsection 139E(1) of the ITAA 1936 to include the discount on the qualifying rights in the taxpayer's assessable income in the year in which the rights were acquired.", "Reasons_for_Decision": "Summary: Section 45-120 of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that instalment income for a period includes ordinary income derived during that period, but only to the extent that it is assessable income of the income year that is or includes that period. Under subsection 139B(1) of the ITAA 1936, if a taxpayer has acquired a right under an employee share scheme, the assessable income of the taxpayer includes the discount in relation to the share or right. In relation to a qualifying right, the discount on the right is not included in the taxpayer's assessable income in the year of income in which the right is acquired if the taxpayer has not made an election under subsection 139E(1) of the ITAA 1936 for the year of income in which the share or right is acquired. Rather, the discount is included in the taxpayer's assessable income of the year in which the cessation time occurs under subsection 139B(3) of the ITAA 1936. In this case, the discount is not included in the taxpayer's instalment income in the year that the rights were acquired because the discount is not assessable in that year. In the later income year (cessation time), the discount is not included in the taxpayer's instalment income because the discount is not ordinary income derived in the later year. Accordingly, the discount that the taxpayer, an employee receives, on a qualifying right granted under an employee acquisition share scheme is not included in the taxpayer's PAYG instalment income if the taxpayer does not make an election under subsection 139E(1) of the ITAA 1936.", "Date_of_Decision": "4 August 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 139B section 139E", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options PAYG instalment income Qualifying rights", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005237", "Unmatched_Content": "Edited for clarity Amend reference to section 45 120 of Schedule 1 to the TAA 1953 | Amend reference to section 45 120 of Schedule 1 to the TAA 1953 | Keywords Employee share schemes & options PAYG instalment income Qualifying rights"}
{"ATO_ID_Number": "ATO ID 2004/798", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: change from a co-operative to a company", "Issue": "Is the taxpayer the same 'entity' for all purposes under the Income Tax Assessment Act 1997 (ITAA 1997) after the conversion from an incorporated co-operative to a company?", "Decision": "Yes. The taxpayer's registration as a company under the Corporations Act 2001 (Cth) (Corporations Act) does not create a new legal entity. Therefore it is the same 'entity' for all purposes of the ITAA 1997 as defined in section 960-100 of the ITAA 1997.", "Facts": "The taxpayer is a co-operative incorporated under the Co-operatives Act 1992 (NSW) (Co-op Act). The taxpayer is treated as a body corporate pursuant to its incorporation under the Co-op Act. The taxpayer will transfer its incorporation under the Co-op Act to become a company registered under the Corporations Act. It will continue to be regarded as a body corporate pursuant to its registration under the Corporations Act. The taxpayer is regarded as the same entity with the same rights under the relevant provisions of the Co-op Act (subsections 316(1) and 321(1), sections 317 and 342) and the Corporations Act (subsection 601BM(1)).", "Reasons_for_Decision": "Summary: The co-operative incorporated under the Co-op Act is a body corporate under that Act and at general law. Section 995-1 of the ITAA 1997 defines an 'entity' to have the meaning in section 960-100 of the ITAA 1997. An 'entity' is defined to mean any of the following: In addition, section 995-1 of the ITAA 1997 defines a 'company' to mean: Relevant to both definitions is the meaning of 'body corporate' which takes its meaning at general law. However, for the purposes of the ITAA 1997, the taxpayer as incorporated under the Co-op Act is an 'entity' as defined in paragraph 960-100(1)(b) of the ITAA 1997. It is also a 'company' as defined in section 995-1 of the ITAA 1997. After the taxpayer's registration under the Corporations Act, it will continue to be a 'body corporate', 'company' and 'entity' as relevantly defined in the ITAA 1997. Notwithstanding the taxpayer's transfer of incorporation to a separate Act, the taxpayer preserves its identity and continues to be the same legal entity. The provisions in the Co-op Act and the Corporations Act both provide for the continuation of the taxpayer as the 'same entity as the body corporate' which was the co-operative, and the act of registration under a different Act of itself will not create a 'new legal entity' (subsection 321(1) of the Co-op Act and paragraph 601BM(1)(a) of the Corporations Act). In addition, the assets, rights and liabilities of the taxpayer vest in and are preserved when the taxpayer is registered under the Corporations Act without the need for any 'conveyance, transfer or assignment or assurance' (subsection 342(2) of the Co-op Act). This indicates that the identity of the body corporate is preserved and continues with the same assets, rights and liabilities, albeit as a company by registration. Therefore, the taxpayer is the same body corporate and 'entity' for the purposes of the ITAA 1997 both before and after it completes its transfer of incorporation.", "Date_of_Decision": "28 June 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 995-1 section 960-100 paragraph 960-100(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/257 (Withdrawn) | ATO ID 2002/808 | ATO ID 2002/816 (Withdrawn) | ATO ID 2003/254 | ATO ID 2004/978", "Subject_References": "Bodies corporate Company law Co-operatives Entities & taxpayer groups Incorporation Taxpayer identification", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004798", "Unmatched_Content": "This ATO Interpretative Decision has been amended to correct a legislative reference and update references to related ATO Interpretative Decisions. | Keywords Bodies corporate Company law Co-operatives Entities & taxpayer groups Incorporation Taxpayer identification"}
{"ATO_ID_Number": "ATO ID 2011/65", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PAYG Withholding: penalty for failure to withhold - imposition of penalty", "Issue": "When is a penalty for failing to withhold imposed on an entity under section 16-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA)?", "Decision": "The penalty under section 16-30 of Schedule 1 to the TAA is imposed at the time the entity failed to withhold from the payment.", "Facts": "After 1 July 2000 an entity makes a payment to another entity from which an amount was required to be withheld under Division 12 of Schedule 1 to the TAA. The ATO commenced an audit of the payer's affairs. The Commissioner identified that the payer had failed to withhold from the payment and notified the payer of the liability to a penalty.", "Reasons_for_Decision": "Summary: With effect from 1 July 2000, an entity that fails to withhold an amount as required by Division 12 of Schedule 1 to the TAA is liable to pay to the Commissioner a penalty equal to that amount under section 16-30 of Schedule 1 to the TAA. The current section 16-30 was inserted by Tax Laws Amendment (2006 Measures No. 2) Act 2006 (TLA 2006), replacing the former section 16-30 with effect from 22 June 2006. The TLA 2006 also extended the application of the machinery provisions for administrative penalties in Subdivision 298-A of Schedule 1 to the TAA to penalties imposed under Division 16 of Schedule 1 to the TAA. The amendments mean that with effect from 22 June 2006, section 298-10 of Schedule 1 to the TAA requires the Commissioner to give written notice of the penalty and section 298-15 of Schedule 1 to the TAA sets the due date for payment of the penalty as the date specified in the notice. This date must be at least 14 days after the notice is given. Prior to the amendments, the due date for payment of the penalty was set by former subsection 16-30(2) of Schedule 1 to the TAA as the time the entity was required to pay to the Commissioner the amount it should have withheld. The issue for consideration is whether the amendments change the time at which the penalty is imposed. Section 16-30 of Schedule 1 to the TAA is a self-executing provision. This means that the liability to penalty arises when the condition outlined in the provision is satisfied, that is, when the failure to withhold occurs. Support for the view that the penalty is imposed at the time when the failure to withhold occurred can be found in Madera v. Federal Commissioner of Taxation [2004] FCA 1616 (Madera) . In Madera, the Court was required to determine if a taxpayer who had been notified of a penalty under section 16-30 of Schedule 1 to the TAA was entitled to a statement of reasons. The Commissioner claimed that section 16-30 of Schedule 1 to the TAA was a self-executing provision and that liability arose when the conditions referred to in the provision were satisfied. The Commissioner also claimed that the process of notification did not involve any decision \"under an enactment\" that is reviewable under the Administrative Decisions (Judicial Review) Act 1977. The Court agreed with these views. Although the amendments made by TLA 2006 require the Commissioner to notify the entity of the liability to penalty and set a due date for payment from that notification, the amendments did not change the self executing nature of the section. Both before and after 22 June 2006, the penalty is imposed when the failure to withhold occurs. The requirement to notify the entity of the liability is a separate obligation of the Commissioner.", "Date_of_Decision": "2 August 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Administrative Decisions (Judicial Review) Act 1977 The Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/133", "Subject_References": "Failure to withhold PAYG system PAYG withholding Tax administration", "Case_References": "Madera v. Federal Commissioner of Taxation (2004) 214 ALR 324 [2004] FCA 1616", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201165", "Unmatched_Content": "Keywords Failure to withhold PAYG system PAYG withholding Tax administration"}
{"ATO_ID_Number": "ATO ID 2007/187", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Failure to withhold from an interest payment to a non-resident and the effect on the payment's deductibility", "Issue": "Does the payment of an administrative penalty amount imposed under section 16-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA), for failure to withhold from interest paid to a non-resident, constitute a payment of withholding tax for the purposes of subsection 26-25(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The payment of an administrative penalty amount imposed under section 16-30 of Schedule 1 to the TAA, for failure to withhold from interest paid to a non-resident, constitutes a payment of withholding tax for the purposes of subsection 26-25(3) of the ITAA 1997.", "Facts": "An Australian resident entity (the payer) made a payment of interest to an overseas person who is a non-resident. An overseas person, for the purposes of section 12-245 of Subdivision 12-F of Schedule 1 to the TAA, is the recipient of the interest who, from the payer's records has an address outside of Australia. The interest income was not exempt from withholding tax under Division 11A of the Income Tax Assessment Act 1936 (ITAA 1936). The payer was required to withhold an amount from the payment under Subdivision 12-F in Schedule 1 to the TAA but failed to do so. Consequently, the payer was liable to pay the Commissioner an administrative penalty under section 16-30 of the TAA, equal to the amount it should have withheld. The payer paid the penalty and no remission was sought or granted.", "Reasons_for_Decision": "Summary: Subsection 128B(5) of the ITAA 1936 imposes a withholding tax liability on a non-resident who derives interest which is paid by a person who is a resident (subparagraph 128B(2)(b)(i) of the ITAA 1936) or by a non-resident who incurs the interest in carrying on business in Australia at or through a permanent establishment in Australia (subparagraph 128B(2)(b)(ii) of the ITAA 1936). As subparagraph 128B(2)(b)(i) of the ITAA 1936 applies in this case, the payer should have withheld an amount from the interest payment to an overseas person as required by section 12-245 of Subdivision 12-F of Schedule 1 to the TAA. As a result, the payer was liable to pay and paid the Commissioner an administrative penalty equal to that amount in accordance with section 16-30 in Schedule 1 to the TAA. An administrative penalty paid under section 16-30 of Schedule 1 to the TAA for not withholding from an interest payment is not income tax payable under section 128B of the ITAA 1936. However, paragraph 18-35(1)(a) of Schedule 1 to the TAA states that where an entity fails to withhold an amount in relation to the payment of interest and pays an equal amount of penalty imposed under section 16-30 of the TAA or the general interest charge (GIC) in relation to that penalty to the Commissioner, the person liable to pay the withholding tax on the interest payment, being the non-resident, is entitled to a credit equal to the amount of the penalty or GIC paid. Where the penalty is paid in full the effect, is ordinarily, to extinguish the liability for the withholding tax on that interest. In that sense the withholding tax payable on the interest may be said to be paid. But, subsection 26-25(1) of the ITAA 1997 provides that an entity that fails to withhold an amount from interest income as required by Subdivision 12-F of the TAA is precluded from claiming a deduction for the interest. However, subsection 26-25(3) of the ITAA 1997 provides that if, apart from subsection 26-25(1) of the ITAA 1997, the entity can deduct the interest for an income year, it will be deductible for that year if the withholding tax payable for that interest is paid. Accordingly, the relevant amount of withholding tax is regarded as having been paid for the purposes of subsection 26-25(3) of the ITAA 1997 when the Australian entity pays the administrative penalty equal to the amount it should have withheld and that amount is subsequently credited to the non-resident's account in accordance with paragraph 18-35(1)(a) of the TAA. Hence, as the payer paid an administrative penalty equal to the withholding tax it should have withheld from the interest payment, the withholding tax is taken to be paid for the purposes of subsection 26-25(3) of the ITAA 1997.", "Date_of_Decision": "1 October 2007", "Year_of_Income": "not applicable", "Legislative_References": "Income Tax Assessment Act 1936 section 128B subparagraph 128B(2)(b)(i) subparagraph 128B(2)(b)(ii) subsection 128B(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Non-resident interest withholding tax Withholding tax credits Withholding taxes Failure to withhold", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007187", "Unmatched_Content": "Keywords International tax Non-resident interest withholding tax Withholding tax credits Withholding taxes Failure to withhold"}
{"ATO_ID_Number": "ATO ID 2012/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amendment of Assessments: time limits for amending assessments for an individual and the application of Regulation 20 of the Income Tax Regulations 1936", "Issue": "When the Commissioner exercises his discretion under subsection 109RB(2) of the Income Tax Assessment Act 1936 (ITAA 1936), does item 2 of regulation 20 of Income Tax Regulations 1936 (Regulation 20) apply to increase the standard amendment period from two to four years because of the qualification in paragraph (f) of the table in subsection 170(1) of the ITAA 1936?", "Decision": "No. The standard two year amendment period will still apply as the Commissioner has exercised his discretion under subsection 109RB(2) of the ITAA 1936. The qualification in paragraph (f) of the table in subsection 170(1) of the ITAA 1936 does not apply because the circumstance prescribed by item 2 in the table of Regulation 20 has not been met.", "Facts": "A taxpayer is an individual shareholder in a private company which made a loan to a controlled trust during the relevant income year. The loan comes within section 109D of the ITAA 1936, being a loan that is treated as a dividend in the year it was made. However, the Commissioner can exercise his discretion in section 109RB of the ITAA 1936 to disregard the operation of section 109D of the ITAA 1936. In such a case, the loan will not be treated as a dividend for the purpose of Division 7A of the ITAA 1936. The Commissioner exercises his discretion in section 109RB of the ITAA 1936 to disregard the operation of 109D of the ITAA 1936.", "Reasons_for_Decision": "Summary: The two year amendment period in item 1 of the table in subsection 170(1) of the ITAA 1936 is subject to certain exceptions or 'qualifications' in that item. One such qualification is paragraph (f) which provides that the two year amendment period does not apply 'in any other circumstance prescribed by the regulations'. Regulation 20 states: Amendment of assessments for an income year For a provision of subsection 170(1) of the Act mentioned in an item of the table, the circumstances set out in the item are prescribed. Note: If a circumstance in an item of the table exists, the Commissioner of Taxation may amend an assessment of the taxpayer within 4 years after the day on which the Commissioner gives notice of the assessment to the taxpayer, unless a longer amendment period applies to the taxpayer. The relevant 'item' in these circumstances is item 2 of the table in Regulation 20. This item ensures that a four year amendment period applies where all of the following exist: The Explanatory Statement explains the operation of item 2 of Regulation 20 as follows: Item 2 excludes taxpayers involved in transactions to which Division 7A of the ITAA 1936 applies, where there is a mismatch between the company's period of review (four years or more) and the related entity's period of review. Transactions or amounts to which Division 7A applies, are treated as dividends. These amounts include amounts paid or lent by a private company or debts that a private company forgives. This exclusion includes related entities who are shareholders, former shareholders and associates of current and former shareholders who have a two year period of review. Item 2 of the table in Regulation 20 is intended to apply to taxpayers involved in transactions where Division 7A of the ITAA 1936 applies, and there is a mismatch in the period of review applicable to the taxpayer and the private company involved. Where the Commissioner exercises his discretion under subsection 109RB(2) of the ITAA 1936, Division 7A does not operate. The effect of this is that a private company is taken not have paid a particular dividend to a particular entity under that Division - subsection 109RB(5) of the ITAA 1936. Therefore not all of the elements referred to in item 2 of Regulation 20 exist and the two year amendment period in item 1 of the table in subsection 170(1) of the ITAA 1936 will apply to the taxpayer.", "Date_of_Decision": "21 November 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subsection 170(1) Division 7A section 109C section 109D section 109F section 109RB subsection 109RB(2) subsection 109RB(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commissioner's discretion Assessment period Shareholder payments Shareholder loans", "Case_References": "", "Other_References": "", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20123", "Unmatched_Content": "Keywords Commissioner's discretion Assessment period Shareholder payments Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2012/51", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessments for the 2003-04 and earlier nil years: nil liability return for the 2003-04 income year: limited period for making an original assessment for a nil year: taxpayer consented to extending the limited amendment periods for the 2003-04 and later relevant income years", "Issue": "Can the Commissioner make an original assessment for the 2003-04 income year after the limited period specified in item 1 in the table in subsection 171A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) has expired where the taxpayer has:", "Decision": "No. The Commissioner is unable to make an original assessment for the 2003-04 income year as the limited period set out in item 1 in the table in subsection 171A(1) of the ITAA 1936 has expired. The taxpayer's consent under former subsection 170(4) of the ITAA 1936 is irrelevant.", "Facts": "An individual lodged a nil return for the 2003-04 income year on 1 December 2006. It was a nil return because it showed that the taxpayer had no taxable income as the taxpayer's deductions equalled the taxpayer's assessable income. The taxpayer did not deduct a tax loss in the 2003-04 income year. The Commissioner commenced an investigation of the taxpayer's affairs for the 2003-04 to 2009-10 income years. On 1 October 2010, the taxpayer consented to extending the periods of review (limited amendment periods) for assessments relating to all of the income years under review. In February 2011, the Commissioner discovered that the taxpayer had omitted income from its income tax returns over a number of years and wished to raise an original assessment in relation to the 2003-04 income year.", "Reasons_for_Decision": "Detailed Reasoning - Limited period for making an original assessment for the 2003-04 nil year: Section 171A of the ITAA 1936 sets out the limited periods in which the Commissioner may make original assessments for nil returns for the 2003-04 income year and earlier income years, referred to in that section as nil years. These provisions ensure that the Commissioner does not have an unlimited period to make original assessments for the 2003-04 or earlier income years in which taxpayers have a nil tax liability. Item 1 in the table in subsection 171A(1) of the ITAA 1936 applies if the taxpayer did not deduct a tax loss in the nil year and the taxpayer had a nil return either because: Item 1 of the table in subsection 171A(1) of the ITAA 1936 applies in the present case as the taxpayer lodged a nil return for the 2003-04 income year showing that it had no taxable income and did not deduct a tax loss in that income year. When item 1 in the table in subsection 171A(1) of the ITAA 1936 applies, the Commissioner cannot make an original assessment for the taxpayer for the nil year after the later of: Accordingly, in February 2011, the Commissioner could not make an original assessment including the omitted income as the four year limited period for making an original assessment for the taxpayer's 2003-04 income year had expired on 1 December 2010; that is, four years after the taxpayer lodged its nil return on 1 December 2006. | Detailed Reasoning - Effect of the taxpayer's consent to extending the limited amendment periods: Former subsection 170(1A) of the ITAA 1936 applied to assessments for the 2003-04 income years and provided for limited amendment periods in which the Commissioner may amend an original assessment. In some circumstances, a taxpayer is able to consent to extending a limited amendment period in relation to an original assessment. Former subsection 170(4) of the ITAA 1936 provided that, if the Commissioner has started to examine the affairs of a taxpayer in relation an assessment and the Commissioner has not completed the examination before the end of the limited amendment period, the Commissioner can request the taxpayer to extend the limited amendment period. Former subsection 170(4) of the ITAA 1936 contained similar wording and applies in relation to assessments for the 2003-04 and earlier income years. Subsection 170(7) contains similar wording to former subsection 170(4) and applies in relation to assessments for the 2004-05 and later income years. Prior to the introduction of the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005 , a nil tax advice or nil assessment was not an income tax assessment: see FC of T v. Ryan 2000 ATC 4079. Since the taxpayer lodged a nil return for the 2003-04 income year, there was no original assessment for that income year. Therefore there was no original assessment to which the limited amendment periods in former subsection 170(1A) of the ITAA 1936 could apply. The taxpayer's consent under former subsection 170(4) of the ITAA 1936 could only be relevant to a limited amendment period that applies to an original assessment. There is no power, similar to former subsection 170(4) of the ITAA 1936 or the current subsection 170(7) of the ITAA 1936, that enables the Commissioner to seek the consent of a taxpayer to an extension of the limited period for making an original assessment under item 1 in the table in subsection 171A(1) of the ITAA 1936. Therefore the taxpayer's consent to extending the limited amendment periods for all of the income years under review makes no difference to the expiry of the limited period within which the Commissioner can make an original assessment for the 2003-04 income year.", "Date_of_Decision": "6 June 2012", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 former subsection 170(4) former subsection 170(1A) subsection 170(7) section 171A subsection 171A(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Original assessments Amendment of assessments Limited amendment period", "Case_References": "FC of T v Ryan [2000] HCA 4 2000 ATC 4079 (2000) 43 ATR 694", "Other_References": "", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201251", "Unmatched_Content": "Keywords Original assessments Amendment of assessments Limited amendment period"}
{"ATO_ID_Number": "ATO ID 2011/102", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amendment of income tax assessment outside limited amendment period on an application for amendment by the taxpayer", "Issue": "Does the Commissioner have the power to amend an income tax assessment for an income year under subsection 170(5) of the Income Tax Assessment Act 1936 (ITAA 1936) to include additional income where:", "Decision": "No. The Commissioner is outside the 2 year limited amendment period under subsection 170(1) of the ITAA 1936 and cannot amend the assessment under subsection 170(5) of the ITAA 1936 to include the additional income in the taxpayer's assessment. The Commissioner can only amend the assessment in relation to the additional deductions claimed by the taxpayer in the application for amendment.", "Facts": "A taxpayer (an individual) is a partner in a partnership. The partnership requested an amendment of the partnership income tax return for an income year (the relevant year) on the basis of a claim for additional partnership deductions. The taxpayer lodged an application for amendment of their income tax assessment for the relevant year to reflect their share of the additional deductions claimed by the partnership. In accordance with subsection 170(5) of the ITAA 1936 the application for amendment was made in the approved form before the end of the 2 year limited amendment period under item 1 of the table in subsection 170(1) of the ITAA 1936 (the limited amendment period). Before the end of the limited amendment period, the Commissioner discovered the partnership had omitted assessable income from its partnership income tax return for the relevant year. The Commissioner did not request the taxpayer to consent to extending the limited amendment period in accordance with subsection 170(7) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Under item 1 of the table in subsection 170(1) of the ITAA 1936, the Commissioner may amend the taxpayer's assessment within the limited amendment period to either increase or decrease the taxpayer's liability. Because of legislative amendments to section 170 of the ITAA 1936 enacted by Parliament in 2005, the period in which the Commissioner can amend an assessment for most individuals and very small business taxpayers was reduced to 2 years. The clear intent behind these amendments is to give certainty to taxpayers about whether they have correctly self-assessed their income tax liability. Relevantly, paragraph 2.14 of the Explanatory Memorandum to the Taw Laws Amendment (Improvements to Self Assessment) Bill (No. 2) 2005, which introduced section 170 of the ITAA 1936 in its current form, states: The purpose of these amendments is to ensure that the time during which taxpayers experience uncertainty over whether they have correctly self assessed their income tax liability approaches the minimum required for the Australian Taxation Office (ATO) to identify the majority of incorrect assessments of that type and correct them. The limited amendment period specified in subsection 170(1) of the ITAA 1936 may be extended in several cases including where the taxpayer applies for an amendment in the approved form before the end of the limited amendment period under subsection 170(5) of the ITAA 1936. In such a case the Commissioner may amend the assessment after the end of the limited amendment period 'to give effect to the decision on the application'. The power to amend conferred by this subsection is limited to giving effect to a decision concerning a particular (or particulars) of the assessment in respect of which the taxpayer has applied for amendment and nothing more. It is contrary to the intent and effect of section 170 of the ITAA 1936 to adopt an interpretation of subsection 170(5) of the ITAA 1936 which enables the Commissioner to use a taxpayer's application for amendment in respect of a particular of an assessment (such as a deduction) to amend another particular (such as income) where the Commissioner is otherwise out of time to amend the taxpayer's assessment. Accordingly, the Commissioner is able to amend the taxpayer's assessment under subsection 170(5) of the ITAA 1936 outside the limited amendment period only in respect of the taxpayer's share of the additional deductions claimed by the partnership. The Commissioner cannot amend the taxpayer's assessment outside the limited amendment period to include the taxpayer's share of the omitted partnership income.", "Date_of_Decision": "1 December 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 section 170 subsection 170(1) subsection 170(5) subsection 170(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self assessment Self amendment of assessments Tax assessments Assessment period", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taw Laws Amendment (Improvements to Self Assessment) Bill (No. 2) 2005", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2011102", "Unmatched_Content": "Keywords Self assessment Self amendment of assessments Tax assessments Assessment period"}
{"ATO_ID_Number": "ATO ID 2010/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amendment of assessments: exception to two year period of review if an individual is a beneficiary of trust estate", "Issue": "Does the two year time limit in item 1 in the table in subsection 170(1) of the Income Tax Assessment Act 1936 (ITAA 1936) apply to prevent the Commissioner from amending an individual's assessment where:", "Decision": "No. The two year time limit in item 1 in the table in subsection 170(1) of the ITAA 1936 does not apply in this case because one of the exceptions in paragraph (d) applies.", "Facts": "A resident individual was a beneficiary of a resident family discretionary trust. The trustee of the trust was a private company. The trust was not a small business entity within the meaning of the term in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The Commissioner gave the individual a notice of assessment for the 2005-06 income year on 22 November 2006. More than two years (but less than four years) after the notice of assessment was given to the taxpayer, the Commissioner identified that the taxpayer made an error in their return for the 2005-06 income year and amended the return. The taxpayer considered that the Commissioner could not amend the return as the two year time limit in item 1 in the table in subsection 170(1) of the ITAA 1936 had expired.", "Reasons_for_Decision": "Summary: The general rule is that the Commissioner may amend an assessment of an individual for a year of income within two years after the day on which the Commissioner gives notice of the assessment to the individual (two year period to amend): item 1 in the table in subsection 170(1) of the ITAA 1936. However, there are a number of qualifications to the general rule. One such qualification is where the individual is a beneficiary of a trust at any time during the income year concerned: paragraph (d) in item 1 in the table in subsection 170(1) of the ITAA 1936. This means that generally the Commissioner may amend an assessment of an individual who is a beneficiary of a trust within four years after the day on which the Commissioner gives notice of the assessment to the beneficiary (four year period to amend). However, there are two exceptions to that qualification where the individual is a beneficiary of a trust at any time in the year and: This means that the Commissioner will have a two year period to amend in this case if one of these two qualifications applies. The first exception does not apply in this case. This is because, on the facts, the trust did not meet the definition of small business entity. With respect to the second exception, 'full self-assessment taxpayer' is defined in subsection 6(1) of the ITAA 1936 and includes: The resolution of this issue turns upon the words 'in that capacity'. A company is a full self-assessment taxpayer within the definition in subsection 6(1) of the ITAA 1936. However, a company, when acting in its 'capacity' as trustee of the trust (other than those listed in categories (b) to (g) above), is not a full self-assessment taxpayer. In that capacity, the company would lodge a trust income tax return and an assessment can be raised under section 169 of the ITAA 1936. As the qualification in paragraph (d) of item 1 in the table in subsection 170(1) of the ITAA 1936 is met, the Commissioner has a four year period to amend any relevant assessments of the individual beneficiary. This can be contrasted with the situation where, for example, the trustee is the trustee of a corporate unit trust. In this situation, the trustee would be required to lodge a company income tax return and the special rules in subsection 166A(3) of the ITAA 1936 for the assessment of full-self assessment taxpayers apply. This means that, provided no other qualification in item 1 of the table in subsection 170(1) of the ITAA 1936 is met, the Commissioner would have a two year period to amend any relevant assessments of an individual beneficiary.", "Date_of_Decision": "12 February 2010", "Year_of_Income": "Year ended 2004-05 and later income years", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 166 subsection 166A(3) section 169 subsection 170(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Amendment of assessments Self assessment Trustees Trusts", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Improvements to Self Assessment) Bill (No. 2) 2005.", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201042", "Unmatched_Content": "Minor changes to clarify facts and improve readability | Amended to clarify the assessment provision that may apply to the trustee in these circumstances | Minor changes to improve readability | Inserted reference to section 169 | Keywords Amendment of assessments Self assessment Trustees Trusts"}
{"ATO_ID_Number": "ATO ID 2010/226", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amendment of assessments: time limits for amending assessments where Regulation 20 of the Income Tax Regulations 1936 applies and the matters for which assessments may be amended", "Issue": "Where the Commissioner determines that section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) applies to a taxpayer and therefore, the taxpayer is subject to the four year amendment period as prescribed by Regulation 20 of the Income Tax Regulations 1936 (Regulation 20), is the Commissioner limited in his amendment to only matters concerning the application of section 45B of the ITAA 1936?", "Decision": "No. Once the Commissioner determines that Regulation 20 applies to the taxpayer, the Commissioner is not limited to amending the taxpayer's assessment only in relation to section 45B of the ITAA 1936. The Commissioner may amend the taxpayer's assessment concerning any matter within the prescribed amendment period, being four years after the notice of assessment is given to the taxpayer.", "Facts": "As a result of a corporate restructure, shares were transferred to an individual taxpayer who was a shareholder of the corporate group in the 2005-06 income year. On the same day the taxpayer acquired their shares, they disposed of them. The taxpayer lodged their tax return for the 2005-06 income year in 2006 and was given a notice of assessment later that year. The Commissioner subsequently commenced an audit into the restructure of the corporate group. As a result of the audit, the Commissioner made a determination under paragraph 45B(3)(b) of the ITAA 1936 that section 45C of the ITAA 1936 applied to part of the capital benefit provided under the scheme. More than two years, but less than four years, after the notice of assessment was given to the taxpayer, the Commissioner issued the taxpayer an amended assessment. The amendment was not made in relation to section 45B of the ITAA 1936 but on the basis that the taxpayer had not declared the correct net capital gain in their assessable income from the disposal of those shares in accordance with section 102-5 of the Income Tax Assessment Act 1997 (ITAA 1997). The Commissioner considered that the restructure did not satisfy the conditions for roll-over relief in Division 125 of the ITAA 1997. The taxpayer took the view that the Commissioner could not amend their assessment as the amendment was not made in relation to section 45B of the ITAA 1936. Therefore, the two year amendment period set out in item 1 in the table in subsection 170(1) of the ITAA 1936 (item 1) had expired.", "Reasons_for_Decision": "Summary: The two year amendment period in item 1 in the table in subsection 170(1) of the ITAA 1936 is subject to the exceptions or 'qualifications' in that item. One such qualification is paragraph (f) which provides that the two year amendment period does not apply 'in any other circumstances prescribed by the regulations'. Regulation 20 of the Income Tax Regulations 1936 (Regulation 20) states: Amendment of assessments for an income year For a provision of subsection 170(1) of the Act mentioned in an item of the table, the circumstances set out in the item are prescribed. Note If a circumstance in an item of the table exists, the Commissioner of Taxation may amend an assessment of the taxpayer within 4 years after the day on which the Commissioner gives notice of the assessment to the taxpayer, unless a longer amendment period applies to the taxpayer. The relevant 'item' in these circumstances is item 8 of the table in Regulation 20. Specifically paragraph 8(b) of Regulation 20 provides that a four year amendment period applies where: 8. Any of the following provisions applies in relation to the taxpayer in the year of income mentioned in the item: ...(b) section 45B of the Act (schemes to provide certain benefits); Paragraph 8(b) of Regulation 20 only requires that section 45B of the ITAA 1936 apply to the taxpayer in the relevant year of income. It does not impose a further requirement that the amendment of the assessment only be limited to matters relating to section 45B of the ITAA 1936. There is nothing in the Explanatory Statement to the Income Tax Regulations 1936 indicating that the ability to amend is intended to apply narrowly. It provides that 'excluded taxpayers' will have a four year amendment period and furthermore that 'Item 8 ...excludes from the two year period of review individuals ...whose tax affairs fall for consideration under the following specific anti-avoidance provisions...'. Therefore, once the Commissioner determines that paragraph 8(b) of Regulation 20 applies to a taxpayer, he is not limited to amending a taxpayer's assessment only in relation to section 45B of the ITAA 1936. The Commissioner may amend the assessment at any time within the four year period in order to arrive at the taxpayer's correct tax position for a given year. The Commissioner is entitled to make such alterations in, or additions to, the relevant assessment as he thinks necessary to correct the assessment. This includes, for example, amending the assessment on the basis that the correct net capital gain is not declared in the taxpayer's assessable income in accordance with section 102-5 of the ITAA 1997.", "Date_of_Decision": "6 December 2010", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 45B paragraph 45B(3)(b) section 45C subsection 170(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Amendment of assessments Assessment period", "Case_References": "", "Other_References": "", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010226", "Unmatched_Content": "Keywords Amendment of assessments Assessment period"}
{"ATO_ID_Number": "ATO ID 2012/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessments for the 2003-04 and earlier nil years: notifying the Commissioner in the approved form for the purposes of item 4 of the table in subsection 171A(1) of the Income Tax Assessment Act 1936", "Issue": "Does disclosure by a company of an amount of tax losses deducted at label R of item 7 of its company income tax return for the 2004-05 income year provide notification to the Commissioner, in the approved form, for the purposes of item 4 of the table in subsection 171A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the company is not required to complete a Losses schedule 2005?", "Decision": "Yes, where a company is not required to complete the Losses schedule 2005 and it discloses an amount of tax losses deducted at label R of item 7 of its company income tax return for the 2004-05 income year, it is at this point that the company notifies the Commissioner, in the approved form, that it had a tax loss in an earlier nil year that is carried forward to the 2004-05 income year for the purposes of item 4 of the table in subsection 171A(1) of the ITAA 1936.", "Facts": "Company X incurred a tax loss in the 2002-03 income year and consequently lodged a nil liability company income tax return for the 2002-03 income year in June 2004. Company X utilised a portion of this carried forward loss in the 2003-04 income year and carried forward the remainder to the 2004-05 income year where the loss was fully utilised. Company X lodged its company income tax return for the 2004-05 income year in July 2006. Company X disclosed an amount of tax loses deducted in the 2004-05 income year at label R of item 7 of the income tax return. The amount of the loss carried forward to the 2004-05 income year was not large enough to require the lodgment of a Losses schedule 2005 and Company X did not meet any of the other conditions for lodging this schedule. Company X is not a member of a consolidated group at the end of the 2004-05 income year.", "Reasons_for_Decision": "Summary: Section 171A of the ITAA 1936 limits the period within which the Commissioner can make an original assessment for nil liability income tax returns for the 2003-04 and earlier income years. Essentially, an original assessment can only be made for these nil years within a limited period according to the circumstances and information provided to the Commissioner. This is tabled in subsection 171A(1) of the ITAA 1936. Item 4 of the table in subsection 171A(1) of the ITAA 1936 provides that where: The approved form for the purposes of item 4 of the table in subsection 171A(1) of the ITAA 1936 is the Losses schedule 2005 that taxpayers are required to complete and send together with their 2004-05 income tax returns. Where a taxpayer does not meet the conditions for lodging a Losses schedule 2005, disclosure of the amount of tax losses deducted at label R of item 7 in the 2004-05 income tax return constitutes notification to the Commissioner, in the approved form, that the taxpayer had a tax loss in the earlier nil year that is carried forward to the 2004-05 income year for the purposes of item 4 of the table in subsection 171A of the ITAA 1936. In this case Company X made a tax loss and lodged a nil liability company income tax return for the 2002-03 income year in June 2004. Some of Company X's tax loss from the 2002-2003 income year was carried forward to the 2004-05 income year as evidenced by it disclosing an amount of tax loss deducted at label R of Item 7 in its 2004-05 company income tax return. Company X was not required to lodge a Losses schedule 2005. For the purposes of item 4 of the table in subsection 171A(1) of the ITAA 1936, Company X notified the Commissioner in the approved form when it lodged its company income tax return in July 2006. Accordingly, the Commissioner has until July 2012 to issue Company X an original assessment for the 2002-03 income year.", "Date_of_Decision": "20 June 2012", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 171A subsection 171A(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Carry forward losses Losses carried forward Original assessments Tax loss Unused carry forward losses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201257", "Unmatched_Content": "Keywords Carry forward losses Losses carried forward Original assessments Tax loss Unused carry forward losses"}
{"ATO_ID_Number": "ATO ID 2010/223", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fuel tax credits: GST groups - applications for private rulings", "Issue": "Does section 70-5 of the Fuel Tax Act 2006 (FTA) prevent an entity that is a member of a GST group, but is not the representative member of the group, from applying for a private ruling in relation to transactions they enter into that affect the net fuel amount of the group?", "Decision": "Yes. Section 70-5 of the FTA prevents an entity that is a member of a GST group, but is not the representative member of that group, from applying for a private ruling in relation to transactions they enter into that affect the net fuel amount of the group because the right to seek the ruling has transferred to the representative member of the group.", "Facts": "An entity is a member of a GST group. The entity is not the representative member of the GST group. The entity enters into a transaction that affects the net fuel amount of the GST group.", "Reasons_for_Decision": "Summary: Division 357 of Schedule 1 to the Taxation Administration Act 1953 (TAA) sets out common rules that apply to rulings. Under paragraph 357-55(i) of Schedule 1 of the TAA, a ruling can be made in relation to a net fuel amount, or the administration, collection or payment of a net fuel amount. Subsection 359-5(1) of Schedule 1 to the TAA explains that the Commissioner may, on application, make a written ruling on the way in which the Commissioner considers a relevant provision applies or would apply to 'you in relation to a specified scheme'. Subsection 359-10(1) of Schedule 1 to the TAA provides that 'you, your agent or your legal personal representative may apply to the Commissioner for a private ruling'. The combined effect of the above provisions is that rulings can be sought and provided in relation to the application of schemes insofar as they relate to the applicant's net fuel amount (or the administration, collection or payment of the applicant's net fuel amount). Section 70-5 of the FTA explains the application of the fuel tax law to GST groups and joint ventures. Subsection 70-5(1) of the FTA provides that the entities listed in column 1 of the table in the section are treated as a single entity for the fuel tax law. Subsection 70-5(2) of the FTA provides that the entities listed in column 2 of the table have all the rights, powers and obligations under the fuel tax law instead of each entity in column 1 of the table having those rights, powers and obligations. Column 1 of item 1 of the table in subsection 70-5(2) of the FTA stipulates that the members of a GST group are treated as a single entity for the purposes of the fuel tax law. Column 2 of item 1 then stipulates that the representative member of the GST group has all the rights, powers and obligations of the single entity under the fuel tax law. The fuel tax law is defined in section 110-5 of the FTA as: As the ability to seek a private ruling in relation to fuel tax matters, and the Commissioner's ability to issue a ruling, are provided for under the TAA, the provisions relating to private rulings are 'fuel tax law' insofar as they relate to fuel tax. As explained above, the effect of the private rulings provisions in the TAA is that an entity has the power to seek a private ruling in relation to schemes they enter into that affect their net fuel amount. However, section 70-5 of the FTA treats all the members of a GST group as a single entity, and gives the representative member all the rights, powers and obligations of the single entity. It follows that where a transaction has been entered into that affects the net fuel amount of the single entity (being the GST group), it is the representative member, and not the individual entity that entered into the transaction, that is able to seek a private ruling.", "Date_of_Decision": "3 December 2010", "Year_of_Income": "", "Legislative_References": "Fuel Tax Act 2006 section 70-5 section 110-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fuel tax credits FTC general FTC fuel tax FTC fuel tax law FTC net fuel amount FTC indirect tax ruling FTC indirect tax law Private ruling Private rulings", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010223", "Unmatched_Content": "Keywords Fuel tax credits FTC general FTC fuel tax FTC fuel tax law FTC net fuel amount FTC indirect tax ruling FTC indirect tax law Private ruling Private rulings"}
{"ATO_ID_Number": "ATO ID 2003/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company net capital loss transfers: valid transfer agreement - single document with multiple agreements", "Issue": "Can a loss company validly transfer various amounts of net capital losses to two or more gain companies in a single document (the Document) for the purposes of section 170-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. As the Document satisfies the requirements of subsection 170-150(2) of the ITAA 1997, the fact that it incorporates several written agreements does not of itself invalidate those agreements.", "Facts": "The public officer of a loss company and the public officer of several gain companies in a wholly owned group agreed for the loss company to transfer various amounts of net capital loss incurred by the loss company to the several gain companies in respect of an income year that ended after 30 June 1998. Rather than preparing a separate written agreement for each loss transfer, the public officer for the loss company and the public officer for the several gain companies incorporated the relevant written agreements for the purposes of section 170-150 of the ITAA 1997 in the Document. The Document was signed by the public officers of the loss company and the several gain companies. It stated that various amounts of net capital loss are transferred from the loss company to the gain companies in accordance with the attached schedule. The schedule specified for each loss transfer: Each written agreement that formed part of the Document was made within the requisite period specified in paragraph 170-150(2)(d) of the ITAA 1997. In order to address the possibility that the loss company is subsequently found to have insufficient net capital losses available to satisfy all of the several written agreements contained in the Document, the Document specified the order in which the net capital loss agreements were entered into.", "Reasons_for_Decision": "Summary: Subsection 170-150(1) of the ITAA 1997 requires that a transfer of a net capital loss must be made by a written agreement. The ITAA 1997 does not prescribe that the written agreement must be in any particular form. However, subsection 170-150(2) of the ITAA 1997 states that the agreement must: As the Document satisfies the above requirements of section 170-150 of the ITAA 1997, the fact that it incorporates several written agreements does not of itself invalidate those agreements. Subdivision 170-B (sections 170-101 to 170-170) of the ITAA 1997 applies to assessments for the year ended 30 June 1999 and later income years.", "Date_of_Decision": "23 January 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-B section 170-150 subsection 170-150(1) subsection 170-150(2) paragraph 170-150(2)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/12", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/123 | ATO ID 2003/124", "Subject_References": "Group company loss transfers Company losses Carry forward losses Losses Current year losses Losses CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200378", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/12 | Keywords Group company loss transfers Company losses Carry forward losses Losses Current year losses Losses CoE"}
{"ATO_ID_Number": "ATO ID 2003/351", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: net capital loss incurred during part of capital loss year after loss company became a member of a wholly-owned group", "Issue": "Can a net capital loss, incurred by a loss company during the part of the capital loss year after it became a member of a wholly-owned group, be transferred to a gain company within the same group under Subdivision 170-B of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A net capital loss transfer is not permitted because the loss company was not a member of the same wholly-owned group as the gain company for the entire capital loss year, as required under subsection 170-130(2) of the ITAA 1997.", "Facts": "A company (the 'loss company') became a member of the same wholly-owned group as another company (the 'gain company') following the acquisition of the shares in the loss company by the holding company of the group during an income year (the 'capital loss year'). The loss company incurred a net capital loss during the part of the capital loss year after it became a member of the wholly-owned group.", "Reasons_for_Decision": "Summary: As a condition for transferring a net capital loss, subsection 170-130(2) of the ITAA 1997 requires that both the loss company and the gain company must be members of the same wholly-owned group at all times during the capital loss year, the application year and intervening years when both companies were in existence. The 'capital loss year' is the income year for which a loss company makes a net capital loss that is available for transfer. The 'application year' is the income year for which the transferred net capital loss can be applied. A company is said to be in existence, as defined in subsection 975-100(1) of the ITAA 1997, if it has been incorporated and has not been dissolved. The loss company in this case was in existence prior to becoming a member of the wholly-owned group during the capital loss year. The loss company only became a member of the wholly-owned group part way through the capital loss year, which means that it has not satisfied the requirement that it must be a member of the same wholly-owned group as the gain company for the whole of the capital loss year. It follows that no capital loss transfer is permitted even though the net capital loss was made during the part of the capital loss year after the loss company became a member of the group.", "Date_of_Decision": "12 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-B subsection 170-130(2) subsection 975-100(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Group company loss transfers Transferred losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003351", "Unmatched_Content": "Keywords Group company loss transfers Transferred losses"}
{"ATO_ID_Number": "ATO ID 2002/964", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: trusts: calculation of beneficiary's net capital gain", "Issue": "Can a beneficiary reduce the share of a trust's net income that is included in their assessable income under section 97 of the Income Tax Assessment Act 1936 (ITAA 1936), by its prior year capital losses?", "Decision": "o. The beneficiary can only apply their capital losses against the extra capital gains that they are taken to have made under Subdivision 115-C of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "An Australian resident beneficiary, who is not under a legal disability, is presently entitled to a share of trust income in the 2002 income year. The beneficiary's share of the net income of the trust for the 2002 income year is attributable to a discount capital gain of $5 million. The beneficiary had a $15 million net capital loss from an earlier income year. The beneficiary calculated their net capital gain for the year as follows: The beneficiary calculated a loss for the 2002 income year as follows:", "Reasons_for_Decision": "Summary: A beneficiary who is not under a legal disability and who is presently entitled to a share of the income of a trust must include in their assessable income their share of the net income of the trust estate (section 97 of the ITAA 1936). Subdivision 115-C of the ITAA 1997 sets out rules that affect the calculation of a beneficiary's net capital gain if the beneficiary is assessed on a share of the net income of the trust which includes a capital gain. Section 115-215 of the ITAA 1997 treats a beneficiary as having capital gains in addition to those they have from a CGT event happening. For each part of a trust capital gain that was reduced by the CGT discount and which is included in the beneficiary's income under section 97 of the ITAA 1936, the beneficiary is treated as having made a capital gain equal to twice that amount (paragraph 115-215(3)(b) of the ITAA 1997). Subsection 115-215(6) of the ITAA 1997 provides a beneficiary with a deduction to the extent that a capital gain has been included in assessable income under section 97 of the ITAA 1936. This deduction ensures that the beneficiary is not taxed twice on the trust capital gain (ie under section 97 of the ITAA 1936 and under Subdivision 115-C of the ITAA 1997). In this case, the beneficiary should calculate their net capital gain for the 2002 income year as follows The beneficiary's taxable income/loss for the 2002 income year is calculated as follows:", "Date_of_Decision": "2 September 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 97", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Trusts CGT discount Net capital gain", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002964", "Unmatched_Content": "Note: This ATO ID contains a view in respect of section 97 of the Income Tax Assessment Act 1936 and Subdivision 115 -C of the Income Tax Assessment Act 1997 as they operated prior to amendments introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 (including the introduction of Division 6E of Part III of the Income Tax Assessment Act 1936 ). Except in the case of some early balancing trusts and managed investment trusts, those amendments take effect from the 2010-11 and later income years. This ATOID was amended by replacing references to 'assessable income' with 'taxable income'. A further amendment clarified the description of the way in which Subdivision 115-C applies. | Section 97 of the ITAA 1936 'capital gain' amount | Section 115-215 of the ITAA 1997 capital gain | less carried forward capital losses | Trust distribution (treated as a capital gain) | less deduction under subsection 115-215(6) of the ITAA 1997 | Carry forward net capital loss | Share of trust net income assessable under section 97 of the ITAA 1936 | Keywords Capital gains tax Trusts CGT discount Net capital gain"}
{"ATO_ID_Number": "ATO ID 2001/799", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: capital losses: rights in relation to non-resident company", "Issue": "Has any CGT event in Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) happened to enable the taxpayer to make a capital loss in relation to their right to sue a Thai securities firm?", "Decision": "No. As no CGT event in Division 104 of the ITAA 1997 has happened to the right to sue the securities firm, the taxpayer is unable to claim a capital loss. If a CGT event occurs in relation to the taxpayer's rights in the future, the taxpayer may make a capital loss at that time.", "Facts": "The taxpayer received an offer to invest in a non-resident company through a securities firm based in Thailand. The taxpayer forwarded US dollars to the firm's bank accounts overseas. The taxpayer has not received share certificates for their investment. The Thai securities firm has been under investigation by authorities in Thailand in relation to their investment activities. The taxpayer has not been able to contact the company or the securities firm to determine the exact status of their investment. The taxpayer suspects that their investment may have been embezzled and that they do not own any shares.", "Reasons_for_Decision": "Summary: Section 102-20 of ITAA 1997 provides that you make a capital gain or capital loss if and only if a CGT event happens. The gain or loss is made at the time of the CGT event. If the taxpayer's investment has been embezzled the relevant CGT asset will be the right to sue the Thai securities firm to seek compensation for their loss. The CGT event that may be relevant in this situation is CGT event C2 - cancellation, surrender and similar endings (section 104-25 of the ITAA 1997). CGT event C2 occurs if the CGT asset ends by cancellation, surrender, redemption, release, discharge, satisfaction, abandonment, surrender, or forfeiture of an intangible CGT asset (subsection 104-25(1) of the ITAA 1997). As the taxpayer has been unable to establish that any of these actions have occurred in relation to the right to sue, CGT event C2 has not occurred at this time. The taxpayer has not made a capital loss at this time. The taxpayer may make a capital loss in the future when CGT event C2 occurs.", "Date_of_Decision": "28 November 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 102-20 section 104-25 subsection 104-25(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2001/800", "Subject_References": "Capital gains tax Capital losses Confirmed significant issues CGT events C1-C3 - end of a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001799", "Unmatched_Content": "Keywords Capital gains tax Capital losses Confirmed significant issues CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2010/121", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: amalgamation of controlled foreign companies - cancellation of shares - capital proceeds for CGT event C2", "Issue": "What are the capital proceeds under Division 116 of the Income Tax Assessment Act 1997 ( ITAA 1997) from the cancellation of shares in a controlled foreign company as a result of the company amalgamating with another controlled foreign company in accordance with specific legislation in their jurisdiction of residence?", "Decision": "The capital proceeds are nil. Having regard to the legislation governing the amalgamation, no money or property is received, or entitled to be received, in respect of the cancellation of the shares for the purposes of section 116-20 of the ITAA 1997. While the market value substitution rule in subsection 116-30(1) of the ITAA 1997 applies to treat the capital proceeds received from the cancellation of the shares as equal to their market value at the time of the event, each share's market value, worked out in accordance with subsection 116-30(3A) of the ITAA 1997, is nil.", "Facts": "A resident company wholly owns a non-resident subsidiary (Z Co). Z Co wholly owns another non-resident subsidiary (Y Co). Z Co and Y Co amalgamate in accordance with specific legislation in the jurisdiction in which they both reside. Z Co will continue as the amalgamated company. The relevant legislation provides that the amalgamation has the effect that Z Co succeeds to all the assets, liabilities and obligations of Y Co. It further provides that the shares of each amalgamating company, other than the amalgamated company (that is, Z Co), will be cancelled without payment or other consideration. The share cancellation and asset succession all occur on the date that the amalgamation comes into effect. CGT event C2 in section 104-25 of the ITAA 1997 happens to Z Co upon the cancellation of the shares it owns in Y Co.", "Reasons_for_Decision": "Summary: Under subsection 116-20(1) of the ITAA 1997, the capital proceeds from a CGT event are the total of the money received (or entitled to be received) and the market value of property received (or entitled to be received) in respect of the event happening. As the relevant legislation prohibits Z Co from receiving any payment or other consideration for the cancellation of the Y Co shares, the property transferred to Z Co from Y Co is not considered to be received in respect of CGT event C2 happening to those shares. As a result, the actual capital proceeds received from the CGT event are nil. Where no capital proceeds are received from a CGT event, the market value substitution rule in subsection 116-30(1) of the ITAA 1997 applies to substitute the market value of the CGT asset (worked out at the time of the event) as the capital proceeds. As the CGT event that happens to Z Co is CGT event C2, the market value of the shares is to be worked out on the basis that the share cancellation had not occurred and was never proposed to occur: subsection 116-30(3A) of the ITAA 1997. Where a company transfers assets to a shareholder as part of an arrangement involving the cancellation of their shares, subsection 116-30(3A) of the ITAA 1997 would ordinarily have the effect that the transfer of those assets is disregarded in working out the market value of the shares. However, in this case, the amalgamation legislation treats the transfer of the assets, liabilities and obligations to Z Co as separate and unrelated to the share cancellation. Because of this, it is considered that in working out the market value of the Y Co shares, subsection 116-30(3A) of the ITAA 1997 does not require Z Co to disregard the transfer to it of all of Y Co's assets, liabilities and obligations in compliance with the relevant amalgamation legislation. This is the case even though the cancellation of the shares and the transfer of the assets, liabilities and obligations are part of the one amalgamation arrangement. On this basis, it is accepted that the market value of the shares in Y Co at the time of CGT event C2 will be nil. Thus the market value substitution rule in subsection 116-30(1) of the ITAA 1997 will treat Z Co as having received nil capital proceeds.", "Date_of_Decision": "7 May 2010", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Division 116 section 116-20 subsection 116-20(1) subsection 116-30(1) subsection 116-30(3A) Division 727", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/265 | ATO ID 2006/266", "Subject_References": "Capital gains Capital gains tax CGT capital proceeds CGT capital proceeds modification market value substitution rule CGT events CGT events C1-C3 - end of a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010121", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT capital proceeds CGT capital proceeds modification market value substitution rule CGT events CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/517", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains: capital proceeds arising from the grant of a licence to use premises", "Issue": "Is a licencee's undertaking to pay ongoing licence fees for the use of facilities included in the licensor's capital proceeds for CGT event D1 (section 104-35 of the Income Tax Assessment Act 1997 (ITAA 1997))?", "Decision": "No. A licencee's undertaking to pay on-going licence fees is not included in capital proceeds for CGT event D1 (section 104-35 of the ITAA 1997) because the undertaking is not received by the licensor 'in respect of the event happening' for the purposes of paragraph 116-20(1)(b) of the ITAA 1997.", "Facts": "A Licence Agreement was entered into between Company A and Company B after 20 September 1985. Under the Licence Agreement, Company A was granted a non-exclusive right to use port facilities by Company B in consideration for a Licence Fee. The Licence Fee is to be paid over the term of the Licence from income generated by the use of the port facilities. The amount of the Licence Fee is determined by the accounting profit or loss made by Company A from the use of the port facilities during the year. If Company A makes a profit, it has to pay an additional fee as well as an agreed Base Fee. If Company A makes a loss, then all or part of the Base Fee is either reduced or refunded. No amount is paid to Company A upon entering into the Licence Agreement. The Licence has an initial fixed term with three options to renew.", "Reasons_for_Decision": "Summary: CGT event D1 happens if a taxpayer creates a contractual right or other legal or equitable right in another entity (subsection 104-35(1) of the ITAA 1997). In the present case, CGT event D1 happens when Company B enters into the Licence Agreement with Company A. Company B has created a right to use the port facilities in Company A. A capital gain will arise on CGT event D1 happening if the capital proceeds from creating the right are more than the incidental costs the taxpayer incurred that relate to the event. The taxpayer can make a capital loss if those capital proceeds are less (subsection 104-35(3) of the ITAA 1997). Generally, the capital proceeds from a CGT event are the total of: Company B does not receive, nor is it entitled to receive, any money as a result of CGT event D1 happening. As a result of granting Company A the right to use the port facilities, Company B is entitled to future income (the Licence Fee) for the term of the Licence. A right to income is generally assignable, and is therefore 'property' for the purposes of paragraph 116-20(1)(b) of the ITAA 1997. However, even though the right to payment is property, the issue in this case is whether this property is received in respect of the event happening. It is considered in the circumstances of this case that it is reasonable to conclude that Company A's undertaking to pay relates to the use of the port facilities, rather than the grant of the licence. The obligation of Company A to pay the Licence Fee is only a promise to pay for the use of the port facilities as and when use is permitted. Company A does not pay a premium for entering into the Licence Agreement, and the Licence Fee does not contain an embedded premium. Therefore, whilst the right to the Licence Fee is 'property' for the purposes of paragraph 116-20(1)(b) of the ITAA 1997, it is not property received 'in respect of the event happening', and is therefore not capital proceeds in accordance with subsection 116-20(1) of the ITAA 1997.", "Date_of_Decision": "7 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-35 subsection 104-35(3) subsection 116-20(1) paragraph 116-20(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT capital proceeds CGT events D1 - D3 Bringing into existence a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003517", "Unmatched_Content": "Remove legislative reference - Section 109-10 | Keywords Capital gains tax CGT capital proceeds CGT events D1 - D3 Bringing into existence a CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/635", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: Capital proceeds payable by instalments - not all received - no reduction of capital proceeds received", "Issue": "Where the 'consideration in respect of the disposal of an asset' is payable by instalments over time, is that consideration later reduced under former paragraph 160ZD(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) if some of the monies are ultimately not received as a result of the vendor agreeing, several years after completion of the sale agreement, to a reduction in the amount owing?", "Decision": "No. The consideration in respect of the disposal determined under former paragraph 160ZD(1)(a) of the ITAA 1936, is not reduced by that provision if some of the monies are ultimately not received because that provision, by itself, does not allow such a reduction.", "Facts": "In 1995 the taxpayer entered into a contract for the sale of an asset to an unrelated purchaser. The selling price under the contract was payable in ten equal annual payments with interest on the unpaid balance from time to time. The contract was completed on the day it was entered into, and at that time, the vendor was required to transfer to the purchaser the asset and any documentation that the vendor held in respect of the asset. The balance of the purchase price owing was subject to certain discounts if the purchaser elected to pay out the balance of its obligations under the contract earlier than the due date. The purchaser made the required annual payments and there was no indication they would not continue to do so. In 2001, the vendor taxpayer sought out the purchaser and initiated negotiations for the payment of the outstanding balance. This resulted in the vendor agreeing that the purchaser would satisfy the remaining obligations under the contract by paying (in two equal payments) an amount that was less than the amount the vendor was entitled to, and also less than the amount that would have applied if the relevant discount had been taken up at that time by the purchaser. As a result, the disposal consideration received by the taxpayer was less than the amount in the contract upon which the capital gain made from the disposal was calculated.", "Reasons_for_Decision": "Summary: Where the proceeds from the disposal of an asset in 1995 are payable by instalments over time, they constitute money or an entitlement to money, and thus, the full amount receivable forms part of the 'consideration in respect of the disposal of the asset' under former paragraph 160ZD(1)(a) of the ITAA 1936. If some of the proceeds are ultimately not received as a result of an agreed reduction several years after completion of the sale agreement, former section 160ZD of the ITAA 1936, of itself, does not provide for any reduction of the consideration in respect of the disposal of the asset. Former section 160ZF of the ITAA 1936 may operate in certain circumstances to reduce the consideration, but this is only where the non-receipt is not due to an act or thing done or omitted to be done by the taxpayer or an associate of the taxpayer, and the taxpayer has taken all reasonable action to secure payment. See ATO Interpretative Decision ATO ID 2003/636 in relation to the operation of former section 160ZF of the ITAA 1936. Note 1: Taxation Determination TD 93/45 covers the situation where a lesser amount of consideration is negotiated prior to settlement of the sale agreement. Note 2: Former subsection 160ZD(1) and section 160ZF of the ITAA 1936 were rewritten as sections 116-20 and 116-45 of the Income Tax Assessment Act 1997 (ITAA 1997) respectively. The decision set out in this ATO Interpretative Decision is therefore equally applicable to the operation of section 116-20 of the ITAA 1997.", "Date_of_Decision": "14 October 2002", "Year_of_Income": "Year ended 30 June 1995", "Legislative_References": "Income Tax Assessment Act 1936 subsection 160ZD(1) paragraph 160ZD(1)(a) section 160ZF", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/636 | ATO ID 2003/637 | ATO ID 2003/638", "Subject_References": "Capital gains tax CGT capital proceeds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003635", "Unmatched_Content": "Keywords Capital gains tax CGT capital proceeds"}
{"ATO_ID_Number": "ATO ID 2003/636", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: Capital proceeds payable by instalments - non-receipt rule", "Issue": "Where the 'consideration in respect of the disposal of an asset' is payable by instalments over time, does former section 160ZF of the Income Tax Assessment Act 1936 (ITAA 1936) apply to later reduce that consideration if some of the monies are ultimately not received as a result of the vendor agreeing, several years after completion of the sale agreement, to a reduction in the amount owing?", "Decision": "No. Former section 160ZF of the ITAA 1936 does not apply to reduce the consideration in respect of the disposal of an asset if the vendor later agrees to a reduction in the amount owing.", "Facts": "In 1995 the taxpayer entered into a contract for the sale of an asset to an unrelated purchaser. The selling price under the contract was payable in ten equal annual payments with interest on the unpaid balance from time to time. The contract was completed on the day it was entered into, and at that time, the vendor was required to transfer to the purchaser the asset and any documentation that the vendor held in respect of the asset. The balance of the purchase price owing was subject to certain discounts if the purchaser elected to pay out the balance of its obligations under the contract earlier than the due date. The purchaser made the required annual payments and there was no indication they would not continue to do so. In 2001, the vendor taxpayer sought out the purchaser and initiated negotiations for the payment of the outstanding balance. This resulted in the vendor agreeing that the purchaser would satisfy the remaining obligations under the contract by paying (in two equal payments) an amount that was less than the amount the vendor was entitled to, and also less than the amount that would have applied if the relevant discount had been taken up at that time by the purchaser. As a result, the disposal consideration received by the taxpayer was less than the amount in the contract upon which the capital gain made from the disposal was calculated.", "Reasons_for_Decision": "Summary: Former subsection 160ZF(1) of the ITAA 1936 applies, in certain circumstances, to reduce the consideration in respect of the disposal of an asset where the whole or a part of the consideration has not been, and is not likely to be, received. As a result, the capital gain arising from the disposal would accordingly be reduced. The reduction does not apply if the non-receipt of the whole or a part of the consideration is due to an act or thing done, or omitted to be done, by the taxpayer or an associate of the taxpayer, or if the taxpayer has not taken all reasonable action to secure payment of the unpaid part of the consideration (former subsection 160ZF(2) of the ITAA 1936). In the present instance, the reduction in the consideration was brought about by approaches made by the taxpayer to the purchaser several years after the completion of the sale agreement, after the time had passed for the purchaser to take advantage of a major discount and by the taxpayer agreeing to accept less than the full amount outstanding. Ultimately, the purchaser was allowed a large reduction in the outstanding balance. Consequently, the non-receipt of part of the consideration is not covered by former subsection 160ZF(1) of the ITAA 1936 because the reduction in the consideration was caused by an act or thing done by the taxpayer. Note: Former section 160ZF of the ITAA 1936 was rewritten as section 116-45 of the Income Tax Assessment Act 1997 (ITAA 1997). The decision set out in this ATO Interpretative Decision is therefore equally applicable to the operation of section 116-45 of the ITAA 1997.", "Date_of_Decision": "14 October 2002", "Year_of_Income": "Year ended 30 June 1995", "Legislative_References": "Income Tax Assessment Act 1936 section 160ZF subsection 160ZF(1) subsection 160ZF(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/635 | ATO ID 2003/637 | ATO ID 2003/638", "Subject_References": "Capital gains tax CGT capital proceeds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003636", "Unmatched_Content": "Keywords Capital gains tax CGT capital proceeds"}
{"ATO_ID_Number": "ATO ID 2003/774", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: capital proceeds - shares held in escrow", "Issue": "Are shares received for the sale of a CGT asset included in the capital proceeds for the sale under subsection 116-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if the shares are subject to a deed of escrow which imposed a restriction on dealing in the shares?", "Decision": "Yes. The restrictions on dealing in the shares imposed by the deed of escrow do not prevent them being property received in respect of the sale and therefore capital proceeds under paragraph 116-20(1)(b) of the ITAA 1997. This means the value of the shares at the time of the sale must be taken into account in working out whether the sale resulted in a capital gain or capital loss.", "Facts": "The taxpayer sold the assets of their business in the 1999-2000 income year. Consideration received by the taxpayer for the sale included shares in the company that purchased the business. On settlement the shares were registered in the taxpayer's name. However, it was a condition of the issue of the shares to the taxpayer that the taxpayer would not sell them during the 12 month period starting at the date of the sale agreement (that is, the escrow period). The taxpayer's holding of the shares during the escrow period was not subject to any other restrictions.", "Reasons_for_Decision": "Summary: The sale of the taxpayer's business caused CGT event A1 in section 104-10 of the ITAA 1997 to happen. The capital proceeds from a CGT event are the total of the money and the market value of other property received in respect of the event: subsection 116-20(1) of the ITAA 1997. The market value of other property is to be worked out at the time of the event (paragraph 116-20(1)(b)). The restrictions on dealing in the shares imposed by the deed of escrow do not prevent them being property received in respect of the sale, that is, in respect of the CGT event. The taxpayer received the shares, albeit with a restriction attached. While the taxpayer could not sell the shares for 12 months, they were entitled to all the other benefits of a shareholder. Therefore, the market value of the shares at the time of the sale is included in the taxpayer's capital proceeds (paragraph 116-20(1)(b) of the ITAA 1997). The taxpayer cannot use the value of the shares at the end of the escrow period for this purpose.", "Date_of_Decision": "24 July 2003", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 subsection 116-20(1) paragraph 116-20(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax CGT capital proceeds Property law Shares", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003774", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT capital proceeds Property law Shares"}
{"ATO_ID_Number": "ATO ID 2010/55", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Australian source capital gains made by a resident trust for CGT purposes", "Issue": "Is the trustee of a resident trust for CGT purposes assessable under paragraph 98(3)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to an individual non-resident beneficiary's share of the net income of a trust estate that is attributable to capital gains arising from the sale, in Australia, of shares in an Australian company, if the beneficiary is presently entitled to a share of the income of the trust for that year?", "Decision": "Yes. The trustee is assessable under paragraph 98(3)(a) of the ITAA 1936 because:", "Facts": "The taxpayer is the trustee of a resident trust for CGT purposes. The trust is not a fixed trust as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). A beneficiary of the trust is an individual who was a non-resident throughout the income year. The beneficiary was presently entitled to a share of the income of the trust for the income year. During the year the trustee made capital gains from the disposal of some shares in a company listed on the Australian Stock Exchange. The shares are not taxable Australian property for the purposes of section 855-15 of the ITAA 1997 because they do not pass the non-portfolio interest or the principal asset tests referred to in subsection 855-25(1) of the ITAA 1997. The trustee made no other capital gains or losses and did not have any net capital losses from earlier years to be carried forward.", "Reasons_for_Decision": "Summary: A resident trust for CGT purposes must include in the calculation of its net capital gain, capital gains and capital losses from CGT events happening to its worldwide assets. The net capital gain is then included in the trust's net income calculated in accordance with subsection 95(1) of the ITAA 1936. Broadly, the trustee of a trust may be assessed on a share of the trust's net income where there is an individual beneficiary who is a non-resident at the end of a year of income and that beneficiary is presently entitled to a share of the income of the trust. If the beneficiary has not been a resident of Australia at any time during the income year, the trustee is assessed under paragraph 98(3)(a) of the ITAA 1936 on so much of the share of the net income of the trust estate as is attributable to sources in Australia - paragraph 98(2A)(d) of the ITAA 1936. The issue in this case is whether the capital gains from the disposal of the shares are from sources in Australia. There is no statutory source rule for capital gains or net capital gains, for the purposes of Division 6 of Part III of the ITAA 1936. The 'taxable Australian property' tests in section 855-15 of the ITAA 1997 are not relevant for this purpose. In the absence of such a statutory source rule reliance is appropriately placed on common law source rules as they relate to income. The leading authority on the source of profits from the sale of shares is Australian Machinery and Investments Company Ltd v. Deputy Federal Commissioner of Taxation (WA ) (1946) 180 CLR 9; 3 AITR 359; (1946) 8 ATD 81, where it was held that where shares are situated outside Australia and sold outside Australia the profit on sale is derived wholly from a source outside Australia. Starke J held that the relevant source rule is where a business habitually enters into and carries out those contracts with a view to profit. Because the shares held by the trust were in an Australian company and the disposal of the shares occurred in Australia, the capital gains made by the trustee are considered to have a source in Australia. The trustee is therefore assessed under paragraph 98(3)(a) of the ITAA 1936 in relation to the beneficiary's share of the trust net capital gain as the beneficiary is presently entitled to a share of the income of the trust, the beneficiary was a non-resident throughout the income year, and the gain is attributable to sources in Australia. It is not relevant for the purposes of Division 6 of Part III of the ITAA 1936 that, had the beneficiary acquired the shares directly, they would not have made a capital gain because their shares would not have been taxable Australian property for the purposes of section 855-15 of the ITAA 1997.", "Date_of_Decision": "25 February 2010", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 855-15 subsection 855-25(1) subsection 855-40(3) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/54", "Subject_References": "Capital gains tax Non-resident individuals Trusts Shares CGT asset CGT taxable Australian assets", "Case_References": "Australian Machinery & Investment Co Ltd v Deputy Commissioner of Taxation (WA) (1946) 180 CLR 9 (1946) 3 AITR 359 (1946) 8 ATD 81", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201055", "Unmatched_Content": "Note: This ATO ID contains a view in respect of section 98 of the Income Tax Assessment Act 1936 as it operated prior to amendments introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 (including the introduction of Division 6E of Part III of the Income Tax Assessment Act 1936 ). Except in the case of some early balancing trusts and managed investment trusts, those amendments take effect from the 2010-11 and later income years. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Capital gains tax Non-resident individuals Trusts Shares CGT asset CGT taxable Australian assets"}
{"ATO_ID_Number": "ATO ID 2004/920", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: portfolio transfer of general insurance liabilities - acquisition of asset by transferor as against transferee", "Issue": "Does a general insurer, upon a full portfolio transfer, acquire a CGT asset, as against the transferee, for the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997) where the insurer undertook a full portfolio transfer by entering into a scheme for the transfer or amalgamation of insurance business under Division 3A of Part III of the Insurance Act 1973 and the portfolio transfer results in the general insurer having no ongoing liability at law to meet the claims arising from the transferred policies?", "Decision": "No. The general insurer does not acquire a CGT asset for the purposes of Parts 3-1 and 3-3 of the ITAA 1997, upon a full portfolio transfer, where the full portfolio transfer was undertaken in accordance with Division 3A of Part III of the Insurance Act and the portfolio transfer results in the general insurer having no ongoing liability at law to meet the claims arising from the transferred policies.", "Facts": "The transferor is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act. The transferor undertook a full portfolio transfer by entering into a scheme for the transfer or amalgamation of insurance business under Division 3A of Part III of the Insurance Act (the scheme), whereby the whole of its business is transferred to another insurance company (the transferee). Following the portfolio transfer, the transferor ceased its business operations. The scheme was confirmed by the Federal Court, and the Australian Prudential Regulation Authority (APRA) revoked the insurer's authorisation under section 15 of the Insurance Act. The transferor will have no ongoing liability at law to meet the claims arising out of the policies transferred as a result of a scheme.", "Reasons_for_Decision": "Summary: In Federal Commissioner of Taxation v. Orica Limited (1998) 194 CLR 500; 98 ATC 4494; (1998) 39 ATR 66 (the Orica Case ) the taxpayer (Orica) entered into an agreement with the Melbourne Metropolitan Board of Works (MMBW) whereby MMBW agreed to assume Orica's obligations to repay the principal amounts due on debentures issued by Orica on their respective maturity dates. The High Court held that following the making of the agreement with MMBW, Orica remained liable on its debentures and the obligations of MMBW under the agreement did not discharge Orica from that liability. As a result, Orica, at all material times, retained the primary obligation to the debenture holders. Accordingly, by entering into the arrangement with MMBW, Orica acquired a CGT asset being the right to compel MMBW to pay Orica's debenture holders the principal amounts as and when they became due. Each performance and discharge by MMBW of its obligations under the agreement constituted a part ending or part satisfaction of Orica's CGT asset (a C2 CGT event happening to the relevant 'part' of Orica's CGT asset). Following confirmation of the scheme by the Federal Court and steps taken by APRA to revoke the transferor's authorisation under section 15 of the Insurance Act, the transferor has no ongoing liability at law to meet the claims arising out of the policies it transferred because of a portfolio transfer. Therefore, as the transferor has been discharged from its liabilities to the policyholders, the portfolio transfer does not result in the transferor acquiring a CGT asset as against the transferee. Accordingly, the decision in the Orica Case can be distinguished from the situation of a full portfolio transfer that takes place under Division 3A of Part III of the Insurance Act, and as the transferor does not acquire an asset, Parts 3-1 and 3-3 of the ITAA 1997 do not apply.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-1 Part 3-3 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry Capital gains tax", "Case_References": "Federal Commissioner of Taxation v. Orica Ltd (1998) 194 CLR 500 98 ATC 4494", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004920", "Unmatched_Content": "Keywords General insurance General insurance industry Capital gains tax"}
{"ATO_ID_Number": "ATO ID 2004/936", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: consequences of barring estate tail", "Issue": "Are there any capital gains tax (CGT) implications when a taxpayer, who owns an estate in fee tail in a property, bars the tail and obtains an estate in fee simple in the property?", "Decision": "No. There are no CGT implications when an estate in fee tail is barred. The owner of the property is not taken to have acquired any asset for the purposes of Division 109 of the Income Tax Assessment Act 1997 (ITAA 1997) when the fee tail is barred.", "Facts": "As a result of the death of an individual before 20 September 1985, the taxpayer acquired an estate in fee tail in a property that the deceased person had owned at the time of their death. The taxpayer wishes to bar the fee tail and obtain an estate in fee simple in the property. Once the taxpayer has obtained the fee simple they intend to sell the property. The taxpayer is unsure whether they will be treated as having acquired the property before 20 September 1985.", "Reasons_for_Decision": "Summary: Under the deceased's will the taxpayer obtained an estate in fee tail in a property. An estate in fee tail is an interest in property which is less than a fee simple. An estate in tail can only descend to lineal descendants of the donee. If the line ended, then the estate would revert to the original donor or their heirs. The owner of an estate in tail cannot alienate the estate for a period longer than their life. For this reason, a variety of methods were developed to bar the tail and convert the estate in tail into an estate in fee simple. Ultimately it became established that all devices aimed at preventing the barring of estates tail were void, that is, it became impossible to create an unbarrable estate tail. In this case, the taxpayer intends to bar the estate tail by the use of a disentailing deed. By entering into a disentailing deed, the taxpayer does not dispose of the property, their interest merely enlarges ( Re Gaskell and Walters' Contract [1906] 2 Ch 1). It is considered that no CGT event in Division 104 of the ITAA 1997 will happen when the taxpayer's interest in the property is enlarged as a result of entering into the disentailing deed. Essentially, the ability of the taxpayer to disentail the property was inherent in the asset that the taxpayer acquired from the deceased former owner. Therefore, the taxpayer is taken to have acquired the estate in fee simple under the terms of the deceased's will. Section 128-15 of the ITAA 1997 sets out the CGT consequences that result when a CGT asset a deceased person owned just before they died passes to a beneficiary in the deceased's estate. One consequence is that the beneficiary is taken to have acquired the asset on the day the deceased person died (subsection 128-15(2) of the ITAA 1997). In this case, the deceased died before 20 September 1985. Therefore, the taxpayer is taken to have acquired the property before that time. The date the taxpayer acquired the property was not affected by their having entered into the disentailing deed. As the taxpayer acquired their interest in the property before 20 September 1985, any capital gain or capital loss they make when they dispose of the property will be disregarded (subsection 104-10(5) of the ITAA 1997).", "Date_of_Decision": "28 October 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 104 subsection 104-10(5) Division 109 section 128-15 subsection 128-15(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/37", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition dates CGT deceased estates Deceased estates Heirs Wills", "Case_References": "Re Gaskell and Walters' Contract [1906] 2 Ch 1", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004936", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/37 | Keywords Acquisition dates CGT deceased estates Deceased estates Heirs Wills"}
{"ATO_ID_Number": "ATO ID 2003/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: CGT event - poker machine entitlement acquired by a NSW hotelier", "Issue": "Did a CGT event happen under Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) when a NSW hotelier acquired the initial allocation of a poker machine entitlement under paragraph 15(1)(a) of the Gaming Machines Act 2001 (NSW)?", "Decision": "No. There was no CGT event under Division 104 of the ITAA 1997 when the hotelier acquired the initial allocation of a poker machine entitlement under paragraph 15(1)(a) of the Gaming Machines Act 2001 (NSW).", "Facts": "Prior to the commencement of the Gaming Machines Act 2001 (NSW) (Gaming Machines Act), hoteliers in NSW were authorised to hold poker machines under the Liquor Act 1982 (NSW) (Liquor Act). On the commencement of the Gaming Machines Act, an initial allocation of poker machine entitlements was made under paragraph 15(1)(a) of that Act. One poker machine entitlement was allocated for each approved poker machine that comprised the frozen number of approved poker machines for a hotel as determined by the Liquor Administration Board. Furthermore, the savings provisions in Schedule 1 of the Gaming Machines Act carried over existing gaming machine approvals and authorisations, and existing gaming-related licences.", "Reasons_for_Decision": "Summary: Legal rights fall within the definition of 'CGT asset' at subsection 108-5(1) of the ITAA 1997. The rights pertaining to each approved poker machine, kept in a hotel, for which a poker machine entitlement was allocated, were effectively carried over from the Liquor Act to the Gaming Machines Act. This was facilitated by paragraph 15(1)(a) and the savings provisions in Schedule 1 of the latter statute.", "Date_of_Decision": "27 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 104 subsection 108-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Amusement & gambling equipment Capital gains tax CGT assets CGT events", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200346", "Unmatched_Content": "This ATO ID has been amended by the inclusion of a note to cover the identical situation with regard to registered clubs that was dealt with in withdrawn ATO ID 2003/47. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Minor punctuation amendments | Minor punctuation amendments. Add Note regarding paragraphs of the Gaming Machine Act 2001 (NSW) which have been repealed | Keywords Amusement & gambling equipment Capital gains tax CGT assets CGT events"}
{"ATO_ID_Number": "ATO ID 2003/551", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: foreign exchange gains or losses", "Issue": "Does the definition of Capital Gains Tax (CGT) asset include bank accounts denominated in a foreign currency so that deposits or withdrawals will be subject to the provisions of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Bank accounts denominated in a foreign currency are CGT assets and the provisions in Parts 3-1 and 3-3 of the ITAA 1997 apply to any deposits or withdrawals made by Australian residents to the bank accounts.", "Facts": "An Australian resident subsidiary of an offshore parent company acts as a retailer for goods produced by various subsidiaries of the Group and has acted as a 'banker' for the Group. The Australian resident subsidiary has a United States dollar (USD) bank account and a USD short-term deposit account. These accounts are used to make repayments of USD loans. Funds deposited in the bank accounts are derived from sales, inter-account transfers, and repayments of loans by the parent company. No amounts of the foreign exchanges have been converted into Australian dollars (AUD).", "Reasons_for_Decision": "Summary: Under section 108-5 of the ITAA 1997, foreign currency is a CGT asset. However, bank accounts denominated in a foreign currency are not foreign currency but rather a chose in action, or more specifically a debt (or debts), denominated in a foreign currency. The depositing of foreign currency into a bank account results in the acquisition of a debt by the depositor, the debt being a chose in action and a CGT asset. The chose in action is the ability to require payment of the account balance, or part of it, on demand ( Joachimson v. Swiss Bank Corporation [1921] 3 KB 110 at 127). A bank account is a single asset, the one debt and chose in action. That is, a single debt existing between the customer and the banker in their respective capacities as creditor and debtor ( Foley v. Hill [1843-1860] All ER 16). As the bank account is one asset, each deposit adds to its cost base and reduced cost base and each withdrawal constitutes a part ending or part satisfaction of the debt asset. Each withdrawal will constitute CGT event C2 happening to the relevant 'part' of the asset (the amount withdrawn). Item 5 of the table in subsection 960-50(6) of the ITAA 1997 requires a 'transaction or event' involving money or property denominated in foreign currency to be converted to AUD at the time of the 'transaction or event'. Therefore, each deposit and withdrawal must be converted to AUD to work out the relevant cost base and capital proceeds of the debt asset. On this basis, foreign exchange gains or losses will be brought to account at the time of a withdrawal depending on the movement of the foreign currency as against the AUD.", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 31 March 1997 Year ended 31 March 1998 Year ended 31 December 1998 Year ended 31 December 1999 Year ended 31 December 2000 Year ended 31 December 2001 Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 103-20 section 104-25 section 108-5 section 112-30 subsection 960-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bank accounts Foreign exchange gains Foreign exchange losses Net capital gains", "Case_References": "Joachimson v. Swiss Bank Corporation [1921] 3 KB 110", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003551", "Unmatched_Content": "This ATO ID has been amended to remove reference to section 103-20 which has been repealed and replaced by item 5 of the table in section 960-50(6) of the ITAA. | Keywords Bank accounts Foreign exchange gains Foreign exchange losses Net capital gains"}
{"ATO_ID_Number": "ATO ID 2003/595", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: assignment of fixtures attached to land", "Issue": "For the purposes of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (ITAA 1997), did the taxpayer acquire ownership of fixtures separately from the leasehold interest in the land to which the fixtures were attached?", "Decision": "No. The taxpayer acquired only one asset for the purposes of Parts 3-1 and 3-3 of the ITAA 1997 - rights under a contract.", "Facts": "A contract for the sale of business was entered into between two entities. Under that contract: The purchaser/lessee has no right to remove the fixtures and must surrender them for their market value at the termination of the lease.", "Reasons_for_Decision": "Summary: Although the contract of sale between the parties evidences an intention to transfer ownership of the fixtures to the purchaser, an issue arises as to whether there was a transfer of those fixtures at law or in equity. Fixtures are chattels that are annexed to the land and are treated in law as part of the land ( Halsbury's Laws of Australia , vol. 19, paragraph 315-20). Subject to statutory exceptions, when an item is a fixture on land it is part of the land and owned by the owner of the land and cannot be sold separately from it ( Mills v. Stokman (1967) 116 CLR 61). The real effect of the transaction was not to make the purchaser the owner of the fixtures but to create rights in the purchaser in relation to those fixtures. Nothing decided in Eastern Nitrogen Ltd v. Federal Commissioner of Taxation (2001) 108 FCR 27; 2001 ATC 4164; (2001) 46 ATR 474 and FC of T v. Metal Manufacturers Ltd 2001 ATC 4152; (2001) 46 ATR 497 on the sale and leaseback of operating plant fixtures means that ownership of the fixtures vests at law or in equity in the lessee/assignee. In those cases, the rights of the lessor to enter into the land and remove the leased operating plant fixtures, in the event of default or at the termination of the lease agreements were fundamental. Here there is no right of removal of the fixtures by the lessor/assignor under the lease agreement. Accordingly, for the purposes of Parts 3-1 and 3-3 of the ITAA 1997, the purchaser acquired only one asset - the rights under the contract.", "Date_of_Decision": "19 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-1 Part 3-3", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/86", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of CGT assets Capital gains tax CGT events D1 - D3 - bringing into existence a CGT asset", "Case_References": "Eastern Nitrogen Ltd v. Federal Commissioner of Taxation (2001) 108 FCR 27 2001 ATC 4164", "Other_References": "Halsbury's Laws of Australia, vol. 19, paragraph 315-20", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003595", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/86 | Keywords Acquisition of CGT assets Capital gains tax CGT events D1 - D3 - bringing into existence a CGT asset"}
{"ATO_ID_Number": "ATO ID 2011/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: assignment of renewable energy certificates", "Issue": "Are there any consequences under Part 3-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the prospective owner of a small generation unit or a solar water heater, if they use their right to create a renewable energy certificate (REC) to acquire the unit or heater?", "Decision": "No, there are no consequences under Part 3-1 of the ITAA 1997 in these circumstances for the prospective owner of the generation unit or solar water heater.", "Facts": "You have contracted to have a solar power generation unit installed. The unit is an eligible small generation unit for the purposes of the Renewable Energy (Electricity) Act 2000 (the REE Act) Following your purchase and installation of the generation unit a statutory right arises under the REE Act entitling you as the owner of the generation unit to create RECs. However, as provided for under the REE Act, you have entered into an agreement with the installer of the unit, who is an agent for the purposes of the REE Act, assigning your right to create RECs to the installer in return for a financial benefit. The financial benefit you receive under the agreement with the installer is a reduction in the amount of money you will pay for the purchase and installation of the generation unit. The reduction reflects the value of the right to create RECs that you assigned to the installer.", "Reasons_for_Decision": "Summary: The right to create RECs is a CGT asset. The right arises under the REE Act (Taxation Determination TD 1999/77). CGT event A1 happens if a change in ownership occurs from you to another entity, whether because of some act or event or by operation of law (subsection 104-10(2) of the ITAA 1997). The transfer of the right, viewed separately from the acquisition of the generation unit, might be taken to cause CGT event A1 to happen. However in this case, where as part of the process of acquiring the small generation unit you assign your rights to the installer, it is considered that the reality of the matter is that you are acquiring a generation unit and the assignment of the right to create a REC merely facilitates that acquisition. Accordingly, where there is an assignment of the right to create a REC, and a reduction in the amount of money required to be paid for the small generation unit (the underlying asset), the CGT provisions of the ITAA 1997 will apply only to the acquisition of the underlying asset and not to the right that merely facilitates the acquisition.", "Date_of_Decision": "16 March 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/77", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/775 | ATO ID 2003/790", "Subject_References": "Capital gains Capital gains tax CGT events CGT event A1 -disposal of a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201126", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 1999/77 | Keywords Capital gains Capital gains tax CGT events CGT event A1 -disposal of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2010/72", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: trustee ceasing to hold an asset on trust and commencing to hold it in its own capacity - CGT event A1", "Issue": "Does CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 ( ITAA 1997) happen if a company ceases to hold a CGT asset in its capacity as trustee of a trust and commences to hold the asset in its own capacity?", "Decision": "Yes. CGT event A1 in section 104-10 of the ITAA 1997 happens because there is a change in ownership of the asset from one entity (the company acting in its capacity as trustee) to another entity (the company acting in its own capacity).", "Facts": "The trustee of a unit trust holds a CGT asset on trust. The trustee is an Australian resident and is a company limited by shares. As part of a restructure, the trustee ceases to hold the asset on trust and commences to hold the asset in its own capacity as a company. The unit holders under the restructure exchange their units in the trust for shares in the company. The trust is subsequently wound up.", "Reasons_for_Decision": "Summary: CGT event A1 in section 104-10 of the ITAA 1997 happens if there is a disposal of a CGT asset. Under subsection 104-10(2) of the ITAA 1997, a disposal of a CGT asset occurs if there is a change in ownership of the asset from one entity to another entity. The term 'entity' is defined in section 960-100 of the ITAA 1997 and includes a body corporate - paragraph 960-100(1)(b) of the ITAA 1997. Where a legal person, such as a body corporate, has a number of different capacities in which the person does things, subsection 960-100(3) of the ITAA 1997 provides that the person is taken to be a different entity in each of those capacities. It follows from this that a body corporate acting in its capacity as a trustee of a trust is a different and distinct entity from the same body corporate acting in its own capacity. Because of this, the requirements for CGT event A1 to happen are satisfied as there has been a change in ownership of the asset from one entity (the company acting in its capacity as trustee) to another entity (the company acting in its own capacity). This is the case notwithstanding that there has been no change in the legal ownership of the asset.", "Date_of_Decision": "2 March 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 subsection 104-10(2) Subdivision 124-N section 960-100 paragraph 960-100(1)(b) subsection 960-100(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/808", "Subject_References": "Capital gains tax CGT events CGT event A1 - disposal of a CGT asset CGT roll-over relief CGT same asset roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201072", "Unmatched_Content": "Keywords Capital gains tax CGT events CGT event A1 - disposal of a CGT asset CGT roll-over relief CGT same asset roll-over"}
{"ATO_ID_Number": "ATO ID 2010/210", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT event A1: partnership becomes corporate limited partnership", "Issue": "Does CGT event A1 in subsection 104-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) happen to a partnership asset when a partnership converts to a limited partnership that satisfies the definition of corporate limited partnership in section 94D of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No, CGT event A1 does not happen as the conversion does not result in a change of ownership for the partnership asset.", "Facts": "A partnership carrying on a business made an application to be a limited partnership and was registered as a limited partnership under the relevant State legislation.", "Reasons_for_Decision": "Summary: CGT event A1 happens if you dispose of a CGT asset (subsection 104-10(1) of the ITAA 1997). Subsection 104-10(2) of the ITAA 1997 provides that you dispose of a CGT asset if a change in ownership occurs from you to another entity, whether because of some act or event or by operation of law. Under the scheme of the relevant State legislation governing limited partnerships, there is no change of ownership of the partnership asset on the registration of a limited partnership. Generally, a partnership converts to a limited partnership, with the consent of all the partners, by varying the terms of the existing partnership agreement to limit the liability of one or more partners and registering the limited partnership under the relevant Australian State laws. This conversion does not cause the original partnership to cease; it merely varies the mutual rights and duties that exist between the partners. Under the operation of Division 5A of the ITAA 1936, a limited partnership that satisfies the definition of corporate limited partnership in section 94D of the ITAA 1936 is treated as a company for certain income tax purposes. Division 5A of the ITAA 1936 does not modify the operation of CGT event A1 in section 104-10 of the ITAA 1997 such that an event happens to the partnership assets on the commencement of corporate limited partnership status. Section 94J of the ITAA 1936 provides that a reference in the income tax law to a company or to a body corporate includes a reference to a partnership. The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 6) of 1992 which introduced Division 5A into the ITAA 1936 advised that, while corporate limited partnerships are generally treated as companies for the purposes of the income tax law, this does not convert them into companies for other purposes, including criminal law, monetary claims, and so on. This is consistent with the view that the treatment of a corporate limited partnership as a company for the purposes of the ITAA 1997 and ITAA 1936 does not deem there to be a transfer of the ownership of partnership assets to the company nor does it change the ownership of partnership assets under general law. As there has been no change of ownership of the partnership assets, CGT event A1 does not happen upon conversion of a partnership to a limited partnership.", "Date_of_Decision": "15 November 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(1) subsection 104-10(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax CGT assets CGT event A1 -disposal of a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010210", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT assets CGT event A1 -disposal of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2009/129", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: land vested in a statutory trustee for sale, CGT event A1 or CGT event E1?", "Issue": "Does CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen if the Supreme Court of Queensland makes an order pursuant to section 38 of the Property Law Act 1974 (Qld) appointing statutory trustees for the sale of a co-owned property?", "Decision": "Yes. CGT event A1 in section 104-10 of the ITAA 1997 will happen in respect of the property on the appointment of the statutory trustees.", "Facts": "A commercial property situated in Queensland was owned by two companies as tenants in common. As a result of a disagreement between the co-owners as to their future use of the property, one of the co-owners applied to the Supreme Court of Queensland for an order under section 38 of the Property Law Act 1974 (PLA) for the appointment of trustees for the sale of the property. The court appointed two accountants as trustees of the property and vested the property in them. The court ordered that the trustees sell the property and pay each co-owner their respective share of the net sale proceeds. In accordance with the court order the property was subsequently sold and the net proceeds were remitted to the co-owners.", "Reasons_for_Decision": "Summary: CGT event A1 happens if you dispose of a CGT asset: subsection 104-10(1) of the ITAA 1997. You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law: subsection 104-10(2) of the ITAA 1997. If the disposal is not made under a contract, then CGT event A1 happens when the change of ownership occurs: subsection 104-10(3) of the ITAA 1997. The effect of the court order is to vest the property in the trustees. This is clear from the terms of the court order itself (which expressly vests the property in the trustees) and from subsection 38(3A) of the PLA (which says that on the appointment of statutory trustees for sale the property shall vest in those trustees). Also, subsection 38(7) of the PLA says that where land becomes subject to a statutory trust for sale it shall be deemed to be 'converted' upon the appointment of trustees for sale unless the court otherwise directs. In equity, conversion is the notional change of land into money (or money into land). Its effect is to turn realty into personalty (or personalty into realty). The principle is that land directed to be sold and turned into money (or money directed to be employed in the purchase of land) is considered to be that species of property into which it is directed to be converted. Refer to Meagher, RP, Heydon, JD, Leeming, MJ, 2002, Meagher, Gummow and Lehane, Equitable Doctrines & Remedies , 4th edn, Butterworths, Lexis Nexis, Australia, pp. 1079-1080; Fletcher v. Ashburner (1779) 1 Bro CC 497; 28ER 1259. On the making of the court order the whole of the co-owners' interests in the property vested in the accountants appointed as trustees for the sale of the property; and the co-owners' interests were converted into personalty, that is, into a right to compel due performance of the trust and to share in the proceeds of sale in accordance with their interests. In these circumstances it is considered that the making of the court order effects a disposal of the property from the co-owners to the trustees for sale by operation of law. Therefore, CGT event A1 happens. A capital gain will be made as a result of CGT event A1 happening if the capital proceeds from the event are more than the asset's cost base. The capital proceeds for the event are the total of the money you receive or are entitled to receive in respect of the event happening and the market value of any other property you receive or are entitled to receive in respect of the event happening (refer to subsection 116-20(1) of the ITAA 1997). On the making of the court order each co-owner's interest in realty is converted to personalty. It is expected that the market value of this property will equate to the share of net proceeds received. CGT event E1 did not happen when the trust was created over the property. That event happens if you create a trust over a CGT asset by declaration or settlement: subsection 104-55(1) of the ITAA 1997.It is considered that this event has no application where the trust is created by order of a court, rather than by the actions of the owners of the property. That is, given the court's role, it is impossible to cast the co-owners in the role of 'you' for the purpose of CGT event E1.", "Date_of_Decision": "26 October 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 subsection 104-10(1) subsection 104-10(2) subsection 104-10(3) subsection 104-55(1) subsection 116-20(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains CGT capital proceeds CGT event A1 - disposal of a CGT asset CGT event E1 -E9 - trusts Disposal of assets", "Case_References": "Fletcher v Ashburner (1779) 1 Bro CC 497 28 ER 1259", "Other_References": "Meagher, Gummow and Lehane, Equitable Doctrines & Remedies, Fourth edition (Meagher, Lehane and Leeming) Butterworths, Lexis Nexis, 2002 at [38-005] and [38-010]", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009129", "Unmatched_Content": "Include reference to CGT event E1 | Minor formatting changes and inclusion of legislative reference to subsection 116-20(1) and subsection 104-55(1) of the ITAA 1997 | Change for citing and referencing the title of the book | Include reference to subsection 104-55(1) of the ITAA 1997 | Keywords Capital gains CGT capital proceeds CGT event A1 - disposal of a CGT asset CGT event E1 -E9 - trusts Disposal of assets"}
{"ATO_ID_Number": "ATO ID 2007/174", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Options: taxing rights on gain from sale of shares by an Australian resident taxpayer where the options to purchase those shares were granted to the taxpayer when they were working in the United States of America", "Issue": "Does a resident individual taxpayer include a capital gain made on the sale of shares acquired under an employee share scheme in their net capital gain or loss, where the option to purchase the shares was granted to the taxpayer when they were a resident of the United States of America (US) and the US has correctly taxed the entire gain on exercise of the option in accordance with Article 15 of the tax treaty between Australia and the US (US Convention) contained in Schedule 2 to the International Tax Agreements Act 1953 (Agreements Act)?", "Decision": "Yes. A resident taxpayer does include a capital gain from the sale of the shares acquired under an employee share scheme in their net capital gain or loss, even though the US has source country taxing rights under Article 15 of the US Convention in respect of the gain made on the exercise of employee share options.", "Facts": "The taxpayer was granted employee share options in a US public company (US Company), while the taxpayer was a resident of the US. These options were granted solely in relation to the taxpayer's performance prior to the options being granted. While the options required a three year holding period prior to vesting, there were no other conditions attached to them. Accordingly, the options were granted as a reward for service which was carried out entirely in the US. The taxpayer subsequently relocated to Australia and immediately became an Australian resident. The taxpayer continued to work for an associate of the US Company in Australia until the taxpayer exercised the options. The shares acquired as a result of the options were disposed of immediately. The facts were such that the taxpayer was unable to choose a tax deferral under Division 13A of the Income Tax Assessment Act 1936 (ITAA 1936).", "Reasons_for_Decision": "Summary: On exercise of the options, a capital gains tax (CGT) event C2 happened in relation to each option (subsection 104-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997)). The taxpayer's capital gains from this event, however, were disregarded and the cost base of the options became part of the cost base of the shares acquired by the exercise of the options (subsections 134-1(1) and 134-1(4) of the ITAA 1997). On the sale of the shares, a CGT event A1 happened in relation to each share (subsection 104-10(1) of the ITAA 1997). There was a capital gain from the disposal of each share equal to the amount by which the capital proceeds from the disposal of the share exceeded the cost base of the share (subsection 104-10(4) of the ITAA 1997). These capital gains included the capital gains on the exercise of the options, because of the cost base calculation described in the preceding paragraph. A capital gain can be reduced under section 118-20 of the ITAA 1997 if, because of the CGT event that resulted in that capital gain, an amount is included in the taxpayer's assessable income or exempt income. This raises the question of whether all or part of the gain on the employee shares is foreign earnings within the meaning of subsection 23AG(7) of the ITAA 1936 and possibly exempt under section 23AG of the ITAA 1936. While the discount on the grant of options to the taxpayer is considered to be employment related income, in accordance with the decision in Donaldson v. FC of T 74 ATC 4192; (1974) 4 ATR 530, the benefit they obtain from the exploitation of those options (that is from the holding of the options from grant time to exercise time and subsequent disposal of the underlying shares) is capital in nature and does not constitute 'foreign earnings' within the meaning of subsection 23AG(7) of the ITAA 1936 (see FC of T v. McArdle 89 ATC 4051; (1988) 19 ATR 1901). Accordingly, the capital gain on the employee shares is not reduced by section 118-20 of the ITAA 1997. In determining liability to Australian tax, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the Agreements Act. Schedule 2 of the Agreements Act contains the US Convention. Article 15 of the US Convention provides that remuneration derived by a resident of one of the Contracting States in respect of employment exercised in the other State may be taxed in that other State. It is accepted that the employment that gives rise to the gain on the employee share option is entirely carried out in the US and, accordingly, the US has correctly taxed such gain under Article 15. However, the Article does not prevent the country of residence of the taxpayer from also taxing the gain. That much is clear from the words of the Article which prima facie only permits the country of residence of the taxpayer to tax the remuneration, unless the employment is exercised in the other country, in which case the remuneration may be taxed by that other country. The words 'may be taxed' in this context do not mean that the other country is the only one entitled to tax that income. Under international tax law principles, the residence country (in this case Australia) may also continue to tax such remuneration (see paragraph 23 of Taxation Ruling TR 2001/13). However, double taxation is avoided by the residence country providing appropriate credit relief. Accordingly, there is nothing in Article 15 or any part of the US Convention that prevents Australia from taxing the gain on the disposal of the shares acquired under the employee share scheme in accordance with its normal domestic tax law provisions. Consequently, the entire capital gain made on the sale of the shares is taken into account in calculating the taxpayer's net capital gain or loss.", "Date_of_Decision": "28 August 2007", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A section 23AG subsection 23AG(7)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/173", "Subject_References": "Double tax agreements Employee share schemes & options United States Capital gains tax Capital gains Capital receipts CGT capital proceeds CGT event A1 - disposal of a CGT asset CGT events C1-C3 - end of a CGT asset", "Case_References": "Donaldson v. FC of T 74 ATC 4192 (1974) 4 ATR 530", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007174", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Employee share schemes & options United States Capital gains tax Capital gains Capital receipts CGT capital proceeds CGT event A1 - disposal of a CGT asset CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2006/17", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: disposal of goodwill by a branch to another entity", "Issue": "Can subsection 23AH(3) of the Income Tax Assessment Act 1936 (ITAA 1936) apply to disregard the capital gain in respect of the disposal of goodwill by the branch of an Australian company to another entity?", "Decision": "Yes. Subsection 23AH(3) of the ITAA 1936 can apply to disregard the capital gain in respect of the disposal of goodwill by the branch of an Australian company to another entity.", "Facts": "The taxpayer is an Australian resident company (the company), that carries on several active businesses at or through a branch in a listed country. The taxpayer will transfer one of the businesses carried on by the branch to a newly incorporated company (the new company) resident in that listed country. The income earned by the relevant business of the branch is sourced in that listed country. The branch is a permanent establishment (PE).", "Reasons_for_Decision": "Summary: Subsection 23AH(1) of the ITAA 1936 states that one of the objects of section 23AH of the ITAA 1936 is to ensure that active foreign branch income derived by an Australian resident company, and capital gains made by a resident company in disposing of non-tainted assets used in deriving foreign branch income are not assessable income or exempt income of the company. Subsection 23AH(3) of the ITAA 1936 provides: Subject to this section, a capital gain from a CGT event happening to a CGT asset is disregarded for the purposes of Part 3-1 of the Income Tax Assessment Act 1997 if: (a) the gain is made by a company that is a resident; and (b) the company used the asset wholly or mainly for the purpose of producing foreign income in carrying on a business at or through a PE of the company in a listed country or unlisted country; and (c) the asset does not have the necessary connection with Australia. The capital gain arising from the transfer of the goodwill from the branch to the new company will be non-assessable, non-exempt income of the Australian resident company under section 23AH of the ITAA 1936 if all of the requirements, set out in subsection 23AH(3) of the ITAA 1936 are satisfied. In addition, the application of subsection 23AH(3) of the ITAA 1936 is subject to the other provisions of that section. The relevant provisions that are required to be considered are subsections 23AH(6) and 23AH(8) of the ITAA 1936. Paragraph 23AH(3)(a) of the ITAA 1936 is satisfied as the company is a 'resident' of Australia as defined in subsection 6(1) of the ITAA 1936. The company is incorporated in Australia and it will not be acting in the capacity of a trustee for the purposes of the definition of 'company' in subsection 23AH(15) of the ITAA 1936. Paragraph 23AH(3)(b) of the ITAA 1936 is satisfied because the company has used the relevant asset, being the goodwill of the business, wholly or mainly in carrying on a business at or through a branch in a listed country. In accordance with Federal Commissioner of Taxation v. Murry 193 CLR 605 at 615; 98 ATC 4585 at 4591; (1998) 39 ATR 129 at 137 ( Murry ) goodwill 'is a right or privilege that is inseparable from the conduct of the business'. The business to which the goodwill relates had earned income, being ordinary assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) . This income is 'foreign income' as defined in subsection 23AH(15) of the ITAA 1936. The income is also derived via a PE as defined in subsection 23AH(15) of the ITAA 1936. Paragraph 23AH(3)(c) of the ITAA 1936 is satisfied as goodwill does not have the 'necessary connection with Australia' under section 136-25 of the ITAA 1997. As paragraphs 23AH(3)(a), 23AH(3)(b) and 23AH(3)(c) of the ITAA 1936 have been satisfied subsection 23AH(3) of the ITAA 1936 will apply subject to subsections 23AH(6) and 23AH(8) of the ITAA 1936. Subsection 23AH(6) of the ITAA 1936 states: Subsection (3) or (4) does not apply to a capital gain or capital loss if: (a) the PE is in a listed country; and (b) for a capital gain - the gain is from a tainted asset and is eligible designated concession income in relation to a listed country; and (c) for a capital loss - the loss is from a tainted asset and would be eligible designated concession income in relation to a listed country if it were a capital gain. Subsection 23AH(15) of the ITAA 1936 provides that the term 'tainted asset' has the same meaning as in Part X of the ITAA 1936. Section 317 of the ITAA 1936 contains a definition of the term 'tainted asset'. Goodwill is not an asset caught by paragraphs (a) or (b) of that definition. However, paragraph (c) covers 'any other asset' and contains some exclusion. Goodwill will be caught by paragraph (c) unless one of the exclusions applies. The exclusion relevant here is whether goodwill is an asset 'used solely in carrying on a business'. This phrase is not defined in Part X of the ITAA 1936 so its ordinary meaning will apply. The word 'sole' is defined in the Macquarie Concise Dictionary to mean 'only'. In Murry the majority of the Full High Court held that goodwill 'is a right or privilege that is inseparable from the conduct of the business'. Isaacs J in Bacchus Marsh Concentrated Milk Co Ltd (in liq) v. Joseph Nathan & Co Ltd (1919) 26 CLR 410 also stated at 438: Goodwill is property but, as such, is inseparable from a particular \"business\" in the sense of a particular going concern. It is an asset of that business, and enhances its value. Since goodwill is inextricably linked with the conduct of a business, it is used solely in carrying on a business. It is therefore not a 'tainted asset' under section 317 of the ITAA 1936 and subsection 23AH(6) of the ITAA 1936 will not apply to preclude the operation of subsection 23AH(3) of the ITAA 1936. Subsection 23AH(8) of the ITAA 1936 states that: Subsection (3) or (4) does not apply to a capital gain or capital loss if: (a) the PE is in an unlisted country; and (b) the gain or loss is from a tainted asset. In the present case, the PE is in a listed country and subsection 23AH(8) of the ITAA 1936 will not apply. Therefore, subsection 23AH(3) of the ITAA 1936 can apply to disregard the capital gain arising from the disposal of goodwill by the branch of an Australian company in a listed country to another entity in that listed country.", "Date_of_Decision": "9 December 2005", "Year_of_Income": "Year ended 30 September 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 23AH(1) subsection 23AH(3) subsection 23AH(6) subsection 23AH(8) subsection 23AH(15) subsection 6(1) section 317", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income International tax Non-assessable non-exempt income Permanent establishment Goodwill Capital gains", "Case_References": "Federal Commissioner of Taxation v. Murry (1998) 193 CLR 605 98 ATC 4585 (1998) 39 ATR 129", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200617", "Unmatched_Content": "Keywords Foreign income International tax Non-assessable non-exempt income Permanent establishment Goodwill Capital gains"}
{"ATO_ID_Number": "ATO ID 2006/94", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: time of CGT event A1 where body corporate transfers property to developer", "Issue": "In a case where, as part of a property development and sale of blocks, a body corporate 'sells-back' a 'new lot' to a developer and: is the time of the CGT event, being the disposal of the new lot, the time that the final sale contract is entered into pursuant to paragraph 104-10(3)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The words 'contract for the disposal' of a CGT asset in paragraph 104-10(3)(a) of the ITAA 1997 refer to the contract that is the source of the obligation to make a specific disposal. Even though the body corporate was not itself required under that contract to make the transfer, there is nevertheless a direct and proximate connection between the contract and the disposal. In the circumstances of this case, it is sufficient to satisfy the requirements of paragraph 104-10(3)(a). It does not matter that the body corporate was not a party to that contract. By it, the purchasers were legally bound to ensure that the body corporate effected the disposal, and this had the practical effect of ensuring that the disposal happened. Further, the developer's consideration for the acquisition of the new lot is contained in the agreements with the purchasers. There is no subsequent agreement by which this is done.", "Facts": "A developer builds a block of three units and enters into contracts to sell the units to individual purchasers (the purchasers). Just after the first sale contract is entered into, the strata plan for the scheme is registered under the Strata Schemes (Freehold Development) Act (NSW) 1973. On registration, the scheme comprises three lots and common property. This is also when the body corporate comes into existence. All contracts for sale contain a special sale back condition. Under this condition, the purchasers were legally bound to propose, and vote in favour of, body corporate resolutions to subdivide the common property to form a new lot and to transfer that lot to the developer. The purchase price under each sale contract reflects the fact that, on fulfilment of the terms of each sale contract, a valuable new lot will be transferred to the developer. The dimensions of the new lot are marked on a plan annexed to each contract. The developer's consideration for the new lot is provided by virtue of these contracts. The developer always intended to develop a scheme comprising four lots. However, it was necessary to adopt a staged approach by selling three units (with sale back conditions) to fund the development of the new lot. The only means by which the developer could give effect to this intent was to include a sale back condition in each sale contract. It was also necessary for all of the purchasers to vote in favour of the subdivision and transfer of the new lot in order for the body corporate resolutions to pass. After the transfer of the final unit from the developer to the purchaser, all of the purchasers are members of the body corporate. They exercise their voting powers to pass resolutions for the transfer of the new lot in fulfilment of their obligations under the sales contracts. This effects the disposal of the new lot by the body corporate to the developer. CGT event A1 in section 104-10 of the ITAA 1997 happens to the body corporate on completion of the transfer of the new lot to the developer. At issue is the time of the event under subsection 104-10(3) of the ITAA 1997.", "Reasons_for_Decision": "Summary: CGT event A1 in section 104-10 of the ITAA 1997 happens if you dispose of an asset, that is, if a change of ownership occurs from you to another entity: subsections 104-10(1) and (2). The time of the event is when you enter into the contract for the disposal or, if there is no contract, when the change of ownership occurs: subsection 104-10(3) of the ITAA 1997. To work out how the timing rules in CGT event A1 apply on the facts of this case, it is necessary to consider whether any of the sale contracts entered into by the vendor and the respective purchasers satisfy the description 'contract for the disposal' in paragraph 104-10(3)(a) of the ITAA 1997. Meaning of 'contract for the disposal' Paragraph 104-10(3)(a) of the ITAA 1997 rewrote, in part, subsection 160U(3) of the Income Tax Assessment Act 1936 (ITAA 1936). The words 'contract for the disposal' in paragraph 104-10(3)(a) rephrased the requirement in subsection 160U(3) that a disposal or acquisition took place 'under a contract'. In considering the meaning of the words 'under a contract' for the purposes of subsection 160U(3) of the ITAA 1936, the Federal Court has held that the contract under which an asset is acquired or disposed of is the contract through whose operation the asset changes ownership: Elmslie v. Federal Commissioner of Taxation (1993) 46 FCR 576; (1993) 93 ATC 4964; (1993) 26 ATR 611 at FCR 592; ATC 4976; ATR 626. The Full Federal Court in Kiwi Brands Pty Ltd v. Commissioner of Taxation (1998) 90 FCR 64; 40 ATR 477; 99 ATC 4001 at FCR 77; ATR 489 and ATC 4011 similarly identified the contract as one 'under which there was a direct connection with the disposition required by it'. There was no requirement in subsection 160U(3) of the ITAA 1936 that the vendor of the asset had to be a party to the relevant contract. The rewritten law in paragraph 104-10(3)(a) of the ITAA 1997 refers to the time when 'you' enter into the contract for the disposal, but the better view is that it highlights the most common case (where the vendor is a party to the contract) without intending to narrow the scope of the law and to exclude other situations so long as the disposal can be said to happen under the relevant contract. In that regard, the establishment of a mere causative link, that the disposal would not have taken place but for the existence of the contract, is not sufficient to attract the operation of the contract timing rule in subsection 160U(3) of the ITAA 1936. The contract must actually require the disposition. In this case, the inclusion of the sale back condition in the sale contracts was the only means by which the intention of the parties to transfer the property could be given contractual form. Further, it was only at the time the final sale contract was entered into that all three purchasers were legally bound to fulfil the terms of the sale back conditions contained in the sale contracts which involved ensuring that the body corporate disposed of the new lot to the developer. On a strict and narrow application of the existing law, it might be said that the contracts between the developer and the purchasers do not of themselves oblige the body corporate to 'sell-back' the new lot, and therefore cannot be said to require the disposal. They merely ensure that the relevant steps will be taken by the purchasers to make it happen (assuming, of course, that the purchasers are not in breach). But against that must be weighed the very direct connection between the final sale contract entered into, at which point all purchasers were legally bound to fulfil the terms of the sale back condition, and the transfer that subsequently took place. It was clearly the intention of the developer and the purchasers that the 'new lot' would be 'conveyed back', and all the terms necessary to do that, including the developer's consideration therefore, were provided under the contracts. There was no subsequent agreement by which these things happened. To find that the body corporate transferred the property not under the final sales contract would have the effect of invoking for the body corporate the market value substitution rules for capital proceeds at the date of transfer. This would be wholly inconsistent with the understanding between the developer and the purchasers in respect of the 'new lot' to be 'sold back', and the consideration to be provided for it. On these particular and unusual facts, it is open to conclude that the 'contract for the disposal' of the new lot by the body corporate was the final sale contract.", "Date_of_Decision": "24 March 2006", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 160U(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event A1-disposal of a CGT asset CGT events", "Case_References": "Elmslie and Others v. Commissioner of Taxation (1993) 46 FCR 576 (1993) 26 ATR 611 93 ATC 4964", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200694", "Unmatched_Content": "Keywords CGT event A1-disposal of a CGT asset CGT events"}
{"ATO_ID_Number": "ATO ID 2005/367", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: not in common ownership - plan of consolidation", "Issue": "Will CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen when the title to land owned by a taxpayer is amalgamated under a 'not in common ownership' plan of consolidation with adjoining land owned by another entity?", "Decision": "No. CGT event A1 will not happen because, in these circumstances, there has been no change of ownership of the taxpayer's land (paragraph 104-10(2)(a) of the ITAA 1997).", "Facts": "The taxpayer acquired land before 20 September 1985. In the 2005-06 income year, the taxpayer and the owner of an adjoining property agreed to develop both properties together. Pursuant to the development agreement, the taxpayer and the owner of the other property obtained approval of a not in common ownership (NICO) plan of consolidation of the two properties. The NICO plan of consolidation was lodged with the Registrar of Titles who issued a NICO title for the lot as consolidated on the plan. On this new title the owners were described as the taxpayer 'as to the land formerly contained in Certificate of Title XX' and the other owner as 'to the land formerly contained in Certificate of Title YY'. The taxpayer wishes to know whether the issuing of a single NICO title covering both of the previous lots results in the taxpayer being taken to have acquired their land after 20 September 1985.", "Reasons_for_Decision": "Summary: CGT event A1 happens if you dispose of a CGT asset (subsection 104-10(1) of the ITAA 1997). You dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner (paragraph 104-10(2)(a) of the ITAA 1997). Generally, CGT event A1 will happen when the title to two properties owned by different entities is merged. This is because each co-owner acquires, as a result of the merger, an interest in the land previously owned by the other. However, a NICO title does not involve co-ownership of land in the generally understood sense (that is, a tenancy in common or joint tenancy). The NICO title recognises that each proprietor continues to own the land described in their previous title deed (though the NICO title requires both owners to agree to any subsequent transfer of any part of the land). In the circumstances, it is considered that there has been no change of ownership of the taxpayer's land. Therefore, CGT event A1 in section 104-10 of the ITAA 1997 has not happened and the land owned by the taxpayer before the issuing of the NICO title continues to be owned by the taxpayer after the issuing of the NICO title. This means the taxpayer will continue to be regarded as having acquired that land before 20 September 1985.", "Date_of_Decision": "14 December 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 subsection 104-10(1) paragraph 104-10(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events CGT event A1 - disposal of CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005367", "Unmatched_Content": "This ATO ID was withdrawn in error on 1 September 2017. This error was corrected on 7 September 2017 and this ATO ID has been current since its release. | Keywords Capital gains tax CGT events CGT event A1 - disposal of CGT asset"}
{"ATO_ID_Number": "ATO ID 2004/668", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax : buy-sell agreement - time of CGT event A1", "Issue": "Is a buy-sell agreement 'entered into' for the purposes of paragraph 104-10(3)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) before a condition precedent to its formation is fulfilled?", "Decision": "No. The buy-sell agreement is not entered into for the purposes of paragraph 104-10(3)(a) of the ITAA 1997 until the condition precedent to its formation is met.", "Facts": "A buy-sell agreement was signed between a private limited company and its shareholders. It was a condition precedent to the formation of the agreement that one of the shareholders die. If any shareholder died, their interests in the company were to be transferred to each of the other shareholders.", "Reasons_for_Decision": "Summary: Buy-sell agreements are used in business succession planning. If a business proprietor is unable to continue in business in circumstances contemplated by the agreement (such as death or disablement), the agreement ensures that the business is preserved for the remaining proprietors. The outgoing proprietor (or their estate) receives an amount equivalent to the worth of their equity in the business. The ultimate transfer of business interests is funded by insurance proceeds. Subsection 104-10(1) of the ITAA 1997 provides that CGT event A1 happens on the disposal of a CGT asset. A CGT asset is disposed of if there is a change in its ownership from one entity to another. The agreement in this case provided for the disposal of shares in a company carrying on a business if a shareholder died. Subsection 104-10(3) ITAA 1997 provides that CGT event A1 happens when you enter into the contract for the disposal or, if there is no contract, when the change of ownership occurs. The time when a contract is entered into is the time when it comes into existence for general law purposes. If a contract is subject to a condition, an issue arises whether the condition is a condition precedent to its formation or whether it is a condition precedent to performance of the contract. In the first case, the contract does not come into existence until the condition is met. In the second case, the condition does not prevent the creation of the contract - non-fulfilment of the condition merely entitles a party to terminate the contract: see Perri v. Coolangatta Investments Pty Ltd (1982) 149 CLR 537. In this case, the language used to describe the condition evidenced the parties' intention not to be bound by it from the date it was signed. That is, it was a condition precedent to the formation of the agreement. Accordingly, no agreement will be entered into for the purposes of CGT event A1 until the death of a party to the contract. When a party to the agreement dies there will only be a contract in respect of the assets being disposed of by that party. Subsequent contracts will be made when other parties die.", "Date_of_Decision": "23 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(1) subsection 104-10(3) paragraph 104-10(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1190", "Subject_References": "capital gains tax CGT event A1-disposal of a CGT asset deaths private companies shareholder payments shareholders", "Case_References": "Perri v. Coolangatta Investments Pty Ltd (1982) 149 CLR 537", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004668", "Unmatched_Content": "Keywords capital gains tax CGT event A1-disposal of a CGT asset deaths private companies shareholder payments shareholders"}
{"ATO_ID_Number": "ATO ID 2003/254", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: amalgamation of incorporated associations - CGT event A1", "Issue": "Does CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to the CGT assets of incorporated associations that amalgamate under the Associations Incorporation Act 1981 (Qld) (AIA (Qld))?", "Decision": "Yes. CGT event A1 in section 104-10 of the ITAA 1997 happens to the CGT assets of incorporated associations that amalgamate under the AIA (Qld) because there is a change of ownership of the assets from those associations to a new association.", "Facts": "Two related associations are incorporated associations under the AIA (Qld). The two associations amalgamate under Part 9, Division 2 of the AIA (Qld). Relevant provisions of the AIA (Qld) include: Part 9, Division 2 - Amalgamation of incorporated associations Definitions for Division 79. In this division- \"new association\" means an incorporated association that is incorporated because of an application to amalgamate made under this division by 2 or more old associations. \"old association\" means an incorporated association that, with one or more other incorporated associations, applies under this division to form a new association. Modified application of Act 84. The provisions of this Act providing for the incorporation of an association apply to the incorporation of a new association with all necessary changes, all changes made under this division and any changes prescribed under the regulations. Certificate of incorporation 85.(1) On registration of a new association, the chief executive must issue the association with a certificate of incorporation. (2)............... Effect of incorporation 86. On the incorporation of a new association- (a) the assets and liabilities of the old associations become the assets and liabilities of the new association; and (b) the incorporation of the old associations is cancelled.", "Reasons_for_Decision": "Summary: CGT event A1 in section 104-10 of the ITAA 1997 happens if there is a disposal of a CGT asset. There is a disposal of a CGT asset if a change of ownership occurs from one entity to another entity. An amalgamation is the merging of two separate things to create a new thing ( Butterworths Australian Legal Dictionary, 1997). The legislation under which the amalgamation is effected does not provide for the continuation of the same legal entity. Instead, the legislation refers to 'old associations' being associations that have applied to amalgamate and to a 'new association' being one that is formed under the amalgamation process. The old associations are separate legal entities incorporated under the AIA (Qld) and the new association is also a separate legal entity. Paragraph 86(b) of the AIA (Qld) provides for the cancellation of the incorporation of the old associations and sections 84 and 85 of the AIA (Qld) provides for the incorporation of the new association. Paragraph 86(a) of the AIA (Qld) provides that the assets and liabilities of the old associations become the assets and liabilities of the new association. In becoming assets of the new association there is a transfer of assets from the old associations to the new association. Subsection 87(1) of AIA (Qld) indicates a transfer of assets from the old associations to the new association in referring to land or an interest in land gained by the new association and requiring such acquisition to be recorded in the appropriate register of titles. Further indications of a transfer are contained in the stamp duties legislation which provides an express stamp duty exemption for the vesting of property in an incorporated association because of amalgamation under the AIA (Qld) (section 427 of the Duties Act 2001 (Qld)). As the assets of the old associations have been transferred to a new entity (the new association) there is a change of ownership (that is, a disposal) of assets from the old associations to the new entity. CGT event A1 in section 104-10 of the ITAA 1997 therefore happens to the CGT assets of the old associations when they amalgamate.", "Date_of_Decision": "31 January 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 50 section 104-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/808 | ATO ID 2004/798", "Subject_References": "Capital gains tax Capital gains Association income Non profit companies Companies Capital Gains Tax CoE CGT event A1-disposal of a CGT asset", "Case_References": "", "Other_References": "Butterworths Australian Legal Dictionary, 1997", "Business_Line": "Losses and CGT Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003254", "Unmatched_Content": "Duty to notify registrar of titles of land or interest in land etc. | 87.(1) The secretary of a new association must ask the registrar of titles, or anyone else who is required to keep a register about dealings in property, (the \"registering authority\") to record in the appropriate register land or an interest in land gained by the new association because of its incorporation under this division. | Amalgamation does not affect certain rights or obligations | Relevant provisions of the Duties Act 2001 (Qld) include: | 427 Exemption - particular instruments and transactions relating to incorporated associations | (1) Duty is not imposed on an instrument or transaction for a vesting of property in an incorporated association under the Associations Incorporation Act 1981, because of its incorporation under part 2 or part 9, division 2, of that Act. | Keywords Capital gains tax Capital gains Association income Non profit companies Companies Capital Gains Tax CoE CGT event A1-disposal of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/518", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: redescription of land boundary and issue of new title - does a CGT event occur?", "Issue": "Does CGT event A1, or any other CGT event, occur when the taxpayer surrenders the title to land granted under a State Act so that the State can issue a new title to the taxpayer in respect of the same land?", "Decision": "No. Neither CGT event A1 nor any other CGT event occurs when the taxpayer surrenders the title to land granted under a State Act so that the State can issue a new title to the taxpayer in respect of the same land.", "Facts": "To satisfy the requirements of relevant State legislation, the taxpayer surrendered their title to a piece of land that it owned. This was done to facilitate the issue of a fresh title to the taxpayer that more accurately described the boundaries of the land. It had become necessary to redefine the boundaries of the property to effectively exclude physical accretions to the land that had occurred over time. This adjacent land had accreted as a result of the placement of structures by previous owners which disrupted the natural tidal flow, causing sand to build up over time. Pursuant to the relevant State legislation, the ownership of such accretions of land vests in the State and not the owner of the adjacent property (the taxpayer). The only method provided for the correction of boundaries under the relevant State legislation, required the taxpayer to execute an ordinary deed of transfer of the land in favour of the State, to enable the State to cancel the existing title and to issue a new title to the taxpayer showing the correct boundaries.", "Reasons_for_Decision": "Summary: The relevant State legislation provided that any land that had accreted to land owned by the taxpayer would belong to the State. Therefore, there was no issue of the taxpayer disposing of or causing any CGT event to occur in relation to the accreted land since it did not lawfully belong to the taxpayer. For the original land which did not arise from accretion, the taxpayer was indisputably the owner of it and although the State Law required that the title be 'surrendered' (to correct the boundaries), it is clear from the provisions that the surrender was only the first step in the process stipulated for boundary correction, with the State being obligated to issue a replacement title setting out the exact land already owned by the taxpayer. The surrender of the Title to the State did not have the effect that the taxpayer was no longer the owner of its land and the issue of a new title did not give devolve or confer any interest in the land upon the taxpayer. At all times the taxpayer retained beneficial ownership of the land. In the circumstances it is considered that a change of ownership of the land did not occur, in terms of paragraph 104-10(2)(a) of the ITAA 1997. Therefore, no CGT event A1 occurred under section 104-10 of the ITAA 1997. Furthermore, the circumstances of the transaction did not lead to any other CGT event occurring.", "Date_of_Decision": "5 March 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 104-5 section 104-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Capital gains CGT replacement assets Centres of Expertise Capital Gains Tax CoE CGT events CGT event A1-disposal of a CGT asset CGT events J1-J3 - rollovers", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003518", "Unmatched_Content": "Add reference to 'any other CGT event' consistent with 'Issue' and 'Reasons for Decision' | Keywords Capital gains tax Capital gains CGT replacement assets Centres of Expertise Capital Gains Tax CoE CGT events CGT event A1-disposal of a CGT asset CGT events J1-J3 - rollovers"}
{"ATO_ID_Number": "ATO ID 2003/559", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disposal of a CGT asset to a trust: application of CGT event A1 or CGT event E2", "Issue": "For the purposes of subsection 102-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997) is CGT event A1 in section 104-10 of the ITAA 1997 the most specific CGT event that happens, rather than CGT event E2 in section 104-60 of the ITAA 1997, as a result of a taxpayer disposing of an asset to a trust that is not connected with the taxpayer in any way?", "Decision": "Yes. CGT event A1 in section 104-10 of the ITAA 1997 is the most specific event that happens (and not CGT event E2) in these circumstances.", "Facts": "The taxpayer owned land which they acquired after 19 September 1985. They engaged a real estate agent to sell the land. They entered into a contract of sale with an entity introduced to them by the agent. The taxpayer was aware of the fact that the purchasing entity was acting in the capacity of trustee of a trust. Ownership of the land changed from the taxpayer to the trustee. The taxpayer and the trustee dealt with each other at arm's length. Apart from this dealing, neither the taxpayer nor their associates have any connection with the trustee or the trust.", "Reasons_for_Decision": "Summary: CGT event A1 happens if the ownership of a CGT asset changes (section 104-10 of the ITAA 1997). CGT event E2 happens if a CGT asset is transferred to an existing trust (section 104-60 of the ITAA 1997). If more than one CGT event happens in respect of a transaction, the most specific event is to be used (subsection 102-25(1) of the ITAA 1997). There may be different tax outcomes for a taxpayer depending on which CGT event happens. CGT event E2 does not happen if the exception in subsection 104-60(5) of the ITAA 1997 applies. That exception looks to the connection between the transferor and transferee. There is no similar exception for CGT event A1. Also, CGT event A1 happens on the contract date whereas CGT event E2 happens when the ownership change occurs. This may affect the income year in which a capital gain or capital loss is taken to be made. On its face, CGT event E2 happens whenever an asset is transferred to a trust and is therefore the applicable event in this case. However, it is considered that CGT event A1 (rather than CGT event E2) is the most specific event where, as in this case, an asset is transferred to another party and the transferor is indifferent as to the identity of that party. That is, CGT event A1 is the most specific event where the parties are completely unconnected and are dealing with each other at arm's length. In this case, the vendor knew that the purchaser was acting in a trustee capacity. But that will not always be the case. For example, the purchaser may be a nominee company formed for the purpose of acquiring property on behalf of others who do not want their identity revealed. Clearly, CGT event A1 is the most specific event in that case. There can be no question of CGT event E2 being the most specific event if the vendor does not know that the asset has been disposed of to a person acting in a trustee capacity. Consistent with that outcome, CGT event A1 is considered the most specific event whenever the parties are unconnected. It would be inappropriate for a different CGT event to apply depending on whether the vendor knew the capacity in which the purchaser was acquiring the asset. On the other hand, CGT event E2 will be the most specific event if, for example, an asset is transferred to a trust of which the transferor or an associate is a beneficiary or object. The exception to CGT event E2 suggests that event is applicable when the parties are connected. That exception applies if the transferor is the sole beneficiary of the trust and is absolutely entitled to the transferred asset as against the trustee and the trust is not a unit trust (section 104-60(5) of the ITAA 1997).Accordingly, CGT event A1 is the most specific event that happens where an asset is sold to the trustee of a trust that has no connection with the vendor or the vendor's associates.", "Date_of_Decision": "25 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 102-25(1) section 104-10 section 104-60 subsection 104-60(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event A1-disposal of a CGT asset CGT events E1-E9 - trusts Connected entity Disposal of assets Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003559", "Unmatched_Content": "Removed reference to section 104-10(7) of the ITAA 1997 | Removed reference to section 104-60(5)(b) | Removed note regarding announced law changes | Removed references to: section 104-70(7)of the ITAA 1997 paragraph 104-60(5)(a) of the ITAA 1997 paragraph 104-60(5)(b) of the ITAA 1997 | Keywords CGT event A1-disposal of a CGT asset CGT events E1-E9 - trusts Connected entity Disposal of assets Trusts"}
{"ATO_ID_Number": "ATO ID 2003/865", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: capital loss on transfer of shares in a company in administration", "Issue": "Does CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen when a taxpayer purports to transfer shares in a company in administration, without obtaining court approval for the transfer?", "Decision": "No. CGT event A1 in section 104-10 of the ITAA 1997 does not happen because the transfer is rendered void by section 437F of the Corporations Act 2001.", "Facts": "The taxpayer acquired shares in a company after September 1985. Subsequently, the company was placed in administration. After that time, the shareholder executed a transfer of the shares to an intending buyer, who forwarded the transfer to the administrator for registration. Court approval was not obtained for the transfer. The administrator refused to register the transfer.", "Reasons_for_Decision": "Summary: CGT event A1 in section 104-10 of the ITAA 1997 happens when there is a change in ownership of an asset from one entity to another. In Taxation Ruling TR 94/29 in the context of the sale of land, the Commissioner has taken the view that an unregistered transfer can effect a change of ownership of land for the purposes of CGT event A1. However, section 437F of the Corporations Act 2001 limits the way that a share can be transferred in a company that is in administration under Part 5.3A of that Act. It provides that 'a transfer of shares in a company, or an alteration in the status of members of a company, that is made during the administration of the company is void except so far as the Court otherwise orders'. There are similar rules for liquidations in subsections 468(1) and 493(2) of the Corporations Act 2001. The purpose of these rules is to prevent the transfer of a share to an impecunious entity to avoid liabilities that may arise in respect of that share - see Keay, A 1999, The law of company liquidation, 4th ed, LBC, Sydney, pp. 239-40. As court approval has not been obtained for the transfer of the taxpayer's shares, the transfer is specifically negated by section 437F of the Corporations Act 2001 . This is not a situation to which the principles in TR 94/29 will apply. Accordingly, CGT event A1 has not happened in respect of the taxpayer's shares.", "Date_of_Decision": "25 August 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/29", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event A1- disposal of a CGT asset Disposal of shares Shares Voluntary administration", "Case_References": "", "Other_References": "Keay, A 1999, The law of company liquidation, 4th ed, LBC, Sydney, pp. 239-40.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003865", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 94/29 | Keywords CGT event A1- disposal of a CGT asset Disposal of shares Shares Voluntary administration"}
{"ATO_ID_Number": "ATO ID 2003/938", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of capital gain derived by non-resident from sale of real property situated in Australia", "Issue": "Is the taxpayer, a non-resident, assessable on a capital gain which arises from the sale of property situated in Australia under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer, a non-resident, is assessable on a capital gain which arises from the sale of property situated in Australia under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Malaysia and a non-resident of Australia for income tax purposes. The taxpayer owned real property situated in Australia. The taxpayer sold the real property. The capital proceeds from the sale exceeded the cost base of the real property.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of a non-resident includes statutory income from all Australian sources as well as other statutory income that a provision includes in assessable income on some basis other than having an Australian source (subsection 6-10(5) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 102-5 of the ITAA 1997 which provides that a net capital gain is to be included in assessable income. Section 102-20 of the ITAA 1997 provides that a taxpayer makes a capital gain or capital loss if and only if a CGT event happens. The gain or loss is made at the time of the event. Section 104-10 of the ITAA 1997 provides that CGT Event A1 happens if the taxpayer disposes of a CGT asset. The real property owned by the taxpayer is a CGT asset (section 108-5 of the ITAA 1997). Section 136-10 of the ITAA 1997 sets out the circumstances when a non-resident can make a capital gain or capital loss from a CGT event. The table in section 136-10 of the ITAA 1997 provides that a capital gain or capital loss can only be made by a non-resident when CGT event A1 happens if the CGT asset has the necessary connection with Australia. Category 1 of the table in section 136-25 of the ITAA 1997 provides that the following CGT assets have the necessary connection with Australia: As the real property owned by the taxpayer is situated in Australia, the property is a CGT asset that has the necessary connection with Australia. The taxpayer has disposed of the real property, CGT event A1 has therefore happened (subsection 104-10(1) of the ITAA 1997). As the capital proceeds from the disposal are more than the property's cost base, the taxpayer has made a capital gain (subsection 104-10(4) of the ITAA 1997). In determining liability to Australian tax on Australian sourced income by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 16 to the Agreements Act contains the double tax agreement between Australia and Malaysia (the Malaysian Agreement). Schedules 16A and 16B to the Agreements Act contain the protocols amending the Malaysian Agreement (the Malaysian Protocols). The Malaysian Agreement and the Malaysian Protocols operate to avoid the double taxation of income received by Australian and Malaysian residents. Article 13 of the Malaysian Agreement (as amended by the Malaysian Protocol) deals with the alienation of property. It provides that income, profits or gains derived by a resident of Malaysia from the alienation of property situated in Australia may be taxed in Australia. As the taxpayer has made a capital gain in relation to the disposal of the real property, section 102-5 of the ITAA 1997 provides that the net capital gain is included in assessable income. Therefore, the net capital gain received by the taxpayer forms part of their assessable income under subsection 6-10(5) of the ITAA 1997.", "Date_of_Decision": "19 August 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-10 subsection 6-10(5) section 10-5 section 102-5 section 102-20 section 104-10 subsection 104-10(1) subsection 104-10(4) section 108-10 section 136-10 section 136-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Double tax agreements Net capital gains Malaysia", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003938", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Capital gains Double tax agreements Net capital gains Malaysia"}
{"ATO_ID_Number": "ATO ID 2002/808", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: conversion from unincorporated association to incorporated association under Associations Incorporation Act 1981 (Qld)", "Issue": "Does CGT event A1 (section 104-10 of the Income Tax Assessment Act 1997 ('ITAA 1997')) happen when an unincorporated association incorporates under the Associations Incorporation Act 1981 (Qld) (AIA (Qld))?", "Decision": "Yes. CGT event A1 (section 104-10 of the ITAA 1997) happens because the newly incorporated association is not the same entity as the unincorporated association resulting in a change in the ownership (ie a disposal) of the assets from the unincorporated association to the incorporated association upon incorporation.", "Facts": "An unincorporated association, a club, converts to an incorporated association under the AIA (Qld). The club is not an exempt entity under Division 50 of the ITAA 1997. Relevant provisions of the AIA (Qld) include: 14 Registration of association 22 Property for an association 23 Transfer of other assets, rights and liabilities 24 Duty to notify registrar of titles of land or interest in land etc.", "Reasons_for_Decision": "Summary: An unincorporated association has no separate or distinct existence apart from its members. It is a voluntary combination of persons with some object or purpose in common (see Kibby v. Registrar of Titles and Another [1999] 1 VR 861; [1998] VSC 148). Hence, an unincorporated association is not an entity at general law. By comparison, an incorporated association is a body corporate and is an entity at law. Ford H. A. J., 1990, Principles of Company Law, 5th edn, Butterworths, Australia, p. 3. cites the following description of a body corporate from Kyd's, Treatise on the law of corporations (1793) Vol 1 p 13: 'a collection of individuals, united in one body, under a special denomination, having perpetual succession under an artificial form, and vested, by the policy of the law, with a capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, of suing and being sued; of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of it's institution, or powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence.' For the purposes of the ITAA 1997, subsection 960-100(1) of the ITAA 1997 includes unincorporated associations and body corporates separately within the definition of 'entity'. They are also separately included within the definition of 'company' in section 995-1 of the ITAA 1997. The fact that the unincorporated association is a 'company' for income tax purposes and, after incorporation, the incorporated association is also a 'company' for income tax purposes does not make them the same 'company' for the purposes of the ITAA 1997. The legislation under which incorporation is effected (the AIA (Qld)) does not provide for the continuation of the same legal entity. These provisions merely provide for registration of the association (section 14 of the AIA (Qld)) and set out the effects of incorporation (sections 22, 23 and 24 of the AIA (Qld)). In particular, subsections 22(1), 23(1) and 24(1) of the AIA (Qld) indicate that property, assets, rights, land, etc, are transferred from the unincorporated association to the incorporated association. A change of ownership (ie, a disposal) will happen on the transfer of the assets from the unincorporated association to the incorporated association. The provisions also contain an express override of the stamp duties legislation so that it does not apply to the transfer of property to the incorporated association (subsection 22(3) of the AIA (Qld)). Therefore, as the incorporated association is not the same entity as the unincorporated association and there is a change in ownership of the assets upon incorporation, CGT event A1 (section 104-10 of the ITAA 1997) will happen to the assets of the unincorporated association on the conversion to an incorporated association.", "Date_of_Decision": "27 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 section 960-100(1) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/809 | ATO ID 2003/254 | ATO ID 2004/750 (Withdrawn) | ATO ID 2004/811 | ATO ID 2010/72", "Subject_References": "Association income Capital gains Capital gains tax CGT event A1 - disposal of CGT asset Companies Non Profit companies", "Case_References": "Kibby v. Register of Titles and Another [1999] 1 VR 861 [1998] VSC 148", "Other_References": "Ford H. A. J., 1990, Principles of Company Law, 5th edn, Butterworths, Australia Kyd, Treatise on the Law of Corporations (1793)", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002808", "Unmatched_Content": "Related ATO Interpretative Decisions | Updated reference link to ATO ID 2004/750 to show (Withdrawn) | Keywords Association income Capital gains Capital gains tax CGT event A1 - disposal of CGT asset Companies Non Profit companies"}
{"ATO_ID_Number": "ATO ID 2002/809", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Unincorporated association - disposal of asset", "Issue": "Does an unincorporated association (or do the individual members) make the capital gain (or capital loss) as a result of CGT event A1 occurring under section 104-10 of the Income Tax Assessment Act 1997 ('ITAA 1997') upon disposal of a CGT asset held by the unincorporated association?", "Decision": "The unincorporated association (and not the individual members) makes the capital gain (or capital loss) as a result of CGT event A1 in section 104-10 of the ITAA 1997 arising from the disposal of a CGT asset held by the unincorporated association.", "Facts": "An unincorporated club disposes of a CGT asset. The club is not an exempt entity under Division 50 of the ITAA 1997.", "Reasons_for_Decision": "Summary: An unincorporated association is an entity and a company for income tax purposes (sections 960-100, 995-1 of the ITAA 1997). The members, in their relationship under the association's constitution, constitute the unincorporated association. The assets held in that relationship represent the assets held by the unincorporated association. Therefore, for the purposes of CGT event A1 under section 104-10 of the ITAA 1997, the unincorporated association is an entity that owns the CGT asset and on its disposal is the entity that makes any resulting capital gain or capital loss. Although the individual members of the unincorporated association jointly own the association's assets at general law, it is the ownership of those assets by the unincorporated entity as a company under tax law that is relevant for the purposes of CGT event A1. Therefore capital gains (or capital losses) are not made by the individual members from the disposal of an asset held by the unincorporated association. The capital gains (or capital losses) are made by the unincorporated association itself.", "Date_of_Decision": "27 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 section 960-100 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/808", "Subject_References": "Association income Capital gains Capital gains tax CGT event A1 - disposal of CGT asset Companies Non profit companies", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002809", "Unmatched_Content": "Issue, Decision and Reason for Decision | Updated for clarity and amended spelling mistake and grammar. | Keywords Association income Capital gains Capital gains tax CGT event A1 - disposal of CGT asset Companies Non profit companies"}
{"ATO_ID_Number": "ATO ID 2001/800", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: capital losses: shares in non-resident company", "Issue": "Has any CGT event in Division 104 of the Income Tax Assessment Act 1997 (ITAA 1997) happened to enable the taxpayer to make a capital loss on their investment, made through Thai securities firms, in shares in non-resident companies?", "Decision": "No. On the evidence available no CGT event in Division 104 of the ITAA 1997 has happened to the taxpayer's shares. The taxpayer is unable to claim a capital loss at this time.", "Facts": "The taxpayer received an offer to invest in a non-resident company through a securities firm based in Thailand. The taxpayer forwarded US dollars to the firm's bank accounts overseas. The taxpayer has received share certificates for their investment. The taxpayer attempted to telephone the securities firm to dispose of the shares in the company. The taxpayer also sent instructions to this firm to dispose of the shares but these instructions were never acted upon. The taxpayer has not received any notice that the company has been placed in liquidation or is in the process of being wound up or that their shares have ended.", "Reasons_for_Decision": "Summary: Section 102-20 of the ITAA 1997 provides that you make a capital gain or capital loss if and only if a CGT event happens. The gain or loss is made at the time of the CGT event. The CGT events that may be relevant to the taxpayer's situation are: CGT event A1 - Disposal of a CGT asset (section 104-10 of the ITAA 1997); CGT event G3 - Liquidator declares shares worthless (section 104-145 of the ITAA 1997); and CGT event C2 - Cancellation, surrender and similar endings (section 104-25 of the ITAA 1997). As the taxpayer has not been able to contact the firm to dispose of their shares in the non-resident company, CGT event A1 has not occurred. As there is no evidence that a liquidator has been appointed or made a declaration that there is no likelihood that the shareholders in the company will receive any further distribution in the course of winding up the company then CGT event G3 has not occurred. CGT event C2 has also not occurred in these circumstances. The only circumstance that CGT event C2 may have occurred would be if the shares ended by being redeemed or cancelled in terms of paragraph 104-25(1)(a) of the ITAA 1997. There is no evidence that this has happened. Further it is considered that it is not possible to abandon or surrender a share in terms of paragraph 104-25(1)(d) of the ITAA 1997. The most appropriate CGT event to apply in this circumstance is CGT event G3. As no CGT events have occurred in relation to the taxpayer's shares, they have not made a capital loss at this time. The taxpayer may make a capital loss when they are able to establish that either CGT events A1, C2 or G3 occur. The taxpayer has been unable to determine whether their investment in these firms has resulted in the acquisition of legitimate shares. In the event that the shares are not legitimate, the taxpayer may have a right to sue the securities firms. The implications of this are outlined in ATOID 2001/799.", "Date_of_Decision": "28 November 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 102-20 section 104-10 paragraph 104-25(1)(a) paragraph 104-25(1)(d) section 104-145", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2001/799", "Subject_References": "Capital gains tax Capital losses Abandonment of assets Confirmed significant issues CGT event A1-disposal of a CGT asset CGT events C1-C3 - end of a CGT asset CGT events G1-G3 - shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001800", "Unmatched_Content": "Keywords Capital gains tax Capital losses Abandonment of assets Confirmed significant issues CGT event A1-disposal of a CGT asset CGT events C1-C3 - end of a CGT asset CGT events G1-G3 - shares"}
{"ATO_ID_Number": "ATO ID 2005/216", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: CGT event B1: right to use property before title passes", "Issue": "Does CGT event A1 in section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) happen if a taxpayer transfers a property to their adult children if it had been agreed that the children could use and enjoy the property for a specified period after which title to the property would be transferred to them?", "Decision": "No. In these circumstances, CGT event B1 in section 104-15 of the ITAA 1997 happened at the time the taxpayer entered into the agreement with their children.", "Facts": "A taxpayer's child and their spouse (the children) wanted to purchase a home but were unable to obtain finance. In the 1999-2000 income year, the taxpayer agreed to obtain a loan for the full amount of the purchase price, so that the children could purchase a property. However it was a loan requirement that the property be registered in the name of the taxpayer. The children agreed to meet all outgoings in relation to the property including the taxpayer's loan repayments. As the children expected that they would be in a position to obtain their own finance in five years it was also agreed that the taxpayer would transfer title to the property to the children in five years if the children paid the amount outstanding on the taxpayer's loan at that time. In the 2004-05 income year, the taxpayer transferred the property to the children in accordance with the agreement. The value of the property increased considerably during the period it was owned by the taxpayer.", "Reasons_for_Decision": "Summary: There is a special rule in the CGT provisions which provides that if more than one CGT event can apply in a particular situation, the event you use is the one that is most specific to your situation: subsection 102-25(1) of the ITAA 1997. There are two CGT events which may apply in these circumstances. These events are CGT event A1 in section 104-10 of the ITAA 1997 and CGT event B1 in section 104-15 of the ITAA 1997. CGT event A1 happens if you dispose of a CGT asset. CGT event B1 happens if you enter into an agreement with another entity under which: In order for CGT event B1 to happen the relevant agreement must be one under which title will or may pass at the end of a specific period or on the occurrence of a specific event. CGT event B1 will not happen if, under a loose family arrangement, title to an asset may pass at an unspecified time in the future. In this case, the taxpayer entered into a formal agreement with their children to grant them the right to use and enjoy the property. Under the agreement title to the property would pass to the taxpayer's children in five years. In these circumstances, CGT event B1 happened in the 1999-2000 income year as it is the most specific event that applies. As CGT event B1 happened when the taxpayer's children were granted the right to use and enjoy the property, there will be no CGT consequences for the taxpayer when the title to the property is ultimately transferred to them.", "Date_of_Decision": "22 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 102-25(1) section 104-10 section 104-15 subsection 104-15(1) paragraph 104-15(4)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax CGT assets CGT capital proceeds CGT capital proceeds modification market value substitution rule CGT event A1-disposal of a CGT asset CGT event B1-use & enjoyment before title passes CGT events", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005216", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT assets CGT capital proceeds CGT capital proceeds modification market value substitution rule CGT event A1-disposal of a CGT asset CGT event B1-use & enjoyment before title passes CGT events"}
{"ATO_ID_Number": "ATO ID 2014/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Discharge of debt arising from the provision of services - changing from cash to accruals accounting", "Issue": "Where the method of accounting changes from cash to accruals basis in an income year, does section 118-20 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to reduce any capital gain made when a debt that arose from the provision of services in the previous income year is discharged?", "Decision": "No. Section 118-20 of the ITAA 1997 does not apply to reduce any capital gain made when CGT event C2 happens on the discharge of the debt. Section 118-20 will not apply to reduce the capital gain because no amount of the debt that was taken into account in working out the capital gain was included in assessable or exempt income under a provision of the ITAA 1997 (apart from Part 3-1) or the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer carries on a business of providing services to clients. The taxpayer had previously accounted for the income of the business on a cash basis. Due to the nature and growth of the taxpayer's business, the taxpayer decides it is more appropriate for the business to convert to an accruals basis of accounting and render its income tax return on that basis. Accordingly, the taxpayer lodges a return on an accruals basis in the current income year. There are outstanding debts owing to the taxpayer in relation to services rendered in the previous income year. The taxpayer receives these amounts in the current income year. These amounts were not included in the taxpayer's assessable income in the previous income year because of the chosen method of accounting.", "Reasons_for_Decision": "Summary: A debt owed to the taxpayer is a CGT asset under section 108-5 of the ITAA 1997. Under subsection 104-25(1) of the ITAA 1997, CGT event C2 happens when the ownership of an intangible asset ends by the asset being satisfied or discharged. The time of the event is when the contract is entered into, or if there is no contract, when the asset ends (subsection 104-25(2) of the ITAA 1997). The taxpayer makes a capital gain if the capital proceeds from the ending of the asset are more than the asset's cost base. On the other hand, the taxpayer makes a capital loss if the capital proceeds are less than the reduced cost base of the asset (subsection 104-25(3) of the ITAA 1997). In this situation, the capital proceeds from discharging the debt are the amounts paid to the taxpayer by its debtors (subsection 116-20(1) of the ITAA 1997). Under subsections 110-25(2) and 110-55(2) of the ITAA 1997, the first element of the cost base and reduced cost base of the debt is nil as the provision of services is not money paid, or other property given, to acquire the debt. Further, the market value substitution rule in section 112-20 of the ITAA 1997 will not apply to treat the debt as having been acquired for its market value (refer to ATO ID 2005/211). Accordingly, the taxpayer makes a capital gain and the amount of the capital gain is the sum received in respect of the outstanding debt. The anti-overlap provisions in section 118-20 of the ITAA 1997 apply to reduce a capital gain to the extent that because of a CGT event an amount is otherwise included in assessable income or exempt income under another provision of the ITAA 1997 or the ITAA 1936. In this case, the taxpayer had not included the outstanding debt in assessable income in the year in which the services were provided to its client because the taxpayer had accounted for its income in that year on a cash basis. In accordance with Henderson v. Federal Commissioner of Taxation (1970) 119 CLR 612; (1970) 44 ALJR 115; (1970) 1 ATR 596; (1970) 70 ATC 4016 (Henderson Case), a change in the basis of accounting should be strictly adhered to, and the income calculated should be arrived at by the proper and regular application of the elected method of accounting. The Henderson Case concerned an entity changing its method of accounting from cash to accruals basis. The full High Court found that the earnings arising from the provision of services supplied in the previous income year were not ordinary income in the current year, only the earnings of the current year could be included in the computation. Applying the decision in the Henderson Case, the debt payment was not ordinary income derived in the current year, thus, no amount would be included in the taxpayer's assessable income under section 6-5 of the ITAA 1997. Consequently, the capital gain made when CGT event C2 happens on discharge of the debt is not reduced under section 118-20 of the ITAA 1997. The resulting capital gain is taken into account in working out the taxpayer's net capital gain or capital loss for the current income year (section 102-5 of the ITAA 1997).", "Date_of_Decision": "30 January 2014", "Year_of_Income": "Year ended 2013", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 102-5 subsection 104-25(1) subsection 104-25(2) subsection 104-25(3) section 108-5 subsection 110-25(2) subsection 110-55(2) section 112-20 subsection 116-20(1) section 118-20", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/211 | ATO ID 2008/110", "Subject_References": "capital gains tax CGT assets CGT events C1-C3 - end of a CGT asset", "Case_References": "Henderson v Federal Commissioner of Taxation (1970) 119 CLR 612 (1970) 44 ALJR 115 (1970) 1 ATR 596 (1970) 70 ATC 4016", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20141", "Unmatched_Content": "Replace 'that' with 'than'. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 | Keywords capital gains tax CGT assets CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2010/116", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT event C1: sale of shares without the owner's consent", "Issue": "Will CGT event C1 under section 104-20 of the Income Tax Assessment Act 1997 (ITAA 1997) happen on the sale of shares in a company, without the consent of the owner of the shares, to a bona fide purchaser of the shares for value and without notice of the owner's prior interest in the shares?", "Decision": "Yes. The sale of shares without the owner's consent, to a bona fide purchaser of the shares for value and without notice of the owner's prior interest in the shares, means that the shares are lost and CGT event C1 will happen.", "Facts": "The taxpayer owned shares in a company which they acquired after 19 September 1985. The taxpayer had no intention of selling these shares. The taxpayer mortgaged the shares to a lender as security for a loan. To effect the mortgage, the taxpayer transferred legal title to the shares to the lender, while retaining an equity of redemption in the shares. Under the terms of the mortgage, the lender had the power to sell the shares in certain circumstances, in which case they had to apply the sale proceeds to reduce the loan balance. The lender purported to exercise this power of sale under the mortgage, and sold the shares to a third party who had no notice of the mortgage. The third party was a bona fide purchaser of the shares for value and without notice of the taxpayer's prior equitable interest in the shares. The sale proceeds were applied in reduction of the loan balance. The taxpayer instituted civil proceedings against the lender. The court found that the exercise of the power of sale under the mortgage was improper.", "Reasons_for_Decision": "Summary: CGT event C1 happens if a CGT asset you own is lost or destroyed (subsection 104-20(1) of the ITAA 1997). Shares are intangible CGT assets. Paragraph 7 of Taxation Determination TD 1999/79 states that CGT event C1 does not distinguish between tangible and intangible assets. Section 104-20 refers to 'CGT asset' and this includes intangible CGT assets. Paragraph 2 of Taxation Determination TD 1999/79 states that: The word 'lost' in its context in subsection 104-20(1) does not contemplate voluntary actions. The shares were sold to a third party without the taxpayer's consent. The taxpayer was involuntarily and permanently deprived of ownership of the shares as the result of the unauthorised sale by another party to a third party who was a bona fide purchaser of the shares for value and without notice of the taxpayer's prior equitable interest in the shares. In all the circumstances, the shares were 'lost' within the meaning of section 104-20 of the ITAA 1997. Therefore, CGT event C1 happened. CGT event A1 also happened on the sale of the shares to a third party (disposal of a CGT asset - section 104-10 of the ITAA 1997). Under subsection 102-25(1) of the ITAA 1997, if more than one CGT event can happen to your situation, you use the one that is the most specific to your situation. In the circumstances, the most specific CGT event is CGT event C1. The time of CGT event C1 is when compensation is first received for the loss. If no compensation is received, the time of the event is when the loss is discovered (subsection 104-20(2) of the ITAA 1997).", "Date_of_Decision": "28 April 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 102-25(1) section 104-10 section 104-20 subsection 104-20(1) subsection 104-20(2) Subdivision 124-B", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/79", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Disposal of shares Shares", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010116", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 1999/79 | Keywords Disposal of shares Shares"}
{"ATO_ID_Number": "ATO ID 2008/58", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: CGT event C2 - unsecured note", "Issue": "Does CGT event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happen on maturity of an unsecured note if the company that issued the note defaults on repayment of the amount the note represents?", "Decision": "No. CGT event C2 in section 104-25 of the ITAA 1997 does not happen on maturity of an unsecured note if the company that issued the note defaults on repayment of the amount the note represents.", "Facts": "A company raised capital by issuing unsecured notes for various terms. The taxpayer deposited an amount in return for an unsecured note for a certain period. Before the taxpayer's note matured the company was placed in voluntary administration and the taxpayer was no longer able to receive quarterly interest payments. The company did not repay the amount deposited (or any interest reinvested or accrued up to the date of entering administration) at the maturity date and the rights to redeem or cancel notes prior to, at or after maturity were suspended. The company was later placed in liquidation. The liquidator advised that a proportion of every dollar of the total amount accrued up to the date when the company was placed in administration would be returned to the taxpayer via instalments. The liquidation of the company has not been completed.", "Reasons_for_Decision": "Summary: If a taxpayer deposits funds with a company raising capital in return for an unsecured note, the relevant CGT asset of the taxpayer is the debt owing to the taxpayer by the company which the note represents. A debt is an intangible CGT asset and is specifically listed as an example of a CGT asset in Note 1 to subsection 108-5(2) of the ITAA 1997. CGT event C2 in section 104-25 of the ITAA 1997 happens if a taxpayer's ownership of an intangible CGT asset ends in certain ways, including because the asset expires or is redeemed, cancelled, released, discharged, satisfied, abandoned, surrendered or forfeited. The time of the event is when a taxpayer enters into the contract that results in the asset ending. If there is no contract, the time of the event is when the asset ends (subsection 104-25(2) of the ITAA 1997). The taxpayer's ownership of the underlying debt which the note represents does not end when the note matures if the company defaults on repayment. Nor does it end if the company is placed in administration or liquidation whether this is before or after the note matures. The debt continues in existence. Per Emmett J stated in Federal Commissioner of Taxation v. Macquarie Health Corporation Limited & Ors (1998) 88 FCR 451 at 472; 98 ATC 5214 at 5230; (1998) 40 ATR 349 at 366: There is no doubt that the effect of winding up and of sequestration is that there is a restriction imposed on the capacity of a creditor to enforce payment of a debt without the leave of the Court. A creditor will not be entitled to payment from the debtor and if the creditor receives payment, he will be required to repay the amount to the liquidator or trustee in bankruptcy. In that sense, the creditor's remedies are converted into a right to prove in winding up or in the bankruptcy. However, it does not follow, in my view, that the debt ceases to exist. The right to enforce payment is restricted. Nevertheless, the right to prove in the winding up or bankruptcy is a right to prove in respect of the debt which continues to exist. In following the above decision, the Full Federal Court, observing the relevant consequences of the making of a winding up order, in Federal Commissioner of Taxation v. Linter Textiles Australia Ltd (in Liq) (2003) 129 FCR 42 at 51; [2003] FCAFC 63 at [26]: 2003 ATC 445 at 4465; (2003) 52 ATR 502 at 509 noted that: The rights of creditors cease to be rights in personam (although their debts are not released prior to dissolution or deregistration); ... Therefore, as the debt continues in existence after the note matures, the taxpayer's ownership of the debt does not end in one of the ways contemplated by subsection 104-25(1) of the ITAA 1997, regardless of whether the company is in administration or liquidation. Accordingly, CGT event C2 in section 104-25 of the ITAA 1997 has not happened in relation to the debt. CGT event C2 in section 104-25 of the ITAA 1997 may happen if:", "Date_of_Decision": "25 February 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 108-5(2) section 104-25 subsection 104-25(1) subsection 104-25(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/948", "Subject_References": "Capital gains tax CGT assets CGT events CGT events C1-C3 - end of a CGT asset", "Case_References": "Federal Commissioner of Taxation v. Macquarie Health Corporation Limited & Ors (1998) 88 FCR 451 98 ATC 5214 (1998) 40 ATR 349", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200858", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT events CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2005/113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: CGT event C1 - loss of an asset - ostriches - company deregistered", "Issue": "Did CGT event C1 under section 104-20 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to a taxpayer who owned ostriches when the company holding the ostriches was deregistered?", "Decision": "Yes. CGT event C1 under section 104-20 of the ITAA 1997 happened to the taxpayer who owned ostriches when the company holding the ostriches was deregistered.", "Facts": "The taxpayer owned six ostriches and had entered into an Agistment and Breeding Services Agreement with a company. The taxpayer paid $10,000 to the company for the management fees and agistment costs associated with the ostriches. In the 2000-01 income year, after reviewing the information available, the taxpayer concluded that there would never be a return on the investment nor any saleable asset to dispose of. At that time, the taxpayer discontinued the payment of monies to the company. In 2001-02 income year, the company was deregistered. All assets of the company were liquidated but no payment was paid to unsecured creditors. The taxpayer had taken no action during liquidation to recover their property or any distribution. The taxpayer does not know what happened to the ostriches when payment of the management and agistment fees ceased.", "Reasons_for_Decision": "Summary: Under section 104-20 of the ITAA 1997 CGT event C1 happens if a CGT asset you own is lost or destroyed. A CGT asset is defined as any kind of property or a legal or equitable right that is not property (section 108-5 of the ITAA 1997). The CGT asset in this case is the six ostriches. The taxpayer owned the ostriches but the company had possession and control of the ostriches. The word 'lost' in subsection 104-20(1) of the ITAA 1997 is not defined and takes its ordinary meaning. Taxation Determination TD 1999/79 states that the meaning of the word 'lose' in the context of subsection 104-20(1) ('lost' being the past tense of lose) is 'to come to be without, by some chance, and not know the whereabouts of: to lose a ring'. Paragraph 3 of TD 1999/79 says that the word 'lost' is wide enough to cover some situations where an asset is confiscated. However, other situations involving confiscation may amount to a change of ownership under CGT event A1, so that the circumstances of each case determine the relevant CGT event. Because the company did not give back the ostriches to the taxpayer and was subsequently liquidated and deregistered, the taxpayer had no means of knowing what had happened to their property. Even if they had located the property held by the company they would have had no means of knowing which ostriches were theirs. They had no means of knowing whether the ostriches had been destroyed, or whether there had been a change of ownership of them by confiscation. CGT event C1 therefore happened as the taxpayer had lost their ostriches when the company was deregistered. Under subsection 104-20(2) of the ITAA 1997 the time of CGT event C1 is when you first receive compensation for the loss or if you receive no compensation when the loss is discovered. As the taxpayer did not receive any payment or compensation the time of CGT event C1 is when the loss was discovered. This was when the company was deregistered in accordance with the Corporations Act 2001 because the company ceased to exist as a legal entity and therefore ceased to hold any property. On deregistration, the taxpayer no longer had any rights to recover their property.", "Date_of_Decision": "27 April 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 104-20 section 108-5 subsection 104-20(1) subsection 104-20(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/79", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT reduced cost base", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005113", "Unmatched_Content": "Removed irrelevant word and made minor punctuation correction. | Exclude immaterial facts. | Related Public Rulings (including Determinations) Taxation Determination TD 1999/79 | Keywords Capital gains tax CGT reduced cost base"}
{"ATO_ID_Number": "ATO ID 2005/164", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: CGT event C2 - close-out of an exchange traded option", "Issue": "Does CGT event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to a taxpayer on the close-out of an exchange-traded option (ETO)?", "Decision": "Yes. CGT event C2 in section 104-25 of the ITAA 1997 happens to a taxpayer on the close-out of an ETO.", "Facts": "The taxpayer bought call and put options (ETOs) over certain listed shares on the Australian Securities Exchange (ASX). The ETOs were subsequently closed out by the taxpayer writing (selling) call and put options in the same series. The taxpayer was not carrying on a business of transacting in ETOs on the ASX options market.", "Reasons_for_Decision": "Summary: An option is an intangible asset. It is also a CGT asset as defined in subsection 108-5(1) of the ITAA 1997. Options are specifically cited as examples of CGT assets (see Note 1 to subsection 108-5(2) of the ITAA 1997). A call option in respect of shares is an option that gives the taker (buyer) the right, but not the obligation, to buy the underlying shares at a specified price on or before a specified date. A put option in respect of shares gives the buyer the right, but not the obligation, to sell the underlying shares at a specified price on or before a specified date. The establishment of an ETO contract is referred to as opening a position (ASX Explanatory Booklet 'Understanding Options Trading'). A person who takes (buys) a call or put option as an opening position may cancel their right to exercise by writing (selling) an identical option. This is referred to as the close-out of an option or the closing-out of an opening position. (Similarly, a person who writes (sells) a call or put option may close out their position by taking (buying) an identical call or put option in the same series.) CGT event C2 happens when a taxpayer's ownership of an intangible CGT asset ends. Subsection 104-25(1) of the ITAA 1997 provides that ownership of an intangible CGT asset ends by cancellation, surrender, or release or similar means. CGT event C2 therefore happens to a taxpayer when their position under an ETO is closed out where the close-out results in the cancellation, release or discharge of the ETO. The close-out of an option position is not the same as the sale of an asset. When an option position is closed out, there is no transfer of rights between two parties. CGT event A1 therefore cannot happen when an option position is closed out, there being no change in ownership of the asset from one entity to another as required by subsection 104-10(2) of the ITAA 1997.", "Date_of_Decision": "24 May 2005", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 15-15 section 25-40 subsection 104-10(2) subsection 104-25(1) subsection 108-5(1) subsection 108-5(2) section 118-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Call options Put options Capital gains tax Capital losses CGT assets CGT capital proceeds CGT cost base CGT reduced cost base Securities rights & options", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005164", "Unmatched_Content": "This ATO ID has been amended to remove the words 'right or obligation' from the 5th paragraph of the Reasons for Decision. | Keywords Call options Put options Capital gains tax Capital losses CGT assets CGT capital proceeds CGT cost base CGT reduced cost base Securities rights & options"}
{"ATO_ID_Number": "ATO ID 2004/150", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: cost base - legal fees incurred in winding up a company", "Issue": "Are legal fees incurred by a taxpayer in winding up a company included under Division 110 of the Income Tax Assessment Act 1997 (ITAA 1997), in the second element of the cost base and reduced cost base of a debt owed by the company to the taxpayer?", "Decision": "Yes. The legal fees are included in the second element of the debt's cost base and reduced cost base under Division 110 of the ITAA 1997.", "Facts": "The taxpayer was a director and shareholder of a company. The taxpayer guaranteed the payment of a bank loan obtained by the company. The company failed to meet its obligations under the loan and the bank sought to enforce the guarantee. As a result, the taxpayer paid out the full amount of the loan. The taxpayer incurred legal fees in applying, as a creditor, to the relevant State Supreme Court for the company to be wound up on the basis that it was insolvent. The Court made the order and a liquidator has been appointed.", "Reasons_for_Decision": "Summary: The taxpayer's right to be indemnified by the company in respect of the payment made by the taxpayer to the bank is a CGT asset (section 108-5 of the ITAA 1997). Essentially, the payment of the amount by the taxpayer gave rise to a debt owed by the company to the taxpayer (paragraph 37 of Taxation Ruling TR 96/23). CGT event C2 in section 104-25 of the ITAA 1997 will happen when the debt expires - for example, when the company is deregistered. The taxpayer will make a capital gain if the capital proceeds from the ending of the debt are more than the debt's cost base, and will make a capital loss if the capital proceeds from the ending are less than the debt's reduced cost base (subsection 104-25(3) of the ITAA 1997). The cost base of a CGT asset consists of five elements (subsection 110-25(1) of the ITAA 1997). The elements of the reduced cost base are the same as for the cost base, except for the third element (subsection 110-55(2) of the ITAA 1997). The first element of the cost base and reduced cost base of the debt is the amount the taxpayer paid under the guarantee (subsections 110-25(2) and 110-55(2) of the ITAA 1997). At issue is whether legal fees incurred by the taxpayer in winding up the company are 'incidental costs' that can be included in the second element of the debt's cost base and reduced cost base. The second element of the cost base and reduced cost base consist of incidental costs incurred to acquire the asset, or that relate to a CGT event that happens in relation to the asset (subsections 110-25(3) and 110-55(2) of the ITAA 1997). Incidental costs are listed in section 110-35 of the ITAA 1997 and include costs incurred for the services of a legal adviser (subsection 110-35(2)). It is considered that the legal fees incurred by the taxpayer in winding up the company relate to CGT event C2 when it happens to the debt. The legal fees would therefore be included in the second element of the debt's cost base and reduced cost base.", "Date_of_Decision": "23 December 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 subsection 104-25(3) section 108-5 Division 110 subsection 110-25(1) subsection 110-25(2) subsection 110-25(3) section 110-35 subsection 110-35(2) subsection 110-55(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/215", "Subject_References": "capital gains tax CGT assets CGT cost base CGT events C1-C3 - end of a CGT asset CGT reduced cost base guarantees liquidation", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004150", "Unmatched_Content": "Amend the related Public Rulings (including determinations) to include Taxation Determination TD 2000/7. | Related ATO Interpretative Decisions | Remove ATO ID 2003/948 has been withdrawn on 1 April 2010 | Related Public Rulings (including Determinations) Taxation Determination TD 2000/7 | Keywords capital gains tax CGT assets CGT cost base CGT events C1-C3 - end of a CGT asset CGT reduced cost base guarantees liquidation"}
{"ATO_ID_Number": "ATO ID 2003/105", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income or capital - payment on termination of an agreement to provide services", "Issue": "Is an amount received by the taxpayer for the termination of an agreement to provide services assessable as income according to ordinary concepts under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The amount received for the termination of an agreement to provide services is not assessable as income according to ordinary concepts under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer entered into an agreement to provide services to another party. This agreement represented the whole business carried on by the taxpayer. This agreement was terminated by the other party. The taxpayer accepted an amount as compensation for the termination of the agreement. On accepting the payment, the taxpayer lost the right to provide services to the other party. The taxpayer was put out of business by the termination of the agreement. The compensation was paid as a lump sum and without any break up of component parts being communicated to the parties. The taxpayer signed a Deed of Release on receiving the payment. The Deed of Release provided that the payment was in full and final satisfaction of all suits, claims and/or demands whatsoever which the taxpayer 'has or may hereafter have in or arising out of the agreement or its termination'", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income is income according to ordinary concepts (subsection 6-5(1) of the ITAA 1997). An amount received in connection with the cancellation or variation of a contract or agreement made in the course of carrying on a business is usually of an income nature if the amount which it replaces would have been income. On the other hand, if the cancellation or variation affects the framework of the business or causes a substantial part of the business to be lost then the amount received will be of a capital nature. In Californian Oil Products Ltd (in liq) v. Federal Commissioner of Taxation (1934) 52 CLR 28; (1934) 3 ATD 10 ( Californian Oil ) the taxpayer under a number of agreements agreed to be an agent of an oil company for the sale of the oil company's petroleum products. By mutual consent the latest agency agreement was cancelled and the taxpayer was to receive a payment. The amount was not calculated by reference to lost earnings though it was to be paid by way of a series of equal instalments. It was held by the High Court that the payment was a capital amount. In Allied Mills Industries Pty Ltd v. Federal Commissioner of Taxation (1989) 20 FCR 288; (1989) 20ATR 457; 89 ATC 4365 ( Allied Mills ) the taxpayer gave up the right to exploit its sole distributorship of certain biscuit products. In return it received a payment of an amount. The taxpayer distributed several products and the biscuits were a substantial part of its business. However the biscuits were only a part of its business and the contract in question was only one of several made in the ordinary course of its business. The Federal Court felt that the distribution arrangements themselves yielded the profit. They did not simply provide the means of making profit. The payment was essentially designed to compensate the taxpayer for the loss of anticipated profits flowing from the termination of the contract. The Federal Court regarded the payment as being on the same footing as the profits themselves would have been, if they had been received. The amount was held to be income. The court said: '...The activities and structures of the appellant as a whole must be considered in determining whether the rights of the appellant which were terminated by the 1977 agreement constituted a structural asset. Normally in order for a contract to be regarded as a capital asset it must be a contract which is of substantial importance to the structure of the business itself. This is a factual matter and inevitably a matter of degree. Here the appellant was not parting with a substantial part of its business or ceasing to carry on business as was the case in Californian Oil Products. Furthermore the appellant was not disposing of part of the fixed framework of its business in the sense required by Van den Bergs v. Clarke, ([1935] AC 431 at 442). The contracts here in themselves yielded profit; they did not simply provide the means of making profit...' On entering into the agreement with the other party, the taxpayer acquired the right to provide services to the other party from which they were able to earn income. This right formed the basis for the taxpayer's business. The taxpayer's business existed in order to provide the services under the agreement. This agreement was of 'substantial importance to the structure of the business itself' ( Allied Mills ). When the right to provide services to the other party ceased the taxpayer ceased to carry on business. The amount received was to compensate for the loss of this right and the loss of their means of making profit. The amount was received by the taxpayer in circumstances which were similar to those in the Californian Oil case and is to be characterised as a receipt of capital. Accordingly this amount is not included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "12 November 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2) section 104-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Business income Income of a capital nature", "Case_References": "Allied Mills Industries Pty Ltd v. Federal Commissioner of Taxation (1989) 20 ATR 457 (1989) 20 FCR 288 89 ATC 4365", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003105", "Unmatched_Content": "This ATO ID was amended to improve clarity and update case references. | Keywords Income Business income Income of a capital nature"}
{"ATO_ID_Number": "ATO ID 2003/198", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: reduced cost base - bad debt deducted", "Issue": "Is a capital loss available when (CGT) event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happens to a debt for which a deduction was allowed under section 25-35 of the ITAA 1997?", "Decision": "Yes, a capital loss will be available when CGT event C2 in section 104-25 of the ITAA 1997 happens to the debt. The amount of the capital loss will be the difference between the capital proceeds for the debt and its reduced cost base. Section 110-55 of the ITAA 1997 applies so that the reduced cost base of the debt is reduced by the amount already recognised as a deduction under section 25-35 of the ITAA 1997.", "Facts": "The taxpayer is carrying on a business of money lending. One of the unsecured debtors of the taxpayer was declared bankrupt. The debtor's trustee in bankruptcy declares that no dividend will be paid to unsecured creditors. An amount was allowed as a bad debt deduction under section 25-35 of the ITAA 1997 in the 1999-2000 income year. The unsecured debtor was subsequently released from all provable debts in accordance with the Bankruptcy Act 1966.", "Reasons_for_Decision": "Summary: CGT event C2 in section 104-25 of the ITAA 1997 happens to a debt when it is released, discharged or satisfied. A capital loss arises if the capital proceeds from the debt are less than its reduced cost base - subsection 104-25(3) of the ITAA 1997. The reduced cost base of the debt is determined under section 110-55 of the ITAA 1997. Subsections 110-55(4) or 110-55(9) of the ITAA 1997 ensure that, in this case, the reduced cost base of the debt will be reduced by the amount that has been or can be deducted under section 25-35 of the ITAA 1997 in respect of it. Subsection 110-55(4) of the ITAA 1997 relevantly provides that the reduced cost base of an asset does not include an amount to the extent that you have deducted or can deduct it. Accordingly, the reduced cost base of the debt is reduced by the amount deducted in the 1999-2000 income year under section 25-35 of the ITAA 1997. Because there was some uncertainty about the scope of subsection 110-55(4) of the ITAA 1997, subsection 110-55(9) of the ITAA 1997 was inserted. It applies to CGT events happening on or after 21 October 1999 ( New Business Tax System (Integrity and Other Measures) Act 1999 Schedule 4, Item 2). Subsection 110-55(9) of the ITAA 1997 states that the reduced cost base of an asset is to be reduced by an amount that you have deducted or can deduct, or could have deducted except for Subdivision 170-D of the ITAA 1997, as a result of a CGT event that happens in relation to a CGT asset. However no reduction is made for an amount that relates to a cost that could never have formed part of the reduced cost base or is excluded from the reduced cost base as a result of another provision of this section. In this instance, the exception in subsection 110-55(9) of the ITAA 1997 will apply because the amount deducted under section 25-35 of the ITAA 1997 was excluded from the reduced cost base of the debt under subsection 110-55(4) of the ITAA 1997. If that were not the case then the reduced cost base of the debt would be reduced by subsection 110-55(9) of the ITAA 1997.", "Date_of_Decision": "21 February 2003", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-D section 25-35 section 104-25 section 110-55 subsection 104-25(3) subsection 104-55(4) subsection 110-55(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bankruptcy Carrying on a business Deductions & expenses Bad debts Capital Gains Tax CoE CGT events C1-C3 - end of a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003198", "Unmatched_Content": "This ATOID was amended by removing 'not' from the first sentence of the last paragraph of the reasons for decision to clarify that the exception in subsection 110-55(9) of the ITAA 1997 will apply because the amount has been excluded from the reduced cost base under subsection 110-55(4) of the ITAA 1997. | Keywords Bankruptcy Carrying on a business Deductions & expenses Bad debts Capital Gains Tax CoE CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/215", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: CGT event C2 - debtor bankrupted", "Issue": "At what stage during the course of the bankruptcy of a borrower does capital gains tax (CGT) event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to a debt owned by the lender?", "Decision": "CGT event C2 in section 104-25 of the ITAA 1997 happens when the bankrupt borrower is discharged from all provable debts in accordance with section 153 of the Bankruptcy Act 1966 unless, alternatively, the debt is extinguished by forgiveness under a deed of release such that the lender is legally barred from collecting the debt. CGT event C2 does not happen upon the borrower being declared bankrupt or upon the trustee indicating that no dividend is likely to be paid in respect of the debt.", "Facts": "The lender loans an amount of money to a borrower. The lender charges interest on these loans under normal commercial terms. The loan is unsecured. The lender is not carrying on the business of money lending. The borrower uses the loan monies for business purposes. The borrower was declared bankrupt. The trustee in bankruptcy declared that no dividend is expected to be paid to unsecured creditors. The borrower is an undischarged bankrupt.", "Reasons_for_Decision": "Summary: The debt will be a CGT asset of the lender under section 108-5 of the ITAA 1997. CGT event C2 (section 104-25 of the ITAA 1997) happens if ownership of an intangible CGT asset ends by the asset: Note paragraph 104-25(1)(e) and paragraph 104-25(1)(f) of the ITAA 1997 are not relevant in this case as they apply to options and convertible notes respectively. The mere writing off of a debt by a taxpayer is insufficient to constitute a cancellation, release, discharge, satisfaction, surrender, forfeiture, expiry or abandonment at law or in equity for the purposes of subsection 104-25(1) of the ITAA 1997. The debt will continue to exist until such time as the bankrupt borrower is discharged from bankruptcy; the discharge operates to release him from all provable debts in accordance with section 153 of the Bankruptcy Act 1966 . A discharge will not occur as a result of a mere statement by the trustee on the likely outcome of the administration of the bankrupt estate. Accordingly, CGT event C2 (section 104-25 of the ITAA 1997) will not happen to the debt until the bankrupt borrower is discharged from bankruptcy and as a result all provable debts are released. Alternatively, the debt may be extinguished by forgiveness under a deed of release such that the owner of the debt is legally barred from collecting the debt. It should be noted that a debt will not be extinguished if it is merely forgiven or abandoned without any legal impediment imposed on its collection.", "Date_of_Decision": "19 December 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 subsection 104-25(1) paragraph 104-25(1)(e) paragraph 104-25(1)(f) section 108-5", "Related_Public_Rulings_and_Determinations": "Class Ruling CR 2002/13.", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bankruptcy Carrying on a business Capital Gains Tax CoE CGT events C1-C3 - end of a CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003215", "Unmatched_Content": "Related Public Rulings (including Determinations) Class Ruling CR 2002/13. | Keywords Bankruptcy Carrying on a business Capital Gains Tax CoE CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/638", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: Capital proceeds payable by instalments - not all received - application of CGT event C2", "Issue": "Where the 'consideration in respect of the disposal of an asset' is payable by instalments over time, does CGT event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to the debt owing to the vendor if the vendor later agrees to a reduction in the amount owing?", "Decision": "Yes. CGT event C2 in section 104-25 of the ITAA 1997 will happen to the debt owing to the vendor, upon the vendor agreeing to accept a lesser amount.", "Facts": "In 1995 the taxpayer entered into a contract for the sale of an asset to an unrelated purchaser. The selling price under the contract was payable in ten equal annual payments with interest on the unpaid balance from time to time. The contract was completed on the day it was entered into, and at that time, the vendor was required to transfer to the purchaser the asset and any documentation that the vendor held in respect of the asset. The balance of the purchase price owing was subject to certain discounts if the purchaser elected to pay out the balance of its obligations under the contract earlier than the due date. The purchaser made the required annual payments and there was no indication they would not continue to do so. In 2001, the vendor taxpayer sought out the purchaser and initiated negotiations for the payment of the outstanding balance. This resulted in the vendor agreeing that the purchaser would satisfy the remaining obligations under the contract by paying (in two equal payments) an amount that was less than the amount the vendor was entitled to, and also less than the amount that would have applied if the relevant discount had been taken up at that time by the purchaser. As a result, the disposal consideration received by the taxpayer was less than the amount in the contract upon which the capital gain made from the disposal was calculated.", "Reasons_for_Decision": "Summary: CGT event C2 in section 104-25 of the ITAA 1997 happens if a person's ownership of an intangible CGT asset ends in certain ways. The debt owing to the vendor is an intangible CGT asset (section 108-5 of the ITAA 1997 Note 1). The action of the vendor in agreeing to accept a lesser amount than that which they were entitled to, results in the debt owing to the vendor being released, discharged or satisfied and accordingly results in CGT event C2 happening under subsection 104-25(1) of the ITAA 1997. Whether a capital gain or capital loss is made from CGT event C2 happening to the debt owing to the vendor, will depend on the calculation of the cost base of that debt and the capital proceeds from the CGT event. If the capital proceeds received from CGT event C2 happening to an asset are less than the market value of the asset, those proceeds are replaced with the market value of the asset as at the time of the event (subsection 116-30(2) of the ITAA 1997). The market value is worked out as if the event had not occurred and was never proposed to occur (subsection 116-30(3A) of the ITAA 1997). In this particular case, the capital proceeds from CGT event C2 happening to the debt owing to the vendor is the new reduced amount the vendor is entitled to receive. If that reduced amount is less than the market value of the debt previously owing to the vendor, then the capital proceeds are replaced with that market value. The ways in which a taxpayer may obtain acceptable valuations for CGT purposes can be found in Taxation Determination TD10.", "Date_of_Decision": "14 October 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 subsection 104-25(1) section 108-5 subsection 116-30(2) subsection 116-30(3A)", "Related_Public_Rulings_and_Determinations": "TD 10", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/635 | ATO ID 2003/636 | ATO ID 2003/637", "Subject_References": "Capital gains tax Capital proceeds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003638", "Unmatched_Content": "Related Public Rulings (including Determinations) TD 10 | Keywords Capital gains tax Capital proceeds"}
{"ATO_ID_Number": "ATO ID 2003/790", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: Acquisition of CGT asset - satisfaction of rights to have asset transferred to purchaser", "Issue": "Does CGT event C2 in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) happen when the taxpayer's contractual rights for the purchase of the asset are satisfied by the actual transfer of ownership of the asset?", "Decision": "No. CGT event C2 in section 104-25 of the ITAA 1997 does not happen when the contractual rights for the purchase of the asset are satisfied by the completion of the transfer of ownership of the asset to the purchaser. It is considered that the real transaction is the acquisition of the underlying CGT asset rather than the ending of the rights which merely facilitate the acquisition.", "Facts": "The taxpayer company entered into a contract for the purchase of real estate. The contract provided for settlement to occur six months from the date of entering into the contract. The contract price was for a fixed sum, payable 10% as a deposit and the balance on settlement. The contract was settled on the specified date. During the time between entering and completing the contract the market value of the property increased by $40,000.", "Reasons_for_Decision": "Summary: The UK case of Zim Properties Ltd v. Proctor (H M Inspector of Taxes) (1985) STC 90; 58 TC 371 ( Zim Properties Case ) concerned damages received by a vendor against a solicitor for negligence, where the buyer rescinded the contract of sale upon the failure of the vendor's solicitor to demonstrate good title to the property. The court took the approach that it was necessary to determine whether the damages were received in respect of the underlying property or the right to sue arising on the solicitor's default. The decision in the Zim Properties Case is relevant to the Australian CGT provisions in that many transactions can be broken down into several sub-transactions, each of which might independently attract the operation of those provisions. In such situations, it is relevant for the Commissioner to consider what the real transaction is. An executory contract for the transfer of a CGT asset is, by definition, itself a CGT asset. The subsequent performance of the contract discharges and satisfies the contractual rights and on the face of it may cause a CGT event C2 to happen. However, in such circumstances, the real transaction is the acquisition of the underlying CGT asset (the property) rather than the ending of the rights that merely facilitate that acquisition. This approach is consistent with the view expressed in Taxation Ruling 95/35 regarding compensation receipts and identifying the relevant asset for the purposes of the CGT provisions. In determining what the most relevant asset or transaction is, it is often appropriate to adopt a 'look-through' approach to the transaction or arrangement. Accordingly, where the change of ownership of a CGT asset occurs under a contract, the CGT provisions of the ITAA 1997 will apply only to the acquisition of the underlying asset and not to the rights that merely facilitate the transaction. Note: This ATO Interpretive Decision does not address the situation where the purchaser deals with the contractual rights other than by simply completing the purchase in accordance with the contract, for example, by assigning the contractual right to have the property conveyed. Such dealings are likely to be CGT events.", "Date_of_Decision": "7 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/35", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of assets CGT assets CGT events C1-C3 - end of a CGT asset Interest in underlying asset Ownership, interests, control & rights Relevant CGT asset", "Case_References": "Zim Properties v. Procter (H M Inspector of Taxes) (1985) STC 90 58 TC 371", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003790", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/35 | Keywords Acquisition of assets CGT assets CGT events C1-C3 - end of a CGT asset Interest in underlying asset Ownership, interests, control & rights Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2002/633", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: demolition of a dwelling: CGT event C1", "Issue": "Does a capital gain or capital loss from CGT event C1 in section 104-20 of the Income Tax Assessment Act 1997 (ITAA 1997) arise on the demolition of a dwelling if no capital proceeds are received?", "Decision": "No. The effect of the cost base rules in subsections 112-30(2) and (3) of the ITAA 1997 and the capital proceeds rule in section 116-25 of the ITAA 1997 is that no capital gain or capital loss arises when CGT event C1 happens on the demolition of a dwelling if no capital proceeds are received for it.", "Facts": "The taxpayer purchased a property (consisting of land and a dwelling) after 20 September 1985. The taxpayer later demolished the dwelling and subdivided the land into 2 blocks. The taxpayer did not receive any capital proceeds on the demolition of the dwelling. The taxpayer commissioned a valuation of the dwelling and land prior to demolition by a registered valuer.", "Reasons_for_Decision": "Summary: CGT event C1 in section 104-20 of the ITAA 1997 happens if a CGT asset you own is lost or destroyed. The dwelling was not a separate CGT asset because none of the balancing adjustment provisions in subsection 108-55(1) of the ITAA 1997 applied to it. However the note to subsection 104-20(1) of the ITAA 1997 makes it clear that CGT event C1 can apply to part of a CGT asset. Taxation Determination TD 1999/79 confirms that CGT event C1 can happen on the voluntary destruction of an asset where for example, a taxpayer might demolish a building in the course of redeveloping a property. Therefore, on the demolition of the dwelling CGT event C1 will happen. Subsection 104-20(3) of the ITAA 1997 provides that you make a capital gain from CGT event C1 if the capital proceeds from the loss or destruction are more than the asset's cost base. You make a capital loss if those capital proceeds are less than the asset's reduced cost base. Capital proceeds The taxpayer did not receive any capital proceeds on the demolition of the dwelling. Further, section 116-25 of the ITAA 1997 provides that the market value substitution rule does not apply to CGT event C1. Cost base As a CGT event has happened to only part of the taxpayer's asset, the taxpayer will be required to apportion the cost base or reduced cost base between the land and the dwelling using the apportionment rules in subsections 112-30(2), (3) and (4) of the ITAA 1997. Because the taxpayer received no capital proceeds, the combined effect of these provisions is that no amount is apportioned to the cost base /reduced cost base of the dwelling. Subsection 112-30(5) of the ITAA 1997 is an exception to the application of these apportionment rules. It provides that an amount that forms part of the cost base or reduced cost base of an asset is not apportioned if, on the facts, that amount is 'wholly attributable' to the part to which the CGT event happened or to the remaining part. No amount of the acquisition cost of the property or of the demolition costs in this case are wholly attributable to the demolished dwelling. Although a valuation of the property carried out after its acquisition might be the basis for making a reasonable apportionment it did not disclose an amount that was 'wholly attributable' to the acquisition of the dwelling. As the capital proceeds from the demolition were nil and the cost base attributed to the dwelling is nil, the taxpayer will not make a capital gain or capital loss from CGT event C1 in section 104-20 of the ITAA 1997 on the demolition of the dwelling.", "Date_of_Decision": "23 February 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 104-20 subsection 104-20(1) subsection 104-20(3) subsection 108-55(1) section 112-30 subsection 112-30(2) subsection 112-30(3) subsection 112-30(4) subsection 112-30(5) section 116-25", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/79 | Taxation Determination TD 93/180", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events C1-C3 - end of a CGT asset Real estate subdivision", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002633", "Unmatched_Content": "Decision Reasons for decision | Amended for clarity Amended for clarity | Related Public Rulings (including Determinations) Taxation Determination TD 1999/79 Taxation Determination TD 93/180 | Keywords Capital gains tax CGT events C1-C3 - end of a CGT asset Real estate subdivision"}
{"ATO_ID_Number": "ATO ID 2002/941", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax - time of CGT event C2", "Issue": "Is the timing of CCT event C2 determined by reference to paragraph 104-25(2)(b) of the Income Tax Assessment Act 1997 ('ITAA 1997'), where a payment is received under an indemnity acquired as part of the capital proceeds of an earlier CGT event?", "Decision": "Yes. The timing of CGT event C2 is determined by reference to paragraph 104-25(2)(b) of the ITAA 1997 when a payment is received under an indemnity, as the indemnity is considered to be discharged or satisfied at that time.", "Facts": "The taxpayer entered into a contract to sell a CGT asset. Under the terms of the contract the taxpayer received cash and several other benefits in return for the CGT asset. The benefits included an indemnity against specified future costs. A payment has now been received under the indemnity.", "Reasons_for_Decision": "Summary: Paragraph 104-25(1)(b) of the ITAA 1997 states that CGT event C2 happens to an intangible asset when it is released, discharge or satisfied. It is therefore necessary to consider when an indemnity is discharged. Subsection 104-25(2) of the ITAA 1997 specifies that the time that a CGT event C2 occurs is: 'The time of the event is: (a) when you enter into the contract that results in the asset ending; or (b) if there is no contract - when the asset ends.' The full Federal Court in FCT v. Dulux Holdings Pty Ltd & Orica Ltd [2001] FCA 1344; 2001 ATC 4658; (the Orica Case ) held that a chose in action was created by the contract and the due performance of the contract gave rise a deemed disposal. Accordingly, the deemed change in ownership took place not under the original contract, but on the progressive discharge of the chose in action. The Court held that subsection 160U(3) of the Income Tax Assessment Act 1936 (ITAA 1936) did not apply. However, subsection 160U(4) of the ITAA 1936 did apply to make the time of the disposal the time of each payment. (Note: In respect of CGT event C2 paragraph 104-25(2)(a) of the ITAA 1997 is the equivalent of subsection 160U(3) of the ITAA 1936. In respect of CGT event C2 paragraph 104-25(2)(b) of the ITAA 1997 is the equivalent of subsection 160U(4) of the ITAA 1936) The application of the principles established in the Orica Case mean that the timing of CGT event C2 is when payments under the indemnity are made and not when the original contract was entered into. At the time of the payment the indemnity ends by the asset being discharge or satisfied.", "Date_of_Decision": "26 June 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 104-25(1)(b) subsection 104-25(2) paragraph 104-25(2)(a) paragraph 104-25(2)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/958", "Subject_References": "Capital gains tax CGT assets CGT events C1-C3 - end of a CGT asset", "Case_References": "FC of T v. Dulux Holdings Pty Ltd & Orica Ltd [2001] FCA 1344 2001 ATC 4658", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002941", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT events C1-C3 - end of a CGT asset"}
{"ATO_ID_Number": "ATO ID 2001/301", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: Bad Debt (Loan by beneficiary to trust)", "Issue": "Is the taxpayer, a beneficiary of a trust, entitled to a deduction under section 25-35 or section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a loan made to the trust that will not be repaid.", "Decision": "No, the taxpayer, a beneficiary of a trust, is not entitled to a deduction under section 25-35 or section 8-1 of the ITAA 1997 for the loan made to the trust that will not be repaid.", "Facts": "The taxpayer, who is a beneficiary of a discretionary trust, lent an amount of money to the trust for use in a business venture being carried on by the trust. The loan was to be repaid with interest. As a beneficiary of the trust, the taxpayer is to receive distributions from the trust. The business venture is unsuccessful and the loan is not repaid to the taxpayer. The taxpayer has not brought the debt into account as assessable income and does not carry on a business of lending money.", "Reasons_for_Decision": "Summary: A deduction for a bad debt may be claimed under section 25-35 or section 8-1 of the ITAA 1997. To qualify for a bad debt deduction under section 25-35 of the ITAA 1997, the debt, in addition to being bad, must satisfy two criteria: As the taxpayer has not brought the debt into account as assessable income and does not carry on a business of lending money, the bad debt cannot be claimed as a deduction under section 25-35 of the ITAA 1997. To qualify for a deduction under section 8-1 of the ITAA 1997, the loan must be incurred in gaining or producing assessable income, or in carrying on a business for the purpose of gaining or producing assessable income. In addition, the loss must not be of a capital, private or domestic nature. If the loss is an ordinary incident of the taxpayer's income earning activities then the loss will be on revenue account. For example, a bad debt loss incurred by a financial institution would generally be expected to be a revenue loss (Taxation Ruling TR 92/18). If the loan has been made in a private capacity (i.e., not business), the bad debt will not be deductible under section 8-1 of the ITAA 1997. The loan will not be regarded as an ordinary incident of the taxpayer's income earning activities, and will also be excluded from deductibility under the capital exclusion under paragraph 8-1(2)(a) of the ITAA 1997. Whilst not deductible as a bad debt, a capital loss may arise under subsection 104-25(3) of the ITAA 1997 if the taxpayer releases the trust from the debt owed (CGT event C2).", "Date_of_Decision": "1 August 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 25-35 section 102-20 subsection 104-25(1)", "Related_Public_Rulings_and_Determinations": "TR 92/18", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Trusts Trust beneficiaries Discretionary trusts Borrowing's & loans Deductions & expenses Bad debts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001301", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 92/18 | Keywords Capital losses Trusts Trust beneficiaries Discretionary trusts Borrowing's & loans Deductions & expenses Bad debts"}
{"ATO_ID_Number": "ATO ID 2001/308", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Sale of Company via Share Cancellation", "Issue": "Whether an amount received or receivable from a 'third party' in respect of a share cancellation (i.e., not from the company in which the shares are being cancelled), is capital proceeds in respect of CGT event C2 contained in section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Depending on the facts, an amount received or receivable from a third party may be capital proceeds in respect of CGT event C2. If the amount is not capital proceeds in respect of CGT event C2, it may constitute capital proceeds in respect of CGT events D1 or H2.", "Facts": "The taxpayer sought to sell its shares in a wholly owned subsidiary company. However, the 'sale' was not effected by a disposal of the shares held by the taxpayer to the purchaser. The terms of the Sale Agreement provided that the purchaser would pay the taxpayer the market value of the shares held in the subsidiary and that the taxpayer would agree to all of the shares it held in the subsidiary being cancelled. Although the subsidiary was not a party to the agreement, under the terms of the Sale Agreement, the taxpayer was required to ensure that the relevant director and shareholder meetings in the subsidiary were held to give effect to the cancellation of shares.", "Reasons_for_Decision": "Summary: Paragraph 104-25(1)(a) of the ITAA 1997 provides that CGT event C2 happens if a taxpayer's ownership of an intangible CGT asset ends because it is redeemed or cancelled. The cancellation of shares will trigger CGT event C2. A CGT gain/loss from CGT event C2 is determined by calculating the difference between the capital proceeds received or to be received on the happening of the CGT event and the cost base/reduced cost base of the CGT asset - subsection 104-25(3) of the ITAA 1997. Subsection 116-20(1) of the ITAA 1997 provides the general rules for determining the capital proceeds from a CGT event. It provides that capital proceeds includes the total of the money you have received, or are entitled to receive, in respect of the event happening. In this case the Sale Agreement establishes a nexus between the payment of the money and the cancellation of the shares. Accordingly, the amount received, or receivable, from the purchaser is capital proceeds in respect of CGT event C2. Is any other CGT event relevant? In this situation, it could be argued that CGT events D1 or H2, sections 104-35 and 104-155 respectively of the ITAA 1997, may happen at the time of cancellation of the shares. However, in accordance with section 102-25 of the ITAA 1997, those events will only apply if no other CGT event applies. As previously outlined, the money received in this case will constitute capital proceeds in respect of CGT event C2. Therefore, it is unnecessary to consider whether the money gives rise to a capital gain from any other CGT event.", "Date_of_Decision": "28 May 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 Section 102-25 Section 104-25 Subsection 104-25(3) Paragraph 104-25(1)(a) Section 104-35 Section 104-155 Subsection 116-20(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Return of capital on shares Disposal of business Cancellation of shares Capital reductions Issue of shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001308", "Unmatched_Content": "Keywords Return of capital on shares Disposal of business Cancellation of shares Capital reductions Issue of shares"}
{"ATO_ID_Number": "ATO ID 2003/1190", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: business succession agreement - put and call options - CGT event D2", "Issue": "Does CGT event D2 (section 104-40 of the Income Tax Assessment Act 1997 (ITAA 1997)) happen when options are granted under a business succession agreement, where the options will only be legally enforceable on the death or disablement of one of the shareholders?", "Decision": "CGT event D2 does not occur at the time the agreement is entered into, but when the condition precedent to the grant (death or disablement of one of the shareholders) occurs.", "Facts": "Shareholders in a private company enter into a buy - sell (business succession) agreement to ensure the continuity of ownership of the business in the remaining shareholders, if one of the major shareholders dies or becomes permanently disabled. Under the agreement, put and call options are granted by each shareholder to the other shareholders to be effective in the event of the death or disablement of any of the shareholders. The options cannot be assigned. The agreement provides that upon the death or disability of one of the shareholders, the remaining shareholders acquire a call option to purchase the shares of the shareholder who suffers death or disablement. Similarly, the executor for the estate of the deceased shareholder or the disabled shareholder acquires a put option, entitling the executor (or shareholder) to require the other shareholders to purchase the disabled or deceased shareholder's shares.", "Reasons_for_Decision": "Summary: Section 104-40 of the ITAA 1997 states that a CGT event D2 occurs when an option is granted, renewed or extended. The legislation does not give a definition of 'option'. In Federal Commissioner of Taxation v. Guy (1996) 67 FCR 68; 96 ATC 4520; (1996) 32 ATR 601, the Federal Court defined option to mean: The word 'option' itself suggests a right in one party to unilaterally require another party to enter a new set of jural relations or to extend or continue an existing jural relationship. Put and call options, options to purchase and options to renew leases are, perhaps, the most common illustrations. A 'call option' gives a person the right to acquire an asset from the person granting the right at some specified time and usually at a predetermined price. A 'put option' gives a person granted the option the right to require the grantor of the option to acquire an asset from the grantee at some specified time and usually for a predetermined price. Under the buy-sell agreement, put and call options are granted to the parties to the agreement. When these are exercised they will create a legally binding contract to buy and sell shares. However the granting of the options may not occur at the time of entering into the agreement if there is a specified condition in the agreement that is yet to occur. In this case it was necessary for the death or disability of a major shareholder to occur before the remaining major shareholders obtained legally enforceable options. The buy -sell agreement is a contract with a condition precedent and cannot proceed until that condition is fulfilled. It is necessary to distinguish between a condition precedent to the performance of the contract and a condition precedent to the formation of the contract as this determines the timing of the D2 event and the subsequent transfer of the shares. As Gibbs CJ noted in Perri v. Coolangatta Investments Pty Ltd (1982) 149 CLR 537 ... It has sometimes proved difficult to decide whether a particular condition of a contract should be classified as a condition precedent or a condition subsequent, ... . However, provided the effect of the condition is clearly understood, its classification may be merely a matter of words. ... And later In Zieme v. Gregory [1963] V.R. 214, and Tait v. Bonnice [1975] V.R. 102 conditions making the contract conditional upon the purchaser containing a loan were held to be conditions subsequent, whereas in Scott v. Rania [1966] N.Z.L.R. a similar condition was held to be a condition precedent to the formation of a binding contract. See also Kiwi Brands Pty Ltd v. Commissioner of Taxation (Cth) 97 ATC 4879; (1997) 37 ATR 25. Where it is evident from the terms of the agreement that the parties intend the arrangement to come into effect only at the time of the death or disablement of one of the shareholders, this will be a condition precedent to the formation of the option contract. It therefore follows that the CGT event D2 does not occur at the time the buy - sell agreement is executed. The CGT event D2 happens when one of the major shareholders dies or becomes permanently disabled.", "Date_of_Decision": "30 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accident & disability insurance Call options CGT events Life insurance policies Private companies Put options Shareholders", "Case_References": "Brooks v Federal Commissioner of Taxation [2000] FCA 721 (2000) 2000 ATC 4362 (2000) 44 ATR 352 (2000) 173 ALR 235 (2000) 100 FCR 117 [2001] NSW ConvR 55-955", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031190", "Unmatched_Content": "This ATO interpretative Decision has been amended to insert an explanatory note at the conclusion of Reason for decision. | Keywords Accident & disability insurance Call options CGT events Life insurance policies Private companies Put options Shareholders"}
{"ATO_ID_Number": "ATO ID 2002/744", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax - creation of contractual rights where a club acquires the assets and liabilities of another club (in liquidation)", "Issue": "Is there a contractual right created under CGT event D1 in section 104-35 of the Income Tax Assessment Act 1997 (ITAA 1997) in Club A (in liquidation) when Club B acquires the assets of Club A and agrees to pay, or guarantees to pay, all of the creditors and honour all obligations under contracts of Club A (in liquidation)?", "Decision": "No. Club A (in liquidation) does not acquire a CGT asset under CGT event D1 pursuant to section 104-35 of the ITAA 1997 resulting from Club B agreeing to pay the liabilities of Club A (in liquidation).", "Facts": "Club A and Club B are companies limited by guarantee. Both clubs are registered under the Registered Clubs Act 1976 (NSW). Club A is to amalgamate with Club B pursuant to subsection 17A(1) of the Registered Clubs Act 1976 (NSW) which states, at paragraph (b), that a reference to the amalgamation of 2 or more registered clubs is a reference to an amalgamation effected by the continuation of one of those clubs and the dissolution of the other club or clubs. A Memorandum of Understanding (MOU) to amalgamate the clubs pursuant to the provisions of the Registered Clubs Act 1976 (NSW) was entered into by the clubs. The MOU at clause 2 provides that Club B will acquire all the assets of Club A and will pay (or guarantee to pay) all creditors of the club A and will honour all obligations under contracts made by the Club A. Club B accepts liabilities of Club A that may crystallise after the amalgamation eg employment and OH&S liabilities. The members of both clubs voted at a general meeting to amalgamate. Club A was placed in voluntary liquidation. The liquidator is to transfer the club A's assets to Club B.", "Reasons_for_Decision": "Summary: Federal Commissioner of Taxation v. Orica Ltd (1998) 194 CLR 500; (1998) 98 ATC 4494; (1998) 39 ATR 66 (Orica) concerned a debt defeasance arrangement where Orica paid the Melbourne and Metropolitan Board of Works (MMBW) $62.3m for MMBW to pay a total of $98.7m to holders of debentures issued by Orica. The High Court decided that a chose in action consisting of MMBW's promise to Orica in the Orica Assumption Agreement was an 'asset' of Orica's and that the payment made by MMBW from time to time in performance of that promise constituted pro tanto 'disposal' of that asset, in each case for the purposes of Pt IIIA of the Income Tax Assessment Act 1936. In terms of the ITAA 1997 Orica acquired a CGT asset under CGT event D1, being the contractual rights created in it by MMBW. A CGT event C2 pursuant to section 104-25 of the ITAA 1997 would happen to Orica upon payment of the liability by MMBW in performance of that contract. The arrangement reflected in the MOU is analogous to a legal defeasance whereby Club B is to take-over the obligation to repay the debt of Club A. In Orica the creditors (debenture holders) had recourse against Orica in the event of default by the assumption party's (MMBW) performance of its promise (ie payment of the liabilities). The principles in Orica only apply where a taxpayer has rights created in it which enable it to compel performance (eg payment of its liabilities) by another party. Under the terms of the current arrangement Club A will not be in existence when the liabilities are ultimately paid by Club B. The arrangement anticipates and requires that Club A be liquidated and therefore there is no intention that rights be created in Club A on which it can compel performance. This means that the arrangement does not constitute the sort of debt defeasance addressed in Orica and therefore contractual rights under CGT event D1 have not been created in Club A.", "Date_of_Decision": "15 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Association income Capital gains Capital gains tax CGT events D1-D3 - bringing into existence a CGT asset Non profit companies Debt defeasance Liquidation Voluntary liquidation", "Case_References": "Federal Commissioner of Taxation v. Orica Ltd (1998) 194 CLR 500 (1998) 98 ATC 4494 (1998) 39 ATR 66", "Other_References": "", "Business_Line": "Centres of Expertise Capital Gains Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002744", "Unmatched_Content": "Keywords Association income Capital gains Capital gains tax CGT events D1-D3 - bringing into existence a CGT asset Non profit companies Debt defeasance Liquidation Voluntary liquidation"}
{"ATO_ID_Number": "ATO ID 2013/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: specifically entitled", "Issue": "Can a beneficiary be specifically entitled to a capital gain made by the trustee of a trust by reason of the happening of CGT event E5 in section 104-75 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. If a trustee of a trust makes a capital gain by reason of CGT event E5 when a beneficiary becomes absolutely entitled to an asset of the trust, the beneficiary can be specifically entitled to the gain.", "Facts": "Pursuant to the will of a deceased individual, a trust was created over the deceased's estate in favour of the deceased's wife for life with his daughter to take in remainder. There were no other beneficiaries. The trust property included shares that were purchased by the trustee. The life tenant died during the 2011-12 income year. At that time, pursuant to the will, the daughter as remainder beneficiary became absolutely entitled to the trust assets (including the shares). The trustee made a capital gain from the shares by reason of CGT event E5 equal to the difference between the market value of the shares at the time of the event (being when the beneficiary became absolutely entitled to the shares) and their cost base. (No capital gain arose in the hands of the beneficiary under subsection 104-75(5) of the ITAA 1997 because the beneficiary acquired their interest for nil consideration (paragraph 104-75(6)(a)). Some of the trust income for the 2011-12 income year had been distributed to the life tenant before she died.", "Reasons_for_Decision": "Summary: The capital gains tax streaming provisions in Subdivision 115-C of the ITAA 1997 (which operate in respect of the 2010-11 and later income years following substantial amendments made to the Subdivision) ensure, among other things, that a beneficiary of a trust who is made 'specifically entitled' to a capital gain made by the trustee (a 'trust capital gain') will be assessed on it (rather than the gain being assessed proportionately to the beneficiaries entitled to trust income). Section 115-228 of the ITAA 1997 sets out when a beneficiary will be regarded as specifically entitled to a trust capital gain (either in whole or in part). To be specifically entitled to the whole gain, one requirement is that the beneficiary must have received, or can reasonably expect to receive, in accordance with the terms of the trust, all of the financial benefit referable to the capital gain (paragraphs (a) and (b) of the definition of 'share of net financial benefit' in subsection 115-228(1) of the ITAA 1997). Another requirement is that the financial benefit be recorded, again in accordance with the terms of the trust, in the accounts or records of the trust in its character as referable to the capital gain (paragraph (c) of the definition). The issues in this case are: As to the first issue, the Explanatory Memorandum to the Bill that on enactment introduced section 115-228 of the ITAA 1997 stated: 2.59 [W]hether a beneficiary can be specifically entitled to a capital gain or franked distribution is a question of fact. For example, when a beneficiary becomes absolutely entitled to a trust asset, it may be reasonable to expect the beneficiary will receive the net financial benefit referable to the deemed (trust) capital gain from CGT event E5. In this case the financial benefit referable to the capital gain is the asset itself (or the value of that asset) and the absolutely entitled beneficiary is, in accordance with the terms of the trust created by the will, the only one that is expected to receive the asset (and thus that benefit). As to the second issue, the Explanatory Memorandum stated: 2.63 The accounts or records of the trust would include the trust deed itself, statements of resolution or distribution statements, including schedules or notes attached to, or intended to be read with them. However, a record merely for tax purposes is not sufficient. In this case, the will which created the trust meets the description of a record of the trust in which is recorded the financial benefit that the daughter is expected to receive in its character as a benefit referable to the capital gain - the will records the daughter's absolute entitlement to the asset. It follows that the absolutely entitled beneficiary will be regarded as specifically entitled to the capital gain that arose from CGT event E5 happening to the shares. It also follows that no portion of the gain falls to be assessed to the life tenant.", "Date_of_Decision": "21 May 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 104-75 subsection 104-75(5) paragraph 104-75(6)(a) Subdivision 115-C section 115-228 subsection 115-228(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event E5 beneficiary becoming entitled to a trust asset CGT trust distributions net income of a trust trust assets trust beneficiaries trust deeds", "Case_References": "", "Other_References": "Explanatory memorandum to the Tax Laws Amendment (2011 Measures No. 5) Bill 2011", "Business_Line": "Law and Practice", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201333", "Unmatched_Content": "Keywords CGT event E5 beneficiary becoming entitled to a trust asset CGT trust distributions net income of a trust trust assets trust beneficiaries trust deeds"}
{"ATO_ID_Number": "ATO ID 2012/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax - CGT event E4 and expenses deductible for taxation purposes in a different year to that for trust law purposes.", "Issue": "Does CGT event E4 in section 104-70 of the Income Tax Assessment Act 1997 (ITAA 1997) happen if a unit holder receives a distribution of trust income for an income year which exceeds the trust's net income for that year and the difference results from an expense being deductible for taxation purposes in that year which was properly charged against income for trust law purposes in an earlier income year?", "Decision": "Yes. CGT event E4 in section 104-70 of the ITAA 1997 does happen. This is because the amount of trust income which exceeds the trust's net income for that year is not included in the unit holder's assessable income either for the income year in which the distribution is made or for the earlier income year (in which the trust net income exceeded the trust income as a result of the expense being recognised for trust law purposes in that year).", "Facts": "A resident taxpayer owns units in a resident unit trust ('the trust'). The trust deed for the trust requires the trustee to distribute to the unit holders before the end of each income year so much of the trust income as remains after provision has been made for those expenses of the trustee that are properly chargeable against income. In the year ended 30 June 2009, the net income of the trust ($11M), calculated under section 95 of the Income Tax Assessment Act 1936 (ITAA 1936), exceeded the income of the trust that was available for distribution to the unit holders ($7M). Part of this difference related to certain expenses that were properly chargeable against trust income for that year but were not deductible for tax purposes in that year. In the year ended 30 June 2011, those expenses became deductible for tax purposes which resulted in the income which was available for distribution to the unit holders ($10M) exceeding the net income of the trust ($8M) for that year.", "Reasons_for_Decision": "Summary: CGT event E4 in section 104-70 of the ITAA 1997 happens to a unit holder in a trust if the trustee makes a payment to the unit holder in respect of their unit and some or all of the payment is not included in the unit holder's assessable income. The effect of the trust deed in this case is that the taxpayer will be presently entitled to a share of the income of the trust for an income year if there is income available for distribution for that year. This means that the taxpayer will be presently entitled to a share of the income of the trust for both the 2009 and 2011 income years. Where a beneficiary is presently entitled to a share of the income of a trust, section 97 of the ITAA 1936 requires the beneficiary to include in their assessable income the corresponding share of the net income of the trust for that year. As the income of the trust for the 2009 income year is less than the net income of the trust for that year, the amount assessed to the taxpayer under section 97 of the ITAA 1936 will exceed the amount that is distributed to the taxpayer. However, in relation to the 2011 income year, the net income of the trust is less than the trust income with the result that that the taxpayer will not be assessed under section 97 of the ITAA 1936 on the total distribution received. As some of that distribution for the 2011 income year has not been included in the taxpayer's assessable income under section 97 of the ITAA 1936, the requirements for CGT event E4 to happen are satisfied. The fact that the taxpayer was assessed on an amount of net income in relation to the 2009 income year which exceeded the total amount that was distributed for that year is not relevant to the question of whether CGT event E4 happens in relation to the 2011 income year as the excess trust income distributed in the 2011 income year is not the same amount as that which was assessed to the taxpayer in relation to the 2009 income year. The excess trust income distributed in the 2011 income year constitutes trust income that was only derived by the trustee during that income year. It follows therefore that this excess trust income could not be the same amount as that which was assessed to the taxpayer in relation to the 2009 income year.", "Date_of_Decision": "10 July 2012", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 95 section 97", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax CGT events CGT events E1-E9 - trusts Non assessable part Present entitlement Trust distributions Trust income", "Case_References": "", "Other_References": "", "Business_Line": "Office of the Chief Tax Counsel Assets and Mining", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201263", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT events CGT events E1-E9 - trusts Non assessable part Present entitlement Trust distributions Trust income"}
{"ATO_ID_Number": "ATO ID 2007/175", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: granting a long-term lease - whether the original lease term includes the term of any renewal of the lease", "Issue": "When determining whether a lease is for at least 50 years under paragraph 104-115(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997), does the original lease term include the period of any renewal of the lease?", "Decision": "No. Under paragraph 104-115(1)(b) of the ITAA 1997, the period of any renewal of the lease must be considered separately from the term of the original lease.", "Facts": "A lease over land was granted for a term of 25 years. It contained an option to renew the lease for a term of 50 years. When the original lease term ended, the lessee exercised the option.", "Reasons_for_Decision": "Summary: Capital gains tax (CGT) event F2 is contained in section 104-115 of the ITAA 1997. CGT event F2 happens if a lessor grants a lease over land, or renews or extends a lease over land. Paragraph 104-115(1)(b) of the ITAA 1997 requires that the lease, renewal or extension is for at least 50 years. In determining whether the lease is for at least 50 years, the period of any renewal of the lease cannot be added to the original lease term. Each period must be considered separately. Under paragraph 104-115(1)(b) of the ITAA 1997, the original lease term must be for at least 50 years, or alternatively a renewal of the lease must be for at least 50 years. Paragraph 104-115(1)(b) considers the two situations separately, as evidenced by the use of the disjunctive 'or' before the word 'extension'. This indicates that the original lease term, and the period of renewal of the lease term, must be considered separately in determining whether CGT event F2 happens. In this case the original lease term will not cause CGT event F2 to happen, but the option to renew may cause CGT event F2 to happen. This interpretation of paragraph 104-115(1)(b) of the ITAA 1997 also accords with the position under the general law. In Gerraty v. McGavin & Anor (1914) 18 CLR 152; (1914) 20 ALR 182, Isaacs J stated of a 'lease obtained by the exercise of an option to renew' that 'clearly it is a new lease, a new demise'. His Honour reiterated this view in The Minister v. New South Wales Aerated Water and Confectionery Company Ltd (1916) 22 CLR 56; (1916) 23 ALR 10, concluding that 'a renewal is a new lease'. In Rider v. Ford [1923] 1 Ch 541 at 547, Russell J stated that the right to renew is a right to call for a fresh lease. The new lease is the result of a fresh demise. Even if all the provisions in the fresh lease were the same as in the old lease it would none the less be a fresh demise, and a fresh term with fresh covenants. In 195 Crown Street Pty Ltd v. Hoare [1969] 1 NSWR 193 at 199, Asprey JA (with whose conclusion on this point Walsh JA, at 198, and Hardie A-JA, at 207, agreed) stated that 'the exercise of an option for the renewal of a lease is a grant of a fresh lease for a new term'. In Sina Holdings Ltd v. Westpac Banking Corporation [1996] 1 NZLR 1 at 13, the New Zealand Court of Appeal stated that a renewed lease clearly was the grant of a new lease which followed expiry of the original lease... It cannot properly be described as simply an extension of the original term. Although none of these cases involved taxation issues, they provide a consistent line of authority under the general law that a lease granted under an option to renew gives rise to a new lease. The lease term granted under an option to renew can not be added to, or regarded as an extension of, the original lease term. Nothing in section 104-115 of the ITAA 1997 changes the position under the general law.", "Date_of_Decision": "28 August 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 104-115 paragraph 104-115(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT events F1-F5 - leases Land Leasehold", "Case_References": "195 Crown Street Pty Ltd v. Hoare [1969] 1 NSWR 193", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007175", "Unmatched_Content": "Keywords CGT events F1-F5 - leases Land Leasehold"}
{"ATO_ID_Number": "ATO ID 2004/650", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: basic conditions - CGT event happening in relation to a CGT asset - granting of a lease", "Issue": "If CGT event F1 (about granting a lease) in section 104-110 of the Income Tax Assessment Act 1997 (ITAA 1997) happens, does that event happen 'in relation to' the underlying asset (the premises over which the lease is granted) so satisfying paragraph 152-10(1)(a) of the ITAA 1997 (one of the basic conditions for small business relief)?", "Decision": "Yes. A CGT event F1 capital gain will qualify for small business CGT relief on the basis that the CGT event happens 'in relation to' the underlying premises, so satisfying paragraph 152-10(1)(a) of the ITAA 1997.", "Facts": "The taxpayer operates a motel which they acquired after 19 September 1985. The taxpayer grants a lease to a third party to use the premises and run the motel business as consideration for the third party paying the taxpayer a lump sum.", "Reasons_for_Decision": "Summary: CGT event F1 in subsection 104-110(1) of the ITAA 1997 happens when the taxpayer grants, renews or extends a lease. A capital gain or capital loss may arise from the CGT event happening. If the basic conditions under section 152-10 of the ITAA 1997 are satisfied, the taxpayer may be eligible to reduce the capital gain resulting from the CGT event using the small business concessions. The first condition in paragraph 152-10(1)(a) of the ITAA 1997 requires that the CGT event happens in relation to a CGT asset of the taxpayer. The fourth condition in paragraph 152-10(1)(d) of the ITAA 1997 requires that the asset satisfies the active asset test. With respect to the first condition it is considered the words 'in relation to' in paragraph 152-10(1)(a) of the ITAA 1997 are wide enough to allow reference to an underlying asset such as the premises over which a lease has been granted. Therefore, if CGT event F1 happens, that event can be said to happen in relation to a CGT asset of the taxpayer, being the underlying premises over which the lease is granted, and accordingly paragraph 152-10(1)(a) of the ITAA 1997 can be satisfied.", "Date_of_Decision": "22 June 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 104-110 subsection 104-110(1) Division 152 section 152-10 paragraph 152-10(1)(a) paragraph 152-10(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/346", "Subject_References": "Active asset Basic conditions for relief Capital gains tax CGT events F1-F5 - leases CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004650", "Unmatched_Content": "Keywords Active asset Basic conditions for relief Capital gains tax CGT events F1-F5 - leases CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2003/906", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: granting a long term lease over land - lease for a term of 80 years", "Issue": "Is a lease over land for a term of 80 years a long term lease under subsection 104-115(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if, at the time the lease is granted, there are circumstances where the lease may be terminated before 50 years have elapsed?", "Decision": "No. The lease over land for a term of 80 years is not a long term lease under subsection 104-115(1) of the ITAA 1997 because at the time that the lease was granted it was not reasonable to expect that the lease would continue for at least 50 years.", "Facts": "The lessor granted a lease over land to the lessee. The lease is for a term of 80 years. Under the lease agreement: The nature of the lessor and the lessee is such that it is likely that neither party will exist in 50 years time.", "Reasons_for_Decision": "Summary: CGT event F2 happens if a lessor grants a long term lease over land. A lease can be a long term lease if the lease is for at least 50 years and at the time the lease is granted it is reasonable to expect that the lease will continue for at least 50 years. The words 'reasonable to expect' were used in paragraph 160ZSA(3)(b) of the Income Tax Assessment Act 1936 , the progenitor of subparagraph 104-115(1)(b)(i) of the ITAA 1997. In the explanatory memorandum to the Tax Law Amendment Bill (No.4) 1989 , in relation to paragraph 160ZSA(3)(b), the Treasurer said: Paragraph (3)(b) requires that at the time the new lease was granted, it was reasonable to expect that the new lease would continue for at least 50 years. The reasonable expectation requirement means that the duration of a lease will be determined at the time the lease is granted. Thus, a lease will not be an eligible long term lease in circumstances where the lease is for a term of more than 50 years but includes a provision for the determination of the lease on the occurrence of an event which is likely to occur before 50 years have elapsed. Where any of the terms of a new lease render it unlikely that the lease will continue beyond a certain date before the expiry of the term of the lease, then it would not be reasonable to expect that the new lease would continue beyond that date. For example, this could occur where the lease provides for the lessee's obligations to become more onerous or for the lessee's rights to diminish after a given date (but the lease includes provision for the lessee to terminate the lease in that event) and those provisions render it unlikely that the lease would continue beyond that given date. ..... Furthermore, where a new lease contains a term providing that the lease may be determined by the lessor giving notice, then ordinarily it would not be reasonable to expect that the lease would continue beyond the earliest date upon which the lease may be determined by the lessor giving such notice. At the time the lease is granted the intentions of the lessor and the lessee are not to sell their respective interests in the land. However at the time the lease is granted it is likely that neither party will exist in 50 years time. Their stated intentions will not survive their existences. The intentions of the lessor and the lessee are their own intentions; they are not the intentions of their administrators, successors or assigns. It is not known what the intentions for the lease are in 50 years time. Under the lease agreement the lessor's interest in the land can be sold to the lessee, or the lessee's interest in the lease can be sold to the lessor, or both interests can be sold to a third party. If this happens, the lease will end by merger with the reversion. The lease will not continue. The first three circumstances can arise at any time. The fourth circumstance can only occur within the first 12 years. However all circumstances can arise as a result of the direct actions of the persons, who for the time being, are the lessor or the lessee of the land. These actions will occur at the absolute discretion of the relevant party. CGT event F2 requires that at the time the lease is granted, it is reasonable to expect that the new lease would continue for at least 50 years. There are not grounds for thinking that the lease will continue for at least 50 years. The lease is not a long term lease for the purposes of section 104-115 of the ITAA 1997.", "Date_of_Decision": "26 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 160ZSA(3)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains CGT events F1-F5 - leases Leasehold Real estate ownership & interests Termination of leases", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Law Amendment Bill (No.4) 1989", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003906", "Unmatched_Content": "Keywords Capital gains CGT events F1-F5 - leases Leasehold Real estate ownership & interests Termination of leases"}
{"ATO_ID_Number": "ATO ID 2006/222", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: CGT event H2 - premium rebate", "Issue": "Is a resolution of an insurer to allow a premium rebate under a policy of insurance a CGT event H2 in relation to the policy holder's asset, which is the bundle of rights under the insurance policy?", "Decision": "Yes. A resolution by an insurer to allow a premium rebate under a policy of insurance is a CGT event H2 in relation to the policy holder's asset.", "Facts": "A policy holder held a contract of insurance (the policy) with an insurer. The policy contained no provision for insurance premium rebates to be paid by the Insurer. The insurer resolved that an insurance premium rebate be paid to the policy holder, and the policy be endorsed to provide for such a premium rebate. Subsequently, the insurer paid a portion of insurance premiums paid under the policy as a rebate to the policy holder.", "Reasons_for_Decision": "Summary: Section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a CGT asset is any kind of property or a legal or equitable right that is not property. The bundle of rights held by the policy holder under the insurance policy is a CGT asset. Pursuant to section 104-155 of the ITAA 1997, CGT event H2 happens if an act, transaction or event occurs in relation to a CGT asset owned by an entity, and the act, transaction or event does not result in an adjustment being made to the asset's cost base or reduced cost base. The insurer's resolution to allow a premium rebate to be paid under the insurance policy affected the rights of the policy holder and ultimately varied the policy. The resolution was an act or event that happened in relation to the policy holder's bundle of rights under the policy. The insurer's resolution did not result in any adjustment to the cost base of the policy holder's bundle of rights under the policies. Further, none of the exceptions to CGT event H2 listed in subsection 104-155(5) of the ITAA 1997 applied. Therefore, the insurer making a resolution to allow a premium rebate to be paid was a CGT event H2 in respect of the policy holder's bundle of rights under the policies.", "Date_of_Decision": "27 July 2006", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 104-155 subsection 104-155(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events H1-H2 - special capital receipts Insurance Refunds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006222", "Unmatched_Content": "Keywords Capital gains tax CGT events H1-H2 - special capital receipts Insurance Refunds"}
{"ATO_ID_Number": "ATO ID 2003/346", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: basic conditions - CGT event happening in relation to a CGT asset - forfeited deposit", "Issue": "If CGT event H1 (about forfeiture of deposits) in section 104-150 of the Income Tax Assessment Act 1997 (ITAA 1997) happens, does that CGT event happen 'in relation to a CGT asset of yours' for the purposes of paragraph 152-10(1)(a) of the ITAA 1997 (one of the basic conditions for small business relief)?", "Decision": "Yes. If CGT event H1 in section 104-150 of the ITAA 1997 happens, that CGT event happens 'in relation to a CGT asset of yours' for the purposes of paragraph 152-10(1)(a) of the ITAA 1997.", "Facts": "The taxpayer owns farming land acquired after 19 September 1985 that is an active asset. The taxpayer entered into a contract to sell the land and the prospective purchaser paid the taxpayer a deposit. The prospective purchaser did not proceed with the purchase of the land and forfeited their deposit. The taxpayer decided not to sell the land and took it off the market.", "Reasons_for_Decision": "Summary: One of the basic conditions for small business CGT relief is that a CGT event happens in relation to a CGT asset of yours in an income year (paragraph 152-10(1)(a) of the ITAA 1997). CGT event H1 in section 104-150 of the ITAA 1997 happens if a deposit paid to you is forfeited because a prospective sale or other transaction does not proceed. Taxation Ruling TR 1999/19 Income tax capital gains: treatment of forfeited deposits deals with the treatment of forfeited deposits. Paragraph 6 of the Addendum to that Ruling effectively provides that CGT event H1 does not happen if the forfeiture of a deposit occurs within a 'continuum of events' constituting a later disposal of post-CGT real estate. Instead, the deposit forms part of the capital proceeds from CGT event A1 in section 104-10 of the ITAA 1997 happening to the land. In this case the land has remained unsold. The forfeiture of the deposit is therefore not part of a 'continuum of events' constituting the later disposal of the land, as that expression is used in Taxation Ruling TR 1999/19. Accordingly, CGT event H1 in section 104-150 of the ITAA 1997 happens. The words 'in relation to' in paragraph 152-10(1)(a) of the ITAA 1997 are wide enough to allow reference to an underlying asset such as land that was the subject of a sale which has fallen through. CGT event H1 happens in relation to the underlying land. Paragraph 152-10(1)(a) of the ITAA 1997 can therefore be satisfied for a capital gain made from CGT event H1.", "Date_of_Decision": "28 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 section 104-150 paragraph 152-10(1)(a) paragraph 152-10(1)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/19 | Taxation Ruling TR 1999/19A - Addendum", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains tax Capital Gains Tax CoE CGT events CGT events H1-H2 - special capital receipts CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003346", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 1999/19 Taxation Ruling TR 1999/19A - Addendum | Keywords Basic conditions for relief Capital gains tax Capital Gains Tax CoE CGT events CGT events H1-H2 - special capital receipts CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2010/102", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax and foreign residents: meaning of 'happening to' a CGT asset in section 855-40 of the ITAA 1997", "Issue": "Is CGT event I2 in section 104-170 of the Income Tax Assessment Act 1997 (ITAA 1997) 'a CGT event happening to a CGT asset' for the purposes of paragraph 855-40(2)(b) of the ITAA 1997?", "Decision": "Yes. CGT event I2 in section 104-170 of the ITAA 1997 is 'a CGT event happening to a CGT asset' for the purposes of paragraph 855-40(2)(b) of the ITAA 1997.", "Facts": "The taxpayer, a foreign resident funds manager owns 100% of the units of Australian Trust which is a resident trust for CGT purposes. The trustee of the Australian Trust owns assets that are not taxable Australian property. Australian Trust will cease to be a resident trust for CGT purposes. The change of residency of Australian Trust will trigger CGT Event I2 under section 104-170 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 855-40(2) of the ITAA 1997 disregards a capital gain made by a foreign resident in respect of that person's interest in a fixed trust if the capital gain relates to an asset that is not taxable Australian property of the fixed trust at the time of the CGT event. One of the eligibility tests for the exemption is contained in paragraph 855-40(2)(b) of ITAA 1997 which provides that: To satisfy that eligibility test in respect of the facts in this case, CGT event I2 must give rise to a gain that is attributable to 'a CGT event happening to a CGT asset' of Australian Trust (emphasis added ). While CGT event I2 happens where Australian Trust stops being a resident for CGT purposes (subsection 104-170(1) of the ITAA 1997), a CGT event I2 capital gain or loss is made only to extent that the trust owns CGT assets (subsection 104-170(3) of the ITAA 1997). Subsection 104-170(3) requires the trustee to work out the capital gain or loss for each CGT asset owned. This means that a capital gain made as a result of CGT event I2 relates to a CGT asset. It follows that a capital gain made as a result of CGT event I2 is a gain that is attributable to 'a *CGT event happening to a *CGT asset' for the purposes of paragraph 855-40(2)(b) of the ITAA 1997.", "Date_of_Decision": "23 April 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 104-170 subsection 104-170(1) subsection 104-170(3) section 855-40 subsection 855-40(2) paragraph 855-40(2)(b) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT events I1-I2 - Australian residency ends CGT exemptions Entities & taxpayer groups Entity changes Fixed trusts Foreign income International tax Ownership, interests, control & rights Relevant CGT asset Trust restructuring Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010102", "Unmatched_Content": "Keywords CGT events I1-I2 - Australian residency ends CGT exemptions Entities & taxpayer groups Entity changes Fixed trusts Foreign income International tax Ownership, interests, control & rights Relevant CGT asset Trust restructuring Trusts"}
{"ATO_ID_Number": "ATO ID 2009/148", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: non-resident becomes resident - assets in respect of which choice was made to treat as having the necessary connection with Australia", "Issue": "Is the acquisition date of CGT assets, in respect of which a choice was made under subsection 104-165(2) of the Income Tax Assessment Act 1997 (ITAA 1997) when the taxpayer became a non-resident of Australia, determined under Subdivision 109-A of the ITAA 1997 if the taxpayer returns to Australia and becomes a resident again?", "Decision": "Yes. The acquisition date of the CGT assets is determined under Subdivision 109-A of the ITAA 1997 and not section 855-45 of the ITAA 1997.", "Facts": "Prior to 12 December 2006, the taxpayer ceased to be a resident of Australia for taxation purposes. At the time of becoming a non-resident, the taxpayer owned a number of assets in respect of which a choice was made under subsection 104-165(2) of the ITAA 1997 to treat the assets as having the necessary connection with Australia. In January 2009, the taxpayer returned to Australia to become a permanent resident again. The taxpayer still owns the assets.", "Reasons_for_Decision": "Summary: As a general rule, you acquire a CGT asset when you become its owner (subsection 109-5(1) of the ITAA 1997). More specific rules are set out in subsection 109-5(2) of the ITAA 1997 for CGT assets acquired as a result of a CGT event happening or in section 109-10 of the ITAA 1997 when assets are acquired without a CGT event happening. If a non-resident individual becomes an Australian resident, a special acquisition rule applies in respect of certain CGT assets owned by the individual just before becoming a resident (section 855-45 of the ITAA 1997). The special acquisition rule is that the taxpayer is treated as having acquired the asset at the time of becoming a resident (subsection 855-45(3) of the ITAA 1997). However, the rule in section 855-45 of the ITAA 1997 does not apply to assets that are taxable Australian property or assets that were acquired before 20 September 1985 (subsection 855-40(1) of the ITAA 1997). Section 104-165 of the Income Tax (Transitional Provisions) Act 1997 has the effect that an asset in respect of which a choice was made under subsection 104-165(2) of the ITAA 1997 to treat it as having the necessary connection with Australia is taken to be taxable Australian property for the purposes of section 855-45 of the ITAA 1997. When the taxpayer became a non-resident of Australia, a choice was made under subsections 104-165(2) of the ITAA 1997 in respect of a number of assets held at that time. As a result of that choice, those assets are taken to be taxable Australian property. Therefore, the acquisition rule in section 855-45 of the ITAA 1997 will not apply to them. This means that the acquisition date of the assets for which the choice was made under subsection 104-165(2) of the ITAA 1997 will be determined under the rules in Subdivision 109-A of the ITAA 1997.", "Date_of_Decision": "24 November 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-165(2) subsection 104-165(3) Subdivision 109-A section 109-5 subsection 109-5(1) subsection 109-5(2) section 855-45 subsection 855-45(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of CGT asset Capital gains tax CGT assets CGT cost base Capital Gains Tax CoE CGT asset with the necessary connection with Australia", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009148", "Unmatched_Content": "Keywords Acquisition of CGT asset Capital gains tax CGT assets CGT cost base Capital Gains Tax CoE CGT asset with the necessary connection with Australia"}
{"ATO_ID_Number": "ATO ID 2006/262", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a capital gain derived by a non-resident from the disposal of shares in an Australian public company which do not have the necessary connection with Australia", "Issue": "Does Australia have a taxing right under Article 13(6) of Schedule 2 and Schedule 2A (the US Convention) to the International Tax Agreements Act 1953 (Agreements Act) in respect of a capital gain which arises from the disposal of shares in an Australian public company which were acquired while the taxpayer was a resident of Australia but disposed of while the taxpayer was a United States (US) resident, where the taxpayer made a choice under subsection 104-165(2) of the Income Tax Assessment Act 1997 (ITAA 1997) to disregard making a capital gain on the shares upon cessation of Australian residency for tax purposes?", "Decision": "No. Australia does not have a taxing right under Article 13(6) of the US Convention in respect of a capital gain which arises from the disposal of shares in an Australian public company which were acquired while the taxpayer was a resident of Australia but disposed of while the taxpayer was a US resident, where the taxpayer made a choice under section 104-165(2) of the ITAA 1997 to disregard making a capital gain on the shares upon cessation of Australian residency for tax purposes.", "Facts": "The taxpayer is a non-resident of Australia for tax purposes and is a US resident for tax purposes. The taxpayer owns shares in an Australian public company. The shares were purchased while the taxpayer was a resident of Australia for taxation purposes. The taxpayer made a choice under section 104-165(2) of the ITAA 1997 to disregard making a capital gain or a capital loss upon cessation of Australian residency for tax purposes. The taxpayer disposed of the shares when they were a resident of the US for tax purposes. The shares owned by the taxpayer did not represent 10% or more of the value of the Australian public company at any time during the five years prior to disposal (\"portfolio shares\").", "Reasons_for_Decision": "Summary: The assessable income of a non-resident includes statutory income from all Australian sources as well as other statutory income that a provision includes in assessable income on some basis other than having an Australian source (subsection 6-10(5) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 102-5 of the ITAA 1997 which provides that a net capital gain is to be included in assessable income. When the taxpayer became a non-resident of Australia, a choice was made under subsection 104-165(2) of the ITAA 1997 to disregard a capital gain made in respect of portfolio shares that were otherwise covered by CGT event I1. As a result of that choice, those assets are treated under subsection 104-165(3) of the ITAA 1997 as assets which have the necessary connection with Australia until the earlier of a CGT event happening in relation to the asset or the taxpayer becoming an Australian resident. In determining liability to Australian tax on income received by a non resident, it is necessary to consider not only the income tax laws but any applicable tax treaty contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedules 2 and 2A respectively of the Agreements Act contain the tax treaty between Australia and the US and the protocol amending the US Convention. Article 13 of the US Convention deals with the alienation of property. Article 13(6) of the US Convention provides that an individual who had made an election to defer taxation on income or gains relating to property which would be otherwise taxable in Australia upon the individual ceasing to be a resident of Australia for the purposes of its tax, shall, if the individual is a resident of the US, be taxable on income or gains from the subsequent alienation of that property only in the US. As the taxpayer made a choice under subsection 104-165(2) of the ITAA 1997 to defer the taxation on the gain relating to the portfolio shares upon cessation of residency for Australian tax purposes, any subsequent disposal of such shares can only be taxable in the US by virtue of Article 13(6) of the US Convention. Moreover, the effect of Article 13(6) of the US Convention will override subsection 104-165(3) of the ITAA 1997 by virtue of subsection 4(2) of the Agreements Act.", "Date_of_Decision": "21 September 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-10 subsection 6-10(5) section 10-5 section 102-5 subsection 104-165(2) subsection 104-165(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT events I1-I2 - Australian residency ends Double tax agreements Net capital gains United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006262", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords CGT events I1-I2 - Australian residency ends Double tax agreements Net capital gains United States"}
{"ATO_ID_Number": "ATO ID 2009/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: CGT event J1 - interposing a partnership in a wholly-owned group", "Issue": "Will CGT event J1 happen if:", "Decision": "No. CGT event J1 will not happen as a result of the interposition of the partnership in the group structure because this interposition would not cause Recipient company to cease to be a 100% subsidiary of Ultimate holding company.", "Facts": "Prior to a group restructure, the corporate structure of the group was represented as: There was a roll-over event that happened in relation to the roll-over asset transferred from Subsidiary to Recipient Company. Following the group restructure, a partnership will be interposed between Ultimate holding company and Subsidiary where: Under the relevant Partnership Act and the partnership agreement, the partnership is not a separate legal entity distinct from its partners. The corporate structure of the group post-restructuring is represented as:", "Reasons_for_Decision": "Summary: CGT event J1 happens under section 104-175 of the ITAA 1997 if roll-over relief under Subdivision 126-B of the ITAA 1997 was chosen in relation to an earlier transfer of a CGT asset and the recipient company subsequently ceased to be a 100% subsidiary of the company that was the ultimate holding company of the group at the time of the roll-over. A company is a 100% subsidiary of another company (the holding company) under section 975-505 of the ITAA 1997 if all the shares in the subsidiary company are beneficially owned by: The phrase 'beneficial ownership' is not defined and therefore its meaning is to be 'construed in context and must reflect the purposes of the section in which it occurs' ( Federal Commissioner of Taxation (Cth) v Linter Textiles Australia (in Liq) (2005) 220 CLR 592; 2005 ATC 4255; (2005) 59 ATR 177) Furthermore, the Explanatory Memorandum to Taxation Laws Amendment Act 1993 which enacted section 160ZZOA of the Income Tax Assessment Act 1936 , the predecessor to section 104-175 of the ITAA 1997, stated that: Provided an asset remains within the beneficial control of its ultimate holding company, no disposal and re-acquisition of the asset will be deemed under new section 160ZZOA. (Emphasis added) The control of Recipient company will continue to be with Ultimate holding company because the corporate partners collectively hold the full bundle of ownership rights in Subsidiary and Ultimate holding company in turn holds the full bundle of ownership rights in each of the corporate partners for its own benefit. Accordingly, CGT event J1 will not happen when the partnership is interposed between Ultimate holding company and Subsidiary as Recipient company has not ceased to be a 100% subsidiary of the wholly owned group.", "Date_of_Decision": "15 June 2009", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 104-75 section 975-505", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event J1-J3 - rollovers Partnerships", "Case_References": "Federal Commissioner of Taxation (Cth) v Linter Textiles Australia (in Liq) (2005) 220 CLR 592 2005 ATC 4255 59 ATR 177", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200943", "Unmatched_Content": "Keywords CGT event J1-J3 - rollovers Partnerships"}
{"ATO_ID_Number": "ATO ID 2006/200", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: balancing adjustment under CGT event K7 - partnership interest", "Issue": "Are partners treated under section 106-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as having an individual interest in a partnership CGT asset, where the asset is a depreciating asset and CGT event K7 in section 104-235 of the ITAA 1997 happens in relation to that asset?", "Decision": "No. Partners in a partnership are not treated as having an individual interest in the depreciating asset; the partners have an interest under section 106-5 of the ITAA 1997 in the capital gain or capital loss as worked out under sections 104-240 and 104-245 of the ITAA 1997 when CGT event K7 happens in relation to the depreciating asset.", "Facts": "A husband and wife partnership purchased a boat in July 1998 for $316,413. The boat was used in the partnership business of a boat charter operation. The boat was wholly used for taxable purposes until 30 June 2003. Depreciation deductions totalling $304,451 were claimed for the boat while it was used for taxable purposes. For the purposes of Division 40 of the ITAA 1997, the partnership holds the boat. From 1 July 2003, the boat has been held for 100% non-taxable use and no further deductions for depreciation have been made. The taxpayer anticipates selling the boat in the near future for approximately $300,000.", "Reasons_for_Decision": "Summary: Under subsection 106-5(1) of the ITAA 1997 any capital gain or capital loss from a CGT event happening in relation to a partnership CGT asset is made by the partners individually, and not the partnership. Subsection 106-5(2) of the ITAA 1997 further provides that each partner has a separate cost base and reduced cost base for the partner's interest in each CGT asset of the partnership. Ordinarily, a capital gain or capital loss made from a CGT event (that is also a balancing adjustment event) that happens to a depreciating asset is disregarded under subsection 118-24(1) of the ITAA 1997. However, subsection 118-24(2) of the ITAA 1997 states that the provision in subsection 118-24(1) does not apply, if the capital gain or capital loss is made when CGT event K7 happens in relation to the depreciating asset. CGT event K7 happens if a balancing adjustment event occurs for a depreciating asset you held and at some time when you held the asset, you used it, or had it installed ready for use, for a purpose other than a taxable purpose. Any capital gain or capital loss made from CGT event K7 happening is worked out under sections 104-240 and 104-245 of the ITAA 1997. The capital gain or capital loss is calculated by reference to the concepts found in Division 40 of the ITAA 1997 (for example, cost and termination value) and not from those found in the CGT provisions. Accordingly, the CGT concepts of cost base and capital proceeds are not relevant for calculating the capital gain or capital loss when CGT event K7 happens. Under Division 40 of the ITAA 1997, the partnership (and not the individual partners) is treated as the owner or holder of the depreciating asset (item 7 of the table in section 40-40 of the ITAA 1997). The Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill of 2001 explaining Division 40 states at paragraph 1.45 that: Where a depreciating asset is or becomes a partnership asset, it is appropriate to identify the partnership as being the economic owner of the asset. Thus, the partnership, and not any individual partner, is regarded as holding the asset. This is consistent with the structure of the income tax law, under which the partnership is a notional taxpayer arriving at a tax position which is then allocated out between the partners. Consequently, in this case, when CGT event K7 happens, the capital gain or capital loss is calculated by reference to the partnership as the holder of the depreciating asset, rather than by an individual partner. Accordingly, under section 106-5 of the ITAA 1997, the partners have an interest in the capital gain or capital loss as calculated by reference to the partnership as the holder of the depreciating asset, rather than by having an individual interest in the depreciating asset.", "Date_of_Decision": "12 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-40 section 104-235 section 104-240 section 104-245 section 106-5 subsection 118-24(1) subsection 118-24(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Depreciating asset Partnership asset Balancing adjustment Economic owner", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006200", "Unmatched_Content": "Include all references quoted in ATO ID. | Include reference to explanatory memorandum. | Keywords Capital gains tax Depreciating asset Partnership asset Balancing adjustment Economic owner"}
{"ATO_ID_Number": "ATO ID 2004/458", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: CGT event K3 - assets pass to a tax exempt testamentary trust", "Issue": "Does CGT event K3 in section 104-215 of the Income Tax Assessment Act 1997 (ITAA 1997) happen if assets, owned by a deceased person at the date of their death, pass to a trust established under their will which is an exempt entity and, under the terms of the trust, the assets are to be held in the trust in perpetuity with the trust income to be applied for public charitable purposes?", "Decision": "Yes. CGT event K3 happens if assets owned by a deceased person at the date of their death pass to a beneficiary in their estate that is an exempt entity when the assets pass. In the circumstances of this case, the testamentary trust is a beneficiary of the estate.", "Facts": "The deceased died in the 2004 income year. Under the deceased's will, the residue of their estate is to be held by their executors and trustees on trust (in perpetuity) to apply the income from the trust for public charitable purposes. The testamentary trust has been endorsed by the ATO under Subdivision 50-B of the ITAA 1997 as an exempt entity, effective upon its commencement, on the basis that it is a registered charity. The executor has asked whether CGT event K3 happens when the administration of the estate is completed and the residue passes to the testamentary trust.", "Reasons_for_Decision": "Summary: When a person dies, any capital gain or loss made by them in respect of a CGT asset they owned just before dying is disregarded, unless CGT event K3 applies (sections 128-10 and 104-215 of the ITAA 1997). CGT event K3 happens if a CGT asset owned by a deceased person just before they died passes to a beneficiary in their estate that is an exempt entity when the asset passes (paragraph 104-215(1)(a) of the ITAA 1997). The time of the event is just before the deceased died which means that any resulting capital gain or loss is accounted for in the final income tax return lodged on behalf of the deceased (referred to as the 'date of death' return) (subsection 104-215(3) of the ITAA 1997). For these purposes, an exempt entity is an entity whose ordinary and statutory income is exempt because of Division 50 of the ITAA 1997 (subsection 995-1(1) of the ITAA 1997). A trust that is a registered charity will only be exempt if it is endorsed as such by the ATO (section 50-52 of the ITAA 1997). An asset passes to a beneficiary in an estate if the beneficiary becomes the owner of the asset under the will or in one of the other ways set out in subsection 128-20(1) of the ITAA 1997. In the circumstances, it is considered that the charitable trust set up under the deceased's will is a beneficiary in the deceased's estate. The trust is a 'purpose' trust in that the assets will be held by the trust in perpetuity and the income of the trust will be used for public charitable purposes. That is, there are no other persons to whom the assets of the trust will eventually pass. Therefore, the testamentary trust is the beneficiary. The trust will commence at the completion of the administration of the estate. As the trust is an exempt entity from its commencement, CGT event K3 happens when the assets pass to it. The time of the event is just before the deceased died. Note 1: Law Administration Practice Statement PS LA 2003/12 sets out the Commissioner's practice for 'treating the trustee of a testamentary trust in the same way as a legal representative for capital gains tax purposes'. PS LA 2003/12 has no application in this case because the trust created under the will of the deceased is itself the ultimate beneficiary. In any event, PS LA 2003/12 contains the proviso that the practice is subject to the normal operation of CGT event K3. Note 2: Any capital gain or loss made as a result of CGT event K3 happening may be disregarded if the testamentary trust is a deductible gift recipient: section 118-60 of the ITAA 1997.", "Date_of_Decision": "14 May 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 50 Subdivision 50-B section 50-52 section 104-215 subsection 104-215(1)(a) subsection 104-215(3) section 118-60 section 128-10 subsection 128-20(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax Capital losses CGT assets CGT deceased estates CGT events K1-K6 - other events Charitable trusts Deductible gift recipients", "Case_References": "", "Other_References": "Law Administration Practice Statement PS LA 2003/12", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004458", "Unmatched_Content": "section 118-60(1) updated to section 118-60 | Changed references to 'Tax Office' to 'ATO' as per the ATO Style Guide | Updated reference in PS LA 2003/12 to reflect the current Practice Statement | Remove and update terms from superseded legislation | Remove reference to superseded legislation | Keywords Capital gains Capital gains tax Capital losses CGT assets CGT deceased estates CGT events K1-K6 - other events Charitable trusts Deductible gift recipients"}
{"ATO_ID_Number": "ATO ID 2004/633", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: demerger - CGT event K6 exception - demerged company listed on stock exchange", "Issue": "Must a demerged company be a listed company for the exception from CGT event K6 under paragraph 104-230(9)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) to apply to shares in the company?", "Decision": "Yes. A demerged company must be a listed company for the exception from CGT event K6 under paragraph 104-230(9)(a) of the ITAA 1997 to apply to shares in the company.", "Facts": "The taxpayer owns shares in a company which has been listed on the Australian Stock Exchange (ASX) for four years. The company is the head entity of a demerger group. As part of a demerger under Division 125 of the ITAA 1997, the taxpayer received new shares in the demerged entity. The demerged entity listed on the ASX just after the demerger. Three years after the demerger, the taxpayer sells their shares in the demerged entity and seeks to apply the CGT event K6 exception under paragraph 104-230(9)(a) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 104-230(9) of the ITAA 1997 provides the general exceptions from CGT event K6 happening. Under paragraph 104-230(9)(a) of the ITAA 1997 CGT event K6 does not happen when some of the shares in the company referred to in subsection 104-230(2) of the ITAA 1997 were listed on a stock exchange (either in Australia or a foreign country) for at least five years at the time the CGT event referred to in paragraph 104-230(1)(b) of the ITAA 1997 (the other CGT event) happens. Subsection 104-230(9A) of the ITAA 1997 further provides that the exception under paragraph 104-230(9)(a) applies where:- If the above conditions are satisfied, the demerged entity is treated as being listed on the stock exchange at all times when some of the shares of the head entity of the demerger group were so listed (subsection 104-230(9A) of the ITAA 1997). As the head entity in this case had been listed on the stock exchange for four years at the time of the demerger, the demerged entity is treated as having been listed for those four years. The demerged entity had been listed for a further three years. Therefore, the combined period of the head entity and the demerged entity being listed on the stock exchange is at least five years as required by paragraph 104-230(9)(a) of the ITAA 1997. The exception from CGT event K6 applied when the taxpayer sold their shares in the demerged entity as provided for by paragraph 104-230(9)(a) of the ITAA 1997 and section 104-230(9A) of the ITAA 1997.", "Date_of_Decision": "12 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 104-230(1)(b) subsection 104-230(2) subsection 104-230(9) paragraph 104-230(9)(a) subsection 104-230(9A) paragraph 104-230(9A)(a) paragraph 104-230(9A)(b) paragraph 104-230(9A)(c) Division 125", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events CGT events K1-K6 - other events Demerged entity Demerger Demerger group", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004633", "Unmatched_Content": "Keywords Capital gains tax CGT events CGT events K1-K6 - other events Demerged entity Demerger Demerger group"}
{"ATO_ID_Number": "ATO ID 2006/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: CGT event L5 where ACA is not negative after step 4", "Issue": "Does CGT event L5 in section 104-520 of the Income Tax Assessment Act 1997 (ITAA 1997) happen to the head company of a consolidated group when an entity ceases to be a subsidiary member of the group and the group's allocable cost amount (ACA) for the leaving entity is not negative?", "Decision": "No. CGT event L5 does not happen to the head company if the group's ACA for the leaving entity is not negative.", "Facts": "On 1 July 2005 Head Co sells all of A Co ordinary shares to a third party. A Co ceases to be a subsidiary member of Head Co's consolidated group from that time. A Co's assets at the leaving time are: A Co's liabilities are: At the leaving time the bank loan and intra-group loan remain outstanding.", "Reasons_for_Decision": "Summary: Subsection 104-520(1) of the ITAA 1997 provides that CGT event L5 happens if: If the ACA is negative after applying step 4 of the table in section 711-20 of the ITAA 1997, then the head company of the group makes a capital gain equal to the amount remaining. When A Co leaves, Head Co's consolidated group, the cost of membership interests that the head company holds in A Co is set just before A Co ceases to be a subsidiary member of the group. The tax cost of the membership interests is set at the interests' tax cost setting amount. The tax cost setting amount of the membership interests is worked out by determining the old group's ACA for A Co in accordance with section 711-20 of the ITAA 1997, then allocating the result to each of the membership interests in A Co. Table 2 (below) sets out the exit ACA calculation for Head Co's membership interests in A Co. The ACA of $100 is allocated to the membership interests. The tax cost setting amount of the membership interests in A Co is $100. Therefore, CGT event L5 does not happen to Head Co, because the ACA, after applying step 4 of the table in section 711-20 of the ITAA 1997, is not negative.", "Date_of_Decision": "25 January 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 711-20 section 104-520 subsection 104-520(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Allocable cost amount Consolidation Consolidation - assets Consolidation - exiting Cost setting rules Joining entity Leaving entity Retained cost base asset Tax cost setting amount Tax cost setting rules", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200638", "Unmatched_Content": "Loan liability to Head Co | Add terminating value of assets: | Intra-group liability (Loan liability to Head Co) | Keywords Allocable cost amount Consolidation Consolidation - assets Consolidation - exiting Cost setting rules Joining entity Leaving entity Retained cost base asset Tax cost setting amount Tax cost setting rules"}
{"ATO_ID_Number": "ATO ID 2003/650", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: chosen transitional entity - CGT event L1", "Issue": "Can a head company make a capital loss under section 104-500 (CGT event L1) of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of an entity that joins a consolidated group and the head company chooses that the entity be a chosen transitional entity?", "Decision": "No. CGT event L1 can only happen to a head company of a consolidated group where a joining entity has the tax cost setting amount of its assets calculated under Division 705 of ITAA 1997.", "Facts": "A Company has a wholly owned subsidiary, B Company. A Company acquired the shares in B Company before 20 September 1985. A Company has had a change in majority underlying interests causing these shares to be treated as being acquired after 19 September 1985 by Division 149 of the ITAA 1997. A Company and B Company consolidate. A Company chooses for B Company to be a chosen transitional entity.", "Reasons_for_Decision": "Summary: For CGT event L1 to occur, a reduction in the tax cost setting amount of assets of an entity that becomes a subsidiary member of a consolidated group under section 705-57 of the ITAA 1997 (or its application under Subdivisions 705-B to 705-E, of ITAA 1997) must have occurred. A reduction in the tax cost setting amount under section 705-57 of the ITAA 1997 occurs when Division 705 of the ITAA 1997 applies to reset the tax costs of the assets of the joining entity. A chosen transitional entity's assets maintain their original tax costs and are not reset. Division 705 of the ITAA 1997 does not apply to the assets of such an entity. In this case, B Company is a chosen transitional entity, and its assets will maintain their original tax costs. As Division 705 of the ITAA 1997 can not apply to a chosen transitional entity, it is not possible to have had a reduction under section 705-57 of the ITAA 1997 in respect of the assets of such an entity. Therefore CGT event L1 is not capable of applying to the head company in respect of a chosen transitional entity. Division 705 of the ITAA 1997 will not apply to Company B and there will be no reduction in the tax cost setting amount of its assets. As a consequence, CGT event L1 will not apply to A Company in respect of B Company, a chosen transitional entity.", "Date_of_Decision": "18 July 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 Division 705 Subdivision 705-B Subdivision 705-C Subdivision 705-D Subdivision 705-E section 104-500 section 705-57", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Chosen transitional entity Consolidation Consolidation - capital gains tax Head company Tax cost setting amount", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003650", "Unmatched_Content": "Keywords Chosen transitional entity Consolidation Consolidation - capital gains tax Head company Tax cost setting amount"}
{"ATO_ID_Number": "ATO ID 2013/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax - bonus shares", "Issue": "Does subsection 130-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997), as originally enacted, apply where bonus shares were acquired prior to 1 July 1998 and those shares are disposed of after 1 July 1998?", "Decision": "Yes. Subsection 130-20(1) of the ITAA 1997 as originally enacted, applies to bonus shares issued up to 1 July 1998.", "Facts": "The taxpayer purchased shares in a company prior to 20 September 1985. Because of the taxpayer's ownership of these shares, the company issued bonus shares to the taxpayer during the year ended 30 June 1992. The taxpayer sold the bonus shares in the year ended 30 June 2012 which caused CGT event A1 under section 104-10 of the ITAA 1997 to happen.", "Reasons_for_Decision": "Summary: The capital gains tax provisions contained in Parts 3-1 and 3-3 of the ITAA 1997 are rewritten from the Income Tax Assessment Act 1936 and apply to assessments for the 1998-99 income year and later (section 102-1 of the Income Tax Transitional Provision) Act 1997 (IT(TP)A 1997)). The sale of bonus shares in June 2012 triggers CGT event A1 under section 104-10 of the ITAA 1997. Subdivision 130-A of the ITAA 1997 determines the acquisition time and cost base of bonus shares. Subsection 130-20(1) of the ITAA 1997 has been amended since it was first enacted. As originally enacted it states: 130-20 Issue of bonus shares or units (1) This section sets out what happens if: (a) you own *shares in a company or units in a unit trust (the original equities); and (b) the company issues other shares, or the trustee issues other units, (the bonus equities) to you because it owes an amount to you in relation to the original equities. The Taxation Laws Amendment (Company Law Review) Act 1998 (Act No. 63 of 1998) amended the original version of subsection 130-20(1) of the ITAA 1997, with effect from 1 July 1998, to remove the words, '... because it owes an amount to you ... ' from paragraph 130-20(1)(b) of the ITAA 1997. The Explanatory Memorandum to the Taxation Laws Amendment (Company Law Review) Bill 1998, that inserted the amendment, effectively provided that the amendment applies to 'things done' after 1 July 1998. In subsection 102-5(1) of the IT(TP)A 1997 the general rule in calculating a capital gain or capital loss is that: ...you use only the provisions of Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (or a provision of an Act that modifies the operation of those Parts) unless a provision of this Part or Part 3-3 of this Act also requires you to use another provision. Note 1 to section 102-5 of the IT(TP)A 1997 also provides that: This means that, for example, in working out your cost base of the asset, you will apply the new law to circumstances that occurred before the 1998-99 income year (except where this Act requires you to use another provision). [Emphasis added] As such, even though the bonus shares were issued in 1992, through the applications of sections 102-1 and 102-5 of the IT(TP)A 1997, Parts 3-1 and 3-3 of the ITAA 1997 apply in calculating the capital gain. Subsection 130-20(1) of the ITAA 1997, as originally enacted, applies to 'things done' prior to 1 July 1998 while the amended version applies to 'things done' after this date. In this case the 'things done' is the issuing of the bonus shares. As this occurred in 1992, that is, prior to 1 July 1998, subsection 130-20(1) as originally enacted applies.", "Date_of_Decision": "25 March 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-1 section 104-10 Part 3-3 Division 130 subdivision 130-A section 130-20 subsection 130-20(1) paragraph 130-20(1)(a) paragraph 130-20(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "bonus shares capital gains tax pre-CGT shares share premiums shares tax law improvement project", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Law Improvement Bill (No. 1) 1998 Explanatory Memorandum to the Taxation Laws Amendment (Company Law Review) Bill 1998", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201319", "Unmatched_Content": "Keywords bonus shares capital gains tax pre-CGT shares share premiums shares tax law improvement project"}
{"ATO_ID_Number": "ATO ID 2013/64", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: cost base: limited recourse loan", "Issue": "Does the taxpayer need to reduce the cost base and reduced cost base of a capital gains tax (CGT) asset by the amount of the shortfall between the loaned amount used to acquire the CGT asset and the market value of the CGT asset in accordance with subsections 110-45(3) and 110-55(6) of the Income Tax Assessment Act 1997 (ITAA 1997) if:", "Decision": "Yes, the taxpayer will need to reduce the cost base and the reduced cost base of the CGT asset by the amount of the shortfall in accordance with subsections 110-45(3) and 110-55(6) of the ITAA 1997.", "Facts": "The taxpayer and lender entered into a limited recourse loan. The loaned amount is used by the taxpayer to purchase a CGT asset. Under the terms of the limited recourse loan, if the taxpayer does not repay the loan by the agreed date, the lender's rights are limited to the proceeds from the disposal of the particular CGT asset. The taxpayer does not repay the loan by the agreed date. The lender sells the CGT asset. The market value of the CGT proceeds received is less than the outstanding balance of the limited recourse loan ('the shortfall amount'). Under the terms of the limited recourse loan, the lender accepts the proceeds from the disposal of the asset as full satisfaction of the loan.", "Reasons_for_Decision": "Summary: Money paid to acquire a CGT asset falls within the first element of its cost base and reduced cost base (paragraph 110-25(2)(a) and subsection 110-55(2) of the ITAA 1997). However, expenditure does not form part of any element of the cost base or reduced cost base to the extent of any amount received as 'recoupment' of it, except so far as the amount is included in the taxpayer's assessable income (subsections 110-45(3) and 110-55(6) of the ITAA 1997). Section 995-1 of the ITAA 1997 provides that 'recoupment' has the meaning given by section 20-25 of the ITAA 1997. Section 20-25 of the ITAA 1997 defines a 'recoupment' of a loss or outgoing as including '...any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery, however described'. The ordinary meaning of the term 'recoup' is provided in The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 (Macquarie Dictionary) and includes '...to obtain an equivalent for; compensate for: to recoup one's losses', '...to regain or recover' and '...to reimburse or indemnify: to recoup a person for expenses'. Where a taxpayer borrows funds under a limited recourse loan and does not repay the loan by the agreed date, either by defaulting or otherwise, the taxpayer obtains an economic gain equivalent to the shortfall amount. That is, notwithstanding that the proceeds from the disposal of the underlying asset are insufficient to repay the loan in full, the taxpayer is not required to repay the shortfall amount to the lender. Therefore, the shortfall amount is regarded as having been indirectly received by the taxpayer as a reduction of the loaned amount. This economic gain is within the meaning of 'recoup' because the taxpayer has received an amount to compensate their loss as a result of the loan being discharged in full by an asset that is worth less than the loaned amount. Accordingly, the shortfall amount is a recoupment in accordance with the definition in section 20-25 of the ITAA 1997. In the alternative, the shortfall amount is a recoupment in accordance with the definition in section 20-25 of the ITAA 1997 because it is an indemnity. The ordinary meaning for the term 'indemnity' is provided in the Macquarie Dictionary as including '...compensation for damage or loss sustained'. A limited recourse loan protects the borrower from any potential economic loss caused by the reduction in value of the CGT asset. In this circumstance, by accepting the value of an asset that is worth less than the loaned amount as full satisfaction of the loan, the lender has compensated the taxpayer for any loss incurred as a result of the decrease in market value of the asset. Accordingly, the shortfall amount is a 'recoupment' and therefore, will not form part of the asset's cost base or reduced cost base in calculating any capital gain or capital loss under subsections 110-45(3) and 110-55(6) of the ITAA 1997.", "Date_of_Decision": "26 November 2013", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 section 20-25 paragraph 110-25(2)(a) subsection 110-45(3) subsection 110-55(6) section 995-1", "Related_Public_Rulings_and_Determinations": "PR 2007/55 | PR 2007/73 | PR 2008/40 | PR 2008/41 | PR 2008/49 | PR 2008/58 | PR 2011/5 | PR 2012/2 | PR 2013/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT CGT cost base recouped expenses CGT reduced cost base shortfalls", "Case_References": "", "Other_References": "", "Business_Line": "Small Business / Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201364", "Unmatched_Content": "Related Public Rulings (including Determinations) PR 2007/55 PR 2007/73 PR 2008/40 PR 2008/41 PR 2008/49 PR 2008/58 PR 2011/5 PR 2012/2 PR 2013/15 | Keywords CGT CGT cost base recouped expenses CGT reduced cost base shortfalls"}
{"ATO_ID_Number": "ATO ID 2012/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: cost base: fourth element of cost base", "Issue": "Does an underground power levy paid by a taxpayer form part of the cost base of the taxpayer's property under subsection 110-25(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The levy will form part of the fourth element of the cost base of the property under subsection 110-25(5) of the ITAA 1997 if the purpose or the expected effect of the expenditure is to increase or preserve the property's value.", "Facts": "The taxpayer owns a rental property that was acquired after 20 September 1985. The electricity supply to the property was converted from overhead mains to underground power through a joint state government and local council project by the installation of underground cables. The taxpayer contributed to the local council's capital works cost by way of levy.", "Reasons_for_Decision": "Summary: Subsection 110-25(5) of the ITAA 1997 provides that the fourth element of the cost base of a CGT asset is that capital expenditure incurred to increase the asset's value. Expenditure incurred for capital improvements to post-CGT land will not be included in the cost base of the land if the capital improvement is considered to be a separate CGT asset. As neither of subsection 108-70(1) or section 108-60 of the ITAA 1997 apply in relation to the cabling it is not a separate asset for CGT purposes. Subsection 108-70(1) of the ITAA 1997 does not treat the cabling as a separate asset because none of the balancing adjustments contained in section 108-55 of the ITAA 1997 apply to it. Section 108-60 of the ITAA 1997 will not apply in this case as the cabling is not a depreciating asset that is part of a building. For expenditure to be included in the fourth element of the cost base of an asset under subsection 110-25(5) of the ITAA 1997, it must be incurred 'to' enhance the value of the asset, that is, for the purpose of enhancing the value of an asset. It is immaterial whether or not the expenditure in fact enhances the value of the asset.", "Date_of_Decision": "22 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 110-25 subsection 110-25(5) section 108-55 section 108-60 subsection 108-70(1) subsection 110-25(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT separate assets Capital gains tax CGT cost base", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201246", "Unmatched_Content": "Keywords CGT separate assets Capital gains tax CGT cost base"}
{"ATO_ID_Number": "ATO ID 2009/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: first element of cost base of shares - company formation expenses", "Issue": "Is an appropriate proportion of the costs incurred by the proposed initial shareholders (the shareholders) of a company in formation in respect of establishing the company, included in the first element of the cost base of each of the shareholder's initial shares under paragraph 110-25(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, an appropriate portion of the costs of establishing the company are not included in the first element of the cost base of each of the initial shareholder's shares.", "Facts": "The shareholders of a company in formation paid another entity an amount to assist in the company registration process including preparing the registration application and consents. The shareholders paid a separate amount to the company once it was formed for each share they agreed to take up.", "Reasons_for_Decision": "Summary: Paragraph 110-25(2)(a) of the ITAA 1997 includes in the first element of the cost base of a CGT asset money paid, or required to be paid, in respect of acquiring it. In the present circumstances the expenditure was for the services provided to assist in establishing the company; it was not in respect of the acquisition of the shareholder's initial shares. Therefore, no part of the payment is included in the first element of the cost base of any of the shares acquired by the initial shareholders. The first element of the cost base of each share owned by an initial shareholder is the separate amount paid to the company for each share.", "Date_of_Decision": "18 July 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 110-25(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT cost base Share capital", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20091", "Unmatched_Content": "Keywords Capital gains tax CGT cost base Share capital"}
{"ATO_ID_Number": "ATO ID 2009/68", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: cost base modification of CGT asset acquired from exercise of put option", "Issue": "Does the market value substitution rule in subsection 112-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to amounts paid by the grantor upon the exercise of a put option where the grantor and grantee are members of the same wholly-owned entity group and the exercise price paid by the grantor of the put option is more than the asset's market value at the time of the exercise?", "Decision": "No. The market value substitution rule in subsection 112-20(1) of the ITAA 1997 will not apply to amounts paid by the grantor upon the exercise of a put option where the terms of the exercise was in accordance with the market value conditions at the time of granting the put option.", "Facts": "The taxpayer (grantor) grants a put option, in relation to a capital gains tax (CGT) asset, to a grantee. The grantor and the grantee are members of the same wholly-owned entity group. Upon the grant of the put option, the terms of the exercise are in accordance with market value conditions. The put option is exercised. At the time of the exercise of the put option, the amount paid to exercise the put option is greater than the market value of the CGT asset.", "Reasons_for_Decision": "Summary: On granting of an option, CGT event D2, in section 104-40 of the ITAA 1997, happens. You make a capital gain if the capital proceeds from the grant are more than the expenditure you incurred to grant it. You make a capital loss if those capital proceeds are less than the expenditure you incurred to grant it (subsection 104-40(3) of the ITAA 1997). If the option is exercised, the capital gain or capital loss you make from the grant is disregarded (subsection 104-40(5) of the ITAA 1997). Section 134-1 of the ITAA 1997 sets out the consequences of an option being exercised and treats the grant of the option and the transaction that supports the exercise of that option as a single transaction - being, in this case, the acquisition, by the grantor, of the CGT asset that is the subject of the option. The first element of the grantor's cost base and reduced cost base for the asset acquired is any amount paid to exercise the option reduced by any payment received by the grantor for granting the option (item 2 of the table in subsection 134-1(1) of the ITAA 1997). Generally, the terms of the exercise of an option are struck at the time of its granting. In this case, the terms of the exercise are struck accordingly and in accordance with market value conditions. For options, both grantor and grantee are subject to the market whether, if and when the option is exercised, the market value of the asset, the subject of the option, is higher, lower or equal to, the exercise price. In regards to a put option, only the grantee is at liberty, if and when, to initiate the exercise of the option. Accordingly, in this case, when invoking the notion of the 'single transaction' in section 134-1 of the ITAA 1997, coupled with the fact that the grantor of the option has no control over the market value of the asset the subject of the option when the option is exercised, the market value substitution rule in subsection 112-20(1) of the ITAA 1997 will not apply to the amount referred to as 'any amount paid to exercise the option' in item 2 of the table in subsection 134-1(1) of the ITAA 1997.", "Date_of_Decision": "26 June 2009", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 104-40 subsection 104-40(3) subsection 104-40(5) subsection 112-20(1) section 134-1 subsection 134-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT cost base CGT cost base modification market value substitution rule CGT events D1-D3 - bringing into existence a CGT asset Put options", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200968", "Unmatched_Content": "Keywords Capital gains tax CGT cost base CGT cost base modification market value substitution rule CGT events D1-D3 - bringing into existence a CGT asset Put options"}
{"ATO_ID_Number": "ATO ID 2008/147", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: vendor cancellation of contract - compensation payment - preserving ownership rights", "Issue": "Can the taxpayer include in the fifth element of the cost base under subsection 110-25(6) of the Income Tax Assessment Act 1997 (ITAA 1997) and the reduced cost base under subsection 110-55(2) of the ITAA 1997 of a CGT asset they own, an amount of damages paid to a potential purchaser upon the potential purchaser's acceptance of the termination of a contract to sell the asset following repudiation of the contract by the taxpayer?", "Decision": "Yes. The payment of damages can be included as part of the fifth element of cost base of the CGT asset under subsection 110-25(6) of the ITAA 1997 and the fifth element of the reduced cost base of the CGT asset under subsection 110-55(2) of the ITAA 1997.", "Facts": "The taxpayer entered into a contract for the sale of a CGT asset. Subsequently they changed their mind and asked the potential purchaser to agree to terminate the contract. The potential purchaser agreed to terminate the contract upon the payment by the taxpayer of an amount of damages.", "Reasons_for_Decision": "Summary: The fifth element of the cost base, under subsection 110-25(6) of the ITAA 1997, is capital expenditure that you incurred to establish, preserve or defend your title to the asset or a right over the asset. The Macquarie Dictionary , 2005, 4th edn, The Macquarie Library Pty Ltd, NSW defines 'preserve' to include ' 4. to keep possession of; retain.' The expenditure (the amount of damages) was incurred so that the taxpayer could retain title to the CGT asset. It was the amount paid so that the potential purchaser would agree to termination of the contract as opposed to enforcing the taxpayer's performance of the contract. The effect of termination was that the title to the CGT asset remained with the taxpayer. Accordingly, the expenditure is included in the fifth element of the cost base of the CGT asset. Subsection 110-55(2) of the ITAA 1997 provides that all of the elements (except the third one) of the reduced cost base are the same as those for the cost base. The expenditure is thus included in the fifth element of the reduced cost base of the CGT asset.", "Date_of_Decision": "4 November 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 110-25(6) subsection 110-55(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Breach of contract Capital gains tax CGT cost base CGT reduced cost base Contract law Law, litigation & legislation", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008147", "Unmatched_Content": "Keywords Breach of contract Capital gains tax CGT cost base CGT reduced cost base Contract law Law, litigation & legislation"}
{"ATO_ID_Number": "ATO ID 2006/179", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: cost base - remuneration paid to a legal adviser", "Issue": "Can the seller of a capital gains tax (CGT) asset include, in the second element of the asset's cost base (subsection 110-25(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and reduced cost base (subsection 110-55(2) of the ITAA 1997), remuneration paid by the seller to a legal adviser as a result of an action for damages brought by the purchaser in connection with the consideration paid for the sale?", "Decision": "Yes. Remuneration paid to a legal adviser by the seller of a CGT asset as a result of an action for damages brought by the purchaser in connection with the consideration for the sale of a CGT asset are incidental costs that relate to a CGT event (paragraph 110-35(1)(b) of the ITAA 1997) and are included in the second element of the asset's cost base and reduced cost base.", "Facts": "The taxpayer sold a business for $25,000. Under the contract of sale, the taxpayer received: The taxpayer prepared its income tax assessment for the relevant year of income on the basis that it realised a capital gain of $12,000 from the sale of goodwill based on a cost base of $8,000 and capital proceeds of $20,000. This capital gain was included in the calculation of its net capital gain. Some months after the sale, the purchaser sued the seller for damages on the grounds that the seller had misrepresented the value of the goodwill. The taxpayer engaged the services of a solicitor, as their legal adviser, to assist with the defence of the action. The taxpayer paid the solicitor $22,000 for these services. The taxpayer paid the purchaser $4,000 in full settlement of the purchaser's claims. The taxpayer was not entitled to a deduction for the legal expenses.", "Reasons_for_Decision": "Summary: The cost base and reduced cost base of a CGT asset each consist of five elements (subsection 110-25(1) and subsection 110-55(1) of the ITAA 1997 respectively). The second element of the cost base and reduced cost base each comprise of incidental costs an entity incurs to acquire a CGT asset or that 'relate to a CGT event' (subsection 110-35(1) of the ITAA 1997). The term 'incidental costs' is defined in section 110-35 of the ITAA 1997. It includes 'remuneration for the services of a ... legal adviser' (subsection 110-35(2) of the ITAA 1997). In this case, CGT event A1 (section 104-10 of the ITAA 1997) happened in relation to the goodwill as a result of its transfer to the purchaser under the contract of sale. The question at issue in this case is whether the legal expenses incurred by the taxpayer can properly be characterised as costs that 'relate' to this CGT event under paragraph 110-35(1)(b) of the ITAA 1997. Subsection 116-50(1) of the ITAA 1997 provides that the capital proceeds from a CGT event are reduced by any part of them repaid by the recipient or any compensation paid by the recipient that can reasonably be regarded as a repayment of them. In the present case, the purchaser sought and received from the taxpayer a payment of a type that caused a reduction, under section 116-50 of the ITAA 1997, in the taxpayer's capital proceeds from the CGT event. It follows that remuneration paid to a legal adviser in connection with this action had a direct relationship with the ascertainment of the amount of capital proceeds from the CGT event and is therefore an incidental cost that relates to the CGT event, which is included in the second element of the asset's cost base and reduced cost base.", "Date_of_Decision": "23 May 2006", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 subsection 110-25(1) subsection 110-25(3) section 110-35 subsection 110-35(1) paragraph 110-35(1)(b) subsection 110-35(2) subsection 110-55(1) section 110-55(2) section 116-50 subsection 116-50(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Asset valuation CGT assets CGT capital proceeds CGT capital proceeds modification repaid rule CGT cost base CGT reduced cost base Goodwill Legal expenses Second element of cost Solicitor Tax related expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006179", "Unmatched_Content": "Keywords Asset valuation CGT assets CGT capital proceeds CGT capital proceeds modification repaid rule CGT cost base CGT reduced cost base Goodwill Legal expenses Second element of cost Solicitor Tax related expenses"}
{"ATO_ID_Number": "ATO ID 2006/315", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Canadian Convention: alienation of property - becoming an Australian resident - modified cost base of property that is situated in Australia", "Issue": "Can Article 13(6) of Schedule 3, as amended by Schedule 3A of the International Tax Agreements Act 1953 (the Canadian Convention), modify the cost base of Australian real property acquired by an individual while they are a Canadian resident who subsequently ceases to be a resident of that country and immediately becomes a resident of Australia?", "Decision": "Yes. The cost base of the Australian real property is treated as if it was acquired for its fair market value at the time the individual becomes an Australian resident where the taxpayer makes an election under Article 13(6) of the Canadian Convention.", "Facts": "The taxpayer acquired a rental property in Australia while a Canadian resident. The taxpayer subsequently ceases to be a Canadian resident and immediately becomes a resident of Australia for tax purposes. The taxpayer is treated as having alienated the Australian real property and is subject to capital gains tax in Canada upon cessation of residency in Canada. The taxpayer has made an election under Article 13(6) of the Canadian Convention.", "Reasons_for_Decision": "Summary: Schedule 3 to the Agreements Act contains the tax treaty between Australia and Canada (the Canadian Convention). Article 13 of the Canadian Convention deals with taxing rights between Australia and Canada in respect of income, profits or gains arising from the alienation of property. Article 13(6) of the Canadian Convention applies where: Where these conditions are met, the taxpayer may elect to treat the property, for the purpose of tax in the country of new residence, as having been disposed of and immediately re-acquired for its fair market value at residence change time. As the taxpayer meets the conditions for the making of an election pursuant to Article 13(6) of the Canadian Convention, the cost base of the Australian real property is modified and treated as if it was acquired for its fair market value at the time the taxpayer becomes an Australian resident where the taxpayer makes an election under Article 13(6) of the Canadian Convention.", "Date_of_Decision": "14 November 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 3 Schedule 3, Article 13(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Canada CGT cost base Double tax agreements International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006315", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Canada CGT cost base Double tax agreements International tax"}
{"ATO_ID_Number": "ATO ID 2004/122", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: split assets - discretionary trusts", "Issue": "If an asset owned by the trustee of a discretionary trust is split into two or more assets, should the trustee calculate the cost base or reduced cost base of each of the new assets in accordance with section 112-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. There has been no change in beneficial ownership of the assets. Therefore, the trustee should calculate the cost base and reduced cost base of each new asset in accordance with the rules in section 112-25 of the ITAA 1997.", "Facts": "The taxpayer is the trustee of a discretionary trust. In the 1998 income year the trust purchased a block of land. In the 2004 income year the trustee subdivided the block of land into two blocks. The taxpayer is now seeking advice as to whether the rules in section 112-25 of the ITAA 1997 apply with respect to calculation of the cost base and reduced cost base of the two new blocks.", "Reasons_for_Decision": "Summary: Section 112-25 of the ITAA 1997 sets out what happens if a CGT asset is split into two or more assets and you are the beneficial owner of the original asset and each new asset. The split is not a CGT event (subsection 112-25(2) of the ITAA 1997). The cost base and reduced cost base of each new asset is calculated in accordance with the method statement in subsection 112-25(3) ITAA 1997. The method statement provides that you first determine each element of the cost base and reduced cost base of the original asset at the time of the split and then apportion in a reasonable way each element to each new asset. At issue is whether the requirement in subsection 112-25(1) of the ITAA 1997 regarding beneficial ownership of the original and new assets has been satisfied as the assets are owned by the trustee of a discretionary trust. The beneficiaries of a discretionary trust do not have any interest either individually or collectively in the property of the trust estate. They have no more than a right to have the trust duly administered. This right does not constitute beneficial ownership: see paragraph 2 of Taxation Determination TD 2000/27. The equivalent provision in Income Tax Assessment Act 1936 (ITAA 1936) to section 112-25 of the ITAA 1997, is subsection 160ZH(12). This subsection provided that the rules about the cost base and reduced cost base in subsections 160ZH(13) and 160ZH(14) of the ITAA 1936 applied if there had not been any change in the beneficial ownership of the asset or assets concerned. If that condition were applied in this case, it would be satisfied, because both before and after the subdivision there was no beneficial owner of the land. It is considered that the relevant provisions in the ITAA 1936 and ITAA 1997 express the same ideas, although different forms of words are used. Section 1-3 of the ITAA 1997 provides that if the ITAA 1936 expressed an idea in a particular form of words and the ITAA 1997 appears to have expressed the same idea in a different form of words in order to use a clearer or simpler style, the ideas are not taken to be different just because different forms of words are used. Therefore, as the beneficial ownership of the land has not changed the subdivision is not a CGT event and the trustee of the discretionary trust will calculate the cost base and reduced cost base of the subdivided land in accordance with the rules in section 112-25 of the ITAA 1997. The cost base and reduced cost base of the subdivided land will be determined by apportioning in a reasonable way each element of the original cost base and reduced cost base.", "Date_of_Decision": "12 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 160ZH(12) subsection 160ZH(13) subsection 160ZH(14)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/27 | Taxation Determination TD 2000/31 | Capital Gains Cell Determination TD 7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "capital gain capital gains tax CGT assets CGT cost base CGT events CGT reduced cost base CGT cost base modification-split, changed or merged asset rule CGT original assets discretionary trusts trustees trusts", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Law Improvement Bill (No. 1) 1998", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004122", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2000/27 Taxation Determination TD 2000/31 Capital Gains Cell Determination TD 7 | Keywords capital gain capital gains tax CGT assets CGT cost base CGT events CGT reduced cost base CGT cost base modification-split, changed or merged asset rule CGT original assets discretionary trusts trustees trusts"}
{"ATO_ID_Number": "ATO ID 2004/238", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Consolidation - tax cost setting amounts and elements of cost base and reduced cost base for capital gains tax purposes", "Issue": "Does the tax cost setting amount for each asset subject to the cost base and reduced cost base modification in subsection 701-55(5) of the Income Tax Assessment Act 1997 (ITAA 1997) become the first element of the cost base and reduced cost base for the asset when it becomes an asset of the taxpayer, the head company of a consolidated group, because subsection 701-1(1) of the ITAA 1997 applies?", "Decision": "Yes. For each asset to which subsection 701-55(5) of the ITAA 1997 applies, the asset's tax cost setting amount becomes the first element of its cost base and reduced cost base for the taxpayer, the head company of a consolidated group, when it becomes the taxpayer's asset because subsection 701-1(1) of the ITAA 1997 applies.", "Facts": "Head Co capitalised Subsidiary Co for $300,000 in August 2001. Sub Co immediately bought: At the end of Subsidiary Co's first income year the depreciating asset gave rise to a deduction of $8,000. Subsidiary Co did not earn any income during this period resulting in a tax loss of $8,000 for the first income year. Head Co and Subsidiary Co formed a consolidated group on 1 July 2002. The market values of Sub Co's assets at that date were: The allocable cost amount worked out for Sub Co is $292,000. The amount allocated to the depreciating asset is limited to $12,000. The amount allocated to the land is $176,296 and the amount allocated to the option $103,704. These amounts become the assets' respective tax cost setting amounts.", "Reasons_for_Decision": "Summary: When a company becomes a member of a consolidated group, subsection 701-55(5) of the ITAA 1997 causes the cost base and reduced cost base of the company's assets to be increased or reduced to equal the tax cost setting amount. Subsection 701-55(5) of the ITAA 1997 does not set out how the cost base and reduced cost base are to be increased or reduced to equal the tax cost setting amount. For example, the subsection does not stipulate whether the tax cost setting amount should be treated as the first element of the asset's cost base and reduced cost base, or whether it should be allocated across their various elements in proportion to the expenditure included in each element just before the company became a member of the consolidated group. In deciding how to apply the provision, guidance may be obtained from other existing provisions in the ITAA 1997. In the context of indexation, subsection 114-15(3) of the ITAA 1997 provides that where a cost base modification reduces the total cost base of a CGT asset, the reduced amount forms a new first element of the cost base, and is later indexed as if expenditure equal to that amount had been incurred in the quarter in which the modification occurred. Similarly, where: An increase or reduction under subsection 701-55(5) of the ITAA 1997 should result in a similar outcome. That is, the tax cost setting amount for the asset replaces the total existing cost base and reduced cost base, and becomes the new first element of the asset's cost base and reduced cost base at the time the asset becomes that of the head company because subsection 701-1(1) of the ITAA 1997 applies. In instances where the tax cost setting amount for an asset equals its cost base or reduced cost base, the tax cost setting amount becomes the new first element of the cost base and reduced cost base of the asset for the head company. The cost base of the land held by Subsidiary Co at the time of joining is $180,000, made up of $150,000 acquisition cost (first element), $10,000 on non-deductible incidental costs (second element) and $20,000 on capital improvements (fourth element). The tax cost setting amount for the land is $176,296. Under subsection 701-55(5) of the ITAA 1997 this amount becomes the new first element of the cost base and reduced cost base of the land for Head Co. The tax cost setting amount for the option is $103,704. Under subsection 701-55(5) of the ITAA 1997 this amount becomes the new first element of the cost base and reduced cost base of the option for Head Co. Accordingly, for each asset to which subsection 701-55(5) applies, the asset's tax cost setting amount becomes the first element of its cost base and reduced cost base for the taxpayer, as head company of the consolidated group, when it becomes the taxpayer's asset because subsection 701-1(1) of the ITAA 1997 applies.", "Date_of_Decision": "8 March 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 114-15(3) subsection 124-10(3) subsection 126-5(5) subsection 128-15(4) subsection 701-1(1) subsection 701-55(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets CGT cost base CGT cost base modification rules CGT reduced cost base Consolidation Consolidation - assets Consolidation - capital gains tax Cost setting rules Tax cost setting amount Tax cost setting rules", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004238", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT cost base CGT cost base modification rules CGT reduced cost base Consolidation Consolidation - assets Consolidation - capital gains tax Cost setting rules Tax cost setting amount Tax cost setting rules"}
{"ATO_ID_Number": "ATO ID 2004/425", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: deceased estate - cost base of CGT asset - fourth element", "Issue": "Do costs incurred by the trustee of a deceased estate to resolve a dispute with a person claiming an interest in an asset of the estate, form part of the cost base of the asset under subsection 110-25(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The costs incurred to settle the dispute, including the legal fees paid in respect of the dispute, form part of the cost base of the estate's asset under subsection 110-25(5) of the ITAA 1997.", "Facts": "A person resided in the home of their relative for a period of 10 years before the death of the relative, assisting with the care of the relative and maintaining the property. After the death of the relative, the person claimed that they had acquired a life interest in the deceased's property. The person was not mentioned in the will of the deceased. While the trustees of the estate disputed the person's claim, the trustees entered into a settlement agreement with the person in order that they may dispose of the property as vacant premises. Under the settlement agreement, the trustees paid the person a substantial sum to surrender any claims the person may have had against the estate. The trustees also incurred legal fees during the dispute. The property was later sold, more than two years after the date of death of the deceased.", "Reasons_for_Decision": "Summary: Subsection 110-25(5) of the ITAA 1997 relates to the fourth element of a cost base and includes capital expenditure you incurred to increase or preserve the asset's value. The payment made by the trustees was incurred to remove an impediment to the sale of the property. The person's claim of a life interest was an issue which needed to be resolved before probate could be granted, allowing the sale of the property to proceed. The requirements of the fourth element of the CGT cost base are satisfied (subsection 110-25(5) of the ITAA 1997). As such, the costs incurred by the trustees to settle the dispute, including the legal fees paid in respect of the dispute, form part of the cost base of the estate's asset under subsection 110-25(5) of the ITAA 1997.", "Date_of_Decision": "29 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 110-25(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Capital gains CGT asset issues CGT cost base CGT deceased estate Compensation Legal title Legal expenses Negotiated settlements", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004425", "Unmatched_Content": "Remove and replace terms to reflect legislative changes | Keywords Capital gains tax Capital gains CGT asset issues CGT cost base CGT deceased estate Compensation Legal title Legal expenses Negotiated settlements"}
{"ATO_ID_Number": "ATO ID 2004/636", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Demerger: original post-CGT interests - consequences for shareholders under Division 725 if new interests in demerged entity are issued at a discount", "Issue": "If a direct value shift happens under a demerger because new interests in a demerged entity are issued at a discount, can the cost bases and reduced cost bases of those interests be increased under section 725-250 of the Income Tax Assessment Act 1997 (ITAA 1997) if they were issued in respect of post-CGT original interests?", "Decision": "No. The cost bases and reduced cost bases of the new interests in the demerged entity are not increased under section 725-250 of the ITAA 1997. As the original interests are post-CGT interests, adjustments are made to the cost base and reduced cost base of both the new interests and the original interests under Division 125 of the ITAA 1997.", "Facts": "There are three Australian resident shareholders (original interest holders) in Company A, an Australian resident company. Each shareholder is an associate of the other shareholders. All of the shares were acquired after 19 September 1985. Company A is the owner of the only share (a post-CGT share) on issue in subsidiary Company B. Company A has not made a choice to form a consolidated group. Under an arrangement, Company B (the demerged entity) issues shares to the shareholders in Company A, in the same proportions as their Company A shareholdings. No consideration is to be provided to Company B for the shares. The arrangement satisfies the definition of a demerger in section 125-70 of the ITAA 1997. As a result of the issue of shares at a discount by Company B, there is a reduction in the market value of the share that Company A holds in Company B, resulting in a direct value shift. The conditions set out in section 725-50 of the ITAA 1997 for there to be consequences under Division 725 of the ITAA 1997 as a result of the direct value shift are satisfied.", "Reasons_for_Decision": "Summary: Division 725 of the ITAA 1997 does not apply to the original interest holders because of the more specific application of section 125-95 of the ITAA 1997. That section provides that where cost base and reduced cost base adjustments are required under sections 125-80, 125-85 or 125-90 of the ITAA 1997, no further cost base and reduced cost base adjustments are required to be made under the Act as a result of something that happens under the demerger. Cost base and reduced cost base adjustments are required under sections 125-80, 125-85 or 125-90 of the ITAA 1997 where the original interests were acquired on or after 20 September 1985. Accordingly, as the new interests are issued in respect of the three shareholders' original post-CGT interests, no further cost base and reduced cost base increases are made under Division 725 of the ITAA 1997 as a result of the direct value shift.", "Date_of_Decision": "16 July 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 125 section 125-70 section 125-80 section 125-85 section 125-90 section 125-95 Division 725 section 725-50 section 725-250", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/635 | ATO ID 2004/637", "Subject_References": "CGT demerger exemption Cost base adjustments for value shift", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004636", "Unmatched_Content": "Keywords CGT demerger exemption Cost base adjustments for value shift"}
{"ATO_ID_Number": "ATO ID 2004/637", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Demerger: original pre-CGT interests - consequences for shareholders under Division 725 if new interests in demerged entity are issued at a discount", "Issue": "If a direct value shift happens under a demerger because new interests in a demerged entity are issued at a discount, can the cost bases and reduced cost bases of those interests be increased under section 725-250 of the Income Tax Assessment Act 1997 (ITAA 1997) if they were issued in respect of pre-CGT original interests?", "Decision": "Yes. The cost bases and reduced cost bases of the new interests in the demerged entity can be increased under section 725-250 of the ITAA 1997 as no adjustments are made to the cost base and reduced cost base of both the new interests and the original interests under Division 125 of the ITAA 1997.", "Facts": "There are three Australian resident shareholders (original interest holders) in Company A, an Australian resident company. Each shareholder is an associate of the other shareholders. All of the shares were acquired before 20 September 1985. Company A is the owner of the only share (a post-CGT share) on issue in subsidiary Company B. Company A has not made a choice to form a consolidated group. Under an arrangement, Company B (the demerged entity) issues shares to the shareholders in Company A, in the same proportions as their Company A shareholdings. No consideration is to be provided to Company B for the shares. The arrangement satisfies the definition of a demerger in section 125-70 of the ITAA 1997. As a result of the issue of shares at a discount by Company B, there is a reduction in the market value of the share that Company A holds in Company B, resulting in a direct value shift. The conditions set out in section 725-50 of the ITAA 1997 for there to be consequences under Division 725 of the ITAA 1997 as a result of the direct value shift are satisfied.", "Reasons_for_Decision": "Summary: Division 725 of the ITAA 1997 does not apply to an original interest holder where the specific terms of section 125-95 of the ITAA 1997 apply. That section provides that where cost base and reduced cost base adjustments are required under sections 125-80, 125-85 or 125-90 of the ITAA 1997, no further cost base and reduced cost base adjustments are required to be made under the Act as a result of something that happens under the demerger. Cost base and reduced cost base adjustments are required under sections 125-80, 125-85 or 125-90 of the ITAA 1997 where the original interests were acquired on or after 20 September 1985. No adjustments are required under those sections where the original interests were acquired before 20 September 1985. Accordingly, as the new interests are issued in respect of the three shareholders' original interests that were acquired before 20 September 1985, and the conditions in section 725-50 of the ITAA 1997 are satisfied, increases may be made to the cost bases and reduced cost bases of those new interests under section 725-250 of the ITAA 1997 as a result of the direct value shift.", "Date_of_Decision": "16 July 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 125 section 125-70 section 125-80 section 125-85 section 125-90 section 125-95 Subdivision 165-CC Division 725 section 725-50 section 725-250", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1050 | ATO ID 2004/635 | ATO ID 2004/636", "Subject_References": "CGT demerger exemption CGT share value shifting arrangements Cost base adjustments for value shift", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004637", "Unmatched_Content": "Keywords CGT demerger exemption CGT share value shifting arrangements Cost base adjustments for value shift"}
{"ATO_ID_Number": "ATO ID 2004/888", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financial Sector (Business Transfer and Group Restructure) Act 1999: transfer of a Capital Gains Tax asset", "Issue": "Where a credit union business is voluntarily transferred to another eligible credit union business, pursuant to the provisions of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (FSBTGR Act) is the receiving body taken to have acquired a Capital Gains Tax (CGT) asset for an amount equal to its indexed cost base at the effective date of transfer, for the purposes of Part 3-1 of the Income Tax Assessment Act 1997 (ITAA 1997)", "Decision": "Yes.", "Facts": "Entity A, the transferring body, has transferred its business to Entity B, the receiving body, in accordance with the FSBTGR Act. Both entities are authorised deposit-taking institutions for the purposes of the Banking Act 1959. The parties satisfied all of the relevant procedural and substantive provisions determined by the Australian Prudential Regulation Authority (APRA), including preparation of a statement under section 20 of the FSBTGR Act (section 20 statement). The section 20 statement provided that the consequences for parties of the transfer of assets and liabilities under the FSBTGR Act are taken to be the same as if the transfer involved a sale of the assets of the transferring body to the receiving body. APRA approved the transfer of business and issued a certificate of transfer pursuant to section 18 of the FSBTGR Act.", "Reasons_for_Decision": "Summary: The FSBTGR Act was enacted to enhance stability in the Australian financial sector by facilitating the merging of eligible entities and otherwise unviable institutions. Under this Act, APRA, in approving the transfer, is required to have regard to the interests of the members of such entities and the financial sector as a whole. The FSBTGR Act empowers APRA to approve, and in some circumstances to compel amalgamations of eligible entities for the purpose of enhancement of the Australian financial sector. For practical purposes, the aim of the FSBTGR Act is to enable APRA to provide certainty that an endorsed transfer is effective at law to ensure that the rights and liabilities of the transferring entity survive in the new entity. This certainty is achieved by APRA issuing a certificate of transfer pursuant to section 18 of the FSBTGR Act stating that the transfer is to take effect on the date specified. Broadly, section 22 of the FSBTGR Act provides that when APRA issues a certificate of transfer, the receiving body becomes the successor in law of the transferring body. In particular, all the assets and liabilities of the transferring body become assets and liabilities of the receiving body without any additional formality. Further, the totality of duties, obligations, immunities, rights and privileges applying to the transferring body apply to the receiving body. Subject to the relevant circumstances of each case of voluntary total transfer of business sanctioned under the FSBTGR Act as the Commissioner will aim to administer the tax law in such a way that it complements the operation of the FSBTGR Act and promotes the stated objectives of the legislation. In practice this will be accomplished by adopting adjustments on the basis of acceptable valuations.", "Date_of_Decision": "26 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of business CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004888", "Unmatched_Content": "This ATO ID is currently under review. | This ATO ID was amended by replacing references to the Financial Sector (Transfers of Business) Act 1999 with references to the Financial Sector (Business Transfer and Group Restructure) Act 1999. | Keywords Acquisition of business CGT assets"}
{"ATO_ID_Number": "ATO ID 2003/150", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading stock - external costs", "Issue": "Are costs incurred by the taxpayer in order to gain development approval for residential units, part of the cost of trading stock under Division 70 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The costs incurred by the taxpayer in order to gain development approval for residential units are part of the cost of trading stock under Division 70 of the ITAA 1997.", "Facts": "The taxpayer is in the business of property development. The taxpayer acquired an area for the purpose of erecting residential units. In order to gain the necessary development approval the taxpayer agreed to redevelop existing facilities in an adjacent area. These costs were not part of the cost of acquisition of the area for development but were a cost incurred in gaining the development approval.", "Reasons_for_Decision": "Summary: Division 70 of the ITAA 1997 deals with tax accounting for trading stock. Section 70-10 of the ITAA 1997 defines 'trading stock' to mean 'anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a business; and livestock'. The area acquired for development into residential units is analogous to broadacre land and forms part of the taxpayer's trading stock ( Federal Commissioner of Taxation v. St Hubert's Island Pty Ltd (in liq) (1978) 138 CLR 210; 78 ATC 4104; (1978) 8 ATR 452). Individual articles of trading stock can be valued when they become identifiable (for example, when the Strata Plan is registered, see Barina Corporation Limited v. FC of T (1985) 4 NSWLR 96; 85 ATC 4847; (1985) 17 ATR 134). In the decision of Federal Commissioner of Taxation v. Kurts Development Ltd (1998) 86 FCR 337; (1998) 39 ATR 493; 98 ATC 4877 ( Kurts Development ), infrastructure and external costs were allocated to the value of trading stock. In discussing the allocation of external costs, the court in Kurts Development used a 'but for' test. In that case the question was whether the external costs were properly characterised as part of the cost price of the individual subdivided lots. They were all expenses which had to be incurred in order to create the individual subdivided lots and, but for that expenditure, those lots would not have been created. For that reason the external costs were also part of the cost price of the individual lots. All of the costs incurred by the taxpayer in acquiring their trading stock are to be regarded as part of the cost price of that trading stock. This includes both the direct costs of the area acquired and the costs of the development of that area. In the taxpayer's circumstances these development costs also include the cost of gaining the development approval. As a condition of gaining that development approval the taxpayer incurred costs in redeveloping the adjacent area. These costs form part of the development costs and are therefore part of the cost of the trading stock. Accordingly, the costs of obtaining development approval by the taxpayer are part of the cost of the taxpayer's trading stock for the purposes of Division 70 of the ITAA 1997.", "Date_of_Decision": "4 March 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Division 70 section 70-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Trading stock", "Case_References": "Federal Commissioner of Taxation v. St Hubert's Island Pty Ltd (in liq) (1978) 138 CLR 210 78 ATC 4104 (1978) 8 ATR 452", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003150", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2003/361", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: cost base - consultant's fees", "Issue": "Will the fees paid by a taxpayer to a consultant to find and recommend a suitable rental property which is later purchased by the taxpayer form part of the second element of the cost base of the property under subsection 110-25(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The fees paid by a taxpayer to a consultant to find and recommend a suitable rental property which is later purchased by the taxpayer will form part of the second element of the cost base of the property under subsection 110-25(3) of the ITAA 1997. The consultant's fees are considered to be incidental costs incurred, to acquire the rental property, under subsections 110-35(1) and 110-35(2) of the ITAA 1997.", "Facts": "The taxpayer engaged a consultant to find a suitable rental property in the 1999-2000 income year and incurred consultancy fees. Based on the consultant's recommendation, the taxpayer purchased the rental property a few months later. The taxpayer disposed of the rental property in the 2001-02 income year and made a capital gain. The taxpayer included the consultant's fees paid as part of the cost base of the rental property.", "Reasons_for_Decision": "Summary: The second element of the cost base of a CGT asset includes the incidental costs that the taxpayer incurs in acquiring the asset or which relate to a CGT event that happens in relation to the asset: subsections 110-25(3) and 110-35(1) of the ITAA 1997. Incidental costs that can be included in the cost base of a CGT asset are set out in section 110-35 of the ITAA 1997. Subsection 110-35(2) of the ITAA 1997 lists remuneration for the services of a consultant as an incidental cost. As the taxpayer has incurred the consultant's fees in relation to the acquisition of the rental property, these fees have been incurred to acquire the CGT asset and will form part of the second element of the cost base of the rental property in accordance with subsection 110-25(3) of the ITAA 1997.", "Date_of_Decision": "6 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 110-25 subsection 110-25(3) section 110-35 subsection 110-35(1) subsection 110-35(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets CGT cost base", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003361", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT cost base"}
{"ATO_ID_Number": "ATO ID 2003/968", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: sale of residential property under an instalment contract", "Issue": "Are weekly instalments received in relation to the sale of a residential property ordinary income and included in assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The weekly instalments are capital receipts and therefore not included in assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer owned a residential property. The taxpayer entered into an agreement for the sale of the property. The agreement provided that:", "Reasons_for_Decision": "Summary: It is generally accepted that rent is ordinary income and included in assessable income under section 6-5 of the ITAA 1997. However, if the weekly instalments represent instalments of the sale price they will be capital receipts and not ordinary income ( Foley v. Fletcher (1858) 157 ER 678). In determining whether or not a payment is rent, it is the reality or substance of the matter, rather than the label given by the parties to the transaction which is decisive ( Ex parte Lathouras; Re Vendardos [1964-1965] NSWR 254). Assistance in determining the nature of the receipts can be also be obtained from the decision in Poole; Dight v. Federal Commissioner of Taxation (1970) 122 CLR 427; 70 ATC 4047; (1970) 1 ATR 715. In that case, the issue was whether payments under a freehold lease, under which the lessee had a right to acquire the estate in fee simple, were revenue or capital in nature. Walsh J at ATC 4053; ATR 721 stated: If land is purchased either on terms that possession is to be given upon completion of the sale by payment of the full purchase price or on terms that payment is deferred, but the purchaser is let into possession, no doubt the rights acquired by the purchaser include the right to occupy and use the land. In the latter case a purchaser would ordinarily be required either to pay interest on the unpaid purchase money or to pay an occupation fee pending completion. But in either case the central feature of the transaction is the acquisition of the land as an asset to which the purchaser obtains a title either at law or equity... The Commissioner considers that the true nature of the agreement is an instalment contract for the sale of the property. The purchase price is paid in instalments with transfer taking place once the full purchase price is paid. The agreement is not a lease, and even though the weekly instalments may be referred to as 'rent', they are in fact instalments of the sale price. In view of the above, the taxpayer is not assessable on the weekly instalments under section 6-5 of the ITAA 1997 as they are receipts of a capital nature.", "Date_of_Decision": "13 October 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital receipts Income", "Case_References": "Ex parte Lathouras Re Vendardos [1964-1965] NSWR 254", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003968", "Unmatched_Content": "Keywords Capital receipts Income"}
{"ATO_ID_Number": "ATO ID 2003/1050", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: demergers - cost base of the new interest in demerged entity where rollover is not chosen", "Issue": "Do the cost base rules in subsection 125-80(2) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a new interest, received in respect of an original interest that was acquired before 20 September 1985, if rollover is not chosen for the CGT event that happened to that original interest under a demerger?", "Decision": "No. The cost base rules in subsection 125-80(2) of the ITAA 1997 do not apply to a new interest received in respect of an original interest that was acquired before 20 September 1985 if rollover is not chosen for the CGT event that happened to that original interest under a demerger.", "Facts": "The taxpayer acquired shares in the head entity of a demerger group before 20 September 1985 (pre CGT). The taxpayer acquired shares in a demerged entity as a result of a demerger, for the purposes of Division 125 of the ITAA 1997, undertaken by the group. The taxpayer did not choose rollover in section 125-80 of the ITAA 1997 for the capital gain made from the CGT event happening under the demerger to their original shares. The capital gain was disregarded as the original shares were acquired pre CGT.", "Reasons_for_Decision": "Summary: Section 125-85 of the ITAA 1997 provides specific rules for the calculation of the cost base and reduced cost base of a new interest in the demerged entity and a remaining original interest in the head entity, where rollover is not chosen. Section 125-85 applies where the original interest in the head entity was acquired on or after 20 September 1985 (post CGT), and overrides the general cost base rules in Subdivision 110-A of the ITAA 1997 and the cost base general modification rules in Subdivision 112-A of the ITAA 1997. However, section 125-85 does not apply to a pre-CGT original interest in the head entity. The cost base spreading rule under subsection 125-80(2) of the ITAA 1997 applies to a new interest, if that interest was acquired because the taxpayer owned a post-CGT original interest. The demerger cost base spreading rule does not apply to a new interest acquired because the taxpayer owned a pre-CGT original interest. Consequently, where a CGT event happens to a pre-CGT original interest and rollover is not chosen, the cost base and reduced cost base of a new interest in a demerged entity is calculated under the general cost base rules in Subdivision 110-A of the ITAA 1997 and the cost base general modification rules in Subdivision 112-A of the ITAA 1997.", "Date_of_Decision": "14 November 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 110-A Subdivision 112-A Division 125 section 125-55 section 125-80 subsection 125-80(2) section 125-85", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/875", "Subject_References": "Capital gains CGT cost base CGT cost base modification rules Cost base adjustments Demerger roll-over Pre-CGT shares Proportionate test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031050", "Unmatched_Content": "Keywords Capital gains CGT cost base CGT cost base modification rules Cost base adjustments Demerger roll-over Pre-CGT shares Proportionate test"}
{"ATO_ID_Number": "ATO ID 2002/691", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: Main Residence - apportioning cost base of land in excess of 2 hectares", "Issue": "Where a taxpayer purchased a block of land exceeding 2 hectares and subsequently constructed a main residence on it, can the cost base of the land be calculated on a pro rata area basis rather than a valuation basis in determining the amount of capital gain to be disregarded under section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer can calculate the cost base of the land on a pro rata area basis when determining the capital gain to be disregarded under section 118-110 of the ITAA 1997, as in the circumstances, apportionment on an area basis is more reasonable than on a valuation basis.", "Facts": "The taxpayer purchased a block of land in excess of 2 hectares in 1987. At the time of purchase there was a fence and water tank on the land and the land was only partially cleared. The taxpayer constructed a house on the land within 4 years of its purchase and used the house as a main residence as soon as it was completed. The taxpayer lived in the house until it was sold in the 1999-2000 year of income. An independent valuation of the house and land was obtained at the time of sale of the property.", "Reasons_for_Decision": "Summary: A taxpayer can only make a capital gain or capital loss if a CGT event happens. CGT event A1 happens when there is a disposal of a CGT asset (section 104-10 of the ITAA 1997). A CGT asset includes any kind of property (section 108-5 of the ITAA 1997. There are some circumstances where, even though a CGT event has occurred, a CGT liability does not arise due to an exemption or exception that applies to disregard any capital gain or capital loss that may arise from a CGT event (section 100-30 of the ITAA 1997). Subdivision 118-B of the ITAA 1997 disregards a capital gain or capital loss that happens to a dwelling that is a main residence. A 'dwelling' includes a building that is a unit of accommodation and the land immediately underneath that building (section 118-115 of the ITAA 1997). Subsection 118-120(3) of the ITAA 1997 extends the area of adjacent land that is used primarily for private or domestic purposes (less the area of the land immediately under the dwelling) to a maximum of 2 hectares. Where a taxpayer has land that exceeds 2 hectares, Taxation Determination TD 1999/67 states at paragraphs 3 to 5: '3. If your selected area of land can be separately valued, you calculate your capital gain or capital loss on the remainder of your land by apportioning the capital proceeds and the cost base or reduced cost base (if applicable) on the basis of the valuation. This is relevant if the value of the remainder of the land is of a greater or lesser value than your selected area of land. 4. If your selected area of land cannot be separately valued, your capital gain or loss on the remainder of your land may be calculated by apportioning the capital proceeds and the cost base or reduced cost base (if applicable) on an area basis. 5. The amount of the capital gain or capital loss attributable to the remainder of your land must be reasonable in the circumstances.' It is clear from paragraph 3 of TD 1999/67 that where the value of the selected area of land for the main residence exemption is greater or less than the remainder of the land and both areas can be valued separately, the capital gain or capital loss is calculated by apportioning the capital proceeds and the cost base, or reduced cost base, on the basis of valuation. However, paragraph 5 of TD 1999/67 further provides that the amount attributable must be reasonable in the circumstances. The taxpayer purchased an undeveloped block of land and subsequently constructed a main residence. On disposal of the property a CGT event A1 happened. However, the taxpayer is entitled to a main residence exemption for the house and up to 2 hectares of adjacent land. At the time of purchase, one part of the land was indistinguishable from another part. The value of the land subject to the main residence exemption was therefore no greater or less than the remainder of the land. Accordingly, the most reasonable method for apportioning the cost of the land for the purposes of calculating the amount of capital gain to be disregarded under section 118-110 of the ITAA 1997 is on an area basis rather than valuation basis. This applies even though the capital proceeds used to calculate the capital gain are valuation based.", "Date_of_Decision": "26 March 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 100-30 section 104-10 section 108-5 Subdivision 118-B section 118-110 section 118-115 subsection 118-120(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/67", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains CGT main residence exemption CGT cost base CGT cost base modification apportionment rule", "Case_References": "", "Other_References": "", "Business_Line": "Centres of Expertise Capital Gains Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002691", "Unmatched_Content": "This ATO ID was amended by replacing the reference to subsection 118-20(2) with reference to subsection 118-120(3). Date of amendment 24 February 2012. | Related Public Rulings (including Determinations) Taxation Determination TD 1999/67 | Keywords Capital gains CGT main residence exemption CGT cost base CGT cost base modification apportionment rule"}
{"ATO_ID_Number": "ATO ID 2002/1069", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax - Cost Base -apportionment of costs to sale of blocks 'off the plan' in a previous income year.", "Issue": "Can capital costs in respect of the subdivision of land, incurred in one financial year, be apportioned to the cost base of blocks sold 'off the plan' in an earlier financial year under section 110-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Capital costs incurred in one financial year can be apportioned in determining the cost base of blocks disposed of in an earlier financial year under subsection 110-25(5) of the ITAA 1997.", "Facts": "The taxpayer sold the first two blocks of a subdivision 'off the plan' before any capital works had been completed. The contract for the sale of the two lots of land occurred during the year ended 30 June 2001. The sale contract required the vendor to complete all road and other works and electricity services to enable the subdivision to meet Council requirements. The construction costs were incurred after the sale of the lots 'off the plan' in the year ended 30 June 2002.", "Reasons_for_Decision": "Summary: Section 110-25 of the ITAA 1997 sets out the five elements that make up the cost base of an asset for CGT purposes. Subsection 110-25(5) of the ITAA 1997 states that the fourth element of an assets cost base includes any capital expenditure the taxpayer incurred to increase or preserve the asset's value. For CGT events happening before 1 July 2005, the expenditure must also be reflected in the state or nature of the asset at the time of the CGT event. The expenditure to increase the assets value had not actually been incurred at the time of the CGT event, that is, the time of the 'off the plan' sales. However the vendors were obligated to incur this expenditure under the contract of sale. The completion of the obligations under the contract would have been reflected in the state or nature of the blocks purchased 'off the plan'. Once completed, the blocks would comply with the Council's development consent as per the conditions set down in the contract of sale. The expenditure incurred to increase the value of the vacant lots can qualify as part of the fourth element of their cost bases, despite being incurred some time after the time of entering into the relevant contracts for the sale of the lots. The completion of various works to comply with Council conditions was part of the sale contract and would inherently increase the value of the blocks purchased 'off the plan'.", "Date_of_Decision": "29 September 2001", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 110-25 subsection 110-25(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Small business exemption CGT small business relief Cost Base Capital Gains Tax Event A1", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021069", "Unmatched_Content": "This ATO ID has been amended by adding material to the Reasons for Decision which clarifies the operation of subsection 110-25(5) of the Income Tax Assessment Act 1997. | Keywords Capital gains tax Small business exemption CGT small business relief Cost Base Capital Gains Tax Event A1"}
{"ATO_ID_Number": "ATO ID 2002/1095", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: incidental costs forming part of the cost base", "Issue": "Can Subco Pty Ltd index incidental costs relating to the acquisition of shares during 1995 under subsection 110-25(7), section 114-1 and subsection 960-275(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The incidental costs relating to the acquisition of shares were incurred by Subco Pty Ltd in 1995 for the purposes of subsection 110-25(7), section 114-1 and subsection 960-275(2) of the ITAA 1997 and can be indexed from the June 1995, September 1995 or December 1995 quarter as relevant.", "Facts": "Subco Pty Ltd was allotted shares in an Australian company in July 1995. Subco Pty Ltd disposed of its shares in the company in the year ended 31 March 2000. Between June and December 1995, Subco Pty Ltd received invoices from its legal advisers, accountants and financial consultants for services rendered to facilitate the acquisition of the shares. The invoices were arranged to be paid by Headco Ltd on behalf of its subsidiary, Subco Pty Ltd. The payment was to be recharged to Subco Pty Ltd in the year ending 31 March 1996. Due to untimely account keeping, the journal entry to recharge the expenditure from Headco Ltd to Subco Pty Ltd was not raised in the year ended 31 March 1996. However, Subco Pty Ltd and its auditors recognised the omission and ensured that the relevant recharge journal entry was raised and booked in the year ended 31 March 2001.", "Reasons_for_Decision": "Summary: Subsection 110-25(1) of the ITAA 1997 provides that the cost base of a CGT asset consists of five elements. Subsection 110-25(3) of the ITAA 1997 provides that the second element of the cost base of a CGT asset is the incidental costs the owner of the asset incurred to acquire it. Incidental costs are further defined in section 110-35 of the ITAA 1997. In particular, subsection 110-35(2) of the ITAA 97 defines the first type of incidental costs as: 'remuneration for the services of a surveyor, valuer, auctioneer, accountant, broker, agent, consultant or legal adviser.' The time when incidental costs are incurred is relevant for the purposes of cost base indexation. The cost base of a CGT asset acquired at or before 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 also includes indexation of the elements of the cost base (except the third element) if the requirements of Division 114 are met: subsection 110-25(7) of the ITAA 1997. For these assets, expenditure incurred at or before that time can be indexed: subsection 114-1 of the ITAA 1997. Subsection 960-275(2) of the ITAA 1997 sets out the formula used to calculate an indexation factor to be applied to an element of the cost base of a CGT asset - the denominator of the formula is the index number for the quarter in which expenditure in an element was incurred. The expenses in this case clearly come within the category of incidental costs defined in subsection 110-35(2) of the ITAA 1997. The main issue is whether, and if so when, the incidental costs were incurred by Subco Pty Ltd. No guidance on the meaning of the term 'incurred' is offered in any of these provisions nor in the Explanatory Memorandum to the bill which became the Tax Law Improvement Act (No 1) 1998 , that introduced them. Similarly the Explanatory Memorandum to the bill which became the Income Tax Assessment Amendment (Capital Gains) Act 1986 is also silent on the meaning of the term 'incurred' in this context. The term 'incurred' was recently considered in Dolby v. Commissioner of Taxation [2002] FCA 1065 (Dolby) in the context of subsection 960-275(2) of the ITAA 1997. In determining the meaning of incurred in this context, Spender J in Dolby observed - ' While it is wise to heed the caution that an exhaustive definition of the conceptions intended by the expression \"incurred\" is neither prudent nor possible New Zealand Flax Investments Pty Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179 at 207, it has been held that a liability presently existing or which has accrued but is not payable until a future time is sufficient ... In Australian and New Zealand Banking Group Ltd v Federal Commissioner of Taxation (1994) FCR 268, Hill J, with whom Northrop and Lockhart JJ agreed, said at 278: \"...for a loss or outgoing to be incurred it must be more than 'impending threatened or expected'. Rather the taxpayer must have been definitively committed in the year of income to that loss or outgoing: New Zealand Flax Investments Ltd v Commissioner of Taxation (Cth) (1938) 61 CLR 179 at 206-207 per Dixon J; Commissioner of Taxation (Cth) v James Flood Pty Ltd (1953) 88 CLR 492 at 506-507. The loss or outgoing must represent a present liability, albeit not immediately payable but payable in the future, and whether or not defeasible; Nilsen Development Laboratories Pty Ltd v Commissioner of Taxation (Cth) (1981) 144 CLR 616 at 627-628 per Gibbs J; Commissioner of Taxation v Australian Guarantee Corporation Ltd (1984) 2 FCR 483 at 486-487 per Toohey J\" A similar view is reflected in Taxation Determination TD 2000/39 which states that in subsection 124-75(2) of the ITAA 1997 (about roll-over for assets compulsorily acquired, lost or destroyed) 'incur' has the same meaning as it has in its context in the general deduction provision in subsection 8-1(1). It is considered that the findings of Spender J in Dolby as to the meaning of 'incurred' will apply equally to the meaning of the term in subsections 110-25(3) and 110-35(2) and section 114-1 of the ITAA 97. In this case the expenses represented a presently existing liability for Subco Pty Ltd in 1995 and were more than merely impending, threatened or expected. The fact that the recharge journal entry was not made until the 2001 income year does not prevent the expenses having been incurred in 1995 as the services to which the invoices related were provided to Subco Pty Ltd in 1995 and the services were invoiced for payment in that year. The quantum of the expenses was known and liability relating to these expenses was presently existing in 1995. Accordingly it is considered that the incidental costs of acquisition were incurred by Subco Pty Ltd in the period June to December 1995 and can be indexed from that time. The relevant indexation numbers will be those for the June 1995, September 1995 and December 1995 quarters depending on the month that the particular expenditure was incurred.", "Date_of_Decision": "7 October 2002", "Year_of_Income": "Year ended 31 March 2000", "Legislative_References": "Income Tax Assessment Act 1997 subsection 8-1(1) subsection 110-25(1) subsection 110-25(3) subsection 110-25(7) subsection 110-35(2) subsection 110-36(1) section 114-1 subsection 124-75(2) subsection 960-275(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/39", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT asset CGT cost base CGT indexation Elements of cost base Incidental costs Incurred", "Case_References": "Dolby v. Commissioner of Taxation [2002] FCA 1065 (2002) 2002 ATC 4976 (2002) 51 ATR 272", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021095", "Unmatched_Content": "This ATO ID has been amended as subsection 110-25(7) has been repealed by Act no. 32 of 2006 and replaced by subsection 110-36(1) of the Income Tax Assessment Act 1997. | Related Public Rulings (including Determinations) Taxation Determination TD 2000/39 | Keywords CGT asset CGT cost base CGT indexation Elements of cost base Incidental costs Incurred"}
{"ATO_ID_Number": "ATO ID 2001/375", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Cost Base: Recoupment of expenses", "Issue": "Do interest payments in respect of a CGT asset made by an employer as part of an employee's salary sacrifice arrangement form part of the asset's cost base?", "Decision": "No. Interest payments made by an employer as part of salary sacrifice arrangement constitute a recoupment of these amounts within the meaning of section 20-25 of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 110-45(3) of the ITAA 1997 provides that expenditure that has been recouped does not form part of the cost base of a CGT asset.", "Facts": "The taxpayer purchased a property in July 2000 and borrowed to finance the purchase. The taxpayer's parents live in the property rent-free. The taxpayer is considering asking their employer to make the loan repayments as part of a salary sacrifice arrangement. The taxpayer will continue to be liable for the interest payments on the loan.", "Reasons_for_Decision": "Summary: As provided by paragraph 110-25(4)(a) of the ITAA 1997 interest incurred on the money borrowed to acquire an asset can form part of the cost base of the asset. For assets acquired after 7.30pm on 13 May 1997, subsection 110-45(3) of the ITAA 1997 provides that, except so far as the amount is included in assessable income, expenditure does not form part of the cost base to the extent that it is recouped. The term 'recoupment' is defined in section 20-25 of the ITAA 1997. Subsection 20-25(2) of the ITAA 1997 provides that where another entity pays an amount for you in respect of a loss or outgoing that you incur you are taken to receive the amount as recoupment of the loss or outgoing. As the interest incurred by the taxpayer is to be paid by their employer, the taxpayer is taken to have recouped these amounts. Therefore the interest paid by the taxpayer's employer will not form part of the CGT asset's cost base.", "Date_of_Decision": "5 March 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 20-25 subsection 20-25(2) paragraph 110-25(4)(a) subsection 110-45(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "capital gains tax capital gains expense payment fringe benefits interest expenses non deductible expenses recoupment rental property rental property loan interest expenses salary sacrifice", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001375", "Unmatched_Content": "Keywords capital gains tax capital gains expense payment fringe benefits interest expenses non deductible expenses recoupment rental property rental property loan interest expenses salary sacrifice"}
{"ATO_ID_Number": "ATO ID 2009/112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: beneficiary's share of trust net income includes trust capital gain - deduction for beneficiary's contribution to a complying superannuation fund", "Issue": "Does the deduction of an amount by a taxpayer under subsection 115-215(6) of the Income Tax Assessment Act 1997 (ITAA 1997) reduce the taxpayer's assessable income for the purposes of applying the '10% test' in subsection 290-160(2) of the ITAA 1997?", "Decision": "No. The deduction provided by subsection 115-215(6) of the ITAA 1997 is relevant to the calculation of a taxpayer's 'taxable income' not their 'assessable income' and, therefore, does not affect the operation of the 10% test in subsection 290-160(2) of the ITAA 1997.", "Facts": "An individual (aged between 18 and 75) made a personal superannuation contribution to a complying superannuation fund. The individual gave a valid notice to the fund of an intention to claim a deduction for the contribution and received an acknowledgement from the fund. In the relevant income year, the individual derived $20,000 as an employee and did not receive any fringe benefits. The individual was also a beneficiary of a trust and was presently entitled to 50% of the income of the trust. The net income of the trust was $200,000, of which $180,000 was attributable to a net capital gain calculated after application of the CGT 50% discount. This gain did not qualify for any of the small business CGT concessions in Division 152 of the ITAA 1997. The individual had no capital losses for the income year and no unapplied net capital losses from earlier years. The individual sought to deduct the superannuation contribution.", "Reasons_for_Decision": "Summary: Section 290-150 of the ITAA 1997 provides that a taxpayer can deduct a contribution to a superannuation fund which was made for the purpose of providing them with superannuation benefits if certain conditions are satisfied. In the relevant income year, those conditions are that: The issue in this case is whether the individual satisfies the 10% test. Assessable income includes ordinary income (section 6-5 of the ITAA 1997) and statutory income (section 6-10 of the ITAA 1997). Ordinary income is income according to ordinary concepts. The $20,000 which the individual received from employment is ordinary income. Statutory income is an amount that is not ordinary income but is included in assessable income by a provision about assessable income - for example, section 97 of the Income Tax Assessment Act 1936 (ITAA 1936). That section provides that a taxpayer who is not under a legal disability and who is presently entitled to a share of the income of a trust estate must include in their assessable income that share of the net income of the trust calculated under section 95 of the ITAA 1936. The individual was presently entitled to 50% of the income of a trust and thus had $100,000 of statutory income under section 97 of the ITAA 1936 (that is, 50% of the trust net income). Where, as here, a trust's net income includes a net capital gain, Subdivision 115-C of the ITAA 1997 treats a beneficiary's share of the net income attributable to that gain as a capital gain which the beneficiary must include in the calculation of their own net capital gain. Because the trust applied the CGT 50% discount, the individual must 'gross-up' the gain and apply their own capital losses and appropriate discount percentage when working out their net capital gain. By operation of paragraph 115-215(3)(b) and section 102-5 of the ITAA 1997, the individual had a net capital gain of $90,000. The net capital gain is statutory income and included in the individual's assessable income under section 102-5 of the ITAA 1997. Subsection 115-215(6) of the ITAA 1997 ensures that a beneficiary's share of a trust net capital gain is not taxed both under section 97 of the ITAA 1936 and as part of the beneficiary's net capital gain worked out taking account of the direction in subsection 115-215(3) of the ITAA 1997. However, this is achieved by way of deduction. And section 4-15 of the ITAA 1997 makes it clear that deductions are taken from assessable income to arrive at the amount of a taxpayer's taxable income (but deductions do not change the amount of a taxpayer's assessable income). In this case the individual's income as an employee was 9.52% of their assessable income for the relevant year [$20,000/ ($20,000 + $100,000 + $90,000)]. Accordingly, the individual's income from employment activities satisfied the 10% test and they were entitled to deduct their superannuation contribution.", "Date_of_Decision": "14 October 2009", "Year_of_Income": "Income year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 4-15 section 6-5 section 6-10 section 102-5 Subdivision 115-C subsection 115-215(3) paragraph 115-215(3)(b) subsection 115-215(6) Division 152 section 290-150 subsection 290-160(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Capital gains Deductions & expenses Net capital gain Trust Superannuation contributions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009112", "Unmatched_Content": "Note: This ATO ID contains a view in respect of subsection 115-215(6) of the Income Tax Assessment Act 1997 which has been repealed. Except in the case of certain early balancing trusts and managed investment trusts, its repeal takes effect for the 2010-11 and later income years. Accordingly, the issue in this ATO ID will not generally arise. | Keywords Income Capital gains Deductions & expenses Net capital gain Trust Superannuation contributions"}
{"ATO_ID_Number": "ATO ID 2009/144", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: testamentary trust - trustee can choose to be assessed on capital gains", "Issue": "Is the trustee assessable under section 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936) on that share of the net income of the trust estate representing capital gains in the circumstances of this case?", "Decision": "No. As the trustee has not made a choice under subsection 115-230(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to be taxed on that share of the trust's net income, it will be assessable to the beneficiary that is presently entitled to the trust income.", "Facts": "A trust was established under the terms of a deceased person's will. The trustee of the trust is resident in Australia. The trust property consists mainly of shares. During the 2008-09 income year, the trustee derived dividends and made capital gains from sales of shares. The deceased's child (the life tenant) is entitled to all of the income of the trust for their lifetime. The life tenant is an Australian resident. Income is not defined for the purposes of the trust (either expressly or by implication and the trustee does not have the authority to determine what is income) and so takes its ordinary meaning. The deceased's grandchildren have a contingent interest in the trust capital. That is, such of the grandchildren as survive the life tenant will be entitled to share equally in the trust capital. If none of the grandchildren survive the life tenant, then the capital passes to a charity. The trustee has not made a choice to be taxed (instead of the life tenant) on the capital gains of the trust.", "Reasons_for_Decision": "Summary: The net income of a trust estate for a particular year is calculated in accordance with section 95 of the ITAA 1936. Broadly, it is the amount that would have been the trustee's taxable income if it were assumed that the trustee was a resident taxpayer. The net income is assessed to the trustee or to beneficiaries of the trust in accordance with the rules set out in Division 6 of Part III of the ITAA 1936. Section 97 of the ITAA 1936 provides (subject to certain exceptions not relevant in this case) that a beneficiary who is presently entitled to a share of the income of a trust estate must include in their assessable income that share of the net income of the trust estate. In this case, the life tenant is presently entitled to all of the income of the trust and so prima facie they should be assessed on the entire net income of the trust (including the capital gains). This is the case even though the life tenant cannot benefit from those capital gains. However, section 115-230 of the ITAA 1997 applies with respect to the 2005-06 and later income years. It allows the trustee of a testamentary trust to choose to be assessed on the share of the trust net income attributable to capital gains if a beneficiary who would otherwise be assessed under section 97 of the ITAA 1936 on that share of the net income does not have a vested and indefeasible interest in trust property representing that share, nor has had such property paid or applied for its benefit. The trustee must choose to be assessed no later than the deadline in subsection 115-230(5) of the ITAA 1997. That deadline is the day two months after the last day of the relevant income year or such later day as the Commissioner allows. As the trustee in this case has not chosen that section 115-230 of the ITAA 1997 apply, or sought an extension of time in which to make the choice, the whole of the net income is properly assessed to the life tenant. If the trustee were to seek, and be granted, an extension of time in which to make the choice, the capital gains would be assessed to the trustee under section 99A of the ITAA 1936 or, at the Commissioner's discretion, section 99 of the ITAA 1936.", "Date_of_Decision": "16 November 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 section 95 section 97 section 99 section 99A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains CGT choice Income Net income of a trust Testamentary trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009144", "Unmatched_Content": "Note: This ATO ID contains a view in respect of subsection 115-230 of the Income Tax Assessment Act 1997 as it operated prior to amendments introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 . Except in the case of some early balancing trusts and managed investment trusts, those amendments take effect from the 2010-11 and later income years. | Keywords Capital gains CGT choice Income Net income of a trust Testamentary trusts"}
{"ATO_ID_Number": "ATO ID 2009/147", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: CGT discount - application of Subdivision 152-E and Subdivision 124-B roll-over", "Issue": "If a taxpayer qualifies for both the small business roll-over in Subdivision 152-E the Income Tax Assessment Act 1997 (ITAA 1997) and the replacement asset roll-over in Subdivision 124-B of the ITAA 1997 in relation to a capital gain, can the taxpayer choose which to apply?", "Decision": "Yes. If a taxpayer qualifies for both the small business roll-over in Subdivision 152-E of the ITAA 1997 and the replacement asset roll-over in Subdivision 124-B of the ITAA 1997 in relation to a capital gain, the taxpayer can choose to apply either roll-over.", "Facts": "The taxpayer, an Australian resident, satisfies the maximum net asset value test in section 152-15 of the ITAA 1997. The taxpayer acquired land after 19 September 1985 which satisfies the active asset test in section 152-35 of the ITAA 1997. The land was compulsorily acquired during the 2006-07 income year and the taxpayer received money as compensation. A capital gain arose from the compulsory acquisition of the asset. The taxpayer used the compensation to acquire replacement land which was immediately used by the taxpayer in carrying on their business. The replacement land was acquired within one year of the land being compulsorily acquired.", "Reasons_for_Decision": "Summary: CGT event A1 (in section 104-10 of the ITAA 1997) happens if a CGT asset you own is compulsorily acquired. A capital gain from a CGT event may be disregarded if a roll-over applies. There are two roll-overs that are potentially available to the taxpayer: the small business roll-over in Subdivision 152-E of the ITAA 1997, and the replacement asset roll-over in Subdivision 124-B of the ITAA 1997 for assets that are compulsorily acquired, lost or destroyed. If the taxpayer satisfies the conditions for both of the roll-overs, the taxpayer can choose which of the roll-overs to apply. In making the choice, the taxpayer might consider the different ways in which the roll-overs operate. For example, if the taxpayer chooses roll-over under Subdivision 152-E of the ITAA 1997, a capital gain from CGT event J2 in section 104-185 of the ITAA 1997 may arise if there is a change in the status of the replacement asset. A change of status might happen if, for example, the replacement asset is disposed of, or if it otherwise stops being an active asset of the taxpayer. This capital gain would be in addition to any capital gain or capital loss that is actually made from the replacement asset.", "Date_of_Decision": "3 December 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 section 104-185 Subdivision 124-B Subdivision 152-E section 152-15 section 152-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT compulsory acquisitions CGT choice CGT events CGT replacement assets CGT replacement asset roll-over CGT small business relief CGT same asset roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009147", "Unmatched_Content": "Keywords Capital gains tax CGT compulsory acquisitions CGT choice CGT events CGT replacement assets CGT replacement asset roll-over CGT small business relief CGT same asset roll-over"}
{"ATO_ID_Number": "ATO ID 2008/2", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Discount capital gains", "Issue": "Can an overseas pension fund constituted as a Stichting under Dutch legal concepts make a discount capital gain under section 115-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when it disposes of taxable Australian property?", "Decision": "Yes, the pension fund can make a discount capital gain under section 115-10 of the ITAA 1997 when it disposes of taxable Australian property.", "Facts": "An overseas pension fund is constituted as a Stichting that is a legal person under Dutch legal concepts. Under the bye-laws the purpose of the fund is to protect employees, former employees and their legal heirs from the consequences of old age, disablement and death in accordance with the pension regulations. The property of the pension fund consists of contributions by affiliated employers, investments and fund earnings. The pension fund is administered by a Board of trustees. The Board is authorised to undertake all actions relating to management and disposition within the framework of the objectives of the fund. The pension fund intends to dispose of taxable Australian property that is currently held as a long term investment.", "Reasons_for_Decision": "Summary: CGT event A1 will happen upon the disposal of the taxable Australian property and may result in a capital gain. Section 115-10 of the ITAA 1997 provides that to be a discount capital gain the capital gain must be made by an, individual, a complying superannuation fund, a trust or a life insurance company in relation to a CGT event in respect of particular CGT assets. 'Trust' is not defined in the Income Tax Assessment Act 1936 or ITAA 1997. French J in Harmer & Ors v. Federal Commissioner of Taxation (1989) 20 ATR 1461; 89 ATC 5180 stated that a trust 'is notably a definition of a relationship by reference to obligations'. He went on to state that the four essential elements of a trust are: Having regard to the Bye-laws of the pension fund (the Stichting), all four elements are present so as to give rise to a trust relationship between the Stichting and those individuals entitled to benefits from the pension fund for the purposes of section 115-10 of the ITAA 1997. The Stichting has ownership and possession of the trust property and is the trustee. The trust property consists of the contributions made to the fund, investments and fund earnings. The beneficiaries are the employees, former employees and their legal heirs. The Bye-laws of the Stichting impose on it a personal obligation to deal with the trust property for the benefit of the beneficiaries. Having regard to the relationship between the Stichting, contributors, beneficiaries and potential beneficiaries and the express intention that the Stichting hold the property not exclusively for itself, but subject to an equitable obligation to deal with the property for the benefit of the beneficiaries the relationship constitutes a trust for the purposes of section 115-10 of the ITAA 1997. Because it is a trust for the purposes of section 115-10 of the ITAA 1997 this pension fund may make a discount capital gain.", "Date_of_Decision": "3 December 2007", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 115-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/42 | ATO ID 2003/48", "Subject_References": "Capital gains tax CGT discount Non resident trusts Trusts Netherlands", "Case_References": "Harmer v. Federal Commissioner of Taxation (1989) 20 ATR 1461 (1989) 89 ATC 5180", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20082", "Unmatched_Content": "Keywords Capital gains tax CGT discount Non resident trusts Trusts Netherlands"}
{"ATO_ID_Number": "ATO ID 2003/639", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: demerger relief - two original interests - different acquisition times", "Issue": "In applying subsection 115-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997), when is a taxpayer treated as having acquired a new interest in a demerged entity as a replacement for two original interests which were acquired at different times?", "Decision": "The new interest will be treated, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired at the earliest time that either original interest was acquired.", "Facts": "The taxpayer acquired one share in the head entity of a demerger group in August 2000. An additional share was acquired in September 2002. In November 2002 the group undertook a demerger. Under the demerger a CGT event happened to each of the two shares and the taxpayer received one new share in the demerged entity. The demerger qualified for rollover relief in terms of Division 125 of the ITAA 1997. In January 2003 the taxpayer sold the share in the demerged entity and made a capital gain.", "Reasons_for_Decision": "Summary: Subsection 115-25(1) of the ITAA 1997 states that a capital gain can only be a discount capital gain where the asset which gave rise to the capital gain was acquired at least twelve months before the relevant CGT event. The replacement asset, acquired in a replacement-asset rollover, will be treated, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired at the time the original asset involved in the roll-over was acquired. The definition of replacement-asset roll-over in section 112-115 of the ITAA 1997 includes demerger rollovers. As the taxpayer's two original shares have two different acquisition dates, it is reasonable to treat the new share, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired in August 2000 (the earlier of the two acquisition dates). [Note: the taxpayer's capital gain satisfies the twelve month ownership requirement to be a discount capital gain.]", "Date_of_Decision": "9 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 112-115 subsection 115-25(1) subsection 115-30(1) Division 125", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/640 | ATO ID 2003/641", "Subject_References": "Acquisition of CGT assets Capital gains Capital gains tax CGT original assets CGT replacement asset roll-over CGT replacement assets Demerger roll-over Demerging entity", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003639", "Unmatched_Content": "Keywords Acquisition of CGT assets Capital gains Capital gains tax CGT original assets CGT replacement asset roll-over CGT replacement assets Demerger roll-over Demerging entity"}
{"ATO_ID_Number": "ATO ID 2003/640", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: demerger relief - more than two original interests - different acquisition times", "Issue": "In applying subsection 115-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997), when is a taxpayer treated as having acquired a new interest in a demerged entity as a replacement for more than two original interests which were acquired at different times?", "Decision": "The new interest will be treated, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired at the time that a majority of the original interests were acquired.", "Facts": "The taxpayer acquired five shares in the head entity of a demerger group in August 2000. An additional fifteen shares were acquired in September 2002. In November 2002 the group undertook a demerger. Under the demerger a CGT event happened to each of the twenty shares and the taxpayer received one new share in the demerged entity for the twenty shares held in the head entity. The demerger qualified for roll-over relief in terms of Division 125 of the ITAA 1997. In January 2003 the taxpayer sold the share in the demerged entity and made a capital gain.", "Reasons_for_Decision": "Summary: Subsection 115-25(1) of the ITAA 1997 states that a capital gain can only be a discount capital gain where the asset which gave rise to the capital gain was acquired at least twelve months before the relevant CGT event. The replacement asset, acquired in a replacement-asset rollover, will be treated for the purposes of subsection 115-30(1) of the ITAA 1997 as having been acquired at the time the original asset involved in the rollover was acquired. The definition of replacement-asset roll-over in section 112-115 of the ITAA 1997 includes demerger rollovers. As the taxpayer's original shares have two different acquisition dates, it is reasonable to treat the new share, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired in September 2002 (the acquisition time of the majority of the original shares).", "Date_of_Decision": "9 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 112-115 subsection 115-25(1) subsection 115-30(1) Division 125", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/639 | ATO ID 2003/641", "Subject_References": "Acquisition of CGT assets Capital gains Capital gains tax CGT original assets CGT replacement asset roll-over CGT replacement assets Demerger roll-over Demerging entity", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003640", "Unmatched_Content": "Keywords Acquisition of CGT assets Capital gains Capital gains tax CGT original assets CGT replacement asset roll-over CGT replacement assets Demerger roll-over Demerging entity"}
{"ATO_ID_Number": "ATO ID 2003/641", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: demerger relief - more than two parcels of original interests - different acquisition times", "Issue": "In applying subsection 115-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997), when is a taxpayer treated as having acquired new interests in a demerged entity as a replacement for more than two original parcels of interests which were acquired at different times?", "Decision": "The new interests will be treated, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired at the same time as the original shares, determined on a reasonable basis of identification.", "Facts": "The taxpayer acquired forty shares in the head entity of a demerger group in August 2000. An additional forty shares were acquired in September 2002. In November 2002 the group undertook a demerger. Under the demerger a CGT event happened to each of the eighty shares and the taxpayer received forty new shares in the demerged entity; one for every two shares held in the head entity. The demerger qualified for rollover relief in terms of Division 125 of the ITAA 1997. In January 2003 the taxpayer sold the shares in the demerged entity and made a capital gain on each of the shares.", "Reasons_for_Decision": "Summary: Subsection 115-25(1) of the ITAA 1997 states that a capital gain can only be a discount capital gain where the asset which gave rise to the capital gain was acquired at least twelve months before the relevant CGT event. The replacement asset, acquired in a replacement-asset rollover, will be treated for the purposes of subsection 115-30(1) of the ITAA 1997 as having been acquired at the time the original asset involved in the rollover was acquired. The definition of replacement-asset roll-over in section 112-115 of the ITAA 1997 includes demerger rollovers. It is reasonable to treat twenty of the new shares, for the purposes of subsection 115-30(1) of the ITAA 1997, as having been acquired in August 2000 and twenty in September 2002, ie on a proportionate basis. It is not considered reasonable to treat each new share as relating to one August 2000 share and one September 2002 share in order to treat all new shares as having been received in August 2000. [Note: this will have the effect of treating the taxpayer's capital gains on half of the new shares as discount capital gains.]", "Date_of_Decision": "9 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 115-25(1) subsection 115-30(1) section 112-115 Division 125", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/639 | ATO ID 2003/640", "Subject_References": "Acquisition of CGT assets Capital gains Capital gains tax CGT original assets CGT replacement asset roll-over CGT replacement assets Demerger roll-over Demerging entity", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003641", "Unmatched_Content": "Keywords Acquisition of CGT assets Capital gains Capital gains tax CGT original assets CGT replacement asset roll-over CGT replacement assets Demerger roll-over Demerging entity"}
{"ATO_ID_Number": "ATO ID 2003/798", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: CGT discount - discount capital gain distributed by public trading trust to unit holder", "Issue": "Will the taxpayer, an individual unit holder receiving a distribution from a public trading trust, that is attributable to a discount capital gain made by the trust, apply Subdivsion 115-C of the Income Tax Assessment Act 1997 (ITAA 1997) to the distribution?", "Decision": "No. The taxpayer will not apply Subdivision 115-C of the ITAA 1997 to the amount of the distribution attributable to the trust capital gain.", "Facts": "The unit trust is a public trading trust under section 102R of the Income Tax Assessment Act 1936 (ITAA 1936). The trust made a capital gain from the sale of shares that it acquired after 21 September 1999. The trust had owned the shares for more than 12 months at the time that it disposed of them. The trust has not made a choice under section 703-50 of the ITAA 1997 to form a consolidated group. The trust was entitled to the 50% CGT discount for the discount capital gain in terms of subparagraph 115-100(b)(ii) of the ITAA 1997. The trustee distributed the capital gain to the unit holders in proportion to their unit holdings.", "Reasons_for_Decision": "Summary: Subdivision 115-C of the ITAA 1997 sets out the rules for dealing with the net income of a trust that has a capital gain. The rules treat parts of the net income attributable to capital gains included in the trust's net capital gain as capital gains made by beneficiaries specifically entitled to those gains or otherwise having a share of those gains. Subsection 115-210(1) of the ITAA 1997 states that this Subdivision applies where a net capital gain is taken into account in calculating the trust's net income for the year. This subsection adopts the definition of 'net income' contained at subsection 95(1) of the ITAA 1936. The net income of a public trading trust is determined in accordance with the definition in section 102M of the ITAA 1936. As the public trading trust's 'net income' does not fall under that definition at subsection 95(1) of the ITAA 1936, the taxpayer cannot apply Subdivision 115-C of the ITAA 1997 to the amount of the distribution attributable to the trust capital gain.", "Date_of_Decision": "22 August 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 95(1) section 102M section 102R", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/652 | ATO ID 2003/652", "Subject_References": "Capital gains tax CGT 50% individual discount CGT discount CGT trust distribution Consolidated group Consolidation Net capital gain Net income of a trust Public trading trusts Unit trust distributions Unitholders", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003798", "Unmatched_Content": "This ID has been amended to include the fact that the trust has not made the choice to form a consolidated group and updated following amendments to Subdivision 115-C of the Income Tax Assessment Act 1997 introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 . | Keywords Capital gains tax CGT 50% individual discount CGT discount CGT trust distribution Consolidated group Consolidation Net capital gain Net income of a trust Public trading trusts Unit trust distributions Unitholders"}
{"ATO_ID_Number": "ATO ID 2003/916", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demerger - CGT discount", "Issue": "Does subsection 115-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to change the date of acquisition of a new interest in a demerged entity, if the new interest was acquired without a CGT event happening to an original interest ?", "Decision": "No. Subsection 115-30(1) of the ITAA 1997 only changes the acquisition date for the purposes of testing for eligibility for the CGT discount for an asset acquired as a result of a replacement-asset rollover. The new interest was not acquired as a result of a CGT event happening to an original interest, and so a replacement-asset rollover does not apply.", "Facts": "The taxpayer acquired shares in the head entity of a demerger group on 20 September 1990. On 1 November 2002 the taxpayer acquired shares in a demerged entity as a result of a demerger undertaken by the group. This acquisition was not the result of a CGT event happening to the taxpayer's shares in the head entity. The taxpayer made a capital gain on 1 December 2002 when the shares in the new entity were sold.", "Reasons_for_Decision": "Summary: Subsection 115-25(1) of the ITAA 1997 states that a capital gain can only be a discount capital gain where the asset which gave rise to the capital gain was acquired at least twelve months before the relevant CGT event. Table item 2 in subsection 115-30(1) treats a replacement asset, acquired in a replacement-asset rollover, as having been acquired at the time the original asset was acquired. The table in section 112-115 of the ITAA 1997 lists all replacement-asset rollovers and includes demergers at item 14C, with reference to Division 125 of the ITAA 1997. Paragraph 125-55(1)(d) of the ITAA 1997 in the demerger relief provisions, states that rollover relief can be chosen if a CGT event happens to your original interests and you acquire a new or replacement interest in the demerged entity. A CGT event did not happen to the taxpayer's shares in the head entity (original interests) as a result of the demerger, and so replacement-asset rollover cannot be chosen. The taxpayer acquired the new shares on 1 November 2002 and table item 2 in subsection 115-30(1) of the ITAA 1997 cannot apply to change this date for the purposes of satisfying the twelve month ownership test for the CGT discount.", "Date_of_Decision": "17 July 2003", "Year_of_Income": "30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 112-115 subsection 115-25(1) subsection 115-30(1) Division 125 paragraph 125-55(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT discount CGT events CGT replacement asset roll-over Demerged entity Demerger Demerger group Shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003916", "Unmatched_Content": "Keywords Capital gains tax CGT discount CGT events CGT replacement asset roll-over Demerged entity Demerger Demerger group Shares"}
{"ATO_ID_Number": "ATO ID 2003/1031", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: Demerger - CGT discount in relation to new interests if rollover not chosen", "Issue": "Does subsection 115-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to change the date of acquisition of a new interest in a demerged entity for the purposes of accessing the CGT discount, if the rollover provided by section 125-80 of the ITAA 1997 is not chosen in respect of the CGT event that happened to an original interest under a demerger?", "Decision": "Yes. Subsection 115-30(1) of the ITAA 1997 applies to change the date of acquisition of a new interest in a demerged entity for the purposes of accessing the CGT discount, if the rollover provided by section 125-80 of the ITAA 1997 is not chosen in respect of the CGT event that happened to an original interest under a demerger.", "Facts": "The taxpayer acquired shares (the original shares) in Company A in September 1995. Company A demerged its wholly owned subsidiary, Company B, in November 2002. The demerger satisfied the conditions in Division 125 of the ITAA 1997. Under the demerger, CGT event G1 (section 104-135 of the ITAA 1997) happened to the taxpayer's original shares. As a result, the taxpayer acquired new shares in Company B. The taxpayer did not choose rollover under section 125-80 for the CGT event G1. The taxpayer sold their shares in Company B in June 2003 and made a capital gain.", "Reasons_for_Decision": "Summary: Division 115 of the ITAA 1997 requires the CGT asset, in relation to which a capital gain has arisen, to be acquired 12 months before the CGT event. However, subsection 115-30(1) of the ITAA 1997 allows owners of certain CGT assets to adopt an earlier acquisition time for the purpose of determining whether the 12 month ownership test in section 115-25 of the ITAA 1997 has been satisfied. One situation covered by subsection 115-30(1) is where a CGT asset is a replacement asset for the purposes of a replacement asset rollover. The replacement asset is treated as having been acquired at the time the original asset was acquired. The rollover provided under a demerger is contained in section 125-80 of the ITAA 1997. There are three components: The cost base adjustments calculated in subsections 125-80(2) and (3) apply whether or not rollover is chosen (section 125-85 of the ITAA 1997). Although the taxpayer has not chosen rollover in respect of the CGT event G1 that happened to their original shares, a component of the rollover (apportionment of cost base) has been applied. The new shares are taken to be replacement shares for the purposes of applying section 115-30. The taxpayer then satisfies the 12 month ownership test in subsection 115-30(1), and is able to claim the CGT discount in calculating the capital gain on the sale of the shares in Company B.", "Date_of_Decision": "7 November 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-135 Division 115 section 115-25 subsection 115-30(1) Division 125 section 125-55 section 125-80 subsection 125-80(1) subsection 125-80(2) subsection 125-80(3) subsection 125-80(4) subsection 125-80(5) subsection 125-80(6) subsection 125-80(7) section 125-85", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/916", "Subject_References": "Capital gains Capital losses CGT discount Cost base adjustments Demerger Demerger roll-over Ownership test period", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031031", "Unmatched_Content": "Keywords Capital gains Capital losses CGT discount Cost base adjustments Demerger Demerger roll-over Ownership test period"}
{"ATO_ID_Number": "ATO ID 2006/224", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Sale of an interest in an afforestation project: deed of assignment", "Issue": "Can section 118-20 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to reduce the capital gain made from the disposal of a capital gains tax (CGT) asset, to the extent that an amount has been assessed to the taxpayer under section 70-90 of the ITAA 1997 on the disposal of trading stock when they entered into a deed of assignment under Part X of the Bankruptcy Act 1966 ?", "Decision": "Yes. Section 118-20 of the ITAA 1997 can apply to reduce the capital gain from the disposal of the CGT asset to the extent an amount is assessed to the taxpayer under section 70-90 of the ITAA 1997 when they entered into a deed of assignment under Part X of the Bankruptcy Act 1966 .", "Facts": "The taxpayer acquired an interest in woodlots from an afforestation project. A product ruling issued in relation to the afforestation project determining that the growers' afforestation activities constitute the carrying on of a business with the woodlots being the growers' trading stock. Later, the taxpayer became insolvent and entered into a deed of assignment under Part X of the Bankruptcy Act 1966. Under the deed of assignment, all divisible property was assigned to the trustee, upon trust, to deal with it for the benefit of the taxpayer's creditors. The assignment of the woodlots to the trustee constituted the disposal of trading stock outside the ordinary course of a business and the market value of the woodlots was included in the taxpayer's assessable income under section 70-90 of the ITAA 1997. The trustee did not hold the woodlots as trading stock. The creditors resolved that the trustee should seek to secure a buyer for the interest in the woodlots prior to their maturation. The trustee sold the woodlots in 2003-04 income year.", "Reasons_for_Decision": "Summary: Ordinarily a capital gain or capital loss made from the disposal of a CGT asset that is your trading stock is disregarded under section 118-25 of the ITAA 1997. However, subsection 106-30(1) of the ITAA 1997 states that for the purposes of Part 3-1 and Part 3-3 of the ITAA 1997, the vesting of an individual's CGT assets in the trustee under the Bankruptcy Act is ignored. The Explanatory Memorandum to the Income Tax Assessment Amendment (Capital Gains) Bill of 1986 explaining section 160W of the Income Tax Assessment Act 1936 (the equivalent provision to section 106-30 of the ITAA 1997) stated that: The effect of this section is that the asset is still considered to be owned by the insolvent person or company, notwithstanding that the asset is vested in a trustee or liquidator. Accordingly, no disposal takes place on the vesting of the asset in the trustee or liquidator but a disposal of the asset by the trustee or liquidator is considered to be a disposal by the insolvent person or company. Therefore, the intent of section 106-30 of the ITAA 1997 is to ensure that the ownership of a CGT asset does not transfer to the trustee of a bankruptcy estate for the purposes of applying Parts 3-1 and 3-3 of the ITAA 1997. Accordingly, no CGT event happens to the bankrupt taxpayer when the woodlots are vested in the trustee of the bankruptcy estate. Under subsection 106-30(2) of the ITAA 1997, the acts of the trustee under a deed of assignment under Part X of the Bankruptcy Act 1966 are treated as if they had been done by the bankrupt taxpayer. Accordingly, CGT event A1 in subsection 104-10(1) of the ITAA 1997 happens to the bankrupt taxpayer when the trustee sells the woodlots. Under section 118-25 of the ITAA 1997, the CGT asset must be your trading stock at the time of the CGT event. As the woodlots, because of section 70-90 of the ITAA 1997, were no longer trading stock when CGT event A1 happens, section 118-25 will not apply to disregard the capital gain or capital loss made by the bankrupt taxpayer. Consequently, the capital gain made by the bankrupt taxpayer from the disposal of the woodlots includes an amount that was included in the bankrupt taxpayer's assessable income under section 70-90 of the ITAA 1997 when the bankrupt taxpayer entered into the deed of assignment. Under subsection 118-20(1) of the ITAA 1997 as extended by subsection 118-20(1A) of the ITAA 1997, an amount included in your assessable income in relation to a CGT asset will be treated as being included in your assessable income because of the CGT event. Accordingly, the anti-overlap provision in section 118-20 of the ITAA 1997 can apply to reduce the capital gain made by the bankrupt taxpayer from the disposal of the woodlots by the amount that is assessed as trading stock under section 70-90 of the ITAA 1997 when the woodlots are vested in the trustee.", "Date_of_Decision": "12 July 2006", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 70-90 section 106-30 section 118-25 subsection 104-10(1) subsection 118-20(1) subsection 118-20(1A) paragraph 104-10(3)(a) paragraph 106-30(2)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/6 | Taxation Ruling IT 175 | Taxation Determination TD 98/23", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Crops as trading stock Insolvency Ownership, interests, control & rights Part X bankruptcy arrangements Trading stock", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006224", "Unmatched_Content": "History : The issue and decision sections of this ID were amended to clarify that the capital gain is not made by the trustee. | Related Public Rulings (including Determinations) Taxation Ruling TR 95/6 Taxation Ruling IT 175 Taxation Determination TD 98/23 | Keywords Capital gains Crops as trading stock Insolvency Ownership, interests, control & rights Part X bankruptcy arrangements Trading stock"}
{"ATO_ID_Number": "ATO ID 2006/53", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: disposal of a life insurance business - value of in force business", "Issue": "Is a capital gain made by a life insurance company on the disposal of its life insurance business disregarded under item 1 in the table in subsection 118-300(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the capital gain relates to the consideration received by the company for the future profits component of the value of the 'in force business' of the company?", "Decision": "No. A capital gain made by a life insurance company on the disposal of its life insurance business is not disregarded under item 1 in the table in subsection 118-300(1) of the ITAA 1997 where the capital gain relates to the consideration received by the company for the future profits component of the value of the 'in force business' of the company.", "Facts": "A life insurance company (the transferor) transferred its life insurance business to another company (the transferee). The consideration received by the transferor was based on an appraisal valuation, which included an amount worked out in relation to the value of the 'future profits' component of the transferor's in force business. The valuation of in force business involved an assessment of the present value of the shareholders' interest in future distributable profits from the in force business, that is, the anticipated profits from the provision of services under current policy contracts which the transferor had issued. There was no enforceable right to the estimated future profits before the services had been provided by the transferor. The value of in force business may also include an amount in respect of regulatory surplus assets relating to current policies. This decision concerns the component of the value worked out in respect of future profits.", "Reasons_for_Decision": "Summary: Under subsection 118-300(1) of the ITAA 1997, any capital gain or capital loss made from certain CGT events that happen in relation to an insurer's interest in rights under insurance policies, which it has issued, is disregarded. The exemption under item 1 in the table in subsection 118-300(1) of the ITAA 1997 only applies if all of the following conditions are satisfied: The value of the transferor's in force business was based on an estimate of its future profits. The projected future profits depended on the provision of future services to policy holders with existing policy contracts. There was no enforceable right to the estimated future profits until such time as the services had been provided by the transferor. In the general scheme of a life insurance policy, the profit element will be impacted by various factors, including whether and for how long the policy holder continues to maintain the policy with the life insurance company, or in a transfer of business, maintain the policy with the transferee. Where policy holders maintain the policy following a transfer of business, the transferee would normally earn the profits associated with the policies transferred. These anticipated profits are recognised in the value of in force business. The profits would arise from the performance of the contracts in the ongoing operations of the insurance business after the business transfer. The value of the profits is not considered to be attributable to any rights that the transferor may have in the transferred policies. Accordingly, it is not considered that the value of in force business reflected the transferor's 'interest in rights' under the insurance policies for the purposes of subsection 118-300(1) of the ITAA 1997, nor that the consideration paid for the transfer of in force business could be attributed to the policy rights which are the subject matter of the exemption. The amount paid for the future economic benefits represented by the value of in force business was not consideration for the realisation of the transferor's interest in rights under life insurance policies. It follows that the capital gain made from 'in force business' on disposal of the life insurance business is not disregarded under item 1 in the table in subsection 118-300(1) of the ITAA 1997.", "Date_of_Decision": "15 February 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 118-300(1) subsection 118-300(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax CGT exemptions Insurance industry Life insurance company Life insurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200653", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT exemptions Insurance industry Life insurance company Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2006/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: main residence exemption - testamentary trust - CGT event brought about by individual to whom ownership interest passed", "Issue": "Can a capital gain or capital loss made by a testamentary trust on the transfer of an interest in a dwelling by the trustee to an individual beneficiary be disregarded under item 2(c) in the table in subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Item 2(c) in the table in subsection 118-195(1) of the ITAA 1997 can apply only if a relevant CGT event happens to an individual beneficiary to whom an ownership interest in a dwelling has passed.", "Facts": "A taxpayer acquired a dwelling before 20 September 1985 which was their main residence throughout the period they owned it. The taxpayer died in the 1998-99 income year. Under the taxpayer's will, the dwelling was to be held on trust for five individuals. The individuals were not the deceased's spouse nor were they granted a right to occupy the dwelling under the will. Immediately after the deceased died, one of the beneficiaries (with the consent of the other beneficiaries) started to occupy the dwelling as their main residence. In the 2005-06 income year, the beneficiaries and the trustee agreed to transfer ownership of the dwelling to the beneficiary who had been residing there. In order to achieve this, the trustee transferred a 1/5th interest in the dwelling directly to that beneficiary consistent with their entitlement in the trust. The trustee sold the remaining 4/5th interest to that same beneficiary in accordance with the trustee's power of sale.", "Reasons_for_Decision": "Summary: CGT event A1 in section 104-10 of the ITAA 1997 happened when the trustee of the testamentary trust disposed of the 4/5th interest in the dwelling to the beneficiary under the trustee's power of sale. The capital gain from this CGT event happening is not disregarded under Division 128 of the ITAA 1997 as this interest in the dwelling did not pass to the beneficiary under the deceased's will in the ways set out in section 128-20 of the ITAA 1997. Subsection 128-20(2) of the ITAA 1997 provides that an asset does not pass to a beneficiary in your estate if it is transferred to them under a power of sale. Section 118-195 of the ITAA 1997 sets out the circumstances in which a full main residence exemption is available to an individual beneficiary or a trustee of a deceased estate. To determine if the trustee's capital gain qualifies for the exemption in section 118-195, both the meaning of 'trustee of a deceased estate' and the requirements set out in item 2(c) of the table in subsection 118-195(1) of the ITAA 1997 must be considered. | Detailed Reasoning - Meaning of 'trustee of a deceased estate': The words 'trustee of a deceased estate' as used in section 118-195 of the ITAA 1997 are not limited to a legal personal representative but include the trustee of a testamentary trust. This view is supported by comments made in the Explanatory Memorandum to the Taxation Laws Amendment Bill 1990 which introduced changes to section 160ZZQ of the Income Tax Assessment Act 1936 (ITAA 1936) to provide an exemption for the period a dwelling was occupied by an individual under the terms of the deceased's will. The Explanatory Memorandum provided: The amendments are being made to allow the sole or principal residence exemption to apply to the dwelling of a deceased person for any period since the date of the deceased person's death during which the dwelling had been the sole or principal residence of the spouse of the deceased person or of a person who had the right to occupy the dwelling (life tenant) under the terms of the deceased person's will. At present no account is taken of the time during which a dwelling owned by a trustee of a deceased person's estate was the sole or principal residence of a life tenant. As a life tenancy would only arise after administration of an estate has been completed, the phrase 'trustee of a deceased estate' in section 118-195 of the ITAA 1997 must be interpreted as including the trustee of a testamentary trust to give effect to the intended policy. | Detailed Reasoning - Main residence requirements in the table in subsection 118-195(1) of the ITAA 1997: Item 2 in the table insubsection 118-195(1)of the ITAA 1997 provides that where the deceased owned the interest before 20 September 1985 an exemption is available if the dwelling was from the deceased's death until the ownership interest ends, the main residence of one or more of: Item 1 - the ownership interest ends within two years of the deceased's death, or within a longer period allowed by the Commissioner, or within a longer period allowed by the Commissioner, or Item 2 - the dwelling was from the deceased's death until the ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual. For item 2(b) purposes, 'under the deceased's will' is limited to circumstances where a right to occupy has been expressly granted under the terms of the will to an individual specifically named in the will. The phrase 'under the deceased will' does not extend to a right under a testamentary trust (or any other separate agreements) because the deceased's will is separate and distinct from a testamentary trust. In this case, the issue is the proper construction of item 2(c). In rewriting the former section 160ZZQ of the ITAA 1936, section 118-195 of the ITAA 1997 combined exemptions for beneficiaries and trustees that had previously been dealt with in separate provisions. In particular, section 118-195 of the ITAA 1997 rewrote subsection 160ZZQ(15) and introduced item 2 (c) in the table. No exemption previously existed for a trustee in respect of a period that the dwelling was the sole or principal residence of a beneficiary. It is clear from the wording of the legislation that the changes were only intended to determine the beneficiary's eligibility for the main residence exemption. In this context and having regard to section 1-3 of the ITAA 1997, item 2(c) in the table in subsection 118-195(1) of the ITAA 1997 only applies to a CGT event which happens to an individual to whom the ownership interest 'passed' as a beneficiary, within the meaning of section 128-20 of the ITAA 1997. For example, if the beneficiary brings about the sale of the interest in the dwelling which has passed to them. A trustee would have no need to apply item 2(c) to a capital gain or loss that arises in respect of an ownership interest which passes to a beneficiary because it would be disregarded under Division 128 of the ITAA 1997, irrespective of who occupied the dwelling as their main residence from the date of the deceased's death. In any case,item 2(c) cannot apply to a trust capital gain, where the relevant ownership interest (the 4/5th interest) did not 'pass' to the individual as a beneficiary, but as a purchaser (see 128-20(2) of the ITAA 1997). The transfer of this interest was also not 'brought about' by that individual, but rather by the trustee and the other beneficiaries by agreement. For all these reasons, the capital gain made by the trustee on the sale of the 4/5th interest in the dwelling to the beneficiary is not disregarded.", "Date_of_Decision": "6 February 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 160ZZQ subsection 160ZZQ(15)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT deceased estates CGT events CGT main residence exemption Wills", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill 1990 Draft Taxation Determination TD 2026/D1 Income tax: deceased estates – meaning of 'right to occupy the dwelling under the deceased's will' in item 2(b) of column 3 of the table in subsection 118-195(1) of the Income Tax Assessment Act 1997", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200634", "Unmatched_Content": "Item 2(b) in subsection 118-195(1) of the ITAA 1997 | Clarification of 'under the deceased's will' | Insert reference to Draft Taxation Determination TD 2026/D1 | Update in legislation for Item 1 of subsection 118-195(1) ITAA 1997 | Include material fact; remove irrelevant fact. | Insert the reference to the Explanatory Memorandum | Keywords Capital gains tax CGT deceased estates CGT events CGT main residence exemption Wills"}
{"ATO_ID_Number": "ATO ID 2002/795", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains: Personal use asset - floor tiles", "Issue": "Are unused marble floor tiles 'personal use assets' as defined in subsection 108-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's unused marble floor tiles are personal use assets as defined in subsection 108-20(2) of the ITAA 1997, as they were kept mainly for the taxpayer's personal use and not for any business or profit making purpose.", "Facts": "The taxpayer purchased a large number of marble floor tiles at an auction. The tiles were purchased for use in a property that the taxpayer owned and resided in. The taxpayer lived in the property for a number of years before leaving it vacant. The tiles were stored at the property during that time. None of the tiles were actually used to tile the taxpayer's property. They were eventually sold to a number of different purchasers during the 2000 income year, some 7 years after the taxpayer acquired them.", "Reasons_for_Decision": "Summary: Paragraph 108-20(2)(a) of the ITAA 1997 states that a personal use asset is 'a *CGT asset (except a *collectable) that is used or kept mainly for your (or your *associate's) personal use or enjoyment'. In Favaro v. FC of T (1996) 34 ATR 1; 96 ATC 4975 Branson J held that Italian currency which was converted to Australian currency was not a 'personal use asset' as defined in subsection 160B(1) of the Income Tax Assessment Act 1936 . In making this decision Branson J accepted the Commissioner's argument 'that the expression \"personal use\" is used in s 160B of the ITAA 1936 in contradistinction to use for business or profit making purposes'. The tiles were never 'used' for any purpose. However the definition also has regard to the purpose for which an asset is kept. At the time of purchase the taxpayer intended to use the tiles to tile the floor of a property he owned and resided in. After the taxpayer decided not to use the tiles in the property the tiles were held pending a decision as to their use. The Macquarie Dictionary, 2001 , rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'mainly' as 'chiefly; principally; for the most part'. The tiles were personal use assets when they were acquired and while being held pending a personal decision as to their use. Consequently, the tiles are considered to be personal use assets as they were kept 'mainly' for the taxpayer's personal use and enjoyment. Subsection 108-20(3) of the ITAA 1997 provides that 'a personal use asset does not include land, a stratum unit or a building or structure that is taken to be a separate CGT asset because of Subdivision 108-D.' The fact that the tiles would not be personal use assets had they actually been used for the purpose for which they were acquired because of that provision is not relevant.", "Date_of_Decision": "19 June 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 108-20 paragraph 108-20(2)(a) subsection 108-20(3) Subdivision 108-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Personal use assets CGT cost base", "Case_References": "Favaro v. FC of T (1996) 34 ATR 1 96 ATC 4975", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002795", "Unmatched_Content": "Keywords Capital gains tax Personal use assets CGT cost base"}
{"ATO_ID_Number": "ATO ID 2010/54", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: foreign source capital gains made by a resident trust for CGT purposes", "Issue": "Is the trustee of a trust that is a 'resident trust for CGT purposes', assessable under paragraph 98(3)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to an individual non-resident beneficiary's share of the net income of the trust that is attributable to capital gains arising from the disposal of shares in foreign companies transacted in foreign jurisdictions, if the beneficiary is presently entitled to a share of the income of the trust for that year?", "Decision": "No. The trustee is not assessable under paragraph 98(3)(a) of the ITAA 1936 because the capital gains are not attributable to sources in Australia. As the contracts for the acquisition and disposal of the shares were concluded in foreign jurisdictions, any capital gains from the disposal of the shares are taken to have a source outside Australia for the purpose of Division 6 of Part III of the ITAA 1936.", "Facts": "The taxpayer is the trustee of a resident trust for CGT purposes. The trust is not a fixed trust as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). A beneficiary of the trust is an individual who was a non-resident throughout the income year. The beneficiary was presently entitled to a share of the income of the trust for the income year. The trustee owns shares in foreign companies that are listed on stock exchanges located in foreign jurisdictions. The shares are all traded on foreign stock exchanges. The trustee engages the services of an overseas broker for all trades. Different overseas brokers are used for different trades on particular stock exchanges. No retainer was paid to any overseas broker. The trustee decides which investments to buy and sell. Overseas brokers act only under the orders of the trustee. No overseas broker has a power of attorney to conclude contracts without the approval of the trustee. During the year the trustee made capital gains from the sale of some of the shares. The shares are not taxable Australian property for the purposes of section 855-15 of the ITAA 1997 because they do not pass the non-portfolio interest or the principal asset tests referred to in subsection 855-25(1) of the ITAA 1997. The trustee made no other capital gains or losses and did not have any net capital losses from earlier years to be carried forward.", "Reasons_for_Decision": "Summary: A resident trust, for CGT purposes, must include in the calculation of its net capital gain, capital gains and capital losses from CGT events happening to its worldwide assets. The net capital gain is then included in the net income of the trust calculated in accordance with subsection 95(1) of the ITAA 1936. Broadly, the trustee of a trust may be assessed on a share of the trust's net income where there is a beneficiary who is a non-resident at the end of a year of income and that beneficiary is presently entitled to a share of the income of the trust. If the beneficiary is an individual who has not been a resident of Australia at any time during the income year, the trustee is assessed under paragraph 98(3)(a) of the ITAA 1936 on so much of the share of the net income of the trust as is attributable to sources in Australia - paragraph 98(2A)(d) of the ITAA 1936. The issue in this case is whether capital gains from the disposal of the shares by the trustee are sourced in Australia. The capital gains tax provisions do not contain any provision that expressly determines the source of a capital gain, or net capital gain, for the purposes of Division 6 of Part III of the ITAA 1936. The 'taxable Australian property' tests in section 855-15 of the ITAA 1997 are not relevant for this purpose. In the absence of a statutory source rule for capital gains for the purposes of Division 6 of Part III of the ITAA 1936, reliance is appropriately placed on the common law source rules as they relate to income, notwithstanding that net capital gains are a form of statutory income. In Nathan v. Federal Commissioner of Taxation (1918) 25 CLR 183 at 189-190, Isaacs J said: The Legislature in using the word \"source\" meant, not a legal concept, but something which a practical man would regard as a real source of income. Legal concepts must, or course, enter into the question when we have to consider to whom a given source belongs. But, the ascertainment of the actual source of a given income is a practical, hard matter of fact. The Act on examination so treats it. In Federal Commissioner of Taxation v. Efstathakis (1979) 38 FLR 276 at 280; 79 ATC 4256 at 4259; 9 ATR 867 at 870 Bowen CJ stated 'the answer is not to be found in the cases, but in the weighting of the relative importance of the various factors which the cases have shown to be relevant.' Also, Kennedy J in Cliffs International Inc v. Commissioner of Taxation (Cth) (1985) 80 FLR 12; 85 ATC 4374; (1985) 16 ATR 601 stated 'there is no simple universal rule which can be applied to identify the source of any particular income. In some cases, particular features may be determinative. In others, they may not.' The leading Australian authority on the source of profits from the sale of shares is Australian Machinery and Investments Company Ltd v. Deputy Commissioner of Taxation (WA) (1946) 180 CLR 9; 3 AITR 359; (1946) 8 ATD 81, where it was held that where shares are situated outside Australia and sold outside Australia the profit on sale is derived wholly from a source outside Australia. Starke J said that the relevant source rule is where a business habitually enters into and carries out those contracts with a view to profit. In Lovell & Christmas Ltd v. Commissioner of Taxes (Vict.) [1908] AC 46 at 52-53, Sir Arthur Wilson said: In the present case their Lordships are of opinion that the business which yields the profit is the business of selling goods on commission in London. The commission is the consideration for effecting such sales. The moneys received by the appellants out of which they deduct their commission, and from which, therefore, their profits come, are paid to them under the contract of sale effected in London. The earlier arrangements entered into in New Zealand appear to their Lordships to be transactions the object and effect of which is to bring goods from New Zealand within the net of the business which is to yield a profit. To make those transactions a ground for taxing, in New Zealand, the profits actually realized in London would, in their Lordships opinion, be to extend the area of taxation further than the authorities warrant. [Emphasis added] Although these cases relate to profits that are ordinary income, we consider that similar principles apply in determining the source of a capital gain included in the calculation of a net capital gain. Thus, where shares are sold using an offshore broker, the buying and selling is undertaken and thus sourced, where the contract is concluded. We consider that the decisions by the trustee to sell the shares are incidental to the activities that actually realise the profits. Accordingly, the trustee will not be assessed under paragraph 98(3)(a) of the ITAA 1936 in relation to the non-resident beneficiary's share of the trust net capital gain because the capital gains are sourced outside of Australia.", "Date_of_Decision": "25 February 2010", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 Division 6 of Part III section 95 subsection 98(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2049", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/55", "Subject_References": "Capital gains tax Capital gains Foreign income Foreign source income", "Case_References": "Australian Machinery and Investment Co Ltd v Deputy Commissioner of Taxation (1946) 180 CLR 9 (1946) 3 AITR 359 (1946) 8 ATD 81", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201054", "Unmatched_Content": "Note: This ATO ID contains a view in respect of section 98 of the Income Tax Assessment Act 1936 as it operated prior to amendments introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 (including the introduction of Division 6E of Part III of the Income Tax Assessment Act 1936 ). Except in the case of some early balancing trusts and managed investment trusts, those amendments take effect from the 2010-11 and later income years. | Related Public Rulings (including Determinations) Taxation Ruling IT 2049 | Keywords Capital gains tax Capital gains Foreign income Foreign source income"}
{"ATO_ID_Number": "ATO ID 2009/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: temporary residents - temporary resident acting in a trustee capacity", "Issue": "Does section 768-915 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to disregard a capital gain or capital loss that an individual makes from a capital gains tax (CGT) event in their capacity as trustee of a trust if the individual is a temporary resident just before, or at the time of, the CGT event?", "Decision": "No. A capital gain or capital loss that an individual makes in their capacity as trustee of a trust is not disregarded under section 768-915 of the ITAA 1997 as it is only capital gains or capital losses that an individual makes in their personal capacity that are disregarded under that provision.", "Facts": "A foreign resident individual comes to Australia and becomes a temporary resident within the meaning of that term in subsection 995-1(1) of the ITAA 1997. The individual creates a trust of which the individual is the trustee. The trust is a resident trust for CGT purposes. The trustee acquires some shares in an Australian company that are non-taxable Australian property (non-TAP). The trustee later disposes of the shares and makes a capital gain under CGT event A1. The individual was still a temporary resident at the time of the CGT event.", "Reasons_for_Decision": "Summary: Broadly, section 768-915 of the ITAA 1997 allows a taxpayer to disregard a capital gain or capital loss they make from a CGT event if they are a temporary resident when, or immediately before, the CGT event happens provided the capital gain or capital loss would have been disregarded under Division 855 of the ITAA 1997 if the taxpayer were a foreign resident at that time. A capital gain or capital loss that a taxpayer makes from a CGT event happening in relation to non-TAP is disregarded under subsection 855-10(1) of the ITAA 1997 if the taxpayer is a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens. By referring to both taxpayers who are a foreign resident and taxpayers who are the trustee of a foreign trust, subsection 855-10(1) of the ITAA 1997 provides separately for capital gains or capital losses that a particular taxpayer makes in their personal capacity and capital gains or capital losses that the same taxpayer makes in their capacity as trustee of a trust. In contrast, paragraph 768-915(b) of the ITAA 1997 only makes reference to a taxpayer who is a foreign resident. This suggests strongly that it is only capital gains or capital losses that a temporary resident makes in their personal capacity that can be disregarded under that provision. Had it been intended to also disregard capital gains or capital losses that the temporary resident makes in their capacity as trustee of a trust, then the provision would also have made reference to a taxpayer who is the trustee of a foreign trust. For this reason, it is considered that a capital gain or capital loss that an individual makes in their capacity as trustee of a trust is not disregarded under section 768-915 of the ITAA 1997 as only capital gains or capital losses that an individual makes in their personal capacity can be disregarded under that provision.", "Date_of_Decision": "31 July 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 768-915 paragraph 768-915(b) Division 855 subsection 855-10(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT exemptions Temporary resident", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200988", "Unmatched_Content": "Keywords Capital gains tax CGT exemptions Temporary resident"}
{"ATO_ID_Number": "ATO ID 2008/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign residents and indirect Australian real property interests", "Issue": "Is the non-portfolio interest test under subparagraph 855-25(1)(a)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997) satisfied if a foreign resident holding company and its foreign resident associates cumulatively held a direct participation interest in an Australian resident company exceeding 10% for 12 months, without their individual holdings spanning those 12 months?", "Decision": "Yes. As the sum of the foreign resident holding company's and its foreign resident associates' direct participation interests in the Australian resident company exceeded 10% throughout 12 months, the non-portfolio interest test is satisfied throughout a 12 month period within subparagraph 855-25(1)(a)(ii) of the ITAA 1997.", "Facts": "The taxpayer is a foreign resident holding company with two foreign resident associates. On 1 January 2007, the first associate acquired a direct participation interest of 15% in an Australian resident company. On 1 June 2007, the first associate transferred that interest to the second associate. On 1 December 2007, the second associate transferred 9% of its interest in the Australian resident company to the taxpayer. The second associate retained its remaining 6% interest. On 1 January 2008, the taxpayer and the second associate disposed of their respective 9% and 6% direct participation interests in the Australian resident company. Between 1 January 2007 and 1 January 2008, the Australian resident company's assets consisted entirely of real property situated in Australia.", "Reasons_for_Decision": "Summary: A capital gain or capital loss from a CGT event is disregarded if you are a foreign resident just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not taxable Australian property: subsection 855-10(1) of the ITAA 1997. The taxpayer was a foreign resident just before the disposal of its CGT asset, consisting of its direct participation interest in the Australian resident company. Taxable Australian property includes a CGT asset that is an 'indirect Australian real property interest': item 2 of the table in section 855-15 of the ITAA 1997. Subsection 855-25(1) of the ITAA 1997 provides: A membership interest held by an entity (the holding entity) in another entity (the test entity) at a time is an indirect Australian real property interest at that time if: An interest held by the holding entity in the test entity passes the non-portfolio interest test at a time if the sum of the 'direct participation interests' held by the holding entity and its 'associates' in the test entity at that time is 10% or more: section 960-195 of the ITAA 1997. The taxpayer and its associates cumulatively held direct participation interests in the Australian resident company between 1 January 2007 and 1 January 2008. That 12 month period began no earlier than 24 months before 1 January 2008 and ended no later than that time. The sum of their direct participation interests exceeded 10% throughout that 12 month period. Therefore, as the sum of the taxpayer's and its foreign resident associates' direct participation interests in the Australian resident company exceeded 10% throughout a 12 month period which began no earlier than 24 months before 1 January 2008 and ended no later than that time, the requirements of subparagraph 855-25(1)(a)(ii) of the ITAA 1997 are met. The taxpayer's interest in the Australian resident company also passes the principal asset test in section 855-30 of the ITAA 1997, as 100% of the market value of the Australian resident company's assets was attributable to real property situated in Australia (which is taxable Australian real property of the Australian resident company): subsection 855-30(2) of the ITAA 1997. Therefore the taxpayer's interest in the Australian resident company is an indirect Australian real property interest. As such, the taxpayer's interest is taxable Australian property. Any capital gain or capital loss resulting from the disposal of the taxpayer's interest can not be disregarded under subsection 855-10(1) of the ITAA 1997. The taxpayer will make a capital gain if the capital proceeds from the disposal are more than the cost base of the CGT asset. Alternatively, the taxpayer will make a capital loss if the capital proceeds are less than the asset's reduced cost base: subsection 104-10(4) of the ITAA 1997. Any resulting capital gain or capital loss must be taken into account in working out the taxpayer's net capital gain or net capital loss for the income year in which the disposal happened.", "Date_of_Decision": "6 March 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(4) subsection 855-10(1) section 855-15 subsection 855-25(1) paragraph 855-25(1)(a) subparagraph 855-25(1)(a)(ii) subsection 855-30 subsection 855-30(2) section 960-195", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains CGT taxable Australian assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200846", "Unmatched_Content": "Keywords Capital gains CGT taxable Australian assets"}
{"ATO_ID_Number": "ATO ID 2007/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: exemption for non-resident beneficiary of trust", "Issue": "Does subsection 855-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) disregard a capital gain that a foreign resident beneficiary of an Australian resident non-fixed trust makes because of the operation of subsection 115-215(3) of the ITAA 1997?", "Decision": "No. Subsection 855-10(1) of the ITAA 1997 only disregards a capital gain from a CGT event. A capital gain that a beneficiary of a trust makes because of the operation of subsection 115-215(3) of the ITAA 1997 is not a capital gain from a CGT event.", "Facts": "The trustee of a discretionary trust that is a resident trust for CGT purposes sold a CGT asset that was not taxable Australian property. The trustee made a capital gain from the sale. The contract of sale was entered into in Australia with the result that the capital gain was sourced here. A beneficiary who was a foreign resident throughout the relevant income year is presently entitled to all of the income of the trust. As a result, the beneficiary is assessed under subsection 98A(1) of the Income Tax Assessment Act 1936 (ITAA 1936), as modified by section 102UX of the ITAA 1936, on so much of their interest in the trust's Division 6E net income as is attributable to sources in Australia. The beneficiary is also taken to have made extra capital gains under subsection 115-215(3) of the ITAA 1997 as a result of the trust making a capital gain from the sale of the CGT asset. The beneficiary argues that these extra capital gains are disregarded under subsection 855-10(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: If a trust's net income includes a net capital gain, section 115-215 of the ITAA 1997 treats relevant beneficiaries as having extra capital gains (so that the beneficiary can apply their capital losses and the appropriate discount percentage). Subsection 115-215(4A) of the ITAA 1997 makes it clear that the beneficiary is taken to have made these capital gains even though no CGT event has happened. Section 855-40 of the ITAA 1997 exempts a capital gain that a foreign resident beneficiary in a fixed trust is taken (by section 115-215 of the ITAA 1997) to have made as a result of a CGT event happening to a CGT asset of a trust if, at the time of the event, the asset was not taxable Australian property of the trust. The exemption does not apply if the trust is a non-fixed trust. It has been suggested that although section 855-40 of the ITAA 1997 does not exempt a capital gain which a foreign resident beneficiary of a non-fixed trust is taken (by section 115-215 of the ITAA 1997) to have made as a result of a CGT event happening to non-taxable Australian property of the trust, the gain is nevertheless exempt under subsection 855-10(1) of the ITAA 1997. That subsection provides that a foreign resident can disregard a capital gain or capital loss from a CGT event if the CGT event happens in relation to a CGT asset that is not taxable Australian property. But because the beneficiary's capital gain arises from the operation of section 115-215 of the ITAA 1997, and not from the happening of a CGT event, the requirements of subsection 855-10(1) of the ITAA 1997 are not satisfied. Also, it would be anomalous if subsection 855-10(1) of the ITAA 1997 could apply in this way given the 'fixed trust' requirement in section 855-40 of the ITAA 1997. Accordingly, the capital gain cannot be disregarded.", "Date_of_Decision": "22 March 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 Division 6E subsection 98A(1) section 102UX", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax Extra capital gains Fixed trusts Non fixed trusts Non resident beneficiaries", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200760", "Unmatched_Content": "Keywords Capital gains Capital gains tax Extra capital gains Fixed trusts Non fixed trusts Non resident beneficiaries"}
{"ATO_ID_Number": "ATO ID 2006/71", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of capital gain on sale of a property from the Netherlands", "Issue": "Is the taxpayer, a resident of Australia, assessable on the capital gain on the sale of a property situated in the Netherlands under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer, a resident of Australia, is assessable on the capital gain on the sale of a property situated in the Netherlands under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for taxation purposes. The taxpayer owned a real property in the Netherlands. The taxpayer makes a capital gain on the sale of the property. The taxpayer pays the Netherlands tax on the capital gain.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997) Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 102-5 of the ITAA 1997 which provides that a net capital gain is to be included in assessable income. Hence the capital gain on the sale of the property is assessable under subsection 6-10(4) of the ITAA 1997. However, in determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 10 to the Agreements Act contains the tax treaty and the protocol between Australia and the Kingdom of the Netherlands (the Netherlands Agreement). Schedule 10A to the Agreement Act contains the Second Protocol to the Netherlands Agreement (the Second Protocol). The Netherlands Agreement and the Protocols operate to avoid the double taxation of income received by Australian and Netherlands residents. Article 13 of the Netherlands Agreement deals with alienation of property. Article 13(1) of the Netherlands Agreement provides that income from the alienation of real property situated in the Netherlands may be taxed in the Netherlands. The Netherlands Agreement does not exclude the capital gain from being taxed in Australia and it may therefore be taxable in both countries. Article 23(1) of the Netherlands Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in the Netherlands will be allowed against Australian tax payable on income from Netherlands sources. The capital gain made on the on sale of the property forms part of the taxpayer's assessable income under subsection 6-10(4) of the ITAA 1997. As foreign tax has been paid in relation to this capital gain, a foreign tax credit will be allowed subject to the Australian foreign tax credit rules.", "Date_of_Decision": "27 February 2006", "Year_of_Income": "Year ended 30 June 2002 onwards", "Legislative_References": "Income Tax Assessment Act 1997 section 6-10 subsection 6-10(4) section 10-5 section 102-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Double tax agreements Foreign tax credits Net capital gains Netherlands", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200671", "Unmatched_Content": "This ATO ID has been amended to make it clear that the amount that is assessable is the capital gain calculated according to the capital gains tax provisions of the ITAA 1997. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Capital gains Double tax agreements Foreign tax credits Net capital gains Netherlands"}
{"ATO_ID_Number": "ATO ID 2011/101", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: Division 149 majority underlying interests - no new shareholders", "Issue": "For the purposes of Subdivision 149-B of the Income Tax Assessment Act 1997 (ITAA 1997) in a company where all the shares carry a discretionary right to dividends, are majority underlying interests in a pre-CGT asset of the company had by ultimate owners who had such interests in the asset immediately before 20 September 1985 if after that date there has been no new shareholders in the company?", "Decision": "Yes, majority underlying interests in an asset are had by ultimate owners who had such interests in the asset immediately before 20 September 1985.", "Facts": "Immediately prior to 20 September 1985 the shareholders of Company B are individuals X, Y and Z. There has to date been no new shareholder who has acquired shares in Company B. Company B owns a pre-CGT asset. All issued shares in company B have discretionary rights as to dividends. All shares carry the same rights as to the capital of company B.", "Reasons_for_Decision": "Summary: Subsection 149-30(1) of the ITAA 1997 provides that an asset stops being a pre-CGT asset at the earliest time when majority underlying interests in the asset were not had by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985. An underlying interest in a CGT asset is a beneficial interest that an ultimate owner has whether directly or indirectly in the asset or in any ordinary income that may be derived from the asset (subsection 149-15(2) of the ITAA 1997). An ultimate owner indirectly has a beneficial interest in ordinary income that may be derived from a CGT asset of another entity if he she or it would receive for his her or its own benefit any of a dividend or income if the other entity were to pay that dividend or otherwise distribute that income and the dividend or income were then successively paid or distributed by each entity interposed between the other entity and the ultimate owner (subsection 149-15(5) of the ITAA 1997). Individuals X, Y and Z, collectively comprise those who would receive for their benefit any of a dividend if Company B were to pay the dividend. Subsection 149-30(2) of the ITAA 1997 provides that if the Commissioner is satisfied or thinks it reasonable to assume that at all times on and after 20 September 1985 and before a particular time majority underlying interests in the asset were had by ultimate owners who had majority underlying interests in the asset immediately before that day, subsections 149-30(1) and 149-30(1A) of the ITAA 1997 apply as if that were in fact the case. As there has been no change in the membership of that group, there has been no change in majority underlying interest. Accordingly, the Commissioner finds it reasonable to assume that majority underlying interests have been held at all times by the same ultimate owners who held such interests immediately before 20 September 1985.", "Date_of_Decision": "29 November 2011", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 149-B subsection 149-15(2) subsection 149-15(5) subsection 149-30(1) subsection 149-30(1A) subsection 149-30(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets Pre-CGT assets Majority underlying interests", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2011101", "Unmatched_Content": "Keywords Capital gains tax CGT assets Pre-CGT assets Majority underlying interests"}
{"ATO_ID_Number": "ATO ID 2011/107", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: Division 149 majority underlying interests - new shareholder", "Issue": "For the purposes of Subdivision 149-B of the Income Tax Assessment Act 1997 (ITAA 1997) in a company where all the shares carry a discretionary right to dividends are majority underlying interests in an asset had by ultimate owners who had such interests in the asset immediately before 20 September 1985 if after that date a new share with discretionary rights to dividends is issued to a new shareholder?", "Decision": "No, majority underlying interests in an asset are not had by ultimate owners who had such interests in the asset immediately before 20 September 1985 if after that date new shares with discretionary rights to dividends are issued to a new shareholder.", "Facts": "Immediately prior to 20 September 1985 the shareholders of Company B are Companies E, R and T. Individual X owns all the shares in Company E, individual Y owns all the shares in company R and individual Z owns all the shares in Company T. Company B owns a pre-CGT asset. All issued shares in company B have discretionary rights as to dividends. All issued shares in company B carry the same rights as to the capital of company B. Subsequent to 19 September 1985 the company issues a further share, with discretionary rights to dividends to Company H. The sole shareholder in Company H is T the trustee of a trust (T) for which the entitlement of beneficiaries to income and capital is not immediately ascertainable. The beneficiaries are selected from a nominated class by the trustee. The class of beneficiary includes individual X, their spouse, children and grandchildren.", "Reasons_for_Decision": "Summary: Subsection 149-30(1) of the ITAA 1997 provides that an asset stops being a pre-CGT asset at the earliest time when majority underlying interests in the asset were not had by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985. An underlying interest in a CGT asset is a beneficial interest that an ultimate owner has whether directly or indirectly in the asset or in any ordinary income that may be derived from the asset (subsection 149-15(2) of the ITAA 1997). An ultimate owner indirectly has a beneficial interest in ordinary income that may be derived from a CGT asset of another entity if he she or it would receive for his her or its own benefit any of a dividend or income if the other entity were to pay that dividend or otherwise distribute that income (subsection 149-15(5) of the ITAA 1997). Whilst the receipt of a share of the ordinary income that may be derived from the asset of the company is at the discretion of the company, between them, the shareholders X, Y and Z collectively held all of the beneficial interests in the income just before 20 September 1985. However, the issue of a share to Company H introduced a new shareholder in whose favour a distribution of income could be made. Due to the discretionary right to dividends which all shares carry, Company B can distribute the dividends to one shareholder to the exclusion of the other shareholders. This means that Company B could pay 100% of any dividends to Company H, who in turn could distribute it to T, who in turn could distribute it to any of the individuals who are members of the class of beneficiaries. Accordingly, the possibility exists that the ultimate owners (individuals X, Y and Z) who between them collectively had majority underlying interests in the asset immediately before 20 September 1985 may receive less than 50% of the ordinary income that may be derived by Company B from the asset. Subsection 149-30(2) of the ITAA 1997 provides that if the Commissioner is satisfied or thinks it reasonable to assume that at all times on and after 20 September 1985 and before a particular time majority underlying interests in the asset were had by ultimate owners who had majority underlying interests in the asset immediately before that day, subsections 149-30(1) and 149-30(1A) of the ITAA 1997 apply as if that were in fact the case. Due to the discretionary right to dividends which all shares carry, Company B could pay 100% of any dividend to Company H, which could in turn pay 100% of any dividend to T, which could in turn pay 100% of any benefit to any beneficiary within the class of beneficiaries. Following the change in shareholding, the Commissioner cannot be satisfied, or find it reasonable to assume, that more than 50% of the beneficial interests in the income of Company B and therefore majority underlying interests have been held at all times by the same ultimate owners who held such interests immediately before 20 September 1985.", "Date_of_Decision": "20 November 2011", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 149-B subsection 149-15(2) subsection 149-30(1) subsection 149-30(1A) subsection 149-30(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/101", "Subject_References": "Capital gains tax CGT assets Pre-CGT assets Majority underlying interests", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2011107", "Unmatched_Content": "Keywords Capital gains tax CGT assets Pre-CGT assets Majority underlying interests"}
{"ATO_ID_Number": "ATO ID 2010/98", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: majority underlying interests - ultimate owners", "Issue": "Can a company be an ultimate owner as described in paragraph 149-15(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) at a particular time if its constitution provides that rights to surplus assets on a subsequent winding-up are to be determined under legislation and that legislation does not prevent a distribution to members?", "Decision": "No. A company is not an ultimate owner as described in paragraph 149-15(3)(b) of the ITAA 1997 at a particular time if at that time its constitution provides that rights to surplus assets on a subsequent winding-up are to be determined under legislation that does not prevent a distribution to members.", "Facts": "A company owns capital gains (CGT) assets that it acquired before 20 September 1985. Immediately prior to and after 20 September 1985 the company's constitution provided that in the event it was wound-up, the winding-up would be conducted in accordance with legislation which governed the industry. Under that legislation, a distribution of surplus assets on winding-up is to be made in accordance with the instrument of dissolution or the award of the Minister.", "Reasons_for_Decision": "Summary: A CGT asset of an entity stops being a pre-CGT asset at the earliest time when the 'majority underlying interests' in the asset were not had by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985 (subsection 149-30(1) of the ITAA 1997). Paragraph 149-15(3)(b) of the ITAA 1997 states that a company whose constitution prevents it from making any distribution, whether in money, property or otherwise, to its members, is an 'ultimate owner' for the purposes of Division 149 of the ITAA 1997. The Macquarie Dictionary , 2005, 4th edition, The Macquarie Library Pty Ltd, NSW, defines 'prevent' as 'to keep from occurring; hinder ... to cut off beforehand or debar (a person, etc), as from something'. In its ordinary meaning, an action is prevented where it is not possible that it will happen. Taking into account the ordinary meaning of the word 'prevent' and the context in which it appears, for the purposes of paragraph 149-15(3)(b) of the ITAA 1997 a constituent document of a company will prevent the making of a distribution to members where it is reasonable to conclude that the effect of that document, taken with the surrounding legal context, is that it is not possible for the company to make distributions to members. In this case, the company's constitution refers the distribution of surplus assets on winding-up to the governing legislation. The legislation governing the distribution of surplus assets by the company on winding-up does not expressly provide that the surplus is to be divided amongst members of the company. This, however is not the test required by paragraph 149-15(3)(b) of the ITAA 1997. The terms of the legislation and the constituent document do not prevent a distribution of surplus assets to members on winding-up, as it is possible for such distributions to be made.", "Date_of_Decision": "25 November 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 paragraph 149-15(3)(b) subsection 149-30(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets Majority underlying interests Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201098", "Unmatched_Content": "Keywords Capital gains tax CGT assets Majority underlying interests Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2010/99", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: majority underlying interests - transfer of pre-CGT asset", "Issue": "For the purposes of applying section 149-30 of the Income Tax Assessment Act 1997 (ITAA 1997), can a change in the direct ownership of a CGT asset on or after 20 September 1985 result in a change to the ultimate owners who had majority underlying interests in the asset immediately before that date?", "Decision": "No. The ultimate owners of an asset immediately before 20 September 1985 are those who at that time held beneficial interests (directly or indirectly):", "Facts": "Immediately before 20 September 1985, asset P is directly owned by A Co, a wholly owned subsidiary of Hold Co. In March 2000, A Co transfers the asset to B Co, another wholly owned subsidiary of Hold Co. Subdivision 126-B of the ITAA 1997 roll-over is claimed for the transfer with the effect that the asset is taken to have been acquired by B Co before 20 September 1985. At all times the shares in Hold Co have equal rights to income and capital, and are owned by two individuals X (as to 40%) and Y (as to 60%). B Co was incorporated in 1980. Hold Co acquired all of the shares in B Co from the original shareholders of B Co [X (99%) and K (1%)] in 1997. At all relevant times B Co is not an entity described in subsection 149-50(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Division 149 of the ITAA 1997 determines when a pre-CGT asset will be taken to be acquired after 19 September 1985. In accordance with section 149-30 of the ITAA 1997, an asset will stop being a pre-CGT asset at the earliest time when majority underlying interests in the asset are not held by ultimate owners who held such interests just before 20 September 1985. The terms 'ultimate owner' and 'majority underlying interest' are central to the operation of Division 149 of the ITAA 1997. Subsections 149-15(4) and 149-15(5) of the ITAA 1997 establish when an ultimate owner indirectly has a beneficial interest in the pre-CGT asset of another entity or ordinary income that may be derived from that asset. To have a beneficial interest, the ultimate owner must be entitled to receive for their own benefit any distribution of capital or income if: It is possible for the ultimate owners to alter the way in which they hold their pre-20 September 1985 interest in an asset (or in the income derived from it) without affecting the pre-CGT status of that asset. For example, a new entity could be interposed between the entity that directly owns the asset and the ultimate owners. Or a pre-CGT asset could be transferred to another entity who is taken to have acquired the asset just before 20 September 1985 under a CGT same asset roll-over. In the latter case, it has been suggested that, for subsequent testing of majority underlying interests, the ultimate owners who indirectly held beneficial interests just before 20 September 1985 are those who would have held such interests if the asset's new owner had made a distribution of income and capital at that time. On the current facts, this approach would mean that, for testing at or after the time when the transfer happens, the pre-20 September 1985 ultimate owners would be X (99%) and K (1%). There would be a failure of the majority underlying interests test. We do not agree with this approach. In the absence of express statutory modification (see for example subsection 149-30(3) of the ITAA 1997), the identification of the ultimate owners who held beneficial interests in the asset, and in any income derived from its use, just before 20 September 1985 is not affected by any changes which happen following that time. Subsection 149-30(1) of the ITAA 1997 refers to the majority underlying interests in the asset immediately before 20 September 1985. These are worked out by applying the definitions in section 149-15 of the ITAA 1997 to the facts in existence at that time. On the facts of this case, majority underlying interests in the asset continue to be maintained. This is because the ultimate owners (X and Y) who held more than 50% of the beneficial interests in the asset, and in any income derived from it, just before 20 September 1985 continue to hold more than 50% of such interests just after the transfer time. As noted above, changes in ownership in B Co that happened before it became the owner of asset P are not relevant.", "Date_of_Decision": "25 November 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 149-C subsection 149-15(1) subsection 149-15(2) subsection 149-15(3) subsection 149-15(4) subsection 149-15(5) subsection 149-30 paragraph 149-50(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets Majority underlying interests Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201099", "Unmatched_Content": "Keywords Capital gains tax CGT assets Majority underlying interests Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2010/228", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: majority underlying interests - partnership to company roll-over", "Issue": "In applying subsection 149-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997), who are the ultimate owners who had an underlying interest, as at 19 September 1985, in the separate asset that the company is taken to have acquired before 20 September 1985 under Subdivision 122-B of the ITAA 1997?", "Decision": "The ultimate owners are those owners who trace their pre-CGT partners' interests directly or indirectly in the original asset that the separate asset mentioned in paragraph 122-200(4)(b) of the ITAA 1997 represents.", "Facts": "As at 19 September 1985 the partners of a partnership were natural persons X (75%), Y (20%) and Z (5%). In 1995 X leaves and is replaced by natural person G. In November 1998 the 3 partners (G, Y and Z) dispose of their interests in the CGT assets of the business carried on by the partnership to a company B Co in exchange for shares. The requirements for Subdivision 122-B roll-over are met and all of the partners choose to obtain roll-over under section 122-125 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Division 149 of the ITAA 1997 is about when an asset stops being a pre-CGT asset. Subsection 149-30(1) of the ITAA 1997 provides that an asset of an entity that is not a public entity stops being a pre-CGT asset at the earliest time when majority underlying interests in the asset were not held by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985 (hereafter ' the base time'). The entity is taken, for the purposes of the capital gains tax rules in Part 3-1 of the ITAA 1997, to have acquired the asset for a market value consideration at the time when it stops being a pre-CGT asset. One case where an asset of a non-public entity is a pre-CGT asset, to which the tests in subsection 149-30(1) of the ITAA 1997 will need to be applied, is where the asset is taken to have been acquired before 20 September 1985 by that entity under the terms of a CGT roll-over. The facts of this case involve the operation of the Subdivision 122-B partnership to company roll-over where only some of the partners had acquired their interests in a partnership asset pre-CGT (called 'the original asset') that is transferred to the company. The consequences for the company are described in subsection 122-200(4) of the ITAA 1997. As relevant to the application of Division 149 of the ITAA 1997, the company is taken to have acquired before 20 September 1985 a separate asset 'representing the extent to which the partners' interests in the original asset were acquired by the partners before that day': paragraph 122-200(4)(b) of the ITAA 1997. In order to apply the tests in subsection 149-30(1) of the ITAA 1997 to this asset, it is necessary to identify the ultimate owners who held underlying interests in this 'separate asset' (see immediately preceding paragraph) at the base time, and the proportions in which they were held. But as the 'separate asset' didn't exist until the roll-over time, it is necessary to apply the ownership tests to this asset's precursor (and its proxy for these purposes), being the aggregation of partners' pre-CGT interests in the original asset. This is consistent with the scheme of the Subdivision 122-B roll-over. Therefore the ultimate owners who hold underlying interests in the paragraph 122-200(4)(b) of the ITAA 1997 asset at the base time are those which can be traced through the pre-CGT interests that it represents. On the facts of this case, at the base time the ultimate owners of the asset described in paragraph 122-200(4)(b) of the ITAA 1997 are Y (who has an 80% underlying interest) and Z (who holds 20%). The asset stops being a pre-CGT asset, and it is taken to be acquired by the company for a consideration equal to market value, immediately after it is transferred to B Co, as at that time Y and Z no longer hold majority underlying interests.", "Date_of_Decision": "10 December 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment 1997 Subdivision 122-B paragraph 122-200(4)(b) Division 149 subsection 149-30(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT events Majority underlying interests Pre-CGT assets CGT same asset roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010228", "Unmatched_Content": "Keywords CGT events Majority underlying interests Pre-CGT assets CGT same asset roll-over"}
{"ATO_ID_Number": "ATO ID 2006/172", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: pre-CGT asset and majority underlying interest - whether a non-profit company can be an ultimate owner if its constitution permits distributions to members in limited circumstances", "Issue": "Can a non-profit company be an ultimate owner under paragraph 149-15(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) at a particular time if its constitution provides for distributions, in limited circumstances, to an entity with similar objects which is a member of the non-profit company?", "Decision": "No. Under the terms of the non-profit company's constitution, the entity receives the distributions in its capacity as a member of the non-profit company.", "Facts": "At all relevant times an entity (Entity) is a member of a non-profit company (Company) which owns assets that it acquired before 20 September 1985. Under Company's constitution no income or property of Company shall be paid or distributed to members except as expressly provided. One clause in the constitution of Company (first clause) states that should Company have property remaining after a winding up and payment of all debts and liabilities, that property shall be distributed to Entity provided Entity has similar objects to Company. However a second clause in Company's constitution (second clause) provides that this first clause does not apply if Entity ceases to be a member of Company. A third clause in the constitution of Company (third clause) states that any property remaining after a winding up of Company and payment of its debts and liabilities will be paid to members if Entity ceases to be a member of Company for any reason.", "Reasons_for_Decision": "Summary: Under subsection 149-30(1) of the ITAA 1997 a CGT asset of an entity stops being a pre-CGT asset at the earliest time when the 'majority underlying interests' in the asset were not held by ultimate owners who held majority underlying interests in the asset immediately before 20 September 1985. Paragraph 149-15(3)(b) of the ITAA 1997 states that a company whose constitution prevents it from making any distribution, whether in money, property or otherwise, to its members, is an 'ultimate owner' for the purposes of Division 149 of the ITAA 1997. The terms of Company's constitution, when taken as a whole, provide that Entity can receive distributions of property from Company in its capacity as a member of Company after a winding up. While Entity will only receive distributions if it has similar objects to Company, this entitlement is conditional upon Entity continuing to be a member of Company. Further, the third clause in the constitution of Company permits distributions to members other than Entity in limited circumstances. Accordingly Company is not an 'ultimate owner' within paragraph 149-15(3)(b) of the ITAA 1997.", "Date_of_Decision": "30 June 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 paragraph 149-15(3)(b) subsection 149-30(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/294 | ATO ID 2005/293", "Subject_References": "Friendly societies Majority underlying interests Pre-CGT assets Ultimate owners", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006172", "Unmatched_Content": "Keywords Friendly societies Majority underlying interests Pre-CGT assets Ultimate owners"}
{"ATO_ID_Number": "ATO ID 2006/219", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: pre-CGT asset and majority underlying interest - whether an ultimate owner can have an underlying interest in a CGT asset where there is an interposed superannuation fund", "Issue": "Can an individual have a beneficial interest for the purposes of subsections 149-15(4) and 149-15(5) of the Income Tax Assessment Act 1997 (ITAA 1997) in a capital gains tax (CGT) asset where the entity that owns the CGT asset is itself owned by a superannuation fund of which the individual is a member?", "Decision": "Yes. Those subsections hypothesise distributions of capital or dividends that override the common law position that a member of a superannuation fund has no interest in the fund's assets.", "Facts": "An individual at all relevant times has been the only member of superannuation fund. The superannuation fund at all relevant times owns all the units in unit trust. The unit trust owns an asset acquired before 20 September 1985-a pre-CGT asset.", "Reasons_for_Decision": "Summary: Under subsection 149-30(1) of the ITAA 1997 a CGT asset of an entity stops being a pre-CGT asset at the earliest time when the 'majority underlying interests' in the asset were not held by ultimate owners who held majority underlying interests in the asset immediately before 20 September 1985. Both unit trust and superannuation fund constitute an 'entity' by virtue of paragraphs 960-100(1)(f) and 960-100(1)(g) respectively of the ITAA 1997. The individual is an 'ultimate owner' in accordance with paragraph 149-15(3)(a) of the ITAA 1997. A superannuation fund cannot be an 'ultimate owner' under subsection 149-15(3) of the ITAA 1997. Subsection 149-15(1) of the ITAA 1997 specifies that the 'majority underlying interests' in a CGT asset consist of: At common law, the individual has no interest in the assets of the superannuation fund including its units in the unit trust. However, the operation of subsections 149-15(4) and 149-15(5) of the ITAA 1997 which determine whether an ultimate owner has an indirect interest in a CGT asset or the ordinary income that may be derived from the asset, override that common law position. Both subsections test for the existence of indirect beneficial interests by respectively hypothesising that an individual could receive for his or her own benefit any capital or dividends distributed by a superannuation fund of which he or she is a member. Subsection 149-15(4) of the ITAA 1997 provides that: An *ultimate owner indirectly has a beneficial interest in a *CGT asset of another entity (that is not an ultimate owner) if he, she or it would receive for his, her or its own benefit any of the capital of the other entity if: (a) the other entity were to distribute any of its capital; and (b) the capital were then successively distributed by each entity interposed between the other entity and the ultimate owner. * denotes a term defined in section 995-1 of the ITAA 1997. Similarly subsection 149-15(5) of the ITAA 1997 provides that: An *ultimate owner indirectly has a beneficial interest in *ordinary income that may be *derived from a *CGT asset of another entity (that is not an *ultimate owner) if he, she or it would receive for his, her or its own benefit any of a *dividend or income if: (a) the other entity were to pay that dividend, or otherwise distribute that income; and (b) the dividend or income were then successively paid or distributed by each entity interposed between the other entity and the ultimate owner. As the only member of the superannuation fund, it is reasonable to conclude that the individual would receive for 'his or her own benefit' any capital or dividends that the entity superannuation fund would hypothetically pay. Accordingly the individual at all relevant times has had 100% of the beneficial interests, for the purposes of subsections 149-15(4) and 149-15(5) of the ITAA 1997, in the unit trust's pre-CGT asset and any ordinary income that may be derived from the asset. Those beneficial interests constitute 'underlying interests' in the pre-CGT asset under subsection 149-15(2) of the ITAA 1997. Subsection 149-15(2) of the ITAA 1997 provides as follows: An underlying interest in a CGT asset is a beneficial interest that an ultimate owner has (whether directly or indirectly) in the asset or in any ordinary income that may be *derived from the asset.' As the sole owner of all underlying interests in unit trust's pre-CGT asset, there has been no change in the majority underlying interests in the pre-CGT asset for the purposes of subsection 149-15(1) of the ITAA 1997.", "Date_of_Decision": "31 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 subsection 149-15(1) subsection 149-15(2) paragraph 149-15(3)(a) subsection 149-15(4) subsection 149-15(5) subsection 149-30(1) paragraph 960-100(1)(f) paragraph 960-100(1)(g)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets Majority underlying interests Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006219", "Unmatched_Content": "Keywords Capital gains tax CGT assets Majority underlying interests Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2005/293", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: majority underlying interests- friendly society", "Issue": "Can a friendly society be an ultimate owner described in paragraph 149-15(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) at a particular time if, at that time, members of its benefit funds are entitled to receive benefits pursuant to their policies, which may represent surpluses transferred from the management fund in which capital gains tax (CGT) assets acquired before 20 September 1985 are held?", "Decision": "Yes. The friendly society is able to meet the requirements of an ultimate owner at a time (in this case the end of the test day) provided its constitution prevented it from making any other forms of distributions to members at that time.", "Facts": "A friendly society owns CGT assets that it acquired before 20 September 1985. The friendly society maintains various benefit funds and a management fund. At the end of a test day prescribed under subsection 149-55(2) of the ITAA 1997, the pre-CGT assets of the friendly society were held in the management fund. The rules of the management fund and the benefit funds formed part of the friendly society's constitution at the end of the test day. Each benefit fund had rules dealing with membership of the fund, contributions to the fund and benefits payable from the fund. The rules for the management fund required that the fund only be appropriated towards the disbursement of expenses and promoting the objects of the friendly society, including the transfer of funds to any of the benefit funds. The members of the friendly society at the end of the test day were defined in its constitution to include members of benefit funds.", "Reasons_for_Decision": "Summary: Division 149 of the ITAA 1997 determines when a pre-CGT asset will be taken to be acquired after 19 September 1985. For a public entity, this will occur unless the Commissioner is satisfied, or thinks it reasonable to assume, that at the end of a test day, majority underlying interests in the asset were had by ultimate owners who also had majority underlying interests in the asset at the end of the starting day (sections 149-50, 149-60 and 149-70 of the ITAA 1997). The term 'ultimate owner' is central to the operation of Division 149 of the ITAA 1997. Ultimate owner is defined in subsection 149-15(3) of the ITAA 1997 to include companies whose constitutions prevent them from making any form of distribution to their members. In determining whether a friendly society can satisfy the requirements of an ultimate owner for the purposes of paragraph 149-15(3)(b) of the ITAA 1997, it is necessary to consider the benefits which it provides to members, having regard to its objects and any relevant terms and conditions of membership. Where a friendly society provides benefits, services and facilities to its members pursuant to the members' policies, such benefits would not be considered distributions of the kind with which paragraph 149-15(3)(b) of the ITAA 1997 is concerned. These benefits are provided in accordance with the terms and conditions of membership agreed to between the company and its members. It is where a member can receive some additional benefit to that which they are entitled under their policy which may cause the company to fail the requirements of an ultimate owner. In this case, the friendly society's constitution contained various rules governing the operation of the management fund and each of the benefit funds. The benefit fund rules allowed payments to be made from the funds to members of the fund. As the payments represent benefit amounts to which members are entitled to receive under their policy with the friendly society, these payments are not considered to be distributions of the kind with which paragraph 149-15(3)(b) of the ITAA 1997 is concerned. This is not affected by the friendly society's ability to transfer actuarially determined surpluses of the management fund to any of the benefit funds. In accordance with APRA Prudential Standards No 2, a friendly society may transfer amounts from a management fund to an approved benefit fund only after obtaining prior written approval from APRA. Consistent with industry practice, such transfers would only take place to provide a capital injection into the fund to ensure its compliance with regulatory capital and solvency requirements. Any surplus transferred from the management fund would only be used to ensure the payment of benefits accrued to members of that fund in accordance with their policy if a benefit fund of the friendly society were to cease operating. The friendly society therefore can meet the requirements of an ultimate owner for Division 149 of the ITAA 1997 purposes, provided its constitution prevented it from making any other distributions to its members at the end of the test day.", "Date_of_Decision": "27 September 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 subsection 149-15(3) paragraph 149-15(3)(b) section 149-50 subsection 149-55(2) section 149-60 section 149-70", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/294", "Subject_References": "Capital gains tax CGT assets Majority underlying interests Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005293", "Unmatched_Content": "Keywords Capital gains tax CGT assets Majority underlying interests Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2005/294", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: majority underlying interests - friendly society", "Issue": "Can a friendly society be an ultimate owner under paragraph 149-15(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) at a particular time if, at that time, its constitution only allows distributions to be made to members who hold certain classes of shares but there are no shares issued in the entity?", "Decision": "Yes. The friendly society is an ultimate owner at a time (in this case the end of the test day) because at that time:", "Facts": "A friendly society owns capital gains tax (CGT) assets that it acquired before 20 September 1985. At the end of a test day prescribed by subsection 149-55(2) of the ITAA 1997, the friendly society's constitution allowed the Board of Directors to declare, at their discretion, the payment of dividends to members holding certain classes of shares. There were no issued shares in the friendly society at the end of the test day. The friendly society was prevented by its constitution from making any other distributions to its members at the end of the test day, whether in money, property or otherwise.", "Reasons_for_Decision": "Summary: Division 149 of the ITAA 1997 determines when a pre-CGT asset will be taken to be acquired after 19 September 1985. For a public entity, this will occur unless the Commissioner is satisfied, or thinks it reasonable to assume, that at the end of a test day, majority underlying interests in the asset were had by ultimate owners who also had majority underlying interests in the asset at the end of the starting day: sections 149-50, 149-60 and 149-70 of the ITAA 1997. The term 'ultimate owner' is central to the operation of Division 149 of the ITAA 1997. Ultimate owner is defined in subsection 149-15(3) of the ITAA 1997 and includes companies whose constitutions prevent them from making any form of distribution to their members. Determining whether a company meets the definition of ultimate owner at a particular time therefore requires a careful examination of its constitution. In particular, it is necessary to consider the entitlements of members to share in any income or capital of the company if a distribution were made at that time. At the end of the test day, the friendly society's constitution provided the Board of Directors with a discretion to declare dividends from profits to be paid to members holding certain classes of shares. On a strict reading of paragraph 149-15(3)(b) of the ITAA 1997, the friendly society's constitution does not prevent it from making distributions to its members. The effect of taking this view would be that the friendly society would need to identify ultimate owners who held beneficial interests in its income and capital at the end of the test day. However, there would be no ultimate owners who held such interests because there were no issued shares to which dividend entitlements attached and the friendly society was prevented by its constitution from making any other form of distribution to its members. To read the provisions in this way would therefore deny Division 149 of the ITAA 1997 its intended operation. As the relevant classes of shares were unissued at the end of the test day, it is considered that the friendly society's constitution did have the effect of preventing it from making any distributions to members at that time. This is because the Board of Directors had no authority to make distributions outside of the circumstances provided by the constitution. Accordingly, the friendly society can meet the requirements of an ultimate owner in paragraph 149-15(3)(b) of the ITAA 1997 at the end of the test day.", "Date_of_Decision": "27 September 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 subsection 149-15(3) paragraph 149-15(3)(b) section 149-50 subsection 149-55(2) section 149-60 section 149-70", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/293", "Subject_References": "Capital gains tax CGT assets Majority underlying interests Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005294", "Unmatched_Content": "Keywords Capital gains tax CGT assets Majority underlying interests Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2004/978", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: status of pre-CGT assets - incorporated association becoming a company", "Issue": "Do CGT assets held by an association incorporated under the ACT Associations Incorporation Act 1991 , whose constitution has at all times prevented it from making any form of distribution to its members, stop being pre-CGT assets under subsection 149-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997) when the association changes registration to a company under the Corporations Act 2001 (Corporations Act) and has similar restrictions in its constitution?", "Decision": "No. To the extent that the incorporated association has CGT assets that were acquired before 20 September 1985, those assets will not stop being pre-CGT assets under subsection 149-30(1) of the ITAA 1997 upon registration as a company under the Corporations Act.", "Facts": "The taxpayer is an association, incorporated under the ACT Associations Incorporation Act, whose constitution has at all times prevented it from making any distribution whether in money, property or otherwise, to its members. The association is to convert to a company under the Corporations Act. Upon conversion, its constitution will prevent it from making any distribution whether in money, property or otherwise, to its members. The association is not an exempt entity for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997.", "Reasons_for_Decision": "Summary: Subdivision 149-B of the ITAA 1997 provides that an asset of a non-public entity stops being a pre-CGT asset at the earliest time when majority underlying interests in the asset were not had by the same ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985 (subsection 149-30(1) of the ITAA 1997). Subsection 149-15(1) of the ITAA 1997 defines 'majority underlying interests' in a CGT asset to consist of more than 50% of the beneficial interests held, directly or indirectly, in the asset and any income that may be derived from it. 'Ultimate owner' is defined in subsection 149-15(3) of the ITAA 1997 to include a company whose constitution prevents it from making any distribution, whether in money, property or otherwise, to its members. The definition of 'company' in section 995-1 of the ITAA 1997 would include an incorporated association. Because the incorporated association's constitution has, at all times, prevented it from making any form of distribution to its members, it is considered to be an 'ultimate owner'. Consequently, the pre-CGT status of any CGT assets acquired by the association before 20 September 1985 will be maintained immediately before conversion as the same ultimate owner held majority underlying interests in the assets at all times. On conversion, the company's constitution will prevent it from making any distribution to its members so it will also be the ultimate owner of its assets. As incorporation under the Corporations Act does not create a new legal entity (under paragraph 601BM(1)(a) of Part 5B.1 of that Act), there will be no change in majority underlying interests held in the pre-CGT assets because they will be held by the same ultimate owner who held those interests immediately before 20 September 1985. Consequently, CGT assets acquired before 20 September 1985 will retain their pre-CGT status on conversion. Section 160ZZS of the ITAA 1936 (rewritten as Subdivision 149-B of the ITAA 1997) applies to pre-CGT assets before the start of the 1998-99 income year and, for the purposes of this interpretative decision, provides the same outcome.", "Date_of_Decision": "24 November 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 160ZZS", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/257", "Subject_References": "Acquisition of CGT assets Capital gains tax CGT assets Majority underlying interests Non profit companies Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004978", "Unmatched_Content": "Keywords Acquisition of CGT assets Capital gains tax CGT assets Majority underlying interests Non profit companies Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2003/777", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: majority underlying ownership and deceased estate - life interest in shares", "Issue": "Has there been a change in the majority underlying ownership of a non-public entity (company) under Subdivision 149-B of the Income Tax Assessment Act 1997 (ITAA 1997) when the beneficiary acquires a life interest in shares in the entity under the will?", "Decision": "No. Taking into account the terms of the will, there has not been a change under Subdivision 149-B of the ITAA 1997 in the majority underlying ownership of the non-public entity when a beneficiary acquires a life interest in shares in the entity under a will.", "Facts": "The deceased estate holds almost all of the equity in a non-public entity as a result of the death of the majority equity owner. The equity was a pre-CGT asset of the deceased. The non-public entity owns assets that it acquired before 20 September 1985. A testamentary trust has been established in accordance with the will, for the benefit of a member of the family of the deceased. Under the trust, the family member has a life interest in the assets of the estate, after which they will pass to a remainder beneficiary, who is also a family member. The will of the deceased enables the trustee to sell, call in and convert into money the whole of the trust estate.", "Reasons_for_Decision": "Summary: The provisions of Subdivision 149-B of the ITAA 1997 determine when a CGT asset of an entity stops being a pre-CGT asset (unless the entity is a public entity listed in section 149-50 of the ITAA 1997). Subsections 149-30(3) and 149-30(4) of the ITAA 1997 provide that, if an ultimate owner (new owner) has acquired an interest in an asset because it was transferred to the new owner by way of a marriage breakdown rollover or because of the death of a person (former owner), the new owner is treated as having held the underlying interests of the former owner for the period the former owner held them. On the terms of the will concerned, it can be argued that either: Because of the terms of subsections 149-30(3) and 149-30(4) of the ITAA 1997 it is not necessary to resolve this point. The person who has the beneficial interest for the term of the life interest, whether it is the person holding the life interest or the person who will take the assets on that person's death, is treated under subsection 149-30(4) of the ITAA 1997 as if they held those interests at all times when they were held by the deceased. Taking into account the terms of the will, there has not been a change under Subdivision 149-B of the ITAA 1997 in the majority underlying ownership of the non-public entity when the beneficiary acquired a life interest in shares in the entity under the will. Consequently, the pre-CGT assets of the non-public entity retain their status.", "Date_of_Decision": "27 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 149-B section 149-30 subsection 149-30(3) subsection 149-30(4) section 149-50", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/778 | ATO ID 2003/779", "Subject_References": "Capital gains tax CGT assets CGT deceased estates Pre-CGT assets Underlying ownership & interests", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003777", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT deceased estates Pre-CGT assets Underlying ownership & interests"}
{"ATO_ID_Number": "ATO ID 2003/778", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: majority underlying ownership and deceased estate - discretionary trust - beneficiary a 'new owner'", "Issue": "Can the beneficiary of the (discretionary) testamentary trust be said to have a beneficial interest in the assets of the trust and be a 'new owner' for purposes of the deemed continuity of underlying interests provisions in subsections 149-30(3) and 149-30(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. On the basis of the terms of the particular trust deed, the beneficiary of the (discretionary) testamentary trust can be said to have a beneficial interest in the assets of the trust and be a 'new owner' for the purposes of section 149-30 of the ITAA 1997.", "Facts": "A deceased estate holds almost all of the equity in a non-public entity as a result of the death of the majority equity owner. The equity was a pre-CGT asset of the deceased. A discretionary testamentary trust has been established in accordance with the will. The beneficiaries can only receive amounts from the estate if the trustee exercises a discretion in their favour. The non-public entity owns assets that it acquired before 20 September 1985.", "Reasons_for_Decision": "Summary: The provisions of Subdivision 149-B of the ITAA 1997 determine when a CGT asset of an entity stops being a pre-CGT asset (unless the entity is a public entity listed in section 149-50 of the ITAA 1997). This happens at the earliest time when the 'majority underlying interests' in the asset were not held by 'ultimate owners' who held majority underlying interests in the asset immediately before 20 September 1985. Subsections 149-30(3) and 149-30(4) of the ITAA 1997 provide that, if an ultimate owner (new owner) has acquired an interest in an asset because it was transferred to the new owner by way of a marriage breakdown rollover or because of the death of a person (former owner), the 'new owner' is treated as having held the underlying interest of the 'former owner' for the period the 'former owner' held them. Can the beneficiaries of a testamentary trust, given that they can only receive amounts from the estate if the trustee exercises a discretion in their favour, be a 'new owner' for purposes of subsections 149-30(3) and 149-30(4) of the ITAA 1997? Under ordinary legal concepts, where there is a discretionary trust deed, no beneficiary is entitled to income or capital of the trust until the trustee exercises its discretion to distribute income or to make an appointment of capital. Because the beneficiary of a discretionary trust does not hold an interest in any asset of the trust or in the ordinary income derived from the asset until the trustee's discretion is exercised, it would not be possible for a discretionary trust to satisfy the continuing majority underlying interests test set out in subsection 149-30(1) of the ITAA 1997. Taxation Ruling IT 2340 reflects on an approach of looking through interposed entities to determine which natural persons hold the beneficial interests for the purposes of section 160ZZS of the Income Tax Assessment Act 1936 (ITAA 1936), which preceded Division 149 of the ITAA 1997, is reflected in Taxation Ruling IT 2340. Among other issues, IT 2340 deals with questions regarding the application of section 160ZZS of the ITAA 1936 'to assets held by trustees of family trusts where the trustees are vested with discretionary powers as to distributions from the trusts.' Taxation Ruling IT 2340 states at paragraph 5 that it will be relevant to take into account the way in which the discretionary powers of the trustee are exercised when considering the question whether majority underlying interests have been maintained in the assets of the trust. IT 2340 continues: 6. Where a trustee continues to administer a trust for the benefit of members of a particular family, for example, it will not bring section 160ZZS into application merely because distributions to family members who are beneficiaries are made in such amounts and to such of those beneficiaries as the trustee determines in the exercise of his discretion. 7. In such a case the Commissioner would, in terms of sub-section 160ZZS(1), find it reasonable to assume that for all practical purposes the majority underlying interests in the trust assets have not changed.... Taxation Ruling IT 2340 correctly reflects the position that section 160ZZS of the ITAA 1936, by its terms, necessarily supplants normal legal concepts of interests in assets. For the purposes of section 160ZZS, a beneficiary of a discretionary trust is treated as having a beneficial interest in the trust's assets. Likewise, a shareholder is treated for the purposes of section 160ZZS as having a beneficial interest in the company's assets. The discretionary powers of the trustee of a discretionary (family) trust and those of the trustee of a discretionary testamentary trust are not materially different and it is reasonable to adopt the same approach to both when considering the question of majority underlying interests for purposes of Division 149 of the ITAA 1997. Applying the 'look through' approach to the present case and considering the terms of the testamentary trust, as well as the way in which the trustee has exercised his powers, the beneficiary of the trust can be said to have a beneficial interest in the assets of the trust. The beneficiary is therefore a 'new owner' for purposes of subsections 149-30(3) and 149-30(4) of the ITAA 1997 and the pre-CGT assets of the non-public entity retain their status.", "Date_of_Decision": "27 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 160ZZS (rewritten as section 149-30 and 149-35 of the ITAA 1997)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2340", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/777 | ATO ID 2003/779", "Subject_References": "Capital gains tax CGT assets CGT deceased estates Executors Legal personal representatives Ownership, interests, control & rights Pre-CGT assets Underlying ownership & interests", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003778", "Unmatched_Content": "Section 160ZZS of the ITAA 1936 rewritten as section 149-30 and 149-35 of the ITAA 1997 | Related Public Rulings (including Determinations) Taxation Ruling IT 2340 | Keywords Capital gains tax CGT assets CGT deceased estates Executors Legal personal representatives Ownership, interests, control & rights Pre-CGT assets Underlying ownership & interests"}
{"ATO_ID_Number": "ATO ID 2003/779", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: majority underlying ownership and deceased estate - continuity of interest during the period of administration", "Issue": "Can the beneficiary of the deceased estate be treated as having a beneficial interest in the assets of the trust before the estate has been fully administered, in order to enable the deemed continuity of underlying interests provisions in subsections 149-30(3) and 149-30(4) of the Income Tax Assessment Act 1997 (ITAA 1997) to have effect?", "Decision": "Yes. Unless the beneficiary of the deceased estate is treated as if they had a beneficial interest in the assets of the trust before the estate has been fully administered, subsections 149-30(3) and 149-30(4) of the ITAA 1997 can never achieve their purpose.", "Facts": "A deceased estate holds almost all of the equity in a non-public entity as a result of the death of the majority equity owner. The equity was a pre-CGT asset of the deceased. A testamentary trust has been established in accordance with the will, for the benefit of a member of the family of the deceased. Under the trust, the family member has a life interest in the assets of the estate, after which they will pass to a remainder beneficiary, who is also a family member. The non-public entity owns assets that it acquired before 20 September 1985.", "Reasons_for_Decision": "Summary: The provisions of Subdivision 149-B of the ITAA 1997 determine when a CGT asset of an entity stops being a pre-CGT asset (unless the entity is a public entity listed in section 149-50 of the ITAA 1997). Under subsection 149-30(1) of the ITAA 1997 the asset stops being a pre-CGT asset at the earliest time when majority underlying interests in the asset were not had by ultimate owners who had majority underlying interests in the asset immediately before 20 September 1985. Subsections 149-30(3) and 149-30(4) of the ITAA 1997 provide that, if an ultimate owner (new owner) has acquired an interest in an asset because it was transferred to the new owner by way of a marriage breakdown rollover or because of the death of a person (former owner), the 'new owner' is treated as having held the underlying interest of the 'former owner' for the period the 'former owner' held them. There is a period prior to the completion of the administration of the estate, during which beneficiaries are not considered to be presently entitled to the income of a deceased estate. Income of a deceased estate derived prior to the completion of the administration of the estate, is treated as the income of the legal personal representative (LPR) and is not income of the beneficiaries (paragraph 9 of Taxation Ruling IT 2622). Subsection 149-30(1) of the ITAA 1997 requires that the same majority underlying interests have been maintained at all times. If there is no person who holds beneficial interests in the assets of the estate during the period of administration, the continuity required by subsection 149-30(1) would be broken and the pre-CGT assets of the estate would lose their pre-CGT status. Subsection 128-15(2) of the ITAA 1997 provides that an LPR, or beneficiary, is taken to have acquired the asset(s) of a deceased person's estate on the day of death. That is, once the beneficiary takes ownership of assets of the estate, the beneficiary is taken, for CGT purposes, to have owned them since the deceased person died. It would be consistent with this provision if the beneficiary were also taken to have had beneficial interests in the assets since the date of death for purposes of Division 149 of the ITAA 1997. To give subsections 149-30(3) and 149-30(4) of the ITAA 1997 their intended effect, it is necessary to apply subsection 149-30(1) of the ITAA 1997 as if the beneficiary had beneficial interests in the assets of the estate from the date of the deceased person's death until the time the estate had been fully administered. Subsections 149-30(3) and 149-30(4) could never achieve their purpose if the period of administration were treated as a period when no one had any beneficial interests. Consequently, the beneficiary of a deceased estate must be treated as having a beneficial interest in the assets of the trust before the estate has been fully administered, in order to enable subsections 149-30(3) and 149-30(4) of the ITAA 1997 to have effect.", "Date_of_Decision": "27 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 149 Subdivision 149-B subsection 128-15(2) subsection 149-30(1) subsection 149-30(3) subsection 149-30(4) section 149-50", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2622", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/777 | ATO ID 2003/778", "Subject_References": "Capital gains tax CGT assets CGT deceased estates Executors Legal personal representatives Ownership, interests, control & rights Pre-CGT assets Underlying ownership & interests", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003779", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2622 | Keywords Capital gains tax CGT assets CGT deceased estates Executors Legal personal representatives Ownership, interests, control & rights Pre-CGT assets Underlying ownership & interests"}
{"ATO_ID_Number": "ATO ID 2012/56", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT Roll-Over Relief: same wholly-owned group", "Issue": "Does a 'legal merger' of two companies that are members of the same wholly-owned group carried out under the law of a foreign country prevent those companies from choosing roll-over under paragraph 126-55(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) on the basis that the transferor company (the originating company) ceases to exist at the time required by subsection 126-50(1) of the ITAA 1997?", "Decision": "No. Both companies are considered to still be members of the same wholly-owned group at the time that the CGT event happened to the originating company. Therefore, the originating company and the company to which the asset was transferred (the recipient company) can choose under paragraph 126-55(1)(b) of the ITAA 1997 to obtain roll-over under Subdivision 126-B of the ITAA 1997.", "Facts": "Holding Company is a listed foreign public company, which owns 100 per cent of the share capital in the originating company and the recipient company. Both the originating and recipient companies are non-resident companies. The originating company owns 100 per cent of the share capital in two companies incorporated and resident in Australia. A 'legal merger' is to be carried out between the originating and recipient companies in accordance with a foreign country's Civil Code. The legal effect of the merger is as follows:", "Reasons_for_Decision": "Summary: Subdivision 126-B of the ITAA 1997 provides for roll-over for asset transfers between two companies that are members of the same wholly-owned group of companies where one or both companies are non-residents. Where both the originating company and the recipient company are non-residents, the asset for which roll-over is sought must be taxable Australia property as defined in section 855-15 of the ITAA 1997 just before and just after the CGT event happens to the asset (subsection 126-50(5) of the ITAA 1997). Subsection 126-50(1) of the ITAA 1997 requires that both the originating and recipient companies must be members of the same wholly-owned group at the time that the CGT event happens to the originating company. Even though the originating company will immediately cease to exist following and consequent upon the legal merger process, it is considered that only after the shares have been transferred does the recipient company 'step into the shoes of the originating company'. Accordingly, it is considered that the originating company and the recipient company continue to be members of the same wholly-owned group of companies at the time of the disposal of the shares in the Australian companies. It is considered that the 'legal merger' carried out between the originating company and the recipient company does not prevent them from both choosing roll-over under paragraph 126-55(1)(b) of the ITAA 1997.", "Date_of_Decision": "28 March 2012", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 126-B section 126-45 subsection 126-50(1) subsection 126-50(5) paragraph 126-55(1)(b) section 855-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT roll-over relief Capital Gains Tax CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201256", "Unmatched_Content": "Keywords Capital gains tax CGT roll-over relief Capital Gains Tax CoE"}
{"ATO_ID_Number": "ATO ID 2004/459", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: Subdivision 126-B roll-over: asset transfer between foreign resident companies - asset originally acquired from Australian resident company under a roll-over", "Issue": "Does paragraph 126-50(7)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to deny roll-over under Subdivision 126-B of the ITAA 1997 in relation to the transfer of a CGT asset between two foreign resident companies in the same wholly-owned group if the foreign resident company transferring the asset originally acquired the asset from an Australian resident company under a transaction for which roll-over under Subdivision 126-B was chosen?", "Decision": "No. Paragraph 126-50(7)(a) of the ITAA 1997 only applies to deny roll-over under Subdivision 126-B of the ITAA 1997 if the foreign resident company transfers the CGT asset to an Australian resident company which is not the same resident company from which it previously acquired the asset.", "Facts": "The taxpayer, a foreign resident company, has wholly-owned Australian resident and foreign resident subsidiaries. On 1 July 2003, the taxpayer acquired land from Company X, one of its wholly-owned Australian resident subsidiaries. Roll-over relief under Subdivision 126-B of the ITAA 1997 was chosen in relation to the transfer as all of the requirements for roll-over were satisfied. The taxpayer subsequently transferred the land to one of its wholly-owned foreign resident subsidiaries in the 2003-04 income year. As the taxpayer made a capital gain in relation to the transfer, the taxpayer and the company to which the asset was transferred would like to choose roll-over under Subdivision 126-B of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subdivision 126-B of the ITAA 1997 provides for roll-over in relation to certain transactions between two companies that are members of the same wholly-owned group of companies. There are a number of requirements to be satisfied for the roll-over to be available. Where the company transferring the CGT asset is a foreign resident company that originally acquired the asset from an Australian resident company under a transaction for which roll-over under Subdivision 126-B of the ITAA 1997 was chosen, a requirement for roll-over under paragraph 126-50(7)(a) of the ITAA 1997 is that the foreign resident company must not have acquired the asset from '... an Australian resident originating company other than the company that is the recipient company for the current application of this Subdivision'. Under one interpretation of paragraph 126-50(7)(a) of the ITAA 1997, roll-over would only be available under Subdivision 126-B of the ITAA 1997 if the transaction involved the transfer of the asset by the foreign resident company back to the Australian resident company from which it acquired the asset. Support for this interpretation can be found in paragraph 13.27 of the Explanatory Memorandum (EM) to the New Business Tax System (Consolidation) Bill (No. 1) 2002 where it is stated: If the originating company in the transaction is a foreign resident, and the asset has already been rolled over to that foreign resident by an Australian resident under a previous application of new Subdivision 126-B, subsequent rollover under new Subdivision 126-B is not permitted. ... If however, the asset is merely re-transferred by the foreign resident back to the Australian resident company, rollover relief will be available for the subsequent re-transfer of the asset to the Australian resident. Despite the wording of the EM, it is considered that the requirement in paragraph 126-50(7)(a) of the ITAA 1997 is only applicable where the asset is being transferred to an Australian resident company. In those circumstances, paragraph 126-50(7)(a) of the ITAA 1997 requires the recipient company to be the same company as that from which the foreign resident company previously acquired the asset in order for roll-over to be available. Support for limiting the paragraph 126-50(7)(a) of the ITAA 1997 requirement in this way can be found in the operation of paragraph 126-50(7)(b) of the ITAA 1997, which applies where there has been a 'series' of roll-overs the first of which involved a transfer from an Australian resident company. Were paragraph 126-50(7)(a) of the ITAA 1997 to apply to deny rollover in relation to a transfer of an asset to a foreign resident company, it would not be possible for there to be a 'series' of roll-overs, as envisaged by the legislature in paragraph 126-50(7)(b) of the ITAA 1997. Adopting this interpretation is consistent with the further statement in the EM at paragraph 13.27 that the purpose of the restriction is 'to prevent the removal of CGT rollover relief in relation to resident companies from being undermined'. Therefore, as subsection 126-50(7) of the ITAA 1997 has no application where the asset is transferred to a foreign resident company, that provision will not apply in this case to deny roll-over under Subdivision 126-B of the ITAA 1997 in relation to the transfer of the asset between two foreign resident companies in the same wholly-owned group.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 126-B subsection 126-50(7) paragraph 126-50(7)(a) paragraph 126-50(7)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT assets CGT choice CGT companies in the same wholly owned group CGT roll-over relief Group company transfers Non resident companies Subsidiary companies Wholly owned subsidiary", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004459", "Unmatched_Content": "Keywords CGT assets CGT choice CGT companies in the same wholly owned group CGT roll-over relief Group company transfers Non resident companies Subsidiary companies Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2003/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT roll-over: whether a partnership can be a member of a 'wholly owned group'", "Issue": "If an unlimited general partnership formed under a foreign partnership law is a 'company' for tax purposes, does it qualify as a member of the same 'wholly-owned group' as required by subsection 126-50(1) of the Income Tax Assessment Act 1997 (ITAA 1997), so as to enable its partners to obtain capital gains tax (CGT) roll-over on contributing shares to the partnership?", "Decision": "No. The partnership is not a body corporate with shares for purposes of Subdivision 975-W of the ITAA 1997 and therefore cannot be a member of the same 'wholly-owned group' at the time of the trigger event as required by subsection 126-50(1) of the ITAA 1997.", "Facts": "Two companies formed a partnership under a foreign partnership Act. Each of those companies are a '100% subsidiary' of a holding company. Each of those companies owns 100% interest in a resident subsidiary company. Each of those companies contributed shares in the resident subsidiary company to the partnership. The foreign partnership Act provides that the 'partnership is a separate legal entity distinct from its partners unless or to the extent otherwise provided in a statement of partnership existence and in a partnership agreement'. The Partnership Agreement provides that any provision of the agreement may be amended or waived by each of the partners in the case of an amendment, or by the partner against whom the waiver is to be effective in the case of a waiver.", "Reasons_for_Decision": "Summary: Subdivision 126-B of the ITAA 1997 provides CGT roll-over to a company (the originating company) that transfers a CGT asset to, or creates a CGT asset in, another company (the recipient company) that is a member of the same 'wholly-owned group'. Subsection 126-50(1) of the ITAA 1997 requires the originating and recipient companies to be members of the same 'wholly-owned group' at the time of the trigger event. Section 975-500 of the ITAA 1997 states: Two companies are members of the same wholly-owned group if: one of the companies is a 100% subsidiary of the other company; or each of the companies is a 100% subsidiary of the same third company. Subsection 975-505(1) of the ITAA 1997 provides that a company is a '100% subsidiary' of another company if all the shares in the subsidiary company are beneficially owned by the holding company, or one or more 100% subsidiaries of the holding company, or both. Subsection 995-1(1) of the ITAA 1997 defines 'share' in a company to mean 'a share in the capital of a company, and includes stock'. Paragraph 22 of Taxation Ruling TR 94/30 states that 'an often-used description of a share is that it is an aliquot interest of a shareholder in a company as measured by a sum of money.' 'Company' is defined in subsection 995-1(1) of the ITAA 1997 as: The expression 'body corporate' resorts to general law principles. The Macquarie Dictionary 3rd edition, 1997, Macquarie University, NSW defines a 'body corporate' as 'an association or group of persons legally incorporated in a corporation'. The Macquarie Dictionary also defines a 'corporation' as: An association of individuals, created by law or under authority of law, having a continuous existence irrespective from that of its members, and powers and liabilities distinct from those of its members. A company in which a share is held is best described by paragraph (a) of the definition of a 'company' in subsection 995-1(1) of the ITAA 1997, as a 'body corporate'. That is, it has a separate legal identity of its own that it obtains upon becoming incorporated under relevant corporations legislation. Tomasic, R, Jackson J, Woellner R 2002 Corporations Law: Principles, Policy and Process , 4th edn, Butterworths, Australia, p.215 expresses the view that: Upon incorporation, the company \"comes into existence as a body corporate\" under its specified name at the beginning of the day of registration (s.119) and has the legal capacity and powers of an individual, and all the \"special\" powers of a body corporate including the power to issue shares and debentures... A partnership whose separate legal identity can be affected by a variation or amendment to the Partnership Agreement owes that identity not to statute but, essentially, to the Partnership Agreement under contract law. It is therefore incompatible with the concept of an incorporated company pursuant to a corporations law. The partnership is best described by paragraph (b) of the definition of a 'company' in subsection 995-1(1) of the ITAA 1997 as an 'unincorporated association'. Furthermore, each partner's interest in the partnership represents under the Partnership Agreement, a proprietary interest in the property of the partnership. The nature of a partnership interest is to confer a beneficial interest in the partnership property. In Federal Commissioner of Taxation v. Everett (1980) 143 CLR 440; 80 ATC 4076; (1980) ATR 608, the majority view of the Full High Court in relation to the nature of a partnership interest was: Although a partner has no title to specific property owned by the partnership, he has a beneficial interest in the partnership assets, indeed in each and every asset of the partnership ( Canny Gabriel Castle Jackson Advertising Pty. Ltd. & Anor. V. Volume Sales (Finance) Pty. Ltd. (1974) 131 C.L.R. 321, at pp. 327-328; Livingston v. Commr. Of Stamp Duties (Qld) (1960) 107 C.L.R. 411, at p. 453). A partnership interest is different in legal nature to a share in the capital of a company as the latter confers no proprietary interest in the company assets nor confers any proportionate ownership of the company upon its members. Tomasic R, Bottomley S & McQueen R,2002, Corporations Law in Australia , The Federation Press, Australia, p.447, expresses such a view that the share, although a fraction of the capital, is the property of the shareholder entirely distinct from the company's property. Even if a partnership is characterised as a company for the purposes of subsection 995-1(1) of the ITAA 1997, it cannot be a member of the same 'wholly-owned group' for the purposes of section 975-505 of the ITAA 1997 given that: The requirement in subsection 126-50(1) of the ITAA 1997 for roll-over is not satisfied. The partners are not able to obtain CGT roll-over on contributing shares to the partnership.", "Date_of_Decision": "21 June 2002", "Year_of_Income": "Year ended 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 126-B subsection 126-50(1) Subdivision 975-W subsection 975-100(1) section 975-500 section 975-505 subsection 975-505(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/30", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT roll-over relief Non resident partnerships Ownership, interests, control & rights Exchange of shares CGT event A1-disposal of a CGT asset CGT companies in the same wholly owned group", "Case_References": "Federal Commissioner of Taxation v. Everett (1980) 143 CLR 440 80 ATC 4076 10 ATR 608", "Other_References": "The Macquarie Dictionary, 3rd edition, 1997, Macquarie University, NSW Tomasic, R, Jackson J, Woellner R 2002 Corporations Law: Principles, Policy and Process, 4th edn, Butterworths, Australia, p.215 Tomasic, R, Bottomley S & McQueen R,2002, Corporations Law in Australia, The Federation Press, Australia, p.447", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200337", "Unmatched_Content": "This ATO ID has been amended by deleting a paragraph that refers to subection 975-100(1) of the ITAA 1997 which was repealed with effect from 1 April 2005 by Tax Laws Amendment Act (2004 Measures No 7) 2005. | Related Public Rulings (including Determinations) Taxation Ruling TR 94/30 | Keywords CGT roll-over relief Non resident partnerships Ownership, interests, control & rights Exchange of shares CGT event A1-disposal of a CGT asset CGT companies in the same wholly owned group"}
{"ATO_ID_Number": "ATO ID 2010/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: roll-over relief - compulsory acquisition - easement created", "Issue": "Can any of the roll-over threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997), be satisfied by an entity that has an easement created over their land?", "Decision": "No. The threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the ITAA 1997 cannot be satisfied in this case.", "Facts": "An Australian government agency (the acquirer) intends to obtain road access across a landowner's property for the construction of an infrastructure facility. The acquirer serves a notice on the landowner inviting them to negotiate for the creation of an easement over the landowner's land. The notice informs the landowner that if negotiations are unsuccessful, the acquirer will proceed to create an easement pursuant to its powers under State legislation. The parties negotiate and agree. An easement is created, for which the acquirer pays an amount to the landowner.", "Reasons_for_Decision": "Summary: Provided the other requirements are satisfied, capital gains tax roll-over under Subdivision 124-B of the ITAA 1997 may be available where the threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the ITAA 1997 are satisfied. Both paragraphs 124-70(1)(a) and 124-70(1)(aa) of the ITAA 1997 require that a CGT asset that you own is compulsorily 'acquired' by another entity. Paragraph 124-70(1)(c)of the ITAA 1997 requires that you 'dispose of' a CGT asset to another entity in circumstances where the disposal takes place after service on you of a notice inviting negotiation for a sale and informing you that, if negotiations are unsuccessful, compulsory acquisition will follow. A disposal involves a change of ownership of an asset from you to another entity (the definition of 'dispose of' in subsection 995-1(1) of the ITAA 1997). For roll-over under Subdivision 124-B to be available under the threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) or 124-70(1)(c) of the ITAA 1997, there must be a change of ownership of an asset that is the subject of the CGT event, which must exist both before and after the event. In accordance with Taxation Ruling TR 97/3, when an easement is created by being granted to an entity that has the power to compulsorily create the easement (such as the acquirer), a landowner's rights of ownership are affected. The right to exclude all others is forfeited in part when the easement comes into existence. The ending of part of this right causes CGT event C2 to happen to it (section 104-25 of the ITAA 1997). The change of ownership required does not happen, as that part of the right ceases to exist when CGT event C2 happens. Therefore, the threshold conditions in paragraphs 124-70(1)(a), 124-70(1)(aa) and 124-70(1)(c) of the ITAA 1997 cannot be satisfied in this case. Accordingly, the landowner cannot claim the roll-over under Subdivision 124-B of the ITAA 1997.", "Date_of_Decision": "21 January 2010", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 124-B paragraph 124-70(1)(a) paragraph 124-70(1)(aa) paragraph 124-70(1)(c) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT compulsory acquisitions CGT events CGT roll-over relief Disposal of assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201034", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/3 | Keywords Capital gains tax CGT compulsory acquisitions CGT events CGT roll-over relief Disposal of assets"}
{"ATO_ID_Number": "ATO ID 2003/127", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: replacement asset roll-over - compulsory acquisition, loss or destruction of original asset", "Issue": "In determining for the purpose of subsection 124-75(4) of the Income Tax Assessment Act 1997 (ITAA 1997) whether a replacement block of vacant land is used for the same or a similar purpose as an original block of vacant land, is it relevant to have regard to the potential use to which either block can be put?", "Decision": "No. If the original land was not being used for any purpose prior to its compulsory acquisition and the replacement land is not used for any purpose for a reasonable period after it is acquired, it is considered that the requirements in subsection 124-75(4) of the ITAA 1997 will be satisfied. It is not relevant to have regard to the potential use to which the land could be put.", "Facts": "The taxpayer owned a block of land acquired after 19 September 1985. The land was subject to a Council restriction on its use. The land was not used by the taxpayer in carrying on a business. The land was compulsorily acquired by an Australian government agency after 1 July 1998 and the taxpayer received money from the agency as a result of the acquisition. The taxpayer used the money to acquire another vacant block of land. The land was acquired within one year of the end of the income year in which the original block of land was compulsorily acquired. The replacement block of land was not subject to the same Council restriction as the original block of land.", "Reasons_for_Decision": "Summary: A taxpayer may be able to obtain a roll-over under Subdivision 124-B of the ITAA 1997 if a CGT asset they own is compulsorily acquired by an Australian government agency: paragraph 124-70(1)(a) of the ITAA 1997. 'Australian government agency' is defined in subsection 995-1(1) of the ITAA 1997 as the Commonwealth, a State or Territory, an authority of one of them or a local governing body established by or under a State or Territory law. If a taxpayer receives money as a result of the compulsory acquisition of their asset they must satisfy the requirements in section 124-75 of the ITAA 1997 for roll-over to be available. Subsection 124-75(2) of the ITAA 1997 requires that the taxpayer incur expenditure in acquiring another CGT asset. Where the original asset was not in any way connected to a business being carried on by the taxpayer, the replacement asset must be used (for a reasonable period after it is acquired) for the same purpose, or for a similar purpose, to the purpose for which the original asset was used just before the event happened (subsection 124-75(4) of the ITAA 1997). Taxation Determination TD 2000/42 provides some guidance as to the scope of the words 'use the other asset... for the same purpose... or for a similar purpose' in subsection 124-75(4) of the ITAA 1997. The Determination states that whether an asset is used for the same or a similar purpose as another asset is a question of fact and degree (paragraph 2 of TD 2000/42). In the present circumstances, the taxpayer's original land was not used for any purpose immediately before the compulsory acquisition. The requirement in subsection 124-75(4) of the ITAA 1997 will therefore be satisfied if the taxpayer uses the money to acquire another vacant block of land. The potential use to which the land could be put or the intended use of the land is not relevant.", "Date_of_Decision": "23 October 2002", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-B paragraph 124-70(1)(a) section 124-75 subsection 124-75(2) subsection 124-75(4) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/42", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT replacement asset roll-over CGT replacement assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003127", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2000/42 | Keywords Capital gains tax CGT replacement asset roll-over CGT replacement assets"}
{"ATO_ID_Number": "ATO ID 2006/178", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: demerger - measurement of ownership interests - exceptions to subsection 125-70(2) - adjusting instruments", "Issue": "Is it possible to refer to the number of adjusting instruments issued in determining whether the threshold of 10% is reached in applying subsection 125-75(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Adjusting instruments can be measured by reference to either number or market value in applying subsection 125-75(4) of the ITAA 1997.", "Facts": "A listed public company proposes to demerge its subsidiary to its shareholders. The company has both shares and adjusting instruments. The total percentage of adjusting instruments is not more than 10% by number of the total ownership interests in the head entity.", "Reasons_for_Decision": "Summary: Paragraph 1.8 of the Supplementary Explanatory Memorandum to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002 provides that: there are various means by which the level of ownership can be determined. For example, it may be appropriate to take account of just the value of the ownership interests, while in another case it may be appropriate to take account of a mix of the number, nature and value. Subsection 125-75(1) of the ITAA 1997 excludes 3% of employee scheme ownership interests by 'taking into account either or both of their number and value'. Measuring the adjusting instruments under subsection 125-75(4) of the ITAA 1997 by either the number or the value is consistent with subsection 125-75(1). Therefore, the company should use the most appropriate means, by number or by value, to determine its level of ownership interests.", "Date_of_Decision": "18 July 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 125-75(1) subsection 125-75(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Demerger Exception to proportionate test for adjusting instruments", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006178", "Unmatched_Content": "Keywords Capital gains tax Demerger Exception to proportionate test for adjusting instruments"}
{"ATO_ID_Number": "ATO ID 2004/455", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demerger - consideration given by head entity shareholders for new interests in demerged entity", "Issue": "Can the condition in paragraph 125-70(1)(d) of the Income Tax Assessment Act 1997 (ITAA 1997) be satisfied if the head entity shareholders give consideration for the shares they receive in the demerged entity?", "Decision": "Yes. The condition in paragraph 125-70(1)(d) of the ITAA 1997 can be satisfied if the head entity shareholders give consideration for the shares they receive in the demerged entity.", "Facts": "A company is a head entity of a demerger group in terms of section 125-65 of the ITAA 1997. The company demerged a subsidiary in a manner that satisfied all the conditions of the definition of demerger in section 125-70 of the ITAA 1997 (assuming the giving of consideration by the head entity shareholders does not result in those conditions not all being satisfied). The shareholders in the head entity gave consideration to the demerged entity for the shares they received in the demerged entity under the demerger.", "Reasons_for_Decision": "Summary: Paragraph 125-70(1)(d) of the ITAA 1997 provides that one of the conditions which a restructure must satisfy in order to be a 'demerger' as defined by section 125-70 of the ITAA 1997 is that 'the acquisition by entities of new interests [in the demerged entity] happens only because those entities own or owned original interests [in the head entity]'. It has been suggested that paragraph 125-70(1)(d) of the ITAA 1997 could be interpreted as requiring that there be no condition for the acquisition of new interests other than the ownership of original interests, with the consequence that a requirement that any consideration be given for the new interests would result in paragraph 125-70(1)(d) being failed. The relevant Explanatory Memorandum to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002 is silent on the meaning of paragraph 125-70(1)(d) of the ITAA 1997. The purpose of paragraph 125-70(1)(d) of the ITAA 1997 is to exclude from the definition of a demerger a restructure in which persons other than owners of original interests in the head entity acquire new interests in the demerged entity. Neither Division 125 of the ITAA 1997 nor the Explanatory Memorandum implies any other purpose. Consequently, paragraph 125-70(1)(d) of the ITAA 1997 does not exclude a restructure from being a demerger under section 125-70, where the head entity shareholders give consideration for their new interests in the demerged entity. As only the head entity shareholders were entitled to acquire interests in the demerged entity, the condition in paragraph 125-70(1)(d) can be satisfied.", "Date_of_Decision": "6 May 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 125 section 125-65 section 125-70 paragraph 125-70(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Demerged entity Demerger Demerger roll-over", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004455", "Unmatched_Content": "Keywords Capital gains tax Demerged entity Demerger Demerger roll-over"}
{"ATO_ID_Number": "ATO ID 2004/635", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Demerger: direct value shift - consequences for demerging entity under Division 725", "Issue": "Are there capital gains consequences for a demerging entity under Division 725 of the Income Tax Assessment Act 1997 (ITAA 1997) if, under a demerger as defined in section 125-70 of the ITAA 1997, a direct value shift happens as a result of new interests in the demerged entity being issued at a discount?", "Decision": "No. There are no capital gains consequences for the demerging entity under Division 725 of the ITAA 1997 as a result of the direct value shift that happens under the demerger. The consequences for the demerging entity are instead determined exclusively under Division 125 of the ITAA 1997.", "Facts": "There are three Australian resident shareholders in Company A, an Australian resident company. Each shareholder is an associate of the other shareholders. Company A is the owner of the only share (a post-CGT share) on issue in subsidiary Company B. Company A has not made a choice to form a consolidated group. Under an arrangement, Company B (the demerged entity) issues shares to the shareholders in Company A (the demerging entity), in the same proportions as their Company A shareholdings. No consideration is to be provided to Company B for the shares. The arrangement satisfies the definition of a demerger in section 125-70 of the ITAA 1997. As a result of the issue of shares at a discount by Company B, there is a reduction in the market value of the share that Company A holds in Company B, resulting in a direct value shift. The conditions set out in section 725-50 of the ITAA 1997 for there to be consequences under Division 725 of the ITAA 1997 as a result of the direct value shift are satisfied.", "Reasons_for_Decision": "Summary: Sections 125-165 and 125-170 of the ITAA 1997 are specific provisions which determine the consequences for the demerging entity as a result of any value shift, whether indirect or direct (as in this case), which happens under a demerger. This is confirmed by the note to subsection 125-170(2) of the ITAA 1997 which states: The rules in section 125-165 and this section deal with any value shift that might occur under the demerger (emphasis added) and avoid the need for the general value shifting regime to apply. The interpretation is also supported by the explanatory material for New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002 where it is stated at paragraph 15.67 of the revised Explanatory Memorandum: Other cost base adjustment rules do not apply if a CGT asset's reduced cost base is reduced, because of a demerger. Accordingly, the demerging entity Company A will not be required to make cost base and reduced cost base adjustments under Division 725 of the ITAA 1997 and will not make a capital gain under capital gains tax (CGT) event K8 in section 104-250 of the ITAA 1997 as a result of the direct value shift. However, a capital loss that is later realised on the interest that Company A holds in the demerged entity Company B will be reduced to the extent to which it is reasonably attributable to a reduction in value that happens under the demerger (section 125-165 of the ITAA 1997).", "Date_of_Decision": "16 July 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 104-250 Division 125 section 125-70 section 125-165 section 125-170 subsection 125-170(2) Division 725 section 725-50", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/636 | ATO ID 2004/637", "Subject_References": "Capital loss reduction for value shift CGT demerger exemption CGT exemptions Cost base adjustments for value shift Demerger subsidiary", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004635", "Unmatched_Content": "Keywords Capital loss reduction for value shift CGT demerger exemption CGT exemptions Cost base adjustments for value shift Demerger subsidiary"}
{"ATO_ID_Number": "ATO ID 2003/874", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demerger - definition of demerger", "Issue": "In relation to a demerger, is the requirement in subparagraph 125-70(1)(e)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) satisfied if the original interests in the head entity, a company, consist of both shares and options, when the new interests in the demerged entity, also a company, consist only of shares?", "Decision": "Yes. In relation to a demerger, the requirement in subparagraph 125-70(1)(e)(i) of the ITAA 1997 is satisfied if the original interests in the head entity, a company, consist of both shares and options when the new interests in the demerged entity, also a company, consist only of shares.", "Facts": "Company X, the head entity of a demerger group, undertook a demerger of its wholly owned subsidiary, Company Y. The method of demerger that Company X chose was to dispose of all of its interests in Company Y to its own shareholders. The original interests of shareholder W in Company X consisted of shares and options. However, W received only shares in Company Y, the demerged entity.", "Reasons_for_Decision": "Summary: The definition of a demerger is contained in subsection 125-70(1) of the ITAA 1997. Paragraph 125-70(1)(e) of the ITAA 1997 requires that new interests must be of a similar kind to the original interests. Subparagraph 125-70(1)(e)(i) of the ITAA 1997 specifically requires that all the new interests must be ownership interests in a company, if the head entity of a demerger group is a company. An 'ownership interest in a company' is defined in paragraph 125-60(1)(a) of the ITAA 1997 as a share in the company or an option, right or similar interest issued by the company that gives the owner an entitlement to acquire a share in the company. Therefore, if all the new interests qualify as ownership interests in a company as defined under paragraph 125-60(1)(a), the requirement under subparagraph 125-70(1)(e)(i) is met. There is no requirement for some of the new interests to be options if some of the original interests are options. If the original interests consist of shares and options, the new interests may be only shares.", "Date_of_Decision": "22 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 125-60(1)(a) subsection 125-70(1) paragraph 125-70(1)(e) subparagraph 125-70(1)(e)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Change in ownership interests Demerger Demerger group Demerger subsidiary Head entity", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003874", "Unmatched_Content": "Keywords Capital gains tax Change in ownership interests Demerger Demerger group Demerger subsidiary Head entity"}
{"ATO_ID_Number": "ATO ID 2003/875", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demerger - CGT status of new interests where CGT rollover not chosen", "Issue": "Does section 125-85 of the Income Tax Assessment Act 1997 (ITAA 1997) deem the new interests of a shareholder to have been acquired before 20 September 1985 if their original interests were acquired before 20 September 1985?", "Decision": "No. Section 125-85 of the ITAA 1997 does not deem the new interests of a shareholder to have been acquired before 20 September 1985 if their original interests were acquired before 20 September 1985.", "Facts": "The taxpayer acquired shares (original interests) in the head company both before 20 September 1985 and after 19 September 1985. A demerger happened after 1 July 2002 which qualified for relief under Division 125 of the ITAA 1997. Shareholders of the head company (demerging entity) received new shares (new interests) in the demerged company, under the demerger. The taxpayer did not chose rollover under section 125-80 of the ITAA 1997 for the CGT event that happened to their original interests under the demerger.", "Reasons_for_Decision": "Summary: Section 125-80 of the ITAA 1997 allows capital gains tax (CGT) rollover relief when a CGT event happens to original interests in a company under a 'demerger' and new interests are received in the demerged company. However, where a CGT event happens to the shareholder's original interests and rollover is not chosen, the cost base and reduced cost base of those interests must still be adjusted to reflect the change in values caused by the demerger (subsection 125-85(1) of the ITAA 1997). Subsection 125-85(2) of the ITAA 1997 requires that the cost base and reduced cost base of the original interest is apportioned between the original interest and the new interest, based on the relative market values of those interests as per subsection 125-80(2) of the ITAA 1997. Subsection 125-85(2) does not provide for the provisions in subsections 125-80(4) to (7) of the ITAA 1997 to apply to deem any of the new interests to have a pre-CGT status (acquired before 20 September 1985).", "Date_of_Decision": "22 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 125 section 125-80 subsection 125-80(2) subsection 125-80(4) subsection 125-80(5) subsection 125-80(6) subsection 125-80(7) section 125-85 subsection 125-85(1) subsection 125-85(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT choice CGT cost base CGT events CGT original assets Cost base adjustments Demerger roll-over Demerger subsidiary Demerging entity Pre-CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003875", "Unmatched_Content": "Keywords Capital gains tax CGT choice CGT cost base CGT events CGT original assets Cost base adjustments Demerger roll-over Demerger subsidiary Demerging entity Pre-CGT assets"}
{"ATO_ID_Number": "ATO ID 2003/913", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demergers - Chess Unit of Foreign Security (CUFS) issued under a demerger", "Issue": "Is a Chess Unit of Foreign Security (CUFS) an ownership interest in a company, for the purposes of the demerger provisions in Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A CUFS is an ownership interest in a company, for the purposes of the demerger provisions in Division 125 of ITAA 1997.", "Facts": "A CUFS is a type of depositary interest developed by the Australian Stock Exchange to facilitate the transferring and holding of a foreign security. A CUFS is a unit of beneficial ownership in a foreign security. Legal title in the security is held by an Australian depositary entity on behalf of, and for the benefit of, the CUFS holder. In the demerger under consideration, the head entity was listed on the Australian Stock Exchange, but the demerged entity was a company listed on a foreign stock exchange. Shareholders in the head entity were not issued with shares in the demerged entity. Instead, they were issued with CUFS.", "Reasons_for_Decision": "Summary: Paragraph 125-60(1)(a) of ITAA 1997 defines an ownership interest in a company as being either a share in the company or an 'option, right or similar interest issued by the company that gives the owner an entitlement to acquire a share in the company'. Under a demerger, a CUFS is created over a share in the demerged entity and issued to the shareholder in the head entity. The owner of a CUFS is absolutely entitled to the security covered by the CUFS. The consequences of dealing in the share in the demerged entity are attributed to the shareholder (section 106-50 of ITAA 1997). [Note: The treatment of a CUFS as an ownership interest is relevant to the maintenance of ownership test (subsection 125-70(2) of ITAA 1997) in the definition of a demerger (subsection 125-70(1) of ITAA 1997).]", "Date_of_Decision": "17 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 106-50 Division 125 paragraph 125-60(1)(a) subsection 125-70(1) subsection 125-70(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets Demerger Demerger roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003913", "Unmatched_Content": "Keywords Capital gains tax CGT assets Demerger Demerger roll-over"}
{"ATO_ID_Number": "ATO ID 2003/914", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demergers - cost base allocation rules in the demerger provisions", "Issue": "Do the cost base allocation rules in the demerger provisions in Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997) apply if there is no capital gain or capital loss made for the CGT event that happened to the original interests?", "Decision": "Yes. The cost base allocation rules in the demerger provisions in Division 125 of ITAA 1997 apply, even if there is no capital gain or capital loss made for the CGT event that happened to the original interests.", "Facts": "Mr A acquired shares in B Ltd, the head entity of a demerger group, in 1992. B Ltd demerged its subsidiary, C Ltd. This was done by B Ltd declaring a dividend and approving a return of capital to its shareholders, with both being compulsorily applied as full consideration for the acquisition of shares in C Ltd. The demerger satisfied all the conditions of the demerger provisions in Division 125 of ITAA 1997. The return of share capital caused CGT event G1 (section 104-135 of ITAA 1997) to happen. However, in respect of every share in B Ltd owned by Mr A, the amount of the return of capital per share was less than the cost base of the share. Consequently, there was no capital gain or capital loss from the CGT event.", "Reasons_for_Decision": "Summary: Section 125-55 of ITAA 1997 allows an owner of original interests who satisfies the conditions of that section to choose the rollover described in section 125-80 of ITAA 1997. Section 125-55 requires that a CGT event happens to the original interests, but does not require that there be a capital gain or capital loss from the CGT event. CGT event G1 happened to Mr A's shares in B Ltd (original interests) under the demerger. Even though there was no capital gain or capital loss, section 125-55 allows Mr A to choose a rollover, as he has satisfied the conditions for rollover. If Mr A makes this choice then, as a result of the operation of section 125-80, the cost base of his shares in B Ltd are spread over those shares and his new shares in C Ltd. Even if Mr A does not make this choice, section 125-85 operates to require him to make the same cost base allocations he would have done, had he chosen rollover.", "Date_of_Decision": "17 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-135 Division 125 section 125-55 section 125-80 section 125-85", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets CGT cost base CGT replacement asset roll-over Cost base adjustments Demerged entity Demerger Demerger roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003914", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT cost base CGT replacement asset roll-over Cost base adjustments Demerged entity Demerger Demerger roll-over"}
{"ATO_ID_Number": "ATO ID 2003/915", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Demergers - option holders", "Issue": "Does a CGT event happen when, as part of a demerger involving a return of share capital, option holders in the head entity give up their right to a reduction in the exercise price of the original option, in return for options in the demerged entity?", "Decision": "No. No CGT event happens when, as part of a demerger involving a return of share capital, option holders in the head entity give up their right to a reduction in the exercise price of the original option, and receive options in the demerged entity.", "Facts": "A demerger after 30 June 2002 included a return of share capital by a company (the head entity) to its shareholders, to be satisfied by the issue of shares in the demerged entity. Persons (the option holders) also owned options, issued by the head entity, to acquire shares in the head entity. One of the terms of the options was that, if any share capital was returned to the shareholders before exercise or termination of the options, the exercise price of each of the options was to be reduced by the amount of share capital returned for each share. Under the demerger, the option holders were issued by the demerged entity with options to acquire shares in the demerged entity. In return, the option holders surrendered their rights to have the exercise price of their original options to be reduced by the amount of any share capital return to shareholders. The option holders continued to own their original options.", "Reasons_for_Decision": "Summary: Given the particular circumstances, the only possible CGT events which need to be considered are CGT events C2 and H2. For the reasons explained below, neither of these CGT events happen. CGT event C2 Section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that CGT event C2 happens if, inter alia, a person's ownership of an intangible CGT asset ends by the asset being cancelled. Section 108-5 of ITAA 1997 provides that part of a CGT asset is itself a CGT asset. The right to the reduction in exercise price of the option was a part of the bundle of rights of which the option consisted. If the operation of section 108-5 has the result that the right to the reduction in exercise is a separate CGT event, then there is clearly a CGT event C2, and conversely, if the operation of section 108-5 does not have the result that the right to a reduction in exercise price is a CGT asset, then there is clearly no CGT event C2. Taxation Ruling TR 94/30 states that a right attaching to a share is not a separate asset to the share, and a variation of a right attaching to a share is not a disposal of the share. Because the principles involved are identical, TR 94/30 is equally applicable to options issued by a company to acquire shares in the company, that is, a right attaching to an option issued by a company to acquire shares in the company is not a separate CGT asset. Consequently, for the purposes of section 104-25, there is no ending of any asset of the option holder, and so no CGT event C2 happens. CGT event H2 Section 104-155 of ITAA 1997 provides that, subject to the exceptions specified in subsection 104-155(5), CGT event H2 happens if an act, transaction or event occurs in relation to a CGT asset, and that act, transaction or event does not result in an adjustment to that asset's cost base or reduced cost base. The grant of the options in the demerged entity by the demerged entity is an act, transaction or event in relation to the shares in the head entity, and no cost base adjustment results. Therefore, there would be a CGT event H2 if no exception applied. Paragraph 104-155(5)(g) of ITAA 1997 provides that CGT event H2 does not happen where a company that is a member of a demerger group issues new ownership interests under the demerger. This exception applies in the circumstances under consideration, and so excludes CGT event H2.", "Date_of_Decision": "17 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 section 104-155 subsection 104-155(5) paragraph 104-155(5)(g) section 108-5 section 125-55", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 93/30", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT asset CGT event Capital gains tax CGT events G1-G3 - shares CGT events H1-H2 - special capital receipts Demerger", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003915", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 93/30 | Keywords CGT asset CGT event Capital gains tax CGT events G1-G3 - shares CGT events H1-H2 - special capital receipts Demerger"}
{"ATO_ID_Number": "ATO ID 2007/216", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Subdivision 124-G roll-over - requirements that must be met for interposed company to choose that the consolidated group continue in existence", "Issue": "Is it necessary to demonstrate satisfaction with the requirements in subsection 124-365(4) of the Income Tax Assessment Act 1997 (ITAA 1997) to enable an interposed company to make a choice under subsection 124-380(5) of the ITAA 1997 that the consolidated group is to continue in existence?", "Decision": "No. It is not necessary for the interposed company to demonstrate satisfaction with the requirements of subsection 124-365(4) of the ITAA 1997 for it to make a choice under subsection 124-380(5) of the ITAA 1997.", "Facts": "Company B is a resident of Australia and the head company of a consolidated group. Under a scheme for reorganising its affairs it intends to interpose between itself and its shareholders a non operating head company (interposed company). Immediately after the shareholders in Company B have exchanged their shares in it for shares in the interposed company, the interposed company is the head company of a consolidatable group consisting only of itself and the members of the group immediately before the completion time.", "Reasons_for_Decision": "Summary: Subdivision 124-G of the ITAA 1997 allows, where specified requirements are satisfied, roll-over for certain shareholders who, under a scheme for reorganising a company's affairs (the original company), exchange their shares in that company for shares in another company, the interposed company. In certain circumstances where the original company is a head company of a consolidated group the interposed company may choose that the consolidated group will continue in existence under subsection 124-380(5) of the ITAA 1997. An effect of this choice is that the interposed company is taken to have become the head company of the consolidated group and in that case certain shareholders who dispose of their shares in the original company are taken to have chosen roll-over under subsection 124-360(2) of the ITAA 1997. A requirement that must be satisfied before a shareholder can choose or is taken to have chosen roll-over is set out in subsection 124-365(4) of the ITAA 1997, which requires: Either: The Explanatory Memorandum to the New Business Tax System (Consolidations and Other Measures) Bill (No 1) 2002 (the EM), which became the New Business Tax System (Consolidations and Other Measures) Act (No 1) 2002 which introduced subsection 124-380(5) of the ITAA 1997 states at paragraph 2.11 of Chapter 2: 2.11 Before the interposed company can make a choice that the consolidated group is to continue in existence, the share exchange which results in the interposed company being interposed between the original company and its shareholders must also be in accordance with the conditions set out in Subdivision 124-G of the ITAA 1997... [emphasis added]. The EM states further at paragraphs 2.32 to 2.33 of Chapter 2: 2.32 Where the interposed company makes a choice for the consolidated group to continue in existence, the shareholders of the original company will be taken to have chosen rollover relief on the disposal, cancellation or redemption of their shares in the original company which are exchanged for replacement shares in the interposed company if: Accordingly, all of the conditions in Subdivision 124-G of the ITAA 1997 that relate to or refer to the conditions of the share exchange must be satisfied before the interposed company can make the choice under subsection 124-380(5) of the ITAA 1997. However, it is not necessary for the interposed company to demonstrate satisfaction with the conditions in subsections such as 124-365(4) of the ITAA 1997 that do not relate to or refer to the conditions of the share exchange in order for it to make the choice under subsection 124-380(5) of the ITAA 1997.", "Date_of_Decision": "11 July 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-G section 124-360 subsection 124-360(2) subsection 124-365(4) subsection 124-380(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/18", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT exchange of shares in one company for shares in another company (124-G) CGT replacement asset roll-over CGT roll-over relief Consolidated group", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidations and Other Measures) Bill (No 1) 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007216", "Unmatched_Content": "2.33 The share exchange which results in the interposed company being interposed between the original company and its shareholders must have also been in accordance with the conditions set out in Subdivision 124-G of the ITAA 1997 for the rule in paragraph 2.32 to apply [emphasis added]. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/18 | Keywords Capital gains tax CGT exchange of shares in one company for shares in another company (124-G) CGT replacement asset roll-over CGT roll-over relief Consolidated group"}
{"ATO_ID_Number": "ATO ID 2005/217", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: roll-over relief: exchange of share owned jointly for shares owned individually in an interposed company", "Issue": "Is roll-over relief available under Subdivision 124-G of the Income Tax Assessment Act 1997 (ITAA 1997) where the joint owners of a share in an original company do not own a share jointly in the interposed company just after the reorganisation of the original company is completed?", "Decision": "No. The requirement in paragraph 124-365(2)(b) of the ITAA 1997 can only be satisfied if the joint owners hold a share jointly in the interposed company just after the reorganisation of the original company is completed.", "Facts": "An Australian resident company (the original company) entered into a scheme to reorganise its affairs. Just before the reorganisation of the original company, shareholders A and B owned one share jointly in the company and C, D and E each owned one share. Under the scheme, the shareholders of the original company disposed of all their shares in the company in exchange for shares in a newly incorporated company (the interposed company). Just after the reorganisation of the original company, shareholders C, D and E each own two shares in the interposed company while A and B were each issued with one share in their own name.", "Reasons_for_Decision": "Summary: An entity can choose to obtain roll-over relief under Subdivision 124-G of the ITAA 1997 on the reorganisation of a company's affairs if certain conditions are satisfied: subsection 124-360(1) of the ITAA 1997. One of the conditions is that, just after the reorganisation is completed, each entity (an 'exchanging member') that owned shares in the original company owns a whole number of the shares issued in the interposed company: paragraph 124-365(2)(a) of the ITAA 1997. Another condition is that the exchanging member owns a percentage of the shares in the interposed company issued to all exchanging members that is equal to the percentage of the shares in the original company (disposed of under the scheme) which they owned: paragraph 124-365(2)(b) of the ITAA 1997. The exchanging members in this case are shareholders A, B, C, D and E. There is no requirement that an entity own a share in the original company in its own right in order to be an exchanging member. Therefore, joint owners A and B would each be an exchanging member because they each own (jointly) one share in the original company. Each exchanging member owns a whole number of shares in the interposed company just after the reorganisation is completed: paragraph 124-365(2)(a) of the ITAA 1997. Further, the requirement in paragraph 124-365(2)(b) of the ITAA 1997 can be satisfied in relation to shareholders C, D and E. This is because they each own 25% of the total shares issued in the interposed company to all exchanging members and this is the same as their individual ownership interest in the original company's shares disposed of under the scheme. However, the requirement in paragraph 124-365(2)(b) of the ITAA 1997 cannot be satisfied in relation to shareholder A. The percentage of total shares that A owns in the interposed company just after the reorganisation (that is, one-eighth which equals 12.5%) is not the same as the percentage of shares that it owned (jointly with B) in the original company (that is, 1/4 which equals 25%). On the same basis, paragraph 124-365(2)(b) cannot be satisfied in respect of shareholder B. As the condition in paragraph 124-365(2)(b) of the ITAA 1997 cannot be satisfied in respect of each exchanging member, roll-over will not be available to any of the shareholders of the original company.", "Date_of_Decision": "22 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-G paragraph 124-360(1) paragraph 124-365(2)(a) paragraph 124-365(2)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/18", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT event A1 - disposal of CGT asset CGT exchange of shares in one company for shares in another company (124-G) CGT replacement asset roll-over CGT roll-over relief Interposed companies Joint interests Member of an entity", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005217", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/18 | Keywords Capital gains tax CGT event A1 - disposal of CGT asset CGT exchange of shares in one company for shares in another company (124-G) CGT replacement asset roll-over CGT roll-over relief Interposed companies Joint interests Member of an entity"}
{"ATO_ID_Number": "ATO ID 2010/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: scrip for scrip roll-over - Delaware limited partnerships", "Issue": "Is scrip for scrip roll-over under Subdivision 124-M of the Income Tax Assessment Act 1997 (ITAA 1997) available for the exchange of interests in a Delaware Limited Partnership (DLP) formed under the Delaware Revised Uniform Limited Partnership Act (Del.) for interests in another DLP?", "Decision": "Yes. Scrip for scrip roll-over under Subdivision 124-M of the ITAA 1997 is available for the exchange of interests in a DLP for interests in another DLP provided the conditions in the Subdivision are satisfied.", "Facts": "An Australian resident holder of interests in DLP A transfers their interests to DLP B in exchange for interests in DLP B. DLP B will become the owner of 100% of the interests in DLP A. DLP A and DLP B are foreign residents for Australian income tax purposes. DLP A and DLP B are 'limited partnerships' within the meaning of that term as defined in subsection 995-1(1) of the ITAA 1997 and are not Controlled Foreign Companies under Part X of the Income Tax Assessment Act 1936 (ITAA 1936). The partnership agreement for DLP A provides interest holders with voting or decision making rights similar to those of an ordinary company shareholder. The Australian resident holder has not made an election under section 485AA of the ITAA 1936 to treat their interests in DLP A and DLP B as foreign hybrid limited partnerships.", "Reasons_for_Decision": "Summary: Subdivision 124-M of the ITAA 1997 contains a number of conditions for, and exceptions to, a shareholder being eligible to choose scrip for scrip roll-over relief. One condition is that the interest holder exchanges shares in one company for shares in another company (subparagraph 124-780(1)(a)(i) of the ITAA 1997). Under section 94D of the ITAA 1936, a limited partnership is a corporate limited partnership for the purposes of Division 5A of Part III of the ITAA 1936 for the 1995-96 or later years of income if the exceptions in that section do not apply. On the facts of this case, DLP A and DLP B are considered to be corporate limited partnerships in accordance with section 94D of the ITAA 1936. Under section 94J of the ITAA 1936, a reference in the ITAA 1936 or ITAA 1997 to a company or to a body corporate includes a reference to a corporate limited partnership. Further, section 94P of the ITAA 1936 provides that a reference in the ITAA 1936 or ITAA 1997 to a share includes a reference to an interest in a corporate limited partnership. Therefore, for the purposes of the ITAA 1936 and ITAA 1997, DLP A and DLP B are treated as a company and/or body corporate and interests in them as shares. Accordingly, the exchange of interests in DLP A by the Australian resident holder for interests in DLP B can be considered as an exchange of shares in a company for shares in another company for the purposes of subparagraph 124-780(1)(a)(i) of the ITAA 1997. However, the conditions for scrip for scrip roll-over specified in paragraphs 124-780(2)(a) and 124-780(2)(b) of the ITAA 1997 relate to voting shares in the original entity. Subsection 995-1(1) of the ITAA 1997 defines the term 'voting share' as follows: Voting share in a company means: if the company is a body corporate - a voting share as defined by section 9 of the Corporations Act 2001; and otherwise - a share that would be a voting share as defined by that section if the company were a body corporate. Accordingly, a reference to a voting share will include a reference to an interest in a corporate limited partnership if the corporate limited partnership was a body corporate and the interest would be a voting share as defined by section 9 of the Corporations Act 2001 . In specifying the attributes required, section 9 of the Corporations Act 2001 provides that a: voting share in a body corporate means an issued share in the body that carries any voting rights beyond the following: (a) a right to vote while a dividend (or part of a dividend) in respect of the share is unpaid; (b) a right to vote on a proposal to reduce the body's share capital; (c) a right to vote on a resolution to approve the terms of a buy-back agreement; (d) a right to vote on a proposal that affects the rights attached to the share; (e) a right to vote on a proposal to wind the body up; (f) a right to vote on a proposal for the disposal of the whole of the body's property, business and undertaking; (g) a right to vote during the body's winding up. In determining whether interests in a corporate limited partnership can be considered as voting shares, the provisions of Division 5A of Part III of the ITAA 1936 will not alter the attributes of the partnership interests. Consequently, in applying the provisions of the Corporations Act 2001 , the interests in the corporate limited partnership must be voting interests and their attributes must entitle the interest holders with voting rights in accordance with the concept of voting shares under section 9 of the Corporations Act 2001 . In this case, the partnership agreement for DLP A entitles the interest holders with voting rights that are in accordance with the concept of voting shares and the exchange of those interests can therefore be considered as an exchange of voting shares for the purposes of subparagraphs 124-780(2)(a) and 124-780(2)(b) of the ITAA 1997. Accordingly, scrip for scrip roll-over under Subdivision 124-M of the ITAA 1997 will be available to the Australian resident holder for the exchange of their interests in DLP A for interests in DLP B provided the other conditions in the Subdivision are satisfied.", "Date_of_Decision": "2 September 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 section 94D section 94J section 94P section 485AA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Scrip for scrip roll-over Exchange of shares Limited partnerships", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20109", "Unmatched_Content": "Keywords Capital gains tax Scrip for scrip roll-over Exchange of shares Limited partnerships"}
{"ATO_ID_Number": "ATO ID 2004/498", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Scrip for scrip rollover - whether original shareholders and acquiring company are dealing at arm's length", "Issue": "Did a shareholder in a closely-held company deal with another company at arm's length for the purposes of subsection 124-780(4) of the Income Tax Assessment Act 1997 (ITAA 1997) under an arrangement that involved the acquisition of the shareholder's shares in exchange for ordinary and redeemable preference shares (equivalent in value to the original shares)?", "Decision": "No. The parties did not deal with each other at arm's length for the purposes of subsection 124-780(4) of the ITAA 1997. While the consideration paid for the original shares was equivalent to their market value, the acquiring entity had no bargaining power in relation to the transaction and did not act independently to the shareholders as a group.", "Facts": "The shareholder is one of a small group of shareholders who own all the ordinary shares in a closely held company (original entity). All the shares were acquired after 19 September 1985. A restructure is implemented whereby a new company (acquiring entity) is incorporated and acquires all the shares in the original entity in exchange for the issue of ordinary shares and redeemable preference shares. The original shareholders own all the shares in the acquiring entity in the same proportion as they did in the original entity. Based on independent valuations, the consideration paid by the acquiring entity is reasonably equivalent to the market value of the shares in the original entity. Each shareholder obtained their own professional advice and acted in their own interests in deciding whether to enter the restructure but they agreed as a group to the major terms and characteristics of the restructure including the amount paid as consideration for their shares. The creation and capital structure of the acquiring company are part of these terms and conditions.", "Reasons_for_Decision": "Summary: To qualify for scrip for scrip roll-over relief under Subdivision 124-M of the ITAA 1997, a shareholder must satisfy the conditions in subsection 124-780(5) of the ITAA 1997 if subsection 124-780(4) of the ITAA 1997 applies (paragraph 124-780(1)(d) of the ITAA 1997). Subsection 124-780(4) of the ITAA 1997 applies if the shareholder in the original entity and the acquiring entity did not deal with each other at arm's length and: As the original and acquiring entities in this case had fewer than 300 members before the arrangement started, subsection 124-780(4) of the ITAA 1997 will apply if the shareholder and the acquiring entity did not deal at arm's length in relation to the transaction. The structure of subsections 124-780(4) and 124-780 (5) of the ITAA 1997 indicate the phrase 'dealing at arm's length' is not to be construed as meaning the parties exchange their shares for a fair price or market value. A condition to be met in subsection 124-780(5), that the market value of the capital proceeds received by the shareholders is substantially the same as the market value of their original interest, must be met only if the original interest holder and acquiring entity 'did not deal with each other at arm's length' and fall within paragraphs 124-780(4)(a) or (b). 'Arm's length' is defined at subsection 995-1(1) of the ITAA 1997 as: 'in determining whether parties deal at arm's length, consider any connection between them and any other relevant circumstances.' The Commissioner is therefore required to consider not only the relationship or connection between the shareholder and the acquiring entity but also the nature and circumstances of the dealing. When determining whether the shareholder dealt with the acquiring entity at arm's length it is the collective bargaining power of the group of shareholders against the acquiring entity which must be considered ( Elmslie and Others v. Commissioner of Taxation (1993) 46 FCR 576; 26 ATR 611; (1993); 93 ATC 4964). As the restructure occurred in accordance with terms and conditions agreed between the shareholders it is considered that the newly incorporated acquiring company did not bargain as a party dealing at arm's length with these shareholders. Accordingly, for the shareholder to be able to choose scrip for scrip roll-over they must satisfy the conditions in subsection 124-780(5) of the ITAA 1997 including that the shares carry the same kind of rights and obligations. As the redeemable preference shares do not carry the same kind of rights and obligations as the original shares, roll-over is not available to the extent that the original shares were exchanged for those redeemable preference shares.", "Date_of_Decision": "21 April 2004", "Year_of_Income": "year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-M paragraph 124-780(1)(d) subsection 124-780(4) paragraph 124-780(4)(a) paragraph 124-780(4)(b) subsection 124-780(5) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events CGT exchange of shares in one company for shares in another company CGT roll-over relief Redeemable preference shares Scrip for scrip roll-over", "Case_References": "Elmslie and Others v. Commissioner of Taxation (1993) 46 FCR 576 26 ATR 611 93 ATC 4964", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004498", "Unmatched_Content": "Removed reference to 124-G | Keywords Capital gains tax CGT events CGT exchange of shares in one company for shares in another company CGT roll-over relief Redeemable preference shares Scrip for scrip roll-over"}
{"ATO_ID_Number": "ATO ID 2004/800", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: roll-overs - scrip for scrip - arrangement on substantially same terms for owners of interests of a particular type", "Issue": "Are all the ordinary shares in a company 'interests of a particular type' for the purposes of paragraph 124-780(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) if one shareholder has additional rights in respect of their shares acquired under a shareholders' agreement?", "Decision": "Yes. All of the ordinary shares are interests of the same type for the purposes of paragraph 124-780(2)(c) of the ITAA 1997 even though one shareholder has collateral rights in relation to their shares.", "Facts": "The issued share capital of Company A consists of one class of ordinary shares. Company A and its shareholders entered into a shareholders' agreement under which shareholder C acquired ordinary shares in Company A as well as additional rights set out in the agreement. The additional rights granted to C included the following: These rights did not pass with the transfer of C's shares. Company A's constitution does not have a provision dealing with the variation of share rights, nor were any special resolutions of the company made to vary the rights attaching to its ordinary class shares. In the 2003-04 income year Company B made an offer to acquire all of the shares in Company A. The offer provided that all of the members of Company A (except C) would receive ordinary shares in Company B in exchange for their shares in Company A. However, in recognition of their additional rights under the existing shareholders' agreement, C was offered preference shares in Company B in exchange for their shares in Company A.", "Reasons_for_Decision": "Summary: One of the conditions that must be satisfied for a shareholder to qualify for scrip for scrip roll-over under Subdivision 124-M of the ITAA 1997 is that participation in the scrip for scrip arrangement must have been on substantially the same terms for all the owners of interests of a particular type in the original entity (paragraph 124-780(2)(c) of the ITAA 1997). In this case the offer made to C was different from the offer made to the remaining ordinary shareholders. It is therefore necessary to determine whether the shares owned by C were of a different type to those owned by the other members of Company A. Unless the company's constitution provides otherwise, there is a presumption that all shares in a company have the same rights Birch v. Cropper (1889) 14 App Cas 525 at 543. The procedures to be followed in order to vary rights attaching to shares are set out in section 246B of the Corporations Act 2001 . Generally, in order to vary share rights the company must comply with the variation procedures set out in its constitution or, in the absence of such procedures, pass a special resolution. In this case the share capital of Company A consists of only one class of shares. There is no evidence that as part of the arrangement any change was made to the company's constitution to vary the rights attaching to a particular shareholder's share. Further, no special resolutions of the company were made to change the rights of any ordinary shareholders. The additional rights were granted to C under a separate agreement and do not form part of the rights attaching to the share. As a result, it is considered that all the ordinary shareholders in Company A own interests of the same type. Accordingly, as different offers have been made to C and the remaining ordinary shareholders in Company A, the requirement that each owner of an interest of a particular type is able to participate in the arrangement on substantially the same terms in paragraph 124-780(2)(c) of the ITAA 1997 has not been satisfied in this case. Rollover is not available under Subdivision 124-M of the ITAA 1997 for any of the shareholders.", "Date_of_Decision": "21 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Corporations Act 2001 section 246B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/177", "Subject_References": "arrangement capital gains CGT roll-over relief scrip for scrip roll-over shareholders", "Case_References": "Birch v. Cropper (1889) 14 App Cas 525", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004800", "Unmatched_Content": "Keywords arrangement capital gains CGT roll-over relief scrip for scrip roll-over shareholders"}
{"ATO_ID_Number": "ATO ID 2003/177", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: scrip for scrip roll-over - arrangement on substantially the same terms", "Issue": "Does an arrangement satisfy the requirement in paragraph 124-780(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) that participation in it be on 'substantially the same terms for all owners of interests of a particular type' if different offers are made to separate classes of shareholders?", "Decision": "Yes. The arrangement will satisfy the requirement in paragraph 124-780(2)(c) of the ITAA 1997 providing the offer to shareholders within each class of share is on substantially the same terms.", "Facts": "A company made a takeover offer in relation to all of the shares in Company X. The issued share capital of Company X consists of 2 classes of shares. The holders of one class of share have no special rights to participate in the profits of Company X. The holders of the other class of share have special rights that allow priority participation in the profits of the non-core business of Company X. Because of the different rights attaching to the shares in each class, the takeover offer that has been made to each class of shareholders is different.", "Reasons_for_Decision": "Summary: One of the conditions that has to be satisfied for a shareholder to qualify for scrip for scrip roll-over under Subdivision 124-M of the ITAA 1997 is that participation in the scrip for scrip arrangement must have been on substantially the same terms for all the owners of interests of a particular type in the original entity (paragraph 124-780(2)(c) of the ITAA 1997). In this case, the difference in the rights attaching to each class of share is sufficient for each class of share to be regarded as a different type of interest for the purposes of paragraph 124-780(2)(c) of the ITAA 1997. Accordingly, if each shareholder within each class of share is able to participate in the arrangement on substantially the same terms, the requirement in paragraph 124-780(2)(c) of the ITAA 1997 will be satisfied.", "Date_of_Decision": "9 December 2002", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-M paragraph 124-780(2)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Tax Capital gains CGT roll-over relief Scrip for scrip roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003177", "Unmatched_Content": "Keywords Capital gains Tax Capital gains CGT roll-over relief Scrip for scrip roll-over"}
{"ATO_ID_Number": "ATO ID 2003/197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: scrip for scrip rollover - unit in a public trading trust exchanged for a share in a company", "Issue": "Is rollover available under Subdivision 124-M of the Income Tax Assessment Act 1997 (ITAA 1997) if a taxpayer exchanges a unit in a public trading trust that has not chosen to form a consolidated group, for a share in a company?", "Decision": "No. Rollover is not available under Subdivision 124-M of the ITAA 1997 if a taxpayer exchanges a unit in a public trading trust that has not chosen to form a consolidated group, for a share in a company.", "Facts": "The taxpayer acquired units in a public trading trust (as defined in section 102R of the Income Tax Assessment Act 1936 (ITAA 1936)) on or after 20 September 1985. The trust has not made a choice under section 703-50 of the ITAA 1997 to form a consolidated group. In accordance with an 'arrangement' that satisfied subsection 124-780(2) of the ITAA 1997, the taxpayer disposed of those units in exchange for shares in a company. The taxpayer and the company dealt with each other at arms' length. The taxpayer made a capital gain from the disposal of the units and wishes to choose rollover under Subdivision 124-M of the ITAA 1997.", "Reasons_for_Decision": "Summary: Rollover is available under Subdivision 124-M of the ITAA 1997 if an entity exchanges a share in a company for a share in another company: subparagraph 124-780(1)(a)(i) of the ITAA 1997. Division 6C of the ITAA 1936 applies in relation to certain public trading trusts defined in section 102R of the ITAA 1936. For certain purposes of the ITAA 1936 and ITAA 1997 those trusts are treated as companies and units in them are treated as shares. The Explanatory Memorandum to the Bill which became the Taxation Laws Amendment Act (No.4) 1985 and which introduced Division 6C of the ITAA 1936 states: The purpose of this section [section 102T], in broad terms, is to equate public trading trusts or, where appropriate, prescribed trust estates, with companies in the application of certain specified provisions of the Principal Act. In like manner, units in prescribed trust estate, unitholders and unit trust dividends will be equated respectively with shares, shareholders and dividends paid by a company [emphasis added]. The issue in this case is whether a unit is treated as a 'share in a company' for the purposes of subsection 124-780(1) of the ITAA 1997. Section 102T of the ITAA 1936 sets out the circumstances when the application of the income tax law to a public trading trust is modified for example, subsection 102T(13) specifies that a unit will be treated as a share for the purposes of Subdivision 12F in Schedule 1 to the Taxation Administration Act 1953. Subsection 124-780(1) of the ITAA 1997 is not listed in section 102T of the ITAA 1936. However, the note to subsection 102T(1) indicates that there is a different approach for a public trading trust that chooses to form a consolidated group. Essentially, if that choice has been made, then Subdivision 713-C of the ITAA 1997 applies to treat the trust as a company and units in it as shares. As the trust has not made a choice to form a consolidated group, section 102T has its normal operation. Accordingly as subsection 124-780(1) of the ITAA 1997 is not listed in section 102T of the ITAA 1936, a unit in a public trading trust that has not made a choice to form a consolidated group is not treated as a share when applying Subdivision 124-M of the ITAA 1997. Roll-over is not available if the unit is exchanged for a share in a company.", "Date_of_Decision": "14 March 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Division 6C section 102J section 102R section 102T subsection 102T(1) subsection 102T(13)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT event A1-disposal of a CGT asset Consolidated group Consolidation Corporate unit trusts Head entity Public trading trusts Scrip for scrip roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003197", "Unmatched_Content": "This ID has been amended to include the fact that the trust has not made the choice to form a consolidated group. | Keywords Capital gains tax CGT event A1-disposal of a CGT asset Consolidated group Consolidation Corporate unit trusts Head entity Public trading trusts Scrip for scrip roll-over"}
{"ATO_ID_Number": "ATO ID 2003/893", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: scrip for scrip rollover - redeemable preference shares exchanged for ordinary shares", "Issue": "Is the taxpayer, a shareholder who owned redeemable preference shares in a company, eligible to choose scrip for scrip rollover under Subdivision 124-M of the Income Tax Assessment Act 1997 (ITAA 1997) if they exchanged those shares for ordinary shares in another company?", "Decision": "Yes. The taxpayer can choose scrip for scrip rollover in respect of the exchange of redeemable preference shares in one company for ordinary shares in another company.", "Facts": "The taxpayer owned 1,000 redeemable preference shares in a company (the original company) that they acquired after 19 September 1985. The redeemable preference shares are treated as 'debt interests' for the purposes of Division 974 of the ITAA 1997. After 9 September 1999, another company (the acquiring company) acquired all of the shares in the original company under a scheme of arrangement in exchange for the issue of ordinary shares. As a result, the taxpayer received 1,000 ordinary shares in the acquiring company. The taxpayer and the acquiring company dealt with each other at arm's length. The taxpayer satisfied all of the other scrip for scrip rollover requirements in subsection 124-780(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: A taxpayer can choose scrip for scrip rollover under paragraph 124-780(3)(d) of the ITAA 1997 if, among other conditions, they exchange: One of the conditions in subsection 124-780(5) is that the replacement shares carry the same kind of rights and obligations as those attaching to the original shares (paragraph 124-780(5)(b)). Paragraph 124-780(1)(d) is not relevant as the taxpayer and the other company were dealing with each other at arm's length. The Explanatory Memorandum to the New Business Tax System (Capital Gains Tax) Act 1999 indicates that rollover is available if 'a share in a company is exchanged for a share in another company ...even if the rights attaching to the share ... are different'. There is nothing in Subdivision 124-M of the ITAA 1997 that prevents shares that are treated as debt interests for Division 974 purposes from being eligible for scrip for scrip rollover. The taxpayer may therefore choose scrip for scrip rollover as all of the requirements in subsection 124-780(1) of the ITAA 1997 are met. The effect of the rollover is that any capital gain arising from the original shares is deferred until a CGT event happens to the replacement shares.", "Date_of_Decision": "17 September 2003", "Year_of_Income": "year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-M subsection 124-780(1) subparagraph 124-780(1)(a)(i) paragraph 124-780(1)(a) paragraph 124-780(1)(d) paragraph 124-780(3)(d) subsection 124-780(5) paragraph 124-780(5)(b) Division 974", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT event CGT exchange of shares in one company for shares in another company CGT roll-over relief Redeemable preference shares Scrip for scrip roll-over", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Gains Tax) Act 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003893", "Unmatched_Content": "Keywords Capital gains tax CGT event CGT exchange of shares in one company for shares in another company CGT roll-over relief Redeemable preference shares Scrip for scrip roll-over"}
{"ATO_ID_Number": "ATO ID 2002/100", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Capital Gains tax: Partial scrip for scrip roll-over: ineligible proceeds", "Issue": "Is the taxpayer, a shareholder who exchanges shares in one company for shares and a right to an undetermined number of shares in another company entitled to a full scrip for scrip roll-over under Subdivision 124-M of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer is only entitled to a partial scrip for scrip roll-over under section 124-790 of the ITAA 1997.", "Facts": "Under a share sales agreement, the shareholders have sold shares in a company (the original entity) in exchange for: The requirements for roll-over are otherwise satisfied.", "Reasons_for_Decision": "Summary: The taxpayer is entitled to choose scrip for scrip roll-over to the extent that the taxpayer's shares are exchanged for shares in the acquiring company. Subsection 124-780(1) of the ITAA 1997 requires that a replacement interest must be of the same kind as the original interest, e.g., a share for a share. Subsection 124-790(1) of the ITAA 1997 provides that there is no roll-over to the extent that the capital proceeds from shares includes something other than a 'replacement interest' which is referred to in this subsection as 'ineligible proceeds.' Ineligible proceeds are not limited to cash, e.g., a right to be issued shares that cannot be ascertained until a future date, is not a replacement asset for a share for the purposes of subsection 124-780(1) of the ITAA 1997. In these circumstances only partial roll-over is available as the taxpayer has accepted a right to shares which cannot be ascertained until a future date. Under subsection 124-790(2) of the ITAA 1997 a reasonable part of the cost base of the taxpayer's shares in the original entity can be taken into account in working out the capital gain from the receipt of the ineligible proceeds. The Commissioner considers it is reasonable to allocate a portion of the cost base of the original shares having regard to the proportion that the ineligible proceeds bears to the total proceeds.", "Date_of_Decision": "10 December 2001", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 124-M subsection 124-780(1) section 124-790 subsection 124-790(1) subsection 124-790(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/239 | ATO ID 2002/274 | ATO ID 2002/411 | ATO ID 2002/891 | ATO ID 2002/892 | ATO ID 2003/177 | ATO ID 2003/363", "Subject_References": "Capital gains Capital gains tax CGT roll-over relief Partial roll-over Scrip for scrip roll-over", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002100", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT roll-over relief Partial roll-over Scrip for scrip roll-over"}
{"ATO_ID_Number": "ATO ID 2002/239", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: scrip for scrip roll over: member of wholly owned group of companies", "Issue": "Is Acquiring Co a member of a wholly-owned group of companies for the purposes of paragraph 124-780(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. For the purposes of subparagraph 124-780(2)(a)(ii) of the ITAA 1997 Acquiring Co is a member of a wholly-owned group of companies just before it first increases the percentage of voting shares that it owns in Target Co under the scrip for scrip arrangement. This is different from the time when Acquiring Co acquires the Target Co shares for the purposes of the CGT provisions.", "Facts": "Parent Co owned 85% of the shares in Acquiring Co. On 31 July 2001, Parent Co acquired the remaining shares in Acquiring Co. On 1 July 2001, Acquiring Co made an offer to the shareholders of Target Co to exchange their Target Co shares for shares in Parent Co. The offer was accepted by 100% of Target Co shareholders during July 2000 but settlement did not occur until 1 August 2001.", "Reasons_for_Decision": "Summary: In applying section 124-780 of the ITAA 1997 it is important to ascertain whether a company (an acquiring entity) is a member of a wholly owned group of companies because that determines which company must issue replacement shares under a scrip for scrip arrangement. If the acquiring entity is not a member of a wholly owned group, it must issue the replacement shares (subparagraphs 124-780(3)(c)(i) and 124-780(2)(a)(i) of the ITAA 1997). However where the acquiring entity is a member of a wholly owned group of companies, the replacement shares must be issued by the ultimate holding company of the group (subparagraph 124-780(3)(c)(ii) and 124-780(2)(a)(ii) of the ITAA 1997). In this case, Acquiring Co was a member of the wholly owned group (of which Parent Co was the ultimate holding company) just before 1 August 2001, the date of settlement, when Acquiring Co first increased the percentage of shares that it owned in Target Co. Accordingly for the target shareholders to qualify for scrip for scrip roll-over their replacement shares must be in Parent Co. The fact that Acquiring Co was not a member of the wholly owned group of companies when the offer was made to the Target Co shareholders (1 July 2001) or when they accepted the offer is not relevant for the purposes of the roll-over. Providing all the other conditions in Subdivision 124-M of the ITAA 1997 are satisfied, scrip for scrip roll-over will be available for the original shareholders of Target Co because they acquired shares in the ultimate holding company of the wholly owned group as required by subparagraph 124-780(3)(c)(ii) of the ITAA 1997.", "Date_of_Decision": "22 January 2001", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-M section 124-780 subsection 124-780(2) paragraph 124-780(2)(a) subparagraph 124-780(2)(a)(i) subparagraph 124-780(2)(a)(ii) subsection 124-780(3) subparagraph 124-780(3)(c)(i) subparagraph 124-780(3)(c)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Scrip for scrip roll-over Arrangement CGT companies in the same wholly owned group", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002239", "Unmatched_Content": "Keywords Scrip for scrip roll-over Arrangement CGT companies in the same wholly owned group"}
{"ATO_ID_Number": "ATO ID 2002/274", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: scrip for scrip roll-over - single arrangement.", "Issue": "Is the requirement in paragraph 124-780(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) that shares be exchanged in consequence of a single arrangement satisfied when, as a result of one contract, shares are exchanged in two or more stages?", "Decision": "Yes. The staged exchange is in consequence of a single arrangement as required by paragraph 124-780(1)(b) of the ITAA 1997 because the obligation to undertake all exchanges arose from a single contract. However, roll-over will only be available when the acquiring entity becomes the owner of at least 80% of the voting shares in the original entity as required by paragraph 124-780(2)(a) of the ITAA 1997.", "Facts": "The taxpayer owns all of the shares in a company (the original entity). Another company (the acquiring entity) wishes to take over the original entity and offers the taxpayer shares in itself in return for the shares the taxpayer holds in the original entity. The acquiring entity and the rulee enter into an agreement whereby the acquiring entity will acquire 50% of the shares in the original entity within 7 days of executing the agreement (stage 1) and the remaining 50% of the shares within a number of months after entering into the agreement (stage 2).", "Reasons_for_Decision": "Summary: The term 'arrangement' is defined very broadly in section 995-1 of the ITAA 1997: arrangement means any arrangement, agreement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable (or intended to be enforceable) by legal proceedings. While the term 'arrangement' is defined very broadly, there is no definition of the term 'single arrangement'. Paragraph 11.23 of the Explanatory Memorandum to the New Business Tax System (Miscellaneous) Bill (No.2) 2000 provides a number of factors that may assist in determining what constitutes a single arrangement: What constitutes a single arrangement is a question of fact. Relevant factors in determining whether what takes place is part of a single arrangement would include, but not be limited to, whether there is more than one offer or transaction, whether aspects of an overall transaction occur contemporaneously, and the intention of the parties in all the circumstances as evidenced by objective facts. In this case the offer made by the acquiring entity is the same for all shares. More importantly, the obligation to undertake both stages arose from one contract. It is therefore considered that the shares in the original entity will be exchanged in consequence of a single arrangement. However, scrip for scrip roll-over for shares exchanged in step 1 will only become available when step 2 is completed because it is not until that time that the 80% test in paragraph 124-780(2)(a) of the ITAA 1997 is satisfied. The taxpayer will have to include the amount of any capital gain from the shares disposed of under step 1 in the calculation of their net capital gain for the income year in which those shares are disposed of. When the ownership of the remaining 50% of the shares in the original entity changes, the taxpayer will be entitled to seek an amendment of their earlier income tax return.", "Date_of_Decision": "19 February 2002", "Year_of_Income": "Year ending 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 124-780(1)(b) paragraph 124-780(2)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/100 | ATO ID 2002/239 | ATO ID 2002/411 | ATO ID 2002/602 | ATO ID 2002/891 | ATO ID 2002/892 | ATO ID 2003/177 | ATO ID 2003/362 | ATO ID 2003/893", "Subject_References": "Capital gains tax Capital gains Capital Gains Tax CoE CGT Replacement asset rollover Scrip for scrip rollover 80% control test Arrangement", "Case_References": "", "Other_References": "Explanatory Memorandum for Taxation Laws Amendment Act (No. 4) 1994", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002274", "Unmatched_Content": "Keywords Capital gains tax Capital gains Capital Gains Tax CoE CGT Replacement asset rollover Scrip for scrip rollover 80% control test Arrangement"}
{"ATO_ID_Number": "ATO ID 2010/114", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: disposal or creation of assets by partners to a wholly-owned company", "Issue": "Where the partners in a partnership dispose of their interests in a CGT asset of the partnership to a company, and receive shares in the company as consideration for their disposal, is the requirement in subsection 122-135(1) of the Income Tax Assessment Act 1997 (ITAA 1997) satisfied if the partners are not issued with shares in the company until completion of the disposal contract.", "Decision": "Yes. The requirement in subsection 122-135(1) of the ITAA 1997 is satisfied because the partners are taken to have owned the shares in the company from the time they enter into the disposal contract.", "Facts": "Two partners in a partnership are the only shareholders of a company. The partners entered into a contract to dispose of all the assets of a business carried on by the partnership to the company. Under the disposal contract, the company undertakes to issue shares to the partners as consideration for their disposal. Shares will be issued to the partners upon completion of the disposal contract in two months time.", "Reasons_for_Decision": "Summary: Section 122-125 of the ITAA 1997 provides that all of the partners in a partnership can choose to obtain a roll-over if one of the specified CGT trigger event happens involving the partners and a company in the circumstances set out in sections 122-130 to 122-140 of the ITAA 1997. Subsection 122-135(1) of the ITAA 1997 requires that the partners must own all the shares in the company just after the time of the trigger event. The time of the relevant trigger event here, that is, CGT event A1, is when the partners enter into the contract for the disposal (subsection 104-10(3) of the ITAA 1997). Under subsection 109-5(2) of the ITAA 1997, the partners are taken to have acquired the shares in the company when the disposal contract is entered into. For the purposes of section 122-135 of the ITAA 1997, the partners are taken to own the shares in the company from the time they acquired the shares, that is, from the time when they enter into the contract. Accordingly, the requirement in subsection 122-135(1) of the ITAA 1997 is satisfied because the partners own all the shares in the company just after the time of the trigger event.", "Date_of_Decision": "30 April 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 122-125 section 122-135 subsection 122-135(1) subsection 104-10(3) subsection 109-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT roll-over relief Partnerships Disposal of assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010114", "Unmatched_Content": "Keywords Capital gains tax CGT roll-over relief Partnerships Disposal of assets"}
{"ATO_ID_Number": "ATO ID 2005/218", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: roll-over to wholly owned company - business asset - part use", "Issue": "Is an asset which is partly used in a taxpayer's business an 'asset of a business' for the purpose of the table in section 122-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An asset which is partly used in a taxpayer's business is an 'asset of a business' for the purpose of the table in section 122-15 of the ITAA 1997.", "Facts": "The taxpayer is a sole trader running a business. The taxpayer owns a commercial building part of which is used as a retail outlet for the taxpayer's business. The rest of the building is rented out by the taxpayer to two other unrelated businesses. The taxpayer is considering transferring assets to a wholly owned company and choosing roll-over relief under Subdivision 122-A of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 122-15 of the ITAA 1997 provides that an individual can choose to obtain a roll-over in certain circumstances if one of the specified CGT events occurs. The disposal to a company of a CGT asset, or 'all the assets of a business', is (are) a CGT event(s) to which this provision applies. The term 'all the assets of a business' is not defined in Subdivision 122-A of the ITAA 1997. The question is whether an asset used partly in a business and partly for other purposes is nevertheless an 'asset of a business' for the purpose of the roll-over in section 122-15 of the ITAA 1997. There is no main use test within Subdivision 122-A of the ITAA 1997. An asset used partly in a business as in the circumstances of this case and partly for other purposes is therefore an asset of the business for the purpose of the roll-over in section 122-15 of the ITAA 1997.", "Date_of_Decision": "4 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 122-A section 122-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Capital gains tax CGT assets CGT roll-over relief", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005218", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT assets CGT roll-over relief"}
{"ATO_ID_Number": "ATO ID 2004/94", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Subdivision 122-A rollover: no consideration received", "Issue": "Can a taxpayer choose rollover under Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) if they dispose of an asset to a company in which they own all of the issued shares and are not issued with any new shares or paid any other form of consideration by the company?", "Decision": "Yes. Section 122-20 of the ITAA 1997 does not require that a taxpayer must receive consideration for the disposal of an asset to a company in order to obtain the rollover. Rather, it provides that if there is consideration received for the disposal, then that consideration must be either non-redeemable shares in the company or non-redeemable shares in the company and the company's undertaking to discharge one or more liabilities in respect of the asset.", "Facts": "The shares in a resident company are all owned by the taxpayer (the trustee of a resident trust for capital gains tax (CGT) purposes). None of the shares is a redeemable share. The company is not an exempt entity. The company's only asset is less than ten dollars in cash. The taxpayer subsequently disposed of land to the company. No shares were issued by the company as consideration for the transfer of the land. No other consideration was paid by the company.", "Reasons_for_Decision": "Summary: Section 122-15 of the ITAA 1997 provides that where a trustee disposes of an asset, or all of the assets of a business, to a company the trustee can choose to obtain rollover if certain requirements are met. One of the requirements is that if the trustee receives consideration for the disposal of the asset (or assets) to the company that consideration must include shares in the company (subsection 122-20(1) of the ITAA 1997). Although subsection 122-20(1) of the ITAA 1997 contemplates that ordinarily a transferee company will issue shares in respect of any assets transferred to it, the provision does not specifically require that consideration must be provided in respect of the transfer. Rather, the requirement is that where consideration is given by the company, it must be either shares in the company or shares in the company and the company undertaking to discharge one or more liabilities in respect of the asset or the assets of the business. As the taxpayer has received no consideration in respect of the disposal, there is no need to consider the application of section 122-20 of the ITAA 1997. Section 122-25 of the ITAA 1997 contains further conditions that must be satisfied before rollover can be chosen. Relevantly these are: Therefore, the taxpayer is entitled to choose rollover under Subdivision 122-A of the ITAA 1997. If rollover is chosen any capital gain or capital loss made by the taxpayer as a result of the disposal is disregarded (subsection 122-40(1) of the ITAA 1997). Subsections 122-40(2) and 122-40(3) of the ITAA 1997 provide rules for determining the first element of cost base and reduced cost base of each share received as consideration for the disposal of the asset and the pre-CGT status of those shares. In this case, the rules in subsections 122-40(2) and 122-40(3) of the ITAA 1997 will not apply in relation to the taxpayer's existing shares as those rules only apply to shares received as consideration for the disposal of the asset.", "Date_of_Decision": "13 January 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 122-A section 122-15 section 122-20 subsection 122-20(1) section 122-25 subsection 122-25(1) subsection 122-25(5) subsection 122-25(7) subsection 122-40(1) subsection 122-40(2) subsection 122-40(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/95 | ATO ID 2002/172 | ATO ID 2002/361 | ATO ID 2004/8", "Subject_References": "Capital gains tax CGT event A1-disposal of a CGT asset CGT events CGT replacement assets CGT replacement asset roll-over CGT roll-over relief Trusts Wholly owned", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200494", "Unmatched_Content": "Please note: This ATO ID was withdrawn on 23 February 2018. This was in error and was corrected on 26 April 2018 and this ATO ID has been current since its release This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Keywords Capital gains tax CGT event A1-disposal of a CGT asset CGT events CGT replacement assets CGT replacement asset roll-over CGT roll-over relief Trusts Wholly owned"}
{"ATO_ID_Number": "ATO ID 2003/340", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: trust to company rollover - CGT assets retained by the trustee - availability of rollover", "Issue": "Is the trust to company rollover under Subdivision 124-N of the Income Tax Assessment Act 1997 (ITAA 1997) available for CGT assets disposed of to the company, during the trust restructuring period, where those assets had initially been retained by the trust to pay existing or expected debts and remained after those debts had been finalised?", "Decision": "Yes. Rollover under Subdivision 124-N of the ITAA 1997 is available in relation to the CGT assets disposed of to the transferee company during the trust restructuring period.", "Facts": "The trustee disposed of nearly all of the CGT assets from the unit trust into the company under the trust restructure rollover in Subdivision 124-N. The trustee made a reasonable determination of the CGT assets needed to be retained in the trust to pay existing or expected debts of the trust. When all the debts were settled there were still CGT assets remaining in the trust and these were transferred to the company within six months from the start of the trust restructuring period.", "Reasons_for_Decision": "Summary: Section 124-860 of the ITAA 1997 sets out the requirements to be satisfied by the transferor, so that rollover relief is available for the disposal of the trust's CGT assets. All of the CGT assets owned by the transferor, the trust, must be disposed of to the transferee, the company, during the trust restructuring period. However, any CGT assets retained by the transferor to pay existing or expected debts of the transferor can be ignored (subsection 124-860(1) of the ITAA 1997). The trust restructuring period starts just before the first CGT asset is disposed of to the transferee, the company, under the trust restructure and ends when the last CGT asset of the transferor, the trust, is disposed of to the transferee (subsection 124-860(2) of the ITAA 1997). As a general rule, the trust must cease to exist within six months after the trust first disposed of a CGT asset to the company under a trust restructure otherwise the effect of the roll-over will be reversed (see the note to section 124-850 of the ITAA 1997 and CGT event J4, section 104-195 of the ITAA 1997). As it has now been determined that the remaining CGT assets are no longer required to pay the debts of the transferor the trust to company rollover under Subdivision 124-N of the ITAA 1997 is available for these CGT assets.", "Date_of_Decision": "28 April 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-195 Subdivision 124-N section 124-850 section 124-860 subsection 124-860(1) subsection 124-860(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/955", "Subject_References": "Capital gains tax Capital gains CGT assets Unit trust restructuring", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003340", "Unmatched_Content": "Keywords Capital gains tax Capital gains CGT assets Unit trust restructuring"}
{"ATO_ID_Number": "ATO ID 2003/341", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: trust to company rollover - CGT assets retained by the trustee to pay existing or expected debts not used for this purpose", "Issue": "Is the trust to company rollover under Subdivision 124-N of the Income Tax Assessment Act 1997 (ITAA 1997) available if some of the CGT assets, retained by the trustee to pay the existing or expected debts of the trust, are not ultimately used for this purpose?", "Decision": "Yes. The trust to company rollover under Subdivision 124-N of the ITAA 1997 will be available for the CGT assets that were disposed of to the company.", "Facts": "The trustee disposed of nearly all of the CGT assets of the unit trust to the company under the trust restructure rollover in Subdivision 124-N. The trustee retained CGT assets in the trust to pay existing or expected debts of the trust, having made a reasonable determination of the CGT assets needed to be retained for this purpose. When all the debts were settled there were CGT assets remaining in the trust.", "Reasons_for_Decision": "Summary: Section 124-860 of the ITAA 1997 sets out the requirements to be satisfied by the transferor so that rollover relief is available for the disposal of the trust's CGT assets. All of the CGT assets owned by the transferor, the trust, must be disposed of to the transferee, the company, during the trust restructuring period. However, any CGT assets retained by the transferor to pay existing or expected debts of the transferor can be ignored (subsection 124-860(1) of the ITAA 1997). As a result, the trust to company rollover is not denied if some CGT assets, retained to pay existing or expected debts of the transferor, are owned by the trustee after the settlement of the debts. The rollover allowed for the CGT assets already disposed of to the company is not affected by this outcome. As a general rule the trust must cease to exist within 6 months, after it first disposed of a CGT asset to the company under the trust restructure otherwise the effect of the roll-over will be reversed (see the note to section 124-850 of the ITAA 1997 and CGT event J4, section 104-195 of the ITAA 1997).", "Date_of_Decision": "28 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-195 Subdivision 124-N section 124-850 section 124-860 subsection 124-860(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/955 | ATO ID 2003/340", "Subject_References": "Capital gains Capital gains tax CGT assets Unit trust restructuring", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003341", "Unmatched_Content": "Keywords Capital gains Capital gains tax CGT assets Unit trust restructuring"}
{"ATO_ID_Number": "ATO ID 2002/955", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Trust to company rollover", "Issue": "Is a trust to company rollover available under Subdivision 124-N of the Income Tax Assessment Act 1997 (ITAA 1997) where one of the beneficiaries of the trust owns an interest in the trust that only has a discretionary income entitlement and no capital entitlement?", "Decision": "No. Paragraph 124-855(1)(b) of the ITAA 1997 requires that CGT event E4 (capital payments for trust interest) in section 104-70 of the ITAA 1997 must be capable of applying to all interests in the trust. CGT event E4 does not apply where a trust interest is merely discretionary.", "Facts": "The taxpayer carries on a business through a unit trust. The trust has two classes of unitholders. One class owns interests with capital and income rights. The other class, comprising of a single unitholder, owns an interest with a discretionary income entitlement and no capital entitlement.", "Reasons_for_Decision": "Summary: Section 124-850 of the ITAA 1997 states that an entity may choose to obtain a rollover where a trust disposes of all of its assets to a company and units and interests in the trust are replaced with shares in the company. Section 124-855 of the ITAA 1997 outlines when a rollover for trust restructuring may be available. Specifically, paragraph 124-855(1)(b) of the ITAA 1997 states that in order for the rollover to be available CGT event E4 must be capable of applying to all of the units and interests in the trust. A beneficiary with only a discretionary interest in a trust does not own an interest of the nature or character referred to in section 104-70 of the ITAA 1997. CGT event E4 cannot apply to an interest in a trust where a beneficiary only owns an interest with a discretionary income entitlement and no capital entitlement. Therefore, paragraph 124-855(1)(b) of the ITAA 1997 is not satisfied and the rollover contained in Subdivision 124-N of the ITAA 1997 is not available.", "Date_of_Decision": "27 August 2002", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-N subsection 104-70 section 124-850 paragraph 124-855(1)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2003/28", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Capital gains CGT roll-over relief CGT events CGT events E1-E9 - trusts CGT replacement asset rollover", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002955", "Unmatched_Content": "This ATO ID was amended by replacing the references to TD 97/15 and TD 97/15A with a reference to TD 2003/28. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Related Public Rulings (including Determinations) Taxation Determination TD 2003/28 | Keywords Capital gains tax Capital gains CGT roll-over relief CGT events CGT events E1-E9 - trusts CGT replacement asset rollover"}
{"ATO_ID_Number": "ATO ID 2006/187", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: early loan repayment benefit - separate asset", "Issue": "Is the right to an 'early repayment benefit' under the terms of a loan agreement a CGT asset under section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) that is separate from the loan agreement?", "Decision": "No. The right to an 'early repayment benefit' under the terms of a loan agreement is not a CGT asset under section 108-5 of ITAA 1997 that is separate from the loan agreement.", "Facts": "The taxpayer purchased an investment property in 2003. The taxpayer entered into a loan agreement to finance the purchase of the property. The loan was a fixed rate interest-only loan. It was initially fixed for a five-year period (from 2003 to 2008) at an annual interest rate of 6.24% per annum. A term of the loan agreement was that in the event of early, full repayment, the lender could recover an 'early repayment benefit' or the taxpayer could receive an 'early repayment adjustment', depending on interest rates applicable at the time the loan was broken. As the taxpayer was of the view that interest rates may rise significantly, he instructed the lender to break the original loan and refix it for another five years in 2006. Because of the taxpayer's request, the lender re-fixed the loan at an annual interest rate of 6.64% for a new five-year period. Under the taxpayer's original loan agreement, he received a bonus called an 'early repayment adjustment'.", "Reasons_for_Decision": "Summary: Under section 108-5 of the ITAA 1997, a CGT asset is any kind of property, or a legal or equitable right that is not property. Taxation Determination TD 93/86 states that generally, the totality of rights under a contract will be regarded as the one CGT asset. In this case, the relevant asset would be the loan agreement and the totality of rights (coupled with the obligations) under the loan agreement would be the one CGT asset. Butterworths Encyclopaedic Australian Legal Dictionary , (Online Edition), LexisNexis Australia defines a loan as 'the temporary transfer of an asset, usually funds, from a lender who controls funds, to a borrower in return for payment, usually in the form of interest. The asset must be returned either in one sum at the maturity of the loan or in periodic payments'. Thus, a liability arises when the debtor borrows money under a loan contract. Accordingly, in this case, the taxpayer, as borrower, did not acquire a CGT asset but instead incurred a legal obligation to repay the funds under the terms of the loan agreement (a liability). The positive attribute of the loan agreement (the early repayment benefit) was merely a feature of the terms of the loan agreement, and it was incidental to the early repayment of the borrowed funds. Consequently, the right to the early repayment benefit does not form a CGT asset that is separate from the loan agreement. Accordingly, there are no CGT consequences for the taxpayer from the receipt of the 'early repayment adjustment' bonus.", "Date_of_Decision": "6 July 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 108-5", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/86", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets", "Case_References": "", "Other_References": "Butterworths Encyclopaedic Australian Legal Dictionary, (Online Edition), LexisNexis", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006187", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/86 | Keywords Capital gains tax CGT assets"}
{"ATO_ID_Number": "ATO ID 2010/90", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: active asset test - company liquidations and cancellation of shares - relevant business ceases", "Issue": "For the purpose of determining whether a share in a company that has ceased to carry on its business satisfies the active asset test, is the relevant business referred to in subparagraph 152-35(2)(b)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997) the business previously carried on by the company?", "Decision": "Yes. For the purpose of determining whether a share in a company that has ceased to carry on its business satisfies the active asset test, the relevant business referred to in subparagraph 152-35(2)(b)(ii) of the ITAA 1997 is the business previously carried on by the company.", "Facts": "The taxpayer is the controlling individual of an Australian resident company and acquired shares in the company after 19 September 1985. The company's business is sold in winding-up the company in October 2006. Six months later the shares in the company are cancelled and the taxpayer makes a capital gain on the cancellation. Just before the sale of the company's business, the market value of the active assets of the company was at least 80% of the market value of all the assets of the company.", "Reasons_for_Decision": "Summary: For the small business CGT concessions in Division 152 of the ITAA 1997 to apply, the CGT asset must satisfy the active asset test in section 152-35 of the ITAA 1997. A requirement of the active asset test in subsection 152-35(2) of the ITAA 1997 is that the CGT asset must be an active asset from the time when the asset was acquired until the time of either the CGT event giving rise to the capital gain or, if the relevant business had ceased to be carried on in the 12 months before the CGT event, the cessation of that business. The Commissioner can allow a longer period than 12 months. The reference to the relevant business ceased to be carried on in subparagraph 152-35(2)(b)(ii) of the ITAA 1997 is not limited to a business that ends, in the sense that no one continues to carry it on, and includes a reference to a business that has ceased to be carried on by a taxpayer because the taxpayer has sold that business. For the purpose of determining whether a share in a company that has ceased to carry on a business satisfies the active asset test, the 'relevant business' referred to in subparagraph 152-35(2)(b)(ii) of the ITAA 1997 is the business previously carried on by the company. Therefore, if a CGT event happens to a share in a company in the 12 month period (or such longer period as the Commissioner allows) after the company has ceased to carry on its business, the relevant test time for subparagraph 152-35(2)(b)(ii) of the ITAA 1997 purposes is just before the cessation of the business because that pre-dates the CGT event. That is, the share must be an active asset just before the cessation of the business and not just before the CGT event.", "Date_of_Decision": "16 March 2010", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 152 section 152-35 subsection 152-35(1) subsection 152-35(2) subparagraph 152-35(2)(b)(ii) subsection 152-40(3) paragraph 152-40(3)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Active asset test Basic conditions for relief Capital gains tax CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201090", "Unmatched_Content": "Minor punctuation amendment. | Minor punctuation amendments. Minor editing of second paragraph to improve clarity. Typographical error corrected in last paragraph. | Keywords Active asset test Basic conditions for relief Capital gains tax CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2004/378", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: active asset - joint ownership of a share", "Issue": "Is a jointly owned share in a company an active asset under paragraph 152-40(3)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A jointly owned share in a company is an active asset under paragraph 152-40(3)(a) of the ITAA 1997.", "Facts": "A company carries on a business and uses all of its assets in the course of carrying on that business. The company has 300 shares on issue and has two shareholders. The two shareholders each own 100 shares in their own right as well as jointly owning the remaining 100 shares. One shareholder is intending to sell and will make capital gains from the sale of their shares.", "Reasons_for_Decision": "Summary: For a capital gain to qualify for the small business capital gains tax (CGT) concessions the basic conditions in Subdivision 152-A of the ITAA 1997 must be satisfied. One of those conditions is that the CGT asset that gives rise to the capital gain must satisfy the active asset test (paragraph 152-10(1)(d) of the ITAA 1997). Section 152-35 of the ITAA 1997 provides that an asset satisfies the active asset test if it was an active asset at a particular time and for at least half a particular period. Section 152-40 of the ITAA 1997 specifies when an asset is an active asset. In particular, subsection 152-40(3) of the ITAA 1997 provides that a share in a company that is an Australian resident can be an active asset in certain circumstances. A part of, or an interest in, a CGT asset, is itself a CGT asset. A jointly owned share in a company is therefore a CGT asset and accordingly, the sale of a jointly owned share may give rise to a capital gain. The question therefore arises, in the context of the small business CGT concessions, as to whether a jointly owned share can be an active asset such that any gain made on its sale may qualify for those concessions. In other words, the question is whether the reference to a share in a company in paragraph 152-40(3)(a) of the ITAA 1997 includes a reference to a jointly owned share in a company. The same question also arises in relation to the additional basic conditions in subsection 152-10(2) of the ITAA 1997 in that, if a reference to a share includes a reference to a jointly owned share, the controlling individual test must also be satisfied. The purpose and effect of subsection 152-40(3) of the ITAA 1997 and related provisions is to enable individual taxpayers actively involved in managing their businesses through certain companies and trusts to qualify for the small business concessions, without separately selling the active assets of the company or trust. Having regard to this, it is considered that the reference to a share in a company (or to shares) in paragraph 152-40(3)(a) and subsections 152-10(2) and 152-55(1) of the ITAA 1997 includes a reference to a jointly owned share in a company. Accordingly, a jointly owned share may be an active asset if the requirements of paragraph 152-40(3)(b) of the ITAA 1997 are satisfied, and any capital gain arising from its sale may qualify for the small business CGT concessions if the other conditions are satisfied.", "Date_of_Decision": "2 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 152-A paragraph 152-10(1)(d) subsection 152-10(2) section 152-35 section 152-40 subsection 152-40(3) paragraph 152-40(3)(a) paragraph 152-40(3)(b) subsection 152-55(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Active asset Active asset test Basic conditions for relief Capital gains tax CGT assets CGT small business relief Controlling individual Controlling individual test Shares", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004378", "Unmatched_Content": "Keywords Active asset Active asset test Basic conditions for relief Capital gains tax CGT assets CGT small business relief Controlling individual Controlling individual test Shares"}
{"ATO_ID_Number": "ATO ID 2003/714", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: active assets - application of the 80% test to trust accounts", "Issue": "Will funds in a bank account in the company's name, held in trust for its clients, be included as an asset of the company for purposes of the 80% test contained in paragraph 152-40(3)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Funds in a bank account in the company's name, held in trust for its clients, will not be included in the 80% test contained in paragraph 152-40(3)(b) of the ITAA 1997.", "Facts": "The taxpayer and the taxpayer's spouse owned all the shares in the company that operated an agency business. The company sold its business and made a capital gain. Just before the sale of the business, one of the assets held in the company's name was a bank account containing funds held on behalf of various clients. It was the practice of the company to withdraw commissions from the account, and then hold the funds in the bank account before remitting them on behalf of the clients within 90 days of receipt. These funds were a substantial asset of the company prior to the sale of the business. After the company sold its business, it was wound up and all of the shares were cancelled. The net assets of the company and its associates were at all times less than $5,000,000.", "Reasons_for_Decision": "Summary: Under subsection 152-40(3) of the ITAA 1997, shares in a company will be an active asset at a given time if the company is an Australian resident, and the company passes the '80% test'. The 80% test requires that the total of the market values of the active assets of the company (and certain funds held pending the acquisition of new active assets) is 80% or more of the market value of all of the assets of the company. Apart from the exception mentioned in the previous paragraph, cash (usually held as funds in a bank account) and the value of a debt owed to the company are included in the market value of all of the company's assets, but do not contribute to the active asset part of the 80% test calculation. However, where the company holds legal title to the funds in the bank account, but does not have an equitable interest in these funds, it is appropriate, under general principles of trust law, to exclude the funds from the company's assets entirely. A trust may be loosely defined as an equitable obligation binding a person to deal with property over which he or she has control for the benefit of other persons. The trustee holds legal title to the trust property, but in most cases does not have an equitable interest in it. The general principle is that in most cases the trust property cannot be said to be an asset that belongs beneficially to the trustee. The funds in the bank account were held on trust for the benefit of various clients, and were kept separate from the company's other funds. Therefore, the funds in the bank account are not included as assets of the company when considering whether the 80% test contained in paragraph 152-40(3)(b) of the ITAA 1997 has been passed.", "Date_of_Decision": "27 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 152-40 subsection 152-40(3) paragraph 152-40(3)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Active asset test Basic conditions for relief CGT small business relief Trust accounts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003714", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by Tax Laws Amendment (2006 Measures No 7) Act 2007 (Act No 55 of 2007), applicable to CGT events happening in the 2006-07 income year or later income years. | Keywords Active asset test Basic conditions for relief CGT small business relief Trust accounts"}
{"ATO_ID_Number": "ATO ID 2002/354", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax - Small Business Rollover Relief - Active Assets - Asset 'held ready for use'.", "Issue": "Can land, on which minor earthworks have been carried out in preparation for the construction of a shed to be used in a business, but sold prior to the construction of the shed, be 'held ready for use' for the purposes of the CGT Small Business Concessions under section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The land is not regarded as being 'held ready for use' in the course of carrying on a business under section 152-40 of the ITAA 1997.", "Facts": "The taxpayer acquired a property, which consists of 10 acres of land that included a private dwelling. Shortly after settlement the taxpayer was approached by another entity that wished to acquire it as a buffer to its future operations. The taxpayer carried on a business at various customer on-site locations. No business was carried on from the property. The taxpayer commenced earthworks to erect a shed with the intention to run its business from the property. The property was subsequently sold to the other entity without any further work to complete the construction of the shed. A capital gain was realised.", "Reasons_for_Decision": "Summary: One of the conditions for the Small Business Concessions that must be met by an entity is that the capital gain must relate to the disposal of an 'active asset'. Paragraph 152-40(1)(a) of the ITAA 1997 states that an asset will be an active asset if it is used or held ready for use in the course of carrying on a business. The expression 'held ready for use' is not defined in the legislation, nor is the meaning of the expression discussed in the Explanatory Memorandum to the New Tax System (Capital Gains Tax) Bill 1999 which introduced Division 152 into the ITAA 1997. The expression 'held ready for use' is used in other places in the income tax legislation. For example, the expression occurs in the former subsection 82KZC(4) of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to land used for rent producing purposes. The subsection says that land will be taken to be used for rent producing purposes if 'at that time the land is used, or held ready for use.........for the purposes of producing rent...'. In the Explanatory Memorandum to the Taxation Laws Amendment Act 1986 , which introduced this provision, it is noted that the condition of 'readiness' would not be satisfied while a building was under construction on the land, but would generally be satisfied once construction finished and tenants were being sought. A similar expression has been used in the former subsection 54(1) of the ITAA 1936. The subsection allowed a deduction for depreciation of items of plant used for the purpose of producing assessable income that '...has been installed ready for use for that purpose and is during that year held in reserve....'. The meaning of 'installed ready for use' has been discussed in a number of Taxation Board of Review cases. In (1956) 6 CTBR(NS) Case 24 the Board of Review held that unfinished property was not depreciable property. At P 157, Mr. J F McCaffrey said: 'Thus, under the Assessment Act prior to 1936, ordinary depreciation was allowable on property being plant etc. owned and used for the production of income(s.23(1)(e)(i) ). Thus as a fundamental requirement for the allowance the relevant 'property' had to be functionally operative in the taxpayer's business. This idea was preserved in the 1936 Act, which, as well, extended the allowance to property being plant, etc., installed ready for use and held in reserve (vide S. 54). The choice of the word 'ready' in that section is indicative of the requirement of functional operability at relevant times...' A similar conclusion was reached in (1964) 11 CTBR(NS) Case 103 . In that case the taxpayer carried on a business as a primary producer. On 30 June 1961 the taxpayer commenced construction of a building to provide accommodation for future employees. The building was not completed till after 30 June 1962 and during the year was not used for the purpose of producing assessable income. The taxpayer had sought to claim a deduction for depreciation for the year ended 30 June 1962. It was held by the Board that since construction was not complete the building could not be said to be 'ready for use'. The land which was acquired by the taxpayer with the intention of constructing a shed from which to operate its business was not in a state of preparedness from which the business could be carried on. The land was not ready for use unless it enabled the taxpayer to operate the business on it. Therefore the land cannot be considered to be held 'ready for use' in the course of carrying on a business and, by definition, cannot be regarded as an 'active asset' under section 152-40 of the ITAA 1997.", "Date_of_Decision": "21 February 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Division 152 subsection 152-10(1) subsection 152-40(1) paragraph 152-40(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "Case 24 (1956) 6 CTBR(NS) 154", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002354", "Unmatched_Content": "Add the words \"the former\" prior to subsection 82KZC(4) of the ITAA 1936 and subsection 54(1) of the ITAA 1936."}
{"ATO_ID_Number": "ATO ID 2002/629", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT - small business concessions - active asset - just before the CGT event", "Issue": "Was the taxpayer's farm an active asset 'just before the CGT event', as required by paragraph 152-35(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the taxpayer's farm was an active asset 'just before the CGT event' as required by paragraph 152-35(a) of the ITAA 1997.", "Facts": "The taxpayer acquired breeding stock and a farm on which to conduct a livestock breeding business. The taxpayer made improvements to the property after it was acquired to better carry on that business. The taxpayer appointed a farm manager to look after the business. However, the manager did not provide satisfactory care for the stock and was subsequently dismissed. The stock were moved to another property for rehabilitation. Plans were made to move the stock back to the property when they had fully recovered. The farmhouse was leased on a short term basis. The lease did not extend to the remaining area of the farm. The taxpayer continued to improve the property in preparation for the stock's return. However, the taxpayer began to suffer various health problems and was unable to work. The plans to move the stock back to the property were delayed. The taxpayer's worsening health situation lead to a decision to sell the property and purchase a smaller and better equipped farm. The taxpayer sold the property and made a capital gain. The proceeds from the sale were used to acquire a replacement farm. The stock were gradually relocated to the new property. The breeding business continues to operate from the new property.", "Reasons_for_Decision": "Summary: One of the requirements of the active asset test in paragraph 152-35(a) of the ITAA 1997 is that the definition of active asset (section 152-40 of the ITAA 1997) be satisfied 'just before the CGT event' (in cases where there hasn't been a cessation of business). To satisfy the definition of active asset in section 152-40 of the ITAA 1997 the asset must be used or held ready for use in the course of carrying on a business. Even though the farm was not used in the course of carrying on the taxpayer's business for a certain period of time, their intention and activities of continually improving the farm in preparation for the stock's return clearly indicate that the farm was held ready for use during that period. There was never a cessation of business in this case or an intention to abandon the business due to the taxpayer's or stock's health conditions. Although the taxpayer had formed an intention to carry on the business on another property if the farm could be sold, it is accepted that just before the time the contract for sale was made that the farm was held ready for use in the taxpayer's business. Consequently, the requirement in paragraph 152-35(a) of the ITAA 1997 has been satisfied in this case.", "Date_of_Decision": "17 April 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 Paragraph 152-35(a) Section 152-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Active Asset test", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002629", "Unmatched_Content": "This ATOID has been amended by replacing in the Status of Decision field \"Decision current\" with \"Decision current for CGT events in the 2005-06 income year and earlier income years.\", and adding the note to the Reasons for Decision. | Keywords Capital gains tax Active Asset test"}
{"ATO_ID_Number": "ATO ID 2002/753", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: small business roll-over/ replacement active asset/ main residence", "Issue": "Can an interest in a property from which the taxpayer will carry on a business satisfy the meaning of an active asset under section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997) for the purpose of choosing the small business roll-over under section 152-410 of the ITAA 1997?", "Decision": "Yes. An interest in a property from which the taxpayer will carry on a business will satisfy the meaning of an active asset under section 152-40 of the ITAA 1997.", "Facts": "The taxpayer is a company which anticipates making a capital gain from the sale of a business. The taxpayer intends to use the capital gains tax (CGT) small business roll-over by buying a replacement active asset, being a 30% interest in a property from which it will run a new business. The property will include a house, and the taxpayer estimates it will use approximately 30% of the house for business purposes. The remaining interest in the property will be held by several individuals who intend to use the house as their main residence.", "Reasons_for_Decision": "Summary: For the interest in the property to be a replacement asset for the CGT small business roll-over relief under Subdivision 152-E of the ITAA 1997 the property must be an active asset when it is acquired or within 2 years of the relevant CGT event (subsection 152-420(4) of the ITAA 1997). Active asset is defined in section 152-40 of the ITAA 1997. Essentially an asset is an active asset if it is owned by a taxpayer and used or held ready for use in the course of carrying on a business and does not fall within one of the exclusions contained in subsection 152-40(4) of the ITAA 1997. The property will be used to carry on the business by the taxpayer and does not fall within one of the exclusions under subsection 152-40(4) of the ITAA therefore it will be an active asset. The fact that other persons will use the property for private purposes does not affect the property's standing as an active asset in the hands of the taxpayer. The taxpayer may therefore choose to use the CGT small business roll-over and treat the property as a replacement asset.", "Date_of_Decision": "8 May 2002", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 152-40 subsection 152-40(4) Subdivision 152-E subsection 152-420(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT replacement assets Small business roll-over Active asset test CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Centres of Expertise Capital Gains Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002753", "Unmatched_Content": "This ATO ID has been amended due to the repeal of subsection 152-420(4) by Tax Laws Amendment (2006 Measures No. 7) Act 2007. | Keywords CGT replacement assets Small business roll-over Active asset test CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2002/862", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: active asset test: interest in property acquired at different times", "Issue": "Is the active asset test in section 152-35 of the Income Tax Assessment Act 1997 ('ITAA 1997') applied separately to interests in land acquired at two different times?", "Decision": "Yes. Where a taxpayer acquires an interest in land at two different times each interest is a separate asset for the purposes of applying the active asset test in section 152-35 of the ITAA 1997.", "Facts": "The taxpayer acquired a half interest in a farming property 1 January 1990 (interest A) and acquired the other half interest fourteen months later in 1 March 1991 (interest B). The taxpayer commenced farming operations on the property immediately after acquiring interest B. After unsuccessfully trying to sell the property for some time, the taxpayer leased the property for three years from 1 June 1997 to 31 May 2000. At the conclusion of the lease the taxpayer once again began farming the property for a six month period.", "Reasons_for_Decision": "Summary: In order to satisfy the active asset test, section 152-35 of the ITAA 1997 requires a CGT asset to be an active asset of a taxpayer: '(a) just before the earlier of: (i) the CGT event; and (ii) if the relevant business ceased to be carried on in the last 12 months or any longer period that the Commissioner allows - the cessation of the business; and Taxation Determination TD 2000/31 states that if a taxpayer owns an interest in a CGT asset and they acquire another interest in the asset, the interests remain separate CGT assets. Therefore, the two half interests in the farming property that the taxpayer acquired remain separate CGT assets throughout the period of ownership. The active asset test must be applied separately to each interest. Both interests in the property became the taxpayer's active assets immediately after the acquisition of interest B when the taxpayer commenced farming operations. The interests remained the taxpayer's active assets until the lease was entered into (75 months). The interests once again became active assets for the period immediately after the lease ended and before the sale (6 months). The total period the interests were used as active assets was 81 months. Interest A was owned for a total period of 131 months and interest B for 117 months. Interest A was active for approximately sixty per cent of the total period of ownership. Interest B was active for approximately seventy per cent of the total period of ownership. It is therefore considered that the both interests in the property will be the taxpayer's active assets for over half the period from their respective dates of acquisition to the time of the CGT event as required by paragraph 152-35(b) of the ITAA 1997. (The taxpayer owned both interests in the property for less than 15 years and therefore the consideration of subparagraph 152-35(b)(ii) of the ITAA 1997 is not relevant).", "Date_of_Decision": "15 March 2002", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 152-35 paragraph 152-35(b) subparagraph 152-35(b)(ii) paragraph 152-40(1)(a)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/31 | Taxation Determination TD 1999/78", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT small business relief Active asset test CGT separate assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002862", "Unmatched_Content": "Reasons for Decision: and ending at the time that applies under paragraph (a).' | Related Public Rulings (including Determinations) Taxation Determination TD 2000/31 Taxation Determination TD 1999/78 | Keywords Capital gains tax CGT small business relief Active asset test CGT separate assets"}
{"ATO_ID_Number": "ATO ID 2015/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: CGT small business concessions: small business participation percentage - trust where entities have entitlement to all income and capital of the trust", "Issue": "Is a trust, in relation to which a term of the trust deed gives the trustee the power to accumulate income or capital of the trust estate for a year of income, capable of being a trust where entities have entitlements to all the income and capital of the trust for the purposes of Item 2 of the table in subsection 152-70(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A trust, in relation to which a term of the trust deed gives the trustee the power to accumulate income or capital of the trust estate for a year of income, is capable of being a trust where entities have entitlements to all the income and capital of the trust for the purposes of Item 2 of the table in subsection 152-70(1) of the ITAA 1997.", "Facts": "The XYZ Trust is a unit trust, in which two unit holders, U1 and U2, each hold 50% of the single class of units. Under the XYZ Trust Deed, unit holders are entitled to each year's income of the trust estate in proportion to their unit holdings. Upon vesting, or at an earlier time determined by the trustee, unit holders are also entitled to the capital of the trust estate in proportion to their unit holdings. The trustee has no discretion to allocate income or capital of the trust to unit holders other than in accordance with the share of income and capital represented by their units. The XYZ Trust Deed gives the trustee discretion to accumulate some, or all, of the income of the trust estate for a year of income such that it forms part of the capital of the trust fund. Each unit holder retains their interest in the share of accumulated income represented by their unit holdings.", "Reasons_for_Decision": "Summary: The small business Capital Gains Tax (CGT) concessions only apply to a capital gain if, amongst other things, the basic conditions in section 152-10 of the ITAA 1997 are met. Where that capital gain is made in respect of an interest in a trust or a share in a company, the additional basic condition in subsection 152-10(2) of the ITAA 1997 requires a determination of whether or not an individual is a CGT concession stakeholder and, in turn, a significant individual, in the trust or company just before the relevant CGT event (defined in sections 152-60 and 152-55 of the ITAA 1997, respectively). An individual is a significant individual in a trust at a time if, at that time, the individual has a small business participation percentage in the trust of at least 20% (section 152-55 of the ITAA 1997). An entity's small business participation percentage in another entity at a time is the percentage that is the sum of the entity's direct small business participation percentage and indirect small business participation percentage in the other entity at that time (section 152-65 of the ITAA 1997). An entity's direct small business participation percentage in a trust is calculated using the methodology in either item 2 or 3 of the table in subsection 152-70(1) of the ITAA 1997, depending on whether or not the trust is one in which entities have entitlements to all of the income and capital of the trust. Items 2 and 3 of the table in subsection 152-70(1) of the ITAA 1997 state: An entity's direct small business participation percentage In this entity: Is: 1 ... ... 2 A trust (where entities have entitlements to all the income and capital of the trust) This percentage: (a) the percentage of any distribution of income that the trustee may make to which the entity would be beneficially entitled; or (b) the percentage of any distribution of capital that the trustee may make to which the entity would be beneficially entitled; or, if they are different, the smaller. 3 A trust (where entities do not have entitlements to all the income and capital of the trust) This percentage: (a) if the trustee makes distributions of income during the income year (the relevant year) in which that time occurs-the percentage of the distributions to which the entity was beneficially entitled; or (b) if the trustee makes distributions of capital during the relevant year-the percentage of the distributions to which the entity was beneficially entitled; or, if 2 different percentages are applicable, the smaller. or, if they are different, the smaller. or, if 2 different percentages are applicable, the smaller. Although 'income' is not relevantly defined, in context, it has the meaning which it has for the purposes of the general law of trusts (ATO Interpretative Decision ATO ID 2012/99). Similarly, it is considered that 'capital' has the meaning which it has for the purposes of the general law of trusts. Accordingly, a determination of whether a trust is an entity to which item 2 or item 3 of the table in subsection 152-70(1) of the ITAA 1997 applies, depends on whether or not, on a proper construction of the trust instrument, there is any amount of income or capital of the trust to which no beneficiary is entitled at the relevant time. The 'relevant time' (as that phrase is used in subsection 152-70(1) of the ITAA 1997) for making the determination is, with respect to the additional basic conditions, 'just before the CGT event' (subsection 152-10(2) of the ITAA 1997). Accordingly, a trust instrument which gives the trustee discretion to appoint or distribute income or capital to one or more of a class of beneficiaries is a trust where entities do not have entitlements to all the income and capital of the trust. Although entities may become entitled to the income and capital of the trust as a result of the exercise of the trustee's discretion, those entitlements do not exist prior to that time. By contrast, whilst every case will turn on a proper construction of the trust instrument, the power in the trustee to accumulate income of the trust in the present case does not of itself cause the trust to be one in which beneficiaries do not have entitlements to all the income and capital of the trust. Generally, an accumulation clause gives the trustee a power to effectively cause part of the income of the trust estate to be capital of the trust estate. Provided that, under the trust instrument, one or more beneficiaries has, at the relevant time, an entitlement to all of the income and capital of the trust, including any accumulated income or capital, the trust will be a trust to which item 2 of the table in subsection 152-70(1) of the ITAA 1997 applies. For the purposes of determining whether or not a trust is a trust to which item 2 or item 3 of the table in subsection 152-70(1) applies, it doesn't matter whether the same beneficiary or beneficiaries have an entitlement to the accumulated income or capital. In the present case, the power in the trustee to accumulate some or all of the income of the trust estate in accordance with the terms of the trust deed does not change the fact that entities are, at all relevant times, entitled to all of the income and capital of the unit trust. Note: A number of other provisions in Division 152 of the ITAA 1997 are also conditional upon whether or not an individual is a concession stakeholder or significant individual (as defined in sections 152-60 and 152-55 of the ITAA 1997). In general, the 'relevant time' is 'just before the CGT event'. However, the '15-year exemption' in Subdivision 152-B contains a number of provisions that test whether a company or trust had a significant individual for 'a total of at least 15 years' (sections 152-105 and 152-110 of the ITAA 1997). The 'relevant time' in respect of those provisions is each point in time on which the test is being applied.", "Date_of_Decision": "10 February 2015", "Year_of_Income": "Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Division 152 Subdivision 152-B section 152-10 subsection 152-10(2) section 152-55 section 152-60 section 152-65 subsection 152-70(1) subsection 152-70(2) section 152-105 section 152-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/99", "Subject_References": "Basic conditions for relief Capital gains tax CGT concession stakeholder CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20158", "Unmatched_Content": "Keywords Basic conditions for relief Capital gains tax CGT concession stakeholder CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2012/99", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax - direct small business participation percentage in a trust - meaning of 'distributions of income' and capital", "Issue": "When determining an entity's direct small business participation percentage in a trust under items 2 or 3 of the table in subsection 152-70(1) of the Income Tax Assessment Act 1997 (ITAA 1997), do the references to distributions of 'income' necessarily mean income according to ordinary concepts?", "Decision": "No. The references to distributions of 'income' in the context of determining an entity's direct small business participation percentage in a trust mean the income of the trust, determined according to the general law of trusts, to which a beneficiary could be entitled. Depending on the deed and/or actions of the trustee, this may be an amount that differs from the ordinary income of the trust.", "Facts": "In a particular income year the trustee of a discretionary trust makes a capital gain of $90,000 from the sale of shares in a company (the object company ). Prior to the sale, the trustee owned 50% of the shares in that company. The trustee also derived ordinary income of $10,000 in that year. The trustee has a power to appoint income of the trust among a range of discretionary objects. The trust deed does not define 'income' although the trustee does have a power to determine whether receipts are on capital or revenue account. Pursuant to the deed, the trustee validly resolves to treat the capital gain as income of the trust and to distribute it to beneficiary A. The trustee resolves to appoint the ordinary income to beneficiary B.", "Reasons_for_Decision": "Detailed Reasoning - Background: The small business Capital Gains Tax (CGT) concessions will only potentially apply to a capital gain if the basic conditions in section 152-10 of the ITAA 1997 are met. Where that capital gain is made by a trust in respect of a share in a company, those basic conditions include the requirement that CGT concession stakeholders in that company together hold a small business participation percentage in the trust of at least 90 percent (paragraph 152-10(2)(b) of the ITAA 1997). | Detailed Reasoning - Which entities have a small business participation percentage in the discretionary trust?: An individual's direct small business participation percentage in a trust is worked out under either item 2 or item 3 of the table in subsection 152-70(1) of the ITAA 1997 depending on whether beneficiaries have or do not have entitlements to all of the income and capital of the trust. In this case the trust is a discretionary trust (beneficiaries do not have entitlements to all the income and capital of the trust) and so the relevant percentage is worked out under item 3 as follows: To make the calculation it must first be ascertained whether the amount treated by the trustee as income of the trust estate is 'income' for the purpose of paragraph (a) of item 3. Neither 'income' nor the expression 'distributions of income' is defined in that provision. However it is considered that when read in context income has the meaning which it has for the purposes of the general law of trusts. This is consistent with the decision in Commissioner of Taxation v. Bamford [2010] FCAFC 6; 2010 ATC 20-163 ( Bamford ). In that case, the High Court held that the expression 'income of the trust estate' as used in section 97 of the ITAA 1936 had a content found in the general law of trusts upon which Division 6 (including section 97) then operates. Section 97 is concerned with ascertaining whether a beneficiary is 'presently entitled to a share of the income of the trust estate' as a step in the process of determining the share of the trust's net income (calculated pursuant to subsection 95(1) of the ITAA 1936) included in the assessable income of the beneficiary. Item 3 of the table in subsection 152-70(1) provides a different legislative context. It is instead concerned with determining a beneficiary's entitlement to income distributions made by a trust for the purpose of determining the beneficiary's participation percentage in the trust. This is a step in the process of determining whether a capital gain made by the beneficiary on the disposal of its interest in the trust qualifies for any of the CGT small business concessions. While item 3 of the table in subsection 152-70(1) concerns a legislative enquiry that is different from that required by section 97, it is nonetheless considered that the reference in item 3 to 'income' also has a content found in the general law of trusts - albeit a content upon which item 3 then operates (in a different fashion from the operation of section 97). Accordingly, where a trust instrument, or the trustee acting in accordance with it, treats the whole or part of a receipt as income of a period and distributes that amount to a beneficiary entitled to income, that amount is a distribution of income within the meaning of paragraph (a) of item 3. In this case, it follows that in consequence of the trustee's valid resolution pursuant to the deed to treat the capital gain as income of the trust, that amount is 'income' for the purpose of paragraph (a) of item 3 of the table in subsection 152-70(1) of the ITAA 1997. As the trustee did not make a distribution of capital during the income year, beneficiary A has a direct small business participation percentage in the trust of 90% whereas B has a direct small business participation percentage in the trust of 10%. | Detailed Reasoning - Is beneficiary A or beneficiary B a CGT concession stakeholder in the object company?: An individual with a small business participation percentage in a company of at least 20% is a 'significant individual' in that entity and thereby qualifies as a CGT concession stakeholder of that entity (sections 152-55 and 152-60 of the ITAA 1997). The 20% can be made up of direct and indirect percentages (section 152-65 of the ITAA 1997). Although the beneficiaries do not have a direct small business participation percentage in the company they have an indirect small business participation percentage calculated under section 152-75 of the ITAA 1997 of 45% and 5% respectively (as a consequence of the trust's 50% shareholding in the company immediately prior to the sale giving the trustee a direct small business participation percentage in the company of 50%). Beneficiary A is therefore a CGT concession stakeholder in the company (by virtue of holding an indirect small business participation percentage in the company of at least 20%). However, Beneficiary B is not a CGT concession stakeholder as its indirect small business participation percentage is only 5%. Despite beneficiary B not satisfying the significant individual test, the additional basic condition under paragraph 152-10(2)(b) will be met in respect of the capital gain made by the trustee from the disposal of the shares because beneficiary A is a CGT concession stakeholder in the object company and has a small business participation percentage in the trust of 90%.", "Date_of_Decision": "10 December 2012", "Year_of_Income": "year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 section 97 section 102UI", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains CGT events CGT small business relief Trusts Trustees Discretionary trusts Trust income Trust deeds", "Case_References": "Commissioner of Taxation v Bamford [2010] HCA 10 (2010) 240 CLR 481 2010 ATC 20-170 (2010) 75 ATR 1", "Other_References": "", "Business_Line": "Law and Practice", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201299", "Unmatched_Content": "or, if 2 different percentages are applicable, the smaller. | Keywords Capital gains CGT events CGT small business relief Trusts Trustees Discretionary trusts Trust income Trust deeds"}
{"ATO_ID_Number": "ATO ID 2011/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: maximum net asset value test - disregarded assets - asset being used solely for personal use and enjoyment", "Issue": "Is the use of an asset over its ownership period taken into account in determining whether the asset is being used solely for personal use and enjoyment and therefore disregarded from the net value of an individual's CGT assets under subparagraph 152-20(2)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The use of an asset over its ownership period is taken into account in determining whether the asset is being used solely for personal use and enjoyment and therefore disregarded from the net value of an individual's CGT assets under subparagraph 152-20(2)(b)(i) of the ITAA 1997.", "Facts": "An individual taxpayer makes a capital gain from the sale of a business asset. The individual also owns a dwelling (separate from their business). The dwelling has been leased to tenants for a period of 5 years from the time of acquisition until one month before the sale of the business asset. From the time the leasing of the dwelling ceased until after the sale of the business asset, the dwelling was used solely for the personal use and enjoyment of the individual (but not as a main residence). The individual is not a small business entity within the meaning of section 328-110 of the ITAA 1997 at any time. For the purpose of determining whether they qualify for the small business CGT concessions, the individual must determine the net value of their CGT assets and in particular, whether the value of the dwelling is included in the calculation.", "Reasons_for_Decision": "Summary: To qualify for the small business CGT concessions, a taxpayer must generally satisfy either the maximum net asset value test or, for CGT events happening in the 2007-08 or later income years, be a small business entity ($2 million turnover test) (paragraph 152-10(1)(c) of the ITAA 1997). A taxpayer satisfies the maximum net asset value test if, just before the CGT event, the net value of their CGT assets and of certain related entities does not exceed a threshold (section 152-15 of the ITAA 1997). In working out the net value of the CGT assets of an individual, assets being used solely for the personal use and enjoyment of the individual, or the individual's affiliate (except a dwelling, or an ownership interest in a dwelling, that is the individual's main residence, including any relevant adjacent land) are disregarded (subparagraph 152-20(2)(b)(i) of the ITAA 1997). The question arises as to whether subparagraph 152-20(2)(b)(i) of the ITAA 1997 requires only a consideration of the use of an asset immediately before the relevant CGT event or requires a consideration of the use of the asset throughout its ownership period to determine whether it is an asset being used solely for personal use and enjoyment. It is considered that if regard was had only to an asset's use at a single point in time, that is, immediately before the relevant CGT event, the result would not necessarily reflect the true nature of the use of the asset. Accordingly, it is considered that regard must be had to the use of an asset over its ownership period in order to ascertain whether the asset is being used solely for personal use and enjoyment. As the provision refers to sole personal use, any non-personal use of an asset over its ownership period will mean the asset is not disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997. In this case, the individual has used their dwelling for non-personal use for nearly the entire period of ownership up to the time of the sale of the business asset. Accordingly, the dwelling is not an asset being used solely for the personal use and enjoyment of the individual and is not disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997. The dwelling must be included in the net value of the individual's assets under section 152-15 of the ITAA 1997.", "Date_of_Decision": "3 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 152-10(1)(c) section 152-15 subparagraph 152-20(2)(b)(i) section 328-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201137", "Unmatched_Content": "Keywords Basic conditions for relief Capital gains CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2011/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: maximum net asset value test - disregarded assets - dwellings", "Issue": "In working out the net value of the CGT assets of an individual, does the reference to 'dwelling' in subsection 152-20(2A) of the Income Tax Assessment Act 1997 (ITAA 1997) only refer to a dwelling that is an individual's main residence?", "Decision": "Yes. The reference to 'dwelling' in subsection 152-20(2A) of the ITAA 1997 only refers to a dwelling that is an individual's main residence.", "Facts": "An individual taxpayer makes a capital gain from the sale of a business asset. The individual also owns a dwelling (separate from their business). The dwelling has been leased to tenants for a period of 5 years from the time of acquisition until one month before the sale of the business asset. From the time the leasing of the dwelling ceased until after the sale of the business asset, the dwelling was used solely for the personal use and enjoyment of the individual (but not as a main residence). The individual is not a small business entity within the meaning of section 328-110 of the ITAA 1997 at any time. For the purpose of determining whether they qualify for the small business CGT concessions, the individual must determine the net value of their CGT assets and in particular, whether the value of the dwelling is included in the calculation.", "Reasons_for_Decision": "Summary: To qualify for the small business CGT concessions, a taxpayer must generally satisfy either the maximum net asset value test (section 152-15 of the ITAA 1997), or be a CGT small business entity (as defined by subsection 152-10(1AA), paragraph 152-10(1)(c) of the ITAA 1997). A taxpayer satisfies the maximum net asset value test if, just before the CGT event, the net value of their CGT assets and of certain related entities does not exceed a threshold (section 152-15 of the ITAA 1997). In working out the net value of the CGT assets of an individual, subsection 152-20(2A) of the ITAA 1997 provides for the inclusion of an apportioned amount of the value of certain dwellings that have been used to produce assessable income. In particular, if an individual's dwelling was used during all or part of its ownership period to produce assessable income and the individual satisfied paragraph 118-190(1)(c) of the ITAA 1997 (about interest deductibility) to some extent, then a reasonable proportion of the value of the dwelling is included in the net value of the individual's CGT assets, having regard to the extent of interest deductibility. Section 118-190 of the ITAA 1997 applies to dwellings that are main residences. It provides for apportionment of the main residence exemption where a dwelling is used to produce assessable income during all or part of the ownership period and at least some interest could be deducted if it was incurred on money borrowed to acquire the dwelling. The question arises as to whether subsection 152-20(2A) of the ITAA 1997 only applies to a dwelling that is the relevant individual's main residence or whether it applies to dwellings more generally. A dwelling is defined in section 118-115 of the ITAA 1997 as including a unit of accommodation that is a building or is contained in a building and consists wholly or mainly of residential accommodation. It also includes a unit of accommodation that is a caravan, houseboat or other mobile home and any land immediately under the unit of accommodation. As such, the definition of dwelling is not restricted to main residences. However, the requirement in paragraph 152-20(2A)(b) of the ITAA 1997 for the individual to satisfy to some extent the interest deductibility test in the main residence provisions indicates that the provision is intended to apply to dwellings that are main residences. Further, subsection 152-20(2A) of the ITAA 1997 is linked to subparagraph 152-20(2)(b)(ii) of the ITAA 1997, which, except for an amount that is included under subsection 152-20(2A), disregards the value of a dwelling that is an individual's main residence. In other words, the subject matter of subsection 152-20(2A) is a subset or a part of the subject matter of subparagraph 152-20(2)(b)(ii), which is main residence. It can also be noted that dwellings, being assets, are considered under subparagraph 152-20(2)(b)(i) of the ITAA 1997 (except for dwellings that are main residences). This is consistent with the view that subparagraph 152-20(2)(b)(ii) of the ITAA 1997 and subsection 152-20(2A) of the ITAA 1997 only apply to dwellings that are main residences. Accordingly, it is considered the reference to 'dwelling' in subsection 152-20(2A) of the ITAA 1997 only refers to a dwelling that is an individual's main residence. Therefore in this case, as the individual's dwelling has never been their main residence, the dwelling is not disregarded from the net value of the individual's CGT assets under subparagraph 152-20(2)(b)(ii) of the ITAA 1997 and subsection 152-20(2A) also does not apply to provide for only an apportioned amount of the value of the dwelling to be included. The dwelling is also not disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997 (see ATO ID 2011/37) and therefore must be included in the net value of the individual's CGT assets.", "Date_of_Decision": "3 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 118-115 section 118-190 paragraph 118-190(1)(c) paragraph 152-10(1)(c) subsection 152-10(1AA) section 152-15 subparagraph 152-20(2)(b)(i) subparagraph 152-20(2)(b)(ii) subsection 152-20(2A) paragraph 152-20(2A)(b) section 328-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/37", "Subject_References": "Basic conditions for relief Capital gains CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201138", "Unmatched_Content": "Reasons for decision, legislative reference | Update legislative reference-subsection 152-10(1AA) | Keywords Basic conditions for relief Capital gains CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2011/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: maximum net asset value test - disregarded assets - asset being used solely for personal use and enjoyment by spouse and children", "Issue": "Will the personal use of a holiday house by an individual's spouse and children under the age of 18 mean that the holiday house is not an asset being used solely for the personal use and enjoyment of the individual, such that the holiday house is not disregarded under subparagraph 152-20(2)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) in working out the net value of the individual's CGT assets?", "Decision": "No. The personal use of a holiday house by an individual's spouse and children under the age of 18, in conjunction with the individual's personal use, will not by itself stop the holiday house from being an asset used solely for the personal use and enjoyment of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997.", "Facts": "An individual taxpayer makes a capital gain from the sale of a business asset in the 2010-11 income year. The individual also owns a holiday house which has never been leased out. For the entire period of ownership, the holiday house has been used solely for the personal use and enjoyment of the individual, their spouse and their children under the age of 18 (for occasional holidays but never as a main residence). Neither the individual's spouse nor their children carry on any business. The individual is not a small business entity within the meaning of section 328-110 of the ITAA 1997 at any time. For the purpose of determining whether they qualify for the small business CGT concessions, the individual must determine the net value of their CGT assets and in particular, whether the value of the holiday house is included in the calculation.", "Reasons_for_Decision": "Summary: To qualify for the small business CGT concessions, a taxpayer must generally satisfy either the maximum net asset value test or, for CGT events happening in the 2007-08 or later income years, be a small business entity ($2 million turnover test) (paragraph 152-10(1)(c) of the ITAA 1997). A taxpayer satisfies the maximum net asset value test if, just before the CGT event, the net value of their CGT assets and of certain related entities does not exceed a threshold (section 152-15 of the ITAA 1997). In working out the net value of the CGT assets of an individual, assets being used solely for the personal use and enjoyment of the individual, or the individual's affiliate (except a dwelling, or an ownership interest in a dwelling, that is the individual's main residence, including any relevant adjacent land) are disregarded (subparagraph 152-20(2)(b)(i) of the ITAA 1997). For CGT events happening in the 2007-08 or later income years, the definition of 'affiliate' does not automatically include an individual's spouse or children under the age of 18. Further, if an individual does not carry on business, they can never be an 'affiliate' (subsection 328-130(1) of the ITAA 1997). As the individual's spouse and children are not affiliates of the individual, the question arises as to whether their personal use of the holiday house means that the holiday house is not being used solely for the personal use and enjoyment of the individual. It is considered that the personal use of the holiday house by the individual's spouse and children under the age of 18, in conjunction with the individual's personal use, is still nevertheless a part of the personal use and enjoyment of the holiday house by the individual. Such use will not therefore by itself stop the holiday house from being an asset used solely for the personal use and enjoyment of the individual. Accordingly, in the circumstances of this case, the holiday house is disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997 in working out the net value of the individual's CGT assets.", "Date_of_Decision": "3 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 152-10(1)(c) section 152-15 subparagraph 152-20(2)(b)(i) section 328-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201139", "Unmatched_Content": "Keywords Basic conditions for relief Capital gains CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2011/40", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: maximum net asset value test - disregarded assets - asset being used solely for personal use and enjoyment - non-income producing use by others", "Issue": "Will the personal use by others of an individual's holiday house for which no rent is paid mean that the holiday house is not an asset being used solely for the personal use and enjoyment of the individual, such that the holiday house is not disregarded under subparagraph 152-20(2)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) in working out the net value of the individual's CGT assets?", "Decision": "No. The personal use by others of an individual's holiday house for which no rent is paid will not by itself stop the holiday house from being an asset used solely for the personal use and enjoyment of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997.", "Facts": "An individual taxpayer makes a capital gain from the sale of a business asset in the 2010-11 income year. The individual also owns a holiday house which has never been leased out. For the entire period of ownership, the holiday house has been either used for the personal use and enjoyment of the individual (for occasional holidays but never as a main residence) or for the personal use and enjoyment of the individual's friends or relatives (none of which are the individual's affiliates). No rent is paid to the individual in these circumstances although payments are often made to cover the use of utilities such as electricity, gas and water. The individual is not a small business entity within the meaning of section 328-110 of the ITAA 1997 at any time. For the purpose of determining whether they qualify for the small business CGT concessions, the individual must determine the net value of their CGT assets and in particular, whether the value of the holiday house is included in the calculation.", "Reasons_for_Decision": "Summary: To qualify for the small business CGT concessions, a taxpayer must generally satisfy either the maximum net asset value test or, for CGT events happening in the 2007-08 or later income years, be a small business entity ($2 million turnover test) (paragraph 152-10(1)(c) of the ITAA 1997). A taxpayer satisfies the maximum net asset value test if, just before the CGT event, the net value of their CGT assets and of certain related entities does not exceed a threshold (section 152-15 of the ITAA 1997). In working out the net value of the CGT assets of an individual, assets being used solely for the personal use and enjoyment of the individual, or the individual's affiliate (except a dwelling, or an ownership interest in a dwelling, that is the individual's main residence, including any relevant adjacent land) are disregarded (subparagraph 152-20(2)(b)(i) of the ITAA 1997). The question arises as to whether the personal use of the holiday house by the individual's friends and relatives means that the holiday house is not being used solely for the personal use and enjoyment of the individual. It is considered that the personal use of the holiday house by the individual's friends and relatives for which no rent is paid is still nevertheless a part of the personal use and enjoyment of the holiday house by the individual. This is so even if amounts are paid to cover the use of utilities. Such use will not therefore by itself stop the holiday house from being an asset used solely for the personal use and enjoyment of the individual. Accordingly, in the circumstances of this case, the holiday house is disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997 in working out the net value of the individual's CGT assets.", "Date_of_Decision": "20 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 152-10(1)(c) section 152-15 subparagraph 152-20(2)(b)(i) section 328-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains CGT small business relief Maximum net asset value test", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201140", "Unmatched_Content": "Delete 'or later' and '($2 million turnover test)' from paragraph one. | Add dot points to paragraph one. | Add 'to 2015-16' and ', or for CGT events happening in the 2016-17 income year or later, be a CGT small business entity' to the second dot point in paragraph one. | Change from '8 January 2015' to '20 June 2018'. | Keywords Basic conditions for relief Capital gains CGT small business relief Maximum net asset value test"}
{"ATO_ID_Number": "ATO ID 2011/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: maximum net asset value test - disregarded assets - asset being used solely for personal use and enjoyment - income producing use", "Issue": "Will the personal use by others of an individual's holiday house for which rent is paid mean that the holiday house is not an asset being used solely for the personal use and enjoyment of the individual, such that the holiday house is not disregarded under subparagraph 152-20(2)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) in working out the net value of the individual's CGT assets?", "Decision": "Yes. The personal use by others of an individual's holiday house for which rent is paid means that the holiday house is not an asset being used solely for the personal use and enjoyment of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997.", "Facts": "An individual taxpayer makes a capital gain from the sale of a business asset in the 2010-11 income year. The individual also owns a holiday house. For most of the period of ownership, the holiday house has been used for the personal use and enjoyment of the individual (for occasional holidays but never as a main residence). Occasionally however, the holiday house has been used by others (none of which are the individual's affiliates). In these circumstances, at least on some occasions, rent is paid to the individual. The individual is not a small business entity within the meaning of section 328-110 of the ITAA 1997 at any time. For the purpose of determining whether they qualify for the small business CGT concessions, the individual must determine the net value of their CGT assets and in particular, whether the value of the holiday house is included in the calculation.", "Reasons_for_Decision": "Summary: To qualify for the small business CGT concessions, a taxpayer must generally satisfy either the maximum net asset value test or, for CGT events happening in the 2007-08 or later income years, be a small business entity ($2 million turnover test) (paragraph 152-10(1)(c) of the ITAA 1997). A taxpayer satisfies the maximum net asset value test if, just before the CGT event, the net value of their CGT assets and of certain related entities does not exceed a threshold (section 152-15 of the ITAA 1997). In working out the net value of the CGT assets of an individual, assets being used solely for the personal use and enjoyment of the individual, or the individual's affiliate (except a dwelling, or an ownership interest in a dwelling, that is the individual's main residence, including any relevant adjacent land) are disregarded (subparagraph 152-20(2)(b)(i) of the ITAA 1997). The question arises as to whether the personal use of the holiday house by others for which rent is paid means that the holiday house is not being used solely for the personal use and enjoyment of the individual. It is considered that the personal use of the holiday house by others for which rent is paid means that the holiday house is not being used solely for the personal use and enjoyment of the individual. The income producing nature of the arrangement is inconsistent with the concept of personal use and enjoyment. As the test is a sole use test, the holiday house is not being used solely for the personal use and enjoyment of the individual even if there is only occasional use of the holiday house by others during the ownership period for which rent is paid. Accordingly, in the circumstances of this case, the holiday house is not disregarded under subparagraph 152-20(2)(b)(i) of the ITAA 1997 in working out the net value of the individual's CGT assets.", "Date_of_Decision": "20 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 152-10(1)(c) section 152-15 subparagraph 152-20(2)(b)(i) section 328-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains CGT small business relief Maximum net asset value test", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201141", "Unmatched_Content": "Keywords Basic conditions for relief Capital gains CGT small business relief Maximum net asset value test"}
{"ATO_ID_Number": "ATO ID 2011/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: basic conditions - CGT event happening in relation to a CGT asset - granting an option", "Issue": "If CGT event D2 (about granting, renewing or extending an option) in section 104-40 of the Income Tax Assessment Act 1997 (ITAA 1997) happens, does that event happen 'in relation to' the asset in respect of which the option is granted (the underlying asset) therefore satisfying paragraph 152-10(1)(a) of the ITAA 1997?", "Decision": "Yes. A capital gain made from CGT event D2 happening will qualify for small business CGT relief on the basis that the CGT event happens 'in relation to' the underlying asset, therefore satisfying paragraph 152-10(1)(a) of the ITAA 1997.", "Facts": "The taxpayer owns land. The taxpayer grants an option to a third party to acquire the land as consideration for the third party paying the taxpayer a lump sum. The third party does not exercise the option.", "Reasons_for_Decision": "Summary: CGT event D2 in section 104-40 of the ITAA 1997 happens when a taxpayer grants an option to an entity, or renews or extends an option they had granted. A capital gain or loss may arise from the CGT event happening. If the basic conditions under section 152-10 of the ITAA 1997 are satisfied, the taxpayer may be eligible to reduce the capital gain resulting from the CGT event using the small business concessions. The first condition in paragraph 152-10(1)(a) of the ITAA 1997 requires that the CGT event happens in relation to a CGT asset of the taxpayer. The fourth condition in paragraph 152-10(1)(d) of the ITAA 1997 requires that the CGT asset satisfies the active asset test. With respect to the first condition it is considered the words 'in relation to' in paragraph 152-10(1)(a) of the ITAA 1997 are wide enough to allow reference to an underlying asset such as the land in relation to which the option has been granted. They are also wide enough to allow reference to land in relation to which an option to acquire an easement over the land has been granted. Therefore, if CGT event D2 happens, that event can be said to happen in relation to a CGT asset of the taxpayer, being the land in relation to which the option has been granted, and accordingly paragraph 152-10(1)(a) of the ITAA 1997 can be satisfied.", "Date_of_Decision": "26 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 104-40 section 152-10 paragraph 152-10(1)(a) paragraph 152-10(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/650", "Subject_References": "Active asset Basic conditions for relief Capital gains tax CGT events D1-D3 - bringing into existence a CGT asset CGT event D4 - entering into a conservation covenant CGT small business relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201145", "Unmatched_Content": "Keywords Active asset Basic conditions for relief Capital gains tax CGT events D1-D3 - bringing into existence a CGT asset CGT event D4 - entering into a conservation covenant CGT small business relief"}
{"ATO_ID_Number": "ATO ID 2010/106", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Small business concessions: connected entities - 'control' of an unadministered deceased estate", "Issue": "Are two unadministered deceased estates connected with each other under subsection 328-125(1) of the Income Tax Assessment Act 1997 (ITAA 1997) because they have the same executor or beneficiaries?", "Decision": "No. The two unadministered deceased estates are not connected with each other under subsection 328-125(1) of the ITAA 1997 because they have the same executor or beneficiaries.", "Facts": "Two unadministered deceased estates carry on business in partnership. The estates have the same executor and some of the same beneficiaries. One of the estates disposed of an asset it used in the business but which was not a partnership asset and made a capital gain. The estate is determining whether it qualifies for the small business capital gains tax (CGT) concessions in Division 152 of the ITAA 1997, and in doing so it must determine whether it satisfies the $6 million maximum net asset value test. As part of considering that test, the estate must determine whether the other estate is connected with it such that the other estate's assets are included in its net asset test.", "Reasons_for_Decision": "Summary: Under subsection 328-125(1) of the ITAA 1997, an entity is 'connected with' another entity if either entity controls the other entity in the way described in section 328-125 of the ITAA 1997 or both entities are controlled in that way by the same third entity. An entity 'controls' another entity if it, its affiliates, or it together with its affiliates owns, or has the right to acquire the ownership of, interests in the other entity that carry between them the right to receive at least 40% of any distribution of income or capital by the other entity (paragraph 328-125(2)(a) of the ITAA 1997). A beneficiary of an unadministered deceased estate does not own, or have the right to acquire ownership of, interests in the unadministered estate which carry rights to receive any distributions of income or capital. The beneficiary therefore does not control (and hence is not connected with) the estate under paragraph 328-125(2)(a) of the ITAA 1997. The executor of an unadministered deceased estate also does not own, or have the right to acquire ownership of, interests which carry rights to receive distributions of income or capital. The executor therefore also does not control (and hence is not connected with) the estate under paragraph 328-125(2)(a) of the ITAA 1997. As such, there is no entity that controls an unadministered deceased estate under paragraph 328-125(2)(a) of the ITAA 1997. Therefore, although the two unadministered deceased estates have the same executor and beneficiaries, there is no entity that controls both estates and accordingly the estates are not connected with each other under subsection 328-125(1) of the ITAA 1997.", "Date_of_Decision": "20 April 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 152 subsection 328-125(1) paragraph 328-125(2)(a)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/68", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains tax CGT small business relief CGT deceased estates Connected entity", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010106", "Unmatched_Content": "Amendments to ensure that the test is based on legal ownership of an interest in an entity, rather than who benefits from the interest due to amendments by No. 119 of 2013, s 3 and Sch 1 item 7 | Related Public Rulings (including Determinations) Taxation Determination TD 2006/68 | Keywords Basic conditions for relief Capital gains tax CGT small business relief CGT deceased estates Connected entity"}
{"ATO_ID_Number": "ATO ID 2010/126", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: small business concessions - maximum net asset value test - foreign resident's worldwide assets", "Issue": "Are the worldwide CGT assets of a foreign resident included in the net value of their CGT assets in determining if they satisfy the maximum net asset value test in section 152-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The worldwide CGT assets of a foreign resident are included in the net value of their CGT assets in determining if they satisfy the maximum net asset value test in section 152-15 of the ITAA 1997.", "Facts": "A foreign resident disposed of a farm in Australia and made a capital gain. The net value of the foreign resident's (and other related entities) CGT assets that are taxable Australian property does not exceed $5 million. The net value of the foreign resident's worldwide CGT assets exceeds $5 million.", "Reasons_for_Decision": "Summary: A capital gain or capital loss from a CGT event is disregarded under subsection 855-10(1) of the ITAA 1997 if it is made by a foreign resident, or the trustee of a foreign trust for CGT purposes, just before the CGT event happens and the CGT event happens in relation to a CGT asset that is not 'taxable Australian property'. What constitutes 'taxable Australian property' is set out in section 855-15 of the ITAA 1997. Taxable Australian real property is listed as item 1 of the table in section 855-15. Taxable Australian real property includes real property situated in Australia (section 855-20 of the ITAA 1997). If a foreign resident makes a capital gain from a CGT event that happens in relation to real property situated in Australia, the small business CGT concessions may apply if all the conditions are satisfied. One of the conditions is the maximum net asset value test in section 152-15 of the ITAA 1997. Under this test, the net value of the CGT assets of the taxpayer and certain related entities must not exceed $5 million. Section 152-20 of the ITAA 1997 includes all the CGT assets of the taxpayer and related entities (subject to the exclusions in section 152-20 of the ITAA 1997) regardless of whether they are located in Australia or elsewhere. Accordingly, a foreign resident's worldwide CGT assets are included in the net value of their CGT assets in determining if they satisfy the $5 million maximum net asset value test in section 152-15 of the ITAA 1997.", "Date_of_Decision": "15 January 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 152-15 section 152-20 subsection 855-10(1) section 855-15 section 855-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/110", "Subject_References": "Basic conditions for relief Capital gains tax CGT small business relief Maximum net asset value test Non resident individuals", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010126", "Unmatched_Content": "Amendments to clarify content | ATO Interpretative Decisions overturned by this decision | Changed to Related ATO IDs. Amendment to clarify that this ATO ID reflects the same view in respect of the replacement or rewritten provision for decisions on or after 12 December 2006. | Keywords Basic conditions for relief Capital gains tax CGT small business relief Maximum net asset value test Non resident individuals"}
{"ATO_ID_Number": "ATO ID 2009/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT Small Business Concessions: maximum net asset value test - assets used solely for personal use and enjoyment - personal bank account", "Issue": "Is an interest earning personal bank account of an individual disregarded in working out the net value of the CGT assets of the individual under subparagraph 152-20(2)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An interest earning personal bank account is not being used solely for personal use and enjoyment, and accordingly is not disregarded in working out the net value of the CGT assets of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997.", "Facts": "A company sells its business and makes a capital gain on the sale of an active asset. An individual owns 50% of the shares in the company, and is therefore connected with the company. The individual has significant funds in an interest earning personal bank account, which they use only for personal living expenses. They intend to use the funds only for private purposes in the future. To qualify for the small business CGT concessions, the company must satisfy the maximum net asset value test in section 152-15 of the ITAA 1997. To do this, the company must determine if the personal bank account is included in the net value of the CGT assets of the connected individual.", "Reasons_for_Decision": "Summary: To determine if a taxpayer satisfies the maximum net asset value test, the net value of the CGT assets of the taxpayer and certain related entities must be calculated just before the relevant CGT event (section 152-15 of the ITAA 1997). As the individual is connected with the company (under paragraphs 328-125(1)(a) and 328-125(2)(b) of the ITAA 1997), the net value of the CGT assets of the individual is included in determining whether the company satisfies the maximum net asset value test. The amount standing to the credit of a bank account is a chose in action (a debt owed by the bank), and accordingly is a CGT asset under section 108-5 of the ITAA 1997. In working out the net value of the CGT assets of an individual, assets being used solely for the personal use and enjoyment of the individual, or the individual's affiliate, are disregarded (subparagraph 152-20(2)(b)(i) of the ITAA 1997). As the bank account is interest earning, it cannot be described as being used solely for personal use and enjoyment. It is used to produce income. The fact that the funds in the bank account are used only for personal living expenses does not affect this outcome. Accordingly, the individual's interest earning personal bank account is not disregarded in working out the net value of the CGT assets of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997. It is included in determining whether the company satisfies the maximum net asset value test.", "Date_of_Decision": "29 April 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 108-5 section 152-15 subparagraph 152-20(2)(b)(i) paragraph 328-125(1)(a) paragraph 328-125(2)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bank accounts CGT small business relief Connected entity Interest income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200933", "Unmatched_Content": "Keywords Bank accounts CGT small business relief Connected entity Interest income"}
{"ATO_ID_Number": "ATO ID 2009/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT Small Business Concessions: maximum net asset value test - assets used solely for personal use and enjoyment - vacant land", "Issue": "Is vacant land owned by an individual on which they intend to construct in the future a dwelling for private use disregarded in working out the net value of the CGT assets of the individual under subparagraph 152-20(2)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Vacant land owned by an individual on which they intend to construct in the future a dwelling for private use is not being used solely for personal use and enjoyment, and accordingly is not disregarded in working out the net value of the CGT assets of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997.", "Facts": "An individual owns all of the shares in a company which carries on a business. The individual also owns vacant land which is currently not being used for any purpose, but on which they intend to build a holiday house in the future for private use only. The individual disposed of the shares in the company and made a capital gain. To qualify for the small business CGT concessions, the individual must satisfy the maximum net asset value test in section 152-15 of the ITAA 1997. To do this, the individual must determine if the vacant land is included in the net value of the CGT assets of the individual.", "Reasons_for_Decision": "Summary: To determine if a taxpayer satisfies the maximum net asset value test, the net value of the CGT assets of the taxpayer and certain related entities must be calculated just before the relevant CGT event (section 152-15 of the ITAA 1997). The vacant land is property, and accordingly is a CGT asset under section 108-5 of the ITAA 1997. In working out the net value of the CGT assets of an individual, assets being used solely for the personal use and enjoyment of the individual, or the individual's affiliate, are disregarded (subparagraph 152-20(2)(b)(i) of the ITAA 1997). Subparagraph 152-20(2)(b)(i) of the ITAA 1997 does not take into account the intended future use of an asset. In this case, the vacant land is not being used for any purpose. As subparagraph 152-20(2)(b)(i) of the ITAA 1997 does not have regard to the intended future use, it follows that the land is not being used solely for the personal use and enjoyment of the individual or the individual's affiliate. Accordingly, the vacant land is not disregarded in working out the net value of the CGT assets of the individual under subparagraph 152-20(2)(b)(i) of the ITAA 1997. It is included in determining whether the individual satisfies the maximum net asset value test.", "Date_of_Decision": "29 April 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 108-5 section 152-15 subparagraph 152-20(2)(b)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT small business relief Land", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200934", "Unmatched_Content": "Keywords Capital gains tax CGT small business relief Land"}
{"ATO_ID_Number": "ATO ID 2003/110", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event on the theft of a depreciating asset", "Issue": "Does a balancing adjustment event occur for a depreciating asset under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) on the theft of the asset?", "Decision": "No. The theft of a depreciating asset does not, of itself, constitute a balancing adjustment event occurring for the asset under paragraph 40-295(1)(a) of the ITAA 1997.", "Facts": "The taxpayer owned a depreciating asset at the time it was stolen. The taxpayer used the asset wholly for a taxable purpose. The asset was insured against the event of theft.", "Reasons_for_Decision": "Summary: Subsection 40-295(1) of the ITAA 1997 states that a balancing adjustment event occurs for a depreciating asset if: For a balancing adjustment event to occur for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997, the taxpayer must stop holding the asset. The taxpayer is the legal owner of the asset and, therefore, a holder of it under Item 10 of the table in section 40-40 of the ITAA 1997. The taxpayer does not cease to be the asset's legal owner even though they have lost immediate physical possession of it. The taxpayer retains legal title to the asset while it remains stolen. This means that the theft of a depreciating asset does not, of itself, cause a balancing adjustment event to occur for the asset under paragraph 40-295(1)(a) of the ITAA 1997. A balancing adjustment event would occur for a stolen depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if, for example:", "Date_of_Decision": "26 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 subsection 40-295(1) paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/782 | ATO ID 2003/111 | ATO ID 2003/112", "Subject_References": "Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Hold a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003110", "Unmatched_Content": "General updated to Income tax | Keywords Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Hold a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2003/166", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: maximum net asset value test - Australian currency", "Issue": "Is Australian currency, that is, notes and coins, a CGT asset for the purposes of determining the 'net value of the CGT assets' of certain entities under paragraph 152-15(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Australian currency is a CGT asset for the purposes of determining the 'net value of the CGT assets' of certain entities under paragraph 152-15(a) of the ITAA 1997.", "Facts": "The taxpayer carries on business and at any point in time has Australian currency on hand (that is, notes and coins).", "Reasons_for_Decision": "Summary: A basic condition for small business relief in Division 152 of the ITAA 1997 is the maximum net asset value test in section 152-15 of the ITAA 1997. Under this test the net value of the CGT assets of the taxpayer and certain related entities must not exceed $5 million (or $6 million for the 2007-08 and later income years). In this context, Australian currency, being Australian notes issued by the Reserve Bank of Australia or Australian coins issued on the authority of the Federal Treasurer, is a CGT asset, and is therefore included in the calculation of the 'net value of the CGT assets' under section 152-15 of the ITAA 1997. Note: Australian currency is not a CGT asset under section 108-5 of the ITAA 1997 when it is used as legal tender (Taxation Determination TD 2002/25).", "Date_of_Decision": "13 February 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 108-5 section 152-15 paragraph 152-15(a)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2002/25", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Keywords Capital gains tax CGT assets Active asset test CGT small business relief Basic conditions for relief Maximum net asset value test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003166", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2002/25 | Keywords Keywords Capital gains tax CGT assets Active asset test CGT small business relief Basic conditions for relief Maximum net asset value test"}
{"ATO_ID_Number": "ATO ID 2003/744", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business relief: maximum net asset value test - 'just before' the time of the CGT event", "Issue": "Does the reference to 'just before the CGT event' in section 152-15 of the Income Tax Assessment Act 1997 (ITAA 1997) refer to just before the time of the CGT event or just before the CGT event happens?", "Decision": "The reference to 'just before the CGT event' in section 152-15 of the ITAA 1997 refers to just before the time of the CGT event, that is, the time listed in column 2 of the table in section 104-5 of the ITAA 1997 for each CGT event.", "Facts": "The taxpayer has carried on a farming business for many years. The taxpayer decides to sell the land and enters into a contract for sale on 31 March 2003. Settlement is due to take place 6 months later on 30 September 2003.", "Reasons_for_Decision": "Summary: A basic condition for small business relief in Division 152 of the ITAA 1997 is the maximum net asset value test in section 152-15 of the ITAA 1997. Under this test the net value of the CGT assets of the taxpayer and certain related entities must not exceed $5 million 'just before' the CGT event. Under section 104-10 of the ITAA 1997, CGT event A1 happens if a taxpayer disposes of a CGT asset, that is, there is a change of ownership of the CGT asset from one entity to another. A change in the ownership of land generally occurs at completion (that is, settlement) of the contract under which the land is sold (Taxation Ruling TR 94/29). So the CGT event happens upon settlement. However, under paragraph 104-10(3)(a) of the ITAA 1997 the time of the CGT event is taken to be the time of entering into the contract for the disposal. It is considered the reference to 'just before the CGT event' in section 152-15 of the ITAA 1997 refers to just before the time of the CGT event, that is, just before the time of entering into the contract for the disposal of the land. It is at this point the maximum net asset value test must be satisfied. Therefore, the taxpayer must satisfy the maximum net asset value test just before the sale contract was entered into on 31 March 2003.", "Date_of_Decision": "4 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-5 section 104-10 paragraph 104-10(3)(a) section 152-15", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/29", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events CGT small business relief Time of CGT event Maximum net asset value test Basic conditions for relief", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003744", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 94/29 | Keywords Capital gains tax CGT events CGT small business relief Time of CGT event Maximum net asset value test Basic conditions for relief"}
{"ATO_ID_Number": "ATO ID 2003/745", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business relief: maximum net asset value test - 'just before' the CGT event - immediately before", "Issue": "If the net value of the CGT assets of the taxpayer (and other relevant entities) increased from less than $5 million to more than $5 million on the same day as, but prior to, a CGT event happening, does the taxpayer satisfy the maximum net asset value test in section 152-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer does not satisfy the maximum net asset value test in section 152-15 of the ITAA 1997 because 'just before' the CGT event the net value of the CGT assets of the taxpayer (and other relevant entities) exceeded $5 million.", "Facts": "The taxpayer is a sole trader. The net value of the CGT assets of the taxpayer (and other relevant entities) was $4,995,000 on the morning of the sale of an active asset. This included public company shares that had a market value of $1 million. By 11.59 am that day the share price had risen 0.6% so that the market value of the shares increased to $1,006,000 and the net value of the CGT assets increased to $5,001,000. Immediately after that time, the taxpayer entered into a contract to sell their business.", "Reasons_for_Decision": "Summary: A basic condition for small business relief in Division 152 of the ITAA 1997 is that the maximum net asset value test in section 152-15 of the ITAA 1997 is satisfied. Under this test the net value of the CGT assets of the taxpayer and certain related entities must not exceed $5 million 'just before' the CGT event that gave rise to the capital gain for which relief is sought. The words 'just before' in section 152-15 of the ITAA 1997 effectively mean 'immediately before'. Under subsection 152-20(1) of the ITAA 1997 the net value of the CGT assets of an entity is the amount (if any) by which the sum of the market values of those assets exceeds the sum of the liabilities of the entity that are related to the assets. In this case, there was an increase in the market value of some of the taxpayer's CGT assets on the same day as, but prior to, the CGT event. The net value of the taxpayer's CGT assets increased and as a result exceeded the $5 million threshold immediately before the CGT event. The taxpayer therefore does not satisfy the maximum net asset value test 'just before' the CGT event.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Tax Laws Amendment (Small Business) Act 2007 The Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains tax CGT events CGT small business relief Maximum net asset value test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003745", "Unmatched_Content": "This ATO ID was amended by adding the note to the Reasons for decision so as to clarify legislative changes made by the Tax Laws Amendment (Small Business) Act 2007 which applies to CGT events happening in the 2007-08 income year and later income years. | Keywords Basic conditions for relief Capital gains tax CGT events CGT small business relief Maximum net asset value test"}
{"ATO_ID_Number": "ATO ID 2003/1110", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: connected entities - indirect control - subsection 328-125(7)", "Issue": "If the beneficiaries of a discretionary trust control the trust for the purposes of subsection 328-125(1) of the Income Tax Assessment Act 1997 (ITAA 1997) are the beneficiaries then connected with each other because of the operation of subsection 328-125(7) of the ITAA 1997?", "Decision": "No. If the beneficiaries of a discretionary trust control the trust for the purposes of subsection 328-125(1) of the ITAA 1997 the beneficiaries are not then connected with each other because of the operation of subsection 328-125(7) of the ITAA 1997.", "Facts": "The taxpayer, an individual, carries on a farming business on land they own. The taxpayer is also a beneficiary of a family discretionary trust. The taxpayer's spouse, other family members and various charitable institutions are also potential beneficiaries of the family trust. The family trust derives income from various activities and has for many years distributed all of the net income of the trust to the taxpayer and their spouse in equal shares. The taxpayer intends to sell the farm land and seek access to the small business CGT concessions in Division 152 of the ITAA 1997. Accordingly, they must determine whether they satisfy the $6 million maximum net asset value test and, in considering that test, whether certain entities are connected entities.", "Reasons_for_Decision": "Summary: Under subsection 328-125(1) of the ITAA 1997 an entity is connected with another entity if either entity controls the other entity in the way described in section 328-125 or both entities are controlled in that way by the same third entity. Section 328-125 of the ITAA 1997 sets out the various ways an entity is taken to control another entity including the circumstances in which beneficiaries of a discretionary trust are taken to control the trust. If a beneficiary is taken to control the trust, the beneficiary and the trust are connected with each other under paragraph 328-125(1)(a) of the ITAA 1997. However, this does not mean the trust controls the beneficiary. Under subsection 328-125(7) of the ITAA 1997 an entity that directly controls a second entity is also taken to control any other entity that is directly or indirectly controlled by the second entity. That is, if A controls B and B controls C, A is also taken to control C. Therefore, if a beneficiary of a discretionary trust is taken to control the trust and the trust also controls another entity, the beneficiary will also be taken to control, and hence be connected with, that other entity. However, if the beneficiaries of a discretionary trust are taken to control the trust, the trust is not also taken to control the beneficiaries by that reason alone. Accordingly, subsection 328-125(1) of the ITAA 1997 does not apply to deem control of one beneficiary by another beneficiary and therefore the beneficiaries are not connected with each other simply because of the operation of subsection 328-125(7).", "Date_of_Decision": "24 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 152 section 328-125 subsection 328-125(1) paragraph 328-125(1)(a) subsection 328-125(7) section 328-130", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains tax CGT small business relief Maximum net asset value test", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031110", "Unmatched_Content": "This ATO ID was amended by replacing the references to the former section 152-30 with references to section 328-125. Section 328-125 applies in relation to the 2007-08 income year and later years. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Added reference to subsection 328-125(1) of the ITAA 1997 | Updated to describe the effect of the changes to the legislation | Corrected citation of subsection 328-125(1) | Keywords Basic conditions for relief Capital gains tax CGT small business relief Maximum net asset value test"}
{"ATO_ID_Number": "ATO ID 2012/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax small business retirement exemption: deceased estate - choice by executor", "Issue": "Can the executor of a deceased estate, when preparing outstanding income tax returns of the deceased, aged 55 at the time of their death, make a choice to disregard under subsection 152-305(1) of the Income Tax Assessment Act 1997 (ITAA 1997) all or part of a capital gain made by the deceased before their death?", "Decision": "Yes. The executor of a deceased estate, when preparing outstanding income tax returns of the deceased, can make a choice under subsection 152-305(1) of the ITAA 1997 (if the condition in paragraph 152-305(1)(a) of the ITAA 1997 is met) to disregard all or part of a capital gain made by the deceased before their death.", "Facts": "A taxpayer sold an asset that was used in a business they conducted as a sole trader. When the asset was sold the business ceased. A capital gain was made on the disposal of the asset. The taxpayer died before lodging an income tax return for the income year in which the asset was sold. The taxpayer was aged 55 years at the time of their death. The executor of the deceased estate, in preparing the deceased's outstanding income tax returns, is seeking to choose the retirement exemption under subsection 152-305(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Paragraph 152-305(1)(a) of the ITAA 1997 allows an individual aged 55 or over at the time of choosing to choose to disregard all or part of a capital gain from a CGT event if the basic conditions for relief in Subdivision 152-A of the ITAA 1997 are satisfied for the gain. The choice must have been made by the day the individual's income tax return for the income year in which the relevant CGT event happened was lodged, or within a further time allowed by the Commissioner (subsection 103-25(1) of the ITAA 1997). On the death of a taxpayer, an executor, in effect, steps into the shoes of the deceased and winds up the deceased's personal affairs (Taxation Ruling IT 2622, paragraph 2). An executor is treated as a trustee for income tax purposes (subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936), section 995-1 of the ITAA 1997). There are various provisions in the tax law that provide for or require a trustee to be answerable as taxpayer for the doing of all necessary things under the law and, in the case of the estate of a deceased person, make returns that are the same (as far as practicable) as the deceased would have made (section 254 of the ITAA 1936). Also, under section 260-140 of the Taxation Administration Act 1953 , the Commissioner may in certain circumstances deal with the trustee of a deceased estate as if the trustee were the deceased person and the deceased were still alive. As such, it is accepted that the executor of a deceased estate, when preparing outstanding income tax returns of the deceased, can make a choice to disregard under paragraph 152-305(1)(a) of the ITAA 1997 all or part of the capital gain made by the deceased before their death.", "Date_of_Decision": "1 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 subsection 103-25(1) subsection 152-305(1) paragraph 152-305(1)(a) section 995-1 Subdivision 152-A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2622", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT small business relief Small business retirement exemption CGT choice Deceased estates Executors", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201239", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2622 | Keywords Capital gains tax CGT small business relief Small business retirement exemption CGT choice Deceased estates Executors"}
{"ATO_ID_Number": "ATO ID 2010/217", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: small business concessions - retirement exemption - contribution to complying superannuation fund - transfer of real property", "Issue": "If an individual chooses the retirement exemption in Subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA 1997), can the contribution required under paragraph 152-305(1)(b) of the ITAA 1997 be made by transferring real property to a complying superannuation fund instead of money if the transfer satisfies the relevant provisions of the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes. If an individual chooses the retirement exemption in Subdivision 152-D of the ITAA 1997, the contribution required under paragraph 152-305(1)(b) of the ITAA 1997 can be made by transferring real property to a complying superannuation fund if the transfer satisfies the relevant provisions of the SISA.", "Facts": "An individual taxpayer, aged less than 55, made a capital gain from the sale of an active asset. The individual is considering choosing the small business retirement exemption to disregard the capital gain. The individual proposes to use the capital proceeds to pay out a mortgage on real property before making an in specie transfer of the real property, instead of paying cash, to their self managed superannuation fund.", "Reasons_for_Decision": "Summary: Under subsection 152-305(1) of the ITAA 1997 an individual can choose the retirement exemption and disregard all or part of a capital gain if: The question arises as to whether the requirement in paragraph 152-305(1)(b) of the ITAA 1997 can be satisfied by the transfer of real property from the individual to a complying superannuation fund. Generally speaking, a superannuation contribution can be made in a number of ways including by transferring an asset to the superannuation provider (an in specie contribution: refer section 285-5 of the ITAA 1997, and paragraphs 4, 10, 18-25, and 151 of Taxation Ruling TR 2010/1). A superannuation provider may breach section 66 of the SISA when an asset is acquired from a related party of the fund, such as a member (refer SMSFR 2010/1). Subsection 66(2) of the SISA does however provide an exception to the prohibition relating to the acquisition by a superannuation fund of assets from related parties where the asset is 'business real property' (as defined in subsection 66(5) of the SISA) and other conditions are satisfied. Accordingly, it is considered that a transfer of real property to a complying superannuation fund can satisfy the requirement in paragraph 152-305(1)(b) of the ITAA 1997 to contribute an amount if the transfer of the real property satisfies the relevant provisions of the SISA.", "Date_of_Decision": "25 October 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 152-A Subdivision 152-D subsection 152-305(1) paragraph 152-305(1)(b) paragraph 152-325(7)(a) section 285-5", "Related_Public_Rulings_and_Determinations": "Self Managed Superannuation Fund Ruling SMSFR 2010/1 | Taxation Ruling TR 2010/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Basic conditions for relief Capital gains tax CGT capital proceeds CGT choice CGT small business relief Complying superannuation funds Small business retirement exemption In-specie contributions Self managed superannuation funds SMSF acquisition of asset", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010217", "Unmatched_Content": "Amendments to clarify content | Related Public Rulings (including Determinations) Self Managed Superannuation Fund Ruling SMSFR 2010/1 Taxation Ruling TR 2010/1 | Keywords Basic conditions for relief Capital gains tax CGT capital proceeds CGT choice CGT small business relief Complying superannuation funds Small business retirement exemption In-specie contributions Self managed superannuation funds SMSF acquisition of asset"}
{"ATO_ID_Number": "ATO ID 2004/121", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions: retirement - choice made by beneficiary of deceased estate", "Issue": "Can the beneficiary of a deceased estate choose the small business retirement exemption in Subdivision 152-D of the Income Tax Assessment Act 1997 (ITAA 1997) on the sale of the deceased's business assets by the estate's executor, if the beneficiary is absolutely entitled to the business assets as against the trustee?", "Decision": "Yes. In the circumstances, the beneficiary is entitled to choose the small business retirement exemption in Subdivision 152-D.", "Facts": "The deceased operated a business and owned a number of assets which were used in the business. The executor/trustee appointed by the deceased has continued to operate the business since the death of the deceased. The deceased's spouse is the only beneficiary under the deceased's will. The executor has called in all of the deceased's assets and paid all of their debts. All that remains to be done is to distribute the assets (or the proceeds from their sale) to the sole beneficiary. As the beneficiary is not able to operate the business, the beneficiary has requested that it be sold by the trustee. The net value of the beneficiary's CGT assets, including the assets to which the beneficiary is entitled under the will, is less than $5 million. The beneficiary has asked whether they or the executor is entitled to choose the small business retirement exemption in respect of any capital gain made on the sale of the business assets.", "Reasons_for_Decision": "Summary: A CGT asset passes to a beneficiary in the estate of a deceased person if the beneficiary becomes the owner of the asset under the will of the deceased person or in one of the other ways outlined in section 128-20 of the ITAA 1997. It is considered that a CGT asset passes to a beneficiary of a deceased estate under section 128-20 of the ITAA 1997 when the beneficiary becomes absolutely entitled to the asset as against the estate's trustee (whether or not the asset is later transmitted or transferred to the beneficiary). Because the administration of the estate in this case is complete, the executor is now acting in the capacity of trustee. The beneficiary is absolutely entitled to the assets of the business as against the trustee, because the beneficiary has a vested, indefeasible and absolute interest in each asset and is able to direct how each asset be dealt with. Therefore, the assets of the deceased's business have passed to the beneficiary which means that anything done by the trustee, including the carrying on of the business and its sale, is taken to have been done by the beneficiary (section 106-50 of the ITAA 1997). Because any capital gain made on the sale of the business will be taken to have been made by the beneficiary, the beneficiary is entitled to choose the small business retirement exemption in Subdivision 152-D of the ITAA 1997 in respect of the gain, provided the other conditions for the exemption are satisfied. The beneficiary satisfies the maximum net asset value test in section 152-15 of the ITAA 1997 (because the net value of their assets is less than $5 million) and the active asset test in section 152-35 of the ITAA 1997 (because the actions of the executor in continuing to operate the business are attributed to the beneficiary). Therefore the beneficiary is entitled to choose the small business retirement exemption to the extent that their CGT retirement exemption limit is not exceeded. Note: For CGT events happening in the 2007-08 and later income years, section 152-15 of the ITAA 1997 has been amended by the Tax Laws Amendment (Small Business) Act 2007 to increase the maximum net asset value test to $6 million.", "Date_of_Decision": "23 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 152-D section 106-50 section 128-20 section 152-15 section 152-35", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/3 | Draft Taxation Ruling TR 2004/D25", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "capital gains tax CGT deceased estates CGT event A1-disposal of a CGT asset CGT retirement exemptions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004121", "Unmatched_Content": "Note added regarding the increase to maximum net asset value test. | Related Public Rulings and Determinations | Inserted reference to TR 2004/D25. | Related ATO Interpretative Decisions | Related Public Rulings (including Determinations) Taxation Determination TD 2004/3 Draft Taxation Ruling TR 2004/D25 | Keywords capital gains tax CGT deceased estates CGT event A1-disposal of a CGT asset CGT retirement exemptions"}
{"ATO_ID_Number": "ATO ID 2003/505", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business retirement exemption: sale proceeds credited to a superannuation fund - Part IVA", "Issue": "Is an arrangement, where a taxpayer disposes of a property to a superannuation fund and directs that the sale proceeds be credited to the taxpayer's members account with that fund, a 'scheme' to which Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) applies?", "Decision": "No. The arrangement is not a 'scheme' to which Part IVA of the ITAA 1936 applies.", "Facts": "The taxpayer purchased a commercial property in 1987. A company, of which the taxpayer is the sole shareholder and director, operates a business from the property. The taxpayer leased the property to the company under a formal lease. During the year ended 30 June 2003, the taxpayer disposed of the property under a contract for sale for its market value to a superannuation fund and made a capital gain. The applicable stamp duty was duly paid. The taxpayer and the taxpayer's spouse are the only members of the fund. The parties agreed that the proceeds of the sale be credited to the taxpayer's members account in the fund and treated as an undeducted contribution. The main reason for transferring the asset to the superannuation fund was for asset protection. The taxpayer chose to disregard the capital gain under the small business retirement exemption in subsection 152-305(1) of the Income Tax Assessment Act 1997 (ITAA 1997).", "Reasons_for_Decision": "Summary: Part IVA of the ITAA 1936 contains general anti-avoidance provisions designed to prevent the avoidance of tax. Part IVA of the ITAA 1936 applies where a scheme or any part of the scheme has been entered into or carried out in a particular way to obtain a tax benefit in connection with the scheme, having regard to the factors set out in subsection 177D(2) of the ITAA 1936. The arrangement in this case is a bona fide disposal of an asset (land) by the taxpayer to a superannuation fund in which the taxpayer and their spouse are the only members. As a result, the taxpayer made a capital gain and sought to choose the small business retirement exemption in subsection 152-305(1) of the ITAA 1997. For CGT events that occur in the 2006/07 and later income years, the retirement exemption is available where a capital gain is made on the disposal of an active asset and the conditions in section 152-305 of the ITAA 1997 are satisfied. In this case, the taxpayer has directed that the sale proceeds be credited to his account in the superannuation fund and a taxpayer is taken to have received money or other property if it has been applied for their benefit or as they direct (subsection 103-10(1) of the ITAA 1997). The taxpayer is therefore able to choose the retirement exemption if the other conditions are satisfied. In these circumstances, it is considered that there is no basis for concluding that the taxpayer entered into a scheme for the purpose of obtaining a tax benefit. The taxpayer disposed of the asset to the superannuation fund for reasons of asset protection. It was also more efficient to direct the proceeds into the superannuation fund rather than have funds change hands as it reduced bank fees and handling. Accordingly, the arrangement is not a scheme to which Part IVA of the ITAA 1936 applies. Note: Taxpayers who are contemplating disposing of an asset to an SMSF of which they are a member, should consider whether the tax and regulatory issues noted in TA 2015/1 have application.", "Date_of_Decision": "21 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Part IVA paragraph 177D(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 95/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT capital proceeds CGT capital proceeds modification market value substitution rule CGT small business relief Part IVA Small business retirement exemption", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003505", "Unmatched_Content": "Note added referring to TA 2015/1 | Updated reference to from paragraph 177D(b) to subsection 177D(2) of the ITAA 1936. | Updated to describe the effect of the changes to the legislation. | Updated paragraph 177D(b) to subsection 177D(2). | Removed ATO ID 2003/454 as this was withdrawn on the 19 August 2005. | Related Public Rulings (including Determinations) Taxation Determination TD 95/4 | Keywords Capital gains tax CGT capital proceeds CGT capital proceeds modification market value substitution rule CGT small business relief Part IVA Small business retirement exemption"}
{"ATO_ID_Number": "ATO ID 2002/494", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT small business concessions - retirement exemption - making an eligible termination payment years later.", "Issue": "Can the taxpayer, a private company, make an eligible termination payment under subsection 152-325(1) of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to a CGT concession stakeholder several years after the CGT concession stakeholder ceased to be an employee of the taxpayer?", "Decision": "Yes. The taxpayer can make an eligible termination payment under subsection 152-325(1) of ITAA 1997 in relation to a CGT concession stakeholder who was an employee of the taxpayer several years after the employment was terminated provided the payment is made in consequence of the termination of that employment.", "Facts": "The taxpayer sold a business which was acquired after 20 September 1985. A capital gain arose on the sale of a CGT asset of the business. Capital proceeds from the sale of the CGT asset will be paid in instalments over a number of years. A CGT concession stakeholder of the taxpayer ceased to be an employee of the taxpayer on the sale of the business. The taxpayer meets the basic conditions contained in Subdivision 152-A of ITAA 1997 for small business relief.", "Reasons_for_Decision": "Summary: A company can choose to disregard all or part of a capital gain under the small business retirement exemption if, amongst other things, the conditions set out in section 152-325 of ITAA 1997 are satisfied. Subsection 152-325(1) of ITAA 1997 requires a company to make an eligible termination payment in relation to a CGT concession stakeholder each time it receives an amount of capital proceeds from a CGT event for which it has chosen the retirement exemption. An eligible termination payment in relation to a person means any payment made in respect of the person in consequence of the termination of any employment of the person. Employment includes the holding of an office (subsection 27A(1) of the Income Tax Assessment Act 1936 ). If the termination of an employment is either a cause or an antecedent of the payment the payment is made in consequence of that termination. A gap of several years between the termination of the employment and the making of the payment will not destroy this connection. In these circumstances the entitlement to the payment was not dependent upon the occurrence of any other event or upon the consent of any other person. An employment has terminated and that termination is the reason for the payment. Consequently the payment is an eligible termination payment.", "Date_of_Decision": "12 February 2002", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27A(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT concession stakeholder Eligible termination payments Sale by instalments Small business retirement exemption", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002494", "Unmatched_Content": "This ATO ID has been amended by replacing in the Status of Decision field \"Decision Current\" with \"Decision current for CGT events that occur before the end of the 2005-06 income year where the payment is made before 30 June 2007. | Keywords Capital gains tax CGT concession stakeholder Eligible termination payments Sale by instalments Small business retirement exemption"}
{"ATO_ID_Number": "ATO ID 2003/103", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Choice and the small business roll-over", "Issue": "Does the inclusion of a capital gain in a taxpayer's income tax return without any consideration of the small business capital gains tax (CGT) concessions in Division 152 of the Income Tax Assessment Act 1997 (ITAA 1997) constitute the making of a choice, and therefore prevent the taxpayer from later choosing the small business roll-over in section 152-410 of the ITAA 1997?", "Decision": "No. The inclusion of a capital gain in a taxpayer's income tax return without any consideration of the small business CGT concessions does not constitute the making of a choice, and therefore does not prevent the taxpayer from later choosing the small business roll-over in section 152-410 of the ITAA 1997.", "Facts": "The taxpayer made a capital gain after 21 September 1999 on the disposal of goodwill in the 1999-2000 income year. Due to an oversight by the taxpayer's former tax agent, the small business CGT concessions in Division 152 of the ITAA 1997 were not considered and the whole of the capital gain was returned in the taxpayer's income tax return. The taxpayer's new tax agent detected this oversight and almost immediately notified the Commissioner. The taxpayer would now like to choose the small business roll-over in Subdivision 152-E of the ITAA 1997 to apply after the small business 50% reduction has applied to the capital gain. The taxpayer satisfies the basic conditions under Subdivision 152-A of the ITAA 1997 and the requirements for small business roll-over under section 152-410 of the ITAA 1997.", "Reasons_for_Decision": "Summary: The general rule is that a choice available under the CGT provisions once made can not be changed. Generally, such a choice must be made by the time the income tax return is lodged, or within such further time as the Commissioner allows (subsection 103-25(1) of the ITAA 1997). A taxpayer who has considered the application of the CGT concessions and chosen a particular concession has made a choice which cannot later be changed. However, a taxpayer who did not consider the CGT concessions and accordingly included a capital gain in their income tax return has not made a choice and can, if the Commissioner allows further time, later make a choice for a CGT concession and amend their return to reduce or disregard the capital gain. In this case, due to an oversight, the taxpayer did not consider any of the CGT concessions and hence did not make any choice. As the taxpayer satisfies the conditions for small business roll-over in section 152-410 of the ITAA 1997, the taxpayer may later choose the small business roll-over in Subdivision 152-E of the ITAA 1997 for the capital gain if the Commissioner allows further time to make a choice under paragraph 103-25(1)(b) of the ITAA 1997.", "Date_of_Decision": "20 September 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-1 Part 3-3 section 103-25 paragraph 103-25(1)(b) section 152-410", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Commissioner's discretion Extension of time Small business roll-over CGT choice", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003103", "Unmatched_Content": "This ATO ID has been amended as part of a review of when a choice can be made for the small business rollover. | Keywords Capital gains tax Commissioner's discretion Extension of time Small business roll-over CGT choice"}
{"ATO_ID_Number": "ATO ID 2003/676", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: foreign source income made by a resident trust", "Issue": "Is an Australian resident trustee assessable under subsection 98(4) of the Income Tax Assessment Act 1936 (ITAA 1936) on any resulting net capital gain on the vesting of the trust and registration of the trust assets, being shares in a foreign company, in the names of the non-resident beneficiaries?", "Decision": "No. The trustee is not assessable under subsection 98(4) of the ITAA 1936 because any resulting net capital gain is not attributable to sources in Australia.", "Facts": "An Australian resident trust (the Trust) was established before 20 September 1985 (pre-CGT) and vested on the death in late 2002 of an individual, a non-resident for taxation purposes. The trustee remained at all times an Australian resident for taxation purposes. The only assets of the Trust were post-CGT shares in a foreign company that is listed on foreign stock exchanges. The shares could only be physically sold via an overseas broker. The shares have increased in value and the trustee has an unrealised capital gain. The trustee currently holds the shares in a nominee capacity and proposes to transfer the shares to the non-resident beneficiaries in their individual names. Upon the vesting of the Trust, the individual's two children, who are both non-residents for Australian taxation purposes, became presently entitled to 50% each of the trust estate's net income (including the net capital gain). There is no net income (including the net capital gain) to which no beneficiary is presently entitled.", "Reasons_for_Decision": "Summary: A resident trust, for CGT purposes, must include in the calculation of its net capital gain, capital gains and capital losses from CGT events happening to its worldwide assets. The net capital gain is then included in the net income of the trust in accordance with subsection 95(1) of the ITAA 1936. Broadly, subsection 98(4) of the ITAA 1936 provides that the trustee of a trust may be assessed where there is an individual beneficiary who is a non-resident at the end of a year of income and that beneficiary is presently entitled to income of the trust. If the beneficiary has not been a resident of Australia at any time during the income year, the trustee is assessed on so much of the share of the net income of the trust estate as is attributable to sources in Australia. As a consequence of the vesting of the trust on the death of the individual, the two non-resident beneficiaries became presently entitled to the net income of the trust. The fundamental issue to be resolved is whether any capital gain made by the trustee in respect of the shares, is sourced in Australia. The capital gains tax provisions do not contain any provision that expressly determines the source of a capital gain, or net capital gain, for the purposes of Division 6 of Part III of the ITAA 1936. The 'taxable Australia property' tests in section 855-15 of the Income Tax Assessment Act 1997 (ITAA 1997) are not relevant for this purpose. In the absence of a statutory source rule for capital gains for the purposes of Division 6 of Part III of the ITAA 1936, reliance is appropriately placed on the common law source rules as they relate to income notwithstanding that net capital gains are a form of statutory income. The leading Australian authority on the source of profits from the sale of shares is Australian Machinery and Investments Company Ltd v. Deputy Commissioner of Taxation (WA) (1946) 180 CLR 9; 3 AITR 359; (1946) 8 ATD 81 where it was held that where shares are situated outside Australia and sold outside Australia, the profit on sale is derived wholly from a source outside Australia. Thus, where shares are sold using an offshore broker, the buying and selling is undertaken and thus sourced, where the contract is concluded. Therefore, in applying the common law rules, the source of the capital gain made by the trustee will be outside Australia. This is because the shares in the foreign company are only traded on foreign stock exchanges and can only be bought and sold via an overseas broker and, as the company is trading overseas, from a practical viewpoint, the increase in the economic value of the shares would occur outside Australia. Accordingly, as the source of the capital gain is outside Australia, the trustee is not assessable under subsection 98(4) of the ITAA 1936 on any resulting net capital gain from the vesting of the trust and registration of the shares in the names of the non-resident beneficiaries.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 95(1) subsection 98(4)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2680", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/394 | ATO ID 2002/903 | ATO ID 2002/913", "Subject_References": "Capital gains tax Capital gains Foreign income Foreign source income Non resident beneficiaries Trusts Discretionary trusts Trustees", "Case_References": "Australian Machinery & Investment Co Ltd v. Deputy Commissioner of Taxation (1946) 180 CLR 9 (1946) 3 AITR 359 (1946) 8 ATD 81", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003676", "Unmatched_Content": "Note: This ATO ID contains a view in respect of section 98 of the Income Tax Assessment Act 1936 as it operated prior to amendments introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 (including the introduction of Division 6E of Part III of the Income Tax Assessment Act 1936 ). Except in the case of some early balancing trusts and managed investment trusts, those amendments take effect from the 2010-11 and later income years. This ATO ID has been amended to clarify legislative changes made by Tax Laws Amendment (2007 Measures No 3) Act 2007, and also Tax Laws Amendment (2006 Measures No 4) Act 2006 which is applicable to CGT events that happen on or after 12 December 2006. However these changes do not affect the decision in this interpretative decision. | Related Public Rulings (including Determinations) Taxation Ruling IT 2680 | Keywords Capital gains tax Capital gains Foreign income Foreign source income Non resident beneficiaries Trusts Discretionary trusts Trustees"}
{"ATO_ID_Number": "ATO ID 2010/208", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: goodwill of acquired business - time of coalescence", "Issue": "Does the contract timing rule in subsection 109-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) have the effect that the goodwill of a new business acquired by an entity under a contract; which coalesces with the goodwill of the existing business already conducted by that entity to form a single CGT asset; is for the purposes of Part 3-1 taken to have become a single CGT asset from the date of the contract under which the new business was acquired?", "Decision": "No, the contract timing rule does not have the effect of treating the acquired goodwill of a business as coalescing with the existing goodwill from the time when the contract to acquire the new business has been entered into.", "Facts": "The assets of a business (the old business) conducted by non-public entity Company X include goodwill acquired before 20 September 1985. Company X enters into a contract to acquire the assets of a business (the acquired business), including goodwill. The assets of the acquired business are transferred to the company at settlement. At that time, the acquired business is as a matter of fact subsumed into and forms a part of the old business. At some time between the contract date and the settlement date there is a change in the majority underlying interests for Company X so that the pre-CGT assets of the company are taken to have been acquired on the date of the change and have a cost base equal to their market values worked out as at that time (that is, as an effect of the operation of subsections 149-30(1A) and 149-35(2) of the ITAA 1997).", "Reasons_for_Decision": "Summary: When a business acquired by an entity is in fact subsumed into and forms a part of a business already conducted by that entity, the goodwill of the businesses coalesce and the cost base of the goodwill of the acquired business becomes part of the cost base of the goodwill of the entire business. If the goodwill of the business already conducted has an acquisition date before 20 September 1985, all of the coalesced goodwill will be taken to have been acquired before that date: paragraphs 63 and 64 of Taxation Ruling TR 1999/16. The consequences for the cost base and acquisition date of goodwill are worked out as at the time when the goodwill assets coalesce. The contract timing rule for acquisitions in subsection 109-5(2) of the ITAA 1997 applies to nominate when a CGT asset is 'acquired' for any purposes where that concept is relevant (such as the CGT discount). That rule, as applied to the assets of the acquired business, does not have the further effect of treating the goodwill assets as having coalesced at any time earlier than when the acquired business is in fact subsumed into the business that is already being conducted. This means that where there is a change in the majority underlying interests of a company at a time when the contract for the acquisition of the assets of a new business has not been completed, the acquisition date and cost base consequences referred to in subsections 149-30(1A) and 149-35(2) of the ITAA 1997 will be applied to the goodwill of the business then conducted by the company. When the acquired business is later subsumed, the coalesced goodwill assets will have an acquisition date after 20 September 1985.", "Date_of_Decision": "12 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-1 subsection 109-5(2) subsection 149-30(1A) subsection 149-35(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/29 | Taxation Ruling TR 1999/16", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT assets Pre-CGT assets Acquisition of CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010208", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 94/29 Taxation Ruling TR 1999/16 | Keywords CGT assets Pre-CGT assets Acquisition of CGT assets"}
{"ATO_ID_Number": "ATO ID 2006/130", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: the exit history rule and time of acquisition of an asset", "Issue": "A unit trust ceases to be a subsidiary member of a consolidated group taking with it capital gains tax (CGT) assets previously held by the head company for income tax purposes under the single entity rule (SER) in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997). For the purpose of applying section 115-25 of the ITAA 1997 to gains made on the disposal of the assets by the unit trust after leaving the consolidated group will the exit history rule in section 701-40 of the ITAA 1997 deem the trustee of the unit trust to have acquired the assets at the time they were acquired by the head company.", "Decision": "Yes, for the purpose of applying section 115-25 of the ITAA 1997 to any gains made on disposal of the assets by the trustee of the unit trust, the exit history rule in section 701-40 of the ITAA 1997 will deem the trustee to have acquired the assets at the time acquired by the head company.", "Facts": "A unit trust ceases to be a subsidiary member of a consolidated group and leaves the group taking with it CGT assets previously held by the head company for income tax purposes under the SER in section 701-1 of the ITAA 1997. The trustee of the unit trust disposes of one (or more) of these assets after leaving the group and wishes to apply section 115-25 of the ITAA 1997 to the gain that results from the CGT event. Under section 115-25 of the ITAA 1997 a gain that results from a CGT event will be a discount capital gain if the CGT asset was acquired by the entity making the gain at least 12 months before the CGT event. The head company had acquired, or was deemed to have acquired (under the SER or the entry history rule in section 701-5 of the ITAA 1997) the CGT asset more than 12 months before the CGT event that arises as a result of the disposal of the asset by the trustee.", "Reasons_for_Decision": "Summary: When the trustee of the unit trust disposes of a CGT asset after leaving the consolidated group the trustee may need to know the time of acquisition of the asset for the purpose of applying section 115-25 of the ITAA 1997. Section 115-25 of the ITAA 1997 states that to be a discount capital gain, the capital gain must result from a CGT event happening to a CGT asset that was acquired by the entity making the gain at least 12 months before the CGT event. The time of acquisition of a CGT asset is determined under Division 109 of the ITAA 1997. Under subsection 701-40(1) of the ITAA 1997 the exit history rule applies to assets, liabilities or any business (eligible asset) that becomes that of an entity when it ceases to be a subsidiary member of a group. Subsection 701-40(3) of the ITAA 1997 states that everything that happened in relation to any eligible asset while it was that of the head company, including because of any application of section 701-5 of the ITAA 1997 (the entry history rule), is taken to have happened to the eligible asset as if it had been an eligible asset of the leaving entity. In relation to any eligible asset that becomes that of the trust on leaving the consolidated group, the exit history rule in section 701-40 of the ITAA 1997 will deem the trustee to have acquired the asset at the time the head company was recognised as having acquired the asset for the purpose of Division 109 of the ITAA 1997. Where the trustee disposes of a CGT asset after leaving the consolidated group and the asset was recognised as having been acquired by the head company under Division 109 of the ITAA 1997 at least 12 months before the time of the CGT event that arises as a result of the disposal of the asset by the trustee, then for the purpose of section 115-25 of the ITAA 1997 the trustee will be deemed to have acquired the asset at least 12 months before the time of the CGT event.", "Date_of_Decision": "3 May 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 115-25 section 701-1 section 701-40 section 701-5 Division 109 subsection 701-40(1) subsection 701-40(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of CGT Assets CGT assets CGT discount Consolidation Consolidation - exiting Leaving entity Leaving time Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006130", "Unmatched_Content": "Keywords Acquisition of CGT Assets CGT assets CGT discount Consolidation Consolidation - exiting Leaving entity Leaving time Trusts"}
{"ATO_ID_Number": "ATO ID 2004/123", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: time of acquisition of poker machine rights", "Issue": "Did the taxpayer, a hotelier, acquire poker machine rights for the purposes of section 160U of the Income Tax Assessment Act 1936 (ITAA 1936) at the time they were granted in 1997 under the Liquor Act 1982 (NSW) (LA 1982)?", "Decision": "Yes. The taxpayer acquired the poker machine rights for the purposes of section 160U of the ITAA 1936 at the time they were granted in 1997 under the LA 1982.", "Facts": "The taxpayer, a hotelier, was granted poker machine rights under the LA 1982 in 1997. The rights were not acquired pursuant to a contract. The LA 1982 was replaced by the Gaming Machines Act 2001 (NSW) (GMA 2001). The taxpayer's rights under the LA 1982 were carried over to the GMA 2001 as poker machine entitlements. The taxpayer sold the poker machine entitlements in 2003.", "Reasons_for_Decision": "Summary: Legal rights fall within the definition of 'CGT asset' at subsection 108-5(1) of the Income Tax Assessment Act 1997 . This is consistent with the position under paragraph 160A(a) of the ITAA 1936. Poker machine rights are therefore CGT assets. The rights pertaining to each approved poker machine, kept in a hotel, for which a poker machine entitlement was allocated, were effectively carried over from the LA 1982 to the GMA 2001. This was facilitated by paragraph 15(1)(a) and the savings provisions in Schedule 1 of the GMA 2001. The poker machine rights created in 1997 under the LA 1982 were covered by subsection 160M(6) of the ITAA 1936 because they were not a form of corporeal property and vested in the taxpayer on their creation. Under paragraph 160M(6B)(a) of the ITAA 1936, the taxpayer acquired those rights at the time applicable under subparagraph 160U(6)(b)(i) of the ITAA 1936. As a result of the interaction between subparagraph 160U(6)(b)(i) and paragraph 160M(6)(b) of the ITAA 1936, the time that the poker machine rights were acquired was the time at which they were granted to the taxpayer in 1997 under the LA 1982.", "Date_of_Decision": "24 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 108-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/46", "Subject_References": "Capital gains tax Acquisition of CGT assets Amusement & gambling equipment CGT asset construction & creation CGT assets Statutory licences", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004123", "Unmatched_Content": "Added Note regarding repeal of Paragraph 15(1)(a) of the GMA 2001. | Related ATO Interpretative Decisions | Remove reference to withdrawn ATO IDs 2003/47 and 2002/785. | Keywords Capital gains tax Acquisition of CGT assets Amusement & gambling equipment CGT asset construction & creation CGT assets Statutory licences"}
{"ATO_ID_Number": "ATO ID 2004/731", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: acquisition of asset: adverse possession", "Issue": "For the purposes of subsection 109-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997), when did a taxpayer acquire a property if they became entitled to claim title to the property by adverse possession before 20 September 1985 but did not make that claim, and therefore did not become the registered owner of the property, until after 19 September 1985?", "Decision": "The taxpayer acquired the property for the purposes of subsection 109-5(1) of the ITAA 1997 when they became entitled to claim title to the property before 20 September 1985.", "Facts": "Before 20 September 1985 the taxpayer entered into possession of a property in Victoria without the consent of the property's registered proprietor. The taxpayer also arranged to be recorded as the ratepayer for the property. The taxpayer remained in continuous possession of the property and paid the rates on it. At no time did the registered proprietor attempt to reclaim possession of the property. Broadly, under the relevant Victorian legislation, a claim for title to land by adverse possession may be made after 15 years of continuous possession. The 15 year period expired before 20 September 1985. However, the taxpayer applied to have the property registered in their name after 19 September 1985. The Registrar accepted this application and the taxpayer became the registered proprietor of the property. After the taxpayer's death in the 2004 income year, the taxpayer's legal personal representatives became the registered proprietors of the property. The legal personal representatives sold the property in the 2004 income year. The legal personal representatives need to know when the taxpayer acquired the property so they can determine the cost base and reduced cost base of the property which is used in working out their capital gain or loss from its sale.", "Reasons_for_Decision": "Summary: Division 109 of the ITAA 1997 sets out when you are taken to have acquired an asset for CGT purposes. In general, you acquire a CGT asset when you become its owner: subsection 109-5(1) of the ITAA 1997. In this case the taxpayer did not become the registered proprietor of the property until after 19 September 1985. However, the law recognises that in special circumstances title to property can be acquired based on a claim of adverse possession. In order for title to property to be acquired by adverse possession, the person claiming title must establish that the time limit on the right of the registered proprietor to recover possession of the land has expired and that they satisfy the common law requirements of adverse possession. In this case the property was located in Victoria. In Victoria, the relevant limitation period for bringing actions to recover land is 15 years from the date on which the right of action accrued: section 8 of the Limitation of Actions Act 1958 (Vic). Once the limitation period has expired, the title of the person entitled to bring an action to recover the land is extinguished: section 18 of the Limitation of Actions Act 1958 (Vic). At common law, to extinguish the registered proprietor's title, the possession must be open, not secret; peaceful, not by force; and adverse, not by the consent of the true owner: Mulcahy v. Curramore Pty Ltd [1974] 2 NSWLR 464 at 475. In this case, the relevant limitation period expired before 20 September 1985. In addition, the taxpayer satisfied the common law requirements to establish adverse possession. It is therefore considered that the taxpayer obtained possessory title to the property before 20 September 1985. A person who has acquired title to property by possession may make an application to become the registered proprietor of the land: section 60 of the Transfer of Land Act 1958 (Vic). If the conditions in section 60 are satisfied then the Registrar may register the applicant as the owner of the relevant estate claimed: section 62 of the Transfer of Land Act 1958 (Vic). If the Registrar accepts the application it is considered that formal registration does not confer ownership of the property, it merely converts the possessory title to legal title. Possessory title is a lesser form of ownership than legal title; however it is a form of ownership that is recognised at law. In the case of Perry v. Clissold (1906) 4 CLR 374 at 377 it was held that: It cannot be disputed that a person in possession of land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner. And if the rightful owner does not come forward and assert his title by process of law within the limitation period prescribed by the provisions of the Statute of Limitations applicable to the case, his right is forever extinguished, and the possessory owner acquires an absolute title. In this case, the taxpayer became the owner of the property before 20 September 1985 as they satisfied the common law requirements to establish possessory title and the relevant limitation period expired before this date. Therefore, for the purposes of subsection 109-5(1) of the ITAA 1997 it is considered that the taxpayer acquired the property before 20 September 1985. The taxpayer's legal personal representative will be taken to have acquired the property on the date of the deceased's death for the market value of the property on the date the deceased died: subsection 128-15(2) and item 4 in the table in subsection 128-15(4) of the ITAA 1997.", "Date_of_Decision": "26 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 109 subsection 109-5(1) subsection 128-15(2) subsection 128-15(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "acquisition dates acquisition of CGT assets capital gains CGT assets CGT deceased estates", "Case_References": "Mulcahy v. Curramore Pty Ltd [1974] 2 NSWLR 464", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004731", "Unmatched_Content": "Keywords acquisition dates acquisition of CGT assets capital gains CGT assets CGT deceased estates"}
{"ATO_ID_Number": "ATO ID 2003/128", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: Date of acquisition of shares - exercise of options acquired under employee share schemes", "Issue": "When is a share, acquired as the result of the exercise of an option issued under an employee share scheme taken to be acquired under Division 109 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Under section 109-10 of the ITAA 1997, shares acquired upon the exercise of an option granted under an employee share scheme, are acquired when the contract resulting from the exercise of the option is entered into and not when the contract for the acquisition of the option was entered into.", "Facts": "The taxpayer acquired options to purchase shares under an employee share scheme in August 1996. The terms and conditions of the options provided that: Some years later, the taxpayer exercised the option to acquire some shares. The taxpayer sold the shares less than 12 months after they exercised the option, and made a capital gain. The taxpayer sought to apply the CGT discount to the capital gain from the sale of the shares. The taxpayer argued that the shares were acquired when the taxpayer entered into the contract for the acquisition of the options.", "Reasons_for_Decision": "Summary: Division 13A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) deals with the assessability of discounts relating to shares and rights under employee share schemes. It does not operate to determine the date at which shares are acquired when an option is exercised. The time of acquisition of the shares is determined in accordance with Division 109 of the ITAA 1997. When a company issues or allots shares, the time of acquisition of the shares is when the contract is entered into or, where there is no contract, when the shares are issued or allotted (item 2 of the table in section 109-10 of the ITAA 1997). In this case the shares were acquired pursuant to a contract. The shares were acquired at the time the contract that directly effected their acquisition was entered into and not at the time when the contract for the acquisition of the options was made. Prior to that time, the taxpayer had not contracted to acquire the shares but was simply in possession of an irrevocable offer to allot a share at a pre-determined price if the taxpayer chose to request the allotment within the period of the offer. The shares were therefore acquired when the taxpayer gave notice of the exercise of the option to request allotment of the shares and not at the time the options were acquired. As a result, the shares sold were not acquired at least 12 months prior to the date of their sale and the taxpayer is not entitled to the CGT discount.", "Date_of_Decision": "14 January 2003", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 109 section 109-10", "Related_Public_Rulings_and_Determinations": "Capital Gains Tax Determination TD 16", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Employee share schemes & options Acquisition of CGT assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003128", "Unmatched_Content": "This ATO ID has been amended to note the repeal of Division 13A of ITAA 1936 by the Tax law Amendment (2009 Budget Measures No.2) Act 2009. | Related Public Rulings (including Determinations) Capital Gains Tax Determination TD 16 | Keywords Capital gains tax Employee share schemes & options Acquisition of CGT assets"}
{"ATO_ID_Number": "ATO ID 2013/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "School building fund established and maintained by a government school", "Issue": "Is a school building fund that is established and maintained by a government school an 'Australian Charities and Not-for-profit Commission (ACNC) type of entity' under section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, the school building fund is not an 'ACNC type of entity'.", "Facts": "A government school establishes and maintains a school building fund solely for the purpose of providing money for the acquisition, construction or maintenance of buildings used by the school. The school building fund is a public fund. The government school has its own Australian Business Number (ABN). The school building fund is controlled by a management committee, which includes the school principal and a majority of other persons having a degree of responsibility to the community. The school building fund is not established by trust deed or other written declaration of trust.", "Reasons_for_Decision": "Summary: Subdivision 30-B of the ITAA 1997 sets out the funds, authorities and institutions which are eligible to receive deductible gifts. In order for a fund to satisfy item 2.1.10 of the table in subsection 30-25(1) of the ITAA 1997: Section 995-1 of the ITAA 1997 defines the phrase 'ACNC type of entity' to mean: an entity that meets the description of a type of entity in column 1 of the table in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012 . The term 'entity' is defined in section 960-100 of the ITAA 1997 to include 'a trust'. The term 'trust' is not defined in the ITAA 1997. The school has not manifested an intention to create the school building fund as a separate trust. In the absence of the school entering into a trust deed or other written declaration of trust as part of the establishment of the school building fund, there is no indication that the school intended to create a trust over any particular property in these circumstances. The school building fund is not a trust. The school building fund is not any other type of 'entity' listed in section 960-100 of the ITAA 1997. The school building fund is therefore not an 'entity' within the meaning of that term under section 960-100 of the ITAA 1997. As a result, the school building fund is not an 'ACNC type of entity' under section 995-1 of the ITAA 1997.", "Date_of_Decision": "18 November 2013", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 30-B subsection 30-25(1) section 960-100 section 995-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2013/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/61 | ATO ID 2013/62", "Subject_References": "school building funds deductible gift recipients associations, organisations and societies entities and taxpayer groups", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201360", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2013/2 | Keywords school building funds deductible gift recipients associations, organisations and societies entities and taxpayer groups"}
{"ATO_ID_Number": "ATO ID 2013/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "School building fund established and maintained by a church - trust deed", "Issue": "Is a school building fund that is established and maintained by a church an Australian Charities and Not-for-profit Commission (ACNC) type of entity as defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where the school building fund is established by trust deed?", "Decision": "Yes, where the school building fund is established by trust deed the school building fund is an 'ACNC type of entity'.", "Facts": "A church conducts a school. The church has an Australian Business Number, and is registered under the Australian Charities and Not-for-profits Commission Act 2012 . The church establishes and maintains a school building fund solely for the purpose of providing money for the acquisition, construction or maintenance of buildings used by the school. The school building fund is a public fund. The school building fund is established by trust deed. The church is the trustee of the school building fund.", "Reasons_for_Decision": "Summary: Subdivision 30-B of the ITAA 1997 sets out the funds, authorities and institutions which are eligible to receive deductible gifts. In order for a fund to satisfy item 2.1.10 of the table in subsection 30-25(1) of the ITAA 1997: Section 995-1 of the ITAA 1997 defines the phrase 'ACNC type of entity' to mean: an entity that meets the description of a type of entity in column 1 of the table in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012 . The term 'entity' is defined in section 960-100 of the ITAA 1997 to include a trust. The term 'trust' is not defined in the ITAA 1997. The school building fund is a trust, and is therefore an entity under section 960-100 of the ITAA 1997. As the school building fund is also a charity, it is an entity that meets the description of a type of entity in column 1 of the table in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012 . Therefore, the school building fund is an 'ACNC type of entity' as defined in section 995-1 of the ITAA 1997.", "Date_of_Decision": "18 November 2013", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 30-B subsection 30-25(1) section 960-100 section 995-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2013/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/60 | ATO ID 2013/62", "Subject_References": "school building funds deductible gift recipients associations, organisations and societies entities and taxpayer groups", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201361", "Unmatched_Content": "Issue, Facts, Reason for Decision | Minor punctuation amendments | Related Public Rulings (including Determinations) Taxation Ruling TR 2013/2 | Keywords school building funds deductible gift recipients associations, organisations and societies entities and taxpayer groups"}
{"ATO_ID_Number": "ATO ID 2013/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "School building fund established and maintained by a church - no trust deed", "Issue": "Is a school building fund that is established and maintained by a church an Australian Charities and Not-for-profits Commission (ACNC) type of entity as defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, where the school building fund is not established by trust deed the school building fund is not an 'ACNC type of entity'.", "Facts": "A church conducts a school. The church has an Australian Business Number, and is registered under the Australian Charities and Not-for-profits Commission Act 2012 . The church establishes and maintains a school building fund solely for the purpose of providing money for the acquisition, construction or maintenance of buildings used by the school. The school building fund is not established by trust deed or other written declaration of trust. The school building fund is established as a public fund in accordance with the fund rules set out in the constituent documents of the school. There is no declaration of trust in relation to the assets of the school building fund in these documents.", "Reasons_for_Decision": "Summary: Subdivision 30-B of the ITAA 1997 sets out the funds, authorities and institutions which are eligible to receive deductible gifts. In order for a fund to satisfy item 2.1.10 of the table in subsection 30-25(1) of the ITAA 1997: Section 995-1 of the ITAA 1997 defines the phrase ACNC type of entity to mean: an entity that meets the description of a type of entity in column 1 of the table in subsection 25-5(5) of the Australian Charities and Not-for-profits Commission Act 2012 . The term 'entity' is defined in section 960-100 of the ITAA 1997 to include a trust. The term 'trust' is not defined in the ITAA 1997. The church has not manifested an intention to create the school building fund as a separate trust. In the absence of the church entering into a trust deed or other written declaration of trust as part of the establishment of the school building fund, there is no indication that the church intended to create a trust over any particular property in these circumstances. The school building fund is not a trust. The school building fund is not any other type of entity listed in section 960-100 of the ITAA 1997. The school building fund is therefore not an entity within the meaning of that term under section 960-100 of the ITAA 1997. Consequently, the school building fund is not an 'ACNC type of entity' as defined in section 995-1 of the ITAA 1997.", "Date_of_Decision": "18 November 2013", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 30-B subsection 30-25(1) section 960-100 section 995-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2013/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/60 | ATO ID 2013/61", "Subject_References": "school building funds deductible gift recipients associations, organisations and societies entities and taxpayer groups", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201362", "Unmatched_Content": "Issue, Facts, Reason for Decision | Minor punctuation amendments | Related Public Rulings (including Determinations) Taxation Ruling TR 2013/2 | Keywords school building funds deductible gift recipients associations, organisations and societies entities and taxpayer groups"}
{"ATO_ID_Number": "ATO ID 2006/155", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Entities: employer association", "Issue": "Is the taxpayer, an association of contractors, an exempt entity that is an employer association under item 3.1(b) of the table in section 50-15 of the Income Tax assessment Act 1997 (ITAA 1997), and a rebatable employer that is an employer association under item 6 of the table in subsection 65J(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The taxpayer is a combination of persons who associate in their capacity as contractors rather than as employers of labour and as such is not an employer association.", "Facts": "The taxpayer is an industry association whose membership is open to any person who is a contractor, and who is substantially engaged in the work usually performed by a contractor, within the industry. Employees are not eligible for membership. The objects clause in the taxpayer's rules and constitution states that the taxpayer's object is to protect and further the interests of employers in the industry through a range of activities. The taxpayer is registered under the state industrial relations legislation as an industrial union of employers and is able to represent its members in the state Industrial Commission. The majority of the taxpayer's members are employers but a significant minority of members are contractors without employees. The taxpayer's revenue is from fees received proportionally from members. The majority of the taxpayer's expenditure relates to representing or assisting its members in respect of their roles as employers. The material published by the taxpayer describes the taxpayer as an organisation that represents contractors. It provides services which are relevant to employers only but also provides other services, such as industry information and member discounts and services, that are relevant to members who are not employers.", "Reasons_for_Decision": "Summary: By virtue of section 50-1 of the ITAA 1997, an entity that is an 'employer association' for the purposes of item 3.1(b) of the table in section 50-15 of the ITAA 1997 is exempt from income tax on the total of its ordinary and statutory income providing it meets the following special conditions: An association will also be eligible for a rebate of fringe benefits tax if it meets the requirements of subsection 65J(1) of the FBTAA which states: An employer is a rebatable employer for a year of tax if the employer: (a) is exempt from income tax at any time during the year of tax under any of the provisions set out in the following table; and (b) satisfies the special conditions (if any) set out in the following table. Item 3.1(b) of the table in section 50-15 of the ITAA 1997 is a rewritten form of paragraph 23(f) of the Income Tax Assessment Act 1936 (ITAA 1936), which used the term \"association of employers\". Accordingly the terms employer association and association of employers have the same meaning. The High Court has considered the meaning of association of employers for the purposes of paragraph 23(f) of the ITAA 1936 in Associated Newsagents Co-operative Limited v. FC of T 70 ATC 4030; (1970) 1 ATR 609 (Associated Newsagents Co-operative Case). Associated Newsagents Co-operative Limited was registered as an industrial union of employers under the relevant state legislation and was a party to an award and to certain industrial agreements relevant to the newsagents industry. Owen J said at ATC 4032; ATR 616: Its members are associated not because they or some of them are employers of labour but because they carry on the occupation of newsagents. The words \"association of employers\" in s 23(f) are, in my opinion, confined to a combination of persons who associate in their capacity as employers of labour and do not cover an association of persons merely because they pursue the same calling. To be an employer association it must consist of persons who are associated in their capacity as employers of labour. Factors indicating this include whether the association's membership consists of employers and whether the association's purposes are related to employment matters. An employer association would normally be one whose membership consists solely of employers. However the inclusion of the words 'or some of them' by Owen J at ATC 4032; ATR 616 in the Associated Newsagents Co-operative Case suggests that an employer association may have members who are not employers. Where a significant number of members of an association are not employers and a significant amount of the association's income is from membership fees from those members it would be reasonable to conclude that the members are associated in a capacity other than as employers. In Taxation Ruling TR 97/22, the Commissioner has indicated that one of the tests for eligibility of an entity for income tax exemption under a particular provision is that its main purpose must relate to the subject of the exemption provision. TR 97/22 indicates the activities of an entity that are relevant to determining its main purpose and lists a number of factors that can be considered, including: The object of the taxpayer is to represent the interests of employers in the industry and the majority of the taxpayer's resources are used for that purpose. However the taxpayer's activities indicate that it has another purpose of providing a range of services to its members that are unrelated to their role as an employer. Whilst these activities may be an ancillary purpose for members who are employers, for members who are not employers that purpose would be the main reason for their membership. The taxpayer's publications describe the taxpayer as an organisation that specifically represents the interests of contractors in the industry and support the conclusion the taxpayer's primary purpose is to represent contractors, rather than employers, in the industry. Accordingly the taxpayer is not considered to be an association of persons who associate in their capacity as employers of labour. It is an association of persons who associate in their capacity as contractors within the industry. The taxpayer is not an employer association for the purpose of item 3.1(b) of the table in section 50-15 of the ITAA 1997 and item 6 of the table in subsection 65J(1) of the FBTAA.", "Date_of_Decision": "15 June 2006", "Year_of_Income": "Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 section 50-1 section 50-15 section 50-15 item 3.1(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/22", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT rebatable employers Tax exempt bodies", "Case_References": "Associated Newsagents Co-operative Limited v. FC of T 70 ATC 4030 (1970) 1 ATR 609", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006155", "Unmatched_Content": "an employer association or an employee association covered by item 3.1 of the table in section 50-15 of the Income Tax Assessment Act 1997 | Removed duplicate of phrase 'which used the term \"association of employers\"' that had been inserted twice. | Updated to reflect amendments to subsection 65J(1) of the FBTAA 1986 in Act No. 124 of 2013 | Updated item 3.1(b) of the table in section 50-15 of the ITAA 1997 to reflect amendments in Act No. 124 of 2013 Updated subsection 65J(1) of the FBTAA 1986 to reflect amendments in Act No. 124 of 2013 Included reference to paragraph 23(f) of the ITAA 1936 (repealed) | Updated reference to subsection 65J(1) of the FBTAA | The amendments to item 3.1(b) of section 50-15 of the ITAA 1997 and subsection 65J of the ITAA 1936 in Act No. 124 of 2013 take effect from 30 June 2013 | Related Public Rulings (including Determinations) Taxation Ruling TR 97/22 | Keywords FBT rebatable employers Tax exempt bodies"}
{"ATO_ID_Number": "ATO ID 2005/348", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt income: entity that is a trade union", "Issue": "Is the taxpayer, an association of employees, an exempt entity that is a 'trade union' for the purposes of item 3.2 in the table in section 50-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer, an association of employees, is an exempt entity that is a 'trade union' for the purposes of item 3.2 in the table in section 50-15 of the of the ITAA 1997 as it's main purpose is that of a 'trade union' according to the ordinary meaning of that term.", "Facts": "The taxpayer is an association of employees that has a range of objectives, including those traditionally associated with the term 'trade union'. This includes the protection and furtherance of employee member's interests in regard to wages, hours and working conditions. The taxpayer's activities are in accordance with its stated objectives. The taxpayer is located in Australia, incurs its expenditure, and pursues its objectives exclusively in Australia.", "Reasons_for_Decision": "Summary: By virtue of section 50-1 of the ITAA 1997, an entity that is a 'trade union' for the purposes of item 3.2 in the table in section 50-15 of the ITAA 1997 is exempt from income tax on the total of its ordinary income and statutory income providing it is located in Australia and incurs its expenditure and pursues its objectives principally in Australia. 'Trade union' is not defined for the purposes of the ITAA 1997. A number of case law judgements discuss the meaning of 'trade union' as it applied to section 23(f) of the Income Tax Assessment Act 1936 , the predecessor to section 50-15 of the ITAA 1997. The judicial approach has been that of understanding the term in its ordinary sense and, beginning with Victorian Employers' Federation v. Federal Commissioner of Taxation (1957) 96 CLR 390; 11 ATD 266, it has been held that popular usage of the term 'trade union' conforms to its Oxford English Dictionary meaning: An association of the workers in any trade or in allied trades for the protection and furtherance of their interests in regard to wages, hours, and conditions of labour, and for the provision, from their common funds, of pecuniary assistance to the members during strikes, sickness, unemployment, old age, etc. ( The Oxford English Dictionary , Vol XI, (Oxford: OUP, 1989)) In Norseman Amalgamated Distress and Injustices Fund v. Commissioner of Taxation (1995) 56 FCR 512; (1995) 95 ATC 4227; (1995) 30 ATR 356, Justice Lee ruled that the first part of the Oxford English Dictionary meaning was predominant in that an association of employees may well administer a fund for the mutual aid and protection of its members in their time of need, but that association would not qualify as a 'trade union' unless: the association of employees in question has been formed to deal with the employers of the members and for the protection and furtherance of the interests of members in respect of the conditions of their employment. In Taxation Ruling TR 97/22, the Commissioner has indicated that one of the tests for eligibility of an entity for income tax exemption under a particular provision is that its main purpose must relate to the subject of the exemption provision. Where an entity conducts ancillary or incidental activities this would not of itself change what is regarded as the entity's main purpose. In that regard, Lockhart J in Cronulla Sutherland Leagues Club Limited v. FC of T (1990) 23 FCR 82; 90 ATC 4215 at 4225; (1990) 21 ATR 300 at 312 said: It [the club] may have other objects or purposes which are merely incidental or ancillary thereto or which are secondary and even unrelated to the main object or purpose without disqualifying the body from the exemption. However, if an entity is equally involved in other purposes, then that entity would not be eligible for exemption. As Lockhart J said at ATC 4225; ATR 312: But if it has two co-ordinate objects, one of which is outside the exemption, the exemption cannot apply because it would be impossible to say that one object is the main or predominant object. Taxation Ruling TR 97/22 also indicates the Commissioner's view that it is appropriate to take into account the activities of an organisation to support a conclusion that the organisation's main purpose is relevant to the subject of the exemption provision. The taxpayer's stated objectives are similar to those described in the dictionary meaning of 'trade union' and whilst it has other objectives that are not of a kind specifically referred to in the dictionary meaning, those objectives are considered to be ancillary to the main objects or purpose of the taxpayer. Further, the taxpayer's activities support a conclusion that its main purpose is that of a trade union. Accordingly, it is considered that the taxpayer, an association of employees, is an exempt entity that is a 'trade union' for the purposes of item 3.2 in the table in section 50-15 of the of the ITAA 1997.", "Date_of_Decision": "22 November 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 50-1 section 50-15 item 3.2", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/22", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt entities Trade unions & employee associations", "Case_References": "Victorian Employers' Federation v. Federal Commissioner of Taxation (1957) 96 CLR 390 11 ATD 266", "Other_References": "The Oxford English Dictionary Vol XI, (Oxford: OUP, 1989)", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005348", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/22 | Keywords Exempt entities Trade unions & employee associations"}
{"ATO_ID_Number": "ATO ID 2004/757", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax exemption: company established by local council", "Issue": "Is the taxpayer, a company established by a local council, an exempt entity under item 5.1 of section 50-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer, a company established by a local council, is not an exempt entity under item 5.1 of section 50-25 of the ITAA 1997.", "Facts": "A local council is in the preconstruction phase of a building complex. A company will be formed for the purpose of running the complex. The council will hold all the ordinary shares in the company. The council will issue preference shares to business persons who are prepared to invest in the company.", "Reasons_for_Decision": "Summary: Item 5.1 of section 50-25 of the ITAA 1997 provides that the following are exempt entities: Under section 50-1 of the ITAA 1997, the income of these entities is exempt from income tax. Therefore, if the company established by the local council is a 'municipal corporation' or a 'local governing body', it will be exempt from income tax. 'Municipal corporation' is not defined in the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936). In the High Court case of Federated Engine-Drivers and Firemen's Association of Australasia v. Broken Hill Pty Co Ltd (1911) 12 CLR 398, Barton J said that 'a municipal corporation is a part of the governmental power of the State.' In the same case, Isaacs J in reference to municipal corporations said ...a corporation is constituted as a regulating agent for certain purposes, and for those purposes is entrusted with governmental powers He described the Melbourne City Council as 'primarily constituted for the purposes of municipal government and, in respect of its functions of legislation and administration, may be said to be a subordinate local agent for the purposes of government.' He then said: For the purpose of non-interference with their governmental functions, a municipal corporation might fairly claim to stand as ... \"extending ... the shield of the Crown to what might more fitly be described as the public government of the country.\" But, on the other hand, corporate trading is none the less trading, and is on a wholly different plane. The difference is ineradicable. The meaning of 'municipal corporation' was discussed in the Administrative Appeals Tribunal Taxation Appeals Division case, AAT No. 6709 Debit Tax Administration Act , by Mrs R.A. Balmford, the Senior Member, who concluded that: ....That expression, combined with \"or other local governing body\" is calculated to subsume any body, wherever it is situate within the Commonwealth, and under whatever legislation it is established, which, in terms of the decision in Tribe v Salt Lake City (paragraph 15 supra) \"is a body politic and corporate created to administer the internal concerns of the district embraced with its corporate limits, in matters peculiar to such place and not common to the state at large\". The words \"municipal\" and \"local\" in sub-paragraph (vii)(c) indicate that that provision is concerned with bodies operating in respect of a discrete district, region or area within a State or Territory. Therefore, a municipal corporation must be constituted to exercise governmental functions and is considered to be part of the Government. In this case, the company's object and purpose will be to run a building complex. This activity is in the nature of trading or business and not a governmental function. Therefore, the new company is not constituted as a municipal corporation. 'Local governing body' is defined by section 995-1 of the ITAA 1997 as meaning 'a local governing body established by or under a State law or Territory law. The company must be established by or under a law of a State or Territory for the purpose of being a local governing body. Obviously, most entities which have legal status are constituted or established under a law of a state or territory. This does not mean that all entities so constituted are local governing bodies. Rather, the test requires that the body be constituted or established as a local governing body. The formation of a company limited by shares owned partly by a local council and partly by others only shows that the company is incorporated. It does not mean that it is 'constituted as' a local governing body. In the High Court case of Renmark Hotel Inc v. Federal Commissioner of Taxation (1949) 79 CLR 10; (1949) 9 ATD 106, Rich J said: The word 'constituted' is not the same as 'incorporated'. For the purposes of s 23(d) it is conceivable that an unincorporated body might be constituted under a State Act so as to satisfy the exemption. On the other hand, mere incorporation under an Act does not constitute the body. The word 'constituted' immediately follows 'public authority'. It means constituted as a public authority.... The company has not been given the characteristics and powers of a local governing body under a law of a State. Neither the incorporation of an entity nor the mere ownership of a corporation by a local council means the corporation is established as a local governing body. As the company is not a municipal corporation or a local governing body it is not an exempt entity under section 50-25 of the ITAA 1997, and section 50-1 of the ITAA 1997 will not apply to make the income of the company exempt from income tax.", "Date_of_Decision": "27 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 50-1 section 50-25 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Entities & taxpayer groups Exempt entities State and territory bodies", "Case_References": "Renmark Hotel Inc v. Federal Commissioner of Taxation (1949) 79 CLR 10 (1949) 9 ATD 106", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004757", "Unmatched_Content": "Keywords Entities & taxpayer groups Exempt entities State and territory bodies"}
{"ATO_ID_Number": "ATO ID 2003/1088", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt entities: non-profit status - surplus funds paid to parent body", "Issue": "Can the taxpayer, a wholly owned subsidiary of a body which is an exempt entity by virtue of Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997), be considered an exempt entity in its own right if it pays surplus profits to its parent?", "Decision": "No. The distribution of profits to a member, even when that member is an exempt entity, will prevent an organisation from being considered to be a non-profit entity. Division 50 of the ITAA 1997 requires, among other things, that exempt entities must be non-profit.", "Facts": "The taxpayer company primarily engages in providing public clinical and other health services. The company is a wholly-owned subsidiary of an exempt entity but operates with total autonomy and is self-funded. The company's Memorandum of Association contains clauses preventing distributions of profit during operation and on winding up. The constitution of the company makes allowance for surplus funds to be retained by them as reserves for future expenditure, or to be 'donated' to the parent, with a request that they be used by the parent institution for research in areas relevant to the operations of the subsidiary. The company has not made donations to research bodies other than the parent. However, there is a history of significant surplus funds being regularly passed to the parent. An entity will be considered to be an exempt entity under Division 50 of the ITAA 1997 if it fulfils the requirements of one of the entity types listed within Division 50, together with any special conditions which may attach to that entity type. An entity cannot be an exempt entity unless it operates on a non-profit basis (Else-Mitchell J in McGarvie-Smith Institute v. Campbelltown Municipal Council [1965] NSWR 1641 and Federal Commissioner of Taxation v. Cappid Pty Ltd , 71 ATC 4121; (1971) 2 ATR 319. A 'non profit company' is defined in subsection 3(1) of the Income Tax Rates Act 1986 and means, among other things, a company that: In the present case, the constitution of the company allows it to make donations to its parent body - its only member. In limited cases, it may be accepted that a subsidiary may make gifts to its parent or ultimate beneficiary, in that entity's capacity as, for example, a Deductible Gift Recipient or a charity or other type of exempt organisation. However, in the case where a payment is made to a parent body, whether the payment is truly a gift is a matter which must be determined objectively, at the time the gift is made. A payment to a parent body is more likely to be a profit distribution and less likely to be a gift if there is evidence that the subsidiary has the ability to consistently make profits without the support of external funding or donors, and there is evidence of a purpose to distribute a significant portion of these profits to the parent body. The ability of the subsidiary entity to consistently generate profits could be evidenced by the fact that the entity is operating in a commercial environment with profit making competitors. A purpose of passing profits to the parent could be evidenced by: In the present case, the company operates in a commercial environment and has consistently generated significant profits. In addition, the form of the company's Memorandum of Association indicates that it has a purpose of generating funds to distribute to the parent body. The funds distributed to the parent are a significant portion of the company's annual profits. The company has no history of donating funds to bodies other than the parent. Therefore, it is considered that the funds transferred to the parent body in this case are not donations, but distributions of profit. As the entity has paid profits to a member, it is not operating as a non-profit organisation and cannot be an exempt entity under Division 50 of the ITAA 1997. Note: A body which makes profit distributions to members cannot be a Deductible Gift Recipient under Division 30 of the ITAA 1997, a public benevolent institution for the purposes of subsection 57A(1) of the Fringe Benefits Tax Assessment Act (1986) (FBTAA) or a rebatable employer for the purposes of subsection 65J(1) of the FBTAA.", "Reasons_for_Decision": "", "Date_of_Decision": "26 August 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 50 Division 30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Fringe benefits tax Public Benevolent Institution Rebatable employer Charitable institution Gifts Non profit bodies Non profit entities Non profit companies", "Case_References": "McGarvie-Smith Institute v. Campbelltown Municipal Council [1965] NSWR 1641", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031088", "Unmatched_Content": "Keywords Exempt benefits Fringe benefits tax Public Benevolent Institution Rebatable employer Charitable institution Gifts Non profit bodies Non profit entities Non profit companies"}
{"ATO_ID_Number": "ATO ID 2012/76", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Eligibility for refund of excise paid on beer manufactured at an eligible brewery and classified to subitem 1.15 or 1.16 in the Schedule to the Excise Tariff Act 1921", "Issue": "Does the refund circumstance at item 21, clause 1 of Schedule 1 of the Excise Regulation 2015 (Excise Regulation) apply to beer that is entered for home consumption under either subitem 1.15 or 1.16 in the Schedule to the Excise Tariff Act 1921 (Excise Tariff Act)?", "Decision": "No. Because beer under subitems 1.15 and 1.16 of the Schedule to the Excise Tariff Act is not sold, item 21, clause 1 of Schedule 1 of the Excise Regulation does not apply.", "Facts": "A brewery is operated by an entity that is legally and economically independent of any other entity that operates a brewery. The entity sells, directly from the brewery, beer they manufacture at the brewery. Excise duty is paid on the beer that is sold. The brewing equipment and facilities of the brewery are also made available to individuals to brew their own beer. The individuals pay for the ingredients, use of the equipment, recipes and are responsible for their own brews. Beer brewed by the individuals is not sold at the brewery. The operator of the brewery enters the beer for home consumption under subitems 1.15 or 1.16 of the Schedule to the Excise Tariff Act and pays excise duty.", "Reasons_for_Decision": "Summary: Section 78 of the Excise Act 1901 (Excise Act) provides that a refund of excise duty may be allowed in prescribed circumstances. Section 8 of the Excise Regulation states that the prescribed circumstances are listed in Schedule 1. Item 21, clause 1 of that Schedule includes excise duty that has been paid on beer manufactured in an eligible brewery during the financial year. Item 21 does not appear to directly limit its application to beer that is sold from the brewery, however, the meaning of the term 'eligible brewery' is given in regulation 6 which states an: eligible brewery means a brewery that: (a) is operated by an entity that is legally and economically independent of any other entity that operates a brewery; and (b) sells beer (whether wholesale or retail), on which excise has been paid, directly from the manufacturing premises of the brewery. The Commissioner considers that item 21 and regulation 6 of the Excise Regulation must be read together and, in context, the beer referred to in the refund circumstance is the beer which qualifies the brewery as an eligible brewery. That is, the beer referred to in item 21 must be beer that is sold from the manufacturing premises of the brewery for the refund to be applicable. Beer described at subitems 1.15 or 1.16 of the Schedule to the Excise Tariff Act is beer of a particular strength of alcohol by volume and which is produced for non-commercial purposes using commercial facilities or equipment. This is beer that is not sold. Although the beer is made using the equipment of the brewery, neither the brewery nor anyone else sells it from the manufacturing premises of the brewery. Hence, the refund circumstance in item 21, clause 1 of Schedule 1 of the Excise Regulation does not apply to beer entered for home consumption under subitems 1.15 or 1.16 in the Schedule to the Excise Tariff Act.", "Date_of_Decision": "31 August 2012", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 78", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Beer Refund", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201276", "Unmatched_Content": "Changes to citations due to Excise Regulation 2015 replacing Excise Regulations 1925 | Amended to correct references for clarity | Keywords Excise Beer Refund"}
{"ATO_ID_Number": "ATO ID 2010/130", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: iced alcoholic beverage (slushie)", "Issue": "Is the preparation of an iced alcoholic beverage (slushie) by mixing duty paid spirit with syrup or fruit juice in a frozen cocktail machine behind the bar of a licensed premises considered to be 'manufacture' for the purposes of section 4 of the Excise Act 1901 (Excise Act)?", "Decision": "No. The preparation of a slushie by mixing duty paid spirit with syrup or fruit juice in a frozen cocktail machine behind the bar of a licensed premises is not considered to be 'manufacture' for the purposes of section 4 of the Excise Act.", "Facts": "A frozen cocktail machine consists of between one to four bowls. Each bowl has a capacity of between 10 to 20 litres and is capable of containing and mixing a different flavoured alcoholic beverage. Duty paid spirit is mixed with a sugared, flavoured, non-alcoholic liquid (syrup) or fruit juice in the frozen cocktail machine. Once added to the frozen cocktail machine, the mixture is frozen by a freezing cylinder in the machine. The frozen mixture is then continuously scraped off the cylinder and constantly stirred by a rotating blade in order to provide a uniform icy consistency. The slushie is then dispensed directly from the frozen cocktail machine into a glass or jug for retail sale and consumption at the premises. The slushie will generally have an alcohol content of between 5% and 11%. The frozen cocktail machine is located and the entire process takes place behind the bar of a licensed hotel, club or restaurant.", "Reasons_for_Decision": "Summary: Section 25 of the Excise Act provides that only a licensed manufacturer is to manufacture excisable goods. Excisable goods are goods on which excise duty is imposed by Parliament. Under section 5 of the Excise Tariff Act 1921 (Excise Tariff Act), excise duty is imposed on goods listed in the Schedule to the Excise Tariff Act that are manufactured or produced in Australia. Items 2 and 3 of the Schedule to the Excise Tariff Act set out the excise duties imposed on spirits and other excisable beverages. Therefore, it is necessary to determine if the product is manufactured in Australia. Section 4 of the Excise Act defines 'manufacture' as: Manufacture includes all processes in the manufacture of excisable goods and, in relation to beer, includes the provision to the public at a particular premises of commercial facilities and equipment for use in the production of beer at those premises. This definition (which includes the term 'manufacture' within it) is circular and provides little guidance. It is therefore necessary to look outside the provisions of the Excise Act for guidance on the meaning of the term. The Australian Oxford Dictionary , 2nd edn, 2004, Oxford University Press, Melbourne, defines manufacture to be: 1a the making of articles especially in a factory etc. b a branch of an industry (woollen manufacture ). 2 esp derog . The merely mechanical production of literature, art, etc... 1 make (articles), especially on an industrial scale. 2 invent or fabricate (evidence, a story, etc.) 3 esp. derog . Make or produce (literature, art, etc.) in a mechanical way... In addition to its ordinary meaning, the courts have extensively examined the meaning of the term 'manufacture' in the context of legislation other than the Excise Act, in particular sales tax legislation. Although it is not possible, for the purposes of the Excise Act, to directly adopt the judicial interpretation of the word 'manufacture' as it appears outside of the Excise regime, the cases still provide a useful guideline as to possible interpretations of the term. In McNichol and Anor v. Pinch [1906] 2 KB 352, Darling J stated at page 361: ... the essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made. Factors that have been taken into consideration by the courts in examining whether something is a different thing from that out of which it is made include but are not limited to the colour, shape, composition or any other quality, as well as differences in its utility for some purpose: M.P. Metals Pty Ltd v. Federal Commissioner of Taxation (1967-1968) 117 CLR 631; (1968) 14 ATD 407. Another factor that has been considered by the courts is whether there has been an application of skill to the component elements of a thing in order to bring a new and saleable entity into existence: Re Searls Ltd (1932) 33 SR (NSW) 7 at 11. Although it is clear from the definition of 'manufacture' contained in the Excise Act that the term is intended to be interpreted and applied broadly, whether or not excisable goods are 'manufactured' will often be a question of fact and degree that requires the exercise of judgement in relation to the different processes involved in the making of the goods. Bearing this in mind, the courts have also provided that the concept of manufacture should not be taken beyond its usually accepted limit unless the legislation so requires: Federal Commissioner of Taxation v. Nimrod Theatre Co. Pty. Ltd . (1984) 15 ATR 607; 84 ATC 4310 ( Nimrod ); Adams v. Rau (1931) 46 CLR 572 ( Adams ) and Federal Commissioner of Taxation v. Rochester (1934) 50 CLR 225; (1934) 2 ATD 466. For example, in explaining that the concept of manufacture should not be taken beyond its usually accepted limit, the court in Nimrod referred to Adams stating: ...In Adams v. Rau (supra), it was held that transcripts produced by professional shorthand writers were not manufactured goods within the meaning of the Act... It was said (at 579) that it would be a misuse of English to describe a shorthand writer's employment as the manufacture and production of transcripts... In Adams the court stated the following in relation to construing the term 'manufacture': ...The definition should receive an operation according to the natural and ordinary meaning of its terms... It is acknowledged that a strict interpretation of the term 'manufacture' as it is defined in the Excise Act may lead to the conclusion that the preparation of slushies in the manner described could be 'manufacture' for the purposes of the Excise Act. However, in the absence of any provision in the Excise Act to the contrary, such an interpretation would be taking the concept of 'manufacture' beyond its usually accepted limit. It is acknowledged that there is a distinction between the mixing of spirits behind a bar in a licensed hotel, club or restaurant upon a customer's specific request and the preparation of slushies as described. Slushies are produced in bulk and are available for customers to purchase in a pre-prepared form as opposed to being prepared on an individual drink-by-drink basis. However, it is the Commissioner's view that this distinction is not material for present purposes. Where a bartender mixes spirits behind a bar upon a customer's request it is considered that the bartender is simply using the manufactured product (duty paid spirit) for one of the uses for which it was intended; namely, the preparation of a mixed alcoholic beverage for retail sale and consumption at the licensed premises. The frozen cocktail machine is simply a modern electric appliance performing the same function as a bartender albeit in larger quantities and with greater efficiency. Therefore, the preparation of a slushie in the manner and circumstances described in the facts above involves simply using duty paid spirit for one of the uses for which it was intended and is not considered to be 'manufacture' for the purposes of the Excise Act.", "Date_of_Decision": "9 June 2010", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 4 section 25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Alcohol Excise Excisable goods Excisable goods manufacturer Manufacturer Spirits", "Case_References": "Adams v Rau (1931) 46 CLR 572", "Other_References": "The Australian Oxford Dictionary, 2nd edn, 2004, Oxford University Press, Melbourne", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010130", "Unmatched_Content": "Keywords Alcohol Excise Excisable goods Excisable goods manufacturer Manufacturer Spirits"}
{"ATO_ID_Number": "ATO ID 2009/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine Equalisation Tax: cider manufacture", "Issue": "Is reconstituted apple juice the juice of apples for the purposes of the definition of 'cider or perry' as defined in paragraph 31-5(a) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?", "Decision": "Yes. Reconstituted apple juice is the juice of apples for the purposes of the definition of 'cider or perry' in paragraph 31-5(a) of the WET Act.", "Facts": "The juice of apples is extracted from apples and then subjected to an evaporation process whereby water vapour is removed to produce apple juice concentrate. As a consequence of the concentration process, volatile aromatic components are also removed from the juice. These aromatic compounds are condensed to liquid and called apple juice condensate. The apple juice condensate is obtained solely via the concentration process and contains only the natural aromatic compounds of apple juice. Apple juice condensate is re-introduced to concentrated apple juice to restore the original aroma and flavour of the juice. The apple juice concentrate, apple juice condensate and water are combined to produce a reconstituted apple juice, which is then fermented.", "Reasons_for_Decision": "Summary: Section 31-5 of the WET Act defines 'cider or perry' to mean a beverage that: Paragraph 31-5(a) of the WET Act requires the beverage to be the product of the fermentation of the juice of apples. However, it does not preclude the use of a reconstituted apple juice. The use of the phrase 'reconstituted apple juice' in this context is simply a reference to a product that is the combination of the products derived from the juice of apples. It does not require 'reconstituted apple juice' to adhere to the requirements of the Australia New Zealand Food Standards Code. The Commissioner accepts that the juice of apples that has been concentrated and later reconstituted with water to a concentration consistent with that of the undiluted juice is the juice of apples for the purposes of paragraph 31-5(a) of the WET Act. The Commissioner also accepts that the juice of apples extends to combinations of products derived solely from the juice of apples. Apple juice concentrate and apple juice condensate are products derived from the juice of apples. As such, the combining of apple juice concentrate and apple juice condensate with water does not prevent the product from being the juice of apples for the purposes of paragraph 31-5(a) of the WET Act. The addition of apple juice condensate to merely reconstitute apple juice for fermentation is not adding a substance to give flavour to the juice as contemplated by paragraph 31-5(c) of the WET Act. As such, the reconstituted apple juice which is the product of combining apple juice concentrate, apple juice condensate and water is the same as the juice of apples for the purposes of paragraph 31-5(a) of the WET Act.", "Date_of_Decision": "26 May 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 31-5 paragraph 31-5(a) paragraph 31-5(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cider Wine equalisation tax", "Case_References": "", "Other_References": "Australia New Zealand Food Standards Code", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200938", "Unmatched_Content": "Keywords Cider Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2008/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Addition of wine to brandy and whether the finished product is brandy", "Issue": "Is an alcoholic beverage that is 40.2% alcohol by volume (a/v) which is made by combining grape wine and brandy (in the proportion of 49% wine to 51% brandy) 'brandy' as defined in the Schedule to the Excise Tariff Act 1921 (Excise Tariff Act)?", "Decision": "No. An alcoholic beverage that is 40.2% a/v which is made by combining grape wine and brandy (in the proportion of 49% wine to 51% brandy) is not 'brandy' as defined in the Schedule to the Excise Tariff Act.", "Facts": "Grape wine with an alcoholic strength of 14.5% a/v is added to brandy with an alcoholic strength of 65% a/v to produce an alcoholic beverage with a strength of 40.2% a/v. The finished product is made by combining grape wine with brandy at a ratio of 49% grape wine and 51% brandy. The grape wine complies with the definition of grape wine in subdivision 31-A of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act).", "Reasons_for_Decision": "Summary: 'Brandy' is defined in the Schedule to the Excise Tariff Act as follows: brandy means a spirit distilled from grape wine in such a manner that the spirit possesses the taste, aroma and other characteristics generally attributed to brandy. The definition of brandy in the Schedule to the Excise Act was amended by the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Act 2006 with effect from 1 July 2007. The Explanatory Memorandum to the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 states: 1.12 The excise duty rate applicable to 'brandy' is at a lower rate than that applicable to other excisable beverages and so it is necessary to provide a definition so that only brandy as defined pays duty at that rate. Brandy is defined in a commencing note to the excise tariff to be a spirit that has been distilled from grape wine so that it tastes and smells like brandy and possesses other characteristics such as colour that are expected of brandy [Schedule 1, item 30] . So-called fruit brandies such as peach brandy and apricot brandy do not fall within this definition as they are not distilled from 'grape wine'. [Emphasis added] 1.13 'Grape wine' is defined in a commencing note to the excise tariff by reference to the A New Tax System (Wine Equalisation Tax) Act 1999 [Schedule 1, item 32] . This ensures a consistent definition across alcoholic beverages and reinforces that brandy applies to spirit of grape origin but not of origin from other fruits. [Emphasis added] Thus it can be seen that there is no precise definition of brandy, but for a beverage to be brandy the beverage must be a spirit distilled from grape wine and conform to those characteristics that are accepted as belonging to brandy. In this case the beverage is a mixture of grape wine and brandy rather than a spirit distilled from grape wine. The definition of 'brandy' in the Schedule to the Excise Tariff Act also states that 'it possesses the taste, aroma and other characteristics generally attributed to brandy'. The terms 'taste, aroma and other characteristics' are not defined in Excise legislation nor have they been examined in case law, therefore we must rely on the common meaning of these terms to determine whether the final product in this case possesses the same taste, aroma and other characteristics generally attributable to brandy. Other indicators in determining whether an alcoholic beverage is a brandy, although not definitive on their own, are the requirements prescribed by the Food Standards Code established by Food Standards Australia New Zealand. Standard 2.75 of the Food Standards Code relevantly provides the following definitions of 'brandy' and 'spirit': brandy means a spirit obtained from the distillation of wine, or fermented preparations of grapes or grape product. spirit means a potable alcoholic distillate, including whisky, brandy, rum, gin, vodka and tequila, which, unless otherwise required by this Standard, contains at least 37% alcohol by volume , produced by distillation of fermented liquor derived from food sources, so as to have the taste, aroma and other characteristics generally attributable to that particular spirit. [Emphasis added] Thus, for the alcoholic beverage to be considered a 'brandy' under the Food Standards Code , the beverage must be a spirit of at least 37% a/v distilled from grape wine or fermented preparations of grapes or grape product. This is a characteristic attributable to brandy. Standard 4.5.1 of the Food Standards Code contains requirements for the production of wine and brandy in Australia. In relation to brandy, the schedule to this standard provides a list of things that may be added to brandy. This list includes grape wine. This is congruent with the long-standing practice for commercial distillers to add, among other things, a small quantity of wine to brandy. In this case, although the alcoholic beverage has an overall alcoholic strength of 40.2% a/v, it is not a spirit obtained from the distillation of wine. It is a mixture of a spirit and wine. While the Commissioner of Taxation acknowledges that taste and aroma are subjective and has not assessed the taste or aroma of the beverage, nor has it been considered if the beverage exhibits the 'other characteristics generally attributable to brandy', the alcoholic beverage is a blend of 51% brandy and 49% grape wine and is not 'a spirit distilled from grape wine'. Therefore, an alcoholic beverage with 40.2% a/v which is made by combining brandy and grape wine in the proportions of 51% brandy and 49% grape wine, is not 'brandy' as defined in the Schedule to the Excise Tariff Act.", "Date_of_Decision": "30 January 2008", "Year_of_Income": "", "Legislative_References": "Excise Tariff 1921 The Schedule", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/192", "Subject_References": "Alcohol Alcohol excise Excise Excise collections Grape wine Spirit excise", "Case_References": "", "Other_References": "Explanatory Memorandum to the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 Food Standards Code", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200829", "Unmatched_Content": "Keywords Alcohol Alcohol excise Excise Excise collections Grape wine Spirit excise"}
{"ATO_ID_Number": "ATO ID 2007/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: conditions on a permit to receive concessional spirit", "Issue": "Is the Commissioner of Taxation (CEO) able to impose conditions on an approval issued under section 77FF of the Excise Act 1901 that restrict the manner and the markets in which essences, manufactured using spirit subject to subitem 3.7 of the Schedule to the Excise Tariff Act 1921 , may be sold by a manufacturer?", "Decision": "Yes. The CEO is able to impose conditions on an approval issued under section 77FF of the Excise Act that restrict the manner and the markets in which essences, manufactured using spirit subject to subitem 3.7 of the Schedule to the Excise Tariff Act, may be sold by a manufacturer.", "Facts": "High strength spirit is used in the manufacture of essences and flavours for use in the food industry. Essences and flavours are typically used in the food industry to impart flavours rather than as a source of intoxicating liquor. Essences and flavours can be used as an alcoholic beverage or in the production of an alcoholic beverage without the addition of further alcohol.", "Reasons_for_Decision": "Summary: Subitem 3.7 of the Schedule to the Excise Tariff Act specifies a free rate of duty for spirit to be used for an industrial, manufacturing, scientific, medical, veterinary or educational purpose, supplied to a person who has an approval under section 77FF of the Excise Act. This spirit is commonly referred to as concessional spirit. Subsection 77FF(1) of the Excise Act specifies that for the purposes of subitem 3.7 of the Schedule to the Excise Tariff Act, the CEO may grant a person written approval to use spirit for a specified industrial, manufacturing, scientific, medical, veterinary or educational purpose. Subsection 77FF(3) of the Excise Act states that 'the CEO must specify in any approval any conditions to which the approval is subject'. The Excise legislation does not expressly state or limit the conditions to which an approval granted under section 77FF of the Excise Act may be subject. Subsection 77FF(5) of the Excise Act requires that the CEO must, by means of a legislative instrument, develop guidelines that the CEO must have regard to when deciding whether or not to grant an approval under subsection 77FF(1) of the Excise Act. The guidelines so developed are called the Excise concessional spirit approvals guidelines 2006 (No. 1) (the guidelines). Paragraph 10 of the guidelines states that an industrial, manufacturing, scientific, medical, veterinary or educational purpose does not include use of the spirit as a beverage or in the production of a beverage (other than as an incidental input), and does not include the use of the spirit for an intoxicating effect in a product that is not a beverage. Paragraph 11 of the guidelines states that in granting approval to a person under subsection 77FF(1) of the Excise Act, the CEO must be satisfied that the person intends to use the spirit for the approved purpose, and that it is unlikely that the spirit will be used for another purpose. Essences manufactured using alcohol consist of concentrated flavours, colours or aromas in a high strength alcohol base. Alcohol is used as a carrying medium and frequently forms a very large proportion of the ingredients. Because of the concentration of flavours in essences, only small quantities are normally required in food. Essences can be made in the flavour of many alcoholic beverages, such as brandy, whisky and rum, so that simply by the addition of water a passable imitation of the beverage can be made. Because of the high concentration of alcohol in essences, they can easily be converted into alcoholic beverages. In the absence of express legislative direction, it is therefore reasonable that the CEO can impose conditions on an approval granted under section 77FF of the Excise Act for the purpose of ensuring concessional spirit or goods manufactured using concessional spirit are not used in the production of an alcoholic beverage or for an intoxicating effect in a product that is not a beverage. Therefore, the CEO may impose conditions that restrict the manner and markets in which essences, manufactured using spirit subject to subitem 3.7 of the Schedule to the Excise Tariff Act, may be sold by a manufacturer.", "Date_of_Decision": "16 January 2007", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 Schedule, Item 3.7", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Alcohol Alcohol permits Concessional spirits permits Excise Spirits", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200719", "Unmatched_Content": "Amended citation for clarity | Keywords Alcohol Alcohol permits Concessional spirits permits Excise Spirits"}
{"ATO_ID_Number": "ATO ID 2007/202", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: beer used in the manufacture of a non-excisable product", "Issue": "Can an entity that manufactures beer, use that beer to make another product that is not excisable without paying excise duty on the beer?", "Decision": "No, an entity that manufactures beer cannot use that beer to manufacture another product that is not excisable without paying excise duty on that beer.", "Facts": "The entity is licensed to manufacture excisable goods pursuant to Part IV of the Excise Act 1901 (Excise Act). The entity manufactures beer as defined in the Schedule to the Excise Tariff Act 1921 (Excise Tariff Act). The beer is fit for human consumption. The beer is used as an ingredient in the manufacture of a non-beverage food product that is not an excisable good. The manufacture of the beer and the manufacture of the food product are undertaken at the same premises.", "Reasons_for_Decision": "Summary: Section 5 of the Excise Tariff Act imposes excise duty on goods that are specified in the Schedule to that Act and which are manufactured or produced in Australia. Item 1 in the Schedule to the Excise Tariff Act specifies that excise duty is applicable to beer and provides various rates of duty dependent upon the strength of the beer and the size of the container in which the beer is packaged. The Commissioner is cognisant of the fact that the entity commercially manufactures non-excisable goods for sale, with the manufacture of the beer undertaken solely for the purpose of achieving that end. Notwithstanding that the entity does not manufacture beer for sale, the beer is an excisable good on which duty is imposed. Pertinent to this entity then, is whether the Excise Act or Excise Tariff Act contains a provision allowing the Commissioner to give permission to the entity to use the beer without paying duty. Section 77D of the Excise Act allows for the delivery of certain beer to be used for manufacturing purposes without an entry for home consumption and without paying duty. However section 77D is limited to beer that is unfit for human consumption. That is not the situation in this case. Other provisions of the Excise Act or Excise Tariff Act allow the Commissioner to grant approval to a person to use certain excisable goods for specified purposes. For example, section 77FF of the Excise Act allows the Commissioner to grant approval to a person to use spirits for specified industrial, manufacturing scientific, medical, veterinary or educational purposes. Spirit subject to such an approval is classified to subitem 3.7 in the Schedule to the Excise Tariff Act which attracts a free rate of duty. However, no such provisions have been provided for in the relevant Acts specific to beer. Section 61 of the Excise Act provides that excisable goods are subject to the Commissioner's control until they are delivered for home consumption or for export. Section 61 also provides that a person must not, without permission, move, alter or interfere with goods subject to the Commissioner's control. Section 24 of the Excise Act may allow for excisable goods to be used in the manufacture of other excisable goods. However as the entity is using an excisable good to manufacture a food product which is not excisable, section 24 will not apply. In the absence of a similar provision allowing the use of excisable goods in the manufacture of non-excisable goods, it can be inferred that Parliament has not intended for such manufacturing processes to be allowed without the entity being required to pay duty on those goods. There are two ways in which the entity may account for the beer and pay the requisite duty. Section 58 of the Excise Act allows entries to be made in respect of excisable goods, and for Excise officers to pass the entries, thereby authorising the removal of the goods for home consumption. Alternatively, entities may seek permission under section 61C of the Excise Act to deliver the goods for home consumption without entering the goods. In both instances the beer must be classified to the appropriate subitem in the table in the Schedule to the Excise Tariff Act and excise duty paid accordingly. Therefore an entity that manufactures beer cannot use the beer in the manufacture of non-excisable products without paying the appropriate excise duty on the beer.", "Date_of_Decision": "5 November 2007", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 section 5 Item 1 in the Schedule", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Alcohol Alcohol excise Beer Beer excise Excisable goods Excisable goods manufacturer Excise Licensing", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007202", "Unmatched_Content": "Keywords Alcohol Alcohol excise Beer Beer excise Excisable goods Excisable goods manufacturer Excise Licensing"}
{"ATO_ID_Number": "ATO ID 2006/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: manufacturer's licence - suspend a licence", "Issue": "Is the Commissioner able to suspend a manufacturer licence pursuant to paragraph 39G(1)(m) of the Excise Act 1901 if the licence holder has been charged with offences under the Excise Act including non-payment of duty on excisable goods?", "Decision": "Yes. The Commissioner is able to suspend a manufacturer licence pursuant to paragraph 39G(1)(m) of the Excise Act if the licence holder has been charged with offences under the Excise Act including non-payment of duty on excisable goods.", "Facts": "A person (the licensee) holds an excise manufacturer licence. The licensee has been charged with offences under the Excise Act. The offences include non-payment of duty on excisable goods.", "Reasons_for_Decision": "Summary: Section 4 of the Excise Act provides that the term 'Collector' means the 'CEO' which in turn means the 'Commissioner'. Subsection 39G(1) of the Excise Act provides that the Collector may suspend a licence in a number of circumstances. One of the circumstances is if the Collector has reasonable grounds for believing that it is necessary for the protection of the revenue to suspend the licence. The expression 'protect the revenue' is not defined in the Excise Act. In an unreported decision, Re Francesco Martino Applicant v. Australian Taxation Office Respondent [2002] AATA 1242 (unreported, Deputy President Forgie, 29 November 2002) (the Martino Case ), the tribunal referred to the judgment of Hodges J. in Stephens v. Abrahams (1902) 23 ALT 233; (1902) 27 VLR 753; (1902) 8 ALR 112 where he defined the term 'revenue' as '...moneys which belong to the Crown, or moneys to which the Crown has a right, or moneys which are due to the Crown...'. Although the Martino Case considered the suspension of a tobacco producer licence, the Tribunal's views on what constitutes 'necessary to protect the revenue' are equally relevant to excise manufacturer licences. The Tribunal found that the protection of the revenue has two aspects. Firstly, the Commonwealth must be certain of receiving all the excise duty that is ultimately payable. The second aspect is that the Commonwealth should not have to spend more than would normally be necessary in carrying out its supervisory duties and responsibilities under the Excise Act. Further, the Tribunal took the view that the word necessary does not mean essential. The word necessary means that which is reasonably required. In this instance, the licensee has been charged with offences under the Excise Act. The offences include non-payment of excise duty. Given the licensee's alleged failure to remit all excise duty properly payable, it is reasonable to conclude that suspension of their excise manufacturer licence is warranted. If the licence is not suspended, both of the reasons for protecting of the revenue identified by the Tribunal in the Martino Case become relevant. Firstly the licensee's alleged past failures indicate a risk that the Commonwealth may miss out on duty properly payable. Secondly, given the client's alleged failure to comply with excise laws, the Commonwealth would have to boost its compliance efforts, thus requiring expenditure of additional sums in carrying out its supervisory duties and responsibilities under the Excise Act. Therefore, where the holder of an excise manufacturer licence has been charged with offences under the Excise Act, including non-payment of excise duty, the Collector may suspend their licence pursuant to paragraph 39G(1)(m) of the Excise Act.", "Date_of_Decision": "10 March 2006", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 4 section 39G subsection 39G(1) paragraph 39G(1)(m)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/78 | ATO ID 2006/79", "Subject_References": "Excise Excise collections Licensed manufacturer Tobacco producer licence", "Case_References": "Stephens v. Abrahams (1902) 23 ALT 233 (1902) 27 VLR 753 (1902) 8 ALR 112", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200677", "Unmatched_Content": "Keywords Excise Excise collections Licensed manufacturer Tobacco producer licence"}
{"ATO_ID_Number": "ATO ID 2005/221", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: Goods destroyed in transit to, or at, a place of export", "Issue": "Has an excise export movement permission holder accounted for excisable goods to the satisfaction of the Collector, for the purposes of section 60 of the Excise Act 1901 (Excise Act), if the permission holder can prove that the excisable goods were destroyed while in transit to, or at, a place of export specified in the export movement permission?", "Decision": "Yes. An export movement permission holder has accounted for excisable goods to the satisfaction of the Collector, for the purposes of section 60 of the Excise Act, if the permission holder can prove that the excisable goods were destroyed while in transit to, or at, a place of export specified in the export movement permission.", "Facts": "An entity holds an export movement permission (granted under subsection 61A(2A) of the Excise Act) that entitles the entity to move certain excisable goods to a place of export specified in the permission. No excise duty has been paid on the goods as they are intended for export. The goods are destroyed while in transit to, or at, the place of export. The entity has provided evidence that proves that the goods have been destroyed.", "Reasons_for_Decision": "Summary: Section 60 of the Excise Act contains a number of mechanisms that ensure that where a person fails to account for excisable goods to the satisfaction of the Commissioner of Taxation (the Commissioner), the person is liable to pay to the Commissioner an amount equivalent to the duty that would have been payable on those goods if they had been delivered for home consumption. Subsection 60(1) of the Excise Act is relevant where excisable goods are still subject to the Commissioner's (CEO's) control. Subsection 61(1) of the Excise Act states: All excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first. Where goods have not yet been delivered for exportation (delivered to a place of export) subsection 61(1) of the Excise Act ensures the goods remain under the CEO's control. Subsection 60(1) of the Excise Act states, in part: Where a person (including a licensed manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the CEO's control: ... (b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand. Therefore, where goods are in transit to a place of export, a person entrusted with the possession of those goods must, when requested by a Collector (the CEO or an authorised officer), account for those goods to the satisfaction of the Collector. If the person fails to do so, the Collector may demand that the person pay an amount equal to the Excise duty that would have been payable if the goods had been entered for home consumption on the day on which the Collector made the demand. Where goods have been delivered for export, one of the conditions set out in subsection 61(1) of the Excise Act has been satisfied and the goods are no longer subject to the CEO's control. Subsection 60(1C) of the Excise Act ensures that notwithstanding the fact that the goods are no longer subject to the CEO's control, the Collector can require a person entrusted with goods that have been delivered for export to account for those goods. Failure to account to the Collector's satisfaction can result in the person being liable for an amount equivalent to the duty that would have been payable on those goods if they had entered home consumption. Subsection 60(1C) of the Excise Act states: If a person (including a licensed manufacturer) has, or has been entrusted with, the possession, custody or control of excisable goods: (a) on which duty has not been paid; and (b) that have been delivered for exportation in accordance with a permission under section 61A; and (c) the person: (i) fails to keep those goods safely; or (ii) when requested by a Collector, does not satisfy the Collector that the goods have been exported and does not otherwise account for those goods to the satisfaction of the Collector Both subsections 60(1) and 60(1C) of the Excise Act empower the Collector to require a person entrusted with excisable goods to account for those goods. The purpose of section 60 of the Excise Act was examined in Collector of Customs (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279. The case predates the Commissioner of Taxation assuming responsibility for Excise matters. The principles outlined in the case remain valid but references to 'Customs control' should be read as 'the CEO's control'. Dixon CJ stated '... on a complete view of s.60 it seems rather to be a provision for the protection of the revenue ...' Menzies J, in discussing subsection 60(1) of the Excise Act stated: ... the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. Finkelstein J in Sidebottom v. Guiliano (2000) 98 FCR 579; [2000] FCA 607 stated: The object of s60 is to impose an obligation upon a person in possession, custody or control of excisable goods to ensure that those goods do not find their way into home consumption without the payment of duty. Given the comments of Menzies J. and Finkelstein J., it can be concluded that a person entrusted with excisable goods has accounted for those goods to the Collector's satisfaction provided the person can show: In this instance, the person entrusted with possession of the excisable goods has provided evidence that proves that the goods have been completely destroyed while in transit to, or at, a place of export. Therefore there is no prospect of the goods entering home consumption and the second of the above requirements is satisfied. Accordingly, an export movement permission holder has accounted for excisable goods to the satisfaction of the Collector, for the purposes of section 60 of the Excise Act, if the permission holder can prove that the excisable goods were destroyed while in transit to, or at, a place of export specified in the export movement permission.", "Date_of_Decision": "22 July 2005", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 Section 60 Subsection 60(1) Subsection 60(1C) Subsection 61(1) Subsection 61A(2A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excisable goods Export of goods", "Case_References": "Collector of Customs (N.S.W) v. Southern Shipping Co. Ltd (1962) 107 CLR 279", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005221", "Unmatched_Content": "the person must, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand. | Keywords Excisable goods Export of goods"}
{"ATO_ID_Number": "ATO ID 2014/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Refund of excise duty - goods destroyed after delivery for home consumption", "Issue": "Is the owner of tobacco products entitled to a refund of excise duty under section 78 of the Excise Act 1901 (Excise Act) if the products are destroyed after they have left the owner's licensed premises?", "Decision": "The owner of tobacco products is not entitled to a refund of excise duty under section 78 of the Excise Act if the products are destroyed after they have left the owner's licensed premises.", "Facts": "The owner of tobacco products had paid excise duty in respect of the products. The tobacco products had left the owner's licensed premises and were in transit to the owner's customers' retail premises. The vehicle transporting the tobacco products was involved in an accident and all of the tobacco products were destroyed.", "Reasons_for_Decision": "Summary: Section 78 of the Excise Act provides that a refund of excise duty may be paid. Subsection 78(1) of the Excise Act states: Refunds of excise duty may be allowed: (a) in respect of excisable goods generally or in respect of the goods included in a class of excisable goods; and (b) in such circumstances, and subject to such conditions and restrictions (if any), as are prescribed, being circumstances, and conditions and restrictions, that relate to excisable goods generally or to the goods included in a class of excisable goods. Schedule 1 of the Excise Regulation 2015 specifies the circumstances under which refunds of excise duty may be made and the two most relevant circumstances are: Item 1 of clause 1 Excise duty has been paid or is payable on goods that have, while subject to the CEO's control: (a) deteriorated; or (b) been damaged, pillaged, lost or destroyed; or (c) become unfit for human consumption. Item 7 of clause 1 Excise duty has been paid on goods that: (a) have not been used; and (b) are returned to: (i) premises for which a licence has been granted under section 39A of the Act; or (ii) a person authorised by the manufacturer of the goods to receive goods on behalf of the manufacturer; and Each of these circumstances will be examined in turn. Item 1 of clause 1 To be entitled to a refund under this provision, the goods must have been under the CEO's control at the time of their destruction. Therefore we must determine at what point goods leave the CEO's control. Section 61 of the Excise Act defines when excisable goods cease to be subject to the CEO's control. Subsection 61(1) of the Excise Act states 'All excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first.' Section 58 of the Excise Act allows for authority to be given for the removal of goods for home consumption. Alternatively excisable goods may be delivered for home consumption without entry under the authority of permission granted under section 61C of the Excise Act. In accordance with subsection 61C(2) of the Excise Act excisable goods delivered under the authority of section 61C are deemed to be entered for home consumption on the day they are delivered. The term 'delivered for home consumption' is not defined in the Excise Act. However, this issue was considered in detail in Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 (Caltex case), where Sundberg J, in considering whether fuel manufactured and consumed in a licensed premises had been delivered for home consumption, stated: [140] I agree with the Commissioner that Caltex delivered the residual oils for home consumption for the purposes of the Excise Act. The Excise Act does not refer to delivery to a person but adopts the more ample language of delivery for or into home consumption. While I accept that the typical case of delivery will involve the movement of excisable goods from one person or place to another, the language of the Excise Act is sufficiently broad to apply to the less typical case of consumption by a manufacturer at its own premises. The contention that the Excise Act necessarily requires the physical removal of goods from one place to another seems to me to give the concept of delivery for home consumption a restricted meaning not warranted either by the breadth of the language used or the evident purpose of the legislation, namely to tax manufactured goods consumed in Australia... Permission under section 61C of the Excise Act allows for goods to be delivered for home consumption without entry. However, section 61 of the Excise Act maintains the CEO's control until goods are delivered. Based on the reasoning in the Caltex case, excisable goods are generally delivered into home consumption when they are physically delivered from the licensed premises (although excisable goods that are consumed on the licensed premises are also considered to have been delivered for home consumption). Excisable goods are therefore subject to the CEO's control until dispatched into circulation. This means the goods must physically leave the licensed area and once they do so they are no longer subject to the CEO's control. As the tobacco products were in transit to the owner's customers at the time of the accident, and the tobacco had been delivered for home consumption, the tobacco is no longer subject to the CEO's control. Since the tobacco was no longer subject to the CEO's control at the time of the tobacco products destruction, the circumstance at item 1, clause 1 of Schedule 1 of the Excise Regulation 2015 has not been satisfied. Item 7 of clause 1 As the tobacco products were destroyed in the accident, they have not been returned to the premises or a person authorised by the manufacturer to receive those goods on behalf of the manufacturer. Hence the key circumstance at item 7, clause 1 of Schedule 1 of the Excise Regulation 2015 is unsatisfied. As no circumstance at Schedule 1 of the Excise Regulation 2015 has been satisfied, a refund of excise duty is not payable under section 78 of the Excise Act.", "Date_of_Decision": "14 October 2014", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 58 section 61 section 61C section 78", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/100 (Withdrawn)", "Subject_References": "Delivered for home consumption Excisable goods Excise Excise collections Tobacco Periodic Settlement Permission Tobacco manufacturer", "Case_References": "Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 (2008) 173 FCR 359 74 ATR 676", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201430", "Unmatched_Content": "Changes to citations due to Excise Regulation 2015 replacing Excise Regulations 1925 | Keywords Delivered for home consumption Excisable goods Excise Excise collections Tobacco Periodic Settlement Permission Tobacco manufacturer"}
{"ATO_ID_Number": "ATO ID 2011/48", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise and the number of premises specified in a licence to manufacture", "Issue": "Can a licence to manufacture excisable goods issued under the Excise Act 1901 (Excise Act) specify multiple premises?", "Decision": "Yes, a licence to manufacture excisable goods issued under the Excise Act can specify multiple premises.", "Facts": "An entity applies for a licence to manufacture excisable goods at three premises. The entity will undertake a process of manufacturing of particular excisable goods at these different locations.", "Reasons_for_Decision": "Summary: By the operation of section 25 of the Excise Act, a person is required to hold a licence to manufacture excisable goods. Section 27 of the Excise Act stipulates that the excisable goods may only be manufactured at the premises specified in the licence. Sections 39 and 39A of the Excise Act deal with the application for, and the granting of a licence respectively. Section 39 of the Excise Act provides that an application may be made for a licence, and in particular paragraph 39(2)(d) states in part that the application must 'contain a description of the premises in relation to which the licence is sought'. The term 'premises' is not defined in the Excise Act and therefore takes its ordinary meaning. The Australian Oxford Dictionary , 2004, rev. 2nd edn, Oxford University Press, Melbourne defines 'premises', when used in plural, as 2 (in pl .) a a house or building with its grounds and appurtenances, b Law houses, lands, or tenements previously specified in a document etc. Hence, when adopting the ordinary meaning of 'premises' in the context of a licence issued under the Excise Act, the word means the buildings and lands that are specified in the licence. This does not clarify whether a manufacturer licence may specify premises that are at more than one separately identifiable location. Subsection 39A(1) of the Excise Act gives the discretion to the Commissioner to grant, or refuse to grant the licence. Without limiting the operation of subsection 39A(1), subsection 39A(2) of the Excise Act includes matters on which the Commissioner may refuse to grant a licence. Relevantly, subsection 39A(2) includes the following: ... (g) in relation to an application for a manufacturer licence...the physical security of the premises in relation to which the licence is sought is not adequate having regard to: (i) the nature of the premises; or (ii) the kinds and quantity of goods that would be kept at the premises; or (iii) the procedures and methods that would be adopted by the applicant to ensure the security of goods at the premises The Excise Act does not state that only one location may be cited when a premises is specified in a manufacturer licence. It merely states the premises must be specified, and that the Commissioner, in exercising the discretion to grant a manufacture licence, may give consideration to the premises and matters directly related to the premises. The Acts Interpretation Act 1901 provides, at section 23, the rules as to gender and number in the interpretation of statute and states: In any Act, unless the contrary intention appears: ... (b) words in the singular number include the plural and words in the plural number include the singular. As the Excise Act does not explicitly state that only premises at a single location may be specified in a manufacturer licence, it is considered that premises at more than one location may be specified in a manufacturer licence.", "Date_of_Decision": "3 June 2011", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 25 section 27 section 39 section 39A subsection 39A(1) subsection 39A(2) paragraph 39(2)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Statutory licences Licensed premises", "Case_References": "", "Other_References": "The Australian Oxford Dictionary, 2004, rev. 2nd edn, Oxford University Press, Melbourne", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201148", "Unmatched_Content": "Keywords Excise Statutory licences Licensed premises"}
{"ATO_ID_Number": "ATO ID 2010/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: home consumption - delivered - periodic settlement permission", "Issue": "Are excisable goods still subject to the Commissioner's control at the time of their destruction, if they are destroyed after they have been sold, and after preparation of documents required by their periodic settlement permission, but before they were physically removed from the licensed premises?", "Decision": "Yes. Excisable goods are subject to the Commissioner's control if the goods are destroyed after they have been sold, and after preparation of documents required by their periodic settlement permission, but before they were physically removed from the licensed premises.", "Facts": "An excise manufacturer holds a periodic settlement permission that was issued by the Commissioner pursuant to section 61C of the Excise Act 1901 (Excise Act). The excise manufacturer stores excisable goods in a licensed place. The excise manufacturer has sold the goods. The excisable goods were loaded onto a truck. The excisable goods were accidentally destroyed on the truck prior to the goods being physically removed from the licensed place. The entity's periodic settlement permission was issued subject to the following condition (which is commonly included in periodic settlement permissions): The entity had prepared a document consistent with the requirements of their periodic settlement permission prior to the excisable goods being loaded onto the truck.", "Reasons_for_Decision": "Summary: Subsection 61(1) of the Excise Act specifies when excisable goods cease to be subject to the CEO's control. Subsection 61(1) states: 61(1) All excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first. CEO is defined in section 4 of the Excise Act to mean the Commissioner of Taxation. Excisable goods may be delivered without entry under the authority of permission granted under section 61C of the Excise Act which states, in part: 61C(1) A Collector may give permission in writing to a person specified in the permission to deliver for home consumption from a place specified in the permission goods of a kind so specified that are subject to the CEO's control, and, until the permission is revoked, the permission is authority for that person to deliver for home consumption from that place goods of that kind that are subject to the CEO's control (other than goods that a Collector has directed are not to be delivered for home consumption under this section) notwithstanding that an entry of the goods for home consumption has not been made and passed under this Act. Therefore, in order to determine when goods leave the Commissioner's control, we must determine what constitutes 'home consumption' and when goods are 'delivered for home consumption'. The term 'home consumption' is not defined in the Excise Act. However, based on cases that have looked at this issue, it is evident that it is accepted that it is a term of broad application, intended to capture all domestic use of excisable goods manufactured in Australia (see Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 ( Caltex Case ) and Moama Refinery Pty Ltd v. Chief Executive Officer of Customs [2001] FCA 1287). The Excise Act does not define 'delivered for home consumption'. However, this issue was considered in detail in the Caltex Case , where Sundberg J, in considering whether fuel manufactured and consumed on the licensed premises had been delivered for home consumption, stated: [140] I agree with the Commissioner that Caltex delivered the residual oils for home consumption for the purposes of the Excise Act. The Excise Act does not refer to delivery to a person but adopts the more ample language of delivery for or into home consumption. While I accept that the typical case of delivery will involve the movement of excisable goods from one person or place to another, the language of the Excise Act is sufficiently broad in my view to apply to the less typical case of consumption by a manufacturer at its own premises... Sundberg J reiterates his view in paragraph 144 where he states: ... The section also accommodates and is consistent with a delivery for home consumption constituted by a use of the relevant goods at that place. Whilst the Caltex Case discusses the concept of 'deliver for home consumption' in the context of section 61C of the Excise Act, the discussion is equally relevant to the concept of 'delivery for home consumption' generally in the Excise Act. Based on the reasoning in the Caltex Case , excisable goods are generally delivered into home consumption when they are physically delivered from the licensed premises (although excisable goods that are consumed on the licensed premises are also considered to have been delivered for home consumption). It follows that where an entity has sold goods and prepared the appropriate documentation under their periodic settlement permission, but the goods have not yet left the licensed premises, they remain under the CEO's control.", "Date_of_Decision": "22 December 2009", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 4 subsection 61(1) section 61C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Delivered for home consumption Excisable goods Excise Excise collections Licensing Weekly settlement permission", "Case_References": "Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation [2008] FCA 1951", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201012", "Unmatched_Content": "Keywords Delivered for home consumption Excisable goods Excise Excise collections Licensing Weekly settlement permission"}
{"ATO_ID_Number": "ATO ID 2010/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: home consumption - delivered - prepaid entry", "Issue": "Are excisable goods subject to the Commissioner's control for the purposes of item 1, clause 1 of Schedule 1 of the Excise Regulation 2015 (Excise Regulation) if the goods are destroyed after they have been entered for home consumption and excise duty paid, but before they are removed from the licensed premises?", "Decision": "Yes. Excisable goods are subject to the Commissioner's control for the purposes of item 1, clause 1 of Schedule 1 of the Excise Regulation if the goods are destroyed after they have been entered for home consumption and excise duty paid, but before they are removed from the licensed premises.", "Facts": "Excisable goods were entered for home consumption under section 58 of the Excise Act 1901 (Excise Act) and the relevant excise duty paid. Authority had been given under section 58 of the Excise Act to remove the goods from the licensed place for home consumption. The goods were destroyed prior to being physically removed from the licensed place.", "Reasons_for_Decision": "Summary: Section 78 of the Excise Act provides for the granting of remissions, rebates and refunds in respect of excisable goods, subject to the Excise Regulation. Schedule 1 of the Excise Regulation sets out a number of circumstances under which refunds, rebates and remissions are available. The availability of refunds, rebates and remissions is also subject to a number of other provisions under the Excise Regulation. The Excise Regulation at item 1, clause 1 of Schedule 1 provides that one of the prescribed circumstances in which a refund, rebate or remission is available is where: Excise duty has been paid or is payable on goods that have, while subject to the CEO's control: (a) deteriorated; or (b) been damaged, pillaged, lost or destroyed; or (c) become unfit for human consumption. Therefore, entitlement to a refund relies (in part) on whether the goods on which excise duty has been paid were subject to the CEO's (defined in section 4 of the Excise Act to mean the Commissioner of Taxation) control when they were destroyed. Subsection 61(1) of the Excise Act specifies when excisable goods cease to be subject to the CEO's control. Subsection 61(1) states: 61(1) All excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first. The concept of delivery for home consumption can be contrasted with the concept of 'entry' of goods. This is evident from section 61C of the Excise Act which enables the Commissioner to grant permission for goods to be delivered for home consumption without entry. A similar distinction appears in section 58 of the Excise Act which provides for entries to be made by a manufacturer or owner of excisable goods, and passed by an officer, thus authorising the removal of the goods for home consumption or to an approved place. In this instance, the goods that were destroyed had been entered by the manufacturer under section 58 of the Excise Act and duty paid. The term 'home consumption' is not defined in the Excise Act. However, based on cases that have looked at this issue, it is evident that it is accepted as being a term of broad application, intended to capture all domestic use of excisable goods manufactured in Australia (see Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951 ( Caltex Case ) and Moama Refinery Pty Ltd v. Chief Executive Officer of Customs [2001] FCA 1287). The Excise Act does not define 'delivered for home consumption'. However, this issue was considered in detail in the Caltex Case, where Sundberg J, in considering whether fuel consumed in the licensed premises in which it was manufactured had been delivered for home consumption, stated: [140] I agree with the Commissioner that Caltex delivered the residual oils for home consumption for the purposes of the Excise Act. The Excise Act does not refer to delivery to a person but adopts the more ample language of delivery for or into home consumption. While I accept that the typical case of delivery will involve the movement of excisable goods from one person or place to another, the language of the Excise Act is sufficiently broad in my view to apply to the less typical case of consumption by a manufacturer at its own premises... Sundberg J reiterates his view in paragraph 144 where he states: ... The section also accommodates and is consistent with a delivery for home consumption constituted by a use of the relevant goods at that place. Whilst the Caltex Case discusses the concept of 'deliver for home consumption' in the context of section 61C of the Excise Act, the discussion is equally relevant to the concept of 'delivery for home consumption' generally in the Excise Act. Based on the reasoning in the Caltex Case , the primary means by which excisable goods are delivered into home consumption is physical delivery from the licensed premises (although excisable goods consumed on the licensed premises are also considered to have been delivered for home consumption). In this instance, the entity, although it had entered the goods, paid duty, and received permission to remove the goods from the licensed premises, had not yet removed the goods when they were destroyed. Nor did the entity consume the goods (in the sense of putting the goods to some purpose). It follows that where the goods have been destroyed before physically leaving the licensed premises they are still subject to the CEO's control even though they have been entered and duty has been paid and authority to remove them for home consumption has been given.", "Date_of_Decision": "22 December 2009", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 4 section 58 subsection 61(1) section 61C section 78", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Delivered for home consumption Excise Excise collections Licensing", "Case_References": "Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation [2008] FCA 1951", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201013", "Unmatched_Content": "Changes to citations due to Excise Regulation 2015 replacing Excise Regulations 1925 | Keywords Delivered for home consumption Excise Excise collections Licensing"}
{"ATO_ID_Number": "ATO ID 2007/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: Licensing conditions - notification of non-renewal of lease on licensed premises", "Issue": "Can the Collector impose a condition on a licence under subsection 39D(3) or paragraph 39DA(1)(b) of the Excise Act 1901 requiring a licence holder to notify the Collector in writing no later than 30 days prior to the event that the licence holder's occupancy of licensed premises will be terminated?", "Decision": "Yes. The Collector may impose a condition on a licence under subsection 39D(3) or paragraph 39DA(1)(b) of the Excise Act requiring a licence holder to notify the Collector in writing no later than 30 days prior to the event that the licence holder's occupancy of licensed premises will be terminated.", "Facts": "An entity has applied for a manufacturer licence. The applicant intends to carry on a business manufacturing excisable goods from leased premises.", "Reasons_for_Decision": "Summary: All legislative references are made to the Excise Act. Subsection 4(1) defines 'Collector' to mean the Commissioner of Taxation or an authorised officer. An application for a licence may be made under section 39. Section 39A provides that the Collector has discretion whether or not to grant a licence. If the Collector chooses to grant a licence, the licence is subject to the conditions set out in subsection 39D(1), any conditions prescribed under subsection 39D(2) and any conditions specified in the licence under subsection 39D(3). The conditions specified under subsection 39D(3) are conditions that are considered by the Collector to be necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts. Under paragraph 39DA(1)(b) the Collector may impose additional conditions on an existing licence. The term 'necessary for the protection of the revenue' was considered in Re Francesco Martino Applicant v. Australian Taxation Office Respondent (2002) AATA 1242 ( Martino ). The following two elements for the protection of the revenue may be drawn from Deputy President Forgie's judgement. The entity has applied for a manufacturer licence in respect of the premises they are leasing. The imposition of a condition on the licence to the effect that the licence holder must notify the Collector in writing no later than 30 days prior to the event that the licence holder's occupancy of licensed premises will be terminated is necessary to protect the revenue and ensure compliance with the Excise Acts for the following reasons: The above factors justify the imposition by the Collector of a condition requiring a licence holder to notify the Collector in writing no later than 30 days prior to the event that the licence holder's occupancy of licensed premises will be terminated.", "Date_of_Decision": "16 February 2007", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 subsection 4(1) section 27 section 39 paragraph 39(2)(d) subsection 39D(1) subsection 39D(2) subsection 39D(3) Part IV", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Excise collections Licensing", "Case_References": "Re Francesco Martino Applicant and Australian Taxation Office Respondent [2002] AATA 1242 (2002) 70 ALD 403", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200734", "Unmatched_Content": "Keywords Excise Excise collections Licensing"}
{"ATO_ID_Number": "ATO ID 2007/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: licence conditions in relation to notification of change of trustee for a trust", "Issue": "Can the Collector impose a condition on a licence under subsection 39D(3) of the Excise Act 1901 (Excise Act) that requires the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee?", "Decision": "Yes. The Collector can impose a condition on a licence under subsection 39D(3) of the Excise Act that requires the trustee for a trust to notify the Collector of the appointment of a new trustee in writing and prior to the appointment of the new trustee.", "Facts": "A company, in its capacity as trustee for a trust, has made an application to the Collector under section 39 of the Excise Act for a licence to manufacture excisable goods.", "Reasons_for_Decision": "Summary: All legislative references which follow are made to the Excise Act. Section 25 provides that it is an offence to manufacture excisable goods without a licence. An application for a licence may be made under section 39. Section 39A provides that the Collector may grant, or refuse to grant, a licence to a natural person, a partnership or a company. Therefore, the Collector cannot license a trust, but may grant a licence to a natural person or a company in its capacity as trustee for a trust. A licence is subject to the conditions set out in subsection 39D(1), any conditions prescribed under subsection 39D(2) and any conditions specified in the licence under subsection 39D(3). The conditions that can be specified in the licence under subsection 39D(3) are conditions that are considered by the Collector to be necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts. Subsection 4(1) defines 'Collector' to mean the Commissioner of Taxation or an authorised officer. Subsection 4(1) also provides that 'Excise Acts' mean the Excise Act and any instruments (including rules, regulations or by-laws) made under the Excise Act and any other Act, and any instruments (including rules, regulations or by-laws) made under any other Act, relating to excise in force within the Commonwealth or any part of the Commonwealth. The term 'necessary for the protection of the revenue' was considered in Re Francesco Martino Applicant v. Australian Taxation Office Respondent (2002) AATA 1242 (unreported, Deputy President Forgie, 29 November 2002). At paragraphs 51 and 52 of the judgement in that case Deputy President Forgie stated: 51...the ordinary meanings of the word 'protect' include 'keep safe, take care of', (The New Shorter Oxford English Dictionary, 3rd edition, 1993) and they would seem to be in the senses in which the word is used in the expression 'protect the revenue'. Mr Martino's licence may only be cancelled if it is necessary to take care of the money belonging to the Crown in right of the Commonwealth. That has the aspect of ensuring that the Commonwealth receives all that it should in the form of any excise that is ultimately payable in respect of tobacco originally grown on Mr Martino's farm and keeps all that it receives. It also has the aspect of not spending more of the Commonwealth's money than need be spent in carrying out its supervisory duties and responsibilities under the Act and in ensuring that the tobacco is not marketed illegally in Australia, and so avoid the payment of excise duty, if it cannot be marketed legally. 52 What is meant by the word 'necessary'? I have taken the view that the meaning adopted by Allen J in State Drug Crime Commission of NSW v Chapman (1987) 12 NSWLR 447: As to the word 'necessary' it does not have, in my judgement, the meaning of 'essential'. The word is to be subjected to the touchstone of reasonableness. The concept is one as to what reasonably is necessary in a commonsense way. As Pollock CB said in Attorney General v Walker (1849) 3 Ex 242; 154 ER 833: \"it may be stated as a general rule that those things are necessary for the doing of a thing which are reasonably required or which are legally ancillary to its accomplishment.\" (page 452) The following two elements for the protection of the revenue may be drawn from Deputy President Forgie's judgement. A licensed trustee is not required by subsection 39D(1) to notify the Collector in the event that a new trustee is appointed. However, as only a licensed person may manufacture excisable goods, the trust will be unable to continue its excise related activities unless and until the new trustee is appropriately licensed. For this to occur, any new trustee that is appointed will have to apply for a licence, and the Collector will require sufficient time to consider whether a licence should be granted. Ensuring adequate time for this to happen is considered necessary to ensure compliance with the Act. Further, if an existing trustee departs before a new trustee is granted a licence, any remaining excisable goods will no longer be in the possession of a licensed person. In addition to this being an offence, the risk to revenue is that the goods will be delivered into home consumption without payment of the requisite excise duty. It is reasonable that the Collector take steps to mitigate against these events happening therefore, the Collector can impose a condition on a licence under subsection 39D(3) that a trustee must notify the Collector in writing and prior to the appointment of a new trustee on the basis that it is necessary or desirable for the protection of the revenue or to ensure compliance with the Excise Acts.", "Date_of_Decision": "22 March 2007", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 subsection 4(1) section 25 section 39 section 39A section 39D subsection 39D(1) subsection 39D(2) subsection 39D(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Excise collections Licensing", "Case_References": "Re Francesco Martino Applicant and Australian Taxation Office Respondent [2002] AATA 1242 (2002) 70 ALD 403", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200761", "Unmatched_Content": "Keywords Excise Excise collections Licensing"}
{"ATO_ID_Number": "ATO ID 2007/148", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: imposing restrictions on an excise storage licence", "Issue": "Is the Collector able to impose a condition on a storage licence under subsection 39D(3) of the Excise Act 1901 (Excise Act) that restricts the storage of excisable goods to ship's stores and aircraft's stores?", "Decision": "Yes. The Collector is able to impose a condition on a storage licence under subsection 39D(3) of the Excise Act that restricts the storage of excisable goods to ship's stores and aircraft's stores.", "Facts": "An entity (provedore) supplies excisable goods in the form of ship's stores and aircraft's stores to overseas ships and international aircraft. The provedore applies for a storage licence in order to receive excisable goods in the form of ship's stores and aircraft's stores under bond.", "Reasons_for_Decision": "Summary: Section 39D of the Excise Act provides that: A licence is subject to such conditions (if any) as are specified in the licence, being conditions considered by the Collector to be necessary or desirable for the protection of the revenue or for the purpose of ensuring compliance with the Excise Acts. In Re Francesco Martino Applicant v. Australian Taxation Office Respondent [2002] AATA 1242 (the Martino Case ) (unreported, Deputy President Forgie, 29 November 2002), the expression 'protect the revenue' was considered to have two limbs: A further aspect of the first limb is that the Commonwealth should receive all the monies properly payable to it in a timely manner. This principle is also evident in paragraph 39A(2)(k) of the Excise Act. Under this paragraph, the Collector may refuse to grant a storage licence on the grounds that the grant of the licence would delay liability for duty. With regard to ship's stores and aircraft's stores, subsection 160A(1) of the Excise Act provides that excise duty is not payable (except as provided by the regulations). If a provedore did not hold a storage licence, they would be required to acquire excisable goods duty paid. As ship's stores and aircraft's stores are not liable to excise duty, a provedore would need to seek a refund of the duty that they paid on the goods under item 5, clause 1 of Schedule 1 of the Excise Regulation 2015. To avoid this situation, the Collector grants storage licences to provedores under section 39A of the Excise Act so that they do not need to acquire excisable goods duty paid but may instead receive them under bond. However, if a provedore had an unconditional storage licence and sold excisable goods other than in the form of ship's stores or aircraft's stores, then the provedore would be able to hold those goods and delay the payment of duty until those goods are delivered from the provedore's licensed storage place. Such a delay in payment means that the Collector spends more time (and therefore money) than is necessary in carrying out their supervisory duties and responsibilities under the Excise Act. It also means that the Commonwealth will not receive the excise duty properly payable to it in a timely manner. Consequently, it is necessary or desirable for the protection of the revenue to impose a condition on a storage licence granted to a provedore under subsection 39D(3) of the Excise Act that restricts the storage of excisable goods to ship's stores and aircraft's stores.", "Date_of_Decision": "10 July 2007", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 39A paragraph 39A(2)(k) section 39D subsection 39D(3) subsection 160A(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Ship's stores", "Case_References": "Re Martino v. Australian Taxation Office [2002] AATA 1242", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007148", "Unmatched_Content": "Changes to citations due to Excise Regulation 2015 replacing Excise Regulations 1925 | Keywords Excise Ship's stores"}
{"ATO_ID_Number": "ATO ID 2006/114", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: ship's stores consumed during an aborted international voyage", "Issue": "Is excise duty payable on ship's stores that are consumed during an aborted international voyage?", "Decision": "No. Excise duty is not payable on ship's stores that are consumed during an aborted international voyage.", "Facts": "A ship leaves port with the genuine intention of undertaking an overseas voyage. The vessel has ship's stores on board. Some or all of the ship's stores are consumed during the voyage. The ship is forced to return to an Australian port without making landfall overseas.", "Reasons_for_Decision": "Summary: Section 160A of the Excise Act 1901 (Excise Act) provides that ship's stores will not be subject to duty except as prescribed by the regulations. Therefore, goods taken on board a vessel will be free from excise duty if: The term 'ship's stores' is defined in subsection 160A(5) of the Excise Act as follows: ship's stores means stores for the use of the passengers or crew of an overseas ship, or for the service of an overseas ship. The term 'overseas ship' is defined in section 4 of the Excise Act as follows: Overseas ship has the same meaning as ship has in Part VII of the Customs Act 1901. The term 'ship' is defined in section 130C (of Part VII) of the Customs Act 1901 (Customs Act) as follows: ship does not include: (a) a ship that is not currently engaged in making international voyages; or (b) a ship that is currently engaged in making international voyages but is about to make a voyage other than an international voyage. The expression 'international voyage' is also defined by section 130C of the Customs Act to mean, in relation to a ship: ...a voyage, whether direct or indirect, between a place in Australia and a place outside Australia. It was stated in the High Court case of BP Australia Limited v. Bissaker (1987) 163 CLR 106; 71 ALR 449 that: The words \"whether direct or indirect\" take account of the circumstance that a vessel may, for example, proceed to or from an Australian port to a foreign port via another Australian port. In this situation the fact that a foreign port is not the previous port of call or the immediate destination does not detract from the international character of the voyage. It is reasonable to accept that where a vessel leaves port with the genuine intention of undertaking an overseas voyage, it is an overseas ship under the definition of 'ship' in the Customs Act, notwithstanding the fact that at some point, through misadventure or some other eventuality, it has to turn around. In such an instance, excisable goods provided to passengers and crew will be ship's stores and will be free from duty unless they are rendered excisable via the regulations to the Excise Act. However, if the vessel never intended to make an international voyage it is never engaged in an international voyage and the goods were never classified as ship's stores. Excise duty would be payable in this circumstance. As detailed below, section 55 of Excise Regulation 2015 sets out a number of circumstances where ship's stores are subject to duty. 55 Ship's stores liable to excise duty (1) For subsection 160A(1) of the Act, this section sets out ship's stores that are liable to excise duty. (2) The ship's stores liable to excise duty are those consisting of: (a) alcoholic beverages (other than beer) sold to a passenger or member of the crew of a ship, other than by the glass or nip; or (b) cigars sold to a passenger or to a member of the crew of a ship, other than by the individual packet, tin or box containing 25 or less cigars; or (c) cigarettes sold to a passenger or to a member of the crew of a ship, other than by the individual packet or tin containing 50 or less cigarettes; or (d) tobacco products (other than those mentioned in paragraphs (b) and (c)) sold to a passenger or to a member of the crew of a ship in a quantity that exceeds 120 grams in weight; or (e) alcoholic beverages (including beer), cigarettes, cigars or other tobacco products sold to a person other than a passenger or a member of the crew of a ship. Provided that the goods consumed on the vessel are dispensed to passengers or crew in acceptable quantities (for example, spirits by the nip and cigarettes by the individual packet) they will not be liable to excise duty even where the vessel is forced to return to an Australian port without making landfall overseas. The only exceptions are where there was never a genuine intention for the vessel to undertake an overseas journey (in which case the goods cannot be regarded as ship's stores) or where the stores are dispensed to people or in quantities that render them liable to excise duty under the Excise Regulation 2015 .", "Date_of_Decision": "10 May 2006", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 160A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Ship's stores", "Case_References": "BP Australia Limited v. Bissaker (1987) 163 CLR 106 71 ALR 449", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006114", "Unmatched_Content": "Reasons for Decision & Legislative References | Updated reference to regulation 55 with new reference to section 55 | Changes to citations due to Excise Regulation 2015 replacing Excise Regulations 1925 | Minor spelling error, formatting and removal of duplication | Keywords Excise Ship's stores"}
{"ATO_ID_Number": "ATO ID 2006/216", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Licensing: application for licence under section 39A of the Excise Act", "Issue": "Is it necessary for a natural person to satisfy at least one of the conditions in section 39B of the Excise Act 1901 before they can be held to be 'not a fit and proper person' for the purposes of paragraph 39A(2)(a) of the Excise Act?", "Decision": "Yes. A natural person can only be regarded as 'not a fit and proper person' for the purposes of paragraph 39A(2)(a) of the Excise Act if they satisfy at least one of the conditions in section 39B of the Excise Act.", "Facts": "A natural person lodged an application for a licence under section 39 of the Excise Act. The applicant has an extensive history of non-compliance with taxation laws. The applicant lodged several returns late (after receiving final notices from the Tax Office) and the returns contained material errors in the form of understatements of income. The applicant's assessments were amended following audit action. The applicant has also accumulated wealth from sources that are not reflected in their income tax returns. The applicant has also received overpayments of benefits from another Commonwealth department. The applicant has not, within the year preceding their application, been charged with any offences detailed in paragraph 39B(a) of the Excise Act. The applicant has not, within the 10 years preceding their application, been convicted of any offences detailed in paragraph 39B(b) of the Excise Act. The applicant has not had a licence cancelled, or participated in the management and control of a company that has had its licence cancelled. The applicant is not an undischarged bankrupt. The applicant has not made any misleading statements in their application. The applicant has not knowingly made any false statements in their application.", "Reasons_for_Decision": "Summary: Subsection 39A(1) of the Excise Act provides the Collector with a broad power to grant, or refuse to grant, a licence. Subsection 39A(2) of the Excise Act provides that: Section 39B of the Excise Act provides that: The Collector may, in considering whether a natural person is a fit and proper person, have regard to: The applicant does not satisfy any of the criteria in paragraphs 39B(a) to 39B(f) of the Excise Act. Therefore, we must determine whether the Collector may have regard to other factors in determining whether the applicant is fit and proper to hold a licence. The use of the word 'may' in section 39B of the Excise Act indicates the Collector does not have to have regard to the factors in paragraphs 39B(a) to 39B(f) of the Excise Act. This conclusion is clear from the wording of subsection 33(2A) of the Acts Interpretation Act 1901 which states: Where an Act assented to after the commencement of this subsection provides that a person, court or body may do a particular act or thing and the word \"may\" is used, the act or thing may be done at the discretion of the person, court or body. However, the fact the Collector may choose whether or not to take into account any or all of the factors listed in paragraphs 39B(a) to 39B(f) of the Excise Act does not necessarily empower the Collector to take into account other factors that are not listed within the provision. Support for this view can be found by contrasting the wording of section 39B of the Excise Act with that in section 39A of the Excise Act. Subsection 39A(1) of the Excise Act states that the Collector may grant, or refuse to grant, a licence. Subsection 39A(2) of the Excise Act provides that; Without limiting subsection (1) but subject to subsection (3), the Collector may refuse to grant a licence if, in the Collector's opinion: ... The subsection proceeds to list a number of factors that warrant refusal to grant a licence. The use of the words 'without limiting' within subsection 39A(2) of the Excise Act demonstrates a deliberate intent by Parliament to enable the Collector to consider any factors whatsoever in determining whether a licence should be granted or refused. Therefore, regardless of whether any of the factors justifying refusal contained in subsection 39A(2) are triggered, the Collector retains the ability to grant, or refuse to grant, a licence. However, in section 39B of the Excise Act there is no similar wording. Section 39B provides a finite list of factors that the Collector can take into account in determining that an applicant is not fit and proper. The absence of the term 'without limiting' or similar terminology supports the view that the Collector cannot find that an applicant is not fit and proper unless the applicant satisfies at least one of those factors within section 39B. Therefore, despite the fact that the applicant in this case has a history of poor compliance, such matters cannot be taken into account for the purposes of determining whether or not they are 'fit and proper' for the purposes of paragraph 39A(2)(a) of the Excise Act as they have not satisfied at least one of the conditions in section 39B of the Excise Act.", "Date_of_Decision": "20 April 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Excise Act 1901 paragraph 39A(2)(a) subsection 39A(1) subsection 39A(2) subsection 39A(3) section 39A section 39B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Excise collections Tobacco Tobacco producer Tobacco producer licence", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006216", "Unmatched_Content": "Keywords Excise Excise collections Tobacco Tobacco producer Tobacco producer licence"}
{"ATO_ID_Number": "ATO ID 2006/270", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise implications of repackaging excise equivalent goods upon which customs duty has been paid", "Issue": "Is the process of repackaging imported tobacco products excise manufacture for the purposes of the Excise Act 1901 ?", "Decision": "No. The repackaging of imported tobacco products is not excise manufacture for the purposes of the Excise Act.", "Facts": "The entity imports tobacco goods in non-stick form which are equivalent to goods classifiable to the Schedule to the Excise Tariff Act 1921 (the Schedule). Customs duty has been paid on the imported goods. As the overseas packaging is poor, the entity would like to repackage the goods in Australia. The goods would not undergo any process in Australia other than repackaging. The tobacco will remain in non-stick form after its repackaging.", "Reasons_for_Decision": "Summary: Subsection 4(1) of the Excise Act defines the term 'manufacture' as follows includes all processes in the manufacture of excisable goods... Given the inclusive nature of this definition, and the absence of any further guide in relation to what constitutes manufacture from the point of view of the Excise Act, one must also consider the ordinary meaning of the term. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the term manufacture as follows: manufacture ... noun 1. the making of goods or wares by manual labour or by machinery, especially on a large scale. 2. the making of anything. 3. the thing or material manufactured. Putting the dictionary definition and the Excise Act definition together, 'manufacture' from the point of view of the Excise Act includes any process undertaken in making something. The Schedule, following amendments which took effect on 1 July 2006, specifies only two rates of excise duty for tobacco products. The two rates (as at 1 July 2006) were as follow: In this instance the imported tobacco, if it had been manufactured in Australia, would have been classifiable to sub-item 5.5 of the tariff. Customs duty has been paid on this tobacco at a rate equivalent to the excise rate. Accordingly, the client is importing a fully manufactured product upon which Customs duty has been paid at the full excise equivalent rate. Following its repackaging, the tobacco will not have changed in any way. It is the same product both prior to and after its repackaging. Accordingly, the mere repackaging of imported tobacco, in the absence of any other process, does not constitute manufacture. This would not be the case however if the tobacco underwent any processes other than repackaging. For example, if the tobacco was cut and/or rolled, this would constitute a step in manufacture as the tobacco following the process(es) would be in a different form to the tobacco prior to the process(es). Accordingly, if duty paid pouch tobacco were used to make stick tobacco, this would constitute a step in excise manufacture. In this instance the entity is importing tobacco products which are a finished product. The tobacco products are not undergoing any other process in Australia other than the process of repackaging which results in no change to the product. Therefore the process of repackaging does not constitute manufacture for the purposes of the Excise Act.", "Date_of_Decision": "19 September 2006", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 Schedule", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Tobacco products Excisable goods Manufacture", "Case_References": "McNicol and Anor v. Pinch [1906] 2 KB 352", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006270", "Unmatched_Content": "Tobacco, cigars, cigarettes and snuff | In stick form not exceeding in weight 0.8 grams per stick actual tobacco content | $290.74 per kilogram of tobacco content | Keywords Excise Tobacco products Excisable goods Manufacture"}
{"ATO_ID_Number": "ATO ID 2006/324", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Shipping of excisable goods to the Joint Petroleum Development Area", "Issue": "Can excisable goods be delivered for exportation to a 'place outside Australia' for the purposes of section 61 of the Excise Act 1901 , if they are intended to be shipped to an installation in the Joint Petroleum Development Area (JPDA)?", "Decision": "No. An installation outside Australia, located within the JPDA, is not a 'place outside Australia' for the purposes of section 61 of the Excise Act. Therefore excisable goods cannot be delivered for exportation to a place outside Australia for the purposes of section 61 if they are intended to be shipped to an installation in the JPDA.", "Facts": "A licensed manufacturer intends to have excisable goods transported to an installation located in the JPDA. The JPDA is a specified area in the Timor Sea. Australia and East Timor signed a treaty, in relation to the JPDA, to jointly control, manage and facilitate the exploration, development and exploitation of the petroleum resources of the specified area. The JPDA is located outside Australia.", "Reasons_for_Decision": "Summary: Subsection 61(1) of the Excise Act provides that all excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever occurs first. Subsection 4(1) of the Excise Act defines 'place outside Australia' to not include: As the above definition excludes an installation outside Australia from being a place outside Australia, an installation in the JPDA, while it is not in Australia, is not a 'place outside Australia' for the purposes of the Excise Act. As an installation in the JPDA is not a place outside Australia, excisable goods cannot be delivered for exportation to a place outside Australia when they are intended to be transported to an installation in the JPDA.", "Date_of_Decision": "21 November 2006", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 subsection 4(1) section 61 subsection 61(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/100", "Subject_References": "Excisable goods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006324", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2005/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: excisable goods delivered in error and returned to stock", "Issue": "Have excisable goods left the CEO's control for the purposes of section 61 of the Excise Act 1901 if they have been removed from licensed premises and delivered to a customer without being entered for home consumption and without duty having been paid and the goods are subsequently returned to the licensed premises?", "Decision": "No. Excisable goods have not left the CEO's control for the purposes of section 61 of the Excise Act if they have been removed from licensed premises and delivered to a customer without being entered for home consumption and without duty having been paid and the goods are subsequently returned to the licensed premises.", "Facts": "An excise licensee accepts an order for excisable goods. The licensee raises an invoice/picking slip for the goods, enters the goods for home consumption and pays the excise duty. When picking the goods from stock, the licensee makes an error (either by choosing the wrong goods or taking a quantity in excess of the ordered goods). The goods are then delivered to the customer who realises the error and reports it to the licensee. The goods that were delivered in error are subsequently returned to the licensed premises.", "Reasons_for_Decision": "Summary: Subsection 61(1) of the Excise Act provides that all excisable goods are subject to the CEO's control until delivered for home consumption or for exportation to a place outside Australia, whichever comes first. Exportation is not a consideration in this instance. There are two ways in which the manufacturer or owner of excisable goods may lawfully deliver excisable goods from licensed premises and pay the requisite duty. Under section 58 of the Excise Act, the licensed manufacturer or owner may make an entry and pay the requisite duty in respect of excisable goods. The goods may then be removed from the licensed premises. Under subsection 61C(1) of the Excise Act, a Collector may give written permission to a person to deliver excisable goods for home consumption, notwithstanding that an entry of the goods for home consumption has not been made and passed. Subsection 61C(2) of the Excise Act provides that goods that are delivered for home consumption by authority of subsection 61C(1) of the Excise Act are deemed to be entered for home consumption on the day on which they are delivered. Where a periodic settlement permission is in place, subsection 61C(3) of the Excise Act empowers the CEO to stipulate requirements that the owner/manufacturer must satisfy. The CEO normally requires a return to be lodged on a weekly basis detailing all the movements that have taken place under the permission. Duty is normally payable at the time of lodgement of the return. The Excise Act also ensures the Government's revenue is protected if a licensee delivers goods without the authority bestowed by section 58 or section 61C of the Excise Act. Section 60 of the Excise Act requires persons who have been entrusted with the possession, custody or control of excisable goods to keep those excisable goods safely or, when requested by the CEO, to account for those goods. The term 'CEO' is defined in section 4 of the Excise Act to mean the Commissioner of Taxation. The purpose of section 60 of the Excise Act was examined in Collector of Customs v. Southern Shipping Co Ltd (1962) 107 CLR 279. The case was decided prior to the CEO of Taxation taking responsibility for Excise matters. The principles outlined in the decision remain valid but references to Customs control should be read as being references to the CEO's control. In discussing sub section 60(1) of the Excise Act, Menzies J stated: ... the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account that shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not gone into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. In this instance, the excisable goods have been removed from the licensed premises without being entered under section 58 of the Excise Act, and without being recorded in accordance with the client's periodic settlement permission. Therefore, in the words of Menzies J., there has been 'an unauthorized loss of possession, custody and control'. However, the fact that the goods are present in the licensed premises is evidence that, in the words of Menzies J., 'notwithstanding the failure to keep the goods safely, Customs control over them is still effective'. Therefore, it can be concluded that the CEO's control over the goods is still effective, notwithstanding the temporary absence of the goods from the licensed premises.", "Date_of_Decision": "11 February 2005", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 58 section 60 section 61 subsection 61(1) section 61C subsection 61C(1) subsection 61C(2) subsection 61C(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Alcohol excise Excise Excise payments other", "Case_References": "Collector of Customs v. Southern Shipping Co Ltd (1962) 107 CLR 279", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200545", "Unmatched_Content": "Keywords Alcohol excise Excise Excise payments other"}
{"ATO_ID_Number": "ATO ID 2005/280", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: Accounting for stock shortages and surpluses.", "Issue": "Has a person accounted for excisable goods to the satisfaction of the CEO for the purposes of section 60 of the Excise Act 1901 (Excise Act) if, following a stock take, the person advises the CEO of various stock shortages and stock surpluses, and pays an amount of duty equating to the difference between the amount outstanding on stock shortages and the amount overpaid on stock surpluses?", "Decision": "Yes. A person has accounted for excisable goods to the satisfaction of the CEO for the purposes of section 60 of the Excise Act if, following a stock take, the person advises the CEO of various stock shortages and stock surpluses, and pays an amount of duty equating to the difference between the amount outstanding on stock shortages and the amount overpaid on stock surpluses.", "Facts": "An excise licensee conducts regular, periodic stock takes. Stock shortages and/or surpluses of excisable alcoholic goods are identified as a result of the stock takes. Details of the shortages and surpluses are provided to the CEO. The licensee has determined that their production records are accurate. The licensee pays an amount of duty to the CEO equating to the difference between the amount outstanding on stock shortages and the amount overpaid on stock surpluses.", "Reasons_for_Decision": "Summary: Section 60 of the Excise Act requires persons who have been entrusted with the possession, custody or control of excisable goods to keep those excisable goods safely or, when requested by the CEO to account for those goods to the satisfaction of the CEO. The term 'CEO' is defined in section 4 of the Excise Act to mean the Commissioner of Taxation. The purpose of section 60 of the Excise Act was examined in Collector of Customs v. Southern Shipping Co Ltd (1962) 107 CLR 279. The case was decided prior to the Commissioner of Taxation taking responsibility for Excise matters. The principles outlined in the decision remain valid but references to Customs control should be read as references to the CEO's control. In discussing sub section 60(1) of the Excise Act, Menzies J stated: ... the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account that shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not gone into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. Finkelstein J in Sidebottom v. Giuliano (2000) FCA 607; (2000) 98 FCR 579, described the object of section 60 of the Excise Act as follows: The object of s60 is to impose an obligation upon a person in possession, custody or control of excisable goods to ensure that those goods do not find their way into home consumption without the payment of duty. Therefore, section 60 of the Excise Act requires that excisable goods do not leave the CEO's control until they are properly accounted for. Proper accounting requires that the goods are entered for home consumption and the correct amount of duty paid. Where a person identifies a stock shortage, this indicates that goods have entered home consumption without being reported to the CEO and without paying the requisite duty. A proper accounting under section 60 requires the licensee to advise the CEO of the goods that have entered home consumption and pay the requisite duty. Section 59 of the Excise Act prescribes that the rate of duty on excisable goods must be calculated based on the prevailing rates at the earlier of the date when the goods were delivered for home consumption or when payment was made. In this instance, the goods have been delivered for home consumption prior to the payment of duty. Therefore, the licensee must determine, to the best of their ability, the date upon which the goods were delivered into home consumption and calculate the duty payable based on the rates applicable at that date. Where a person has determined that their production records are correct, and identifies a stock surplus, this indicates that duty has been paid in error on goods that were never delivered into home consumption. The client may offset this overpayment against the underpayment of duty indicated by the stock shortage. The stock surplus must also be taken up in the licensee's stock records, so that duty is paid appropriately when the goods are delivered into home consumption. In the above circumstances, to account for the goods satisfactorily for the purposes of section 60 of the Excise Act, the licensee must ensure that the CEO is made aware of the accounting errors, and that the CEO is recompensed for any net shortfall in duty. It should be noted that the CEO may specify the form that this disclosure takes. Section 50 of the Excise Act requires manufacturers and proprietors of approved places to submit whatever returns, and to keep whatever records, the CEO requires. Therefore, the CEO is able to specify the information that must be provided to him.", "Date_of_Decision": "4 October 2005", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 3 section 60 subsection 60(1) section 50 section 59", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Alcohol excise Excise Excise payments other", "Case_References": "Sidebottom v. Giuliano [2000] FCA 607 (2000) 98 FCR 579", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005280", "Unmatched_Content": "Keywords Alcohol excise Excise Excise payments other"}
{"ATO_ID_Number": "ATO ID 2004/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: goods given away without payment of excise duty", "Issue": "Has a licensee who has given away excisable goods for promotional purposes, without payment of excise duty on those goods, accounted for those goods to the satisfaction of a Collector as required by subsection 60(1) of the Excise Act 1901?", "Decision": "No. A licensee who has given away excisable goods, without payment of excise duty on those goods, has not accounted for those goods to the satisfaction of a Collector as required by subsection 60(1) of the Excise Act.", "Facts": "Excisable goods were manufactured by a licensed manufacturer and were subject to the control of the CEO. Excise duty was not paid on the goods. A Collector requested the licensee to account for the goods. The licensee explained that the goods were given away for promotional purposes.", "Reasons_for_Decision": "Summary: Section 5 of the Excise Tariff Act 1921 (Tariff Act) imposes duties of excise on the goods which are specified in The Schedule to the Tariff Act. Section 54 of the Excise Act requires the manufacturer or the owner of excisable goods to pay the excise duty on those goods when the goods are entered for home consumption. Subsection 60(1) of the Excise Act states: Where a person (including a licensed manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the CEO's control: (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector The licensee has explained that the goods were given away to prospective customers to gain sales. The issue at hand is whether the licensee has accounted for the goods to the satisfaction of a Collector. If not, the licensee is liable to pay an amount equal to the Excise duty which would have been payable on those goods. The purpose of section 60 of the Excise Act was examined in Collector of Customs (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279. The case predates the Commissioner of Taxation assuming responsibility for Excise matters. The principles outlined in the case remain valid but references to 'Customs control' should be read as 'the CEO's control'. Dixon CJ stated '... on a complete view of s.60 it seems rather to be a provision for the protection of the revenue ...' Menzies J, in discussing subsection 60(1) stated: ... the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. Finkelstein J in Sidebottom v. Guiliano (2000) 98 FCR 579 stated: The object of s60 is to impose an obligation upon a person in possession, custody or control of excisable goods to ensure that those goods do not find their way into home consumption without the payment of duty. As may be seen from the above information, the object of section 60 is to ensure that excisable goods do not leave the CEO's control until they have been properly accounted for. Where goods have gone into home consumption, proper accounting requires the making of an Excise Return for removal of the goods for home consumption and the payment of the appropriate excise duty. As the licensee has allowed the goods to leave the CEO's control without payment of the appropriate amount of excise duty, the goods have not been properly accounted for to the satisfaction of a Collector.", "Date_of_Decision": "14 January 2004", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 5 section 54 subsection 60(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise collections Section 60 excise demands", "Case_References": "Sidebottom v. Giuliano (2000) 98 FCR 579", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200461", "Unmatched_Content": "the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand. | Keywords Excise collections Section 60 excise demands"}
{"ATO_ID_Number": "ATO ID 2004/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: goods sold without payment of excise duty", "Issue": "Has an entity accounted for excisable goods to the satisfaction of a Collector (as required by subsection 60(1) of the Excise Act 1901 ) if the entity provides evidence of their sale?", "Decision": "No. An entity has not accounted for excisable goods to the satisfaction of a Collector (as required by subsection 60(1) of the Excise Act) if the entity provides evidence of their sale.", "Facts": "An entity manufactures a range of beverages. The entity has been paying wine tax on those beverages. The entity has sold the beverages. The Tax Office decided that the beverages were excisable beverages. A demand under section 60 of the Excise Act was issued to the manufacturer.", "Reasons_for_Decision": "Summary: Subsection 60(1) of the Excise Act states: Where a person (including a licensed manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the CEO's control: (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector In this instance, the entity has explained that the goods were sold. The entity has also provided documentary evidence confirming their sale. The issue to be determined is whether the entity has accounted for those goods to the satisfaction of the Collector. If the entity has not properly accounted for the goods, the entity is liable to pay an amount equal to the excise duty. The purpose of section 60 of the Excise Act was examined in Collector of Customs (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279. The case was decided prior to the Commissioner of Taxation taking over responsibility for Excise matters. The principles outlined in the case remain valid but references to Customs control should be read as being references to 'the CEO's control'. Menzies J, in discussing subsection 60(1) stated: ... the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. Finkelstein J. in Sidebottom v. Giuliano (2000) 98 FCR 579 described the object of section 60 as follows: The object of s60 is to impose an obligation upon a person in possession, custody or control of excisable goods to ensure that those goods do not find their way into home consumption without the payment of duty. The manufacturer of the excisable goods had possession of the goods from the time they were made until they were sold. As can be seen from the above case extracts, the object of section 60 is to ensure that goods do not leave the CEO's control until they are properly accounted for. Proper accounting for goods that have entered home consumption requires the recording and payment of the requisite duty. As the entity has allowed the goods to leave the CEO's control without payment of the requisite duty, the goods have not been properly accounted for, regardless of whether the entity can provide evidence of their sale.", "Date_of_Decision": "14 January 2004", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 subsection 60(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise collections Section 60 excise demands", "Case_References": "Customs, Collector of (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200462", "Unmatched_Content": "Reasons for Decision: the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand. | Keywords Excise collections Section 60 excise demands"}
{"ATO_ID_Number": "ATO ID 2004/667", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: accounting for excisable goods when a continuing permission is in place", "Issue": "Has a licensed manufacturer accounted for excisable goods to the satisfaction of a Collector for the purposes of section 60 of the Excise Act 1901 (Excise Act), where they hold a continuing permission to move excisable goods to another premise, but in moving them, deal with them as if they were not excisable?", "Decision": "No. A licensed manufacturer has not accounted for excisable goods to the satisfaction of a Collector for the purposes of section 60 of the Excise Act where they hold a continuing permission to move excisable goods to another premise, but in moving them, deal with them as if they were not excisable.", "Facts": "An entity manufactures goods subject to wine equalisation tax (WET) and goods subject to excise duty. The entity has an excise manufacturer's licence. The entity sold a quantity of goods to a second entity and identified the goods as subject to WET. It was subsequently shown that these goods were in fact excisable goods and subject to excise duty. The entity holds a continuing permission granted under subsection 61A(1) of the Excise Act that permits the entity to move underbond excisable goods between their premises and those of the second entity. The permission is issued subject to the provisions of the Excise Act and includes, amongst others, the following standard conditions: ... the permission holder shall provide a company document to the proprietor of the place of removal and to the proprietor of the specified destination place, along with the goods. This 'movement' document should form part of a consecutively numbered system of documents and must outline: • the place from where the goods were dispatched and where they are destined • date of dispatch • the number and type of packages • description of the goods • a statement that the goods are underbond • any other information necessary to permit the goods to be further dealt with on receipt at the destination.", "Reasons_for_Decision": "Summary: Subsection 60 (1) of the Excise Act states: The purpose of section 60 of the Excise Act was examined in Collector of Customs (NSW) v. Southern Shipping Co Ltd (1962) 107 CLR 279 (Southern Shipping). The case was decided prior to the Commissioner of Taxation taking over responsibility for Excise matters. The principles outlined in the case remain valid but references to Customs control should be read as being references to 'the CEO's control'. Menzies J, in discussing subsection 60(1) stated: ... the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. Finkelstein J in Sidebottom v. Giuliano (2000) 98 FCR 579 summarised the views of the High Court in Southern Shipping as follows: The High Court held that s60 was a provision for the protection of the revenue. The obligation that it imposes upon a person who is or has been entrusted with the possession, custody or control of excisable goods is to ensure that the goods do not irregularly find their way into home consumption. Accordingly, goods will be accounted for if the person parted with possession of them in a manner authorised by the Excise Act ... One method authorised by the Excise Act by which a person can part with excisable goods that are under the CEO's control is by way of a permission granted under section 61A. Subsection 61A(1) of the Excise Act states: A Collector may give permission in writing to a person specified in the permission to remove goods of a kind specified in the permission that are subject to the CEO's control from a place so specified to another place so specified and, until the permission is revoked, the permission is authority for the person to remove goods of that kind that are subject to the CEO's control accordingly. Subsection 61A(3) of the Excise Act states: Note that subsection 61A(3) conditions the permission. Permission is only given if the person complies with the requirements specified in the permission. One of the conditions specified in the continuing permission was that the holder must prepare documentation and provide it to the proprietor of the place of removal and to the proprietor of the specified destination place. This documentation must contain details including a statement that the goods are underbond. By failing to identify the goods on the movement documentation as excisable goods being moved underbond, the manufacturer did not meet the conditions attached to the permission and therefore moved the goods without permission. Further, by failing to identify the goods as excisable goods when moving them, and in fact identifying them as goods subject to WET and therefore not subject to excise duty, the manufacturer allowed the goods to leave the CEO's control (and thereby enter home consumption) without proper authorisation and without payment of the requisite duty. It follows that the entity has not accounted for excisable goods to the satisfaction of a Collector for the purposes of section 60 of the Excise Act where they hold a continuing permission to move excisable goods to another premise, but in moving them, deal with them as if they were not excisable.", "Date_of_Decision": "22 July 2004", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 60 section 61A subsection 61A(1) subsection 61A(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Continuing permission Excisable goods Excisable goods manufacturer Excise Excise collections Wine equalisation tax", "Case_References": "Sidebottom v. Giuliano (2000) 98 FCR 579", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004667", "Unmatched_Content": "Keywords Continuing permission Excisable goods Excisable goods manufacturer Excise Excise collections Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2001/595", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: Liability to pay an amount equal to the excise duty on excisable goods stolen from the premises of a licensed excise manufacturer or a licensed storage place.", "Issue": "Whether an excise licensee has a liability to pay an amount equal to the amount of duty ordinarily payable on underbond excisable goods (i.e., goods on which duty has not been paid) which have been stolen from their licensed premises.", "Decision": "An excise licensee has a liability to pay an amount equal to the amount of duty payable on underbond excisable goods stolen from their premises.", "Facts": "The goods are excisable and are subject to the control of Excise. The goods are stored at the premises of an excise licensee. The excise licensee is a licensed excise manufacturer or a proprietor of a licensed storage place. No excise duty has been paid on the goods as the goods are yet to be \"entered and delivered into home consumption\". The goods were stolen from the premises of a licensed manufacturer or from a licensed storage place.", "Reasons_for_Decision": "Summary: Section 5 of the Excise Tariff Act 1921 imposes the duties of excise on the goods, which are described in the Schedule to the Act. Subsection 4 (1) of the Excise Act 1901 defines 'CEO', 'Collector' and 'excisable goods'. Parts III and IV of the Excise Act require a manufacturer of excisable goods, and a proprietor of a place for the storage of excisable goods on which excise duty has not been paid, to be licensed. Excisable goods stored at a manufacturer's premises or at a licensed storage place are under the control of Excise until delivered for home consumption or for exportation, which ever occurs first (subsection 61 (1) Excise Act). The manufacturer or the owner of excisable goods must pay the excise duty which is imposed by the Excise Tariff Act when the goods are entered for home consumption (section 54 Excise Act). No goods may be removed from a manufacturer's premises or licensed storage place without permission. Even in circumstances where an excise licensee has taken reasonable precautions (such as secure premises with monitored burglar alarm) to keep excisable goods safe, a liability will arise under paragraph 60 (1) (a) Excise Act. An excise licensee will incur a liability to pay an amount equal to the amount of duty payable on the stolen underbond excisable goods vide paragraph 60 (1) (a) Excise Act, which states: '(1) Where a person (including a manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the CEO's control: (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of a Collector; Further, Taylor J in the Southern Shipping Case (at 296) said: 'That is to say, that whilst he is in possession of the goods it is his responsibility alone to ensure the goods do not irregularly find their way into home consumption. It is in this sense that he is bound to keep the goods safely and to account for them. That being so he may escape liability if he is still in possession of the goods or if he can account for them by showing that they did not pass into home consumption from his hands.'", "Date_of_Decision": "23 August 2001", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 Section 5 The Schedule", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise duty Excisable goods Excise manufacturer Storage place", "Case_References": "Collector of Customs (N.S.W) v. Southern Shipping Co. Ltd (1962) 107 CLR 279", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001595", "Unmatched_Content": "the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods, if they had been entered for home consumption on the day on which the Collector made the demand.' | This view is supported by the judgement of McTiernan J stated in Collector of Customs (N.S.W) v. Southern Shipping Co . Ltd. (1962) 107 CLR 279 (the Southern Shipping Case) at 290, 'The task of keeping goods safely cannot be said to have been fulfilled if the goods are stolen even though reasonable precautions were taken.' | Keywords Excise duty Excisable goods Excise manufacturer Storage place"}
{"ATO_ID_Number": "ATO ID 2015/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: Petroleum: Fuel blends that can be used as fuel in an internal combustion engine", "Issue": "Does a blend of fuels fall within subitem 10.30 of the Schedule to the Excise Tariff Act 1921 (Tariff Act) where that blend is of a low quality and can only be used in a robust internal combustion engine such as a heavy haulage vehicle or a marine diesel engine?", "Decision": "Yes. So long as a blend of fuels (with or without other substances) can be used as fuel in at least one type of internal combustion engine, then irrespective of the fuel's quality the blend falls within subitem 10.30 of the Tariff Act.", "Facts": "A licensed excise manufacturer blends excisable fuel with other substances. The blended product cannot be used as fuel in the internal combustion engine of a light high performance vehicle as it will damage the engine and compromise the engine warranty. The blended product can be used as fuel in the internal combustion engines of heavy haulage diesel vehicles or slow turning marine engines.", "Reasons_for_Decision": "Summary: Goods which fall within subitem 10.30 are: Blends of 1 or more of the above goods (with or without other substances) not elsewhere included that can be used as fuel in an internal combustion engine (other than goods covered by section 77J of the Excise Act 1901). Goods that may be blended for the purpose of subitem 10.30 include, petroleum condensate and oil, liquid hydrocarbon products, liquefied petroleum gas, liquefied natural gas and biodiesel. These goods may also be blended with other substances. Section 77J of the Excise Act is not relevant in these circumstances as it deals with goods reused as a solvent following a recycling process. The description of goods which fall within subitem 10.30 states only that the blend 'can' be used as fuel in an internal combustion engine. Relevantly, the term 'can' is defined in the Macquarie Dictionary as, amongst other things, 'to be able to'. In turn, the term 'able' is defined as: 1. having sufficient power, strength, or qualifications; qualified: she is ready, willing, and able. ... -phrase 4. be able to, to have the capability or capacity to... Therefore, if a fuel blend, when used in an internal combustion engine, enables the engine in which it is used to operate as intended, it can be said that the fuel blend 'can be used as fuel in an internal combustion engine' for the purpose of subitem 10.30. The quality of the fuel and the specifications of the engine are only relevant to this extent. It will always be a question of fact whether use of a particular blend of fuel will enable the internal combustion engine in which it is used to operate as intended. This conclusion is supported by the explanatory memorandum to the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006, under which subitem 10.30 was inserted into the Schedule to the Tariff Act. Paragraph 1.113 of the explanatory memorandum explains the phrase 'can be used', for the purpose of subitem 10.30 as: This test is a practical, objective test of whether the blend can be used in an internal combustion engine, not whether the blend is designed or intended to be used in that way. For example, paint can be manufactured by blending toluene (subitem 10.25) with other substances including pigments. An objective test says that paint cannot be used in an internal combustion engine. Paint is therefore not classified to subitem 10.30 (or any other item). The above discussion refers to the ability of a blend of excisable fuel products, with or without other substances, to be used as a fuel in an internal combustion engine. It does not infer that the fuel must be of a certain quality or that the internal combustion engine is for a particular use. In this case, the fuel blend cannot be used as fuel in the internal combustion engine of a high performance vehicle. It would damage the engine and compromise the engine warranty. However, the same blend may be used as fuel in a more robust internal combustion engine such as a heavy haulage vehicle or a marine diesel engine. Consequently, the fuel blend can be used as a fuel in an internal combustion engine for the purpose of subitem 10.30.", "Date_of_Decision": "20 July 2015", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 Schedule item 10 subitem 10.30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excisable goods manufacturer Fuel blending", "Case_References": "", "Other_References": "Explanatory Memorandum to the Excise Tariff Amendment (Fuel Tax Reform and Other Measures) Bill 2006", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201520", "Unmatched_Content": "Keywords Excisable goods manufacturer Fuel blending"}
{"ATO_ID_Number": "ATO ID 2014/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: Blended fuel - used, contaminated fuel and diesel", "Issue": "Are there any amounts of duty to be subtracted from the total duty to be paid for the purposes of section 6G of the Excise Tariff Act 1921, in relation to a constituent element of a blend where the constituent element has had duty paid, is used and becomes contaminated through use and is then blended with diesel?", "Decision": "No. There are no amounts of duty to be subtracted from the total duty to be paid for the purposes of section 6G of the Excise Tariff Act. In this case, any duty that was paid on the fuel before it was used and contaminated is not relevant for the purposes of section 6G.", "Facts": "An entity acquires duty paid fuel classified to sub-item 10.28 of the Schedule to the Excise Tariff Act for use as a solvent. The solvent is used for the cleaning of engine parts. As a result of its use as a solvent, the fuel is contaminated with dirt and particulates. The used solvent is collected and stored in a small tank. The entity subjects the contaminated solvent to a process to remove all dirt and particulates. The process requires the contaminated solvent to pass through a filtration system in a continuous cycle. The resultant product is not for use as a solvent. Duty is not paid on the used solvent product. The used solvent is then blended with diesel fuel, on which duty has not been paid, to produce a fuel which is suitable for use in diesel powered vehicles and which is classified to sub-item 10.30 of the Schedule to the Excise Tariff Act.", "Reasons_for_Decision": "Summary: Section 6G of the Excise Tariff Act provides the method for working out the duty payable on certain fuel blends specified in item 10 of the Schedule to the Excise Tariff Act as follows: Method statement Note: The rate set out in this step is indexed under section 6A of the Excise Tariff Act. The effect of section 6G of the Excise Tariff Act is that the entire volume of the blend is subject to a rate of duty of $0.38143 per litre, however, subtracted from the amount of duty payable is any duty that has been previously paid on any of the constituents of the blend. In this case the constituent elements of the blend are diesel and used solvent. To be determined is whether any of the duty previously paid on the solvent when it was originally delivered, is an amount of duty to be subtracted from the total duty to be paid on the blended goods. The Commissioner's view is that the solvent which was originally delivered is not the constituent element of the blend. The constituent element is the used solvent product. As the used solvent has not had any duty paid on it there is no amount of duty to be subtracted from the total duty to be paid on the blended product for the purposes of section 6G of the Excise Tariff Act.", "Date_of_Decision": "8 April 2014", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 section 6G item 10 of the Schedule subitem 10.28 of the Schedule", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/165 (withdrawn)", "Subject_References": "Excise Fuel", "Case_References": "", "Other_References": "", "Business_Line": "Interpretative Assistance, Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201413", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the Fuel Tax legislation with the term 'indirect tax zone' by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 . The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Add up the amount of duty that would be payable on each constituent of the blended goods, that is classified to item 10 of the Schedule, if the constituent had not been included in the blended goods. | Work out the volume, in litres, of the blended goods that is not attributable to those constituents or to water added to manufacture the blended goods. | Total the results of steps 1 and 3. | Subtract from the total any duty paid on a constituent of the blended goods that is classified to item 10 or 15 of the Schedule. | Included a note to section 6G of the Excise Tariff Act 1921"}
{"ATO_ID_Number": "ATO ID 2011/98", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Determining compressed natural gas that is exempt from excise duty", "Issue": "For the purposes of section 77HA of the Excise Act 1901 is a licensed manufacturer able to determine whether a particular quantity of compressed natural gas (CNG) is exempt from excise duty at the time the CNG is delivered into home consumption?", "Decision": "Yes. For the purposes of section 77HA of the Excise Act, a licensed manufacturer may determine whether a particular quantity of CNG is exempt from excise duty at the time CNG is delivered into home consumption.", "Facts": "An entity is a licensed manufacturer (manufacturer) of excisable goods namely CNG. Natural gas is compressed and then stored in a bulk tank on the premises. Delivery to clients is effected directly from the bulk tank through metered facilities. The CNG is supplied to clients for three possible uses - exclusively for transport, exclusively for non-transport and mixed transport/non-transport use. For each delivery into home consumption of CNG, the manufacturer determines and records the intended use of that quantity of CNG.", "Reasons_for_Decision": "Summary: Section 5 of the Excise Tariff Act 1921 provides that excise duty is imposed on goods manufactured or produced in Australia that are classified to the Schedule to that Act. The excise duty is imposed at the time of manufacture or production. Paragraph 10(j) of the Schedule to the Excise Tariff Act excludes from item 10 'goods covered by section 77HA or 77HB of the Excise Act 1901'. Of relevance in this case, is section 77HA of the Excise Act. Section 77HA provides that CNG is exempt from excise duty in a number of circumstances. One circumstance, specified in paragraph 77HA(a) of the Excise Act, is where 'the gas was compressed for use other than as a fuel for a motor vehicle'. Given the exclusion of CNG that is exempt under section 77HA of the Excise Act from paragraph 10(j) of the Schedule to the Excise Tariff Act, the two provisions must be read together in order to determine whether a particular quantity of CNG is specified in the Schedule to the Excise Tariff Act and thereby duties of excise are imposed. Generally, a manufacturer of CNG will be able to determine with certainty at the time of compression that a particular quantity of CNG will be for use other than in a motor vehicle (non-transport use). In many instances, the only CNG manufactured or produced by a manufacturer will be for non-transport use, and the exemption in section 77HA of the Excise Act serves to ensure that the CNG is not covered by item 10 of the Schedule to the Excise Tariff Act. In this instance, the manufacturer operates a single storage tank that supplies CNG for a range of transport and non-transport uses. As a single storage tank is used, the manufacturer is unable to identify at the time of compression that certain quantities of CNG are for use in transport or non-transport applications. Since the manufacturer is unable to establish that a particular quantity of CNG is intended for non-transport use at time of compression of the natural gas, the CNG is included in item 10 and subitem 10.19C of the Schedule to the Excise Tariff Act and is therefore subject to excise. As the entity is manufacturing excisable goods, it is required to hold a manufacturer licence, lodge excise returns and comply with the other requirements of the excise legislation. The key issue then becomes whether a quantity of CNG that is excisable can subsequently be found to be exempt from duty under section 77HA of the Excise Act because it is determined at the time of delivery into home consumption that the CNG was compressed for use other than in a motor vehicle. Paragraph 10(j) and subitem 10.19C of the Schedule to the Excise Tariff Act excludes goods covered by section 77HA of the Excise Act. Section 77HA of the Excise Act uses the words 'exempt from duty' rather than simply removing certain CNG from the ambit of subitem 10.19C of the Schedule to the Excise Tariff Act. The actual rate of duty payable on excisable goods is not determined at the point of manufacture or production but rather in accordance with section 59 of the Excise Act. Section 59 of the Excise Act specifies that the rate of duty payable on excisable goods is the rate in force when the goods are delivered under subsection 61C(2) of the Excise Act or when payment is made whichever is earlier. Section 77HA of the Excise Act can therefore provide that certain CNG is exempt from duty when determining the rate applicable at the relevant point in time. In summary, section 77HA of the Excise Act serves two roles. Firstly, it excludes CNG from paragraph 10(j) and subitem 10.19C of the Schedule to the Excise Tariff Act (and therefore from being excisable in the first place) where the manufacturer is able to ascertain at the time of compression that the CNG is intended for non-transport use (or meets any of the other requirements for exemption under section 77HA of the Excise Act). Secondly, it provides for exemption from duty where, at the time of delivery of CNG into home consumption, it can be ascertained that a particular quantity of CNG is exempt from duty. Therefore, even though at the time of compression section 77HA of the Excise Act may not serve to exclude certain CNG from item 10 of the Schedule to the Excise Tariff Act, the manufacturer is able to determine, at the time of delivery into home consumption, whether particular quantities of CNG are exempt from duty under section 77HA of the Excise Act.", "Date_of_Decision": "1 December 2011", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 59 subsection 61C(2) section 77HA paragraph 77HA(a) section 77HB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Excisable goods manufacture", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201198", "Unmatched_Content": "Keywords Excise Excisable goods manufacture"}
{"ATO_ID_Number": "ATO ID 2008/118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: synthetic hydraulic fluid", "Issue": "Is a product made of the polyol ester family and used as a hydraulic fluid in industrial hydraulic applications a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule to the Excise Tariff Act 1921 (Schedule)?", "Decision": "Yes. A product that is made of the polyol ester family and used as a hydraulic fluid in industrial hydraulic applications is a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule.", "Facts": "The entity manufactures at a chemical plant, a product which is used as a hydraulic fluid. The hydraulic fluid, which is formed through the reaction of an organic acid and alcohol, is of the polyol ester family. The hydraulic fluid can be used for the same applications to that of petroleum hydraulic fluids.", "Reasons_for_Decision": "Summary: Subitem 15.1 of the Schedule applies to 'petroleum-based oils (including lubricant/fluid/oil products) and their synthetic equivalents but not greases'. The Prefatory Notes to the Schedule give the meaning of 'lubricant/fluid/oil products' to include hydraulic fluid. The Excise Tariff Act does not define the meaning of 'synthetic equivalent'. Therefore the term takes on its ordinary meaning. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW (the Dictionary) relevantly defines the term 'synthetic' as '2 denoting or relating to chemical compounds, resins rubbers, etc., formed by chemical reaction in a laboratory or chemical plant, as opposed to those of natural origin'. Polyol esters are produced by re-acting a highly branched di-functional alcohol with a monobasic acid. As polyol esters are produced by a process of a chemical reaction in a laboratory or at a chemical plant, a product belonging to the polyol ester family is a synthetic product. To be classifiable to subitem 15.1 of the Schedule the product must be synthetic, and, an equivalent of a petroleum-based hydraulic fluid. The Dictionary relevant defines 'equivalent' as '2 corresponding in position, function, etc.'. Hydraulic fluids have been and are currently manufactured from petroleum-based oil and are used in various hydraulic systems including industrial machinery, construction equipments, automotive, aircraft and marine applications. Petroleum-based hydraulic fluids and polyol ester based hydraulic fluids can be used in the same hydraulic systems. Therefore, as polyol ester based hydraulic fluids have a corresponding function to that of petroleum-based hydraulic fluids, they are an equivalent of petroleum based hydraulic fluids. Hence a product that is made of the polyol ester family and used as a hydraulic fluid is a synthetic equivalent of a petroleum based oil for the purposes of subitem 15.1 in the Schedule.", "Date_of_Decision": "29 August 2008", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 Schedule subitem 15.1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/119", "Subject_References": "Excisable goods Excise", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008118", "Unmatched_Content": "Keywords Excisable goods Excise"}
{"ATO_ID_Number": "ATO ID 2008/154", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: naturally occurring stabilised crude petroleum oil", "Issue": "Is crude petroleum oil (crude oil) that is stable as extracted from a production well, 'stabilised crude petroleum oil' for the purposes of the Schedule to the Excise Tariff Act 1921 (Tariff Act)?", "Decision": "Yes, crude oil that is stable as extracted from a production well, is 'stabilised crude petroleum oil' for the purposes of the Schedule to the Tariff Act.", "Facts": "An oil producer extracts crude oil that is not from a Resource Rent Tax area and is not exempt offshore oil. The crude oil has a low gas-to-oil ratio, that is, a low proportion of hydrocarbon gases. It is not necessary to subject this crude oil to a stabilisation process, such as a separation or treatment process, as the crude is sufficiently stable for safe storage and/or transport.", "Reasons_for_Decision": "Summary: Subsection 4(1) of the Excise Act 1901 defines 'excisable goods' as goods in respect of which excise duty is imposed by Parliament, and includes goods the subject of an Excise Tariff or Excise Tariff alteration proposed in the Parliament. Section 5 of the Tariff Act imposes excise duty on goods specified in the Schedule and which are manufactured or produced in Australia. The Schedule describes those goods which are excisable, and sets down the rate of excise duty levied on those goods. 'Stabilised crude petroleum oil' is specified in both item 10 and item 20 of the Schedule to the Tariff Act and is therefore an excisable good, subject to certain exceptions (for the purposes of this question we will only make reference to item 20, unless otherwise indicated, however the meaning applies to both item 10 and item 20). The meaning of the term 'stabilised crude petroleum oil' has not been statutorily defined by the Excise Act or the Tariff Act. The Tariff Act was amended by the Excise Tariff Act 1975 which inserted item 17 into the Schedule to the Tariff Act to include, among other things, 'stabilised crude petroleum oil'. The Excise Tariff Bill 1975 did not have an accompanying explanatory memorandum and the second reading speech to this Bill does not clarify the Parliament's intended meaning of the term 'stabilised crude petroleum oil'. However, the meaning of 'stabilised crude petroleum oil' is discussed in the explanatory memorandum that accompanied the Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006, stating at paragraph 1.54: Stabilised crude petroleum oil is produced when crude oil from wells is taken to the surface and cooled and treated to achieve a state in which it can be further dealt with, in particular safely transported. Although the explanation above related to item 10 of the Schedule to the Tariff Act, the Commissioner considers this explanation to be equally relevant to the reference to 'stabilised crude petroleum oil' in item 20 (effectively item 20 is a renumbered item 17) of the Schedule insofar as the explanatory memorandum discusses the meaning of 'stabilised crude petroleum oil'. Notwithstanding the explanatory memorandum providing some assistance, the Commissioner considers that the term 'stabilised crude petroleum oil' is a technical term adopted from the petroleum industry rather than a term of ordinary English usage. A technical term adopted by Parliament into legislation as opposed to a term of ordinary English usage was discussed in Abbott Point Bulk Coal Pty Ltd & Anor v. Collector of Customs (1992) 35 FCR 371. Ryan and Cooper JJ said: It is clear, in our view, that 'beneficiation' is not a term in ordinary English usage. It is a technical term applicable to a range of processes in the mining and metallurgical industries. Accordingly, its meaning is to be determined as a question of fact. ... Here the Tribunal found, ... 'beneficiation' denotes the processing of minerals or ore-bearing minerals to improve their physical and chemical properties. [Emphasis added] Similarly, 'stabilised crude petroleum oil' is a technical term used by the petroleum industry to describe crude oil that is sufficiently stable for safe storage and transport. It is pertinent then to observe what crude oil is, and what makes crude oil stabilised and unstable. Crude oil is a mixture of hydrocarbons that exists as a liquid in natural underground reservoirs and remains liquid at atmospheric pressure after passing through surface separating facilities. Ordinarily, the crude oil is extracted from the production well under high pressure and contains a significant proportion of dissolved hydrocarbon gases that makes the crude oil unstable (volatile). To stabilise the crude oil for safe storage and transportation, the majority of the dissolved gases are removed (separated) from the crude oil so that the crude oil is stable at ambient temperature. The separated gases are used for other products and the crude oil is then technically known as 'stabilised crude petroleum oil'. Therefore the Commissioner considers that the use of the phrase 'stabilised crude petroleum oil' in the Schedule to the Tariff Act is merely a description of crude oil that is stable. Whether the crude petroleum oil is stable 'as extracted' from the production well or unstable 'as extracted' and subsequently stabilised by a stabilisation process, in this context, is immaterial for the purposes of satisfying the term 'stabilised crude petroleum oil'. What is material for the purposes of the excise Acts is the point at which the crude oil meets the description of 'stabilised crude petroleum oil', that being the point at which the crude oil is stable (that is, had the majority of hydrocarbon gases been removed (if required) and therefore safe for storage and/or transportation) is a question of fact. In this case the crude oil as extracted from the production well is stable for the purposes of safe storage and transportation to downstream refining without having been subjected to a stabilisation process, such as a separation facility or treatment process. It is stable crude oil as extracted, and therefore 'stabilised crude petroleum oil' for the purposes of the Schedule to the Tariff Act at the point the crude oil is extracted from the production well.", "Date_of_Decision": "21 November 2008", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 subsection 4(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Crude oil Excisable goods Excise Stabilised crude oil", "Case_References": "Abbott Point Bulk Coal Pty Ltd & Anor v. Collector of Customs (1992) 35 FCR 371", "Other_References": "Excise Laws Amendment (Fuel Tax Reform and Other Measures) Bill 2006 Second reading speech to the Excise Tariff Bill 1975", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008154", "Unmatched_Content": "Keywords Crude oil Excisable goods Excise Stabilised crude oil"}
{"ATO_ID_Number": "ATO ID 2006/281", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum : blend of fuels - blend cannot be used in an internal combustion engine in its pure form - capable of use as a fuel extender", "Issue": "Can a blend of fuel and other substances be 'used as fuel in an internal combustion engine' for the purposes of subitem 10.30 of the Schedule to the Excise Tariff Act 1921 (the Schedule), if the blend cannot be used in an internal combustion engine in its pure form, but is capable of use as a fuel extender?", "Decision": "No. A blend of fuel and other substances cannot be used as fuel in an internal combustion engine for the purposes of subitem 10.30 of the Schedule, if the blend cannot be used in an internal combustion engine in its pure form, but is capable of use as a fuel extender.", "Facts": "A licensed excise manufacturer blends fuel with other substances. The resultant blend is intended for various uses but cannot be used in its pure form in an internal combustion engine. However, the blend may be used as a fuel extender. That is, if the blend is mixed with other fuel, the resultant mix can be used as fuel in an internal combustion engine.", "Reasons_for_Decision": "Summary: Subitem 10.30 of the Schedule covers blends of one or more fuels (with or without other substances), not elsewhere included under item 10, that can be used as fuel in an internal combustion engine (other than goods covered by section 77J of the Excise Act 1901 ). The particular blend that is manufactured by the licensed manufacturer cannot be used in its pure form as a fuel in an internal combustion engine. Given subitem 10.30 of the Schedule refers to blends 'that can be used as fuel in an internal combustion engine', it is necessary to consider whether that blend alone fulfils this test. In this instance, the blend does not, as it cannot be used as fuel in an internal combustion engine in its pure form. The fact the blend can be used as a fuel extender does not change the fact that the blend itself cannot be used as fuel in an internal combustion engine. If the blend is used as a fuel extender, this will necessarily involve the mixing of the blend with other fuel(s). This mixing will constitute the creation of a new blend, distinct from the original blend being manufactured by the licensed manufacturer. While the new blend (containing the original blend plus fuel) can be used as fuel in an internal combustion engine, and will therefore be classifiable to subitem 10.30 of the Schedule, this does not alter the fact that the original blend being manufactured by the licensed manufacturer cannot be used as fuel in an internal combustion engine and therefore cannot be classified to the same sub-item. Therefore, a blend of fuel with other substances cannot be used as fuel in an internal combustion engine for the purposes of subitem 10.30 of the Schedule if it cannot be used in an internal combustion engine in its pure form, regardless of the fact that it may be used as a fuel extender.", "Date_of_Decision": "25 September 2006", "Year_of_Income": "", "Legislative_References": "Excise Tariff Act 1921 Schedule, subitem 10.30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excisable goods manufacturer Fuel blending Not for use in an internal combustion engine Fuel extender", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006281", "Unmatched_Content": "Keywords Excisable goods manufacturer Fuel blending Not for use in an internal combustion engine Fuel extender"}
{"ATO_ID_Number": "ATO ID 2013/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fuel tax credits: vehicles of less than 4.5 tonnes GVM travelling on a public road whilst providing safety support to a vehicle engaged in road maintenance, repair or construction", "Issue": "Is a safety vehicle with a gross vehicle mass (GVM) of less than 4.5 tonnes travelling on a public road, for the purposes of section 41-20 of the Fuel Tax Act 2006 (FTA), when it is moving along a public road providing safety support services to a separate vehicle that is maintaining a public road?", "Decision": "Yes. A safety vehicle which is providing safety support services is travelling on a public road for the purposes of section 41-20 of the FTA.", "Facts": "An entity acquires taxable fuel for use in its enterprise of road line marking. The fuel is used in the vehicle used for line marking and in the vehicle used to accompany the line marking vehicle. The line marking vehicle has a GVM exceeding 4.5 tonnes and marks lines on a public road by spraying paint onto the road or the verge as stipulated under the relevant state and territory legislation. A factor in the Australian Safety Standards with which the entity must comply in its line marking activities is the provision of a 'safety vehicle'. This vehicle is positioned in front or behind the vehicle marking the road and travels at the same speed as the line marking vehicle. The vehicle has yellow flashing lights affixed to the roof of the cabin and warns other vehicles, approaching from both directions, of the presence of a slow moving vehicle, and to reduce speed and to change lanes or overtake the vehicles when it is safe to do so. The safety vehicle has a GVM of less than 4.5 tonnes.", "Reasons_for_Decision": "Summary: Under section 41-5 of the FTA an entity is entitled to a fuel tax credit for taxable fuel that it acquires, manufactures, or imports into Australia to the extent that it does so for use in carrying on its enterprise. Subdivision 41-B of the FTA provides a number of disentitlement rules for fuel tax credits. Relevantly, section 41-20 of the FTA states that an entity is not entitled to a fuel tax credit for taxable fuel used in a vehicle with a GVM of 4.5 tonnes or less 'travelling on a public road'. The FTA does not define the term 'travelling', however, in Fuel Tax Ruling FTR 2008/1, Fuel tax : vehicle's travel on a public road that is incidental to the vehicle's main use and the road user charge (FTR 2008/1), the Commissioner discusses the meaning of the terms 'travel' and 'travelling', and other relevant terms. The Commissioner states in paragraph 14 of FTR 2008/1 that in subsections 43-10(3) and 43-10(4) of the FTA the terms 'travelling' and 'travel' mean 'to go from one place to another place or to move from one point to another point'. At paragraph 22 of FTR 2008/1 the Commissioner states: However, 'travelling' in the sense contemplated by subsection 43-10(3) of the FTA does not include the movement of a vehicle on a public road or portion of a public road where: • the vehicle is engaged in the construction, repair or maintenance of the road; and • that road or portion of that road is under construction, repair or maintenance. The Commissioner further explains at paragraph 117 of FTR 2008/1 that where a vehicle is engaged in road construction, repair or maintenance and moves on the road that is under construction, repair or maintenance in the course of carrying out this work, the vehicle does not 'travel' on the road in the sense contemplated by subsections 43-10(3) and 43-10(4) of the FTA. The purpose of this movement is to benefit the road, not to use the road to relocate the vehicle. In this case the safety vehicle is moving along the road warning on-coming vehicles of a potential road hazard, namely a slow moving vehicle positioned on the road such that it is likely to be an obstruction. Whilst Australian Safety Standards require that a vehicle must accompany the vehicle that is marking lines on a public road, the safety vehicle is not engaged in the construction, repair or maintenance of the road. The function of a safety vehicle is to warn on-coming vehicles of a potential road hazard. The activity of the vehicle to which the safety warning relates is irrelevant. Hence, the discussion at paragraphs 22 and 117 of FTR 2008/1 is not relevant to a safety vehicle, irrespective of the activity that is undertaken on the public road that requires the provision of a safety vehicle. It is considered that a safety vehicle moving along a public road providing safety support to a vehicle that is constructing, repairing or maintaining the road is travelling on a public road. Accordingly, section 41-20 of the FTA applies to the taxable fuel acquired for use in a safety vehicle, such that there is no entitlement to a fuel tax credit for the fuel used.", "Date_of_Decision": "2 April 2013", "Year_of_Income": "2012-13 income year", "Legislative_References": "Fuel Tax Act 2006 Subdivision 41-B section 41-5 section 41-20 subsection 43-10(3) subsection 43-10(4)", "Related_Public_Rulings_and_Determinations": "FTR 2008/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/114", "Subject_References": "Excise Excise offsets FTC light vehicle FTC Partial Credit FTC public road FTC road user charge FTC use in road construction Fuel tax credits", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201316", "Unmatched_Content": "Related Public Rulings (including Determinations) FTR 2008/1 | Keywords Excise Excise offsets FTC light vehicle FTC Partial Credit FTC public road FTC road user charge FTC use in road construction Fuel tax credits"}
{"ATO_ID_Number": "ATO ID 2008/47", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fuel tax credits and measuring instruments for fuel", "Issue": "For the purposes of working out the amount of fuel in respect of which you are entitled to a fuel tax credit under the Fuel Tax Act 2006 (FTA), are you required by the FTA or the Tax Office to use a measuring instrument approved for trade use by the National Measurement Institute and certified in accordance with the relevant trade measurement legislation?", "Decision": "No. For the purposes of working out the amount of fuel in respect of which you are entitled to a fuel tax credit under the FTA, you are not required by the FTA or the Tax Office to use a measuring instrument approved for trade use by the National Measurement Institute and certified in accordance with the relevant trade measurement legislation?", "Facts": "You acquire fuel in Australia for use in carrying on your enterprise. You dispense varying quantities of fuel from a tank into several different vehicles by using metering equipment. The equipment is not approved for trade use by the National Measurement Institute nor certified in accordance with the relevant trade measurement legislation? You use the records of the quantities of fuel metered into the vehicles to enable you to apportion the fuel between multiple uses. Those uses include uses for which you claim a fuel tax credit.", "Reasons_for_Decision": "Summary: The FTA provides for the payment of fuel tax credits to ensure that, generally fuel tax is effectively only applied to: Section 41-5 of the FTA of the states: You are entitled to a fuel tax credit for taxable fuel that you acquire or manufacturer in, or import into, Australia to the extent that you do so for use in carrying on your enterprise. For the purposes of working out your entitlement to a fuel tax credit, the FTA does not specify any method or equipment to calculate the quantity of taxable fuel that you acquire for use in carrying on your enterprise. In Fuel Tax Determination FTD 2010/1, about calculation methods, the Commissioner has determined that you can use any fair and reasonable method to work out the quantity of fuel for use in carrying on your enterprise. You need to keep records that detail how the quantity of fuel was worked out in order to show that your method is fair and reasonable and appropriate to your circumstances. What is fair and reasonable depends on the circumstances, but trade measurement legislation requirements do not limit what is fair and reasonable for the purposes of the FTA. Measuring equipment approved for trade use and certified in accordance with state or national trade measurement legislation can support a method of working out the quantity of fuel used in carrying on your enterprise, and may be one type of measuring equipment that provides a fair and reasonable basis for calculating your entitlement to a fuel tax credit. Other measuring equipment not so certified may also provide a fair and reasonable basis for calculating your entitlement to a fuel tax credit. Whether use of such equipment meets the requirements of the relevant trade measurement legislation is a separate matter for the relevant authority to determine.", "Date_of_Decision": "20 March 2008", "Year_of_Income": "", "Legislative_References": "Fuel Tax Act 2006 section 41-5", "Related_Public_Rulings_and_Determinations": "Fuel Tax Determination FTD 2010/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FTC fuel tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200847", "Unmatched_Content": "Excise: This ATO ID has been amended by replacing the reference to 'relevant State trade measurement legislation' with 'relevant trade measurement legislation' and replacing reference to FTD 2006/1 with FTD 2010/1. | Related Public Rulings (including Determinations) Fuel Tax Determination FTD 2010/1"}
{"ATO_ID_Number": "ATO ID 2007/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fuel Tax Act 2006: Business taxpayers - registration for fuel tax credits", "Issue": "Is an entity's entitlement to fuel tax credits under section 41-5 of the Fuel Tax Act 2006 (FTA) affected by whether the entity is registered for fuel tax credits at the time that it acquired taxable fuel for use in carrying on its enterprise?", "Decision": "No. An entity's entitlement to fuel tax credits under section 41-5 of the FTA is not affected by whether the entity is registered for fuel tax credits at the time that it acquired taxable fuel for use in carrying on its enterprise.", "Facts": "An entity registered for goods and services tax (GST) prior to 1 July 2006 The entity acquired taxable fuel after 1 July 2006 for use in carrying on its enterprise. The entity registered for fuel tax credits after it acquired the taxable fuel. The entity is not covered by the exemptions in subsection 41-5(3) of the FTA.", "Reasons_for_Decision": "Summary: Section 41-5 of the FTA provides that an entity is entitled to a fuel tax credit for taxable fuel that it acquires, manufactures in, or imports into Australia to the extent to which the entity does so for use in carrying on its enterprise. A further requirement imposed by section 41-5 is that to be entitled, an entity must, subject to exceptions in subsection 41-5(3) of the FTA, be registered for GST or required to be registered for GST. The Tax Office requires entities to register for fuel tax credits. However, this is merely an administrative requirement and has no basis in the fuel tax law. The registration process ensures an entity's Business Activity Statements, which are the approved forms for returns for fuel tax, are modified so that they include fuel tax labels to facilitate the claiming of fuel tax credits. Therefore, the entity's entitlement to fuel tax credits is not affected by whether the entity was registered for fuel tax credits at the time that it acquired taxable fuel for use in carrying on its enterprise.", "Date_of_Decision": "26 February 2007", "Year_of_Income": "", "Legislative_References": "Fuel Tax Act 2006 section 45-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FTC registration FTC requirement to be registered for GST FTC taxable fuel Fuel tax credits", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200743", "Unmatched_Content": "Excise: With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the Fuel Tax legislation with the term 'indirect tax zone' by the Tax and Superannuation Laws Amendment (2015 Measures No. 1) Act 2015 . The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. | Keywords FTC registration FTC requirement to be registered for GST FTC taxable fuel Fuel tax credits"}
{"ATO_ID_Number": "ATO ID 2014/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise PSO: entitlement for a PSO benefit under category 1 where re-refined base oil is not used or sold for use as a lubricant or a hydraulic or transformer oil", "Issue": "Is an entity entitled to a PSO benefit under item 1 of the table in regulation 4 of the Product Stewardship (Oil) Regulations 2000 (Regulations), for re-refined base oil that satisfies the requirements of subregulation 3(2)(a) of the Regulations and the requirements prescribed in Schedule 1 of the Regulations, even if it is neither used as, nor sold for use as, a lubricant or a hydraulic or transformer oil?", "Decision": "Yes, an entity is entitled to a PSO benefit under item 1 of the table in regulation 4 of the Regulations, for re-refined base oil that satisfies the requirements of subregulation 3(2)(a) of the Regulations and the requirements prescribed in Schedule 1 of the Regulations, even if it is neither used as, nor sold for use as, a lubricant or a hydraulic or transformer oil.", "Facts": "An oil recycler is registered for entitlement to product stewardship (oil) benefits. The oil recycler collects waste oil and re-refines it through thin film evaporation (or vacuum distillation) followed by solvent extraction (or hydrofinishing) to produce base oil. The re-refined base oil satisfies the requirements prescribed in Schedule 1 of the Regulations. The oil recycler sells the re-refined base oil to customers for a variety of uses. Some customers use the oil as a lubricant, hydraulic or transformer oil. Other customers may use the re-refined base oil for incorporation into a rock drilling composition or as an input into the manufacture of carpet underlay.", "Reasons_for_Decision": "Summary: Subsection 9(1) of the Product Stewardship (Oil) Act 2000 (PSO Act) provides that an entity is entitled to a benefit for the sale or consumption of recycled oil that the entity has recycled in Australia. Subsection 10(1) of the PSO Act explains that the amount of benefit for a claim period is worked out in accordance with the PSO Regulations. Subregulation 4(1) of the Regulations includes a table which itemises the different categories of recycled oil and the benefit that is payable. Item 1 in that table refers to 're-refined base oil (for use as a lubricant or a hydraulic or transformer oil) that meets the criteria mentioned in Schedule 1'. Subregulation 3(2) of the Regulations stipulates that to be 're-refined', a used oil must be restored to the condition of a base oil by either thin film evaporation or vacuum distillation, followed by either solvent extraction or hydrofinishing (or by another approved process). The entity has re-refined the base oil in accordance with the requirements of subregulation 3(2). There is no provision in the Regulations which stipulates that, to qualify under item 1, the re-refined base oil must be used or sold for use as a lubricant or hydraulic or transformer oil. The Commissioner considers that the phrase 'for use as a lubricant or a hydraulic or transformer oil' merely serves to describe the qualities a recycled oil will possess if it has been re-refined in accordance with the Regulations to a base oil that satisfies the requirements of Schedule 1 of the Regulations. The Explanatory Statement that accompanied the Regulations provides the following in relation to Item 1 recycled oil: Item 1 prescribes a category for oil subject to the highest level of processing. It provides the maximum reward for the highest quality product - that is, a non-carcinogenic re-refined base-oil suitable to be made into engine lubricant, transformer and hydraulic oil. [ emphasis added ] In the Commissioner's view, by referring to re-refined base-oil 'suitable to be made' into engine lubricant etc. (rather than referring to re-refined base-oil that is actually made into engine lubricant etc.), the Explanatory Statement indicates that the meaning of the phrase 'for use as' in item 1 may relate to the objective qualities of the product, rather than its use, or any subjective intention of the recycler or end-user of the product as to its use. If the re-refined base oil has been re-refined in accordance with the Regulations and satisfies the requirements of Schedule 1 of the Regulations, then the actual or intended end use of the base oil has no bearing on whether it will qualify under item 1. Punctuation and syntax may also be taken into account in interpreting the meaning of a statutory provision (see, for example, Conigrave v. Tanner [1978] WAR 225 at 230 and Pearce and RS Geddes, Statutory Interpretation in Australia: 5th Edition at [4.44]). In the Commissioners view, the fact that the phrase 'for use as a lubricant [etc.]' appears in brackets in item 1 of the table in Regulation 4(1) indicates that the phrase is employed as an appositive in relation to the preceding and following phrases 're-refined base oil ...that meets the criteria in Schedule 1' (see Style Manual for Authors, Editors and Printers: Fifth Edition, 1994, at [6.51] and The New Fowler's Modern English Usage: Revised Edition, 1998, at p 115). In other words, the phrase 'for use as a lubricant [etc.]' explains (but does not define) the preceding and following phrases. The entity is entitled to a benefit calculated in accordance with item 1 of the table in regulation 4 of the Regulations for a quantity of used oil which has been re-refined to base oil that satisfies the requirements of Schedule 1 of the PSO Regulations irrespective of whether or not it is used, or sold for use as, a lubricant or a hydraulic or transformer oil.", "Date_of_Decision": "11 November 2014", "Year_of_Income": "", "Legislative_References": "Product Stewardship (Oil) Act 2000 subsection 9(1) subsection 10(1)", "Related_Public_Rulings_and_Determinations": "Product Grants and Benefits Ruling 2012/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/38", "Subject_References": "Product Stewardship Oil PSO Re-refined base oil", "Case_References": "Conigrave v. Tanner [1978] WAR 225", "Other_References": "Pearce and RS Geddes, Statutory Interpretation in Australia: 5th Edition. Style Manual for Authors, Editors and Printers: Fifth Edition, 1994. The New Fowler's Modern English Usage: Revised Edition, 1998.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201435", "Unmatched_Content": "Related Public Rulings (including Determinations) Product Grants and Benefits Ruling 2012/1 | Keywords Product Stewardship Oil PSO Re-refined base oil"}
{"ATO_ID_Number": "ATO ID 2008/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PSO: entitlement for a PSO benefit where category 5 oil is not used as a burner fuel", "Issue": "Is used oil that has been filtered, de-watered and de-mineralised required to be used as a burning oil to meet the description of a recycled oil in item 5 of the table in subregulation 4(1) of the Product Stewardship (Oil) Regulations 2000 (PSO Regulations)?", "Decision": "No, used oil that has been filtered, de-watered and de-mineralised is not required to be used as a burning oil to meet the description of a recycled oil in item 5 of the table in subregulation 4(1) of the PSO Regulations.", "Facts": "An oil recycler filters, de-waters and de-mineralises used oil. The recycler sells the recycled oil for uses other than as a burner fuel.", "Reasons_for_Decision": "Summary: Subsection 9(1) of the Product Stewardship (Oil) Act 2000 (PSO Act) provides that an entity is entitled to a benefit for the sale or consumption of recycled oil that the entity has recycled in Australia. Subsection 10(1) of the PSO Act explains that the amount of benefit for a claim period is worked out in accordance with the PSO Regulations. Subregulation 4(1) of the PSO Regulations includes a table which itemises the different categories of recycled oil and the benefit that is payable. Item 5 in that table describes the recycled oil as 'high grade industrial burning oils (filtered, de-watered and de-mineralised)'. There is no provision in the PSO Regulations which stipulates the recycled oil described in item 5 of the table in subregulation 4(1) of the PSO Regulations must be used as a high grade burner fuel. It is considered that the phrase 'high grade industrial burning oils' is a description for recycled oil that has been filtered de-watered and de-mineralised. Hence, a quantity of used oil which has been filtered, de-watered and de-mineralised meets the description of item 5 of the table in subregulation 4(1) of the PSO Regulations irrespective of whether or not it is used as a high grade industrial burning oil.", "Date_of_Decision": "22 February 2008", "Year_of_Income": "", "Legislative_References": "Product Stewardship (Oil) Act 2000 subsection 9(1) subsection 10(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "PSO recycling", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200838", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2008/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PSO: complying with relevant Commonwealth, State and Territory legislation", "Issue": "Is the Commonwealth, State or Territory legislation referred to in subregulation 4B(1) of the Product Grants and Benefits Administration Regulations (PGBA Regulations), legislation which stipulates the licences, permits and approvals that must be held when undertaking used oil recycling activities?", "Decision": "Yes. The Commonwealth, State or Territory legislation referred to in subregulation 4B(1) of the PGBA Regulations is legislation that stipulates the licences, permits and approvals that must be held when undertaking used oil recycling activities.", "Facts": "An entity conducts used oil recycling activities in several States and Territories of Australia. The entity intends to register for product stewardship (oil) (PSO) benefits.", "Reasons_for_Decision": "Summary: Registration for PSO benefits is administered under the Product Grants Benefits and Administration Act 2000 (PGBAA). Subsection 9(3A) of the PGBAA sets out the specific requirements for registration for PSO benefits. Subparagraph 9(3A)(b)(i) of the PGBAA provides that, in relation to registration for PSO benefits, the Commissioner must be satisfied that the applicant complies with any regulations made in relation to compliance with relevant Commonwealth, State or Territory legislation that relates to recycling operations or enterprises. Regulation 4B of the PGBA Regulations deals with the requirement for registration for PSO benefits under section 9 of the PGBAA. Subregulation 4B(1) of the PGBA Regulations states that the applicant 'must comply with relevant Commonwealth, State or Territory legislation relating to oil recycling operations or enterprises'. In the Second Reading Speech to the Product Stewardship (Oil) (Consequential Amendments) Bill 2000 which inserted subsection 9(3A) into the PGBAA, the Parliamentary Secretary to the Minister for the Environment and Heritage said: A claimant for product stewardship benefits will need to satisfy a number of requirements. The Commissioner of Taxation must be satisfied that a recycler holds both a licence as a manufacturer of excisable goods under section 34 of the Excise Act 1901 and an Australian business number. The claimant must also demonstrate that all necessary licences, permits and approvals to operate the business are held as required by relevant state and territory environmental protection agencies. In addition, the Explanatory Statement to the Product Grants and Benefits Administration Amendment Regulations 2000 (No.1) states: ...Regulation 4A and 4B of the Product Grants and Benefits Administration Regulations 2000 (the Regulations) prescribe requirements for registration for a Product Stewardship (Oil) Scheme. Registration for Product Stewardship (Oil) Benefit is subject to the applicant providing the ATO applicant must also comply with relevant state and territory legislation relating to recycling operations. Therefore, it is evident from the discussions above that the legislation contemplated in regulation 4B of the PGBA Regulations is legislation that governs oil recycling operations. Generally this legislation is administered by Commonwealth, State or Territory environmental protection agencies. The legislation may stipulate that certain licences, permits and approvals must be held by entities undertaking oil recycling activities and therefore, for the purposes of regulation 4B of the PGBA Regulations, an applicant for registration of PSO benefits must demonstrate that they comply with these specific requirements.", "Date_of_Decision": "12 May 2008", "Year_of_Income": "", "Legislative_References": "Product Grants and Benefits Administration Act 2000 9 9(3A) 9(3A)(b)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Product stewardship oil scheme PSO recycling", "Case_References": "", "Other_References": "Second Reading Speech to the Product Stewardship (Oil) (Consequential Amendments) Bill 2000 (the Bill) Explanatory Statement to the Product Grants and Benefits Administration Amendment Regulations 2000 (No. 1)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200874", "Unmatched_Content": "Keywords Product stewardship oil scheme PSO recycling"}
{"ATO_ID_Number": "ATO ID 2008/84", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PSO: accredited laboratory and appropriate facilities, resources and expertise", "Issue": "Does the Commissioner consider that accreditation for microbiological analysis and for industrial chemical analysis and testing demonstrate that a laboratory has the 'appropriate facilities, resources and expertise' for the purposes of the definition of 'independent laboratory' in subregulation 3(1) of the Product Stewardship (Oil) Regulations 2000 (PSO Regulations)?", "Decision": "Yes, provided the accreditation is for microbiological analysis in the case of mutagenicity testing and for industrial chemical analysis and testing for the other requirements, the Commissioner considers that a laboratory that is accredited demonstrates that it has 'appropriate facilities, resources and expertise' for the purposes of the definition of 'independent laboratory' in subregulation 3(1) of the PSO Regulations.", "Facts": "A recycler of used oil has engaged a laboratory to test a sample of oil that the recycler has processed. The laboratory tests the sample against the criteria in Schedule 1 to the PSO Regulations. The laboratory is accredited to perform specific testing and analysis namely microbiological analysis and industrial chemical analysis specifically in the testing of petroleum liquid fuels and lubricants. The laboratory is accredited in compliance and assurance processes by an internationally recognised organisation and is also licensed by the relevant Commonwealth authority for microbiological analysis and testing. The laboratory is also accredited by an independent body for the testing of petroleum liquid fuels and lubricants. The accreditation body is endorsed by the Commonwealth Government.", "Reasons_for_Decision": "Summary: Subregulation 4(3) of the PSO Regulations provides that for a benefit under item 1 in the table of subregulation 4(1) of the PSO Regulations, the re-refined base oil must be tested by an independent laboratory against the criteria in Schedule 1 to the PSO Regulations (Schedule 1). Included in the definition of 'independent laboratory' in subregulation 3(1) of the PSO Regulations is the requirement that the laboratory has the 'appropriate facilities, resources and expertise to conduct the tests necessary for the purposes of Schedule 1'. Schedule 1 stipulates that the re-refined base oil must: The Commissioner considers that the person or persons who conduct the tests specified in Schedule 1 must be qualified, trained and experienced. The Modified Ames Test relies on analysing bacterial growth. Therefore the person or persons must be qualified, appropriately trained and experienced in microbiological analysis to conduct a Modified Ames Test. In reference to the other criterion of Schedule 1 they must be accredited for industrial chemical analysis of petroleum liquid fuels and lubricants. Assessment by a recognised accreditation body involves a thorough evaluation of all the elements and processes of a laboratory and therefore accredited laboratories have demonstrated, in the course of gaining and maintaining their accreditation, that they have the appropriate skills, expertise, and equipment and have the appropriate practices and procedures in place to produce accurate and reliable test data. It is therefore considered that a laboratory demonstrates that it has the appropriate facilities, resources, and expertise for the purposes of the definition of an 'independent laboratory' in subsection 3(1) of the PSO Regulations where it is: The accrediting authority must be recognised in the accreditation for industrial chemical analysis and testing or in the accreditation of microbiological analysis.", "Date_of_Decision": "2 June 2008", "Year_of_Income": "", "Legislative_References": "Product Stewardship (Oil) Regulations 2000 Schedule 1 subregulation 3(1) subregulation 4(1) subregulation 4(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/85", "Subject_References": "Product stewardship oil scheme PSO base oil PSO recycling PSO re-refining", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200884", "Unmatched_Content": "Keywords Product stewardship oil scheme PSO base oil PSO recycling PSO re-refining"}
{"ATO_ID_Number": "ATO ID 2008/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "PSO: non accredited laboratory and appropriate facilities, resources and expertise", "Issue": "What does the Commissioner consider necessary to demonstrate that a laboratory has the appropriate facilities, resources and expertise to conduct the tests necessary for the purposes of the definition of 'independent laboratory' in subregulation 3(1) of he Product Stewardship (Oil) Regulations 2000 (PSO Regulations)?", "Decision": "The Commissioner considers a laboratory that has the following elements demonstrates that it has the appropriate facilities, resources and expertise to conduct tests necessary for the purposes of the definition of 'independent laboratory' in subregulation 3(1) of the PSO Regulations:", "Facts": "A recycler of used oil engages two laboratories to test a sample of oil that the recycler has processed. The laboratories tested the sample against the criteria in Schedule 1 to the PSO Regulations. Laboratory A conducts the test to determine the mutagenicity index of the oil using the Modified Ames Test. The test is conducted by specialists that are qualified, appropriately trained and experienced in microbiological analysis. Laboratory B conducts tests to determine if the sample meets the criterion in items 2 to 7 in Schedule 1 to the PSO Regulations. This laboratory is experienced in testing petroleum liquid fuels and lubricant analysis.", "Reasons_for_Decision": "Summary: Subregulation 4(3) of the PSO Regulations provides that for a benefit under item 1 in the table of subregulation 4(1) of the PSO Regulations, the re-refined base oil must be tested by an independent laboratory against the criteria in Schedule 1 to the PSO Regulations (Schedule 1). Included in the definition of an 'independent laboratory' in subregulation 3(1) of the PSO Regulations is the requirement that the laboratory has the 'appropriate facilities, resources and expertise to conduct the tests necessary for the purposes of Schedule 1'. A criterion in Schedule 1 stipulates that the oil must be non-carcinogenic, demonstrated by having a prescribed mutagenicity index using the Modified Ames Test. The Modified Ames Test relies on analysing bacterial growth. Therefore the Commissioner considers that a person conducting the Modified Ames Test must be qualified, appropriately trained and experienced in microbiological analysis to accurately analyse and record the test results. Schedule 1 also stipulates that the oil must be tested to establish the levels of: The person that conducts these tests must be qualified, trained and experienced in conducting tests that provide results to the levels specified in Schedule 1. Therefore the Commissioner considers that the laboratory must be experienced in testing petroleum liquid fuels and lubricant analysis. However there are other elements of a laboratory that contribute to the production of accurate and reliable test data. These elements include, but are not limited to: Therefore, a laboratory will demonstrate that it has the appropriate facilities, resources and expertise to conduct the tests necessary for the purposes of Schedule 1 where all the above mentioned elements are evident. Further, in relation to testing the mutagenicity index of the oil, the sample is analysed by a qualified, appropriately trained and experienced specialist using the Modified Ames Test. In relation to testing the other criterion in Schedule 1, the laboratory is experienced in testing petroleum liquid fuels and lubricant analysis.", "Date_of_Decision": "2 June 2008", "Year_of_Income": "", "Legislative_References": "Product Stewardship (Oil) Regulations 2000 subregulation 3(1) subregulation 4(1) item 1 of the Table in subregulation 4(1) subregulation 4(3) Schedule 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/84", "Subject_References": "Product stewardship oil scheme PSO base oil PSO recycling PSO re-refining", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200885", "Unmatched_Content": "Keywords Product stewardship oil scheme PSO base oil PSO recycling PSO re-refining"}
{"ATO_ID_Number": "ATO ID 2002/890", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise - Payments - Product Stewardship (Oil) Scheme - is excess product 'used oil'?", "Issue": "Is oil that is excess product considered to be 'used oil' for the purposes of section 6 of the Product Stewardship (Oil) Act 2000 (the Act) and therefore eligible for a product stewardship (oil) benefit?", "Decision": "No. Oil that is excess product is not considered to be 'used oil' for the purposes of section 6 of the Act and therefore is not eligible for a product stewardship (oil) benefit as it has not been employed for some purpose.", "Facts": "An entity blends and processes petroleum products. As part of the blending or processing, some oil is excess product. Excess product may result from product not meeting certain specifications, an accumulation of returned or manufactured 'off-specification' product in a 'slops' tank, and cleaning sludge from the bottom of storage tanks. The excess product is then subjected to processes described in Product Stewardship (Oil) Regulations 2000 subregulation 4(1).", "Reasons_for_Decision": "Summary: Under the Act, you are entitled to a product stewardship (oil) benefit for the sale or consumption of recycled oil that you have used or recycled in Australia. Recycled oil is defined in section 6 of the Act as follows: ' recycled oil means: (a) goods produced from used oil; or (b) used oil that has been restored to its former state.' Consistent with the ordinary meaning of 'used', the ATO will accept that an oil product has been used if it has been employed for some purpose. For example, used oil may include oil that has been used to flush lines during the blending process. It does not, however, include oil that is considered to be waste oil in so far as it is excess product for the purposes of commercial blending or processing, as the excess product has not been employed for some purpose. Therefore excess product is not considered to be used oil for the purposes of the Act and therefore is not eligible for a product stewardship (oil) benefit.", "Date_of_Decision": "16 August 2002", "Year_of_Income": "", "Legislative_References": "Product Stewardship (Oil) Act 2000 section 6", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Product stewardship oil scheme Excise payments", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002890", "Unmatched_Content": "Keywords Excise Product stewardship oil scheme Excise payments"}
{"ATO_ID_Number": "ATO ID 2013/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Manufacture or production of cigarettes using a hand operated cigarette making machine", "Issue": "Can the use of a hand operated cigarette making machine, that makes one cigarette at a time, constitute manufacture or production of excisable goods for the purposes of the Excise Act 1901 ?", "Decision": "Yes, depending on the circumstances in which it is used, the use of a hand operated cigarette making machine to make cigarettes can constitute manufacture or production of excisable goods for the purposes of the Excise Act.", "Facts": "A person makes cigarettes using a hand operated cigarette making machine at a residential premises in Australia. The cigarettes are made using cut tobacco and cigarette tubes (consisting of a paper and filter). The machine facilitates the injection of the cut tobacco into a cigarette tube. The machine makes one cigarette at a time. The person used the hand operated cigarette making machine to make over 70,000 cigarettes. The person had at the premises boxes and bags of cut tobacco (totalling 250 kilograms), scales and thousands of filtered cigarette tubes.", "Reasons_for_Decision": "Summary: Excisable goods are goods on which excise duty is imposed. Under section 5 of the Excise Tariff Act 1921 (Excise Tariff Act), excise duty is imposed on goods listed in the Schedule to the Excise Tariff Act that are manufactured or produced in Australia. Item 5 of the Schedule to the Excise Tariff Act lists tobacco and cigarettes as goods that duty is imposed on. Therefore, to determine if the product is excisable it is necessary to establish whether or not the product is manufactured or produced in Australia. Section 4 of the Excise Act provides an inclusive definition of 'manufacture': Manufacture includes all processes in the manufacture of excisable goods and, in relation to beer, includes the provision to the public at a particular premises of commercial facilities and equipment for use in the production of beer at those premises. It is therefore necessary to look outside the provisions of the Excise Act for guidance on the meaning of the terms. In Caltex Australia Petroleum Pty Ltd v. Commissioner of Taxation [2008] FCA 1951; 173 FCR 359 (Caltex) Sundberg J considered whether Caltex was manufacturing or producing an excisable good for the purpose of the Excise Acts (meaning the Excise Act and the Excise Tariff Act). Sundberg J stated the following: [71] ...The critical question in my view is whether objectively speaking the goods in question can be said to have emerged from a process as a \"new and different article ...having a distinctive character or use\"... At paragraph 65 of Caltex Sundberg J cites with approval Commissioner of Taxation v. Jax Tyres Pty Ltd (1984) 5 FCR 257 in which Lockhart J referred to McNicol and Anor v. Pinch [1906] 2 KB 352 (McNicol). Relevantly, Darling J in McNicol states at page 361: ... the essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made. At paragraph 66 of Caltex, Sundberg J also cites with approval M.P. Metals Pty Ltd v. Federal Commissioner of Taxation (1967-1968) 117 CLR 631; (1968) 14 ATD 407 (M.P. Metals). At page 639 of M.P. Metals Windeyer J discusses factors that may be taken into consideration in examining whether something is a different thing from that out of which it is made. The court stated that these factors include, but are not limited to, the colour, shape, composition or any other quality, as well as differences in its utility for some purpose. In this case a person uses a hand operated cigarette making machine to make cigarettes. The process involves placing a specified amount of cut tobacco into the machine and then inserting the cigarette tube into a separate compartment. The person turns a handle on the exterior of the machine to trigger a crank-style injection of the tobacco into the cigarette tube. The cigarette can be distinguished from its inputs. Applying Darling J's test, a cigarette is a different thing from that out of which it is made. It is acknowledged that a strict interpretation of the terms 'manufacture' or 'produced' may therefore lead to the conclusion that the making of cigarettes using a hand operated cigarette making machine would always constitute 'manufacture or production' for the purposes of the Excise Act. However, although the terms 'manufactured' or 'produced' contained in the Excise Act are intended to be interpreted and applied broadly, whether or not excisable goods are 'manufactured or produced' will often be a question of fact and degree that requires the exercise of judgement taking into account the different processes involved in the making of the goods and the circumstances in which the goods are made. Having regard to the operation of the excise system, it is considered that the phrase 'manufactured or produced' for the purposes of the Excise Acts requires that something new or different having a distinctive character or use, results from a process, which is captured under the Excise Acts. This means that 'manufactured or produced' in the sense contemplated by the Excise Acts does not include activities that amount to reasonable steps taken in the course of consuming existing excisable (or excise equivalent) products once they have found their way into home consumption. If the Excise legislation has been complied with, appropriate duties will have been paid on the products that have been delivered into home consumption, and the delivery of those products will have been authorised. Any subsequent dealings with those products that are consistent with the manner in which consumption of those products would normally occur, falls outside the scope of the Excise Act. It will be a question of fact and degree whether, in the particular circumstances, the activities undertaken by a person amount to reasonable steps taken in the course of consuming existing excisable goods. Factors that may be relevant in establishing whether the use of excisable goods that have found their way into home consumption amounts to the manufacture or production of a good for excise purposes include the scale of production, method of production, volume of goods produced and whether the products are used in making other distinct marketable goods. Issues such as quantification, packaging and the application of brand names could evidence the 'marketable' factor. The Commissioner accepts that the activities of an individual making cigarettes for personal consumption, using a hand operated cigarette making machine and using cut tobacco, will not necessarily amount to the manufacture or production of a good dutiable under the Schedule. However, this will remain a question of fact and degree. In this case the person possessed a large quantity of cigarettes made by the use of their hand operated machine and 250 kilograms of duty paid cut tobacco at a residential premises. The person also possessed a large quantity of filtered cigarette tubes and a set of scales. The amount of cigarettes found at the residential premises was substantial and it is impossible that an individual could consume these cigarettes within a reasonable timeframe. Having regard to the scale and method of production, it is improbable that the cigarettes are merely being made in the course of consuming the tobacco. This circumstance can be distinguished from that where a person uses cut tobacco to make a cigarette using a hand operated cigarette making machine for personal use. Based on the facts and circumstances of this case, it is considered that the goods are intended to fall within the ambit of excisable goods manufactured or produced for the purpose of the Excise Acts. Therefore, in the above circumstances, the use of a hand operated cigarette making machine to make cigarettes constitutes manufacture of excisable goods for the purpose of the Excise Acts.", "Date_of_Decision": "19 February 2013", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 section 4", "Related_Public_Rulings_and_Determinations": "ER 2012/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Tobacco Excisable goods Manufacture", "Case_References": "Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation [2008] FCA 1951 173 FCR 359", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201310", "Unmatched_Content": "Related Public Rulings (including Determinations) ER 2012/1 | Keywords Tobacco Excisable goods Manufacture"}
{"ATO_ID_Number": "ATO ID 2009/118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excise: meaning of tobacco plant", "Issue": "What plant species are tobacco plants for the purposes of the Excise Act 1901 (Excise Act)?", "Decision": "Species of the Nicotiana genus where the leaves of that species are generally used for smoking, chewing or snuff are considered to be tobacco plants for the purposes of the Excise Act. Nicotiana tabacum, Nicotiana rusticum and Nicotiana sylvestris are tobacco plants for the purposes of the Excise Act. Should varieties of other species of Nicotiana be developed where the leaves are generally used for smoking, chewing or as snuff then those species would also be considered tobacco plants for the purposes of the Excise Act.", "Facts": "An entity grows a commercial crop of Nicotiana tabacum, Nicotiana rusticum or Nicotiana sylvestris .", "Reasons_for_Decision": "Summary: Parts III, IV, IVA and X of the Excise Act refer, in various sections, to tobacco seed, tobacco plant or tobacco leaf. For example Part III section 28 of the Excise Act provides that it is an offence for a person who does not have a producer licence to produce tobacco seed, tobacco plant or tobacco leaf. Part IV subsection 39D(1) of the Excise Act refers to tobacco seed, tobacco plant and tobacco leaf in relation to licence conditions. Part IVA section 44 of the Excise Act provides that permission may be given for a person to move tobacco seed, tobacco plant or tobacco leaf from one place to another place. Part X section 117C of the Excise Act provides that it is an offence for a person to unlawfully possess tobacco seed, tobacco plant or tobacco leaf. The Excise Act, however, does not provide a definition of tobacco seed, tobacco plant or tobacco leaf. The Excise Tariff Act 1921 (Excise Tariff Act) is incorporated and read as one with the Excise Act by virtue of section 6 of the Excise Act and the definition of Excise Acts in subsection 4(1) of the Excise Act. The Schedule to the Excise Tariff Act contains the following definition of tobacco: tobacco means tobacco leaf subjected to any process other than curing the leaf as stripped from the plant. Item 5 of the Schedule to the Excise Tariff Act includes 'tobacco, cigars, cigarettes and snuff'. Section 68 of the Excise Act states: No person shall be deemed to manufacture merely because he or she cures tobacco leaf as stripped from the plant so as to convert it into leaf tobacco. There is no specific definition of which species of plant are tobacco plants. Therefore to determine which species are tobacco plants, and therefore which seeds, plants and leaf are subject to the controls imposed by the Excise Act requires an examination of the context in which these controls operate. The references to tobacco seed, tobacco plant or tobacco leaf were inserted by the Excise Amendment (Compliance Improvement) Act 2000 . In the Explanatory Memorandum to the Excise Amendment (Compliance Improvement) Bill 2000 the purpose of the amendments is described as: 1.2 The amendments will address deficiencies in existing provisions of the Excise Act that regulate the production, dealing, manufacturing and storage of tobacco. The amendments will create a more robust statutory framework to support the compliance initiatives of the Australian Taxation Office (ATO). They are designed to protect the excise revenue base from the illicit trade in tobacco, and from arrangements prone to duty evasion and deferral in relation to excisable goods generally. Thus the changes made by the Excise Amendment (Compliance Improvement) Act 2000 , including the insertion in various sections of the phrase tobacco seed, tobacco plant and tobacco leaf, were directed at ensuring that excise duty collected on excisable tobacco was not eroded. It can be seen references to tobacco seed, tobacco plants and tobacco leaf are references to those seeds, plants and leaves that can be manufactured into tobacco products such as cigarettes, cigars and smoking or chewing tobacco. In relation to the types of plants the Australian Oxford Dictionary , 2004, 2nd edn, Oxford University Press, Melbourne defines tobacco as: 1. a solanaceous plant of the genus Nicotiana , of American origin, with narcotic leaves used for smoking, chewing, or snuff. 2. its leaves, especially as prepared for smoking The Australian Oxford Dictionary further explains that: Tobacco was originally used by some North American indigenous peoples as a narcotic drink, but by the time that Christopher Columbus (1451-1506) (see Nicotiana) arrived they were smoking it. They used it for ceremonial purposes and believed it to have medicinal properties, which was the main reason for taking it back to Europe. The diplomat Jean Nicot is said to have introduced it to France in 1556. Tobacco was originally smoked mainly in pipes and cigars; cigarettes did not become socially acceptable until the late 18th century. It is usually made from the leaves of common tobacco ( Nicotiana tabacum ) and sometimes from wild tobacco ( N. rusticum ); many varieties have been developed and a number of different additives and preparation techniques are used... The Commissioner considers that the ordinary meaning of tobacco plant in the context of the Excise Act and the Excise Tariff Act is a species of the Nicotiana plant that is used to produce material for smoking, chewing or as snuff. Under this view, there are two aspects that need to be satisfied: Whether material from the plant is to be used to produce material for smoking, chewing or as snuff will depend largely on the physical properties of the plant and how the material produced from the leaf of the plant is used. Historically the Nicotiana species grown for the leaves of the plant to be used for smoking, chewing or as snuff are Nicotiana tabacum and Nicotiana rusticum . Accordingly, a relevant consideration in determining whether other Nicotiana plants are tobacco for the purposes of the Excise Act and the Excise Tariff Act is whether the physical properties of the plant are sufficiently similar to Nicotiana tabacum and Nicotiana rusticum (for example, nicotine content) such that the material produced from the leaf of the plant may be used for smoking, chewing or as snuff. In determining how the material produced from the Nicotiana plant is to be used, it is reasonable for the Commissioner to consider whether there is evidence of the material being used for smoking, chewing or as snuff and whether there are any viable commercial markets for non-tobacco products that use the material. The commercial production of material produced from the leaf of the Nicotiana plant in the absence of viable commercial markets for non-tobacco products may indicate that material derived from those varieties of plants is for smoking, chewing or as snuff. It is well accepted that Nicotiana tabacum and Nicotiana rusticum are tobacco plants that produce tobacco for the purposes of the Excise Act and the Excise Tariff Act. Nicotiana sylvestris has similar physical properties to Nicotiana tabacum and Nicotiana rusticum which makes it suitable for use as material to be smoked, chewed or as snuff or to be blended with tobacco sourced from tabacum or rusticum to produce material for smoking, chewing or as snuff. The Commissioner has identified websites that promote the use of Nicotiana sylvestris for smoking. In relation to viable commercial markets for non-tobacco products, the Commissioner has only identified a relatively small market for the sale of Nicotiana sylvestris seeds to grow ornamental plants. There is no evidence to suggest that the identified seed market is capable of absorbing the produce from the commercial crop of Nicotiana sylvestris . In the context of the commercial crop grown, the Commissioner considers that it is reasonable to conclude that material derived from Nicotiana sylvestris is to be used to produce tobacco. Therefore Nicotiana tabacum, Nicotiana rusticum and Nicotiana sylvestris are tobacco plants for the purposes of the Excise Act. Should varieties of other species of Nicotiana be developed where the leaves are used for smoking, chewing or as snuff then those species would also be considered tobacco plants for the purposes of the Excise Act.", "Date_of_Decision": "14 October 2009", "Year_of_Income": "", "Legislative_References": "Excise Act 1901 Part III Part IV Part IVA Part X subsection 4(1) section 6 section 28 subsection 39D(1) section 44 section 68 section 117C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/104", "Subject_References": "Tobacco leaf Tobacco plant Tobacco seed", "Case_References": "", "Other_References": "Excise Amendment (Compliance Improvement) Act 2000 Explanatory Memorandum to the Excise Amendment (Compliance Improvement) Bill 2000 The Australian Oxford Dictionary, 2004, 2nd edn, Oxford University Press, Melbourne", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009118", "Unmatched_Content": "Keywords Tobacco leaf Tobacco plant Tobacco seed"}
{"ATO_ID_Number": "ATO ID 2009/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reportable fringe benefits: excluded fringe benefit - 'occasional' travel", "Issue": "Are the fringe benefits provided to an employee, being travel between their present place of residence in a remote area and their home city, excluded fringe benefits as prescribed by paragraph 5E(3)(j) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Paragraph 5E(3)(j) of the FBTAA can only apply where occasional travel is undertaken.", "Facts": "An employee has a house in a major Australian population centre (city X) The employer seconded the employee to a country location (location Y) where they took up residence. Location Y was not in or adjacent to an eligible urban area. The employee was provided with flights back to city X where their family resided. In the six months they were a resident at location Y they made seven return flights to city X. Each journey occurred at least once a month and always started on a Friday. For the rest of the time, they remained a resident of location Y.", "Reasons_for_Decision": "Summary: Paragraph 5E(3)(j) of the FBTAA states that an excluded fringe benefit is a fringe benefit: that relates to occasional travel to a major population centre in Australia provided to employees and family members resident in a location that is not in or adjacent to an eligible urban area. The FBTAA does not include a definition of 'occasional', therefore it takes its ordinary meaning. The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/1001 defines 'occasional' as: 1. occurring or appearing from time to time, not at regular intervals: an occasional visitor. There is no explanation of the intended operation of paragraph 5E(3)(j) of the FBTAA in the Explanatory Memorandum which accompanied the Bill [A New Tax System (Fringe Benefits Reporting) Bill 1998] that introduced the legislation. At the time it moved through the Senate however, as provided in the Historic House Hansard Database on 29 March 1999 at pages 3442- 3445, in successfully amending the Bill to include present paragraph 5E(3)(j), the following was recorded: Senator Crossin - the fares entitle these people and their families who are resident in remote localities to paid travel- either by air or by motor vehicle at 49c a kilometre- to Alice Springs or Darwin two or three times a year, depending on their location. So the benefit is specifically designed to assist these people to get out of these isolated communities two or three times a year. Taken together the dictionary meaning and the apparent intent stated above, 'occasional' in this context means something that occurs from time to time and not at regular intervals, for example two or three times a year. The employee's travel is not considered to be 'occasional' as they made seven return trips by plane which happened at regular intervals, that is each journey occurred at least once a month and always started on a Friday. Accordingly, as the employee's travel is not 'occasional' the fringe benefits are not excluded fringe benefits as specified by paragraph 5E(3)(j) of the FBTAA.", "Date_of_Decision": "24 March 2009", "Year_of_Income": "Year ended 31 March 2009", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 5E(3)(j)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Excluded fringe benefits", "Case_References": "", "Other_References": "Australia, Senate, Debates 29 March 1999, at pp 3442-3445 The Macquarie Dictionary [Multimedia] version 5.0.0 1/1001", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200924", "Unmatched_Content": "Updated to correct business line | Keywords Fringe benefits tax Fringe benefits Excluded fringe benefits"}
{"ATO_ID_Number": "ATO ID 2008/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reportable fringe benefits: pooled or shared cars - where one employee's use of the car is an exempt benefit", "Issue": "Are the fringe benefits provided to an employee, being the private use of a car held by the employer during the year of tax, excluded fringe benefits as prescribed by regulation 8 of the Fringe Benefits Tax Regulations 1992 (FBTR), when a second employee's private use of the same car is an exempt benefit?", "Decision": "Yes. Regulation 8 of the FBTR is satisfied and the fringe benefits provided to the first employee are excluded fringe benefits in relation to the year of tax.", "Facts": "The employer owns and maintains a car which is designed to carry a load of less than one tonne. The employer provides the first employee with the use of the car during the year of tax. The first employee uses the car for travel to and from work and for other private purposes. The benefits that arise through the first employee's use of the car are benefits provided in respect of the employee's employment and are fringe benefits within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). The employer also provides a second employee with the use of the same car during the year of tax. The second employee uses the car for private purposes to travel from work to a home emergency and then returns to work. The benefits that arise through the second employee's use of the car are benefits provided in respect of the employee's employment and are exempt benefits (minor benefits) under section 58P of the FBTAA. These benefits would be fringe benefits except that the benefits are exempt benefits. The year of tax is the year starting on 1 April 2007.", "Reasons_for_Decision": "Summary: Section 5E of the FBTAA determines the employee's individual fringe benefits amount. Excluded from the individual fringe benefits amount are excluded fringe benefits. Benefits which are prescribed for the purposes of paragraph 5E(3)(i) of the FBTAA are excluded fringe benefits. Regulation 8 of the FBTR prescribes benefits relating to pooled or shared cars as being excluded fringe benefits for the purposes of paragraph 5E(3)(i) of the FBTAA. Fringe benefits which are excluded fringe benefits would also not be included in the employee's reportable fringe benefits amount under Part XIB of the FBTAA. In general terms, the exclusion prescribed by regulation 8 of the FBTR for pooled or shared cars is available from 1 April 2007 where a car held by an employer is used by two employees during the year of tax, where each employee is provided with: Where such a pooled or shared use exists during the year of tax the benefits are excluded fringe benefits for both employees. Regulation 8 of the FBTR provides: 8(1) For paragraph 5E(3)(i) of the Act, a car benefit is prescribed if: (a) the benefit: (i) is a car fringe benefit; or (ii) would be a car fringe benefit if it were not an exempt benefit; and Subregulation 8(1)(a)(i) of the FBTR requires the benefit to be a 'car benefit' as described in subsection 7(1) of the FBTAA. The term 'car benefit' is defined in subsection 136(1) of the FBTAA and means a benefit referred to in subsection 7(1) of the FBTAA. Under subsection 7(1) of the FBTAA, a car benefit will arise at any time on a day in respect of the employment of an employee where a car is held by the employer and is applied to a private use by the employee or is taken to be available for the private use of the employee. Subsection 136(1) of the FBTAA and subsection 995-1(1) of the Income Tax Assessment Act 1997 provides: car means a *motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers. During the year of tax, the car is held by the employer and is applied to a private use by the first and second employees. The benefits provided to both employees are benefits which are car benefits under subsection 7(1) of the FBTAA. The benefits provided to the first employee are fringe benefits within the meaning of subsection 136(1) of the FBTAA. These benefits satisfy subregulation 8(1)(a)(i) of the FBTR. The benefits provided to the second employee are benefits which are exempt benefits under section 58P of the FBTAA and would be fringe benefits within the meaning of subsection 136(1) of the FBTAA except that the benefits are exempt benefits. These benefits satisfy subregulation 8(a)(ii) of the FBTR. The car benefits provided to the first employee relates to a car, the provision of which gives rise to the benefit described in subregulation 8(1)(a) of the FBTR for more than one employee. Subregulation 8(1)(b) of the FBTR is satisfied and the fringe benefits are excluded fringe benefits under subregulation 8(2)of the FBTR. The year of tax is a year commencing after 31 March 2007. Subregulation 8(2)(b) of the FBTR is satisfied. Regulation 8 of the FBTR is satisfied and the fringe benefits provided to the first employee, being the private use of the car by the employee, are excluded fringe benefits in relation to the year of tax.", "Date_of_Decision": "18 December 2007", "Year_of_Income": "FBT year ended 31 March 2008", "Legislative_References": "Fringe Benefits Tax Regulations 1992 Regulation 8 Subregulation 8(1)(a) Subregulation 8(1)(a)(i) Subregulation 8(1)(a)(ii) Subregulation 8(1)(b) Subregulation 8(2) Subregulation 8(2)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car fringe benefits Excluded fringe benefits FBT car fringe benefit Fringe benefits Fringe benefits tax Reportable fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200821", "Unmatched_Content": "An employer makes one car available to 3 employees, for private use, at different times during the year of tax. | Updated to correct business line | Substitute reference to Regulation 3F of the Fringe Benefits Tax Regulations 1992 with reference to Regulation 8 of the Fringe Benefits Tax Regulations 1992. | Keywords Car fringe benefits Excluded fringe benefits FBT car fringe benefit Fringe benefits Fringe benefits tax Reportable fringe benefits"}
{"ATO_ID_Number": "ATO ID 2011/56", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reduction of taxable value: education of children of overseas employees - tutor", "Issue": "Can a spouse of an overseas employee who participates in the Home School Education Program in respect of the full-time education of their child, be a 'tutor' for the purposes of subparagraph 65A(b)(ii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. A spouse of an overseas employee who participates in the Home School Education Program in respect of the full-time education of their child can satisfy the requirements of being a 'tutor' for the purposes of subparagraph 65A(b)(ii) of the FBTAA.", "Facts": "An overseas employee is working for an employer in Australia for a fixed period. The employee's spouse and child also accompany the employee and reside in Australia during this period. The child is home-schooled, that is, education is delivered in the child's home by a parent or guardian through the Home School Education Program. The employee's spouse accepts responsibility for developing, implementing and evaluating their child's learning program. The home schooling meets the requirements for registration with the Board of Studies. As evidence of meeting these requirements, records are kept of the teaching/learning program, time allocated, assessment of achievement and progress and resources used. Parents do not need formal teacher training or teaching experience to be home educators. However, a capacity to plan and provide for the educational needs of the child must be demonstrated. Applications for registration for home schooling are assessed by an Authorised Person during a home visit.", "Reasons_for_Decision": "Summary: Section 65A of the FBTAA applies to reduce the taxable value of certain fringe benefits which meet the costs of the education of children of overseas employees. To qualify for the reduction, a benefit must fulfil a number of conditions. In accordance with paragraph 65A(b) of the FBTAA the full-time education being received by the child must be either: There is no definition of 'tutor' in the FBTAA and as such it takes on its ordinary meaning. The Macquarie Dictionary Online defines 'tutor' as: 4 . a teacher without institutional connections who assists students in preparing for examinations. A 'teacher' in turn is defined in The Macquarie Dictionary Online as: 1 . someone who teaches or instructs, especially as a profession; instructor. Where a parent has been accepted by the Board of Studies for registration as a home schooler and there is a formal Home School Education Program in place, the parent can be considered as 'someone who teaches or instructs' and is therefore a 'tutor' as defined. Evidence of meeting these requirements is provided through records of the teaching/learning program, time allocated, assessment of achievement and progress and resources used under the formal program. Accordingly, it is accepted that a spouse of an overseas employee who participates in the Home School Education Program in respect of the full-time education of their child, is a 'tutor' for the purposes of subparagraph 65A(b)(ii) of the FBTAA.", "Date_of_Decision": "30 June 2011", "Year_of_Income": "Year ended 31st March 2012", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 65A paragraph 65A(b) subparagraph 65A(b)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax FBT employees Overseas employees Reductions of taxable value", "Case_References": "", "Other_References": "The Macquarie Dictionary Online", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201156", "Unmatched_Content": "Minor grammatical changes | Updated to correct business line | Minor formatting and punctuation | Reason for Decision and Other References | 'The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01' reference updated to 'Macquarie Dictionary Online' | Keywords Fringe benefits tax FBT employees Overseas employees Reductions of taxable value"}
{"ATO_ID_Number": "ATO ID 2009/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Entertainment Facility Leasing Expenses: private function room and hotel room expenses", "Issue": "Where the employer reimburses expenses incurred by the employee on leasing or hiring a private function room and hotel room, are the tax-exempt body entertainment benefits, benefits whose taxable values are wholly or partly attributable to entertainment facility leasing expenses and therefore disregarded for the purposes of subsection 5B(1L) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. As the employee has incurred expenses which are entertainment facility leasing expenses, and they have not been provided under a salary packaging arrangement, the tax-exempt body entertainment benefits are disregarded for the purposes of subsection 5B(1L) of the FBTAA.", "Facts": "The employer of the employee is a public hospital. The employee has incurred expenses on hiring a private function room at a club for a family celebration. The employee also incurred accommodation costs for the exclusive use of a hotel room in a hotel whilst travelling on holidays. The employer reimburses the employee for the expenses incurred in hiring the private function room and for the expenses incurred for the use of the hotel room. These reimbursements are not provided under a salary packaging arrangement. No part of the expenses are for the provision of food or drink, or advertising. During the holiday travel, the employee was not otherwise travelling on work related purposes.", "Reasons_for_Decision": "Summary: For employers that are public hospitals subject to the provisions of section 57A of the FBTAA, benefits provided to employees whose taxable values are wholly or partly attributable to entertainment facility leasing expenses, and not provided under a salary packaging arrangement, are not subject to fringe benefits tax because of the interaction between subsection 57A(3), subsection 5B(1L) and subsection 5E(3) of the FBTAA. Step 1 of the method statement in subsection 5B(1L) specifically disregards these benefits for the purposes of calculating the employee's subsection (1L) amount where they have not been provided under a salary packaging arrangement. The effect is that these benefits remain exempt from fringe benefits tax and do not form part of the fringe benefits tax capping threshold in respect of an employee of an employer that is a public hospital. The phrase 'whose taxable values are wholly or partly attributable to entertainment facility leasing expenses' (or words to the same effect) appears in subsection 5B(1L), subsection 5E(3) and section 152B of the FBTAA. Under subsections 5B(1L) and 5E(3) these expenses can be incurred by a person. This can include expenses incurred by the employer or by the employee. However, under section 152B the expenses that are taken into account are limited to those expenses incurred by the employer. The benefits provided to the employee are tax-exempt body entertainment benefits being the reimbursement of the employee's expenses. If section 57A of the FBTAA did not apply the benefit would also be a fringe benefit. The taxable value of the tax-exempt body entertainment benefits would have been the amount of the reimbursement. The taxable value would have been wholly or partly attributable to the employee's expenses. If the employee's expenses are entertainment facility leasing expenses that have not been provided under a salary packaging arrangement, the taxable value of the tax-exempt body entertainment benefits will be disregarded in determining the employee's subsection (1L) amount in accordance with the method statement in subsection 5B(1L) of the FBTAA. Subsection 136(1) of the FBTAA defines 'entertainment facility leasing expenses': entertainment facility leasing expenses , for a person, means expenses incurred by the person in hiring or leasing: (a) a corporate box; or (b) boats, or planes, for the purpose of the provision of entertainment; or (c) other premises, or facilities, for the purpose of the provision of entertainment; There are a number of requirements that must be satisfied in considering whether expenses incurred satisfy the definition of 'entertainment facility leasing expenses'. | Detailed Reasoning - Hiring or leasing: Under the definition of 'entertainment facility leasing expenses', an expense must be incurred by the person in 'hiring or leasing ...' As the word 'hiring' is not defined in the FBTAA it has its natural meaning, taken in the context in which it appears in the legislation. The Macquarie Dictionary (Multimedia version 5.0.0) defines 'hire' as: verb (t) (hired, hiring) 1. to engage the services of for payment: to hire a clerk. 2. to engage the temporary use of for payment: to hire a car. 3. Also, hire out. Subsection 136(1) of the FBTAA defines 'leased': means let on hire (including a letting on hire that is described in the relevant agreement as a lease) under an agreement other than a hire-purchase agreement. The employee has incurred expenses in return for the temporary use of the private function room in a club which accords with the dictionary definition of 'hire'. The employee has incurred expenses on obtaining the exclusive use of a hotel room in a hotel which accords with the dictionary definition of 'hire' and with the FBTAA definition of 'leased'. In these circumstances the expenses incurred by the employee in relation to the private function room and hotel room fall within 'hiring or leasing' in the definition of 'entertainment facility leasing expenses'. | Detailed Reasoning - Other Premises or facilities: Under the definition of 'entertainment facility leasing expenses', the hire or lease must be of a corporate box, boat, plane or other premises or facilities ... As the words 'premises' or 'facilities' are not defined in the FBTAA they have their natural meaning, taken in the context that they appear in the legislation. The words 'premises' and 'facility are defined in the Macquarie Dictionary to mean: premise noun 2. (plural) the property forming the subject of a conveyance. a tract of land. a house or building with the grounds, etc., belonging to it. facility noun (plural facilities) 9. a building or complex of buildings, designed for a specific purpose, as for the holding of sporting contests. In this case the employee has hired a single room in a hotel or club but has not hired the hotel or club in its entirety. Accordingly, there is a difficulty in determining whether the employee has hired premises or a facility by reference to the dictionary meaning which only refers to a property, house and grounds or a specific purpose building. Additionally, the legislative reference to boats or planes would not ordinarily be considered as a (type of) premises or facility. Taxation Laws Amendment (FBT Cost of Compliance) Bill 1995 introduced subsection 136(1) of the FBTAA definition of 'entertainment facility leasing expenses' and introduced section 152B of the FBTAA. The Explanatory Memorandum to that Bill describes the new arrangement as being: ...applied to leasing or hiring costs of corporate boxes and other similar hospitality arrangements... It is considered that the use of the words 'other premises or facility' derives meaning ejusdem generis as having similar characteristics to a corporate box. Hiring or leasing of a corporate box would generally only involve the hiring or leasing of part of premises or a facility. For example, the corporate box is only part of a sporting stadium complex. However, a corporate box is a separate or distinct area or room which is in fact able to be hired as a separate room or distinct area. The hiring or leasing of a separate room or distinct area for other hospitality purposes such as an end of year corporate event at a city hotel would be considered similar to a corporate box arrangement. It is considered that these would be premises or facilities for the purposes of the definition of 'entertainment facility leasing expenses'. When a private function room in a club or a separate hotel room at a hotel have been leased or hired, they will be premises or facilities for the purposes of the definition of 'entertainment facility leasing expenses'. | Detailed Reasoning - Provision of entertainment: Under the definition of 'entertainment facility leasing expenses' the expenses incurred in hiring or leasing the premises or facilities must be 'for the purpose of the provision of entertainment'. Subsection 136(1) of the FBTAA defines 'entertainment': entertainment has the meaning given by section 32-10 of the Income Tax Assessment Act 1997 . Subsection 32-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that 'entertainment' means: Subsection 995-1 of the ITAA 1997 provides the meaning of 'recreation': recreation includes amusement, sport or similar leisure-time pursuits. In relation to the private function room a relevant question to consider under paragraph 32-10(1)(a) of the ITAA 1997 is whether the use of the room is for the purposes of providing entertainment by way of recreation. While 'recreation' is defined the words 'entertainment by way of recreation' are not defined. As these words are not defined, they have their natural meaning, taken in the context in which they appear in the legislation The word 'entertainment', which is key to the operation of the relevant words, is defined in the Macquarie Dictionary to mean: As the private function room has been used for a family celebration, the use of the private function room is a leisure-time pursuit. This is 'recreation' as defined in the ITAA 1997. This use of the room is also something affording diversion or amusement and is entertainment within the natural meaning. The use of the private function room is entertainment by way of recreation under paragraph 32-10(1)(a) of the ITAA 1997. The use of the private function room for a family celebration does not fall within paragraph 32-10(1)(b) of the ITAA 1997 because the private function room is not accommodation. In relation to the use of the hotel room whilst the employee is travelling on a holiday and is not on work related duties, paragraph 32-10(1)(a) of the ITAA 1997 must also be considered. The use of the hotel room whilst on holidays is a leisure-time pursuit which is 'recreation' as defined in the ITAA 1997. This use of holiday accommodation is something affording diversion or amusement and will be entertainment within the natural meaning. The use of the hotel room is entertainment by way of recreation under paragraph 32-10(1)(a) of the ITAA 1997. Alternatively, a hotel room occupied whilst on holidays is accommodation. Such accommodation can fall within 'entertainment' under paragraph 32-10(1)(b) of the ITAA 1997, being accommodation to do with providing entertainment by way of recreation. Further, Taxation Determination TD 94/55: Income tax: when does providing an item of property constitute the provision of entertainment within the meaning of subsection 51AE(3) of the Income Tax Assessment Act 1936 ?, states that in determining whether providing an item of property constitutes entertainment, regard should be had to all the circumstances of the case. In particular, regard should be given to the character of the entertainment to be derived from the item of property provided. Specifically, in Example 2 in TD 94/55, costs incurred in providing holiday accommodation are incurred in providing property that would constitute the provision of entertainment. When the employee incurs expenses in hiring or leasing a private function room or a hotel room those expenses are incurred for the purposes of the provision of entertainment as entertainment is defined in subsection 136(1) of the FBTAA 1986 and section 32-10 of the ITAA 1997. As required in the definition of 'entertainment facility leasing expenses' those expenses are not attributable to food or drink, or advertising. The expenses incurred by the employee on hiring or leasing the private function room and the hotel room are 'entertainment facility leasing expenses' as defined in subsection 136(1) of the FBTAA. As the employer has reimbursed the employee's expenses, the tax-exempt body entertainment benefits would have a taxable value (but for section 57A of the FBTAA) which is wholly or partly attributable to entertainment facility leasing expenses. As the tax-exempt body entertainment benefits have not been provided under a salary packaging arrangement, they are disregarded for the purposes of subsection 5B(1L) of the FBTAA. Note - The Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015 made changes to the FBTAA to limit the concessional fringe benefits tax treatment of entertainment benefits provided under a salary packaging arrangement. These amendments provide that from 1 April 2016 the method statement in subsection 5B(1L) no longer disregards the provision of meal entertainment or entertainment facility leasing expenses provided under a salary packaging arrangement. However, the amendments also introduced a separate cap for employers subject to the provisions of section 57A such that salary packaged entertainment benefits will continue to be exempt from fringe benefits tax where the grossed-up taxable value of these benefits do not exceed $5,000 for an employee in a FBT year. The amount of those benefits exceeding that separate cap will be included in calculating if the value of all benefits an employee receives exceeds the general exemption or rebate caps. See Chapter 6.5 of the Fringe Benefits Tax - A Guide for Employers (QC 16123) or the FBT changes to salary packaged meal and other entertainment benefits fact sheet (QC 48052) for further information on these changes.", "Date_of_Decision": "23 June 2009", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 5B(1L) subsection 5E(3) section 23 section 57A subsection 57A(3) subsection 136(1) section 152B", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/55", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Entertainment expenses Entertainment facility leasing expenses Excluded fringe benefits Exempt benefits Tax-exempt body entertainment fringe benefits FBT entertainment FBT expense payment Fringe benefit Fringe benefits tax", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (FBT Cost of Compliance) Bill 1995 Explanatory Memorandum to the Taxation Laws Amendment (2015 Measures No. 5) Bill 2015 Macquarie Dictionary (Multimedia version 5.0.0)", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200945", "Unmatched_Content": "This ATO ID was amended by replacing the reference to 'expense payment benefits' to ' tax-exempt body entertainment benefits This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | to grant the temporary use of, or the services of, for a payment. | Minor grammatical adjustments | Updated to correct business line | Amended to take into account legislative changes to the provision of entertainment facility leasing expenses under a salary packaging arrangement applying from 1 April 2016. | Related Public Rulings (including Determinations) Taxation Determination TD 94/55 | Keywords Entertainment expenses Entertainment facility leasing expenses Excluded fringe benefits Exempt benefits Tax-exempt body entertainment fringe benefits FBT entertainment FBT expense payment Fringe benefit Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2009/159", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employer's fringe benefits taxable amount: change in employer's status from endorsed public benevolent institution to a hospital", "Issue": "For the purposes of subsection 5B(1E) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) where the employer's status changes during the FBT year from being a public benevolent institution (PBI) that is endorsed, to that of a hospital that is not endorsed: will the employer remain entitled to the $30,000 capped exemption for each employee who was employed both before and after this change while being provided with benefits throughout the FBT year?", "Decision": "Yes. Under subsection 5B(1E) of the FBTAA, the employer will remain entitled to the $30,000 capped exemption for each employee who was employed both before and after the change while being provided with benefits throughout the FBT year.", "Facts": "The employer is an entity carried on by a non-profit society. For the first part of the FBT year the employer had two business activities: the operation of an aged care facility and the operation of a hospital. During this period the predominant activity of the employer was the provision of aged care. As a result, the employer was a PBI that was not a hospital. Midway through the FBT year the aged care facility was sold and the employer's activities from that day were only in relation to carrying on a hospital. From that day, the employer was a hospital carried on by a non-profit society (the second part of the FBT year). Those employees who were attached to the hospital before the sale of the aged care facility continued in their employment with the employer for the remainder of the FBT year. These employees were provided with benefits throughout the FBT year. In a previous FBT year the employer entity was endorsed by the Commissioner as a PBI under subsection 123C(1) of the FBTAA. The entity remained endorsed for the first part of the FBT year. With effect from the commencement of the second part of the FBT year the entity's endorsement as a PBI under subsection 123C(1) of the FBTAA was revoked by the Commissioner. The revocation occurred as the entity became an employer to which step 2(d) of the method statement in subsection 5B(1E) of the FBTAA commenced to apply. As a result the entity was no longer entitled to be endorsed as a PBI under subsection 123C(2) of the FBTAA.", "Reasons_for_Decision": "Summary: The employer was for the first part of the FBT year an endorsed PBI for the purposes of subsection 57A(1) of the FBTAA. The employer was for the second part of the FBT year a hospital carried on by a society or association that meets the requirements of subsection 57A(4) of the FBTAA. Benefits provided during the FBT year by the employer to its employees were exempt under section 57A of the FBTAA. Subsection 5B(1D) of the FBTAA requires an adjustment to be made to an employer's fringe benefits taxable amount for the year of tax where benefits have been provided to an employee in respect of their employment which are exempt benefits under section 57A of the FBTAA. Subsection 5B(1D) of the FBTAA requires that the employer's fringe benefits taxable amount is increased by the employer's 'aggregate non-exempt amount' for the year of tax. The aggregate non-exempt amount for the year of tax is determined under the method statement in subsection 5B(1E) of the FBTAA. Step 1 of the method statement determines the 'individual grossed-up non-exempt amount' for each employee. Step 2(d) of the method statement, which is relevant in these circumstances, requires for each employee's individual grossed-up non-exempt amount to determine whether the employer is a hospital described in subsection 57A(4) of the FBTAA. If step 2(d) is satisfied, the individual grossed-up non-exempt amount is reduced by $17,000. Where step 2 of the method statement does not apply, step 3 will apply to reduce the employee's individual grossed-up non-exempt amount by $30,000 [see Note]. From 1 April 2016, if any amount remains from the calculation under either step 2 or 3, step 4 may apply to further reduce the employee's individual grossed-up non-exempt amount (but not below zero) by the lesser of $5,000 and the grossed-up taxable value of any salary packaged meal entertainment and entertainment facility leasing benefits provided to an employee. Step 5 of the method statement adds together the amounts calculated under step 4 in relation to the employees of the employer. The total amount ascertained at step 5 is the employer's aggregate non-exempt amount for the year of tax concerned. In this case, the effect of the employer being endorsed as a PBI for the first part of the FBT year and being a hospital for the second part is that the step 1 individual grossed-up non-exempt amount for the year of tax may consist of two categories of benefits received by an employee: For an employee who only received benefits in relation to their employment in the first part of the FBT year, such as an employee who resigned from the employer during that first part, all benefits provided to that employee would be benefits received as a result of the employer being an endorsed PBI which is not a hospital carried on by a society or association that meets the criteria in subsection 57A(4) of the FBTAA. The step 1 amount for this employee is an amount to which step 2(d) would not apply. For this employee, step 3 of the method statement will apply to reduce the individual grossed-up non-exempt amount by $30,000. For an employee who only received benefits in relation to their employment in the second part of the FBT year, such as an employee who commenced employment at any time during that second part, all benefits provided to that employee would be benefits received as a result of the employer being a hospital described in subsection 57A(4) of the FBTAA. The step 1 amount for this employee is an amount to which step 2(d) would apply. For this employee, Step 2 of the method statement will apply to reduce the individual grossed-up non-exempt amount by $17,000. However, as described in the facts, employees were employed by the same employer during the first part of the FBT year when it was a PBI which was not a hospital and during the second part of the FBT year when it was a hospital. These employees were provided with benefits throughout the FBT year. In these circumstances, the step 1 amount for these employees cannot be described as an amount where the employer was a hospital as described in subsection 57A(4) of the FBTAA for the year of tax: Step 2 does not apply. For these employees, Step 3 of the method statement will apply to reduce the individual grossed-up non-exempt amount by $30,000. Accordingly, under subsection 5B(1E) of the FBTAA, the employer will remain entitled to the $30,000 capped exemption for each employee who was employed both before and after the employer's change in status while being provided with benefits throughout the FBT year.", "Date_of_Decision": "14 December 2009", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 5B subsection 5B(1B) subsection 5B(1C) subsection 5B(1D) subsection 5B(1E) section 57A subsection 57A(1) subsection 57A(4) subsection 123C(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Exempt benefits FBT Public Benevolent Institutions FBT tax-exempt body Aggregate non-exempt amount", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009159", "Unmatched_Content": "This ATO ID has been updated to take into account the amendments to the method statement in subsection 5B(1E) enacted under the Tax and Superannuation Laws Amendment (2015 Measures No 5) Act 2015 with effect from 1 April 2016. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated to take into account amendments to 'societies and associations' in subsection 57A(4) enacted under Treasury Laws Amendment (2022 Measures No. 1) Act 2022 . | Updated to correct business line | Updated to take into account the amendments to the method statement in subsection 5B(1E) enacted under the Tax and Superannuation Laws Amendment (2015 Measures No 5) Act 2015 . | Keywords Fringe benefits tax Exempt benefits FBT Public Benevolent Institutions FBT tax-exempt body Aggregate non-exempt amount"}
{"ATO_ID_Number": "ATO ID 2005/210", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee contributions: excess contributions used in a later FBT year", "Issue": "If an employee makes contributions to an employer from after-tax salary income, that are in excess of the recipient's payment required to reduce the taxable value of a car fringe benefit to nil under subparagraph 9(2)(e)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), can those excess amounts be applied to a fringe benefit provided in a later FBT year?", "Decision": "Yes. Where there is a remuneration agreement in place between the employer and employee to make recipient's payments under subparagraph 9(2)(e)(i) of the FBTAA to the extent of the taxable value of the fringe benefit, excess amounts may be set aside for a later FBT year.", "Facts": "An employer has a salary sacrifice arrangement (SSA) in place with an employee, under which the employee is provided with the use of a car. The employer chooses to use the statutory formula method of calculating the taxable value of car fringe benefits for this car. Under a separate remuneration arrangement, the employee agrees to make recipient's payments, being from after-tax salary income, to the extent of reducing the taxable value of any car fringe benefits to nil. The employee makes contributions to the employer that are in excess of the amount required to reduce the taxable value of the car fringe benefits to nil. Under the remuneration arrangement the excess amount of contributions paid by the employee are held by the employer until the following FBT year, when they can be applied against the taxable value of the employee's car fringe benefits in that year.", "Reasons_for_Decision": "Summary: Under subsection 9(1) of the FBTAA the taxable value of car fringe benefits calculated under the statutory formula method, can be reduced by the amount of the recipient's payment. Subparagraph 9(2)(e)(i) of the FBTAA then explains that the recipient's payment is the amount of the consideration paid to the employer by the employee in respect of the provision of the car fringe benefits. Where a remuneration arrangement entered into between an employer and employee requires that the employee makes contributions, from after-tax salary income, to the extent of reducing the taxable value of any car fringe benefits to nil, only these amounts can be regarded as consideration for the provision of the car fringe benefits, due to the remuneration agreement that is in place. Amounts that are paid to the employer in excess of these amounts are not recipient's payments in this year, and can be either refunded to the employee, or dealt with as agreed between the employer and employee, including being set aside for a later FBT year.", "Date_of_Decision": "9 March 2005", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 9(1) paragraph 9(2)(e)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT employee contributions Fringe benefits tax Recipients contributions Recipients payment", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005210", "Unmatched_Content": "Updated to correct business line and punctuation | Keywords FBT employee contributions Fringe benefits tax Recipients contributions Recipients payment"}
{"ATO_ID_Number": "ATO ID 2001/758", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax - Recipients Contribution", "Issue": "Whether an employer who pays the income tax liability of an expatriate employee is able to treat the employee's income tax refund as a \"recipient's contribution\" under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Decision": "No. A refund of the expatriate employee's income tax, paid by the employer, is not a \"recipients contribution\" under subsection 136(1) of the FBTAA. However, the refund will reduce the taxable value of the residual fringe benefit that arose from the payment of the employee's income tax under section 50 of the FBTAA.", "Facts": "The employer was the host entity of a number of expatriate employees. The expatriate employees were remunerated on a net salary basis with the host entity paying the employee's income tax obligations. A formal agreement with the expatriate employees provided for income tax refunds to be returned to the host entity. No tax instalments were deducted from salary paid to the expatriate employee, but provisional tax instalments were paid. The employer received an income tax refund from the final income tax return lodged by the expatriate employee.", "Reasons_for_Decision": "Summary: The term \"recipients contribution\" is defined in subsection 136(1) of the FBTAA as the amount of any consideration paid to the employer in respect of the provision of the recipients benefit. A refund resulted from the lodgement of the final income tax return of the employee as the provisional tax instalments paid exceeded the employee's income tax liability for the year. The refund does not constitute consideration paid by the employee to the employer, so it will not be a \"recipients contribution\". However, the income tax refund will reduce the taxable value of the residual fringe benefit that arose from the payment of the employee's income tax liability under section 50 of the FBTAA.", "Date_of_Decision": "2 November 2001", "Year_of_Income": "Year ended 31 March 1998", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1) section 50", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Expense payment fringe benefits Residual fringe benefits Double tax agreements Objections Overseas employees", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001758", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated to remove the reference to tax treaties because they are not mentioned in the reasoning for this ATO ID. | Minor punctuation and formatting amendments | Keywords Fringe benefits tax Expense payment fringe benefits Residual fringe benefits Double tax agreements Objections Overseas employees"}
{"ATO_ID_Number": "ATO ID 2012/94", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Associate: authority of the State", "Issue": "Is the employer, a local government council, an 'authority of the State' for the purposes of the extended definition of 'associate' in subsection 159(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The employer is an 'authority of the State' for the purposes of subsection 159(2) of the FBTAA as the employer has been given the power by the State to direct and control the affairs of the people within its jurisdiction on behalf of the State and in the interests of the community.", "Facts": "The employer is a local government council. It has the power under an Act of Parliament of a State to make local laws for and otherwise ensure the good rule and local government of the territory within its jurisdiction. The functions and powers given to the employer under State legislation are matters within the constitutional power of the State and the employer can only do something that the State can validly do. State laws prevail over local laws to the extent of any inconsistency. The State, through the relevant Minister ('the Minister'), can suspend or revoke a local law if the Minister believes the law is contrary to or inconsistent with local government principles (such as transparent decision-making, good governance and ethical and legal behaviour). Before making certain local laws, the employer must consult with relevant Government entities about the overall State interest in the proposed law and give the Minister a copy of the proposed law. When a local law is made, the employer must give the Minister a copy of the law. The Minister can gather information to evaluate whether the employer is performing its responsibilities properly. If not, the Minister can take remedial action. The employer's borrowings are subject to approval by the State, and the State is required to audit the employer. The State is not subject to rates and charges which are levied on rateable land.", "Reasons_for_Decision": "Summary: All legislative references are to the FBTAA unless otherwise stated. Subsection 159(2) extends the generality of the expression 'associate' for the purposes of the FBTAA. In particular, paragraph 159(2)(d) deems a State to be an associate of each authority of the State. The phrase 'authority of the State' is not defined in the FBTAA. However, a number of decided cases have considered the meaning of 'authority of a State' and 'authority'. In Committee of Direction of Fruit Marketing v. Australian Postal Commission (1980) 144 CLR 577 (the Fruit Marketing case) the High Court unanimously decided that the Committee of Direction of Fruit Marketing was an authority of the State of Queensland for the purposes of the Postal Services Act 1975 . Gibbs J stated at 580: The expression \"authority of a State\" refers to a body which exercises power derived from or delegated by the State, but the fact that a body is established under State law and possesses power conferred upon it by State law will not necessarily mean that the body is an authority of a State...The words \"authority of a State\" naturally mean a body which is given by the State the power to direct or control the affairs of others on behalf of the State - ie, for the purposes of and in the interests of the community or some section of it. In some cases it may be decisive that the body concerned is given exceptional powers of a kind not ordinarily possessed by an individual or a company, and that those powers are intended to be exercised for a purpose that would ordinarily be regarded as a purpose of government. On the other hand, in some cases it may be decisive that the body is conducted in the interest, and for the profit, of its members. In all cases, however, it is necessary to have regard to all the relevant circumstances in order to determine the character of the body in question. In FC of T v. Bank of Western Australia Ltd ; FC of T v. State Bank of New South Wales Ltd 96 ATC 4009; (1995) 133 ALR 599 the meaning of the word 'authority' was considered in the context of the phrase 'the official use,... and not for sale by,... an authority which is completely controlled by,... a State' in the Sales Tax (Exemptions and Classifications) Acts 1935 and 1992 was considered by the Full Federal Court. In that case Hill J looked at a number of Australian cases as to the meaning of the word 'authority'. He derived the following propositions from those cases: In this case, the functions and powers given to the employer under the State legislation are matters within the constitutional power of the State. Under the State legislation the employer has been given the power to direct and control the affairs of the people within its jurisdiction in the interests of the community. Having regard to the degree of control over the employer exercisable by the State, it is considered that the employer is an instrument of the State and that the employer is exercising its powers on behalf of the State. The State, through the Minister, has the power to revoke or suspend a local law. State laws prevail over local laws to the extent of any inconsistency. Before making certain local laws the employer must consult with relevant Government entities about the overall State interest and provide the Minister with a copy of the proposed law. When a local law is made the employer must provide the Minister with a copy of the law. The Minister can gather information to evaluate whether the employer is performing its responsibilities properly and, if not, the Minister can take remedial action. The employer's borrowings are subject to approval by the State and the State is required to audit the employer. The State is not subject to rates and charges which are levied on rateable land. Further, the powers granted to the employer by the State are exceptional powers of a kind not ordinarily possessed by an individual or a company and are intended to be exercised for a purpose that would ordinarily be regarded as a purpose of government. Therefore, it is considered that the employer is 'an authority of the State' for the purposes of the extended definition of 'associate' in subsection 159(2).", "Date_of_Decision": "9 November 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 159(2) paragraph 159(2)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Associate FBT associates Fringe benefits Fringe benefits tax", "Case_References": "Committee of Direction of Fruit Marketing v Australian Postal Commission (1980) 144 CLR 577 [1980] HCA 23", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201294", "Unmatched_Content": "Updated to correct business line | Keywords Associate FBT associates Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2011/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed dividend: No FBT on a Division 7A shareholder loan where distributable surplus is nil", "Issue": "Will the paragraph (r) exclusion from the definition of 'fringe benefit' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) preclude a loan from being a loan fringe benefit where the loan is taken to be a dividend, but the amount is reduced to nil in accordance with section 109Y of Division 7A of Part III (Division 7A) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The paragraph (r) exclusion from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA will preclude a loan from being a loan fringe benefit where the loan is taken to be a dividend, but the amount is reduced to nil in accordance with section 109Y of the ITAA 1936.", "Facts": "The taxpayer is a shareholder and an employee of the private company employer. The private company lent an amount to the shareholder in respect of their employment during the 2008-09 income year which has not been fully repaid before the private company's lodgment day for the year ended 30 June 2009. The taxpayer was a shareholder at the time the loan was made. The loan is subject to Division 7A of the ITAA 1936 and is not of a type that would come within Subdivision D of Division 7A. The private company's distributable surplus is nil for the year ended 30 June 2009.", "Reasons_for_Decision": "Summary: Fringe Benefits Tax (FBT) will apply to loan benefits provided to employees (as defined in subsection 16(1) of the FBTAA) that are otherwise fringe benefits. The paragraph (r) definition of 'fringe benefit' in subsection 136(1) of the FBTAA states that a 'fringe benefit' does not include: anything done in relation to a shareholder in a private company (as those terms are defined in section 6 of the Income Tax Assessment Act 1936 ), or an associate of such a shareholder, that causes (or will cause) the private company to be taken under Division 7A of Part III of that Act to pay the shareholder or associate a dividend. Under subsection 109D(1) of the ITAA 1936 an amount lent by a private company to a shareholder during the current year is taken to be a dividend for the purposes of Division 7A if the loan is not fully repaid before the private company's lodgment day for that income year, and Subdivision D of Division 7A of the ITAA 1936 does not otherwise prevent the private company from being taken to have paid a dividend to the shareholder. Under subsection 109D(1AA) of the ITAA 1936 the amount of the dividend taken to have been paid is the amount of the loan that has not been repaid before the private company's lodgment day for the current year, subject to section 109Y of the ITAA 1936. Section 109Y of the ITAA 1936 limits the total amount of dividends taken to have been paid by the private company under Division 7A of the ITAA 1936 to the company's distributable surplus as at the end of its year of income. In this case the private company has made a loan to the shareholder which is taken to be a dividend under section 109D of the ITAA 1936, and the amount of the dividend is reduced to nil because the company has a nil distributable surplus for the year ended 30 June 2009. However, the private company is still taken to pay a dividend to the shareholder under subsection 109D(1) of the ITAA 1936. It is only the amount of the dividend under subsection 109D(1AA) of the ITAA 1936 which is affected by the private company's distributable surplus. Accordingly, the paragraph (r) exclusion from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA precludes the loan from being a loan fringe benefit for the year ended 31 March 2010.", "Date_of_Decision": "3 November 2010", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A Division 7A, Subdivision D section 6 section 109D subsection 109D(1) subsection 109D(1AA) section 109Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Deemed dividends Dividend income Fringe benefits tax Loan fringe benefits FBT shareholder loans Private companies Private company distributions Shareholder loans", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201133", "Unmatched_Content": "Keywords Companies Deemed dividends Dividend income Fringe benefits tax Loan fringe benefits FBT shareholder loans Private companies Private company distributions Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2010/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Third party recipient deemed to be an associate: friend of an employee", "Issue": "Will benefits provided by an employer to its employee's friend be fringe benefits as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 ( FBTAA)?", "Decision": "Yes. The benefits provided by the employer to its employee's friend are fringe benefits as defined in subsection 136(1) of the FBTAA as all of the requirements of the definition are satisfied including that the friend is an associate of the employee.", "Facts": "By reason of the employment relationship between the employer and an employee, an agreement is entered into whereby the employer provides the employee's friend (who is not an employee) with the ongoing use of a car. The car is owned and maintained by the employer. Each use of the car by the employee's friend is a 'benefit' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: A 'fringe benefit' is defined in subsection 136(1) of the FBTAA as being a benefit that is provided by an employer or associate of the employer, to an employee or an associate of the employee, in respect of the employment of the employee. On the basis that the other requirements of the definition of 'fringe benefit' have been satisfied, provided that the friend qualifies as an associate of the employee, the benefits will be fringe benefits. | Detailed Reasoning - Subsection 136(1) of the FBTAA 'associate' defined: Subsection 136(1) of the FBTAA provides a definition of 'associate'. 'Associate' has the same meaning in relation to a person as that expression has in relation to a person in section 318 of the Income Tax Assessment Act 1936 ( ITAA 1936). Section 318 of the ITAA 1936 covers a broad range of entities that are associates of natural persons, companies, partnerships and trustees. The term 'associate' includes relatives, partners, trustees and beneficiaries, and related companies. Therefore, consideration has to be given as to whether a friend is a 'relative' of the employee as a friend does not fall within any other class of 'associate' contained within section 318 of the ITAA 1936. Section 318 of the ITAA 1936 provides that a 'relative' of a natural person will be an 'associate' of that person, The definition of 'relative' for the purpose of section 318 of the ITAA 1936 is the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 ( ITAA 1997), that is; relative of a person means: (a) the person's *spouse; or (b) the parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendent or *adopted child of that person, or of that person's spouse; or (c) the spouse of a person referred to in paragraph (b). The FBTAA also contains a definition of 'relative' in subsection 136(1). This definition states that 'relative' also has the meaning given by subsection 995-1(1) of the ITAA 1997. Notwithstanding the wide meaning of 'relative' given above a friend does not fall within this definition. As a 'friend' does not fall within any class of 'associate' contained within section 318 of the ITAA 1936, the friend is not an 'associate' of the employee as defined in subsection 136(1) of the FBTAA. | Detailed Reasoning - Subsection 148(2) of the FBTAA 'third party recipient' deemed to be an 'associate': However, subsection 148(2) of the FBTAA provides an additional class or category of 'associate' by way of a deeming provision which also needs to be considered. Subsection 148(2) of the FBTAA deems a third party to be an 'associate' of an employee where the third party receives a benefit provided under an 'arrangement' between the employer and the employee. An 'arrangement' is defined in subsection 136(1) of the FBTAA and includes agreements, arrangements and promises. As the employee and the company have an agreement in place which recognises that the friend has the use of the company car. There is an 'arrangement' in place between the employer and the employee. Consequently, the friend is deemed to be an 'associate' of the employee under subsection 148(2) of the FBTAA. The benefits provided by the employer to the friend are therefore benefits provided to an 'associate' of the employee. This broad position was supported by the Full Federal Court decision in J & G Knowles and Associates Pty Ltd v. Commissioner of Taxation ( 2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22. At paragraph 15 of the decision, the following is stated: By s 148(2) where a benefit is provided to a person, other than the employee or an associate of the employee, under an agreement between the provider and the employee, the recipient shall be deemed an associate. Accordingly, the benefits provided by the employer to its employee's friend are fringe benefits as defined in subsection 136(1) of the FBTAA as all of the requirements of the definition are satisfied including that the friend is an associate of the employee.", "Date_of_Decision": "22 April 2010", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1) subsection 148(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits FBT arrangement FBT associates", "Case_References": "J & G Knowles and Associates Pty Ltd v Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201097", "Unmatched_Content": "Minor grammatical adjustments | Updated to correct business line | Keywords Fringe benefits tax Fringe benefits FBT arrangement FBT associates"}
{"ATO_ID_Number": "ATO ID 2010/142", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: indeterminate rights not fringe benefits", "Issue": "Is the grant by a company of indeterminate rights to employees in relation to their employment excluded from the definition of fringe benefit by paragraph 136(1)(f) or 136(1)(h) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The grant of indeterminate rights to employees of a company in relation to their employment is excluded from the definition of fringe benefit by paragraph 136(1)(f) or 136(1)(h) of the FBTAA.", "Facts": "A company operates a scheme under which the company grants rights (indeterminate rights) to its employees in relation to their employment at a discount. The rights granted entitle the employees to acquire:", "Reasons_for_Decision": "Summary: The definition of benefit in subsection 136(1) of the FBTAA includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility. The indeterminate rights come within the definition of 'benefit'. Generally, a benefit provided to an employee by their employer in respect of the employee's employment is a fringe benefit as defined in subsection 136(1) of the FBTAA. However, the definition of 'fringe benefit' does not include: At the time the indeterminate rights are granted it may be considered unclear if paragraph (f) or (h) of the definition of fringe benefit in subsection 136(1) of the FBTAA applies because: Although the indeterminate rights are not ESS interests within the meaning of subsection 83A-10(1) of the ITAA 1997 at the time they are granted, where they are ultimately satisfied with shares instead of cash (or when the number of shares the employee is entitled to receive is determined): Alternatively, where an employee's indeterminate rights are ultimately satisfied with cash instead of shares, the granting of the rights: Therefore, the grant of indeterminate rights to employees of the company in relation to their employment will be excluded from the definition of fringe benefit by either paragraph 136(1)(f) or (h) of the FBTAA.", "Date_of_Decision": "24 June 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1) paragraph 136(1)(f) paragraph 136(1)(h)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Benefit Employee share schemes & options", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010142", "Unmatched_Content": "Keywords Fringe benefits tax Benefit Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2010/219", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefit: shares provided to employees upon exercise of rights granted under an employee share scheme", "Issue": "Will a share provided by a company to an employee to satisfy the exercise of a right, being a right to acquire a share of the company granted under an employee share scheme, be a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The provision of a share to satisfy the exercise of a right granted under an employee share scheme is not a fringe benefit within the meaning of the definition in subsection 136(1) of the FBTAA.", "Facts": "A company grants rights to its employees under an employee share scheme for nil consideration. The rights entitle the employees to acquire shares in the company. The rights are subject to vesting conditions. When the vesting conditions are satisfied, employees can exercise their rights to acquire the shares at no cost. Upon exercise, the company allocates the shares to the employees. Rights acquired by the employees under the employee share scheme are assessed under Division 83A of the Income Tax Assessment Act 1997 .", "Reasons_for_Decision": "Summary: In order for a benefit to be a 'fringe benefit' in accordance with the definition in subsection 136(1) of the FBTAA, the benefit must be provided to an employee or an associate of the employee in respect of the employment of the employee. Thus, in order for the shares issued in respect of the rights to be treated as a fringe benefit they must be provided 'in respect of' the employee's employment. Whilst the expression 'in respect of' has no fixed meaning, it has been considered by the courts in various statutory contexts. In J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22, the full Federal Court in examining its meaning in relation to Fringe Benefits Tax (FBT) noted that: ... what must be established is whether there is a sufficient or material, rather than a causal connection or relationship between the benefit and the employment... The Court also suggested that it would be useful to ask, 'whether the benefit is a product or incident of the employment'. In FC of T v. McArdle (1988) 89 ATC 4051; (1988) 19 ATR 1901, an employee was granted valuable rights in respect of his employment which he subsequently surrendered in return for a lump sum payment. The Court ruled that what had occurred under the surrender agreement was not the granting of a valuable benefit, but the exploitation of rights received from the employer in previous years. When rights granted under an employee share scheme are exercised, and shares are allocated by the employer, it is considered that the benefit that arises comes as a consequence of the employee exercising the rights previously obtained under the scheme, and not in respect of employment. Therefore, the benefit gained by the employee upon the exercise of rights granted under the employee share scheme does not give rise to a fringe benefit, as no benefit has been provided to the employee in respect of an employment relationship.", "Date_of_Decision": "23 November 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits In respect of employment Employee share schemes & options", "Case_References": "J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010219", "Unmatched_Content": "Minor grammatical changes | Updated to correct business line | Keywords Fringe benefits tax Fringe benefits In respect of employment Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2007/194", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: definition of 'fringe benefit'- benefit provided to employees 'generally'", "Issue": "Where the employer issues shares to the trustee of a discretionary trust in respect of 'employees generally' under an employee share scheme, has a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) been provided by the employer?", "Decision": "No. A fringe benefit as defined in subsection 136(1) of the FBTAA has not been provided by the employer because no particular employee has been identified who will benefit under the trust.", "Facts": "In an effort to attract and retain staff, an employer formulates an employee share scheme which will be offered to 'employees generally'; that is, both current and future employees but not specific employees. The employer settles a discretionary trust, and issues shares which are gifted to the trustee with the potential class of beneficiaries being limited to employees of the employer who had met certain specifications with regard to length of service or seniority. The trustee would exercise its discretion to issue shares to particular employees at a later time having regard to matters such as their employment position and their years of service. The shares provided to the trustee constitute a benefit in the form of 'property' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: The definition of a fringe benefit contained within subsection 136(1) of the FBTAA requires, amongst other things, that in order for a benefit to be a fringe benefit that the benefit be provided to 'the employee or an associate of the employee' and that the benefit be provided 'in respect of the employment of the employee'. In determining whether a 'fringe benefit' has been provided in these circumstances the Full Federal Court decision in Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236; 65 ATR 369 is authority for the requirement that a particular employee must be identified. Edmonds J provided reasons for decision, with which Stone and Allsop JJ agreed in separate judgements. His Honour said that it was necessary, as Kiefel J had held in Essenbourne Pty Ltd v. Federal Commissioner of Taxation [2002] FCA 1577; 2002 ATC 5201; 51 ATR 629 to identify a particular employee in respect of whose employment a benefit is provided (paragraph 35). An analogy was drawn that in terms of an associate of a natural person; it would not be possible to conclude that a person is a relative without knowing the identity of the relevant employee. On that basis, this was strongly suggestive of the reference to 'the employee' being a reference to a particular employee (paragraph 36). His Honour, at paragraph 37, found that whilst a benefit provided to a trustee of a trust estate can be a fringe benefit, for this to occur ......the identity of each employee who will take a share of the benefit is known with sufficient particularity, at the time the benefit is provided to enable it to be said that the benefit is provided in respect of the employment of each of those employees. His Honour further found that the shares provided to the trustee were not provided in respect of the employment of any particular employee, nor all of the employees capable of benefiting who would in fact receive a benefit - only some employees may later benefit and their identity is not known (paragraph 38). His Honour, at paragraph 39, said, that his conclusion was consistent with his view that there was no discernible legislative policy to accelerate and bring to charge..... a benefit which the employee may never get as against a policy of deferring taxes on the benefit unless and until it comes home to the employee.... As no particular employee can be identified in the circumstances of this case who will benefit under the trust, it is not possible to find that the benefit has been provided to an associate of an employee nor can it be said that the benefit has been provided in respect of the employment of an employee. Accordingly, a fringe benefit as defined in subsection 136(1) of the FBTAA has not been provided by the employer because no particular employee has been identified who will benefit under the trust.", "Date_of_Decision": "4 September 2007", "Year_of_Income": "31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits In respect of employment", "Case_References": "Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16 2007 ATC 4236 65 ATR 369", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007194", "Unmatched_Content": "Updated minor punctuation error | Updated to correct business line | Keywords Fringe benefits tax Fringe benefits In respect of employment"}
{"ATO_ID_Number": "ATO ID 2005/195", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefits tax: issue of shares to a trust by a franchisor for the benefit of franchisee employees", "Issue": "Where a franchisor company (franchisor) issues shares to a trust for the benefit of franchisee employees, will the franchisor be a person who provides a benefit for the purposes of paragraph (ea) of the definition of fringe benefit at subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The franchisor will be a person who provides a benefit for the purposes of paragraph (ea) of the definition of fringe benefit at subsection 136(1) of the FBTAA.", "Facts": "A franchisor carries on business involving a number of franchisees. The franchisor and franchisee are not associates as defined in subsection 136(1) of the FBTAA. Each franchisee employs its own staff. Under the licence agreement between the franchisor and franchisees the payroll function of the franchisees is performed by the franchisor. The franchisor has established a trust for the benefit of franchisee employees who have signed workplace agreements and hold specified positions for specified periods with franchisees. The franchisor issues shares to the trust, the number of shares issued being calculated by reference to the number of franchisee employees who have signed workplace agreements and have occupied specified positions for specified periods. The settlor intends that the trustee, in exercising its powers to allocate shares to a beneficiary, have regard to (amongst other matters) the employment position and length of service of the beneficiary with a franchisee since becoming a beneficiary. The trustee of the trust has an absolute discretion to allocate shares to employee beneficiaries. The trust has been conceived and established by the franchisor without the consent of, or without consultation with the franchisees. Information about franchisee employees, required by the franchisor to issue shares to the trust, is available to the franchisor because the franchisor performs the payroll function. Information about franchisee employees, required by the trustee to allocate trust income and capital to beneficiaries, is obtained from the franchisor which has access to this information because the franchisor performs the payroll function.", "Reasons_for_Decision": "Summary: As the franchisor and the franchisees are not associates (for the purposes of the FBTAA), the franchisor will be a person (the provider) for the purposes of paragraph (ea) of the definition of fringe benefit at subsection 136(1) of the FBTAA if: The issue of shares by the franchisor to the trustee will be calculated by reference to the number of franchisee employees who have signed workplace agreements and have occupied specified positions for specified periods. In relation to the ongoing operation of the trust, the trustee, in order to satisfy its fiduciary obligations to the beneficiaries, will need specific information in relation to each of the beneficiaries, for example, position held and length of service. If the franchisees were to provide this information directly to the trustee they would be considered to be participating in or facilitating the issue of shares to the trustee and participating in or facilitating a scheme or plan involving the issue of shares to the trustee and would know, or ought reasonably to know that they were doing so. Where the franchisor provides the information to the trustee the information is only available to the franchisor as a result of the payroll function that it performs under licence agreements between itself and the franchisees. Therefore the franchisees will still be considered to be and would know, or ought reasonably to know that they were doing so Thus for the purposes of paragraph (ea) of the definition of fringe benefit at subsection 136(1) of the FBTAA the franchisor is considered to be a person who provides a benefit.", "Date_of_Decision": "1 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Discretionary trusts Employee share schemes & options Fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005195", "Unmatched_Content": "Minor punctuation amendment | Minor grammatical and punctuation amendments | Keywords Discretionary trusts Employee share schemes & options Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2003/316", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefit: benefit arising upon discharge of a limited recourse loan", "Issue": "Can a fringe benefit as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) arise upon the discharge of a limited recourse loan provided to an employee?", "Decision": "No. Any benefit that arises to the employee upon the discharge of a limited recourse loan is not a fringe benefit.", "Facts": "An associate of an employer provides an employee with a limited recourse loan with which to acquire shares. Under the terms of the loan agreement, the employee may elect to transfer the shares to the lender in full and final satisfaction of the loan balance. At the time of transfer, the value of the shares is less than the amount of the loan balance. The employee elects to transfer the shares to the lender. The terms of the loan agreement are accepted as being commercial. The provision of the loan gives rise to a 'loan fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: When the employee transfers shares to the lender to discharge the loan, and the value of those shares is less than the balance of the outstanding loan, a benefit is considered to arise to the employee. 'Fringe benefit' is defined at subsection 136(1) of the FBTAA to include: 'A benefit provided to the employee or to an associate of the employee ... by ... the employer ... in respect of the employment of the employee... .' [emphasis added] Thus, for a benefit to be a 'fringe benefit' it must be provided 'in respect of' the employment. Whilst the expression 'in respect of ' has no fixed meaning, it has been considered by the courts in various statutory contexts on numerous occasions. Whilst an employee's employment may explain their selection to receive a benefit, in order to find that a benefit is provided 'in respect of' employment, there needs to be a sufficient or material, rather than a causal connection or relationship to employment. Refer J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22. The benefit that arises upon the discharge of the loan is considered to be provided as a result of the employee exercising rights (previously obtained) as a debtor under the loan agreement. The situation is considered to be analogous to that in FC of T v. McArdle 89 ATC 4051; (1988) 19 ATR 1901. McArdle was granted valuable rights in respect of his employment which he subsequently surrendered in return for a lump-sum payment. The Court noted that what had occurred under the surrender agreement was not the granting of a valuable benefit, but the exploitation of rights received from the employer in previous years. In this case, when the employee enters into the loan agreement they obtain the right to transfer the shares to the lender in full satisfaction of the debt. If these rights are subsequently exercised and the shares surrendered, any benefit would be in respect of the exercise of these rights, and not in respect of employment. At the time the shares are surrendered, the rights given up are considered to have a value equal to the loan balance. Thus, the benefit that arises to the employee upon the surrender of the shares, does not give rise to a fringe benefit as no benefit has been provided to the employee 'in respect of' the employment relationship.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/315 | ATO ID 2003/317", "Subject_References": "Fringe benefits tax Fringe benefits Loan fringe benefits Employee share loan benefit In respect of employment Employee share schemes & options", "Case_References": "J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003316", "Unmatched_Content": "Updated to correct business line | Keywords Fringe benefits tax Fringe benefits Loan fringe benefits Employee share loan benefit In respect of employment Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2003/458", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefits tax - employee benefits obtained through fraudulent activity", "Issue": "Does a benefit obtained through fraudulent activity by an employee, give rise to a fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Providing the employer does not condone the actions of the employee, the obtaining of a benefit through fraudulent activity does not give rise to a fringe benefit.", "Facts": "An employee uses employer funds for the payment of their private expenses without the knowledge of the employer. The action of the employee in obtaining these benefits is later proven to be a criminal offence by a Court of Law. The unauthorised use of the employer's funds by the employee is not condoned by the employer.", "Reasons_for_Decision": "Summary: 'Fringe Benefit' is relevantly defined at subsection 136(1) of the FBTAA as 'a benefit provided to the employee ... by the employer'. In relation to a benefit, 'provide' is relevantly defined to include something, which is 'allowed, conferred, given, granted or performed.' The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, defines these terms in the following manner: What is common to the definition of each of these terms is that a decision is consciously made by a person to do something for or to another person. Where no decision is consciously made by a person to allow, confer, give, grant or perform something for or to another person, for the purposes of the FBTAA, a benefit is not 'provided' by an employer. Thus, where a benefit is obtained from an employer through fraudulent activity by an employee, in the absence of a conscious decision by the employer to provide the benefit, the benefit obtained will not be a 'fringe benefit' for the purposes of subsection 136(1) of the FBTAA. Conversely, where an employer condones an employee obtaining a benefit through fraudulent activity, the condoning of the activity will be regarded as a conscious decision by the employer to provide the benefit.", "Date_of_Decision": "12 May 2003", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits Fringe benefits tax Losses from fraud, theft & embezzlement", "Case_References": "", "Other_References": "NTLG Subcommittee Minutes December 1994 Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003458", "Unmatched_Content": "Minor grammatical amendments | Updated to correct business line | Keywords Fringe benefits Fringe benefits tax Losses from fraud, theft & embezzlement"}
{"ATO_ID_Number": "ATO ID 2003/690", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: company demerger - allotment of shares to trustee", "Issue": "Does the allotment of shares in a demerged entity, to the trustee of an employee share trust, in respect of shares held on behalf of employees in the head entity of the demerged group, constitute a 'fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The allotment of the shares in the demerged entity is not in respect of employment and thus does not constitute a 'fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Facts": "A head entity has established an employee share scheme under which a trustee holds shares in the head entity on behalf of participating employees. Under a demerger, the head entity allots shares in the demerged entity to existing shareholders in the head entity. Those shareholders include the trustee of the employee share trust. The trustee of the employee share trust is an associate of the participating employees.", "Reasons_for_Decision": "Summary: For a benefit to be a 'fringe benefit' in accordance with the definition in subsection 136(1) of the FBTAA, it must be provided to an employee or the associate of the employee in respect of the employment of the employee. Whilst the expression 'in respect of' has no fixed meaning, the full Federal Court in J & G Knowles v FC of T (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22; examined its meaning in relation to Fringe Benefits Tax (FBT) and noted that: ... what must be established is whether there is a sufficient or material, rather than a causal connection or relationship between the benefit and the employment... The Court also suggested that it would be useful to ask 'whether the benefit is a product or incident of the employment'. Whilst participating employees' interests, via the trust, in shares held by the trustee, are acquired pursuant to an employee share scheme - and therefore in respect of their employment - shares in the demerged entity are allotted to all shareholders on the basis of their ownership of shares in the head entity at the time of the demerger. Thus, as the allotment of shares to the trustee is considered to be a product or incident of the shareholder relationship rather than the employment relationship, it does not constitute a 'fringe benefit'.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1).", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/417 | ATO ID 2003/418", "Subject_References": "Benefit Company restructuring Employee share schemes & options Fringe benefits In respect of employment", "Case_References": "J & G Knowles v FC of T (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003690", "Unmatched_Content": "Keywords Benefit Company restructuring Employee share schemes & options Fringe benefits In respect of employment"}
{"ATO_ID_Number": "ATO ID 2003/692", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: company demerger - allotment of shares to employees", "Issue": "Does the allotment of shares in a demerged entity to employees, in respect of shares held in the head entity of the demerged group acquired under an employee share scheme, constitute a 'fringe benefit' under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The allotment of the shares in the demerged entity is not in respect of employment and thus does not constitute a 'fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Facts": "A head entity has established an employee share scheme under which participating employees acquire shares in the head entity. Under a demerger, the head entity allots shares in the demerged entity to existing shareholders in the head entity. Those shareholders include the participating employees.", "Reasons_for_Decision": "Summary: For a benefit to be a 'fringe benefit' in accordance with the definition in subsection 136(1) of the FBTAA, it must be provided in respect of the employment of the employee. Whilst the expression 'in respect of' has no fixed meaning, the full Federal Court in J & G Knowles v FC of T (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 examined its meaning in relation to Fringe Benefits Tax (FBT) and noted that: ... what must be established is whether there is a sufficient or material, rather than a causal connection or relationship between the benefit and the employment... The Court also suggested that it would be useful to ask 'whether the benefit is a product or incident of the employment'. Whilst participating employees' shares in the head entity are acquired pursuant to an employee share scheme and therefore in respect of their employment, shares in the demerged entity are allotted to all shareholders on the basis of their ownership of shares in the head entity at the time of the demerger. Thus, as the allotment of shares to participating employees is considered to be a product or incident of the shareholder relationship rather than the employment relationship, it does not constitute a 'fringe benefit'.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/416 | ATO ID 2003/417", "Subject_References": "Benefit Company restructuring Employee share schemes & options Fringe benefits In respect of employment", "Case_References": "J & G Knowles v FC of T (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003692", "Unmatched_Content": "Minor grammatical changes | Updated to correct business line | Keywords Benefit Company restructuring Employee share schemes & options Fringe benefits In respect of employment"}
{"ATO_ID_Number": "ATO ID 2009/127", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Rebatable employer: meaning of 'non-profit association' - members include government bodies", "Issue": "Is the employer, (who is an association carried on otherwise than for the purposes of profit or gain to its members), a 'non-profit association' for the purposes of section 65J of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where the association is an incorporated company limited by guarantee and included in its membership are both government bodies and non-government bodies?", "Decision": "Yes. The employer is a 'non-profit association' as outlined in subparagraph 65J(5)(b)(ii) of the FBTAA for the purposes of section 65J of the FBTAA. This is because the member organisations (who beneficially own the members interests and rights in the company) are not all government bodies. As a consequence the interests and rights of the members in the company are not beneficially owned by such government bodies as described in subparagraph 65J(5)(b)(ii) of the FBTAA.", "Facts": "The employer is an association relating to the public health care system of a State of Australia ('the association'). The association is not carried on for the purpose of profit or gain to its individual members. The association is an incorporated company limited by guarantee. Membership of the association is by organisation. A member must be an organisation that provides health services in the particular State. Members have the right to receive notices of, to attend, be heard, and have the right to vote, at general meetings. The interests and rights of the members in the company are beneficially (and legally) owned by the member organisations. Pursuant to subsection 65J(3) of the FBTAA, a number of the member organisations are taken to be institutions of the State for the purposes of section 65J of the FBTAA (for discussion on the extended meaning of 'institution of the Commonwealth, a State or a Territory' refer to Taxation Determination TD 2008/2). The remaining member organisations are private organisations in the health services industry. The association is not a body which is formed by government, controlled by government and performing functions on behalf of government and is an 'association' for the purposes of section 65J of the FBTAA (refer to Taxation Determination TD 95/56).", "Reasons_for_Decision": "Summary: Subsection 65J(1) of the FBTAA provides that certain non-profit associations will (subject to all relevant conditions being satisfied) be rebatable employers. Broadly, section 65J of the FBTAA provides that an employer will be a rebatable employer for a year of tax if the employer is exempt from income tax at any time during the year of tax under any of the provisions set out in the table in subsection 65J(1) and satisfy the special conditions (if any) set out in that table. Item 5 of the table provides that 'a society, association or club' which is (a) established for community service purposes (except political or lobbying purposes); and (b) is covered by item 2.1 of the table in section 50-10 of the Income Tax Assessment Act 1997 will be a rebatable employer provided the special conditions in subsection 65J(5) are met. The facts indicate that the association relates to the public health care system of a State of Australia and therefore would likely be deemed to have been established for community service purposes. Subsection 65J(5) of the FBTAA provides that, for the purposes of section 65J of the FBTAA, the type of societies, associations or clubs that will not be covered by the table in subsection 65J(1) and therefore not deemed rebatable employers under the provision. Subsection 65J(5) provides that: 65J(5) A society, association or club is not covered by table item 4, 5, 8, 9, 10, 11 or 12 in subsection (1) for a year of tax if it is: (a) an incorporated company where all the stock or shares in the capital of the company is or are beneficially owned by: (i) the Commonwealth, a State or a Territory; or (ii) an authority or institution of the Commonwealth, a State or a Territory; or Subsection 65J(5) addresses the meaning of a \"non-profit society\", '\"non-profit association\" and a \"non-profit club\". The provision provides that a society, association or club will not be rebatable employers if they are (a) an incorporated company where all the stock or shares in the capital of the company is or are beneficially owned by (i) the Commonwealth, a State or a Territory, or (ii) an authority or institution of the Commonwealth, a Sate or a Territory. Paragraph 65J(5)(b) applies the same rules to incorporated companies limited by guarantees. That is, the association will not be characterised as a non-profit association for the purposes of section 65J of the FBTAA if paragraphs 65J(5)(a) or (b) are satisfied. As the association is not an incorporated company by way of stock or share ownership, paragraph 65J(5)(a) of the FBTAA will not apply. Conversely, as the association is an incorporated company limited by guarantee, consideration will be directed towards the application of paragraph 65J(5)(b). The facts indicate that several of the member organisations are institutions of the State, within the extended meaning of that term given in subsection 65J(3) for the purposes of section 65J of the FBTAA. The facts also show that the remaining member organisations are private organisations in the health services industry. The provision requires that 'the interests and rights of the members in or in relation to the company are beneficially owned by...the Commonwealth, a State or a Territory, or an authority or institution of the Commonwealth, a State or a Territory.' Paragraphs 65J(5)(a) and (b) of the FBTAA refers to 'the' interests and rights of the members in or in relation to the company, not just to some of these interests and rights. Moreover, it refers to these rights of 'the members' in the plural. Without more this wording is indicative that that the provision should be read in relation to all the relevant interests and rights in the company of all of the members being beneficially owned by a relevant government body or bodies. As such, all of the member organisations (who beneficially own the interests and rights in the company) would need to be relevant government bodies in order to deny the 'non-profit association' status under this paragraph. The Supplementary Explanatory Memorandum to the Taxation Laws Amendment (Fringe Benefits Tax Measures) Bill 1992, which introduced paragraph 65J(5)(b) of the FBTAA, explained that: ...the Bill will ensure that the meaning of a society, association or club does not include, for the purposes of section 65J, an incorporated company which is beneficially owned by the Commonwealth, a State or a Territory or an authority or institution of the Commonwealth, a State or a Territory. The Supplementary Explanatory Memorandum confirms the intention that the Act does not distinguish between companies limited by shares and companies limited by guarantee in the way it effectively excludes companies owned by a government body or bodies from being non-profit associations. As beneficial ownership by shares in subparagraph 65J(5)(b)(i) of the FBTAA requires all of the stock or shares in the capital of the company to be beneficially owned by a government body, then on a consistent basis, the test for government ownership in subparagraph 65J(5)(b)(ii) of the FBTAA for a company limited by guarantee should as a matter of intended policy be that the interests and rights in the company of all of the members be beneficially owned by a government body such as an institution of the State. The plain reading of the provision expressed above (that for subparagraph 65J(5)(b)(ii) of the FBTAA to be satisfied the relevant interests and rights of all of the members in the company need be beneficially owned by government bodies) is consistent with the intended policy. Accordingly, as the member organisations of the association are not all relevant government bodies, then 'the' interests and rights of 'the members' in the association cannot be said to be beneficially owned by such government bodies. Subparagraph 65J(5)(b)(ii) of the FBTAA is not satisfied. As subparagraphs 65J(5)(b)(i) and (ii) of the FBTAA are not satisfied, paragraph 65J(5)(b) of the FBTAA is satisfied in respect of the association. As paragraph 65J(5)(a) of the FBTAA is also satisfied the association is a 'non-profit association' as defined in subsection 65J(5) for the purposes of section 65J of the FBTAA.", "Date_of_Decision": "29 October 2009", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 65J subsection 65J(1) subsection 65J(3) subsection 65J(5) paragraph 65J(5)(a) paragraph 65J(5)(b) subparagraph 65J(5)(b)(i) subparagraph 65J(5)(b)(ii)", "Related_Public_Rulings_and_Determinations": "TD 95/56 | TD 2008/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT rebatable employers Fringe benefits tax Health organisations Non profit associations & clubs", "Case_References": "", "Other_References": "Supplementary Explanatory Memorandum to the Taxation Laws Amendment (Fringe Benefits Tax Measures) Bill 1992", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009127", "Unmatched_Content": "This ATO ID has been updated to take into account amendments enacted under the Tax Laws Amendment (2013 Measures No. 2) Act 2013 to update the framework for determining the meaning of 'non-profit association' from 30 June 2013. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | New 'Alert' stating the impact of legislative amendments to section 65J | Minor correction to address legislative amendments | Revised reasoning to address legislative amendments | Updated to correct business line | Included reference to 'date reviewed' | Related Public Rulings (including Determinations) TD 95/56 TD 2008/2 | Keywords FBT rebatable employers Fringe benefits tax Health organisations Non profit associations & clubs"}
{"ATO_ID_Number": "ATO ID 2009/141", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Entertainment facility leasing expenses: hire of a marquee", "Issue": "Where an employee hires a marquee for use at the employee's home for the purpose of the provision of entertainment, is the marquee a 'facility' as that term is used in the definition of 'entertainment facility leasing expenses' under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The marquee is a 'facility' as that term is used in the definition of 'entertainment facility leasing expenses' under subsection 136(1) of the FBTAA.", "Facts": "The employer of the employee is a public hospital. The employee has incurred expenses on hiring a marquee to be constructed at the employee's home for a family wedding celebration. The expenses are incurred 'for the purpose of the provision of entertainment' as those words are used in the definition of 'entertainment facility leasing expenses' under subsection 136(1) of the FBTAA. The employer reimburses the employee for the expenses incurred in hiring the marquee, which includes the costs of set-up and removal. This reimbursement is not provided under a salary packaging arrangement. No part of the expenses incurred is for the provision of food, drink or advertising.", "Reasons_for_Decision": "Summary: For employers that are public hospitals subject to the provisions of section 57A of the FBTAA, benefits provided to employees whose taxable values are wholly or partly attributable to entertainment facility leasing expenses are not subject to fringe benefits tax. This is provided the benefits have been not provided to an employee under a salary packaging arrangement. Refer also to ATO Interpretative Decision ATO ID 2009/45. Under the definition of 'entertainment facility leasing expenses' in subsection 136(1) of the FBTAA, expenses incurred by a person must be the hire or lease of a corporate box, boat, plane or other premises or facilities for the purpose of the provision of entertainment. A marquee is a temporary structure which can be used to accommodate people for dining and other purposes. In the current example a marquee is used to hold a wedding reception at the employee's home. Other examples might include a marquee used for entertaining corporate guests at a sports event; for the display of goods at a trade show; to house guests and staff at a fashion show. Whilst the term 'facility' is not defined in the FBTAA it is used in conjunction with other definitions such as: Similarly, the term 'facility' is used in the Income Tax Assessment Act 1997 (ITAA 1997) including instances where a facility is used for recreation purposes. The word 'facility' is defined in the Macquarie Dictionary (Multimedia version 5.0.0) to mean: facility noun (plural facilities) 1. something that makes possible the easier performance of any action; advantage: transport facilities; to afford someone every facility for doing something . 9. a building or complex of buildings, designed for a specific purpose, as for the holding of sporting contests. The word 'facility' is also defined in the Butterworths Encyclopaedic Australian Legal Dictionary , (Online Edition), LexisNexis Australia: Facility A building or appliance, designed for a specific purpose, which has the effect of making possible the easier performance of an action The word facility, as described in each dictionary definition above, and as used in the income tax and fringe benefits tax definitions above is of wide meaning. It is accepted that the term 'facility' as it is used in the definition of 'entertainment facility leasing expenses' also has a wide meaning that includes buildings, part of buildings or other structures that is used for the purpose of the provision of entertainment. In the present case the marquee is a temporary structure that has been hired and used for a wedding reception. The marquee is used for the purpose of the provision of entertainment. The marquee is a 'facility' as that term is used in the definition of 'entertainment facility leasing expenses' under subsection 136(1) of the FBTAA Note - The Tax and Superannuation Laws Amendment (2015 Measures No. 5) Act 2015 made changes to the FBTAA to limit the concessional fringe benefits tax treatment of entertainment benefits provided under a salary packaging arrangement. These amendments provide that from 1 April 2016 the method statement in subsection 5B(1L) no longer disregards the provision of meal entertainment or entertainment facility leasing expenses provided under a salary packaging arrangement. However, the amendments also introduced a separate cap for employers subject to the provisions of section 57A such that salary packaged entertainment benefits will continue to be exempt from fringe benefits tax where the grossed-up taxable value of these benefits do not exceed $5,000 for an employee in a FBT year. The amount of those benefits exceeding that separate cap will be included in calculating if the value of all benefits an employee receives exceeds the general exemption or rebate caps.", "Date_of_Decision": "9 October 2009", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 57A subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/45", "Subject_References": "Entertainment expenses Entertainment facility leasing expenses Excluded fringe benefits Exempt benefits Expense payment fringe benefits FBT entertainment FBT expense payment Fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (2015 Measures No. 5) Bill 2015 Macquarie Dictionary (Multimedia version 5.0.0) Encyclopaedic Australian Legal Dictionary (Online Edition), LexisNexis Chapter 6.5 of the Fringe Benefits Tax - A Guide for Employers", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009141", "Unmatched_Content": "Updated to correct business line | Amended to take into account legislative changes to the provision of entertainment facility leasing expenses under a salary packaging arrangement applying from 1 April 2016. | Keywords Entertainment expenses Entertainment facility leasing expenses Excluded fringe benefits Exempt benefits Expense payment fringe benefits FBT entertainment FBT expense payment Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2007/200", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Liability to fringe benefits tax: Commonwealth Statutory Agency", "Issue": "Is a Commonwealth Statutory Agency, whose establishment Act provides a general exemption from taxation, nevertheless subject to the notional application of fringe benefits tax under the Fringe Benefits Tax (Application to the Commonwealth) Act 1986?", "Decision": "Yes. The Statutory Agency is subject to the notional application of fringe benefits tax in relation to benefits provided in respect of the employment of Commonwealth employees under the Fringe Benefits Tax (Application to the Commonwealth) Act 1986 .", "Facts": "A Commonwealth Government body (the Agency) is a 'Statutory Agency' within the meaning of that term in the Public Service Act 1999 and is a 'Commonwealth authority' within the meaning of that term in the Commonwealth Authorities and Companies Act 1997 . The Agency was established by an Act of Parliament (the Agency Act), a Commonwealth Act specific to the Agency. The Agency Act provides for money to be appropriated by the Parliament for the purposes of the Agency which is applied for the payment of remuneration and allowances. Commonwealth employees perform their duties of employment in or in respect of the Agency. The Agency provides benefits in respect of the employment of Commonwealth employees. The Agency Act provides 'Exemption from taxation' as follows: The income, property and transactions of the Agency are not subject to taxation under any law of the Commonwealth or of a State or Territory.", "Reasons_for_Decision": "Summary: In his second reading speech introducing the Fringe Benefits Tax Assessment Bill 1986 the Treasurer stated: As the purpose of the tax is to remove a serious gap in the income tax law and ensure that all forms of remuneration paid to employees bear a fair measure of tax, fringe benefits tax is pitched at all employers - both taxable employers and exempt employers under the income tax law. It will apply to Commonwealth, State and local governments and their agencies. The fringe benefits tax legislation has been subject to constitutional challenges. In State Chamber of Commerce and Industry & Ors v. The Commonwealth of Australia (1987) 163 CLR 329; (1987) 87 ATC 4745; (1987) 19 ATR 103 (the Second Fringe Benefits Tax Case ), the High Court of Australia examined the Fringe Benefits Tax Act 1986 (the Tax Act); the Fringe Benefits Tax Assessment Act 1986 (the Assessment Act); and the Fringe Benefits Tax (Application to the Commonwealth) Act 1986 (the Application Act). At CLR 357-358; ATC 4757; ATR 118-119, Mason CJ, Wilson J, Dawson J, Toohey J and Gaudron J discuss the Application Act: The Application Act is, as its long title indicates, an Act to provide for the notional application of fringe benefits tax in relation to benefits provided in respect of the employment of Commonwealth employees. Section 4 provides that, subject to certain modifications, the Assessment Act applies in relation to Commonwealth employment. Section 7 enables the Minister of Finance to give such directions in writing as are necessary or convenient to be given for carrying out or giving effect to the Application Act and, in particular, may give directions in relation to the transfer of money within the Public Accounts. The plaintiffs' submission that the Application Act cannot be supported as an exercise of either the taxation power or the express incidental power operating in combination therewith is not to the point. The Constitution established a new body politic, the Commonwealth of Australia. The body politic was armed with specific legislative, executive and judicial powers. However, the establishment and the nature of the body politic gave rise also to certain implied powers, as explained by Dixon J. (as he then was) in Burns v. Ransley (1949) 79 CLR 101 at p. 116; The King v. Sharkey (1949) 79 CLR 121 at pp. 148-149; and Australian Communist Party v. The Commonwealth (1950-1951) 83 CLR 1 at p. 188. Subject to constitutional prohibitions, express or implied, the implied powers include a power for the regulation and supervision of the polity's own activities, the exercise of its powers and the assertion or waiver of its immunities. The Application Act is a law for the regulation and supervision of the provision of fringe benefits by Commonwealth departments and authorities to Commonwealth employees, and as such is a law which the power to enact is necessarily implied from the establishment and nature of the Commonwealth of Australia. It may also be supported as an exercise of the express incidental power in sec. 51(xxxix) in combination with other constitutional provisions. But in any event the invalidity of the Application Act, if it could be established, would not lead to the invalidity of the Tax Act and the Assessment Act. The operation of the Tax Act and the Assessment Act is not expressed to be conditional on the operation of the Application Act: DFC of T (NSW) v. W.R. Moran Pty Ltd (1939) 61 CLR 735 at pp. 762, 772; Logan Downs Pty. Ltd. v. FC of T (1965) 112 CLR 177 at pp. 187, 190. Moreover, the Tax Act, the Assessment Act and the Application Act do not form interdependent elements in a general scheme because the rights and liabilities created by the first two statutes are not related to the operation of the Application Act: W.R. Moran Pty. Ltd. at pp. 762, 772; South Australia v. The Commonwealth (the First Uniform Tax Case\" ) (1942) 65 CLR 373, at pp. 411, 447-448, 456, 462. The plaintiffs relied on statements in Hansard made with reference to the Application Act with a view to showing that the three Acts form part of a general interdependent scheme. The statements do not go that far and, even if they did, they provide no basis for giving the statutes an interpretation which finds no support at all in their language. An examination of the fringe benefits tax legislation shows there are two independent schemes operating to deal with the subject of fringe benefits. The main scheme deals with the general population of employers and comprises two Acts, the Tax Act and the Assessment Act. The secondary Commonwealth scheme deals with employment of Commonwealth employees and comprises two Acts, the Application Act and the Assessment Act. The main scheme comprised of the Tax Act, and the Assessment Act applies taxation to taxpayers who are employers within the definition of 'employer' in subsection 136(1) of the Assessment Act. Tax is imposed on the employer by the Tax Act on the fringe benefits taxable amount. Tax imposed on the employer is payable under section 66 of the Assessment Act. The definition of 'employer' in subsection 136(1) of the Assessment Act does not include: Goods and Services Tax Ruling GSTR 2006/5 Goods and services tax: meaning of 'Commonwealth, a State or a Territory', discusses the meaning of 'Commonwealth....' under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It is accepted that the meaning of 'the Commonwealth' in the GST Act and in the Assessment Act are the same. Note: the meaning of 'the Commonwealth' in these Acts can be determined in accordance with the same general principles as developed by the High Court of Australia, for example in considering the meaning of 'the Commonwealth' within the scope of the expression in section 75(iii) of the Constitution in Australian Securities & Investments Commission v. Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1. GSTR 2006/5 at paragraphs 6 and 7 provides for a Statutory Agency, within the meaning of the Public Service Act 1999 , to be 'the Commonwealth' under the GST Act. The Agency, being 'the Commonwealth', is therefore not included in the definition of 'employer' in subsection 136(1) of the Assessment Act. As the Agency is not an 'employer' it is not subject to fringe benefits tax under the main scheme. Any questions on liability for tax imposed under section 66 of the Assessment Act under the main scheme, because the Agency Act contains a taxation exemption clause, do not arise. As the long title to the Application Act indicates, the Commonwealth Scheme comprised of the Application Act and the Assessment Act provides for the notional application of fringe benefits tax, and for the application of the reportable fringe benefits system, in relation to benefits provided in respect of the employment of Commonwealth employees. In his second reading speech to the Fringe Benefits Tax (Application to the Commonwealth) Bill 1986 the Treasurer stated that: the various departments and authorities will face the same obligations as other employers to lodge annual fringe benefits tax returns and to pay the tax, including quarterly instalments. The Government will be at pains to ensure that agencies fully bear the burden of the tax through the annual appropriation procedures and other measures. Under subsection 3(1) of the Application Act, 'Department' is relevantly defined as: The Agency is a 'Statutory Agency' and a 'Department' as defined under subsection 3(1) of the Application Act. The Agency is also the 'responsible Department' as defined under subsection 3(1) of the Application Act because the Commonwealth employee's remuneration is paid out of the Agency's appropriation and the employee performs duties in or in respect of the Agency. Under section 4 of the Application Act, the Assessment Act applies as if the employee were employed by the 'responsible Department' (the Agency) and not by the Commonwealth. The Commonwealth scheme does not impose tax as does the Tax Act. Instead, the Application Act, rather than being a law with respect to taxation, 'is a law for the regulation and supervision of the provision of fringe benefits by Commonwealth departments and authorities to Commonwealth employees', as quoted above from the Second Fringe Benefits Tax Case . The Commonwealth scheme through the Application Act including section 7 of that Act provides for a transfer of money within the Public Account. As the Commonwealth scheme does not impose tax, the provision in the Agency Act for a general exemption from all Commonwealth, State and Territory taxes does not affect the transfer of money under the Commonwealth scheme. The Commonwealth scheme applies to the Agency. The Agency is subject to the notional application of fringe benefits tax in relation to benefits provided in respect of the employment of Commonwealth employees under the Application Act. The Agency is also subject to the application of the reportable fringe benefits system.", "Date_of_Decision": "1 November 2007", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 The Act", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2006/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits Fringe benefits tax", "Case_References": "Australian Securities & Investments Commission v. Edensor Nominees Pty Ltd (2001) 204 CLR 559 [2001] HCA 1", "Other_References": "Second reading speech to the Fringe Benefits Tax (Application to the Commonwealth) Bill 1986 Second reading speech to the Fringe Benefits Tax Assessment Bill 1986", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007200", "Unmatched_Content": "Updated to correct business line | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2006/5 | Keywords Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2001/333", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: Administrative costs of salary packaging", "Issue": "Whether the costs incurred by the employer, for the administration of salary packaging arrangement for its employees, would constitute the provision of a fringe benefit as defined under section 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The costs incurred by the employer for the administration of employee salary packaging arrangement do not constitute the provision of a fringe benefit as defined under section 136(1) of the FBTAA.", "Facts": "The employer provides fringe benefits to employees by way of salary packaging arrangement and consequently incurs administrative costs either internally or externally to another company. The external administration may include the cost of maintaining records in relation to payment of employee fringe benefits and retention of relevant documents for record keeping requirements. These administrative costs do not include the costs of negotiating or renegotiating employee remuneration contracts. The external administrative costs are a sacrificed component of an employee's salary package.", "Reasons_for_Decision": "Summary: Where the administrative service is provided to the employer by an external service provider, no fringe benefit liability will arise as no benefit has been provided to the employee within the meaning of the word \"benefit\" as defined under section 136(1) of the FBTAA. A benefit will not arise when the service agreement is between the employer and the service provider, and the employer is liable for the cost of the administrative services provided. Where the employer has a policy that employees who participate in salary package arrangements must sacrifice a certain amount of salary to recompense any administrative cost incurred, the liability for this cost will continue to be that of the employer in accordance with the service agreement between the employer and the service provider. Where the employer administers the salary packaging in-house and has a policy that employees who participate in salary package arrangements must sacrifice a certain amount of salary to recompense some or all of the administrative costs incurred, no fringe benefit will arise as no \"benefit\" as defined under section 136(1) of the FBTAA has been provided.", "Date_of_Decision": "23 July 2001", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Section 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Benefit Fringe benefit Administration fee Administrative cost FBT salary packaging FBT salary sacrifice", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employee Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001333", "Unmatched_Content": "Minor punctuation amendments | Keywords Benefit Fringe benefit Administration fee Administrative cost FBT salary packaging FBT salary sacrifice"}
{"ATO_ID_Number": "ATO ID 2003/1099", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: logbook requirements - exercise of the Commissioner's discretion", "Issue": "Will the Commissioner, in the course of reviewing the affairs of an employer, exercise his discretion under subsection 123B(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to waive the substantiation rules, when considering a log book which records business kilometres but fails to record opening and closing odometer readings for each business journey?", "Decision": "Yes. Where the Commissioner is satisfied that the calculation of business kilometres is accurate, the discretion under subsection 123B(1) of the FBTAA to waive strict log book substantiation requirements will be exercised.", "Facts": "The employer elects to calculate the taxable value of car fringe benefits under the operating cost method. The employer maintains an electronic logbook for a 12-week period for each car. The log book records the following information: The log book does not record odometer readings at the start and end of each business journey. At the end of the 12-week log book period the address details of each business journey are sent to a specialist third-party to independently and accurately calculate the kilometres for each business journey on the basis of the shortest possible direct road route. The employer is the subject of an audit of its FBT return by the Australian Taxation Office.", "Reasons_for_Decision": "Summary: Car fringe benefits valued under the provisions of section 10 of the FBTAA are subject to the requirement in section 10A to maintain, amongst other things, 'log book records'. 'Logbook records' are defined in subsection 136(1) of the FBTAA and require the following entries to be made in respect of each business journey: However, specific relief from the substantiation requirements exists in the form of a Commissioner's discretion under section 123B of the FBTAA which states that the substantiation rules do not apply in relation to a benefit if the nature and quality of evidence that a person has satisfies the Commissioner that the taxable value of the benefit is not greater than the amount specified in the taxpayer's return for the FBT year as the taxable value of that benefit. At the time that section 123B was incorporated into the FBTAA, it was stated that the intention was to give the Commissioner a similar discretion to that which operates under the income tax legislation. The similar requirements of the FBTAA and the Income Tax Assessment Act 1997 means that Taxation Ruling TR 97/24 Income tax: relief from the effects of failing to substantiate, is also useful when considering the application of section 123B of the FBTAA. Taxation Ruling TR 97/24 at paragraph 41 has this to say about the nature of 'sufficient evidence': It is not possible to specify the nature and quality of supporting evidence that satisfies the Commissioner in all circumstances. Each case must be considered on its own merits and a common sense approach applied. Regard has to be had to the overall purpose of a log book when calculating a car fringe benefit under section 10 of the FBTAA. The Explanatory Memorandum to the FBTAA at Clause 10 says that a 'log book or similar document is required to be maintained to substantiate the number of kilometres on business journeys...' Accordingly, the lack of opening and closing odometer readings for each business journey does not impact on the overall integrity of the log book. The employer has in place a system which results in the accurate calculation of business kilometres. The Commissioner's discretion under section 123B of the FBTAA will therefore be exercised in these circumstances to waive the strict log book requirements, as the employer is able to substantiate the number of business kilometres travelled. The employer is therefore able to use the operating cost method and make the reduction for the number of business kilometres travelled.", "Date_of_Decision": "4 December 2003", "Year_of_Income": "Year ending 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 10 section 10A subsection 136(1) section 123B", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/24", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/925", "Subject_References": "Car fringe benefits FBT business journey FBT business kilometre FBT car substantiation FBT log book records FBT operating cost Fringe benefits tax", "Case_References": "", "Other_References": "Explanatory Memorandum to the Fringe Benefits Tax Assessment Act 1986", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031099", "Unmatched_Content": "Changed formatting of 'Income Tax Assessment Act 1997' to be consistent with ATO Standards for Citation. | Capitalised 'Taxation Ruling' to be consistent with ATO Standards for Citation. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/24 | Keywords Car fringe benefits FBT business journey FBT business kilometre FBT car substantiation FBT log book records FBT operating cost Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2014/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car expense - cost of map update of in-built satellite navigation system", "Issue": "Is the cost of a map update of an in-built satellite navigation system a 'car expense' within the meaning in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The cost of a map update of an in-built satellite navigation system is a 'car expense' within the meaning in subsection 136(1) of the FBTAA as the expense is incurred in respect of repairs to or maintenance of the car.", "Facts": "An employee is provided with a car benefit by his employer for the purposes of section 7 of the FBTAA. The car has an in-built satellite navigation system that is part of the car. During the FBT year, as part of a service of the car, a map update of the satellite navigation system was installed. The update allowed the employee to navigate to locations along roads constructed or altered after the system was installed.", "Reasons_for_Decision": "Summary: In subsection 136(1) of the FBTAA 'car expense', in relation to a car, means: an expense incurred in respect of: (a) the registration of, or insurance in respect of, the car; (b) repairs to or maintenance of the car; or (c) fuel for the car. In the situation being considered, the relevant paragraph of the definition is paragraph (b). In considering whether the map update of the in-built satellite navigation system is a repair to the car, guidance can be obtained from Taxation Ruling TR 97/23 Income tax: deduction for repairs (TR 97/23). Although TR 97/23 explains the circumstances in which expenditure incurred by a taxpayer for repairs is an allowable deduction under section 25-10 of the Income Tax Assessment Act 1997, the discussion can be applied in determining whether an expense is a repair within the meaning of 'car expense' in subsection 136(1) of the FBTAA. In discussing the meaning of the term 'repairs', paragraphs 13 and 15 of TR 97/23 state: 13. The word 'repairs' has its ordinary meaning. It ordinarily means the remedying or making good of defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property. 15. Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. A repair merely replaces a part of something or corrects something that is already there and has become worn out or dilapidated. Works can fairly be described as 'repairs' if they are done to make good damage or deterioration that has occurred by ordinary wear and tear, by accidental or deliberate damage or by the operation of natural causes (whether expected or unexpected) during the passage of time. The term 'maintenance' is not defined in the FBTAA. It, therefore, takes its ordinary meaning. The Macquarie Dictionary, Sixth Edition, October 2013, defines the term 'maintenance' as: 1. the act of maintaining. 2. the state of being maintained. Relevantly, the term 'maintain' is defined as: 2. to keep in due condition, operation, or force; keep unimpaired. In ACT Construction Co Ltd v. Customs and Excise Commissioners [1979] 2 All ER 691 Drake J stated at 695: ...In my judgment, repair to a building necessarily involves the putting into good order or restoration of the condition of some existing building, whilst maintenance of a building is the keeping of the building in good repair. The two may and often will overlap... In applying the meaning of the terms 'repairs' and 'maintenance' to the map update, the update involves a restoration of the functionality of the satellite navigation system and does not change its character. Without the update, the system is not able to navigate to locations along roads constructed or altered after the system was installed. The map update also preserves and keeps the satellite navigation system unimpaired and in due condition and operation. Therefore, the cost of the map update of the in-built satellite navigation system can be seen as both a repair to and maintenance of the car. Accordingly, the cost of the map update of the in-built satellite navigation system is a 'car expense' within the meaning in subsection 136(1) of the FBTAA as the expense is incurred in respect of repairs to or maintenance of the car.", "Date_of_Decision": "19 May 2014", "Year_of_Income": "Year ended 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 7 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/23 Income tax: deductions for repairs", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT car expenses Fringe benefits tax", "Case_References": "ACT Construction Co Ltd v. Customs and Excise Commissioners [1979] 2 All ER 691", "Other_References": "Macquarie Dictionary Sixth Edition, October 2013", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201418", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/23 Income tax: deductions for repairs | Keywords FBT car expenses Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2013/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Car Benefits: work related travel", "Issue": "Is travel by an employee in their employer's car, between their place of residence and the employee's place of employment in relation to a second employer, 'work-related travel' for the purposes of paragraph (a) of the definition in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. An employee's place of employment for the purposes of paragraph (a) of the definition of 'work-related travel' in subsection 136(1) of the FBTAA relates only to the employment relationship under which the car benefit is provided. Therefore, travel by an employee in their employer's car, between their place of residence and the employee's place of employment in relation to a second employer, is not 'work-related travel' for the purposes of paragraph (a) of the definition.", "Facts": "All legislative references are to the FBTAA. The employee is a current employee of Company A and Company B. The companies are unrelated. During the FBT year, a car benefit (within the meaning of subsection 7(1)) is provided to the employee in respect of their employment with Company A. The relevant car is a utility truck designed to carry a load of less than one tonne. The employee uses the utility truck to travel between their place of residence and their place of employment in relation to Company B. This travel is private use of the utility truck by the employee.", "Reasons_for_Decision": "Summary: Car benefits provided in relation to the types of cars listed in paragraph 8(2)(a), such as utility trucks designed to carry a load of less than one tonne, are exempt benefits if there is no private use of the car during the income year other than the types of private use listed in paragraph 8(2)(b). Paragraph 8(2)(b) requires that there be no private use of the car when the benefit was provided other than: The term 'work-related travel' is defined in subsection 136(1) as follows: work-related travel , in relation to an employee, means: (a) travel by the employee between: (i) the place of residence of the employee; and (ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or It is a fundamental rule of statutory interpretation that the words of a provision must be read in their context (see for example, K & S Lake City Freighters Pty Ltd v. Gordon & Gotch Ltd (1985) 157 CLR 309). Read in isolation, the words 'place of employment of the employee' or 'place from which or at which the employee performs duties of his or her employment' might be interpreted as referring to any place of employment of an employee. However, the introductory words to subsection 8(2) include a contextual reference to the car benefit being provided 'in respect of the employment of a current employee'. Therefore, it is in the context of this employment relationship that paragraph (a) of the definition of 'work-related travel' must be read. In this context, 'place of employment of the employee' and 'place from which or at which the employee performs duties of his or her employment' relate only to the employment relationship under which the car benefit is provided. Accordingly, travel between the employee's place of residence and place of employment in relation to Company B in the utility truck provided by Company A is not 'work-related travel' for the purposes of paragraph (a) of the definition in subsection 136(1).", "Date_of_Decision": "11 June 2013", "Year_of_Income": "Year ending 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 7(1) subsection 8(2) paragraph 8(2)(a) paragraph 8(2)(b) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/96 | ATO ID 2012/97 | ATO ID 2012/98", "Subject_References": "Fringe benefits tax Exempt car benefits Car fringe benefits FBT exempt private use FBT home to work travel FBT work-related travel", "Case_References": "K & S Lake City Freighters Pty Ltd v. Gordon & Gotch Ltd (1985) 157 CLR 309", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201334", "Unmatched_Content": "Updated business line details | Keywords Fringe benefits tax Exempt car benefits Car fringe benefits FBT exempt private use FBT home to work travel FBT work-related travel"}
{"ATO_ID_Number": "ATO ID 2012/96", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: business journey", "Issue": "Where an employee's duties of employment are inherently itinerant in nature, is their journey between home and a work location in their employer's car a 'business journey' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) if they transport a family member during part of the journey?", "Decision": "No. Where the transportation of the family member during the journey is an application of the car to a private use and that application results in the provision of a fringe benefit in relation to the employer, the entire journey does not meet the definition of 'business journey' in subsection 136(1) of the FBTAA.", "Facts": "All statutory references are to the FBTAA. The employer provides a sedan to the employee which is garaged by the employee at their home. Therefore, a car benefit arises under section 7. The car benefit is a 'car fringe benefit' within the meaning of that term in subsection 136(1). The employee carries out their duties of employment at varying locations and varying times. Their duties of employment are inherently itinerant in nature. The employee's unaccompanied travel in the sedan from home to work would be considered business travel in accordance with an application of Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax : private use of cars : home to work travel (MT2027). On a frequent and regular basis in the year of tax the employee used the sedan to transport their spouse to the spouse's workplace during the employee's journey from home to their work locations. Each application of the car to transporting the employee's spouse is an application of the car to a 'private use' as defined in subsection 136(1) and results in the provision of a 'fringe benefit' within the meaning of that term in subsection 136(1). The employer has elected to use the operating cost method in section 10 to calculate the aggregate taxable values of car fringe benefits in relation to the car.", "Reasons_for_Decision": "Summary: Calculating the aggregate taxable values of car fringe benefits under the operating cost method in section 10 requires, amongst other things, a determination of the 'business use percentage' applicable to the car. Under the definition of 'business use percentage' in subsection 136(1), the percentage is dependant, in part, on the number of business kilometres travelled by the car. The definition of 'business kilometre' is 'a kilometre travelled by the car in the course of a 'business journey'. Subsection 136(1) relevantly defines 'business journey' to mean: As stated in the facts, unaccompanied travel of the employee from home to work in the sedan would be considered business travel in accordance with an application of MT 2027. However, as also stated in the facts, the employee's transportation of their spouse to the spouse's workplace during the employee's journey from home to work is an application of the car to a private use which results in the provision of a fringe benefit in relation to the employer. Therefore, that portion of the journey where the employee transports their spouse to the spouse's workplace does not meet the definition of 'business journey'. It falls for consideration whether the entire journey from the employee's home to their work location does not meet the definition of 'business journey' or whether only that portion of the journey where the car was applied to a private use with the spouse as passenger is excluded from being a 'business journey'. The FBTAA does not specify what is to be regarded as a 'journey'. The Macquarie Dictionary 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW provides the following definition for the term 'journey': journey noun 1 . a course of travel from one place to another, especially by land. It is considered that a course of travel in a vehicle from one place to another may include stops, diversions, or changes in the number of occupants in the vehicle and it will still satisfy the definition of journey. In this case the course of travel in the employer's car from the employee's home to their work location is the relevant journey that needs to meet the definition of 'business journey'. The transporting of the employee's spouse during the course of that journey is part of the relevant journey and not a separate journey. There is no mechanism in the FBTAA to allow the apportionment of the total distance travelled in a journey where the journey would otherwise be considered a 'business journey' but it includes an application of the car to a private use. Accordingly, where a journey that would be considered a 'business journey' other than the fact that it includes an application of the car to a private use which results in the provision of a fringe benefit in relation to the employer, the entire journey does not meet the definition of 'business journey'. In this case, where the employee's journey from their home to their work locations includes the transporting of their spouse to the spouse's workplace, the entire journey does not meet the definition of 'business journey' in subsection 136(1).", "Date_of_Decision": "14 November 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 7 section 10 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling MT 2027", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/140 | ATO ID 2012/97 | ATO ID 2012/98", "Subject_References": "Fringe benefits tax Exempt car benefits Car fringe benefits FBT business journey FBT business kilometre FBT exempt private use FBT home to work travel", "Case_References": "", "Other_References": "The Macquarie Dictionary, 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201296", "Unmatched_Content": "Updated business line details | Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling MT 2027 | Keywords Fringe benefits tax Exempt car benefits Car fringe benefits FBT business journey FBT business kilometre FBT exempt private use FBT home to work travel"}
{"ATO_ID_Number": "ATO ID 2012/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt car benefits: private use", "Issue": "Where an employee's duties of employment are inherently itinerant in nature, is the transporting of the employee's family member by the employee on their journey from home to a particular work location in their employer's car, which satisfies the requirements of paragraph 8(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), a 'private use' of the car for the purposes of paragraph 8(2)(b) of the FBTAA?", "Decision": "Yes. The transporting of the employee's family member is a 'private use' of the car for the purposes of paragraph 8(2)(b) of the FBTAA as the use of the car is not exclusively in the course of producing assessable income of the employee.", "Facts": "All statutory references are to the FBTAA. The employee carries out their duties of employment at varying locations and varying times. Their duties of employment are inherently itinerant in nature. The employer provides a panel van designed to carry a load of less than one tonne to the employee. The van satisfies the requirements of paragraph 8(2)(a). The van is garaged by the employee at their home. Therefore, a car benefit arises under section 7. On one occasion in the year of tax the employee transported their child to school in the van during the employee's journey from home to one of their work locations.", "Reasons_for_Decision": "Summary: Car benefits provided in relation to types of cars listed in paragraph 8(2)(a), such as panel vans designed to carry a load of less than one tonne, are exempt benefits if there is no private use other than excepted 'private use' for the purposes of paragraph 8(2)(b). Paragraph 8(2)(b) requires that there was no private use of the car when the benefit was provided other than: Subsection 136(1) states that: private use , in relation to a motor vehicle, in relation to an employee or an associate of an employee, means any use of the motor vehicle by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee. Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax : private use of cars : home to work travel (MT 2027) considers the distinction between business and private use of a car in circumstances where the car is being driven to or from the employee's home. Paragraph 25 of MT 2027 sets out that travel from an employee's home may constitute business travel where the nature of the employment is inherently itinerant. As the employee's duties of employment are inherently itinerant in nature, their unaccompanied journey in the van from home to work would generally be considered business travel in accordance with an application of MT 2027. However, the specific journey in this case involves the transporting of the employee's child to school during the employee's journey from home to one of their work locations. In these circumstances, the employee's journey is not business travel, and it is a private use of the car because the journey was not made exclusively in the course of the employee producing their assessable income. Therefore, the transporting of the employee's family member is a 'private use' of the car for the purposes of paragraph 8(2)(b). Accordingly, it cannot be said that there has been 'no private use of the car' as required by paragraph 8(2)(b).", "Date_of_Decision": "14 November 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 7 paragraph 8(2)(a) paragraph 8(2)(b) subparagraph 8(2)(b)(i) subparagraph 8(2)(b)(ii) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling MT 2027", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/96 | ATO ID 2012/98", "Subject_References": "Fringe benefits tax Exempt car benefits Car fringe benefits FBT exempt private use", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201297", "Unmatched_Content": "Updated business line details | Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling MT 2027 | Keywords Fringe benefits tax Exempt car benefits Car fringe benefits FBT exempt private use"}
{"ATO_ID_Number": "ATO ID 2012/98", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt car benefits: excepted private use", "Issue": "Where an employee's duties of employment are inherently itinerant in nature, is the transporting of the employee's family member by the employee on their journey from home to a particular work location in their employer's car, which satisfies the requirements of paragraph 8(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), an excepted 'private use' for the purposes of paragraph 8(2)(b) of the FBTAA?", "Decision": "Yes. The transporting of the employee's family member is an excepted 'private use' for the purposes of paragraph 8(2)(b) of the FBTAA as the use of the car for this purpose is minor, infrequent and irregular in accordance with subparagraph 8(2)(b)(ii) of the FBTAA.", "Facts": "All statutory references are to the FBTAA. The employee carries out their duties of employment at varying locations and varying times. Their duties of employment are inherently itinerant in nature. The employee's unaccompanied travel in the van from home to work would be considered business travel in accordance with an application of Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax : private use of cars : home to work travel . The employer provides a panel van designed to carry a load of less than one tonne to the employee. The van satisfies the requirements of paragraph 8(2)(a). The van is garaged by the employee at their home. Therefore, a car benefit arises under section 7. On one occasion in the year of tax the employee transported their child to school in the van during the employee's journey from home to one of their work locations. The transporting of the employee's family member is a 'private use' of the car for the purposes of paragraph 8(2)(b). There was no other private use.", "Reasons_for_Decision": "Summary: Car benefits provided in relation to types of cars listed in paragraph 8(2)(a), such as panel vans designed to carry a load of less than one tonne, are exempt benefits if there is no private use other than excepted 'private use' for the purposes of paragraph 8(2)(b). Paragraph 8(2)(b) requires that there be no private use of the car when the benefit was provided other than: As stated in the facts, the transporting of the employee's family member is a 'private use' of the car for the purposes of paragraph 8(2)(b). As a result, it cannot be said that there has been 'no private use of the car' as required by paragraph 8(2)(b). There will need to be a consideration as to whether the private use of the car in this case falls into either of the categories of excepted private use under subparagraph 8(2)(b)(i) and subparagraph 8(2)(b)(ii). | Detailed Reasoning - Subparagraph 8(2)(b)(i) - work-related travel: The term 'work-related travel' is defined in subsection 136(1) as follows: work-related travel , in relation to an employee, means: (a) travel by the employee between: (i) the place of residence of the employee; and (ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or The words 'travel by the employee' in paragraph (a) of the definition of 'work-related travel' in subsection 136(1) make it clear that the paragraph only applies to the employee's travel between home and a work location. Similarly, the words 'travel by the employee' in paragraph (b) of the definition of 'work-related travel' in subsection 136(1) make it clear that the paragraph only applies to the employee's travel that is incidental to travel in the course of performing their employment duties. Travel by someone other than the employee, such as travel by a member of the employee's family, is not the type of travel which falls into either paragraph (a) or (b) of the definition of 'work-related travel' in subsection 136(1). Therefore, the travel by the employee's child in this case does not meet the definition of 'work-related travel'. Accordingly, the transportation of the employee's child to school by the employee on their way to a work location is not work-related travel for the purposes of subparagraph 8(2)(b)(i). In these circumstances, subparagraph 8(2)(b)(i) does not except the private use of the car by the employee. | Detailed Reasoning - Subparagraph 8(2)(b)(ii) - minor, infrequent and irregular private use: The FBTAA does not specify what is meant by the terms 'minor', 'infrequent' and 'irregular' in relation to private use and, therefore, each of those terms will take their ordinary meaning in the context in which they are used. The Macquarie Dictionary 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW provides the following definitions for each of the terms: minor adjective 1. lesser, as in size, extent, or importance... infrequent adjective 1. happening or occurring at long intervals or not often... 2. not constant, habitual, or regular... irregular adjective not characterised by any fixed principle, method, or rate: irregular intervals For the purposes of subparagraph 8(2)(b)(ii) all three of the conditions must be satisfied. The transportation of the employee's child to school during the employee's journey from home to a work location was a one-off occasion and there was no other private use of the car. In these circumstances, the transporting of the employee's family member is an excepted 'private use' for the purposes of subparagraph 8(2)(b)(ii) as the use of the car for this purpose is minor, infrequent and irregular.", "Date_of_Decision": "14 November 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 7 paragraph 8(2)(a) paragraph 8(2)(b) subparagraph 8(2)(b)(i) subparagraph 8(2)(b)(ii) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling MT 2027", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/96 | ATO ID 2012/97", "Subject_References": "Fringe benefits tax Exempt car benefits Car fringe benefits FBT exempt private use FBT home to work travel", "Case_References": "", "Other_References": "Macquarie Dictionary 2009, rev. 5th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201298", "Unmatched_Content": "Updated business line details | Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling MT 2027 | Keywords Fringe benefits tax Exempt car benefits Car fringe benefits FBT exempt private use FBT home to work travel"}
{"ATO_ID_Number": "ATO ID 2011/28", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: car destroyed in natural disaster", "Issue": "Where a car is destroyed in a natural disaster, is it still considered to be a car that is held by the employer for the purposes of subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. It is no longer considered to be a car from the date it was destroyed for the purposes of subsection 7(1) of the FBTAA.", "Facts": "A car which is held by an employer in an FBT year is provided to an employee for their exclusive private use. Part-way through the FBT year the car is burnt out in a bushfire. Prior to being removed some time later, it remained at the employee's residence where it had been incinerated. Due to the scale of the natural disaster, insurance assessors cannot determine any claims for a considerable time after the bushfire.", "Reasons_for_Decision": "Summary: A car fringe benefit will arise under subsection 7(1) of the FBTAA only where a car held by the provider is available for the private use of an employee. Under section 162 of the FBTAA, a car is held by a person where it is owned, leased or otherwise made available to the person by another person. A car is defined under subsection 136(1) of the FBTAA as having the same meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). A car is defined in subsection 995-1(1) of the ITAA 1997 as a 'motor vehicle...'. In turn, motor vehicle is defined in subsection 136(1) of the FBTAA as having the same meaning given by subsection 995-1(1) of the ITAA 1997. The definition of motor vehicle in subsection 995-1(1) of the ITAA 1997 is 'any motor-powered road vehicle (including a 4 wheel drive).' Where a car has been destroyed as a result of a natural disaster, then it ceases to be a motor-powered road vehicle from the date of the natural disaster. The vehicle is simply no longer capable of operating as a road vehicle and is therefore no longer a car as defined for the purposes of the FBTAA. As such the holding period also ends at that time in accordance with section 162C of the FBTAA. There is no requirement that an insurance assessor make a determination that the vehicle is a 'write-off'. In these circumstances the calculation of the taxable value of the car fringe benefits provided will only take into account the period up to the date of the natural disaster. After the natural disaster the vehicle is no longer considered to be a car.", "Date_of_Decision": "5 April 2011", "Year_of_Income": "Year ended 31 March 2011", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) subsection 7(1) subsection 136(1) section 162 section 162C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Car fringe benefits FBT car FBT motor vehicle", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201128", "Unmatched_Content": "Minor punctuation amendment | Minor punctuation amendments | Keywords Fringe benefits tax Fringe benefits Car fringe benefits FBT car FBT motor vehicle"}
{"ATO_ID_Number": "ATO ID 2011/47", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: non-business accessory", "Issue": "Are paint protection, fabric protection, rust protection and window tinting which are applied to a car each a non-business accessory as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Decision": "Yes. Paint protection, fabric protection, rust protection and window tinting are each a non-business accessory as defined in subsection 136(1) of the FBTAA.", "Facts": "An employer purchases a new car from a car dealer. The employer also purchases paint protection, fabric protection, rust protection and window tinting as optional extras. On the contract of sale, the car dealer charges a price for the new car and a separate price for each optional extra. The optional extras are applied to the car by the car dealer at its business premises before the employer takes possession of the car. Paint protection is a clear layer of special wax which is applied on top of the existing paint of the car. This protection cannot be removed. Fabric protection is a protective coating which is applied onto the car fabric and forms a protective layer designed to alleviate oil and water-based spills. Rust protection is a protective coating designed to prevent the corrosion of metal. The product is applied to the underside of the car. Window tinting involves a sun resistant membrane being applied to the car windows.", "Reasons_for_Decision": "Summary: Cost price and non-business accessory are terms which are defined in subsection 136(1) of the FBTAA. The cost price of a car and the cost price of a non-business accessory are two important elements in determining the taxable value of car fringe benefits. Each of these elements can be affected by whether or not an item that is applied to a car is a non-business accessory. Subsection 136(1) of the FBTAA defines the term non-business accessory: in relation to a car, means an accessory fitted to the car, whether at the factory where the car was assembled or at some other place, other than an accessory required to meet the special needs of any business operations in relation to which the car is used. Subsection 136(1) of the FBTAA defines the term fitting to include: in relation to a non-business accessory, includes the acquisition of the accessory. The FBTAA does not define what are accessories or what are accessories fitted to a car. The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01, defines the word accessory as: 1. a subordinate part or object; something added or attached for convenience, attractiveness, etc., such as a spotlight, heater, driving mirror, etc., for a vehicle. 2. (plural) the additional parts of an outfit, as shoes, gloves, hat, handbag, etc. The meaning of the word accessory has been considered in a number of cases relating to sales tax and customs tariff classification. In FC of T v. Polaroid Australia Pty Ltd 71 ATC 4249; (1971) 2 ATR 653, Gibbs J. stated at ATC 4253; ATR 657: The ordinary dictionary meaning of accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependent upon it. In Zendel Australia Ltd & Others v. FC of T 92 ATC 4515; (1992) 24 ATR 101, Hill J. held that an accessory must contribute to the working of some principal item or its general effect and also an accessory must be an adjunct to an item rather than an adjunct to a process. In determining whether aluminium foil was an accessory for an oven, Hill J at ATC 4520; ATR 107 stated: ...As the dictionary definitions demonstrate for an item to be an 'accessory' in the relevant sense that item must contribute to the working of some principal item or its general effect. Thus both a camera lens and light meter are, as Gibbs J observed, accessories to a camera; mag wheels may be an accessory to a car, a crisper may be an accessory to a refrigerator, or perhaps even a baking dish might be an accessory to a stove, at least if custom made for it. In each of these examples the accessory actually contributes to the functioning of the principle item. Paint, fabric, and rust protection and window tinting involve applying a material or chemical onto a car such as by pasting, painting or spraying and may involve other finishing processes. When the process is complete the material which is applied is united with and covers the cars enamel, bodywork, windows or fabric. The material takes the same shape as that to which it is applied and would be difficult, if not impossible to remove. Once the paint protection or the other optional extras are applied to the car it could be argued that they become a component or part of the car itself. In Air International Pty Ltd v. Chief Executive Officer of Customs [2001] FCA 1386; (2001) 48 ATR 173 ( Air International ), Weinberg J. at FCA 51; said: However, an air conditioning system which is installed in a passenger motor vehicle can, in a meaningful sense, be described as being a part, and an accessory, and a component of that vehicle. The Explanatory Memorandum to the Fringe Benefits Tax Assessment Bill 1986 (at Clause 136) says: \"non-business accessory\" is an item the cost of which will be added to the cost price of a car for the purpose of determining the taxable value of a car fringe benefit. It is an accessory not required for the particular needs of the business operations served by the car. An example would be an air-conditioner. Therefore, what may be regarded as a component of a car such as the air-conditioner described in the Explanatory Memorandum and in Air International can also be an accessory. The definition of non-business accessory in subsection 136(1) of the FBTAA requires that the item be an 'accessory fitted to the car'. The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01, defines the word fitted as: 1. made so as to conform to the shape of something else. 2. (of carpets) extending from wall to wall. 3. provided or equipped with accessories. When paint protection or the other optional extras are applied to the car they conform to the shape of the car. This is consistent with the definition of fitted. Therefore, the paint protection, fabric protection, rust protection and window tinting are accessories fitted to the car. These accessories are not required to meet the special needs of any business operations in relation to which the car is used. Paint protection, fabric protection, rust protection and window tinting are each a non-business accessory as defined in subsection 136(1) of the FBTAA.", "Date_of_Decision": "6 April 2011", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car fringe benefits FBT cost price Fringe benefits tax", "Case_References": "Air International Pty Ltd v. Chief Executive Officer of Customs [2001] FCA 1386 (2001) 48 ATR 173", "Other_References": "Explanatory Memorandum to the Fringe Benefits Tax Assessment Bill 1986 Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201147", "Unmatched_Content": "Minor punctuation amendment | Minor amendments to case citation | Minor punctuation and style amendments | Keywords Car fringe benefits FBT cost price Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2007/140", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Fringe Benefits: operating cost method - calculating taxable value when minor benefits that are exempt benefits are provided", "Issue": "When calculating the 'business use percentage' of a particular car for the purposes of the operating cost method under subsection 10(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), will journeys that result in minor benefits that are exempt benefits, be treated as business journeys?", "Decision": "Yes. Such journeys are treated as business journeys and will therefore increase the business use percentage of a car for the purposes of the operating cost method under subsection 10(2) of the FBTAA.", "Facts": "An employer has a pool of cars each of which are held for the full year and for the purposes of subsections 162(1) and 162(2) of the FBTAA. Log book and odometer records are maintained for each of the cars. A particular car is regularly used during the year by employees for both work related and for private purposes. The log book records show that during the year one employee used this car to undertake a short private journey. This use of the car was a car benefit under section 7 of the FBTAA. It was determined at the end of the year that this car benefit satisfied the requirements of section 58P of the FBTAA and was an exempt benefit. The employer elects and uses the operating cost method in section 10 of the FBTAA to calculate the aggregate of the taxable value of car fringe benefits in relation to the car.", "Reasons_for_Decision": "Summary: In calculating the aggregate taxable values of the car fringe benefits under the operating cost method subsection 10(2) of the FBTAA provides the following formula: ( C x (100% - BP )) - R where: C is the operating cost of the car during the holding period; BP is: R is the amount (if any) of the recipient's payment. The term 'business use percentage' is defined in subsection 136(1) of the FBTAA: business use percentage , for a car held by a person during a period ( the holding period ) in an FBT year, means the percentage worked out using the formula: Number of business kilometres travelled by the car during the holding period / Total number of kilometres travelled by the car during the holding period X 100% The term 'business kilometre' is defined in subsection 136(1) of the FBTAA: \" business kilometre \", in relation to a car, means a kilometre travelled by the car in the course of a business journey. The term 'business journey', is defined in subsection 136(1) of the FBTAA: \" business journey \" means: (a) for the purposes of the application of Division 2 of Part III in relation to a car fringe benefit in relation to an employer in relation to a car - a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer; or (b) ....... The car is described in the facts as being held for the full year under subsections 162(1) and 162(2) of the FBTAA. As a result, components C and BP of the formula are also based upon the full year. The formula in subsection 10(2) of the FBTAA does not allow for any direct reduction for the notional value of a minor benefit that is an exempt benefit so the aggregate of the taxable values of any car fringe benefits is unaffected by such a value. When calculating the aggregate of the taxable values of car fringe benefits under subsection 10(2) of the FBTAA, the 'business use percentage' applicable to the car needs to be determined. As the definitions show, the amount of the 'business use percentage' is dependant on the ratio of the number of business kilometres to total kilometres. The number of business kilometres is dependant on what is a 'business journey' The definition of 'business journey' above requires, a journey undertaken in a car otherwise than in the application of the car to a private use, being an application that results in the provision of a fringe benefit in relation to the employer.... (emphasis added). Where a journey is concluded to be a minor benefit that is an exempt benefit, it meets the definition of a 'business journey' as it is not private use that results in the provision of a fringe benefit, but rather it is private use that results in the provision of an exempt benefit. The employer should therefore record any journeys that are determined to be minor benefits that are exempt benefits, as business journeys. The inclusion of a minor benefit that is an exempt benefit as a 'business journey' and therefore as 'business kilometres' will result in an increase in the ratio of number of business kilometres to total kilometres which will increase the 'business use percentage'. The end result of the inclusion of the number of kilometres travelled on the short private journey (which was a minor benefit that is an exempt benefit) will be a reduction in the aggregate taxable value of the car fringe benefits as determined under subsection 10(2) of the FBTAA.", "Date_of_Decision": "10 May 2007", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 7 section 10 subsection 10(2) section 58P subsection 136(1) subsection 162(1) subsection 162(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car fringe benefits Exempt benefits FBT operating cost Fringe benefits Fringe benefits tax Minor benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007140", "Unmatched_Content": "Updated to correct business line | Keywords Car fringe benefits Exempt benefits FBT operating cost Fringe benefits Fringe benefits tax Minor benefits"}
{"ATO_ID_Number": "ATO ID 2006/253", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Fringe Benefits: cost price of a car - extended car warranty", "Issue": "Does the expenditure incurred on the purchase of an extended car warranty form part of the 'cost price' of a car for the purposes of Division 2 of Part III of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The expenditure incurred on the purchase of an extended car warranty does not form part of the 'cost price' of a car for the purposes of Division 2 of Part IIII of the FBTAA, as the expenditure is not directly attributable to the acquisition or delivery of the car.", "Facts": "An employer purchased a new car. The cost of the car included the manufacturer's normal new car warranty. The employer purchased, at an additional cost, an extended car warranty offered by the manufacturer. The employer provided the car to an employee as a car fringe benefit.", "Reasons_for_Decision": "Summary: The 'cost price' of a car is referred to for the purposes of calculating the taxable value of car fringe benefits under both the statutory formula and cost basis methods under Division 2 of Part III of the FBTAA. The term 'cost price' is defined in subsection 136(1) of the FBTAA. Sub-subparagraph (a)(ii)(A) of the definition states that 'cost price' in relation to a car owned by a person, means: the expenditure incurred by the person (other than expenditure in respect of registration or in respect of a tax on, or on a transfer of, registration) that is directly attributable to the acquisition or delivery of the car or, if subsection 7(6) applies in relation to the car, the leased car value of the car when the person first took the car on hire. The purchase price of the employer's car includes the normal new car warranty provided by the manufacturer. This expenditure is directly attributable to the acquisition or delivery of the car and as such forms part of the 'cost price' of a car as defined in subsection 136(1) of the FBTAA. In contrast to a new car warranty, it is considered that the purchase of an extended car warranty is a separate contract from the contract for the sale of the car and is a form of insurance which is not directly attributable to the acquisition or delivery of the car. Accordingly, the separate purchase of an extended car warranty does not form part of the 'cost price' of the car as defined in subsection 136(1) of the FBTAA. If the cost basis method is used to value any car fringe benefits, the expenditure incurred on the separate purchase of an extended car warranty would form part of the operating cost of the car under subparagraph 10(3)(a)(ii) of the FBTAA. Further the separate purchase of an extended warranty does not form part of the 'cost price' of the car and thus the depreciated value of the car as specified in section 12 of the FBTAA for the purpose of determining deemed depreciation and deemed interest under section 11 of the FBTAA. If the statutory formula method is used to value any car fringe benefits, the expenditure incurred on the separate purchase of an extended car warranty does not form part of the base value of the car.", "Date_of_Decision": "28 August 2006", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Division 2 subsection 9(2) subparagraph 10(3)(a)(ii) section 11 section 12 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2011/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/585 | ATO ID 2003/586 | ATO ID 2003/587", "Subject_References": "Car fringe benefits FBT car FBT cost price FBT operating cost FBT statutory formula Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006253", "Unmatched_Content": "Updated to correct Business Line . | Removed Year of Income as not relevant to ongoing view. | Inclusion of reference to subsequent ATO view, TR 2011/3. This ATO ID was retained in 2011 when TR 2011/3 was released as it provides a detailed explanation of the view provided in the later ATO view. | Related Public Rulings (including Determinations) Taxation Ruling TR 2011/3 | Keywords Car fringe benefits FBT car FBT cost price FBT operating cost FBT statutory formula Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2005/166", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Fringe Benefit: non resident employee from United Kingdom or New Zealand", "Issue": "Will the Australian company have provided a person with a car fringe benefit in terms of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where the person is seconded from a United Kingdom (UK) employer to work for an Australian company, which then pays the person a salary under the secondment agreement and also provides them with a car benefit?", "Decision": "Yes. The Australian company in its capacity as an employer has provided a car fringe benefit in accordance with subsection 136(1) of the FBTAA.", "Facts": "The person is a resident of the UK. The person is seconded to Australia to work for an Australian company, which is a resident of Australia. Prior to the person's secondment to Australia, the person was an employee of an employer based in the UK. The person is based in Australia for more than 183 days during the Australian income tax year after which the individual returns to the UK to work for the previous employer. As the person is in Australia for more than 183 days, they are also classified as a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936. The person is deemed to be only a resident of the UK under Article 4(3) of UK/ Australia Double Taxation Convention Signed 21 August 2003 (2003 UK Convention). Whilst in Australia the person's salary is paid by the Australian employer which is not deductible in determining the taxable profits of the UK employer. During the person's stay in Australia, they are provided with a car benefit by the Australian company.", "Reasons_for_Decision": "Summary: By paying for the person's salary the individual would be classified as a 'current employee in terms of subsection 136(1) of the FBTAA with the Australian company being classified as a 'current employer' under the same subsection. There would consequently be a fringe benefits tax liability in terms of subsection 66(1) of the FBTAA to the Australian company where it (as an employer) provides a fringe benefit to an employee in respect of their employment. The car benefit provided to the employee has been provided to them in respect of their employment' as defined by subsection 136(1) of the FBTAA and would therefore also constitute a car fringe benefit in terms of subsection 136(1) of the FBTAA, meaning the Australian employer would notionally have a fringe benefits tax liability in Australia. In determining liability to fringe benefits tax on fringe benefits provided to an employee, it is necessary to consider not only the fringe benefits tax law but also any applicable double tax agreement contained in the Agreements Act. Section 4AA of the International Tax Agreements Act 1953 (the Agreements Act) incorporates that Act with the FBTAA so that both Acts are read as one. The provisions of the Agreements Act however will have effect notwithstanding any inconsistencies that may exist in the FBTAA. Section 3AAA of the Agreements Act lists the 2003 UK Convention as one of the Current Agreements. Section 5 gives this current agreement the force of law. The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. In accordance with Article 15(1) of the 2003 UK Convention, where a fringe benefit is taxable in both contracting states, the benefit will be taxable only in that contracting state which would have the primary taxing right over that benefit, if the value of that benefit were paid to the employee as ordinary employment income. Article 15(2)(b) of the 2003 UK Convention provides that a Contracting State has a 'primary taxing right' to the extent that it has a taxing right under the 2003 UK Convention in respect of the remuneration for the relevant employment. Article 1(e) of the 2003 UK Convention defines the term 'contracting state' to mean UK or Australia as the context requires. The Explanatory Memorandum (EM) introducing the 2003 UK Convention states that under Article 15, the country which would have the primary taxing right if the benefit were ordinary employment income will have the sole taxing right in relation to the fringe benefit and this would generally be determined in accordance with Article 14 (Income from employment) or Article 18 (Government service). The EM also states that regardless of whether the benefit is taxed under the ordinary income tax law or under a separate legislation as is in Australia, or whether the tax is liable to be paid by the employer or the employee, Article 15 of the 2003 UK Convention will ensure that liability to tax on the fringe benefit will be taxed in only one of the countries. Article 14(1) of the 2003 UK Convention which deals with income from employment provides that salaries, wages and other similar remuneration derived by a resident of the UK shall be taxable only in the UK unless the employment is exercised in Australia. If the employment is so exercised, such remuneration may be taxed in Australia. Notwithstanding the provisions of Article 14(1) of the 2003 UK Convention, under Article 14(2), remuneration derived by a resident of the UK in respect of employment exercised in Australia shall be taxable only in the UK where: As the employee has been present in Australia for more than 183 days and the remuneration is paid by an Australian resident employer, Article 14(2) of the 2003 UK Convention does not apply. Under Article 14(1) of the 2003 UK Convention, Australia has the primary taxing right over the remuneration received by the employee as it is an Australian sourced income. The value of the fringe benefit if paid as ordinary employment income would be assessable in Australia. Therefore, in accordance with Article 15(1) of the 2003 UK Convention, the fringe benefit provided by the Australian employer would be taxable only in Australia.", "Date_of_Decision": "14 June 2005", "Year_of_Income": "Year ending 31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1) subsection 66(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Benefit Car fringe benefits FBT employees FBT employers Fringe benefits tax International tax Overseas employees United Kingdom", "Case_References": "", "Other_References": "The Convention between Australia and the United Kingdom of Great Britain and Northern Ireland - Article 4(3) - Article 14(1) - Article 14(2) - Article 15(1)", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005166", "Unmatched_Content": "Updated legislative reference | Updated to correct business line | Facts and Reasons for Decision | Updated references to the UK / Australia Double Taxation Convention | Keywords Benefit Car fringe benefits FBT employees FBT employers Fringe benefits tax International tax Overseas employees United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/385", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: cost basis (operating cost) method - log book records not maintained", "Issue": "Can an employer use the operating cost method to value the car fringe benefits in relation to a particular car, under subsection 10(2) of Fringe Benefits Tax Assessment Act 1986 (FBTAA), where a log book has not been maintained?", "Decision": "Yes. An employer can use the operating cost method of valuing all of the car fringe benefits for a particular car, under subsection 10(2) of the FBTAA, where a log book has not been maintained. However, there will be no reduction in the operating cost of the car for any business journeys that were made.", "Facts": "The employer provides a car to an employee which is used for predominantly private purposes. The employer has never maintained a log book in respect of this car. The employer elects to use the operating cost method to calculate the taxable value of the car fringe benefits in relation to this car. The employee made a recipient's payment in relation to this car.", "Reasons_for_Decision": "Summary: Under subsection 10(1) of the FBTAA an employer may elect to use the cost basis (or operating cost) method to calculate the taxable value of all of the car fringe benefits that relate to a particular car. The operating cost method under subsection 10(2) of the FBTAA makes provision for a reduction in the taxable value of the car fringe benefits in relation to a car where there has been business use of the car. However, under section 10A of the FBTAA, the employer is not entitled to make such a reduction unless a log book has been maintained. Where a log book has not been maintained the taxable value of a car under the operating cost method will be the total operating costs of the car reduced by any recipient's payment. The employer is entitled to use the operating cost method of calculating the taxable value of the car fringe benefits but will be prohibited from making any reduction in the taxable value for any business use of the car.", "Date_of_Decision": "31 March 2004", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 10(1) subsection 10(2) subsection 10(5) section 10A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Car fringe benefits FBT log book records FBT operating cost FBT car", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004385", "Unmatched_Content": "Updated to correct business line | Keywords Fringe benefits tax Car fringe benefits FBT log book records FBT operating cost FBT car"}
{"ATO_ID_Number": "ATO ID 2004/527", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: 1/3 reduction in the base value of a car under the statutory formula method", "Issue": "Does an employer need to hold a car continuously for 4 years before the base value can be reduced by 1/3, under paragraph 9(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. A 1/3 reduction in the base value can be made under paragraph 9(2)(a) of the FBTAA in the fringe benefits tax (FBT) year following the fourth anniversary of the date the car was first owned or leased by the employer. The car does not have to be held continuously by the provider for the entire 4–year period.", "Facts": "The employee entered into an effective salary sacrifice arrangement with his employer who provided him with the use of a car through a novated lease agreement. At the end of a three–year lease period the employee purchased the car from the lease company. A year later, the employee entered into a second lease agreement with the employer involving this same car. Under the second lease agreement the employee sold the car to a new leasing company and is then provided with the same car through a novated lease agreement between the employer and that company. The employer elects to use the statutory formula method to value any car fringe benefits for this particular car.", "Reasons_for_Decision": "Summary: Subsection 9(1) of the FBTAA sets out the formula for calculating the taxable value for one or more car fringe benefits for a particular car held by the employer, where the employer uses the statutory formula method. Under subsection 162(1) of the FBTAA a car is 'held' where it is owned, leased or otherwise made available to the employer by another person. Subsection 9(2) of the FBTAA explains how to calculate the base value of a car. Under paragraph 9(2)(a) there is provision to reduce the base value component where a car is owned (subparagraph 9(2)(a)(i)) or leased (subparagraph 9(2)(a)(ii)). Whether the car is owned or leased is not relevant, it merely needs to be 'held'. The 1/3 reduction in base value is allowed 'where the commencement of the year of tax is later than the fourth anniversary of the earliest holding time'. Therefore, the reduction is determined on the length of time between the first time the car is held and the current time. If this difference is 4 years, then a 1/3 reduction in the base value may be made at the commencement of the next FBT year. The car does not need to be held continuously for the entire 4–year period for the reduction to be made.", "Date_of_Decision": "17 June 2004", "Year_of_Income": "Year ending 31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 9 paragraph 9(2)(a) subparagraph 9(2)(a)(i) subparagraph 9(2)(a)(ii) subsection 162(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/28", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/584 | ATO ID 2004/528", "Subject_References": "Fringe benefits tax Car fringe benefits FBT base value FBT statutory formula", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004527", "Unmatched_Content": "Updated to correct business line | Amend 'tax year' to 'year of tax' to reflect legislative provision. | Related ATO Interpretative Decisions | Amend ATO ID 2003/528 to ATO ID 2004/528 to correct error. | Related Public Rulings (including Determinations) Taxation Determination TD 94/28 | Keywords Fringe benefits tax Car fringe benefits FBT base value FBT statutory formula"}
{"ATO_ID_Number": "ATO ID 2004/528", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: base value of a car where the car has been previously leased by the employer", "Issue": "If an employer provides the use of a car to an employee, where the car has been previously provided to the employee under an earlier lease agreement that involved a different lease company, will the base value of the car that is calculated under subsection 9(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) be the cost price of the car to the second lessor?", "Decision": "No. The base value of the car, for the purpose of subsection 9(2) of the FBTAA, is determined by reference to the earliest time that the employer first held the car.", "Facts": "The employee entered into an effective salary sacrifice arrangement with his employer who provided him with a car through a novated lease agreement. At the end of the lease period the employee purchased the car from the lease company. Shortly after, the employee entered into a second lease agreement with the employer involving the same car. Under the second lease arrangement the employee sold the car to a new leasing company and is then provided with the same car through a novated lease agreement between the employer and that company. The employer elects to use the statutory formula method to value any car fringe benefits for this car.", "Reasons_for_Decision": "Summary: Subsection 9(1) of the FBTAA sets out the formula for calculating the taxable value for one or more car fringe benefits for a particular car held by the employer, where the employer uses the statutory formula method. Under subsection 162(1) of the FBTAA a car is 'held' where it is owned, leased or otherwise made available to the employer by another person. Where the car is leased by the employer, subparagraph 9(2)(a)(ii) of the FBTAA provides that the base value of the car is the 'leased car value of the car at the earliest holding time'. 'Leased car value' is defined in subsection 136(1) of the FBTAA to mean, where a car is 'held but not owned by a person', the cost price of the car to the lessor. 'Earliest holding time' is explained at paragraph 9(2)(b) of the FBTAA to be the earliest time before the current time when the car was held by the provider or an associate of the provider. Therefore, the base value will be the cost price to the lessor under the first lease arrangement, being the earliest time that the car was held.", "Date_of_Decision": "22 June 2004", "Year_of_Income": "31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 9(1) subsection 9(2) subsection 136(1) subsection 162(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "2004/527 | 2003/584", "Subject_References": "Car fringe benefits FBT base value FBT cost price FBT leased car value FBT statutory formula Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004528", "Unmatched_Content": "Updated to correct business line | Keywords Car fringe benefits FBT base value FBT cost price FBT leased car value FBT statutory formula Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2004/852", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: statutory formula method - places of residence and available for private use", "Issue": "Where an employee is provided with the use of a car by their employer and, as a result of employment duties, the car is parked overnight at or near the employee's temporary motel, hotel or similar type of accommodation, will the car be taken to be available for private use under subsection 7(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. A car parked overnight by an employee under such circumstances is considered to be 'garaged or kept at or near a place of residence' and thus available for private use under subsection 7(2) of the FBTAA.", "Facts": "The employee has been provided with the use of a car by their employer. The employer uses the statutory formula method for calculating the taxable value of car fringe benefits. The car is generally garaged or kept overnight at the employee's home. The employee uses the car for the purposes of both private and business travel. When using the car for business travel, the employee is required to occasionally be away from home overnight. When this occurs, the employee parks the car at or near a motel, which is temporary accommodation.", "Reasons_for_Decision": "Summary: Under paragraph 7(1)(a) of the FBTAA, a car benefit will arise at any time of day in respect of the employment of the employee where a car held by the provider is either: In accordance with paragraph 7(2)(b) of the FBTAA, a car shall be taken to be available for private use where it is garaged or kept at or near a place of residence of the employee or an associate of the employee, for the purposes of subparagraph 7(1)(a)(ii) of the FBTAA. Subsection 136(1) of the FBTAA defines a 'place of residence' as: Accommodation in the form of a motel or hotel room is 'sleeping accommodation' that is used on a temporary basis. Therefore, where the car is parked overnight at or near such temporary accommodation, this will constitute days on which the car is available for private use of the employee.", "Date_of_Decision": "25 October 2004", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 7(1)(a) subparagraph 7(1)(a)(ii) subsection 7(2) paragraph 7(2)(b) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/16", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/613", "Subject_References": "Fringe benefits tax Fringe benefits Car fringe benefits FBT car FBT statutory formula", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004852", "Unmatched_Content": "Updated to correct business line | Related Public Rulings (including Determinations) Taxation Determination TD 94/16 | Keywords Fringe benefits tax Fringe benefits Car fringe benefits FBT car FBT statutory formula"}
{"ATO_ID_Number": "ATO ID 2003/498", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car benefit: service of a chauffeur", "Issue": "Is the service of a chauffeur a car benefit as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The service of a chauffeur is a residual benefit as defined in subsection 136(1) of the FBTAA and is not a car benefit.", "Facts": "A company owns and uses a car in its business. The company allows its employee to travel in the car for business and private purposes. The employer provides the service of a chauffeur to the employee. The chauffeur drives the car at the employee's direction for business and private purposes.", "Reasons_for_Decision": "Summary: Is the service of a chauffeur a car benefit? The term car benefit, as defined in subsection 136(1) of the FBTAA, 'means a benefit referred to in subsection 7(1)'. A benefit referred to in subsection 7(1) of the FBTAA is the application or availability of the car for private purposes. The employee is provided with the service of a chauffeur. The chauffeur drives the car at the employee's direction. The service of a chauffeur is not an application of a car to a private use by the employee. The service of a chauffeur is not the availability of a car for the private use of the employee. The service of a chauffeur is not a benefit referred to in subsection 7(1) of the FBTAA and is not a car benefit as defined in subsection 136(1) of the FBTAA. Accordingly, the car benefit provisions (under Subdivision A of Division 2 of Part III of the FBTAA) do not apply in relation to the service of a chauffeur. Is the service of a chauffeur a residual benefit? The service of a chauffeur is a benefit as defined in subsection 136(1) of the FBTAA. The benefit does not fall within any of the categories of benefits covered by Subdivision A of Divisions 2 to 11 (inclusive) of Part III of the FBTAA, such as car benefits. Accordingly, the benefit is a residual benefit per section 45 of the FBTAA, and as defined in subsection 136(1) of the FBTAA.", "Date_of_Decision": "18 June 2003", "Year_of_Income": "Year ending 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 7(1) section 45 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Benefit Car fringe benefits FBT car FBT car expenses Fringe benefits Fringe benefits tax Residual fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003498", "Unmatched_Content": "Updated business line details | Minor punctuation and style amendments. | Keywords Benefit Car fringe benefits FBT car FBT car expenses Fringe benefits Fringe benefits tax Residual fringe benefits"}
{"ATO_ID_Number": "ATO ID 2003/584", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: statutory formula method - 'earliest holding time'", "Issue": "When using the statutory formula method and where the foreign car company is an associate of the provider, is the time the car was first held by the foreign car company that manufactures the car, the 'earliest holding time' for the purposes of paragraph 9(2)(b) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The time the car was first held by the foreign car company is the earliest time before the 'current time' when the car was held by the provider or an associate of the provider.", "Facts": "The foreign car company manufactures the car outside of Australia. On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car. The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia. The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company. The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes. The Australian company uses the statutory formula method for returning its car fringe benefits. These facts are common in the 'Related ATO Interpretative Decisions' below.", "Reasons_for_Decision": "Summary: When using the statutory formula method to determine the taxable value of car fringe benefits, the taxable value is calculated by reference to the base value of the car and by reference to the 'earliest holding time'. Paragraph 9(2)(b) of the FBTAA provides that: the earliest holding time, in relation to a car held by the provider at a particular time (the \"current time\"), is the earliest time before the current time when the car was held by the provider or an associate of the provider. Subsection 162(1) of the FBTAA refers to a car 'held' by a person if the car is owned by the person, leased to the person, or otherwise made available to the person by another person. Subsection 162(2) does not apply when using the statutory formula method. The Australian company is the provider of the car fringe benefit and 'held' the car (by ownership) at the 'current time'. Sections 158 and 159 of the FBTAA apply so that parent and subsidiary companies will be 'associates' of each other for the purposes of the FBTAA. Thus, the Australian company and the foreign car company are associates. The foreign car company, which is an associate of the Australian company, first 'held' the car (by ownership) on the day the manufacturing process was complete and the car come into existence. This day will be the 'earliest holding time' under paragraph 9(2)(b) of the FBTAA.", "Date_of_Decision": "3 April 2003", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 9(2)(b) subsection 136(1) section 158 section 159 subsection 162(1) subsection 162(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/585 | ATO ID 2003/586 | ATO ID 2003/587", "Subject_References": "Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT statutory formula FBT Car", "Case_References": "", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003584", "Unmatched_Content": "Updated business line details | Keywords Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT statutory formula FBT Car"}
{"ATO_ID_Number": "ATO ID 2003/585", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: cost price for manufacturer - 'application to the person's own use'", "Issue": "When using the statutory formula method and determining the 'cost price' of a car, for the purposes of the definition in subparagraph 136(1)(a)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), in relation to a car owned and manufactured by a foreign car company, will the car be 'applied to the person's (foreign car company's) own use' because the person sells the car?", "Decision": "Yes. Under the definition of 'cost price', selling the car would be an application to the person's own use.", "Facts": "The foreign car company manufactures the car outside of Australia. On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car. The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia. The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company. The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes. The Australian company uses the statutory formula method for returning its car fringe benefits. These facts are common in the 'Related ATO IDs' below.", "Reasons_for_Decision": "Summary: Where the statutory formula method is used to determine the taxable value of a car fringe benefit, the taxable value of the benefit is calculated by reference to the base value of the car which, pursuant to subsection 9(2) of the FBTAA, includes the 'cost price' of the car. 'Cost price' is defined in subsection 136(1) of the FBTAA. Where a car is owned by the person and manufactured by the person, subparagraph 136(1)(a)(i) applies as follows: the amount for which the car could reasonably have been expected to have been sold by the person by wholesale under an arm's length transaction at or about the time when the car was applied to the person's own use [emphasis added] Thus, the 'cost price' of the car is an amount determined at a particular point in time, being the time the car was applied to the person's own use. | Detailed Reasoning - Applied to the person's own use: The expression 'applied to own use' and similar expressions, have been held by the Courts to have a broad meaning when used in relation to goods manufactured and used by the manufacturer in the course of carrying on a business ( Max Factor & Co. Inc v Federal Commissioner of Taxation (1971), 124 CLR 353; 71 ATC 4136; (1971) 2 ATR 420, Deputy Federal Commissioner of Taxation v Taubmans (NSW) Pty Ltd (1966), 115 CLR 570; (1966) 14 ATD 188). In the Max Factor case above, Justice Gibbs referred to the House of Lords decision in Shell-Mex and BP Ltd v. Clayton [1956] 3All ER 185. In that case Viscount Simmonds said at pp 191-192: It would in my opinion, be in its context placing too narrow a meaning on \"use\" to confine it to use by consumption. It may, and, I think, does, include such use as a trader makes of his stock in trade, that is by selling it. Thus, where a foreign car company sells a car that it has manufactured, to its Australian subsidiary company, the sale of the car is considered to be an application of the car to the foreign company's own use, and this 'application to the person's own use' occurs at the time of sale.", "Date_of_Decision": "3 April 2004", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 9(2) subsection 136(1) subparagraph 136(1)(a)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/584 | ATO ID 2003/586 | ATO ID 2003/587", "Subject_References": "Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT car FBT statutory formula", "Case_References": "Max Factor & Co. Inc v. Federal Commissioner of Taxation (1971) 124 CLR 353 71 ATC 4136 (1971) 2 ATR 420", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003585", "Unmatched_Content": "Keywords Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT car FBT statutory formula"}
{"ATO_ID_Number": "ATO ID 2003/586", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: cost price of a car - associate of provider is a foreign company that manufactured the car", "Issue": "When using the statutory formula method and determining the 'cost price' of a car, for the purposes of the definition in subparagraph 136(1)(a)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where the associate of the provider is a foreign car company that manufactured the car, will the wholesale price of the car include transport costs, customs duty and import duty?", "Decision": "No. When determining the 'cost price' of the car, transport costs, customs duty and import duty are not costs incurred by the foreign car company and do not form part of the wholesale price of the car.", "Facts": "The foreign car company manufactures the car outside of Australia. On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car. The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia. The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company. The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes. The Australian company uses the statutory formula method for returning its car fringe benefits. These facts are common in the 'Related ATO IDs' below.", "Reasons_for_Decision": "Summary: Where the statutory formula method is used to determine the taxable value of a car fringe benefit, the taxable value of the benefit is calculated by reference to the base value of the car which, pursuant to subsection 9(2) of the FBTAA, includes the 'cost price' of the car. 'Cost price' is defined in subsection 136(1) of the FBTAA. Where a car is owned by the person and manufactured by the person, subparagraph 136(1)(a)(i) applies as follows: the amount for which the car could reasonably have been expected to have been sold by the person by wholesale under an arm's length transaction at or about the time when the car was applied to the person's own use [emphasis added] Where the manufacturer sells the car, it will be applied to the manufacturer's own use (refer to ATO ID 2003/585). Thus, the cost price of the car will be the amount the manufacturer could reasonably expect to receive if they had sold the car by wholesale under an arm's length transaction, at or about the time the car was applied to the manufacturer's own use. As the costs of transport, customs duty and import duty are not incurred by the foreign car company, they do not form part of the wholesale price of the car.", "Date_of_Decision": "3 April 2003", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 9(2) subsection 136(1) subparagraph 136(1)(a)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/584 | ATO ID 2003/585 | ATO ID 2003/587", "Subject_References": "Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT car FBT statutory formula", "Case_References": "", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003586", "Unmatched_Content": "Updated Business line to SEO. | Keywords Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT car FBT statutory formula"}
{"ATO_ID_Number": "ATO ID 2003/587", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car fringe benefits: base value of the car", "Issue": "When using the statutory formula method and when a car is manufactured by a foreign car company and subsequently purchased by its Australian subsidiary, can section 13 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to increase the base value of the car?", "Decision": "No. Section 13 of the FBTAA will not apply to increase the base value of the car.", "Facts": "The foreign car company manufactures the car outside of Australia. On the day the manufacturing process is completed, the car commences to exist as a 'car' as defined in subsection 136(1) of the FBTAA. On this day, the foreign car company owns the car. The Australian company is a wholly owned subsidiary of the foreign car company. The Australian company purchases the car from the foreign car company and imports the car into Australia. The costs of importing the car into Australia include transport costs, customs duty and import duty. These costs are incurred by the Australian company. The Australian company is the employer of the employee, and during the year it maintains the car and allows its employee to use the car for private and work-related purposes. The Australian company uses the statutory formula method for returning its car fringe benefits.", "Reasons_for_Decision": "Summary: Where the statutory formula method is used to determine the taxable value of a car fringe benefit, the taxable value of the benefit is calculated by reference to the base value of the car which, pursuant to subsection 9(2) of the FBTAA, includes the 'cost price' of the car. Section 13 of the FBTAA is an anti-avoidance measure that ensures that the base value of a car will always be determined by reference to expenditure under arm's length transactions. In the present case, the base value has firstly been determined by reference to the 'cost price' under subparagraph 136(1)(a)(i) of the FBTAA to the foreign car company, being the arm's length wholesale price (refer ATO ID 2003/586). Therefore, in applying section 13 of the FBTAA, the reference in that section to the 'person' who incurred the expenditure or to 'person' who acquired the property, can only be the foreign car company. That is, whether or not the Australian company incurred expenditure in acquiring the car is irrelevant in determining the base value of the car. Because the 'cost price' is already a price under an arm's length transaction (under subparagraph 136(1)(a)(i) of the FBTAA), then subsection 13(2) of the FBTAA has no application. Subsection 13(4) of the FBTAA requires an acquisition of property or the provision of any benefit. The foreign car company does not acquire the car - it manufactures it (refer Taxation Ruling TR 2001/2 paragraph 52). The foreign car company is not provided with any benefit under subsection 13(4). Therefore subsection 13(4) does not apply. Accordingly, section 13 does not apply to increase the base value of the car.", "Date_of_Decision": "3 April 2003", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 9(2) section 13 subsection 13(2) subsection 13(4) subsection 136(1) subparagraph 136(1)(a)(i)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/584 | ATO ID 2003/585 | ATO ID 2003/586", "Subject_References": "Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT Car FBT statutory formula method", "Case_References": "", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003587", "Unmatched_Content": "Updated Business line to SEO. | Updated to reflect legislative amendment to the definition of 'cost price' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/2 | Keywords Fringe benefits tax Car fringe benefits FBT base value FBT cost price FBT Car FBT statutory formula method"}
{"ATO_ID_Number": "ATO ID 2002/102", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax - Changing the basis for valuing car fringe benefits", "Issue": "Can a request for an amendment of a Fringe Benefits Tax (FBT) return after the return has been lodged, to change the method used to value a car fringe benefit from the statutory formula to the operating cost method, be allowed under subsection 10(4) of the Fringe Benefit Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. A request for an amendment of an FBT return after the return has been lodged, to change the method used to value a car fringe benefit from the statutory formula to the operating cost method, can be allowed under subsection 10(4) of the FBTAA.", "Facts": "The employer lodged an FBT return using the statutory formula method to calculate the value of a vehicle as the log book was misplaced. Subsequently, the log book was found. A comparison of the taxable value of the vehicle using the operating cost method as against the statutory formula method revealed that the value was lower under the operating cost method. The employer requested an amendment to the original assessment.", "Reasons_for_Decision": "Summary: As required under subsection 10(4) of the FBTAA, an employer wishing to use the operating cost method to value a car fringe benefit is required to make an election in writing to the Commissioner on or before 'the declaration date'. This date is defined in subsection 136(1) of the FBTAA as 'the date of lodgment of the return of the fringe benefits taxable amount of the employer of the year of tax, or such later date as the Commissioner allows'. It is considered appropriate in the specific circumstances of the employer for the Commissioner to extend the declaration date to accept a late election by the employer to allow the operating cost method of valuing the car fringe benefit.", "Date_of_Decision": "16 November 2001", "Year_of_Income": "Year ended 31 March 2001", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Subsection 10(4) Subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT car FBT operating cost FBT statutory formula", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002102", "Unmatched_Content": "Updated to Superannuation and Employer Obligations | Keywords FBT car FBT operating cost FBT statutory formula"}
{"ATO_ID_Number": "ATO ID 2002/925", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Fringe Benefits: Log book requirements - high integrity electronic devices", "Issue": "Can a high integrity electronic device, other than the motor vehicle's own odometer, be used in keeping a log book when ascertaining the value of a car fringe benefit under Section 10 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), when the log book is generated and entries completed on a weekly basis?", "Decision": "Yes. A high integrity electronic devices, other than the motor vehicle's own odometer, can be used in keeping a log book when ascertaining the value of a car fringe benefit under Section 10 of the FBTAA, when the log book is generated and entries completed on a weekly basis.", "Facts": "The employer has purchased a high integrity global positioning system (GPS) to record the distances travelled by motor vehicles. The system, which is attached to the cars of employees, records the distances travelled from one point to the next as well as the date and time of the journeys. The opening odometer reading of the car is programmed into the system and the GPS continuously tracks the location and distance of journeys undertaken in the car. Standard journeys can be stored on a database with the co-ordinates of the locations recorded on that database. A draft log book is generated once a week and given to the driver to record the purpose of each non-standard journey undertaken in the car. Once this updated data is entered into the database, a log book report is generated for the employee to sign off, also on a weekly basis. This log book report contains all the details required to meet the definition of 'log book records' under subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: 'Odometer' is not defined in the FBTAA, but the Macquarie dictionary defines it as 'an instrument for measuring distance passed over, as by a motor vehicle'. 'Odometer records', as defined in subsection 136(1) of the FBTAA makes reference to 'odometer readings of the car '. In this regard, it is concluded that, whilst these readings must pertain to the car, it does not necessarily mean that they must also be attributable either wholly or in part to the rotation of the car's wheels, thereby mechanically moving the standard odometer fitted in the car by the manufacturer. The Commissioner may accept other non-standard electronic odometer devices being used, subject to the integrity of such devices used. In maintaining 'log book records' as defined, entries should be made 'as soon as reasonably practicable, after the end of the journey'. It is ATO policy to expect that normally such entries would be made in the log on the same day as the journey undertaken. However, in a situation where either it is not practical to generate a hard copy of the log on a daily basis from such devices or the employees do not have access to a hard copy of the log on a daily basis, the period for making such entries may be extended. On this basis, the use of a high integrity electronic device, other than the motor vehicle's own odometer, whereby the log book is produced and entries completed on a weekly basis is accepted as meeting the requirements of the law.", "Date_of_Decision": "22 February 2002", "Year_of_Income": "Year ending 31 March 2002 Year ending 31 March 2003 Year ending 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Section 10A Subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Car fringe benefits FBT log book records Odometer", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002925", "Unmatched_Content": "Keywords Fringe benefits tax Car fringe benefits FBT log book records Odometer"}
{"ATO_ID_Number": "ATO ID 2001/327", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Lump sum payment received for removal of motor vehicle from remuneration package", "Issue": "Is a lump sum payment received by a taxpayer for the removal of a motor vehicle from a remuneration package assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, a lump sum payment received by a taxpayer for the removal of a motor vehicle from a remuneration package is assessable income under subsection 6-5(1) of the ITAA 1997.", "Facts": "The taxpayer's employer removed a motor vehicle from the taxpayer's remuneration package. The motor vehicle had been supplied to the taxpayer during previous years as a fringe benefit. After the taxpayer's employment was terminated the taxpayer successfully recovered the fringe benefits tax value of the motor vehicle from the former employer. The taxpayer received the fringe benefits tax value of the motor vehicle as a lump sum payment from which an amount of tax had been withheld under section 12-35 of Schedule 1 of the Taxation Administration Act 1953.", "Reasons_for_Decision": "Summary: An employee's remuneration package may include salary, wages or fringe benefits provided by the employer. Salary or wages are considered to be income according to ordinary concepts under subsection 6-5(1) of the ITAA 1997 and are therefore assessable income. Income provided in the form of fringe benefits, as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), is not assessable income and is not exempt income under subsection 23L(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Section 11-55 of the ITAA 1997 lists fringe benefits under subsection 23L(1) of the ITAA 1936 as non-assessable non-exempt income. Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income it is not assessable income. The definition of fringe benefit under subsection 136(1) of the FBTAA specifically excludes a payment of salary or wages. The taxpayer received a lump sum payment representing the fringe benefits tax value of the motor vehicle that was excluded from the remuneration package. As this fringe benefit entitlement was satisfied by the payment of cash, the payment is considered to be salary or wages and is therefore assessable income under subsection 6-5(1) of the ITAA 1997.", "Date_of_Decision": "23 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1) subsection 6-15(3) section 11-55", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Salary or wage income Salary sacrifice Fringe benefits Car remuneration package FBT salary packaging FBT motor vehicle FBT car", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001327", "Unmatched_Content": "Update reference to subsection 23L(1) of ITAA 1936 Include reference to section 11-55 of ITAA 1997 | Replace reference to subsection 6-15(2) of ITAA 1997 with subsection 6-15(3) Include reference to section 11-55 of ITAA 1997 | Keywords Income Salary or wage income Salary sacrifice Fringe benefits Car remuneration package FBT salary packaging FBT motor vehicle FBT car"}
{"ATO_ID_Number": "ATO ID 2014/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Parking Fringe Benefits: all-day parking", "Issue": "Is a fee charged by the operator of a commercial parking station for vehicles entering the station from 1.00 p.m. a fee charged for 'all-day parking' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. A fee charged by the operator of the commercial parking station for vehicles entering the station from 1 p.m. is not a fee for 'all-day parking' as defined in subsection 136(1) of the FBTAA. After 1 p.m. it is impossible to park for a continuous period of six hours or more during a 'daylight period' on that day. Under the definition in subsection 136(1) a 'daylight period' ends before 7.00 p.m. on that same day.", "Facts": "An employee parks his car in a car parking space located on the employer's business premises. The car parking space used by the employee is located within one kilometre of a commercial parking station as defined in subsection 136(1) of the FBTAA. The parking station operates between 6:30 a.m. and 10.00 p.m. The operator of the parking station charges different fees for vehicles that enter before 1 p.m. and those that enter from 1 p.m.", "Reasons_for_Decision": "Summary: All legislative references are to the FBTAA. Subsection 39A(1) sets out the criteria that must be met for a car parking benefit to arise. Subparagraph 39A(1)(a)(ii) requires a commercial parking station to be located within a 1 km radius of the premises on which the car is parked. Subparagraph 39A(1)(a)(iii) contains the following requirement: 'All-day parking' is defined in subsection 136(1) to mean, in relation to a particular day: ... parking of a single car for a continuous period of 6 hours or more during a daylight period on that day. 'Daylight period' is defined in subsection 136(1) to mean, in relation to a day: so much of a period on that day as occurs: (a) after 7 a.m. on that day; and (b) before 7 p.m. on that day. The application of these definitions was considered by the Administrative Appeals Tribunal in Case 27/95 95 ATC 275; AAT Case 10 , 128 (1995) 30 ATR 1297. The Tribunal considered a submission that the lowest fee charged for all-day parking would be 10 cents where that was the charge for a car parked for a period of at least six hours from just before 6.00 p.m. Senior Member Fayle said at ATC 278: 16. ... All-day parking, as mentioned, is a continuous period of at least 6 hours during a daylight period on that day. 'Daylight period' is defined above as being a twelve hour period from 7.00 a.m. to 7.00 p.m., a definition, it is observed, which conforms with the lexical definition of 'day'. 17. It is impossible for the applicant to satisfy this condition if the parking commences just before 6.00 p.m., only one hour before 7.00 p.m. Even if the fee of 10 cents was a charge to park from 6.00 p.m. for a continuous period of at least 6 hours, that would not be for 'all-day parking' as defined in the Act. Similarly, the fee charged for vehicles entering the parking station from 1 p.m. is not a fee paid for 'all-day parking' as defined in subsection 136(1). After 1 p.m. it is impossible to park for a continuous period of six hours or more during a 'daylight period' on that day. Under the definition in subsection 136(1) a 'daylight period' ends before 7.00 p.m. on that same day.", "Date_of_Decision": "27 February 2014", "Year_of_Income": "Year ended 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 39A(1) subparagraph 39A(1)(a)(ii) subparagraph 39A(1)(a)(iii) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car parking fringe benefits FBT daylight period Fringe benefits Fringe benefits tax", "Case_References": "Case 27/95 95 ATC 275 30 ATR 1297", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201412", "Unmatched_Content": "Keywords Car parking fringe benefits FBT daylight period Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2007/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Parking Fringe Benefits: 12 week record keeping method - change to location of car parking facilities", "Issue": "Where an employer uses the '12 week register method' for determining the taxable value of a car parking fringe benefit, will the fact that the employer later changes the location of their car parking facilities on which the taxable value has been calculated, mean that this register ceases to be valid under section 39GF of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The act of changing the location of the car parking facilities will not invalidate the original register under section 39GF of the FBTAA.", "Facts": "An employer provides car parking fringe benefits in respect of its employees. In determining the taxable value of these benefits, the employer has elected under section 39GA of the FBTAA to use the 12 week record keeping method, commonly known as the 12 week register method. The register is completed within a 12 week period wholly within a fringe benefits tax (FBT) year. In the following FBT year, the employer changes car parking facilities with the only change being that the total car park spaces have increased by an amount which represents less than a 10% increase in car parking fringe benefits for that year.", "Reasons_for_Decision": "Summary: Section 39GF of the FBTAA contains the rules which apply to determine the FBT years for which the register is valid. As provided for in subsection 39GF(1) of the FBTAA, where a register has been completed, then subject to subsections 39GF(3) and 39GF(4) of the FBTAA, the register will be valid for the following four FBT years. Under subsection 39GF(3) of the FBTAA, a register will cease to be valid if the number of car parking fringe benefits for the employer increases by more than 10% on any day in that FBT year. As the increase in car parking spaces is less than 10%, the existing register has not been invalidated by this action. Under subsection 39GF(4) of the FBTAA, a register that is valid for an FBT year ceases to be valid, if there is a later valid register that is kept for that FBT year that covers the same employee. As a later register has not been commenced at this stage, the original will be valid for the remaining time that it has to run in terms of subsection 39GF(1) of the FBTAA. The change of location of the employer car parking facilities does not mean the register that has been maintained ceases to be valid under section 39GF of the FBTAA.", "Date_of_Decision": "26 February 2007", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) section 39GF subsection 39GF(1) subsection 39GF(2) subsection 39GF(3) subsection 39GF(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car parking fringe benefits Fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200745", "Unmatched_Content": "Keywords Car parking fringe benefits Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2006/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car parking fringe benefits: fee charged by a parking station for all-day parking - daily rate equivalent for periodic parking arrangements.", "Issue": "Where a parking station charges a parking fee for all-day parking which becomes progressively lower after a number of days parking, does the formula in section 39E of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to determine the lowest fee the parking station is taken to charge for all-day parking on a particular day?", "Decision": "Yes. When a customer parks their car for more than one day, the parking station provides all-day parking on a periodic basis and the lowest fee for all-day parking on a particular day will be calculated using the formula in section 39E of the FBTAA.", "Facts": "A parking station is a 'commercial parking station' and provides 'all-day parking' in accordance with subsection 136(1) of the FBTAA. The parking station provides all-day parking in the ordinary course of business to members of the public. The parking station charges a parking fee for all-day parking which becomes progressively lower after a number of days parking. The following table represents the fees charged by the parking station: For 25 or more days parking the additional charge per day is $5.00 (including GST). There is no limit to how many days a customer could park their car under this arrangement. A customer who parked their car for 365 days would incur a $1,909 parking fee. During this period there are 246 business days.", "Reasons_for_Decision": "Summary: The car parking fringe benefits provisions require the ascertainment of the amount of the lowest fee charged by a commercial parking station for all-day parking on a particular day. Section 39E of the FBTAA provides a daily rate equivalent where there is a periodic parking arrangement. Section 39E of the FBTAA applies if the commercial parking station provides all-day parking in the ordinary course of business to members of the public on a weekly, monthly, yearly or other periodic basis. When a customer parks their car for more than one day, the parking station is providing all-day parking on a periodic basis under section 39E of the FBTAA. The facts show that the parking station has no limit to the number of days of continuous parking. Under this arrangement, it is accepted that customers could park their car on a longer term periodic basis and as a practical general rule for a continuous period of up to one year. In order to determine the lowest rate charged for all-day parking by the car park, on a particular day, the formula in section 39E of the FBTAA would be applied on the basis that a car had been parked for a continuous period of one year (365 days). The parking station is taken to charge, on any particular day, a daily rate equivalent. This is calculated by use of the formula: | Detailed Reasoning - Total Fee/Business days in period: Total fee is the total fee charged by the operator in respect of all-day parking for the total days in that period. Business days in period means the number of business days in that period. | Detailed Reasoning - Total Fee/Business days in period = 1909/246 = $7.76: The lowest rate charged for all-day parking on a particular day would therefore be $7.76. In determining the amount of that lowest fee, it has been accepted that a customer has parked their car on a yearly periodic basis in these circumstances. Accordingly, where a parking station charges a parking fee for all-day parking which becomes progressively lower after a number of days parking, the formula in section 39E of the FBTAA applies to determine the lowest fee the parking station is taken to charge for all-day parking on a particular day.", "Date_of_Decision": "15 February 2006", "Year_of_Income": "31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 39E", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/26", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car parking fringe benefits Fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200693", "Unmatched_Content": "Updated formula with correct calculation and minor wording change. | Related Public Rulings (including Determinations) Taxation Ruling TR 96/26 | Keywords Car parking fringe benefits Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2001/255", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car Parking Fringe Benefits", "Issue": "Whether the provision of carparking spaces to employees at a third party's business premises constitute a car parking fringe benefit as defined under section 39A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Decision": "Yes, the provision of the carparking spaces constitutes a car parking fringe benefit under section 39A of the FBTAA.", "Facts": "The taxpayer requires a 'third party' to provide carparking facilities free of charge to the taxpayer's employees at the third party's business premises. The employees' cars are parked in the basement of the third party's business premises which is owned/leased by the third party. Four parking spaces are allocated for the use of the taxpayer's employees and the taxpayer does not pay for these spaces. The taxpayer advises that all the conditions for a car parking fringe benefit are satisfied apart from sub-paragraph 39A(1)(a)(i) of the FBTAA.", "Reasons_for_Decision": "Summary: A car parking fringe benefit will arise on each day on which an employer provides a car parking space for the use of an employee and all of the conditions in section 39A of the FBTAA are satisfied. Subsection 136(1) of the FBTAA provides definitions of \"business premises\", \"associated premises\" and \"leased\". Paragraph 4 of Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises' (TR 2000/4) states that premises are only \"business premises\" where two requirements have been satisfied: The definition of a \"fringe benefit\" in subsection 136(1) of the FBTAA includes a benefit provided to an employee of an employer under an arrangement between the employer (or associate) and a third party. An \"arrangement\" is defined in subsection 136(1) of the FBTAA. Sub-paragraph 39A(1)(a)(i) of the FBTAA states that the car must be parked on the business premises, or associated premises of the provider. A \"provider\" is defined in subsection 136(1) of the FBTAA as meaning the person who provides the benefit. The provider will usually be the employer, but this need not be the case. Where there is an arrangement between the carpark owner and the taxpayer the nature of that arrangement will: Where the carpark owner retains ownership or other exclusive occupancy rights in respect of the relevant parking space the carpark owner is the \"provider\". Where the taxpayer obtains exclusive occupancy rights in respect of the relevant parking space the taxpayer is the \"provider\". Therefore, either the carpark owner or the taxpayer satisfies the requirements of being the \"provider\" as required in sub-paragraph 39A(1)(a)(i) of the FBTAA. The taxpayer states that the remainder of the conditions in subsection 39A(1) are satisfied. As an arrangement exists between the taxpayer and the third party, the provision of car parking to the employees constitutes a car parking fringe benefit under subsection 39A(1) of the FBTAA.", "Date_of_Decision": "11 July 2001", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 39A subsection 136(1) sub-paragraph 39A(1)(a)(i)", "Related_Public_Rulings_and_Determinations": "TR 2000/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Car parking fringe benefits FBT arrangement FBT arranger FBT business premises FBT providers", "Case_References": "", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001255", "Unmatched_Content": "Corrected citations of Taxation Ruling and legislation | Updated business line details | Related Public Rulings (including Determinations) TR 2000/4 | Keywords Car parking fringe benefits FBT arrangement FBT arranger FBT business premises FBT providers"}
{"ATO_ID_Number": "ATO ID 2003/317", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt waiver benefits: benefit upon discharge of limited recourse loan", "Issue": "Can a 'debt waiver benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) arise when an employee discharges a loan through the transfer of shares to the lender and the shares have a lesser value than the loan balance?", "Decision": "No. A 'debt waiver benefit' does not arise provided the terms of the loan allow the employee to transfer the shares to the lender in full and final satisfaction of the loan balance.", "Facts": "An associate of an employer provides an employee with a limited recourse loan with which to acquire shares. Under the terms of the loan agreement the employee may elect to transfer the shares to the lender in full and final satisfaction of the loan balance. At the time of transfer, the value of the shares is less than the amount of the loan balance. The employee elects to transfer the shares to the lender. The terms of the loan agreement are accepted as being commercial. The provision of the loan gives rise to a 'loan fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: A 'debt waiver benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit referred to in section 14 of that Act. Section 14 of the FBTAA states that: Where, at a particular time, a person (in this section referred to as the 'provider' ) waives the obligation of another person (in this section referred to as the 'recipient') to pay or repay to the provider an amount, the waiver shall be taken to constitute a benefit provided at that time by the provider to the recipient. The word 'waive' was considered by the Court in Banning v. Wright (1972) 2 All ER 987 where it was held to mean the giving up or abandoning of some right. Where, under the terms of a loan agreement, a lender accepts a transfer of shares in full satisfaction of the loan balance, there is no release or waiver of any obligation to pay or repay an amount. Thus, the discharge of a loan through the transfer of shares to the lender, where the shares have a lesser value than the loan balance, is not considered to give rise to a debt waiver benefit.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 14 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/315 | ATO ID 2003/316", "Subject_References": "Fringe benefits tax Fringe benefits Debt waiver fringe benefits Loan fringe benefits", "Case_References": "Banning v. Wright (1972) 2 All ER 987", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003317", "Unmatched_Content": "Keywords Fringe benefits tax Fringe benefits Debt waiver fringe benefits Loan fringe benefits"}
{"ATO_ID_Number": "ATO ID 2001/253", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefits tax: waiver of a levy payable by a unit owner/employee", "Issue": "Whether the waiver of a levy payable by the owner of a unit in a strata titled complex is a fringe benefit in a situation where the owner is employed as a caretaker by the owners corporation.", "Decision": "Yes. The waiving of the levy will be either a debt waiver fringe benefit under section 14 or a residual fringe benefit under section 45 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Facts": "The owner of one of the units in a strata titled complex of residential units has been employed by the owners corporation as its part-time caretaker. The caretaker is paid a wage by the owners corporation. The operating expenses of the owners corporation are met by periodic levies collected from unit owners. The owners corporation has decided not to collect these levies from the owner who is the part-time caretaker. The minutes of a meeting of the owners corporation record that as an employee of the owners corporation, the caretaker enjoyed privileges that were not given to other unit owners. Specific mention was made to the waiving of levies applicable to the duration of employment of the caretaker.", "Reasons_for_Decision": "Summary: A 'fringe benefit' is defined in subsection 136(1) of the FBTAA as a benefit provided to an employee (or their associate) by the employer (or their associate) in respect of the employment of the employee, but does not include certain benefits (such as salary or wage payments, specifically exempted benefits, and payments to complying superannuation funds). The meaning of 'in respect of employment' was considered by the Full Federal Court in J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 45 ATR 1101. The Full Federal Court held that it is not sufficient for the purposes of the FBTAA to conclude that there was a causal connection between the benefit and the employment. It must be established that there was a sufficient and material connection or relationship between the benefit and the employment. The agreement between the caretaker and the owners corporation shows sufficient and material connection between the non-payment of the levies and the employment duties of the caretaker. The caretaker would not have received the benefit had he not been an employee and the Minutes confirmed that the levies were only waived because the caretaker was an employee of the owners corporation. The levies were only waived during the period of the caretaker's employment. The waiving of the unit owners levy by the owners corporation is a benefit provided in respect of the employment of the unit owner in the role of caretaker and satisfies the definition of a 'fringe benefit' in subsection 136(1) of the FBTAA. The levy waiver is either a debt waiver fringe benefit under section 14 or a residual fringe benefit under section 45 of the FBTAA.", "Date_of_Decision": "22 May 2001", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 14 section 45 section 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe Benefits Debt Waiver Fringe Benefits Residual Fringe Benefits", "Case_References": "J & G Knowles & Associates Pty Ltd v Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001253", "Unmatched_Content": "Updated to clarify reasoning, update references, and for other minor grammatical amendments. | Keywords Fringe Benefits Debt Waiver Fringe Benefits Residual Fringe Benefits"}
{"ATO_ID_Number": "ATO ID 2014/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Remote area holiday transport fringe benefit: gross taxable value - recipients contribution", "Issue": "For the purposes of working out the amount of the reduction of a remote area holiday transport fringe benefit under section 60A of the Fringe Benefits Tax Assessment Act1986 (FBTAA), is '50% of the gross taxable value' of the fringe benefit calculated under paragraph 60A(1)(c) of the FBTAA before deducting any recipients contribution?", "Decision": "No, for the purposes of working out the amount of the reduction of a remote area holiday transport fringe benefit under section 60A of the FBTAA, '50% of the gross taxable value' of the fringe benefit is not calculated under paragraph 60A(1)(c) of the FBTAA before deducting any recipients contribution. The 'gross taxable value' is the amount that would be the taxable value of the fringe benefit if any reduction under subsection 60A(1) and section 62 of the FBTAA was ignored. The amount that would otherwise be the taxable value has already taken the recipients contribution into account.", "Facts": "An employee works in a remote area of Australia. His employer pays $1,500 for the employee's return travel between the work locality and the employee's holiday destination in Australia. The employee contributes $250 towards the cost of the travel. The payment of the employee's travel cost by the employer constitutes an external expense payment fringe benefit under paragraph 20(a) and subsection 136(1) of the FBTAA. The provision of the expense payment fringe benefit is a remote area holiday transport fringe benefit for the purposes of subsection 143(2) of the FBTAA. The employee's holiday destination is not the place where he resided before commencing his employment in the remote area or the capital city of the state in which the workplace is located. Therefore, subsection 143(3) of the FBTAA applies to the fringe benefit. The employee is not provided with any other fringe benefit in relation to the holiday.", "Reasons_for_Decision": "Summary: All legislative references are to the FBTAA. Section 60A provides a reduction in the taxable value of remote area holiday transport fringe benefits to which subsection 143(3) applies. To work out the amount of the reduction under section 60A, paragraph 60A(1)(c) requires you to calculate '50% of the gross taxable value' of the remote area holiday transport fringe benefit(s). In this case, where only one remote area holiday transport fringe benefit is provided, the 'gross taxable value' is determined under paragraph 60A(1)(a). Under that paragraph the 'gross taxable value' is so much of the taxable value of the fringe benefit as is attributable to transport, meals or accommodation in relation to a particular holiday for a particular family member, ignoring any reduction under subsection 60A(1) and section 62. Section 62 does not apply in this situation. The taxable value of an external expense payment fringe benefit is worked out under section 23. Under that section the taxable value of a fringe benefit to which paragraph 20(a) applies is the amount of the expense payment reduced by the amount of the recipients contribution. Under section 23 the taxable value of the external expense payment fringe benefit provided to the employee would be the cost of the travel less the recipients contribution. Therefore, the amount that would be the taxable value of the remote area holiday transport fringe benefit, ignoring any reduction under subsection 60A(1), is the cost of the travel less the recipients contribution. This is the 'gross taxable value' of the fringe benefit. As the recipients contribution has already been taken into account in working out what would otherwise be the taxable value of the remote area holiday transport fringe benefit, for the purposes of working out the amount of the reduction under section 60A, '50% of the gross taxable value' of the fringe benefit is not calculated under paragraph 60A(1)(c) before deducting any recipients contribution. Under section 23 the taxable value of the fringe benefit provided to the employee is $1,250 ($1,500 less $250). Therefore, the 'gross taxable value' of the fringe benefit for the purposes of paragraph 60A(1)(a) is also $1,250. Under paragraph 60(A)(1)(c) '50% of the gross taxable value' of the fringe benefit is $625.", "Date_of_Decision": "13 February 2014", "Year_of_Income": "Year ended 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(a) section 23 section 60A subsection 60A(1) paragraph 60A(1)(a) paragraph 60A(1)(b) paragraph 60A(1)(c) section 62 subsection 136(1) subsection 143(2) subsection 143(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Expense payment fringe benefits Fringe benefits tax Remote area holiday transport fringe benefits FBT taxable value Recipients contributions FBT employee contributions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20149", "Unmatched_Content": "Keywords Expense payment fringe benefits Fringe benefits tax Remote area holiday transport fringe benefits FBT taxable value Recipients contributions FBT employee contributions"}
{"ATO_ID_Number": "ATO ID 2013/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee required to change usual place of residence in order to perform duties of employment", "Issue": "If an employee changes their usual place of residence to be closer to where they perform the duties of their employment, even though it is not required by their employer, is the employee still 'required' to change their usual place of residence in order to perform the duties of their employment for the purposes of subparagraph 58B(1)(b)(iii) of the Fringe Benefits Tax Assessment Act 1986 ( FBTAA)?", "Decision": "Yes. Even though the employer does not require the employee to change their usual place of residence, it is considered that the duties of the employee's employment are such that the employee is 'required' to change their usual place of residence in order to perform the duties of their employment for the purposes of subparagraph 58B(1)(b)(iii) of the FBTAA.", "Facts": "All legislative references are to the FBTAA. An employee accepts a promotion from their employer. The employee is required to perform their new duties of employment over 3,000 kilometres away from their usual place of residence. Under the applicable enterprise bargaining agreement, the employer cannot require the employee to change their usual place of residence in order to live closer to where the employee is required to perform their new duties of employment ('the new place of employment'). However, the employee is not permitted to perform their new duties of employment from where they performed their former duties of employment ('the former place of employment'). The employer will not provide transport for the employee to commute between their usual place of residence and the new place of employment. The employee is required to be on call at certain times. The employee must sign on for duty within two hours of being contacted by their employer. The employee changes their usual place of residence to a location near the new place of employment. The employer reimburses the employee for the costs of the removal of the employee's household effects to the new residence. The reimbursement is an expense payment benefit within the meaning in section 20.", "Reasons_for_Decision": "Summary: Under section 58B, expense payment and residual benefits provided in respect of the removal or storage of household effects of an employee are exempt benefits under certain conditions. Subparagraph 58B(1)(b)(iii) applies to the situation where an employee changes their usual place of residence. That subparagraph provides that the removal or storage must be required solely because the employee is 'required' to change their usual place of residence in order to perform the duties of their employment. The term 'required' is not defined in the FBTAA. Therefore, it must take its ordinary meaning in the context in which it is used. Relevantly , The Macquarie Dictionary [ Multimedia], version 5.0.0, 01/10/01, defines 'require' as: 'to have need of; need; to impose need or occasion for; make necessary or indispensable; to place under an obligation or necessity.' Therefore, it is considered that the term 'required' as it is used in subparagraph 58B(1)(b)(iii) does not mean that the change of usual place of residence must be compulsory. Rather, the change may be one that is necessary in the circumstances in order for the employee to perform the duties of their employment. In the Administrative Appeals Tribunal case of Re Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v. FC of T [ 2008] AATA 845; 2008 ATC 10-051; (2008) 71 ATR 720 (Compass), the Tribunal examined the meaning of the word 'required' in the context of living-away-from-home allowance benefits under former subsection 30(1). In Compass an employee temporarily accepted a more senior position from his employer. The position required him to work an additional five and a half hours each week. The employee's usual place of residence was 60 kilometres from his place of employment. As a result of his extended working hours, the employee rented premises closer to his place of employment and stayed there during the week. His employer did not require him to do so. The employee intended to return to his home when the extended working arrangements came to an end. The employee was paid a weekly allowance by his employer for the additional costs he incurred in renting the property. The Tribunal considered whether the employee was required to live away from his usual place of residence in order to perform the duties of his employment and, therefore, whether the allowance was a living-away-from-home allowance within the meaning in former subsection 30(1). The Tribunal said in Compass: 63. ...it would seem that the agent requiring the employee to live away from his or her usual place of residence must be the employer, the inherent nature of the employment or a mixture of the two. It would seem that regard must be had to both in order to answer whether the employee is so required... 65. The word 'require' does not contemplate choice... 70. ...I come to the conclusion that a reasonable person would conclude that he was not required to rent premises...but chose to...there is no evidence that suggests that his employer required or even requested that he do so in order that he could perform his duties...The work itself does not seem to have demanded or required it...the hours were not so extended and the commuting distance...not so great that it could be thought that the work itself required it so that he could perform the duties of his employment. In this case, the employee is not required by their employer to change their usual place of residence. However, it is considered that the duties of the employee's employment are such that it is necessary for the employee to change their usual place of residence to effectively perform those duties. This is because: Therefore, it is considered that the employee is 'required' to change their usual place of residence in order to perform the duties of their employment for the purposes of subparagraph 58B(1)(b)(iii).", "Date_of_Decision": "24 January 2013", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 20 subsection 30(1) section 58AA section 58B subparagraph 58B(1)(b)(iii) section 58C section 58D section 61C section 143A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Expense payment fringe benefits FBT living-away-from-home FBT place of residence FBT relocation transport Fringe benefits tax Removal & relocation expenses Residual fringe benefits", "Case_References": "Re Compass Group (Vic) Pty Ltd (as trustee for White Roche & Associates Hybrid Trust) v FC of T [2008] AATA 845 2008 ATC 10-051 (2008) 71 ATR 720", "Other_References": "The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20138", "Unmatched_Content": "Keywords Expense payment fringe benefits FBT living-away-from-home FBT place of residence FBT relocation transport Fringe benefits tax Removal & relocation expenses Residual fringe benefits"}
{"ATO_ID_Number": "ATO ID 2012/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxable value of in-house residual expense payment fringe benefits - effect of a reduced premium under the Private Health Insurance Act 2007", "Issue": "In determining the taxable value of an in-house residual expense payment fringe benefit, under subsection 22A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), will the lowest price at which an identical benefit is sold to a member of the public in terms of section 48 of the FBTAA reflect any reduction in premium provided by the Commonwealth Government to the employee under the Private Health Insurance Act 2007 ?", "Decision": "No. In determining the 'lowest price' in terms of section 48 of the FBTAA, the reduction in premium will constitute a recipients contribution and will not be included in that process.", "Facts": "In the terms of an agreement with its employee an employer agrees to pay the employee's liability under a private health insurance policy with a related company. In his capacity as an employee, the employee receives a 12% discount from the full premium which would otherwise be payable under the policy. The related company offers the same discount to employees of unrelated employers. The Commonwealth Government provides a reduction in premium in respect of private health insurance cover for which the employee qualifies. The reduction in premium is a percentage of the discounted premium which is otherwise payable. Under his agreement with the employer the employee agrees to apply to become a participant in the premium reduction scheme. Where the full premium payable is $3,000 and a 30% reduction in premium is claimed by the employee the calculation is as follows:", "Reasons_for_Decision": "Summary: The payment of the employee's private health insurance premium by the employer is an in-house residual expense payment fringe benefit in terms of subsection 136(1) of the FBTAA. In determining the taxable value of the benefit under subsection 22A(2) of the FBTAA it is necessary to refer to section 48 of the FBTAA on the basis that if the service had been provided as a residual benefit, it would have constituted an in-house non period residual fringe benefit. Under section 48 of the FBTAA the taxable value is calculated in relation to an employer in relation to a year of tax as being: (aa) if the benefit was provided to the recipient under a salary packaging arrangement - an amount equal to the notional value of the benefit at the comparison time; or (ab) if paragraph (aa) does not apply and the benefit is an airline transport fringe benefit - an amount equal to 75% of the stand-by airline travel value of the benefit at the comparison time; or (a) if neither paragraph (aa) nor (ab) applies and, at or about the comparison time, identical benefits were provided by the provider (i) ... and (ii) ... If the amount paid by the employee to the employer is a 'recipients contribution', it will be deducted from 75% of the 'lowest price' and therefore cannot take part in the determination of the 'lowest price'. If it were then this amount would be taken into account twice. The relevant definition of 'recipients contribution' in subsection 136 (1) FBTAA is: (a) ... (b) in relation to an expense payment fringe benefit provided in respect of the employment of an employee or an employer being a fringe benefit to which paragraph 20(a) applies - an amount paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the fringe benefit. In using the method in section 48 of the FBTAA to calculate the taxable value of an 'in-house residual fringe benefit', paragraph 22A(2)(b) of the FBTAA provides the calculation of 'recipients contribution'. However, the amount of the recipients contribution as defined in subsection 136(1) of the FBTAA in relation to the actual fringe benefit is still taken into account in this calculation. By agreeing to claim the reduction in premium, an amount equal to that reduction is paid by the employee to the employer pursuant to their agreement in respect of the fringe benefit and will be a recipients contribution. It will therefore not be taken into account in determining the 'lowest price' in section 48 of the FBTAA. The lowest price at which an identical benefit would be offered to the public by the employer is the amount of the obligation to the insurer prior to any rebates or reductions to which a particular individual may be entitled as a result of the Private Health Insurance Act 2007 . This situation may be contrasted with a manufacturer's rebate in relation to the cost price of a car which is dealt with in Taxation Ruling TR 2011/3 Fringe benefits tax: meaning of ' cost price' of a car, for the purpose of calculating the taxable value of car fringe benefits . Subsection 136(1) of the FBTAA, defines 'cost price of a car' as being: (a) in relation to a car owned by a person (i) ... (ii) ... (A) the expenditure incurred by the person (other than expenditure in respect of registration or in respect of a tax on, or a transfer of, registration) that is directly attributable to the acquisition or delivery of the car..., Paragraph 77 of TR 2011/3, states that 'expenditure incurred' in relation to the 'cost price of a car' is intended to reflect the net expenditure borne in acquiring a car. Therefore, a manufacturer's rebate will reduce the 'cost price of a car'. Manufacturer rebates are provided by the person trying to affect the sale, up to the point of delivery and as such would have a positive impact on the calculation of 'expenditure incurred'. 'Price' is not defined in the FBTAA and takes on its ordinary meaning. The Macquarie Dictionary Online defines price as being 'the sum of money or its equivalent for which anything is bought, sold or offered for sale'. The Commonwealth Government reduction in premium is provided to the individual under the Private Health Insurance Act 2007 . It is not relevant to the process of determining the price at which a similar policy is to be offered for sale. Accordingly, for these reasons, the lowest price would be $2,640.", "Date_of_Decision": "13 April 2016", "Year_of_Income": "Year ending 31 March 2016", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 22A(2) section 48 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2011/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/86", "Subject_References": "Fringe benefits tax Expense payment fringe benefits In-house expense payment fringe benefits In-house residual expense payment fringe benefits Insurance premium FBT taxable value FBT employee contribution Recipients contributions", "Case_References": "", "Other_References": "The Macquarie Dictionary Online", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201285", "Unmatched_Content": "an amount equal to 75% of the lowest price at which an identical benefit was sold to a member of the public or | reduced by the amount of recipients contribution (emphasis added) | Minor grammatical and stylistic changes | Updated to correct business line | Amend reference from ' Private Health Insurance Incentives Act 2007 ' to ' Private Health Insurance Act 2007 ' | Include reference to subsections 48(aa) and 48(ab) of FBTAA Amend reference to subsections 48(a) and 48(b) of FBTAA Amend reference to Macquarie Dictionary from '[MultiMedia], version 5.0.0, 1/10/01' to 'Online' Amend reference from ' Private Health Insurance Incentives Act 2007 ' to ' Private Health Insurance Act 2007 ' | Include reference to subsections 48(aa) and 48(ab) of FBTAA Amend reference to subsections 48(a) and 48(b) of FBTAA Amend reference from ' Private Health Insurance Incentives Act 2007 ' to ' Private Health Insurance Act 2007 ' | Amend reference to Macquarie Dictionary from '[MultiMedia], version 5.0.0, 1/10/01' to 'Online' | Include insurance premium | Related Public Rulings (including Determinations) Taxation Ruling TR 2011/3 | Keywords Fringe benefits tax Expense payment fringe benefits In-house expense payment fringe benefits In-house residual expense payment fringe benefits Insurance premium FBT taxable value FBT employee contribution Recipients contributions"}
{"ATO_ID_Number": "ATO ID 2012/86", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxable value of in-house residual expense payment fringe benefits - effect of a rebate under the Private Health Insurance Incentives Act 2007", "Issue": "In determining the taxable value of an in-house residual expense payment fringe benefit under subsection 22A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), will the lowest price at which an identical benefit is sold to a member of the public in terms of section 48 of the FBTAA reflect any Commonwealth Government rebate provided to the employee under the Private Health Insurance Incentives Act 2007 ?", "Decision": "No. In determining the 'lowest price' in terms of section 48 of the FBTAA, such rebates will constitute recipients contributions and will not be included in that process.", "Facts": "In the terms of an agreement with its employee an employer agrees to pay the employee's liability under a private health insurance policy with a related company. In his capacity as an employee, the employee receives a 12% discount from the full premium which would otherwise be payable under the policy. The related company offers the same discount to employees of unrelated employers. The Commonwealth Government provides a rebate in respect of private health insurance cover for which the employee qualifies. The rebate is a percentage of the discounted premium which is otherwise payable. To claim the rebate the employee must complete a claim form and attach a receipt from the health insurer. Under their agreement, the employee agrees to pay the amount of the rebate received to the employer in the same FBT year. Where the full premium payable is $3,000 and a 30% Commonwealth Government rebate is paid the rebate received by the employee will be $792.", "Reasons_for_Decision": "Summary: The payment of the employee's private health insurance premium by the employer is an in-house residual expense payment fringe benefit in terms of subsection 136(1) of the FBTAA. In determining the taxable value of the benefit under subsection 22A(2) of the FBTAA it is necessary to refer to section 48 of the FBTAA on the basis that if the service had been provided as a residual benefit, it would have constituted an in-house non period residual fringe benefit. Under section 48 of the FBTAA the taxable value is calculated in relation to an employer in relation to a year of tax as being: If the amount paid by the employee to the employer is a 'recipients contribution', it will be deducted from 75% of the 'lowest price' and therefore cannot take part in the determination of the lowest price. If it were, then this amount would be taken into account twice. The relevant definition of 'recipients contribution' in subsection 136(1) of the FBTAA is: In using the method in section 48 of the FBTAA to calculate the taxable value of an 'in-house residual fringe benefit', paragraph 22A(2)(b) of the FBTAA provides the calculation of 'recipients contribution'. However, the amount of the recipients contribution as defined in subsection 136(1) of the FBTAA, in relation to the actual fringe benefit is still taken into account in this calculation. As the amount equal to the rebate was paid by the employee to the employer pursuant to their agreement in respect of the fringe benefit it will be a recipients contribution and will not be taken into account in determining the 'lowest price' in section 48 of the FBTAA. The lowest price at which an identical benefit would be offered to the public by the employer is the amount of the obligation to the insurer prior to any rebates or reductions to which a particular individual may be entitled under the Private Health Insurance Incentives Act 2007 . This situation may be contrasted with a manufacturer's rebate in relation to the cost price of a car which is dealt with in Taxation Ruling TR 2011/3 Fringe benefits tax : meaning of ' cost price' of a car, for the purpose of calculating the taxable value of car fringe benefits . Subsection 136(1) of the FBTAA, defines 'cost price of a car' as being: Paragraph 77 of TR 2011/3, states that 'expenditure incurred' in relation to the 'cost price of a car' is intended to reflect the net expenditure borne in acquiring a car. Therefore, a manufacturer's rebate will reduce the 'cost price of a car'. Manufacturer rebates are provided by the person trying to affect the sale, up to the point of delivery and as such would have a positive impact on the calculation of 'expenditure incurred'. 'Price' is not defined in the FBTAA and takes on its ordinary meaning. The Macquarie Dictionary [MultiMedia], version 5.0.0, 1/10/01, defines price as being 'the sum of money or its equivalent for which anything is bought, sold or offered for sale'. The Commonwealth Government rebate is provided to the individual under the Private Health Insurance Incentives Act 2007 . It is not relevant to the process of determining the price at which a similar policy is to be offered for sale. Accordingly, for these reasons, the lowest price would be $2,640.", "Date_of_Decision": "10 October 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 22A(2) section 48 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2011/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/85", "Subject_References": "Fringe benefits tax Expense payment fringe benefits In-house expense payment fringe benefits In-house residual expense payment fringe benefits FBT taxable value FBT employee contribution Recipients contributions", "Case_References": "", "Other_References": "The Macquarie Dictionary [MultiMedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201286", "Unmatched_Content": "Rebate received by employee | an amount equal to 75% of the lowest price at which an identical benefit was sold to a member of the public or | reduced by the amount of recipients contribution (emphasis added) | Minor grammatical and stylistic changes | Updated to correct business line | Related Public Rulings (including Determinations) Taxation Ruling TR 2011/3 | Keywords Fringe benefits tax Expense payment fringe benefits In-house expense payment fringe benefits In-house residual expense payment fringe benefits FBT taxable value FBT employee contribution Recipients contributions"}
{"ATO_ID_Number": "ATO ID 2012/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Expense payment fringe benefit: recipients contribution", "Issue": "If an employee is provided with an expense payment fringe benefit in relation to the payment of a proportion of the interest incurred on a loan granted to them by their employer, is the payment by the employee of the remaining interest a 'recipients contribution' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The payment by the employee of the remaining interest incurred on the loan is not a 'recipients contribution' as defined in subsection 136(1) of the FBTAA as the amount was not paid 'in respect of' the provision of the expense payment fringe benefit.", "Facts": "An employee enters into a loan agreement with their employer. Under the terms of the loan agreement, the employee is granted a loan and is under an obligation to pay the interest and principal. Under the terms of an effective salary sacrifice arrangement, an amount of the employee's pre-tax salary is paid to a salary packaging service provider (the 'SPSP') each pay. This amount is 50 per cent of the interest the employee has incurred on the loan granted by the employer. The SPSP then deposits the amount directly into the employee's loan account with the employer. The making of the payment into the employee's loan account constitutes the provision of an expense payment benefit within the meaning in paragraph 20(a) of the FBTAA and an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA. The employee pays the remaining 50 per cent of the interest incurred on the loan to their employer from their after-tax salary.", "Reasons_for_Decision": "Summary: All legislative references are to the FBTAA. Broadly, in the case of an expense payment fringe benefit to which paragraph 20(a) applies, the taxable value (as worked out under Subdivision B of Division 5 of Part III) is reduced by the amount of the recipients contribution. Relevantly, 'recipients contribution' is defined in subsection 136(1) as: ...(b) in relation to an expense payment fringe benefit provided in respect of the employment of an employee of an employer, being a fringe benefit to which paragraph 20(a) applies - the amount paid to the provider or to the employer by the recipient or by the employee in respect of the provision of the fringe benefit. In this case the employee pays 50 per cent of the interest incurred on the loan to the employer from their after-tax salary and is provided with an expense payment fringe benefit in relation to the other 50 per cent of the interest incurred. However, the question arises as to whether the amount paid to the employer by the employee is paid 'in respect of' the provision of the expense payment fringe benefit. The term 'in respect of' is defined in subsection 136(1) in the context of 'in respect of the employment of the employee' to include 'by reason of, by virtue of, or for or in relation directly or indirectly to, that employment'. A number of judicial decisions have considered the meaning of the phrase 'in respect of'. In Federal Commissioner of Taxation v. Scully (2000) 201 CLR 148; 2000 ATC 4111; (2000) 43 ATR 718, consideration of the words 'in respect of' highlighted the importance of the context in which the phrase appears and resulted in the requirement that there be some 'discernible rational link' between the two subject matters. In J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; 44 ATR 22, Heerey, Merkel and Findelstein JJ stated: The words \"in respect of\" have no fixed meaning. They are capable of having a very wide meaning denoting a relationship or connection between two things or subject matters. However, the words must, as with any other statutory expression, be given a meaning that depends on the context in which the words are found... ...it must be remembered that what must be established is whether there is a sufficient or material, rather than a, causal connection or relationship... Therefore, in the context of the meaning of 'recipients contribution' in subsection 136(1) as it applies in this case, there needs to be a sufficient or material connection between the payment of the remaining 50 per cent of the interest by the employee to their employer and the provision of the expense payment fringe benefit to the employee. When the employee enters into the loan agreement with their employer they are under an obligation to pay the total amount of the interest (and the principal). The provision of the expense payment fringe benefit under the terms of the salary sacrifice arrangement discharges the obligation of the employee to pay 50 per cent of the interest incurred by them on the loan. The payment of the remaining interest by the employee from their after-tax salary relates to the employee's obligation to pay the amount of interest not covered by the provision of the expense payment fringe benefit. The payment by the employee of the remaining interest incurred is made in respect of the employee's obligation under the loan agreement and not in respect of the provision of the expense payment fringe benefit. Therefore, it is considered that there is not a sufficient or material connection between the employee's payment of the remaining interest incurred and the provision of the expense payment fringe benefit. Accordingly, as the amount is not paid 'in respect of' the provision of the expense payment fringe benefit, it is not a 'recipients contribution' as defined in subsection 136(1).", "Date_of_Decision": "18 October 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Subdivision B of Division 5 of Part III paragraph 20(a) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Expense payment fringe benefits FBT taxable value Fringe benefits tax Recipients contributions", "Case_References": "Federal Commissioner of Taxation v Scully (2000) 201 CLR 148 2000 ATC 4111 (2000) 43 ATR 718", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201288", "Unmatched_Content": "Minor spelling error corrected | Minor citation error corrected | Keywords Expense payment fringe benefits FBT taxable value Fringe benefits tax Recipients contributions"}
{"ATO_ID_Number": "ATO ID 2011/54", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Expense payment fringe benefit: employee loan from a trust repaid by employer", "Issue": "Where an employer pays amounts which have been salary sacrificed by an employee to the trustee of a trust as repayments of principal on an interest free loan: has the employer provided an external expense payment fringe benefit under section 23 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) the taxable value of which is not reduced by the 'otherwise deductible' rule (ODR) under section 24 of the FBTAA?", "Decision": "Yes. Each payment made by the employer to the trustee is taken to constitute the provision of an expense payment benefit under section 20 of the FBTAA provided by the employer to the employee. The trust is not a employee share trust within the meaning of the Income Tax Assessment Act 1997 (ITAA 1997) and the benefit provided to the employee is not excluded from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA under paragraph (ha) of that definition. The benefit is a 'fringe benefit' and an 'external expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA. The taxable value of the external expense payment fringe benefit is determined under section 23 of the FBTAA and is equal to the amount of the loan repayment. The taxable value of the external expense payment fringe benefit is not reduced by the ODR in section 24 of the FBTAA. This is because each repayment on the loan is a repayment of principal on an interest free loan and the employee would not have been entitled to an income tax deduction had the employee incurred and paid these amounts.", "Facts": "The employer establishes an employee benefit arrangement which operates through a trust. The employer makes a loan contribution to the trust. The trust deed allows the trustee to provide an interest free loan to the employee. The employee receives a loan from the trustee. The employee uses the loan funds to acquire units in the trust. The trustee invests in the employer by acquiring shares and notionally allocates those shares to the units in the trust. The employee agrees to forego part of the remuneration that they would otherwise expect to receive as salary or wages in return for the employer making a repayment to the trustee in respect of the loan from the trustee to the employee. The employee loan is reduced by the amount of each repayment. The salary sacrifice arrangement (SSA) is an 'Effective SSA' as described in Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements .", "Reasons_for_Decision": "Summary: Section 20 of the FBTAA relevantly provides that: Where a person (in this section referred to as the \"provider\"): (a) makes a payment in discharge, in whole or in part, of an obligation of another person (in this section referred to as the \"recipient\") to pay an amount to a third person in respect of expenditure incurred by the recipient; or (b).....; the making of the payment referred to in paragraph (a),....., shall be taken to constitute the provision of a benefit by the provider to the recipient. The employee has an obligation to the trustee for the loan. Under the arrangement the employer is the person who makes payments in discharge of the employee's loan obligation to the trustee. Each payment made by the employer to the trustee is, under section 20 of the FBTAA, taken to constitute the provision of a benefit by the employer (the provider) to the employee (the recipient). The provision of a benefit under section 20 of the FBTAA is an 'expense payment benefit' as defined in subsection 136(1) of the FBTAA. Under the statutory framework of the FBTAA, each category of benefit provided must also be a 'fringe benefit' to be subject to fringe benefits tax. The definition of 'fringe benefit' in subsection 136(1) excludes under paragraph 136(1)(ha) of that definition: a benefit constituted by the acquisition of money or property by an employee share trust (within the meaning of the Income Tax Assessment Act 1997 ) Subsection 130-85(4) of the ITAA 1997 provides that an employee share trust for an 'employee share scheme' (ESS), is a trust whose sole activities are: ATO ID 2010/108 has now been withdrawn but considered whether a trust qualifies as an employee share trust for the purposes of subsection 130 85(4) of the ITAA 1997. The Commissioner's current view on the interpretation of subsection 130 85(4), including the application of the \"sole activities\" and \"merely incidental\" tests, is set out in Taxation Determination TD 2019/13 (see in particular paragraph 4 and paragraphs 5-9). A trust in which the trustee is permitted to and includes in its activities the lending of money for employees to acquire units in the trust would not be an employee share trust as described in subsection 130-85(4) of the ITAA 1997. The trust is not an employee share trust within the meaning of the ITAA 1997, and the benefit provided to the employee under section 20 of the FBTAA is not a benefit excluded from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA under paragraph (ha) of that definition. Each benefit provided to the employee under the present arrangement is a 'fringe benefit', 'expense payment fringe benefit' and 'external expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA. The taxable value of each external expense payment fringe benefit under section 23 of the FBTAA is equal to the amount of the loan repayment, subject to this amount being reduced by the ODR under section 24 of the FBTAA. Subsection 24(1) of the FBTAA applies where the recipient of the expense payment fringe benefit is an employee. The taxable value of the external expense payment fringe benefit is not reduced by the ODR under section 24 of the FBTAA as the loan repayments are repayments of principal on an interest free loan and the employee would not have been entitled to an income tax deduction under section 8-1 of the ITAA 1997 had the employee incurred and paid these amounts.", "Date_of_Decision": "1 June 2011", "Year_of_Income": "Year ended 31 March 2011", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 20 section 23 section 24 subsection 136(1) paragraph 136(1)(ha)", "Related_Public_Rulings_and_Determinations": "TR 2001/10 | TD 2019/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Employee share trust FBT salary sacrifice FBT expense payment fringe benefit", "Case_References": "", "Other_References": "TA 2011/5", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201154", "Unmatched_Content": "Minor stylistic changes and updating to align with current ATO resources | Updated to correct business line | Related Public Rulings (including Determinations) TR 2001/10 TD 2019/13 | Keywords Fringe benefits tax Employee share trust FBT salary sacrifice FBT expense payment fringe benefit"}
{"ATO_ID_Number": "ATO ID 2008/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "In-house residual expense payment fringe benefit", "Issue": "Has the employee who is invoiced for and pays their water service charges, incurred recipients expenditure in respect of the provision of a residual benefit in accordance with paragraph (a) of the definition of 'in-house residual expense payment fringe benefit' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The employee has incurred the expenditure in respect of the provision of a residual benefit being the provision of water services by the employer in accordance with paragraph (a) of the definition of 'in-house residual expense payment fringe benefit' in subsection 136(1) of the FBTAA.", "Facts": "The employer is a water service provider whose function is to provide water, sewerage and other services to residential and business customers in a State of Australia. The employer is a body corporate which has been established under a State Act. The State Government is the sole shareholder. The employer includes provision of water services in its pricing structure. It derives revenue for these services from its customers. The employer is required to and is able to recover all costs in association with the provision of its functions. The employer provides its residential customers, including employees, with water services. These water services are the provision of a right to a supply of water to the land and the provision of sewerage and drainage services. The employer invoices its residential customers for water service charges which are payable for the right to a supply of water to the land and for sewerage and drainage services. The employer provides its employees with the same water services it provides to its residential customers. The employer charges its employees for water services on the same basis as for residential customers. As part of a salary packaging arrangement, the employer reimburses its employees for costs incurred in respect of invoiced water service charges. These reimbursements are provided as expense payment fringe benefits as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: Subsection 136(1) of the FBTAA defines 'in-house residual expense payment fringe benefit', relevantly as follows: \"in-house residual expense payment fringe benefit\", in relation to an employer, means an expense payment fringe benefit in relation to the employer where: (a) the recipients expenditure was incurred in respect of the provision of a residual benefit (other than a benefit provided under a contract of investment insurance) by a person (in this definition called the \"residual benefit provider\"); The employee is invoiced for and pays their water service charges. The employee has incurred an expense. This expense incurred is 'recipients expenditure' under subsection 136(1) and paragraph 20(b) of the FBTAA. The employer reimburses this expense under a salary sacrifice arrangement as an 'expense payment fringe benefit' under subsection 136(1) of the FBTAA. The recipients expenditure is in respect of the water services provided to the employee by the employer. Residual benefits are those benefits which do not fall within Divisions 2 to 11 of Part III of the FBTAA. The provision of a right to a supply of water to the land and the provision of sewerage and drainage services are not the provision of property benefits or any other form of benefit as provided for in Divisions 2 to 11 of Part III of the FBTAA. These benefits are residual benefits as defined in subsection 136(1) of the FBTAA. The residual benefits are provided by the employer. The employee who is invoiced for and pays their water service charges, incurs recipients expenditure in respect of the provision of a residual benefit in accordance with paragraph (a) of the definition of 'in-house residual expense payment fringe benefit' in subsection 136(1) of the FBTAA.", "Date_of_Decision": "6 February 2008", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(b) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits Fringe benefits tax In-house residual expense payment fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200830", "Unmatched_Content": "Updated to correct business line | Keywords Fringe benefits Fringe benefits tax In-house residual expense payment fringe benefits"}
{"ATO_ID_Number": "ATO ID 2006/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Expense Payment Fringe Benefit: reduction of taxable value - education of children of overseas employees", "Issue": "Where an employer pays for additional tuition costs of children of overseas employees, will this be considered to be expenditure 'in respect of the full time education of a child' and thus eligible for reduction under section 65A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The expenditure in question is in respect of the full time education of the child in terms of section 65A of the FBTAA.", "Facts": "An employer decides to employ an expatriate employee on a temporary visa in Australia. As part of this arrangement, the employee's family, including a school age child are relocated to Australia for the duration of the appointment. The employee's child is enrolled in a Development & Coaching Centre which specialises in teaching school subjects to support school study needs. The child attends this Centre one afternoon a week after normal school hours. The employer pays the tuition fees. This would be an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: In accordance with subparagraph 65A(a)(ii) of the FBTAA, in order to qualify for a reduction in the taxable value of the expense payment fringe benefit otherwise provided, the recipient's expenditure must be in respect of the full time education of the child of the employee. Although the attendance of a child at this Coaching Centre is not of itself 'full time education', it needs to be considered whether the additional tuition is 'in respect of the full time education' of a child. As held in the Full Federal Court decision of J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151 (2000) 44 ATR 22, the words 'in respect of' have no fixed meaning. However 'the words must be given a meaning that depends on the context in which the words are found'. It was also held by the Court that there must be a 'sufficient or material connection or relationship' between the benefit and employment. The words 'in respect of the full time education of the child', requires that any expense, whilst not necessarily directly incurred on full time education, must have a sufficient or material connection to the full time education of the child. It is considered that the extra tuition provided to the employee's child at the Development & Coaching Centre, in supporting the study needs of the child in practical areas of their normal education and not being in the area of general interest pursuits, has a sufficient or material connection to the child's full time education. Accordingly, the recipient's expenditure is 'in respect of the full time education' of a child of the employee and thus eligible for reduction under section 65A of the FBTAA.", "Date_of_Decision": "17 February 2006", "Year_of_Income": "Year ended 31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 65A subparagraph 65A(a)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT employees FBT expense payment fringe benefit Fringe benefits tax Overseas employees Reductions of taxable value", "Case_References": "J & G Knowles v. Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200652", "Unmatched_Content": "Keywords FBT employees FBT expense payment fringe benefit Fringe benefits tax Overseas employees Reductions of taxable value"}
{"ATO_ID_Number": "ATO ID 2006/196", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: in house residual expense payment fringe benefit - meaning of 'associate'", "Issue": "In terms of the definition of 'associate' as provided for at subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) and as expressed in the accompanying diagram, is company W an associate of the employer company E?", "Decision": "Yes. Company W is an 'associate' of employer company E as provided for in subsection 136(1) of the FBTAA.", "Facts": "Company W is an electricity producer which sells electricity to an unrelated third party electricity retailer. Company E is an employer that reimburses their employee's electricity expenses which are incurred to the third party electricity retailer. Company E is 100% owned and controlled by company D which in turn is 90% owned and controlled by company A. Company W is 90% owned and controlled by company A. The payments of the electricity expenses by the employer company E are expense payment benefits under section 20 of the FBTAA and their taxable value is to be calculated under Division 5, Subdivision B of the FBTAA.", "Reasons_for_Decision": "Summary: In order to calculate the taxable value of an expense payment fringe benefit, it is necessary to consider if a benefit is an 'in house' benefit and therefore subject to concessional valuation rules. In turn a benefit will be an 'in house' benefit only if the expenditure that is reimbursed by the employer was incurred in purchasing goods or services that the employer or an associate sells to customers in the ordinary course of their business. Therefore, it needs to be determined if company W is an associate of company E (employer). The definition of 'associate' within subsection 136(1) of the FBTAA refers to the definition of 'associate' as provided for in section 318 (formerly section 26AAB) of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 318(2) helps determine who are associates of a company. In this case, the employer, Company E, is under the control of Company D, who is under the control of Company A, who is also a parent company of Company W. For the purposes of this Part, the following are associates of a company (in this subsection called the primary entity (in this case, company E)); Paragraph 318(2)(d) will apply to deem company A, a parent company of company E. (d) another entity (in this paragraph called the controlling entity ) where: (i) the primary entity is sufficiently influenced by: (A) the controlling entity; or (B) the controlling entity and another entity or entities; or In this case, the primary entity (Company E) is under 100 per cent control of Company D who is further controlled by Company A (application of subparagraph 318(2)(d)(i)(b). The next step is determining if Company W is an associate of Company E. Paragraph 318(2)(e) states: (e) another company (in this paragraph [is] called the controlled company ) where: (i) the controlled company is sufficiently influenced by: (A) the primary entity; or (B) another entity that is an associate of the primary entity because of another paragraph of this subsection; or (C) a company that is an associate of the primary entity because of another application of this paragraph; or (D) 2 or more entities covered by the preceding sub-subparagraphs; or The application of the above section concludes that Company A is in control of Company W, and through subparagraph 318(2)(e)(i)(B), company A, being an associate of company E, means that Company W is also an associate of Company E. On that basis, company W is an 'associate' of company E under the definition of 'associate' contained in section 318 of the ITAA 1936 and as a consequence in terms of the subsection 136(1) definition of 'associate' in the FBTAA.", "Date_of_Decision": "25 July 2006", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Associate FBT associates Fringe benefits tax In-house residual expense payment fringe benefit FBT documentary evidence", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006196", "Unmatched_Content": "Corrected minor spelling error. | Replaced references to section 26AAB with references to section 318 of the ITAA 1936. | Rewrite to insert information and explanation regarding section 318 of the ITAA 1936. | Removed referencs to subparagraph 136(1)(c)(i) of FBTAA. Removed references to section 26AAB, and to subsections, paragrapahs and subparagraphs under section 26AAB. | Keywords Associate FBT associates Fringe benefits tax In-house residual expense payment fringe benefit FBT documentary evidence"}
{"ATO_ID_Number": "ATO ID 2006/197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: in-house residual expense payment fringe benefit", "Issue": "If an employer re-imburses the private electricity expenses of its employees, which were incurred to an unrelated third party electricity retailer, can the benefits be valued as 'in house residual expense payment fringe benefits for the purposes of subsection 22A(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. Where the electricity retailer purchases the electricity from a generating company that is an associate of the employer, the benefit will be valued as an 'in house residual expense payment fringe benefit for the purposes of subsection 22A(2) of the FBTAA.", "Facts": "The employer is a participant in the electricity industry. There is an electricity generating company (the electricity generator) which 'is an associate' of the employer under the definition of 'associate' in subsection 136(1) of the FBTAA. The electricity generator is one of a number of generators that supply electricity into an electricity pool which is managed by an administrator on behalf of all generators and suppliers. Because one unit of electricity is indistinguishable from all other units, it is impossible to determine which generator produced which electricity. Electricity retailers purchase electricity from the electricity pool and on-sell it to end-use customers. The employees of the employer company are end-use customers of one of these retailers (the electricity retailer). The electricity retailer which is 'not an associate' of the employer provides electricity to all its domestic customers through a reticulation system. The quantum of electricity produced by the electricity generator and supplied to the electricity pool is well in excess of any potential energy consumption by employees of the employer company. The pool administrator calculates the financial liability of all electricity retailers on a daily basis. This involves the administrator collecting all money due for electricity purchased from the pool by electricity retailers, and forwarding payment to the electricity generators. The pool administrator does not have any possessory rights over the electricity in the pool. Section 156 of the FBTAA provides that the supply of electricity through a reticulation system shall be deemed not to constitute the provision of property. The supply of electricity to an employee's residence is a residual benefit. Both the electricity retailer (the residual benefit provider) and the electricity generator (the seller) carried on a business of supplying electricity that consisted of or included the provision of identical or similar benefits principally to outsiders. The employer reimburses their employees' private electricity expenses incurred to the electricity retailer. The employees provide their employer with a copy of the electricity retailers invoice for electricity consumed during the billing period prior to being reimbursed for electricity costs.", "Reasons_for_Decision": "Summary: 'In-house residual expense payment fringe benefit' is defined in subsection 136(1) of the FBTAA. In particular subparagraph (c)(i) of the definition requires that where the residual benefit provider is not the employer or the associate of the employer, that the provider will have purchased the benefit from the 'seller,' being the employer or an associate of the employer. It is therefore necessary to determine that the electricity retailer (residual benefit provider) has purchased electricity from the electricity generator (associate of the employer). Because of the nature of the electricity industry, it is impossible to distinguish which generator actually produced the electricity that is consumed by the employer's employees. One interpretation of this provision might conclude that a strict physical tracing and identification process must take place. In this regard, it would not be possible to trace the source of the electricity consumed by employees to the electricity produced by the electricity generator. However, regard should be had to the nature of the wholesale electricity market. The wholesale electricity market is distinctive because all electricity output from the generators is centrally pooled. In essence, the pool administrator merely acts as a facilitator by ensuring that electricity is supplied reliably and at the best market price. The residual benefit flows from the electricity generator directly to the electricity retailer. The arrangement is such that the electricity retailer makes an electricity settlement payment through the pool administrator which in turn passes the payment to the electricity generator. The Explanatory Memorandum to the Taxation Laws Amendment (Fringe Benefits and Substantiation) Act 1987 at Part A- Main Features: In-house fringe benefits (clauses 15, 17, 40, 48) describe the application of the new (property benefit) rules: A further category of fringe benefits will also now qualify for the in-house concessions. The new category will, broadly, comprise expense payment fringe benefits where the employee receives a reimbursement of expenditure incurred in respect of the purchase of goods, etc., of a kind supplied to the public in the ordinary course of the employer's business. For example, where an employee of a petroleum company purchases the company's brand of petrol from an independently owned retail outlet at the usual retail price and the employee subsequently receives a reimbursement of a percentage of that retail price from the employer, that reimbursement will qualify as an in-house expense payment fringe benefit. Whilst the EM contemplates a physical delivery of the employer's product, which is difficult to establish in the electricity industry, the EM does not indicate that a precise matching of the product is necessary. Further, whilst it may not be possible to establish that the specific electricity consumed by an employee was produced by electricity generator, it is however clear that a portion of the electricity sold by each electricity retailer will necessarily have been produced by this entity. The EM indicates that the in-house rules were intended to be available for employers in an industry such as the petroleum industry. It is clear that the in-house provisions should generally be available to industries in Australia who produce goods or services which can be consumed by individuals including the employees. The in-house provisions should also necessarily include the utility industries. To deny access to the in-house provisions for participants in the Australian electricity industry because of the nature of the product and the method of its delivery would not be the intention of the fringe benefits tax provisions. It is therefore accepted that the electricity generator sells electricity to the electricity retailer that was in turn provided by the electricity retailer to the employees of the employer as residual benefits. Therefore, the benefits will be valued as 'in-house residual expense payment fringe benefits' for the purposes of subsection 22A(2) of the FBTAA.", "Date_of_Decision": "25 July 2006", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1) section 156 subsection 22A(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe Benefit In-house residual expense payment fringe benefit", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Fringe Benefits and Substantiation) Act 1987", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006197", "Unmatched_Content": "Update to correct business line | Keywords Fringe benefits tax Fringe Benefit In-house residual expense payment fringe benefit"}
{"ATO_ID_Number": "ATO ID 2003/836", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Expense payment fringe benefit: reimbursement of legal expenses", "Issue": "Does the reimbursement of an individual's legal expenses, incurred in appearing before an enquiry into the activities of the individual's former employer, constitute the provision of an 'expense payment fringe benefit' as defined at subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The reimbursement of the individual's legal expenses constitutes the provision of an expense payment fringe benefit.", "Facts": "An individual was employed by an authority of the State (the authority). The authority was established under a State Act and is an associate of the State pursuant to subsection 159(2) of the FBTAA. After the individual ceased employment with the authority, a report raised concerns about the activities and management of the authority during the period when the individual was employed by that authority. Subsequently, an enquiry was formed to enquire into whether there had been any illegal or improper conduct in a number of matters relating to the authority. These matters included activities involving the individual during the period they were employed by the authority. The individual was subpoenaed to appear before the enquiry as a key witness and a person with an interest in the proceedings. The individual incurred legal costs in relation to this appearance. The State reimbursed the individual's legal expenses in appearing before the enquiry. This reimbursement was paid subject to the individual having discharged their duties in good faith and not being guilty of misconduct, or not having acted negligently, or not being convicted of an offence in relation to such conduct. The enquiry did not find any wrongdoing by the individual. The State also reimbursed the legal expenses of other persons who were not employees of the authority. The reimbursement did not constitute a benefit included within paragraphs (f) to (s) of the definition of 'fringe benefit' in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: An 'expense payment fringe benefit' is defined in subsection 136(1) to mean a fringe benefit that is an expense payment benefit. An 'expense payment benefit' is defined in subsection 136(1) of the FBTAA to mean a benefit referred to in section 20. Section 20 of the FBTAA provides that where a person reimburses another person (the recipient), in whole or in part, in respect of an amount of expenditure incurred by the recipient; the reimbursement shall be taken to constitute the provision of a benefit by the provider to the recipient. Thus the reimbursement of a person's expenses constitutes the provision of an expense payment benefit to the person. 'Fringe benefit' is defined in subsection 136(1) of the FBTAA and relevantly includes a benefit provided to an employee by their employer (or an associate of the employer) in respect of the employment of the employee, but does not include a benefit included within paragraphs (f) to (s) of the definition. Consequently, the reimbursement of a person's expenses will constitute the provision of an expense payment fringe benefit where the person is an employee of the employer and the reimbursement is provided to the person by the employer (or an associate of the employer) in respect of the employment of the employee. Subsection 136(1) of the FBTAA defines 'employee' to include a former employee and 'employer' to include a former employer. Therefore, the reimbursement of a former employee's expenses by an associate of a former employer constitutes the provision of a benefit to an employee by an associate of the employer. The expression 'in respect of the employment of the employee' was considered by the Full Federal Court in J & G Knowles v FCT [2000] FCA 196; 2000 ATC 4151; (2000) 44 ATR 22. The Full Federal Court said that what must be established is a 'sufficient or material relationship' rather than a 'causal link' between the benefit and the employment. The relevant question to ask is whether the benefit is a product or incident of the person's former employment. In this case, the enquiry was formed to enquire into whether there had been any illegal or improper conduct in a number of matters relating to the agency, including the activities and involvement of the individual as an employee of the authority. The State reimbursed the individual's legal expenses in appearing before the enquiry because, as a former employee of the authority, they had an interest in the proceedings, and they considered the individual to have discharged their employment duties in good faith. These factors indicate that the reimbursement of the legal expenses was a product of the individual's former employment. The reimbursement had the requisite 'sufficient or material relationship' to the individual's former employment such that the reimbursement could be said to have been provided in respect of the employment of that individual. Thus, the reimbursement of the individual's legal expenses is considered to constitute the provision of an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.", "Date_of_Decision": "12 August 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 20 subsection 136(1) subsection 159(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Benefit Expense payment fringe benefits Fringe benefits tax Legal expenses", "Case_References": "J & G Knowles v FCT [2000] FCA 196 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003836", "Unmatched_Content": "Updated Business Line and review date | Facts and Reasons for Decision | Minor change to reference from '(r)' to '(s)' as paragraph (s) was added to the definition of 'fringe benefit' in subsection 136(1) by section 32 of Schedule 1 to the Tax Laws Amendment (2007 Measures No. 3) Act 2007. | Keywords Benefit Expense payment fringe benefits Fringe benefits tax Legal expenses"}
{"ATO_ID_Number": "ATO ID 2001/532", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: Salary sacrifice arrangements involving loans with redraw facilities", "Issue": "Is a salary sacrifice arrangement (SSA) involving an employee sacrificing amounts into a home mortgage account with a redraw facility which satisfies Taxation Ruling TR 2001/10 and section 20 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) effective for taxation purposes?", "Decision": "Yes, provided both Taxation Ruling TR 2001/10 and section 20 of the FBTAA are satisfied, an SSA involving an employer repaying into an employee's home mortgage account (with or without a redraw facility) is effective for taxation purposes.", "Facts": "The employer enters into a SSA with the employee. This arrangement involves the employer repaying amounts into the employee's home loan account in lieu of the payment of salary. The \"home loan\" has a redraw facility whereby the employee can access any amounts in excess of the minimum repayments.", "Reasons_for_Decision": "Summary: An SSA is generally considered effective if the arrangement is set up within the rules in Taxation Ruling TR 2001/10. The consequence of an effective SSA would be that the employee agrees to forgo part of his or her total remuneration in return for the employer providing the employee \"benefits\" of similar value. The employee will only be liable to income tax on the reduced salary. The employer may be assessed under fringe benefits tax legislation in relation to those \"benefits\" provided to the employee. For a benefit to be an \"expense fringe benefit\" under section 20 of the FBTAA, the employer must be making a payment in relation to an \"obligation\" of the employee and that the payment is in respect of \"expenditure incurred\" by the employee. An arrangement for the employer to repay the employee's loan account (with or without redraw facility) is considered to be an \"expense payment fringe benefit\" provided by the employer to the employee under section 20 of the FBTAA. The full amount borrowed by the employee is viewed as the obligation of the employee, which has been partially met by the employer. The fact that the employee may or may not have utilised the redraw facility would not affect the arrangement. According to paragraph 39 of Taxation Ruling TR 2000/2, any redraw would constitute new borrowing of funds that cannot be traced to the extra repayments.", "Date_of_Decision": "26 June 2001", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Section 20", "Related_Public_Rulings_and_Determinations": "TR 2000/2 | TR 2001/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax FBT non profit employers FBT charities FBT salary sacrifice arrangement FBT mortgage loan repayments FBT expense payment fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001532", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 2000/2 TR 2001/10 | Keywords Fringe benefits tax FBT non profit employers FBT charities FBT salary sacrifice arrangement FBT mortgage loan repayments FBT expense payment fringe benefits"}
{"ATO_ID_Number": "ATO ID 2001/803", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: Living away from home and expenditure incurred in respect of accommodation", "Issue": "Whether the term \"in respect of accommodation\" contained in paragraph 21(b) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) includes the reimbursement or payment by the employer of mortgage expenses in respect of a house purchased by an employee and used as a dwelling by the employee and members of the employee's family while they are temporarily residing in Australia?", "Decision": "No. The term \"in respect of accommodation\" contained in paragraph 21(b) of the FBTAA does not include the reimbursement or payment by the employer of mortgage expenses in respect of a house purchased by an employee and used as a dwelling by the employee and members of the employee's family while they are temporarily residing in Australia.", "Facts": "The employee and members of the employee's family arrived in Australia on a prearranged 3-year to 4-year employment assignment. The intention of the employer and the employee is that the employee will only remain in Australia for the anticipated duration of the assignment, which is not expected to exceed four years. But for the assignment in Australia, the employee would not have established a residence in Australia and would have continued to reside overseas. The employee will continue to maintain an overseas residence which will be let during the duration of the employee's assignment in Australia. The employee would prefer to purchase a house in which to live while temporarily residing in Australia. The employee would have leased a property instead of purchasing a house if a suitable rental property had been available. The employer proposes to compensate the employee by way of reimbursement for mortgage expenditure incurred by the employee.", "Reasons_for_Decision": "Summary: The expenditure which is reimbursed or paid by the employer is considered to be expenditure in respect of a mortgage connected with the acquisition of a house. It is not considered to be \"in respect of accommodation\" for the purposes of paragraph 21(b) of the FBTAA. Accordingly, the expense payment benefit is not an exempt accommodation expense payment benefit under section 21 of the FBTAA.", "Date_of_Decision": "27 November 2001", "Year_of_Income": "Year ending 31 March 2002 Year ending 31 March 2003 Year ending 31 March 2004 Year ending 31 March 2005 Year ending 31 March 2006", "Legislative_References": "Fringe Benefit Tax Assessment Act 1986 Section 21 Paragraph 21(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Living away from home allowance fringe benefits FBT Living away from home Exempt accommodation component Exempt food component", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001803", "Unmatched_Content": "Updated for minor style changes | Updated to Superannuation and Employer Obligations | Keywords Fringe benefits tax Living away from home allowance fringe benefits FBT Living away from home Exempt accommodation component Exempt food component"}
{"ATO_ID_Number": "ATO ID 2011/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Housing fringe benefits: house destroyed in natural disaster", "Issue": "Will a housing fringe benefit, as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) still exist where an employee has been previously granted a housing right, but is unable to continue to occupy the house as it has been destroyed in a natural disaster?", "Decision": "No. A housing fringe benefit, as defined in subsection 136(1) of the FBTAA, no longer exists from the date the house was destroyed.", "Facts": "An employer grants an employee the right to occupy a house on a rent-free basis during the FBT year. The house is the employee's usual place of residence. Part-way through the FBT year the house is destroyed in a bushfire. The house is uninhabitable from the date of the bushfire.", "Reasons_for_Decision": "Summary: A housing fringe benefit is defined in subsection 136(1) of the FBTAA as a fringe benefit that is a housing benefit. A housing benefit is defined in subsection 136(1) of the FBTAA as a benefit referred to in section 25 of the FBTAA. Section 25 of the FBTAA provides that a housing benefit will arise when an employee is provided with a housing right. A housing right is defined in subsection 136(1) of the FBTAA as, in relation to a person, means a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence. A unit of accommodation is defined widely in subsection 136(1) of the FBTAA and includes a house, flat or home unit. A housing fringe benefit will not arise unless the employee is provided with the right to use or occupy a unit of accommodation and the accommodation is the employee's usual place of residence. Where a house has been destroyed due to a natural disaster a 'housing right' will not exist from that point in time, as there is no unit of accommodation that can be used or occupied. Accordingly, a housing fringe benefit will no longer exist from the date the house was destroyed for the purposes of subsection 136(1) of the FBTAA.", "Date_of_Decision": "1 June 2011", "Year_of_Income": "Year ended 31st March 2012", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) section 25 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Housing fringe benefit FBT accommodation FBT dwellings FBT unit of accommodation Non remote housing fringe benefits.", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201157", "Unmatched_Content": "Updated business line details | Keywords Fringe benefits tax Housing fringe benefit FBT accommodation FBT dwellings FBT unit of accommodation Non remote housing fringe benefits."}
{"ATO_ID_Number": "ATO ID 2011/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Housing fringe benefits: house damaged in natural disaster", "Issue": "Where a house has been substantially damaged by a natural disaster but remains habitable, can the property be deemed to be a different unit of accommodation in accordance with subsection 26(5) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. Where a house has been materially altered by a natural disaster it can be deemed to be a different unit of accommodation after the natural disaster in accordance with subsection 26(5) of the FBTAA.", "Facts": "During an FBT year an employee is provided with a housing fringe benefit, as defined by subsection 136(1) of the FBTAA, by their employer. The housing fringe benefit is provided to the employee during the FBT year in respect of a two-storey house. The two-story house is a unit of accommodation as defined in subsection 136(1) of the FBTAA. Part-way through the FBT year the ground level of the house is substantially damaged by a flood. Only the upper level of the house remains habitable for the balance of the FBT year. After the date of the flood the market value of the right to occupy the house has decreased by 10% or more.", "Reasons_for_Decision": "Summary: Subsection 26(5) of the FBTAA applies where there has been a material alteration to a unit of accommodation that has the effect of substantially altering (that is, by 10% or more) the market value of the right to occupy the unit of accommodation. Where this occurs subsection 26(5) of the FBTAA deems the unit of accommodation to be treated as a 'new' unit of accommodation. There is deemed to be a new housing right granted in the same circumstances as the original housing right and the value of the right to occupy the unit of accommodation is from the date of the change, re-established by reference to the adjusted market value of that right. Subsection 26(6) of the FBTAA states, for the purposes of subsection 26(5) of the FBTAA, a 'material alteration' to a unit of accommodation includes additions or improvements or other work carried out, any damage, or any addition of facilities or removal of facilities from the unit of accommodation. For the purposes of subsection 26(5) of the FBTAA, the flood damage to the ground level of the two-storey house is a material alteration to the unit of accommodation. Further, the flood damage has substantially reduced the market value of the right to occupy the unit of accommodation by 10% or more and as such subsection 26(5) of the FBTAA applies. Accordingly, where a house has been materially altered by a natural disaster it can be deemed to be a different unit of accommodation after the natural disaster, in accordance with subsection 26(5) of the FBTAA.", "Date_of_Decision": "31 May 2011", "Year_of_Income": "Year ended 31st March 2012", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 26(5) subsection 26(6) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Housing fringe benefits FBT accommodation FBT dwellings FBT unit of accommodation Non remote housing fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201159", "Unmatched_Content": "Added 'of the FTBAA' where necessary to conform to the ATO guide to citations and references. | Removed reference to section 58N | Added reference to subsection 136(1) | Keywords Fringe benefits tax Housing fringe benefits FBT accommodation FBT dwellings FBT unit of accommodation Non remote housing fringe benefits"}
{"ATO_ID_Number": "ATO ID 2013/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Living-away-from-home allowance fringe benefits: fly in fly out and drive in drive out requirements", "Issue": "Will the requirements of subparagraph 31E(a)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) be satisfied where an employee during the period of their employment tenure works for five and half days and remains on call on the seventh day?", "Decision": "No. The requirements of subparagraph 31E(a)(i) of the FBTAA specify that the employee must, on a regular and rotational basis work for a number of days and have a number of days off.", "Facts": "An employee who is in receipt of a living-away-from-home allowance is seconded to Australia. The employee's working conditions are such that for a period of 6 months they work from 7am to 5pm for five days and on the sixth day from 8am to 2.00pm. On the seventh day the employee is required to be on call so that they can monitor e-mails and be available to deal with issues that may arise from overseas projects. No other employee performs the duties of their employment on the seventh day. At the completion of the 6 month period they return to their normal country of residence for a period of 15 days and then return to Australia for another period of 6 months. The employee is not working in a remote area meaning that the principles of Taxation Determination TD94/96 do not apply.", "Reasons_for_Decision": "Summary: The requirements to be met for an employee to be considered to be a fly-in fly-out and drive-in drive-out employee are set out in section 31E of the FBTAA. Subparagraph 31E(a)(i) states: The employee satisfies this section if: (a) the employee, on a regular and rotational basis: (i) works for a number of days and has a number of days off (but not the same days in consecutive weeks); and (ii) ... The meaning of 'regular and rotational basis' is not defined in the FBTAA. Therefore, it is relevant to consider the ordinary meanings of the terms 'regular' and 'rotational' in the context in which they are used in the FBTAA. The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 ( Macquarie Dictionary ), defines 'regular' as: usual; normal; customary; conforming in form or arrangement; characterised by fixed principle, uniform procedure, etc; recurring at fixed times; periodic; adhering to rule or procedure. The word \"rotational\" in the employment context is defined in the Cambridge Dictionaries Online as: relating to a system in which the person who does a particular job is regularly changed: The shifts work on a rotational basis. Depending on the department, some recruits will participate in rotational placements. The employee performs the duties of their employment on the basis that they alone are responsible for the day to day operations for which they are employed. The employee does not job share nor does anyone else perform the duties of that employee's employment when they are on call on the seventh day. For the time that they are in receipt of a living-away-from-home allowance, the employee remains solely responsible for performing the duties of their employment, and as such is not working on a regular and rotational basis. Accordingly the requirements of subparagraph 31E(a)(i) of the FBTAA have not been met.", "Date_of_Decision": "15 July 2013", "Year_of_Income": "Year ending 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 31E paragraph 31E(a) subparagraph 31E(a)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax FBT living-away-from-home Living-away-from-home allowance fringe benefits", "Case_References": "", "Other_References": "The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 Cambridge Dictionaries Online, Cambridge Business English Dictionary, Cambridge University Press 2013", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201343", "Unmatched_Content": "Corrected case reference. | Other minor grammatical errors. | Keywords Fringe benefits tax FBT living-away-from-home Living-away-from-home allowance fringe benefits"}
{"ATO_ID_Number": "ATO ID 2002/232", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a sleepover allowance paid to a care worker", "Issue": "Is an allowance paid to the taxpayer when they are required to attend a client's premises during specific hours, assessable under section 15-2 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The allowance paid to the taxpayer for attending a clients premises during specific hours is assessable under section 15-2 of the ITAA 1997.", "Facts": "The taxpayer is a support worker who assists people with disabilities. As part of the taxpayer's duties they are occasionally required to be present at a client's premises during certain hours (or part thereof) to assist the client with any of their needs during the night. The taxpayer is paid a set hourly rate for the number of hours worked, and in addition is paid a sleepover allowance for having been available to attend to the client's needs between specific hours. This allowance is paid to compensate the taxpayer for the inconvenience suffered as a result of being required to be away from their usual place of residence during those hours.", "Reasons_for_Decision": "Summary: Subsection 15-2(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes the value of allowances paid in respect of employment. However, if a sleepover allowance paid is properly characterised as a living-away-from-home allowance, the sleepover allowance will be a fringe benefit within the meaning of subsection 30(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). Fringe benefits are non-assessable non-exempt income in the hands of the taxpayer under subsection 23L(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 30(1) of the FBTAA provides that where an employer pays an allowance to an employee as compensation for additional non-deductible expenses incurred or other additional disadvantages due to living away from their normal place of residence to perform the duties of employment, the allowance constitutes a benefit provided by the employer to employee. Paragraph 38 of Miscellaneous Taxation Ruling MT 2030 discusses the meaning of living-away-from-home allowance and states that: 'A living-away-from-home allowance is paid where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new (but temporary) workplace.' The sleepover allowance is paid as compensation for the inconvenience the taxpayer suffered as a result of occasionally spending the night at a client's residence. The allowance is not a living-away-from-home allowance because: Consequently, the sleepover allowance is not a fringe benefit for the purposes of the FBTAA and therefore not non-assessable non-exempt income under subsection 23L(1) of the ITAA 1936. The allowance is therefore assessable under section 15-2(1) of the ITAA 1997.", "Date_of_Decision": "8 November 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 23L", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling 2030", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/314", "Subject_References": "Employee allowances Income Living away from home allowances", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002232", "Unmatched_Content": "Replace para 26(e) of ITAA 1936 with s15-2 of ITAA 1997. | Insert note re change in para 30(1)(b) of FBTAA from usual place of residence to normal place of residence. | Insert additional keywords | Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling 2030 | Keywords Employee allowances Income Living away from home allowances"}
{"ATO_ID_Number": "ATO ID 2006/294", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt loan benefits: outlay advance - in the course of performing the duties of that employment", "Issue": "Is an outlay advance that is made to an employee who is temporarily relocated overseas, which is made solely to meet expenses associated with the overseas posting, considered to be a loan made to the employee to meet expenses incurred by the employee 'in the course of performing the duties of that employment', within the meaning of subsection 17(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The purpose of the outlay advance is to enable the employee to meet household expenses to be incurred by the employee in the course of performing the duties of that employment.", "Facts": "The employer requires the employee to be temporarily relocated overseas in order to perform the duties of their employment. The employee is transferred from their usual place of residence in Australia to the overseas post for a period of 3 years. At the end of this period the employee will return to Australia. One of the conditions of service at the overseas post is an entitlement to receive an interest free loan described as an 'outlay advance'. The employee is entitled to receive an outlay advance of up to $10,000 upon acceptance of the overseas posting. The sole purpose for providing the outlay advance is to enable the employee to meet expenses associated with the overseas posting. The employee makes an application for an outlay advance in order to purchase household goods, household furniture and a washing machine to be used in the employee's place of accommodation at the overseas post. Within 6 months of making the loan, the employee provides the employer with evidence that the loan has been fully expended. The full amount of the outlay advance is repaid within 12 months.", "Reasons_for_Decision": "Summary: The provision of the outlay advance is a loan benefit under section 16 of the FBTAA. Section 17 of the FBTAA provides an exemption for certain loan benefits. Exempt loan benefits are not subject to fringe benefits tax. Subsection 17(3) of the FBTAA provides that a loan made by an employer to an employee for the purpose of enabling the employee to meet expenses incurred by the employee, 'in the course of performing the duties of that employment' (emphasis added), subject to additional conditions, is an exempt benefit. The outlay advance is made to the employee for the purpose of enabling the employee to meet expenses associated with the overseas posting. Those expenses are identified by the employee as being the purchase of household goods, household furniture and a washing machine. It needs to be determined whether those household expenses are in the nature of expenses incurred by the employee 'in the course of performing the duties of that employment'. The phrase 'in the course of performing the duties of that employment' is not defined in the FBTAA and takes on its ordinary meaning. The phrase 'in the course of performing the duties of that employment', is used in the FBTAA in several places in relation to travel undertaken, for example refer sections 21 and 143A of the FBTAA. However, only section 17 of the FBTAA deals with that phrase in relation to expenses incurred by the employee. The Explanatory Memorandum to the FBTAA, at Clause 17, states that 'an advance made by an employer to an employee solely for the purpose of meeting expenses incurred, within a maximum of 6 months of the advance being made, in carrying out duties of employment, is taken outside the scope of the fringe benefits tax rules'. Australian courts when dealing with workers compensation law have determined whether an injury occurring during intervals between an employee's ordinary duties was sustained 'in the course of employment' (emphasis added). These courts have applied a principal formulated by the High Court in Hatzimanolis v. ANI Corporation Ltd (1992) 173 CLR 473 ( Hatzimanolis) . In the present case, the employee spends the outlay advance on household items in order to establish the accommodation at the overseas posting. The employee is engaged in working at the overseas posting and is living away from home for a period of 3 years. The entire period of the overseas posting constitutes an overall period or episode of work rather than a series of discrete periods or episodes of work. This satisfies the first element of the principle stated in Hatzimanolis . The second element in Hatzimanolis is satisfied as the employee was doing something which he was reasonably required, expected or authorised to do in order to carry out his duties. That is, the employee was induced or encouraged, including by the making of the loan, to establish and live at a place of accommodation at the place of the overseas post. In accordance with the principle formulated in Hatzimanolis , the outlay advance is spent on household items in which expenses are incurred 'in the course of employment' and 'in order to carry out his duties'. In the present case, the employee is establishing accommodation at an overseas post in order for the employee to work at the overseas post. The employee is living away from the usual place of residence in Australia. In order to facilitate this process, the employer provides an outlay advance. In these circumstances it is accepted that expenditure incurred on household goods, household furniture and a washing machine is expenditure incurred 'in the course of performing the duties of that employment'. Accordingly, the sole purpose of the outlay advance is to enable the employee to meet household expenses to be incurred 'in the course of performing the duties of that employment' in accordance with subsection 17(3) of the FBTAA. Subject to the additional conditions contained in subsection 17(3) of the FBTAA, the loan benefit provided to the employee would be an exempt loan benefit.", "Date_of_Decision": "14 September 2006", "Year_of_Income": "year ending 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 16 section 17 subsection 17(3) section 21 section 143A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Fringe benefits Fringe benefits tax Loan fringe benefits", "Case_References": "Hatzimanolis v. ANI Corporation Ltd (1992) 173 CLR 473", "Other_References": "Explanatory Memorandum to the Fringe Benefits Tax Assessment Act 1986", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006294", "Unmatched_Content": "Keywords Exempt benefits Fringe benefits Fringe benefits tax Loan fringe benefits"}
{"ATO_ID_Number": "ATO ID 2003/315", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Loan fringe benefits: loans with limited recourse loan facility", "Issue": "Can a limited recourse loan facility attached to an employee loan give rise to a residual fringe benefit or property fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The provision of a loan with a limited recourse loan facility to an employee can only give rise to a loan fringe benefit.", "Facts": "An associate of an employer provides an employee with a limited recourse loan with which to acquire shares. Under the terms of the loan agreement the employee may elect to transfer the shares to the lender in full and final satisfaction of the loan balance. The terms of the loan agreement are accepted as being commercial. The provision of the loan gives rise to a 'loan fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: When the employee is provided with a limited recourse loan the non-recourse feature of the loan protects the employee from loss, should the value of the shares be below the loan balance when the loan is discharged. This protection is commonly referred to as downside risk protection (DRP). Thus, under the terms of the loan agreement, the employee is considered to obtain at least two advantages or benefits - one being the use of the lenders money, the other being the right to DRP. The right to DRP may give rise to a property benefit or alternatively a residual benefit provided it is not also a benefit pursuant to Division 4 of Part III of the FBTAA (Division 4). That is, a benefit that is a loan benefit cannot be: In Westpac Banking Corporation v. Federal Commissioner of Taxation (1996) 70 FCR 52; (1996) 34 ATR 143; 96 ATC 5021, the Court examined loans provided by the bank to its employees. The loans were at a concessional interest rate and the usual loan establishment fees charged to the public were generally waived. The Court found that the benefits relating to the loan establishment service were not within the subject matter of Division 4 and more generally, that Division 4 was not an exclusive code for all benefits that in any way relate to loans. Whilst all benefits that relate to a loan may not necessarily fall within Division 4, where a loan is provided on a commercial basis, the DRP benefits that specifically arise under the terms of the loan are considered to be within the subject matter of Division 4. As such the DRP benefits that arise under terms of a limited recourse loan cannot also give rise to either property benefits or residual benefits.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 45 subsection 136(1) Division 4 of Part III", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/316 | ATO ID 2003/317", "Subject_References": "Fringe benefits tax Fringe benefits Loan fringe benefits Property fringe benefits Residual fringe benefits", "Case_References": "Westpac Banking Corporation v. Federal Commissioner of Taxation (1996) 70 FCR 52 (1996) 34 ATR 143 96 ATC 5021", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003315", "Unmatched_Content": "Keywords Fringe benefits tax Fringe benefits Loan fringe benefits Property fringe benefits Residual fringe benefits"}
{"ATO_ID_Number": "ATO ID 2003/347", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Loan Fringe Benefits - advance of money by cheque", "Issue": "Is the date on which an employee receives a cheque for an advance of money from an employer, the time at which a loan benefit arises under subsection 16(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The date on which an employee receives a cheque for an advance of money from an employer is the time at which a loan benefit arises under subsection 16(1) of the FBTAA.", "Facts": "An employer offered to make a loan of money to an employee. Under the terms and conditions of the agreement, the loan was interest-free and immediately repayable by the employee on the cessation of their employment. The offer was accepted by the employee and the advance was paid by cheque. The employee held the cheque for a number of months before presenting it for payment at a bank. The borrowed funds were used by the employee to meet private expenses.", "Reasons_for_Decision": "Summary: Under subsection 16(1) of the FBTAA, when an employer makes a loan of money to an employee, a loan benefit arises in respect of each year in which an employee is under an obligation to repay the whole or any part of the advance. In effect, this means that a loan benefit arises at the time when a loan is made. A cheque represents a written instrument that embodies a right to be paid and is generally regarded as payment of cash unless and until it has been presented and refused. In Tilley v. The Official Receiver (1960) 103 CLR 529 at 535 Kitto J, in a general observation concerning payment by cheque, stated that There can be no doubt that the acceptance of a payment by cheque implies, if there be nothing to the contrary, an agreement that it shall be considered as payment, subject to the condition subsequent that if the cheque be dishonoured it shall no longer be so considered. By accepting the cheque which is regarded as payment of the advance, the employee was at liberty to bank it or apply it as he or she wished. The employee chose not to bank the cheque immediately and when it was eventually presented for payment, it was honoured. It is considered that the right to draw the money is a loan and thus the loan benefit arose at the time the right was created or granted, which is when the cheque was handed to the employee. It is irrelevant that the employee did not present the cheque for payment for several months.", "Date_of_Decision": "22 January 2003", "Year_of_Income": "Year ended 31 March 2003", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 16(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cheques FBT loan Fringe benefits tax Loan fringe benefits", "Case_References": "Tilley v. Official Receiver in Bankruptcy (1960) 103 CLR 529", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003347", "Unmatched_Content": "Keywords Cheques FBT loan Fringe benefits tax Loan fringe benefits"}
{"ATO_ID_Number": "ATO ID 2014/15", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Meal Entertainment Fringe Benefit: travel - reimbursement of car parking fees", "Issue": "For the purposes of section 37AD of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), are an employee's car parking fees reimbursed by the employer an expense incurred in providing the employee with travel?", "Decision": "Yes. For the purposes of section 37AD of the FBTAA the car parking fees reimbursed by the employer are an expense incurred in providing the employee with travel as the fees were incurred as part of the employee's journey.", "Facts": "The employer made an election under section 37AA of the FBTAA that Division 9A of the FBTAA applies in respect of the current FBT year for any meal entertainment fringe benefits that may arise. During the FBT year the employer provided entertainment by way of food and drink to an employee at a venue away from the employee's place of employment (the venue). The employee drove to the venue in his car which he parked in a car park adjacent to the venue. The employer reimbursed the employee for his car parking fees.", "Reasons_for_Decision": "Summary: All legislative references are to the FBTAA. Provided a benefit is not provided under a salary packaging arrangement, Division 9A provides that an employer can elect to determine the taxable value of 'meal entertainment' provided by an employer to employees and their associates by one of two methods. These methods are the 50/50 split method or the 12 week register method. For the purposes of Division 9A, section 37AD defines the expression 'provision of meal entertainment' as: A reference to the provision of meal entertainment is a reference to the provision of: (a) entertainment by way of food or drink; or (b) accommodation or travel in connection with, or for the purpose of facilitating, entertainment to which paragraph (a) applies; or (c) the payment or reimbursement of expenses incurred in providing something covered by paragraph (a) or (b); The employer provided the employee with entertainment by way of food and drink. Therefore, the employee was provided with meal entertainment for the purposes of paragraph 37AD(a). The question arises as to whether the car parking fees reimbursed by the employer are an expense incurred in providing travel. 'Travel' is not defined in section 37AD. Relevantly, the Macquarie Dictionary, Sixth Edition, 1 October 2013, defines 'travel' as: 1. To go from one place to another; to make a journey; to travel for pleasure The term 'journey' is defined as: 1. A course of travel from one place to another especially by land. The relevant journey undertaken by the employee in connection with the provision of the entertainment by way of food or drink was the journey from his home to the venue. The car parking fees were incurred as part of the employee's journey. Accordingly, the car parking fees reimbursed by the employer are an expense incurred in providing the employee with travel for the purposes of section 37AD.", "Date_of_Decision": "14 April 2014", "Year_of_Income": "Years ended 31 March 2013 and 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Division 9A section 37AA section 37AD paragraph 37AD(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT entertainment FBT meal entertainment Fringe benefits tax", "Case_References": "", "Other_References": "Macquarie Dictionary, Sixth Edition, 1 October 2013", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201415", "Unmatched_Content": "minor amendment - clarify election rules in Div 9A as a result of changes to the FBTAA from the Tax and Superannuation Law Amendment (2015 Measures No. 5) Act 2015 | Keywords FBT entertainment FBT meal entertainment Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2005/146", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Meal Entertainment Fringe Benefit: 50/50 split method - reimbursement of employer's expenditure by a third party", "Issue": "If an employer incurs expenditure in providing meal entertainment to employees, but is reimbursed for that expenditure by a third party, will the amount of the original expenditure still represent 'expenses incurred' by the employer under section 37BA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The amount of the employer's original expenditure represents the 'expenses incurred' by the employer under section 37BA of the FBTAA.", "Facts": "An employer incurs expenditure in providing meal entertainment to employees. As part of a business agreement a third party will reimburse the employer for expenses incurred in providing meal entertainment to its employees. The employer has made an election under section 37AA of the FBTAA that Division 9A of the FBTAA applies to the employer in respect of the current FBT year for any meal entertainment fringe benefits that may arise. The employer has not made an election under section 37CA of the FBTAA that the '12 week register method' be used in the calculation of meal entertainment fringe benefits, therefore in accordance with section 37B of the FBTAA the 50/50 split method is to be used by the employer.", "Reasons_for_Decision": "Summary: Division 9A of the FBTAA provides that an employer can elect to determine the taxable value of 'meal entertainment' provided by an employer to employees and their associates by one of two methods. These methods are the 50/50 split method or the 12 week register method. For the purposes of Division 9A of the FBTAA, section 37AD of the FBTAA defines the expression 'provision of meal entertainment' by reference to three circumstances: The employer has incurred expenditure in providing meal entertainment to its employees and as such this will constitute the provision of meal entertainment under section 37AD of the FBTAA. The employer has made an election under section 37AA of the FBTAA that Division 9A of the FBTAA applies in respect of the current FBT year for any meal entertainment fringe benefits that may arise. The 50/50 split valuation method may be used by the employer, to determine the FBT liability for meal entertainment fringe benefits. Under the 50/50 split method the taxable value of meal entertainment fringe benefits provided by the employer is one-half of the total expenditure incurred by the employer on the provision of meal entertainment. Section 37AB of the FBTAA ensures that any reference to expenses or expenditure incurred by the employer will be reduced by any contributions from an employee or an associate of an employee that is not subject to reimbursement by the employer. It does not allow for contributions from a third party. If an employee makes a contribution towards the cost of meal entertainment then the value of any benefit received by them is reduced. However, if a contribution is made by a third party the value of the benefit received by the employee is not reduced. The arrangement between the employer and the third party is unrelated to the benefit provided to the employee. Accordingly, it is the amount of the expenditure incurred by the employer that is used to calculate the taxable value of meal entertainment fringe benefits for the 50/50 split method under section 37BA of the FBTAA. An arrangement whereby a third party reimburses an employer for expenses incurred in providing meal entertainment to its employees will not alter this outcome.", "Date_of_Decision": "26 May 2005", "Year_of_Income": "Year ended 31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 37AA section 37AB section 37AD section 37BA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT entertainment FBT meal entertainment FBT taxable amount Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005146", "Unmatched_Content": "Updated to correct business line | Keywords FBT entertainment FBT meal entertainment FBT taxable amount Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2005/366", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: minor benefits - gift jointly purchased by employer and employees - calculation of notional taxable value", "Issue": "Where a gift is presented to an employee, which has been purchased using funds contributed by both the employer and work colleagues, will those contributions made by the work colleagues be included in determining whether the notional taxable value of the minor benefit is less than $300, as specified in paragraph 58P(1)(e) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Only the amount contributed by the employer would be relevant in determining whether or not the requirements of paragraph 58P(1)(e) of the FBTAA have been satisfied.", "Facts": "An employee and their partner have a new baby. To recognise this event, a work colleague of the employee collects voluntary contributions from other work colleagues, for the purpose of presenting a gift to the employee. As a matter of company policy the employer considers that a gift to the employee is appropriate, and therefore contributes an amount towards the purchase of a suitable gift. Whilst the total amount collected is in excess of $300, the amount contributed by the employer is less than $300. The combined funds are used to purchase a gift which is presented to the employee at a staff presentation. The gift is a property benefit as defined in subsection 136(1) of the FBTAA. The other requirements of section 58P of the FBTAA have been met.", "Reasons_for_Decision": "Summary: Section 58P of the FBTAA exempts benefits provided to employees which are considered minor in nature. To satisfy paragraph 58P(1)(e) of the FBTAA, it is necessary that the notional taxable value of the minor benefit in relation to a current year of tax be less than $300. 'Notional taxable value' is defined in subsection 136(1) of the FBTAA as being: in relation to a benefit provided ....., in respect of the employment of an employee, means the amount that, if it were assumed that.... the benefit was a fringe benefit in relation to the employer in relation to the year of tax, would be the taxable value in relation to the year of tax. As the property to be gifted has been purchased, the benefit provided by the employer would be an external property fringe benefit. Under these circumstances, the taxable value of the benefit would then be calculated in accordance with paragraph 43(a) of the FBTAA, meaning that its value would be based on the 'cost price of the recipients property to the provider'. Under paragraph (c) of the definition of 'cost price' in subsection 136(1) of the FBTAA, the cost price of a property fringe benefit means the expenditure incurred by the provider that is directly attributable to purchasing or obtaining delivery of the property. Under these circumstances it is accepted that the employer is the provider and the expenditure that is 'incurred by the provider' is the amount that has been contributed by the employer towards the purchase of the gift. Therefore, as the notional taxable value of the benefit is less than $300, the requirements of paragraph 58P(1)(e) of the FBTAA would be satisfied.", "Date_of_Decision": "25 May 2005", "Year_of_Income": "Year ended 31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 43(a) paragraph 58P(1)(e) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Minor benefits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005366", "Unmatched_Content": "This ATOID has been amended in respect of subparagraph 58P(1)(e) by replacing the notional value of less than $100 to less than $300 with effect from 1 April 2007. | Keywords Fringe benefits tax Fringe benefits Minor benefits"}
{"ATO_ID_Number": "ATO ID 2013/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits - relocation transport - cost of visa application for a non-resident employee to remain in Australia", "Issue": "If an employer pays the costs of a visa application for a non-resident employee to remain in Australia, will the benefit be provided in respect of relocation transport and be exempt under section 58F of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. As the employee is already living in Australia, the benefit is not provided in respect of the provision of transport. Therefore, the benefit is not provided in respect of relocation transport and is not an exempt benefit under section 58F of the FBTAA.", "Facts": "During the FBT year a non-resident employee worked for an employer in Australia for a fixed period whilst on a visa. While in Australia, the employee is living away from their usual place of residence. The employer would like the employee to continue working for them and consequently the employee applies for another visa in order to remain in Australia. The employer pays the costs of that visa application. The payment of the cost of the employee's visa application by the employer is an expense payment benefit in accordance with section 20 of the FBTAA.", "Reasons_for_Decision": "Summary: Section 58F of the FBTAA exempts from fringe benefits tax benefits 'in respect of relocation transport'. The circumstances in which a benefit will be treated as a benefit 'in respect of relocation transport' are specified in section 143A of the FBTAA. Broadly, such benefits are transport, meals or accommodation provided to an employee who is required to live away from, or change, their usual place of residence in order to perform the duties of their employment. Subparagraph 143A(a)(ii) of the FBTAA stipulates that relocation costs include an expense payment benefit where the recipients expenditure is in respect of the provision of transport, or meals or accommodation in connection with transport. Transport is not defined in the FBTAA but by virtue of subsection 142A(1) of the FBTAA expenditure by an employee on accident insurance, airport or departure tax, a passport, a visa, a vaccination or any similar matter 'in connection with transport' is taken to be 'in respect of the provision of, or to consist of, transport'. The meaning of the phrase 'in connection with' was discussed in Burswood Management Ltd v. Attorney-General (1990) 23 FCR 144. In a joint decision the court said: The words 'in connection with' are words of wide import; and the meaning to be attributed to them depends on their context and the purpose of the statute in which they appear. The Explanatory Memorandum to the Tax Laws Amendment (Fringe Benefits and Substantiation) Bill 1987 ('the EM') which introduced section 143A of the FBTAA discusses the intended meaning of 'benefit in respect of relocation transport': The circumstances in which a benefit will be treated as a 'benefit in respect of relocation transport' are specified in proposed section 143A. Broadly, such a benefit is one that is provided to an employee who moves from one locality to another in the course of employment or in order to commence new employment where the benefit meets travel costs (i.e., transport costs and accommodation and meals en route) incurred by the employee (or a family member) for the purpose of taking up residence in the locality of the new work place. The EM makes it clear that a benefit in respect of relocation transport is intended to cover travel costs incurred for the purpose of an employee taking up residence in the locality of a new work place. Therefore, the words 'in connection with' in subsection 142A(1) of the FBTAA should be read such that only visa application costs that are incurred for the purpose of an employee taking up residence in the locality of a new work place will be 'in connection with transport'. The employee applied for a visa in order to remain in Australia. At the time, the employee was already living in Australia. The visa application costs were not incurred for the purpose of the employee taking up residence in the locality of a new work place. Therefore, the costs are not 'in connection with transport' for the purposes of subsection 142A(1) of the FBTAA or 'in respect of the provision of transport' for the purposes of subparagraph 143A(a)(ii) of the FBTAA. Accordingly, the benefit is not provided 'in respect of relocation transport' and therefore is not an exempt benefit under section 58F of the FBTAA.", "Date_of_Decision": "5 June 2013", "Year_of_Income": "Year ended 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58F subsection 142A(1) section 143A subparagraph 143A(a)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe Benefits Tax Exempt Benefits FBT Relocation Transport", "Case_References": "Burswood Management Ltd v. Attorney-General (Cth) (1990) 23 FCR 144", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Fringe Benefits and Substantiation) Bill 1987", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201335", "Unmatched_Content": "Keywords Fringe Benefits Tax Exempt Benefits FBT Relocation Transport"}
{"ATO_ID_Number": "ATO ID 2012/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: reimbursement of parking fees - remote area employees", "Issue": "Where an employer reimburses an employee for fees incurred to park the employee's car at the local airport whilst the employee is working interstate at a remote location, will the reimbursement of the parking fees constitute an exempt benefit under paragraph 58G(1)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The reimbursement of the parking fees will constitute an exempt benefit under paragraph 58G(1)(a) of the FBTAA.", "Facts": "An employee's usual place of residence is situated in a major Australian city. The employee's primary place of employment is located at a mine site in a remote locality interstate. The employee works under a roster system which requires the employee, on a regular basis, to work for a number of days followed by a number of days off. At the commencement of each rostered period of working days, in order to get to the place of employment, the employee drives to the local airport and leaves their car at the airport car park and in so doing incurs car parking fees. The employee flies interstate and catches a connecting flight to a township near the mine site. At the completion of each rostered period of working days, the employee returns to his usual place of residence. The employer reimburses the employee for the parking fees incurred at the airport. The employer is not a non-profit organisation that could consider the application of either subsections 58G(2) or 58G(3) of the FBTAA. Division 10A - Car parking fringe benefits, of the FBTAA, does not apply in these circumstances for a number of reasons including that the employee's car is not being parked at or in the vicinity of the employee's primary place of employment.", "Reasons_for_Decision": "Summary: Where an employer reimburses an employee for an expense incurred by the employee in these circumstances, an expense payment benefit can arise. However, in accordance with paragraph 58G(1)(a) of the FBTAA an expense payment benefit will be an exempt benefit where: 'Motor vehicle parking facilities' is not a defined term in the FBTAA. It is considered that any defined area which may be utilised for the purposes of parking motor vehicles would qualify as a 'motor vehicle parking facility'. Where the employee has incurred fees for parking a car at the airport car park, the employee has incurred expenditure in respect of the provision of motor vehicle parking facilities. In so doing the requirement of subparagraph 58G(1)(a)(i) of the FBTAA has been satisfied. The term 'eligible car parking expense payment benefit' is a defined term. For a benefit to be an 'eligible car parking expense payment benefit', paragraph (c) of the definition of the term in subsection 136(1) of the FBTAA requires that all of the following conditions must be satisfied: As the employee has parked the car at the local airport and the employee's primary place of employment is interstate, subparagraph (ii) of the definition has not been satisfied. Therefore, the expense payment benefit does not qualify as an 'eligible car parking expense payment benefit'. As a consequence, the requirement of subparagraph 58G(1)(a)(ii) of the FBTAA has been met. Accordingly the reimbursement of the parking fees will constitute an exempt benefit under paragraph 58G(1)(a) of the FBTAA.", "Date_of_Decision": "7 March 2012", "Year_of_Income": "Year ending 31 March 2012", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 58G(1) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe Benefits Tax Exempt Benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201218", "Unmatched_Content": "Updated to correct business line | Keywords Fringe Benefits Tax Exempt Benefits"}
{"ATO_ID_Number": "ATO ID 2012/95", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: payments to approved worker entitlement funds", "Issue": "Will contributions made by an employer to an approved worker entitlement fund, in order to provide income protection insurance to its employees, constitute exempt benefits under section 58PA of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No, contributions made for income protection insurance do not constitute exempt benefits in terms of section 58PA of the FBTAA.", "Facts": "An employer is covered by an industrial award (IA) which imposes an obligation on the employer to make payments to its' eligible employees when those employees cease employment. As part of this process, the employer entered into an enterprise agreement (EA) with its union with regards to those previously mentioned employees whereby the employer would join and participate in an approved worker entitlement fund nominated by the union. Both, the IA and the EA are 'industrial instruments' in terms of subsection 136(1) of the FBTAA. The EA specifies the quantum of the contributions to be made by the employer to an approved worker entitlement fund for the purposes of meeting employee redundancy pay. The EA also states that the employer is required to make contributions to the approved worker entitlement fund in respect of employee income protection insurance. The IA makes no mention of a requirement for income protection insurance.", "Reasons_for_Decision": "Summary: Section 58PA of the FBTAA, provides that a contribution is an exempt benefit if: In terms of the highlighted words in the previous paragraph, the initial assumption that could be made is that the industrial instrument referred to in paragraph 58PA(b), is the same instrument referred to in subparagraph 58PA(c)(i). However, in order to determine whether this section is referring to the possible existence of more than one industrial instrument, reference is made to paragraph 8.12 in Chapter 8 of explanatory memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005 (EM) which amended the intent of the original 2003 provision in the following way: Whilst an obligation to make contributions for the purposes of meeting employee leave or redundancy payments is made under the industrial instrument, the amendments allow related legal instruments to be used to determine the quantum and other relevant matters regarding the contributions. The EM quoted above, therefore recognises the possible existence of more than one instrument in the form of a 'related legal instrument'. For such an instrument to exist however, it presupposes the existence of the main legal instrument in the form of an 'industrial instrument 'with the related legal instrument merely being used to determine quantum or other relevant matters in order to make leave payments or payments when the employee ceased employment. To be 'related', reference is made to the Macquarie Dictionary [MultiMedia], version 5.0.0, 1/10/01 which defines the term as: 1. associated; connected. Therefore, whilst such a connection could be inferred between two industrial instruments it must still be proven that in making the contribution under the EA that it has been wholly for the purposes of the IA as per paragraph 58PA(b) through meeting the requirements of subparagraph 58PA(c)(i). That is, by ensuring that an obligation is met under the IA to either make leave payments or payments when an employee ceases employment. Whilst the EA specifies the quantum of the contributions to be made for redundancy payments which are associated with the IA's purpose in providing for income insurance, this is not in accordance with the stated purpose of the main industrial instrument of making payments when an employee ceases employment. In this respect, it can be concluded that the EA has no overall association or connection to the IA but rather by providing for income insurance it is providing for a new purpose outside meeting the initial obligation imposed by the original award and as such does not constitute a related legal instrument. The fact that part of the document could be viewed as being 'associated' to the IA is therefore not relevant in concluding whether the EA is a related legal instrument for the purposes of section 58PA of the FBTAA as it provides for purposes outside of the IA and not in accordance with 58PA(c)(i). As that necessary connection cannot be established, the EA does not meet the requirements of subparagraph 58PA(c)(i) and accordingly such contributions do not constitute exempt benefits in terms of section 58PA of the FBTAA.", "Date_of_Decision": "31 October 2012", "Year_of_Income": "Year ending 31 March 2013", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58PA paragraph 58PA(b) subparagraph 58PA(c)(i) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Exempt benefits Worker entitlement funds", "Case_References": "", "Other_References": "Explanatory memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005 The Macquarie Dictionary [MultiMedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201295", "Unmatched_Content": "Keywords Fringe benefits tax Exempt benefits Worker entitlement funds"}
{"ATO_ID_Number": "ATO ID 2011/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: emergency assistance - cash payment to victim of natural disaster to provide immediate relief", "Issue": "If an employer makes an emergency relief cash payment to an employee who is a victim of a natural disaster, is that payment a benefit that is exempt under section 58N of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The emergency relief cash payment provided by the employer to the employee who was a victim of a natural disaster is an exempt benefit under section 58N of the FBTAA.", "Facts": "Part-way through the FBT year an employee's house is destroyed in a flood. The house is uninhabitable from the date of the flood. The employee has no other accommodation following the natural disaster. The employer subsequently made an emergency relief cash payment to the employee to cover the immediate expenses for meals and food supplies, clothing and hire of household goods. This emergency relief cash payment also covered anticipated rent for a reasonable period of time to enable the employee to find alternative permanent accommodation. The emergency relief cash payment to the employee is not a payment of 'salary or wages' as defined in subsection 136(1) of the FBTAA. The emergency relief cash payment to the employee is a property benefit in accordance with section 40 of the FBTAA.", "Reasons_for_Decision": "Summary: Section 58N of the FBTAA provides an exemption for 'emergency assistance' provided to an employee or to an associate of an employee. In this situation in order for the benefit to be exempt under section 58N of the FBTAA, the following two conditions must be satisfied: The emergency relief cash payment is a benefit provided in respect of the employment of the employee of the employer as required by paragraph 58N(a) of the FBTAA. For the purposes of the exemption provided by section 58N an 'emergency' is defined in subsection 136(1) of the FBTAA to mean: an emergency involving any of the following matters: (a) a natural disaster; (b) a conflict involving an armed force; (c) a civil disturbance; (d) an accident; (e) a serious illness; (f) any similar matter. The flood was an emergency involving a natural disaster as defined in paragraph (a) of the definition of 'emergency' in subsection 136(1) of the FBTAA. The definition of 'emergency assistance' in subsection 136(1) of the FBTAA states: in relation to a person, means assistance granted to the person where: (a) the person is, or is at immediate risk of becoming, the victim of an emergency; (b) the assistance is granted to the person solely in order to provide immediate relief; (c) the assistance is in respect of all or any of the following matters: (i) first aid or other emergency health care; (ii) emergency meals or food supplies; (iii) emergency clothing; (iv) emergency transport; (v) emergency accommodation; (vi) emergency use of household goods; (vii) temporary repairs; (viii) any similar matter. The emergency relief cash payment to the employee is 'emergency assistance' as defined in subsection 136(1) of the FBTAA as: Accordingly, the emergency relief cash payment by the employer to the employee who was a victim of a natural disaster is an exempt benefit under section 58N of the FBTAA.", "Date_of_Decision": "31 May 2011", "Year_of_Income": "Year ended 31st March 2012", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58N paragraph 58N(a) paragraph 58N(b) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Exempt benefits FBT emergency assistance", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201160", "Unmatched_Content": "Paragraph two updated for clarity. Insert the word 'two' | Keywords Fringe benefits tax Exempt benefits FBT emergency assistance"}
{"ATO_ID_Number": "ATO ID 2009/140", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: free travel on bus - private use", "Issue": "When an employee only travels between home and work on a bus owned by the employer, under an employment arrangement, will the employee's travel constitute a residual benefit which is an exempt benefit under subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The travel between home and work under the employment arrangement is work-related travel. The travel constitutes a residual benefit which is an exempt benefit under subsection 47(6) of the FBTAA.", "Facts": "The employer is the owner of a fleet of buses and is in the business of providing transport to members of the public. The employer also engages in business activities other than providing transport to members of the public. The employee is engaged in these other activities. As the employee is not employed in the business of providing transport to members of the public the exemption under subsection 47(1) of the FBTAA does not apply. Payment of the fare is facilitated by a pre-paid ticketing system. A third party entity operates the ticketing system. Tickets and credits which are placed on the tickets are purchased from the third party entity. The employee is provided with free transport on the buses under the employment arrangement. The employment arrangement is facilitated through the employer providing the employee with the use of a pre-paid ticket. The tickets and credits on each ticket are purchased by the employer from the third party entity, remain the property of the employer, and are held in the employer's name. Under the employment arrangement the employee is only permitted to use this ticket for travel between the employee's place of residence and the employee's place of employment (between home and work). Any other form of use, including any use by an associate of the employee, is expressly prohibited. The employer implements a policy to ensure that each ticket is only used by the employee for travel between home and work. The employer has no involvement in travel by the employee or associate on the buses when they travel in a private capacity, apart from the employer being a public transport provider. That is, the employee or associate is able to travel as a member of the public for private travel by purchasing their own ticket. In these circumstances, the employee or associate is not travelling in respect of the employment of the employee.", "Reasons_for_Decision": "Summary: Subsection 47(6) of the FBTAA provides: Where: the benefit is an exempt benefit in relation to the year of tax. | Detailed Reasoning - Paragraph 47(6)(a): A bus is a motor vehicle (refer subsection 136(1) of the FBTAA). The employee's travel on a bus is the use of a bus. This travel is undertaken by using the employer's ticket under the employment arrangement. The employee's travel is a residual benefit. Therefore, paragraph 47(6)(a) of the FBTAA is satisfied. | Detailed Reasoning - Paragraph 47(6)(aa): Paragraph 47(6)(aa) of the FBTAA is satisfied as the bus is neither a taxi nor a car. | Detailed Reasoning - Paragraph 47(6)(b): Paragraph 47(6)(b) uses the defined terms: 'private use' and 'work-related travel'. Private use is defined in subsection 136(1) of the FBTAA: \"private use\", in relation to a motor vehicle, in relation to an employee or an associate of an employee, means any use of the motor vehicle by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee. Work-related travel is defined in subsection 136(1) of the FBTAA: \"work-related travel\", in relation to an employee, means: (a) travel by the employee between: (i) the place of residence of the employee; and (ii) the place of employment of the employee or any other place from which or at which the employee performs duties of his or her employment; or Paragraph 47(6)(b) of the FBTAA requires that there was no private use of the bus during the year of tax and at a time when the benefit was provided other than private use by the employee being work-related travel or other than private use by the employee or associate being use that was minor, infrequent and irregular. Private use, as defined, in relation to a bus, in relation to an employee or an associate of an employee, means any use of the bus by the employee or associate, as the case may be, that is not exclusively in the course of producing assessable income of the employee. Private use also includes a contextual reference to 'in relation to an employee or an associate of an employee'. The introductory words to subsection 47(6) of the FBTAA include a contextual reference to the residual benefit being provided 'in respect of the employment of a current employee'. Private use should be confined to when an employee or associate is provided with or uses the bus and when the travel has a sufficient connection with the employment of the employee. Refer also J & G Knowles & Associates Pty Ltd v. Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22. Therefore, use of the bus by a member of the public, by the employee or associate in a private capacity for private travel, or by a different employee for any purpose is not private use of the bus in relation to the residual benefit provided to the employee under paragraph 47(6)(b) of the FBTAA. Accordingly, in the present matter, private use only occurs when the employee is travelling between home and work using the employer's ticket. Any associate of the employee does not have access to the employer's ticket. This private use by the employee occurs during the year of tax and at a time when the (residual) benefit was provided. The employer has implemented a policy to ensure that the employee limits travel to between home and work when under this employment arrangement. During the FBT year and at the time the employee is provided with the residual benefit there is no private use of the bus other than for work-related travel. Accordingly, the residual benefit consisting of the use of the bus when the employee only travels between home and work under the employment arrangement is an exempt benefit under subsection 47(6) of the FBTAA.", "Date_of_Decision": "28 September 2009", "Year_of_Income": "Year ended 31 March 2010", "Legislative_References": "Fringe Benefit Tax Assessment Act 1986 subsection 47(1) subsection 47(6) paragraph 47(6)(a) paragraph 47(6)(aa) paragraph 47(6)(b) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/313", "Subject_References": "Exempt benefits FBT exempt private use FBT residual fringe benefit Residual fringe benefits", "Case_References": "J & G Knowles & Associates Pty Ltd v. Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009140", "Unmatched_Content": "Updated to reflect change to provision | Updated to correct business line | Keywords Exempt benefits FBT exempt private use FBT residual fringe benefit Residual fringe benefits"}
{"ATO_ID_Number": "ATO ID 2006/333", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: meals on working days - benefit consisting of a meal that is ready for consumption", "Issue": "Where an employee is provided with uncooked meat and vegetables on a working day, has a benefit been provided that consists of 'a meal that is ready for consumption' in accordance with paragraph 58ZD(c) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Food provided to an employee on a working day, which requires the employee to prepare in order to be eaten, is not considered to be a benefit consisting of a meal that is ready for consumption pursuant to paragraph 58ZD(c) of the FBTAA.", "Facts": "The employer carries on a business of primary production in a remote area. The employer provides their employee with free meat and vegetables on a working day. However the employee is required to prepare the food for it to be eaten. The circumstance under which the food is supplied does not amount to meal entertainment for the purposes of section 37AD of the FBTAA.", "Reasons_for_Decision": "Summary: Section 58ZD of the FBTAA exempts from fringe benefits tax certain benefits consisting of a meal provided by employers carrying on the business of primary production. Each of the conditions as specified in section 58ZD of the FBTAA must be met before the benefit can be an exempt benefit. Paragraph 58ZD(c) of the FBTAA requires that the benefit provided to an employee on a working day consists of a meal that is ready for consumption. The explanatory memorandum to the A New Tax System (Fringe Benefits) Bill 2000 that introduced section 58ZD of the FBTAA does not define what is meant by 'meals' and 'ready'. As such they would be interpreted on the basis of their ordinary meaning. Meal is defined in the Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01 as: Ready is also defined in the Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01 as: The food which has been provided to the employee does not consist in its raw form, of a meal that is completely prepared for immediate use. Accordingly such food is not considered to be a benefit consisting of a meal that is ready for consumption pursuant to paragraph 58ZD(c) of the FBTAA.", "Date_of_Decision": "14 November 2006", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58ZD paragraph 58ZD(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/109", "Subject_References": "Exempt benefits Fringe benefits tax", "Case_References": "", "Other_References": "The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. A New Tax System (Fringe Benefits) Bill 2000", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006333", "Unmatched_Content": "Minor punctuation amendment | Minor punctuation amendments | Keywords Exempt benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2004/293", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: relocation transport benefits provided to an employee prior to actual relocation taking place", "Issue": "If an employee and their family undertake a journey in order to arrange suitable accommodation prior to their actual employment relocation, will the costs associated with that journey, that are paid by the employer, be exempt from FBT under section 58F of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The costs of a journey that enables an employee and their family to relocate will be exempt from FBT under section 58F of the FBTAA, as the employee has already accepted an offer to transfer.", "Facts": "During the FBT year the employee accepted a temporary employment transfer. This would require the employee to live away from their usual place of residence in order to perform the duties of that employment. Under the employer's relocation policy, the employer provided the employee and their family with reimbursed airline tickets and other associated expenses in order to find suitable accommodation prior to the actual relocation taking place. These 'other expenses' included accommodation and meals en route to visit real estate agents and view rental properties in the town where they will be temporarily employed. The employee was not required to perform any employment duties whilst undertaking the travel.", "Reasons_for_Decision": "Summary: Section 58F of the FBTAA exempts from fringe benefits tax 'benefits in respect of relocation transport'. The requirements for a benefit to be treated as a 'benefit in respect of relocation transport' are specified in section 143A of the FBTAA. In particular subparagraph 143A(d)(i) requires that the transport (including meals and accommodation whilst undertaking the journey) is provided to an employee and their family to enable them to take up residence near the locality of the new workplace. It is accepted that a journey undertaken prior to relocation in order to seek accommodation (where the employee and their family are definitely relocating) does 'enable' the employee to take up residence in the new locality. As the benefits provided by the employer satisfy the requirements specified in section 143A of the FBTAA, they will be exempt from FBT under section 58F of the FBTAA.", "Date_of_Decision": "3 March 2004", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58F section 143A subparagraph 143A(d)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax FBT relocation transport Exempt benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004293", "Unmatched_Content": "Updated to correct business line | Replaced 'air line' with 'airline' | Keywords Fringe benefits tax FBT relocation transport Exempt benefits"}
{"ATO_ID_Number": "ATO ID 2004/935", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: small business car parking - the sum of the employer's ordinary income and statutory income", "Issue": "In determining whether the employer's ordinary and statutory income for the income tax year ending most recently before the start of the fringe benefits tax (FBT) year is less than $10 million, for the purposes of subparagraph 58GA(1)(d)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), is the $10 million threshold calculated on a GST inclusive basis?", "Decision": "Yes. The employer's ordinary and statutory income for the income tax year for the purposes of subparagraph 58GA(1)(d)(i) of the FBTAA, the $10 million threshold is calculated on a GST inclusive basis.", "Facts": "The employer provides 'car parking benefits' in respect of the employment of employees as defined in subsection 136(1) of the FBTAA. The parking is not provided in a commercial car park. The employer is neither a government body, nor a listed public company, nor a subsidiary of a listed public company. The employer carries on an enterprise and is registered for GST. The employer's ordinary and statutory income includes amounts of GST.", "Reasons_for_Decision": "Summary: Section 58GA of the FBTAA exempts from fringe benefits tax car parking benefits provided by small business employers. The exemption will apply to a car parking benefit provided in respect of the employment of an employee if all of the conditions of subsection 58GA(1) of the FBTAA are satisfied. Paragraph 58GA(1)(d) of the FBTAA specifies that the employer's ordinary and statutory income for the income tax year ending most recently before the start of the FBT year must be less than $10 million; or that the employer is a small business entity, or is an employer covered by subsection (1A), for the year of income ending most recently before the start of the FBT year. Subsection 58GA(3) of the FBTAA defines 'ordinary income' and 'statutory income' and subsection 136(1) of the FBTAA defines 'small business entity' to have the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). 'Ordinary income' has the meaning given in subsection 6-5(1) of the ITAA 1997. 'Statutory income' has the meaning given in subsection 6-10(2) of the ITAA 1997. 'Small business entity' has the meaning given to it by subsection 328-110(1) of the ITAA 1997. Ordinary and statutory income includes exempt income (subsection 6-1(2) of the ITAA 1997). The GST amount payable on a taxable supply in the absence of paragraph 17-5(a) of the ITAA 1997 would be ordinary or statutory income. Paragraph 17-5(a) of the ITAA 1997 however specifically excludes the GST payable on a taxable supply from being included in the assessable income or exempt income of a taxpayer. Subparagraph 58GA(1)(d)(i) of the FBTAA refers to the sum of the employer's ordinary and statutory income for the income year. This is not the employer's assessable income. Therefore, although the GST payable on a taxable supply would not form part of the employer's assessable income, it would constitute its ordinary or statutory income. Accordingly, in determining whether the sum of the employer's ordinary and statutory income for the income year is less than $10 million, for the purposes of subparagraph 58GA(1)(d)(i) of the FBTAA, the $10 million threshold is calculated on a GST inclusive basis.", "Date_of_Decision": "11 October 2004", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58GA subsection 58GA(1) paragraph 58GA(1)(d) subsection 58GA(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/793 | ATO ID 2003/25 | ATO ID 2004/296", "Subject_References": "Car parking fringe benefits Exempt benefits Fringe benefits Fringe benefits tax Small business", "Case_References": "", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004935", "Unmatched_Content": "This ATO ID has been updated to take into account the amendments to the definition of small business entity enacted under the Tax Laws Amendment (Small Business Measures No. 3) Act 2015 that has effect from 1 April 2016. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated paragraph 58GA(1)(d) by adding 'or is an employer covered by subsection (1A),' in line with legislation amendment by the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020 (No 92 of 2020). Added reference to subsection 328-110(1) and removed reference to section 995-1 of the ITAA 1997. | Updated business line details | Updated to take into account the amendments to the definition of small business entity enacted under the Tax Laws Amendment (Small Business Measures No. 3) Act 2015 that has effect from 1 April 2016. | Keywords Car parking fringe benefits Exempt benefits Fringe benefits Fringe benefits tax Small business"}
{"ATO_ID_Number": "ATO ID 2003/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefits tax: exempt benefits - small business car parking", "Issue": "Does the $10 million threshold prescribed in subparagraph 58GA(1)(d)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) only apply to the sum of the ordinary and statutory income of the employer entity itself, and not to the sum of the ordinary and statutory income of the group of entities of which the employer is a member?", "Decision": "Yes. The $10 million threshold prescribed in subparagraph 58GA(1)(d)(i) only applies to the sum of the ordinary and statutory income of the employer entity itself.", "Facts": "The employer is a proprietary limited company (the employer company) and is wholly owned by another proprietary limited company. Both companies form a group of companies. The sum of ordinary income and statutory income of the employer company for the relevant year in subparagraph 58GA(1)(d)(i) is less than $10 million. The sum of ordinary income and statutory income for the group of companies for the same year is $10 million or more. Subsection 58GA(2) of the FBTAA (new employers) does not apply.", "Reasons_for_Decision": "Summary: Section 58GA of the FBTAA provides that certain car parking benefits will be exempt for small businesses. In order for the exemption to apply, the employer must, among other things, meet the turnover test at subparagraph 58GA(1)(d)(i); or be a small business entity for the income year ending most recently before the start of the FBT year. Subparagraph 58GA(1)(d)(i) states: (i) the sum of the employer's ordinary income and statutory income for the year of income ending most recently before the start of the fringe benefits tax (FBT) year is less than $10 million. Subparagraph 58GA(1)(d)(i) only refers to the sum of the employer's ordinary income and statutory income for the year of income (income tax year) ended most recently before the start of the FBT year. The sum of the ordinary income and statutory income of the group of companies is not relevant to subparagraph 58GA(1)(d)(i). Where subparagraph 58GA(1)(d)(i) is satisfied, the other parts of section 58GA of the FBTAA must also be satisfied in order for the car parking benefit to be an exempt benefit.", "Date_of_Decision": "23 October 2002", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58GA subparagraph 58GA(1)(d)(i) paragraph 58GA(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits Fringe benefits tax FBT motor vehicle parking Car parking fringe benefits Small business Exempt benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employee Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200325", "Unmatched_Content": "Updated business line details | The amendment renders the ATO ID technically correct. | Keywords Fringe benefits Fringe benefits tax FBT motor vehicle parking Car parking fringe benefits Small business Exempt benefits"}
{"ATO_ID_Number": "ATO ID 2001/332", "Status": "", "Title": "", "Issue": "", "Decision": "", "Facts": "", "Reasons_for_Decision": "", "Date_of_Decision": "", "Year_of_Income": "", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "", "Business_Line": "", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001332", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2008/127", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: work related items - primarily for use in the employee's employment", "Issue": "Where an employee, who regularly visits clients, is provided with a laptop computer by their employer, is that laptop computer primarily for use in the employee's employment as required by subsection 58X(2) of the Fringe Benefits Tax Assessment Act (1986) (FBTAA)?", "Decision": "Yes. In view of the information available to the employer at the time the benefit is provided to the employee, the laptop computer is primarily for use in the employee's employment, as required by subsection 58X(2) of the FBTAA.", "Facts": "The employer has provided a laptop computer to the employee to assist the employee to undertake duties of employment. The employee's main employment duty is visiting clients on a regular basis, which requires ready access to a laptop computer for producing and updating work reports between client visits. The employer anticipates there may be incidental personal use of the laptop computer. The employer does not have a written policy restricting this personal use. A laptop computer is a portable electronic device for the purposes of subsection 58X(2) of the FBTAA.", "Reasons_for_Decision": "Summary: Section 58X of the FBTAA provides an exemption for benefits relating to the provision of certain work related items. Subsection 58X(1) of the FBTAA states that the provision of an expense payment benefit, a property benefit or a residual benefit in respect of an eligible work related item will be an exempt benefit. Subsection 58X(2) of the FBTAA includes a list of items that, if provided primarily for use in an employee's employment, can be considered as eligible work related items. The list of items in subsection 58X(2) of the FBTAA includes '(a) a portable electronic device'. The word primarily is not defined in the FBTAA therefore it takes on its ordinary meaning. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines primarily as: 1. in the first place; chiefly; principally. The employer in applying section 58X of the FBTAA is required to have a basis for concluding that the laptop computer is primarily for use in the employee's employment. This conclusion is based on intended use at the time the benefit is provided to the employee that is, why the laptop computer was provided to an employee 'in the first place'. There is no requirement to reach this conclusion by reference to usage which can only be ascertained retrospectively. Rather this conclusion is determined by reference to the available evidence at the time the benefit is provided. Generally, an employer will know whether a laptop computer is being provided chiefly or principally to enable the employee to undertake their employment duties. For example, the employee's job description, duty statement or employment contract can provide a basis for concluding that the laptop computer was primarily for business use. Alternatively, or in cases where it is evident that there are competing uses, in order to determine if the laptop computer is primarily for use in the employee's employment an employer could document such factors as: As the employer provides the employee with a laptop computer for use by the employee in their main employment duty that is, regularly visiting clients which requires ready access to a laptop computer for producing and updating work reports between client visits, any personal use of the laptop computer is considered to be incidental to business use. Accordingly, the laptop computer is primarily for use in the employee's employment as required by subsection 58X(2) of the FBTAA.", "Date_of_Decision": "28 August 2008", "Year_of_Income": "Year ended 31 March 2009", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) section 58X subsection 58X(1) subsection 58X(2) subsection 58X(3) subsection 58X(4) subsection 58X(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008127", "Unmatched_Content": "Minor punctuation amendment and inclusion of subsection 58X(5) | Updated to include subsection 58X(5) | Updated to correct business line | Minor punctuation amendment | Minor punctuation and style amendments | Keywords Exempt benefits Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2008/133", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: work related items - a portable electronic device", "Issue": "Is a GPS navigation receiver a portable electronic device under paragraph 58X(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. A GPS navigation receiver is a portable electronic device under paragraph 58X(2)(a) of the FBTAA.", "Facts": "An employer provides an employee with a GPS navigation receiver. The GPS navigation receiver is portable and can be attached to the employee's motor vehicle. The GPS navigation receiver:", "Reasons_for_Decision": "Summary: Section 58X of the FBTAA provides an exemption for benefits relating to the provision of certain work related items. Subsection 58X(1) of the FBTAA states that the provision of an expense payment benefit, a property benefit or a residual benefit in respect of an eligible work related item will be an exempt benefit. Subsection 58X(2) of the FBTAA includes a list of items that, if provided primarily for use in an employee's employment, can be considered as 'eligible work related items'. The list in subsection 58X(2) of the FBTAA is as follows: A 'portable electronic device' is included in the list. However, the FBTAA does not provide a definition of 'a portable electronic device'; therefore, it takes on its ordinary meaning. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. defines 'portable' as: 2. easily carried or conveyed by hand. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. defines 'electronic' as: 2. of, relating to, or concerned with electronics or any devices or systems based on electronics. The meaning of the words 'a portable electronic device' should be restricted to the characteristics of the words that precede the word device. That is, the meaning of 'a portable electronic device' is limited to a device that is easily carried by hand and is based on electronics. The Tax Laws Amendment (Budget Measures) Act 2008 repealed the former subsection 58X(2) of the FBTAA. Previously under subsection 58X(2) of the FBTAA the list of exempt items included, as relevant: This previous list of exempt items had become outdated because of changes in technology, for example, many portable electronic devices have more than one function and other work-related electronic devices have become available. 'A portable electronic device' is a generic term which would include but is not restricted to items which were previously exempt under subsection 58X(2) of the FBTAA and items of new technology which may have characteristics similar to those previously listed items. Taken together the dictionary meanings and characteristics of the previous listed items noted above indicate that the primary characteristics of 'a portable electronic device' for the purposes of this provision would be that the device is: If a device has these characteristics, it would be 'a portable electronic device' for the purposes of paragraph 58X(2)(a) of the FBTAA. Accordingly as the GPS receiver can operate on a battery power source, is small and light, easily portable and designed as a complete receiver for use away from an office environment it is a portable electronic device under paragraph 58X(2)(a) of the FBTAA.", "Date_of_Decision": "27 August 2008", "Year_of_Income": "Year ended 31 March 2009", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58X subsection 58X(1) subsection 58X(2) paragraph 58X(2)(a) subsection 58X(3) subsection 58X(4) subsection 58X(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/44", "Subject_References": "Exempt benefits Fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. Tax Laws Amendment (Budget Measures) Act 2008", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008133", "Unmatched_Content": "Included reference to 58X(5) | Updated to correct business line | Keywords Exempt benefits Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2008/158", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: work related items - portable electronic device - upgrades made at the time of purchase", "Issue": "Where an employee is reimbursed by their employer for the purchase of a laptop computer with additional memory, will the cost of the additional memory form part of the cost of the portable electronic device under paragraph 58X(2)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. Any cost of upgrades involving built-in internal components of a laptop computer, that are made at the time of purchase, will form part of the cost of the portable electronic device under paragraph 58X(2)(a) of the FBTAA.", "Facts": "An employee purchased a laptop computer. At the time of purchase the employee also requested additional memory be included in the computer. The laptop computer and the additional memory were itemised on the one invoice. The employer agreed to reimburse the employee for the cost of the laptop and additional memory, that is, the total invoiced amount. The laptop computer is 'a portable electronic device' for the purposes of paragraph 58X(2)(a) of the FBTAA. The employer's reimbursement is an expense payment benefit for the purposes of paragraph 20(b) of the FBTAA.", "Reasons_for_Decision": "Summary: Section 58X of the FBTAA exempts from FBT the provision of certain eligible work related items. Subsection 58X(1) of the FBTAA provides that the provision of an expense payment benefit, a property benefit or a residual benefit by an employer to an employee in respect of an eligible work related item will be an exempt benefit. Subsection 58X(2) of the FBTAA lists the items that, if provided primarily for use in the employee's employment, are 'eligible work related items' that may be subject to exemption. Included in this list is paragraph (a) 'a portable electronic device.' The exemption under paragraph 58X(2)(a) of the FBTAA applies to any computer upgrades made at the time of purchase involving built-in internal components; such as additional memory, bigger hard drive, internal modem or wireless LAN module, which are ordered and itemised on the one invoice (even at a separate cost). These items are clearly not peripheral items in relation to the laptop computer and form part of the laptop computer. It is no different, in effect, from simply purchasing a laptop computer model with better specifications at an increased cost. However, where the employee requests peripheral items such as cables, modems or cradles or an extension to the warranty that is offered, and these come at an additional cost, the exemption in paragraph 58X(2)(a) of the FBTAA will not extend to these items. Accordingly, where an employee is reimbursed by their employer for the purchase of a laptop computer with additional memory, the cost of the upgrade will form part of the cost of the portable electronic device under paragraph 58X(2)(a) of the FBTAA.", "Date_of_Decision": "20 November 2008", "Year_of_Income": "Year ended 31 March 2009", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58X subsection 58X(1) subsection 58X(2) paragraph 58X(2)(a) subsection 58X(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Expense payment fringe benefits FBT reimbursements Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008158", "Unmatched_Content": "Included reference to 58X(5) | Updated to correct business line | Keywords Exempt benefits Expense payment fringe benefits FBT reimbursements Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2008/159", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: work related items - expense payment made earlier in an FBT year", "Issue": "If an employer reimburses an employee over a period spanning two FBT years for the cost the employee incurred to purchase a laptop computer, can the employer provide another laptop computer to the employee in the second FBT year as an exempt benefit, under subsection 58X(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Where there has been either an expense payment or property benefit in relation to a laptop computer earlier in an FBT year, the provision of another laptop computer in that same year will not be an 'eligible work related item' and therefore will not be an exempt benefit under subsection 58X(1) of the FBTAA.", "Facts": "An employee purchases a laptop computer. The laptop computer is a 'portable electronic device' and primarily for use in the employee's employment for the purposes of subsection 58X(2) of the FBTAA. The employer agrees to reimburse the employee for the cost of the laptop computer. These reimbursements are made over a period of time which overlaps two FBT years. Each of the employer's payments is an expense payment benefit for the purposes of paragraph 20(b) of the FBTAA. If provided, the second laptop computer will not be a replacement and will have substantially identical functions to the first computer. The employer does not satisfy the definition of 'small business entity' in subsection 136(1) of the FBTAA for the income year starting after the start of the FBT year or the income year ending after the start of the FBT year.", "Reasons_for_Decision": "Summary: Section 58X of the FBTAA exempts from FBT the provision of certain work related items. Subsection 58X(1) of the FBTAA provides that the provision of an expense payment benefit, a property benefit or a residual benefit in respect of an eligible work related item will be an exempt benefit. Subsection 58X(2) of the FBTAA, which in turn is subject to subsection 58X(3) and subsection 58X(4) of the FBTAA, lists the items where if they are primarily for use in the employee's employment are 'eligible work related items' and thus subject to exemption. Subsection 58X(3) of the FBTAA limits the exemption in relation to these items by providing that they are not exempt if, 'earlier in the FBT year, an expense payment benefit or a property benefit of the employee has arisen in relation to another item that has substantially identical functions to the later item'. The test under subsection 58X(3) does not simply limit the exemption to the provision of one eligible work related item per year. Subsection 58X(3) in fact limits the exemption to the provision of expense payments for one item or the provision of one item (property benefit) per year. This means that if an employer provides multiple expense payments with respect to one item which spans more than one FBT year, then another item cannot be provided as an expense payment benefit or a property benefit in either the first or second year of payments. This is because there has already been expense payments made in relation to an item that has substantially identical functions as the later item. However, the test in subsection 58X(3) of the FBTAA is subject to subsection 58X(4) of the FBTAA. Subsection 58X(4) of the FBTAA provides that the test does not apply to portable electronic devices provided by an employer that meets the definition of 'small business entity' in subsection 136(1) of the FBTAA for the income year starting after the start of the FBT year or the income year ending after the start of the FBT year. This means that from 1 April 2017 an employer with an aggregate annual turnover less than $10 million can provide a portable electronic device to an employee that has substantially identical functions to a device provided to that employee in the same FBT year, and all of the devices will be exempt from FBT. For a portable electronic device provided on or after 1 April 2021, employers with an aggregate turnover less than $50 million will be eligible for the exemption. As the employer does not satisfy the definition of a 'small business entity' in subsection 136(1) of the FBTAA in the income year starting or ending after the start of the FBT year, subsection 58X(4) does not apply to the expense payment benefit in relation laptop computer. Therefore, where there has been an expense payment benefit in relation to a laptop computer earlier in an FBT year, the provision of another laptop computer in that same year will not be an exempt benefit under subsection 58X(1) of the FBTAA.", "Date_of_Decision": "28 November 2008", "Year_of_Income": "Year ended 31 March 2009", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 58X(1) subsection 58X(2) subsection 58X(3) subsection 58X(4) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Expense payment fringe benefits FBT reimbursements Fringe Benefits Tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008159", "Unmatched_Content": "This ATO ID has been updated to take into account amendments enacted under the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020 to increase the aggregated turnover threshold for access to small business tax concessions to $50 million. This amendment applies to the exemption for work-related portable electronic devices provided to an employee from 1 April 2021. | Updated to take into account amendments enacted under the Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Act 2020 . | Updated to correct business line | Updated to take into account amendments enacted under the Treasury Laws Amendment (Enterprise Tax Plan) Act 2017 . | Facts and Reasons for decision | Updated to take into account amendments enacted under the Tax Laws Amendment (Small Business Measures No. 3) Act 2015 . | Add subsection 136(1) of the FBTAA. | Keywords Exempt benefits Expense payment fringe benefits FBT reimbursements Fringe Benefits Tax"}
{"ATO_ID_Number": "ATO ID 2008/160", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: work related items - loan arrangements", "Issue": "If an employer pays an employee's loan repayments, where the loan was taken out by the employee to purchase an eligible work related item, will this be an exempt benefit under paragraph 58X(1)(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The repayment of the employee's loan is not considered to be referable to the purchase of an eligible work related item and is therefore not exempt under paragraph 58X(1)(a) of the FBTAA.", "Facts": "The employee selects a laptop computer that they intend to acquire from a retailer. The employee obtains a personal loan, in their own name, to buy the computer. The employee uses the loan funds to purchase the laptop computer. The laptop computer is 'a portable electronic device' for the purposes of paragraph 58X(2)(a) of the FBTAA. The employee enters into a valid salary sacrifice arrangement (SSA) for the employer to make the loan repayments (principal and interest) on their behalf.", "Reasons_for_Decision": "Summary: Section 58X of the FBTAA exempts from fringe benefits tax (FBT) certain expense payment, property or residual benefits in respect of an eligible work related item. Subsection 58X(2) of the FBTAA lists the items that, if provided primarily for use in the employee's employment, are eligible work related items and includes at paragraph (a) 'a portable electronic device.' Where the eligible work related item is provided by way of an expense payment, the requirement under paragraph 58X(1)(a) of the FBTAA is that the 'recipients expenditure' is in respect of an eligible work related item. The term 'recipients expenditure' is defined in subsection 136(1) of the FBTAA as 'in relation to an expense payment benefit, means the expenditure incurred by the recipient as mentioned in paragraph 20(a) or 20(b) of the FBTAA, as the case requires.' For the exemption under paragraph 58X(1)(a) of the FBTAA to apply, the employer's payments under the SSA need to be referable to the reimbursement or payment of an expense. Where under the SSA the employer makes loan repayments it cannot be said that 'the recipients expenditure is in respect of an eligible work related item', because the employer is not making payments towards the purchase of the laptop by the employee. Rather, the employer is meeting the employee's personal loan obligations, which are not considered to be referable to the purchase of the laptop. Therefore, the expense payment is not an exempt benefit under paragraph 58X(1)(a) of the FBTAA and remains subject to FBT.", "Date_of_Decision": "28 November 2008", "Year_of_Income": "Year ended 31 March 2009", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(a) paragraph 20(b) section 58X paragraph 58X(1)(a) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Expense payment fringe benefits Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008160", "Unmatched_Content": "Updated to correct business line | Year to be changed from 2009 to 2008 | Keywords Exempt benefits Expense payment fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2006/248", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: work related item - tool of trade", "Issue": "Can a microscope that is provided by an employer to an employee be described as a 'tool of trade' under paragraph 58X(2)(e) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The microscope is a 'tool of trade' under paragraph 58X(2)(e) of the FBTAA.", "Facts": "The employee is a scientist. The employee will be reimbursed by the employer for the expense incurred in purchasing a microscope. It is part of a salary packaging arrangement. The microscope although electrically powered is manually operated and is used to examine microscopic organisms.", "Reasons_for_Decision": "Summary: Section 58X of the FBTAA exempts from FBT the provision of certain eligible work related items. Subsection 58X(1) of the FBTAA provides that the provision of an expense payment benefit, a property benefit or a residual benefit by an employer to an employee in respect of an eligible work related item will be an exempt benefit. Subsection 58X(2) of the FBTAA lists the items that, if provided primarily for use in the employee's employment, are 'eligible work related items' that may be subject to exemption. Included in this list, at paragraph (e), is 'a tool of trade'. The term 'tool of trade' is not defined in the FBTAA; therefore, it takes on its ordinary meaning. 'Tool' is defined in the Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01 as: The meaning of 'tool of trade' has also been commented on in various court cases arising from the interpretation of various sections of bankruptcy law. In Vaughn v. Official Trustee in Bankruptcy (1996) 71 FCR 34 ( Vaughn ) the expression 'tools of trade' was considered by the Full Federal Court by reference to The New Shorter Oxford English Dictionary (1993) as: 'Tool': 1. A thing used to apply manual force to an object or material, esp. a device designed for some particular mechanical function in a manual activity, as a hammer, a saw, a fork; an implement. Now also, a powered machine used for a similar purpose...2 trans. & fig. A thing (concrete or abstract) used in the carrying out of some occupation or pursuit; a means of effecting a purpose or facilitating an activity. 'Tools of Trade' : The basic equipment required for a particular occupation. For an item to qualify as a 'tool', whilst it must meet the necessary condition of being dependant on manual operation to give effect to its purpose, it can also be electrically powered. For instance, it would be accepted that both a handsaw and a power saw used by a tradesperson would both be 'tools of trade'. By ignoring the wider term of 'equipment' and restricting the phrase to the actual tools themselves used in an occupation, the Court used the analogy of allowing a professional photographer's camera and filters but not the film used in the camera as a 'tool of trade'. In terms of the dictionary definition quoted in Vaughan , a thing will qualify as a tool, where it meets either definition rather than a composite or both. In terms of definition (1), although a microscope's focus is adjusted manually and it is electrically powered, it could not be said to operate through the microscope applying manual force to another object. For that reason, it would not qualify as a 'tool' under those terms. Through definition (2) however, it is accepted that it is a thing which is used in carrying out a scientist's occupation and as such on that basis would still qualify as a 'tool'. With regard to the definition of 'tools of trade', it is considered that a scientist's microscope would equate with a professional photographer's camera and as such qualify as a 'tool of trade'. Therefore, as the microscope is manually operated by the scientist the microscope is considered to be a 'tool of trade' under paragraph 58X(2)(e) of the FBTAA.", "Date_of_Decision": "28 August 2006", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58X subsection 58X(1) subsection 58X(2) paragraph 58X(2)(e) subsection 58X(3) subsection 58X(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits FBT expense payment Fringe benefits Fringe benefits tax", "Case_References": "Vaughan v. Official Trustee in Bankruptcy (1996) 71 FCR 34", "Other_References": "The New Shorter Oxford English Dictionary(1993) The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006248", "Unmatched_Content": "Updated business line details | Keywords Exempt benefits FBT expense payment Fringe benefits Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2010/183", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefits tax: exempt benefits - remote area housing benefits - new novated lease arrangement", "Issue": "Whether the provision of housing benefits in a remote area by the employer to an employee under a new novated lease arrangement, when the previous arrangement was exempt from fringe benefits tax, will invoke the application of subparagraph 58ZC(2)(e)(ii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No, the recipient's overall housing right under the new arrangement was not granted to an employee under an arrangement for the purpose of obtaining the benefit of section 58ZC of the FBTAA. The arrangement was implemented to enable the employer to provide the benefit of housing to its employee as an ordinary business requirement of the employer but in a manner which limits the employer's rental obligations if the employee ceases employment.", "Facts": "An employer has a workplace located in a remote area. It is customary for employers in the employer's industry to provide subsidised residential accommodation for their employees. Under the former arrangement the employer leased a residential property located in a remote area from the owner of the property. The employer provided the employee with a lease or licence to occupy the property which was a remote area housing benefit and was exempt from fringe benefits tax under section 58ZC of the FBTAA. The lease between the employer and the owner of the property expired and a new lease was entered into in which the employee occupant leased the house from the owner. The new lease was immediately novated under a tripartite agreement between the owner, employee and the employer, thereby shifting the various rights and obligations, including the obligation to make the rental payments, from the employee to the employer. In the event of a termination of the employment of the employee, the novation will be extinguished and the underlying lease between the employee and owner will be reinstated. In other words, the novation provides for the transferring of contractual obligations associated with rental lease agreements from the employer to the employee who occupies the premises, should the employment cease. Both the former and the new arrangements are covered by an 'Effective SSA' as described in Taxation Ruling TR 2001/10 Income tax : fringe benefits tax and superannuation guarantee : salary sacrifice arrangements .", "Reasons_for_Decision": "Summary: When an employer provides a housing benefit to its employees in a remote area and the requirements of section 58ZC of the FBTAA are satisfied, the housing benefit is a remote area housing benefit which is an exempt benefit. Subparagraph 58ZC(2)(e)(ii) of the FBTAA provides conditions which if satisfied will deny the exemption otherwise available under section 58ZC of the FBTAA. Subparagraph 58ZC(2)(e)(ii) provides that: Recipients overall housing right, arrangement and housing right are defined in subsection 136(1) of the FBTAA: recipients overall housing right, in relation to a housing fringe benefit in relation to a year of tax, means the housing right to which the fringe benefit relates, including that housing right as it subsisted, or will subsist, outside the year of tax. arrangement means: (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. Under subparagraph 58CZ(2)(e)(ii) of the FBTAA, the granting of the recipients overall housing right under an arrangement refers to the granting of the lease or licence to the employee to use the house or unit of accommodation under an arrangement. Subparagraph 58ZC(2)(e)(ii) of the FBTAA requires that the parties to the arrangement enter into the arrangement for the purpose, or for purposes that included the purpose, of enabling the employer to obtain the benefit of the application of the section. In Newton v. Federal Commissioner of Taxation (1958) 98 CLR 1; (1958) 11 ATD 442; (1958) 7 AITR 298, the Privy Council examined the meaning of the word purpose. Lord Denning said at page number CLR 8; ATD 445; AITR 304, The word \"purpose\" means, not motive, but the effect which is sought to achieve - the end in view. Lord Denning also said (at the same page), In order to bring an arrangement within the section, you must be able to predicate by looking at the overt acts by which it was implemented that it was implemented in that particular way so as to avoid tax. If you cannot so predicate, but have to acknowledge that the transactions are capable of explanation by reference to ordinary business or family dealing, without necessarily being labelled as a means to avoid tax, then the arrangement does not come within the section. Under the former arrangement the employer was exempt from fringe benefits tax on the housing benefit under section 58ZC of the FBTAA. Under the new arrangement which provides or grants the recipient's overall housing right, the arrangement is entered into by each of the parties for the purpose of enabling the employer to continue to provide the benefit of housing to its employee whilst the employee remains currently employed. The benefit was previously fully exempt so that the employer does not gain a taxation advantage in moving to the current arrangement. There are no overt acts by which one could predicate that the arrangement has been implemented by any of the parties for the purpose of allowing the employer to enjoy the benefits of the tax exemption. The arrangement can be explained as being one of ordinary business dealings as is customary in the employer's industry. Accordingly, the recipient's overall housing right was not granted to an employee under an arrangement described in subparagraph 58ZC(2)(e)(ii) of the FBTAA. Subparagraph 58ZC(2)(e)(ii) is not satisfied.", "Date_of_Decision": "28 September 2010", "Year_of_Income": "Year ended 31 March 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 260", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/10", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/182", "Subject_References": "Housing fringe benefits FBT exempt housing benefit Remote area housing fringe benefits", "Case_References": "Newton v Federal Commissioner of Taxation (1958) 98 CLR 1 (1958) 11 ATD 442 (1958) 7 AITR 298", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010183", "Unmatched_Content": "housing right, in relation to a person, means a lease or licence granted to the person to occupy or use a unit of accommodation, insofar as that lease or licence subsists at a time when the unit of accommodation is the person's usual place of residence. | Updated to correct business line | Facts, Reason for Decision | Minor punctuation amendments | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/10 | Keywords Housing fringe benefits FBT exempt housing benefit Remote area housing fringe benefits"}
{"ATO_ID_Number": "ATO ID 2005/156", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: remote area housing - non-arm's length arrangement", "Issue": "Where a housing benefit is provided in a 'remote area' location, to an employee who is also a shareholder of the employer company, will the recipients overall housing right always be granted to the employee under a non-arm's length arrangement for the purposes of subparagraph 58ZC(2)(e)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Even though the employer and employee are not at arm's length, a recipients overall housing right can be granted as part of an arm's length arrangement. As such, the recipients overall housing right was not granted to the employee under a non-arm's length arrangement for the purposes of subparagraph 58ZC(2)(e)(i) of the FBTAA.", "Facts": "A company provides professional services in a remote area. The company rents a house in the remote area. The company makes the house available to an employee at no cost to the employee. The employee is employed by the company as a manager. The employee is also a shareholder of the employer company. The company does not have any other employees who are managers. The company has always had a written policy of providing free housing to any of its managerial employees working in remote areas.", "Reasons_for_Decision": "Summary: Section 58ZC of the FBTAA exempts remote area housing benefits from fringe benefits tax. Apart from the question of location, for a housing benefit to qualify as a remote area housing benefit (and therefore be exempt from fringe benefits tax), the conditions set out in subsection 58ZC(2) of the FBTAA must be satisfied. Subparagraph 58ZC(2)(e)(i) of the FBTAA requires that the recipients overall housing right was not granted to the employee under a non-arm's length arrangement. Within subsection 136(1) of the FBTAA, the expression non-arm's length arrangement is defined to mean an arrangement other than an arm's length arrangement. The term arm's length arrangement is not defined in the FBTAA. However, section 136(1) defines arm's length transaction to mean a transaction where the parties to the transaction are dealing with each other at arm's length in relation to the transaction. The expression at arm's length is defined in The CCH Macquarie Concise Dictionary of Modern Law , 1988, CCH Australia Ltd/ Macquarie Library Pty Ltd, Sydney as meaning that the parties to a transaction are not connected in such a way as to bring into question the ability of one to act independently of the other. In Granby Pty Ltd v. FCT (1995) 30 ATR 400; 95 ATC 4240, where the expression dealing with each other at arm's length in section 160ZH of the Income Tax Assessment Act 1936 was in question, Lee J said (at ATR 403; ATC 4243): The expression \"dealing with each other at arm's length\" involves an analysis of the manner in which the parties to a transaction conducted themselves in forming that transaction. What is asked is whether the parties behaved in the manner in which parties at arm's length would be expected to behave in conducting their affairs. Of course, it is relevant to that enquiry to determine the nature of the relationship between the parties, for if the parties are not parties at arm's length the inference may be drawn that they did not deal with each other at arm's length. Even though the employer and the employee are not at arm's length, the employer has a written policy of providing free housing to all of its managerial employees working in remote areas. As such, it is considered that the recipient's overall housing right was granted under an arm's length arrangement. As the recipient's overall housing right was not granted under a non-arm's length arrangement, subparagraph 58ZC(2)(e)(i) of the FBTAA is satisfied.", "Date_of_Decision": "1 June 2005", "Year_of_Income": "Year ended 31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58ZC subsection 58ZC(2) subparagraph 58ZC(2)(e)(i)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/200 (Withdrawn) | Taxation Determination TD 93/201 (Withdrawn)", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/761 | ATO ID 2002/412", "Subject_References": "FBT exempt housing benefit FBT remote area housing FBT unit of accommodation Fringe benefits Fringe benefits tax Housing fringe benefits Remote housing fringe benefits", "Case_References": "Granby Pty Ltd v. FCT (1995) 30 ATR 400 95 ATC 4240", "Other_References": "The CCH Macquarie Concise Dictionary of Modern Law, 1988, CCH Australia Ltd/Macquarie Library Pty Ltd, Sydney", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005156", "Unmatched_Content": "Updated Business Line and review date | Minor punctuation amendments. | Change from employee's overall housing right to recipient's overall housing right in the last paragraph. | Related Public Rulings (including Determinations) Taxation Determination TD 93/200 (Withdrawn) Taxation Determination TD 93/201 (Withdrawn) | Keywords FBT exempt housing benefit FBT remote area housing FBT unit of accommodation Fringe benefits Fringe benefits tax Housing fringe benefits Remote housing fringe benefits"}
{"ATO_ID_Number": "ATO ID 2004/276", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: remote area housing and residential fuel", "Issue": "Where the employer provides an employee with remote area housing, that is an exempt benefit under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), will the provision of 'residential fuel' in the form of free electricity constitute part of that benefit?", "Decision": "No. The remote area housing benefit and free electricity are two separate benefits. Only the remote area housing benefit is exempt under section 58ZC of the FBTAA.", "Facts": "The employer provides housing to an employee. The housing is provided to an employee in a remote area. Under an agreement the employer provides the employee with free electricity in connection with the accommodation provided to the employee.", "Reasons_for_Decision": "Summary: The provision of gas or electricity to an employee in receipt of a remote area housing benefit can be a property, residual or expense payment fringe benefit. Section 58ZC of the FBTAA provides that a remote area housing benefit will be an exempt benefit from 1 April 2000. At the same time, subsection 59(1) of the FBTAA was rewritten to reflect the new remote area housing exemption under section 58ZC. The explanatory memorandum to the A New Tax System (Fringe Benefits) Bill 2000 explained that, Where an employer provides a remote area housing benefit and supplies, pays for, or reimburses the cost of electricity, gas or other residential fuel for an employee in a remote area, the taxable value of the benefit is reduced by 50%. It is clear that subsection 59(1) intends that the provision of residential fuel is to be treated as a separate benefit. Subsection 136(1) of the FBTAA defines 'residential fuel' to mean any form of fuel (including electricity) for use for domestic purposes. It is considered that the remote area housing and electricity are two separate benefits. Only the remote area housing benefit is exempt under section 58ZC of the FBTAA. A 50% reduction in the taxable value of the electricity applies in accordance with subsection 59(1) of the FBTAA.", "Date_of_Decision": "10 March 2004", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58ZC subsection 59(1) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits Fringe benefits tax FBT remote area housing FBT exempt housing benefit Reduction of taxable value", "Case_References": "", "Other_References": "Explanatory memorandum to the A New Tax System (Fringe Benefits) Bill 2000", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004276", "Unmatched_Content": "Updated to correct business line | Keywords Fringe benefits Fringe benefits tax FBT remote area housing FBT exempt housing benefit Reduction of taxable value"}
{"ATO_ID_Number": "ATO ID 2003/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Remote area housing: reduction of taxable value - remote area housing loan interest", "Issue": "Is the employer entitled to claim a 50% reduction in the taxable value of the expense payment fringe benefit, as it relates to interest in respect of a remote area housing loan, pursuant to subsection 60(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes, because the expense payment fringe benefit is a reimbursement of the employee's interest incurred in relation to the employee's remote area housing loan.", "Facts": "The employee owns land on which there is a house. The employee lives in the house which is his or her usual place of residence. The employee has a housing loan with a bank. The loan was entered into to enable the employee to purchase the land and house. The employee is a current employee of the employer. The dwelling is situated in a remote area. The employee works in a remote area. In the employer's industry it is customary to provide housing assistance to employees. The loan is a remote area housing loan connected with a dwelling as required by paragraph 60(2)(b) and subsection 142(1) of the FBTAA. The employee incurs $5,000 interest in relation to the housing loan. The employer reimburses the full amount of the $5,000 interest expense incurred. This reimbursement is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA. There is no recipients contribution made by the employee to the employer. Paragraph 60(2)(d) of the FBTAA is about not allowing non-arm's length arrangements or arrangements entered into for the purposes of obtaining the tax concessions available under section 60. Paragraph 60(2)(d) does not apply to this arrangement. The facts as above continue to apply with the following exception. Instead of the employer reimbursing the full amount of the $5,000 interest expense incurred, the employer only reimburses (in part), half of the $5,000 interest expense incurred. This reimbursement, $2,500, is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: The recipient of the $5,000 (or $2,500) expense payment fringe benefit is the employee of the employer. Paragraph 60(2)(a) of the FBTAA is satisfied. Recipients expenditure, as defined in section 136(1) of the FBTAA means, in relation to an expense payment benefit, the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA. The expenditure incurred by the recipient as described in 20(b) of the FBTAA is the amount of the interest expense incurred by the employee, $5,000. The loan is a remote area housing loan connected with a dwelling as required by paragraph 60(2)(b) and subsection 142(1) of the FBTAA. Accordingly, the $5,000 interest expense is recipients expenditure which is in respect of a remote area housing loan connected with a dwelling. Paragraph 60(2)(b) of the FBTAA is satisfied. The employee lives in the dwelling as his or her usual place of residence. Paragraph 60(2)(c) of the FBTAA is satisfied. Paragraph 60(2)(d) of the FBTAA does not apply. Subsection 60(2) of the FBTAA is satisfied. Accordingly, the employer is entitled to a 50% reduction of the taxable value of the expense payment fringe benefit. Based on the facts (and alternative facts) contained above, the reduction in taxable value of the expense payment fringe benefit would be calculated as follows:", "Date_of_Decision": "14 January 2003", "Year_of_Income": "Year ended 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(b) subsection 60(2) paragraph 60(2)(a) paragraph 60(2)(b) paragraph 60(2)(c) paragraph 60(2)(d) subsection 136(1) subsection 142(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/158 | ATO ID 2003/159 | ATO ID 2003/160", "Subject_References": "Expense payment fringe benefits FBT expense payment FBT housing loan FBT interest on loans FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003157", "Unmatched_Content": "Less 'recipients contribution' | Taxable value before reduction | Less subsection 60(2) reduction, 50% of taxable value, (50% x $5,000 or 2,500) | Delete unnecessary single quotation mark. | Facts, Reason for Decision | Minor punctuation amendments | Keywords Expense payment fringe benefits FBT expense payment FBT housing loan FBT interest on loans FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value"}
{"ATO_ID_Number": "ATO ID 2003/158", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Remote area housing: reduction of taxable value - residential property and employee's mortgage loan repayments", "Issue": "Does the employee's expenditure incurred in making repayments on the employee's residential home loan satisfy the paragraph 142(2C)(c)of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) requirement of being 'recipients expenditure that is incurred wholly to enable the employee to acquire an estate or interest in land on which there is a dwelling'?", "Decision": "No, because the employee's expenditure is not wholly for that purpose.", "Facts": "The employee owns land on which there is a house (the property). The employee has a home loan with a bank which is secured by way of mortgage over the property. The loan with the bank was entered into to enable the employee to acquire the property. Under the terms of the loan the employee is required to make regular repayments in order to repay the loan within the loan period. The terms of the loan include that the loan accrues interest and other charges. The interest and charges are added to the loan. The employee makes repayments on the loan which reduces the current (at the repayment date) balance of the loan. The employer reimburses the employee all (or part) of the loan repayment(s). The reimbursement is made with reference to the loan repayment(s), being the expenditure incurred by the employee. The reimbursement(s) is an expense payment fringe benefit as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: Under subsection 60(4) of the FBTAA, an employer is entitled to apply a 50% reduction in the taxable value of certain expense payment fringe benefits when the recipients expenditure is in respect of remote area residential property. Broadly, the subsection discounts by 50% the taxable value of a fringe benefit relating to the provision of assistance to enable an employee to acquire a unit of remote area accommodation (typically, a house in a remote area of Australia). Subsection 60(4) of the FBTAA (and subsection 142(2C) of the FBTAA) was inserted by Taxation Laws Amendment Act (No 4) 1988 . The Explanatory Memorandum to that Act described subsection 60(4) as expanding the (at that time) existing range of section 60 benefits. Subsection 60(2) of the FBTAA, which provides assistance for remote area housing interest, was already in place. Subsection 142(2C) of the FBTAA provides rules for determining eligibility for the subsection 60(4) of the FBTAA reduction in taxable value. Subsection 142(2C) of the FBTAA sets out the criteria of when the recipients expenditure is in respect of remote area residential property. As part of that criteria, paragraph 142(2C)(c) of the FBTAA requires that the recipients expenditure be incurred wholly to enable the employee to acquire an estate or interest in land on which there is a dwelling. The recipient of the expense payment fringe benefit is an employee of the employer. Recipients expenditure, as defined in section 136(1) of the FBTAA means, in relation to an expense payment benefit, the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA. The recipients expenditure is the loan repayment. The Macquarie Dictionary , 2001, Revised Third Edition, defines the term wholly as meaning: 1. entirely; totally; altogether; quite. 2. to the whole amount, extent, etc. 3. so as to comprise or involve all. The Commissioner does not consider that the loan repayment is incurred wholly or entirely for the purposes required by paragraph 142(2C)(c) of the FBTAA for the following reasons: 1. The loan repayment is expenditure incurred to enable the employee to meet the conditions of the loan and to enable the employee to reduce the debt owing to the bank. 2. The loan repayment is expenditure incurred to enable the employee to eventually discharge the mortgage over the property which he or she has previously acquired. 3. The loan repayment is not qualifying expenditure because at the time of the loan repayment, the employee had previously and separately incurred the cost of acquiring the estate or interest in land on which there is a dwelling as the purchaser under the contract of sale. 4. The loan repayment would include repayment of principal (the original borrowing), interest and other charges. Repayment of the principal component would not be qualifying expenditure as per reasons 1 to 3 above. 5. The loan repayment would include repayment of principal (the original borrowing), interest and other charges. Repayment of the interest component would not be qualifying expenditure as per reasons 1 to 3 above. 6. The loan repayment would include repayment of principal (the original borrowing), interest and other charges. Repayment of the interest component would not be qualifying expenditure under subsection 60(4)of the FBTAA as subsection 60(2) of the FBTAA applies to this expenditure at the time the expenditure is incurred, as expenditure related to a remote area housing loan. Refer also ATO Interpretative Decision ATO ID 2003/157. Subsection 60(4) of the FBTAA does not provide an additional method of claiming benefits already available under subsection 60(2) of the FBTAA. Accordingly, paragraph 142(2C)(c) of the FBTAA is not satisfied. Note: please refer to ATO Interpretative Decision ATO ID 2003/160 where an employee's cost of the purchase of a house was considered to be qualifying expenditure within paragraph 142(2C)(c) of the FBTAA.", "Date_of_Decision": "14 January 2003", "Year_of_Income": "Year ended 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(b) subsection 136(1) section 60(4) subsection 142(2C) paragraph 142(2C)(a) paragraph 142(2C)(b) paragraph 142(2C)(c) paragraph 142(2C)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003 157 | ATO ID 2003 159 | ATO ID 2003 160", "Subject_References": "Expense payment fringe benefits FBT expense payment FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value Remote housing fringe benefits", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Act (No 4) 1988 Macquarie Dictionary, 2001, Revised Third Edition", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003158", "Unmatched_Content": "Facts, Reason for Decision | Minor punctuation amendments | Minor punctuation and grammar amendments | Keywords Expense payment fringe benefits FBT expense payment FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value Remote housing fringe benefits"}
{"ATO_ID_Number": "ATO ID 2003/159", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Remote area housing: reduction of taxable value - remote area housing rent", "Issue": "Is the taxable value of the expense payment fringe benefit reduced by 50% of the gross rent incurred by the employee when the rent relates to a unit of remote area accommodation under subsection 60(2A) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes, because the gross rent is the amount of the 'recipients expenditure as relates to the occupation period'.", "Facts": "The employee leases a house and lives in the house which is the employee's usual place of residence. The employee pays rent to the landlord under the terms of the lease. The employee is a current employee of the employer. The dwelling is situated in a 'remote area'. The employee works in a 'remote area'. In the employer's industry it is customary to provide 'housing assistance' to employees. During the year the employee incurs rent of $5,000. The employer reimburses the full amount of the $5,000 rent expense incurred. This reimbursement is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA. The rent the employee pays the landlord satisfies the reference in paragraph 60(2A)(b) and subsection 142(1A) of the FBTAA to 'remote area housing rent connected with a unit of accommodation'. There is no 'recipients contribution' made by the employee to the employer. Paragraph 60(2A)(d) of the FBTAA is about not allowing non-arms length arrangements or arrangements entered into for the purposes of obtaining the tax concessions available under section 60. Paragraph 60(2A)(d) of the FBTAA does not apply to this arrangement. The facts as above continue to apply with the following exception. Instead of the employer reimbursing the full amount of the $5,000 rent expense incurred, the employer only reimburses (in part), half of the $5,000 rent expense incurred. This reimbursement, $2,500, is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: The recipient of the $5,000 (or $2,500) 'expense payment fringe benefit' is the employee of the employer. Paragraph 60(2A)(a) of the FBTAA is satisfied. 'Recipients expenditure', as defined in section 136(1) of the FBTAA means, in relation to an 'expense payment benefit', the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA. The expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA is the amount of rent incurred by the employee. That is, the amount of the gross rent incurred before reimbursement, which is $5,000 in both factual situations. The rent the employee pays the landlord satisfies the reference in paragraph 60(2A)(b) and subsection 142(1A) of the FBTAA to 'remote area housing rent connected with a unit of accommodation'. During the year, the rent expense accrues and the employee lives in the accommodation as his or her usual place of residence. Paragraph 60(2A)(c) of the FBTAA is satisfied. Paragraph 60(2A)(d) of the FBTAA does not apply. Subsection 60(2A) of the FBTAA is satisfied. Accordingly, the employer is entitled to a reduction in taxable value equal to 50% of the gross rent incurred by the employee as relates to the occupation period. Based on the facts (and alternative facts) contained above, the reduction in taxable value of the 'expense payment fringe benefit' would be calculated as follows: Note: Unlike the reduction contained in subsection 60(2) of the FBTAA the 50% reduction contained in subsection 60(2A) of the FBTAA refers to 50% of the employee's expenditure (the gross rent) not to 50% of the taxable value. ATO Interpretative Decision ATO ID 2003/157 contains an example of the application of subsection 60(2)of the FBTAA in relation to remote area housing interest.", "Date_of_Decision": "14 January 2003", "Year_of_Income": "Year ended 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(b) subsection 60(2A) paragraph 60(2A)(a) paragraph 60(2A)(b) paragraph 60(2A)(c) paragraph 60(2A)(d) subsection 136(1) subsection 142(1A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/157 | ATO ID 2003/158 | ATO ID 2003/160", "Subject_References": "Expense payment fringe benefits FBT expense payment FBT housing rent FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003159", "Unmatched_Content": "Less 'recipients contribution' | Taxable value before reduction | Less subsection 60(2A) reduction, 50% of gross rent (50% x $5,000) | Issue, Reason for Decision, Example calculation | Minor punctuation and grammar amendments | Keywords Expense payment fringe benefits FBT expense payment FBT housing rent FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value"}
{"ATO_ID_Number": "ATO ID 2003/160", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Remote area housing: reduction of taxable value - residential property and employee's purchase consideration", "Issue": "Does the employee's expenditure incurred in purchasing a house in a remote area satisfy the paragraph 142(2C)(c) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) requirement of being 'recipients expenditure that is incurred wholly to enable the employee to acquire an estate or interest in land on which there is a dwelling'?", "Decision": "Yes, because the employee's expenditure is wholly for that purpose.", "Facts": "After commencing employment with the employer, the employee acquires land on which there is a house (the property). The property is located in a remote area. The property is acquired under a contract of sale. The employer reimburses the employee all (or part) of the purchase price of the property. The reimbursement is made with reference to the purchase price of the property, being the expenditure incurred by the employee. The reimbursement is an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: Under subsection 60(4) of the FBTAA, an employer is entitled to apply a 50% reduction to the taxable value of certain 'expense payment fringe benefits' when the 'recipients expenditure is in respect of remote area residential property'. Broadly, the subsection discounts by 50% the taxable value of a fringe benefit relating to the provision of assistance to enable an employee to acquire a 'unit of remote area accommodation' (typically, a house in a remote area of Australia). Subsection 142(2C) of the FBTAA provides rules for determining eligibility for this 50% reduction. Subsection 142(2C) of the FBTAA sets out the criteria of when 'the recipients expenditure is in respect of remote area residential property'. Paragraph 142(2C)(c) of the FBTAA includes the requirement that the 'recipients expenditure' be incurred wholly 'to enable the employee to acquire an estate or interest in land on which there is a dwelling'. The recipient of the 'expense payment fringe benefit' is an employee of the employer. 'Recipients expenditure', as defined in section 136(1) of the FBTAA means, in relation to an 'expense payment benefit', the expenditure incurred by the recipient as described in paragraph 20(b) of the FBTAA. The 'recipients expenditure' is the employee's purchase price under the contract of sale. The Macquarie Dictionary Online defines the term 'wholly' as meaning: 1. entirely; totally; altogether; quite. 2. to the whole amount, extent, etc. 3. so as to comprise or involve all. The 'recipients expenditure', being the purchase price under the contract of sale, is considered to be expenditure incurred wholly or entirely for the purpose of acquiring the property. Accordingly, paragraph 142(2C)(c)of the FBTAA is satisfied. Subsection 142(2C) of the FBTAA contains other requirements. Subparagraph 142(2C)(g)(ii) requires that, at the time the 'recipients expenditure' was incurred, which is the date the contract of sale was executed, the employee was a current employee and the usual place of employment was in a remote area. Note: Refer also to ATO Interpretative Decision ATO ID 2003/158 where an employee's residential loan repayments were considered not to be qualifying expenditure within paragraph 142(2C)(c) of the FBTAA.", "Date_of_Decision": "14 January 2003", "Year_of_Income": "Year ended 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 paragraph 20(b) subsection 60(4) subsection 136(1) subsection 142(2C) paragraph 142(2C)(c) subparagraph 142(2C)(g)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/157 | ATO ID 2003/158 | ATO ID 2003/159", "Subject_References": "Expense payment fringe benefits FBT expense payment FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value", "Case_References": "", "Other_References": "Macquarie Dictionary Online", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003160", "Unmatched_Content": "Issue, Reason for Decision | Minor punctuation and grammar amendments | Keywords Expense payment fringe benefits FBT expense payment FBT remote area housing FBT taxable value Fringe benefits Fringe benefits tax Reduction of taxable value"}
{"ATO_ID_Number": "ATO ID 2002/412", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt remote area housing benefits", "Issue": "Whether the provision of a housing benefit to the employee in a remote area by the employer who enters into a rental agreement with a landlord for a residential property immediately after the termination of a previous rental agreement of that same property between the employee and the landlord, will invoke the application of subparagraph 58ZC(2)(e)(ii) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No, the provision of a housing benefit to the employee in a remote area by an employer who enters into a rental agreement with a landlord for a residential property immediately after the completion of a previous rental agreement of that same property between the employee and the landlord, will not invoke the application of subparagraph 58ZC(2)(e)(ii) of the FBTAA.", "Facts": "An employer customarily provides residential accommodation to staff in remote areas. The employer employs a manager under a contract basis. The employee currently leases a house privately and pays the rent from after tax earnings. The employer proposes to enter into a new rental agreement with the landlord immediately after the completion of the employee's rental agreement on the same property with the same landlord and provide a housing benefit to the employee as the employee's usual place of residence.", "Reasons_for_Decision": "Summary: Where the employer is located in a remote area, the employer provides accommodation to its employees as their usual place of residence and the requirements of section 58ZC of the FBTAA are satisfied, the housing benefit is an exempt remote housing benefit. A housing benefit provided to an employee by an employer, as a result of the completion of an existing rental agreement between the employee and the landlord and entering into a new lease agreement between the employer and the same landlord on an arm's length basis on the same property, will not invoke the application of subparagraph 58ZC(2)(e)(ii) of the FBTAA to disentitle the remote area housing benefit exemption provided under section 58ZC of the FBTAA. The housing right acquired by the employer through the new rental agreement entered into with the landlord and subsequently provided to the employee will not represent an arrangement that was entered into for the purpose or for the purposes that included the purpose of enabling the employer to obtain the benefit of the application of this section.", "Date_of_Decision": "6 June 2001", "Year_of_Income": "Year ended 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Section 58ZC Subparagraph 58ZC(2)(e)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/761", "Subject_References": "Housing benefit Fringe benefits Remote area housing exemption Remote housing fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002412", "Unmatched_Content": "Change of title to Fringe Benefits Tax and removal of Fringe Benefits Tax from subtitle | Changing the wording of \"termination to completion\" | Changing the wording \"of the commencement of to entering into\" | Changing the word \"landlord at an arm's length to landlord on an arm's length\" | Changing the word \"employee does not necessarily represent to employee will not represent\" | Housing benefit - insert Fringe benefits - insert Remote area housing exemption - insert | Keywords Housing benefit Fringe benefits Remote area housing exemption Remote housing fringe benefits"}
{"ATO_ID_Number": "ATO ID 2001/761", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: Remote Area Housing Exempt Benefits", "Issue": "Whether the novation of an existing rental agreement for a house in a remote area, (between the employer, employee and landlord), creates the provision of an exempt remote area housing benefit under section 58ZC of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Decision": "No, the novated lease between the relevant parties will not result in the provision of a remote area housing benefit which is exempt under section 58ZC of the FBTAA.", "Facts": "As part of salary packaging, an arrangement (being a tripartite contract involving the employee, landlord and employer) was proposed that would shift the rights and obligations of the tenancy agreement, including the obligation to make the rental payments, from the employee to the employer. This proposal was made in recognition of the earlier decision that as an employer in a remote area, something would have to be done if it were to successfully compete for and retain its better staff. As a result of the novation, the employer would have the right to use the unit of accommodation but allow the employee to live in it rent free until such time as the employee ceases to be in employment. In the event of a termination of the employment of the employee, the novated lease between the employer and the landlord would be extinguished and the original rental lease between the landlord and the employee resurrected. The employee and the employee's family have resided in the rented accommodation prior to commencing employment with the employer.", "Reasons_for_Decision": "Summary: For a remote area housing benefit to be exempt it is necessary that all of the requirements of section 58ZC of the FBTAA be satisfied. Whilst: the overall housing right must not represent an arrangement that was granted for the purpose or for the purposes that included the purpose, of enabling the employer to obtain the benefit of the application of this section. It is considered that the creation of a housing right as an exempt benefit, emanating from the decision to novate a lease, is an arrangement which would be inclusive of the purposes to obtain the benefit of the application of this section.", "Date_of_Decision": "23 August 2001", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58ZC", "Related_Public_Rulings_and_Determinations": "TD 94/97", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits Housing benefit Remote area housing exemption Novated rental agreement", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001761", "Unmatched_Content": "(1) Delete \"as explained in Practice Statement PS2000/6\" | Delete \"Practice Statement PS2000/6\" | Related Public Rulings (including Determinations) TD 94/97 | Keywords Fringe benefits Housing benefit Remote area housing exemption Novated rental agreement"}
{"ATO_ID_Number": "ATO ID 2015/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: work-related counselling - training courses or activities for employees being made redundant", "Issue": "Does the payment for or reimbursement of a training course or activity provided under a worker retraining program by an employer to an employee being made redundant relate to any matter specified in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The payment for or reimbursement of a training course or activity does not meet the definition of 'work-related counselling' in subsection 136(1) of the FBTAA as it does not relate to a matter specified in paragraph (d) of the definition.", "Facts": "The employer has committed to closing its operations. A current employee is considered excess and will be made redundant when the operations cease at a specified time in the future. The employer has created a vocational training and development (worker retraining) program under which employees being made redundant or redeployed may have their fees for eligible training courses or activities provided by external educational institutions or training organisations paid for or reimbursed by the employer. The amount paid or reimbursed is subject to a specified limit and is available until the cessation of the employment of the employee. The worker retraining program allows an employee to retrain, up-skill, and acquire new skills, qualifications, accreditations and competencies to enhance their prospects for future employment elsewhere. It excludes activities that relate to hobbies or personal interests. The terms and conditions of the worker retraining program must be satisfied for the excess employee to be eligible for the payment or reimbursement. This includes that the employee attend and successfully complete the training course or activity. The benefit is an expense payment benefit under section 20 of the FBTAA regardless of whether the amount is reimbursed to the employee or paid directly to the provider of the training course or activity. The payment or reimbursement is a fringe benefit within the meaning of that term in subsection 136(1) of the FBTAA as it is provided by the employer to a particular employee in respect of their employment. The employee has not entered a salary sacrifice arrangement. The employee only performs normal duties to qualify for the benefit. The payment for or reimbursement received by the employee under the worker retraining program in this case is not in consequence of the termination of employment. It is therefore not an eligible termination payment and is not excluded from the definition of 'fringe benefit' at paragraphs (la) to (le) of subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: The FBTAA specifies that certain benefits will be exempt benefits. Paragraph 58M(1)(a)(iv) of the FBTAA provides that an expense payment benefit is an exempt benefit where the recipients expenditure is in respect of 'work-related counselling' of an employee or their associate. 'Work-related counselling', as is relevant to the circumstances, is defined in subsection 136(1) of the FBTAA to mean: (a) ... counselling attended by the employee; ... Paragraphs (a), (c) and (e) of the definition of 'work-related counselling' are satisfied. The training course or activity is 'counselling' as defined in subsection 136(1) of the FBTAA, which includes the giving of advice or information in a seminar. 'Seminar', while not defined in the FBTAA, takes its ordinary meaning which The Macquarie Dictionary Online edition defines as: 1. a small group of students, as in a university, engaged in advanced study and original research under a professor or the like. 2. the gathering place of such a group. 3. a course or subject of study for advanced graduate students. 4. a meeting of students, usually at an advanced level, for discussion of and instruction in a specified topic, usually chaired by a teacher. 5. a meeting organised to discuss a specific topic: a public seminar on uranium mining. An employee attending a training course or activity pursuant to the worker retraining program at least maintains the quality of the performance of employees' duties until the cessation of the employers operations. The benefit is not wholly or principally a reward for services as the employee has not entered a salary sacrifice arrangement and is not required to do anything other than their normal duties for which they are paid in order to qualify for the benefit. However, paragraph (d) of the definition of 'work-related counselling' requires that the counselling 'relates to' certain specified matters. The phrase 'relates to' is not defined in the FBTAA. The meaning of these words has however been discussed at common law. It was common ground in Tooheys Ltd v. Commissioner of Stamp Duties (NSW) (1960) 105 CLR 602 at 620 per Taylor J; Joye v. Beach Petroleum NL & Anor (1996) 14 ACLC 1174 at 1181-1182; (1996) 67 FCR 275 at 285 per Beaumont and Lehane JJ; Australian Competition and Consumer Commission v. Maritime Union of Australia (2002) ATPR 41-849 at 44,514; (2001) 114 FCR 472 at 487 per Hill J; North Sydney Council v. Ligon 302 Pty Ltd (1996) 185 CLR 470; Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355 at 387; O'Grady v. Northern Queensland Co Ltd (1990) 169 CLR 356 at 374 per Toohey and Gaudron JJ; and HP Mercantile Pty Limited v. FC of T 2005 ATC 4571 at 35; that the term 'relates to' was extremely wide requiring the existence of an association or connection between two subject matters. That connection or association may be direct or indirect, substantial or real, depending on the context in which the words are used. However, the connection or association must be relevant and a remote relationship would generally not suffice. It is considered that the training course or activity does not relate to any of the specific matters listed in subparagraphs (i) to (ix) of paragraph (d) because the connection or association is too remote. The training course or activity enables the employee to acquire new skills, qualifications, and accreditations to enhance their future employment prospects. It is not apparent from an examination of the type of counselling that it relates to one of the matters listed. It is further considered that the training course or activity does not relate to any similar matter. The Macquarie Dictionary Online edition defines 'similar' to mean having likeness or resemblance, especially in a general way. In this context, for an unlisted matter to be similar, that matter would have to resemble or have likeness to one of the listed matters. It is not considered in the circumstances described that the matter of redundancy resembles or has a likeness to any specific matter listed. Accordingly, the training courses or activities therefore are not related to any matter listed in paragraph (d) of the definition of 'work-related counselling' in subsection 136(1) of the FBTAA. Note - The payment for or reimbursement of the training course or activity may be an exempt benefit if the conditions of a minor benefit under section 58P of the FBTAA are satisfied. Alternatively, if the employee would otherwise have been eligible to a deduction for the expenses incurred for the training course or activity, the taxable value of the benefit may be reduced under the 'otherwise deductible rule' in section 24 of the FBTAA (see Taxation Ruling TR 2024/3 about the deductibility of self-education expenses incurred by an employee).", "Date_of_Decision": "1 December 2014", "Year_of_Income": "Year ended 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 20 section 24 section 58M subparagraph 58M(1)(a)(iv) section 58P subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2024/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe Benefits Tax Exempt benefits FBT work-related counselling Expense payment benefit Expense payment fringe benefits", "Case_References": "Australian Competition and Consumer Commission v. Maritime Union of Australia (2002) ATPR 41-849 (2001) 114 FCR 472", "Other_References": "The Macquarie Dictionary Online edition", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20151", "Unmatched_Content": "Revised to reflect update taxation ruling | Updated to correct business line | Updated citations to reflect TR 2024/3 | Related Public Rulings (including Determinations) Taxation Ruling TR 2024/3 | Keywords Fringe Benefits Tax Exempt benefits FBT work-related counselling Expense payment benefit Expense payment fringe benefits"}
{"ATO_ID_Number": "ATO ID 2007/141", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: work related medical examinations", "Issue": "When an employee undergoes a medical examination prior to the commencement of a new employment contract with the same employer will the benefit be accepted as a 'work-related medical examination' that is an exempt benefit under section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The medical examination prior to commencement of a new contract will be an exempt benefit under section 58M of the FBTAA.", "Facts": "The employee is employed under a contract of employment for a fixed 5 year term. Prior to the expiration of that first contract the employer and employee meet to determine if a new contract can be agreed. In the event that an agreement is reached the employee shall enter into a new contract on completion of the former contract. The continued service of the employee will be recognised under the new contract so as to avoid any break of service, and any accrued or pro-rata entitlements will be carried forward into the new contract. The employer requires, prior to the employee entering into a new contract for the same position, that the employee undergo and satisfactorily pass a medical examination by a qualified medical practitioner selected by the employer at the employer's expense. The medical examination is carried out by or on behalf of a legally qualified medical practitioner wholly or principally in order to ascertain the physiological or psychological condition of the employee for the purpose of the employee entering into the new employment contract.", "Reasons_for_Decision": "Summary: Under section 58M of the FBTAA where an employer provides an expense payment benefit, property benefit or a residual benefit in respect of a work-related medical examination of an employee, the benefit will be an exempt benefit. The term 'work-related medical examination' is defined in subsection 136(1) of the FBTAA to mean: in relation to a benefit provided in respect of the employment of an employee, means an examination or test carried out by, or on behalf of, an audiometrist or a legally qualified medical practitioner, nurse, dentist or optometrist wholly or principally in order to ascertain the physiological or psychological condition of the employee for any or all of the following purposes: (a) the commencement of the employment of the employee; (b) the confirmation of probationary employment of the employee; (c) a change in the duties or location of the employment of the employee; (d) the employee becoming a member of a superannuation fund. As the employee's job will be effectively completed at the end of the contract term, it is considered that the new contract will satisfy 'the commencement of employment of the employee' requirement. Therefore, as the employer provided a work-related medical examination for the employee prior to the commencement of a new contract of employment, the benefit will be exempt under section 58M of the FBTAA.", "Date_of_Decision": "10 May 2007", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58M subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT work-related counselling FBT work-related medical examination Fringe benefits Fringe benefits tax Exempt benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007141", "Unmatched_Content": "Updated to correct business line and punctuation | Keywords FBT work-related counselling FBT work-related medical examination Fringe benefits Fringe benefits tax Exempt benefits"}
{"ATO_ID_Number": "ATO ID 2004/301", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: Influenza (Flu) vaccinations & work-related preventative health care", "Issue": "If an employer provides an employee with a free flu vaccination, is this an exempt benefit under section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The provision of a free flu vaccination to an employee will be an exempt benefit under section 58M of the FBTAA.", "Facts": "Flu is a serious respiratory infection that can be spread easily from one person to another. The employer has made free flu vaccinations available to all its employees although not all of the employees take up this offer. The vaccinations have been administered by a nurse or doctor.", "Reasons_for_Decision": "Summary: Section 58M of the FBTAA exempts from FBT any 'work-related preventative health care' (WRPHC) of the employee. This term is defined in subsection 136(1) of the FBTAA to basically mean any form of care provided by, or on behalf of a medical professional to prevent work-related trauma provided it is not excluded from those employees: 'Work-related trauma' is defined in subsection 136(1) of the FBTAA to include the contraction of a disease that is related to the employment of the employee. Because of the nature of flu, any member of the workforce is equally susceptible to contracting this disease and therefore it would qualify as 'work-related trauma'. Although the employer's offer of free flu vaccinations was only taken up by some employees, as it was offered to all employees the requirements of the definition of WRPHC have been satisfied. On that basis, the benefit would be an exempt benefit under section 58M of the FBTAA.", "Date_of_Decision": "23 March 2004", "Year_of_Income": "31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58M section 136 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/963", "Subject_References": "Exempt benefits FBT work-related preventative health care FBT work-related trauma Fringe benefits tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004301", "Unmatched_Content": "Updated to correct business line | Keywords Exempt benefits FBT work-related preventative health care FBT work-related trauma Fringe benefits tax"}
{"ATO_ID_Number": "ATO ID 2004/557", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: work-related preventative health care - corrective optical aids for screen based equipment", "Issue": "If an employer only reimburses permanent employees for the cost of corrective optical aids, are the expense payment benefits exempt benefits under section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The health care is not made available generally to all employees of the employer with similar work-related risks. Therefore, the recipients expenditure is not in respect of the work-related preventative health care (WRPHC) of the employee as required by subparagraph 58M(1)(a)(iii) of the FBTAA.", "Facts": "The employer has both permanent and non-permanent employees. The employer maintains an eyesight screening and testing policy in relation to employees work involving use of screen based equipment (SBE). The employer recommends that employees who are required to operate SBE for at least one hour per day or ten hours per week have their eyesight tested on a regular basis. The minimum set of tests for determining whether special optical aids are required to perform SBE work are: The employer does not subsidise the cost of eyesight screening and testing. The employer advises that this is the responsibility of the employee. The employer will only reimburse permanent employees for part or all of the cost of corrective optical aids for use on SBE, after allowance for reimbursement by any private health insurance fund. To be eligible for the reimbursement an employee must:", "Reasons_for_Decision": "Summary: Section 58M of the FBTAA exempts from FBT the provision of certain benefits provided in respect of the employment of an employee. The exemptions include, at subparagraph 58M(1)(a)(iii) of the FBTAA, the provision of expense payment benefits where the recipient's expenditure is in respect of WRPHC of the employee. The definition of WRPHC in subsection 136(1) of the FBTAA requires, in relation to an employee of an employer, that the form of care provided by, or on behalf of, a legally qualified optometrist is wholly or principally in order to prevent the employee from suffering from work-related trauma. The definition also requires that the form of care is made generally available to all employees of the employer who are likely to be at risk of suffering from similar work-related trauma. It is accepted that the provision of optical aids such as spectacles is a form of care provided by or on behalf of an optometrist. 'Work-related trauma' is defined in subsection 136(1) of the FBTAA to include the coming into existence, the aggravation, acceleration or recurrence of any physiological condition in relation to an employee that is or may be harmful or disadvantageous to, the employee. It is accepted that the coming into existence, the aggravation, acceleration or recurrence of any physiological condition as a result of using SBE in the workplace can be a 'work-related trauma' in accordance with subsection 136(1) of the FBTAA. Where it has been established that the employee uses SBE in the workplace for at least one hour continuously each working day or at least 10 hours in a working week, and an optometrist has examined the employee and certified that the employee requires optical aids for the performance of SBE work, this level of enquiry would be sufficient in order for the employer to be satisfied that the optical aids were provided wholly or principally in order to prevent the employee from suffering from work-related trauma. The section 136(1) of the FBTAA definition of WRPHC also requires that that the form of care is made available generally to all employees of the employer who are likely to be at risk of suffering from similar work-related trauma. The definition of WRPHC is also 'in relation to an employee of an employer'. Therefore, those employees attending 'in relation to an employee of an employer' and receiving care in relation to that role and in order to prevent the employee from suffering from work-related trauma would only include those permanent employees who have obtained a statement of authorisation from their employer. Non-permanent employees who attend (or who might attend) the optometrist and who do not have a statement of authorisation from the employer would attend the optometrist in a private capacity. As the form of care is not made available generally to all employees of the employer who have similar risks the definition of WRPHC is not satisfied for those employees who do receive the form of care. On that basis, the recipients expenditure is not in respect of WRPHC under subparagraph 58M(1)(a)(iii) of the FBTAA. As a consequence the expense payment benefit is not an exempt benefit under section 58M of the FBTAA.", "Date_of_Decision": "30 June 2004", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58M subparagraph 58M(1)(a)(iii) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/301 | ATO ID 2002/963 | ATO ID 2003/689", "Subject_References": "Fringe benefits Fringe benefits tax Exempt benefits FBT work-related preventative health care", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004557", "Unmatched_Content": "Updated Business Line and review date | Include reference to subparagraph 58M(1)(a)(iii) Hyphenate 'work related trauma' Updated wording | Include reference to subparagraph 58M(1)(a)(iii) | Keywords Fringe benefits Fringe benefits tax Exempt benefits FBT work-related preventative health care"}
{"ATO_ID_Number": "ATO ID 2003/689", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: work related preventative health care - meaning of 'on behalf of a legally qualified medical practitioner'", "Issue": "Where an employer engages a masseuse on the recommendation of a legally qualified medical practitioner, is the masseuse providing any form of care 'on behalf of a legally qualified medical practitioner' for the purposes of the definition of 'work related preventative health care' under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The masseuse is not providing any form of care 'on behalf of a legally qualified medical practitioner' for the purposes of the definition of work related preventative health care.", "Facts": "The advice of a legally qualified medical practitioner was sought by the employer in order to determine what action should be taken in respect of employees whose health was suffering because of their work environment. After examining the work environment and the nature of the illnesses and injuries being suffered by the employees, the legally qualified medical practitioner made a recommendation to the employer concerning the type of treatment that would reduce or prevent illness and injury of the employees. Based on that recommendation, the employer engaged the services of a masseuse. The masseuse does not report to the legally qualified medical practitioner.", "Reasons_for_Decision": "Summary: Subsection 58M(1) of the FBTAA provides that benefits relating to the 'work-related preventative health care' of an employee are exempt benefits. For health care to be 'work-related preventative health care' as defined in subsection 136(1) of the FBTAA the care must be provided by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or optometrist in order to prevent the employees from suffering injuries or illnesses relating to their employment. The form of care must be made available to all employees with similar work-related risks. When health care is not provided directly by a legally qualified medical practitioner, nurse, dentist or optometrist, the care must be provided 'on behalf of' such a qualified person. The phrase 'on behalf of' is not defined for the purposes of the FBTAA. The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne defines the term 'behalf' or 'on behalf of' as behalf n. on behalf of (or on a person's behalf ) 1 in the interests of (a person, principle, etc.). 2 as representative of ( acting on behalf of my client ). In Cuthbertson & Richards Sawmills v. Thomas (1999) 93 FCR 141 the meaning of the phrase 'on behalf of' was discussed. It was stated that the phrase does not have a strict legal meaning. The court referred to R v. Toohey; Ex parte Attorney General (N.T.) (1980) 145 CLR 374 at 386 where Stephen, Mason, Murphy and Aickin JJ referred to the phrase in these terms: ...it bears no single and constant significance. Instead it may be used in conjunction with a wide range of relationships, all however, in some way concerned with the standing of one person as auxiliary to or representative of another person or thing. ...Context will always determine to which of the many possible relationships the phrase \"on behalf of\" is in a particular case being applied; \"the context and subject matter\" (per Dixon J in R v. Portus; Ex parte Federated Clerks Union (1949) 79 CLR 428) will be determinative. In the present case, the phrase 'on behalf of' requires a relationship between the two parties such that one party is acting in place of or as representative of the other. The masseuse is not acting in the place of or as a representative of the legally qualified medical practitioner. The health care provided by the masseuse is not provided by, or on behalf of, the legally qualified medical practitioner. As a result, the health care services provided by the masseuse are not 'work related preventative health care' for the purposes of the definition in s 136(1) of the FBTAA and are not exempt benefits under section 58M (1).", "Date_of_Decision": "19 March 2003", "Year_of_Income": "Year ended 31 March 2001", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 58M(1) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/963", "Subject_References": "Fringe benefits Exempt benefits FBT work related preventative health care FBT health care", "Case_References": "Cuthbertson & Richards Sawmills v. Thomas (1999) 93 FCR 141", "Other_References": "Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003689", "Unmatched_Content": "Updated to correct business line | Keywords Fringe benefits Exempt benefits FBT work related preventative health care FBT health care"}
{"ATO_ID_Number": "ATO ID 2002/963", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe Benefits Tax: Exempt benefits - work-related preventative health care", "Issue": "Are benefits relating to the vaccination of an employee against Q fever 'work-related preventative health care' ('WRPHC') and exempt from Fringe Benefits Tax (FBT) under section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. Benefits relating to the vaccination of an employee against Q fever are for 'WRPHC' and are exempt from FBT under section 58M of the FBTAA.", "Facts": "Q fever is a well-recognised occupational hazard within the cattle industry. It is a disease carried by cattle which is communicable to human beings. The employer, an abattoir, incurs expenses to make vaccinations available to all employees who, because of their duties, are at risk of contracting Q fever. The vaccination process includes skin and blood testing, vaccination and registration on the Q Fever Register. The expenses include the costs of providing a legally qualified medical practitioner (LQMP) or nurse, the testing procedure and the vaccination.", "Reasons_for_Decision": "Summary: Section 58M of the FBTAA exempts from FBT the provision of certain benefits provided in respect of the employment of an employee. The exemptions include the provision of benefits that result in the 'WRPHC' of the employee. The definition of 'WRPHC' in subsection 136(1) of the FBTAA requires that the form of care needs to be for the purpose of preventing the employee suffering from 'work-related trauma'. 'Work-related trauma' is defined in subsection 136(1) of the FBTAA to include the contraction of a disease that is related to the employee's employment. An employee contracting Q fever as a result of his or her work duties would be one form of 'work-related trauma'. The definition of 'WRPHC' in subsection 136(1) of the FBTAA requires that the care provided to the employee is made available generally to all employees of the employer: If care as required by (a) above, is made available to all employees of the employer who because of their work duties are likely to be at risk of contracting Q fever, then (b) and (c) above would always be satisfied. The employer makes vaccinations available to all employees who, because of their work duties, are at risk of contracting Q fever. The definition of 'WRPHC' in subsection 136(1) of the FBTAA also requires that the care be provided by, or on behalf of a legally qualified medical practitioner (LQMP) or nurse. The provision of benefits relating to vaccination against Q fever is for 'WRPHC' as defined in subsection 136(1) of the FBTAA. These benefits include the provision of an LQMP, a nurse, the testing procedure and the vaccine itself. These benefits are exempt from FBT under section 58M of the FBTAA.", "Date_of_Decision": "1 July 2002", "Year_of_Income": "Year ended 31 March 2002", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 58M subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Exempt benefits Residual fringe benefits Medical expenses Vaccinations FBT work-related preventative health care FBT work-related trauma", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002963", "Unmatched_Content": "Minor spelling corrections | Keywords Fringe benefits tax Exempt benefits Residual fringe benefits Medical expenses Vaccinations FBT work-related preventative health care FBT work-related trauma"}
{"ATO_ID_Number": "ATO ID 2001/543", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "FBT: Exempt Benefits - Work-related Counselling", "Issue": "Is the quit-smoking program in the nature of work-related counselling and thus an exempt benefit under section 58M of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The quit-smoking program is in the nature of work-related counselling and as such is an exempt benefit under section 58M of the FBTAA.", "Facts": "An employee attends a structured quit-smoking program which provides counselling services to assist the employee to stop the habit of cigarette smoking. The employer has a non-smoking policy for the workplace. Smoking in the workplace is considered a health hazard for employees and is therefore an occupational health and safety issue. The non-smoking policy is devised to improve or maintain the quality of the employee's performance at work. The reason for the attendance of the employee at a quit-smoking program is to improve or maintain the employee's health. As part of the employer's non-smoking policy, the employer will assist employees to quit smoking by reimbursing all or part of the program fees for any employee who can remain a successful non-smoker for at least three months after completing the program. The benefit which is available to any employee is not part of any salary packaging arrangement and is not provided as a reward for services rendered or to be rendered by the employee.", "Reasons_for_Decision": "Summary: The reimbursement of all or part of the program fee by the employer to the employee is an expense payment benefit as defined in section 20 of the FBTAA. If the expense payment benefit is one where the employee's expenditure was for \"work-related counselling\", then the expense payment benefit will be an exempt benefit under section 58M of the FBTAA. In order to fall within the definition of \"work-related counselling\" under subsection 136(1) of the FBTAA, a number of conditions must be met. The employee has attended the quit-smoking counselling session as required under paragraph 136(1)(a) of the FBTAA. The employee's attendance at the quit-smoking counselling session forms part of the employer's non-smoking policy which is devised to improve or maintain the quality of the performance of its employees' duties as required under paragraph 136(1)(c) of the FBTAA. The quit-smoking counselling session relates to health matters as required under paragraph 136(1)(d) of the FBTAA. The expense payment benefit is not provided wholly or principally as a reward for services rendered or to be rendered by the employee as required under paragraph 136(1)(e) of the FBTAA.", "Date_of_Decision": "17 September 2001", "Year_of_Income": "Year ending 31 March 2002 Year ending 31 March 2003 Year ending 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 20 section 58M subsection 136(1) paragraph 136(1)(a) paragraph 136(1)(c) paragraph 136(1)(d) paragraph 136(1)(e)", "Related_Public_Rulings_and_Determinations": "TD 93/153", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Expense payment fringe benefits Exempt benefits Fringe benefits tax Fringe benefits FBT reimbursements FBT salary sacrifice FBT work related counselling", "Case_References": "", "Other_References": "National Taxation Liaison Group FBT Sub-Committee - Minutes of Meeting 22 February 2001", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001543", "Unmatched_Content": "Changed spelling to program | Related Public Rulings (including Determinations) TD 93/153 | Keywords Expense payment fringe benefits Exempt benefits Fringe benefits tax Fringe benefits FBT reimbursements FBT salary sacrifice FBT work related counselling"}
{"ATO_ID_Number": "ATO ID 2014/17", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Property fringe benefits: redemption of voucher/coupon by a retail store employee for merchandise retailed by their employer.", "Issue": "When a retail store employer provides an employee with a voucher/coupon, entitling the employee to merchandise from a participating retail store of the employer, has the employer provided the employee with an in-house property fringe benefit as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No, the employer provides the employee with an in-house property fringe benefit as defined in subsection 136(1) of the FBTAA when the employee redeems the voucher/coupon for merchandise at a participating retail store of the employer.", "Facts": "The employer operates retail stores. In recognition of the employment of the employee the employer provides the employee with a voucher/coupon at regular intervals during the year. No monetary value is specified, nor loaded, on the voucher/coupon. The voucher/coupon can be redeemed at participating stores operated by the employer. The voucher/coupon can be redeemed for a specified type of merchandise up to a specified number of items within a specified time of its issue date. If the employee does not redeem the voucher/coupon by the expiry date it will be forfeited. The employee does not pay for the voucher/coupon or for the merchandise. Each voucher/coupon is individually numbered and the number is recorded as being provided to that particular employee. Each voucher/coupon is surrendered upon redemption (that is, it can only be used once) and the redeemed voucher number is recorded in the employer's sales system. The identity of the employee must be reconciled against the voucher/coupon before the merchandise can be obtained. The merchandise can only be obtained in person by the employee. The merchandise is, otherwise, exactly the same as that sold by the employer to the general public.", "Reasons_for_Decision": "Summary: (All legislative references are to the FBTAA). Section 40 deals with property benefits and states as follows: Where, at a particular time, a person (in this section referred to as the 'provider') provides property to another person (in this section referred to as the 'recipient'), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. Subsection 136(1) provides the following definitions which are relevant to property benefits: property means: (a) intangible property; and (b) tangible property. The term benefit is also defined in subsection 136(1) as including 'any right (including any right in relation to, and an interest in, real or personal property), privilege, service or facility'. The provision of the voucher/coupon, and the later redemption of that voucher/coupon to obtain merchandise, involves two distinct actions. The issue of the voucher/coupon does not constitute a fringe benefit for the purposes of the FBTAA at the time of issue but is an administrative aid in facilitating the later provision of merchandise to the employee. The benefit under subsection 136(1) therefore is the provision of the merchandise by the employer. The employer provides the benefit when the employee redeems the voucher/coupon for the merchandise. Support for this view is found in Taxation Ruling TR 1999/10 which provides the following guidance in respect of Life Gold Passes and Severance Passes given to members of Federal Parliament on their retirement: 22. On 'retirement' from Federal Parliament, Members may be issued with either a Life Gold Pass or a Severance Pass which may entitle the holder of the pass and his or her spouse to travel benefits. Similar travel entitlements are available for Members of State and Territory Parliaments. 23. We consider that the issuing of a Life Gold Pass or Severance Pass has no income taxation implications. The value of travel benefits received through the use of these passes does not form part of either a Member's or a Member's spouse's assessable income. However, travel benefits received from the use of a Life Gold Pass or Severance Pass are residual fringe benefits and the provider of the pass may be subject to fringe benefits tax when the passes are used for travel (paragraphs 84 to 88). ... 86. We do not consider that the issuing of passes under the Life Gold Pass and Severance Pass Schemes attracts any income tax implications. However, travel benefits received in relation to each use of a Gold Pass or Severance Pass by a Member will be taxed as a residual benefit, within the meaning of section 45 of Division 12 of the FBTAA, to the provider of the pass. As stated above, property means intangible property and tangible property. Tangible property means goods, animals, gas and electricity. The term goods is not defined in the FBTAA. It therefore takes on its ordinary meaning. The Macquarie Dictionary Sixth Edition, 1 October 2013 defines the term good relevantly as: 30. (plural) possessions, especially movable effects or personal chattels. 31. (plural) articles of trade; wares; merchandise, especially that which is transported by land. ... 33. an item of merchandise. As merchandise is a good the benefit provided is a property benefit. Further, as the property benefit was provided in recognition of employment it is a property fringe benefit as defined in subsection 136(1). A property fringe benefit is an in-house property fringe benefit where certain conditions are satisfied. The term in-house property fringe benefit is defined in subsection 136(1) as: In relation to an employer, means a property fringe benefit in relation to the employer in respect of tangible property: (a) Where both of the following conditions are satisfied: (i) the provider is the employer or an associate of the employer; and (ii) at or about the provision time, the provider carried on a business that consisted of or included the provision of identical or similar property principally to outsiders. In this case, the benefit is an in-house property fringe benefit, as it is a property fringe benefit, it is provided by the employer, and at or about the provision time, the employer carried on a business that consisted of or included the provision of identical or similar property principally to outsiders. Accordingly, where the employer has provided an employee with a voucher/coupon, which the employee can redeem for merchandise from a participating retail store of the employer, the employer provides the employee with an in-house property fringe benefit as defined subsection 136(1) when the employee redeems the voucher/coupon for the merchandise, not when the voucher/coupon is issued.", "Date_of_Decision": "14 May 2014", "Year_of_Income": "1 April 2012 - 31 March 2013 1 April 2013 - 31 March 2014 1 April 2014 - 31 March 2015", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 40 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "TR 1999/10", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/35", "Subject_References": "Fringe benefits tax Property fringe benefits FBT tangible property In-house property fringe benefits", "Case_References": "", "Other_References": "Macquarie Dictionary Sixth Edition, 1 October 2013", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201417", "Unmatched_Content": "property benefit means a benefit referred to in section 40, but does not include a benefit that is a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III. | property fringe benefit means a fringe benefit that is a property benefit. | Minor punctuation amendment | Minor punctuation, grammar and style amendments | Related Public Rulings (including Determinations) TR 1999/10 | Keywords Fringe benefits tax Property fringe benefits FBT tangible property In-house property fringe benefits"}
{"ATO_ID_Number": "ATO ID 2010/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Property fringe benefits: gift cards", "Issue": "Where a retail store employer provides an employee with a gift card, has the employer provided the employee with an 'in-house property fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. As the gift card provided to the employee is not 'tangible property' as defined in the FBTAA, the gift card does not satisfy the definition of 'in-house property fringe benefit' in subsection 136(1) of the FBTAA.", "Facts": "The employer operates retail stores. As part of the employer's business, gift cards are available for purchase by the public with a loaded value ranging from a minimum of $20 to a maximum of $500. The employer recognises the efforts of employees who have worked diligently over a period of time or who have met particularly tight work project deadlines. In recognition of an employee's work, the employer provides the employee with a gift card. The value that is loaded on the gift card, up to the maximum of $500, is solely at the employer's discretion. The decision as to the stored value of the gift card was made prior to the gift card being provided to the employee. The gift card can be redeemed at participating stores operated by the employer. The gift card can be redeemed for goods or services up to the stored value on the gift card within 12 months of its issue date. Any remaining stored value on the gift card at the expiry date will be forfeited. Once the stored value of the gift card is redeemed, the gift card cannot be re-activated. That is, the gift card is not re-loadable. The gift card cannot be refunded or exchanged for cash. The gift card can be used by any person (bearer) who holds it. If the gift card is lost or stolen, it cannot be replaced and may still be used by whoever holds it.", "Reasons_for_Decision": "Summary: Section 40 of the FBTAA deals with 'property benefits' and states the following: Where, at a particular time, a person (in this section referred to as the 'provider') provides property to another person (in this section referred to as the 'recipient'), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. Subsection 136(1) of the FBTAA provides the following definitions relevant to property benefits: 'property' means: (a) intangible property; and (b) tangible property. The term 'benefit' is defined in subsection 136(1) of the FBTAA as including: any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility. A gift card in the circumstances described confers rights on the bearer, being the merchant's promise to provide goods or services up to the stored value on the gift card. When the employer gives a gift card to the employee, the rights conferred are 'benefits' under subsection 136(1) of the FBTAA. Subsection 136(1) of the FBTAA defines 'provide', in relation to property, to mean dispose of (whether by sale, gift, declaration of trust or otherwise) the beneficial interest in property or the legal ownership of property. The rights that exist as a bearer of a stored value gift card, which allows the bearer to receive goods or services up to the stored value, are property. The benefit is a property benefit. The employer 'provided' the benefit when the gift card was given to the employee. As the property benefit was provided as a reward for services performed it is a 'property fringe benefit' as defined in subsection 136(1) of the FBTAA. The concessional valuation for 'in-house property fringe benefits', as defined in subsection 136(1) of the FBTAA, is limited to benefits in respect of 'tangible property'. That is: in-house property fringe benefit, in relation to an employer, means a property fringe benefit in relation to the employer in respect of tangible property.... (emphasis added) As stated above, 'property' means 'intangible property' and 'tangible property'. Tangible property means goods, animals, gas and electricity. 'Goods' is not a defined term in the FBTAA and therefore it takes on its ordinary meaning. The Macquarie Dictionary [Online], viewed 17 October 2017, www.macquariedictionary.com.au defines the term 'goods' relevantly as: 1. possessions, especially movable effects or personal chattels. 2. articles of trade; wares; merchandise, especially that which is transported by land. The benefit the gift card represents, being the employer's promise to provide goods or services up to the stored value where redemption occurs before the 12 month expiry date, does not constitute possessions, articles of trade or merchandise and is not 'goods' for the purposes of the FBTAA. The benefit is property but is not goods or any other form of 'tangible property' as defined in the FBTAA. The benefit is accordingly 'intangible property' as defined in subsection 136(1) of the FBTAA. As the gift card provided to the employee is not 'tangible property' as defined in the FBTAA, the gift card does not satisfy the definition of 'in-house property fringe benefit' in subsection 136(1) of the FBTAA.", "Date_of_Decision": "16 June 2010", "Year_of_Income": "Year ended 31 March 2011", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) section 40 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Property fringe benefits FBT intangible property FBT tangible property In-house property fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010135", "Unmatched_Content": "'tangible property' means goods and includes: | 'intangible property' means: | 'property benefit' means a benefit referred to in section 40, but does not include a benefit that is a benefit by virtue of a provision of Subdivision A of Divisions 2 to 10 (inclusive) of Part III. | 'property fringe benefit' means a fringe benefit that is a property benefit. | Facts and Reasons for Decision | Minor grammatical corrections | Replace the reference to the Macquarie Dictionary 2014 online edition for the definition of the term 'goods' with the currently viewed online edition of the Macquarie Dictionary. | Minor adjustments to omit the definition of the term 'good' and replace it with the definition of the term 'goods', as contained in the current online edition of Macquarie Dictionary. | Minor adjustment to the referencing of the definition of benefit in line with the style guide. Minor changes to the referencing of the definition of good in the Macquarie Dictionary to reference the 2014 online edition. | Keywords Fringe benefits tax Fringe benefits Property fringe benefits FBT intangible property FBT tangible property In-house property fringe benefits"}
{"ATO_ID_Number": "ATO ID 2010/151", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Property fringe benefit: money - tangible or intangible property", "Issue": "Can a payment of money constitute the provision of 'tangible property' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Although money is property for the purposes of the FBTAA, it does not meet the definition of 'tangible property' under subsection 136(1) of the FBTAA. Money will however satisfy the definition of 'intangible property' under subsection 136(1) of the FBTAA.", "Facts": "The employer makes a payment of money to an associate of an employee in respect of the employment of the employee. The money is in a form that is used in the ordinary course of business, that is, a medium of exchange. The payment does not constitute 'salary or wages' as defined in subsection 136(1) of the FBTAA. The payment of money represents a 'benefit' as defined in subsection 136(1) of the FBTAA. Money is 'property' as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: 'Property' is defined in subsection 136(1) of the FBTAA as meaning: intangible property; and tangible property. While money is property for the purposes of the FBTAA, it must be determined whether money is intangible property or tangible property for the purposes of the definition of 'property'. 'Tangible property' is defined in subsection 136(1) of the FBTAA as meaning: goods and includes: (a) animals, including fish; and (b) gas and electricity. There is no definition of 'goods' in the FBTAA. While money is property it is not generally considered as 'goods' ( Miller v. Race (1758) 1 Burr 452; Sale of Goods Act 1923 (NSW), section 5; Goods Act 1958 (Vic), section 3; Sale of Goods Act 1896 (Qld), section 3; The Sale of Goods Act 1895 (WA), section 60; etcetera). Further, paragraphs (a) and (b) of the definition of tangible property do not apply to money. Therefore, money will not satisfy the definition of 'tangible property' in subsection 136(1) of the FBTAA. 'Intangible property' is defined in subsection 136(1) of the FBTAA as meaning: As money is property and it is not tangible property, money will come within paragraph (c) of the definition of intangible property as 'any other kind of property other than tangible property'. The two exclusions at paragraphs (d) and (e) have no application to property in the form of money. It might be considered that there is an alternative view as expressed in the decision in Walstern v. Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423 where Hill J stated at FCR 23; ATC 5092; ATR 441: It follows in my mind that at the time of allocation there was the provision of property, namely the benefit in the trust fund constituted by the money which was tangible property, so that there was a property benefit as defined in the FBTA Act. ... However, it is not considered that the use of the words 'tangible property' by Hill J above was in the context of the definition of 'tangible property' in subsection 136(1) of the FBTAA. Rather it was the use of the words in their ordinary sense; that is, capable of being touched, or real or actual. Although money is property for the purposes of the FBTAA, it does not meet the definition of 'tangible property' under subsection 136(1) of the FBTAA. Money will however satisfy the definition of 'intangible property' under subsection 136(1) of the FBTAA.", "Date_of_Decision": "2 July 2010", "Year_of_Income": "Year ended 31 March 2011", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/204", "Subject_References": "Fringe benefits tax Fringe benefits Property fringe benefits FBT intangible property FBT tangible property", "Case_References": "Walstern v Commissioner of Taxation (2003)138 FCR 1 2003 ATC 5076 (2003) 54 ATR 423", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010151", "Unmatched_Content": "Keywords Fringe benefits tax Fringe benefits Property fringe benefits FBT intangible property FBT tangible property"}
{"ATO_ID_Number": "ATO ID 2007/204", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Property Fringe Benefit: status of money as a fringe benefit", "Issue": "Can the payment of 'money' constitute the provision of a 'property fringe benefit' as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The payment of money can constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA.", "Facts": "The employer makes a payment of money to an associate of a particular identified employee in respect of the employment of the employee. The payment represents a 'benefit' as defined at subsection 136(1) of the FBTAA. This payment does not constitute 'salary or wages' for the purposes of section 12-35 of the Taxation Administration Act 1953 and therefore is not 'salary or wages' of the employee as defined in subsection 136(1) of the FBTAA.", "Reasons_for_Decision": "Summary: Section 40 of the FBTAA provides that where a person (the 'provider') provides property to another person (the recipient), the provision of property 'shall be taken to constitute a benefit provided by the provider to the recipient'. 'Property' is defined in subsection 136(1) of the FBTAA as 'intangible property' and 'tangible property'. Tangible property is in turn defined as 'goods and includes animals, including fish; and gas and electricity'. Intangible property' is defined as: Money is or may be a form of exchange, but even when regarded as currency; money is still a form of property. The courts have always recognised that when money is exchanged or provided by one person to another, property passes from one to the other. For example, in Higgs v. Holiday (1599) Cro Eliz 746; 78 ER 978, the court held that, in respect of money 'where the owner of property lost the possession of it, he had lost the property in it'. Similarly, in Wookey v. Pole (1820) 4 B & Ald 1; 106 ER 839, the court held that, in the case of money, the property passes with delivery. In describing the nature of money, Best J said that 'by the use of money the interchange of all other property is most readily accomplished'. To constitute a 'property fringe benefit' a property benefit needs to be a 'fringe benefit'. The definition of 'fringe benefit' in subsection 136(1) of the FBTAA is as follows: \"fringe benefit\", in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit: (a) provided at any time during the year of tax; or (b) provided in respect of the year of tax; The FBTAA contemplates that money is property and capable of constituting a fringe benefit. This is evident from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA which specifically excludes certain payments of money (paragraphs 136(1)(j) to 136(1)(p) of the FBTAA), otherwise such exclusions would be superfluous. The principle that money can constitute property for the purposes of the FBTAA has the support of the Federal Court decision of Caelli Constructions (VIC) Pty Ltd v. Commissioner of Taxation (2005) 147 FCR 449; 2005 ATC 4938; 60 ATR 542. Here at FCR 465; ATC 4952; ATR 557, Kenny J accepted the Commissioner's submission that money constitutes property whilst formally rejecting the applicant's argument that the FBTAA does not contemplate that the payment of money can constitute a property fringe benefit. For these reasons, the payment of money can constitute a property fringe benefit as defined in subsection 136(1) of the FBTAA.", "Date_of_Decision": "12 November 2007", "Year_of_Income": "31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 40 section 43 section 136", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Property fringe benefits", "Case_References": "Caelli Constructions (VIC) Pty Ltd v. Commissioner of Taxation (2005) 147 FCR 449 2005 ATC 4938 60 ATR 542", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007204", "Unmatched_Content": "Updated due to an amendment to the definition of 'fringe benefit' in section 136(1) of the FBTAA, and minor punctuation errors. | Keywords Fringe benefits tax Fringe benefits Property fringe benefits"}
{"ATO_ID_Number": "ATO ID 2007/208", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Property Fringe Benefit: employer contribution to its employees' social club", "Issue": "Where an employer has made a contribution to its employees' social club, will this contribution be a property fringe benefit as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The contribution will not be a property fringe benefit as defined in subsection 136(1) of the FBTAA as at the time no particular employee has been identified who will benefit from that contribution to the social club.", "Facts": "Employees of an employer have formed a social club. The employer provides the social club with an annual donation which in turn is supplemented by personal contributions made by employee members during the year and through fundraising events. The social club operates on the basis of a committee of officers being drawn from the employees. The committee is a body of persons and therefore a person for the purposes of paragraph (d) of this definition at subsection 136(1) of the FBTAA. The committee operates in a fiduciary capacity in terms of the funds that are kept in a bank account and for which it shall appoint the signatories thereto. The social club is a trustee under the definition of trustee at subparagraph 136(1)(f)(ii) of the FBTAA. The payment of money to the social club is a property benefit under section 40 of the FBTAA.", "Reasons_for_Decision": "Summary: The definition of a fringe benefit contained in subsection 136(1) of the FBTAA requires, amongst other things, that in order for a benefit to be a fringe benefit the benefit must be provided to the employee or an associate of the employee and that the benefit be provided in respect of the employment of the employee. In determining whether a fringe benefit has been provided in these circumstances the Full Federal Court decision in Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16; 2007 ATC 4236; 65 ATR 369 is authority for the requirement that a particular employee must be identified. Edmonds J, at paragraph 37, found that whilst a benefit provided to a trustee of a trust estate can be a fringe benefit, this occurs when ...the identity of each employee who will take a share of the benefit is known with sufficient particularity, at the time the benefit is provided to enable it to be said that the benefit is provided in respect of the employment of each of those employees. His Honour further found that the shares provided to the trustee were not provided in respect of the employment of any particular employee, nor all of the employees capable of benefiting who would in fact receive a benefit - only some employees may later benefit and their identity was not known (paragraph 38). With respect to the facts relating to the social club, at the time the benefit is provided by the employer to the social club, the identity of employees is not known with 'sufficient particularity', despite the fact that the social club has been established solely for the benefit of employees of the employer. It cannot be ascertained at that point in time that there has been a benefit provided in respect of any particular individual employee. Accordingly, a property fringe benefit as defined in subsection 136(1) of the FBTAA has not been provided by the employer because no particular employee has been identified who will benefit from that contribution to the social club.", "Date_of_Decision": "12 November 2007", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Property fringe benefits", "Case_References": "Commissioner of Taxation v. Indooroopilly Children Services (Qld) Pty Ltd [2007] FCAFC 16 2007 ATC 4236 65 ATR 369", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007208", "Unmatched_Content": "Minor punctuation and rewording amendments | Issue, Decision, Facts, Reason for Decision | Minor punctuation amendments | Keywords Fringe benefits tax Fringe benefits Property fringe benefits"}
{"ATO_ID_Number": "ATO ID 2005/109", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: vouchers - property consumed by employee on employer's business premises", "Issue": "If an employer provides an employee with a voucher that entitles the employee to receive massage services during a working day on the employer's business premises, is this an exempt benefit under section 41 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Section 41 of the FBTAA does not apply to exempt the property benefit as the benefit provided is not consumed by the employee.", "Facts": "The employer on a working day provides a current employee with a voucher which entitles that employee to receive massage services. The voucher entitles the holder to receive a massage from a third party provider (masseuse) on the employer's business premises during the course of a working day. The vouchers are purchased by the employer from the masseuse and provided by the employer to its employees prior to the provision of the massage services. Any employee in possession of a voucher may use it to obtain a massage from the masseuse on the employer's business premises during the course of a working day. The voucher is a property benefit in accordance with section 40 of the FBTAA. The voucher is provided to the employee by the employer 'in respect of' the employment of the employee pursuant to subsection 136(1) of FBTAA.", "Reasons_for_Decision": "Summary: The general effect of section 41 of the FBTAA is to exempt a property benefit where the property is provided to, and consumed by, an employee on a working day on the employer's business premises. There is no definition of 'consume' in the FBTAA and as such it takes on its ordinary meaning. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. defines 'consume' as: The explanatory memorandum to the Fringe Benefits Tax Assessment Bill 1986 in relation to section 41 explained that, Goods supplied on a working day and consumed on the employer's premises, e.g., a daily ration of beer consumed at work by brewery workers, will not attract tax. Given the context and the policy intent, it is considered that the meaning of 'consumed' in section 41 of the FBTAA is limited to that which can be eaten, drunk or otherwise devoured. The act of redeeming a voucher does not fall within this definition of consume. Consequently the voucher is not capable of being consumed for the purposes of section 41 of the FBTAA. Accordingly, section 41 of the FBTAA does not apply to exempt the property benefit as the benefit provided is not consumed by the employee.", "Date_of_Decision": "30 March 2005", "Year_of_Income": "Year ended 31 March 2006", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 41", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt benefits Exempt property benefits Fringe benefits tax Property fringe benefits", "Case_References": "", "Other_References": "The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01. Explanatory memorandum to the Fringe Benefits Tax Assessment Bill 1986.", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005109", "Unmatched_Content": "Updated to correct business line | Keywords Exempt benefits Exempt property benefits Fringe benefits tax Property fringe benefits"}
{"ATO_ID_Number": "ATO ID 2004/211", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Property fringe benefit: 'in-house property fringe benefit' - house and land package", "Issue": "Will the taxable value of a house and land package provided by a property developer to an employee, be calculated as an 'in-house property fringe benefit' in accordance with subsection 42(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. Subsection 42(1) of the FBTAA does not apply as the house and land package is not an 'in-house property fringe benefit'.", "Facts": "The employer is engaged in the business of property development. The employer acquired a parcel of land and constructed a number of houses on the land. Most of the house and land packages were sold at market price to members of the public. During the FBT year the employer provided an employee with a house and land package at below market price. The provision of a house and land package to the employee is a property fringe benefit in accordance with section 40 of the FBTAA.", "Reasons_for_Decision": "Summary: The taxable value of a property fringe benefit depends on whether the property benefit falls for consideration under subsection 42(1) of the FBTAA as an 'in-house property fringe benefit' or section 43 of the FBTAA as an 'external property fringe benefit'. An 'in-house property fringe benefit' is defined in subsection 136(1) of the FBTAA to mean a property fringe benefit in relation to the employer in respect of 'tangible property', where both the following conditions are satisfied: (a) 'Tangible property' is defined as 'goods and includes animals, including fish; and gas and electricity', whereas (b) 'Intangible property' is defined as: There is no definition of 'real property' in the FBTAA therefore it takes on its ordinary meaning. Words And Phrases - legally defined , (1990), Volume 4, 3rd Edition, Saunders JB, Butterworths, London at page 10, defines the term 'real property' as follows, ....denotes (1) land and things attached to land, so as to become part of it...' The house and land package would clearly meet the definition of real property and consequently, intangible property. Therefore, it cannot be taxed as an 'in-house property benefit' and is not subject to the 25% in-house concession. As such, the taxable value of the property fringe benefit is determined in accordance with section 43 of the FBTAA, as an external property fringe benefit.", "Date_of_Decision": "13 February 2004", "Year_of_Income": "Year ended 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 40 section 42 section 43 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "External property fringe benefits FBT tangible property FBT taxable value Fringe benefits tax In-house property fringe benefits Property fringe benefits", "Case_References": "", "Other_References": "Words And Phrases - legally defined, (1990), Volume 4, 3rd Edition, Saunders JB, Butterworths, London", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004211", "Unmatched_Content": "Updated to correct business line | Keywords External property fringe benefits FBT tangible property FBT taxable value Fringe benefits tax In-house property fringe benefits Property fringe benefits"}
{"ATO_ID_Number": "ATO ID 2003/688", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "FBT - payment of interest to an employee by an employer", "Issue": "Does the payment by an employer of a marginally higher than market rate of interest to an employee/investor, give rise to a fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The payment of a marginally higher rate of interest to an employee who has invested funds with their employer, does not have a sufficient or material connection with employment and does not give rise to a fringe benefit.", "Facts": "The business of the employer includes paying interest to members of the public who invest funds. The employer offers to pay a rate of interest that is marginally higher than the market rate, to its employees, if they invest funds. The offer to all employees is made on the same terms and conditions as to members of the public apart from the rate of interest.", "Reasons_for_Decision": "Summary: Section 40 of the FBTAA provides that where an employer provides property to an employee, the provision of the property is taken to constitute a benefit. Money is considered to be property for the purposes of section 40 of the FBTAA. Therefore, the payment of money in the form of interest, by the employer to an employee in these circumstances, constitutes a property benefit. However, for a benefit to be a fringe benefit, it must be provided in respect of employment. Whilst the expression 'in respect of' has no fixed meaning, it has been considered by the courts on numerous occasions. In J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 it was noted that the term 'in respect of employment', includes benefits where ... there is a sufficient or material, rather than a, causal connection or relationship between the benefit and the employment ... It is considered that in these circumstances, the property benefit provided, being the total amount of interest paid by the employer to an employee investor, does not possess a 'sufficient or material' connection to employment. The payment of the total amount of interest is considered to be a consequence of the relationship of investor, despite the interest paid to employees being marginally higher than comparative rates available to members of the public. Accordingly, the property benefit provided by the employer to an employee in the form of interest on funds invested, is not a fringe benefit, as it is not provided in respect of employment. The total amount of interest received by an employee in these circumstances, is ordinary income for the purposes of section 6-5 of the Income Tax Assessment Act 1997.", "Date_of_Decision": "2 July 2003", "Year_of_Income": "Year ending 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402 2000 ATC 4151 (2000) 44 ATR 22", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003688", "Unmatched_Content": "Reference to TR 1999/5 removed."}
{"ATO_ID_Number": "ATO ID 2015/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt residual benefits - the provision, or use, of a recreational facility", "Issue": "Will the residual benefit that arises from the participation of an employee in a fitness class provided by the employer on the employer's premises be an exempt benefit under subsection 47(2) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. The residual benefit will not be an exempt benefit under subsection 47(2) of the FBTAA as the benefit provided to the employee is the participation in a fitness class and not the provision, or use, of a recreational facility.", "Facts": "The employer is liable to pay income tax. The employer's business premises include a large room which contains various pieces of gymnasium equipment and a carpeted open space area. The employer enters into an agreement with a fitness instructor for the instructor to run a weekly fitness class for employees on the carpeted open space area. As part of the fitness class the employee may use an item of gymnasium equipment located in the room.", "Reasons_for_Decision": "Summary: The residual benefit that arises from the participation of an employee in a fitness class will be an exempt benefit under subsection 47(2) of the FBTAA if it consists of the provision, or use, of a recreational facility located on the business premises of the employer (or if the employer is a company, a company that is related to the employer). Subsection 136(1) of the FBTAA defines 'recreational facility' to mean: ... a facility for recreation, but does not include a facility for accommodation or a facility for drinking or dining. A similar provision is contained in item 1.5 of the table in section 32-30 of Income Tax Assessment Act 1997 (ITAA 1997). Item 1.5 enables an employer to claim an income tax deduction for entertainment expenditure incurred for: 1.5 providing a facility for recreation on property you occupy, if the facility is mainly operated for your employees to use. But the exception does not apply if the facility is: (a) for accommodation, or (b) dining or drinking (unless it is a food or drink vending machine). Both provisions contain the phrase 'facility for recreation' and by exclusion indicate this term can include a facility for accommodation, dining, drinking, a food or drink vending machine. The meaning of the term 'facility' in the context of the definition of 'entertainment facility leasing expenses' is discussed in ATO Interpretative Decision ATO ID 2009/141 Fringe benefits tax Entertainment facility leasing expenses: hire of a marquee. In summarising the dictionary, income tax and fringe benefit definitions referred to, ATO ID 2009/141 states: The word facility, as described in each dictionary definition above, and as used in the income tax and fringe benefits tax definitions above is of wide meaning. It is accepted that the term 'facility' as it is used in the definition of 'entertainment facility leasing expenses' also has a wide meaning that includes buildings, part of buildings or other structures used for the purpose of the provision of entertainment. A similar wide meaning will apply to the term 'facility' as it is used in the definition of 'recreational facility'. It can include buildings, part of buildings, structures or items (for example a food or drink vending machine or pool table). A facility will be a recreational facility if it is used for recreation and is not a facility for accommodation, drinking or dining. The term 'recreation' is defined in subsection 136(1) of the FBTAA as follows: Recreation includes: (a) amusement (b) sport or similar leisure-time pursuits; and (c) recreation or amusement provided on, or by means of, a vehicle, ship, vessel or aircraft. As the definition of the term 'recreation' in subsection 136(1) is inclusive, the ordinary meaning of the term is also relevant. The Macquarie Dictionary Online edition states in relation to the term 'recreation': recreation 1. refreshment by means of some pastime, agreeable exercise, or the like. 2. a pastime, diversion, exercise, or other resource affording relaxation and enjoyment. In the situation being considered, the room in which the fitness class is conducted and the gymnasium equipment located in the room are recreational facilities. Although the room in which the class is conducted is a recreational facility and particular exercises may involve the use of an item of gymnasium equipment located in the recreational facility, the relevant benefit provided to the employee in this circumstance is the participation in the fitness class where various exercises are undertaken at the direction of the fitness instructor provided by the employer. Accordingly, as the benefit provided to the employee is the participation in a fitness class, rather than the provision, or use, of a recreational facility, the residual benefit that arises from the participation in the fitness class will not be an exempt benefit under subsection 47(2). Note: If the employer is exempt from income tax, a tax-exempt body entertainment benefit as defined in section 38 of the FBTAA may arise from the expenditure incurred in hiring the fitness instructor.", "Date_of_Decision": "4 September 2015", "Year_of_Income": "Year ending 31 March 2016", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 38 subsection 47(2) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/141", "Subject_References": "Fringe benefits tax FBT recreational facility FBT recreation FBT entertainment", "Case_References": "", "Other_References": "Macquarie Dictionary Online edition", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201525", "Unmatched_Content": "Keywords Fringe benefits tax FBT recreational facility FBT recreation FBT entertainment"}
{"ATO_ID_Number": "ATO ID 2013/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt benefits: employer provided housing through unrelated third party", "Issue": "In determining whether the provision of accommodation to an employee is an exempt residual benefit under subparagraph 47(5)(ba)(i) of the Fringe Benefits Tax Assessment Act 1986 ( FBTAA), are the transitional provisions met where accommodation is provided by an unrelated third party under a secondment agreement between the employer, the employee and the third party?", "Decision": "Yes, the transitional provisions are met in relation to subparagraph 47(5)(ba)(i) as the secondment agreement is an 'eligible employment agreement' for the purposes of item 27 of Schedule 1 of Tax Law Amendment (2012 Measures No 4) Act 2012.", "Facts": "An employee who is employed by an Australian company is temporarily seconded under a contract to an unrelated overseas entity for a 12 month period from 23 May 2011. This contract provided for the option that should the secondment be extended, then the contract would continue for that extended period, that is until 23 May 2013 The extension for the further 12 months was signed off on 3 May 2012. For the duration of the whole secondment, the employee will remain employed by the Australian company, subject to the terms and conditions of their initial contract but as modified by the secondment agreement. At the expiry of the secondment, the employee will return to their substantive position in Australia with their employer. The employee owns a house in Australia where they reside with immediate family and to which they intend to return at the completion of their secondment. The employee is a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 as their domicile is Australia. The employee is an Australian resident for the purposes of the Social Security Act 1991 and as such is not a temporary resident for the purposes of subsection 995-(1) of the Income Tax Assessment Act 1997 . This house represents the employee's normal place of residence for the purposes of section 30. As part of the secondment agreement with their employer, the unrelated overseas entity will provide the employee with accommodation to the employee and to their immediate family while they are based in the overseas country.", "Reasons_for_Decision": "Summary: From 1 October 2012, the concessional tax treatment of Living-Away-From-Home allowances and benefits to employees who maintain a house in Australia (paragraph 31C(a) of the FBTAA) and provide their employer with a declaration has been adjusted to a maximum period of 12 months (section 31D of the FBTAA). This arrangement however is subject to the transitional rules in Schedule 1, Part 3 of Tax Laws Amendment (2012 Measures No 4) Act 2012 which provide that where these rules are applicable, the employee is not required to maintain a home in Australia and the concession is not limited to 12 months. Specifically: 27 Transitional - existing employment arrangements (1) During the transitional period, disregard paragraph 31C(a) and section 31D of the Fringe Benefits Tax Assessment Act 1986 if: (a) the employee is neither a temporary resident nor a foreign resident; and (b) during the entire period: (i) starting at the Budget time; and (ii) ending on 30 September 2012; As the secondment agreement is an arrangement between the employer and the third party to provide the employee with accommodation, the employer has 'committed itself' to provide the employee with that benefit. It is therefore an 'eligible employment arrangement'. The fact that the benefit is ultimately provided by an unrelated third party who is not an associate of the employer is immaterial to that conclusion. As provided for by the secondment agreement, should that agreement be extended, then it would expire on the date of the extended term which was 23 May 2013. As this extension was signed off on 3 May 2012, then this arrangement predated the budget time being 8 May 2012 meaning that item 27 of the transitional provisions will apply. This is because during the whole period starting at budget time and ending on 30 September 2012, the employment was covered by an eligible employment arrangement that was neither varied in a material way nor renewed. Accordingly, as the transitional provisions have been met the requirements of both paragraph 31C(a) and section 31D are to be disregarded when considering whether the benefit represents an exempt benefit in terms of paragraph 47(5)(ba).", "Date_of_Decision": "2 July 2013", "Year_of_Income": "Year ending 31 March 2014", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subparagraph 47(5)(ba)(i) section 30 section 31C section 31D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "fringe benefits tax exempt benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201342", "Unmatched_Content": "Budget time means 7.30 pm, by legal time in the Australian Capital Territory, on 8 May 2012. | commits to provide the employee with [a] benefit for the employee's accommodation...while the duties of that employment require the employee to live away from [the employee's]...normal residence. | Keywords fringe benefits tax exempt benefits"}
{"ATO_ID_Number": "ATO ID 2010/163", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Benefits: motor vehicle not for private use- tram", "Issue": "Where an employee is provided with a residual benefit consisting of the use of a tram, does this benefit constitute the use of a motor vehicle for the purposes of subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. A tram is not a motor vehicle for the purposes of subsection 47(6) of the FBTAA and therefore the use of a tram does not constitute the use of a motor vehicle.", "Facts": "An employer provides its employee with the use of a tram. Trams or light rail are a form of public transportation designed to operate on its own contained system which may in part or in whole utilise public roads. A tram is a flanged wheel passenger carrying vehicle which runs on a tramway. The tramway is powered by electricity fed from an external source which powers the tram's motor through a current collector from an overhead conductor wire. Trams are fitted with signalling devices, interact with motor vehicles and are subject to traffic rules.", "Reasons_for_Decision": "Summary: Subsection 47(6) of the FBTAA provides an exemption for the provision or use of certain motor vehicles. The exemption excludes taxis on hire and most cars. The exemption is also subject to certain private use restrictions. Those exclusions and restrictions are not relevant to determining whether a tram is a motor vehicle. A tram is a vehicle propelled by a motor. However, whether a tram is a motor vehicle requires reference to the statutory definition of motor vehicle. Subsection 136(1) of the FBTAA defines motor vehicle for the purposes of that Act: Motor vehicle has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 Subsection 995-1(1) of the Income Tax Assessment Act 1997 relevantly provides: Motor vehicle means any motor- powered road vehicle (including a 4 wheel drive vehicle). What constitutes a 'road vehicle' is not further defined. In DFC of T v. ICI Australia Operations Pty Ltd 87 ATC 4069; (1987) 18 ATR 313 Murray J considered whether a vehicle was a 'road vehicle' under the former Sales Tax (Exemptions and Classifications Act) 1935 (at ATC 4076; ATR 320): A vehicle may be a road vehicle and yet be exclusively used on roads within private property. The manager of a large cattle station may purchase a utility for use exclusively for travel on the property whether over rough country or on bush tracks but nevertheless the utility is still a road vehicle. Further at ATC 4077; ATR 321 It is fundamentally a vehicle and a vehicle of a kind which is designed for use on roads be they public roads or private roads. This position was also taken in the more recent Administrative Appeals Tribunal (AAT) decision in Dreamtech International Pty Ltd v. Federal Commissioner of Taxation [2009] AATA 365; 2009 ATC 10-091; (2009) 72 ATR 822. One of the questions before the AAT was whether a Hummer was a road vehicle as the term was used in A New Tax System (Luxury Car Tax) Act 1999 . In making its decision the AAT examined the use for which it was designed and concluded that it was designed as a civilian vehicle for on road and off road use. It therefore fell within the description of a motor powered road vehicle. That decision and reasoning has not been overturned in subsequent Federal Court appeals. For the purposes of the FBTAA, the question of whether a vehicle is a 'road vehicle' should also be determined by its inherent design characteristics rather than the use to which the vehicle is put. A tram is designed only to run on rails in the form of a tramway. A tramway is a discrete transport system which may overlap with, but remains distinct from, a road network. Tram rails may co-exist with a road over a major portion of the tramway, but this co-existence only arises from the sharing of that public space. Outside that shared space trams do not travel on roads and road vehicle do not travel on tramways. A tram is by design a rail vehicle. Although a tram is a vehicle that is motorised and which may share some roadways with motor vehicles, it does not constitute a road vehicle. Therefore, it is not a motor vehicle for the purposes of the FBTAA. Accordingly, an employee who has been provided use of a tram is not in receipt of a benefit exempted by subsection 47(6) of the FBTAA.", "Date_of_Decision": "14 September 2010", "Year_of_Income": "Year ended 31 March 2011", "Legislative_References": "Fringe Benefits Tax Assessment Act (1986) subsection 47(6) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "FBT motor vehicle Fringe benefits tax Fringe benefits Exempt benefits", "Case_References": "DFC of T v ICI Australia Operations Pty Ltd 87 ATC 4069 (1987) 18 ATR 313", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010163", "Unmatched_Content": "Minor grammatical amendments | Updated to correct business line | Keywords FBT motor vehicle Fringe benefits tax Fringe benefits Exempt benefits"}
{"ATO_ID_Number": "ATO ID 2008/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Residual fringe benefit: tax-exempt body - recreation centre", "Issue": "Does the employer, a local government council who provides an employee with the use of the local recreation centre including use of a swimming pool and gymnasium, provide the employee with a residual benefit under section 45 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "Yes. The benefit provided to the employee is not a tax-exempt body entertainment benefit and is therefore a residual benefit under section 45 of the FBTAA.", "Facts": "The employer is a local government council and is wholly exempt from income tax on income derived from its activities. The employer owns and operates a recreation centre which provides members of the public with the use of various sporting facilities including swimming pool, spa, sauna, gymnasium, basketball and volleyball facilities. The employer carries on a business of providing the recreation centre for use by members of the public. The employer charges the public for use of the recreation centre. The employer incurs expenditure in operating the centre. For example, it pays for electricity usage, for employee's wages and for swimming pool chemicals. The employer provides an employee the use of the recreation centre for one year.", "Reasons_for_Decision": "Summary: The term 'benefit' in subsection 136(1) of the FBTAA includes any right, privilege, service or facility. In the present case the benefit provided to the employee is the employee's use of the centre over the course of the year. Section 45 of the FBTAA provides: 45 RESIDUAL BENEFITS A benefit is a residual benefit for the purposes of this Act if the benefit is not a benefit by virtue of a provision of Subdivision A of Divisions 2 to 11 (inclusive). Section 38 of the FBTAA needs to be considered before section 45 of the FBTAA because it is one of the provisions within Divisions 2 to 11 which take precedence over residual benefits. Section 38 of the FBTAA provides: 38 TAX-EXEMPT BODY ENTERTAINMENT BENEFITS Where, at a particular time, a person (in this section referred to as the \"provider\") incurs non-deductible exempt entertainment expenditure that is wholly or partly in respect of the provision, in respect of the employment of an employee, of entertainment to a person (in this section referred to as the \"recipient\") being the employee or an associate of the employee, the incurring of the expenditure shall be taken to constitute a benefit provided by the provider to the recipient at that time in respect of that employment. 'Entertainment' as defined in subsection 136(1) of the FBTAA and by extension section 32-10 of the Income Tax Assessment Act 1997 (ITAA 1997) includes in its meaning, entertainment by way of recreation. The term recreation is further defined in subsection 995-1(1) of the ITAA 1997 to include amusement, sport or similar leisure-time pursuits. The employee's use of the recreation centre is entertainment by way of recreation under section 32-10 of the ITAA 1997. As provided by section 38 of the FBTAA, the employer incurs expenditure operating the recreation centre, which is partly in respect of the provision, in respect of the employment of the employee, of entertainment to the employee. Where this expenditure is also 'non-deductible exempt entertainment expenditure', as defined in subsection 136(1) of the FBTAA, the incurring of the expenditure will be deemed to constitute a benefit as described in section 38 of the FBTAA. Subsection 136(1) of the FBTAA provides: 'non-deductible exempt entertainment expenditure' means non-deductible entertainment expenditure to the extent to which it is not incurred in producing assessable income. 'non-deductible entertainment expenditure' means a loss or outgoing to the extent to which: (a) section 32-5 of the Income Tax Assessment Act 1997 applies to it, or would apply if it were incurred in producing assessable income; and (b) apart from that section, it would be deductible under section 8-1 of that Act, or would be if it were incurred in producing assessable income; The employer, a local government council, would be deriving assessable income and deducting its operating expenses if it were not exempt from income tax. Where this operating expenditure would also be entertainment expenditure under section 32-5 of the ITAA 1997 then the employer will have incurred 'non-deductible entertainment expenditure' which is also 'non-deductible exempt entertainment expenditure'. Under these circumstances the employer would have provided a benefit under section 38 of the FBTAA. However, section 32-40 of the ITAA 1997 provides an exception to what is considered entertainment expenditure in section 32-5 of the ITAA 1997. Section 32-40 of the ITAA 1997, at Item 3.1, provides: Section 32-5 does not stop you deducting a loss or outgoing for ... 3.1 providing *entertainment for payment in the ordinary course of a *business that you carry on. The employer carries on a business of providing the use of the recreation centre to members of the public for payment. The business is one of providing recreation which is entertainment and the activity is considered to be 'in the ordinary course of a business'. Section 32-40 of the ITAA 1997 is therefore satisfied. This means that the employer's expenditure is not entertainment expenditure within section 32-5 of the ITAA 1997; is not 'non-deductible entertainment expenditure' within subsection 136(1) of the FBTAA and is not 'non-deductible exempt entertainment expenditure' within subsection 136(1) of the FBTAA. The benefit provided to the employee, being the use of the recreation centre over the course of the year is therefore not a benefit which is covered by section 38 of the FBTAA. As the benefit provided to the employee does not fall within any of the categories of benefits covered by Subdivision A of Divisions 2 to 11 (inclusive) of Part III of the FBTAA, it is therefore a 'residual benefit' under section 45 of the FBTAA.", "Date_of_Decision": "26 February 2008", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 38 section 45 subsection 47(2) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Entertainment expenses FBT entertainment FBT recreation FBT tax-exempt body Fringe benefits tax Residual fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200860", "Unmatched_Content": "(on the assumption that section 32-20 of the Income Tax Assessment Act 1997 had not been enacted). | Minor grammatical correction | Revised amendment history note | Added reference to s 995-1 of the ITAA 1997 | Updated to correct business line | Correction from s 32-5 of FBTAA to s 32-5 of the ITAA 1997 | Keywords Entertainment expenses FBT entertainment FBT recreation FBT tax-exempt body Fringe benefits tax Residual fringe benefits"}
{"ATO_ID_Number": "ATO ID 2006/159", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Residual fringe benefit: funeral expenses of deceased employee", "Issue": "Where an employer has organised and paid for the funeral expenses of a deceased employee, has a 'residual fringe benefit' been provided as defined in subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?", "Decision": "No. A benefit provided in respect of a deceased employee does not give rise to a 'residual fringe benefit' as defined in subsection 136(1) of the FBTAA.", "Facts": "An employee died leaving a dependant spouse with a young family. To assist the deceased's family, the employer decided to organise and pay for the funeral expenses of the deceased employee. By making this payment, a 'residual benefit' has been provided under section 45 of the FBTAA.", "Reasons_for_Decision": "Summary: Under subsection 136(1) of the FBTAA, a 'residual fringe benefit' is defined as being a 'fringe benefit that is a residual benefit'. With regard to the definition of 'fringe benefit' at subsection 136(1) of the FBTAA, a benefit may be provided to an employee or an associate of an employee. An 'employee', through the definitions of both a 'current employee' and a 'former employee', is defined in terms of 'a person' who receives, or has received, or is entitled or has been entitled to receive, salary or wages. Central to these concepts of an 'employee' is the continuing existence of an individual. Where the individual dies, they are no longer 'a person' for the purposes of the FBTAA. This would be distinct from a benefit being provided to a former employee who has merely retired or changed employers. Taxation Ruling TR 1999/10A addendum states that 'The fringe benefits tax system does not apply to benefits provided to relatives of deceased employees.' Such a decision is consistent with the long-held views of the Commissioner and expressed by the then Treasurer, recorded as follows in the Historic House Hansard Database of 27 May 1987 at page 3458 question No 4745: Fringe Benefits Tax (Question No. 4745) Mr Hodgman asked the Treasurer, upon notice, on 9 October 1986: (1) Do the provisions of the fringe benefits tax legislation require an employer to pay tax on (a) employer contributions to the cost of funerals of employees, including employees killed on the job (b) employer payments for incidental funeral expenses, including hire of hearse and mourning cars, insertion of death notices on behalf of management and staff and the provision of wreaths and (c) employer provision of \"free funerals\" to employees of undertakers and funeral directors. (2) Will payments under State Workers' compensation legislation for funerals of deceased employees attract fringe benefits taxes. (3) Is it a fact that the fringe benefits tax will apply to certain employer expenses incurred in respect of deceased employees. These responses are consistent with the views of the Commissioner that FBT does not apply to benefits provided in respect of a deceased employee, thus the provision of a funeral for a deceased employee will not give rise to a fringe benefit.", "Date_of_Decision": "22 June 2006", "Year_of_Income": "Year ended 31 March 2007", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 subsection 136(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/10A", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deceased employee FBT employees Funeral expenses Fringe benefits Fringe benefits Tax", "Case_References": "", "Other_References": "Historic House Hansard Database 27 May 1987", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006159", "Unmatched_Content": "Updated to reflect change of ownership | Minor amendment to fourth paragraph to remove duplication. | Other minor grammatical amendments. | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/10A | Keywords Deceased employee FBT employees Funeral expenses Fringe benefits Fringe benefits Tax"}
{"ATO_ID_Number": "ATO ID 2004/487", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "In-house period residual fringe benefits: valuation of education provided by independent school - similar circumstances and identical terms and conditions", "Issue": "For the purposes of paragraph 49(a) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where a school provides education to an employee's child, can the taxable value of the in-house period residual fringe benefit be ascertained using the amount paid or payable by a person holding a school scholarship?", "Decision": "No. As the child of the employee is not a person who is a holder of a school scholarship, the identical overall benefit is not provided in similar circumstances and subject to identical terms and conditions (other than as to price) as the recipients overall benefit. Therefore, the amount paid or payable by a person who holds a school scholarship cannot be used as the basis for ascertaining the taxable value of the in-house period residual fringe benefit.", "Facts": "An independent secondary school carries on a business of providing education to children who are students at the school. The school generally charges a full annual tuition fee for education provided to a student by the school over the term of the school year (January to December). Over the term of the school year, the school provides education to a student who is a child of an employee of the school. The fee payable for this child is less than the full annual tuition fee. The school provides scholarship awards including scholarships that are based upon academic achievement and financial hardship criteria. Each school scholarship contains specific selection criteria. Each school scholarship has ongoing requirements in relation to maintaining the scholarship throughout the school year or school years. Different school scholarships provide different levels of fee remission. The child of the employee does not hold a school scholarship. The education provided to the child of the employee over the school year is an 'in-house period residual fringe benefit' as described in section 136(1) of the FBTAA. For the purposes of paragraph 49(a) of the FBTAA, when comparing the benefit provided to the child of the employee to the benefit provided to a person who holds a school scholarship, at or about the comparison time, the benefits were identical overall benefits. The benefit was not provided to the recipient under a salary packaging arrangement, and the benefit is not an airline transport fringe benefit. Therefore, paragraphs 49(aa) and (ab) of the FBTAA do not apply.", "Reasons_for_Decision": "Summary: Section 49 of the FBTAA contains the valuation rules which determine the taxable value of an in-house period residual fringe benefit. Paragraph 49(a) values an in-house period residual fringe benefit where an identical benefit is provided to a member of the public. Section 49 provides as follows: 49 Subject to this Part, the taxable value of an in-house period residual fringe benefit in relation to a year of tax is: (a) if neither paragraph (aa) or (ab) applies and, at or about the comparison time, identical overall benefits were provided by the provider: (i) in the ordinary course of business to members of the public under an arm's length transaction or arm's length transactions; and (ii) in similar circumstances and subject to identical terms and conditions (other than as to price) as those that applied in relation to the provision of the recipients overall benefit; Subparagraph 49(a)(ii) of the FBTAA requires that, at or about the comparison time, identical overall benefits be provided by the provider in similar circumstances and subject to identical terms and conditions (other than as to price), as those that applied in relation to the provision of the recipient's overall benefit. In order to satisfy subparagraph 49(a)(ii), the child of the employee would need to be a person who was the holder of a comparable school scholarship. That is, a school scholarship that was the same in all respects as that held by the recipient of the identical overall benefit. As the child of the employee is not a person who is a holder of a school scholarship, the fringe benefit is not provided 'in similar circumstances and subject to identical terms and conditions (other than as to price)' as required by subparagraph 49(a)(ii). Accordingly, the taxable value of the in-house period residual fringe benefit under paragraph 49(a) of the FBTAA cannot be based on the amount paid or payable by a person who holds a school scholarship.", "Date_of_Decision": "13 February 2004", "Year_of_Income": "Year ending 31 March 2004", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 section 49 paragraph 49(a) paragraph 49(aa) paragraph 49(ab) subparagraph 49(a)(ii) subsection 136(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Fringe benefits Residual fringe benefits In-house fringe benefit In-house residual fringe benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation and Employer Obligations", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004487", "Unmatched_Content": "Updated to correct business line | Include reference to paragraphs 49(aa) and (ab) of the FBTAA 1986 | Keywords Fringe benefits tax Fringe benefits Residual fringe benefits In-house fringe benefit In-house residual fringe benefits"}
{"ATO_ID_Number": "ATO ID 2001/313", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fringe benefits tax : exempt residual benefit", "Issue": "Whether the use of a bus hired by an employer for the sole purpose of transporting employees to and from work is an exempt residual benefit under subsection 47(6) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Decision": "Yes. The use of a bus hired by an employer for the sole purpose of transporting employees to and from work is an exempt residual benefit under subsection 47(6) of the FBTAA.", "Facts": "The employer hired a bus to transport employees between the town where they resided and the nearby mine site at the beginning and end of each shift. The employees paid a nominal amount per trip to the bus driver. The employer paid the bus company the balance of the cost of hiring the bus.", "Reasons_for_Decision": "Summary: Subsection 47(6) of the FBTAA provides that a residual benefit consisting of the \"provision or use of a motor vehicle\" will be an exempt benefit for certain motor vehicles where the private use of the motor vehicle is restricted to travel to and from work and other non-work-related use that is minor, infrequent and irregular. The subsection does not apply if the motor vehicle is a taxi let on hire to the provider, or a car (other than a panel van, utility truck or other commercial vehicle not designed to carry passengers). As the bus is neither a taxi or a car and was only used to take employees between home and work, the determinative question to be considered is whether the benefit consisted of the \"provision or use of a motor vehicle\". The word \"use\" has a broad meaning. It is not restricted to situations where the employee has control of a vehicle. While the facts that the bus carried a number of employees on a pre-organised route and at pre-organised times enable the benefit to be described as the provision of transport; they do not alter the fact that the benefit consisted of \"the use of a motor vehicle\". In National Australia Bank v. FCT (1993) 46 FCR 252; 93 ATC 4914; (1993) 26 ATR 503 Ryan J noted that the specific inclusion of \"a taxi let on hire to the provider\" in paragraph 47(6)(aa) of the FBTAA indicates that the legislature considered \"use of a motor vehicle\" could include a passenger's travel in a taxi. As a passenger's travel in a bus hired by the employer is comparable to a passenger's travel in a taxi, these comments support the conclusion that bus transportation can also involve the \"use of a motor vehicle\".", "Date_of_Decision": "10 August 2001", "Year_of_Income": "", "Legislative_References": "Fringe Benefits Tax Assessment Act 1986 Subsection 47(6) Paragraph 47(6)(aa)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits tax Residual fringe benefits Exempt benefits", "Case_References": "National Australia Bank v. FCT (1993) 46 FCR 252 93 ATC 4914 26 ATR 503", "Other_References": "", "Business_Line": "SEO", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001313", "Unmatched_Content": "Updated business line details | Amendments to correct a grammatical error and clarify content | Keywords Fringe benefits tax Residual fringe benefits Exempt benefits"}
{"ATO_ID_Number": "ATO ID 2005/243", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the timing of choice to treat a fund-raising event as an input taxed fund-raising event", "Issue": "Is the entity, an endorsed charitable institution, required to make its choice to treat supplies made in connection with a fund-raising event as input taxed under section 40-160 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) prior to making the first supply in connection with the event?", "Decision": "Yes, the entity is required to make its choice to treat supplies made in connection with a fund-raising event as input taxed under section 40-160 of the GST Act prior to making the first supply in connection with the event.", "Facts": "The entity is an endorsed charitable institution. The entity intends to conduct a fund-raising event. The event will satisfy the meaning of a fund-raising event for the purposes of section 40-165 of the GST Act. The entity will make supplies of goods and services in connection with the fund-raising event which it wishes to treat as input taxed.", "Reasons_for_Decision": "Summary: Section 40-160 of the GST Act enables a charitable institution, a trustee of a charitable fund, a gift-deductible entity and a government school to choose to treat all supplies it makes in connection with certain fund-raising events as input taxed. Where the entity does not make this choice, the supplies relating to the event will be treated under the general goods and services tax (GST) principles. Section 40-160 of the GST Act stipulates the conditions that must be satisfied for a supply made in connection with a fund-raising event to be treated as input taxed. One of the conditions that must be satisfied is that 'the supplier chooses to have all supplies that it makes in connection with the event treated as input taxed' (paragraph 40-160(1)(c) of the GST Act). The GST is a transaction based tax. The operation of the GST Act requires that the supplier determines whether there is a GST liability associated with the supply when that supply occurs. Therefore, where a choice is provided under the GST Act which affects the GST treatment of a particular supply, that choice must be made prior to making the supply. Consequently, the entity must choose to have all supplies that it makes in connection with the fund-raising event treated as input taxed prior to the first supply being made in connection with the event.", "Date_of_Decision": "12 April 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 19 section 40-160 paragraph 40-160(1)(c) section 40-165", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST non profit GST charities GST supplies & acquisitions GST supply Input taxed supplies", "Case_References": "", "Other_References": "Non-Profit Organisation and Fundraising Guide (NAT 13095 - 03.2005)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005243", "Unmatched_Content": "Keywords Goods and services tax GST non profit GST charities GST supplies & acquisitions GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2016/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration turnover threshold for a body corporate", "Issue": "Is a body corporate entity that will not make distributions to its members considered a non-profit body for the purposes of the registration turnover threshold under section 23-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, a body corporate entity is considered to be a non-profit body under section 23-15 of the GST Act, if it is clear from the objects, policy statements, history, intention, activities and proposed future directions of the body corporate that there will be no distributions to its members.", "Facts": "The entity is registered for GST and is a body corporate that administers, manages and controls the common property and assets of a residential unit complex in Australia (in the indirect tax zone as defined in section 195-1 of the GST Act) for the benefit of its members. The entity is obliged to make a variety of supplies in the course of administering the common property and assets (that is, maintenance and servicing) of the residential unit complex. Its members also contribute to an administration and/or sinking fund in order for the entity to perform its obligations and to carry out its activities. These supplies by the entity to its members satisfy the requirements of a taxable supply under section 9-5 of the GST Act (see also the decision of BJ McCabe SM in Re Body Corporate, Villa Edgewater CTS 23092 and Federal Commissioner of Taxation 2004 ATC 2056; (2004) 55 ATR 1162; [2004] AATA 425). Either:", "Reasons_for_Decision": "Summary: By virtue of section 23-15 of the GST Act and related GST Regulations, the registration turnover threshold applicable to the body corporate will be higher if it is a non-profit body. The GST registration turnover threshold for non-profit bodies was increased from $100,000 to $150,000, effective from 1 July 2007. Refer to section 23-15 of the GST Act and sub-regulation 23-15.02 of the A New Tax System (Goods and Services Tax) Regulations 1999. The Commissioner's view of when a society, association or club is not carried on for the purpose of profit or gain is explained in Taxation Ruling TR 97/22: Income tax: exempt sporting clubs (TR 97/22). Paragraph 22 of TR 97/22 relevantly provides: 22. We accept a club as being non-profit where, by operation of law (for example, a statute governing a club's activities) or by its constituent documents, the club is prevented from distributing its profits or assets among members while the club is functional and on its winding-up. The club's actions must, of course, be consistent with the prohibition. Further guidance for GST purposes is provided under paragraph 109 of Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance (GSTR 2012/2) which states that: 109. Where the law or the constituent documents do not prohibit distributions, whether the body is not carried on for purposes of profit or gain to the individual members is to be determined by reference to the surrounding circumstances. Factors that are considered relevant include whether distributions have been made, whether there is a stated or demonstrated policy to make or not to make such distributions and whether winding-up is contemplated. Where it is clear from the objects, policy statements, history, activities and proposed future directions of the body that there will be no distributions to members, we accept that the non-profit test has been satisfied. A body corporate entity is permitted by their governing state or territory legislation to make distributions to proprietors in certain circumstances. Generally, such legislative provisions cannot be excluded by a by-law of the body corporate. We consider that the circumstances in which profits will be available for distribution by a body corporate to its proprietors will be limited. A return of the members' own funds will not amount to a distribution of profits but a return of capital. The sinking fund and administration fund may include interest income or other income such as income from the rental of common property. The existence of interest income or income from rental or other activities in the various funds held by the body corporate will not of itself preclude the body corporate from being a non-profit body for the purposes of the GST Act. However, (contrary to the facts here) an intention to distribute the interest income or profits from rental or other activities, either while the body corporate is functional or upon its winding up, would disqualify the body corporate from being a non-profit body for the purposes of the GST Act. Here, the body corporate entity is considered to be a non-profit body that is carrying on an enterprise, and is required to be registered when it meets the registration turnover threshold of $150,000 for the purposes of section 23-15 of the GST Act. However, the body corporate may choose to be registered if its turnover is under the threshold of $150,000.", "Date_of_Decision": "13 May 2016", "Year_of_Income": "2009 onwards", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 23-15 subsection 23-15(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2012/2 | Taxation Ruling TR 97/22", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "Re Body Corporate, Villa Edgewater CTS 23092 and Federal Commissioner of Taxation 2004 ATC 2056 (2004) 55 ATR 1162 [2004] AATA 425", "Other_References": "Section 1.1.5 of the ATO's Property and Construction Industry Partnership - issues register.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20161", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2012/2 Taxation Ruling TR 97/22"}
{"ATO_ID_Number": "ATO ID 2010/215", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of accommodation: National Rental Affordability Scheme", "Issue": "Is the incentive received under the National Rental Affordability Scheme (NRAS) by an endorsed charitable institution consideration for the supply of accommodation for the purposes of determining whether the supply is GST-free under section 38-250 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No. The incentive received is not consideration for the supply of accommodation for the purposes of section 38-250 of the GST Act.", "Facts": "The entity is an endorsed charitable institution. The entity supplies accommodation in a dwelling for which it is eligible to receive a National Rental Incentive (Incentive). The NRAS is an Australian Government initiative to stimulate the supply of new affordable rental dwellings. The Incentive is only available in respect of a dwelling that has not previously been occupied as a residence or, if the dwelling was unfit for occupation but has since been made fit for occupation, has not been occupied as a dwelling since becoming fit for occupation. The legislative framework for the NRAS is provided through the National Rental Affordability Scheme Act 2008 (NRAS Act), the National Rental Affordability Scheme (Consequential Amendments Bill) Act 2008 and the National Rental Affordability Scheme Regulations (NRAS Regulations). The NRAS Act and NRAS Regulations are administered by the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA). Successful NRAS applicants are eligible to receive an Incentive for each approved dwelling which is rented to eligible low and moderate income households at a rate of at least 20 per cent below market rates. The income levels for tenants to be eligible tenants are specified in the NRAS Regulations. Subject to eligibility, the Incentive will be provided to approved participants each year for 10 years (Incentive Period). FaHCSIA seeks applications from potential participants for the allocation of Incentives under the Scheme and offers successful applicants allocations of Incentives in relation to the approved dwellings. Upon accepting an offer, an applicant becomes an approved participant in the Scheme. The approved participant must lodge a Statement of Compliance for each approved dwelling with FaHCSIA by 13 May of each year of the Incentive Period. The Statement of Compliance contains information about each approved dwelling for the preceding NRAS year. Using the information provided in the Statement of Compliance, FaHCSIA determines the extent to which an approved participant is entitled to receive an Incentive in relation to an approved dwelling for the preceding NRAS year. An approved participant for an approved dwelling that has satisfied the conditions of the allocation for the period is entitled to receive the full amount of the Incentive. Incentives are payable annually over a period of ten years. The amounts payable are $6,504 from the Commonwealth Government and $2,168 from the relevant State or Territory Government (the amounts are current for the 2009-10 year). The amounts payable are not affected by the value of the particular property, and nor are they affected by the amount of rent normally charged for the property, or the extent to which the market rent for the property is discounted (provided the minimum 20% discount requirement is satisfied). The amount of the Incentive to be paid for the period is proportionately reduced where: The entity has received an Incentive for the 2009-10 year. No reductions were applicable. The NRAS Act and NRAS Regulations do not prescribe how an approved dwelling is to be used at the end of the Incentive period.", "Reasons_for_Decision": "Summary: A supply of accommodation by an endorsed charitable institution is GST-free under section 38-250 of the GST Act where it is made for consideration which is less than either: The term 'consideration' is defined in section 195-1 of the GST Act. Relevantly subsection 9-15(1) provides that consideration includes: Subsection 9-15(2) of the GST Act provides that consideration includes payments made voluntarily and payments made by persons other than the recipient of the supply. Goods and Services Tax Ruling GSTR 2001/6: Goods and Services Tax : non-monetary consideration considers the question of what constitutes consideration under section 9-15 of the GST Act. Paragraph 50 of GSTR 2001/6 states: 50. Section 9-15 further provides that a payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply. Thus there must be a sufficient nexus between a particular payment and a particular supply for the payment to be consideration for that supply. Paragraphs 71 and 72 of GSTR 2001/6 consider the issue of whether a sufficient nexus exists between a payment and a supply. These paragraphs state: 71. In determining whether a sufficient nexus exists between supply and consideration, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description that parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made. 72. The test as to whether there is a sufficient nexus is an objective test. The motive of the supplier and the recipient also may be relevant in determining whether the supply was made for consideration, if a reasonable assessment of the evidence supports that motive. The legislative framework for the Scheme stipulates the conditions that must be satisfied in order for an approved participant to receive an Incentive. Included in these conditions is that the approved dwelling is rented to an eligible tenant and that the rent charged is at least 20% less than the market value rent for the dwelling. Where the dwelling is either not available to the Scheme for the full year or is vacant for more than the prescribed amount of time the approved participant may only be entitled to a proportion of the Incentive. These conditions would indicate that some connection exists between the Incentive and the use of an approved dwelling in supplying accommodation. However, in determining whether the Incentive is included as consideration for the supply of accommodation for the purposes of determining whether the supply is GST-free under section 38-250 of the GST Act, the degree of the connection that exists between the payment of the Incentive and the particular supply of accommodation must be considered. The Incentive will only be regarded as consideration for the supply of accommodation where a sufficient nexus exists between the Incentive and that particular supply. The following factors support a conclusion that the Incentive is not consideration for the supply of the accommodation. | Detailed Reasoning - The policy objective of the NRAS: The objective of the NRAS is to increase the number of affordable rental dwellings generally, rather than to supplement the rent payable by specific tenants for the provision of specific accommodation, | Detailed Reasoning - The fixed amount of the Incentive (subject to reductions in some circumstances): The amount of the Incentive bears no relationship to the value of the particular property concerned nor the amount of rental income foregone (other than the requirement to provide a minimum 20% discount on market value). | Detailed Reasoning - The full Incentive may be payable even where the property remains untenanted for part(s) of the year: Provided the property is made available to the Scheme for the entire year, the full Incentive is payable even where the property was untenanted for a period of time (provided it was not untenanted for a continuous period of 13 weeks or more during the relevant year, or for a continuous period of 13 weeks or more across two years). Accordingly, the Incentive is not paid in relation to the provision of accommodation to specific tenants (other than the requirement for the tenants to satisfy certain means tests) for specific periods. Rather it is paid in recognition of the entity's participation in the Scheme. The Incentive is not paid to, or on behalf of, a particular tenant for a particular supply of accommodation. It is provided to approved participants of the Scheme. The incentive is not dependent on the amount of rent charged nor the precise discount on market value provided (subject to a minimum 20% discount requirement). The nature of the NRAS Incentive can be contrasted with the rebate considered in TT-Line Company Pty Ltd v. Commissioner of Taxation [2009] FCAFC 178; 2009 ATC 20-157; (2009) 74 ATR 771 ( TT-Line ). In TT-Line , the issue considered was whether the payment of a rebate by the Commonwealth to the supplier of travel represented consideration for the supply of the travel. The aim of the scheme considered in TT-Line was to reduce the costs associated with the transport by sea of passenger vehicles across Bass Strait. Under the Scheme, the ferry operator would provide a rebate (in the form of a fare reduction on the scheduled fee) to passengers travelling to Tasmania across Bass Strait with their vehicles. The Commonwealth would, on a monthly basis, pay an amount to the ferry operator that precisely matched the total of rebates provided to passengers. In analysing the scheme, the judgment noted that the scheme was focused on providing a rebate to the passenger and not to the supplier of the travel. The consideration for the supply of the travel was the aggregate of the amount actually paid by the passenger and the amount paid by the Commonwealth to the ferry operator in recognition of the specific rebate given to the passenger. Accordingly, in TT-Line , the amounts paid by the Commonwealth precisely matched the amount of fare reduction offered to passengers. If no service was provided, no amount was payable. The NRAS Incentives on the other hand are not matched specifically to specific tenants for specific supplies of accommodation. In addition, the Incentive is payable even where the property remains untenanted for less than 13 weeks. Although the objectives of both the NRAS and the scheme considered in TT-Line are similar in that they are designed to reduce the cost of specific services provided to consumers, the variations in how the schemes are structured result in different outcomes for GST purposes. While the government payments in TT-Line were considered part of the consideration for the supply of the transport service, the NRAS Incentives do not have a sufficient connection with the supply of the rental accommodation to be regarded as consideration for the supply of the accommodation. | Detailed Reasoning - Conclusion: For the reasons explained above, the NRAS Incentives are not regarded as consideration for the supply of accommodation for the purposes of determining whether the supply is GST-free under section 38-250 of the GST Act.", "Date_of_Decision": "19 November 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-15 subsection 9-15(1) subsection 9-15(2) section 38-250 subparagraph 38-250(1)(b)(i) subparagraph 38-250(2)(b)(i) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6 | Goods and Services Tax Ruling GSTR 2000/11 | Goods and Services Tax Ruling GSTR 2012/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST consideration", "Case_References": "TT-Line Company Pty Ltd v Commissioner of Taxation [2009] FCAFC 178 2009 ATC 20-157 (2009) 74 ATR 771", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010215", "Unmatched_Content": "Reasons for decsion Legislative References Related Public Rulings (including Determinations) | Updated for the changes in the appropriations legislation which involved the repealing of 9-15(3) of the GST Act and replacing it with section 9-17 of the GST Act. This change was included in the \"Tax and Superannuation laws Amendment (2012 Measures No:1) Bill: 2012 | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 Goods and Services Tax Ruling GSTR 2000/11 Goods and Services Tax Ruling GSTR 2012/2 | Keywords Goods and services tax GST consideration"}
{"ATO_ID_Number": "ATO ID 2006/112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and annual conference held by a religious institution", "Issue": "Is the entity, a religious institution, making a GST-free supply of a religious service under section 38-220 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it holds an annual conference?", "Decision": "Yes. The entity is making a GST-free supply of a religious service under section 38-220 of the GST Act, when it holds an annual conference.", "Facts": "The entity is a religious institution and is registered for goods and services tax (GST). Religious teaching shapes the content and nature of the activities provided by the entity and includes presentations, talks and lectures by speakers credentialed in the entity's religion, worship, prayer and music. The activities are held weekly and referred to as 'weekly service'. The moral and ethical beliefs of the entity's religion are integral to the religious teaching. The weekly service is of two hours duration and is open to both the public and followers of the entity's religion who are formally members or participants in the religion. People socialise before and after they attend the weekly service. Occasionally people participate in a recreational game of sport after the weekly service. At the weekly service held on the entity's premises, CDs and DVDs with relevant religious content are regularly offered for sale. Light refreshments are also offered after the weekly service and these are sometimes for sale and sometimes free. Accommodation is not offered to or arranged for followers and the public who attend the weekly service, other than in special circumstances. The entity holds an annual conference for which the participants pay a registration fee to attend the conference. The annual conference comprises a daily program of service provided by the entity, including religious teaching in presentations by speakers credentialed in the entity's religion, worship, prayer and music. The annual conference and activity in the daily program is open to the public and followers of entity's religion. Most of the time at the annual conference is devoted to presentations and prayer. The daily programs are divided into afternoon and night sessions of two to three hours duration. Accommodation is not provided as part of the conference program and is not included in the registration fee. Attendees can choose to make accommodation arrangements through the entity. Social and recreational activities do not form part of the conference program. The entity sells food and drink at the annual conference, servicing meals and operating a canteen. Food and drink are not included in the registration fee. DVDs and CDs of the current and previous annual conferences, speakers and other similar recordings are sold at the annual conference. They are not included in the registration fee.", "Reasons_for_Decision": "Summary: Under section 38-220 of the GST Act, a supply is GST-free if it is a supply of service that: As the entity is a religious institution, paragraph 38-220(a) of the GST Act is satisfied. For the purposes of paragraph 38-220(b) of the GST Act, the annual conference must be integral to the practice of the entity's religion. This is a question of fact determined by comparing the content and nature of the activities in question with the content and nature of the usual and regularly provided activities in the practice of the entity's religion. The conference activities predominantly focus on the moral and ethical beliefs of the religious institution. These activities involve prayer and presentations, talks and lectures. In contrast to the weekly services, there are no social or recreational activities arranged as part of the conference. DVDs and CDs of the current and previous annual conferences, speakers and other similar recordings are sold at the conference. All of these activities are consistent with the entity's activities in the weekly service. As the sale of food and drink and arranging of accommodation are not included in the registration fee they do not, in these circumstances, exclude the other activities at the conference from being 'integral to the practice of that religion'. Overall, the conference activities are sufficiently similar in content and nature to the usual activities regularly provided in the practice of the entity's religion. Accordingly, the supply of the conference by the entity is a GST-free supply of service under section 38-220 of the GST Act.", "Date_of_Decision": "10 March 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-220 paragraph 38-220(a) paragraph 38-220(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST non profit GST religious services", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006112", "Unmatched_Content": "Keywords Goods and services tax GST non profit GST religious services"}
{"ATO_ID_Number": "ATO ID 2004/765", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and religious practitioner purchasing religious tracts and selling to church members", "Issue": "Under section 50-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the entity, a religious practitioner, purchases and then sells religious tracts to members of their religion, is that activity treated as an activity done by the religious institution of which the entity is a member?", "Decision": "Yes, under section 50-5 of the GST Act, the activity is treated as an activity done by the religious institution of which the entity is a member, rather than being done by the entity.", "Facts": "The entity is a religious practitioner. The entity purchases religious tracts, which set out the doctrines and practices of the entity's religion. The entity subsequently sells the religious tracts to members of the entity's religion. The entity sells the religious tracts during the course of conducting their activities as a religious practitioner and as a member of the religious institution. The entity does not carry out this activity as an employee or agent of the religious institution or any other entity.", "Reasons_for_Decision": "Summary: Section 50-5 of the GST Act provides that activities of a religious practitioner done in pursuit of their vocation as a religious practitioner and as a member of a religious institution will be treated, for the purposes of applying the GST law, as activities done by the religious institution and not by the religious practitioner, unless the religious practitioner is acting as an employee or agent of the religious institution or another entity. During the course of conducting their activities as a religious practitioner, the entity purchases religious tracts and sells them to members of their religion. The religious tracts set out the doctrines and practices of the entity's religion and the purchase and sale of the tracts forms part of the normal activities of the entity's vocation as a religious practitioner. In addition, the entity is a member of a religious institution and is not an employee or agent of the institution or another entity. Accordingly, under section 50-5 of the GST Act, the activity of purchasing religious tracts and then selling them to members of the entity's religion is treated as an activity done by the religious institution, of which the entity is a member, rather than being done by the entity.", "Date_of_Decision": "2 September 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 50-5 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/766 | ATO ID 2004/767", "Subject_References": "Goods and services tax GST special rules", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004765", "Unmatched_Content": "Keywords Goods and services tax GST special rules"}
{"ATO_ID_Number": "ATO ID 2004/766", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and religious practitioner writing a book about a particular aspect of the history of the religious institution of which they are a member and selling the book to the public", "Issue": "Under section 50-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the entity, a religious practitioner, writes a book about a particular aspect of the history of the religious institution of which they are a member, with the intention of selling the book to the general public, is that activity treated as an activity done by their religious institution?", "Decision": "No, under section 50-5 of the GST Act, the activity is not treated as an activity done by their religious institution. This is because the activity is not done in pursuit of the entity's vocation as a religious practitioner.", "Facts": "The entity is a religious practitioner. The entity writes a book about a particular aspect of the history of the religious institution, of which the entity is a member. The entity writes the book with the intention of selling the book widely to the general public.", "Reasons_for_Decision": "Summary: Section 50-5 of the GST Act provides that the activities of a religious practitioner done in pursuit of their vocation as a religious practitioner and as a member of a religious institution will be treated, for the purposes of applying the GST law, as activities done by the religious institution and not by the religious practitioner, unless the religious practitioner is acting as an employee or agent of the religious institution or another entity. The entity is a religious practitioner who writes a book about a particular aspect of the history of the religious institution, of which they are a member. Although the book is about a particular aspect of the history of the religious institution, the entity does not write the book just for members of that institution. Rather, the entity writes the book with the intention of selling it widely to the general public. While the entity is a religious practitioner of the religious institution, the writing and selling of the book is not an activity that forms part of the entity's normal activities as a religious practitioner and as such, is not an activity done in pursuit of the entity's vocation as a religious practitioner. Accordingly, under section 50-5 of the GST Act, the activity of writing a book about a particular aspect of the history of the religious institution, of which the entity is a member with the intention of selling to the general public, is an activity treated as being done by the entity and not the religious institution.", "Date_of_Decision": "2 September 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 50-5 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/765 | ATO ID 2004/767", "Subject_References": "Goods and services tax GST special rules", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004766", "Unmatched_Content": "Keywords Goods and services tax GST special rules"}
{"ATO_ID_Number": "ATO ID 2003/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and monetary and non-monetary consideration for a supply of membership", "Issue": "Does an interest-free loan form part of the consideration, as defined in section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for a taxable supply of club membership made by the entity, a sporting club, to the individual where the individual pays an annual subscription fee as well as provide an interest-free loan to the entity?", "Decision": "Yes, the interest-free loan forms part of the consideration, as defined in section 9-15 of the GST Act for a taxable supply of club membership made by the entity to the individual where the individual pays an annual subscription fee as well as provide an interest-free loan to the entity. The entity receives both monetary and non-monetary consideration for the taxable supply of membership. The monetary consideration is the annual subscription fee. The non-monetary consideration is the benefit derived by the entity when it has the use of the sum of money, interest free, during the period that the loan continues.", "Facts": "The entity is a sporting club that is registered for goods and services tax (GST). The entity makes a taxable supply of club membership to an individual under section 9-5 of the GST Act. The entity receives from the individual an annual subscription fee and a once-only entrance loan that is provided interest-free. The entrance loan is repayable 30 days after the individual ceases to be a member or dies. The annual subscription fee and the entrance loan are compulsory payments by the member. In return for making these payments, members can use all of the sporting facilities offered by the club without any further payments being required in that subscription year.", "Reasons_for_Decision": "Summary: Consideration is defined in section 195-1 of the GST Act to mean 'any consideration within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition'. Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with a supply of anything or in response to or for the inducement of a supply of anything. For the purposes of the GST Act it is clear that 'consideration' has a broad meaning. Consideration includes anything done or offered by way of reward or remuneration provided in connection, in response to or for the inducement of the supply. The definition includes payments as well as other acts or forbearances made in connection with the supply, which means that consideration may be monetary (consideration expressed as an amount of money) or non-monetary, or a combination of both. This reasoning is supported in Goods and Services Tax Ruling GSTR 2001/6 which states that where there is monetary consideration for a supply, it does not necessarily follow that there is no other consideration for that supply. If any non-monetary consideration is received for that supply, it must be added to the monetary amount to work out the total consideration for that supply. On the facts, the annual subscription fee that the entity receives is the monetary consideration for the taxable supply of the club membership. However, the entity also receives a once-only entrance loan in the form of an interest-free loan from the individual in connection with this taxable supply. Therefore, it is necessary to determine whether this interest-free loan is also consideration for the taxable supply of the club membership. In Customs and Excise Commissioners v Exeter Golf and Country Club Ltd (1979) 1 BVC 316; Exeter Golf and Country Club Ltd v Customs and Excise Commissioners (1981) 1 BVC 385 ( Exeter's case ) the Court considered whether, in addition to the payment of an annual subscription, the provision upon entrance of an interest-free loan as a condition of membership of a club, is part of the consideration for the supply by the club's facilities to its members. In concluding that the interest-free loan formed part of the consideration for the supply of the club's facilities to its members, the Court described the loan as being a transfer of money from 'A' to 'B' on the term that the borrower shall have the use of the money for the period that the loan has been agreed to be outstanding. The benefit that the borrower enjoyed when he borrowed the money from the lender was not the money, but the use of the money during the period that the loan continued. Applying the decision in Exeter's case , it is the benefit that the entity derives from the use of the money, interest-free, during the period that the loan continues, that forms part of the consideration for the taxable supply of membership and not the actual loan amount that it receives from the individual. As the benefit that the entity derives is not an amount expressed in the form of money, it is non-monetary consideration. Therefore, the interest-free loan provided by an individual to the entity forms part of the consideration received by the entity for a taxable supply of club membership by the entity to the individual under section 9-5 of the GST Act for which the individual also pays an annual membership fee. The entity receives both monetary and non-monetary consideration for the taxable supply of club membership. The monetary consideration is the annual subscription fee. The non-monetary consideration is the benefit derived by the entity by having the use of the sum of money, interest-free, during the period that the loan continues.", "Date_of_Decision": "4 December 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-15 subsection 9-15(1) section 9-17 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST consideration Taxable supply", "Case_References": "Customs and Excise Commissioners v Exeter Golf and Country Club Ltd (1979) 1 BVC 316", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20034", "Unmatched_Content": "Amended by inserting section 9-17. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 | Keywords Goods and services tax GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/189", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of student accommodation by a hostel whose primary purpose is to accommodate overseas students", "Issue": "Is the entity, a hostel that provides accommodation to students that undertake a secondary course at a separate institution, making a GST-free supply under subsection 38-105(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:", "Decision": "No, the entity is not making a GST-free supply under subsection 38-105(2) of the GST Act. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a hostel and its stated and demonstrated primary purpose is the provision of accommodation to students from outside of Australia. Occasionally it will supply accommodation to students from rural or remote locations in Australia. All students being accommodated are undertaking a secondary course at a separate institution. The entity is registered for goods and services tax and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply is GST-free under subsection 38-105(2) of the GST Act if: The entity is supplying accommodation in a hostel to students who are undertaking a secondary course. The remaining requirement in subsection 38-105(2) of the GST Act is that the hostel's primary purpose must be to provide accommodation for students from 'rural or remote locations'. The entity's primary purpose is the provision of accommodation to students from outside of Australia. Therefore, it must be determined whether overseas students are from 'rural or remote locations'. The GST legislation only applies to Australia and its States and Territories. Therefore, it excludes areas outside Australia unless specified. The term 'rural or remote locations' is not defined in the GST Act and as such is considered to be rural or remote locations in Australia only. Rural or remote locations in Australia are listed in the Rural, Remote and Metropolitan Areas Classification (RRMA) (see Note 1), which delineates Australia into a seven-scale classification system. Of the seven classifications, two are metropolitan, three are rural and two are remote. A student will be from a rural or remote location if they are from an area designated as R1, R2, R3, Rem 1 or Rem 2 as described in the following table. The entity's primary purpose is to provide accommodation to students from outside of Australia, not to provide accommodation to students from 'rural or remote locations'. Therefore, the entity does not satisfy the requirements in subsection 38-150(2) of the GST Act and is not making a GST-free supply even when made to students from rural or remote locations. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. The supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "27 June 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-105(2) Division 87", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/977", "Subject_References": "Goods and services tax GST free GST education Student accommodation", "Case_References": "", "Other_References": "Department of Primary Industries and Energy and the Department of Human Services 1994, Rural, Remote and Metropolitan Area Classification", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005189", "Unmatched_Content": "Other metropolitan centres with population >100,000 | Large rural centre with population 25,000-99,999 | Small rural centre with population 10,000-24,999 | Other rural areas with population <10,000 | Remote centres with population >5000 | Remote area with population <5001 | Keywords Goods and services tax GST free GST education Student accommodation"}
{"ATO_ID_Number": "ATO ID 2004/977", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and student accommodation in boarding schools", "Issue": "Is the entity, a boarding school, making a GST-free supply under section 38-105 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides accommodation to a student from a metropolitan location undertaking a primary course at a separate institution?", "Decision": "Yes, the entity is making a GST-free supply under section 38-105 of the GST Act when it provides accommodation to a student from a metropolitan location undertaking a primary course at a separate institution.", "Facts": "The entity is a boarding school. Its documented principal objectives are to provide education to primary students and to provide accommodation to students from rural or remote locations. Students from rural or remote locations are given preference when accommodation places are offered by the entity. However, where vacancies exist, students from metropolitan locations may be accommodated. The entity supplies supervised accommodation to a student from a metropolitan location who is undertaking a GST-free primary course supplied by another entity at a separate institution. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 38-105 of the GST Act sets out when a supply of student accommodation is GST-free. A supply is GST-free under subsection 38-105(1) of the GST Act if: Although the entity is supplying student accommodation to a student that is undertaking a primary course, the student is undertaking that primary course at a separate institution. The entity is not the supplier of that primary course. Therefore, the entity's supply of accommodation is not GST-free under subsection 38-105(1) of the GST Act. A supply of accommodation is GST-free under subsection 38-105(2) of the GST Act if: Therefore, in order for the entity to provide GST-free student accommodation under subsection 38-105(2) of the GST Act, these criteria must be satisfied: The entity is supplying supervised accommodation to a student that is undertaking a primary course. It does not matter that the entity is not the supplier of the primary course, as long as the student is undertaking a primary course. Therefore, the first criterion is satisfied. In relation to the second criterion, it must be determined whether the entity's boarding operation has similar characteristics to that of a 'hostel'. The word 'hostel' is defined in The Macquarie Dictionary , 1997, 3rd Edition, The Macquarie Library Pty Ltd, NSW as 1. a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses or the like. The entity supplies supervised accommodation, the characteristics of which are similar to those provided by a 'hostel'. Therefore, the entity's supervised accommodation will be treated as a hostel for the purposes of paragraph 38-105(2)(b) of the GST Act, and satisfies the second criterion. In order to satisfy the third criterion, the stated and demonstrated primary purpose, objective, goal, aim or mission of the entity's boarding operation must be to provide accommodation to students from rural or remote locations who are undertaking a primary, secondary or special education course. The documented principal objective of the entity's boarding operation is to provide accommodation to students from rural or remote locations. Further, as it gives preference to those students from rural or remote locations, the entity is demonstrating that its activities are consistent with its principal objective. The supply of accommodation to a student from a metropolitan location does not change the underlying primary purpose. Therefore, the third criterion is satisfied. As all three criteria are satisfied, the entity is making a GST-free supply under subsection 38-105(2) of the GST Act when it provides accommodation to a student from a metropolitan location undertaking a primary course at a separate institution. As the entity satisfies subsection 38-105(2) of the GST Act, the supply of accommodation by the entity to all students undertaking a primary course will be GST-free, whether or not the student is from a rural or remote location and whether or not the entity is making the supply of the primary course.", "Date_of_Decision": "15 December 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-105 subsection 38-105(1) subsection 38-105(2) paragraph 38-105(2)(b)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/30", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Student accommodation Student accommodation - non-tertiary", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd Edition, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004977", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/30 | Keywords Goods and services tax GST free GST education Student accommodation Student accommodation - non-tertiary"}
{"ATO_ID_Number": "ATO ID 2003/976", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and long-term accommodation supplied to staff in a school's boarding house", "Issue": "Does the entity, a boarding school that provides long-term accommodation to both staff and students in the same premises, include the number of students receiving GST-free student accommodation in calculating whether the premises used for staff accommodation are 'predominantly for long-term accommodation', as defined in subsection 87-20(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, the entity does include the number of students receiving GST-free student accommodation in calculating whether the premises used for staff accommodation are 'predominantly for long-term accommodation', as defined in subsection 87-20(3) of the GST Act.", "Facts": "The entity is a boarding school. The entity supplies its staff with long-term commercial accommodation in its boarding house. The entity also makes supplies of long-term accommodation to students through its boarding house. The supplies of student accommodation are GST-free under subsection 38-105 of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 87-20(3) of the GST Act provides that commercial residential premises are predominantly for long-term accommodation if at least 70 per cent of the individuals who are provided with commercial accommodation in the premises are provided with commercial accommodation as long-term accommodation. In determining whether premises are 'predominantly for long-term accommodation' an entity includes all individuals that are provided with commercial accommodation in those premises. Therefore, although the students are provided with GST-free student accommodation, if the supply satisfies the definition of 'commercial accommodation' the students are included in determining whether the premises are 'predominantly for long-term accommodation'. 'Commercial accommodation' is defined in section 87-15 of the GST Act to mean the right to occupy the whole or any part of commercial residential premises. Premises used to provide accommodation in connection with a school are commercial residential premises (paragraph (b) in the definition of commercial residential premises in section 195-1 of the GST Act). The entity, a school, is providing accommodation to its students in a boarding house. This accommodation is in connection with the school and as such, the entity's boarding house is commercial residential premises. As the entity is providing accommodation to the students in commercial residential premises, the entity's supply of accommodation to the students satisfies the definition of commercial accommodation. Therefore, the entity does include the number of students receiving GST-free student accommodation in calculating whether the premises used for staff accommodation are 'predominantly for long-term accommodation', as defined in subsection 87-20(3) of the GST Act. Note 1: If at least 70 per cent of the individuals (staff and students) provided with commercial accommodation in the boarding house are staying long-term, that is, 28 days or more (subsection 87-20(1) of the GST Act), the premises are 'predominantly for long-term accommodation' (subsection 87-20(3) of the GST Act). Where there are 2 or more individuals sharing a room who are charged separately, they are counted separately in calculating the 70 per cent figure (paragraph 154 of Goods and Services Tax Ruling GSTR 2000/20). Note 2: Where an entity provides long-term commercial accommodation in commercial residential premises that are predominantly for long term accommodation, the GST payable on the supply of that accommodation is calculated at a reduced rate in accordance with section 87-5 of the GST Act. Alternatively, section 87-25 of the GST Act provides that the supplier can choose not to apply Division 87 of the GST Act and, as a result, treat its supplies of long-term commercial accommodation as input taxed under paragraph 40-35(1)(b) of the GST Act. Note 3: A supply of accommodation to students in a boarding house can meet the requirements of both GST-free student accommodation and taxable commercial accommodation. Section 9-5 of the GST Act provides that a supply is not a taxable supply to the extent that it is GST-free or input taxed. Therefore, the student accommodation would be treated as a GST-free supply.", "Date_of_Decision": "30 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-105 paragraph 40-35(1)(b) Division 87 section 87-5 section 87-15 subsection 87-20(1) subsection 87-20(3) section 87-25 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST education Student accommodation GST long term accommodation GST commercial residential premises GST property & construction Student accommodation - non-tertiary", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003976", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax GST education Student accommodation GST long term accommodation GST commercial residential premises GST property & construction Student accommodation - non-tertiary"}
{"ATO_ID_Number": "ATO ID 2003/977", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and long-term accommodation supplied to staff in premises used to provide accommodation to tertiary students", "Issue": "Does the entity, a higher education institution that provides long-term accommodation to both staff and students in the same premises, include the number of students that it provides with accommodation in calculating whether the premises used for staff accommodation are 'predominantly for long-term accommodation', as defined in subsection 87-20(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entity does not include the number of students that it provides with accommodation in calculating whether the premises used for staff accommodation are 'predominantly for long-term accommodation', as defined in subsection 87-20(3) of the GST Act.", "Facts": "The entity is a higher education institution. The entity supplies its staff with long-term accommodation. The entity also makes supplies of accommodation to its students. The supplies of accommodation to staff and students are in the same premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 87-20(3) of the GST Act provides that commercial residential premises are 'predominantly for long-term accommodation' if at least 70 per cent of the individuals who are provided with commercial accommodation in the premises, are provided with such accommodation as long-term accommodation. In determining whether premises are 'predominantly for long-term accommodation' an entity includes all individuals that are provided with commercial accommodation in those premises. Therefore, if the supply to the students satisfies the definition of 'commercial accommodation', the students are included in determining whether the premises are 'predominantly for long-term accommodation'. 'Commercial accommodation' is defined in section 87-15 of the GST Act to mean the right to occupy the whole or part of 'commercial residential premises'. 'Commercial residential premises' is defined in section 195-1 of the GST Act. The definition specifically excludes premises to the extent that they are used to provide accommodation to students in connection with an education institution that is not a school. Section 195-1 of the GST Act defines a 'school' as an institution that supplies pre-school courses, primary courses, secondary courses or special education courses but not any other education course. Therefore, higher education institutions or technical and further education institutions are not schools for the purposes of the GST Act. The entity is a higher education institution and as such, is not a school. Therefore, to the extent that the entity uses its premises to provide accommodation to students, the premises are excluded from the definition of 'commercial residential premises' and the accommodation provided to students in those premises is not commercial accommodation. As the students are not provided with commercial accommodation in the entity's premises, they are not included in determining whether those premises are 'predominantly for long-term accommodation', as defined in subsection 87-20(3) of the GST Act. Note 1: If at least 70 per cent of the staff provided with commercial accommodation are staying long-term, that is, 28 days or more (subsection 87-20(1) of the GST Act), the premises used to provide that accommodation is 'predominantly for long-term accommodation' (subsection 87-20(3) of the GST Act). Where there are 2 or more individuals sharing a room who are charged separately, they are counted separately in calculating the 70 per cent figure (paragraph 154 of Goods and Services Tax Ruling GSTR 2000/20). Note 2: Where an entity provides long-term commercial accommodation in commercial residential premises that are predominantly for long term accommodation, the GST payable on the supply of that accommodation is calculated at a reduced rate in accordance with section 87-5 of the GST Act. Alternatively, section 87-25 of the GST Act provides that the supplier can choose not to apply Division 87 of the GST Act and, as a result, treat its supplies of long-term commercial accommodation as input taxed under paragraph 40-35(1)(b) of the GST Act.", "Date_of_Decision": "30 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 40-35(1)(b) Division 87 section 87-5 section 87-15 subsection 87-20(1) subsection 87-20(3) section 87-25 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Student accommodation GST residential rents GST long term accommodation GST commercial residential premises GST property & construction Student accommodation - tertiary", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003977", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax Student accommodation GST residential rents GST long term accommodation GST commercial residential premises GST property & construction Student accommodation - tertiary"}
{"ATO_ID_Number": "ATO ID 2002/969", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of accommodation in a university residential college to non-students", "Issue": "To the extent that the university residential college is used to provide accommodation to non-students, is it 'commercial residential premises' as defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, to the extent that the university residential college is used to provide accommodation to non-students, it is 'commercial residential premises' as defined in section 195-1 of the GST Act.", "Facts": "The university supplies accommodation in its residential college to both students and non-students. The accommodation is hostel-style accommodation (consisting of board and lodging).", "Reasons_for_Decision": "Summary: Under paragraphs (a) and (f) of the definition of 'commercial residential premises' in section 195-1 of the GST Act, a hotel, motel, inn, hostel, boarding house or anything similar to those types of premises is 'commercial residential premises' for the purposes of the GST Act. The terms 'hotels', 'motels', 'inns', 'hostels' and 'boarding houses' are not defined in the GST Act. Paragraph 75 of Goods and Services Tax Ruling GSTR 2000/20 provides that they take their ordinary or common meaning subject to context. The Macquarie Dictionary defines the term 'hostel': '1. A supervised place of accommodation, usually supplying board and lodging provided at a comparatively low cost, as one for students, nurses, or the like. 2. ... ' The accommodation in the university residential college is hostel-style accommodation (consisting of board and lodging). This meets the ordinary meaning of the term 'hostel'. Therefore, the university residential college is 'commercial residential premises' as defined in section 195-1 of the GST Act. However, section 195-1 of the GST Act excludes from the definition of 'commercial residential premises', premises to the extent that they are used to provide accommodation to students in connection with an education institution that is not a school. The university is an education institution and not a school. This means the exclusion in section 195-1 of the GST Act would apply to the extent that the accommodation in the university residential college is provided to students. In this case, the accommodation in the university residential college is supplied to non-students. This means that the exclusion does not apply. Therefore, to the extent that the university residential college is used to provide accommodation to non-students, it is 'commercial residential premises' as defined in section 195-1 of the GST Act.", "Date_of_Decision": "30 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/970 | ATO ID 2002/971", "Subject_References": "Goods and services tax GST education Student accommodation - tertiary GST property & construction GST commercial residential premises GST long term accommodation GST residential premises GST residential rents GST long term accommodation GST residential premises", "Case_References": "", "Other_References": "The Macquarie Dictionary,1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002969", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax GST education Student accommodation - tertiary GST property & construction GST commercial residential premises GST long term accommodation GST residential premises GST residential rents GST long term accommodation GST residential premises"}
{"ATO_ID_Number": "ATO ID 2002/970", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of long-term accommodation in a university residential college to non-students", "Issue": "Can the entity, a university, apply the concessional treatment in section 87-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies commercial accommodation in a university residential college to a non-student, for a continuous period of 28 days or more?", "Decision": "Yes, the entity can apply the concessional treatment in section 87-5 of the GST Act when it supplies commercial accommodation in a university residential college to a non-student, for a continuous period of 28 days or more.", "Facts": "The entity is a university. The entity is not a charitable institution or a gift-deductible entity. The entity supplies a non-student with commercial accommodation in its residential college for a continuous period of 28 days or more in the same premises. At least 70% of the non-students are provided with commercial accommodation in the residential college for periods of 28 days or more. To the extent that the university residential college is used to provide accommodation to non-students, it is 'commercial residential premises' as defined in section 195-1 of the GST Act commercial residential premises (see ATO ID 2002/969). The entity is registered for goods and services tax (GST). The supply of commercial accommodation in the university residential college satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 87-5 of the GST Act provides a concessional treatment where: Taxable supply of commercial accommodation A supply is a taxable supply where the elements of section 9-5 of the GST Act are met. The entity is registered for goods and services tax (GST). The supply of commercial accommodation in the university residential college satisfies the other positive limbs of section 9-5 of the GST Act. Therefore, the supply is a taxable supply. Commercial residential premises that are predominantly for long-term accommodation The term 'commercial residential premises' is defined in section 195-1. To the extent that the university residential college is used to provide accommodation to non-students, it is 'commercial residential premises' as defined in section 195-1 of the GST Act (see ATO ID 2002/969). Therefore, the supply of accommodation is provided in commercial residential premises. Under subsection 87-20(1) of the GST Act, long-term accommodation is provided to an individual if commercial accommodation is provided for a continuous period of 28 days or more, in the same premises. The entity supplies the non-student with commercial accommodation in its residential college for a continuous period of 28 days or more in the same premises. This means that the entity provides long-term accommodation to that student. Subsection 87-20(3) of the GST Act provides that commercial residential premises are predominantly for long-term accommodation if at least 70% of the individuals who are provided with commercial accommodation in the premises are provided with long-term accommodation. As at least 70% of the non-students are provided with accommodation in the university residential college for periods of 28 days or more, the premises provided to non-students are predominantly for long-term accommodation. Accommodation is provided to an individual as long-term accommodation The entity supplies the non-student with commercial accommodation in its residential college for a continuous period of 28 days or more. This means that the accommodation is provided to an individual as long-term accommodation. Accordingly, all the elements of section 87-5 of the GST Act are satisfied. Therefore, the entity can apply the concessional treatment available under that section, when it supplies commercial accommodation in a university residential college to a non-student for a continuous period of 28 days or more.", "Date_of_Decision": "30 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 40-35(1)(b) section 87-5 subsection 87-20(1) subsection 87-20(3) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/969 | ATO ID 2002/971", "Subject_References": "Goods and services tax GST education Student accommodation - tertiary GST property & construction GST commercial residential premises GST long term accommodation GST residential premises GST residential rents GST long term accommodation GST residential premises", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002970", "Unmatched_Content": "Keywords Goods and services tax GST education Student accommodation - tertiary GST property & construction GST commercial residential premises GST long term accommodation GST residential premises GST residential rents GST long term accommodation GST residential premises"}
{"ATO_ID_Number": "ATO ID 2002/971", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of accommodation in a university residential college to non-students for periods of less than 28 days", "Issue": "Is the entity, a university, making an input taxed supply of residential premises under section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a non-student with accommodation in a university residential college for a period of less than 28 days?", "Decision": "No, the entity is not making an input taxed supply under section 40-35 of the GST Act when it supplies a non-student with accommodation in a university residential college for a period of less than 28 days. The entity is making a supply of accommodation in commercial residential premises. The supply is a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a university. The entity is not a charitable institution or a gift-deductible entity. The entity supplies hostel-style accommodation (consisting of board and lodging) in a university residential college to both students and non-students. The entity supplies the non-student with accommodation in the residential college for a period of less than 28 days. To the extent that the university residential college is used to provide accommodation to non-students, it is 'commercial residential premises' (see ATO ID 2002/969). The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 40-35 of the GST Act: The entity supplies the non-student with accommodation in a university residential college. This supply is a supply of residential premises used predominantly for residential accommodation and is input taxed under section 40-35 of the GST Act unless the university residential college is 'commercial residential premises'. To the extent that the university residential college is used to provide accommodation to non-students, it is 'commercial residential premises' (see ATO ID 2002/969). As the entity is making the supply to a non-student, the premises are 'commercial residential premises'. Therefore, the supply is not input taxed under paragraph 40-35(1)(a) of the GST Act. Division 87 of the GST Act only applies to accommodation provided for a continuous period of 28 days or more. As the entity is supplying the non-student with accommodation for a period of less than 28 days, Division 87 does not apply to the supply. Therefore, the supply cannot be input taxed under paragraph 40-35(1)(b) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under any other provisions in Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a non-student with accommodation in a university residential college for a period of less than 28 days.", "Date_of_Decision": "30 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40 section 40-35 paragraph 40-35(1)(a) paragraph 40-35(1)(b) Division 87", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/969 | ATO ID 2002/970", "Subject_References": "Goods and services tax GST education Student accommodation - tertiary GST property & construction GST commercial residential premises GST long term accommodation GST residential premises GST residential rents GST long term accommodation GST residential premises", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002971", "Unmatched_Content": "Keywords Goods and services tax GST education Student accommodation - tertiary GST property & construction GST commercial residential premises GST long term accommodation GST residential premises GST residential rents GST long term accommodation GST residential premises"}
{"ATO_ID_Number": "ATO ID 2002/972", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of accommodation in residential premises to school staff", "Issue": "Is the entity, a school, making an input taxed supply under section 40-35 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies accommodation to a staff member in residential premises?", "Decision": "Yes, the entity is making an input taxed supply under section 40-35 of GST Act when it supplies accommodation to a staff member in residential premises.", "Facts": "The entity is a school as defined in section 195-1 of the GST Act. The entity is not a charitable institution, a trustee of a charitable fund, a gift deductible entity or a government school. The entity supplies accommodation to a staff member by way of lease or licence in residential premises. These residential premises provided are houses, units or flats. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 40-35 of the GST Act, a supply of residential premises (other than commercial residential premises), by way of lease, hire or licence, is input taxed to the extent that the premises are to be used predominantly for residential accommodation. The entity supplies the staff member with accommodation in residential premises by way of lease or licence. Therefore, the supply of the accommodation to the staff member is an input-taxed supply under paragraph 40-35(1)(a) of the GST Act unless the residential premises are commercial residential premises. Under section 195-1 of the GST, commercial residential premises includes: The entity is a school that supplies accommodation to a staff member in residential premises. Therefore, it is necessary to examine whether the accommodation is provided in commercial residential premises, as defined in paragraph (b) above. An important rule of statutory interpretation is that the words in the legislation must be read in their context ( K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 302). Broadly, commercial residential premises have a particular character that removes them from the class of residential premises (paragraph 10 of GSTR 2000/20). Therefore, an interpretation of paragraph (b) must be made in context by reading the definition of 'commercial residential premises' in its totality. As the premises described under paragraphs (a), (c), (d), (da) and (e) all have characteristics that exhibit a commercial flavour, paragraph (b) must be read in this context. This means that paragraph (b) also covers only those premises that exhibit characteristics that have a commercial flavour. In the context of paragraph (b), this limits its application to boarding houses in boarding schools and other similar premises. Residential premises, such as houses, units or flats, that the entity provides to the staff member do not exhibit characteristics that have a commercial flavour. Therefore, the residential premises that the entity provides to the staff member are not premises of the type covered by paragraph (b) of the definition of commercial residential premises in section 195-1 of the GST Act. The entity is supplying residential accommodation to the staff member in residential premises that are not commercial residential premises. Therefore, the entity is making an input taxed supply under section 40-35 of GST Act when it supplies accommodation to a staff member in residential premises.", "Date_of_Decision": "30 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(3) section 38-250 section 40-35 section 40-35(1)(a) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST education GST property & construction GST commercial residential premises GST residential premises GST supplies & acquisitions Taxable supply Input taxed supplies", "Case_References": "K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002972", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax GST education GST property & construction GST commercial residential premises GST residential premises GST supplies & acquisitions Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2003/776", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adult and community education courses", "Issue": "Is the entity, a not-for-profit body corporate, making a GST-free supply of an adult and community education (ACE) course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a course which is widely promoted in the community and is not subject to any prerequisite for entry?", "Decision": "Yes, the entity is making a GST-free supply of an ACE course under section 38-85 of the GST Act when it supplies a course which is widely promoted in the community and is not subject to any prerequisite for entry.", "Facts": "The entity is a not for profit body corporate that is registered for goods and services tax (GST). It has not been denied recognition as a provider of adult and community education courses by the relevant State or Territory authority. The entity supplies a training course that provides a basic level of skill in the particular area. The skills are relevant to a wide range of occupations or professions. The course is likely to add to employment related skills of the participant in accordance with Goods and Services Tax Ruling GSTR 2000/27. There is no prerequisite by way of a necessary level of knowledge or skill, or of completion of prior training, required by participants to undertake and gain benefit from the course. The course is widely advertised in local papers, posters or fliers distributed around the district and through a number of community organisations. Participants are enrolled on a 'first come - first served' basis. The course is presented by way of a series of lectures, tutorials, discussion groups and practical exercises undertaken by participants in groups. It is not presented by way of private tuition for individuals. The course is not presented by or on behalf of employers to their employees, nor by an organisation only to its members. The course is not of a kind mentioned in any other paragraph of the definition of education courses in section 195-1 of the GST Act.", "Reasons_for_Decision": "Summary: The supply of an 'education course' is GST-free under section 38-85 of the GST Act. 'Education course' is defined in section 195-1 of the GST Act to include, amongst other things, an ACE course. Section 195-1 of the GST Act and the Education Minister's Determination A New Tax System (Goods and Services Tax)(Adult and Community Education Courses) Determination 2000 (Education Minister's Determination) provide that an ACE course means a course of study or instruction that is: The entity's course is likely to add to the employment related skills of the participant (in accordance with GSTR 2000/27) and the entity is a not-for-profit body corporate that has not been denied recognition as a provider of adult and community education courses by the relevant State or Territory authority. Therefore, the first and third requirements of an ACE course are satisfied. The second requirement for an ACE course is that it must be of a kind determined by the Education Minister to be an ACE course. At subsection 5(2) of the Education Minister's Determination, the Education Minister states that an ACE course must: The course is not of a kind mentioned in any other paragraph of the definition of education courses in section 195-1 of the GST Act. The course is widely advertised in local papers, posters or fliers distributed around the district and through a number of community organisations. Entry to it is not restricted to any particular group or by way of the imposition of an entry prerequisite and participants are enrolled on a 'first come - first served' basis. Therefore, the course is available to adults in the general community. The course is not provided at the request of an employer to employees of that employer or by an organisation for its members and the course is not provided by way of private tuition. As such, the course satisfies the criteria of the Education Minister's Determination and the second requirement of an ACE course is satisfied. As the entity is a not-for-profit body corporate that supplies a course that is likely to add to the employment related skills of participants, and does so in circumstances that are in accordance with the Education Minister's Determination, the entity's supply is an ACE course that is GST-free under section 38-85 of the GST Act.", "Date_of_Decision": "18 February 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-85 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/27", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education courses Adult & community education course", "Case_References": "", "Other_References": "A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2000", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003776", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/27 | Keywords Goods and services tax GST free GST education Education courses Adult & community education course"}
{"ATO_ID_Number": "ATO ID 2003/1013", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adult and community education courses provided by a women's association to its members", "Issue": "Is the entity, a not-for-profit body corporate, making a GST-free supply of an adult and community education (ACE) course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a widely promoted course to its women members?", "Decision": "Yes, the entity is making a GST-free supply of an ACE course under section 38-85 of the GST Act when it supplies a widely promoted course to its women members.", "Facts": "The entity is a not-for-profit body corporate (incorporated association) that is registered for goods and services tax (GST). The association is set up to support the interests of women in industry. Membership is open to any woman of 18 years or over. The entity has not been denied recognition as a provider of ACE courses by the relevant State or Territory authority. The entity supplies a course that is likely to add to the employment related skills of participants in accordance with Goods and Services Tax Ruling GSTR 2000/27. There is no prerequisite by way of a necessary level of knowledge or skill, or of completion of prior training, required by participant to undertake and gain benefit from the course. The entity supplies the course to its members only. Any woman who wishes to take the course is required to join the association. The course is widely advertised in local papers, posters and fliers distributed around the district and through a number of community organisations. Participants are enrolled on a 'first come - first served' basis. The course is presented by way of a series of lectures, tutorials, discussion groups and practical exercises undertaken by participants in groups. The manner in which the course is presented is not by way of private tuition for individuals. The course is not provided by or at the request of an employer to employees of that employer. The course is not of a kind mentioned in any other paragraph of the definition of education courses in section 195-1 of the GST Act.", "Reasons_for_Decision": "Summary: The supply of an 'education course' is GST-free under section 38-85 of the GST Act. 'Education course' is defined in section 195-1 of the GST Act to include, amongst other things, an ACE course. Section 195-1 of the GST Act and the Education Minister's Determination A New Tax System (Goods and Services Tax)(Adult and Community Education Courses) Determination 2000 (Educations Minister's Determination) provides that an ACE course is a course of study or instruction that is: The entity supplies a course that is likely to add to the employment related skills of participants (in accordance with GSTR 2000/27) and the entity is a not-for-profit body corporate that has not been denied recognition as a provider of adult and community education courses by the relevant State or Territory authority. Therefore, the first and third requirements of an ACE course are satisfied. The second requirement for an ACE course is that it must be of a kind determined by the Education Minister to be an ACE course. At subsection 5(2) of the Education Minister's Determination, the Education Minister states that an ACE course must: The course is not of a kind mentioned in any other paragraph of the definition of education courses in section 195-1 of the GST Act. The entire membership of a particular gender constitutes a sufficiently large segment of the population to be considered 'adults in the general community'. In addition, the course has no prerequisite by way of a necessary level of knowledge or skill, or of completion of prior training and the method of promotion of the course lead to the conclusion that the course is available to adults in the general community. The course is not provided by or at the request of an employer to employees of that employer. The entity supplies the course to its members only and any woman who wishes to take the course is required to join the association. Membership is open to any woman of 18 years or over. As concluded above, the entire membership of a particular gender constitutes a sufficiently large segment of the population to be considered adults in the general community. As such, the course is a course provided by an organisation for which membership is open to adults in the general community. The course is presented by way of a series of lectures, tutorials, discussion groups and practical exercises undertaken by participants in groups. The manner in which the course is presented is not by way of private tuition for individuals. As such, the supply of the course by the entity satisfies the criteria of the Education Minister's Determination and the second requirement of an ACE course is satisfied. The entity is a not-for profit body corporate that supplies a course that is likely to add to the employment related skills of participants, and does so in circumstance that are in accordance with the Education Minister's Determination. Therefore, the entity is making a GST-free supply of an ACE course under section 38-85 of the GST Act when it supplies a widely promoted course to its women members.", "Date_of_Decision": "6 March 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-85 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/27", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education courses Adult & community education course", "Case_References": "", "Other_References": "A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2000", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031013", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/27 | Keywords Goods and services tax GST free GST education Education courses Adult & community education course"}
{"ATO_ID_Number": "ATO ID 2003/1097", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adult and community education courses provided to non-resident students", "Issue": "Is the entity, an Australian based campus of an overseas university, making a GST-free supply of an adult and community education (ACE) course under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a course that is only open to non-resident students with tertiary qualifications?", "Decision": "No, the entity is not making a GST-free supply of an ACE course under section 38-85 of the GST Act when it supplies a course that is only open to non-resident students with tertiary qualifications as the course is not available to adults in the general community. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is an Australian based campus of an overseas university. The entity is a not-for-profit body corporate and is registered for goods and services tax (GST). The entity supplies a course to non-resident students that are in Australia. The entity's course is designed to develop job skills and include, but are not limited to, courses in field research. The course application is made through the overseas university with registration and all fees paid to that university. The course is advertised off shore and the course is only available to non-resident applicants who have tertiary qualifications. Applicants are then selected for the course through a selection process. The entity is not a registered training organisation or a State or Territory accredited place of higher education. The entity's course is not of a kind mentioned in any other paragraph of the definition of an education course in section 195-1 of the GST Act. The supply satisfies the positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: The supply of an 'education course' is GST-free under section 38-85 of the GST Act. 'Education course' is defined in section 195-1 of the GST Act to include, amongst other things, an ACE course. Section 195-1 of the GST Act provides, amongst other things, that an ACE course must be of a kind determined by the Education Minister to be an adult and community education course. The Minister's determination is contained in A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2000 (the Determination). One of the requirements for a course to be of a kind described in the Determination is that the course must be available to adults in the general community. The entity supplies its course to non-resident students in Australia. The course application is made through the overseas university with registration and all fees paid to that university. The course is advertised off shore and the course is only available to non-resident applicants who have tertiary qualifications. Applicants are then selected for the course through a selection process. As the course is not available to Australian residents, and there are prerequisites for entry, the course is not available to adults in the general community. As such, the course is not of a kind specified in the Determination and is not an ACE course that is GST-free under section 38-85 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under any other provision in Division 38 of the GST Act, nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a course that is only open to non-resident students with tertiary qualifications.", "Date_of_Decision": "2 March 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-85 Division 40 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/27", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST education Education courses Adult & community education course Taxable supply", "Case_References": "", "Other_References": "A New Tax System (Goods and Services Tax) (Adult and Community Education Courses) Determination 2000", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031097", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/27 | Keywords Goods and services tax GST education Education courses Adult & community education course Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/248", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and English language courses for foreign nationals", "Issue": "Is the entity, a provider of English language courses, making a GST-free supply of an English language course for overseas students under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies courses to foreign nationals in Australia who enter Australia on a temporary visa that does not contain a 'no study' condition?", "Decision": "Yes, the entity is making a GST-free supply of an English language course for overseas students under section 38-85 of the GST Act when it supplies courses to foreign nationals in Australia who enter Australia on a temporary visa that does not contain a 'no study' condition.", "Facts": "The entity is an English language course provider. The entity provides English language courses that consist of classroom tuition, excursions and activities. The entity is accredited and listed on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). The entity only provides courses to foreign nationals who are in possession of a student visa or one of various temporary visas (that do not contain a 'no study' clause) issued by the Department of Immigration and Multicultural and Indigenous Affairs. These foreign nationals decide to seek formal English language instruction during their stay. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: The supply of an education course is GST-free under section 38-85 of the GST Act. The definition of an education course includes, amongst other things, 'an English language course for overseas students'. An English language course for overseas students is defined in section 195-1 of the GST Act as a course of study or education supplied to overseas students that: An overseas student in this context is a foreign national who holds a student visa or another form of temporary visa (excluding a visa that is subject to a 'no study' condition (condition 8207)) and who is enrolled to study in Australia. The entity only provides courses to foreign nationals whose temporary visas do not contain a 'no study' condition and therefore, the entity is supplying the courses to overseas students. The entity is supplying the overseas students with tuition in the English language and it is accredited and listed on the CRICOS. Therefore, the entity is making a GST-free supply of an English language course for overseas students under section 38-85 of the GST Act.", "Date_of_Decision": "30 August 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-85 section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2001/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education courses English language course for overseas students", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005248", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2001/1 | Keywords Goods and services tax GST free GST education Education courses English language course for overseas students"}
{"ATO_ID_Number": "ATO ID 2004/144", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of training for the purpose of licensing for a particular occupation", "Issue": "Is the entity, a trade association, making a GST-free supply under section 38-110 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an assessment of a person's knowledge and skills for the purpose of that person gaining a forklift license?", "Decision": "Yes, the entity is making a GST-free supply under section 38-110 of GST Act when it supplies an assessment of a person's knowledge and skills for the purpose of that person gaining a forklift license.", "Facts": "The entity is a trade association. The entity supplies an assessment of a person's knowledge and skills for the purpose of that person gaining a forklift license. The entity does not provide a training service. It is a requirement of the person's occupation to hold a forklift licence. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply is GST-free under subsection 38-110(1) of the GST Act when the supply is the assessment or issue of qualifications for the purpose of: Registration or licensing for a particular occupation refers to a situation where a person is required to hold a licence or be registered with an authority before they may practice or take up employment in a particular trade, profession or occupation, such as medical practitioners, plumbers, lawyers, electricians and operators of certain types of industrial equipment such as cranes and forklifts. The entity supplies an assessment of a person's knowledge and skills for the purpose of that person gaining a forklift license. It is a requirement of the person's occupation to hold a forklift licence. Therefore, the entity's supply is for the purpose of licensing for a particular occupation. As such, the supply satisfies the requirements in subsection 38-110(1) of the GST Act. However, subsection 38-110(2) of the GST Act provides that a supply is not GST-free under subsection 38-110(1) of the GST Act unless the supply is carried out by: The entity is a trade association. Therefore, the entity's supply is not excluded from being GST-free under subsection 38-110(2) of the GST Act. Accordingly, the entity is making a GST-free supply under section 38-110 of the GST Act when it supplies an assessment of a person's knowledge and skills for the purpose of that person gaining a forklift license.", "Date_of_Decision": "11 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-110 subsection 38-110(1) subsection 38-110(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Recognition of prior learning", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004144", "Unmatched_Content": "Keywords Goods and services tax GST free GST education Recognition of prior learning"}
{"ATO_ID_Number": "ATO ID 2004/155", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a package consisting of an education course and other supplies", "Issue": "Is the entity, a government school, making a mixed supply that must be valued under section 9-80 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies overseas students with a package consisting of an English language course, airport pick up and delivery, accommodation, food and social activities?", "Decision": "Yes, the entity is making a mixed supply that must be valued under section 9-80 of the GST Act. The supply of the English language course is GST-free under section 38-85 of the GST Act and the supplies of airport pick up and delivery, accommodation, food and social activities are taxable supplies under section 9-5 of the GST Act.", "Facts": "The entity is a government school. The entity supplies overseas students with a package consisting of an English language course, airport pickup and delivery, accommodation, food and a range of social activities. The English language course the entity supplies is designed to improve the student's written and verbal English communication skills. This course is accredited as an English Language Intensive Course for Overseas Students (ELICOS). The entity is accredited to provide this course by the State or Territory authority responsible for their accreditation and appears on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). The airport pickup and delivery is carried out by the entity's staff. The entity contracts with motels to provide the students with accommodation and food. The food is supplied and consumed on the motel's premises. The social activities organised by the entity are predominantly for recreational purposes. The activities are for the students' enjoyment and to provide them with opportunities to socialise. The activities are not a part of the course curriculum. The entity charges the students an all-inclusive fee for the package that covers all of the supplies. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 9-80(1) of the GST Act provides that if a supply is: the value of the taxable part must be apportioned. A supply that is partly taxable and partly GST-free or input taxed is referred to as mixed supply. Paragraph 19 of Goods and Services Tax Ruling GSTR 2001/8 provides that where a transaction comprises a bundle of features and acts, all the transaction's circumstances must be considered to ascertain its essential character. A mixed supply has separately identifiable parts that the GST Act treats as taxable and non-taxable, and these parts are not just integral, ancillary or incidental in relation to the whole supply. Whether a particular part is integral, ancillary or incidental in relation to the whole supply is a question of fact and degree. The entity's package consists of an English language course, airport pickup and delivery, accommodation, food and a range of social activities. Each of these parts are sufficient enough in their own right to be regarded as separately identifiable parts and not as integral, ancillary or incidental to each other. As such, the package is a mixed supply and it is necessary to identify which supplies in the package are taxable and non-taxable. Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity is registered for GST and its supply of the package satisfies the other positive limbs of section 9-5 of the GST Act. Therefore, the entity's supply of the package is a taxable supply unless the separate parts of the package are identified as GST-free or input taxed. Paragraph 38-85(a) of the GST Act provides that a supply is GST-free if the supply is an education course. Section 195-1 of the GST Act defines 'education course' to include, amongst other things, an English language course for overseas students. An 'English language course for overseas students' is defined in section 195-1 of the GST Act to mean a course of study or education supplied to overseas students that: The English language course the entity supplies is designed to improve the student's written and verbal English communication skills and is accredited as an ELICOS course. The entity is accredited to provide this course by the State or Territory authority responsible for their accreditation. Therefore, the entity's course satisfies the definition of an English language course and is GST-free under paragraph 38-85(a) of the GST Act. Paragraph 38-85(b) of the GST Act provides that a supply is GST-free if the supply is administrative services directly related to the supply of a GST-free education course, but only if they are provided by the supplier of the course. The airport pick up and delivery carried out by the entity's staff is a service provided to allow students to attend the course rather an administrative service directly related to its supply of the English language course. Therefore, the airport pick up and delivery is not GST-free under paragraph 38-85(b) of the GST Act. Section 38-105 of the GST Act provides that a supply is GST-free if it is a supply of student accommodation to students undertaking a primary course, a secondary course or a special education course. The entity's course is an English language course and therefore, the accommodation is not GST-free under section 38-105 of the GST Act. Under section 40-35 of the GST Act, a supply of premises that is by way of lease, hire or licence is input taxed if it is a supply of residential premises other than commercial residential premises. A motel is one of the classes of premises specified in the definition of commercial residential premises in section 195-1 of the GST Act. The entity's supply of accommodation in motels is not input taxed under section 40-35 of the GST Act. Section 38-2 of the GST Act provides that a supply of food is GST-free. However, under subsection 38-3(1) of the GST Act, the supply of food is not GST-free if it is for consumption on the premises from which it is supplied. The food is supplied and consumed on the motel's premises. Therefore, the supply of food is not GST-free under section 38-2 of the GST Act. Section 38-90 of the GST Act provides that a supply is GST-free if it is a supply of an excursion or field trip, but only if the excursion or field trip: The social activities are organised by the entity for the students' enjoyment and to provide them with opportunities to socialise. That is, they are predominately for recreational purposes. Further, they are not a part of the course curriculum. As such, the social activities do not have a direct relationship to the course curriculum. Therefore, the social activities are not GST-free under section 38-90 of the GST Act. The supply of the English language course included in the entity's package is GST-free, while the supplies of the airport pick up and delivery, accommodation, food and social activities are taxable supplies under section 9-5 of the GST Act. Therefore, the entity is making a mixed supply of a GST-free supply and taxable supplies that must be valued under section 9-80 of the GST Act when it supplies overseas students with the package. Note: Subsection 9-80(2) of the GST Act provides that the value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula: (Price of the supply * 10) / (10 + Taxable proportion) where: 'Taxable proportion' is the proportion of the value of the supply that represents the value of the taxable supply, as expressed as a number between '0' and '1'. GSTR 2001/8 provides guidance on the apportionment of consideration for a supply that includes taxable and non-taxable parts.", "Date_of_Decision": "6 March 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-80 subsection 9-80(1) subsection 9-80(2) section 38-2 subsection 38-3(1) paragraph 38-85(a) paragraph 38-85(b) section 38-90 section 38-105 section 40-35 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education course administrative services Education courses English language course for overseas students Education excursions GST Food Prepared foods GST property & construction GST commercial residential premises GST supplies & acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004155", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/8 | Keywords Goods and services tax GST free GST education Education course administrative services Education courses English language course for overseas students Education excursions GST Food Prepared foods GST property & construction GST commercial residential premises GST supplies & acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/438", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a religious pastoral ministry course", "Issue": "Is the entity, a religious institution, making a GST-free supply under section 38-220 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a course in religious pastoral ministry?", "Decision": "No, the entity is not making a GST-free supply under section 38-220 of the GST Act when it supplies a course in religious pastoral ministry. The supply of the religious pastoral ministry course is a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a religious institution. The entity supplies a course in religious pastoral ministry. The course is essential for someone wishing to become a chaplain at a religious institution. Completion of the course will entitle the student to a credit in theology studies at tertiary level. The supply of the course is not a GST-free supply of an education course under Subdivision 38-C of the GST Act. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 38-220 of the GST Act, a supply is GST-free if it is a supply of service that: The entity is a religious institution and therefore satisfies the first requirement. To satisfy the second requirement, a service must be integral to the practice of that religion. Examples of these services include religious services provided at ceremonies such as weddings, baptisms or funerals that are conducted in accordance with the canons of conduct for the members of that religious institution. The training of a student is not the supply of a religious service that is integral to the practice of that religion. Accordingly, the entity's supply does not meet all of the requirements of section 38-220 of the GST Act and the entity is not making a GST-free supply when it supplies a course in religious pastoral ministry. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a course in religious pastoral ministry.", "Date_of_Decision": "20 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-220 Division 38 Subdivision 38-C Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST non profit GST religious services GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004438", "Unmatched_Content": "Keywords Goods and services tax GST non profit GST religious services GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/1036", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and first aid courses", "Issue": "Is the entity, a supplier of first aid services and equipment that is an associate of a registered training organisation, making a GST-free supply under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a first aid course?", "Decision": "No, the entity is not making a GST-free supply under section 38-85 of the GST Act when it supplies a first aid course. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of first aid services and equipment. The entity is supplying a first aid course that comprises training in first aid, cardio-pulmonary resuscitation (CPR) and basic emergency care (basic life support). The course is an accredited vocational education and training course that is specified in the Education Minister's determination under subsection 5D(1) of the Student Assistance Act 1973 (The Student Assistance Act Determination (No. 1999/2) (SAA Determination). In the entity's State or Territory, a registered training organisation (RTO) is a body that is approved by the relevant authority to provide first aid courses. The entity is not an RTO, nor is it approved by the relevant authority as a first aid provider. The entity is an associate of an RTO. The RTO does not directly supervise the entity in running the course, nor does it provide any regular guidance, support or direction to the entity. The RTO is not involved in the enrolling of participants or any other administrative aspects of the course. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: The supply of an education course is GST-free under section 38-85 of the GST Act. An education course is defined in section 195-1 of the GST Act to include, amongst other things, a tertiary course and a first aid or life saving course. These are the only types of education course from the definition in section 195-1 of the GST Act that could be relevant to the entity's situation. To be GST-free as a tertiary course, as defined in section 195-1 of the GST Act, a course must be specified in the SAA Determination. The SAA Determination provides that an accredited vocational education and training course specified in the SAA Determination that is conducted by an RTO is a tertiary course. The entity is supplying an accredited vocational education and training course that is specified in the SAA Determination. However, the entity itself is not an RTO, it is the associate of an RTO. For the purpose of the SAA Determination, it is not sufficient that the supply is made by the associate of an RTO, the course supplier itself must be the RTO. Were the entity acting as agent for the RTO, then the RTO would be making the supply of the course, and the requirement in the SAA Determination would be satisfied. As the entity supplies the course in its own right and has complete control and administration of the course, the relationship between the entity and the RTO does not amount to an agency agreement. The entity has little to no contact, support or direction from the RTO. Therefore, as the entity is the supplier of the course and it is not an RTO nor is it acting as agent for the RTO, the course does not satisfy the definition of a tertiary course in section 195-1 of the GST Act. To be GST-free as a first aid or life saving course, as defined in section 195-1 of the GST Act, a course must satisfy both of the following requirements. First requirement Under section 195-1 of the GST Act, a first aid or life saving course must be one that principally trains individuals in one or more of the following: The entity is supplying a first aid course that comprises training in first aid, cardio-pulmonary resuscitation (CPR) and basic emergency care (basic life support). Therefore, the entity's course satisfies the first requirement of the definition of first aid or life saving course in section 195-1 of the GST Act. Second requirement The first aid or life saving course must be provided by a body that is: In the entity's State or Territory, a first aid course satisfies the second requirement of the definition in section 195-1 of the GST Act if it is provided by an RTO. The entity is not an RTO, nor is it registered or approved as a first aid course provider by the relevant State or Territory body or authority. Moreover, as discussed above, the entity is not acting as agent for its associated RTO. As the course does not satisfy the second requirement of the definition, it does not amount to a first aid or life saving course as defined in section 195-1 of the GST Act. Accordingly, the entity is not making a supply of a tertiary course or a first aid or life saving course, nor is it making a supply of any other type of education course as defined in section 195-1 of the GST Act. Therefore, the entity is not making a GST-free supply under section 38-85 of the GST Act when it supplies a first aid course. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under any other provision in Division 38 of the GST Act, nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a first aid course.", "Date_of_Decision": "1 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-85 Division 40 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education courses First aid or life saving course GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Student Assistance Act Determination (No. 1999/2)(SAA Determination)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031036", "Unmatched_Content": "Keywords Goods and services tax GST free GST education Education courses First aid or life saving course GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/217", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of bus service to transport students to and from school", "Issue": "Is the entity, an accredited secondary school, making a GST-free supply under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a bus service to transport students to and from school and does not charge an additional fee to the students for the provision of the service?", "Decision": "Yes, the entity is making a GST-free supply under section 38-85 of the GST Act when it supplies a bus service to transport students to and from school and does not charge an additional fee to the students for the provision of the service.", "Facts": "The entity is a secondary school. The entity provides an accredited secondary course that is GST-free under section 38-85 of the GST Act. The school uses a global budget to determine an identical fee for each student. The fee paid includes access to a bus service, regardless of whether a student makes use of the service. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: An education course is GST-free under section 38-85 of the GST Act. The entity provides an accredited secondary course that is GST-free under section 38-85 of the GST Act. Some supplies that relate to an education course are also GST-free. The entity's supply of the bus service is a supply that may relate to its supply of a GST-free education course. Goods and Services Tax Ruling, GSTR 2000/30, sets out those supplies that relate to a GST-free education course. Paragraph 30 of GSTR 2000/30 provides that a fee for the supply of an education course that consists of tuition, facilities and other curriculum related activities, associated with a GST-free course, is GST-free. Paragraphs 34 and 35 of GSTR 2000/30 provide that the supply of facilities is part of the supply of an education course and includes such items as the provision and maintenance of buildings, grounds, sporting and musical equipment and other curriculum related items. The supply of facilities will extend to the provision of a bus service, where the service is made available to all students who have paid the same fee for the supply of the education course, regardless of whether they use the bus service or not. The entity uses a global budget and charges each student the same amount for their school fees. The entity does not charge a separate fee for the supply of the bus service. The cost of providing this bus service is one of the outlays that the entity factors into the calculation of the school fees. As such, the entity's supply of the bus service is the supply of a facility that is included in the entity's fee for the supply of an education course. Therefore, the entity is making a GST-free supply under section 38-85 of the GST Act when it supplies a bus service to transport students to and from school.", "Date_of_Decision": "22 October 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-85", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/30", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education courses Secondary course", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004217", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/30 | Keywords Goods and services tax GST free GST education Education courses Secondary course"}
{"ATO_ID_Number": "ATO ID 2002/1075", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and general research services supplied by an education institution", "Issue": "Is the entity, a supplier of GST-free education courses, making a GST-free supply under section 38-85 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a separate supply of general research services to a student undertaking a GST-free course?", "Decision": "No, the entity is not making a GST-free supply under section 38-85 of the GST Act when it makes a separate supply of general research services to a student undertaking a GST-free course. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of GST-free education courses. The courses are GST-free under paragraph 38-85(a) of the GST Act. The entity makes a separate supply of general research services to a student undertaking a GST-free course. The general research service involves undertaking research on behalf of the student, retrieving relevant information and providing it to the student. This service is a general research facility and the information retrieved is not in relation to the student's enrolment. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 38-85 provides that a supply is GST-free if it is a supply of: Although the supply of the entity's education courses is GST-free under paragraph 38-85(a) of the GST Act, the supply of the general research services is separate from the supply of the GST-free course. Therefore, the general research services are not GST-free under paragraph 38-85(a) of the GST Act as part of the education course. Paragraph 38-85(b) of the GST Act provides that the supply of administrative services directly related to the supply of a GST-free education course is GST-free, if supplied by the supplier of the course. The term 'administrative service' is not defined in the GST Act and therefore, takes on its ordinary meaning. The Macquarie Dictionary (1997) defines 'administrative' as 'relating to administration' and 'administration' as 'the management or direction of any office or employment'. Therefore, for a service to be an administrative service for the purposes of paragraph 38-85(b) of the GST Act, the service must pertain to the management or direction of an education course. The entity is supplying a general research service. This service is general in nature and does not pertain to the management or direction of the entity's education courses. Therefore, the entity's general research service is not an administrative service and the supply of the service is not GST-free under paragraph 38-85(b) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under any other provision in Division 38 of the GST Act, nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it makes a separate supply of general research services to students undertaking the GST-free education courses.", "Date_of_Decision": "17 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-85 paragraph 38-85(a) paragraph 38-85(b) Division 40", "Related_Public_Rulings_and_Determinations": "GSTR 2000/30 | GSTR 2001/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Education course administrative services GST supplies and acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021075", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2000/30 GSTR 2001/1 | Keywords Goods and services tax GST free GST education Education course administrative services GST supplies and acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/199", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and food for students on field trips", "Issue": "Is the entity, an organisation that supplies an outdoor education field trip to students, making a GST-free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies food to students in the course of that field trip?", "Decision": "No, the entity is not making a GST-free supply under Division 38 of the GST Act when it supplies food to students in the course of an outdoor education field trip. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is an organisation that supplies an outdoor education field trip to students as part of the students' curriculum. During the course of the field trip, students camp in the bush. At the campsite, the entity supplies the students with food that is also consumed at the campsite. The food provided includes food such as fresh fruit, salami, sliced ham and fresh bread. On most occasions, students prepare the food themselves; but at times, the camp staff prepares a hot meal for the students. The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Paragraph 38-90(2)(b) of the GST Act provides that any supply of food as part of an excursion or field trip is not GST-free under section 38-90 of the GST Act. However, the supply of food to students in the course of a field trip may be GST-free under the food provisions contained in Subdivision 38-A of the GST Act. Under section 38-2 of the GST Act, a supply of 'food' is GST-free provided that it does not come within any of the exclusions in section 38-3 of the GST Act. 'Food' is defined in paragraph 38-4(1)(a) of the GST Act to include 'food for human consumption (whether or not requiring processing or treatment)'. In this case, the food supplied to the students is food for human consumption. However, a supply of food is not GST-free if it is 'food for consumption on the premises from which it is supplied' (paragraph 38-3(1)(a) of the GST Act). 'Premises' is defined in section 38-5 of GST Act and in Goods and Services Tax Determination GSTD 2000/4 to include: • the place where the supply takes place; or • the grounds surrounding a café or public house, or other outlet for the supply; or • the whole of any enclosed space such as a football ground, garden, showground, amusement park or similar area where there is a clear boundary or limit. In this case, food is supplied to the students at the campsite, for their consumption at the campsite. Therefore, the food is being supplied for consumption at 'the place where the supply takes place'. As such, the campsite is considered to be 'premises' for the purposes of paragraph 38-5(a) of the GST Act. Therefore, the supply is a supply of 'food for consumption on the premises from which it is supplied'. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the supply will be a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "31 October 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Subdivision 38-A section 38-2 section 38-3 paragraph 38-3(1)(a) paragraph 38-4(1)(a) section 38-5 paragraph 38-5(a) section 38-90 paragraph 38-90(2)(b) Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Determination GSTD 2000/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax GST free GST education Education excursions GST food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001199", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Determination GSTD 2000/4 | Keywords Goods and Services Tax GST free GST education Education excursions GST food"}
{"ATO_ID_Number": "ATO ID 2004/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and assessment of prior learning for the purpose gaining a promotion", "Issue": "Is the entity, a trade association, making a GST-free supply under section 38-110 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it assesses the qualifications of a person for the purpose of that person gaining a promotion?", "Decision": "Yes, the entity is making a GST-free supply under section 38-110 of the GST Act when it assesses the qualifications of a person for the purpose of that person gaining a promotion.", "Facts": "The entity is a trade association. The entity supplies a service of assessing the qualifications held by a person for the purpose of that person gaining a promotion. The entity conducts a test of that person's knowledge and skills and may also issue a qualification based on that test. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply is GST-free under subsection 38-110(1) of the GST Act when the supply is the assessment or issue of qualifications for the purpose of: An assessment or issue of qualifications for the purpose of employment encompasses assessment or issue of qualifications for any aspect of employment, including obtaining, retaining, advancement within or changing employment. The entity's supply of assessing the qualifications of a person is for the purpose of that person gaining a promotion. A promotion is advancement within employment and, as such, the entity is making an assessment that is for a purpose of employment. Therefore, the entity's supply satisfies the requirements in subsection 38-110(1) of the GST Act. However, subsection 38-110(2) of the GST Act provides that a supply is not GST-free under subsection 38-110(1) of the GST Act unless the supply is carried out by: The entity is a trade association. Therefore, the entity's supply is not excluded from being GST-free. Accordingly, the entity is making a GST-free supply under section 38-110 of the GST Act when it assesses the qualifications of a person for the purpose of that person getting a promotion.", "Date_of_Decision": "14 January 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-110 subsection 38-110(1) subsection 38-110(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Recognition of prior learning", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200445", "Unmatched_Content": "Keywords Goods and services tax GST free GST education Recognition of prior learning"}
{"ATO_ID_Number": "ATO ID 2004/119", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and assessment of prior learning for access to informal on-the-job training", "Issue": "Is the entity, a training organisation, making a GST-free supply under section 38-110 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it assesses the qualifications of a person for the purpose of determining the type of informal on-the-job training that person will require?", "Decision": "Yes, the entity is making a GST-free supply under section 38-110 of the GST Act when it assesses the qualifications of a person for the purpose of determining the type of informal on-the-job training that person will require.", "Facts": "The entity is a training organisation. The entity provides assessing services. The entity is registered by a training recognition authority of a State or Territory in accordance with the Australian Recognition Framework to provide skill recognition (assessment only) services. The entity supplies a service of either assessing the qualifications held by a person or conducting a test to assess a person's knowledge and skills. The assessment is for the purpose of determining what informal on-the-job training that person will require. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply is GST-free under subsection 38-110(1) of the GST Act when the supply is the assessment or issue of qualifications for the purpose of: The entity supplies a service of either assessing the qualifications held by a person or conducting a test to assess a person's knowledge and skills. The entity's assessment is for the purpose of determining the type of informal on-the-job training that person will require. The GST Act does not define the word 'education', therefore it will take its ordinary meaning. The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'education': 1. the act or process of educating; the imparting or acquisition of knowledge, skill, etc.; systematic instruction or training. 2. the result produced by instruction, training, or study... Informal on the job training involves the imparting or acquisition of knowledge and skill and accordingly comes within the meaning of education. As such, the entity's supply is for the purpose of access to education and the supply satisfies the requirements in subsection 38-110(1) of the GST Act. However, subsection 38-110(2) of the GST Act provides that a supply is not GST-free under subsection 38-110(1) of the GST Act unless the supply is carried out by: The entity is registered by a training recognition authority of a State or Territory in accordance with the Australian Recognition Framework to provide skill recognition (assessment only) services. Therefore, the entity's supply is not excluded from being GST-free under subsection 38-110(2) of the GST Act. Accordingly, the entity is making a GST-free supply under section 38-110 of the GST Act when it assesses the qualifications of a person for the purpose of determining the type of informal on-the-job training that person will require. Note: A list of the State or Territory training recognition authorities is available from the National Training Information Service (NTIS) website.", "Date_of_Decision": "11 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-110 subsection 38-110(1) subsection 38-110(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Recognition of prior learning", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004119", "Unmatched_Content": "Keywords Goods and services tax GST free GST education Recognition of prior learning"}
{"ATO_ID_Number": "ATO ID 2004/145", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and assessment of prior learning carried out by a contracted entity", "Issue": "Is the entity, a trade association, making a GST-free supply under section 38-110 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of assessing a person's qualifications, for the purpose of that person gaining membership to the entity, where the assessment is actually carried out by a contracted education institution?", "Decision": "Yes, the entity is making a GST-free supply under section 38-110 of GST Act when it makes a supply of assessing a person's qualifications, for the purpose of that person gaining membership to the entity, where the assessment is actually carried out by a contracted education institution.", "Facts": "The entity is a trade association. The entity makes a supply of assessing a person's qualifications. The purpose of the assessment is for the person to gain membership to the entity. The entity engages an education institution to carry out the assessment. The education institution carries out the assessment under authority granted by the entity. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply is GST-free under subsection 38-110(1) of the GST Act when the supply is the assessment or issue of qualifications for the purpose of: The entity supplies a service of assessing a person's qualifications. The entity's assessment is for the purpose of the person gaining membership to the entity, which is a trade association. As such, the supply satisfies the requirements in subsection 38-110(1) of the GST Act. However, subsection 38-110(2) of the GST Act provides that a supply is not GST-free under subsection 38-110(1) of the GST Act unless the supply is carried out by: 'Carried out by' means that the assessment must be conducted by a body that is specified in subsection 38-110(2) of the GST Act. Where the assessment is conducted by some other entity acting under a licence, franchise or authority granted by the body, and that other entity is not one of the kinds of bodies specified in subsection 38-110(2) of the GST Act, then the supply will be excluded from being GST-free. The education institution carries out the assessment under authority granted by the entity. An education institution is one of the kinds of bodies specified in subsection 38-110(2) of the GST Act. As such the supply is not excluded from being GST-free by subsection 38-110(2) of the GST Act. There are 2 supplies being made in these circumstances: (1) the education institution supplies assessment services to the trade association; and (2) the trade association supplies assessment services to the potential member. As the education institution and the trade association are both kinds of bodies specified in subsection 38-110(2) of the GST Act, each supply is GST-free as both supplies are not excluded from being GST-free by subsection 38-110(2) of the GST Act. Accordingly, the entity is making a GST-free supply under section 38-110 of the GST Act when it makes a supply of assessing a person's qualifications, for the purpose of that person gaining membership to the entity, where the assessment is actually carried out by a contracted education institution.", "Date_of_Decision": "11 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-110 subsection 38-110(1) subsection 38-110(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Recognition of prior learning", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004145", "Unmatched_Content": "Keywords Goods and services tax GST free GST education Recognition of prior learning"}
{"ATO_ID_Number": "ATO ID 2003/1185", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and assessment of prior learning for changing membership status within a professional association", "Issue": "Is the entity, a professional association, making a GST-free supply under section 38-110 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it assesses the qualifications of one of its members for the purpose of that member changing their membership status from an associate to a fellow?", "Decision": "Yes, the entity is making a GST-free supply under section 38-110 of the GST Act when it assesses the qualifications of one of its members for the purpose of that member changing their membership status from an associate to a fellow.", "Facts": "The entity is a professional association. The entity supplies a service of assessing the qualifications held by a member for the purpose of that member changing their membership status from an associate to a fellow. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply is GST-free under subsection 38-110(1) of the GST Act when the supply is the assessment or issue of qualifications for the purpose of: The entity supplies a service of assessing the qualifications held by a member. The entity's assessment is for the purpose of that member changing their membership from an associate to a fellow. For the purposes of subsection 38-110(1) of the GST Act, membership of a professional or trade association relates not only to the initial entry into the ranks of that body but to any upgrade or rise in status of the class of membership. As such, the purpose of the entity's supply is for membership of a professional association and the supply satisfies the requirements in subsection 38-110(1) of the GST Act. However, subsection 38-110(2) of the GST Act provides that a supply is not GST-free under subsection 38-110(1) of the GST Act unless the supply is carried out by: The entity is a professional association. Therefore, the entity's supply is not excluded from being GST-free. Accordingly, the entity is making a GST-free supply under section 38-110 of the GST Act when it assesses the qualifications of one of its members for the purpose of that member changing their membership status from an associate to a fellow.", "Date_of_Decision": "11 November 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-110 subsection 38-110(1) subsection 38-110(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST education Recognition of prior learning", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031185", "Unmatched_Content": "Keywords Goods and services tax GST free GST education Recognition of prior learning"}
{"ATO_ID_Number": "ATO ID 2013/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amount of input tax credits relating to employee reimbursements", "Issue": "Is the entity entitled, under section 111-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to an amount of input tax credit (ITC) equal to 1/11 of the amount of reimbursement the entity makes to an employee if the reimbursement is consideration for a partly creditable acquisition?", "Decision": "No. The amount of the ITC for a creditable acquisition under section 111-10 of the GST Act is reduced under section 11-30 of the GST Act if the acquisition is partly creditable.", "Facts": "The entity is a GST registered financial institution that exceeds the financial acquisitions threshold for the purposes of Division 189 of the GST Act. An employee of the entity has incurred an expense that is related directly to his activities as the entity's employee. The expense was for an acquisition that was a taxable supply to the employee. The entity reimburses the employee for the expense incurred. The reimbursement satisfies subsection 111-5(1) of the GST Act and is taken to be consideration for an acquisition made by the entity from the employee. The fact that the acquisition the entity is taken to have made from the employee is not a taxable supply to the entity does not prevent the acquisition being a creditable acquisition under section 11-5 of the GST Act because of the application of subsection 111-5 (2) of the GST Act. The acquisition taken to have been made by the entity is not precluded from being a creditable acquisition under subsection 111-5(3) of the GST Act. The entity's acquisition is only partly for a creditable purpose under section 11-15 of the GST Act as the acquisition partly relates to the making of input taxed supplies by the entity.", "Reasons_for_Decision": "Summary: Section 111-10 of the GST Act sets out how an amount of ITC is worked out for a creditable acquisition if the consideration for the acquisition is a reimbursement to which section 111-5 of the GST Act applies: On the other hand, section 11-30 of the GST Act sets out how an amount of ITC is worked out for an acquisition that is partly creditable. Paragraph 11-30(1)(a) of the GST Act provides that an acquisition is partly creditable if it is made only partly for a 'creditable purpose' as defined in section 11-15 of the GST Act. This definition of 'creditable purpose' is not overridden by Division 111 of the GST Act. Therefore, to the extent that the acquisition for the reimbursement relates to making input taxed supplies, the acquisition is not creditable. While section 111-10 of the GST Act has effect despite section 11-25 of the GST Act, there is nothing in the GST Act that provides that that section overrides section 11-30 of the GST Act. Therefore, an amount of ITC worked out under subsection 111-10(1) would be subject to the reduction provided by subsection 11-30(3) of the GST Act if the acquisition is partly creditable. If an acquisition is partly creditable under paragraph 11-30(1)(a) of the GST Act, subsection 11-30(3) of the GST Act relevantly provides that the amount of the ITC is worked out as: 'full input tax credit' x 'extent of creditable purpose' Subsection 11-30(3) of the GST Act defines 'full input tax credit' and 'extent of creditable purpose' as follows: full input tax credit is what would have been the amount of the input tax credit for the acquisition if it had been made solely for a creditable purpose and you had provided, or had been liable to provide, all of the consideration for the acquisition extent of creditable purpose is the extent to which the creditable acquisition is for a creditable purpose, expressed as a percentage of the total purpose of the acquisition In this case, for the purposes of subsection 11-30(3) of the GST Act, the 'full input tax credit' is the amount of the ITC worked out under subsection 111-10(1) of the GST Act. Subsection 11-25 of the GST Act does not apply here. Goods and Services Tax Ruling GSTR 2006/4 determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose provides the Commissioner's view on the meaning of the phrase 'extent of creditable purpose'. Goods and Services Tax Ruling GSTR 2006/3 determining the extent of creditable purpose for providers of financial supplies explains the meaning of that phrase as it applies to providers of financial supplies.", "Date_of_Decision": "8 March 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 section 11-15 section 11-25 section 11-30 subsection 11-30(3) paragraph 11-30(1)(a) Division 111 section 111-5 subsection 111-5(1) subsection 111-5(2) subsection 111-5(3) section 111-10 subsection 111-10(1) subsection 111-10(2) subsection 111-10(3) Division 189", "Related_Public_Rulings_and_Determinations": "GSTR 2006/3 | GSTR 2006/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Input tax credits Creditable acquisition GST financial supplies Creditable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201313", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2006/3 GSTR 2006/4 | Keywords Goods and services tax Input tax credits Creditable acquisition GST financial supplies Creditable purpose"}
{"ATO_ID_Number": "ATO ID 2008/123", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST: interaction of the financial acquisitions threshold and Division 72", "Issue": "Does a financial acquisition by the entity, when acquired from an associate for no consideration, give rise to input tax credits to which the entity would be entitled for purposes of determining the financial acquisitions threshold (FAT) under Division 189 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, the financial acquisition by the entity when acquired from an associate for no consideration, does give rise to input tax credits to which the entity would be entitled for purposes of determining the FAT under Division 189 of the GST Act.", "Facts": "The entity raises funds in the capital market through the issue of debt instruments. The funds raised are on-lent to another entity for consideration. The entity's only acquisitions of taxable supplies relate to the issue of the debt instruments. In addition, the entity acquires from an associate for no consideration supplies of administrative functions. These are not supplies made in settling a claim under an insurance policy or compulsory third party scheme. The acquisitions the entity makes from its associate relate both to the issue of the debt instruments and to the on-lending supply it makes. The acquisitions are made in the course or furtherance of an enterprise that the entity carries on. The entity is not a member of a GST group. The entity and the associate are both registered for GST. The associate makes the supplies to the entity in the course or furtherance of the associate's enterprise. The associate is an associate of the entity for the purposes of section 318 of the Income Tax Assessment Act 1936.", "Reasons_for_Decision": "Summary: The issue of the debt instruments and the on-lending of the funds borrowed are both financial supplies made by the entity in terms of subdivision 40A of the A New Tax System (Goods and Services Tax) Regulations 1999 and are input taxed in line with subsection 40-5(1) of the GST Act. The raising of funds through the issue of debt instruments is a 'borrowing' as defined in the Dictionary at section 195-1 of the GST Act (the definition taking its meaning from section 995-1 of the Income Tax Assessment Act 1997 ). The issue of the debt instruments is a financial supply consisting of a borrowing. The borrowing relates to the input taxed financial supply of the on-lending of the funds. The entity is entitled to input tax credits for creditable acquisitions that it makes. The essential requirements of a creditable acquisition are set out at section 11-5 of the GST Act. Paragraph (a) of that section requires that the acquisition be solely or partly for a creditable purpose. Creditable purpose is relevantly defined in the Dictionary of the GST Act by reference to section 11-15 of the GST Act. Subsection 11-15(1) of the GST Act provides that a thing is acquired for a creditable purpose 'to the extent that you acquire it in carrying on your enterprise'. Paragraph 11-15(2)(a) of the GST Act then operates to deny creditable purpose on an acquisition to the extent that the acquisition relates to making supplies that would be input taxed. However, to the extent one or more of subsections 11-15(3),(4) and (5) of the GST Act applies, denial of creditable purpose by paragraph 11-15(2)(a) in respect of that acquisition is reversed (see paragraph 197 of GSTR 2008/1: 'When do you acquire anything or import goods solely or partly for a creditable purpose?') Thus, even though acquisitions relating to the entity's financial supplies consisting of a borrowing do not have creditable purpose re-instated through subsection 11-15(5) of the GST Act (because they do not relate to making supplies that are not input taxed), denial of creditable purpose in respect of these acquisitions will be reversed under subsection 11-15(4) of the GST Act where the acquiring entity does not exceed the FAT. Division 189 of the GST Act contains tests to determine whether an entity exceeds the FAT. Goods and Services Tax Ruling GSTR 2003/9 'Goods and Services Tax Ruling: financial acquisitions threshold', explains in detail the operation of these tests. Central to the operation of the FAT is the concept of a 'financial acquisition', which is defined at section 189-15 of the GST Act as 'an acquisition that relates to the making of a financial supply (other than a financial supply consisting of a borrowing)'. Thus, the entity's acquisitions relating to the issue of the debt instruments are not financial acquisitions. In line with section 11-15 of the GST Act, a financial acquisition is not for a creditable purpose if the entity exceeds the FAT (unless the acquisition relates to a GST-free financial supply). The entity's acquisitions are financial acquisitions to the extent that they relate to the on-lending financial supply. An integral step in determining the FAT is the quantification of 'the amount of all the input tax credits to which you would be entitled for [financial] acquisitions' assuming the financial acquisitions were made solely for a creditable purpose (see for example paragraph 189-5(1)(a) of the GST Act). Unless the supply of the thing acquired is a taxable supply, the 'input tax credits to which you would be entitled' in respect of the supply is nil (paragraph 91 of GSTR 2003/9). In this case, the supply to the entity by the associate is not a taxable supply in terms of section 9-5 of the GST Act, as it is not made for consideration. However, section 72-5 of the GST Act provides that the absence of consideration does not stop a supply from an associate being a taxable supply where the conditions of that section are met. In the facts of this case, section 72-5 of the GST Act will apply to the supply by the associate to the entity if paragraph 72-5(1)(b) of the GST Act is satisfied. Paragraph 72-5(1)(b) of the GST Act requires the acquisition of the thing supplied to be 'otherwise than solely for a creditable purpose'. The acquisition in this case is, in the first instance, denied creditable purpose under paragraph 11-15(2)(a) of the GST Act, as it relates to making the input taxed financial supply of the loan from the entity to another entity. It will nevertheless be for a creditable purpose, in line with subsection 11-15(4) of the GST Act, if the entity does not exceed the FAT. However, the role of subsection 11-15(4) of the GST Act can only be considered for the purposes of section 11-15 of the GST Act when it is known whether the entity exceeds the FAT, whereas subsection 11-15(4) of the GST Act is being considered in this case for the very purpose of determining whether the entity exceeds the FAT. Thus, in considering the possible application of subsection 11-15(4) of the GST Act for determining whether a supply is a taxable supply under section 72-5 of the GST Act (and consequentially whether the entity exceeds the FAT), a literal reading of the provisions gives rise to a circularity in analysis, and results in ambiguity with no clear outcomes. To enable Divisions 72 and 189 of the GST Act to operate together, allowing this circularity in analysis to be overcome, we consider it is necessary to interpret these provisions taking into account their context and purpose. The relevance of context both in a broad sense and in relation to the text of specific provisions within an Act is discussed at paragraphs 18 to 20 of Goods and Services Tax Ruling GSTR 2006/9. Interpreting the provisions in this way requires as a first step a 'notional' consideration of Division 72 of the GST Act conducted purely for the purposes of determining whether the entity exceeds the FAT. For these purposes alone we consider it necessary to interpret 'otherwise than solely for a creditable purpose' in section 72-5 of the GST Act, without reference to subsection 11-15(4) of the GST Act. Once the entity has determined if it exceeds the FAT, section 72-5 of the GST Act can be actually applied based on the words of the provision (including the reference to subsection 11-15(4) of the GST Act), as the result of the FAT test is now known and the circularity issue is overcome. Accordingly, the financial acquisition by the entity gives rise to input tax credits to which the entity would be entitled for purposes of determining the financial acquisitions threshold under Division 189 of the GST Act, where the acquisition is from an associate entity for no consideration.", "Date_of_Decision": "8 September 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 section 11-15 subsection 11-15(1) paragraph 11-15(2)(a) subsection 11-15(3) subsection 11-15(4) subsection 11-15(5) subsection 40-5(1) Division 72 section 72-5 paragraph 72-5(1)(b) subsection 72-10(1) Division 189 paragraph 189-5(1)(a) section 189-15 section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2003/9 | GSTR 2006/9 | GSTR 2008/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST associates GST financial acquisitions threshold Accounting expenses Management fees expenses", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008123", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) GSTR 2003/9 GSTR 2006/9 GSTR 2008/1 | Keywords Goods and services tax GST associates GST financial acquisitions threshold Accounting expenses Management fees expenses"}
{"ATO_ID_Number": "ATO ID 2006/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and thresholds for adjustments for changes in extent of creditable purpose relating to being a former member of a GST group", "Issue": "Is an acquisition made by the entity, a company that is a member of a GST group making only input taxed supplies, an acquisition that 'relates to business finance' for the purposes of Division 129 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when the entity leaves the GST group and makes taxable supplies?", "Decision": "Yes, the entity's acquisition is an acquisition that 'relates to business finance' for the purposes of Division 129 of the GST Act.", "Facts": "The entity is a company that was a member of a GST group. The GST group made only input taxed financial supplies and exceeded the financial acquisition threshold. While a member of the GST group, the entity only made supplies to other members of the GST group. The entity has ceased to be a member of the GST group and does not belong to any other GST group. The entity makes only taxable supplies and is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under Division 129 of the GST Act an entity may have an adjustment when the extent of creditable purpose of an acquisition changes. Whether the entity has an adjustment is affected by the GST exclusive value of the acquisition and whether there are any adjustment periods remaining for the acquisition. To determine whether an adjustment arises or the number of adjustment periods, it is necessary to establish whether the acquisition 'relates to business finance'. Subsection 129-10(3) of the GST Act provides that an acquisition 'relates to business finance' if, at the time of the acquisition, it related solely or partly to making financial supplies and was not solely or partly of a private or domestic nature. At the time of the acquisition the entity was a member of the GST group and the acquisition related solely to the GST-group making financial supplies (subsection 48-45(2) of the GST Act). The entity's acquisition 'relates to business finance' notwithstanding that the entity is no longer a member of the GST group. Therefore, the entity's acquisition is an acquisition that 'relates to business finance' for the purposes of Division 129 of the GST Act.", "Date_of_Decision": "1 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 48-D subsection 48-45(2) Division 129 subsection 129-10(3)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST net amounts & adjustments Adjustments GST groups GST financial acquisitions threshold", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200662", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/24 | Keywords Goods and services tax GST net amounts & adjustments Adjustments GST groups GST financial acquisitions threshold"}
{"ATO_ID_Number": "ATO ID 2013/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and termination amounts payable after a hire purchase agreement is terminated due to default", "Issue": "Does a termination amount payable to the entity, a supplier under a hire purchase agreement, arising from the termination of a hire purchase agreement by the entity due to a default by the hirer, form part of the consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the termination amount payable to the entity does not form part of the consideration for a taxable supply under section 9-5 of the GST Act. The termination amount is payable in respect of damages and accordingly the payment is not consideration for a supply.", "Facts": "The entity enters into a hire purchase agreement on or after 1 July 2012 with a customer for the supply of goods. Under the hire purchase agreement the entity makes two supplies, a taxable supply of goods and a taxable supply of credit (the disclosed credit charges). Payments for these supplies are taxable, and are made to the entity in instalments. The entity is registered for goods and services tax (GST). The entity does not account for GST on a cash basis. In a later tax period, there is a genuine dispute between the parties, the hirer defaults and the entity exercises its right to terminate the hire purchase agreement. The entity has the right to repossess the goods and then sell or re-hire them. Any amount in arrears up to the date of termination remains payable. Under the hire purchase agreement, the future outstanding instalments are no longer payable. To compensate the entity for any loss under the hire purchase agreement the entity is entitled to a termination amount. The termination amount is the discounted future outstanding amounts reduced by the net proceeds of resale or rehiring. These events are illustrated in the following diagram. This ATO ID addresses event (1):", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. A transaction is only a taxable supply if there is consideration for a taxable supply (paragraph 9-5(a) of the GST Act). When there is a default and termination under a lease agreement, the supply of hire or the right to possess the goods has come to an end and the damages payments that subsequently arise do not relate to this earlier supply. In contrast a hire purchase agreement 'is in commercial substance a method by which the 'hirer' purchases goods on deferred payment terms' (paragraph 197 of GSTR 2000/29). The legal form that is used to achieve the sale of goods on deferred terms generally 'involves bailment and an option to purchase' (paragraph 199 of GSTR 2000/29). After a hire purchase agreement has been terminated, both the right to possess the goods and any right or option to obtain legal title to the goods have been extinguished. In addition, any credit that was provided under the agreement has also come to an end. Paragraph 72 of Goods and Services Tax Ruling GSTR 2003/11 explains that a termination payment made to compensate the genuine damage or loss flowing from early termination as a result of a default by the lessee is not consideration for a supply. This is the case even though the lessor brings the lease to an end by exercising the right to terminate the lease. GSTR 2003/11 does not deal specifically with hire purchase agreements, but the principles may have broad application depending on the individual facts (paragraph 2 of GSTR 2003/11). When the hirer makes payments to compensate for loss of future instalments, these payments can no longer be characterised as consideration for the original supply of goods or credit under the agreement. While there are differences in both the commercial substance and legal form of leases and hire purchase agreements, the treatment of payments made after termination is comparable and the principles in GSTR 2003/11 can be applied to hire purchase agreements. Applying paragraph 74 of GSTR 2003/11 to hire purchase agreements, a payment for damages includes amounts calculated with reference to putting the financier in the position it would have been in if the hire purchase agreement had been completed. The damages payable by the hirer may be calculated by reference to the future instalments (commonly adjusted to present values) less any net sale proceeds from sale of the goods by the entity. The termination amount is calculated under the agreement by reference to the discounted value of all future instalments less the net proceeds of the repossessed assets and is generally consistent with calculation illustrated in paragraph 74 of GSTR 2003/11. As such, the termination amount is a payment for damages, as one party (the hirer) has not met their obligations under the contract. Therefore the termination amount payable to the entity, under a hire purchase agreement that has been terminated due to a default by the hirer, does not form part of the consideration for a taxable supply under section 9-5 of the GST Act. The termination amount is payable in respect of damages and accordingly the payment is not consideration for a supply. Note: The termination amount does not include amounts in arrears that relate to instalments that had become due and payable before the termination date. Amounts in arrears are consideration for the supply of goods and the supply of credit made under the hire purchase contract and are not damages. If a termination amount included these amounts, it would be necessary to apportion the amount between the damages and the supply .", "Date_of_Decision": "12 September 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a)", "Related_Public_Rulings_and_Determinations": "GSTR 2000/29 | GSTR 2003/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/51 | ATO ID 2006/4", "Subject_References": "goods and services tax GST hire purchase GST supplies and acquisitions GST consideration", "Case_References": "", "Other_References": "", "Business_Line": "Interpretative Assistance, Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201352", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2000/29 GSTR 2003/11 | Keywords goods and services tax GST hire purchase GST supplies and acquisitions GST consideration"}
{"ATO_ID_Number": "ATO ID 2010/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and decreasing adjustments for supplies arising from terminated hire purchase agreements with underlying securitisation arrangements", "Issue": "Does an entity have a GST decreasing adjustment under section 19-55 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in circumstances where the payment stream relating to a hire purchase (HP) agreement has been equitably assigned to a special purpose trust, and the entity subsequently exercises its right to terminate a hire purchase agreement due to a default by a customer?", "Decision": "Yes, the entity has a GST decreasing adjustment under section 19-55 of the GST Act in circumstances where the payment stream relating to the HP agreement has been equitably assigned to a special purpose trust, and the entity subsequently terminates its supply under the HP agreement due to a default by a customer.", "Facts": "The entity enters into an HP agreement with a customer under which it makes a supply of goods. The consideration for this supply is provided by payment of regular instalments over the term of the HP agreement. Legal title in the goods remains with the entity until all amounts payable under the HP agreement have been received. The provision of goods to a customer under the HP agreement is a taxable supply (there is also a financial supply component which is not relevant to this issue). The entity accounts for GST on a non-cash basis and attributes all of the GST payable on the supply of goods in the period in which the hire purchase agreement is entered into, as the agreement constitutes an invoice. The entity has entered into a securitisation arrangement and equitably assigned the payment stream that arises from the HP agreement to a special purpose trust. The assignment also includes other incidental related rights. The assignment of the entity's rights under the HP agreement does not amount to an assignment of underlying property. The entity continues to service the HP agreements that are the subject of the assignments. The entity remains liable for the performance of its obligations under the terms of the HP agreement. In a later tax period, there is a genuine default by the customer under the HP agreement and the entity exercises its right to terminate the HP agreement and repossesses the goods. Although a separate termination amount will become payable to compensate the entity, the future instalments under the HP agreement will no longer be due and payable by the customer. As a result, the entity will not receive the full amount of consideration for the supply of the goods agreed to under the HP agreement. There is no adjustment under Division 21 of the GST Act occurring in the relevant tax period.", "Reasons_for_Decision": "Summary: The facts establish that the assignment of the entity's rights under an HP agreement does not amount to an assignment of underlying property but is rather an equitable assignment of the right to a payment stream. This will be a financial supply if the conditions of regulation 40-5.09 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) are satisfied. Goods and Services Tax Ruling 'GSTR 2004/4: assignment of payment streams including under a typical securitisation arrangement' (GSTR 2004/4) explains the Commissioner's view on how the GST Act and the GST Regulations apply to the supply of rights to a payment stream by means of an assignment. Paragraph 44 of that ruling provides that the assignment of a payment stream does not change the underlying supply, and the assignor retains the obligation to make the underlying supply and remit any GST liability in respect of that supply. It follows that, although the entity has assigned the relevant payment streams, it remains the supplier of the relevant goods. Division 19 of the GST Act explains the meaning of an adjustment event and the circumstances when an entity will have an adjustment. Subsection 19-10(1) of the GST Act provides that an adjustment event is any event which has the effect of: When a customer defaults and the goods are repossessed, the HP agreement is terminated. This means that future instalments will no longer be payable, resulting in a decrease in the agreed consideration for the supply of the goods under the HP agreement (refer to ATO ID 2006/2 and paragraphs 215 and 216 of GSTR 2000/29). Accordingly, the entity has an adjustment event under paragraph 19-10(1)(b) of the GST Act as the consideration for the relevant supply has changed. Section 19-40 of the GST Act provides that an entity has an adjustment for a supply for which it is liable to pay GST if: The entity has attributed the GST on the supply of the goods under the HP agreement in an earlier tax period and, as a result of the adjustment event, the previously attributed GST amount for the supply no longer reflects the amount of GST on the supply. Therefore, all the requirements in section 19-40 of the GST Act have been met. Section 19-55 of the GST Act provides that if the correct amount of GST is less than the previously attributed amount, the supplier is entitled to a decreasing adjustment. Accordingly, the entity will be entitled to a decreasing adjustment under section 19-55 of the GST Act in respect of the HP agreement terminated, regardless of whether the rights to the payment stream under the HP agreement were assigned to the special purpose trust at the time of termination.", "Date_of_Decision": "28 September 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 19-10 subsection 19-10(1) paragraph 19-10(1)(b) section 19-40 section 19-55", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2004/4 | Goods and Services Tax Ruling GSTR 2000/29", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/2", "Subject_References": "Goods and services tax GST hire purchase Adjustments Assignment of rights & entitlements", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20106", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2004/4 Goods and Services Tax Ruling GSTR 2000/29 | Keywords Goods and services tax GST hire purchase Adjustments Assignment of rights & entitlements"}
{"ATO_ID_Number": "ATO ID 2005/186", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and refinancing hire purchase agreements as leases", "Issue": "Does the entity, a financier, need to make an adjustment to reduce the input tax credit it claimed for the acquisition of a luxury car to reflect the car input tax credit limit under section 69-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when:", "Decision": "No, the entity does not need to make an adjustment to reduce the input tax credit it claimed for the acquisition of a luxury car to reflect the car input tax credit limit under section 69-10 of the GST Act when it terminates the hire purchase agreement and leases the car instead.", "Facts": "The entity is a financier that is registered for goods and services tax (GST). The entity acquired a luxury car for the purpose of supplying it to customers by way of hire purchase agreement. In accordance with the A New Tax System (Luxury Car Tax) Act 1999 (LCT Act), the entity quoted their Australian business number (ABN) in relation to the supply of the luxury car to it. The entity's acquisition of the luxury car was a creditable acquisition and the entity claimed an input tax credit. The input tax credit claimed was equal to the GST payable on the supply of the luxury car to the entity. The entity supplied the vehicle to a customer under a hire purchase agreement. However, before all the payments under the agreement were made, the hire purchase agreement was terminated. The entity retains title to the vehicle and subsequently leases the vehicle to the customer.", "Reasons_for_Decision": "Summary: Section 69-10 of the GST Act provides that if an entity makes a creditable acquisition or importation of a car that exceeds the car limit, the amount of the input tax credit the entity is entitled to is limited to the GST payable on the supply or importation up to one-eleventh of the car limit, unless the entity is entitled to quote its ABN for the purposes of the LCT Act. Under paragraph 9-5(1)(a) of the LCT Act, an entity is entitled to quote its ABN in relation to a supply of a luxury car if, at the time of quoting, the entity has the intention of using the car for the sole purpose of holding the car as trading stock, other than holding it for hire or lease. For a quote to be effective, it must be in the approved form and made at or before the time of the supply or importation (subsection 9-15(2) of the LCT Act). Paragraphs 194 and 198 of Goods and Services Tax Ruling GSTR 2000/29 makes it clear that a hire purchase agreement is not a hire arrangement. Hence, the entity acquired a luxury car for the purpose of supplying it to a customer by way of hire purchase agreement and not for hire or lease. Therefore, the entity was entitled to, and did, quote their ABN at the time of the supply of the luxury car to it and consequently the car input tax credit limit in section 69-10 of the GST Act did not apply. Although at a later time the entity's intention changed, this does not alter fact that the entity was entitled to quote at the relevant time. Section 69-10 does not require an adjustment to be made if the intended use changes. In addition, the adjustment rules in Division 19 and Division 129 of the GST Act do not apply as the entity's acquisition of the car has not been cancelled, there has been no change in the consideration the entity provided to the supplier, the acquisition remains a creditable acquisition and the entity is still using the car wholly for a creditable purpose. Therefore, the entity does not need to make an adjustment to reduce the input tax credit it claimed for the acquisition of a luxury car under section 69-10 of the GST Act.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 19 section 69-10 Division 129", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/29", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST net amounts and adjustments Adjustments GST hire purchase GST Luxury Car Tax Stream", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005186", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/29 | Keywords Goods and services tax GST net amounts and adjustments Adjustments GST hire purchase GST Luxury Car Tax Stream"}
{"ATO_ID_Number": "ATO ID 2004/325", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and assignment of a hire purchase agreement", "Issue": "Is the entity, a company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it assigns its rights under a hire purchase agreement to a third party that is not an associate, for which the entity receives no payment from the third party?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act, when it assigns its rights under a hire purchase agreement to a third party that is not an associate, for which the entity receives no payment from the third party as the entity is not making a supply for consideration.", "Facts": "The entity is a company. The entity entered into a hire purchase agreement with a financier. This agreement is in respect of a car to be used for business purposes. The entity entered into a 'Deed of Assignment of Hire Purchase Agreement' (Deed) with the financier and an independent and unrelated third party that is not an associate of the entity. Under this Deed, the entity assigned to the third party, for the residual of the term of the hire purchase agreement, all the entity's rights, title and interest under the original hire purchase agreement. This assignment was made subject to the condition that the third party will pay the instalments and perform and observe the covenants, conditions and stipulations expressed or implied in the hire purchase agreement. The Deed also provides that upon payment of all instalments up to the date of the Deed being paid, the entity will be released from all liability under the hire purchase agreement. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. The first requirement is that there must be a supply for consideration (paragraph 9-5(a) of the GST Act). Section 9-10 of the GST Act defines 'supply'. Paragraph 9-10(2)(e) of the GST Act provides that a supply includes the creation, grant, transfer, assignment or surrender of any right. Accordingly, when the entity assigns its rights under the hire purchase agreement, to the third party, it is making a supply under section 9-10 of the GST Act. 'Consideration' is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance in connection with, in response to or for the inducement of a supply of anything. The third party has agreed to pay the instalments and perform and observe the covenants, conditions and stipulations expressed or implied in the hire purchase agreement. These instalments and obligations made by the third party under the hire purchase agreement are made to the financier. The entity does not receive any payment, act or forbearance from the third party that is in connection with the assignment of the hire purchase agreement to the third party. Therefore, there is no consideration for the supply of the assignment of the hire purchase agreement. Accordingly, the entity is not making a taxable supply under 9-5 of the GST Act when it assigns its rights under a hire purchase agreement to a third party, for which the entity receives no payment from the third party.", "Date_of_Decision": "7 February 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) section 9-10 paragraph 9-10(2)(e) subsection 9-15(1) Division 72", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies without consideration GST consideration GST supply GST hire purchase", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004325", "Unmatched_Content": "Keywords Goods and services tax GST supplies without consideration GST consideration GST supply GST hire purchase"}
{"ATO_ID_Number": "ATO ID 2004/725", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a motor vehicle where payment for the supply is provided to an entity other than the supplier", "Issue": "Is the entity, a business operator, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it:", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a motor vehicle that was financed under a hire purchase agreement and directs the purchaser to pay the purchase price directly to the financier.", "Facts": "The entity is a business operator. The entity is selling a motor vehicle that was financed under a hire purchase agreement. At the time of entering into the agreement to sell the motor vehicle, the entity still owed money to the financier that financed the hire purchase agreement. The entity directs the purchaser to pay the purchase price directly to the financier rather than to the entity. Upon payment, the financier transfers title in the motor vehicle to the entity. Under the terms of the agreement between the entity and the purchaser, the entity then immediately supplies the motor vehicle to the purchaser. Registration of the motor vehicle is then transferred from the entity to the purchaser. The entity is registered for goods and services tax (GST). The entity's sale of the motor vehicle is made in the course of conducting its enterprise in Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement in section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 9-10(2)(a) of the GST Act provides that for GST purposes, the term 'supply' includes a supply of goods. The entity is selling a motor vehicle and is therefore making a supply of goods. The entity has directed the purchaser to pay the purchase price to the financier. Upon receipt by the financier of the purchase price, the financier transfers title in the motor vehicle to the entity and the entity then sells the motor vehicle to the purchaser. Subsection 9-15(1) of the GST Act provides that for GST purposes, the term 'consideration' includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything. At the time of entering into the agreement to sell the motor vehicle, the entity still owes money to the financier that financed the hire purchase agreement. As such, the entity directs the purchaser to pay the purchase price directly to the financier. The purchaser therefore makes the payment to the financier in connection with and for the inducement of the supply of the motor vehicle to it by the entity. The payment is consideration as defined in subsection 9-15(1) of the GST Act. Accordingly, the entity is making a supply for consideration as per the first requirement of section 9-5 of the GST Act. The entity is registered for GST, the supply is made in the course of the entity's enterprise and is connected with Australia. In addition, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a motor vehicle that was financed under a hire purchase agreement and directs the purchaser to pay the purchase price directly to the financier", "Date_of_Decision": "12 February 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-10(2)(a) subsection 9-15(1) section 9-40 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST consideration GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004725", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST consideration GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2010/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and bill of exchange not honoured at maturity", "Issue": "Has an entity received consideration for a supply for the purposes of paragraph 21-5(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), in accepting a bill of exchange with a future maturity date as payment for the supply when the bill, which it still holds, is not honoured at maturity?", "Decision": "No, the entity has not received consideration when a bill of exchange it accepted as payment and of which it remains the holder, has a future maturity date and the bill is not honoured at maturity.", "Facts": "The entity accounts for GST on a non-cash basis. The entity makes a taxable supply of goods and the recipient of the supply makes payment for the goods by accepting the obligation under a bill of exchange to pay the supplier the outstanding amount upon maturity of the bill. The supplier is the drawer of the bill and remains the holder, that is, it has not endorsed the bill in favour of any third parties prior to its maturity date. The recipient of the supply is the drawee/acceptor of the bill. The recipient of the supply fails to pay the bill upon its maturity and the entity later writes off the outstanding debt as bad.", "Reasons_for_Decision": "Summary: Division 21 of the GST Act deals with the writing off of bad debts on taxable supplies. Section 21-5 of the GST Act states: All the elements of section 21-5 of the GST Act need to be satisfied before entitlement to a decreasing adjustment arises under this Division of the GST Act. The facts establish that, in regard to the debt owing under the bill of exchange, a taxable supply has been made and the relevant debt has been written off. Thus paragraphs 21-5(1)(a) and (c) of the GST Act have been satisfied. It is also known that the entity accounts on a non-cash basis so subsection 21-5(2) of the GST Act is also satisfied. Therefore it needs to be determined if the entity has received consideration for a supply under paragraph 21-5(1)(b) of the GST Act. | Detailed Reasoning - Bills of Exchange: A bill of exchange is defined in subsection 8(1) of the Bills of Exchange Act 1909 . This subsection states: A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer. In the Victorian Supreme Court case of Mobil Oil Australia Limited v. Caulfield Tyre Service Pty Ltd [1984] V.R. 440 (before Young C.J.), the status of a bill as a payment instrument and the obligations of the person to whom the bill is 'addressed' were considered. In the course of delivering his judgment in that case, the Chief Justice referred favourably to observations on the character of a bill made in several UK cases. These references include: The bill is itself a contract separate from the contract for sale. Its purpose is not merely to serve as a negotiable instrument; it is also to avoid postponement of the purchaser's liability to the vendor himself... ( Nova (Jersey) Knit Ltd. V. Kammgarn Spinnerei G.m.b.H .[1977] 2 All E.R. 463) ...the bona fide holder for value of a bill of exchange is entitled, save in truly exceptional circumstances, on its maturity, to have it treated as cash... ( Cebora S. N. C. v. S. I. P . ( Industrial Products) Ltd . [1976] 1 Lloyd's Rep. 271) Bills of exchange are treated as cash, and unless there are exceptional circumstances where there is an action between the immediate parties to a bill of exchange judgment will not be held up by virtue of a counterclaim by the defendant and execution will not be stayed. ( Cebora S. N. C. v. S. I. P . ( Industrial Products) Ltd . [1976] 1 Lloyd's Rep. 271) When one person buys goods from another ... He may demand payment in cash; but if the buyer cannot provide this at once, he may agree to take bills of exchange payable at future dates. These are taken as equivalent to deferred instalments of cash. ( Nova (Jersey) Knit Ltd. V. Kammgarn Spinnerei G.m.b.H .[1977] 2 All E.R. 463) | Detailed Reasoning - Effect of bill of exchange being dishonoured at maturity: At the time that the entity supplied the goods, the recipient accepted the bill of exchange, due to mature on a future date. We take the view that in the circumstances given, if the bill had been honoured on its maturity, consideration would have been provided and received on the maturity date. This is similar to the treatment that would be afforded a post-dated cheque. A bill with a future maturity date has payment similarities to a post-dated cheque, and we consider this to be appropriately consistent treatment for GST purposes. However, while the date on a post-dated cheque is the date that consideration will be received (per GSTR 2003/12), a subsequent dishonouring of the cheque may trigger a decreasing bad debt adjustment as explained in paragraph 49 of Goods and Services Tax Ruling 'GSTR 2000/19: making adjustments under Division 19 for adjustment events'. The judicial comment set out above, however, provides support for the view that a holder of a bill of exchange is entitled to have it treated as cash on its maturity and in the event that the recipient of the supply (the acceptor) fails to honour the bill at its maturity date, receipt of consideration simply does not occur. It follows that the entity has not received consideration for the supply for the purposes of paragraph 21-5(1)(b) of the GST Act and therefore will have a decreasing adjustment under section 21-5 of the GST Act.", "Date_of_Decision": "22 December 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 21-5(1)(a) paragraph 21-5(1)(b) paragraph 21-5(1)(c) section 21-5 subsection 21-5(1) subsection 21-5(2) Division 21", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/19 | Goods and Services Tax Ruling GSTR 2003/12", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/11", "Subject_References": "Decreasing adjustment Goods and services tax GST bad debts GST consideration GST net amounts & adjustments GST supplies & acquisitions Write off", "Case_References": "Mobil Oil Australia Limited v Caulfield Tyre Service Pty Ltd [1984] VR 440", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201010", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/19 Goods and Services Tax Ruling GSTR 2003/12 | Keywords Decreasing adjustment Goods and services tax GST bad debts GST consideration GST net amounts & adjustments GST supplies & acquisitions Write off"}
{"ATO_ID_Number": "ATO ID 2010/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and bill of exchange as consideration for a supply", "Issue": "For a bill of exchange with a future maturity date that is provided as payment for a supply, where the bill is not endorsed by the supplier in favour of a third party, is consideration provided and received under section 29-10 and section 29-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) upon maturity of the bill?", "Decision": "Yes, for a bill of exchange with a future maturity date that is provided as payment for a supply, where the bill is not endorsed in favour of a third party, consideration is provided and received upon maturity of the bill.", "Facts": "Entity 1 makes a supply to Entity 2. Entity 2 arranges for payment to Entity 1 by accepting the obligation under a bill of exchange to pay the outstanding amount on a future date. The bill is payable to the order of Entity 1. Entity 1, as drawer of the bill, remains the holder of the bill, that is, it does not endorse the bill in favour of any third party prior to maturity.", "Reasons_for_Decision": "Summary: Determining when consideration is provided and received is required for attributing GST payable and input tax credits to a tax period under Division 29 of the GST Act. Section 195-1 of the GST Act defines 'consideration' for a supply or acquisition to mean any consideration, within the meaning given by sections 9-15 and 9-17 of the GST Act, in connection with the supply or acquisition. In particular subsections 9-15(1) and 9-15(2) of the GST Act state: Goods and Services Tax Ruling 'GSTR 2001/6: non-monetary consideration' (GSTR 2001/6) discusses the meaning of 'consideration' in the context of the GST Act. It states: 49. Consideration is defined in section 195-1 to mean 'any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply'. The meaning given to consideration in section 9-15 extends beyond payments to include such things as acts and forbearances. It may include payments made voluntarily, and payments made by persons other than the recipient of a supply. [ footnotes omitted ] A bill of exchange is defined in subsection 8(1) of the Bills of Exchange Act 1909 . This subsection states: A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer. In the Victorian Supreme Court case of Mobil Oil Australia Limited v. Caulfield Tyre Service Pty Ltd [1984] V.R. 440 (before Young C.J.), the status of a bill as a payment instrument and the obligations of the person to whom the bill is 'addressed' were considered. In the course of delivering his judgment in that case, the Chief Justice referred favourably to observations on the character of a bill made in several UK cases. These references include: The bill is itself a contract separate from the contract for sale. Its purpose is not merely to serve as a negotiable instrument; it is also to avoid postponement of the purchaser's liability to the vendor himself... ( Nova (Jersey) Knit Ltd. V. Kammgarn Spinnerei G.m.b.H .[1977] 2 All E.R. 463) ...the bona fide holder for value of a bill of exchange is entitled, save in truly exceptional circumstances, on its maturity, to have it treated as cash... ( Cebora S. N. C. v. S. I. P . ( Industrial Products) Ltd . [1976] 1 Lloyd's Rep. 271) Bills of exchange are treated as cash, and unless there are exceptional circumstances where there is an action between the immediate parties to a bill of exchange judgment will not be held up by virtue of a counterclaim by the defendant and execution will not be stayed. ( Cebora S. N. C. v. S. I. P . ( Industrial Products) Ltd . [1976] 1 Lloyd's Rep. 271) When one person buys goods from another ... He may demand payment in cash; but if the buyer cannot provide this at once, he may agree to take bills of exchange payable at future dates. These are taken as equivalent to deferred instalments of cash. ( Nova (Jersey) Knit Ltd. V. Kammgarn Spinnerei G.m.b.H .[1977] 2 All E.R. 463) At the time that Entity 1 made the underlying supply to Entity 2, Entity 2 accepted the bill of exchange, due to mature on a future date. For a bill of exchange used as a form of payment, it is necessary to consider when that payment is regarded as being provided or received for the purposes of the GST Act. Goods and Services Tax Ruling 'GSTR 2003/12: when consideration is provided and received for various payment instruments and other methods of payment' (GSTR 2003/12) discusses forms of payment and when consideration is provided or received for GST purposes under each form of payment. GSTR 2003/12 does not discuss bills of exchange in general, but it does discuss both cheques and post-dated cheques-a cheque being a special form of a bill of exchange. A bill of exchange with a future maturity date has features similar to a post-dated cheque-value for both financial instruments is not received until a specified future date, being the date shown on the cheque or the maturity date of the bill. We consider that these similarities warrant consistency of treatment for GST purposes when determining the date of provision and receipt of consideration under a bill of exchange. For post-dated cheques, paragraph 27 of GSTR 2003/12 states that consideration is provided and received on the date shown on the cheque. We consider that adopting similar treatment for a bill of exchange with a future maturity date is supported by the case law referred to above. It follows that, in regard to a bill of exchange with a future maturity date that is provided as payment for a supply, consideration is provided and received for the purposes of section 29-10 and section 29-5 of the GST Act on the maturity date specified under the terms of the bill.", "Date_of_Decision": "22 December 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-15 subsection 9-15(1) subsection 9-15(2) section 9-17 section 29-5 section 29-10 section 195-1 Division 29", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6 | Goods and Services Tax Ruling GSTR 2003/12", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/10", "Subject_References": "Goods and services tax GST consideration GST supplies & acquisitions", "Case_References": "Mobil Oil Australia Limited v Caulfield Tyre Service Pty Ltd [1984] VR 440", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201011", "Unmatched_Content": "Amended by inserting references to section 9-17. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. | Subsections 9-15(1) and 9-15(2) added. Section 9-17 added. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 Goods and Services Tax Ruling GSTR 2003/12 | Keywords Goods and services tax GST consideration GST supplies & acquisitions"}
{"ATO_ID_Number": "ATO ID 2010/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and financial supplies made by a time-sharing scheme developer", "Issue": "Is the entity, a developer of a time-sharing scheme making an input taxed financial supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when its interest in the time-sharing scheme decreases to enable the time-sharing scheme to issue timeshare points to members of the public?", "Decision": "Yes, the developer is making a financial supply of an interest in a time-sharing scheme when its interest in the time-sharing scheme decreases to enable new issues of timeshare points to members of the public.", "Facts": "The developer carries on an enterprise that includes the development and promotion of a time-sharing scheme (the scheme). The developer is registered for GST. The scheme meets the definition of a time-sharing scheme under the Corporations Act 2001 (Corporations Act) and is a registered managed investment scheme under the Corporations Act. The timeshare scheme is a trust which is an entity for GST purposes. As the trust is not a legal entity, a company in its capacity as responsible entity and trustee of the scheme is registered for GST and is taken to be the scheme entity. This entity will be referred to as 'the scheme'. The scheme issues interests in the scheme to approved applicants who become new participants of the scheme. Only the scheme can issue these interests to participants. An interest in the scheme provides the participant with a right to benefits provided by the scheme, including the right to use scheme accommodation on a recurring basis. Interests are issued to participants in the form of 'timeshare points'. The developer holds a special class of interest in the scheme (developer interest). The developer provides funding (developer contributions) so the scheme can acquire additional real property for accommodation purposes. As additional property is introduced to the scheme, new timeshare points are allocated by the scheme. Until the scheme uses these points to issue new interests in the scheme to participants, and in return for making the developer contributions, the developer acquires an entitlement to the rights under the newly allocated but unissued points. Under the terms of the scheme's constitution, the developer interest in the scheme is the equivalent to the rights and obligations that attach to the unissued timeshare points. Whenever the scheme issues new interests to participants, the developer's entitlement to rights under the allocated but unissued points decreases, and this is reflected in a decrease in the value of the developer interest to the same extent. The developer receives consideration equal to the sale proceeds that the scheme receives for the issue of timeshare interests by the scheme. When the developer makes a developer contribution, instead of having its interests in the scheme reflected under its developer interest, the developer can at any time request that the scheme issue participant timeshare interests to it in the same form as those that are issued to members of the public. Both the developer and the scheme's activities relating to interests in the timeshare scheme are connected with Australia, and are done in the course or furtherance of their respective enterprises.", "Reasons_for_Decision": "Summary: Section 40-5 of the GST Act provides that financial supplies are input taxed and that these supplies have the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Under subregulation 40-5.09(1) of the GST Regulations, the provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply if the provision, acquisition or disposal is: the supplier is: Item 10 in the table in subregulation 40-5.09(3) of the GST Regulations includes an interest in or under securities (Item 10). Securities are defined to take the meaning provided in subsection 92(1) of the Corporations Act. Paragraph 92(1)(c) of the Corporations Act provides that 'interests in a managed investment scheme' are securities for the purposes of that Act. An MIS includes a time-sharing scheme which is defined in section 9 of the Corporations Act. The timeshare points that the scheme issues to participants provide a recurrent right to use scheme property, and satisfy the definition of an interest in a time-sharing scheme. As such, the scheme makes financial supplies to members of the public when it issues timeshare points. When the scheme allocates time-share points in respect of property introduced by the developer, and the rights under these allocated but unissued points attach to the developer's interest, these rights also constitute interests in the scheme and are financial supplies made by the scheme to the developer. When the scheme issues timeshare points to participants, the developer's interest in the scheme decreases as the developer's unissued timeshare points have decreased. The issue is, therefore, does this decrease in the developer interest in the scheme constitute a financial supply made by the developer? Subsection 9-10(1) of the GST Act states that a supply is any form of supply whatsoever. Paragraph 9-10(2)(f) of the GST Act expands this with the inclusion of 'a financial supply', thus allowing for an acquisition to be characterised as a supply. The other financial supply forms, 'provision' and 'disposal', may both be considered supplies under the general scope of the subsection 9-10(1) of the GST Act. This is supported by paragraph 22 of Goods and Services Tax Ruling GSTR 2002/2 'GST treatment of financial supplies and related supplies and acquisitions' which states '...the provision and/or disposal of an interest may be a supply within the ordinary meaning of supply'. GSTR 2006/9 'Goods and services tax :supplies', at paragraph 71, also acknowledges the ordinary meaning is 'to furnish or provide'. However, proposition 5 in GSTR 2006/9 also explains that to 'make a supply' an entity must 'do something' (paragraphs 71 to 91). In the context of both provision and disposal of an interest it is relevant to determine what if anything the developer does to cause the decrease in its interest in the time share scheme held under its developer interest. In the context of proposition 5 (to 'make a supply an entity must do something'), the required action does not have to be the supply itself. If an entity takes some action that causes a supply to occur, that can be sufficient (paragraph 74 of GSTR 2006/9). This is supported by the Administrative Appeals Tribunal decision in Hornsby Shire Council v. Commissioner of Taxation [2008] AATA 1060; 2008 ATC 10-061; 71 ATR 442. While there will often be a close temporal relationship between the supplier doing something and the passing of something from one entity to another, this is not always the case. Therefore, the fact that the developer agrees to have its interests dealt with in this way at the commencement of the scheme and not each time the scheme issues timeshare points to participants does not necessarily mean that the developer has not made a supply. When the developer agrees to be bound by the terms of the scheme constitution by subscribing for a developer interest, one of the things it has agreed to is that the scheme will reduce the developer's interest in the scheme whenever timeshare points are issued to new participants, but the developer will receive the relevant sale proceeds. By agreeing to the terms of the constitution and subsequently making developer contributions, the developer is doing something as it is agreeing to the scheme dealing with its interests in a specific way. Furthermore, it is noted that the scheme is not unilaterally exercising some general power that would allow it cancel any participant's interest in the scheme. Rather, the reduction of the developer's rights only occurs under specified circumstances. In our view it follows that when the scheme accepts an application for an issue of timeshare points to a participant, the developer makes a supply of its unissued timeshare interests to the scheme to enable it to issue the timeshare points to a participant. The developer is making a provision or disposal of an interest in a time-sharing scheme for consideration being the entitlement to be paid the sale proceeds by the scheme. As all the other requirements in subregulation 40-5.09(1) of the GST Regulations are satisfied, the developer is making a financial supply of an interest in a time-sharing scheme when its interest in the timeshare scheme decreases to enable the time-sharing scheme to issue timeshare points to members of the public.", "Date_of_Decision": "7 January 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(1) paragraph 9-10(2)(f) section 38-190 section 40-5 subsection 40-5(1)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2 | Goods and Services Tax Ruling GSTR 2006/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST financial supplies Input taxed supplies Securities", "Case_References": "Hornsby Shire Council v Commissioner of Taxation [2008] AATA 1060 2008 ATC 10-061 71 ATR 442", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201018", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax Ruling GSTR 2006/9 | Keywords Goods and services tax GST financial supplies Input taxed supplies Securities"}
{"ATO_ID_Number": "ATO ID 2010/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supplies of an interest in a time-sharing scheme to non-residents overseas", "Issue": "Is the supply of an interest in a time-sharing scheme that the scheme makes to a non-resident overseas, a supply that is GST-free under section 38-190 of the Goods and Services Tax (A New Tax System) Act 1999 (GST Act)?", "Decision": "No, the supply of an interest in a time-sharing scheme that the scheme makes to a non-resident overseas, is not GST-free under section 38-190 of the GST Act.", "Facts": "The scheme meets the definition of a time-sharing scheme under the Corporations Act 2001 (Corporations Act) and is a registered managed investment scheme under the Corporations Act. The time-sharing scheme is a trust which is an entity for GST purposes. As the trust is not a legal entity, a company in its capacity as responsible entity and trustee of the scheme is registered for GST and is taken to be the scheme entity. This entity will be referred to as 'the scheme'. The scheme holds a portfolio of Australian holiday resorts, and a smaller portfolio of overseas holiday resorts. The scheme is registered as a managed investment scheme under the Corporations Act. The scheme carries on its enterprise in accordance with its constitution of the scheme. A Product Disclosure Statement (PDS) for the scheme sets out the rights to benefits produced by the scheme that a participant can expect to enjoy over the period of their participation in the scheme. The PDS indicates that the primary benefit of participation is being able to choose from a range of scheme accommodation, and to stay in the chosen accommodation, free of charge. The accommodation is subject to availability. A booking fee may be payable. The scheme is expected to run for several decades. The rights and benefits of participation can be passed to a participant's heirs in the case of the participant's death. Upon expiry of the scheme, a person who is a participant at that time is entitled to a share of the liquidated net assets of the scheme. The scheme is expressly not designed to provide financial returns. The PDS indicates that upon the eventual windup of the scheme, any remaining scheme assets are to be sold and net proceeds distributed to participants. However, the windup of the scheme is not anticipated until many years into the future. There is no identifiable quantum of benefit to a new participant in relation to liquidation of scheme property. A new participant acquires an interest in the scheme by purchasing a specified minimum number of timeshare points. A participant may subsequently apply for a further interest in the scheme by purchasing additional timeshare points. The number of timeshare points each participant holds reflects the extent of their interest in benefits produced by the scheme. The year to year allocation of benefits produced by the scheme is regulated by way of an 'annual points' account established for each participant. The scheme determines an annual points value for each night's accommodation. This value depends on the location of the resort, the time of year (peak or off-peak), and the size and quality of the accommodation. A participant's account is credited once a year with annual points equal to the number of timeshare points the participant holds in the scheme. The participant can apply for scheme accommodation up to the points value available in their annual points account. Unused annual points may be deferred for a maximum period of one year and, if still unused, are cancelled. The scheme attempts to satisfy booking requests made by participants on a best-fit basis for all participants, and subject to the rules of the scheme. Accordingly, on some occasions a participant will be allocated their second choice of hotel or booking dates. A non-resident of Australia who is overseas acquires timeshare points from the scheme.", "Reasons_for_Decision": "Summary: The supply of an interest in a time-sharing scheme that the scheme makes to a non-resident overseas, is not GST-free under section 38-190 of the GST Act because the essential character of an interest in a time-sharing scheme is rights over real property as defined in the GST Act, and section 38-190 does not apply to the extent that supplies are of real property. These reasons are set out in detail in the following paragraphs. The supply of the interest in the scheme is made in the context of, and subject to the requirements of, the Corporations Act. A time-sharing scheme is defined in the dictionary (section 9) of the Corporations Act, as follows: time - sharing scheme means a scheme, undertaking or enterprise, whether in Australia or elsewhere: (a) participants in which are, or may become, entitled to use, occupy or possess, for 2 or more periods during the period for which the scheme, undertaking or enterprise is to operate, property to which the scheme, undertaking or enterprise relates; and (b) that is to operate for a period of not less than 3 years. Section 9 of the Corporations Act provides that 'managed investment scheme' means, amongst other things, a 'time-sharing scheme'. Section 9 of the Corporations Act defines an interest in a managed investment scheme as follows: interest in a managed investment scheme means a right to benefits produced by the scheme (whether the right is actual, prospective or contingent and whether it is enforceable or not). Section 9 of the Corporations Act provides that 'securities' has the meaning given by section 92 of the Corporations Act. Interests in a managed investment scheme appear in subsection 92(1) of the Corporations Act at paragraph (c). Although the predominant type of benefit a new participant can be expected to request and receive from the time-sharing scheme is annual accommodation in scheme property, what is actually supplied to the new participant for their initial payment to participate in the scheme is a complex set of rights. This is an interest in the time-sharing scheme, which is a managed investment scheme, which is a form of security. This grant of rights is made by the scheme in Australia in response to an application form lodged by a new participant. The scheme approves the application and grants an interest in the scheme. The grant of the interest in the scheme is done in Australia. It is considered to be a supply connected with Australia under subsection 9-25(5) of the GST Act. If the interest is granted on or after 20 December 2000, the supply of the interest to the new participant is a financial supply as the supply meets the requirements of Regulation 40-5.09 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Item 10 in the table in subregulation 40-5.09 of the GST Regulations refers to 'securities'. 'Securities' are defined in the dictionary in the GST Regulations as having the meaning given by subsection 92(1) of the Corporations Act. Under section 40-5 of the GST Act, a financial supply is input taxed. It is also necessary to consider whether section 38-190 of the GST Act might apply to make the supply GST-free. Subsection 9-30(3) of the GST Act relevantly provides that to the extent a supply would otherwise be both GST-free and input taxed, it is GST-free. Subsection 38-190(1) of the GST Act sets out the supplies of things for consumption outside Australia that are GST-free. Subsection 38-190(1) only applies to supplies of things that are not supplies of goods or real property such as services or various rights. As stated at paragraph 15 of Goods and Services Tax Ruling GSTR 2003/7, in determining whether a supply is properly characterised as a supply of goods or real property or a thing other than goods or real property, it is necessary to consider all of the circumstances of the transaction to ascertain its essential character. A time-sharing scheme is different from other forms of securities in that it expressly provides for benefits to be provided in the form of accommodation. The PDS for the time-sharing scheme states that the scheme is not designed to provide financial returns. By definition, an interest in a time-sharing scheme must provide an entitlement 'to use, occupy or possess, for 2 or more periods during the period for which the scheme, undertaking or enterprise is to operate, property to which the scheme, undertaking or enterprise relates'. These rights are set out in the Constitution of the scheme and agreed to by each new participant in the scheme. Therefore, the essential character of an interest in a time-sharing scheme based on accommodation assets is contractual rights in relation to land. Contractual rights to land or accommodation fall within the extended definition (paragraph (c)) of 'real property' in section 195-1 of the GST Act. The definition of real property in section 195-1 of the GST Act is as follows: real property includes: (a) any interest in or right over land; or (b) personal right to call or to be granted any interest or right over land; or (c) a licence to occupy land or any other contractual right exercisable over or in relation to land. The third column of the table to subsection 38-190(1) of the GST Act states 'These supplies are GST-free (except to the extent that they are supplies of *real property)'. As the character of the supply of the interest is contractual rights to land or accommodation, subsection 38-190(1) of the GST Act does not apply, and the supply of the interest in a time-sharing scheme that the scheme makes to a non-resident overseas, is not GST-free.", "Date_of_Decision": "8 January 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(5) subsection 9-30(3) section 38-190 subsection 38-190(1) section 40-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST financial supplies Input taxed supplies GST time share Securities GST real property", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201020", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/7 | Keywords Goods and services tax GST free GST financial supplies Input taxed supplies GST time share Securities GST real property"}
{"ATO_ID_Number": "ATO ID 2010/225", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and provision of a prepaid card facility by an Australian authorised deposit-taking institution", "Issue": "For the purposes of item 1 in the table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), is the provision of the prepaid card facility by an entity, an Australian authorised deposit-taking institution (ADI), the provision of an interest in an account made available by the entity in the course of its banking business within the meaning of the Banking Act 1959 (Banking Act)?", "Decision": "Yes, for the purposes of item 1 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 1), the provision of the prepaid card facility by the entity is the provision of an interest in an account made available by an ADI in the course of its banking business within the meaning of the Banking Act.", "Facts": "The entity, a corporation to which paragraph 51(xx) of the Constitution applies, is an Australian ADI that carries on a business of taking deposits and making advances of money. The entity provides stored value facilities (prepaid card facilities) for a fee. When a prepaid card facility is provided to a customer, the customer loads value onto the facility. The value loaded onto the facility by the customer is not loaded onto the card itself. The card is then signed and activated for use by either the customer or by someone to whom the customer gives the card ('cardholder'). The prepaid card facility does not allow value to be loaded onto the facility in foreign currency. Cardholders make purchases of goods or services from merchants, by swiping the prepaid card through the merchants' payment system terminals. The prepaid card facility may also be used to make purchases via phone, internet or point of sale from any merchant who accepts this kind of prepaid card. The entity maintains an electronic record of issued prepaid card facilities in its computer system. Such records show the initial value of each prepaid card facility, and the balance of the prepaid card facility after the initial value has been debited for transactions between cardholders and merchants. A prepaid card facility's balance recorded by the entity is used for the purposes of authorising future transactions between the cardholder and merchants. The cardholder can ascertain the balance of unused value available on the product over the internet, or by calling an information line. In addition, the terms and conditions of the prepaid card facilities may vary in the following aspects:", "Reasons_for_Decision": "Summary: Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Subsection 40-5(1) of the GST Act provides that a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides a financial supply has the meaning given by the GST Regulations. Amongst other things, subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply. Paragraph (a) of Item 1 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 1) refers to an interest in or under an account made available by an Australian ADI in the course of its banking business within the meaning of the Banking Act. | Detailed Reasoning - Account: The dictionary to the GST Regulations defines an account as follows: Account: (a) means an account mentioned in item 1 in the table in regulation 40-5.09; and (b) includes an account in relation to which the account holder (the customer) has the right: (i) to have the account maintained by the account provider (the provider); and (ii) to repayment of the amount credited to the account by the provider; and (iii) to require the provider to act on directions by the customer that are in accordance with the arrangements, or any agreement, between the provider and the customer in relation to operation of the account. The term 'account' in paragraph (a) of the above definition is not defined further in the GST Regulations. In the present case, the entity maintains a formal record of the prepaid card facility in its computer system to track the remaining balance of each prepaid card facility. The record is a running balance that at least shows the unused balance for a given card, and depending on the facility, may also show credit and debit transactions made on the prepaid card facility. The term 'account' is considered in paragraphs 202-206 of Goods and Services Tax Ruling GSTR 2002/2 Goods and services tax : GST treatment of financial supplies and related supplies and acquisitions ; and paragraphs 51-54 of Goods and Services Tax Ruling GSTR 2004/1 Goods and services tax : reduced credit acquisitions . Consistent with the discussion in those rulings, we conclude the prepaid card facility in this case is an 'account' for the purpose of paragraph (a) of Item 1. | Detailed Reasoning - Made available: A cardholder can ascertain the unused balance available on the cardholder's prepaid card facility over the internet, or by calling an information line. Also, the unused balance on a cardholder's facility is what is accessed when the cardholder makes purchases from merchants using a payment system terminal. Accordingly, we consider that the prepaid card facility in this case, can be said to be an account 'made available' to the cardholder for the purposes of Item 1. | Detailed Reasoning - Banking business: 'Banking business' is defined in subsection 5(1) of the Banking Act as: The leading High Court authority on the meaning of the term 'banking' is Commissioner State Savings Bank of Victoria v. Permewan Wright & Co Ltd (1914) 19 CLR 457. There, Isaacs J at 470 - 1 described the essential characteristics of the business of banking as: ... the collection of money by receiving deposits on loan, repayable when and as expressly or impliedly agreed upon, and the utilization of the money so collected by lending it again in such sums as are required. These are the essential functions of a bank as an instrument of society. It is, in effect, a financial reservoir receiving streams of currency in every direction, and from which there issue outflowing streams where and as required to sustain and fructify or assist commercial industrial or other enterprises or adventures. It is considered that the terms and features of the prepaid card facility fall within the characteristics identified by Isaacs J, such that the provision of the facility may be characterised as falling within the entity's business that consists of banking for the purposes of paragraph (a) of the definition of banking business. It is also considered that the provision of the prepaid card facility by the entity will satisfy the requirement of paragraph (b) of the definition of banking business. This is because the entity, being a corporation to which paragraph 51(xx) of the Constitution applies, is carrying on a business that consists, to any extent, of both taking money on deposit (otherwise than as part-payment for identified goods or services) and making advances of money. | Detailed Reasoning - Conclusion: We therefore consider that the prepaid card facility is an account made available in the course of the entity's banking business within the meaning of the Banking Act. Therefore, for the purposes of Item 1, the provision of the prepaid card facility by the entity is a provision of an interest in an account made available by an ADI in the course of its banking business within the meaning of the Banking Act.", "Date_of_Decision": "3 December 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2 | Goods and Services Tax Ruling GSTR 2004/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Taxable supply GST consideration GST financial supplies Accounts", "Case_References": "Commissioners of the State Savings Bank of Victoria v Permewan Wright & Co Ltd (1914) 19 CLR 457", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010225", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax Ruling GSTR 2004/1 | Keywords Goods and services tax Taxable supply GST consideration GST financial supplies Accounts"}
{"ATO_ID_Number": "ATO ID 2007/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of a responsible entity for a managed investment scheme", "Issue": "Is an entity, in its capacity as the responsible entity of a managed investment scheme (MIS), having the features specified below under 'Facts', entitled to register for goods and services tax (GST) under Division 23 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, the entity, in its capacity as the responsible entity of a MIS, having the features specified below under 'Facts', is entitled to register for GST under Division 23 of the GST Act.", "Facts": "The scheme is a MIS (not an agricultural scheme) under the Corporations Act 2001 (Corporations Act). The responsible is a public company that complies with the requirements of Division I of Part 5.C2 of the Corporations Act (which is about the responsibilities and powers of a responsible entity) and it provides responsible entity, investment and administration services in its operation of the MIS. The MIS has the following specific features:", "Reasons_for_Decision": "Summary: Subsection 23-10(1) of the GST Act provides that 'you may be registered if you are carrying on an enterprise (whether or not your GST turnover is at, above or below the registration turnover threshold)'. Section 195-1 of the GST Act provides that when the expression 'you' is used in the GST Act, it applies to entities generally. Therefore, the responsible entity of a MIS is entitled to register, in that capacity, under the GST Act if it is an 'entity' that is 'carrying on an enterprise'. | Detailed Reasoning - Entity: For GST purposes, the term 'entity' is defined by section 195-1 of the GST Act to have the meaning given by section 184-1 of the GST Act. The meaning given includes, at paragraph 184-1(1)(g) of the GST Act, a trust. However, at law a trust is not a legal person and cannot itself be a party to legal proceedings nor have other obligations placed on it. The trustee is the appropriate party. This is recognised in subsection 184-1(2) of the GST Act, which provides that the trustee in that capacity is taken to be the trust entity. In this case, under the MIS constitution, a custodian holds legal title to assets to which an investor has 'absolute and beneficial entitlement'. The separation of legal and beneficial interests in the portfolio assets, within the context of the MIS constitution, indicates the existence of a trust. Although the custodian holds legal title, it does so as agent of the responsible entity and, in the context of the MIS, it is the responsible entity that is trustee under subsection 601FC(2) of the Corporations Act. Given that each investor has a beneficial entitlement to the assets within its portfolio, a trust relationship exists between the responsible entity (as trustee) and each investor. Accordingly, from a structural perspective, there exists a collection of individual trusts. However, through the MIS, investors are collectively provided with benefits such as access to wholesale investments, consolidated reporting and the expertise of the responsible entity together with its agents. In addition to these benefits, there is also the requirement that all investors' cash contributions are processed through a single trust account held with an ADI. This pooling of funds provides the responsible entity with the practical means by which the activities of the MIS can be facilitated. The existence of a trust in respect of the single account held with the ADI, together with the above mentioned collectively provided benefits indicates a separate overall trust in existence for carrying on the MIS activities. In substance, the individual trusts co-exist with an overall trust relationship that practically facilitates the operation of the MIS activities. This overall trust relationship is regarded as a trust entity for the purposes of the GST Act. | Detailed Reasoning - Enterprise: As stated above, to be registered for GST, an entity must be carrying on an enterprise. 'Enterprise' is defined in section 9-20 of the GST Act to include an activity, or series of activities, done in the form of a business. In this regard, 'an activity or series of activities' are essentially any act or series of acts that an entity chooses to do. The acts can range from a single transaction to groups of related transactions or to entire operations of the entity. With regard to the words 'in the form of', they have the effect of extending the meaning of 'enterprise' beyond entities carrying on a business. Accordingly, an enterprise will include entities that carry out activities that, while they are not sufficient to meet the criteria of being regarded as a business, have the appearance or characteristics of business activities. In terms of trusts, a passive investment vehicle, for example a family discretionary trust (that merely holds shares and term deposits and receives investment income) will not be carrying on an enterprise. This is because it lacks the requisite actions to satisfy the enterprise test of activities done in the form of a business. However, a public unit trust will satisfy the enterprise test of activities done in the form of a business, notwithstanding that it may follow a passive investment mandate. The rationale in this case is that the public unit trust is established for commercial reasons and therefore exhibits the necessary business like activities to satisfy the stated enterprise test. As indicated above, there is an overall trust relationship facilitating the operation of the MIS activities. In the context of this overall trust relationship, the responsible entity necessarily undertakes activities, in exercising its investment discretions, managing the pooled monies and associated activities, that are of a commercial nature and therefore done in the form of a business. As such, the activities of the overall trust relationship are considered an enterprise. As it is the operation of the overall trust relationship which gives rise to cost reductions through carrying out transactional and administrative functions on a collective basis, it is the overall trust relationship that should be recognised for registration purposes. As such, it is the entity in its capacity of responsible entity of the MIS that should be registered for GST purposes in respect of the overall trust relationship.", "Date_of_Decision": "6 November 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-20 subsection 23-10(1) section 184-1 paragraph 184-1(1)(g) subsection 184-1(2) section 195-1", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling MT 2006/1 | Goods and Services Tax Determination GSTD 2006/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST registration Trustee", "Case_References": "", "Other_References": "Financial services - questions and answers - 13. Investor directed portfolio services", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20077", "Unmatched_Content": "Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling MT 2006/1 Goods and Services Tax Determination GSTD 2006/6 | Keywords Goods and services tax GST registration Trustee"}
{"ATO_ID_Number": "ATO ID 2006/245", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and superannuation fund: supply of information about a member spouse's interest to a non-member spouse in accordance with the Family Law Act 1975", "Issue": "Is the entity, a trustee of a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993 ), liable for GST under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), in respect of the supply of information about a member spouse's superannuation interest to a non-member spouse in accordance with the requirements of the Family Law Act 1975 ?", "Decision": "Yes. The entity is liable for GST under section 9-40 of the GST Act on the supply of information about a member spouse's superannuation interest to a non-member spouse in accordance with the requirements of the Family Law Act, as the entity makes a taxable supply of the information under section 9-5 of the GST Act.", "Facts": "The Family Law Legislation Amendment (Superannuation) Act 2001 allows the parties to a marriage to make a superannuation agreement, in the context of a financial agreement. The agreement specifies how a superannuation interest will be divided when the parties separate. Superannuation agreements will be binding if they comply with the requirements of Pt VIIIB of the Family Law Act. When a superannuation agreement is binding, the entity will be required by law to give effect to the agreement. If the parties are unable to agree about how to divide a superannuation interest on separation, the court will have the power to make an order about a superannuation interest that will bind the third party superannuation trustee. An order about a superannuation interest will be made in proceedings for a property order under section 79 of the Family Law Act. Such an order will usually be made as part of a broader court order dealing with any property not covered by a financial agreement. In order to calculate the value of a superannuation interest, the parties to a superannuation agreement or the court will need certain information from the entity. The entity must provide information, on request from an eligible person, about the superannuation interest of a member. Only the member, a spouse of the member and a person who intends to enter into a superannuation agreement with the member (that is, under a pre-nuptial superannuation agreement) can be an eligible person. A person applying for information from the entity must make a declaration that the information is required for either or both of the following purposes: The entity is registered for GST purposes, and charges a fee for the provision of such information (connected with Australia) in the course of the enterprise that it carries on. There are no facts to indicate that a GST-free supply has been made.", "Reasons_for_Decision": "Summary: In accordance with section 9-40 of the GST Act, an entity is liable for GST on any taxable supply that it makes. Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement in section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 47 of Goods and Services Tax Ruling GSTR 2001/6 provides that there needs to be a supply, a payment and the necessary relationship between the supply and the payment. Subsection 9-10(1) of the GST Act provides that a 'supply' is any form of supply whatsoever. Without limiting this meaning, paragraphs 9-10(2)(c) and 9-10(2)(f) of the GST Act respectively state that a 'supply' includes: Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. The entity's provision of information about a member spouse's superannuation interest to the non-member spouse for a fee is a supply for consideration. The positive requirements of section 9-5 of the GST Act are satisfied. Therefore it is necessary to consider whether the supply made is GST-free or input taxed. The facts of the case do not suggest that the supply is GST-free under Division 38 of the GST Act. Therefore, it needs to be considered whether the supply is an input taxed supply under Division 40 of the GST Act. Section 40-5 of the GST Act establishes that a financial supply is input taxed and has the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). In accordance with regulation 40-5.09(1) of the GST Regulations, the provision, acquisition or disposal of an interest in or under a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993 ) is a financial supply where the provision, acquisition or disposal of that interest is: In this case, the entity provides an interest in a regulated superannuation fund (financial interest) to the member only-this being a financial supply. The supply of information by the entity to the non-member spouse is a separate supply. Consequently, any payment made by the non-member spouse is for the information and is not in connection with the financial supply made by the entity to the member spouse. There is no item in subregulation 40-5.09(3) of the GST Regulations that mentions the supply of information by the entity to the non-member spouse. Accordingly, the entity does not make an input taxed financial supply to the non-member spouse. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it provides information about a member spouse's superannuation interest to a non-member spouse. The entity will be liable for GST under section 9-40 of the GST Act.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) paragraph 9-10(2)(c) paragraph 9-10(2)(f) subsection 9-15(1) section 9-40 section 40-5", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/246", "Subject_References": "Goods and services tax GST financial supplies GST superannuation funds Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006245", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 | Keywords Goods and services tax GST financial supplies GST superannuation funds Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2006/246", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and superannuation fund: supply of information about a member's interest to the member in accordance with the Family Law Act 1975", "Issue": "Is the entity, a trustee of a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993 ), liable for GST under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), in respect of the supply of information about a member's superannuation interest to the member in accordance with the requirements of the Family Law Act 1975 ?", "Decision": "No. The entity is not liable for GST under section 9-40 of the GST Act on the supply of information about a member's superannuation interest to a member, as the supply is made input taxed under section 40-5 of the GST Act.", "Facts": "The Family Law Legislation Amendment (Superannuation) Act 2001 allows the parties to a marriage to make a superannuation agreement, in the context of a financial agreement. The agreement specifies how a superannuation interest will be divided when the parties separate. Superannuation agreements will be binding if they comply with the requirements of Pt VIIIB of the Family Law Act. When a superannuation agreement is binding, the entity will be required by law to give effect to the agreement. If the parties are unable to agree about how to divide a superannuation interest on separation, the court will have the power to make an order about a superannuation interest that will bind the third party superannuation trustee. An order about a superannuation interest will be made in proceedings for a property order under section 79 of the Family Law Act. In order to calculate the value of a superannuation interest, the parties to a superannuation agreement or the court will need certain information from the entity. The entity must provide information, on request from an eligible person, about the superannuation interest of a member. Only the member, a spouse of the member and a person who intends to enter into a superannuation agreement with the member (that is, under a pre-nuptial superannuation agreement) can be an eligible person. A person applying for information from the entity must make a declaration that the information is required for either or both of the following purposes: The entity is registered for GST purposes, and charges a fee for the provision of such information (that is connected with Australia) in the course of the enterprise that it carries on. There are no facts to indicate that a GST-free supply has been made.", "Reasons_for_Decision": "Summary: In accordance with section 9-40 of the GST Act, an entity is liable for GST on any taxable supply that it makes. Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement in section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 47 of Goods and Services Tax Ruling GSTR 2001/6 provides that there needs to be a supply, a payment and the necessary relationship between the supply and the payment. Subsection 9-10(1) of the GST Act provides that a 'supply' is any form of supply whatsoever. Without limiting this meaning, paragraphs 9-10(2)(c) and 9-10(2)(f) of the GST Act respectively state that a 'supply' includes: Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. The entity's provision of information about a member's superannuation interest to the member for a fee is a supply for consideration. The positive requirements of section 9-5 of the GST Act are satisfied. It is therefore necessary to consider whether the supply made is GST-free or input taxed. The facts of the case do not suggest that the supply is GST-free under Division 38 of the GST Act. Therefore, it needs to be considered whether the supply is an input taxed supply under Division 40 of the GST Act. Section 40-5 of the GST Act establishes that a financial supply is input taxed and has the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). In accordance with regulation 40-5.09(1) of the GST Regulations, the provision, acquisition or disposal of an interest in or under a regulated superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993) is a financial supply where the provision, acquisition or disposal of that interest is: In this case, the entity provides an interest in a regulated superannuation fund (a financial interest mentioned in item 4 of subregulation 40-5.09(3)) to the member which comprises of a bundle of rights. By the entity providing information about the member's interest in the regulated superannuation fund to the member, the entity is giving effect to the member's financial interest. The provision of information to the member in this circumstance is a corollary of the financial interest supplied by the entity, and is therefore regarded to be a financial supply under subregulation 40-5.09(1) of the GST Regulations. Therefore, the entity is not liable for GST under section 9-40 of the GST Act as the provision of information about a member's superannuation interest to a member is an input taxed supply under section 40-5 of the GST Act.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) paragraph 9-10(2)(c) paragraph 9-10(2)(f) subsection 9-15(1) section 9-40 subsection 40-5(1) Subdivision 40-A", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/245", "Subject_References": "Goods and services tax GST financial supplies GST superannuation funds Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006246", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 | Keywords Goods and services tax GST financial supplies GST superannuation funds Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2006/283", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST financial supply: issue of bonus shares", "Issue": "Is the entity, a company incorporated in Australia, but entering into a Dual Listed Company (DLC) agreement with an entity in another country, making an input taxed financial supply under regulation 40-5.09 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), when it issues bonus shares for the purpose of equalising the rights attaching to the ordinary shares of both entities in the combined enterprise?", "Decision": "No. The entity is not making an input taxed financial supply under regulation 40-50.9 of the GST Regulations when it issues the bonus shares.", "Facts": "Entity A enters into a 'Dual Listed Company' (DLC) agreement with entity B, which has no presence in Australia. Under the DLC agreement, the two entities will operate as if they were a single economic enterprise while remaining as separate legal entities. The DLC agreement requires the ordinary shares of entity A and entity B to be equal in terms of the dividend, capital and voting rights attaching to each share. In the implementation process of the agreement, it is found that the ordinary shareholders of the entity A have greater interests per share in the combined enterprise than the shareholders of the entity B. To achieve the equality that is sought between the ordinary shares of the two entities, entity A needs to issue a certain number of bonus shares to its existing shareholders. The issue of the bonus shares does not result in any change in the equitable interest of existing shareholders, their voting rights, or their entitlements to dividends. Existing shareholders are not required to make any payments to receive these bonus shares. The proposal to enter into the DLC agreement needs to be approved by shareholders of both entities.", "Reasons_for_Decision": "Summary: The issue of the bonus shares by the entity is a supply of an interest in or under securities as mentioned in item 10 of subregulation 40-5.09(3) of the GST Regulations. For such a supply to be a financial supply, subregulation 40-5.09(1)(a)(i) of the GST Regulations requires it to be made for consideration. Consideration as used in the GST Regulations has the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Consideration is defined in section 195-1 of the GST Act to mean 'any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition'. For there to be a supply of an interest 'for consideration', there must be sufficient nexus between the consideration and the particular supply. In the present case, there has been no monetary consideration provided for the issued bonus shares. The payments made by shareholders in originally acquiring the shares held at the time of the bonus share issue, do not constitute consideration for the issue of bonus shares. The nexus between those payments made and the supply of the bonus shares is too remote. In addition, there has been no consideration provided in a non-monetary form. An act or a forbearance that is in connection with a supply of anything, or in response to or for the inducement of a supply of anything may also constitute consideration for a supply (section 9-15(1) of the GST Act). However, the act of voting to approve the DLC agreement by the shareholders is not considered to constitute consideration for the issue of the bonus shares. The act of voting and the issue of the bonus shares are both part of the machinery of the DLC process. There is not sufficient nexus between the act of voting and the issue of the bonus shares to make one consideration for the other. As there is no consideration for the supply of the interests in or under the securities, being the bonus shares, the supply is not a financial supply under regulation 40-5.09 of the GST Regulations. It should be noted that this ATO ID does not apply to bonus shares issued in factual circumstances other than those set out above.", "Date_of_Decision": "22 September 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1 section 9-15 section 9-17", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6 | Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bonus shares Dual Listed Companies Financial instruments Goods and services tax GST consideration GST debt securities GST financial supplies Input taxed supplies Securities Shares", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006283", "Unmatched_Content": "Good and Services Tax: A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Amended by inserting section 9-17. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 Goods and Services Tax Ruling GSTR 2002/2 | Keywords Bonus shares Dual Listed Companies Financial instruments Goods and services tax GST consideration GST debt securities GST financial supplies Input taxed supplies Securities Shares"}
{"ATO_ID_Number": "ATO ID 2012/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Goods and Services Tax: Reduced credit acquisitions and investment banking services acquired by a takeover target", "Issue": "Is the entity (target entity), acquiring a reduced credit acquisition under item 9 in the table in subregulation 70-5.02(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), when it acquires investment banking services to assist in considering a takeover bid by way of a scheme of arrangement proposal, and the subsequent implementation of a scheme of arrangement so that the target entity shareholders dispose of their shares to the bidder entity?", "Decision": "Yes, the target entity is acquiring a reduced credit acquisition under item 9 in the table in subregulation 70-5.02(2) of the GST Regulations (Item 9), when it acquires investment banking services to assist in considering a takeover bid by way of a scheme of arrangement proposal, and the subsequent implementation of a scheme of arrangement so that the target entity shareholders dispose of their shares to the bidder entity.", "Facts": "The target entity receives a takeover bid by way of a scheme of arrangement proposal under section 411 of the Corporations Act 2001 from the bidder entity. The bidder entity proposes to acquire the target entity shares from the target entity's shareholders (shareholders) by way of the target entity and its shareholders entering into a scheme of arrangement to transfer the shares to the bidder entity. The bidder entity will provide consideration to the target shareholders by way of cash or the bidder entity shares (or a combination of both). The target entity will not itself be disposing of the relevant shares or making a financial supply directly relating to the takeover transaction. The target entity engages an investment bank to assist it in relation to the potential disposal of target entity shares from its shareholders to the bidder entity. The investment bank provides an overall arranging and co-ordination role in relation to the scheme proposal for the target entity. This includes considering the offer and assisting with the target entity's decisions about whether to recommend the bid to the shareholders, developing bid response strategies, negotiating with the bidder, assisting with execution of the proposed transaction by a scheme of arrangement, including the preparation of scheme booklets provided to shareholders and other regulatory approvals. The target entity and its directors decide that the bid is in the best interests of the company and its shareholders, and recommend that the shareholders accept the bid. The target entity commences the scheme of arrangement process and the shareholders vote in favour of the scheme. The scheme receives court approval and the shareholders' shares are transferred to the bidder entity, in return for the bidder entity providing consideration to the shareholders. Unrelated to the takeover, the target entity has a division of its ongoing enterprise that makes input taxed financial supplies (ongoing financial supplies). The target entity exceeds the financial acquisitions threshold for the purposes of subsection 11-15(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and to the extent that acquisitions relate to the ongoing financial supplies the target entity treats these acquisitions as not being for a creditable purpose under Division 11 of the GST Act. The target entity has established that the acquisition of investment banking services in respect of the takeover bid relates to the overall operation of its enterprise and the structure of the entity and is therefore partly related to its ongoing financial supplies. This ATO ID only discusses that part of the acquisition that relates to the target entity making input taxed ongoing financial supplies that would not be acquired for a creditable purpose under paragraph 11-15(2)(a) of the GST Act, but for the operation of Division 70 of the GST Act. Subsection 70-5(1A) of the GST Act does not apply. The disposal of the shares by the target entity shareholders via a transfer executed by a scheme of arrangement is a disposal of an interest in a security under subsection 92(1) of the Corporations Act 2001 , and is therefore a disposal of a security for the purposes of Item 9, and a 'financial interest' listed in Item 10 in the table in subregulation 40-5.09(3) of the GST Regulations.[0]", "Reasons_for_Decision": "Summary: In some cases, specific acquisitions (referred to as reduced credit acquisitions) that relate to making input taxed financial supplies may attract a reduced input tax credit, even though no input tax credit would ordinarily arise under Division 11 of the GST Act (subsection 70-5(1) of the GST Act). The first requirement to determine if an entity is acquiring a reduced credit acquisition is whether the acquisition 'relates to making financial supplies' (subregulation 70-5.02(1) of the GST Regulations). As the acquisition relates to input taxed supplies (i.e. the 'ongoing financial supplies') for paragraph 11-15(2)(a) of the GST Act, it is also taken to relate to making financial supplies for the purposes of subsection 70-5(1) of the GST Act (paragraph 48 of Goods and Services Tax Ruling GSTR 2004/1). The second requirement is to determine if the nature of the acquisition is one that is listed in one of the Items of the table in subregulation 70-5.02(2). Having met the first requirement the acquisition's connection to the relevant financial supply (for example, ongoing financial supplies of the target entity), will not be relevant unless the specific requirements of a particular Item require a more stringent nexus to a particular type of supply (paragraph 48 of GSTR 2004/1). In this regard the second requirement is separate; it involves an assessment as to whether the acquisition meets the description in a particular Item. For example, Item 16, 'supplies to a credit union' and Item 25 'brokerage of general ... insurance' do not refer to any particular category of financial supply. Because the disposal of the shares by the shareholders is not a supply made by the target entity this does not impact on the extent to which acquisition 'relates to making financial supplies' (paragraph 102 of Goods and Services Tax Ruling GSTR 2008/1). However this does not prevent the disposal of the shares being relevant in characterising if the service is of the kind described in Item 9. | Detailed Reasoning - Item 9 - arrangement of securities transactions: Item 9 provides that 'Arrangement, by a financial supply facilitator of the provision, acquisition or disposal of an interest in a security...' is a reduced credit acquisition. Paragraphs (a) to (i) of Item 9 then provide illustrative examples of such acquisitions (paragraph 216 of Goods and Services Tax Ruling GSTR 2002/2), including paragraph (e) 'arranging mergers and acquisitions'. It is important to note that Item 9 only identifies the supplier of the service (the financial supply facilitator) it does not specify who the recipient must be. This varies from Item to Item in the table, some other Items specify the recipient of the supply, for example Item 8 'to a third party', Item 10 'the securities and unit issuers', and Item 16 'supply to a credit union'. As such for the purposes of Item 9 it is not relevant that the target entity shareholders, rather than the target entity are disposing of the securities. Rather, it is a question of assessing if the supplier is in fact a financial supply facilitator and if its services can be characterised as arranging for the disposal of the target shareholders' shares. | Detailed Reasoning - Financial supply facilitator: For Item 9 to apply, the entity providing the service must be a financial supply facilitator. 'Financial supply facilitator' is defined in the Dictionary of the GST Regulations by reference to regulation 40-5.07 of the GST Regulations which says 'A financial supply facilitator, in relation to supply of an interest, is an entity facilitating the supply of the interest for a financial supply provider'. The shareholders are disposing of target entity shares that were immediately before the supply their property, it follows that they are a financial supply provider (paragraph 40-5.06(1)(a) of the GST Regulations). As such it needs to be determined if the investment bank facilitates the disposal of the securities for the shareholders. An entity 'facilitates' a supply when its activities have the effect of helping forward or assisting the relevant supply of an interest, rather than those that simply assist the financial supply provider (paragraph 31 of GSTR 2004/1). The focus is the facilitator's '... role in a particular transaction' (paragraph 33 of GSTR 2004/1) and the relationship with a particular supply, rather than whether the recipient of that service is necessarily making the particular supply. As such, a financial supply facilitator can also provide a service to a recipient (target entity) that involves facilitating a supply made by a third party (the shareholders). The role the target company has in negotiating, assessing and implementing a scheme of arrangement proposal, and the role and influence it has in regard to whether the takeover or merger is successful, gives rise to a situation where it is capable of acquiring a service that still has an 'identifiable association' with the relevant supply by the shareholders. The activities of financial supply facilitator must relate to and assist a particular supply, not merely contemplated supplies (paragraph 32 of GSTR 2004/1). Goods and Services Tax Determination GSTD 2007/1 clarifies that the scope of 'contemplated supplies' does not include the situation where an entity has formed the intent (as evidenced by the surrounding circumstances) to make a specific type of supply. Accordingly, an 'intended supply' is a 'particular supply' such that the activities of an entity clearly directed towards assisting in the making of the intended financial supply will retain the character of a financial supply facilitator. This also establishes that a 'particular supply' does not mean that each recipient of the each individual supply needs to be specifically identifiable at the time of providing the relevant facilitation service. In this case, the target entity has engaged the investment bank to assist in the intended disposal of the shareholders' securities because a takeover bid process has commenced and this is sufficient to meet the requirements that there is a particular financial supply. In this context it is considered evident that the investment bank is assisting and helping forward particular supplies being the disposal of the shareholders' securities therefore the investment bank is a financial supply facilitator in relation to the supply of securities. | Detailed Reasoning - Arrangement of the disposal of the securities: The remaining requirement in Item 9 is to determine if the investment bank's service as a financial supply facilitator constitutes 'arrangement' of the disposal of the shareholders' securities. Paragraph 287 of GSTR 2004/1 indicates that in the context of a securities transaction, arrangement activities are those relating to the 'preparation for the transaction, the planning of the transaction and the settlement of the details of the transaction'. The investment banking services in this case provide an overall co-ordinating role in the assessment and negotiation of the takeover bid and then the steps in the scheme of arrangement process. The nature of the services have a sufficient connection to the preparation, planning and settlement of the disposal of the shareholders' securities to be described as 'arranging' that transaction. Therefore the investment bank is providing arrangement services for the disposal of the shareholders' securities for the purposes of Item 9. Further support regarding the application of Item 9 is the specific example of 'arranging mergers and acquisitions' in paragraph (e) of Item 9. Mergers and acquisitions is not a defined term but is generally understood to include takeovers by way of one company taking a controlling interest in the shares of another. A merger inherently implies the involvement of two corporate entities it is therefore a reasonable conclusion that paragraph (e) contemplates a service of arranging the transaction for either of the merging corporate entities. | Detailed Reasoning - Conclusion: In summary, the services acquired can be related back to an identified supply of the interests in the shares to the bidder entity by the shareholders. The provision of the investment bank's services to the target entity is capable of assisting in this supply and the investment bank is therefore a financial supply facilitator. Similarly the investment bank's services have a sufficient connection and scope to be considered arranging for the shareholders to dispose of their shares. Therefore the investment banking services are an acquisition of arrangement by a financial supply facilitator of the disposal of securities and therefore qualify as a reduced credit acquisition for the purpose of Item 9. Related Public Rulings (Including Determinations)", "Date_of_Decision": "3 February 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 11-15(2)(a) subsection 11-15(4) subsection 70-5(1) subsection 70-5(1A)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2 | Goods and Services Tax Ruling GSTR 2004/1 | Goods and Services Tax Ruling GSTR 2008/1 | Goods and Services Tax Determination GSTD 2007/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Reduced credit acquisitions Input taxed supplies GST financial supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201211", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax Ruling GSTR 2004/1 Goods and Services Tax Ruling GSTR 2008/1 Goods and Services Tax Determination GSTD 2007/1 | Keywords Reduced credit acquisitions Input taxed supplies GST financial supplies"}
{"ATO_ID_Number": "ATO ID 2010/176", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and termination payment relating to assignment of payment streams", "Issue": "Is Entity A providing consideration for a taxable supply made by Entity B under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when Entity A makes a payment in the course of exercising its right to terminate an agreement relating to the assignment of payment streams relating to loans from Entity B?", "Decision": "Yes, Entity A is providing consideration for a taxable supply under section 9-5 of the GST Act when it makes a payment to Entity B in the course of exercising its right to terminate the agreement.", "Facts": "Entity B, a financier, enters into an agreement with Entity A under which Entity A is obliged to accept any sale notice offered by Entity B for loans it makes to third parties (specifically the equitable assignment of the payment streams relating to the loans). Each sale and purchase of these loans under the relevant sale notice is a separate financial supply. The agreement provides that Entity A's obligation terminates on a stipulated date (called the termination date), which may be extended at the sole discretion of Entity A. The agreement's termination clause provides that prior to each termination date Entity A at its sole discretion determines whether to extend this date. A determination by Entity A not to extend the termination date requires a formal notification, accompanied by a termination payment, to Entity B. The amount of the payment decreases with each extension of the current termination date. Entity A exercises its right under the agreement not to extend the termination date and it pays the required termination amount to Entity B. Entity A and Entity B both carry on enterprises and are both registered for GST. Their relevant dealings with each other are conducted entirely within Australia.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that you make a taxable supply if: Subsection 9-10(1) of the GST Act provides that a 'supply is any form of supply whatsoever'. Subsection 9-10(2) of the GST Act provides a non-exhaustive list of things that are included as supplies. The Commissioner's view on the meaning of 'supply' is set out in Goods and Services Tax Ruling GSTR 2006/9 Goods and Services Tax : Supplies (GSTR 2006/9). GSTR 2006/9, sets out a number of propositions to assist in analysing a transaction to identify supplies made in the transaction. Proposition 5 is that to 'make a supply' an entity must 'do something'. The action required by proposition 5 does not have to be the supply itself. If an entity takes some action that causes a supply to occur, that can be sufficient (paragraph 74 of GSTR 2006/9 and Hornsby Shire Council v. Commissioner of Taxation [2008] AATA 1060; 2008 ATC 10-061; 71 ATR 442). In agreeing to the termination date clause on entry into the agreement rather than each time the exercise of the Entity A's discretion fell due, Entity B has 'done something' for purposes of Proposition 5. Proposition 9 of GSTR 2006/9 is that the creation of expectations alone does not establish a supply. When the entities entered into the agreement, they were bound by its specific provision that extension of the termination date would be at the sole discretion of Entity A. This was more than simply the creation of expectations as contemplated in Proposition 9. The principles discussed in Goods and Services Tax Ruling GSTR 2009/3 Goods and services tax : cancellation fees (GSTR 2009/3) are also relevant to determining this issue. GSTR 2009/3 recognises a 'release supply' when a customer exercises their contractual right to be released from the performance of their obligations, for which they agree to pay a cancellation fee as consideration. The termination in this instance is not a breach of the contract (paragraphs 51-58 of GSTR 2009/3). Paragraph 55 of GSTR 2009/3 states: ...the Commissioner's view is that, if it is not consideration for any other supply, a cancellation fee may be consideration for the creation or surrender of rights and/or a release supply that occurs when an arrangement is cancelled, and/or a combination of these supplies under paragraph 9-10(2)(h). In the context of the overall operation of the agreement, formal notification of termination, making the appropriate payment, may be viewed as having similar characteristics to the early termination (or cancellation fee) scenarios described in GSTR 2009/3. Paragraph 18 of GSTR 2009/3 notes that a supply for which a cancellation fee may be consideration can be 'a release from an obligation to do anything, refrain from an act or tolerate an act or situation'. Entity A exercised unfettered discretion as to whether to extend the termination date or not. Entity B was a passive participant in relation to this process. Thus, in exercising its discretion not to extend and in paying the required termination amount, Entity A acquired a release from Entity B in relation to its ongoing obligations under the agreement, but did not acquire rights from Entity B (nor did Entity B surrender any rights). Paragraph 55 of GSTR 2009/3 contemplates that a 'release supply' may stand alone from a supply that is constituted by the 'creation or surrender of rights' and the release supply that occurred in this case was a release by Entity B of Entity A's relevant obligations under the agreement. This 'release supply' is made for consideration, in the course or furtherance of Entity B's enterprise, it is connected with Australia, and Entity B is registered for GST. The supply is not GST-free. Therefore it is a taxable supply except to the extent, if any, to which it is input taxed. The obligations entered into on entry into the agreement are not themselves the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or (4) of the A New Tax System (Goods and Services Tax) Regulations 1999 and as such are not input taxed financial supplies. Each specific financial supply is made under the terms set out by the relevant sale notice which specifies the price and terms under which the loans are sold. Both entities' obligations continue to exist for these loans after the termination date. The termination payment is therefore not consideration for these earlier financial supplies. It follows that this current situation is not analogous to early termination payments relating to loans, because there is not sufficient nexus between the underlying supplies that were made prior to the termination date and the termination payment. The termination payment does not change the consideration of the earlier financial supplies of the sale of loans. As the 'release supply' is not an input taxed supply, Entity A is providing consideration for a taxable supply under section 9-5 of the GST Act when it makes a payment to Entity B in the course of exercising its right to terminate the agreement.", "Date_of_Decision": "15 September 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) subsection 9-10(2) paragraph 9-10(2)(h)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2009/3 | Goods and Services Tax Ruling GSTR 2006/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST debt, loan and credit GST financial supplies Input taxed supplies Securitisation", "Case_References": "Hornsby Shire Council v Commissioner of Taxation [2008] AATA 1060 2008 ATC 10-061 71 ATR 442", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010176", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2009/3 Goods and Services Tax Ruling GSTR 2006/9 | Keywords Goods and services tax GST debt, loan and credit GST financial supplies Input taxed supplies Securitisation"}
{"ATO_ID_Number": "ATO ID 2007/158", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and finance leases and securitisation arrangements", "Issue": "Is a lessor of goods providing an interest in or under a debt under item 2 in the table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) when it assigns its right to the receivables arising from its finance lease agreements, together with all its interests in the underlying leased goods, to a special purpose vehicle (SPV) under a securitisation arrangement?", "Decision": "Yes, the entity is providing an interest in or under a debt under item 2 in the table in subregulation 40-5.09(3) of the GST Regulations when it assigns its right to the receivables arising from its finance lease agreements, together with its interests in the underlying leased goods, to a SPV under a securitisation arrangement.", "Facts": "The lessor is a GST registered entity (the entity) in the business of leasing certain types of equipment. The entity enters into finance lease agreements with its customers. The entity has entered into an arrangement with a SPV to securitise its receivables (payments to be made by lessees) arising from the lease agreements. Under the arrangement the lessor entity assigns, to the SPV, its rights to the receivables together with all of its interest in the leased goods. Under the securitisation arrangement, the entity is to be: The assignment of the receivables to the SPV is equitable only. The SPV does not take any steps to perfect its title to the assigned receivables, unless a title perfection event occurs-in which case the SPV would register its ownership and notify the entity's customers to direct payments to it. The entity's right to the receivables and its interests in the leased goods will be assigned to the SPV at an agreed price. There is no allocation of prices between the assigned receivables and other interests in the goods. The SPV will fund the acquisition of the receivables by issuing debt instruments. The SPV would not normally register its interest in either the receivables or the underlying goods in government security registers.", "Reasons_for_Decision": "Detailed Reasoning - The legislation: Under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given in the GST Regulations. Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 2 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 2) lists an interest in or under a debt, credit arrangement or right to credit, including a letter of credit. | Detailed Reasoning - Securitisation arrangements: The Glossary to Goods and Services Tax Ruling GSTR 2002/2 Goods and services tax: treatment of financial supplies and related supplies and acquisitions, states that a securitisation arrangement is the process whereby an entity packages and converts legal or beneficial title, to future receivables and kindred assets, into marketable debt securities which are traded in the capital market. Paragraph 18 of Goods and Services Tax Ruling GSTR 2004/4 Goods and services tax: assignment of payment streams including under a typical securitisation arrangement, states that the main feature of a securitisation arrangement is the establishment of a SPV under either trust or corporations law. The purpose of the SPV is to acquire a pool of receivables and any associated collateral rights from an originating institution. The SPV pays for the assets by issuing debt securities (or notes) backed by the asset pool. | Detailed Reasoning - The receivables: Paragraph 30 of GSTR 2004/4 states: Provided there has been an effective legal or equitable assignment of a right to all or part of a payment stream, or an agreement to assign the right to a payment stream that arises in the future there will be the supply of an interest in or under a debt. This is a financial supply under item 2 of subregulation 40-5.09(3) provided the requirements of subregulation 40-5.09(1) are also satisfied. In the current case, whilst the receivables arising from the financing agreements may not be due and payable at the time that the assignment occurs, it is accepted that the due dates specified in the relevant agreements are effective in ensuring that a payment stream arises in the future. As such, the assignment of the right to this payment stream constitutes an assignment of an interest in a debt. | Detailed Reasoning - Other interests in the financed equipment: As well as assigning the receivables arising from the lease agreements, the entity also assigns all of its interests in the underlying goods. At the time of entering into a finance lease, the lessor entity retains legal title in the underlying goods and there is no clause in the lease agreement that provides the lessee with an option to obtain ownership of the goods. During the term of the finance lease, there is only a supply of the right to use the goods. When considering all of the circumstances surrounding the assignment, it is concluded that the assignment of the entity's interests in the underlying goods does not result in a sale of the goods by the entity to the SPV for GST purposes. The assignment of any interests in the underlying goods effectively operates as a security for the SPV's right to the payment stream. This conclusion is based on the following facts: This conclusion is also consistent with the accounting treatment of finance lease agreements. Paragraph 21 of Accounting Standard, AASB 117 Leases, states that in substance, the lessee has acquired the economic benefits of the use of the underlying equipment for the major part of its economic life by entering into an obligation to pay for that right. The amount it will pay will approximate, at the inception of the lease, the fair value of the underlying equipment and the related finance charge. This indicates that by entering into a finance lease agreement with its customer, the entity has transferred substantially all the risks and rewards of ownership of the equipment to the lessee. It follows that neither the lessor, nor any other entity to whom the lessor assigns its interest in the goods, has any intention of taking on any of the risks or rewards of ownership. | Detailed Reasoning - GST consequences of the assignment: As previously stated, the entity's assignment of its right to the receivables arising from the finance lease agreements, together with all its interests in the underlying goods, is effectively an assignment of the right to a payment stream together with security interests over that payment stream. As the assignment contains two parts, that is, the right to a payment stream and some security interests, the GST consequence of such an assignment will depend on whether these two parts need to be recognised separately or if they are components of a single supply. Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts, provides the Commissioner's view on how to determine whether parts in a supply should be separately recognised for GST purposes or if in fact they are integral, ancillary and incidental to a dominant supply. Applying the principles provided in GSTR 2001/8 to the current circumstances, it is considered that the entity's assignment of its right to the receivables arising from the finance lease agreements, together with all its interests in the underlying leased goods, involves a composite supply of a right to a payment stream with related security interests being incidental or integral to the right to the payment stream. This view is based on the analysis of the arrangement as a whole, taking into account all circumstances and indicators surrounding the transaction. The composite supply of a right to a payment stream is a supply of an interest in a debt. If the other requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied, the entity will make an input taxed financial supply when it assigns its rights to the receivables arising from the finance lease agreements together with its rights in the underlying leased goods.", "Date_of_Decision": "21 May 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/8 | Goods and Services Tax Ruling GSTR 2002/2 | Goods and Services Tax Ruling GSTR 2004/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST financial supplies Input taxed supplies", "Case_References": "", "Other_References": "Accounting Standard AASB 117 Leases", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007158", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/8 Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax Ruling GSTR 2004/4 | Keywords Goods and services tax GST financial supplies Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2012/66", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Goods and Services Tax and redemption of redeemable preference shares", "Issue": "Does an entity make a financial supply under subregulation 40-5.09(1) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) when it redeems redeemable preference shares from its shareholders?", "Decision": "Yes, the entity makes a financial supply under subregulation 40-5.09(1) of the GST Regulations when it redeems redeemable preference shares from its shareholders.", "Facts": "The entity is a company that is registered for GST. The entity has several classes of shares on issue to its shareholders, including redeemable preference shares, which are all fully paid up. All the entity's redeemable preference shareholders are in Australia. The entity issues a redemption notice to holders of its redeemable preference shares. The notice requires each holder of the redeemable preference shares to deliver to the entity the certificates for all such shares held, by the redemption date. On the redemption date: Each shareholder delivers their redeemable preference share certificates, as required under the notice. The company pays each shareholder for their redeemable preference shares. The company cancels the redeemable preference shares. The redemption process complies with all requirements of the Corporations Act 2001 .", "Reasons_for_Decision": "Summary: Subsection 40-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a financial supply has the meaning given by the GST Regulations. Regulation 40-5.02 of the GST Regulations gives the meaning of 'interest' as anything that is recognised at law or in equity as property in any form. The GST Regulations relevantly provides that the provision, acquisition or disposal of an interest listed in the table in subregulation 40-5.09(3) of the GST Regulations is a financial supply if the requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied. Securities are listed at item 10 in the table in subregulation 40-5.09(3) of the GST Regulations. Redeemable preference shares are securities for the purposes of the GST Regulations. It follows that an acquisition of an interest in redeemable preference shares (an acquisition-supply) is a financial supply if the requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied in relation to the acquisition. 'Acquisition', in relation to the provision and disposal of an interest, includes acceptance and receipt of the interest. Through the redemption process, the shareholders deliver their share certificates, thereby disposing of their interests in the redeemable preference shares. By taking delivery of the share certificates, the entity accepts and receives the interests. Accordingly, the entity acquires an interest in (makes an acquisition-supply of) the redeemable preference shares. The GST Regulations do not require that, following acquisition, the interest must be enduring. It is not relevant that the entity cancels the shares after it acquires them. For the acquisition-supply to be a financial supply, subregulation 40-5.09(1) of the GST Regulations requires that the acquisition must be for consideration, in the course or furtherance of an enterprise, and connected with Australia; and that the supplier is registered or required to be registered for GST, and is a financial supply provider in relation to the supply of the interest. A payment that is consideration for the supply of an interest acquired, may also be treated for GST purposes as consideration for the acquisition-supply of that interest (Authority for this view is found in AXA Asia Pacific Holdings Limited v. Commissioner of Taxation [2008] FCA 1834). Thus, the payment made to each shareholder for redemption of the redeemable preference shares is consideration for the entity's acquisition-supply of that interest. The entity acquires the interest in the course or furtherance of its enterprise and the acquisition was in connection with Australia. The company is registered for GST. Subregulation 40-5.06 of the GST Regulations provides that, in relation to the supply of an interest, the entity that acquires the interest is also the financial supply provider of the interest. Accordingly, the entity is also a financial supply provider in relation to supply of the interest. It follows that the entity meets the requirements of subregulation 40-5.09(1) of the GST Regulations in relation to the acquisition of the interest in redeemable preference shares and therefore makes a financial supply of the interest when it redeems the shares from its shareholders.", "Date_of_Decision": "9 July 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST financial supply Redeemable preference share", "Case_References": "AXA Asia Pacific Holdings Limited v Commissioner of Taxation [2008] FCA 1834 (2008) 2008 ATC 20-074 (2008) 71 ATR 1", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201266", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST financial supply Redeemable preference share"}
{"ATO_ID_Number": "ATO ID 2010/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and annual maintenance fees paid under a time-sharing scheme", "Issue": "Is the annual maintenance fee payable by a participant in a time-sharing scheme for levy periods commencing on or after 20 December 2000, consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No. The annual maintenance fee payable by a participant in a time-sharing scheme for levy periods commencing on or after 20 December 2000, is not consideration for a taxable supply. It is consideration for an input taxed financial supply of an interest in the time-sharing scheme.", "Facts": "The time-sharing scheme is a registered managed investment scheme under the Corporations Act 2001 . The responsible entity, in its capacity as the responsible entity for the time-sharing scheme, is registered for GST. This entity will be referred to as 'the scheme'. Before 1 July 2000, the scheme supplied timeshare interests to entities that became participants in the time-sharing scheme. Under the Constitution of the scheme, the timeshare interest provides a participant a number of rights including an accommodation entitlement to use and occupy apartments for specified periods of time, extending beyond 20 December 2000. The supply of each of these timeshare interests is a supply for a continuous period. The scheme's supply of a timeshare interest to a participant from 1 July 2000 until 20 December 2000 was a taxable supply under section 9-5 of the GST Act. To the extent that the supply of a timeshare interest is made to the participant on or after 20 December 2000, it is a financial supply that is input taxed under subsection 40-5(1) of the GST Act. The scheme levies an annual maintenance fee on participants. The Constitution imposes the obligation upon a participant to pay the annual maintenance fee when it is due. The annual maintenance fee is based on the scheme's annual costs divided by the number of timeshare interests issued. The Constitution of the scheme provides the scheme with the power to suspend the rights of a participant to access accommodation if they do not pay the annual maintenance fee levied by the scheme. The timeshare interests held by a participant may also be forfeited and sold by the scheme for non-payment of annual maintenance fees.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Under subsection 40-5(1) of the GST Act, the supply of a timeshare interest on or after 20 December 2000 is an input taxed financial supply. Consideration for GST purposes is defined in section 195-1 of the GST Act to mean any consideration, within the meaning given by sections 9-15 and 9-17 of the GST Act, in connection with the supply or acquisition. Section 9-15 of the GST Act expands on the meaning of 'consideration for a supply'. Under subsection 9-15(1) of the GST Act, a payment will be consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply of anything. The test of whether a payment is consideration under subsection 9-15(1) of the GST Act is whether there is sufficient nexus between the supply and the payment made. In Berry v. Federal Commissioner of Taxation (1953) 89 CLR 653; (1953) 10 ATD 262; (1953) 5 AITR 591, the High Court considered the meaning of consideration 'for or in connection with' in the context of former section 84 of the Income Tax Assessment Act 1936 , a provision which included consideration for or in connection with goodwill in a lease premium. In this case, Kitto J. held that 'in connection with' was a broader test than 'for'. At CLR 659, his Honour commented that consideration will be in connection with property where: the receipt of the payment has a substantial relation, in a practical business sense, to that property. To determine whether there is sufficient nexus between a supply and consideration, the true character of the transaction must be considered. The payment of the annual maintenance fee confers no rights, goods or services to participants other than the ability to exercise the accommodation entitlement associated with the timeshare interest. Payment of the annual maintenance fee is essential for a participant to maintain its continuing interest in the time-sharing scheme. There is sufficient nexus between the supply of the timeshare interest and the annual maintenance fee paid by a participant for the fee to be characterised as consideration for the supply of the interest. The annual maintenance fee payable by a participant for levy periods commencing on or after 20 December 2000 is, therefore, not consideration for a taxable supply as it is consideration for an input taxed financial supply of an interest in a time-sharing scheme under subsection 40-5(1) of the GST Act.", "Date_of_Decision": "19 January 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-15 subsection 9-15(1) section 9-17 subsection 40-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST financial supplies Taxable supply Input taxed supplies GST time share Securities", "Case_References": "Berry v Federal Commissioner of Taxation (1953) 89 CLR 653 (1953) 10 ATD 262 (1953) 5 AITR 591", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201023", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Amended by inserting section 9-17 and removing inverted commas. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. | Keywords GST financial supplies Taxable supply Input taxed supplies GST time share Securities"}
{"ATO_ID_Number": "ATO ID 2010/125", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and acquisition of an interest in a Delaware limited liability company", "Issue": "Is an entity acquiring an interest as a single member in a limited liability company (LLC) formed in the United States of America (US), acquiring 'securities' under item 10 in the table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)?", "Decision": "Yes, the entity acquiring an interest as a single member in a LLC formed in the US is acquiring 'securities' under item 10 in the table in subregulation 40-5.09(3) of the GST Regulations.", "Facts": "The entity carries on an enterprise in Australia and is registered for GST. The LLC is established under the US State of Delaware's Limited Liability Company Act (Del.) (LLC Act). Under the LLC Act, an LLC is not required to issue shares, its 'owners' are called members and sole membership of a LLC is permitted. The LLC is a separate legal entity and a body corporate. When the entity becomes a member of the LLC it acquires the associated interest, called a limited liability company interest (LLC interest), which represents the member's share of the LLC's profits and losses and the member's right to receive distributions of the LLC's assets. Note : the facts above may not apply to all LLC's. Whilst the LLC Act sets out standard rules in relation to the operation of LLC's, in some instances the LLC Act allows an LLC to vary these rules via its operating agreement.", "Reasons_for_Decision": "Summary: Subregulation 40-5.09(3) of the GST Regulations itemises financial interests that are financial supplies if all of the requirements in subregulation 40-5.09(1) are satisfied in relation to the provision, acquisition or disposal of them. Item 10 in the table in subregulation 40-5.09(3) (Item 10) is about 'securities'. The Dictionary to the GST Regulations, states that 'securities' has the meaning given by subsection 92(1) of the Corporations Law (repealed and re-enacted as the Corporations Act 2001 (Corporations Act)). Under subsection 92(1), 'securities' includes 'shares in a body'. For Item 10 purposes, 'securities' has an extended meaning, which includes 'capital of a partnership'. 'Partnership' is defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to have the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). A single member US LLC may be treated as a partnership for income tax purposes by the operation of the foreign hybrid company provisions in Division 830 of the ITAA 1997. However, Division 830 is not considered to extend the 'meaning' of partnership given by section 995-1 of the ITAA 1997. It follows that the LLC is not a partnership for purposes of the GST Act. As the LLC is a 'body corporate' it is a 'body' for the purpose of the definition of securities (section 9 of the Corporations Act). As a body corporate, it is also a company as defined in section 195-1 of the GST Act. While 'share' is not defined in the Corporations Act, the Corporations Law defined the term to mean 'share in the share capital of a body'. Though now repealed, this was similar, but arguably narrower in scope than the GST Act definition, which is that 'share' in a company means a share in the capital of the company and includes stock. The GST Act definition is the same as paragraph (a) of the definition of 'shares' in section 995-1 of the ITAA 1997. The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 7) 2003 (enacted as Taxation Laws Amendment Act (No. 1) 2004 which introduced the foreign hybrids provisions into Division 830 of the ITAA 1997) states that based on the broad meaning of 'share' in the ITAA 1997, 'shareholder' includes a member of a US LLC. While there is no direct referencing to these definitions from Item 10, we consider that contextually for Item 10 purposes, the meaning of a 'share' in a body needs to be consistent with the GST Act definition. The Explanatory Memorandum to the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1)1999 (which as enacted repealed the definition of 'share' in the Corporations Law) indicated the removal of the definition was to allow for the issue of shares (for example membership shares) which had no 'share capital' attached. Other amendments to the Corporations Act have introduced 'no par value' shares and the ability to issue bonus shares without increasing total share capital (see Note 3 of subsection 254A(1) of the Corporations Act). As it is no longer specifically defined for Corporations Act purposes, we consider the meaning of 'share' in these circumstances should take into account the context in which it is used in the GST Act and Regulations. It is recognised that the LLC does not issue share instruments to record the interests of members. However, the entity's LLC interest entitles it to a proportionate share of the LLC's profits, and assets on distribution (in this case 100% as it is the only member). It follows that the entity has a proportionate share in the LLC's capital (as a measure of its interest in the company) which is consistent with the GST Act definition of shares. It is also broadly equivalent to a share in the share capital of a company (limited by shares). We consider that contextually the LLC interest the entity acquires falls within the subsection 92(1) of the Corporations Act meaning of the term 'shares in a body' and therefore the meaning of 'securities' for Item 10 purposes. We therefore conclude that the Australian entity is acquiring an Item 10 interest in or under securities when it acquires a 'limited liability company interest' and becomes the single member of an LLC.", "Date_of_Decision": "21 December 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/77", "Subject_References": "Goods and services tax GST financial supplies Input taxed supplies Securities", "Case_References": "", "Other_References": "Explanatory Memorandum to the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 1)1999 Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 7) 2003", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010125", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST financial supplies Input taxed supplies Securities"}
{"ATO_ID_Number": "ATO ID 2010/129", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agriculture: managed investment scheme - supply of an interest in the managed investment scheme", "Issue": "Are payments made by the participants consideration for an input taxed supply of an interest in a forestry managed investment scheme by reason of item 10 in the table to subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)?", "Decision": "Yes. The payments made by the participants are consideration for an input taxed supply of an interest in a forestry managed investment scheme by reason of item 10 in the table to subregulation 40-5.09(3) of the GST Regulations.", "Facts": "The Scheme, a 'forestry managed investment scheme' as defined in subsection 394-15(1) of the Income Tax Assessment Act 1997, involves the establishment and tending of trees for felling in Australia. The Scheme Constitution establishes the Scheme and, in relation to the participants, provides: Under the Scheme documents the participants do not acquire an interest in the land and do not enter into an agreement for the management of the plantation. In relation to the RE the Constitution provides:", "Reasons_for_Decision": "Summary: Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 ( GST Act), an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Section 40-5 of the GST Act provides that financial supplies are input taxed and that these supplies have the meaning given by the GST Regulations. Under subregulation 40-5.09(1) of the GST Regulations, the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) is a financial supply if the provision, acquisition or disposal is: the supplier is: Item 10 in the table in subregulation 40-5.09(3) of the GST Regulations includes an interest in or under securities. Securities are defined in the GST Regulations to take the meaning provided in subsection 92(1) of the Corporations Act 2001 ( Corporations Act). Paragraph 92(1)(c) of the Corporations Act provides that 'interests in a managed investment scheme' (MIS) are securities for the purposes of that Act. Section 9 of the Corporations Act provides that 'interest' in a managed investment scheme means a right to benefits produced by the scheme (whether the right is actual, prospective or contingent and whether it is enforceable or not); 'benefit' includes any benefit, whether by way of payment of cash or otherwise; and 'managed investment scheme' means: In this case: Therefore, the supply of a forestry interest under the Scheme is the provision of an interest in or under a security for the purposes of item 10 in the table in subregulation 40-5.09(3) of the GST Regulations. Amounts payable by participants of the Scheme are set out in the Constitution. Application monies can be paid as a single payment or as regular contributions. After the initial application monies a participant must also pay to the RE the: These fees are calculated having regard to the participant's proportional interest in the Scheme; and are payable to the RE by way of deduction from the product sale proceeds, insurance proceeds (if any) or other plantation income. Where the other requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied, the provision of the interest in the item 10 security is an input taxed financial supply if the above application monies and fees are consideration for the provision of that interest. Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration ( paragraphs 64-72), Goods and Services Tax Ruling GSTR 2000/11 Goods and services tax: grants of financial assistance ( paragraphs 76-81) and Goods and Services Tax Ruling GSTR 2009/3 Goods and services tax: cancellation fees ( paragraphs 98-99) contain the Commissioner's views on determining whether a payment is consideration for a supply. The relevant principles repeated in these paragraphs are that in determining whether a payment is consideration under subsection 9-15(1) of the GST Act, the test is whether there is a sufficient nexus between the supply and the payment made; in determining whether a sufficient nexus exists, regard needs to be had to the true character of the transaction; an arrangement between parties will be characterised not merely by the description which parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made; and whether there is a sufficient nexus is an objective test. The Scheme documentation provides that a participant will receive a proportional amount of the income of the Scheme (after deducting all amounts the RE is entitled to deduct from that income); and makes it clear that the participant does not acquire an interest in the plantation land or the product. What the participants acquire is the right to share in the net proceeds of the Scheme. On an objective determination, having regard to the true character of this transaction and all the circumstances mentioned above, the participant's contributions have a sufficient nexus to the provision of the interest in the item 10 security. Consequently, all of the participant's contributions are regarded as consideration for the supply of the interest in the Scheme. Where the supply of the interest in the scheme meets the remaining conditions set out in subregulation 40-5.09(1) of the GST Regulations, the supply is an input taxed financial supply of an interest in a forestry managed investment scheme.", "Date_of_Decision": "5 May 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-15(1) section 40-5", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/11 | Goods and Services Tax Ruling GSTR 2001/6 | Goods and Services Tax Ruling GSTR 2009/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Input taxed supplies GST financial supplies GST supply GST regulations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010129", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/11 Goods and Services Tax Ruling GSTR 2001/6 Goods and Services Tax Ruling GSTR 2009/3 | Keywords Goods and services tax Input taxed supplies GST financial supplies GST supply GST regulations"}
{"ATO_ID_Number": "ATO ID 2010/156", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and treatment of a currency hedge agreement embedded within a contract for services", "Issue": "Does the agreement, described in the facts, involve each entity making a financial supply of an interest in a derivative under item 11 in the table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations)?", "Decision": "Yes, under the agreement described in the facts, each entity makes a financial supply by providing the other entity with an interest in a derivative under item 11 in the table in subregulation 40-5.09(3) of the GST Regulations.", "Facts": "Entities A and B both carry on an enterprise and are registered for GST. Their relevant dealings with each other are conducted in Australia. Entity A makes a taxable supply of services to Entity B. Under the supply contract, the supply is made over a period of time with the consideration being payable in set periodical amounts expressed in United States dollars (USD). The entities subsequently insert a separate agreement (the agreement) into the supply contract to partially hedge against the risk of loss through exchange rate fluctuations. The agreement protects Entity A against an appreciating Australian dollar and Entity B against a depreciating Australian dollar (AUD). The agreement results in each entity making a foreign exchange gain or loss each time a payment is made. It involves a four-step calculation by which the amounts payable in USD are altered to reflect changes in the exchange rate. To explain the steps, example figures are included in brackets where the AUD has appreciated against the USD over the relevant period. Step 1: Each payment to be made in USD (for example USD 200) is divided into two equal parts ('1' and '2') (USD 100 each). Step 2: Part 2 is converted into Australian dollars (AUD) at the exchange rate that prevailed at a specified time on the contract date (converting USD 100 at the contract date exchange rate of AUD 1 = USD 0.80, Part 2 becomes AUD 125). Step 3: The AUD amount, calculated in step 2, is then converted back to USD at the exchange rate prevailing at a specified time on the day of the payment. (Converting AUD 125 at the payment date exchange rate of AUD 1 = USD 0.90, Part 2 becomes USD 112.50). Step 4: Parts 1 and 2 are then added back to give the total amount payable in USD. (USD 100 + USD 112.50 = total amount payable USD 212.50) If movements in the exchange rate from the contract date to the day of payment cause the AUD to appreciate against the USD (as in the example figures above), Entity A will make a gain under the hedge agreement and Entity B will make a corresponding loss. Alternatively, if exchange rate fluctuations cause the AUD to depreciate against the USD, the reverse will apply.", "Reasons_for_Decision": "Summary: Subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that 'financial supply' has the meaning given by the GST Regulations. Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations (a financial interest) is a financial supply if: However, the provision of a financial interest will not be a financial supply where the provision is a feature of a transaction which is objectively assessed as being integral, ancillary or incidental to the essential character of the transaction. A supply in which the provision of a financial interest forms merely an integral, ancillary or incidental part is a composite supply. A composite supply is treated as the supply of a single thing and for GST purposes assumes the character of the dominant part. If the dominant part of such a supply is services, the composite supply is treated as a taxable supply if it satisfies the requirements of section 9-5 of the GST Act. This is explained in GSTR 2001 / 8 : apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8). The particular feature under consideration in the facts of this case is the insertion of the agreement by which the entities could hedge against exchange rate gains and losses. The value for the supply of services under the supply contract has been negotiated by the entities and fixed in United States dollars (USD). Despite this, the entities have embedded a foreign currency hedge into the supply contract by inserting the agreement. The Dictionary to the GST Regulations defines derivative as 'an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate'. Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 11) mentions an interest in or under a derivative. Part 9 of Schedule 7 of the GST Regulations provides examples for Item 11. Included in the examples listed in Part 9 are 'forward contracts, futures contracts, swap contracts and options contracts the value of which depends on, or is derived from:...foreign exchange or currency values or currency index values'. Schedule 1 to Goods and Services Tax Ruling GSTR 2002/2 : GST treatment of financial supplies and related supplies and acquisitions , observes that entities usually use derivatives to hedge against changes in interest rates and foreign exchange risks or to minimise business risks. In the facts of this case, the effect of the agreement is to provide a currency hedge in a form similar to the financial instruments mentioned in Part 9 of Schedule 7 of the GST Regulations above. Because the value of the currency hedge under the agreement depends on, or is derived from, changes in the AUD/USD exchange rate, the currency hedge is a 'derivative' as defined in the Dictionary to the GST Regulations. By inserting the agreement into the supply contract, the entities have provided each other with an interest in a derivative, within the meaning of Item 11. In providing each other with the interest in a derivative, the entities are providing each other with non-monetary consideration. This is consistent with the view explained in GST Determination GSTD 2005 / 3 : are contracts for difference and financial spread betting contracts financial supplies ? (GSTD 2005/3). On an objective assessment, the supply of the interest in the derivative by Entity A to Entity B is separately identifiable and retains its own identity within the supply contract. It is not merely integral, ancillary or incidental to the essential character of the transaction, and as such the supply of which it is part is not a composite supply. With each payment, the difference between amounts calculated under steps 1 and 4 in the facts is the effect of the currency hedge. It may be owing by either entity, depending on movements in the exchange rate. Consistent with the explanation in GSTD 2005/3, it is additional consideration for the supply of the interests. In accordance with regulation 40-5.06 of the GST Regulations, each entity is the financial supply provider in relation to the provision of an interest in a derivative. The provision of each interest is for consideration. Each entity is registered for GST and it provides the interest in the course or furtherance of its enterprise. The supply of each interest is connected with Australia. All the requirements in subregulation 40-5.09(1) of the GST Regulations are satisfied, and regulation 40-5.12 of the GST Regulations does not apply. It follows that the provision of the interest by each entity is a financial supply of a derivative under Item 11.", "Date_of_Decision": "1 September 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-85 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Good and Services Tax Ruling GSTR 2001/2 | Good and Services Tax Ruling GSTR 2001/8 | Good and Services Tax Ruling GSTR 2002/2 | Goods and Services Tax Determination GSTD 2005/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Taxable supply GST consideration GST derivatives GST financial supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010156", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Good and Services Tax Ruling GSTR 2001/2 Good and Services Tax Ruling GSTR 2001/8 Good and Services Tax Ruling GSTR 2002/2 Goods and Services Tax Determination GSTD 2005/3 | Keywords Goods and services tax Taxable supply GST consideration GST derivatives GST financial supplies"}
{"ATO_ID_Number": "ATO ID 2010/198", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agricultural managed investment scheme - pre-establishment acquisitions", "Issue": "Is the entity entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for acquisitions made to set-up and promote a forestry managed investment scheme, prior to the establishment of the scheme?", "Decision": "Yes. The entity is entitled to input tax credits under section 11-20 of the GST Act, for acquisitions made to set-up and promote the forestry managed investment scheme, prior to the establishment of the scheme.", "Facts": "The scheme: The scheme constitution establishes the scheme and in relation to the participants provides: Under the scheme documents the participants do not acquire an interest in the land and do not enter into an agreement for the management of the plantation. The contributions of money by the participant to the scheme, and the property acquired (directly or indirectly) with the contributions of money, are 'scheme property' as defined by the Corporations Act. Under subsection 601FC(2) of the Corporations Act, the RE holds such scheme property on trust for the participants. Under paragraph 184-1(1)(g) of the GST Act such a trust is an entity for GST purposes ('trust entity'). A trust (and therefore a trust entity) logically comes into existence when subsection 601FC(2) of the Corporations Act operates to create a trust over the scheme property. The scheme's documentation does not provide for a trust coming into existence at an earlier point in time, and therefore there is a trust entity established at the time there is scheme property (as defined in the Corporations Act). The constitution provides: Prior to there being scheme property (as defined in the Corporations Act), the entity makes acquisitions to set up and promote the scheme, including acquisitions of: After there is scheme property (as defined in the Corporations Act), the entity makes acquisitions that relate solely to the management of the participants' interests in the scheme, including the necessary accounting and legal services. The entity also makes acquisitions (after the scheme is established) that relate solely to carrying on the agricultural enterprise, including:", "Reasons_for_Decision": "Summary: Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisitions that it makes. Under section 11-5 of the GST Act, an entity makes a 'creditable acquisition' if: 'Creditable purpose' is defined in section 11-15 of the GST Act as follows: Goods and Services Tax Ruling GSTR 2008 / 1 Goods and services tax : when do you acquire anything or import goods solely or partly for a creditable purpose (GSTR 2008/1) explains the Commissioner's approach to determining whether an acquisition relates to the making of supplies that would be input taxed. GSTR 2008/1 states at paragraph 119: For the purposes of paragraph 11-15(2)(a) of the GST Act a sufficient connection is established if, on an objective assessment of the surrounding facts and circumstances, the acquisition is used, or intended to be used, solely or to some extent for the making of supplies that would be input taxed. Paragraph 128 of Miscellaneous Tax Ruling MT 2006 / 1 Miscellaneous Tax : the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number states that activities undertaken to establish an entity, for example drawing up a trust deed and the settlement of trust property are not commencement activities. This is because the trust cannot commence activities until it is in existence. By reason of the scheme documentation, the Corporations Act and paragraph 184-1(1)(g) of the GST Act, there is scheme property held on trust, and therefore a trust entity for the GST, at the time the trust relationship is established under subsection 601FC(2) of the Corporations Act. Consequently, for the purposes of section 11-5 of the GST Act, any acquisitions made prior to there being a trust entity can only be made by the entity in its corporate capacity, that is, the acquisitions cannot be made by the entity in its capacity as trustee of the trust entity, as the trust entity does not yet exist. For the purposes of 11-15(1) of the GST Act, these acquisitions are acquired by the entity in carrying on its enterprise. Although the trust entity (once it exists) will make input taxed supplies to participants, the entity in its corporate capacity does not make input taxed supplies in relation to the establishment of the scheme. Therefore, for the purposes of paragraph 11-15(2)(a) of the GST Act, the acquisitions made by the entity do not relate to making input taxed supplies. Because the acquisitions made to set-up and promote the scheme are made by the entity in carrying on its enterprise, and the acquisitions do not relate to the entity making input taxed supplies, the acquisitions are made for a creditable purpose. Provided the other requirements of section 11-5 of the GST Act are met, the entity will be entitled to input tax credits under section 11-20 of the GST Act for such acquisitions.", "Date_of_Decision": "26 October 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 section 11-15 subsection 11-15(1) paragraph 11-15(2)(a) section 11-20 subsection 184-1(1)(g)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2008/1 | Miscellaneous Tax Ruling MT 2006/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/129 | ATO ID 2010/196 | ATO ID 2010/197 | ATO ID 2010/199", "Subject_References": "Goods and services tax Input taxed supplies GST financial supplies GST input tax credits & creditable acquisitions", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010198", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2008/1 Miscellaneous Tax Ruling MT 2006/1 | Keywords Goods and services tax Input taxed supplies GST financial supplies GST input tax credits & creditable acquisitions"}
{"ATO_ID_Number": "ATO ID 2007/15", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and right to a share of net profit in return for a contribution of money - not a credit arrangement", "Issue": "Is an entity making an input taxed supply of an interest in a credit arrangement under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it contributes an amount to another entity's business in return for a right to a share of the net profit from the other entity's business?", "Decision": "No. The entity is not making an input taxed supply of an interest in a credit arrangement under subsection 40-5(1) of the GST Act when it contributes an amount to another entity's business in return for a right to a share of the net profit from the other entity's business.", "Facts": "The entity enters into an arrangement with another entity (the enterprise operator). Under the terms of the arrangement, the entity agrees to contribute an amount of money as consideration for the right to receive a share of the net revenue of the enterprise operator's business at a certain rate up to the extent of the contribution amount, and thereafter, at a lesser rate. In the event that the enterprise operator makes a loss, the entity will receive nothing. There is no separate obligation of the enterprise operator to repay any of the contribution amount to the entity. The entity is registered for goods and services tax (GST) and the arrangement entered into is connected with Australia.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 2 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 2) lists an interest in or under a debt, credit arrangement or right to credit, including a letter of credit. Paragraphs 37 to 41, of Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax: GST treatment of financial supplies and related supplies and acquisitions, state that a loan involves the supply of an interest in or under a credit arrangement by the lender to the borrower and the supply of an interest in or under a debt (that includes any interest payable) by the borrower to the lender. The term 'credit arrangement' is defined in the Glossary of Terms in GSTR 2002/2 as: an arrangement under which an entity lends money on terms that include deferred repayment, or under which payment of a debt owed by one entity to another is deferred or time is allowed to pay. The term 'debt' is defined in GSTR 2002/2 as: an amount due from one entity to another or a presently existing obligation to pay an ascertainable amount at a future time. For common law purposes, the essence of a loan is that it involves the obligation to repay the amount borrowed ( Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 72 FCR 300; 97 ATC 4151; (1997) 34 ATR 635) and it requires the existence of a debtor-creditor relationship. The enterprise operator has no obligation under the arrangement to repay the amount contributed, either in circumstances where its business generates a profit, or where no profit is made. Where the business does generate a profit, the share of the net profit which the entity is entitled to receive may be much greater than the amount that it originally contributes. An interest in a debt includes an interest in a contingent debt, which is a debt, based on an existing obligation, that will or might arise at a future time or if a future event occurs. However, the enterprise operator does not provide an interest in either a debt or a contingent debt to the entity. Although contingent in nature, the amount that the entity may receive under the arrangement is just an entitlement to a percentage share of the actual net revenue from the enterprise operator's business. The arrangement entered into by the entity therefore does not have the characteristics of a loan, because there is no presently existing obligation for the enterprise operator to repay the amount contributed, now or in the future, and there is no debtor-creditor relationship. For GST purposes, the arrangement does not involve either the making of a loan or the supply of an interest in a credit arrangement under item 2 by the entity to the enterprise operator. The arrangement is not an arrangement under which the entity lends money on terms that include deferred repayment, or under which payment of a debt is owed by the enterprise operator. As the requirements of subregulation 40-5.09(1) of the GST Regulations are not satisfied, the entity does not make an input taxed financial supply of an interest in a credit arrangement under subsection 40-5(1) of the GST Act.", "Date_of_Decision": "21 December 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/16 | ATO ID 2007/17 | ATO ID 2007/18", "Subject_References": "Goods and services tax GST regulations GST supplies & acquisitions GST supply Input taxed supplies GST financial supplies GST debt, loan and credit", "Case_References": "Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 72 FCR 300 97 ATC 4151 (1997) 34 ATR 635", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200715", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Goods and services tax GST regulations GST supplies & acquisitions GST supply Input taxed supplies GST financial supplies GST debt, loan and credit"}
{"ATO_ID_Number": "ATO ID 2007/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and right to a share of net profit in return for a contribution of money - not an interest in a debt", "Issue": "Is the entity, a business operator, making an input taxed supply of an interest in a debt under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it grants a right to a share of the net profit from its business to another entity in return for the contribution of an amount of money?", "Decision": "No. The entity is not making an input taxed supply of an interest in a debt under subsection 40-5(1) of the GST Act when it grants a right to a share of the net profit from its business to another entity in return for the contribution of an amount of money.", "Facts": "The entity is a business operator and enters into an arrangement with another entity (the financier). Under the terms of the arrangement, in return for the contribution of an amount of money by the financier, the entity grants the financier a right to receive a share of the net revenue from its business at a certain rate up to the extent of the contribution amount and thereafter at a lesser rate. In the event that the enterprise operator makes a loss, the entity will receive nothing. There is no separate obligation of the enterprise operator to repay any of the contribution amount to the entity. The entity is registered for goods and services tax (GST) and the arrangement entered into is connected with Australia.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 2 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 2) lists an interest in or under a debt, credit arrangement or right to credit, including a letter of credit. The term 'debt' is defined in the Glossary of Terms, in Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax: GST treatment of financial supplies and related supplies and acquisitions, as: an amount due from one entity to another or a presently existing obligation to pay an ascertainable amount at a future time. Under the terms of the arrangement there is no presently existing obligation for the entity to repay the amount contributed by the financier, either now or in the future. Where the business makes a loss, the entity has no obligation to pay any amount to the financier. Where the business generates a profit, the share of the net profit which the financier is entitled to receive may be much greater than the amount that it originally contributes. An interest in a debt includes an interest in a contingent debt which is a debt, based on an existing obligation, that will or might arise at a future time or if a future event occurs. However, the entity does not provide an interest in a contingent debt to the financier. Although contingent in nature, the amount that the financier may receive under the arrangement is just a percentage share of the actual net revenue from the entity's business. The arrangement therefore does not involve the provision by the entity to the financier of an interest in or under a debt under item 2. The supply that the entity makes to the financier is a right to a share of the net proceeds (if any) from the operation of the entity's business. The amount contributed by the financier is consideration for the supply of that right and not for the provision of any interest in a debt. As the requirements of subregulation 40-5.09(1) of the GST Regulations are not satisfied, the entity does not make an input taxed financial supply of an interest in a debt under subsection 40-5(1) of the GST Act.", "Date_of_Decision": "21 December 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/15 | ATO ID 2007/17 | ATO ID 2007/18", "Subject_References": "Goods and services tax GST regulations GST supplies & acquisitions GST supply Input taxed supplies GST financial supplies GST debt, loan and credit", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200716", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Goods and services tax GST regulations GST supplies & acquisitions GST supply Input taxed supplies GST financial supplies GST debt, loan and credit"}
{"ATO_ID_Number": "ATO ID 2007/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and contingent debt", "Issue": "Is an entity making a supply of an interest in a debt under sub-regulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) when it enters into an agreement to repay an amount to a contributor under certain circumstances?", "Decision": "Yes, the entity makes a supply of an interest in a debt under sub-regulation 40-5.09(3) of the GST Regulations when it enters into an agreement to repay an amount to a contributor under the circumstances given in the facts.", "Facts": "The entity makes an agreement with another entity (the contributor). The agreement provides:", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given in the GST Regulations. Sub-regulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under sub-regulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 2 in the table in sub-regulation 40-5.09(3) of the GST Regulations (Item 2) lists an interest in or under a debt. | Detailed Reasoning - Whether there is a supply of an interest in a debt under the agreement: Under the agreement the entity enters into an obligation to repay the money advanced, provided the project is sufficiently profitable, and the profitability has been confirmed by an audit to be completed within a specified timeframe. The entity has a contingent liability when it enters into the agreement. The liability to repay the contribution, or a portion of it, is contingent upon a financial audit finding available funds. On the happening of that event, the contingent liability matures into a debt due and payable. A debt, based on an existing obligation, that will or might arise at a future time or if a future event occurs, has been defined as a 'contingent debt' by Butterworths Australian Legal Dictionary , 1997, Sydney. It follows that an amount that may become payable by the entity under the agreement is a contingent debt at the time of entering into the agreement. | Detailed Reasoning - Whether 'debt' includes 'contingent debt' for the purposes of Item 2: The contributor's interest in or under the contingent debt arising out of the agreement will be an interest in or under a debt for Item 2 if a contingent debt is recognised as a debt for the purposes of the GST Regulations. The GST Regulations do not define the term 'debt', however the Courts have held that contingent debts may be debts for the purposes of other legislation. In Hawkins & Ors v. Bank of China (1992) 26 NSWLR 562, the New South Wales Court of Appeal considered whether the contingent liability undertaken by a guarantor, when entering into a guarantee, is a debt at the time of entering into the guarantee. The question arose in the context of section 556 of the Companies (New South Wales) Code (Companies Code). Per Gleeson CJ (at 572): '\"Debt\" is capable of including a contingent liability.... Dictionaries define \"debt\" as a liability or obligation to pay or render something. Such a liability may be conditional as well as present and absolute...' Hawkins & Ors v. Bank of China was applied in Commissioner of State Taxation (WA) v. Pollock 93 ATC 5220; (1993) 27 ATR 108 where the issue before the court was whether the Commissioner of State Taxation could bring a claim against a director for unpaid payroll tax due from the company of which Pollock was a director. The court concluded that the balance of authority was to the effect that a contingent debt is capable of being a debt for the purposes of section 556 of the Companies Code. A conclusion that an interest in a debt includes an interest in a contingent debt for the purposes of item 2 is consistent with the above decisions. This conclusion is also consistent with the views of the Tax Office stated in Goods and Services Tax Ruling GSTR 2004/4 Goods and Services Tax: assignment of payment streams including under a securitisation arrangement. Paragraphs 81 to 82 of GSTR 2004/4 state: A hire purchase agreement gives rise to a presently existing right to receive regular payments from the debtor. In some circumstances receipt of the final payment may be contingent on the option to purchase the goods being exercised . Even though the payment may be subject to a contingency, the right to the payment stream, under an existing hire purchase agreement, is a presently existing right that is property and an interest for the purposes of regulation 40-5.02. Assignment of this property is the disposal of an interest in a debt for GST purposes ..' (emphasis added) Similarly, paragraphs 83 to 84 of GSTR 2004/4 state: The supply that is the subject of a royalty agreement or licence is a taxable supply where the requirements of section 9-5 are satisfied. The agreement or licence may provide for payment of royalties that is subject to contingences such as certain production levels being reached or commodity prices achieving certain levels . Even though payments may be subject to contingencies, the right to the payment stream, under an existing agreement or licence, is a presently existing right that is property and an interest for the purposes of regulation 40-5.02. Assignment of this property is the disposal of an interest in a debt for GST purposes ... (emphasis added) That is, the right to receive these contingent payments is an interest in a debt for the purposes of Item 2. The hire purchase agreement, royalty agreement and license referred to above are agreements under which there is a presently existing obligation to make a payment in the future subject to a contingency. The same may be said of the agreement between the entity and the contributor. In the agreement there is a presently existing obligation to make a payment in the future subject to a contingency. Therefore, consistent with the Tax Office view that the right to receive the contingent payments under the hire purchase agreement, royalty agreement or license is an interest in a debt, the right to receive the contingent payment under the agreement is also an interest in a debt for the purposes of Item 2. As the interest in the debt was created by the entity in making the supply, the entity is a financial supply provider under sub-regulation 40-5.06(1) of the GST Regulations. Provided the other requirements of sub-regulation 40-5.09(1) of the GST Regulations are met, the supply of the interest in the debt will be a financial supply.", "Date_of_Decision": "11 January 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2004/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST debt, loan and credit GST financial supplies GST regulations GST supplies & acquisitions GST supply Input taxed supplies", "Case_References": "Commissioner of State Taxation (WA) v. Pollock 93 ATC 5220 (1993) 27 ATR 108", "Other_References": "Butterworths Australian Legal Dictionary, 1997, Sydney", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200729", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2004/4 | Keywords Goods and services tax GST debt, loan and credit GST financial supplies GST regulations GST supplies & acquisitions GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2007/32", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and transaction information supplied by an ADI - client's own transaction", "Issue": "Is an entity, an Australian authorised deposit-taking institution (ADI), making a financial supply under subregulation 40-5.09(4) of the A New Tax System (Goods and Services Tax) Regulations 1999 (the GST Regulations) when it provides transaction information, for not more than $1,000, to a client who is not an account holder with the entity and the information relates to the client's own transaction.", "Decision": "Yes, the entity is making a financial supply under subregulation 40-5.09(4) of the GST Regulations when it provides transaction information, for not more than $1,000, to a client who is not an account holder and the information relates to the client's own transaction.", "Facts": "The entity is an Australian ADI that carries on a banking business within the meaning of the Banking Act 1959 . The entity provides transaction information to clients, some of whom do not hold accounts with the entity. The applicable fee for each request does not exceed $1,000. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given by the GST Regulations. Subregulation 40-5.09(1) of the GST Regulations states that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 1 in the table in subregulation 40-5.09(3) of the GST Regulations lists, as a financial supply, an interest in or under an account made available by an Australian ADI in the course of: In regard to a client that is an account holder, the entity makes a supply of an interest in an account which is a financial supply. Regulation 40-5.11 of the GST Regulations states: Something mentioned in a Part of Schedule 7 that relates to a financial supply mentioned in an item in the table in regulation 40-5.09 . . . is an example of the financial supply mentioned in the item . . . Note 1: The examples are not to be taken as exhaustive. Note 2: If an example in Schedule 7 is inconsistent with the description in this Division of the financial supply to which the example relates, the description prevails. . . Note 3: Something that is within the scope of an item in the table in regulation 40-5.09 will be a financial supply described in that item even if it is not mentioned as an example of the item . . . Part 1 of Schedule 7 to the GST Regulations provides examples of services and products which relate to the supply of an interest in an account made available by an Australian ADI. It follows that each of the services or products mentioned in Part 1 of Schedule 7 is an example of a financial supply - being the supply of an interest in an account under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations. The following listed examples have a similar context to the provision of transaction information, in the way that they relate to the supply of an account by an Australian ADI: The provision of transaction information is consistent with these examples. It is within the scope of a type of product or service relating to the supply of an account by an Australian ADI. It follows that the provision of transaction information for consideration, to a client who is an account holder, would be a financial supply under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations when the information relates to a transaction on the client's account. | Detailed Reasoning - A financial supply to non-account holders: Subregulation 40-5.09(4) of the GST Regulations states that a supply (to which item 1 in the table to subregulation 40-5.09(3) of the GST Regulations does not apply) by an Australian ADI for a fee of not more than $1,000 is a financial supply if: Examples of financial supplies mentioned in subregulation 40-5.09(4) of the GST Regulations are: Further explanation and guidance to the interpretation of subregulation 40-5.09(4) of the GST Regulations is found in the Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No.2) (the Explanatory Statement). The Explanatory Statement with regard to subregulation 40-5.09(4) states: ... that where an Australian ADI provides a service and charges a fee of $1,000 or less the supply will be treated as a financial supply if it would have been a financial supply if provided to an account holder. This will make it unnecessary for the provider of the service to determine whether the supply is being made to an account holder or non-account holder. In both cases the supply would be input taxed...However, supplies not made in connection with an account that would be a taxable supply will not become financial supplies even if a fee less than $1,000 is charged. The provision intends for an Australian ADI to treat supplies, for a fee of not more than $1,000, as financial supplies if they are provided to non-account holders and those supplies would have otherwise been financial supplies under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations if made to account holders. A supply of transaction information to a client, where the information relates to a client transaction, will be a financial supply under subregulation 40-5.09(4) of the GST Regulations when made to a recipient who does not hold an account and the fee charged is not more than $1,000. This is because it would have been a supply under subregulation 40-5.09(3) of the GST Regulations if the client held an account.", "Date_of_Decision": "25 October 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/33", "Subject_References": "Accounts Goods and services tax GST financial supplies GST regulations GST supply Input taxed supplies", "Case_References": "", "Other_References": "Explanatory Statement to the A New Tax System (Goods and Services Tax) Amendment Regulations 2000 (No.2)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200732", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Accounts Goods and services tax GST financial supplies GST regulations GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2007/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and transaction information supplied by an ADI - not relating to a client's own transaction", "Issue": "Is an entity, an Australian authorised deposit-taking institution (ADI), making a financial supply of an interest under either item 1 in the table in subregulation 40-5.09(3) or subregulation 40-5.09(4) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), when it provides transaction information, for not more than $1,000, to a client (also an Australian ADI) in respect of a transaction undertaken by a customer of the client?", "Decision": "No, the entity is not making a financial supply of an interest under either item 1 in the table in subregulation 40-5.09(3) or subregulation 40-5.09(4) of the GST Regulations when it provides transaction information, for not more than $1,000, to a client ADI in respect of a transaction undertaken by a customer of the client ADI.", "Facts": "The entity is an Australian ADI that carries on a banking business within the meaning of the Banking Act 1959 . The entity provides transaction information to clients that are also Australian ADIs. The entity also provides a payment system to its client ADIs. The transaction information relates to transactions undertaken by customers of the client ADI. A client ADI may or may not hold an account with the entity. The applicable fee for each request does not exceed $1,000. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given by the GST Regulations. Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 1 in the table in subregulation 40-5.09(3) of the GST Regulations lists, as a financial supply, an interest in or under an account made available by an Australian ADI in the course of: For there to be a financial supply under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations, a supply must firstly be capable of characterisation as the supply of an interest in an account made available by an Australian ADI. It is possible for a supply of transaction information to be a supply of an interest in an account under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations. This will be the case when information is supplied to a client and it relates to a transaction on the client's account. Regulation 40-5.11 of the GST Regulations operates to make the provision of transaction information a financial supply because it relates to the supply of an account in that circumstance. However, when a client ADI obtains transaction information on behalf of a customer, the transaction information is in connection with a supply of an interest in an account by the client ADI to its customer. The service provided by the entity merely assists the making of a supply by the client ADI to its customer. It follows that the provision of the transaction information, by the entity to the client ADI, does not involve the making of a financial supply of an interest in an account under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations. Even if the client ADI has an account with the entity, the transaction information is not provided in relation to an interest in an account by the entity to the client ADI. The transaction information is provided to the client ADI because an interest in a payment system is also supplied by the entity to the client ADI. Subregulation 40-5.09(4) of the GST Regulations states that a supply (to which item 1 in the table in subregulation 40-5.09(3) of the GST Regulations does not apply) by an Australian ADI for a fee of not more than $1,000 is a financial supply if: As the provision of transaction information would not have been treated as a financial supply under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations if the client were an account holder, subregulation 40-5.09(4) of the GST Regulations has no application. A supply of transaction information by the entity to its client ADI, when the information relates to a transaction by a customer of the client ADI, will be a taxable supply where the requirements of section 9-5 of the GST Act are satisfied.", "Date_of_Decision": "25 October 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/32", "Subject_References": "Accounts Goods and services tax GST financial supplies GST regulations GST supply Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200733", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Accounts Goods and services tax GST financial supplies GST regulations GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2007/159", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and cheques issued by a non-authorised deposit-taking institution", "Issue": "Is a GST registered entity, that is not an authorised deposit-taking institution (ADI), making an input taxed financial supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it issues a cheque to a client in exchange for the same amount of cash, together with a fee for doing so?", "Decision": "Yes, the entity is making an input taxed financial supply under subsection 40-5(1) of the GST Act when it issues a cheque to a client in exchange for the same amount of cash, together with a fee for doing so.", "Facts": "The entity is registered for goods and services tax (GST) and operates as a money centre which provides a service of issuing cheques to clients in exchange for cash. The entity is not an ADI. Cheques the entity issues to clients are drawn on a specific account in the entity's name and held with its bank. To acquire a cheque from the entity, a client provides a cash payment equal to the face value of the cheque the client requires. In addition, the client is required to pay the entity a fee.", "Reasons_for_Decision": "Summary: A cheque is a document that complies with the definition set out in section 10 of the Cheques Act 1986 , as follows: A cheque is a negotiable instrument that is used or intended for use or circulation as money. Subsection 39(1) of the Cheques Act states that every cheque may be transferred by negotiation until it is discharged. A cheque is also a bill of exchange, as defined in subsection 8(1) of the Bills of Exchange Act 1909 . This subsection states: A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer. As a negotiable instrument or bill of exchange, a cheque falls within the definition of 'money' in section 195-1 of the GST Act. Under this definition, money includes: In issuing a cheque in exchange for cash, the entity is providing money, in exchange for money in another form (cash) provided by the client, together with the fee to be paid by the client. Subsection 9-10(4) of the GST Act states: However, a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money. As each party to the transaction is supplying money to the other, and each supply of money is provided as consideration for the other supply of money, each supply is a 'supply' for GST purposes. Subdivision 40-A of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) is about financial supplies. Central to the operation of this subdivision is the concept of 'an interest', which is defined in regulation 40-5.02 of the GST Regulations as 'anything that is recognised at law or in equity as property in any form'. Subregulation 40-5.09(1) of the GST Regulations states that the provision, acquisition or disposal of an interest mentioned in subrequlation 40-5.09(3) of the GST Regulations is a financial supply if: Subregulation 40-5.09(3) of the GST Regulations lists those interests, the provision, acquisition or disposal of which may be financial supplies. While 'money' is not separately listed here, cash (which includes Australian currency) falls under item 9 in the table in subregulation 40-5.09(3). Item 10 in the table in subregulation 40-5.09(3) of the GST Regulations is about interests in securities. A non-exhaustive list of examples of item 10 interests is set out in Part 8 of Schedule 7 of the GST Regulations. This list includes promissory notes and bills of exchange. It follows that a cheque is a security for the purposes of item 10 in the table in subregulation 40-5.09(3). The provision of the cheque by the registered entity is a financial supply, as the requirements set out above are satisfied in relation to it. The provision of the cash equivalent of the cheque by the client, together with the fee paid, will be a financial supply by the client if the client is registered or required to be registered. Subsection 40-5(1) of the GST Act provides that a financial supply is input taxed.", "Date_of_Decision": "26 September 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(4) subsection 40-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/146", "Subject_References": "Cheques GST financial supplies GST money Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007159", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Cheques GST financial supplies GST money Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2006/203", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and foreign currency export", "Issue": "Is the supply of foreign currency banknotes by an entity to a wholesale customer in another country a GST-free supply pursuant to subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, the supply of foreign currency banknotes by an entity to a wholesale customer in another country is a GST-free supply pursuant to subsection 38-190(1) of the GST Act.", "Facts": "The entity is a financial institution that provides wholesale currency services to customers including major banks, financial institutions and commercial businesses, both in Australia and overseas. These services include the supply of foreign currency bank notes to a wholesale customer in another country. The customer has no presence in Australia. The agreement under which the entity supplies these banknotes to the customer does not require the entity to provide them to another entity in Australia, and it does not do so. The foreign currency banknotes supplied to the customer are physically packed for shipment and sent overseas. An invoice is raised in respect of this supply. The consideration for the supply is paid to the entity when the currency is delivered to the customer. The customer is not registered, or required to be registered for GST.", "Reasons_for_Decision": "Summary: As defined in section 195-1 of the GST Act, 'money includes (a) currency (whether of Australia or of any other country...' (other than currency the market value of which exceeds its stated value as legal tender in the country of issue). Subsection 9-10(4) of the GST Act states that, however, supply does not include a supply of money or digital currency unless the money or digital currency is provided as consideration for a supply that is a supply of money or digital currency. Provided the market value of the foreign currency does not exceed its face value in the country of issue, the foreign currency is money that is supplied as consideration for a supply that is a supply of money (and vice versa), meaning each is a supply for the purposes of the GST Act, in accordance with subsection 9-10(4) of the GST Act. Subdivision 40-A of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) is about financial supplies. Central to the scheme of GST financial supplies is the concept of an 'interest', which is defined at regulation 40-5.02 of the GST Regulations as anything that is recognised at law or in equity as property in any form. Subregulation 40-5.09(1) of the GST Regulations sets the requirements for a supply to be a financial supply. It states: The provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply if: The interests itemised at subregulation 40-5.09(3) of the GST Regulations (in Goods and Services Tax Ruling GSTR 2002/2, the Tax Office calls these 'financial interests'), include, at item 9, 'an interest in or under Australian currency, the currency of a foreign country, digital currency or an agreement to sell any of these 3 things'. Part 7 of Schedule 8 of the GST Regulations contains examples of the kinds of interests intended to be covered by item 9. The first example in the table at Part 7 is 'foreign currency in cash form'. The Tax Office considers that the GST regulations are clear in the way they intend a transaction involving the exchange of foreign currency banknotes for money in another form to be characterised for GST purposes. Provided the foreign currency banknotes have a market value that does not exceed their stated value as legal tender, such a transaction involves the provision, acquisition and/or disposal of an interest in foreign currency and is a financial supply by the entity where the requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied. Subsection 40-5(1) of the GST Act provides that a financial supply is input taxed. However, the supply of the financial interest also has the character of a GST-free supply where the requirements of subsection 38-190(1) of the GST Act are satisfied. The Tax Office considers that section 38-190 of the GST Act, which is about supplies of things other than goods or real property, may apply to supplies of financial interests, including an interest in foreign currency banknotes. Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) may apply to make the supply of a financial interest GST-free, provided the requirements of Item 2 are satisfied. These requirements are satisfied where the supply of the financial interest is a supply made to a non-resident who is not in Australia when the thing supplied is done, and: Both of these requirements are satisfied in this case. However, such a supply may still be denied GST-free status where it is a supply of a right or option to acquire something, the supply of which would not be GST-free. That exclusion does not apply in this case. As the entity does not supply the banknotes to another entity in Australia (and the agreements under which it makes the supplies do not require it to do so), Item 2 applies to the supply. The supply is therefore input taxed under subsection 40-5(1) and GST-free under subsection 38-190(1) of the GST Act. This situation requires consideration to be given to the operation of subsection 9-30(3) of the GST Act. Paragraph 9-30(3)(a) of the GST Act provides that to the extent that a supply would (apart from this subsection) be both GST-free and input taxed, the supply is GST-free and not input taxed unless the provision under which it is input taxed requires the supplier to have chosen for its supplies of that kind to be input taxed. As subsection 40-5(1) of the GST Act and regulation 40-5.09 of the GST Regulations do not require the entity to have chosen for its supplies of foreign currency banknotes to be input taxed, the supply of the banknotes to a wholesale customer in another country is GST-free in accordance with the application of subsection 9-30(3) of the GST Act.", "Date_of_Decision": "27 July 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(4) subsection 9-30(3) paragraph 9-30(3)(a) section 38-190 subsection 38-190(1) subsection 38-190(1) table item 2 subsection 40-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/65", "Subject_References": "Foreign currency Goods and services tax GST free GST money Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006203", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | This ATO ID has been amended to reflect the legislative amendments to the A New Tax System (Goods and Services Tax) Act 1999 that are effective from 1 July 2017. Under the amendments, from 1 July 2017 digital currency will have the equivalent treatment to money and in certain circumstances supplies of digital currency will be treated as financial supplies. | Update to include digital currency | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Foreign currency Goods and services tax GST free GST money Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2005/70", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and in specie contributions to a self managed superannuation fund", "Issue": "Is the entity, a sole trader, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes an in specie contribution of commercial property to the trustee of a self managed superannuation fund?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act, when it makes an in specie contribution of commercial property to the trustee of a self managed superannuation fund.", "Facts": "The entity is a sole trader who is registered for goods and services tax (GST). The entity owns commercial property that it uses in conducting its enterprise. The entity is a member of a self managed superannuation fund (superannuation fund) which is registered for GST and is a regulated superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 . A trust deed sets out the entity's rights in relation to the superannuation fund. The supply of the initial interest in the superannuation fund was a financial supply under subsection 40-5(1) of the GST Act. The entity makes an in specie contribution of the commercial property to the trustee of the superannuation fund in carrying on its enterprise. The trustee does not provide any monetary consideration to the entity for the commercial property. The trustee intends to lease out the commercial property, which will be a taxable supply.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement in section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 47 of Goods and Services Tax Ruling GSTR 2001/6 provides that there needs to be a supply, a payment and the necessary relationship between the supply and the payment. The transfer of the commercial property from the entity to the trustee of the superannuation fund is a supply, however it needs to be determined if there is any consideration for this supply. Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. Although, the trustee of the superannuation fund did not provide any monetary consideration for the commercial property, a 'payment' is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form (paragraph 12 of GSTR 2001/6). Paragraphs 15 and 16 of GSTR 2001/6 indicate that by providing non-monetary consideration for a supply, an entity is in turn making a supply. As such, if the trustee of the fund is making a supply in response to the contribution of the commercial property it may constitute non-monetary consideration for the supply of the commercial property. In the case of a self managed superannuation fund, members, or beneficiaries of the fund obtain their rights, or prospective rights in relation to the fund by way of the trust deed that creates the fund. As such, the deed provides the interest in the superannuation fund and from that point onwards the member has acquired an ongoing interest in the self managed superannuation fund, which is a financial supply. Whilst the contribution of the commercial premises may result in an increased level of assets being held in the superannuation fund the contribution does not result in the trustee of the superannuation fund providing a further interest to the entity. Therefore, the only supply the trustee of the superannuation fund has made is the initial supply of the interest in the superannuation fund. This supply of the initial interest in the fund by the trustee is not a supply made in response, in connection with or for the inducement of the entity's contribution of the commercial property. Accordingly, the superannuation fund does not provide consideration for the supply of the commercial property. However, under section 72-5 of the GST Act the fact that a supply is made to an associate without consideration does not stop the supply being a taxable supply if: 'Associate' is defined in section 195-1 of the GST act as having the meaning given in section 318 of the Income Tax Assessment Act 1936 (ITAA 1936). In relation to a natural person, the term associate is defined in section 318 of the ITAA 1936 to include a trustee of a trust where the person benefits under the trust. The entity, a sole trader, is a beneficiary of the superannuation fund (a trust) and as such, is an entity that benefits under the superannuation fund. Therefore, the entity and the trustee of the superannuation fund are associates. The trustee is registered for GST and intends to lease out the commercial property which will be a taxable supply under section 9-5 of the GST Act. Therefore, the trustee of the superannuation fund has acquired the commercial property for a creditable purpose and neither of the requirements of section 72-5 of the GST Act are satisfied. As there is no consideration for the supply, paragraph 9-5(a) of the GST Act is not satisfied. Therefore, the entity is not making a taxable supply under section 9-5 of the GST Act, when it makes an in specie contribution of commercial property to a self managed superannuation fund.", "Date_of_Decision": "20 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) subsection 9-15(1) subsection 40-5(1) section 72-5 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST consideration GST superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200570", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 | Keywords Goods and services tax GST consideration GST superannuation funds"}
{"ATO_ID_Number": "ATO ID 2005/182", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a call option over commercial property", "Issue": "Is the entity, a supplier of real property, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it grants a call option that entitles the grantee to purchase real property, the supply of which would be a taxable supply?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act, when it grants a call option that entitles the grantee to purchase real property, the supply of which would be a taxable supply.", "Facts": "The entity is a supplier of real property and is registered for goods and services tax (GST). The entity grants the purchaser a call option to purchase a commercial property for a specific amount up until a specified date. The purchaser paid 5% of the purchase price of the property to enter into the call option. The purchaser may sell the call option to another entity. The supply of the real property would be a taxable supply of a commercial property under section 9-5 of the GST Act. The supply of the call option is connected with Australia and is made in the course or furtherance of the entity's enterprise.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity grants the purchaser a call option to purchase a commercial property and the purchaser paid 5% of the purchase price of the property to enter into the call option. Accordingly, the entity has made a supply for consideration. The supply is made in the course or furtherance of the entity's enterprise, is connected with Australia and the entity is registered for GST. As such, the supply satisfies the positive limbs of section 9-5 of the GST Act. The entity's supply is not GST-free under any provision of the GST Act. However, the supply of a call option could be an input taxed financial supply. Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Service Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations, provides that, when certain requirements are met, the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply. Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 11), lists a derivative. A derivative is defined in the GST Regulations to mean an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate. The entity grants the purchaser a call option to purchase commercial property for a specific amount up until a specified date. The purchaser paid 5% of the purchase price of the property to enter into the call option. Therefore, the call option is an agreement the value of which is derived from the value of an asset, the property and satisfies the definition of a derivative. However, regulation 40-5.12 of the GST Regulations provides that the supply of something, or an interest in something that is mentioned in the table in regulation 40-5.12 is not a financial supply. Item 7 in the table in regulation 40-5.12 of the GST Regulations (Item 7) lists an option, right or obligation to make or receive a taxable supply, except a mortgage or charge mentioned in item 3 in the table in subregulation 40-5.09(3) of the GST Regulations. The call option to purchase real property is an option to receive a taxable supply. As such, the entity is not making a financial supply under subsection 40-5(1) of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it grants a call option that entitles the grantee to purchase real property, the supply of which is a taxable supply.", "Date_of_Decision": "26 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 40-5 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/183 | ATO ID 2005/184", "Subject_References": "Goods and services tax GST property & construction GST rights and real property Input taxed supplies Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005182", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST property & construction GST rights and real property Input taxed supplies Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/183", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a call option over residential premises", "Issue": "Is the entity, a supplier of real property, making an input taxed financial supply under section 40-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it grants a call option that entitles the grantee to purchase real property, the supply of which would be an input taxed supply of residential premises?", "Decision": "Yes, the entity is making an input taxed financial supply under section 40-5 of the GST Act. The grant of the call option is also an input taxed supply under paragraph 9-30(2)(b) of the GST Act.", "Facts": "The entity is a supplier of real property and is registered for goods and services tax (GST). The entity grants the purchaser a call option to purchase residential premises for a specific amount up until a specified date. The purchaser paid 5% of the purchase price of the property to enter into the call option. The purchaser may sell the call option to another entity. The supply of the real property would be an input taxed supply of residential premises under subsection 40-65(1) of the GST Act. The supply of the call option is connected with Australia and is made in the course or furtherance of the entity's enterprise.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Service Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations, provides that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 11), lists a derivative. A derivative is defined in the GST Regulations to mean an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate. The entity grants the purchaser a call option to purchase residential premises for a specific amount up until a specified date. The purchaser paid 5% of the purchase price of the property to enter into the call option. Therefore, the call option is an agreement the value of which is derived from the value of an asset, the property. Accordingly, the call option satisfies the definition of a derivative. The supply of the call option was made for consideration, in the course or furtherance of the entity's enterprise and was connected with Australia. The entity is registered for GST and as it granted the option, it is a financial supply provider in relation to the supply of the call option (regulation 40-5.06 of the GST Regulations). Therefore, the requirements in subregulation 40-5.09(1) of the GST Regulations are satisfied and the entity's supply is an input taxed financial supply under subsection 40-5(1) of the GST Act. In addition, under subsection 9-30(2) of the GST Act a supply is input taxed if: The supply of the call option is a supply of a right to receive a supply of residential premises which would be input taxed under subsection 40-65(1) of the GST Act. Therefore, the supply of the call option is also an input taxed supply under paragraph 9-30(2)(b) of the GST Act. Accordingly, the entity is making an input taxed financial supply, under subsection 40-5(1) of the GST Act, and an input taxed supply under paragraph 9-30(2)(b) of the GST Act, when it grants a call option which entitles the grantee to purchase real property, the supply of which is an input taxed supply.", "Date_of_Decision": "26 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(2) subsection 11-15(4) Division 40 subsection 40-5(1) subsection 40-5(2) subsection 40-65(1) Division 70", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/182 | ATO ID 2005/184", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST rights and real property Input taxed supplies GST financial supplies GST derivatives", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005183", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | History: ATO ID amended on 15 August 2005 to amend reference from subsection 9-30(2) of the GST Act to paragraph 9-30(2)(b) of the GST Act. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST property & construction GST residential premises GST rights and real property Input taxed supplies GST financial supplies GST derivatives"}
{"ATO_ID_Number": "ATO ID 2005/184", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a call option over GST-free land", "Issue": "Is the entity, a supplier of real property, making an input taxed financial supply under section 40-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it grants a call option that entitles the grantee to purchase real property, the supply of which would be a GST-free supply?", "Decision": "No, the entity is not making an input taxed financial supply under section 40-5 of the GST Act. Due to the operation of subsection 9-30(3) of the GST Act, the supply of the call option is GST-free under paragraph 9-30(1)(b) of the GST Act .", "Facts": "The entity is a supplier of real property and is registered for goods and services tax (GST). The entity grants the purchaser a call option to purchase a property for a specific amount up until a specified date. The purchaser paid 5% of the purchase price of the property to enter into the call option. The purchaser may sell the call option to another entity. The supply of the real property would be a GST-free supply of farmland under section 38-480 of the GST Act. The supply of the call option is connected with Australia and is made in the course or furtherance of the entity's enterprise.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Service Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations, provides that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 11), lists a derivative. A derivative is defined in the GST Regulations to mean an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate. The entity grants the purchaser a call option to purchase property for a specific amount up until a specified date. The purchaser paid 5% of the purchase price of the property to enter into the call option. Therefore, the call option is an agreement the value of which is derived from the value of an asset, the property. Accordingly, the call option satisfies the definition of a derivative. The supply of the call option was made for consideration, in the course or furtherance of the entity's enterprise and was connected with Australia. The entity is registered for GST and as it granted the option, it is a financial supply provider in relation to the supply of the call option (regulation 40-5.06 of the GST Regulations). Therefore, the requirements in subregulation 40-5.09(1) of the GST Regulations are satisfied and the entity's supply is an input taxed financial supply under subsection 40-5(1) of the GST Act. However, under subsection 9-30(1) of the GST Act a supply is GST-free if: The supply of the call option is a supply of a right to receive a supply of a property which would be a GST-free supply under section 38-480 of the GST Act. Therefore, the supply of the call option is also a GST-free supply under paragraph 9-30(1)(b) of the GST Act. Accordingly, the entity's supply of the call option is both an input taxed financial supply, under subsection 40-5(1) of the GST Act, and a GST-free supply under subsection 9-30(1) of the GST Act. Subsection 9-30(3) of the GST Act provides that where a supply is both GST-free and input taxed, the supply will be GST-free and not input taxed, unless the provision under which it is input taxed requires the supplier to have chosen for its supplies of that kind to be input taxed. Subsection 40-5(1) of the GST Act does not require the entity to choose for the supply to be input taxed. As such, the entity's supply will be GST-free and not input taxed.", "Date_of_Decision": "26 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(1) paragraph 9-30(1)(b) subsection 9-30(3) Division 38 Section 38-480 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/182 | ATO ID 2005/183", "Subject_References": "Goods and services tax GST-free supply GST property & construction GST residential premises GST rights and real property Input taxed supplies GST financial supply GST derivatives", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005184", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST-free supply GST property & construction GST residential premises GST rights and real property Input taxed supplies GST financial supply GST derivatives"}
{"ATO_ID_Number": "ATO ID 2005/194", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a credit arrangement by way of an instalment contract for the sale of residential premises", "Issue": "Is the entity, a property investor, making an input taxed financial supply of a credit arrangement under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it gives the purchaser time to pay for a property under an instalment contract?", "Decision": "Yes, the entity is making an input taxed financial supply of a credit arrangement under subsection 40-5(1) of the GST Act when it gives the purchaser time to pay for a property under an instalment contract.", "Facts": "The entity is a property investor. The entity is selling residential premises that it owns. The entity and the purchaser enter into an instalment contract, by which the entity provides the purchaser with a credit arrangement to enable the purchaser to purchase the residential premises. Under the terms of the contract, the purchaser agrees to pay monthly instalments and interest over an extended period of time. The purchaser has a right to occupy the residential premises from the date on which the contract is signed (possession date) until the date on which the purchaser is required to pay the final instalment (settlement date). Title to the property does not pass to the purchaser until the settlement date. The entity is registered for goods and services tax (GST). The supply is made in the course of its enterprise and is connected with Australia.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). GST Regulations subregulation 40-5.09(1) provides that the provision, acquisition, or disposal of an interest mentioned under GST Regulations subregulation 40-5.09(3) or 40-5.09(4) is a financial supply if: Item 2 in the table in GST Regulations subregulation 40-5.09(3) (Item 2) lists a debt, credit arrangement or right to credit, including a letter of credit. The glossary in Schedule 1 of Goods and Services Tax Ruling GSTR 2002/2 defines a credit arrangement as 'an arrangement under which an entity lends money on terms that include deferred repayment, or under which payment of a debt owed by one entity to another is deferred or time is allowed to pay'. The entity provides time to pay, by way of an instalment contract, to the purchaser of the residential premises. This supply is the provision of an interest in a credit arrangement and is covered by Item 2. The consideration received for the supply of an interest in a credit arrangement is the monthly interest payments paid by the purchaser under the terms of the contract. In addition, the provision of this interest is made in the course of the entity's enterprise and it is connected with Australia. Therefore, all of the requirements of GST Regulations paragraph 40-5.09(1)(a) are satisfied. The entity is registered for GST. As the entity created the interest in the credit arrangement, it is the financial supply provider in relation to the supply of the credit arrangement (GST Regulations subregulation 40-5.06(1)). Therefore, the requirements in GST Regulations paragraph 40-5.09(1)(b) are satisfied. As all the requirements of GST Regulations subregulation 40-5.09(1) are satisfied, the supply of the credit arrangement is a financial supply. The entity is making an input taxed financial supply of a credit arrangement under subsection 40-5(1) of the GST Act.", "Date_of_Decision": "18 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST financial supplies GST debt, loan and credit GST sale of residential premises GST residential premises", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005194", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Goods and services tax GST financial supplies GST debt, loan and credit GST sale of residential premises GST residential premises"}
{"ATO_ID_Number": "ATO ID 2005/201", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and increasing adjustment where previously written off bad debts are sold to a debt factor", "Issue": "Does the entity, a supplier, have an increasing adjustment under section 21-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where its previously written off debts (bad debts) are sold to a debt factor?", "Decision": "No, the entity does not have an increasing adjustment under section 21-10 of the GST Act where its bad debts are sold to a debt factor.", "Facts": "The entity is a supplier that makes taxable supplies. The entity has debts that it has previously written off as bad. Where allowable under section 21-5 of the GST Act, the entity made decreasing adjustments when the debts were written off. The entity is now selling those debts to a debt factor. Any payments the entity receives for the debts will be made by the debt factor and not the original customers to whom the services were supplied.", "Reasons_for_Decision": "Summary: Under section 21-10 of the GST Act, the entity has an increasing adjustment if: The debts referred to in section 21-5 of the GST Act are the debts that arise in respect of an underlying supply, that is, the debts in respect of the entity's services. Section 21-10 of the GST Act then requires the supplier to make a corresponding increasing adjustment for any amount recovered. The amount recovered would also be in respect of the same debt that initially gives rise to the increasing adjustment, that is, the debt in respect of the entity's services. The factoring of the debts is a separate and independent transaction from the initial supplies of the services giving rise to the debts. Therefore, the amounts paid by the debt factor for the debts are payments for the factoring of the debts. The amounts paid are not the recovery of the amounts written off or overdue for 12 months or more that arise from the underlying supplies of the services. As such, the entity would not have an increasing adjustment under section 21-10 of the GST Act.", "Date_of_Decision": "21 October 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 21-5 section 21-10", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2004/4 | Goods and Services Tax Ruling GSTR 2000/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST bad debts Recovering amounts Write off Input taxed supplies GST financial supplies GST debt, loan and credit", "Case_References": "", "Other_References": "Australian Taxation Office Financial Services Industry - questions and answers - Issue 8 - Debt Factoring", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005201", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2004/4 Goods and Services Tax Ruling GSTR 2000/2 | Keywords Goods and services tax GST bad debts Recovering amounts Write off Input taxed supplies GST financial supplies GST debt, loan and credit"}
{"ATO_ID_Number": "ATO ID 2004/76", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agreement for the supply and repurchase of a commodity", "Issue": "Is entity A, a commodity handling and marketing company, making an input taxed financial supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it:", "Decision": "No, entity A is not making an input taxed financial supply under subsection 40-5(1) of the GST Act when it supplies a commodity to entity B and agrees to repurchase that commodity from entity B for an agreed price at a future date. Entity A is making a taxable supply under section 9-5 of the GST Act.", "Facts": "Entity A is a commodity handling and marketing company. Entity B is a financial institution. The entities enter into an agreement whereby entity A supplies a commodity to entity B. Included in the agreement is an undertaking from entity A to repurchase the commodity for an agreed price at a future date. Where entity A repurchases the commodity, the agreed price is equivalent to the original purchase price paid by entity B plus interest and holding costs borne by entity B. Ownership and title in the commodity passes from entity A to entity B upon payment by entity B. When the repurchase occurs, ownership and title passes from entity B to entity A upon payment by entity A. When entity B acquires ownership and title, entity B appoints entity A as its agent for the storage and insurance of the commodity. Possession of the commodity remains with entity A throughout the period of the arrangement. The arrangement between entity A and entity B does not create a mortgage or charge over the commodity. Entity A and entity B are registered for goods and services tax (GST). The transactions relate to carrying on their enterprises and the transactions take place in Australia.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that 'financial supply' is defined in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Therefore, it is necessary to determine whether entity A is providing, acquiring or disposing of an interest in or under an item mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations when it supplies the commodity to entity B under the agreement. Item 2 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 2) lists an interest in or under a debt, credit arrangement or right to credit, including a letter of credit. The entities enter into an agreement whereby entity A supplies a commodity to entity B. Included in the agreement is an undertaking from entity A to repurchase the commodity for an agreed price at a future date. Where entity A repurchases the commodity, the agreed price is equivalent to the original purchase price paid by entity B plus interest and holding costs borne by entity B. The agreement merely provides for the sale and repurchase of goods and there is no creation of a debt, credit arrangement or right to credit, including a letter of credit. In addition, a mortgage or charge has not been created over the commodity. As such, the supply and repurchase of the commodity is not an interest in or under a debt, credit arrangement or right to credit, including a letter of credit. Therefore, the arrangement is not covered by Item 2. Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 11) lists an interest in or under a derivative. The term 'derivative' is defined in the dictionary of the GST Regulations to mean 'an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate'. Item 3 of part 9 of Schedule 7 of the GST Regulations lists a 'reciprocal repurchase agreement' as an example of a derivative. A repurchase agreement, otherwise known as a 'Reciprocal repurchase agreement' is defined in Schedule 1 of GSTR 2002/2 as 'an agreement whereby securities are sold by one party to another party on the provision that the first party may repurchase them as at a specified price and time'. The agreement in the present situation is not a reciprocal repurchase agreement, because it does not deal with the sale and repurchase of securities, but a commodity. Ownership and title in the commodity passes from entity A to entity B upon payment by entity B. When the repurchase occurs, ownership and title passes from entity B to entity A upon payment by entity A. Although, the initial supply of the commodity by entity A to entity B and the future repurchase of that commodity by entity A from entity B could be viewed as a single arrangement which may have the characteristics of a derivative, the agreement involves two separate transactions. The initial transaction is a single supply of goods where ownership and title in the commodity passes from entity A to entity B even though possession of the commodity remains with entity A throughout the period of the arrangement. The second transaction is a repurchase of the commodity and is also a separate supply of goods where ownership and title passes from entity B to entity A. Accordingly, the agreement is not a derivative and is not covered by Item 11. As the supply and repurchase of the commodity is not a financial supply under subregulation 40-5.09(1) of the GST Regulations, entity A is not making an input taxed supply under subsection 40-5(1) of the GST Act. Entity A is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under any other provisions in Division 40 of the GST Act. As such, entity A is making a taxable supply under section 9-5 of the GST Act when it supplies a commodity to entity B and agrees to repurchase that commodity from entity B for an agreed price at a future date.", "Date_of_Decision": "12 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 40-5(1) subsection 40-5(2) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST financial supplies GST debt, loan and credit GST derivates Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200476", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST financial supplies GST debt, loan and credit GST derivates Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and service fee applied to debt acquired from a taxi driver", "Issue": "Is the entity, a business operator that purchases debts from other parties, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the entity applies a 10% service fee to a debt that it acquires from a taxi driver?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when the entity applies a 10% service fee to a debt that it acquires from a taxi driver.", "Facts": "The entity is a business operator that purchases debts from other parties (clients). These debts may be purchased for the face value of the debt or at a discount or premium to the face value. A taxi driver is one of the entity's clients. The entity provides the taxi driver with paper dockets to issue to passengers that pay for their fare by using a credit card. The taxi driver subsequently provides the service of taxi travel to a taxi passenger. The taxi passenger (card holder) pays for the taxi fare by way of a credit card. The taxi driver manually processes the fare on one of the paper dockets issued by the entity. The paper docket states that use of the credit card will attract a 10% service fee. This 10% service fee is payable by the cardholder. The taxi driver only writes the price for the taxi fare on the paper docket. The cardholder signs the docket therefore agreeing to pay the fare and the service fee by credit card. The taxi driver then takes this paper docket to the entity and the entity pays the taxi driver the face value on the paper docket, being the price of the taxi fare. In disposing of the paper docket, the taxi driver is supplying, to the entity, an interest in a debt as per item 2 in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). The remaining requirements of subregulation 40-5.09(1) are also satisfied and the disposal of the interest in the debt, by the taxi driver, is an input taxed financial supply. The entity's acquisition of the interest in the debt is also an input taxed financial supply. In accordance with the conditions on the paper docket, the entity grosses up the face value amount by adding the 10% service fee. The entity then electronically processes the charge with the credit card issuer, for the grossed up amount. The credit card issuer pays the entity the grossed up amount, less the credit card issuer's merchant fee. The credit card issuer subsequently provides a statement to the card holder. On this statement, the supply of taxi travel is listed for the grossed up amount processed by the entity. The entity is registered for goods and services tax (GST). The entity makes the supply in the course of conducting its enterprise in Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. To determine whether the entity makes a taxable supply in relation to the 10% service fee it adds to the debt that it acquires from the taxi driver, it is necessary to first determine whether the entity makes a supply. 'Supply' is defined very broadly in section 9-10 of the GST Act and includes a supply of services (paragraph 9-10(2)(b) of the GST Act). As such, a supply of the services offered by the entity is a supply for the purposes of the GST Act. The paper docket states that use of the card will attract a 10% service fee and the card holder, in signing the docket, agrees to pay this fee. In accordance with the conditions on the paper docket, the entity adds the 10% service fee. The entity makes an acquisition-supply of an interest in a debt when it takes receipt of the paper docket from the taxi driver. That supply is an input taxed financial supply. However, that supply is distinguishable from the entity's separate supply of services, for which the 10% service fee represents separate consideration. When the taxi customer signs the docket, agreeing to pay the face value of the taxi fare and the 10% service fee by way of credit card, consideration is provided and received at this point - consistent with paragraph 30 of Goods and Services Tax Ruling GSTR 2003/12. The entity's supply is for consideration and is made in the course of it's enterprise. The supply is connected with Australia and the entity is registered for GST. In addition, the supply is neither input taxed under Division 40 of the GST Act nor GST-free under Division 38 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when, under the terms and conditions of offering its service, the entity applies a 10% service to a debt that it acquires from a taxi driver.", "Date_of_Decision": "12 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 paragraph 9-10(2)(b) subsection 9-15(2) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies and acquisitions Taxable supply GST financial supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004135", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/12 | Keywords Goods and services tax GST supplies and acquisitions Taxable supply GST financial supplies"}
{"ATO_ID_Number": "ATO ID 2004/360", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and cancellation fees for deliverable commodity forward contracts", "Issue": "Is the entity, a commodity trader, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives a cancellation fee in relation to a deliverable commodity forward contract?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it receives a cancellation fee in relation to a deliverable commodity forward contract.", "Facts": "The entity is a commodity trader. The entity enters into forward contracts to buy and sell a taxable commodity with another entity. The physical delivery of the commodity would be a taxable supply under section 9-5 of the GST Act. The relevant contracts conform to an industry association's trade rules. The entity and the other entity verbally agree to terminate the forward contracts and agree on a cancellation fee. This process is an alternative to the formal default process under the industry association's trade rules. The entity has agreed to accept a cancellation fee for agreeing to allow the other party to default on its obligations in relation to delivery of the commodity. The entity is registered for goods and services tax (GST). The transaction is made in the course of an enterprise carried on by the entity and is connected with Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. A transaction is only a taxable supply under section 9-5 of the GST Act, if it also comes within the meaning of the word 'supply' as discussed in section 9-10 of the GST Act. Subsection 9-10(2) of the GST Act provides a non-exhaustive list of things that are a 'supply' for GST purposes. Subparagraph 9-10(2)(g)(i) of the GST Act provides that an entry into, or release from, an obligation to do anything is a supply under the GST Act. The agreed termination of the forward contracts, without physical delivery occurring, results in the entity releasing the other entity from its obligations in relation to delivery of the commodity. As such, the entity is making a supply under subparagraph 9-10(2)(g)(i) of the GST Act. The cancellation fee is consideration for the supply of that release. The entity is registered for GST, the transaction is in the course or furtherance of the entity's enterprise and the supply is connected with Australia. The entity's supply meets the positive requirements of section 9-5 of the GST Act. However, it needs to be determined whether the entity is making an input taxed supply. Financial supplies are input taxed under section 40-5(1) of the GST Act. An interest in or under a derivative that is cash settled, will be a financial supply if the all the requirements in subregulation 40-5.09(1) of the A New Tax System (Goods and Services Tax) Regulations 1999 are satisfied. The payment (cancellation fee) that occurs when both parties agree to terminate the contract is not the cash settlement of a derivative. This is because when the two parties verbally agree to pay a cancellation fee this is a new agreement, outside the terms of the original contract. Therefore, when a cancellation fee is paid, the transaction that occurs does not result in either party making a financial supply that is input taxed. Accordingly, the entity is making a taxable supply under section 9-5 of the GST Act when it receives a cancellation fee in relation to a deliverable commodity forward contract.", "Date_of_Decision": "14 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 subsection 9-10(2) subparagraph 9-10(2)(g)(i) section 40-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/358 | ATO ID 2004/359", "Subject_References": "Goods and services tax GST supplies & acquisitions GST supply Taxable supply Input taxed supplies GST financial supplies GST derivatives", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004360", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies & acquisitions GST supply Taxable supply Input taxed supplies GST financial supplies GST derivatives"}
{"ATO_ID_Number": "ATO ID 2004/477", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agreement to pay or recoup foreign exchange loss or gain when a forward currency contract is closed out", "Issue": "Is the entity, a supplier of goods, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it enters into a binding verbal agreement with a client, whereby the client either pays or recoups any respective foreign exchange loss or gain when a forward currency contract is closed out?", "Decision": "Yes, the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it enters into a binding verbal agreement with a client, whereby the client either pays or recoups any respective foreign exchange loss or gain when a forward currency contract is closed out.", "Facts": "The entity is a supplier of goods. The entity's client forecasts an amount of goods that the client will purchase from the entity in the future. The entity then enters into a forward currency contract with a bank to cover any materials used in producing the goods that the entity may import, based on the client's forecast. If the client does not meet their forecast the forward currency contract will be closed out. This may result in a loss or gain. There is also a binding verbal agreement between the entity and the client, whereby the client is bound to pay, or is entitled to receive, the difference arising from the forward currency contract between the entity and the bank. That is, if the forward currency contract between the entity and the bank results in a foreign exchange loss for the entity, the client pays that amount to the entity. If a foreign exchange gain arises, the client is entitled to receive that amount from the entity. The entity does not charge a fee to the client. The forward currency contract between the entity and bank is covered by item 11 in the table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services) Regulations 1999 (GST Regulations) and is an input taxed supply under subsection 40-5(1) of the GST Act. The entity is registered for goods and services tax (GST). The supply is made in the course of the entity's enterprise and is connected with Australia.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that financial supply has the meaning given by the GST Regulations. Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations lists an interest in or under a derivative. Regulation 3 of the GST Regulations defines derivative as 'an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate'. Schedule 1 to Goods and Services Tax Ruling GSTR 2002/2, further provides that a derivative includes financial instruments such as options, forwards, futures, swaps and whose value is tied to or derived from an underlying security, commodity, currency, liability or index. Entities usually use derivatives to hedge against changes in interest rates and foreign exchange risks or to minimise business risks. The entity's client forecasts an amount of goods that the client will purchase from the entity in the future. There is a binding verbal agreement between the entity and the client. Under this agreement, the entity's client is bound to pay or is entitled to receive the difference arising from the forward currency contract between the entity and the bank. If the forward currency contract results in a foreign exchange loss for the entity, the client pays that amount to the entity. If a foreign exchange gain arises, the entity's client is entitled to receive that amount. The binding verbal agreement between the entity and its client is separate to their agreement for the sale of the goods. The value of this verbal binding agreement depends on, or is derived from, the underlying foreign currency values, as reflected in the forward currency contract between the entity and the bank. The entity creates its own interest in a separate derivative and provides the interest in that derivative to its client. As noted, a derivative is an interest mentioned in item 11 in the table in subregulation 40-5.09(3) of the GST Regulations and the supply of an interest in a derivative is a financial supply where all of the conditions of subregulation 40-5.09(1) of the GST Regulations are satisfied. The entity makes this supply in the course of its enterprise and the supply is connected with Australia. The entity is registered for GST. As the entity creates its own interest in a separate derivative, the entity is a financial supply provider in relation to the supply of that interest (regulation 40-5.06 of the GST Regulations). The remaining requirement under subregulation 40-5.09(1) of the GST Regulations is that the entity supplies the interest in the derivative for consideration. The entity does not charge a fee to its client, however, the entity and the client enter into a binding verbal agreement and exchange their reciprocal rights and obligations to pay or receive an amount when the foreign exchange results in either a loss or a gain. The exchanging of their rights and obligations, although not priced, does constitute consideration for the derivative agreement and the payment of the difference by one party to the other is a consequence of the agreement. Accordingly, the supply satisfies the requirements of subregulation 40-5.09(1) of the GST Regulations and the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it enters into a binding verbal agreement with a client whereby the client either pays or recoups any respective foreign exchange loss or gain when a forward currency contract entered into is closed out.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Input taxed supplies GST financial supplies GST derivatives GST foreign exchange transactions", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004477", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Goods and services tax Input taxed supplies GST financial supplies GST derivatives GST foreign exchange transactions"}
{"ATO_ID_Number": "ATO ID 2004/820", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and EFTPOS facilities used by two businesses", "Issue": "Is the entity, a service provider, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it allows another business to use its EFTPOS facilities for a fee?", "Decision": "No, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act when it allows another business to use its EFTPOS facilities for a fee. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a service provider. The entity subleases part of its business premises to another business. The entity allows the other business to use its EFTPOS facilities. The entity charges this business a fee for each transaction processed using EFTPOS. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that a supply is not a taxable supply to the extent that it is input taxed. By allowing the other business to use its EFTPOS facilities, the entity is making a supply of services. However, there is a question as to whether this supply is also a financial supply. Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that in certain circumstances, the provision, acquisition or disposal of an interest listed in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations, is a financial supply. The entity subleases part of its business premises to another business and allows the other business to use its EFTPOS facilities. The actual EFTPOS transaction between the bank and the customer is a financial supply under item 1 in the table in subregulation 40-5.09(3) of the GST Regulations. However, in allowing the other business to use its EFTPOS facilities, the entity does not provide, acquire or dispose of an interest in or under any of the items listed in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations. Therefore, the entity is not making an input taxed supply under subsection 40-5(1) of the GST Act. The entity is registered for GST and the supply of services satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under any other provision of Division 40 of the GST Act. Therefore, the entity is making a taxable supply of services under section 9-5 of the GST Act when it allows another business to use its EFTPOS facilities for a fee.", "Date_of_Decision": "9 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Input taxed supplies GST financial supplies GST non financial supplies GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004820", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax Input taxed supplies GST financial supplies GST non financial supplies GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/902", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and convertible notes to raise capital - a financial supply consisting of a borrowing", "Issue": "For the purpose of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), is the entity, a company, making a 'financial supply consisting of a borrowing' when it issues convertible notes to raise capital in the course of its enterprise?", "Decision": "Yes. For the purpose of the GST Act, the entity is making a 'financial supply consisting of a borrowing' when it issues convertible notes to raise capital in the course of its enterprise.", "Facts": "The entity is a company that is registered for goods and services tax (GST). The entity raises capital in the course of its carrying on an enterprise by issuing convertible note securities. The entity's issue of the convertible notes is a financial supply under subsection 40-5(1) of the GST Act. Under the terms of the issue, note holders have the right to redeem the note for cash or convert it into ordinary shares at a fixed price at a specified date. Coupons are payable annually. The convertible notes are only issued to Australian residents.", "Reasons_for_Decision": "Summary: A number of provisions in the GST Act refer to a 'financial supply consisting of a borrowing' (see paragraphs 11-15(5)(a) and 15-10(5)(a) of the GST Act and section 189-15 of the GST Act). 'Borrowing' is defined in section 195-1 of the GST Act as having the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 995-1 of the ITAA 1997 defines 'borrowing' as any form of borrowing, whether secured or unsecured, and includes the raising of funds by the issue of a bond, debenture, discounted security or other document evidencing indebtedness. Paragraph 62 of the Goods and Services Tax Ruling GSTR 2003/9 provides that the requirement for a document evidencing indebtedness leads to the conclusion that for the purposes of the GST Act, a borrowing must involve a debtor-creditor relationship. The entity is issuing convertible notes to raise capital. Schedule 1 to Goods and Services Tax Ruling GSTR 2002/2 provides the following definition of convertible notes: Unsecured notes issued to existing shareholders with the right to either redeem the note for cash or convert it into ordinary shares at a fixed price at certain specified dates. Notes carry a fixed interest rate based on the issue price known as the coupon rate. Under the terms of the issue, note holders have the right to redeem the note for cash or convert it into ordinary shares at a fixed price at a specified date. This creates a debtor-creditor relationship between the entity and the holders of the convertible notes, allowing the issue of the entity's convertible notes to satisfy the definition of borrowing. The entity's issue of the convertible notes is a financial supply under subsection 40-5(1) of the GST Act. As such, for the purpose of the GST Act, the entity is making a 'financial supply consisting of a borrowing' when it issues convertible notes to raise capital in the course of its enterprise.", "Date_of_Decision": "13 September 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 11-15(5)(a) paragraph 15-10(5)(a) subsection 40-5(1) section 189-15 section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2002/2 | GSTR 2003/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Input taxed supplies GST financial supplies GST debt securities GST debt, loan and credit", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004902", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2002/2 GSTR 2003/9 | Keywords Goods and services tax Input taxed supplies GST financial supplies GST debt securities GST debt, loan and credit"}
{"ATO_ID_Number": "ATO ID 2003/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of discounted credit", "Issue": "Is the entity, a finance company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when in accordance with a general understanding with a seller of goods, it allows a reduction off the normal rate of interest on credit it provides to a purchaser of goods from that seller?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act, when in accordance with a general understanding with a seller of goods, it allows a reduction off the normal rate of interest on credit it provides to a purchaser of goods from that seller.", "Facts": "The entity is a finance company. The entity has a general understanding with a seller of goods under which it will allow a reduction off the normal rate of interest on credit it provides to prospective purchasers of goods from that seller. In return for allowing a reduction off the normal rate of interest on credit provided to the purchaser, the seller of the goods pays to the entity an amount (known as a subsidy) equal to the difference between the agreed reduced interest rate and the market interest rate. When making a sale, the seller of goods advises the purchaser of the availability of credit from the entity at a reduced interest rate. The entity then provides the purchaser with credit at a reduced interest rate. This is a financial supply that is input taxed under subsection 40-5(1) of the GST Act. The general understanding between the entity and the seller of goods is informal and does not create any binding obligations between the parties. There is no written agreement between the entity and the seller or the purchaser of the goods regarding the subsidy payment. The entity is registered for goods and services tax (GST). The transaction between the entity and the seller of the goods is made in the course or furtherance of the entity's enterprise, and is connected with Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. In this case, the entity is registered for GST, and the transaction between the entity and the seller of the goods is made for consideration, in the course or furtherance of the entity's enterprise and is connected with Australia. However, it remains necessary to determine whether the transaction amounts to a 'supply' as defined in the GST Act. Although the general understanding between the entity and the seller of goods is informal and does not create any binding obligations between the parties to provide discounted credit, it is not necessary that there is an entry into an obligation under the general understanding for there to be a supply. Under section 9-10 a supply is any form of supply whatsoever, including a supply of services. The entity is making a supply of a service to the seller of goods by allowing a reduction off the normal rate of interest on credit it provides to a purchaser of goods from that seller. The supply is not the actual provision of credit and is therefore not a financial supply that is an input taxed supply under subsection 40-5(1) of the GST Act. In addition, the supply is not input taxed under any of the other provisions in Division 40 of the GST Act nor is it GST-free under Division 38 of the GST Act. Accordingly, all of the requirements in section 9-5 of the GST Act are satisfied. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it enters into an agreement with the seller of goods, to provide credit at a reduced interest rate to a prospective purchaser.", "Date_of_Decision": "13 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subparagraph 9-10(2)(b) Division 38 Division 40 subsection 40-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST supplies & acquisitions GST supply Taxable supply Input taxed supplies GST financial supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200349", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST supplies & acquisitions GST supply Taxable supply Input taxed supplies GST financial supplies"}
{"ATO_ID_Number": "ATO ID 2003/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fees for storage, cleaning and maintenance, testing and repairs of pawned goods", "Issue": "Is the entity, a pawnbroker, making an input taxed financial supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies services for the storage, cleaning, maintenance, testing and repairs of pawned goods that are being held as security for a loan provided by the entity to a customer, and a separate fee is charged to the customer for these services?", "Decision": "No, the entity is not making an input taxed financial supply under subsection 40-5(1) of the GST Act when it supplies services for the storage, cleaning, maintenance, testing and repairs of pawned goods that are being held as security for a loan provided by the entity to a customer, and a separate fee is charged to the customer for these services. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a pawnbroker. The entity supplies services for the storage, cleaning, maintenance, testing and repairs of pawned goods. These pawned goods are being held as security for a loan provided by the entity to its customer. The provision of the loan is an input taxed financial supply under subsection 40-5(1) of the GST Act. The entity charges the customer a fee for the supply of the services separate from the consideration for the loan. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act defines a financial supply as having the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.08(1) provides that a supply is a financial supply if the supply is mentioned as: Under regulation 40-5.09 of the GST Regulations, the first requirement for a financial supply is that the supply must be the provision, acquisition or disposal of an interest mentioned in subregulation 40-5.09(3) or (4) of the GST Regulations. The entity is supplying services of storage, cleaning, maintenance, testing and repairs. These services are not listed in either subregulation 40-5.09(3) or (4) of the GST Regulations. Therefore, the entity's supply is not a financial supply under regulation 40-5.09 of the GST Regulations. Regulation 40-5.10 of the GST Regulations provides that something: The entity's original financial supply is the supply of the loan secured by pawned goods. The supply of the storage, cleaning, maintenance, testing and repair services is to the same customer that the entity supplied with the loan. Paragraphs 126-132 of Goods and Services Tax Ruling GSTR 2002/2 discuss when something is 'directly in connection with' a financial supply. For a supply to be 'directly in connection with' a financial supply, the supply must have a direct relationship with the financial supply. A supply has a direct relationship with a financial supply where the supply: The supply of the storage, cleaning, maintenance, testing and repair services has occurred because the entity supplied a loan to the customer that was secured by pawned goods. The supply of the services would not have occurred if the entity had not made the financial supply of the loan. Therefore, there is a direct relationship between the services and the financial supply of the loan. As such, the entity's supply of services is 'directly in connection with' a financial supply. As the entity's supply of services is to the same customer and is directly in connection with the entity's financial supply, the services will be an incidental financial supply where the requirements in paragraphs (a) to (c) of regulation 40-5.10 of the GST Regulations are satisfied. Paragraph 40-5.10(b) of the GST Regulations requires that the financial supply and the incidental financial supply must be supplied at or about the same time, but not for separate consideration. The entity's supply of services is at or about the same time as the supply of the loan. However, the services are supplied for a separate fee from the consideration for the loan. Therefore, the requirement in paragraph 40-5.10(b) is not met and the entity is not making an incidental financial supply under regulation 40-5.10 of the GST Regulations. As the entity is not making a financial supply under regulation 40-5.09 of the GST Regulations nor an incidental financial supply under regulation 40-5.10 of the GST Regulations, the entity is not making an input taxed financial supply under subsection 40-5(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. Therefore the entity is making a taxable supply under section 9-5 of the GST Act when it supplies services for the storage, administration, cleaning, maintenance, testing and repairs of pawned goods and charges a separate fee for these services.", "Date_of_Decision": "24 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies and acquisitions Taxable supply Input taxed supplies GST financial supplies Incidental financial supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200352", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) GSTR 2002/2 | Keywords Goods and services tax GST supplies and acquisitions Taxable supply Input taxed supplies GST financial supplies Incidental financial supplies"}
{"ATO_ID_Number": "ATO ID 2003/55", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and international inbound money transfer service", "Issue": "Is the entity, a non-resident overseas company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an inbound money transfer service (from overseas to Australia) to a customer overseas?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act, when it supplies an inbound money transfer service to a customer overseas. The supply of the inbound money transfer service is outside the scope of the Australian goods and services tax (GST) system.", "Facts": "The entity is a non-resident overseas company. The entity provides an international money transfer service to customers located worldwide, via its agents that are located in various countries (including Australia). In this case, the entity is supplying an inbound money transfer service (from overseas to Australia) to an overseas customer. This supply involves these steps: The supply is in the course or furtherance of the entity's overseas enterprise. In this instance the supply is made through the non-resident agent and not made through an enterprise carried on in Australia. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act sets out the requirements that must be satisfied for a supply to be a taxable supply. One of those requirements is that the supply must be connected with Australia (paragraph 9-5(c) of the GST Act). Section 9-25 of the GST Act defines when a supply is 'connected with Australia'. For the purposes of determining whether a supply is connected with Australia, section 9-25 makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property. The entity is not making a supply of goods or real property. The entity is supplying an inbound money transfer service to a customer overseas. In making this supply, the entity is providing the customer with a presently existing obligation to pay an ascertainable amount at a future time. Therefore, the supply that the entity makes is a supply of something other than goods or real property and, as such, subsection 9-25(5) of the GST Act is the appropriate provision to determine whether the supply is connected with Australia. Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if either: For the purposes of paragraph 9-25(5)(a) of the GST Act, paragraph 209 of Goods and Service Tax Ruling GSTR 2000/31 provides: 'if the supply is the obligation to do anything or the obligation to refrain from an act or the obligation to tolerate an act or situation, the thing that is being supplied is the obligation to do something, or to tolerate something, and the thing is done where that obligation is entered into'. In this circumstance the obligation arises under an agreement which was executed when the overseas customer completed a money transfer form. The completion of the money transfer form by the customer and the acceptance of the completed form and money by the entity's agent is done overseas and not in Australia. Therefore, the supply of the obligation to the customer is not done in Australia and the supply is not connected with Australia under paragraph 9-25(5)(a) of the GST Act. As the supply in this case is is made through the non-resident agent and not through an enterprise carried on in Australia, the supply is not connected with Australia under paragraph 9-25(5)(b) of the GST Act. Paragraph 9-25(5)(c) of the GST Act may apply where neither paragraph 9-25(5)(a) nor paragraph 9-25(5)(b) of the GST Act apply. For paragraph 9-25(5)(c) to apply, the thing supplied must be a right or option to acquire another thing, where the supply of the other thing would be connected with Australia. In this case, the thing supplied was not a right or option, it was the entry into a presently existing obligation (to an overseas customer) to pay an ascertainable amount at a future time. The subsequent payment of this amount to the customer's nominee in Australia simply discharges the obligation to the customer. As such, the supply is not connected with Australia under paragraph 9-25(5)(c). As the supply is not connected with Australia, the requirements of paragraph 9-5(c) of the GST Act are not satisfied. Accordingly, the entity is not making a taxable supply under section 9-5 of the GST Act when it supplies an inbound money transfer service to a customer overseas. The supply of the inbound money transfer service is outside the scope of the Australian GST system.", "Date_of_Decision": "3 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(c) section 9-25 subsection 9-25(5) paragraph 9-25(5)(a) paragraph 9-25(5)(b) Paragraph 9-25(5)(c) subparagraph 9-25(5)(c)(i) subparagraph 9-25(5)(c)(ii) subparagraph 9-25(5)(c)(iii)", "Related_Public_Rulings_and_Determinations": "GSTR 2000/31", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Connected with Australia", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200355", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2000/31 | Keywords Goods and services tax Connected with Australia"}
{"ATO_ID_Number": "ATO ID 2003/1061", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a guaranteed fixed interest rate facility", "Issue": "Is the entity, a provider of financial products, making an input taxed supply under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a guaranteed fixed interest rate facility to a customer and the customer chooses to exit the facility?", "Decision": "Yes, the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it supplies a guaranteed fixed interest rate facility to a customer and the customer chooses to exit the facility.", "Facts": "The entity is a provider of financial products. One of the financial products that the entity offers to a customer is a guaranteed fixed interest rate facility. Under this facility, the customer enters into a contract to finance equipment (by way of a loan, a hire purchase, a finance lease or an operating lease) at a guaranteed fixed interest rate and at a future date. The guaranteed fixed interest rate will be used to calculate repayments if the customer enters into a loan, hire purchase, finance lease or operating lease at a future date. The contract allows the entity to charge a fee to the customer if, after entering into this facility, the customer decides to exit the facility. Changes in the interest rate subsequently prove to be unfavourable and the customer chooses to exit the facility. The entity then charges the customer the fee for exiting the facility. The entity is a financial supply provider as defined under regulation 40-5.06 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). The supply is for consideration. The supply is made in the course of the entity's enterprise and is connected with Australia. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that financial supply has the meaning given by the GST Regulations. Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Therefore, it is necessary to determine whether the entity is providing, acquiring or disposing of an interest in or under an item mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations when it supplies the guaranteed fixed interest rate facility. Item 2 and Item 11 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 2 and Item 11) are the relevant items that need to be considered in this case. Item 2 lists 'an interest in or under a debt, credit arrangement or right to credit, including a letter of credit'. Goods and Services Tax Ruling GSTR 2002/2 defines a debt as an amount due from one entity to another or a presently existing obligation to pay an ascertainable amount at a future time. A credit arrangement is an arrangement under which an entity lends money on terms that include deferred repayment, or an agreement under which payment of a debt, owed by one entity to another, is deferred or time is allowed to pay. Although an interest rate is usually connected with a debt or a credit arrangement and is used to calculate repayments under these transactions, the interest rate itself is not a debt or a credit arrangement and as such, the supply of a guaranteed interest rate facility is not a financial supply under Item 2. Item 11 lists 'a derivative'. Regulation 3 of the GST Regulations defines derivative as 'an agreement or instrument the value of which depends on, or is derived from, the value of assets or liabilities, an index or a rate'. Schedule 1 of GSTR 2002/2 further provides that a derivative includes financial instruments such as options, forwards, futures, swaps and whose value is tied to or derived from an underlying security, commodity, currency, liability or index. Entities usually use derivatives to hedge against changes in interest rates and foreign exchange risks or to minimise business risks. Under the entity's guaranteed fixed interest rate facility, the customer enters into a contract to finance equipment (by way of a loan, a hire purchase, a finance lease or an operating lease) at a guaranteed fixed interest rate and at a future date. The value of a guaranteed fixed interest rate facility is derived from the value of a current interest rate and therefore, the guaranteed fixed interest rate facility is a derivative for the purposes of Item 11. The derivative is used by the customer to hedge against changes in interest rates at a future date. As such, the entity is providing an interest, as mentioned under subregulation 40-5.09(3) of the GST Regulations, when it provides a guaranteed fixed interest rate facility. The entity charges a fee to the customer when the customer exits the facility. This fee is consideration for the entity's supply of the facility. The supply is made in the course of the entity's enterprise and is connected with Australia. In addition, the entity is registered for GST and is a financial supply provider in relation to the supply of the guaranteed interest rate facility. Accordingly, the supply satisfies the requirements of subregulation 40-5.09(1) of the GST Regulations and the entity is making an input taxed supply under subsection 40-5(1) of the GST Act when it supplies a guaranteed interest rate facility to a customer and the customer chooses to exit the facility.", "Date_of_Decision": "11 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Input taxed supplies GST financial supplies GST debt, loan and credit GST derivatives", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031061", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2002/2 | Keywords Goods and services tax Input taxed supplies GST financial supplies GST debt, loan and credit GST derivatives"}
{"ATO_ID_Number": "ATO ID 2002/907", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the treatment of surcharge levied by taxi company for the provision of a credit facility", "Issue": "Is the entity, a taxi network company, making a financial supply that is input taxed under subsection 40-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides a credit facility to its customers and levies a surcharge for that facility?", "Decision": "Yes, the entity is making a financial supply that is input taxed under subsection 40-5(1) of the GST Act when it provides a credit facility to its customers and levies a surcharge for that facility.", "Facts": "The entity is a taxi network company in Australia that provides network services to the owners of taxi-cabs who are affiliated with it. The entity also provides a credit facility to customers who hire taxis on account (account holders). The account holders sign account vouchers whenever they use a taxi. The entity collects the vouchers from the taxi-cab owners/drivers who are required to lodge the vouchers by a specified day of the month for payment by the entity, on a specified day of the month. In some cases the entity will immediately pay out the face value of the voucher upon its lodgement, or will credit the amount of the voucher against network fees owed to it by the taxi-cab owner. Upon receipt of the voucher, the entity adds a surcharge, calculated on the value of the taxi service, and charges the account holders the total amount. The entity is registered for goods and services tax (GST). The supply is in the course or furtherance of the entity's enterprise.", "Reasons_for_Decision": "Summary: Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given by the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply if: Firstly, it is necessary to determine whether the entity is providing, acquiring or disposing of an interest in or under an item mentioned in subregulation 40-5.09(3) or (4) of the GST Regulations. 'Interests' are mentioned in the table in subregulation 40-5.09(3) of the GST Regulations and Item 2 in the table (Item 2) lists 'a debt, credit arrangement or right to credit, including a letter of credit'. As the entity provides a credit facility, it is providing an interest under a credit arrangement and the surcharge that it levies represents consideration for this interest. The entity's supply of the interest is in the course or furtherance of the enterprise that it carries on in Australia, the entity is registered for GST and charges a surcharge to its customers for the provision of the credit facility which amounts to consideration. The final requirement is that the supplier is a financial supply provider in relation to the supply of the interest. 'Financial supply provider' is defined in subregulation 40-5.06(1) of the GST Regulations: 'An entity, in relation to the supply of an interest that was: (a) immediately before the supply, the property of the entity; or (b) created by the entity in making the supply; As the interest (the credit arrangement) was created by the entity in making the supply, the entity is a financial supply provider in relation to that interest. Therefore, all the requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied. As such, the entity is making a financial supply that is input taxed under subsection 40-5(1) of the GST Act when it provides a credit facility to its customers and levies a surcharge for that facility.", "Date_of_Decision": "15 January 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 40-5(1) subsection 40-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax Input taxed supplies GST financial supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002907", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | is the financial supply provider of the interest.' | Keywords Goods & services tax Input taxed supplies GST financial supplies"}
{"ATO_ID_Number": "ATO ID 2008/144", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and chocolate beverage drinking preparation", "Issue": "Does item 8 in the table in clause 1 of Schedule 2 to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) apply to make the supply of dry chocolate and cocoa drinking preparations GST-free, by virtue of section 38-2 of the GST Act?", "Decision": "Yes. Subject to the exceptions below, item 8 in the table in clause 1 of Schedule 2 to the GST Act applies to make the supply of dry chocolate and cocoa drinking preparations GST-free, by virtue of section 38-2 of the GST Act.", "Facts": "Dry chocolate and cocoa preparations are not in a form that is ready to drink. Dry chocolate and cocoa preparations are used as an ingredient for a beverage. Dry chocolate and cocoa preparations are marketed principally for the addition of hot water so as to create drinking chocolate or drinking cocoa.", "Reasons_for_Decision": "", "Date_of_Decision": "25 September 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) paragraph 38-4(1)(d) subsection 38-4(2) section 195-1 Schedule 2 clause 1 table item 6 Schedule 2 clause 1 table item 7 Schedule 2 clause 1 table item 8", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST beverages Food & drink Goods and services tax GST free GST food Ingredients for beverages", "Case_References": "", "Other_References": "The Australian Concise Oxford Dictionary 4th edition", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008144", "Unmatched_Content": "Reasons for the Decision: A supply of food is GST-free under section 38-2 of the GST Act provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act. | Food is defined in paragraph 38-4(1)(d) of the GST Act to include ingredients for beverages for human consumption. Dry chocolate and cocoa preparations are used as ingredients for beverages, namely drinking chocolate or drinking cocoa. | Section 195-1 of the GST Act provides that the term beverage has the meaning given by subsection 38-4(2) of the GST Act. Subsection 38-4(2) of the GST Act states that, 'beverage includes water'. | However under paragraph 38-3(1)(d) of the GST Act, the supply of an ingredient for a beverage is only GST-free if it is an ingredient of a kind specified in the table in clause 1 of Schedule 2 to the GST Act. | It is therefore necessary to consider whether dry chocolate and cocoa preparations are ingredients of a kind specified in the table in clause 1 of Schedule 2 to the GST Act. | The beverage category in clause 1 of Schedule 2 to the GST Act that is of particular relevance is 'Tea, coffee, etc'. Within that category, the relevant table items are 7 and 8. Item 7 refers to 'preparations that are marketed principally as tea preparations, coffee preparations, or preparations for malted beverages'. Item 8 refers to 'preparations marketed principally as substitutes for preparations covered by item 6 or 7'. | The term 'marketed' is to be given a wide interpretation. All factors associated with marketing need to be considered in their totality in order to determine if a product is marketed in a certain manner. Such factors should include cost, packaging, placement, advertising and promotion. | The term 'substitute' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of the term 'substitute'. The Australian Concise Oxford Dictionary 4th edition, defines 'substitute' to mean: | A substitute would ordinarily have similarities with the original product making it suitable to use as a substitute to the original. | In the community, drinking chocolate or cocoa is a common substitute for a hot malted drink or hot tea or coffee. They are a similar class of beverage. | Dry Chocolate and cocoa preparations are marketed similarly to tea or coffee preparations; that is, similar cost, packaging, market placement, advertising or promotion. Thus dry chocolate and cocoa preparations are marketed principally as a substitute for tea or coffee preparations and are GST-free pursuant to item 8 in the table in clause 1 of Schedule 2 to the GST Act. | Chocolate and cocoa flavoured dietary products | Chocolate and cocoa flavoured dietary products can also be used in the preparation for a beverage which is used for nourishment. However, such products would not qualify for GST-free treatment under item 8 in the table in clause 1 of Schedule 2 to the GST Act as they are not marketed as substitutes for tea, coffee or malt beverages. Chocolate and cocoa flavoured dietary products' market placement and marketing strategies are different to that of chocolate and cocoa preparations as they are marketed as meal replacement beverages. | Soft drinks are not GST-free. Although tea, coffee or malt beverages, including substitutes for them can be consumed cold, they are usually consumed hot. Soft drinks are usually consumed cold. As their marketing strategies and market placement are different to tea, coffee or malt beverages, including their substitutes, they are not a substitute for tea, coffee and malt beverages. | Keywords GST beverages Food & drink Goods and services tax GST free GST food Ingredients for beverages"}
{"ATO_ID_Number": "ATO ID 2004/497", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and frozen coconut juice", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies frozen coconut juice?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies frozen coconut juice.", "Facts": "The entity is a food supplier. The entity supplies frozen coconut juice. The frozen coconut juice is supplied as a beverage. It is supplied frozen as it spoils quickly in its unfrozen state. The product is designed to be thawed prior to drinking. The ingredients of the drink are coconut juice (greater than 90% by volume), water, sugar and coconut meat. The frozen coconut juice is not supplied for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). Even though the coconut juice is supplied frozen it is designed to be thawed prior to drinking. As such, it is a beverage for human consumption. Therefore, the frozen coconut juice comes within the meaning of food contained in section 38-4 of the GST Act as a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Of most relevance to this product is item 12 of Schedule 2 (Item 12), which provides that non-alcoholic non-carbonated beverages, that consist of at least 90% by volume of juices of fruits or vegetables, are GST-free. Coconuts are the fruit or seeds of the coco palm. Accordingly, coconut juice is considered to be the juice of a fruit. Furthermore, the coconut juice is non-alcoholic, non-carbonated and consists of at least 90% by volume of juice and therefore is covered by Item 12. In addition, frozen coconut juice does not fall within any of the exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies frozen coconut juice.", "Date_of_Decision": "26 May 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) paragraph 38-4(1)(c) Schedule 2 Schedule 2 clause 1 item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food GST beverages GST favourable decision", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004497", "Unmatched_Content": "Keywords Goods and services tax GST free GST food GST beverages GST favourable decision"}
{"ATO_ID_Number": "ATO ID 2003/425", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and malted milk powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells malted milk powder marketed solely as a preparation for malted beverages?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells malted milk powder marketed solely as a preparation for malted beverages.", "Facts": "The entity is a food supplier. The entity is selling malted milk powder. Malted milk powder can be used to make malted beverages. Malted milk powder can also be used as an ingredient for confectionery. However, the entity markets the malted milk powder solely as a preparation for malted beverages. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include: As malted milk powder can be used as an ingredient both for confectionery and malted drinks, it falls within the definition of food. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 8 of Schedule 1 (Item 8) provides that food marketed as ingredients for confectionery is not GST-free. Although malted milk powder can be used as an ingredient for confectionery, the entity markets the malted milk powder solely as a preparation for malted beverages. Therefore, the malted milk powder does not fall within Item 8. Under paragraph 38-3(1)(d) of the GST Act, the supply of an ingredient for a beverage is only GST-free if it is an ingredient of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Item 7 of Schedule 2 (Item 7) specifies preparations that are marketed principally as preparations for malted beverages. The entity markets the malted milk powder solely as a preparation for malted beverages. Therefore, the malted milk powder is an ingredient for a beverage of a kind specified in Item 7. Furthermore, the supply of the malted milk powder does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells malted milk powder marketed solely as a preparation for malted beverages.", "Date_of_Decision": "30 January 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(b) paragraph 38-4(1)(d) Schedule 1, clause 1 Schedule 1, clause 1, table item 8 Schedule 2, clause 1 Schedule 2, clause 1, table item 7", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/324 | ATO ID 2001/451", "Subject_References": "Goods & services tax GST free GST food Ingredients for beverages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003425", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Ingredients for beverages"}
{"ATO_ID_Number": "ATO ID 2003/1181", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and yoghurt drink powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies yoghurt drink powder?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies yoghurt drink powder. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity is supplying yoghurt drink powder. The yoghurt drink powder is a powdered ingredient that can be mixed with water, milk or soy milk to make a yoghurt drink. The product is not marketed for the purpose of flavouring milk. It is marketed as a yoghurt drink powder and the directions for use indicate that it can also be added to cold water rather than milk. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The yoghurt drink powder is an ingredient for a beverage for human consumption and therefore satisfies the definition of food in paragraph 38-4(1)(d) of the GST Act. However, paragraph 38-3(1)(d) of the GST Act provides that ingredients for beverages are only GST-free if they are of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Item 9 in Schedule 2 (Item 9) lists dry preparations marketed for the purpose of flavouring milk. The product is not marketed for the purpose of flavouring milk. It is marketed as a yoghurt drink powder and the directions for use indicate that it can also be added to cold water rather than milk. As such, the yoghurt drink powder is not covered by Item 9. There are no other items in Schedule 2 that would cover yoghurt drink powder. Therefore, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells yoghurt drink powder. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore the entity is making a taxable supply under section 9-5 of the GST Act when it supplies yoghurt drink powder.", "Date_of_Decision": "20 June 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(d) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 9", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Ingredients for beverages Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031181", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Ingredients for beverages Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/223", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and concentrated lactofermented whey", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies concentrated lactofermented whey?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act, when it supplies concentrated lactofermented whey. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity sells concentrated lactofermented whey. The concentrated lactofermented whey is sold in a liquid form and is added to other liquids prior to consumption. The entity is registered for goods and services tax (GST). The supply satisfies all of the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). As the concentrated lactofermented whey is a liquid that is added to other beverages for consumption, it is an ingredient for a beverage which meets the definition of food in paragraph 38-4(1)(d) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of an ingredient for a beverage is not GST-free unless it is an ingredient for a beverage, of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Concentrated lactofermented whey is not specifically listed in Schedule 2. As such, it must be determined whether concentrated lactofermented whey is a beverage or an ingredient for a beverage, of a kind specified in Schedule 2. The items from Schedule 2 that are of relevance are: In relation to item 1(c) in Schedule 2 (Item 1(c)), the terms 'whey', 'whey powder' and 'whey paste' are not defined in the GST Act. Therefore, it is necessary to rely on the ordinary meanings of those words. The Macquarie Dictionary (1997) defines 'whey' as 'milk serum, separating as a watery liquid from the curd after coagulation, as in cheese making'. Accordingly, 'whey powder' and 'whey paste' are taken to be the powdered and paste versions of this substance. The product in question is described as 'concentrated lactofermented whey'. As the concentrated lactofermented whey is supplied in a liquid form, it is neither whey powder nor whey paste. As such, it is necessary to determine whether 'whey' includes concentrated lactofermented whey. An accepted principle of statutory interpretation (the noscitur a sociis rule) states that words take their meaning from the words with which they are associated ( Fox v. Warde [1978] VR 362: Supreme Court of Victoria). As such, aid in understanding the meaning of the word 'whey' can be obtained from the context of the surrounding words used in the items in the category 'milk products' in Schedule 2. Item 1(a) in Schedule 2 (Item 1(a)) lists 'milk, skim milk or buttermilk (whether liquid, powdered, concentrated or condensed)'. The words used in Item 1(a) confirm that the legislative intention is to expressly include concentrated milk, skim milk or buttermilk. On the other hand, Item 1(c) lists 'whey, whey powder or whey paste' but does not specify concentrated whey. If the intention was to include concentrated whey, the legislation would have expressly listed it as was done in item 1(a). Therefore, the term 'whey' in Item 1(c) does not include concentrated lactofermented whey. Item 2 in Schedule 2 (Item 2) provides that the supply of beverages consisting of products referred to in Item 1 in Schedule 2 (or a combination of those products), to the extent of at least 95%, but not including flavoured beverages, are GST-free. For the reasons expressed above, the concentrated lactofermented whey is not covered by any of the products listed in item 1 in Schedule 2. Therefore, it is not included in Item 2. Although concentrated lactofermented whey is an ingredient for a beverage, it is not an ingredient of a kind specified in Schedule 2. Therefore, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells concentrated lactofermented whey. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the supply of concentrated lactofermented whey is a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "28 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(c) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 1 Schedule 2 clause 1 table item 1 paragraph (a) Schedule 2 clause 1 table item 1 paragraph (c) Schedule 2 clause 1 table item 2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Ingredients for beverages GST supplies & acquisitions Taxable supply", "Case_References": "Fox v. Warde [1978] VR 362: Supreme Court of Victoria", "Other_References": "The Macquarie Dictionary, 1997, 3rd Edition, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002223", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Ingredients for beverages GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/224", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and whey protein powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies whey protein powder?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies whey protein powder. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies whey protein powder. The whey protein powder is a derivative of whey. The whey protein powder contains a large amount of protein and also contains flavouring. The instructions for consumption of the product state that the whey protein powder can be mixed with either milk, water or any other liquid and consumed as a beverage. The product is marketed as a tool for use in muscle and strength building and is designed for consumption by people seeking a healthy, high protein, low carbohydrate diet. The entity is registered for goods and services tax (GST). The supply satisfies all of the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The product is mixed with milk, water or any other liquid and then consumed. Therefore, the whey protein powder is an ingredient for a beverage for human consumption. Therefore, the whey protein powder satisfies the definition of food contained in paragraph 38-4(1)(d) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage, or an ingredient for a beverage, of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Whey protein powder is not specifically listed in Schedule 2. As such, it must be determined whether whey protein powder is an ingredient of a kind specified in Schedule 2. The items from Schedule 2 that are of relevance are: In relation to item 1(c) in Schedule 2 (Item 1(c)), the terms 'whey', 'whey powder' and 'whey paste' are not defined in the GST Act. Therefore, it is necessary to rely on the ordinary meanings of those words. The Macquarie Dictionary (1997) defines 'whey' as 'milk serum, separating as a watery liquid from the curd after coagulation, as in cheese making'. Accordingly, 'whey powder' and 'whey paste' are taken to be the powdered and paste versions of this substance. The product in question is described as 'whey protein powder'. Therefore, it must be determined whether 'whey protein powder' is the same as 'whey powder'. Where a word or phrase has a special or technical meaning, it is necessary to determine that meaning by reference to the industry to which that word or phrase relates ( Herbert Adams Pty Ltd v. FCT (1932) 47 CLR 222). 'Whey powder' is produced after whey is concentrated (via reverse osmosis or evaporation) and dried (via spray or roller). However, to produce 'whey protein powder', whey must be submitted to a far more complex process in order to isolate and extract the protein from the whey. The whey must undergo precipitation by polyelectrolytes, centrifugation or filtration, separation of precipitation reagents, concentration by evaporation, and spray drying. 'Whey powder' is a complete whey product whereas 'whey protein powder' is one derivative of whey. Therefore, although both products come from the same source (whey), they are produced differently and ultimately possess different characteristics. Accordingly, the 'whey protein powder' is not an ingredient 'of a kind' listed in Item 1(c). In relation to item 9 of Schedule 2 (Item 9), it is necessary to determine whether whey protein powder is a dry preparation marketed for the purpose of flavouring milk. Although the whey protein powder contains flavouring, it not marketed for the purpose of flavouring milk; rather, it is marketed as a muscle and strength building product. As such, the whey protein powder is not covered by Item 9. Although whey protein powder is an ingredient for a beverage, it is not an ingredient of a kind specified in Schedule 2. Therefore, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells whey protein powder. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the supply of whey protein powder is a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "28 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(c) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 1 paragraph (c) Schedule 2 clause 1 table item 9", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Ingredients for beverages GST supplies & acquisitions Taxable supply", "Case_References": "Herbert Adams Pty Ltd v. FCT 47 CLR 222", "Other_References": "The Macquarie Dictionary, 1997, 3rd Edition, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002224", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Ingredients for beverages GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/231", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and reconstituted juices consisting principally of noni juice", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a reconstituted fruit juice product consisting principally of noni juice?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a reconstituted fruit juice product consisting principally of noni juice.", "Facts": "The entity is a food supplier. The entity is supplying a reconstituted fruit juice product consisting principally of noni juice (noni juice). Noni juice is the juice pressed from the fruit of the noni tree. The botanical name of the noni tree is Morinda citrifolia. The noni juice is reconstituted and combined with two other juices. The noni juice is at least 90 per cent by volume of juices of fruits. Testing is performed on noni juice before and after it has been reconstituted, and the bottled juice has the same scientific properties as the juice extracted from the fruit. The noni juice is promoted as having numerous nutritional benefits. The noni juice is not promoted as having any medicinal benefits. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include beverages for human consumption (paragraph 38-4(1)(c) of the GST Act). The meaning of the term beverage for the purposes of the GST Act is determined by subsection 38-4(2) of the GST Act. This section provides that beverage includes water . As this definition does not assist in determining whether noni juice is a beverage for the purposes of the GST Act, it is necessary to consider how the courts have defined 'beverage'. Lockhart J in Bristol-Myers Co. Pty. Ltd. v. Federal Commissioner of Taxation (1990) 21 ATR 417 describes 'a beverage' as 'a drink of any kind'. Lockhart J goes on to say that: '...\"Drink\" when used as a noun is defined in slightly different ways by dictionaries, but in my view it means any liquid which is swallowed to quench thirst or for nourishment.' Therefore, a beverage is considered to be any liquid that is swallowed for nourishment or to quench thirst. A liquid providing nourishment will sustain life by assisting in growth or providing energy. A nutritional purpose may be contrasted with a medicinal purpose, which arises where a liquid is provided for the treatment of disease or has curative or remedial purposes. Noni juice is a liquid that is swallowed for nourishment. Furthermore, the product is not promoted as having any medicinal purposes. Therefore, the noni juice is a beverage for human consumption as per paragraph 38-4(1)(c) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Of most relevance to noni juice is item 12 of Schedule 2 (Item 12), which provides that non-alcoholic non-carbonated beverages, that consist of at least 90 per cent by volume of juices of fruits or vegetables, are GST-free. Noni juice is both non-alcoholic and non-carbonated, and it consists of at least 90 per cent by volume of the juice of fruits. As the reconstituted noni juice has the same properties as the juice when it is initially extracted from the fruit, the reconstituted juice is considered to be the same product as freshly extracted juice and is covered by Item 12. In addition, the supply of noni juice does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies noni juice.", "Date_of_Decision": "21 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(c) subsection 38-4(2) Schedule 2 clause 1 Schedule 2 clause 1 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST free GST food GST beverages", "Case_References": "Bristol-Myers Company Pty Ltd v. Federal Commissioner of Taxation - 27 June 1990 90 ATC 4553 (1990) 23 FCR 126 21 ATR 417", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002231", "Unmatched_Content": "Keywords GST free GST food GST beverages"}
{"ATO_ID_Number": "ATO ID 2002/286", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of grape juice concentrate for making alcoholic beverages", "Issue": "Is the entity, a supplier of a grape juice concentrate, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies grape juice concentrate that is for making alcoholic beverages, to a customer who makes a declaration that the grape juice concentrate will be used to make non-alcoholic beverages?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies grape juice concentrate that is for making alcoholic beverages, to a customer who makes a declaration that the grape juice concentrate will be used to make non-alcoholic beverages. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity supplies grape juice concentrates to the wine industry. All of the entity's concentrates are marketed for use in alcoholic beverages and are stored identically. The grape juice concentrates consist of at least 90% by volume of fruit juice and are used for making alcoholic beverages. However, a small number of the entity's customers use this product for making non-alcoholic beverages. At the time of sale, the customer makes a declaration that it will use the grape juice concentrate to make non-alcoholic beverages. The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The grape juice concentrate is an ingredient for a beverage for human consumption and therefore, satisfies the definition of food in paragraph 38-4(1)(d) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, ingredients for beverages are only GST-free if they are of a kind listed in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Item 10 of Schedule 2 (Item 10) lists 'concentrates for making non-alcoholic beverages, if the concentrates consist of at least 90% by volume of juices of fruit.' The grape juice concentrate supplied by the entity does contain at least 90% by volume of fruit juice. Therefore, it needs to be determined whether the grape juice concentrate for making alcoholic beverages sold by the entity is considered to be a concentrate for making non-alcoholic beverages when the customer has declared that the concentrate will be used to make non-alcoholic beverages. Under the GST legislation, the GST status of a supply of food is determined on the basis of what is being supplied, not what the recipient of the supply intends to do with the food. Therefore, there is no requirement for the entity to determine how the customer will use the grape juice concentrate in order to determine the GST status of the supply. The entity does not differentiate the grape juice concentrate when it supplies it to customers that may make either alcoholic or non-alcoholic beverages. All of its grape juice concentrates are marketed for use in alcoholic beverages and are stored identically. Therefore, the entity is supplying grape juice concentrate for making alcoholic beverages despite the customer's declaration. Accordingly, the grape juice concentrate is not covered by Item 10 and the supply of the grape juice concentrate is not a GST-free supply under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies grape juice concentrate that is for making alcoholic beverages, to a customer who makes a declaration that the grape juice concentrate will be used to make non-alcoholic beverages.", "Date_of_Decision": "28 March 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-20 Division 38 section 38-2 section 38-3 subsection 38-3(1)(d) section 38-4 paragraph 38-4(1)(d) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & Services tax GST-free GST food Ingredients for beverages Supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002286", "Unmatched_Content": "Keywords Goods & Services tax GST-free GST food Ingredients for beverages Supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/696", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and permeate", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells permeate?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies permeate. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies permeate. Permeate is the liquid product that is extracted from milk via a method of filtration that occurs during the milk concentration process. Permeate is predominantly comprised of lactose, however, it also contains milk proteins and minerals and water. Permeate is not consumed as food. Permeate can be dried to a lactose powder or used as a filler for town white milk. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include: Permeate is a liquid that can be dried into a lactose powder or used as a filler for town white milk. It is not food, ingredients for food or a beverage. However, permeate could be considered to be an ingredient for a beverage. Paragraph 38-3(1)(d) of the GST Act provides that a supply of an ingredient for a beverage is only GST-free if the ingredient is of a kind listed in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The only item in Schedule 2 that may be of relevance to this case is item 3 in Schedule 2 (Item 3) which lists lactose. The permeate is predominantly comprised of lactose and can be dried into lactose powder. However, permeate also contains milk proteins and minerals and water. It is only after the drying process has removed these elements that the product becomes lactose. Therefore, permeate is not lactose and is not covered by Item 3. Furthermore, permeate is not covered by any other ingredient for a beverage listed in Schedule 2. Accordingly, paragraph 38-3(1)(d) of the GST Act excludes the supply of permeate from being GST-free under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies permeate.", "Date_of_Decision": "10 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-3(1)(d) section 38-4 Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Ingredients for beverages GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002696", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Ingredients for beverages GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/982", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of thick shake mix", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies thick shake mix?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies thick shake mix.", "Facts": "The entity is a food supplier. The entity supplies thick shake mix. The thick shake mix is a powder ingredient that comes in a variety of flavours and is supplied in sachets. It is used to flavour milk. The instructions on the sachets state that the thick shake mix has to be mixed with milk or soy milk to make a thick shake. The thick shake mix is not sold for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for beverages for human consumption (paragraph 38-4(1)(d) of the GST Act). The thick shake mix is a powder that is added to milk or soy milk to make a thick shake. Therefore, it is an ingredient for a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, ingredients for beverages are only GST-free if they are of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Item 9 in Schedule 2 (Item 9) lists 'dry preparations marketed for the purpose of flavouring milk'. The thick shake mix is a powder that comes in a variety of flavours and is used to flavour milk. The instructions on the sachets of the thick shake mix state that it has to be mixed with milk or soy milk to make a thick shake. Accordingly, the thick shake mix is a dry preparation marketed for the purpose of flavouring milk and is covered by Item 9. The thick shake mix is not sold for consumption on the premises from which it is supplied. Further, the supply of the thick shake mix does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a thick shake mix.", "Date_of_Decision": "17 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(d) Schedule 2 clause 1 Schedule 2 clause 1 table item 9", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Ingredients for beverages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002982", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Ingredients for beverages"}
{"ATO_ID_Number": "ATO ID 2002/989", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fruit jelly juice", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies fruit jelly juice?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit jelly juice. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies fruit jelly juice. The fruit jelly juice is a liquid that consists of water, sugar, fruit juice (less than 90% by volume), thickener and flavouring. It is non-alcoholic and non-carbonated. The fruit jelly juice can be consumed from its packing through a straw and is thin enough to be consumed from a glass. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes: The fruit jelly juice can be consumed from its packing through a straw and is thin enough to be consumed from a glass. Therefore, the fruit jelly juice is a beverage for human consumption and comes within the meaning of food contained in paragraph 38-4(1)(c) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is GST-free only if it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The only item in Schedule 2 that is relevant to the fruit jelly juice is Item 12 of Schedule 2 (Item 12). Item 12 provides that non-alcoholic non-carbonated beverages, that consist of at least 90% by volume of juices of fruits or vegetables, are GST-free. Fruit jelly juice is non-alcoholic and non-carbonated, however, it consists of less than 90% by volume of fruit juice. Therefore, the fruit jelly juice is not a beverage of a kind specified in Item 12 No other items listed in Schedule 2 apply to the fruit jelly juice. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit jelly juice. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies fruit jelly juice.", "Date_of_Decision": "9 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(a) paragraph 38-4(1)(c) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST beverages GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002989", "Unmatched_Content": "Keywords Goods and services tax GST free GST beverages GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/193", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and wine must", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells wine must?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells wine must. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier that sells wine must. Wine must is a liquefied product that results from the process of crushing grapes. Wine must is not 100% juice; it is a mixture of the grape juice, pulp, skins and seeds. Wine must is an essential component of the wine manufacturing process; however, it is not in itself, a drink. Additionally, wine must is not classified as wine, as it contains no alcohol because fermentation has not occurred. Wine, on the other hand, does contain alcohol. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food will be GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Section 38-4 of the GST Act defines food to include beverages for human consumption and ingredients for beverages for human consumption. Subsection 38-4(2) of the GST Act states that 'beverage' includes water. Generally, where the word includes is used in relation to a definition of a word or phrase, the word or phrase defined has its ordinary meaning in addition to the matters specified in the definition ( Cohns Industries Pty Ltd v. Deputy FCT (1979) 24 ALR 658). The ordinary meaning of the word 'beverage' is found in The Macquarie Dictionary (1997) which defines beverage as 'any kind of drink, other than water'. Therefore, for the purposes of the GST Act, a beverage is any kind of drink, including water. Therefore, as wine must is not a drink, it is not a beverage. As such, the supply of wine must will only be GST-free if it is an ingredient for a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act the supply of a beverage (or an ingredient for a beverage) is only GST-free if it is a supply of a beverage (or ingredient) of a kind specified in the third column of the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Therefore, the issue in this case is whether or not wine must is an ingredient of a kind specified in Schedule 2. Wine must is not specifically listed in Schedule 2. The only item that is of relevance to this case is item 10 of Schedule 2. Item 10 of Schedule 2 lists 'concentrates for making non-alcoholic beverages, if the concentrates consist of at least 90% by volume of juices of fruits'. As wine must is used in the production of an alcoholic beverage, (i.e.,) wine, it will not fall under item 10 of Schedule 2. Therefore, wine must is not an ingredient of a kind specified in Schedule 2. As such, the supply of wine must is not GST-free under section 38-2 of the GST Act. In this case, the entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "5 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 Division 40 Schedule 2, clause 1 Schedule 2, clause 1, Item 10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax GST food Food for human consumption GST beverages Ingredients for beverages Taxable supply", "Case_References": "Cohns Industries Pty Ltd v. Deputy FCT (1979) 24 ALR 658", "Other_References": "The Macquarie Dictionary 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001193", "Unmatched_Content": "Keywords Goods and Services Tax GST food Food for human consumption GST beverages Ingredients for beverages Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/209", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Liquid Breakfast Cereal", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells liquid breakfast cereal?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells liquid breakfast cereal. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. In this case, the entity is selling liquid breakfast cereal. The liquid breakfast cereal is designed as a meal replacement. Cereal is the main component of this product. It also contains fruit juice, various flavour enhancers, vitamins and other additives. The liquid breakfast cereal is sold in a Tetra( pack equipped with a drinking straw. It can be drunk as a meal replacement, for pleasure, to increase bodily fluids and to quench thirst. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 38-2 of the GST Act a supply of food is GST-free. Subsection 38-4(1) of the GST Act sets out what amounts to food for the purposes of section 38-2 of the GST Act. Of most relevance to this case is paragraph 38-4(1)(c) of the GST Act which provides that food includes 'beverages for human consumption'. Therefore, it is necessary to consider whether the liquid breakfast cereal is a beverage for the purposes of paragraph 38-4(1)(c) of the GST Act. Subsection 38-4(2) of the GST Act states that 'beverage' includes water. Generally, where the word 'includes' is used in relation to a definition of a word or phrase, the word or phrase defined has its ordinary meaning in addition to the matters specified in the definition (Cohns Industries Pty Ltd v. Deputy FCT (1979) 24 ALR 658). The ordinary meaning of the word 'beverage' is found in The Macquarie Dictionary (1997) which defines beverage as 'any kind of drink, other than water'. Therefore, for the purposes of the GST Act, a beverage is any kind of drink, including water. It is considered that the liquid breakfast cereal is a beverage because it falls within the ordinary meaning of 'beverage'. The liquid breakfast cereal is sold with a straw for the purposes of drinking and is ready to drink straight from the Tetra( pack. It can be drunk as a meal replacement, for pleasure, to increase bodily fluids and to quench thirst. The fact that the liquid breakfast cereal is designed as a meal replacement does not detract from its character as a beverage. However, only beverages that are of a kind specified in the third column of the table in clause 1 of Schedule 2 to the GST Act (Schedule 2) are GST-free (paragraph 38-3(1)(d) of the GST Act). Liquid breakfast cereal is not a beverage of a kind specified in Schedule 2. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells the liquid breakfast cereal. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "11 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 paragraph 38-3(1)(d) subsection 38-4(1) paragraph 38-4(1)(c) subsection 38-4(2) Division 40 Schedule 2 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST beverages Taxable supplies", "Case_References": "Cohns Industries Pty Ltd v. Deputy FCT (1979) 24 ALR 658", "Other_References": "The Macquarie Dictionary 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001209", "Unmatched_Content": "Keywords Goods & services tax GST free GST beverages Taxable supplies"}
{"ATO_ID_Number": "ATO ID 2001/366", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and soy milk with sugar added", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells soy milk with sugar added?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells soy milk with sugar added.", "Facts": "The entity is a food supplier that sells soy milk with a small amount of sugar added. The added sugar acts as a sweetener. The soy milk is not flavoured. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in paragraphs 38-4(1)(c) and 38-4(1)(d) of the GST Act to include beverages for human consumption and ingredients for beverages for human consumption. Soy milk with sugar added is considered to be either a beverage for human consumption or an ingredient for a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage or an ingredient for a beverage is not GST-free unless it is of a kind listed in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The item from Schedule 2 that is relevant to soy milk is item 4. Item 4 of Schedule 2 lists 'beverages consisting principally of soy milk or rice milk, but not including flavoured beverages'. In this case, the supply of soy milk with sugar added consists principally of soy milk. The added sugar acts as a sweetener and is not considered to be a flavouring. As the supply of soy milk with sugar added is covered by item 4 of Schedule 2, the supply is GST-free under section 38-2 of the GST Act.", "Date_of_Decision": "20 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-3(1)(d) section 38-4 Schedule 2 clause 1 Schedule 2 clause 1 table item 4", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST-free GST food GST beverages Ingredients for beverages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001366", "Unmatched_Content": "Keywords Goods and services tax GST-free GST food GST beverages Ingredients for beverages"}
{"ATO_ID_Number": "ATO ID 2001/372", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and unfermented grape juice", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells 100% unfermented grape juice?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells 100% unfermented grape juice. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity sells 100% unfermented grape juice. The unfermented grape juice is not supplied as a beverage until it is further processed. Grape juice is grape must (the liquefied product from the process of crushing grapes containing liquid, pulp, skins and seeds) that has the skins and seeds removed but not all of the pulp. The grape juice still contains approximately 5-8% solids. Grape juice can be used in the manufacture of both alcoholic and non-alcoholic beverages. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act, provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Paragraphs 38-4(1)(c) and 38-4(1)(d) of the GST Act define food to include beverages and ingredients for beverages for human consumption. Unfermented grape juice requires further processing before it can be consumed as a beverage. Therefore, it is not a beverage and does not satisfy the definition of food contained in paragraph 38-4(1)(c) of the GST Act. The unfermented grape juice is used as an ingredient for beverages and therefore satisfies the definition of food contained in paragraph 38-4(1)(d) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of food is not GST-free if it is an ingredient for a beverage, other than an ingredient, of a kind, that is specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The only ingredient for a beverage of relevance to this case is item 10 in Schedule 2 (Item 10). Item 10 provides that concentrates for making non-alcoholic beverages, if the concentrates consist of at least 90% by volume of juices of fruit, are GST-free. The unfermented grape juice that the entity supplies is not a concentrate and therefore does not fall within Item 10. The supply of unfermented grape juice is not a supply of food that is GST-free under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells 100% unfermented grape juice.", "Date_of_Decision": "9 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) paragraph 38-4(1)(c) paragraph 38-4(1)(d) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/373", "Subject_References": "Goods & services tax GST food GST beverages Ingredients for beverages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001372", "Unmatched_Content": "Keywords Goods & services tax GST food GST beverages Ingredients for beverages"}
{"ATO_ID_Number": "ATO ID 2001/373", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and unfermented clarified grape juice", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells 100% unfermented clarified grape juice?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells 100% unfermented clarified grape juice. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity sells 100% unfermented clarified juice. The unfermented clarified grape juice is not supplied as a beverage until it is further processed. Clarified juice is used in the manufacture of wine. It is grape juice that is clarified by settling or filtration to remove any remaining solids from it before fermentation. Clarified grape juice is not supplied for consumption as grape juice. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act, provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Paragraphs 38-4(1)(c) and 38-4(1)(d) of the GST Act define food to include beverages and ingredients for beverages for human consumption. Unfermented clarified grape juice requires further processing before it can be consumed as a beverage. Therefore, it does not satisfy the definition of food contained in paragraph 38-4(1)(c) of the GST Act. The unfermented clarified grape juice is used as an ingredient for beverages and therefore satisfies the definition of food contained in paragraph 38-4(1)(d) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of food is not GST-free if it is an ingredient for a beverage, other than an ingredient, of a kind, that is specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The only ingredient for a beverage of relevance to this case is item 10 of Schedule 2 (Item 10). Item 10 provides that concentrates for making non-alcoholic beverages, if the concentrates consist of at least 90% by volume of juices of fruit are GST-free. The unfermented clarified grape juice supplied by the entity is not a concentrate. Therefore, the supply of unfermented clarified grape juice is not a GST-free supply of food under section 38-2 of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells 100% unfermented clarified grape juice.", "Date_of_Decision": "9 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) paragraph 38-4(1)(c) paragraph 38-4(1)(d) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/372", "Subject_References": "Goods & services tax GST food GST beverages Ingredients for beverages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001373", "Unmatched_Content": "Keywords Goods & services tax GST food GST beverages Ingredients for beverages"}
{"ATO_ID_Number": "ATO ID 2001/450", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and lactose used in home brewing", "Issue": "Is the entity, a supplier of home brew products, making a GST-free supply under section 38-2 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it supplies lactose as an ingredient for making alcoholic home brew?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies lactose as an ingredient for making alcoholic home brew.", "Facts": "The entity is a supplier of home brew products. The entity sells lactose that is packaged, labelled and sold for use in making alcoholic home brew. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Generally, a supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in paragraph 38-4(1)(d) of the GST Act to include ingredients for beverages for human consumption. In this case, lactose is used as an ingredient to make alcoholic home brew. Therefore, it falls within the definition of food as it is an ingredient for a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, the supply of an ingredient for a beverage is only GST-free if it is an ingredient of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Lactose is listed at item 3 of Schedule 2. It is irrelevant whether the lactose is sold for use in making an alcoholic or non-alcoholic beverage. Accordingly, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies lactose as an ingredient for beverages for human consumption.", "Date_of_Decision": "11 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods & Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(d) paragraph 38-4(1)(d) Schedule 2 clause 1 Schedule 2 clause 1 table item 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/438 | ATO ID 2001/439 | ATO ID 2001/440 | ATO ID 2001/441 | ATO ID 2001/442 | ATO ID 2001/450", "Subject_References": "Goods & services tax GST free GST food Food for human consumption GST beverages Ingredients for beverages Taxable supply", "Case_References": "", "Other_References": "Food Industry Issues Register - Issue 24", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001450", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption GST beverages Ingredients for beverages Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/451", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and naturally carbonated mineral water", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies naturally carbonated mineral water?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies naturally carbonated mineral water.", "Facts": "The entity is a food supplier. The entity sells water that is bottled from naturally carbonated water from a spring. The water has not been subject to further processing and does not contain any added chemicals. The naturally carbonated mineral water is not supplied for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act, provided that the supply does not come within any of the exclusions listed in section 38-3 of the GST Act. Subsection 38-4(1) of the GST Act defines food for the purposes of section 38-2 of the GST Act. Paragraph 38-4(1)(c) of the GST Act provides that food includes beverages for human consumption. Naturally carbonated mineral water is a beverage for human consumption. However, under paragraph 38-3(1)(d) of the GST Act, a beverage is only GST-free if it is a beverage of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). Naturally carbonated mineral water is not specifically listed in Schedule 2. However, item 14 in Schedule 2 (Item 14) provides that a supply of water that is 'natural water, non-carbonated and without any other additives' is GST-free. As such, it is necessary to determine whether water that is 'natural water, non-carbonated and without any other additives' includes naturally carbonated water from a spring. An accepted principle of statutory interpretation (the noscitur a sociis rule) states that words take their meaning from the words with which they are associated ( Fox v. Warde [1978] VR 362: Supreme Court of Victoria). As such, the meaning of the words 'non carbonated' can be derived from the context of the surrounding words, 'and without any other additives', used in Item 14. It is considered that the use of the word 'other' implies that the carbonation is considered to be an additive. As such, water that is carbonated would be excluded from Item 14 only if the carbonation is introduced as an additive. In this case, the carbonation in the water occurs naturally and there are no other additives. As such, naturally carbonated mineral water is covered by Item 14. In addition, the supply of naturally carbonated mineral water does not fall within any of the exclusions listed in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act, when it supplies naturally carbonated mineral water.", "Date_of_Decision": "16 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-10 section 38-2 section 38-3 paragraph 38-3(1)(d) subsection 38-4 (1) paragraph 38-4(1)(c) Schedule 2 Schedule 2 clause 1 Schedule 2 clause 1 table item 14", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST beverages", "Case_References": "Fox v. Warde [1978] VR 362", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001451", "Unmatched_Content": "Keywords Goods & services tax GST free GST beverages"}
{"ATO_ID_Number": "ATO ID 2001/780", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and apple cider", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells apple cider?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells apple cider. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity is selling apple cider. The cider is produced by fermenting crushed apples in oak barrels. The cider has an alcohol content of 7½ per cent. The entity is registered for goods and services tax (GST). The supply satisfies the positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act. The term 'food' is defined in paragraph 38-4(1)(c) of the GST Act to include 'beverages for human consumption'. It is considered that apple cider is a beverage for human consumption. Therefore, the apple cider satisfies the definition of food contained in paragraph 38-4(1)(c) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage, or an ingredient for a beverage, of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The items from Schedule 2 that are of most relevance to apple cider are items 10, 11 and 12 from the category 'Fruit and vegetable juices'. The apple cider is an alcoholic beverage that acquires its alcohol content through human intervention (that is by fermentation in an oak cask) - see JMB Beverages Pty Ltd v. FC of T 2009 ATC 20-112. As items 10, 11 and 12 in Schedule 2 all specifically relate to non-alcoholic beverages, they do not cover the apple cider in question. Therefore, the apple cider is excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any of the other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells apple cider.", "Date_of_Decision": "26 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(c) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 10 Schedule 2 clause 1 table item 11 Schedule 2 clause 1 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/781", "Subject_References": "Goods & services tax GST-free GST food GST beverages", "Case_References": "JMB Beverages Pty Ltd v FC of T 2009 ATC 20-112", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001780", "Unmatched_Content": "Keywords Goods & services tax GST-free GST food GST beverages"}
{"ATO_ID_Number": "ATO ID 2001/781", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fruit wine", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies fruit wine?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit wine. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity is selling fruit wine. The wine is produced by fermenting crushed applies in oak barrels. The wine has an alcohol content of 7½ per cent. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in paragraph 38-4(1)(c) of the GST Act to include 'beverages for human consumption'. It is considered that fruit wine is a beverage for human consumption. Therefore, the fruit wine satisfies the definition of food contained in paragraph 38-4(1)(c) of the GST Act. However, under paragraph 38-3(1)(d) of the GST Act, a supply of a beverage is not GST-free unless it is a beverage, or an ingredient for a beverage, of a kind specified in the table in clause 1 of Schedule 2 to the GST Act (Schedule 2). The items from Schedule 2 that are of most relevance to fruit wine are items 10, 11 and 12 from the category 'Fruit and vegetable juices'. The fruit wine is an alcoholic beverage that acquires its alcohol content through human intervention (that is by fermentation in an oak cask) - see JMB Beverages Pty Ltd v. FC of T 2009 ATC 20-112. As items 10, 11 and 12 in Schedule 2 all specifically relate to non-alcoholic beverages, they do not cover the fruit wine in question. Therefore, the fruit wine is excluded from being GST-free under paragraph 38-3(1)(d) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any of the other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells fruit wine.", "Date_of_Decision": "26 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(d) section 38-4 paragraph 38-4(1)(c) Division 40 Schedule 2 clause 1 Schedule 2 clause 1 table item 10 Schedule 2 clause 1 table item 11 Schedule 2 clause 1 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/780", "Subject_References": "Goods & services tax GST free GST food GST beverages", "Case_References": "JMB Beverages Pty Ltd v FC of T 2009 ATC 20-112", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001781", "Unmatched_Content": "Keywords Goods & services tax GST free GST food GST beverages"}
{"ATO_ID_Number": "ATO ID 2008/132", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and pizza/Italian rolls", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies pizza rolls / Italian rolls?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies pizza rolls / Italian rolls.", "Facts": "The entity is a food supplier. The entity supplies food products known as pizza rolls / Italian rolls. The pizza rolls / Italian rolls form part of the savoury roll product range which includes cheese topped rolls and cheese and bacon rolls. These products are baked and supplied daily by the entity in addition to other bread products. They are not supplied for consumption on the premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). The pizza rolls / Italian rolls are food for human consumption and, therefore, satisfy the definition of food in paragraph 38-4(1)(a). However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 3 of Schedule 1 (Item 3) covers pizza, pizza subs, pizza pockets and similar food which are described as prepared food. The question at issue is whether pizza rolls / Italian rolls are similar food to these products and therefore subject to GST. The Tax Office, in consultation with relevant industry bodies, has considered this issue and has identified three common characteristics of pizza, pizza subs and pizza pockets. A food product, which is not identical to pizza, pizza subs or pizza pockets, may be covered under Item 3 as 'similar food', if it is food for human consumption that has a general likeness or resemblance to pizza, pizza subs and pizza pockets. To be considered 'similar food', a product should have all of the three common characteristics of pizza, pizza subs and pizza pockets, as listed above. The pizza rolls / Italian rolls are capable of being cut and filled, have a traditional bread dough base and have a topping of less than 30% compared with the depth of the whole product. The rolls do not share any of the three characteristics as listed above. It is considered that they are not food of a kind specified in Schedule 1. In addition, the supply by the entity of the pizza rolls / Italian rolls does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act.", "Date_of_Decision": "26 August 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1, clause 1, item 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bakery products Food for human consumption Goods and services tax GST food", "Case_References": "", "Other_References": "Policy paper: GST classification of similar food to pizza, pizza subs and pizza pockets (2008).", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008132", "Unmatched_Content": "Keywords Bakery products Food for human consumption Goods and services tax GST food"}
{"ATO_ID_Number": "ATO ID 2004/536", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and oriental pancakes with sweet filling", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells oriental pancakes with a sweet filling?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells oriental pancakes with a sweet filling. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity sells oriental pancakes with a sweet filling such as red bean paste or lotus seed paste. While called 'oriental pancakes', these products are similar to tortillas and flat breads and do not resemble pancakes. The ingredients of the oriental pancakes are wheat flour, margarine, sugar, salt, vegetable oil and red beans or lotus seed paste. Oriental pancakes do not contain egg or milk. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). Oriental pancakes with a sweet filling are food for human consumption and satisfy the definition of food contained in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 20 of Schedule 1 (Item 20) lists various bakery items including pancakes and crepes. Therefore, it needs to be determined whether the oriental pancake is a kind of 'pancake' or 'crepe'. The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) 3rd edn, The Macquarie Library Pty Ltd, New South Wales does not define the entire phrase 'of a kind'. However, it defines the word 'kind' to mean: 1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4. .... Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question. The terms 'pancake' and 'crepe' are also not defined in the GST Act. The Macquarie Dictionary (1997) defines pancake as 'a thin flat cake made from a batter of eggs, flour, sugar and milk, cooked in a frying pan' and 'crepe' as 'a thin pancake'. Although the products are labelled as pancakes, they are not made from a batter of egg, flour, sugar and milk. Therefore, the oriental pancakes are not a kind of pancake or crepe as listed in Item 20. Item 27 of Schedule 1 (Item 27) lists 'bread (including buns) with a sweet filling or coating'. An oriental pancake is a flat bread that contains a sweet filling. Therefore, oriental pancakes are food of a kind specified at Item 27 and the supply of oriental pancakes is excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply of oriental pancakes with sweet filling is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells oriental pancakes with sweet filling.", "Date_of_Decision": "13 June 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 20 Schedule 1 clause 1 table item 27", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/908", "Subject_References": "Goods and services tax GST food Bakery products GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004536", "Unmatched_Content": "Keywords Goods and services tax GST food Bakery products GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/675", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and mantous (oriental buns without filling)", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells mantous?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells mantous.", "Facts": "The entity is a food supplier. The entity sells mantous in plain and coloured varieties. Mantous are oriental buns without filling. The ingredients are flour, sugar, margarine and yeast. The coloured mantous also have food colouring. The mantous are supplied frozen and may be steamed, microwaved or deep fried. The product is not sold hot and is not for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). Mantous are food for human consumption and satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 27 in Schedule 1 (Item 27) specifies 'bread (including buns) with a sweet filling or coating.' Neither the plain mantous nor the coloured mantous have sweet fillings or coatings. Therefore, mantous are not food of a kind covered by Item 27 and are not excluded from being a GST-free supply by paragraph 38-3(1)(c) of the GST Act. In addition, the supply of mantous does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells mantous.", "Date_of_Decision": "13 June 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 27", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004675", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/695", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and plain oriental buns", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies plain oriental buns?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies plain oriental buns.", "Facts": "The entity is a food supplier. The entity supplies plain oriental buns. The ingredients of the buns are flour, water, sugar, and yeast. The product is not sold hot and is not for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment)(paragraph 38-4(1)(a) of the GST Act). As they are food for human consumption plain oriental buns satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 27 in Schedule 1 (Item 27) specifies 'bread (including buns) with a sweet filling or coating'. Plain oriental buns have no sweet filling or coating. Therefore, plain oriental buns are not food of a kind specified at Item 27 and are not excluded from being a GST-free supply by paragraph 38-3(1)(c) of the GST Act. In addition, the supply of plain oriental buns does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies plain oriental buns.", "Date_of_Decision": "13 June 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 27", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/32", "Subject_References": "Goods and services tax GST free GST food Bakery products Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004695", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Bakery products Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/709", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and oriental buns with sweet filling", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies oriental buns with a sweet filling?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies oriental buns with a sweet filling as buns with a sweet filling are specifically excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies oriental buns with a sweet filling. The ingredients of the buns are flour, water, sugar, and yeast. The ingredients of the filling are beans, sugar and oil. The product is not sold hot and is not for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST) and the supply of the oriental buns with sweet filling satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment)(paragraph 38-4(1)(a) of the GST Act). As they are food for human consumption, oriental buns with a sweet filling satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 27 in Schedule 1 (Item 27) specifies 'bread (including buns) with a sweet filling or coating'. The filling in the oriental buns is a sweet mixture of beans, sugar and oil. As the oriental buns have a sweet filling they are food of a kind specified at Item 27 and are excluded from being a GST-free supply by paragraph 38-3(1)(c) of the GST Act. Therefore, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies oriental buns with sweet filling. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply of oriental buns with sweet filling is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the supply of oriental buns with sweet filling is a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "13 June 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 27", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST food Bakery products Food for human consumption Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004709", "Unmatched_Content": "Keywords Goods and services tax GST food Bakery products Food for human consumption Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/876", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fillings for bakery goods and desserts", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells flavoured fillings for bakery goods and desserts?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells flavoured fillings for bakery goods and desserts.", "Facts": "The entity is a food supplier. The entity supplies flavoured fillings for bakery goods and desserts. The fillings are fruit and cheese products that can also be used as toppings on bakery goods and desserts. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). The flavoured fillings for bakery goods and desserts are ingredients for food for human consumption and therefore satisfy the definition of food in paragraph 38-4(1)(b) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Flavoured fillings are not food of a kind specified in Schedule 1. In addition, the flavoured fillings do not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells flavoured fillings for bakery goods and desserts.", "Date_of_Decision": "25 August 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Bakery products Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003876", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Bakery products Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2002/118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and filo pastries with savoury vegetarian fillings", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies filo pastries with savoury vegetarian fillings?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies filo pastries with savoury vegetarian fillings. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies uncooked frozen filo pastries with savoury vegetarian fillings. The filo pastries with savoury vegetarian fillings may contain either spinach, mushroom or sprout fillings and come in round, triangular and log shapes. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a) of the GST Act). The filo pastries with savoury vegetarian fillings are food for human consumption, and therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 25 of Schedule 1 (Item 25) provides that 'pastizzi, calzoni and brioche' are not GST-free. Therefore, it must be determined whether the filo pastries with savoury vegetarian fillings are a kind of pastizzi, calzoni or brioche. The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind' however, it defines the word 'kind' to mean: '1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4 ...' Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question. The term 'pastizzi' is not defined in The Macquarie Dictionary (1997) . However, the general meaning of the term provided by culinary reference books is that a pastizzi is a traditional Maltese pastry that is boat shaped and contains a variety of fillings. A pastizzi is made of puff pastry and traditionally is filled with ricotta cheese. However, a pastizzi may also contain various other fillings and is baked. The filo pastries with vegetarian savoury fillings are considered to be food that is of a kind of pastizzi. Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that foods listed at Item 25 are not GST-free regardless of whether they are supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption. Therefore, even though the filo pastries with vegetarian savoury fillings are raw and frozen they are still food of a kind listed in Schedule 1. Thus, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies filo pastries with vegetarian savoury fillings. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies filo pastries with vegetarian savoury fillings.", "Date_of_Decision": "7 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-4(1)(a) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 25 Schedule 1 clause 2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption GST supplies and acquisitions Taxable supply", "Case_References": "Hygienic Lily Ltd v. Deputy Commissioner of Taxation (NSW) 18 ATR 619 (1987) 13 FCR 396 (1987) 71 ALR 441 87 ATC 4327", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002118", "Unmatched_Content": "Typographical error corrected | Keywords Goods & services tax GST free GST food Food for human consumption GST supplies and acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/119", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and potato borekas", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies potato borekas?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies potato borekas. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies uncooked frozen potato borekas. The potato borekas are a roll shaped pastry product with a savoury potato filling. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a) of the GST Act). Potato borekas are food for human consumption, and therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 22 of Schedule 1 (Item 22) provides that 'pies (meat, vegetable or fruit), pasties and sausage rolls' are not GST-free. Therefore, it must be determined whether the potato borekas are a kind of pie, pastie or sausage roll. The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term . The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind' however, it defines the word 'kind' to mean: '1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange king of hero. 4 ...' Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question. The Macquarie Dictionary (1997) defines 'pie' as 'a baked dish consisting of a sweet (fruit, etc.) or savoury (meat, fish, etc.) filling, enclosed in or covered by pastry, or sometimes other toppings as mashed potatoes.' 'Pastie' is defined as 'a type of pie in which a circular piece of pastry is folded around a filling of vegetables, meat, etc and baked.' Potato borekas are a roll shaped pastry product with a savoury potato filling. According to The Macquarie Dictionary (1997) , pies and pasties can contain vegetarian fillings. Therefore, despite their shape, the potato borekas are a kind of pie or pastie because they consist of pastry folded around a savoury potato filling which is then baked. Thus, the supply of the potato borekas are not GST-free because the potato borekas are covered by Item 22. Clause 2 of Schedule 1 of the GST Act (Clause 2) operates to ensure that food listed at Item 22 is not GST-free regardless of whether it is supplied hot or cold, or require cooking, heating, thawing or chilling prior to consumption. Therefore, although the potato borekas are supplied raw and frozen, it is still food of a kind listed in Schedule 1. As such, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies potato borekas. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies of potato borekas.", "Date_of_Decision": "7 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-4(1)(a) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 22 Schedule 1 Clause 2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002119", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/908", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Chinese pancakes", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a product known as a 'Chinese pancake'?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a product known as a 'Chinese pancake'.", "Facts": "The entity is a food supplier. The entity supplies a product known as a 'Chinese pancake'. While called 'Chinese pancakes', these products are similar to tortillas and flat breads and do not resemble pancakes. The ingredients for 'Chinese pancakes' are flour, oil, salt and water. 'Chinese pancakes' do not contain egg or milk. The Chinese pancake is heated, using either a steamer or microwave, and filled with a savoury or sweet filling before consumption. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The Chinese pancake is used to wrap savoury or sweet fillings for consumption. Therefore, the Chinese pancake is food for human consumption and satisfies the definition of food contained in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 20 in Schedule 1 (Item 20) lists various bakery items including pancakes and crepes. Therefore, it needs to be determined whether the Chinese pancake is a kind of 'pancake' or 'crepe'. The phrase 'of a kind' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) does not define the entire phrase 'of a kind'. However, it defines the word 'kind' to mean: '1. A class or group of individuals of the same nature or character, especially a natural group of animals or plants. 2. Nature or character as determining likeness or difference between things: things differing in degree rather than in kind. 3. A person or thing as being of a particular character or class: he is a strange kind of hero. 4. ....' Accordingly, something will be 'of a kind' if it is of the same nature or character (possessing the same distinguishing qualities) as the thing or group in question. The terms 'pancake' and 'crepe' are not defined in the GST Act and therefore take on their ordinary meaning. The Macquarie Dictionary (1997) defines pancake as 'a thin flat cake made from a batter of eggs, flour, sugar, and milk, cooked in a frying pan' and crepe as 'a thin pancake.' Although the product is known as a 'Chinese pancake', it is not a kind of 'pancake' or 'crepe'. Rather, it is similar to tortilla or flat bread. While the 'Chinese pancake' contains flour, oil, salt and water, unlike the traditional pancakes or crepes, the 'Chinese pancake' does not contain egg or milk. Therefore, the 'Chinese pancake' is not food of a kind covered by Item 20. Also, under the category heading 'Bakery products', item 27 of Schedule 1 (Item 27) lists ' bread (including buns) with a sweet filling or coating'. While the 'Chinese pancake' is a kind of tortilla or flat bread, it is not a bread that contains a sweet filling or coating at the time of supply. Therefore, a 'Chinese pancake' is not covered by Item 27. As such, a 'Chinese pancake' is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. In addition, the supply of a 'Chinese pancake' does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a product known as a 'Chinese pancake'.", "Date_of_Decision": "20 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1 Schedule 1 clause 1 table item 20 Schedule 1 clause 1 table item 27", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002908", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2001/173", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Samosas", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells samosas?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells samosas.", "Facts": "The entity is a food supplier. In this case, the entity is selling samosas. Samosas are a savoury pastry product filled with curried meat and/or vegetables. They are usually triangular in shape. Samosas are fried. The samosas are not sold for consumption on the premises from which they are supplied. The entity does not supply the samosas as hot food for consumption away from those premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act. Food is defined in paragraph 38-4(1)(a) of the GST Act to include 'food for human consumption (whether or not requiring processing or treatment)'. Samosas are food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in clause 1 of Schedule 1 to the GST Act (Schedule 1). Samosas are not specifically listed in Schedule 1. As such, the issue in this case is whether samosas are 'food of a kind' specified in Schedule 1. The phrase 'food of a kind' is not defined in the GST Act. However, the words 'of a kind' and their meanings were considered in Hygienic Lily Ltd v. Deputy Commissioner of Taxation (NSW) (1987) 13 FCR 399. Accordingly, it is considered that food will be 'food of a kind' listed in Schedule 1 if it is food belonging to the same class or genus as food listed in Schedule 1. The items from Schedule 1 that are of most relevance to this case are items 22, 23 and 25 of Schedule 1. Item 22 of Schedule 1 lists 'pies (meat, vegetable or fruit), pasties and sausage rolls'. All of these products are baked. Therefore, in order for samosas to belong to the same class of food as 'pies (meat, vegetable or fruit), pasties and sausage rolls' they need to be baked. As samosas are fried they are not considered to be 'food of a kind' known as 'pies (meat, vegetable or fruit), pasties and sausage rolls'. Item 23 of Schedule 1 lists 'tarts and pastries'. After consultation with The Food Consultative Committee it is considered that the reference to 'tarts and pastries' in item 23 of Schedule 1 is to sweet and not savoury pastries. Moreover, item 23 of Schedule 1 is not intended to be a catch all provision for all products that are made from pastry. As such, samosas are not 'food of a kind' known as pastries. Item 25 of Schedule 1 lists 'pastizzi, calzoni and brioche'. All of these products are baked. Therefore, in order for samosas to belong to the same class as 'pastizzi, calzoni and brioche' they need to be baked. As samosas are fried, they are not considered to be 'food of a kind' known as 'pastizzi, calzoni and brioche'. Samosas therefore fall outside the scope of Schedule 1. In addition, the supply of samosas, in this case, does not fall within any of the other exclusions in section 38-3 of the GST Act. The entity is therefore making a GST-free supply under section 38-2 of the GST Act when it sells samosas.", "Date_of_Decision": "22 January 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1, Clause 1, item 22 Schedule 1, Clause 1, item 23 Schedule 1, Clause 1, item 25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & Services tax GST-free GST food Food for human consumption", "Case_References": "Hygienic Lily Ltd v. Deputy Commissioner of Taxation (NSW) 13 FCR 396", "Other_References": "Food Industry Issues Register - Issue No.30", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001173", "Unmatched_Content": "Keywords Goods & Services tax GST-free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2001/268", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Savoury Flavoured Focaccias", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells savoury flavoured focaccias?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells savoury flavoured focaccias.", "Facts": "The entity is a food supplier. The entity supplies savoury flavoured focaccias. Some examples include pumpkin flavoured focaccias, olive topped focaccias, herb topped focaccias and tomato flavoured focaccias. The olive topped and herb topped focaccias do not have a substantial amount of topping and are not akin to pizza. The savoury flavoured focaccias supplied by the entity do not have a sweet filling or coating. The savoury flavoured focaccias are not sold for consumption on the premises from which they are supplied. The entity does not supply the savoury flavoured focaccias as hot food for consumption away from those premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). Savoury flavoured focaccias are food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The category of food from Schedule 1 that is of particular relevance to this case is 'bakery products'. Item 27 from the category 'bakery products' in Schedule 1, provides that bread (including buns) with a sweet filling or coating is not GST-free. The issue therefore, is whether the flavoured focaccias are considered to be bread (including buns) with a sweet filling or coating. In this case, all of the focaccias supplied by the entity are savoury flavoured, or have savoury toppings. The focaccias supplied by the entity do not have sweet fillings or coatings. Therefore, the savoury flavoured focaccias are not covered by item 27 of Schedule 1 as they are not considered to be bread (including buns) with a sweet filling or coating. In addition, the supply of savoury flavoured focaccias does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act, when it sells the savoury flavoured foccacias.", "Date_of_Decision": "16 March 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 3 Schedule 1 clause 1 table item 27", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001268", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/442", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and wafer paper sheets", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies wafer paper sheets?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies wafer paper sheets. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies edible wafer paper sheets. The wafer paper sheets are made of potato starch and a little vegetable oil to assist with rolling the wafer paper into sheets. The wafer paper sheets are used in the manufacture of confectionery by placing the sheets on the top and bottom of confectionery to stop the confectionery from sticking to the outer wrapping. The wafer paper sheets are marketed as ingredients for confectionery. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). Wafer paper sheets are ingredients for food for human consumption and therefore, satisfy the definition of food in paragraph 38-4(1)(b) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 8 in Schedule 1 (Item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. Wafer paper sheets are used in the manufacture of confectionery and are marketed as ingredients for confectionery. As such, wafer paper sheets are covered by Item 8 and their supply is excluded from being GST-free by the operation of paragraph 38-3(1)(c) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply of wafer paper sheets is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies wafer paper sheets.", "Date_of_Decision": "4 October 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 item 8", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004442", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/1142", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and banana chips", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies banana chips?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies banana chips.", "Facts": "The entity is a food supplier. The entity supplies banana chips. Banana chips are thin, crisp, cross-sections (slices) of processed banana and are commonly supplied as a snack product. Banana chips are produced by cooking banana slices in oil. The resultant slices are thin and crisp. The banana chips are lightly flavoured with sugar, honey and artificial flavouring or they may be seasoned with salt or spices. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment)(paragraph 38-4(1)(a) of the GST Act). Banana chips are food for human consumption and therefore, satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 18 of Schedule 1 (Item 18) specifies food similar to that covered by item 15 of Schedule 1 (Item 15) or item 16 of Schedule 1 (Item 16), whether or not consisting wholly or partly of any vegetable, herb, fruit, meat, seafood or dairy product or extract and whether or not it is artificially flavoured. Banana chips consist of a fruit (banana) with added ingredients including oil and flavouring or seasoning. Therefore, banana chips are food of a kind specified in Item 18 provided they are similar to food that is covered by either Item 15 or Item 16. Item 15 specifies potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips. The foods listed in Item 15 are snack foods that have undergone a cooking process and share certain other characteristics such as crispness. Although none of the foods listed in Item 15 is comprised of fruit, for a food to be covered by Item 18, the food need only be of a kind that is similar to that covered by Item 15. Banana chips are thin, sliced discs in the form of chips and are cooked in oil so that they are crisp and crunchy. They are generally supplied and labelled as banana 'chips'. Banana chips possess many of the characteristics of the foods specified in Item 15 and are therefore, similar to those foods. Furthermore, banana chips can be distinguished from foods in the class of dried fruit, due to the cooking and flavouring process used in their manufacture. Dried fruits are dried to varying extents, but do not exhibit other similarities to the foods listed in Item 15. Accordingly, banana chips are food of a kind covered by Item 18 and a supply of banana chips is, therefore, excluded from being a GST-free supply by the operation of paragraph 38-3(1)(c) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies banana chips.", "Date_of_Decision": "2 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 15 Schedule 1 clause 1 table item 16 Schedule 1 clause 1 table item 18", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST food Food for human consumption GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031142", "Unmatched_Content": "Keywords Goods and services tax GST food Food for human consumption GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/1046", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and energy/sports bars", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies energy/sports bars?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies energy/sports bars. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies energy/sports bars to health food stores, supermarkets and sports shops. The energy/sports bars are located next to or near muesli bars and health food bars, and are wrapped in similar packaging. The energy/sports bars contain some ingredients similar to those found in muesli bars and health food bars. The energy/sports bars are enriched with vitamins and minerals and supplement a healthy diet. The bars are specifically marketed for use by athletes as a formulated supplementary sports food which improves their performance. The directions for use state that the energy and sports bars are to be consumed with plenty of fluid. The bars contain a warning that they are not to be consumed by children under 15 years of age or by pregnant women. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a) of the GST Act). Sports/energy bars are food for human consumption. Therefore they satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 11 of Schedule 1 (Item 11) provides that 'food known as muesli bars or health food bars, and similar foodstuffs' is not GST-free. First, it must be determined whether the energy/sports bars are 'food known as muesli bars or health food bars'. The energy/sports bars contain similar ingredients to muesli bars and health food bars. However, the energy/sports bars are specifically marketed for use by athletes as a formulated supplementary sports food to improve performance. The directions for use state that the energy/sports bars are to be consumed with plenty of fluid. In addition, the energy/sports bars contain a warning that they are not to be consumed by children under the age of 15 years and pregnant women. Muesli and health food bars are not specifically marketed for athletes and do not contain any warnings. Therefore, energy/sports bars are not 'food known as muesli and health food bars' despite containing some similar ingredients. The next step is to determine whether energy/sports bars are 'similar foodstuffs' to muesli and health food bars as per Item 11. The phrase 'similar foodstuffs' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines the word 'similar' to mean 'having likeness, or resemblance, especially in a general way'. 'Foodstuff' is defined in The Macquarie Dictionary (1997) as a 'substance or material suitable for food'. Therefore, to be a similar foodstuff to muesli bars or health food bars, the energy/sports bars would need to have a general likeness or resemblance to muesli bars or health food bars. The energy/sports bars contain some ingredients similar to those found in muesli bars and health food bars, are bar shaped and wrapped in similar packaging. Therefore, the energy/sports bars are foodstuffs similar to muesli bars and health food bars and are covered by Item 11. Accordingly, the energy/sports bars are excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. This means that the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies energy/sports bars. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies energy/sports bars.", "Date_of_Decision": "15 February 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 11", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Sports food", "Case_References": "", "Other_References": "The Macquarie Dictionary, (1997), 3rd edition, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021046", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Sports food"}
{"ATO_ID_Number": "ATO ID 2001/501", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fruit jubes", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies fruit jubes?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies fruit jubes. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity is supplying fruit jubes. Fruit jubes are a fruit, jube-like, snack product formed by combining concentrated fruit juice with glucose, sugar, gelatine and natural colour and flavour. The fruit juice content (rehydrated equivalent) of the product is over 95%. The product contains a substantial amount of sugar. The marketing describes the product as a convenient and delicious snack or treat. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Section 38-4 of the GST Act provides the meaning of food. Under paragraph 38-4(1)(a) of the GST Act food includes 'food for human consumption'. Fruit jubes are food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 8 of Schedule 1 (Item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. The term 'confectionery' is not defined in the GST Act and therefore must be given its ordinary meaning. 'Confectionery' is defined in The Macquarie Dictionary (1997) as 'confections or sweets collectively'. 'Confection' is defined, amongst other things, as 'a sweet preparation (liquid or dry) of fruit or the like...'. Furthermore, Aickin J in the High Court decision Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192 gave the following general description of the term 'confectionery': 'one of common usage which embraces a wide variety of articles, many readily recognisable as examples of confectionery. They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed ... '. Fruit Jubes are small articles of a sweet character containing substantial amounts of sugar. Furthermore, as the product is marketed as a delicious and convenient snack or treat, fruit jubes are regarded as being in the nature of a delicacy. Accordingly, fruit jubes are considered to be confectionery and are covered by Item 8. Therefore, the supply of the fruit jubes is excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies fruit jubes.", "Date_of_Decision": "7 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-3(1)(c) paragraph 38-4(1)(a) Division 40 Schedule 1 clause 1 Schedule 1 clause 1 table item 8", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST food Food for human consumption GST supplies & acquisitions Taxable supply", "Case_References": "Landau and Anor. v Goldwater and Anor (1976) 13 ALR 192", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001501", "Unmatched_Content": "Keywords Goods & services tax GST food Food for human consumption GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/434", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and canned boiled nuts", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies canned boiled nuts?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies canned boiled nuts.", "Facts": "The entity is a food supplier. The entity supplies canned boiled nuts. The canned boiled nuts do not require further cooking before being eaten and are often used in stir-fried dishes. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption, (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). Canned boiled nuts are food for human consumption and therefore satisfy the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 16 of Schedule 1 (Item 16) specifies that seeds or nuts that have been processed or treated by salting, spicing, smoking or roasting, or in any other similar way are not GST-free. Boiled nuts are not considered to have been processed or treated in a way similar to the processes listed in Item 16 and are therefore not covered by this item. Accordingly, the excluding provisions of paragraph 38-3(1)(c) of the GST Act do not apply. In addition, the supply of canned boiled nuts does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies canned boiled nuts.", "Date_of_Decision": "4 October 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 16", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004434", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2002/298", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and dried, hardened biltong", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies biltong in its dry and hardened form?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies biltong in its dry and hardened form.", "Facts": "The entity is a food supplier. The entity supplies biltong in its dry and hardened form. Biltong is a dried, flavoured meat product that requires no refrigeration. It is made from uncooked lean meat that is dried in the open air to varying degrees. Traditional biltong (as is being supplied in this case) is dry and hard. It is sold in strips, pieces and slices. It is a source of high protein that is eaten on its own (often by bushwalkers) but can also be used in salads, sandwiches, as an ingredient for savoury baked goods, quiches and omelettes or reconstituted for use in stews and soups. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). Biltong is food for human consumption and therefore satisfies the definition of food in section 38-4 of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Of relevance to the classification of dry, hardened biltong, is item 18 of Schedule 1 (Item 18). Item 18 specifies that food similar to that covered by items 15 or 16 of Schedule 1, whether or not consisting wholly or partly of any vegetable, herb, fruit, meat, seafood or dairy product or extract and whether or not it is artificially flavoured, is not GST-free. Item 16 of Schedule 1 lists seeds or nuts that have been processed or treated by salting, spicing, smoking, or roasting, or in any other similar way and therefore, is not relevant to the classification of biltong. However, item 15 of Schedule 1 (Item 15) lists potato crisps, sticks or straws, corn crisps or chips, bacon or pork crackling or prawn chips. Therefore, although biltong in its dry, hardened form is not covered by any of the foods listed in Item 15, it must be determined whether it is food similar to that covered by Item 15. All of the foods listed in Item 15 are generally cooked. The biltong is uncooked and although dry and hardened, is not similar in appearance or composition to a crisp, stick, straw or chip. Although the biltong is often eaten as a snack food in the same way that the crisps, sticks, straws and chips listed in Item 15 are, unlike those products, biltong has many other food uses as an ingredient for baking, sandwiches, salads, stews etc. Therefore, the biltong is not considered to be food similar to that covered by Item 15. As such, the dry and hardened biltong is not excluded from being a GST-free supply of food under paragraph 38-3(1)(c) of the GST Act. In addition, as the supply does not fall within any of the other exclusions in section 38-3 of the GST Act, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies the dry and hardened biltong.", "Date_of_Decision": "13 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 15 Schedule 1 clause 1 table item 16 Schedule 1 clause 1 table item 18", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/299", "Subject_References": "Goods & services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002298", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2002/299", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and semi-dried, soft biltong", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies biltong in its semi-dried, soft form?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies biltong in its semi-dried, soft form.", "Facts": "The entity is a food supplier. The entity supplies biltong in its semi-dried, soft form. Biltong is a dried, flavoured meat product that requires no refrigeration. It is made from uncooked lean meat that is dried in the open air to varying degrees. Traditional biltong is dry and hard. It is sold in strips, pieces and slices. It is a source of high protein that is eaten on its own (often by bushwalkers) but can also be used in salads, sandwiches, as an ingredient for savoury baked goods, quiches and omelettes or reconstituted for use in stews and soups. However, in this case, the entity is supplying biltong that is semi-dried and soft. This biltong is marinated and dried to a point where it is still moist. It is often packaged with an oxygen absorber in sealed plastic wrapping in order to extend the period it can be kept. The semi-dried, soft biltong is used in the same manner as other cooked, pickled, corned or smoked smallgoods and like most smallgoods, is also sold from delicatessens by the kilogram. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). Semi-dried, soft biltong is food for human consumption and therefore satisfies the definition of food in section 38-4 of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Semi-dried, soft biltong is not food of a kind listed in Schedule 1. As such, the semi-dried, soft biltong is not excluded from being a GST-free supply of food under paragraph 38-3(1)(c) of the GST Act. In addition, as the supply does not fall within any of the other exclusions in section 38-3 of the GST Act, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies the semi-dried, soft biltong.", "Date_of_Decision": "13 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/298", "Subject_References": "Goods & services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002299", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/463", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and pharmaceutical white oil", "Issue": "Is the entity, a supplier of chemicals, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies pharmaceutical white oil that is marketed as a generic product?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies pharmaceutical white oil that is marketed as a generic product. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of chemicals. The entity supplies white oil of pharmaceutical grade. The pharmaceutical white oil is approved for food contact. The pharmaceutical white oil has multiple industrial applications and is used in the pharmaceutical, cosmetic, food and packaging industries. While the pharmaceutical white oil may be used as a processing aid in food manufacture, it is supplied and marketed as a generic product. It is not marketed specifically for culinary purposes. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act, if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include fats and oils marketed for culinary purposes (paragraph 38-4(1)(f) of the GST Act). The word 'culinary' is not defined in the GST Act. Generally, where a word is not defined in the relevant Act, it is interpreted in accordance with its ordinary meaning. The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne defines culinary to mean 'of or for cooking or the kitchen'. Pharmaceutical white oil has multiple industrial applications and is used in the pharmaceutical, cosmetic, food and packaging industries. While the pharmaceutical white oil is used as a processing aid in food manufacture, it is supplied and marketed as a generic product rather than as a product specifically for culinary purposes. As the pharmaceutical white oil is not an oil that is marketed for culinary purposes, it does not meet the definition of food in paragraph 38-4(1)(f) of the GST Act. Therefore, the entity is not making a GST-free supply of food under section 38-2 of the GST Act when it sells pharmaceutical white oil. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies pharmaceutical white oil that is marketed as a generic product.", "Date_of_Decision": "12 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-4 paragraph 38-4(1)(f) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST food GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004463", "Unmatched_Content": "Keywords Goods and services tax GST food GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/496", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and lye water", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies lye water?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies lye water. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a food supplier. The entity supplies lye water in bottles. The product is diluted with water to make a solution. This solution is used to refresh dried seafood before cooking. Food needs to be rinsed to remove the lye water solution before cooking. The ingredients are: water, potassium carbonate and sodium bi-carbonate. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for food for human consumption. The lye water is used as a solution to refresh dried seafood before cooking. The food needs to be rinsed to remove the lye water solution before cooking. Although the lye water is applied to the food it is rinsed off before the food is cooked and as such is not an ingredient for that food. Accordingly, the lye water is not considered to be an ingredient for food for human consumption. As lye water does not come within the meaning of 'food' in section 38-4 of the GST Act, it is not GST-free under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies lye water.", "Date_of_Decision": "26 May 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-2 section 38-3 section 38-4 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST food Ingredients for food Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004496", "Unmatched_Content": "Keywords Goods and services tax GST food Ingredients for food Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/912", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of food grade fish as bait", "Issue": "Is the entity, a commercial fisherman, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when they supply food grade fish as bait?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act, when they supply food grade fish as bait. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a commercial fisherman. The entity supplies fresh, unprocessed, food grade fish as bait. The fish are not alive when sold. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The entity is supplying food grade fish, which is fit for human consumption. However, the entity is not supplying the fish as food for human consumption. The entity is supplying the fish as bait. If a supplier differentiates a product to be supplied as food from a product to be supplied for industrial or other non-food uses, the latter supply is not considered to be a GST-free supply of food under section 38-2 of the GST Act. Some of the ways in which a dual-purpose food product is considered to be differentiated for a non-food use are: Although the entity is supplying fish that is food grade and could be used as food for human consumption, it has differentiated the product by supplying it as bait. As such, the supply of the fish is not a supply of food for human consumption despite the fact that the fish is of food grade quality, and therefore, does not amount to food for the purposes of section 38-4 of the GST Act. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when they sell food grade fish as bait. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any of the other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when they sell food grade fish as bait.", "Date_of_Decision": "15 January 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-4 paragraph 38-4(1)(a) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002912", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/271", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Certified seed potatoes", "Issue": "Is the entity, a farmer, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies certified seed potatoes to another farmer to use to grow potato crops?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies certified seed potatoes to another farmer to use to grow potato crops. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity, a farmer, grows seed potatoes. The entity sells the seed potatoes to another farmer as seed for their next crop. The seed potatoes are sold as certified seed potatoes. They are potatoes that are grown under special conditions to ensure that they are disease free and have a high purity level. A certified seed potato crop is differentiated from other potato crops in that it is grown in accordance with a system of management protocols and is subjected to crop health checks determined by the certification authority. When harvested, the seed potatoes are visually no different from any other potatoes of the same variety, however they are able to be labelled as certified seed potatoes and generally attract a premium price if sold for seed purposes. The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 38-2 of the GST Act a supply of 'food' is GST-free. Subsection 38-4(1) of the GST Act sets out what amounts to food for the purposes of section 38-2 of the GST Act. Of most relevance to this case is paragraph 38-4(1)(a) of the GST Act which provides that food includes 'food for human consumption (whether or not requiring processing or treatment)'. Therefore, the issue at hand is whether the certified seed potatoes are considered to be 'food for human consumption' under paragraph 38-4(1)(a) of the GST Act. The certified seed potatoes are sold to another farmer as seed for their next crop. Furthermore, the certified seed potato crop is differentiated from other potato crops and is labelled as 'certified seed potatoes'. As the certified seed potatoes are sold for the purposes of growing potato crops, they are not considered to be food for human consumption for the purposes of paragraph 38-4(1)(a) of the GST Act. Therefore, the supply of seed potatoes to another farmer to use to grow potato crops is not GST-free under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "26 July 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 subsection 38-4(1) paragraph 38-4(1)(a) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption GST primary production Taxable supply", "Case_References": "", "Other_References": "Food Industry Issues Register - Issue No.17", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001271", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption GST primary production Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/560", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of brood prawns", "Issue": "Is the entity, a supplier of brood prawns, making a GST-free supply under section 38-2 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells brood prawns to produce hatchlings (larvae)?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells brood prawns to produce hatchlings (larvae). The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of brood prawns. The entity supplies brood prawns to a prawn hatchery. The prawn hatchery then uses the brood prawns to produce hatchlings (larvae). The entity is registered for GST. The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in subsection 38-4(1) of the GST Act. Paragraph 38-4(1)(a) lists food for human consumption (whether or not requiring further processing or treatment). However, paragraph 38-4(1)(g) of the GST Act provides that the definition of food does not include live animals (other than crustaceans or molluscs). Brood prawns are live animals, but as brood prawns are crustaceans they are not excluded by paragraph 38-4(1)(g) of the GST Act from being food as defined in the GST Act. However, in order to be considered food according to the definition in the GST Act, brood prawns must be supplied as food for human consumption (whether or not requiring further processing or treatment). In this case, brood prawns are supplied to produce hatchlings (larvae), rather than as food for human consumption. Therefore, the supply is not a GST-free supply of food under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells brood prawns to produce hatchlings (larvae).", "Date_of_Decision": "1 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods & Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 subsection 38-4(1) paragraph 38-4(1)(a) paragraph 38-4(1)(g) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/561", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Live animals GST primary production GST fishing Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001560", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Live animals GST primary production GST fishing Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/561", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of prawn larvae", "Issue": "Is the entity, a prawn hatchery, making a GST-free supply under section 38-2 of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act) when it sells prawn larvae?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells prawn larvae. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a prawn hatchery. The entity hatches the prawn larvae and then sells them. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act, provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Food is defined in subsection 38-4(1) of the GST Act. Paragraph 38-4(1)(a) of the GST Act lists food for human consumption (whether or not requiring further processing or treatment). However, paragraph 38-4(1)(g) of the GST Act provides that the definition of food does not include live animals (other than crustaceans or molluscs). The prawn larvae are live animals but as prawn larvae are crustaceans they are not excluded by paragraph 38-4(1)(g) of the GST Act from being food as defined in the GST Act. However, in order to be considered food according to the definition in the GST Act, prawn larvae must be supplied as food for human consumption (whether or not requiring further processing or treatment). Prawn larvae are not considered to be food for human consumption, as the larvae are not fully-grown and not ready for human consumption. Therefore, the supply of prawn larvae is not a GST-free supply under section 38-2 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells prawn larvae.", "Date_of_Decision": "1 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods & Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 subsection 38-4(1) paragraph 38-4(1)(a) paragraph 38-4(1)(g) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/560", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Live animals GST primary production GST fishing Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001561", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Live animals GST primary production GST fishing Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/272", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and lecithin supplied as a food emulsifier", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells lecithin as a food emulsifier?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells lecithin as a food emulsifier.", "Facts": "The entity is a food supplier. The entity sells lecithin and soy lecithin (derived from eggs and soybeans respectively) as a food emulsifier. The entity sells the lecithin in bulk and not for retail sale. As a food emulsifier, the lecithin is used in the production of a variety of foods as it helps mix fats with water and keeps them from separating. The lecithin contains measurable amounts of various ingredients including lipids (fats), trace elements and carbohydrates. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for food for human consumption under paragraph 38-4(1)(b) of the GST Act. Lecithin as a food emulsifier is an ingredient for food for human consumption and therefore satisfies the definition of food. However, under paragraph 38-3(1)(e) of the GST Act, a supply is not GST-free if it is food of a kind specified in regulations made for the purposes of subsection 38-3(1) of the GST Act. Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), effective from 1 December 2001, deals with food additives. This Regulation gives effect to paragraph 38-3(1)(e) of the GST Act and determines those foods that are not GST-free. Subregulation 38-3.02(1) of the GST Regulations provides that food additives, other than exempt food additives, are not GST-free. Although the term 'food additive' is used in the regulation, it is not defined elsewhere in the GST Act. The word 'additive' is defined in The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW to mean '...a substance added to a product, usually to preserve or improve its quality'. As a food emulsifier, lecithin helps mix fats with water and keeps them from separating. Therefore, the lecithin improves the quality of food to which it is added and is a 'food additive' for GST purposes. Subregulation 38-3.02(2) of the GST Regulations outlines the requirements for an additive to be an 'exempt food additive', the supply of which is GST-free. Under paragraph 38-3.02(2)(a) of the GST Regulations, a food additive which, at the time of supply, is packaged and marketed for retail sale is an exempt food additive. The entity sells the lecithin in bulk and not for retail sale. As such, the lecithin is not an exempt food additive under paragraph 38-3.02(2)(a). To be an exempt food additive under paragraph 38-3.02(2)(b) of the GST Regulations, the lecithin must: The lecithin contains measurable amounts of various ingredients including lipids (fats), trace elements and carbohydrates. Therefore, the lecithin product has a measurable nutritional value for GST purposes. The entity supplies the lecithin as a food emulsifier. The lecithin is used in the production of a variety of foods to mix fats with water and to keep them from separating. Therefore, lecithin supplied as a food emulsifier is used solely or predominantly in the composition of food. For the purposes of the GST regulations, it is accepted that a product is 'essential' to an item of food where it is manufactured specifically for use in foods. The lecithin is a food emulsifier and therefore, is essential to the composition of food. Accordingly, lecithin supplied as a food emulsifier, is an exempt food additive under paragraph 38-3.02(2)(b) of the GST Regulations and it is not food of a kind specified for the purposes of paragraph 38-3(1)(e) of the GST Act. In addition, the supply of the entity's lecithin product does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies lecithin as a food emulsifier.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 section 38-3(1) paragraph 38-3(1)(e) section 38-4 paragraph 38-4(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food additives Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005272", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST food Food additives Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2005/361", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and lecithin powder or granules", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells lecithin powder or granules?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells lecithin powder or granules.", "Facts": "The entity is a food supplier. The entity supplies lecithin and soy lecithin (derived from eggs and soybeans respectively). The lecithin is not supplied in tablet or capsule form. It is supplied in either granular or powdered form, and is usually consumed by adding to foods such as cereals or fruit juice. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and its supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) and ingredients for food and beverages for human consumption. Lecithin granules and powder may be consumed with foods such as cereals and fruit juices. The powder and granules are not added as an ingredient of the food or beverage. Lecithin is therefore not an ingredient for these food items, rather it is food in its own right. As such, lecithin satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act. Paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Lecithin is not food of a kind specified in Schedule 1. In addition, the supply of lecithin does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies lecithin powder or granules.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/272", "Subject_References": "Goods and services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005361", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and edible massage oils and lotions", "Issue": "Is the entity, a retailer, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies edible massage oils and lotions?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies edible massage oils and lotions. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a retailer. The entity supplies edible massage oils and lotions. The ingredients, which include vegetable oil or fruit juice, flavours, vegetable gum, water and preservatives, are common to a variety of foods. The oils and lotions are marketed as edible massage oils and lotions and are labelled as a massage aid, to be applied to the human body. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption, ingredients for food for human consumption, beverages for food for human consumption, ingredients for beverages for food for human consumption, and goods to be mixed with or added to food for human consumption. Some food products have alternative non-food uses. A product that is indicated to be for a use other than food cannot be a supply of food for the purposes of the GST Act, even if it is identical in substance to a GST-free food product. In determining whether a supply is a supply of a GST-free food, it is not only the physical characteristics of the product that are important but also the nature of the supply. Some of the ways in which a dual-purpose food product could be considered to be differentiated for non-food use are: The oils and lotions are marketed as edible massage oils or lotions and are labelled as an aid to massage, for application to the human body. As such, the oils and lotions have been designated as an aid to massage and not food. Further, the massage oils and lotions are labelled and marketed as a non-food product. Therefore, the entity is supplying products, the contents of which are edible, as something other than food. Accordingly, the supply of edible massage products is not a supply of 'food' as defined. The nature of this supply is more accurately characterised as a supply of massage products. The fact that the products are edible due to the nature of their ingredients does not change the nature of the supply or lead to the conclusion that the products are food. This is irrespective of the fact that some of the products may be consumed during use. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies edible massage oils and lotions.", "Date_of_Decision": "27 September 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-4 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200437", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and edible chocolate body paint", "Issue": "Is the entity, a retailer, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies edible chocolate body paint?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies edible chocolate body paint. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a retailer. The entity supplies edible chocolate body paint. The product is packaged with a brush or applicator, or in a plastic bottle designed to be squeezed to apply the contents. The ingredients, which include sugar, glucose syrup, milk solids, vegetable oil, cocoa powder, flavours, vegetable gum and water, are common to a variety of chocolate toppings and sauces. The product is marketed as edible body paint and is supplied as a novelty to be applied to the human body. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption, ingredients for food for human consumption, beverages for food for human consumption, ingredients for beverages for food for human consumption, and goods to be mixed with or added to food for human consumption. Some food products have alternative non-food uses. A product that is indicated to be for a use other than food cannot be a supply of food for the purposes of the GST Act, even if it is identical in substance to a GST-free food product. In determining whether a supply is a supply of a GST-free food, it is not only the physical characteristics of the product that are important but also the nature of the supply. Some of the ways in which a dual-purpose food product could be considered to be differentiated for non-food use are: The entity supplies the body paint with a paint brush and other instructions which indicate the product is not being supplied as food. The product is described as edible body paint and is supplied as a novelty to be applied to the human body. Therefore, the body paint has been designated as a novelty and not food. Further, the body paint has been labelled and marketed as body paint which is a non-food product. As such, the entity is supplying a product, the contents of which are normally regarded as food, as something other than food. Therefore, the supply of edible chocolate body paint is not a supply of 'food' as defined. The nature of this supply is more accurately characterised as a supply of body paint or a novelty product. The fact that this product is edible and consists of ingredients common to various chocolate sauces does not change the nature of the supply. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies edible chocolate body paint.", "Date_of_Decision": "27 September 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-4 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and service tax GST food Food for human consumption GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200438", "Unmatched_Content": "Keywords Goods and service tax GST food Food for human consumption GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/48", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sodium metabisulphite", "Issue": "Is the entity, a wholesale food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies sodium metabisulphite that is not packaged or marketed for retail sale?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies sodium metabisulphite that is not packaged or marketed for retail sale. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a wholesale food supplier. The entity sells sodium metabisulphite. Sodium metabisulphite is a food preservative used in the preparation of foods such as smallgoods, seafood, fruits and vegetables, pastry items and home brew products. Sodium metabisulphite has no measurable nutritional value. At the time of supply sodium metabisulphite is not packaged or marketed for retail sale. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). Sodium metabisulphite is a food preservative used in the preparation of foods such as smallgoods, seafood, fruits and vegetables, pastry items and home brew products. Therefore, sodium metabisulphite is an ingredient for food for human consumption under paragraph 38-4(1)(b) of the GST Act. However, under paragraph 38-3(1)(e) of the GST Act a supply is not GST-free under section 38-2 of the GST Act if it is a supply of 'food of a kind specified in regulations made for the purposes of this subsection'. Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), effective from 1 December 2001, deals with food additives. This regulation gives effect to paragraph 38-3(1)(e) of the GST Act and determines those foods that are not GST-free. Subregulation 38-3.02(1) of the GST Regulations provides that food additives, other than exempt food additives, are not GST-free. Although the term 'food additive' is used in the regulation, it is not defined elsewhere in the GST Act. The word 'additive' is defined in The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales to mean '...a substance added to a product, usually to preserve or improve its quality'. Examples of products that are considered to be additives for GST purposes include colourings, flavourings, preservatives, antioxidants, sweeteners, vitamins, minerals and modifying agents. As sodium metabisulphite is a food preservative it comes within the definition of 'additive' and is therefore a food additive for GST purposes. Subregulation 38-3.02(2) of the GST Regulations provides that some food additives are exempt food additives, the supply of which, will be GST-free. Under paragraph 38-3.02(2)(a) of the GST Regulations, a food additive which, at the time of supply, is packaged and marketed for retail sale is an exempt food additive. The entity is a wholesaler, and does not package or market sodium metabisulphite for retail sale at the time of supply. Therefore, the sodium metabisulphite supplied by the entity is not an exempt food additive under paragraph 38-3.02(2)(a) of the GST Regulations. To be considered an exempt food additive under paragraph 38-3.02(2)(b) of the Regulations, sodium metabisulphite must: Sodium metabisulphite has no measurable nutritional value. Therefore, sodium metabisulphite is not an exempt food additive under 38-3.02(2)(b) of the GST Regulations. As sodium metabisulphite is a supply of food of a kind specified in the GST Regulations, the supply of it is excluded from being GST-free by paragraph 38-3(1)(e) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies sodium metabisulphite that is not packaged or marketed for retail sale.", "Date_of_Decision": "23 January 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(e) section 38-4 paragraph 38-4(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Ingredients for food Food additives GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200448", "Unmatched_Content": "Good and Services Tax: A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST food Ingredients for food Food additives GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/289", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fruit in alcohol", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells fruit in alcohol?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells fruit in alcohol.", "Facts": "The entity is a food supplier. The entity sells jars that are filled with fruit in alcohol. The fruit in alcohol is not marketed as confectionery or as an ingredient for confectionery or food consisting principally of confectionery. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The fruit in alcohol is food for human consumption and therefore, satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 12 in Schedule 1 (Item 12) lists crystallised fruit, glace fruit and drained fruit. The product that the entity sells is fruit in alcohol. The fruit in alcohol is not a fruit product as described in Item 12. Item 8 in Schedule 1 (Item 8) lists confectionery, food marketed as confectionery, food marketed as ingredients for confectionery or food consisting principally of confectionery. The term 'confectionery' is not defined in the GST Act. However, Aickin J in the High Court decision Landau and Anor. v. Goldwater and Anor (13 ALR 192) gave the following general description of confectionery: They are primarily small articles of a sweet character containing substantial amounts of sugar and regarded as being in the nature of a delicacy in whatever quantity they may be consumed. Fruit in alcohol is not primarily small articles of a sweet character containing substantial amounts of sugar and the presentation of fruit in alcohol is not enough to make this product a confectionery product. Therefore, the fruit in alcohol is not confectionery. In addition, the product is not marketed as confectionery or as an ingredient for confectionery or food consisting principally of confectionery. Fruit in alcohol is not covered by Item 8 and the excluding provision of paragraph 38-3(1)(c) of the GST Act does not apply. The supply of fruit in alcohol does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells fruit in alcohol.", "Date_of_Decision": "5 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 Schedule 1 clause 1 table item 8 Schedule 1 clause 1 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption", "Case_References": "Landau and Anor v. Goldwater and Anor (1976) 13 ALR 192", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004289", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/372", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and dried bamboo leaves used to wrap and flavour food", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies dried bamboo leaves used to wrap and flavour food while cooking?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies dried bamboo leaves used to wrap and flavour food while cooking.", "Facts": "The entity is a food supplier. The entity supplies dried bamboo leaves that are used in cooking Asian foods such as dumplings, cakes and puddings. The dried bamboo leaves are softened by soaking them in water. The bamboo leaves are then used to wrap all the ingredients together for cooking. In the cooking process, the bamboo leaves add a special flavour to the food in a similar way as other spices. The bamboo leaves are not consumed, they are discarded before the cooked food is eaten. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings) (paragraph 38-4(1)(e) of the GST Act). Although the dried bamboo leaves are discarded before consumption, the leaves are used to wrap all the ingredients together for cooking and the leaves add a special flavour to the food in the cooking process. As such, the dried bamboo leaves are goods added to food for human consumption and satisfy the definition of food in paragraph 38-4(1)(e) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Dried bamboo leaves are not food of a kind specified in Schedule 1. In addition, the dried bamboo leaves do not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies dried bamboo leaves used to wrap and flavour food while cooking.", "Date_of_Decision": "02 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(e) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Food seasoning", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004372", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Food seasoning"}
{"ATO_ID_Number": "ATO ID 2004/373", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and rosemary skewers", "Issue": "Is the entity, an herb grower, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells rosemary skewers?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells rosemary skewers.", "Facts": "The entity is an herb grower. The entity sells rosemary skewers that it picks from the field. The entity then dries them and packages them for sale. The rosemary skewers are used when cooking lamb or chicken kebabs. The meat is threaded onto the skewers and then cooked. During the cooking process, the rosemary skewers infuse its rosemary flavour and fragrance into the meat. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings) (paragraph 38-4(1)(e) of the GST Act). Although the rosemary skewers are not consumed, they infuse its rosemary flavour and fragrance to the meat during the cooking process. As such, the rosemary skewers are considered goods added to food for human consumption, and therefore, satisfy the definition of food in paragraph 38-4(1)(e) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Rosemary skewers are not food of a kind specified in Schedule 1. In addition, the rosemary skewers do not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells rosemary skewers.", "Date_of_Decision": "23 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(e) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Food seasoning Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004373", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Food seasoning Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2004/444", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a meat cure", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a meat cure?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells a meat cure.", "Facts": "The entity is a food supplier and sells meat cure. The product is supplied for use solely in the manufacture of ham and bacon, of which the curing process is an essential part. The meat cure consists of measurable amounts of various ingredients including protein, sugar and salt. The product is not packaged and marketed for retail sale at the time of supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). The meat cure is an ingredient for food for human consumption and therefore satisfies the definition of food in paragraph 38-4(1)(b) of the GST Act. However, under paragraph 38-3(1)(e) of the GST Act, a supply is not GST-free if it is food of a kind specified in regulations made for the purposes of subsection 38-3(1) of the GST Act. Regulation 38-3.02 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), effective from 1 December 2001, deals with food additives. This regulation gives effect to paragraph 38-3(1)(e) of the GST Act and determines those foods that are not GST-free. Subregulation 38-3.02(1) of the GST Regulations provides that food additives, other than exempt food additives, will not be GST-free. Although the term 'food additive' is used in the regulation, it is not defined elsewhere in the GST Act. The word 'additive' is defined in The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales to mean '...a substance added to a product, usually to preserve or improve its quality'. The meat cure is a preservative as it comes within the definition of 'additive' and is therefore a food additive for GST purposes. Subregulation 38-3.02(2) of the GST Regulations provides that some food additives are exempt food additives, the supply of which will be GST-free. Under paragraph 38-3.02(2)(a) of the GST Regulations, a food additive which, at the time of supply, is packaged and marketed for retail sale is an exempt food additive. The entity does not package or market the product for retail sale at the time of supply. Therefore, the meat cure is not an exempt food additive under paragraph 38-3.02(2)(a) of the GST Regulations. To be considered an exempt food additive under paragraph 38-3.02(2)(b) of the GST Regulations, meat cure must: The ingredients in the meat cure include measurable amounts of protein, sugar and salt. Therefore, the meat cure has measurable nutritional value for GST purposes. The entity supplies the product for use solely in the manufacture of ham and bacon. Therefore, this product is supplied by the entity for use solely or predominantly in the composition of food. As the curing process is an essential part of the manufacture of ham and bacon, meat cure is an ingredient that is essential to the composition of ham and bacon products. Accordingly, the entity's product is an exempt food additive under paragraph 38-3.02(b) of the GST Regulations and it is therefore not food of a kind specified for the purposes of paragraph 38-3(1)(e) of the GST Act. In addition, the supply of the entity's product does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells the meat cure.", "Date_of_Decision": "8 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(e) section 38-4 paragraph 38-4(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food additives Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004444", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST food Food additives Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2004/622", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and bovine colostrum powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies bovine colostrum powder as food for human consumption?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies bovine colostrum powder as food for human consumption.", "Facts": "The entity is a food supplier. The entity supplies bovine colostrum powder. Bovine colostrum is derived from the first milking of dairy cows and freeze dried to form a powder. Bovine colostrum powder is high in protein and other nutrients. It has a variety of uses including food for human consumption, pharmaceuticals and in animal feed. The entity in this case is supplying bovine colostrum powder as food for human consumption. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). Bovine colostrum powder that is supplied as food for human consumption satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Bovine colostrum powder is not food of a kind specified in Schedule 1. In addition, the supply of bovine colostrum powder does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies bovine colostrum powder as food for human consumption.", "Date_of_Decision": "7 July 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004622", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2004/645", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and fruit preserved in brine", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells fruit preserved in brine that must be cleaned before it is ready for consumption?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells fruit preserved in brine that must be cleaned before it is ready for consumption.", "Facts": "The entity is a food supplier and supplies fruit preserved in brine. The raw fruit is supplied in a sulphur dioxide brine solution for preservation and bleaching. The preserved fruit is whole and is not crystallised, glace or drained. Before the preserved fruit can be consumed, it must go through a cleaning process to remove the brine solution. After the cleaning process is completed the fruit is ready for human consumption. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). The entity is supplying fruit that requires processing to remove the sulphur dioxide, before it can be consumed. Although the fruit requires processing, it is still food for human consumption and as such, is food as defined in section 38-4 of the GST Act. Under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Item 12 of Schedule 1 (Item 12) lists crystallised fruit, glace fruit or drained fruit. As the fruit preserved in brine is not crystallised, glace or drained, it is not covered by Item 12. The fruit is not covered by any other item in Schedule 1 and therefore, its supply is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. In addition, the supply of fruit preserved in brine does not fall within any of the other exclusions listed in section 38-3 of the GST Act. Accordingly, the entity is making a GST-free supply under section 38-2 of the GST Act.", "Date_of_Decision": "30 January 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/473", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Non-taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004645", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Non-taxable importations"}
{"ATO_ID_Number": "ATO ID 2004/677", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and spirulina powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies spirulina powder?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies spirulina powder.", "Facts": "The entity is a food supplier. The entity supplies spirulina powder. The label on the spirulina product describes it as a natural food containing protein, chlorophyll and vitamins. Promotional materials describe the product as a nutrient rich food and indicate that the product can be added to a range of recipes such as dips, bread, biscuits, gravies and etcetera as an ingredient, or added directly to dishes such as salads. Spirulina powder may also be consumed by adding to water or fruit juice. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and its supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) under paragraph 38-4(1)(a) of the GST Act. Although spirulina powder is sometimes used as an ingredient in food or consumed by adding to a beverage, it is generally supplied as a food in its own right and therefore satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Spirulina powder is not food of a kind specified in Schedule 1. In addition, the supply of spirulina powder does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies spirulina powder. Note: this decision should not be interpreted as meaning that spirulina tablets or capsules are GST-free. Spirulina tablets and capsules are not food and are subject to GST.", "Date_of_Decision": "9 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004677", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2004/681", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and chlorella powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies chlorella powder?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies chlorella powder.", "Facts": "The entity is a food supplier. The entity supplies chlorella powder. The label on the chlorella product describes it as a plant source of chlorophyll, vitamins and minerals. Promotional materials describe the product as a nutrient rich food and indicate that the product can be added to a range of recipes such as dips, bread, biscuits, gravies and etcetera as an ingredient, or added directly to dishes such as salads. Chlorella powder may also be consumed by adding to water or fruit juice. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and its supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (whether or not requiring processing or treatment) under paragraph 38-4(1)(a) of the GST Act. Although chlorella powder is sometimes used as an ingredient in food or consumed by adding to a beverage, it is generally supplied as a food in its own right and therefore satisfies the definition of food in paragraph 38-4(1)(a) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Chlorella powder is not food of a kind specified in Schedule 1. In addition, the supply of chlorella powder does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies chlorella powder. Note: this decision should not be interpreted as meaning that chlorella tablets or capsules are GST-free. Chlorella tablets and capsules are not food and are subject to GST.", "Date_of_Decision": "9 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004681", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2002/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and bird's nest with sugar", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act), when it supplies bird's nest with sugar?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies bird's nest with sugar.", "Facts": "The entity is a food supplier. The entity supplies bird's nest with sugar. Bird's nest is a food ingredient derived from birds' nests. It is considered a delicacy in Chinese cooking. It can also be consumed as a tonic. The bird's nest with sugar is made of sugar solution, bird's nest and stabiliser. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act. The definition of food in section 38-4 of the GST Act includes ingredients food for human consumption (paragraph 38-4(1)(b) of the GST Act). Although bird's nest with sugar can be consumed as a tonic, it is an ingredient for food, and therefore, it is considered that bird's nest with sugar is an ingredient for food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Bird's nest with sugar is not a food of a kind specified in Schedule 1. In addition, bird's nest with sugar does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies bird's nest with sugar.", "Date_of_Decision": "13 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200213", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2002/14", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and essence of chicken", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act), when it supplies essence of chicken?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies essence of chicken.", "Facts": "The entity is a food supplier. The entity supplies essence of chicken. The chicken essence is made of concentrated chicken extract and colour. It is used in making foods such as soups or stews and can be consumed as a tonic. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act. The definition of food in section 38-4 of the GST Act includes ingredients food for human consumption (paragraph 38-4(1)(b) of the GST Act). Although essence of chicken can be consumed as a tonic, it is used in making foods such as soups and stews. Therefore, it is considered that essence of chicken is an ingredient for food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Essence of chicken is not a food of a kind specified in Schedule 1. In addition, essence of chicken does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies essence of chicken.", "Date_of_Decision": "13 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200214", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2002/130", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and glucose powder", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies glucose powder?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies glucose powder.", "Facts": "The entity is a food supplier. The entity is supplying glucose powder. The glucose powder is composed of dextrose monohydrate. Glucose powder is added to water, juice, cereals or fruit for consumption. It is also used as a sweetening agent to enhance taste and flavour. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in subsection 38-4(1) of the GST Act and it is not excluded by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include goods to be mixed with or added to food for human consumption (including condiments, spices, seasonings, sweetening agents or flavourings)(paragraph 38-4(1)(e) of the GST Act). The glucose powder is added to water, juice, cereals or fruit for consumption. It is also used as a sweetening agent to enhance taste and flavour. Therefore, it is considered that the glucose powder satisfies the definition of food in paragraph 38-4(1)(e) of the GST Act as goods to be mixed with or added to food for human consumption. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free, if it is a food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1), or food that is a combination of one or more foods, at least one of which specified in Schedule 1. Glucose powder is not food of a kind specified in Schedule 1, nor is it food that is a combination of one or more foods, at least one of which is of a kind specified in Schedule 1. Therefore, glucose powder is not excluded from being GST-free by paragraph 38-3(1)(c) of the GST Act. Furthermore, none of the other exclusions in section 38-3 of the GST Act exclude the supply of glucose powder from being GST-free under section 38-2 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies dextrose monohydrate as a powdery product to be mixed with or added to food for human consumption.", "Date_of_Decision": "30 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 subsection 38-4(1) paragraph 38-4(1)(e) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002130", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2002/164", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and virgin coconut oil", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies virgin coconut oil?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies virgin coconut oil.", "Facts": "The entity is a food supplier. The entity is supplying virgin coconut oil in bulk containers. The coconut oil is raw, unprocessed and solid. The virgin coconut oil is food grade and stored in sealed containers in accordance with food standards and health regulations. The oil is supplied and used as an ingredient for food for human consumption and has a wide range of other uses including in soaps, cosmetics and medicinal products. The oil is not differentiated in any way when supplied to industries other than the food industry. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include 'ingredients for food for human consumption' (paragraph 38-4(1)(b) of the GST Act). The virgin coconut oil is food grade, stored in accordance with applicable food standards and health regulations, and supplied and used as an ingredient for food for human consumption. When the virgin coconut oil is supplied to industries other than the food industry, the product is not differentiated in any way. Therefore, the virgin coconut oil that the entity is supplying is an ingredient for food for human consumption and falls within the meaning of food under paragraph 38-4(1)(b) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Virgin coconut oil is not food of a kind specified in Schedule 1. Furthermore, none of the other exclusions contained in section 38-3 of the GST Act prevent the supply of the virgin coconut oil from being GST-free. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies the virgin coconut oil.", "Date_of_Decision": "4 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST food Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002164", "Unmatched_Content": "Keywords Goods & services tax GST-free GST food Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2002/878", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of used cooking oil", "Issue": "Is the entity, a supplier of used cooking oil, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies used cooking oil, that has been extracted from cooking vats, to a company that recycles the oil?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies used cooking oil, that has been extracted from cooking vats, to a company that recycles the oil. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of used cooking oil. It cleans and filters oil from deep fry cooking vats. The entity supplies the used cooking oil to a company for recycling. At the time of supply, the used cooking oil is not able to be used in any food application (that is, it cannot be used in food or to cook food). The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include: The entity supplies used cooking oil, that has been extracted from cooking vats, to a company for recycling. The oil is not able to be used in any food application. Therefore, the used cooking oil is not an ingredient for food for human consumption nor is it goods to be mixed with or added to food for human consumption. In addition, as the oil cannot be used for food and is being sold to an oil recycling company, the used cooking oil is not marketed for culinary purposes. Therefore, the supply of used cooking oil is not a supply of food for the purposes of section 38-4 of the GST Act. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it supplies used cooking oil that has been extracted from cooking vats, to a company that recycles the oil. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies used cooking oil that has been extracted from cooking vats, to a company that recycles the oil.", "Date_of_Decision": "21 February 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 section 38-4(1)(b) section 38-4(1)(e) section 38-4(1)(f) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Ingredients for food GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002878", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Ingredients for food GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/981", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and ice cream mix", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells ice cream mix?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells ice cream mix.", "Facts": "The entity is a food supplier. The entity is selling ice cream mix. The ice cream mix is an ingredient for making ice cream. It is not aerated and must be mixed with other ingredients and further processed to become ice cream. The ice cream mix is not intended to be eaten in its current state. The ice cream mix is not supplied for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions listed in section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes ingredients for food for human consumption (paragraph 38-4(1)(b) of the GST Act). Ice cream mix is an ingredient used in making ice cream. As ice cream is food for human consumption, ice cream mix is an ingredient for food for human consumption. Therefore, the ice cream mix comes within the meaning of food contained in paragraph 38-4(1)(b) of the GST Act. However, paragraph 38-3(1)(c) of the GST Act provides that a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The category of food from Schedule 1 that is of particular relevance is 'ice cream food'. Specified in this category are the following items: Ice cream mix is not food of a kind specified in items 28 to 30 in Schedule 1. All of those listed items do not require the addition of any other ingredients in order to be ready for consumption, whereas the ice cream mix is not intended to be eaten in its current state. Instead, the ice cream mix, which is not aerated, must be mixed with other ingredients and further processed to become ice cream. Furthermore, for these same reasons, the ice cream mix is not covered by item 31 in Schedule 1 because it is not food that is similar to any of the products listed in items 28 to 30 in Schedule 1. Therefore, ice cream mix is not food of a kind that is specified in Schedule 1 and accordingly, is not excluded by paragraph 38-3(1)(c) of the GST Act from being GST-free. In addition, the ice cream mix is not sold for consumption on the premises from which it is supplied, nor does it fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells ice cream mix.", "Date_of_Decision": "5 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(b) Schedule 1 clause 1 Schedule 1 clause 1 table item 28 Schedule 1 clause 1 table item 29 Schedule 1 clause 1 table item 30 Schedule 1 clause 1 table item 31", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002981", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2002/1047", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and hydroponically grown herb plant", "Issue": "Is the entity, a food supplier, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a hydroponically grown herb plant with its roots attached?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a hydroponically grown herb plant with its roots attached.", "Facts": "The entity is a food supplier. The entity supplies a hydroponically grown herb plant ('hydroponic plant') with roots attached. Hydroponically grown plants are grown in sand, gravel or liquid without soil and with added nutrients. The hydroponic plant is placed in a plastic bag that is labelled with instructions and refrigerated. The hydroponic plant can be consumed as food for human consumption. The hydroponic plant is not provided for consumption on the premises from which it is supplied. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if the product satisfies the definition of food in section 38-4 of the GST Act and the supply is not excluded from being GST-free by section 38-3 of the GST Act. Food is defined in section 38-4 of the GST Act to include food for human consumption (paragraph 38-4(1)(a) of the GST Act). However, under paragraph 38-4(1)(i) of the GST Act, plants under cultivation that can be consumed (without being subject to further process or treatment) as food for human consumption are not included in the definition of food. The hydroponic plant can be consumed as food for human consumption. Therefore, it is necessary to determine whether the hydroponic plant is a 'plant under cultivation'. The phrase 'plants under cultivation' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'cultivation' to mean: '1. the act or art of cultivating. 2. the state of being cultivated'. 'Cultivated and cultivating' is defined to mean: 'to promote or improve the growth of (a plant, etc) by labour and attention'. The entity supplies a hydroponically grown herb plant with its roots attached. As the hydroponic plant is not supplied in the medium in which it is grown (sand, gravel or liquid), there is no promotion of growth of the hydroponic plant. Instead, the hydroponic plant is placed in a plastic bag that is labelled with instructions and refrigerated. Therefore, it is not a plant under cultivation. As such, it is not excluded from the definition of food for human consumption in paragraph 38-4(1)(a) of the GST Act. Under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). The hydroponic plant is not specified in Schedule 1. Further, the hydroponic plant is not provided for consumption on the premises from which it is supplied and does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it supplies a hydroponically grown herb plant with its roots attached.", "Date_of_Decision": "22 February 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) paragraph 38-4(1)(i) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST food Food for human consumption Plants under cultivation", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021047", "Unmatched_Content": "Keywords Goods and services tax GST free GST food Food for human consumption Plants under cultivation"}
{"ATO_ID_Number": "ATO ID 2001/361", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a supply of a bulk catch of fresh dead fish", "Issue": "Is the entity, a professional fisherman, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a bulk catch of fresh dead fish?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells a bulk catch of fresh dead fish.", "Facts": "The entity is a professional fisherman. The entity sells a bulk catch of fish. The fish are sold dead, fresh, chilled and unprocessed, apart from cleaning or skinning certain varieties in readiness for sale. The entity sells the catch as food for human consumption. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it is not excluded by section 38-3 of the GST Act. Food is defined in paragraph 38-4(1)(a) of the GST Act to include food for human consumption (whether or not requiring processing or treatment). In this case, the fish are dead and are supplied as food for human consumption. Therefore, the fish satisfy the definition of food contained in paragraph 38-4(1)(a) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Fresh dead fish do not fall under any item in Schedule 1. In addition, the supply of the fresh dead fish does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply of a bulk catch of fresh dead fish under section 38-2 of the GST Act.", "Date_of_Decision": "4 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST food Food for human consumption", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001361", "Unmatched_Content": "Keywords Goods & services tax GST-free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2001/562", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of culinary herbs", "Issue": "Is the entity, a herb grower, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells culinary herbs?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells culinary herbs.", "Facts": "The entity is a herb grower. The entity sells culinary herbs which it labels and markets as being culinary herbs. These herbs are sold to buyers who use them for a range of purposes, from food manufacture to herbal medicines. Culinary herbs are those herbs that are consumed primarily for culinary purposes, and are not consumed for their actual or perceived medicinal or therapeutic properties (that is, they are not consumed principally for medicinal or therapeutic reasons). Culinary herbs are usually used as an ingredient or additive in food rather than consumed as food on their own. They are added to food to enhance the flavour either during the preparation process or once the food item is complete. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act provided that it does not come within any of the exclusions listed in section 38-3 of the GST Act. Herbs can have both culinary and medicinal uses. Therefore, it is necessary to determine if herbs are food for the purposes of the GST Act. Food is defined in section 38-4 of the GST Act to include: As the phrase 'food for human consumption' is not defined in the GST Act, it takes on its ordinary meaning. It is considered that the ordinary meaning of the phrase 'food for human consumption' would exclude products that are principally consumed for medicinal or therapeutic purposes. The herbs that are being sold by the entity are culinary herbs. Culinary herbs are those herbs that are consumed primarily for culinary purposes. These herbs are usually used as an ingredient or additive in food rather than consumed as food on their own. They are added to food to enhance the flavour either during the preparation process or once the food item is complete. As the herbs have been labelled and marketed as being culinary herbs, it is clear that the intention of the entity is to sell herbs which are intended to be used primarily for culinary purposes and not for medicinal or therapeutic purposes. Therefore, culinary herbs are food under paragraphs 38-4(1)(b) and 38-4(1)(e) of the GST Act. However, under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind that is specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). Culinary herbs are not specifically listed in Schedule 1, nor are they food of a kind specified in Schedule 1. In addition, the supply of culinary herbs does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells culinary herbs.", "Date_of_Decision": "7 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 pargraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) paragraph 38-4(1)(b) paragraph 38-4(1)(e) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/563", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Food seasoning Ingredients for food", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001562", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Food seasoning Ingredients for food"}
{"ATO_ID_Number": "ATO ID 2001/563", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of medicinal herbs", "Issue": "Is the entity, a herb grower, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells medicinal herbs?", "Decision": "No, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells medicinal herbs. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a herb grower. The entity sells medicinal herbs to buyers who use them for a range of purposes, from food manufacture to herbal medicines. The herbs are labelled and marketed as being medicinal herbs. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and does not come within any of the exclusions listed in section 38-3 of the GST Act. Herbs can have both culinary and medicinal uses. Therefore, it is necessary to determine if herbs are food for the purposes of the GST Act. Food is defined in section 38-4 of the GST Act to include: As the phrase 'food for human consumption' is not defined in the GST Act, it takes on its ordinary meaning. It is considered that the ordinary meaning of the phrase 'food for human consumption' would exclude products that are principally consumed for medicinal or therapeutic purposes. The entity is selling medicinal herbs which have been labelled and marketed as being medicinal herbs. It is clear that the intention of the entity is to sell herbs which are intended to be used primarily for their medicinal or therapeutic properties, not as (or in) food for human consumption. Therefore, the sale of medicinal herbs is not a supply of food for GST purposes. Accordingly, the entity is not making a GST-free supply under section 38-2 of the GST Act when it sells medicinal herbs. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells medicinal herbs.", "Date_of_Decision": "7 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-2 section 38-3 paragraph 38-4(1)(a) paragraph 38-4(1)(b) paragraph 38-4(1)(e) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/562", "Subject_References": "Goods & services tax GST free GST food Food for human consumption Ingredients for food Supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001563", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption Ingredients for food Supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/793", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and pearl oyster meat", "Issue": "Is the entity, the operator of a cultured pearl business, making a GST-free supply under section 38-2 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells pearl oyster meat?", "Decision": "Yes, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells pearl oyster meat.", "Facts": "The entity operates a cultured pearl business. The entity grows pearl oysters, to obtain cultured pearls. In addition to selling cultured pearls, the entity also sells pearl oyster meat. The life of the pearl oyster is approximately 3 years. At the end of its life the oyster is removed from its shell, sun dried on racks and then sold as food for human consumption. The meat is considered to be a delicacy. The pearl oyster meat is not sold for consumption on the premises from which it is supplied nor is it sold hot for consumption away from those premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of food is GST-free under section 38-2 of the GST Act if it satisfies the definition of food in section 38-4 of the GST Act and it does not come within any of the exclusions in section 38-3 of the GST Act. The meaning of food in section 38-4 of the GST Act includes food for human consumption (whether or not requiring processing or treatment) (paragraph 38-4(1)(a) of the GST Act). In this case, although the pearl oyster is initially used to grow cultured pearls, the pearl oyster is ultimately supplied as food for human consumption. Therefore, the pearl oyster meat satisfies the definition of food contained in paragraph 38-4(1)(a) of the GST Act. Under paragraph 38-3(1)(c) of the GST Act, a supply of food is not GST-free if it is food of a kind specified in the table in clause 1 of Schedule 1 to the GST Act (Schedule 1). However, pearl oyster meat is not covered by any of the items in Schedule 1. In addition, the supply of pearl oyster meat does not fall within any of the other exclusions in section 38-3 of the GST Act. Therefore, the entity is making a GST-free supply under section 38-2 of the GST Act when it sells pearl oyster meat.", "Date_of_Decision": "13 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-2 section 38-3 paragraph 38-3(1)(c) section 38-4 paragraph 38-4(1)(a) Schedule 1 clause 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST food Food for human consumption", "Case_References": "", "Other_References": "Food Index - GST Status of Items Food Issues Register - Issue No. 22", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001793", "Unmatched_Content": "Keywords Goods & services tax GST free GST food Food for human consumption"}
{"ATO_ID_Number": "ATO ID 2005/353", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adjustment of input tax credit after legislative change for supply of retirement village accommodation", "Issue": "Is the entity, a supplier of retirement village accommodation, entitled to make an adjustment under Division 19 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) or revise its previous business activity statements (BASs) to claim input tax credits for the construction costs of the retirement village incurred in prior tax periods as a result of the introduction of section 38-260 of the GST Act?", "Decision": "No. The entity is not entitled to make an adjustment under Division 19 of the GST Act or revise its previous BASs. The correct method of determining the entitlement to input tax credits not previously claimed is to make an adjustment under Division 129 of the GST Act.", "Facts": "The entity is a charitable institution that built a retirement village and is registered for goods and services tax (GST). The entity accounts for GST on a non-cash basis. Prior to 14 December 2004, the entity entered a construction contract that required monthly progressive payments. Before construction commenced, the entity determined that the supply of accommodation would be input taxed, therefore no input tax credits were claimed when it made progressive payments for the construction costs. On 14 December 2004, section 38-260 of the GST Act was introduced. This section provides that if certain conditions are met, the supply of accommodation in a retirement village operated by a charitable institution is GST-free. The entity meets these conditions and its supplies of accommodation in the retirement village are GST-free.", "Reasons_for_Decision": "Summary: For Division 19 of the GST Act to apply, the introduction of section 38-260 into the GST Act must be an 'adjustment event'. A change in the law with prospective application (such as section 38-260 which only applies to supplies made on or after 14 December 2004) is not considered to give rise to an adjustment event in these circumstances as it does not cause acquisitions associated with the construction of the retirement village to become creditable acquisitions (paragraph 19-10(c) of the GST Act). At the time the entity made the acquisitions (prior to 14 December 2004), the acquisitions related to making supplies that would be input taxed. Consequently, the acquisitions were not made for a creditable purpose. The introduction of section 38-260 of the GST Act does not cause an acquisition made prior to 14 December 2004 which was not made for a creditable purpose to become creditable at the time of acquisition or at any other time prior to 14 December 2004. Similarly, an entity can only revise a previous BAS where it has made an error or omission, for example, it did not claim input tax credits on creditable acquisitions. In this instance, the entity has not made an error in a previous BAS as it was not entitled to claim an input tax credit at the time of acquisition. As section 38-260 of the GST Act only applies prospectively, it does not result in the acquisition becoming creditable at the time of acquisition. An adjustment under Division 129 of the GST Act arises for an acquisition in an adjustment period where: The actual application of the thing acquired is the extent to which it is applied for a creditable purpose during the period: At the time that the entity made the progressive payments under the construction contract, input tax credits were not claimed as it had determined that the supplies of accommodation would be input taxed. It is the subsequent introduction of section 38-260 of the GST Act, which only applies to supplies made on or after 14 December 2004, that has caused the entity to review the extent of creditable purpose of these acquisitions. Therefore, as section 38-260 of the GST Act only applies to supplies made on or after 14 December 2004, the appropriate method of determining the entitlement to input tax credits on the construction costs of the retirement village is to make an adjustment under Division 129 of the GST Act.", "Date_of_Decision": "9 August 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 19 paragraph 19-10(c) section 38-260 Division 129", "Related_Public_Rulings_and_Determinations": "GSTR 2000/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST free GST non-profit GST charities GST input tax credits and creditable acquisitions GST net amounts and adjustments Adjustments GST property and construction GST retirement villages GST supplies and acquisitions Creditable acquisition Creditable purpose Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005353", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2000/24 | Keywords GST free GST non-profit GST charities GST input tax credits and creditable acquisitions GST net amounts and adjustments Adjustments GST property and construction GST retirement villages GST supplies and acquisitions Creditable acquisition Creditable purpose Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2007/72", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and attribution of an increasing adjustment for a recipient of a GST-free supply of a going concern", "Issue": "In which tax period does an entity attribute an increasing adjustment arising under section 135-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the entity is the recipient of a GST-free supply of a going concern and it only becomes aware in a subsequent tax period that the supplies which, at the time of its acquisition, it intended to make and subsequently made through the enterprise, are neither taxable supplies nor GST-free supplies?", "Decision": "The increasing adjustment arising under section 135-5 of the GST Act is attributable to the tax period in which the entity acquired the GST-free supply of the going concern.", "Facts": "The entity was the recipient of a GST-free supply of a going concern. The entity intended to make particular supplies through the enterprise it acquired and understood, at the time of acquisition of the enterprise, that the GST law applied such that those supplies would be taxable supplies. The entity has become aware in a subsequent tax period that it was mistaken in its original understanding of how the GST law applied to its intended supplies in that the intended supplies, which were the supplies it actually made, were input taxed supplies rather than taxable supplies. The entity has an increasing adjustment in relation to the supply of the going concern under section 135-5 of the GST Act that takes into account the proportion of all intended supplies to be made through the enterprise that are neither taxable supplies nor GST-free supplies. The entity is registered for GST and accounts for GST on a non-cash basis.", "Reasons_for_Decision": "Summary: Division 135 of the GST Act does not contain rules concerning the attribution of increasing adjustments that arise under section 135-5 of the GST Act. It is therefore necessary to consider the general attribution rules for adjustments in section 29-20 of the GST Act. Subsection 29-20(1) of the GST Act provides that an adjustment an entity has, is attributable to the tax period in which the entity becomes aware of the adjustment. The word 'adjustment' as used in this subsection is defined in section 195-1 of the GST Act to mean an increasing adjustment or a decreasing adjustment. The term 'increasing adjustment' is also defined in this section to mean an amount arising under one of the provisions listed in the table. Item 7 in the table includes section 135-5 of the GST Act. It follows then, that an increasing adjustment which arises under section 135-5 of the GST Act is attributable, in accordance with subsection 29-20(1) of the GST Act, to the tax period in which the entity became aware of the adjustment. The GST Act does not provide any specific guidance in relation to when an entity becomes aware of an adjustment it has. However, in relation to adjustments which arise from an adjustment event, an entity becomes aware of the adjustment when it becomes aware the event has occurred. Generally, the time an entity becomes aware an event has occurred is when the event actually occurs. Although the adjustment which arises under section 135-5 of the GST Act is not strictly an adjustment which arises from an adjustment event as defined, that section sets out two conditions which need to be satisfied for the adjustment to arise. The first condition is satisfied when an entity becomes the recipient of a supply of a going concern. An entity becomes the recipient of such a supply when it makes the acquisition of the enterprise. The second condition is that the recipient intends that some or all of the supplies made through the enterprise which has been acquired will be supplies that are neither taxable supplies nor GST-free supplies. The intention of the recipient is determined at the time the acquisition is made. As both of these conditions relate to the point in time at which the acquisition is made, the adjustment under section 135-5 of the GST Act arises at this time. In effect, this is consistent with the treatment of adjustments which arise from an adjustment event. It follows then that the adjustment which arises under section 135-5 of the GST Act is attributable to the tax period in which the entity acquired the enterprise. This is when the entity forms the intention to make the particular input taxed supplies, even though at the time, it incorrectly characterised those intended supplies as being taxable supplies. The correct GST treatment of the intended supplies is not dependent on the entity's understanding of the GST law, but is determined by the law itself. At the time the entity made the acquisition of the supply of a going concern it was aware that it was the recipient of the supply and was aware of the supplies which it intended to make. Under the GST law, those intended supplies were supplies that, when made, will be input taxed. Accordingly, the entity attributes the increasing adjustment it has under section 135-5 of the GST Act to the tax period in which its acquisition of the supply of the going concern occurred.", "Date_of_Decision": "13 April 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 29-20 subsection 29-20(1) Division 135 section 135-5 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Adjustments GST supply of going concern GST Property & Construction Stream", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200772", "Unmatched_Content": "Keywords Adjustments GST supply of going concern GST Property & Construction Stream"}
{"ATO_ID_Number": "ATO ID 2007/180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and 'supplies made through the enterprise' for the purposes of Division 135", "Issue": "Is the sale of the entity's enterprise itself a supply 'made through the enterprise' for the purposes of paragraphs 135-10(1)(a) and 135-10(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes. The sale of the entity's enterprise is a supply 'made through the enterprise' for the purposes of paragraphs 135-10(1)(a) and 135-10(1)(b) of the GST Act.", "Facts": "The entity, which is registered for GST, acquired a retirement village enterprise as a GST-free supply of a going concern under section 38-325 of the GST Act. The entity acquired the enterprise with the intention of operating it, its intended supplies being input taxed supplies of residential accommodation and taxable supplies of services. At the time of acquiring the enterprise, the entity did not intend to sell the enterprise. The entity had an increasing adjustment under section 135-5 of the GST Act. After several years of operating the enterprise, the entity sold it to another entity as a GST-free supply of a going concern under section 38-325 of the GST Act. The entity has to determine whether the sale of the enterprise itself needs to be taken into account in working out how section 135-10 of the GST Act applies.", "Reasons_for_Decision": "Summary: Subsection 135-10(1) of the GST Act effectively provides that if an entity has acquired a supply of a going concern, Division 129 of the GST Act applies to that acquisition, in relation to: in the same way as that Division applies: When Division 129 of the GST Act applies because of subsection 135-10(1) of the GST Act, it involves a comparison of the intended proportion of all supplies to be made through the enterprise that are neither taxable nor GST-free with the actual proportion of such supplies. Whether the sale of the retirement village enterprise itself is a supply made through that enterprise for the purposes of section 135-10 of the GST Act requires a consideration of the meaning of the word 'through' which appears in the phrase 'supplies made through the enterprise', at the same time keeping in mind the context in which it appears. There is no definition of 'through' in the GST Act. Of the meanings given by the Macquarie Dictionary , 3rd Edition, 'by means of' is the most pertinent. Considering the dictionary meaning in isolation from the context of the provision may lead to the conclusion that the sale of the enterprise itself is not a supply made 'by means of' the enterprise, as the operation of the enterprise does not involve its sale. Rather, the enterprise involves the provision of residential accommodation and services to the residents. However, in interpreting the meaning and scope of the phrase 'supplies made through the enterprise' for the purposes of section 135-10 of the GST Act, it is necessary to consider its policy intent and the surrounding legislative context, as well as the syntax of the provision. This is the approach adopted by the Courts in interpreting the GST Act ( HP Mercantile Pty Ltd v. Commissioner of Taxation [2005] FCAFC 126: 2005 ATC 4571; (2005) 60 ATR 106, Sterling Guardian Pty Ltd v. Commissioner of Taxation [2005] FCA 1166; 2005 ATC 4796; (2005) 60 ATR 502, SAGA Holidays Limited v. Commissioner of Taxation [2006] FCAFC 191; 2006 ATC 4841; (2006) 64 ATR 602 ( SAGA Holidays )). As Young J said in SAGA Holidays : ... the legislation is expressed in broad and flexible language. These considerations, and the nature, policy and surrounding legislative context of the GST Act, indicate that the Court should construe the Act in a practical and common sense way and that, generally speaking, it should avoid interpretations which are unduly technical or overly meticulous and literal: see HP Mercantile at 564-566 [41]-[53] per Hill J; and DG Hill, Some thoughts on the principles applicable to the interpretation of the GST (2004) 6 Journal of Australian Taxation 1. Paragraph 6.255 of the Explanatory Memorandum to A New Tax System (Goods and Services Tax) Bill 1998 (EM) states: Under the general rule for supplies there will be GST included in the price for an acquisition. If the acquisition is not entirely for a creditable purpose you are not entitled to a full input tax credit for it. This means that you bear some of the cost of the GST on the acquisition in proportion to your private or input taxed use. However, if the thing you acquire is GST-free and you use it only partly for a creditable purpose there is no GST for you to bear. This applies to acquisitions of going concerns that are supplied GST-free. Further, paragraphs 6.256 to 6.258 of the EM state: Division 135 provides for an adjustment to ensure that you account for GST in proportion to the private or input taxed use of a going concern that you acquire. The adjustment increases your net amount by an amount equal to the GST you would bear on the acquisition if it had been a taxable supply to you. The adjustment is equivalent to the difference between what would have been the GST on the supply and the input tax credit you would have been entitled to for the acquisition if the supply had been a taxable supply. This is the effect of section 135-5. This means that you only get a going concern GST-free to the extent that you intend to make taxable supplies with it. If what you actually use the going concern for is different from what you intended to use it for when you acquired it, you will have an adjustment for change in creditable purpose under Division 129. It can be seen from the above statements in the EM that the underlying objective of Division 135 of the GST Act is to provide for one or more adjustments to ensure that a recipient of a GST-free supply of a going concern accounts for GST to the extent that the going concern is used for non-creditable purposes. In this context, it is appropriate to interpret the phrase 'supplies made through the enterprise' for the purposes of paragraphs 135-10(1)(a) and 135-10(1)(b) of the GST Act to include a supply that is a sale of the enterprise itself. It accords with the purpose of Division 135 of the GST Act and the policy intent of the GST Act as a whole to view the sale of the enterprise itself as a use of the going concern acquired. This view results in an appropriate amount of GST being accounted for in relation to the acquisition of the going concern that reflects the proportion of its non-creditable use. The alternative view that the sale of the enterprise itself is not a supply 'made through the enterprise' would, contrary to the policy and legislative context of the GST Act, result in an adjustment which does not reflect the total use of the enterprise acquired. This in turn could result in an underpayment or overpayment of GST depending on whether the sale of the enterprise is a taxable supply, an input taxed supply or a GST-free supply.", "Date_of_Decision": "31 August 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-325 Division 129 Division 135 section 135-5 section 135-10 subsection 135-10(1) paragraph 135-10(1)(a) paragraph 135-10(1)(b)", "Related_Public_Rulings_and_Determinations": "GSTR 2002/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/72", "Subject_References": "Goods and services tax GST free GST supply of going concern Adjustments", "Case_References": "HP Mercantile Pty Ltd v. Commissioner of Taxation [2005] FCAFC 126 2005 ATC 4571 60 ATR 106", "Other_References": "Explanatory Memorandum to A New Tax System (Goods and Services Tax) Bill 1998 The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007180", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2002/5 | Keywords Goods and services tax GST free GST supply of going concern Adjustments"}
{"ATO_ID_Number": "ATO ID 2007/185", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adjustment events", "Issue": "Is an entity entitled to a decreasing adjustment under section 19-55 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) , when it supplies a grant of a right or option to acquire goods to a non-resident recipient as a taxable supply, but upon the exercise of the right or option by the recipient, the underlying goods acquired are exported from Australia as a GST-free supply?", "Decision": "No. The entity is not entitled to a decreasing adjustment under section 19-55 of the GST Act. The subsequent supply of the goods as a GST-free export when the recipient exercises its right or option to acquire the goods does not result in an adjustment event under section 19-10 of the GST Act.", "Facts": "The entity granted a right or option to purchase goods within an agreed period of time to a non-resident recipient. The recipient was outside of Australia when the right or option was granted. In consideration for the supply of this right or option, the non-resident recipient pays a monthly instalment to the entity. At the time the supply of the right or option was made, the intention of the parties was for the goods to be made available and remain in Australia if the right or option to purchase the goods was exercised. Accordingly, the supply of the grant of the right or option by the entity was treated as a taxable supply under section 9-5 of the GST Act. Although the supply of the grant of the right or option satisfied the requirements of a GST-free supply under paragraph (b) of item 4 in the table in subsection 38-190(1) of the GST Act, subsection 38-190(2) of the GST Act negates the GST-free status as the supply of the underlying goods would be connected with Australia and would not be GST-free. Subsequently, the recipient exercised the right or option to acquire the goods within the agreed period. The goods were then exported from Australia within the requirements of section 38-185 of the GST Act as a GST-free export. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Goods and Services Tax Ruling GSTR 2003/8 provides guidance in determining the GST treatment of rights under item 4 in the table in subsections 38-190(1) (item 4) and 38-190(2) of the GST Act. Paragraph 114 of this Ruling states: ...it is the intended use of the rights at the time they are created, granted, transferred, assigned or surrendered that determines whether the rights are 'for use outside Australia' and therefore the extent to which the supply is GST-free. The extent to which the supply is taxable or GST-free is not affected by the actual use of the rights, other than as potential evidence of the intended use. Further, paragraphs 140 and 141 of GSTR 2003/8 discuss whether an adjustment event occurs where the actual use of the rights under item 4 differs from the intended use. These paragraphs state: Division 19 outlines how adjustments arise through adjustment events. Subsection 19-10(1) states: An adjustment event is any event which has the effect of: The extent to which a supply of a right is GST-free under paragraph (a) of item 4 is a question of apportionment based on the extent of intended use of the right outside Australia. There is no adjustment event under paragraph 19-10(1)(c), where the actual use differs from the intended use, as nothing has occurred to cause the supply to become or stop being a taxable supply. A change in use of a supply of rights does not cause the supply to become or stop being a taxable supply for the purposes of Division 19. Although the guidance above specifically relates to the supply of a right for use outside Australia under paragraph (a) of item 4, it is considered that the guidance set out in GSTR 2003/8 equally applies to the supply of a right or option to acquire something which is contemplated under subsection 38-190(2) of the GST Act. This is because, in describing the circumstances in which the GST-free status of a supply under items 2 to 4 in the table in subsection 38-190(1) of the GST Act is negated under subsection 38-190(2) of the GST Act, Parliament have used the words 'would be connected with Australia' and 'would not be GST-free'. This language suggests that the GST status of the supply of the granting of the right or option is determined on the basis of how the goods were intended to be supplied in the event that the right or option to acquire was exercised rather than how the goods are actually supplied. In this case, at the time the right or option was granted, it was the intention of the parties that the supply of the goods, if the right was exercised, would be a supply that was connected with Australia and would not be GST-free. It is this intended treatment of the underlying supply of the goods which determines for the purposes of subsection 38-190(2) of the GST Act, that the supply of the right or option is not GST-free. It is not relevant for the purposes of subsection 38-190(2) that the actual treatment of the supply of the goods upon the exercise of the option is a GST-free supply. Accordingly, there is no adjustment event under section 19-10 of the GST Act when, upon the exercise of the right or option, the goods acquired were exported from Australia as a GST-free supply. Nothing has occurred to cause the supply of the right or option to be a GST-free supply for the purposes of subsection 38-190(2) of the GST Act. The entity therefore will not have a decreasing adjustment under section 19-55 of the GST Act.", "Date_of_Decision": "16 August 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 19-10 section 19-55 subsection 38-190(1) subsection 38-190(1) table item 4 subsection 38-190(2)", "Related_Public_Rulings_and_Determinations": "GSTR 2003/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consumption outside Australia Export of ships or aircraft Supplies used or enjoyed outside Australia Adjustment events", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007185", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2003/8 | Keywords Consumption outside Australia Export of ships or aircraft Supplies used or enjoyed outside Australia Adjustment events"}
{"ATO_ID_Number": "ATO ID 2005/253", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adjustments in relation to the settlement of a voidable preference claim", "Issue": "Does the entity, a company in liquidation, have an adjustment under section 19-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when its representative receives a payment in settlement of a voidable preference claim?", "Decision": "Yes, the entity has an adjustment under section 19-70 of the GST Act when its representative receives the settlement payment.", "Facts": "The entity is registered for goods and services tax (GST) and accounts for GST on a basis other than cash. The entity made a creditable acquisition from a supplier and provided payment for the acquisition. The input tax credit for the creditable acquisition was attributable to, and claimed in, the tax period in which the payment was made. The entity has not had any adjustments under Division 21 or 129 of the GST Act for the acquisition. Subsequently, a liquidator (representative) was appointed to wind up the entity. The representative commenced legal action against the supplier on the basis that the payment made to the supplier was a voidable transaction pursuant to section 588FE of the Corporations Act 2001 . The supplier and the representative agreed to settle the matter before it was heard by a court. Under the deed of settlement, the supplier repaid, to the representative, a portion of the consideration it had previously received from the incapacitated entity for the creditable acquisition. The deed provides that the supplier will not lodge a claim (proof of debt) against the incapacitated entity in the winding up process.", "Reasons_for_Decision": "Summary: Under section 19-70 of the GST Act an entity has an adjustment for an acquisition if: Paragraph 19-10(1)(b) of the GST Act provides that an adjustment event is any event 'which has the effect' of changing the consideration for a supply or acquisition. The deed of settlement requires the supplier to repay some of the consideration provided by the incapacitated entity for the creditable acquisition. Paragraph 129 of Goods and Services Tax Ruling GSTR 2001/4 provides that an adjustment is required when a payment made under an out of court settlement is a repayment of consideration wholly or in part for an earlier supply. Under the deed, the supplier agrees that it will not lodge a claim (proof of debt) against the incapacitated entity in the winding up process. Therefore, although the deed does not expressly state that the parties are agreeing to a change in the consideration for the earlier supply, the 'effect' of the deed is that the final consideration for the supply is less than the original amount. As such, the arrangement has the effect of changing the consideration for the incapacitated entity's acquisition and there is an adjustment event under paragraph 19-10(1)(b) of the GST Act. As a result of the adjustment event, the previously attributed input tax credit amount no longer correctly reflects the amount of the input tax credit on the acquisition. Therefore, the incapacitated entity has an adjustment under section 19-70 of the GST Act for its acquisition.", "Date_of_Decision": "8 March 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 19-10(1)(b) section 19-70 Division 21 subsection 58-10(4) section 58-60 Division 129", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/19 | Goods and Services Tax Ruling GSTR 2001/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST net amounts & adjustments Adjustment events Adjustments GST special rules Representative of incapacitated entities", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005253", "Unmatched_Content": "Replace reference to section 147-20 with its current equivalents, subsection 58-10(4) and section 58-60. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/19 Goods and Services Tax Ruling GSTR 2001/4 | Keywords Goods and services tax GST net amounts & adjustments Adjustment events Adjustments GST special rules Representative of incapacitated entities"}
{"ATO_ID_Number": "ATO ID 2001/101", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST: Stolen Takings", "Issue": "Can the entity's 'net amount' be decreased under subsection 17-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when all of its takings are stolen?", "Decision": "No, the entity's 'net amount' cannot be decreased under subsection 17-5(2) of the GST Act when all of its takings are stolen. The 'net amount' remains unaltered.", "Facts": "The entity is a social club operator and is registered for goods and services tax (GST). The entity conducts a social event and receives proceeds from gate takings, souvenir and bar sales. All the supplies, for which these proceeds are consideration, are taxable supplies under section 9-5 of the GST Act. The entity does not make any other taxable supplies in the tax period. All the proceeds from the social event were stolen in a burglary. The entity lodges a claim under its insurance policy to recover some of the amount that was stolen.", "Reasons_for_Decision": "Summary: The amount that is payable by an entity to the Commissioner (or payable to the entity) for a particular tax period is the entity's 'net amount' for that tax period. The entity's net amount for a tax period is worked out under section 17-5 of the GST Act by using the following formula: GST - Input tax credits where: 'GST' is the sum of all the GST (that is attributable to the tax period) for which the entity is liable on the taxable supplies that it makes; and 'Input tax credits' is the sum of all the input tax credits (that is attributable to the tax period) to which the entity is entitled for the creditable acquisitions and importations that it makes. Under section 9-40 of the GST Act, the entity must pay the GST payable on any taxable supply that it makes. The amount of GST on a taxable supply is 10% of the value of the supply (section 9-70 of the GST Act). The value of a taxable supply is defined in subsection 9-75(1) of the GST Act and is equal to 10/11th of the price of the supply (or, as the consideration for the supply is expressed as an amount of money, 10/11th of the consideration for the supply). As all the supplies that the entity makes are taxable supplies under section 9-5 of the GST Act, the sum of all the GST for which the entity is liable in the tax period is 10% of 10/11th of the consideration or proceeds it receives from the social event (or expressed another way, 1/11th of the total consideration received). This amount will form part of the net amount under section 17-5 of the GST Act. Subsection 17-5(2) of the GST Act provides that the net amount for the tax period may be increased or decreased by any adjustments for the period. Under section 17-10 of the GST Act, the entity may decrease its net amount by subtracting the sum of any decreasing adjustments (if any) that are attributable to the tax period from the net amount. A decreasing adjustment is defined under section 195-1 of the GST Act to mean an amount arising under one of the provisions listed in that definition. Stolen takings do not give rise to a decreasing adjustment under any of these provisions. Therefore, the entity's net amount under Division 17 of the GST Act remains unaltered despite the fact that all of the takings are stolen.", "Date_of_Decision": "6 April 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 7-15 section 9-5 section 9-40 section 9-70 subsection 9-75(1) Division 17 section 17-5 subsection 17-5(2) section 17-10 section 78-50 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax GST net amounts & adjustments Adjustment events Adjustments Net amounts", "Case_References": "", "Other_References": "Transport and Taxi - Industry Partnership - Taxi Industry Partnership Issues Register- Issue Resolved 23/05/00", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001101", "Unmatched_Content": "Amended for self assessment legislation effective from 1 July 2012. | Keywords Goods and Services Tax GST net amounts & adjustments Adjustment events Adjustments Net amounts"}
{"ATO_ID_Number": "ATO ID 2013/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of goods and the transport of those goods into Australia", "Issue": "Is the entity, a non-resident supplier of goods to a recipient in Australia, making a GST-free supply of international transport under paragraph (b) of item 5 in the table in subsection 38-355(1) of the A New Tax System Goods and Services Tax Act 1999 (GST Act) when it delivers the goods to the recipient in Australia?", "Decision": "No. The entity is not making a GST-free supply of international transport under paragraph (b) of item 5 in subsection 38-355(1) of the GST Act. Rather they are making a composite supply of delivered goods to the recipient in Australia.", "Facts": "The entity is a non-resident on-line retailer that does not have a presence in Australia. The entity sells goods to Australian based recipients on 'deliver at place' (DAP) terms of trade. Under these terms the entity has agreed to supply and deliver the goods from overseas to an address in Australia nominated by the recipient and also bears all risks involved in bringing those goods to that address. Additionally, as per DAP terms of trade the recipient has agreed to be responsible for any customs formalities, including the payment of duty and GST (if any) on the import of those goods into Australia. As per the terms and conditions the recipient is not entitled to make their own delivery arrangements to bring the goods into Australia. The value of the transport does not exceed $50,000.", "Reasons_for_Decision": "Detailed Reasoning - Background: Division 38 of the GST Act sets out supplies that are GST-free. Relevantly, section 38-355 of the GST Act specifies when supplies of transport and related matters will be GST-free. In particular, paragraph (b) of item 5 in the table in subsection 38-355(1) (Item 5) of the GST Act provides that, subject to subsection 38-355(2), the supply of international transport of goods from a place outside Australia to their place of consignment in Australia will be GST-free. Goods and Services Tax Ruling GSTR 2001/8 provides that where a supply consists of more than one part, such as with goods and delivery (that is, transport), the supply could be either a mixed or a composite supply. If the delivery services are integral, ancillary or incidental to the supply of goods, the supply is a composite supply of delivered goods. A composite supply of delivered goods is treated as a single supply and takes its GST status from the dominant part of the supply, being the goods. If this is the case then Item 5 of the GST Act will not be relevant and therefore will not apply. However, if the supply of goods and delivery has separately identifiable parts that require individual recognition due to their relative significance in the supply, the supply is a mixed supply. A supply is also a mixed supply where the GST Act requires you to treat a part of a supply in a particular way. The GST status of the component parts of a mixed supply, being the goods and delivery, is determined separately. If the supply is a mixed supply then the delivery services can be considered separately to determine if that part of the supply meets the requirements of being GST-free under Item 5 of the GST Act. | Detailed Reasoning - Is delivery part of a mixed supply or composite supply?: Paragraph 59 of GSTR 2001/8 provides that no single factor (by itself) will provide the sole test for determining whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply. All relevant circumstances should be taken into account, including for example, whether the transport contributes to the proper performance of the contract to supply the dominant part. Paragraph 2 of GSTD 2002/3 provides that a delivery service is significant where it is an aim in itself. That is, where the recipient has a genuine choice under the contract as to whether the supplier delivers the goods. A choice is indicated where: In this case, we consider that delivery is integral, ancillary or incidental to the dominant supply of goods and accordingly, is a composite supply of delivered goods, as indicated by the following factors: Does the GST Act require you to treat the delivery part of a supply of delivered goods as a mixed supply for the purposes of item 5 in the table in subsection 38-355(1) of the GST Act? At paragraph 23 of GSTR 2001/8, a supply may be considered to be a mixed supply where a particular provision of the GST Act requires you to treat a part of a supply in a particular way, regardless of its scale or connection with the supply. For example, a supply of food as part of an excursion or field trip may otherwise be considered to be integral, ancillary or incidental to the supply of the excursion or field trip, but paragraph 38-90(2)(b) of the GST Act specifies that such food as part of the excursion or field trip is not GST-free. This means that the consideration for the field trip requires apportionment. We do not consider paragraph (b) of item 5 of the GST Act specifically requires a supply that is characterised as a composite supply of delivered goods to be treated as a mixed supply of goods and transport services. In paragraph 38-90(2)(b) of the GST Act, there is a specific reference and requirement to treat a supply of food as part of the excursion or field trip as GST-free. By contrast, item 5 of the GST Act refers only to supplies of international transport of goods, rather than transport specifically supplied as part of a supply of goods. Additionally, this interpretation of paragraph (b) of item 5 of the GST Act is considered to produce an appropriate outcome that is consistent with the policy intent having regard to section 13-20 of the GST Act. We consider the policy intent is that the international transport provisions under Item 5 of the GST Act and the value of the taxable importation (VoTI) provisions under section 13-20 of the GST Act operate in conjunction with each other to make international transport of goods subject to GST, if the goods are a taxable importation. Item 5 of the GST Act was amended in 2010. Paragraph 1.13 and 1.17 of the Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No. 3) Bill 2010 states: 1.13 In certain circumstances, the liability for GST on the Australian leg of the international transport of imported goods is shifted from transport service suppliers to the importer of the goods. This is achieved by adding the importer's cost from the primary agreement for the Australian leg of the international transport of those to the 'value of the taxable importation' used to calculate the GST liability on importation. ... 1.17 The inclusion of the amount paid or payable for certain Australian legs of international transport in the value of taxable importations results in GST on the Australian transport of imported goods being collected at a single point at the border. Under these amendments, international transport suppliers (as opposed to suppliers of goods) can treat their supply of transport as GST-free when their transport costs are included in the VoTI. If the supplier of the 'delivered goods' makes the taxable importation, claims a creditable importation and is also entitled to treat their supply as a mixed supply of goods and GST-free international transport, this would undermine the intent of capturing the relevant GST on the transport services through the goods. As such, it is consistent with the policy intent that the international transport of goods is treated in the same manner as the goods. Another provision of the GST Act that could require the supply of delivered goods to be treated as separate supplies is Division 96. As such, item 5 of the GST Act may apply to provide GST-free treatment on the separate supply of transport. In this instance, we do not consider Division 96 applies because of the application of subsection 96-5(4) of the GST Act. Section 96-5 of the GST Act provides that if, because a supply (the actual supply) is a supply of more than one of these kinds; a supply of goods, a supply of real property, a telecommunication supply and a supply of anything, other than goods or real property, that is not a telecommunication supply; only part of the actual supply is connected with Australia, then the actual supply is to be treated as if it were separate supplies. However, subsection 96-5(4) of the GST Act provides an exclusion for the requirement to treat the parts as a separate supply if one of the kinds of supply that forms part of the actual supply may reasonably be regarded as incidental to the other kind of supply or one (but not both) of the other kinds of supply that form part of the actual supply, and its value (if it were a separate taxable supply) would not exceed $50,000. If the conditions in subsection 96-5(4) of the GST Act are met, the incidental part of the actual supply is treated as part of that other kind of supply, rather than a separate supply. In Saga Holidays Limited v. Federal Commissioner of Taxation [2006] FCAFC 191, the meaning of 'incidental' for the purposes of subsection 96-5(4) of the GST Act is discussed by Stone J (at paragraph 49): 49. There is no definition of \"incidental\" in the Act. Of the meanings given by the Shorter Oxford English Dictionary and the Macquarie Dictionary respectively, the following meanings are the most apposite to s 96-5: \"occurring as something ... of secondary importance\" and \"happening or likely to happen in fortuitous or subordinate conjunction with something else\". As previously outlined, we consider that delivery is integral, ancillary or incidental to the dominant supply of goods. The value of the transport does not exceed $50,000. The conditions in subsection 96-5(4) of the GST Act are met and the transport component of the supply is not treated as if it were a separate supply under section 96-5 of the GST Act. As such, we consider the entity in this case is making a composite supply of delivered goods to the recipient in Australia and therefore paragraph (b) of item 5 of the GST Act does not apply to provide GST-free treatment to the international transport.", "Date_of_Decision": "22 April 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-20 Item 5 in the table in subsection 38-355(1) paragraph (b) of item 5 in the table in subsection 38-355(1) subsection 38-355(2) paragraph 38-90(2)(b) section 96-5 subsection 96-5(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST international services GST Transport Transport of goods Partly connected with Australia", "Case_References": "Saga Holidays Limited v Federal Commissioner of Taxation [2006] FCAFC 191 2006 ATC 4841 64 ATR 602", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2010 GST Administration Measures No. 3) Bill 2010", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201320", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST international services GST Transport Transport of goods Partly connected with Australia"}
{"ATO_ID_Number": "ATO ID 2008/75", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a retrospective application of a changed apportionment method under Division 11", "Issue": "Can the entity, a financial supply provider, change its apportionment method which is fair and reasonable and revise an earlier net amount, by applying a new apportionment method which is also fair and reasonable?", "Decision": "Yes, the entity can change its apportionment method, and revise an earlier net amount, by applying a new apportionment method which is also fair and reasonable.", "Facts": "The entity is a financial supply provider which is registered for goods and services tax (GST). The entity carries on an enterprise and makes financial supplies and taxable supplies in Australia. The entity makes acquisitions for the purpose of making financial supplies and taxable supplies. The entity accounts on a non-cash basis. The entity exceeds the financial acquisitions threshold and is not entitled to claim input tax credits to the extent that the acquisitions relate to making financial supplies but may be entitled to claim reduced input tax credits on reduced credit acquisitions. The entity in making an input tax credit claim in a GST return for the relevant tax period estimated the planned use of its acquisitions by applying a fair and reasonable apportionment method as set out in Goods and Services Tax Ruling GSTR 2006/3 (the first apportionment method). The entity held the relevant tax invoices in this tax period. Then, at a later time, the entity determined that by applying another apportionment method, which is also fair and reasonable and in accordance with GSTR 2006/3 (the second apportionment method), its entitlement to an input tax credit in the GST return for the earlier period could increase. The entity revised its GST return for that period to make this claim.", "Reasons_for_Decision": "Summary: The entity lodged a GST return under Division 31 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). In this return, the entity provided the net amount for the original tax period. The net amount, as required under subsection 17-5(1) of the GST Act, is the GST less any input tax credits. The input tax credits for the purposes of section 17-5 of the GST Act is the sum of all of the input tax credits to which an entity is entitled for the creditable acquisitions and creditable importations that are attributable to the tax period. An entity makes a creditable acquisition , under section 11-5 of the GST Act, when that entity: The entity made creditable acquisitions which were only partly for a creditable purpose, as defined in subsections 11-15(1) and (2) of the GST Act. These subsections provide that: The entity made an input tax credit claim in the original tax period, to the extent that the acquisitions are partly creditable by applying the formula in subsection 11-30(3) of the GST Act, which is: Full input tax credit * Extent of creditable purpose * Extent of consideration In order to calculate the extent of creditable purpose, the entity applied a fair and reasonable apportionment method, as prescribed in GSTR 2006/3, to the acquisitions made (the first apportionment method). Then, at a later point in time, the entity determined that another apportionment method (the second apportionment method) could be applied, which is also fair and reasonable and in accordance with GSTR 2006/3, to increase the input tax credit entitlement lodged in the GST return for the original tax period. The entity is entitled to revise the original net amount lodged in the GST return for the original tax period by amending its input tax credit claim. The revised net amount reflects a correct input tax credit entitlement when the new method (the second apportionment method) is also fair and reasonable and in accordance with GSTR 2006/3 given the facts and circumstances which existed at that time.", "Date_of_Decision": "8 May 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 subsection 11-15(1) subsection 11-15(2) subsection 11-30(3) section 17-5 subsection 17-5(1) Division 31 section 93-5", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2006/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Creditable acquisition Goods and services tax GST input tax credits & creditable acquisitions GST net amounts & adjustments GST returns GST returns, payments & refunds GST supplies & acquisitions GST supply Net amounts Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200875", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Amended previous Notes 2 and 4; rearranged the order of Notes 1 and 2 | Updated to refer to the time limit for claiming an input tax credit | Decisions & Reason for Decision | Deleted second paragraph under 'Decision', and Notes 1 and 2 amended. Updated for the introduction of self assessment from 1 July 2012. | New note 2 added and previous note 2 renumbered as note 3 | Updated for the amendment to section 105-55 effective 1 July 2012 | Inserted information about the Correcting GST Errors Determination GSTE 2013/1 | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2006/3 | Keywords Creditable acquisition Goods and services tax GST input tax credits & creditable acquisitions GST net amounts & adjustments GST returns GST returns, payments & refunds GST supplies & acquisitions GST supply Net amounts Taxable supply"}
{"ATO_ID_Number": "ATO ID 2008/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and when consideration is provided where a debt is deferred", "Issue": "Under a contract for the sale of land by instalment payments, when is consideration provided by the purchaser and received by the vendor, where the vendor supplies to the purchaser an interest in a credit arrangement that does not involve a loan or advance?", "Decision": "Consideration for the sale of the land is provided by the purchaser and received by the vendor when each instalment amount is paid.", "Facts": "A vendor entered into a transaction for the sale of land to a purchaser. No payment for the land was made by the purchaser before or at the time of settlement. The parties had entered into an arrangement for the purchaser to pay the purchase price to the vendor in instalments after settlement, with interest accruing on the outstanding balance. The sale of the land is a taxable supply. The consideration for the supply is the instalment payments. This arrangement does not constitute a loan or advance, nor is it in the nature of a line of credit or overdraft. However, the arrangement to pay the debt (owed by the purchaser to the vendor at the time of settlement) by instalments is a credit arrangement, with the consideration for the supply of the credit arrangement being the interest accruing under the terms of the agreement. To secure the purchaser's performance of its obligation to pay the consideration by instalments, a mortgage over the property is provided by the purchaser to the vendor at settlement. The vendor and purchaser are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A determination of the tax period in which consideration is provided and received is one of the matters central to the attribution of GST payable on taxable supplies and input tax credits for creditable acquisitions under the attribution rules in Subdivision 29-A of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It is therefore necessary to ascertain when consideration for the supply of the land is provided and received under the credit arrangement. In circumstances where an arrangement between a hypothetical vendor and purchaser constitutes a loan, the vendor's obligation to advance loan money may be offset against the purchaser's obligation to pay for the property. The consideration is provided by the purchaser and received by the vendor when the obligation to advance the loan money is offset (by the parties) against the obligation to pay for the property (refer to paragraphs 25 to 27 of Goods and Services Tax Determination GSTD 2004/4 Goods and services tax: can consideration for a supply be provided or received without transferring money (such as where the parties only make book entries recording their agreement that the supply is paid for)? and paragraph 77 of Goods and Services Tax Ruling GSTR 2003/12 Goods and services tax: when consideration is provided and received for various payment instruments and other methods of payment). However, the credit arrangement between the parties is not a loan and no advance is made by the vendor to the purchaser. The vendor is providing the purchaser with time to pay the debt owed by instalments and interest accrues until each instalment payment is made. This arrangement is akin to a sale on credit. Paragraph 78 of GSTR 2003/12 provides the Commissioner's views on when consideration is received for sales on credit. This paragraph states: Sale on credit 78. Where a supply is made on credit (for example, 30 days to pay), consideration is provided and received when an amount is paid, unless the arrangement is in the nature of a line of credit or overdraft as described in paragraph 77 of this ruling. Consideration is provided and received when actual payment is made, and this is determined by the payment instrument used. As the arrangement is not in the nature of a line of credit or overdraft, but is an arrangement where the debt is deferred and interest is accrued until each instalment is paid, it more closely resembles a sale on credit as contemplated by paragraph 78 of GSTR 2003/12. Accordingly, the consideration for the supply of the land pursuant to the credit arrangement is provided and received when each instalment amount is paid. The mortgage is given merely as security to ensure payment of the consideration by instalments. The mortgage is not consideration received for the land for the purposes of section 29-5 of the GST Act. Similarly, the acquisition of the interest in the credit arrangement by the purchaser may be an input taxed financial supply where the requirements of subdivision 40-A of the GST Regulations are satisfied.", "Date_of_Decision": "20 March 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 29-A section 29-5 section 29-10", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/12 | Goods and Services Tax Determination GSTD 2004/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Attribution rules Goods and services tax GST debt, loan and credit GST financial supplies GST tax periods Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200849", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/12 Goods and Services Tax Determination GSTD 2004/4 | Keywords Attribution rules Goods and services tax GST debt, loan and credit GST financial supplies GST tax periods Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2004/181", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and attribution rules on a taxable supply of land where consideration is received on an instalment basis", "Issue": "Is the entity, a property developer, required to apply the attribution rules in accordance with section 29-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser?", "Decision": "Yes, the entity is required to apply the attribution rules in accordance with section 29-5 of the GST Act and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser.", "Facts": "The entity is a property developer. The entity is registered for GST and accounts for GST on a non-cash basis. The entity makes a taxable supply of land to a purchaser. The entity and the purchaser sign a contract and under the terms of the contract, the purchaser agrees to pay the purchase price by making several equal, monthly instalments over an extended period of time. The first instalment is not held by the entity as security for performance of the contract. The contract does not satisfy the requirements under subsection 29-70(1) of the GST Act to be a tax invoice or the requirements in goods and services tax ruling (GSTR) 2000/34 to be an invoice for GST purposes. The entity does not issue an invoice or tax invoice to the purchaser prior to the purchaser making the first instalment payment. The certificate of title to the land will not pass from the entity to the purchaser until the final instalment has been paid.", "Reasons_for_Decision": "Summary: Section 29-5 of the GST Act sets out the rules that determine the tax period in which an entity is required to attribute the GST payable on a taxable supply. Subsection 29-5(1) of the GST Act determines the tax period in which an entity is required to attribute the GST payable when it accounts for GST on a non-cash basis. As the entity accounts for GST on a non-cash basis, it is the relevant provision to be considered. Under this subsection the GST payable on a supply is attributable to: The contract between the entity and the purchaser does not satisfy the tax invoice requirements under subsection 29-70(1) of the GST Act or the requirements in GSTR 2000/34 to be an invoice for GST purposes. The entity does not issue an invoice or a tax invoice to the purchaser prior to the purchaser making the first instalment payment. As such, the second element of subsection 29-5(1) of the GST Act is not applicable. Where the attribution rules of subsection 29-5(1) of the GST Act are applicable, the entity is required to attribute all of the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser. However, Goods and Services Tax Ruling, GSTR 2000/28, provides special rules on attributing the GST payable on a sale of land under what is termed a 'standard land contract'. Paragraph 25 of GSTR 2000/28 provides that the GST payable on a supply of land under a standard land contract is attributed to the tax period in which settlement occurs and not at the time when the deposit is paid. This is because the deposit made under a standard land contract is taken to be a deposit made as a security to which Division 99 of the GST Act applies. For the purposes of GSTR 2000/28, paragraph 13 defines a standard land contract to be a written contract for the sale of land that provides for: An agreement, which requires a purchaser to provide the purchase price to a vendor in the form of a number of instalments, as opposed to a deposit and a final payment upon settlement, is not a standard land contract for the purposes of GSTR 2000/28. Under the terms of the contract with the entity, the purchaser agrees to make payments, by monthly instalments, over an extended period of time. The purchaser does not pay a deposit that is to be forfeited for failure to perform the obligations under the contract. The certificate of title to the land will not pass, from the entity to the purchaser, until the final instalment has been paid. As such, the entity is not supplying the land under a contract that is regarded as a standard land contract for the purposes GSTR 2000/28. Therefore, the entity is required to apply the attribution rules in accordance with section 29-5 of the GST Act and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser. Note: Division 99 of the GST Act does not apply to change the attribution rules as the first instalment is not a deposit taken as security for the performance of the obligations under the contract.", "Date_of_Decision": "28 October 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 29-5 subsection 29-10(1) subsection 29-10(2) paragraph 29-5(1)(a) Division 99", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/28 | Goods and Services Tax Ruling GSTR 2000/34", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST sale of real property GST tax periods Non cash basis GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004181", "Unmatched_Content": "This ATO ID was amended by the inclusion of related public ruling GSTR 2000/34 | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/28 Goods and Services Tax Ruling GSTR 2000/34 | Keywords Goods and services tax GST property & construction GST sale of real property GST tax periods Non cash basis GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/422", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and cash basis attribution rules for the operator of a Queensland retirement village when residents deposit money into the maintenance reserve fund", "Issue": "Does the entity, an operator of a Queensland retirement village that accounts for goods and services tax (GST) on a cash basis, attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the tax period in which the resident's contribution is deposited into the entity's maintenance reserve fund (MRF)?", "Decision": "No, the entity does not attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(2) of the GST Act, to the tax period in which the resident's contribution is deposited into the entity's MRF. The entity attributes the GST payable to the tax periods in which it withdraws amounts from the MRF for the provision of the maintenance services. The amount of GST that the entity attributes to the tax periods will be 1/11th of the amount received (that is, withdrawn from the MRF)", "Facts": "The entity is an operator of a Queensland retirement village that accounts for GST on a cash basis. A 'MRF' is a trust fund established under section 97 of the Retirement Villages Act 1999 (Qld) (Retirement Villages Act) for maintaining and repairing the retirement village's capital items. Residents of the retirement village make contributions towards this fund. The contributions form part of the recurrent charges paid by these residents. Section 97 of the Retirement Villages Act also requires that the entity must hold amounts standing to the credit of the fund on trust solely for the benefit of the residents. The monies in the MRF must not be used for a purpose other than those outlined in subsection 97(3) of the Retirement Villages Act. The supplies of services involved in maintaining and repairing the retirement village's capital items are made by the entity to the residents of the retirement village. The trust does not make any supplies of maintenance services to the entity or the residents. To the extent that amounts withdrawn from the MRF are related to a taxable supply such as a hairdressing salon, beauty parlour, retirement village bus, restaurant or communal area that are used for commercial activities, the amounts represent consideration for taxable supplies.", "Reasons_for_Decision": "Summary: Subsection 29-5(2) of the GST Act sets out the attribution requirements for an entity that accounts on a cash basis. This provision states that: Therefore, it needs to be determined when the entity has received consideration for its supply of services. When a resident's contribution is deposited into the MRF the entity holds the amount on trust for the residents. At this point in time, because the entity does not have access to the monies, the resident is not providing consideration for maintenance services. The Retirement Villages Act determines when the entity is entitled to withdraw funds from the MRF for maintaining the village. When the entity maintains the capital items of the village, in accordance with the purposes outlined in subsection 97(3) of the Retirement Villages Act, it is entitled to withdraw funds from the MRF to pay for the provision of those services. It is at this point that the entity is receiving consideration for its supply. Therefore, the entity does not attribute the GST payable to the tax period in which the resident's contribution is deposited into the MRF. Rather the entity attributes the GST payable to the tax periods in which it withdraws the payment from the MRF for the taxable supply of maintenance services as this is when the consideration is received. The amount of GST that the entity attributes to the tax periods is 1/11th of the amount received (that is, withdrawn from the MRF). For instance, if the entity withdrew $990 from an MRF as part payment for the supply of maintenance services totalling $1,100 in a tax period, the GST payable on the services which is attributable to that tax period is $90 (one-eleventh of $990).", "Date_of_Decision": "31 October 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/423", "Subject_References": "Goods and services tax GST tax periods Attribution rules Cash basis GST property and construction GST retirement villages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003422", "Unmatched_Content": "This ATO ID has been amended to improve clarity and remove reference to related ATO ID 2003/424 | Keywords Goods and services tax GST tax periods Attribution rules Cash basis GST property and construction GST retirement villages"}
{"ATO_ID_Number": "ATO ID 2003/423", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and non-cash basis attribution rules for the operator of a Queensland retirement village when residents deposit money into the maintenance reserve fund", "Issue": "Does the entity, an operator of a Queensland retirement village that accounts for goods and services tax (GST) on a non-cash basis, attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the tax period in which a resident's contribution is deposited into the entity's maintenance reserve fund (MRF), where the entity does not issue an invoice for the supply?", "Decision": "No, the entity does not attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(1) of the GST Act, to the tax period in which the resident's contribution is deposited into the entity's trust account. As the entity does not issue an invoice for the supply, the entity attributes the GST payable to the tax period when it withdraws any amount from the MRF as consideration for the supply of maintenance services.", "Facts": "The entity is an operator of a Queensland retirement village that accounts for GST on a non-cash basis. A 'MRF' is a trust fund established under section 97 of the Retirement Villages Act 1999 (Qld) (Retirement Villages Act) for maintaining and repairing the retirement village's capital items. Residents of the retirement village make contributions towards this fund. The contributions form part of the recurrent charges paid by these residents. Section 97 of the Retirement Villages Act requires that the entity must hold amounts standing to the credit of the fund on trust solely for the benefit of the residents. The monies in the MRF must not be used for a purpose other than those outlined in subsection 97(3) of the Retirement Villages Act. The supplies of services involved in maintaining and repairing the retirement village's capital items are made by the entity to the residents of the retirement village. The trust does not make any supplies of maintenance services to the entity or the residents. To the extent that amounts withdrawn from the MRF are related to a taxable supply applied to maintain facilities or outlets such as a hairdressing salon, beauty parlour, retirement village bus, restaurant or communal area that are used for commercial activities, the amounts represent consideration for taxable supplies. The entity does not issue an invoice for the supply of the maintenance services.", "Reasons_for_Decision": "Summary: Subsection 29-5(1) of the GST Act sets out the attribution requirements for an entity that accounts on a non-cash basis. This provision states that: The GST payable by an entity on a taxable supply is attributable to: As the entity does not issue an invoice for the supply, it is necessary to determine when the entity has received consideration for the supply. When a resident's contribution is deposited into the MRF, the entity holds the amount on trust for the resident. At this point in time, because the entity does not have access to the monies, the resident is not providing consideration for maintenance services. The Retirement Villages Act determines when the entity is entitled to withdraw funds from the MRF for maintaining the village. When the entity maintains the capital items of the village, in accordance with the purposes set out in subsection 97(3) of the Retirement Villages Act, it is entitled to withdraw funds from the MRF to pay for the provision of those services. It is at this point that the entity is receiving consideration for its supply. Therefore, the entity does not attribute the GST payable on a taxable supply under subsection 29-5(1) of the GST Act to the tax period in which the resident's contribution is deposited into the MRF. As the entity does not issue an invoice for the supply, the entity attributes the GST payable for the taxable supply of maintenance services to the tax period when it withdraws any amount from the MRF as consideration for the supply of maintenance services. For instance, if the entity made a supply to residents of maintenance services at a price of $1,100, but only withdrew $900 from an MRF as part payment, the GST payable on the services which is attributable to that tax period is $100 (one-eleventh of $1,100).", "Date_of_Decision": "31 October 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/422", "Subject_References": "Goods and services tax GST tax periods Attribution rules Non cash basis GST property and construction GST retirement villages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003423", "Unmatched_Content": "This ATO ID has been amended to improve clarity and remove reference to related ATO ID 2003/424 | Keywords Goods and services tax GST tax periods Attribution rules Non cash basis GST property and construction GST retirement villages"}
{"ATO_ID_Number": "ATO ID 2002/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and cash basis attribution rules for a legal firm when client deposits money in trust account", "Issue": "Does the entity, a legal firm that accounts for goods and services tax (GST) on a cash basis, attribute the GST payable on the taxable supply of its services, under subsection 29-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to the tax period in which the client deposits money into the entity's trust account?", "Decision": "No, the entity does not attribute the GST payable on the taxable supply of its services, under subsection 29-5(2) of the GST Act, to the tax period in which the client deposits money into the entity's trust account. The entity attributes the GST payable to the tax period in which it is entitled to withdraw, in full or part, the payment for its services, from the trust account.", "Facts": "The entity is a legal firm that accounts for GST on a cash basis. The entity is engaged by a client to provide legal services. This supply is a taxable supply under section 9-5 of the GST Act. As part of the service agreement, prior to the provision of any services, the client deposits money into the entity's trust account. This money is treated as security for future services provided by the entity. The entity does not have access to the money at the time of the deposit. In the next tax period, the client authorises the payment for these services from the trust account.", "Reasons_for_Decision": "Summary: Subsection 29-5(2) of the GST Act sets out the attribution requirements for an entity that accounts on a cash basis. This provision states that: Therefore, it needs to be determined when the entity has received consideration for its supply of services. When a client deposits money into a legal firm's trust account it is providing money that the legal firm holds on trust for the client. The client is not providing consideration for the legal firm's services. The relevant legislation and the agreement between a legal firm and a client will determine when the legal firm is entitled to withdraw funds from the trust account for disbursements or for its services. When the legal firm is entitled to withdraw funds from the trust account for its services, it is receiving consideration for its supply. At the time the client deposits money into the trust account, the entity does not have access to the money. Therefore, the client is not providing consideration for services at the time it makes the deposit. The client provides consideration to the entity in the next tax period when the client authorises the payment of these services from the trust account. Therefore, the entity does not attribute the GST payable on a taxable supply under subsection 29-5(2) of the GST Act to the tax period in which the client deposits money into the entity's trust account. The entity attributes the GST payable to the tax period in which it is entitled to withdraw, in full or part, the payment for its services from the trust account.", "Date_of_Decision": "22 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 29-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST tax periods Attribution rules Cash basis", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002111", "Unmatched_Content": "Keywords Goods & services tax GST tax periods Attribution rules Cash basis"}
{"ATO_ID_Number": "ATO ID 2002/113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and non-cash basis attribution rules for a legal firm when client deposits money in trust account", "Issue": "Does the entity, a legal firm that accounts for goods and services tax (GST) on a non-cash basis, attribute the GST payable on the taxable supply of its services, under subsection 29-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), to the tax period in which the client deposits money into the entity's trust account, when it invoices the client for its legal services in the next tax period?", "Decision": "No, the entity does not attribute the GST payable on the taxable supply of its services, under subsection 29-5(1) of the GST Act, to the tax period in which the client deposits money into the entity's trust account. The entity attributes the GST payable to the tax period in which it invoices the client for its legal services.", "Facts": "The entity is a legal firm that accounts for GST on a non-cash basis. The entity is engaged by a client to provide legal services. This supply is a taxable supply under section 9-5 of the GST Act. As part of the service agreement, prior to the provision of any services, the client deposits money into the entity's trust account. This money is treated as security for future services provided by the entity. The entity does not have access to the money at the time of the deposit. In the next tax period (the second tax period), the entity invoices its client for legal services rendered. The client authorises the payment for these services from the trust account in the following tax period (the third tax period).", "Reasons_for_Decision": "Summary: Subsection 29-5(1) of the GST Act sets out the attribution requirements for an entity that accounts for GST on a non-cash basis. Under this provision if an entity accounts on a non-cash basis then the GST payable is attributed to the first tax period in which one of the following occurs: The entity has issued an invoice for services rendered in the second tax period. Therefore, it needs to be determined whether the entity has received consideration for the supply of its services prior to issuing the invoice. When a client deposits money into a legal firm's trust account it is providing money that the legal firm holds on trust for the client. The client is not providing consideration for the legal firm's services. The relevant legislation, and the agreement between a legal firm and a client will determine when the legal firm is entitled to withdraw funds from the trust account for disbursements or for its services. When the legal firm is entitled to withdraw funds from the trust account for its services, it is receiving consideration for its supply. Therefore, the GST on the entity's taxable supply is attributable to the tax period in which: At the time the client deposits money into the trust account, the entity does not have access to the money. Therefore, the client is not providing consideration for services at the time it makes the deposit. The entity receives consideration in the third tax period when it receives authorisation from its client and is entitled to withdraw funds from the trust account for its services. At this time, the money is applied as consideration for the entity's services. Therefore, the entity does not receive consideration for its supply until the third tax period, which is after the issuing of the bill. The entity does not attribute the GST payable on the taxable supply of legal services under subsection 29-5(1) of the GST Act to the tax period in which the client deposits money into the entity's trust account. The entity attributes the GST payable to the tax period in which it invoices the client for its legal services.", "Date_of_Decision": "22 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 29-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST tax periods Attribution rules Non-cash basis", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002113", "Unmatched_Content": "Keywords Goods & services tax GST tax periods Attribution rules Non-cash basis"}
{"ATO_ID_Number": "ATO ID 2002/520", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and attribution of GST payable on a packaged supply of advertising services", "Issue": "Is the entity, a supplier of advertising services, able to attribute all of the goods and services tax (GST) payable on a supply in accordance with Division 156 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of a packaged advertising service consisting of two parts, only one of which is supplied on a progressive or periodic basis?", "Decision": "No, the entity is not able to attribute all of the GST payable on the supply in accordance with Division 156 of the GST Act when it makes a supply of packaged advertising services consisting of two parts, only one of which is supplied on a progressive or periodic basis. However, it can attribute GST payable on the part that is supplied on a progressive or periodic basis in accordance with Division 156 of the GST Act.", "Facts": "The entity is a supplier of advertising services. The entity is making a taxable supply of packaged advertising services. The packaged supply of advertising services consists of continuous online advertising over a particular period and a one-off print advertisement. The entity receives one payment each month for its supply of the packaged advertising service. The invoice issued to the client by the entity does not split the payment into separate parts to reflect the different kinds of advertising services supplied. However, the entity is able to calculate the value of each separate part of the packaged supply. The entity does not account for GST on a cash basis. In some cases, the entity supplies online advertising services and print advertisements separately. Where a customer pays for a single supply of online advertising services on a progressive or periodic basis, this single supply is a supply to which Division 156 of the GST Act applies. A single supply of a one-off print advertisement is not a supply to which Division 156 of the GST Act applies. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Division 156 of the GST Act sets out special rules relating to supplies and acquisitions made on a progressive or periodic basis. Under subsection 156-5(1) of the GST Act, the GST payable by an entity on a taxable supply that is made: is attributable, in accordance with section 29-5 of the GST Act, as if each progressive or periodic component of the supply were a separate supply. The entity receives one payment each month for its supply of the packaged advertising services. Therefore, the consideration for the taxable supply is being provided on a periodic basis. However, the supply consists of two parts, one of which is a supply made on a progressive or periodic basis (ie the online advertising services) and the other which is not made on a progressive or periodic basis (ie the one-off print advertisement). As such, it needs to be determined whether the entity is making either: In determining whether a supply has separately identifiable parts, it is necessary to objectively assess the characteristics of the supply. In relation to whether various parts of a supply are separately identifiable, Millet LJ stated in Customs and Excise Commissioners v Wellington Private Hospital Ltd (1997) BVC 251 at 266 that: 'The proper inquiry is whether one element of the transaction is so dominated by another element as to lose any separate identity as a supply for fiscal purposes, leaving the latter, the dominant element of the transaction, as the only supply. If the elements of the transaction are not in this relationship with each other, each remains as a supply in its own right with its own separate fiscal consequences.' Millet LJ (at p 266) also found that courts need to ask whether one part is connected with the other, or whether the two parts are 'physically and economically dissociable'. In this case, the separate parts of the packaged advertising services can be supplied on their own, and in fact, in some cases are. Therefore, neither part of the packaged advertising service is so dominated by the other part as to lose any separate identity it may have. Furthermore, the online advertising is physically separable from the print advertising, and as the entity can value each part, the separate parts are also economically separable. Therefore, each part of the supply of the packaged advertising service remains a supply in its own right and each part must be treated according to whether it is a supply made for a period or on a progressive basis for the purposes of Division 156 of the GST Act. The online advertising part of the packaged supply is a supply to which Division 156 of the GST Act applies. As such, the GST payable on the consideration which can be attributed to the supply of online services must be attributed in accordance with Division 156 of the GST Act. As a one-off print advertisement is not supplied for a period or on a progressive basis, Division 156 of the GST Act does not apply to this part of the advertising package. Therefore, the GST payable on the consideration that relates to the print advertising must be attributed in accordance with Division 29 of the GST Act. The entity is not able to attribute all of the GST payable on the supply in accordance with Division 156 of the GST Act when it makes a supply of packaged advertising services consisting of two parts, only one of which is supplied for a period or on a progressive basis.", "Date_of_Decision": "30 May 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 29 Division 156 subsection 156-5(1)", "Related_Public_Rulings_and_Determinations": "GSTR 2000/35 | GSTR 2001/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST attribution rules", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002520", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2000/35 GSTR 2001/8 | Keywords Goods & services tax GST attribution rules"}
{"ATO_ID_Number": "ATO ID 2003/1177", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and date of effect of a permission to account on a cash basis", "Issue": "Can the date of effect of the permission for an entity to account on a cash basis, under section 29-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), be the first day of a tax period that has ended before the entity applied to the Commissioner for permission?", "Decision": "No, the date of effect of the permission for an entity to account on a cash basis under section 29-45 of the GST Act cannot be the first day of a tax period that has ended before the entity applied for the permission.", "Facts": "The entity is registered for goods and services tax (GST) and does not meet any of the requirements in section 29-40 of the GST Act that allows an entity to choose to account for GST on a cash basis. Consequently, the entity applied to the Commissioner for permission to account on a cash basis. The entity also requested that the date of effect for the permission to be the start of a tax period that ended prior to the entity seeking permission. The entity satisfies the requirement under subsection 29-45(1) of the GST Act for the Commissioner to permit the entity to account on a cash basis.", "Reasons_for_Decision": "Summary: Section 29-45 of the GST Act provides that an entity may apply to the Commissioner for permission to account on a cash basis where certain requirements are satisfied. Under subsection 29-45(2) of the GST Act, the Commissioner must notify the entity of any decision made in relation to section 29-45. Where the Commissioner decides to permit the entity to account on a cash basis, the notice must specify the date of effect of the permission. The Commissioner considers that the date of effect of the permission will be the first day of the tax period during which the entity seeks permission or any subsequent tax period. However, the date of effect of the permission cannot be the first day of a tax period that has ended before the entity applied for the permission.", "Date_of_Decision": "6 February 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 29-40 section 29-45 subsection 29-45(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST tax periods Cash basis Non cash basis", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031177", "Unmatched_Content": "Keywords Goods and services tax GST tax periods Cash basis Non cash basis"}
{"ATO_ID_Number": "ATO ID 2003/1179", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and date of effect to account on a cash basis", "Issue": "Can the date of effect of the choice by an entity to account on a cash basis, under subsection 29-40(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), be the first day of a tax period that has ended before the choice is made?", "Decision": "No, the date of effect of the choice by an entity to account on a cash basis under subsection 29-40(1) of the GST Act cannot be the first day of a tax period that has ended before the choice is made.", "Facts": "The entity is a business operator that is registered for goods and services tax (GST) and accounts for GST on a non-cash basis. The entity satisfies at least one of the requirements under section 29-40(1) of the GST Act that allows an entity to choose to account on a cash basis. The entity made a choice to account on a cash basis and requested that the date of effect be the first day of a tax period that ended before the entity made its choice.", "Reasons_for_Decision": "Summary: Subsection 29-40(1) of the GST Act provides that where certain requirements are met, an entity can choose to account on a cash basis with effect from the first day of the tax period that the entity chooses. The Commissioner considers that the date of effect is the first day of the tax period during which the entity makes its choice or the first day of any subsequent tax period. However, the date of effect cannot be the first day of a tax period that has ended before the entity made its choice.", "Date_of_Decision": "6 August 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 29-40(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST tax periods Cash basis Non cash basis", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031179", "Unmatched_Content": "Keywords Goods and services tax GST tax periods Cash basis Non cash basis"}
{"ATO_ID_Number": "ATO ID 2005/306", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and unclaimed money from the cancellation of lay-by sales", "Issue": "Is unclaimed money held by the entity, a retailer in Victoria, for a customer in relation to a cancelled lay-by sale and to be paid to the Registrar, as required by the Unclaimed Moneys Act 1962 (Vic) if it remains unclaimed, treated as consideration for a supply made by the entity under section 102-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the unclaimed money is not treated as consideration for a supply made by the entity under section 102-5 of the GST Act.", "Facts": "The entity is a retailer located in Victoria and is registered for goods and services tax (GST). The entity enters into a lay-by agreement with a customer to sell goods. The customer makes an initial payment then fails to make any other payments on the lay-by. The entity cancels the agreement and holds the initial payment for the customer to collect. For purposes of the Unclaimed Moneys Act: The entity continues to hold the initial payment for the customer's collection until the Unclaimed Moneys Act requires the entity to pay it to the Registrar.", "Reasons_for_Decision": "Summary: Section 102-5 of the GST Act provides, amongst other things, that if a supply by way of lay-by sale is cancelled, any amount retained or recovered by the supplier because of the cancellation is treated as consideration for a supply made by the supplier. Although the entity has the customer's initial payment, the entity is holding this money for the customer to collect. If it remains unclaimed for 12 months or more it becomes 'unclaimed moneys' under the Unclaimed Moneys Act and the entity will be required to forward the money to the Registrar. The entity does not have any right to take the money into its revenue and use it for its own purposes. The entity is merely holding the money on trust for the customer. The entity does not retain the money for the purposes of section 102-5 of the GST Act. This means the money is not treated as consideration for a supply.", "Date_of_Decision": "7 December 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 102-5", "Related_Public_Rulings_and_Determinations": "GSTR 2000/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST lay by sales GST supplies & acquisitions GST consideration", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005306", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2000/12 | Keywords Goods and services tax GST special rules GST lay by sales GST supplies & acquisitions GST consideration"}
{"ATO_ID_Number": "ATO ID 2004/446", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and food and/or drinks provided for no charge to an employee in respect of their employment", "Issue": "When food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, an employer, for no charge, is the amount of goods and services tax (GST) on that supply calculated to be zero in accordance with section 9-70 of the New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, when food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, for no charge, the amount of GST on that supply is calculated to be zero in accordance with section 9-70 of the GST Act.", "Facts": "The entity is an employer that is registered for GST. The entity provides an employee (or an associate of the employee) with food and/or drinks. The food and/or drinks are supplied, for no charge, to the employee (or an associate of the employee). The supply of the food and/or drinks to the employee (or an associate of the employee) satisfies the requirements of section 9-5 of the GST Act as being a taxable supply. The consideration provided for the supply of food and/or drinks is the employee's services. The supply of the food and/or drinks to the employee (or an associate of the employee) is provided in respect of the employee's employment. The supply of the food and/or drinks is a fringe benefit for the purposes of the GST Act, regardless of whether or not it is an exempt benefit under section 136 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).", "Reasons_for_Decision": "Summary: Section 9-70 of the GST Act provides that the amount of GST on a taxable supply is 10% of the value of the taxable supply. Subsection 9-75(1) of the GST Act provides that the value of a taxable supply is the price x 10/11 and if the consideration for the supply is not expressed as an amount of money, or not only in money, the price of the supply is the sum of the amount of money, if any, and the GST inclusive market value of the consideration where the consideration is not expressed as an amount of money. The consideration provided for the entity's taxable supply of food and/or drinks is the employee's services and as such, the consideration is not expressed as an amount of money. Therefore, the price for the supply is the GST inclusive market value of the employee's services. However, the supply of food and/or drinks is a fringe benefit for the purposes of the GST Act and the way the value of a supply of a fringe benefit is worked out is different than for other supplies. Subsection 9-75(3) of the GST Act provides that, in working out the value of a supply where: the price of the supply is the amount of consideration in the form of the recipients contribution made in the relevant tax period. As such, in working out the value of the entity's taxable supplies of food and/or drinks, the price of the supply of the fringe benefit is limited to the amount of the recipients contribution. The term 'recipients contribution' is defined in section 195-1 of the GST Act to have the meaning given by subsection 136(1) of the FBTAA, but includes any consideration paid in respect of a benefit that is an exempt benefit for the purposes of that Act. Under subsection 136(1) of the FBTAA, the term 'recipients contribution' is defined in relation to a fringe benefit, other than an expense payment fringe benefit, to mean the amount of any consideration paid to the provider or to the employer by the recipient of the benefit or the employee in respect of the provision of the recipient's property reduced by any reimbursement paid to the recipient in respect of that consideration. The above definitions mean that the application of subsection 136(1) of the FBTAA 1986 and section 195-1 of the GST Act is such that, regardless of whether or not the supply is an exempt benefit under the FBTAA, the recipients contribution is limited to any consideration paid to the entity in respect of the provision of the food and/or drinks. The entity provides the food and/or drinks to the employee (or an associate of the employee) for no charge. The consideration provided for the entity's supply is the employee's services. As there is no charge for the food and/or drinks, the employee (or an associate of the employee) has not made any contribution towards the cost of the food and/or drinks. As the price of the entity's taxable supplies of food and/or drinks is limited to the amount of the recipients contribution and the employee (or an associate of the employee) has not made any contribution, the value of the entity's taxable supplies of food and/or drinks is zero. Therefore, when food and/or drinks are supplied to an employee (or an associate of the employee) by the entity, for no charge, the amount of GST on that supply is calculated to be zero in accordance with section 9-70 of the GST Act.", "Date_of_Decision": "4 March 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-70 subsection 9-75(1) subsection 9-75(3) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST consideration GST/FBT interaction", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004446", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/3 | Keywords Goods and services tax GST consideration GST/FBT interaction"}
{"ATO_ID_Number": "ATO ID 2004/673", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and 'gift' supplied to a party host", "Issue": "Is the entity, a direct marketer, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a 'gift' to a party host?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a 'gift' to a party host.", "Facts": "The entity is a direct marketer. The entity sells its products to an independent sales representative. The representative subsequently sells these products to people through party plan arrangements or home demonstrations. The representative attends the home of a person (the host) for the purpose of demonstrating and selling the products. It is customary for the entity to supply the host with a reward for hosting the party. The 'gift' is given to the host by the representative, on behalf of the entity. The host does not carry on an enterprise and is not registered or required to be registered for goods and services tax (GST). The entity is registered for GST. The supply of the 'gift' is made in the course of an enterprise carried on by the entity and is connected with Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement of section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 9-10(2)(b) of the GST Act provides that for GST purposes, the term 'supply' includes a supply of goods. The entity supplies a 'gift' to the host and is, therefore, making a supply as per paragraph 9-10(2)(b) of the GST Act. Subsection 9-15(1) of the GST Act provides that, for GST purposes, the term 'consideration' includes any payment, act or forbearance, in connection with, in response to or for the inducement of the supply of anything. Therefore, it is not necessary for consideration to be in a monetary form. As the host does not make a monetary payment to the entity, it is necessary to determine whether the host provides consideration in the form of an act in connection with, in response to, or for the inducement of the entity's supply of the 'gift'. As a result of the sales made through the party plan arrangements or home demonstrations, the representative purchases replacement products from the entity. Therefore, the entity depends on these parties or home demonstrations being held for the regular sales of its products to the representative. The entity provides the 'gift' to reward the host for holding a party or home demonstration. This, in turn, encourages other people to hold a party or home demonstration, whereby increasing the sales of the entity's products to the representative. The supply of the 'gift' is a reward that is conditional on the host holding the party. As such, there is a direct connection between the supply of the 'gift' and the host's act of holding the party or home demonstration. Therefore the act of holding the party or home demonstration is consideration for the purposes of subsection 9-15(1) of the GST Act. The entity makes the supply of the 'gift' for consideration. The supply is made in the course of an enterprise carried on by the entity and is connected with Australia. In addition, the entity is registered for GST. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a 'gift' to a host. Note: section 9-75 of the GST Act requires that the entity's liability to GST on the supply of the 'gift' is calculated by reference to the GST inclusive market value of the consideration. Goods and Services Tax Ruling GSTR 2001/6 provides guidance on non-monetary consideration and includes examples of reasonable methods for determining market value.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-10(2)(b) subsection 9-15(1) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "GSTR 2000/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004673", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2000/11 | Keywords Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and provision of superannuation support for contractors", "Issue": "Do superannuation support contributions, made on behalf of an entity, an independent contractor, by the recipient of the entity's services, form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, superannuation support contributions, made on behalf of the entity, by the recipient of the entity's services, do not form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the GST Act.", "Facts": "The entity is an independent contractor that is carrying on an enterprise in Australia. In the course of this enterprise, the entity is contracted to provide specified services to a recipient. These services are wholly or principally for the entity's labour and are a taxable supply under section 9-5 of the GST Act. The entity is paid an agreed fee for the services. In addition to the agreed fee, the recipient is required under the Superannuation Guarantee (Administration) Act 1992 (SGA Act) to pay superannuation support contributions for the entity at a prescribed rate. Both the entity and the recipient are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The entity is making a taxable supply of services to the recipient. However, it needs to be determined whether the payment of the superannuation support contributions form part of the consideration for the entity's taxable supply of services to the recipient. The superannuation support contributions have been made as a result of the operation of subsection 12(3) of the SGA Act. This subsection expanded the common law definition of an employee to include contractors who are engaged 'wholly or principally' for their labour. In this case, the entity is contracted wholly or principally to provide labour to the recipient and is deemed to be an employee of the recipient for the purposes of the SGA Act. As such, the recipient is under a statutory obligation to provide superannuation support contributions for the entity. The deeming effect of the definition of employee in the SGA Act is for the purposes of providing superannuation support only and does not alter the contractual relationship between the parties. For GST purposes, the effect of the deemed employee relationship is that payment of the superannuation support contribution is not consideration for something done in the course or furtherance of an enterprise carried on by the entity (paragraph 9-20(2)(a) of the GST Act). On this basis, the superannuation support contributions made by the recipient are not part of the total payment for the taxable supply of labour. Therefore, the superannuation support contributions made on behalf of the entity, by the recipient of the entity's services, do not form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the GST Act.", "Date_of_Decision": "8 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-20(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST supplies & acquisitions GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200222", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST supplies & acquisitions GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/300", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and living away from home allowance paid to a contractor", "Issue": "Does a living away from home allowance paid to the entity, an independent contractor, by the recipient of its services, form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, a living away from home allowance paid to the entity by the recipient of its services, does form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the GST Act.", "Facts": "The entity is an independent contractor. In the course of this enterprise, the entity is contracted to provide services to a recipient. The supply of these services is a taxable supply under section 9-5 of the GST Act. The provision of part of these services requires that the entity lives away from home. In addition to a set hourly rate, the recipient of the entity's services pays the entity an allowance for each day that the entity has to live away from home. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The entity is making a taxable supply of services to the recipient. However, it needs to be determined whether the payment of the living away from home allowance forms part of the consideration for the entity's taxable supply of services to the recipient. Consideration is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance in connection with, in response to or for the inducement of a supply of anything. In this case, the allowance is an additional payment for the entity's supply of services provided away from the entity's home. Therefore, it forms part of the total consideration for the entity's supply of services. The living away from home allowance paid to the entity by the recipient of the entity's services, does form part of the consideration for the entity's taxable supply of services to the recipient under section 9-5 of the GST Act.", "Date_of_Decision": "12 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-15(1) paragraph 9-20(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST supplies & acquisitions GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002300", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST supplies & acquisitions GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/686", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and input tax credits for renovating farm manager's residence", "Issue": "Is the entity, a farm operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for acquisitions made to renovate the farm manager's residence?", "Decision": "No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for acquisitions made to renovate the farm manager's residence.", "Facts": "The entity is a farm operator. The entity's farming property is located in a remote area. The entity employs a farm manager to manage the property. The farm manager is an employee of the entity. It requires the manager to stay on the property and provides the manager with residential premises on the property. The farm manager does not pay any rent for the premises. The entity engages various suppliers to renovate the residence. The supply of these goods and services to the entity are taxable supplies under section 9-5 of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 11-20 of the GST Act provides that an entity is entitled to the input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act lists the requirements that must be satisfied for an entity to make a creditable acquisition. One of those requirements is that the entity must acquire the thing solely or partly for a creditable purpose (see paragraph 11-5(a) of the GST Act). Section 11-15 of the GST Act defines the meaning of creditable purpose. Paragraph 11-15(2)(a) of the GST Act provides that an entity does not acquire a thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input taxed. The entity's acquisitions relate to the provision of a residence to the farm manager. Therefore, it needs to be determined whether this provision of a residence is an input taxed supply. Under section 40-35 of the GST Act, the supply of premises by way of lease, hire or licence is input taxed where the supply is of residential premises. Section 195-1 of the GST Act defines residential premises to mean, in part, land or a building that is occupied as a residence, or for residential accommodation; or is intended to be occupied and is capable of being occupied, as a residence, or for residential accomodation. The premises, in this instance, are capable of being, and are, occupied as a residence. Accordingly, the entity is providing the farm manager with residential premises. The supply of the residential premises is also the provision of a housing fringe benefit to the farm manager as an employee. Paragraph 19 of Goods and Services Tax Ruling GSTR 2001/3 provides that the consideration for the supply of the fringe benefit is the services of the employee (unless the employee makes a payment or contribution). However, it must be determined if the supply of the fringe benefit is a taxable supply. The supply of the residential premises cannot be by way of lease or hire as the farm manager does not pay any consideration for the residential premises. However, by virtue of the entity's requirement that the farm manager occupy the residential premises as a condition of employment, the farm manager subsequently has a licence to occupy the premises. The entity is therefore supplying residential premises by way of licence which is input taxed under section 40-35 of the GST Act. As the entity is making an input taxed supply of the residential premises, the acquisitions made to renovate the residential premises are acquisitions that relate to the making of an input taxed supply. The entity is not making the acquisitions for a creditable purpose (see paragraph 11-15(2)(a) of the GST Act) and the acquisitions are not creditable acquisitions under section 11-5 of the GST Act. The entity therefore is not entitled to an input tax credit under section 11-20 of the GST Act for acquisitions made to renovate the farm manager's residence.", "Date_of_Decision": "15 February 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 paragraph 11-5(a) section 11-15 paragraph 11-15(2)(a) section 11-20 section 40-35 section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2001/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST property & construction GST residential premises GST residential rents GST supplies & acquisitions Creditable acquisition Creditable purpose Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002686", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2001/3 | Keywords Goods & services tax GST property & construction GST residential premises GST residential rents GST supplies & acquisitions Creditable acquisition Creditable purpose Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2010/197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agricultural managed investment scheme - investor carrying on an enterprise", "Issue": "Is the entity, an individual who is a participant in an agricultural managed investment scheme, carrying on an enterprise under section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes. The individual who is a participant in the agricultural managed investment scheme is carrying on an enterprise under section 9-20 of the GST Act.", "Facts": "The scheme: Investors become participants in the scheme by entering into the scheme constitution and associated agreements with the responsible entity. The constitution provides the responsible entity of the scheme is to be appointed as manager of the scheme ('the manager'). The scheme agreements relevantly provide that: The management fees and the lease payments are the only payments made by the participant.", "Reasons_for_Decision": "Summary: An entity may be registered for GST if it is carrying on an enterprise. 'Enterprise' is defined in section 9-20 of the GST Act. Paragraph 9-20(1)(a) of the GST Act provides that enterprise includes an activity, or series of activities, done in the form of a business. Miscellaneous Taxation Ruling MT 2006 / 1 The New Tax System : the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number (MT 2006/1) explains the Commissioner's views on when an entity is carrying on an enterprise for the purposes of section 9-20 of the GST Act. Paragraph 159 of MT 2006/1 states that whether or not an activity, or series of activities amounts to an enterprise is a question of fact and degree, having regard to all of the circumstances of the case. Paragraph 160 of MT 2006/1 states it is therefore important that the relevant activity or series of activities are identified in order to determine whether an enterprise is being carried on. Paragraph 170 of MT 2006/1 states (amongst other things) the phrase 'in the form of a business' is broad and has as its foundation the longstanding concept of a business. MT 2006/1 further states at paragraphs 175 and 176: 175. The definition is the same as the definition of 'business' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936), and section 995-1 of the ITAA 1997. 176. As the definition of 'business' is identical in the GST Act and the ITAAs, it can be interpreted in a similar way. The meaning of 'business' is considered in Taxation Ruling TR 97/11. Although TR 97/11 deals with carrying on a primary production business, the principles discussed in that Ruling apply to any business. Paragraph 178 of MT 2006/1 sets out the indicia of business referred to in paragraph 13 of TR97/11 as follows: The Commission's Decision Impact Statement for Hance v Federal Commissioner of Taxation ; Hanneberry v. Federal Commissioner of Taxation 2008 ATC 20-085, (2008) 74 ATR 644 states: ... [the] retention of ownership by individual members, of the produce of the scheme, was of critical importance in this matter, and it will be necessary to ensure that this feature is present in order to reach the same conclusion as that reached by the Court. Having regard to the indicia listed above, and the essential feature that the Decision Impact Statement states must be present (before the Commissioner will conclude the participants in such schemes are carrying on a business), we conclude each participant is carrying on a business. Specifically, we consider the relevant features of the scheme are: Therefore the participant, in carrying out activities in the form of a business, will be carrying on an enterprise, unless those activities fall into the exclusions listed under subsection 9-20(2) of the GST Act. In this case, none of the activities carried out by the participant fall into the exceptions listed under subsection 9-20(2) of the GST Act. Therefore, the participant is carrying on an enterprise under section 9-20 of the GST Act.", "Date_of_Decision": "26 October 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-20 subsection 9-20(2) paragraph 9-20(2)(a)", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling MT 2006/1 | Taxation Ruling TR 97/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/129 | ATO ID 2010/196 | ATO ID 2010/198 | ATO ID 2010/199", "Subject_References": "Goods and services tax GST enterprise", "Case_References": "Hance v Federal Commissioner of Taxation Hanneberry v Federal Commissioner of Taxation 2008 ATC 20-085 (2008) 74 ATR 644", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010197", "Unmatched_Content": "Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling MT 2006/1 Taxation Ruling TR 97/11 | Keywords Goods and services tax GST enterprise"}
{"ATO_ID_Number": "ATO ID 2003/701", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of an asset that was purchased for, but not used in, an entity's business", "Issue": "Is the entity, a business operator, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a business asset that it initially purchased to use in its enterprise, but which it never actually used prior to sale?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a business asset that it initially purchased to use in its enterprise, but which it never actually used prior to sale.", "Facts": "The entity is a business operator. The entity sells an asset that it initially purchased to use in its enterprise. The asset was not actually used by the entity prior to sale. The asset was not used for a private or domestic purpose. The entity is registered for goods and services tax (GST) and the supply of the business asset is for consideration and is connected with Australia. The supply of the business asset is neither GST-free nor input taxed.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The sale of the asset is for consideration, is connected with Australia, and the entity is registered for GST. As such the first, third and fourth requirements of section 9-5 of the GST Act are met. The second requirement in section 9-5 of the GST Act is that the supply is made in the course or furtherance of the enterprise carried on by the entity. The phrase, 'in the course or furtherance of' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of those words. The Australian Concise Oxford Dictionary (1997) defines the phrase 'in the course of' as 'during'. The word 'furtherance' is defined to mean 'furthering or being furthered; the advancement of a scheme etc'. The Explanatory Memorandum relating to the A New Tax System (Goods and Services Tax) Bill 1998 confirms this ordinary meaning at paragraph 3.10 which states: 'In the course or furtherance' is not defined, but is broad enough to cover any supplies made in connection with your enterprise. An act done for the purpose or object of furthering an enterprise, or achieving its goals, is a furtherance of an enterprise although it may not always be in the course of that enterprise. The entity is selling an asset that it initially purchased to use in its enterprise. This is a sale that is connected with the entity's enterprise. Therefore, although the entity did not actually use the asset, the sale is made in the course or furtherance of the entity's enterprise. As such the second requirement of section 9-5 of the GST Act is satisfied. Therefore, the sale of the asset satisfies the positive requirements of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a business asset that it initially purchased to use in its enterprise, but which it never actually used prior to sale. [Note: Paragraph 15AB(1)(a) of the Acts Interpretation Act 1901 provides that consideration may be given to material not forming part of an Act to confirm that the meaning of a provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purposes or object underlying the Act. Paragraph 15AB(2)(e) of the Acts Interpretation Act provides that any explanatory memorandum relating to the Bill containing the provision is extrinsic material that may be considered for this purpose.]", "Date_of_Decision": "5 June 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions GST enterprise Taxable supply", "Case_References": "", "Other_References": "The Australian Concise Oxford Dictionary, (1997), 3rd edn, Oxford University Press, South Melbourne. The Explanatory Memorandum relating to the A New Tax System (Goods and Services Tax) Bill 1998.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003701", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies & acquisitions GST enterprise Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/465", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and company amalgamations", "Issue": "Is the merging of entity A and entity B, bodies corporate, to become entity C an amalgamation under section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, the merging of entity A and entity B to become entity C is an amalgamation under section 195-1 of the GST Act.", "Facts": "Entity A and entity B are bodies corporate. Entity C is the new entity formed by the merger of entity A and entity B. Entity C is a company. Following the merger, entity A and entity B will cease to exist and the bodies corporate will be integrated into the one company with a newly constituted Board and management structure. The merger of entity A and entity B is governed by Australian legislation.", "Reasons_for_Decision": "Summary: 'Amalgamation' is defined in section 195-1 of the GST Act, which states that ' amalgamation means any procedure, under an *Australian law or a *foreign law, by which 2 or more *companies amalgamate and continue as one company.' The term 'procedure' is not defined in the GST Act, and therefore, it is given its ordinary meaning. The Macquarie Dictionary 1997 defines 'procedure' as: '1. the act or manner of proceeding in any action or process; conduct. 2. a particular course or mode of action. 3. mode of conducting legal, parliamentary, or other business, especially litigation and judicial proceedings.' In this case, the ordinary meaning of 'procedure' is met as the merging of entity A and entity B into entity C and the subsequent dissolution of entity A and entity B are particular courses of action. 'Australian law' is defined in section 195-1 of the GST Act as having the meaning given by section 995-1 of Income Tax Assessment Act 1997 , which provides that Australian law means a Commonwealth law, a State law or a Territory law. As the merger of entity A and entity B is governed by Australian legislation , the procedure will be one under an Australian law. 'Company' is defined in section 195-1 of the GST Act to include a body corporate. As entity A and entity B are bodies corporate, they both satisfy the definition of a company. The term 'amalgamate' is not defined in the GST Act and therefore it should take its ordinary meaning. The Macquarie Dictionary 1997 defines 'amalgamate' as '1. to mix so as to make a combination; blend; unite; combine: to amalgamate two companies.' The Butterworths Australian Legal Dictionary defines an 'amalgamation' as 'a joining, merging or union of two separate things to create a new thing.' The merger of entity A and entity B to form entity C is a 'combination', 'joining, merging or union'. The definition of amalgamation in the GST Act, stated above, requires that the amalgamated companies 'continue as one company'. Following the amalgamation, entity A and entity B cease to exist and both companies will be integrated into the one company with a newly constituted Board and management structure, being entity C. Thus, the amalgamated companies will continue as one company. In conclusion, the merger of entity A and entity B to form entity C will come about through a procedure under an Australian State law whereby two existing companies will be merged and will continue as one company. The merger of entity A and entity B to form entity C merger is an 'amalgamation' under section 195-1 of the GST Act.", "Date_of_Decision": "9 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST company amalgamations", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales; and Butterworths Australian Legal Dictionary, 1997, Butterworths", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001465", "Unmatched_Content": "Keywords Goods & services tax GST company amalgamations"}
{"ATO_ID_Number": "ATO ID 2012/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and representative of an incapacitated entity acting as both supplier and recipient of the representative's administration services", "Issue": "Is Entity A, an administrator acting in its capacity as a representative for an incapacitated entity, entitled to input tax credits (ITCs) under section 58-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for its payment of administration fees imposed by Entity B, the administrator in its capacity as an insolvency practitioner, even though Entity A and Entity B are the same legal person?", "Decision": "Yes, Entity A, as the representative of the incapacitated entity, is entitled to ITCs under section 58-10 of the GST Act for its payment of administration fees imposed by Entity B, even though Entity A and Entity B are the same legal person.", "Facts": "Entity A and Entity B are the same legal person, an administrator, acting in two different capacities. Entity A is an administrator acting in its capacity as the representative for the incapacitated entity that makes only taxable supplies. Entity B is the administrator acting in its capacity as an insolvency practitioner for the incapacitated entity. The legal person is registered twice for goods and services tax (GST). Once as Entity A pursuant to Division 58 of the GST Act and once as Entity B under Division 23 of the GST Act. The incapacitated entity is also registered for GST. Entity B performs administration services for Entity A and issues an invoice to Entity A. Entity A pays the invoice. The supply made by Entity B is a taxable supply under section 9-5 of the GST Act. The acquisition by Entity A is a creditable acquisition, under section 11-5 of the GST Act. (None of the activities of the incapacitated entity are of a private or domestic nature. None of the activities of the incapacitated entity involve the making of input taxed supplies. The acquisition by the incapacitated entity (while under administration) of administration services (paid for by the administration fees) is in the course of the activities of the incapacitated entity.) The acquisition of Entity B's services is within the scope of Entity A's responsibility or authority for managing the incapacitated entity's affairs.", "Reasons_for_Decision": "Summary: Under subsection 184-1(3) of the GST Act a legal person can have a number of different capacities. In each of these capacities, the legal person is taken to be a different entity for GST purposes. Entity A and Entity B are the same legal person acting in two different capacities and are treated as two separate entities for the purposes of the GST Act. As a result, Entity A, the administrator in its capacity as the representative of the incapacitated entity, can make acquisitions from Entity B, the administrator in its capacity as an insolvency practitioner. Subsection 58-5(1) of the GST Act ensures that any acquisitions made by the representative of the incapacitated entity are taken to be acquisitions made by the incapacitated entity. As stated in the facts, the acquisition is a creditable acquisition under section 11-5 of the GST Act. However, under paragraph 58-10(1)(b) of the GST Act, a representative of an incapacitated entity is entitled to any ITCs that the incapacitated entity would be entitled to for a creditable acquisition to the extent that the making of the acquisition is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs. This is despite section 11-20 of the GST Act, which is about who is entitled to ITCs. Accordingly, Entity A as the representative of the incapacitated entity is entitled to any ITCs under paragraph 58-10(1)(b) of the GST Act in relation to the fees paid to Entity B, and not the incapacitated entity. The fees are paid for a creditable acquisition of Entity B's services, that is within the scope of Entity A's responsibility or authority for managing the incapacitated entity's affairs. Entity A has the entitlement to the ITCs for the acquisitions. Notes:", "Date_of_Decision": "20 January 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 section 11-20 Division 23 Division 58 subsection 58-5(1) section 58-10 paragraph 58-10(1)(b) subsection 184-1(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules Representative of incapacitated entities GST supplies & acquisitions Creditable acquisition", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20126", "Unmatched_Content": "Keywords Goods and services tax GST special rules Representative of incapacitated entities GST supplies & acquisitions Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2008/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and claiming input tax credits where GST ceases to be payable", "Issue": "Is the entity, a recipient of a taxable supply, entitled to any amount of an input tax credit under Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires a taxable supply from a supplier who:", "Decision": "No, the entity is not entitled to any amount of an input tax credit under Division 11 of the GST Act, when it acquires a taxable supply from a supplier who treated the supply as non-taxable, did not charge GST, either did not issue a tax invoice or issued an invoice showing that no GST was payable on the supply, and is now not required to pay GST on that supply due to the application of section 105-50 of Schedule 1 to the TAA. While the entity may have been entitled to an input tax credit, the amount of the input tax credit is now zero due to the operation of section 11-25 of the GST Act.", "Facts": "The entity is registered for goods and services tax (GST). The entity is a recipient of a taxable supply from a supplier, though at the time of the transaction the supplier treated the transaction as non-taxable. The acquisition was a creditable acquisition by the entity in that it was for a creditable purpose and the entity provided consideration for the supply. The price charged by the supplier to the entity did not include an amount of GST. The supplier either did not issue a tax invoice to the entity or only ever issued a tax invoice indicating that no GST was payable on the supply. The Commissioner has not required payment of the additional net amount in respect of the relevant tax period in which the particular transaction occurred to reflect the increased GST payable on the transaction treated as non-taxable by the supplier. More than four years has elapsed since the transaction occurred and since the net amount became payable for the tax period in which the particular transaction occurred. Although the transaction is a taxable supply, the supplier in this circumstance is not required to pay the unpaid GST to the Tax Office because the GST has ceased to be payable due to the operation of section 105-50 of Schedule 1 to the TAA.", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, you are entitled to the input tax credit for any creditable acquisition that you make. Section 11-5 of the GST Act provides that you make a creditable acquisition if: The acquisition was a creditable acquisition by the entity in that it was for a creditable purpose and the entity provided consideration for the supply. Section 11-25 of the GST Act provides that the amount of the input tax credit for a creditable acquisition is equal to the GST payable on the supply. Section 105-50 of Schedule 1 to the TAA provides that any unpaid net amount or amount of indirect tax ceases to be payable four years after it became payable, unless the Commissioner: As section 105-50 of Schedule 1 to the TAA applies to the supplier, any GST that was payable on the supply has now ceased to be payable. As there is now no GST payable on the supply due to the operation of section 105-50 of Schedule 1 to the TAA, and the amount of the input tax credit must be equal to the GST payable on the supply under section 11-25 of the GST Act, the amount of input tax credit the entity is entitled to claim is now zero.", "Date_of_Decision": "8 January 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 11 section 11-5 section 11-20 section 11-25 section 29-10 subsection 29-70(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Creditable acquisition Goods and services tax GST input tax credits & creditable acquisitions GST supplies & acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200816", "Unmatched_Content": "This ATO ID was amended to clarify the ATO position and/or update legislative references. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Notes are numbered; Note 3 updated | Note 3 updated to specify the date from which 4 year period starts | Changes made in line with Bot 20 being changes to section 105.50 post 1 July 2008 and pre 1 July 2012. | Amended for self assessment legislation effective from 1 July 2012. | Keywords Creditable acquisition Goods and services tax GST input tax credits & creditable acquisitions GST supplies & acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2006/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and input tax credits for acquisitions made by the agent of joint venture participants", "Issue": "Is the entity, an operator of a GST joint venture, entitled to input tax credits under subsection 51-35(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for creditable acquisitions made by the agent for the joint venture participants in relation to a project to expand the joint venture enterprise?", "Decision": "No, the entity is not entitled to input tax credits under subsection 51-35(1) of the GST Act on creditable acquisitions made by the agent for the joint venture in relation to a project to expand the joint venture enterprise.", "Facts": "The entity is an operator of a GST joint venture. The GST joint venture conducts an enterprise. An expansion, which is in the course of the joint venture activities, has been undertaken by the joint venture participants. The agent for the joint venture participants was appointed as the manager of the expansion project. The agent's appointment arises under an agreement between the joint venture participants and the agent. Under the agreement, the agent is authorised as agent on behalf of the participants, to enter into contracts and place orders for the acquisition of goods and services. Under the agreement, the entity is appointed as the representative of the joint venture participants in their dealings with the agent. To the extent that the agent requires funds, those funds are paid to the agent by the entity as representative of the joint venture participants. The entity 'cash calls' the funds from the joint venture participants. The agent is not acting as agent for the entity, rather it is the agent of the joint venture participants. The entity and the GST joint venture are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 51-35(1) of the GST Act provides that if the joint venture operator of a GST joint venture makes a creditable acquisition on behalf of another entity that is a participant in the joint venture, in the course of activities for which the joint venture was entered into: This section has the effect despite sections 11-20 and 15-15, which are about who is entitled to input tax credits (subsection 51-35(2) of the GST Act). The acquisitions from third party suppliers in relation to the project to expand the enterprise conducted by the joint venture have been made by the agent in its capacity as agent for the participants in the joint venture. These supplies have not been acquired by the entity in its capacity as operator of the joint venture. All the entity has done is to provide the funds to the agent to enable the acquisitions to be made from third party suppliers. Under the agreement, the acquisitions are made by the agent, as agent for the joint venture participants and not by the entity. As the entity has not made a creditable acquisition on behalf of a joint venture participant it is not entitled to input tax credits under subsection 51-35(1) of the GST Act.", "Date_of_Decision": "20 January 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-20 section 15-15 subsection 51-35(1) subsection 51-35(2) Subdivision 153-B", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2004/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST input tax credits & creditable acquisitions GST special rules Acquisitions and supplies by Agents GST joint ventures GST supplies & acquisitions Creditable acquisition", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200643", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2004/2 | Keywords Goods and services tax GST input tax credits & creditable acquisitions GST special rules Acquisitions and supplies by Agents GST joint ventures GST supplies & acquisitions Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2005/121", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of meals to clients in an in-house dining facility", "Issue": "Is the entity, a business operator, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides meals to clients in an in-house dining facility for no consideration but in accordance with section 32-70 of the Income Tax Assessment Act 1997 (ITAA 1997), it includes $30 in its assessable income for each meal provided?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act, when it provides meals to clients in an in-house dining facility for no consideration but in accordance with section 32-70 of the ITAA 1997, it includes $30 in its assessable income for each meal provided.", "Facts": "The entity is a business operator and is registered for goods and services tax (GST). The entity supplies meals to clients in an in-house dining facility. The entity does not receive any consideration from the client for the provision of the meal. The client is not an associate of the entity. In accordance with section 32-70 of the ITAA 1997, the entity includes $30 per meal as assessable income for meals provided to clients. This allows the entity to claim an income tax deduction for the cost of the meal provided to clients.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: Under the first requirement of section 9-5 of the GST Act, the supply made by the entity must be for consideration. The entity supplies meals to clients in its in-house dining facility. The entity does not receive any consideration from the client for the provision of the meal. However, under section 32-70 of the ITAA 1997, the entity includes $30 in its assessable income, allowing the entity to be eligible to claim a deduction. 'Consideration' is defined in section 9-15 of the GST Act to include any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything. This $30 is the arbitrary amount statutorily deemed for income tax purposes to allow a deduction under the ITAA 1997. The inclusion of $30 in the entity's assessable income is not the receipt of consideration. As such, there is no consideration provided for the entity's supply of the meal in its in-house dining facility. Therefore, the entity is not making a taxable supply under section 9-5 of the GST Act when it provides meals to clients in an in-house dining facility for no consideration but in accordance with section 32-70 of the ITAA 1997, it includes $30 in its assessable income for each meal provided.", "Date_of_Decision": "20 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/122", "Subject_References": "Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005121", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/122", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and entitlement to input tax credits for acquisitions made to supply meals to clients in an in-house dining facility", "Issue": "Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act), for goods and services tax (GST) included in acquisitions made to provide meals to clients in an in-house dining facility when, in accordance with section 32-70 of the Income Tax Assessment Act 1997 (ITAA 1997), the entity includes $30 for each meal in its assessable income?", "Decision": "Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act for GST included in acquisitions made to provide meals to clients in an in-house dining facility when, in accordance with section 32-70 of the ITAA 1997, the entity includes $30 for each meal in its assessable income.", "Facts": "The entity is a business operator and is registered for goods and services tax (GST). The entity made acquisitions to provide meals to clients in an in-house dining facility. The supplies to the entity were taxable supplies. The meal is not provided at a party, reception or other social function. In accordance with section 32-70 of the ITAA 1997, the entity includes $30 per meal as assessable income for meals provided to clients.", "Reasons_for_Decision": "Summary: Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an acquisition is creditable if: The entity made the acquisitions in the course of its business, the supplies to it were taxable supplies and it is registered for GST. Therefore, the requirements in section 11-5 of the GST Act are satisfied. However, Division 69 of the GST Act provides that some acquisitions that are not deductible under the ITAA 1997 are not creditable acquisitions. Subsection 69-5(1) of the GST Act provides that an acquisition is not a creditable acquisition to the extent that it is a 'non-deductible expense'. Of relevance to this situation is paragraph 69-5(3)(f) of the GST Act which provides that entertainment expenses that are not deductible under Division 8 of the ITAA 1997 because of Division 32 of the ITAA 1997 (which deals with entertainment expenses), are non-deductible expenses. Meal entertainment provided to clients on the business premises of the employer is generally not deductible for income tax purposes (section 35-2 of the ITAA 1997). However, item 1.2 in the table in section 32-30 of the ITAA 1997 provides an exception where the meal is provided to an individual (other than an employee) in an in-house dining facility (not at a party, reception or social function) and the employer includes $30 in assessable income in respect of the meal under section 32-70 of ITAA 1997. The entity has provided a meal to a client in an in-house dining facility. The meal is not provided at a party, reception or other social function and, in accordance with section 32-70 of the ITAA 1997, the entity includes $30 per meal as assessable income. Therefore, Division 32 of the ITAA 1997 does not prevent the entity from deducting the expenses under section 8-1 of the ITAA and the acquisitions are not non-deductible expenses. As such, the entity is entitled to an input tax credit under section 11-20 of the GST Act for GST included in acquisitions made to provide meals to clients in an in-house dining facility when, in accordance with section 32-70 of the ITAA 1997, the entity includes $30 for each meal in its assessable income", "Date_of_Decision": "20 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 section 11-20 Division 69 subsection 69-5(1) paragraph 69-5(3)(f)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/121", "Subject_References": "Goods and services tax Non deductible expenses GST supplies & acquisitions Creditable acquisition Entertainment expenses", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005122", "Unmatched_Content": "Keywords Goods and services tax Non deductible expenses GST supplies & acquisitions Creditable acquisition Entertainment expenses"}
{"ATO_ID_Number": "ATO ID 2004/220", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and entitlement to input tax credits for acquisitions that relate to an entity's relative's travel", "Issue": "Is the entity, a sole trader, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for their acquisitions of air travel and accommodation made for a relative who accompanied the entity on a business trip?", "Decision": "No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for their acquisitions of air travel and accommodation made for a relative who accompanied the entity on a business trip.", "Facts": "The entity is a sole trader. The entity went on a business trip and was accompanied by a relative. The entity paid for airfares and accommodation for themselves and their relative. The entity's relative did not assist the entity with their business activities. The entity's relative is not an employee of the entity. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. However, Division 69 of the GST Act provides that some acquisitions that are not deductible under the Income Tax Assessment Act 1997 (ITAA 1997) are not creditable acquisitions. Subsection 69-5(1) of the GST Act provides that an acquisition is not a creditable acquisition to the extent that it is a 'non-deductible expense'. Of relevance to this situation is paragraph 69-5(3)(b) of the GST Act which provides that acquisitions made for a relative's travel that are not deductible under Division 8 of the ITAA 1997 because of section 26-30 of the ITAA 1997 (which deals with relative's travel expenses), are non-deductible expenses. Subsection 26-30(1) of the ITAA 1997 provides that an entity cannot deduct a loss or outgoing they incurred, insofar as it is attributable to a relative's travel, if: The entity made acquisitions of air travel and accommodation for their relative to accompany them on a business trip. However, subsection 26-30(2) of the ITAA 1997 provides that an entity is not stopped from deducting a loss or outgoing if: Also, under subsection 26-30(3) of the ITAA 1997 an entity is not stopped from deducting a loss or outgoing when the expenditure was incurred in providing a fringe benefit. The entity's relative did not assist the entity with their business activities. As the entity's relative is not an employee there is no fringe benefit for the purpose of subsection 26-30(3) of the ITAA 1997 Therefore, the entity is not excluded from the operation of section 26-30 of the ITAA 1997. As such, the entity cannot deduct its acquisitions of air travel and accommodation for its relative under Division 8 of the ITAA 1997. As the entity's acquisitions that relate to their relative are not deductible under Division 8 of the ITAA 1997 (due to the operation of section 26-30 of the ITAA 1997), the entity's acquisitions are non-deductible expenses for the purposes of the GST Act. Therefore, in accordance with subsection 69-5(1) of the GST Act, the entity is not making a creditable acquisition. Accordingly, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for acquisitions of air travel and accommodation made for a relative who accompanied the entity on a business trip.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-20 Division 69 subsection 69-5(1) paragraph 69-5(3)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST input tax credits & creditable acquisitions Non deductible expenses GST supplies & acquisitions Creditable acquisition", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004220", "Unmatched_Content": "Keywords Goods and services tax GST input tax credits & creditable acquisitions Non deductible expenses GST supplies & acquisitions Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2004/302", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and construction of a car park on leased residential premises used for carrying on an enterprise", "Issue": "Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the acquisitions it makes to construct a car park on residential premises that it leases solely for the purpose of operating its business?", "Decision": "Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act for the acquisitions it makes to construct a car park on residential premises that it leases solely for the purpose of operating its business.", "Facts": "The entity is a business operator. The entity operates its business from residential premises that it leases from a landlord. The entity does not make supplies that are input taxed. The entity has approval from the landlord to construct a car park on the residential premises. The car park is being built to provide parking facilities to be used solely by the entity's staff and customers. The entity pays for the acquisition of the goods and services required to construct the car park. The entity does not receive any reimbursement from the landlord either directly (for example, a direct payment) or indirectly (for example, a reduction in the lease payments) for these acquisitions. The entity is registered for goods and services tax (GST). The supply of the goods and services to the entity for the construction of the car park were taxable supplies under section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: The first requirement in section 11-5 of the GST Act is that the entity makes the acquisition solely or partly for a creditable purpose. Under subsection 11-15(1) of the GST Act, an entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise. The entity is constructing a car park to provide car parking facilities to be used solely by its staff and customers. The entity is constructing the car park on the leased residential premises, from which the entity operates its business. Therefore, the entity acquires the goods and services in the course of conducting its enterprise. However, subsection 11-15(2) of the GST Act provides that an entity does not acquire the thing for a creditable purpose to the extent that: The entity acquires goods and services in the course of conducting its enterprise, and they are not of a private or domestic nature. Further, the acquisition of the goods and services to construct the car park do not relate to making supplies by the entity that would be input taxed. As a result, subsection 11-15(2) of the GST Act does not apply and the acquisitions are for a creditable purpose. The goods and services that the entity acquires in the construction of the car park were taxable supplies made to the entity under section 9-5 of the GST Act. The entity has paid for all of the acquisitions and has not been reimbursed by the landlord in any way. In addition, the entity is registered for GST. As such, the requirements of section 11-5 of the GST Act are satisfied and the entity is making a creditable acquisition when it acquires goods and services associated with constructing the car park. Therefore, the entity is entitled to an input tax credit under section 11-20 of the GST Act when it acquires goods and services to construct a car park on residential premises that it leases for the purpose of operating its business.", "Date_of_Decision": "26 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 section 11-15 subsection 11-15(1) subsection 11-15(2) section 11-20 section 40-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Taxable supply Creditable acquisition GST input tax credits & creditable acquisitions Creditable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004302", "Unmatched_Content": "This ATO ID was amended to clarrify the ATO position. | Keywords Goods and services tax Taxable supply Creditable acquisition GST input tax credits & creditable acquisitions Creditable purpose"}
{"ATO_ID_Number": "ATO ID 2004/505", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and entitlement to an input tax credit for acquisitions that are used to make supplies to customers who provide entertainment", "Issue": "Is the entity, a local council, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for acquisitions it makes which it then supplies to a customer who uses the goods and services to provide entertainment?", "Decision": "Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act, for acquisitions it makes which it then supplies to a customer who uses the goods and services to provide entertainment.", "Facts": "The entity is a local council. The entity makes acquisitions solely for a creditable purpose. The entity provides consideration for the acquisitions. The supply of the goods and services to the entity is a taxable supply. The entity supplies these goods and services to a customer. The customer uses the goods and services to provide entertainment to its clients, guests and employees. The expenses incurred by the customer in providing the entertainment are non-deductible expenses as a result of the operation of Division 32 of the Income Tax Assessment Act 1997 (ITAA 1997). The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes. Under section 11-5 of the GST Act, an entity makes a creditable acquisition if: The entity provides consideration for the acquisitions which are solely for a creditable purpose. The supply of the goods and services to the entity is a taxable supply. In addition, the entity is registered for GST. Accordingly, all of the requirements of section 11-5 of the GST Act are met. However, section 69-5 of the GST Act provides that an acquisition is not a creditable acquisition to the extent the acquisition is a non-deductible expense. An acquisition is a non-deductible expense if it is not deductible under Division 8 of the ITAA 1997 because of, amongst other things, Division 32 of the ITAA 1997 (paragraph 69-5(3)(f) of the GST Act). Division 32 of the ITAA 1997 prohibits, with certain exceptions, expenses an entity incurs in respect of providing entertainment from being deductible under Division 8 of the ITAA 1997. Therefore, an acquisition an entity makes in providing entertainment is not a creditable acquisition where the expenditure is not deductible because of Division 32 of the ITAA 1997. The entity makes acquisitions for the purpose of supplying goods and services to a customer who uses the goods and services to provide entertainment. That is, it is the customer who uses the goods to provide entertainment, not the entity. As the entity has not used the goods and services to provide entertainment, their deductible expenditure incurred to make the acquisitions is not affected by the operation of Division 32 of the ITAA 1997. Therefore, section 69-5 of the GST Act does not stop the entity's acquisitions from being creditable acquisitions. As all the elements of section 11-5 of the GST Act are met, and section 69-5 of the GST Act does not apply, the entity is entitled to an input tax credit under section 11-20 of the GST Act for acquisitions that it makes which it then supplies to a customer who uses the goods and services to provide entertainment.", "Date_of_Decision": "22 October 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 section 11-20 section 69-5 paragraph 69-5(3)(f)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST input tax credits & creditable acquisitions GST supplies & acquisitions Creditable acquisition Deductions & expenses Entertainment expenses", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004505", "Unmatched_Content": "Keywords Goods and services tax GST input tax credits & creditable acquisitions GST supplies & acquisitions Creditable acquisition Deductions & expenses Entertainment expenses"}
{"ATO_ID_Number": "ATO ID 2002/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the acquisition of goods to be provided as gifts", "Issue": "Is the entity, a school, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it purchases goods that will be provided to members of the school community?", "Decision": "Yes, the entity is entitled to an input tax credit under section 11-20 of the GST Act when it purchases goods that will be provided to members of the school community.", "Facts": "The entity is a school. The entity purchases goods that will be provided to members of the school community. The supply of the goods to the entity is a taxable supply under section 9-5 of the GST Act. Gifts are provided to members of the school community: In this case, the support of parents, past students and friends is fundamental to the school's existence. Gifts are given to encourage such people to support the school, and make donations that lead to the construction of buildings and facilities. The purchase of the goods does not relate to making supplies that would be input taxed. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. Under section 11-5 of the GST Act, an entity makes a creditable acquisition if: Firstly, it needs to be determined whether the entity acquires the goods for a creditable purpose. According to section 11-15 of the GST Act, an entity acquires a thing for a creditable purpose, to the extent it acquires it in carrying on its enterprise. Activities which foster the fundraising potential of the entity are done so in the carrying on of the entity's enterprise. In this case, gifts are given to encourage parents, past students and friends to support the school by making donations that lead to the construction of buildings and facilities which are essential for the school's progress. As such, by giving the gifts the entity is improving its fundraising potential. Therefore, the goods are purchased in carrying on its enterprise. However, under section 11-5 of the GST Act, an entity does not acquire the goods for a creditable purpose to the extent that: As making gifts is a way for the school to create goodwill amongst the people it deals with, those acquisitions are used for a creditable purpose. That is, the acquisitions of the gifts are not for a private or domestic purpose, nor do the acquisition relate to making supplies that are input taxed. As such, the acquisition satisfies paragraph 11-5(a) of the GST Act. In addition, the entity is registered for GST. The supply of the goods is a taxable supply to the entity and the entity provides consideration for the goods. Therefore, the entity is making a creditable acquisition under section 11-5 of the GST Act. Therefore, the entity acquires the goods for a creditable purpose under section 11-15 of the GST Act. As such, the acquisition satisfies paragraph 11-5(a) of the GST Act. In addition, the entity is registered for GST. The supply of the goods is a taxable supply to the entity and the entity provides consideration for the goods. Therefore, the entity is making a creditable acquisition under section 11-5 of the GST Act. As the entity is making a creditable acquisition, the entity is entitled to an input tax credit under section 11-20 of the GST Act when it purchases goods that will be provided to a member of the school community. Where acquisitions are made for the purpose of an input taxed fundraising event, the acquisition will not be for a creditable purpose, and an entity will not be entitled to an input tax credit under section 11-20 of the GST Act for that acquisition.]", "Date_of_Decision": "28 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 paragraph 11-5(a) section 11-15 section 11-20 section 40-160", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST supplies & acquisitions Creditable acquisition Creditable purposes", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021", "Unmatched_Content": "Keywords Goods & services tax GST supplies & acquisitions Creditable acquisition Creditable purposes"}
{"ATO_ID_Number": "ATO ID 2002/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and input tax credits for legal expenses incurred in recovering equity from a dissolved partnership", "Issue": "Is the entity, a sole trader, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for legal expenses incurred in recovering its equity from a dissolved partnership, in which it was a partner?", "Decision": "No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for legal expenses incurred in recovering its equity from a dissolved partnership, in which it was a partner.", "Facts": "The entity carries on an enterprise in its current capacity as a sole trader and is registered for goods and services tax (GST). The entity was a partner in a partnership. The entity resigned from the partnership and incurred legal expenses to recover its equity from the dissolved partnership. The supply of the legal services to the entity was a taxable supply under section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to the input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: The first requirement in section 11-5 of the GST Act is that the entity makes the acquisition solely or partly for a creditable purpose. Subsection 11-15(1) of the GST Act provides that an entity acquires a thing for a creditable purpose to the extent that it acquires the thing in carrying on its enterprise. Therefore, the acquisition of the legal services is for a creditable purpose if the entity acquires the services in carrying on its enterprise. The entity currently carries on an enterprise in its capacity as a sole trader. The entity did not acquire the legal services in carrying on this enterprise. However, it is necessary to determine whether the legal expenses were acquired by the entity in carrying on any other enterprise. In this case, the entity resigned from the partnership and incurred the legal expenses for the purpose of recovering its equity from the dissolved partnership. For GST purposes, the partnership is the entity that carries on the enterprise of the partnership and not the partners themselves. In addition, the entity's activities as a partner in a partnership do not amount to carrying on an enterprise in its own right. Therefore, the entity itself was not carrying on an enterprise when it was a partner in the partnership. Accordingly, the legal expenses were not incurred in the course of carrying on an enterprise and as such, the requirement in paragraph 11-5(a) of the GST Act is not satisfied. As the entity is not making a creditable acquisition, it is not entitled to any input tax credits for the legal expenses incurred in recovering its equity from a dissolved partnership, in which it was a partner.", "Date_of_Decision": "2 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 paragraph 11-5(a) subsection 11-15(1) section 11-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST supplies & acquisitions Creditable acquisition Creditable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200211", "Unmatched_Content": "Keywords Goods & services tax GST supplies & acquisitions Creditable acquisition Creditable purpose"}
{"ATO_ID_Number": "ATO ID 2002/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and input tax credits for payment of superannuation supervisory levy", "Issue": "Is the entity, a trustee of a superannuation fund, entitled to an input tax credit (reduced or otherwise) under Division 11 or Division 70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it pays the annual superannuation supervisory levy?", "Decision": "No, the entity is not entitled to an input tax credit (reduced or otherwise) under section Division 11 or Division 70 of the GST Act when it pays the annual superannuation supervisory levy.", "Facts": "The entity is a trustee of a superannuation fund. The entity, in its capacity as trustee for the superannuation fund, pays to the Australian Taxation Office the annual superannuation supervisory levy when lodging documents in compliance with regulatory requirements under the Superannuation Industry (Supervision) Act 1993. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit (reduced or otherwise), if it makes a creditable acquisition. One of the requirements for an entity to make a creditable acquisition is that the entity must provide, or be liable to provide consideration for the supply (paragraph 11-5(c) of the GST Act). Subsection 81-5(2) of the GST Act provides that the payment of any Australian tax, fee or charge specified in a written determination of the Treasurer is not the provision of consideration. When the entity pays the superannuation supervisory levy, the entity is making a payment of an Australian tax, fee or charge, as the entity is paying a fee imposed under an Australian law and payable to an Australian government agency (section 195-1 of the GST Act). The superannuation supervisory levy is listed at item 14.22 in the table in part 1 (Commonwealth) of Schedule 1 of the A New Tax System (Goods and Services Tax) (Exempt Taxes Fees and Charges) Determination 2008 (No. 1). As such, the payment of the superannuation supervisory levy does not represent the provision of consideration for a supply due to the operation of subsection 81-5(2) of the GST Act. Therefore, the entity is not providing, nor is the entity liable to provide consideration for a supply. The entity is not making a creditable acquisition under section 11-5 of the GST, and is therefore not entitled to any amount of input tax credit under Division 11 or Division 70 of the GST Act when it pays the superannuation supervisory levy.", "Date_of_Decision": "30 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 11 section 11-5 paragraph 11-5(c) section 11-20 Division 70 subsection 81-5(2) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax Reduced credit acquisitions Input taxed supplies GST financial supplies Creditable acquisition", "Case_References": "", "Other_References": "A New Tax System (Goods and Services Tax) (Exempt Taxes Fees and Charges) Determination 2008 (No. 1) Schedule 1 Part 1 table item 14.22", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200278", "Unmatched_Content": "Keywords Goods & services tax Reduced credit acquisitions Input taxed supplies GST financial supplies Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2002/438", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and entitlement to input tax credits for acquisitions made prior to registration", "Issue": "Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for acquisitions made to establish its business before it registered, or became required to be registered, for goods and services tax (GST)?", "Decision": "No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for acquisitions made to establish its business before it registered, or became required to be registered, for GST. However, the entity is entitled to a decreasing adjustment under section 137-5 of the GST Act for stock on hand at the time it registers where the stock is for the purposes of sale or exchange, or for use as raw materials.", "Facts": "The entity is a business operator. The entity makes acquisitions to establish its business. These acquisitions are made before it registers, or becomes required to be registered, for GST. On the day that the entity registers for GST, it holds some of these acquisitions as stock items for the purpose of sale. The entity has not had an increasing adjustment under Division 138 of the GST Act for the stock it has on hand. The entity is not a company.", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to the input tax credit for any creditable acquisition that it makes. Section 11-5 of the GST Act provides that an entity makes a creditable acquisition if: The entity was not registered or required to be registered for GST when it made the acquisitions to establish its business. Therefore, the requirement in paragraph 11-5(d) of the GST Act is not met and the entity is not entitled to input tax credits for the acquisitions. However, section 137-5 of the GST Act provides that an entity has a decreasing adjustment for stock on hand if: The entity has registered for GST and holds stock for the purpose of sale. This stock was purchased for use in the entity's enterprise and is therefore acquired for a creditable purpose (section 11-15 of the GST Act). The entity is not entitled to an input tax credit for the acquisitions and has not had an increasing adjustment under Division 138 of the GST Act. Therefore, although the entity is not entitled to an input tax credit under section 11-20 of the GST Act for establishment acquisitions, it does have a decreasing adjustment under section 137-5 of the GST Act for the stock it has on hand for the purpose of sale when it registers for GST.", "Date_of_Decision": "28 March 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 paragraph 11-5(d) section 11-15 section 11-20 Division 60 section 137-5 subsection 137-5(3) Division 138", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST registration GST supplies & acquisitions", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002438", "Unmatched_Content": "Keywords Goods & services tax GST registration GST supplies & acquisitions"}
{"ATO_ID_Number": "ATO ID 2008/124", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and cremated remains", "Issue": "Is the entity, a crematorium, packaging and transporting 'goods' under the definition in section 195-1 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sends cremated human remains overseas?", "Decision": "Yes, the entity is packaging and transporting 'goods' under the definition in section 195-1 of the GST Act when it sends cremated human remains overseas.", "Facts": "The entity is a crematorium. The entity packages and sends cremated remains overseas. This service is separate to the cremation and associated funeral services.", "Reasons_for_Decision": "Summary: Under section 195-1 of the GST Act, 'goods' means 'any form of tangible personal property'. Common law provides that the body of a deceased is not considered the personal property of another. Rather, a duty of care is conferred upon a person, by virtue of their relationship with the deceased, to give the deceased a decent burial. Doodeward v. Spence (1908) 6 CLR 406 ( Doodeward ) is authority for an exception to this view in that where there has been an application of work and skill on the deceased that can differentiate the body from a corpse awaiting burial a human body is capable of becoming the subject of property. Byrne J, in Leeburn v. Derndorfer and Another (2004) 14 VR 100 at paragraph 27 compares ashes as being similar to the preserved body in Doodeward : ...the application of fire to the cremated body is to be seen as the application to it of work or skill which has transformed it from flesh and blood to ashes, from corruptible material to material which is less so. The legal consequence of this accords with what I apprehend to be the community attitude and practice. Ashes which have in this way been preserved in specie are the subject of ordinary rights of property, subject to one possible qualification. In this way, ownership in the ashes may pass by sale or gift or otherwise. The only qualification, which, if it exists, may require some working out, arises from the fact that the ashes are, after all, the remains of a human being and for that reason they should be treated with appropriate respect and reverence. So long as the cremated remains are not dispersed or otherwise lose their physical character as cremated remains, they may be owned and possessed and therefore be considered tangible personal property. Accordingly, for the purposes of the GST Act, services supplied by the entity in packaging and transporting the cremated remains can be treated as services in dealing with goods as per the definition in section 195-1 of the GST Act. In making this conclusion it is not necessary to consider who has the proprietary interest in the cremated remains.", "Date_of_Decision": "17 September 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-355 table item 5 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Export of goods Goods and services tax GST exports GST international services", "Case_References": "Doodeward v. Spence (1908) 6 CLR 406", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008124", "Unmatched_Content": "Keywords Export of goods Goods and services tax GST exports GST international services"}
{"ATO_ID_Number": "ATO ID 2005/354", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of domain name registration", "Issue": "Is the entity, a non-resident registrar of domain names, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies a domain name registration to an Australian resident entity that is registered for goods and services tax (GST)?", "Decision": "No. The non-resident entity is not making a taxable supply under section 9-5 of the GST Act when it supplies a domain name registration to an Australian resident customer through its website. The supply is not connected with Australia.", "Facts": "The entity is a non-resident registrar of .au domain names. It does not have a permanent establishment in Australia. It is not registered for GST. The entity supplies domain name registrations through its website from outside Australia for Australian resident customers who are in Australia. When registering a domain name, the entity: The entity charges the Australian resident customer a fee for the domain name registration. The customer receives use of that domain name for two years. The Australian resident customer is not granted a proprietary right when it receives a domain name registration. The customer is entitled to transfer its registration to another domain name registrar and becomes responsible for administering the registration.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that a taxable supply is made where: However, the supply is not a taxable supply if it is GST-free or input taxed. The entity makes the supply of a domain name registration for consideration and in the course of carrying on its enterprise. Accordingly, the first two requirements of section 9-5 of the GST Act are met. The third requirement is that the entity must make a supply that is connected with Australia. Section 9-25 of the GST Act defines supplies connected with Australia referring to supplies of goods, real property and 'anything else'. The supply of a domain name registration is not the supply of goods or real property. Subsection 9-25(5) of the GST Act provides that a supply other than goods or real property is connected with Australia if: The entity does not carry on an enterprise in Australia. Furthermore, the supply is not a right or option to acquire another thing. Therefore, the supply will only be connected with Australia to the extent that the domain name registration is done in Australia. The meaning of 'done' can mean, for example, performed, executed, completed or finished depending on the nature of the thing supplied (paragraph 64 of Goods and Services Tax Ruling GSTR 2000/31). Consequently, it is important to characterise a supply in determining where it is done. The supply of a domain name registration is the supply of a service. This service includes submitting the customer domain name application to the registry and providing associated activities required in managing that registration. The supply of a service is done where that service is performed (paragraph 65 of GSTR 2000/31). The domain name registration services are performed outside Australia where the entity carries on its enterprise. Accordingly, the supply of this service is not connected with Australia. This is because the entity performs the registration services outside Australia, where it carries on its enterprise. The fourth requirement of section 9-5 of the GST Act is that the entity is registered or required to be registered for GST. As the entity is not registered, the fourth requirement can be satisfied only if the entity is required to be registered. Under section 23-5 of the GST Act, an entity is required to be registered if it carries on an enterprise and its GST turnover meets the registration turnover threshold. Subsections 188-15(3) and 188-20(3) of the GST Act provide that in working out the GST turnover supplies that are not connected with Australia are disregarded. The entity is not required to be registered because its does not have a GST turnover for the purposes of section 23-5 of the GST Act. The requirements of section 9-5 of the GST Act that the supply is connected with Australia and that the entity be registered or required to be registered are not satisfied. Therefore, the entity does not make a taxable supply under section 9-5 when it supplies domain name registration services to an Australian resident customer.", "Date_of_Decision": "12 December 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-25(5) section 23-5 subsection 188-15(3) subsection 188-20(3)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/31", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies and acquisitions Taxable supply GST international services Connected with Australia Reverse charge on supplies made by non-resident GST registration Required to be registered GST turnover GST turnover threshold", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005354", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/31 | Keywords Goods and services tax GST supplies and acquisitions Taxable supply GST international services Connected with Australia Reverse charge on supplies made by non-resident GST registration Required to be registered GST turnover GST turnover threshold"}
{"ATO_ID_Number": "ATO ID 2004/824", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of goods by a non-resident supplier to a resident distributor where the non-resident supplier is responsible for the installation of goods when the resident distributor on-sells the goods to an end-user", "Issue": "Is the entity, a non-resident, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act as the supply of goods and installation services is connected with Australia.", "Facts": "The entity is a non-resident that is registered for goods and services tax (GST). The entity has entered into a distribution agreement with an Australian distributor. The distributor purchases the entity's goods and imports them into Australia. Under the terms of the agreement, the entity ships the goods on a free-on-board basis (FOB). The distributor is named as the owner of the goods for Customs purposes and makes a taxable importation of the goods. The distributor on-sells the goods to end-users in Australia however, the entity's Australian branch installs the goods for the end-user. There is no additional consideration paid to the entity's branch by either the distributor or the end-user for the installation of the goods. The cost of the installation is embedded in the price paid by the distributor to the entity for the goods. There is no agency relation between the distributor and the entity. The entity's branch is not registered as a GST branch under Division 54 of the GST Act. There is no separate agreement executed directly between the non-resident supplier and the end-user. The entity's supply of goods is not a GST-free supply or an input taxed supply.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity supplies goods to its Australian distributor for consideration. The supply is in the course of an enterprise that it carries on and it is registered for GST. Furthermore, the supply is not GST-free or input taxed. Therefore, if the entity's supply is connected with Australia, it will be a taxable supply under section 9-5 of the GST Act. Section 9-25 of the GST Act defines when a supply is 'connected with Australia' and makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property. The entity is supplying goods, inclusive of installation services, to the distributor. Subsection 9-25(3) of the GST Act provides that a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: Under the terms of the agreement, the entity ships the goods on a FOB basis and the distributor is named as the owner of the goods for Customs purposes and makes taxable importation of the goods. As such, it is the distributor and not the entity who imports the goods into Australia and paragraph 9-25(3)(a) of the GST Act does not apply. Although the distributor subsequently supplies the goods to an end-user, it is the entity's Australian branch that actually installs the goods for the end-user. There is no additional consideration paid to the entity's branch, by either the resident distributor or the end-user for the installation of the goods as the cost of the installation is embedded in the price paid by the distributor to the entity for the goods. Notwithstanding that the goods are actually installed only when they are subsequently supplied by the distributor to the end-user, it is the entity, through its Australian branch, that installs the goods that it has supplied and which have been brought into Australia. As such, the supply of goods by the entity satisfies the requirement under paragraph 9-25(3)(b) of the GST Act and is connected with Australia. Therefore, the entity's supply is connected with Australia and the entity is making a taxable supply under 9-5 of the GST Act.", "Date_of_Decision": "21 June 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-25 subsection 9-25(3) paragraph 9-25(3)(a) paragraph 9-25(3)(b) paragraph 9-25(5)(a) section 9-40 section 11-20 section 13-15 Division 15", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/31", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST imports Creditable importations Taxable importations GST imports and exports Input tax credits GST international services Connected with Australia GST supplies & acquisitions Creditable purpose GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004824", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/31 | Keywords Goods and services tax GST imports Creditable importations Taxable importations GST imports and exports Input tax credits GST international services Connected with Australia GST supplies & acquisitions Creditable purpose GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/948", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of goods imported by a recipient where the non-resident supplier subsequently installs the goods in Australia under a separate contract", "Issue": "Is the entity, a non-resident, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract.", "Facts": "The entity is a non-resident that is registered for goods and services tax (GST). Under a sale of goods contract, the entity sold goods to an Australian customer for consideration. The supply of the goods is not GST-free or input taxed. The sale was on Delivered Ex Quay (DEQ) terms, where the entity was responsible for discharging the goods at the quay (port of destination) and the customer was responsible for clearing the goods for importation and paying for all formalities, duties, taxes and other charges upon importation. At a later date, both parties entered into a separate contract where the entity agreed to install the goods in Australia for the customer. This separate contract was entered into before the goods were imported into Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity sold goods to a customer, for consideration, in the course of an enterprise that it carries on and it is registered for GST. Furthermore, the supply is neither GST-free nor input taxed. Therefore, if the entity's supply is connected with Australia, it will be a taxable supply. Subsection 9-25(3) of the GST Act provides that a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: Paragraph 73 of the Goods and Services Tax Ruling GSTR 2003/15 provides that when a supplier causes the goods to be brought to Australia, the supplier does not import the goods into Australia where the customs formalities for the importation of the goods are completed by the entity that acquires the goods from the supplier. The goods are sold by the entity on DEQ terms. The DEQ terms requires the customer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. As such, the entity does not import the goods into Australia and paragraph 9-25(3)(a) of the GST Act is not satisfied. However, under paragraph 9-25(3)(b) of the GST Act, a supply of goods being brought to Australia is connected with Australia if the supplier installs or assembles the goods in Australia. This provision applies broadly to circumstances where a supply of goods to Australia involves the supplier installing or assembling the goods in Australia and does not only apply to the supply of 'installed goods'. This ensures that the GST treatment of goods being brought to Australia is identical regardless of whether installed goods are supplied or the parties split the supply of the goods and the supply of installation services into separate contracts. At a later date and before the goods were imported into Australia, both parties entered into a separate contract where the entity agreed to install the goods in Australia. Notwithstanding that the parties enter into separate contracts, paragraph 9-25(3)(b) of the GST Act applies because the entity agrees to install, in Australia, the goods that it supplied and that were brought to Australia. As such, the supply of the goods is connected with Australia. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract.", "Date_of_Decision": "8 June 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-25 subsection 9-25(3) paragraph 9-25(3)(a) paragraph 9-25(3)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST international services Connected with Australia GST supplies & acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004948", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST international services Connected with Australia GST supplies & acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/577", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of software by a non-resident to a Australian resident customer via e-mail", "Issue": "Is the entity, a non-resident supplier of software, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies software to an Australian resident customer via e-mail?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies software to an Australian resident customer via e-mail.", "Facts": "The entity is a non-resident supplier of software. The entity sells software to an Australian resident customer via e-mail from outside of Australia. The entity has a permanent establishment with one employee in Australia. This employee has the responsibility to secure resellers of the software in Australia through promotional activities. After negotiation activities by the employee, the Australian resident customer places the purchase order directly with the entity and the entity makes the supplies to the Australian resident customer directly via e-mail. The employee in Australia does not handle any of the entity's products or invoicing activities. The entity receives payment directly from the Australian resident customer for the supply of the software. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that a taxable supply is made where: However, the supply is not a taxable supply if it is GST-free or input taxed. The entity sells software to the Australian resident customer in the course of an enterprise that it carries on. The entity receives payment directly from the Australian resident customer for the supply of the software. The entity is registered for GST. Therefore, the requirements in paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act are satisfied. Furthermore, the supply of software to the Australian resident customer is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Accordingly, it needs to be determined whether the supply is connected with Australia (paragraph 9-5(c) of the GST Act). Section 9-25 of the GST Act defines when a supply is connected with Australia. For the purposes of determining whether a supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property. As the supply of software via e-mail is not a supply of goods or real property, subsection 9-25(5) of the GST Act applies in determining whether the supply is connected with Australia. Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if either: The entity supplies the software to the Australian customer via e-mail from outside of Australia. As such, the supply is not connected with Australia under paragraph 9-25(5)(a) of the GST Act. Therefore, it is necessary to determine whether the supply is connected with Australia under paragraph 9-25(5)(b) of the GST Act. Under paragraph 9-25(5)(b) of the GST Act, a supply is connected with Australia if the supplier makes the supply through an enterprise that the supplier carries on in Australia. Under subsection 9-25(6) of the GST Act, an entity carries on an enterprise in Australia if the enterprise is carried on through: The entity has a permanent establishment in Australia. However, for a supply to be connected with Australia under paragraph 9-25(5)(b) of the GST Act, a connection must be established between the Australian permanent establishment and the supply (paragraph 84 of Goods and Services Tax Ruling GSTR 2000/31). The permanent establishment has an employee in Australia. This employee has the responsibility to secure resellers of the software in Australia through promotional activities. Discussing the product and the addressing of potential buyers' concerns and needs constitute a substantial part of the supply of the software. The fact that the orders are not specifically made and delivered through this employee does not necessarily mean that the supply does not satisfy paragraph 9-25(5)(b) of the GST Act. It is considered that the activities of the employee in Australia established a connection between the Australian permanent establishment and the supply. Therefore, the entity is making the supply through an enterprise that it carries on in Australia and the supply is connected with Australia under paragraph 9-25(5)(b) of the GST Act. As all the requirements in section 9-5 of the GST are satisfied, the entity is making a taxable supply when it supplies software to an Australian resident customer via e-mail.", "Date_of_Decision": "28 February 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) paragraph 9-5(b) paragraph 9-5(c) paragraph 9-5(d) subsection 9-25(5) paragraph 9-25(5)(a) paragraph 9-25(5)(b) subsection 9-25(6) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "GSTR 2000/31", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax Connected with Australia Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001577", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2000/31 | Keywords Goods & services tax Connected with Australia Taxable supply"}
{"ATO_ID_Number": "ATO ID 2010/196", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agricultural managed investment scheme - supply of forestry services", "Issue": "Are payments made by participants in a forestry managed investment scheme consideration for:", "Decision": "The payments made are consideration for a taxable supply of forestry services under Division 9 of the GST Act.", "Facts": "The scheme: Investors become participants in the scheme by entering into the scheme constitution and associated agreements with the responsible entity. The constitution provides the responsible entity of the scheme is to be appointed as manager of the scheme ('the manager'). The scheme agreements relevantly provide that: The management fees and the lease payments are the only payments made by the participant.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Section 195-1 of the GST Act defines 'consideration' for a supply or acquisition as meaning any consideration, within the meaning given by sections 9-15 and 9-17 of the GST Act, in connection with the supply or acquisition. In particular, subsection 9-15(1) of the GST Act defines 'consideration' as including: Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (paragraphs 49, 64-72), Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance payments (paragraphs 15-16) and Goods and Services Tax Ruling GSTR 2009 / 3 Goods and services tax : cancellation fees (paragraphs 98-99) explain the Commissioner's views on determining whether there is a sufficient connection between a payment and a supply. In determining whether there is a sufficient connection, regard needs to be had to the true character of the transaction. An arrangement between parties will be characterised not merely by the description which parties give to the arrangement, but by looking at all of the transactions entered into, and the circumstances in which the transactions are made. As stated in the facts, the clauses of scheme agreements specifically provide that the participant is granted a lease over a particular parcel of land that includes (amongst other things) the right to enter the land and establish, maintain and harvest a crop of trees; and that the participant may appoint the manager as an independent contractor to provide forestry services in relation to that land. The agreements also provide that in consideration of the manager agreeing to carry out such services, the participant agrees to pay to the manager the management fee. The terms of the constitution and other scheme agreements therefore indicate the supply of the forestry services is for consideration. Further, having regard to the circumstances in which the transaction is made, we consider the true character of the transaction is one of a supply of forestry services to a holder of a lease over forestry land for a fee. Therefore, we conclude there is sufficient connection between the supply of the forestry services and the management fee, such that the fee is consideration for the supply of services for the GST. Given the other requirements of section 9-5 of the GST Act are satisfied, we conclude the manager makes a taxable supply of the forestry services to the grower.", "Date_of_Decision": "26 October 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 9 section 9-5 section 9-15 subsection 9-15(1) section 9-17 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6 | Goods and Services Tax Ruling GSTR 2009/3 | Goods and Services Tax Ruling GSTR 2012/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/129 | ATO ID 2010/197 | ATO ID 2010/198 | ATO ID 2010/199", "Subject_References": "Goods and services tax Taxable supply Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010196", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Inserting 'section 9-17'. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. Goods and Services Tax Ruling GSTR 2012/2 Goods and services tax: financial assistance payments (paragraphs 15-16). [Note: GSTR 2000/11 was replaced by GSTR 2012/2 with effect from 31/5/2012.] | Related Public Rulings (including Determinations) | Reference to Goods and Services Tax Ruling GSTR 2000/11 deleted. Reference to Goods and Services Tax Ruling GSTR 2012/2 added. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6 Goods and Services Tax Ruling GSTR 2009/3 Goods and Services Tax Ruling GSTR 2012/2 | Keywords Goods and services tax Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2008/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the transfer between funeral providers of rights and obligations under a prepaid funeral agreement: the original funeral provider accounts on a basis other than cash (non-cash basis)", "Issue": "Are there any goods and services tax (GST) implications when rights and obligations under a prepaid funeral agreement are transferred from the original funeral provider, who accounts on a non-cash basis, to the new funeral provider who accounts on a non-cash basis?", "Decision": "No, there are no GST implications when rights and obligations under a prepaid funeral agreement are transferred from the original funeral provider, who accounts on a non-cash basis, to the new funeral provider who accounts on a non-cash basis.", "Facts": "A funeral provider and a client enter into a prepaid funeral agreement (the agreement) on or after 1 July 2000. The funeral provider is registered for GST and accounts on a non-cash basis. Under the agreement, the funeral provider is required to supply a funeral service to the client at some future point in time. The consideration for the right to receive the future funeral service is paid as follows: The client's benefit entitlement to the amount in the independent investment fund (and any interest earned on the funds) is assigned to the funeral provider. The funeral provider is making a supply of a right to receive a funeral service for consideration and this is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) (assuming that the other requirements of section 9-5 are met). The funeral provider remits GST on the price of the funeral service agreed to in the agreement as the amount is attributable under Division 29 of the GST Act to the tax period in which any of the consideration for the supply is received or an invoice is issued. The funeral provider receives the total amount invested in the independent investment fund after a death certificate has been presented to the fund and the funeral service has been provided. When the funeral service is provided it is not considered to be a taxable supply as no additional consideration is received. After the agreement is made, the client decides to transfer the rights and obligations under the agreement from the original funeral provider to a new funeral provider. The new funeral provider is registered for GST and accounts on a non-cash basis. The client, the original funeral provider and the new funeral provider mutually agree in writing to the transfer. The client and the new funeral provider do not enter into a new prepaid funeral agreement. There are no upgrades or variations to the funeral service that was agreed to with the original funeral provider. The independent investment fund is notified of the transfer. The entitlement to the amount in the independent investment fund (and any interest earned on the funds) is assigned to the new funeral provider.", "Reasons_for_Decision": "Summary: The transfer of the rights and obligations under the agreement does not result in changes to the terms and conditions that were agreed to between the original funeral provider and the client on entry into the agreement. The transfer does not cancel the agreement. The new funeral provider agrees to undertake all the rights and obligations under the original terms and conditions of the agreement. That is, in place of the original funeral provider the new funeral provider undertakes to provide a funeral service, at some future point of time, according to the terms and conditions of the agreement. When the transfer occurs, the new funeral provider does not make a taxable supply of a right to receive a funeral service to the client. That taxable supply was made by the original funeral provider, who has already remitted the GST for the supply. Further, when the new funeral provider supplies the funeral service, the supply will not be taxable as it is not made for consideration. As a result, when the rights and obligations under the agreement are transferred there are no GST implications.", "Date_of_Decision": "28 February 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 29", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services Tax GST supply Funeral industry", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200841", "Unmatched_Content": "This ATO ID was amended to clarrify the ATO position and/or update legislative references. | Keywords Goods and services Tax GST supply Funeral industry"}
{"ATO_ID_Number": "ATO ID 2004/362", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and transfer of annual leave, annual leave loading, flextime and sick leave entitlements", "Issue": "Does the entity, a government agency employer, make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it receives a payment in respect of a new employee's annual leave, annual leave loading, flextime and sick leave which accrued with the employee's former government agency employer?", "Decision": "No, the entity employer does not make a taxable supply under section 9-5 of the GST Act as the entity does not make a supply.", "Facts": "The entity is a government agency employer. The entity employs a person who was previously employed by another government agency. The entity receives a payment from the other government agency that represents the employee's accrued leave and other entitlements. Provisions within the relevant legislation or awards (statute) explain the obligations of government agencies in connection with the transfer of an employee from one government agency to another government agency. When an employee transfers to another government agency, the relevant statute imposes: The relevant statute also imposes an obligation on the former employer to make a payment or contribution to the new employer in respect of leave accrued to the employee at the time of transfer. In other words, the former employer bears a liability to the new employer for the period the employee was employed by the former employer for the following: The transfer of flextime is statutorily covered by separate legislation . The relevant legislation stipulates that a Minister may give directions and issue guidelines requiring the transfer of funds between public sector employers for the purpose of making allowance and appropriate adjustments for the transfer of employees' leave entitlements. There are no separate contractual arrangements between the new and former employers. All that occurs is a payment of money. The entity and the other government agency are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: One of the requirements of a taxable supply is that an entity makes a supply (paragraph 9-5(a) of the GST Act). The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. 'Supply' refers to 'something which passes from one entity to another'. Other jurisdictions have held that the term 'supply' takes its ordinary and natural meaning, being 'to furnish with or provide'. Subsection 9-10(2) of the GST Act provides a list of examples of supplies. In particular subparagraph 9-10(2)(g) of the GST Act includes: an entry into, or release from, an obligation: (i) to do anything; or (ii) to refrain from an act; or iii) to tolerate an act or situation; As the new employer becomes subject to an obligation to do something, that is, to pay annual leave, annual leave loading, flextime and sick leave entitlements, it is necessary to consider whether there is a supply within the meaning of section 9-10 of the GST Act. In the GST Act, the term 'supply' covers not only the subject of the transaction - the thing that passes - but also includes the action by which the thing passes from one entity to another. By use of the word 'make' in the phrase 'you make the supply' in paragraph 9-5(a) of the GST Act, there is a requirement for a supplier to take some action to cause a supply to be made. This means that the new employer must take some action or do something to cause the supply to occur. The obligations referred to in the above Facts are imposed, required and effected by the words of the statute. Neither employer takes any action to enter into these obligations. There is no positive act by the new employer to cause a supply to occur. The effect of the employee accepting employment with the new employer is that the former employer's obligation for any future leave entitlements to the employee is extinguished. The obligation to pay annual leave, annual leave loading, flextime and sick leave always rests with the current employer at the time when the leave is taken. The new employer has not entered into an obligation with the former employer to do anything. The new employer's obligations are to the employee only and these arise from statute, not because of any obligation it enters into with the former employer. There is no supply by the new employer. This means that for the purposes of paragraph 9-5(a) of the GST Act, the new government agency employer has not made a supply of the entry into the obligation. As a supply has not been made by the new employer, it is not necessary to proceed with the balance of paragraph 9-5(a) of the GST Act to ascertain if there is any consideration for a supply. Therefore, there has not been a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "26 November 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) subsection 9-10(1) subsection 9-10(2) paragraph 9-10(2)(g)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1182", "Subject_References": "Goods and services tax GST supplies & acquisitions GST supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004362", "Unmatched_Content": "Keywords Goods and services tax GST supplies & acquisitions GST supply"}
{"ATO_ID_Number": "ATO ID 2003/1182", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and transfer of long service leave entitlements", "Issue": "Does a local Government employer make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it receives a payment in respect of a new employee's long service leave entitlements which accrued with the employee's former Local Government employer?", "Decision": "No, the entity employer does not make a taxable supply under section 9-5 of the GST Act as the entity does not make a supply.", "Facts": "The entity is a Local Government employer. The entity employs a person who was previously employed by another Local Government entity. The entity receives a payment from the other Local Government entity that represents the employee's accrued long service leave entitlement. Long service leave provisions within the relevant State legislation or awards (statute) explain the obligations of Local Government entities in connection with the transfer of an employee from one Local Government entity to another Local Government entity. When an employee transfers to another Local Government entity, the relevant statute imposes: The relevant statute also imposes an obligation on the former employer to make a payment or contribution to the new employer in respect of the long service leave accrued to the employee at the time of transfer. In other words, the former employer bears a liability to the new employer for the period the employee was employed by the former employer. There are no separate contractual arrangements between the new and former employers. All that occurs is a payment of money. The entity and the other Local Government entity are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: One of the requirements of a taxable supply is that an entity makes a supply (paragraph 9-5(a) of the GST Act). The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. 'Supply' refers to 'something which passes from one entity to another'. Other jurisdictions have held that the term 'supply' takes its ordinary and natural meaning, being 'to furnish with or provide'. Subsection 9-10(2) of the GST Act provides a list of examples of supplies. In particular, subparagraph 9-10(2)(g) of the GST Act provides: As the new employer becomes subject to an obligation to do something, that is, to pay long service leave entitlements, it is necessary to consider whether there is a supply within the meaning of section 9-10 of the GST Act. In the GST Act, the term 'supply' covers not only the subject of the transaction - the thing that passes - but also includes the action by which the thing passes from one entity to another. By use of the word 'make' in the phrase 'you make the supply' in paragraph 9-5(a) of the GST Act, there is a requirement for a supplier to take some action to cause a supply to be made. This means that the new employer must take some action or do something to cause the supply to occur. The obligations referred to in the above Facts are imposed, required and effected by the words of the statute. Neither employer takes any action to enter into these obligations. There is no positive act by the new employer to cause a supply to occur. The effect of the employee accepting employment with the new employer is that the former employer's obligation for any future long service leave entitlements to the employee is extinguished. The obligation to pay long service leave always rests with the current employer at the time when the leave is taken. The new employer has not entered into an obligation with the former employer to do anything. The new employer's obligations are to the employee only and these arise from statute, not because of any obligation it enters into with the former employer. There is no supply by the new employer. This means that for the purposes of paragraph 9-5(a) of the GST Act, the new local government employer has not made a supply of the entry into an obligation. As a supply has not been made by the new employer, it is not necessary to proceed with the balance of paragraph 9-5(a) of the GST Act to ascertain if there is any consideration for a supply. Therefore, there has not been a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "17 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) section 9-10 subsection 9-10(1) subsection 9-10(2) paragraph 9-10(2)(g) subparagraph 9-10(2)(g)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1183", "Subject_References": "Goods and services tax GST supplies & acquisitions GST supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031182", "Unmatched_Content": "Keywords Goods and services tax GST supplies & acquisitions GST supply"}
{"ATO_ID_Number": "ATO ID 2002/1052", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and reimbursement of salary", "Issue": "Is the entity, a Government department, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when its employee transfers to another Government department (Government department B) and Government department B reimburses the entity for salary that the entity overpaid to the employee?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act when its employee transfers to Government department B and Government department B reimburses the entity for salary that the entity overpaid to the employee.", "Facts": "The entity is a Government department. An employee of the entity secured a temporary transfer to another Government department (Government department B). This transfer took effect part way through a pay period. Liability for the employee's salary and other remuneration is to be borne by the new employer from the date of transfer. The entity made an advance salary payment. As a consequence of this, the entity paid the employee from the date of transfer until the end of the pay period. The new employer, Government department B, has repaid the entity for the overpayment. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, one of the requirements for an entity to make a taxable supply is that the entity must make a supply for consideration (paragraph 9-5(a) of the GST Act). 'Supply' is defined in section 9-10 of the GST Act to include any supply whatsoever. The entity's employee secured a transfer to Government department B. As from the date of the transfer, it is the new employer, Government department B, that is responsible for the employee's salary and other remuneration. The entity is not making a supply to Government department B through the employee nor does the entity provide anything else to Government department B. Therefore, the entity is not making a supply to Government department B. This means that the entity is not making a supply for consideration and the requirement in paragraph 9-5(a) of the GST Act is not met. The entity is not making a taxable supply under section 9-5 of the GST Act when its employee transfers to Government department B and Government department B reimburses the entity for salary that the entity overpaid to the employee.", "Date_of_Decision": "9 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST consideration GST supply GST taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021052", "Unmatched_Content": "Keywords Goods and services tax GST consideration GST supply GST taxable supply"}
{"ATO_ID_Number": "ATO ID 2013/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and points fee in a loyalty program", "Issue": "Is an entity, a loyalty program operator, making a taxable supply to a program partner where:", "Decision": "Yes, the entity is making a taxable supply of points to the program partner to the extent that the points would be redeemed for Division 100 vouchers and those vouchers would not be redeemed for supplies which are GST-free or input-taxed.", "Facts": "The entity, a GST registered loyalty program operator, establishes a customer loyalty program where members of the loyalty program can accumulate loyalty points for their eligible purchases and redeem these points for rewards. The program contains the features of the loyalty program arrangements described at paragraphs 6 to 14 of Goods and Services Tax Ruling GSTR 2012/1. In particular: The points can be redeemed by the member for goods and services, as well as vouchers that can be later redeemed for goods and services. The vouchers that are redeemed by members are subject to the modified rules in Division 100 of the GST Act.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act lists the elements for a taxable supply, including that there is a supply for consideration. Sections 9-10 and 9-15 of the GST Act define 'supply' and 'consideration' very broadly. Having regard to the terms and conditions of the participation agreement, there is a supply (of points) made by the loyalty program operator to the program partner for which the consideration is the points fee paid by the program partner. Accordingly, the supply of points will be a taxable supply if the other elements of section 9-5 of the GST Act are met. It is clear that the supply is both connected with Australia and made in the course of furtherance of the enterprise carried on by the program operator (being a GST registered taxpayer). The key remaining element is whether the supply is otherwise GST free or input taxed. Consistent with the view expressed at paragraph 75 of GSTR 2012/1, the supply of points by the program operator to the program partner constitutes a supply of 'rights', being the rights that program members obtain on receiving points. Such supply is GST free to the extent it is GST free under Division 38 or paragraph 9-30(1)(b) of the GST Act or is input taxed to the extent that it is input taxed under Division 40 or paragraph 9-30(2)(b) of the GST Act. For example, to the extent that the points would be redeemed by members for other supplies which are GST free or input taxed pursuant to paragraph 9-30(1)(b) or 9-30(2)(b) of the GST Act , such supply of points is GST free or input taxed. However, where the points would be redeemed for rewards, being vouchers, the GST treatment of the points is not immediately clear where the vouchers are subject to the modified rules in Division 100 of the GST Act. It has been argued that the GST treatment of the supply of points should follow the character of the underlying rewards provided to members. Therefore, to the extent that the underlying rewards provided to members are vouchers that are subject to the modified rules in Division 100 of the GST Act and treated as non-taxable supplies, the supply of points should similarly be non-taxable to that extent. However, as stated previously, the supply of points is characterised as a supply of rights rather than the underlying rewards provided to members and is a taxable supply to the extent that it is not otherwise GST free or input taxed. Where the supply of points would be redeemed for vouchers which, in turn, would be redeemed for supplies which are GST free or input taxed, such supply is GST free or input taxed to that extent because of paragraph 9-30(1)(b) or 9-30(2)(b) of the GST Act. Accordingly, the supply of points is a taxable supply to the extent that it would be redeemed for vouchers which are subject to the modified rules in Division 100 of the GST Act and those vouchers would not be redeemed for supplies which are GST free or input taxed.", "Date_of_Decision": "4 January 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-10 section 9-15 paragraph 9-30(1)(b) paragraph 9-30(2)(b) Division 38 Division 40 Division 100", "Related_Public_Rulings_and_Determinations": "GSTR 2012/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Customer loyalty programs Vouchers", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20131", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2012/1 | Keywords Goods and services tax Customer loyalty programs Vouchers"}
{"ATO_ID_Number": "ATO ID 2007/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and right to a share of net profit in return for a contribution of money - a taxable supply", "Issue": "Is the entity, a business operator, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it grants a right to a share of the net profit from its business to another entity, in return for the contribution of an amount of money?", "Decision": "Yes. The entity is making a taxable supply under section 9-5 of the GST Act when it grants a right to a share of the net profit from its business to another entity, in return for the contribution of an amount of money.", "Facts": "The entity is a business operator and enters into an arrangement with another entity (the financier). Under the terms of the arrangement, in return for the contribution of an amount of money by the financier, the entity grants the financier a right to receive a share of the net revenue from its business, at a certain rate up to the extent of the contribution amount, and thereafter, at a lesser rate. The entity is registered for goods and services tax (GST) and the arrangement entered into is connected with Australia. The arrangement does not involve a supply that is GST-free under Division 38 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. To satisfy the first requirement in section 9-5 of the GST Act, an entity must first make a 'supply' for 'consideration'. Subsection 9-10(1) of the GST Act states that a supply is any form of supply whatsoever. Paragraph 9-10(2)(e) of the GST Act provides that a supply includes the creation, grant, transfer, assignment or surrender of any right. In this case, under the terms of the arrangement, the entity makes a supply for GST purposes to the financier. The supply is the creation or grant of a right to receive a share of the net revenue from the entity's business. The entity provides the financier with a right to participate in the net profit from its business, at a certain rate up to the extent of the amount contributed by the financier, and thereafter, at a lesser rate. The supply of this right is a supply under paragraph 9-10(2)(e) of the GST Act. Subsection 9-15(1) of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything. The amount contributed is in connection with, and in response to, the grant of a right to a share of the net revenue from the entity's business. There is a direct nexus between the amount contributed and the supply of the right, so that the payment is consideration for the supply for the purposes of subsection 9-15(1) of the GST Act. The entity therefore makes a supply for consideration which satisfies paragraph (a) of section 9-5 of the GST Act. Paragraphs (b) to (d) of section 9-5 of the GST Act are also satisfied as the entity is registered for GST, the supply of the right is made in the course or furtherance of its enterprise and is connected with Australia. Given that the positive limbs of section 9-5 of the GST Act are satisfied, the entity makes a taxable supply to the financier to the extent that the supply is not GST-free or input taxed. Under subsection 40-5(1) of the GST Act, a financial supply is input taxed. Subsection 40-5(2) of the GST Act provides that a financial supply has the meaning given in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Subregulation 40-5.09(1) of the GST Regulations provides that the provision, acquisition, or disposal of an interest mentioned under subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations is a financial supply if: Item 2 in the table in subregulation 40-5.09(3) of the GST Regulations (Item 2) lists an interest in or under a debt, credit arrangement or right to credit, including a letter of credit. Item 10 of the table in subregulation 40-5.09(3) of the GST Regulations (Item 10) lists an interest in securities, including the capital of a partnership or trust. In this circumstance, the arrangement does not involve a supply made by the entity to the financier that is an interest under Item 2. Further, the supply made under the arrangement is not the provision, acquisition or disposal of an interest in or under Item 10 or any of the other interests mentioned in subregulation 40-5.09(3) or 40-5.09(4) of the GST Regulations. The requirements of subregulation 40-5.09(1)(a) of the GST Regulations are therefore not satisfied and the supply by the entity to the financier is not a financial supply. As the requirements in paragraphs (a) to (d) of section 9-5 of the GST Act are satisfied, and the supply is neither GST-free nor input taxed under the provisions of Divisions 38 and 40 of the GST Act respectively, the supply by the entity to the financier of the right to a share of the net revenue from the entity's business is a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "22 December 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 subsection 9-10(1) paragraph 9-10(2)(e) subsection 9-10(4) section 9-15 Division 38 section 38-190 Division 40 subsection 40-5(1)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/15 | ATO ID 2007/16 | ATO ID 2007/17", "Subject_References": "Goods and services tax GST regulations GST supplies & acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200718", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Goods and services tax GST regulations GST supplies & acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/186", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adult entertainment services", "Issue": "Is the entity, a supplier of adult entertainment services, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a dancer, engaged by the entity, performs a lap dance or striptease for one or more of the entity's customers?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for one or more customers of the entity's customers.", "Facts": "The entity operates an establishment in Australia, which supplies adult dancing services as part of its total entertainment package. The entity is registered or required to be registered for goods and services tax (GST). The entity engages dancers to perform in its establishment. The entity enters into an agreement with each dancer for the dancer to provide its services to the entity. This agreement sets out the terms and conditions under which the parties will operate and enables the entity to control the dancer's behaviour in regard to issues such as their compliance with drug and prostitution laws. The entity has control over which dancers are allowed to perform at the establishment. The entity's customers can watch the dancers on stage or they can approach an employee of the entity directly and request for one of the dancers to provide a private lap dance or striptease for a price. The entity's employees assist with the selection of a dancer who will then provide private dances for the customers. The entity provides the venue for the private performance. The entity also collects and processes the payments for private performances. The entity sets the price of the lap dances or stripteases that are provided to customers. The entity establishes a price with each dancer for the supply of their dancing services. This is either an agreed percentage of the price paid by each customer or an agreed fixed dollar amount per dance performance. Payments by the customers using credit card or EFTPOS go directly into the entity's account and a receipt is issued under the entity's trading or business name. The entity retains its percentage of the dance fee and then distributes the dancer's percentage to the dancer (generally by way of cash). Subject always to the entity's ability to control who performs at the club, the dancers choose where and when they perform and they may perform lap dances or stripteases at a number of clubs on any one night.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that an entity is making a taxable supply where: However, a supply is not taxable if it is GST-free or input taxed. The first requirement in section 9-5 of the GST Act is that an entity must make a supply for consideration. When a customer requests a lap dance or striptease, they approach the entity. The entity organises the lap dance or striptease and receives payment from the customer. The entity provides the venue and the dancers and arranges the private dances. The entity is supplying the customer with a service. However, it needs to be determined whether the entire amount paid by the customer is consideration for the entity's service, or if any of the consideration is paid to the entity acting as an agent on behalf of the dancer who is making a separate supply of their services. Goods and services tax ruling, GSTR 2000/37, outlines a number of factors that are taken into account in determining whether an entity is an agent under an agency relationship. However, no single factor (by itself) is determinative. These factors include: Full payments are being made to the entity directly. The entity acts in its own name and is not holding itself out to its customers as acting on behalf of the dancer. The entity sets the prices for the lap dances and stripteases. It is also providing the means for collecting and processing the payments from the customer. Payments using credit card or EFTPOS go directly into the entity's account and a receipt is issued under the entity's trading or business name. The agreement between the parties is for the provision of the dancer's services to the entity, in return for payment for the lap dance or striptease. The agreement does not provide for a separate supply of services by the dancer to the customers. The agreement does not provide for the entity as having authority to act on behalf of the dancer, nor does it entitle the entity to enter legal relations with a third party on behalf of the dancer. The entity is not bearing any commercial risk by entering into the agreement with the dancer. Taking into account these factors, the entity is not acting as an agent for the dancer in respect to the supply of the lap dances or stripteases to the customers. Therefore, the entire payment by the customer is for the supply of services by the entity. The entity is registered, or required to be registered for GST, its supply is made in the course of its enterprise and is connected with Australia. In addition, the supply is not input taxed under any of the provisions in Division 40 of the GST Act nor is it GST-free under Division 38 of the GST Act. Accordingly, all the requirements in section 9-5 of the GST Act are satisfied. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for one or more of the entity's customers. Note: As the lap dance/striptease fee is consideration for the entity's supply of services, the entity has a GST liability equal to 1/11th of the total fee received (section 9-70 of the GST Act).", "Date_of_Decision": "12 February 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-70 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/37", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/187 | ATO ID 2004/188", "Subject_References": "Goods and services tax GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004186", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Removed unnecessary reference to section 9-15 | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/37 | Keywords Goods and services tax GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/187", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of adult entertainment services: dancer collects payments and distributes entity's percentage", "Issue": "Is the entity, a supplier of adult entertainment services, making a taxable supply to a customer under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a dancer, engaged by the entity, performs a lap dance or striptease for one or more customers and the dancer collects the payment for the performance?", "Decision": "Yes, the entity is making a taxable supply to a customer under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for one or more customers and collects the payment for the performance.", "Facts": "The entity operates an establishment in Australia, which supplies adult dancing services as part of its total entertainment package. The entity is registered or required to be registered for goods and services tax (GST). The entity engages dancers to perform in its establishment. The entity enters into an agreement, whereby each dancer agrees to supply their dancing services to the entity. The agreement sets out the terms and conditions under which the parties will operate and enables the entity to control each dancer's behaviour in regard to issues such as their compliance with drug and prostitution laws. The entity also has control over which dancers are allowed to perform at the establishment. The entity's customers can watch the dancers on stage or they can approach an employee of the entity directly and request for one of the dancers to provide a private lap dance or striptease for a price. The entity's employees assist with the selection of a dancer who will then provide private dances to one or more customers. The entity provides the venue for the private performance. The entity establishes the price of the lap dances with customers and establishes the percentage of that price that the dancer will receive. The dancer collects the fees for these dances from the customers in cash. The dancer retains the agreed percentage of the fee for their services. The dancer then passes the balance, being the entity's share of the fee, to the entity at the end of the dancer's shift. Subject always to the entity's ability to control who performs at the club, the dancers choose where and when they lap dance and dancers may perform lap dances at a number of clubs in any one night.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that an entity is making a taxable supply where: However, a supply is not taxable if it is GST-free or input taxed. The first requirement in section 9-5 of the GST Act is that an entity must make a supply for consideration. When a customer requests a lap dance or striptease, they approach the entity. The entity organises the lap dance or striptease. The entity provides the venue and the dancers and organises the private dances. The entity is supplying the customer with a service. The customer pays their money to the dancer, who retains an agreed percentage and passes the remaining amount to the entity. Therefore, it needs to be determined whether all or any of the amount paid by the customer is consideration for the entity's service or if the entity is acting as an agent on behalf of the dancer who is making a separate supply of their services. Goods and services tax ruling, GSTR 2000/37, outlines a number of factors that are taken into account in determining whether an entity is an agent under an agency relationship. However, no single factor (by itself) is determinative. These factors include: The entity operates an establishment which supplies adult dancing services as part of its total entertainment package. The entity acts in its own name and does not hold itself out to its customers as acting on behalf of the dancer. The entity sets the prices for the lap dances and stripteases. The agreement between the entity and the dancer is for the provision of the dancer's services to the entity, in return for payment for the lap dance or striptease. The agreement does not provide for a separate supply of services by the dancer to the customers. The agreement does not provide for the entity as having authority to act on behalf of the dancer, nor does it entitle the entity to enter legal relations with a third party on behalf of the dancer. The entity is not bearing any commercial risk by entering into the agreement with the dancer. Taking into account these factors, the entity is not acting as an agent for the dancer in respect to the supply of the lap dances or stripteases to the customers. As such, the entire payment made by the customer is for the supply of services by the entity. The entity is registered or required to be registered for GST, its supply is made in the course of its enterprise and is connected with Australia. In addition, the supply is not input taxed under any of the provisions in Division 40 of the GST Act nor is it GST-free under Division 38 of the GST Act. Accordingly, all the requirements in section 9-5 of the GST Act are satisfied. Therefore, the entity is making a taxable supply to a customer under section 9-5 of the GST Act when a dancer, engaged by the entity, performs a lap dance or striptease for one or more customers. Note: As the lap dance/striptease fee is consideration for the entity's supply of services, the entity has a GST liability equal to 1/11th of the total fee received (section 9-70 of the GST Act).", "Date_of_Decision": "12 February 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-70 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/37", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/186 | ATO ID 2004/188", "Subject_References": "Goods and services tax GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004187", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/37 | Keywords Goods and services tax GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/188", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and adult entertainment services: dancer contracted to a third party", "Issue": "Is entity A, a supplier of adult entertainment services, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a dancer, provided by and contracted to another entity, entity B, performs a lap dance or striptease for one or more of entity A's customers?", "Decision": "Yes, entity A is making a taxable supply under section 9-5 of the GST Act when a dancer, provided by and contracted to entity B, performs a lap dance or striptease for one or more of entity A's customers.", "Facts": "Entity A operates an establishment in Australia, which supplies adult dancing services as part of its total entertainment package. Entity A is registered or required to be registered for goods and services tax (GST). Entity B contracts the services of dancers and provides the dancers' services to establishments that offer adult entertainment. Entity A enters into an agreement with entity B, whereby entity B supplies dancers to entity A for the purpose of providing dancing and striptease services for entity A's customers. This agreement sets out the percentage of the fees that entity B will receive for the dances. The agreement also establishes the percentage of the fees to be distributed to the dancer. In accordance with the terms of the agreement, entity A distributes the agreed fee (either at a rate per dance or at a percentage of the consideration received) to the dancer at the end of their shift. The agreement also sets out the terms and conditions, under which the parties will operate and enables entity A to control the dancer's behaviour in regard to issues such as their compliance with drug and prostitution laws. Entity A is also able to choose which dancers, supplied by entity B, will be allowed to perform in its establishment. Entity A's customers can either watch the dancers on stage or approach an employee of entity A directly and request for one of the dancers to provide a private lap dance or striptease. Entity A sets the prices for the lap dances and stripteases. Entity A's employees can assist with selecting a dancer to provide private dances for customers. Entity A provides the venue for private performances and has a cashier who collects and processes the payments for these private performances. Payments by way of cash are paid directly to entity A and deposited into its cash register. Payments by way of EFTPOS or credit card are processed on an EFTPOS machine owned by entity B and go directly into entity B's bank account. At the end of the night entity A reconciles all the money taken for the dances. Any amount owed to entity B is transferred directly into entity B's bank account and if entity B owes entity A any money, entity A deposits the amount owing into their own account.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that an entity is making a taxable supply where: However, a supply is not taxable if it is GST-free or input taxed. Before examining the elements of section 9-5 of the GST Act, it is necessary to identify who is actually making the supply of dancing services to the customers. Entity B contracts the services of dancers. Entity A enters into an agreement with entity B, whereby entity B supplies the dancers to entity A for the purpose of providing dancing and striptease services for entity A's customers. In this situation two separate supplies exist. The first supply is the supply of contracted services by the dancers to entity B. The second supply is the agreement between entity A and entity B, whereby entity B supplies the services of the dancers to entity A. The dancers are only supplying their services to entity A in accordance with this agreement. The dancers are contracted to entity B and while entity A distributes an agreed fee to the dancers at the end of their shift, it does this only in accordance with the terms of the agreement it has with entity B. As such, it is entity A that is making the supply of dancing services to the customer. However, it needs to be determined whether the amount paid by the customer is consideration for entity A's service. Section 9-15 of the GST Act provides that a payment will be consideration for a supply if the payment is 'in connection with' a supply and 'in response to' or 'for the inducement' of a supply. Thus, there must be a sufficient nexus between a particular supply and a particular payment, provided for that supply, for there to be a supply for consideration. Entity A sets the price for the lap dances and stripteases and provides the means for collecting and processing the payments from the customer. The payment by the customer, regardless of which entity this payment initially goes to, is made in return for the supply of dancing services provided by entity A and is consideration for that supply. As such, entity A is making the supply for consideration. The entity is registered or required to be registered for GST and the supply is made in the course of its enterprise and is connected with Australia. In addition, the supply is not input taxed under any of the provisions in Division 40 of the GST Act nor is it GST-free under Division 38 of the GST Act. Accordingly, all the requirements in section 9-5 of the GST Act are satisfied. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when a dancer, provided by and contracted to entity B, performs a lap dance or striptease for one or more of entity A's customers Note: As the lap dance/striptease fee is consideration for the entity's supply of services, the entity has a GST liability equal to 1/11th of the total fee received (section 9-70 of the GST Act).", "Date_of_Decision": "19 February 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-15 section 9-70 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/186 | ATO ID 2004/187", "Subject_References": "Goods and services tax GST consideration GST supplies & acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004188", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST consideration GST supplies & acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/232", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and payment of a commission in the form of a rebate", "Issue": "Is the entity, a company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it recommends another company's products, for which it receives a commission in the form of a rebate?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act, when it recommends another company's products, for which it receives a commission in the form of a rebate.", "Facts": "The entity is a company. The entity has entered into a written agreement with another company, whereby the entity has agreed to recommend the other company's products to its customers. The entity also purchases products from the other company. In return for providing recommendations, the entity receives a commission in the form of a rebate on products that it purchases from the other company. Under the terms of the agreement the rebate is calculated based on the amount of sales that the other company makes to the entity's customers. The entity makes the recommendations of the other company's products in the course of carrying on its enterprise in Australia and is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, a supply is not taxable to the extent that it is GST-free or input taxed. Section 9-10 of the GST Act defines 'supply' to mean any form of supply whatsoever. Paragraph 9-10(2)(b) of the GST Act states that a supply of services is a supply. Under the agreement the entity recommends the other company's products to its customers. When the entity makes these recommendations, the entity is providing a service. The supply is the entity's entry into and fulfilment of the obligation to participate in the promotion and recommendation of another company's products. The entity is making a supply as defined in subparagraph 9-10(2)(b) of the GST Act. 'Consideration' is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance, in connection with, in response to, or for the inducement of a supply of anything. Under the agreement the entity receives a commission in the form of a rebate on products that it purchases from the other company. The rebate is calculated based on the amount of sales the other company makes as a result of the entity's recommendations. This is to be distinguished from a rebate that changes the consideration for a previous supply and results in an adjustment event as explained in paragraph 24 of Goods and Services Tax Ruling GSTR 2000/19 Goods and services tax: making adjustments under Division 19 for adjustment events which provided: Under their terms of trade, suppliers may pay rebates to customers who reach certain levels of purchases. The rebates are typically expressed as a percentage of the purchases made in a particular period. A payment of this type is regarded as a reduction in the consideration for the relevant purchases and so is an adjustment event. The rebate the entity receives is consideration for the supply of services the entity makes when it recommends the other company's products. It is not a reduction in consideration for the products that the entity buys from the other company, these are separate and distinct supplies. The rebate is given in connection with the entity's supply of the recommendation services and as such, is consideration for the entity's supply. The entity is making a supply for consideration and the first requirement in section 9-5 of the GST Act is satisfied. The entity makes the supply in the course of carrying on its enterprise in Australia and is registered for GST satisfying the other positive requirements of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it recommends the use of another company's products, for which it receives a commission in the form of a rebate.", "Date_of_Decision": "5 September 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 section 9-10(2)(b) subsection 9-15(1) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/19", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004232", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Reasons for Decision, Legislative References | Minor update to references | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/19 | Keywords Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/315", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of land by the sheriff of a court", "Issue": "Is the entity, a government department that employs the Sheriff of a court, making a taxable supply under either section 105-5 or section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when, under an enforcement warrant, the Sheriff is required to sell the property of a debtor?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when, under an enforcement warrant, the Sheriff is required to sell the property of a debtor.", "Facts": "The entity is a government department. The entity is the employer of the Sheriff of a court. A creditor has obtained a court judgment against a debtor. The debtor has failed to pay the judgment debt and the creditor has filed an enforcement warrant for the seizure and sale of property owned by the debtor. The court issued an enforcement warrant for the seizure of a vacant lot of land owned by the debtor. The vacant lot is in Australia. The Sheriff of the court is now required to sell the debtor's property for consideration. The Sheriff is not acting as an agent of either the creditor or the debtor. The Sheriff is also not a representative as defined in section 195-1 of the GST Act as the Sheriff is not appointed or authorised to manage the affairs of the debtor because the debtor is unable to pay all debts as and when they become due and payable. The sale of the debtor's property is made for consideration. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 105-5 of the GST Act provides that a supply made by a creditor in satisfaction of a debt is a taxable supply if: The first requirement of section 105-5 of the GST Act is that an entity supplies the property of the debtor, to a third party, in satisfaction of a debt that the debtor owes to the entity. A creditor has obtained a court judgment against a debtor. The debtor has failed to pay the judgment debt and the creditor has filed an enforcement warrant for the seizure and sale of property owned by the debtor resulting in the court issuing an enforcement warrant for the seizure of a vacant lot of land owned by the debtor. In selling the debtor's property, the Sheriff is not acting as an agent of either the creditor or the debtor. While the Sheriff is selling the debtor's property, to a third party, the judgment debt is not a debt owed to the Sheriff. The Sheriff's role is to enforce payment of the amount, which is due to the creditor under the judgment, by selling the land. The Sheriff is an employee of the entity. Therefore, the sale of the land is not in satisfaction of a debt that the debtor owes to the entity and as such, section 105-5 of the GST Act does not apply to the sale and the rules in Division 9 of the GST Act must be considered. Under section 9-5 of the GST Act, an entity makes a taxable supply if: The sale of the debtor's property is for consideration. The Sheriff is an employee of the government department and organising the sale of property in their capacity as Sheriff. The Sheriff is also not a representative under Division 147 of the GST Act. It follows that the entity, the government department, is supplying the land. Section 9-20 of the GST Act defines enterprise to include an activity or series of activities done by the Commonwealth, a State or a Territory. Therefore, the entity is supplying the land in the course of an enterprise that it carries on. The debtor's property is in Australia and the entity is registered for GST. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when, under an enforcement warrant, the Sheriff of a court is required to sell the property of a debtor.", "Date_of_Decision": "18 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 9 section 9-5 section 9-20 Division 38 Division 40 section 105-5 Division 147 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies in satisfaction of debt GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004315", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies in satisfaction of debt GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/957", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply connected with direct selling enterprise", "Issue": "Is the entity, a distributor for a direct selling organisation, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it introduces a new member to the direct selling organisation, and receives a voucher from the direct selling organisation which it can redeem for products for its personal use?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it introduces a new member to the direct selling organisation, and receives a voucher from the direct selling enterprise which it can redeem for products for its personal use.", "Facts": "The entity is a distributor for a direct selling organisation. The entity introduces a prospective member to the direct selling organisation and, in return for this, the direct selling organisation provides the entity with a voucher. The entity can redeem the voucher for products from the direct selling organisation. The products are supplied only for the entity's personal use. The entity is registered for goods and services tax (GST). The entity introduces the new member to the organisation in the course of its own enterprise that is carried on in Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, a supply is not taxable to the extent that it is input taxed or GST-free. To satisfy the first requirement in section 9-5 of the GST Act, an entity must make a 'supply' for 'consideration'. Paragraph 9-10(2)(b) of the GST Act provides that for GST purposes, the term 'supply' includes a supply of services. In introducing a prospective member to the direct selling organisation, the entity is providing a service to the direct selling organisation. Therefore, the entity is making a supply as per paragraph 9-10(2)(b) of the GST Act. Subsection 9-15(1) of the GST Act provides that for GST purposes, the term 'consideration' includes any payment, act or forbearance, in connection with, in response to, or for the inducement of a supply of anything. The voucher is provided in recognition of the entity introducing a prospective member to the direct selling enterprise. If the introduction had not occurred, a voucher would not have been provided to the entity. Therefore, the voucher amounts to consideration as defined in subsection 9-15(1) of the GST Act. Accordingly, the entity is making a supply for consideration as per the first requirement in section 9-5 of the GST Act. Furthermore, the entity is registered for GST, the supply is made in the course of the entity's enterprise, and is connected with Australia. In addition, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it introduces a new member to the direct selling organisation, and receives a voucher from the direct selling organisation which it can redeem for products for its personal use.", "Date_of_Decision": "18 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-10(2)(b) subsection 9-15(1) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003957", "Unmatched_Content": "Good and Services Tax: With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies & acquisitions GST consideration GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/474", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and payments for seconded employees", "Issue": "Is a government related entity, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives payment for the secondment of its employees to a non-government entity?", "Decision": "Yes, the government related entity is making a taxable supply under section 9-5 of the GST Act when it receives payment for the secondment of its employees to a non-government entity.", "Facts": "The entity is a government related entity (entity). It has reciprocal arrangements for the secondment of its employees to a non-government entity (recipient). The secondment to the entity does not change the employment status of the entity's employees. The entity enters into agreements to charge the recipient the antispiated costs of employing the seconded employees during the duration of the secondments. Tha calculation takes into account the salaries of the employees, plus the relevant on-costs such as annual leave, long service leave, payroll tax, workers compensation, superannuation, use of entity's motor vehicles and mobile pghone and the entity's administration costs. The entity is registered for goods and services tax (GST). The supply of the services that are provided by the entity's seconded employees are connected with Australia. The payment by the recipient is not covered by an appropriation under Australian Law.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5 of the GST Act. Section 9-10 of the GST Act discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(b) of the GST Act states that a supply includes a supply of services. In this case, it is considered that the entity makes a supply of services that are performed by the seconded employee when it seconds its employees to the recipient. The term 'consideration' is defined in section 195-1 of the GST Act and for a supply or acquisition, means any consideration , within the meaning given by section 9-15, in connection with the supply or acquisition. Paragraph 9-15(1)(a) of the GST Act includes any payment, or any act or forbearance, in connection with a supply of anything as consideration. The entity has entered into a written agreement with the recipient which specifies an amount to be paid for the secondment of the employee. Therefore, the payment that the entity receives is consideration for the supply of its employees' services. Subsection 9-20(1) of the GST Act defines an enterprise as an activity, or series of activities, which include such things as 'in the form of a business'. The supply made by the entity to the recipient is in the course or furtherance of its enterprise. The entity carries on activities in the form of a business, and the provision of the services of its employees constitute a supply made in connection with those activities. The entity is registered for GST and the transaction is a 'supply' that fulfils all of the requirements of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply of services under 9-5 of the GST Act when it receives payment for the secondment of its employees to another entity.", "Date_of_Decision": "13 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 paragraph 9-10(2)(b) paragraph 9-15(1)(a) subsection 9-20(1) Division 38 Division 40 Section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/54", "Subject_References": "Goods and services tax GST supplies and acquisitions GST consideration GST enterprise GST supply Taxable supply Appropriation", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001474", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Reason for decision Legislative references Related ATO ID's | Updated for changes in the appropriations legislation which included adding the definition of the term 'consideration' in section 195-1 of the GST Act. | Keywords Goods and services tax GST supplies and acquisitions GST consideration GST enterprise GST supply Taxable supply Appropriation"}
{"ATO_ID_Number": "ATO ID 2001/503", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and an in specie distribution by a discretionary family trust (distribution for a creditable purpose)", "Issue": "Is the entity, a discretionary family trust, making a taxable supply pursuant to sections 9-5 and 72-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes an in specie distribution to a beneficiary of the trust that is registered for goods and services tax (GST) and the distribution is used solely for a creditable purpose?", "Decision": "No, the entity is not making a taxable supply pursuant to sections 9-5 and 72-5 of the GST Act when it makes an in specie distribution to a beneficiary of the trust that is registered for GST and the acquisition is solely for a creditable purpose.", "Facts": "The entity is a discretionary family trust. The entity makes an in specie distribution to a beneficiary of the trust that is registered for GST and the distribution is used solely for a creditable purpose. An in specie distribution means a distribution in kind of goods or natural produce instead of money. The distribution is not covered by Division 38 of the GST Act or by Division 40 of the GST Act. The trustee of the entity is registered for GST. The distribution is made in the course or furtherance of the enterprise carried on by the entity in Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The existence of a 'supply' itself is an essential element in determining whether the distribution is a taxable supply under section 9-5 of the GST Act. 'Supply' is defined in subsection 9-10(1) of the GST Act to include any form of supply whatsoever. In this case, the distribution by the entity is the supply. 'Consideration' is defined in paragraph 9-15(1)(a) of the GST Act to include any payment, or any act or forbearance, in connection with a supply of anything. In some trust arrangements, beneficiaries have indefeasible rights to the trust property. In the case of a discretionary trust, a beneficiary does not have a vested interest in either the income or the assets of the trust. The beneficiary merely has their right to demand that the trustee administers the trust according to the trust deed. As such, when the trustee makes a distribution, the beneficiary has no rights to surrender and gives no consideration. Although, the supply is not being made for consideration, a distribution made by a discretionary trust may still be a taxable supply where Division 72 of the GST Act applies. Division 72 removes the requirement for consideration from section 9-5 of the GST Act in certain circumstances where the recipient is an associate. Section 72-5 of the GST Act provides that a supply to an associate for no consideration will be a taxable supply if the associate is not registered or required to be registered, or the associate acquires the thing supplied otherwise than solely for a creditable purpose. The term associate which is defined in section 318 of the Income Tax Assessment Act 1936 includes a beneficiary and the trustee of a trust. In this case, the entity is making an in specie distribution to a beneficiary that is registered for GST and the distribution is used solely for a creditable purpose. Therefore, section 72-5 of the GST Act is not applicable. As section 72-5 of the GST Act is not applicable, the requirement for consideration under paragraph 9-5(a) of the GST Act is not satisfied. Therefore, the entity is not making a taxable supply under section 9-5 of the GST Act when it makes an in specie distribution to a beneficiary that is registered and the distribution is used solely for a creditable purpose.", "Date_of_Decision": "19 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) subsection 9-10(1) paragraph 9-15(1)(a) Division 38 Division 40 Division 72 section 72-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/504 | ATO ID 2001/505", "Subject_References": "Goods & services tax GST associates GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001503", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST associates GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/504", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and an in specie distribution by a discretionary family trust (distribution not for a creditable purpose)", "Issue": "Is the entity, a discretionary family trust, making a taxable supply pursuant to sections 9-5 and 72-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes an in specie distribution to a beneficiary of the trust that is registered for goods and services tax (GST) and the distribution is not used solely for a creditable purpose?", "Decision": "Yes, the entity is making a taxable supply pursuant to sections 9-5 and 72-5 of the GST Act when it makes an in specie distribution to a beneficiary of the trust that is registered for GST and the distribution is not used solely for a creditable purpose.", "Facts": "The entity is a discretionary family trust. The entity makes an in specie distribution to a beneficiary of the trust that is registered for GST and the distribution is not used solely for a creditable purpose. An in specie distribution means a distribution in kind of goods or natural produce instead of money. The distribution is not covered by Division 38 of the GST Act or by Division 40 of the GST Act. The trustee of the entity is registered for GST. The distribution is made in the course or furtherance of the enterprise carried on by the entity in Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The existence of a 'supply' itself is an essential element in determining whether the distribution is a taxable supply under section 9-5 of the GST Act. 'Supply' is defined in subsection 9-10(1) of the GST Act to include any form of supply whatsoever. In this case, the distribution by the entity is the supply. 'Consideration' is defined in paragraph 9-15(1)(a) of the GST Act to include any payment, or any act or forbearance, in connection with a supply of anything. In some trust arrangements, beneficiaries have indefeasible rights to the trust property. In the case of a discretionary trust, a beneficiary does not have a vested interest in either the income or the assets of the trust. The beneficiary merely has their right to demand that the trustee administers the trust according to the trust deed. As such, when the trustee makes a distribution, the beneficiary has no rights to surrender and gives no consideration. Although the supply is not being made for consideration, a distribution made by a discretionary trust may still be a taxable supply where Division 72 of the GST Act applies. Division 72 removes the requirement for consideration from section 9-5 of the GST Act in certain circumstances where the recipient is an associate. Section 72-5 of the GST Act provides that a supply to an associate for no consideration will be a taxable supply if the associate is not registered or required to be registered, or the associate acquires the thing supplied otherwise than solely for a creditable purpose. The term associate, which is defined in section 318 of the Income Tax Assessment Act 1936, includes a beneficiary and the trustee of a trust. In this case, the entity is making an in specie distribution to a beneficiary that is registered and the distribution is not used solely for a creditable purpose. Therefore, the supply meets the requirements of section 72-5 of the GST Act. The trustee for the entity is registered for GST and the distribution is a 'supply' that fulfils all of the requirements of section 9-5 and section 72-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it makes an in specie distribution to a beneficiary that is registered for GST but the acquisition is not solely for a creditable purpose.", "Date_of_Decision": "19 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) paragraph 9-15(1)(a) Division 38 Division 40 Division 72 section 72-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/503 | ATO ID 2001/505", "Subject_References": "Goods & services tax GST associates GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001504", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST associates GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/505", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and an in specie distribution by a discretionary family trust (beneficiary not registered)", "Issue": "Is the entity, a discretionary family trust, making a taxable supply pursuant to sections 9-5 and 72-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes an in specie distribution to a beneficiary of the trust that is not registered, or required to be registered for goods and services tax (GST)?", "Decision": "Yes, the entity is making a taxable supply pursuant to sections 9-5 and 72-5 of the GST Act when it makes an in specie distribution to a beneficiary that is not registered, or required to be registered for GST.", "Facts": "The entity is a discretionary family trust. The entity makes an in specie distribution to a beneficiary of the trust that is not registered, or required to be registered. An in specie distribution means a distribution in kind of goods or natural produce instead of money. The distribution is not covered by Division 38 of the GST Act or by Division 40 of the GST Act. The trustee of the entity is registered for GST. The distribution is made in the course or furtherance of the enterprise carried on by the entity in Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The existence of a 'supply' itself is an essential element in determining whether the distribution is a taxable supply under section 9-5 of the GST Act. 'Supply' is defined in subsection 9-10(1) of the GST Act to include any form of supply whatsoever. In this case, the distribution by the entity is the supply. 'Consideration' is defined in paragraph 9-15(1)(a) of the GST Act to include any payment, or any act or forbearance, in connection with a supply of anything. In some trust arrangements, beneficiaries have indefeasible rights to the trust property. In the case of a discretionary trust, a beneficiary does not have a vested interest in either the income or the assets of the trust. The beneficiary merely has their right to demand that the trustee administers the trust according to the trust deed. As such, when the trustee makes a distribution, the beneficiary has no rights to surrender and gives no consideration. Although, the supply is not being made for consideration, a distribution made by a discretionary trust may still be a taxable supply where Division 72 of the GST Act applies. Division 72 removes the requirement for consideration from section 9-5 of the GST Act in certain circumstances where the recipient is an associate. Section 72-5 of the GST Act provides that a supply to an associate for no consideration will be a taxable supply if the associate is not registered or required to be registered, or the associate acquires the thing supplied otherwise than solely for a creditable purpose. The term associate which is defined in section 318 of the Income Tax Assessment Act 1936 includes a beneficiary and the trustee of a trust. In this case, the entity is making an in specie distribution to a beneficiary that is not registered or required to be registered. Therefore, the supply meets the requirements of section 72-5 of the GST Act. The trustee for the entity is registered for GST and the distribution is a 'supply' that fulfils all of the requirements of section 9-5 and section 72-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it makes an in specie distribution to a beneficiary that is not registered, or required to be registered for GST.", "Date_of_Decision": "19 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) paragraph 9-15(1)(a) Division 38 Division 40 Division 72 section 72-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/503 | ATO ID 2001/504", "Subject_References": "Goods & services tax GST associates GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001505", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST associates GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/388", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and non-payment of GST component on an invoice", "Issue": "Does the entity, a supplier of goods, have a goods and services tax (GST) liability under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies goods to a company that refuses to pay the GST component included in the price of the goods?", "Decision": "Yes, the entity does have a GST liability under section 9-40 of the GST Act, when it supplies material to a company that refuses to pay the GST component included in the price of the goods.", "Facts": "The entity is a supplier of goods. The entity supplies goods to a company that refuses to pay the GST component included in the price of the goods. The entity is registered for GST. The supply of goods is for consideration. The supply is made in the course or furtherance of an enterprise carried on by the entity in Australia. The entity accounts for GST on a non-cash basis. The entity issued the invoice for the goods prior to receiving any consideration for the supply.", "Reasons_for_Decision": "Summary: Section 9-40 of the GST Act provides that it is the supplier who must pay the GST payable on any taxable supplies it makes. An entity makes a taxable supply under section 9-5 of the GST Act if: In this case, the entity is registered for GST. The supply of goods is for consideration and is made in the course of the enterprise carried on by the entity in Australia. Accordingly, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods to the company. Therefore, the entity has a GST liability under section 9-40 of the GST Act, when it supplies goods to a company that refuses to pay the GST component included in the price of the goods. The entity's GST liability is 1/11th of the price of the goods invoiced.", "Date_of_Decision": "26 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-40 Division 21", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001388", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax Taxable supply"}
{"ATO_ID_Number": "ATO ID 2010/146", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and tax invoices issued by another entity on behalf of a supplier", "Issue": "Does Entity A, a supplier of services, issue a tax invoice for the purposes of paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where Entity B, on behalf of Entity A, prepares and issues a single tax invoice for the taxable supplies that each entity makes separately to the same customers?", "Decision": "Yes. Entity A issues a tax invoice for the purposes of paragraph 29-70(1)(a) of the GST Act in the circumstance described.", "Facts": "Entity A and Entity B make separate taxable supplies of certain services to the same customers. Both entities are registered for goods and services tax (GST). Entity A and Entity B enter into a written agreement for the preparation and issuance of tax invoices. Under this agreement, Entity B prepares and issues a single tax invoice on behalf of Entity A and for itself for the taxable supplies that each entity separately makes to the same customer. Entity B does not charge a fee for preparing and issuing the tax invoices. The tax invoice shows the identity and Australian Business Number (ABN) of both entities. The tax invoice satisfies the requirements for a tax invoice as set out in paragraphs 29-70(1)(b), 29-70(1)(c), and 29-70(1)(d) of the GST Act. The tax invoice is not a recipient created tax invoice as the customer does not create or issue it. Entity A does not issue its own tax invoice in respect of the taxable supplies that it makes and that are invoiced along with the taxable supplies made by Entity B.", "Reasons_for_Decision": "Summary: Subsection 29-70(1) of the GST Act provides that a document is a tax invoice if it meets several requirements. Paragraph 29-70(1)(a) of the GST Act provides that one of these requirements is that the document must be issued by the supplier, unless it is a recipient created tax invoice. The term 'supplier' is not defined in the GST Act. However, in the context of section 9-5 of the GST Act, an entity that makes a taxable supply is treated as the supplier. As Entity A and Entity B both make separate taxable supplies, they are the suppliers for the purposes of paragraph 29-70(1)(a) of the GST Act. However, as it is Entity B that prepares and issues the tax invoice, it needs to be determined whether the tax invoice is also 'issued' by Entity A. Under the written agreement, Entity B physically prepares and issues the tax invoice on behalf of Entity A. Entity B does not charge a fee to Entity A for this service. This written agreement does not alter Entity A's relevant obligations under the GST Act. Further, Entity A's identity and ABN appear on each tax invoice issued by Entity B. For the purposes of determining whether Entity A has also 'issued' the tax invoice, it is not relevant that Entity B's identity, ABN and details of Entity B's taxable supplies are also shown on the tax invoice. By entering the written agreement with Entity B and because Entity A's relevant details are on the invoice, Entity A also issues the tax invoice. As the tax invoice satisfies the other requirements for a tax invoice, Entity A issues a tax invoice for the purposes of paragraph 29-70(1)(a) of the GST Act.", "Date_of_Decision": "1 July 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 29-70(1) paragraph 29-70(1)(a) paragraph 29-70(1)(b) paragraph 29-70(1)(c) paragraph 29-70(1)(d) paragraph 29-75(1)(a)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2013/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions Taxable supply GST invoices Tax invoices", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010146", "Unmatched_Content": "Updated to reflect GSTR 2013/1 | Related Public rulings (including Determination) | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2013/1 | Keywords Goods and services tax GST supplies & acquisitions Taxable supply GST invoices Tax invoices"}
{"ATO_ID_Number": "ATO ID 2004/947", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and written recipient created tax invoice agreement entered into by a resident agent on behalf of a non-resident recipient", "Issue": "Can the entity, an agent for a non-resident recipient, enter into the written agreement required by clause 4(f) of the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 1) 2000 (RCTI Determination), so that the non-resident can issue recipient created tax invoices (RCTIs) to its supplier?", "Decision": "Yes, the entity can enter into the written agreement required by clause 4(f) of the RCTI Determination so that the non-resident can issue RCTIs to its supplier.", "Facts": "The entity is an agent for a non-resident recipient. The entity and the non-resident are registered for goods and services tax (GST). The non-resident instructs the entity, its agent, to enter into written agreements with the Australian suppliers.", "Reasons_for_Decision": "Summary: Clause 4(f) of the RCTI Determination provides that the recipient must issue the RCTI pursuant to a written agreement that the 'recipient has with the supplier'. When an agent uses its authority to act for a principal, then any act done on behalf of that principal is an act of the principal. As such, a written agreement entered into by an agent, on behalf of their principal, will be an agreement entered into by the principal. The non-resident recipient has instructed the entity to enter into the written RCTI agreement, on its behalf, with the Australian suppliers. Therefore, the entity can enter into the agreement required by clause 4(f) of the RCTI Determination so that the non-resident can issue RCTIs to its supplier.", "Date_of_Decision": "17 March 2004", "Year_of_Income": "", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "GSTR 2000/37 | A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 1) 2000, clause 4(f)", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST international services Connected with Australia GST resident agents GST invoices Recipient created tax invoices", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004947", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2000/37 A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No. 1) 2000, clause 4(f) | Keywords Goods and services tax GST international services Connected with Australia GST resident agents GST invoices Recipient created tax invoices"}
{"ATO_ID_Number": "ATO ID 2001/290", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Tax Invoices", "Issue": "Is the entity, a solicitor, required to issue a tax invoice under subsection 29-70(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to an insurer, where the insurer requests a tax invoice in respect of legal services provided by the entity to an injured worker?", "Decision": "No, the entity is not required to issue a tax invoice under subsection 29-70(2) of the GST Act, to an insurer where the insurer requests a tax invoice in respect of legal services provided by the entity to an injured worker.", "Facts": "The entity is a solicitor. The entity represented an injured worker in a worker's compensation claim against the injured worker's employer. This legal service was a taxable supply under section 9-5 of the GST Act. The injured worker was successful in their claim for compensation. As such, the employer's insurer was liable to pay out the compensation claim. This pay out included an amount to cover the legal costs of the injured worker (ie the entity's fees). The insurer has requested that the entity supply it with a tax invoice in relation to the services supplied by the entity to the injured worker. The insurer has requested that the tax invoice be made out in their name. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: One of the requirements for a recipient of a supply to claim an input tax credit is that they must hold a tax invoice (subsection 29-10(3) of the GST Act). Under subsection 29-70(2) of the GST Act, the supplier of a taxable supply must give a tax invoice, for the supply, to the recipient of the supply, if requested by the recipient to do so. Therefore, in order to determine whether the entity is required to issue a tax invoice to the insurer, it is necessary to establish who is the recipient of the entity's services. Section 195-1 of the GST Act defines recipient, in relation to a supply, as the entity to which the supply was made. In this case, the entity is making a taxable supply of legal services to the injured worker. Therefore, although the employer's insurer is, in effect, paying the legal fees of the injured worker, the recipient of the supply is the injured worker. Therefore, as the insurer is not the recipient of the supply, the entity is not required to issue a tax invoice under subsection 29-70(2) of the GST Act, to the insurer.", "Date_of_Decision": "30 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 29-10(3) subsection 29-70(2) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST invoices Tax invoices", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001290", "Unmatched_Content": "Keywords Goods and services tax GST invoices Tax invoices"}
{"ATO_ID_Number": "ATO ID 2013/54", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and payments for seconded employees", "Issue": "Is a government agency, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 when it receives a payment for the secondment of its employees to another government entity?", "Decision": "No, the payment received is not the provision of consideration for a supply.", "Facts": "The entity is a government related entity. It has reciprocal arrangements for the secondment of its employees to other government related entities (recipient). The entity is registered for good and services tax (GST). The supply of the services that are provided by the entity's seconded employees is connected with Australia. The secondment to the recipient does not change the employment status of the employees. The entity continues to pay the salaries of the employees. The entity enters into agreements to charge the recipient the anticipated costs of employing the seconded employees during the duration of the secondments. The calculation takes into account the salaries of the employees, plus the relevant on-costs such as annual leave, long service leave, payroll tax, workers compensation, superannuation, use of the entity's motor vehicles and mobile phones and the entity's administration costs. The payment by the recipient is covered by an appropriation under an Australian Law.", "Reasons_for_Decision": "Summary: All legislative references in this document are to the GST Act. The existence of a 'supply' itself is an essential element in determining whether the transaction is a taxable supply under section 9-5. Section 9-10 discusses the meaning of the word 'supply' for GST purposes. Paragraph 9-10(2)(b) states that a supply includes a supply of services. In this case, it is considered that the entity makes a supply of services when it seconds its employees to the recipient. The term 'consideration' is defined in section 195-1 and for a supply or acquisition, means any consideration, within the meaning given by sections 9-15 and 9-17, in connection with the supply or acquisition. Paragraph 9-15(1)(a) includes any payment, or any act or forbearance, in connection with a supply as consideration. Section 9-17 provides that certain payments and other things are not consideration. Relevant to these facts, subsection 9-17(3) provides that a payment is not the provision of consideration if: The first two tests are satisfied, as indicated in the facts above. Paragraph 9-17(3)(c) sets out the non-commercial test and to satisfy this requirement, the amount of the payment must be calculated on the basis that the sum of the following does not exceed the anticipated or actual cost of making those supplies: The entity has only received the payment from the recipient in regards to the supply of services by its seconded employees. The term 'cost' includes the entity's direct and indirect costs of making the supplies. It does not include a return on capital or concepts of cost which are measured based on opportunity cost or forgone revenue. The basis of the calculation of the payment was to cover the anticipated costs that would be payable by the entity as a result of continuing to employ the employees during the secondment period. The anticipated costs include both direct costs such as the salary of the employee and also indirect costs such as the costs of administration. As the payment is based on anticipated costs, it is not necessary to subsequently review the calculation once the actual cost of making the supply is known. In this case the requirements of subsection 9-17(3) are satisfied and therefore the payment is not the provision of consideration. As these payments do not constitute consideration, the supplies to which the payment relates do not satisfy the requirements of section 9-5. Therefore, these supplies are not taxable supplies.", "Date_of_Decision": "14 October 2013", "Year_of_Income": "", "Legislative_References": "A New tax system (Goods and Services Tax) Act 1999 section 9-5 section 9-10 paragraph 9-15(1)(a) subsection 9-17(3) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/474", "Subject_References": "Good and services tax GST supplies and acquisitions GST consideration GST supply taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201354", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Issue, Decision, Facts Reason for Decision | To clarify the application of the legislation. | Keywords Good and services tax GST supplies and acquisitions GST consideration GST supply taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/337", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a local government as an associate of State Government departments", "Issue": "For the purposes of Division 72 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) is the entity, a local government body, an associate of Government Departments of the State in which they reside?", "Decision": "No, for the purposes of Division 72 of the GST Act, the entity is not an associate of Government Departments of the State in which they reside.", "Facts": "The entity is a local government body, which is a body corporate, and is registered for goods and services tax (GST). The entity was formed as a local governing body under an Act of Parliament of a State, to make local laws for and otherwise ensure the good rule and government of the territory within its jurisdiction. The local government has autonomy of administration and only in extreme situations would the Minister interfere with the management and administration of matters in the local government body", "Reasons_for_Decision": "Summary: Division 72 of the GST Act sets out special rules that apply to supplies and acquisitions made between associates for inadequate or no consideration. An entity will be an 'associate' of another entity for the purposes of Division 72 of the GST Act if it meets: An 'associate' is defined in section 195-1 of the GST Act as having the meaning given by section 318 of the Income Tax Assessment Act 1936 (ITAA 1936). The entity is a body corporate and is therefore a company for income tax and GST purposes (section 995-1 of Income Tax Assessment Act 1997 and section 195-1 of the GST Act). The relevant provision in section 318 of the ITAA 1936 is subsection 318(2) of the ITAA 1936 which sets out the associates of companies. As Government Departments of States are not natural persons, partnerships, trusts or companies, they will only be associates of the entity, the local government body, if the requirements of paragraph 318(2)(d) of the ITAA 1936 are satisfied. Paragraph 318(2)(d) of the ITAA 1936 provides that an entity (controlling entity) will be an associate of a company where: The entity, the local government body, has autonomy of administration and only in extreme situations would the Minister interfere with the management and administration of matters in the local government body. The entity neither operates solely in the interests of the State nor is controlled by the State, but is an autonomous body, separate from the State. As such, the State and the Government Departments of the State are not associates of the entity under section 318 of the ITAA 1936 or section 195-1 of the GST Act. In Subdivision 72-D of the GST Act, section 72-100 of the GST Act outlines who are associates of State or Territory Government entities. It provides that Division 72 of the GST Act applies to a government entity that is: as if the government entity was an associate of: Therefore, for the entity, the local government body, to be treated as an associate of a Department of the State in which they reside, it must be an organisation, established by a State or Territory, of a kind referred to in paragraph (e) of the definition of 'government entity' in section 41 of the ABN Act. One of the requirements in paragraph (e) of the definition of 'government entity' in section 41 of the ABN Act is that the organisation is not an entity. The entity, a local government body, as a body corporate is an 'entity' for GST purposes (paragraph 184-1(1)(b) of the GST Act). Therefore, it does not satisfy paragraph (e) of the definition of 'government entity' and section 72-100 of the GST Act does not apply. For the purposes of Division 72 of the GST Act, the entity, a local government body, is not an associate of the Government Departments of the State in which they reside.", "Date_of_Decision": "24 February 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 72 Subdivision 72-D section 72-100 paragraph 184-1(1)(b) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Government entities GST special rules GST associates Government related entities", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005337", "Unmatched_Content": "Keywords Goods and services tax Government entities GST special rules GST associates Government related entities"}
{"ATO_ID_Number": "ATO ID 2013/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the recovery of waste levies and carbon pricing mechanism costs by waste disposal facility operators", "Issue": "Is the entity, a waste disposal facility operator, liable for GST on the total amount charged to customers for allowing them to dispose of waste at the facility, when the total includes amounts for the recovery of waste levies under relevant state or territory environment protection legislation and regulations and carbon pricing mechanism costs under Commonwealth legislation, which may be identified separately on the tax invoice?", "Decision": "Yes, the entity is liable for GST on the total amount charged to customers for allowing them to dispose of waste at a waste disposal facility, including amounts for the recovery of waste levies and carbon pricing mechanism costs, even if the amounts are identified separately in tax invoices issued to customers.", "Facts": "The GST registered entity operates a waste disposal facility and charges customers for allowing them to dispose of waste at the facility. The entity incurs costs in relation to operating the waste disposal facility including: When the entity pays the waste levies and the CPM costs to the relevant Australian government agency, Division 81 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) applies to the payments and these payments are not subject to GST. This is because these amounts are Australian fees or charges imposed on the entity under an Australian law that are payable to an Australian government agency, and the entity is the entity that is liable to pay for these amounts under the relevant law. The entity recovers the waste levies and CPM costs by including amounts in relation to these costs in the total amount charged to customers when they dispose of waste at the facility. In some cases, the amounts recovered in relation to the waste levies and CPM costs are identified separately in the tax invoices issued to customers.", "Reasons_for_Decision": "Summary: Division 81 of the (GST Act) applies to the payment (or the discharging of the liability to make a payment) of Australian taxes or Australian fees or charges, to an Australian government agency by an entity that is liable for the tax, fee or charge under the provisions of the applicable Australian law. The payment of fees or charges to which Division 81 applies is not subject to GST. When the entity allows customers to dispose of waste at its waste disposal facility and charges customers a fee, the entity is making a taxable supply of waste management services under section 9-5 of the GST Act and the fee charged is consideration for that supply. The entity calculates the fee charged on a commercial basis. Generally, the calculation of such fees can be affected by many factors and typically reflect the costs of providing the services including, for example, costs of Australian taxes and Australian fees and charges for which the entity is liable and which the entity may seek to recover. In the present case, the entity may identify separate amounts in relation to the waste levies and CPM costs in the tax invoices issued to customers to indicate some or all of these costs are being recovered in the total amount charged for the services. While the total amount charged to customers may be calculated by reference to the waste levies and CPM costs, the amount paid by the customer to the entity does not meet the requirements of Division 81 as they are not being paid to an Australian government agency under an Australian law. That is, the amount identified as being for the recovery of the waste levies and CPM costs are subject to GST. This is consistent with the view explained at paragraphs 8 and 9 of Goods and Services Tax Determination GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises?. Therefore, the total amount charged to customers, including amounts for the recovery of waste levies and CPM cost, is the consideration for the taxable supply of waste management services made by the entity and the entity is liable to pay GST on the total amount. That is, the entity does not exclude the amounts included for recovery of these costs when calculating the GST payable, even if the amounts are identified separately in tax invoices issued to customers.", "Date_of_Decision": "2 July 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 81", "Related_Public_Rulings_and_Determinations": "GSTR 2000/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Australian tax Australian fee or charge Australian government agency Australian law consideration goods and services tax supply", "Case_References": "", "Other_References": "", "Business_Line": "Interpretative Assistance, ITX", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201338", "Unmatched_Content": "Deleted note referring to subsection 81-10(2) of A New Tax System (Goods and Services Tax) Act 1999 and paragraph 81-10.01(1)(d) of the A New Tax System (Goods and Services Tax) Regulations to improve clarity. These provisions are not relevant to the decision. | Editing to improve clarity. These amendments do not change the substance of the advice in this ATO ID. | Added note about the repeal of the Clean Energy Act 2011. | Related Public Rulings (including Determinations) GSTR 2000/10 | Keywords Australian tax Australian fee or charge Australian government agency Australian law consideration goods and services tax supply"}
{"ATO_ID_Number": "ATO ID 2012/55", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Goods and Services Tax and Division 81 of the A New Tax System (Goods and Services Tax) Act 1999: registration of a community plan, deposited plan or strata plan", "Issue": "Is the payment to an Australian government agency (you) of a fee for pre-examination of a community plan, deposited plan or strata plan (plan) the provision of consideration under subsection 81-10(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because it is a fee that is of a kind prescribed by paragraph 81-10.01(e) of the A New Tax System (Goods and Services Tax) Regulations (GST Regulations)?", "Decision": "Yes, the payment to you of a fee for pre-examination of a plan is the provision of consideration under subsection 81-10(2) because it is a fee that is prescribed by paragraph 81-10.01(e) of the GST Regulations.", "Facts": "Unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 . You are an Australian government agency established by State law and are registered for GST. A land owner who requires the registration of a plan must lodge an application for registration and pay a fee to you. The application for registration of the plan is for the purpose of altering the legal identity of the land by: Upon the registration of the plan by you, the following actions occur: Prior to the lodgment of an application for registration of a plan a land owner may pay a fee to you for a review of the draft plan to ensure that it complies with the legislative requirements. Pre-examination of a draft plan is not a compulsory requirement in the process of seeking registration of a plan. For GST purposes, the fees for the registration of the plan and the pre-examination of the draft plan are Australian fees or charges because they are:", "Reasons_for_Decision": "Summary: Subsection 81-10(1) provides that a payment of a fee or charge that is of a kind covered by subsection 81-10(4) or 81-10(5) is not the provision of consideration. However, subsection 81-10(2) provides that a regulation can be made to treat the payment, or the discharge of the liability to make such a payment, of an Australian fee or charge as the provision of consideration for a supply. | Detailed Reasoning - Fees relating to permissions etcetera: Subsection 81-10(4) covers a fee or charge if the fee or charge: Although the pre-examination of a plan will not, in itself, give rise to the provision of a permission, exemption, authority or licence, (permission etc) the pre-examination fee will be covered by subsection 81-10(4) if the fee 'relates to' or 'relates to an application for' the provision of such a permission etcetera. It is therefore necessary to consider two things: Firstly, it is necessary to determine whether the fee relates to a permission etcetera for the purposes of subsection 81-10(4). These words are not defined in the GST Act or the GST Regulations and therefore take their ordinary meaning in the context in which they are used. The following definitions are drawn from The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 . Permission is defined as '1. the act of permitting; formal or express allowance or consent. 2. liberty or licence granted to do something'. Authority is defined as '7. a warrant for action; justification'. We consider that the registration of a plan is the provision of a permission for the purposes of subsection 81-10(4). Registration of the plan permits the land owner to deal with or otherwise use the real property based on the new legal identity of the land. | Detailed Reasoning - Relates to: Goods and Services Tax Ruling GSTR 2003/9: Goods and Services Tax: financial acquisitions threshold (GSTR 2003/9) provides that the words 'relates to' must be read in the context in which they appear and courts have ruled that the terms be interpreted in accordance with the intent of the relevant statute. On the basis that we consider that registration of a plan is the provision of a permission, we also consider that a fee or charge for the pre-examination of a plan prior to lodgment of a plan for registration also relates to an application for the provision of a permission for the purposes of subsection 81-10(4). As pre-examination of a plan is a service used by the land owner associated with the process of seeking registration of a final plan, it is considered that a fee or charge imposed on land owners to access the service relates to an application to which subsection 81-10(4) applies. | Detailed Reasoning - Fees relating to information and record keeping etcetera: Subsection 81-10(5) covers a fee or charge paid to an Australian government agency if the fee or charge relates to the agency doing any of the following: The fees or charges for the pre-examination of a plan relate to the agency doing some of the activities that are listed in paragraphs 81-10(5)(a) to 81-10(5)(g). Specifically, we consider that the fees or charges relate to the agency receiving and/or processing information under paragraphs 81-10(5)(e) and 81-10(5)(f). As the fees are of the kind covered by subsections 81-10(4) and 81-10(5), subsection 81-10(1) applies and these payments are 'not the provision of consideration.' However, a fee or charge covered by subsection 81-10(1) may still be subject to GST where subsection 81-10(2) applies. Subsection 81-10(2) provides that a payment you make, or a discharging of your liability to make a payment, is treated as the provision of consideration to the extent the payment is an Australian fee or charge that is, or is of a kind, prescribed by the GST Regulations. For the purposes of subsection 81-10(2), the following kinds of Australian fees or charges are prescribed in GST Regulation 81-10.01: Paragraph 81-10.01(e) of the GST Regulations is relevant to a fee or charge for pre-examination of a plan. We consider that the fee for the pre-examination of the draft plan is a fee for pre-lodgment advice. In addition, we have previously determined that the pre-examination of the draft plan relates to an application to which subsection 81-10(4) applies. On the basis that the fee for the pre-examination of the draft plan is a fee for pre-lodgment advice which relates to an application which is covered by subsection 81-10(4) and it is not compulsory to seek that advice, the requirements of paragraph 81-10.01(e) of the GST Regulations are satisfied. This means that subsection 81-10(2) applies because the payment is an Australian fee or charge that is a kind which is prescribed in the GST Regulations. Even though it is considered that subsection 81-10(5) may also apply to the fee or charge for pre-examination of a plan, subsection 81-10(2) prevails. Accordingly the relevant fees and charges are consideration for a supply. Therefore the supply to which this fee relates will be a taxable supply where all of the conditions in section 9-5 are satisfied.", "Date_of_Decision": "7 June 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 81 subsection 81-10(1) subsection 81-10(2) subsection 81-10(4) subsection 81-10(5) subsection 81-10(5)(a) subsection 81-10(5)(b) subsection 81-10(5)(c) subsection 81-10(5)(d) subsection 81-10(5)(e) subsection 81-10(5)(f) subsection 81-10(5)(g)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST consideration Goods and services tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201255", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords GST consideration Goods and services tax"}
{"ATO_ID_Number": "ATO ID 2012/87", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Division 81 of the A New Tax System (Goods and Services Tax) Act 1999: whether payment of general rates imposed by a local government is an 'Australian tax' for Division 81 purposes", "Issue": "Does the payment of general rates to the entity, a local government, constitute the payment of an 'Australian tax', for the purposes of subsection 81-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, the payment of general rates to the entity constitutes the payment of an 'Australian tax', for the purposes of subsection 81-5(1) of the GST Act. As a consequence, the payment is not consideration and general rates are not subject to goods and services tax (GST).", "Facts": "The entity is a local government in a State (including a territory) of Australia. The way in which the entity is constituted and the nature and extent of its powers and responsibilities is governed by a legislative act of State Parliament (the local government act). The local government act empowers, and requires, the entity to levy general rates (or ordinary rates) on rateable land within the entity's local government area. The general rates levied and received by the entity form part of the entity's general revenue which is held in the entity's consolidated fund. This fund is available to be expended by the entity for any purpose related to local government operations. The local government act also empowers the entity to levy other charges in addition to general rates, for example, charges for water supply, sewerage, or drainage. These are separate charges which, in accordance with the local government act, do not fall within the description of general rates. Land owners are liable to pay general rates to the entity solely as a consequence of their land ownership within the entity's local government areas. The amount of general rates charged is calculated according to a formula contingent upon the rateable value of the land. The entity may undertake enforcement action to recover unpaid general rates. A land owner has a right of appeal regarding the extent to which land is rateable. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Australian tax Subsection 81-5(1) of the GST Act states that a payment, or the discharging of a liability to make a payment, is not the provision of consideration to the extent that the payment is an 'Australian tax'. For GST purposes, an 'Australian tax' is a tax (however described) imposed under an 'Australian law'. Australian law The GST Act defines an Australian law in section 195-1 by reference to the dictionary in the Income Tax Assessment Act 1997 at section 995-1 which in turn refers to the definitions in that Act of 'Commonwealth law', 'State law' and 'Territory law'. When the above definitions are read together, 'an Australian law' means: The term 'Australian law' encompasses Acts and laws made under law making powers which are delegated by Parliaments, such as regulations, legislative instruments, by-laws, proclamations and orders made under Acts. Tax In The Municipal Council of Sydney v. The Commonwealth (1904) 1 CLR 208 ( Municipal Council of Sydney ), all three judges of the High Court agreed that the municipal rates which had been imposed were taxes within the meaning of section 114 of the Constitution. Chief Justice Griffith noted at 233: ...I am of the opinion that the rates sought to be recovered in this action are taxes within the meaning of sec. 114 of the Constitution... He also noted at 230: The Statute operates as a delegation of the taxing power of the State, coupled with a direction when and how to use it. The assessment of land and the striking of a rate together operate as municipal legislation in exercise of the power. It is clear, therefore, that under this [Sydney Corporation] Act the imposition of a rate is the act of the corporation, and not of the State, and that the tax is imposed from time to time when the rate for the year is made. Municipal Council of Sydney was cited with authority by the High Court in Roy Morgan Research Pty Ltd v. Federal Commissioner of Taxation [2011] HCA 35 ( Roy Morgan ), and as noted at paragraph 23 of the High Court's decision in Roy Morgan , the Municipal Council of Sydney was established and continued by state legislation that empowered the Council to levy rates in respect of land situated in the City of Sydney. Further, as referred to at paragraph 25 of the decision in Roy Morgan , the rates levied by the Municipal Council of Sydney were raised 'for the general expenditure of the city' and were paid 'into the office of the city treasurer'. Municipal Council of Sydney is authority for the view that general rates levied and received by the entity, under State legislation, are a 'tax'. The municipal rates levied by the Municipal Council of Sydney, that were found by the High Court in Municipal Council of Sydney to be in the nature of a 'tax', are levied and received on an almost identical basis, and raised for the same purpose, as the general rates that are raised by the entity, pursuant to State legislation, in this case. Furthermore, the general rates levied by the entity pursuant to state legislation satisfy the following usual description of a tax, as cited in Roy Morgan , as per Latham CJ in Matthews v. Chicory Marketing Board (Vict ) (1938) 60 CLR 263: .....a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered ... Consequently, the general rates levied by the entity are levied by a public authority; a local government. Legislation empowers the entity to levy general rates and to enforce their payment and, as opposed to being payment for services rendered, the general rates are levied on all land owners because of their ownership of land in a local government area, and are applied for the general expenditure of the local government area. That is, for public purposes. Conclusion It is considered that the payment of general rates to the entity, is the payment of an 'Australian tax' for the purposes of subsection 81-5(1) of the GST Act. This view is consistent with paragraph 4.22 of the Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 2) Bill 2011 which lists general rates as an example of an 'Australian tax' for the purposes of the amended Division 81 of the GST Act. Paragraph 4.22 states: 4.22 Examples of Australian taxes imposed under an Australian law include: income tax, stamp duty, fringe benefits tax, payroll tax, the Medicare Levy, local government general rates and various industry levies (emphasis added). Consequently the payment of general rates is not consideration for a supply and therefore is not subject to GST.", "Date_of_Decision": "12 October 2012", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 81-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST payment of taxes GST consideration Goods and services tax", "Case_References": "Matthews v Chicory Marketing Board (Victoria) (1938) 60 CLR 263", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 2) Bill 2011", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201287", "Unmatched_Content": "Keywords GST payment of taxes GST consideration Goods and services tax"}
{"ATO_ID_Number": "ATO ID 2002/877", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and amount for a vehicle modification permit included in price charged to customer for vehicle modifications", "Issue": "Is the entire fee charged by the entity, a supplier of motor vehicle modifications, consideration for its supply, under section 9-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the fee includes an amount for a vehicle modification permit that the customer is legally required to obtain and that is listed in the Treasurer's Determination made for the purposes of Division 81 of the GST Act?", "Decision": "No, the entire fee charged by the entity is not consideration for its supply, under section 9-15 of the GST Act, where the fee includes an amount for a vehicle modification permit that the customer is legally required to obtain and that is listed in the Treasurer's Determination made for the purposes of Division 81 of the GST Act. The amount for the vehicle modification permit is not consideration for the entity's supply of the motor vehicle modification to the customer.", "Facts": "The entity is a supplier of motor vehicle modifications. The entity modifies a customer's motor vehicle. Under the relevant legislation, the customer is required to obtain a motor vehicle permit from the relevant authority to certify that the car modification is in accordance with safety standards. After completion of the modification, the entity takes the vehicle to be inspected by the relevant authority and pays for the permit. The permit is issued in the name of the owner of the vehicle, that is, the entity's customer. The permit is listed in the Treasurer's Determination made for the purposes of Division 81 of the GST Act (Treasurer's Determination). The relevant authority does not apply goods and services tax (GST) to the amount charged for the permit. In its total fee to the client, the entity separately identifies on its invoice to the client, the fee for the vehicle modification permit, costs incurred in taking the vehicle to be inspected, parts and labour. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Under section 9-15 of the GST Act, consideration includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything. The total fee paid by the client includes amounts for the vehicle modification permit, costs incurred in taking the vehicle to be inspected, parts and labour. The payment for the parts, labour and costs incurred to take the vehicle to be inspected are connected with the supply of vehicle modifications made by the entity and are therefore consideration. However, it needs to be determined whether the part of the fee that is for the vehicle modification permit is also consideration for the entity's supply. That is, is the customer paying the entity for its vehicle modification services or is it paying the relevant authority for the vehicle modification permit. The owner of the vehicle is legally required to obtain the vehicle modification permit which is issued by the relevant authority in the owner's name. Therefore, the supply of the permit is made by the relevant authority to the entity's customer and not to the entity. When the entity pays for the permit it is acting as a paying agent for its customer. Paragraph 49 of Goods and Services Tax Ruling GSTR 2000/37 outlines the GST consequences where one entity, a solicitor, acts as a paying agent for a client and on charges the amount paid: 'If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor.' This example is similar to the entity's arrangement. The entity, in its capacity as paying agent for its customer, pays the relevant authority for the permit. The permit to which the payment relates is supplied by the relevant authority to the customer, not to the entity. Therefore, the amount paid by the customer to the entity for the permit is a reimbursement which forms no part of the consideration payable to the entity for the supply of the vehicle modifications. As such, the entire fee charged by the entity is not consideration for its supply under section 9-15 of the GST Act, where the fee includes an amount for a vehicle modification permit that the customer is legally required to obtain and that is listed in the Treasurer's Determination. The amount for the vehicle modification permit is not consideration for the entity's supply of the motor vehicle modification to the customer. GSTR 2000/37", "Date_of_Decision": "3 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-15 section 9-70 Division 81", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/133", "Subject_References": "Goods and services tax GST payment of taxes State & local government taxes", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002877", "Unmatched_Content": "Keywords Goods and services tax GST payment of taxes State & local government taxes"}
{"ATO_ID_Number": "ATO ID 2001/133", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Stamp Duty", "Issue": "Is the entity, a hire company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it hires out goods to a customer in exchange for a fee that includes an amount on-charged by the entity for stamp duty incurred in the course of making the supply?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it hires out goods to a customer in exchange for a fee that includes an amount on-charged by the entity for stamp duty incurred in the course of making the supply.", "Facts": "The entity is a hire company. The entity pays stamp duty to a State government in the course of its enterprise. As the stamp duty incurred by the entity is listed in the A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2001 (Determination), it is not subject to goods and services tax (GST) by virtue of subsection 81-5(2) of the GST Act. The entity hires out goods to a customer in exchange for a monetary fee. Included in that monetary fee is an amount on-charged by the entity to its customer for the stamp duty paid by the entity to a State government. The entity is registered for GST. The supply is made in the course or furtherance of the entity's enterprise and is connected with Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: In this case, the entity is registered for GST and the supply is made in the course of the entity's enterprise and is connected with Australia. As such, it is necessary to consider whether the entity is making a supply to its customer for 'consideration' as per the requirement in paragraph 9-5(a) of the GST Act. Paragraph 9-15(1)(a) of the GST Act provides that 'consideration' includes any payment in connection with a supply of anything. In this case, the entity has received consideration from its customer in the form of a monetary fee. However, subsection 81-5(2) of the GST Act states that the payment of any Australian tax, fee or charge that is specified in a written determination of the Treasurer is not the provision of consideration. In this case, the stamp duty incurred by the entity is specified in a written determination of the Treasurer, namely the Determination. However, it is considered that taxes, fees and charges incurred by a supplier in the course of its enterprise are 'business costs'. When a supplier on-charges a business cost to its customers, the business cost loses its character as a tax, fee or charge for the purposes of the Determination. Therefore, in this case, when the entity on-charges the cost of stamp duty incurred to its customer, the customer is no longer paying stamp duty to a State government but rather they are paying for a business cost of the entity. As such, the payment by the entity's customer amounts to consideration under paragraph 9-15(1)(a) of the GST Act, because the payment does not come within the scope of subsection 81-5(2) of the GST Act. Therefore, the entity is making a supply for consideration under paragraph 9-5(a) of the GST Act. In this case, the entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, as the supply is neither GST-free under Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act; the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "6 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) section 9-15 paragraph 9-15(1)(a) section 9-75 Division 38 Division 40 subsection 81-5(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Determination GSTD 2000/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST miscellaneous GST ministerial determinations GST special rules GST payment of taxes GST supplies & acquisitions GST consideration Taxable supply", "Case_References": "", "Other_References": "A New Tax System (Goods and Services Tax) (Exempt Taxes, Fees and Charges) Determination 2001", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001133", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Determination GSTD 2000/10 | Keywords Goods & services tax GST free GST miscellaneous GST ministerial determinations GST special rules GST payment of taxes GST supplies & acquisitions GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of care services to a person who lives in supported accommodation", "Issue": "Is the entity, a supplier of care services, making a GST-free supply under subsection 38-30(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it is funded for and supplies one of the services listed in Schedule 1 to the GST-free Supply (Care) Determination 2000 (Care Determination), to a client who lives in supported accommodation?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-30(4) of the GST Act when it is funded for and supplies one of the services listed in Schedule 1 to the Care Determination, to a client who lives in supported accommodation.", "Facts": "The entity is a supplier of care services. The entity supplies services that are listed in Schedule 1 to the Care Determination. The entity supplies these services to a young client who suffers from a disability. The entity receives payment for its services from funds that are sourced from the relevant State Government budget. The entity is not contracted by a government entity or any business entity to provide these services to the client. The client is not living in long term care in a hospital or other institution, is not in receipt of residential care within the meaning of the Aged Care Act 1997 and is not currently in receipt of residential care pursuant to subsection 38-25(2) or subsection 38-25(3) of the GST Act. The client lives in supported accommodation, whereby they live independently in the community in shared accommodation, but require assistance with daily living activities from attendant carers. If the client did not receive these services, they would be at risk of prematurely needing long term care in a hospital or other institution. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-30(4) of the GST Act provides that a supply of care is GST-free if: For the purposes of subsection 38-30(4) of the GST Act, it is considered that a payment constitutes 'funding from the Commonwealth, a State or a Territory' if the funds are sourced from Commonwealth, State or Territory budgets under a government-funded care program. The entity receives payment for its services from funds that are sourced from the relevant State Government budget under a government-funded care program and as such, the first requirement of subsection 38-30(4) of the GST Act is satisfied. The second requirement of subsection 38-30(4) of the GST Act requires that the supply of the care is of a kind determined in writing by the Aged Care Minister to be similar to a supply that is GST-free because of subsection 38-30(2) of the GST Act. Clause 4 of the Care Determination provides that the supply of care of a kind mentioned in Schedule 1 to the Care Determination to a 'targeted person' is similar to a supply that is GST-free because of subsection 38-30(2) of the GST Act. The term 'targeted person' is defined in the Care Determination to mean a frail, older person or a younger person who: The entity provides its services to a young client who suffers from a disability. If the client did not receive these services, they would be at risk of prematurely needing long term care in a hospital or other institution. As such, it remains to be determined whether the client 'lives at home'. A person 'lives at home' when they are living in the community but are not in long term care provided in a hospital or other institution or through a residential care service within the meaning of the Aged Care Act. For the purposes of the Care Determination, a person does not have to live in their private home to satisfy the requirement that they live at 'home'. The entity is supplying services to a client who lives in supported accommodation. Although they require assistance with daily living activities and do not live in their own private home, they do live independently in the community in shared accommodation. They are not living in long term care provided in a hospital or other institution or in long term care provided through a residential care service within the meaning of the Aged Care Act. As such, the client meets the definition of a 'targeted person' as provided in the Care Determination. The services that the entity supplies to the client are listed in Schedule 1 to the Care Determination. Therefore, the entity is supplying services of a kind determined in writing by the Aged Care Minister to be similar to a supply that is GST-free because of subsection 38-30(2) of the GST Act and the second requirement of subsection 38-30(4) of the GST Act is satisfied. The entity is making a GST-free supply under subsection 38-30(4) of the GST Act when it supplies one of the services that is listed in Schedule 1 to the Care Determination, to a client who lives in supported accommodation.", "Date_of_Decision": "15 September 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-30 subsection 38-30(2) subsection 38-30(4) paragraph 38-30(4)(a) paragraph 38-30(4)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-30 - community care", "Case_References": "", "Other_References": "GST-free Supply (Care) Determination 2000, Schedule 1", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200541", "Unmatched_Content": "This ATO ID is being reviewed for minor updates following the replacement of the Aged Care Act 1997 with the Aged Care Act 2024 from 1 November 2025. | Keywords Goods and services tax GST free GST health Section 38-30 - community care"}
{"ATO_ID_Number": "ATO ID 2003/1038", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supplies of meals funded under the Home and Community Care Act 1985", "Issue": "Is the entity, a community organisation, making a GST-free supply under subsection 38-30(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a meal to a person where the entity receives funding under the Home and Community Care Act 1985 to provide meals to people in the community?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-30(2) of the GST Act when it supplies a meal to a person where the entity receives funding under the Home and Community Care Act to provide meals to people in the community.", "Facts": "The entity is a community organisation. The entity receives funding under the Home and Community Care Act to provide meals to people in their own homes. The entity supplies a meal to a person. The person provides consideration for the meal. The transactions can be illustrated: The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-30(2) of the GST Act, a supply of care is GST-free if the supplier receives funding under the Home and Community Care Act in connection with the supply. The provision of meals is accepted as the provision of care for the purposes of subsection 38-30(2) of the GST Act. The entity receives funding under the Home and Community Care Act to provide meals to people in their own homes. As such, the entity is making a GST-free supply under subsection 38-30(2) of the GST Act when it supplies a meal, for which the entity receives funding under the Home and Community Care Act to provide the meal. Note: The funding to provide meals to people in the community (supply 1) is not consideration for the supply of a meal to an individual. This funding will often be consideration for a supply made to the funding body and the GST status of that supply is considered separately. Note 2: This decision (supply 2) generally only has practical effect where the individual provides consideration for the supply that is made to that individual. Where no consideration is provided, there is no need to determine the GST status of the supply.", "Date_of_Decision": "18 April 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-30(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-30 - community care", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031038", "Unmatched_Content": "Keywords Goods and services tax GST free GST health Section 38-30 - community care"}
{"ATO_ID_Number": "ATO ID 2005/333", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and personal importation of a drug that is the subject of an approval under the Therapeutic Goods Act 1989", "Issue": "Is the entity, a patient suffering from a serious illness, making a taxable importation under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when:", "Decision": "No, the entity is not making a taxable importation under section 13-5 of the GST Act. The entity's importation is a non-taxable importation.", "Facts": "The entity is a patient who is suffering from a serious illness. The entity is importing a drug that is an injection that contains material of human or animal origin. The drug has not yet been approved for supply in Australia. The drug is for the entity's personal use. In accordance with paragraph 19(1)(a) of the Therapeutic Goods Act, the entity's medical practitioner applied for, and was granted, an approval from the Therapeutic Goods Administration (TGA) to import the unapproved drug under the Special Access Scheme for the treatment of the entity. However, the entity, not the medical practitioner, imported the drug into Australia. The entity's importation of the drug is covered by subsection 18(1) of the Therapeutic Goods Act and Item 1(b) in Schedule 5 to the Therapeutic Goods Regulations 1990. The entity provided a copy of the medical practitioner's approval at the time of importation. The entity's importation is not covered by Part 3-2 of the GST Act.", "Reasons_for_Decision": "Summary: Section 13-5 of the GST Act provides that an entity makes a taxable importation if: However, the importation is not a taxable importation to the extent that it is a non-taxable importation. Under section 13-10 of the GST Act, an importation is a non-taxable importation if: The entity's importation is not covered by Part 3-2 of the GST Act and therefore, the importation is only GST-free if, had the importation been a supply, it would have been GST-free or input taxed. Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation is GST-free. Paragraph 38-50(6)(a) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if the drug or medicinal preparation is the subject of an approval under paragraph 19(1)(a) of the Therapeutic Goods Act and any conditions to which the approval is subject have been complied with. The entity's medical practitioner obtained approval under paragraph 19(1)(a) of the Therapeutic Goods Act to import the drug for the treatment of the entity. However, the entity's medical practitioner did not import the goods into Australia under this approval. The entity imported the goods into Australia and its importation is covered by subsection 18(1) of the Therapeutic Goods Act and Item 1(b) in Schedule 5 to the Therapeutic Goods Regulations. Therefore, it is necessary to determine if, for the purposes of paragraph 38-50(6)(a) of the GST Act, the drug is considered to be the subject of an approval under paragraph 19(1)(a) of the Therapeutic Goods Act when it is not imported under that approval. The effect of subsection 18(1) of the Therapeutic Goods Act and Item 1(b) in Schedule 5 to the Therapeutic Goods Regulations is that a person can import, for the purposes of treating themselves or their immediate family, injections that contain material of human or animal origin if the drugs are the subject of an approval under section 19 of the Therapeutic Goods Act. Therefore, the drugs retain their character as drugs that are \"the subject of an approval under section 19 of the Therapeutic Goods Act\" as they are for the treatment of that entity identified in the approval even though they are not imported by the medical practitioner who obtained that approval. As such, paragraph 38-50(6)(a) of the GST Act is satisfied. However, subsection 38-50(7) of the GST Act provides that a supply of a drug or medicinal preparation covered by section 38-50 is only GST-free if, and only if: As the entity is an individual and the drugs are for their own treatment, the requirements of subsection 38-50(7) of the GST Act are satisfied. As paragraph 38-50(6)(a) and subsection 38-50(7) of the GST Act are satisfied, if the importation of the drug had of been a supply, it would be GST-free under section 38-50 of the GST Act. As such, the entity's importation is a non-taxable importation under section 13-10 of the GST Act.", "Date_of_Decision": "16 November 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 section 13-10 section 38-50 paragraph 38-50(6)(a) subsection 38-50(7) Part 3-2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-50 - drugs & medicinal preparations GST imports Non-taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005333", "Unmatched_Content": "Keywords Goods and services tax GST free GST health Section 38-50 - drugs & medicinal preparations GST imports Non-taxable importations"}
{"ATO_ID_Number": "ATO ID 2003/1122", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the importation of drugs for use in treating a patient", "Issue": "Is the entity, a medical practitioner, making a non-taxable importation under section 13-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it imports a drug for use in treating a patient?", "Decision": "No, the entity is not making a non-taxable importation under section 13-10 of the GST Act when it imports a drug for use in treating a patient. The entity is making a taxable importation under section 13-5 of the GST Act.", "Facts": "The entity is a medical practitioner. The entity imports a drug for use in treating a patient. The drugs are not non-taxable importations under Part 3-2 of the GST Act. The entity is registered for goods and services tax (GST). The goods are imported and are entered for home consumption within the meaning of the Customs Act 1901 .", "Reasons_for_Decision": "Summary: Under section 13-10 of the GST Act, an importation is a non-taxable importation if: As the importation is not a non-taxable importation under Part 3-2 of the GST Act, it is necessary to determine if, had it been a supply, it would have been GST-free or input taxed. Under section 38-50 of the GST Act, a supply of certain drugs and medicinal preparations are GST-free. However, a supply of a drug or medicinal preparation is only GST-free under section 38-50 of the GST Act if: While the drugs imported by the entity, may be drugs which are for human use or consumption, it is necessary to determine whether the supply is to an individual for private or domestic use or consumption. The drugs are being imported by the entity to be used in the carrying on of its enterprise. The entity is not importing the drugs for its own private or domestic use. Therefore, if there had been a supply to the entity (instead of an importation by the entity), the supply would not be GST-free under section 38-50 of the GST Act. Furthermore, if there had been a supply to the entity, the supply would not be GST-free under any other provision in Division 38 of the GST Act nor would it be input taxed under Division 40 of the GST Act. Therefore, the importation is not a non-taxable importation under section 13-10 of the GST Act. As such, the entity is making a taxable importation under section 13-5 of the GST Act when it imports drug for use in treating a patient.", "Date_of_Decision": "31 October 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 section 13-10 Division 38 section 38-50 subsection 38-50(7) Division 40 Part 3-2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST-free GST health Section 38-50 - drugs & medicinal preparations Non-taxable importations Taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031122", "Unmatched_Content": "Keywords Goods and services tax GST-free GST health Section 38-50 - drugs & medicinal preparations Non-taxable importations Taxable importations"}
{"ATO_ID_Number": "ATO ID 2002/254", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of paracetamol products to pharmacies and supermarkets", "Issue": "Is the entity, a supplier of paracetamol products, making a GST-free supply under section 38-50 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies paracetamol products to pharmacies and supermarkets?", "Decision": "No, the entity is not making a GST-free supply under section 38-50 of the GST Act, when it supplies paracetamol products to pharmacies and supermarkets. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of paracetamol products. The entity supplies paracetamol products to pharmacies and supermarkets. The paracetamol products are for human use or consumption. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation is GST-free. For a supply of a drug or medicinal preparation to be GST-free under section 38-50 of the GST Act, the supply must first satisfy the requirements in subsection 38-50(7) of the GST Act. Where this condition is satisfied, the supply must also satisfy the requirements contained in at least one of subsections 38-50(1), 38-50(2), 38-50(4), 38-50(4A), 38-50(5) or 38-50(6) of the GST Act. Subsection 38-50(7) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free under this section if, and only if: In the present circumstances, the entity is supplying paracetamol products that are for human use or consumption. However, the supply is not made to an individual for their private or domestic use or consumption. The entity is supplying the paracetamol product to supermarkets and pharmacies. Therefore, the requirements of subsection 38-50(7) of the GST Act are not satisfied. Accordingly, the supply is not GST-free under section 38-50 of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies paracetamol products to pharmacy and supermarkets.", "Date_of_Decision": "19 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-50(7) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST health Section 38-50 - drugs and medicinal preparations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002254", "Unmatched_Content": "Keywords Goods & services tax GST-free GST health Section 38-50 - drugs and medicinal preparations"}
{"ATO_ID_Number": "ATO ID 2001/492", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of a repeat prescription", "Issue": "Is the entity, a medical practitioner, making a GST-free supply under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a repeat prescription to a patient?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act where it supplies a repeat prescription to a patient and it is evidenced that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of that patient.", "Facts": "The entity is a medical practitioner. The entity supplies a repeat prescription to a patient. The entity charges a fee for this repeat prescription. The prescription is not provided during a medical consultation. A medicare benefit is not payable for this service. The service is not rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 or for cosmetic reasons. In this case, the entity has previously prescribed this particular drug to the patient. The entity has assessed the patient and determined that the repeat prescription is necessary for the ongoing treatment of the patient. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free. A 'medical service' is defined under section 195-1 of the GST Act to mean: In this case, there is no medicare benefit payable for the service provided by the entity. As such, the service does not fall within the first limb of the definition of 'medical service' in section 195-1 of the GST Act. Therefore, it is necessary to determine whether the entity is making a supply that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply, as per the second limb of the definition of 'medical service' in section 195-1 of the GST Act. It is considered that appropriate treatment is established where a medical practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient. Appropriate treatment includes the principles of preventative medicine. The entity has previously assessed the patient and determined that the repeat prescription is necessary for the ongoing treatment of the patient. The medical service is not excluded under subsection 38-7(2) of the GST Act. Therefore, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it supplies a repeat prescription to a patient and it is evidenced that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of that patient.", "Date_of_Decision": "11 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(1) subsection 38-7(2) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical services", "Case_References": "", "Other_References": "Health Industry Issue Register issue 1.a.14 and 1.a.18", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001492", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Medical services"}
{"ATO_ID_Number": "ATO ID 2001/493", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of a prescription", "Issue": "Is the entity, a medical practitioner, making a GST-free supply under subsection 38-7(1) of the A New tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a prescription for an immunisation medication to a patient?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it supplies a prescription for an immunisation medication to a patient and it is evidenced that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of that patient.", "Facts": "The entity is a medical practitioner. The entity supplies a prescription for an immunisation medication to a patient. The entity charges a fee for this prescription. The prescription is not provided during a medical consultation. A medicare benefit is not payable for this service. The service is not rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 or for cosmetic reasons. The entity supplies the patient with the prescription and the patient has the prescription filled at the pharmacy. The patient usually returns to the medical practitioner to have the immunisation administered. The entity has assessed the patient during a previous consultation and determined, that the vaccination is for the appropriate treatment of the patient. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free. A 'medical service' is defined under section 195-1 of the GST Act to mean: In this case, there is no medicare benefit payable for the service provided by the entity. As such, the service does not fall within the first limb of the definition of a 'medical service' in section 195-1 of the GST Act. Therefore it is necessary to determine whether the entity is making a supply that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply, as per the second limb of the definition of 'medical service' in section 195-1 of the GST Act. It is considered that appropriate treatment is established where a medical practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient. Appropriate treatment includes the principles of preventative medicine. The entity has assessed the patient during a previous consultation and determined that the vaccination is for the appropriate treatment of the patient. The medical service is not excluded under subsection 38-7(2) of the GST Act. Therefore, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it supplies to a patient a prescription for an immunisation medication and it is evidenced that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of that patient.", "Date_of_Decision": "11 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(1) subsection 38-7(2) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical services", "Case_References": "", "Other_References": "Health Industry Issues Register issue 1.a.14 and 1.a.18", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001493", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Medical services"}
{"ATO_ID_Number": "ATO ID 2004/51", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and laser vision correction surgery", "Issue": "Is the entity, an ophthalmic surgeon, making a GST-free supply under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of laser vision correction surgery to a patient?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it makes a supply of laser vision correction surgery to a patient.", "Facts": "The entity is an ophthalmic surgeon. The entity carried out laser vision correction surgery on a patient. The surgery corrects the vision of the patient by using an excimer laser to modify the surface of the cornea. A medicare benefit is not payable for the laser vision correction surgery. An ophthalmic surgeon satisfies the definition of a medical practitioner in section 195-1 of the GST Act. The patient individually engages and pays the entity to supply the laser vision correction surgery.", "Reasons_for_Decision": "Summary: Under subsection 38-7(1) of the GST Act, a supply of a 'medical service' is GST-free. Section 195-1 of the GST Act defines a 'medical service' to mean: There is no medicare benefit payable for the laser vision correction surgery. As such, the procedure does not fall within the first limb of the definition of medical service in section 195-1 of the GST Act. Where surgery is carried out by an ophthalmic surgeon, laser vision correction surgery is considered to be 'appropriate treatment' to correct vision impairment in a patient. Also, as the patient individually engages and pays the entity to supply the laser vision correction surgery, the patient is the recipient of the supply. Therefore, laser vision correction surgery is a 'medical service' under the second limb of section 195-1 of the GST Act. However, under subsection 38-7(2) of the GST Act, a supply of a medical service is not GST-free under subsection 38-7(1) of the GST Act if: Laser vision correction surgery is not one of the services excluded under regulation 14 of the Health Insurance Regulations and therefore, the first element under subsection 38-7(2) of the GST Act does not apply. The second element of subsection 38-7(2) of the GST Act provides that a medical service is not GST-free if it is rendered for cosmetic reasons and no medicare benefit is payable for that service. There is no medicare benefit payable for the laser eye surgery. Therefore, if the service is performed for cosmetic reasons, it is not GST-free. The term 'cosmetic reasons' is not defined in the GST Act. The Macquarie Dictionary 1997 defines 'cosmetic' as: serving to beautify: imparting or improving beauty, especially of the complexion, designs to effect a superficial alteration while keeping the basis unchanged. A 'medical service' will be 'rendered for cosmetic reasons' if it is predominantly performed for, or is rendered for the purpose of permitting, the improvement of the personal appearance of a patient, such as a face-lift. Whether a service is for cosmetic reasons must be evaluated on a case by case basis. Procedures that alter or enhance a patient's appearance but have no medical or reconstructive purpose are considered to be cosmetic and are taxable. However, a procedure that is performed for medical or reconstructive reasons is not cosmetic and is GST-free. An example of this is skin grafting performed on a burn victim. The entity carries out laser vision correction surgery on a patient to correct the vision of the patient and the entity uses an excimer laser to modify the surface of the cornea. Laser surgery performed to correct a patient's vision, changes the function, but not the appearance of the eye. The laser vision correction surgery will improve the patient's vision. Therefore, the medical service is performed for medical reasons, not for cosmetic reasons and the second element in subsection 38-7(2) of the GST Act also does not apply. As neither of the elements in subsection 38-7(2) of the GST Act applies, the entity's supply of laser vision correction surgery is not excluded from being GST-free. Therefore, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it makes a supply of laser vision correction surgery to a patient.", "Date_of_Decision": "17 April 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(1) subsection 38-7(2) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-7 - medical services", "Case_References": "", "Other_References": "Health Industry Partnership - Issues Register The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200451", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-7 - medical services"}
{"ATO_ID_Number": "ATO ID 2003/1157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and medical services supplied to a health service provider", "Issue": "Is entity A, a health service provider, making a GST-free supply under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 ( GST Act), when it supplies medical assessment facilities and support services, under an agreement with entity B (another health service provider), to enable entity B to conduct medical examinations on clients?", "Decision": "No, entity A is not making a GST-free supply under subsection 38-7(1) of the GST Act when it supplies medical assessment facilities and support services, under an agreement with entity B, to enable entity B to conduct medical examinations on clients as entity A is not supplying appropriate treatment to entity B. Entity A is making a taxable supply under section 9-5 of the GST Act.", "Facts": "Entity A is a health service provider. Entity A has entered into an agreement with entity B. Under this agreement, entity A provides medical assessment facilities and support services to enable entity B to conduct medical examinations on particular clients. Under this agreement, entity A will provide the following services to entity B at pre-determined times throughout the year: The supply of the actual medical assessment to clients is made by doctors who have been engaged by entity B. A medicare benefit is not payable for the supply of services by entity A. Entity A is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free. A 'medical service' is defined under section 195-1 of the GST Act to mean: There is no medicare benefit payable for the services provided by entity A. As such, the service does not fall within the first limb of the definition of medical service as provided in section 195-1 of the GST Act. Therefore, it is necessary to determine whether entity A is making a supply under the second limb of the definition of medical service provided in section 195-1 of the GST Act. One of the requirements of the second limb of the definition of medical service is that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply. Appropriate treatment is established where a practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and includes subsequent supplies for the assessed process. Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean the entity to which the supply was made. There is an agreement that entity A will provide medical assessment facilities and support services to enable entity B to conduct medical examinations on clients. Entity B is the recipient of the supply of these services and the services being provided by entity A are commercial in nature. In addition, the supply of the actual medical assessment to clients is made by doctors who have been engaged by entity B. As such, entity A is not supplying appropriate treatment to entity B, the recipient of the supply. Therefore, entity A is not making a GST-free supply under subsection 38-7(1) of the GST Act. Entity A is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, entity A is making a taxable supply under section 9-5 of the GST Act when it supplies medical assessment facilities and support services, under an agreement with entity B, to enable entity B to conduct medical examinations on clients.", "Date_of_Decision": "19 December 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-7(1) Division 40 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-7 - medical services GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031157", "Unmatched_Content": "Keywords Goods and services tax GST free GST health Section 38-7 - medical services GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/501", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and speech therapy in a group environment following a detailed one on one assessment of a child", "Issue": "Is the entity, a speech pathologist, making a GST-free supply under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, after conducting a detailed one on one assessment of a child, the entity supplies speech therapy to the child in a group environment?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-10(1) of the GST Act when, after conducting a detailed one on one assessment of the child, the entity supplies speech therapy to the child in a group environment.", "Facts": "The entity is a speech pathologist. The entity supplies speech therapy to children in a group environment. The entity undertakes a detailed one on one assessment of a child's language skills prior to the child attending therapy. This assessment is conducted to determine whether speech therapy in a group environment will be beneficial for the child. From the assessment, the entity plans the content of the speech therapy sessions to target the specific needs of the children attending. Speech therapy conducted in a group environment, under these circumstances, is accepted within the speech pathology profession as an appropriate method of treating a child with speech difficulties. The entity is a member of the relevant national professional association and is a recognised professional as defined in section 195-1 of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-10(1) of the GST Act, an entity makes a GST-free supply of other health services if: Speech pathology services are listed at item 19 in the table in subsection 38-10(1) of the GST Act and the entity is a recognised professional in relation to the supply of speech pathology. As such, the first two requirements under subsection 38-10(1) of the GST Act are satisfied. The third requirement is that the treatment must be generally accepted in the relevant health profession as being necessary for the appropriate treatment of the recipient. 'Appropriate treatment' will be established where a recognised professional, assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of that recipient, insofar as that professional area of training allows. It will include subsequent supplies for the determined process. Appropriate treatment includes the principles of preventative medicine. Such treatment must be generally accepted in the profession associated with supplying services of that kind, as being necessary. The entity undertakes a detailed one on one assessment of a child's language skills prior to the child attending therapy. This assessment is to determine whether speech therapy in a group environment will be beneficial for the child. From the assessment, the entity plans the content of the speech therapy sessions to target the specific needs of the children attending. Therefore, the entity has assessed the child's health to determine the appropriate treatment for the child. Speech therapy conducted in a group environment, under these circumstances, is accepted within the speech pathology profession as an appropriate method of treating a child with speech difficulties. As such, the third requirement of subsection 38-10(1) of the GST Act is satisfied. The entity's supply of the speech therapy satisfies all of the requirements under subsection 38-10(1) of the GST Act. Therefore, the entity is making a GST-free supply under subsection 38-10(1) of the GST Act when after conducting a detailed one on one assessment of the child, the entity supplies speech therapy to the child in a group environment.", "Date_of_Decision": "22 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(1) subsection 38-10(1) table item 19 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and service tax GST free GST health Section 38-10 - other health services", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004501", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and service tax GST free GST health Section 38-10 - other health services"}
{"ATO_ID_Number": "ATO ID 2003/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and goods supplied after conclusion of GST-free other health service", "Issue": "Is the entity, a health professional, making a GST-free supply under subsection 38-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies goods to a client after the conclusion of a GST-free consultation?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-10(3) of the GST Act when it supplies goods to a client after the conclusion of a GST-free consultation. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a health professional. The entity supplies a client with a health service that is GST-free under subsection 38-10(1) of the GST Act. Because of this health service, the entity establishes that the client requires certain goods for their treatment. The entity does not have the goods in stock at the time of consultation. The entity orders the goods and supplies them to the client on a subsequent day after they have been delivered. The supply of the goods occurs at the same premises at which the GST-free health service was supplied. The entity does not provide any health services to the client at the time of supplying the goods. The goods are not GST-free medical aids or appliances under subsection 38-45(1) of the GST Act. The entity is not a Naturopath, Herbal medicine provider, Optometrist or Pharmacist. The goods are not 'Other GST-free health goods' under subsection 38-47(1) of the GST Act. The goods are not GST-free drugs or medicinal preparations under section 38-50 of the GST Act. The entity is registered for goods and services tax (GST) and the supply of the goods satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-10(3) of the GST Act provides that a supply of goods is GST-free if: The entity is not a Naturopath, Herbal medicine provider, Optometrist or Pharmacist and has supplied its client with a GST-free health service under subsection 38-10(1) of the GST Act. The entity also supplies the goods from the same premises at which the GST-free health service was supplied. Therefore, it needs to be determined whether the entity is supplying the goods 'in the course of supplying' the GST-free health service. For goods to be supplied 'in the course of supplying to the person a service', in the context of subsection 38-10(3) of the GST Act, the goods must be supplied at the same point in time at which the GST-free health service is supplied. In addition, the goods have to be either: The entity does not have the goods in stock at the time of the GST-free consultation. The entity orders the goods and, after they have been delivered, supplies the goods to its patient. Therefore, the goods are not supplied at the same point in time as the GST-free consultation. In addition, when the entity finally does supply the goods to the client, it does not provide the client with any further health services. The entity is merely making a sale of goods. As such, the entity is not making a GST-free supply of goods under subsection 38-10(3) of the GST Act as the entity is not supplying the goods to its client 'in the course of supplying' its GST-free health service. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods to a client after the conclusion of a GST-free consultation.", "Date_of_Decision": "5 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-10(1) subsection 38-10(3) subsection 38-10(4) section 38-45 subsection 38-45(1) section 38-47 subsection 38-47(1) section 38-50 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-10 - other health services GST supplies & acquisition Taxable supply", "Case_References": "", "Other_References": "Health Industry Partnership - Issues Register - issue 2.b", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200310", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-10 - other health services GST supplies & acquisition Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/522", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and monitoring of 'medical alert' devices by an ambulance service", "Issue": "Is the entity, an ambulance service, making a GST-free supply under subsection 38-10(5) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a service of monitoring a 'medical alert' device to a person whose medical practitioner considers it necessary that a medical alert device be installed in their home as part of their ongoing treatment?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-10(5) of the GST Act when it supplies a service of monitoring a 'medical alert' device to a person whose medical practitioner considers it necessary that a medical alert device be installed in their home as part of their ongoing treatment.", "Facts": "The entity is an ambulance service. The entity supplies a medical alert device monitoring service to an individual. The individual's medical practitioner considers it necessary that the 'medical alert' device be installed within the individual's home as part of their ongoing treatment. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-10(5) of the GST Act provides that a supply is GST-free if it is provided by an ambulance service in the course of treatment of the recipient of the supply. Accordingly, the monitoring of a medical alert device is GST-free where it is supplied: As the monitoring service is supplied by an ambulance service, the first element of subsection 38-10(5) of the GST Act is met. Subsection 38-10(5) of GST Act also requires that the service be supplied 'in the course of the treatment of the recipient of the supply'. Where a patient is receiving ongoing medical treatment and as part of that ongoing treatment, the patient's medical practitioner considers it necessary for the patient to be monitored by means of a medical alert device, the service of monitoring the medical alert device is considered to be supplied 'in the course of the treatment of the recipient of the supply'. The individual's medical practitioner considers it necessary that the 'medical alert' device be installed within the individual's home as part of their ongoing treatment. Therefore, the second element of 38-10(5) of the GST Act is met. Accordingly, the entity is making a GST-free supply under subsection 38-10(5) of the GST Act when it supplies a service of monitoring a 'medical alert' device to a person whose medical practitioner considers it necessary that a medical alert device be installed in their home.", "Date_of_Decision": "10 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-10 - other health services", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002522", "Unmatched_Content": "Keywords Goods and services tax GST free GST health Section 38-10 - other health services"}
{"ATO_ID_Number": "ATO ID 2001/390", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and psychology services", "Issue": "Is the entity, a supplier of health services, making a GST-free supply under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies psychology services in a group therapy session?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-10(1) of the GST Act when it supplies psychology services in a group therapy session.", "Facts": "The entity is a supplier of health services. The entity supplies psychology treatment in a group environment rather than individually. The entity is registered as a psychologist as required by State law. The therapy services provided in the group session are considered by the psychology profession as being necessary for the appropriate treatment of the patients in these circumstances. The entity assesses each patient and determines that group therapy is an appropriate form of treatment for each of those patients. The group session is for treatment purposes and is not a general information session. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-10(1) of the GST Act provides that a supply of other health services is GST-free if: For the purposes of paragraph 38-10 (1)(a) of the GST Act, the service must be of a kind specified in the table in the subsection. Psychology services are listed at item 16 of the table contained in subsection 38-10(1) of the GST Act. For the purposes of paragraph 38-10(1)(b) of the GST Act, a recognised professional must provide the service. Section 195-1 of the GST Act provides that a person is a recognised professional, in relation to a supply of services of a kind specified in subsection 38-10(1) of the GST Act (psychology services), if: '(a) the service is supplied in a State or Territory in which the person has permission or approval, or is registered, under a State law or a Territory law prohibiting the supply of services of that kind without such permission, approval or registration'. A person practicing in psychology is a 'recognised professional' if they are registered under a State or Territory law prohibiting the supply of psychology services without such registration. In this case, the entity is registered as a psychologist by a State law. As such, the psychologist is a recognised professional under paragraph 38-10(1)(b) of the GST Act. For the purposes of paragraph 38-10(1)(c) of the GST Act, the psychologist must provide the service, and the psychology profession would need to consider the service as being necessary for the appropriate treatment of the recipient of the supply in these circumstances. In this case, the group therapy services are conducted by a registered psychologist and are generally accepted in the psychology profession as being necessary for the appropriate treatment of the recipient of the supply. Therefore, the entity is making a GST-free supply under subsection 38-10(1) of the GST Act when it supplies psychology services in a group therapy session.", "Date_of_Decision": "6 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(1) paragraph 38-10(1)(a) paragraph 38-10(1)(b) paragraph 38-10(1)(c) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001390", "Unmatched_Content": "Keywords Goods & services tax GST free GST health"}
{"ATO_ID_Number": "ATO ID 2001/661", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and goods supplied during an herbal medicine service", "Issue": "Is the entity, a qualified herbalist, making a GST-free supply under subsection 38-10(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a herbal mixture to a patient during a GST-free herbal medicine service, where the mixture is for use after the consultation?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-10(4) of the GST Act when it supplies a herbal mixture to a patient during a GST-free herbal medicine service, where the mixture is for use after the consultation. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a qualified herbalist. The entity supplies a herbal medicine service to a patient. This service is GST-free under subsection 38-10(1) of the GST Act. During this service, the entity supplies a herbal mixture to the patient. This herbal mixture is customised for the exclusive treatment of the particular patient's illness or disability and is to be used by the patient after the consultation. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-10(4) of the GST Act provides that the supply of goods is GST-free if: Item 8 in the table in subsection 38-10(1) of the GST Act lists 'Herbal medicine (including traditional Chinese herbal medicine)'. The entity is supplying a GST-free herbal medicine service to the patient. Therefore, it is necessary to determine whether the supply of the goods is 'in the course of supplying' the GST-free herbal medicine service. It is considered that the phrase 'in the course of supplying' in the context of subsection 38-10(4) requires that the goods must be supplied at the same point in time as the GST-free health service and must have been either: The entity supplies the herbal mixture to the patient during the consultation and therefore the mixture is supplied at the same point in time as the GST-free herbal service. Additionally, the herbal mixture is customised for the exclusive treatment of the illness or disability of the entity's patient who is the recipient of the GST-free herbal service. Therefore, the first requirement in subsection 38-10(4) of the GST Act is met. The second requirement of subsection 38-10(4) of the GST Act is that the goods must be supplied and used or consumed at the premises where the service is supplied. The entity supplies the herbal mixture during the consultation and it is therefore supplied at the premises where the service is supplied. However, the herbal mixture is to be used by the patient after the consultation. Therefore, the herbal mixture is not used or consumed at the premises where the service is supplied and the second requirement of subsection 38-10(4) of the GST Act is not met. Consequently, the supply is not GST-free under subsection 38-10(4) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a herbal mixture to a patient during a GST-free health service, where the mixture is to be used after the consultation.", "Date_of_Decision": "6 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-10(1) subsection 38-10(1) table item 8 subsection 38-10(1) table item 9 subsection 38-10(4) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST health Section 38-10 - other health services", "Case_References": "", "Other_References": "Health Issues Register - Issue 2.b, 2.c", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001661", "Unmatched_Content": "Keywords Goods & services tax GST-free GST health Section 38-10 - other health services"}
{"ATO_ID_Number": "ATO ID 2001/663", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and kinesiology services", "Issue": "Is the entity, a provider of natural therapies, making a GST-free supply under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies kinesiology services to a patient?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-10(1) of the GST Act when it supplies kinesiology services to a patient. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a provider of natural therapies. The entity supplies kinesiology services to a patient. The entity is not an Acupuncturist, Herbal Medicine practitioner, Chiropractor or Naturopath. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-10(1) of the GST Act, an entity makes a GST-free supply of health services if: Kinesiology is not listed in the table in subsection 38-10(1) of the GST Act or in the GST Regulations. Therefore, kinesiology, in itself, does not satisfy the requirement in paragraph 38-10(1)(a) of the GST Act. However, the requirement in paragraph 38-10(1)(a) of the GST Act is satisfied where the supplier is supplying one of the services listed in the table in subsection 38-10(1) of the GST Act and kinesiology is a standard technique or a component of the supply of that listed service. For example, 'Acupuncture', 'Chiropractic', 'Herbal medicine (including traditional Chinese herbal medicine)', and 'Naturopathy' are services in the table in subsection 38-10(1) of the GST Act for which kinesiology, as a diagnostic technique, may be considered a component of the supply. In these cases, the kinesiology, as a component of the supply rather than as a supply in its own right, will have the same GST status as the treatment supplied as part of that supply. For example, where kinesiology is used to diagnose a condition and that practitioner performs acupuncture as a treatment, the kinesiology will be a component of the supply of acupuncture and will have the same GST status as the acupuncture. The entity in this particular case is providing a kinesiology service. The entity is not supplying any of the relevant services listed in the table in subsection 38-10(1) of the GST Act or the GST Regulations. Therefore, the requirement in paragraph 38-10(1)(a) of the GST Act is not satisfied and the supply is not GST-free under subsection 38-10(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not a GST-free supply under Division 38 of the GST Act or input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it provides kinesiology services to a patient.", "Date_of_Decision": "6 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-10(1) paragraph 38-10(1)(a) paragraph 38-10(1)(b) paragraph 38-10(1)(c) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health section 38-10 - other health services GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001663", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health section 38-10 - other health services GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/993", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of disability services where the service provider receives block funding", "Issue": "Is the entity, a disability support service provider, making a GST-free supply under section 38-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies disability support services, for which it receives block funding, to a client who pays for the disability services in full?", "Decision": "Yes, the entity is making a GST-free supply under section 38-40 of the GST Act when it supplies disability support services, for which it receives block funding, to a client who pays for the disability services in full.", "Facts": "The entity is a disability support service provider. The entity supplies disability services to a particular client with a disability. The entity charges this client for the disability services and for all overheads associated with the provision of these services. The entity receives funding under a State law, which is complementary to the Disability Services Act 1986 , to supply disability services to its clients. This funding comes in the form of 'block funding' and 'packages'. The block funding is provided to help fund the general provision of disability services to its clients. Package funding is provided for the purpose of funding services to particular clients. This particular client is not one of the clients for which package funding is provided. The terms of the service agreement, between the entity and the government agency that provides the funding, do not restrict the entity from applying all or some of the block funding towards providing disability services to the client. The entity does not apply any of the block funding towards providing disability services to the client. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A supply of services is GST-free under section 38-40 of the GST Act, if the supplier receives funding under the Disability Services Act or under a complementary State law or Territory law in respect of the services. The entity receives funding under a State law that is complementary to the Disability Services Act. Therefore, if this funding is in respect of the services provided to the client, the entity's supply will be GST-free. This funding comes in the form of 'block funding' and 'packages'. The package funding is provided for the purpose of funding services to particular clients. However, this particular client is not one of the clients for which this funding is provided. The block funding is provided to help fund the general provision of disability services to its clients. While the entity does not apply any of the block funding towards providing disability services to the client, the service agreement that the entity has with the government agency does not restrict the entity from applying all or some of the block funding towards providing disability services to the client. The entity has the option to apply the funding to the supply of services to this particular client, if the entity chooses to do so. Therefore, the block funding is in respect of the general provision of disability services to its clients including the services provided to the client. This is not altered by the fact that the client pays in full for these services. Accordingly, the entity is making a GST-free supply under section 38-40 of the GST Act when it supplies disability support services, for which it receives block funding, to a client who pays for the disability services in full.", "Date_of_Decision": "4 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-40 - specialist disability services", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003993", "Unmatched_Content": "Keywords Goods and services tax GST free GST health Section 38-40 - specialist disability services"}
{"ATO_ID_Number": "ATO ID 2014/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and contoured pillows", "Issue": "Is the entity making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies a contoured pillow designed for people with head and/or neck injuries?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a contoured pillow designed for people with head and/or neck injuries.", "Facts": "The entity is a supplier of a contoured pillow. The contoured pillow is specifically designed for people with head and neck injuries. The contoured pillow is designed to be placed on a mattress and alter the position of the user's head and/or neck while they sleep. The contoured pillow is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 82 in the table in Schedule 3 (Item 82) lists 'night-time positioning equipment modifications'. The contoured pillow is covered by item 82 because it is a product that modifies the function of a mattress, which is 'night time positioning equipment' as held by the Administrative Appeal Tribunal in Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation [2013] AATA 802. The contoured pillow is designed to be placed on and used in conjunction with a mattress to alter the flat, horizontal surface of the mattress and to change the sleeping position of the user by altering the position of the user's head and neck while they sleep. This pillow is specifically designed for people with an illness or disability as it's designed for people with head and/or neck injuries. Also, the pillow is not widely used by people without an illness or disability. Therefore, the supply of the contoured pillow is GST-free pursuant to section 38-45(1) of the GST Act. Note: Pillows that are not specifically designed for people with an illness or disability do not satisfy subsection 38-45(1) of the GST Act. For example, a product which is designed to promote healthy posture while sleeping and prevent or reduce the risk of postural problems and neck stiffness from occurring in the future is not specifically designed for people with an illness or disability. Further, pillows (including contoured pillows) that are widely used by people without an illness or disability do not satisfy subsection 38-45(1).", "Date_of_Decision": "17 June 2014", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 paragraph 182-10(2)(c) section 182-15 Schedule 3 Schedule 3 table item 66 Schedule 3 table item 82 Schedule 3 table item 87", "Related_Public_Rulings_and_Determinations": "ATO ID 2002/525 is overturned by this decision.", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health section 38-45 - medical aids & appliances supplies & acquisitions taxable supply", "Case_References": "Snugfit Australia Pty Ltd v. Federal Commissioner of Taxation [2013] AATA 802", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201421", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Related Public Rulings (including Determinations) ATO ID 2002/525 is overturned by this decision. | Keywords Goods & services tax GST free GST health section 38-45 - medical aids & appliances supplies & acquisitions taxable supply"}
{"ATO_ID_Number": "ATO ID 2006/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sound amplifiers for people with hearing difficulties", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a product that is a sound amplifier for people with hearing difficulties?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act. The product is a 'speech amplification /clarification aid' under Item 14 of Schedule 3 to the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity is registered for goods and services tax (GST). The entity supplies a product that is a sound amplifier for people with hearing difficulties. The product works with a hearing aid and is designed to enable the hearing-impaired person to better listen to what they need to, without the limitation of distance and the noise and distraction of other background noise. The product is specifically designed and manufactured to benefit a person with a hearing impairment who wears a hearing aid, and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances will be GST-free where the medical aid or appliance: Item 14 in the table in Schedule 3 to the GST Act (Item 14) lists 'speech amplification/clarification aids'. A speech amplification/clarification aid is a device that is designed to make a person's voice or sound appear larger and/or clearer and more intelligible. The entity is supplying a product that is a sound amplifier for people with hearing problems. The product works with a hearing aid and is designed to enable the hearing-impaired person to better listen to what they need to, without the limitation of distance and the noise and distraction of other background noise. As the product makes a person's voice or sound appear clearer and more intelligible, it is a 'speech amplification/clarification aid' under Item 14. Since the product is specifically designed and manufactured to benefit a person with a hearing impairment who wears a hearing aid, it is specifically designed for people with an illness or disability. Further, it is not widely used by people without an illness or disability. As such, the product satisfies all the requirements in subsection 38-45(1) of the GST Act. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a product that is a sound amplifier for people with hearing difficulties.", "Date_of_Decision": "14 December 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-45(1) Schedule 3 Schedule 3 table item 14", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/212", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20061", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions"}
{"ATO_ID_Number": "ATO ID 2006/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of vertical lifts specifically designed for use primarily by people with limited mobility", "Issue": "Is the entity, a supplier of lifts, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a slow speed vertical lift that is specifically designed for use primarily by people with limited mobility?", "Decision": "Yes. The entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a slow speed vertical lift that is specifically designed for use primarily by people with limited mobility.", "Facts": "The entity is a supplier of lifts. It supplies a slow speed vertical lift that is for use primarily by people with limited mobility. The lift is electrically operated. The lift complies with the relevant part of the Australian Standard (AS 1735) in relation to passenger lifts that are for use primarily by persons with limited mobility (Part 15, 16 or 17 as the case may require). There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 88 in the table in Schedule 3 (Item 88) lists 'manual, electric, ceiling track or pool hoists specifically designed for people with disabilities'. The ordinary meaning of 'hoist' as defined in The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd New South Wales is: 4. an apparatus for hoisting, as a lift. 5. a lift for heavy goods: goods lift. The usual devices that are covered by Item 88 are used to lift an individual and transfer them, for example, from a bed to a wheelchair or from a wheelchair into a pool. The ordinary meaning of 'hoist' also covers lifts. The lift is electrically operated. Therefore, it is included in the range of hoists to which Item 88 relates subject to it satisfying Item 88 in relation to specific design requirements. Item 88 restricts the device to those which are specifically designed for people with disabilities. The Australian Standards in relation to lifts, escalators and moving walks (AS 1735) have parts which relate to people with limited mobility, for example, AS 1735.15 applies to 'passenger lifts that are intended primarily to provide vertical access for persons with limited mobility'. This evidences that some lifts are specifically designed for people with disabilities and are not merely general purpose passenger lifts with additional facilities for people with disabilities such as Braille information and lower buttons which are accessible by people in wheelchairs. Therefore, vertical lifts that are specifically designed for people with disabilities are covered by Item 88. This satisfies the first requirement in subsection 38-45(1) of the GST Act. The second requirement in subsection 38-45(1) of the GST Act is that the item must be specifically designed for people with an illness or disability. The vertical lift complies with the relevant part of the Australian Standard (AS 1735) in relation to passenger lifts that are for use primarily by people with limited mobility. As the requirements of Item 88 are that the device must be specifically designed for people with disabilities, and Item 88 has been satisfied, this requirement is also satisfied. The third requirement in subsection 38-45(1) of the GST Act is that the thing supplied is not widely used by people without an illness or disability. The entity supplies a slow speed vertical lift that is for use primarily by people with limited mobility. It is not a lift that is widely used by people without an illness or disability. Therefore, this requirement is also satisfied. All the requirements in subsection 38-45(1) of the GST Act are satisfied. The entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a slow speed vertical lift that is specifically designed for use primarily by people with limited mobility.", "Date_of_Decision": "7 February 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 88", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd NSW.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200637", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2005/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and mattress as spare part for hospital bed", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply of a spare part under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a hospital bed mattress?", "Decision": "Yes, the entity is making a GST-free supply of a spare part under subsection 38-45(2) of the GST Act when it supplies a hospital bed mattress.", "Facts": "The entity is registered for goods and services tax (GST). The entity is a supplier of medical aids and appliances. The entity supplies hospital bed mattresses. The mattresses have a PVC cover consisting of medical grade vinyl or polyurethane to prevent penetration of fluids. The cover may either be welded shut or have a zip allowing the cover to be removed. Mattresses with a zip have a flap over the zip. The mattresses are specifically designed to fit 'hospital-type beds' listed at item 61 in the table in Schedule 3 to the GST Act (Item 61), the supplies of which are GST-free under subsection 38-45(1) of the GST Act. There is no agreement between the entity and the recipient that the supply of the mattresses will not be a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(2) of the GST Act, the supply of a spare part is GST-free if the spare part is: The entity's mattresses have a PVC cover consisting of medical grade vinyl or polyurethane to prevent penetration of fluids. The mattresses are specifically designed to fit 'hospital-type beds' listed at Item 61, the supplies of which are GST-free under subsection 38-45(1) of the GST Act. Therefore, the entity is supplying a mattress that is specifically designed for a GST-free medical aid or appliance. However, the entity's supply will only be GST-free if the mattress is a 'spare part' for a hospital-type bed. The term 'spare part' is not defined in the GST Act. 'Spare part' is defined in The Macquarie Dictionary , 1997, 3rd edition, The Macquarie Library Pty Ltd NSW, as a 'part which replaces a faulty, worn or broken part of a machine'. Accordingly, a part need not actually be replacing something which is faulty, worn or broken to qualify as a spare part, but just be capable of doing so. Therefore, it needs to be determined if a mattress is 'part' of a bed. Neither the term 'hospital-type bed' nor the word 'bed' are defined in the GST Act. The Macquarie Dictionary , 1997, 3rd edition, The Macquarie Library Pty Ltd NSW, defines the word 'bed' to mean, amongst other things, ' 1. a piece of furniture upon which or within which a person sleeps. 2. the mattress and bedclothes together with the bedstead. 3. the bedstead alone. 4 ...' Therefore, 'bed' could mean the frame and mattress or the frame only. The context within which the word 'bed' is used in Item 61 does not suggest that 'bed' should be given its more restrictive meaning. Therefore, the word 'bed' as used in Item 61 refers to both the bed frame and its mattress. Accordingly, a mattress forms part of a bed for the purposes of Item 61. The entity is supplying a mattress that is capable of replacing an existing hospital bed mattress that is worn, faulty or broken. Therefore, the mattress supplied by the entity is a 'spare part' for a hospital bed. Therefore, the entity is making a GST-free supply of a spare part under subsection 38-45(2) of the GST Act when it supplies a hospital bed mattress.", "Date_of_Decision": "20 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) subsection 38-45(2) Schedule 3 Schedule 3 table item 61", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/5", "Subject_References": "Goods and services tax GST-free GST health Medical aids and appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20054", "Unmatched_Content": "Keywords Goods and services tax GST-free GST health Medical aids and appliances"}
{"ATO_ID_Number": "ATO ID 2005/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and hospital bed mattresses as pressure management devices", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a hospital bed mattress that has an in-built layer of convoluted egg crate foam?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a hospital bed mattress that has an in-built layer of convoluted egg crate foam.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a hospital bed mattress that has an in-built layer of convoluted egg crate foam. The convoluted egg crate foam assists in the even distribution of pressure for patients who may be lying down for prolonged periods, such as patients in a hospital setting. The mattresses have a PVC cover to prevent penetration of fluids. The cover is either welded shut or may have a zip allowing the cover to be removed. Those mattresses with a zip have a flap over the zip. The mattresses are specifically designed to fit hospital beds and are predominately used in hospitals and nursing homes. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 66 in the table in Schedule 3 (Item 66) lists 'pressure management mattresses and overlays'. A mattress will be a 'pressure management mattress' where it is designed to provide comfort and prevent bed sores by evenly distributing the pressure exerted by the mattress on the patient's body. The entity is supplying a hospital bed mattress that has an in-built layer of convoluted egg crate foam forming part of the mattress. The egg crate foam assists in the even distribution of pressure for patients who may be lying down for prolonged periods, such as patients in a hospital setting. As such, the entity's hospital bed mattress is a pressure management mattress, covered by Item 66. The entity's mattresses have a PVC cover which is either welded or has a covered zip, to prevent bodily fluids from permeating the mattress. The mattresses are designed to fit specifically onto hospital type beds and are predominately used in hospitals and nursing homes where patients may be lying down for prolonged periods. Therefore, the shape and construction of the mattresses are such that the entity's mattresses are specifically designed for people with an illness or disability and not widely used by people without an illness or disability. As such, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a hospital bed mattress that has an in-built layer of convoluted egg crate foam.", "Date_of_Decision": "20 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 66", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/4", "Subject_References": "Goods and services tax GST-free GST Health Medical aids and appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20055", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST-free GST Health Medical aids and appliances"}
{"ATO_ID_Number": "ATO ID 2005/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a Braille sign", "Issue": "Is the entity, a sign manufacturer and supplier, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a Braille sign which does not comprise any non-Braille component such as words or diagrams?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a Braille sign which does not comprise any non-Braille component such as words or diagrams.", "Facts": "The entity is a sign manufacturer and supplier. The entity manufactures and supplies a Braille sign. The signs are installed in public buildings and provide information for the visually impaired as to the location of various areas and amenities inside and outside of the building, including: toilets, parents' rooms, lifts, stairs, and access ramps. The sign does not comprise any non-Braille component such as words or diagrams for use by the sighted. The entity is registered for goods and services tax (GST) and there is no agreement between the entity and the recipient that the supply of the Braille sign will not be GST-free.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 151 in the table in Schedule 3 (Item 151) lists 'auditory/tactile alerting devices'. The phrase 'auditory/tactile alerting devices' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'auditory' to mean 'relating to hearing, or the sense of hearing ...', 'tactile' to mean '1. of or relating to the organs of sense or touch. 2. perceptible to the touch...'; and 'alert' to mean '...4. an alarm or warning..' Accordingly, an auditory/tactile alerting device is a device which is designed to alert a visually impaired person to a presence, occurrence or danger through the person's sense of touch or hearing. The Braille sign constructed and supplied by the entity uses Braille to relay information to the visually impaired through their sense of touch. The sign is installed in public buildings and provides information for the visually impaired as to the location of various areas and amenities inside and outside of the building, including: toilets, parents' rooms, lifts, stairs, and access ramps. Therefore, the Braille sign is an auditory/tactile alerting device and is covered by Item 151. The Braille sign is designed specifically for the purpose of communicating information to the visually impaired and is only used by people able to read Braille. It does not comprise any non-Braille component for use by the sighted, such as words or diagrams, and therefore, is not widely used by people who are not visually impaired. As such, the supply of the Braille sign meets the requirements of subsection 38-45(1) of the GST Act and is GST-free.", "Date_of_Decision": "8 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 151", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/79 | ATO ID 2005/80 | ATO ID 2002/230", "Subject_References": "Goods and services tax GST free GST health GST supplies & acquisitions Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200578", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health GST supplies & acquisitions Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2005/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and signs containing words, diagrams and Braille translation", "Issue": "Is the entity, a sign manufacturer and supplier, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a sign that comprises information for the sighted and a Braille translation of that information for the visually impaired?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a sign that comprises information for the sighted and a Braille translation of that information for the visually impaired as the sign is widely used by people without an illness or disability. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a sign manufacturer and supplier. The entity manufactures and supplies various types of signs for use by both the sighted and visually impaired. The entity is constructing and installing a sign that comprises information for the sighted and a Braille translation of that information for the visually impaired. The information for the sighted is displayed on the sign with words and/or diagrams. A Braille translation of that information is either built into the surface of the sign or is recorded in a 'Braille skin' which is then laid over the sign prior to installation. The signs are installed in public buildings and provide information as to the location of various areas and amenities inside and outside of the building, including: toilets, parents' rooms, lifts, stairs, and access ramps. The sign is designed as a directional aid for all members of the general public, whether sighted or visually impaired. The entity is registered for goods and services tax (GST) and its supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 151 in the table in Schedule 3 (Item 151) lists 'auditory/tactile alerting devices'. The phrase 'auditory/tactile alerting devices' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'auditory' to mean 'relating to hearing, or the sense of hearing ...', 'tactile' to mean '1. of or relating to the organs of sense or touch. 2. perceptible to the touch...'; and 'alert' to mean '...4. an alarm or warning..' Accordingly, an auditory/tactile alerting device is a device which is designed to alert a visually impaired person to a presence, occurrence or danger through the person's sense of touch or hearing. The entity's sign comprises words, diagrams and a corresponding Braille translation and is designed to alert both the sighted and visually impaired to the presence and location of various things inside and outside of the public building. The Braille component of the sign uses Braille to relay this information to the visually impaired through their sense of touch. Due to its Braille component, the sign is an auditory/tactile alerting device and is covered by Item 151. The remaining requirements in subsection 38-45(1) of the GST Act are that the sign must be specifically designed for people with an illness or disability and not widely used by people without an illness or disability. The sign is designed for and installed in public buildings. It is used by any person, whether sighted or visually impaired, who enters that building and uses the sign for information. Therefore, the sign is widely used by people without an illness or disability. As such, the supply of the sign does not meet the remaining requirement of subsection 38-45(1) of the GST Act and is not GST-free. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a single sign that comprises directional information for the sighted and a Braille translation of that information for the visually impaired.", "Date_of_Decision": "8 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 151", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/78 | ATO ID 2005/80 | ATO ID 2002/230", "Subject_References": "Goods and services tax GST free GST health GST supplies & acquisitions Section 38-45 - medical aids & appliances Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200579", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health GST supplies & acquisitions Section 38-45 - medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of Braille overlay for existing sign", "Issue": "Is the entity, a sign manufacturer and supplier, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies and installs a Braille overlay for a sign?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies and installs a Braille overlay for a sign.", "Facts": "The entity is a sign manufacturer and supplier. The entity manufactures and supplies a Braille overlay for an existing sign that is located in a public building. The entity did not supply the existing sign. The existing sign contains information in the form of words and diagrams. The Braille overlay is a Braille translation of that existing information which is recorded on a 'Braille skin' that is then laid over the existing sign. The existing sign is located in a public building and provides information as to the location of various areas and amenities inside and outside of the building, including: toilets, parents' rooms, lifts, stairs, and access ramps. The existing sign is designed as a directional aid for the general public, whether sighted or visually impaired. There is no agreement between the entity and the recipient of the supply that the supply will be treated as taxable. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 151 in the table in Schedule 3 (Item 151) lists 'auditory/tactile alerting devices'. The phrase 'auditory/tactile alerting devices' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997), 3rd edition, The Macquarie Library Pty Ltd, New South Wales defines 'auditory' to mean 'relating to hearing, or the sense of hearing ...', 'tactile' to mean '1. of or relating to the organs of sense or touch. 2. perceptible to the touch ...' and 'alert' to mean '... 4. an alarm or warning...' Accordingly, an auditory/tactile alerting device is a device which is designed to alert a visually impaired person to a presence, occurrence or danger through the person's sense of touch or hearing. The Braille overlay constructed, supplied and installed by the entity uses Braille to relay information to the visually impaired through their sense of touch. The overlay is installed on signs located in public buildings and provides a Braille translation of the information contained on that sign. Its purpose is to alert the visually impaired as to the location of various areas and amenities inside and outside of the building, including: toilets, parents' rooms, lifts, stairs and access ramps. Therefore, the Braille overlay is an auditory/tactile alerting device and is covered by Item 151. The Braille overlay is designed specifically for the purpose of translating and communicating information to the visually impaired and is only used by people able to read Braille. The overlay itself does not comprise any non-Braille component for use by the sighted, such as words or diagrams, and therefore, is not widely used by people who are not visually impaired. As such, the supply of the Braille overlay meets the requirements of subsection 38-45(1) of the GST Act and is GST-free. The GST Act does not provide for the supply of labour services relating to medical aids and appliances to be GST-free. For example, labour for the installation of a GST-free medical aid/appliance that is not provided by the supplier of the medical aid/appliance, or that is provided by the same supplier but in a later transaction that is distinct and separate to the supply of the medical aid/appliance, does not form part of the GST-free supply of the medical aid/appliance and is not GST-free under subsection 38-45(1) of the GST Act. However, where the supply of GST-free medical aids/appliances is supplied in one transaction which also includes labour components (such as for the installation of the medical aid/appliance), the GST treatment of the transaction will depend on how the supply is characterised. It will either be: In this instance, the substance of the entity's supply was the Braille overlay itself. The labour involved in attaching the Braille overlay to the existing sign is incidental to the supply of the overlay and forms no significant component of the entity's overall supply. Therefore, the supply of the labour component, being integral, ancillary or incidental to the supply of the Braille overlay itself, forms part of the GST-free supply of the Braille overlay under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "8 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/78 | ATO ID 2005/79 | ATO ID 2002/230", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales Health Industry Partnership - Issues Register: Issue 4.a.13", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200580", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2005/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and custom-made surgical footwear", "Issue": "Is the entity, a supplier of footwear, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies custom-made surgical footwear?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies custom made surgical footwear.", "Facts": "The entity is a supplier of footwear. The entity supplies surgical footwear that is custom-made to provide support, and correct, a person's deformed foot. The custom-made footwear is specifically designed for people with a disability and not widely used by people without disabilities. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: The entity supplies modified surgical footwear that has been modified for a client with a disability. Of relevance to the entity's supply is item 41 in the table in Schedule 3 (Item 41). Item 41 lists 'surgical shoes, boots, braces and irons'. The phrase 'surgical shoes, boots, braces and irons' is not defined in the GST Act. Therefore, it is appropriate to consider its ordinary meaning. The Macquarie Dictionary (1997), 3RD edition, The Macquarie Library Pty Ltd, New South Wales, defines surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'. Accordingly, 'surgical shoes and boots' are shoes or boots designed to support or correct a deformed foot or leg or those designed to be worn to support or protect a foot as a result of surgery. The entity supplies surgical footwear that is custom-made to provide support, and correct, a person's deformed foot. Therefore, the custom-made surgical footwear are surgical shoes and are covered by Item 41. The custom-made surgical shoes are specifically designed for people with a disability and not widely used by people without a disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies custom-made surgical footwear.", "Date_of_Decision": "30 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 41", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/87 | ATO ID 2005/89 | ATO ID 2005/90 | ATO ID 2005/91", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions", "Case_References": "", "Other_References": "The Macquarie Dictionary (1997), 3RD edition. The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200588", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions"}
{"ATO_ID_Number": "ATO ID 2005/89", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of footwear modified to support and correct a deformed foot", "Issue": "Is the entity, a supplier of footwear making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies modified footwear, being general purpose orthopaedic footwear that has been modified to support and correct a person's deformed foot?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies modified footwear, being general purpose orthopaedic footwear that has been modified to support and correct the person's deformed foot.", "Facts": "The entity is a supplier of footwear. The entity supplies general purpose orthopaedic footwear that it has modified so that the shoes provide support and correct a person's deformed foot. Modifications to the footwear are done by using build ups, sole and heel flares and adding calliper sockets or braces. The modified footwear is specifically designed to correct and support the person's deformed foot. Footwear that has been modified in this manner is not widely used by people without disabilities. There is no agreement between the entity and the recipient of supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Item 41 in the table in Schedule 3 (Item 41) lists 'surgical shoes, boots, braces and irons'. The phrase 'surgical shoes, boots, braces and irons' is not defined in the GST Act. The Macquarie Dictionary (1997), 3RD edition, The Macquarie Library Pty Ltd, New South Wales, defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'. Accordingly, 'surgical shoes and boots' are shoes or boots designed to support or correct a deformed foot or leg or those designed to be worn to support or protect a foot as a result of surgery. This includes fully customised medical grade shoes and boots. A surgical shoe does not include shoes that are designed merely for comfort or for wearers who have extra long, extra wide, extra high or injured feet, even if the shoes are custom made or modified. Neither will it include shoes which are merely designed or worn to correct stance or posture. The entity supplies general purpose orthopaedic footwear that has been modified to support and correct a person's deformed foot. Therefore, the modified footwear is covered by Item 41. The modified footwear is specifically designed for the person's foot and is therefore, specifically designed for people with a disability. The modified footwear is not widely used by people without a disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies general purpose orthopaedic footwear that has been modified to support and correct the person's deformed foot.", "Date_of_Decision": "30 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 41", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/88 | ATO ID 2005/90 | ATO ID 2005/91", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary (1997), 3RD edition. The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200589", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2005/90", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of general purpose orthopaedic footwear known as comfort footwear", "Issue": "Is the entity, a supplier of footwear, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies general purpose orthopaedic footwear known as comfort footwear?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells general purpose orthopaedic footwear known as comfort footwear. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of footwear. The entity supplies general purpose orthopaedic footwear known as comfort footwear. Comfort footwear is footwear that is designed to provide extra comfort to the wearer, particularly people with extra long, extra wide, extra high or injured feet. Comfort footwear is sold to the public. Orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses comfort footwear. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of sections 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: The entity supplies general purpose orthopaedic footwear that is designed to provide extra comfort to the wearer. Of relevance to the entity's supply is item 41 in the table in Schedule 3 (Item 41) and item 42 in the table in Schedule 3 (Item 42). Item 41 lists 'surgical shoes, boots, braces and irons'. The phrase 'surgical shoes, boots, braces and irons' is not defined in the GST Act. The Macquarie Dictionary (1997), 3RD edn, The Macquarie Library Pty Ltd, New South Wales, defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'. Accordingly, 'surgical shoes, boots, braces and irons' are shoes or boots (and associated braces and irons) designed to support or correct a deformed foot or leg and those designed to be worn to support and protect a foot as a result of surgery. This includes fully customised medical grade shoes and boots. Footwear that is designed for general use or is designed primarily to provide proper support and comfort in general (as opposed to supporting or correcting a deformed foot) is not covered by Item 41. The entity's comfort footwear is general purpose orthopaedic footwear that is only designed to provide extra comfort to the wearer, particularly people with extra long, extra wide, extra high or injured feet. They are not designed to support or correct deformed feet or support and protect a foot after surgery. Although orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses the entity's footwear, this does not alter the design or purpose of the footwear. The entity's footwear is not covered by Item 41. Item 42 lists 'orthotics'. The word 'orthotics' is not defined in the GST Act. The Macquarie Dictionary (1997), 3RD edn, The Macquarie Library Pty Ltd, New South Wales, defines 'orthotic' as the adjectival form of the word orthosis. Orthosis is defined as 'a device applied to the body to modify position or motion, as a supporting collar, plaster cast, etc'. Therefore, an orthotic for the purposes of Item 42 is a device which is applied to the body to change or alter position or motion, or prevent movement. Shoes could be orthotics but only in very limited situations. The common meaning of the term 'orthotics', in relation to feet, is that it applies to devices which are inserts for shoes, and not to shoes themselves. For shoes to be orthotics, they would have to be custom made and incorporate an orthotic device as an integral part of the shoe. Such shoes would generally only be made for a person with some form of deformity. Therefore shoes which can be classed as 'orthotics' would generally also be classed as 'surgical shoes'. The entity's footwear provides extra comfort to the wearer. It does not change or alter the position or motion, or prevent movement, in the feet of the wearer. Therefore, the entity's footwear is not covered by Item 42. Furthermore, the entity's footwear does not fall under any other item in Schedule 3 or the GST Regulations. The supply of the entity's footwear is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies general purpose orthopaedic footwear known as comfort footwear.", "Date_of_Decision": "30 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 41 Schedule 3 table item 42", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/87 | ATO ID 2005/88 | ATO ID 2005/89 | ATO ID 2005/91", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary (1997), 3RD edition. The Macquarie Library Pty Ltd, New South Wales Commonwealth of Australia 2004. GST Pharmaceutical Health Forum - Issues Register - Attachment A - Schedule 3 - Medical aid or appliance. Tax Office, viewed 19 March 2004.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200590", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/91", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of general purpose orthopaedic footwear known as extra-depth footwear", "Issue": "Is the entity, a supplier of footwear, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies general purpose orthopaedic footwear known as extra-depth footwear?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells general purpose orthopaedic footwear known as extra-depth footwear. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of footwear. The entity supplies general purpose orthopaedic footwear known as extra-depth footwear. Extra-depth footwear is footwear that is designed to accommodate the wearing of a foot orthosis to provide proper support and comfort. Extra-depth footwear is sold to the public. Orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses extra-depth footwear. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: The entity supplies general purpose orthopaedic footwear that is designed to accommodate the wearing of a foot orthosis to provide proper support and comfort. Of relevance to the entity's supply is item 41 in the table in Schedule 3 (Item 41) and item 42 in the table in Schedule 3 (Item 42). Item 41 lists 'surgical shoes, boots, braces and irons'. The phrase 'surgical shoes, boots, braces and irons' is not defined in the GST Act. Therefore the phrase will be given its ordinary meaning. The Macquarie Dictionary (1997), 3RD edn, The Macquarie Library Pty Ltd, New South Wales, defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'. Accordingly, 'surgical shoes, boots, braces and irons' are shoes or boots (and associated braces and irons) designed to support or correct a deformed foot or leg and those designed to be worn to support and protect a foot as a result of surgery. This includes fully customised medical grade shoes and boots. Footwear that is extra deep to accommodate the wearing of a foot orthosis to provide proper support and comfort in general (as opposed to extra deep to support or correct a deformed foot such as hammer toes or another specific deformity) is not covered by Item 41. The entity's extra-depth footwear is general purpose orthopaedic footwear that is only designed to accommodate the wearing of a foot orthosis. The footwear is not designed to support or correct deformed feet or support and protect a foot after surgery. Although orthopaedic specialists or chiropodists may also recommend or prescribe that an individual uses the entity's footwear, this does not alter the design or purpose of the footwear. The entity's footwear is not covered by Item 41. Item 42 lists 'orthotics'. The word 'orthotics' is not defined in the GST Act and is therefore given its ordinary meaning. The Macquarie Dictionary (1997) defines 'orthotic' as the adjectival form of the word orthosis. Orthosis is defined as 'a device applied to the body to modify position or motion, as a supporting collar, plaster cast, etc'. Therefore, an orthotic for the purposes of Item 42 is a device which is applied to the body to change or alter position or motion, or prevent movement. Shoes could be orthotics but only in very limited situations. The common meaning of the term 'orthotics', in relation to feet, is that it applies to devices which are inserts for shoes, and not to shoes themselves. For shoes to be orthotics, they would have to be custom made and incorporate an orthotic device as an integral part of the shoe. Such shoes would generally only be made for a person with some form of deformity. Therefore shoes which can be classed as 'orthotics' would generally also be classed as 'surgical shoes'. Although the entity's footwear is extra deep to accommodate the wearing of a foot orthosis, the footwear itself is not an orthotic. Therefore, the entity's footwear is not covered by Item 42. Furthermore, the entity's footwear does not fall under any other item in Schedule 3 or the GST Regulations. The supply of the entity's footwear is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies general purpose orthopaedic footwear known as extra-depth footwear.", "Date_of_Decision": "30 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 41 Schedule 3 table item 42", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/88 | ATO ID 2005/89 | ATO ID 2005/90", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary (1997), 3RD edition. The Macquarie Library Pty Ltd, New South Wales Commonwealth of Australia 2004. GST Pharmaceutical Health Forum - Issues Register - Attachment A - Schedule 3 - Medical aid or appliance. Tax Office, viewed 19 March 2004.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200591", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/295", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of a spinal catheter kit", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies a spinal catheter kit?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a spinal catheter kit.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a spinal catheter kit consisting of a spinal catheter, needle, stylet and filter to hospitals. The spinal catheter is a thin, flexible tube which is inserted by medical procedure through the skin into the space surrounding the spinal cord to deliver medication. The catheter is not part of the pump, it is connected to an external pump that is filled with the medication that is released at a set rate through the spinal catheter. The spinal catheter is used for short periods of time to administer medications and trial spinal medications on patients. It is specifically designed for people with an illness or disability and not widely used by people without an illness or disability. The entity is registered for goods and services tax (GST). There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-fee where the medical aid or appliance is: Item 12 in the table in Schedule 3 to the GST Regulations (Item 12) lists 'infusion sets'. The phrase 'infusion sets' is not defined in the GST Act or GST Regulations. Generally, where a phrase is not defined in the relevant Act or regulations, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222; (1932) 2 ATD 31). An 'infusion set' is a sterile device used for introduction of fluid, including medication or nutrient but excluding blood and blood products, by means other than through the gastrointestinal tract. It normally consists of several parts that together form the infusion set. These parts consist of a sterile container with an attached drip chamber allowing fluid to flow one drop at a time, a long sterile tube with a clamp to regulate the flow, a connector to attach to the access device and possibly connectors to allow another infusion set to be connected into the same line. A set can be gravity fed or can be used in conjunction with an infusion pump. The spinal catheter kit is used to administer medication, at a set rate, into the space surrounding the spinal cord. The spinal catheter is surgically placed under the skin to deliver the medication to a specific site in the patient's spine. The medication that will be infused is supplied by connecting the spinal catheter to an external pump containing the medication. The spinal catheter kit, which contains the spinal catheter, needle, stylet and filter, enables the infusion of medicine to be made and is an 'infusion set' as specified at Item 12. The spinal catheter kit is used for short periods of time to administer medications and trial spinal medications on patients and is therefore, specifically designed for people with an illness or a disability and is not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a spinal catheter kit.", "Date_of_Decision": "14 October 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "Herbert Adams Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222 (1932) 2 ATD 31", "Other_References": "Commonwealth of Australia GST Pharmaceutical Health Forum - Issues Register-Attachment B - Schedule 3 - Medical aid or appliance (Regulation 38-45.01)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005295", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/218", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of an airway suction device", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a portable, stand-alone airway suction device?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a portable, stand-alone airway suction device. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies an electrically powered airway suction device that is portable and designed for field and transport use. The airway suction device is a stand alone device. It can be used: The airway suction device is specifically designed for use by people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: There are no items in Schedule 3 or the GST Regulations that specifically list airway suction devices. However, item 127 in the table in Schedule 3 (Item 127) lists 'respiratory appliance accessories'. The word 'accessories' is not defined in the GST Act. Accordingly, it is necessary to consider the ordinary meaning of that word. The Australian Concise Oxford Dictionary (1997) defines the word 'accessory' to include 'an additional or extra thing' or 'a small attachment or fitting'. The Macquarie Dictionary (1997) defines 'accessory' as 'a subordinate part or object; something added or attached for convenience, attractiveness, etc., such as a spotlight, heater, driving mirror, etc., for a vehicle.' The meaning of the word 'accessory' has also been considered in a number of cases relating to sales tax and customs tariff classification. In FC of T v. Polaroid Australia Pty Ltd 71 ATC 4249; (1971) 2 ATR 653, Gibbs J., stated: 'The ordinary dictionary meaning of accessory is an adjunct, which itself is defined as something joined to another, but subordinate, as auxiliary, or dependent upon it.' In FC of T v Kentucky Fried Chicken Pty Ltd 88 ATC 4363; (1988) 19 ATR 1141, Hope J held that an item does not have to be joined to the primary object for it to be considered an accessory. Furthermore, in Zendel Australia Ltd & Others v. FC of T 92 ATC 4515; (1992) 24 ATR 101 ( Zendel's Case ), Hill J. held that an accessory must contribute to the working of some principal item or its general effect and also an accessory must be an adjunct to an item rather than an adjunct to a process . This interpretation was confirmed on review by the Full Federal Court (see Zendel Australia Pty Ltd (t/as Glad Products Australia) v. Federal Commissioner of Taxation (1993) 46 FCR 14; 94 ATC 4022; (1993) 27 ATR 352). In determining whether aluminium foil was an accessory for an oven, Hill J stated: As the dictionary definitions demonstrate for an item to be an 'accessory' in the relevant sense that item must contribute to the working of some principal item or its general effect. Thus both a camera lens and light meter are, as Gibbs J observed, accessories to a camera; mag wheels may be an accessory to a car, a crisper may be an accessory to a refrigerator, or perhaps even a baking dish might be an accessory to a stove, at least if custom made for it. In each of these examples the accessory actually contributes to the functioning of the principle item. However, to take the example of aluminium foil, that does not in any way contribute to the stove, or its functioning. The stove functions and performs in the same way irrespective of the use of aluminium foil. It is true that the foil may improve the effect of cooking on the food, or the freezer bags may modify the effect of freezing on food, but this is but to say that the product in question assists in the process of cooking or freezing. They are, as counsel for the Commissioner submitted, an adjunct to the process, rather than an adjunct to the appliance. The entity supplies an electrically powered airway suction device that is portable and designed for field and transport use. The airway suction device is a stand alone device. It can be used in hospital wards and at home by people suffering from respiratory illnesses such as cystic fibrosis. It can also be used by ambulance paramedics and emergency room medical personnel in the course of patient resuscitation often as a necessary pre-cursor to, or in conjunction with, devices such as respirators or ventilators. The airway suction device, being a stand alone device, is an entirely separate piece of equipment to the respirator and performs a completely distinct function from that of respiration. The airway suction device does not form an additional or extra part of the equipment of a respirator nor is it dependant upon, or subordinate or auxiliary to, the respirator. Although at times the airway suction device performs the first step in the resuscitation process, that is to suction a patient's airway, the airway suction device is also utilised on its own to just perform the task of suction, as in the case of an at home patient suffering from a respiratory illness. Whilst the process of suction may accompany the process of respiration, the airway suction device itself does not contribute to the working of the respirator device. Although the two processes may be interdependent and both devices may be required to complete the resuscitation of a patient, each device performs a separate and distinct process, which may or may not need to be combined to necessitate a successful resuscitation. Based on the reasoning of Hill J. in Zendel's Case , for a device to be an accessory, it needs to be an adjunct to an item rather than an adjunct to the process. A respirator would function and perform in the same way irrespective of the use of the airway suction device. In the same way that the aluminium foil is an adjunct to the process of cooking, the airway suction device is an adjunct to the process of respiration rather than an adjunct to the respirator itself. The airway suction device is a device in its own right that performs a task that is separate and distinct from that of a respirator. Therefore, the airway suction device is not an 'accessory' within the ordinary meaning of that term. In addition, there is nothing in the surrounding context of item 127 which would suggest that a wider than ordinary meaning be given to the term 'respiratory appliance accessories'. Accordingly, the airway suction device is not covered by item 127. Therefore, the supply of the airway suction device is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a portable, stand-alone airway suction device.", "Date_of_Decision": "26 August 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 127", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/138 | ATO ID 2001/639", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "Federal Commissioner of Taxation v. Kentucky Fried Chicken Pty Ltd 88 ATC 4363 (1988) 19 ATR 1141", "Other_References": "The Australian Concise Oxford Dictionary (1997), 3rd edn, Oxford University Press, Victoria The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004218", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/228", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and repacking rechargeable wheelchair batteries with new general purpose rechargeable cells", "Issue": "Is the entity, a supplier of batteries, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it repacks a customer's old rechargeable wheelchair battery with new general purpose rechargeable cells?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it repacks a customer's old rechargeable wheelchair battery with new general purpose rechargeable cells. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of batteries. The entity repacks wheelchair batteries with new general purpose rechargeable cells. The repacking process consists of stripping the dead cells from the customer's old battery casing and replacing them with new general purpose rechargeable cells. Once repacked, the old casing is then resealed and the battery returned to the customer. The customer always retains ownership of the battery. The new general purpose rechargeable cells are of a type commonly used in a multitude of applications, for example, in portable battery operated electric drills and mobile phones. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act. The supply is not input taxed under Division 40 of the GST Act.", "Reasons_for_Decision": "Summary: To determine the GST status of the entity's supply, it is first necessary to establish what the entity is actually supplying. The entity strips the dead cells from the customer's battery casing and replaces them with new general purpose rechargeable cells. The customer always retains ownership of the battery. The entity is providing a repacking/reconditioning service consisting of a labour component and a materials component (that is, the new general purpose rechargeable cells). The entity is not supplying a wheelchair battery to the customer. Where a supply consists of more than one part, the supply could be either a mixed or a composite supply. Where a supply contains a dominant part and also something that is integral, ancillary or incidental to that part, the supply is composite. A composite supply is treated as a single supply and takes its GST status from the dominant component of the supply. Where the supply has separately identifiable parts, the supply is a mixed supply. The GST status of the component parts of a mixed supply are determined separately (Goods and Services Tax Ruling GSTR 2001/8). The labour component of the entity's supply is the value of the total time used to complete the process of removing the old cells, replacing them with new general purpose rechargeable cells and resealing the casing. The materials component is the value of the new general purpose rechargeable cells packed into the old casing. Both the labour and materials components are significant in their own right and neither dominates the other. The GST status of each component is determined separately. | Detailed Reasoning - Battery Cells: Subsection 38-45(2) of the GST Act provides that a supply of a spare part is a GST-free supply if the spare part is: The new cells that the entity uses to repack the battery are general purpose rechargeable cells commonly used in a multitude of applications, for example, in portable battery operated electric drills and mobile phones. As such, the new cells are not specifically designed as a spare part of a GST-free medical aid or appliance and the second requirement in subsection 38-45(2) of the GST Act is not satisfied. Therefore, the supply of the battery cells is not GST-free. | Detailed Reasoning - Labour: There are no provisions in the GST Act that operate to make the supply of the labour component GST-free. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it repacks a customer's old rechargeable wheelchair battery with new general purpose rechargeable cells.", "Date_of_Decision": "30 May 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) subsection 38-45(2) Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "Commonwealth of Australia 2003. Health Industry Partnership - Issues Register - 2.a.15 - Repairs to GST-free Medical Aids and Appliances (which may include the supply of spare parts). Tax Office, viewed 30 May 2003, www.ato.gov.au Commonwealth of Australia 2003. Health Industry Partnership - Issues Register - 4.a.2 - Where a medical aid or appliance is repaired, will the repair be GST-free? Tax Office, viewed 30 May 2003, www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004228", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/8 | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/440", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of prescription lenses for swimming goggles", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies prescription lenses for swimming goggles?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies prescription lenses for swimming goggles.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies prescription lenses for swimming goggles. The lenses for the swimming goggles are ground to specification and allow people who require prescription lenses to see clearly underwater. The prescription lenses for swimming goggles are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: There are no items in Schedule 3 or the GST Regulations that specifically list prescription lenses for swimming goggles. However, item 155 in the table in Schedule 3 (Item 155) lists 'lenses for prescription spectacles'. The term 'prescription spectacles' is not defined in the GST Act. Where a term is not defined in the GST Act, it will take on its ordinary meaning unless the term has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates ( Herbert Adams Pty Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222). Given the context in which the term 'prescription spectacles' appears, the term is considered to have a special or technical meaning. Dorland's Medical Dictionary (2000) edition, Newman W. Dorland, WB Saunders, London, defines the word 'prescription' as a 'written direction for the preparation and administration of a remedy'. The word 'spectacles' is defined as 'a pair of lenses in a frame to assist vision'. Accordingly, it is considered that 'prescription spectacles' are a pair of lenses in a frame provided in accordance with a prescription. Further, it is considered that the prescription must be made by an appropriately qualified person (eg an optometrist) for the purpose of remedying a sight defect. The entity is supplying lenses prepared in accordance with a prescription to be used in swimming goggles to allow people who require prescription lenses to see clearly underwater. It needs to be determined whether the word 'goggles' fall within the meaning of the word 'spectacles'. The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'goggles' as 'spectacles often with special rims, lenses, or sidepieces, so devised as to protect the eyes from wind, dust, water, or glare'. Therefore, the entity's swimming goggles fall within the meaning of the word 'spectacles' in Item 155. As the entity's swimming goggles are a form of spectacles that have prescription lenses, the entity's supply of the lenses for swimming goggles is covered by Item 155. In addition, lenses for swimming goggles are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies prescription lenses for swimming goggles.", "Date_of_Decision": "8 February 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 155", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/355", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222", "Other_References": "Dorland's Medical Dictionary, 2000, 29th edition, Newman W. Dorland, WB Saunders, London. The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004440", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/443", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and weight management kit", "Issue": "Is the entity, a dietician, making a GST-free supply under subsection 38-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a weight management kit to a patient during a GST-free health service?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-10(3) of the GST Act when it supplies a weight management kit to a patient during a GST-free health service. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a dietician. The entity supplies a dietary service to a patient. The supply of the service is GST-free under subsection 38-10(1) of the GST Act. During the GST-free health service, the entity also supplies a patient with a weight management kit that is to be taken away and used at home. This weight management kit is a standard kit that is supplied to assist the patient in managing their weight loss. The weight management kit provides the basis of the treatment regime that is to be followed over several weeks and contains educational information, guidelines and action plans for the patient. For the duration of the program, the patient uses the weight management kit and is required to return to the entity on a weekly basis. Medical reviews, checks and management are an integral part of the program. The weight management kit is not a GST-free medical aid or appliance under subsection 38-45(1) of the GST Act. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-10(3) of the GST Act provides that a supply of goods is GST-free if: The entity's supply of dietary services is a GST-free supply under subsection 38-10(1) of the GST Act and is not the provision of an excluded service as listed under subsection 38-10(3) of the GST Act. In the context of subsection 38-10(3) of the GST Act, the phrase 'in the course of supplying to that person a service', requires the goods to be supplied at the same point in time at which the GST-free health services are supplied. In addition, the goods must be: While the weight management kit is supplied at the same point in time at which the GST-free health service is supplied, it is a standard kit that is designed as an aid for people with particular health problems and as such, it is not individually customised to treat the illness or disability of that particular patient exclusively. The weight management kit is given to the patient during the consultation to take away and use at home over a period of time. Although it may be useful as part of the patient's overall treatment, it is not used as an integral part of the patient's treatment and is not required immediately during that specific consultation but rather forms the basis for a treatment regime that is carried out over a period of time. As such, the supply of the weight management kit is not made 'in the course of supplying' a GST-free health service. Therefore, as the supply of the weight management kit is not made 'in the course of supplying' the GST-free health service and it does not satisfy subsection 38-10(3) of the GST Act, the entity is not making a GST-free supply under subsection 38-10(3) of the GST Act when it supplies the weight management kit. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a weight management kit to a patient during a GST-free health service.", "Date_of_Decision": "5 March 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-10(1) subsection 38-10(3) subsection 38-45(1) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health", "Case_References": "", "Other_References": "Commonwealth of Australia 2003. Health Industry Partnership - Issues Register - Issue 2 - Other Health Issues. Tax Office, viewed 18 June 2003, www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004443", "Unmatched_Content": "Keywords Goods and services tax GST free GST health"}
{"ATO_ID_Number": "ATO ID 2004/450", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a carry apron for a walking frame", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a carry apron for a walking frame?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a carry apron for a walking frame as a carry apron is an accessory associated with a walking frame under item 17 in the table in Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a carry apron for a walking frame. The carry apron is a bag that attaches to a walking frame and provides a person with somewhere to put things. This product enables the person to have their hands free to hold and control their walking frame. The carry apron is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply is not to be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 17 in the table in Schedule 3 to the GST Regulations (Item 17) lists 'accessories associated with walking frames or specialised ambulatory ortheses'. The word 'accessories' is not defined in the GST Act. Therefore, it is appropriate to consider the ordinary meaning of this word. The Macquarie Dictionary (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'accessory' as 'a subordinate part or object, something added or attached for convenience, attractiveness, etc., such as a spotlight, heater, driving mirror, etc., for a vehicle.' The carry apron for a walking frame is a bag that attaches to a walking frame to provide a person with the convenience of having somewhere to put things in and have their hands free to hold and control their walking frame. Accordingly, the carry apron is an 'accessory' within the ordinary meaning of the term. As such, the carry apron for a walking frame is covered by Item 17. In addition, the carry apron for a walking frame is specifically designed for people with an illness or disability and not widely used by people without an illness or disability. As such, the requirements under subsection 38-45(1) of the GST Act are satisfied. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a carry apron for a walking frame.", "Date_of_Decision": "4 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/864", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004450", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/451", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of wheelchair gloves", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies wheelchair gloves?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies wheelchair gloves.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies wheelchair gloves. The wheelchair gloves are designed specifically to protect a person's hands when using a wheelchair. They are often used with sporting wheelchairs. The wheelchair gloves are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 106 in the table in Schedule 3 (Item 106) lists 'accessories associated with wheelchairs, motorised wheelchairs, scooters, tricycles, spinal carriages and other goods for the carriage of people with disabilities'. For a medical aid or appliance to be covered by Item 106, it does not need to be an accessory 'for' items listed, rather it only needs to be 'associated with' the items listed. The entity supplies wheelchair gloves that are specifically designed to protect the hands when using a wheelchair. They are often used with sporting wheelchairs. As the wheelchair gloves are designed to protect the hand when using a wheelchair, they are an accessory associated with wheelchairs. Therefore, the wheelchair gloves are covered by Item 106. The wheelchair gloves are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. As such, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies wheelchair gloves.", "Date_of_Decision": "4 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 item 106", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/138 | ATO ID 2001/639 | ATO ID 2004/218", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004451", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/467", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a plate surround", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a plate surround?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a plate surround.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a plate surround. The plate surround is a metal piece that has been designed to attach to a plate so as to stop food from sliding off the plate. The plate surround is often used by people who have had strokes. The plate surround is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 28 in the table in Schedule 3 (Item 28) lists 'customised eating equipment for people with disabilities'. The term 'customised' is not defined in the GST Act and therefore, it is appropriate to consider its ordinary meaning. The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd NSW defines customised to mean, 'to adapt to suit the needs of a particular customer'. Item 28, therefore, covers eating equipment that has been adapted to suit the needs of people with disabilities. The plate surround is designed to attach to a plate so as to assist a person to eat their meal without food sliding off the plate and is often used by people who have had strokes. The plate surround has been designed to suit the needs of people with disabilities and falls within the scope of customised eating equipment for people with disabilities. As such, the plate surround is covered by Item 28. In addition, the plate surround is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. As such, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a plate surround.", "Date_of_Decision": "4 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 28", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004467", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/492", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of isotoner gloves", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies isotoner gloves?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies isotoner gloves.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies isotoner gloves. The isotoner gloves are used by people with lymphoedema. The isotoner gloves are designed to compress the hands for therapeutic benefit. The isotoner gloves are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 14 in the table in Schedule 3 to the GST Regulations (Item 14) lists 'compression garments'. Compression garments will be medical aids or appliances when the garments exert sufficient pressure on the wearer to be of therapeutic benefit. They are commonly used by lymphoedema and burn sufferers. The entity supplies isotoner gloves that are used by people with lymphoedema. The isotoner gloves are designed to compress the hands for therapeutic benefit, therefore, the entity's isotoner gloves fall within the meaning of compression garments and are covered by Item 14. In addition, isotoner gloves are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies isotoner gloves.", "Date_of_Decision": "4 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/953", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "Commonwealth of Australia 2003. GST Pharmaceutical Health Forum - Issues Register - Attachment B - Schedule 3 - Medical aids or appliances (Regulation 38-45.01). Tax Office, www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004492", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/521", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and stoma cream product", "Issue": "Is an entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a cream that is listed on the Stoma Appliance Schedule?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a cream that is listed on the Stoma Appliance Schedule.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a cream that is listed on the Stoma Appliance Schedule under the Stoma Appliance Scheme. This scheme is administered by the Commonwealth Department of Health and Ageing. The cream protects the user's skin and the listing on the Stoma Appliance Schedule identifies the cream as a product that assists people who have to wear an ostomy product as a consequence of having a stoma created by surgery. The cream is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 142 in the table in Schedule 3 (Item 142) lists stoma products including all bags and related equipment for patients with colostomies and ileostomies. The Stoma Appliance Schedule under the Stoma Appliance Scheme is administered by the Commonwealth Department of Health and Ageing and any product listed on the Stoma Appliance Schedule is a stoma product covered under Item 142. The entity supplies a cream that is listed on the Stoma Appliance Schedule under the Stoma Appliance Scheme, which is administered by the Department of Health and Ageing. As such, the entity's product satisfies the first requirement under subsection 38-45(1) of the GST Act. In addition, the cream is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a cream that is listed on the Stoma Appliance Schedule.", "Date_of_Decision": "22 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 142", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "Stoma Appliance Scheme, Commonwealth Department of Health and Ageing - 'Continence Aids Assistance Scheme', The National Continence Management Strategy.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004521", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/630", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of an implantable drug pump", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an implantable drug pump?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an implantable drug pump as it is covered by item 13 in the table in Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations).", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies an implantable drug pump. The implantable drug pump is supplied to hospitals and is used to treat patients with chronic pain through the continuous delivery of medication, at a set rate, into the intrathecal space (the area surrounding the spinal cord). The implantable drug pump is surgically placed under the skin of the abdomen to deliver the medication to a specific site in the body through an infusion set that includes a surgically placed catheter. The implantable drug pump is specifically designed for people with an illness or disability and not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 13 in the table in Schedule 3 to the GST Regulations (Item 13) lists 'infusion pumps'. An infusion pump is a pump that is used in association with an infusion set to deliver a measured dose of medication. The implantable drug pump is used to treat patients with chronic pain through the continuous delivery of medication, at a set rate, into the intrathecal space (the area surrounding the spinal cord). The implantable drug pump is surgically placed under the skin of the abdomen to deliver the medication to a specific site in the body through an infusion set that includes a surgically placed catheter. As such, the implantable drug pump is an infusion pump that is covered by Item 13. In addition, the implantable drug pump is specifically designed for people with an illness or disability and not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an implantable drug pump.", "Date_of_Decision": "21 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "Commonwealth of Australia 2004. GST Pharmaceutical Health Forum - Issues Register - Attachment B - Schedule 3 - Medical aid or appliance (Regulation 38-45.01). Tax Office, viewed 21 May 2004, www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004630", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2004/804", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and spare part for a vital signs monitor", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a spare part for a vital signs monitor?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies a spare part for a vital signs monitor. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a spare part for a vital signs monitor. The primary function of the vital signs monitor is to monitor the blood pressure and the pulse rate of a patient. The vital signs monitor has an alarm that sounds if the patient's statistics are outside of the acceptable parameters. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply of a spare part is a GST-free supply if the spare part is: The entity supplies a spare part for a vital signs monitor. Therefore, it is necessary to determine whether the vital signs monitor is GST-free under subsection 38-45(1) of the GST Act. Subsection 38-45(1) of the GST Act provides that the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Vital signs monitors are not specifically listed in Schedule 3 or the GST Regulations. However, an item that may be of relevance is '\"medical alert\" devices' which are shown at item 33 in the table in Schedule 3 (Item 33). The term '\"medical alert\" devices' is not defined in the GST Act. For the purposes of item 33, a '\"medical alert\" device' is interpreted to mean a device which is designed for the purpose of alerting medical or caring personnel, or an ambulance service, that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment. In a Sales Tax context, in determining how goods might be covered by one or other of the items in the various Schedules, the tribunals and courts have often looked to the 'essential character' or 'objective characterisation' of goods. Essential character tests have been established by the Courts in cases such as Thomson Australia Holdings Pty Ltd v. Federal Commissioner of Taxation (1988) 20 FCR 85; 88 ATC 4916; (1988) 19 ATR 1896 and FC of T v. Rotary Offset Press Pty Ltd 71 ATC 4170; (1971) 2 ATR 411. Davies J. said in Thomson Australia Holdings: the task of the court is to determine the essential character of the goods, what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part. Also, in Rotary Offset Press Pty Ltd 71 ATC 4170 at 4175; (1971) 2 ATR 411 at 417, Gibbs J commented: The question whether a periodical is \"advertising matter\" seems to me to depend on whether the periodical, viewed objectively and without regard to the actual intentions of those publishing it, answers that description. Similarly for GST, to determine whether a thing is covered by an item in Schedule 3 or the GST Regulations, it is considered necessary to have regard to the essential character of the thing. This means deciding what the goods essentially are, as distinct from merely identifying one of a number of characteristics the goods might have. This approach relies upon deciding what is the basic nature of the goods and involves consideration of what the goods are made of and what they might be used for. The primary purpose of a medical alert device is to alert. The primary function of the vital signs monitor is to monitor the pulse rate and blood pressure of individual patients. The alarm in the vital signs monitor is not a medical alert device in itself. It is merely a function within the vital signs monitor. Therefore, the vital signs monitor is not a \"medical alert\" device and is not covered by Item 33. As the vital signs monitor is not covered by Schedule 3 or the GST Regulations, it is not GST-free under subsection 38-45(1) of the GST Act. Accordingly, the supply of the spare part for the vital signs monitor is not GST-free under subsection 38-45(2) of the GST Act. The entity is registered for GST and the supply satisfies the positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a spare part for a vital signs monitor.", "Date_of_Decision": "22 September 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) subsection 38-45(2) Division 40 Schedule 3 Schedule 3 table item 33", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/805", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "Thomson Australia Holdings Pty Ltd v. Federal Commissioner of Taxation (1988) 20 FCR 85 88 ATC 4916 (1988) 19 ATR 1896", "Other_References": "Stedman's Medical Dictionary (2000), 27th edition, Lippincott Williams & Williams, Baltimore", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004804", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/805", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and spare part for an anaesthesia monitor", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a spare part for an anaesthesia monitor?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies a spare part for an anaesthesia monitor. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a spare part for an anaesthesia monitor. The primary function of the anaesthesia monitor is to monitor patients during anaesthesia. For example, the monitor contains modules that can monitor heart rate, blood pressure and saturation of oxygen in the blood system of patients during anaesthesia. An anaesthesia monitor also has a built-in alarm function that can alert medical staff when a patient needs attention. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply of a spare part is a GST-free supply if the spare part: The entity supplies a spare part for an anaesthesia monitor. Therefore, it is necessary to determine whether the anaesthesia monitor is GST-free under subsection 38-45(1) of the GST Act. Subsection 38-45(1) of the GST Act provides that the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Anaesthesia monitors are not specifically listed in Schedule 3 or the GST Regulations. However, items that may be of relevance are 'heart monitors' which are shown at item 1 in the table in Schedule 3 (Item 1) and '\"medical alert\" devices' which are shown at item 33 in the table in Schedule 3 (Item 33). The terms 'heart monitors' and '\"medical alert\" devices' are not defined in the GST Act. Where a term is not defined in the relevant Act, it takes on its ordinary meaning, unless the term has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates ( Herbert Adams Pty Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222; (1932) 2 ATD 31). The Stedman's Medical Dictionary (2000), 27th edition, Lippincott Williams & Williams, Baltimore, defines a 'cardiac (heart) monitor' as: an electronic monitor which, when connected to the patient, signals each heart beat with a flashing light, an electrocardiographic curve, an audible signal, or all three. The term '\"medical alert\" devices' is not defined in medical dictionaries. For the purposes of item 33, a '\"medical alert\" device' is interpreted to mean a device which is designed for the purpose of alerting medical or caring personnel, or an ambulance service, that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment. In a Sales Tax context, in determining how goods might be covered by one or other of the items in the various Schedules, the tribunals and courts have often looked to the 'essential character' or 'objective characterisation' of goods. Essential character tests have been established by the Courts in cases such as Thomson Australia Holdings Pty Ltd v. Federal Commissioner of Taxation (1988) 20 FCR 85; 88 ATC 4916; (1988) 19 ATR 1896 and FC of T v. Rotary Offset Press Pty Ltd 71 ATC 4170; (1971) 2 ATR 411. Davies J. said in Thomson Australia Holdings: the task of the court is to determine the essential character of the goods, what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are, though composition, function and other factors necessarily play a part. Also, in Rotary Offset Press Pty Ltd 71 ATC 4170 at 4175; (1971) 2 ATR 411 at 417, Gibbs J commented: The question whether a periodical is \"advertising matter\" seems to me to depend on whether the periodical, viewed objectively and without regard to the actual intentions of those publishing it, answers that description. Similarly for GST, to determine whether a thing is covered by an item in Schedule 3 or the GST Regulations, it is necessary to have regard to the essential character of the thing. This means deciding what the goods essentially are, as distinct from merely identifying one of a number of characteristics the goods might have. This approach relies upon deciding what is the basic nature of the goods and involves consideration of what the goods are made of and what they might be used for. A heart monitor is a device with the primary function of monitoring a patient's heart beat. Although the anaesthesia monitor can monitor a patient's heart beat, this is not the primary function of the machine. The anaesthesia monitor is comprised of numerous modules that perform different functions including monitoring blood pressure and saturation of oxygen in the blood. The anaesthesia monitor is not a heart monitor within the meaning of this term in Item 1 and is not covered by the item. The primary purpose of a medical alert device is to alert. Although, the anaesthesia monitor has an alarm function, the primary function of the anaesthesia monitor is to monitor patients during anaesthesia. The alarm function is not a medical alert device in itself. It is merely a function within the anaesthesia monitor. The anaesthesia monitor is not a \"medical alert\" device and is not covered by Item 33. As the anaesthesia monitor is not covered by Schedule 3 or the GST Regulations, it is not GST-free under subsection 38-45(1) of the GST Act. Therefore, the supply of the spare part for the anaesthesia monitor is not GST-free under subsection 38-45(2) of the GST Act. The entity is registered for GST and the supply satisfies the positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a spare part for an anaesthesia monitor.", "Date_of_Decision": "22 September 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) subsection 38-45(2) Division 40 Schedule 3 Schedule 3 table item 1 Schedule 3 table item 33", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/804", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "Herbert Adams Pty Ltd v. Federal Commissioner of Taxation (1932) 47 CLR 222 (1932) 2 ATD 31", "Other_References": "Stedman's Medical Dictionary (2000), 27th edition, Lippincott Williams & Williams, Baltimore", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004805", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/850", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a toilet seat and accessories for people with disabilities", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a toilet seat, for use by people with disabilities, together with associated accessories?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a toilet seat, for use by people with disabilities, together with associated accessories.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a toilet seat for use by people with disabilities. The entity also supplies associated accessories for use with the toilet seat. The toilet seat is an ergonomically designed bathroom aid that gives its users independence, safety and privacy. The toilet seat is electrically controlled and is designed to enable the elderly, infirmed and those with disabilities to go to the toilet without the aid of a carer. Accessories include swing away handles, oversize buttons and comfort seats. The toilet seat and associated accessories are specifically designed for people with disabilities and are not widely used by people without disabilities. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids or appliances is GST-free where the medical aid or appliance: There are two separate parts to the entity's supply, these being the toilet seat and associated accessories. Therefore, in order to determine the GST status of the supply, it is necessary to look at each part of the supply separately. Item 111 in the table in Schedule 3 (Item 111) lists 'bathboards or toilet seats for people with disabilities'. The entity's toilet seat is electrically controlled and is designed to enable the elderly, infirmed and those with disabilities to go to the toilet without the aid of a carer. Therefore, the toilet seat is specifically designed for people with disabilities and is covered by Item 111. Item 18 in the table in Schedule 3 to the GST Regulations (Item 18) lists 'customised modifications and accessories for the aids and appliances mentioned in items 111 to 121 of Schedule 3 to the GST Act'. The entity supplies accessories, such as swing away handles, oversize buttons and comfort seats, for use with the toilet seat that is covered by Item 111. As such, the accessories for the toilet seat are covered by Item 18. The toilet seat and accessories are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a toilet seat, for use by people with disabilities, together with associated accessories.", "Date_of_Decision": "8 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 111", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003850", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2003/1102", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and hydro gel based advanced burn treatment products", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a hydro gel based advanced burn treatment product?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a hydro gel based advanced burn treatment product.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies hydro gel based burn treatment products such as: Hydro gels are preparations whose bases usually consist of water, glycerol (glycerine) or propylene glycol gelled with suitable gelling agents such as tragacanth, starch, cellulose derivatives, carboxyvinyl polymers and magnesium-aluminium silicates. Hydro gels provide optimal circumstances for wound healing. The entity's products are used primarily to treat burns and are specifically designed for burns victims. The products are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Paragraph (c) of item 1 in subsection 38-45.01(1) of the GST Regulations (paragraph (c) item 1) lists 'hydro gel'. The entity's products, hydro gel soaked dressings and blankets, consist primarily of hydro gel and fall within paragraph (c) item 1. As such, these products satisfy the first requirement under subsection 38-45(1) of the GST Act. The entity's products are used primarily to treat burns and are specifically designed for burns victims. The products are not widely used by people without an illness or disability. Therefore, the remaining requirements in subsection 38-45(1) of the GST Act are met. The entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a hydro gel based advanced burn treatment product.", "Date_of_Decision": "18 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Regulations 2019 subsection 38-45.01(1) table item 1 paragraph (c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031102", "Unmatched_Content": "ATO ID 2003/1102 does not set out how the law might apply to other burn products comprised of hydro gel, including gel, spray and cream products. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Removed the reference to The GST Pharmaceutical Health Forum - Issues Register - Attachment B as this has been withdrawn. | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2003/1144", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of a home massage recliner chair", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a home massage recliner chair that is designed to provide therapeutic massage for people with disabilities?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a home massage recliner chair that is specifically designed to provide therapeutic massage for people with disabilities.", "Facts": "The entity is a supplier of medical aids and appliances. The entity is supplying a home massage recliner chair. The recliner is not designed for general massage, but rather, it is designed to provide therapeutic massage for people with disabilities. The recliner is electronically operated and provides a robotic massage that simulates techniques used by massage therapists, physicians, chiropractors and other healthcare professionals. The recliner is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Item 86 in the table in Schedule 3 (Item 86) lists 'electrically operated therapeutic lounge/recliner chairs specifically designed for people with disabilities'. The entity's recliner is not designed for general massage, but rather, it is designed to provide therapeutic massage for people with disabilities. The recliner is electronically operated and provides a robotic massage that simulates techniques used by massage therapists, physicians, chiropractors and other healthcare professionals. As such, the therapeutic recliner is specifically designed for people with disabilities and is covered by Item 86. Furthermore, the recliner is not widely used by people without an illness or disability. Therefore, as all of the requirements of subsection 38-45(1) of the GST Act have been met, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a home massage recliner chair that is designed to provide therapeutic massage for people with disabilities.", "Date_of_Decision": "10 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 86", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031144", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2003/1159", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and importation of air purification system for installation in a motor vehicle", "Issue": "Is the entity, an importer of medical aids and appliances, making a non-taxable importation under paragraph 13-10(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it imports an air purification system to be installed in a motor vehicle?", "Decision": "No, the entity is not making a non-taxable importation under paragraph 13-10(b) of the GST Act when it imports an air purification system to be installed in a motor vehicle. The entity is making a taxable importation under section 13-5 of the GST Act.", "Facts": "The entity is an importer of medical aids and appliances. The entity imports an air purification system. The air purification system has been manufactured without the use of synthetic chemicals and is to be installed into a motor vehicle for use by a person with chemical sensitivities. The entity is registered for goods and services tax (GST). The air purification system has been entered for home consumption within the meaning of the Customs Act 1901. The importation is not a non-taxable importation under Part 3-2 of the GST Act.", "Reasons_for_Decision": "Summary: Section 13-5 of the GST Act provides that the importation of goods into Australia is subject to GST if they are entered for home consumption within the meaning of the Customs Act 1901. However, an importation is not subject to GST if it is a non-taxable importation. Under paragraph 13-10(b) of the GST Act, an importation is a non-taxable importation if, had the importation been a supply, the supply would have been GST-free or input taxed. Of relevance in this instance is subsection 38-45(1) of the GST Act, which provides that a supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 58 in the table in Schedule 3 (Item 58) lists 'motor vehicle modifications'. Item 58 refers to modifications made to a motor vehicle where: In the circumstances, provision of the air purification system is the provision of a part that is to be installed and does not involve the actual modification of the motor vehicle. That is, it does not form an integral part of a conversion process of a motor vehicle at the point in time that it is received. As such, an air purification system is not covered by Item 58. As the air purification system is not covered by Item 58, if there had been a supply to the entity (instead of an importation by the entity), the supply would not be GST-free under subsection 38-45(1) of the GST Act. As such, the entity is not making a non-taxable importation under paragraph 13-10(b) of the GST Act. The importation of the air purification system by the entity meets the positive limbs of section 13-5 of the GST Act. Furthermore, the importation is neither a non-taxable importation under Part 3-2 of the GST Act nor would it have been GST-free under any other provision of Division 38 of the GST Act or input taxed under Division 40 of the GST Act, had the importation been a supply. As such, the entity is making a taxable importation under section 13-5 of the GST Act when it imports an air purification system to be installed in a motor vehicle.", "Date_of_Decision": "7 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 paragraph 13-10(b) Division 38 Division 40 Part 3-2 subsection 38-45(1) Schedule 3 Schedule 3 table item 58", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST imports Taxable importations", "Case_References": "", "Other_References": "GST Pharmaceutical Health Forum - Issues Register - Attachment A Tax fact sheet NAT 4651", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031159", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST imports Taxable importations"}
{"ATO_ID_Number": "ATO ID 2002/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a cushion with an overlay", "Issue": "Is the entity, a supplier of seating accessories, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a cushion with an overlay that is designed for use on the seats of heavy earthmoving equipment?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a cushion with an overlay that is designed to be used on the seats of heavy earthmoving equipment. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of seating accessories. The entity supplies a cushion with an overlay that is designed and marketed for use on seats of heavy earthmoving equipment. The cushion with an overlay is designed to act as a shock absorber to help prevent back injury for people using heavy earthmoving equipment. The cushion with an overlay is customised to fit the seat dimensions of the heavy earthmoving equipment. The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Item 87 in the table of Schedule 3 (Item 87) lists 'cushions specifically designed for people with disabilities'. It is considered that for an item to fall within this category, the item must be a cushion with a specifically designed character or function, that has been made or adapted for the purpose of assisting with the support or positioning of an individual with a disability or to prevent or alleviate conditions associated with that disability. In this case, the cushion with an overlay is designed to help prevent back injury for people using heavy earthmoving equipment. It is being used as a preventative measure and to provide comfort during work activities rather than to assist with the support or positioning of a person with a disability. As such, the cushion with an overlay is not a cushion specifically designed for people with disabilities for the purpose of Item 87. In addition, this cushion with an overlay is not specifically designed for people with an illness or disability and is widely used by people without an illness or disability. Therefore, the supply of a cushion with an overlay is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a cushion with an overlay that is designed for use on the seats of heavy earthmoving equipment.", "Date_of_Decision": "8 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 87", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20023", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and an emergency assistance light", "Issue": "Is the entity, a supplier of emergency devices, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an emergency assistance light?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an emergency assistance light. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of emergency devices. The entity is supplying an emergency assistance light. The product is a portable battery powered, flashing light that can be attached to the outside of a property or can be hand held. When activated, it emits a bright flashing light that can be seen for about 300 metres in daylight or 5 to 8 kilometres in darkness. A person in need of emergency assistance contacts the relevant emergency service, and then manually activates the emergency assistance light. The flashing light enables the responding emergency service (eg ambulance) to quickly locate the premises of the person requiring assistance. The entity is registered for goods and services tax (GST). The supply of the emergency assistance light satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 33 in the table in Schedule 3 (Item 33) lists 'medical alert devices'. It is considered that a 'medical alert device' is a device that is designed for the purpose of alerting medical/caring personnel or an ambulance service to the fact that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment. In this case, the emergency assistance light is used as a locating beacon to assist the relevant emergency service in finding a person in need of assistance. The device is activated after the emergency service has already been advised of a person's need for assistance. As such, the device itself is not used to alert the emergency service of the need for assistance. Therefore, the emergency assistance light is not a 'medical alert device' and is not covered by Item 33. There are no items specified in the GST Regulations that are relevant to this case, nor are there any other items listed in Schedule 3 that could cover the device. As the emergency assistance light is not covered by Schedule 3 or specified in the GST Regulations, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies the emergency assistance light.", "Date_of_Decision": "24 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 33", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200212", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of an intraocular lens", "Issue": "Is the entity, a supplier of medical goods, making a GST-free supply under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an intraocular lens to a hospital/medical practitioner?", "Decision": "No, the entity is not making a GST-free supply under section 38-45 of the GST Act when it supplies an intraocular lens to a hospital/medical practitioner. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical goods. In this case, the entity is supplying an intraocular lens to a hospital/ medical practitioner. The hospital/medical practitioner will subsequently supply the intraocular lens to the patient in the course of supplying hospital or medical treatment. An intraocular lens is designed to be implanted, to replace a part of the patient's natural eye, during an operation to correct eyesight problems. The lens is not implanted as part of, or as a spare part to, a non-seeing prosthetic eyeball. Whilst the lens replaces part of the eye's outer wall, it does not, of itself, constitute a whole eye or eyeball. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-45(1) Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Intraocular lenses are not listed in Schedule 3 nor are they specified in the GST Regulations. However, item 154 in Schedule 3 (Item 154) lists 'artificial eyes'. Therefore, it is necessary to determine whether an intraocular lens is an artificial eye for the purpose of Item 154. 'Artificial eye' is not defined in the GST Act. Generally, where a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning unless it has a special or technical meaning. Where a word or phrase has a special or technical meaning, it is necessary to determine the meaning by reference to the industry to which that word or phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). The Stedman's Medical Dictionary (2000) defines 'artificial eye' as: 'a curved disk of opaque glass or plastic, containing an imitation iris and pupil in the centre, inserted beneath the eyelids and supported by the orbital contents after evisceration or enucleation; it may be ready-made (stock) or custom-made.' It is considered that an 'artificial eye' essentially replaces a natural eyeball which has been surgically removed due to severe damage, disease or tumour. Artificial eyes do not restore sight, but are prostheses designed to aid in: In this case, the intraocular lens is designed to be implanted in the patient, to replace a part of a natural eye to correct eyesight problems. Whilst the lens replaces part of the eye's outer wall, it does not, of itself, constitute a whole eye or eyeball. Accordingly, it is considered that the intraocular lens is not an artificial eye for the purpose of Item 154. Intraocular lenses are not covered by any other items in Schedule 3 or the GST regulations. Therefore, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an intraocular lens to a hospital/medical practitioner. Subsection 38-45(2) Subsection 38-45(2) of the GST Act provides that a supply of a spare part is a GST-free supply if the spare part is: In this case, the intraocular lens is designed to be implanted in the patient, to replace a part of a natural eye during an operation to correct eyesight problems. The lens is not implanted as part of, or a spare part to, a non-seeing prosthetic eyeball (an artificial eye). Therefore, the supply is not GST-free under subsection 38-45(2) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies an intraocular lens to a hospital/medical practitioner.", "Date_of_Decision": "27 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-7(3) subsection 38-20(3) section 38-45 subsection 38-45(1) subsection 38-45(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - Medical aids & appliances Taxable supply", "Case_References": "", "Other_References": "Stedman's Medical Dictionary, 2000, 27th edn, Lippincott Williams & Williams, Baltimore", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200220", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-45 - Medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and slide sheets", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a slide sheet set?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act, when it supplies a slide sheet set.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies slide sheet sets to hospitals. The slide sheet set is used to manoeuvre patients on their own beds in the course of their hospital care. The slide sheet set consists of two slide sheets. These sheets are constructed of specialised fabric with low friction inner surfaces that glide over themselves during a patient transfer. The slide sheets cannot be washed in the same way as ordinary sheets. The slide sheet set is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the hospital (recipient of the supply) that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 92 in the table in Schedule 3 to the GST Act (Item 92) lists transfer sheets, mats and belts. As such, it is necessary to determine whether the slide sheet set falls within the scope of transfer sheets. The term 'transfer sheets' is not defined in the GST Act. Generally, where a term is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). It is considered that transfer sheets are sheets that may be used to assist in the transfer of patients. The various purposes of a transfer sheet include: In this case, the slide sheet set is used to manoeuvre patients in their own beds. It is considered that slide sheets fall within the scope of transfer sheets and as such are covered by Item 92. In addition, the slide sheet set is specifically designed for people with an illness or disability and is not widely used for people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a slide sheet set.", "Date_of_Decision": "12 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 92", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids and appliances", "Case_References": "Herbert Adams Pty Ltd v FCT 47 CLR 222", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200225", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids and appliances"}
{"ATO_ID_Number": "ATO ID 2002/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and monitoring of medical alert devices", "Issue": "Is the entity, a community care provider, making a GST-free supply under subsection 38-30(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) , when it supplies the services of monitoring a medical alert device to an individual care recipient and it receives funding under the Home and Community Care Act 1985 (HACC Act) in connection with that supply?", "Decision": "Yes. The entity is making a GST-free supply under subsection 38-30(2) of the GST Act when it supplies the services of monitoring a medical alert device to an individual care recipient and it receives funding under the HACC Act in connection with that supply .", "Facts": "The entity is a community care provider and is registered for goods and services tax (GST). The entity has a client, an individual care recipient, who requires a medical alert device and associated monitoring services. The supply of the medical alert device is GST-free under subsection 38-45(1) of the GST Act (see ATO ID 2001/509). The entity supplies the monitoring services to the individual care recipient under an arrangement whereby the actual monitoring of the medical alert device is performed by a monitoring company on behalf of the entity. There is no contractual relationship between the individual care recipient and the monitoring company The monitoring company charges an amount to the entity for the monitoring services it supplies to the entity. The entity charges an amount to the individual care recipient for the monitoring services that it supplies to the individual care recipient. The entity receives funding under the HACC Act to supply medical alert devices and monitoring services to people who are living at home and are frail or have a moderate or severe disability.", "Reasons_for_Decision": "Summary: Subsection 38-30(2) provides that a supply of care is GST-free if the supplier receives funding under the HACC Act in connection with the supply. The entity receives funding under the HACC Act to supply medical alert devices and monitoring services to people who are frail or who have a moderate or severe disability, and are living at home. As the entity receives funding under the HACC Act for the provision of the monitoring services, it is receiving funding in connection with the supply. Therefore the entity is making a GST-free supply under subsection 38-30(2) of the GST Act when it supplies the services of monitoring a medical alert device to an individual care recipient and it receives funding under the HACC Act in connection with that supply.", "Date_of_Decision": "13 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-30(2) subsection 38-45(1)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2006/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/509", "Subject_References": "Goods & services tax GST free GST health Section 38-30 - community care", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200236", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2006/9 | Keywords Goods & services tax GST free GST health Section 38-30 - community care"}
{"ATO_ID_Number": "ATO ID 2002/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and lumbar rolls", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a lumbar roll?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a lumbar roll.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a lumbar roll. A lumbar roll is a cylindrical cushion that has been manufactured from a special supportive foam and designed to assist with the support or positioning of the lower back area of an individual with a disability, while seated or reclined. In this case, the lumbar roll is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. The entity is registered for goods and services tax (GST). There is no agreement between the entity and the recipient to treat the supply as not a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 87 of Schedule 3 (Item 87) lists 'cushions specifically designed for people with disabilities'. The phrase 'cushions specifically designed for people with disabilities' is not defined in the GST Act. Generally, where a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning unless it has a special or technical meaning. Where a word or phrase has a special or technical meaning, it is necessary to determine the meaning by reference to the industry to which that word or phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). For the purposes of Item 87, the ordinary meaning of the phrase 'cushions specifically designed for people with disabilities' is interpreted to mean cushions with a specifically designed character or function that have been made, or adapted, for the purposes of: In this case, the lumbar roll is a cylindrical cushion that has been manufactured from a special supportive foam and designed to assist with the support or positioning of the lower back area of an individual with a disability, in a seated or reclined position. Therefore, the lumbar roll falls within the interpreted meaning of 'cushions specifically designed for people with disabilities' for the purposes of Item 87. The lumbar roll is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability. Therefore the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a lumbar roll.", "Date_of_Decision": "28 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 87", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200238", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and foot compression device", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a foot compression device?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a foot compression device. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity is supplying a foot compression device. The foot compression device is a single chambered intermittent compression device that consists of an inflatable foot sleeve and an electric pump. The device stimulates the natural pumping of blood in the veins in the foot and/or calf by its frequent 'on and off' squeezing action. This results in a large volume of blood moving rapidly up the deep veins of the leg. The pressure generated by the device is between 140 - 180mmHg. The foot compression device, through the application of this squeezing action, is used primarily to reduce the occurrence of deep vein thrombosis (DVT). The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, a supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only item of relevance is item 71 in the table in Schedule 3 (Item 71), which lists 'pressure management garments and lymphoedema pumps'. The foot compression device is not specified in the GST Regulations. The foot compression device is not a 'pressure management garment' as it is not a garment but rather an intermittent compression device with an inflatable foot sleeve. Therefore, it needs to be determined whether the foot compression system is a lymphoedema pump. Compression pumps used in lymphoedema treatment gently squeeze the limb to force lymph fluid, which has accumulated in the tissues, to drain from the limb through the lymphatic system. Lymphoedema pumps are used at relatively low pressures so as not to damage the superficial lymphatic vessels, which are very small and fragile. These can be easily damaged and can be broken when a pressure of more than 60mmHg is applied. A lymphoedema pump generally consists of an inflatable sleeve which is placed over the arm or leg, and an electric pump which slowly inflates the sleeve to a preset pressure (usually no more than 40mmHg) for a few minutes and then deflates for a few minutes in a repeated cycle. The squeezing action of a lymphoedema pump is quite slow. It may be a single chambered or sequential multi-chambered compression device. The foot compression device is a single chamber intermittent compression device that consists of an inflatable foot sleeve and an electric pump. However, the 'on/off' squeezing action of the device is much more frequent than the squeezing action of a lymphoedema pump. The pressure generated by the device is between 140 - 180mmHg, which is much higher than that of lymphoedema pumps that are operated at a recommended pressure of less than 40mmHg. The higher pressure and increased squeezing frequency of the foot compression device leads to large volumes of blood being pumped up the leg more rapidly than with lymphoedema pumps. Therefore, it is considered that the foot compression device is not a lymphoedema pump, and is therefore not covered by Item 71. As the foot compression device is not covered by Schedule 3, the supply of the device is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under any of the other provisions in Division 38, nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies the foot compression device.", "Date_of_Decision": "29 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Schedule 3 Schedule 3 table item 71 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200239", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/73", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Toothbrushes", "Issue": "Is the entity, a dental service provider, making a GST-free supply under subdivision 38-B of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a standard toothbrush to a patient?", "Decision": "No, the entity is not making a GST-free supply under subdivision 38-B of the GST Act when it sells a standard toothbrush to a patient. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a dental service provider. The entity supplies a dental service to a patient that is GST-free under subsection 38-10(1) of the GST Act. The entity also supplies a standard toothbrush to the patient at the same time as providing the dental service. (Note : an electric toothbrush would also be regarded as a standard toothbrush.) The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subdivision 38-B of the GST Act, the supply of various health related goods and services is GST-free. There are two provisions within subdivision 38-B under which the supply of toothbrushes may be GST-free. Subsection 38-10(3) of the GST Act provides that a supply of goods is GST-free if: In this situation, the standard toothbrush is supplied at the same time as the dental service, the supply of which is GST-free. The standard toothbrush is also supplied from the same premises. Therefore, it is necessary to determine whether the standard toothbrush is supplied 'in the course of supplying' the GST-free dental service. It is considered that the phrase 'in the course of supplying to the person a service', in the context of subsection 38-10(3) of the GST Act, requires the goods to be supplied at the same point in time at which the GST-free dental service is supplied. In addition, the goods must be either: In this case, the standard toothbrush is not individually customised for the exclusive treatment of the patient. Further, it is not used as an integral part of the patient's treatment required immediately during that specific consultation. As such, the entity is not making a GST-free supply of the standard toothbrush under subsection 38-10(3) of the GST Act. Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 29 in the table in Schedule 3 (Item 29) lists 'customised toothbrushes for people with disabilities'. It is considered that customised toothbrushes are toothbrushes that have been adapted to suit the needs of a class of disabled persons. The standard toothbrush has not been adapted to suit the needs of a class of disabled persons. Accordingly, the standard toothbrush does not fall within Item 29. Therefore, the supply of the standard toothbrush is not GST-free under subsection 38-45(1) of the GST Act. In summary, the entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a standard toothbrush to a patient.", "Date_of_Decision": "24 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subdivision 38-B subsection 38-10(3) subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 29", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST Health GST Other health services Taxable supply Section 38-45 - Medical aids & appliances", "Case_References": "", "Other_References": "Health Issues Register Issue 1.c", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200273", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST Health GST Other health services Taxable supply Section 38-45 - Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and beach access tracks", "Issue": "Is the entity, an importer, making a taxable importation under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it imports tracks to enable access to the beach?", "Decision": "Yes, the entity is making a taxable importation under section 13-5 of the GST Act when it imports tracks to enable access to the beach.", "Facts": "The entity is an importer. The entity imports access tracks. The tracks are laid on sand to make paths which allow access to the beach for wheelchairs, pedestrians, strollers, cyclists and light vehicles. The entity enters the tracks for home consumption (within the meaning of the Customs Act 1901 ). The access tracks are not non-taxable importations under Part 3-2 of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 13-5 of the GST Act, an entity makes a taxable importation if the goods are imported and the entity enters the goods for home consumption (within the meaning of the Customs Act 1901). However, paragraph 13-10(b) of the GST Act provides that an importation is a non-taxable importation if it would have been a supply that was GST-free or input taxed if it had been a supply. This means that where the supply of the goods within Australia would be GST-free then the importation of these goods is a non-taxable importation. Therefore, the importation of access tracks which enable access to the beach will be a non-taxable importation if the supply of the access tracks within Australia would be GST-free. Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: In relation to Schedule 3, the only items of relevance in this case are Item 106 in the table in Schedule 3 which lists 'accessories associated with wheelchairs, scooters, tricycles, spinal carriages and other goods for the carriage of people with disabilities' and Item 56 in the table in Schedule 3 which lists 'wheelchair ramp'. However, regardless of whether the beach access tracks could potentially be covered by either of these two Items in the table in Schedule 3, the beach access tracks in question provide beach access for strollers, pedestrians, cyclists and light vehicles as well as wheelchairs. Accordingly, it is considered that these beach access tracks are not specifically designed for people with an illness or disability and are widely used by people without an illness or disability. Therefore, the supply of the beach access tracks is not GST-free under subsection 38-45(1) of the GST Act. The importation by the entity meets the positive limbs of section 13-5 of the GST Act. Furthermore, the importation is neither a non-taxable importation under Part 3-2 of the GST Act nor would it have been GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act had the importation been a supply. Therefore, the entity is making a taxable importation under section 13-5 of the GST Act when it imports tracks to enable access to the beach.", "Date_of_Decision": "28 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 section 13-10 Division 38 Division 40 subsection 38-45(1) Schedule 3 Part 3-2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Imports Taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200279", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Imports Taxable importations"}
{"ATO_ID_Number": "ATO ID 2002/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the importation of footwear designed to be fitted with an orthotic", "Issue": "Is the entity, an importer of medical aids and appliances, making a non-taxable importation under paragraph 13-10(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes an importation of footwear that is designed to be fitted with an orthotic?", "Decision": "No, the entity is not making a non-taxable importation under paragraph 13-10(b) of the GST Act when it makes an importation of footwear that is designed to be fitted with an orthotic. The entity is making a taxable importation under section 13-5 of the GST Act.", "Facts": "The entity is an importer of medical aids and appliances. The entity imports footwear that is specifically designed to be fitted with an orthotic. The footwear is not complete at the time of importation. The orthotic is a structural part of the shoe and is required before the shoe is complete. The entity sells the footwear to podiatrists who fit the orthotic before selling the completed footwear to their patients. The entity is registered for goods and services tax (GST). The footwear has been entered for home consumption within the meaning of the Customs Act 1901. The importation is not a non-taxable importation under Part 3-2 of the GST Act.", "Reasons_for_Decision": "Summary: Section 13-5 of the GST Act provides that the importation of goods into Australia is subject to GST if they are entered for home consumption within the meaning of the Customs Act 1901. However, an importation is not subject to GST if it is a non-taxable importation. Under paragraph 13-10(b) of the GST Act, an importation is a non-taxable importation if the thing imported would have been GST-free or input taxed if it had been supplied within Australia. Therefore, it needs to be determined whether the footwear would have been GST-free or input taxed, if the imported footwear had been a supply made within Australia. Of relevance in this instance is subsection 38-45(1) of the GST Act which provides that a supply of a medical aid or appliance is GST-free where the medical aid or appliance: The items which are of relevance to this case are item 41 and item 42 in the table in Schedule 3. Item 41 in the table in Schedule 3 (Item 41) lists 'surgical shoes, boots, braces and irons'. The terms 'surgical shoes, boots, braces and irons' are not defined in the GST Act. Therefore the terms will be given their ordinary meaning. The Macquarie Dictionary (1997) defines surgical as 'relating to or involving surgery' and surgical boot as 'a specially constructed boot or shoe designed to support or correct a deformed foot'. Accordingly, it is considered that surgical shoes or boots are limited to those specially constructed shoes or boots designed to support or correct a deformed foot and those shoes and boots designed to be worn to support and protect a foot as a result of surgery. It would also be expected that the surgical shoes or boots would be a complete item that is custom made for a specific individual. In this case, the entity imports footwear that is neither complete at the time of importation nor specially constructed for a specific individual. The footwear is not complete until it has been fitted with an orthotic which is a structural part of the shoe. As such, the footwear is not a surgical shoe or boot for the purposes of Item 41. Item 42 in the table in Schedule 3 (Item 42) lists 'orthotics'. The word orthotics is not defined in the GST Act and is therefore given its ordinary meaning. The Macquarie Dictionary (1997) defines 'orthotic' as the adjectival form of the word orthosis. Orthosis is defined as 'a device applied to the body to modify position or motion, as a supporting collar, plaster cast, etc'. The category heading 'footwear for people with disabilities' provides guidance as to the meaning of 'orthotics' for the purposes of Schedule 3. Although the category heading is not an operative part of Schedule 3 (section 182-15 of the GST Act and Note 2 in Schedule 3), it does confirm, in accordance with paragraph 182-10(2)(b) of the GST Act, that orthotics, covered by Item 42, are devices that are designed to be used or applied as an orthosis for the foot to change or alter position or motion or prevent movement. Shoes could be orthotics in very limited situations, however, the common meaning of the term 'orthotics' is that it applies to devices which are inserts for shoes, and not to shoes themselves. For shoes to be orthotics, they would have to be custom made and incorporate an orthotic device as part of the shoe. Such shoes would generally only be made for a person with some form of deformity. Therefore shoes which can be classed as 'orthotics' would generally also be classed as 'surgical shoes'. In this case, the footwear imported by the entity does not contain an orthotic device at the time of importation. The footwear is sold to a podiatrist who fits an orthotic to the footwear depending on the particular needs of each individual. As the entity is not importing an orthotic, the footwear would not be covered by Item 42. Therefore, as the footwear is not covered by either Item 41 or Item 42 the supply would not be GST-free under subsection 38-45(1) of the GST Act if it had been a supply made within Australia. The importation of the footwear by the entity meets the positive limbs of section 13-5 of the GST Act. Furthermore, the importation is neither a non-taxable importation under Part 3-2 of the GST Act nor would it have been GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act had the importation been a supply. As such, the supply is not a non-taxable importation under paragraph 13-10(b) of the GST Act. The entity is making a taxable importation under section 13-5 of the GST Act when it makes an importation of footwear that is designed to take an orthotic.", "Date_of_Decision": "7 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 paragraph 13-10(b) Division 38 subsection 38-45(1) Division 40 Part 3-2 section 182-15 paragraph 182-10(2)(b) Schedule 3 table item 41 Schedule 3 table item 42 Schedule 3 Note 2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Imports Non taxable importations Taxable importations", "Case_References": "", "Other_References": "The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200280", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Imports Non taxable importations Taxable importations"}
{"ATO_ID_Number": "ATO ID 2002/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and computerised massage cushion", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a computerised massage cushion?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a computerised massage cushion. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a computerised massage cushion. The entity markets the cushion as a massage device that is designed to alleviate tension and fatigue. The cushion is used for relaxation purposes. The cushion is not designed to assist with the support or positioning of a person with a disability nor is it designed to prevent alleviate some form of disablement. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Item 87 in the table in Schedule 3 to the GST Act (Item 87) lists 'cushions specifically designed for people with disabilities.' It is considered that 'cushions specifically designed for people with disabilities' means a cushion with a specifically designed character or function, that has been made or adapted for the purpose of assisting with the support or positioning of an individual with a disability or to prevent or alleviate conditions associated with that disability. In this case, the entity markets the cushion as a massage device that is designed to alleviate tension and fatigue and is used for relaxation purposes. The cushion is not designed to assist with the support or positioning of a person with a disability nor is it designed to prevent or alleviate some form of disablement. As such, the cushion is not a 'cushion specifically designed for people with disabilities' for the purpose of Item 87. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a computerised massage cushion.", "Date_of_Decision": "19 May 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 87", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Taxable supply", "Case_References": "", "Other_References": "Pharmaceutical Issues Register - Attachment A", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200283", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/143", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a supply of anti-inflammatory gel to an individual", "Issue": "Is the entity, a pharmacist, making a GST-free supply under section 38-50 of the A New Tax System (Goods and Services) Act 1999 (GST Act), when it supplies anti-inflammatory gel to an individual?", "Decision": "No, the entity is not making a GST-free supply under section 38-50 of the GST Act when it supplies anti-inflammatory gel to an individual. The entity is making a taxable supply under section 9-5 of the Act.", "Facts": "The entity is a pharmacist. The entity is supplying anti-inflammatory gel to an individual, to be used for private or domestic consumption. Anti-inflammatory gel is a medicinal preparation that is applied to the skin of an individual to relieve swelling or soreness in a particular limb or part of the body and is for human use. Further: The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation is GST-free. For a supply of a medicinal preparation to be GST-free under section 38-50 of the GST Act, the supply must first satisfy the requirements in subsection 38-50(7) of the GST Act. Where this condition is satisfied, the supply must also satisfy all the requirements as contained in subsections 38-50(1), 38-50(2), 38-50(4), 38-50(4A), 38-50(5) or 38-50(6) of the GST Act. Subsection 38-50(7) of the GST Act provides that a supply of a medicinal preparation is GST-free under this section if, and only if: Anti-inflammatory gel is a medicinal preparation that is for human use. The recipient of the supply is an individual who will use the anti-inflammatory gel for private or domestic use or consumption. Therefore, the supply of the anti-inflammatory gel meets the requirements of subsection 38-50(7). As this requirement has been satisfied, to determine whether the supply is GST-free, it is necessary to consider whether the anti-inflammatory gel satisfies the other legislative requirements. | Detailed Reasoning - Subsection 38-50(1): Under subsection 38-50(1) of the GST Act, a supply of a medicinal preparation is GST-free if the medicinal preparation is supplied on prescription and: Although the anti-inflammatory gel may be prescribed by a medical practitioner, the supply of the anti-inflammatory gel is not restricted. In addition, the anti-inflammatory gel is not a pharmaceutical benefit under the National Health Act 1953 . Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(1) of the GST Act. | Detailed Reasoning - Subsection 38-50(2): Under subsection 38-50(2) of the GST Act, a supply of a medicinal preparation is GST-free if the supply is restricted under a State or Territory law in which it is supplied, but may be made by a medical practitioner, dental practitioner, pharmacist or any other person permitted by or under that law to do so. The supply of the anti-inflammatory gel in Australia is not restricted under a State or Territory law. Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(2) of the GST Act. | Detailed Reasoning - Subsection 38-50(4): Under subsection 38-50(4) of the GST Act, a supply of a medicinal preparation is GST-free if the medicinal preparation is supplied on prescription and: The anti-inflammatory gel is not a pharmaceutical benefit under the Veterans' Entitlements Act 1986 . Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(4) of the GST Act. | Detailed Reasoning - Subsection 38-50(4A): Under subsection 38-50(4A) of the GST Act, a supply of a medicinal preparation is GST-free if the medicinal preparation is supplied on prescription and: The anti-inflammatory gel is not a pharmaceutical benefit under the Military Rehabilitation and Compensation Act 2004 . Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(4A) of the GST Act. | Detailed Reasoning - Subsection 38-50(5): Under subsection 38-50(5) of the GST Act, a supply of a medicinal preparation is GST-free if: The GST-free Supply (Drugs and Medicinal Preparations) Determination 2004 (No.2)(the Determination), specifies the circumstances where an eligible analgesic is GST-free under subsection 38-50(5) of the GST Act. The Determination provides that for a supply of a drug or medicinal preparation to be GST-free under this subsection the drug or medical preparation: In the present circumstances, the supply of the anti-inflammatory gel is not a supply of an analgesic that is determined by the Health Minister, in the Determination, to be GST-free as the anti-inflammatory gel is not to be taken by mouth. Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(5) of the GST Act. | Detailed Reasoning - Subsection 38-50(6): Under subsection 38-50(6) of the GST Act, a supply of a medicinal preparation is GST-free if: This subsection applies to supplies of drugs and medicinal preparations that are supplied under the SAS. The SAS allows new drugs and medicinal preparations, which have not yet been approved for supply in Australia, to be supplied to patients who have life-threatening or other serious illnesses. The supply of the anti-inflammatory gel is not a supply under the SAS. Therefore, the supply of the anti-inflammatory gel does not satisfy the requirements of subsection 38-50(6) of the GST Act. The supply of the anti-inflammatory gel is neither GST-free under any other provisions of Division 38 of the GST Act nor input-taxed under Division 40 of the GST Act. Therefore the entity is making a taxable supply under section 9-5 of the GST Act when it supplies anti-inflammatory gel to an individual.", "Date_of_Decision": "29 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-50 subsection 38-50(2) subsection 38-50(7) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-50 - drugs & medicinal preparations GST supplies and acquisitions Taxable supply", "Case_References": "", "Other_References": "The Standard for the Uniform Scheduling of Drugs and Poisons (SUSDP) GST-free Supply (Drugs and Medicinal Preparations) Determination 2004 (No.2)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002143", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-50 - drugs & medicinal preparations GST supplies and acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/169", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and rubber tips for walking sticks and crutches", "Issue": "Is the entity, a supplier of walking aids, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies rubber tips for walking sticks and crutches?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies rubber tips for walking sticks and crutches.", "Facts": "The entity is a supplier of walking aids. The entity supplies rubber tips to replace faulty, worn or broken tips of walking sticks and crutches. The rubber tips are specifically designed as spare parts for walking sticks and crutches. The rubber tips are not designed as multiple purpose rubber end stoppers that are also used for different types of goods, such as chairs. The supply of the walking sticks and crutches is GST-free under subsection 38-45(1) of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply of a spare part is GST-free if: Spare part is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) defines spare part to mean 'a part which replaces a faulty, worn, or broken part of a machine'. Therefore, it is considered that a spare part for a medical aid or appliance is a part that is used to replace a faulty, worn or broken part of a medical aid or appliance. The rubber tips have been designed to replace a faulty, worn or broken part of the walking sticks and crutches. Further, the supply of the walking sticks and crutches is GST-free under subsection 38-45(1) of the GST Act. Therefore, the rubber tips are spare parts for a GST-free medical aid or appliance. The second requirement is that the spare part is specifically designed as a spare part for a GST-free medical aid or appliance. Rubber tips are considered to be specifically designed as a spare part for a walking stick or crutch where they exhibit special characteristics that make them suitable for that purpose and where they are not designed as multiple purpose rubber end stoppers that are also used for different types of goods, such as chairs. It is accepted that a rubber tip will be a specifically designed spare part for a walking stick or crutch where it is not a multiple purpose rubber end stopper and it has characteristics such as: The rubber tips are specifically designed as a spare part for the walking sticks and crutches. Therefore, the supply satisfies the requirements in subsection 38-45(2) of the GST Act. As such, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies rubber tips for walking sticks and crutches.", "Date_of_Decision": "18 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) subsection 38-45(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax GST-free GST health Medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002169", "Unmatched_Content": "Keywords Goods and Services Tax GST-free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/225", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and ear moulds for hearing aids", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an ear mould for use as a spare part for a hearing aid?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies an ear mould for use as a spare part for a hearing aid.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies an ear mould to replace a faulty, worn or broken part for a GST-free hearing aid for the hearing impaired. The ear mould is specifically designed as a spare part for a hearing aid. The supply of a hearing aid is GST-free under subsection 38-45(1) of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply of a spare part is a GST-free supply if the spare part is: The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...' The part is supplied to replace a faulty, worn or broken component of a medical aid. Accordingly, the part is considered a 'spare part' for the purposes of the GST Act. Furthermore, the part is supplied as a spare part for a medical aid that is GST-free under subsection 38-45(1) of the GST Act. Therefore, the supply satisfies the first requirement in subsection 38-45(2) of the GST Act. The ear mould is specifically designed for a hearing aid that is GST-free under subsection 38-45(1) of the GST Act. Therefore, it meets the second requirement. Therefore, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies an ear mould for use as a spare part for a hearing aid.", "Date_of_Decision": "25 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-45 subsection 38-45(1) subsection 38-45(2) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/210 | ATO ID 2001/211 | ATO ID 2001/212 | ATO ID 2001/216", "Subject_References": "Goods and Services Tax GST-free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002225", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and Services Tax GST-free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/230", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and tactile alerting tiles for the visually impaired", "Issue": "Is the entity, a supplier of tiles, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies tactile alerting tiles that are designed to aid a person who is visually impaired?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies tactile alerting tiles that are designed to aid a person who is visually impaired.", "Facts": "The entity is a supplier of tiles. The entity supplies tactile alerting tiles that are designed to aid a person who is visually impaired. The tiles have a distinct raised surface and are used both inside and outside of buildings as tactile ground surface indicators. A visually impaired person will be alerted to potential hazards, such as the presence of stairs or the need to change direction to avoid danger, through sensory contact with the tiles. In this case, the tiles comply with Australian Standards for, 'Design for access and mobility - Tactile ground surface indicators for the orientation of people with vision impairment'. As such, the tactile alerting tiles are specifically designed for people with an illness or disability. The tactile alerting tiles do not have an application other than to alert the visually impaired. As such, the tactile alerting tiles are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 151 in the table in Schedule 3 (Item 151) lists 'auditory/tactile alerting devices'. The phrase 'auditory/tactile alerting devices' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'auditory' to mean 'relating to hearing, or the sense of hearing ...', 'tactile' to mean '1. of or relating to the organs or sense of touch. 2. perceptible to the touch...'; and 'alert' to mean '...4. an alarm or warning..' Accordingly, it is considered that an auditory/tactile alerting device is a device which is designed to alert a visually impaired person to a strong occurrence, danger or presence through the person's sense of touch or hearing. The tactile alerting tiles have a distinct raised surface and are used both inside and outside of buildings as tactile ground surface indicators. The tiles alert visually impaired people to potential hazards such as the presence of stairs or the need to change direction to avoid danger. Therefore, the tactile alerting tiles are considered a tactile alerting device and are covered by Item 151. The tactile alerting tiles are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. Accordingly, the supply meets the remaining requirements of subsection 38-45(1) of the GST Act. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies tactile alerting tiles that are designed to aid a person who is visually impaired.", "Date_of_Decision": "4 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45 subsection 38-45(1) Schedule 3 Schedule 3 table item 151", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales Australian Standard, AS 1428.4 - 1992 - Design for access and mobility - Tactile ground surface indicators for the orientation of people with vision impairment.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002230", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and Services Tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/301", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of an indirect calorimeter", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an indirect calorimeter?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an indirect calorimeter. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity is supplying an indirect calorimeter. The indirect calorimeter is a device whose primary function is to measure a person's energy expenditure. In the course of this function, the device also measures how much oxygen is inhaled and exhaled by that person. The entity promotes the device for use in nutritional research. For instance, the device can be used to provide a comparative analysis of energy expenditure between healthy and sick subjects. The entity is registered for goods and services tax (GST)", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, a supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only item of relevance to the status of the indirect calorimeter is item 137 in the table in Schedule 3 (Item 137), which lists 'breathing monitors'. Indirect calorimeters are not specified in the GST Regulations. The term 'breathing monitors' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates (Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). The health industry considers a breathing monitor to be a device with the primary purpose of measuring a patient's breathing in circumstances where such monitoring is essential (eg the patient is unconscious, under an anaesthetic etc). Although the indirect calorimeter does measure the level of oxygen breathed in and out during a person's breathing cycle, the primary purpose of the device is to measure how much energy the person is expending. Furthermore, the device is not used to monitor a person's breathing in situations where the person is unconscious or under an anaesthetic, but rather is used in nutritional research. As such, it is considered that the indirect calorimeter system is not a 'breathing monitor' and is not covered by Item 137. As the indirect calorimeter is not covered by Schedule 3, the supply of the machine is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is not GST-free under any of the other provisions in Division 38 of the GST Act nor is it input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies the indirect calorimeter.", "Date_of_Decision": "18 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Schedule 3 Schedule 3 table item 137 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002301", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/441", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and bathroom rod accessories", "Issue": "Is the entity, a supplier of bathroom accessories, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies bathroom rod accessories, namely a modular shelf and a towel holder, installed for people with a physical disability?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies bathroom rod accessories, namely a modular shelf and a towel holder, installed for people with a physical disability. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of bathroom accessories. The entity is supplying a modular shelf and a towel holder that are accessories for a bathroom rod. The bathroom rod is fixed to the wall of the bathroom, but is not designed to support the weight of an individual. The modular shelf and the towel holder are then attached to the bathroom rod. The modular shelf and towel holder are installed for people with a physical disability. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 18 in the table in Schedule 3 to the GST Regulations (Item 18) lists 'customised modifications and accessories for the aids and appliances mentioned in items 111 to 121 of Schedule 3 to the GST Act'. The entity is supplying accessories (a modular shelf and a towel holder) for a bathroom rod. Therefore, it must first be determined whether the bathroom rod is a medical aid or appliance covered by items 111 to 121 in the table in Schedule 3 to the GST Act. The relevant items listed in the table in Schedule 3 to the GST Act that may cover the bathroom rod are: For the bathroom rod to be accepted as a bath support, a shower support, or a toilet support, it is considered that the bathroom rod must be able to support the weight of an individual when the rod is attached to a wall. In this case, although the bathroom rod is attached to a wall, it is not designed to support the weight of an individual. Therefore, the bathroom rod is not a bath support, shower support or a toilet support as listed in Schedule 3 to the GST Act. Further, it is not covered by anything else in items 111 to 121 in the table in Schedule 3 to the GST Act. Accordingly, the modular shelf and towel holder, are not covered by Item 18 because they are not customised modifications and accessories for a medical aid or appliance that is covered by items 111 to 121 in the table in Schedule 3 to the GST Act. Therefore, the first requirement of subsection 38-45(1) of the GST Act is not satisfied. Accordingly, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies bathroom rod accessories, namely a modular shelf and a towel holder. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any of the other provisions in Division 38 of the GST Act not input taxed under Division 40 of the GST Act. The entity is making a taxable supply under section 9-5 of the GST Act when it supplies bathroom rod accessories, namely a modular shelf and a towel holder installed for people with a physical disability.", "Date_of_Decision": "18 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 111 Schedule 3 table item 112 Schedule 3 table item 113 Schedule 3 table item 114 Schedule 3 table item 115 Schedule 3 table item 116 Schedule 3 table item 117 Schedule 3 table item 118 Schedule 3 table item 119 Schedule 3 table item 120 Schedule 3 table item 121", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/442", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002441", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/534", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and blood coagulation test strips", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies blood coagulation test strips?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies blood coagulation test strips.", "Facts": "The entity is a supplier of medical aids and appliances. The entity is supplying test strips that measure blood coagulation levels for people with heart conditions or blood disorders. The test strips are specifically designed for this purpose and are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient of the supply that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Medical aids and appliances which are GST-free under subsection 38-45(1) are GST-free at all points in the supply chain from the point in time when they become those listed items, and not only when supplied to a person with an illness or disability. Item 36 in the table in Schedule 3 (Item 36) lists 'test strips' and this item is listed under the category heading of 'Diabetes'. In the present circumstances, the test strips are for use by people suffering from heart conditions or blood disorders rather than for use by people with diabetes. However, section 182-15 of the GST Act provides that the second column of Schedule 3 (the column in which 'Diabetes' is listed), is not operative and can only be considered for the purposes for which an explanatory section may be considered under subsection 182-10(2) of the GST Act. An explanatory section may only be considered: The meaning of the phrase 'test strip' is clear and unambiguous. It is not necessary to consider the category heading in the second column for any of the purposes listed in subsection 182-10(2) of the GST Act to interpret the meaning of 'test strip'. This means that Item 36 is not restricted to diabetes test strips and covers the blood coagulation test strips. The test strips are specifically designed for people with an illness or disability (heart conditions or blood disorders). In addition, the test strips are not widely used by people who do not have an illness or disability. Therefore, as all of the requirements of subsection 38-45(1) of the GST Act are satisfied, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies blood coagulation test strips.", "Date_of_Decision": "10 January 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-45(1) Schedule 3 Schedule 3 table item 36 subsection 182-10(2) section 182-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002534", "Unmatched_Content": "Keywords Goods & services tax GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/535", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a toilet support rail", "Issue": "Is the entity, a supplier of bathroom accessories, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a toilet support rail?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies the toilet support rail.", "Facts": "The entity is a supplier of bathroom accessories. The entity supplies a toilet support rail. The toilet support rail is a grab rail that is specifically designed and manufactured for use in disabled toilets and is not used for any other applications. The grab rail can support the weight of a disabled person. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, a supply of a medical aid and appliance is GST-free if: Item 121 in the table in Schedule 3 (Item 121) lists 'toilet supports'. A toilet support is an aid or appliance that has design characteristics such that it assists a disabled person when they are using a toilet. In addition, generally it must be able to support the weight of the disabled person. A toilet grab rail may possess the characteristics of a toilet support and be identifiable as a toilet support either at the point of manufacture or, in the case of a generic grab rail, at the point of installation in a toilet area. A toilet grab rail is covered by Item 121 if it has the characteristics of and is identifiable as being a toilet support when it is supplied. In this case, the toilet support rail assists a disabled person to use the toilet and it can support the weight of a disabled person. The grab rail is designed and manufactured solely to be used in disabled toilets and has design characteristics that make it identifiable as a toilet support from the point of manufacture. As such, the toilet support rail is a toilet support and is covered by Item 121. In addition, as the toilet support rail is specifically designed for use in disabled toilets and is not used for any other applications, the toilet support rail is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies the toilet grab rail.", "Date_of_Decision": "4 March 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 121", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002535", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/713", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and spare parts for a TENS machine", "Issue": "Is the entity, a supplier of parts, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies electrodes and pads for a transcutaneous nerve stimulator machine (TENS machine)?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies electrodes and pads for a TENS machine.", "Facts": "The entity is a supplier of parts. The entity is supplying electrodes and pads for a TENS machine. The electrodes and pads are designed to be used with the TENS machine and cannot be used for any other purpose. The electrodes and pads on the TENS machine require replacing when they become worn, faulty or broken. The supply of a TENS machine is GST-free under subsection 38-45(1) of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply is GST-free if the thing supplied is: The first requirement is that the thing supplied must be supplied as a spare part for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act. The term 'spare part' is not defined in the GST Act. Therefore, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...'. The entity is supplying electrodes and pads that replace the worn, faulty or broken electrodes and pads on a TENS machine. As such, the electrodes and pads are spare parts for the purposes of the GST Act. The supply of the TENS machine is GST-free under subsection 38-45(1) of the GST Act. The electrodes and pads are supplied as spare parts for a TENS machine. Therefore, the electrodes and pads are supplied as spare parts for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act. The second requirement in subsection 38-45(2) of the GST Act is that the spare part must be specifically designed as a spare part for the GST-free medical aid or appliance. The electrodes and pads are designed for use with the TENS machine and cannot be used for any other purpose. Therefore, the electrodes and pads are specifically designed as a spare part for the TENS machine. As all of the requirement in subsection 38-45(2) of the GST Act are met, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act, when it supplies electrodes and pads for a TENS machine.", "Date_of_Decision": "5 March 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-10 subsection 38-45(1) subsection 38-45(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002713", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/714", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and alternative joystick", "Issue": "Is the entity, a supplier of computer equipment, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an alternative joystick?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an alternative joystick.", "Facts": "The entity is a supplier of computer equipment. The entity supplies an alternative joystick. The alternative joystick is a substitute for a standard mouse designed for people who, due to their disability, are unable to use their hands. The joystick is controlled by the mouth or chin and is activated by a sip/puff switch. The joystick is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply is not to be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 11 of Schedule 3 (Item 11) lists 'mouth/head sticks/pointers'. The entity is supplying an alternate joystick designed to be controlled by a person's mouth or chin and is activated by a sip/puff switch. This falls within the description of a mouth/head stick in Item 11. Therefore, the alternative joystick is covered by Schedule 3. The alternative joystick is designed for people that are unable to use their hands due to their disability. Therefore it is designed for people with an illness or disability. In addition, the joystick is not widely used by people without an illness or disability. Accordingly, the requirements in subsection 38-45(1) of the GST Act are met. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an alternative joystick.", "Date_of_Decision": "5 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 11", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002714", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/715", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and alternative keyboard", "Issue": "Is the entity, a supplier of computer equipment, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an alternative keyboard?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an alternative keyboard.", "Facts": "The entity is a supplier of computer equipment. The entity supplies an alternative keyboard. The alternative keyboard is designed as a substitute keyboard for people who are unable to use their hands to operate a normal computer keyboard. It enables people with disabilities to operate the keyboard by their head movements only. The user attaches a laser pen, which is pointed towards the alternative keyboard, to their head. The alternative keyboard has special receptors that receive the signal from the laser pen and the chosen letter is then transferred to the attached computer. The keyboard is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply is not to be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 12 of Schedule 3 (Item 12) lists 'alternative keyboards'. An alternative keyboard is a keyboard with special features that allow it to be used by people with a disability. The entity is supplying a keyboard that is designed for people who are unable to use their hands to operate a normal computer keyboard. The user attaches a laser pen, which is pointed towards the alternative keyboard, to their head. The alternative keyboard has special receptors that receive the signal from the laser pen and the chosen letter is then transferred to the attached computer. Accordingly, the alternative keyboard has special features that allow people with disabilities to operate the keyboard by their head movements only. Therefore, the keyboard falls within the description in Item 12 and is covered by Schedule 3. The alternative keyboard is designed for people that are unable to use their hands and, therefore is designed for people with an illness or disability. In addition, the alternative keyboard is not widely used by people without an illness or disability. Accordingly, the requirements in subsection 38-45(1) of the GST Act are met. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an alternative keyboard.", "Date_of_Decision": "5 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002715", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/864", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and walking frames", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a walking frame?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a walking frame.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies various types of walking frames including walking frames without wheels, with wheels, brakes and/or seats. The walking frames are designed to support both adults and children with ambulatory difficulties while they are walking. The walking frames are specifically designed for people with an illness or disability and are not widely used for people without an illness or disability. However, they have not been adapted to the specific illness or disability of a particular patient. There is no agreement between the entity and the recipient that the supply is not to be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Items of relevance in Schedule 3 are: Standard walking frames for adults and children are frames designed to support adults and children while they are walking. Specialised walking frames are frames that have additional special characteristics or functions, or have been made or adapted to the specific illness or disability of a particular person. The entity's walking frames do not have any special characteristics nor have they been adapted to the specific illness or disability of a particular patient. Therefore, they are not considered to be specialised walking frames under Item 100. The walking frames in question are designed to support adults and children whilst they are walking. As such, the walking frames designed for adults are covered by Item 98 and the frames designed for children are covered by Item 99. In addition, the walking frames are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. As such, the requirements in subsection 38-45(1) of the GST Act are met. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a walking frame for an adult or child.", "Date_of_Decision": "1 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-10 subsection 38-45(1) Schedule 3 Schedule 3 table item 98 Schedule 3 table item 99 Schedule 3 table item 100", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002864", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/865", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and walking sticks", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a walking stick?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a walking stick.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a walking stick. The walking stick is designed to aid a person to walk. The walking stick is not non-functional nor is it purely ornamental. The walking stick is specifically designed for people with an illness or disability and is not widely used for people without an illness or disability. There is no agreement between the entity and the recipient that the supply is not to be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: Item 97 in the table in Schedule 3 (Item 97) lists 'walking sticks - specialised'. A specialised walking stick is a hand held device the principal function of which is to assist a person to walk by taking some of the weight of that person. Walking sticks that are non-functional or are purely ornamental are not walking sticks for the purposes of Item 97. The entity is supplying a walking stick that assists people to walk. They are not purely ornamental nor are they non-functional. Therefore, the walking stick is covered by Item 97. In addition, the walking stick is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. As such, the requirements in subsection 38-45(1) of the GST Act are met. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a walking stick.", "Date_of_Decision": "1 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-10 subsection 38-45(1) Schedule 3 Schedule 3 table item 97", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002865", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2002/991", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and modifications made to doors relating to the disability of a particular person", "Issue": "Is an entity, a supplier of building services, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it widens a doorway within a home to allow disabled access and attaches a screen door?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it widens a doorway within a home to allow disabled access and attaches a screen door. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of building services. The entity modifies a doorway within a home to allow wheelchair access by widening it and attaches a screen door. The screen door does not have any special characteristics or features. The entity does not receive any Commonwealth, State or Territory government funding. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 52 in the table in Schedule 3 (Item 52) lists 'special door fittings relating to the disability of a particular person'. The phrase 'relating to the disability of a particular person' means that, when supplied, the special door fittings must be customised in such a way that the method of operation of the door relates specifically to the needs or requirements of a particular disabled person. The entity alters the framework of the doorway by widening it. This is a service provided to alter the existing structure of the building and is not a supply of actual goods, such as a special door fitting. Accordingly, this service is not covered by Item 52. In addition, the screen door attached to the widened doorway does not have any special characteristics. It is not a door fitting customised in such a way that the method of operation of the door relates specifically to the needs or requirements of a particular disabled person. Therefore, the screen door is not covered by Item 52. Therefore, the supply of the entity's services to widen the doorway and attach a screen door is not a GST-free supply under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it widens a doorway within a home to allow disabled access and attaches a screen door.", "Date_of_Decision": "10 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-30(4) section 38-38 section 38-40 subsection 38-45(1) Division 38 Division 40 Schedule 3 Schedule 3 table item 52", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Taxable supply", "Case_References": "", "Other_References": "Home and Community Care Act 1985", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002991", "Unmatched_Content": "Amended to note possible application of section 38-38 of the GST Act, which came into effect on 1 July 2013 | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/1060", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and batteries used in wheelchairs and scooters", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a multi-purpose battery for use in a motorised wheelchair or scooter used for the carriage of people with disabilities?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it sells a multi-purpose battery for use in a motorised wheelchair or scooter used for the carriage of people with disabilities. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity is selling a multi-purpose battery. The entity supplies these batteries for use in motorised wheelchairs and scooters used for the carriage of people with disabilities. However, the batteries in question are not specifically designed for a particular purpose and are widely used in other applications such as golf buggies and electrical products. The supply of a motorised wheelchair or scooter used for the carriage of people with disabilities is GST-free under subsection 38-45(1) of the GST Act. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply is GST-free if the thing supplied is: The term 'spare part' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that term. The Macquarie Dictionary (1997) defines 'spare part' to mean 'a part which replaces a faulty, worn, or broken part of a machine ...'. Therefore, it is considered that a spare part for a GST-free medical aid or appliance is a part that can be used to replace a faulty, worn, or broken part of the GST-free medical aid or appliance. The entity is supplying a battery that is used to replace the faulty, worn or broken battery of a motorised wheelchair or scooter used for the carriage of people with disabilities. The supply of a motorised wheelchair or scooter used for the carriage of people with disabilities is GST-free under subsection 38-45(1) of the GST Act. Therefore, the first requirement in subsection 38-45(2) of the GST Act is satisfied. To satisfy the second requirement in subsection 38-45(2) of the GST Act, the battery must be specifically designed as a spare part for a GST-free medical aid or appliance. The entity supplies the battery for use in motorised wheelchairs and scooters that are GST-free under subsection 38-45(1) of the GST Act. However, the battery is not specifically designed for this purpose. The battery is a multi-purpose battery that can be used in many applications. As such, the second requirement in subsection 38-45(2) of the GST Act is not satisfied and the supply of the battery is not GST-free under subsection 38-45(2) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. In addition, the supply is not GST-free under any other provisions in Division 38 of the GST Act nor is it input taxed under Division 40 of the GST Act. As such, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a multi-purpose battery for use in a motorised wheelchair or scooter used for the carriage of people with disabilities.", "Date_of_Decision": "13 February 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) subsection 38-45(2) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021060", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/134", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and importation of hypodermic safety syringes", "Issue": "Is the entity, an importer, making a non-taxable importation under paragraph 13-10(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it imports hypodermic safety syringes?", "Decision": "Yes, the entity is making a non-taxable importation under paragraph 13-10(b) of the GST Act, when it imports hypodermic safety syringes.", "Facts": "The entity is an importer of medical aids and appliances. In this case, the entity is importing hypodermic safety syringes. These syringes are specifically designed for people with an illness or disability. They are not widely used by people without an illness or disability. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under paragraph 13-10(b) of the GST Act, an importation is classed as a non-taxable importation if it would have been a supply that was GST-free or input taxed, if it had been a supply. Therefore, in order for the importation of hypodermic safety syringes to be non-taxable, the supply of hypodermic safety syringes must be GST-free. Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances will be GST-free where the medical aid or appliance: Item 37 of Schedule 3 specifies 'needles and syringes'. The hypodermic safety syringes in question, are considered to be specifically designed for people with an illness or disability. Furthermore, it is considered that these hypodermic syringes are not widely used by people without an illness or disability. As such, the supply of these hypodermic safety syringes is GST-free under subsection 38-45(1) of the GST Act. Therefore, as the supply of these hypodermic safety syringes is GST-free under subsection 38-45(1) of the GST Act; the importation of these syringes is also non-taxable under paragraph 13-10(b) of the GST Act.", "Date_of_Decision": "1 May 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 paragraph 13-10(b) subsection 38-45(1) Schedule 3 Schedule 3 item 37", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances Imports Non taxable importations", "Case_References": "", "Other_References": "GST Consultative Forum on Health - Issues Log issue 4.a.5", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001134", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances Imports Non taxable importations"}
{"ATO_ID_Number": "ATO ID 2001/139", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Hearing Induction Loops", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies and installs 'hearing loops' that are built up on the premises from their integral components?", "Decision": "Yes, The entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies and installs 'hearing loops' that are built up on the premises from their integral components.", "Facts": "The entity is a supplier of medical aids and appliances. In this case, the entity is supplying and installing 'hearing loops'. These 'hearing loops' are built up on the premises from their integral components. The term 'hearing loop' encompasses infra-red, FM and induction loop hearing systems. These systems are used in conjunction with an individual's own hearing aid to increase the volume of a dedicated sound source and decrease the impact of background noise. Based upon common industry usage of these terms, infra-red and FM hearing systems consist of a small transmitter attached to a specific sound source (such as a dedicated microphone or television). The transmitter sends signals directly to a receiver worn by the listener. These signals are then converted back into sound. An induction loop system consists of an amplifier (connected to a specific sound source such as a dedicated microphone or television) and a loop of wire (placed around the perimeter of a room). These items work together to create a magnetic field within the room. When a person wearing a hearing aid or loop receiver equipped with a 'T' or telecoil circuit comes within this magnetic field, a second electric current is created. This second current is amplified by the hearing aid or loop receiver and is then converted back into sound. These 'hearing loops' are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. The entity is registered for goods and services tax (GST). There is no agreement between the entity and the recipient to treat the supply as not a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances will be GST-free where the medical aid or appliance: Item 11 of Schedule 3 to the Regulations (item 11) specifies 'hearing loops'. The term 'hearing loop' is not defined in the GST Act. However, the term is commonly used to denote Infra-red, FM and Induction Loop systems. From the accepted industry definitions of these hearing systems, it is considered that the term 'hearing loop' refers to the integral components of a system that transforms a voice into a current and either transmits it directly to a receiver worn by the listener, or induces a corresponding current within a loop receiver or hearing aid equipped with a 'T' or telecoil circuit. The integral components of an infra-red or FM hearing system are the specially designed transmitter and receiver. The integral components of an induction loop hearing system will usually be an amplifier, a loop wire, the associated cables and clips, the loop receiver (such as a specially equipped headset) and a microphone and stand where the loop cannot be used as part of a public address system. Where the integral components of a hearing loop system are sold together as a complete device, which may or may not be attached to a building or fixture, this supply is GST-free under subsection 38-45(1) of the GST Act. However, the installation charge is a taxable supply provided that the requirements of section 9-5 of the GST Act are satisfied. In contrast, where the hearing loop system is built up on the premises (either from various generic components or from a kit), the supply of the integral components and their installation will be the supply of a 'hearing loop' as specified in item 11, provided that the components are integrated into an identifiable medical aid or appliance. In this situation, the individual components lose their distinct identity and become a part of the entire created unit. In this case, the entity is supplying and installing those types of hearing loops that are built up on the premises from integral components. Therefore, the supply and installation of these hearing loops is covered by item 11. As these hearing loops are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability, their supply and installation is a GST-free supply under subsection 38-45(1) of the GST Act. Some parts used to make hearing loops are generic in nature. When supplied separately, as individual items, they are not GST-free under subsection 38-45(2) of the GST Act as they are not a spare part specifically designed for use in the hearing loop. If a purchaser (who is registered for GST), acquires parts in the course of or in furtherance of their enterprise, for the purpose of using those parts to make a GST-free supply of a hearing loop, an input tax credit may be claimed for any GST paid in relation to those parts provided that the requirements of Division 11 of the GST Act are satisfied.]", "Date_of_Decision": "1 February 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 11 section 38-45 subsection 38-45(1) subsection 38-45(2) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances Medical goods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001139", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Medical aids & appliances Medical goods"}
{"ATO_ID_Number": "ATO ID 2001/216", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and spare parts for medical aids and appliances", "Issue": "Is the entity, a supplier of parts, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a part for a GST-free medical aid, where that part is a generic component designed for various uses?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies a part for a GST-free medical aid, where that part is a generic component designed for various uses. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of parts. The entity is supplying a part to replace a worn component of a medical aid. The supply of the medical aid is GST-free under subsection 38-45(1) of the GST Act. The part is generic and can be used as a part in many appliances other than the medical aid. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-45(2) of the GST Act provides that a supply of a spare part will be a GST-free supply if the spare part is: The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'spare part' as, amongst other things, 'a part which replaces a faulty, worn, or broken part of a machine...' In this case, the part is supplied to replace a worn component of a medical aid. As such, the part is considered to be a 'spare part' for the purposes of the GST Act. Furthermore, as the part is supplied as a spare part for a medical aid that is GST-free under subsection 38-45(1) of the GST Act; the supply satisfies the first requirement in subsection 38-45(2) of the GST Act. However, as the spare part is a generic component that can be used as a spare part for many appliances, it is considered that it is not specifically designed as a spare part for the GST-free medical aid in question. Therefore, as the supply does not meet the second requirement in subsection 38-45(2) of the GST Act, the entity is not making a GST-free supply of a spare part. In this case, the entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, as the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act; the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "19 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) subsection 38-45(2) Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/210", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales. GST Pharmaceutical Health Forum - Issue 1.g", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001216", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/217", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Wheelchair Ramp", "Issue": "Is the entity, an installer of wheelchair ramps, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it constructs a wheelchair ramp and incorporates it into the structure of a house?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it constructs a wheelchair ramp and incorporates it into the structure of a house.", "Facts": "The entity is an installer of wheelchair ramps. The entity constructs a wheelchair ramp and incorporates it into the structure of a house in order to provide access to an individual in a wheelchair. Various components are used to build the wheelchair ramp in situ (on site). To function properly, the wheelchair ramp is incorporated into the structure of the house. The wheelchair ramp is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act a supply of a medical aid and appliance will be GST-free if: The category of medical aids and appliances listed in Schedule 3 that is of particular relevance to this case is 'mobility of people with disabilities - motor vehicles'. Within this category, item 56 in the table in Schedule 3 lists 'wheelchair ramp'. The category heading 'mobility of people with disabilities - motor vehicles' is not an operative part of Schedule 3 (section 182-15 of the GST Act and Note 2 in Schedule 3). As such, the category heading may only be used as an interpretation tool in certain circumstances, for example, where the description of an item listed in Schedule 3 is ambiguous or obscure (paragraph 182-10(2)(c) of the GST Act). In this case, the meaning of the term 'wheelchair ramp' is clear. Therefore, the interpretation of 'wheelchair ramp' is not restricted by its category heading. It is considered that a wheelchair ramp that provides access to a house, falls within the scope of item 56 in the table in Schedule 3. Furthermore, in this case, the wheelchair ramp is built up in situ (on site) from various components. As the wheelchair ramp needs to be incorporated into the structure of the house to function properly, it is only upon the completion of its construction and incorporation that the ramp becomes identifiable as a wheelchair ramp. As such, the supply by the entity, of the construction and incorporation of the wheelchair ramp (which includes materials and labour), is the supply of a 'wheelchair ramp' as specified in item 56 in the table in Schedule 3. As this wheelchair ramp is covered by Schedule 3, is specifically designed for people with an illness or disability, and is not widely used by people without an illness or disability; its supply and installation is a GST-free supply of a medical aid or appliance under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "18 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 182-10 paragraph 182-10(2)(c) subsection 38-45(1) section 182-15 Schedule 3 Schedule 3 Note 2 Schedule 3 item 56", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances", "Case_References": "", "Other_References": "GST Consultative Forum on Health Issues Log - Issue 4.a.14", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001217", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/273", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Foot Orthoses", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells foot orthoses?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it sells foot orthoses.", "Facts": "The entity is a supplier of medical aids and appliances. In this case, the entity is selling foot orthoses. The entity is registered for goods and services tax (GST). The orthosis in question is described as a 'proprio receptive arch' and is designed to support an injured foot. This orthosis is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, a supply of a medical aid and appliance is GST-free if: The category of medical aids and appliances from Schedule 3 that is of particular relevance to this case is 'footwear for people with disabilities'. Within this category, item 42 in the table in Schedule 3 (Item 42) lists orthotics. Orthotics is not defined in the GST Act and is therefore given its ordinary meaning. The Macquarie Dictionary (1997) defines 'orthotic' as the adjectival form of the word orthosis. Orthosis is defined as a device applied to the body to modify position or motion, as a supporting collar, plaster cast, and so on. The category heading 'footwear for people with disabilities' provides guidance as to the meaning of 'orthotics' for the purposes of Schedule 3. Although the category heading is not an operative part of Schedule 3 (section 182-15 of the GST Act and Note 2 in Schedule 3), it does confirm, in accordance with paragraph 182-10(2)(b) of the GST Act, that orthotics, for the purposes of Item 42, is restricted to devices which are designed to be used or applied as an orthosis for the foot to change or alter position or motion or prevent movement. In this case, the orthosis is a 'proprio receptive arch' that is designed to provide support to a particular part of an injured foot in order to position or prevent movement so as to prevent any further injury. The orthosis in question therefore falls within the interpretation of orthotics for the purposes of Item 42. Therefore, as the foot orthoses fall within the scope of Schedule 3 and are specifically designed for people with an illness or disability, and are not widely used by people without an illness or disability, their supply is GST-free under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "1 November 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) section 182-15 paragraph 182-10(2)(b) Schedule 3 table item 42 Schedule 3 Note 2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001273", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/280", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Doorbell Alert System", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a doorbell alert system?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a doorbell alert system.", "Facts": "The entity is a supplier of medical aids and appliances. In this case, the entity is supplying a specifically designed doorbell alert system. The doorbell alert system is made up of two components; a doorbell component and a remote component. The two components cannot work independently. The remote portion has a combined sound and flashing strobe alert and is completely portable. The doorbell alert system is specifically designed for people whose disabilities range from minor hearing problems to profound hearing loss. The doorbell alert system is not widely used by people without an illness or disability. The entity is registered for goods and services tax (GST). There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act the supply of a medical aid or appliance is GST-free if: Item 47 in the table in Schedule 3 lists 'visual/tactile alerting devices' (Item 47). This term is not defined in the GST Act and must therefore be given its ordinary meaning. The Macquarie Dictionary (1997) defines 'alert' to mean 'an alarm or warning'. Based on this definition, it is considered that 'visual/tactile alerting devices' are devices that are designed to alert vision and hearing impaired people to a strong occurrence, danger or presence. In this case, the doorbell alert system alerts hearing impaired persons to the fact that someone is present at the door of their residence, via a flashing strobe light. Therefore, it is considered that the doorbell alert system falls within the scope of Item 47. As the doorbell alert system is covered by Schedule 3; is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability; the entity is making a GST-free supply of a medical aid or appliance under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "5 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 47", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001280", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/281", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Non-invasive acupuncture point electric stimulators", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a non-invasive acupuncture point electric stimulator developed primarily for the relief of pain?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a non-invasive acupuncture point electric stimulator developed primarily for the relief of pain.", "Facts": "The entity is a supplier of medical appliances. In this case, the entity supplies a non-invasive acupuncture point stimulator device. The non-invasive acupuncture point stimulator device is a small, battery-operated unit with leads connected to electrodes that are then attached to the skin. The device has been developed primarily for the relief of pain associated with various illnesses. The non-invasive acupuncture point stimulator device is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: The only item of relevance to this case is item 141 in the table in Schedule 3 to the GST Act (Item 141). Item 141 lists 'transcutaneous nerve stimulator machines' (TENS machines). Non-invasive acupuncture point electric stimulators are not specified in the Regulations. The phrase 'transcutaneous nerve stimulator machines' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In this case, given the context in which the phrase appears (ie in a list of medical aids and appliances), the phrase is considered to have a special or technical meaning. The Concise Medical Dictionary (1998) defines 'transcutaneous electric nerve stimulation' as: 'the introduction of pulses of low-voltage electricity into tissue for the relief of pain. It is effected by means of a small portable battery-operated unit with leads connected to electrodes attached to the skin; the strength and frequency of the pulses, which prevent the passage of pain impulses to the brain, can be adjusted by the patient. TENS is used mainly for the relief of rheumatic pain; as a method of producing pain relief in labour, it is less frequently used than epidural anaesthesia (see spinal anaesthesia), which has a much wider application for pain relief in obstetrics.' Black's Medical Dictionary (1995) defines 'transcutaneous nerve stimulation' as: 'a method of electrical stimulation that is being used for the relief of pain, including that of migraine, neuralgia and phantom limbs. Known as TENS, its mode of action appears to have some resemblance to that of acupuncture. Several controlled trials suggest that it provides at least a modicum of relief of pain after operations, thereby reducing the amount of analgesics that may be called for.' Based on the above definitions, it is considered that a TENS machine is a small portable battery-operated unit with leads connected to electrodes that are then attached to the skin. The purpose of the machine is to aid pain relief by preventing the passage of pain impulses to the brain. As such, a TENS machine only includes those devices which are developed primarily for the purpose of pain relief. In this case, the non-invasive acupuncture point stimulator device is a small portable battery-operated unit with leads connected to electrodes that are then attached to the skin. The device has been developed primarily for the relief of pain. As such, the device is a TENS machine for the purposes of Item 141. Additionally, the non-invasive acupuncture point stimulator device is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. As such, the requirements of subsection 38-45(1) of the GST Act are satisfied. Therefore, the supply of the non-invasive acupuncture point stimulator device that is developed primarily for pain relief is a GST-free supply under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "26 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Schedule 3 table item 141", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/282", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "Concise Medical Dictionary, 1998, Oxford University Press, Market House Books Ltd Black's Medical Dictionary, 1995, 38th Edition, A & C Black, London", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001281", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/282", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Non-invasive acupuncture point electric stimulators", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies non-invasive acupuncture point electric stimulators developed primarily for the treatment of smoking, obesity and stress?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies non-invasive acupuncture point electric stimulators developed primarily for the treatment of smoking, obesity and stress. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical appliances. The entity supplies a range of non-invasive acupuncture point stimulator devices. The non-invasive acupuncture point stimulator devices are small, battery-operated units with leads connected to electrodes that are then attached to the skin. The devices have been developed primarily for the treatment of smoking, obesity and stress. They have not been developed for pain relief. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: The only item of relevance to this case is item 141 in the table in Schedule 3 to the GST Act (Item 141). Item 141 lists 'transcutaneous nerve stimulator machines' (TENS machines). Non-invasive acupuncture point electric stimulators are not specified in the Regulations. The phrase 'transcutaneous nerve stimulator machines' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In this case, given the context in which the phrase appears (ie a list of medical aids and appliances), the phrase is considered to have a special or technical meaning. The Concise Medical Dictionary (1998) defines 'transcutaneous electric nerve stimulation' as: 'the introduction of pulses of low-voltage electricity into tissue for the relief of pain. It is effected by means of a small portable battery-operated unit with leads connected to electrodes attached to the skin; the strength and frequency of the pulses, which prevent the passage of pain impulses to the brain, can be adjusted by the patient. TENS is used mainly for the relief of rheumatic pain; as a method of producing pain relief in labour, it is less frequently used than epidural anaesthesia (see spinal anaesthesia), which has a much wider application for pain relief in obstetrics.' Black's Medical Dictionary (1995) defines 'transcutaneous nerve stimulation' as: 'a method of electrical stimulation that is being used for the relief of pain, including that of migraine, neuralgia and phantom limbs. Known as TENS, its mode of action appears to have some resemblance to that of acupuncture. Several controlled trials suggest that it provides at least a modicum of relief of pain after operations, thereby reducing the amount of analgesics that may be called for.' Therefore, a TENS machine is a small portable battery-operated unit with leads connected to electrodes that are then attached to the skin. The purpose of the machine is to aid pain relief by preventing the passage of pain impulses to the brain. As such, a TENS machine will only include those devices which were developed primarily for the purpose of pain relief. In this case, the non-invasive acupuncture point stimulator devices are small portable battery-operated units with leads connected to electrodes that are then attached to the skin. However, the devices have been developed primarily for the treatment of obesity, smoking and stress-related problems. They have not been developed for pain relief. As such, they are not TENS machines for the purposes of Item 141. Therefore, the supply of non-invasive acupuncture point stimulator devices for the treatment of obesity, smoking and stress is not a GST-free supply under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "26 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 table item 141", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/281", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances Taxable supply", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "Concise Medical Dictionary, 1998, Oxford University Press, Market House Books Ltd Black's Medical Dictionary, 1995, 38th Edition, A & C Black, London", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001282", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/303", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and pulse oximeters", "Issue": "Is the entity, a supplier of medical, scientific, industrial and laboratory equipment, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a pulse oximeter?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a pulse oximeter. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical, scientific, industrial and laboratory equipment. In this case, the entity is supplying a pulse oximeter. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: A pulse oximeter is not specifically listed in Schedule 3; nor is it specified in the Regulations. As such, it is necessary to determine whether a pulse oximeter is a medical aid or appliance that is covered by Schedule 3. The item of most relevance in this case, is item 1 in the table in Schedule 3 to the GST Act (Item 1), which lists 'heart monitors'. Accordingly, the question at issue is whether a pulse oximeter is a heart monitor. The term 'heart monitors' is not defined in the GST Act. As this term is considered to be used in the GST Act in a technical sense, it is appropriate to determine its meaning by reference to a technical publication ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222: High Court of Australia [Full Court]). The Stedmans Medical Dictionary (2000) defines a cardiac (heart) monitor to mean: 'an electronic monitor which, when connected to the patient, signals each heart beat with a flashing light, an electrocardiographic curve, an audible signal, or all three'. As such, it is considered that a device with the primary function of monitoring a patient's heartbeat is a 'heart monitor'; and is covered by Item 1. The Stedmans Medical Dictionary (2000) defines an oximeter as 'an instrument for determining photoelectrically the oxygen saturation of a sample of blood'. 'Pulse oximetry' is defined as a procedure performed usually on the finger or ear lobe 'in which the small increase in absorption of light during the systolic pulse is used to calculate oxygen saturation'. Accordingly, a pulse oximeter's primary function is not to monitor a patient's heartbeat but rather to determine the oxygen saturation in the blood. Therefore, a pulse oximeter is not a 'heart monitor' for the purposes of Item 1. As such, the supply by the entity of a pulse oximeter is not covered by Schedule 3 or the Regulations and is not GST-free under subsection 38-45(1) of the GST Act. In this case, the entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, as the supply is neither GST-free under any of the other provisions in Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act; the supply by the entity is a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "27 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Schedule 3 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/286", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222: High Court of Australia [Full Court]", "Other_References": "Stedmans Medical Dictionary; 2000, 27th Edition, Lippincott Williams and Wilkins, Maryland, USA.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001303", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/346", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and implantable joint prostheses", "Issue": "Is the entity, a supplier of implantable prostheses, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies implantable joint prostheses to a medical practitioner for use in a surgical procedure?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies implantable joint prostheses to a medical practitioner for use in a surgical procedure. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of implantable prostheses. In this case, the entity is supplying implantable joint prostheses to a medical practitioner for use in a medical procedure. The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Implantable joint prostheses are not covered in Schedule 3 and neither are they specified in the GST Regulations. As such, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "6 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 13-5 Division 38 subsection 38-45(1) Division 40 Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Medical aids & appliances Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001346", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Added Note 2 as a result of an amendment to the definition of 'hospital treatment' in subsection 67(4) of the National Health Act 1953, which applies to section 38-20 of the GST Act. The amendment came into effect on 31 October 2005. | Keywords Goods and services tax GST free GST health Medical aids & appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/355", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and slip-on sunglasses", "Issue": "Is the entity, a supplier of sunglasses, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells slip-on sunglasses?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells slip-on sunglasses.", "Facts": "The entity is a supplier of sunglasses. The entity is selling slip-on sunglasses. The slip-on sunglasses fit in behind the lenses of prescription glasses. They are only used in conjunction with prescription glasses. The slip-on sunglasses have no corrective prescription incorporated in them. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: The only item of relevance to this case is item 155 in the table in Schedule 3 (Item 155). Item 155 lists lenses for prescription spectacles. The slip-on sunglasses are not specified in the GST Regulations. The term 'prescription spectacles' is not defined in the GST Act. Pursuant to the rules of statutory interpretation, a term will take on its ordinary meaning unless the term has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In this case, given the context in which the phrase appears, the phrase is considered to have a special or technical meaning. Dorland's Medical Dictionary (2000) defines the words 'prescription' as a 'written direction for the preparation and administration of a remedy'. The word 'spectacles' is defined as 'a pair of lenses in a frame to assist vision'. Accordingly, it is considered that 'prescription spectacles' are a pair of lenses in a frame provided in accordance with a prescription and further, it is considered that the prescription must be by an appropriately qualified person (eg an optometrist) for the purpose of remedying a defect. It is considered that lenses, which have some part of a corrective prescription incorporated in them and have no other use than finishing and incorporation into prescription spectacles, are lenses for prescription spectacles for the purposes of subsection 38-45(1) of the GST Act. Where the lenses do not have a corrective prescription incorporated in them, they do not satisfy the meaning of the phrase 'lenses for prescription spectacles'. The slip-on sunglasses do not have a corrective prescription incorporated in them. Therefore, they are not covered by Item 155, lenses for prescription spectacles. Consequently, the supply of the slip-on sunglasses is not a GST-free supply under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies the slip-on sunglasses.", "Date_of_Decision": "23 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 155", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST-free GST health Medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "Dorland's Medical Dictionary, 2000, 29th edition, Newman W. Dorland, WB Saunders, London.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001355", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords GST-free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/363", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and leg braces", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a leg brace?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a leg brace.", "Facts": "The entity is a supplier of medical appliances. The entity supplies a leg brace. The leg brace is a medical aid, which attaches to the upper and lower leg and provides resistance to movements of the knee joint. The purpose of the appliance is to exercise the hamstring muscles and to aid in correcting patellofemoral dysfunctions (knee joint pain, anterior pelvic tilt, etc). In this case, the leg brace is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, a supply of a medical aid and appliance is GST-free if: Item 69 in the table in Schedule 3 (Item 69) lists 'lower limb orthoses'. The terms 'lower limb' and 'orthoses' are not defined in the GST Act. Generally, where a term is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a term has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that term relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In this case, given the context in which the terms appears (i.e., in a list of medical aids and appliances), the terms are considered to have a special or technical meaning. Stedman's Medical Dictionary (2000) defines 'orthoses' as 'an external orthopaedic appliance, as a brace or splint, that prevents or assists movement of the spine or the limbs'. Lower limb is defined to mean 'the hip, thigh, leg, ankle or foot'. In this case, the leg brace is a medical aid, which attaches to the upper and lower leg and provides resistance to movements of the knee joint. Therefore, it is considered that the leg brace is a 'lower limb orthoses' as listed in Item 69, as it is designed to be applied to the leg to prevent movement of the knee joint. The leg brace is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. Therefore, the supply of the leg brace is GST-free under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "14 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 69", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "Stedman TL, Stedmans Medical Dictionary, 27th Edition, Lippincott, Williams & Wilkins, Baltimore 2000", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001363", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/364", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of an orthopaedic chair", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an orthopaedic chair?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an orthopaedic chair.", "Facts": "The entity is a supplier of various medical aids and appliances including orthopaedic chairs. The orthopaedic chair in this case can be adjusted to suit a person with an illness or disability. It has the following design characteristics: There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Item 16 in the table in Schedule 3 to the Regulations (Item 16) specifies 'postural support seating'. Postural support seating as listed in Item 16 needs to be a specific type of seating possessing characteristics that satisfies both the description of the item and the use requirement of paragraph 38-45(1)(b) of the GST Act. The phrase 'postural support seating' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In consultation with the Health Industry, it is considered that for the purposes of Item 16 and to be a thing that is specifically designed for people with an illness or disability, 'postural support seating' should be: In this case, the orthopaedic chair contains several of the characteristics from element (iii) above. As such, the orthopaedic chair is covered by Item 16 and is specifically designed for people with an illness or disability. In addition, it is not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies the orthopaedic chair.", "Date_of_Decision": "23 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) paragraph 38-45(1)(b) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/365", "Subject_References": "Goods and Services tax GST-free GST health Medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001364", "Unmatched_Content": "Keywords Goods and Services tax GST-free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/365", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of an orthopaedic stool (leg rest)", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an orthopaedic stool (leg rest)?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies an orthopaedic stool (leg rest). The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of various medical aids and appliances including orthopaedic stools (leg rests). The particular orthopaedic stool (leg rest) in question fits under an orthopaedic chair and is used as an extension of the chair, or can be used as a stool. The entity is registered for goods and services tax (GST). The supply meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Of relevance in this case is item 16 in the table in Schedule 3 to the Regulations which lists 'postural support seating'. Postural support seating as listed in Item 16 needs to be a specific type of seating possessing characteristics that satisfies both the description of the item and the use requirement of paragraph 38-45(1)(b) of the GST Act. The phrase 'postural support seating' is not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a special or technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). In consultation with the Health Industry, it is considered that for the purposes of Item 16 and to be a thing that is specifically designed for people with an illness or disability, 'postural support seating' should be: However, it is considered that an orthopaedic stool (leg rest) does not fall within that item. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies an orthopaedic stool.", "Date_of_Decision": "23 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services tax GST-free GST health Medical aids and appliances Taxable supply", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001365", "Unmatched_Content": "Keywords Goods and Services tax GST-free GST health Medical aids and appliances Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/386", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and wheelchair cushions", "Issue": "Is the entity, a supplier of wheelchair accessories, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a wheelchair cushion?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a wheelchair cushion.", "Facts": "The entity is a supplier of wheelchair accessories. The entity supplies a product that is marketed as a wheelchair cushion. The wheelchair cushion is shock absorbent and therefore, prevents back injury due to excessive jolting and jarring for people confined to wheelchairs or for people who need to use scooters to aid their mobility. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: Item 106 in the table in Schedule 3 (Item 106) lists 'accessories associated with wheelchairs, motorised wheelchairs, scooters, tricycles, spinal carriages and other goods for the carriage of people with disabilities'. In this case, the wheelchair cushion is shock absorbent to prevent back injury for people confined to wheelchairs or for people who need to use scooters to aid their mobility. Therefore, it is considered that the wheelchair cushion is an accessory associated with wheelchairs and scooters and therefore, comes within the scope of Item 106. Furthermore, as the wheelchair cushion is designed to assist people using wheelchairs or scooters, it is considered that the wheelchair cushion is specifically designed for people with an illness or disability and not widely used by people without an illness or disability. Accordingly, the supply of the wheelchair cushion satisfies the requirements in subsection 38-45(1) of the GST Act. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a wheelchair cushion.", "Date_of_Decision": "8 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 106", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001386", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/472", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and mastectomy bras", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a mastectomy bra?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it sells a mastectomy bra.", "Facts": "The entity is a supplier of medical aids and appliances. The entity sells mastectomy bras. The mastectomy bra is specifically designed to conceal and hold a mammary prosthesis securely in place. The bra differs from regular bras and is not widely used by women who have not undergone medical treatment such as a mastectomy or lumpectomy. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 15 in the table in Schedule 3 to the GST Regulations (Item 15) specifies 'supplements and aids associated with mammary prostheses'. Generally, where a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning unless it has a special or technical meaning. Where a word or phrase has a special or technical meaning, it is necessary to determine the meaning by reference to the industry to which the word or phrase relates ( Herbert Adams Pty Ltd V FCT (1932) 47 CLR 222 ). It is considered, in consultation with the Pharmaceutical Health Sector, that 'supplements and aids associated with mammary prostheses' include items that are worn to support and conceal mammary prostheses. In this case, the mastectomy bra is specifically designed to conceal and hold a mammary prosthesis securely in place. As such, the mastectomy bra is covered by Item 15. The bra is specifically designed for people with an illness or disability; and is not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it sells a mastectomy bra.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health section 38-45 Medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "GST Pharmaceutical Issues Register - Issue 1b", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001472", "Unmatched_Content": "Keywords Goods & services tax GST free GST health section 38-45 Medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/476", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of an alternative mouse device", "Issue": "Is the entity, a supplier of computer equipment, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells the alternative mouse device?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it sells the alternative mouse device.", "Facts": "The entity is a supplier of computer equipment. The entity sells an alternative mouse device. Unlike a standard mouse that is controlled by hand, the alternative mouse device is controlled by head movement and uses a direct focused beam of light to operate the computer. It is designed for people who are unable to use a standard computer mouse due to upper limb impairment, such as a person who is quadriplegic or a person with cerebral palsy. The entity is registered for goods and services tax (GST). There is no agreement between the entity and the recipient to treat the supply as not a GST-free supply.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 11 in the table in Schedule 3 (Item 11) lists 'mouth/head sticks/pointers'. Head pointers are not defined in the GST Act. Generally, where a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning unless it has a special or technical meaning. Where a word or phrase has a special or technical meaning, it is necessary to determine the meaning by reference to the industry to which that word or phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). It is considered that the term 'head pointers' has a special or technical meaning. A head pointer is a device which is placed on the head and is used to point to objects or to press switches or keys on a keyboard. It may operate using a pointer or a focused beam of light. In this case, the alternative mouse device is controlled by head movements and uses a direct focused beam of light to operate the computer. Therefore, it is considered that the mouse device is covered by Item 11. The alternative mouse device is designed for people who have an upper limb impairment such as a quadriplegic or a person with cerebral palsy. Therefore, it is considered the alternative mouse device is specifically designed for people with an illness or disability and not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45c(1) of the GST Act when it sells the alternative mouse device.", "Date_of_Decision": "25 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 11", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001476", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/502", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and pelvic floor muscle exercise device", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a pelvic floor muscle exercise device designed to help women with stress incontinence?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a pelvic floor muscle exercise device designed to help women with stress incontinence.", "Facts": "The entity is a supplier of medical aids and appliances. In this case, the entity supplies a pelvic floor muscle exercise device. The pelvic floor muscle exercise device is designed to help women with stress incontinence which is brought about by an overall weakness in the pelvic floor muscles. The device comprises a number of vaginal cones and a set of weights. Once the weighted vaginal cone is inserted, the pelvic floor muscles automatically contract to keep the cone in place. This reflex action exercises and strengthens the pelvic floor muscles. The improvement in pelvic muscle tone, which usually takes up to 12 weeks to be realised, results in greater bladder control. In this case, the pelvic floor muscle exercise device is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only item of relevance to this case is item 20 in the table in Schedule 3 (Item 20). Item 20 lists 'incontinence appliances'. The pelvic floor muscle exercise device is designed to help women with stress incontinence, and as such, is considered to be an incontinence appliance for the purposes of Item 20. Additionally, the pelvic floor muscle exercise device is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. As such, the requirements of subsection 38-45(1) of the GST Act are satisfied. Therefore, the supply of the pelvic floor muscle exercise device designed to help women with stress incontinence, is GST-free under subsection 38-45(1) of the GST Act.", "Date_of_Decision": "10 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 table item 20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Medical aids and appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001502", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST free GST health Medical aids and appliances"}
{"ATO_ID_Number": "ATO ID 2001/508", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of hip prostheses to a hospital", "Issue": "Is the entity, a supplier of health goods, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a hip prosthesis to a hospital?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a hip prosthesis to a hospital. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of health goods. The entity sells a hip prosthesis to a hospital. A hip prosthesis is an artificial hip that is surgically implanted by a medical practitioner. The entity is registered for goods and services tax (GST). The supply satisfies the other positive elements of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only listed item of relevance to this case is item 83 in the table in Schedule 3 (Item 83) which lists 'artificial limbs and associated supplements and aids'. The phrase 'artificial limbs and associated supplements and aids' is not defined in the GST Act. Generally, where a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning unless it has a special or technical meaning. Where a word or phrase has a special or technical meaning, it is necessary to determine the meaning by reference to the industry to which that word or phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). After consultation with the Health Industry, it is considered that an artificial limb includes an artificial arm or leg but excludes surgically implanted prostheses (for example, artificial hips and knees). Therefore, the hip prosthesis is not covered by Item 83. As there are no other items in Schedule 3 which cover the supply of the hip prosthesis, it is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a hip prosthesis to a hospital.", "Date_of_Decision": "31 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-7(3) subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 83", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-45 - medial aids & appliances GST supplies and acquisitions Taxable supply", "Case_References": "Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222", "Other_References": "Pharmaceutical Product Classification Issues Log", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001508", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | add 'Prior to 31 October' into Note 1 and to add Note 2 as a result of an amendment to the definition of 'hospital treatment' in subsection 67(4) of the National Health Act 1953, which applies to section 38-20 of the GST Act. The amendment came into effect on 31 October 2005. | Keywords Goods and services tax GST free GST health Section 38-45 - medial aids & appliances GST supplies and acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/509", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the installation of medical alert device components", "Issue": "Is the entity, a supplier and installer of medical alert device components, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies components, labour and materials used to build up an emergency nurse call system (call system) in situ (on site)?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies components, labour and materials used to build up an emergency nurse call system in situ (on site).", "Facts": "The entity is a supplier and installer of medical alert device components, and sells a call system to a nursing home. The call system is built up in situ from various components and forms part of the structure of the building. The supply by the entity of the call system includes all installation costs such as labour used in hardwiring through walls and ceilings, and the use of materials such as cable for wiring, connectors and plugs, etc. The supply of the call system is only complete and identifiable as such, when it has been fully installed. There is only one charge for the supply, that being the supply of the installed call system. The emergency call system is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 33 in the table in Schedule 3 (Item 33) specifies 'medical alert' devices. It is considered that a medical alert device is a device that is designed for the purpose of alerting medical/caring personnel or an ambulance service that a person is in need of emergency medical assistance or that the person has a medical condition that may require specific treatment. An emergency call system falls within the meaning of Item 33. The issue here is whether the supply of components, labour and materials used to build up a call system in situ is a medical alert device within the meaning of Item 33. Generally, the supply of a medical aid or appliance built up in situ from various components that do not become identifiable as a medical aid or appliance until installation is completed, includes installation charges as part of the GST-free supply. In this case, the call system is built up in situ and is not complete until it is installed. After the installation of the call system, the installed components are identifiable as a 'medical alert' device within the meaning of Item 33. In addition, there is only one charge for the supply. The charge is for the supply of medical alert device components which make up the call system, labour and materials used to build the call system in situ. The call system is specifically designed for people with an illness or disability and is not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies components, labour and materials used to build an emergency nurse call system in situ.", "Date_of_Decision": "22 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 Schedule 3 table item 33", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST- free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001509", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST- free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/520", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of an addition to an existing denture to a dentist", "Issue": "Is the entity, a dental laboratory, making a GST-free supply under section 38-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an addition to an existing denture to a dentist?", "Decision": "No, the entity is not making a GST-free supply under section 38-45 of the GST Act when it supplies an addition to an existing denture to a dentist. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a dental laboratory. The entity makes a supply to a dentist of an addition to an existing denture. The entity does not deal directly with the public. An addition to an existing denture is a service that alters the denture to accommodate an additional tooth or teeth. The service involves re-working and re-moulding the existing denture. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: Item 30 of Schedule 3 lists 'dentures and artificial teeth'. An addition to an existing denture is not considered to be a supply of a 'denture' for the purposes of item 30 of Schedule 3. The addition to an existing denture is a service that alters the denture to accommodate an additional tooth or teeth. Therefore, the supply of an addition to a denture is not GST-free under subsection 38-45(1) of the GST Act. Subsection 38-45(2) of the GST Act provides that spare parts, that are specifically designed as spare parts for a medical aid or appliance that is GST-free under subsection 38-45(1) of the GST Act are also GST-free. The term 'spare part' is not defined in the GST Act, therefore it is given its ordinary meaning. The Macquarie Dictionary (1997) defines a spare part as 'a part which replaces a faulty, worn, or broken part of a machine....'. In this case, the entity is supplying a service of re-working and re-moulding the existing denture and incorporated into that service is the supply of the artificial teeth. It is considered that a supply of an addition to the denture (including the additional teeth) is not a spare part because it does not replace an existing part that is faulty, worn or broken. The supply of the teeth is a component of the supply of the service of altering the denture but in this context, it is not a supply of a specifically designed spare part for a denture under subsection 38-45(2) of the GST Act. The supply of a denture addition is not GST-free under subsections 38-45(1) or (2) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies an addition to a denture.", "Date_of_Decision": "23 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-80 subsection 38-10(1) paragraph 38-10(1)(c) section 38-45 subsection 38-45(1) subsection 38-45(2) Schedule 3 Schedule 3 table item 30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST-free GST health Section 38-10 - other health services Section 38-45 - medical aids and appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001520", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods and services tax GST-free GST health Section 38-10 - other health services Section 38-45 - medical aids and appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/567", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and diagnostic external programmable cardiac stimulators", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a diagnostic external programmable cardiac stimulator?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies a diagnostic external programmable cardiac stimulator. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical appliances. The entity supplies diagnostic external programmable cardiac stimulators to other entities. The diagnostic external programmable cardiac stimulator is used by or under supervision of a cardiologist. The diagnostic external programmable cardiac stimulator is used to perform diagnostic tests to investigate various heart conditions, such as arrhythmias. It does this by stimulating the heart into simple and complex patterns to detect any heart condition. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of certain medical aids and appliances is GST-free where the medical aid or appliance: To be GST-free as a medical aid or appliance one of the requirements is that the product in question must be covered in Schedule 3 or specified in the GST Regulations. The diagnostic external programmable cardiac stimulator is not specifically covered in Schedule 3 or specified in the GST Regulations. However, heart monitors are listed at Item 1 of the table to Schedule 3 (Item 1). In addition, pacemakers are listed at Item 2 of the table to Schedule 3 (Item 2). Therefore, the issue is whether Item 1 or Item 2 covers the diagnostic external programmable cardiac stimulator. Heart monitors and pacemakers are not defined in the GST Act. Generally, where a phrase is not defined in the relevant Act, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. Where a phrase has a technical meaning, it is necessary to determine its meaning by reference to the industry to which that phrase relates ( Herbert Adams Pty Ltd v FCT (1932) 47 CLR 222). The terms 'heart monitors' and 'pacemakers' must be defined in the context in which they appear. In this case, they have a special or technical meaning. | Detailed Reasoning - Heart monitors: Steadman's Medical Dictionary , 1999, Lippincott Williams & Wilkins, United States of America defines a cardiac (heart) monitor to mean, 'an electronic monitor which, when connected to the patient, signals each heart beat with a flashing light, an electrocardiographic curve, an audible signal, or all three'. As such, a device with the primary function of monitoring a patient's heartbeat is a heart monitor, and is covered by Item 1. In this case, the primary function of the diagnostic external programmable cardiac stimulator is to stimulate the heart into simple or complex patterns to diagnose heart conditions. It is not a heart monitor as its primary function is something other than monitoring a patient's heartbeat. As such, the diagnostic external programmable cardiac stimulator is not covered under Item 1. | Detailed Reasoning - Pacemakers: Steadman's Medical Dictionary defines a 'pacemaker' to include the following meaning, '... an artificial regulator of rate activity...' The word 'regulator' is defined in The Macquarie Dictionary , 1997, The Macquarie Library Pty Ltd, Macquarie University, New South Wales as '...that which regulates...'. The word 'regulates' is defined in The Macquarie Dictionary to include the following meaning, '...to control or direct by rules, principle, method...to adjust to some standard or requirements....' As such, a pacemaker is an artificial item which controls and directs the heart into a set standard of rate activity. In this case, the diagnostic external programmable cardiac stimulator stimulates the heart into simple and complex patterns for the purpose of diagnosing various heart conditions. It does not regulate the heart into a set standard of rate activity. Therefore, the diagnostic external programmable cardiac stimulator is not covered under Item 2. Item 1 or Item 2 does not cover the diagnostic external programmable cardiac stimulator. As such, the entity is not a making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies diagnostic external programmable cardiac stimulators. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, in this case the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "5 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-45(1) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST-free Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "Steadman's Medical Dictionary, 1999, Lippincott Williams & Wilkins, United States of America. The Macquarie Dictionary, 1997, The Macquarie Library Pty Ltd, Macquarie University, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001567", "Unmatched_Content": "Keywords Goods and services tax GST-free Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/602", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and muscle stimulation machine", "Issue": "Is the entity, a supplier of medical aids and appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a muscle stimulation machine?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies the muscle stimulation machine. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical aids and appliances. The entity supplies a muscle stimulation machine. The machine is primarily used on patients who have suffered a stroke and whose muscles require massaging and stimulation to prevent atrophication. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid and appliance is GST-free where the medical aid or appliance: The muscle stimulation machine is not specifically listed in Schedule 3 or specified in the GST Regulations. However item 141 in Schedule 3 (Item 141) lists the 'transcutaneous nerve stimulator machine' (TENS machine). The phrase 'transcutaneous nerve stimulator machine' is not defined in the GST Act. When a word or phrase is not defined, it is usually interpreted in accordance with its ordinary meaning, unless it has a special or technical meaning. When a word or phrase has a technical meaning it is necessary to determine the meaning by reference to the industry in which that word or phrase relates. Given that this phrase appears in the context of a list of medical aids and appliances, it is considered to have a special or technical meaning. After consultation with the health industry it is considered that a TENS machine is a device that is used for the purpose of pain relief by preventing the passage of pain impulses to the brain. The TENS machine introduces pulses of low-voltage electricity into tissues for the relief of pain. A TENS machine will only include those devices which were developed primarily for the purposes of pain relief. This is contrasted with the operation of the muscle stimulation machine where there is no input of electricity or chemicals into the body. As the muscle stimulation machine is designed for and marketed as a device to prevent muscle atrophication and not for pain relief and management, it is not a TENS machine for the purpose of Item 141. Therefore, the supply is not GST-free under subsection 38-45(1) of the GST Act. The entity is registered for GST and the 'supply' satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a muscle stimulation machine.", "Date_of_Decision": "11 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 Schedule 3 Schedule 3 table item 141", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & Services Tax GST-free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001602", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & Services Tax GST-free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/637", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and bottled oxygen and associated hardware", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies medical oxygen bottles and associated hardware?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies medical oxygen bottles and associated hardware.", "Facts": "The entity is a supplier of medical appliances. In this case, the entity supplies medical oxygen bottles and associated hardware. The associated hardware is in the form of regulators, flow meters, oxygen cylinder support trolleys, stands, and carry bags, back packs and kits which assist patient mobility by enabling hands-free delivery of medical oxygen to the patient. The associated hardware is used in conjunction with medical oxygen bottles to deliver medical oxygen to patients. The medical oxygen bottles and associated hardware are specifically designed for people with an illness or disability and are not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only item of relevance to this case is item 135 in the table in Schedule 3 to the GST Act (Item 135). Item 135 lists 'bottled oxygen and associated hardware'. The phrase 'associated hardware' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines the word 'associated' to include the following meaning '...anything usually accompanying or associated with another;...' and it defines the word 'hardware' to include the following meaning, 'the mechanical equipment necessary for conducting an activity...'. Therefore, 'associated hardware' is considered to be mechanical equipment that usually accompanies or is associated with another piece of equipment, in order to conduct a certain activity. In this case, the hardware is used in conjunction with medical oxygen bottles to supply oxygen to patients. As such, the hardware is also covered under Item 135 as associated hardware for bottled oxygen. The medical oxygen bottles and associated hardware are specifically designed for people with an illness or disability and not widely used by people without an illness or disability. As such, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it makes a supply of medical oxygen bottles and associated hardware.", "Date_of_Decision": "7 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) Schedule 3 table item 135", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001637", "Unmatched_Content": "Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/638", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and electrocardiogram (ECG) cables", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies ECG cables?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies ECG cables.", "Facts": "The entity is a supplier of medical appliances. In this case, the entity is making a supply of ECG cables. The entity supplies ECG cables as a part for heart monitors. The supply of the heart monitor is a GST-free supply under subsection 38-45(1) of the GST Act. The supply is made when original ECG cables are worn or faulty. The ECG cables are specifically designed as a part for GST-free heart monitors. In this case, the ECG cables are not capable of being used with devices other than the GST-free heart monitor. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(2) of the GST Act, a supply of a spare part will be a GST-free supply if the spare part is: The term 'spare part' is not defined in the GST Act. As such, it is necessary to rely on the ordinary meaning of that phrase. The Macquarie Dictionary (1997) defines 'spare part' as, amongst other things, '...a part which replaces a faulty, worn, or broken part of a machine...'. In this case, the ECG cable is supplied to replace a worn or faulty component of a GST-free heart monitor. As such, the ECG cable is considered to be a 'spare part' for the purposes of the GST Act. Furthermore, the ECG cable is supplied as a spare part for a medical appliance that is GST-free under subsection 38-45(1) of the GST Act. In addition, as the ECG cables can not be used as a spare part for other appliances, it is considered that the ECG cables are specifically designed as a spare part for GST-free heart monitors. Therefore, the entity is making a GST-free supply under subsection 38-45(2) of the GST Act when it supplies ECG cables.", "Date_of_Decision": "7 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-45(1) subsection 38-45(2) Schedule 3 table item 1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/216", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001638", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/639", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and oxygen sensors for respiratory appliances", "Issue": "Is the entity, a supplier of medical appliances, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies oxygen sensors for ventilators and sleep apnoea machines?", "Decision": "Yes, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies oxygen sensors for ventilators and sleep apnoea machines.", "Facts": "The entity is a supplier of medical appliances. In this case, the entity is making a supply of oxygen sensors. Oxygen sensors are devices used for measuring the oxygen concentration in a patient's breathing mixture. The oxygen sensors, in this case, are used in conjunction with ventilators and sleep apnoea machines. 'Ventilators' are covered under item 123 in the table in Schedule 3 to the GST Act (Item 123). 'Sleep apnoea machines' are covered under item 128 in the table in Schedule 3 to the GST Act (Item 128). In this case, the supply of the ventilators and sleep apnoea machines satisfy the other requirements of subsection 38-45(1) of the GST Act and, as such, are GST-free. The oxygen sensors are specifically designed for people with an illness or disability and not widely used by people without an illness or disability. There is no agreement between the entity and the recipient that the supply will not be treated as a GST-free supply. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of a medical aid or appliance is GST-free where the medical aid or appliance: The only item of relevance to this case is item 127 in the table in Schedule 3 to the GST Act (Item 127). Item 127 lists, 'respiratory appliance accessories'. The word 'accessories' is not defined in the GST Act. Accordingly, it is appropriate to examine the ordinary meaning of that word. The Macquarie Dictionary (1997) defines the word 'accessories' to be the plural of the word 'accessory'. The word 'accessory is defined to include the following meaning, 'a subordinate part or object; something added or attached...'. In this case, the oxygen sensor is a subordinate part which is attached and used in conjunction with ventilators and sleep apnoea machines. As such, it is an accessory to the ventilators and sleep apnoea machines. Ventilators are listed at Item 123 and sleep apnoea machines are listed at Item 128. Under section 182-15 of the GST Act and paragraph 182-10(2)(b) of the GST Act, the category heading of 'Respiratory appliances - other products for those with breathing difficulties' may be used to confirm that the meaning in Item 123 and Item 128 is the ordinary meaning. As such, ventilators and sleep apnoea machines are respiratory appliances. Therefore, the oxygen sensors are respiratory appliance accessories and are covered under Item 127. The oxygen sensors are specifically designed for people with an illness or disability and not widely used by people without an illness or disability. Therefore, the entity is making a GST-free supply under subsection 38-45(1) of the GST Act when it supplies oxygen sensors for ventilators and sleep apnoea machines.", "Date_of_Decision": "7 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1) subsection 38-45(2) Schedule 3 Schedule 3 table item 123 Schedule 3 table item 127 Schedule 3 table item 128", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST health Section 38-45 - medical aids & appliances", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001639", "Unmatched_Content": "Keywords Goods & services tax GST free GST health Section 38-45 - medical aids & appliances"}
{"ATO_ID_Number": "ATO ID 2001/656", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the importation of insulin", "Issue": "Is the entity, an individual, making a non-taxable importation under section 13-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it imports insulin for its own private use?", "Decision": "Yes, the entity is making a non-taxable importation under section 13-10 of the GST Act when it imports insulin for its own private use.", "Facts": "The entity is an individual. The entity visited Australia for business purposes. At the overseas departure point, the entity's hand luggage, including a personal supply of insulin, was misplaced. Once the luggage was located, it was sent to the entity in Australia by courier. Insulin is a drug for human use. The supply of insulin in Australia to individuals for private use is restricted under State and Territory laws such that it can only be made by a pharmacist, medical practitioner, dental practitioner or any other person permitted under that law to do so. The importation of insulin is not a non-taxable importation under Part 3-2 of the GST Act. The goods are imported and are entered for home consumption within the meaning of the Customs Act 1901 .", "Reasons_for_Decision": "Summary: Under section 13-10 of the GST Act, an importation is a non-taxable importation if: As the importation is not a non-taxable importation under Part 3-2 of the GST Act, it is necessary to determine if, had it been a supply, it would have been GST-free or input taxed. Section 38-50 of the GST Act outlines the circumstances in which the supply of a drug or medicinal preparation is GST-free. Subsection 38-50(7) of the GST Act provides that a supply of a drug or medicinal preparation covered by section 38-50 of the GST Act is GST-free if, and only if: In this case, the supply of insulin to an individual for its own private use satisfies the requirements of subsection 38-50(7) of the GST Act. Therefore, section 38-50 of the GST Act may apply to make the supply of insulin GST-free. Subsection 38-50(2) of the GST Act provides that a supply of a drug or medicinal preparation is GST-free if the supply is to an individual for private or domestic use or consumption and is restricted under a State or Territory law in which it is supplied, but may be made by a medical practitioner, dental practitioner, pharmacist or any other person permitted by or under that law to do so. The focus of subsection 38-50(2) of the GST Act is the drug or medicinal preparation itself and not who is actually supplying it. The supply of insulin in Australia to individuals for private use is restricted under State and Territory laws such that it can only be made by a pharmacist, medical practitioner, dental practitioner or any other person permitted under that law to do so. Therefore, the supply of insulin satisfies subsection 38-50(2) of the GST Act. As such, the supply of insulin to an individual for private use is GST-free under section 38-50 of the GST Act. Therefore, as the supply of insulin would have been GST-free under section 38-50 of the GST Act if the supply had been made in Australia, the entity is making a non-taxable importation under section 13-10 of the GST Act when it imports insulin for its own private use.", "Date_of_Decision": "7 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-10 section 38-50 subsection 38-50(2) subsection 38-50(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST health Section 38-50 - drugs and medicinal preparations Imports Non-taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001656", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax GST-free GST health Section 38-50 - drugs and medicinal preparations Imports Non-taxable importations"}
{"ATO_ID_Number": "ATO ID 2001/708", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of an external tissue expander machine to a plastic surgeon", "Issue": "Is the entity, a supplier of medical goods, making a GST-free supply under subsection 38-45(1) of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells an external tissue expander machine to a plastic surgeon?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-45(1) of the GST Act when it sells an external tissue expander machine to a plastic surgeon. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a supplier of medical goods. The entity sells an external tissue expander machine to a plastic surgeon. The external tissue expander machine works by applying external suction pressure to lift and gradually increase breast tissue over a long period of time. The machine is worn externally and held in place with a sports bra. The external tissue expander machine is not associated with mammary prostheses, but rather is used as an alternative to mammary prostheses. The machine is not used for reconstructive purposes, for example, it is not related to breast reconstruction following a mastectomy. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-45(1) of the GST Act, the supply of medical aids and appliances is GST-free where the medical aid or appliance: Item 84 in the table in Schedule 3 (Item 84) lists 'mammary'. 'Mammary' is not defined in the GST Act and therefore it is given its ordinary meaning. The Macquarie Dictionary (1997) defines 'mammary' as 'of or relating to the mamma or breast'. It is considered that it is not possible to supply a 'mammary' and, as such, it is unclear what should be included under this item. Therefore section 182-15 of the GST Act, pursuant to paragraph 182-10(2)(c) of the GST Act, can be relied on because the meaning of the item is ambiguous. Under section 182-15 of the GST Act, the second column in the table in Schedule 3 may be considered when determining the meaning of Item 84. 'Mammary' is listed in Schedule 3 under the second column heading of 'Mobility of people with disabilities - physical: prostheses'. Therefore, it is considered that the meaning of 'mammary' in Item 84 is intended to be restricted to mammary prostheses. The external tissue expander machine is not a mammary prosthesis. It is an alternative to a mammary prosthesis. Therefore, an external tissue expander machine is not covered by Item 84. Item 15 of Schedule 3 to the GST Regulations (Item 15) specifies 'supplements and aids associated with mammary prostheses'. In this case, the external tissue expander machine is an alternative to a mammary prosthesis and is not a supplement or aid associated with mammary prostheses. Therefore, the external tissue expander machine is not covered by Item 15. As the supply of an external tissue machine is not covered by the items discussed above and is not covered by any other items in Schedule 3 of the GST Act nor specified in the GST Regulations, the requirements of subsection 38-45(1) of the GST Act are not satisfied. Consequently, the supply is not GST-free under section 38-45(1) of the GST Act. The entity is registered for GST and the supply meets the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells an external tissue expander machine to a plastic surgeon.", "Date_of_Decision": "17 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-45(1) Division 40 section 182-15 Schedule 3 Schedule 3 table item 84", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd Edition, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001708", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods & services tax GST-free GST health Section 38-45 - medical aids & appliances GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/1156", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and access to an individual's health records for a fee", "Issue": "Is the entity, a medical practitioner, making a GST-free supply under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an individual with access to their health records and charges a fee for the service?", "Decision": "No, the entity is not making a GST-free supply under subsection 38-7(1) of the GST Act when it supplies an individual with access to their health records and charges a fee for the service. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a medical practitioner. The entity is supplying an individual with access to their health records. The entity does not provide an explanation of their health information. The entity charges a fee to supply this service. There is no medicare benefit payable for the service that the entity is providing. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 38-7(1) of the GST Act, the supply of a 'medical service' is GST-free. A 'medical service' is defined under section 195-1 of the GST Act to mean: There is no medicare benefit payable for the service provided by the entity. As such, the service does not fall within the first limb of the definition of medical service as provided in section 195-1 of the GST Act. One of the requirements of the second limb of the definition of medical service is that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply. Appropriate treatment is established where a practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and includes subsequent supplies for the assessed process. The entity is supplying an individual with access to their health records. A supply of access to health information does not involve treatment of any kind and therefore, the requirement that the supply be 'for the appropriate treatment of the recipient of the supply' is not satisfied. As such, the service does not fall within the second limb of the definition in section 195-1 of the GST Act and the supply is not a GST-free supply of a medical service under subsection 38-7(1) of the GST Act. The entity charges a fee for supplying an individual with access to their health records. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies an individual with access to their health records and charges a fee for this service.", "Date_of_Decision": "9 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 subsection 38-7(1) Division 40 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST health Section 38-7 - medical services GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031156", "Unmatched_Content": "Keywords Goods and services tax GST free GST health Section 38-7 - medical services GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/575", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of IT industry domain name to a non-resident recipient outside Australia", "Issue": "Is the entity, a business operator in the Information Technology (IT) industry, making a GST-free supply under item 2 in the table in subsection 38-190 (1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an IT industry domain name to a non-resident recipient outside Australia?", "Decision": "Yes, the entity is making a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act when it supplies an IT industry domain name to a non-resident recipient outside Australia.", "Facts": "The entity is a business operator in the IT industry. As a part of its business the entity acquires 'domain names' by reserving them from suppliers of domain name registrations and then supplies the domain names to its clients. The entity is supplying the domain name to a non-resident recipient who is outside Australia. The non-resident recipient acquires the domain name to carry on its overseas enterprise. The non-resident recipient is neither registered nor required to be registered for goods and services tax (GST). There is no agreement between the two parties to provide the supply to another entity within Australia. The non-resident recipient may use the domain name to conduct its business with customers throughout the world, including those in Australia. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Subsection 38-190(1) of the GST Act specifies circumstances where the supply of things other than goods or real property, for consumption outside of Australia, is GST-free. Domain names are intangible products and are neither goods nor real property. As such, the supply of a domain name is appropriately considered under subsection 38-190(1) of the GST Act. Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done is GST- free where: The supply of the domain name to a non resident overseas recipient is not work physically performed on goods situated in Australia nor directly related to real property in Australia. Therefore, the supply satisfies the requirements of item 2(a) in the table in subsection 38-190(1) of the GST Act. The non-resident recipient acquires the domain name in carrying on its enterprise overseas and is neither registered nor required to be registered for GST. Therefore, the supply satisfies the requirements of item 2(b) in the table in subsection 38-190(1) of the GST Act Item 2 in the table in subsection 38-190(1) of the GST Act is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by item 2 in that table is not GST-free if: In this case, there is no agreement between the entity and the non-resident recipient to provide the supply to another entity within Australia. Therefore, the supply is not excluded by subsection 38-190(3) of the GST Act from being GST-free. As the supply satisfies the requirements in item 2 in the table in subsection 38-190(1) of the GST Act and is not excluded from being GST-free by subsection 38-190(3) of the GST Act, the entity is making a GST-free supply when it supplies the domain names to a non-resident recipient outside Australia.", "Date_of_Decision": "12 October 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190 (1) subsection 38-190 (1) table item 2 subsection 38-190 (3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/574", "Subject_References": "Goods & services tax Consumption outside Australia GST-free", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001575", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax Consumption outside Australia GST-free"}
{"ATO_ID_Number": "ATO ID 2001/578", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the subscription for Internet information services acquired from overseas", "Issue": "Is the entity, a research organisation, liable to pay goods and services tax (GST) under subsection 84-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it subscribes to an information service that is delivered via the Internet by a non-resident overseas supplier?", "Decision": "No, the entity is not liable to pay GST under subsection 84-10(1) of the GST Act when it subscribes to an information service that is delivered via the Internet by a non-resident overseas supplier.", "Facts": "The entity is a research organisation. In the process of carrying on its enterprise, the entity subscribes to information services that are delivered via the Internet. These may include the electronic versions of international scientific journals and periodicals. In this case, the entity acquires information, including electronic copies of journals and periodicals sent via the Internet by a non-resident overseas supplier. The acquisition of the information, including electronic copies of journals and periodicals, is solely for a creditable purpose. The supply of the information service is not done in Australia nor is it supplied through an enterprise that the non-resident overseas supplier is carrying on in Australia. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Division 84 of the GST Act applies to supplies not connected with Australia. Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if either: The supply of information, including electronic copies of journals and periodicals, sent via the Internet, is an intangible supply and not a supply of goods or real property. Furthermore, the supply is not connected with Australia as it is not done in Australia nor is it supplied through an enterprise that the non-resident overseas supplier is carrying on in Australia nor is it a right or option to acquire another thing. Therefore, the supply is appropriately considered under Division 84 of the GST Act. Under section 84-5 of the GST Act, a supply of anything other than goods or real property that is a supply not connected with Australia, is a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Subsection 84-10(1) of the GST Act provides that where a supply is a taxable supply under section 84-5 of the GST Act, the GST amount payable on that supply is payable by the recipient of the supply. In this case, the entity acquires the information solely for a creditable purpose. As such, section 84-5 of the GST Act does not apply and the entity is not liable to pay any GST amount under subsection 84-10(1) of the GST Act when it subscribes to an information service that is delivered via the Internet by a non-resident overseas supplier.", "Date_of_Decision": "4 May 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(5) Division 84 subsection 84-5(1) subsection 84-10(1)", "Related_Public_Rulings_and_Determinations": "GST Ruling GSTR 2000/31 | GST Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST international services GST offshore supplies Connected with Australia Reverse charge on offshore intangible supplies Taxable supply", "Case_References": "", "Other_References": "Electronic Commerce Issues Register - Chapter 4", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001578", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GST Ruling GSTR 2000/31 GST Ruling GSTR 2002/2 | Keywords Goods and services tax GST international services GST offshore supplies Connected with Australia Reverse charge on offshore intangible supplies Taxable supply"}
{"ATO_ID_Number": "ATO ID 2013/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and ship's stores", "Issue": "Is the entity making GST-free supplies of ship's stores to passengers and crew under item 5 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells certain types of merchandise on board a ship undertaking an international voyage?", "Decision": "No. The entity is not making GST-free supplies of ship's stores to passengers and crew.", "Facts": "The entity makes retail sales on passenger cruise ships. Sales are made to passengers and crew while the ship is in Australia. The ship is to depart on a voyage which has a destination outside Australia. The merchandise sold to passengers and crew include:", "Reasons_for_Decision": "Summary: The on board sale of ship's stores is a GST-free export of goods where item 5 in the table in subsection 38-185(1) of the GST Act (Item 5) is satisfied. Item 5 requires that: In this case, the ship is on an international voyage and it is necessary to consider the first two requirements only. To meet Item 5, goods sold through a retail store on board must be properly regarded as 'stores'. If the goods are of a type capable of being stores those goods must be supplied for the purpose of being used or consumed on board the ship by, in this instance, the purchaser. 'Ship's stores' takes its meaning from section 130C of the Customs Act 1901 and is defined as 'stores for the use of the passengers or crew of a ship, or for the service of the ship'. Goods of a type normally considered to be stores are general provisions for the comfort and consumption of passengers and crew whilst they are on board the ship and consumables necessary for the operation and maintenance of the ship. Accordingly goods that are intended to be consumed by a person on board the ship such as food, water, beverages and tobacco, and goods that are intended to be consumed in the operation and maintenance of the ship such as fuel, are commonly regarded as ship's stores. | Detailed Reasoning - Durable goods - fashion clothing and accessories, electronic goods, and jewellery: Durable goods have a long life span and usage period, therefore it can be expected that these types of goods will be removed from the ship by the purchaser and used over a long period of time beyond the cruise. Goods sold that are of a durable nature will not be ship's stores if it cannot be established that the goods are specifically for the purchaser's use on the cruise. Use, in this context, would include goods that make the cruise more comfortable and excludes goods that are more relevant to use after the cruise. The supply of a beach towel on luxury cruise ship that has a swimming pool or the supply of a sunhat would be durable items that would be GST-free ship's stores because these goods would specifically be for the purchaser's use on the cruise. However, durable goods such as fashion clothing and accessories, electronic goods, and jewellery sold on board will not be GST-free ship's stores because they would be mainly relevant to use after the cruise. | Detailed Reasoning - Consumables - Alcohol and tobacco that is not made available for consumption during the cruise: Alcohol and tobacco are normally considered to be stores when they are supplied for the consumption of passengers and crew whilst on board the ship. Where it is known when the goods are sold that the goods will not actually be used or consumed on board, for example bottles of alcohol and cartons of cigarettes which must be taken ashore when the passenger disembarks, the goods will not be GST-free supplies of ship's stores. | Detailed Reasoning - Consumable - Perfumes and cosmetics: These goods are sold in quantities whereby it is not reasonable to expect that they will be substantially consumed on board the ship on a cruise of a short duration. Therefore, goods of this kind are not in the nature of general provisions and are therefore not capable of being stores. Accordingly these items will not be GST-free supplies of ship's stores. Note: Goods that are in the nature of general provisions including hygiene and medicinal products, accessories of a protective nature, clothing relevant to a cruise, batteries for electronic goods and souvenir items would be considered ship's stores. GSTR 2003/4 provides further guidance on what goods are ship's stores for the purposes of Item 5.", "Date_of_Decision": "02 July 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 item 5 in the table in subsection 38-185(1) section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2003/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST exports Goods consumed on international flights or voyages Export of goods GST imports and exports Ship's stores", "Case_References": "", "Other_References": "", "Business_Line": "Interpretative Assistance Technical Projects, ITX", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201337", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2003/4 | Keywords Goods and services tax GST exports Goods consumed on international flights or voyages Export of goods GST imports and exports Ship's stores"}
{"ATO_ID_Number": "ATO ID 2002/294", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of goods to Cocos (Keeling) Islands", "Issue": "Is the entity, a supplier of goods, making a GST-free supply under item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells goods to a customer from the Cocos (Keeling) Islands, and has the goods couriered to that customer's address on those islands, within 60 days of receiving payment for those goods?", "Decision": "Yes, the entity is making a GST-free supply under item 1 in the table in subsection 38-185(1) of the GST Act when it sells goods to a customer from the Cocos (Keeling) Islands, and has the goods couriered to that customer's address on those islands, within 60 days of receiving payment for those goods.", "Facts": "The entity is a supplier of goods. The entity sells goods to a customer from the Cocos (Keeling) Islands. The goods are paid for immediately, but rather than taking them from the shop, the customer pays an additional fee for the entity to arrange delivery to their home. The entity has the goods couriered to the customer's address on the Cocos (Keeling) Islands within 60 days of the transaction. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-185(1) of the GST Act specifies the circumstances where the supply of goods for consumption outside Australia is GST-free. Item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) is most relevant in this case. Item 1 provides that a supply of goods is GST-free if the supplier exports them from Australia before, or within 60 days after: Item 1 requires that the supplier export the goods from Australia. The entity (the supplier) is having the goods couriered to the customer's address on the Cocos (Keeling) Islands. Therefore, the entity is exporting the goods. However, it is necessary to determine whether exporting goods to the Cocos (Keeling) Islands constitutes exporting the goods from 'Australia'. Paragraph 17(a) of the Acts Interpretation Act 1901 provides that in any Act, unless the contrary intention appears, Australia means the Commonwealth of Australia and, when used in a geographical sense, includes the Territory of Christmas Island and the Territory of Cocos (Keeling) Islands, but does not include any other external Territory. For GST purposes, section 195-1 of the GST Act shows such contrary intention. Section 195-1 of the GST Act provides that the definition of Australia does not include any external Territory. The term 'external Territory' is not defined in the GST Act. However, 'external Territory' is specifically defined in the Acts Interpretation Act 1901. Paragraph 17(pd) of the Acts Interpretation Act provides that in any Act, unless the contrary intention appears, 'external Territory' means a Territory, not being an internal Territory, for the government of which as a Territory, provision is made by any Act. Paragraph 17(pe) of the Acts Interpretation Act provides that only the Australian Capital Territory, the Jervis Bay Territory or the Northern Territory satisfy the definition of internal Territory. Paragraph 17(p) of the Acts Interpretation Act defines 'Territory' as a Territory referred to in section 122 of the Commonwealth of Australia Constitution Act (Constitution), and includes a Territory administered by the Commonwealth under a Trusteeship Agreement. Section 122 of the Constitution provides that the Parliament may make laws for the government of any territory surrendered by any State to and accepted by the Commonwealth, or of any territory placed by the Queen under the authority of and accepted by the Commonwealth, or otherwise acquired by the Commonwealth, and may allow the representation of such territory in either House of the Parliament to the extent and on the terms which it thinks fit. Section 5 of the Cocos (Keeling) Island Act 1955 provides that the Cocos (Keeling) Islands are declared to be accepted by the Commonwealth as a Territory under the authority of the Commonwealth and is known as the Territory of Cocos (Keeling) Islands. As such, the Cocos (Keeling) Islands satisfy the definition of Territory under paragraph 17(p) of the Acts Interpretation Act. As the Territory of Cocos (Keeling) Islands is a Territory that is not an internal Territory and provision for its government is made by the Cocos Keeling Islands Act, it is an external Territory as defined in paragraph 17(pd) of the Acts Interpretation Act. As the Territory of Cocos (Keeling) Islands is an external Territory, it is excluded from the definition of Australia under section 195-1 of the GST Act. Therefore, the entity is exporting the goods from Australia when it has the goods couriered to customer's address on the Cocos (Keeling) Islands. The customer paid for the goods at the time of sale and the entity has the goods couriered to the customer's address on the Cocos (Keeling) Islands within 60 days of the transaction. The requirements of Item 1 are satisfied. Therefore, the entity is making a GST-free supply when it sells goods to a customer from the Cocos (Keeling) Islands, and has the goods couriered to that customer's address on those island, within 60 days of receiving payment for those goods.", "Date_of_Decision": "22 March 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(1) subsection 38-185(1) table item 1 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax Exports Consumption outside Australia", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002294", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/6 | Keywords Goods & services tax Exports Consumption outside Australia"}
{"ATO_ID_Number": "ATO ID 2002/295", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of goods to Norfolk Island", "Issue": "Is the entity, a supplier of goods, making a GST-free supply under item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells goods to a customer from Norfolk Island, and has the goods couriered to that customer's address on Norfolk Island, within 60 days of receiving payment for those goods?", "Decision": "Yes, the entity is making a GST-free supply under item 1 in the table in subsection 38-185(1) of the GST Act when it sells goods to a customer from Norfolk Island, and has the goods couriered to that customer's address on Norfolk Island, within 60 days of receiving payment for those goods.", "Facts": "The entity is a supplier of goods. The entity sells goods to a customer from Norfolk Island. The goods are paid for immediately, but rather than taking them from the shop, the customer pays an additional fee for the entity to arrange delivery to their home. The entity has the goods couriered to the customer's address on Norfolk Island within 60 days of the transaction. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subsection 38-185(1) of the GST Act specifies the circumstances where the supply of goods for consumption outside Australia is GST-free. Item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) is most relevant in this case. Item 1 provides that a supply of goods is GST-free if the supplier exports them from Australia before, or within 60 days after: Item 1 requires that the supplier export the goods from Australia. The entity (the supplier) is having the goods couriered to the customer's address on Norfolk Island. Therefore, the entity is exporting the goods. However, it is necessary to determine whether exporting goods to Norfolk Island constitutes exporting the goods from 'Australia'. Section 195-1 of the GST Act provides that the definition of Australia does not include any external Territory. The term 'external Territory' is not defined in the GST Act. However, 'external Territory' is specifically defined in the Acts Interpretation Act 1901. Paragraph 17(pd) of the Acts Interpretation Act provides that in any Act, unless the contrary intention appears, 'external Territory' means a Territory, not being an internal Territory, for the government of which as a Territory, provision is made by any Act. Paragraph 17(pe) of the Acts Interpretation Act provides that only the Australian Capital Territory, the Jervis Bay Territory or the Northern Territory satisfy the definition of internal Territory. Paragraph 17(p) of the Acts Interpretation Act defines 'Territory' as a Territory referred to in section 122 of the Commonwealth of Australia Constitution (the Constitution), and includes a Territory administered by the Commonwealth under a Trusteeship Agreement. Section 122 of the Constitution provides that the Parliament may make laws for the government of any territory surrendered by any State to and accepted by the Commonwealth, or of any territory placed by the Queen under the authority of and accepted by the Commonwealth, or otherwise acquired by the Commonwealth, and may allow the representation of such territory in either House of the Parliament to the extent and on the terms which it thinks fit. The preamble of the Norfolk Island Act 1979 refers to Act No 15 of 1913. Section 3 of the Norfolk Island Act 1913 (Act No 15 of 1913) provides that Norfolk Island is declared to be accepted by the Commonwealth as a Territory under the authority of the Commonwealth by the name of Norfolk Island. The Norfolk Island Act 1979 provides that Norfolk Island shall be governed as a Territory under the authority of the Commonwealth. As such, Norfolk Island satisfies the definition of Territory under paragraph 17(p) of the Acts Interpretation Act. As Norfolk Island is a territory that is not an internal Territory and provision for its government is made by the Norfolk Island Act, it is an external Territory as defined in paragraph 17(pd) of the Acts Interpretation Act. As Norfolk Island is an external Territory, it is excluded from the definition of Australia under section 195-1 of the GST Act. Therefore, the entity is exporting the goods from Australia when it has the goods couriered to the customer's address on Norfolk Island. The customer paid for the goods at the time of sale and the entity has the goods couriered to the customer's address on Norfolk Island within 60 days of the transaction. The requirements of Item 1 are satisfied. Therefore, the entity is making a GST-free supply when it sells goods to a customer from Norfolk Island, and has the goods couriered to that customer's address on Norfolk Island, within 60 days of receiving payment for those goods.", "Date_of_Decision": "22 March 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(1) subsection 38-185(1) table item 1 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax Exports Consumption outside Australia", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002295", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/6 | Keywords Goods & services tax Exports Consumption outside Australia"}
{"ATO_ID_Number": "ATO ID 2002/530", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and receipt of consideration for the export of wool", "Issue": "Is the entity, a wool exporter, receiving consideration for its supply of wool on the day that it receives a conditional letter of credit from the purchaser, for the purposes of determining the commencement of the 60 days referred to in item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entity is not receiving consideration for its supply of wool on the day that it receives a conditional letter of credit from the purchaser, for the purposes of determining the commencement of the 60 days referred to in item 1 in the table in subsection 38-185(1) of the GST Act (Item 1). The entity receives consideration when it draws on the letter of credit.", "Facts": "The entity is a wool exporter. The entity enters into a sale agreement with an overseas buyer. This initial agreement specifies the approximate quantity and quality of wool that is to be sold and exported to the overseas buyer. The entity later provides the buyer with written advice of the exact details of the quantity and quality of the wool available and the total price. The overseas buyer then issues a letter of credit to the entity. A letter of credit is a letter written by one banker or merchant to another, requesting an extension of credit to the person named therein, up to a specified amount. The letter of credit issued to the entity, is subject to various conditions that do not permit the entity to draw on the letter of credit until the entity supplies the overseas buyer's financial institution with formal export documentation (such as an on board bill of lading, a signed commercial invoice for the wool and details of marine insurance of the vessel). The wool is then loaded for export and the entity prepares a commercial invoice. At this point, the entity also provides the overseas buyer's financial institution with the relevant export documentation and draws on the letter of credit. The wool is then delivered to the overseas buyer. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Item 1 provides that a supply of goods is GST-free, if the supplier exports the goods from Australia before, or within 60 days (or such further time as the Commissioner allows) after: Therefore, it must be determined whether the entity is receiving consideration when it receives a letter of credit that is not able to be drawn upon until the entity provides the overseas buyer's financial institution with the relevant export documentation. A conditional letter of credit is merely proof given to the supplier that funds will be available for the anticipated purchase. These funds can only be accessed by the supplier when the conditions of the letter of credit are fulfilled. GSTR 2003/12 discusses when consideration is provided and received, for various payment instruments and other methods of payment. In relation to 'direct credit' arrangements (which are initiated by the recipient of the supply), paragraph 33 of GSTR 2003/12 states that consideration is provided on the date the the payment is authorised by the recipient, and consideration is received when the payment is credited to the supplier's account. As a letter of credit is sufficiently similar to a direct credit arrangement, the principle in paragraph 33 of GSTR 2003/12 may be equally applied. The letter of credit does not authorise payment to the entity until the entity fulfils certain requirements. Therefore, the entity did not receive consideration when it received the letter of credit, because payment was not authorised at that stage. The entity received consideration when it presented the overseas buyer's financial institution with the relevant export documentation, and was then allowed to draw on the letter of credit. Therefore, the entity is not receiving consideration for its supply of wool on the day that it receives a conditional letter of credit from the purchaser, for the purposes of determining the commencement of the 60 days referred to in Item 1. The entity receives consideration when it draws on the letter of credit.", "Date_of_Decision": "21 January 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(1) table item 1", "Related_Public_Rulings_and_Determinations": "GSTR 2003/12", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/531", "Subject_References": "Goods & services tax Exports Export of goods GST supplies & acquisitions GST consideration", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002530", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2003/12 | Keywords Goods & services tax Exports Export of goods GST supplies & acquisitions GST consideration"}
{"ATO_ID_Number": "ATO ID 2002/531", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and receipt of valid invoice for the export of wool", "Issue": "Is the entity, a wool exporter, giving an invoice for its supply of wool on the day that it provides an overseas buyer with written advice outlining the exact quantity and quality of the wool available and the total price, for the purposes of determining the commencement of the 60 days referred to in item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entity is not giving an invoice for its supply of wool on the day that it provides an overseas buyer with written advice outlining the exact quantity and quality of the wool available and the total price, for the purposes of determining the commencement of the 60 days referred to in item 1 in the table in subsection 38-185(1) of the GST Act (Item 1). The commercial invoice that is prepared once the wool is loaded aboard the ship is considered the invoice for the purposes of Item 1.", "Facts": "The entity is a wool exporter. The entity enters into a purchase agreement with an overseas buyer. This initial agreement specifies the approximate quantity and quality of wool that is to be sold and exported to the overseas buyer. The entity later provides the buyer with written advice of the exact details of the quantity and quality of the wool available and the total price. The overseas buyer then issues a letter of credit to the entity. The letter of credit is subject to various conditions that do not permit the entity to draw on the letter of credit until the entity supplies the overseas buyer's financial institution with formal export documentation (such as an on board bill of lading, a signed commercial invoice for the wool and details of marine insurance of the vessel). The wool is then loaded for export and the entity prepares a commercial invoice. At this point, the entity also provides the overseas buyer's financial institution with the relevant export documentation and draws on the letter of credit. The wool is then delivered to the overseas buyer. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Item 1 provides that a supply of goods is GST-free, if the supplier exports the goods from Australia before, or within 60 days (or such further time as the Commissioner allows) after: Therefore, it must be determined whether the entity is providing the overseas buyer with an invoice, for the purposes of Item 1, when it sends written advice outlining the exact quantity and quality of the wool available and the total price. The term 'invoice' is defined in section 195-1 of the GST Act to mean 'a document notifying an obligation to make a payment'. At the time of issue, the written advice was not indicative of a presently existing obligation to pay. Rather, it was indicative of a debt that would become due at a later stage, that is, when the wool is loaded aboard the ship. Therefore, the entity is not giving an invoice for its supply of wool on the day that it provides an overseas buyer with written advice outlining the exact quantity and quality of the wool available and the total price, for the purposes of determining the commencement of the 60 days referred to in Item 1. The commercial invoice that is prepared once the wool is loaded aboard the ship is considered the invoice for the purposes of Item 1.", "Date_of_Decision": "21 January 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-185(1) table item 1 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/530", "Subject_References": "Goods & services tax Exports Export of goods GST supplies & acquisitions GST consideration", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002531", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax Exports Export of goods GST supplies & acquisitions GST consideration"}
{"ATO_ID_Number": "ATO ID 2004/153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and importation of a ticket to attend an event in a foreign country", "Issue": "Is the entity, an Australian individual, making a taxable importation under section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when a ticket, that the entity purchased to attend an event in a foreign country, is sent to the entity in Australia?", "Decision": "No, the entity is not making a taxable importation under section 13-5 of the GST Act, when a ticket, that the entity purchased to attend an event in a foreign country, is sent to the entity in Australia.", "Facts": "The entity is an individual who is a resident of Australia. The entity is not registered or required to be registered for goods and services tax (GST). The entity purchased a ticket to attend an event in a foreign country. The ticket is sent from the foreign country to the entity in Australia.", "Reasons_for_Decision": "Summary: Under section 13-5 of the GST Act, an entity makes a taxable importation if: The entity purchased a ticket to attend an event in a foreign country. The ticket is sent from the foreign country to the entity in Australia. Therefore, it needs to be determined whether the ticket to attend an event falls within the meaning of 'goods' for the purposes of section 13-5 of the GST Act. Under section 195-1 of the GST Act, 'goods' means any form of tangible personal property. When an entity purchases a ticket to an event the ticket is merely evidence of a prepayment for services or other things - the ticket is not tangible personal property. The ticket is not 'goods' within the meaning of section 195-1 of the GST Act. Therefore, the entity is not making a taxable importation under section 13-5 of the GST Act, when a ticket, that the entity purchased to attend an event in a foreign country, is sent to the entity in Australia.", "Date_of_Decision": "30 May 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 13-5 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST imports Non-taxable importations Taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004153", "Unmatched_Content": "Keywords Goods and services tax GST imports Non-taxable importations Taxable importations"}
{"ATO_ID_Number": "ATO ID 2013/55", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Revocation of approval for making deferred payments of GST", "Issue": "Will an entity's approval for making deferred payments of GST be revoked under subparagraph 33-15.08(1)(c) of the A New Tax System (Goods and Services Tax) Regulations 1999 (the GST Regulations), if the entity applies to adjust previously declared customs values, by lodging a refund application form with Australian Customs and Border Protection Service (ACBPS) manually instead of by computer?", "Decision": "No, the entity's approval for making deferred payments of GST will not be revoked under subparagraph 33-15.08(1)(c) of the GST Regulations. The refund application containing the amendment to the original import declaration is not considered to be an entry of goods for home consumption within the meaning of the Customs Act 1901 (the Customs Act) and the GST Regulations. As such an application for a refund will have no material effect on the deferred GST status of the entity; regardless of whether they lodge their refund application by computer or manually.", "Facts": "An Australian entity imports into Australia a broad range of goods and is registered for the Deferred GST Scheme under Division 33 of the GST Regulations. For the relevant importation of goods the entity had communicated with ACBPS in accordance with sections 68 and 71A of the Customs Act and submitted their import declarations electronically via the ACBPS Integrated Cargo System (ICS). The relevant goods were dealt with in accordance with the entry and thereby entered into home consumption. After the goods were entered for home consumption the entity lodged refund application forms manually with ACBPS to adjust previously declared customs values due to transfer pricing adjustments for each affected import declaration. The reduction in customs value also reduces the GST payable on each taxable importation. The entity did not amend the import declaration by computer through the ICS.", "Reasons_for_Decision": "Summary: The Commissioner may, in writing, revoke an entity's approval for making deferred GST payments under paragraph 33-15.08(1)(c) of the GST Regulations if the Commissioner is satisfied that the entity has failed to meet a requirement in subregulation 33-15.06(1) of the GST Regulations. Under subregulation 33-15.06(1) of the GST Regulations, an approved entity must: Under the facts in this situation the Commissioner considers that paragraph 33-15.06(1)(a) of the GST Regulations continues to be satisfied. In analysing paragraph 33-15.06(1)(a) of the GST Regulations, the meaning of entering goods for home consumption is drawn from the Customs Act. | Detailed Reasoning - Entry of goods for home consumption: An entry of goods for home consumption is made by communicating to ACBPS an import declaration in respect of the goods under subsection 68(3A) of the Customs Act. An import declaration can be communicated by document or electronically under subsection 71A(2) of the Customs Act The entity has communicated with Customs in accordance with sections 68 and 71A of the Customs Act and their communication to Customs was via an import declarations submitted electronically via the ICS. Subsection 71F(2) of the Customs Act provides that alteration of an entry done after an import declaration (entry) is made to ACBPS and before the goods are dealt with in accordance with the entry would constitute a withdrawal. As such any new entry would be regarded as a new entry for home consumption and would be required to be lodged by computer if the importer was registered under the Deferred GST Scheme. This provision is not relevant in the current set of circumstances as the entity's goods have already been dealt with in accordance with the original entry. Subsection 71G(1) shows that unless the original import declaration is withdrawn, a new declaration cannot be made. Also under section 71J of the Customs Act that acceptance by ACBPS of an application for a refund of duty paid is not taken to constitute a withdrawal of the entry for the purposes of the Customs Act. The refund application containing the amendment (adjusting the price as per the transfer-pricing revaluation) to the original import declaration lodged with ACBPS will not constitute a withdrawal of the original entry if ACBPS accepts that refund request. The refund application is not considered to be an entry for home consumption within the meaning of the Customs Act. As such, there is no requirement for the entity to submit the refund application to ACBPS electronically to satisfy paragraph 33-15.06(1)(a) of the GST Regulations. Accordingly, the entity is not in breach of paragraph 33-15.08(1)(c) of the GST Regulations when it lodges the refund application to adjust previously declared customs values as they have not failed to meet a requirement in subregulation 33-15.06(1) of the GST Regulations. The Commissioner would not consider revoking the entity's approval of deferred GST payments.", "Date_of_Decision": "16 October 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Regulations 1999 subregulation 33-15.06(1) paragraph 33-15.06(1)(a) subregulation 33-15.08(1) paragraph 33-15.08(1)(c)", "Related_Public_Rulings_and_Determinations": "GSTR 2003/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "goods and services tax deferred GST Scheme GST Imports GST import of goods GST supply GST supplies & acquisitions", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201355", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) GSTR 2003/15 | Keywords goods and services tax deferred GST Scheme GST Imports GST import of goods GST supply GST supplies & acquisitions"}
{"ATO_ID_Number": "ATO ID 2008/69", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and whether a resident company incorporated overseas is in Australia in relation to a supply of services", "Issue": "Is Entity X, a resident company, making a GST-free supply under item 3 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies services to Entity Y, a company incorporated outside Australia that has its central management and control in Australia and carries on its entire core business in Australia through Entity X?", "Decision": "No, Entity X is not making a GST-free supply under item 3 in the table in subsection 38-190(1) of the GST Act, as the recipient of the supply, Entity Y, is in Australia in relation to the supply during the period the services are performed.", "Facts": "Entity X supplies services to Entity Y, pursuant to an agreement between the two entities. The services are not provided, nor does the agreement require that they be provided, to another entity outside Australia. The services provided by Entity X to Entity Y essentially amount to the carrying on Entity Y's entire core business. Entity X carries on the business, as an agent of Entity Y, at a fixed and definite place in Australia. Entity Y is not incorporated in Australia, but is a resident of Australia for income tax purposes. Entity Y's central management and control is in Australia. Any business activities that Entity Y undertakes outside Australia are incidental to its core business. Such activities may, for instance, amount to the provision of minor administrative and support services. Entity X is registered for goods and services tax.", "Reasons_for_Decision": "Summary: Subsection 38-190(1) of the GST Act sets out the circumstances in which supplies of things, other than goods or real property, for consumption outside Australia are GST-free. Item 3 in the table in subsection 38-190(1) of the GST Act (Item 3) provides that a supply is GST-free if, amongst other things, it is made to a recipient who is not in Australia when the thing supplied is done. The term 'recipient', in relation to a supply, is defined in section 195-1 of the GST Act to mean the entity to which the supply is made. Entity X makes its supply of services to Entity Y. It follows that Entity Y is the recipient of the supply. The 'not in Australia' requirement present in Item 3 is in effect a proxy test for determining place of consumption. The term 'not in Australia' should be interpreted in the context of the supply in question. The requirement that a recipient not be in Australia is, in the Tax Office's view, a requirement that a recipient not be in Australia 'in relation to the supply'. The Tax Office considers that a company not incorporated in Australia is 'in Australia' if it carries on business in Australia: If it is established that such a company is in Australia, the Tax Office considers that the company will be in Australia 'in relation to the supply' if: Entity Y carries on business in Australia through an agent, Entity X, at a fixed and definite place for a sufficiently substantial period of time and is thus 'in Australia'. Entity X's supply, which essentially amounts to the carrying on of Entity Y's core business, is made for the purposes of furthering Entity Y's business as a whole. As Entity Y's entire business is carried on in Australia, save for some incidental activities, and its central management and control is in Australia, the supply is for the purposes of the Australian presence of Entity Y. It follows that Entity Y is in Australia in relation to Entity X's supply. The mere fact that Entity Y is incorporated overseas is not, of itself, sufficient reason to conclude that Entity Y is not in Australia in relation to Entity X's supply. In keeping with Item 3 being a proxy place of consumption test, such a conclusion could only be reached if a sufficient connection existed between Entity X's supply and Entity Y's overseas presence. In this case no such connection exists. At most, Entity Y's overseas presence may undertake some incidental activities, such as the provision of minor administrative and support services. The relationship between Entity X's supply of services and Entity Y's overseas presence is not such that the services could reasonably be thought of as being for consumption by the overseas presence. As Entity Y is in Australia in relation to Entity X's supply, the supply is not GST-free under Item 3 in the table in subsection 38-190(1) of the GST Act. The supply will be a taxable supply if the requirements of section 9-5 of the GST Act are met.", "Date_of_Decision": "30 April 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 38-190(1) subsection 38-190(1) table item 3 subsection 38-190(4) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2004/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST international services Consumption outside Australia GST offshore supplies GST resident agents", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200869", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2004/7 | Keywords Goods and services tax GST international services Consumption outside Australia GST offshore supplies GST resident agents"}
{"ATO_ID_Number": "ATO ID 2004/491", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and removal of grey waste water from a foreign ship in an Australian port", "Issue": "Is the entity, a supplier of grey waste water removal services, making a GST-free supply for the purposes of item 5 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it removes grey waste water from the holding tank of a foreign ship that arrived from outside Australia and is en route to a destination outside Australia?", "Decision": "Yes, the entity is making a GST-free supply for the purposes of item 5 in the table in subsection 38-190(1) of the GST Act when it removes grey waste water from the holding tank of a foreign ship that arrived from outside Australia and is en route to a destination outside Australia.", "Facts": "The entity is a supplier of grey waste water removal services and is registered for goods and services tax (GST). The entity provides its services to a foreign ship that has stopped over in Australia for victualling. The foreign ship arrived from a place outside Australia en route to a destination outside Australia. The entity's services include the removal of grey waste water from the holding tank of the foreign ship in an Australian port and the disposal of the grey waste water through a local council sewerage network.", "Reasons_for_Decision": "Summary: Under section 38-190 of the GST Act, certain supplies of things other than goods or real property for consumption outside of Australia are GST-free. As the entity's supply of services for the removal of grey waste water is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act. Item 5 in the table in subsection 38-190(1) of the GST Act (Item 5) provides that a supply is GST-free if it is a supply that is constituted by the repair, renovation, modification or treatment of goods from outside Australia whose destination is outside Australia. Paragraph 71 of the Goods and Services Tax Ruling GSTR 2005/2 provides that, amongst other things, ships or aircraft that have arrived in Australia on a predetermined journey to a place outside Australia are goods for the purposes of Item 5. The entity provides its services to remove the grey waste water from the holding tank of a foreign ship that has stopped over in Australia for victualling. The foreign ship arrived from a place outside Australia on a predetermined journey to a destination outside Australia. As the holding tank is a component of the foreign ship, it is a good for the purposes of Item 5. Paragraph 42 of GSTR 2005/2 provides that repair, renovation, modification or treatment is a process applied to existing goods which may involve some change in the nature, form or condition of the existing goods, the substance of which remains unchanged. The entity's service is not a repair, renovation or modification. However, the entity's service may be characterised as being a treatment for the purposes of Item 5 and in this regard, paragraph 37 of GSTR 2005/2 provides: The ordinary meaning of 'treat' is 'to subject to some agent or action in order to bring about a particular result: to treat a substance with an acid' [Macquarie Dictionary 3rd edition]. Processes such as cleaning, sterilising, waterproofing or rust proofing goods are examples of treating goods. The entity's services include the removal of grey waste water from the holding tank of the foreign ship in an Australian port and the disposal of the grey waste water through a local council sewerage network. The entity's service is a process that empties the holding tank of the grey waste water and this process is similar to a cleaning or waterproofing process. The substance and character of the ship remains unchanged. As such, the entity's service for the removal of grey waste water is treatment of goods from outside Australia whose destination is outside Australia. Accordingly, the entity is making a GST-free supply for the purposes of Item 5 when it removes grey waste water from the holding tank of a foreign ship that arrived from outside Australia and is en route to a destination outside Australia.", "Date_of_Decision": "2 March 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-190 subsection 38-190(1) table item 5", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2005/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST exports Destination outside Australia GST free GST international services Connected with Australia", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004491", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2005/2 | Keywords Goods and services tax GST exports Destination outside Australia GST free GST international services Connected with Australia"}
{"ATO_ID_Number": "ATO ID 2004/819", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and goods sold in Australia that were imported under a Tradex order", "Issue": "Does the entity, a manufacturer, have an increasing adjustment under section 141-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when goods that it manufactured from components it imported under a Tradex order are sold in Australia?", "Decision": "Yes, the entity does have an increasing adjustment under section 141-5 of the GST Act, when goods that it manufactured from components it imported under a Tradex order are sold in Australia.", "Facts": "The entity is a manufacturer who is registered for goods and services tax (GST). The entity imported components under a Tradex order and is the holder of the Tradex order relating to those components. The entity's importation was a non-taxable importation under subsection 42-5(1) of the GST Act. No other provision under Part 3-2 of the GST Act would have made the importation a non-taxable importation if it had not been covered by item 21A in Schedule 4 to the Customs Tariff Act 1995 . If the importation of the components had been a supply to the entity it would not have been input taxed or GST-free. The components are incorporated into goods that the entity manufactures. Most of the goods the entity manufactures are exported except for a small number which are sold in Australia. The entity's sale of the goods in Australia falls within one of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act 1999 .", "Reasons_for_Decision": "Summary: The holder of a Tradex order has an increasing adjustment if goods relating to that order are dealt with contrary to the Tradex Scheme. Specifically, section 141-5 of the GST Act provides that an entity has an increasing adjustment if: As the entity imported components under a Tradex order and is the holder of the Tradex order relating to those components, the first two requirement of section 141-5 of the GST Act are satisfied. Subsection 13-5(1) of the GST Act provides that an entity makes a taxable importation if goods are imported, and the goods are entered for home consumption (within the meaning of the Customs Act 1901). However, section 13-10 of the GST Act provides that an importation is a non-taxable importation if: No other provision under Part 3-2 of the GST Act would have made the importation a non-taxable importation had it not been covered by item 21A in Schedule 4 to the Customs Tariff Act. If the importation of the components had been a supply to the entity it would not have been input taxed or GST-free. Therefore, the entity's importation would have been a taxable importation if the components had not been covered by item 21A of Schedule 4 to the Customs Tariff Act at the time of their entry for home consumption. As such, the third requirement of section 141-5 of the GST Act is satisfied. The fourth requirement under section 141-5 of the GST Act is that any of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act occur in respect of the goods. Where one of these circumstances occurs, the goods relating to the Tradex order are dealt with contrary to the Tradex Scheme. As the entity's sale of the goods in Australia falls within one of the circumstances referred to in subsection 21(1) of the Tradex Scheme Act, the fourth requirement of section 141-5 of the GST Act is satisfied. All the requirements under section 141-5 of the GST Act are satisfied and as such, the entity has an increasing adjustment for the components that it imported under a Tradex order when goods manufactured from those components are sold in Australia.", "Date_of_Decision": "23 September 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 13-5(1) section 13-10 Part 3-2 subsection 42-5(1) section 141-5 subsection 141-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST imports Customs concessions Non-taxable importations", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004819", "Unmatched_Content": "Keywords Goods and services tax GST imports Customs concessions Non-taxable importations"}
{"ATO_ID_Number": "ATO ID 2001/600", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Tourist Refund Scheme", "Issue": "Is the entity, an individual, entitled to claim a tourist refund scheme (TRS) refund under subsection 168-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the goods and services tax (GST) payable on its acquisition of goods, when it leaves Australia and exports the goods from Australia as accompanied baggage?", "Decision": "Yes, the entity is entitled to claim a TRS refund under subsection 168-5(1) of the GST Act for GST payable on its acquisition of goods when it leaves Australia and exports the goods from Australia as accompanied baggage.", "Facts": "The entity is an individual. The entity is not registered for GST. The entity acquired goods in Australia. The supply of the goods to the entity was a taxable supply under section 9-5 of the GST Act. The entity leaves Australia within 30 days of acquiring the goods and exports the goods from Australia as accompanied baggage. The goods do not consist of alcohol, tobacco or any associated products. The goods have not been partly consumed at the time the entity leaves Australia. The purchase price of the goods was at least $300. The entity holds one tax invoice for the acquisition. The entity makes a claim for the TRS refund at the TRS verification facility before boarding the aircraft. The entity presents its passport, international boarding pass, the goods and the tax invoice for the goods at the request of an officer of Customs.", "Reasons_for_Decision": "Summary: Subsection 168-5(1) of the GST Act provides that an entity is entitled to a refund of the GST that was payable on the supply of goods to it, if: The supply of the goods to the entity was a taxable supply under section 9-5 of the GST Act. Therefore, the entity meets paragraph 168-5(1)(a) of the GST Regulations. Regulation 168-5.01 of the GST Regulations provides that, for paragraph 168-5(1)(b) of the GST Act, the acquisition must be a kind of acquisition in accordance with Subdivision 168 of the GST Regulations. Regulation 168-5.02 of the GST Regulations provides that subdivision 168-1 applies to goods the supply of which is a taxable supply, except any of the following goods: The entity's goods do not consist of alcohol, tobacco or any associated products, and the goods have not been partly consumed at the time the entity leaves Australia. Therefore, this requirement is satisfied. Regulation 168-5.04 of the GST Regulations provides that if 1 item has been acquired from a registered entity, the purchase price paid by the acquirer must be at least $300. If 2 or more items have been acquired from the same registered entity, the total purchase price paid by the acquirer for the items must be at least $300. Regulation 168-5.05 of the GST Regulations provides that the acquisition must be an acquisition for which the acquirer holds 1 tax invoice only. The purchase price of the goods was greater than $300, and the entity holds one tax invoice for the acquisition. Therefore, this requirement is satisfied. In this case, paragraph 168-5(1)(b) of the GST Act has been met because the acquisition is of a kind specified in the regulations. Regulation 168-5.08 of the GST Regulations provides that, for paragraph 168-5(1)(c) of the GST Act, an entity must export goods from Australia as accompanied baggage in the circumstances set out in Subdivision 168-3 of the GST Regulations. Regulation 168-5.09 of the GST Regulations provides that the goods must be exported within 30 days after the day on which they were acquired. The entity leaves Australia within 30 days of acquiring the goods and exports the goods from Australia as accompanied baggage. Therefore, this requirement is satisfied. Regulation 168-5.07 of the GST Regulations provides that the entity must leave Australia at an airport, or seaport, that has a TRS verification facility. In this case, this requirement is satisfied. Regulation 168-5.10 of the GST Regulations sets out the export verification requirements that must be satisfied before an entity can receive a TRS refund. Subregulation 168-5.10(3) of the GST Regulations provides that the entity must present to an officer of Customs, at a TRS verification facility when the entity is leaving Australia, the following items: In this case, when the entity makes a claim for the TRS refund at the TRS verification facility before boarding the aircraft, it presents its passport, international boarding pass, the goods and the tax invoice of the goods at the request of the Customs officer. As the entity does meet the requirements of regulations 168-5.10 of the GST Regulations, the entity is exporting the goods from Australia as accompanied baggage, in the circumstances specified in the GST Regulations. Consequently, the entity does meet the requirement in paragraph 168-5(1)(c) of the GST Act. In conclusion, the entity meets all the requirements of subsection 168-5(1) of the GST Act. Therefore, the entity is entitled to claim a TRS refund for the GST payable on its acquisition of the goods when it leaves Australia and exports the goods as accompanied baggage", "Date_of_Decision": "3 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 168-5(1) paragraph 168-5(1)(a) paragraph 168-5(1)(b) paragraph 168-5(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST tourist refund scheme Export of goods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001600", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST tourist refund scheme Export of goods"}
{"ATO_ID_Number": "ATO ID 2004/117", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and retrospective application of a GST reverse charge agreement", "Issue": "Can the entity, a non-resident supplier making taxable supplies to a resident, enter into a reverse charge agreement under subsection 83-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) that applies retrospectively to supplies that were attributable to an earlier tax period?", "Decision": "No. The entity cannot enter into a reverse charge agreement under subsection 83-5(1) of the GST Act that applies retrospectively to supplies that were attributable to an earlier tax period.", "Facts": "The entity is a non-resident supplier. Since 1 July 2000, the entity has been making taxable supplies under section 9-5 of the GST Act, to a resident entity (recipient). At the time the supplies were made, the entity and the recipient did not have an agreement that the GST on the supplies was payable by the recipient ('reverse charged'). Both the entity and the recipient agree to have a reverse charge on future supplies and to have this agreement applied retrospective to supplies that were attributable to earlier tax periods. The entity does not carry on an enterprise in Australia nor does the entity provide the supply through a resident agent in Australia. The entity is not registered for goods and services tax (GST). The recipient of the entity's supply is registered for GST.", "Reasons_for_Decision": "Summary: Under subsection 83-5(1) of the GST Act, the GST on a taxable supply made by a non-resident supplier can be reverse charged to the recipient of the supply if: The entity is a non-resident supplier making taxable supplies. The entity does not carry on an enterprise in Australia nor does it provide the supply through a resident agent in Australia. The recipient of the supply is registered for GST. Therefore, the first three requirements of subsection 83-5(1) of the GST Act are satisfied. The entity and the recipient agree that the GST on future supplies will be payable by the recipient (that is, they will be 'reverse charged'). However, the entity and the recipient want to have this agreement applied retrospectively to cover taxable supplies that were attributable to earlier tax periods. Except where a special rule applies, Division 29 of the GST Act contains the rules for attribution. The attribution rules establish the tax period in which the GST payable on a taxable supply must be paid to the Commissioner. It follows that the entity liable to pay the GST must be known at this time. As an agreement under Division 83 changes the liability for GST from the supplier to the recipient, this agreement must be in place for the tax period in which the GST is attributable. Therefore, an agreement cannot be made retrospectively to cover supplies that were attributable to earlier tax periods. Accordingly, the entity cannot enter into a reverse charge agreement under subsection 83-5(1) of the GST Act that applies retrospectively in respect of supplies that were attributable to earlier tax periods.", "Date_of_Decision": "2 May 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 29 Division 83 subsection 83-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST international services Connected with Australia Reverse charge on supplies made by non-residents GST supplies & acquisitions Creditable acquisition Creditable purpose GST enterprise GST supply Taxable supply GST tax periods Attribution rules", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004117", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST international services Connected with Australia Reverse charge on supplies made by non-residents GST supplies & acquisitions Creditable acquisition Creditable purpose GST enterprise GST supply Taxable supply GST tax periods Attribution rules"}
{"ATO_ID_Number": "ATO ID 2002/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and repatriation of a deceased person", "Issue": "Is the entity, a funeral parlour operator, making a GST-free supply under Subdivision 38-E of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a repatriation service together with a casket to a non-resident in the course of repatriating a deceased person?", "Decision": "Yes, the entity is making a GST-free supply under Subdivision 38-E of the GST Act when it supplies a repatriation service together with a casket to a non-resident in the course of repatriating a deceased person.", "Facts": "The entity is a funeral parlour operator that is located in Australia. The entity contracts with a non-resident to repatriate a deceased person. The repatriation service that the entity provides includes: As part of this service, the entity also provides a casket for the actual transportation of the body. This service is undertaken from the entity's premises in Australia. The non-resident's representative visited Australia to formalise the agreement between the entity and the non-resident. However, the representative is not in Australia when the actual repatriation service is performed. The various components of the repatriation service that the entity provides are not specifically identified on the invoice. One amount for the overall service, including the casket, transportation and various other services, is shown on the invoice. The entity invoices the non-resident on the same day that the body is shipped overseas. No consideration is received for the supply prior to issuing the invoice. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subdivision 38-E of the GST Act provides that some exports and other supplies for consumption outside of Australia may be GST-free. The export of goods is dealt with under section 38-185 of the GST Act and supplies of things other than goods or real property, for consumption outside of Australia, is covered by section 38-190 of the GST Act. Therefore, in order to identify the applicable section of the GST Act, it is necessary to determine whether the entity is making supplies of goods, or supplies of something other than goods or real property. The overall supply that the entity makes, in fact, consists of two supplies. One is the supply of the repatriation service, which includes the preparation of the body, organising the appropriate documentation and the transportation of the body to the airport. This is the supply of something other than goods or real property and therefore must be examined in the context of section 38-190 of the GST Act. The other supply is the supply of the casket. This is a supply of goods and needs to be examined under section 38-185 of the GST Act. Section 38-190 of the GST Act Under paragraph (a) of item 2 in the table in subsection 38-190(1) (Item 2) of the GST Act, a supply, other than goods or real property, made to a non-resident is GST-free if: The supply of the repatriation services is not directly connected with real property in Australia and the non-resident is not in Australia when the supply is made. Therefore, it needs to be determined whether any of the services provided by the entity amount to work physically performed on goods situated in Australia. The question is whether the body is 'goods' for the purposes of the GST Act. The term 'goods' is defined in section 195-1 of the GST Act to mean 'any form of tangible personal property'. A human body awaiting burial is not considered to be goods as defined in section 195-1 of the GST Act. Support for this position can be found in the High Court decision in Doodeward v Spence [1908] 6 CLR 406, where Griffith J states that a human body is only capable by law of becoming the subject of property when: 'a person has by the lawful exercise of work or skill so dealt with a human body or part of a human body in his lawful possession that it has acquired some attributes differentiating it from a mere corpse awaiting burial, he acquires a right to retain possession of it, at least as against any person not entitled to have it delivered to him for the purposes of burial, but subject, of course, to any positive law which forbids its retention under the particular circumstances.' The embalming services that the entity performs on the body do not change the attributes of the body from being a corpse awaiting burial. Therefore, the body has not become the subject of property and is not considered to be goods for the purposes of the GST Act. Accordingly, the repatriation service that the entity provides is not a service of work physically performed on goods situated in Australia when the work is done. Therefore, the supply of the repatriation service which includes the preparation of the body, organising the appropriate documentation and the transportation of the body to the airport is GST-free under paragraph (a) of Item 2. Section 38-185 of the GST Act Under item 1 in the table in subsection 38-185(1) (Item 1) of the GST Act, a supply of goods is GST-free if the supplier exports the goods within 60 days after: the day on which the supplier receives any of the consideration for the supply; or if, on an earlier day, the supplier gives an invoice for the supply - the day on which the supplier gives the invoice. The entity invoices the non-resident on the same day that the body is shipped overseas. No consideration for the supply is received prior to issuing the invoice. Therefore, paragraph (b) of Item 1 applies. As the casket is shipped overseas on the same day that the entity invoices the client, the casket is exported within 60 days after the entity gives the invoice for the supply. Accordingly, the supply of the casket is a GST-free supply under paragraph (b) of Item 1. Conclusion In summary, the entity is making a GST-free supply under Subdivision 38-E of the GST Act when it supplies a repatriation service together with a casket to a non-resident. The supply of the repatriation service is GST-free under item 2 of subsection 38-190(1) of the GST Act, and the supply of the casket is GST-free under item 1 of subsection 38-185(1) of the GST Act.", "Date_of_Decision": "5 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-E section 38-185 subsection 38-185(1) subsection 38-185 table item 1 subsection 38-185 table item 1 paragraph (b) section 38-190 subsection 38-190 table item 2 subsection 38-190 table item 2 paragraph (a) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax Exports Export of goods GST free", "Case_References": "Doodeward v Spence [1908] 6 CLR 406", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200226", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods & services tax Exports Export of goods GST free"}
{"ATO_ID_Number": "ATO ID 2007/169", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of services for the construction of plant on an oil rig in the Joint Petroleum Development Area", "Issue": "Is the entity, a supplier of services, making a GST-free supply under item 1 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies services for the construction of plant on an oil rig in the Joint Petroleum Development Area (JPDA)?", "Decision": "Yes, the entity is making a GST-free supply under item 1 in the table in subsection 38-190(1) of the GST Act (Item 1) when it supplies services for the construction of plant on an oil rig in the JPDA.", "Facts": "The entity is a supplier of services. The entity supplies services for the construction of plant on an oil rig in the JPDA. The JPDA is a specified area in the Timor Sea between Australia and East Timor. Australia and East Timor signed a treaty (the Timor Sea Treaty [2003]), in relation to the JPDA, to jointly control, manage and facilitate the exploration, development and exploitation of the petroleum resources of the specified area. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 38-190 of the GST Act, certain supplies, other than goods or real property for consumption outside of Australia, are GST-free. As the entity's supply of services is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act. Item 1 in the table in subsection 38-190(1) of the GST Act provides that a supply is GST-free where the supply is directly connected with goods or real property situated outside Australia. As the entity supplies services for the construction of plant on an oil rig in the JPDA, its supply is directly connected with goods. Therefore, if the oil rig in the JPDA is situated outside of Australia, the supply satisfies the requirements of Item 1 in the table in subsection 38-190(1) of the GST Act and is GST-free. 'Australia', as defined in section 195-1 of the GST Act, does not include any external territory, but includes an installation that is deemed by section 5C of the Customs Act 1901 to be part of Australia. For the following reasons the JPDA is not deemed to be part of Australia. Subject to subsections 5C(2) and 5C(3) of the Customs Act, subsection 5C(1) of the Customs Act provides that the following installations are deemed to be part of Australia: There are two aspects of paragraph 5C(1)(a) of the Customs Act that need to be considered: what is a resource installation and what is the area the Australian seabed covers. In the Customs Act, a 'resources installation' is either a resources industry fixed structure within the meaning of subsection 4(5) of the Customs Act or a resources industry mobile unit within the meaning of subsection 4(6) of the Customs Act. Many oil rigs will be a resources installation so that in this case this aspect would be satisfied. Subsection 4(1) of the Customs Act defines the area that is considered to be 'Australian seabed'. However it specifically states that the seabed to which it applies is seabed 'other than the seabed within the JPDA'. As such, the oil rig that is a resources installation in the JPDA is a resources installation that is not attached to the Australian seabed and so not deemed to be part of Australia. Accordingly, paragraph 5C(1)(a) of the Customs Act is not satisfied and therefore paragraph 5C(1)(b) of the Customs Act needs to be considered. Under subsection 4(1) of the Customs Act, '\"sea installation\" has the same meaning as in the Sea Installations Act 1987 '. Under subsection 4(1) of the Sea Installations Act the term \"sea installation\" is explained to include certain structures but to not include certain other structures, units, vessels and so on. Two of the exclusions mentioned in subsection 4(1) of the Sea Installations Act, ...(k) a resources industry fixed structure;... and ...(m) a resources industry mobile unit... are explained in subsections 4(2) and 4(3), respectively, of that Act. As the oil rig falls within one of these exclusions, it is not a sea installation. This means that the definition in paragraph 5C(1)(b) of the Customs Act is not applicable to such an oil rig and that the oil rig is not deemed to be part of Australia. For the purposes of the Customs Act, the oil rig in the JPDA is not deemed to be part of Australia. Therefore, the entity's supply of services for the construction of plant on such an oil rig in the JPDA is directly connected with goods situated outside Australia and the entity is making a GST-free supply under Item 1 in the table in subsection 38-190(1) of the GST Act.", "Date_of_Decision": "16 August 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-190 subsection 38-190(1) table item 1 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Connected with Australia Consumption outside Australia Goods and services tax GST free GST international services Supplies used or enjoyed outside Australia Supply directly connected with goods or real property situated outside Australia", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007169", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Connected with Australia Consumption outside Australia Goods and services tax GST free GST international services Supplies used or enjoyed outside Australia Supply directly connected with goods or real property situated outside Australia"}
{"ATO_ID_Number": "ATO ID 2015/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and inwards port service charges", "Issue": "Are the fees paid for loading, handling and associated activities consideration for GST-free supplies of international transport made by the non-resident shipping line under item 5 in subsection 38-355(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes. The fees paid for loading, handling and associated activities form part of the consideration for a GST-free supply of international transport made by the non-resident shipping line and are therefore GST-free under item 5 in subsection 38-355(1) of the GST Act.", "Facts": "The non-resident shipping line enters into an international carriage contract (either through its Australian agent or independently) with Australian resident and non-resident customers for the international shipping of goods to the indirect tax zone (the extent of 'Australia' for GST purposes as defined in section 195-1 of the GST Act). A document called a bill of lading or ocean bill of lading (or similar) is issued to the relevant parties and this document includes details such as the consignor, consignee, port of discharge and if the delivery point is beyond the port of discharge, the place of delivery of the goods. The non-resident shipping line does not generally hold, or have access to, the relevant sale of goods contract for the freight it carries. Under the sale of goods contract the buyer and seller determine which party is responsible for the transport costs in sending the goods to the indirect tax zone. Importation of the cargo is not the responsibility of the shipping line. The shipping line's Australian agent looks after all of the indirect tax zone based aspects of the line's international shipping operations including; arranging the docking and unloading of vessels at indirect tax zone ports, delivery of the goods (where the Place of Delivery is in the indirect tax zone), preparation of the necessary indirect tax zone import documentation and the inspection of shipping containers returned in the indirect tax zone. The shipping line (independently or via its Australian agent) invoices the customer cost elements for various supplies that are separate to the cost of the ocean freight including (but not limited to): While the fees for the services are itemised separately, they are still invoiced in accordance with the standard services supplied under the international carriage contract between the customer and the shipping line for the provision of international shipping services. The shipping line does not have any separate agreement with the customer for supplying the services or charging these fees.", "Reasons_for_Decision": "Summary: The services charged for by the non-resident shipping line (or its agent) to its customer form part of the supply of international transport. The supply of international transport by a shipping line is GST-free under item 5 in the table under subsection 38-355(1) up to and including the activities carried out by the shipping line at the port of discharge. The fees in question are for activities necessarily carried out by the shipping line (or acquired by the shipping line) in transporting the cargo and are included in the standard services supplied by the shipping line under the international carriage contract. Under item 5 in subsection 38-355(1) the inbound international transport of goods is GST-free to the place of consignment in the indirect tax zone. The 'place of consignment' is set out in section 195-1 of the GST Act: As the non-resident shipping line does not generally hold or have access to the sales contract relevant to the freighted goods, it will not be able to determine where the place of consignment is under its contractual relationship with the customer. In these circumstances, the ATO allows the shipping line to assume that the place of consignment under paragraphs (aa) or (ab) should be at least at the port of discharge specified on the relevant Bill. The ATO accepts that the port of discharge in these circumstances is the 'terminal gate' and therefore activities carried out at the port are within the place of consignment. This means that services related to the transport and handling of the goods (including issuing or processing associated documentation) made by the shipping line under its international carriage contract will be GST-free if the goods are released to the customer at the port of discharge, as these services are made at, or prior to, the place of consignment. If the goods are released to the customer after the port of discharge (that is, beyond the terminal gate) then all services after the terminal gate can only be treated as GST-free by the shipping line if it obtains information from the buyer or seller of the goods that the place of consignment of the goods is a place beyond the port of discharge. This outcome ensures that all services performed by the shipping line at the port in fulfilling its international transport contract can be included as GST-free international transport with the services having the same GST treatment as the international transport. The services included as part of GST-free international transport are typically activities associated with transport that are normally carried out under a bill of lading (standard international carriage contract). Note that item 5 is limited by subsection 38-355(2) of the GST Act under which the transport of goods to and from the indirect tax zone can only be GST-free under item 5 where either: In the circumstances at hand subsection 38-355(2) will not limit item 5 given the transport services within the indirect tax zone are being supplied by the shipping line that transported the goods to the indirect tax zone.", "Date_of_Decision": "28 September 2015", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Service Tax) Act 1999 subsection 38-355(1) subsection 38-355(2) section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2003/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bill of lading Goods and services tax GST transport Transport of goods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201526", "Unmatched_Content": "other than an installation (within the meaning of the Customs Act 1901) that is deemed by section 5C of the Customs Act 1901 to be part of Australia and that is located in an offshore area or the Joint Petroleum Development Area.] | Related Public Rulings (including Determinations) GSTR 2003/15 | Keywords Bill of lading Goods and services tax GST transport Transport of goods"}
{"ATO_ID_Number": "ATO ID 2004/519", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of music CDs and electronic games by an agent", "Issue": "Is the entity, an agent, making a supply of a kind specified in the A New Tax System (Goods and Services Tax) Application of Agency Arrangements to the Multi-Media Industry Determination (No. 1) 2000 (Multi-Media Determination), when it supplies music compact discs and electronic games?", "Decision": "Yes, the entity is making a supply of a kind specified in the Multi-Media Determination when it supplies music compact discs and electronic games.", "Facts": "The entity is an agent. The entity supplies music compact discs (CDs) and electronic games to a third party on behalf of another party (principal). The entity and the principal are both registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: The Multi-Media Determination applies to all supplies of multi-media products made through retailers and distributors of those products including, but not limited to, newsagents, supermarkets, convenience stores and delivery agents. Clause 3 of the Multi-Media Determination provides that a reference to supplies of multi-media products includes, but is not limited to: The definition of multi-media products in the Multi-Media Determination is not an exhaustive one. As such, any multi-media product will be covered, unless the product is excluded under the Multi-Media Determination. Clause 4 of the Multi-Media Determination provides that reference to multi-media products does not include: The entity is an agent that supplies music CDs and electronic games to a third party on behalf of a principal. As music CDs and electronic games are not excluded, reference to multi-media products in the Multi-Media Determination also includes music CDs and electronic games. Accordingly, the entity is making a supply of a kind specified in the Multi-Media Determination when it supplies music compact discs and electronic games. Note: The Multi-Media Determination has the effect of requiring the entity and the principal to account for GST on the basis of, principal to principal, in relation to specified supplies and acquisitions. As such, the entity and the principal are taken to be in an arrangement under Subdivision 153-B of the GST Act, unless either the entity or the principal notifies the other in writing or both notify each other in writing that the Subdivision 153-B arrangement does not apply. The arrangement will also cease to have effect if the entity or the principal or both of them, cease to be registered for GST.", "Date_of_Decision": "25 March 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 153-B", "Related_Public_Rulings_and_Determinations": "Goods and Services Taxation Ruling 2000/37", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules Acquisitions and supplies by Agents", "Case_References": "", "Other_References": "A New Tax System (Goods and Services Tax) Application of Agency Arrangements to the Multi-Media Industry Determination (No. 1) 2000", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004519", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Taxation Ruling 2000/37 | Keywords Goods and services tax GST special rules Acquisitions and supplies by Agents"}
{"ATO_ID_Number": "ATO ID 2001/195", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the Agency Relationship", "Issue": "Is the entity, an owner of commercial premises who is not registered or required to be registered for goods and services tax (GST), making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when those premises are supplied to a tenant through a real estate agent who is registered for GST?", "Decision": "No, the entity, who is not registered or required to be registered for GST, is not making a taxable supply of commercial premises under section 9-5 of the GST Act when those premises are supplied to a tenant through a real estate agent who is registered for GST.", "Facts": "The entity is an owner of commercial premises. The premises, which are being leased to a tenant, are managed by a real estate agent. The rental payments are collected by the real estate agent from the tenant. The real estate agent has the authority to act on behalf of the entity. The entity is not registered or required to be registered for GST. The real estate agent is registered for GST.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act states that 'you' make a taxable supply if certain requirements are met. Therefore, before examining the elements of section 9-5 of the GST Act, it is necessary to identify who is actually making the supply. The issue in this case is whether the entity, the owner of the commercial premises, or the real estate agent is making the supply of the commercial premises. Goods and Services Tax Ruling GSTR 2000/37 discusses the general law in relation to agency relationships. Paragraph 10 of GSTR 2000/37 explains that: 'An intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent. The party who authorises the agent to act on their behalf is called the principal.' Paragraph 15 of GSTR 2000/37 goes on to state that: 'When an agent uses his or her authority to act for a principal, then any act done on behalf of that principal is an act of the principal.' In this case, the real estate agent has the authority to act on behalf of the entity. The entity, being the owner of the commercial premises is, therefore, the principal and the real estate agent is the agent. As such, any act performed by the real estate agent is considered to be an act of the entity. Although the agent manages the property and collects the rent from the tenant, these acts are considered to be acts performed by the entity. As a result, it is the entity, not the real estate agent that is making the supply of the commercial premises to the tenant. Therefore, if the supply of the commercial premises by the entity satisfies the requirements of section 9-5 of the GST Act, the supply is a taxable supply. Paragraph 9-5(d) of the GST Act requires that for a supply to be a taxable supply, the supplier must be registered or required to be registered for GST. In this case, the entity is not registered or required to be registered for GST. Consequently, the entity, the owner of the commercial premises, is not making a taxable supply under section 9-5 of the GST Act when it supplies those premises to a tenant through a real estate agent who is registered for GST.", "Date_of_Decision": "31 March 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(d)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/37", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001195", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/37 | Keywords Goods and Services Tax Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/291", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply to an associate for no consideration", "Issue": "Is the entity, a company, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies, for no consideration, machinery to a director who is neither registered nor required to be registered for GST?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies, for no consideration, machinery to a director who is neither registered nor required to be registered for GST.", "Facts": "The entity is a company. The entity owns a piece of machinery that it supplies to a director. The entity supplies the machinery for no consideration. The supply of the machinery is neither input taxed under Division 40 of the GST Act nor GST-free under Division 38 of the GST Act. The director holds a majority voting interest in the entity. The director is neither registered nor required to be registered for goods and services tax (GST). The entity is registered for GST. The supply is made in the course of the entity's enterprise and is connected with Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity makes the supply of the machinery in the course of its enterprise and the supply is connected with Australia. In addition, the entity is registered for GST, whereby satisfying three of the requirements of section 9-5 of the GST Act. The remaining requirement of section 9-5 of the GST Act is that an entity makes the supply for consideration. The entity makes the supply of the machinery to a director for no consideration. Normally, the fact that a supply has been made for no consideration would preclude the supply from being a taxable supply under section 9-5 of the GST Act. However, while the entity makes the supply to a director for no consideration, the fact that a supply to an associate is without consideration, does not, under section 72-5 of the GST Act, stop the supply being a taxable supply if: The term associate is defined in section 318 of the Income Tax Assessment Act 1936 to include an entity that holds a majority voting interest in a company, as an associate of that company. The director holds a majority voting interest in the entity and as such, is an associate of the entity. The director is neither registered nor required to be registered for GST. Therefore, as the director is an associate of the entity and the director is neither registered nor required to be registered for GST, the fact that the entity supplies the machinery for no consideration, does not stop the supply from being a taxable supply. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies, for no consideration, machinery to a director who is neither registered nor required to be registered for GST.", "Date_of_Decision": "9 October 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 72-5 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies without consideration GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004291", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies without consideration GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/698", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and payments made under an insurance policy for bad debts", "Issue": "Does the entity, a supplier, have an increasing adjustment under section 21-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives a payment made under an insurance policy that covers the non-payment of customer debts?", "Decision": "No, the entity does not have an increasing adjustment under section 21-10 of the GST Act when it receives a payment made under an insurance policy that covers the non-payment of customer debts as the payment is not the recovery of the amount previously written off.", "Facts": "The entity is a supplier. The entity has an insurance policy with an insurer to cover the non-payment of customer debts. The entity is registered for goods and services tax (GST) and made a taxable supply to a customer. The customer was unable to pay the amount owing and the entity wrote this amount off as a bad debt. The entity claimed a decreasing adjustment, under section 21-5 of the GST Act, equal to 1/11th of the amount that had been written off. The entity made a claim under its insurance policy and received a payment in settlement of their claim from the insurer. The payment from the insurer is not made for or on behalf of the entity's customer as a payment of the customer's debt. The settlement amount is determined in accordance with the terms and conditions of the insurance policy.", "Reasons_for_Decision": "Summary: Section 21-10 of the GST Act, provides that an entity has an increasing adjustment equal to 1/11th of the amount recovered if: The entity previously claimed a decreasing adjustment, under section 21-5 of the GST Act, of 1/11th of the amount that had been written off. Therefore, the entity has satisfied the first requirement of section 21-10 of the GST Act. The second requirement in section 21-10 of the GST Act is that the entity recovers all or part of the amount previously written off, or all or part of the amount that has been overdue for 12 months or more. The payment the entity received from the insurer resulted from a claim the entity made under their insurance policy. The payment from the insurer is not made for or on behalf of the entity's customer as a payment for the customer's debt. The settlement amount from the insurer is in relation to a claim made under a separate supply, that is, the supply of an insurance policy. It is a payment that the insurer is liable to make to the entity in accordance with the terms and conditions of the insurance policy. The payment by the insurer to the entity does not cancel the debt owed to the entity by the customer. The liability of the customer to repay the amount owed still remains. The entity has not received a payment from the customer. The amount received from the insurer is not, for the purposes of section 21-10 of the GST Act, a recovery of any of the amount written off by the entity. Accordingly, the entity does not have an increasing adjustment.", "Date_of_Decision": "4 September 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 21-5 section 21-10", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services Tax GST bad debts Recovering amounts Write off GST net amount & adjustments Decreasing adjustment Increasing adjustment GST insurance policy Insurance settlement under an insurance policy", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003698", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/2 | Keywords Goods & services Tax GST bad debts Recovering amounts Write off GST net amount & adjustments Decreasing adjustment Increasing adjustment GST insurance policy Insurance settlement under an insurance policy"}
{"ATO_ID_Number": "ATO ID 2001/779", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of farmland under the administration of a deceased estate", "Issue": "Is the entity, an executor of a deceased estate, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a freehold interest in farmland where there has been a break in farming activities immediately preceding the sale due to the winding up of the deceased's estate?", "Decision": "Yes, the entity is making a GST-free supply under section 38-480 of the GST Act when it sells a freehold interest in farmland where there has been a break in farming activities immediately preceding the sale due to the winding up of the deceased's estate.", "Facts": "The entity is an executor of a deceased estate. The estate includes a freehold interest in farmland. The deceased was the proprietor of the farming business on the farmland. The entity is winding up the farming business, selling off all of the assets and stock of the farming business and selling the freehold interest in the farmland. The farming business had been carried on upon the land for a period in excess of five years. There has been a break in farming activities due to the death of the farmer and the winding up of the deceased estate. The purchaser of the farmland intends to carry on a farming business upon the land. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subdivision 38-O of the GST Act allows the supply of farmland to be GST-free in certain circumstances. Section 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if: In this case, the recipient of the supply (the purchaser) intends to carry on a farming business upon the land. Therefore, it must be determined if a farming business has been carried on for at least the period of five years immediately preceding the supply where there has been a break in the farming activities due to the winding up of the deceased's estate. The term 'farming business' is to be distinguished from the term 'farming activity'. A farming business includes farming activities such as fencing and tending stock. It also includes business activities such as keeping business records. Sometimes, a temporary cessation in the daily farming activities will occur, for example in the event of poor weather, taking holidays, leaving the land fallow and in this case, winding up of the deceased's estate. Although the farming activities have ceased during the period of the administration of the estate, it is necessary to determine whether the farming business is still being carried on during this time. The term 'carried on' is defined in section 195-1 of the GST Act to include doing anything in the course of the commencement or termination of the enterprise. Enterprise is defined in section 9-20 of the GST Act to include an activity or series of activities done in the form of a business. A farming business satisfies this definition. Therefore, a farming business is an enterprise within the meaning of the GST Act. As such, anything done in the course of the commencement or termination of a farming business, where carried out in a business like way, without unnecessary delay, is accepted as being part of carrying on the farming business. However, it must be considered whether the duties of winding up the deceased's estate are still part of carrying on the farming business where the duties are carried out by an executor as opposed to the farmer. Taxation Ruling IT 2622 explains that upon the death of a person, the property of the deceased passes to their estate, the legal control over which is exercised by an executor or an administrator. The executor or administrator, in effect, steps into the shoes of the deceased and winds up the deceased's personal affairs. Therefore, it is considered that the winding up of a farming business, whether performed by the business operator themselves, or by an executor or administrator upon the death of the business operator, will still be part of carrying on the farming business. Furthermore, it is accepted that the process leading up to the granting of probate and the stages that follow in administering the estate are necessary delays in winding up the deceased's farming business. Accordingly, although the farming activities have ceased following the death of the farmer, it is considered that the farming business is carried on continuously up until the time of sale because activities done in the cessation of a business are considered to be part of carrying on a business. As such, the farming business is considered to have been carried on continuously for at least the period of 5 years immediately preceding the supply, regardless of the fact that there has been a temporary cessation in the farming activities due to the winding up of the deceased estate. As a result, all of the requirements of section 38-480 of the GST Act have been met. Therefore, the entity is making a GST-free supply under section 38-480 of the GST Act when it sells a freehold interest in farmland where there has been a break in farming activities immediately preceding the sale due to the winding up of the deceased's estate.", "Date_of_Decision": "23 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-20 Subdivision 38-O section 38-480 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST farm land Farming business GST supplies & acquisitions GST enterprise", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001779", "Unmatched_Content": "Keywords Goods & services tax GST free GST farm land Farming business GST supplies & acquisitions GST enterprise"}
{"ATO_ID_Number": "ATO ID 2006/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and varying a transitional lease agreement retrospectively before 22 February 2005", "Issue": "If the consideration for a supply by way of lease that was GST-free under section 13 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act) is changed prior to 22 February 2005 with retrospective effect, does the supply lose its GST-free status from when the change is made or from when the change takes effect?", "Decision": "The supply loses its GST-free status under section 13 of the GST Transition Act on the date when the change to the consideration is made and not when the change takes effect.", "Facts": "Prior to 1 July 2000, the entity, a lessor of commercial premises, entered into a long-term written lease agreement with a tenant of the premises. Rent was payable monthly. The quantum of the rent was expressed as a formula that took into account the monthly turnover of the tenant. The lease agreement satisfied section 13 of the GST Transition Act and did not contain a 'review opportunity'. GST commenced on 1 July 2000 and some time after this, the parties became aware that the turnover formula was no longer appropriate. In 2004, they executed a deed of variation to the lease agreement consideration formula and backdated this change to 1 July 2000. The total rent payable under the amended lease agreement for the period from 1 July 2000 to the date the variation was executed exceeded the rent payable for that period under the original lease agreement. The tenant made a lump sum payment to cover the difference. After this, the tenant continued to make monthly rent payments under the amended lease agreement.", "Reasons_for_Decision": "Summary: Section 13 of the GST Transition Act makes certain supplies identified in a written agreement GST-free if the agreement was made before 8 July 1999 and the conditions of the section are met. The supply is GST-free to the extent it is made until the earlier of 1 July 2005 or a review opportunity arises on or after 8 July 1999. However, on or after 22 February 2005 if a change is made to the consideration for a supply covered by section 13 of the GST Transition Act and the change applies to supplies made before 1 July 2005 then the supply is not GST-free to the extent that it is made on or after the day the change takes effect. Goods and Services Tax Ruling GSTR 2000/16, amended on 11 May 2005, provides guidance on the interpretation of the GST Transition Act. The position taken in GSTR 2000/16 is that where a variation to the consideration in a written agreement that satisfies section 13 of the GST Transition Act is made before 22 February 2005 with a future date of effect, a supply ceases to be GST-free from the date of the variation and not the future date of effect. The alteration in the consideration changes the agreement, even if the alteration does not take practical effect until a future time. This is confirmed in paragraph 69C of GSTR 2000/16, which states: If a variation which changes the consideration was made before 22 February 2005 but was to take effect at some time after the variation was made, it remains our view that section 13 ceased to apply to the supplies from the date of the variation rather than the date on which the change takes effect. The new rule explained in paragraphs 69A and 69B of this Ruling applies only if the change is made on or after 22 February 2005. Consistent with paragraph 69C of GSTR 2000/16, it is also our view that section 13 of the GST Transition Act ceases to apply to a supply, or part of a supply, from the date of a variation made before 22 February 2005 that changed the consideration retrospectively. The already completed part of the lease does not cease to be GST-free under section 13 of the GST Act merely because the parties later agree to treat the price for that part of the lease as having been greater or less than it actually was.", "Date_of_Decision": "9 July 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax Transition) Act 1999 section 13 subsection 13(4B) subsection 13(4C)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/16 | Goods and Services Tax Ruling GSTR 2000/16 - Addendum", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST transitional issues Agreements spanning 1 July 2000", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200657", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/16 Goods and Services Tax Ruling GSTR 2000/16 - Addendum | Keywords Goods and services tax GST free GST transitional issues Agreements spanning 1 July 2000"}
{"ATO_ID_Number": "ATO ID 2006/113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and whether a lease with an option to renew is a long-term lease", "Issue": "Is the supply of real property by the entity, an Australian Government agency, by way of lease for less than 50 years with an option to renew, a 'long-term lease' as defined in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No. The supply of real property by way of lease for less than 50 years with an option to renew is not a 'long-term lease' as defined in section 195-1 of the GST Act.", "Facts": "The entity is an Australian government agency, which administers the leasehold over an area of real property. The entity enters into a lease agreement with another party (lessee) for a term of less than 50 years. The lease agreement contains an option for the lessee to renew the lease for a period of 50 years. The lessee has exercised the option to renew the lease. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: A 'long-term lease' is defined in section 195-1 of the GST Act as a supply by way of lease, hire or licence, including a renewal or extension of a lease, hire or licence for at least 50 years if: The entity is an Australian government agency. As such the entity must satisfy only the first requirement above (the term 'unless' means 'except when'). Pursuant to the definition of 'long term lease' it is apparent that the 'lease, hire or licence' and the renewal or extension of a 'lease, hire or licence' are to be considered as separate supplies. The lease is a supply for a particular period and the renewal or extension of that lease is a supply for a separate period. This can be illustrated as follows: As seen above if the entity and the lessee agree to renew or extend the lease, the entity and the lessee enter into a further supply of the real property by way of lease for a further period. The renewal or extension of the lease therefore is not considered in making a determination as to whether the lease is a long-term lease. The definition of a long-term lease provides that it must be reasonable to expect that the lease would continue for at least 50 years at the time the lease was entered. The phrase 'reasonable to expect' has not been defined in the GST Act. To find the meaning, one must consider the ordinary meaning of the words in the phrase, the legislative context in which the phrase appears, and any comments made by judges interpreting statutes that have provisions which incorporate the concept of 'reasonable expectation'. The above has been considered in paragraphs 37 to 46 of Goods and Services Tax Ruling GSTR 2000/7 by the Commissioner in determining the meaning of the phrase 'could reasonably be expected' in section 11 of the A New Tax System (Goods and Services Tax Transition) Act 1999 . The Commissioner concluded that for there to be a 'reasonable expectation' there must be about an even chance of the event occurring. Consistent with the above meaning of 'reasonable expectation', if there was about an even chance that the lease would continue for at least 50 years, the lease would be a long-term lease. In this case the lease was for less than 50 years and was not reasonably expected to continue for 50 years when the lease was entered between the entity and lessee. The lease therefore is not a long-term lease as defined in section 195-1 of the GST Act.", "Date_of_Decision": "16 March 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/635", "Subject_References": "Goods and services tax GST lease and real property GST long term lease", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006113", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/7 | Keywords Goods and services tax GST lease and real property GST long term lease"}
{"ATO_ID_Number": "ATO ID 2007/31", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and barter scheme/trade exchanges: making a taxable supply of trade credits", "Issue": "Is the entity, a barter scheme/trade exchange manager, making a taxable supply of trade credits under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it credits an exiting member's trade account, upon the receipt of a cash payment from the exiting member, to bring the debit balance in the trade account to nil?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act when it credits an exiting member's trade account, upon the receipt of a cash payment from the exiting member, to bring the debit balance in the trade account to nil.", "Facts": "The entity is the manager of a barter scheme/trade exchange. The manager is the entity through which the barter scheme/trade exchange (the exchange) provides services to its members. A member (the exiting member) of the exchange ceases trading and leaves a debit balance in its trading account. Under the rules of the exchange, which are legally binding between the members and the exchange, a debit balance on a member's trade account is a liability by the member to the exchange. An exiting member has 30 days to sell goods and services to other members to reduce its trade account debit balance. At the expiration of the 30 day period, the exiting member must pay to the exchange a cash amount that is equivalent to the value, expressed in trade dollars, of the remaining debit balance in the trade account. The exiting member pays this amount. The manager receives the cash payment on behalf of the exchange. The manager credits the member's trade account, reducing the debit balance to nil.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. The first requirement is that there must be a supply for consideration (paragraph 9-5(a) of the GST Act). Therefore, it is necessary to determine whether the entity makes a supply when it credits an exiting member's trade account with trade dollars upon the receipt of a cash payment from the member. Under the rules of the exchange, when an exiting member fails to trade out of its debit position in its trade account, the member has a cash debt to the exchange equivalent to the debit balance in trade dollars. When the exiting member makes a payment to the entity, its debt is extinguished. The extinguishment of a debt through its payment does not constitute a supply for GST purposes. The crediting of the trade dollars by the entity to the exiting member's trade account, to reduce the balance to zero, is merely part of the recognition that the member's debt is extinguished. As such it is not a supply of trade credits by the entity to the exiting member. There is a distinction between the transaction described above and a sale of trade credits as discussed in Goods and Services Tax Ruling GSTR 2003/14, beginning at paragraph 74. The transaction envisaged in that ruling is one whereby a member of good standing sells its credits for a sum of money. The crediting of the trade dollars to the buying member's account allows that member to use those units to obtain value. However, in the current circumstances, the crediting of the trade account does not provide the exiting member with anything. As the requirement that there must be a supply for consideration (paragraph 9-5(a) of the GST Act) is not met, the entity is not making a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "12 December 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Barter & countertrade Goods and services tax GST financial supplies GST supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200731", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/14 | Keywords Barter & countertrade Goods and services tax GST financial supplies GST supply"}
{"ATO_ID_Number": "ATO ID 2005/227", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and validity of an arbitrated offer in respect of a long-term non-reviewable contract", "Issue": "Can the entity, a supplier under a long-term non-reviewable contract, make an 'arbitrated offer' in accordance with section 15J of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act) if the assessor's determination of an appropriate price change is not made within 28 days of the end of the initial offer period?", "Decision": "No, the entity cannot make an arbitrated offer in accordance with section 15J of the GST Transition Act if the assessor's determination of an appropriate price change is not made within 28 days of the end of the initial offer period.", "Facts": "The entity is a supplier under a long-term non-reviewable contract. The entity wishes to change the price for the supply it makes under the contract to account for the goods and services tax (GST) payable from 1 July 2005. The entity and the recipient of the supply are unable to agree on a price change. The entity decides to use the arbitration process provided by Subdivision C of Division 2 of the GST Transition Act. In accordance with section 15K of the GST Transition Act, the entity makes an initial offer to the recipient to change the price of the supply. The recipient fails to accept the offer. In accordance with section 15L of the GST Transition Act, the entity then applies to an arbitrator for appointment of an assessor to determine an appropriate price change. The assessor does not make the price determination within the prescribed 28 day period as required under paragraph 15L(1)(d) of the GST Transition Act.", "Reasons_for_Decision": "Summary: Section 15J of the GST Transition Act provides that a final offer to change the consideration for supplies, that are made on or after 1 July 2005 and that are specifically identified by an agreement of a kind referred to in subsection 13(1) of the GST Transition Act, is an arbitrated offer if: The arbitration process in section 15L of the GST Transition Act is a prescribed arbitration process. Paragraph 15L(1)(d) of the GST Transition Act specifically provides that the assessor's determination of an appropriate change to the consideration 'must be made within 28 days of the end of the offer period ...' As the assessor's determination was not made within the prescribed 28 day period, the entity has not met the requirements of section 15L of the GST Transition Act. Therefore the entity cannot make an 'arbitrated offer' in accordance with section 15J of the GST Transition Act.", "Date_of_Decision": "19 July 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax Transition) Act 1999 subsection 13(1) Division 2 Subdivision C section 15J section 15K section 15L paragraph 15L(1)(d) section 15M", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/228", "Subject_References": "Goods and services tax GST long term lease GST property & construction GST transitional issues", "Case_References": "", "Other_References": "GST and long-term non-reviewable contracts (NAT 12997)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005227", "Unmatched_Content": "Keywords Goods and services tax GST long term lease GST property & construction GST transitional issues"}
{"ATO_ID_Number": "ATO ID 2005/228", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and ability to vary an initial offer for the purpose of arbitration of a long-term non-reviewable contract", "Issue": "Can the entity, a supplier under a long-term non-reviewable contract, vary the terms of an 'initial offer' to extend the initial offer period when it is faced with insufficient time to complete the arbitration process prescribed in section 15L of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act)?", "Decision": "No, the entity cannot vary the terms of an initial offer once it has been made. However, the entity can make a further initial offer and restart the arbitration process if the further initial offer period lapses without acceptance, or the recipient rejects the further initial offer made.", "Facts": "The entity is a supplier under a long-term non-reviewable contract. The entity wishes to change the price for the supply it makes under the contract to account for the goods and services tax (GST) payable from 1 July 2005. The entity and the recipient of the supply are unable to agree on a price change. The entity decides to use the arbitration process provided by Subdivision C of Division 2 of the GST Transition Act. In accordance with section 15K of the GST Transition Act, the entity makes an initial offer to the recipient to change the price of the supply. The recipient fails to accept the offer. In accordance with section 15L of the GST Transition Act, the entity then applies to an arbitrator for appointment of an assessor to determine an appropriate price change. The entity becomes aware that the assessor will not be able to complete the price determination within the 28 day time period stipulated in paragraph 15L(1)(d) of the GST Transition Act. The entity proposes to get around this difficulty by varying the initial offer to extend the offer period as a way of deferring the start of the 28 day time period.", "Reasons_for_Decision": "Summary: Under paragraph 15L(1)(d) of the GST Transition Act, an appointed assessor must make a determination of an appropriate change in the consideration for the supply under the contract within 28 days of the end of the offer period. Paragraph 15K(1)(c) of the GST Transition Act states that the initial offer must state the period (the initial offer period) for which the offer remains open. There is no provision in the legislation that provides that the supplier can amend the terms of an initial offer. Although as a matter of contract law, offers can be withdrawn, rejected, varied, or revitalised, the initial offer referred to in section 15K of the GST Transition Act is part of a prescribed arbitration process. Subsection 15L(2) of the GST Transition Act provides that a supplier must not apply to an arbitrator until after the earlier of the end of the initial offer period or the recipient giving the supplier a written rejection of the initial offer. If a supplier could change the originally specified 'initial offer period' after the offer has been given, it would create doubt as to when the supplier would be authorised to apply to an arbitrator. Accordingly, the entity cannot vary the terms of the initial offer after that offer has been given to the recipient. This includes extending the initial offer period when the entity is faced with insufficient time to complete the arbitration process prescribed in section 15L of the GST Transition Act.", "Date_of_Decision": "19 July 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax Transition) Act 1999 section 15K paragraph 15K(1)(c) section 15L paragraph 15L(1)(d) subsection 15L(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/227", "Subject_References": "Goods and services tax GST long term lease GST property & construction GST transitional issues", "Case_References": "", "Other_References": "GST and long-term non-reviewable contracts (NAT 12997)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005228", "Unmatched_Content": "Keywords Goods and services tax GST long term lease GST property & construction GST transitional issues"}
{"ATO_ID_Number": "ATO ID 2004/833", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and its calculation for construction agreements made before 1 July 2000", "Issue": "How does the entity, a builder, calculate the goods and services tax (GST) payable under section 19 of the A New Tax System (Goods and Services Tax Act Transition) Act 1999 (GST Transition Act) on a taxable supply of building construction?", "Decision": "The GST payable under section 19 of the GST Transition Act can be calculated using the following formula: GST payable = 1/11 * (Price of the supply - value as at 1 July 2000) where 'value as at 1 July 2000' is the value of all work and materials permanently incorporated in or affixed on the site of the building work in accordance with the agreement, as at the start of 1 July 2000.", "Facts": "The entity is a builder who is registered for GST. In January 2000, the entity entered into a written agreement to construct a building. The completed building was made available to the recipient of the supply after 1 July 2000. The construction of the building is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 , and a supply to which section 19 of the GST Transition Act applies. The price of the supply is set out in the written agreement to be $110,000. The entity determined, as at 1 July 2000, the value of all the work and materials permanently incorporated in or affixed on the site of the building work, to be $88,000. This valuation met the requirements of subsections 19(2) and 19(4) of the GST Transition Act.", "Reasons_for_Decision": "Summary: Subsection 19(3) of the GST Transition Act provides that GST is only payable on the supply to the extent that the price of the supply (less the amount of any GST payable on the supply) exceeds the value determined under subsection 19(2) of the GST Transition Act. This can be expressed as a formula: GST payable = 10% ((Price of the supply - GST payable) - value) This formula can be restated as: GST payable = 1/11 * (Price of the supply - value) Therefore, if the price of the entity's supply is $110,000 and the value is $88,000, the GST payable is calculated as follows: 1/11 * ($110,000 - $88,000) = $2,000 GST payable = 10% * $110,000 - $88,000 = $2,200", "Date_of_Decision": "25 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST transitional issues Special transitional rules", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004833", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/14 | Keywords Goods and services tax GST property & construction GST transitional issues Special transitional rules"}
{"ATO_ID_Number": "ATO ID 2002/235", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and time of supply of goods manufactured before 1 July 2000", "Issue": "Did the entity, a manufacturer of goods, make a supply before 1 July 2000 as determined by subsection 6(2) of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act), when it manufactured goods for a customer and made them available for collection before 1 July 2000, even though the customer neither collected nor paid for the goods before 1 July 2000?", "Decision": "Yes, the entity made a supply before 1 July 2000 as determined by subsection 6(2) of the Transition Act when it manufactured goods for a customer and made them available for collection before 1 July 2000, even though the customer neither collected nor paid for the goods before 1 July 2000.", "Facts": "The entity is a manufacturer of goods. The entity reached a verbal agreement with a customer for goods to be manufactured and supplied. The entity manufactured the goods, invoiced the customer for the goods, and made the goods available to its customer for collection, all before 1 July 2000. Property in the goods also passed to the customer prior to 1 July 2000. However, as at 1 July 2000, the customer had neither collected nor paid for the goods. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 6 of the Transition Act sets out how to determine when a supply is made for the purposes of that Act. Under subsection 6(2) of the Transition Act, a supply of goods is made: The word 'removed' is not defined in the Transition Act. Therefore, it is appropriate to examine the ordinary meaning of this term. The Macquarie Dictionary (1997) defines 'remove' to mean: '1. to move from a place or position; take away; take off ... 2. to move or shift to another place or position ... 5. to take, withdraw, or separate (from) ... 8. to move from one place to another, especially to another locality or residence...' Based on the ordinary meaning of the word 'removed', it is considered that this term in subsection 6(2) of the Transition Act refers to a physical removal of goods from the supplier's possession. The phrase 'not to be removed' in paragraph 6(2)(b) of the Transition Act is capable of two interpretations - whether the goods are never to be removed or whether the goods are not to be removed immediately . In relation to the interpretation of legislation, Lord Wensleydale in Grey v Pearson (1857) 6 HLC 61 at 106, stated that: '... the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid the absurdity and inconsistency, but no farther.' Interpreting the phrase 'not to be removed' to mean that the goods are never to be removed (the literal interpretation), would leave a gap in the transitional 'time of supply' rules for goods that are not removed immediately but physically remain in the supplier's possession for a period of time until the goods are collected by or delivered to the recipient. For example, as part of a contract for the sale of goods, title passes to the purchaser when the goods are paid for on 29 June 2000. The goods are available for collection at the time of payment, but the purchaser does not collect the goods from the supplier's premises until 2 July 2000. In this example, the goods are made available to the purchaser before 1 July 2000, but are not removed from the supplier's possession until after 1 July 2000. If paragraph 6(2)(b) of the Transition Act was interpreted to refer only to goods that are never to be removed, this paragraph would not apply to the above example. Therefore, under paragraph 6(2)(a) of the Transition Act, the supply of the goods would be made when the goods were removed, on 2 July 2000. Under this interpretation, the supply would be subject to GST although the goods are also subject to wholesale sales tax. However, under section 16 of the Transition Act, the supplier would not be entitled to a special GST credit for any sales tax incurred on acquiring those goods, as the goods have already been sold on 29 June 2000 and therefore would not have been on hand for the purposes of sale at the start of 1 July 2000. The double taxation that arises from this interpretation is inconsistent with the object or purpose of the Transition Act and leads to the conclusion that the legislature could not have intended such an interpretation. Therefore, it is considered that the phrase 'not to be removed' in paragraph 6(2)(b) of the Transition Act refers to circumstances where the goods are not to be removed immediately. Under paragraph 6(2)(b) of the Transition Act, if the goods are not to be removed immediately, the time of supply of the goods is when the goods are made available to the recipient. In relation to the sale of goods, when the goods are made available to the purchaser will depend on the terms of the particular contract for the sale of the goods. Relevant factors to consider will include when property in the goods passes to the purchaser, when the purchaser has the power to dispose of the goods or to direct how the goods are to be dealt with, conditions under which deposits are paid or consideration is provided, conditions requiring something further to be done (or not done) in relation to the goods and any other conditions of sale. In this case, the entity completed the manufacturing of the goods for its customer before 1 July 2000. The goods were not removed immediately but were made available to the customer for collection at the time that the manufacturing of the goods was completed. Although the customer neither collected nor paid for the goods before 1 July 2000, as the goods were made available for collection before 1 July 2000, the time of supply under paragraph 6(2)(b) of the Transition Act is before 1 July 2000. Therefore, the entity made a supply before 1 July 2000 as determined by subsection 6(2) of the Transition Act when it manufactured goods for its customer and made them available for collection before 1 July 2000, even though the customer neither collected nor paid for the goods before 1 July 2000.", "Date_of_Decision": "24 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax Transition) Act 1999 section 6 subsection 6(2) paragraph 6(2)(a) paragraph 6(2)(b) section 7", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST supplies & acquisitions GST supply GST transitional issues Time of supply/acquisition", "Case_References": "Grey v Pearson (1857) 6 HLC 61 at 106", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002235", "Unmatched_Content": "Keywords Goods & services tax GST supplies & acquisitions GST supply GST transitional issues Time of supply/acquisition"}
{"ATO_ID_Number": "ATO ID 2002/264", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and modification of coin-operated devices", "Issue": "Is the entity, the owner and operator of coin-operated devices, eligible to make an election under section 24C of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act) to treat supplies made from its coin-operated devices as input taxed supplies, when it modifies the coin-acceptor mechanism of its coin-operated devices from accepting multiple denominations of coin to accepting $1 coins only?", "Decision": "No, the entity is not eligible to make an election under section 24C of the Transition Act to treat supplies made from its coin-operated devices as input taxed supplies, when it modifies the coin-acceptor mechanism of its coin-operated devices from accepting multiple denominations of coin to accepting $1 coins only.", "Facts": "The entity is the owner and operator of coin-operated devices which make supplies of tangible personal property and services. The maximum consideration for the supplies from the coin-operated devices is $1. Up to and including 1 July 2000, the coin-operated devices accepted multiple denominations of coin and did not give change. After 1 July 2000, the entity modified the coin-acceptor mechanism of its coin-operated devices to accept $1 coins only. The supplies from the coin-operated devices are not gambling supplies. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 24C of the Transition Act allows an entity to make an election to treat certain supplies from coin-operated devices as input taxed supplies. This transitional measure only applies to supplies made on or after 1 July 2000 but before 1 July 2005. Subsection 24C(1) of the Transition Act provides that a supply of tangible personal property or a service from a mechanical coin-operated device is input taxed if: The entity's coin-operated devices make supplies of tangible personal property and services. These supplies are not gambling supplies. The devices were operating on 1 July 2000 and the supplies are being made before 1 July 2005. Since being modified, the devices only accept one denomination of coin. However, as at 1 July 2000 (prior to modification) the devices accepted more than one denomination of coin. The maximum consideration for the supplies from the coin-operated devices is $1. The coin-operated devices do not give change. Section 24C of the Transition Act is not clear as to whether the concession applies to devices that did not satisfy paragraph 24C(1)(b) of the Transition Act as at 1 July 2000 but which were subsequently modified to accept only one denomination of coin after 1 July 2000. Subparagraph 15AB(1)(b)(i) of the Acts Interpretation Act 1901 provides that consideration may be given to material not forming part of the Act to determine the meaning of a provision when the provision is ambiguous or obscure. Any explanatory memorandum relating to the Bill containing the provision or any relevant report of a committee of the Parliament or of either House of the Parliament before the time when the provision was enacted, are extrinsic materials that may be considered for this purpose (paragraphs 15AB(2)(e) and (c) of the Acts Interpretation Act). Paragraph 1.21 of the Explanatory Memorandum relating to the Taxation Laws Amendment Bill (No. 8) 2000 (EM) states that '...The concession is designed to allow operators of coin-operated devices further time to convert the device to accept a wider range of coins or payment options.' Furthermore, paragraph 1.56 of the Senate Economics Legislation Committee (SELC) report states: 'Presently some coin-operated devices take only certain denominations of coins. These machines cannot be easily or quickly converted to allow them to take other denominations of coins, thus the machines cannot immediately be adapted to take account of the GST. The Bill recognises this and allows supplies from some, and only some, coin-operated machines to be input taxed, thus effectively allowing more time for businesses to adapt their machines...' The EM together with the SELC report confirm that the purpose of the concession in section 24C of the Transition Act was to allow operators of coin-operated devices that accept only one denomination of coin, additional time to convert those devices to accept a wider range of coins. The concession was not intended to apply to operators who had coin-operated devices that accepted multiple denominations of coins as at 1 July 2000, but who subsequently modified these devices to accept only one denomination in order to take advantage of the concession. Therefore, it is considered that the concession in section 24C of the Transition Act only applies if the requirement in paragraph 24C(1)(b) of the Transition Act was satisfied as at 1 July 2000. In this case, as at 1 July 2000, the coin-operated devices did not meet the requirement in paragraph 24C(1)(b) of the Transition Act because at that time, the devices accepted multiple denominations of coins. As such, the entity is not eligible to make an election under section 24C of the Transition Act to treat supplies made from its coin-operated devices as input taxed supplies.", "Date_of_Decision": "14 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax Transition) Act 1999 section 24C subsection 24C(1) paragraph 24C(1)(a) paragraph 24C(1)(b) paragraph 24C(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST transitional issues Special transitional rules", "Case_References": "", "Other_References": "Explanatory Memorandum relating to the Taxation Laws Amendment Bill (No. 8) 2000 paragraph 1.21 Senate Economics Legislation Committee paragraph 1.56", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002264", "Unmatched_Content": "Keywords Goods & services tax GST transitional issues Special transitional rules"}
{"ATO_ID_Number": "ATO ID 2002/267", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and concrete pumping equipment attached to truck - transitional provisions", "Issue": "Is concrete pumping equipment, purchased separately and then affixed to the back of a truck, a 'body for a motor vehicle' for the purposes of paragraph 20(1)(c) of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act)?", "Decision": "No, the concrete pumping equipment, purchased separately and then affixed to the back of a truck, is not a 'body for a motor vehicle' for the purposes of paragraph 20(1)(c) of the GST Transition Act.", "Facts": "The concrete pumping equipment consists of 3 parts: a pumping unit, a hose and a hopper. On a job site, concrete is poured from another truck into the hopper and then pumped from the hopper to the place where the concrete is needed. During the pumping operation, there are legs that are used to stabilise the operations. The pumping equipment was purchased separately, and then affixed to a truck. The pumping equipment is not used to transport any concrete or anything else.", "Reasons_for_Decision": "Summary: Section 20 of the GST Transition Act deals with the phasing in of input tax credits for motor vehicles etc. Paragraph 20(1)(c) of the GST Transition Act provides that section 20 of the GST Transition Act applies to the acquisition by way of purchase (including hire purchase), or importation, of a 'body for a motor vehicle, including an insulated body, tank-body, or other body designed for transporting goods of particular kinds.' A truck is a motor vehicle. Therefore, it needs to be determined whether the concrete pumping equipment is a body for the truck. The term 'body' is not defined in the GST Act and therefore must be given its ordinary meaning. The Macquarie Dictionary (1997) defines 'body' to mean, amongst other things, 'a vehicle minus wheels and other appendages'. The concrete pumping equipment is purchased and mounted onto an existing truck. The truck, without the concrete pumping equipment, is a complete vehicle consisting of a body, wheels, engine and attachments. The concrete pumping equipment is designed and built as specialised building and construction equipment. It has a specialised purpose, which is to be used on a worksite to pump ready-mix concrete from a hopper to the place where it is needed. This is distinct from the purpose of loading /carrying goods for transport on roads. It is separate and removable equipment that is mounted onto the truck as distinct from being fully integrated as part of the whole truck. The truck is used to transport the pumping equipment from site to site. Therefore, the concrete pumping equipment is not a 'body for a motor vehicle' for the purposes of paragraph 20(1)(c) of the GST Transition Act.", "Date_of_Decision": "7 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST transitional issues Special transitional rules GST supplies and acquisitions Creditable acquisition", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002267", "Unmatched_Content": "Keywords Goods & services tax GST transitional issues Special transitional rules GST supplies and acquisitions Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2002/1056", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and input tax credits for a new pneumatic bulk road tanker acquired before 23 May 2001", "Issue": "Is the entity, a business operator, entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires a new pneumatic bulk road tanker before 23 May 2001?", "Decision": "No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act when it acquires a new pneumatic bulk road tanker before 23 May 2001.", "Facts": "The entity is a business operator. The entity acquires a new pneumatic bulk road tanker ('tanker') before 23 May 2001. The entity is registered for goods and services tax (GST). The tanker attaches to a prime mover but is not fixed to the prime mover. It is an item of mobile plant and not a self-propelled item. It is not designed to be towed by a car. The purchase of the tanker is a creditable acquisition in accordance with section 11-5 of the GST Act. The acquisition of the tanker would have been taxable under the sales tax law if sales tax had not been ended by the A New Tax System (End of Sales Tax) Act 1999 .", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. The entity is making a creditable acquisition in accordance with section 11-5 of the GST Act. However, section 20 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act) contains special transitional rules relating to the phasing in of input tax credits for new motor vehicles, certain trailers and bodies for motor vehicles. Under subsection 20(2) of the GST Transition Act, an entity is not entitled to an input tax credit if the acquisition or importation is made before 23 May 2001. Paragraph 20(1)(b) of the GST Transition Act provides that section 20 of the GST Transition Act applies to the acquisition of a new detachable trailer designed to be towed by a prime mover of a kind prescribed in the regulations. Regulation 6 of the A New Tax System (Goods and Services Tax Transition) Regulations 2000, states that for paragraph 20(1)(b) of the GST Transition Act, any kind of detachable trailer designed to be towed by a prime mover (except a kind of detachable trailer designed to be towed by a car and commonly used for private or domestic purposes) is prescribed. Examples of detachable trailers that are designed to be towed by a car and are commonly used for private or domestic purposes are box trailers, horse floats and caravans. The tanker attaches to a prime mover but is not fixed to the prime mover and is not designed to be towed by a car. This means that paragraph 20(1)(b) is satisfied and section 20 of the GST Transition Act does apply to the acquisition of a new pneumatic bulk road tanker. Therefore, the entity is not entitled to an input tax credit under section 11-20 of the GST Act when it acquires a new pneumatic bulk road tanker before 23 May 2001.", "Date_of_Decision": "27 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 section 11-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions Creditable acquisition GST transitional issues Special transitional rules", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021056", "Unmatched_Content": "Keywords Goods and services tax GST supplies & acquisitions Creditable acquisition GST transitional issues Special transitional rules"}
{"ATO_ID_Number": "ATO ID 2002/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of a GST branch", "Issue": "Can the entity, an events management organisation, have each event that it manages registered as a GST branch under subsection 54-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entity cannot have each event that it manages registered as a GST branch under subsection 54-5(1) of the GST Act.", "Facts": "The entity is an events management organisation. The entity manages events and conferences for various organisations and associations. The organisation of each separate event occurs at the one location, which is the entity's main business premises. Each event or conference takes place at a separate venue, and is run independently. For each event, the entity supplies its services to a new customer. The entity maintains an individual and independent set of financial accounts and records, and operates a separate bank account with its own set of signatories for each event. The signatories for any one account cannot transact for any other account. The entity is registered for goods and services tax (GST). The entity applies in the approved form, for the registration of each event (branch).", "Reasons_for_Decision": "Summary: Subsection 54-5(1) of the GST Act provides that the Commissioner must register a branch of a registered entity as a GST branch if the entity makes an application in the approved form; and the Commissioner is satisfied that: The entity is registered for GST and has applied in the approved form. Therefore, it needs to be determined whether each branch maintains a separate independent system of accounting and can be separately identified by reference to the nature of the activities carried on through the branch or the location of the branch. The entity maintains an individual and independent set of financial accounts and records and operates a separate bank account with its own set of signatories for each event (branch). Therefore, it is considered that each event (branch) maintains an independent system of accounting. Next it needs to be determined whether the activities carried on by the entity are separately identifiable. In this case, the entity's enterprise consists of only managing various events. These events may be different from each other and may be conducted in different locations, independently of each other. However, this does not depart from the fact that the entity's enterprise consists of a single type of activity, which is that of managing events. Therefore, it is considered that the activities are not separately identifiable by reference to their nature. Therefore, it is not possible for the entity to have a GST branch unless the branch carries on the activity of managing events from a different location. The fact that each event is conducted at its own unique venue does not mean that the entity has multiple branches that are separately identifiable by reference to their locations. Each venue is merely the location where the individual event is held. It is considered that the location from which the entity carries on its activity of event management is its main business premises, despite the fact that each individual event may be held at a separate location. As such, none of the entity's 'branches' are separately identifiable by reference to either the nature of the activities carried on through the branch or the location of the branch. Therefore, the entity can not register each of its events as GST branches as all of the requirements in subsection 54-5(1) of the GST Act are not satisfied.", "Date_of_Decision": "5 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 54-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST special rules GST branches", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200216", "Unmatched_Content": "Keywords Goods & services tax GST special rules GST branches"}
{"ATO_ID_Number": "ATO ID 2003/997", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and child care: funded outside school hours care and vacation care services", "Issue": "Is the entity, a child care provider that is eligible to receive funding from the Commonwealth, making a GST-free supply under subdivision 38-D of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies extra activities as part of its outside school hours care and vacation care services and charges an additional fee for those activities?", "Decision": "Yes, the entity is making a GST-free supply under subdivision 38-D of the GST Act, when it supplies extra activities as part of its outside school hours care and vacation care services and charges an additional fee for those activities. The supply of the extra activities is GST-free under section 38-155 of the GST Act and the supply of the outside school hours care and vacation care services is GST-free under section 38-150 of the GST Act.", "Facts": "The entity is an organisation registered for goods and services tax (GST). The entity is supplying child care. The entity supplies centre-based child care of outside school hours and vacation care services for which the entity is eligible for Commonwealth funding in respect of that kind of care. The supplies of centre-based child care of outside school hours and vacation care services is of a kind specified in a determination made by the Child Care Minister made for the purposes of subsection 38-150(2) of the GST Act. The entity's outside school hours care service provides recreational programs and activities as well as time for rest and homework. The entity cares for primary school children before and/or after school and/or on 'pupil free' days. The entity's vacation care service provides care and creative indoor and outdoor activities during the school holidays for primary school children. As part of its outside school hours and vacation care service, the entity provides extra activities for the children, for example dancing as part of regularly scheduled 'activity days' and on an ad hoc basis. The entity charges an additional fee, for these extra activities, on top of the normal daily fee. The entity does not offer the extra activities to any child who is not concurrently receiving centre-based child care of outside school hours or vacation care services from the entity. The entity operates in accordance with the child care licensing requirements of the State or Territory in which the child care is supplied.", "Reasons_for_Decision": "Summary: Section 38-150 of the GST Act states: A reference to the Child Care Minister is a reference to the Minister administering the Child Care Act 1972 and the family assistance law (within the meaning of section 3 of the A New Tax System (Family Assistance) (Administration) Act 1999 . The entity is supplying centre-based child care of outside school hours and vacation care services. The entity is eligible for Commonwealth funding in respect of the child care supplied and the child care supplied is of a kind specified in the Child Care Minister's Determination. Therefore, as the entity's supply of child care satisfies the requirements of section 38-150 of the GST Act, it is GST-free. However, the entity also provides extra activities as part of regularly scheduled 'activity days' and on an ad hoc basis. Section 38-155 of the GST Act states: A supply is GST-free if it is a supply that is directly related to a supply of child care that is: (a) GST-free because of section 38-145 or 38-150; and (b) supplied by, or on behalf of, the supplier of the child care. The extra activities are directly related to a supply of child care as they are offered as part of the entity's supply of the outside school hours care service and its vacation care service. As the entity's supply of child care is GST-free under section 38-150 of the GST Act and the extra activities are directly related to that child care, the supply by, or on behalf of, the entity of the extra activities is GST-free under section 38-155 of the GST Act. Accordingly, the entity is making a GST-free supply under subdivision 38-D of the GST Act, when it supplies extra activities as part of its outside school hours care and vacation care services and charges an additional fee for those activities.", "Date_of_Decision": "25 January 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subdivision 38-D section 38-150 section 38-155", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST child care Other child care", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003997", "Unmatched_Content": "This ATO ID has been amended to reflect the legislative amendments to section 38-150 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as a result of the Family Assistance Legislation Amendment (Jobs for Family Child Care Package) Act 2017 that introduced the child care subsidy. As a result, the new section 38-150 Act was inserted in the GST Act from 5 April 2017. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updates to the wording throughout the 'Facts' section. | Updates to the wording throughout the 'Reason for Decision' section. | Keywords Goods and services tax GST free GST child care Other child care"}
{"ATO_ID_Number": "ATO ID 2012/54", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Supplies of things being used in an enterprise that are not necessary for the continued operation of that enterprise, and which do not form part of the 'supply of a going concern'", "Issue": "Can an entity supply a thing that is being utilised in its business, but which is not necessary for the continued operation of that business, independently of the arrangement referred to in subsection 38-325(2) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), under which the entity's business is sold to the same recipient as a GST-free going concern?", "Decision": "Yes, an entity can supply something that is being utilised in its enterprise, which is not necessary for the continued operation of the enterprise, independently of the arrangement referred to in subsection 38-325(2) of the GST Act ('the arrangement'), under which the entity's business is sold to the same recipient as a GST-free going concern. A thing is considered to be supplied independently of the arrangement if:", "Facts": "The entity is a company that is operating a business. The entity occupies the premises from which the business operates under a lease granted by the owner of the premises; a fully owned subsidiary of the entity. The entity owns a residence on an adjoining lot, which is being utilised in the enterprise by a manager of the business who resides in the premises, as part of his employment contract, under a residential tenancy agreement with the entity. The entity arranges to sell its business to a purchaser. Amongst other things, the agreement for sale of the business provides that the entity will supply to the recipient all of the things necessary for the continued operation of the business, including: The agreement for sale of the business also incorporates a tripartite arrangement with the entity's wholly owned subsidiary, whereby the subsidiary (the landlord) agrees that the benefits of covenants under the lease of the business premises will be assigned to the purchaser of the business. Under a separate agreement, that is not expressed to be dependent upon the business sale agreement, the entity also sells the residence located on the adjoining block and the shares in its wholly owned subsidiary to the purchaser of the business. The business enterprise is operated until the day of supply. The conditions listed in paragraphs 38-325(1)(a) and 38-325(1)(b) of the GST Act are satisfied. The entity and the purchaser have agreed in writing that the sale of the business pursuant to the business sale agreement, is a supply of a going concern. There are no other written agreements relating to, or dependant on, the sale of the entity's business as a GST-free going concern.", "Reasons_for_Decision": "Summary: Section 38-325 of the GST Act provides that a supply of an enterprise will be GST-free if certain conditions are met. Subsection 38-325(1) of the GST Act lists the conditions for a supply of a going concern to be GST-free. Subsection 38-325(2) of the GST Act defines the term 'supply of a going concern' as: Subsection 38-325(2) of the GST Act requires that under an arrangement, the supplier supplies all things that are necessary for the continued operation of an enterprise (the term 'thing' is defined in section 195-1 of the GST Act as anything that can be supplied or imported). Paragraph 166 of Goods and Services Tax Ruling GSTR 2002 / 5 : when is a ' supply of a going concern' GST-free ? (GSTR 2002/5) states that the supply under an arrangement of a going concern may include those things which, while not essential to the continued operation of the business, are utilised in the enterprise carried on by the supplier until the day of the supply. Paragraph 168 of the same ruling states that supplies which are not made under the relevant arrangement will not form part of the 'supply of a going concern' and will not be GST-free under subsection 38-325(1) of the GST Act. The entity's supply of its business pursuant to the business sale agreement is a 'supply of a going concern' under subsection 38-325(2) of the GST Act. As the requirements of subsection 38-325(1) of the GST Act are satisfied, the entity's supply of the going concern will be GST-free. The entity's supplies of the residence and the shares in its subsidiary under a separate, independent agreement do not form part of the arrangement for the purposes of subsection 38-325(2) of the GST Act and are not part of the entity's supply of the GST-free going concern. That is, the supply of the residence and the shares are separate to, and excluded from, the entity's supply of the GST-free going concern under section 38-325 of the GST Act.", "Date_of_Decision": "8 June 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1 Division 38 Subdivision 38J section 38-325 subsection 38-325(1) paragraph 38-325(1)(a) paragraph 38-325(1)(b) paragraph 38-325(1)(c) subsection 38-325(2)", "Related_Public_Rulings_and_Determinations": "GSTR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST-free GST-free supply of a going concern", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201254", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2002/5 | Keywords Goods & services tax GST-free GST-free supply of a going concern"}
{"ATO_ID_Number": "ATO ID 2005/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of farm land that is also part of a GST-free supply of a going concern", "Issue": "Is the entity, a vineyard owner and wine seller, making a GST-free supply of farm land under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:", "Decision": "Yes, the entity is making a GST-free supply of farm land under section 38-480 of the GST Act. The combined operation of sections 38-325 and 38-480 of the GST Act has the effect that the entire sale is GST-free.", "Facts": "The entity is a vineyard owner and wine seller that is registered for goods and services tax (GST). The entity is selling farm land consisting of a vineyard, and two residential cottages. The entity is also selling its vineyard business to the same purchaser as a supply of a going concern. The farm land has been used by the entity to carry on its vineyard business for at least five years prior to sale. Even though not all portions of the land are used to carry on a farming business, the essential character of the land is such that it is accepted that the land in its entirety is land on which a farming business has been carried on. The purchaser intends to continue the vineyard business. The land used as the vineyard forms part of the supply of the going concern that is GST-free under section 38-325 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if: The entity has used the farm land to carry on the vineyard business for at least five years before the sale and the purchaser intends to continue the vineyard business. However, as there are two residential cottages on the land, the entity has not directly used all of the land in its farming business. It is recognised that there will be cases where not all of the land is used for farming purposes. For the purposes of section 38-480 of the GST Act, farming must be the predominant activity carried out on the land. In other words, the land must have the essential characteristics of farm land. The other activities cannot be so significant that the land cannot be considered to be farm land. The essential character of the entity's land is such that it is accepted that the land in its entirety is land on which a farming business has been carried on. However, the part of the land that is actually used to carry on the farming business, the vineyard, is part of a GST-free supply of a going concern under section 38-325 of the GST Act. Therefore, it is necessary to consider whether this fact precludes the application of section 38-480 of the GST Act to the farm land in its entirety. There is nothing in the wording of section 38-480 of the GST Act that precludes it operating concurrently with another GST-free provision in the GST Act. In addition, there is no provision in the GST Act that precludes two GST-free provisions from operating concurrently. Accordingly, in appropriate circumstances, a supply may be GST-free under more than one provision of Division 38 of the GST Act. The fact that part of the land used for a vineyard is also GST-free under section 38-325 of the GST Act does not detract from the characterisation of the land for the purpose of section 38-480 of the GST Act. Accordingly, the supply of the land in its entirety, including the residential cottages, is GST-free under section 38-480 of the GST Act.", "Date_of_Decision": "23 September 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 38 section 38-325 section 38-480", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST farm land Farming business GST supply of going concern", "Case_References": "", "Other_References": "Tax Office Primary Production Industry Partnership Issues Register", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200592", "Unmatched_Content": "Keywords Goods and services tax GST free GST farm land Farming business GST supply of going concern"}
{"ATO_ID_Number": "ATO ID 2002/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of commercial premises with an expired lease as a going concern", "Issue": "Is the entity, a landlord, making a GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells commercial premises which are the subject of a monthly periodic tenancy under the terms of an expired lease?", "Decision": "Yes, the entity is making a GST-free supply of a going concern under section 38-325 of the GST Act when it sells commercial premises which are the subject of a monthly periodic tenancy under the terms of an expired lease.", "Facts": "The entity is a landlord that owns commercial premises which it leases to a tenant. The lease with the tenant has expired but the tenant is still occupying the premises pursuant to a monthly periodic tenancy. This monthly periodic tenancy allows the tenant to continue in possession until either party provides one month's notice to vacate. The entity is in the process of selling the tenanted commercial premises to a third party (the purchaser). The sale is for consideration and the entity and the purchaser have agreed in writing that the supply of the commercial premises is the supply of a going concern. In addition, the entity intends to carry on the enterprise of leasing until the day of the supply. Both the entity and the purchaser are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: The 'supply of a going concern' is GST-free where the requirements of section 38-325 of the GST Act are met. Subsection 38-325(2) of the GST Act states that a 'supply of a going concern' is a supply under an arrangement under which: Providing the entity carries on the enterprise of leasing until the day of the supply, it remains to be determined whether the supply is under an arrangement under which the entity supplies all of the things that are necessary for the continued operation of the enterprise (paragraph 38-325(2)(a) of the GST Act). Goods and Services Tax Ruling GSTR 2002/5 - Goods and services tax: when is a 'supply of a going concern' GST- free? considers the meaning of the phrase 'all of the things that are necessary for the continued operation of an enterprise'. In particular, paragraph 71 of GSTR 2002/5 states: '80 The supplier supplies all of the things that are necessary for the continued operation of an enterprise when the supplier supplies those things which will put the recipient in a position to carry on the enterprise, if it chooses.' (This statement also appeared in paragraph 71 of GSTR 2001/5, which was withdrawn and replaced by GSTR 2002/5 with effect from 16 October 2002.) For the continued operation of the enterprise of leasing commercial premises, it is necessary to supply the premises together with the existing lease agreements. For the sale to be the supply of a going concern, the supplier must assign all existing lease agreements to the purchaser so that the purchaser can continue the leasing enterprise without any disruption. In this case, the lease with the tenant has expired and the tenant is occupying the commercial premises on a monthly periodic tenancy. Paragraphs 65 and 66 of GSTR 2002/5 consider if a period tenancy under the terms of an expired lease can be assigned. These paragraphs state: 65. However, if upon expiration of a lease, the tenant is allowed to continue in possession pursuant to a short term periodic tenancy, the new periodic tenancy may be capable of assignment. A periodic tenancy means that the tenant pays rent to the landlord with reference to a period and therefore has a legally enforceable right to occupy the premises for a period. 66. The law of the States and Territories may prescribe certain requirements which will have to be met in respect of the creation or assignment pf such tenancies. A supplier who occupies premises under a periodic tenancy therefore can supply the right to occupy the premises to a recipient and would not be precluded from making a supply of a going concern in circumstances where the premises were a thing necessary for the continued operation of the relevant enterprise. (A similar explanation appeared in paragraph 63 of GSTR 2001/5, which was withdrawn and replaced by GSTR 2002/5 with effect from 16 October 2002.) Paragraph 66 deals with the situation whereby the supplier is the lessee of premises occupied under a periodic tenancy. However, it is considered that the principle in paragraph 66 applies equally to the situation where the supplier is the lessor of commercial premises which it owns. Therefore, a supplier who leases premises to a tenant under a periodic tenancy, is able to supply the property subject to a periodic tenancy to another party. As the entity is supplying the commercial premises subject to the monthly periodic tenancy, the purchaser will be able to continue the enterprise of leasing if it chooses. Therefore, the entity is supplying to the purchaser all of the things necessary for the continued operation of an enterprise under paragraph 38-325(2)(a) of the GST Act. As such, the entity is making a supply of a going concern under subsection 38-325(2) of the GST Act. Subsection 38-325(1) of the GST Act provides that a 'supply of a going concern' is GST-free if: In this case, the supply of the commercial premises is for consideration, the purchaser is registered for GST and the entity and the purchaser have agreed in writing that the supply is of a going concern. As such, the requirements in subsection 38-325(1) of the GST Act are satisfied. Therefore, the entity is making a GST-free supply of a going concern under section 38-325 of the GST Act when it sells commercial premises which are the subject of a monthly periodic tenancy under the terms of an expired lease.", "Date_of_Decision": "7 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-325 subsection 38-325(1) subsection 38-325(2) paragraph 38-325(2)(a)", "Related_Public_Rulings_and_Determinations": "GSTR 2001/5 | GSTR 2001/5W | GSTR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST supply of going concern", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20027", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2001/5 GSTR 2001/5W GSTR 2002/5 | Keywords Goods & services tax GST free GST supply of going concern"}
{"ATO_ID_Number": "ATO ID 2002/237", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of a going concern where the trading name is not sold but is licensed to the purchaser", "Issue": "Is the entity, a business operator, making a GST-free supply of a going concern under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells all things necessary for the continued operation of its business except for the trading name, which it licenses to the purchaser?", "Decision": "Yes, the entity is making a GST-free supply of a going concern under section 38-325 of the GST Act when it sells all things necessary for the continued operation of its business except for the trading name, which it licenses to the purchaser.", "Facts": "The entity is a business operator. The entity enters into an arrangement with a purchaser under which it sells its business to the purchaser except for the trading name of the business. The trading name is licensed to the purchaser for a specified period of time under a separate contract commencing on settlement. The trading name is a crucial part of the business The sale and the licence are for consideration. The entity and the purchaser have agreed in writing that the supply of the business is the supply of a going concern. In addition, the entity carries on the business until the day of the supply. The purchaser is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: The 'supply of a going concern' is GST-free where the requirements of section 38-325 of the GST Act are met. Subsection 38-325(2) of the GST Act provides that a 'supply of a going concern' is a supply under an arrangement under which: Paragraph 19 of Goods and Services Tax Ruling GSTR 2002/5 Goods and services tax: when is a 'supply of a going concern' GST-free states: The term 'supply under an arrangement' includes a supply under a single contract or supplies under multiple contracts which comprise a single arrangement. Therefore, an entity may supply a going concern under more than one contract provided that all of the contracts are part of the one arrangement. The entity has entered into two separate contracts, one for the sale of the business and one for licensing the trading name. The two contracts comprise a single arrangement. As the entity carries on the business until the day of the supply, it remains to be determined whether under the arrangement, the supplier supplies to the recipient all of the things that are necessary for the continued operation of the enterprise. The meaning of the phrase 'all of the things that are necessary for the continued operation of an enterprise' is explained in GSTR 2002/5. Paragraph 80 of GSTR 2002/5 states: The supplier supplies all of the things that are necessary for the continued operation of an enterprise when the supplier supplies those things which will put the recipient in a position to carry on the enterprise, if it chooses. The entity's enterprise is a business operating under a trading name. In light of the nature of the enterprise and the core attributes of that enterprise the trading name is one of the things that are necessary for the continued operation of the identified enterprise. Paragraph 38-325(2)(a) of the GST Act requires that all things necessary for the continued operation of the enterprise be supplied to the purchaser. The definition of the term 'supply' in section 9-10 of the GST Act includes 'a creation, grant, transfer, assignment or surrender of any right'. A licence to use a trading name is a grant of a right for the purposes of the definition. Therefore, for the purposes of paragraph 38 325(2)(a) of the GST Act an entity supplies the trading name when it grants the purchaser a licence to use it. Paragraph 100 of GSTR 2002/5 states: The supply of all of the things that are necessary for the continued operation of an enterprise may require that the supplier enters into contracts, leases or other things which were not in existence prior to the day of the supply. This will be the case where the supplier retains the ownership of premises from which an enterprise is conducted, but supplies the business structure and possession of the premises by way of lease. In respect of the identified enterprise the supply of all of the things that are necessary for the continued operation of the enterprise requires that the supplier grant the licence to the purchaser to use the trading name. The licence was not in existence prior to the day of the supply. Paragraph 100 of GSTR 2002/5 means that the entity can grant the licence over the trading name to the purchaser on the day of the supply. Accordingly, the entity supplies to the purchaser all of the things necessary for the continued operation of the enterprise. Therefore, the entity makes a supply of a going concern under subsection 38-325(2) of the GST Act. Subsection 38-325(1) of the GST Act provides that a 'supply of a going concern' is GST-free if: The supply of the business and the trading name is for consideration, the purchaser is registered for GST and the entity and the purchaser have agreed in writing that the supply is of a going concern. As such, the requirements in subsection 38-325(1) of the GST Act are satisfied. Therefore, the entity makes a GST-free supply of a going concern under section 38-325 of the GST Act.", "Date_of_Decision": "28 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-325 subsection 38-325(1) subsection 38-325(2) paragraph 38-325(2)(a)", "Related_Public_Rulings_and_Determinations": "GSTR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST free GST supply of a going concern", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002237", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2002/5 | Keywords Goods & services tax GST free GST supply of a going concern"}
{"ATO_ID_Number": "ATO ID 2011/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST: revocation of approval of membership in a GST group of a company that goes into liquidation on or after 4 December 2009", "Issue": "Will the entity, a member of a GST group, have its GST group membership approval revoked by the Commissioner under subsection 48-70(2) of the A New Tax System (Goods and Services) Act 1999 (GST Act) when the entity and no other GST group member goes into liquidation, on or after 4 December 2009, and the representative member of the GST group makes no election under subsection 48-73(1) of the GST Act?", "Decision": "Yes, the entity will have its GST group membership revoked by the Commissioner under subsection 48-70(2) of the GST Act when the entity and no other GST group member goes into liquidation, on or after 4 December 2009, and the representative member of the GST group makes no election under subsection 48-73(1) of the GST Act.", "Facts": "The entity is a member of a GST group. The entity goes into liquidation on or after 4 December 2009 and on a date that is not the first day of the GST group's tax period. The entity is the only member of the GST group that goes into liquidation. The representative member of the GST group does not make an election under subsection 48-73(1) of the GST Act for the tax period of each group member to cease at the same time as the tax period of the group member that goes into liquidation.", "Reasons_for_Decision": "Summary: Under subsection 48-70(2) of the GST Act, the Commissioner must revoke the approval of one of the members of a GST group if satisfied that the member does not satisfy the membership requirements for the GST group. Section 48-10 of the GST Act sets out the membership requirements for GST groups. One of the membership requirements that must be satisfied is that a group member must have the same tax periods applying to it as the tax periods applying to all the other members of the GST group (paragraph 48-10(1)(d) of the GST Act). Effective from 4 December 2009, subsection 27-39(1) of the GST Act provides that where an entity becomes an incapacitated entity (which includes an entity in liquidation), the entity's tax period at the time is taken to have ended at the end of the day before the entity becomes incapacitated. The entity becomes incapacitated, and as such, its tax period at the time is taken to have ended at the end of the day before it becomes incapacitated. Therefore, the entity does not continue to have the same tax periods as the other members of the GST group and does not satisfy the membership requirements for GST groups as set out in section 48-10 of the GST Act. Therefore, the approval of the entity's GST group membership must be revoked under subsection 48-70(2) of the GST Act.", "Date_of_Decision": "17 June 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 27-39(1) section 48-10 paragraph 48-10(1)(d) subsection 48-70(2) paragraph 48-70(1)(b) subsection 48-70(1A) subsection 48-73(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/693 | - for date of effect of revocation | ATO ID 2004/676 | - for liquidations occurring prior to 4 December 2009", "Subject_References": "Goods and services tax GST special rules GST groups", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201130", "Unmatched_Content": "Keywords Goods and services tax GST special rules GST groups"}
{"ATO_ID_Number": "ATO ID 2012/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Intra-group supply when an invoice is issued after recipient leaves a GST group", "Issue": "Does subsection 48-40(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) apply to a supply made from Entity A to Entity B if it is made at a time when they are in the same GST group, but the related invoice is issued when Entity B is no longer a member of the GST group?", "Decision": "Yes, subsection 48-40(2) of the GST Act 1999 applies to Entity A's supply to Entity B such that it is not a taxable supply, as the supply was made at a time when both entities were members of the GST group.", "Facts": "In tax period 1 Entity A and Entity B are both members of the same GST group. Entity A is the representative member of the GST group. In tax period 1 Entity A makes a supply (supply X) to Entity B. At the end of tax period 1, after supply X is made, Entity B ceases to be a member of the GST group. In tax period 2 Entity A issues an invoice to Entity B for supply X. No consideration was received for the supply before the invoice was issued. Entity A and Entity B account for GST on a non-cash basis and have monthly tax periods. But for subsection 48-40(2) of the GST Act 1999 supply X would be a taxable supply. Subparagraphs 48-40(2)(a)(i) of the GST Act 1999 and 48/40(2)(a)(ii) of the GST Act 1999 do not apply to supply X.", "Reasons_for_Decision": "Summary: All legislative references are to the GST Act 1999. Division 48 of the GST Act enables two or more entities to form a GST group provided that certain requirements are satisfied. In accordance with section 48-1 of the GST Act this allows one member of the GST group to deal with all GST liabilities and entitlements, and (in most cases) exclude intra-group transactions from the GST. Relevantly, subsection 48-40(2) provides that in certain circumstances intra-group supplies are treated as if they are not taxable supplies. Paragraph 48-40(2)(a) states that: Subsection 29-5(1) determines in which tax period GST payable on a taxable supply is to be attributed when a supplier accounts for GST on a non-cash basis, it states: Therefore, but for subsection 48-40(2), supply X would be a taxable supply, so it would follow that attribution of GST payable would occur in tax period 2 as that is when the invoice relating to the supply was issued (as no consideration was received for the supply prior to this time). However, to determine if a potential intra-group supply is to be treated as if it were not a taxable supply the key issue is the interpretation given to the phrase 'supply that an entity makes to another member of the same GST group' in paragraph 48-40(2)(a). Hence it is apparent that both entities need to be members of the relevant GST group at the relevant time - being the time of the supply - for the provision to take effect. It follows that when one of the relevant members either leaves or joins the GST group, there is a need to determine when the supply was made relative to the membership of the group changing. The GST Act is silent on the issue of when a supply is made, although the Act does contain rules (generally in Division 29) which determine the tax period to which any GST payable on the supply is attributable. However while these attribution rules determine when GST is payable they do not address when the supply is made. If a supply is made in a tax period that is different to the tax period in which any GST payable on the supply is to some extent attributed, the timing of attribution does not change the character of the supply, as being taxable or not, nor does it change when the supply occurs. In the case of a supply that is an intra-group supply subsection 48-40(2) treats the supply as if it were not a taxable supply if it is made while both entities are members of the GST group. There is nothing in subsection 48-40(2), nor elsewhere in Division 48, that changes the way the supply is treated if, subsequent to the supply being made, one of the entities leaves the group. The time at which the supply is made and the application of subsection 48-40(2), are not affected by the notion that (if subsection 48-40(2) did not in fact apply) the related GST payable would have been attributed under section 29-5 at a time when Entity B was no longer a member of the GST group. In this instance supply X is made at a time when both Entity A and Entity B are members of the same GST group, therefore subsection 48-40(2) applies to Entity A's intra-group supply to Entity B so that it is not treated as a taxable supply. This is not affected by Entity A subsequently issuing the related invoice when Entity B is no longer a member of the GST Group.", "Date_of_Decision": "30 March 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 29 section 29-5 subsection 29-5(1) Division 48 section 48-1 subsection 48-40(2) paragraph 48-40(2)(a) subparagraph 48-40(2)(a)(i) subparagraph 48-40(2)(a)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/34", "Subject_References": "Goods and services tax Goods and services tax special rules Goods and services tax groups Taxable supply", "Case_References": "", "Other_References": "ATO Guidance: NTLG GST issues register - 5.9 Formation and revocation of GST groups www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201233", "Unmatched_Content": "Keywords Goods and services tax Goods and services tax special rules Goods and services tax groups Taxable supply"}
{"ATO_ID_Number": "ATO ID 2012/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Intra-group supply of services that is partly performed after the recipient leaves the GST group", "Issue": "Does subsection 48-40(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) apply to a supply of services made from Entity A to Entity B, to the extent that the services are performed at a time when they are in the same GST group, despite the fact that some part of the services are performed when Entity B is no longer a member of the GST group?", "Decision": "Yes, subsection 48-40(2) of the GST Act 1999 applies to Entity A's supply of services to Entity B such that it is not a taxable supply, but only to the extent that the supply was performed at a time when both entities were members of the GST group. To the extent that the supply is performed after Entity B leaves the GST group it will be a taxable supply under section 9-5 of the GST Act 1999.", "Facts": "In tax period 1 Entity A and Entity B are both members of the same GST group. In tax period 1 Entity A enters into an agreement to make a supply of services to Entity B. The services will be performed over the course of tax period 1 and tax period 2. At the end of tax period 1, Entity B ceases to be a member of the GST Group. As previously agreed Entity A continues to supply the services to Entity B. In tax period 2 the supply of services is completed. But for subsection 48-40(2) of the GST Act 1999 the supply of services would be a taxable supply. Subparagraphs 48-40(2)(a)(i) of the GST Act 1999 and 48-40(2)(a)(ii) of the GST Act 1999 do not apply to the supply of services.", "Reasons_for_Decision": "Summary: All legislative references are to the GST Act 1999. Division 48 enables two or more entities to form a GST group provided that certain requirements are satisfied. Section 48-1 indicates that the purpose of Division 48 is to allow one member of the GST group to deal with all GST liabilities and entitlements, and (in most cases) exclude intra-group transactions from the GST. Relevantly, subsection 48-40(2) provides that in certain circumstances intra-group supplies are treated as if they are not taxable supplies. Paragraph 48-40(2)(a) states that: To determine if a potential intra-group supply is to be treated as if it were not a taxable supply the key issue is the interpretation given to the phrase 'supply that an entity makes to another member of the same GST group' in paragraph 48-40(2)(a). Hence it is apparent that both entities need to be members of the relevant GST group at the relevant time - being the time of the supply - for the provision to take effect. It follows that when one of the relevant members either leaves or joins the GST group, there is a need to determine when the supply was made relative to the membership of the GST group changing. If the supply was only performed and therefore made when both Entity A and B were members of the GST group, subsection 48-40(2) would apply and the supply would not be treated as a taxable supply. In this instance the supply is a service partly performed in that time period, but continues to be performed after Entity B ceases to be a member of the GST group. The issue is therefore whether the phrase 'A supply that an entity makes to another member of the same GST group' only applies to a supply of services 'to the extent' that the supply is made when both entities are members. At the time immediately following Entity B leaving the GST group, Entity A is still making a supply by continuing to perform the service, however from this point in time there is no longer 'a supply that an entity makes to another member', because Entity B is not 'another member' for the purposes of paragraph 48-40(2)(a). As such, a reasonable interpretation is that to the extent that the supply of services is performed after the recipient ceases to be a member, paragraph 48-40(2)(a) no longer has application to that part of the supply. Paragraph 48-40(2)(a) can be interpreted in this way, despite the absence of the words 'to the extent' in the provision. This is consistent with the approach taken in determining the extent to which a supply is connected with Australia under section 9-25, and therefore the extent to which a supply is a taxable supply under section 9-5. The subsections that make up section 9-25 do not contain the term 'extent to' or another phrase that explicitly contemplates apportioning a supply into parts for the purposes of determining if a part of the supply is connected with Australia. The Commissioner's view, expressed in paragraph 226 of GSTR 2000/31, is that section 9-25 is to be interpreted to allow apportionment of the supply so that '...the supply is connected with Australia to the extent that that part of the supply is connected with Australia'. More specifically paragraph 9-25(5)(b) which is applicable to a supply of services uses similar terminology to paragraph 48-40(2)(a) as it refers to 'the supplier makes the supply...'. The Commissioner's view on paragraph 9-25(5)(b), expressed in paragraph 94 of GSTR 2000/31 is that apportionment on an extent to basis is contemplated under this particular paragraph. This interpretation of section 9-25 is based on the intent of the GST legislation that supplies not being connected with Australia should be outside the GST system (paragraph 226 of GSTR 2000/31). Similarly to the extent that an entity makes supplies to another group member they should benefit from the concession provided in paragraph 48-40(2)(a), as it is consistent with the stated objectives in section 48-1 to '(... in most cases) exclude intra-group transactions from the GST'. The exceptions referred to by the phrase 'in most cases' are those set out in subparagraphs 48-40(2)(a)(i) & 48-40(2)(a)(ii). The supply of services in this case does not fall into one of those exceptions. Therefore, subsection 48-40(2) applies to Entity A's supply of services to Entity B such that it is not a taxable supply, but only to the extent that the supply of services was performed at a time when both entities were members of the GST group. To the extent that the supply of services was performed after the time at which Entity B ceases to be a member of the GST group, the services are a taxable supply made by Entity A, because paragraph 48-40(2)(a) does not apply to this part of the supply.", "Date_of_Decision": "29 March 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-25 paragraph 9-25(5)(b) Division 48 section 48-1 subsection 48-40(2) paragraph 48-40(2)(a) subparagraph 48-40(2)(a)(i) subparagraph 48-40(2)(a)(ii)", "Related_Public_Rulings_and_Determinations": "Goods and Service Tax Ruling GSTR 2000/31", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/33", "Subject_References": "Goods and services tax GST special rules GST groups Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201234", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Service Tax Ruling GSTR 2000/31 | Keywords Goods and services tax GST special rules GST groups Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/201", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two companies", "Issue": "Do the entities, company A and company B, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where:", "Decision": "Yes, company A and company B satisfy the membership requirements of a GST group under section 48-10 of the GST Act as they belong to the same 90% owned group.", "Facts": "Company A and company B are registered for goods and services tax (GST), have the same tax periods and account for GST on the same basis. Company A and company B are not members of any other GST group and have no branches that are registered for GST. The shares in Company B carry with them the right to vote, the right to receive dividends and the right to a distribution of capital. Company A owns 50% of the total shares in Company B and controls the rights attached to those shares. An individual owns the other 50% of the shares in company B as a nominee shareholder for company A. The declaration of trust by the individual stipulates that the individual must vote in respect of its shares as directed by company A and must account to company A for any distribution of dividends or capital. Company A notified the Commissioner, in the approved form, of the formation of a GST group and is nominated in that notice as representative member of the GST group.", "Reasons_for_Decision": "Summary: Section 48-10 of the GST Act sets out the membership requirements of a GST group that an entity must satisfy in order to form a GST group. If the entity is a company, it must: Company A and company B are registered for goods and services tax (GST), have the same tax periods and account for GST on the same basis. Company A and company B are not members of any other GST group and have no branches that are registered GST. Therefore, company A and company B will satisfy the membership requirements of a GST group if they are in the same 90% owned group. Paragraph 190-1(a) the GST Act provides that two companies are members of the same 90% owned group if one of the companies has at least a 90% stake in the other company. Section 190-5 of the GST Act provides that a company (the holding company) has at least a 90% stake in another company (the subsidiary company) if the holding company: The words 'whether directly, or indirectly through one or more interposed companies' do not extend or restrict the opening words. Rather these words are illustrative as to how the control of the voting rights, the right to receive the dividends and a distribution of capital might be achieved. The words do not imply that the requisite controls and rights must be satisfied in the manner mentioned. As such, it is accepted that the controls and rights can be achieved through an interposed entity other than a company. Company A holds 50% of the shares in company B and controls the rights attached to these shares. The remaining 50% of the shares in company B are owned by an individual as a nominee shareholder for company A. The declaration of trust by the individual stipulates that the individual must vote in respect of the shares as directed by company A and must account to company A for any distribution of dividends or capital. Therefore, company A indirectly controls the voting rights and has the right to receive the dividends and any distribution of capital attached to the shares. Company A controls 50% of the rights directly, and 50% indirectly through the interposed entity that is the individual shareholder. As such, company A controls 100% of the voting rights in company B and has the right to receive 100% of the dividends and the distribution of the capital of company B. Therefore, company A and company B are members of the same 90% owned group and satisfy the membership requirements of a GST group under section 48-10 of the GST Act.", "Date_of_Decision": "29 April 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-5 paragraph 48-5(1)(a) section 48-10 Division 54 section 190-5 paragraph 190-1(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST groups GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004201", "Unmatched_Content": "This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010 | Keywords Goods and services tax GST special rules GST groups GST tax periods"}
{"ATO_ID_Number": "ATO ID 2004/445", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of a company and a non-fixed trust from 1 April 2003", "Issue": "Do entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), from 1 April 2003 when:", "Decision": "Yes, entity A and entity B both satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Facts": "Entity A, a company, and entity B, a non-fixed trust, are both registered for goods and services tax (GST). Entity A is a company in which Individual X is the sole shareholder and director. Entity B is a non-fixed trust of which the beneficiaries are Individual X, Individual Y and Individual Z. Individual Y and Individual Z are family members of Individual X. Entity B makes distributions of income and capital only to Individual X, Individual Y and Individual Z. The trustee of entity B is an unrelated company. Entity B does not have any ownership interest in entity A. Individual X, Individual Y and Individual Z are not registered for GST. Entity A and entity B have the same tax periods, account for GST on the same basis, are not members of any other GST group and do not have any branches which are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: The membership requirements for entities to form a GST group are set out in section 48-10 of the GST Act. Some of the requirements apply to all entities. All entities must: Entity A and entity B are registered for GST, have the same tax periods, account for GST on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, these requirements are satisfied by both entities. However, there are additional requirements for both companies and non-fixed trusts that have to be satisfied before a GST group can be approved. | Detailed Reasoning - Additional membership requirements for a company: The additional membership requirements for companies are set out in section 48-10 of the GST Act. Subsection 48-10(3) of the GST Act requires a company in a GST group to satisfy the relationship requirements set out in section 48-15 of the GST Act, where one of the members of the proposed GST group is a non-company entity. Therefore, entity A, the company, must meet the relationship requirements with entity B, the non-fixed trust, set out in subsection 48-15(1) of the GST Act. The relevant relationship requirements of subsection 48-15(1) of the GST Act are set out in paragraph 48-15(1)(e) of the GST Act which provides that a company that is a member of a GST group or a proposed GST group satisfies the relationship requirements if a trust is a member of the GST group or proposed GST group, and distributions of income or capital of the trust are not made except to an entity that is: Entity B, the non-fixed trust, makes distributions of income and capital only to Individual X, Individual Y and Individual Z. Individual X is the only member of entity A, the company, and Individual Y and Individual Z are family members of Individual X. Therefore, as the income and capital distributions of entity B are only made to the member of, or a family member of the member of entity A, entity A will satisfy the relationship requirement in paragraph 48-15(1)(e) of the GST Act if it is a company to which subsection 48-15(1A) of the GST Act applies. Paragraph 48-15(1A)(a) of the GST Act provides that subsection 48-15(1A) of the GST Act applies to a company if the company has only one member. Entity A is a company in which Individual X is the sole shareholder and director. As entity A only has one member, it is a company to which subsection 48-15(1A) of the GST Act applies. Entity A satisfies paragraph 48-15(1)(e) of the GST Act. Consequently, entity A satisfies the relationship requirements with entity B under subsection 48-15(1) of the GST Act. Entity A satisfies the additional membership requirements of a GST group under section 48-10 of the GST Act. | Detailed Reasoning - Additional membership requirements for a non-fixed trust: The additional membership requirements for trusts are set out in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Regulation 48-10.03 of the GST Regulations sets out the additional requirements that must be satisfied for a trust to be a member of a GST group. This regulation was amended with effect from 1 April 2003. Subregulation 48-10.03(1) of the GST Regulations provides that if the GST group does not consist only of fixed trusts, one of the four requirements listed in subregulation 48-10.03(2) of the GST Regulations must be satisfied by the trustee of the trust (candidate trustee) for the trust to be a member of a GST group. Paragraph 48-10.03(2)(b) of the GST Regulations provides that the requirements are satisfied if the candidate trustee distributes any income or capital of the trust only to a beneficiary that is a 'permitted beneficiary'. Entity B makes distributions of income and capital only to Individual X, Individual Y and Individual Z. Accordingly, if Individual X, Individual Y and Individual Z are permitted beneficiaries, then entity B will satisfy the membership requirements. The meaning of 'permitted beneficiary' is set out in subregulations 48-10.03(3), 48-10.03(4) and 48-10.03(5) of the GST Regulations. Subregulation 48-10.03(4) of the GST Regulations provides that for a company that is a member of the GST group, each representative of a shareholder of the company is also a permitted beneficiary if, for a company with 1 shareholder - the beneficiaries of the trust include a representative of the shareholder. Regulation 48-10.01 of the GST Regulations defines 'representative' in relation to an individual shareholder in a company, as the shareholder or a family member of the shareholder. Individual X is the sole shareholder of entity A. Both Individual Y and Individual Z are family members of Individual X. Therefore, Individual X, Individual Y and Individual Z all satisfy the definition of a 'representative' of entity A, for the purposes of regulation 48-10.01 of the GST Regulations. Accordingly, as Individual X, Individual Y and Individual Z are all beneficiaries of entity B, and are also representatives of entity A, they are all a 'permitted beneficiary' for the purposes of subregulation 48-10.03(4) of the GST Regulations. As entity B is distributing income or capital only to beneficiaries that are permitted beneficiaries, subregulation 48-10.03(2) of the GST Regulations is satisfied. Therefore, entity B meets the additional membership requirements to be a member of a GST group under regulation 48-10.03 of the GST Regulations. Entity A and the entity B both satisfy the membership requirements to form a GST group under section 48-10 of the GST Act.", "Date_of_Decision": "23 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subsection 48-10(3) section 48-15 subsection 48-15(1) paragraph 48-15(1)(e) subsection 48-15(1A) paragraph 48-15(1A)(a) Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004445", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST special rules GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/919", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and requirements for a member partnership in a GST group", "Issue": "Does entity D, a partnership, satisfy the regulatory membership requirements of a GST group for the purposes of subparagraph 48-10(1)(a)(ii) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) with any of the partnerships in an existing GST group, where:", "Decision": "Yes, entity D satisfies the regulatory membership requirements of a GST group for the purposes of subparagraph 48-10(1)(a)(ii) of the GST Act with either entity A or entity C.", "Facts": "Entity D consists of two partners: Individual M and Individual Z. Entities A, B and C are partnerships that are members of an existing GST group. Entity A consists of three partners: Individual M, Individual Y and Individual Z. Entity B consists of two partners: Individual Y and Individual Z. Entity C consists of two partners: Family Trust M and Company Z. Family Trust M is a family trust (paragraph 48-10.02(6)(a) of the GST Regulations for the definition of the term 'family trust') of Individual M and Company Z is a family company (paragraph 48-10.02(6)(b) of the GST Regulations for the definition of the term 'family company') of Individual Z. Entity D is a partnership registered for goods and services tax (GST) and has the same tax periods that apply to entities A, B and C. These four entities also account for GST on the same basis. Entity D does not belong to any other GST group and does not have any branches that are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: Section 48-10 of the GST Act sets out the membership requirements of a GST group. In relation to partnerships, each entity must: Entity D is registered for GST, has the same tax periods and accounts on the same basis as the GST group members, is not a member of another GST group and has no branches registered separately for GST. Therefore, entity D will satisfy the membership requirements of section 48-10 of the GST Act, if it satisfies the requirements specified in the GST Regulations. Regulation 48-10.02 of the GST Regulations specifies the requirements that must be satisfied for a partnership to be a member of a GST group. Subregulation 48-10.02(2A) of the GST Regulations states: If the GST group consists only of partnerships: there are no further requirements for one of the partnerships; and each other partnership must satisfy the requirements of subregulation (5). Entities A, B and C met the grouping requirements and had formed a GST group. That is, one of those entities is a member partnership because of the operation of paragraph 48-10.02(2A)(a) of the GST Regulations and the other entities satisfied the application or repeated application of subregulation 48-10.02(5) of the GST Regulations. Entity D must satisfy all of the requirements of subregulation 48-10.02(5) of the GST Regulations to consider grouping with any other partnership. In this regard, the requirements centre on a particular partnership being the partnership on which the relationships are tested - namely the candidate partnership. Generally, any of the partnerships can be regarded as either the member partnership or the candidate partnership. However, in this case it is more appropriate to consider entity D as the candidate partnership. The following tests are applied with entity D as the candidate partnership. This paragraph is satisfied if the member partnership is a member of the group because of either: Entities A, B and C are member partnerships of the GST group because each entity has already satisfied either subregulation 48-10.02(2A) and subparagraph 48-10.02(5)(a)(i) or subparagraph 48-10.02(5)(a)(ii) of the GST Regulations. Therefore paragraph 48-10.02(5)(a) of the GST Regulations is satisfied. This paragraph requires that each partner in the candidate partnership (entity D) is an individual, a family trust of an individual or a family company of an individual. The partners in entity D are two individuals and this requirement is satisfied. To meet this requirement, for each partner in the candidate partnership, there must be a partner in the member partnership that is listed in this provision. In this case, this requirement is met through more than one membership partnership: Entity A As Individuals M and Z (the only partners of entity D) are common to both entity D and entity A, paragraph 48-10.02(5)(c) of the GST Regulations is satisfied through entity A. Entity C Family Trust M is the family trust of Individual M and Company Z is the family company of Individual Z. That is, each of the partners of entity D is represented by an entity of the type listed in paragraph 48-10.02(5)(c) of the GST Regulations as a partner in entity C. Therefore paragraph 48-10.02(5)(c) of the GST Regulations is also satisfied through entity C. The requirement in paragraph 48-10.02(5)(c) of the GST Regulations is not met for entity B because Individual M of entity D is not represented by either of the entity B partners. On this basis, either entity A or entity C could be the member partnership for the purposes of entity D satisfying paragraph 48-10.02(5)(c) of the GST Regulations. Entity B is no longer considered as the member partnership for the reason stated above. To meet this requirement, at least two of the partners in the candidate partnership must satisfy paragraph 48-10.02(5)(c) of the GST Regulations through different partners in the member partnership. That is, the partners in entity D, Individual M and Individual Z, must satisfy paragraph 48-10.02(5)(c) of the GST Regulations through different partners in the member partnership (entity A or entity C). In relation to member partnership entity A: Individual M satisfies this requirement through being a partner in entity A, whereas Individual Z satisfies this through also being a partner in entity A. That is, they have both satisfied this through different partners in entity A. In relation to membership partnership entity C: Individual M satisfies this through Family Trust M, whereas Individual Z satisfies this through Company Z. That is, they have both satisfied this through different partners in entity C. Paragraph 48-10.02(5)(d) of the GST Regulations is satisfied. Therefore, the candidate partnership, entity D, satisfies the requirements of subregulation 48-10.02(5) of the GST Regulations when either entity A or entity C is the member partnership. As such, regulation 48-10.02 of the GST Regulations is satisfied. Entity D fulfils the membership requirements of the GST group under section 48-10 of the GST Act. As it is joining an already established GST group, there is no further need to discuss the other members' satisfaction of their membership requirements.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subparagraph 48-10(1)(a)(ii) Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003919", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/920", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two fixed trusts from 1 April 2003", "Issue": "Do entity A and entity B, both fixed unit trusts, satisfy the regulatory membership requirement of a GST group for the purposes of section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where:", "Decision": "Yes, entity A and entity B satisfy the regulatory membership requirement of a GST group for the purposes of section 48-10 of the GST Act.", "Facts": "Entity A and entity B are fixed unit trusts. The trustee of entity A owns 90% of the issued units in entity B and has the right to receive 90% of any distribution of capital or income by entity B. Neither entity satisfies the requirements of subregulation 48-10.03(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). The entities are registered for Goods and Services Tax (GST), have the same tax periods and account for GST on the same basis. Neither entity belongs to any other GST groups nor do they have any branches that are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: The membership requirements of a GST group are set out in section 48-10 of the GST Act. In relation to trusts, each entity must: Entity A and entity B are registered for GST, have the same tax periods, account on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, the entities will satisfy the membership requirements, if they satisfy the requirements specified in the GST Regulations. Regulation 48-10.03 of the GST Regulations specifies the requirements that must be satisfied for a trust to be a member of a GST group. This regulation was amended with effect from 1 April 2003 to allow GST groups to consist solely of trusts. Paragraph 48-10.03(1)(a) of the GST Regulations provides that if the GST group consists only of fixed trusts, the requirements set out in either subregulation 48-10.03(2) of the GST Regulations or regulation 48-10.03A of the GST Regulations must be satisfied. Neither of the entities satisfy the requirements of subregulation 48-10.03(2) of the GST Regulations. Therefore, the group of fixed trusts must meet the requirements set out in regulation 48-10.03A of the GST Regulations to satisfy regulation 48-10.03 of the GST Regulations. Under regulation 48-10.03A of the GST Regulations, for a trust to be a member of a GST group consisting only of fixed trusts, it must be a member of the same 90% owned group as all the other fixed trusts in that group. For two fixed trusts to be members of the same 90% owned group, paragraph 48-10.03A(3)(a) of the GST Regulations requires the trustee of one fixed trust to have either: For a trustee of a fixed trust (the head trust) to have a stake of at least 90% in another fixed trust (the sub-trust), paragraph 48-10.03A(3)(b) of the GST Regulations requires the trustee of the head trust to: The trustee of entity A (head trust) owns 90% of the issued units of entity B (sub-trust) and has the right to receive 90% of any distribution of capital or income of entity B. Therefore, entity A has a 90% stake in entity B. As such, entities A and B are members of the same 90% owned group and both entity A and entity B satisfy the requirements of regulation 48-10.03 of the GST Regulations. Accordingly, entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Date_of_Decision": "17 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subparagraph 48-10(1)(a)(ii) Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/921", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003920", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/921", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two fixed trusts owned by a third fixed trust from 1 April 2003", "Issue": "Do entity A and entity B, both fixed unit trusts, satisfy the regulatory membership requirements of a GST group for the purposes of section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) from 1 April 2003 where:", "Decision": "Yes, entity A and entity B satisfy the regulatory membership requirements of a GST group for the purposes of section 48-10 of the GST Act.", "Facts": "Entity A and entity B are fixed unit trusts and are registered for goods and services tax (GST). Entity C is also a fixed unit trust. The trustee of entity C owns 90% of the issued units in each of entity A and entity B. It also has the right to receive 90% of any distribution of capital or income by entity A and entity B. The ownership structure is shown in the following diagram: Neither entity satisfies the requirements of subregulation 48-10.03(2) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Both entity A and entity B have the same tax periods and account for GST on the same basis. Neither entity belongs to any other GST group, nor do they have any branches that are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: The membership requirements of entities proposing to form a GST group are set out in section 48-10 of the GST Act. In relation to trusts, each entity must: Entity A and entity B are registered for GST, have the same tax periods, account on the same basis, are not members of another GST group and do not have any branches registered under Division 54 of the GST Act. Therefore, the entities will satisfy the membership requirements if they satisfy the requirements specified in the GST Regulations. Regulation 48-10.03 of the GST Regulations specifies the requirements that must be satisfied for a trust to be a member of a GST group. This regulation was amended with effect from 1 April 2003 to allow trusts that meet specified requirements to form a GST group with other trusts. Paragraph 48-10.03(1)(a) of the GST Regulations provides that if the GST group consists only of fixed trusts, the requirements set out in either subregulation 48-10.03(2) of the GST Regulations or regulation 48-10.03A of the GST Regulations must be satisfied. Neither of the entities satisfy the requirements in subregulation 48-10.03(2) of the GST Regulations. Therefore, the group of fixed trusts must meet the requirements set out in regulation 48-10.03A of the GST Regulations to satisfy regulation 48-10.03 of the GST Regulations. Under regulation 48-10.03A of the GST Regulations, for a trust to be a member of a GST group consisting only of fixed trusts, it must be a member of the same 90% owned group as all the other fixed trusts in that group. For two trusts to be members of the same 90% owned group, paragraph 48-10.03A(3)(a) of the GST Regulations requires: Neither the trustee of entity A nor the trustee of entity B own units in each other. However, the trustee of entity C owns units in both entity A and B. Therefore, entity A and entity B will be part of the same 90% owned group if the trustee of entity C has at least a '90% stake' in both entity A and entity B. For a trustee of a fixed trust (the head trust) to have a stake of at least 90% in another fixed trust (the sub-trust), paragraph 48-10.03A(3)(b) of the GST Regulations requires the trustee of the head trust to: The trustee of entity C (head trust) owns 90% of the issued units in both entity A and entity B (sub-trusts) and has the right to receive 90% of any distribution of income or capital from both sub-trusts. Therefore, the trustee of entity C has a 90% stake in both entity A and entity B. As such, entity A and entity B are both members of the same 90% owned group and satisfy the regulatory requirements. Both entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Date_of_Decision": "24 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subparagraph 48-10(1)(a)(ii) Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/920", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003921", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/1014", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two individuals", "Issue": "Do entity A and entity B, both individuals, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, entity A and entity B do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act, as a GST group cannot consist solely of individuals.", "Facts": "Entity A and entity B are Australian resident individuals who are registered for goods and services tax (GST). Entity A and entity B have the same tax periods and account for GST on the same basis. Neither entity belongs to any other GST group nor do they have any branches that are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: Section 48-10 of the GST Act sets out the membership requirements of a GST group. In relation to an individual, they must: Entity A and entity B are registered for GST, have the same tax periods, account for GST on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, entity A and entity B will satisfy the membership requirements, if they each satisfy the requirements specified in the GST Regulations. Regulation 48-10.04 of the GST Regulations specifies the membership requirements that must be satisfied for an individual to be a member of a GST group. It provides that an individual may be a member of a GST group where it satisfies one of the following requirements: It is clear from this that, for an individual to be a member of a GST group, the group must have at least one member that is a company, a partnership or a trust. The proposed GST group will consist of only entity A and entity B who are individuals. There are no members of the proposed GST group that are a company, partnership or trust. Therefore, entity A and entity B do not satisfy the requirements under regulation 48-10.04 of the GST Regulations. Accordingly, entity A and entity B do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act.", "Date_of_Decision": "4 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 Division 54 section 190-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031014", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/1015", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of a fixed trust and a non-fixed trust from 1 April 2003", "Issue": "Do entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), from 1 April 2003 where:", "Decision": "Yes, both entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Facts": "Entity A and entity B are Australian resident trusts that are registered for goods and services tax (GST). Both entity A and entity B have corporate trustees. Entity A is a fixed trust with unit holders Individual X and Individual Y. For the purposes of a GST group, Individual Y is a family member of Individual X. Entity B is a non-fixed trust of which the beneficiaries are Individual U, Individual V and Individual W who, for the purposes of a GST group, are family members of Individual X. Entity A and entity B make distributions of income and capital only to these family members and not to the trustee of either trust. None of the beneficiaries are a charitable institution, a trustee of a charitable fund or a gift-deductible entity. Entity A and entity B apply the same tax periods, account for GST on the same basis, are not members of any other GST group and do not have any branches which are registered under Division 54 of the Act.", "Reasons_for_Decision": "Summary: The membership requirements of entities within a GST group are outlined in section 48-10 of the GST Act. In relation to trusts, each entity must: Entity A and entity B are registered for GST, have the same tax periods, account on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, each trust will satisfy the membership requirements if they satisfy the requirements specified in the GST Regulations. Regulation 48-10.03 of the GST Regulations deals with the membership requirements that must be satisfied for a trust to be a member of a GST group. Subregulation 48-10.03(1) of the GST Regulations provides that if the GST group does not consist only of fixed trusts the requirements set out in subregulation 48-10.03(2) must be satisfied for the trust to meet the regulatory requirements. Subregulation 48-10.03(2) of the GST Regulations sets out four membership requirements. For the trust to be a member of a GST group, the trustee of a trust (the candidate trustee) must satisfy one of the requirements. The candidate trustee has, at least, a 90% stake in a company that is a member of the GST group, worked out in accordance with section 190-5 of the GST Act as if the trustee were a company. As there are no companies in the proposed GST group, the trustees do not satisfy this requirement. The candidate trustee distributes any income or capital of the trust only to beneficiaries that are permitted beneficiaries, whether or not other distributions could lawfully be made. The meaning of 'permitted beneficiary' is set out in subregulations 48-10.03(3), 48-10.03(4) and 48-10.03(5) of the GST Regulations. For a GST group that consists only of trusts, the relevant permitted beneficiaries are: Therefore, to meet this paragraph, the trustees of entity A and entity B can distribute income and capital only to these kinds of permitted beneficiaries. As the trustees of entity A and entity B distribute income and capital only to individuals, namely Individual X, Individual Y, Individual U, Individual V and Individual W, this paragraph is not met by either trustee. The candidate trustee is the sole beneficiary of any distribution of income or capital by the trustee of another trust that is a member of the GST group. The trustee of entity A is not a beneficiary of any distribution of income or capital made by the trustee of entity B, and the trustee of entity B is not a beneficiary of any distribution of income or capital made by the trustee of entity A. Therefore, the trustees do not satisfy this requirement. The candidate trustee distributes income or capital of the trust, and the trustee of another trust that is a member of the GST group distributes income or capital of the other trust, only to persons who are all family members of the same individual, whether or not other distributions could lawfully be made. 'Family member' is defined in subsection 48-15(2) of the GST Act and section 272-95 of Schedule 2F to the Income Tax Assessment Act 1936 . Generally, a 'family member' includes a parent, grandparent, brother, sister, nephew, niece, child or children of an individual or the individual's spouse. Family also includes the partner's spouse and the spouses of any person mentioned in the previous sentence. The trustees of entity A and entity B distribute their income or capital to Individuals X Y, U, V and W. Individuals Y, U, V and W are all family members of Individual X. Therefore, the trustees satisfy this requirement. As entity A and entity B satisfy the requirements of regulation 48-10.03 of the GST Regulations, both entities satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Date_of_Decision": "24 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subparagraph 48-10(1)(a)(ii) subsection 48-15(2) Division 54 section 190-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/920 | ATO ID 2003/921", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031015", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/1016", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two or more companies where some of the companies are owned by a holding company", "Issue": "Do entities A, B, C, D, E and F, all companies, satisfy the membership requirements under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for the formation of a GST group where:", "Decision": "No, none of the entities satisfy the membership requirements of a GST group under section 48-10 of the GST Act as they do not belong to the same 90% owned group, they do not account on the same basis and they are not all registered for GST.", "Facts": "Entities A, B, E and F are registered for GST. Entities C and D are not. Entities B, E and F account for GST on a different basis from entity A. The ownership structure of the entities is shown in the following diagram: Entity A has an individual as the only member (shareholder). Entity A is the only member of entity B and entity C. Entity B owns a 67% membership (shareholding) in entity D and a 50% membership in entity E. Entity F has as its only members two individuals and so is not related to any of the other companies.", "Reasons_for_Decision": "Summary: The membership requirements of entities proposing to form a GST group are set out in section 48-10 of the GST Act. In relation to companies, each entity must: Same 90% owned group Section 190-1 of the GST Act provides that two companies are members of the same 90% owned group if one of the companies has, at least, a 90% stake in the other company or a third company has, at least, a 90% stake in each of the two companies. Section 190-5 of the GST Act provides that a company (the holding company) has, at least, a 90% stake in another company (the subsidiary company) when it: In this case, entity A (the holding company) owns 100% of both entity B and entity C. Therefore entities A, B and C are members of the same 90% owned group and satisfy this membership requirement. Entity A also owns 67% of entity D and 50% of entity E indirectly through entity B. However this does not represent a 90% stake and entities A, D and E cannot be part of the same 90% owned group. Entity F is wholly owned by two individuals and, as such, cannot be part of the same 90% owned group of companies as entities A, B, C, D, and E. The only entities that potentially could be members of the same GST group are entities A, B and C. GST Registration Entity C is not registered for GST and cannot be a member of a GST group. Entities A and B are registered for GST and can be members of the same 90% owned group. They meet the first two membership requirements of a GST group. Accounting Basis Entities A and B do not account for GST on the same basis as each other and cannot be members of the same GST group. As such, none of the entities satisfy the membership requirements of a GST group under section 48-10 of the GST Act.", "Date_of_Decision": "4 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 Division 54 section 190-1 section 190-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/492 | ATO ID 2003/1019", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031016", "Unmatched_Content": "This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010 | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/1017", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two partnerships from 1 April 2003", "Issue": "Do entity A and entity B, both partnerships, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), from 1 April 2003 where:", "Decision": "Yes, both entity A and entity B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Facts": "Entity A and entity B are Australian resident partnerships that are registered for goods and services tax (GST). Entity A comprises two partners: Individual X and Family Trust Y. Entity B comprises four partners: Individual X, Individual Y, Family Trust X and Family Company Y. For the purposes of a GST group; Entity A and entity B share the same tax periods and account for GST on the same basis. Entity A and entity B have jointly applied to the Commissioner, in the approved form, for approval as a GST group. In their application, entity A is nominated as the representative member for the group. Neither entity A nor entity B belongs to any other GST group, nor do they have any branches that are registered under Division 54 of the GST Act. Entity A notified the Commissioner, in the approved form, of the formation of a GST group and is nominated in that notice as representative member of the GST group.", "Reasons_for_Decision": "Summary: The membership requirements of entities proposing to form a GST group are outlined in section 48-10 of the GST Act. In relation to partnerships, each entity must: Entity A and entity B are registered for GST, have the same tax periods, account for GST on the same basis, are not members of another GST group and do not have any branches registered under Division 54 of the GST Act. Therefore, the entities will satisfy the membership requirements if they satisfy the requirements specified in the GST Regulations. Regulation 48-10.02 of the GST Regulations sets out the membership requirements that must be satisfied for a partnership to be a member of a GST group. Subregulation 48-10.02(2A) of the GST Regulations states that: If the GST group consists only of partnerships: Either partnership can be chosen to meet the requirements of paragraph (a). For the purpose of this ATO Interpretative Decision, entity A is taken to be this partnership (the member partnership). Therefore, entity B (the candidate partnership) must satisfy the requirements of subregulation 48-10.02(5) of the GST Regulations to qualify for membership of a GST group. Subregulation 48-10.02(5) of the GST Regulations is satisfied if the candidate partnership meets the four requirements of the subregulation. In this case, entity B is the candidate partnership that must satisfy this subregulation. This requirement is satisfied for a candidate partnership where the member partnership is a member of the group because of the operation of paragraph 48-10.02(2A)(a) or subregulations 48-10.02(3), 48-10.02(3A) or 48-10.02(4) of the GST Regulations or the application, or repeated application, of subregulation 48-10.02(5) of the GST Regulations. Entity A is a member of the GST group and the member partnership because it was taken to be the partnership that satisfied paragraph 48-10.02(2A)(a) of the GST Regulations. Therefore, entity B satisfies this requirement. This paragraph requires that each partner in the candidate partnership is an individual, a family trust of an individual or a family company of an individual. There are four partners in entity B, the candidate partnership. The four partners are individual X and individual Y (two individuals), Family Trust X (a family trust of an individual) and Family Company Y (a family company of an individual). The partners of entity B are of a type listed in paragraph 48-10.02(5)(b) and entity B satisfies this requirement. To meet this requirement, for each partner in the candidate partnership there must be a partner in the member partnership that is of a kind listed in this provision. For entity B to satisfy this requirement, each of the four partners of entity B must have a particular relationship (as listed in the provision) with a partner of the member partnership. Each partner in entity B has a relationship with a partner in entity A (which includes being a partner in entity A) and the relationships are as follows: Individual X (a partner of entity B) is also a partner in entity A and therefore has a relationship with entity A (subparagraph 48-10.02(5)(c)(i) of the GST Regulations); Family Trust X (a partner of entity B) is a family trust of individual X and individual X is a partner of entity A. Family Trust X has a relationship with entity A (subparagraph 48-10.02(5)(c)(i) of the GST Regulations); Individual Y (a partner of entity B) has a family trust, Family Trust Y, which is a partner in entity A. Therefore Individual Y has a relationship with entity A (subparagraph 48-10.02(5)(c)(ii) of the GST Regulations); and Family Company Y (a partner of entity B) is a family company of Individual Y. Family Trust Y, a family trust of Individual Y, is a partner of entity A. Therefore, Family Company Y has a relationship with entity A (subparagraph 48-10.02(5)(c)(ii) of the GST Regulations). Entity B has therefore satisfied this requirement. To meet this requirement, at least two of the partners in the candidate partnership must satisfy paragraph 48-10.02(5)(c) of the GST Regulations through different partners in the member partnership. That is, one of the partners in entity B, the candidate partnership, must comply through Individual X and another partner must comply through Family Trust Y. Individual X is a partner in both entity B (the candidate partnership) and entity A (the member partnership). Individual Y, a partner in entity B, satisfies paragraph 48-10.02(5)(c) of the GST Regulations through Family Trust Y, a partner in entity A. Therefore, two partners in entity B, the candidate partnership, comply through different partners in entity A. This requirement is then met. All of the requirements of subregulation 48-10.02(5) of the GST Regulations are satisfied by entity B, the candidate partnership. As the proposed group consists only of two partnerships, entity A and entity B, and entity B meets all of the requirements of subregulation 48-10.02(5) of the GST Regulations, the conditions of subregulation 48-10.02(2A) of the GST Regulations are satisfied. Therefore, entities A and B satisfy the membership requirements of a GST group under section 48-10 of the GST Act from 1 April 2003.", "Date_of_Decision": "17 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/919 | ATO ID 2003/1018 | ATO ID 2003/1019", "Subject_References": "Goods & services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031017", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010. | Keywords Goods & services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/1018", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a partnership joining an existing GST group of partnerships from 1 April 2003", "Issue": "Does entity C, a partnership containing a non-family company partner, satisfy the membership requirements under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), and so be able to join an existing GST group comprising entity A and entity B, both partnerships, from 1 April 2003?", "Decision": "No, entity C does not satisfy the membership requirements under section 48-10 of the GST Act and cannot join the existing GST group comprising entities A and B, from 1 April 2003.", "Facts": "Entity C is an Australian resident partnership that is registered for goods and services tax (GST). Entities A and B are partnerships that are members of an existing GST group. Entity A comprises two partners; Individual D and Individual E. Entity B comprises two partners; Family Trust D (Individual D's family trust (refer note 1)) and Family Company E (Individual E's family company). Entity C comprises three partners; Individual D, Individual E and Company X. Individuals D and E hold a large number of shares in Company X, but not all shareholders are family members of Individuals D or E. Entity C has the same tax periods that apply to entities A and B and these three entities also account for GST on the same basis. Entity C does not belong to any other GST group nor does it have any branches that are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: Section 48-10 of the GST Act sets out the membership requirements of a GST group. In relation to partnerships, each entity must: Entity C is registered for GST, has the same tax periods and accounts for GST on the same basis as the GST group members, is not a member of another GST group and has no branches registered for GST. Therefore, entity C will satisfy the membership requirements if it satisfies the requirements specified in the GST Regulations. Regulation 48-10.02 of the GST Regulations sets out the membership requirements that must be satisfied for a partnership to be a member of a GST group. Subregulation 48-10.02(2A) of the GST Regulations states: If the GST group consists only of partnerships: (a) there are no further requirements for one of the partnerships; and (b) each other partnership must satisfy the requirements of subregulation (5). Entities A and B meet the grouping requirements as they are already in a GST group. Entity C, as the 'candidate partnership', must satisfy the four requirements of subregulation 48-10.02(5) of the GST Regulations to become a member of the GST group. One of the requirements is that each partner in the candidate partnership is an individual, a family trust of an individual or a family company of an individual (paragraph 48-10.02(5)(b) of the GST Regulations). The partners in entity C are two individuals (Individuals D and E) and Company X. Therefore, it is necessary to determine whether Company X satisfies the definition of a family company. Paragraph 48-10.02(6)(b) of the GST Regulations defines a family company of an individual as being a company each shareholder of which is either the individual or a family member of an individual. Although Individuals D and E hold shares in Company X, other non-related entities also hold shares in the company. Therefore, Company X is not a family company within the above definition and fails to satisfy paragraph 48-10.02(5)(b) of the GST Regulations. As entity C does not satisfy this requirement, there is no need to address the other requirements of subregulation 48-10.02(5) of the GST Act. Entity C does not satisfy the regulatory membership requirements and therefore is unable to satisfy the membership requirements under section 48-10 of the GST Act. Entity C cannot join the existing GST group, comprising entities A and B, from 1 April 2003. Note 1. Refer to paragraph 48-10.02(6)(a) of the GST Regulations for the definition of the term 'family trust'.", "Date_of_Decision": "20 June 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1017 | ATO ID 2003/919 | ATO ID 2003/1019", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031018", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2003/1019", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping a partnership with a company from 1 April 2003", "Issue": "Do entity A, a partnership, and entity B, a company, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act) where:", "Decision": "No, although entity A satisfies the membership requirements of a GST group, entity B does not meet the GST group membership requirements under section 48-10 of the GST Act as Individual Z is not a partner, or family member of a partner, in entity A.", "Facts": "Entity A is a partnership and entity B is a company. Both entities are registered for goods and services tax (GST). Entity A consists of two partners, Individual X and Individual Y (a family member of Individual X). Entity A does not have a stake in entity B, for the purposes of the GST Act. Individuals X, Y and Z are the shareholders of entity B. Individual Z is not a family member of Individual X or Individual Y. Entity A and entity B have the same tax periods and account for GST on the same basis. Neither entity belongs to any other GST group nor do they have any branches that are registered under Division 54 of the GST Act.", "Reasons_for_Decision": "Summary: The membership requirements for entities in a GST group are set out in section 48-10 of the GST Act. Some of the requirements apply to all entities. All entities must: Entity A and entity B are registered for GST, have the same tax periods, account for GST on the same basis, are not members of another GST group and do not have GST branches registered. Therefore, these requirements are satisfied by both entities. However, there are additional requirements for both partnerships and companies that have to be met before a GST group can be approved. The additional membership requirements for partnerships are set out in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Regulation 48-10.02 of the GST Regulations sets out the additional requirements that must be satisfied for a partnership to form a GST group with a company. This regulation was amended with effect from 1 April 2003. Subregulation 48-10.02(3) of the GST Regulations provides that a partnership satisfies the requirements if, for at least 1 company that is a member of the GST group: As entity A does not hold a stake in entity B and entity B has more than one shareholder, entity A will only satisfy the regulatory requirements if entity B has at least two shareholders that are representatives of different partners in entity A. Regulation 48-10.01 of the GST Regulations, provides, in part that the representative of a partner, for a partner that is an individual, is either the partner or a family member of the partner. Two of the shareholders of entity B, Individuals X and Y, are representatives of different partners in entity A. Therefore, although Individual Z is not a partner, or a family member of a partner, in entity A, the requirement in subparagraph 48-10.02(3)(b)(ii) of the GST Regulations is satisfied. That is, entity A satisfies the membership requirements to form a GST group with entity B. The additional membership requirements for companies are set out in section 48-10 of the GST Act. Subsection 48-10(3) of the GST Act requires one company in a GST group to satisfy the relationship requirements set out in section 48-15 of the GST Act, where one of the members of the GST group is a non-company entity. Entity B must meet the relationship requirements with entity A set out in subsection 48-15(1) of the GST Act. The relevant requirements are set out in paragraphs 48-15(1)(a) and 48-15(1)(c) of the GST Act and are: Entity A does not have a stake in entity B and does not satisfy paragraph 48-15(1)(a) of the GST Act. Therefore, to satisfy the requirements in paragraph 48-15(1)(c) of the GST Act, each member of entity B must be either a partner, or a family member of a partner, of the partnership that is a proposed member of the GST group. Individual Z is not a partner or a family member of a partner in entity A. Therefore, entity B does not satisfy the membership requirements of a GST group under section 48-10 of the GST Act. Note 1 'Family' of a partner, beneficiary or shareholder will be any parent, grandparent, brother, sister, nephew, niece, child or child of a child of either the individual or the individual's spouse. Family also includes the partner's spouse and the spouses of any person mentioned in the previous sentence. Note 2. Refer to regulation 48-10.01 of the GST Regulations for the definition of 'shareholder'. Note 3. Refer to regulation 48-10.01 of the GST Regulations for the definition of 'representative'. Note 4. Refer to section 190-5 of the GST Act for the definition of 'at least a 90% stake'.", "Date_of_Decision": "4 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-10 subsection 48-10(3) section 48-15 subsection 48-15(1) paragraph 48-15(1)(b) paragraph 48-15(1)(c) subsection 48-15(2) section 190-5 Division 54", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1016 | ATO ID 2003/1017 | ATO ID 2003/1018 | ATO ID 2003/919", "Subject_References": "Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031019", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods and services tax GST special rules GST branches GST groups GST regulations GST tax periods"}
{"ATO_ID_Number": "ATO ID 2002/492", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of companies when an individual has 100 per cent ownership of each company", "Issue": "Do the entities, companies A, B and C, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when an individual has 100% ownership of each company?", "Decision": "No, the entities do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act when an individual has 100% ownership of each company.", "Facts": "The entities are companies A, B and C. An individual has 100% ownership of these companies. Companies A, B and C, therefore, do not have any ownership interests in each other. All of the companies are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 48-5 of the GST Act sets out the requirements that must be satisfied for two or more entities to form a GST group. Paragraph 48-5(1)(a) of the GST Act requires that each of the entities must satisfy the membership requirements for that GST group. The membership requirements of a GST group are set out in section 48-10 of the GST Act. Under paragraph 48-10(1)(b) of the GST Act, to be a member of a GST group that contains other companies, a company must be part of the same 90% owned group as all the other companies in the proposed GST group. Division 190 of the GST Act defines the term '90% owned group'. According to section 190-1 of the GST Act, two companies are members of the same 90% owned group if: In this case, an individual has 100% direct ownership of each of the companies. Companies A, B and C do not have any ownership interests in each other. As none of the companies have any ownership interests in each other, they are not part of the same 90% owned group. Therefore, companies A, B and C, do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act, where an individual has 100% ownership of each company.", "Date_of_Decision": "14 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-5 paragraph 48-5(1)(a) section 48-10 paragraph 48-10(1)(b) Division 190 section 190-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST special rules GST groups", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002492", "Unmatched_Content": "This ATO ID has been amended due to changes to Division 48 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010 | Keywords Goods & services tax GST special rules GST groups"}
{"ATO_ID_Number": "ATO ID 2002/524", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of partnership with companies", "Issue": "Do the entities, a partnership and two companies the shares in which are held by the individuals in the partnership, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entities do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act.", "Facts": "The entities, a partnership, company A and company B have jointly applied to the Commissioner, in the approved form, for approval to operate as a GST group. Three individuals are partners in the partnership. Each partner has a 1/3 interest in the partnership. The partnership is registered for goods and services tax (GST). The above individuals are also shareholders in company A and company B. Each individual owns a 1/3 interest in both company A and company B. These interests exist in respect of entitlement to all income, capital and voting power. The individual partners, not the partnership, own the companies.", "Reasons_for_Decision": "Summary: Section 48-5 of the GST Act outlines the conditions that must be satisfied for the Commissioner to approve two or more entities as a GST group. In particular, paragraph 48-5(1)(b) of the GST Act requires that each of the entities applying to be part of the GST group must satisfy the membership requirements for that GST group. The general membership requirements that an entity must satisfy, to be part of a GST group or proposed GST group, are outlined in section 48-10 of the GST Act. These include requirements that each member is registered for GST, has the same tax periods as the other members, accounts for GST on the same basis as the other members, is not a member of any other GST group, and does not have any branches that are registered under the GST rules for branching. Where the members of a proposed GST group include a partnership and two or more companies, the entities must satisfy the membership requirements for: First, it must be determined whether the partnership meets the membership requirements of the proposed GST group. Subparagraph 48-10 (1)(a)(ii) of the GST Act provides that if the entity is a partnership, it must satisfy the specifications in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). Regulation 48-10.02 of the GST Regulations outlines the requirements that must be satisfied for a partnership to be a member of a GST group. In particular, subregulation 48-10.02(2) provides that a partnership must satisfy the requirements of subregulation 48-10.02(3), (3A) or (4) of the GST Regulations, to form part of a GST group. Sub-regulation 48-10.02(3) is the relevant requirement where the only other members of the proposed GST group are companies. This requirement has to be satisfied in relation to only one company if there is more than one company in the proposed GST group. Sub-regulation 48-10.02(3) is satisfied if the partnership has at least a 90% stake in at least one of the companies in the proposed GST group (sub-regulation 48-10.02(3)(a)). In the alternative, sub-regulation 48-10.02(3) is satisfied if, for at least one of the companies (being a company with more than one member (shareholder)), the membership of the company consists only of partners in the partnership, or family members of the partners, in a way that ensures that at least two partners are represented, either personally or by a family member. The partnership in the proposed GST group satisfies the above mentioned requirement in relation to each company because all of the shareholders of each company are partners in the partnership and at least two of the partners are also members of each company. Next, it must be determined whether company A and company B satisfy the membership requirements to group with the partnership. Section 48-15 provides additional requirements where a company and a non-company wish to form a GST group. Paragraph 48-15(1)(c) of the GST Act outlines the requirements for a company to GST group with a partnership that does not have at least a 90% stake in it. The membership of the company must consist only of partners in the partnership, or family members of the partners, in a way that ensures that at least two partners are represented, either personally or by a family member. Company A is owned by all three individual partners in the partnership. Company B is also owned by all three individual partners in the partnership. Therefore, both company A and company B satisfy the membership requirements of having only partners of the partnership as members and at least two of the partners of the partnership being members of each company. Under paragraph 48-10(1)(b) of the GST Act, a company has to be of the same 90% owned group as all other members of the GST group or proposed GST group that are also companies. Section 190-1 of the GST Act provides that two companies are members of the same 90% owned group if one of the companies has at least a 90% stake in the other company or a third company has at least a 90% stake in each of the two companies. Section 190-5 of the GST Act provides that a company (the holding company) has at least a 90% stake in another company (the subsidiary company) when it: Company A is owned by the individual partners in the partnership. Company B is also owned by the individual partners in the partnership. Therefore, neither company A nor company B have a 90% stake in each other. Therefore, the companies do not belong to the same 90% owned group. The fact that company A and company B have individuals, as common shareholders, does not satisfy the membership requirement of a GST group. Therefore, the proposed GST group does not meet the membership requirements outlined in subparagraph 48-10(1)(b) of the GST Act. Accordingly, the entities do not satisfy the membership requirements to form a GST group under section 48-10 of the GST Act.", "Date_of_Decision": "31 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-5 section 48-10 subparagraph 48-10(1)(a)(ii) paragraph 48-10(1)(b) paragraph 48-10(1)(f) subparagraph 48-15(c)(i) subparagraph 48-15(c)(iii) section 190-1 section 190-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST special rules GST groups", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002524", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | The A New Tax System (Goods and Services Tax) Regulations 1999 (amended by the A New Tax System (Goods and Services Tax) Amendment Regulations 2003 (No.1) (2003 No. 37) affects certain group membership requirements from 1 April 2003. | Keywords Goods & services tax GST special rules GST groups"}
{"ATO_ID_Number": "ATO ID 2002/995", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and grouping of two trusts", "Issue": "Do the entities, unit trust A and unit trust B, satisfy the membership requirements of a GST group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when they apply to form a GST group?", "Decision": "No, unit trust A and unit trust B do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act when they apply to form a GST group.", "Facts": "Unit trust A and unit trust B are Australian resident unit trusts. Both entities have jointly applied to the Commissioner, in the approved form, for approval as a GST group. Both unit trust A and unit trust B have the same beneficiaries, a company and an individual, to whom the respective trustees of both unit trusts will be making distributions of income and/or capital. Neither beneficiary is a proposed member of the GST group. Neither beneficiary is a charitable institution, a trustee of charitable fund, or a gift-deductible entity.", "Reasons_for_Decision": "Summary: Section 48-5 of the GST Act sets out the conditions that must be satisfied for the Commissioner to approve two or more entities as a GST group. In particular, paragraph 48-5(1)(b) of the GST Act requires that each of the entities applying to be part of the GST group must satisfy the membership requirements for that GST group. The general membership requirements of a GST group are set out in section 48-10 of the GST Act. For a trust to meet the membership requirements of a GST group, subparagraph 48-10(1)(a)(ii) of the GST Act provides that the trust must also satisfy the conditions listed in regulation 48-10.03 of the GST Regulations. Subregulation 48-10.03(2) of the GST Regulations provides that for a trust to be a member of a GST group, the trustee: There are no companies in the proposed GST group, only unit trusts A and B. Therefore, the first limb of subregulation 48-10.03(2) of the GST Regulations does not apply. Accordingly, it is necessary to consider whether unit trust A and unit trust B satisfy the membership requirement under the second limb of subregulation 48-10.03(2) of the GST Regulations. For the purposes of the second limb of subregulation 48-10.03(2) of the GST Regulations, subregulation 48-10.03(3) of the GST Regulations provides that each of the following is a permitted beneficiary: Both unit trust A and unit trust B have the same beneficiaries, a company and an individual, to whom the respective trustees of both unit trusts will be making distributions of income and/or capital. Neither the company nor the individual are members of the proposed GST group, a charitable institution, a trustee of a charitable fund, a gift-deductible entity, or a family member of an individual who is a member of the GST group (as the GST group members are both unit trusts). Therefore, unit trust A and unit trust B do not satisfy the membership requirement under the second limb of subregulation 48-10.03(2) of the GST Regulations because the respective trustees of both unit trusts will be making distributions to beneficiaries that are not permitted beneficiaries. As neither unit trust A nor unit trust B satisfy the conditions listed in regulation 48-10.03 of the GST Regulations, they do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act when they apply to form a GST group.", "Date_of_Decision": "5 March 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-5 paragraph 48-5(1)(b) section 48-10 subparagraph 48-10(1)(a)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST special rules GST groups", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002995", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | The A New Tax System (Goods and Services Tax) Regulations 1999 (amended by the A New Tax System (Goods and Services Tax) Amendment Regulations 2003 (No.1) (2003 No. 37) affects certain group membership requirements from 1 April 2003. | Keywords Goods & services tax GST special rules GST groups"}
{"ATO_ID_Number": "ATO ID 2001/344", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Grouping of partnership and trust", "Issue": "Do the entities, a partnership, Trust A and Trust B satisfy the membership requirements to form a goods and services tax (GST) group under section 48-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entities do not satisfy the membership requirements to form a GST group under section 48-10 of the GST Act.", "Facts": "The entities have jointly applied to the Commissioner, in the approved form, for approval to operate as a GST group. The partnership is registered for GST. The partners of the partnership are individual A and individual B. Trust A (family trust of individual A) and Trust B (family trust of individual B) are not registered for GST. The beneficiaries of Trust A are individual A, their spouse and children. The beneficiaries of Trust B are individual B, their spouse and children. Both Trust A and B are administered by corporate trustees that trade only as trustees for the entities and not in their own right.", "Reasons_for_Decision": "Summary: Section 48-5 of the GST Act sets out the requirements that must be satisfied for the Commissioner to approve two or more entities as a GST group. In particular, paragraph 48-5(1)(b) of the GST Act requires that each of the entities applying to be part of the GST group must satisfy the membership requirements for that GST group. The general membership requirements of a GST group are set out in section 48-10 of the GST Act. Paragraph 48-10(1)(c) of the GST Act applies to all entities that wish to form a GST group and requires that they be registered for GST. As Trust A and Trust B are not registered for GST, they cannot be members of a GST group. Furthermore, in this case, there are other reasons why the entities cannot form a GST group. For a partnership or trust, subparagraph 48-10(1)(a)(ii) of the GST Act provides that to satisfy the membership requirements of a GST group, the specifications in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) must be met. | Detailed Reasoning - Partnerships and the regulatory requirements: Firstly, it must be determined whether the partnership, meets the requirements in the GST Regulations. Regulation 48-10.02 of the GST Regulations sets out the requirements that must be satisfied for a partnership to be a member of a GST group. Subregulation 48-10.02(4) of the GST Regulations is of particular relevance, in this case. It is satisfied if, for at least one trust that is a member of the GST group, the beneficiaries include partners in the partnership, or family members of the partners, in a way that ensures that at least two partners are represented: This means that individual B or a family member of individual B need to be a beneficiary of Trust A or, alternatively, individual A or a family member of individual A need to be a beneficiary of Trust B. In this case, neither Trust A nor Trust B has both partners represented (either personally or by a family member) as beneficiaries. Accordingly, the requirements set out in subregulation 48-10.02(4) of the GST Regulations are not met. Therefore, the partnership cannot form a GST group with either Trust A or Trust B as the requirements set out in subparagraph 48-10(1)(a)(ii) of the GST Act are not satisfied. | Detailed Reasoning - Trusts and the regulatory requirements: Next, it must be determined whether either trust can form a GST group with the partnership. This is because there is no regulatory ability for a trust to form a GST group solely with another trust. For the three entities to form a GST group, each trust must be able to form a GST group with the partnership. For Trust A to be part of a GST group, regulation 48-10.03 of the GST Regulations must be satisfied. In this case as there is no company in the proposed group, neither of the trustees has at least a 90% stake in a company group member (paragraph 48-10.03(2)(a) of the GST Regulations). Therefore, it must be determined whether the trustee of Trust A is distributing income or capital only to 'permitted beneficiaries' (paragraph 48-10.03(2)(b) of the GST Regulations). Subregulation 48-10.03(5) of the GST Regulations allows the partners in a partnership that is a member of a GST group and their family members to be 'permitted beneficiaries' if the beneficiaries of the trust include partners and their family members of the partner, in a way that ensures that at least two partners are represented: In this case, Trust A's only beneficiaries are individual A, their spouse and children. Neither individual B nor a family member of individual B is a beneficiary of Trust A. Therefore, both partners of the partnership are not represented in Trust A. Thus, anytime the trustee of Trust A distributes income or capital of the trust, it is distributing to beneficiaries that are not 'permitted beneficiaries'. Accordingly, regulation 48-10.03 of the GST Regulations is not satisfied. Therefore, Trust A cannot form a GST group with the partnership as the requirements set out in subparagraph 48-10(1)(a)(ii) of the GST Act are not satisfied. Similarly, Trust B also cannot form a GST group with the partnership. This is because the beneficiaries of Trust B are individual B, their spouse and children. Neither individual A nor a family member of individual A is a beneficiary of Trust B. Therefore, both partners of the partnership are not represented in Trust B. Thus, anytime the trustee of Trust B distributes income or capital of the trust, it is distributing to beneficiaries that are not 'permitted beneficiaries'. Therefore, Trust B cannot form a GST group with the partnership, as the requirements set out in subparagraph 48-10(1)(a)(ii) of the GST Act are not satisfied. Thus, the entities do not satisfy the membership requirements of a GST group under section 48-10 of the GST Act.", "Date_of_Decision": "10 April 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 48-5 paragraph 48-5(1)(b) section 48-10 subparagraph 48-10(1)(a)(ii) paragraph 48-10(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST groups", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001344", "Unmatched_Content": "Keywords Goods and services tax GST special rules GST groups"}
{"ATO_ID_Number": "ATO ID 2012/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and liability for a supply made by an incapacitated entity prior to the appointment of a representative", "Issue": "Is the entity, a representative of an incapacitated entity, liable for GST under section 58-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it receives consideration for a supply that was made by the incapacitated entity prior to its appointment?", "Decision": "No, the representative of the incapacitated entity is not liable for GST under section 58-10 of the GST Act when it receives consideration for a supply that was made by the incapacitated entity prior to the appointment of the representative. (It is the incapacitated entity that is liable for GST, under section 9-40 of the GST Act.)", "Facts": "The incapacitated entity is registered for GST. The representative of the incapacitated entity is registered for GST. The incapacitated entity made a taxable supply under section 9-5 of the GST Act prior to the appointment of the representative. While appointed, the representative receives all of the consideration for the taxable supply made by the incapacitated entity prior to the appointment.", "Reasons_for_Decision": "Summary: Under subsection 58-10(1) of the GST Act, a representative of an incapacitated entity is liable to pay any GST that the incapacitated entity would, but for section 58-10 or section 48-40, be liable to pay on a taxable supply to the extent that the making of the supply is within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs. Paragraph 58-10(2)(a) of the GST Act provides an exception to the general rule in subsection 58-10(1) of the GST Act. Under paragraph 58-10(2)(a), the representative of an incapacitated entity is not liable for any GST amounts to the extent that the consideration for a taxable supply was received before the representative became a representative of the incapacitated entity . This exception does not apply as the incapacitated entity did not receive any consideration for the supply prior to the appointment of the representative. The facts state that the incapacitated entity made the taxable supply prior to the appointment of the representative. As the supply was made by the incapacitated entity prior to the appointment of the representative, the making of the supply clearly did not fall within the representative's responsibility or authority for managing the incapacitated entity's affairs, at the time the supply was made. The mere subsequent receipt by the representative of the consideration for the supply that was made by the incapacitated entity before the appointment of the representative does not have the effect of bringing the 'making' of the supply within the scope of the representative's responsibility or authority for managing the incapacitated entity's affairs. Accordingly, because the supply is not within the scope of authority of the representative, the representative is not liable for the GST on the taxable supply under subsection 58-10(1) of the GST Act, despite the fact that the representative receives all of the consideration for the supply. Instead, the incapacitated entity is liable for GST, under section 9-40 of the GST Act. Notes:", "Date_of_Decision": "20 January 2012", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-40 subsection 58-10(1) subparagraph 58-10(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules Representative of incapacitated entities GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20127", "Unmatched_Content": "Keywords Goods and services tax GST special rules Representative of incapacitated entities GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/290", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a representative's liability for a supply made under a contingent agreement", "Issue": "Is the entity, a representative of an incapacitated entity, liable for goods and services tax (GST) under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it completes the final condition of a contingent agreement that was made by the incapacitated entity?", "Decision": "No, the entity is not liable for GST under section 9-40 of the GST Act when it completes the final condition of a contingent agreement that was made by the incapacitated entity, as it is the incapacitated entity that makes the supply and is liable for GST.", "Facts": "The entity is a representative of an incapacitated entity. The incapacitated entity owns several assets. Before the entity's appointment, the incapacitated entity entered into a contingent agreement with a purchaser to sell these assets. Under the terms of this agreement, the purchaser has had possession and use of the assets since the day the agreement was signed. The terms of the agreement provide that title to the assets does not pass to the purchaser until two conditions are met, resulting in the agreement being completed. The first condition for the completion of the agreement is the sale of specified premises. This sale was completed before the entity was appointed. The second condition for the completion of the agreement is the release of the assets from a registered charge. After the entity's appointment, the entity paid monies owed to the relevant finance companies. Following these payments, the charges were released. As the second condition under the terms of the agreement was met, the title to the assets was transferred to the purchaser, free of encumbrances. The purchaser paid the consideration due and a tax invoice was issued. At the time of the entity's appointment, the incapacitated entity was registered for GST. The entity registered for GST, in its capacity as representative of the incapacitated entity, in accordance with the provisions of subsection 58-20(1) of the GST Act. The supply of the assets satisfies the requirements of section 9-5 of the GST Act and is a taxable supply.", "Reasons_for_Decision": "Summary: Section 9-40 of the GST Act provides that an entity is liable for the GST payable on any taxable supply that it makes. Therefore, the entity is only liable to pay the GST if it is the entity that has made the supply. The incapacitated entity entered into the contingent agreement to sell the assets before the entity's appointment. The incapacitated entity signed the agreement and made the assets available to the purchaser for possession and use on the same day. In addition, the incapacitated entity met the first condition of the agreement when it sold the premises prior to the appointment of the entity. After the entity's appointment and as part of its professional duties, the entity engaged in actions on behalf of the incapacitated entity to ensure that the second condition (releasing the charge over the assets) was met and the original agreement was completed. Under the terms of the agreement, the completion of the related transaction and the release of the charge, are prerequisites to title passing to the purchaser. The entity does not make the supply merely by ensuring that those prerequisites are satisfied. It was the incapacitated entity who did everything to effect the actual supply of the goods and as such, it is the incapacitated entity that makes the supply. Therefore, the entity is not liable for GST under section 9-40 of the GST Act when it completes the final condition of a contingent agreement made by the incapacitated entity.", "Date_of_Decision": "29 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-40 subsection 58-20(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules Representative of incapacitated entities GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004290", "Unmatched_Content": "Update reference to subsection 58-20(1), which replaced subsection 147-5(1). | Keywords Goods and services tax GST special rules Representative of incapacitated entities GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/236", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of an administrator of a deed of company arrangement for two companies", "Issue": "Is the entity, an administrator of a deed of company arrangement (the Deed) over two companies, required to be registered twice for GST under section 58-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), once for each company subject to the Deed?", "Decision": "Yes, the entity is required to be registered twice for GST under section 58-20 of the GST Act, once for each company subject to the Deed.", "Facts": "The entity is an administrator of the Deed. The Deed is for two separate companies, company A and company B. Company A and company B are incapacitated entities. The Deed is executed by both companies and each company is separately subject to the Deed. However, contributions received under the Deed will not be separately identified for each company. Company A and company B are registered for GST. The companies are not grouped.", "Reasons_for_Decision": "Summary: Under section 58-20 of the GST Act, a representative of an incapacitated entity is required to be registered if the incapacitated entity is registered or required to be registered. The term 'representative' is defined in section 195-1 of the GST Act. The definition of a representative includes an administrator of a deed of company arrangement executed by the incapacitated entity. The entity is the administrator of a deed of company arrangement executed by company A and company B. Therefore, the entity meets the definition of a representative under section 195-1 of the GST Act. In addition, although the Deed is common to both companies, each company is separately subject to the Deed. Therefore, for the purposes of the GST Act, the entity is a representative of company A and a representative of company B. Subsection 184-1(3) of the GST Act provides that a legal person can have a number of different capacities in which the person does things. In each of these capacities, the person is taken to be a different entity. Therefore, in accordance with subsection 184-1(3) of the GST Act, the representative of an incapacitated entity is, in that particular representative capacity, a separate entity for the purposes of the GST Act. If an entity is also the representative of other incapacitated entities, separate registration is required in respect of each representative capacity in which the entity acts. As such, the entity is required to register separately for GST under section 58-20 of the GST Act for each company; once in its capacity as the administrator for company A and once in its capacity as administrator for company B.", "Date_of_Decision": "8 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 58-20 subsection 184-1(3) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST registration Required to be registered Representative of incapacitated entities", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002236", "Unmatched_Content": "[History note: This ATO ID was amended on 27 January 2012 to update all references to section 147-5 with references to section 58-20.] | Keywords Goods & services tax GST registration Required to be registered Representative of incapacitated entities"}
{"ATO_ID_Number": "ATO ID 2004/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and renting property by a mortgagee in possession", "Issue": "Is the entity, a mortgagee in possession, making a taxable supply under subsection 105-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it leases out commercial property belonging to a debtor that is registered for goods and services tax (GST)?", "Decision": "Yes, the entity is making a taxable supply under subsection 105-5(1) of the GST Act when it leases out commercial property belonging to a debtor that is registered for GST.", "Facts": "The entity is a mortgagee in possession (a creditor). The entity is in possession of a debtor's commercial property as mortgagee in possession. The entity is entitled under the mortgage to sell or lease the property and apply the proceeds towards satisfaction of the debt that the debtor owes to the entity. The entity leases out the commercial premises to a third party. The entity and the debtor are registered for GST. If the debtor had leased out the commercial property, the supply would have been a taxable supply under section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 105-5(1) of the GST Act provides that a supply made by an entity is a taxable supply if: A lease of commercial property is a grant of real property and is a supply for the purposes of the GST Act (paragraph 9-10(2)(d) of the GST Act). The entity is leasing the debtor's commercial property to a third party and applying the proceeds towards the debtor's debt to the entity. Therefore, the entity is supplying the debtor's property to a third party in satisfaction of a debt that the debtor owes to it. The requirement in paragraph 105-5(1)(a) of the GST Act is satisfied. The debtor is registered for GST. Had the debtor leased out the commercial premises, the supply would have been taxable under section 9-5 of the GST Act. Therefore, the requirement in paragraph 105-5(1)(b) of the GST Act is also satisfied. Accordingly, the entity is making a taxable supply under subsection 105-5(1) of the GST Act when it leases out the commercial property of a debtor that is registered for GST.", "Date_of_Decision": "13 September 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 105-5(1) paragraph 105-5(1)(a) paragraph 105-5(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules GST supplies in satisfaction of debt GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200435", "Unmatched_Content": "Keywords Goods and services tax GST special rules GST supplies in satisfaction of debt GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and mortgagee in possession", "Issue": "Can the entity, a mortgagee in possession (a creditor), choose to apply the margin scheme under section 75-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it exercises power of sale in relation to real property?", "Decision": "Yes, the entity can choose to apply the margin scheme under section 75-5 of the GST Act when it exercises power of sale in relation to real property.", "Facts": "The entity is a mortgagee in possession (a creditor). The supply of the real property would have been a taxable supply if the debtor had made the supply. The debtor, if it had sold the real property, could have chosen to apply the margin scheme under section 75-5 of the GST Act. The debtor does not give written notice to the entity that the supply, had the debtor made it, would not have been a taxable supply.", "Reasons_for_Decision": "Summary: Under section 75-5 of the GST Act, 'you' may choose to apply the margin scheme if 'you' make a taxable supply of real property by selling a freehold interest in land. The debtor, had it sold the property, would have been able to apply the margin scheme. Therefore, it must be considered whether the word 'you' can still be taken to mean the debtor, where the creditor, rather than the debtor, is making the supply. Division 105 of the GST Act deals with supplies made by creditors of property belonging to a debtor, where the supply is in satisfaction of a debt owed to the creditor. The supply is a taxable supply if, had the debtor made the supply, it would have been a taxable supply. The creditor is liable for any GST payable on the supply of the debtor's property. It does not matter if the supply is made in the course of the creditor's enterprise, or if the creditor is registered, or required to be registered for GST. Having regard for the provisions of Division 105 of the GST Act, the creditor is taken to be standing in the shoes of the debtor when the creditor makes the supply. Therefore, for the purpose of the creditor applying the margin scheme to the sale, the word 'you' as used in section 75-5 is taken to mean the debtor. As the debtor was able to apply the margin scheme in line with section 75-5 of the GST Act, the entity may also choose to apply the margin scheme in respect of the sale.", "Date_of_Decision": "19 April 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 75-5 Division 105", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies in satisfaction of a debt Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001112", "Unmatched_Content": "Keywords Goods and services tax GST supplies in satisfaction of a debt Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/32", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and decreasing adjustments for settlements of compulsory third party insurance claims following transfer of registration", "Issue": "Does the entity, a compulsory third party (CTP) insurer, use the input tax credit percentage entitlement notified by the original holder of a CTP insurance policy to calculate its decreasing adjustment using the formula in section 78-15 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, after transfer of motor vehicle registration, the entity settles a claim made by the new holder of the CTP insurance policy?", "Decision": "Yes, the entity does use the input tax credit percentage entitlement notified by the original holder of a CTP insurance policy to calculate its decreasing adjustment using the formula in section 78-15 of the GST Act when, after the transfer of the motor vehicle registration, the entity settles a claim made by the new holder of the CTP insurance policy.", "Facts": "The entity is a CTP insurer. The entity supplied CTP insurance to an owner of a motor vehicle. The supply of the CTP insurance policy was a taxable supply under section 9-5 of the GST Act. The owner of the motor vehicle notified the entity of the extent of their entitlement to claim input tax credits on its acquisition of the CTP insurance (its input tax credit percentage entitlement). The owner of the motor vehicle sold the vehicle part way though the CTP insurance policy period. Under the relevant state legislation, when a motor vehicle is sold, the motor vehicle registration is transferred to the new owner of the vehicle and the CTP insurance policy is also effectively transferred along with the registration. That is, the original insurance policy issued by the CTP insurer remains in force and is not cancelled. In certain circumstances, additional premium may be charged and collected from the new owner by the CTP insurer. The new owner of the motor vehicle made a claim under the CTP insurance policy. The entity settled the new owner's claim. The settlement of the claim satisfied the requirements in section 78-10 of the GST Act requiring the entity to make a decreasing adjustment. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 78-15 of the GST Act sets out the formula for determining the amount of an insurer's decreasing adjustment required to be made as a result of an insurer settling a claim under an insurance policy (section 78-10 of the GST Act). Section 78-15 of the GST Act provides: (1 / 11) × Settlement amount × (1 - Extent of input tax credit) Therefore, in calculating decreasing adjustments for settlements of insurance claims, the insurer must determine the extent of input tax credit entitlement for the supply of the insurance policy for the period to which the premium related. The entity has settled the claim made by the new owner of the motor vehicle. However, the relevant legislation provides that transfer of the CTP insurance policy does not constitute a new supply under the respective CTP insurance schemes. Therefore, it is the input tax credit entitlement at the time the policy was underwritten that will be applied to calculate the insurer's decreasing adjustment. The entity, in calculating their decreasing adjustment using the formula in section 78-15 of the GST Act, uses the input tax credit percentage entitlement notified by the original holder of a CTP insurance policy when it settles an insurance claim made by the new owner of the motor vehicle.", "Date_of_Decision": "16 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 19-10 section 19-70 section 78-10 section 78-15 subsection 78-15(1) subsection 78-15(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/31 | ATO ID 2004/33", "Subject_References": "Goods and services tax GST insurance Decreasing adjustment", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200432", "Unmatched_Content": "Keywords Goods and services tax GST insurance Decreasing adjustment"}
{"ATO_ID_Number": "ATO ID 2005/206", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and acquisition of a salvaged motor vehicle on settlement of an insurance claim", "Issue": "Is the entity, an insurer, entitled to an input tax credit under section 66-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:", "Decision": "No, the entity is not entitled to an input tax credit under section 66-10 of the GST Act as the entity did not provide, and is not liable to provide, consideration for the acquisition of the salvaged motor vehicle.", "Facts": "The entity is an insurer and is registered for goods and services tax (GST). An insured was involved in a motor vehicle accident and made a claim under their comprehensive motor vehicle insurance policy. The insured's motor vehicle was 'uneconomical' for the insurer to repair and so the entity settled the claim by paying out the insured for their loss. 'Uneconomic to repair' vehicles are referred to as 'salvaged motor vehicles'. Under the insurance policy, property in the motor vehicle passed to the entity. The supply of the salvaged motor vehicle by the insured to the entity is not a taxable supply under section 78-60 of the GST Act. The entity subsequently makes a taxable supply of the salvaged motor vehicle. The entity does not make any other payment to the insured or perform any other act for the insured in return for the salvaged motor vehicle.", "Reasons_for_Decision": "Summary: The supply of the salvaged motor vehicle from the insured to the entity is not a taxable supply under section 78-60 of the GST Act. Subsection 66-10(1A) of the GST Act states that the amount of the input tax credit for a creditable acquisition of second-hand goods is one-eleventh of the consideration you provide, or are liable to provide, when the consideration is $300 or less. Subsection 66-10(1) states when the consideration you provide is more than $300, the amount of the input tax credit is one-eleventh of the consideration you provide, or are liable to provide, or when that amount is greater than the GST payable on a taxable supply of the good you make, the amount of the input tax credit is limited to the amount of GST on that taxable supply. Subsection 66-10(3) of the GST Act provides that section 66-5 of the GST Act will have effect despite section 11-25 of the GST Act. As the entity acquired the salvaged motor vehicle in carrying on its enterprise, the entity acquired the motor vehicle for a creditable purpose. The entity is registered for GST. The remaining requirement is that it provided, or was liable to provide consideration for the supply. Although the entity paid the insured a sum of money to cover the insured's loss, this payment was made in settlement of the insured's claim under the insurance policy. Section 78-20 of the GST Act provides that a payment or supply by an insurer, in settlement of a claim under an insurance policy, is not treated as consideration for an acquisition made by the insurer. Therefore, the entity's payment to settle the claim is not consideration for the acquisition of the salvaged motor vehicle. The entity does not make any other payment or perform any other act in return for the salvaged motor vehicle. Therefore, the entity does not provide consideration for the supply of the salvaged motor vehicle and its acquisition is not a creditable acquisition. As such, the entity is not entitled to an input tax credit under section 66-10 of the GST Act for the acquisition of the salvaged motor vehicle.", "Date_of_Decision": "29 June 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 subsection 66-5(1) subsection 66-5(3) subsection 66-10 subsection 66-10(A) subsection 66-10(1) subsection 66-10(3) section 78-20 section 78-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST insurance policy Insurance settlement under an insurance policy Salvage under an insurance policy GST second hand goods GST supplies & acquisitions Creditable acquisition GST consideration", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005206", "Unmatched_Content": "Keywords Goods and services tax GST insurance policy Insurance settlement under an insurance policy Salvage under an insurance policy GST second hand goods GST supplies & acquisitions Creditable acquisition GST consideration"}
{"ATO_ID_Number": "ATO ID 2001/116", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Decreasing Adjustments", "Issue": "Does the entity, an insurer, have a decreasing adjustment under Division 78 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it reimburses an intermediary, with whom it has entered into an agreement under subdivision 153-B of the GST Act, where that intermediary makes an acquisition directly for the purpose of settling an insurance claim on behalf of the entity?", "Decision": "No, the entity does not have a decreasing adjustment under Division 78 of the GST Act when it reimburses an intermediary, with whom it has entered into an agreement under subdivision 153-B of the GST Act, where that intermediary makes an acquisition directly for the purposes of settling an insurance claim on behalf of the entity.", "Facts": "The entity has a warranty insurance business. The entity agrees to cover the cost of replacing and repairing a defective part or workmanship in a product. The entity markets this type of insurance through a Third Party Administrator (TPA). The entity has entered into agreements under subdivision 153-B of the GST Act with the TPAs. They are both registered for goods and services tax (GST). The insurance is administered as follows. The insurer supplies a policy to the TPA for a premium of $55. The TPA claims $5 input tax credit and sells the insurance to the insured for $77. In accordance with the agency agreement when a claim is made the TPA administers the claim by organising repair and replacement services through individual repairers or retailers who are retained by the TPA. The TPA also pays the cost of the replacement or repair. The intermediary authorises the repairs, enters into a binding obligation with the repairers and is liable for the cost of the repairs The TPA is reimbursed the actual cost of the repair or replacement from the entity.", "Reasons_for_Decision": "Summary: Under subdivision 153-B of the GST Act, an entity may, in writing, enter into an arrangement with an intermediary under which the intermediary will, on behalf of that entity, make supplies to third parties or acquisitions from third parties, or both. The effect of such an arrangement is that the intermediary is treated as making the supplies to, or acquisitions from third parties and the entity is treated as making corresponding supplies to or acquisitions from the intermediary (paragraph 153-50(c)of the GST Act). This means that the entity is treated as making the supply of insurance to the intermediary. The intermediary is treated as acquiring that insurance. The intermediary is then treated as making a supply of that insurance to the insured. Section 78-10 of the GST Act states that an insurer may have a decreasing adjustment if, in settlement of a claim under an insurance policy, the insurer makes a payment of money or digital currency, makes a supply, or both. Under section 78-20 of the GST Act, such a payment or supply is not to be treated as consideration for a creditable acquisition made by an insurer. This has effect despite section 11-5 of the GST Act, which is about creditable acquisitions. Goods and Services Tax Ruling GSTR 2006/10 provides guidance for determining whether an acquisition or payment (in settlement of a claim) will result in a decreasing adjustment (under Division 78 of the GST Act) or a creditable acquisition (under Division 11 of the GST Act). In the Commissioner's view it is considered that there needs to be a binding obligation between the insurer and the repairer or other supplier for there to be supplies acquired by the insurer from the repairer or other supplier in respect of which the insurer can claim input tax credits. These same principles apply to supplies and acquisitions made by principals and intermediarys under subdivision 153-B of the GST Act It is the TPA that enters into the binding obligations with suppliers and not the entity. The TPA has acquired the supply and will be entitled to input tax credits for the GST paid on the supply. However, the entity will be treated as making a corresponding acquisition from the TPA (subparagraph 153-50(c)(ii) of the GST Act). The reimbursement to the TPA from the insurer will be consideration for a creditable acquisition made by the entity and the entity will be entitled to an input tax credit. The reimbursement will be consideration for a taxable supply made by the TPA. The Commissioner considers that there is no entitlement to a decreasing adjustment where an insurance settlement gives rise to an input tax credit for the insurer. Therefore, the entity will not be entitled to a decreasing adjustment under Division 78 of the GST Act.", "Date_of_Decision": "26 September 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 11 Section 11-5 Division 78 Section 78-10 Section 78-20 Subdivision 153-B Paragraph 153-50(c) Subparagraph 153-50(c)(ii)", "Related_Public_Rulings_and_Determinations": "GSTR 2006/10", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/117", "Subject_References": "Goods and Services Tax GST insurance Insurers", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001116", "Unmatched_Content": "This ATO ID amendment is effective from 1 July 2010. | This ATO ID has been amended to reflect the legislative amendments to the A New Tax System (Goods and Services Tax) Act 1999 that are effective from 1 July 2017. Under the amendments, from 1 July 2017 digital currency will have the equivalent treatment to money and in certain circumstances supplies of digital currency will be treated as financial supplies. | Add 'or digital currency' | Related Public Rulings (including Determinations) GSTR 2006/10 | Keywords Goods and Services Tax GST insurance Insurers"}
{"ATO_ID_Number": "ATO ID 2001/117", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Decreasing Adjustments", "Issue": "Does the entity, an insurer, have a decreasing adjustment under Division 78 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it reimburses an intermediary, with whom it has entered into an agreement under subdivision 153-B of the GST Act, where that intermediary makes a payment or supply or both in settlement of insurance claims on behalf of the entity?", "Decision": "No, the entity does not have a decreasing adjustment under Division 78 of the GST Act when it reimburses an intermediary, with whom it has entered into an agreement under subdivision 153-B of the GST Act, where that intermediary makes a payment or supply or both in settlement of insurance claims on behalf of the entity. Furthermore, the entity is not entitled to claim an input tax credit under section 11-5 of the GST Act.", "Facts": "The entity has a warranty insurance business. The entity agrees to cover the cost of replacing and repairing a defective part or workmanship in a product. The entity markets this type of insurance through a Third Party Administrator (TPA). The entity has entered into agreements under subdivision 153-B of the GST Act with the TPAs. They are both registered for goods and services tax (GST). By way of illustration, the insurance is administered as follows. The entity supplies a policy to the TPA for a premium of $55. The TPA claims a $5 input tax credit and sells the insurance to the insured for $77. In accordance with the agency agreement, when a claim is made, the TPA administers the claim by paying the cost of repairs to the insured where the insured has repaired the item itself or arranged for another party to repair the item. The TPA does not enter into a binding obligation with the repairers. The TPA is reimbursed the actual cost of the repair or replacement from the entity.", "Reasons_for_Decision": "Summary: Under Subdivision 153-B of the GST Act, an entity may, in writing, enter into an arrangement with an intermediary under which the intermediary will, on behalf of the entity, make supplies to third parties or acquisitions from third parties, or both. The effect of such an arrangement is that the intermediary is treated as making the supplies to or acquisitions from third parties and the entity is treated as making corresponding supplies to or acquisitions from the intermediary (paragraph 153-50(c) of the GST Act). This means that the entity is treated as making the supply of insurance to the intermediary. The intermediary is treated as acquiring that insurance. The intermediary is then treated as making a supply of that insurance to the insured. Section 78-10 of the GST Act states that an insurer may have a decreasing adjustment if, in settlement of a claim under an insurance policy, the insurer makes a payment of money or digital currency, makes a supply, or both. Under section 78-20 of the GST Act, such a payment or supply is not to be treated as consideration for an acquisition made by an insurer. This has effect despite section 11-5 of the GST Act, which is about creditable acquisitions. Goods and Services Tax Ruling GSTR 2006/10 provides guidance for determining whether an acquisition or payment (in settlement of a claim) will result in a decreasing adjustment (under Division 78 of the GST Act) or a creditable acquisition (under Division 11 of the GST Act). These same principles apply to supplies and acquisitions made by principals and intermediarys under subdivision 153-B of the GST Act. In those circumstances where the TPA facilitates payment after accepting a claim from the insured, the TPA (who, because of the agreement under Subdivision 153-B of the GST Act, is treated as having supplied insurance to the insured and so is treated as the insurer), is not making an acquisition because the TPA has not entered into a binding obligation with the supplier. Instead, the TPA is making a payment in settlement of an insurance claim and may have a decreasing adjustment under Division 78 of the GST Act. Subsection 78-10(2) of the GST Act states that an insurer will not be entitled to a decreasing adjustment where the entity acquiring the insurance policy was entitled to input tax credits in respect of the premium. The TPA (who, because of the agreement under subdivision 153-B of the GST Act, is treated as having acquired insurance from the insurer) is entitled to an input tax credit in respect of the premium. Therefore, the entity is not entitled to a decreasing adjustment under Division 78 of the GST Act. Furthermore, as there is no acquisition, the entity will not be entitled to an input tax credit under section 11-5 of the GST Act.", "Date_of_Decision": "26 September 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 11 Section 11-5 Division 78 Section 78-10 Section 78-20 Subsection 78-10(2) Subdivision 153-B Paragraph 153-50(c)", "Related_Public_Rulings_and_Determinations": "GSTR 2006/10", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/116", "Subject_References": "Goods and Services Tax GST insurance Insurers", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001117", "Unmatched_Content": "This ATO ID 2001/117 has been amended to reflect changes to Subdivision 153-B of the A New Tax System (Goods and Services Tax) Act 1999 as a result of Tax Laws Amendment (2009 GST Administration Measures) Act 2010 by replacing the reference to 'agent' with 'intermediary'. | This ATO ID amendment is effective from 1 July 2010. | This ATO ID has been amended to reflect the legislative amendments to the A New Tax System (Goods and Services Tax) Act 1999 that are effective from 1 July 2017. Under the amendments, from 1 July 2017, digital currency will have the equivalent treatment to money and in certain circumstances supplies of digital currency will be treated as financial supplies. | Add 'or digital currency' | Related Public Rulings (including Determinations) GSTR 2006/10 | Keywords Goods and Services Tax GST insurance Insurers"}
{"ATO_ID_Number": "ATO ID 2002/491", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and purpose of a joint venture", "Issue": "Do the entities, participants in a joint venture (Joint Venture 1), meet the requirements to become the participants in a GST joint venture under subsection 51-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the purpose of Joint Venture 1 is to treat a by-product created by a GST joint venture for mineral exploitation,(Joint Venture 2), so that it can be re-used by Joint Venture 2?", "Decision": "Yes, the entities meet the requirements to become the participants in a GST joint venture under subsection 51-5(1) of the GST Act where the purpose of Joint Venture 1 is to treat a by-product created by Joint Venture 2 ,so that it can be re-used by Joint Venture 2.", "Facts": "The entities are participants in Joint Venture 1. The purpose of Joint Venture 1 is to treat a by-product created by Joint Venture 2. Joint Venture 2 is a GST joint venture for the exploitation of mineral deposits. Joint Venture 1 treats the by-product in order to extract a certain substance from it. Joint Venture 1 then supplies that substance back to Joint Venture 2 for re-use in Joint Venture 2's activities. Joint Venture 1 is not a partnership and the entities satisfy the GST joint venture participation requirements in section 51-10 of the GST Act. The entities agreed in writing to the formation of a GST joint venture and nominated one of the entities to be the joint venture operator. The nominated joint venture operator notified the Commissioner in the approved form of the formation of the GST joint venture. The entities are registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Division 51 of the GST Act allows entities engaged in joint ventures to form a GST joint venture if they meet certain criteria. Subsection 51-5(1) of the GST Act provides that entities in a joint venture may become participants in a GST joint venture if: The entities in Joint Venture 1 meet the requirements in paragraphs (b) to (f). Therefore, it needs to be determined whether Joint Venture 1 is for the exploration or exploitation of mineral deposits, or for a purpose specified in the GST Regulations. The by-product treated by Joint Venture 1 and the substance that Joint Venture 1 extracts from that by-product are not minerals. Therefore, it could be considered that Joint Venture 1 is not for the exploration or exploitation of mineral deposits. However, Joint Venture 1 is treating a by-product (that is created by Joint Venture 2 in the exploitation of mineral deposits) in order to extract a valuable substance that will be used again by Joint Venture 2 in its exploitation of mineral deposits. Therefore, the activities carried out by Joint Venture 1 are integrally linked to the exploitation of mineral deposits that is carried out by Joint Venture 2. As such, Joint Venture 1 is also considered to be for the exploitation of mineral deposits and the requirement in paragraph (a) is satisfied. The entities in Joint Venture 1 meet all of the requirements to become participants in a GST joint venture under subsection 51-5(1) of the GST Act where the purpose of Joint Venture 1 is to treat a by-product created by Joint Venture 2 so that it can be re-used by Joint Venture 2.", "Date_of_Decision": "4 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 51 subsection 51-5(1) section 51-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST joint ventures", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002491", "Unmatched_Content": "This ATO ID has been amended due to changes to Division 51 of the A New Tax System (Goods and Services Tax) Act 1999 which apply to tax periods starting on or after 1 July 2010 | Updated A New Tax System (Goods and Services Tax) Regulations 1999 to A New Tax System (Goods and Services Tax) Regulations 2019 . | Keywords Goods & services tax GST joint ventures"}
{"ATO_ID_Number": "ATO ID 2004/696", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of mineral ore to a common stockpile alongside a ship bound for overseas", "Issue": "Is the entity, an ore supplier, making a GST-free supply under item 1 in the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it is contracted to supply a type of ore (type A ore) to a common stockpile alongside a ship bound for overseas?", "Decision": "Yes, the entity is making a GST-free supply provided the ore is exported within the 60 day period as required by item 1 in the table in subsection 38-185(1) of the GST Act.", "Facts": "The entity is an ore supplier. The entity enters into a contract to supply a certain type of ore to a purchaser (type A ore). Under the terms of the contract, the entity is required to deliver the type A ore to the port, where it is unloaded onto a common stockpile alongside a ship which has been engaged to carry the ore to a destination outside Australia. After delivery into the common stockpile, the ore is blended with other similar ore delivered by a different supplier creating a new and specific blend of ore (type AB ore). The type AB ore is then loaded onto the foreign bound ship. The purchaser of the entity's type A ore is contracted to sell the blended type AB ore to a foreign customer. The entity receives documentation from the Port Authority which: The entity and the purchaser are both registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 38-185 of the GST Act, certain supplies of goods, for consumption outside of Australia, are GST-free. The entity's supply of type A ore is a supply of goods. As such, the GST status of the supply of the type A ore is appropriately considered under section 38-185 of the GST Act. Item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) provides that a supply of goods is GST-free if the supplier exports the goods before, or within 60 days after, the earlier of consideration being received or an invoice being issued. Therefore, under Item 1, a supply of goods that are exported is GST-free where: The entity is contracted to supply type A ore to the purchaser by delivering the type A ore to the port. Therefore, as the entity is making a supply of goods (type A ore), the first element in Item 1 is satisfied. Item 1 further requires that the supplier exports the goods from Australia. Amongst other things, paragraph 22 of Goods and Services Tax Ruling GSTR 2002/6 provides that the requirement that the supplier is the entity that exports the goods is satisfied where the supplier is responsible for delivering the goods to the operator of a ship or aircraft who, or that, has been engaged by another party to transport those goods to a destination outside Australia. Further, paragraph 119 of GSTR 2002/6 states: In the case of 'break bulk' commodities and other goods that are carried out of Australia on board a ship without being packed in a freight container, the supplier exports where the supplier delivers the goods on board or alongside the ship. The entity delivers the type A ore to the port and unloads it onto a common stockpile alongside the ship which has been engaged to carry the ore to an overseas destination. However, the supply will only be GST-free provided the goods are in fact exported. If the goods are not transported out of Australia, Item 1 will not apply. The documentary evidence provided by the Port Authority shows that the goods supplied by the entity, that is type A ore, were loaded on board a ship engaged to carry those goods to an overseas destination. It follows that the type A coal was removed from Australia. Therefore, the second element of Item 1 is satisfied. Provided the ore is exported within the 60 day period as required by the third element of Item 1 (or such further period as the Commissioner allows), the entity's supply of type A ore satisfies the requirements of Item 1 and will be GST-free supply.", "Date_of_Decision": "10 August 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-185 subsection 38-185(1)", "Related_Public_Rulings_and_Determinations": "GSTR 2002/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/14", "Subject_References": "Goods and services tax Exports Export of goods GST free Consumption outside Australia GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004696", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2002/6 | Keywords Goods and services tax Exports Export of goods GST free Consumption outside Australia GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/14", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the delivery of mineral ore to a common stockpile", "Issue": "Is entity A, an ore supplier, making a taxable supply to entity B, another ore supplier, under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when entity A delivers ore to a common stockpile for blending with entity B's ore?", "Decision": "No, entity A is not making a taxable supply to entity B under section 9-5 of the GST Act when it delivers ore to a common stockpile for blending with entity B's ore. In this situation, there is no supply being made by entity A to entity B.", "Facts": "Entity A is an ore supplier. Entity B is another ore supplier. Both entity A and entity B enter into separate contracts to supply ore to a single purchaser. Entity A has not entered into any agreement to supply any goods or services to entity B. Conversely, entity B has not agreed to supply any goods or services to entity A. Under the terms of the contract of sale, entity A is required to deliver the ore to a common stockpile where it is blended with other similar ore (including the ore belonging to entity B) and then loaded on board a vessel for transport. Once the various ores are blended in the common stockpile, a new and specific blend of ore is created. The ore is blended due to the delivery requirements of the purchaser and not as a result of any agreement between entities A and B. Entity B does not obtain any rights in relation to entity A's ore. Entity A is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The first element in section 9-5 of the GST Act requires that an entity make a supply for consideration. In this case, entity A has entered into a contract with the purchaser for the supply and delivery of a specific type of ore to a common stockpile. Entity A has not entered into any agreement to supply any goods or services to entity B. Conversely, entity B has not agreed to supply any goods or services to entity A. Although the ore of entity A is blended in the common stockpile with the ore of entity B, entity B does not obtain any rights in relation to entity A's ore. The ore is blended due to the delivery requirements of the purchaser and not as a result of any agreement between entities A and B. Therefore, there is no supply of ore from entity A to entity B, and the first requirement in section 9-5 of the GST Act is not met. As such, entity A is not making a taxable supply to entity B under section 9-5 of the GST Act when it delivers ore to a common stockpile for blending with entity B's ore.", "Date_of_Decision": "11 April 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST supplies & acquisitions Taxable supply Supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200314", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST supplies & acquisitions Taxable supply Supply"}
{"ATO_ID_Number": "ATO ID 2004/167", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and disposal of a GST-free car by an eligible disabled person", "Issue": "Does the entity, an eligible disabled person who purchased a car GST-free under Subdivision 38-P of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), have a goods and services tax (GST) liability when they dispose of the car before the 'Subdivision 38-P period' has expired?", "Decision": "No, the entity does not incur a GST liability when they dispose of the car before the 'Subdivision 38-P period' has expired.", "Facts": "The entity is an individual who is an eligible disabled person. The entity purchased a car GST-free under Subdivision 38-P of the GST Act. At the time of purchasing the car the entity had the intention of using it for the prescribed use under Subdivision 38-P of the GST Act for at least two years or until the car travelled 40,000 kilometres. Due to the entity's deteriorating medical condition, the car was no longer suitable for their needs. The entity disposed of the car in order to purchase a more suitable car. The entity owned the car for less than two years and the car had travelled less than 40,000 kilometres. The entity is not registered or required to be registered for GST.", "Reasons_for_Decision": "Summary: Under Subdivision 38-P of the GST Act, a supply of a car to a disabled person may be GST-free. One of the requirements for a supply of a car to be GST-free is that the eligible disabled person intends to use the car for the prescribed use under Subdivision 38-P of the GST Act during all of the 'Subdivision 38-P period'. Section 195-1 of the GST Act defines the 'Subdivision 38-P period', in relation to the supply of a car to an individual, as the period starting when he or she acquires the car and ending at the earliest of the following times: For the purposes of paragraph (c) of the above definition, the Commissioner considers that an appropriate circumstance is where the car has travelled 40,000 kilometres. The entity satisfied the intention test at the time of purchase of the car. The entity's deteriorating medical condition required the individual to dispose of the car before the end of the 'Subdivision 38-P period'. There are no provisions in the GST Act that impose a GST liability where an eligible disabled person acquires a car GST-free and disposes of it before the 'Subdivision 38-P period' has expired. Therefore, the entity will not incur a GST liability when they dispose of the car before the 'Subdivision 38-P period' has expired.", "Date_of_Decision": "9 July 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-P section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/395 | ATO ID 2001/496", "Subject_References": "Goods and services tax GST free Cars for disabled veterans Cars for other disabled people", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004167", "Unmatched_Content": "Keywords Goods and services tax GST free Cars for disabled veterans Cars for other disabled people"}
{"ATO_ID_Number": "ATO ID 2005/338", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and entitlement to input tax credits for entertainment expenses incurred by an entity that cannot make income tax deductions", "Issue": "Is the entity, an overseas company that cannot make income tax deductions under the Income Tax Assessment Act 1997 (ITAA 1997), denied by section 69-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), from claiming input tax credits for acquisitions made in Australia for entertainment purposes?", "Decision": "Yes, the entity is denied from claiming input tax credits for acquisitions made for entertainment purposes.", "Facts": "The entity is a company incorporated and managed and controlled overseas. Its principal place of business is outside Australia. The entity cannot make any deductions from assessable income under Division 8 of the ITAA 1997 or any specific provision of the ITAA 1997. The entity made acquisitions in Australia for entertainment purposes. These entertainment expenses are of the type that Division 32 of the ITAA 1997 prohibits from being deductible under Division 8 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes. However, Division 69 of the GST Act provides that some acquisitions that are not deductible under the ITAA 1997 are not creditable acquisitions. Subsection 69-5(1) of the GST Act provides that an acquisition is not a creditable acquisition to the extent that it is a 'non-deductible expense'. Subsection 69-5(3) of the GST Act provides that an acquisition will be a non-deductible expense if it is not deductible under Division 8 of the ITAA 1997 because of one of the specified statutory provisions in the ITAA 1997. Paragraph 69-5(3)(f) of the GST Act specifies Division 32 of the ITAA 1997 (which deals with entertainment expenses). The entity has made acquisitions that are of a type that Division 32 of the ITAA 1997 prohibits from being deductible under Division 8 of the ITAA 1997. When section 69-5 of the GST Act refers to an expense being not deductible under Division 8 of the ITAA 1997 because of one of the specified statutory provisions, it is referring to the requirements specified in the statutory provision and not to whether the claimant for an input tax credit would have been entitled to a deduction for income tax but for the statutory provision. That is, the words 'under Division 8 of the ITAA 1997' is a reference to the general deductibility provisions of the ITAA 1997 rather than the particular circumstances of an entity's case. Section 69-5 of the GST Act incorporates the income tax provisions into the GST Act only for the purpose of identifying non-deductible expenses which will not form part of a creditable acquisition or importation. Therefore, as a result of the operation of section 69-5 of the GST Act, the entity cannot claim an input tax credit for its acquisitions made for entertainment purposes.", "Date_of_Decision": "17 November 2005", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-20 section 69-5 subsection 69-5(1) subsection 69-5(3) paragraph 69-5(3)(f)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Good and services tax GST special rules Non deductible expenses GST supplies & acquisitions Creditable acquisition", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005338", "Unmatched_Content": "Keywords Good and services tax GST special rules Non deductible expenses GST supplies & acquisitions Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2009/131", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of potential residential land subdivided from land on which a farming business was carried on that is not GST-free", "Issue": "Is the entity making a GST-free supply under section 38-475 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies land that is subdivided from land on which a farming business was carried on for at least 5 years but not up until commencement of the subdivision?", "Decision": "No. In these circumstances, the entity is not making a GST-free supply under section 38-475 of the GST Act.", "Facts": "The entity is an owner of land that is 'potential residential land' as defined in section 195-1 of the GST Act. The entity is supplying a freehold interest in the potential residential land to an associate for consideration that is less than the GST inclusive market value of the supply. The potential residential land is subdivided from land on which the entity carried on a farming business for at least 5 years, but not up until commencement of the subdivision. The entity had ceased the farming business and used the land for non-farming purposes for a period of time before subdividing the land. The entity is registered for GST and the supply of the land to the associate satisfies the other positive limbs of section 9-5 of the GST Act. The supply is not GST-free or input taxed under any other provision of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 38-475(1) of the GST Act provides that the supply of a freehold interest in potential residential land is GST-free if: On the facts, paragraph 38-475(1)(b) of the GST Act is clearly satisfied. The question is whether paragraph 38-475(1)(a) of the GST Act is satisfied. That is, whether the potential residential land that the entity is supplying to its associate 'is subdivided from land on which a farming business has been carried on for at least 5 years' if the subdivision commenced some time after the entity had ceased the farming business and used the land for non-farming purposes. The use of the perfect tense in the phrase 'land on which a farming business has been carried on for at least 5 years' and the placement of that phrase next to the words 'is subdivided from' indicate a temporal connection is required between the carrying on of the business and the time of subdividing the land (see note 1 below). This means that to satisfy paragraph 38-475(1)(a) of the GST Act, the potential residential land must be subdivided from land on which a farming business continued to be carried on for at least 5 years up until commencement of the subdivision. In this case, paragraph 38-475(1)(a) of the GST Act is not satisfied. While the entity carried on a farming business for at least 5 years on the land from which the potential residential land was subdivided, it did not carry on the farming business up until commencement of the subdivision. Therefore, the supply of the potential residential land by the entity to its associate is not a GST-free supply under section 38-475 of the GST Act. As section 9-5 of the GST Act is satisfied, and the supply is also not GST-free or input taxed under any other provision of the GST Act, the supply is a taxable supply.", "Date_of_Decision": "12 October 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-475 subsection 38-475(1) paragraph 38-475(1)(a) paragraph 38-475(1)(b) section 72-70", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Farming business Goods and services tax GST associates GST farm land GST free Potential residential land Subdivided farm land Taxable supply", "Case_References": "", "Other_References": "Greenbaum, S 1996, The Oxford English Grammar, Oxford University Press, New York. Biber, D and others 1999, Longman Grammar of Spoken and Written English, Pearson Education Limited, England. Huddleston, R 1984, Introduction to the Grammar of English, Cambridge University Press, Cambridge.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009131", "Unmatched_Content": "Keywords Farming business Goods and services tax GST associates GST farm land GST free Potential residential land Subdivided farm land Taxable supply"}
{"ATO_ID_Number": "ATO ID 2005/103", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of farm land for simultaneous on-sale", "Issue": "Is the entity, an owner of farm land, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells farm land to a purchaser whose intention is to simultaneously on-sell the land to a third party who intends that a farming business will be carried out on the land?", "Decision": "Yes. The entity is making a GST-free supply under section 38-480 of the GST Act. This is because the purchaser's simultaneous on-sale to a third party, who intends that a farming business will be carried out on the land, satisfies the requirement that the purchaser itself intends that a farming business will be carried out on the land.", "Facts": "The entity is an owner of farm land. The entity is selling farm land to a purchaser. The farm land is land on which a farming business has been carried on for more than the five years preceding the sale by the entity. The purchaser intends to simultaneously on-sell the land to a third party who intends to carry on a farming business on the land. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if: A farming business was carried on, on the land, for the period of five years preceding the supply by the entity to the purchaser. Accordingly, it is necessary to determine whether the purchaser, the recipient of the supply, intends that a farming business be carried on, on the land. The second requirement of section 38-480 of the GST Act does not specify any period of time within which the intended farming business must commence. It is also not necessary for the recipient to carry on the intended farming business. It is the intended use of the land that is important, not who carries on the intended farming business. The purchaser's intention is to simultaneously on-sell the land to a third party who intends that a farming business will be carried out on the land. In these circumstances, the ultimate use of the land by the third party who purchases the land from the purchaser may be taken into account in determining the intention of the purchaser. Accordingly, at the time of the supply to the purchaser, the purchaser intended that a farming business be carried on, on the land. As such, all the requirements in section 38-480 of the GST Act are satisfied and the entity is making a GST-free supply when it sells farm land to a purchaser who intends to simultaneously on-sell the land to a third party who intends that a farming business will be carried out on the land.", "Date_of_Decision": "21 December 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Subdivision 38-O section 38-480", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/631 | ATO ID 2004/632", "Subject_References": "Goods and services tax GST free GST farm land Farming business Supply of land", "Case_References": "", "Other_References": "Commonwealth of Australia 2003 Primary Production Industry Partnership - Issues Register - Issue 6.2.1(b) - Farmland", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005103", "Unmatched_Content": "Keywords Goods and services tax GST free GST farm land Farming business Supply of land"}
{"ATO_ID_Number": "ATO ID 2004/631", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of farm land to a purchaser who intends to on-sell the land to a third party", "Issue": "Is the entity, an owner of farm land, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells farm land to a purchaser whose intention is to on-sell the land to a third party who intends that a farming business will be carried out on the land?", "Decision": "No, the entity is not making a GST-free supply under section 38-480 of the GST Act as the purchaser does not intend that a farming business be carried out on the land at any time while it owns the land. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is an owner of farm land. The entity is selling farm land to a purchaser. The farm land is land on which a farming business has been carried on for more than the five years preceding the sale by the entity. The purchaser does not intend that a farming business be carried out on the land between the time it acquires the farm land and the time it subsequently sells the farm land. The purchaser intends to sell the land to a third party who intends to carry on a farming business on the land. The purchaser's acquisition of the land and subsequent sale will not occur simultaneously. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subdivision 38-O of the GST Act allows the supply of farm land to be GST-free in certain circumstances. Section 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if: A farming business was carried on, on the land, for the period of five years preceding the supply by the entity to the purchaser. Accordingly, it is necessary to determine whether the purchaser, the recipient of the supply, intends that a farming business be carried on, on the land. The second requirement of section 38-480 of the GST Act does not specify any period of time within which the intended farming business must commence. Furthermore, it is not necessary for the recipient to carry on the intended farming business. It is the intended use of the land that is important, not who carries on the intended farming business. The purchaser's intention is to sell the land. The purchaser does not intend that a farming business be carried on, on the land at any time while it owns the land. The ultimate use of the land by the third party who purchases the land from the purchaser is too remote from the entity's supply of the land for it to be taken into account in determining whether, at the time of the supply to the purchaser, the purchaser intended that a farming business be carried on, on the land. As such, the requirements in section 38-480 of the GST Act are not satisfied and the entity is not making a GST-free supply when it sells farm land to a purchaser who intends to on-sell the land but does not intend that a farming business be carried on, on the land, at any time while it owns the land. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. In addition, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells farm land to a purchaser whose intention is to on-sell the land to a third party who intends that a farming business will be carried out on the land.", "Date_of_Decision": "2 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Subdivision 38-O section 38-480 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/632 | ATO ID 2005/103", "Subject_References": "Goods and services tax GST free GST farm land Farming business Supply of land", "Case_References": "", "Other_References": "Commonwealth of Australia 2003. Primary Production Industry Partnership - Issues Register - Issue 6.2.1(b) - Farmland. Tax Office, viewed 18 June 2003, www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004631", "Unmatched_Content": "Keywords Goods and services tax GST free GST farm land Farming business Supply of land"}
{"ATO_ID_Number": "ATO ID 2004/632", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of farm land preceded by cessation of farming business for a short period", "Issue": "Is the entity, an owner of farm land, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when:", "Decision": "No, the entity is not making a GST-free supply under section 38-480 of the GST Act when it sells farm land to a purchaser who intends that a farming business be carried on, on the land and there has been a cessation in carrying on a farming business on the land for a short period from when the entity purchased the land to the time the entity sells the land. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is an owner of farm land, which the entity purchased for the purpose of re sale. At the time the entity purchased the land, a farming business had been carried on, on the land for more than five years. The entity has owned the land for only a short period and is now selling to a purchaser who intends that a farming business be carried on, on the land. The entity's acquisition of the land and subsequent sale do not occur simultaneously. During the period that the entity has owned the land, there has been a cessation in carrying on a farming business, on the land. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 38-480 of the GST Act provides that the supply of a freehold interest in land is GST-free if: The first requirement to be satisfied under section 38-480 of the GST Act is that the land is land on which a farming business has been carried on for at least the period of five years preceding the supply. The phrase, 'the period of 5 years preceding the supply' means that the period immediately preceding the supply must be a continuous period. At the time that the entity purchased the farm land, a farming business had been carried on, on the land for at least five years and now after a short period of ownership, the entity is selling to a purchaser who intends that a farming business will be carried on, on the land. However, there has been a cessation of carrying on a farming business on the land for the short period from when the entity purchased the land to the time the entity sells the land. While the entity's period of ownership has been short, during this period, there has been more than a mere temporary cessation of farming activities on the land, but rather, there has been a complete cessation of carrying on a farming business. As such, the land is not land on which a farming business has been carried on for a continuous period of five years preceding the entity's supply and the first requirement of section 38-480 of the GST Act is not satisfied. Accordingly, the entity is not making a GST-free supply when it sells the farm land. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. In addition, the supply is not GST-free under any other provision of Division 38 of the GST Act or input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells farm land to a purchaser who intends that a farming business be carried on, on the land and there has been a cessation in carrying on a farming business on the land for a short period from when the entity purchased the land to the time the entity sells the land.", "Date_of_Decision": "2 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 section 38-480 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/103 | ATO ID 2004/631", "Subject_References": "Goods and services tax GST free GST farm land Farming business Supply of land", "Case_References": "", "Other_References": "Commonwealth of Australia 2003. Primary Production Industry Partnership - Issues Register - Issue 6.2.1(b) - Farm Land. Tax Office, viewed 2 December 2003. www.ato.gov.au", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004632", "Unmatched_Content": "Keywords Goods and services tax GST free GST farm land Farming business Supply of land"}
{"ATO_ID_Number": "ATO ID 2004/674", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of farm land that includes the assignment of a lease of Crown land that is dedicated as a future road", "Issue": "Is the entity, a farm operator, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, as part of the sale of farm land, the entity assigns its interest under a lease of Crown land that is dedicated as a future road?", "Decision": "Yes, the entity is making a GST-free supply under section 38-480 of the GST Act when, as part of the sale of farm land, the entity assigns its interest under a lease of Crown land that is dedicated as a future road.", "Facts": "The entity is a farm operator that is registered for goods and services tax (GST). Under a single contract of sale, the entity sells its freehold interest in two separately titled adjacent lots of land. The entity has carried on a farming business on the land for more than five years before the sale. As part of the sale arrangement, the entity is also assigning its interest under a lease of Crown land to the purchaser of the freehold interests. The entity leases this area of Crown land from an Australian government agency. The Crown land is dedicated as a future road and is situated within the boundaries of the entity's freehold land. The land dedicated as a future road is not open to the public. Because of the land's dedication as a future road, the entity has not planted any crops on it. The purchaser intends that a farming business be carried on, on the land.", "Reasons_for_Decision": "Summary: Section 38-480 of the GST Act provides that the supply of a freehold interest in, or the lease by an Australian government agency of or the long term lease of, land is GST-free if: Under a single contract of sale, the entity is selling its freehold interest in two separately titled adjacent lots of land and is also assigning its interest under a lease of Crown land. Section 38-480 of the GST Act refers to a supply by way of lease by an Australian government agency. A supply by way of the lease referred to in section 38-480 of the GST Act, includes not only the initial grant of the lease by the Australian government agency, but also a supply by way of assignment or transfer of the lease. Accordingly, the entity's supply of land (the sale and the assignment) can be considered under section 38-480 of the GST Act. In order to determine the past, or intended use, of land it is necessary to look at the land in its entirety. If farming activities represent the predominant activity carried out, or to be carried out, on the land in its entirety, then it can be considered that a farming business has been carried on, on the land. Where a farming business has been, or is to be, carried out on adjacent blocks of land, it is necessary to have regard to the activities carried out on all the blocks viewed as a whole. Although the entity has not planted crops on the land that is dedicated as a future road, when that area of land is viewed in conjunction with the activities which have taken place, or are to take place, on the two adjacent freehold lots, the entity's land is regarded as land on which a farming business has been and will be conducted. The farming business has been carried on, on the land for more than 5 years preceding the supply and the purchaser intends that a farming business be carried on, on the land. Therefore, the entity is making a GST-free supply under section 38-480 of the GST Act when, as part of the sale of farm land, the entity assigns its interest under a lease of Crown land that is dedicated as a future road.", "Date_of_Decision": "19 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-480", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST farm land Farming business Supply of land", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004674", "Unmatched_Content": "Keywords Goods and services tax GST free GST farm land Farming business Supply of land"}
{"ATO_ID_Number": "ATO ID 2004/730", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of farm land when a portion of the farm land is subject to a restrictive covenant", "Issue": "Is the entity, a farmer, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells farm land and a portion of that farm land is subject to a restrictive covenant that prohibits farming activities from being carried out on that portion of the land?", "Decision": "Yes, the entity is making a GST-free supply under section 38-480 of the GST Act when it sells farm land and a portion of that farm land is subject to a restrictive covenant that prohibits farming activities from being carried out on that portion of the land.", "Facts": "The entity is a farmer that owns farm land. The entity has carried on a farming business on the land for more than five years preceding the sale. A portion of the entity's farm land is subject to a restrictive covenant that prohibits farming activities from being carried out on that portion of the farm land. The portion of the farm land that the entity uses for farming is greater than the portion of the farm land that is subject to the restrictive covenant. The entity is selling the farm land to a purchaser who intends that a farming business be carried on, on the land. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subdivision 38-O of the GST Act allows the supply of farm land to be GST-free in certain circumstances. Section 38-480 of the GST Act provides that the supply of a freehold interest in, or the lease by an Australian government agency of or the long term lease of, land is GST-free if: While the entity has carried on a farming business on the land for more than five years preceding the sale, a portion of the entity's farm land is subject to a restrictive covenant that prohibits farming activities from being carried out on that portion of the farm land. In determining whether land is land on which a farming business is to be carried on for the purposes of section 38-480 of the GST Act, it is necessary to look at the land in its entirety and whether the farming activities represent the predominant activity carried out on the land. Where a covenant restricts the use to which land may be put and also imposes other obligations on an owner of land, any farming activities will generally be regarded as being the predominant activity carried out on the land, if any of the following conditions are satisfied: The portion of the farm land that the entity uses for farming is greater than the portion of the farm land that is subject to the restrictive covenant. Therefore, as the entity uses the majority of the land to carry on a farming business, farming activities represent the predominant activity carried out on the land. As such, the farm land is land on which a farming business has been carried on for more than five years preceding the supply and the first requirement of section 38-480 of the GST Act is satisfied. The entity is selling the farm land to a purchaser who intends that a farming business be carried on, on the land. As such, the second requirement of section 38-480 of the GST Act is satisfied. Accordingly, the entity is making a GST-free supply under section 38-480 of the GST Act when it sells farm land and a portion of the farm land is subject to a restrictive covenant that prohibits farming activities from being carried out on that portion of the land.", "Date_of_Decision": "2 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-O section 38-480", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/631 | ATO ID 2004/632 | ATO ID 2004/674", "Subject_References": "Goods and services tax GST free GST farm land Farming business Supply of land", "Case_References": "", "Other_References": "Commonwealth of Australia 2003. Primary Production Industry Partnership - Issues Register - Farmland. Tax Office, viewed 18 June 2003.", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004730", "Unmatched_Content": "Keywords Goods and services tax GST free GST farm land Farming business Supply of land"}
{"ATO_ID_Number": "ATO ID 2001/291", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Sale of Farmland", "Issue": "Is the entity, a grazier, making a GST-free supply under section 38-480 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells its grazing property?", "Decision": "Yes, the entity is making a GST-free supply under section 38-480 of the GST Act when it sells its grazing property.", "Facts": "The entity carries on a business of grazing cattle for sale. The entity grazes the cattle on the land it owns. The entity is now selling the land. The entity has been carrying on the business on the land for a period of 5 years and will continue to do so leading up to the sale. The purchaser of the land intends to carry on a horticulture business on the property. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subdivision 38-O of the GST Act allows the supply of farm land to be GST-free in certain circumstances. Section 38-480 of the GST Act states: 'The supply of a freehold interest in, or the lease by an Australian government agency of or the long term lease of, land is GST-free if: (a) the land is land on which a farming business has been carried on for at least the period of 5 years preceding the supply; and (b) the recipient of the supply intends that a farming business be carried on, on the land.' Therefore, for the sale of farm land to be GST-free, the above requirements must be satisfied. In this case, the entity has been carrying on a business of grazing cattle for sale on the land. The entity has been carrying on that business on the land for the period of 5 years preceding the sale (supply). Furthermore, the purchaser (the recipient of the supply) intends to carry on a horticulture business on the land. As such, it is necessary to determine whether the entity's grazing activities amount to a 'farming business' as per the first requirement in section 38-480 of the GST Act; and whether a horticulture business amounts to a 'farming business' as per the second requirement in section 38-480 of the GST Act. The phrase 'farming business' is defined for the purposes of the GST Act. Subsection 38-475(2) of the GST Act states: 'An entity carries on a farming business if it carries on a business of: (a) cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or (b) maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or ....' In this case, the entity has been carrying on a business of grazing cattle for sale. This activity falls within the definition of 'farming business' in paragraph 38-475(2)(b) of the GST Act, as grazing cattle for sale is 'maintaining animals for the purpose of selling them'. As such, a 'farming business' has been carried on for at least the period of 5 years preceding the supply as per the requirement in paragraph 38-480(a) of the GST Act. In addition, the purchaser (the recipient of the supply) intends to conduct a horticulture business on the property. This activity falls within the definition of 'farming business' in paragraph 38-475(2)(a) of the GST Act because 'horticulture' involves the growing of plants for sale. Furthermore, as paragraph 38-480(b) of the GST Act requires that the recipient intend that 'a farming business' be carried on, it is not necessary for the recipient of the supply to intend for the same farming business to be carried on, on the land. Accordingly, the requirement in paragraph 38-480(b) of the GST Act is also satisfied. Therefore, as the requirements in section 38-480 of the GST Act are satisfied, the entity is making a GST-free supply of farm land.", "Date_of_Decision": "26 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-O section 38-475(2)(a) section 38-475(2)(b) section 38-480 paragraph 38-480(a) paragraph 38-480(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/292", "Subject_References": "Goods & services tax GST free GST farm land Supply of land", "Case_References": "", "Other_References": "Primary Production Newsletter No. 2 - 23 May 2000", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001291", "Unmatched_Content": "This ATO ID has been amended to improve clarity. | Keywords Goods & services tax GST free GST farm land Supply of land"}
{"ATO_ID_Number": "ATO ID 2001/292", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and increasing adjustments for supply of farmland", "Issue": "Does the entity, a horticulturalist, have an increasing adjustment under subsection 135-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, at the time of purchasing farm land that is GST-free under section 38-480 of the GST Act, it intends to build residential premises on the farm land, and lease those premises to a farm manager?", "Decision": "Yes, the entity does have an increasing adjustment under subsection 135-5(1) of the GST Act when, at the time of purchasing farm land that is GST-free under section 38-480 of the GST Act, it intends to build residential premises on the farm land, and lease those premises to a farm manager.", "Facts": "The entity is a horticulturalist. The entity has purchased farm land that was supplied to it as a GST-free supply under section 38-480 of the GST Act. At the time of purchasing the farm land, the entity intended to build a house on the farm land and then lease it to a farm manager. The lease of the house is an input taxed supply under paragraph 40-35(1)(a) of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under subsection 135-5(1) of the GST Act, an entity has an increasing adjustment where: In this case, when the entity purchased the farm land, it became the recipient of a supply that is GST-free under section 38-480 of the GST Act. Accordingly, the first requirement in subsection 135-5(1) of the GST Act is satisfied. In addition, at the time of purchasing the farm land, the entity intended to build a house on the farm land and lease it to a farm manager. The lease of residential premises by the entity to the farm manager is an input taxed supply under paragraph 40-35(1)(a) of the GST Act. As such, the entity intended that some of the supplies made through the enterprise to which the supply relates, would be supplies that are neither taxable supplies nor GST-free supplies. Therefore, the second requirement in subsection 135-5(1) of the GST Act is also satisfied. As such, at the time of purchasing the farm land, the entity is required to make an increasing adjustment under subsection 135-5(1) of the GST Act. where: ' supply price means the price of the supply in relation to which the increasing adjustment arises' and ' proportion of non-creditable use is the proportion of all the supplies made through the enterprise that the entity intends will be supplies that are neither taxable supplies nor GST-free supplies, expressed as a percentage worked out on the basis of the prices of those supplies'.]", "Date_of_Decision": "26 July 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-480 subsection 135-5(1) subsection 135-5(2) paragraph 40-35(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/291", "Subject_References": "Goods & services tax GST free GST farm land Supply of land GST net amounts & adjustments Adjustments GST residential rents Residential premises", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001292", "Unmatched_Content": "This ATO ID was amended to clarrify the ATO position. | '1/10 x Supply price x Proportion of non-creditable use' | Keywords Goods & services tax GST free GST farm land Supply of land GST net amounts & adjustments Adjustments GST residential rents Residential premises"}
{"ATO_ID_Number": "ATO ID 2006/247", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and agricultural managed investment scheme - sale of a grower's business", "Issue": "Does the entity, a participant in an agricultural managed investment scheme, carrying on an enterprise as a grower in that scheme, and registered for goods and services tax (GST), make a taxable supply when it sells its enterprise?", "Decision": "Yes, the entity makes a taxable supply when it sells its enterprise.", "Facts": "The entity is a participant in an agricultural managed investment scheme. The scheme arrangement is that each participant, described as a 'grower', enters into a subleasing and management agreement over one or more 'farmlots. Farmlots are parcels of land specifically allocated to each grower. The manager of all of the farmlots is the responsible entity of the managed investment scheme. Each grower carries on a business on its particular farmlot using the services of the manager. Each grower pays the manager for these management services. The leasing and management agreements make it clear that each grower owns the harvest from their own farmlot. An opportunity arises for the entity to transfer all of its interests - its leasehold interest, and the balance of the management agreement - to a buyer. The entity accepts the offer and transfers all its interests in the farmlots to the buyer. The buyer does not enter into a written agreement with the entity for the sale of the agricultural business to be treated as the sale of a going concern for GST purposes. The entity is registered for GST under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The supply of the entity's business is in the course or furtherance of the grower's enterprise. The supply is connected with Australia.", "Reasons_for_Decision": "Summary: The supply meets the four positive requirements of section 9-5 of the GST Act. The supply is therefore taxable except to the extent, if any, that it is GST-free or input taxed. It is clear that the supply does not meet the requirements for a GST-free supply under Division 38. Is the supply of the business input taxed under division 40 of the GST Act, and in particular is it a financial supply under subsection 40-5(1) of the GST Act? The table in subregulation 40-5.09(3) of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) lists the interests, the supply of which, can be input taxed financial supplies where all of the conditions set out in subregulation 40-5.09(1) in the GST Regulations are satisfied. Item 10 in the table lists securities. 'Securities' has the meaning provided in subsection 92(1) of the Corporations Act 2001 (Corporations Act).. The Corporations Act includes various types of managed investment schemes as securities. Although interests in managed investment schemes are specified in subregulation 40-5.09(3) of the GST Regulations ,agricultural schemes as described in the present case have features that are different from an asset management managed investment scheme, such as a unit trust dealing in securities. In an asset managed scheme, the trustee uses trust funds to purchase assets such as shares. The assets remain the property of the scheme or trust. A unit holder has only a beneficial interest in the scheme's assets. By contrast, in the present scheme individual growers enter into subleasing agreements over specific parts of the land or 'farmlots'. The leasing and management agreements typically make it clear that the particular grower owns the harvest from that grower's farmlots. Where a grower has an interest in land and other rights or interests associated with carrying on their business, they have an asset - a business - that can be sold. The business that a grower supplies consists of an interest in land, an interest in the harvest from that land and the balance of the rights under the management agreement. We consider that the consideration they receive is for the supply of the business and the interests and rights needed to carry it on, rather than for an interest in a managed investment scheme. The supply of the business is therefore not input taxed.", "Date_of_Decision": "25 August 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST agriculture GST input taxed GST primary production GST financial supplies GST managed investment schemes GST property and construction", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006247", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | This ATO ID has been amended to improve clarity | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Goods and services tax GST agriculture GST input taxed GST primary production GST financial supplies GST managed investment schemes GST property and construction"}
{"ATO_ID_Number": "ATO ID 2005/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and entitlement to register for GST by a grower in an agricultural managed investment scheme", "Issue": "Is the entity, an individual participating as a grower in an agricultural managed investment scheme, entitled to register for goods and services tax (GST) under section 23-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when:", "Decision": "Yes, the entity is entitled to register for GST under section 23-10 of the GST Act as the entity will be carrying on an enterprise with an expectation of profit.", "Facts": "The entity is an individual. The entity applied for and has been allocated, on a sub-lease basis, a farm lot in an agricultural managed investment scheme. Prior to the formal offer to members of the public to participate in the agricultural scheme, the Tax Office issued an income tax Product Ruling indicating that the specific activities to be conducted by growers covered by the Ruling would be accepted as constituting the carrying on of a business. The entity is a grower covered by that Product Ruling. Immediately prior to becoming a participant in the scheme, the entity was not registered for GST. On being accepted into the scheme, the entity does not necessarily expect to have any turnover from the agricultural activities in the first 12 months. However, the entity does expect to make a profit from its agricultural activities in the long term. This is consistent with the type of agricultural activity the entity is conducting.", "Reasons_for_Decision": "Summary: Subsection 23-10(1) of the GST Act provides an entity may be registered for GST if the entity is carrying on an enterprise (whether or not the entity's turnover is at, above or below the registration turnover threshold). Paragraph 9-20(1)(a) of the GST Act provides that an enterprise includes an activity, or a series of activities done in the form of a business. Goods and Services Tax Determination GSTD 2006/6 examines the issue of what constitutes an enterprise. Paragraph 12 of GSTD 2006/6 explains that the definition of 'business' found in section 195-1 of the GST Act is the same as that used in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) and in section 995-1 of the Income Tax Assessment Act 1997. (A similar explanation appeared in paragraph 6 of GSTD 2000/8, which was withdrawn and replaced by GSTD 2006/6 with effect from 13 December 2006.). Prior to the scheme becoming available to the public, an income tax Product Ruling was issued, which ruled that the specific activities to be conducted under the scheme will constitute the carrying on of a business by growers covered by the Ruling. The entity is such a grower in the scheme and will be carrying on activities as described in the Product Ruling. Therefore, the entity is carrying on activities in the form of a business which satisfyies the requirement under paragraph 9-20(1)(a) of the GST Act. However, paragraph 9-20(2)(c) of the GST Act provides that an enterprise does not include an activity, or series of activities done by an individual or a partnership (all or most of the members of which are individuals), without a reasonable expectation of profit or gain. Although, the entity does not necessarily expect to have any turnover in the first 12 months in connection with the managed investment scheme, the entity does expect to make a profit in the long term. This is consistent with the type of agricultural activity the entity is conducting. Therefore, the entity has a reasonable expectation of profit and paragraph 9-20(2)(c) of the GST Act does not exclude the entity's activities from being an enterprise. As such, the entity's activities constitute an enterprise. Accordingly, the entity is entitled to register for GST under subsection 23-10(1) of the GST Act.", "Date_of_Decision": "2 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-20 paragraph 9-20(1)(a) paragraph 9-20(2)(c) section 23-10 subsection 23-10(1)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Determination GSTD 2000/8 | Goods and Services Tax Determination GSTD 2006/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and service tax GST registration GST enterprise", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20053", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Determination GSTD 2000/8 Goods and Services Tax Determination GSTD 2006/6 | Keywords Goods and service tax GST registration GST enterprise"}
{"ATO_ID_Number": "ATO ID 2004/485", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of impounded livestock by a local council", "Issue": "Is the entity, a local council, making a taxable supply under either section 105-5 or section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, under council by-laws it sells impounded livestock?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when, under council by-laws it sells impounded livestock. Section 105-5 of the GST Act does not apply, as the supply is not made in satisfaction of a debt.", "Facts": "The entity is a local council. The entity impounded stray livestock. The council by-laws provide that the entity can sell the impounded livestock after a specified period if the owner of the livestock cannot be identified. After the specified period the entity sold the livestock at public auction. The purchaser of the livestock has full ownership of the livestock. The entity did not take ownership of the livestock. Under the council by-laws the entity holds the proceeds from the sale of the livestock, less the costs of impounding and selling the livestock, on trust for the collection by the owner of the livestock once identified. If the owner of the livestock had realised their livestock had strayed and been impounded, before the entity sold the livestock, they could have collected the livestock and would have been liable to pay the impounding fees. The entity is not acting as an agent for the owner of the livestock when they sell the livestock. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 105-5 of the GST Act provides that a supply made by a creditor in satisfaction of a debt is a taxable supply if: The entity sold the livestock to a third party at public auction. Under the council by-laws the entity holds the proceeds from the sale of the livestock, less the costs of impounding and selling the livestock, on trust for the collection by the owner of the livestock once identified. As such, the entity did not make the supply in satisfaction of a debt that the owner of the livestock owed to the entity, which is the first requirement of section 105-5 of the GST Act. Even though the costs of impounding and selling the livestock were withheld from the proceeds of the sale, the sale was not made for the purpose of satisfying a debt. Section 105-5 of the GST Act does not apply to the sale and the rules in Division 9 of the GST Act must be considered. Under section 9-5 of the GST Act, an entity makes a taxable supply if: The sale of the livestock is for consideration. The entity makes the supply in the course of its enterprise that it carries on in Australia and is registered for GST. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when, under council by-laws it sells impounded livestock.", "Date_of_Decision": "24 January 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 105-5 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/486", "Subject_References": "Goods and services tax GST livestock GST supplies and acquisitions GST supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004485", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST livestock GST supplies and acquisitions GST supply"}
{"ATO_ID_Number": "ATO ID 2004/486", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and proceeds received by owner of impounded livestock sold by a local council", "Issue": "Is the entity, a farmer, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, after lodging a claim under the relevant local council by-laws, it receives proceeds from the sale of its impounded livestock?", "Decision": "No, the entity is not making a taxable supply under section 9-5 of the GST Act when, after lodging a claim under the relevant local council by-laws, it receives proceeds from the sale of its impounded livestock. The entity is not making a supply.", "Facts": "The entity is a farmer. Some of the entity's livestock strayed and were impounded by the local council. The entity was not aware that the livestock had strayed and been impounded. Under the relevant local council by-laws, the local council can sell impounded livestock after a specified period if the owner of the livestock cannot be identified. The local council sold the impounded livestock, by way of a public auction. The local council's supply of the impounded livestock was a taxable supply under section 9-5 of the GST Act. As required by the local council by-laws, it held the proceeds from the sale, less the costs of impounding and selling the livestock, on trust for collection by the owner once identified. After the auction had taken place, the entity became aware that the livestock had been impounded. Under the relevant council by-laws, the entity put in a claim for the proceeds from the sale of the livestock. The local council gave the entity the proceeds from the sale. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. One of the requirements of a taxable supply is that an entity makes a supply (subsection 9-5(a) of the GST Act). Therefore, it must first be established that the entity made a supply. The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Without limiting subsection 9-10(1), under subsection 9-10(2) of the GST Act, a 'supply' includes: • a supply of goods • a supply of services • a provision of advice or information • a grant, assignment or surrender of real property • a creation, grant, transfer, assignment or surrender of any right • a financial supply • an entry into, or release from, an obligation, to do anything, to refrain from doing something, or to tolerate an act or situation • any combination of these. However, for an entity to make a supply it must take some action or do something to cause the supply to be made (see paragraphs 71 to 79 of Goods and Services Tax Ruling GSTR 2006/9). In this case, the entity's livestock strayed and were impounded by the local council. Under the relevant council by-laws, the local council sold the impounded livestock, by way of a public auction. The entity did not take any action to cause the impoundment or sale of the livestock to occur. Therefore, the entity did not make a supply of the livestock to the local council or the purchaser. To receive the proceeds from the sale of the impounded livestock that the local council were holding on trust, the entity was required to lodge a claim. The lodgement of the claim to the sale proceeds is not a supply. As the entity is not making a supply, the entity is not making a taxable supply under section 9-5 of the GST Act when, after lodging a claim under the relevant government legislation, it receives proceeds from the sale of its impounded livestock", "Date_of_Decision": "13 January 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-5(a) section 9-10 subsection 9-10(1) subsection 9-10(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2006/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/485", "Subject_References": "Goods and services tax GST primary production GST livestock GST supplies & acquisitions GST supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004486", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2006/9 | Keywords Goods and services tax GST primary production GST livestock GST supplies & acquisitions GST supply"}
{"ATO_ID_Number": "ATO ID 2001/113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Lease of a fishing quota", "Issue": "Is the entity, the holder of an 'individual transferable quota' in a fishery, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it leases its quota to another entity?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it leases its 'individual transferable quota' to another entity.", "Facts": "Certain species of fish are protected by a quota system. In order to fish for these protected species, it is a requirement to hold an 'individual transferable quota' (ITQ). The entity is the holder of a number of ITQ's which it leases out to other entities. The entity is registered for goods and services tax (GST). The transaction meets the other positive requirements of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: An entity makes a taxable supply where the requirements of 9-5 of the GST Act are satisfied. An essential element of a taxable supply is the making of a supply by an entity. The term 'supply' is broadly defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Paragraph 9-10(2)(e) of the GST Act further states that a 'supply' includes a creation, grant, transfer, assignment or surrender of any right. An ITQ consists of a bundle of rights which are transferable. The lease of these rights are therefore a supply within the specific meaning of the term under paragraph 9-10(2)(e) of the GST Act. Accordingly, the entity makes a supply when it leases its quota to another entity. The lease of the ITQ is a taxable supply in this case as the supply satisfies the requirements of a taxable supply under section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act.", "Date_of_Decision": "24 March 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) paragraph 9-10(2)(e) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/114 | ATO ID 2001/115", "Subject_References": "Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001113", "Unmatched_Content": "Keywords Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/114", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Sale of fishing quota", "Issue": "Is the entity, the holder of an 'individual transferable quota' in a fishery, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act), when it sells its quota to another entity?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells its 'individual transferable quota' to another entity.", "Facts": "Certain species of fish are protected by a quota system. In order to fish for these protected species, it is a requirement to hold an 'individual transferable quota' (ITQ). The entity is the holder of an ITQ which it is selling to another entity. The entity is registered for goods and services tax (GST). The transaction meets the other positive requirements of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: An entity makes a taxable supply where the requirements of section 9-5 of the GST Act are satisfied. An essential element of a taxable supply is the making of a supply by an entity. The term 'supply' is broadly defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Paragraph 9-10(2)(e) of the GST Act further states that a 'supply' includes a creation, grant, transfer, assignment or surrender of any right. An ITQ consists of a bundle of rights which are transferable. The sale of these rights are therefore a supply within the specific meaning of the term under paragraph 9-10(2)(e) of the GST Act. Accordingly, the entity makes a supply when it sells its quota to another entity. The sale of the ITQ is a supply in this case as the supply satisfies the other requirements of a taxable supply under section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act.", "Date_of_Decision": "24 March 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-10(1) paragraph 9-10(2)(e) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/113 | ATO ID 2001/115", "Subject_References": "Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001114", "Unmatched_Content": "Keywords Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2001/115", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and Temporary exchange of a fishing quota", "Issue": "Is entity A, the holder of an 'individual transferable quota' in a fishery, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it temporarily exchanges its quota with the quota of entity B?", "Decision": "Yes, entity A is making a taxable supply under section 9-5 of the GST Act when it temporarily exchanges 'individual transferable quotas' with entity B.", "Facts": "Certain species of fish are protected by a quota system. In order to fish for these protected species, it is a requirement to hold an 'individual transferable quota' (ITQ). Entity A holds an ITQ. It agrees to exchange ITQs with entity B for one year. The ITQs revert back to the original holders at the end of the year. Entity A is registered for goods and services tax (GST). The temporary exchange of ITQs is in the course of entity A's enterprise and is connected with Australia.", "Reasons_for_Decision": "Summary: An entity makes a taxable supply where the requirements of section 9-5 of the GST Act are satisfied. One of the requirements of a taxable supply is that an entity must make a supply for consideration (see paragraph 9-5(a) of the GST Act). The term 'supply' is broadly defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. Paragraph 9-10(2)(e) of the GST Act further states that a 'supply' includes a creation, grant, transfer, assignment or surrender of any right. An ITQ consists of a bundle of rights which are transferable. The exchange of these rights is therefore a supply within the specific meaning of the term under paragraph 9-10(2)(e) of the GST Act. Consideration is defined in section 195-1 of the GST Act to mean 'any consideration within the meaning given by sections 9-15 and 9-17, in connection with the supply.' Subsection 9-15(1) of the GST Act provides that a payment, or any act or forbearance is consideration for a supply if it is 'in connection with', 'in response to or for the inducement of' a supply. Paragraph 12 of Goods and Services Tax Ruling GSTR 2001/6 also provides that consideration includes a payment in a non-monetary or in an 'in kind' form. This includes acts, forbearances, and goods or property. The consideration, in this instance, is non-monetary in that the consideration for the supply made by entity A of its quota to entity B is the supply of entity's B quota to entity A. Accordingly, entity A makes a supply for consideration when it exchanges its quota with the quota of entity B. The supply of the ITQ by entity A is a taxable supply in this case as the supply satisfies the other requirements of a taxable supply under section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. In the case of non-monetary consideration, the price of the supply will be its GST inclusive market value (paragraph 9-75(1)(b) of the GST Act).]", "Date_of_Decision": "24 March 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-5(a) subsection 9-10(1) paragraph 9-10(2)(e) section 9-15 paragraph 9-15(1)(a) section 9-17 paragraph 9-75(1)(b) Division 38 Division 40 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/113 | ATO ID 2001/114", "Subject_References": "Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001115", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Space inserted after the word 'quota' | Amended by inserting section 9-17. As of 1 July 2012, section 9-17 is included within the definition of consideration as defined by section 195-1. | Section 9-15 and section 9-17 added | Keywords Goods and Services Tax GST primary production GST fishing GST supplies acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2006/202", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and acquisition of legal tender for possible re-sale as collectable coins and notes", "Issue": "Is an entity, a GST registered dealer in collectible coins and banknotes, which acquires currency at face value with a view to possible re-sale as collectible notes and coins, entitled to input tax credits on its acquisitions under Division 66 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, a GST registered entity which acquires currency at face value with a view to possible re-sale as collectible notes and coins, is not entitled to input tax credits for such acquisitions under Division 66 of the GST Act.", "Facts": "The entity carries on an enterprise of selling banknotes and coins as items of interest distinct from their face value and use as currency. The entity purchases Australian coins and notes at face value and then selects the coins and/or notes which may be fit for re-sale at a price exceeding the face value. The remaining coins and notes are exchanged at face value. The entity purchases coins and notes from any type of dealer or entity, but does not acquire coins as a first supply from the Royal Australian Mint.", "Reasons_for_Decision": "Summary: Division 66 of the GST Act applies to an acquisition of second-hand goods for the purposes of sale or exchange (but not manufacture) in the ordinary course of business. Subsection 66-5(1) of the GST Act qualifies the operation of Division 11 of the GST Act by allowing an input tax credit for the acquisition of second-hand goods even though the supply of the goods is not a taxable supply. Subsection 66-5(2) of the GST Act limits the operation of section 66-5 of the GST Act by providing that section 66-5 does not apply if: That is, for section 66-5 of the GST Act to apply, the subsequent supply by the acquirer must be a taxable supply. The entity is not entitled to an input tax credit as a result of the operation of Division 66 of the GST Act in relation to its acquisition of banknotes and coins unless they are: Thus, for Subdivision 66-A of the GST Act to apply to these acquisitions, as a starting point it would be necessary to find that the banknotes and coins in question are 'goods' for GST purposes. Section 195-1 of the GST Act defines 'goods' to mean any form of tangible personal property. Section 195-1 of the GST Act defines 'money' to 'include ... currency (whether of Australia or of any other country)....' The definition also explicitly excludes: Thus, while money may take a number of forms, only cash (that is, banknotes and coins) is 'money in a tangible form'. That is, banknotes and coins may be considered chattels. However, 'goods and chattels' are usually construed so as to exclude money, whether in a physical or in any other form. Banknotes and coins placed into currency circulation by the Reserve Bank of Australia and the Royal Australian Mint are legal tender for payment of money in Australia, subject to limitations placed by the Currency Act 1965 on amounts that may be paid with coins. As a medium of exchange, they represent purchasing power of the holder. However, a person in possession of money is not legally bound to buy anything, or to exchange his money for goods or services. In such a sense, money does not become valueless merely because it is not in use as a medium of exchange. It serves as a store of value or wealth for the holder. Under the GST Act definition of money above, a banknote or coin that is purchased for its rarity or curiosity value at a price above its face value cannot be regarded as money in relation to that specific transaction, even though it may otherwise retain its formal status as legal tender. In such a case, the note or coin is the object of the exchange, rather than the medium of exchange. In the facts of this case, the dealer entity acquires banknotes and coins that are in currency circulation, at face value (that is, they are exchanged for money in other forms or denominations), with the hope or intention that some of the notes or coins may be subsequently identified as having a higher value than their face value. In the Tax Office view, such acquisitions are not acquisitions of goods for GST purposes. However, if the dealer entity acquires banknotes or coin that are sold to it as items of rarity, curiosity, or some other characteristic attractive to coin and note collectors (other than the currency value of the note or coin), the dealer entity is acquiring goods. Where notes and coins which, having been acquired by the dealer entity, are subsequently identified and sold by it for a price above their face value, the supply is a supply of goods. Subsection 9-10(4) of the GST Act states: However, a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money. Subdivision 40-A of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) is about financial supplies. Subregulation 40-5.09(1) of the GST Regulations states the requirements for a supply to be a financial supply. It states: The interests itemised at subregulation 40-5.09(3) of the GST Regulations include, at item 9, 'an interest in or under Australian currency, the currency of a foreign country or an agreement to sell currency of either kind'. In the Tax Office view, the GST regulations are clear in the way they intend a transaction involving the exchange of coins and/or notes for money in another form to be characterised for GST purposes. Provided the coins and/or notes have a market value that does not exceed their stated value as legal tender, such a transaction involves the provision, acquisition and/or disposal of an interest in currency and is a financial supply by the entity where the requirements of subregulation 40-5.09(1) of the GST Regulations are satisfied. Subsection 40-5(1) of the GST Act provides that a financial supply is input taxed. In conclusion, the Tax Office considers that the acquisition of coins and/or banknotes on an exchange of currency basis (that is, at their face value), is not an acquisition of goods, but an acquisition of money and a financial supply if subregulation 40-5.09(1) of the GST Regulations is satisfied. As a result, there is no entitlement to input taxed credits under Division 66 of the GST Act. This conclusion is consistent with the policy as set out paragraph 6.69 of the Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1999 , which states: If you acquire second hand goods from an unregistered entity, that entity has paid GST on the supply of the goods to them. They were not entitled to an input tax credit. There is therefore some GST included in the price you pay for those second hand goods. If you subsequently supply those goods in a taxable supply, GST is payable on the supply. This would mean that there is GST charged on GST. In this case, the entity that supplied the notes and coins to the dealer entity would not have paid GST on the supply previously made to them. This is because the supply to that entity was a supply of money, which was either not a supply at all for GST purposes under subsection 9-10(4) of the GST Act, or an input taxed supply of an interest in currency, if it was provided in exchange for money in other forms or currency denominations.", "Date_of_Decision": "24 July 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-10(4) Division 11 section 40-5(1) Division 66 Subdivision 66-A section 66-5 subsection 66-5(1) subsection 66-5(2) Subdivision 66-B section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2 | Goods and Services Tax Ruling GSTR 2004/1 | Goods and Services Tax Ruling GSTR 2005/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Coins & medallions Goods and services tax GST financial supplies GST second hand goods Taxable supply", "Case_References": "", "Other_References": "Paragraph 6.69 of the Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1999", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006202", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 Goods and Services Tax Ruling GSTR 2004/1 Goods and Services Tax Ruling GSTR 2005/3 | Keywords Coins & medallions Goods and services tax GST financial supplies GST second hand goods Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and creditable acquisition of second hand goods that are reconditioned and sold", "Issue": "Is the entity, a second-hand goods dealer, making a creditable acquisition of second-hand goods under section 66-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires second-hand goods that are then reconditioned and sold?", "Decision": "Yes, the entity is making a creditable acquisition of second-hand goods under section 66-5 of the GST Act when it acquires second-hand goods that are then reconditioned and sold.", "Facts": "The entity is a second-hand goods dealer. The entity purchased second-hand goods. The supply of the goods to the entity was neither a taxable nor GST-free supply. The entity provided consideration for this supply. The entity did not import the goods. The entity then reconditioned the second-hand goods (restored them to a good and satisfactory condition) prior to selling them. This sale was a taxable supply. The entity did not divide the goods prior to selling them. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Division 66 of the GST Act allows an entity, in some circumstances, to claim an input tax credit for an acquisition of second-hand goods even though the supply to the entity was not a taxable supply. Subsection 66-5(1) of the GST Act provides that when an entity acquires second-hand goods for the purpose of sale or exchange (but not for manufacture) in the ordinary course of business, the fact that the supply to the entity is not a taxable supply does not stop the acquisition being a creditable acquisition. The entity purchased the second-hand goods for the purpose of sale in its second-hand goods business. However, the entity reconditioned the second-hand goods prior to selling them. Therefore, it is necessary to consider whether the reconditioning of the goods by the entity amounts to manufacture. Goods and Services Tax Ruling GSTR 2000/8 outlines the meaning of 'not for manufacture'. Paragraph 80 of GSTR 2000/8 provides that the word 'manufacture' must be given its ordinary meaning. The Macquarie Dictionary (1997) defines 'manufacture' to mean 'to make or produce by hand or machinery, esp on a large scale; to make in any manner; to work (material) into form for use....' Further, paragraph 81 of GSTR 2000/8 provides that: 'Whether goods you acquired or imported are held for manufacture depends upon whether a different thing has been produced. If the work done is more than a repair renovation or modification of old material and changes the goods into something of a different character, there has been a manufacture of goods (see FC of T v. Jack Zinader Pty Ltd (1949) ATD 46; (1949) 78 CLR 336 and FC of T v. Jax Tyres Pty Ltd 85 ATC 4001; (1985) 5 FCR 257).' The reconditioning of the goods by the entity merely restored the goods to a good and satisfactory condition; it did not alter the goods into something different. Therefore, the entity did not acquire the goods for the purpose of manufacture and the requirements in subsection 66-5(1) of the GST Act are met. However, subsection 66-5(2) of the GST Act provides that subsection 66-5(1) of the GST Act does not apply where: The supply of the goods to the entity was neither a taxable nor GST-free supply. The entity did not import the goods. The supply of the goods to the entity was not a supply by way of hire as the entity purchased the goods. The entity did not divide the goods prior to selling them and the subsequent sale of the goods was a taxable supply. Accordingly, the exclusions in subsection 66-5(2) of the GST Act do not apply to exclude the application of subsection 66-5(1) of the GST Act. Therefore, the entity is making a creditable acquisition of second-hand goods under section 66-5 of the GST Act when it acquires second-hand goods that are then reconditioned and sold.", "Date_of_Decision": "13 December 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 11-5 paragraph 11-5(a) paragraph 11-5(c) paragraph 11-5(d) section 11-20 Division 66 section 66-5 subsection 66-5(1) subsection 66-5(2) section 66-10", "Related_Public_Rulings_and_Determinations": "GSTR 2000/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/8 | ATO ID 2003/9", "Subject_References": "Goods & services tax GST second hand goods GST supplies & acquisitions Creditable acquisition", "Case_References": "FC of T v Jack Zinader Pty Ltd (1949) 9 ATD 46 (1949) 78 CLR 336", "Other_References": "The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20038", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2000/8 | Keywords Goods & services tax GST second hand goods GST supplies & acquisitions Creditable acquisition"}
{"ATO_ID_Number": "ATO ID 2003/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of reconditioned second-hand goods divided before sale", "Issue": "Is the entity, a second-hand goods dealer, making a supply that is not a taxable supply in accordance with section 66-45 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells one of the divided parts of second-hand goods that it divided and reconditioned prior to sale?", "Decision": "Yes, the entity is making a supply that is not a taxable supply in accordance with section 66-45 of the GST Act when it sells one of the divided parts of second-hand goods that it divided and reconditioned prior to sale.", "Facts": "The entity is a second-hand goods dealer. The entity purchased second-hand goods for $770. The consideration for the goods was not itemised. The supply of the goods to the entity was neither a taxable nor GST-free supply. The entity did not import the goods. The entity divided the second-hand-goods into several parts and reconditioned each part (restored them to a good and satisfactory condition). The second-hand goods are of a kind that it is reasonable to expect the entity to divide before supplying them. The entity is now selling one of the divided parts of the second-hand goods for $440. The supply of this divided part of the second-hand goods would normally be a taxable supply. Prior to purchasing the second-hand goods, the entity's total Subdivision 66-B credit amount and total Subdivision 66-B GST amount were zero. The entity keeps records regarding its acquisition of second-hand goods that satisfy the requirements in section 66-55 of the GST Act. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Subdivision 66-B of the GST Act sets out special rules for second-hand goods that are divided prior to re-supply. Under section 66-45 of the GST Act, a supply is not a taxable supply if: The first requirement in section 66-45 of the GST Act is that Subdivision 66-B must apply to the entity's acquisition of second-hand goods; that is that the acquisition must meet the requirements of subsection 66-40(1) but is not excluded under subsection 66-40(2). Subsection 66-40(1) of the GST Act provides that Subdivision 66-B of the GST Act applies to an acquisition of second-hand goods if: The entity purchased the second-hand goods for the purpose of sale in its second-hand good business. The entity then divided the second-hand-goods into several parts and reconditioned each part. Therefore, it is necessary to consider whether the reconditioning of the goods by the entity amounts to manufacture. Goods and Services Tax Ruling GSTR 2000/8 outlines the meaning of 'not for manufacture'. Paragraph 80 of GSTR 2000/8 provides that the word 'manufacture' must be given its ordinary meaning. The Macquarie Dictionary (1997) defines 'manufacture' to mean 'to make or produce by hand or machinery, esp on a large scale; to make in any manner; to work (material) into form for use... .' Further, paragraph 81 of GSTR 2000/8 provides that: 'Whether goods you acquired or imported are held for manufacture depends upon whether a different thing has been produced. If the work done is more than a repair renovation or modification of old material and changes the goods into something of a different character, there has been a manufacture of goods (see FC of T v. Jack Zinader Pty Ltd (1949) ATD 46; (1949) 78 CLR 336 and FC of T v. Jax Tyres Pty Ltd 85 ATC 4001; (1985) 5 FCR 257).' The reconditioning of the divided parts by the entity merely restored the second-hand goods to a good and satisfactory condition; it did not alter the second-hand goods into something different. Therefore, the entity did not acquire the second-hand goods for manufacture. Further, the consideration for the entity's acquisition was greater than $300, the goods are of such a kind that it is reasonable to expect that they would be divided and the entity is selling the divided parts separately. Therefore, the requirements of subsection 66-40(1) of the GST Act are met. However, subsection 66-40(2) of the GST Act provides that Subdivision 66-B of the GST Act does not apply to the acquisition if: The consideration for the goods was not itemised and the supply of the goods to the entity was neither a taxable nor GST-free supply. The entity did not import the goods. The supply of the goods to the entity was not a supply by way of hire as the entity purchased the goods. The entity divided the goods prior to selling them and the subsequent sale of the divided part would normally be a taxable supply. Accordingly, the exclusions in subsection 66-40(2) of the GST Act do not apply to exclude the application of Subdivision 66-B of the GST Act to the entity's acquisition of the goods. Therefore, the first requirement in section 66-45 of the GST Act is satisfied. The second requirement in section 66-45 of the GST Act provides that the entity's Subdivision 66-B credit amount is more that the entity's total Subdivision 66-B GST amount. These terms are defined in section 66-65 of the GST Act. The total Subdivision 66-B credit amount is the sum of the amounts of the input tax credits to which an entity would have been entitled, for all its acquisitions of second-hand goods to which this Subdivision applied, if this Subdivision had not applied to them. If the entity had been entitled to an input tax credit for the acquisition of second-hand goods the amount of its input tax credit would be $70 (1/11th of $770 purchase price). As such, the entity's total Subdivision 66-B credit amount is $70. The total Subdivision 66-B GST amount is the sum of: Prior to purchasing the second-hand goods, the entity's total Subdivision 66-B GST amount was zero. As this is the first sale of part of the second-hand goods the entity's total Subdivision 66-B GST amount is still zero. Therefore, the entity's total Subdivision 66-B credit amount ($70) is more than the entity's total Subdivision 66-B GST amount ($0) and the second requirement in section 66-45 of the GST Act is satisfied. The last requirement in section 66-45 of the GST Act is that the amount of GST that would have been payable on the entity's supply of the goods (if the supply was a taxable supply) must be less than or equal to the difference between the total Subdivision 66-B credit amount and the total Subdivision 66-B GST amount. The amount of GST that would have been payable on the entity's supply is $40 (sale price of $440 x 1/11). This is less than the difference between the entity's total Subdivision 66-B credit amount and the total Subdivision 66-B GST amount ($70 - $0). Therefore, the third requirement in section 66-45 of the GST Act is satisfied. As all the requirements in section 66-45 of the GST Act are met, the entity is making a supply that is not a taxable supply when it sells part of second-hand goods that it divided and reconditioned prior to sale.", "Date_of_Decision": "13 December 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 66-B subsection 66-40(1) paragraph 66-40(1)(a) subsection 66-40(2) section 66-45 section 66-50 section 66-55 section 66-65", "Related_Public_Rulings_and_Determinations": "GSTR 2000/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/8", "Subject_References": "Goods & services tax GST second hand goods GST supplies & acquisitions Taxable supply", "Case_References": "FC of T v Jack Zinader Pty Ltd (1949) 9 ATD 46 (1949) 78 CLR 336", "Other_References": "The Macquarie Dictionary 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20039", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2000/8 | Keywords Goods & services tax GST second hand goods GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2004/478", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of a cycle rickshaw operator", "Issue": "Is the entity, a business operator, required to be registered for goods and services tax (GST) in accordance with the compulsory registration requirements in subsection 144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it transports passengers, for a fare, by way of a cycle rickshaw?", "Decision": "No, the entity is not required to be registered for GST in accordance with the compulsory registration requirements in subsection 144-5(1) of the GST Act when it transports passengers, for a fare, by way of a cycle rickshaw.", "Facts": "The entity is a business operator. The entity transports passengers by way of a cycle rickshaw and charges its passengers a fare. The cycle rickshaw is a tricycle that is pedal-driven by the entity. Passengers are able to either pre-book the cycle rickshaw or hail its use as they walk along the street. The entity's current GST turnover and projected GST turnover are below the registration turnover threshold as set out in section 23-15 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 144-5(1) of the GST Act provides that an entity is required to be registered for GST if, in carrying on its enterprise, the entity supplies taxi travel. The term 'taxi travel' is defined in section 195-1 of the GST Act to mean travel that involves transporting passengers, by taxi or limousine, for fares. The terms 'taxi' and 'limousine' are not defined in the GST Act and therefore it is appropriate to consider their ordinary meaning. The Macquarie Dictionary , 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales, defines 'taxi' as, 'a motor car for public hire, especially one fitted with a taximeter' and the term 'limousine' as 'any large luxurious car.' The cycle rickshaw supplied by the entity is a pedal-driven tricycle and as such, does not fall within the definition of either a taxi or limousine. Although the entity charges a fare for its supply of transport by way of cycle rickshaw, the cycle rickshaw is neither a taxi nor a limousine for the purposes of the GST Act. As such, the supply of transport by way of cycle rickshaw is not the supply of 'taxi travel' as defined in section 195-1 of the GST Act. Therefore, the entity is not required to be registered for GST in accordance with the compulsory registration requirements in subsection 144-5(1) of the GST Act when it transports passengers, for a fare, by way of a cycle rickshaw.", "Date_of_Decision": "7 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 23-15 subsection 144-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST special rules Registration of taxis", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004478", "Unmatched_Content": "Keywords Goods and services tax GST special rules Registration of taxis"}
{"ATO_ID_Number": "ATO ID 2004/523", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of motor powered tricycle operator", "Issue": "Is the entity, a business operator, required to be registered for goods and services tax (GST) in accordance with the compulsory registration requirements in subsection 144-5(1) of the A New Tax System (Goods and Services Tax) Act (GST Act), when the entity transports passengers, for a fare, by way of a motor powered tricycle?", "Decision": "No, the entity is not required to be registered for GST in accordance with the compulsory registration requirements in subsection 144-5(1) of the GST Act when the entity transports passengers, for a fare, by way of a motor powered tricycle.", "Facts": "The entity is a business operator. The entity transports passengers by way of a motor powered tricycle and charges its passengers a fare. The motor powered tricycle is a motorcycle with additional seating capacity constructed to transport passengers. The entity's current GST turnover and projected GST turnover are below the registration turnover thresholds as set out in section 23-15 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 144-5(1) of the GST Act provides that an entity is required to be registered for GST if, in carrying on its enterprise, it supplies taxi travel. The term 'taxi travel' is defined in section 195-1 of the GST Act to mean travel that involves transporting passengers, by taxi or limousine, for fares. The terms 'taxi' and 'limousine' are not defined in the GST Act and therefore it is appropriate to consider their ordinary meaning. The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'taxi' as 'a motor car for public hire, especially one fitted with a taximeter' and the term 'limousine' as 'any large luxurious car'. The motor powered tricycle supplied by the entity is a motorcycle with additional seating capacity constructed to transport passengers and as such, does not fall within the definition of either a taxi or a limousine. Although the entity charges a fare for its supply of transport by way of motor powered tricycle, the motor powered tricycle is neither a taxi nor a limousine for the purposes of the GST Act. As such, the supply of transport by way of motor powered tricycle is not the supply of 'taxi travel' as defined in section 195-1 of the GST Act. Therefore, the entity is not required to be registered for GST in accordance with the compulsory registration requirements in subsection 144-5(1) of the GST Act when the entity transports passengers, for a fare, by way of a motor powered tricycle. Note. When an entity's current or projected GST turnover from its enterprise meets the registration turnover threshold in section 23-15 of the GST Act it will be required to registered for GST under section 23-5 of the GST Act.", "Date_of_Decision": "8 October 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 144-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/478", "Subject_References": "Goods and services tax GST special rules Registration of taxis", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004523", "Unmatched_Content": "Keywords Goods and services tax GST special rules Registration of taxis"}
{"ATO_ID_Number": "ATO ID 2002/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of a wedding car operator", "Issue": "Is the entity, a wedding car operator, required to be registered for goods and services tax (GST) as per the compulsory registration requirements in subsection 144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies car hire and chauffeuring services for weddings in accordance with a restricted hire licence?", "Decision": "No, the entity is not required to be registered for GST as per the compulsory registration requirements in subsection 144-5(1) of the GST Act when it supplies car hire and chauffeuring services for weddings in accordance with a restricted hire licence.", "Facts": "The entity is a wedding car operator. The entity supplies car hire and chauffeuring services for weddings but only uses its vehicles for the transport of passengers on the day of a wedding. The entity charges a fee for this service. The entity is accredited by the relevant transport authority as a private hire vehicle operator. The entity's vehicle is only authorised by the Department of Motor Transport to be used for the transport of wedding parties on the day of the wedding. The entity's current GST turnover and projected GST turnover are below the registration turnover threshold in section 23-15 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 144-5(1) of the GST Act, an entity is required to be registered for GST if, in carrying on its enterprise, it supplies taxi travel. Section 195-1 of the GST Act defines taxi travel to mean travel that involves transporting passengers, by taxi or limousine, for fares. The terms 'taxi' and 'limousine' are not defined in the GST Act and therefore take on their ordinary meaning. The Macquarie Dictionary 1997, defines 'taxi' as, 'a motor car for public hire, especially one fitted with a taximeter'. In accordance with the restricted hire licence, the entity's vehicle is only available for private hire. The vehicle is not available for public hire, and therefore, the wedding car is not a taxi. The Macquarie Dictionary 1997 defines 'limousine' as any large luxurious car.' Some, if not all, of the vehicles that the entity uses would satisfy the ordinary definition of a limousine. However, the definition of 'limousine' should be interpreted in accordance with the context in which the term 'limousine' is used. The term 'limousine' is included in the definition of taxi travel for the purposes of Division 144 of the GST Act. The explanatory section in Division 144 states that 'Taxi operators are required to be registered, regardless of turnover.' Subsection 182-10(2) of the GST Act provides that while explanatory sections are not operative provisions they may be considered in certain circumstances. Paragraph 182-10(2)(a) of the GST Act provides that explanatory provisions can be used to determine the purpose or object underlying the provision. The purpose of Division 144 of the GST Act is to require all taxi operators to register for GST. The term 'limousine' is therefore used in the context of taxi operations. Taking this into account, it is considered that only limousine services that are provided by the taxi industry or are similar to and essentially in competition with the taxi industry are 'taxi travel'. In this case, the entity is a private hire vehicle operator and only uses its vehicles in accordance with the restricted licences issued by the relevant transport authority for the transport of passengers on the day of their wedding. The entity is not providing a service that is similar to the services provided by the taxi industry nor is it providing a service that essentially competes with the taxi industry. As such, the entity is not providing travel in a 'limousine' for the purposes of the GST Act and therefore, the entity is not supplying taxi travel as defined in section 195-1 of the GST Act. The entity is not required to be registered for GST as per the compulsory registration requirements in subsection 144-5(1) of the GST Act when it only supplies car hire and chauffeuring services for weddings in accordance with a restricted hire licence.", "Date_of_Decision": "10 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 23-5 section 23-15 Division 144 subsection 144-5(1) subsection 182-10(2) paragraph 182-10(2)(a) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST registration Required to be registered GST special rules Registration of taxis", "Case_References": "", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200223", "Unmatched_Content": "Keywords Goods & services tax GST registration Required to be registered GST special rules Registration of taxis"}
{"ATO_ID_Number": "ATO ID 2002/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and reception and transfer services", "Issue": "Is the entity, a supplier of reception and transfer services to overseas students, required to be registered for goods and services tax (GST), in accordance with the compulsory registration requirements in subsection 144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the entity is not required to be registered for GST in accordance with the compulsory registration requirements under subsection 144-5(1) of the GST Act.", "Facts": "The entity is a supplier of reception and transfer services to overseas students. The entity supplies the services to the students upon their arrival in Australia. As part of this service, the entity deals with any problems facing the students upon their arrival including lost baggage and Customs, and provides the students with information on schools, relevant local conditions, settling in services and general orientation activities. Sometimes the entity uses its vehicle to convey the overseas students from the airport to the students accommodation. The entity's vehicle is not a limousine. The entity receives a standard amount for the reception and transfer services it provides to each student. The entity's current and projected GST turnover is below the registration turnover threshold in section 23-15 of the GST Act.", "Reasons_for_Decision": "Summary: Under subsection 144-5(1) of the GST Act, an entity is required to be registered for GST if, in the course of its enterprise, it supplies taxi travel. Section 195-1 of the GST Act defines taxi travel to mean travel that involves transporting passengers, by taxi or limousine, for fares. As the entity's vehicle is not a limousine, it remains to be determined whether the services that the entity provides amounts to transporting passengers, by taxi, for fares. The word 'taxi' is not defined in the GST Act and accordingly takes on its ordinary meaning. The Macquarie Dictionary (1997), defines 'taxi' as, 'a motor car for public hire, especially one fitted with a taximeter.' In this case, the entity supplies reception and transfer services. The conveying of passengers from the airport to their accommodation is part of the reception and transfer service that the entity provides. The entity does not use its vehicle in a taxi like manner or operate its vehicle on a fare for distance or time arrangement. Additionally, the entity's vehicle is not available for public hire. The entity's vehicle is not a 'taxi' and it is considered that the entity is not providing a service that is similar to services provided in the taxi industry nor is it providing a service that essentially competes with the taxi industry. Accordingly, the entity is not supplying taxi travel as defined in section 195-1 of the GST Act. As the entity is not providing taxi travel, it is not required to register for GST in accordance with the compulsory registration requirements in subsection 144-5(1) of the GST Act.", "Date_of_Decision": "10 September 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 23-5 section 23-15 subsection 144-5(1) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST registration GST annual turnover GST turnover threshold Required to be registered GST special rules Registration of taxis", "Case_References": "", "Other_References": "The Macquarie Dictionary, (1997), 3rd edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200224", "Unmatched_Content": "Keywords Goods & services tax GST registration GST annual turnover GST turnover threshold Required to be registered GST special rules Registration of taxis"}
{"ATO_ID_Number": "ATO ID 2002/486", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and taxi plate owner that does not provide taxi travel", "Issue": "Is the entity, a taxi plate owner, required to be registered for goods and services tax (GST) under the compulsory registration requirements in subsection 144-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it only leases out the taxi plate but does not provide taxi travel?", "Decision": "No, the entity is not required to be registered for GST under the compulsory registration requirements in subsection 144-5(1) of the GST Act, when it only leases out the taxi plate but does not provide taxi travel.", "Facts": "The entity owns taxi plates. The entity provides the taxi plates to a taxi company under a lease agreement. The taxi company attaches the plates to its vehicles. The entity does not own a taxi or a taxi driver's licence.", "Reasons_for_Decision": "Summary: Subsection 144-5(1) of the GST Act provides that an entity is required to be registered if, in carrying on its enterprise, it supplies taxi travel. Subsection 144-5(2) of the GST Act further states that it does not matter whether: Taxi travel is defined in section 195-1 of the GST Act to mean 'travel that involves transporting passengers, by taxi or limousine, for fares.' The entity is only leasing out the taxi plates, it is not transporting passengers. The leasing out of taxi plates in itself does not constitute the supply of taxi travel for the purposes of subsection 144-5(1) of the GST Act. Further, the entity does not own a taxi or a taxi driver's licence and the taxi company attaches the plates to its vehicles. It is the taxi company that provides the taxi travel. Therefore, the entity is not required to be registered for GST, under the compulsory registration requirements in subsection 144-5(1) of the GST Act, when it only leases out the taxi plates but does not provide taxi travel.", "Date_of_Decision": "23 February 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 23 subsection 144-5(1) subsection 144-5(2) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST transport GST registration Registration of taxis", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002486", "Unmatched_Content": "Keywords Goods and services tax GST transport GST registration Registration of taxis"}
{"ATO_ID_Number": "ATO ID 2011/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of a security and safety assessment of goods to be transported overseas", "Issue": "Is the supply of a security and safety assessment of goods to be transported overseas within the definition of 'loading or handling of goods' under paragraph (a) of item 5A in the table in subsection 38-355(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes. The entity is making a supply of 'loading or handling of goods' under paragraph (a) of item 5A in the table in subsection 38-355(1) of the GST Act when it provides a security and safety assessment of goods to be transported overseas.", "Facts": "The entity is an international freight carrier. The entity provides a security and safety assessment of goods together with the transport of those goods overseas.", "Reasons_for_Decision": "Summary: Subsection 38-355(1) of the GST Act provides the circumstances under which supplies of transport and other related matters will be treated as GST-free. Specifically, paragraph (a) of item 5A in the table in subsection 38-355(1) of the GST Act concerns supplies of loading and handling of goods undertaken during the course of international transport of those goods. 'Handling' is not defined in the GST Act. The term 'handling' is defined in The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01 as '...3. the process of packing, moving, carrying or transporting something.' It is considered that the security and safety assessment provided by the entity amounts to 'handling' of the goods as per the definition in The Macquarie Dictionary because it is part of the process of transporting the goods overseas. Accordingly, the supply of a security and safety assessment of goods will fall within the meaning of 'loading or handling of goods' in paragraph (a) of item 5A in the table in subsection 38-355(1) of the GST Act.", "Date_of_Decision": "13 January 2011", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 38-355(1) subsection 38-355(1) table item 5A paragraph (a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Export of goods GST free GST transport Transport of goods", "Case_References": "", "Other_References": "The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201110", "Unmatched_Content": "Keywords Goods and services tax Export of goods GST free GST transport Transport of goods"}
{"ATO_ID_Number": "ATO ID 2004/608", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and removal of waste matter from traps, pits and tanks on commercial premises", "Issue": "Is the entity, a business operator, making a GST-free supply under section 38-290 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies a service of removing, and then disposing of, waste matter from a commercial premises' traps, pits and tanks that are connected to the sewer system?", "Decision": "No, the entity is not making a GST-free supply under section 38-290 of the GST Act when it supplies a service of removing and then disposing of waste matter from a commercial premises' traps, pits and tanks that are connected to the sewer system. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a business operator. The entity supplies a service of removing and then disposing of waste matter from a client's commercial premises. The client collects non-toxic waste matter, which is not of a kind that is normally allowed by law to be disposed of directly into the sewer lines, in its traps, pits and tanks. These traps, pits, and tanks are connected to the sewer system and are not septic tanks. To dispose of the waste matter, which is in the form of a sludge, the entity pumps the waste matter into its tankers and takes the waste matter to a treatment plant. The entity does not clean the traps, pits, and tanks. The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Section 38-290 of the GST Act provides that certain supplies of sewerage and sewerage-like services are GST-free. Under subsection 38-290(1) of the GST Act, a supply of sewerage services is GST-free. Paragraph 39 of Goods and Services Tax Ruling GSTR 2000/25 provides that a supply of 'sewerage services' is the supply of a service that enables an end recipient to discharge waste water, including water containing human waste, into a network of sewer pipes connected to the recipient's premises. The entity's supply is the removal of waste matter from traps, pits, and tanks by pumping the waste matter into the entity's tankers and taking it to a treatment plant. The entity's service does not enable the client to discharge waste water, including water containing human waste, into a network of sewer pipes connected to the client's premises. Therefore, the entity's supply is not a supply of sewerage services under subsection 38-290(1) of the GST Act. Under subsection 38-290(2) of the GST Act, a supply of removing waste matter from residential premises is GST-free in certain circumstances. The entity's supply is made from the client's commercial premises and not from residential premises. As such, subsection 38-290(2) of the GST Act does not apply. Under subsection 38-290(3) of the GST Act, a supply of servicing a domestic self-contained sewage system is GST-free. The entity's supply is not for a domestic self-contained sewerage system and subsection 38-290(3) of the GST Act does not apply. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies a service of removing and then disposing of waste matter from a commercial premises' traps, pits and tanks that are connected to the sewer system.", "Date_of_Decision": "30 August 2002", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 38-290 subsection 38-290(1) subsection 38-290(2) subsection 38-290(3) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/25", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST free GST water, sewerage & drainage Emptying of septic tanks Supply of sewerage services GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004608", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/25 | Keywords Goods and services tax GST free GST water, sewerage & drainage Emptying of septic tanks Supply of sewerage services GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2013/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the application of the margin scheme to taxable supplies to associates for no consideration", "Issue": "Can an entity use the margin scheme to work out the GST payable on a taxable supply of real property that was held prior to 8 December 2008, and made after 24 March 2010 to an associate for no consideration where the associate will not use the real property for a fully creditable purpose?", "Decision": "Yes. The entity can use the margin scheme to work out the GST payable on a taxable supply of real property that was held prior to 8 December 2008 and made after 24 March 2010 to an associate for no consideration where the associate will not use the real property for a fully creditable purpose, subject to the provisions of subsection 75-5(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).", "Facts": "The entity is registered for GST and is carrying on an enterprise in the building and construction industry. The entity has an associate who is carrying on an enterprise of supplying residential premises by way of lease. On 1 November 2008 the entity acquired the freehold interest in real property from an arm's length supplier who was not registered, nor required to be registered for GST. The entity developed residential premises on the real property. On 1 July 2010 the entity made a supply of the freehold interest in the real property as new residential premises to the associate. The entity and the associate agreed in writing that the margin scheme would be used to work out the GST payable on the supply.", "Reasons_for_Decision": "Summary: The entity has made a supply of a freehold interest of real property consisting of new residential premises to an associate for no consideration. The associate will not use the real property for a fully creditable purpose. Therefore the supply is a taxable supply by virtue of section 72-5 of the GST Act. The supply of the freehold interest in the real property on 1 July 2010 is taken for the purposes of the GST law to be a sale in accordance with the provisions of section 72-20 of the GST Act. Section 72-20 Act applies to supplies made on or after 24 March 2010. The entity has made a taxable supply of a freehold interest of real property to an associate, which is taken for the purposes of the GST law to be a sale. The entity and the associate have agreed in writing that the margin scheme is to apply. Therefore the relevant requirements of section 75-5(1) of the GST Act are met and the entity can apply the margin scheme to work out the GST payable on the taxable supply. The supply is not ineligible for the margin scheme, as that term is defined in subsection 75-5(3) of the GST Act, as the entity acquired the freehold interest in the real property from an arm's length supplier who was not registered, nor required to be registered for GST. It should be noted that, if the entity had acquired the real property on or after 8 December 2008, then a subsequent supply for no consideration made to an associate would be treated as a sale according to the application of the provisions of section 75-5 (1B) of the GST Act.", "Date_of_Decision": "8 April 2013", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 72-5 section 72-20 section 75-5(1) section 75-5(1B) subsection 75-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax real property GST margin scheme GST associates", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201318", "Unmatched_Content": "Keywords Goods and services tax real property GST margin scheme GST associates"}
{"ATO_ID_Number": "ATO ID 2010/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST: revoking agreement to apply the margin scheme", "Issue": "Can a supplier and recipient of real property that make an agreement to apply the margin scheme under subsection 75-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) revoke that agreement after settlement of the supply of the real property?", "Decision": "No, the entities are not able to revoke an agreement to apply the margin scheme under subsection 75-5(1) of the GST Act, after settlement of the supply of the real property.", "Facts": "An entity entered into an agreement to sell real property in the form of a freehold interest in land to another entity. The supply of the real property is a taxable supply for the purposes of the GST Act. The supplier acquired the real property before 1 July 2000. The supplier's supply of the real property to the recipient was: Before making the supply of the real property, the supplier and the recipient made an agreement to apply the margin scheme in Division 75 of the GST Act to the supply. All of the other requirements for the margin scheme to apply were satisfied. The supplier calculated the GST payable on the taxable supply in accordance with the margin scheme. After settlement of the supply of the real property, the supplier and the recipient are now seeking to revoke their agreement to apply the margin scheme. The supplier and the recipient intend to do this by entering into a deed of variation to the contract of sale for the real property.", "Reasons_for_Decision": "Summary: The margin scheme in Division 75 of the GST Act can be used to work out the amount of GST payable on a taxable supply of real property provided that certain requirements are satisfied. One of the requirements in subsection 75-5(1) of the GST Act is that the supplier and the recipient of the supply have agreed in writing that the margin scheme is to apply. In accordance with subsection 75-5(1A) of the GST Act, this agreement must be made on or before the making of the supply or within such further period as the Commissioner allows. It is considered that the time of making the supply of real property for the purposes of Division 75 of the GST Act is at settlement (see paragraphs 42 to 45 of Goods and Services Tax Ruling GSTR 2006/7 'Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000'). Accordingly, the written agreement to apply the margin scheme must be made on or before the time of settlement (if the agreement is made at a later time, it is subject to the exercise of a discretionary power by the Commissioner under subsection 75-5(1A) of the GST Act). As the supplier and recipient have entered into a written agreement to apply the margin scheme on or before that time, and the other requirements of section 75-5 of the GST Act are met, GST payable on the taxable supply of the real property has been worked out in accordance with Division 75 of the GST Act. Once the requirements for the operation of subsection 75-5(1) of the GST Act have been met, including the key requirement that a timely written agreement be in place between the parties, there is nothing in the words of the provision that allows its operation to be unwound. The fact that the parties to the written agreement subsequent to settlement consent to revoke that agreement is irrelevant. This view is further supported by the context in which the provision operates. Under the provision, the supplier and recipient have alternative courses of action available to them; that is, they can choose to apply the margin scheme or not in working out the GST payable on the taxable supply. In making that choice, the parties would necessarily have regard to likely future events and circumstances that may affect them at the time of making the supply. If the choice, once made, is capable of being altered after that time, it would enable the parties to the supply to enjoy the benefit of hindsight. This is contrary to the purpose and intent of the provision which is there to provide certainty to the parties at the time of supply (see paragraph 6.38 of the Revised Explanatory Memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005). If the provision envisaged that the parties to the supply could alter their choice at a later time, there would have been express provision for it in the legislation. The absence of such a provision provides further contextual support for the view that there is no capacity for the supplier and recipient to revoke the written agreement after the making of the supply. Also, while subsection 75-5(1A) of the GST Act permits a discretion for the Commissioner to allow a further time in which an agreement may be made, it does not permit a discretion for the Commissioner to allow an entity to revoke an agreement that was in place at the time of settlement. In this case, as a written agreement to apply the margin scheme was in place at the time of making the supply, the supplier and the recipient are not able to revoke the agreement and calculate the GST payable on the taxable supply in accordance with the basic rules in the GST Act. The GST payable is to be calculated in accordance with the rules in Division 75 of the GST Act.", "Date_of_Decision": "26 March 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Division 75 section 75-5 subsection 75-5(1) subsection 75-5(1A)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2006/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "GST margin scheme GST property & construction GST sale of real property Taxable supply", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the Tax Laws Amendment (2005 Measures No. 2) Bill 2005", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201083", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2006/7 | Keywords GST margin scheme GST property & construction GST sale of real property Taxable supply"}
{"ATO_ID_Number": "ATO ID 2006/255", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and calculating the margin on the granting of a long term lease of land that was acquired before 1 July 2000", "Issue": "Can the entity, under subsection 75-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), calculate the margin for a grant of a long term lease of land by reference to a valuation of the freehold interest in the land?", "Decision": "Yes, the entity can calculate the margin under subsection 75-10(3) of the GST Act for a grant of a long term lease of land by reference to a valuation of the freehold interest in the land.", "Facts": "The entity owns a freehold interest in land, which was acquired before 1 July 2000. There were improvements on the land as at 1 July 2000. The entity is an Australian Government Agency. After 1 July 2000, the entity grants a long term lease over the land to a property developer for an amount of consideration. The entity has been registered for goods and services tax (GST) since 1 July 2000, and in granting the long term lease of the land, is making a taxable supply under section 9-5 of the GST Act. The grant of the long tem lease satisfies the requirements of section 75-5 of the GST Act for the application of the margin scheme. Section 75-11 of the GST Act does not apply to the entity. The entity has an approved valuation of the freehold interest in the land as at 1 July 2000, in accordance with subsection 75-10(3) of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 75-10(1) of the GST Act provides that the amount of GST on a taxable supply of real property (that is, sale of a freehold interest in land, sale of a stratum unit, or grant or sale of a long term lease) under the margin scheme is 1/11th of the margin for the supply. The margin for a supply of real property is determined in accordance with subsection 75-10(2) of the GST Act unless subsection 75-10(3) or section 75-11 of the GST Act applies. In this case, section 75-11 of the GST Act does not apply. Subsection 75-10(3) of the GST Act applies if: Subsection 75-10(3) of the GST Act provides that the margin for the supply is the amount by which the consideration for the supply exceeds the valuation of the freehold interest, stratum unit or long term lease. Goods and Services Tax Ruling GSTR 2006/7, at paragraph 66, states: If subsection 75-10(3) or any of the provisions of section 75-11 require you to obtain an approved valuation, the real property that you value is the interest, unit or lease that is in existence at the valuation date. This will not always be the real property that is supplied. In this case, in accordance with the table in subsection 75-10(3) of the GST Act, the relevant valuation date is 1 July 2000. At 1 July 2000, the long term lease did not exist because it was only granted after 1 July 2000. The real property to be valued is the freehold interest in the land which was held by the entity at 1 July 2000. Therefore, the margin for the grant of the long term lease is the difference between the consideration for the grant of the long term lease and the valuation of the freehold interest in the land as at 1 July 2000.", "Date_of_Decision": "11 September 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Section 75-5 subsection 75-10(1) subsection 75-10(2) subsection 75-10(3) section 75-11", "Related_Public_Rulings_and_Determinations": "Goods and services tax ruling GSTR 2000/21 | Goods and services tax ruling GSTR 2006/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST margin scheme GST long term lease GST property & construction", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006255", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and services tax ruling GSTR 2000/21 Goods and services tax ruling GSTR 2006/7 | Keywords Goods and services tax GST margin scheme GST long term lease GST property & construction"}
{"ATO_ID_Number": "ATO ID 2004/223", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and valuation date for calculating GST under the margin scheme", "Issue": "Can the entity, a property developer, use the date when it re-registers for goods and services tax (GST) as the valuation date under subsection 75-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it chooses to apply the margin scheme to the sale of real property acquired before 1 July 2000?", "Decision": "No, the entity cannot use the date when it re-registers for GST as the valuation date under subsection 75-10(3) of the GST Act when it chooses to apply the margin scheme to the sale of real property acquired before 1 July 2000.", "Facts": "The entity is a property developer. The entity is selling a block of land that it acquired before 1 July 2000. The sale of the land is a taxable supply under section 9-5 of the GST Act. The entity meets the requirements under section 75-5 of the GST Act to apply the margin scheme to calculate the GST payable on the supply of the land and has chosen to calculate the margin based on a valuation method. The entity holds an approved valuation for the purposes of section 75-35. There were no improvements on the land or premises as at 1 July 2000. The entity is not the Commonwealth, a State or a Territory. The circumstances specified in section 75-11 of the GST Act do not apply. The entity was previously registered for GST at 1 July 2000. However, after a few tax periods the entity cancelled its registration, as its turnover was below the registration turnover threshold. The entity then re-registered for GST at a later date as its turnover had increased.", "Reasons_for_Decision": "Summary: Subsection 75-10(3) of the GST Act provides that if: the margin for the supply is the amount by which the consideration for the supply exceeds that valuation. Therefore, the date when the valuation of the interest must be made will depend on which item in the table in subsection 75-10(3) of the GST Act applies. Item 1 in the table (Item 1) provides that the valuation date will be 1 July 2000, where an entity acquired its interest in real property before 1 July 2000 and item 2, item 3 and item 4 in the table (Item 2, Item 3 and Item 4) do not apply. The entity acquired its interest in the real property before 1 July 2000. As there were no improvements on the land or premises as at 1 July 2000, Item 3 does not apply. As the entity is not the Commonwealth, a State or a Territory, Item 4 does not apply. Item 2 provides that where the supplier acquired the interest unit or lease before 1 July 2000, but does not become registered or required to be registered until after 1 July 2000, the valuation date is the earlier of either the date of effect of the entity's registration or the day on which the entity applied for registration. That is, Item 2 only applies to determine the valuation date in circumstances where the supplier was not registered or required to be registered until after 1 July 2000. The entity was registered for GST on 1 July 2000. As such, Item 2 does not apply. Item 2A applies where the supplier acquired the interest, unit or lease on or after 1 July 2000. As the entity acquired the land before 1 July 2000, Item 2A does not apply. Accordingly, the entity's supply of real property satisfies the requirements of Item 1 and therefore, the valuation date to be used is 1 July 2000. Therefore, the entity cannot use the date that it re-registers for GST as the valuation date under subsection 75-10(3) of the GST Act when it chooses to apply the margin scheme to the sale of real property acquired before 1 July 2000.", "Date_of_Decision": "29 October 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 75-5 subsection 75-5(1)(A) subsection 75-5(3) subsection 75-10(3) subsection 75-10(3) table item 1 subsection 75-10(3) table item 2 subsection 75-10(3) table item 2A subsection 75-10(3) table item 3 subsection 75-10(3) table item 4 section 75-11 section 75-35", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/21 | Goods and Services Tax Ruling GSTR 2000/21A - Addendum | Goods and Services Tax Ruling GSTR 2000/21ER - Erratum | Goods and Services Tax Ruling GSTR 2006/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST margin scheme GST sale of real property GST registration Registration cancellation Required to be registered GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004223", "Unmatched_Content": "This ATO ID has been amended to improve clarity and to update legislative references and related public rulings. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/21 Goods and Services Tax Ruling GSTR 2000/21A - Addendum Goods and Services Tax Ruling GSTR 2000/21ER - Erratum Goods and Services Tax Ruling GSTR 2006/7 | Keywords Goods and services tax GST property & construction GST margin scheme GST sale of real property GST registration Registration cancellation Required to be registered GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/1171", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and choosing to apply the margin scheme on supplies of real property previously existing as smaller blocks", "Issue": "", "Decision": "Yes, the entity may apply the margin scheme under section 75-5 of the GST Act when it sells four blocks of land that previously existed as five residential blocks at 1 July 2000.", "Facts": "The entity is a property developer. The entity held a freehold interest in five residential blocks of land of equal area as at 1 July 2000. The entity enters into contracts to sell its freehold interest in each block of land after 29 June 2005. However, to increase the marketability of the land, the entity has reduced the number of blocks from five to four residential blocks of equal area. The entity and the recipients of the supplies had agreed in writing before making the supply that the margin scheme is to apply. The entity is registered for goods and services tax (GST) and the entity's supply of the blocks of land are taxable supplies under section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 75-5(1) of the GST Act provides that the margin scheme applies in working out the amount of GST on a taxable supply of real property that an entity makes by: if the entity and the recipient of the supply have agreed in writing that the margin scheme is to apply. The entity in this instance, is selling the freehold interest in four residential blocks of land to several recipients. These sales of real property by the entity are taxable supplies. The entity and the recipient of the supplies had agreed in writing before making the supply that the margin scheme is to apply. The requirements of subsection 75-5(1) and 75-5(1A) of the GST Act are satisfied. Subsection 75-5(2) of the GST Act, however, provides that the margin scheme does not apply if the entity acquired the entire freehold interest, stratum unit or long term lease through a taxable supply that was ineligible for the margin scheme if it is a taxable supply, on which the amount of GST was worked out without applying the margin scheme. The entity, in this instance, held the four blocks of land prior to 1 July 2000. The entire freehold interest in the four blocks of land was not acquired through a taxable supply and paragraph 75-5(3)(a) of the GST Act does not apply. Although at the time of acquisition, the blocks of land existed in the form of five residential blocks, this does not change the fact that the land was not acquired through a taxable supply that was eligible for the margin scheme. Before 1 July 2000, the entity acquired and held the four blocks of land in the sense that it held the five blocks of land from which those four blocks were later carved out. Subsection 75-5(2) of the GST Act, therefore, does not exclude the entity from choosing to apply the margin scheme. As such, the entity and the recipient of the supply may agree in writing to apply the margin scheme under section 75-5 of the GST Act when it sells the four blocks of land that previously existed as five residential blocks at 1 July 2000.", "Date_of_Decision": "23 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 75-5 subsection 75-5(1) subsection 75-5(2) subsection 75-10(1) subsection 75-10(3)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/21", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST margin scheme GST sale of real property GST special rules", "Case_References": "Brady King Pty Ltd v Commissioner of Taxation [2008] FCAFC 118 2008 ATC 20-034 69 ATR 670", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031171", "Unmatched_Content": "Can the entity, a property developer, apply the margin scheme under section 75-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells four blocks of land that previously existed as five residential blocks at 1 July 2000? | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/21 | Keywords Goods and services tax GST property & construction GST margin scheme GST sale of real property GST special rules"}
{"ATO_ID_Number": "ATO ID 2010/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and land supplied by way of a long term lease on the condition that residential premises are constructed on the land", "Issue": "Is the entity, an Australian government agency, making a taxable supply of land under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it grants a long term lease which is subject to the condition that the lessee constructs residential premises on the land?", "Decision": "Yes, the Australian government agency is making a taxable supply of land under section 9-5 of the GST Act when it grants a long term lease which is subject to the condition that the lessee constructs residential premises on the land.", "Facts": "The entity is an Australian government agency which carries on an enterprise in relation to supplying land by way of long term lease. The lease is granted for a period of 99 years, subject to the condition that the lessee constructs a house on the land. The annual lease fee is calculated as a percentage of the unimproved value of the land and reviewed annually to increase in line with property values. However, the scheme allows lessees to make a single lump sum payout of the annual lease fee commitment at any time by applying to the relevant authority for a variation of the lease to reduce the annual lease fee payable to a nominal amount. The amount payable to vary the annual lease fee to a nominal amount is based on the unimproved market value of the land at the time of conversion. After the variation, the annual lease fee payable is five cents. The annual lease payments are not a factor in the calculation of the lump sum payout. Under the terms of the annual fee lease, the lessee is required to finance and construct a house on the land within a set period of time of the lease being granted. Annual fee lessees may also be eligible for other forms of home buyer assistance. All vacant land supplied by the entity under the annual fee lease is improved land. The entity is registered for goods and services tax (GST). The supply is made in the course of its enterprise and is connected with Australia.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, a supply is not taxable to the extent that it is input taxed or GST-free. Subdivision 40-C of the GST Act deals with sales of residential premises and supplies of residential premises by way of long term lease. Section 195-1 of the GST Act defines a long term lease as a supply by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) for at least 50 years if: Under section 40-70 of the GST Act, a supply of residential premises (not being new residential premises) by way of long term lease is input taxed. The policy intent in relation to section 40-70 is set out in the Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998 which states: 5.166 The supply of a long term lease (that is, a lease of 50 years or more) is not a supply of residential rent. The supply of a long term lease is to be treated as a sale of residential premises and input taxed under Subdivision 40-C. Subsection 40-35(2) and section 40-70 . 5.167 The supply of real property as residential premises and the supply of residential premises by way of a long term lease is input taxed to the extent that the residential premises are not: • 'commercial residential premises' such as hotels, motels etc ('commercial residential premises' is discussed at 6.140); or • newly constructed residential premises. Subsection 40-65(2) and 40-70(2 ) The definition of residential premises in section 195-1 of the GST Act refers to land or a building that is occupied as a residence or for residential accommodation, or is intended to be, and is capable of being, occupied as a residence or for residential accommodation. For land to be residential premises, as defined, there must be a building on the land that has the physical characteristics of a residence. Vacant land, of itself, can never have sufficient physical attributes to characterise it as being able to be, or intended to be, occupied as a residence (see paragraph 25 of Goods and Services Tax Ruling GSTR 2000/20 and paragraph 26 of Goods and Services Tax Ruling GSTR 2003/3). It follows that, in the context of the GST Act, a supply of vacant land by way of a long term lease for consideration should be treated the same as a sale of the land as it is a supply of the maximum interest in the land that the Crown has alienated. Under the lease, the interest in the vacant land is supplied to the lessee by the entity when the lease is granted. The consideration for the grant of the lease may be annual lease payments or a combination of both annual lease payments and a single lump sum which has the effect of extinguishing the lessee's liability to future annual lease payments. The interest in the land held by the lessee is not affected by any change to the calculation or the timing of the payment of the consideration. As the interest in the land obtained by the lessee under the lease is the maximum interest the Crown has alienated, the subsequent construction of residential premises on the land by the lessee will not change the nature of the supply made by the entity to the lessee. The entity is registered for GST and the supply of the leasehold interest in the land in Australia is in the course of its enterprise. The entity's supply of the land is not GST-free under Division 38 of the GST Act as the land is improved land when the lease is granted. The entity's supply of the land is not input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply of land under section 9-5 of the GST Act when it grants a long term lease which is subject to the condition that the lessee constructs residential premises on the land.", "Date_of_Decision": "18 November 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Subdivision 40-C section 40-65 section 40-70 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20 | Goods and Services Tax Ruling GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services Tax GST property & construction GST lease and real property GST residential premises GST supplies & acquisitions Taxable supply Input taxed supplies", "Case_References": "", "Other_References": "Explanatory Memorandum to the A New Tax System (Goods and Services Tax) Bill 1998", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201022", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 Goods and Services Tax Ruling GSTR 2003/3 | Keywords Goods and services Tax GST property & construction GST lease and real property GST residential premises GST supplies & acquisitions Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2009/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of vacant land after removal of a damaged house that had been used solely in connection with input taxed supplies", "Issue": "Is the entity, a residential property owner, making an input taxed supply under subsection 9-30(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells its property as vacant land after demolishing a fire damaged house on the land and where, prior to the fire, it had used the property solely to make input taxed supplies by way of lease?", "Decision": "Yes, the entity is making an input taxed supply under subsection 9-30(4) of the GST Act when it sells its property as vacant land in these circumstances.", "Facts": "The entity is a residential property owner and is registered for GST. The entity carries on an enterprise of leasing and selling residential premises, and developing property. As part of its property development activities, it regularly acquires properties to demolish the existing houses and to sell the properties as vacant land (whether subdivided or not) or to construct new houses for sale or lease. The entity owns a property that was residential premises for the purposes of the GST Act when it acquired the property. The house forming the residential premises was damaged by fire such that it was uninhabitable. Prior to the fire, the entity had used the residential premises solely to make supplies by way of lease that are input taxed under section 40-35 of the GST Act. As the house was no longer inhabitable, it could not be used for residential leasing. It was also not cost effective for the entity to renovate the house or to construct a new house on the land for lease. To prepare the land for sale, the entity arranged for the demolition and removal of the fire damaged house as it was a health and safety risk. The entity sells the property as vacant land.", "Reasons_for_Decision": "Summary: Subsection 9-30(4) of the GST Act states: A supply is taken to be a supply that is *input taxed if it is a supply of anything (other than *new residential premises) that you have used solely in connection with your supplies that are input taxed but are not *financial supplies. In considering the application of subsection 9-30(4) of the GST Act to the supply of the vacant land it is necessary to identify the uses to which the entity has put the land and whether these uses are solely in connection with the entity's input taxed supplies (other than financial supplies).This requires that the land, whether by itself or as part of the residential premises, has not been used in any way other than in connection with the entity's input taxed supplies. The Commissioner's view is that 'used' has a broad meaning in the context of subsection 9-30(4) of the GST Act (see the interpretation of 'use' in other statutory contexts in Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1; Ryde Municipal Council v. Macquarie University (1978) 139 CLR 633; and Lennard v. Jessica Estates Pty Ltd [2008] NSWCA 121). The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW, defines 'use' as including 'to employ for some purpose'. In considering whether land has been used solely in connection with input taxed supplies, it is important to consider throughout the period of ownership by the entity: It is necessary to look at the surrounding circumstances to determine if the entity's activities can be said to be connected with the entity's input taxed supplies, or whether they instead should be regarded as having a separate purpose. In this case, the entity's enterprise involves activities of property development and activities of making supplies by way of lease. Up to the time when the house was fire damaged the entity had used the property solely in connection with its leasing activities. The entity had not held the property for the purpose of, or as part of, its activities of property development. Since the property was fire damaged the entity has not done anything significant to improve the value of the land or occupied the land in a way to suggest that it commenced to hold the land for a purpose not connected with its input taxed supplies of residential leasing. The fire damaged house was demolished and removed merely to prepare the land for sale, as it was a health and safety risk. In these circumstances where the fire made the house uninhabitable, the demolition should not be regarded as a separate and distinct use of the land, but rather as a consequential step between the end of the leasing activities and the sale of the land. After the fire, the entity has only been carrying out activities and holding the land for the purpose of bringing an end to its leasing of the property, as it was not cost effective to rebuild the house for lease. The entity's only use of the land has been in connection with making input taxed supplies by way of lease of residential premises. Therefore, the sale of the vacant land is taken to be an input taxed supply under subsection 9-30(4) of the GST Act.", "Date_of_Decision": "25 March 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(4) section 40-35", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/19 | ATO ID 2009/20", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST sale of real property GST supply Input taxed supplies", "Case_References": "Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1", "Other_References": "The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200918", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/3 | Keywords Goods and services tax GST property & construction GST residential premises GST sale of real property GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2009/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of vacant land used in connection with input taxed supplies and property development activities", "Issue": "Is the entity, a residential property owner, making an input taxed supply under subsection 9-30(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, as part of its property development activities, the entity sells its property as vacant land after having demolished a house on the land that it had used together with the land solely to make input taxed supplies by way of lease?", "Decision": "No, the entity is not making input taxed supplies under subsection 9-30(4) of the GST Act when it sells its property as vacant land in these circumstances.", "Facts": "The entity is a residential property owner and is registered for GST. The entity carries on an enterprise of leasing and selling residential premises, and developing property. As part of its property development activities, it regularly acquires properties to demolish the existing houses and to sell the properties as vacant land (whether subdivided or not) or to construct new houses for sale or lease. The entity owns a property that was residential premises for the purposes of the GST Act. Since acquiring the property many years ago, the entity had used it solely to make supplies by way of lease that are input taxed under section 40-35 of the GST Act. The entity's property is located in an area that has undergone extensive redevelopment where a lot of the older houses have been replaced by the construction of new houses. There has been an increasing demand for vacant residential land in the area which meant land prices have risen significantly. The entity is able to generate a higher financial return by selling its property rather than continue to use it for leasing. The entity terminated the residential lease so that it could sell the property unencumbered. The entity took advantage of the opportunity created by the increased demand for vacant land by undertaking significant works in demolishing and removing the house to improve the value of the property for sale as vacant land. The entity incurred significant costs in undertaking the works but was able to have the house demolished and removed at a lower cost than potential purchasers were likely to achieve. This is because of its expertise as a property developer and the economies of scale it could achieve in regularly demolishing houses as part of its enterprise. The entity sells the property as vacant land. The sale is for consideration, is made in the course or furtherance of the entity's enterprise and is connected with Australia. The sale is not an input taxed supply or a GST-free supply under any other provision of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 9-30(4) of the GST Act states: A supply is taken to be a supply that is *input taxed if it is a supply of anything (other than *new residential premises) that you have used solely in connection with your supplies that are input taxed but are not *financial supplies. In considering the application of subsection 9-30(4) of the GST Act to the supply of the vacant land it is necessary to identify the uses to which the entity has put the land and whether these uses are solely in connection with the entity's input taxed supplies (other than financial supplies). This requires that the land, whether by itself or as part of the residential premises, has not been used in any way other than in connection with the entity's input taxed supplies. The Commissioner's view is that 'used' has a broad meaning in the context of subsection 9-30(4) of the GST Act (see the interpretation of 'use' in other statutory contexts in Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1; Ryde Municipal Council v. Macquarie University (1978) 139 CLR 633; and Lennard v. Jessica Estates Pty Ltd [2008] NSWCA 121). The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW, defines 'use' as including 'to employ for some purpose'. In considering whether land has been used solely in connection with input taxed supplies, it is important to consider throughout the period of ownership by the entity: It is necessary to look at the surrounding circumstances to determine if the entity's activities can be said to be connected with the entity's input taxed supplies, or whether they instead should be regarded as having a separate purpose. In this case, the facts indicate that the entity was no longer using the land solely in connection with its input taxed supplies of residential leasing when it undertook works to demolish the house. There are two factors which together lead to this conclusion: As the entity's use of the land has not been solely in connection with its input taxed supplies, the sale of the vacant land is not taken to be an input taxed supply under subsection 9-30(4) of the GST Act. The sale of the vacant land is a taxable supply as it satisfies all the requirements of a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "25 March 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-30(4) section 40-35", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/18 | ATO ID 2009/20", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST sale of real property GST supply Input taxed supplies", "Case_References": "Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1", "Other_References": "The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200919", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/3 | Keywords Goods and services tax GST property & construction GST residential premises GST sale of real property GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2009/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale of vacant land and demountable dwelling used solely in connection with input taxed supplies", "Issue": "Is the entity, a residential property owner, making input taxed supplies under subsection 9-30(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells vacant land and a demountable dwelling separately, which together have been used by the entity solely to make input taxed supplies by way of lease?", "Decision": "Yes, the entity is making input taxed supplies under subsection 9-30(4) of the GST Act when it sells the vacant land and the demountable dwelling separately in these circumstances.", "Facts": "The entity is a residential property owner and is registered for GST. The entity carries on an enterprise of leasing and selling residential premises, and developing property. As part of its property development activities, it regularly acquires properties to demolish the existing houses and to sell the vacant land (whether subdivided or not) or to construct new houses for sale or lease. Some of the properties the entity uses for residential leasing have demountable dwellings which the entity may sell separately from the land. The entity owns a property which has a demountable dwelling affixed to the land. The property is residential premises for the purposes of the GST Act. Since acquiring the property more than 30 years ago, the entity had used it solely to make supplies by way of lease that are input taxed under section 40-35 of the GST Act. The entity no longer requires this property for its activities of making supplies by way of lease and the existing lease has terminated. The demountable dwelling is in poor condition and adds little economic value to the land. The entity sells the demountable dwelling and then the vacant land in separate transactions to another party. The entity arranged for the disconnection of essential services (such as electricity and water) to the demountable dwelling, but no other work is done to the dwelling or the land. The purchaser of the demountable dwelling is responsible for the removal of the demountable dwelling from the land.", "Reasons_for_Decision": "Summary: Subsection 9-30(4) of the GST Act states: A supply is taken to be a supply that is *input taxed if it is a supply of anything (other than *new residential premises) that you have used solely in connection with your supplies that are input taxed but are not *financial supplies. In considering the application of subsection 9-30(4) of the GST Act to the supplies of the vacant land and the demountable dwelling it is necessary to identify the uses to which each has been put by the entity and whether these uses are solely in connection with the entity's input taxed supplies (other than financial supplies). This requires that the land or the demountable dwelling, whether by itself or as part of the residential premises, has not been used in any way other than in connection with the entity's input taxed supplies. The Commissioner's view is that 'used' has a broad meaning in the context of subsection 9-30(4) of the GST Act (see the interpretation of 'use' in other statutory contexts in Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1; Ryde Municipal Council v. Macquarie University (1978) 139 CLR 633; and Lennard v. Jessica Estates Pty Ltd [2008] NSWCA 121). The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW, defines 'use' as including 'to employ for some purpose'. In considering whether land has been used solely in connection with input taxed supplies, it is important to consider throughout the period of ownership by the entity: It is necessary to look at the surrounding circumstances to determine if the entity's activities can be said to be connected with the entity's input taxed supplies, or whether they instead should be regarded as having a separate purpose. Similarly, occupying a demountable dwelling for private purposes or making significant physical improvements to increase its sale value may indicate that the dwelling is held for a purpose not solely connected with the owner's input taxed supplies of residential leasing. In this case, the entity's only use of the land has been in connection with its input taxed supplies of residential leasing. Since the residential lease terminated, the entity has not done anything significant to the land or occupied it in a way to suggest that it commenced to hold the land for a purpose not connected with its input taxed supplies of residential leasing. The entity arranged for the disconnection of the electricity and water to the demountable dwelling merely to prepare both the dwelling and the land for sale. The scale and degree of these activities is not sufficiently significant to indicate a separate use of the land. There is no evidence that the entity commenced holding or employing the land or dwelling for the purpose of the entity's property development activities. The entity also has not made any significant physical changes to the demountable dwelling or occupied it in a way to suggest that it has changed its use of the dwelling. The entity has only used it together with the land in connection with the entity's input taxed supplies of residential leasing. After the lease terminated, the entity has only been carrying out activities in relation to the land and the demountable dwelling for the purpose of bringing an end to its leasing of the property. Therefore, the sales of the vacant land and the demountable dwelling both satisfy the requirements of subsection 9-30(4) of the GST Act and are taken to be supplies that are input taxed.", "Date_of_Decision": "25 March 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(4) section 40-35", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/18 | ATO ID 2009/19", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST sale of real property GST supply Input taxed supplies", "Case_References": "Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1", "Other_References": "The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200920", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/3 | Keywords Goods and services tax GST property & construction GST residential premises GST sale of real property GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2009/40", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and lease of vacant land after removal of a demountable dwelling used solely in connection with input taxed supplies", "Issue": "Is the entity, a residential property owner, making an input taxed supply under subsection 9-30(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it leases its property as vacant land after the removal of a demountable dwelling from the land that together had been used by the entity solely to make input taxed supplies by way of lease?", "Decision": "No. The entity is not making an input taxed supply under subsection 9-30(4) of the GST Act when it leases the vacant land in these circumstances.", "Facts": "The entity is a residential property owner and is registered for GST. The entity carries on an enterprise of leasing and selling residential premises, and developing land for sale. The entity owned and leased land with a demountable dwelling affixed to the land. This property was residential premises for the purposes of the GST Act. The entity no longer required this property for its activities of making supplies of residential premises by way of lease and the existing lease had terminated. The entity sold the demountable dwelling to a purchaser who removed the demountable dwelling from the land. The entity then leases the vacant land to a third party immediately after the removal of the demountable dwelling. Before the removal of the demountable dwelling from the land, the entity had used the land solely in connection with its supplies by way of lease of residential premises that were input taxed supplies under section 40-35 of the GST Act. The lease of the vacant land is for consideration, is made in the course or furtherance of the entity's enterprise and is connected with Australia. The lease of the land is not an input taxed supply or a GST-free supply under any other provision of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 9-30(4) of the GST Act states: A supply is taken to be a supply that is *input taxed if it is a supply of anything (other than *new residential premises) that you have used solely in connection with your supplies that are input taxed but are not *financial supplies. In considering the application of subsection 9-30(4) of the GST Act to the lease of the vacant land it is necessary to identify the uses to which the entity has put the land and whether these uses are solely in connection with the entity's input taxed supplies (other than financial supplies). This requires that the land, whether by itself or as part of the residential premises, has not been used in any way other than in connection with the entity's input taxed supplies. The Commissioner's view is that 'used' has a broad meaning in the context of subsection 9-30(4) of the GST Act (see the interpretation of 'use' in other statutory contexts in Council of the City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1; Ryde Municipal Council v. Macquarie University (1978) 139 CLR 633; and Lennard v. Jessica Estates Pty Ltd (2008) NSWCA 121). The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW, defines 'use' as including 'to employ for some purpose'. In considering whether land has been used solely in connection with input taxed supplies, it is important to consider throughout the period of ownership by the entity: It is necessary to look at the surrounding circumstances to determine if the entity's activities can be said to be connected with the entity's input taxed supplies, or whether they instead should be regarded as having a separate purpose. In this case, before the removal of the demountable dwelling from the land by the purchaser, the entity had used the land solely in connection with its input taxed supplies of residential premises by way of lease. In arranging the sale of the demountable dwelling to the purchaser, the entity still used the land in connection with its input taxed supplies of residential premises by way of lease as the sale of the demountable dwelling was for the purpose of bringing an end to the residential leasing activities. (The sale of the demountable dwelling in these circumstances is taken to be an input taxed supply under subsection 9-30(4) of the GST Act: see ATO ID 2009/20.) However, in devoting the land to the purpose of leasing it in its vacant state to the third party, the entity is using the land for a separate purpose. This is because, unlike the disposal of the ownership of the land by way of sale, the entity continues to hold the land while leasing it to the third party. The entity is devoting the land to a separate on-going activity of the entity's enterprise (that is, leasing of the vacant land) which is not connected with bringing to an end the earlier residential leasing activities. For this reason, the entity is no longer using the land solely in connection with the entity's earlier input taxed supplies of residential premises by way of lease. Therefore, subsection 9-30(4) of the GST Act does not apply to the lease of the vacant land. The lease of the vacant land by the entity is a taxable supply as it satisfies all the requirements of a taxable supply under section 9-5 of the GST Act.", "Date_of_Decision": "19 May 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-30(4) section 40-35", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/18 | ATO ID 2009/19 | ATO ID 2009/20", "Subject_References": "Goods and services tax GST lease and real property GST property & construction GST residential premises GST supply Input taxed supplies", "Case_References": "Council of the City of Newcastle v Royal Newcastle Hospital (1959) 100 CLR 1", "Other_References": "The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200940", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/3 | Keywords Goods and services tax GST lease and real property GST property & construction GST residential premises GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2008/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and sale by an Owners Corporation of a new residential lot created out of common property", "Issue": "Is the entity, an Owners Corporation for a registered strata scheme in New South Wales, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells a new residential lot created out of the common property of a strata scheme?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a new residential lot created out of the common property of a strata scheme.", "Facts": "The entity is an Owners Corporation for a strata scheme that is registered in New South Wales. The Owners Corporation carries on an enterprise of managing and maintaining the buildings and common property of the strata scheme and is registered for goods and services tax (GST). The lot proprietors passed a special resolution at a general meeting of the Owners Corporation, authorising the Owners Corporation to subdivide the common property pursuant to subsection 9(1) of the Strata Schemes (Freehold Development) Act 1973 (NSW) (SSFDA 1973) to create a new residential lot. Under the arrangement, it was further agreed that a new residential apartment would be constructed by the Owners Corporation on the common property that was to be subdivided into the new residential lot. Pursuant to statute, the newly created lot vests in the Owners Corporation upon registration of the strata plan of subdivision. The Owners Corporation sells the newly created lot which is vested in it to a third party for consideration.", "Reasons_for_Decision": "Summary: For an entity to make a taxable supply under section 9-5 of the GST Act it must first make a supply. The Owners Corporation makes a supply of the new lot to the third party. Section 20 of the SSFDA 1973 provides that the estate or interest of an Owners Corporation in common property vested in it or acquired by it shall be held by the Owners Corporation as agent for the lot proprietors as tenants in common in proportions equal to their lot entitlements. However, the common property may be subdivided by registration of a strata plan of subdivision so as to create one or more new lots (subsections 9(1) and 5(7) of the SSFDA 1973). The registration of the strata plan of subdivision containing a lot made up in whole or in part from the common property changes the nature of that property. Since common property is the land in a parcel that is not comprised in a lot, lots and common property are mutually exclusive ( Houghton v. Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 51 per Handley JA). Therefore, on registration of the strata plan of subdivision the subdivided property ceases to be common property and becomes a new lot. The legal and beneficial interests in the new lot are vested in the Owners Corporation. Further, under subsection 110(2) of the Strata Schemes Management Act 1996 (NSW) an Owners Corporation may dispose of or otherwise deal with any lot vested in it as a result of a subdivision of the common property. Consequently, the sale of the newly created lot is a supply made by the Owners Corporation. For this supply to be a taxable supply, the requirements in section 9-5 of the GST Act must be met. Section 9-5 provides that an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. In this case the Owners Corporation receives consideration from the third party to which it makes the supply of the newly created lot. The Owners Corporation carries on an enterprise of managing and maintaining the buildings and common property. The subdivision of the common property and the construction of a new apartment on the new lot are part of the activities carried on by the Owners Corporation in managing the common property and the strata scheme. Furthermore, the supply of the newly created lot is in the course or furtherance of the Owners Corporation's enterprise. The supply is connected with Australia and the Owners Corporation is registered for GST. The residential apartment located on the new lot has not previously been sold as residential premises (see paragraph 40-75(1)(a) of the GST Act). As stated above, the registration of the strata plan of subdivision results in the legal and beneficial interests in the new lot being vested in the Owners Corporation. As the interests in the new lot are created and vested in the Owners Corporation by the operation of the law, the new residential apartment was not sold as residential premises to the Owners Corporation. Accordingly, the supply of the residential premises by the Owners Corporation to the third party is a supply of new residential premises and therefore it is not an input taxed sale of residential premises under section 40-65 of the GST Act. As all of the requirements for a taxable supply under section 9-5 of the GST Act are satisfied, the supply made by the Owners Corporation of the newly created lot to a third party is a taxable supply.", "Date_of_Decision": "31 January 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 40-65 Paragraph 40-75(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/694 | ATO ID 2008/82", "Subject_References": "Goods and services tax GST body corporates GST supply GST sale of real property", "Case_References": "Houghton v. Immer (No 155) Pty Ltd (1997) 44 NSWLR 46", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200881", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Goods and services tax GST body corporates GST supply GST sale of real property"}
{"ATO_ID_Number": "ATO ID 2008/82", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and subdivision of common property to create a new residential lot", "Issue": "Are the entities, the lot proprietors of a strata scheme registered in New South Wales, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when a new residential lot is created out of the common property of the strata scheme?", "Decision": "No, the entities, the lot proprietors of a strata scheme registered in New South Wales, are not making a taxable supply under section 9-5 of the GST Act when a new residential lot is created out of the common property of the strata scheme.", "Facts": "The entities are the lot proprietors of a strata scheme that is registered in New South Wales. The lot proprietors passed a special resolution at a general meeting of the Owners Corporation, authorising the Owners Corporation to subdivide the common property pursuant to subsection 9(1) of the Strata Schemes (Freehold Development) Act 1973 (NSW) (SSFDA 1973) to create a new residential lot. Under the arrangement, it was further agreed that a new residential apartment would be constructed by the Owners Corporation on the common property that was to be subdivided into the new residential lot. The Owners Corporation undertakes the necessary works and has the strata plan of subdivision registered. Pursuant to statute, the newly created lot vests in the Owners Corporation upon registration of the strata plan of subdivision.", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act provides that an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. Before an entity can make a taxable supply it must first make a supply. The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'. The meaning of the term 'supply' is discussed in Goods and Services Tax Ruling GSTR 2006/9 'Goods and services tax: supplies'. The term 'supply' is considered to take its ordinary and natural meaning, being 'to furnish or to serve' or 'to furnish or provide'. At paragraphs 71 to 91 GSTR 2006/9 also states and explains the proposition that to 'make a supply' an entity must do something. Section 20 of the SSFDA 1973 provides that the estate or interest of an Owners Corporation in common property vested in it or acquired by it shall be held by the Owners Corporation as agent for the lot proprietors as tenants in common in proportions equal to their lot entitlements. However, the common property may be subdivided by registration of a strata plan of subdivision so as to create one or more new lots (subsections 9(1) and 5(7) of the SSFDA 1973). In this case, the registration of the strata plan of subdivision containing a lot made up in whole or in part from the common property changes the nature of that property. Since common property is the land in a parcel that is not comprised in a lot, lots and common property are mutually exclusive ( Houghton v. Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 51 per Handley JA). Therefore, on registration of the strata plan of subdivision the subdivided property ceases to be common property and becomes a new lot. The legal and beneficial interests in the new lot are vested in the Owners Corporation. A transfer of an interest in land, or the surrender of real property, is within the definition of supply in section 9-10 of the GST Act. However, in this case rights or interests are not transferred or surrendered. The registration of the strata plan of subdivision pursuant to the statute has the effect of extinguishing the entities' interests in the land and creates new rights in the land that vest in the Owners Corporation. The entities do not 'do something'. Therefore, the entities are not making a supply of their interests and are not making a taxable supply under section 9-5 of the GST Act when a new residential lot is created out of the common property of the strata scheme.", "Date_of_Decision": "31 January 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2006/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/694 | ATO ID 2008/81", "Subject_References": "Goods and services tax GST body corporates GST supply", "Case_References": "Houghton v. Immer (No 155) Pty Ltd (1997) 44 NSWLR 46", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200882", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2006/9 | Keywords Goods and services tax GST body corporates GST supply"}
{"ATO_ID_Number": "ATO ID 2008/136", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and motel apartments", "Issue": "Is the entity, a property owner, making an input taxed supply of residential premises under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it sells a strata titled unit that has not been previously sold and has only been used for making supplies of commercial accommodation before 2 December 1998?", "Decision": "No, the entity is not making an input taxed supply under section 40-65 of the GST Act when it sells a strata titled unit that has not been previously sold, and has only been used for making supplies of commercial accommodation before 2 December 1998.", "Facts": "The entity is a property owner which is carrying on an enterprise. The entity is registered for GST. Prior to 2 December 1998 the entity constructed a unit complex containing multiple units. The unit complex was commercial residential premises as defined under section 195-1 of the GST Act. Subsequent to 1 July 2000 the entity strata titled one of the units and the strata titled unit was subsequently sold. The strata titled unit was used to provide commercial accommodation, as defined in section 87-15 of the GST Act, as part of commercial residential premises from the time construction of the unit complex was completed. The strata titled unit continued to be used to provide commercial accommodation as part of commercial residential premises from before 2 December 1998 up until the time it was sold. The strata titled unit was not previously sold individually or as part of a commercial residential premises. The strata titled unit was not substantially renovated between construction and sale.", "Reasons_for_Decision": "Summary: Subsection 40-65(1) of the GST Act provides that a sale of real property is input taxed to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). However, subsection 40-65(2) of the GST Act provides that the sale of real property is not input taxed to the extent that the residential premises are: The sale of the strata tilted unit is not a sale of commercial residential premises even though it has been used to provide commercial accommodation as part of commercial residential premises. As explained in Goods and Services Tax Ruling GSTR 2000/20 at paragraphs 51 to 54, a strata titled unit cannot, by itself, exhibit the characteristics of commercial residential premises. It is therefore necessary to determine whether the strata titled unit is 'new residential premises, other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998'. Subsection 40-75(1) of the GST Act states that residential premises are new residential premises if they: The strata titled unit satisfies paragraph 40-75(1)(a) of the GST Act as they have not previously been sold as residential premises nor been the subject of a long-term lease. Subsection 40-75(2) of the GST Act provides an exclusion to subsection 40-75(1). It states that residential premises are not new residential premises if the premises have only been used for making input taxed supplies under paragraph 40-35(1)(a) of the GST Act by way of residential rent for a period of at least five years. Subsection 40-75(2) of the GST Act does not apply as the strata titled unit has not been used for making input taxed supplies under paragraph 40-35(1)(a) of the GST Act. While the strata titled unit is considered to be new residential premises under section 40-75 of the GST Act, it still needs to be determined whether the supply of accommodation in the strata titled unit is nonetheless input taxed under paragraph 40-65(2)(b) of the GST Act. This provides that supplies of new residential premises that were used for residential accommodation (regardless of the term of occupation) before 2 December 1998 will be input taxed. Unlike commercial accommodation, residential accommodation is not defined in the GST Act. The reference to prior use for residential accommodation in subsection 40-65(2) of the GST Act does not encompass the prior use of providing commercial accommodation as part of commercial residential premises. The strata titled unit was only used as part of commercial residential premises from the time of construction, up until the time of sale. Therefore the strata title unit was not used for residential accommodation before 2 December 1998. The view that the reference to prior use for residential accommodation in paragraph 40-65(2)(b) of the GST Act does not encompass prior use as part of commercial residential premises is supported by extrinsic materials pertaining to the GST Act. Paragraph 11.21 of the of the Revised Explanatory Memorandum to the Indirect Tax Legislation Amendment Bill 2000, in discussing the amendment to subsection 40-65(2) of the GST Act stated that 'it was not intended that supplies of existing housing stock which may have been used for many years by the original owners for residential accommodation (either rental income production or for owner occupation) would be subject to GST as new residential premises when first supplied after 1 July 2000'. The reference to 'housing stock' would not indicate that prior use of commercial residential premises is intended to fall within the scope of paragraph 40-65(2)(b) of the GST Act. Further, the Explanatory Memorandum to Tax Laws Amendments (2006 Measures No. 3) Bill 2006 ('the EM') provides the following example: | Detailed Reasoning - Example 15.4: The later sale in example 15.4 of the EM could not be a taxable supply if the reference to prior use for residential accommodation in paragraph 40-65(2)(b) of the GST Act was to be read as encompassing prior use as part of commercial residential premises. As the strata titled unit was not used for residential accommodation before 2 December 1998, it remains new residential premises at the time of sale under paragraph 40-65(2)(b) of the GST Act. The sale of the strata titled unit is therefore not an input taxed supply under section 40-65 of the GST Act.", "Date_of_Decision": "25 September 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 40-35(1)(a) section 40-65 subsection 40-65(1) subsection 40-65(2) paragraph 40-65(2)(b) subsection 40-75(1) paragraph 40-75(1)(a) subsection 40-75(2) Division 75 section 87-15 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST new residential premises GST residential premises GST commercial residential premises GST sale of real property GST supplies & acquisitions Taxable supply Input taxed supplies", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the Indirect Tax Legislation Amendment Bill 2000 Explanatory Memorandum to the Tax Laws Amendments (2006 Measures No. 3) Bill 2006", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008136", "Unmatched_Content": "Camille Enterprises purchases a motel in August 1996 and operates it for 10 years as a motel. In August 2006, Camille Enterprises ceases operation of the motel, strata titles the motel and sells one of the strata titled units as residential premises to Sebastien. | Although the motel was sold as commercial residential premises in August 1996, the sale of the strata titled unit to Sebastien in August 2006 is a sale of new residential premises. This reflects the position that a prior sale as commercial residential premises does not preclude a later sale of residential premises from being a sale of new residential premises. The previous supplies of accommodation in the motel, being supplies of accommodation in commercial residential premises provided to an individual by an entity that owns the commercial residential premises, were not input taxed supplies; thus, subsection 40-75(2) has no operation. | The later sale to Sebastien is subject to GST. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax GST property & construction GST new residential premises GST residential premises GST commercial residential premises GST sale of real property GST supplies & acquisitions Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2006/340", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and whether a sublease of real property is a long-term lease", "Issue": "For the purposes of the definition of 'long term lease' in section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), are the terms of a sublease substantially the same as those under which the supplier held the real property?", "Decision": "No. For the purposes of the definition of 'long term lease' in section 195-1 of the GST Act, the terms of the sublease are not substantially the same.", "Facts": "The supplier is registered for goods and services tax (GST) and is not an Australian government agency. The supplier leases an area of real property (the head lease) from an Australian government agency. Under the terms of the head lease, the supplier: Subsequent to entering into the head lease, the supplier constructed a block of residential units on the real property and granted subleases over the individual units to other parties. Under the terms of each sublease, the sublessee:", "Reasons_for_Decision": "Summary: A 'long-term lease' is defined in section 195-1 of the GST Act as a supply by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) for at least 50 years if: Whether, for the purposes of paragraph b) of the definition, the terms of a sublease applying to the sublessee are substantially the same as those for the supplier under the head lease is a question of fact and degree in each particular case. Consideration needs to be given to matters such as: A comparison of the sublease here with the head lease indicates the terms of each lease are not substantially the same. The amount of rental payable, the way it is worked out and paid, the area of property leased, and how the leased property can be used are all significantly different. While the period of occupancy for the head lease (in perpetuity) may be said to be substantially the same as the sublease (99 years with an option for further 99 years), all the other essential terms are not substantially the same. As the supplier is not an Australian government agency, and paragraph b) of the definition is not satisfied, the sublease is not a long term lease.", "Date_of_Decision": "15 December 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 195-1", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/45", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/113 | ATO ID 2001/635", "Subject_References": "Agreements spanning 1 July 2000 Goods and services tax GST input tax credits & creditable acquisitions GST lease and real property GST long term lease GST property & construction GST real property GST residential premises GST transitional issues Time of supply/acquisition", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006340", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2000/45 | Keywords Agreements spanning 1 July 2000 Goods and services tax GST input tax credits & creditable acquisitions GST lease and real property GST long term lease GST property & construction GST real property GST residential premises GST transitional issues Time of supply/acquisition"}
{"ATO_ID_Number": "ATO ID 2004/807", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of a fractional interest in land by a tenant in common", "Issue": "Is the entity, a property developer that owns a fractional interest in vacant land as a tenant in common, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells its fractional interest in the land and the entity and co-owner are not carrying on an enterprise in partnership?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it sells its fractional interest in the land that it owns as a tenant in common and the entity and co-owner are not carrying on an enterprise in partnership.", "Facts": "The entity is a property developer that owns a fractional interest in vacant land, in Australia, as a tenant in common. The entity carries on an enterprise as a property developer and is registered for goods and services tax (GST). The entity acquired the fractional interest in the land from a deceased estate (the co-owner). The acquisition resulted from the settlement of a debt owed by the deceased estate to the entity in respect of its enterprise activities. The entity and co-owner are now selling their respective interests in the land at an auction. The entity and its co-owner are not carrying on an enterprise in partnership. There have been no improvements or any development activities carried out on the land before the sale. The land is not farm land and the supply of the land does not fall under any provision of Division 38 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, a supply is not taxable to the extent that it is input taxed or GST-free. The entity owns a fractional interest in vacant land as a tenant in common. The entity and co-owner are now selling the land at an auction. The Butterworths Australian Property Law Dictionary , 1997, P E Nygh & P J Butt Eds, Butterworths, Sydney defines 'tenancy in common' as: A type of co-ownership where two or more persons own distinct interests in the same piece of property. The tenants in common hold undivided shares, possessing the property in common and without exclusive possession of any part of it. The shares may be in different proportions. Tenants in common may deal with their respective shares as they wish during their lifetime, and usually may devise them by will... Accordingly, as tenants in common, the entity and the co-owner are making separate supplies of their respective interests in the vacant land in their own capacities. Further, the entity and co-owner are not carrying on an enterprise in partnership. Thus, they are not making a single supply of the whole land. Rather, each is supplying its individual interest in the vacant land. As the entity acquired the fractional interest in the vacant land as the settlement of a debt in respect of its enterprise, the supply of its fractional interest in the vacant land in Australia is in the course or furtherance of its enterprise as a property developer. The entity is registered for GST and the entity's supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells its fractional interest in the vacant land that it owns as a tenant in common and the entity and co-owner are not carrying on an enterprise in partnership.", "Date_of_Decision": "25 July 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "GSTR 2003/3 | GSTR 2004/6 | GSTR 2006/8 | GSTR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST sale of real property GST supplies & acquisitions Taxable supply", "Case_References": "", "Other_References": "Butterworths Australian Property Law Dictionary, 1997, P E Nygh & P J Butt Eds, Butterworths, Sydney", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004807", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2003/3 GSTR 2004/6 GSTR 2006/8 GSTR 2009/2 | Keywords Goods and services tax GST property & construction GST sale of real property GST supplies & acquisitions Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/1055", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and tenant's surrender of a commercial lease (supply) - lessor's agreement to provide premises for rent-free period (consideration)", "Issue": "Does the supply of premises for a rent-free period made by the lessor to the entity, a tenant, form part of the consideration for the entity's taxable supply to the lessor under section 9-5 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act), the supply being the surrender of a commercial lease?", "Decision": "Yes, the supply of premises for a rent-free period made by the lessor to the entity does form part of the consideration for the entity's taxable supply to the lessor under section 9-5 of the GST Act, the supply being the surrender of a commercial lease.", "Facts": "The entity is a tenant. The entity agrees to surrender its rights to lease commercial premises from the lessor. The lessor pays the entity a lump sum to vacate the commercial premises. The surrender of the commercial lease is a taxable supply under section 9-5 of the GST Act. The lessor and the entity also agree that the entity will remain in the commercial premises for a rent-free period before it vacates the commercial premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: In accordance with subsection 7-1(1) of the GST Act, GST is payable on taxable supplies. Under section 9-5 of the GST Act, an entity makes a taxable supply if: The entity is making a taxable supply when it surrenders its rights to lease commercial premises from the lessor. However, in working out the GST payable it needs to be determined whether the supply of premises for a rent-free period made to the entity forms part of the consideration for the entity's taxable supply. Consideration is defined in subsection 9-15(1) of the GST Act to include any payment, act or forbearance in connection with, in response to or for the inducement of a supply of anything. The entity is receiving a lump sum payment to vacate the premises. In addition to this, the entity is entitled to remain in the premises for a rent-free period. In this case, the lessor is forgoing its right to be paid rent. This is in connection with and for the inducement of the entity's surrender of the lease. Therefore, the supply of premises for a rent-free period made by the lessor to the entity does form part of the consideration for the entity's taxable supply to the lessor under section 9-5 of the GST Act, the supply being the surrender of a commercial lease.", "Date_of_Decision": "14 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) section 9-5 subsection 9-15(1)", "Related_Public_Rulings_and_Determinations": "GSTR 2001/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and Services Tax GST supplies & acquisitions GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021055", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2001/6 | Keywords Goods and Services Tax GST supplies & acquisitions GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2010/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of excess accommodation by a time-sharing scheme", "Issue": "Is the entity, a time-sharing scheme, making a taxable supply of accommodation in commercial residential premises under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies excess accommodation?", "Decision": "Yes. The entity is making a taxable supply of accommodation in commercial residential premises under section 9-5 of the GST Act when it supplies excess accommodation.", "Facts": "The scheme meets the definition of a time-sharing scheme under the Corporations Act 2001 (Corporations Act) and is a registered managed investment scheme under the Corporations Act. The time-sharing scheme is a trust which is an entity for GST purposes. As the trust is not a legal entity, a company in its capacity as responsible entity and trustee of the scheme is registered for GST and is taken to be the scheme entity. This entity will be referred to as 'the scheme'. The scheme provides participants with an annual entitlement to a period of accommodation (accommodation entitlement) at a holiday resort. All assets of the scheme are held on trust for scheme participants. The assets of the scheme include real property (scheme accommodation) in the form of: Participants are able to book scheme accommodation by using their accommodation entitlement. Not all participants use their accommodation entitlement every year, which can result in scheme accommodation being unoccupied. At the beginning of each year, the scheme estimates the amount of accommodation that may not be used by participants. This accommodation is referred to as 'excess accommodation'. To reduce excess accommodation, the scheme offers preferential rates for participants on excess accommodation. This provides participants with accommodation in addition to their usual accommodation entitlement. In some circumstances, the entity may rent the excess accommodation to the general public. The fee that participants pay for the excess accommodation is always less than the rent payable by a member of the public. The purchase of excess accommodation provides the right to occupy and enjoy the premises, but does not provide any legal interest in the premises. The excess accommodation is provided at a variety of resorts offering different standards and styles of accommodation ranging from studio apartments, to apartments with a number of bedrooms and separate kitchen facilities. All scheme accommodation is provided in resorts located in Australia. These resorts comply with local and State regulatory requirements in relation to zoning, building code and health regulations that apply to hotels and motels. The accommodation in these resorts is also provided in a business-like manner. The resorts that provide excess accommodation accommodate multiple groups of unrelated guests. Scheme accommodation is advertised on the internet and in printed media. However, marketing strategies designed to promote the purchase of excess accommodation may only be directed at scheme participants. The scheme's supplies of excess accommodation include the use of the resort facilities and amenities as well as services such as reception, cleaning and maintenance, electricity, gas, air-conditioning or heating, telephone and television. In addition, towels and linen are provided. The accommodation rooms are fully furnished and rooms are serviced at least weekly.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The scheme's supplies of excess accommodation satisfy all of the positive elements of section 9-5 of the GST Act as: Therefore it must be determined if the entity's supplies of excess accommodation are GST-free or input taxed. There are no provisions in the GST Act under which these supplies would be GST-free. However, a supply of residential premises by way of lease, hire or licence is input taxed under subsection 40-35(1) of the GST Act other than: The term 'residential premises' is defined in section 195-1 of the GST Act to mean land or a building that: (regardless of the term of the occupation or intended occupation) and includes a floating home. The term 'commercial residential premises' is also defined in section 195-1 of the GST Act to include, among other things, a hotel, motel, inn, hostel or boarding house or anything similar to these residential premises. Paragraph 20 of Goods and Services Tax Ruling GSTR 2000/20 'Goods and Services Tax: commercial residential premises', states that the physical characteristics common to residential premises are that these premises provide the occupants with sleeping accommodation and at least some basic facilities for day to day living, such as areas for eating and bathing. The Federal Court has confirmed that premises that provide shelter and basic living facilities such as a bedroom and bathroom will come within the definition of residential premises in the GST Act (see South Steyne Hotel Pty Ltd v. Commissioner of Taxation [2009] FCA 13; 2009 ATC 20-090; (2009) 71 ATR 228; and confirmed by the Full Federal Court at [2009] FCAFC 155; and see also Vidler v. Commissioner of Taxation [2009] FCA 1426 at [12]; 2009 ATC 20-149). However, accommodation in commercial residential premises is supplied by an entity in the business of providing accommodation together with some level of services to guests. The physical characteristics common to commercial residential premises such as a hotel include infrastructure, for example a reception area, restaurant and conference rooms, in addition to providing the occupants with sleeping accommodation and some facilities for daily living. The inclusion of infrastructure in the premises facilitates the operation of the premises on a commercial basis and the provision of some level of services. The characteristics that are common to a hotel, motel, inn, hostel or boarding house are listed in paragraph 83 of GSTR 2000/20 to assist in identifying premises that are similar to these establishments. These characteristics include: Excess accommodation may result from scheme property where the entity controls the whole of the premises in its own right or may include accommodation rights in premises that are owned and controlled by another entity. Under both arrangements the resorts exhibit the characteristics of commercial residential premises. In particular: Accordingly, the scheme's supply of excess accommodation is a taxable supply under section 9-5 of the GST Act of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises.", "Date_of_Decision": "23 December 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 40-35(1) section 40-5 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST time share Taxable supply", "Case_References": "South Steyne Hotel Pty Ltd v Commissioner of Taxation [2009] FCA 13 2009 ATC 20-090 (2009) 71 ATR 228", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201019", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax GST property & construction GST time share Taxable supply"}
{"ATO_ID_Number": "ATO ID 2014/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of newly constructed residential premises under an arrangement entered into prior to 27 January 2011", "Issue": "Do newly constructed residential units developed and built by an entity under an arrangement entered into with a government body, that the entity was 'commercially committed' to as at 27 January 2011, cease to be new residential premises upon the granting of new individual strata lot leases over each individual unit?", "Decision": "Yes, the newly constructed residential units will cease to be new residential premises for the purposes of paragraph 40-75(1)(a) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act). [1] The granting of a new individual strata lot lease for each residential unit gives rise to a supply of residential premises. Subsection 40-75(2B) does not disregard this supply for the purposes of applying paragraph 40-75(1)(a), as the transitional exception [2] to subsection 40-75(2B) applies.", "Facts": "The entity is registered for GST and is carrying on a property development enterprise. In January 2010 the entity was issued a 99 year Crown lease (Crown lease) over a large block of land by the relevant government body. The terms of the Crown lease include a 'building and development' provision that required the entity to commence the approved development on the land within 12 months and to complete that development within 36 months of the date of the grant of the Crown lease. In March 2010 the entity lodged a development application with the government body to construct multiple residential units on the land. The government body approved the development application in April 2011. As at 27 January 2011 the entity had undertaken significant works directly related to the development, with acquisitions in excess of $200,000. In June 2012 the construction of the residential units was completed and the entity lodged a strata leasehold plan for registration with the government body. The strata leasehold plan was registered on 1 July 2012 and individual 99 year strata lot leases were granted to the entity with respect to each of the individual residential units comprising the development.", "Reasons_for_Decision": "Summary: Subdivision 40-C provides that a supply of residential premises will be input taxed to the extent that they are not commercial residential premises or new residential premises. | Detailed Reasoning - The meaning of new residential premises: The term 'new residential premises' has the meaning given by section 40-75, which states at paragraph 40-75(1)(a) that residential premises are new residential premises if they have not previously been sold as residential premises (other than commercial residential premises) and have not previously been the subject of a long-term lease. Consistent with the majority of the Full Federal Court's decision in Federal Commissioner of Taxation v. Gloxinia Investments Ltd [2010] FCAFC 46, the granting of a strata lot lease over residential premises is a supply of residential premises and, without more, the granting of a 99 year strata lot lease over newly constructed residential premises will mean that they are no longer new residential premises. This is because under paragraph 40-75(1)(a), the grant of the strata lot lease will mean that they are residential premises that have previously been the subject of a long-term lease. However, section 40-75 contains further provisions which provide that certain supplies of residential premises are disregarded for the purposes of determining whether the premises have previously been sold as residential premises or have been the subject of a long term lease, for the purposes of paragraph 40-75(1)(a). | Detailed Reasoning - Subsection 40-75(2B): Where the requirements of subsection 40-75(2B) are met, a supply (the wholesale supply) of newly constructed residential premises will be disregarded for the purposes of applying paragraph 40-75(1)(a), and a subsequent supply of those premises is a supply of new residential premises. Firstly, paragraph 40-75(2B)(a) requires the premises from which the residential premises were created to have earlier been supplied to the recipient of the wholesale supply, or their associates. In this case paragraph 40-75(2B)(a) is satisfied because the land [3] from which the residential premises were created have previously been supplied to the entity when it received the grant of the 99 year Crown lease. Secondly, paragraph 40-75(2B)(b) requires that an arrangement (including an agreement) be made between the supplier of the earlier supply, or their associate, and the recipient of that earlier supply, or their associate. Here, paragraph 40-75(2B)(b) is satisfied as there is an arrangement between the supplier of the earlier supply (the government body that granted the 99 year Crown lease) and the recipient of that earlier supply (the entity). Lastly, paragraph 40-75(2B)(c) requires that under the arrangement the wholesale supply of the residential premises is conditional upon specified building or renovation work being undertaken by the recipient of the earlier supply (in this case, the entity). The wholesale supply in this case is the granting of the individual strata lot leases by the government body to the entity. The arrangement between the entity and the government body includes the development approval and the Crown lease, which set out the requirements for the type of development including the specified building works. The specified building works are also governed by the statutory requirements covering the construction of residential premises under which the development approval has been given and the Crown lease granted by the government body. The arrangement also includes the lodging of the strata leasehold plan and granting of the individual strata lot leases. This is because the intent of the parties in entering into the development was for the construction and sale of individual residential premises to home owners and investors, and the sale of the individual residential units can only occur following the lodgement of a strata leasehold plan and the subsequent grant of the individual strata lot leases. In this case, subsection 40-75(2B) would apply to disregard the supply of the residential premises that occurs upon grant of the individual strata lot leases, except for the operation of the transitional provision item 12 of Schedule 4 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012 (item 12). Subject to certain conditions being met, item 12 provides that subsection 40-75(2B) does not apply to supplies of residential premises made on or after 27 January 2011 if, prior to 27 January 2011, the recipient of the supply was 'commercially committed' to an arrangement. In this case there was an earlier supply [4] of the premises through the Crown lease. The entity was commercially committed to the arrangement, having undertaken significant work and made acquisitions in excess of $200,000 before 27 January 2011. Therefore, item 12 applies so that the granting of the individual strata lot leases over the individual residential units is not disregarded for the purposes of applying paragraph 40-75(1)(a). Following the grant of the strata lot leases the newly constructed residential units will cease to be new residential premises. The subsequent supplies by the entity of the residential units to home owners or investors will be input taxed supplies. | Detailed Reasoning - Subsection 40-75(2C): Under subsection 40-75(2C), a supply of the newly constructed residential premises is disregarded as a sale or supply for the purposes of applying paragraph 40-75(1)(a) if it is made because a property sub-division plan relating to the premises was lodged for registration (however described) by the recipient of the supply or their associate. In this case the strata leasehold plan is a property sub-division plan as defined in section 195-1 and the granting of the individual strata lot leases would therefore be captured by subsection 40-75(2C). However, the transitional provision exception to subsection 40-75(2C) provided by item 13 of Schedule 4 to the Tax Laws Amendment (2011 Measures No. 9) Act 2012 (item 13) is not satisfied. [5] Accordingly, although both subsections 40-75(2B) and 40-75(2C) apply to this supply, the combined effect of subsection 40-75(2C) and item 13 do not prevail to prevent the exception provided by the transitional provision of item 12 from applying. This is because regard must be had to the overall intent and operation of all the transitional provisions relating to these legislative amendments, [6] which is to ensure that taxpayers that entered into arrangements prior to the legislative amendments relying on the law as stated in Gloxinia would not be disadvantaged. [7] Therefore, the subsequent supply by the entity of the residential units to home owners and investors will be input taxed supplies.", "Date_of_Decision": "27 May 2014", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 40-75 paragraph 40-75(1)(a) subsection 40-75(2B) paragraph 40-75(2B)(a) paragraph 40-75(2B)(b) paragraph 40-75(2B)(c) subsection 40-75(2C)", "Related_Public_Rulings_and_Determinations": "GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "goods and services tax GST lease and real property GST long term lease GST new residential premises GST residential premises GST sale of real property", "Case_References": "Federal Commissioner of Taxation v. Gloxinia Investments Ltd [2010] FCAFC 46 2010 ATC 20-182 75 ATR 806", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2011 Measures No. 9) Bill 2011", "Business_Line": "Interpretative Assistance, Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201419", "Unmatched_Content": "Related Public Rulings (including Determinations) GSTR 2003/3 | Keywords goods and services tax GST lease and real property GST long term lease GST new residential premises GST residential premises GST sale of real property"}
{"ATO_ID_Number": "ATO ID 2008/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and hotel managed investment schemes and sale of a new accommodation suite", "Issue": "Does the entity, the owner of a hotel it has recently constructed, make a taxable supply of new residential premises under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a new strata-titled accommodation suite in the hotel to a purchaser who licenses it back to the entity, in its capacity as a Responsible Entity (RE), under a registered managed investment scheme arrangement?", "Decision": "Yes, the entity, the owner of a hotel it has recently constructed, makes a taxable supply of new residential premises under section 9-5 of the GST Act when it sells a new strata-titled accommodation suite in the hotel to a purchaser who licenses it back to the entity, in its capacity as an RE, under a registered managed investment scheme arrangement.", "Facts": "The entity: The product disclosure statement gives information about the decision to acquire the benefit of an agreement with the entity to manage the accommodation suites as part of the hotel as the RE of an arrangement registered as a managed investment scheme under the Corporations Act 2001. It includes an invitation to members of the public to buy accommodation suites in the hotel, subject to the condition that each accommodation suite be licensed to the entity (in its capacity as an RE), for a specified period. During that period, the RE will lease all of the accommodation suites to another party (the hotel operator). Each purchaser enters into a written contract to purchase a recently constructed accommodation suite in the hotel from the entity, in its capacity as vendor, and to license it back to the entity, in its capacity as RE, for the specified period and under the terms set out in the management agreement, which is referred to in the constitution of the registered managed investment scheme. Each accommodation suite exhibits the characteristics of residential premises, such as the provision of bathing and sleeping facilities. Under the management agreement, the monies periodically payable by the RE to each purchaser are calculated under a formula that takes into account the rent that the RE charges the hotel operator for all of the accommodation suites. The formula also takes into account certain expenses that each purchaser is required to meet under the constitution of the scheme. A special clause in the contract of sale requires each purchaser to agree not to resell the accommodation suite while it is licensed to the RE, unless the contract of sale contains a clause binding the new owner to continue to licence the accommodation suite to the RE for the balance of the specified period and under the same terms of the management agreement. Purchasers are not required to furnish any separate membership fee to become members of the registered managed investment scheme. On settlement of the contract of sale of the accommodation suite, each purchaser is entitled to be registered as the owner of the freehold title to an accommodation suite. The purchase price set out in the contract for sale is approximately the same as what the accommodation suite might otherwise be sold for as real property that is not part of a managed investment scheme arrangement.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The agreement is a written contract of sale of an accommodation suite in the hotel between the entity, as vendor, and the purchaser. The written contract incorporates covenants requiring the purchaser to licence the accommodation suite back to the vendor, under the terms of a management agreement. For GST purposes, the monies the purchaser furnishes at settlement are properly regarded as consideration for the sale by the entity to the purchaser of the accommodation suite. Therefore, paragraph 9-5(a) of the GST Act is met. Paragraphs 9-5(b) to (d) of the GST Act are also satisfied in relation to the supply of the accommodation suite made by the entity to the purchaser, as the supply is made by the entity in the course of its enterprise, the accommodation suite is in Australia and the entity is registered. However, section 9-5 of the GST Act provides that a supply is not a taxable supply to the extent it is GST-free or input taxed. Under subsection 40-65(1) of the GST Act, a sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). However, subsection 40-65(2) of the GST Act provides that the sale is not input taxed to the extent that the residential premises are commercial residential premises, or new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998. The separately titled accommodation suite is residential premises as defined under section 195-1 of the GST Act. However, it is not commercial residential premises. As stated in paragraph 51 of GSTR 2000/20, a strata-titled unit or suite cannot, by itself, exhibit the characteristics of commercial residential premises. In this case, the accommodation suite has recently been constructed by the entity and the sale to the purchaser is the first sale of the residential premises. Accordingly, the definition of new residential premises in paragraph 40-75(1)(a) of the GST Act is satisfied. Further, subsection 40-75(2) of the GST Act is not applicable as less than five years have elapsed since the premises were built. Therefore, the supply by the entity of the accommodation suite to the purchaser is a supply of new residential premises. The consideration provided by the purchaser to the entity is for the supply of the accommodation suite. Accordingly, the entity does make a taxable supply of new residential premises under section 9-5 of the GST Act when it sells a strata-titled accommodation suite in the hotel to a purchaser who licenses it back to the entity, in its capacity as RE, under a registered managed investment scheme arrangement.", "Date_of_Decision": "8 February 2008", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 paragraph 9-5(a) paragraph 9-5(b) paragraph 9-5(c) paragraph 9-5(d) subsection 40-65(1) subsection 40-65(2) paragraph 40-75(1)(a) subsection 40-75(2) section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST commercial residential premises GST new residential premises GST property & construction GST sale of residential premises", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200837", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 | Keywords Goods and services tax GST commercial residential premises GST new residential premises GST property & construction GST sale of residential premises"}
{"ATO_ID_Number": "ATO ID 2004/47", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the sale of strata titled motel units", "Issue": "Is the entity, a motel owner, making an input taxed supply under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it strata titles the motel and sells each of the strata titled motel rooms?", "Decision": "No, the entity is not making an input taxed supply under section 40-65 of the GST Act when it strata titles the motel rooms and sells each of the strata titled motel rooms separately . The entity is making taxable supplies of new residential premises under section 9-5 of the GST Act.", "Facts": "The entity is a motel owner and operator. The entity bought the freehold title to a motel complex that was constructed after 2 December 1998. The entity used the premises to operate a business of providing motel accommodation. The entity is now selling the strata titled motel rooms ('motel units'). The entity chose to strata title the motel rooms and the management lot in the motel complex and to sell the motel units (but not the management lot) separately. All of the motel units have the basic facilities for daily living such that they are residential premises to be used predominantly for residential accommodation.. Prior to sale, the motel units were not used to make any input taxed supplies. They have not previously been the subject of a 'long term lease' as that term is defined in section 195-1 of the GST Act. The entity is registered for goods and services tax (GST). The sale of each of the motel units meets the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Subsection 40-65(1) of the GST Act provides that a sale of real property is input taxed to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). On their own,each of the entity's motel units are residential premises to be used predominantly for residential accommodation. However, subsection 40-65(2) of the GST Act provides that the sale of real property is not input taxed to the extent that the residential premises are: Sold separately, the motel units are not commercial residential premises even though they were part of commercial residential premises (that is, the motel complex). As explained in Goods and Services Tax Ruling GSTR 2000/20, at paragraph 51, a motel unit cannot, by itself, exhibit the characteristics of commercial residential premises. Therefore, it needs to be determined whether the motel units are 'new residential premises, other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998'. Subsection 40-75(1) of the GST Act states that residential premises are new residential premises if they: Subsection 40-75(2) of the GST Act provides that residential premises are not new residential premises if the premises have been used solely for making input taxed supplies by way of lease, hire or licence for a period of at least five years. Subsection 40-75(2) of the GST Act does not apply here, as the motel units have not been used for making input taxed supplies. However, each of the motel units satisfy paragraph 40-75(1)(a) of the GST Act. They are residential premises that have not previously been sold as residential premises nor been the subject of a long term lease. Even though they were previously sold to the entity operating the motel business, they were sold as part of commercial residential premises (the motel complex), rather than as residential premises. As the motel units are new residential premises and were not used for residential accommodation before 2 December 1998 (they were constructed after that date), their sale is not input taxed under section 40-65 of the GST Act. The sale of the motel units satisfies the positive limbs in section 9-5 of the GST Act. Furthermore, the sale is neither GST-free under Division 38 of the GST Act nor input taxed under any other section of Division 40 of the GST Act. Therefore, the separate sales of the motel units are taxable supplies under section 9-5 of the GST Act.", "Date_of_Decision": "17 December 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40 section 40-65 subsection 40-65(1) subsection 40-65(2) section 40-75 subsection 40-75(1) paragraph 40-75(1)(a) subsection 40-75(2) Division 75 section 195-1", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2000/20 | Goods and Services Tax Ruling GSTR 2003/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST new residential premises GST residential premises GST commercial residential premises GST sale of real property GST supplies & acquisitions Taxable supply Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200447", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2000/20 Goods and Services Tax Ruling GSTR 2003/3 | Keywords Goods and services tax GST property & construction GST new residential premises GST residential premises GST commercial residential premises GST sale of real property GST supplies & acquisitions Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2004/303", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of residential premises together with assignment of development consent", "Issue": "Is the entity, a property developer that is making an input taxed supply of residential premises, making a separate taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when under a contract of sale, it assigns to the purchaser a development consent that runs with the premises?", "Decision": "No, the entity is not making a separate taxable supply under section 9-5 of the GST Act when under a contract of sale it assigns to the purchaser a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent.", "Facts": "The entity is a property developer. The entity is selling residential premises. The sale of the residential premises is an input taxed supply under section 40-65 of the GST Act. Prior to the sale, the entity obtained a development consent in relation to the residential premises. Under the contract of sale, the entity formally assigns that development consent to the purchaser. The development consent is attached to the land and runs with the land. Upon sale of the residential premises, the development consent is automatically transferred to the purchaser as a natural consequence of the sale. The entity's assignment of the development consent does not result in anything being transferred to the purchaser that would not result naturally from the transfer of the land itself. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Section 9-5 of the GST Act sets out the requirements that must be satisfied for a supply to be a taxable supply. It further provides that a supply is not a taxable supply to the extent that it is GST-free or input taxed. Before determining whether a taxable supply is being made in relation to the development consent, the substance of the supply or supplies must be established. That is, in relation to the formal assignment of the development consent, it must be determined whether the entity is making a separate supply from its input taxed supply of the residential premises. The development consent is attached to the land belonging to the residential premises and runs with that land. Upon sale of the residential premises, the development consent is automatically transferred to the purchaser as a natural consequence of the sale. This transfer takes place regardless of the formal assignment in the sale contract. The entity's assignment of the development consent does not result in anything being transferred to the purchaser that would not result naturally from the transfer of the land itself. Therefore, the entity is not supplying the purchaser with anything more than the residential premises. The formal assignment of the development consent does not amount to a separate supply because it does not effect the transfer of anything that was not already transferred to the purchaser as a direct and natural consequence of the sale of the premises. As such, the entity is not making a separate taxable supply under section 9-5 of the GST Act when it assigns to the purchaser, under the contract of sale, a development consent that runs with the premises. The entity is making a single input taxed supply of the residential premises, which includes the development consent. Note: Where a formal assignment of the development consent effects a transfer of something more than that resulting naturally from the transfer of the land itself, the additional assignment may be a separately identifiable supply, which may be a taxable supply where all of the requirements of section 9-5 of the GST Act are satisfied.", "Date_of_Decision": "5 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 40-65", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST sale of real property GST supplies & acquisitions GST supply Taxable supply Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004303", "Unmatched_Content": "Keywords Goods and services tax GST property & construction GST residential premises GST sale of real property GST supplies & acquisitions GST supply Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2004/401", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of chattels included in the sale of previously leased residential premises", "Issue": "Is the entity, a property vendor, making a separate supply that is taxable under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it includes chattels in its sale of residential premises and the entity used those chattels solely in connection with its input taxed supply of those premises by way of lease?", "Decision": "No, the entity is not making a separate supply that is taxable under section 9-5 of the GST Act. The entity's supply of the chattels is an input taxed supply under subsection 9-30(4) of the GST Act as the entity used the chattels solely in connection with its input taxed supply of residential premises by way of lease.", "Facts": "The entity is a property vendor. The entity is selling a residential property. The sale of the property is input taxed under section 40-65 of the GST Act. The entity used this property to make input taxed supply of residential premises by way of lease under section 40-35 of the GST Act. The entity provided chattels such as beds, chairs, tables and rubbish bins for its tenants to use in the property. The entity did not use the chattels for any other purpose. The entity includes the chattels in its sale of the residential premises. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: To determine the GST status of a supply, it is first necessary to establish what the entity is supplying. The entity is selling a residential premises including a number of chattels. Unlike fixtures that form part of the building they are affixed to, chattels are separate items to the building they are contained in and title to them does not automatically pass to a purchaser. Therefore, the entity's sale comprises two parts, the residential premises and the chattels. Goods and Services Tax Ruling GSTR 2001/8 provides that where a supply consists of more than one part, the supply could be either a mixed or a composite supply. Where a supply contains a dominant part and also something that is integral, ancillary or incidental to that part, the supply is composite. A composite supply is treated as a single supply and takes its GST status from the dominant component of the supply. Where the supply has separately identifiable parts, the supply is a mixed supply. The GST status of the component parts of a mixed supply are determined separately. The entity's sale comprises of residential premises and chattels. The supply of chattels is not integral, ancillary or incidental to the supply of residential premises. As such, the entity is making a mixed supply and the GST status of the supply of chattels is determined separately from the supply of the residential premises. Subsection 9-30(4) of the GST Act provides that an entity's supply is input taxed if it is a supply of anything (other than new residential premises) that it has used solely in connection with its supplies that are input taxed but are not financial supplies. The entity provided the chattels to the tenants in the residential premises. The supply of the premises to the tenants was input taxed. The entity did not use the chattels for any other purpose. Therefore, the entity used the chattels solely in connection with its input taxed supply of residential premises by way of lease. Accordingly, the requirement under subsection 9-30(4) of the GST Act is satisfied and the entity's supply of the chattels is input taxed.", "Date_of_Decision": "30 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-30(4) section 40-35 section 40-65", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/402", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST sale of real property GST special rules GST supplies & acquisitions GST supply Input taxed supplies", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004401", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/8 | Keywords Goods and services tax GST property & construction GST residential premises GST sale of real property GST special rules GST supplies & acquisitions GST supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2004/402", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and supply of chattels included in the sale of residential premises", "Issue": "Is the entity, a property vendor, making a separate supply that is taxable under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it includes chattels in its input taxed supply of residential premises?", "Decision": "Yes, the entity is making a separate supply that is taxable under section 9-5 of the GST Act when it includes chattels in its input taxed supply of residential premises.", "Facts": "The entity is a property vendor. The entity's enterprise consists of renovating and selling old houses. The entity is selling a recently renovated residential property. The renovation did not amount to substantial renovations and the sale of the property is an input taxed supply under section 40-65 of the GST Act. The entity purchased new and second-hand chattels such as beds, chairs, tables and rubbish bins to furnish the house. The entity is including the chattels in its sale of the residential premises. The entity is registered for goods and services tax (GST) and the supply of the chattels satisfies the other positive limbs of a taxable supply under section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: To determine the GST status of a supply, it is first necessary to establish what the entity is actually supplying. The entity is selling a residential premises including a number of chattels. Unlike fixtures that form part of the building they are affixed to, chattels are separate items to the building they are contained in and title to them does not automatically pass to a purchaser. Therefore, the entity's sale comprises two parts, the residential premises and the chattels. Goods and Services Tax Ruling GSTR 2001/8 provides that where a supply consists of more than one part, the supply could be either a mixed or a composite supply. Where a supply contains a dominant part and also something that is integral, ancillary or incidental to that part, the supply is composite. A composite supply is treated as a single supply and takes its GST status from the dominant component of the supply. Where the supply has separately identifiable parts, the supply is a mixed supply. The GST status of the component parts of a mixed supply are determined separately. The entity's sale comprises of residential premises and chattels. The supply of chattels is not integral, ancillary or incidental to the supply of residential premises. As such, the entity is making a mixed supply and the GST status of the supply of chattels is determined separately from the supply of the residential premises. Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity is registered for GST and the supply of the chattels satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. However, subsection 9-30(4) of the GST Act provides that an entity's supply is input taxed if it is a supply of anything (other than new residential premises) that it has used solely in connection with its supplies that are input taxed but are not financial supplies. For the purposes of subsection 9-30(4) of the GST Act, the thing being supplied must be connected with previous supplies an entity made that were input taxed. For example, if chattels had been previously supplied to tenants who rented residential premises, an entity would have used the chattels in connection with supplies that were input taxed. The entity purchased chattels to furnish the renovated residential premises that it is selling. The entity has not used the chattels for any other purpose. Therefore, the chattels included in the sale of the renovated property have not been previously used by the entity in connection with the making of input taxed supplies. As such, the entity's supply of the chattels is not input taxed under subsection 9-30(4) of the GST Act. Therefore, the entity is making a separate supply that is taxable under section 9-5 of the GST Act when it includes chattels in its input taxed supply of residential premises. Subsection 9-80(2) of the GST Act provides that the value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula: (Price of the supply * 10) / (10 + Taxable proportion) where: 'Taxable proportion' is the proportion of the value of the supply that represents the value of the taxable supply, as expressed as a number between '0' and '1'. GSTR 2001/8 provides guidance on the apportionment of consideration for a supply that includes taxable and non-taxable parts.", "Date_of_Decision": "30 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 subsection 9-30(4) subsection 9-80(2) Division 38 Division 40 section 40-65", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/401", "Subject_References": "Goods and services tax GST property & construction GST residential premises GST sale of real property GST supplies & acquisitions GST enterprise GST supply Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004402", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/8 | Keywords Goods and services tax GST property & construction GST residential premises GST sale of real property GST supplies & acquisitions GST enterprise GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2002/523", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and the supply of a 'removal house'", "Issue": "Is the entity, a property developer, making an input taxed supply under section 40-65 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it sells a 'removal house'?", "Decision": "No, the entity is not making an input taxed supply under section 40-65 of the GST Act when it sells a 'removal house'. The entity is making a taxable supply under section 9-5 of the GST Act.", "Facts": "The entity is a property developer. The entity purchases residential premises comprising a house and land. The house is attached to the land and forms an integral part of the land. The entity then removes the house from the land and sells the house only. The entity retains all interests in relation to the land. The house is referred to as a 'removal house'. The house was never rented by the developer. The entity is registered for goods and services tax (GST). The supply satisfies all of the other positive limbs of section 9-5 of the GST Act.", "Reasons_for_Decision": "Summary: Under section 40-65 of the GST Act, a sale of real property is input taxed, but only to the extent that the property is residential premises to be used predominantly for residential accommodation (regardless of the term of occupation). Section 195-1 of the GST Act states that real property includes: The case of Cohns Industries Pty Ltd v Deputy FCT (1979) 24 ALR 658 provides legal authority for the rule of statutory interpretation that if the word 'includes' is used in relation to a definition of a word or phrase, prima facie, the word or phrase defined has its ordinary meaning in addition to the matters specified in the definition, whether or not these words of definition come within the ordinary meaning of the word or phrase being defined. The Macquarie Dictionary (1997) defines 'real property' as: 'tangible and immovable property such as land and houses, buildings or any such structures on the land, and any rights attached to the ownership of the land, such as mineral rights (but excluding leasehold interests).' The entity is not supplying land, or land and houses, buildings or any such structures on that land. The entity is only supplying a 'removal house' that is detached from the land. Furthermore, the entity retains all interests in relation to the land. Therefore, the 'removal house' does not satisfy the ordinary definition of 'real property' in The Macquarie Dictionary (1997) nor does it satisfy the statutory definition of 'real property' in section 195-1 of the GST Act. Accordingly, the supply does not satisfy the requirements in section 40-65 of the GST Act because the entity is not selling 'real property'. As such, the entity is not making an input taxed supply under section 40-65 of the GST Act when it sells a 'removal house'. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act; nor input taxed under any of the other provisions in Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a 'removal house'.", "Date_of_Decision": "3 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 Division 38 Division 40 section 40-65 section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods & services tax GST property & construction GST residential premises GST real property GST supplies & acquisitions Taxable supply Input taxed supplies", "Case_References": "Cohns Industries Pty Ltd v Deputy FCT (1979) 24 ALR 658", "Other_References": "The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales. Property and Construction Issues Register - Issue 15.4.15", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002523", "Unmatched_Content": "Keywords Goods & services tax GST property & construction GST residential premises GST real property GST supplies & acquisitions Taxable supply Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2001/650", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and a special levy charged by a body corporate", "Issue": "Is the entity, a body corporate for a residential unit complex, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it charges a special levy to its members?", "Decision": "Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it charges a special levy to its members.", "Facts": "The entity is a body corporate that administers, manages and controls the common property and assets of a residential unit complex in Australia for the benefit of its members. The entity is obliged to make a variety of supplies in the course of administering the common property and assets (that is, maintenance and servicing) of the residential unit complex. The members contribute to an administration and/or sinking fund in order for the entity to perform its obligations and to carry out the activities. These supplies by the entity to its members satisfy the requirements of a taxable supply under section 9-5 of the GST Act (see also the decision of BJ McCabe SM in Re Body Corporate, Villa Edgewater CTS 23092 and Federal Commissioner of Taxation 2004 ATC 2056; (2004) 55 ATR 1162; [2004] AATA 425). A public liability judgment was issued against the entity, which cannot be recovered from any insurance company. In order to pay this judgment debt, the entity charges each member a special levy in addition to its ordinary administration and/or sinking fund levy. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: In determining whether a transaction is a taxable supply, it is necessary to determine whether the transaction falls within the meaning of 'supply' set out in section 9-10 of the GST Act. Paragraph 9-10(2)(b) of the GST Act provides that the expression 'supply' includes 'a supply of services' and paragraph 9-10(2)(g) of the GST Act provides that 'supply' includes 'an entry into... an obligation... to do anything'. A body corporate is obliged to perform a variety of activities in the course of administering the common property and assets of a complex for the benefit of its members. These activities are 'services' within the meaning of 'supply'. Although the term 'services' is undefined, it clearly comprehends the performance of obligations imposed on the entity to manage the affairs of the residential unit complex, including affairs in relation to a public liability judgment. The special levy is an additional amount of consideration paid by members for the services provided by the entity, even though the additional consideration is applied to the fulfilment of the entity's obligation in relation to the public liability judgment. The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it charges a special levy to its members.", "Date_of_Decision": "7 June 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-10 paragraph 9-10(2)(b) subparagraph 9-10(2)(g)(i) Division 38 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST property and construction GST body corporates GST supplies and acquisitions GST supply Taxable supply", "Case_References": "Re Body Corporate, Villa Edgewater CTS 23092 and Federal Commissioner of Taxation 2004 ATC 2056 (2004) 55 ATR 1162 [2004] AATA 425", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001650", "Unmatched_Content": "This ATO ID has been amended to improve clarity This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Facts and Reasons for decision | Keywords Goods and services tax GST property and construction GST body corporates GST supplies and acquisitions GST supply Taxable supply"}
{"ATO_ID_Number": "ATO ID 2009/103", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and services related to accommodation in a retirement village operated by an endorsed charitable institution or trustee of a charitable fund that are GST-free", "Issue": "Are building and garden maintenance services (including cleaning of the residential premises and communal facilities) supplied by a charitable retirement village operator to a resident, related to the supply of the accommodation in a retirement village (and GST-free) under subparagraph 38-260(c)(i) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "Yes, building and garden maintenance services (including cleaning of the residential premises and communal facilities) supplied by a charitable retirement village operator to a resident are related to the supply of the accommodation in a retirement village (and GST-free) under subparagraph 38-260(c)(i) of the GST Act.", "Facts": "The retirement village operator is an endorsed charitable institution for GST purposes. The retirement village comprises a number of independent living units together with communal facilities and is located in Australia. Prior to entry into a retirement village, residents sign a Residence Agreement with the operator specifying, among other things, the residential premises and communal facilities provided and the respective obligations of the operator and resident. Pursuant to the Residence Agreement, the entity provides a range of services to the resident, including building and garden maintenance services.", "Reasons_for_Decision": "Summary: Section 38-260 of the GST Act states that: A supply is GST-free if: Section 38-260 of the GST Act applies to supplies made on or after 14 December 2004. To determine whether a supply made by a charitable retirement village operator is related to the supply of accommodation for the purposes of subparagraph 38-260(c)(i) of the GST Act, it is necessary to define the term 'accommodation in a retirement village'. The specific term is not a defined term in the GST Act but a retirement village is defined for the purposes of the GST Act. Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118 considered the meaning of supply of accommodation in subparagraph 38-250(1)(b)(i) of the GST Act. The ordinary and natural meaning of \"accommodation\" includes an apartment or any premises that are used by a person as their place of residence, whether their right of residency is conferred by licence, lease or ownership. We consider that as subparagraph 38-260(c)(i) of the GST Act and subparagraph 38-250(1)(b)(i) of the GST Act are both in Subdivision 38-G of the GST Act the same meaning of \"accommodation\" should be applied to these provisions. The definition of 'retirement village' at section 195-1 of the GST Act provides that premises are a retirement village if: (a) the premises are residential premises; and (b) accommodation in the premises is intended to be for persons who are at least 55 years old, or who are a certain age that is more than 55 years and (c) the premises include communal facilities for use by the residents of the premises but the following are not retirement villages: (d) premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act 1997) by an approved provider (within the meaning of that Act) (e) *commercial residential premises. In this context, the Commissioner considers that a supply of 'accommodation in a retirement village' is a supply of residential premises and communal facilities to a resident (if at least of 55 years of age) that has the right to occupy such premises. It must then be determined whether the relevant services are related to the supply of the residential premises and communal facilities. The term 'relates to' was discussed in the Federal Court decision of HP Mercantile Pty Ltd v. Commissioner of Taxation (2005) 143 FCR 553; 2005 ATC 4571; (2005) 60 ATR 106, where Hill J (with whom Allsop and Stone JJ agreed) stated that: ... The sufficiency of the connection or association will be a matter for judgment which will depend, among other things, upon the subject matter of the inquiry, the legislative history, and the facts of the case. Put simply, the degree of relationship implied by the necessity to find a relationship will depend upon the context in which the words are found. ... The Explanatory Memorandum to the Tax Laws Amendment (Retirement Villages) Bill 2004 (Explanatory Memorandum) provides further context to the degree of relationship implied by the words 'related to' in subparagraph 38-260(c)(i) of the GST Act. Paragraphs 1.51 and 1.52 of the Explanatory Memorandum provide as follows: 1.51 In order that GST-free treatment applies, it is necessary that the charitable retirement village operator make (sic) the supply to a resident of a retirement village operated by the charity. Accordingly, supplies made by the charitable retirement village to visitors or staff of the retirement village would not qualify for GST-free treatment ... 1.52 The range of supplies to which GST-free treatment applies, includes the supply of accommodation in a charitable retirement village, services related to the supply of the accommodation and meals. This would include, for example, the supply of accommodation in an independent living unit or serviced apartment, property maintenance fees and gardening services and meals and beverages ... Based on these paragraphs of the Explanatory Memorandum, the Commissioner considers that for the purposes of subparagraph 38-260(c)(i) of the GST Act, a service is related to the supply of the accommodation if the service is for the maintenance of the residential premises or communal facilities. Accordingly, since services included in the Residence Agreement such as building and garden maintenance services are for the maintenance of the residential premises or communal facilities, they are GST-free under subparagraph 38-260(c)(i) of the GST Act.", "Date_of_Decision": "20 August 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-G section 38-250 38-250(1)(b)(i) section 38-260 subparagraph 38-260(c)(i) section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2007/1 | GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/104", "Subject_References": "Goods and services tax GST retirement villages GST residential premises GST free GST supply", "Case_References": "HP Mercantile Pty Ltd v Commissioner of Taxation (2005) 143 FCR 553 2005 ATC 4571 (2005) 60 ATR 106", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Retirement Villages) Bill 2004", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009103", "Unmatched_Content": "This ATO ID is being reviewed for minor updates following the replacement of the Aged Care Act 1997 with the Aged Care Act 2024 from 1 November 2025. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Added paragraph regarding case Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118 which considered the meaning of supply of accommodation in subparagraph 38-250(1)(b)(i) of the GST Act. | Added case Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118. | Related Public Rulings (including Determinations) GSTR 2007/1 GSTR 2000/20 | Keywords Goods and services tax GST retirement villages GST residential premises GST free GST supply"}
{"ATO_ID_Number": "ATO ID 2009/104", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and services not related to accommodation in a retirement village operated by an endorsed charitable institution or trustee of a charitable fund", "Issue": "Are laundry, personal care, hairdressing and bus services supplied by a charitable retirement village operator to a resident, related to the supply of the accommodation in a retirement village (and GST-free) under subparagraph 38-260(c)(i) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?", "Decision": "No, the supply of laundry, personal care, hairdressing and bus services supplied by a charitable retirement village operator to a resident, are not related to the supply of the accommodation in a retirement village (and GST-free) under subparagraph 38-260(c)(i) of the GST Act.", "Facts": "The retirement village operator is an endorsed charitable institution for GST purposes. The retirement village comprises a number of independent living units together with communal facilities and is located in Australia. Prior to entry into a retirement village, residents sign a Residence Agreement with the operator specifying, among other things, the residential premises and communal facilities provided and the respective obligations of the operator and resident. Pursuant to the Residence Agreement, the entity provides a range of services to the resident, including laundry services, trips in the retirement village bus, assistance with personal care and hairdressing.", "Reasons_for_Decision": "Summary: Section 38-260 of the GST Act states that: A supply is GST-free if: (a) the supplier is an *endorsed charitable institution, or an *endorsed trustee of a charitable fund, that operates a *retirement village; and (b) the supply is made to a resident of the retirement village; and the supply is: (i) a supply of accommodation in the retirement village, or a supply of a service related to the supply of the accommodation; or (ii) a supply of meals. Section 38-260 of the GST Act applies to supplies made on or after 14 December 2004. To determine whether a supply made by a charitable retirement village operator is related to the supply of accommodation for the purposes of subparagraph 38-260(c)(i) of the GST Act, it is necessary to define the term 'accommodation in a retirement village'. The specific term is not a defined term in the GST Act but a 'retirement village' is defined for the purposes of the GST Act. Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118 considered the meaning of supply of accommodation in subparagraph 38-250(1)(b)(i) of the GST Act. The ordinary and natural meaning of \"accommodation\" includes an apartment or any premises that are used by a person as their place of residence, whether their right of residency is conferred by licence, lease or ownership. We consider that as subparagraph 38-260(c)(i) of the GST Act and subparagraph 38-250(1)(b)(i) of the GST Act are both in Subdivision 38-G of the GST Act the same meaning of \"accommodation\" should be applied to these provisions. The definition of 'retirement village' at section 195-1 of the GST Act provides that premises are a retirement village if: (a) the premises are residential premises; and (b) accommodation in the premises is intended to be for persons who are at least 55 years old, or who are a certain age that is more than 55 years and (c) the premises include communal facilities for use by the residents of the premises but the following are not retirement villages: (d) premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act 1997) by an approved provider (within the meaning of that Act) (e) *commercial residential premises. In this context, the Commissioner considers that a supply of 'accommodation in a retirement village' is a supply of residential premises and communal facilities to a resident (if at least of 55 years of age) that has the right to occupy such premises. It must then be determined whether the relevant services are related to the supply of the residential premises and communal facilities. The term 'relates to' was discussed in the Federal Court decision of HP Mercantile Pty Ltd v. Commissioner of Taxation (2005) 143 FCR 553; 2005 ATC 4571; (2005) 60 ATR 106, where Hill J (with whom Allsop and Stone JJ agreed) stated that: ... The sufficiency of the connection or association will be a matter for judgment which will depend, among other things, upon the subject matter of the inquiry, the legislative history, and the facts of the case. Put simply, the degree of relationship implied by the necessity to find a relationship will depend upon the context in which the words are found. ... The Explanatory Memorandum to the Tax Laws Amendment (Retirement Villages) Bill 2004 (Explanatory Memorandum) provides further context to the degree of relationship implied by the words 'related to' in subparagraph 38-260(c)(i) of the GST Act. Paragraphs 1.51 and 1.52 of the Explanatory Memorandum provide as follows: 1.51 In order that GST-free treatment applies, it is necessary that the charitable retirement village operator make (sic) the supply to a resident of a retirement village operated by the charity. Accordingly, supplies made by the charitable retirement village to visitors or staff of the retirement village would not qualify for GST-free treatment ... 1.52 The range of supplies to which GST-free treatment applies, includes the supply of accommodation in a charitable retirement village, services related to the supply of the accommodation and meals. This would include, for example, the supply of accommodation in an independent living unit or serviced apartment, property maintenance fees and gardening services and meals and beverages ... Based on these paragraphs of the Explanatory Memorandum, the Commissioner considers that for the purposes of subparagraph 38-260(c)(i) of the GST Act, a service is related to the supply of the accommodation if the service is for the maintenance of the residential premises or communal facilities. Accordingly, since services included in the Residence Agreement such as laundry services, trips in the retirement village bus, assistance with personal care and hairdressing are not for the maintenance of the residential premises or communal facilities, they are not GST-free under subparagraph 38-260(c)(i) of the GST Act.", "Date_of_Decision": "20 August 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-G section 38-250 38-250(1)(b)(i) section 38-260 subparagraph 38-260(c)(i) section 195-1", "Related_Public_Rulings_and_Determinations": "GSTR 2007/1 | GSTR 2000/20", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/103", "Subject_References": "Goods and services tax GST retirement villages GST residential premises GST free GST supply", "Case_References": "HP Mercantile Pty Ltd v Commissioner of Taxation (2005) 143 FCR 553 2005 ATC 4571 (2005) 60 ATR 106", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Retirement Villages) Bill 2004", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009104", "Unmatched_Content": "This ATO ID is being reviewed for minor updates following the replacement of the Aged Care Act 1997 with the Aged Care Act 2024 from 1 November 2025. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Added paragraph regarding case Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118 which considered the meaning of supply of accommodation in subparagraph 38-250(1)(b)(i) of the GST Act. | Added case Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118. | Related Public Rulings (including Determinations) GSTR 2007/1 GSTR 2000/20 | Keywords Goods and services tax GST retirement villages GST residential premises GST free GST supply"}
{"ATO_ID_Number": "ATO ID 2001/635", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and leases of independent living units in retirement villages", "Issue": "Is the entity, an owner-operator of a retirement village, making an input taxed supply under paragraph 40-35(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies an independent living unit in the retirement village to a resident by way of a lease that is greater than 50 years?", "Decision": "Yes, the entity is making an input taxed supply under paragraph 40-35(1)(a) of the GST Act when it supplies an independent living unit in the retirement village to a resident by way of a lease that is greater than 50 years.", "Facts": "The entity is an owner-operator of a retirement village. It is not an endorsed charitable institution or an endorsed trustee of a charitable fund. The entity leases an independent living unit to a resident of the retirement village. The lease document provides for the grant of a lease of the premises to the resident for more than 50 years. The lease cannot be assigned but can be terminated or surrendered when the resident leaves the retirement village. Pursuant to discussions with members of the Retirement Village industry it has been revealed that the average duration of a retirement village lease is approximately 12 years. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under paragraph 40-35(1)(a) of the GST Act, a supply of residential premises (other than commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises), by way of lease is input taxed. The independent living unit is not commercial residential premises as it does not fall within the meaning of commercial residential premises as defined in section 195-1 of the GST Act. The unit is residential premises as defined in section 195-1 as it is occupied as a residence. The entity is making a supply of residential premises to the resident of the retirement village by way of lease. However, pursuant to paragraph 40-35(2)(b) of the GST Act the supply is not input taxed if it is made by way of a long-term lease. The term 'long-term lease' is defined in section 195-1 of the GST Act. It provides that a supply by way of lease (including a renewal or extension of a lease) for at least 50 years is a long-term lease if: Pursuant to discussions with members of the Retirement Village industry it has been revealed that the average duration of a retirement village lease is approximately 12 years. Accordingly, at the time of the parties entering into the lease agreement, it is not reasonable to expect that the lease will continue for at least 50 years. Consequently, the lease is not a long-term lease as defined in section 195-1 of the GST Act and paragraph 40-35(2)(b) of the GST Act does not apply. Therefore, the entity is making an input taxed supply under paragraph 40-35(1)(a) of the GST Act when it supplies the independent living unit by way of a lease that is granted for a period greater than 50 years.", "Date_of_Decision": "21 August 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 38-260 paragraph 40-35(1)(a) paragraph 40-35(2)(b) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/634 | ATO ID 2001/636", "Subject_References": "Goods & Services Tax GST residential premises GST residential rents GST retirement villages", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001635", "Unmatched_Content": "This ATO ID has been amended by removing an unnecessary paragraph following the Note | Keywords Goods & Services Tax GST residential premises GST residential rents GST retirement villages"}
{"ATO_ID_Number": "ATO ID 2001/636", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and monthly maintenance fees in non-freehold and non-strata titled retirement villages", "Issue": "Does a monthly maintenance fee consisting of components that can be reasonably characterised as part of the rental charge, form part of the consideration for an input taxed supply under paragraph 40-35(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the entity, an owner-operator of a retirement village, leases an independent living unit to a resident?", "Decision": "Yes, the monthly maintenance fee consisting of components that can be reasonably characterised as part of the rental charge, does form part of the consideration for an input taxed supply under paragraph 40-35(1)(a) of the GST Act, when the entity leases an independent living unit to a resident.", "Facts": "The entity is an owner-operator of a non-freehold and non-strata titled retirement village. The entity is not an endorsed charitable institution or an endorsed trustee of a charitable fund. The entity leases an independent living unit to a resident of the retirement village. The resident is not receiving services referred to in paragraph 38-25(3)(c) of the GST Act being daily living activities assistance or nursing services as prescribed by that paragraph. The lease of the independent living unit to the resident is an input taxed supply of residential premises under paragraph 40-35(1)(a) of the GST Act. As part of the lease agreement between the entity and the resident, the resident pays a monthly maintenance fee to the entity. The monthly maintenance fee covers the entity's costs in relation to the upkeep of the communal paths, driveways, parks, swimming pools and gardens within the retirement village complex. The entity is registered for goods and services tax (GST).", "Reasons_for_Decision": "Summary: Under paragraph 9-15(1)(a) of the GST Act, any payment in connection with the supply of anything is consideration. Under the lease the entity is responsible for the upkeep of the communal paths, driveways, parks, swimming pools and gardens of the retirement village. In return for this, it receives a monthly payment from the resident. Therefore, the entity is receiving consideration for a supply. As stated in the facts, the supply of the independent living unit by way of lease is an input taxed supply of residential premises. Accordingly, the issue is whether the payment of the monthly maintenance fee forms part of the consideration for the supply of residential premises. The extent to which resident's monthly maintenance fees are input taxed depends on whether the components of these fees can be reasonably characterised as part of a rental charge. Under section 195-1 of the GST Act, residential premises is defined to mean land or a building that: (regardless of the term of the occupation or intended occupation) and includes a floating home. The term 'residence' is central to the above definition. It is considered that the term 'residence' includes the building in which one resides and extends to include: Therefore, for retirement villages, residential premises include common areas such as paths, driveways, parks, swimming pools and gardens. Areas not included in residential premises within a complex include restaurants and associated dining areas where prepared meals are provided, hairdressing/beauty salon, pharmacy, medical room, nursing station, convenience stores and areas geographically situated away from the residence. Therefore, the monthly maintenance fee, which covers the entity's costs in relation to the upkeep of the communal paths, driveways, parks, swimming pools and gardens within the retirement village complex can be reasonably characterised as part of the rental charge. These services are incidental to the supply of the residential premises in the retirement village by way of lease to the resident. Accordingly, the monthly maintenance fee is consideration for an input taxed supply of residential premises under paragraph 40-35(1)(a) of the GST Act.", "Date_of_Decision": "21 August 2000", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-15(1)(a) paragraph 38-25(3)(c) section 38-250 section 38-260 section 40-35 paragraph 40-35(1)(a) section 195-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/103 | ATO ID 2009/104 | ATO ID 2001/634 | ATO ID 2001/635", "Subject_References": "Goods & Services Tax GST residential premises GST residential rents GST retirement villages Input taxed supplies", "Case_References": "", "Other_References": "Retirement Villages Industry Partnership - Issues Register - Issue 1", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001636", "Unmatched_Content": "Keywords Goods & Services Tax GST residential premises GST residential rents GST retirement villages Input taxed supplies"}
{"ATO_ID_Number": "ATO ID 2004/447", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and exercise of discretion to allow late election to pay GST by instalments: Activity Statement posted but not received by Tax Office", "Issue": "Will the Commissioner exercise his discretion under subsection 162-25(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to allow the entity, a business operator, to make a late election to pay goods and services tax (GST) by instalments when:", "Decision": "Yes, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments since the entity is eligible to elect to pay GST by instalments and, having regard to the entity's good compliance history, exceptional circumstances led to the entity not making its election by the due date.", "Facts": "The entity is a business operator that is registered for GST. The entity paid GST by instalments in previous financial years, making its elections by the due date. The entity meets the requirements in section 162-5 of the GST Act to elect to pay GST by instalments and made this election on its September quarter AS. The entity's AS was sent in a paper form, via the Post Office on 28 October. The entity does not have a Post Office receipt to show that it sent the AS. The Tax Office did not receive the entity's AS and sent a request to the entity to lodge its September AS. The entity's tax agent promptly lodged the September AS over the phone. The entity requested, in the approved form, the Commissioner to exercise his discretion to allow the entity to make a late GST instalment election. The entity has a good compliance history including lodging their ASs by the due date and paying GST instalments on time.", "Reasons_for_Decision": "Summary: An entity that wants to and is eligible to pay GST by instalments must make an election: However, pursuant to subsection 162-25(3) of the GST Act, the Commissioner may, in accordance with a request from an entity in the approved form, allow the entity to make its election on a specified day occurring after the day provided for under subsection 162-25(1) or 162-25(2) of the GST Act. This discretion is exercised on a case by case basis after considering the individual circumstances of the entity. The discretion in subsection 162-25(3) of the GST Act only gives the Commissioner a discretion in relation to the date of an entity's election. It does not give the Commissioner a discretion in relation to an entity's eligibility to elect to pay GST by instalments. Therefore, an entity must still meet the eligibility requirements in subsection 162-5 (1) of the GST Act before the Commissioner is able to allow an entity to elect to pay GST by instalments after the legislated due date of the election. That is, the Commissioner is unable to allow an entity to elect to pay GST by instalments late where the entity is not eligible to pay GST by instalments. Factors that the Commissioner will consider when determining whether he will allow an entity to make a late election include: The entity is eligible to elect to pay GST by instalments and has applied in the approved form for the Commissioner to exercise his discretion. The entity posted their AS to the Tax Office on 28 October. The Tax Office did not receive the AS and the entity has no receipt to evidence that it posted the AS. This circumstance, of itself, is not an exceptional circumstance such that it warrants the Commissioner exercising his discretion. However, the entity has a good compliance history, including complying with its obligations to give ASs to the Commissioner and paying GST instalments on time. In addition, the entity's previous elections to pay GST by instalments were made by the due date. Therefore, the entity's failure to elect to pay GST by instalments by the due date is an exceptional circumstance having regard to their history. Its late election is a one off occurrence. Therefore, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments.", "Date_of_Decision": "6 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 162-5 subsection 162-25(1) subsection 162-25(2) subsection 162-25(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/448 | ATO ID 2004/449", "Subject_References": "Goods and services tax GST payments GST returns, payments & refunds", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004447", "Unmatched_Content": "Keywords Goods and services tax GST payments GST returns, payments & refunds"}
{"ATO_ID_Number": "ATO ID 2004/448", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and exercise of discretion to allow late election to pay GST by instalments: Activity Statement lodged late due to serious illness", "Issue": "Will the Commissioner exercise his discretion under subsection 162-25(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to allow the entity, a business operator, to make a late election to pay goods and services tax (GST) by instalments when:", "Decision": "Yes, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments since the entity is eligible to elect to pay GST by instalments and, having regard to the entity's good compliance history, exceptional circumstances led to the entity not making its election by the due date.", "Facts": "The entity is a business operator that is registered for GST. The entity paid GST by instalments in previous financial years, making its elections by the due date. The entity meets the requirements in section 162-5 of the GST Act to elect to pay GST by instalments. The person who completes the entity's AS became seriously ill. The entity's AS was completed by a person who was inexperienced in AS lodgment requirements. The entity's AS was lodged after 28 October. The entity requested, in the approved form, the Commissioner to exercise his discretion to allow the entity to make a late GST instalment election. The entity has a good compliance history including lodging their ASs by the due date and paying GST instalments on time.", "Reasons_for_Decision": "Summary: An entity that wants to, and is eligible to, pay GST by instalments must make an election: However, pursuant to subsection 162-25(3) of the GST Act, the Commissioner may, in accordance with a request from an entity in the approved form, allow the entity to make its election on a specified day occurring after the day provided for under subsection 162-25(1) or 162-25(2) of the GST Act. This discretion is exercised on a case by case basis after considering the individual circumstances of the entity. The discretion in subsection 162-25(3) of the GST Act only gives the Commissioner a discretion in relation to the date of an entity's election. It does not give the Commissioner a discretion in relation to an entity's eligibility to elect to pay GST by instalments. Therefore, an entity must still meet the eligibility requirements in subsection 162-5 (1) of the GST Act before the Commissioner is able to allow an entity to elect to pay GST by instalments after the legislated due date of the election. That is, the Commissioner is unable to allow an entity to elect to pay GST by instalments late where the entity is not eligible to pay GST by instalments. Factors that the Commissioner will consider when determining whether he will allow an entity to make a late election include: The entity is eligible to elect to pay GST by instalments and has applied in the approved form for the Commissioner to exercise his discretion. The entity lodged their AS after 28 October as an inexperienced person completed the AS. This circumstance, of itself, is not an exceptional circumstance such that it warrants the Commissioner exercising his discretion. However, the entity has a good compliance history, including complying with its obligations to give GST returns to the Commissioner and paying GST instalments on time. In addition, the entity's previous elections to pay GST by instalments were made by the due date. Therefore, the entity's failure to elect to pay GST by instalments by the due date is an exceptional circumstance having regard to their history. Its late election is a one off occurrence. Therefore, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments.", "Date_of_Decision": "6 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 162-5 subsection 162-25(1) subsection 162-25(2) subsection 162-25(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/447 | ATO ID 2004/449", "Subject_References": "Goods and services tax GST payments GST returns, payments & refunds", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004448", "Unmatched_Content": "Keywords Goods and services tax GST payments GST returns, payments & refunds"}
{"ATO_ID_Number": "ATO ID 2004/449", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and exercise of discretion to allow late election to pay GST by instalments: instalment paid but activity statement unintentionally not lodged", "Issue": "Will the Commissioner exercise his discretion under subsection 162-25(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to allow the entity, a business operator, to make a late election to pay goods and services tax (GST) by instalments when:", "Decision": "Yes, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments since the entity is eligible to elect to pay GST by instalments and, having regard to the entity's good compliance history, exceptional circumstances led to the entity not making its election by the due date.", "Facts": "The entity is a business operator that is registered for GST. The entity paid GST by instalments in previous financial years, making its elections by the due date. The entity meets the requirements in section 162-5 of the GST Act to elect to pay GST by instalments and made this election on its September quarter AS. The entity paid its September instalment at the Post Office by the due date. The entity thought it had also sent its September AS at this time. When the December AS was to be lodged the entity discovered that it could not pay its GST by instalments as it has not lodged is September AS and therefore, had not elected to pay GST by instalments. The entity has requested, in the approved form, the Commissioner exercise his discretion to allow the entity to make a late GST instalment election. The entity has a good compliance history including lodging their ASs by the due date and paying GST instalments on time.", "Reasons_for_Decision": "Summary: An entity that wants to and is eligible to pay GST by instalments must make an election: However, pursuant to subsection 162-25(3) of the GST Act, the Commissioner may, in accordance with a request from an entity in the approved form, allow the entity to make its election on a specified day occurring after the day provided for under subsection 162-25(1) or 162-25(2) of the GST Act. This discretion is exercised on a case by case basis after considering the individual circumstances of the entity. The discretion in subsection 162-25(3) of the GST Act only gives the Commissioner a discretion in relation to the date of an entity's election. It does not give the Commissioner a discretion in relation to an entity's eligibility to elect to pay GST by instalments. Therefore, an entity must still meet the eligibility requirements in subsection 162-5(1) of the GST Act before the Commissioner is able to allow an entity to elect to pay GST by instalments after the legislated due date of the election. That is, the Commissioner is unable to allow an entity to elect to pay GST by instalments late where the entity is not eligible to pay GST by instalments. Factors the Commissioner will consider when determining whether he will allow an entity to make a late election include: The entity is eligible to elect to pay GST by instalments and has applied in the approved form for the Commissioner to exercise his discretion. The entity paid its September instalment on time and believed that it has also posted its AS to the Tax Office. The entity was unaware that it had not lodged its September AS, and therefore had not made its election to pay GST by instalments, until it was time to lodge is December AS. This circumstance, of itself, is not an exceptional circumstance such that it warrants the Commissioner exercising his discretion. However, the entity has a good compliance history, including complying with its obligations to give GST returns to the Commissioner and paying GST instalments on time. In addition, the entity's previous elections to pay GST by instalments were made by the due date. Therefore, the entity's failure to elect to pay GST by instalments by the due date is an exceptional circumstance having regard to their history. Its late election is a one off occurrence. Therefore, the Commissioner will exercise his discretion under subsection 162-25(3) of the GST Act to allow the entity to make a late election to pay GST by instalments.", "Date_of_Decision": "6 April 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 162-5 subsection 162-25(1) subsection 162-25(2) subsection 162-25(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/447 | ATO ID 2004/448", "Subject_References": "Goods and services tax GST payments GST returns, payments & refunds", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004449", "Unmatched_Content": "Keywords Goods and services tax GST payments GST returns, payments & refunds"}
{"ATO_ID_Number": "ATO ID 2013/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and registration of a representative of an incapacitated entity when the incapacitated entity is neither registered nor required to be registered", "Issue": "Can the representative of an incapacitated entity register, under section 23-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), in its capacity as the representative of the incapacitated entity if the incapacitated entity is neither registered nor required to be registered for GST?", "Decision": "No. The representative cannot register under section 23-10 of the GST Act in its capacity as the representative of the incapacitated entity if the incapacitated entity is neither registered nor required to be registered for GST.", "Facts": "The representative of an incapacitated entity, in its capacity as representative, carries on an enterprise. However, it is not required to be registered in that capacity under section 23-5 of the GST Act. The incapacitated entity is neither registered nor required to be registered.", "Reasons_for_Decision": "Summary: Section 23-10 of the GST Act provides that an entity may register for GST if it is carrying on an enterprise or intends to carry on an enterprise. While an entity may register under section 23-10 of the GST Act if it is carrying on an enterprise or intends to carry on an enterprise, subsection 58-25(1) of the GST Act provides that the registration of a representative of an incapacitated entity must be cancelled if the Commissioner is satisfied that the representative is not required to be registered in that capacity. The representative is not required to be registered as representative of the incapacitated entity under section 23-5 of the GST Act. The representative is also not required to be registered under subsection 58-20(1) of the GST Act, which provides that a representative of an incapacitated entity is required to be registered in that capacity if the incapacitated entity is registered or required to be registered. This is because the incapacitated entity here is neither registered nor required to be registered for GST. As the representative is not required to be registered as representative of the incapacitated entity, the application of subsection 58-25(1) of the GST Act would mean that the representative cannot register in that capacity under section 23-10 of the GST Act.", "Date_of_Decision": "7 February 2013", "Year_of_Income": "Periods including and after 4 December 2009", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 23-5 section 23-10 subsection 58-20(1) subsection 58-25(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1063 | (withdrawn)", "Subject_References": "Goods and services tax GST registration Registration cancellation Required to be registered GST special rules Representative of incapacitated entities", "Case_References": "Deputy Commissioner of Taxation v PM Developments Pty Ltd [2008] FCA 1886", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20139", "Unmatched_Content": "Keywords Goods and services tax GST registration Registration cancellation Required to be registered GST special rules Representative of incapacitated entities"}
{"ATO_ID_Number": "ATO ID 2002/529", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and date of effect of GST registration", "Issue": "Under section 25-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), will the date of effect of the goods and services tax (GST) registration of the entity be a date before the date specified in its application for registration, where the entity commenced carrying on its enterprise and met the registration turnover threshold before the specified date?", "Decision": "Yes, under section 25-10 of the GST Act, the date of effect of the GST registration of the entity is a date before the date specified in its application for registration, where the entity commenced carrying on its enterprise and met the registration turnover threshold before the specified date.", "Facts": "The entity is a company that is registered for GST. The entity is a for-profit body. The entity commenced carrying on an enterprise on a certain date, at which point the entity's projected GST turnover (as defined in section 195-1 of the GST Act) was greater than $75 000. The entity applied for GST registration and specified in its application that the date of effect be after the date it commenced carrying on an enterprise.", "Reasons_for_Decision": "Summary: Under subsection 25-10(1) of the GST Act, the Commissioner must decide the date from which an entity's registration takes effect. However, paragraph 25-10(1)(b) of the GST Act provides that if the entity applied for registration, the date of effect must not be a day before: In its GST registration application, the entity specified a date of effect. However, the entity commenced carrying on its enterprise at an earlier date, at which point its projected GST turnover was greater than $75 000. Section 23-5 of the GST Act provides that an entity is required to be registered under the GST Act if: An entity has an GST turnover that meets a particular turnover threshold if its projected GST turnover is at or above the turnover threshold (paragraph 188-10(1)(b) of the GST Act). As the entity is a for-profit body, its registration turnover threshold is $75 000 (paragraph 23-15(1)(b) of the GST Act). When the entity first commenced carrying on its enterprise, its projected GST turnover was greater than $75 000. Therefore, at that point in time, the entity was carrying on an enterprise and its GST turnover met the registration turnover threshold. As such, the entity was required to be registered under the GST Act as at that earlier date. As the Commissioner was satisfied that the entity became required to be registered at an earlier date, the date of effect of the entity's GST registration will be that earlier date as opposed to the later date specified on the entity's GST registration application.", "Date_of_Decision": "29 November 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Regulations 1999 regulation 23-15.01 regulation 23-15.02", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/528", "Subject_References": "Goods & services tax GST registration Required to be registered", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002529", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Keywords Goods & services tax GST registration Required to be registered"}
{"ATO_ID_Number": "ATO ID 2014/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and changes in net amount where an entity has notified the Commissioner of an entitlement to a refund", "Issue": "In working out an entity's entitlement to a refund under section 105-55 of Schedule 1 to the Taxation Administration Act 1953 (TAA), does the four-year time limit in section 105-50 of Schedule 1 to the TAA apply to prevent an amount of unpaid goods and services tax (GST) payable on a taxable supply being taken into account, where, in the same tax period:", "Decision": "No. The four-year time limit in section 105-50 of Schedule 1 to the TAA does not apply to prevent the unpaid GST payable being taken into account in determining the entity's entitlement to a refund under section 105-55 of Schedule 1 to the TAA in these circumstances.", "Facts": "The entity is registered for GST. It lodges and pays the net amount shown on its activity statement for the relevant tax period. Within 4 years after the end of that tax period, the entity realised that it omitted to claim an input tax credit. Before the end of that four-year period, the entity gives the Commissioner a notice under section 105-55 of Schedule 1 to the TAA. At the time of preparing its revised activity statement the entity also realised that it failed to report GST payable on a taxable supply that is attributable to the same tax period. The amount of unpaid GST payable is less than the amount of the unclaimed input tax credit that it now wants to claim in the same tax period, resulting in an overall decrease to the net amount. The entity lodges the revised activity statement for the relevant tax period, (showing an overall decrease in the net amount) after 4 years from the date upon which that net amount became payable. The Commissioner did not give the entity a notice under section 105-50 of Schedule 1 to the TAA requiring payment of an unpaid net amount for that tax period.", "Reasons_for_Decision": "Summary: Subsection 105-50(1) of Schedule 1 to the TAA provides that any unpaid net amount ceases to be payable four years after it became payable unless the Commissioner: 'Net amount' for a tax period is defined in section 17-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) according to the following formula: GST - input tax credits GST is the sum of all of the GST for which an entity is liable on the taxable supplies that are attributable to the tax period. Input tax credits is the sum of all of the input tax credits to which an entity is entitled for creditable acquisitions and creditable importations that are attributable to the tax period. Section 9-40 of the GST Act provides that an entity must pay the GST payable on any taxable supply that it makes. Division 33 of the GST Act sets out when payment of an entity's net amount must be made. GST payable on a taxable supply is not an amount that is separately payable to the Commissioner under the GST Act. Although section 9-40 of the GST Act requires payment of the GST payable, there are no provisions in the GST Act or TAA that: Section 105-50 of Schedule 1 to the TAA applies to an 'unpaid net amount'. It does not apply to individual amounts of GST payable on a particular taxable supply. In determining the net amount, all transactions attributable to a tax period need to be taken into account. The result will either give rise to an overall increase or decrease in the net amount. In this instance, as there is an overall decrease in the net amount for the relevant tax period (which was previously paid), there is no unpaid net amount to which section 105-50 of Schedule 1 to the TAA applies. Accordingly, it does not matter that the Commissioner has not given a notice under section 105-50 of Schedule 1 to the TAA within the four-year period requiring payment of an unpaid net amount for that tax period. The overall decrease in the net amount - worked out by offsetting the increase in GST payable against the input tax credit claim - results in the entity being entitled to a refund in relation to a net amount under section 105-55 of Schedule 1 to the TAA as they have given the Commissioner a valid notice under that section within four years of the end of the relevant tax period. However, where there is an overall increase in the net amount for the relevant tax period, the Commissioner's ability to recover the unpaid net amount is limited by section 105-50 of Schedule 1 to the TAA. | Detailed Reasoning - Example: An entity originally reports and pays its net amount for the December 2011 tax period. In December 2015, it realises it omitted to claim an input tax credit of $9,000 that would otherwise have been attributable to its December 2011 tax period. Consequently, the entity gives a section 105-55 notice to the Commissioner before 31 December 2015. The Commissioner did not give a section 105-50 notice to the entity for the same tax period. In March 2016, while preparing the revised activity statement for the December 2011 tax period, the entity also found that it failed to account for GST payable of $2,000 in respect of a taxable supply attributable to the December 2011 tax period. Even though the Commissioner did not give a section 105-50 notice, the $2,000 in unreported GST can be taken into account in working out the net amount for the December 2011 tax period. The entity's entitlement to a refund in relation to the net amount for that tax period is $7,000 (that is, $9,000 input tax credit less $2,000 GST). However, if the unreported GST is $12,000 instead of $2,000, there would be an overall increase in the net amount for the December 2011 tax period of $3000 (that is, $12,000 GST less $9,000 input tax credit). As the $3,000 is an unpaid net amount, the Commissioner's ability to recover such amount is limited by section 105-50. As the amount remains unpaid after four years from the date when it became payable and the Commissioner has not given a section 105-50 notice requiring payment within the relevant four-year period, nor was the payment of the amount avoided due to fraud or evasion, the Commissioner cannot recover the unpaid net amount of $3,000.", "Date_of_Decision": "2 December 2014", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-40 section 17-5 subsection 29-10(1) Division 33 Subdivision 78D Division 105", "Related_Public_Rulings_and_Determinations": "MT 2009/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST net amounts & adjustments net amounts GST supplies & acquisitions GST supply taxable supply tax administration", "Case_References": "", "Other_References": "", "Business_Line": "Indirect tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201436", "Unmatched_Content": "Related Public Rulings (including Determinations) MT 2009/1 | Keywords Goods and services tax GST net amounts & adjustments net amounts GST supplies & acquisitions GST supply taxable supply tax administration"}
{"ATO_ID_Number": "ATO ID 2012/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of prize money derived by foreign resident horse trainer", "Issue": "Is prize money derived from sources in Australia by a visiting horse trainer resident in a treaty country assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Prize money derived from sources in Australia by a visiting horse trainer resident in a treaty country is not assessable under subsection 6-5(3) of the ITAA 1997 as the trainer does not have a permanent establishment in Australia.", "Facts": "The taxpayer was a foreign resident horse trainer, resident in a treaty country. The taxpayer obtained a Victorian training licence, which was valid for 12 months. A horse that the taxpayer trained arrived in Australia in a late September 2010 shipment for the Victorian Spring racing carnival. Upon arrival in Australia, the horse underwent 3 weeks of post arrival quarantine at the Werribee International Horse Centre (WIHC) at Werribee Racecourse. The horse was maintained the whole time, other than race days, at the WIHC, which was fully equipped with stables, a racetrack for training and veterinary facilities. The horse was taken care of by the taxpayer's head lad and other staff of the taxpayer. The taxpayer kept in daily contact with the head lad by telephone and email. The taxpayer arrived in Australia in early October 2010. The horse trained by the taxpayer finished a place during the Victorian Spring racing carnival and Racing Victoria paid 10% of the total prize money directly to the horse trainer's nominated account. The taxpayer departed Australia in early November 2010. The horse departed Australia in a late November 2010 shipment.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes ordinary income derived directly or indirectly from all Australian sources during the income year. In determining liability to tax on Australian income derived by a foreign resident, it is necessary to also consider the applicable agreement as defined in section 3AAA or section 3AAB of the International Tax Agreements Act 1953 (the Agreements Act). Subsection 4(1) of the Agreements Act incorporates the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one with the Agreements Act. Subsection 4(2) of the Agreements Act, provides that the Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531, the High Court accepted that the OECD Model Taxation Convention's official Commentaries (the OECD Commentary) may be relevant to the interpretation of Double Tax Agreements based on the OECD Model Tax Convention on Income and on Capital. In Thiel, the High Court approved recourse to the OECD Model and Commentaries under section 32 of the Vienna Convention (see paragraph 90 of Taxation Ruling TR 2001/13). Paragraph 1 of the Business Profits article of the relevant Tax Treaty (generally Article 7 in Australia's tax treaties) states that the profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. Therefore, in order for Australia to have a taxing right, one of the requirements is that the taxpayer has a permanent establishment in Australia. Paragraph 1 of the 'permanent establishment' definition in the relevant Tax Treaty (generally Article 5 in Australia's tax treaties) is identical to Article 5(1) of the OECD Model Convention which defines 'permanent establishment' to mean a 'fixed place of business through which the business of an enterprise is wholly or partly carried on'. Paragraph 6 of the 2010 OECD Commentary on Article 5 relevantly states: Since the place of business must be fixed, it also follows that a permanent establishment can be deemed to exist only if the place of business has a certain degree of permanency, that is if it is not of a purely temporary nature...Whilst the practices followed by member countries have not been consistent in so far as time requirements are concerned, experience has shown that permanent establishments normally have not been considered to exist in situations where a business had been carried on in a country through a place of business that was maintained for less than six months (conversely, practice shows that there were many cases where a permanent establishment has been considered to exist where the place of business was maintained for a period longer than six months)...\" Guidance can also be drawn from Taxation Ruling TR 2002/5, which considers the definition of permanent establishment in the context of subsection 6(1) of the ITAA 1936. Paragraph 33 of the TR 2002/5 states: Whether temporal permanence exists is a matter of fact and degree. However, as a guide, if a business operates at or through a place continuously for six months or more that place will be temporally permanent. It is considered that the taxpayer commenced an enterprise in Australia from the time the horse arrived at the WIHC, being the time the taxpayer commenced the horse's preparation for the Spring carnival from a base in Australia. The taxpayer conducted their business by instructing the head lad via telephone and email daily until such time as they arrived in Australia. It is also considered that the taxpayer maintained their business operation in Australia until such time that the horse departed Australia. This is the case even though the taxpayer left Australia at an earlier time. The horse arrived in Australia in late September and departed Australia in late November, being a period of three months. The period of three months is considered insufficient to represent the requisite degree of permanency to establish the existence of a fixed based, in which case, the taxpayer did not have a permanent establishment in Australia. In the absence of a permanent establishment in Australia, Australia does not have a taxing right over the prize money derived by the taxpayer in Australia. As such, that income is not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "28 March 2012", "Year_of_Income": "ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Horse racing Permanent Establishment Prizes & awards", "Case_References": "Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "2010 OECD Model Tax Convention on Income and on Capital 2010 OECD Commentaries on the Articles of the Model Tax Convention", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201223", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 2002/5 | Keywords Double tax agreements Horse racing Permanent Establishment Prizes & awards"}
{"ATO_ID_Number": "ATO ID 2012/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of prize money derived by foreign resident horse trainer from a non treaty country", "Issue": "Is prize money derived by a visiting horse trainer resident in a non treaty country assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Prize money derived by a visiting horse trainer resident in a non treaty country is assessable under subsection 6-5(3) of the ITAA 1997 as the income is sourced in Australia.", "Facts": "The taxpayer was a foreign resident horse trainer, resident in a non treaty country. The taxpayer entered into a contract overseas with a horse owner to train a horse which was located in the taxpayer's country of residence. The terms of this contract specified that the taxpayer would be paid a monthly fee by the owner and in addition is entitled to any allocation of prize money to a trainer under the relevant racing rules. The taxpayer applied for and was granted a Victorian training licence, which was valid for 12 months. When applying for the licence the taxpayer agreed to be bound by the Rules of Racing of Racing Victoria (Rules of Victoria Racing) and to comply with all requirements therein. The horse that the taxpayer trained arrived in Australia in a late September 2010 shipment for the Victorian Spring racing carnival. Upon arrival in Australia, the horse underwent three weeks of post arrival quarantine at the Werribee International Horse Centre (WIHC) at Werribee Racecourse. The horse was maintained the whole time, other than race days, at the WIHC, which was fully equipped with stables, a racetrack for training and veterinary facilities. In accordance with the Rules of Victoria Racing, the horse was taken care of by the taxpayer's head lad and other staff of the taxpayer. The taxpayer kept in daily contact with the head lad by telephone and email. The taxpayer arrived in Australia in early October 2010. The horse trained by the taxpayer finished a place during the Victorian Spring racing carnival and Racing Victoria paid 10% of the total prize money directly to the taxpayer's nominated account. The taxpayer departed Australia in early November 2010. The horse departed Australia in a late November 2010 shipment.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes ordinary income derived directly or indirectly from all Australian sources during the income year. Therefore, in order for subsection 6-5(3) of the ITAA 1997 to apply, it is necessary to determine whether the prize money derived by the taxpayer is income from Australian sources. The term 'source' is not defined in the ITAA 1997, in which case, the term will take its common law meaning. In Nathan v. Federal Commissioner of Taxation (1918) 25 CLR 183 at 189-190, Isaacs J stated: The Legislature in using the word \"source\" meant, not a legal concept, but something which a practical man would regard as a real source of income. Legal concepts must, of course, enter into the question when we have to consider to whom a given source belongs. But the ascertainment of the actual source of a given income is a practical, hard matter of fact. In FC of T v. Efstathakis (Efstathakis) 79 ATC 4256, in considering source of income, Bowen CJ stated at 4259: ...the answer is not to be found in the cases, but in the weighting of the relative importance of the various factors which the cases have shown to be relevant. In Efstathakis, in considering factors relevant in determining the source of income, Bowen CJ stated at 4258: The principles applied in English decisions relating to income derived from trade or business activities require that the most significance be attached to the place where the activity takes place ( Bennett v. Marshall (1938) 1 K.B. 591 at pp. 612-613). Further, on appeal from Spotless Services & Anor v. FC of T 93 ATC 4397, Beaumont J stated in FC of T v. Spotless Services Limited & Anor 95 ATC 4775, at 4789: As has been noted, Lockhart J. stated, correctly in my view, that the test to be applied in determining the source of income is to ''search for the 'real source' and to judge the question in a practical way''. As his Honour went on to say (at 4409-4410), it is a matter of ''judgment'' and ''relative weight'' in each case to determine the various factors to be taken into account in reaching this conclusion. In determining the source of the prize money, it is considered that relevant factors include: | Detailed Reasoning - Place the Activities are Performed: The prize money was derived by the taxpayer when the horse being trained finished a place in a race held during the Victorian Spring racing carnival. The activities associated with training the horse to finish a place, is reflected in the training efforts of the taxpayer and their staff in preparing the horse for racing in Australia in compliance with the Rules of Victoria Racing. Even though the taxpayer was not present in Australia for the whole duration of the horse's preparation in Australia, the taxpayer kept in daily contact with the head lad and conducted their training activities through their head lad and other staff in Australia. It is acknowledged that there may be activities performed by the taxpayer and staff prior to the horse's arrival in Australia that may have contributed to the horse's preparation. However these activities are considered too far removed from the derivation of the prize money for achieving a place in the race. It is also noteworthy that the taxpayer derives separate training fees from the owners for training the horse. It is considered that the activities that derived the prize money are performed in Australia. | Detailed Reasoning - Place of the Contract: The taxpayer trained the horse in accordance with the contract entered into overseas with the owner. While entering into such a contract is a necessary part of a business of this kind, it does not necessarily follow that that the prize money in this instance is earned from this contract. The taxpayer obtained and was granted a Victorian trainer's licence and conducted the training activities in Australia in compliance with the Rules of Victoria Racing The prize money was derived by the taxpayer as a result of the activities associated with training the horse in compliance with the Rules of Victoria Racing. It is therefore apparent that the conditions under which the taxpayer operated when training the horse in Australia were set in Australia. | Detailed Reasoning - Place of Payment: Upon the horse finishing a place, a payment amounting to 10% of the total prize money was made by Racing Victoria directly to the taxpayer's nominated account. Whilst a trainer's nominated account could potentially be in any country, the payer of the prize money, Racing Victoria, is situated in Australia. The place where the payment was made is Australia. In conclusion, it is considered that the most important factor in this case is where the services were performed as payment of the prize money, based on the horse's success in the race in Australia, depended on the actual performance of the training services in Australia. Other factors are considered to be of lesser importance, although it is noted that on balance they also point to a source in Australia. The prize money derived by the foreign resident trainer had an Australian source and is therefore assessable under subsection 6-5(3) of ITAA 1997.", "Date_of_Decision": "4 April 2012", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Horse racing Prizes & awards", "Case_References": "FC of T v Efstathakis 79 ATC 4256 (1979) 9 ATR 867", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201230", "Unmatched_Content": "Minor punctuation amendments | Keywords Horse racing Prizes & awards"}
{"ATO_ID_Number": "ATO ID 2006/67", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by a Singapore resident to conduct research in Australia", "Issue": "Is the salary and wages income from employment performed in Australia by a resident of Singapore assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages income from employment performed in Australia by a resident of Singapore is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a citizen and resident of Singapore. The taxpayer will be employed by an Australian university to conduct academic research as a Research Fellow with a team of other researchers (colleagues). The taxpayer arrived in Australia at the beginning of the 2005-06 income year. The taxpayer has no intention to reside permanently in Australia. The taxpayer will stay in Australia for a few months (less than 183 days) conducting research work and then will leave Australia for 12 months (only returning to Australia for a short visit during this time). During the 2006-07 income year the taxpayer intends to return to Australia for a few months (less than 183 days) to finish writing a book with colleagues at the university. The taxpayer will be renting an apartment on the university campus and the taxpayer's salary and wages will be paid by the university. The taxpayer is not performing services in Australia for or on behalf of the Singapore-resident employer and does not intend to work for the former employer in Singapore on their return to Singapore. The taxpayer's salary will be deposited in a bank account in Australia. The taxpayer has bank accounts, shares in companies and a flat in Singapore and receives rent, interest and dividends from these investments. The taxpayer has social connections with family and friends in Singapore.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed (see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76) where Williams J stated at CLR 414; ATD 296; AITR 85 that: ......the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on.... The salary and wages income received by the taxpayer has an Australian source having regard to the significance attributable to the place where the services are performed. In determining liability to tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). The taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Singapore (the Singapore Agreement) and the protocols to that agreement contained in Schedule 5 and 5A of the Agreements Act respectively must be considered in determining whether the salary and wages paid to the taxpayer is taxable in Australia. Section 7 of the Agreements Act gives the Singapore Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the Income Tax Assessment Act 1936 and ITAA 1997 must be read as one with the Agreements Act. Under Article 11 of the Singapore Agreement remuneration in respect of the performance of personal (including professional) services derived by a resident of one country is subject to tax only in that country unless the services are performed in the other country, in which case the income is attributed with a source in, and can be taxed by, the other country. Accordingly, the remuneration derived by the Singapore resident taxpayer from performing professional services in Australia has an Australian source and can be taxed in Australia. However, the power given by Article 11 of the Singapore Agreement to the source country to tax income from personal services performed by a resident of the other country in the source country is subject to the operation of Article 12 of the Singapore Agreement. Article 12 of the Singapore Agreement exempts such personal services income from taxation in the country where the services are performed provided the services are performed during a short term visit and certain other conditions are satisfied. The taxpayer's facts indicate that the services have been performed during short periods (less than 183 days). However, the taxpayer has also stated that the services were not performed for or on behalf of a Singapore resident (company or individual). This fails to satisfy the second condition under Article 12 of the Singapore Agreement which stipulates that the services should be performed for or on behalf of a Singapore resident (company or individual). Therefore, the exemption under this Article is not available to the taxpayer. Accordingly, the salary and wages received by the taxpayer from employment performed in Australia by a resident of Singapore, even during short visits (less than 183 days), is assessable in Australia under subsection 6-5(3) of the ITAA 1997. N.B.: Taxation Ruling TR 2003/11 which provides the interpretation of the general exclusion provision of the Dependent Personal Services Article does not apply to the Singapore Agreement as Article 12 of this Agreement does not refer to 'in respect of employment' or 'employer' in describing the provisions of the Article - see [F5] of TR 2003/11.", "Date_of_Decision": "7 March 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2003/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreement Singapore Income International tax Non-resident individuals Salary and wages income", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200667", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2003/11 | Keywords Double tax agreement Singapore Income International tax Non-resident individuals Salary and wages income"}
{"ATO_ID_Number": "ATO ID 2006/263", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by a US resident company with an employee in Australia", "Issue": "Is the income derived by a taxpayer, a company resident in the United States of America (US), from the sale of the company's products in Australia, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived by a taxpayer company from the sale of the company's products in Australia, is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a company and is a resident of the US. The taxpayer is not a resident of Australia for income tax purposes. The taxpayer develops, sells and maintains specialist publication and document management software and sells their products to Australian customers. However, all contracts are written and signed in the US, including maintenance contracts. The taxpayer is registered for Goods and Service Tax (GST) in Australia and pays GST on all sales to Australian customers. The taxpayer holds no substantial equipment or goods for sale in Australia. The taxpayer has an Australian resident employee who is required to undertake work duties at their home. The employee has maintained a home office for a number of years and this will continue on an ongoing basis. Separate office machines and communications devices are available for the employee to undertake their activities. The taxpayer reimburses the employee for these costs. The duties performed by the employee at the home office include attending calls and emails from customers regarding support queries and performing consultancy jobs for customers. The employee is also responsible for the installation and on site support for Australian customers. The employee works forty hours per week and spends approximately one day per month at the customer sites. The employee has no sales authority and cannot enter into contracts on behalf of the taxpayer. The taxpayer engages an accounting firm in Australia to perform the necessary compliance and administration functions and to act as registered agent for Australian Securities & Investment Commission purposes. The taxpayer has an Australian bank account which is administered by the accounting firm. The employee has no access to the taxpayer's Australian bank account.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources. The income derived by the taxpayer from the sale of their company's products to Australian consumers is ordinary income under subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 2 to the Agreements Act contains the tax treaty between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Article 7 of the US Convention governs the taxation of business profits derived from Australia by a resident of the US. Under Article 7, the business profits of an enterprise of the US shall be taxable only in the US unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 5(1) of the US Convention as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The United States Tax Court held that a well-known author's home office was their fixed place of business through which the business of an enterprise was carried on and that office therefore was a permanent establishment ( Georges Simenon v. Commissioner of Internal Revenue (1965) 44 T.C. 820). The taxpayer's business has a permanent establishment in Australia under Article 5(1) of the US Convention, as the taxpayer has an employee that is carrying on the taxpayer's business in Australia through a fixed place, being the home of the employee, and the employee has been performing their duties from their home for a number of years. As it has been established that the taxpayer is carrying on the business through a permanent establishment situated in Australia under Article 5(1), the deeming provision within Article 5(4) of the US Convention does not need to be considered. Therefore, the fact that the employee cannot enter into contracts on behalf of the taxpayer is not relevant. Article 5(3)(e) of the US Convention provides that an enterprise shall not be regarded as having a permanent establishment solely as a result of maintaining of fixed place of business for the purpose of activities which have a preparatory or auxiliary character. The term 'preparatory or auxiliary' is not defined. Paragraph 4 of the OECD Commentary on Article 5 of the OECD Model Tax Convention explains that the decisive criterion as to whether an activity has a preparatory or auxiliary character is whether or not the activity of the fixed place of business in itself forms an essential and significant part of the activity of the enterprise as a whole. It is considered that the activities performed by the employee for the taxpayer are customer relationship activities and are an essential and significant part of the service of the taxpayer to its Australian customers. Article 5(3)(e) of the US Convention, therefore, does not apply. Accordingly, Article 7 of the US Convention applies, and the profit of the business, so much of them as is attributable to that permanent establishment, is taxable in Australia. The income from the sale of the taxpayer's products attributable to the permanent establishment is therefore assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/289", "Subject_References": "Double tax agreements Non resident companies Permanent establishment United States", "Case_References": "Georges Simenon v. Commissioner of Internal Revenue (1965) 44 TC 820", "Other_References": "OECD Model Tax Convention on Income and on Capital, Condensed Version 2005", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006263", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Keywords Double tax agreements Non resident companies Permanent establishment United States"}
{"ATO_ID_Number": "ATO ID 2006/337", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent establishment: meaning of 'substantial equipment'", "Issue": "Is a computer system, located in a non-treaty country and used by the taxpayer to trade in securities, 'substantial equipment' for the purposes of paragraph (b) of the definition of 'permanent establishment' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The computer system is not substantial equipment for the purposes of paragraph (b) of the definition of 'permanent establishment' in subsection 6(1) of the ITAA 1936.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer operates a proprietary securities trading firm consisting of market making and arbitrage trading on the stock market of a non-treaty country. The taxpayer conducts its own electronic and manual trading through its computer system in that country. The taxpayer estimates that the computer system is used 50% for manual and 50% for electronic trading. The computer system consists of approximately ten pieces of hardware, including servers and routers, and software for market access and trading algorithms. The approximate dimensions of each piece of the taxpayer's computer system ranges from 4.40 x 44.70 x 71.10 cm to 46.00 x 26.20 x 68.80 cm. Collectively, the computer system measures 260 cm x 398 cm x 470 cm. The approximate weight of the computer system is 164 kilograms, and its value is $200,000.", "Reasons_for_Decision": "Summary: 'Permanent establishment' includes, by virtue of paragraph (b) of its definition in subsection 6(1) of the ITAA 1936: ... a place where the person has, is using or installing substantial equipment or substantial machinery; ... The terms 'equipment' and 'substantial equipment' are not defined in Australia's domestic tax laws, but are discussed in Draft Taxation Ruling TR 2006/D8. Draft Taxation Ruling TR 2006/D8 deals with the meaning of these terms for the purposes of Article 5(4)(b) and 5.3(b) of the US and UK tax treaties respectively. The Commissioner considers that the meaning given to the term 'substantial equipment' in Australia's tax treaties applies to the same term under the ITAA 1936 for the following reasons: Paragraph 106 of TR 2006/D8 states that the relevant meanings of 'equipment' in the Macquarie Dictionary , 2001, 5th Edition, The Macquarie Library Pty Ltd, NSW are: anything used in or provided for equipping, a collection of necessary implements (such as tools). Paragraph 107 of TR 2006/D8, states that paragraphs 33 to 36 of Taxation Ruling TR 98/21 point to a number of cases and other references indicating that the meaning of 'equipment' is a wide one, and should be determined in the context in which it appears. From the ordinary meaning of the word 'equipment', the Commissioner considers the taxpayer's computer system includes a number of individual items of 'equipment' for the purposes of paragraph (b) of the definition of 'permanent establishment' in subsection 6(1) of the ITAA 1936. Paragraph 109 of TR 2006/D8 states that the relevant meanings of 'substantial' in the Macquarie Dictionary are: Paragraph 112 of TR 2006/D8 states that whether the equipment in question is 'substantial' is a question of fact and degree to be determined: Therefore, based on the ordinary meaning of the term 'substantial', the relevant case law (McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) ATC 4398; (2005) 59 ATR 358; (2005) 142 FCR 134; [2005] FCAFC 67; Tillmanns Butcheries Pty Ltd v. Australian Meat Industry Employees' Union (1979) 42 FLR 331; Case H106 (1957) 8 TBRD 484, and the guidance provided at paragraph 112 of TR 2006/D8 and paragraphs 1.61 to 1.64 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003 (the EM), the Commissioner considers that the following factors are relevant in determining whether equipment is 'substantial': The common characteristic of the examples of substantial equipment in McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) 142 FCR 134; 2005 ATC 4398; (2005) 59 ATR 358 and at paragraph 1.63 of the EM is the size of the equipment. The Commissioner therefore considers that size is the key factor and has greater weight in determining whether equipment is 'substantial'. If an item of equipment is sufficiently large in size, it will be 'substantial' in an absolute sense. In such instances, this factor alone will be decisive and further consideration of any of the other factors is not necessary. As the nature of the 'substantial equipment' test in paragraph 112 of TR 2006/D8 is one of fact and degree, determined on balance according to individual facts and circumstances, the Commissioner considers that the factors listed above, other than size, are not of themselves determinative. Each of these factors needs to be considered with the others, having regard to all the facts and circumstances of the particular case. This is consistent with the analysis in Case No. H106 (1957) 8 TBRD 484, where the Board of Review used more than one of the factors stated above to find that the equipment in question in that case was substantial. Where there are a number of items of equipment that are not large enough individually to be substantial in an absolute sense, the Commissioner considers that the size of the items collectively and the quantity can only be considered if the items of equipment are part of a unified process. This arises from the context in which the term 'substantial' appears in the provision; that is, it is part of the expression 'substantial equipment' as opposed to 'a substantial amount of equipment'. Value is a relevant factor on two levels; firstly, in the sense of its cost (as per the ordinary meaning of the term) and, secondly, in the sense of its value creating potential. In relation to the latter, paragraph 1.62 of the EM refers to high value activities involved in the development of natural resources. Equipment may be so valuable that it may be considered substantial in an absolute sense. For example, in Number 630 v. Minister of National Revenue (1959) 59 DTC 300, tunnelling equipment costing $600,000 was considered to be substantial equipment purely on the basis of its cost alone. However, it is not possible to set a precise monetary threshold in relation to cost that will be determinative in all cases. In relation to importance, Mr Fletcher, the Chairman of the Board in Case No. H106 (1957) 8 TBRD 484 stated at 486: The meaning of 'substantial' is relative and in the case where the machinery required is not extensive, and the whole is involved, it is 'substantial'. The statement above from Case No. H106, the ordinary meaning of the term 'substantial', and the context in which the term is used, indicate that the sense in which importance is relevant is where the equipment is core to the enterprise conducting its income producing or value creating activity or to it creating its product in a particular country. Given the dimensions of the individual items of the taxpayer's computer system, the Commissioner considers that those individual items of equipment are each not large enough to be considered substantial in an absolute sense. Furthermore, the individual items of equipment are part of a unified process, but when the size of the individual items of equipment are viewed in aggregate, the dimensions of the entire computer system again indicate that the computer system is not substantial equipment by reason of its size. As there are only 10 individual items of equipment, the Commissioner considers that this factor does not indicate that the computer system is substantial equipment. The Commissioner considers that the taxpayer's computer system, valued at $200,000, is not of sufficiently high value for it to constitute substantial equipment on the basis of its value. As only 50 percent of the taxpayer's business activities involve electronic trading through the computer system, the Commissioner considers that the computer system does not play a core role in the taxpayer's income-producing activities. On balance, there are insufficient grounds for the Commissioner to conclude that the taxpayer's computer system is 'substantial equipment' for the purposes of paragraph (b) of the definition of permanent establishment in subsection 6(1) of the ITAA 1936.", "Date_of_Decision": "17 November 2006", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Draft Taxation Ruling 2006/D8 | Taxation Ruling 98/21", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/314", "Subject_References": "Double tax agreements International tax Permanent establishment Substantial equipment", "Case_References": "McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation 2005 ATC 4398 (2005) 59 ATR 358 (2005) 142 FCR 134 [2005] FCAFC 67", "Other_References": "Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003 Macquarie Dictionary, 2001, 5th Edition, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006337", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Draft Taxation Ruling 2006/D8 Taxation Ruling 98/21 | Keywords Double tax agreements International tax Permanent establishment Substantial equipment"}
{"ATO_ID_Number": "ATO ID 2005/117", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived on or after 1 July 2004 by a company resident of Australia and of the United Kingdom", "Issue": "Is the business income derived by a company taxpayer that is incorporated in the United Kingdom (UK) and has its central management and control in Australia assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The business income derived by the company taxpayer is assessable under subsection 6-5(2) of the ITAA 1997. Article 7(1) of Schedule 1 to the International Tax Agreements Act 1953 (the Agreements Act) provides Australia the sole taxing right over the income as Article 4 of Schedule 1 deems the company to be a resident of Australia.", "Facts": "The taxpayer is a company that is incorporated in UK but not in Australia. The company is a resident of the UK for the purposes of the domestic tax laws of the UK. The company carries on business in Australia and its central management and control is located in Australia. The company does not derive any business income through a permanent establishment in the UK. All board of directors meetings are held in Australia. All strategic, investment and operational business decisions are made and implemented in Australia. The company is not a dual listed company within the meaning of Article 4(6) of the UK Double Tax Convention.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Business income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. According to subsection 995-1(1) of the ITAA 1997, the term 'resident' has the same meaning as the definition of 'resident' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). A company is therefore a resident if it is incorporated in Australia or, if it is not so incorporated, it carries on business in Australia and has either its central management and control in Australia or its voting power is controlled by resident Australian shareholders. In the present case, the company taxpayer is not incorporated in Australia but it does carry on business in Australia and its central management and control is located in Australia. Accordingly, it is a resident of Australia for the purposes of Australia's domestic tax law. However, the company is also a resident of the United Kingdom (UK) for the purposes of the domestic tax laws of the UK because it is incorporated in the UK. Therefore, it is necessary to consider not only the income tax law but also the applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 1 to the Agreements Act contains the double tax convention between Australia and the United Kingdom of Great Britain and Northern Ireland (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. The 2003 UK Convention entered into force on 17 December 2003, and in the case of Australia, applies to income or gains for the income year beginning on 1 July 2004 and thereafter. Article 7(1) of the 2003 UK Convention provides that profits of an enterprise shall only be taxable in the country of residence unless the enterprise carries on business through a permanent establishment in the other country. Article 4(1) provides that a company is a resident of the UK if it is a resident of the UK for the purposes of UK tax. The company is a resident of Australia if it is a resident of Australia for the purposes of Australian tax. Where a company is treated as a resident of both the UK and Australia by reason of the domestic tax laws of both countries, Article 4(4) deems the company to be a resident only of the country in which its place of effective management is situated. According to the Organisation of Economic Cooperation and Development (OECD) Commentary, the place of effective management is the place where key management and commercial decisions that are necessary for the conduct of the entity's business are in substance made. Based on the explanation used in paragraph 24 of the OECD Commentary, the test of 'place of effective management' is very similar to the test of 'central management and control' and is a question of fact. Therefore, if the company's central management and control is in Australia, then its place of effective management is also likely to be in Australia. In the present case, all the board of directors meetings are held in Australia. Furthermore, all strategic, investment and operational business decisions are made and implemented in Australia. For these reasons, the place of effective management of the company is situated in Australia and therefore the company is a resident of Australia for the purposes of the 2003 UK Convention. Article 7(1) of the 2003 UK Convention provides Australia sole taxing rights over the company's business income because the company does not derive any business income through a permanent establishment in the UK. Accordingly, the business income of the company is included in its assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "20 April 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Draft Taxation Ruling TR 2004/D7", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/118", "Subject_References": "Double tax agreements Dual residence International tax Residence in Australia United Kingdom", "Case_References": "", "Other_References": "Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and on Capital - Commentary on Article 4", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005117", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Draft Taxation Ruling TR 2004/D7 | Keywords Double tax agreements Dual residence International tax Residence in Australia United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived before 1 July 2004 by a company resident of Australia and of the United Kingdom", "Issue": "Is the business income derived by a company taxpayer that is incorporated in the United Kingdom (UK) and has its central management and control in Australia assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The business income derived by the company taxpayer is assessable under subsection 6-5(2) of the ITAA 1997. Article 5 of Former Schedule 1 to the International Tax Agreements Act 1953 (the Agreements Act) provides Australia the sole taxing rights over the income as Article 3 deems the company to be a resident of Australia.", "Facts": "The taxpayer is a company that is incorporated in UK but not in Australia. The company is a resident of the UK for the purposes of the domestic laws of the UK. The company carries on business in Australia and its central management and control is located in Australia. The company does not derive any business income through a permanent establishment in the UK. All board of directors meetings are held in Australia. All strategic, investment and operational business decisions are made and implemented in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Business income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. According to subsection 995-1(1) of the ITAA 1997, the term 'resident' has the same meaning as the definition of 'resident' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). A company is therefore a resident if it is incorporated in Australia or, if it is not so incorporated, it carries on business in Australia and has either its central management and control in Australia or its voting power is controlled by resident Australian shareholders. In the present case, the company taxpayer is not incorporated in Australia but it does carry on business in Australia and its central management and control is located in Australia. Accordingly, it is a resident of Australia for the purposes of Australia's domestic tax law. However, the company is also a resident of the United Kingdom (UK) for the purposes of the domestic tax laws of the UK because it is incorporated in the UK. Therefore, it is necessary to consider not only the income tax law but also the applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Former Schedule 1 to the Agreements Act contained the double tax agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (the 1967 UK Agreement). Former Schedule 1A to the Agreements Act contained the Protocol to the 1967 UK Agreements (the 1980 Protocol). The 1967 UK Agreement and 1980 Protocol were replaced by the 2003 UK Convention which entered into force on 17 December 2003, and in the case of Australia, applies to income or gains for the income year beginning on 1 July 2004 and thereafter. However, the 1967 UK Agreement and the 1980 Protocol continue to operate to avoid the double taxation of income received by Australian and UK residents from income derived before 1 July 2004. Article 5 of the 1967 UK Agreement governs taxing of business income derived by a resident of one country from sources in the other. Article 5(2) provides that business income of an Australian enterprise may be taxed in the UK only if that income is attributable to a permanent establishment in the UK. According to Article 3(5), an Australian enterprise refers to a commercial enterprise or undertaking by an Australian resident. The definition of an 'Australia resident' within Article 3(1)(d) for the purposes of the 1967 UK Agreement includes an Australian company. Article 3(1)(a)(ii) defines an Australian company as a company which is: By operation of Article 2(1)(k), a 'resident of Australia' has the same meaning which it has under Australia's domestic tax laws. Therefore, in the present case, the company is a 'resident of Australia' for the purposes of the 1967 UK Agreement because it is a 'resident of Australia' by operation of the definition of subsection 6(1) of the ITAA 1936. The company in the present case is also is also managed and controlled in Australia for the purposes of the 1967 UK Agreement. All the board of directors meetings are held in Australia. Furthermore, all strategic, investment and operational business decisions are made and implemented in Australia. The company is therefore an Australian company for the purposes of the 1967 UK Agreement. Accordingly, Article 5 of the 1967 UK Agreement exempts the business income of the company from tax in the UK unless it derives income through a permanent establishment in the UK. The company in the present case, however, does not have a permanent establishment in the UK. Since Article 5 of the 1967 UK Agreement does not prohibit Australia from taxing the business income of the company, the business income is included in its assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "20 April 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Draft Taxation Ruling TR 2004/D7", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/117", "Subject_References": "Double tax agreements Dual residence International tax Residence in Australia United Kingdom", "Case_References": "", "Other_References": "Income Tax (International Agreements) Bill 1968 - Explanatory Memorandum", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005118", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Draft Taxation Ruling TR 2004/D7 | Keywords Double tax agreements Dual residence International tax Residence in Australia United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/904", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of profits from carrying on a business as a share trader by a non-resident", "Issue": "Are the profits derived by a non-resident taxpayer from carrying on a business as a trader in shares and options in Australian entities, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The profits derived by a non-resident taxpayer from carrying on a business as a trader in shares and options in Australian entities are assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a company and a non-resident of Australia for income tax purposes. Australia has no double tax agreement with the taxpayer's country of residence. The taxpayer company is in the business of buying and selling shares and options listed on various stock exchanges. The company regularly buys and sells shares and options listed on the Australian Stock Exchange (ASX). It is the practice of the company to buy and sell the shares within a short period of time. The taxpayer company has no office or staff in Australia. The company engages the services of an Australian stockbroker for the purpose of buying and selling the shares of Australian entities listed on the ASX. The stockbroker acts on the verbal instructions from one of the directors of the company located in a foreign country. The initial research and decision on which shares to purchase and sell are made by the same director of the company. The stockbroker executes the orders in Australia on behalf of the taxpayer company. The stockbroker has no power to conclude contracts binding the company without the approval of the director. The taxpayer derives substantial profits from the sale of shares and options.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year, as well as other ordinary income included by a provision on a basis other than having an Australian source. For subsection 6-5(3) of the ITAA 1997 to apply, it is necessary to determine whether the profits from the trading of shares and options are ordinary income from Australian 'sources'. The term 'source' is not defined in the ITAA 1997. Other than certain rules prescribed for statutory income (for example, royalties, interest), the ITAA 1997 relies on the common law 'source' rules. In Nathan v. FC of T (1918) 25 CLR 183 at 189-190, Isaacs J said that the term 'source' meant not a legal concept, but something which a practical man would regard as a real source of income. In Federal Commissioner of Taxation v. Efstathakis (1979) 38 FLR 276 at 280; 79 ATC 4256 at 4259; 9 ATR 867 at 870 Bowen CJ stated 'the answer is not to be found in the cases, but in the weighting of the relative importance of the various factors which the cases have shown to be relevant.' In Australian Machinery and Investments Company Ltd v. Deputy Commissioner of Taxation (WA) (1946) 180 CLR 9; 3 AITR 359; (1946) 8 ATD 81, it was held that where shares are situated outside Australia and sold outside Australia, the profit on sale is derived wholly from a source outside Australia. Starke J said at 180 CLR 9 at 27; 3 AITR 359 at 378; 8 ATD 81 at 95-96: The question is from what source or sources these various profits arise or to use Lord Atkin's phrase in Smidth & Co v. Greenwood (Surveyor of Taxes) ([1921] 3 KB 583, at p593) \"where do the operations take place from which the profits [or for the purpose of the Income Tax Act 'the income'] in substance arise\". One rule deducible from the decided cases is that where the essence of the business ordinarily consists in making certain classes of contracts and in carrying those contracts into operation with a view to profit or income then for the purposes of Income Tax Acts, such as here under consideration, the business is carried on within the locality where such contracts are habitually made which is the source of the profit or income.' Where, as in this case, the business is one of buying and selling shares and options, the relevant processes which contribute to the earning of the profit are the making of contracts for the purchase and sale of shares and options. In such cases, it may be that more weight should be put on the place of the contract for the purchase and sale. Although the skill and judgement exercised by the director in the purchase and sale of shares and options contributed to the profits, they are immaterial in determining the source, since the question is not why but where the profits are made - D & W Murray Ltd v. Commissioner of Taxation (WA) (1929) 42 CLR 332. The purchase and sale of shares normally involves entering into contracts and the contract is formed where the final act regarded as completing the contract occurs - Tallerman and Co Pty Ltd v. Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93. Thus, where the postal acceptance rule applies, the contract is considered to be made in the place where the acceptance is posted, and in other cases the contract is made at the place where acceptance is communicated to the offeror. When the process of purchase and sale of shares and options are examined, weighting needs to be given to the following factors in determining the source of the profits: Though the director of the taxpayer company makes the decision as to when to purchase or sell the shares and options, this has minimal weighting in determining the source. The source is determined by where the profits are made. It is the buying and selling of shares and options undertaken in Australia, where the contracts are concluded, that actually realise the profit. As all the important factors relating to the realisation of the profit take place in Australia, it follows that the source of the profit is in Australia. Accordingly, the profits from the sale of shares and options in Australian entities are assessable as ordinary income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "21 May 2004", "Year_of_Income": "Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/300 | ATO ID 2002/394 | ATO ID 2002/903 | ATO ID 2002/913 | ATO ID 2003/676", "Subject_References": "Non-resident Profit on sale of shares Source of income", "Case_References": "Nathan v. FC of T (1918) 25 CLR 183", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004904", "Unmatched_Content": "Keywords Non-resident Profit on sale of shares Source of income"}
{"ATO_ID_Number": "ATO ID 2010/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividend income sourced in France received by an Australian resident individual", "Issue": "Are French sourced dividends received by an Australian resident individual assessable under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The French sourced dividends received by an Australian resident individual are assessable under subsection 6-10(4) of the ITAA 1997. However, if the Australian resident has paid French income tax not exceeding 15% of the gross amount of the dividend income, they are entitled to claim a foreign income tax offset.", "Facts": "The taxpayer is an individual and a resident of Australia for taxation purposes. The taxpayer receives dividends from French sources, which are treated as dividends for French tax law purposes. The taxpayer does not carry on business through a permanent establishment in France.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident taxpayer includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists provisions about assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends. Paragraph 44(1)(a) of the ITAA 1936 provides that the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source. Section 44 of the ITAA 1936 goes on to state that the section does not apply to any part of the dividend if another provision (which expressly deals with dividends, such as sections 23AJ, 23AI, 23AK and 128D of the ITAA 1936) includes that part in, or excludes it from, the taxpayer's assessable income. However, in this case, there is no other provision which affects this dividend. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 11 to the Agreements Act contains the tax treaty between Australia and France (the 2006 French Convention) which came into force on 1 June 2009 and, by virtue of Article 30(1)(a)(ii), applies to dividends derived after 1 July 2010. The 2006 French Convention operates to prevent fiscal evasion and avoid double taxation of income received by Australian and French residents. Article 10(1) of the 2006 French Convention provides that dividends paid by a company that is a resident of France, being dividends beneficially owned by a resident of Australia, may be taxed in Australia. However, Article 10(2)(c) of the 2006 French Convention allows France to also tax such dividends, at a rate not exceeding 15%, where the beneficial owner of the dividends is an individual. Hence, although the 2006 French Convention limits the rate of tax France can impose, it allows for this dividend income to be taxed by both countries. As the Convention does not prevent Australia taxing the dividend income received by the Australian resident individual, the dividend income is assessable in Australia under subsection 6-10(4) of the ITAA 1997.", "Date_of_Decision": "7 April 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 23AJ section 23AI section 23AK section 128D subsection 44(1) paragraph 44(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income Double tax agreements Foreign income Foreign source income France International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201092", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend income Double tax agreements Foreign income Foreign source income France International tax"}
{"ATO_ID_Number": "ATO ID 2010/95", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Sale of shares for less than market value", "Issue": "Will the sale by company X of its shareholding in company Y to its parent company Z for consideration less than the market value of the shares, constitute a 'dividend' within the definition in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the purposes of section 44 and 128B of the ITAA 1936?", "Decision": "No. The sale by company X of its shareholding in company Y to its parent company Z for consideration less than the market value of the shares will not constitute a 'dividend' within the definition of subsection 6(1) of the ITAA 1936 for the purposes of section 44 and 128B of the ITAA 1936.", "Facts": "Company X is an Australian resident company and is not a resident of any other jurisdiction. Company Y is incorporated in an overseas country and is not a resident of Australia for tax purposes. Company X is a shareholder of company Y. At all relevant times, company X held more than 10% of the shareholding in company Y. Company Z is incorporated in an overseas country and is not a resident of Australia for tax purposes. Company Z is also a shareholder of company Y. In order to rationalise the corporate structure, company X proposes to sell its shareholding in company Y to company Z. The market value of company X's shareholding in company Y is significantly greater than the cost base of those shares. Company X proposes to sell those shares at their cost base and not their market value. The proposed transaction will not involve a distribution made out of the share capital account or the share premium account. The proposed transaction will not have the effect of increasing the value of company Z's shareholding in company X. Company X has provided that the market value of the shares in company Y will be greater than their cost base for Australian tax purposes.", "Reasons_for_Decision": "Summary: A 'dividend' for Australian tax purposes is defined in subsection 6(1) of the ITAA 1936 and states: Dividend includes: (a) any distribution made by a company to any of its shareholders, whether in money or other property; and (b) any amount credited by a company to any of its shareholders as shareholders; This definition is broad and could conceivably encompass payments or distributions not ordinarily considered to be dividends. According to this definition, a dividend includes a distribution to a shareholder or any amount credited to a shareholder. In the case of company X, only paragraph (a) is relevant. It is important to determine whether there is a distribution by company X to company Z in order to ascertain whether there is a dividend as defined under subsection 6(1) of the ITAA 1936. The word 'distribution' is not defined in the Act. Thus, the dictionary definition lends some assistance to determine what constitutes a distribution. Distribution has been defined by the Macquarie Dictionary ,2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW as: 1. the act of distributing. 2. the state or manner of being distributed... 4. that which is distributed... Oxford Law Dictionary has defined 'distribution' as: ... 2. any payment made by a company to a shareholder out of its distributive profits in cash or kind. It does not include payments made in the course of winding-up or repayments of the capital originally subscribed or subsequently received by the company. In Deputy Commissioner of Taxation v. Black (1990) 25 FCR 274; 90 ATC 4699; (1990) 21 ATR 701, the Court was required to consider whether forgiveness of a debt amounted to a distribution to a shareholder as a dividend pursuant to subsection 6(1) of the ITAA 1936. Sweeny J in this case said, that: The word \"distribution\" involves, at the least, a dealing out or bestowal. Accordingly, for there to be a 'dividend' as defined in subsection 6(1) of the ITAA 1936 there must be a distribution in the form of a 'dealing out or bestowal' by a company to a shareholder. | Detailed Reasoning - Distribution to a shareholder: On the issue of who is a shareholder, Sweeny J went on to say: In my opinion, no amount was credited by Lens-co to the shareholder, as shareholder (emphasis added). The phrase \"as shareholder\" is to be read as \"in the capacity of shareholder\". Removal of a debit standing against the taxpayer constituted, at best for the Commissioner, an amount credited to the taxpayer in his capacity as a debtor of Lens-co, not in his capacity as a shareholder. Therefore, a distribution will be a dividend if it is made to a shareholder in their capacity as a shareholder whether in money or in property. In the case of company X, the shares in company Y were sold to company Z. Company Z is the purchaser of the shares so did not acquire the shares in their capacity as a shareholder. Company X has acknowledged that the scheme would be completed pursuant to a sale and purchase agreement rather than a simple transfer of shares. Davis Investments Pty Ltd v. Commissioner of Stamp Duties (1958) 100 CLR 392 ( Davis ) is a case in which the court was asked to determine whether the Commissioner of Stamp Duties could go behind the transaction in order to raise stamp duty on the shares sold substantially below the market value by Davis. Although this case was considered in the context of stamp duties, it could lend some assistance to the current analysis. In Davis , the court ruled that notwithstanding the relationship that existed and the fact that the consideration provided for the transfer was substantially below the market value, the agreement to sell the shares was nevertheless one for a sale of shares at below market value in form and in substance. The court was not prepared to strike down the transaction as a sham as the legality of the agreement was not disputed there. In the case of company X, it is accepted that there is a valid sale of the shares in company Y to company Z for an amount considerably less than their current market value. As there is in form and substance a sale of company Y shares by company X to company Z, the difference between the sale price, which is company X's cost base of the shares for Australian tax purposes, and the market value of the shares is not a distribution to a shareholder in their capacity as a shareholder. Thus, the sale by company X of its shareholding in company Y to its parent, company Z, for consideration less than the market value of the shares will not constitute a 'dividend' within the definition of subsection 6(1) of the ITAA 1936.", "Date_of_Decision": "28 March 2010", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Disposal of assets Disposal of shares Dividend income", "Case_References": "Taxation, Deputy Federal Commissioner of v Black (1990) 25 FCR 274 321 ATR 701 90 ATC 4699", "Other_References": "Macquarie Dictionary,2001, rev. 3rd edn Oxford Law Dictionary", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201095", "Unmatched_Content": "Keywords Disposal of assets Disposal of shares Dividend income"}
{"ATO_ID_Number": "ATO ID 2006/243", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividends paid in respect of an underlying share that is the subject of an endowment warrant", "Issue": "Are dividends paid in respect of an underlying share that is the subject of an endowment warrant assessable income in the hands of the holder of the endowment warrant under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The dividends paid in respect of an underlying share that is the subject of an endowment warrant will not be assessable income in the hands of the holder of the endowment warrant under subsection 6-5(1) of the ITAA 1997.", "Facts": "The taxpayer is the holder of an endowment warrant which may be traded on the Australian Stock Exchange (ASX). The endowment warrant is an agreement for the sale and purchase of a share in an ASX listed company (the underlying share), the completion of which is at the option of the holder of the endowment warrant. That is, the endowment warrant gives the holder the right to purchase the underlying share (a call option), exercisable at a date typically known as the completion date. The issue price of an endowment warrant is typically between 30%-65% of the market value of the underlying share at the time of issue. The endowment warrant does not confer on the holder any interest or right in respect of the underlying share. It is only if the holder exercises their option to complete the purchase on the completion date that the holder will have an interest in the underlying share. To complete the purchase of the underlying share, the holder makes a final payment on the completion date. This final payment will be a variable amount (predominantly comprised of an amount typically known as the outstanding amount). The outstanding amount is established at the start of the issue of the endowment warrant. In broad terms, the outstanding amount will be the difference between the market value of the underlying share at the time of issue (plus any issuer costs, profit and premium) and the issue price of the endowment warrant. During the period of the endowment warrant, the balance of the outstanding amount will be: Generally, the completion date for the endowment warrant will be 30 business days after the earlier of the expiry date (generally 10 years from the date of purchase) and the date when the outstanding amount is reduced to zero. If the holder does not complete the purchase of the underlying share (that is, the holder does not exercise their right of purchase under the endowment warrant), the endowment warrant lapses, or terminates.", "Reasons_for_Decision": "Summary: A taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income (subsection 6-5(1) of the ITAA 1997). It is therefore necessary to consider whether any ordinary income is earned from holding an endowment warrant. The holder does not earn any income directly in respect of an endowment warrant. Nor does an endowment warrant confer on the holder any legal or beneficial interest in the ownership of the underlying share during the period of the endowment warrant, and thus there is no entitlement to dividends or other distributions payable in respect of that underlying share. The endowment warrant merely confers on the holder certain rights that are exercisable on the completion date, which include the right, but not the obligation, to take delivery of the underlying share in certain circumstances. Although the outstanding amount payable in respect of the endowment warrant is calculated by reference to any dividends payable in respect of the underlying share, this does not mean that the taxpayer has derived assessable income equivalent to the amount of the dividend. This is because any dividends payable in respect of the underlying share are only relevant to determining the outstanding amount in respect of the endowment warrant, and do not represent a gain accruing directly or beneficially to the taxpayer. Accordingly, any dividends paid in respect of an underlying share that is the subject of an endowment warrant cannot be regarded as ordinary income to the holder and will not be included in the assessable income of the holder under subsection 6-5(1) of the ITAA 1997. Where an amount of ordinary income is applied or dealt with in any way on behalf of the taxpayer or on their direction, it will be considered a constructive receipt under subsection 6-5(4) of the ITAA 1997. As there is no ordinary income derived by the holder, this provision will not apply.", "Date_of_Decision": "13 July 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) subsection 6-5(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006243", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2004/652", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Return of Capital: not a dividend", "Issue": "Will a return of capital paid by a company to its shareholders fall within the definition of dividend in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A return of capital paid by a company to its shareholders falls within the exclusion in paragraph (d) in the definition of dividend in subsection 6(1) of the ITAA 1936.", "Facts": "The company distributed funds to its shareholders as a return of capital in proportion to their shareholding. The return of capital was debited to the company's share capital account and funded out of the company's existing borrowing facilities. The company had not transferred any amount to its share capital account that could constitute the tainting of the share capital account.", "Reasons_for_Decision": "Summary: The distribution was debited against an amount standing to the credit of the company's share capital account. The definition of a 'dividend' contained in subsection 6(1) of the ITAA 1936 includes any distribution made by a company to any of its shareholders but excludes moneys debited against an amount standing to the credit of the share capital account. By virtue of paragraph (d) of the definition of a dividend contained in subsection 6(1) of the ITAA 1936, moneys debited against an amount standing to the credit of the share capital account are not defined as dividends except to the extent that subsection 6(4) of the ITAA 1936 excludes those monies from this definition. In this instance the paragraph (d) exclusion does not apply as the arrangement is not one that triggers the operation of subsection 6(4) of the ITAA 1936, that is, the capital reduction is not part of an arrangement where: As subsection 6(4) of the ITAA 1936 does not apply to negate the effect of paragraph (d) of the definition of 'dividend' in subsection 6(1) of the ITAA 1936, the moneys paid by the company to its shareholders as a capital return do not constitute a dividend under subsection 6(1) of the ITAA 1936.", "Date_of_Decision": "08 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 6(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/860", "Subject_References": "Share capital Capital reductions Dividend income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004652", "Unmatched_Content": "Add \"1936\" after \"subsection 6(4) of the ITAA\" in paragraph three. | Change from \"25 September 2014\" to \"2 June 2017\". | Keywords Share capital Capital reductions Dividend income"}
{"ATO_ID_Number": "ATO ID 2003/824", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Special dividend paid prior to a corporate restructuring", "Issue": "Is a Special Dividend, paid out of a combination of current year profits and retained earnings prior to a corporate restructuring, a 'dividend' for income tax purposes?", "Decision": "Yes. The Special Dividend constitutes a 'dividend' within the meaning of that term as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "A resident company pays a special dividend to its ordinary shareholders prior to a corporate restructuring under which the shareholders are offered a combination of cash and scrip in exchange for their shares in the company. The special dividend is debited solely against current year profits and prior year retained earnings accounts.", "Reasons_for_Decision": "Summary: Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines the term 'dividend' for income tax purposes. Under this section, 'dividend' has the meaning given by subsections 6(1) and (4) and 6BA(5) and section 94L of the ITAA 1936 The payment of the Special Dividend is a distribution of money by the company to its shareholders. This satisfies paragraph (a) of the definition of 'dividend' in subsection 6(1) of the ITAA 1936. As the special dividend is sourced entirely from the company's current year and retained earnings, the distribution does not fall within any of the exclusions to the 'dividend' definition. The other provisions referred to in the subsection 995-1(1) of the ITAA 1997 definition are not relevant to the given facts. The Special Dividend is therefore a dividend for income tax purposes.", "Date_of_Decision": "14 August 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Distributions Frankable dividends", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003824", "Unmatched_Content": "This ATO ID has been amended to remove references to repealed legislation | Keywords Distributions Frankable dividends"}
{"ATO_ID_Number": "ATO ID 2003/873", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity Interest: Redeemable Preference Shares - equity interest", "Issue": "Will a distribution on redeemable preference shares (RPS), issued by a Company pursuant to its proposed constitution, be a frankable distribution, in so far as that depends on whether the RPS are an equity interest pursuant to Subdivision 974-C of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A distribution from RPS held by a member of the Company in accordance with its proposed constitution may be frankable distributions pursuant to section 202-30 of the ITAA 1997 as the RPS constitute an equity interest pursuant to Division 974 of the ITAA 1997.", "Facts": "The Company operates in the finance industry and is regulated by the Australian Prudential Regulation Authority (APRA). The Company has issued to its Members shares only in the form of RPS. The Company is proposing to hold a meeting of its members where part of the business is to put to the members the proposed constitution to be adopted. A principle feature of the proposed constitution is the allowance of dividends to be paid to members who hold RPS (whenever the RPS were issued). The payment of dividends are subject to various conditions, including that there are sufficient profits out of which to pay them. The Company may pay dividends in the form of bonus shares which themselves have various conditions and rights as well as in the form of cash. In essence, the features, rights and obligations attached to the redemption of RPS are:", "Reasons_for_Decision": "Summary: The RPS are equity interests as defined in subsection 974-70(1) of the ITAA 1997 because: It is necessary to consider the 'tie-breaker' provision outlined at subsection 974-5(4) of the ITAA 1997 to ascertain if the nature of the interest is also a debt interest, in which case the character of the interest will be taken as being a debt interest despite the fact that it is also an equity interest. An essential element (inter alia) in the debt test outlined in subsection 974-20(1) of the ITAA 1997 is that the effectively non-contingent obligations to provide a financial benefit by the entity (or entity and connected entity) under the scheme is equal to, or greater than, the financial benefit received by the (interest issuing) entity (or connected entity). The RPS will not be characterised as a debt interest because they fail to satisfy two elements of the debt test as set out in subsection 974-20(1) of the ITAA 1997. That is: Subsection 974-135(3) of the ITAA 1997 provides that an obligation is non-contingent if it is not contingent on any event, condition or situation (including the economic performance of the entity having the obligation or its connected entity), other than the ability or willingness of that entity or its connected entity to meet the obligation. The dividend payments associated with the RPS are not effectively non-contingent obligations of the issuer as they are contingent on the issuer having sufficient profits (economic performance). Where the form of dividend payment is by scrip (bonus) shares, subsection 974-30(1) of the ITAA 1997 provides that the issue of an equity interest in the entity (or connected entity) does not constitute the provision of a financial benefit. In respect of whether there is or is not an effectively non-contingent obligation on the part of the Company (issuer) vis-à-vis the RPS redemption, there is no such obligation because: Therefore, the Company will not have an effectively non-contingent obligation to redeem the RPS because redemption is at the option of the holder and there is no compulsion for the directors of the issuing Company to redeem the RPS at a specified date or time. Given that there is no established point in time where the issuing Company could be said to be under an obligation to redeem the RPS, if the holders do not elect to do so, the RPS may never be redeemed and no payment will ever eventuate. As a result of the issuing Company not having an effectively non contingent obligation to pay a dividend or redeem the RPS, it cannot be said that it is substantially more likely than not that the value of the financial benefits provided will equal or exceed the value of the financial benefits received (paragraph 974-20(1)(d) of the ITAA 1997). It is only the value of financial benefits that are effectively non- contingent obligations (paragraph 974-20(1)(c) of the ITAA1997) that are taken into consideration in determining whether the requirement in paragraph 974-20(1)(d) is satisfied. As the RPS do not meet the debt test, the nature of the interest would remain an equity interest with the consequence that any future distributions made by the Company on the RPS may constitute frankable distributions pursuant to section 202-30 of the ITAA 1997 and will not be deductible outgoings of the Company.", "Date_of_Decision": "9 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 202-30 Subdivision 974-B subsection 974-5(4) subsection 974-15(1) subsection 974-20(1) paragraph 974-20(1)(c) paragraph 974-20(1)(d) subsection 974-30(1) subsection 974-70(1) subsection 974-75(1) subsection 974-75(2) subsection 974-135(3) section 974-160 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/200 | ATO ID 2003/527 | ATO ID 2003/665", "Subject_References": "Debt interest Debt test Effectively non-contingent obligation Equity test Financing arrangement", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003873", "Unmatched_Content": "Keywords Debt interest Debt test Effectively non-contingent obligation Equity test Financing arrangement"}
{"ATO_ID_Number": "ATO ID 2002/772", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dividend: Shares received from demerger of foreign company - Australian resident shareholder", "Issue": "Are the shares in the Danish company, Novozymes A/S, received by an Australian resident taxpayer, following the demerger of the Danish company, Novo Nordisk A/S, assessable as a dividend under subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The shares received in Novozymes A/S following the demerger are assessable as a dividend under subsection 44(1) of the ITAA 1936.", "Facts": "The taxpayer owned shares in Novo Nordisk A/S. On 13 November 2000, Novo Nordisk A/S demerged by transferring some of its business activities to the new company, Novozymes A/S. There were no amounts debited to the share capital accounts of Novo Nordisk A/S in respect of the demerger. The taxpayer received one share in Novozymes A/S for each share owned in Novo Nordisk A/S. The Novozymes A/S share had similar rights, proportion of issued capital, par value, etc in Novozymes A/S as the equivalent share in Novo Nordisk A/S. The was no change to the taxpayer's Novo Nordisk A/S shares as a result of the demerger.", "Reasons_for_Decision": "Summary: Subsection 6(1) of the ITAA 1936 defines dividend to include: The definition specifically excludes: The receipt of these shares, as a result of the demerger, do not fall into one of the exclusions to the definition of a dividend as outlined in subsection 6(1) of the ITAA 1936. Therefore the value of the shares will be an assessable dividend. Section 44(1) of the ITAA 1936 provides, subject to the other provisions of sections 44 and 128D of the ITAA 1936, that the assessable income of a shareholder in a resident or non-resident company includes dividends paid by a company: Therefore, the value of the shares received by an Australian resident in Novozymes A/S as part of the demerger will be included as a dividend in the assessable income of the shareholder.", "Date_of_Decision": "5 June 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 44(1) section 128D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/771", "Subject_References": "Acquisition of shares Company restructuring Dividend income Non resident companies Public companies Shares Shareholders", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002772", "Unmatched_Content": "Keywords Acquisition of shares Company restructuring Dividend income Non resident companies Public companies Shares Shareholders"}
{"ATO_ID_Number": "ATO ID 2001/323", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Proposed off market share buy-back.", "Issue": "Will Division 16K of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) deem the difference between the market value of the shares bought back and the amount paid by the company to the shareholder to be a dividend?", "Decision": "No. The difference between the amount paid for the share and the market value will not be a deemed dividend.", "Facts": "The taxpayer, an individual, acquired his/her entire shareholding in the company before 20 September 1985. The company now proposes to buy-back a majority of the shares on issue at their face value and debit the full purchase price against the credit standing in the company's share capital account. The market value of the shares exceeds their face value.", "Reasons_for_Decision": "Summary: The buy-back arrangement is an off-market purchase in accordance with the explanation of terms in section 159GZZZK of the ITAA 1936. Subdivision C of Div 16K (sections 159GZZZP and 159GZZZQ) of the ITAA 1936 sets out the tax consequences for a shareholder who sells shares to a company in an 'off market purchase'. Section 159GZZZP of the ITAA 1936 deals with the treatment of the purchase price in an off-market buy-back situation. It acts to treat the difference between the purchase price and that part of the purchase price (if any) which is debited against a credit in the company's share capital account as a dividend paid by the company to the seller out of the company profits on the day the buy-back occurs. In this case as the full purchase price will be debited against the credit standing in the company's share capital account, no amount is taken to be a dividend deemed or otherwise. Subsection 159GZZZQ(1) of the ITAA 1936 provides that the buy-back price of the share is, for general income tax and Capital Gains Tax purposes, the amount actually received. If the full purchase price is less than the share's market value, the market value is used as the disposal consideration (subsection 159GZZZQ(2)) of the ITAA 1936. In this case the market value of the shares bought back does exceed the buy back price, however the transaction is not caught by any general income tax provision as the shares were not acquired or held for instance for the purpose of obtaining a profit on resale nor were they held as trading stock. A capital gain however has been made as the deemed capital proceeds, in terms of section 116-30 of the Income Tax Assessment Act 1997 (ITAA 1997), equals the market value of the shares. However the capital gain is exempt in terms of paragraph 104-10(5)(a) of the ITAA 1997, as the shares were acquired before 20 September 1985.", "Date_of_Decision": "5 September 2001", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 159GZZZP subsection 159GZZZQ(1) subsection 159GZZZQ(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Family Court cases Companies Share buy backs Disposal of shares Shares", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001323", "Unmatched_Content": "Retrospective tax law changes have effect for a period before the date of enactment once the legislation is passed. See Administrative treatment of retrospective legislation . | Keywords Capital gains tax Family Court cases Companies Share buy backs Disposal of shares Shares"}
{"ATO_ID_Number": "ATO ID 2014/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income: Commission paid to executor of deceased estate", "Issue": "Is a commission paid to the taxpayer for acting as the executor of a deceased estate included in the taxpayer's assessable income?", "Decision": "Yes. A commission paid to the taxpayer for acting as the executor of a deceased estate is included in the taxpayer's assessable income as it is a payment within the meaning of section 15-2 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "The taxpayer was appointed as executor and trustee under a will. The taxpayer received an executor's commission for services they performed as executor and trustee of the deceased estate. The taxpayer did not ask for and did not expect to receive the commission.", "Reasons_for_Decision": "Summary: Section 6-5 of ITAA 1997 provides that the assessable income of an Australian resident for taxation purposes, includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources. Ordinary income has generally been held to include three categories: Paragraph 3 of Taxation Ruling IT 2639 explains that 'income from personal services' is: income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour. The inclusion of predominantly in this definition allows for the situation where personal services involve the use of some equipment, for example the drawing board of an architect. Other characteristics of income that have evolved from case law include receipts that: The taxpayer may be said to have earned the executor's commission as it related directly to the services they performed. It is not clear, however, that the taxpayer could be said to have expected or relied upon the payment nor has the payment any element of recurrence or regularity. In these circumstances it is arguable whether the payment is income according to ordinary concepts and assessable under section 6-5 of the ITAA 1997. However, section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income but are included in assessable income by another provision, are called statutory income and are also included in assessable income. Subsection 15-2(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes the value to the taxpayer of all allowances, gratuities, compensation, benefits, bonuses and premiums provided to the taxpayer in respect of, or for or in relation directly or indirectly to, any employment of or services rendered by the taxpayer (including any service as a member of the Defence Force). Section 15-2 of the ITAA 1997 is the rewritten provision, with equivalent meaning, of the former subsection 26(e) of the Income Tax Assessment Act 1936 (ITAA 1936) (Section 15-2 commenced operation from 14 September 2006 and subsection 26(e) ceased to have effect from the same date - Tax Laws Amendment (Repeal of Inoperative Provisions) Act 2006). The courts have consistently indicated that paragraph 26(e) of the ITAA 1936 is not limited to employment situations and that it can apply to payments for services rendered in the absence of an employer/employee relationship (FC of T v. Cooke and Sherden 80 ATC 4140; (1980) 10 ATR 696, FC of T v. Holmes 95 ATC 4476; (1995) 31 ATR 71; and Smith v. Federal of Commissioner of Taxation (1987) 164 CLR 513; 87 ATC 4883; (1987) 19 ATR 274). The payment here is a payment of the type covered by subsection 15-2(1) of the ITAA 1997 as it can be said to be a benefit granted in respect of the services rendered by the taxpayer as the executor of the deceased estate. Accordingly, a commission paid to an executor or trustee of a deceased estate in respect of or for or in relation directly or indirectly to services rendered by them as executor or trustee would be included in the taxpayer's assessable income under section 6-10 of the ITAA 1997 as the commission is assessable income of the taxpayer under subsection 15-2(1) of the ITAA 1997.", "Date_of_Decision": "2 October 2014", "Year_of_Income": "Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-10 section 15-2", "Related_Public_Rulings_and_Determinations": "IT 2639", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/513 (withdrawn)", "Subject_References": "Benefit Commission income Executors Income Trustees Trusts", "Case_References": "FC of T v Cooke and Sherden (1980) 80 ATC 4140 (1980) 10 ATR 696", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201444", "Unmatched_Content": "Related Public Rulings (including Determinations) IT 2639 | Keywords Benefit Commission income Executors Income Trustees Trusts"}
{"ATO_ID_Number": "ATO ID 2007/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a benefit in kind paid by a former United Kingdom employer to an Australian resident", "Issue": "Is a benefit in kind received by a resident of Australia from a former United Kingdom (UK) employer in respect of past employment exercised in the UK assessable income under subsection 6-5(2) or 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A benefit in kind received by a resident of Australia from a former UK employer in respect of past employment exercised in the UK is assessable income under subsection 6-5(2) or 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer was previously employed in the UK by a UK employer. In accordance with the taxpayer's former employment agreement, the former employer is required to pay for certain benefits in kind to the taxpayer. From April 2006 the taxpayer is required to pay 'Benefit in Kind' tax in the UK on the employer contribution toward the benefits in kind. The 'Benefit in Kind' tax falls within the general UK income tax regime.", "Reasons_for_Decision": "Summary: Subsections 6-5(2) and 6-10(4) of the ITAA 1997 provide that the assessable income of a resident taxpayer includes ordinary or statutory income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages and similar remuneration, including a benefit in kind which are paid in an employment context, are either ordinary or statutory income for the purposes of subsection 6-5(2) or 6-10(4) of the ITAA 1997, unless the benefit is not assessable and not exempt income as listed in section 11-55 of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the Government of the UK of Great Britain and Northern Ireland (2003 UK Convention). Article 15 of the 2003 UK Convention provides that where a fringe benefit is taxable in both Australia and the UK, the benefit will be taxable only in the Contracting State which would have the primary taxing right over that benefit if the value of the benefit were paid to the employee as ordinary employment income. Article 15(2)(a) of the 2003 UK Convention provides that 'fringe benefit' has the meaning it has under the Fringe Benefits Assessment Act 1986 (FBTAA). There is a fundamental requirement under that Act that to be a fringe benefit the benefit must have been provided in respect of the employment of the employee. The term employee is a defined term in subsection 136(1) of the FBTAA and it includes a current, former and future employee. A former and future employee is one who has been or will become a current employee respectively. To be a current employee the person must be in receipt of salary and wages. This term is defined in subsection 136(1) of the FBTAA. It states in part: it means a payment from which an amount must be withheld (even if the amount is not withheld) under a provision in Schedule 1 to the Taxation Administration Act 1953 listed in the table, to the extent that the payment is assessable income............. In this case there has been no withholding payment that is covered by the table referred to in the definition of salary and wages in subsection 136(1) of the FBTAA as the taxpayer was not in receipt of assessable income while employed by their former UK employer. Therefore the person is not considered to be an employee for the purposes of the FBTAA. The benefit in kind paid by the former UK employer is not considered to be a fringe benefit for the purposes of the FBTAA. Accordingly, Article 15 of the 2003 UK Convention does not apply. Article 14(1) of the 2003 UK Convention provides that salaries, wages and other similar remuneration derived by a resident of Australia in respect of an employment shall be taxable only in Australia unless the employment is exercised in the UK. If the employment is exercised in the UK, such remuneration may be taxed in the UK. The benefit in kind is paid in respect of 'an employment' as it is paid by a previous employer for past employment services exercised in the UK. In accordance with Article 14(1) of the 2003 UK Convention both the UK and Australia may tax the income. Accordingly, the benefit in kind will be assessable under either subsections 6-5(2) or 6-10(4) of the ITAA 1997. As the UK may also tax the benefit in kind under Article 14(1) of the 2003 UK Convention, a credit will be allowed for the UK income tax paid on the benefit in kind (Article 22 of the 2003 UK Convention). For income years starting on or after 1 July 2008, relief from double taxation for taxpayers deriving foreign assessable income is provided by the foreign income tax offset provisions in Division 770 of the Income Tax Assessment Act 1997 . The new rules replace the former foreign tax credit rules.", "Date_of_Decision": "18 January 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fringe benefits International tax Salary and wages income United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200725", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Fringe benefits International tax Salary and wages income United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/274", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: repayment arrangement - amounts not yet repaid", "Issue": "Is an amount received by a taxpayer which is subject to a repayment arrangement, but has not yet been repaid, treated as 'not assessable income' under section 59-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An amount received by a taxpayer which is subject to a repayment arrangement, but has not yet been repaid, is not treated as 'not assessable income' under section 59-30 of the ITAA 1997.", "Facts": "The taxpayer received a grant to assist them in studying full time. The grant formed part of their assessable income in the income year the payment was received. The grant was paid subject to certain conditions, one of which was that upon completion of their studies the taxpayer was required to complete a further two years of service with their employer. Failure to satisfy this condition would result in the taxpayer being required to repay the grant. The taxpayer's circumstances changed and they decided not to return to complete the two years further service. The taxpayer has agreed to repay the grant in monthly instalments over a period of two years. The taxpayer has made some of these instalment payments in the income year following the year in which the grant was received. The remainder of the amount remains unpaid. The taxpayer is not entitled to a deduction for any of the amounts repaid or to be repaid.", "Reasons_for_Decision": "Summary: Subsection 59-30(1) of the ITAA 1997 states that: An amount you receive is not assessable income, and is not exempt income, for an income year if: The first requirement is that the taxpayer must 'repay' the grant. The term repay is not defined in income tax legislation. It is appropriate therefore to look at the ordinary meaning of the term repay. The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, defines the term as 'pay back (money) ... make payment (to a person) ... make payment'. It follows that the term requires the actual transfer of money rather than merely a promise or requirement to make a payment in the future. The taxpayer will only satisfy this requirement that they repay the amount, in relation to the amount of the instalments actually paid. For any amounts that are required to be paid, but as yet have not been, the requirement is not satisfied. Therefore these amounts are not treated as 'not assessable income' under section 59-30 of the ITAA 1997.", "Date_of_Decision": "20 February 2004", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 22-5 section 59-30 subsection 59-30(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "repayments", "Case_References": "", "Other_References": "The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004274", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2004/587", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of honorarium received by a Canadian student visiting Australia", "Issue": "Is the honorarium paid in Australia by an Australian University to the taxpayer, a resident of Canada, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The honorarium payment received by the taxpayer, a resident of Canada, from an Australian University is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Canada for income tax purposes and is not a resident of Australia for income tax purposes. The taxpayer is a full time student undertaking a course of study in Canada. As part of the course of study, the taxpayer accepted an invitation from the Australian University to fulfil a position as an occupational trainee in Australia. The Australian University pays the taxpayer an honorarium to cover their living expenses.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The honorarium received is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. Schedule 3 to the Agreements Act contains the convention between Australia and Canada (the Canadian Convention). Schedule 3A of the Agreements Act contains the protocol amending the Canadian Convention (the Canadian Protocol). The Canadian Convention and Canadian Protocol operate to avoid the double taxation of income received by Australian and Canadian residents. Article 15(1) of the Canadian Convention provides that remuneration derived by an individual who is a resident of Canada in respect of an employment shall be taxable only in Canada unless the employment is exercised in Australia. If the employment is exercised in Australia, any remuneration received may be taxable in Australia. Article 15(1) of the Canadian Convention does not apply as there is no employer-employee relationship between the taxpayer and the Australian University with any entitlement for remuneration. Article 20 of the Canadian Convention provides that payments received from sources outside Australia by a Canadian resident for the purposes of maintenance or education, while temporarily present in Australia solely for the purpose of education, are not taxable in Australia. Even though the taxpayer is a full time student, Article 20 of the Canadian Convention will not apply as the payment is from an Australian University. Article 21(2) of the Canadian Convention provides that items of income which are not specifically mentioned in the Canadian Convention that are received by a Canadian resident derived from sources in Australia, may be taxed in Australia and Canada. The taxpayer receives an honorarium from an Australian source. There are no specific Articles in the Canadian Convention that deal with the honorarium payment. Therefore Article 21(2) of the Canadian Convention will apply. Accordingly, the honorarium payment may be taxed in Australia and Canada. The honorarium payment received by the taxpayer, a resident of Canada, from an Australian University is assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "16 June 2004", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Canada Double tax agreements International tax Honoraria", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004587", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Canada Double tax agreements International tax Honoraria"}
{"ATO_ID_Number": "ATO ID 2003/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of foreign sourced payments made to Australian resident student", "Issue": "Are monthly maintenance payments from sources outside Italy received by an Australian resident taxpayer temporarily present in Italy solely for educational purposes assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Monthly maintenance payments from sources outside Italy received by an Australian resident taxpayer temporarily present in Italy solely for educational purposes are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is enrolled as a part-time student at an Australian university. The taxpayer's course of study includes a compulsory work experience component. The taxpayer undertakes the work experience component in Italy through a one year placement with an Italian resident company. The taxpayer receives monthly payments to meet basic living costs from the parent company of the Italian resident company. The parent company is not a resident of Italy.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 6-5(1) of the ITAA 1997 defines ordinary income to mean income according to ordinary concepts. Subsection 6-15(2) of the ITAA 1997 provides that exempt income is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 51-10 of the ITAA 1997 which deals with educational allowances. Item 2.1A of the table in section 51-10 of the ITAA 1997 provides that, subject to the exceptions and special conditions contained within section 51-35 of the ITAA 1997, amounts received by way of scholarship, bursary, educational allowance or educational assistance by a full-time student at a school, college or university is exempt from income tax. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that all Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions. Schedule 21 to the Agreements Act contains the double tax agreement between Australia and Italy (the Italian Convention). The Italian Convention operates to avoid the double taxation of income received by Australian and Italian residents. Article 21 of the Italian Convention provides that payments received by an Australian resident taxpayer from sources outside Italy for maintenance or education while present in Italy solely for the purpose of education, will be exempt from tax in Italy. Even though the payments received by the Australian resident taxpayer will be exempt from tax in Italy, the assessability of the payment in Australia needs to be considered. The taxpayer does not meet one of the essential requirements of section 51-10 of the ITAA 1997 for exemption - the taxpayer must be a full-time student at a school, college or university. The monthly maintenance payments are not exempt from income tax under section 51-10 of the ITAA 1997 as the taxpayer is enrolled as a part-time student. The payments received by the taxpayer are income according to ordinary concepts and form part of the taxpayer's assessable income in accordance with subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "3 February 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1) subsection 6-5(2) subsection 6-15(2) section 11-15 section 51-10 section 51-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/227", "Subject_References": "Double tax agreements Education payments Exempt income Foreign source income Income International tax Italy Scholarships, fellowships & bursaries", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003135", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Education payments Exempt income Foreign source income Income International tax Italy Scholarships, fellowships & bursaries"}
{"ATO_ID_Number": "ATO ID 2002/205", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income - Money received for personal expenses while residing at a college", "Issue": "Is money received by the taxpayer for personal expenses while residing at a college assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Money received by the taxpayer for personal expenses while residing at a college is income according to ordinary concepts and assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is an overseas student who is residing at an Australian college between the end of secondary education and the start of university. The taxpayer undertakes various duties while at the college. The taxpayer is provided with board and lodging and a limited amount of money for personal expenses. The taxpayer is a resident of Australia for income tax purposes.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business. Paragraph 3 of Taxation Ruling IT 2639 defines 'income from personal services' and states that: '3. \"Income from personal services\" is income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour. The inclusion of predominantly in this definition allows for the situation where personal services involve the use of some equipment, for example the drawing board of an architect.' Other characteristics of income that have evolved from case law include that the receipts: The taxpayer undertakes various duties at the college and is provided with board and lodgings and a limited amount of money for personal expenses. The taxpayer receives the money on a regular basis, and it is earned, expected and relied upon. The money received by the taxpayer is therefore ordinary income and assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "26 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "IT 2639", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Salary & wages income Employee allowances", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002205", "Unmatched_Content": "Expanded statement of subsection 6-5(2) of the ITAA 1997 regarding 'assessable income' to be more comprehensive Minor rewording for clarity, and minor format changes | Related Public Rulings (including Determinations) IT 2639 | Keywords Salary & wages income Employee allowances"}
{"ATO_ID_Number": "ATO ID 2002/815", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income - non resident taxpayer - visiting scholar's grant", "Issue": "Is the visiting scholar's grant paid to the taxpayer to assist with living and other expenses on their appointment as an honorary fellow, assessable income pursuant to subsection 6-10(5) of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. The visiting scholar's grant paid to the taxpayer to assist with living and other expenses on their appointment as an honorary fellow is assessable income pursuant to subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a resident of a foreign country and is a non resident of Australia for taxation purposes. Australia does not have a double tax agreement with the foreign country. The taxpayer was appointed as an honorary fellow with an Australian University. As part of the appointment, the taxpayer was provided with a visiting scholar's grant of a set amount paid fortnightly. This amount was paid to assist the taxpayer with their living and other expenses. The taxpayer's role at the Australian University was training and research. The taxpayer was not a full time student at the Australian University.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes ordinary income derived directly or indirectly from all Australian sources during the income year. Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business. Paragraph 3 of Taxation Ruling IT 2639 defines income from personal services as: '... income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour.' Other characteristics of income that have evolved from case law include receipts that: The taxpayer was provided with a visiting scholar's grant of a set amount paid fortnightly in order to assist the taxpayer with living and other expenses. The payments are not 'earned', as they do not directly relate to any services performed. Although the payments have the element of regularity this is not sufficient to characterise the payments as income according to ordinary concepts. Therefore, the payments are not assessable as ordinary income under section 6-5 of the ITAA 1997. However, section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income are also included in assessable income. These amounts are called statutory income and are included as assessable income under provisions in relation to assessable income. Paragraph 26(e) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that the value of all allowances, gratuities, compensation, benefits etc. given or granted in respect of employment or services rendered are included in assessable income. Therefore, an allowance under paragraph 26(e) of the ITAA 1936 is included in assessable income under section 6-10 of the ITAA 1997. Paragraph 2 of Taxation Ruling TR 92/15 states that: 'A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance.' The taxpayer was paid a fortnightly payment to assist them with their living and other expenses. The amount was not paid to reimburse the taxpayer for expenses actually incurred. Therefore, the amount is an allowance under paragraph 26(e) of the ITAA 1936 and is included in assessable income under section 6-10 of the ITAA 1997. In determining the liability to tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). The Agreements Act contains agreements that Australia has with other countries for the prevention of double taxation. The provisions of the Agreements Act will generally override the Australian domestic law, to the extent that there is an inconsistency between the two. In many cases, these agreements provide that income is exempt from tax in the country of source if the taxpayer's visit is for teaching or research and does not exceed 2 years. However, as Australia does not have a double tax agreement with the taxpayer's country of residence, no such exemption is provided. Therefore, the visiting scholar's grant given to assist the taxpayer to meet living and other expenses associated with the taxpayer's appointment as an honorary fellow is assessable under subsection 6-10(5) of the ITAA 1997.", "Date_of_Decision": "23 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(3) section 6-10 subsection 6-10(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/15 | Taxation Ruling IT 2639", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/447 | ATO ID 2002/206", "Subject_References": "Foreign income Non resident individuals Scholarships, fellowships & bursaries", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002815", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 92/15 Taxation Ruling IT 2639 | Keywords Foreign income Non resident individuals Scholarships, fellowships & bursaries"}
{"ATO_ID_Number": "ATO ID 2002/944", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income - food vouchers received for child-minding", "Issue": "Are the monetary values of food vouchers received by the taxpayer for child-minding the neighbour's child included in their assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The monetary values of food vouchers received by the taxpayer for child-minding the neighbour's child are not included in their assessable income under section 6-5 of the ITAA 1997 as the receipts are not in the nature of ordinary income.", "Facts": "The taxpayer minds a neighbour's child. The child-minding generally involves supervision of the child and the provision of lunches, snacks and drinks for the child. The taxpayer also takes the child to playgroup once per week along with the taxpayer's child. The taxpayer does not mind any other children. The taxpayer's neighbour provides food vouchers for use in supermarkets, in return for the child-minding and provision of food to the child. There is no set time for the receipt of the vouchers and the value of the vouchers varies. The total value of the vouchers received are less than normal market rates payable for the provision of child minding services. The arrangement between the taxpayer and the neighbour is an informal one between friends.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Section 21 of the Income Tax Assessment Act 1936 provides that where a transaction or payment is paid or given in a form other than cash, a taxpayer is deemed to have received the money value of that item. Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business. Paragraph 3 of Taxation Ruling IT 2639 defines 'income from personal services' and states that: '3.\"Income from personal services\" is income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour. The inclusion of predominantly in this definition allows for the situation where personal services involve the use of some equipment, for example the drawing board of an architect.' Other characteristics of income that have evolved from case law ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; [1952] HCA 65; (1952) 10 ATD 82) include receipts that: It is considered that the food vouchers are gifts to the taxpayer given by the neighbour as token of appreciation for the taxpayer's help in minding the neighbour's child. Therefore, the food vouchers received by the taxpayer do not represent a regular form of receipt that could be relied on as income by the taxpayer. There is no set time for the receipt of the vouchers, the value of the vouchers varies, and the total value of the voucher's received are less than normal market rates payable for the provision of child minding services. The food vouchers received by the taxpayer do not in these circumstances have the characteristics of income according to ordinary concepts. Accordingly, the monetary values of food vouchers received for child-minding are not ordinary income and are not included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "11 September 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 21", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2639", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 [1952] HCA 65 (1952) 10 ATD 82", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002944", "Unmatched_Content": "Updated to improve clarity and replace case references with medium neutral citations. | Related Public Rulings (including Determinations) Taxation Ruling IT 2639"}
{"ATO_ID_Number": "ATO ID 2001/381", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Payments received under a homestay arrangement", "Issue": "Is an amount received by a taxpayer with regard to a student who is boarding with them under a homestay arrangement, assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, the amount received by a taxpayer with regard to a student who is boarding with them under a homestay arrangement is not assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer boards a student in their home under a homestay arrangement organised by the Department of Education. The taxpayer intends to board one or two students at any time. The amounts paid to the taxpayer to board the homestay student are used to pay all of the household expenses of the student (food, phone, electricity etc). There may be a negligible amount of surplus money after expenses in any particular week.", "Reasons_for_Decision": "Summary: The term 'homestay' is used to describe accommodation provided to local and overseas students studying or training at Australian universities or other educational institutions. Under a homestay arrangement, students live with the host family in their home. They are usually provided with their own room and have access to other household facilities. Main meals are provided by the host family. They may also have their laundry and ironing done, and provided with occasional transport. They may be required to help out with household chores and keep their room clean. Housing officers at the educational institution determine how much is paid to the host family. The payments are designed to cover the costs to the host family of supplying food, utilities, and other minor expenses of the student. Section 6-5 of the ITAA 1997 provides that the assessable income of an Australian resident includes all ordinary income derived directly or indirectly from all sources. Rental income is normally regarded as ordinary income and therefore forms part of the taxpayer's assessable income. However, where there is a non-commercial or domestic arrangement, amounts paid for board or lodging do not give rise to the derivation of assessable income ( FC of T v. Groser 82 ATC 4478; 13 ATR 445). Taxation Ruling TR 2026/1 considers the consequences of different rental income producing situations. Paragraph 52 and 53 of TR 2026/1 states that: Amounts received in the context of household or family situations are not assessable income where they relate to the provision of family care or shared responsibility for household expenses. It is a matter of fact and circumstance whether an amount is for shared household expenses or a payment for the use of property under a lease or licence. You should be able to show that amounts received to cover household expenses reasonably represent the householder's share of those costs. Amounts received under the homestay arrangement are determined by the educational institution to cover the expenses of accommodating the student in the home. The amount of the payment is set with regard to the normal cost of supplying food, utilities and overheads for the student. These rates are not regarded as true commercial rates and there is no built in benefit component to the taxpayer for the use of parts of the house. While there might be some surplus on occasions to the home owner, these amounts will generally be small having regard to the expenditure incurred. The amounts received by the taxpayer are made in relation to a non-commercial or domestic arrangement and are therefore not assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "14 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2026/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Rental property income", "Case_References": "FC of T v. Groser 82 ATC 4478 13 ATR 445", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001381", "Unmatched_Content": "Updated to replace references to IT 2167 (now withdrawn) with TR 2026/1 | Related Public Rulings (including Determinations) Taxation Ruling TR 2026/1 | Keywords Income Rental property income"}
{"ATO_ID_Number": "ATO ID 2013/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: application of section 23AG of the Income Tax Assessment Act 1936 to sick leave accrued during a period of foreign service and taken after the period of foreign service has ceased", "Issue": "Can sick leave payments be exempt from tax under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936), where the leave accrued during a period of foreign service and the leave is then taken after the period of foreign service has ceased?", "Decision": "No. Sick leave payments cannot be exempt from tax under section 23AG of the ITAA 1936 where the leave accrued during a period of foreign service and the leave is then taken after the period of foreign service has ceased.", "Facts": "The taxpayer is an individual who worked overseas for a continuous period of at least 91 days. The taxpayer is an Australian resident for taxation purposes. This period of overseas work constituted 'foreign service' as defined under subsection 23AG(7) of the ITAA 1936. During this period of foreign service, the taxpayer accrued three weeks of fully paid sick leave. Under the terms and conditions of both his Australian and foreign employment, the taxpayer was entitled to be absent from his employment where he was unable to work because of an illness or injury. Where the taxpayer met the required conditions, he was entitled to utilise his paid sick leave. The taxpayer did not take any sick leave during the period of his employment in the foreign country. However, after recommencing employment in Australia with the same employer, the taxpayer used two weeks of his paid sick leave entitlement. The taxpayer used the paid sick leave he had accrued during his period of foreign service.", "Reasons_for_Decision": "Summary: Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer, being a natural person, has been engaged in certain types of foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service will be exempt from tax. To qualify for the exemption, it is a requirement that the 'foreign earnings' be derived by a resident of Australia who was 'engaged in foreign service' and whose earnings were 'derived from that foreign service': Chaudhri v. Federal Commissioner of Taxation [2001] FCA 554; 2001 ATC 4214; (2001) 47 ATR 126. 'Foreign earnings' has the meaning given in subsection 23AG(7) of the ITAA 1936 and includes income consisting of salary and wages, bonuses or allowances, while 'foreign service' includes service in a foreign country in the capacity as an employee. Under subsection 23AG(6) of the ITAA 1936, the meaning of 'engaged in foreign services' is extended to include: ...any period during which the person is, in accordance with the terms and conditions of that service: ... (b) absent from work because of accident or illness. Foreign earnings do not need to be received at the time of engaging in a period of foreign service. The important test is that the foreign earnings need to be attributable to that period of service in a foreign country rather than to a period before or after the period of foreign service. The period the taxpayer worked overseas constituted 'foreign service' for the purposes of subsection 23AG(7) of the ITAA 1936. Under the terms and conditions of both the taxpayer's Australian and foreign service, the taxpayer was only entitled to be absent due to illness or injury, or entitled to receive sick leave payments, where the taxpayer was unable to work because of that illness or injury. Following the taxpayer's return to Australia, the taxpayer used two weeks of his sick leave that had accrued during his period of foreign service. Sick leave is a conditional entitlement. Until the taxpayer suffered an illness or injury, the taxpayer had no entitlement either to be absent due to illness or injury, or to receive sick leave payments. When sick leave is taken after resumption of duty in Australia, it no longer meets the terms and conditions of foreign service or forms part of the period of foreign service within the meaning of subsection 23AG(7) of the ITAA 1936. Therefore, sick leave is taken and paid, in accordance with the terms and conditions of the continuing Australian service. Where the sick leave is taken after the period of foreign service has ended, those earnings are not 'from' the period of foreign service. They are instead, from the period of sick leave. As the taxpayer's absence due to illness fails to meet the extended definition of 'foreign service' as defined in subsection 23AG(6) of the ITAA 1936, the sick leave payments are not 'foreign earnings' from 'foreign service'. Rather, the payments are solely attributable to, and derived from, the taxpayer's Australian service. The sick leave payments cannot be exempt from income tax under subsection 23AG(1) of the ITAA 1936 and are assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 .", "Date_of_Decision": "8 May 2013", "Year_of_Income": "Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1936 subsection 23AG(1) subsection 23AG(6) subsection 23AG(7)", "Related_Public_Rulings_and_Determinations": "TD 2012/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Foreign salary & wages International tax Employee allowances", "Case_References": "Chaudhri v. Federal Commissioner of Taxation [2001] FCA 554 2001 ATC 4214 (2001) 47 ATR 126", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201327", "Unmatched_Content": "Related Public Rulings (including Determinations) TD 2012/8 | Keywords Exempt income Foreign salary & wages International tax Employee allowances"}
{"ATO_ID_Number": "ATO ID 2007/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by a South African resident taxpayer", "Issue": "Is a South African resident's employment income from a South African employer assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer performs employment duties in Australia?", "Decision": "Yes. The employment income received by a resident of South Africa is assessable in Australia under subsection 6-5(3) of the ITAA 1997 where the taxpayer performs employment duties in Australia.", "Facts": "The taxpayer is a resident of South Africa and a non-resident of Australia for taxation purposes. The taxpayer is present in Australia for more than 183 days, spanning across two Australian income years, from 1 February 2006 to 31 March 2007. The taxpayer is performing employment duties in Australia but their salary and wages are paid by their employer in South Africa, who does not have a permanent establishment or fixed base in Australia. The taxpayer is taxed in South Africa on their salary and wages.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident for the income year includes ordinary income derived directly or indirectly from all Australian sources and other ordinary income that a provision includes in assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed (see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76) where Williams J stated at CLR 414; ATD 296; AITR 85 that: ...the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place... As the taxpayer performs employment duties in Australia and receives ordinary income as remuneration for these, that remuneration would be assessable under subsection 6-5(3) of the ITAA 1997. However, in determining the liability to tax on employment income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). If there is an inconsistency, the provisions of the Agreements Act will prevail over those of the ITAA 1997 (subsection 4(2) of the Agreements Act). Schedule 42 of the Agreements Act contains the tax treaty between Australia and the Republic of South Africa (the South African Agreement). The South African Agreement operates to avoid the double taxation of income received by Australian and South African residents. Article 15(1) of the South African Agreement provides that employment income derived by a resident of South Africa shall be taxable only in South Africa unless the employment is exercised in Australia. If the employment is exercised in Australia it may be taxed in Australia. However, Article 15(2) of the South African Agreement provides that such income will be taxable only in South Africa if: As the employer is a South African resident and does not have a permanent establishment or fixed base in Australia, the conditions in Article 15(2)(b) and 15(2)(c) of the South African Agreement are satisfied. In interpreting the meaning of Article 15(2)(a) of the South African Agreement, regard may be had to the OECD Model Tax Convention on Income and on Capital (the OECD Model) and the Commentaries on the Articles of the OECD Model (the OECD Commentary) as the South African Agreement is based on the OECD Model. This approach was accepted by the High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531 (see paragraph 102 of Taxation Ruling TR 2001/13). Article 15 of the South African Agreement is the same in substance as Article 15 of the OECD Model. Paragraph 4 of the OECD Commentary on Article 15 of the OECD model states that in interpreting the wording of subparagraph (a) of paragraph (2) all possible periods of twelve consecutive months must be considered, even periods which overlap others to a certain extent. On the current facts, there are two periods of twelve consecutive months to consider. The first begins in the 2005-06 income year, on 1 February 2006 (when the taxpayer arrived in Australia). The second ends in the 2006-07 income year on 31 March 2007 (the last day on which the taxpayer will be in Australia). During the 12 month period beginning in the 2005-06 income year (that is, 1 February 2006), the taxpayer is present in Australia for more than 183 days in the aggregate. Accordingly, Article 15(2) of the South African Agreement does not apply and Australia may tax the employment income derived during that time (under Article 15(1) of the South African Agreement). During the 12 month period ending in the 2006-07 income year (that is, 31 March 2007), the taxpayer is present in Australia for more than 183 days in the aggregate. Accordingly, Article 15(1) of the South African Agreement does not apply and Australia may tax the employment income derived during that time (under Article 15(1) of the South African Agreement). In accordance with subsection 6-5(3) of the ITAA 1997, the taxpayer's assessable income in the 2005-06 income year will include the employment income derived between 1 February 2006 and 30 June 2006, and the taxpayer's assessable income in the 2006-07 income year will include the employment income derived between 1 July 2006 and 31 March 2007.", "Date_of_Decision": "21 December 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Double tax agreements Non resident individuals Salary and wages income South Africa", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "OECD Model Tax Convention on Income and on Capital Commentaries on the Articles of the OECD Model", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20079", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords International tax Double tax agreements Non resident individuals Salary and wages income South Africa"}
{"ATO_ID_Number": "ATO ID 2007/103", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian sourced salary and wages received by a resident of Switzerland", "Issue": "Is the salary and wages income from employment performed in Australia by a resident of Switzerland over three income years assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages income from employment performed in Australia by a resident of Switzerland over three income years is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Switzerland and is not an Australian resident for income tax purposes. The taxpayer is employed by an Australian company. The taxpayer's salary and wages will be paid by the Australian company and will be sourced in Australia. The taxpayer will be working in Australia over a period spanning three income years. The taxpayer will perform services in Australia for more than 183 days in one income year. The taxpayer will perform services in Australia for less than 183 days in each of the other two income years.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The income in the present case is sourced from Australia and subsection 6-5(3) will apply. In determining liability to tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). The taxpayer is a resident of Switzerland, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Switzerland (the Swiss Agreement) and the protocol to that agreement contained in Schedule 15 of the Agreements Act must be considered in determining whether the salary and wages paid to the taxpayer is taxable in Australia. Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Article 15 of the Swiss Agreement deals with dependent personal services. The Article provides that salary, wages and other similar remuneration derived by a Swiss resident shall be taxable only in Switzerland unless the employment is exercised in Australia. If the employment is exercised in Australia then the income may also be taxed in Australia. Article 15(2) of the Swiss Agreement provides that the income will be exempt from tax in Australia if: In the present case, the remuneration is paid to the taxpayer by an employer who is a resident of Australia and so the exemption under paragraph (b) will not apply. In addition, the taxpayer is present in Australia for more than 183 days for one of the income years and so the exemption under paragraph (a) will not apply as well in that year. As a result, Article 15(2) of the Swiss Agreement does not apply and Article 15(1) of the Swiss Agreement gives Australia the right to tax the salary and wages earned by the taxpayer in all three income years. Accordingly, the salary and wages will be assessed under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "27 February 2007", "Year_of_Income": "Year ended 30 June 2007 Year ending 30 June 2008 Year ending 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Double tax relief International tax Residence in Australia Salary & wages income Switzerland", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007103", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Double tax relief International tax Residence in Australia Salary & wages income Switzerland"}
{"ATO_ID_Number": "ATO ID 2006/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received from an Australian resident employer by a New Zealand resident individual", "Issue": "Is a New Zealand resident's employment income (that is, an expense deductible to a New Zealand permanent establishment of an Australian resident employer) assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer performed his duties in Australia for less than 183 days in an income year?", "Decision": "Yes. The employment income is assessable where a non-resident works in Australia for an Australian resident employer.", "Facts": "The taxpayer is a resident of New Zealand for tax treaty purposes. The taxpayer is employed by a company that is a resident of Australia. However, the services performed by the taxpayer are in connection with the activities carried out in New Zealand of a permanent establishment of the resident employer. The remuneration derived by the taxpayer from such activities is deductible in determining the taxable profits of the New Zealand permanent establishment. The taxpayer exercises employment in Australia for a period of less than 183 days. The taxpayer's employment in Australia is connected with the activities of the New Zealand permanent establishment.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed: see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76 where Williams J stated at CLR 414; ATD 296; AITR 85 that: ... the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on. In determining the liability to tax on employment income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in specified situations). Schedule 4 of the Agreements Act contains the tax treaty between Australia and New Zealand (the New Zealand Agreement). The New Zealand Agreement operates to avoid the double taxation of income received by Australian and New Zealand residents. Article 15(1) of the New Zealand Agreement provides that salary and wages derived by a New Zealand resident for employment exercised in Australia may be taxed in Australia. However Article 15(2) of the New Zealand Agreement provides that the income will only be taxed in New Zealand if: For Article 15(2) to allocate sole taxing rights to New Zealand, the requirements in all paragraphs must be met. As the taxpayer exercises employment within Australia for a period of less than 183 days, Article 15(2)(a) is met. However, under Article 15(2)(b), the remuneration derived by the taxpayer is paid by, or on behalf of, an employer who is a resident of Australia. The key term in Article 15(2)(b) is the requirement for the employer to not be a resident of the Contracting State in which the employment is exercised. In this case, the employer of the taxpayer is an Australian resident. That remains so, notwithstanding that the taxpayer's activities are connected with the New Zealand permanent establishment and the remuneration derived from such activities is deductible in determining the taxable profits of the permanent establishment in New Zealand. At law, the permanent establishment is not a separate legal entity but is part of the resident company. As Article 15(2)(b) only refers to the residency status of the employer, it is concluded that the remuneration derived by the taxpayer from services performed in connection with the activity of the New Zealand permanent establishment is, nonetheless, remuneration paid by, or on behalf of, the Australian resident employer. Accordingly, condition (b) is not met. As one of the conditions in Article 15(2) is not met, the remuneration derived by the taxpayer from the exercise of employment in Australia may be taxed by Australia pursuant to Article 15(1) of the New Zealand Agreement. As the remuneration derived by the taxpayer from the exercise of employment in Australia is deemed to be from sources in Australia by virtue of Article 23 of the New Zealand Agreement, such income is included in the taxpayer's assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "20 December 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "International Tax Agreements Act 1953 Schedule 4-Article 15 Schedule 4-Article 23", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2003/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Assessable Income Employment Income New Zealand", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20068", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2003/11 | Keywords Double tax agreements Assessable Income Employment Income New Zealand"}
{"ATO_ID_Number": "ATO ID 2006/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a lump-sum payment received by a non-resident upon commencing employment in Australia", "Issue": "Is the lump-sum payment received by a non-resident taxpayer upon commencing employment in Australia assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The lump-sum payment received by a non-resident taxpayer upon commencing employment in Australia is assessable income under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of the United Kingdom (UK). The taxpayer is employed by an Australian resident entity (the employer) and performs duties as an employee in Australia. The contract of employment was executed by the taxpayer in the UK. Under the contract of employment the taxpayer received a lump-sum payment from the employer upon the taxpayer's commencement of employment. The taxpayer commenced performing duties in Australia for the employer one week after the commencement of employment and receipt of the lump-sum. In the event that the taxpayer terminates their employment prior to the completion of a specified period of service, the taxpayer is required to repay a portion of the lump-sum to the employer. The taxpayer remained in Australia for a period greater than 183 days during the Australian income year.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. A lump sum payment received upon commencing employment in Australia is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. The source of remuneration received in the capacity of an employee will depend on the facts of each case. However, the source is generally the place where the services of the employee are performed (see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76) where Williams J stated at CLR 414; ATD 296; AITR 85 that: ...the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on. However, other factors may apply in cases where special skills or creative talents are being rendered ( Federal Commissioner of Taxation v. Mitchum (1965) 113 CLR 401; (1965) 13 ATD 497; (1965) 9 AITR 559). In such cases, factors such as the place of negotiation and execution of the contract may be relatively more important. Under the terms of the taxpayer's employment contract, the taxpayer received a lump-sum payment on commencement with the employer. In the event that the taxpayer terminates their employment prior to the completion of a specified period of service, the taxpayer is required to repay a portion of the lump-sum to the employer. Although, the payment was received before any services were rendered, the lump sum payment is income derived, under an employment contract, in the taxpayer's capacity as an employee. Therefore, the source of this income is the place where the taxpayer will render the services in their capacity as an employee. Given that these services will be rendered in Australia, the lump sum payment received on commencement of the taxpayer's employment will have an Australian source. In determining the liability to tax on any Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that the two Acts are read as one. Schedule 1 of the Agreements Act contains the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland and Notes to the agreement (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 14 of the 2003 UK Convention deals with income from employment. Under Article 14(1) of the 2003 UK Convention salaries, wages and other similar remuneration derived by a resident of the UK in respect of employment exercised in Australia may be taxed in Australia. Under Article 21 of the 2003 UK Convention income or gains derived by a resident of the UK that may be taxed in Australia under Article 14 are deemed to have an Australian source. The term 'other similar remuneration' in Article 14(1) of the 2003 UK Convention is not defined in the 2003 UK Convention. Article 3(3) of the 2003 UK Convention provides that any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the domestic laws of each country. Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's double tax agreements, discusses the Commissioner's views about interpreting tax treaties. At paragraph 104, TR 2001/13 provides that the OECD Model Tax Convention and Commentary (the Commentary) may be considered in interpreting tax treaties. Paragraph 2.1 of the Commentary states that 'member countries have generally understood the term \"salaries, wages and other similar remuneration\" to include benefits in kind received in respect of an employment'. The lump sum payment received by the taxpayer on commencement with the employer is a benefit received in respect of their employment with that employer. For the purposes of Article 14(1) of the 2003 UK Convention this payment will constitute 'other similar remuneration' received in respect of the taxpayer's employment with the employer and may be taxed in Australia. However, Article 14(2) of the 2003 UK Convention provides that a lump-sum payment will be exempt from tax in Australia if: The taxpayer was present in Australia for a period of greater than 183 days and the taxpayer's employer is a resident of Australia. Therefore the exemption under Article 14(2) of the 2003 UK Convention will not apply. Accordingly, the lump sum payment made under the taxpayer's contract of employment may be taxed in Australia under Article 14(1) of the 2003 UK Convention and will be deemed to have an Australian source under Article 21 of that Convention. Therefore, the lump sum payment received by the taxpayer upon commencing employment in Australia is assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "24 January 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident individuals Lump-sum payments United Kingdom Income Double tax agreements", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and Gains", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200625", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Non resident individuals Lump-sum payments United Kingdom Income Double tax agreements"}
{"ATO_ID_Number": "ATO ID 2006/184", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by a dual resident of Australia and Italy", "Issue": "Are the salary and wages received by a taxpayer, who is a dual resident of Australia and Italy, from an Italian employer for work solely performed in Australia assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages received by a taxpayer, who is a dual resident of Australia and Italy, from an Italian employer for work performed solely in Australia are assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer is also a resident of Italy for Italian tax purposes for part of their stay in Australia. The taxpayer's employer is a non resident of Australia. The taxpayer is working in Australia for a period of approximately four years. The taxpayer exercises the duties of their employment solely in Australia. The taxpayer receives salary and wages from their Italian employer. The taxpayer will reside in a rental property for the duration of their stay in Australia. The taxpayer has a home available in Italy. The taxpayer will spend time in Australia and in Italy during their stay in Australia. The taxpayer's personal and economic relations are predominantly associated with Italy.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer, includes ordinary income derived directly or indirectly from all sources during the income year. Salary and wages are ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 21 to the Agreements Act contains the tax treaty and the protocol between Australia and the Republic of Italy (the Italian Convention). The Italian Convention and the protocol operate to avoid the double taxation of income received by Australian and Italian residents. Article 4(3) of the Italian Convention provides tests of residency which are used where the individual is a resident of two countries (tie breaker tests). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(3) of the Italian Convention provides that a person's residency status for the purpose of applying the Italian Convention shall be determined as follows: Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting tax treaties. Paragraph 104 of TR 2001/13 states that the OECD Model Tax Convention and Commentary (OECD Commentary) will often need to be considered in interpreting tax treaties. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer has residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in Italy. In relation to a habitual abode, the OECD Commentary states that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the presence in each country is habitual and to also determine the intervals at which the stays take place. The notion of an habitual abode is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the taxpayer's circumstances. As it is usual or customary for the taxpayer to spend time in both countries, the taxpayer has a habitual abode in both countries. In relation to a taxpayer's personal and economic relations, the OECD Commentary states that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer's personal and economic ties are closer with Italy than with Australia. Accordingly, the taxpayer will be treated as a resident of Italy for the purposes of applying the provisions of the Italian Convention to income earned by the taxpayer during the period of dual residency. Article 15(1) of the Italian Convention provides that salaries, wages and similar remuneration derived by an individual who is a resident of Italy in respect of employment shall be taxable only in Italy unless the employment is exercised in Australia. If the employment is exercised in Australia, the income may be taxed in Australia. Even though the taxpayer is a resident of Italy for the purpose of the Italian Convention, the salary and wages may be taxed in Australia as the employment is exercised in Australia. Accordingly, the salary and wages received by the taxpayer, who is a dual resident of Australia and Italy for a part of their stay in Australia, are assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "8 July 2004", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign tax credits Foreign income Italy", "Case_References": "", "Other_References": "Taxation Ruling TR 2001/13", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006184", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign tax credits Foreign income Italy"}
{"ATO_ID_Number": "ATO ID 2005/180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of directors fees received from an Australian company by a resident of Thailand", "Issue": "Are director's fees received by the taxpayer, a Thai resident from services performed in Thailand as a director of an Australian company included in the taxpayer's assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The director's fees received by the taxpayer, a Thai resident, from services performed in Thailand as a director of an Australian company, are included in the taxpayer's assessable income under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Australia. The taxpayer is a resident of Thailand for taxation purposes. The taxpayer is a non-executive director of an Australian resident company. The taxpayer receives director's fees from services performed as a director of an Australian resident company. The taxpayer performs their duties as a director in Thailand.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Director's fees are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws, but also any applicable double tax agreements contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 30 to the Agreements Act contains the double tax agreement between Australia and Thailand (the Thai Agreement). The Thai Agreement operates to avoid the double taxation of income received by Australian and Thai residents. Article 16 of the Thai Agreement provides that director's fees and similar payments derived by a resident of Thailand, in the capacity as a member of the board of directors of a company which is a resident of Australia, may be taxed in Australia. Taxation Ruling TR 2001/13 discusses the Commissioner's views on double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double taxation agreements. The OECD Commentary provides that in relation to Article 16: Since it might sometimes be difficult to ascertain where the services are performed, the provision treats the services as performed in the State of residence of the company. The OECD Commentary further provides that Article 16 would not apply to a member of a board of a company exercising their function in the capacity of an ordinary employee, adviser or consultant. Australia, as the country of residence of the company, being the country of source, has the primary right to tax the director's fees paid by the company to the taxpayer as a member of its board of directors on account of services rendered. Article 23 of the Thai Agreement also provides that income, derived by a resident of Thailand under Article 16, may be taxed in Australia, and shall, for the purposes of Article 24 and of the income tax law of Australia, be deemed to be income from sources in Australia. Accordingly, as the taxpayer's services are treated as being performed in Australia, the director's fees received by the taxpayer from services performed as a non-executive director of the Australian company are included in the taxpayer's assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "10 June 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Directors fee income Double tax agreements Foreign income International tax Non resident individuals Thailand", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital Condensed Version, January 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005180", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Directors fee income Double tax agreements Foreign income International tax Non resident individuals Thailand"}
{"ATO_ID_Number": "ATO ID 2005/249", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Austrian resident working in Australia for less than 183 days in an income year", "Issue": "Is an Austrian resident's employment income from an Austrian employer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer performed his duties in Australia for less than 183 days in an income year?", "Decision": "No. The employment income is not assessable in Australia where a non-resident worked in Australia for less than 183 days in an income year.", "Facts": "The taxpayer is an Austrian resident who is employed by an Austrian company. The taxpayer was sent to Australia by the Austrian company to work with the Australian subsidiary for less than 183 days in the 2005-2006 income year. The Austrian company paid the taxpayer's income whilst the taxpayer was engaged in employment in Australia. The taxpayer is not an Australian resident for tax purposes. The taxpayer's salary will be subject to tax in Austria.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed: see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76 where Williams J stated at CLR 414; ATD 296; AITR 85 that: ... the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on. In determining the liability to tax on employment income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Schedule 27 to the Agreements Act contains the tax treaty between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income received by Australian and Austrian residents. Paragraph (1) of Article 15 of the Austrian Agreement provides that salary and wages derived by an Austrian resident for employment exercised in Australia may be taxed in Australia. However paragraph (2) of Article 15 of the Austrian Agreement provides that the income will only be taxed in the Republic of Austria if: On the facts of the case, paragraph b is satisfied. The taxpayer performed the duties for less than 183 days and the remuneration was paid for by the Austrian employer. Further, the facts do not suggest that the Austrian employer had a permanent establishment, fixed base or business in Australia. Finally, the remuneration will be taxed in Austria. As a result, taxing rights are given to Austria and Australia cannot tax the employment income because section 4 of the International Tax Agreements Act 1953 gives primacy to the Austrian Agreement over the Income Tax Assessment Act 1997.", "Date_of_Decision": "27 July 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Austria Double tax agreement International tax", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005249", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 | Keywords Austria Double tax agreement International tax"}
{"ATO_ID_Number": "ATO ID 2005/254", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Austrian resident working in Australia for a period of more than 183 days in a year of income", "Issue": "Is an Austrian resident's employment income from an Austrian employer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer performed the duties in Australia for more than 183 days in an income year?", "Decision": "Yes. The employment income is assessable in Australia where the non-resident worked in Australia for more than 183 days in an income year.", "Facts": "The taxpayer is an Austrian resident who is employed by an Austrian company. The taxpayer was sent to Australia by the Austrian company to work with the Australian subsidiary for more than 183 days in the 2004-05 income year. The Austrian company paid for the taxpayer's income whilst the taxpayer was engaged in employment in Australia. The taxpayer is not an Australian resident for tax purposes. The taxpayer's salary will be subject to tax in Austria.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed (see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76) where Williams J stated at CLR 414; ATD 296; AITR 85 that: ... the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on. In determining the liability to tax on employment income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 27 to the Agreements Act contains the tax treaty between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income received by Australian and Austrian residents. Article 15(1) of the Austrian Agreement provides that salary and wages derived by an Austrian resident for employment exercised in Australia may be taxed in Australia. However Article 15(2) of the Austrian Agreement provides that the income will only be taxed in the Republic of Austria if: ... (a) the recipient is present in that other State for a period or periods not exceeding in the aggregate 183 days in the year of income or the taxable year, as the case may be, of that other State (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State (c) the remuneration is not deductible in determining taxable profits of a permanent establishment, a fixed base or a trade or business which the employer or company has in that other State; and (d) the remuneration is, or upon the application of this Article will be, subject to tax in the first-mentioned State. As the taxpayer had performed the duties in Australia for more than 183 days, Article 22(2)(a) of the Austrian Agreement is not satisfied. Australia will retain the right to tax the employment income under Article 22(1) of the Austrian Agreement, the income will be deemed to have an Australian source. Consequently the employment income is assessable under section 6-5(2) of the ITAA 1997.", "Date_of_Decision": "27 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Austria Double tax agreement International tax", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005254", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 | Keywords Austria Double tax agreement International tax"}
{"ATO_ID_Number": "ATO ID 2004/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by visiting professor from India", "Issue": "Are the salary and wages received by a taxpayer who is a resident of India, from employment as a visiting professor at an Australian university, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The salary and wages received by a taxpayer who is resident of India, from employment as a visiting professor at an Australian university, are not assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of India and a non-resident of Australia for Australian income tax purposes. The taxpayer is employed by an Australian university as a visiting professor. The taxpayer will be present in Australia for the purposes of teaching for a period of less than two years. The taxpayer receives salary and wages from the university.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 35 to the Agreements Act contains the double tax agreement between Australia and the Republic of India (the Indian Agreement). The Indian Agreement operates to avoid the double taxation of income received by Australian and Indian residents. Article 20(1) of the Indian Agreement provides that where a professor or teacher who is a resident of India visits Australia for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution, any remuneration that person receives for such teaching, advanced study or research shall be exempt from tax in Australia to the extent to which such remuneration is, or upon the application of this Article will be, subject to tax in India. Article 20(2) of the Indian Agreement provides that the Article shall not apply to remuneration which a professor or teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. The taxpayer is a resident of India who is visiting Australia for a period of less than two years for the purpose of carrying out employment as a visiting professor at an Australian university. Under Article 20(1) of the Indian Agreement, the salary and wages received by the taxpayer from employment as a visiting professor at an Australian university is exempt from tax in Australia. Accordingly, the salary and wages received by the taxpayer are not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "27 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Academic staff Double tax agreements Exempt income India International tax PAYG withholding PAYG withholding payments to employees Salary & wages income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200478", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Academic staff Double tax agreements Exempt income India International tax PAYG withholding PAYG withholding payments to employees Salary & wages income"}
{"ATO_ID_Number": "ATO ID 2004/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by German citizen studying in Australia", "Issue": "Are the salary and wages received by a taxpayer who is a resident of Australia and of Germany from Australian sources assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages received by a taxpayer who is a resident of Australia and of Germany from Australian sources are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Germany and a resident of Germany for tax purposes. The taxpayer is also a resident of Australia for tax purposes. The taxpayer is a full-time student at a German University. The taxpayer came to Australia to complete a practical training requirement for the purposes of their studies. The taxpayer carried out the practical training requirement at an Australian university. The taxpayer was present in Australia for over 12 months. The taxpayer lived in a rented house while in Australia. The taxpayer previously lived with their family in Germany. The taxpayer received salary and wages income from the Australian university in return for the work done by the taxpayer as part of the practical training requirement.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes all the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Section 6-15 of the ITAA 1997 provides that exempt income is not assessable income. Section 11-15 of the ITAA 1997 list certain types of exempt income. Included in this list is section 51-10 of the ITAA 1997 which deals with income derived by full-time students. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that if you are a full-time student at a school, college or university, a scholarship, bursary, educational allowance or educational assistance you receive is exempt from income tax, unless any of the exceptions listed in section 51-35 of the ITAA 1997 apply. Paragraph 51-35(c) of the ITAA 1997 provides that an amount is not exempt if the payment you receive is made on the condition that you will (or will if required) become, or continue to be, an employee of the payer. While the taxpayer was completing a training component which is related to their education, the taxpayer's position at the Australian university was essentially that of an employee. Therefore, the income is not exempt under section 51-10 of the ITAA 1997 because of section 51-35 of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 9 to the Agreements Act contains the double tax agreement between Australia and the Federal Republic of Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. Article 4 of the German Agreement provides tests of residency which are used where the individual would otherwise be a resident of two countries ('tie breaker tests'). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income. Article 4(2) of the German Agreement provides that a person's residency status for the purpose of applying the German Agreement shall be determined as follows: The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are undefined. Article 3(2) of the German Agreement provides that any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the domestic laws of each country. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. At paragraph 104, it says that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': The taxpayer lived in a rented house for the entire duration of their stay in Australia. This house was available to the taxpayer at all times continuously. Accordingly, the taxpayer had a permanent home in Australia. The taxpayer also had a permanent home available in Germany being the home where they resided with their family. In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. The taxpayer resided in Australia for the entire duration of their stay and did not return to Germany or another country during that time. Therefore, the taxpayer's habitual abode was in Australia and not in Germany. Therefore, for the purposes of applying the German Agreement, the taxpayer is solely a resident of Australia. Article 19(2) of the German Agreement provides that where a student who is a resident of Australia and who is temporarily present in Germany solely for the purposes of education receives payments from sources outside Germany for the purpose of his maintenance or education shall not be taxed in Germany. As the taxpayer is treated as a resident of Australia for the purposes of the German Agreement, this aspect of Article 19(2) of the German Agreement does not apply as the taxpayer is present in Australia. Article 19(2) of the German Agreement alternatively provides that where a student, who was a resident of Germany immediately before visiting Australia and who is temporarily present in Australia solely for the purpose of education, receives payments from sources outside Australia for the purpose of their maintenance or education shall not be taxed in Australia. The taxpayer was a resident of Germany immediately before visiting Australia and was temporarily present in Australia solely for the purposes of their education. However, the payments received by the taxpayer were from sources within Australia and were paid in return for the services provided to the Australian university, rather than for the purposes of their maintenance or education. Therefore, Article 19 of the German Agreement does not apply to the taxpayer. Article 14(1) of the German Agreement provides that employment income derived by a resident of Australia shall be taxable only in Australia unless the employment is exercised in Germany. If the employment is exercised in Germany, the income may also be taxed in Germany. As the taxpayer is a resident of Australia for the purposes of the German Agreement and worked wholly in Australia, the employment income received from the Australian University is taxable only in Australia. Accordingly, the salary and wages received by the taxpayer from the Australian university is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "16 December 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17 | Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Education payments Germany Income International tax Overseas students Salary & wages income Scholarships, fellowships & bursaries Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200481", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 Taxation Ruling TR 2001/13 | Keywords Double tax agreements Education payments Germany Income International tax Overseas students Salary & wages income Scholarships, fellowships & bursaries Treaties"}
{"ATO_ID_Number": "ATO ID 2004/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by a New Zealand resident working in Australia", "Issue": "Are the salary and wages received by a taxpayer who is a resident of New Zealand while working in Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The salary and wages received by a taxpayer who is a resident of New Zealand while working in Australia are not assessable under subsection 6-5(2) of the ITAA 1997 as they are assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of New Zealand. The taxpayer is single with no spouse or dependants. The taxpayer has other family members who reside in New Zealand. The taxpayer was employed in Australia, by an Australian resident employer, for a period of two months. The taxpayer then returned to New Zealand when their employment ceased. The taxpayer had a pre-arranged work contract before entering Australia. The taxpayer was employed in a full-time position. The taxpayer was allocated a residence to live in. It came fully furnished with a fully functioning kitchen, bathroom and laundry. The taxpayer did not intend to reside in Australia permanently nor did they have any immediate intention to return to Australia to continue work. The taxpayer maintained an Australian bank account but had no other assets of a personal nature. The taxpayer did not maintain a permanent place of abode in New Zealand. The taxpayer had no other assets in New Zealand other than a bank account where interest received was minimal.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 states that the assessable income of an Australian resident taxpayer includes all income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) contains the definition of 'resident' which states that a person may be a resident of Australia where: Taxation Ruling TR 98/17 provides the Commissioner's interpretation on the residency status of individuals entering Australia. Generally the Commissioner regards six months or 183 days as a considerable time when deciding an individual's behaviour is consistent with residing here. The Commissioner is also of the view is that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. The following factors are useful in describing the quality and character of an individuals behaviour: The purpose for the taxpayer being in Australia was to take up a pre-arranged work agreement. Whilst the taxpayer's behaviour and living arrangements were consistent with those of a resident, the taxpayer did not intend to live here nor did they intend to return in the immediate future. The taxpayer completed two months of work and returned to New Zealand. The Commissioners view is that an individual staying for a short period for work purposes is normally insufficient to establish that an individual is a resident. As such, we do not regard the taxpayer to be an Australian resident for tax purposes. Therefore, wages received by the taxpayer will not be assessable under subsection 6-5(2) of the ITAA 1997. Subsection 6-5(3) of the ITAA 1997 states that if an individual is not an Australian resident, their assessable income includes all income derived directly or indirectly from all Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Schedule 4 to the Agreements Act contains the double tax agreement between Australia and New Zealand (the NZ Convention). The NZ Convention operates to avoid the double taxation of income received by Australian and New Zealand residents. Article 14(1) of the NZ Convention provides that salary and wages and other similar remuneration derived by an individual who is a resident of New Zealand in respect of employment will be taxable only in New Zealand unless the employment is exercised in Australia. If the employment is exercised in Australia, the remuneration may be taxed in Australia. However, Article 14(2) of the NZ Convention provides that remuneration derived by a New Zealand resident individual taxpayer in respect of an employment exercised in Australia will be taxable only in New Zealand if: This means that as the taxpayer's employment was exercised in Australia, the taxpayer may also be taxed in Australia. Article 14(2) of the NZ Convention will not apply to limit taxation to New Zealand only as the taxpayer's remuneration is paid by an Australian resident employer. Accordingly, the income is included in your assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "9 January 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income International tax New Zealand Resident/residency Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200485", "Unmatched_Content": "This ATO ID was amended by replacing the reference to Articles 15 and 24 of the tax treaty between Australia and New Zealand with Articles 14 and 23 contained in the new tax treaty which took effect from 19 March 2010. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 | Keywords Income International tax New Zealand Resident/residency Treaties"}
{"ATO_ID_Number": "ATO ID 2004/202", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages income derived by German academic working in Australia where initial employment contract for less than two years later extended", "Issue": "Are the salary and wages received by a German citizen from undertaking research in a university in Australia assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer initially contracts to perform research at the university for less than two years but later extends the period of the contract to more than two years and who becomes an Australian resident taxpayer at that time?", "Decision": "The salary and wages received before the change in intention by the taxpayer to stay in Australia for a period exceeding two years are not assessable under subsection 6-5(3) of the ITAA 1997 as Article 19(1) of Schedule 9 to the International Tax Agreements Act 1953 (the Agreements Act) applies. However, the salary and wages received after the change in intention by the taxpayer to extend the period of contract to undertake research in Australia for more than two years are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer, a German academic, is employed to undertake research with a university in Australia under an employment contract for less than two years. The taxpayer initially intended to stay in Australia for no more than two years. However, prior to the expiry of the initial employment contract, the taxpayer accepted a further term of employment to carry out research with the university. The taxpayer became a resident of Australia and ceased to be a resident of Germany for tax purposes at the time the taxpayer's intention changed. The taxpayer's total period of employment in Australia now exceeds two years. The taxpayer receives salary and wages from the Australian university.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 9 to the Agreements Act contains the double tax agreement between Australia and Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. Article 19(1) of the German Agreement provides that remuneration received by a professor or teacher who is a resident of Germany, will not be taxable in Australia where the taxpayer visits Australia for a period not exceeding two years for the purpose of carrying out advanced study or research or of teaching at a university, college, school or other educational institution. Taxation Determination TD 2001/22 provides guidance as to the application of Article 19(1) of the German Agreement. Paragraph 5 of TD 2001/22 states that, if during the period of teaching or after it has finished, an intention is formed to remain in Australia for a period that in total (with the earlier period) exceeds two years, the teaching income derived before the person's intention had changed will remain exempt. However, the exemption will not apply to any teaching income earned after the person's intention changed. The salary and wages received before the change in intention by the taxpayer to stay in Australia for a period exceeding two years are therefore exempt from tax in Australia under Article 19(1) of the German Agreement. Article 19(1) will cease to apply once the taxpayer's intention changes, as the visit will exceed two years. Further, the taxpayer ceased to be a German resident and became an Australian resident at the time their intention changed and as such the German Agreement ceases to apply to the taxpayer after that time. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The remuneration derived by the taxpayer from working in Australia after becoming an Australian resident is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Accordingly, the salary and wages received before the change in intention by the taxpayer to remain in Australia for a period exceeding two years are not assessable under subsection 6-5(3) of the ITAA 1997. The salary and wages received after the change in intention to remain in Australia for a period exceeding two years are assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "25 February 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2) subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2001/22", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Exempt income Germany International tax Non resident individuals Residence in Australia", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004202", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 2001/22 | Keywords Double tax agreements Exempt income Germany International tax Non resident individuals Residence in Australia"}
{"ATO_ID_Number": "ATO ID 2004/283", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by a dual resident of Australia and the United States", "Issue": "Is the employment income of a dual resident of Australia and the United States (US) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), where the taxpayer has been contracted by a non-resident employer to work in Australia?", "Decision": "Yes. The employment income of a dual resident of Australia and the US is assessable under subsection 6-5(2) of the ITAA 1997 even where the taxpayer has been contracted by a non-resident employer to work in Australia.", "Facts": "The taxpayer is a citizen of the US. The taxpayer's employer is a non-resident of Australia. The taxpayer's employment contract requires the taxpayer to work in Australia for a period of 18 months. The taxpayer receives employment income paid on behalf of their employer in the US. US tax is withheld from the taxpayer's employment income. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer's habitual abode and personal and economic ties are in the US.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsections 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the US Protocol amending the US Convention (US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. For the periods of dual residency, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and US, he shall be deemed to be a resident of the State: As the taxpayer's habitual abode and personal and economic ties are in the US, the taxpayer will be considered a resident of the US under the US Convention. Article 15(1) of the US Convention provides that salaries, wages and other similar remuneration derived by an individual who is a resident of the US in respect of an employment shall be taxable only in the US unless the employment is exercised in Australia. If the latter applies, the income may also be taxed in Australia. However, Article 15(2) of the US Convention provides that income from employment exercised in Australia will not be taxed in Australia if: Article 27(1)(a) of the US Convention provides that income derived by a resident of the United States which, under this Convention, may be taxed in Australia shall for the purposes of the income tax law of Australia and of this Convention be deemed to be income from sources in Australia. As the taxpayer will be present in Australia for a period exceeding 183 days in the Australian tax year and the source of the taxpayer's employment income is deemed to be income from sources in Australia, the conditions for this exception to operate will not be met. The income may be taxed by both Australia and US. Accordingly, the employment income of the dual resident of Australia and the US is assessable under subsection 6-5(2) of the ITAA 1997. Article 22(1)(a) of the US Convention provides that the US shall allow a resident or citizen of the US as a credit against US tax the appropriate amount of income tax paid to Australia.", "Date_of_Decision": "21 November 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Double tax relief International law Residency Salary & wages income Treaties United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004283", "Unmatched_Content": "Please note: This ATO ID was withdrawn in error on 10 September 2004. This error was corrected on 14 September 2004 and this ATO ID has been current since its release This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Double tax relief International law Residency Salary & wages income Treaties United States"}
{"ATO_ID_Number": "ATO ID 2004/561", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Resident of the UK in receipt of Australian employment income: present in Australia for a period not exceeding 183 days", "Issue": "Is the Australian sourced employment income received by a resident of the United Kingdom (UK) assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) where they are present in Australia for a period not exceeding 183 days?", "Decision": "Yes. The Australian sourced employment income received by a resident of the UK is assessable income under subsection 6-5(3) of the ITAA 1997 where they are present in Australia for a period not exceeding 183 days as their employer is an Australian resident.", "Facts": "The taxpayer is a resident of the UK and a non resident of Australia for taxation purposes. The taxpayer is present in Australia for a period not exceeding 183 days in the Australian income year. The taxpayer is employed in Australia and receives salary and wage income from an Australian University.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. The salary and wages received by the taxpayer are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates the Agreements Act with the ITAA 1997 so that the two Acts are read as one. Schedule 1 of the Agreements Act contains the double tax convention between Australia and the UK, the 2003 United Kingdom Convention (the UK Convention). The UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 14 of the UK Convention outlines the treatment of income from employment. Article 14(1) of the UK Convention provides that salary and wages derived by a resident of the UK shall be taxable only in the UK unless the employment is exercised in Australia. If the employment is exercised in Australia then the income may also be taxed in Australia. Article 14(2) of the UK Convention provides that the income will be exempt from tax in Australia if: The taxpayer was present in Australia for a period not exceeding 183 days. The taxpayer's salary and wages were paid by an Australian resident employer and the exemption under Article 14(2) of the UK Convention will, therefore, not apply. Accordingly, the taxpayer will be assessable under subsection 6-5(3) of the ITAA 1997 on the salary and wages received from their Australian employer. Note: a credit for the Australian tax paid may be allowed against the UK tax payable on this income (Article 22(2) of the UK Convention).", "Date_of_Decision": "29 June 2004", "Year_of_Income": "Year ending 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/591", "Subject_References": "Exempt income Double tax agreements Non resident individuals United Kingdom Salary & wages income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004561", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Exempt income Double tax agreements Non resident individuals United Kingdom Salary & wages income"}
{"ATO_ID_Number": "ATO ID 2004/736", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of stipend received under a research fellowship by dual resident of Australia and of the United States", "Issue": "Is a stipend received by a taxpayer who is a resident of Australia and of the United States (US) under a research fellowship carried out in Australia included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The stipend received by a taxpayer who is a resident of Australia and of the US under a research fellowship carried out in Australia is included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of the US and a resident of the US for US income tax purposes. The taxpayer is also a resident of Australia for income tax purposes. The taxpayer has a permanent home available in the US at all times during their presence in Australia. While in Australia, the taxpayer will reside in rented accommodation. The taxpayer will be present in Australia for a period of no more than 10 months in order to complete a fellowship program offered by a Research Fund. The taxpayer may be nominally placed in an academic institution, a government department or a private institution for the purposes of carrying out their research activities. The taxpayer will receive a stipend paid by an Australian institution on behalf of the Research Fund. The stipend will be paid on a periodic basis. The stipend is designed to assist with the taxpayer's living expenses while in Australia. The taxpayer is not required to provide personal services to the Australian institution, the Research Fund or to any of the institutions that the taxpayer may be placed with. The taxpayer is not a full time student of an Australian educational institution.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident includes all the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. A stipend paid on periodic basis is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 51-10 of the ITAA 1997 which deals with educational allowances made to a full-time student at a school, college or university. As the stipend will not be paid to the taxpayer in their capacity as a full-time student at a school, college or university it will not be exempt under section 51-10 of the ITAA 1997. In determining liability to Australian tax on income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 2 of the Agreements Act contains the double tax agreement between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the US Protocol, amending the US Convention (US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. The US Protocol entered into force in Australia on 13 May 2003 and has effect in respect of income tax other than withholding taxes for any year of income beginning on or after 1 July 2004. Article 4 of the US Convention provides tests of residency, which are used where the individual would otherwise be a resident of two countries ('tie breaker tests'). The tie breaker tests ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income. The tie breaker tests do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that a person's residency status for the purpose of applying the US Convention shall be determined as follows: Article 4(2) of the US Convention provides that in determining an individual's permanent home, regard should be had to the place where the individual dwells with their family. In determining a person's personal and economic relations, regard should be had to their citizenship. The terms 'permanent home', 'habitual abode', 'personal', and 'economic relations 'are otherwise undefined. Article 3(2) of the US Convention provides that any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the domestic laws of each country. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. At paragraph 104, it says that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': The taxpayer has a permanent home available to them in the US. The property rented by the taxpayer in Australia may also qualify, but it is unlikely that the home has the required element of permanency given their stay in Australia will be no more than 10 months. In the event that the taxpayer's residence in Australia could be considered a permanent home, it would be necessary to progress to the second tie breaker test. In general terms, a habitual abode can be seen as the physical place in which an individual would normally live. This is not merely a test of where a person stays more frequently but also looks to whether living in a particular country is 'normal' having regard to the taxpayer's pattern of life. The OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, should be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. Because of the nature of the taxpayer's circumstances, it is considered that the taxpayer has a habitual abode in the US and in Australia. In considering a person's personal and economic relations, the OECD Commentary provides that regard should be had to family and social relations, occupation, political, cultural or other activities, place of business etc. As the taxpayer's personal and economic ties are closest to the US and the taxpayer is a citizen of the US, the taxpayer will be treated as a resident of the US for the purposes of applying the US Convention. The same outcome would occur if it had been alternatively concluded that the taxpayer did not have a permanent home in Australia. The taxpayer does not provide personal services in an independent capacity or as an employee and as such Articles 14 and 15 of the US Convention do not apply. As the taxpayer is not a full-time student, Article 20 does not apply. Article 21 of the US Convention applies to income not otherwise dealt with in the US Convention. Article 21(1) of the US Convention provides that items of income of a resident of the US, wherever arising, not dealt with in the foregoing Articles of the US Convention shall be taxable only in the US. However, Article 21(3) of the US Convention provides that items of income of a US resident from sources in Australia may also be taxed in Australia. Therefore, the stipend received by the taxpayer may be taxed in Australia and the US. Therefore, as the stipend is not otherwise exempt under the ITAA 1997, the stipend received by the taxpayer who is a resident of Australia and of the US under a research fellowship carried out in Australia will be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "17 August 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(2) section 11-15 section 51-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Exempt income Foreign source income Income International tax Scholarships, fellowships & bursaries United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004736", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Exempt income Foreign source income Income International tax Scholarships, fellowships & bursaries United States"}
{"ATO_ID_Number": "ATO ID 2004/762", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of remuneration received by a Chinese citizen providing professional services in Australia", "Issue": "Is the remuneration received from an Australian university by a Chinese citizen, who is an Australian resident for income tax purposes and for the purposes of Schedule 28 to the International Tax Agreements Act 1953 (the Agreements Act), for the provision of independent scientific and educational activities in Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The remuneration received from an Australian university by a Chinese citizen, who is an Australian resident for income tax purposes and for the purposes of Schedule 28 to the Agreements Act, for the provision of independent scientific and educational activities in Australia is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a Chinese citizen who is a resident of Australia for income tax purposes and for the purposes of Schedule 28 to the Agreements Act. The taxpayer has been contracted by an Australian university to provide scientific and educational services to the university. The taxpayer carries out their activities in Australia at the premises of the Australian university. The taxpayer receives remuneration from the Australian university in respect of the services provided. The taxpayer is not an employee of the Australian university.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Remuneration for professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax on Australian sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 28 to the Agreements Act contains the double tax agreement between Australia and the People's Republic of China (the Chinese Agreement). The Chinese Agreement operates to avoid the double taxation of income received by Australian and Chinese residents. Article 20 of the Chinese Agreement provides that where a professor or teacher who is a resident of China visits Australia for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution, any remuneration the person receives for such teaching, advanced study or research shall be exempt from tax in Australia to the extent to which that remuneration will be subject to tax in China. As the taxpayer is a resident of Australia for the purposes of the Chinese Agreement, Article 20 does not apply. Article 14(1) of the Chinese Agreement provides that income derived by a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia except in one of the following circumstances, when the income may also be taxed in China: Article 14(2) of the Chinese Agreement defines the term 'professional services' to include services performed in the exercise of independent scientific, educational or teaching activities. The taxpayer is considered to be performing professional services. As the taxpayer carries out their activities in Australia, the remuneration received by the taxpayer in respect of the provision of those services will be taxable only in Australia under Article 14(1) of the Chinese Agreement. Accordingly, the remuneration received by the taxpayer for the provision of independent scientific and educational activities in Australia is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "9 September 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "China Double tax agreements International tax Personal services income Professors & lecturers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004762", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords China Double tax agreements International tax Personal services income Professors & lecturers"}
{"ATO_ID_Number": "ATO ID 2003/183", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of remuneration earned by a non-resident from employment aboard an aircraft operated in international traffic by an Australian airline", "Issue": "Is income earned by a resident of Singapore from employment aboard an aircraft operated by an Australian airline in international traffic, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The non-resident taxpayer's income from employment aboard an aircraft operated in international traffic by an Australian resident, would not be assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Singapore and a non-resident of Australia for tax purposes. The taxpayer earned income from employment as an airline steward exercised aboard an aircraft that is operated in international traffic by their employer, an Australian airline.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Subsection 995-1(1) of the ITAA 1997 defines foreign resident to mean a person who is not a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. The source of remuneration for services rendered will depend on the facts of each case. However, the source is generally the place where those services are performed: see Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76 where Williams J stated at CLR 414; ATD 296; AITR 85 that: the locality of the source of income derived from personal exertion in the capacity of employee or in relation to any services rendered surely must be where such personal exertion took place, and the locality of the source of the proceeds of any business where the activities of the business are carried on. It is considered that the salary and wages received by the taxpayer do not have an Australian source as services are performed primarily in international traffic. In determining liability to tax on Australian sourced income received by a non-resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). The Singapore Agreement operates to avoid the double taxation of income received by Australian and Singaporean residents. Paragraph (1) of Article 11 of the Singapore Agreement provides that remuneration or other income derived in respect of personal services performed or exercised by a resident of Singapore shall be taxable only in Singapore, unless the services are performed or exercised in Australia. If the services are performed or exercised in Australia then the income shall be deemed to have a source in Australia, and may be taxed in Australia. However paragraph (3) of Article 11 of the Singapore Agreement provides that remuneration from employment exercised on ships or aircraft in international traffic received by a resident of Singapore shall be exempt from tax in Australia. As the taxpayer is a resident of Singapore, paragraph (3) of Article 11 of the Singapore Agreement applies and the remuneration earned by the taxpayer from employment aboard an aircraft operated by an Australian airline in international traffic is exempt from tax in Australia. Accordingly, the Agreement does not change the source of the remuneration and it is not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "3 March 2003", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act (ITAA 1997) subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non-resident Individuals Double Tax Agreements Singapore Salary and wages income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003183", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Non-resident Individuals Double Tax Agreements Singapore Salary and wages income"}
{"ATO_ID_Number": "ATO ID 2003/438", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages paid to a Netherlands scientific researcher for research in Australia", "Issue": "Are the salary and wages received by the taxpayer, a Netherlands scientific researcher, on a three month research contract with an Australian university, assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages of the taxpayer, a Netherlands scientific researcher, on a three month research contract with an Australian university will be assessable income under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is resident of Netherlands, and is a non-resident of Australia for income tax purposes. The taxpayer holds a doctorate degree, and immediately prior to arriving in Australia was employed as a scientific researcher at a research centre in Amsterdam. The taxpayer is conducting research for an Australian university on a three month employment contract. The taxpayer receives salary and wages from the Australian university. The university is a resident of Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides (among other things) that a non-resident taxpayer's assessable income includes the ordinary income derived from Australian sources. Salary and wages falls under the ordinary concept of income under section 6-5 of the ITAA 1997. Generally, the source of salary and wages is where the service is performed (Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76, and FC of T v. Efstathakis 79 ATC 4256; (1979) 9 ATR 867). In the taxpayer's case, this service is performed in Australia, at the Australian university - which gives the salary and wages an Australian source. The taxpayer is a resident of the Netherlands, a country with which Australia has entered into a double tax agreement. Therefore, the double tax agreement between Australia and the Kingdom of the Netherlands and the protocols to that agreement (the Netherlands Agreement) contained in Schedules 10 and 10A of the International Tax Agreements Act 1953 (the Agreements Act) must be considered in determining whether the salary and wages paid to the taxpayer is taxable in Australia. Sections 11A and 11AA of the Agreements Act give the Netherlands Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the Income Tax Assessment Act 1936 and ITAA 1997 must be read as one with the Agreements Act. Article 15 of the Netherlands Agreement provides, subject to Articles not presently relevant, that salary and wages derived by a Netherlands resident in respect of employment performed in Australia may be taxed in Australia unless all of the following conditions exist: As the taxpayer's remuneration is paid for by an Australian resident (and not a Netherlands resident), the taxpayer does not satisfy the second condition of Article 15(2)(b) of the Netherlands Agreement. Accordingly the remuneration received from the Australian university may be taxed in Australia under Article 15(1) of the Netherlands Agreement. Item 1 of the Protocol to the Netherlands Agreement provides that where a Netherlands resident derives income under Article 15, it shall be deemed for the purposes of the income tax law of Australia to have a source in Australia. Accordingly, the taxpayer's remuneration received from the Australian university will be assessable under subsection 6-5(3) of the ITAA 1997, as the taxpayer is a non-resident for income tax purposes, with Australian sourced income.", "Date_of_Decision": "13 May 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 The Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Netherlands Salary & wages income School teachers", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003438", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Netherlands Salary & wages income School teachers"}
{"ATO_ID_Number": "ATO ID 2003/446", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages received by Irish citizen working in Australia", "Issue": "Are the salary and wages received from Australia by a taxpayer, who is both a resident of Australia and Ireland for income tax purposes, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages received from Australia by a taxpayer, who is both a resident of Australia and Ireland for income tax purposes, are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is a citizen of Ireland and also a resident of Ireland for the purposes of Irish tax. The taxpayer is employed in Australia for a continuous period in excess of 6 months by an Australian employer. The taxpayer receives salary and wages from the Australian employer. The taxpayer has a permanent home available in Ireland and has no permanent home available in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax on Australian sourced income received by the taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 20 to the Agreements Act contains the double tax agreement between Australia and Ireland (the Irish Agreement). The Irish Agreement operates to avoid the double taxation of income received by Australian and Irish residents. Article 4 of the Irish Agreement provides the rules where an individual is a resident of Australia and Ireland for tax purposes (the 'tie breaker tests'). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of applying the Irish Agreement. Article 4(3)(a) of the Irish Agreement provides that a person shall be deemed to be a resident of the country in which the person has a permanent home available. Article 16(1) of the Irish Agreement provides that salary, wages and other similar remuneration derived by a resident of Ireland in respect of employment shall be taxable only in Ireland unless the employment is exercised in Australia. If the employment is exercised in Australia, the income may be taxed in Australia. As the taxpayer has a permanent home in Ireland but not in Australia, the taxpayer will be deemed to be a resident of Ireland under Article 4(3)(a) of the Irish Agreement. Paragraph 66 of Taxation Ruling TR 98/17 states that where the tie breaker tests are used in determining the residence of an individual to a treaty partner country, the terms of the relevant double tax agreement should be referred to in determining the tax liability. TR 98/17 also states that where the tie breaker tests are used in determining the residence of an individual to a treaty partner country, the Australian resident status is not lost for the operation of the ITAA 1997 and the individual continues to be eligible, for example, for the tax-free threshold in respect of the Australian sourced income. Even though the taxpayer is a resident of Ireland under the tie breaker tests, the taxpayer's Australian resident status is not lost for the operation of the ITAA 1997. The salary and wages received by the taxpayer in respect of employment exercised in Australia may be taxed in Australia under Article 16(1) of the Irish Agreement. Accordingly, the salary and wages received from Australia will form part of the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "5 June 2003", "Year_of_Income": "Year ended 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International Law Ireland Residence in Australia Salary & wages income Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003446", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 | Keywords Double tax agreements International Law Ireland Residence in Australia Salary & wages income Treaties"}
{"ATO_ID_Number": "ATO ID 2003/708", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages derived in Australia by a Canadian resident", "Issue": "Are the salary and wages received by a taxpayer, a Canadian resident employed in Australia, from a Canadian employer assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the salary and wages received by the taxpayer, a Canadian resident employed in Australia, from a Canadian employer would be assessable under subsection 6-5(3) of the ITAA 1997, Article 15 of Schedule 3 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the salary and wages are not taxable in Australia.", "Facts": "The taxpayer is a resident of Canada and a non-resident of Australia for income tax purposes. The taxpayer receives salary and wage income from their Canadian employer who does not maintain a permanent establishment or fixed base in Australia. The number of days spent by the taxpayer in Australia during the 2001 income year was less than 183 days.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes ordinary income derived directly or indirectly from all Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. The source of income derived from employment is generally the place where the duties or services are performed ( Federal Commissioner of Taxation v. French (1957) 98 CLR; (1957) 11 ATD 288; (1957) 7 AITR 76). Therefore, the salary and wages received by the taxpayer from employment in Australia has an Australian source. In determining liability to tax on Australian sourced income derived by the non-resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. In the event of inconsistent provisions, the Agreements Act overrides the ITAA 1997 (except in some limited situations). Schedule 3 to the Agreements Act contains the convention between Australia and Canada (the Canadian Convention). Schedule 3A to the Agreements Act contains the protocol amending the Canadian Convention (the Canadian Protocol). The Canadian Convention and the Canadian Protocol operate to avoid the double taxation of income received by Australian and Canadian residents. Article 15(1) of the Canadian Convention provides that salary and wages derived by a Canadian resident for employment exercised in Australia may be taxed in Australia. However, former Article 15(2) of the Canadian Convention provides that remuneration derived by an individual, who is a resident of Canada, in respect of employment exercised in Australia will be taxable only in Canada if the individual is present in Australia for a period or periods not exceeding in the aggregate 183 days in the year of income and either: The taxpayer was present in Australia for less than 183 days and the salary and wages were paid by a Canadian employer who does not have a permanent establishment or fixed base in Australia. Consequently, as the taxpayer is a resident of Canada, Article 15 of the Canadian Convention applies and the salary and wages are not taxable in Australia. Accordingly, the salary and wages received by the Canadian resident taxpayer in Australia are not assessable under subsection 6-5(3) of the ITAA 1997. Note: the monetary requirements contained in former Article 15(2)(a) of the Canadian Convention have been removed by Article 12 of the Canadian Protocol with effect from 12 December 2002.", "Date_of_Decision": "16 June 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Canada Double tax agreements Treaties International Tax", "Case_References": "Federal Commissioner of Taxation v. French (1957) 98 CLR 398 (1957) 11 ATD 288 (1957) 7 AITR 76", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003708", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Canada Double tax agreements Treaties International Tax"}
{"ATO_ID_Number": "ATO ID 2003/829", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wage income - visiting Polish professor", "Issue": "Is the taxpayer, a resident of Poland, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) on salary and wage income earned as a visiting professor?", "Decision": "No. The taxpayer, a resident of Poland, is not assessable under subsection 6-5(3) of the ITAA 1997 on salary and wage income earned as a visiting professor.", "Facts": "The taxpayer is a resident of Poland and a non resident of Australia for taxation purposes. The taxpayer is a professor in Poland. The taxpayer will be in Australia for less than two years for the purpose of carrying out research at an Australian educational institution. The taxpayer receives salary and wage income for this research work. This income will be taxable in Poland", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreements contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Subsection 4(2) of the Agreements Act provides that the Agreements Act overrides the ITAA 1997 where there are inconsistent provisions (apart from Australia's general anti-avoidance rules and certain provisions dealing with limitations of tax credits). Schedule 36 to the Agreements Act contains the double tax agreement between Australia and Poland (the Polish Agreement). The Polish Agreement operates to avoid the double taxation of income received by Australian and Polish residents. Article 21 of the Polish Agreement provides that where: any remuneration the person receives for such teaching, advanced study or research shall be exempt from tax in Australia to the extent to which that remuneration is, or upon the application of the Article will be, subject to tax in Poland. As the taxpayer meets the requirements of Article 21 of the Polish Agreement the salary and wage income will be exempt from tax in Australia and therefore not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "22 August 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Academic staff Double tax agreements Exempt income Poland", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003829", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Academic staff Double tax agreements Exempt income Poland"}
{"ATO_ID_Number": "ATO ID 2002/178", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages income derived prior to 1 July 2016 from employment in Norfolk Island - concurrent contract of less than 6 months", "Issue": "Is the taxpayer's salary and wages income derived prior to 1 July 2016 from employment in Norfolk Island assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) where the income is earned under a contract of less than 6 months duration?", "Decision": "No. The taxpayer's salary and wages income derived prior to 1 July 2016 from employment in Norfolk Island is exempt income and not assessable under subsection 6-5(2) of the ITAA 1997 where the income is earned under a contract of less than 6 months duration as the taxpayer's intention is to remain in Norfolk Island for a period longer than 6 months.", "Facts": "The taxpayer is a resident of Australia. They are not a resident of Norfolk Island for tax purposes. In 2015 the taxpayer became employed in Norfolk Island under a contract of employment for a continuous period of greater than 6 months. The taxpayer undertook another short term employment contract concurrently with the original contract of employment. This short term contract is for a period of less than 6 months. At the time of entering into this short term contract the taxpayer has in excess of 6 months remaining in relation to the original contract. The duties under both contracts are to be performed wholly within the boundaries of Norfolk Island. Both contracts of employment are the result of genuine commercial dealings and neither were entered into for the purpose of avoiding liability to taxation.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income it is not included in assessable income of a taxpayer (subsection 6-15(2) of the ITAA 1997). Section 24G of the Income Tax Assessment Act 1936 (ITAA 1936) provides an exemption from tax on certain income derived from sources in a prescribed Territory. Subsection 24B(1) of the ITAA 1936 provides that 'prescribed Territory' means Norfolk Island. Paragraph 24G(1)(e) of the ITAA 1936 provides an exemption from tax on income derived from employment, the duties of which are performed wholly or mainly in Norfolk Island. The Commissioner must also be satisfied that at the time the duties are commenced the taxpayer intended to remain in Norfolk Island for a continuous period of more than 6 months. However subsection 24G(2) of the ITAA 1936 denies the exemption, subject to subsection 24G(3) of the ITAA 1936, where the income is paid to a non resident of Norfolk Island. Subsection 24G(3) of the ITAA 1936 provides that subsection 24G(2) of the ITAA 1936 will not apply if the income resulted from a genuine commercial arrangement that was not entered into for the purpose of avoiding liability to taxation. The taxpayer's duties under both contracts will be wholly performed within the boundaries of Norfolk Island. Although the short term contract of employment is for a period of less than 6 months, the taxpayer at the time of commencing duties under that contract intended to remain in Norfolk Island for a period in excess of 6 months. Both contracts of employment are the result of genuine commercial dealings and neither were entered into for the purpose of avoiding liability to taxation. Accordingly, the income from the short term contract of employment received prior to 1 July 2016 will be exempt from tax under paragraph 24G(1)(e) of the ITAA 1936 and will therefore not be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "30 May 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 24B(1) section 24G paragraph 24G(1)(e) subsection 24G(2) subsection 24G(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/775", "Subject_References": "Australian external territories Exempt Income Norfolk Island Prescribed Territory", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002178", "Unmatched_Content": "Add 'prior to 1 July 2016' due to removal of s 24G exemption from 1 July 2016 by Tax and Superannuation Laws Amendment (Norfolk Island Reforms) Act 2015 ; add 'concurrent' for clarity. | Add 'prior to 1 July 2016' | Adjust for consistency with new time limitation. | Add time limitation; add Note to indicate the legislative basis for the removal of the exemption from 1 July 2016. | Minor grammatical changes. | Updated legislative references. Minor grammatical changes. Minor changes to wording to remove irrelevant considerations. | Updated legislative references. | Keywords Australian external territories Exempt Income Norfolk Island Prescribed Territory"}
{"ATO_ID_Number": "ATO ID 2002/181", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-resident in receipt of Australian sourced employment income", "Issue": "Is a non-resident taxpayer's employment income assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer only works intermittently in Australia.", "Decision": "Yes. Only the Australian sourced employment income will be included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Facts": "An Australian resident company has employed the taxpayer who is a resident of the United States of America (USA). The taxpayer's employment contract requires the taxpayer to spend 2 months working in the USA and 1 month working in Australia on an alternating basis. The taxpayer is a not a resident of Australia for tax purposes.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. Statutory income from all Australian sources, or included by a provision on a basis other than having an Australian source, is also included in a non resident's assessable income under section 6-10(5) of the ITAA 1997. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. Generally, Australian courts have held that the source of employment income is where the employee performs their duties ( C of T (NSW) v. Cam and Sons Ltd (1936) 36 SR (NSW) 544; 4 ATD 32 and FC of T v. French (1957) 98 CLR 398; (1957) 7 AITR 76; 11 ATD 288). The courts also confirmed that it is appropriate to apportion income earned to reflect the source of income. Thus, employment income earned while carrying out duties in Australia is considered to be sourced in Australia. Employment income earned while being carried out overseas is considered to be sourced in that overseas country, unless it is merely incidental to the performance of the taxpayer's duties in Australia. In determining the liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the USA (the United States Convention). The United States Convention operates to avoid the double taxation of income received by Australian and USA residents. Paragraph (1) of Article 15 of the United States Convention provides that salary and wages derived by a USA resident for employment exercised in Australia may be taxed in Australia. However paragraph (2) of Article 15 of the United States Convention provides that the income will only be taxed in the USA if: As the taxpayer's employer is an Australian resident for tax purposes, the conditions for this exception to operate will not be met. The non resident taxpayer receives salary and wage income for intermittent periods of employment in Australia. Under the United States Convention, the salary and wages paid by the taxpayer's Australian employer may be taxed in Australia. The employment income will need to be apportioned and the Australian component included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "30 January 2002", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements United States Foreign source income Personal exertion income Personal services income", "Case_References": "C of T (NSW) v. Cam and Sons Ltd (1936) 36 SR (NSW) 544 4 ATD 32", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002181", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements United States Foreign source income Personal exertion income Personal services income"}
{"ATO_ID_Number": "ATO ID 2002/215", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by USA visiting lecturer - present in Australia for 183 days or less", "Issue": "Is the taxpayer, a resident of the United States of America (USA), assessable on their Australian sourced lecturing fee under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer, a resident of the USA, is not assessable on their Australian sourced lecturing fee under subsection 6-5(3) of the ITAA 1997 as this income is exempt from tax under Article 14 of Schedule 2 to the International Tax Agreements Act 1953 (the Agreements Act).", "Facts": "The taxpayer is a resident of the USA and is a non resident for Australian tax purposes. The taxpayer is a professor employed by a USA university. The taxpayer was engaged by a Australian body to give a series of lectures in Australia for which they received a flat fee. The taxpayer performs these services independently of their employment with the USA university. The taxpayer was present in Australia for a short period of 183 days or less. The taxpayer has no fixed base in Australia for the purpose of performing their activities.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. The fee for the lecturing services provided by the taxpayer is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreements contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 2 of the Agreements Act contains the double tax agreement between Australia and the USA (USA Convention). The USA Convention operates to avoid the double taxation of income received by Australian and USA residents. Article 14 of the USA Convention deals with independent personal services. The Article provides that if an individual who is a resident of the USA derives income from the performance of services in an independent capacity the income shall be taxable only in the USA. However, there are two exceptions when services are performed by a USA resident in Australia. The first is where the individual is present in Australia for more than 183 days during the Australian income tax year. The second is where the individual has a fixed base regularly available in Australia for the purpose of performing their activities. In both cases the income is subject to tax in Australia. The lecturing fee is income received by the taxpayer from the performance of personal services in an independent capacity. Although the services were performed in Australia, the taxpayer was not present in Australia for more than 183 days and did not have a fixed base in Australia. Accordingly, the income is taxable only in the USA and is not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "6 November 2001", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "United States Exempt income Academic staff", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002215", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords United States Exempt income Academic staff"}
{"ATO_ID_Number": "ATO ID 2002/216", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of ordinary income - effect of overseas holiday on residency status", "Issue": "Is the taxpayer's income assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) as an Australian resident?", "Decision": "Yes. The taxpayer is an Australian resident for income tax purposes and ordinary income derived by the taxpayer is assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer received salary and wages during the year of income. The taxpayer lived with a partner on a genuine domestic basis for the whole of the income year. This included being named on a lease of property. The taxpayer was present in Australia for 300 days in the income year. The taxpayer travelled to Europe for 65 days in the income year to visit friends and family. The taxpayer has continued to reside in Australia since their return and is applying for permanent residency.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. The term 'Australian resident' is defined in section 995-1 of the ITAA 1997 and means a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 6(1) of the ITAA 1936 defines 'resident' or 'resident of Australia' to mean a person, other than a company, who resides in Australia and includes a person: In Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia (TR 98/17) at paragraph 12, it states that if a taxpayer is considered to 'reside' in Australia according to the ordinary meaning of the word, the other tests do not need to be considered. The term 'reside' is not defined in either the ITAA 1936 or ITAA 1997. TR 98/17 provides the Commissioner's interpretation of the ordinary meaning of the word 'reside'. It states that the quality and character of an individual's behaviour while in Australia, as well as the period of physical presence of the individual in Australia, assist in determining whether the individual resides here. Paragraph 20 of TR 98/17 states: 'All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour: TR 98/17, at paragraph 25, explains the Commissioner's view that individuals who enter Australia and extend their stay beyond 6 months are regarded as residents from the time of their arrival, as long as their presence has an habitual and routine character during the entire period. The taxpayer has established permanent ties with Australia through their taking on a lease of property, and developing a permanent relationship here. The taxpayer's application for permanent residency and the length of time they were present in Australia during the year of income also indicate that the taxpayer is a resident of Australia for income tax purposes. The trip to Europe to visit friends and family does not affect this conclusion. The taxpayer is considered to reside in Australia and is therefore considered a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936. Accordingly, the taxpayer's salary and wages will be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "7 February 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Residence in Australia Residence of individuals Domicile tests", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002216", "Unmatched_Content": "Updated wording for technical clarity. | Updated legislative reference to be more specific. Included full title of Taxation Ruling 98/17. Adjusted wording to better reflect the legislation and relevant public ruling, and to improve clarity. | Related Public Rulings (including Determinations) | ATO Taxation Ruling added | Related Public Rulings (including Determinations) TR 98/17 | Keywords Residence in Australia Residence of individuals Domicile tests"}
{"ATO_ID_Number": "ATO ID 2002/447", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income - Non resident taxpayer - visiting academic", "Issue": "Is the income earned by the taxpayer while in Australia as a visiting academic assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income earned by the taxpayer while in Australia as a visiting academic is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is a resident of a foreign country and is a non resident of Australia for taxation purposes. Australia does not have a double tax agreement with this foreign country. The taxpayer was employed in Australia as a visiting academic for less than 2 years.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Employment income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. There are no provisions in section 11-15 of the ITAA 1997 exempting the taxpayer's income earned while in Australia. In determining liability to Australian tax on income earned by a non resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 . Australia has agreements with various countries to prevent the double taxation of income. In many cases these agreements provide that income is exempt from tax in the country of source if the taxpayer's visit is for teaching or research and does not exceed 2 years. However, as Australia does not have a double tax agreement with the taxpayer's country of residence no such exemption is provided. Therefore, the income that the taxpayer earned while in Australia will be included in their assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "15 March 2002", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(3) subsection 6-15(2) section 11-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Academic staff Double tax agreements Double tax relief Non resident individuals", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002447", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Academic staff Double tax agreements Double tax relief Non resident individuals"}
{"ATO_ID_Number": "ATO ID 2002/498", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by a visiting South Korean Academic", "Issue": "Is the taxpayer's income as a visiting South Korean professor assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's income as a visiting South Korean professor is not assessable income under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of South Korea and is a non resident for Australian taxation purposes. The taxpayer is a professor. The taxpayer will be in Australia for less than 2 years. The taxpayer has been invited by a recognised Australian educational institution to visit Australia solely for the purposes of teaching and research. The taxpayer will be employed by the Australian educational institution.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes income derived directly and indirectly from all Australian sources during the income year. Employment income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. There are no provisions listed in section 11-15 of the ITAA 1997 exempting the taxpayer's income earned while in Australia. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreement Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 22 to the Agreements Act contains the double tax agreement between Australia and the Republic of Korea (the Korean Convention). The Korean Convention operates to avoid the double taxation of income received by Australian and Korean residents. Article 20 of the Korean Convention provides that a resident of Korea who visits Australia at the invitation of an educational institution, for a period not exceeding 2 years, solely for the purpose of teaching or research shall be taxable only in Korea. As the taxpayer meets the requirements of Article 20 of the Korean Convention their income as visiting professor will be exempt from tax in Australia and therefore not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "15 February 2002", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) subsection 6-15(2) section 11-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Academic staff Exempt income Double tax agreements Korea", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002498", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Academic staff Exempt income Double tax agreements Korea"}
{"ATO_ID_Number": "ATO ID 2002/737", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by a visiting Argentine academic", "Issue": "Is the taxpayer's income as a visiting Argentine researcher assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's income as a visiting Argentine researcher is not assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Argentina and is a non resident for Australian taxation purposes. The taxpayer is professor. The taxpayer will be in Australia for a period of less than 2 years. The taxpayer was invited by a recognised Australian educational institution to visit Australia for the purpose of undertaking research. The taxpayer will be employed by the Australian educational institution. The research undertaken by the taxpayer was not undertaken for the private benefit of a specific person or persons. The income derived by the taxpayer is subject to tax in Argentina.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes income derived directly or indirectly from all Australian sources during the income year. Employment income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 44 to the Agreements Act contains the double tax agreement between Australia and the Argentine Republic (the Argentine Agreement). The Argentine Agreement operates to avoid the double taxation of income received by Australian and Argentine residents. Paragraph (1) of Article 20 of the Argentine Agreement provides that where a professor or teacher who is a resident of Argentina: any remuneration they receive from those activities will be exempt from tax in Australia to the extent to which that remuneration is or will be subject to tax in Argentina. However if the research is undertaken primarily for the private benefit of a specific person or persons then Article 20 of the Argentine Agreement will not apply (paragraph (2) of Article 20 of the Argentine Agreement). The taxpayer is a professor who is visiting Australia for a period of less than 2 years for the purpose of undertaking research at an educational institution. The income received by the taxpayer is taxable in Argentina. The income will therefore be exempt from tax in Australia and the taxpayer will not be assessable on this income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "11 June 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Academic staff Argentina Double tax agreements Exempt income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002737", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Academic staff Argentina Double tax agreements Exempt income"}
{"ATO_ID_Number": "ATO ID 2001/68", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non Residents' Income", "Issue": "Whether the income earned by the individual, a Canadian citizen working in Australia for twelve months, is subject to tax in Australia.", "Decision": "Yes, the income earned by the Canadian citizen from working in Australia for twelve months is subject to tax in Australia.", "Facts": "The individual, a Canadian citizen, is employed and paid by a foreign placement agency. The agency arranges for the taxpayer to be placed in an Australian organisation for twelve months to perform medical work. Under this arrangement, the taxpayer is still considered to be an employee of the placement agency for the duration of the placement. The taxpayer is also considered to be a resident of Canada for tax purposes.", "Reasons_for_Decision": "Summary: Generally speaking, Australia has jurisdiction to tax individuals where they are either a resident of Australia for tax purposes, or where the relevant income has an Australian source. To determine whether the taxpayer is a resident of Australia for tax purposes, it is necessary to consider whether the individual resides in Australia according to the ordinary meaning of the word 'resides': subsection 6(1) of the Income Tax Assessment Act 1936 ; Taxation Ruling TR 98/17. Although the length of time spent in Australia is not necessarily determinative of residency, in this case the taxpayer has been in Australia for a considerable period. Furthermore, the taxpayer has employment ties and living arrangements that indicate that the taxpayer is a resident of Australia for tax purposes. The source of a taxpayer's income is the place where the services are performed: French v. FC of T (1957) 98 CLR 398. In this case, the income has an Australian source. As the taxpayer may be regarded as an Australian resident for tax purposes, the taxpayer is subject to tax on the ordinary income that the taxpayer derives from all sources during the income year: subsection 6-5(2) of the Income Tax Assessment Act 1997 . Under these circumstances, if the taxpayer was not a resident of Canada, then Australia would be the sole taxing point of this income. However, in this case, the taxpayer is also a resident of Canada for tax purposes and is likely to be subject to tax on this same income under Canada's tax laws. In order to avoid such double taxation of income, Australia has entered into bilateral tax agreements with many countries. Consequently, it is necessary to consider the operation of the Double Tax Agreement (DTA) between Australia and Canada, as contained in Schedule 3 ( International Tax Agreements Act 1953 (ITIA)). For the purposes of establishing taxing rights, Article 4 (DTA) requires that the taxpayer be deemed a resident for DTA purposes of only one of the countries. The relevant test, as set out in Article 4, would indicate that the taxpayer in this case would be a resident of Canada for DTA purposes. As the taxpayer is an employee, Article 15 (DTA), which deals with dependent personal services, is relevant. Article 15(1) (DTA) states that: '... salaries, wages or similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State.' In this case, the taxpayer is only a resident of Canada for DTA purposes, and therefore, shall be subject to tax in Canada. However, the taxpayer's employment is exercised in Australia, which means that the taxpayer may also be subject to tax in Australia. In effect, the DTA operates to allow Australia the first taxing right. Then, under Article 23 (DTA), the taxpayer may, generally speaking, deduct the tax paid in Australia from any Canadian tax payable in respect of that income.", "Date_of_Decision": "1 July 1999", "Year_of_Income": "", "Legislative_References": "International Tax Agreements Act 1953 Schedule 3", "Related_Public_Rulings_and_Determinations": "TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Double tax agreements Residence in Australia Residence of individuals Canada Resident/residency", "Case_References": "French v. FC of T (1957) 98 CLR 398", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200168", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) TR 98/17 | Keywords International tax Double tax agreements Residence in Australia Residence of individuals Canada Resident/residency"}
{"ATO_ID_Number": "ATO ID 2001/252", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt income: tax treatment of research income received by visiting Chinese lecturer", "Issue": "Is income received for research conducted in Australia by a visiting Chinese lecturer for less than two years, assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The Chinese lecturer's research income will not be assessable in Australia as it is exempt from Australian tax under Article 20 of Schedule 28 of the International Tax Agreements Act 1953 , to the extent to which it is subject to tax in China.", "Facts": "A university lecturer from China is conducting full time paid research in an Australian university for no more than two years. The research is not for the private benefit of a specific person or persons. The remuneration is paid by the Australian university.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 includes in assessable income, ordinary income derived from all Australian sources. However, agreements that Australia has with various countries under the International Tax Agreements Act 1953 operate to prevent the double taxation of income. Section 4 of the International Tax Agreements Act 1953 incorporates that Act with the ITAA 1997 so that both Acts are read as one. The International Tax Agreements Act 1953 effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Article 20 of Schedule 28 of the International Tax Agreements Act 1953 provides that where a professor or teacher who is a resident of China, visits Australia for a period not exceeding two years for the purpose of conducting research at an Australian university, any remuneration the person receives for such research shall be exempt from tax in Australia to the extent to which the remuneration is subject to tax in China. However, remuneration which a professor or teacher receives for conducting research where it is undertaken primarily for the private benefit of a specific person or persons is not exempt. The Chinese lecturer meets the conditions of Article 20 of Schedule 28 of the International Tax Agreements Act 1953 . The income the lecturer receives for research undertaken is therefore exempt from tax in Australia to the extent to which it is subject to tax in China.", "Date_of_Decision": "25 May 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Double tax relief Resident/residency China Exempt income Academic staff Non resident individuals", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001252", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Double tax relief Resident/residency China Exempt income Academic staff Non resident individuals"}
{"ATO_ID_Number": "ATO ID 2001/775", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Salary or wages income derived prior to 1 July from employment in Norfolk Island - exempt income", "Issue": "Is the taxpayer's salary and wage income derived prior to 1 July 2016 from employment in Norfolk Island assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's salary and wage income derived prior to 1 July 2016 from employment in Norfolk Island is not assessable under section 6-5 of the ITAA 1997 as it is exempt from tax under section 24G of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer will be employed in Norfolk Island for three years and commences on 31 March 2016. The contract of employment binds the taxpayer to a continuity of service. The duties of the taxpayer's position will be performed wholly within the boundaries of Norfolk Island.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income, it is not included in the assessable income of a taxpayer (subsection 6-15(2) of the ITAA 1997). Section 24G of the ITAA 1936 provides an exemption from tax in Australia on certain income derived from sources in a prescribed Territory. Subsection 24B(1) of the ITAA 1936 provides that Norfolk Island is a prescribed Territory. Paragraph 24G(1)(e) of the ITAA 1936 provides that the exemption will apply where income is derived by a person from employment wholly or mainly performed in a prescribed Territory. The Commissioner must be satisfied that at the commencement of that employment the taxpayer intended to remain in that Territory for a continuous period of more than 6 months. The taxpayer's employment will be wholly performed within the boundaries of Norfolk Island, a prescribed Territory. The posting is for a period of three years and the terms of the contract of employment indicate the requisite continuity of service. Therefore, salary and wage income paid to the taxpayer prior to 1 July 2016 from employment in Norfolk Island will be exempt from tax pursuant to section 24G of the ITAA 1936.", "Date_of_Decision": "1 October 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 24B(1) section 24G paragraph 24G(1)(e)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Australian external territories Prescribed Territory Norfolk Island", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001775", "Unmatched_Content": "Add 'prior to 1 July 2016' | Add 'and commences on 31 March 2016'. | Wording adjusted in text and Note 1, and Note 2 added to accommodate change in the law effective 1 July 2016 under Tax and Superannuation Laws Amendment (Norfolk Island Reforms) Act 2015. | Updated legislative references and adjusted wording to better reflect the legislation and improve clarity. | Keywords Exempt income Australian external territories Prescribed Territory Norfolk Island"}
{"ATO_ID_Number": "ATO ID 2013/67", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Termination payment received by Australian resident in consequence of termination of engagement on qualifying service on an approved project", "Issue": "Will a termination payment be 'exempt from income tax under the law of the foreign country' for the purpose of paragraph 83-240(1)(f) of the Income Tax Assessment Act 1997 (ITAA 1997) if it is received in consequence of termination of engagement on qualifying service on an approved project in relation to a foreign country which does not impose income tax on the payment?", "Decision": "Yes. As the foreign country does not impose income tax on the termination payment the payment is exempt from income tax under the law of the foreign country for the purpose of paragraph 83-240(1)(f) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident and was engaged on qualifying service on an approved project within the meaning of section 23AF of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to a foreign country. The taxpayer received a termination payment in consequence of the termination of their engagement on qualifying service on the approved project. The law of the foreign country does not provide for the imposition of income tax on the termination payment. The eligible foreign remuneration from the service is exempt from income tax under section 23AF of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 83-240 of the ITAA 1997 operates so that a termination payment received by an Australian resident taxpayer is not assessable income and is not exempt income if it is received in consequence of the termination of engagement on qualifying service on an approved project in a foreign country and satisfies certain requirements. Paragraph 83-240(1)(f) of the ITAA 1997 requires that the termination payment 'is not exempt from income tax under the law of the foreign country'. The word 'exempt' in the expression 'not exempt from income tax' in paragraph 83-240(1)(f) of the ITAA 1997 is not defined in the ITAA 1997. The Macquarie Dictionary defines the word 'exempt' as meaning: verb (t) 1. To free from an obligation or liability to which others are subject; release: to exempt someone from military service; to exempt a student from an examination. adjective 2. Released from, or not subject to, an obligation, liability, etc.: exempt from taxes. noun 3. Someone who is exempt from, or not subject to, an obligation, duty, etc. The dictionary definition would therefore permit the word 'exempt' to be interpreted broadly as meaning to release someone or something from an obligation or liability to which others are subject or, in contrast, as meaning simply that someone or something is not subject to an obligation or liability. Since the meaning of 'exempt' in paragraph 83-240(1)(f) of the ITAA 1997 is 'ambiguous or obscure', it is appropriate to have regard to extrinsic material which may assist in ascertaining the meaning of the provision (refer section 15AB of the Acts Interpretation Act 1901). The former section 27A of the ITAA 1936 Section 83-240 was introduced into the ITAA 1997 by the Tax Laws Amendment (Simplified Superannuation) Act 2006 . In relation to section 83-240 of the ITAA 1997 the Explanatory Memorandum (EM) to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 at page 142 provided that: 4.63 Termination payments related exclusively to overseas employment or service are treated differently to employment termination payments resulting from domestic employment. 4.64 The treatment of these payments reflects the existing treatment of exempt non-resident foreign termination payments and exempt resident termination payments as contained in the ITAA 1936. Payments that meet the conditions in sections 83-235 and 83-240 are not subject to tax in the hands of the recipient (ie, they are not assessable). They are, however, not exempt income. [Schedule 2, item 1, Subdivision 83-D] The expression 'exempt resident foreign termination payment' was defined in the former section 27A of the ITAA 1936 which provided that a payment related to the termination of qualifying service would only satisfy the definition of 'exempt resident foreign termination payment' if: ...the payment is not exempt from taxation under the law of the country from sources in which the eligible foreign remuneration in relation to the qualifying service was derived. (emphasis added) The former section 27A of the ITAA 1936 also previously provided that a payment related to the termination of employment, where the foreign earnings from the employment were exempt under section 23AG of the ITAA 1936, would only satisfy the definition of 'exempt resident foreign termination payment' if: ...the payment is not exempt from taxation under the law of the foreign country ... (emphasis added) The definition of 'exempt resident foreign termination payment' was introduced into the former section 27A of the ITAA 1936 by the Taxation Laws Amendment Act (No. 4) 1994 . The EM to the Taxation Laws Amendment Bill (No. 4) 1994 states in relation to the former section 27A of the ITAA 1936: 7.146 The employment must be for service in a foreign country or the qualifying service in respect of an approved project for the purposes of section 23AF and the payment must not be exempt from tax under the law of the foreign country (that is, the payment must be taxed in the foreign country ). (emphasis added) The expressions 'not exempt from taxation under the law of the country' and 'not exempt from taxation under the law of the foreign country' in the former section 27A of the ITAA 1936 are almost identical to the expression 'not exempt from income tax under the law of the foreign country' in paragraph 83-240(1)(f) of the ITAA 1997. Since the treatment of termination payments under section 83-240 of the ITAA 1997 was intended to reflect the treatment under the former section 27A of the ITAA 1936, the expression 'not exempt from income tax under the law of the foreign country' in paragraph 83-240(1)(f) of the ITAA 1997 therefore requires the payment to be taxed under the law of the foreign country. Section 23AG of the ITAA 1936 Section 23AG of the ITAA 1936 also supports the view that if the foreign country does not impose income tax then the income is exempt from income tax in that country for the purpose of paragraph 83-240(1)(f) of the ITAA 1997. Subsection 23AG(2) of the ITAA 1936 states in part: An amount of foreign earnings derived in a foreign country is not exempt from tax under this section if the amount is exempt from income tax in the foreign country only because of any of the following: ... (d) the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c)... (emphasis added) Since the expression 'exempt from income tax in the foreign country' in section 23AG of the ITAA 1936 is almost identical to the expression 'exempt from income tax under the law of the foreign country' in paragraph 83-240(1)(f) of the ITAA 1997, the meaning of 'exempt' should be interpreted consistently in both expressions. Accordingly, if the foreign country does not impose income tax on the termination payment then it is exempt from income tax under the law of that foreign country for the purpose of paragraph 83-240(1)(f) of the ITAA 1997.", "Date_of_Decision": "11 December 2013", "Year_of_Income": "Year ended 30 June 2013", "Legislative_References": "Acts Interpretation Act 1901 section 15AB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "approved overseas projects eligible termination payments foreign termination payments", "Case_References": "", "Other_References": "The Macquarie Dictionary Online, 2009, 5th edition, Macquarie Dictionary Publishers Pty Ltd Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 1994 Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201367", "Unmatched_Content": "Keywords approved overseas projects eligible termination payments foreign termination payments"}
{"ATO_ID_Number": "ATO ID 2010/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "The basis for including an employment termination payment in the assessable income of a foreign resident", "Issue": "Does Division 82 of the Income Tax Assessment Act 1997 (ITAA 1997) include an employment termination payment (ETP) in the assessable income of a foreign resident on a basis other than having an Australian source for the purposes of paragraph 6-10(5)(b) of the ITAA 1997?", "Decision": "No. Division 82 of the ITAA 1997 does not include an ETP in the assessable income of a foreign resident on a basis other than having an Australian source for the purposes of paragraph 6-10(5)(b) of the ITAA 1997.", "Facts": "The taxpayer is a foreign resident. The taxpayer worked for an Australian resident employer in Australia for a period, and then worked for the same employer outside of Australia. The employer decided to terminate the taxpayer's employment and paid the taxpayer a lump sum termination payment, part of which was calculated by reference to the total period of the taxpayer's employment. The payment is an ETP for the purposes of section 82-130 of the ITAA 1997. The ETP is a life benefit termination payment for the purposes of Division 82 of the ITAA 1997. The payment is not a foreign termination payment for the purposes of Subdivision 83-D of the ITAA 1997 and thus is not made non-assessable non-exempt income under that Subdivision.", "Reasons_for_Decision": "Summary: Subsection 82-10(2) of the ITAA 1997 provides that the taxable component of a life benefit ETP is assessable income. Section 10-5 of the ITAA 1997 lists section 82-10 of the ITAA 1997 as a provision which includes statutory income in assessable income. Subsection 6-10(5) of the ITAA 1997 provides: If you are a foreign resident, your assessable income includes: (a) your statutory income from all Australian sources; and (b) other statutory income that a provision includes in your assessable income on some basis other than having an Australian source. Accordingly, the taxable component of the foreign resident's life benefit ETP will only be included in the taxpayer's assessable income if: It is therefore necessary to determine whether Division 82 of the ITAA 1997 is a provision that operates to include ETPs in a foreign resident's assessable income on a basis other than having an Australian source. The following extract from the Explanatory Memorandum (EM) to the ITAA 1997 that introduced paragraph 6-10(5)(b) makes it clear that the alternative rule in paragraph 6-10(5)(b) was only intended to apply in limited circumstances: Most ordinary and statutory income from foreign sources is not assessable to foreign residents. However, there are limited cases where an amount is assessed on a specifically expressed basis ... (emphasis added) The EM to the ITAA 1997 goes on to cite the capital gains tax (CGT) provisions as an example of a provision that operates in this way. Rather than taxing foreign residents on Australian sourced capital gains, Division 855 of the ITAA 1997 only taxes foreign residents on capital gains from CGT assets that are 'taxable Australian property'. A payment made in consequence of the termination of a person's employment will not be an ETP as defined in subsection 82-130(1) of the ITAA 1997 if it is a foreign termination payment to which Subdivision 83-D of the ITAA 1997 applies. Section 83-235 of the ITAA 1997 excludes termination payments from assessable income if: It could be argued that the exclusion of foreign termination payments by section 83-235 of the ITAA 1997 is an alternative to having to determine the source of a payment from the termination of employment. Consequently, under this argument, if such a payment is not a foreign termination payment it is included in assessable income without having to consider if the payment has an Australian source. However, if Division 82 and section 83-235 of the ITAA 1997 were to be considered provisions that included amounts in assessable income on a basis other than having an Australian source, their application would be much wider than could be considered an appropriate alternative to the normal source rule. For instance, under this view of Division 82 it would be possible for a foreign resident employed by a foreign employer to have their entire ETP included in their assessable income in Australia even though only a small portion of their employment was undertaken while a resident in Australia. By contrast, the alternative source rule in the CGT provisions only includes capital gains from CGT assets in a foreign resident's assessable income where they are gains from 'taxable Australian property'. It therefore has a clearly defined scope which focuses on the connection the gain has with Australia. Such a clear focus on the connection an ETP has with Australia is lacking in section 83-235 of the ITAA 1997. Consequently, because of the: it is considered that Division 82 and section 83-235 of the ITAA 1997 are not provisions that include amounts in assessable income on a basis other than having an Australian source. Accordingly, where a foreign resident receives an ETP, paragraph 6-10(5)(a) of the ITAA 1997 will apply and the payment will only be assessable in Australia if it is from an Australian source.", "Date_of_Decision": "13 April 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-10(5) paragraph 6-10(5)(a) paragraph 6-10(5)(b) section 10-5 Division 82 section 82-10 subsection 82-10(2) section 82-130 subsection 82-130(1) Subdivision 83-D section 83-235 Division 855", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employment termination Foreign termination payments Income Salary & wages income", "Case_References": "", "Other_References": "Income Tax Assessment Act 1997 Explanatory Memorandum", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010111", "Unmatched_Content": "Keywords Employment termination Foreign termination payments Income Salary & wages income"}
{"ATO_ID_Number": "ATO ID 2009/123", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign termination payment", "Issue": "Can a payment: be apportioned so as to treat some of the payment as a foreign termination payment under section 83-235 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. As the payment does not relate solely to a period of employment when the recipient was not an Australian resident, neither the whole nor any part of the payment will be a tax free foreign termination payment under section 83-235 of the ITAA 1997.", "Facts": "A resident of Australia is employed by an Australian company (company X). The person accepts a secondment to an overseas company (company B) within the same group of companies. Under the terms of the employment for the secondment, company X will continue to be the person's employer. While the person is working under secondment to company B, company X makes the employee's position within company X redundant, and consequently the employee's secondment in the overseas country is also terminated. The person was a resident of the overseas country, and not an Australian resident for tax purposes, for the period of the secondment. Company X agrees to pay the person a sum consisting of an amount to be paid in lieu of notice and a redundancy amount determined in accordance with the company's redundancy guidelines, taking into account all of the employee's service with company X, including the period when they were on secondment to company B.", "Reasons_for_Decision": "Summary: Section 83-235 of the ITAA 1997 sets out the conditions under which a payment will be a tax free termination payment in respect of a foreign resident period. These are that: In this case the payment to be tested against these conditions is the total termination payment from company X to the person (that is, the sum of the amount in lieu of notice and the redundancy amount). Conditions (a) to (c) are met, but condition (d) requires further examination. According to the Macquarie Dictionary , [Multimedia], version 5.0.0, 01/10/01, one of the meanings given to the word 'only' is 'exclusively'. In the context in which 'only' is used in paragraph 83-235(d) of the ITAA 1997, this is the relevant or appropriate meaning. Foreign termination payments were previously known as 'exempt non-resident foreign termination payments', as defined in former subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936). A payment met that definition only if it 'related solely to a period of the employment [the terminated employment] during which the taxpayer was not a resident of Australia'. In our view, the word 'only' in paragraph 83-235(d) of the ITAA 1997 has the same meaning as the word 'solely' in former subsection 27A(1) of the ITAA 1936. We note that the Explanatory Memorandum (EM) to the Tax Laws Amendment (Simplified Superannuation) Bill 2006, which introduced the ITAA 1997 provision, states at paragraph 4.53 that: Division 83 of the ITAA 1997 contains the provisions related to ... foreign termination payments. The provisions relating to these payments are intended to retain their existing application but may have been redrafted to reflect current drafting approaches. The EM goes on to say, at paragraphs 4.63 and 4.64, that: Termination payments related exclusively to overseas employment or service are treated differently to employment termination payments resulting from domestic employment. The treatment of these payments reflects the existing treatment of exempt non-resident foreign termination payments and exempt resident termination payments as contained in the ITAA 1936. Therefore, in interpreting the conditions in section 83-235 of the ITAA 1997, guidance is provided by case law relating to the ITAA 1936 definition. In Case 16 / 2000 [2000] AATA 1080; 2000 ATC 243; (2000) 46 ATR 1025, the AAT considered whether a payment 'related solely' to a non-resident period. Senior Member Ettinger was satisfied that 'solely' meant 'exclusively'. Submissions during the case referred to the Shorter Oxford Dictionary in which 'solely' was defined as 'only, merely exclusively'. The Senior Member went on to conclude that because the payment was calculated by taking into account the whole period of the recipient's service, during which the person was a non-resident for only part of the time, the payment could not relate solely to non-resident employment. Likewise, in Case 1 / 2008 [2008] AATA 64; 2008 ATC 1-000; (2008) 69 ATR 329 ( Case 1 / 2008 ), Senior Member Hunt of the AAT concluded that in order to show for the purposes of the definition in subsection 27A(1) of the ITAA 1936 that a payment relates 'solely' to a non-resident period of employment, the payment must relate exclusively to a period of employment when the taxpayer was not a resident of Australia. Senior Member Hunt went on to conclude that, 'if a payment is referable partly to a period of employment outside Australia but also partly to period of employment within Australia, it is not solely related to the period when the taxpayer was not a resident of Australia'. Furthermore, the Senior Member reasoned that the payment attributable to both non-resident and resident periods of employment could not be split: 'It is the characterisation of that whole payment, not its constituent parts, with which the definition is concerned'. The taxpayer's appeal against the AAT's decision in Case 1 / 2008 was unsuccessful in the Federal Court, in Branson v. Federal Commissioner of Taxation [2008] FCA 1874; 2008 ATC 20-080. In our view, therefore, a payment that relates to a period of employment during which the recipient was variously a resident and not a resident of Australia, does not relate only to a period of employment when the person was not a resident. The payment will not be tax free under section 83-235 of the ITAA 1997, either in whole or in part. | Detailed Reasoning - Note: If a payment made in consequence of the termination of a person's employment: it will be an employment termination payment as defined in section 82-130 of the ITAA 1997. In particular, among the exclusions in section 82-135 of the ITAA 1997, paragraph 82-135(e) of the ITAA 1997 provides that the (tax free) part of a genuine redundancy payment calculated under section 83-170 of the ITAA 1997 is not an employment termination payment. The conditions under which a payment may be a genuine redundancy payment are set out in section 83-175 of the ITAA 1997, and discussed in detail in Taxation Ruling TR 2009/2 'Income tax: genuine redundancy payments'.", "Date_of_Decision": "9 October 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment 1936 subsection 27A(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employment termination Foreign termination payments Redundancy or early retirement scheme payments", "Case_References": "Case 16/2000 [2000] AATA 1080 2000 ATC 243 (2000) 46 ATR 1025", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009123", "Unmatched_Content": "Keywords Employment termination Foreign termination payments Redundancy or early retirement scheme payments"}
{"ATO_ID_Number": "ATO ID 2007/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Australian sourced eligible termination payment paid to a Singaporean resident", "Issue": "Is the taxpayer, a Singaporean resident, assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) on an eligible termination payment (ETP) received from a complying Australian superannuation fund?", "Decision": "Yes. The taxpayer, a Singaporean resident, is assessable under subsection 6-10(5) of the ITAA 1997 on an ETP received from a complying Australian superannuation fund.", "Facts": "The taxpayer is a Singaporean resident and is not an Australian resident for income tax purposes. The taxpayer received an ETP, as defined in paragraph 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936), from a complying Australian superannuation fund. The ETP consisted of both a concessional component and a post-June 1983 taxed element.", "Reasons_for_Decision": "Summary: Paragraph 27B(1)(a) and subsection 27C(2) of the ITAA 1936 include the post-June 1983 taxed element and the concessional component respectively in the assessable income of a taxpayer. The assessable income of a non-resident, however, only includes the statutory income from Australian sources (subsection 6-10(5) of the ITAA 1997). A non-resident's assessable income will therefore only include the post-June 1983 taxed element and the concessional component where the ETP has an Australian source. The ETP was paid by a superannuation fund that was established and controlled in Australia and so has an Australian source (paragraph 45 of Taxation Ruling IT 2168). It will form part of the non-resident's assessable income. In determining liability to tax on Australian source income received by a non-resident, it is necessary to also consider any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). The taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Singapore (the Singapore Agreement) and the protocols to that treaty contained in Schedule 5 and 5A of the Agreements Act respectively must be considered in determining whether the ETP paid to the taxpayer is taxable in Australia. Section 7 of the Agreements Act gives the Singapore Agreement the force of law in Australia. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Article 11 of the Singapore Agreement deals with remuneration in respect of personal services. It does not apply to amounts paid by a complying superannuation fund that constitute an ETP under paragraph 27A(1)(b) of the ITAA 1936 because such amounts are not remuneration paid in respect of personal services. Article 13 of the Singapore Agreement deals with pensions and annuities. It does not apply because an ETP is not a periodic payment that attracts the application of Article 13. Article 16A of the Singapore Agreement provides that items of income which are not expressly mentioned in the foregoing Articles of the Singapore Agreement shall be taxable in accordance with the laws of the Contracting State. As the ETP is not dealt with by the other Articles of the tax treaty, Article 16A provides that the amount is taxable in Australia in accordance with Australian law. Accordingly, the ETP will be assessable in Australia.", "Date_of_Decision": "11 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 27A(1) paragraph 27B(1)(a) subsection 27C(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2168", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/304 | ATO ID 2002/638 | ATO ID 2003/681 | ATO ID 2003/1155", "Subject_References": "Double tax agreements ETP concessional component ETP post June 1983 component Income tax International CoE International tax Singapore Superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200724", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2168 | Keywords Double tax agreements ETP concessional component ETP post June 1983 component Income tax International CoE International tax Singapore Superannuation funds"}
{"ATO_ID_Number": "ATO ID 2006/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a preserved superannuation benefit paid to a New Zealand resident taxpayer", "Issue": "Is the payment of a preserved superannuation benefit to a New Zealand resident taxpayer assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997) where it constitutes assessable income under section 26AFB of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The payment of a preserved superannuation benefit to a New Zealand resident taxpayer, which constitutes assessable income under section 26AFB of the ITAA 1936, is assessable to the taxpayer under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a resident of New Zealand for tax purposes. The taxpayer has received payment of a preserved superannuation benefit from an Australian complying superannuation fund under an early access arrangement. The preserved superannuation benefit received by the taxpayer is assessable income under section 26AFB of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subsection 6-10(5) of the ITAA 1997 provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Subsection 995-1(1) of the ITAA 1997 defines foreign resident to mean a person who is not a resident of Australia for the purposes of the ITAA 1936. Section 10-5 of the ITAA 1997 lists the provisions in the ITAA 1936 and ITAA 1997 which are about assessable income. Included in this list is section 26AFB of the ITAA 1936, which provides that benefits from certain older superannuation funds are included in assessable income. The taxpayer is a resident of New Zealand, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and New Zealand (the New Zealand Agreement) contained in Schedule 4 of the International Tax Agreements Act 1953 (the Agreements Act) must be considered in determining whether the preserved superannuation benefit paid to the New Zealand resident taxpayer, which is assessable income under section 26AFB, is assessable to the taxpayer under subsection 6-10(5) of the ITAA 1997. Subsection 6B(1A) of the Agreements Act gives the New Zealand Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1936 and ITAA 1997 must be read as one with the Agreements Act. The taxpayer has received payment of a preserved superannuation benefit from a complying Australian superannuation fund. Therefore, the payment has an Australian source. There are no specific Articles in the New Zealand Agreement that deal with such payments, therefore Article 22 of the New Zealand Agreement will apply. Article 22 of the New Zealand Agreement provides that items of income which are not specifically mentioned in the New Zealand Agreement that are received by a resident of New Zealand are taxable only in New Zealand. However, if the income is derived from sources in Australia, it may also be taxed in Australia. Therefore, the payment may be taxed in New Zealand and Australia. Accordingly, the payment of a preserved superannuation benefit to the New Zealand resident taxpayer, that is assessable income under section 26AFB of the ITAA 1936, is assessable to the taxpayer under subsection 6-10(5) of the ITAA 1997 and subject to tax in Australia.", "Date_of_Decision": "2 February 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-10(5) section 10-5 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "New Zealand Double tax agreements International tax Superannuation", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200630", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords New Zealand Double tax agreements International tax Superannuation"}
{"ATO_ID_Number": "ATO ID 2005/143", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation, retirement & employment termination: ETP death benefit dependant and interdependency relationship", "Issue": "Did an interdependency relationship exist between a person who will receive a death benefit eligible termination payment (ETP) and her son, the deceased taxpayer, within the meaning of subsection 27AAB(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The taxpayer and his mother had an interdependency relationship within the meaning of subsection 27AAB(1) of the ITAA 1936.", "Facts": "The taxpayer was a member of a superannuation fund. Since 1998 the taxpayer lived with his mother. After moving in he commenced to make financial contributions towards the payment of electricity and telephone bills. He also contributed towards weekly mortgage repayments. When the mortgage on the home was later refinanced, the lender gave due consideration to the taxpayer continuing to make contributions of weekly amounts toward the mortgage repayments. Apart from making contributions towards other bills, the taxpayer also assisted by purchasing groceries for the household. During a period of separation between his mother and her husband, and later, when the husband was ill and unable to work, the taxpayer made substantial weekly motor vehicle loan repayments. This vehicle had been purchased by his mother. Household chores performed by the taxpayer included mowing the lawn, gardening, laundry, and cooking the evening meals. The taxpayer also did any heavy lifting required around the house and did any maintenance on his mother's vehicle. Emotional support was provided by the taxpayer to his mother when her other son was seriously injured, and in particular during the period of her separation and her husband's illness. In particular, during his mother's separation and when her husband was absent from home due to work, the taxpayer's presence provided his mother with a sense of safety and protection. An ETP will be paid by the superannuation fund to the taxpayer's mother in the year ended 30 June 2005.", "Reasons_for_Decision": "Summary: Concessional tax treatment is available under section 27AAA of the ITAA 1936 when death benefit ETPs are paid to dependants. The term 'dependant' is defined in subsection 27A(1) of the ITAA 1936. For an ETP that is made after 30 June 2004 dependant includes a person with whom the taxpayer has an interdependency relationship. As defined in subsection 27A(1) of the ITAA 1936, 'interdependency relationship' has the meaning given by section 27AAB of the ITAA 1936. Subsection 27AAB(1) of the ITAA 1936 states: Subject to subsection (3), for the purposes of this Subdivision, 2 persons (whether or not related by family) have an interdependency relationship if: (a) they have a close personal relationship; and (b) they live together; and (c) one or each of them provides the other with financial support; and (d) one or each of them provides the other with domestic support and personal care. As stated in the Supplementary Explanatory Memorandum (SEM) to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2003: 2.12 A close personal relationship will be one that involves a demonstrated and ongoing commitment to the emotional support and well-being of the two parties. In this particular case a close familial relationship existed between the taxpayer and his mother at the time of the taxpayer's death. This was demonstrated in a number of ways such as the emotional support that the taxpayer provided during difficult times. Until his death, the taxpayer and his mother had lived together for a number of years. Financial support had been provided by the taxpayer to the extent that his mother relied on that support for her normal standard of living. In discussing the meaning of 'domestic support and personal care', paragraph 2.16 of the SEM states: Domestic support and personal care will commonly be of a frequent and ongoing nature. For example, domestic support services will consist of attending to the household shopping, cleaning, laundry and like services. Personal care services may commonly consist of assistance with mobility, personal hygiene and generally ensuring the physical and emotional comfort of a person. This wording clearly envisages that a wider interpretation of what constitutes 'domestic support and personal care' is required, rather than the slightly narrower view given in cases such as Dridi v. Fillmore [2001] NSWSC 319. In view of the household work performed by the taxpayer the domestic support requirement has clearly been met. Some of the assistance provided by the taxpayer showed a concern for his mother's wellbeing and was clearly directed at ensuring her physical comfort. When the emotional support provided by the taxpayer is taken into account, the personal care requirement is considered to have been met. An interdependency relationship therefore existed between the taxpayer and his mother. His mother will be a dependant for death benefit ETP purposes.", "Date_of_Decision": "1 April 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27A(1) section 27AAA section 27AAB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dependants Eligible termination payments ETP death benefit ETP death benefit dependants Precedent", "Case_References": "Dridi v. Fillmore [2001] NSWSC 319", "Other_References": "Supplementary Explanatory Memorandum to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2003", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005143", "Unmatched_Content": "Include reference to section 10A of the SISA | Include reference to section 302-200 of the ITAA 1997 and section 10A of the SISA | Corrected the Bill to 2003 - Supplementary Explanatory Memorandum to the Superannuation Legislation Amendment (Choice of Superannuation Funds) Bill 2003 | Keywords Dependants Eligible termination payments ETP death benefit ETP death benefit dependants Precedent"}
{"ATO_ID_Number": "ATO ID 2003/1033", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian sourced Eligible Termination Payment paid to resident of the Czech Republic aged over 55: post-June 83 component", "Issue": "Is an Eligible Termination Payment (ETP) paid to a non resident aged over 55 years of age that consists of a post-June 83 component, assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The ETP paid to a non resident that consists of a post-June 83 component is assessable under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a resident of the Czech Republic for income tax purposes. The taxpayer is a non resident of Australia for income tax purposes. The taxpayer is over 55 years of age. The taxpayer worked in Australia and contributed to a complying superannuation fund during their employment. The taxpayer received an ETP from the superannuation fund that consists wholly of a post-June 83 component. The whole of the post-June 83 component comprises a taxed element.", "Reasons_for_Decision": "Summary: Subsection 6-10(5) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes statutory income derived from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list are ETPs dealt with under sections 27A to 27H of the Income Tax Assessment Act 1936 (ITAA 1936) which provide that various components of an ETP are included in assessable income. Section 27AA of the ITAA 1936 provides that the post-June 83 component forms one component of an ETP. Section 27AB provides that a post-June 83 component of an ETP may consist of taxed and untaxed elements. Section 27B of the ITAA 1936 includes the taxed element of a post-June 83 component in assessable income. In determining liability to tax on Australian source income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 40 to the Agreements Act contains the double tax agreement between Australia and the Czech Republic (the Czech Agreement). The Czech Agreement operates to avoid the double taxation of income received by Australian and Czech Republic residents. Article 15(1) of the Czech Agreement provides that salaries, wages and other similar remuneration derived by a resident of the Czech Republic in respect of an employment shall be taxable only in the Czech Republic unless the employment is exercised in Australia in which case such remuneration may be taxed in Australia. An ETP is not considered to be 'salary, wages' or 'other similar remuneration' and therefore does not come within the scope of Article 15 of the Czech Agreement. Article 18(1) of the Czech Agreement provides that pensions and annuities paid to a resident of the Czech Republic shall be taxable only in the Czech Republic. An ETP is not a pension or annuity and is therefore not within the scope of Article 18 of the Czech Agreement. Article 21(1) of the Czech Agreement provides that income not dealt with under foregoing Articles of the Czech Agreement received by a resident of the Czech Republic shall be taxable only in the Czech Republic. However, Article 21(2) of the Czech Agreement provides that income received by a resident of the Czech Republic from sources in Australia may be taxed in Australia. As the ETP received by the taxpayer is from an Australian source, the ETP may be taxed by Australia under Article 21(2) of the Czech Agreement. As the ETP consists wholly of a taxed element of a post-June 83 component, the ETP received by the taxpayer will be assessable under subsection 6-10(5) of the ITAA 1997 as it is included in assessable income by section 27B of the ITAA 1936. Note: As the taxpayer is over 55 years of age, section 159SA of the ITAA 1936 provides a rebate to the taxpayer to ensure that the maximum rate of tax payable on the ETP will be 0%.", "Date_of_Decision": "10 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 27A section 27AA section 27B section 27H section 159SA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreement Czech Republic Other income Lump sum payments Superannuation Non-resident", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031033", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreement Czech Republic Other income Lump sum payments Superannuation Non-resident"}
{"ATO_ID_Number": "ATO ID 2003/359", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Primary Production Averaging: partner in a partnership", "Issue": "Is an individual taxpayer, who is a partner in a partnership which carries on a primary production business, considered to be 'an individual who carries on a primary production business' for the purposes of Division 392 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An individual taxpayer, who is a partner in a partnership which carries on a primary production business, is considered to be an individual who carries on a primary production business for the purposes of Division 392 of the ITAA 1997.", "Facts": "The taxpayer is an individual and is a partner in a partnership. The partnership has carried on a primary production business in Australia for two or more income years in a row, the last of which is the current year.", "Reasons_for_Decision": "Summary: Division 392 of the ITAA 1997 deals with long term averaging of primary producer's tax liability. Section 392-10 of the ITAA 1997 provides, in part, that Division 392 of the ITAA 1997 may apply to a taxpayer's assessment if: The term 'partnership' is defined in section 995-1 of the ITAA 1997 to include 'an association of persons carrying on business as partners.' This aspect of the definition imports the common law meaning of partnership, being the relationship which exists between persons carrying on business in common with a view to profit. A partnership is not a separate legal identity. Each partner of a partnership is carrying on the partnership business. It follows that, where a partnership is carrying on a primary production business, each partner of that partnership is considered to be carrying on the primary production business. Accordingly, the individual taxpayer who is a partner in a partnership which carries on a primary production business is considered to be an individual who carries on a primary production business for the purposes of Division 392 of the ITAA 1997. The taxpayer would therefore, be entitled to the benefit of the averaging provisions under Division 392 of the ITAA 1997, if they also meet all of the other requirements of that Division.", "Date_of_Decision": "22 April 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Division 392 section 392-10 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Primary production Partnerships", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003359", "Unmatched_Content": "Keywords Primary production Partnerships"}
{"ATO_ID_Number": "ATO ID 2005/334", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disposal of an investment by a subsidiary of an insurance company", "Issue": "Is the net profit on disposal of an asset held by a subsidiary of an insurance company included in its assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The net profit from the disposal of the investment asset held by the subsidiary of the insurance company is not included in assessable income under section 6-5 of the ITAA 1997.", "Facts": "The subsidiary of a life insurance company acquired an interest in an infrastructure joint venture project (the asset). Primarily, the asset was seen as providing for an immediate income stream. The company also saw an opportunity in the longer term for a capital gain. Restrictive covenants between the joint venturers prevented the ready disposal of the asset. The acquisition was funded by contributed equity, operating revenues and interest free loans from its parent company. The balance of the loans varied throughout the years that the asset was held. The parent company included the value of its shareholding in the subsidiary company in its solvency and capital adequacy for prudential purposes despite considering the investment illiquid as the asset could not easily be realised. The parent company had sufficient other capital in itself to meet its insurance needs. The illiquid nature of the investment was further supported by the accounting treatment that recognised the investment as long-term. After an extended period of participation in the joint venture the subsidiary received an offer to purchase its interest in the asset from one of the other joint venture participant. Because the terms contained in the joint venture agreement were restrictive it was unlikely that the asset could be disposed of to outside parties. Therefore, if the offer was rejected it would be some time before another opportunity for disposal would arise. Consequently it was decided that this provided a suitable opportunity to dispose of the asset. The disposal resulted in a net gain to the subsidiary which was used in part to repay its outstanding loan and pay a dividend to the parent company.", "Reasons_for_Decision": "Detailed Reasoning - Review of cases re profits on disposal by subsidiaries of insurance companies: The net profit or loss on realisation of an investment by a subsidiary of an insurance company will be on revenue account if the subsidiary's activities are integral to the parent company's insurance business ( GRE Insurance Limited v. Commissioner of Taxation (1992) 34 FCR 160; 92 ATC 4089; (1992) 23 ATR 88; Unitraders Investments Pty Limited v. FC of T 91 ATC 4454; (1991) 22 ATR 83 (GRE Unitraders)). However, in GRE Unitraders the Full Court of the Federal Court accepted as fact, that the subsidiary had been introduced to preserve the benefits of the rebate under former section 46 of the Income Tax Assessment Act 1936 (ITAA 1936). The activities of the subsidiary were therefore integral to the business of the parent insurance company, and the profit on disposal was assessable under section 25 of the ITAA 1936 (see now section 6-5 of the ITAA 1997). Unlike in GRE Unitraders , the taxpayer was not a special purpose company interposed for the purpose of preserving the section 46 rebate as the subsidiary did not hold any securities which yielded dividends. Other factors that may be crucial in determining the proper characterisation of the profit or loss on disposal are whether the funds made available to the subsidiary formed part of the parent company's circulating capital (or were surplus to its needs), and whether the inclusion of the subsidiary's assets, via its shareholding value, in the parent company's statutory solvency calculation is sufficient to taint the asset as integral to the parent's company's business of insurance. It is common ground that the funds used by the parent company to acquire the shareholding in the subsidiary were sourced from its insurance business. The funds made available to the subsidiary via its share subscription and loans were funds that met the description of 'circulating capital' of the parent company ( RAC Insurance Pty Limited v. F C of T 90 ATC 4737; (1990) 21 ATR 709 ( RAC Insurance )) The extent to which the notion of 'circulating capital' applies to subsidiaries of insurance companies was explored by Hill J, at first instance, in AGC (Investments) Limited v. F C of T 91 ATC 4180; (1991) 21 ATR 1379. Hill J, though finding for the Commissioner (his decision was subsequently reversed on appeal) recognised that a subsidiary is a separate legal entity and the funds it acquires from its parent company, although circulating capital of the parent insurance company, are not its own circulating capital. Whilst the Courts have recognised that there is to be a distinction between the two entities it does not detract from the fact that the circulating capital of the subsidiary may still be available to the parent insurance company. Woodward J in the CMI Services v. F C of T 89 ATC 4847; (1989) 20 ATR 1152 (CMI Services) recognised that this could be the case. However, Woodward J also accepted that where an insurer's surplus funds are used to set up and run another business which is distinct from its insurance business the assets of that business cease to be stamped with the identity of assets available to meet insurance claims; and this is even so if the second business is an investment business. However, that conclusion can only be reached once an enquiry is made of the relationship between the subsidiary and its parent and 'whether the assets have genuinely ceased to be part of the reserves of the insurance company' (CMI Services). The availability of funds to the parent may be made, for example, by way of loans or by repayment of loans. In CMI Services Woodward J examined the purpose of repayment of a loan and whether the parent insurance company became a debtor to the subsidiary. He found that the repayment lacked the connection with the payment of claims and had been made out of retained profits. In the present case, the parent insurance company had available capital that was more than sufficient to meet policyholder liabilities as and when they arose, even in the event of a severe downturn in the market. The loan history reveals that at all times during the joint-venture involvement the subsidiary had an outstanding balance. Whilst the quantum of the loans fluctuated the repayments reflected the ability of the subsidiary to settle its obligations to its parent insurance company. At no time during the course of the joint venture was there a role reversal so that the parent company became a net borrower and the subsidiary the lender. Thus there is no evidence of the parent company having treated the assets of the subsidiary as readily available for its business of insurance. Woodward J in CMI Services continued, to explore the nature of the investments that had been acquired and found that because of the nature of the assets and the time needed to sell them made them impracticable to meet insurance claims. The subsidiary's investment in the asset was limited to an interest in an infrastructure project. By its nature, the asset was not readily realisable, firstly because of the nature of the asset, and secondly because of the terms contained in the joint venture. Whilst assets that are not easily realisable were held to be assessable in Australasian Catholic Assurance Co Limited v. Federal Commissioner of Taxation (1959) 100 CLR 502; (1959) 11 ATD 577; (1959) 7 AITR 440 that case can be distinguished as the investments were directly owned by an insurance company and not via a subsidiary. Another aspect that requires examination is the necessity that an insurance company maintain liquidity in order to conduct business. In AGC (Investments) Limited v. F C of T 92 ATC 4239; (1992) 23 ATR 287 the Full Court of the Federal Court examined liquidity and inferred that the liquidity of an insurance company could only be maintained by a regular turnover of easily realisable assets. This was also recognised in RAC Insurance when the Full Court of the Federal Court acknowledged that an asset acquired in the course of carrying on insurance business must 'be available for realisation as and when required'. | Detailed Reasoning - Application of insurance subsidiary cases to the facts: Having regard to the following factors: the asset lacked the necessary connection to the business of insurance carried on by its parent insurance company to determine that it was held as part of that business. The profit made on disposition was therefore not assessable to the subsidiary under section 6-5 of the ITAA 1997. Rather, the subsidiary made a capital gain on the disposal.", "Date_of_Decision": "8 November 2005", "Year_of_Income": "Year ended 31 December 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2276", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Insurance Insurance & insurance industry Life insurance company Disposal of assets Subsidiary companies Wholly owned subsidiary", "Case_References": "GRE Insurance Limited v. Commissioner of Taxation (1992) 34 FCR 160 92 ATC 4089 (1992) 23 ATR 88", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005334", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2276 | Keywords Insurance Insurance & insurance industry Life insurance company Disposal of assets Subsidiary companies Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2013/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: interest income of money lender", "Issue": "Has a taxpayer who carries on a business of money lending derived, under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), interest from a loan calculated on a daily accrual basis that was returned as assessable income in an earlier income year if the taxpayer subsequently recognises that at a point in time in the earlier income year it should have stopped accruing interest on that particular loan?", "Decision": "No. The taxpayer did not derive interest from that particular loan under section 6-5 of the ITAA 1997 from the time in that earlier income year that it made a bona fide assessment based on sound commercial considerations that there was little or no likelihood that the accrued interest would be received. The taxpayer should have stopped accounting for interest on a daily accruals basis in respect of that particular loan.", "Facts": "The taxpayer carries on a business of money lending. The taxpayer routinely takes registered mortgages over real property as security. The taxpayer is a 'financial institution' within the meaning of that term as used in Taxation Ruling TR 93/27 Income tax: basis of assessment of interest derived and incurred by financial institutions . The taxpayer uses the straight-line daily accruals method to include interest income derived on money lent in its assessable income. The taxpayer is not required to, and does not report impaired assets to the Reserve Bank of Australia. In accordance with the relevant State legislation, on 1 August 2006 the taxpayer issued a formal written notice of default of mortgage demanding payment of the outstanding principal and interest by the loan debtor in respect of a particular loan (the loan). The notice allowed the taxpayer to take possession of the real property mortgaged (the security) and exercise its power of sale in default of these payments. Subsequently the taxpayer took possession and obtained judgment in the State's Supreme Court for the outstanding debt. At the time the formal written notice of default was issued in respect of the loan the market value of the security was insufficient to cover the outstanding debt including accrued interest. The taxpayer's commercial books of account for the 2007 income year showed that the taxpayer recorded accrued interest in respect of the loan for the entire income year and also recorded impairment expenses, with the loan having a negative net effect on the taxpayer's profit and loss for the year. In its income tax return for the 2007 income year the taxpayer included the interest accrued in the entire year in respect of the loan in their assessable income and a notice of assessment issued on this basis. In fact no principal or interest was received by the taxpayer in respect of the loan in the 2007 income year. At a subsequent date within the amendment period for the taxpayer, it recognised that it should not have included the interest accrued in the entire year in respect of the loan in their assessable income for the 2007 income year and that instead it should have accounted for interest income on a cash receipts basis from the time it issued the formal written notice of default.", "Reasons_for_Decision": "Summary: Under section 6-5 of the ITAA 1997, taxpayers must include in assessable income their ordinary income as it is derived. According to paragraph 47 of Taxation Ruling TR 98/1 Income tax: determination of income; receipts versus earnings , the general principle is that interest is only derived, or arises, when it is received or credited. Exceptions to this general rule include: According to paragraph 8 of TR 93/27, the adoption of straight-line daily accruals as the basis of tax accounting for interest derived and incurred results in 'a substantially correct reflex' of the taxable income of a financial institution. In this case, the taxpayer uses the straight-line daily accruals method to include interest income on money lent in its assessable income. When a financial institution makes a bona fide assessment based on sound commercial considerations that there is little or no likelihood that the accrued interest will be received, the Commissioner accepts that for income tax purposes a loan can be classified as a 'non-accrual loan'. Any interest accruing thereafter will not be derived for income tax purposes until it is actually received (see paragraph 5 of Taxation Ruling TR 94/32 Income tax: non-accrual loans ). When, at a later point in time, there is an examination of whether such an assessment based on sound commercial considerations was made, only the facts and evidence in existence at the time of the assessment can be taken into account. In this case there are a number of indicators that support that such an assessment was made in respect of the loan, including: It is considered that the above indicators are sufficient evidence that when the taxpayer issued a formal written notice of default on 1 August 2006, the taxpayer had made a bona fide assessment in respect of the loan based on sound commercial considerations that there was little or no likelihood that the accrued interest would be received. Notwithstanding the evidence that the taxpayer had made such a bona fide assessment, the taxpayer included in its 2007 income tax return as assessable income interest accrued from 1 August 2006 to 30 June 2007 in respect of the loan. It is considered that the taxpayer erred in this regard. In this case the taxpayer did not receive any interest in respect of the loan in the period 1 August 2006 to 30 June 2007. It is considered that the amount of the interest accrued during this period included in the taxpayer's assessable income was not derived in that year. Accordingly, provided an amendment is made within the relevant period of review, the taxpayer's assessable income can be reduced by the amount of the interest accrued in respect of the loan that the taxpayer had not derived in that year of income. Note: From 1 July 2010 (or from 1 July 2009 if the taxpayer so elects) the provisions in Division 230 of the ITAA 1997 may apply instead of the principles set out in this interpretative decision .", "Date_of_Decision": "26 April 2013", "Year_of_Income": "Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "TR 93/27 | TR 98/1 | TR 94/32", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "accrued interest interest income financial institutions money lending by financial institutions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201344", "Unmatched_Content": "Minor wording change from 'will' to 'would' | Dates changed in Note from '2008' to '2009' and from '2009' to '2010' | Related Public Rulings (including Determinations) TR 93/27 TR 98/1 TR 94/32 | Keywords accrued interest interest income financial institutions money lending by financial institutions"}
{"ATO_ID_Number": "ATO ID 2009/126", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income sourced in France received by an Australian resident individual", "Issue": "Is the French sourced interest income received by an Australian resident individual assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The French sourced interest income received by an Australian resident individual is assessable under subsection 6-5(2) of the ITAA 1997. However, if the Australian resident has paid French income tax on the interest income, they are entitled to claim a foreign income tax offset.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer receives interest income from French sources. The interest was paid at an arm's length rate, and was not connected with a permanent establishment of the taxpayer in France.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 11 to the Agreements Act contains the tax treaty between Australia and France (the 2006 French Convention) which came into force on 1 June 2009. The 2006 French Convention operates to prevent fiscal evasion and to avoid double taxation of income received by Australian and French residents. Article 11(1) of the 2006 French Convention provides that interest income arising in France, being interest which is beneficially owned by a resident of Australia, may be taxed in Australia. However, Article 11(2) of the 2006 French Convention allows France to also tax the interest income, but at a rate not exceeding 10 per cent of the gross amount of the interest Where France exercises its right under Article 11(2) of the 2006 French Convention to tax the interest, Article 23(1) of the 2006 French Convention operates to require the French tax paid to be allowed as a credit against Australian tax payable in respect of that income. Hence, although the Convention limits the rate of tax France can impose, it allows for this interest income to be taxed by both countries. As the Convention does not prevent Australia taxing the interest income received by the Australian resident individual, the interest income is assessable in Australia under subsection 6-5(2) of the ITAA 1997. Further, the Convention obliges Australia to provide relief from double taxation. This reflects the position applicable under Australia's domestic general foreign income tax offset rules in Division 770 of the ITAA 1997. Subsection 770-10(1) of the ITAA 1997 provides for a foreign income tax offset for an income tax year for foreign income tax paid in respect of an amount that is included in assessable income. Section 770-15 of the ITAA 1997 defines 'foreign income tax' to include a tax on income that is imposed by a law other than an Australian law. A note to section 770-15 of the ITAA 1997 points out that 'foreign income tax' includes only that which has been correctly imposed under the foreign law, and where the foreign jurisdiction has a tax treaty with Australia under the Agreements Act, foreign income tax includes only tax which has been correctly imposed under the treaty. Consequently, an amount of tax that is imposed by France on the interest income and that is not more than 10% of the gross amount of the interest, will satisfy the definition of 'foreign income tax'. If the Australian resident individual has paid that foreign income tax, they will be entitled to a foreign income tax offset in relation to that tax. The amount of foreign income tax offset is calculated in accordance with Subdivision 770-B of the ITAA 1997.", "Date_of_Decision": "23 September 2009", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 770-10(1) section 770-15 subdivision 770-B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign income Foreign income tax offset Foreign tax France Interest income International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009126", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Foreign income tax offset Foreign tax France Interest income International tax"}
{"ATO_ID_Number": "ATO ID 2007/76", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income sourced from Sri Lanka received by an Australian resident", "Issue": "Is the interest income received by an Australian resident taxpayer from bank accounts located in Sri Lanka assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The interest income received by an Australian resident taxpayer from sources in Sri Lanka is assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer receives interest income from bank accounts in Sri Lanka.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 31 to the Agreements Act contains the double tax agreement between Australia and the Democratic Socialist Republic of Sri Lanka (the Sri Lankan Agreement). The Sri Lankan Agreement operates to avoid the double taxation of income received by Australian and Sri Lankan residents. Article 11(1) of the Sri Lankan Agreement provides that interest from sources in Sri Lanka, to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 11(2) of the Sri Lankan Agreement provides that the interest income may also be taxed in Sri Lanka. However, the rate of tax shall not exceed 10 percent of the gross amount of interest. Article 23(1) of the Sri Lankan Agreement provides that a credit against Australian tax for tax paid in Sri Lanka shall be allowed (in accordance with the law of Australia) where tax has been paid under Sri Lankan law and in accordance with the Sri Lankan Agreement. Subsection 770-10(1) of the ITAA 1997 provides that where the assessable income of a resident contains foreign income and foreign income tax has been paid on that income, a tax offset will be allowed subject to a limit. Subsection 770-75(2) provides that the offset limit is the greater of $1,000. and the total amount of Australian income tax that is payable by the taxpayer in the income year less the amount of tax that would be payable in the income year if certain assumptions were made. As the taxpayer is a resident of Australia, the interest income forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. Where Sri Lankan tax is paid in relation to this interest income, a foreign income tax offset may be allowed.", "Date_of_Decision": "18 September 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 770-10(1) subsection 770-75(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign income Foreign tax credits Interest income International tax Sri Lanka Treaties", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200776", "Unmatched_Content": "This ATO ID has been amended to replace the repealed subsection 160AF(1) of the Income Tax Assessment Act 1936 by subsection 770-10(1) of the Income Tax Assessment Act 1997. The term 'foreign tax credit' is also replaced by 'foreign income tax offset'. With effect from 1 July 2008 the foreign tax credit system contained in Div 18 of the Income Tax Assessment Act 1936 has been replaced by the foreign income tax offset system contained in Div 770 of the Income Tax Assessment Act 1997. The 'Note' at the end of the ATOID has also been amended accordingly. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Foreign tax credits Interest income International tax Sri Lanka Treaties"}
{"ATO_ID_Number": "ATO ID 2006/70", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income received from the Netherlands", "Issue": "Is the interest income received from the Netherlands by a resident taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The interest income received from the Netherlands by a resident taxpayer is assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer receives interest income from Netherlands sources. The taxpayer does not carry on business through a permanent establishment in the Netherlands. Tax is withheld on the interest income in the Netherlands.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 10 to the Agreements Act contains the tax treaty and the protocol between Australia and the Kingdom of the Netherlands (the Netherlands Agreement). Schedule 10A to the Agreement Act contains the Second Protocol to the Netherlands Agreement (the Second Protocol). The Netherlands Agreement and the Protocols operate to avoid the double taxation of income received by Australian and Netherlands residents. Article 11(1) of the Netherlands Agreement provides that interest income arising in the Netherlands, to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 11(2) of the Netherlands Agreement provides that the interest income may be taxed in the Netherlands, but the rate of tax charged shall not exceed 10% of the gross amount of the interest income. Article 23(1) of the Netherlands Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in the Netherlands will be allowed against Australian tax payable on income from Netherlands sources. As the taxpayer is a resident of Australia, the interest income received by the taxpayer from the Netherlands forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. As the Netherlands tax has been paid in relation to the interest income, a foreign tax credit will be allowed subject to the Australian foreign tax credit rules.", "Date_of_Decision": "27 February 2006", "Year_of_Income": "Year ended 30 June 2002 onwards", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign income Foreign tax credits Interest income International law Netherlands Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200670", "Unmatched_Content": "This ATOID has been amended by the inclusion of an additional fact to clarify the ATO view. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Foreign tax credits Interest income International law Netherlands Treaties"}
{"ATO_ID_Number": "ATO ID 2005/125", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian sourced interest income derived by a resident of Singapore and of Australia", "Issue": "Is the Australian sourced interest income derived by a taxpayer who is a resident of Singapore and of Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Australian sourced interest income derived by a taxpayer who is a resident of Singapore and of Australia is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Singapore and a resident of Singapore for tax purposes. The taxpayer is a resident of Australia for income tax purposes. The taxpayer is treated solely as a Singapore resident on application of the residency tests (tie breaker tests) contained in Article 3 of Schedule 5 to International Tax Agreements Act 1953 (Agreements Act). The taxpayer derives interest income from Australian sources.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes all the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the year of income. In determining liability to Australian tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the Protocol to the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and the Singapore Protocol operates to avoid the double taxation of income received by Australian and Singaporean residents. Article 9(1) of the Singapore Agreement provides that Australian tax on interest derived by a Singaporean resident shall not exceed 10% of the gross amount of interest. Paragraph 66 of Taxation Ruling TR 98/17 states that where the tie breaker tests are used in determining the residence of an individual to a treaty partner country, the terms of the relevant double tax agreement should be referred to in determining the tax liability. TR 98/17 also states that where the tie breaker tests are used in determining the residence of an individual to a treaty partner country, the Australian resident status is not lost for the operation of the ITAA 1997 and the individual continues to be eligible, for example, for the tax-free threshold in respect of the Australian sourced income. Even though the taxpayer is a Singapore resident under the tie breaker tests, the taxpayer's Australian resident status is not lost for the operation of the ITAA 1997. The interest income derived by the taxpayer from Australian sources is taxable in Australia under Article 9(1) of the Singapore Agreement and the tax shall not exceed 10 per centum of the gross amount of the interest. Accordingly, the interest derived by the taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "1 July 2004", "Year_of_Income": "Year ended 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/308 | ATO ID 2005/123 | ATO ID 2005/124", "Subject_References": "Double tax agreements Interest income Singapore Foreign income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005125", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 | Keywords Double tax agreements Interest income Singapore Foreign income"}
{"ATO_ID_Number": "ATO ID 2004/350", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income sourced in Sweden received by an Australian resident individual", "Issue": "Is the Swedish sourced interest income received by an Australian resident individual assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Swedish sourced interest income received by an Australian resident individual is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer received interest income from sources in Sweden. The taxpayer paid foreign tax in excess of 10% of the gross interest received.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 17 to the Agreements Act contains the double tax agreement between Australia and Sweden (the Swedish Agreement). The Swedish Agreement operates to avoid the double taxation of income received by Australian and Swedish residents. Article 11(1) of the Swedish Agreement provides that interest arising in Sweden, being interest to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 11(2) of the Swedish Agreement provides that the interest may also be taxed in Sweden but the rate of tax is limited to 10 per cent of the gross amount. Article 24(1) of the Swedish Agreement provides that a credit against Australian tax for Swedish tax paid shall be allowed (in accordance with the law of Australia) where tax has been paid under Swedish law and in accordance with the Swedish Agreement. Where the assessable income of a resident contains foreign sourced income and foreign tax has been paid on that income, a foreign tax credit will be allowed. As the taxpayer is a resident of Australia, the interest income forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. As Swedish tax has been paid in relation to this interest, a foreign tax credit will be allowed.", "Date_of_Decision": "7 April 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign tax credits Foreign income Interest income Sweden", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004350", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign tax credits Foreign income Interest income Sweden"}
{"ATO_ID_Number": "ATO ID 2004/544", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income sourced in the United States (US) received by a resident individual", "Issue": "Is the US sourced interest income received by a resident individual assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The US sourced interest income received by a resident individual is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer receives interest income from US sources.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax treaty between Australia and the US (US Convention). The US Convention operates to avoid the double taxation of income received by Australian and US residents. Article 11(1) of the US Convention provides that interest from sources in the US, to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 11(2) of the US Convention provides that interest income may also be taxed in the US. However, the tax shall not exceed 10 per cent of the gross amount of the interest. Article 22(2) of the US Convention provides that a credit against Australian tax for tax paid in the US shall be allowed (in accordance with the law of Australia) where tax has been paid under US law and in accordance with the US Convention. As the taxpayer is a resident of Australia, the interest income forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. If US tax is paid in relation to this interest income, the taxpayer will be entitled to a foreign income tax offset under Division 770 of the ITAA 1997..", "Date_of_Decision": "20 May 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) Division 770", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign income Interest income United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004544", "Unmatched_Content": "This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Interest income United States"}
{"ATO_ID_Number": "ATO ID 2004/548", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income received from the United Kingdom (UK) by an Australian resident", "Issue": "Is the interest income received by an Australian resident taxpayer from sources in the UK included in assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Interest income received by an Australian resident from sources in the UK is included in assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer derives interest income from sources in the UK.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer, includes ordinary income derived directly or indirectly from all sources during the income year. Interest income is ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland (2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. The 2003 UK Convention entered into force on 17 December 2003, and in the case of Australia, in respect of Australian tax applies to income or gains for the income year beginning on 1 July 2004 and thereafter. Article 11(1) of the 2003 UK Convention provides that interest arising in the UK and beneficially owned by a resident of Australia may be taxed in Australia. Article 11(2) of the UK Convention provides that the interest may also be taxed in the UK but the rate of tax is limited to 10 percent of the gross amount of the interest. Article 22(1)(a) of the UK Convention provides that, a credit against Australian tax payable shall be allowed for UK tax paid shall be allowed (in accordance with the law of Australia) where tax has been paid under UK law and in accordance with the UK Convention. As the taxpayer is a resident of Australia, the UK interest income forms part of their assessable income under subsection 6-5(2) of the ITAA 1997 Where UK tax is paid in relation to this interest, a foreign tax credit will be allowed. However, the amount of UK tax that may be considered for a credit under foreign tax credit provisions is limited to 10% of the gross amount of the interest.", "Date_of_Decision": "4 June 2004", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign tax credits Foreign income Interest income United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004548", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign tax credits Foreign income Interest income United Kingdom"}
{"ATO_ID_Number": "ATO ID 2003/141", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest from term deposit in India", "Issue": "Is the interest income derived by a resident taxpayer from sources in India assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The interest income derived by a resident taxpayer from sources in India is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer has invested in India a sum of money in a term deposit account denominated in a foreign currency. The taxpayer derives interest income from the term deposit account. The taxpayer is unable to use the money in Australia due to foreign currency restrictions. The taxpayer can access the money only in India.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Under subsection 6-5(4) of the ITAA 1997 a taxpayer is taken to have received an amount of ordinary income when the amount is applied or dealt with in any way on the taxpayer's behalf or as the taxpayer directs. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 35 to the Agreements Act contains the double tax agreement between Australia and the Republic of India (the Indian Agreement). The Indian Agreement operates to avoid the double taxation of income received by Australian and Indian residents. Paragraph (1) of Article 11 of the Indian Agreement provides that interest arising in India, to which a resident of Australia is beneficially entitled, may be taxed in Australia. Under paragraph (2) of Article 11 of the Indian Agreement, interest from sources in India may also be taxed in India but the rate of tax is not to exceed 15% of the gross amount. Sub-paragraph (1)(a) of Article 24 of the Indian Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in India will be allowed against Australian tax payable on income from sources in India. Although the taxpayer is unable to use the money in Australia due to foreign currency restrictions, the taxpayer is taken to have received the interest income when the interest is credited to the term deposit account or dealt with in any way as the taxpayer has directed. Accordingly, the taxpayer's assessable income includes the interest derived from India under subsection 6-5(2) of the ITAA 1997. If the Indian tax has been paid in relation to this interest, a foreign tax credit will be allowed. If the Indian tax paid on the interest is less than the Australian tax that will be payable, then the taxpayer will be entitled to a full credit for the Indian tax paid.", "Date_of_Decision": "5 February 2003", "Year_of_Income": "Year ended 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-5(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/886", "Subject_References": "Double tax agreements Foreign income Foreign tax credits India Interest income International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003141", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Foreign tax credits India Interest income International tax"}
{"ATO_ID_Number": "ATO ID 2003/1096", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income received by resident taxpayer from Ireland", "Issue": "Is interest income received from the Republic of Ireland (Ireland) by a resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Interest income received from Ireland by a resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Ireland. The taxpayer is a resident of Australia for tax purposes and for the purposes of the double tax agreement between Australia and Ireland contained in Schedule 20 to the International Tax Agreements Act 1953 (the Agreements Act). The taxpayer receives interest income from Irish sources. Irish tax is withheld from the taxpayer's interest income.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 20 to the Agreements Act contains the double tax agreement between Australia and Ireland (the Irish Agreement). The Irish Agreement operates to avoid the double taxation of income received by Australian and Irish residents. Article 12(1) of the Irish Agreement provides that interest income arising in Ireland, to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 12(2) provides that the interest income may be taxed in Ireland, but the rate of tax charged shall not exceed 10% of the gross amount from interest income. Article 25(1) of the Irish Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in Ireland will be allowed against Australian tax payable on income from Irish sources. As the taxpayer is a resident of Australia, the Irish interest income received by the taxpayer forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. As Irish tax has been paid in relation to the interest income a foreign tax credit will be allowed.", "Date_of_Decision": "18 November 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Interest income Foreign income Foreign tax credits International law Republic of Ireland Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031096", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Interest income Foreign income Foreign tax credits International law Republic of Ireland Treaties"}
{"ATO_ID_Number": "ATO ID 2002/833", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest on Rental Bonds - agents as trustee", "Issue": "Is interest earned on term deposits established by the taxpayer for the purposes of section 42 of the Leases (Commercial and Retail) Act 2001 (ACT), assessable under section 99A of the Income Tax Assessment Act 1936 ('ITAA 1936')?", "Decision": "No. Interest earned on term deposits established by the taxpayer for the purposes of section 42 of the Leases (Commercial and Retail) Act is not assessable under section 99A of the ITAA 1936 but is assessable to the tenants?", "Facts": "The taxpayer acts for landlords in leasing out commercial properties in the Australian Capital Territory (ACT). In this role they receive rental bonds on behalf of their clients. The taxpayer places the rental bonds received into an interest bearing account. The term deposit is in the taxpayer's own name on behalf of the tenant. Interest is earned on the term deposit.", "Reasons_for_Decision": "Summary: The Leases (Commercial and Retail) Act covers the rights and responsibilities of landlords and tenants in the ACT. Section 42 of the Leases (Commercial and Retail) Act states: 'If a lessor requires the tenant to pay a bond - a. the bond must be held by the lessor in trust for the tenant in an account that attracts interest; and b. the lessor must account to the tenant for interest earned on the bond, but the lessor is entitled to keep the interest and deal with it as an amount paid by the tenant to the lessor as part of the bond; and c. the lessor may only use the bond money in accordance with section 43.' Section 43 of the Leases (Commercial and Retail) Act refers to situations where rent has been unpaid or where repairs are necessary due to the acts of the tenant. The taxpayer acts as agent of the lessor with regard to the receipt of the bond. The effect of these provisions is that a trust exists, in relation to the bond, with the taxpayer being the trustee and the tenant the beneficiary. Division 6 of the ITAA 1936 determines the assessability of income earned by a trust. If the tenant is presently entitled to the income then section 97 of the ITAA 1936 will apply to assess the income to them. Alternatively, if no one is presently entitled, the taxpayer as trustee will be assessable under section 99A of the ITAA 1936. Present entitlement requires a vested and indefeasible interest in the income. Under section 42 of the Leases (Commercial and Retail) Act, the interest earned under the term deposit accrues to the tenant. The owner, or any agent on their behalf, cannot appropriate the interest unless they are owed money by the tenant for rent or repairs under section 43 of the Leases (Commercial and Retail) Act. The tenant therefore has a vested and indefeasible interest in the income and is presently entitled to that interest income. As such, the interest earned will be assessable to the tenant under section 97 of the ITAA 1936. Accordingly, the interest will not be assessable to the taxpayer under section 99A of the ITAA 1936.", "Date_of_Decision": "6 August 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 97 section 99A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Present entitlement Rental Property Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002833", "Unmatched_Content": "Keywords Present entitlement Rental Property Trusts"}
{"ATO_ID_Number": "ATO ID 2005/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: deductibility of interest and borrowing expenses incurred by a non-resident taxpayer on a loan used to exercise share options", "Issue": "Is a non-resident taxpayer entitled to deductions under sections 8-1 and 25-25 of the Income Tax Assessment Act 1997 (ITAA 1997) for interest and borrowing expenses incurred on a loan used to exercise options acquired under an employee share scheme (ESS) where the taxpayer has included an amount of discount given in relation to the rights as assessable income?", "Decision": "No. The non-resident taxpayer is not entitled to the deductions under sections 8-1 and 25-25 of the ITAA 1997 as there is an insufficient connections between the interest and borrowing expenses incurred and the assessable income in the form of the discount given in relation to the rights.", "Facts": "The taxpayer was formerly an Australian resident taxpayer employed by an Australian company. In 1997, the taxpayer acquired options at a discount to market price under an ESS, which satisfied the conditions for deferred taxation. The taxpayer did not pay any consideration for acquiring the options nor was the discount included in their assessable income under the ESS provisions in the year the options were acquired. Later, the taxpayer ceased to be a resident for Australian taxation purposes when they transferred overseas. While a non-resident, the taxpayer took out a loan and used the funds to exercise the options. The taxpayer included the discount given in relation to the rights as assessable income under the ESS provisions in the year in which the options were exercised. The shares acquired when the options were exercised were not disposed of within 30 days of acquisition. Any dividends received by the taxpayer from these shares will be excluded from their assessable income: pursuant to section 128D of the Income Tax Assessment Act 1936 (ITAA 1936).", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for any outgoing to the extent that it is incurred in gaining or producing assessable income, except where the outgoing: Subsection 25-25(1) of the ITAA 1997 allows a deduction for expenditure incurred in borrowing money to the extent that the money is used for the purpose of producing assessable income. In most cases the deduction is spread over the period of the loan. Taxation Ruling TR 95/25 Income tax: deductions for interest under subsection 51(1) of the Income Tax Assessment Act 1936 following FC of T v. Roberts; FC of T v. Smith outlines the general principles as to when interest expenses are deductible. Subparagraph 3(a) of TR 95/25 states that an interest expense is incurred in gaining or producing assessable income if the interest expense has a sufficient connection with the operations or activities which more directly gain or produce the taxpayer's assessable income and is not of a capital, private or domestic nature. The test is one of characterisation and the essential character of an expense is a question of fact to be determined by reference to all the circumstances. Taxation Ruling IT 2606 Income tax: deduction for interest on borrowings to fund share acquisitions further explains when interest incurred on funds borrowed for the purpose of share acquisition is considered to be deductible. Generally, as highlighted by paragraph 9 of IT 2606, interest on money borrowed to acquire shares will be incurred in gaining or producing assessable income where it is expected that dividends or other assessable income will be derived from the investments. Relevantly here, any dividends received by the taxpayer will be non-assessable non-exempt income: pursuant to section 128D of the ITAA 1936. As a result of the operation of paragraph 8-1(2)(c) of the ITAA 1997, the taxpayer is not entitled to a deduction for expenses incurred in gaining or producing those dividends. Therefore, it must be considered whether the taxpayer is entitled to a deduction for expenses incurred in gaining or producing the discount given in relation to the rights. The discount given in relation to the rights is included as assessable income in the year in which the options were exercised. The discount is the market value of the shares at the time the shares were acquired less any consideration paid by the taxpayer for the shares in exercising the option. For the interest and borrowing expenses to be deductible against the discount given in relation to the rights, it must be shown that there is a sufficient connection between these expenses and the discount included in assessable income. It is considered that the taxpayer's purpose in taking out the loan was to acquire the shares. The discount included in the taxpayer's assessable income in the year the options were exercised was merely incidental to the acquisition of the shares. The interest and borrowing expenses were not incurred for the purpose of gaining or producing the discount. Therefore, the non-resident taxpayer is not entitled to a deduction under either sections 8-1 and 25-25 of the ITAA 1997 for the interest and borrowing expenses incurred. Note: reference to the ESS provisions is to both the now repealed Division 13A of Part III of the ITAA 1936 and to Division 83A of Part 2-40 of the ITAA 1997.", "Date_of_Decision": "16 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(c) section 25-25 section 25-25(1) Division 83A of Part 2-40", "Related_Public_Rulings_and_Determinations": "TR 95/25 | IT 2606", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Share discount on employee share scheme Interest expenses Borrowing expenses Statutory income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200542", "Unmatched_Content": "Issue, Decision and Facts | Reworded for internal consistency and clarity. | Reworded for internal consistency and clarity. Updated with full citations for ATO view documents. | Update to highlight that the discount on the rights is assessable income. | Updated to take into account the repeal of Division 13A of the ITAA 1936 and its replacement with Division 83A of the ITAA 1997. | Updated to take into account the repeal of Division 13A of the ITAA 1936 and include reference to its replacement; Division 83A of the ITAA 1997. | Include reference to Division 13A of the ITAA 1936 and Division 83A of the ITAA 1997. | Related Public Rulings (including Determinations) TR 95/25 IT 2606 | Keywords Employee share schemes & options Share discount on employee share scheme Interest expenses Borrowing expenses Statutory income"}
{"ATO_ID_Number": "ATO ID 2011/100", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: gain made from the buying of Notes at a discount", "Issue": "Is the gain made by a financial institution from the buying back of its own Notes at a discount to their face value assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The gain made by a financial institution from the buying back of its own Notes at a discount to their face value is assessable income under subsection 6-5(1) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident financial institution. As part of its business, the taxpayer borrows funds from various domestic and foreign sources and on-lends to customers. Some of the borrowings include long term debts in the form of debentures and Notes. Under the terms of an Offering Circular, the taxpayer issued subordinated Notes with the issue price being 100 per cent of their principal amount. The Notes had no maturity date and interest was payable semi-annually, in arrears. The net proceeds from the issue of Notes were used in the general operations of the financial institution. Under the capital adequacy rules applicable to financial institutions which existed at the time of the issue of the Notes, the Notes qualified as regulatory capital. After a number of years from the date of issue of the Notes, the taxpayer, having regard to the change in market conditions, bought back the Notes at a discount to their face value. On buying back the Notes, the taxpayer made a gain, being the difference between the face value and the buy back price of the Notes. Division 16K of the Income Tax Assessment Act 1936 (ITAA 1936) does not apply to this arrangement.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts which is called ordinary income. Income from carrying on a business has generally been held as 'ordinary income'. For the purpose of determining whether the gain made on the Notes is of a revenue or capital nature, one has to 'make both a wide survey and an exact scrutiny of the taxpayer's activities' ( Western Gold Mines No Liability v. Commissioner of Taxation (WA) (1937-1938) 59 CLR 729 at 740; 4 ATD 453 at 462). In the present case, the taxpayer is a financial institution that was in the business of borrowing funds from various sources, lending it to its clients and repaying the borrowed funds when required. In considering whether the transactions entered into by a finance company were a loss or outgoing of a revenue character, the majority of the High Court in Coles Myer Finance Limited v. Federal Commissioner of Taxation (1993) 176 CLR 640; [1993] HCA 29 ( Coles Myer ) referred to the decision in AVCO Financial Services Limited v. Federal Commissioner of Taxation (1982) 150 CLR 510; [1982] HCA 36 ( AVCO ) and made the following observation at CLR 663-664; HCA 29 at paragraph 32: ... transactions by a finance company are properly to be regarded as transactions on capital account, the relevant gains and losses are nevertheless to be regarded as revenue gains and losses. That is because the gains and losses were incurred in the course of and as an incident of making repayments of the borrowed money with which the taxpayer carried on its business as a finance company. The losses or outgoings were incurred in the day-to-day conduct of the business and for the purpose of carrying it on as a going concern. Where a gain is made on the discharge of a borrowing and the purpose of the borrowing was to acquire an asset that is turned over in the ordinary course of business, as a trading company, that gain is assessable as ordinary income. (See for example; International Nickel Australia Ltd v. Federal Commissioner of Taxation (1977) 137 CLR 347; 77 ATC 4383; (1977) 7 ATR 739, Thiess Toyota Pty Ltd v. FC of T (1978) [1978] 1 NSWLR 723; 78 ATC 4463; 9 ATR 11 and FC of T v. Cadbury-Fry Pascall (Australia) Ltd (1979) 37 FLR 126; 79 ATC 4346; (1979) 10 ATR 55). [0]However, in the present case, the gain was made by a financial institution, where its business includes making gains or incurring losses on repayment of its borrowings. The decisions in AVCO and Coles Myer support the proposition that gains and losses made on the repayment of borrowings by finance companies are generally revenue in nature. The decisions in Federal Commissioner of Taxation v. Unilever Australia Securities Ltd (1995) 56 FCR 152; 95 ATC 4117; (1995) 30 ATR 134 and Federal Commissioner of Taxation v. Consolidated Press Holdings Limited (No 2 ) (1999) 91 FCR 574; [1999] FCA 1229; 99 ATC 4988 further support this view. However not all gains or losses made on the repayment of a borrowing by a financial institution will be revenue in nature. Mason, Aickin and Wilson JJ said in AVCO at CLR 532; HCA 36 at paragraph 46: A distinction is to be drawn between moneys borrowed by a finance company in the ordinary course of its business and moneys borrowed for some special purpose which excludes the use of the money in the ordinary course of the finance company's business, e.g. for on-lending or for the repayment of a loan the proceeds of which have been employed in the ordinary course of its business. CAGA was an instance of a borrowing for a special purpose, the company undertaking not to use the funds for on-lending and to employ them in such a way that they could be regarded as part of the permanent capital structure of the business. In Commercial and General Acceptance Ltd v. Federal Commissioner of Taxation (1977) 137 CLR 373; 77 ATC 4375; (1977) 7 ATR 716 ( CAGA ), the court held that the gain due to exchange rate fluctuations on repayment of the borrowing by a finance company on a special loan with a foreign financial institution was of a capital nature, as it was not part of the process by which the company operated to obtain regular returns. The funds borrowed were used to strengthen the business entity structure. See also the decision in St George Bank Ltd v. Federal Commissioner of Taxation (2009) 176 FCR 424; [2009] FCAFC 62; 2009 ATC 20-103 ( St George Bank ) where interest expenses relating to debentures issued to meet certain capital adequacy requirements were found to be capital, as they were part of the overall transaction to achieve a structural advantage for St George. In CAGA and St George Bank , the reasons for the borrowings and the usage of the funds were relevant considerations in reaching the decision that the gain or expenses relating to those borrowings were of a capital nature. In both cases, the funds were borrowed and used for the purpose of strengthening the business structure of the relevant entities. In the present case, the net proceeds from the issue of Notes were employed in the general operations of the taxpayer's business and not for the purpose of strengthening the profit making structure of the taxpayer as was the case in CAGA . The gain was made 'in the course of and as an incident of' repaying the borrowed money with which the taxpayer carried on its business as a financial institution. Although the funds raised by the taxpayer from the issue of the Notes satisfied the regulatory capital requirements, it does not necessarily mean the gain realised on buying back of the Notes are for that reason on capital account. Funds that qualify as regulatory capital are often used in the general operations of a financial institution like any other ordinary borrowings. The borrowing and lending of money is an integral part of the ordinary operation of the taxpayer's business as a financial institution so as to represent a matter of revenue rather than capital. In Mutual Acceptance Limited v. Federal Commissioner of Taxation (1984) 81 FLR 209; 84 ATC 4831; (1984) 15 ATR 1238 ( Mutual Acceptance ), a finance company, which was engaged in the business of making loans to its customers, agreed to redeem a number of debentures before their maturity date even though it was under no obligation to do so. Enderby J held that the gain on redemption was assessable income. His Honour said at (FCR 228; ATC 4845; ATR 1255): In my opinion... the \"gain\" resulting from the redemption was a \"gain\" in the nature of income. The decision whether to redeem or not was an exercise in judgment exercised by the appellant's officers. It was part of the ongoing business of producing revenue from the lending of money. It was in the nature of that business that application for redemption would from time to time be received. They were contemplated in the prospectuses. It was part of the trade of the appellant and sufficiently recurrent. Repaying of funds employed in the general operations is part of the ordinary course of a business of a financial institution. In the present case, a change in market conditions presented an opportunity for the taxpayer's officers to exercise their judgment to realise a gain by discharging a liability as was the case in Mutual Acceptance . Accordingly, the gain made from the buying back of the Notes at a discount to its face value is assessable income under subsection 6-5(1) of the ITAA 1997.", "Date_of_Decision": "27 September 2011", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 Division 16K", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Borrowings & loans Financial institutions Financial instruments Financial instrument transactions", "Case_References": "AVCO Financial Services Ltd v Federal Commissioner of Taxation (1982) 150 CLR 510 [1982] HCA 36 13 ATR 63 82 ATC 4246", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2011100", "Unmatched_Content": "Keywords Income Borrowings & loans Financial institutions Financial instruments Financial instrument transactions"}
{"ATO_ID_Number": "ATO ID 2010/56", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: derivation of income - spread betting", "Issue": "Are the gains from financial spread betting assessable income under section 6-5 or section 15-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the gains from financial spread betting are assessable income under section 6-5 or section 15-15 of the ITAA 1997.", "Facts": "The taxpayer is a client of a company which provides the services of financial spread betting for which it holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission (ASIC) under the Corporations Act 2001 . At the time the transactions were entered into, the taxpayer was a full-time salaried employee of a company which is not connected with the financial services industry. The taxpayer's duties as an employee with the company do not involve financial analysis, observing financial markets or the provision of financial advice. The taxpayer entered into these transactions because they believed that they would enjoy participating in some 'sophisticated, exciting and challenging on-line fun' but understood that they could lose. However, having regard to the taxpayers spread betting activities, a win or loss would not be material in their financial circumstances. The taxpayer did not carry out any formal research and did not use any system or trading techniques but made decisions based on what they knew of financial affairs generally. The taxpayer made a net gain from the spread betting activities in that financial year. The taxpayer contends that the profits made were mainly the result of guesswork.", "Reasons_for_Decision": "Detailed Reasoning - Section 6-5: Section 6-5 of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts. A gain from a financial spread betting activity is assessable income under section 6-5 of the ITAA 1997 where the transaction is entered into as an ordinary incident of carrying on a business. It is a question of fact as to whether a taxpayer's activities amount to the carrying on of a business. Income Taxation Ruling TR 97/11: 'Am I Carrying on A Business of Primary Production' discusses the relevant indicators to consider in determining whether a taxpayer's activities amount to the carrying on of a primary production business. These indicators are equally relevant when determining whether a taxpayer is carrying on a business generally. The relevant indicators, which emerge from the case law in this area, to consider are: It is accepted that activities conducted on a small scale and for a short time may nevertheless involve the carrying on of a business. The taxpayer entered into a number of spread betting transactions over a one week period. The proceeds generated from these spread betting activities could be seen as the commencement of a business having regard to the following: Even if the activities do not constitute the carrying on of a business of spread betting, the gains made on each individual contract may still be assessable as ordinary income under section 6-5 of the ITAA 1997 if the profits were obtained in a business operation or commercial transaction entered into with the intention or purpose of making a profit (see Federal Commissioner of Taxation v. The Myer Emporium Ltd (1987) 163 CLR 199; 18 ATR 693; 87 ATC 4363 and Income Taxation Ruling TR 92/3: 'Income tax: Whether Profits on Isolated Transactions Are Income'). The profit-making purpose and commercial nature of these transactions is borne out by the fact that: These circumstances objectively establish that such contracts are entered into for a commercial purpose and the existence of a profit making intention. Objectively, they are not consistent with a person who is merely in pursuit of a recreational gambling activity. | Detailed Reasoning - Section 15-15: If section 6-5 of the ITAA 1997 does not apply, the gains are nevertheless assessable income under section 15-15 of the ITAA 1997 as the spread betting contracts amount to carrying on or carrying out a profit-making undertaking or plan. This is the case even if there are only isolated transactions entered into by the taxpayer as 'the profit arising from an isolated commercial or business transaction will constitute income if the taxpayer's purpose or intention in entering into the transaction was to make a profit' (See Antlers Pty Ltd (in liq) v. Federal Commissioner of Taxation 97 ATC 4192; 35 ATR 64). What is important is the intention or purpose, determined by a consideration of the objective facts. Spread betting contracts are the purchase of financial risk -something with a significant commercial flavour - by means of a contract productive only of a gain or loss. It is an activity undertaken for the purposes of making a profit. | Detailed Reasoning - Not Gaming or Wagering: Spread betting can be distinguished from gaming and wagering that might take place on a race course or at a casino because, unlike those activities, it is not governed by the various State Gaming and Wagering statutes but by Commonwealth legislation dealing with the conduct of commercial activities. The validity of spread betting contracts - being found in the Corporations Act 2001 , as opposed to gaming legislation - indicates Parliament's intention that they, as a branch of human activity, belong to an order entirely different from gaming or gambling, that is, they are true commercial activities. In addition, transacting with financial spread betting is closer to the skill end of the chance-to-skill spectrum and the commercial end of the private/recreation-to-commercial spectrum than a bet on a horse racing (see Taxation Ruling TR 2005/15: 'Income tax: tax consequences of financial contracts for difference'). Transacting with financial spread betting is essentially a commercial activity of investing in a cash-settled derivative, albeit in the legal form of a contract of gaming and wagering, in relation to an underlying financial risk. The degree of control is also another factor that distinguishes financial spread betting from recreational gambling. The winnings tend to be the rewards for skill and judgement rather than purely betting on chance (See Brajkovich v. Federal Commissioner of Taxation 20 ATR 1570; 89 ATC 5227). | Detailed Reasoning - Treatment of losses: Any losses on the spread betting contracts would be deductible under section 8-1 of the ITAA 1997 where, had a gain been made on the contract, it would have been assessable under 6-5 of the ITAA 1997. Similarly, any losses on the spread betting contracts are deductible under sections 25-40 of the ITAA 1997 where, had a gain been made on the relevant contract, it would have been assessable under section 15-15 of the ITAA 1997.", "Date_of_Decision": "3 March 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1 section 15-15 section 25-40", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/3 | Taxation Ruling TR 97/11 | Taxation Ruling TR 2005/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Financial derivatives Gambling income", "Case_References": "Federal Commissioner of Taxation v The Myer Emporium Ltd (1987) 163 CLR 199 18 ATR 693 87 ATC 4363", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201056", "Unmatched_Content": "An amendment is required to change the Issue into a question | Related Public Rulings (including Determinations) Taxation Ruling TR 92/3 Taxation Ruling TR 97/11 Taxation Ruling TR 2005/15 | Keywords Financial derivatives Gambling income"}
{"ATO_ID_Number": "ATO ID 2009/53", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Derivation of an amount received on the cash settlement of an exercised option", "Issue": "When is an amount received on the cash settlement of an exercised option derived for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "An amount received on the cash settlement of an exercised option is derived for the purposes section 6-5 of the ITAA 1997 when the option is exercised.", "Facts": "The taxpayer, a commodity producer, is exposed to fluctuating prices on the sale of its commodities. In order to offset the risk of fluctuating prices the taxpayer adopts various hedging strategies designed to ensure its commodity sales revenue, together with any gains or losses on its hedging transactions, is within an acceptable range. These strategies involve the sale and/or the acquisition of commodity options, or the use of commodity option transactions in combination with other derivatives. As part of this strategy the taxpayer acquired an option which gave the taxpayer the right, but not the obligation, to sell a certain quantity of a particular commodity at a fixed price (the strike price) on the expiry date of the option. The option was exercised on the expiry date. The contract was cash settled, as intended by the parties and provided for under the contract, with the counterparty agreeing to pay an amount equal to the difference between the strike price and the market price of the commodity on the expiry date. The payment was made 12 days after the expiry date.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Derivation of income depends on whether a gain has 'come home' to the taxpayer. In Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 at 427-428; 71 ATC 4195 at 4200; (1971) 2 ATR 563 at 569-570, Gibbs J, in considering the meaning of the word 'derived' said: The word \"derived\" is not necessarily equivalent in meaning to \"earned\". \"Derive\" in its ordinary sense, according to the Oxford English Dictionary, means \"to draw, fetch, get, gain, obtain (a thing from a source)\". It has become well established that unless the Act makes some specific provision on the point the amount of income derived is to be determined by the application of ordinary business and commercial principles and that the method of accounting to be adopted is that which \"is calculated to give a substantially correct reflex of the taxpayer's true income\" (Commissioner of Taxes (South Australia) v Executor, Trustee and Agency Company of South Australia Limited (Carden's Case) (1938), 63 CLR 108, at pp 152-4; 1 AITR 416, at pp 441-2). His Honour then quoted Dixon J, with whom Rich and McTiernan JJ concurred, in Carden's Case : Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realised or immediately realisable form. The option acquired by the taxpayer as part of its hedging strategies is an integral part of its business, designed to protect its revenue in the event of a fall in the price of the commodity it produces for sale. The amount received on cash settling the option represents ordinary income derived by the taxpayer from carrying on its business. For the purposes of section 6-5 of the ITAA 1997, the amount received on cash settling the option is derived at the time the option is exercised. This is the time when the amount has come home to the taxpayer in a realisable form.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ending 31 December 2004 Year ending 31 December 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/54 | ATO ID 2009/55 | ATO ID 2009/56", "Subject_References": "Income Call options Commodity transactions Derived Financial derivatives Hedging Ordinary course of business", "Case_References": "Brent v Federal Commissioner of Taxation (1971) 125 CLR 418 71 ATC 4195 (1971) 2 ATR 563", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200953", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 | Keywords Income Call options Commodity transactions Derived Financial derivatives Hedging Ordinary course of business"}
{"ATO_ID_Number": "ATO ID 2009/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exchange Traded Options: derivation of premiums receivable", "Issue": "Where an individual taxpayer carries on the business of trading in exchange traded options (ETOs), are the premiums receivable from that activity derived under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) at the time an ETO is registered with the Australian Clearing House Pty Ltd (ACH)?", "Decision": "Yes. Where an individual taxpayer carries on the business of trading in ETOs, the premiums receivable from that activity are derived as assessable income under section 6-5 of the ITAA 1997 at the time an ETO is registered with the ACH.", "Facts": "The taxpayer is an individual who carries on the business of trading in ETOs over listed shares on the Australian Securities Exchange's Options Market. The taxpayer routinely and systematically takes (buys) and writes (sells) ETOs with the expectation of profit. The taxpayer uses a broker to trade in ETOs. After writing an ETO contract it is registered with the ACH. On registration the taxpayer becomes entitled to receive a premium.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. In Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 at 427-428; 71 ATC 4195 at 4200; (1971) 2 ATR 563 at 569-570, Gibbs J, in considering the meaning of the word 'derived' said: The word 'derived' is not necessarily equivalent in meaning to 'earned'. 'Derive' in its ordinary sense, according to the Oxford English Dictionary, means 'to draw, fetch, get, gain, obtain (a thing from a source)'. It has become well established that unless the Act makes some specific provision on the point the amount of income derived is to be determined by the application of ordinary business and commercial principles and that the method of accounting to be adopted is that which 'is calculated to give a substantially correct reflex of the taxpayer's true income' (Commissioner of Taxes (South Australia) v Executor, Trustee and Agency Company of South Australia Limited (Carden's Case) (1938), 63 CLR 108, at pp 152-4; 1 AITR 416, at pp 441-2). . . . In the course of a judgment with which Rich and McTiernan, JJ., concurred, Dixon, J., as he then was, said (at 63 CLR, p 155; 1 AITR, at p 442): 'Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form'. The taxpayer's business involves the routine and systematic taking and writing of ETO contracts with the expectation of profit. The premiums received from these repetitious and recurring transactions represent ordinary income derived from the carrying on of a business of dealing in options. As these activities amount to the carrying on of a business, it is appropriate to account for the premiums received on a gross-receipts basis (see Investment and Merchant Finance Corporation Limited v. Federal Commissioner of Taxation (1971) 125 CLR 249 at 264; 71 ATC 4140 at 4147; (1971) 2 ATR 361 at 369). Upon registration of an ETO with the ACH, the taxpayer becomes entitled to receive a non-refundable premium. It is at this point that a recoverable debt comes into existence. For the purposes of section 6-5 of the ITAA 1997, the gross amount of the premium is derived when the ETO contract is registered with the ACH. This is the time when the amount has come home to the taxpayer in a realisable form (see The Commissioner of Taxes (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd (1938) 63 CLR 108 at 155; (1938 ) 5 ATD 98 at 132; (1938) 1 AITR 416 at 442).", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/58 | ATO ID 2009/59", "Subject_References": "Acquisition of shares Call options Carrying on a business Deductions & expenses Derived Income Put options", "Case_References": "Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 71 ATC 4195 (1971) 2 ATR 563", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200957", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 | Keywords Acquisition of shares Call options Carrying on a business Deductions & expenses Derived Income Put options"}
{"ATO_ID_Number": "ATO ID 2007/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of the definition of royalty where an amount is paid for the surrender of data licensing rights", "Issue": "Is a payment from the taxpayer to company X, for the surrender of data licensing rights, a 'royalty' for the purposes of paragraph (c) of the definition of 'royalty' or 'royalties' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A payment from the taxpayer to company X, for the surrender of data licensing rights, is not a royalty for the purposes of paragraph (c) of the definition of 'royalty' or 'royalties' in subsection 6(1) of the ITAA 1936.", "Facts": "The taxpayer is an Australian resident company. Y is the owner of the data licensing rights. Company X and Y entered into a rights agreement under which company X was granted the data licensing rights. Later, company X entered into a surrender agreement with the taxpayer under which company X agreed to surrender the data licensing rights for the payment of a fixed sum by the taxpayer to company X. The taxpayer also entered into a license agreement with Y to acquire the data licensing rights. Y did not receive any payment from the taxpayer or from company X for entering into that agreement. The data licensing rights acquired by the taxpayer from Y under the license agreement relate to the exclusive right to distribute any form of electronic catalogue containing information on the products to dealers worldwide. Company X, Y and the taxpayer are unrelated and were dealing with each other on arms length terms.", "Reasons_for_Decision": "Summary: The definition of 'royalty' or 'royalties' in subsection 6(1) of the ITAA 1936 is an inclusive definition. This means that the definition of the term includes not only the types of payments listed in the definition, but also payments that are royalties within the ordinary meaning of the term. The ordinary meaning of the term 'royalty' has been considered in many cases including Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630; (1955) 11 ATD 1; (1955) 6 AITR 216. In considering the essence of a royalty, the High Court said that: ... the modern applications of the term seem to fall under two heads, namely the payments which the grantees of monopolies such as patents and copyrights receive under licenses and payments which the owner of the soil obtains in respect of the taking of some special thing forming part of it or attached to it which he suffers to be taken. Paragraph (c) of the definition of 'royalty' or 'royalties' in subsection 6(1) of the ITAA 1936 provides that the term 'royalty' includes any amount paid or credited, however described or computed, and whether the payment or credit is periodical or not, to the extent to which it is paid or credited, as the case may be, as consideration for the supply of scientific, technical, industrial or commercial knowledge or information. It is considered that the payment to company X is not a payment 'for the supply of ..... commercial knowledge or information' for the purposes of paragraph (c) of the definition of 'royalty' or 'royalties' in subsection 6(1) of the ITAA 1936 because it was made to induce company X to surrender the data licensing rights which company X had obtained from Y. Although the payment to company X and the surrender of the data licensing rights by company X made it possible for the taxpayer to acquire the data licensing rights from Y, the payment itself is not a royalty as it was not made to the owner of the data licensing rights to acquire those rights but was paid to a third party as compensation for the surrender of the rights company X had obtained from Y. It is considered that there is a presumption in the definition of 'royalty' or 'royalties' in paragraph (c) of subsection 6(1) of the ITAA 1936 that a payment made as consideration 'for the supply of .... commercial knowledge or information' must be made to the owner of the commercial knowledge or information to constitute a royalty. This view is supported by the comments made by the High Court of Australia in Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630; (1955) 11 ATD 1; (1955) 6 AITR 216, viz: ...the payments which the grantees of monopolies such as patents and copyrights receive under licenses and payments which the owner of the soil obtains.... Further support for the above view is found in Taxation Ruling IT 2660, which discusses the ordinary meaning of 'royalty' and how that meaning is extended by the definition in subsection 6(1) of the ITAA 1936. For present purposes paragraph 10(b) of IT 2660 states that a common law royalty will have the following feature: The payment is made to the person who owns the right to confer that beneficial privilege or right - Barrett v. F. C. of T. (1968) 118 CLR 666; Sherritt Gordon Mines Ltd; Case H9 76 ATC 39; 20 CTBR (NS) Case 64. However, the payment would still be a royalty if paid to another person or otherwise applied or dealt with at the direction of the owner. Y did not receive any part of the amount the taxpayer paid to company X for the surrender of the data licensing rights. Furthermore, the consideration was not paid to another person or otherwise applied or dealt with at the direction of Y. The entire payment remained with company X and no part of the payment passed to the owner of the data licensing rights, Y. Accordingly, the payment made by the taxpayer to company X is not a royalty for the purposes of paragraph (c) of the definition of 'royalty' or 'royalties' in subsection 6(1) of the ITAA 1936.", "Date_of_Decision": "30 November 2006", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) paragraph 6(1)(c)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2660", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/5", "Subject_References": "Double tax agreements International tax Non resident royalty withholding tax Royalty income", "Case_References": "Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630 (1955) 11 ATD 1 (1955) 6 AITR 216", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20074", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2660 | Keywords Double tax agreements International tax Non resident royalty withholding tax Royalty income"}
{"ATO_ID_Number": "ATO ID 2007/71", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fuel Tax Credits: assessability of fuel tax credits", "Issue": "Are fuel tax credits received by an entity carrying on a business assessable under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Fuel tax credits received by an entity in carrying on a business are assessable under subsection 6-5(1) of the ITAA 1997.", "Facts": "An entity uses fuel in carrying on a business. The price of fuel includes an amount of fuel tax. The entity claims the cost of the fuel as a deductible business expense when it lodges its income tax return for the relevant year. The entity is entitled to claim a fuel tax credit under the Fuel Tax Act 2006 for all or part of the fuel tax embedded in the price of the fuel. The entity claims the fuel tax credit when it lodges its business activity statement for the relevant period.", "Reasons_for_Decision": "Summary: Assessable income includes amounts that are income according to ordinary concepts (subsection 6-5(1) of the ITAA 1997), and amounts that are not ordinary income but are specifically included by the legislation (section 6-10 of the ITAA 1997). Under section 41-5 of the Fuel Tax Act 2006 an entity that acquires, manufactures, or imports fuel for use in carrying on an enterprise is entitled to claim a credit for all or part of the fuel tax embedded in the price of the fuel. The meaning of 'enterprise' is drawn from section 9-20 of the A New Tax System (Goods and Services Tax) Act 1999 and the most common example of an enterprise is an activity in the form of a business. There is no general principle of law that an amount received as a reimbursement or recoupment of an amount that has been claimed or will be claimed as a deduction, is assessable as ordinary income ( Federal Commissioner of Taxation v. Rowe (1997) 187 CLR 266; 97 ATC 4317; (1997) 35 ATR 432; H R Sinclair and Son Pty Ltd v. Federal Commissioner of Taxation (1966) 114 CLR 537; 14 ATD 194; 10 AITR 3 ( H R Sinclair )). Whether the amount is assessable as ordinary income will depend on its character in the hands of the recipient. Where an entity that is carrying on a business receives an amount that is a direct recoupment of an outgoing on revenue account that was an ordinary incident of its income producing activities, it is likely that the amount received will be so closely connected to the entity's income producing activities that it must be treated as being an incident of the business, and as such, 'stamped' with the character of ordinary income ( HR Sinclair , Warner Music Australia Pty Ltd v. Federal Commissioner of Taxation (1996) 70 FCR 197; 96 ATC 5046; (1996) 34 ATR 171). This reasoning has been applied in Taxation Determination TD 97/25. TD 97/25 states that a diesel fuel rebate is assessable as ordinary income in the hands of the recipient, under section 6-5 of the ITAA 1997, if it is paid as a consequence of the recipient's income producing activities. Similarly, Taxation Ruling 2006/3 notes in an example that the Wine Equalisation Tax producer rebate received by a wine producer in the ordinary course of the entity's wine distribution activities, is assessable as ordinary income under section 6-5 of the ITAA 1997. The ruling explains that the rebate is calculated with reference to business income and is received to offset the liability that arises because of business operations. In the present case, the fuel tax credit received by the entity under section 41-5 of the Fuel Tax Act 2006 is inextricably linked to the business activities of the entity. As such, the fuel tax credit received by the entity forms part of the proceeds of the business carried on by the entity, and is assessable as ordinary income under subsection 6-5(1) of the ITAA 1997.", "Date_of_Decision": "5 April 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) section 6-10", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 97/25 | Taxation Ruling TR 2006/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Business income Deductions & expenses Fuel tax credits", "Case_References": "Federal Commissioner of Taxation v. Rowe (1997) 187 CLR 266 97 ATC 4317 (1997) 35 ATR 432", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200771", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 97/25 Taxation Ruling TR 2006/3 | Keywords Business income Deductions & expenses Fuel tax credits"}
{"ATO_ID_Number": "ATO ID 2005/341", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent Establishment: goods manufactured in Australia on behalf of a Singaporean resident", "Issue": "Is a portion of the sale income derived by a Singaporean resident from the sale of goods manufactured by an Australian company on its behalf assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)", "Decision": "Yes. A portion of the sale income derived by a Singaporean resident from the sale of goods manufactured by an Australian company on its behalf is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "An Australian company is a 'toll manufacturer' of the Singaporean resident. This toll manufacturer is a contract manufacturer of products where it does not take title and does not assume ownership risk in respect of raw materials, work-in-process and finished goods. The Singaporean resident owns the raw materials used to manufacture the goods. The Australian company manufactures the goods and provides the packaging materials for the Singaporean resident. The Singaporean resident pays the Australian company a toll fee for this service. The Singaporean resident owns all finished goods at the end of the manufacturing process. At the end of the manufacturing process, the Singaporean resident sells to the Australian company the finished goods that the Australian company requires for its Australian domestic market and exports the rest. The Australian company maintains a stock of goods belonging to the Singaporean resident and regularly fills orders on behalf of the Singaporean resident. All of the Australian company's revenue from manufacturing and warehousing services is derived from the Singaporean resident. It does not provide these services to any other entity.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. In determining liability to tax on Australian sourced income received by a Singaporean resident, it is necessary to consider not only the domestic income tax laws but also the applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 5 and 5A to the Agreements Act contains the agreement between Australia and Singapore and the Protocol to that agreement (Singapore Agreement). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Article 5 of the Singapore Agreement provides that the profits of an enterprise of Singapore shall be taxable only in Singapore unless the enterprise carries on business in Australia through a permanent establishment situated therein. The term 'permanent establishment' is defined in Article 4 of the Singapore Agreement. Article 4(5) of the Singapore Agreement deems a permanent establishment of the enterprise of the other Contracting State and provides that: A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State, other than an agent of an independent status to whom paragraph (6) applies, shall be deemed to be a permanent establishment of the enterprise in the first-mentioned Contracting State if- The Australian company fulfils paragraphs (b) and (d) of Article 4(5) of the Singapore Agreement that is maintains a stock of goods belonging to the Singaporean entity, regularly fills orders on behalf of the Singaporean entity and manufactures and processes goods. Accordingly, the Singaporean resident has a permanent establishment in Australia. The portion of the profits derived by the Singaporean resident from the sale of goods manufactured by the Australian company on its behalf that are attributable to the permanent establishment may be taxable in Australia by Article 5 of the Singapore Agreement. Article 17 of the Singapore Agreement provides that income derived by a resident of Singapore which, under Article 5, may be taxed in Australia, shall be deemed to be income from sources in Australia for Australian tax purposes. Accordingly, part of the sale income derived by the Singaporean resident taxpayer from the sale of goods manufactured by the Australian company on its behalf is assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "12 August 2004", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Manufacturing Permanent establishment", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005341", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Manufacturing Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2005/360", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of business profits of a New Zealand Company for services provided in Australia.", "Issue": "Is the income received by a New Zealand resident company, from services provided in Australia, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The income received by a New Zealand resident company, from services provided in Australia is not assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer company is a resident of New Zealand and is not a resident of Australia for income tax purposes. The taxpayer company is engaged by an Australian resident company, acting as an independent agent, to provide services to various entities in Australia. The taxpayer company derives income from performing design and drafting services in Australia. The co-director and shareholder is present in Australia for less than 183 days to perform the service. The taxpayer company does not have any other employees, an office, a factory nor a workshop in Australia.", "Reasons_for_Decision": "Summary: Section 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources. The income derived by the taxpayer company from the design and drafting service provided in Australian is ordinary income under subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaties contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (the New Zealand Agreement). The New Zealand Agreement operates to avoid the double taxation of income received by Australian and New Zealand residents. Article 7 of the New Zealand Agreement governs the taxation of business profits derived from Australia by a resident of New Zealand. Under Article 7, the business profits of an enterprise of New Zealand shall be taxable only in New Zealand unless the enterprise carries on business in Australia through a permanent establishment (PE) situated in Australia. The question of whether a non-resident enterprise has a permanent establishment in Australia is a question of fact, which must be determined by reference to the individual circumstances of each case. The term 'permanent establishment' is defined in Article 5(1) of the New Zealand Agreement as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5(2) of the New Zealand Agreement contains a list of examples each of which can be regarded as constituting a PE such as a place of management. The taxpayer does not carry on business through a fixed place as described in Article 5 (2). However, if a non-resident enterprise does not conduct activities itself through a fixed place of business in Australia, it may still, in some circumstances, be 'deemed' to carry on business through a permanent establishment, either under the provisions in the domestic law or under specific articles of the relevant tax treaty (See Unisys Corp v. FC of T (2002) 2002 ATC 5146; (2002) 51 ATR 386 ( Unisys Corp) and Case 23/93 93 ATC 288; AAT Case 8775 (1993) 26 ATR 1056). Article 5(7) of the New Zealand Agreement provides that a PE will be deemed to exist if a New Zealand enterprise carries on business in Australia through a person (other than an independent agent) who has authority to conclude contracts on behalf of the enterprise and habitually exercises that authority in Australia. Therefore, for a non-resident enterprise to be deemed to have a permanent establishment in Australia, not only must the non-resident enterprise have a person acting for them in Australia, that person must have the authority to conclude contracts in a manner that is binding on the non-resident enterprise. Further, the mere possession of the requisite authority is not enough; it must also be exercised regularly or habitually (see Unisys Corp ). Consequently the non-resident company does not have a permanent establishment in Australia because: Therefore, the non resident company does not have a permanent establishment within Australia for the purposes of the New Zealand Agreement. Australia does not generally tax the profits of an enterprise resident in a country with which it has a tax treaty unless the enterprise carries on business through a permanent establishment in Australia. Accordingly, the income received by the taxpayer company from the design and drafting services provided in Australia is not assessable, under subsection 6-5(3) of the ITAA 1997 by virtue of the overriding effect of Article 7 of the New Zealand Agreement.", "Date_of_Decision": "12 December 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company directors Double tax agreements Exempt income Income Non resident companies Permanent establishment Shareholders", "Case_References": "Unisys Corp v. FC of T (2002) 2002 ATC 5146 (2002) 51 ATR 386", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005360", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Company directors Double tax agreements Exempt income Income Non resident companies Permanent establishment Shareholders"}
{"ATO_ID_Number": "ATO ID 2004/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Derivation of income: residential properties instalment sales contracts - carrying on a business", "Issue": "For a taxpayer carrying on a business, are payments received from the sale of residential properties under instalment sales contracts included in assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) in the income year in which the contract is entered into?", "Decision": "No. The payments will not be included in the assessable income of the taxpayer under subsection 6-5(1) of the ITAA 1997 in the income year in which the contract is entered into, as the income has not yet been derived.", "Facts": "The taxpayer carries on a business of buying and selling residential properties. The properties are sold under instalment sales contracts with vendor finance. The instalment sales contract has the following features: It is common ground that the interest is included in assessable income in the year it is received. The taxpayer did not use the properties for any other purpose prior to sale. The properties were sold for an amount that was in excess of the amount paid by the taxpayer to acquire the property. Each property was sold within six months of it being acquired by the taxpayer. The properties are trading stock for the purposes of subdivision 70-C of the ITAA 1997.", "Reasons_for_Decision": "Summary: Taxation Ruling TR 97/15 at paragraph 23 states that: It is an accepted principle of income tax law that the method under which a taxpayer accounts for its business or income producing activities for the purposes of income tax must 'give a substantially correct reflex of the taxpayer's true income' (see Dixon J in The Commissioner of Taxes (South Australia) v The Executor Trustee and Agency Company of South Australia Ltd (1938) 63 CLR 108 at 154; (1938) 5 ATD 98 at 131 (Carden's case)). In Commissioner of Taxes v. Executor, Trustee & Agency Co of SA Ltd (1938) 63 CLR 108 at 155; (1938) 5 ATD 98 at 132; (1938) 1 AITR 416 at 442 (the Carden Case ) Dixon J stated: Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form. Paragraph 28 of TR 97/15 states that based on the decisions in J Rowe & Son Pty Ltd v. Federal Commissioner of Taxation (1971) 124 CLR 421, the Carden Case and Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73 71 ATC 4157; (1971) 2 ATR 497 (the Gasparin Case) it is clear that the sale price of trading stock is derived as income of the seller when the sale price becomes a presently existing debt. In the Gasparin Case, von Doussa J in agreeing with the taxpayer's (the appellant) argument that income from the sale of the allotments of land was not derived until settlement, stated: If the appellant's approach is correct, the allotments remained trading stock on hand until each transaction progressed to the point where a debt accrued due from the purchaser i.e. at settlement. If before that point was reached, a contract of sale came to an end, the allotment remain as stock on hand and no accounting consequences would arise, save in respect of the deposit payment made by the purchaser which might, depending on the circumstances in which the contract of sale came to an end, be forfeited to the vendors and thereupon become an actual receipt at that time. On the other hand, if the Commissioner's approach is correct so that the income is taken to be derived from a sale as soon as a contract of sale becomes unconditional, the Act does not readily provide a means for reversing the imputed derivation of income from the contract which later failed. The difficulty arises from the fact that there is until settlement no debt which can be brought to account as a bad debt under section 63. Paragraph 89 of Taxation Ruling TR 97/9 states in relation to the Gasparin Case: The derivation of income from the sale of goods should be contrasted with the derivation of income from the sale of real property. It was held in Gasparin that income from the sale of land was not derived until settlement had taken place. We do not think that von Doussa J's decision was based on the fact that legal ownership in the land would not be transferred until settlement. The explanation for the judgement rather lies in the realisation that a vendor in a real property transaction will not have performed all that is needed to become entitled to a payment prior to settlement. At settlement, transfers are effected which put the purchaser in a position to become registered as owner. As such, the vendor does not earn the income from the sale until settlement. Under the instalment sales contracts in question, whilst the relevant contracts provide for the payment of instalments over a number of years, as in the Gasparin Case the income from the sale of the properties has not been derived until settlement of the contracts. Until settlement, the vendor has not done all that is required in order to derive the payments in respect of the sale of the properties. At settlement, the vendor will transfer the title to the property and have done all that is necessary for the income to have 'come home'. Until that point in time, the properties remain part of the trading stock of the vendor, and no income from the sales has been derived under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "28 November 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 70-C section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/15 | Taxation Ruling TR 97/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/25 | ATO ID 2004/26 | ATO ID 2004/28 | ATO ID 2004/29", "Subject_References": "Disposal of real estate Disposal of trading stock Real estate income Sale by instalments", "Case_References": "The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Ltd (1938) 63 CLR 108 (1938) 5 ATD 98 (1938) 1 AITR 416", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200427", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/15 Taxation Ruling TR 97/9 | Keywords Disposal of real estate Disposal of trading stock Real estate income Sale by instalments"}
{"ATO_ID_Number": "ATO ID 2004/28", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: instalment sales contracts - default profits - carrying on a business", "Issue": "Are the deposit and instalments retained when a purchaser defaults under an instalment sales contract included in the assessable income of the vendor (the taxpayer) under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), in the year in which the purchaser defaults under the contract?", "Decision": "Yes. The forfeited deposit and instalments are assessable as ordinary income under subsection 6-5(1) of the ITAA 1997 in the year in which the purchaser defaulted under the contract.", "Facts": "The taxpayer carries on a business of buying and selling residential properties. The properties are sold under instalment sales contracts with vendor finance. The instalment sales contract has the following features: It is common ground that the interest is included in assessable income in the year it is received. The taxpayer did not use the properties for any other purpose prior to sale. The properties were sold for an amount that was in excess of the amount paid by the taxpayer to acquire the property. Each property was sold within six months of it being acquired by the taxpayer. The properties are trading stock for the purposes of subdivision 70-C of the ITAA 1997. During the year, a purchaser defaulted under an instalment sales contract. The purchaser had paid a deposit and made a number of instalment payments. At the time of receiving the instalment payments, the taxpayer divided them into their 'price' and interest components. The interest component was brought to account as assessable income. The taxpayer retained the deposit and all instalments paid.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 includes income according to ordinary concepts (ordinary income) in assessable income. Subsection 6-5(2) of the ITAA 1997 includes in assessable income the ordinary income derived during an income year. Taxation Ruling TR 92/3 at paragraphs 15 and 32 provides that if a taxpayer carrying on a business makes a profit from a transaction, that profit is income if the transaction is in the ordinary course of the taxpayer's business, provided that the gross receipts from the transaction lack the character of income. The comments of McGarvie J in L'Estrange v. Federal Commissioner of Taxation (1978) 9 ATR 410; 78 ATC 4744 whilst considering 'recision or default profits' in the context of paragraph 26(a) of the Income Tax Assessment Act 1936 , are relevant to this case. McGarvie J at ATR 430, ATC 4763 said: The amounts in question were moneys paid under the contract. On the discharge of the contract they became profits because the taxpayer had acquired a right under a term of the contract that, although the taxpayer was no longer obliged to transfer the land to the purchaser, he was not obliged to refund equivalent amounts of money to the purchaser. In my opinion the 'recision' profits were profits arising from the sale by the taxpayer of the property. In this case the taxpayer received under the contract the moneys which subsequently became profits and was protected by a right acquired under the contract from having to refund equivalent amounts. The monies retained by the taxpayer where the purchaser has defaulted on the contract are considered to be 'profit' made in the ordinary course of carrying on the business of buying and selling residential properties, and are therefore ordinary income for the purposes of subsection 6-5(1) of the ITAA 1997. In Gasparin v. Federal Commissioner Taxation (1994) 50 FCR 73; (1994) 28 ATR 130; 94 ATC 4280, where the residential properties were trading stock (as in this case), it was considered that when a contract of sale came to an end, the forfeited deposit payment became a receipt of the business at that time. The monies retained by the taxpayer will be derived for the purpose of subsection 6-5(2) of the ITAA 1997 at the time the purchaser defaults under the contract. This is the point at which the taxpayer has done everything necessary to earn the amount. Accordingly, the deposit and instalments retained will be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997 in the year of income in which the purchaser defaults on the contract.", "Date_of_Decision": "28 November 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 70-C section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/25 | ATO ID 2004/26 | ATO ID 2004/27 | ATO ID 2004/29", "Subject_References": "Income Ordinary course of business Profit making purpose Profits Sale by instalments", "Case_References": "L'Estrange v. Federal Commissioner of Taxation 78 ATC 4744 9 ATR 410", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200428", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 92/3 | Keywords Income Ordinary course of business Profit making purpose Profits Sale by instalments"}
{"ATO_ID_Number": "ATO ID 2004/406", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Derivation of income: residential properties instalment sales contracts - taxpayer not owner of properties", "Issue": "Are the proceeds the taxpayer receives to arrange for the purchase of properties by investors and their sale under instalment contracts, included in their assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) in the year in which the proceeds are received?", "Decision": "Yes. The proceeds are ordinary income and are included in the taxpayer's assessable income under section 6-5 of the ITAA 1997 in the year in which they are received.", "Facts": "The taxpayer is a property manager and has entered into joint venture agreements with investors. The taxpayer arranges for investors to purchase residential properties, with the intention of selling them to third party purchasers under instalment sales contracts with vendor finance. Under the joint venture agreement, the taxpayer supervises the performance of the instalment sales contract. At regular intervals, the taxpayer distributes equally, between the investor and itself, the amount remaining from the instalments after deducting the joint venture expenses, including the investor's loan repayments. The title in the property is held by the investor. The joint venture agreement states the agreement does not constitute a partnership. The instalment sales contract between the third party purchaser and the investor has the following features:", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Subsection 6-5(1) of the ITAA 1997 states that ordinary income is income according to ordinary concepts. Characteristics of what is ordinary income have evolved from case law and include receipts that: In Taxation Ruling TR 98/1 the Commissioner provides a guide to determining when income is considered to have been derived. At paragraph 17 TR 98/1 states that: When accounting for income in respect of a year of income, a taxpayer must adopt the method that, in the circumstances of the case, is the most appropriate. A method of accounting is appropriate if it gives a substantially correct reflex of income. Whether a particular method is appropriate to account for the income derived is a conclusion to be made from all the circumstances relevant to the taxpayer and the income. In the case The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Ltd (1938) 63 CLR 108 at 155; 5 ATD 98 at 132; (1938) 1 AITR 416 at 442 Dixon J stated: Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form. Paragraph 89 of Taxation Ruling TR 97/9 considers when income is derived from the sale of real property in reference to the case Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73; 94 ATC 4280; (1994) 28 ATR 130: ...a vendor in a real property transaction will not have performed all that is needed to become entitled to a payment prior to settlement. At settlement, transfers are effected which put the purchaser in a position to become registered as owner. As such, the vendor does not earn the income from the sale until settlement. The receipt by the taxpayer of 50% of the net proceeds of the joint venture has the characteristics of ordinary income for the purposes of subsection 6-5(1) of the ITAA 1997 as the amounts are expected, relied upon and have an element of periodicity, recurrence or regularity. The joint venture agreement provides that the title in the property is taken by the investor - not the taxpayer. Therefore, the taxpayer's 50% of the net proceeds is not reliant on settlement of the contract for sale of the property. Accordingly the proceeds of the joint venture are included in the taxpayer's assessable income under section 6-5 of the ITAA 1997 in the year in which they are received.", "Date_of_Decision": "5 November 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1 | Taxation Ruling TR 97/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/25 | ATO ID 2004/26 | ATO ID 2004/27 | ATO ID 2004/28 | ATO ID 2004/29 | ATO ID 2004/407", "Subject_References": "Ownership, interests, control & rights Real estate ownership & interests Real estate as trading stock Sale by instalments Finance", "Case_References": "The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Ltd (1938) 63 CLR 108 (1938) 5 ATD 98 (1938) 1 AITR 416", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004406", "Unmatched_Content": "Amend \" Commissioner of Taxes v. Executor, Trustee & Agency Co of SA Ltd \" to \" The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Ltd \" | Amend \" Gasparin v. Commissioner of Taxation \" to \" Gasparin v. Federal Commissioner of Taxation \" | Change from \"26 September 2014\" to \"7 June 2017\". | Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 Taxation Ruling TR 97/9 | Keywords Ownership, interests, control & rights Real estate ownership & interests Real estate as trading stock Sale by instalments Finance"}
{"ATO_ID_Number": "ATO ID 2003/835", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility and Assessability on consolidation of forward sales contracts", "Issue": "Will the consolidation of a number of forward sales contracts into a fewer number of forward sales contracts with the same counterparties, give rise to assessable income or deductible losses pursuant to section 6-5 or section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) respectively, where the counterparties and the financial position of those counterparties remain the same and the total quantities to be delivered remain the same, but the maturity dates are altered?", "Decision": "No. The consolidation of the forward sales contracts will not give rise to an assessable gain or a deductible loss under section 6-5 or section 8-1 of the ITAA 1997 respectively, solely as a result of a change in the maturity dates and a consolidation of the quantities.", "Facts": "Company A held a large number of forward sales contracts with various counterparties. Those forward sales contracts provided for the delivery of a quantity of a commodity on specified dates at a price agreed to by the parties at the time the forward sales contracts were entered into. In respect of each of those forward sales contracts, a common forward price was established. For the purposes of administrative convenience, Company A and the counterparties agreed to terminate the existing forward sales contracts on the understanding that a fewer number of forward sales contracts would be established with the same counterparties. It was agreed by Company A and the counterparties that no consideration would be paid to terminate the original forward sales contracts on the basis that a fewer number of forward sales contracts would be entered into on essentially the same terms. Under the terms of the original forward sales contracts, at maturity, close-out or termination, Company A would be required to either: deliver the commodity which was the subject of the forward sales contract and entitled to receive payment; or in the event of cash settlement, receive payment if a receipt became owing or make a payment if an amount became due. The quantum of the receipt or payment would be determined by reference to the difference between the price specified in the forward sales contract and the market price of the commodity at the maturity date of the forward sales contract. The new forward sales contracts amalgamated the quantities to be delivered under the terminated forward sales contracts and established new maturity dates, by reference to the mid date in the range of maturity dates in respect of each group of terminated forward sales contracts originally entered into with each counterparty. The maturity dates were altered to ensure that the financial position of the parties before and after the newly entered forward sales contracts remained the same.", "Reasons_for_Decision": "Summary: Whether the cessation of the original forward sales contracts gives rise to assessable income under section 6-5 of the ITAA 1997 or a deductible loss under section 8-1 of the ITAA 1997 depends upon whether it can be said that a receipt is derived or a loss is incurred, respectively at that time. Derivation of income or the incurrence of a loss, in general terms, depends on whether a gain or loss has 'come home' to the taxpayer. Case law dealing with the derivation of income provides that a gain has 'come home' to the taxpayer if a debt is presently recoverable by action or the taxpayer is not obligated to take any further steps to be entitled to payment (be it actual or constructive payment) ( FC of T v. Australian Gas Light Co & Anor (1983) 83 ATC 4800; (1983) 15 ATR 105; Henderson v. Federal Commissioner of Taxation. (1970) 119 CLR 612; 70 ATC 4016; (1970) 1 ATR 596; Arthur Murray (N.S.W.) Pty. Ltd. v. Federal Commissioner of Taxation. (1965) 114 CLR 314; 14 ATD 98; (1965) 9 AITR 673; Rowe J. & Son Pty. Ltd. v. Federal Commissioner of Taxation. (1971) 124 CLR 421; 71 ATC 4157; (1971) 2 ATR 497). In addition, where a debt is presently recoverable by action, generally, there will be a present right to receive an amount in question, that amount will be quantifiable and not subject to any contingency or defeasibility ( Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73; 94 ATC 4280; (1994) 28 ATR 130; Barratt & Ors v. Federal Commissioner of Taxation (1992) 36 FCR 222; 92 ATC 4275; (1992) 23 ATR 339; Farnsworth v. Federal Commissioner of Taxation (1949) 78 CLR 504; 9 ATD 33; (1949) 4 AITR 258). The meaning of the term 'incurred' has been consistently held to mean a loss or outgoing is incurred when it has been 'encountered, run into, or fallen upon.' The term incurred also covers losses or outgoings to which a taxpayer is 'definitively committed' or has 'completely subjected' itself and liabilities which have 'come home' (presently existing liability has arisen), but does not cover a loss or outgoing that is impending, threatened or expected ( Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492; 10 ATD 240; (1953) 5 AITR 579; Nilsen Development Laboratories Pty Ltd & Ors v. Federal Commissioner of Taxation (1981) 144 CLR 616; 81 ATC 4031; (1981) 11 ATR 505; New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179; 5 ATD 36; (1938) 1 AITR 366). Generally, income is derived or a loss is incurred when a forward sales contract matures, is closed out or is terminated. At those relevant times, a forward sales contract generally gives rise to an entitlement to payment as it coincides with the doing of all things that are required under the terms of the contract (for example, delivery of goods or cash settlement). That is, generally, on the earlier of maturity, close-out or termination, the parties have performed their obligations and a presently recoverable debt is created (the debt at that time is quantifiable and not subject to any contingency or defeasibility). Similarly, those relevant times will generally coincide with when a loss or outgoing is incurred, as at those relevant times a presently existing obligation will arise (for example, a forward sales contract that is cash settled). The terms of the forward sales contracts in this case, provided that at maturity, close-out or termination Company A would be required to: deliver the commodity which was the subject of the forward sales contract and entitled to receive payment; or in the event of cash settlement, receive payment if a receipt became owing or make a payment if an amount became due. In the present circumstances, the parties agreed to terminate the original forward sales contracts on the understanding that a lesser number of forward sales contracts would be entered into that would deal with the same rights and obligations that existed under the original forward sales contracts. This was achieved by using the commodity price relevant to the mid date in the range of maturity dates, and consolidating the quantities of commodity to be delivered. No payment changed hands between the parties and there was no change in the financial position of the parties before or after the termination of the original forward sales contracts. The termination resulted in each party being discharged of their obligations to satisfy performance on the specified dates under the original forward sales contracts on the understanding that the obligations would be performed under the new forward sales contracts entered into. Having regard to the above, particularly the composite nature of the transaction, it cannot be said that a presently existing debt or obligation was created or that the parties had taken the necessary steps to be entitled to payment or had definitely been subjected to the liability, if a liability arose. Accordingly, no gain or loss 'came home' at the time the original forward sales contracts were terminated and the new forward sales contracts were established.", "Date_of_Decision": "5 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commodity transactions Deductions & expenses Derived Financial derivatives Forward contracts Forward rate agreements Forward transactions Hedging Incurred", "Case_References": "Taxation, Federal Commissioner of v. Australian Gas Light Co Newcastle Gas Co Ltd 83 ATC 4800 (1983) 15 ATR 105", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003835", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Commodity transactions Deductions & expenses Derived Financial derivatives Forward contracts Forward rate agreements Forward transactions Hedging Incurred"}
{"ATO_ID_Number": "ATO ID 2002/762", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income: Traineeship program", "Issue": "Is the amount received by the taxpayer from a traineeship program included in assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the amount received by the taxpayer from a traineeship program is included in assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is the employer of a trainee under a traineeship program. The traineeship program is providing sponsorship for the trainee during the 2002 income year. The entity providing the traineeship pays the sponsorship amount to the taxpayer.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer is made up of ordinary income and statutory income. Exempt income is not included in assessable income even when it is also ordinary or statutory income. Ordinary income has generally been held to include three categories: namely, income from rendering personal services, income from property and income from carrying on a business. The amount received by the taxpayer from the traineeship program is assessable income under section 6-5 of the ITAA 1997, as it was received as a consequence of carrying on a business and has the character of income. As such, it constitutes ordinary income. The amount received is not exempt from income tax by a provision of the ITAA 1997 or any other Commonwealth law.", "Date_of_Decision": "8 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Assessable income test Exempt income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002762", "Unmatched_Content": "Keywords Income Assessable income test Exempt income"}
{"ATO_ID_Number": "ATO ID 2002/793", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: GST received by an unregistered business", "Issue": "Is a taxpayer, who carries on a business but is not registered nor required to be registered for the goods and services tax (GST), required to include an amount collected as GST on behalf of the taxpayer, as assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the taxpayer, who carries on a business but is not registered nor required to be registered for the GST, is required to include an amount collected as GST on behalf of the taxpayer, as assessable income under subsection 6-5(1) of the ITAA 1997 as it is an amount received from a transaction carried out in the ordinary course of business.", "Facts": "The taxpayer carries on a business. The business is not registered nor required to be registered for GST. The business sold some stock through a third party on a consignment basis. The third party collected an amount as GST when the stock was sold and forwarded this amount to the taxpayer as part of the proceeds from the sale of the stock.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 includes income according to ordinary concepts, which is called ordinary income, as assessable income. Amounts received from transactions carried out in the ordinary course of business, such as the proceeds from the sale of trading stock (which includes goods on consignment), are normally considered to be ordinary income. Paragraph 17-5(a) of the ITAA 1997, however, states that an amount is not assessable income to the extent that it includes an amount relating to GST payable on a taxable supply. As the taxpayer is not registered nor required to be registered for GST, the taxpayer is not making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). As such, there is no GST payable on a taxable supply for the purposes of paragraph 17-5(a) of the ITAA 1997. The additional amount received by the taxpayer as GST is required to be included as assessable income under subsection 6-5(1) of the ITAA 1997 as it is an amount received from a transaction carried out in the ordinary course of business and is not excluded from assessable income under paragraph 17-5(a) of the ITAA 1997.", "Date_of_Decision": "3 July 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1) paragraph 17-5(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax GST registration Taxable supply Income Goods on consignment Trading stock", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002793", "Unmatched_Content": "Keywords Goods and services tax GST registration Taxable supply Income Goods on consignment Trading stock"}
{"ATO_ID_Number": "ATO ID 2002/849", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Plan Assessability of payments received by Plan company", "Issue": "Are the recoupment payments made by a Plan Company and received by company A in relation to any excess of the proceeds from the sale of forfeited shares over the Plan Company's acquisition cost assessable to Company A under Section 6-5 of the Income Tax Assessment Act 1997 ('ITAA 1997').", "Decision": "Yes. Where the proceeds from the sale of shares forfeited by the participants exceeds the acquisition cost paid by the Plan Company, the excess is assessable to Company A under section 6-5 of the ITAA 1997.", "Facts": "Company A wish to establish an employee Share Plan (ESP) as part of a broad remuneration strategy. To benefit under the ESP, employees are required to satisfy certain performance criteria. Company A through its Human Resource Committee would provide selected employees with the opportunity to acquire shares in Company A. The Human Resource Committee will impose offer conditions on these shares based on performance and continued employment within Company A. A Plan Company will be engaged to administer certain aspects of the ESP in accordance with the Plan Rules. The Plan Company will be a third party for Corporations Law reasons, it will not be controlled or owned by Company A. The participating employees will fund the acquisition cost of shares by way of a loan provided by an associate of Company A. The loan provided is non-interest bearing and fully recourse in nature. In the event that the Human Resource Committee determines that a participant's shares are to be forfeited, such forfeiture will generally be effected by the Plan Company acquiring the shares for an amount being the greater of the market value of the shares or the amount of the participant's loan which ever is greater. In these circumstances, if there are insufficient funds standing to the balance of the \"Plan Account \", Company A will make a payment to the Plan company to cover the shortfall between the proceeds from the Plan Company's sale of the forfeited shares and the amount the Plan Company is required to pay to acquire the forfeited shares from the participant. In the event of any excess funds, the Plan Company will remit the excess to Company A or use them for the purposes of the Plan as directed by Company A.", "Reasons_for_Decision": "Summary: These payments to Company A arise in connection with remuneration related activities of Company A and in certain cases may be regarded as a recovery of expenditure in connection with the operation of the Plan. Therefore these payments come within the meaning of \"income under ordinary concepts\" and accordingly, would be taxable to Company A under Section 6-5 of ITAA 1997.", "Date_of_Decision": "17 May 2002", "Year_of_Income": "Other/Substituted Accounting Period 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/847 | ATO ID 2002/848", "Subject_References": "Precedent Employee share loan benefit Income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002849", "Unmatched_Content": "Keywords Precedent Employee share loan benefit Income"}
{"ATO_ID_Number": "ATO ID 2002/916", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income - payment for seconded employee", "Issue": "Is a taxpayer assessable under section 6-5 of the Income Tax Assessment Act 1997 ('ITAA 1997') on an amount received as payment for a seconded employee?", "Decision": "Yes. A taxpayer is assessable under section 6-5 of the ITAA 1997 on an amount received as payment for a seconded employee as it represents income according to ordinary concepts.", "Facts": "The taxpayer is a non profit organisation. An employee of the taxpayer participated in a review of a project undertaken by an unrelated organisation. As a result, the taxpayer received a payment based on commercial rates which allowed the taxpayer to derive a profit from the transaction after paying the relevant employee and direct on-costs. The objectives of that project was consistent with the taxpayer's objectives. The taxpayer approved the secondment in part because it assisted them in fulfilling their own objectives.", "Reasons_for_Decision": "Summary: Assessable income consists of ordinary income and statutory income. Statutory income is defined in section 6-10 of the ITAA 1997 as any income which is not ordinary income. Ordinary income is defined in section 6-5 of the ITAA 1997 as income according to ordinary concepts. Amounts received in the ordinary course of a taxpayer's business or operations are income according to ordinary concepts. Even though the operations of the taxpayer are not conducted for commercial profit their operations are similar to those of a business. The project to which the employee was seconded was consistent with the taxpayer's objectives. By providing the services of their employee, the taxpayer was fulfilling these objectives. It follows that the payment was received by the taxpayer as a result of carrying out its normal operations and is therefore income according to ordinary concepts. Alternatively, the payment is considered to be ordinary income as the taxpayer has entered into the arrangement with the intention of making a gain from that arrangement. In Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 63 CLR 199; 87 ATC 4363; (1987) 18 ATR 693 the High Court stated 'The important proposition to be derived from Californian Copper and Ducker is that a receipt may constitute income, if it arises from an isolated business operation or commercial transaction entered into otherwise than in the ordinary course of the carrying on of the taxpayer's business, so long as the taxpayer entered into the transaction with the intention or purpose of making a relevant profit or gain from the transaction.' This transaction was a business or commercial transaction for the following reasons: The taxpayer intended to make a gain out of the transaction as the amount received was used to further its aims and assist in funding its operations. Therefore, the amount is income according to ordinary concepts and the taxpayer will be assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "4 September 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Business income Income", "Case_References": "Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 163 CLR 199 (1987) 18 ATR 693 87 ATC 4363", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002916", "Unmatched_Content": "Updated typo error in heading | Keywords Business income Income"}
{"ATO_ID_Number": "ATO ID 2001/433", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income - redemption of credit notes for provision of free services", "Issue": "Does the provision of services free of charge on redemption of a credit note constitute assessable income according to ordinary concepts under section 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Income according to ordinary concepts under section 6-5(1) does not apply to redeemed credit notes that have no conversion or transferable.", "Facts": "The taxpayer, an individual, operates a small business which provides services to other businesses and householders. In order to generate new and repeat business, the taxpayer intends to run a promotional/advertising campaign offering the chance to win $x worth of services if they use any of the taxpayer's services within a selected period. Winners will receive a credit note with a specified dollar value which may be redeemed at their leisure.", "Reasons_for_Decision": "Summary: The issue in this case is whether the redemption of a credit note issued free of charge by the taxpayer constitutes income. Income, or more specifically assessable income, is divided into two categories: Generally, if an amount is neither ordinary nor statutory income, it is not included in assessable income. An important feature to consider in determining whether a non-cash item received is income is whether it is convertible into money. If it is convertible into money it is more likely to be income, subject to fulfilling other tests, than if not convertible into money. In this case the credit note or notes represent no more than an inducement to continue to engage the services of the taxpayer in question, they have no conversion or transferable value to the taxpayer on redemption. At best they may generate future income but certainly do not, on redemption, constitute a receipt of income according to ordinary concepts.", "Date_of_Decision": "21 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001433", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2009/110", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Funds: exchange traded options - tax treatment of premiums receivable", "Issue": "Where a self managed superannuation fund (SMSF) writes an exchange traded option (ETO) as part of a hedging strategy, are the premiums receivable from that activity included as assessable income under either section 6-5 or 15-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where an SMSF writes an ETO as part of a hedging strategy, the premiums receivable from that activity are not included as assessable income under either section 6-5 or 15-15 of the ITAA 1997.", "Facts": "The taxpayer is a SMSF that is a complying superannuation fund. The taxpayer holds an investment portfolio composed of ASX listed Australian equities. The taxpayer writes an ETO over certain of these listed shares on the ASX Options Market as part of a hedging strategy.", "Reasons_for_Decision": "Summary: Paragraph 295-85(2)(a) of the ITAA 1997 provides that where a CGT event happens to a CGT asset of a complying superannuation fund, sections 6-5 and 15-15 of the ITAA 1997 will not apply and instead the CGT provisions will apply. An exception to this is contained in paragraph 295-85(3)(b) of the ITAA 1997 for CGT assets of the Fund that are An option is a CGT asset as defined in subsection 108-5(1) of the ITAA 1997 and options are specifically cited as an example of a CGT asset (see Note 1 to subsection 108-5(2) of the ITAA 1997). CGT Event D2 (granting of an option) will apply on the writing of an ETO by the Fund (section 104-40 of the ITAA 1997). Therefore, unless an ETO falls within one of the exceptions listed in paragraph 295-85(3)(b) of the ITAA 1997, the CGT provisions will be the only provisions to apply. An ETO does not satisfy either subparagraph 295-85(3)(b)(ii) or 295-85(3)(b)(iii) of the ITAA 1997. Neither is an ETO one of the specifically listed instruments in subparagraph 295-85(3)(b)(i) of the ITAA 1997. In relation to the phrase 'or other security' in subparagraph 295-83(3)(b)(i), it is necessary to look at the history of section 295-85 of the ITAA 1997 to determine what instruments are included within the meaning of the phrase. Section 295-85 of the ITAA 1997 represents a rewrite of section 304 of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 303(1) of the ITAA 1936 set out the meaning of 'security' for the purposes of section 304 of the ITAA 1936. The Explanatory Memorandum to the Bill that introduced sections 303 and 304 of the ITAA 1936 provides that. \"security\" ...for these purposes is defined in a similar way in Division 16E.\" The subsection 303(1) of the ITAA 1936 definition of security is now contained in paragraph 295-85(3)(b) of the ITAA 1997. Paragraph 3.1 of the Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006 that introduced section 295-85 of the ITAA 1997, states that the rewritten provisions in Subdivision 295-B of the ITAA 1997 (including section 295-85) do not change the law as it operated under the previous ITAA 1936 provisions. Therefore, subsection 295-85(2) of the ITAA 1997 will apply CGT as the primary code of taxation for superannuation funds unless the ETO is a security as understood for the purposes of Division 16E of the ITAA 1936. The Explanatory Memorandum accompanying Tax Laws Amendment Bill (No.2) 1986 which introduced Division 16E of the ITAA 1936 provided: \"security\" has been defined very widely...so as to encompass as many financial transactions as possible where there may be a deferral in the payment of income .\" The Commissioner has previously stated in Taxation Ruling TR 96/14, that the Division 16E of the ITAA 1936 definition of 'security' contained in subsection 159GP(1) of the ITAA 1936 applies only to debt securities or contracts that create debt-like obligations. Likewise, paragraph 295-85(3)(b) of the ITAA 1997 only encompasses debt securities or contracts that create debt-like obligations and therefore the phrase 'or other security' in subparagraph 295-85(3)(b)(i) of the ITAA 1997 covers only debt arrangements. An ETO is a contract to buy or sell a financial product such as a share. The terms of an ETO are standardised and set by the ASX. ETOs are held until expiry or exercise, or are closed out by entering into an equal but opposite position. An ETO is not a debt instrument and therefore it will not fall within the meaning of the phrase 'or other security' for the purposes of subparagraph 295-85(3)(b)(i) of the ITAA 1997. Subparagraph 295-85(3)(b)(iv) of the ITAA 1997 is broader than subparagraph 295-85(3)(b)(i) of the ITAA 1997. Like paragraph 159GP(1)(d) of the ITAA 1936 it includes a broad range of contracts under which there is a liability to pay an amount. However, TR 96/14 states that, in having regard to paragraphs (a), (b) and (c) of the definition of 'security', only those contracts that have 'debt like obligations' will usually fall under paragraph (d) of the definition of 'security'. In accordance with TR 96/14, there are not sufficient debt-like obligations attaching to an ETO for it to fall under paragraph (d) of the definition of 'security'. Further, deferral of income is not a feature of an ETO arrangement. Therefore, an ETO will not satisfy paragraph 295-85(3)(iv) of the ITAA 1997. Accordingly, an ETO is not an asset that falls within any of the exceptions in paragraph 295-85(3)(b) of the ITAA 1997. Further an ETO is not trading stock (ATO ID 2004/526). Therefore, the exception for trading stock in subsection 295-85(4) of the ITAA 1997 will not apply. As no exceptions in either subsection 295-85(3) or 295-85(4) of the ITAA 1997 apply to the Fund, the premiums receivable will not be assessable income of the Fund under section 6-5 of the ITAA 1997 but will be capital proceeds of the ETO under the CGT provisions. CGT Event D2 will apply on the writing of an ETO by the Fund. The Fund as grantor of the option will make a capital gain (or loss) of the difference between the capital proceeds (that is, the premium receivable) and the cost of granting the option (for example, brokerage fees) at the time the option is granted (subsection 104-40(3) of the ITAA 1997). Any capital gain arising under CGT event D2 is not eligible for the CGT discount (subsection 115-25(3) of the ITAA 1997).", "Date_of_Decision": "28 September 2009", "Year_of_Income": "Income year ending 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 Division 16E subsection 159GP(1) paragraph 159GP(1)(d) section 303 subsection 303(1) section 304", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/14 | Taxation Determination TD 2006/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/526 | ATO ID 2006/313", "Subject_References": "Self managed superannuation funds Derivatives Capital gains tax", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment Bill (No. 2) 1986 Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009110", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/14 Taxation Determination TD 2006/25 | Keywords Self managed superannuation funds Derivatives Capital gains tax"}
{"ATO_ID_Number": "ATO ID 2010/120", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax exemption: payments received by Australian resident from Income Protection Policy - payments replace income (exempt foreign employment income)", "Issue": "Are payments received by an Australian resident under an income protection policy, to replace salary and wages considered to be 'eligible foreign remuneration' for the purposes of subsection 23AF(18) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Payments received by an Australian resident under an income protection policy, to replace salary and wages are not considered to be 'eligible foreign remuneration' for the purposes of subsection 23AF(18) of the ITAA 1936.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer worked on an 'approved project' as defined in subsection 23AF(18) of the ITAA 1936 for a period of not less than 91 days. As an employee of an eligible contractor for the purposes of section 23AF of the ITAA 1936, the taxpayer received salary and wages that was directly attributable to the taxpayer's personal services in connection with the approved project. Due to ill-health directly related to the conditions he worked under, the taxpayer returned to Australia and did not return to continue working on the approved project. Subsequently, the taxpayer received monthly payments under an income protection insurance policy for a period of two years, which was the remainder of the life of the approved project. These payments were to replace the income he would have received if he had continued to work on the project. The income the taxpayer received from the income protection policy was paid as part of an insurance policy that was taken out by the taxpayer. The income was paid by the insurance company and not by the employer.", "Reasons_for_Decision": "Summary: Subsection 23AF(1) of the ITAA 1936 provides that where an individual taxpayer has been engaged on 'qualifying service' on a particular approved project for a continuous period of not less than 91 days, any 'eligible foreign remuneration' derived by the person that is attributable to that qualifying service will be exempt from tax in Australia. 'Eligible foreign remuneration' is defined in subsection 23AF(18) of the ITAA 1936: eligible foreign remuneration in relation to a person, means income (not being excluded income) that is derived by the person at a time when the person is a resident, being: (a) income consisting of salary, wages, commission, bonuses or allowances, or of amounts included in a person's assessable income under Division 83A of the Income Tax Assessment Act 1997 (about employee share schemes), derived by the person in his capacity as an employee of an eligible contractor; or (b) income, or amounts included in a person's assessable income under that Division, derived by the person under a contract with an eligible contractor, being a contract that is wholly or substantially for the personal services of the person; One of the conditions that must be satisfied for income to come with the definition of 'eligible foreign remuneration' is that it must be derived by a resident individual either in his or her capacity as an employee of an eligible contactor or under a contract with an eligible contractor for his or her personal services. The income the taxpayer received from the income protection policy, was paid directly under an insurance policy that was taken out by the taxpayer. As such, this income would not fall within the definition of 'eligible foreign remuneration' under subsection 23AF(18) as those payments were not derived by the taxpayer in their capacity as an employee of an eligible contractor or under a contract with an eligible contractor for the taxpayer's personal services. Accordingly the payments received by an Australian resident under an income protection policy, to replace salary and wages are not considered to be 'eligible foreign remuneration' for the purposes of subsection 23AF(18) of the ITAA 1936. Hence the payments received would not qualify for the exemption under subsection 23AF(1) of the ITAA 1936.", "Date_of_Decision": "11 May 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 23AF(1) subsection 23AF(18)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Approved overseas projects Australians overseas Income protection insurance International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010120", "Unmatched_Content": "that is directly attributable to qualifying service by the person on an approved project and includes any payments received in lieu of eligible leave that accrued in respect of a period during which the person was a resident and was engaged on qualifying service on an approved project. | Keywords Approved overseas projects Australians overseas Income protection insurance International tax"}
{"ATO_ID_Number": "ATO ID 2010/213", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of pre-judgment interest", "Issue": "Is pre-judgment interest received as part of a lump sum compensation payment for personal injury assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Pre-judgment interest received as part of a lump sum compensation payment for personal injury is not assessable under section 6-5 of the ITAA 1997 as the amount is a capital receipt.", "Facts": "The taxpayer sustained personal injuries in a work related accident. They took legal action seeking compensation for their injuries. As a result, they were awarded a lump sum damages payment. The payment included an amount of pre-judgment interest.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 includes ordinary income in a taxpayer's assessable income. Interest income is normally regarded as ordinary income for the purposes of section 6-5 of the ITAA 1997. Lump sum damages awarded at common law for a personal injury claim often include amounts of interest in the form of pre-judgment and/or post-judgment interest. Pre-judgment interest is calculated from the date the cause of action (for example the accident) occurred until the date the judgment is made. In Whitaker v. Federal Commissioner of Taxation (1998) 82 FCR 261; 38 ATR 219; 98 ATC 4285 ( Whitaker ), the full Federal Court considered the assessability of interest on damages awarded for personal injury. The court decided that pre-judgment interest did not have the character of income but was a receipt of a capital nature. It noted that: In view of the decision in Whitaker it is accepted that the amount of pre-judgment interest received as a result of the award of damages for personal injury is a capital receipt and is not assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "8 November 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/404", "Subject_References": "Compensation income Damages income Interest income Personal injury awards Workers compensation income", "Case_References": "Whitaker v Federal Commissioner of Taxation (1998) 82 FCR 261 98 ATC 4285 38 ATR 219", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010213", "Unmatched_Content": "Keywords Compensation income Damages income Interest income Personal injury awards Workers compensation income"}
{"ATO_ID_Number": "ATO ID 2004/405", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a compensation payment to be made to an Australian resident pursuant to an Austrian court order for loss of earnings", "Issue": "Will a compensation payment to be made to an Australian resident taxpayer pursuant to an Austrian court order for loss of earnings in the Netherlands, be assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The compensation payment to be made to the Australian resident taxpayer for loss of earnings in the Netherlands will be assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer was involved in a motor vehicle accident in Austria. At the time of the accident, the taxpayer was a resident of the Netherlands and was working in the Netherlands. The taxpayer commenced proceedings in Austria for compensation for the period from the time of the accident until a subsequent date. The taxpayer was a resident of the Netherlands for the entire period. The compensation relates to loss of earnings in the Netherlands during that period. A lump sum payment will be made from the insurance company to the taxpayer pursuant to the court order.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income is income according to ordinary concepts (subsection 6-5(1) of the ITAA 1997). Income according to ordinary concepts has been held by the courts to include income from the rendering of personal services, income from property and income from carrying on of a business. An amount paid to compensate for loss generally acquires the character of that for which it is substituted ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82; (1952) 8 AITR 443). Compensation payments which substitute income have been held by the courts to be income under ordinary concepts ( FC of T v. Inkster 89 ATC 5142, (1989) 20 ATR 1516; Tinkler v. FC of T 79 ATC 4641, (1979) 10 ATR 411). In Case U165 87 ATC 955, a non-resident taxpayer, who had returned to his country of origin, received compensation under Australian legislation. It was held that the payments had an Australian source. The factors to be taken into account included: from where the payments were sent; by whom and to whom they were sent and received respectively; and where the liability to make the payment arose. The compensation payment to the taxpayer will be sent from Austria by an Austrian insurance company in discharge of a liability that arose under an Austrian court order due to an injury that occurred in Austria. The only connection that this payment will have with a place outside of Austria is its destination. Hence the payment will clearly be sourced in Austria. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for section 160AO and Part IVA of the ITAA 1936). Schedule 27 to the Agreements Act contains the double tax agreement between Australia and Austria (Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income received by Australian and Austrian residents. Article 21 of the Austrian Agreement provides that items of income which are not specifically mentioned in the Austrian Agreement that are received by an Australian resident are taxable only in Australia. However, if the income is derived from sources in Austria, it may also be taxed in Austria. Article 21 does not apply to income derived by an Australian resident from a permanent establishment or fixed base in Austria. The taxpayer will receive a compensation payment from an Austrian source. There are no specific Articles in the Austrian Agreement that deal with compensation payments, therefore Article 21 of the Austrian Agreement will apply. Accordingly, the compensation payment may be taxed in Austria and Australia. As the income will be derived by a resident of Australia and may be taxed in Austria, the income will be deemed to be income from sources in Austria under Article 22 of the Austrian Agreement. Article 23(1) of the Austrian Agreement provides that where Austrian tax has been paid on income that has a source in Austria by an Australian resident, a credit of tax will be allowed against Australian tax payable in respect of that income. Accordingly, the compensation payment to be made to the Australian resident taxpayer will be assessable under subsection 6-5(2) of the ITAA 1997. The taxpayer will be entitled to a foreign tax credit.", "Date_of_Decision": "23 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1) subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Austria Compensation income Double tax agreements Foreign tax credits International tax", "Case_References": "Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 (1952) 10 ATD 82 (1952) 8 AITR 443", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004405", "Unmatched_Content": "This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Austria Compensation income Double tax agreements Foreign tax credits International tax"}
{"ATO_ID_Number": "ATO ID 2004/512", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an act of grace payment", "Issue": "Is an act of grace payment approved under section 33 of the Financial Management and Accountability Act 1997 (FMAA 1997) assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The act of grace payment approved under section 33 of the FMAA 1997 is not assessable under section 6-5 of the ITAA 1997 as it is not ordinary income.", "Facts": "As a result of information provided by a government department the taxpayer considered that they were eligible and applied for a pension administered by that department. After a formal consideration of their claim it was decided that they were not in fact eligible. After a review it was considered that, based on the information provided by the department, it was reasonable for the taxpayer to have concluded that they were eligible for the pension when they were not. In view of this, an act of grace payment was approved under subsection 33(1) of the FMAA 1997 to redress the situation that resulted from the misleading information which had been provided by the department. While the payment was calculated by reference to the amount of pension the taxpayer would have received if they had been eligible, it was not paid in substitution of that pension. The payment was made as a lump sum.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 defines assessable income as including income according to ordinary concepts (ordinary income). There are a number of factors which can assist in determining whether a particular receipt is ordinary income. These include: An act of grace payment under section 33 of the FMAA 1997 is a voluntary payment made by the Commonwealth where there is a moral obligation rather than a legal obligation to do so. Whether a voluntary payment is assessable income was considered in Dixon's Case . In holding that the amount was assessable income Dixon CJ and Williams J held that four factors were relevant: In looking at these four factors in the circumstances here it is considered that the payment is not ordinary income as: Accordingly, the payment is not assessable income under section 6-5 of the ITAA 1997 as it is not ordinary income.", "Date_of_Decision": "10 May 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assessable income Lump sum payments", "Case_References": "FC of T v. Harris (1980) 10 ATR 869 80 ATC 4238", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004512", "Unmatched_Content": "Keywords Assessable income Lump sum payments"}
{"ATO_ID_Number": "ATO ID 2003/263", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Income : Ex-gratia payment to deployed AFP officer working in East Timor", "Issue": "Is an ex-gratia payment made to compensate the taxpayer, an Australian Federal Police (AFP) officer, for tax they paid while serving in East Timor assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An ex-gratia payment made to compensate the taxpayer, an AFP officer, for tax they paid while serving in East Timor is assessable income under section 6-5 of the ITAA 1997", "Facts": "The taxpayer is an AFP officer. They served with the United Nations in East Timor for a period less than 91 days. They paid tax on the income they received during the period they were in East Timor. The Commonwealth Government decided to make an ex gratia payment to the taxpayer to compensate them for the tax paid in regard to this income.", "Reasons_for_Decision": "Summary: Under subsection 6-5(2) of the ITAA 1997 the assessable income of an Australian resident includes income according to ordinary concepts received from all sources, whether in or out of Australia, during the income year. Whether a voluntary payment is income according to ordinary concepts depends on the character of the payment in the hands of the recipient ( Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514; (1966) 14 ATD 286; (1966) 10 AITR 367). In Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 5 AITR 443; (1952) 10 ATD 82 the taxpayer voluntarily joined the army. His former employer made a series of payments to him equal to the difference between his salary prior to joining the army and his army salary. The High Court held that the payments were assessable income in the hands of the taxpayer, Fullagar J said: What is to my mind, decisive is that the expressed object and the actual effect of the payments made was to make an addition to the earnings, the undoubted income, of the respondent. What the employing firm decided to do, and what it really did, in relation to the respondent and others in the same position was \" to make up the difference between their present rate of wages and the amount they will receive\". What is paid is not salary or remuneration, and it is not paid in respect of or in relation to any employment of the recipient. But it is intended to be, and is in fact, a substitute for - the equivalent pro tanto of - the salary or wages which would have been earned and paid if the enlistment had not taken place. As such, it must be income, even though it is paid voluntarily and there is not even a moral obligation to continue making the payments. It acquires the character of that for which it is substituted and that to which it is added. The ex-gratia payment made to the taxpayer is aimed at making up the difference between what the taxpayer received and what they would have received if their income had been exempt. The payment is a substitute for the salary that went to pay their income tax and acquires the character of that for which it is substituted. Accordingly the amount is considered to be income according to ordinary concepts and assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "12 March 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Ex gratia payments Foreign income", "Case_References": "Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514 (1966) 10 AITR 367 (1966) 14 ATD 286", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003263", "Unmatched_Content": "Keywords Ex gratia payments Foreign income"}
{"ATO_ID_Number": "ATO ID 2003/339", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of lump sum payment - for lifetime right to reside in a property", "Issue": "Is a lump sum amount received by the taxpayer, for granting a lifetime right to reside in a property, ordinary income for the purposes of section 6-5 of the Income Tax Assessment Act (ITAA 1997)?", "Decision": "No. A lump sum amount received by the taxpayer, for granting a lifetime right to reside in a property, is not ordinary income for the purposes of section 6-5 of the ITAA 1997.", "Facts": "The taxpayer owns an investment property. The taxpayer granted their relative the right to live in this property rent free. In return for this the relative gave the taxpayer the lump sum proceeds from the sale of their previous home. There was no formal agreement entered into between the parties. No lease agreement was entered into. There were no conditions attached to the payment of the lump sum under which the lump sum or any portion thereof had to be repaid to the relative.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income is defined as income according to ordinary concepts (subsection 6-5(1) of the ITAA 1997). Factors like periodicity, recurrence or regularity, and services performed have been identified by the courts as indicating that an amount is income according to ordinary concepts. However, an amount received in a lump sum can also be ordinary income depending on the nature of the lump sum payment. If the purpose of the lump sum payment is to provide a substitute for an income stream then that lump sum may take on the character of those payments it is intended to replace. In the circumstances here, the issue is whether this lump sum was intended to replace future rental income and whether it amounted to a lump sum payment of prepaid rent. We can take some guidance on this issue from Taxation Ruling TR 2002/14 which deals with the characterisation of receipts on the grant of occupancy rights in the context of retirement villages. Although this ruling applies to the taxation of retirement village operators the principles discussed in determining whether an amount is prepaid rent are relevant here. Paragraph 129 of TR 2002/14 summarises the circumstances where a lump sum should be accounted for as prepaid rent as being where: In the circumstances here, the taxpayer has received the lump sum payment for granting their relative the right to occupy the property. This right to occupy is for an indeterminate period being the life of the relative. It is not for a fixed term. The taxpayer is not required to refund the amount or any portion of the amount, regardless of how long the property is occupied. While the payment will allow the relative to have the use and enjoyment of the dwelling, the amount is not calculated by reference to their use for a fixed term. There is no relationship to any weekly or other periodic amount of rent. This amount has been paid as a consideration for the grant of the right to occupy, rather than as a payment intended as rent for the use of the property. Therefore, the lump sum payment does not have the character of prepaid rent. It is not received by the taxpayer in substitution for future amounts of ordinary income (that is rent) and therefore, does not take the character of ordinary income. Accordingly, the lump sum amount received by the taxpayer is not assessable under section 6-5 of the ITAA 1997. Any potential capital gains tax consequences of granting a lifetime right to reside in a property are discussed in Taxation Ruling TR 2006/14.", "Date_of_Decision": "27 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/14 | Taxation Ruling TR 2006/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003339", "Unmatched_Content": "Included reference to TR 2006/14. | Related Public Rulings (including Determinations) Taxation Ruling TR 2002/14 Taxation Ruling TR 2006/14"}
{"ATO_ID_Number": "ATO ID 2003/404", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: lump sum compensation - pre-judgment interest - non personal injury", "Issue": "Is the pre-judgment interest awarded in a settlement for underpayment of wages assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Pre-judgment interest awarded in a settlement for underpayment of wages is assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer was awarded a lump sum payment by the Federal Court for underpayment of wages by the Federal Court. The payment included an amount of pre-judgment interest awarded under section 179A of the Workplace Relations Act 1996 . The pre-judgment interest was based on the amount of underpayment of wages and was calculated over the period between the date when the cause of action arose and the date on which the judgment was entered.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Taxation Ruling TR 95/35 deals with the taxation treatment of compensation receipts. In paragraph 26 of TR 95/35, the receipt of interest as part of the compensation payment is considered to be assessable income of the taxpayer under the general income provisions. However, the treatment of the pre-judgment interest in a compensation payment may be different depending on the nature of the damages being sought. The receipt of pre-judgment interest in the context of personal injury is considered to be capital in nature (refer ATO Interpretative Decision ATO ID 2010/213 and Whitaker v. Federal Commissioner of Taxation (1998) 82 FCR 261; 98 ATC 4285; (1998) 38 ATR 219 ( Whitaker )). In Whitaker , the interest was considered to be paid as part of a global amount for judgment awarded for pain and suffering. The interest was not calculated based on a sum ascertained before the judgment. The receipt of pre-judgment interest in a commercial situation was also discussed in Whitaker and distinguished from lump sum compensation payments that are for personal injury. In that case Black CJ stated (at 335): In other contexts the characterisation of an amount ordered to be paid as 'interest' as compensation for the loss or detriment suffered by a person by being kept out of his or her money would point to an amount receivable as income rather than as capital... And further (also at 335) I would add that the position here differs greatly from the commercial situation in which interest is payable as the price of being kept out of a specific or calculable principal sum... The receipt of interest as part of a compensation payment for personal injury is to be contrasted with a situation where the interest is part of a compensation payment made to replace lost wages rather than to compensate for the loss of earning capacity. In Atlas Tiles Ltd v. Briers (1978) 144 CLR 202; (1978) 9 ATR 142 at CLR 223; ATR 155, Barwick CJ said: If the award of damages for such an injury destroying or diminishing his earning capacity were merely a matter of replacing those earnings, the amount of the award would be taxable... In the taxpayer's case, the pre-judgment interest was awarded as part of their compensation for underpayment of wages. The principal amount was awarded to replace the earnings that were due to the taxpayer but were not paid. Therefore, the amount on which the interest was calculated was identifiable before the judgment was made and the interest was not part of a global amount for which judgment was made as in a personal injury case. The pre-judgment interest in the taxpayer's award was paid in respect of a specific or calculable principal sum. Accordingly, the pre-judgment interest is considered to be ordinary income and assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "7 May 2003", "Year_of_Income": "Year ended 30 June 1994 Year ended 30 June 1995 Year ended 30 June 1996 Year ended 30 June 1997 Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/35", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/213", "Subject_References": "", "Case_References": "Whitaker v. Federal Commissioner of Taxation (1998) 82 FCR 261 [1998] FCA 262 98 ATC 4285 (1998) 38 ATR 219", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003404", "Unmatched_Content": "Correction to punctuation. | Minor alterations to formatting/style. | Insert medium neutral case references. | Related Public Rulings (including Determinations) Taxation Ruling TR 95/35"}
{"ATO_ID_Number": "ATO ID 2003/512", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: Volunteer Firefighters Emergency and General Assistance payment", "Issue": "Is an Emergency and General Assistance payment made to a taxpayer under the Volunteer Firefighters Assistance package included in assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An Emergency and General Assistance payment made to a taxpayer under the Volunteer Firefighters Assistance package is included in assessable income under section 6-5 of the ITAA 1997 as it was paid as compensation to replace lost income.", "Facts": "Ex gratia payments were made by the Department of Family and Community Services, through Centrelink, under a Volunteer Firefighters Assistance Package. These payments were made as Emergency and General Assistance payments and were paid at the rate of $160 per day. They were paid to compensate volunteer firefighters for the loss of income they sustained while fighting bushfires in New South Wales. The payments were made to those firefighters who met the following criteria: The taxpayer was a volunteer firefighter who met these criteria and received an Emergency and General Assistance payment from Centrelink.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income. Ordinary income has been held by the courts to include income from the rendering of personal services, income from property and income from carrying on a business. An amount paid to compensate for loss generally acquires the character of that for which it is substituted ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; [1952] HCA 65; (1952) 5 AITR 443; (1952) 10 ATD 82). Compensation payments which are paid to substitute income have been held by the courts to be income ( Federal Commissioner of Taxation v. Inkster (1989) 24 FCR 53; [1989] FCA 423; 89 ATC 5142; (1989) 20 ATR 1516, Tinkler v. FC of T (1979) 10 ATR 411; 79 ATC 4641 and Case Y47 91 ATC 433; Case 7328 (1991) 22 ATR 3422). As an Emergency and General Assistance payment made under the Voluntary Firefighters Assistance package is paid as compensation to replace income, the payment acquires the character of income. Accordingly, a Voluntary Firefighters Assistance payment is ordinary income and is therefore assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "13 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Income support payments", "Case_References": "Taxation, Federal Commissioner of v. Dixon (1952) 86 CLR 540 [1952] HCA 65 (1952) 5 AITR 443 (1952) 10 ATD 82", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003512", "Unmatched_Content": "Inserted medium neutral citation for case reference | Inserted medium neutral citation | Keywords Income Income support payments"}
{"ATO_ID_Number": "ATO ID 2002/51", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Medicare Levy - whether receipt of lump sum payment related to a period when a taxpayer was a 'prescribed person' is excluded from taxable income", "Issue": "Is a lump sum payment which related to a period when the taxpayer was a 'prescribed person', excluded from taxable income for the purposes of calculating the rate of Medicare levy under subsection 6(1) of the Medicare Levy Act 1986 (MLA 1986)?", "Decision": "No. A lump sum payment which related to a period when the taxpayer was a 'prescribed person', is not excluded from taxable income for the purposes of calculating the rate of Medicare levy under subsection 6(1) of the MLA 1986.", "Facts": "The taxpayer received an assessable lump sum compensation payment from the Department of Defence. At the time of receipt of the lump sum payment the taxpayer had ceased to be a Defence Force member. The payment related to two earlier income years. The taxpayer had been a member of the Defence Force during those earlier years.", "Reasons_for_Decision": "Summary: Paragraph 251S(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that Medicare levy is payable on the taxable income of a person who was a resident of Australia at any time during the relevant income year. However, paragraph 251T(a) of the ITAA 1936 provides that the Medicare levy is not payable by a person who is a 'prescribed person' during the whole of the year of income. A 'prescribed person' is defined to include a member of the Defence Force (paragraph 251U(1)(a) of the ITAA 1936). The taxable income of a person includes any lump sum payment that was assessable income of the year of income. Such payments are assessable in the year of receipt. The lump sum payment to the taxpayer related to a period when the taxpayer was a member of the Defence Force and consequently was a 'prescribed person'. However, the lump sum payment was made to the taxpayer at a time when the taxpayer was no longer a member of the Defence Force and therefore no longer a 'prescribed person' within the definition of paragraph 251U(1)(a) of the ITAA 1936. The lump sum payment is therefore included in taxable income for the purposes of calculating the Medicare Levy under subsection 6(1) of the MLA 1986. It is not relevant that the taxpayer may have been a 'prescribed person' during the earlier years to which the payment relates.", "Date_of_Decision": "7 August 2001", "Year_of_Income": "", "Legislative_References": "Medicare Levy Act 1986 section 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Medicare levy Lump sum payments Prescribed person issues", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200251", "Unmatched_Content": "Keywords Medicare levy Lump sum payments Prescribed person issues"}
{"ATO_ID_Number": "ATO ID 2002/853", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Customer Service Guarantee Payment", "Issue": "Is the receipt of damages paid by a telephone company as a result of a breach of the Telecommunications (Customer Service Guarantee) Standard 2011 (CSG) included in the assessable income of the taxpayer under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Damages paid by the telephone company as a result of a breach of the CSG are not included in the assessable income of the taxpayer under section 6-5 of the ITAA 1997 as the payment is not ordinary income.", "Facts": "The Australian Communications and Media Authority issued a CSG that applies to telephone companies for the supply of standard fixed-line telephone services as well as five specified enhanced call handling features. The telephone company is bound by the CSG. Should the telephone company fail to comply with the CSG they are required to pay damages to the customer. The telephone company failed to meet the required standard under the CSG in relation to the connection of a private home telephone. The telephone company was required to pay damages to the taxpayer as a result of this breach of the CSG. The damages payment made by the telephone company to the taxpayer was not in any way made in return for the taxpayer relinquishing their rights to seek further damages from the telephone company.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income has generally been held to include 3 categories, namely, income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that: A compensation amount generally bears the character of that which it is designed to replace ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; [1952] HCA 65; (1952) 10 ATD 82; (1952) 5 AITR 443). Compensation payments which substitute income have been held by the courts to be income under ordinary concepts ( FC of T v. Inkster (1989) 24 FCR 53; [1989] FCA 423; (1989) 89 ATC 5142; (1989) 20 ATR 1516; Tinkler v. FC of T (1979) 40 FLR 116; [1979] FCA 88; 79 ATC 4641; (1979) 10 ATR 411 and Case Y47 91 ATC 433; AAT Case 7328 (1991) 22 ATR 3422). The payment the taxpayer received from the telephone company by way of damages was not made as compensation for any loss of income. The taxpayer received the payment as a result of the telephone company failing to comply with the required service standard under the CSG. Further to this, the damages amount does not have the characteristics of ordinary income. It is a one off lump sum payment and is not expected or relied upon. The damages only became payable as a result of a breach of the CSG by the telephone company and were not a reward for the performance of any services by the taxpayer. The damages amount paid by the telephone company as a result of the breach of the CSG is not ordinary income and therefore is not included in the taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "2 August 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/35", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Compensation income Damages income", "Case_References": "Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 [1952] HCA 65 (1952) 10 ATD 82 (1952) 5 AITR 443", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002853", "Unmatched_Content": "Updated reference to legislative instrument | Reasons for decisions Case References | Related Public Rulings (including Determinations) Taxation Ruling TR 95/35 | Keywords Income Compensation income Damages income"}
{"ATO_ID_Number": "ATO ID 2011/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional Currency Choice: A subsidiary member within a tax consolidated group cannot use a currency that is different from the 'applicable functional currency' chosen by the head company of that tax consolidated group, for the purposes of working out the head company's taxable income or tax loss", "Issue": "Can an eligible tier-1 company which is a subsidiary member of a Multiple Entry Consolidated (MEC) group, use the AUD for the purposes of working out the head company's taxable income or tax loss, when another eligible tier-1 company which is the head company of the MEC group has made a choice to use USD as its 'applicable functional currency' under Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An eligible tier-1 company which is a subsidiary member of a Multiple Entry Consolidated (MEC) group has no individual income tax identity and is treated as a part of the head company (rather than a separate entity) for head company and entity core purposes. The subsidiary member is covered by the head company's choice to use USD as its 'applicable functional currency' under Subdivision 960-D of the ITAA 1997.", "Facts": "The Austco consolidated group is a MEC group with two entry points into Australia. Austco-1 and Austco-2 are the two eligible tier-1 companies in the Austco MEC group. Austco-1 is the provisional head company of the Austco consolidated group. Austco-1 changed its functional currency (the currency of the primary environment in which the entity operates) from AUD to USD for Australian Statutory Accounts purposes in accordance with paragraphs 9 to 13 of Australian Accounting Standard AASB 121. Austco-2 continues to keep its accounts in AUD for Australian Statutory Accounts purposes in accordance with Australian Accounting Standard AASB 121. Austco-1 wishes to make a functional currency choice under item 1 of the table in subsection 960-60(1) of Subdivision 960-D of the ITAA 1997 to use USD as its 'applicable functional currency', with Austco-2 still using AUD for income tax purposes.", "Reasons_for_Decision": "Summary: Section 701-1 of the ITAA 1997 provides the 'single entity rule' (SER) in Part 3-90 of the ITAA 1997, which is that the subsidiary members of a consolidated group are taken to be parts of the head company and not separate entities for the head company and entity core purposes (that is, for working out the liability to income tax and losses). Taxation Ruling TR 2004/11 explains in detail the SER and how it applies to members of a consolidated group - refer to paragraphs 3, 4 and 7 as shown below. The SER Principle: 3. Section 701-1 of the ITAA 1997 is a key provision of the consolidation regime. It is the means by which the members of a consolidated group are treated as a single entity (being the head company) for income tax purposes. 4. The SER operates for the purposes set out in subsections 701-1(2) and (3) of the ITAA 1997 (the core purposes). These purposes are to work out the amount of the head company and subsidiary member's liability for income tax and the amount of a loss for a relevant period. They include all matters relevant and incidental to those calculations. The intended operation of the SER is to apply the income tax laws to a consolidated group as if it were a single entity. ... . 7. For income tax purposes the SER deems subsidiary members to be parts of the head company rather than separate entities during the period that they are members of the consolidated group. Under section 719-5 of the ITAA 1997, a MEC group is formed by 2 or more eligible tier-1 companies making an irrevocable choice to consolidate a potential MEC group derived from those eligible tier-1 companies. Subsection 719-60(1) of the ITAA 1997 provides that the eligible tier-1 companies must jointly nominate one of themselves to be the provisional head company of the MEC group. Here, Austco-1 has been jointly appointed as the provisional head company of the Austco consolidated group. Item 1 of the table in subsection 960-60(1) of Subdivision 960-D of the ITAA 1997 provides that an Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 may choose to use the 'applicable functional currency' to work out its taxable income or tax loss. Taxation Determinations TD 2006/7 and TD 2007/24 consider the situation where the entity that is required to prepare financial reports under section 292 of the Corporations Act 2001 and wishes to make a functional currency choice, is the head company of a consolidated group. Taxation Determination TD 2006/7 notes that: 1. The head company can make the choice to use the 'applicable functional currency', as defined in section 960-70 of the Income Tax Assessment Act 1997 (ITAA 1997), under item 1 of the table in subsection 960-60(1). The fact that it is the head company of a consolidated group does not affect its reporting obligations under the Corporations Act 2001. 7. The choice of a head company under item 1 in the table in subsection 960-60(1) to use a non Australian currency as the 'applicable functional currency', means that the head company will work out its taxable income or tax loss as allowed under section 960-80 of the ITAA 1997. Under Part 3-90 of the ITAA 1997, this calculation will be one that applies to the head company as head company of the consolidated group. 8. The views expressed in this Determination apply equally to a MEC (multiple entry consolidated) group where appropriate. Taxation Determination TD 2007/24 states that: 6. The single entity rule in section 701-1 provides that if an entity is a subsidiary member of a consolidated group for any period, it and any other subsidiary member of the group are taken for 'head company core purposes' and 'entity core purposes' to be part of the head company, rather than separate entities for that period. The intended operation of the single entity rule is to apply the income tax laws for these purposes to a consolidated group, as if it was a single entity being the head company. 7. Calculation of the head company's liability for income tax, where this involves an application of item 1 of subsection 960-60(1), will come within the meaning of 'head company core purposes' for the purposes of section 701-1. The single entity rule in this context, will therefore affect the meaning of 'applicable functional currency' in subsection 960-70(1). 8. Accordingly, the term 'you' in subsection 960-70(1) refers, in such a case, to the head company of the consolidated group; including as parts of that entity all of the subsidiary members for the relevant period. ... 9. The 'applicable functional currency' of the head company of a multiple entry consolidated (MEC) group is determined in the same way as that set out above for the head company of a non-MEC consolidated group. The single entity rule in section 701-1 applies equally to both head companies (refer paragraph 15 of Taxation Ruling TR 2004/11). As indicated above, a consequence of the SER is that the head company is the only consolidated group member recognised for head company and entity core purposes. As the provisions of Subdivision 960-D will have an impact on the head company's liability to income tax, they come within the head company core purposes. Consequently, for a choice under item 1 of subsection 960-60(1), the head company is the only entity recognised - and the functional currency provisions will apply to that entity in its capacity as the head company of the consolidated group. This means that, in our case, only Austco-1 will be able to make a functional currency choice under item 1 of subsection 960-60(1) to work out a taxable income or tax loss as specified under Subdivision 960-D. Once a functional currency choice is made by the head company, all amounts that are not in the 'applicable functional currency' must be translated to this currency, under the provisions of subsection 960-80(1) or section 960-85 of the ITAA 1997. Thus, a head company that has made an effective functional currency choice under item 1 of subsection 960-60(1), is required to calculate its taxable income or tax loss (including the assessable income and allowable deductions of all of its subsidiary members) in the functional currency it has chosen. It follows that a head company cannot make a functional currency choice under item 1 of subsection 960-60(1) on behalf of only some subsidiary members of the consolidated group. A head company makes a choice under item 1 of subsection 960-60(1) as head company of all subsidiary members of the consolidated group. This is despite any previous choices that may have been made by a subsidiary member prior to joining (or to the formation of) the consolidated group. Once the head company has made the functional currency choice, a subsidiary member cannot use AUD and must use the chosen functional currency in working out the head company's taxable income or tax loss. Example: A foreign company owns 100% of the shareholding in 2 Australian companies, each of which own other Australian subsidiaries. Both Australian companies (ET-1 Co 1 and ET-1 Co 2) are eligible tier-1 companies for the purposes of the consolidation provisions. ET-1 Co 1 keeps its accounts in USD. ET-1 Co 2 keeps its accounts in AUD. Scenario 1: ET-1 Co 1 is nominated as the provisional head company of the MEC group. After looking at the 'accounts' of all the members of the consolidated group in accordance with TD 2007/24, a functional currency choice is made by ET-1 Co 1 to use USD as its 'applicable functional currency'. Subdivision 960-D applies. ET-1 Co 2 and any other MEC group entity are covered by the functional currency choice of ET-1 Co 1. ET-1 Co 2 is deemed to be a part of ET-1 Co 1, rather than a separate entity, for head company and entity core purposes. Consequently, ET-1 Co 2 does not have a taxable income or tax loss and ET-1 Co 2 cannot make a functional currency choice. As head company of the MEC group, ET-1 Co 1 calculates its taxable income or tax loss in USD, before translating that net amount to AUD for the purpose of calculating income tax payable. This includes assessable income that it is taken to have derived and allowable deductions it is taken to have incurred because of the operation of the SER. Scenario 2: ET-1 Co 2 is nominated as the head company. On the basis that the currency predominantly used for the basic record keeping of the consolidated group is AUD, ET-1 Co 2 does not make a functional currency choice and continues to use AUD for accounting and income tax purposes. Subdivision 960-C applies. ET-1 Co 1 and any other MEC group entity are covered by the lack of any choice (to use a functional currency) by ET-1 Co 2. ET-1 Co 1 is deemed to be a part of ET-1 Co 2 rather than a separate entity, for head company and entity core purposes. Consequently, ET-1 Co 1 does not have a taxable income or tax loss and ET-1 Co 1 cannot make a functional currency choice. As head company of the MEC group, ET-1 Co 2 calculates its taxable income or tax loss in AUD. This includes assessable income that it is taken to have derived and allowable deductions it is taken to have incurred because of the operation of the SER. | Detailed Reasoning - Conclusion: Only Austco-1 as the head company of the MEC group has a taxable income or a tax loss and is able to choose an 'applicable functional currency' under subsection 960-60(1). In order to do this, it needs to satisfy the requirement that the 'sole or predominant currency in which it keeps its accounts' is a currency other than AUD. This will require an examination of all the 'accounts' of the MEC group as a whole (see Taxation Determination TD 2007/24). If the head company has made an effective choice to use USD as its 'applicable functional currency', the functional currency choice will apply to all subsidiary members of the MEC group.", "Date_of_Decision": "17 October 2011", "Year_of_Income": "30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-90 section 701-1 subsection 701-1(2) subsection 701-1(3) section 719-5 subsection 719-60(1) Subdivision 960-C Subdivision 960-D subsection 960-60(1) section 960-70 subsection 960-70(1) section 960-80 subsection 960-80(1) section 960-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11 | Taxation Determination TD 2006/7 | Taxation Determination TD 2007/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounts Applicable functional currency Consolidated group Multiple entry consolidated group Single entity rule", "Case_References": "", "Other_References": "Australian Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201185", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 Taxation Determination TD 2006/7 Taxation Determination TD 2007/24 | Keywords Accounts Applicable functional currency Consolidated group Multiple entry consolidated group Single entity rule"}
{"ATO_ID_Number": "ATO ID 2010/220", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency: the interaction between 'functional currency' for accounting purposes and the 'applicable functional currency' for taxation purposes", "Issue": "Where an entity has a 'functional currency' for accounting purposes, will this of itself qualify that currency as the entity's 'applicable functional currency' for taxation purposes?", "Decision": "No, an entity's 'functional currency' for accounting purposes will not qualify as the 'applicable functional currency' for taxation purposes unless the requirements set out in section 960-70 of Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997) are met.", "Facts": "The entity is an Australian resident that is required to prepare financial reports under section 292 of the Corporations Act 2001 . The entity's sole or predominant foreign currency in which it kept its 'accounts' was the US dollar at the time it made the choice in a prior income year to use the US dollar as its 'applicable functional currency' for taxation purposes pursuant to item 1 of the table in subsection 960-60(1) of the ITAA 1997. At the time that the entity made its choice to use the US dollar as its 'applicable functional currency' for taxation purposes, its 'functional currency' for accounting purposes was also the US dollar. The entity's 'functional currency' for accounting purposes has recently changed from the US dollar to the Australian dollar as a result of a number of commercial factors, which has lead to changes in the entity's reporting and accounting systems so that the entity now keeps its 'accounts' in Australian dollars. The entity seeks to withdraw their choice of the US dollar as the 'applicable functional currency' for taxation purposes pursuant to item 1 of the table in subsection 960-90(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 960-59 of the ITAA 1997 states that the object of Subdivision 960-D of the ITAA 1997, dealing with functional currency, is for the purposes of reducing compliance costs and reflecting commercial practice to allow certain entities whose accounts are kept solely or predominantly in a particular foreign currency to calculate their net incomes by reference to the functional currency. Under item 1 of the table in subsection 960-60(1) of the ITAA 1997, an Australian resident that is required to prepare financial reports under section 292 of the Corporations Act 2001 may choose to use the 'applicable functional currency'. For an Australian resident making a choice under item 1 of the table in subsection 960-60(1) of the ITAA 1997, the 'applicable functional currency' is defined in subsection 960-70(1) of the ITAA 1997 to be the sole or predominant foreign currency in which they kept their 'accounts' at the time they made the choice. Subsection 960-70(4) of the ITAA 1997 defines 'accounts' to mean: a) ledgers; and b) journals; and c) statements of financial performance; and d) profit and loss accounts; and e) balance-sheets; and f) statements of financial position; Item 1 of the table in subsection 960-90(1) of the ITAA 1997 has the effect that, where you have previously made a choice under subsection 960-60(1), you may withdraw this choice where your 'applicable functional currency' has ceased to be the sole or predominant currency in which you keep your 'accounts' (within the meaning of section 960-70). The Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No.1) 2003 (the EM) relevantly states: 3.54 ... Broadly, an entity's applicable functional currency is the sole or predominant currency in which its accounts are kept ... This aligns the commercial rationale for accounting in a foreign currency with the use of that currency for income tax purposes. ... 3.55 For Australian residents required to prepare financial reports under section 292 of the Corporations Act 2001 , the applicable functional currency for the income year and each later year for which the choice is in effect, is the sole or predominant foreign currency in which the books of account are kept. ... 3.86 A taxpayer is not compelled to withdraw a choice and the choice can only be withdrawn if the applicable foreign currency has ceased to be the sole or predominant currency in which the entity ... keeps its books of account. [Emphasis added in paragraph 3.86 of the EM]. The EM thereby supports the legislation that, fundamental to being able to choose to use the 'applicable functional currency', or to withdraw the choice to use the 'applicable functional currency', an entity must keep or cease to keep, as is applicable, their books of account solely or predominantly in the relevant foreign currency. For accounting purposes, the Australian Accounting Standards Board (AASB) adopted the Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates , which applies to annual reporting periods beginning on or after 1 January 2005. AASB 121 defines 'functional currency' as the currency of the primary economic environment in which the entity operates, which is normally the currency in which it primarily generates and expends cash (refer to paragraphs 8 and 9 of AASB 121). An entity does not have a free choice as to whether to use functional currency for accounting purposes. Paragraphs 17 and 21 of AASB 121 require that: 17 In preparing financial statements, each entity - whether a stand-alone entity, an entity with foreign operations (such as a parent) or a foreign operation (such as a subsidiary or branch) - determines its functional currency in accordance with paragraphs 9-14. The entity translates foreign currency items into its functional currency and reports the effects of such translation in accordance with paragraphs 20-37 and 50. ... 21 A foreign currency transaction shall be recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. However, for taxation purposes, the 'applicable functional currency' under subsection 960-70 of the ITAA 1997 is premised on that foreign currency being the sole or predominant foreign currency in which the entity's 'accounts' are kept. In contrast to AASB 121, section 960-60 of the ITAA 1997 has the effect of giving an entity the choice as to whether or not to use a functional currency. It is therefore possible that an entity may have a 'functional currency' for accounting purposes that is different to the entity's 'applicable functional currency' for taxation purposes. With regard to the interaction between 'functional currency' for accounting purposes and the 'applicable functional currency' for taxation purposes, paragraph 15 of Taxation Determination TD 2006/4 stated that: ... an entity may be required under Australian law to keep its accounts in a currency other than Australian currency. This is governed currently by whether or not it is required to comply with the relevant Accounting Standard.5 At the time of issue of this Determination, the relevant Accounting Standard was AASB 121.6 It is accepted in relation to a year of income that, where an eligible entity within the meaning of subsection 960-60(1) of the ITAA 1997) is required under AASB 121 to keep its accounts so that entries are made in a non-Australian currency (referred to in AASB 121 as the 'functional currency'7), then that currency will qualify as the entity's 'applicable functional currency' for the purposes of subsection 960-70(1) of the ITAA 1997.8 [Emphasis added]. The 'functional currency' under AASB 121 will therefore qualify as the entity's 'applicable functional currency' for the purposes of subsection 960-70(1) of the ITAA 1997, only where the entity keeps its 'accounts' in a non-Australian currency such that entries are made in that (non-Australian) 'functional currency' for accounting purposes in accordance with paragraphs 17 and 21 of AASB 121. In order for an Australian resident to withdraw their functional currency choice made under item 1 of the table in subsection 960-60(1) of the ITAA 1997, item 1 of the table in subsection 960-90(1) of the ITAA 1997 clearly requires that their 'applicable functional currency' has ceased to be the sole or predominant currency in which they keep their 'accounts' within the meaning of section 960-70 of the ITAA 1997. Notwithstanding that the entity's 'functional currency' has changed from the US dollar to the Australian dollar for accounting purposes, it will be able to withdraw its choice of the US dollar as its 'applicable functional currency' for taxation purposes only where the requirements of section 960-90 of the ITAA 1997 are met. This will necessitate that the US dollar ceases to be the sole or predominant currency in which it keeps its 'accounts' within the meaning of section 960-70 of the ITAA 1997. In accordance with paragraph 15 of Taxation Determination TD 2006/4, this could be evidenced by the making of entries (that is, the recording of transactions, on initial recognition) for accounting purposes in a currency other than the US dollar, in accordance with paragraphs 17 and 21 of AASB 121. In this case, the entity now keeps its 'accounts' in Australian dollars, which means that the US dollar has ceased to be the sole or predominant currency in which the entity keeps its 'accounts' for taxation purposes. Indeed, even if the entity were to keep its 'accounts' equally in both the US dollar and Australian dollars, the US dollar would cease to be the sole or predominant currency in which the entity keeps its 'accounts' for taxation purposes. (Refer also to paragraphs 10 and 11 of Taxation Determination TD 2006/4). Therefore, the entity would be able to withdraw its choice of the US dollar as its 'applicable functional currency' pursuant to subsection 960-90(1) of the ITAA 1997", "Date_of_Decision": "25 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 960-D section 960-59 section 960-60 subsection 960-60(1) section 960-70 subsection 960-70(1) subsection 960-70(4) subsection 960-90(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Applicable functional currency Functional currency Functional currency choice", "Case_References": "", "Other_References": "Australian Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No.1) 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010220", "Unmatched_Content": "and includes statements, reports and notes attached to, or intended to be read with, any of the foregoing. | Related Public Rulings (including Determinations) Taxation Determination TD 2006/4 | Keywords Applicable functional currency Functional currency Functional currency choice"}
{"ATO_ID_Number": "ATO ID 2010/222", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency: translation requirements where an entity withdraws its 'applicable functional currency' choice", "Issue": "Are amounts required to be translated from the currency that was the 'applicable functional currency' into Australian currency (AUD) under section 960-50 of Subdivision 960-C of the Income Tax Assessment Act 1997 (ITAA 1997) - immediately after the time that the 'applicable functional currency' choice ceases to have effect and based on the relevant exchange rate at that time?", "Decision": "Yes. Where an 'applicable functional currency' choice ceases to have effect, all amounts for income tax purposes will be in the currency that was the 'applicable functional currency' and hence will be amounts in a 'foreign currency'. These amounts are required to be translated into AUD under section 960-50 of the ITAA 1997 - immediately after the time the 'applicable functional currency' choice ceases to have effect and based on the relevant exchange rate at that time.", "Facts": "The entity is an Australian resident who is required to prepare financial reports under section 292 of the Corporations Act 2001 (CA 2001). The entity chose the 'United States dollar' (USD) to be its 'applicable functional currency' pursuant to item 1 of the table in subsection 960-60(1) of Subdivision 960-D of the ITAA 1997, with the choice taking effect from 1 July 2003. Accordingly, the entity was required to translate all of its 'pre-choice' amounts into USD on 1 July 2003, under the two step translation rule in Item 1 of subsection 960-85(1) of Subdivision 960-D of the ITAA 1997. These 'pre-choice' amounts were amounts attributable to an event that happened, or a state of affairs that came into existence, at a time before the choice took effect, that is, before 1 July 2003. Subsequent to the effective time of the functional currency choice, the entity translated all amounts that were denominated in a currency other than USD into the 'applicable functional currency' of USD, under Item 1 of subsection 960-80(1) of Subdivision 960-D of the ITAA 1997. Hence, as at 31 December 2010, all of the entity's amounts for income tax purposes are either denominated in, or else have been translated into, USD. The entity will withdraw the USD as their 'applicable functional currency' choice in writing pursuant to subsections 960-90(1) and 960-90(2) of Subdivision 960-D of the ITAA 1997, no later than 31 December 2010. This withdrawal will take effect from 1 January 2011. The entity has not made a choice under subsection 960-60(1) of Subdivision 960-D of the ITAA 1997 to adopt another foreign currency as their 'applicable functional currency'. From 1 January 2011, the entity will keep its 'accounts' within the meaning of section 960-70 of Subdivision 960-D of the ITAA 1997, in AUD.", "Reasons_for_Decision": "Detailed Reasoning - Withdrawal of 'applicable functional currency' choice under section 960-90 of Subdivision 960-D: Item 1 of subsection 960-90(1) of Subdivision 960-D of the ITAA 1997 provides that an Australian resident who is required to prepare financial reports under section 292 of CA 2001 and whose 'applicable functional currency' has ceased to be the sole or predominant currency in which they keep their 'accounts', may withdraw their functional currency choice with effect from immediately after the end of the income year in which they withdraw their choice. As the USD has ceased to be the sole or predominant currency in which the entity keeps its 'accounts', the entity may withdraw their functional currency choice on or before 31 December 2010, with effect from 1 January 2011. | Detailed Reasoning - The foreign currency translation rules in section 960-50 of Subdivision 960-C: Section 960-49 of the ITAA 1997 outlines the objects of Subdivision 960-C of the ITAA 1997 as being: The core foreign currency translation rule is contained in subsection 960-50(1) of Subdivision 960-C of the ITAA 1997 and provides that: For the purposes of this Act, an amount in a *foreign currency is to be translated into Australian currency. 'Foreign currency' is defined in section 995-1 of the ITAA 1997 to mean 'a currency other than Australian currency'. As indicated above, an exception to this general rule is provided by Subdivision 960-D of the ITAA 1997, where an eligible entity keeps its 'accounts' in a foreign currency and has made an effective functional currency choice. In this case, the functional currency translation rules in subsection 960-80(1) and section 960-85 of Subdivision 960-D of the ITAA 1997 will apply. The entity has withdrawn their functional currency choice effective from 1 January 2011. Hence, the functional currency translation rules contained in subsection 960-80(1) of Subdivision 960-D of the ITAA 1997 cannot be used on or after 1 January 2011. Amounts that have been translated into USD under both section 960-85 and subsection 960-80(1) of the ITAA 1997 are clearly amounts in a 'currency other than Australian currency'. So are amounts that were denominated (transacted) in USD after the effective time of the functional currency choice and thus did not require translation under subsection 960-80(1). All of these amounts will be amounts in a 'foreign currency' as at 1 January 2011 - that is, once the USD functional currency choice has been effectively withdrawn under section 960-90 of the ITAA 1997. Accordingly, assuming the requirements stipulated in section 960-55 of Subdivision 960-C of the ITAA 1997 are met, the entity must use the 'foreign currency' translation rules in section 960-50 of the ITAA 1997 from and including 1 January 2011. | Detailed Reasoning - Subsection 960-55(1) of Subdivision 960-C - section 960-50 applies to 'a transaction, event, or thing that involves an amount in a foreign currency': Subsection 960-55(1) of the ITAA 1997 relevantly states that the translation rules in section 960-50 of the ITAA 1997 apply to: Section 960-55 of the ITAA 1997 provides that section 960-50 of the ITAA 1997 applies to 'a transaction, event or thing that involves an amount in a foreign currency' and occurs on or after the 'applicable commencement date'. Here, the entity's 'applicable commencement date' is 1 July 2003. Therefore, the relevant consideration with regard to section 960-50 of the ITAA 1997 being applicable is whether there is a 'transaction, event or thing' involving an 'amount in a foreign currency' which occurred on or after 1 July 2003. | Detailed Reasoning - Is the withdrawal of the USD functional currency choice under section 960-90 of Subdivision 960-D 'a transaction, event or thing'?: The ITAA 1997 does not provide definitions for 'transaction', 'event' or 'thing' for the purposes of section 960-55 of Subdivision 960-C. The Australian Oxford Dictionary , second edition, 2004 defines 'transaction' as 'a piece of esp. commercial business done, a deal'. Similarly, Taxation Ruling TR 1999/9 considers the definition of 'transaction' to essentially mean 'dealing' (refer to paragraphs 78 and 83). It is considered that the withdrawal of a functional currency choice does not fall within the meaning of 'transaction'. The Macquarie Dictionary lists a range of definitions for 'thing'; however none of these definitions appear to be relevant in the context of the withdrawal of a functional currency choice. It is therefore considered that a withdrawal does not fall within the definition of a 'thing'. The Macquarie Dictionary defines 'event' as 'anything that happens or is regarded as happening; an occurrence'. In Midland Mainline Ltd v. Eagle Star Insurance Co Ltd 2003 WL 21729319; [2003] EWHC 1771, Steel J found the words 'occurrence' and 'event' to be synonymous. In the House of Lords decision in Axa Reinsurance (UK) Ltd. v. Field [1996] 3 All E.R. 517; [1996] 1WLR 1026 at page 1025, Lord Mustill stated that: In ordinary speech, an event is something which happens at a particular time, at a particular place, in a particular way. Consistent with this, Taxation Ruling TR 2007/5 notes at paragraph 38 that: an event generally arises at a particular point in time, and is usually a factual happening or occurrence. It is considered that the withdrawal of a functional currency choice under section 960-90 of the ITAA 1997 is a 'factual happening or occurrence' which 'arises at a particular point in time' and so falls within the definition of an 'event'. | Detailed Reasoning - What is an 'amount'?: In applying section 960-50 of the ITAA 1997, subsection 960-50(1) requires that each 'amount' in a foreign currency is to be translated into Australian currency. Subsection 960-50(2) of Subdivision 960-C of the ITAA 1997 provides the following examples of an amount: The Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 (EM) stated at paragraph 3.5 that the amendments introduced a core translation principle that applies not only to assessable income and allowable deductions, but to all amounts which are relevant to calculating an entity's income tax liability. Paragraph 3.16 of the EM further states that the core translation rule applies to amounts generally and is intended to be interpreted broadly. Most notably, paragraph 960-50(2)(h) of the ITAA 1997 states that a 'value' is an amount. Subsection 960-50(3) of the ITAA 1997 states that, with the exception of 'ordinary income', the amounts 'may be on revenue account, capital account or otherwise'. It is readily apparent that the various amounts being values or other amounts in USD in the entity's 'accounts' for income tax purposes as at 31 December 2010, are all amounts for the purposes of Subdivision 960-C. | Detailed Reasoning - Does the withdrawal of the USD functional currency choice under section 960-90 of Subdivision 960-D 'involve an amount in a *foreign currency'?: The withdrawal of a functional currency choice under section 960-90 of the ITAA 1997 does 'involve an amount in a *foreign currency'. This is notwithstanding that subsection 960-80(1) of the ITAA 1997 provides, where a functional currency choice is in effect for an income year, that for the purpose of working out for the income year your taxable income or tax loss: Section 960-90 of the ITAA 1997 provides that a withdrawal of a functional currency choice has effect from immediately after the end of the income year in which you withdraw your choice. Thus, a withdrawal of a functional currency choice has no effect on the working out of taxable income or tax loss for the year in which the withdrawal of the choice is made. Rather, the withdrawal impacts only years subsequent to this year - being income years in which the functional currency choice is not in effect. Hence, the required conditions set out in subsection 960-80(1) of the ITAA 1997, for the definition of 'foreign currency' in subsection 995-1(1) of the ITAA 1997 not to apply, are not satisfied. The definition of 'foreign currency' in subsection 995-1(1) of the ITAA 1997 applies for the purpose of section 960-90 of the ITAA 1997. Thus, for the purpose of withdrawing a functional currency choice, all of the entity's amounts for income tax purposes in USD are amounts in a 'foreign currency'. It follows that the withdrawal of the USD functional currency choice is an 'event that involves an amount in a *foreign currency'. Treatment of amounts required to have been translated into the 'applicable functional currency' under subsection 960-85(1) or subsection 960-80(1) of Subdivision 960-D - and of amounts originally denominated (transacted) in the 'applicable functional currency' The translation of an amount which is not in the 'applicable functional currency' into the 'applicable functional currency' has effect for both the income year in which the translation takes place and all subsequent income years. Amounts translated into the 'applicable functional currency' remain in that currency unless a subsequent translation (triggered by the effective withdrawal of a functional currency choice) is required. All of the entity's amounts for income tax purposes as at 31 December 2010 are in USD. They will remain in USD following the effective withdrawal of the functional currency choice, until they are translated to AUD under section 960-50 of the ITAA 1997. This will take place on 1 January 2011 immediately after the withdrawal of the USD functional currency choice has taken effect. This is so whether the amounts were translated into USD by section 960-85 of the ITAA 1997 at the time when the USD became the 'applicable functional currency'; or whether they were translated into USD under subsection 960-80(1) of the ITAA 1997 after the USD had become the 'applicable functional currency'. In addition, as noted above, there will be other amounts in USD that were denominated (transacted) in USD during the time the entity was using USD as their 'applicable functional currency'. As with the amounts that required translation to USD under section 960-85 and subsection 960-80(1) of the ITAA 1997, these amounts in a 'foreign currency' (USD) will also need to be translated into AUD, in accordance with the core foreign currency translation rules contained in section 960-50 of the ITAA 1997. | Detailed Reasoning - Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No. 1) 2003: Consistent with the above, the EM confirms that, where a functional currency choice has been effectively withdrawn, and no new functional currency choice has been made, the core foreign currency translation rules in section 960-50 of Subdivision 960-C of the ITAA 1997 will apply. In this regard, the EM advises that: When is a choice withdrawn? 3.85 A choice can be withdrawn if the applicable foreign currency has ceased to be the sole or predominant currency in which the entity or part thereof keeps its books of account. ... 3.86 A taxpayer is not compelled to withdraw a choice and the choice can only be withdrawn if the applicable foreign currency has ceased to be the sole or predominant currency in which the entity ... keeps its books of account. 3.87 A choice must be withdrawn in writing [ Schedule 4, item 59, subsection 960 - 90(2 )]. Withdrawal of a choice does not prevent an entity from making a new choice [ Schedule 4, item 59, subsection 960 - 90(3 )]. If a new choice is not made after withdrawing an earlier choice, the entity or part of the entity will be required to use A$ for the purposes of calculating the income tax liability. ... Application and transitional provisions 3.89 The core translation rule applies to a transaction or event that involves an amount of foreign currency and occurs after the commencement date. However, the rule does not apply to a transaction or event involving an amount covered by subsections 775-110(1), (2) and (4) of the ITAA 1997. [ Schedule 4, item 59, section 960 - 55 ] 3.90 Sections 20, 102AAX and 391 of the ITAA 1936 and section 103-20 of the ITAA 1997 continue to apply in relation to a transaction or event to which section 960-50 does not apply. [ Schedule 4, item 78 ] | Detailed Reasoning - Accounting Standard AASB 121 - change in functional currency: It is noted that this is also consistent with Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates , which applies to annual reporting periods beginning on or after 1 January 2005. Paragraphs 35 and 37 of Accounting Standard AASB 121 provide that: Change in Functional Currency 35 When there is a change in an entity's functional currency, the entity shall apply the translation procedures applicable to the new functional currency prospectively from the date of the change . ... 37 The effect of a change in functional currency is accounted for prospectively. In other words, an entity translates all items into the new functional currency using the exchange rate at the date of the change. The resulting translated amounts for non-monetary items are treated as their historical cost. | Detailed Reasoning - Conclusion: The entity has withdrawn their 'applicable functional currency choice' with effect from 1 January 2011. Accordingly, the functional currency translation rules contained in subsection 960-80(1) of Subdivision 960-D of the ITAA 1997 cannot be used on or after 1 January 2011 (being the effective time of the withdrawal of the functional currency choice). At this time, all of the entity's amounts for income tax purposes will be in USD and hence will all be amounts in a 'foreign currency'. Subsection 960-50(1) of Subdivision 960-C of the ITAA 1997 requires that, for the purposes of this Act, an amount in a 'foreign currency' is to be translated into Australian currency. Central to the operation of section 960-50 of the ITAA 1997 is a 'transaction, event or thing that involves an amount in a foreign currency', occurring on or after the 'applicable commencement date' within the meaning of Division 775 of the ITAA 1997. Specifically, section 960-55 of Subdivision 960-C of the ITAA 1997 provides that section 960-50 of the ITAA 1997 applies to an 'event' that involves an 'amount in a foreign currency' and occurs on or after the 'applicable commencement date' (in this case on or after 1 July 2003). The withdrawal by the entity of its functional currency choice under subsection 960-90(1) of Subdivision 960-D of the ITAA 1997 constitutes an 'event' that involves an amount (indeed many amounts) in a 'foreign currency' (USD). Hence, the requirements stipulated in section 960-55 of the ITAA 1997 are met. Therefore, once the withdrawal of the functional currency choice has taken effect, the entity must immediately begin to use the core foreign currency translation rules contained in section 960-50 of the ITAA 1997. It follows that all of the entity's amounts for income tax purposes as at 1 January 2011 must be translated from USD to AUD, in accordance with the rules contained in section 960-50 of the ITAA 1997 (including subsection 960-50(6)). Subsection 960-50(6) of Subdivision 960-C of the ITAA 1997 sets out special translation rules, as modified by the regulations (refer to subsection 960-50(7) of the ITAA 1997). Notably, Regulation 960-50.01 adds item 11A to the table in subsection 960-50(6) of the ITAA 1997, which specifies that an amount (other than an amount of receipt or a payment) to which none of the above items applies is to be translated into Australian currency at an exchange rate that is reasonable having regard to the circumstances. Under these circumstances, the entity will be required to translate all its amounts from USD to AUD at the time the 'applicable functional currency' ceases to be in use, being 1 January 2011, at the relevant exchange rate in existence at that time.", "Date_of_Decision": "30 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Corporations Act 2001 section 292", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/9 | Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounts Functional currency choice Functional currency translation", "Case_References": "Midland Mainline Ltd v Eagle Star Insurance Co Ltd 2003 WL 21729319 [2003] EWHC 1771", "Other_References": "Australian Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates Australian Oxford Dictionary, 2004, rev. 2nd ed, Oxford University Press, Melbourne Macquarie Dictionary (version 5.0.0, 01/10/01) Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No. 1) 2003 Explanatory Statement to the Income Tax Assessment Amendment Regulations 2005 (No. 2)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010222", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 1999/9 Taxation Ruling TR 2007/5 | Keywords Accounts Functional currency choice Functional currency translation"}
{"ATO_ID_Number": "ATO ID 2010/147", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Bounties and subsidies: whether a repayable government payment a 'bounty or subsidy'", "Issue": "Is a government payment that is received to undertake activities to develop a new product to the stage where it can be taken to market a bounty or subsidy for the purposes of section 15-10 of the Income Tax Assessment Act 1997 (ITAA 1997), if the receipt is subject to a repayment obligation that may arise upon the happening of certain subsequent events?", "Decision": "Yes, a government payment received to undertake activities to develop a new product to the stage where it can be taken to market is a bounty or subsidy for the purposes of section 15-10 of the ITAA 1997, even though the receipt is subject to a repayment obligation that may arise upon the happening of certain subsequent events.", "Facts": "In carrying on a commercialisation project, the taxpayer received a government payment to undertake project activities to develop a new product to the stage where it can be taken to market. In order to receive this payment, the taxpayer was required to demonstrate, amongst other things, that: The funding agreement provides that the receipt of the government payment is subject to a repayment obligation that aligns with the success of the project. The project is considered successful if a specified accumulated sales level arising out of or in connection with the project is achieved. Where the specified accumulated sales level is not met within a certain period, no obligation to repay the funding arises unless or until notified by the government. Where the specified accumulated sales level is met, the obligation to repay will arise; however the government has the discretion to modify the obligation which will nevertheless conclude after ten years. That is, there is no obligation to repay outstanding funding amounts after the tenth anniversary of the project end date.", "Reasons_for_Decision": "Summary: Section 15-10 of the ITAA 1997 provides that assessable income includes a bounty or subsidy that is received in relation to carrying on a business and that is not assessable as ordinary income under section 6-5 of the ITAA 1997. Not all government grants are bounties or subsidies for the purposes of section 15-10 of the ITAA 1997. Taxation Ruling TR 2006/3 Income Tax : government payments to industry to assist entities (including individuals) to continue, commence or cease business sets out the Commissioner's view on circumstances in which a government payment will be considered to be a bounty or subsidy. The terms 'bounty' or 'subsidy' are not defined terms for the purposes of either the ITAA 1997 or Income Tax Assessment Act 1936 (ITAA 1936). However, the Courts in their consideration of how the terms were used in paragraph 26(g) of the ITAA 1936 (the predecessor to section 15-10 of the ITAA 1997) have provided some guidance as to their meaning which are equally relevant for section 15-10 of the ITAA 1997 (see Plant v. FCT 2004 ATC 2364; 58 ATR 1070.) In Reckitt and Colman PTY LTD v. FCT (1974) 4 ATR 501, 74 ATC 4185; Mahoney J said that the terms 'bounty' or 'subsidy' include a financial grant made by the State for the purpose of encouraging a particular activity in the field of trade and commerce. In First Provincial Building Society Ltd v. Commissioner of Taxation (1995) 30 ATR 207; 95 ATC 4145, Hill J referred to Jowitt's Dictionary of English Law's observation that the word subsidy generally means 'financial assistance granted by the Crown' and said that 'This is the meaning which the word truly has in the present context'. In this case, the government payment was provided to the taxpayer to undertake project activities to develop the product to the stage where it can be taken to market. The government payment is financial assistance granted to the taxpayer as it not only increased the financial capacity of the taxpayer to undertake the relevant activities but also reduced the taxpayer's risk of economic loss because the obligation to repay the payment only arises either if the project is successful or in very limited circumstances if the project is not successful. While some or all of the government payment may be repayable, this is not a case where the substance of the transaction is the provision of funds in consideration of a promise to repay that sum (c.f. AAT Case 9472 94 ATC 225; (1994) 28 ATR 1155 Case 22 / 94 ). That is, the provision of the government payment is not characterised as a loan (which would not be a bounty or subsidy for the purposes of section 15-10 of the ITAA 1997) as the essential feature of a loan (a definite obligation to repay the principal sum) is absent on entering the agreement. The provision of the government payment is subject to a contingent liability that may result in repayment in limited circumstances that might or might not ever eventuate. Whether or not the contingency occurs, the obligation to repay the funding did not exist at the time the funding agreement was entered into. In Smart v. Lincolnshire Sugar Co. Ltd (1933-1937) 20 TC 643, the court found that the presence of a similar contingent liability to repay a subsidy in a certain event did not in any way affect the characterisation of the receipt as a subsidy. Therefore, the fact that the government payment in the present case may become repayable does not change the substance of the transaction which is the provision of financial assistance. Accordingly, a government payment received to undertake activities to develop a new product to the stage where it can be taken to market is a bounty or subsidy for the purposes of section 15-10 of the ITAA 1997, even though the receipt is subject to a repayment obligation that may arise in certain events.", "Date_of_Decision": "13 August 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 15-10 section 59-30", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2006/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/292", "Subject_References": "Borrowing & loans Bounties & subsidies Business income Carrying on a business Government grants income Grants of financial assistance & funding Income", "Case_References": "First Provincial Building Society Ltd v Commissioner of Taxation 95 ATC 4145 (1995) 30 ATR 207", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010147", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2006/3 | Keywords Borrowing & loans Bounties & subsidies Business income Carrying on a business Government grants income Grants of financial assistance & funding Income"}
{"ATO_ID_Number": "ATO ID 2006/292", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Whether funding provided by a State government to a company under an industry investment incentive scheme is a grant or a loan", "Issue": "Is funding provided by a State government to a company to assist its expansion of the business premises and the upgrading of the manufacturing capabilities assessable as a grant, subsidy or bounty for the purposes of section 15-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Funding provided by a State government under an industry investment incentive scheme is not assessable as a grant, subsidy or bounty for the purposes of section 15-10 of the ITAA 1997 since the amount received is a loan.", "Facts": "A company received payments from a State government under an industry investment incentive scheme which was set up to provide incentives in the form of funding to new or existing businesses for investing in business ventures in that State. Under the scheme agreement, no interest is payable and periodic repayments are not required. The company must repay the total amount on the termination date which is the earlier of the expiry date of the scheme agreement and the date upon which a repayment event occurs. If the company fails to repay the amount, the amount or so much of it as remains unpaid for the time being will bear interest at the prescribed rate calculated from the termination date to the date on which it is repaid in full.", "Reasons_for_Decision": "Detailed Reasoning - A Grant/Subsidy/Bounty: Section 15-10 of the ITAA 1997 provides that assessable income includes a bounty or subsidy that is received in relation to carrying on a business and is not assessable as ordinary income under section 6-5 of the ITAA 1997. In Reckitt & Colman Pty Ltd v. FC of T 74 ATC 4185; (1974) 4 ATR 501 Mahoney J considered whether grants under the Industrial Research and Development Grants Act 1967 were assessable income under paragraph 26(g) of the Income Tax Assessment Act 1936 (ITAA 1936). In relation to the meaning of 'bounty' and 'subsidy' in that provision, Mahoney J stated: whatever the terms signify, they include in my opinion a financial grant made by the State for the purpose of encouraging a particular activity in the field of trade and commerce. This suggests that the financial grants provided by the government fall within the meaning of 'bounty' and 'subsidy'. If a financial assistance provided by the government is a bounty, a subsidy or a grant, it is accordingly included as an assessable income under section 15-10 of the ITAA 1997. The term 'bounty', 'subsidy' and 'grant' are not defined in legislation, so the ordinary meaning are applied to these terms. In the Macquarie Dictionary 2 nd edn, The Macquarie Library Pty Ltd, NSW, the following meanings are provided: 'Bounty' is defined to include '1. generosity in giving. 2. whatever is given bounteously; a benevolent, generous gift. 3. a premium or reward, one offered by a government.' 'Subsidy' is defined to include '1. a direct pecuniary aid furnished by a government to a private industrial undertaking, a cultural organisation, or the like. 2. a sum paid, often in accordance with a treaty, by one government to another, to secure some service in return. 3. a grant or contribution of money.' 'Grant' is defined to include 'that which is granted, as a privilege or right, a sum of money, as for a student's maintenance, or a tract of land.' | Detailed Reasoning - A Loan: In Case 5/94 94 ATC 130 ; AAT Case 9221 (1993) 27 ATR 1117 at 1125, it was said: the term loan is not defined in the Act, but is defined in Chitty on Contracts, 1989, 26th ed, at para 3574: Definition of loan. A contract of loan of money is a contract whereby one person lends or agrees to lend a sum of money to another, in consideration of the promise expressed or implied to repay that sum on demand, or at a fixed or determinable future time, or conditionally upon an event which is bound to happen, with or without interest. In many circumstances, the question whether a particular transaction is, in law a loan or not will be immaterial, since the transaction will take effect according to the intention of the parties, however the contract may be classified... This definition indicates that a loan should possess the following elements: Based on the above analysis, it is clear that a loan involves an obligation on the borrower to repay the principal with or without interest whereas a grant, a bounty or a subsidy does not impose an obligation on the recipient to repay the amount received. In this case, the funding provided to the company by a State government under an industry investment incentive scheme is a loan because it has all the elements of a loan. The State government has lent money to the company who has in return promised to repay the equivalent amount in full on the termination date which is the earlier of the expiry date of the scheme agreement and the date upon which a repayment event occurs. The scheme agreement has imposed an obligation on the company to repay the sum at a determinable future time with or without interest. Although the repayment will be made with or without interest, it will not alter the nature of the funding as a loan. As the funding provided by a State government under such scheme is a loan, it is not assessable under section 15-10 of the ITAA 1997.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 15-10 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2006/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Borrowings & loans Dealings & transactions Government grants income Income", "Case_References": "Case 5/94 94 ATC 130", "Other_References": "The Macquarie Dictionary 2nd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006292", "Unmatched_Content": "This ATO ID was amended to include a reference to a related public ruling. | Related Public Rulings (including Determinations) Taxation Ruling TR 2006/3 | Keywords Borrowings & loans Dealings & transactions Government grants income Income"}
{"ATO_ID_Number": "ATO ID 2005/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: government grant received under a contract to provide services", "Issue": "Do the amounts received from the government authority constitute assessable income of the taxpayer, a landowner, under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), where the amount is received under an agreement whereby the taxpayer undertakes to provide certain services?", "Decision": "Yes. The amounts received from the government authority under an agreement whereby the taxpayer undertakes to provide certain services constitute assessable income of the taxpayer under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer owns land. The taxpayer does not carry on any business on the land. The land has been identified by the Government as land that contains specific vegetation types that require special protection. The Government invited owners of these lands to submit tenders representing the price for which these owners will do conservation work on these lands. The selection of successful tenders will be through a transparent process based on the conservation value of the site, the expected outcomes of the work and the amount of the tender. The more landholder services that are offered as part of the proposed vegetation management plan, the higher the conservation value of the site will be. The taxpayer submits a successful tender which included a proposed management plan where the taxpayer will provide a number of services over a period of five or ten years. As a successful tenderer, the taxpayer enters into an agreement with the Government authority based on the proposed management plan previously submitted. Once the agreement is signed, the first payment is forwarded to the taxpayer. The payments for the entire contract are paid over a period of three years. However, these payments are made subject to the submission of an annual report by the landholder for the entire period and successful delivery of the services as specified in the agreement. In the event that the land is sold prior to the termination date of the agreement, the agreement will come to an end and, if required in writing by the government authority, the taxpayer will be required to refund an amount equal to the contract sum divided by the term of years of the agreement multiplied by the number of years (or proportion thereof) which remained for the agreement to run at the date that the land is sold.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that an amount is included in assessable income if it is income according to ordinary concepts (ordinary income). However, as there is no definition of 'ordinary income' in income tax legislation it is necessary to apply principles developed by the courts to the facts of a particular case. In determining whether a payment has the character of income or capital, regard must be has to the character of the receipt in the hands of the recipient ( Scott v. Federal Commissioner of Taxation ( 1966) 117 CLR 514; (1966) 14 ATD 286; (1966) 10 AITR 367; Hayes v. Federal Commissioner of Taxation (1956) 96 CLR 47; (1956) 11 ATD 82; (1956) 4 AITR 248 ( Hayes ); Federal Coke Co Pty Ltd v. FC of T 77 ATC 4255; (1977) 7 ATR 519). In MIM Holdings Ltd v. Commissioner of Taxation 97 ATC 4420; (1997) 36 ATR 108 Justices Northrop, Hill and Cooper, relying on Hayes and Reuter v. FC of T 93 ATC 5030; (1993) 24 ATR 527 said that 'amounts paid in consideration of the performance of services will almost always be income'. In Hayes , the High Court considered two factors as relevant in determining whether an amount is a product of the taxpayer's services (that is, paid in consideration of the performance of services): Thus, if the taxpayer had an expectation to receive the amount in return for providing the services and the motive of the government authority is to give the taxpayer a reward or encouragement for providing the services, then the amount is a product of the taxpayer's services and is ordinary income. The agreement can be properly characterised as one whereby the taxpayer agrees to provide its services to the government authority over the specified period. Accordingly, the amounts received under this contract are ordinary income and is assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "24 February 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital receipts Government grants income Income", "Case_References": "Scott v. Federal Commissioner of Taxation ( (1966) 117 CLR 514 (1966) 14 ATD 286 (1966) 10 AITR 367", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200577", "Unmatched_Content": "Keywords Capital receipts Government grants income Income"}
{"ATO_ID_Number": "ATO ID 2004/193", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: derivation of government grant funds - conditional upon funds being expended", "Issue": "Are grant funds, used to acquire an asset, derived by a taxpayer for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) in the income year in which the asset is acquired?", "Decision": "Yes. Grant funds, used to acquire an asset are derived by a taxpayer for the purposes of section 6-5 of the ITAA 1997 in the income year in which the asset is acquired.", "Facts": "The taxpayer (the grantee) received a grant from a Government Agency (the grantor). Under the grant, the grantee received a certain sum of money over a defined period (the grant period). These funds were to be used by the grantee for the purpose of providing assistance to certain businesses. The terms under which the grant funds were provided were set out in a Deed. The Deed provided inter alia that: The grantee was not compelled, under the Deed, to dispose of any assets acquired with the grant funds before the end of the grant period. The taxpayer used a portion of the grant funds to acquire shares in the businesses to which they were providing assistance. Those shares were sold by the taxpayer prior to the end of the grant period. The grantee was required to provide financial reports to the grantor. These reports were prepared by the grantees accountants using appropriate accounting standards and principles. The financial reports treated the grant funds received by the taxpayer, but as yet unexpended, as 'unearned income'. When the grant funds were expended, whether to acquire assets or for any other purpose approved under the Deed, they were treated as 'income' in the taxpayer's accounts. There was no evidence to suggest that the grantee or the grantor considered the payments made under the Deed to be a loan. In the taxpayer's circumstances, the payments under the grant were ordinary income and would form part of their assessable income under section 6-5 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Under subsection 6-5(2) of the ITAA 1997 the taxpayer's assessable income will include ordinary income derived during the income year. The issue to be considered is whether the income under the grant is derived by the taxpayer as grantee in the year when it is received, when that income may, in certain circumstances, have to be repaid in a future income year. The question of when income is derived has been considered in a series of decisions of the Courts and it is often simply a question of whether a 'cash' or 'accruals' basis should be employed. However, in other cases the resolution of the issue is determined by applying the principles that have grown out of cases such as C of T (SA) v. Executor Trustee & Agency Co. of South Australia Ltd (Carden's case) (1938) 63 CLR 108; (1938) 5 ATD 98, Brent v. FC of T (1971) 125 CLR 418; (1971) 71 ATC 4195 ( Brents case ) and Arthur Murray (NSW) Pty Ltd v. FC of T (1965) 114 CLR 314; (1965) 14 ATD 98 ( Arthur Murray ). In Brent's Case at p 420 Gibbs J stated: It has become well established that unless the Act makes some specific provision on the point the amount of income derived is to be determined by the application of ordinary business and commercial principles and that the method of accounting to be adopted is that which 'is calculated to give a substantially correct reflex of the taxpayer's true income. ( The Commissioner of Taxes (South Australia) v The Executor, Trustee and Agency Company of South Australia Limited (Carden's case) (1938) 63 CLR 108 at pp 152-154) Carden's case was also considered in Arthur Murray, where the Court considered when amounts coded as 'unearned income' for accounting purposes, were derived for tax purposes. In discussing the possibility of having to make a refund, the Court said at CLR 319: But those circumstances nevertheless make it surely necessary, as a matter of business good sense, that the recipient should treat each amount of fees received but not yet earned as subject to the contingency that the whole or some part of it may have in effect to be paid back, even if only as damages, should the agreed quid pro quo not to be rendered in due course. The possibility of having to make sure such a payment back (we speak in course in practical terms) is an inherent characteristic of the receipt itself. In our opinion it would be out of accord with the realities of the situation to hold, while the possibility remains, that the amount received has the quality of income derived by the company. For that reason it is not surprising to find, as the parties in the present case agree is fact, that according to established accountancy and commercial principles in the community the books of a business either selling goods or providing services are so kept with respect to amounts received in advance of goods being sold or of the services being provided that the amounts are not entered to the credit of any revenue account until the sale takes place or the services are rendered: in the meantime they are credited to what is in effect a suspense account, and their transfer to an income account takes place only when the discharge of the obligations for which they are a prepayment justifies their being treated as having finally acquired the character of income. The Deed provides in certain circumstances for a refund of funds to the Government agency, where these funds were used to acquire assets which were later disposed of during the grant period. However, it is considered that the funds used to purchase the assets have 'come home' to the taxpayer when expended. In terms of the quid pro quo referred to in the quote from Arthur Murray above, the quid pro quo occurs when the grant monies have been spent for the intended purpose. At that point, the taxpayer has done everything necessary to earn the income. The fact that the Deed provides for a possibility, if certain events occur, that an amount expended may need to be refunded, is not sufficient to say that the point of derivation of the income is deferred. The circumstances here can be distinguished from the situation in Case 22/94 94 ATC 225; AAT Case 9472 (1994) 28 ATR 1155. In that case it was decided that the true nature of the arrangement under which the relevant funds were provided was a conditional loan. As such the funds provided would not be recognised as income until they ceased to be conditionally repayable. In arriving at this decision the Tribunal took into account the fact that the grantor and the grantee had both treated the amount received as a loan in their books of account. However this is not the situation here. There is no evidence which supports the conclusion the payments were intended to be or had the features of a loan. The proper accounting treatment (which was in fact adopted by the taxpayer in their financial accounts) was to treat the grant funds expended on acquiring the assets as derived at the time they were expended . This treatment gives a true reflex of the taxpayer's income. Accordingly, the grant funds used to acquire the assets, are derived by the taxpayer for the purposes of section 6-5 of the ITAA 1997 in the income year in which they are expended to acquire the assets.", "Date_of_Decision": "27 October 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Business income Derived Government grants income Income Shares", "Case_References": "C of T (SA) v. Executor Trustee & Agency Co. of South Australia Ltd (1938) 63 CLR 108 (1938) 5 ATD 98", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004193", "Unmatched_Content": "Keywords Business income Derived Government grants income Income Shares"}
{"ATO_ID_Number": "ATO ID 2004/937", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of payments made by a government authority under a capital support fund", "Issue": "Are payments received by the taxpayer from the relevant government authority under a capital support fund program assessable under section 15-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Payments received by the taxpayer from the relevant government authority under the capital support fund program are assessable under section 15-10 of the ITAA 1997.", "Facts": "The taxpayer is carrying on a business. The taxpayer entered into an agreement with the relevant government authority for funding under a capital support fund. The capital support fund is an initiative of the government to assist with the capital cost of certain projects. The government has allocated certain amounts to the fund for this purpose. The project proposed by the taxpayer involves a certain project. The agreement between the taxpayer and the government authority provides for payments to be made to the taxpayer at the completion of specific milestones set out in the agreement. A number of milestone payments are made to the taxpayer as per the agreement. These milestone payments are calculated on a percentage basis of the total capital cost of the projects.", "Reasons_for_Decision": "Summary: Section 15-10 of the ITAA 1997 includes in assessable income amounts received as a bounty or subsidy in relation to the carrying on of a business where that amount is not assessable as ordinary income under section 6-5 of the ITAA 1997. A bounty or subsidy includes a grant and other financial assistance provided by government to assist businesses ( The Squatting Investment Co Ltd v Federal Commissioner of Taxation (1953) 86 CLR 570; (1953) 10 ATD 126; (1953) 5 AITR 496). The payments received from the relevant government authority under the program are in the nature of a bounty or subsidy as they are payments made by the government that are designed to assist with the capital costs of establishing certain infrastructure. A bounty or subsidy will be 'in relation to carrying on a business' when there is a real connection between the payment and the business, and the payment is directed to the income earning activity of the business ( First Provincial Building Society Ltd v Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207) ( First Provincial) . In First Provincial , the Full Federal Court held that, as the payment there assisted the taxpayer to continue to carry on the taxpayer's business activities, it was made in relation to the carrying on of its business, although it lacked the necessary connection with the taxpayer's business activities to constitute ordinary income. The payments made by the relevant government authority under the capital support fund are received in relation to carrying on a business as they are made to assist the taxpayer to carry on a business involving the establishment of certain infrastructure. The payments are not assessable as ordinary income under section 6-5 of the ITAA 1997, as they are capital in nature. In GP International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 the High Court commented on the characterisation of a subsidy that is intended to assist the recipient with capital costs, saying that such receipts would be capital in nature. The court stated at CLR 124; ATC 4422; ATR 10 that: ...it is necessary to consider the taxpayer's submission that the cases show that a receipt of moneys intended by payer and payee to recoup a recipient's capital expenditure is a receipt of a capital nature. That proposition can be accepted when the amount is received by way of gift or subsidy to replenish or augment the payee's capital, for in such a case the receipt cannot fairly be said to be a product or incident of the payee's income-producing activity. The payments received by the taxpayer from the relevant government authority under the capital support fund will therefore be capital and thus are not ordinary income under section 6-5 of the ITAA 1997 and are bounties or subsidies received in relation to carrying on a business. The payments are therefore included in the taxpayer's assessable income under section 15-10 of the ITAA 1997.", "Date_of_Decision": "05 November 2004", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 15-10 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Government grants income Income", "Case_References": "The Squatting Investment Co Ltd v Federal Commissioner of Taxation (1953) 86 CLR 570 (1953) 10 ATD 126 (1953) 5 AITR 496", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004937", "Unmatched_Content": "Keywords Government grants income Income"}
{"ATO_ID_Number": "ATO ID 2003/82", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of kindergeld (child benefit) payments from Germany", "Issue": "Do kindergeld (child benefit) payments received from Germany form part of an Australian resident taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. As the taxpayer is a resident of Australia, they are required to include the child benefit payments in their assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer receives child benefit payments from Germany in respect of their child. The child benefit is a monthly cash payment that is paid to a person who has dependent children. The child benefit can be claimed for eligible children including children under 18 years of age. The child benefit payments are made by the German government to eligible parents to help to defray the cost of raising a child. The child benefit payments are not taxable in Germany. The taxpayer is a resident of Australia for taxation purposes.", "Reasons_for_Decision": "Summary: Subsections 6-5(1) and 6-5(2) of the ITAA 1997 provide that the assessable income of a taxpayer who is a resident of Australia for taxation purposes includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Characteristics of what is ordinary income have evolved from case law and include receipts that; The child benefit payments have the characteristics of income according to ordinary concepts in that the amounts are periodical, regular or recurring. The amounts are also expected and relied upon by the taxpayer receiving them. As the taxpayer is a resident of Australia the child benefit payments form part of their assessable income under section 6-5 of the ITAA 1997. There is no provision in the income tax legislation which exempts these payments from tax in Australia. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Schedule 9 to the Agreements Act contains the double tax agreement between Australia and Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. The allocation of taxing rights in relation to the child benefit payments is not the subject of any specific Article of the German Agreement. Therefore, the assessability of the child benefit payments has to be determined solely with reference to Australian taxation laws. As the child benefit payments are income under ordinary concepts and are not exempt they are assessable income. Accordingly, the child benefit payments that the taxpayer receives from Germany are to be included in their assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Children Dependent children Double tax agreements Germany Income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200382", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Children Dependent children Double tax agreements Germany Income"}
{"ATO_ID_Number": "ATO ID 2002/627", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income - Photovoltaic Rebate", "Issue": "Is a rebate received under the Commonwealth Photovoltaic Rebate Program, assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The rebate received under the Commonwealth Photovoltaic Rebate Program is not assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer, an individual, installed a Small Grid Interactive Renewable Generator (SGIRG) at their home. A rebate towards the cost of acquiring and installing the system was received by the taxpayer from the Commonwealth Government under the Commonwealth Photovoltaic Rebate Program. The rebate was deducted from the cost of the system by the supplier of the system. The photovoltaic system was installed to help reduce greenhouse emissions and to minimise the taxpayer's domestic electricity bills. The system was installed by the taxpayer for domestic and private reasons; the taxpayer is not in the business of producing electricity and did not enter into the arrangement for the purpose of making a profit.", "Reasons_for_Decision": "Summary: The issue in this case is whether the rebate received by the taxpayer, on the installation of a SGIRG at the taxpayer's residence, constitutes income. Income, or more specifically assessable income, is divided into two categories: As there are no specific provisions within the income tax legislation regarding payments under the Commonwealth Photovoltaic Rebate Program, it is only necessary to consider if the payment is income according to ordinary concepts. In this instance the taxpayer is not in the business of producing and or selling electricity. As the transaction is clearly a non-commercial or domestic transaction, the rebate is not income according to ordinary concepts. Thus the rebate is not assessable income in the hands of the taxpayer.", "Date_of_Decision": "28 March 2002", "Year_of_Income": "Year ending 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Solar energy equipment Government grants income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002627", "Unmatched_Content": "Keywords Income Solar energy equipment Government grants income"}
{"ATO_ID_Number": "ATO ID 2002/784", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a Grant under the Dairy Regional Assistance Program", "Issue": "Is a grant received under the Dairy Regional Assistance Program (DRAP) that will be used for capital expenses associated with establishing a packaging and processing facility included in assessable income under section 15-10 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. A grant received under the DRAP that will be used for capital expenses associated with establishing a packaging and processing facility is included in the assessable income of the recipient in the income year that it is received in accordance with section 15-10 of the ITAA 1997.", "Facts": "The taxpayer operates a dairy farm that produces organically certified milk. This milk is processed and marketed through the established dairy industry structure. The taxpayer wishes to use the DRAP grant to establish a facility to process and package this milk 'on farm'. This will allow the taxpayer to market the milk outside of the established dairy industry structure so as to better promote the product in its intended market. The taxpayer will use the grant for capital expenses associated with establishing the processing and packaging facility, as well as revenue expenses associated with operating the facility. This will create employment within the local community in accordance with the requirements of the DRAP.", "Reasons_for_Decision": "Summary: The DRAP is a grant or subsidy. In accordance with section 15-10 of the ITAA 1997, a grant or subsidy is included in the assessable income of the recipient if it is received in relation to the carrying on of a business. However, a grant or subsidy is not included in the assessable income of the recipient under section 15-10 of the ITAA 1997 if it is received in relation to the establishment of a business. Whether a person is carrying on the same business or is establishing a new business is considered in Taxation Ruling TR 1999/9. This Ruling states that a business may expand or contract its activities without necessarily ceasing to carry on the same business, and that the organic growth of a business through the adoption of new compatible operations is part of the same business, provided the business retains its identity. As the taxpayer intends to use the DRAP grant to develop an alternative method of marketing an existing product, it is considered that the grant was received in relation to the carrying on of an existing business rather than establishing a new business. Therefore, the amounts received for the capital expenses associated with establishing the facility are included in the assessable income of the taxpayer in the income year it is received under section 15-10 of the ITAA 1997. Note: The amounts received for the revenue expenses associated with operating the facility are included in the assessable income of the taxpayer in the year it is received under section 6-5 of the ITAA 1997.", "Date_of_Decision": "24 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 15-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/9 | Taxation Ruling TR 2006/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Grants of financial assistance & funding Statutory compensation scheme Dairy industry", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002784", "Unmatched_Content": "This ATO ID has been amended to improve clarity and include reference to Taxation Ruling TR 2006/3. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Inserted the following words after DRAP ' that will be used for capital expenses associated with establishing a packaging and processing facility ' | In last paragraph, removed reference to revenue expenses associated with operating the facility and inserted reference to 15-10 of the ITAA 1997 Included a note with reference to section 6-5 of the ITAA 1997 | Included reference to section 6-5 of the ITAA 1997 | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/9 Taxation Ruling TR 2006/3 | Keywords Income Grants of financial assistance & funding Statutory compensation scheme Dairy industry"}
{"ATO_ID_Number": "ATO ID 2001/382", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Income: United States Social Security Benefit", "Issue": "Is a Social Security benefit received from the United States of America (USA) included in a taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, a Social Security benefit received from the USA is not included in a taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer receives a social security benefit from the USA.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.. However, agreements that Australia has with various countries under the International Tax Agreements Act 1953 (the Agreements Act) operate to prevent the double taxation of income. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Paragraph 18(2) of Schedule 2 of the Agreements Act provides that Social Security payments by the USA to a resident of Australia shall only be taxed in the USA. The Social Security benefit received by the taxpayer is therefore not assessable income under section 6-5 of the ITAA 1997, but is subject to tax in the USA.", "Date_of_Decision": "29 August 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income Foreign pension Foreign pension income Double tax agreements Social security pensions and allowances", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001382", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign income Foreign pension Foreign pension income Double tax agreements Social security pensions and allowances"}
{"ATO_ID_Number": "ATO ID 2001/715", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of payments under the First Home Owners Grant scheme", "Issue": "Is a First Home Owners Grant scheme payment received by the taxpayer assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A First Home Owners Grant scheme payment received by the taxpayer is not assessable income under section 6-5 of the ITAA 1997 as it is not income according to ordinary concepts.", "Facts": "The taxpayer received a payment under the First Home Owners Grant scheme as an eligible first home owner.", "Reasons_for_Decision": "Summary: From 1 July 2000, eligible first home owners were entitled to receive a one off payment under the First Home Owners Grant scheme, an initiative of the Commonwealth Government administered by the States and Territories. The primary purpose of the payment is to provide financial assistance to home owners in the purchase of their first home. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income is income according to ordinary concepts and is generally considered to include: First Home Owners Grant scheme payments are not paid because of employment, services rendered, investment or the operation of a business. They are a one off lump sum payment and the motive of the body making the payment is to provide assistance for the purchase of a first home, not to help the recipients or their dependants pay for their regular living expenses. The payment under the scheme is not income according to ordinary concepts and therefore is not ordinary income. Accordingly, the First Home Owners Grant scheme payment will not form part of the taxpayer's assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "16 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2010/73", "Subject_References": "Income Ex gratia payment income Government grants income", "Case_References": "Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 [1952] HCA 65", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001715", "Unmatched_Content": "Update heading from 'Personal tax' to 'Income tax' | Issue Decision Facts Reasons for Decision | Add medium neutral case reference | Keywords Income Ex gratia payment income Government grants income"}
{"ATO_ID_Number": "ATO ID 2004/263", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust income: beneficial interest in trust property held for certain children - accumulated income", "Issue": "Is the taxpayer, a trustee of a trust, created for the benefit of certain children who will be entitled to a proportional interest in the trust fund only if they attain 18 years of age, liable to be assessed under Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of accumulated income derived from life insurance policy proceeds that devolved to the trust?", "Decision": "No. The trustee is not liable to be assessed under Division 6AA of the ITAA 1936 in respect of accumulated income derived from life insurance proceeds that devolved to the trust. The trustee is liable to be assessed under section 99A or section 99 of the ITAA 1936.", "Facts": "The taxpayer is a trustee of a trust that was created for the benefit of certain children of a deceased parent. The proceeds of a life insurance policy were paid into the trust as a result of the death of the parent. The trustee invested these proceeds and derived income. The children will be entitled to a proportional interest in the trust fund only if they attain 18 years of age. The trust deed contains a clause that, if any child does not attain 18 years of age, that child's interest will devolve to other beneficiaries when those beneficiaries attain the age of 18. In the relevant income year, all the children are under 18 years of age. Under the trust, the trustee has discretion to accumulate income or to apply some or all of it for the benefit of the beneficiaries. No income was applied to any of the beneficiaries during the income year. The beneficiaries of the trust are not 'excepted persons' as defined in subsection 102AC(2) of the ITAA 1936. As the beneficiaries are under 18 years of age, they are prescribed persons for the purposes of subsection 102AC(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Division 6AA of the ITAA 1936 sets out special rules that apply in working out the basic income tax liability on the income of persons who are prescribed persons. A person is a prescribed person if they are not an 'excepted person' as defined by subsection 102AC(2) of the ITAA 1936 and they are under 18 years of age. Subsection 102AG(1) of the ITAA 1936 provides that Division 6AA of the ITAA 1936 applies to 'so much of the share of the beneficiary of the net income of the trust estate of the year of income' as, in the opinion of the Commissioner, is attributable to the assessable income of a trust estate that is not, in relation to that beneficiary, excepted trust income. Paragraph 102AA(3)(b) of the ITAA 1936 states that a reference to the 'share of a beneficiary of the net income of a trust estate' shall be read as a reference to a share of a beneficiary of the net income of a trust estate 'in respect of which the trustee of the trust estate is liable to be assessed and to pay tax in pursuance of section 98 of the ITAA 1936'. Subsection 98(1) of the ITAA 1936 applies to assess the trustee on a beneficiary's share of income where a beneficiary is presently entitled and is under a legal disability. In this case, all the beneficiaries of the trust are under a legal disability as they are all less than 18 years of age. A beneficiary is presently entitled to the net income of the trust where that beneficiary has an absolute and indefeasible vested interest in the trust income ( Taylor v. FC of T (1970) 119 CLR 444; 70 ATC 4026; (1970) 1 ATR 582 ( Taylor's case )). The High Court held that a beneficiary that is under a legal disability has an absolute and indefeasible vested interest in the trust income, where the terms of trust specify that the accumulated income of the trust is held for the beneficiary until the beneficiary ceases to be a minor or, if the beneficiary dies earlier, for their estate. However, where the terms of the trust provide for the income to go to another person in the event of the beneficiary's death before the beneficiary attains age of majority, the beneficiary is not presently entitled as the beneficiary's interest is considered contingent, and therefore defeasible. In this case, the trust deed contains a clause that if any child does not attain 18 years of age, that child's interest will devolve to other beneficiaries when those beneficiaries attain the age of 18. In the relevant income year, all the children are under 18 years of age. Therefore, there is no beneficiary that is presently entitled in the relevant year and the trustee is not liable to be assessed and to pay tax under section 98 of the ITAA 1936. Accordingly, the trustee taxpayer is not liable to be assessed under Division 6AA of the ITAA 1936 in respect of accumulated income derived from life insurance proceeds that devolved to the trust. As no beneficiary is presently entitled in the relevant year of income, the trustee taxpayer is liable to be assessed under section 99A of the ITAA 1936, unless the Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply. If the Commissioner forms the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply, the taxpayer trustee will be assessed under section 99 of the ITAA 1936.", "Date_of_Decision": "8 December 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Division 6AA section 98 subsection 98(1) section 99 section 99A subsection 102AC(2) subsection 102AG(1) paragraph 102AA(3)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/264", "Subject_References": "Trusts Trust beneficiaries Minor beneficiaries Trust income Present entitlement", "Case_References": "Taylor v. FC of T (1970) 119 CLR 444 70 ATC 4026 1 ATR 582", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004263", "Unmatched_Content": "Inserted the word 'that' in between the words 'trust' and 'was' in the first sentence of the first paragraph. | Removed the word 'a' of the second sentence of the third paragraph | Amended to conform with the facts of Taylor v. FC of T (1970) 119 CLR 444; 70 ATC 4026; (1970) 1 ATR 582 by removing 'reaching the age of 18' and replacing with 'the beneficiary ceases to be a minor' in the second sentence of the fifth paragraph. | Amended to conform with the facts of Taylor v. FC of T (1970) 119 CLR 444; 70 ATC 4026; (1970) 1 ATR 582 by removing 'reaching the age of 18' and replacing with 'the beneficiary attains the age of majority' in the third sentence of the fifth paragraph. | Keywords Trusts Trust beneficiaries Minor beneficiaries Trust income Present entitlement"}
{"ATO_ID_Number": "ATO ID 2004/264", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust income: beneficial interest in trust property held for children - applied income", "Issue": "Is the taxpayer, a trustee of a trust, created for the benefit of certain children who will be entitled to a proportional interest in the trust fund only if they attain 18 years of age, liable to be assessed under Division 6AA of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of income, derived from life insurance policy proceeds that devolved to the trust, that were applied to a beneficiary during the income year?", "Decision": "Yes. The trustee is liable to be assessed under Division 6AA of the ITAA 1936 in respect of income, derived from life insurance proceeds that devolved to the trust, that were applied to a beneficiary during the income year, as the income is not excepted trust income.", "Facts": "The taxpayer is the trustee of a trust that was created for the benefit of certain children of a deceased parent. The proceeds of a life insurance policy were paid into the trust as a result of the death of the parent. The trustee invested these proceeds and derived income. The children will be entitled to a proportional interest in the trust fund only if they attain 18 years of age. The trust deed contains a clause that if any child does not attain 18 years of age, that child's interest will devolve to other beneficiaries when those beneficiaries attain the age of 18. In the relevant income year, all the children are under 18 years of age. Under the trust, the trustee has discretion to accumulate income or to apply some or all of it for the benefit of the beneficiaries. The trustee applied the income derived for the year towards the maintenance of the beneficiaries. The beneficiaries of the trust are not 'excepted persons' as defined in subsection 102AC(2) of the ITAA 1936. As the beneficiaries are under 18 years of age, they are prescribed persons for the purposes of subsection 102AC(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Division 6AA of the ITAA 1936 sets out special rules that apply in working out the basic income tax liability on the income of persons who are prescribed persons. A person is a prescribed person if they are not an 'excepted person' as defined by subsection 102AC(2) of the ITAA 1936 and they are under 18 years of age. Subsection 102AG(1) of the ITAA 1936 provides that Division 6AA of the ITAA 1936 applies to 'so much of the share of the beneficiary of the net income of the trust estate of the year of income' as, in the opinion of the Commissioner, is attributable to the assessable income of the trust estate that is not, in relation to that beneficiary, excepted trust income. Paragraph 102AA(3)(b) of the ITAA 1936 states that a reference to the 'share of a beneficiary of the net income of a trust estate' shall be read as a reference to a share of a beneficiary of the net income of a trust estate 'in respect of which the trustee of the trust estate is liable to be assessed and to pay tax in pursuance of section 98' of the ITAA 1936. Therefore, the trustee is liable to be assessed under Division 6AA of the ITAA 1936 if: A. Subsection 98(1) of the ITAA 1936 applies to assess the trustee on a beneficiary's share of income where a beneficiary is presently entitled and is under a legal disability. Section 101 provides that where a trustee has discretion to pay or apply income of a trust estate to or for the benefit of specified beneficiaries (for example, by paying using the income to pay the beneficiaries' school fees), the beneficiary in whose favour the trustee exercises the trustee's discretion shall be deemed to be presently entitled to the amount paid to the beneficiary or applied for the beneficiary's benefit by the trustee in the exercise of that discretion. In the relevant income year, the trustee applied the income derived for the year towards the maintenance of the beneficiaries. Therefore, under section 101 of the ITAA 1936, each beneficiary is deemed to be presently entitled to the amount of income applied for their benefit. All beneficiaries are under a legal disability as they are all less than 18 years of age in the relevant year of income. Accordingly, in the absence of any other provisions, the trust is liable to be assessed and to pay tax pursuance to section 98 of the ITAA 1936. B. Under subsection 102AG(2A) of the ITAA 1936, paragraph 102AG(2)(c) of the ITAA 1936 does not apply to make the income derived by the trustee 'excepted assessable income' unless the beneficiary of the trust concerned will, under the terms of the trust, acquire the trust property (other than as a trustee) when the trust ends. Subsection 102AG(2A) of the ITAA 1936 was considered by the Commissioner in Taxation Ruling TR 98/4. Paragraph 33 states that subsection 102AG(2A) of the ITAA 1936 requires that the child must, under the terms of the trust, acquire the trust property other than as a trustee when the trust ends. Moreover, the property must pass into the child's estate, should the child die before the trust ends. Accordingly, it is considered that subsection 102AG(2A) of the ITAA 1936 cannot be satisfied where the terms of the trust allow a child's proportional interest in the trust fund to devolve to another beneficiary should the child fail to attain the age of 18. As subsection 102AG(2A) of the ITAA 1936 is not satisfied, the income derived by the trustee from proceeds of the life insurance cannot be 'excepted trust income' for the purposes of subparagraph 102AG(2)(c)(iv) of the ITAA 1936. Therefore, the trustee is liable to be assessed under Division 6AA of the ITAA 1936 in respect of income derived from life insurance proceeds that devolved to the trust.", "Date_of_Decision": "8 December 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Division 6AA section 98 subsection 98(1) section 101 paragraph 102AA(3)(b) subsection 102AC(2) subsection 102AG(1) subsection 102AG(2) paragraph 102AG(2)(c) subparagraph 102AG(2)(c)(iv) subsection 102AG(2A)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/4", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/263", "Subject_References": "Trusts Trust beneficiaries Minor beneficiaries Trust income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004264", "Unmatched_Content": "Removed the word 'a' of the second sentence of the third paragraph | Inserted the words 'in the opinion of the Commissioner' between the words 'as' and 'is' in the first sentence of the second paragraph. | Removed 'section 101 of the ITAA 1936' from the middle of the first sentence of the fifth paragraph and inserted reference to section 101 at the beginning. Inserted 'in whose favour the trustee exercises the trustee's discretion shall be deemed 'in between the words 'beneficiary' and 'to' in the first sentence of the fifth paragraph. | The words 'them' and 'their' have been replaced with 'the beneficiary' and 'the beneficiary's.' as gender-specific language was removed from section 101 of ITAA 1936 effective 27/06/2011 and replaced with the words 'beneficiary' and 'beneficiary's'. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/4 | Keywords Trusts Trust beneficiaries Minor beneficiaries Trust income"}
{"ATO_ID_Number": "ATO ID 2002/819", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excepted Trust Income - investment of personal injury compensation", "Issue": "Is the income the taxpayer receives from the Public Trustee as a result of the investment of a court awarded personal injury compensation amount, 'excepted trust income' pursuant to subsection 102AG(2) of the Income Tax Assessment Act 1936 ('ITAA 1936')?", "Decision": "Yes. The income the taxpayer receives from the Public Trustee as a result of the investment of a court awarded personal injury compensation amount is 'excepted trust income' pursuant to subsection 102AG(2) of the ITAA 1936.", "Facts": "The taxpayer, being less than 18 years of age, suffered a personal injury and was awarded a compensation amount by the courts as a result. The Public Trustee invests the compensation amount until such time as the taxpayer attains the age of 18 years at which time the amount will be paid to the taxpayer at their request. The taxpayer will receive the income resulting from the investment of the compensation amount prior to them attaining the age of 18 years. The taxpayer does not meet the criteria to be an 'excepted person' for the purposes of Division 6AA of the ITAA 1936.", "Reasons_for_Decision": "Summary: Division 6AA of the ITAA 1936 deals with the income of certain children. Trust income that is included in assessable income under Division 6AA of ITAA 1936 is taxed at special rates as set out in the Income Tax Rates Act 1986 . However, certain trust income derived by a 'prescribed person' is excluded from the special rates where the income is 'excepted trust income' (section 102AG of the ITAA 1936). 'Excepted trust income' is included in the assessable income of the beneficiary and taxed at normal rates. A person is a 'prescribed person' if they are less than 18 years of age on the last day of the year of income and are not an 'excepted person' (subsection 102AC(1) of the ITAA 1936. As the taxpayer is less than 18 years of age and is not an 'excepted person' as defined in subsection 102AC(2) of the ITAA 1936, they are a 'prescribed person' for the purposes of Division 6AA of the ITAA 1936. Sub-subparagraph 102AG(2)(c)(i)(B) of the ITAA 1936 includes as 'excepted trust income' any income derived by the trustee of the trust from the investment of compensation monies for personal injury awarded to the beneficiary. However, subsection 102AG(2A) of the ITAA 1936 excludes such income unless the beneficiary will acquire the trust property when the trust ends. The money held by the Public Trustee on the taxpayer's behalf comprises funds received as compensation for personal injury. The income derived by the Public Trustee is income that has resulted from the investment of the compensation amount. In accordance with sub-subparagraph 102AG(2)(c)(i)(B), the taxpayer's income is 'excepted trust income'. As the taxpayer is entitled to the compensation funds when they attain 18 years of age, the exclusion under subsection 102AG(2A) of the ITAA 1936 does not apply. Therefore, the income received by the taxpayer as a result of the investment of the court awarded personal injury compensation amount is 'excepted trust income' pursuant to subsection 102AG(2) of the ITAA 1936 and will be taxed at normal rates.", "Date_of_Decision": "11 April 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1936 Division 6AA subsection 102AC(1) subsection 102AC(2) section 102AG subsection 102AG(2) sub-subparagraph 102AG(2)(c)(i)(B) subsection 102AG(2A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Children's income Compensation for injury Excepted income Minor beneficiaries Trust income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002819", "Unmatched_Content": "Keywords Children's income Compensation for injury Excepted income Minor beneficiaries Trust income"}
{"ATO_ID_Number": "ATO ID 2002/1006", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust Income - excepted trust income - trust established with proceeds of an intestate estate", "Issue": "Is income to which the taxpayer (a prescribed person), is presently entitled as a beneficiary under a trust established with the proceeds of an intestate estate, 'excepted trust income' under subsection 102AG(2) of the Income Tax Assessment Act 1936 (ITAA 1936) where no property devolved directly to the taxpayer under intestacy?", "Decision": "No. Income to which the taxpayer (a prescribed person), is presently entitled as a beneficiary under a trust established with the proceeds of an intestate estate, is not 'excepted trust income' under subsection 102AG(2) of the ITAA 1936 where no property devolved directly to the taxpayer under intestacy.", "Facts": "The taxpayer is under 18 years of age as at the end of the income year. They are not an 'excepted person'. A relative of the taxpayer died intestate. Under the laws of intestacy in the State in which the deceased was domiciled, the estate of the deceased devolved entirely to the deceased's father. The deceased's father used part of the proceeds of the estate of the deceased to establish a trust for the taxpayer. The trust derives income to which the taxpayer is presently entitled.", "Reasons_for_Decision": "Summary: Division 6AA of the ITAA 1936 ensures that special rates of tax and a lower tax free threshold apply in working out the basic income tax liability on taxable income, other than excepted income, derived by a prescribed person. A 'prescribed person' is defined in subsection 102AC(1) of the ITAA 1936 to include any person, other than an 'excepted person' (as defined in subsection 102AC(2) of the ITAA 1936), under 18 years of age at the end of the income year. The taxpayer is a 'prescribed person' for the purposes of Division 6AA of the ITAA 1936. Division 6AA of the ITAA 1936 will apply, where the beneficiary of a trust is a 'prescribed person', to so much of the beneficiary's share of the net income of the trust that is not 'excepted trust income' (subsection 102AG(1) of the ITAA 1936). Subsection 102AG(2) of the ITAA 1936 lists the various types of income of a trust estate which are 'excepted trust income' in relation to the beneficiary of the trust estate. Specifically, income of a trust estate is 'excepted trust income' where the income was derived from property transferred to the trustee for the benefit of the beneficiary by another person out of property that devolved upon that other person from the estate of a deceased person (subparagraph 102AG(2)(d)(ii) of the ITAA 1936). However, subsection 102AG(7) of the ITAA 1936 restricts the amount of income which will be treated as 'excepted trust income' to the amount that in the opinion of the Commissioner would have devolved directly upon the beneficiary if the deceased had died intestate. In this case, the deceased did die intestate and under the relevant laws of intestacy no property devolved directly to the taxpayer. Therefore as a result of the operation of subsection 102AG(7) of the ITAA 1936 none of the income can be treated as 'excepted trust income'. Accordingly, the income to which the taxpayer (a prescribed person) is presently entitled as a beneficiary of the trust, is not 'excepted trust income' under subsection 102AG(2) of the ITAA 1936. The special rates of tax under Division 6AA of the ITAA 1936 will therefore apply to the income.", "Date_of_Decision": "10 October 2002", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Division 6AA subsection 102AC(1) subsection 102AC(2) subsection 102AG(1) subsection 102AG(2) subparagraph 102AG(2)(d)(ii) subsection 102AG(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Children's income Minor beneficiaries Deceased estates Trust beneficiaries Trustees Prescribed person issues", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021006", "Unmatched_Content": "Keywords Children's income Minor beneficiaries Deceased estates Trust beneficiaries Trustees Prescribed person issues"}
{"ATO_ID_Number": "ATO ID 2007/68", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: amount received for the transfer of 'know-how'", "Issue": "Is the amount received by the taxpayer under a contract for the transfer of the information ('know-how') he was able to provide on the design of a certain machine he had invented assessable as ordinary income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The amount received under a contract for the transfer of the know-how he was able to provide on the design of a certain machine he had invented is not assessable ordinary income under subsection 6-5(1) of the ITAA 1997 because the amount is capital in nature.", "Facts": "A self-employed inventor (the taxpayer) had embarked upon a business venture to exploit, by means of licensing rights for royalty income or manufacture of machines for sale, certain machine designs he had invented. After encountering some difficulties in fully developing his designs and because of his advancing age, he entered into an agreement to provide the know-how on the design of the machines to a company in which he held a 10% share. To provide the know-how to the company it was necessary to transfer ownership of existing prototypes and manufacturing drawings for some of the machines and to provide drawings and assist in developing prototypes for the remaining machines where no drawings or prototypes existed. The execution of this agreement represented a real abandonment of the taxpayer's business in regard to the know-how. Prior to the instigation of the agreement, the taxpayer had provided information about his machine designs to other eventual shareholders in the company in an attempt to secure a licence agreement. Upon accepting the payment for the know-how, the taxpayer lost his ability to seek remedies or injunctions enforceable in equity through inappropriate use of the know-how by the other shareholders. The taxpayer, in his own right, was put out of business by entering into the agreement.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that assessable income includes income according to ordinary concepts, which is called ordinary income. Income from carrying on a business has generally been held as ordinary income. An amount received in dealing with information in the course of carrying on a business or under an agreement for the provision of a service that involves sharing the information with another person is usually of an income nature. In Jeffrey v. Rolls Royce Ltd [1962] 1 AER 801 (HL), the taxpayer entered into a series of agreements under which it undertook to supply drawings, manufacturing and engineering data and information required for the construction of aero engines. In respect of each agreement the taxpayer received payments of a lump sum and was entitled to receive payment of royalties. The lump sums were described as 'consideration for the rights granted', and were referred to as capital sums. The Lords found that the amounts received under the agreements were not capital in nature but represented the product of a systematic and repeated exploitation of the taxpayer's knowledge, skill and experience. On the other hand, if the disclosing or sharing of information affects the framework of the business or causes a substantial part of the business to be lost then the amount received may be of a capital nature. In Wolf Electric Tools Ltd v. Wilson [1969] 2 AER 724 (Ch D) ( Wolf Electric Tools ), the taxpayer carried on trade in the manufacture of electric power tools for which it had evolved production methods and a series of drawings. Although it exported to various other countries, it was unable to export to India and consequently entered into a joint venture which formed a company in India. The taxpayer held 45% of the issued shares, of which slightly more than half were in respect of the transfer of plant and machinery to enable the factory to be built, and the balance related to the supply of drawings, designs, know-how and other matters. Pennycuick J. held that the shares allotted in respect of the transfer of know-how were not to be taken into account in computing the taxpayer's profit for income tax purposes, because they were received in return for the transfer to the Indian company of capital assets, comprising a fund of confidential material in relation to the manufacture of tools. In making his judgement he approved the dictum of Viscount Radcliffe in Musker v. English Electric Co Ltd 41 TC 556 where the latter held: ..'know-how', though very naturally looked upon as part of the capital equipment of a trade, is a fixed asset only by analogy and, as it were, by metaphor. The nature of receipts from it depends essentially, I think, upon the transactions out of which they arise and the context in which they are received. Where, as in Moriarty ( Inspector of Taxes ) v Evans Medical Supplies Ltd., 'know-how' is imparted as one element of a comprehensive arrangement by virtue of which a trader effectively gives up his business in a particular area, the moneys paid for the 'know-how', whether or not independently quantified, may properly rank as capital receipts. Upon inventing the machine designs, the taxpayer acquired the know-how from which he would be able to earn income. This know-how formed the basis for the taxpayer's business. The taxpayer's business existed in order to exploit his know-how in the machine designs by way of licensing rights for royalty income or manufacture of machines for sale. When the right to know-how was transferred to the other party the taxpayer ceased to carry on his business. The amount received was to compensate for the loss of his means of making profit from his know-how. The amount was received by the taxpayer in circumstances which were similar to those in the Wolf Electric Tools case and can be characterised as a receipt of capital (see also (1959) 10 TBRD Case K22 ; 8 CTBR (NS) Case 111 ). Accordingly this amount is not assessable as ordinary income under subsection 6-5(1) of the ITAA 1997.", "Date_of_Decision": "28 March 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/69", "Subject_References": "Capital assets Capital receipts Carrying on a business Disposal of business Income of a capital nature Intangible assets Intellectual property rights Inventors Know how", "Case_References": "Rolls-Royce Ltd v. Jeffrey (Inspector of Taxes) [1962] 1 All ER 801 (1962) 40 TC 443", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200768", "Unmatched_Content": "Keywords Capital assets Capital receipts Carrying on a business Disposal of business Income of a capital nature Intangible assets Intellectual property rights Inventors Know how"}
{"ATO_ID_Number": "ATO ID 2006/121", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: Australian resident - disposal of residential property in Singapore", "Issue": "Is a net capital gain, that is made up of a capital gain, made by an Australian resident taxpayer from the disposal of a residential property in Singapore assessable income under section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A net capital gain that is made up of a capital gain, made by an Australian resident taxpayer from the disposal of a residential property in Singapore is assessable income under section 6-10 of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer owns a residential property in Singapore. The taxpayer disposes of the property in Singapore and makes a capital gain. The taxpayer is only entitled to a partial exemption under Subdivision 118-B of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of a resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is section 102-5 of the ITAA 1997 which provides that a net capital gain is to be included in assessable income. The capital gains from each CGT event are used in the calculation of the net capital gain (section 102-5). However, in determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the tax treaty between Australia and Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the Protocol amending the Singapore Agreement (the Protocol). The Singapore Agreement and the Protocol operate to avoid the double taxation of income received by Australian and Singaporean residents. Article 10A(1) of the Singapore Agreement provides that income or gains derived by a resident of Australia from the alienation of real property situated in Singapore may be taxed in Singapore. However, Article 10A(1) of the Singapore Agreement does not preclude taxation of these gains in Australia. Accordingly, such gains may be taxed in Singapore and Australia. For the purposes of Article 10A(1), Article 4A(2) of the Singapore Agreement defines the term 'real property' as having the meaning which it has under the laws of Australia and Singapore and also includes any interest in or over land whether improved or not. A residential property owned by a resident taxpayer in Singapore is 'real property' as defined in Article 4A(2) of the Singapore Agreement. Therefore, any gain derived by a resident taxpayer from the disposal of the property in Singapore may be taxed in Australia under Article 10A of the Singapore Agreement. Accordingly, a net capital gain, that is made up of a capital gain made by an Australian resident taxpayer from the disposal of a residential property in Singapore is assessable income under section 6-10 of the ITAA 1997. The capital gain and net capital gain will be calculated in accordance with the CGT provisions in the ITAA 1997.", "Date_of_Decision": "22 December 2005", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 6-10 subsection 6-10(4) section 10-5 section 102-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/826", "Subject_References": "Singapore Singapore agreement Tax treaty International tax Capital gains tax Foreign sourced income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006121", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Singapore Singapore agreement Tax treaty International tax Capital gains tax Foreign sourced income"}
{"ATO_ID_Number": "ATO ID 2004/275", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: Receipt of an 'early repayment benefit' upon early repayment of a fixed interest rate home loan", "Issue": "Is an 'early repayment benefit', received by the taxpayer upon early repayment of their fixed interest rate home loan, ordinary income and therefore, assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An 'early repayment benefit', received by the taxpayer upon early repayment of their fixed interest rate home loan, is not ordinary income and therefore, not assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer took out a fixed interest rate home loan to purchase their residence. Prior to the expiry of the fixed interest rate loan, the property was sold and the loan was repaid in full. A term of the loan agreement was that in the event of early, full repayment, the lender was able to recoup an early repayment cost, plus an early repayment administration fee. A calculation was carried out by the lender in order to determine its costs arising out of the early repayment. Such costs arise where the prevailing interest rate at the date of early repayment is less than that which applied to the remainder of the taxpayer's fixed interest rate period, thereby denying the lender the higher level of interest they would have earned during that time. In the taxpayer's circumstances, the prevailing interest rate at the date of the early repayment was actually higher than that which applied to the remainder of their fixed interest rate period. As such, there was no cost to the lender as the early repayment put the lender in a position to lend the funds at a higher level of interest than that which applied to the taxpayer's borrowings. Accordingly, the lender's calculation of its costs actually resulted in a negative figure. The loan contract stated that the lender had absolute discretion as to whether or not it would pass on to the taxpayer any benefit it gained through early repayment. Although not contractually obliged to do so, the lender credited to the taxpayer's loan an 'early repayment benefit' equivalent to the lender's notional saving.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 provides that the assessable income of a resident taxpayer includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources. Whether a profit from an isolated transaction is income according to ordinary concepts, depends very much on the circumstances of the case. Where a taxpayer not carrying on a business makes a profit, that profit is income if: In this instance, the receipt of the 'early repayment benefit' was incidental to the early repayment of the taxpayer's home loan. Furthermore, the loan contract made it clear that the lender had absolute discretion as to whether or not it would pass on to the taxpayer any benefit it might gain through early repayment. An objective consideration of the taxpayer's circumstances leads to a finding that the primary intention or purpose of the taxpayer in repaying the loan early was to sell their residence. Upon entering into the agreement to repay the loan and thereby sell the house, the taxpayer had no certainty that they would receive an 'early repayment benefit'. As such, the profit made from the transaction is not income as the taxpayer did not have sufficient intention to profit from the transaction. In addition, while interest is considered to be ordinary income, the 'early repayment benefit' cannot be characterised as interest. In FC of T v. Century Yuasa Batteries (1998) 82 FCR 288; 98 ATC 4380; (1998) 38 ATR 442, the Full Federal Court stated (at ATC 4383, ATR 444) that interest is the return, consideration, or compensation for the use or retention by one person of a sum of money belonging to, or owed to, another, and that interest must be referable to a principal. The 'early repayment benefit' is not interest as it did not arise out of the investment of a capital sum, that is, the taxpayer was not compensated for having been deprived of the use and enjoyment of a principal sum (see also FC of T v. The Myer Emporium Ltd (1987) 163 CLR 199 at 218; 87 ATC 4363 at 4371; 18 ATR 693 at 702). Accordingly, the 'early repayment benefit' received by the taxpayer is not ordinary income and is therefore not included in their assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "18 February 2004", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Borrowings & loans Capital receipts Home loan interest expenses Income Interest income Mortgage expenses Mortgages Payments of a private or domestic nature Private living expenses Private or domestic expenses Windfall gains", "Case_References": "FC of T v. Century Yuasa Batteries (1998) 82 FCR 288 98 ATC 4380 (1998) 38 ATR 442", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004275", "Unmatched_Content": "Keywords Borrowings & loans Capital receipts Home loan interest expenses Income Interest income Mortgage expenses Mortgages Payments of a private or domestic nature Private living expenses Private or domestic expenses Windfall gains"}
{"ATO_ID_Number": "ATO ID 2004/407", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: residential properties instalment sales contracts - investor not carrying on a business", "Issue": "Is the taxpayer, an investor who is not carrying on a business, assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) on the profit on the sale of a residential property under an instalment sale contract, in the year in which the contract is entered into?", "Decision": "No. The profit will not be included in the assessable income of the taxpayer under section 6-5 of the ITAA 1997 in the income year in which the contract is entered into, as the income has not yet been derived.", "Facts": "The taxpayer, an investor, entered into a joint venture agreement with a property manager. The agreement provided that the taxpayer would purchase a property chosen by the manager, with the intention of selling it to a third party purchaser, under an instalment sales contract with vendor finance. Under the joint venture agreement, the property manager supervises the performance of the instalment sales contract. At regular intervals, the property manager distributes equally, between the taxpayer and itself, the amount remaining from the instalments after deducting the joint venture expenses, including the taxpayer's loan repayments. The taxpayer is not carrying on a business of selling residential properties under instalment sales contracts. The joint venture agreement states the agreement does not constitute a partnership. The interest earned by the taxpayer as a result of the provision of the vendor finance is derived for taxation purposes at the time of receipt. The instalment sales contract between the third party purchaser and the taxpayer has the following features:", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that assessable income includes income according to ordinary concepts (ordinary income). Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. In certain circumstances a profit made through an isolated transaction will be ordinary income. Taxation Ruling TR 92/3 deals with isolated transactions and at paragraph 16 states that: If a taxpayer not carrying on a business makes a profit, that profit is income if: Paragraph 40 of TR92/3 states that it is not necessary that the intention or purpose of profit making be the sole or dominant intention for entering into the transaction, although it must be a significant purpose. Paragraph 41 of that ruling also states that if the transaction or operation involves the sale of property, it is usually necessary that the taxpayer has the profit making intention or purpose at the time of acquiring the property. In the circumstances here, whilst the taxpayer also intended to derive interest income under the instalment contract, they had the clear and significant intention of making a profit through buying and selling the property under the terms of the joint venture agreement. The terms of the joint venture agreement meant that the taxpayer was assured of making a profit by entering into the instalment sale contract soon after purchase of the residential property, for a price in excess of the purchase price. The purchase of the property and subsequent entering into of the instalment contract constitutes a 'commercial transaction' as envisaged by TR 92/3. Therefore, the profit was made in the carrying out of a commercial transaction. In the case Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73; 94 ATC 4280; (1194) 28 ATR 130 (the Gasparin Case) , where contracts for the sale of land were executed in one income year but settled in another, it was held that the income was not derived until settlement. Taxation Ruling TR 97/9, while specifically dealing with the sale of wool, discusses the impact of the Gasparin Case in relation to the sale of real property and at paragraph 89 states: The derivation of income from the sale of goods should be contrasted with the derivation of income from the sale of real property. It was held in Gasparin that income from the sale of land was not derived until settlement had taken place. We do not think that von Doussa J's decision was based on the fact that legal ownership in the land would not be transferred until settlement. The explanation for the judgement rather lies in the realisation that a vendor in a real property transaction will not have performed all that is needed to become entitled to a payment prior to settlement. At settlement, transfers are effected which put the purchaser in a position to become registered as owner. As such, the vendor does not earn the income from the sale until settlement. Under the instalment sale contract in question, whilst the relevant contract provides for the payment of instalments over a number of years, as in the Gasparin Case, the income from the sale of the properties has not been derived until settlement of the contract. At settlement, the taxpayer as vendor will transfer the title to the property, and will at that point, have done all that is required in order to derive the payments in respect of the sale of the property. Accordingly, no income from the sale of the property has been derived under subsection 6-5(2) of the ITAA 1997 until the instalment contract is completed and settlement has occurred.", "Date_of_Decision": "24 November 2003", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/3 | Taxation Ruling TR 97/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/25 | ATO ID 2004/26 | ATO ID 2004/27 | ATO ID 2004/28 | ATO ID 2004/29 | ATO ID 2004/406", "Subject_References": "Disposal of real estate Isolated transactions Joint ventures Real estate transactions Sale by instalments", "Case_References": "Gasparin v. Commissioner of Taxation (1994) 50 FCR 73 94 ATC 4280 (1994) 28 ATR 130", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004407", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 92/3 Taxation Ruling TR 97/9 | Keywords Disposal of real estate Isolated transactions Joint ventures Real estate transactions Sale by instalments"}
{"ATO_ID_Number": "ATO ID 2002/824", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of refund of capital contribution towards obtaining electricity", "Issue": "Is a refund of a contribution towards obtaining an electricity supply, included in the taxpayer's assessable income under section 6-5 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "No. A refund of a contribution towards obtaining an electricity supply is not included in the taxpayer's assessable income under section 6-5 of the ITAA 1997 as it is a receipt of a capital nature.", "Facts": "The taxpayer paid an amount to an electricity provider. The amount was paid before 20 September 1985. The amount was a contribution towards the cost of obtaining an electricity supply to the taxpayer's property. Under an agreement, the taxpayer was entitled to receive a full refund of their contribution (without interest) after a specified number of years from the date of the agreement. The taxpayer received a full refund of their contribution from the electricity provider.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 provides that the assessable income of an Australian resident for taxation purposes, includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources. Relevant factors in determining whether a payment is ordinary income include: Under the terms of the agreement, the taxpayer was entitled to receive a refund of the total amount of their contribution, without interest, after a specified number of years from the date of their initial payment. Generally, expenditure incurred in the installation or connection of utilities (eg. electricity, gas, and telephone) is considered to be an outgoing of a capital nature. The taxpayer received a full refund of their contribution from the electricity provider. This payment is a refund of a capital contribution made by the taxpayer. The payment is a one-off payment, that was expected but not relied upon, and not related to work performed or an interest in property. It does not have the characteristics of ordinary income but is rather a capital receipt in the taxpayer's hands. The refund amount is not ordinary income and is therefore not included in the taxpayer's assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "13 August 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Refunds Income Capital receipts Utility expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002824", "Unmatched_Content": "Keywords Refunds Income Capital receipts Utility expenses"}
{"ATO_ID_Number": "ATO ID 2009/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Immediate annuity as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997", "Issue": "Does a life insurance policy provide for an immediate annuity as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the policy provides for a series of monthly payments that are dependant on the returns of an underlying investment and the policy does not satisfy paragraphs (a) or (b) of the definition of annuity in subsection 995-1(1)?", "Decision": "No. A life insurance policy does not provide for an immediate annuity as defined in subsection 995-1(1) of the ITAA 1997 where the policy provides for a series of monthly payments that are dependant on the returns of an underlying investment and the policy does not satisfy paragraphs (a) or (b) of the definition of annuity in subsection 995-1(1).", "Facts": "A life insurance company offered a life insurance policy with the following features: Additionally, the policy does not provide for an annuity within the meaning of the Superannuation Industry (Supervision) Act 1993 or a pension within the meaning of the Retirement Savings Account Act 1997.", "Reasons_for_Decision": "Summary: An 'immediate annuity' is defined in subsection 995-1(1) of the ITAA 1997 as an annuity that is presently payable. An 'annuity' is defined in subsection 995-1(1) of the ITAA 1997 as follows: annuity includes: (a) an annuity, within the meaning of the Superannuation Industry (Supervision) Act 1993; or (b) a pension, within the meaning of the Retirement Savings Accounts Act 1997. The use of the word 'includes' in the definition of annuity indicates that for the purpose of the ITAA 1997 the defined term 'annuity' includes a common law annuity. The policy does not satisfy either paragraph (a) or (b) of the definition of annuity in subsection 995-1(1) of the ITAA 1997. Accordingly, the policy will only satisfy the definition of an annuity in subsection 995-1(1) if it is a common law annuity. Whether a series of regular payments is an annuity at common law has been considered by the courts in numerous cases. One characteristic that the courts have found to be essential in determining whether an annuity exists is the requirement that the annuitant has converted their capital into an income stream (Sothern-Smith v. Clancy (Inspector of Taxes) [1941] 1 KB 276; Egerton-Warburton v. Deputy Commissioner of Taxation (1934) 51 CLR 568; (1934) 10 ATD 274). This principle is expressed at paragraph 9 of Taxation Ruling IT 2480 in the following terms: \"An essential characteristic of a purchased annuity is, therefore, that the capital amount paid has been transformed into income.\" The nature of the 'income' that is referred to here is a series of certain income payments that are made at regular periods for life or over a term of years: Deputy Federal Commissioner of Land Tax, Sydney v. Hindmarsh (1912) 14 CLR 334. This requirement for certainty is expressed in paragraph 10 of IT 2480 in the following terms: \"Another quality or characteristic of an annuity is that it is of a sum certain.\" Taxation Ruling IT 2480 at paragraph 18 also discusses the need for certainty with respect to the payments to be received and states that: \"The fundamental feature of an annuity is the certainty of the payments to be received under the contract. The contract must state what the annuitant's annual entitlement is and the period for which it is payable and, if that stated entitlement can be varied, the contract must state the basis on which variation can be made. A contract without this underlying feature cannot be accepted as an annuity.\" Paragraph 20 of IT 2480 provides that the requirement of a sum certain is not satisfied where the contract provides for the payment of amounts based on the actual earnings performance of the issuer or the value of the units cashed in because the sum provided is not certain in this case. Subsequent to the issue of IT 2480 the question of whether a common law annuity exists has been considered in Australia and New Zealand Savings Bank Limited v. Federal Commissioner of Taxation (1993) 42 FCR 535; 93 ATC 4370; (1993) 25 ATR 369, Clarke v. FC of T 92 ATC 4136; (1992) 23 ATR 102 and FC of T v. Clarke 92 ATC 4561; (1992) 24 ATR 230. These decisions did not alter the common law requirement that a fundamental feature of an annuity is the certainty of the payments to be received under the contract. The policyholder's entitlement to monthly payments is based on the value of their unit entitlement which is in turn dependant on the underlying value of the assets backing the units. Although the policy provides for a certain unit entitlement at each payment time, there is no guaranteed sum and no certainty as to the amount of each payment that will be made to the policyholder. Accordingly, the policy does not provide for an annuity at common law and therefore does not provide for an annuity or immediate annuity as defined in subsection 995-1(1) of the ITAA 1997.", "Date_of_Decision": "23 July 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2480", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Annuity income Income Life insurance policies", "Case_References": "Sothern-Smith v Clancy (Inspector of Taxes) [1941] 1 KB 276", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200980", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2480 | Keywords Annuity income Income Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2007/181", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 15 of Part III of the Income Tax Assessment Act 1936: contract between a non-resident insurance company and a resident insurance company to make good a loss from a surety bond", "Issue": "Is a contract under which a non-resident insurance company agrees to participate in the risk that a resident insurance company has assumed under a surety bond an insurance contract under section 141 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A contract under which a non-resident insurance company agrees to participate in the risk that a resident insurance company has assumed under a surety bond is an insurance contract under section 141 of the ITAA 1936.", "Facts": "ABC is an Australian insurance company that enters into contracts under which ABC undertakes to secure certain obligations owed by a principal to a creditor. The company describes the contract as a surety bond contract. If ABC is called upon under the surety bonds by the creditor to meet an obligation of a principal, ABC (as surety) has a right of recovery against the principal for amounts paid by the ABC to the creditor. Examples of obligations covered by these surety bonds include performance obligations (for example, under a construction contract), payment obligations, maintenance obligations and payment of duties obligations. XYZ is a reinsurance company that is not a resident company of Australia for income tax purposes. XYZ enters into a contract with ABC under which, in return for a premium, XYZ will participate to an agreed extent in the risk that ABC has assumed under the surety bonds where ABC is unable to recover an amount from the principal.", "Reasons_for_Decision": "Summary: Section 141 of the ITAA 1936 sets out that: insurance contract means a contract or guarantee whereby liability is undertaken, contingent upon the happening of any specified event, to pay any money or make good any loss or damage, but does not include a contract of life assurance. The section identifies four criteria that must be present in order for there to be an insurance contract: The arrangement between ABC and XYZ is a contract and therefore meets the first criterion of the definition of insurance contract in section 141 of the ITAA 1936. The second criterion requires that a liability must arise under the insurance contract. The Macquarie Dictionary , 2005, 4th ed, The Macquarie Library Pty Ltd, NSW defines liability as 'an obligation, especially for payment'. Jowitt's Dictionary of English Law defines 'liability' as: ... the condition of being actually or potentially subject to an obligation, either generally, as including every kind of obligation, or, in a more special sense, to denote inchoate, future, unascertained or imperfect obligations, as opposed to debts, the essence of which is that they are ascertained and certain. Thus, when a person becomes surety for another, he makes himself liable, though it is unascertained in what obligation or debt the liability may ultimately result. Under the surety bond ABC has taken on the liability that it will meet the demands of creditors in the event of default by debtors. Under the contract between XYZ and ABC, XYZ has accepted to take on a liability in return for a premium. Accordingly, the second criterion of the definition of insurance contract in section 141 of the ITAA 1936 is satisfied as a liability arises for XYZ under the contract between XYZ and ABC. The next criterion is that the liability that arises for XYZ must be contingent upon the happening of a specified event. Under a surety the 'liability of a surety to the third party is contingent upon the debtor failing to meet his or her obligation': Coles Myer Finance Ltd v. Federal Commissioner of Taxation (1993) 176 CLR 640; 93 ATC 4214; (1993) 25 ATR 95 per McHugh J at CLR 685; ATC 4232; ATR 120. In this respect, the demand by the creditor on ABC will in turn result in a demand being made by ABC on XYZ if ABC is unable to recover an amount from the principal. Accordingly, the liability of XYZ is contingent upon the happening of this specified event and the third criterion of the definition of insurance contract in section 141 of the ITAA 1936 is satisfied. The last criterion is that the liability must be for the payment of money or the making good of any loss or damage. XYZ is required to pay amounts to ABC in accordance with the terms of the respective contracts in relation to a loss sustained by ABC where ABC is unable to recover the loss from the principal. XYZ therefore has a liability to pay money or make good a loss on the happening of the specified events and the fourth criterion of the definition of insurance contract in section 141 of the ITAA 1936 is satisfied. Accordingly, the contracts between XYZ and ABC are considered to meet the definition of an insurance contract in section 141 of the ITAA 1936. The inclusion of suretyship, provided by insurance companies, within the statutory definition of insurance contract is supported by the intent of Division 15 of Part III of the ITAA 1936 which can be ascertained from an examination of the equivalent provision in the Income Tax Assessment Act 1922 (ITAA 1922) which preceded the introduction of the ITAA 1936. The prevailing provision that governed the insurance premiums paid to a non-resident insurance company was subsection 28B(1) of the ITAA 1922. Clause 14 of the Explanatory Memorandum to the Income Tax Assessment Bill 1930 (which inserted section 28B into the ITAA 1922) stated that the provision was being inserted to: ... cause income tax to be payable by or on behalf of ex-Australian underwriters such as Lloyd's Insurance Association of London upon an assumed profit of 10 per cent. of all premiums on insurances effected in Australia by or on behalf of that underwriter. The Explanatory Memorandum makes clear that it was the intention that all forms of insurance business provided by non-resident insurers, such as Lloyd's Insurance Association of London (Lloyd's), would be the subject of section 28B of the ITAA 1922. Insurance business undertaken by Lloyd's at this time extended to suretyship. This is demonstrated by the case Trade Indemnity Co Ltd v. Workington Harbour and Dock Board [1936] 1 All ER 454 where Lord Atkin, in summarising the case before him, referred at All ER 458 to the fact that Trade Indemnity had 'reinsured' its risks under surety bonds with 'other persons carrying on business in the insurance world, notably at Lloyd's'. Accordingly, treating the contract entered into by XYZ with ABC as an insurance contract as defined in section 141 of the ITAA 1936 is considered to be in accordance with the intent of Division 15 of Part III of the ITAA 1936.", "Date_of_Decision": "12 September 2007", "Year_of_Income": "30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 141 Division 15 of Part III", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Guarantees Insurance industry Non resident insurance industry Reinsurance & reinsurers Sureties", "Case_References": "Coles Myer Finance Limited v. Federal Commissioner of Taxation (1993) 176 CLR 640 93 ATC 4214 25 ATR 95", "Other_References": "The Macquarie Dictionary, 2005, 4th ed, The Macquarie Library Pty Ltd, New South Wales Jowitt's Dictionary of English Law, (2nd ed Burke J), Volume 2, The Law Book Company Ltd, Sydney, Melbourne, Brisbane Explanatory Memorandum to Income Tax Assessment Bill 1930", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007181", "Unmatched_Content": "Keywords Guarantees Insurance industry Non resident insurance industry Reinsurance & reinsurers Sureties"}
{"ATO_ID_Number": "ATO ID 2004/599", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a reversionary bonus from a foreign life policy", "Issue": "Is the reversionary bonus received on maturity of a foreign life policy (FLP) taken out before 27 August 1982 in respect of which income has been previously attributed to the taxpayer under Part XI of the Income Tax Assessment Act 1936 (ITAA 1936) assessable income?", "Decision": "No. The reversionary bonus received on maturity of a FLP taken out before 27 August 1982 in respect of which income has been previously attributed to the taxpayer under Part XI of the ITAA 1936 is not assessable income.", "Facts": "The taxpayer is a natural person and an Australian resident. The taxpayer took out the FLP before 27 August 1982. The policy was a FLP within the meaning of section 482 of the ITAA 1936 and the taxpayer's interest was an interest in the FLP within the meaning of subsection 483(3) of the ITAA 1936. The FLP matured in July 2002 and the taxpayer received a one off payment of $100,000 on maturity. The taxpayer's contributions over the life of the FLP were $80,000. No other payments were made to the taxpayer from the FLP at any time during which the policy was held. The taxpayer was assessed under section 529 of the ITAA 1936 in respect of their interest in the FLP in respect of previous income years.", "Reasons_for_Decision": "Summary: Division 6 of the Income Tax Assessment Act 1997 (ITAA 1997) sets out what amounts are included in the taxpayer's assessable income. It provides that the following amounts are included: Taxation Ruling IT 2504 provides the Commissioner's views on bonuses received from life insurance policies. It states at paragraph 2: Bonuses received on a policy of life assurance are not income according to ordinary concepts and therefore do not constitute assessable income under subsection 25(1) of the Act. As the bonus will not be ordinary income, it will only be included in assessable income if it is statutory income. Section 26AH of the ITAA 1936 includes in assessable income certain bonuses received under short term life insurance policies taken out after 27 August 1982, referred to as 'eligible policies'. As the policy commenced before that date, it is not taxed under that provision. Paragraph 26(i) of the ITAA 1936 includes in assessable income bonuses received under a policy of life assurance other than reversionary bonuses. A bonus is a reversionary bonus when the entitlement to the bonus only accrues upon maturity of the policy and is not payable annually. As the taxpayer's bonus was a reversionary bonus, the bonus is not taxed under paragraph 26(i). As the interest in the FLP was acquired prior to 20 September 1985, the capital gains tax provisions are not relevant. In any event section 118-300 of the ITAA 1997 may have applied to disregard any capital gain arising from the disposal. As no amount of the payment is ordinary or statutory income, the payment is not included in assessable income under Division 6 of the ITAA 1997. However, in the taxpayer's income year in which the FLP matured, the taxpayer is required to calculate the attributable income included in their assessable income under section 529 of the ITAA 1936 in respect of the FLP's notional accounting period that ended in that income year. The relevant notional accounting period ends immediately after the disposal of the interest in the FLP (see subsection 487(8) of the ITAA 1936). The amount included in assessable income under section 529 is separate and independent to the final amount received upon maturity. Therefore, the amount attributed to the taxpayer under section 529 of the ITAA 1936 is included in assessable income. However, none of the amount actually received by the taxpayer upon maturity is included in assessable income. The taxpayer may have paid foreign tax on the amount received from the FLP upon maturity. Because none of this payment is assessable income, no amount of foreign income tax offset will be allowed in respect of this foreign tax paid under section 770-10 of the ITAA 1997.", "Date_of_Decision": "18 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 26(i) section 26AH subsection 529", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/893", "Subject_References": "Foreign investment funds Foreign life assurance policies Life insurance policies", "Case_References": "", "Other_References": "Foreign Investments Fund Guide 2002 NAT 2130 Chapter 5", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004599", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/3 | Keywords Foreign investment funds Foreign life assurance policies Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2004/691", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of lump sum payment received by resident beneficiary of a non-resident trust from foreign life assurance policy held by the trust", "Issue": "Is a bonus received by a resident beneficiary of a non-resident trust from a foreign life assurance policy held by the trust, included in assessable income under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A bonus received by a resident beneficiary of a non-resident trust from a foreign life assurance policy held by the trust, is not included in assessable income under section 99B of the ITAA 1936.", "Facts": "The taxpayer purchased capital redemption bonds in 1989 at a time when the taxpayer was a non-resident of Australia. The proceeds of the bonds were used to pay the annual premiums on a life assurance policy held by a non-resident trust. The life assurance policy is not an Australian policy and is not subject to taxation in the taxpayer's previous country of residence. The taxpayer received a lump sum payment as a beneficiary of the non-resident trust after the taxpayer became a resident of Australia. The lump sum payment comprises a bonus payable under the policy. The lump sum payment was made more than 10 years after the date of commencement of the risk and has not previously been subject to tax in Australia. The lump sum payment would not have been included in the taxpayer's assessable income had the taxpayer held the policy directly, because of the operation of section 26AH of the ITAA 1936. Subsection 99B(1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, that amount is to be included in the assessable income of the beneficiary. Subsection 99B(2) of the ITAA 1936 modifies the rule in subsection 99B(1) and has the effect that the amount to be included in assessable income under subsection (1) is not to include any amount that represents either: Section 26AH of the ITAA 1936 provides that a taxpayer's assessable income shall include bonuses, and some other amounts in the nature of bonuses, received under a relevant life assurance policy ('an eligible policy') during a specified period ('the eligible period'). An eligible policy is defined to mean a policy of life assurance in relation to which the date of commencement of risk is after 27 August 1982, while the date of commencement of risk in relation to an eligible policy is - Subsection 26AH(6) of the ITAA 1936 operates to exclude bonuses and other amounts received in respect of certain short-term life assurance policies from a resident taxpayer's assessable income if the amounts are received 10 years or more from the date of commencement of risk. As the amount was paid more than 10 years after the commencement of the risk under the policy, the lump sum payment received by the taxpayer from the life assurance policy held by the non-resident trust would not have been included in the taxpayer's assessable income under section 26AH of the ITAA 1936 had the taxpayer held the policy directly. Further, as a bonus is not ordinary income (see Taxation Ruling IT 2504), the bonus would not be included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) had the taxpayer held the policy directly. Therefore, paragraph 99B(2)(b) of the ITAA 1936 will apply to exclude the lump sum payment from the taxpayer's assessable income. Therefore, the lump sum payment received by the resident taxpayer from a foreign life assurance policy held by a non-resident trust is not included in the taxpayer's assessable income under section 99B of the ITAA 1936.", "Reasons_for_Decision": "", "Date_of_Decision": "2 August 2004", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1936 section 26AH section 99B subsection 99B(1) paragraph 99B(2)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2504", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign investment funds Foreign life assurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004691", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2504 | Keywords Foreign investment funds Foreign life assurance policies"}
{"ATO_ID_Number": "ATO ID 2003/962", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Life insurance company: reinsurance recoveries", "Issue": "Is an amount assessable under paragraph 320-15(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) if the amount is received by a life insurance company on or after 1 July 2000 under a contract of reinsurance and the amount relates to the risk component of a claim that was paid by the company prior to 1 July 2000?", "Decision": "Yes. An amount received by a life insurance company under a contract of reinsurance is assessable under paragraph 320-15(1)(b) of the ITAA 1997 if the amount is received on or after 1 July 2000 under a contract of reinsurance and the amount relates to the risk component of a claim that was paid by the company prior to 1 July 2000.", "Facts": "A life insurance company pays a claim of $100,000 under a life insurance policy on 20 June 2000. The policy is a pure death policy that does not provide participating benefits or discretionary benefits and is not an exempt life insurance policy. For the income year ended 30 June 2000, section 112BA of the Income Tax Assessment Act 1936 applied and the life insurance company did not obtain a deduction in respect of the $100,000 claim paid under the policy. Section 112BA was repealed with effect from 1 July 2000. The life insurance company has a contract of reinsurance with a reinsurance company in respect of the life insurance policy. The life insurance company receives a $70,000 reinsurance recovery in relation to the claim on 21 July 2000 from the reinsurance company under the contract of reinsurance.", "Reasons_for_Decision": "Summary: Division 320 of the ITAA 1997 introduced a new basis for taxing life insurance companies with effect from 1 July 2000. Division 320 includes specific provisions for assessing certain amounts received by a life insurance company, including amounts received under a contract of reinsurance. An amount received by a life insurance company under a contract of reinsurance is assessable under paragraph 320-15(1)(b) of the ITAA 1997 to the extent to which the amount relates to the risk component of claims paid under the life insurance policy. The risk component of claims paid under a life insurance policy is determined under subsection 320-80(2) of the ITAA 1997. Accordingly, where a claim is paid before 1 July 2000, and a reinsurance recovery is received in relation to the claim after that date, subsection 320-80(2) of the ITAA 1997 applies to determine whether there is a risk component of the claim for the purposes of paragraph 320-15(1)(b) of the ITAA 1997. The fact that the claim was paid before 1 July 2000 does not prevent subsection 320-80(2) of the ITAA 1997 applying to determine the risk component of claim for the purposes of applying paragraph 320-15(1)(b) of the ITAA 1997. The risk component of claims paid under a life insurance policy is specified in paragraph 320-80(2)(a)to the ITAA 1997 to be the amount of the claim paid if: For the purposes of paragraph 320-15(1)(b) of the ITAA 1997, the risk component of the claim paid by the life insurance company would therefore be $100,000, as the policy does not provide participating or discretionary benefits, is not an exempt life insurance policy and only provides benefits on the death of the policyholder. The reinsurance recovery of $70,000 is paid to the life insurance company under the reinsurance contract as a consequence of the life insurance company paying the policyholder claim of $100,000. The full amount of the reinsurance recovery is therefore considered to relate to the claim paid of $100,000. Accordingly, as the $70,000 reinsurance recovery relates to the risk component of the claim paid, $70,000 is included in the assessable income of the life insurance company for the year ended 30 June 2001 under paragraph 320-15(1)(b) of the ITAA 1997.", "Date_of_Decision": "20 October 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Division 320 paragraph 320-15(1)(b) subsection 320-80(2) paragraph 320-80(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Reinsurance & reinsurers Life insurance company Life assurance income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003962", "Unmatched_Content": "This ATO Interpretative Decision has been amended to update legislative references. | Keywords Reinsurance & reinsurers Life insurance company Life assurance income"}
{"ATO_ID_Number": "ATO ID 2003/1189", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "CGT: buy - sell (business succession) agreement - life insurance proceeds - income or capital?", "Issue": "Are the proceeds from a life insurance policy, payable on the death of the insured person, assessable income under sections 6-5, 6-10, 15-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The proceeds from the life insurance policy are not assessable income as they are a receipt of capital.", "Facts": "The partners entered into a business succession agreement to ensure both that the business is preserved for the surviving partners and that the estate of the deceased partner receives an amount equivalent to the worth of the partner's equity in the business. Under the terms of a business succession agreement, each of the partners of a business takes out life insurance policies on their own lives, with the other partners as the beneficiaries of the policies. The agreement provides that on the death of a partner, the remaining partners have the right to acquire the interests in the business of a deceased partner at an agreed market value. Conversely the legal personal representative of the estate of the deceased partner has the right to require the surviving partners to purchase the interest of the deceased partner. The surviving partners use the proceeds (a lump sum payment) from the life insurance policy to fund the acquisition of the interests in the business of the deceased partner.", "Reasons_for_Decision": "Summary: The courts have had occasion over the years to examine the meaning of 'a policy of life insurance'. It has been found that life insurance policies exhibit the following characteristics: The courts have also examined the nature of the proceeds from life insurance policies. In Marac Life Assurance Ltd v. Commissioner of Taxation [1986] 1 NZLR 694 the Court of Appeal concluded: Nothing in the Income Tax Act 1976 specifically exempts proceeds of life insurance policies from income tax, but it is common ground that traditionally such proceeds have been treated as capital; and this view is supported by In re The Income Tax Acts (1900) 26 VLR 297. The decision in Marac Life Assurance was applied by the Federal Court of Australia in NM Superannuation Pty. Ltd. v. Young & Anor (1993) 41 FCR 182; (1993) 7 ANZ Insurance Cases 61-163. Ordinary Income and Statutory Income. Section 6-5 of the ITAA 1997 provides that the assessable income of Australian residents includes the ordinary income derived directly or indirectly from all sources. Ordinary income includes income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that: Although the proceeds from a life insurance policy can be said to be expected and relied upon, this expectation arises from taking out an insurance policy, rather than from a relationship within which personal services are performed. The payment is made in a lump sum so it does not have an element of periodicity, recurrence or regularity. The proceeds from a life insurance policy do not relate to personal services, property or the carrying on of a business. Therefore, the proceeds are not considered to be income according to ordinary concepts under section 6-5 of the ITAA 1997. Section 6-10 of the ITAA 1997 provides that amounts that are not ordinary income but are included in assessable income by another provision, are called statutory income. Payments made under a life insurance policy may come under compensation - insurance or indemnity for loss of assessable income under section 15-30 of the ITAA 1997. The proceeds from a life insurance policy represent payment of a benefit contingent on the termination of human life. The compensation amount generally bears the character of that which it is designed to replace. The compensation in this particular case is to replace the capital asset and will be regarded as capital receipt. Section 6-15 of the ITAA 1997 provides that if an amount is not ordinary income and is not statutory income, it is not assessable income.", "Date_of_Decision": "30 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-10 section 6-15 section 15-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Life insurance policies Capital gains tax", "Case_References": "Marac Life Assurance Limited v. Commissioner of Inland Revenue [1986] 1 NZLR 694 (1986) 4 ANZ Insurance Cases 60-735.", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031189", "Unmatched_Content": "Keywords Life insurance policies Capital gains tax"}
{"ATO_ID_Number": "ATO ID 2002/197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Premiums received by a friendly society from ordinary bundled endowment policies", "Issue": "How does subsection 320-15(a) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to ordinary bundled endowment policies issued by a friendly society?", "Decision": "Paragraph 320-15(a) of ITAA 1997 includes in assessable income all life insurance premiums received from ordinary bundled endowment policies issued by a friendly society?", "Facts": "A friendly society issues ordinary bundled endowment policies and receives premiums from policyholders.", "Reasons_for_Decision": "Summary: Paragraph 320-15(a) of ITAA 1997 includes in the assessable income of a friendly society the total amount of premiums received from ordinary bundled endowment policies.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "Year ended 30 June 2001 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 Paragraph 320-15(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/198 | ATO ID 2002/199 | ATO ID 2002/200 | ATO ID 2002/201", "Subject_References": "Life assurance Endowment insurance", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002197", "Unmatched_Content": "Keywords Life assurance Endowment insurance"}
{"ATO_ID_Number": "ATO ID 2002/198", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Ordinary bundled endowment policies issued by a friendly society", "Issue": "Does a friendly society issue any life insurance policies which provide for participating benefits as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, a friendly society does not issue any life insurance policies which provide for participating benefits as defined in subsection 995-1(1) of the ITAA 1997.", "Facts": "A friendly society issues ordinary bundled endowment policies.", "Reasons_for_Decision": "Summary: A friendly society issues a life insurance policy which provides a participating benefit if the definition of a participating benefit in subsection 995-1(1) of the ITAA is satisfied.. Subsection 995-1(1) of the ITAA 1997 defines participating benefit as having the same meaning as that given by section 15 of the Life Insurance Act 1995 (the Life Insurance Act). Policies issued by friendly societies are not participating policies. Regulation 2.01A of the Life Insurance Regulations 1995 (the Regulations) modifies the application of the Life Insurance Act to friendly societies. Item 1 of Schedule 5 of the Regulations omits section 15 of the Life Insurance Act for the purposes of applying that Act to friendly societies. Therefore, policies issued by friendly societies do not provide participating benefits as defined in subsection 995-1(1) of the ITAA 1997.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "Year ended 30 June 2001 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/197 | ATO ID 2002/199 | ATO ID 2002/200 | ATO ID 2002/201", "Subject_References": "Life assurance Endowment insurance", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002198", "Unmatched_Content": "Keywords Life assurance Endowment insurance"}
{"ATO_ID_Number": "ATO ID 2005/212", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-Portfolio Dividends: optional convertible notes - non-assessable non-exempt income under section 23AJ of the ITAA 1936", "Issue": "Will dividends received on shares following conversion of optional convertible notes (OCN) be non-assessable non-exempt income under section 23AJ of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Dividends received by the holder from the issuer on shares following conversion of the OCN will be non assessable non exempt income under section 23AJ of the ITAA 1936.", "Facts": "A non-resident company (the issuer) issues OCN to an Australian resident company (the holder). The terms of the OCN issued include:- The holder is wholly owned by the Australian resident head company (head company) of a consolidated group. Upon full conversion of the OCN to shares, the holder and head company will each hold in excess of 10% shareholding in the issuer.", "Reasons_for_Decision": "Summary: Section 23AJ of the ITAA 1936 provides that a non-portfolio dividend (as defined in section 317 of the ITAA 1936) paid to a company is not assessable income, and is not exempt income, of the company if: | Detailed Reasoning - Is the dividend a 'non portfolio dividend'?: A non portfolio dividend is defined in section 317 of the ITAA 1936 as meaning a dividend (other than an eligible finance share dividend or a widely distributed finance share dividend) paid to a company where that company has a voting interest, within the meaning of section 334A of the ITAA 1936, amounting to at least 10% of the voting power, within the meaning of that section, in the company paying the dividend. Section 317 of the ITAA 1936 states that 'eligible finance share dividend' means a dividend in respect of an 'eligible finance share'; which in turn has the meaning given by section 327 of the ITAA 1936; and excludes dividends paid by a company to an associate. The term 'widely distributed finance share' has the meaning given by section 327A of the ITAA 1936 and requires inter alia, that the share be a 'recognised finance share' which is defined in subsection 327A(3) of the ITAA 1936 and includes the requirement that the shareholder is not an associate of the company. The term 'associate' is defined in section 318 of the ITAA 1936 and includes at subsection 318(2) of the ITAA 1936 a 'controlling entity' holding a majority voting interest in the company. Where on conversion of the OCN both the holder and the head company will jointly hold all the shares in the issuer, as members of the same consolidated group, the entities are associated and the requirements of section 327 of the ITAA 1936 are not satisfied. Dividends received by the holder from the issuer are not 'an eligible finance share dividend' or a widely 'distributed finance share dividend' for the purposes of section 23AJ of the ITAA 1936. | Detailed Reasoning - Is a voting interest of more than 10% of voting power held in the issuer?: Subsection 334A(1) of the ITAA 1936 provides that, a company shall be taken to have a voting interest in another company if: (a) the first-mentioned company is the beneficial owner of shares (other than eligible finance shares or widely distributed finance shares) in the other company that carry the right to exercise any of the voting power in the other company; and (b) there is no arrangement in force at the relevant time by virtue of which any person is in a position, or may become in a position, to affect that right, The effect of the consolidation rules on the application of section 23AJ of the ITAA 1936 is addressed in Taxation Determination TD 2004/76 at paragraphs 6-8 which state that: When determining if section 23AJ of the ITAA 1936 applies to a dividend paid to a consolidated group, the single entity rule (SER) in section 701-1 of the Income Tax Assessment Act 1997 applies. The SER treats the subsidiary members of a consolidated group as parts of the head company (rather than separate entities) for income tax purposes during the period they are members of the consolidated group. A consequence of the SER is that the actions and transactions of a subsidiary member are treated as having been undertaken by the head company and the assets a subsidiary member of the group owns are taken to be owned by the head company (excluding intra-group assets) while the subsidiary remains a member of the group. Accordingly, from the consolidated group's perspective, the head company is taken to hold the shares and voting rights held by a subsidiary member in the foreign company (as well as the shares and voting rights the head company holds directly in the foreign company) and to receive any dividends paid by the foreign company to the subsidiary member. Following conversion of the OCN to ordinary shares, the holder and the head company would have a voting interest in the issuer as defined in subsection 334A(1) of the ITAA 1936. Subsection 334A(4) of the ITAA 1936 provides that, the 'voting power' in a company is the maximum number of votes that can be cast on a poll at, or arising out of, a general meeting of a company as regards all questions that can be submitted to such a poll. The head company and the holder (after full conversion) being the beneficial owners of in excess of 10% of shares in the issuer have a voting interest representing at least 10% of the voting power in the issuer as defined in subsection 334A(4) of the ITAA 1936. Dividends received by the holder following conversion of the OCN will be classified as 'non portfolio dividends' for the purposes of section 23AJ of the ITAA 1936. | Detailed Reasoning - Are the requirements of paragraph 23AJ(a) of the ITAA 1936 satisfied?: Paragraph 23AJ(a) of the ITAA 1936 requires that the company receiving the dividend is an Australian resident and does not receive the dividend in the capacity of a trustee. The head company and the holder are both incorporated in Australia and assumed to be an Australian resident for the purposes of the application section 23AJ of the ITAA 1936. The head company and the holder will both hold the shares in the issuer in their own right and not in the capacity of trustee. The requirements of paragraph 23AJ(a) of the ITAA 1936 would therefore be satisfied. | Detailed Reasoning - Are the requirements of paragraph 23AJ(b) of the ITAA 1936 satisfied?: Paragraph 23AJ(b) of the ITAA 1936 requires that the company that paid the dividend is not a Part X Australian resident (as defined in that section). Part X Australian resident is defined in section 317 of Part X of the ITAA 1936 as follows: \"Part X Australian resident'' means a resident within the meaning of section 6, but does not include an entity where: (a) there is a double tax agreement in force in respect of a foreign country; and (b) that agreement contains a provision that is expressed to apply where, apart from the provision, the entity would, for the purposes of the agreement, be both a resident of Australia and a resident of the foreign country; and (c) that provision has the effect that the entity is, for the purposes of the agreement, a resident solely of the foreign country; Section 6 of the ITAA 1936 defines resident as including a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia. The issuer being a company not incorporated in Australia which does not carry on business in Australia and is therefore not a Part X Australian resident, for the purposes of the application of paragraph 23AJ(b) of the ITAA 1936. Accordingly, as all requirements of section 23AJ of the ITAA 1936 are satisfied, dividends received by the holder following conversion of the OCN to ordinary shares will constitute non assessable and non exempt income by the operation of that section.", "Date_of_Decision": "14 July 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013 Year ended 30 June 2014 Year ended 30 June 2015", "Legislative_References": "Income Tax Assessment Act 1936 section 23AJ section 317 subsection 6(1) section 327 section 334A", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/76", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income Non portfolio foreign income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005212", "Unmatched_Content": "This ATO ID has been amended to replace the repealed s160AFB and its subsections by s334A and its subsections. With effect from 1 July 2008 the foreign tax credit system contained in Div 18 of the Income Tax Assessment Act 1936 has been replaced by the foreign tax offset system contained in Div 770 of the Income Tax Assessment Act 1997 . | and the extent of the voting interest is taken to be the total number of votes that, by virtue of that right, can be cast on a poll at, or arising out of, a general meeting of the other company as regards all questions that could be submitted to such a poll. | Related Public Rulings (including Determinations) Taxation Determination TD 2004/76 | Keywords Foreign income Non portfolio foreign income"}
{"ATO_ID_Number": "ATO ID 2004/955", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Partnership income and non-cash business benefit", "Issue": "Does section 21A of the Income Tax Assessment Act 1936 (ITAA 1936) apply in the calculation of the net income of a partnership in relation to the provision of the exclusive use of plant and equipment to the partnership, at no charge, by the respective partners?", "Decision": "No. Section 21A of the ITAA 1936 does not apply in the calculation of the net income of the partnership as the provision of the exclusive use of plant and equipment by the partners does not constitute a non-cash business benefit.", "Facts": "A and B carry on separate businesses. They have entered into a partnership arrangement for the purpose of sharing the use of plant and equipment which is owned by the businesses as tenants in common. Under the arrangement, the two partners retain ownership of the plant and equipment as tenants in common and allow the partnership the exclusive right to use the plant and equipment at no cost. The partnership will use the plant and equipment to provide certain services to the two partners to be used in their respective businesses. The two partners will be charged for the provision of those services by the partnership, based on an equal share of the costs incurred by the partnership in providing the services.", "Reasons_for_Decision": "Summary: Section 21A of the ITAA 1936 provides that any non-cash business benefit is to be treated as convertible to cash for the purpose of determining the income of a taxpayer from the carrying on of a business. Non-cash business benefit is defined in subsection 21A(5) to include property and services provided in respect of a business relationship. Section 21A of the ITAA 1936 does not actually deem any benefit in the form of property or services to be income. Its effect is that in the event that the non-cash benefit is already considered to be income derived in carrying on a business, subsection 21A(2) specifies that the amount to be brought to account is the amount that the taxpayer would have paid the provider for the property or services under an arm's length transaction. For income tax purposes, a partnership is not a separate legal entity distinct from the partners forming the partnership. A partnership does not pay tax on its net income but is required to furnish a return of the income of the partnership. The partners are then taxable under section 92 of the ITAA 1936 on their individual shares of the net income of the partnership, whether distributed to them or not. Whilst there is a provision of services, being the right to exclusive use of the plant and equipment, by the partners to the partnership, this does not automatically constitute an assessable non-cash business benefit in the hands of the partnership. The benefit is assessable only if it has the character of income derived by the partnership from the carrying on of a business and is provided in the context of a business relationship. The provision of the exclusive use of the plant and equipment to the partnership to enable it to commence providing services to the partners does not have the character of income according to ordinary concepts. The provision of the exclusive use of the plant and equipment is a capital contribution by the partners for the purpose of establishing the partnership business structure. Accordingly, section 21A of the ITAA 1936 does not apply in the calculation of the net income of the partnership.", "Date_of_Decision": "12 November 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 21A subsection 21A (2) subsection 21A (5) section 92", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2631 | Taxation Ruling TR 93/38", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Tax Non cash business benefits Partnerships", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004955", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2631 Taxation Ruling TR 93/38 | Keywords Income Tax Non cash business benefits Partnerships"}
{"ATO_ID_Number": "ATO ID 2014/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Death benefits dependant - adult child on youth allowance", "Issue": "Is a taxpayer in receipt of Youth Allowance at the time of the death of a parent, a death benefits dependant of the parent for the purpose of section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. On the facts given, the taxpayer is a death benefits dependant of the parent for the purpose of section 302-195 of the ITAA 1997.", "Facts": "The taxpayer receives a death benefit from the parent's superannuation fund after the parent's death. The taxpayer is over 18 years old at the time, was living at home with the parent until the parent's death and receiving Youth Allowance payments from Centrelink.", "Reasons_for_Decision": "Summary: The term 'death benefits dependant' is defined in subsection 302-195(1) of the ITAA 1997. Paragraph 302-195(1)(d) states that a death benefits dependant, of a person who has died, is any other person who was a dependant of the deceased person just before he or she died. Dictionary definitions of 'dependant' make reference to substantial financial support. That dependency involves substantial financial support or maintenance is supported by passages in the Explanatory Memorandum to the Income Tax Assessment Amendment Bill (No.3) 1984 and Explanatory Memorandum for Taxation Laws Amendment Bill (No. 5) 1987. The determination of financial support is a question of fact. The Youth Allowance payments the taxpayer received were calculated at a lower 'at home' rate as opposed to the higher 'independent' rate. This indicates that the taxpayer was substantially financially dependent. A comparison of the level of financial support provided by the taxpayer's parent with that provided by the Youth Allowance payments also indicates that the taxpayer was financially dependent.", "Date_of_Decision": "12 February 2014", "Year_of_Income": "2007 - 2008 income year and later income years", "Legislative_References": "Income Tax Assessment Act 1997 section 302-195 subsection 302-195(1) paragraph 302-195(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Death benefits dependant Death benefits - superannuation benefits Superannuation Superannuation benefits", "Case_References": "", "Other_References": "Explanatory Memorandum for Income Tax Assessment Amendment Bill (No. 3) 1984 Explanatory Memorandum for Taxation Laws Amendment Bill (No. 5) 1987", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20146", "Unmatched_Content": "Keywords Death benefits dependant Death benefits - superannuation benefits Superannuation Superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2014/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Death benefits dependant - adult child caring for terminally ill parent", "Issue": "Can a taxpayer who is a child beneficiary over 18 years of age be a 'death benefits dependant' of the deceased for the purposes of section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, in this case the taxpayer was considered to be a death benefits dependant for the purposes of section 302-195 of the ITAA 1997.", "Facts": "In this case the taxpayer (a child of the deceased) was paid a death benefit on the death of the parent. The taxpayer was over 18 years of age at the time of death. The taxpayer had given up work to care for the terminally ill parent and received no financial support from anyone, other than the parent, during that time.", "Reasons_for_Decision": "Summary: Under subsection 302-195(1) of the ITAA 1997, a 'death benefits dependant' as defined includes: The definition of death benefits dependant in paragraph 302-195(1)(d) does not stipulate the nature or degree of dependency, but it is generally accepted that this refers to financial dependence and it is a condition that must exist in relation to the taxpayer at the time of the deceased's death. The taxpayer was financially dependent on the deceased at the time of death. Note: The taxpayer and parent also satisfied the interdependency relationship requirement under paragraph 302-195(1)(c) and as described in paragraphs 302-200(1)(a),(b),(c) and (d) of the ITAA 1997: that is, the taxpayer and parent had a close relationship; they lived together; the parent provided financial support for the taxpayer; and the taxpayer was providing significant care for the parent.", "Date_of_Decision": "18 July 2014", "Year_of_Income": "2007 - 2008 income year and later years", "Legislative_References": "Income Tax Assessment Act 1997 section 320-195 section 302-200 paragraph 302-195(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "death benefits dependant death benefits - superannuation benefits superannuation superannuation benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201422", "Unmatched_Content": "Keywords death benefits dependant death benefits - superannuation benefits superannuation superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2012/67", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Singaporean resident company receiving Australian sourced royalties", "Issue": "Are royalty payments from Australian resident companies to a Singaporean resident company for the use of, or the right to use, copyright in respect of literary works included in assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Royalty payments from Australian resident companies to a Singaporean resident company for the use of, or the right to use, copyright in respect of literary works are included in assessable income under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a Singaporean resident company and is not a resident of Australia for income tax purposes. The taxpayer carries on an information technology business in Singapore and does not carry on a business in Australia at or through a permanent establishment in Australia. The taxpayer owns the copyright over certain computer programs, which are each a 'literary work' under Australia's Copyright Act 1968 (Copyright Act). The taxpayer received payments from Australian resident companies as consideration for granting the Australian resident companies the use of, or the right to use, copyright in those computer programs. The payments made by the Australian resident companies to the taxpayer are not outgoings incurred in carrying on business in a country outside Australia at or through a permanent establishment in that country. The payments come within the definition of 'royalties' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The royalty payments received by the taxpayer constitute ordinary income for the purposes of section 6-5 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. In the present case, subsection 6C(2) of the ITAA 1936 deems the income to have been derived from a source in Australia for the purposes of section 6-5 of the ITAA 1997, because it is derived by a non-resident and consists of royalties paid by a resident other than as an outgoing incurred in carrying on a business in a country outside Australia at or through a permanent establishment in that country. Therefore, the royalty payments received by the taxpayer would be included in assessable income under subsection 6-5(3) of the ITAA 1997, as they are ordinary income and sourced in Australia. However, as the taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty, the Agreement between the Government of the Commonwealth of Australia and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income [1969] ATS 14 (as amended) (the Singaporean agreement) must be considered in determining whether the income will be taxable in Australia. Section 7 of the International Tax Agreements Act 1953 (Agreements Act) gives the Singaporean agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1936 and ITAA 1997 must be read as one with the Agreements Act. Article 10.1 of the Singaporean agreement provides that the Australian tax on royalties derived by a Singaporean resident who is beneficially entitled to the royalties shall not exceed 10% of the gross amount of the royalties. However, Article 10.3 of the Singaporean agreement relevantly provides that: In this Article \"royalties\" means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are received as consideration for- (a) the use of, or the right to use, any- (i) copyright (other than a literary, dramatic, musical or artistic copyright), ... Therefore, payments for the use of, or right to use, 'literary copyright' are excluded from the definition of 'royalties' for the purposes of Article 10 of the Singaporean agreement. The term 'literary copyright' is not defined in the Singaporean agreement. However, Article 2.4 of the Singaporean agreement, the Undefined Terms Article, states: Unless the context otherwise requires, any term of this Agreement not otherwise defined shall have, in a Contracting State, the meaning which it has under the laws in that Contracting State from time to time in force relating to the taxes to which this Agreement applies. As explained at paragraphs 63 to 68 of Taxation Ruling TR 2001/13 'Income tax: Interpreting Australia's Double Tax Agreements', the context in which a term is used in a treaty may allow a specific domestic tax law meaning and/or a domestic non-tax law meaning. That is, the laws 'relating to taxes to which this Agreement applies' includes not only Australia's tax legislation, but also other statute and common law relevant to the application of Australia's tax legislation. Under Australia's taxation legislation, neither the term 'literary copyright', nor 'copyright', is defined. However, copyright is a legal technical term which is found in the Copyright Act. In interpreting legislation under domestic law, a word or phrase that has a technical legal meaning will take this meaning unless the context otherwise requires ( Attorney-General (NSW) v Brewery Employees Union of New South Wales (1908) 6 CLR 469 at 531). It is considered that the Copyright Act is a law relating to taxes to which the Singaporean agreement applies because it is necessary to refer to that Act in order to identify whether a payment is in respect of the use of 'copyright' for tax purposes. Although the Copyright Act does not refer to 'literary copyright' as such, it does provide for copyright in certain 'literary, dramatic, musical or artistic' works. This corresponds with the phrase 'literary, dramatic, musical or artistic copyright' in Article 10.3(a)(i) of the Singaporean agreement. Therefore, it is considered that 'literary copyright' in Article 10.3(a)(i) of the Singaporean agreement is a reference to copyright that subsists in 'literary work' under the Copyright Act. As the royalty payments in the present case are for the use of, or the right to use, copyright in literary works, they are excluded from the definition of 'royalties' in Article 10 of the Singaporean agreement. Therefore, the Royalties Article does not apply to the payments. Furthermore, the Business Profits Article contained in Article 5 of the Singaporean agreement does not apply because the payments are excluded from the definition of 'profits of a Singapore enterprise' by Article 2.1(k)(i) and/or Article 2.1(k)(v). Article 16A of the Singaporean agreement provides that items of income 'which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable according to the laws of the respective Contracting States relating to tax'. The Explanatory Memorandum to the Income Tax (International Agreements) Amendment Bill (No. 2) 1989 that gave force of law to the protocol amending the Singaporean agreement ([1990] ATS 3), which inserted Article 16A into the Singaporean agreement, describes the article as a 'sweep-up' applying to 'income not expressly covered'. As the royalty payments are excluded from the operation of Article 5 of the Singaporean agreement and Article 10, and are not otherwise covered by the foregoing Articles, Article 16A provides that the income is taxable in Australia in accordance with Australian law relating to tax. Accordingly, the royalties received by the taxpayer are included in assessable income under subsection 6-5(3) of the ITAA 1997 because they are ordinary income from an Australian source. Given that the royalties received by the taxpayer, who is a resident of Singapore, are excluded from the definition of 'royalty' for the purposes of Article 10 of the Singaporean agreement, they are not treated as a royalty by the Singaporean agreement and therefore they will be excluded from the withholding tax provisions of section 128B of the ITAA 1936. It also follows that section 128D of the ITAA 1936 does not apply to make the income non-assessable non-exempt income.", "Date_of_Decision": "30 June 2012", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 6C(2) section 128B section 128D", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Copyright Double tax agreements International tax Royalties Royalty article Royalty income Singapore Singaporean agreement Treaties", "Case_References": "Attorney-General (NSW) v. Brewery Employees Union of New South Wales (1908) 6 CLR 469", "Other_References": "Singaporean agreement [1969] ATS 14 Article 2.1(k)(i) Singaporean agreement [1969] ATS 14 Article 2.1(k)(v) Singaporean agreement [1969] ATS 14 Article 2.4 Singaporean agreement [1969] ATS 14 Article 5 Singaporean agreement [1969] ATS 14 Article 10 Singaporean agreement [1969] ATS 14 Article 10.1 Singaporean agreement [1969] ATS 14 Article 10.3 Singaporean agreement [1969] ATS 14 Article 10.3(a)(i) Singaporean protocol (No. 1) [1990] ATS 3 Article 13 (inserting Article 16A) Explanatory Memorandum to the Income Tax (International Agreements) Amendment Bill (No. 2) 1989", "Business_Line": "Private Wealth", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201267", "Unmatched_Content": "Improved wording for clarity | There were 2 quotation errors. | Applied ATO standards for citations and references | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Copyright Double tax agreements International tax Royalties Royalty article Royalty income Singapore Singaporean agreement Treaties"}
{"ATO_ID_Number": "ATO ID 2011/94", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: balancing adjustment - repayment of sale price of depreciating asset in a later income year", "Issue": "When the amount received by Taxpayer X for the sale of its depreciating asset is repaid in a later income year, is the balancing adjustment amount that was included in Taxpayer X's assessable income under subsection 40-285(1) of the Income Tax Assessment Act 1997 (ITAA 1997) in the previous income year in respect of the sale of that depreciating asset treated as non assessable and non exempt income in accordance with section 59-30 of the ITAA 1997?", "Decision": "No. Section 59-30 of the ITAA 1997 does not apply to treat the amount that was included in Taxpayer X's assessable income under subsection 40-285(1) of the ITAA 1997 in respect of the sale of that depreciating asset in the previous income year as non assessable and non exempt income as this amount (the balancing adjustment included in Taxpayer X's assessable income under subsection 40-285(1)) was not the amount that was repaid.", "Facts": "Taxpayer X receives an amount from Taxpayer Y for the sale of a depreciating asset under an agreement whereby Taxpayer X is required to repay the sale price to Taxpayer Y and Taxpayer Y is required to return title to the asset to Taxpayer X if it is later found that the asset failed to meet certain conditions. The depreciating asset had been used by Taxpayer X for a taxable purpose and the payment received by Taxpayer X was included in the termination value of the depreciating asset as worked out under section 40-300 of the ITAA 1997. The adjustable value is less than the termination value and as a result of the balancing adjustment worked out under section 40-285 of the ITAA 1997, an amount was included in the assessable income of Taxpayer X. In the following year the asset failed to meet the conditions expected of it. Consequently, Taxpayer X was required to repay the sale price to Taxpayer Y and Taxpayer Y was required to return title to the asset to Taxpayer X.", "Reasons_for_Decision": "Summary: All references will be to the ITAA 1997 unless stated otherwise. Section 59-30 applies in certain circumstances to allow an amount of assessable or exempt income to be treated as an amount of non assessable and non exempt income. Subsection 59-30(1) states that: An amount you receive is not assessable income and is not exempt income for an income year if: you must repay it; and you repay it in a later income year; and you cannot deduct the repayment for any income year. Subsection 40-285(1) applies to include an amount in assessable income if a balancing adjustment event that occurs for a depreciating asset whose decline in value is or would have been worked out under Subdivision 40-B and the asset's termination value is more than its adjustable value. The amount to be included in assessable income is the difference between the asset's termination value and its adjustable value. For the purposes of working out a balancing adjustment under section 40-285, the termination value of a depreciating asset has the meaning given by section 40-300. Section 40-300 provides direction for the working out of the termination value of a depreciating asset. In the majority of cases, the termination value is the amount that you have received for the asset. The termination value is worked out at the time when the balancing adjustment event occurs. In this case, as the termination value for the depreciating asset was more than its adjustable value, the difference between the asset's termination value and its adjustable value is included in Taxpayer X's assessable income under subsection 40-285(1). The issue is whether subsection 59-30(1) applies to enable the amount included in a taxpayer's assessable income under subsection 40-285(1) to be treated as non assessable and non exempt income. This is because the amount that is included in a taxpayer's assessable income, the balancing adjustment worked out under subsection 40-285(1), is not the amount that is repaid. The amount that is repaid is the amount that is used in working out the balancing adjustment. In addition, section 59-30 lacks any express reference to treat an amount as non assessable and non exempt income because an amount previously taken into account in calculating a taxpayer's assessable income has been repaid. Without such an express reference, it indicates that section 59-30 does not apply when the amount repaid is used in calculating the taxpayer's assessable income. In order to confirm the meaning of the provision is the ordinary meaning conveyed by the text, taking into account its context and the purpose or object underlying the Act, it is appropriate to refer to relevant material that is extrinsic to the provision: section 15AB of the Acts Interpretation Act 1901 . Section 59-30 replaced section 22-5 and the terms of former section 22-5 were identical to those in section 59-30. The Explanatory Memorandum to the Taxation Laws Amendment Bill (No.2) 2003 which introduced section 22-5 provided the context of the amendments: 3.2 There is no provision in the ITAA 1936 or ITAA 1997 which permits an amount of previously assessed income to be excluded from an assessment where income is repaid in a later year of income. Where a taxpayer is not carrying on a business, there is also no deduction available in the year in which the previously assessable income is repaid, because the repayment is not incurred in gaining or producing assessable income of the later year. Consequently, it can be concluded that the purpose underlying section 59-30 is to exclude from a taxpayer's previous assessed income an amount that was income of a previous income year when it is later repaid and the repayment is not deductible for the reason that it is not incurred in gaining or producing assessable income. The sale price of the asset was not income of Taxpayer X in a previous income year. It was a capital amount used to work out an adjustment to the taxable income of Taxpayer X when it stopped holding its depreciating asset. Treating the repayment of the sale price of the asset as the trigger for section 59-30 to regard the subsequent assessable balancing adjustment as non-assessable would be inconsistent with the objective of the provision. The section is not designed to permit previously assessable amounts to be excluded from assessment when an amount that was taken into account in working out the previously assessable amount is repaid in a later income year. Rather the provision is designed to change the treatment of amounts of income to non assessable and non exempt income where no deduction is available for the subsequent repayment of that amount of income because the repayment is not incurred in the course of carrying on a business. Critically it changes the treatment of the amount of income that is repaid (subsection 59-30(1)). In this case, the amount that is repaid is the sale price of Taxpayer X's depreciating asset, not the balancing adjustment worked out under subsection 40-285(1). Section 59-30 can not change the nature of the balancing adjustment (included as assessable income in the previous year) as the balancing adjustment is not the amount repaid. Consequently, the repayment of the amount received by Taxpayer X for the sale of its depreciating asset does not result in the amount that was included in Taxpayer X's assessable income under subsection 40-285(1) in the previous income year to be treated as non assessable and non exempt income in accordance with section 59-30.", "Date_of_Decision": "15 September 2011", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 former section 22-5 section 59-30 subsection 59-30(1) paragraph 59-30(1)(a) Subdivision 40-B section 40-285 subsection 40-285(1) section 40-300", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Balancing adjustment calculation Depreciating assets Income Non-assessable non-exempt income Repayments", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill (No 2) 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201194", "Unmatched_Content": "Keywords Balancing adjustment calculation Depreciating assets Income Non-assessable non-exempt income Repayments"}
{"ATO_ID_Number": "ATO ID 2009/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of periodic payments made to an Australian resident from Ireland", "Issue": "Are periodic payments received by a resident taxpayer from an Irish partnership to induce the taxpayer to leave the partnership assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The periodic payments received by a resident taxpayer from an Irish partnership to induce the taxpayer to leave the partnership are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer was a partner in a partnership that carries on business in Ireland. The taxpayer entered into a contractual arrangement with the continuing partners of the partnership to receive periodic payments. The purpose of the arrangement is to induce the partner to leave the partnership. The taxpayer did not provide consideration in any form to receive the periodic payments. The taxpayer subsequently left the partnership. The taxpayer receives periodic payments from the partnership in accordance with the arrangement. The taxpayer receives a separate pension from the partnership's staff pension scheme in respect of their past service to the partnership.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income received from all sources, whether in or out of Australia, during the income year. The payments received by the taxpayer from the partnership are ordinary income. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 and the Income Tax Assessment Act 1936 so that those Acts are read as one. Schedule 20 to the Agreements Act contains the double tax agreement between Australia and Ireland (the Irish Agreement). The Irish Agreement operates to avoid the double taxation of income received by Australian and Irish residents. Article 19(1) of the Irish Agreement provides that pensions and annuities paid to a resident of Australia shall be taxable only in Australia. Article 19(2) of the Irish Agreement defines the term 'annuity' to mean a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money's worth. As the taxpayer did not provide consideration in any form in order to obtain the periodic payment, the payments received by the taxpayer are not annuities for the purposes of Article 19 of the Irish Agreement. The meaning of the term 'pension' is not defined in the Irish Agreement. Article 3(3) of the Irish Agreement provides that in determining the meaning of undefined terms, unless the context otherwise requires, the term shall have the meaning which it has under the law of the country concerned. The Commissioner has issued Taxation Determination TD 93/151 which discusses the meaning of a pension for double tax agreement purposes in the context of workers compensation payments. Paragraph 1 of TD 93/151 states that a pension is defined in The Macquarie Dictionary , 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW as: '1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. an allowance or annuity.' The meaning of the term 'pension' was also considered by Hill J. in the Federal Court in Tubemakers of Aust Ltd v. FC of T 93 ATC 4207; (1993) 25 ATR 183. His Honour concluded that the essential characteristic of a pension is only that there be periodical payments. The OECD Model Tax Convention and Commentary are also highly relevant in interpreting double tax agreements (see Taxation Ruling TR 2001/13). The OECD Commentary about Article 18 of the OECD Model Tax Convention refers to pensions paid to former employees or their surviving spouses, companions or children in respect of past employment, and pensions for services rendered to a State, political subdivision or local authority thereof. The payments made to the taxpayer are not for injury and loss of wages or in consideration of past services or employment. The taxpayer receives a separate pension from the staff pension scheme in recognition of their services to the partnership. The payments made under the arrangement are made to encourage or induce the taxpayer to exit the partnership. The payments received by the taxpayer are not a pension and therefore Article 19 of the Irish Agreement will not apply. Article 23(1) of the Irish Agreement provides that items of income of an Australian resident which are not expressly mentioned in the foregoing Articles of the Irish Agreement shall be taxable only in Australia. Article 23(2) of the Irish Agreement provides that if such income is derived from Irish sources, the income may also be taxed in Ireland. As the payments made to the taxpayer are from sources in Ireland, both Australia and Ireland may tax the income under Article 23 of the Irish Agreement. The payments received by the taxpayer will be assessable under subsection 6-5(2) of the ITAA 1997. Article 25(1) of the Irish Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in Ireland in accordance with the Irish Agreement will be allowed against Australian tax payable on income from Irish sources. The taxpayer will be entitled to a foreign income tax offset for the Irish tax paid on that income, under section 770-10 of the ITAA 1997. The amount of foreign income taxation offset is calculated in accordance with Subdivision 770-B of the ITAA 1997.", "Date_of_Decision": "29 January 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) section 770-10", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/151 | Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Annuity income Double tax agreements Foreign pension income Income International law Republic of Ireland", "Case_References": "Tubemakers of Aust Ltd v. FC of T 93 ATC 4207 (1993) 25 ATR 183", "Other_References": "The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20095", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 93/151 Taxation Ruling TR 2001/13 | Keywords Annuity income Double tax agreements Foreign pension income Income International law Republic of Ireland"}
{"ATO_ID_Number": "ATO ID 2009/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: securitisation arrangement - profit emerging basis of returning assessable income", "Issue": "Can a company (the taxpayer) undertaking a securitisation arrangement bring to account as assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) the net profit (being the difference between a lump sum paid under an agreement to assign future receivables and the future receivables) emerged annually on an accruals basis?", "Decision": "Yes. The taxpayer can bring to account as assessable income under section 6-5 of the ITAA 1997 the net profit emerged annually on an accruals basis.", "Facts": "The taxpayer is a company incorporated for the purpose of securitising assets and providing finance for a public-private partnership project. The taxpayer acquires, through entering into an agreement to assign future rental payments (receivables) to be generated by a tax exempt body (the originator). Under the securitisation agreement, the definition of receivables is limited to the debt obligation owed to the originator when such an amount becomes due and payable to it. The receivables continue to be payable to the originator, however it instructs payments be made directly to the taxpayer. In the event that the payer of the receivables defaults, the taxpayer's recourse is only against the originator. In exchange for acquiring the right to the receivables, the taxpayer pays to the originator a lump sum payment. The receivables to be received will, over time, exceed the lump sum payment made. The taxpayer prepares its financial accounts using an accruals basis of accounting.", "Reasons_for_Decision": "Summary: In Norman v. Federal Commissioner of Taxation (1963) 109 CLR 9; (1936) 13 ATD 13; (1963) 9 AITR 85 the taxpayer purported to assign all right, title and interest in and to certain interest and dividends he may have been entitled to receive over a specified period. That is, the purported assignment was of a sum of money (interest and dividends) which did not exist but was expected to arise. Dixon CJ, pointed out that for the assignment to be effective, the taxpayer must denude himself of all right to the interest. Windeyer J, set out the important distinction between the assignment of a presently existing right to either present or future income and a future right. The former constituting a chose in action which has an existence in law and thus can be transferred or assigned. The latter is yet to come into existence and is not property that is capable of assignment (although equity will recognise the attempted assignment of a mere expectancy for consideration as an agreement to assign something when it comes into existence). In Shepherd v. Federal Commissioner of Taxation (1965) 113 CLR 385; (1965) 14 ATD 127; (1965) 9 AITR 739 the taxpayer purported to assign to family members by deed poll all right, title and interest in and to an amount equal to ninety per centum of the income which may accrue from royalties during a period of three years from the date of the assignment. In that case, the majority concluded the taxpayer had assigned his presently existing right to the royalties, rather than the royalties themselves. In this instance, the assignment is of the receivables rather than the right to those receivables. However, equity would recognise the assignment as an agreement made for value to assign the receivables when they become payable to the originator. That is, the purported assignment is not effective in denuding the originator from continuing to derive the receivables - the originator continues to derive them but has directed that the receivables be payable to the taxpayer. As the taxpayer is not assigned the right to the receivables, the payments it receives may not have the character of income. The character of the payments may be determined by reference to the scope of the transaction, venture or business in or by reason of which the money is received, and also the taxpayer's purpose in engaging in the pertinent transaction, venture or business ( G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1). In the present case, the transaction has the character of a 'business deal' entered into with the object of purchasing the receivable with a view to generating a profit ( Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693). The specific question of whether a net profit could be included in 'gross income' was considered by Mason J in Commercial and General Acceptance Ltd. v. Federal Commissioner of Taxation (1977) 137 CLR 373; 77 ATC 4375; (1977) 7 ATR 716. His Honour reviewed pertinent judicial discussion of the concepts of assessable income and taxable income as then appeared in the Income Tax Assessment Act 1936 and expressed the conclusion that if it is not apparent that a receipt of money, in the circumstances in which it is received, is income, it may well be the case that a net figure included in the receipt will be stamped with the character of income. Ordinarily for tax purposes, a receipt of money is either income or capital which in the context of carrying on a business is divided into fixed and circulating capital. An assignee that enters into an assignment to acquire money that is not income would normally enter into the assignment as a business deal with the object of outlaying capital in the hope of getting back the outlay and more, that is, a profit. The money outlaid is thus circulating capital and its return would normally constitute a mixture of circulating capital and profit, or if a loss results, just circulating capital. The characterisation of the outlay of money on the purchase of receivables as circulating capital in the circumstances of this case is not dissimilar to the way in which the High Court regarded money as circulating capital in Coles Myer Finance Ltd v. Federal Commissioner of Taxation (1993) 176 CLR 640; 93 ATC 4214; (1993) 25 ATR 95. It is borrowed money which the taxpayer turns to account by purchasing a money stream from which it recovers its investment and a profit. Moreover, the characterisation of the outlay as circulating capital in these circumstances forecloses its deductibility as an outlay on revenue account. In The Commissioner of Taxes (S.A .) v. Executor Trustee and Agency Co. of South Australia Ltd (1938) 63 CLR 108; (1938) 5 ATD 98; (1939) 5 ATD 187, Dixon J, pointed out as a general proposition that 'in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or realizable form'. The expression 'come home' is apt to describe the point when income can be said to be 'derived'. Differentiating between income coming home in a 'realized' form and a 'realizable' form can be said broadly to capture the difference between bringing income to account on a receipts or cash basis and on an earnings or accruals basis. Dixon J also expressed the view, that the admissibility of the chosen method of accounting for income depended on 'whether in the circumstances of the case it is calculated to give a substantially correct reflex of the taxpayer's true income'. His Honour also pointed out 'to a great degree the question whether income can be properly calculated on one basis alone or upon either, must depend upon the nature of the source of the income'. Ordinarily, income by way of net profit would be brought to account as income as the excess of receipts in that year over that proportion of the outlay which is referable to their acquisition. This is the orthodox method of emerging profit which was articulated by Gibbs J in X C O Pty Ltd v. Federal Commissioner of Taxation (1971) 124 CLR 343; 71 ATC 4152; (1971) 2 ATR 353. This is not to say, however, that circumstances cannot exist where it is appropriate to bring profit to account on an accruals basis. As indicated above, the correct reflex of income will depend upon the nature of the source of the income. In other words, if a taxpayer is sufficiently confident of realising a profit that he is prepared to bring it to account as earned and derived before realisation, then the Commissioner is justified in dealing with it in the same fashion. Authority for this approach is found in the High Court's decisions in Commissioner of Taxes (Q) v. Burke (1926) 38 CLR 314 and Federal Commissioner of Taxation v. Thorogood (1927) 40 CLR 454. Accordingly, in this case and under these circumstances, the income received from the assignment of the receivables is the net profit and it is appropriate for that net profit to be emerged annually on an accruals basis.", "Date_of_Decision": "6 July 2009", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Producing assessable income Assignment of rights & entitlements Consideration for assignment Profits Securitisation", "Case_References": "Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 (1936) 13 ATD 13 (1963) 9 AITR 85", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200963", "Unmatched_Content": "Keywords Income Producing assessable income Assignment of rights & entitlements Consideration for assignment Profits Securitisation"}
{"ATO_ID_Number": "ATO ID 2008/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Acquisition of debt ledgers", "Issue": "Is a profit emerging basis the appropriate method of determining assessable income for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where a taxpayer carries on the business of acquiring and recovering receipts from abandoned debt ledgers ?", "Decision": "Yes. A profit emerging basis is the appropriate method of determining assessable income under section 6-5 of the ITAA 1997 for a taxpayer who carries on the business of debt acquisition and recovery.", "Facts": "The taxpayer is an Australian resident who carries on the business of acquiring debt ledgers from credit providers who have abandoned their recovery. Its income is generated from the expectation that the amount it recovers will be in excess of the amount outlaid in acquiring the debt. Acquired debts are generally kept on the taxpayer's books until such time as the statute of limitations applies. However, the debts may be abandoned where the costs of collection make pursuit of a particular debt non-profitable. In 2005, the taxpayer entered into an agreement with a credit provider under which it acquired outstanding debts at a heavily discounted cost to their face value. The cost of acquisition was based on a number of factors including the face value of the debts, risk, debtor's credit rating and profile. The consideration paid on acquisition of the debt ledgers was funded by a mix of debt and equity.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 provides, in brief, that an Australian resident must include in assessable income the ordinary income it derives from all sources. Ordinary income is income according to ordinary concepts. In Federal Commissioner of Taxation v. Stone [2005] HCA 21 (2005) 222 CLR 289 (2005) 2005 ATC 4234; (2005) 59 ATR 50, the majority judgment of the High Court considered the meaning of the phrase 'income according to ordinary concepts'. The court referred to the judgment in Scott v. Commissioner of Taxation (NSW) (1935) 3 ATD 142 at 144-145, where it was considered that in determining how much of a receipt should be treated as income, regard must be had to the ordinary concepts and usages of mankind. Upon entering into the agreement to acquire the outstanding debt, the taxpayer acquired a legal chose in action giving it the right to receive a sum of money. The transaction was entered into with the expectation of making a profit where the proceeds of collection exceed the cost of the acquired debt. The consideration paid on acquisition of the debt is funded by capital being either debt, equity or a mixture of both. Any receipts from collections therefore comprise a return in the form of a partial recovery of its investment (a return of capital) and a profit component. The taxpayer's receipts from its collection activities do not represent ordinary income. They are receipts of money, rather than ordinary income, which incorporate a mix of returned capital and profit. For the purposes of subsection 25(1) of the Income Tax Assessment Act 1936 (now section 6-5 of the ITAA 1997) a number of cases have determined that gross income, or ordinary income, equates with net profits. As referred to by Hill J in Federal Commissioner of Taxation v. Cititbank Limited & Ors (1993) 44 FCR 434; (1993) 93 ATC 4691; (1993) 26 ATR 423 ( Citibank ), a necessary requirement of bringing a net profit into assessable income is that the gross amounts used to calculate that net profit was not itself income in ordinary concepts. In collecting money in respect of the outstanding debts, the taxpayer recovers its capital and, in part, realises a profit. If it fails to recover its capital, it incurs a loss. Therefore, part only of the receipts could be considered income. As such, the gross receipts used in the calculation of net profit are themselves not ordinary income. For accounting purposes, the taxpayer does not treat the acquired debt at actual cost but on a fair value basis with benefits to be received over income years. That is, the taxpayer does not expense the acquisition cost at the time of acquisition. The release of any fair value gains backed up by actual cash receipts and conversely with any impairment may properly be aligned with the approach in emerging profit. Paragraph 17 of Taxation Ruling TR 98/1 states: When accounting for income in respect of a year of income, a taxpayer must adopt the method that, in the circumstances of the case, is the most appropriate. A method of accounting is appropriate if it gives a substantially correct reflex of income. Whether a particular method is appropriate to account for the income derived is a conclusion to be made from all the circumstances relevant to the taxpayer and the income. In Citibank Hill J, in considering the relevance of accounting evidence in determining income tax issues, referred to the judgments in Commissioner of Taxes (SA) v. Executor Trustee & Agency Company of South Australia (1938) 63 CLR 108; (1938) 5 ATD 98; (1938) 1 AITR 416 and Arthur Murray (NSW) Pty Ltd v. Federal Commissioner of Taxation (1965) 114 CLR 314; (1965) 14 ATD 98; 9 AITR 673, where it was held that such evidence is relevant and can be used to provide evidence of what constitutes income. Hill J said that where there is no impediment in the Act to bringing to account a net profit as gross income, then that profit will need to be calculated in accordance with the accounting standards. In this instance, it is considered that the accounting evidence is significantly relevant. It is supportive of a method adopted which gives a true reflex of the ordinary income derived by the taxpayer. In XCO Pty Ltd v. Federal Commissioner of Taxation (1971) 124 CLR 343; (1971) 71 ATC 4152; (1971) 2 ATR 353, the High Court considered the application of a profit emerging basis, in circumstances similar to the present case, where a taxpayer was assigned debts at a deep discount to their face value for consideration. Gibbs J said: Where the carrying out of a profit-making scheme extends over more than one year, the difference between receipts and disbursements in any one year may not give a true reflection of the profit arising or loss sustained in that year, and the assessment of profit on an emerging basis may be appropriate. In determining its profit for accounting purposes, the taxpayer amortises the cost of the debt ledgers. It does not calculate its profit or loss by deducting from the year's collections the total cost it outlays in acquiring debt for that year for that would distort its true position for that year. Instead, its profits are effectively determined on an emerging basis taking into account that portion of the cost relevant to the acquisition of the debt that results in collected income over the period. Here, the taxpayer's profit making scheme extends over more than one income year. The bringing to account for tax purposes the difference between receipts and disbursements in any one particular income year will not give a true reflection of the profit or loss sustained for that year. The assessment of profit on an emerging basis is considered most appropriate in determining its income for tax purposes.", "Date_of_Decision": "11 December 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounting & record keeping Business income Capital assets Debt related transactions Profits Transfer of book debts", "Case_References": "XCO Pty Ltd v. Federal Commissioner of Taxation (1971) 124 CLR 343 (1971) 71 ATC 4152 (1971) 2 ATR 353", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200839", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 | Keywords Accounting & record keeping Business income Capital assets Debt related transactions Profits Transfer of book debts"}
{"ATO_ID_Number": "ATO ID 2007/183", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Transfer and declarations of trust in the context of Division 16E of the Income Tax Assessment Act 1936", "Issue": "Does the declaration of a trust by which a named beneficiary obtains an equitable interest in the future coupon payments on a bond, result in a transfer of payment rights pursuant to section 159GZ of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes, the declaration of the trust will result in a transfer of the payment rights for the purposes of section 159GZ of the ITAA 1936.", "Facts": "An entity (Bond Holder) acquires a bond. The Bond is a fixed rate bond with a term of 5 years. Five days after acquiring the bond, Bond Holder equitably assigns the future bond coupons to another entity (the Beneficiary) for market value consideration. The equitable assignment took the form of Bond Holder declaring a trust (Declaration of Trust) over the future coupon payments in favour of the named beneficiary in return for the payment of consideration. Bond Holder will retain ownership of the bond stub until maturity.", "Reasons_for_Decision": "Summary: Division 16E of the ITAA 1936 (encompassing sections 159GP to 159GZ), provides for the overall yield on certain discounted and deferred interest securities to be taxed on an accruals basis. Generally, a security must meet the definition of 'qualifying security' in subsection 159GP(1) of the ITAA 1936 to fall within the scope of Division 16E of the ITAA 1936. However, Division 16E also applies to 'stripped securities' which are dealt with in section 159GZ of the ITAA 1936. Subsection 159GZ(1) of the ITAA 1936 may operate to deem the declaration of trust to be a separate security for the purposes of Division 16E of the ITAA 1936. Subsection 159GZ(1) applies where: The key consideration is whether the declaration of trust amounts to a 'transfer' of one or some of the payment rights on the underlying bond. The word 'transfer' for this purpose is defined in subsection 159GP(1) of the ITAA 1936 as: \"transfer\", in relation to a security, means transfer, sell, assign or dispose in any way of the security or of the right to receive payment of the amount or amounts payable under the security, but does not include a redemption or partial redemption of the security. The decision of the High Court in Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 163 CLR 199; 18 ATR 693; 87 ATC 4363, confirmed that the right to interest is not a separate capital asset pertaining to the amount be repaid on the underlying asset, in this case the bond. Rather, it is a chose in action representing the right to future interest payments. Thus, the declaration of trust creates an equitable interest in respect of part of the chose in action, not the obligation under the bond to repay the debt. Although the declaration of trust creates an equitable interest in the interest income pertaining to the bond, it does not necessarily follow that there is no transfer of the right to receive interest income by Bond Holder. The declaration of trust is merely the mechanism by which the Beneficiary obtains the benefit of the underlying interest rights. It is considered that the provision of an equitable interest in respect of part of the chose in action will result in the disposal by Bond Holder of that part of the chose in action. As a result of the declaration of trust, Bond Holder no longer holds that part of the chose in action in its own right, but holds it in trust on behalf of the Beneficiary. The use of the words 'in any way' in the definition of 'transfer' are considered important in interpreting the meaning of that term. The equitable assignment of part of the chose in action is a partial disposal of the chose in action. It represents a partial disposal of the right to receive payment. This disposal of part of the right to receive payment thus falls within the scope of the words 'dispose in any way'. This is considered to be the case irrespective of whether the disposal results in splitting the chose in action or the creation of a new chose in action for the purposes of the Beneficiary as the recipient. Support for the argument that an equitable assignment, while creating an equitable interest, results in a transfer of the chose in action (or part of the chose in action), can be found in the words of Kitto J. in the High Court decision of Shepherd v. Federal Commissioner of Taxation (1965) 113 CLR 385; 14 ATD 127; 7 AITR 739 where he states: 'all that is required for an equitable assignment is a manifestation by the assignor of an intention to transfer the chose in action to the assignee in a manner binding upon himself'. By the declaration of trust, Bond Holder will transfer to the Beneficiary one or some, but not all, of its rights to receive payment of amounts under the security. The requirements of paragraphs 159GZ(1)(a) and (b) of the ITAA 1936 are thus satisfied. It is to be noted that the effect of the declaration of trust falling within subsection 159GZ(1) of the ITAA 1936 is that there is taken to have been a separate security issued under which the payment right or rights transferred to the Beneficiary were created. There is a second security consisting of any remaining rights to repayment retained by Bond Holder. This ATO Interpretative Decision does not address the tax implications to Bond Holder of the fact that the declaration of trust falls within subsection 159GZ(1) of the ITAA 1936. Those tax implications will depend on other factors, including whether the bond is a 'traditional security'.", "Date_of_Decision": "12 June 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 159GP section 159GZ subsection 159GZ(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Discounted & deferred interest securities income", "Case_References": "Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 163 CLR 199 87 ATC 4363 18 ATR 693", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007183", "Unmatched_Content": "Keywords Discounted & deferred interest securities income"}
{"ATO_ID_Number": "ATO ID 2006/221", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Ordinary Income: rebate of professional indemnity insurance premiums", "Issue": "Is a rebate of professional indemnity insurance premiums that were paid by a business taxpayer included in the assessable income of that taxpayer?", "Decision": "Yes. A rebate of professional indemnity insurance premiums is included in a taxpayer's assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "The taxpayer carried on a professional business. In the course of this business, the taxpayer held professional indemnity insurance policies. The taxpayer paid premiums in respect of those policies. Business forecasts for a particular period helped determine the premiums paid to the insurer for that period. Premium adjustments were calculated at the end of an insured period to reflect actual business, which from time to time resulted in the insurer crediting an amount for the taxpayer's benefit in determining the next premium. The insurer later resolved to pay out premium rebates to the taxpayer, calculated in proportion to the premiums paid. The taxpayer was subsequently paid a sizeable rebate of the premiums it had paid.", "Reasons_for_Decision": "Summary: The premium rebate is ordinary income of the taxpayer if it arose from an act done in what was truly the carrying on of a business (see Californian Copper Syndicate v. Harris (1904) 5 TC 159 at 166). To determine this, it is necessary to make both a 'wide survey' and an 'exact scrutiny' of the taxpayer's activities at the relevant times (see Western Gold Mines NL v. Commissioner of Taxation (WA) (1938) 59 CLR 729; (1938) 4 ATD 453, (1938) 1 AITR 248 per Dixon and Evatt JJ at CLR 740; ATD 461). At a fundamental level, the business activities of the taxpayer relate to carrying on a professional business. However, acts done in carrying on a business are not limited to acts in relation to a taxpayer's primary business (see, for example, Colonial Mutual Life Assurance Society Ltd v. Federal Commissioner of Taxation (1946) 73 CLR 604; (1946) 8 ATD 137; (1946) 3 AITR 450). The acquisition of insurance for business purposes was an essential act of the taxpayer in the course of its business activity as much as the specific business activities that gave rise more directly to the taxpayer's assessable income (compare Hill J in Commissioner of Taxation v. Cooling (1990) 22 FCR 42; 90 ATC 4472; (1990) 21 ATR 13, at FCR 56; ATC 4484; ATR 26). The business was carried on with a view to profit, and therefore a gain made in the ordinary course of carrying on that business is thereby stamped with the character of income (see Federal Commissioner of Taxation v. Myer Emporium (1986-1987) 163 CLR 199 at 209; 87 ATC 4363 at 4366; (1987) 18 ATR 693 at 697 ( Myer )). Because the transaction which gives rise to the gain is itself a part of the taxpayer's ordinary business, the identification of the business activity itself stamps the transaction as one having a revenue character. The same can be said where the transaction is an ordinary incident of the business activity of the taxpayer, albeit not directly its main business activity (see Hill J in Westfield Ltd v. Commissioner of Taxation (1991) 28 FCR 333 at 342; 91 ATC 4234 at 4242; (1991) 21 ATR 1398 at 1407). The unprecedented form of the specific gain does not prevent it from being revenue, because it results from a transaction incidental to the conduct of the taxpayer's business (see Stephen J, AL Hamblin Constructions Pty Ltd v. Federal Commissioner of Taxation (1974) 130 CLR 159; 74 ATC 4001; (1974) 4 ATR 208). The premium rebate may be said to be consideration for past business between the taxpayer and the insurer, and so an incident of the taxpayer's business. It could be seen as a substitution for future premium reductions. The premium rebate was directly related in a business sense to the insurance obtained from the insurer by the taxpayer. It effectively reduced the cost of obtaining that insurance by the entire amount of the premium rebate. In these circumstances, the premium rebate is revenue. | Detailed Reasoning - Payment without consideration: The insurance premium was paid by the taxpayer as consideration for insurance cover, there was no specific consideration given for the receipt of the premium rebate. Because no consideration was given, the character of the amount depends upon its quality in the hands of the taxpayer (see Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514; (1966) 14 ATD 286; (1966) 10 AITR 367). In determining the character of the receipt in the taxpayer's hands, the whole of the circumstances - 'how and why' it came about - must be considered ( Squatting Investment Co Ltd v. Federal Commissioner of Taxation (1953) 86 CLR 570; (1953) 10 ATD 126; (1953) 5 AITR 496). The premium rebate (although unexpected and unsolicited) was paid because the taxpayer had (as an ordinary incident of its business) paid insurance premiums to the insurer. This indicates the income nature of the premium rebate. Further, a 'chain of events' sufficiently connected the payment of the rebate with the insurance premiums paid as an incident of the taxpayer's ordinary business (see Federal Commissioner of Taxation v. Squatting Investment Co Ltd (1953-1954) 88 CLR 413 (PC); (1954) 10 ATD 361 (PC); (1954) 5 AITR 664 ( Squatting )). The payment of the premium rebates was ostensibly a discretionary act on the part of the insurer, but was in effect the final link in the chain, directly associating the payment by the insurer with the insurance premiums paid. The connection is further evident in the insurer directing such payments to its insureds in proportion to their respective premiums paid. | Detailed Reasoning - Refund/reimbursement/rebate of business expenditure: The premium rebate was a rebate of certain premiums that the taxpayer had claimed as a deduction, but this does not of itself determine whether the premium rebate is of an income nature (see Federal Commissioner of Taxation v. Rowe (1997) 187 CLR 266; 97 ATC 4317; (1997) 35 ATR 432). The character of the amount received depends upon its character in the hands of the recipient (see Squatting). The courts and tribunals have held on the facts of particular cases that amounts which are refunds of previously deductible expenditure are assessable gains. Principles extracted from those cases and applied to the instant facts are discussed below: But even if the premium rebate was unusual, it does not follow that the gain made by the taxpayer is an abnormal gain. That would be to use the word 'abnormal' as meaning 'infrequent'. Although arguably unusual (if the premium adjustments are treated as being of a different nature from the premium rebate), the gain made from the rebate of insurance premiums that the taxpayer paid can be properly regarded as an incident of the taxpayer's professional business. And even if the gain could be properly described as 'abnormal', it does not inevitably follow that the amount is of a capital nature. As noted above, the gain was so intimately connected with the taxpayer's professional business that it was an incident of that business: as such it is 'stamped' with the character of income (see Myer ). Consider also Warner Music Australia Pty Ltd v. Commissioner of Taxation (1996) 70 FCR; 96 ATC 5046; (1996) 30 ATR 171 where Hill J held at FCR 211; ATR 182; ATC 5056: ... a gain made by a taxpayer by virtue of being relieved from a liability to pay sales tax is, in my view, properly to be regarded as an incident of the taxpayer's business of selling goods. ... Whether or not the gain itself was ordinary or abnormal, it was so intimately connected with Warner's business ... that it must be treated as being an incident of that business, even if not an ordinary incident of that business. As such it is, to use the words of the Full Court in Myer , \"stamped\" with the character of income. First Provincial Building Society Ltd v. Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207 is distinguishable: the payment from Consolidated Revenue in that case lacked the necessary connection with the business activities of the taxpayer to constitute ordinary income (at FCR 326; ATC 4149; ATR 212). Here, the receipt of the premium rebate is ordinary income: it is clearly and sufficiently connected to the taxpayer's business. The premium rebate is therefore assessable to the taxpayer under subsection 6-5(1) of the ITAA 1997.", "Date_of_Decision": "27 July 2006", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Business income Insurance income Refunds", "Case_References": "A L Hamblin Equipment Pty Ltd v. Federal Commissioner of Taxation (1974) 130 CLR 159 (1974) 131 CLR 570 (1974) 159 CLR 131 74 ATC 4001 74 ATC 4310 (1974) 4 ATR 208 (1974) 5 ATR 16", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006221", "Unmatched_Content": "Keywords Business income Insurance income Refunds"}
{"ATO_ID_Number": "ATO ID 2006/232", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Return of share capital to overseas parent company", "Issue": "Will the Commissioner make a determination under sections 45A or 45B of the Income Tax Assessment Act 1936 (ITAA 1936) that section 45C of the ITAA 1936 will apply to a return of share capital from an Australian-resident subsidiary to its overseas parent.", "Decision": "No. The Commissioner will not make a determination under sections 45A or 45B of the ITAA 1936 that section 45C of the ITAA 1936 will apply to a return of share capital from the Australian-resident subsidiary to its overseas parent.", "Facts": "The Australian-resident subsidiary is wholly owned by its overseas parent. Several years ago, the subsidiary acquired land and constructed thereon premises from which it conducts its business. The acquisition and construction costs were initially funded from working capital and local bank borrowings. While it was intended from the outset that the overseas parent would fund the project, economic conditions prevented this. When conditions improved the overseas parent injected additional equity into the subsidiary - sufficient to retire bank loans and improve its financial position. The business premises have now been sold under a sale and leaseback arrangement. The sale generated a profit of several million dollars. The Australian-resident subsidiary now proposes to undertake an equal reduction of share capital under subsection 256B(1) of the Corporations Act 2001 by returning an amount from the proceeds of the sale of the business premises equal to the acquisition and construction costs. The main reason for the capital reduction is to return that part of the capital contributed by the overseas parent to indirectly finance the acquisition and construction costs, given that the level of share capital in the Australian-resident company is now far in excess of requirements. No element of the profit under the arrangement is returned to the parent. The Australian-resident subsidiary has not paid any dividend or returned capital to the overseas parent since incorporation.", "Reasons_for_Decision": "Summary: Section 45A of the ITAA 1936 applies in a situation where capital benefits are received by shareholders (advantaged shareholders) who would, in the same year of income in which the capital benefits are provided, derive a greater benefit from the capital benefits than other shareholders and it is reasonable to assume that the other shareholders (disadvantaged shareholders) have received or will receive dividends. Implicit in the section's operation is the 'streaming' of benefits, that is, the provision of different benefits to different shareholders. In the present case, there is only one shareholder who will receive a capital benefit and there is no streaming of capital benefits and dividends among different shareholders of the company. Accordingly, the Commissioner will not make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies to the proposed return of capital. In the present case, section 45B of the ITAA 1936 applies to ensure that relevant amounts are treated as dividends for taxation purposes if certain payments, allocations and distributions are made in substitution for dividends. Specifically, the provision applies where: In this case, whilst the conditions of paragraphs 45B(2)(a) and 45B(2)(b) of the ITAA 1936 are met in relation to the provision of a capital benefit (as defined in subsection 45B(5) of the ITAA 1936), the requisite purpose of enabling the overseas parent to obtain a tax benefit through the provision of the capital benefit is not present. In other words, having regard to the relevant circumstances of the scheme as set out in subsection 45B(8) of the ITAA 1936, it would not be concluded that the person or persons who entered into or carried out the scheme did so for a purpose of obtaining a relevant tax benefit. It is considered that no part of the proposed return of capital is attributable to the profit arising from the sale of the business premises. Accordingly, the Commissioner will not make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies to the proposed return of capital.", "Date_of_Decision": "23 August 2006", "Year_of_Income": "Year ended 31 December 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 45A section 45B section 45C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/857", "Subject_References": "Capital benefit Commissioner's discretion Deemed dividends Distributions Dividend streaming arrangements Return of capital on shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006232", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Capital benefit Commissioner's discretion Deemed dividends Distributions Dividend streaming arrangements Return of capital on shares"}
{"ATO_ID_Number": "ATO ID 2005/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred interest under a Loan Note", "Issue": "Will a loan note have an 'eligible return' for the purposes of subsection 159GP(3) of the Income Tax Assessment Act 1936 (ITAA 1936) if the issuer can, from time to time, elect that interest on the loan note will accrue but not be payable for a period of more than one year?", "Decision": "Yes. A loan note will have an 'eligible return' where the issuer can elect that interest on the note will accrue but not be payable for more than one year.", "Facts": "A company issued Loan Notes to raise unsecured finance. Interest on the Loan Notes accrues at a fixed interest rate per annum. In each year, the issuer can elect that interest accruing during that year will not be paid on an annual basis but will be 'capitalised', at interest, and payable on redemption. The term of the Loan Notes is likely to be in excess of 12 months. The Loan Notes must be redeemed no later than 10 years after the date of issue.", "Reasons_for_Decision": "Summary: Division 16E of the ITAA 1936 imposes a statutory accruals regime on certain payments in relation to a 'security' that is a 'qualifying security'. The Loan Notes are a 'security' for the purposes of Division 16E because they are a loan, and thus meet paragraph (c) of the definition of 'security' in section 159GP(1) of the ITAA 1936. The term 'qualifying security' is also defined in subsection 159GP(1) of the ITAA 1936. One of the elements of that definition is that the security under consideration must have an 'eligible return'. A security will have an 'eligible return' for the purposes of Division 16E of the ITAA 1936 if, at the time the security is issued it is reasonably likely, by reason that the security was issued at a discount, bears deferred interest or is capital indexed or for any other reason, having regard to the terms of the security, that the sum of all payments, other than periodic interest payments, under the security will exceed the issue price of the security (subsection 159GP(3) of the ITAA 1936). The critical issue in this matter is whether interest payable under the terms of issue is 'periodic interest'. If amounts of interest payable are not all periodic interest, there will be an eligible return because it would necessarily follow on the facts that the sum of all payments, other than periodic interest payments, under the security would exceed the issue price of the security. Interest is 'periodic interest' for the purposes of Division 16E if the period between the commencement of the period in respect of which the interest is expressed to be payable, and the time at which the interest is payable, is less than or equal to one year (subsection 159GP(6) of the ITAA 1936). Amounts of interest payable under the Loan Note are not 'periodic interest' for the purposes of Division 16E. At the time of issue, it is apparent that the issuer can elect at certain times to defer the payment of interest so that in any year in which that election is made, the period between the commencement of the period in respect of which that interest is expressed to be payable, and the time at which the interest is payable, would be greater than one year. Accordingly, at the time of issue it cannot be said in relation to all amounts of interest payable under the Loan Notes, that the period between the commencement of the period in respect of which Interest is expressed to be payable, and the time at which the interest is payable, is less than or equal to one year. Therefore, there are amounts of interest that will be payable under the terms of the Loan Notes that are not periodic interest, and the Loan Notes have an 'eligible return' for the purposes of Division 16E of the ITAA 1936.", "Date_of_Decision": "23 December 2004", "Year_of_Income": "31 December 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 159GP(1) subsection 159GP(3) subsection 159GP(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deferred interest securities", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200520", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Deferred interest securities"}
{"ATO_ID_Number": "ATO ID 2004/886", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financial Sector (Business Transfer and Group Restructure) Act 1999: transfer of revenue assets", "Issue": "Where a credit union business is voluntarily transferred to another eligible credit union business, pursuant to the provisions of the under the Financial Sector (Business Transfer and Group Restructure) Act 1999 (FSBTGR Act) what are the acquisition costs the receiving body is taken to have incurred in respect of revenue assets at the effective date of transfer, for the purposes of Division 977 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The receiving body is taken to have incurred acquisition costs in respect of revenue assets at the effective date of transfer, for the purposes of Division 977 of the ITAA 1997, equal to the amount of debt owing on securities at the effective date of transfer.", "Facts": "Entity A, the transferring body, has transferred its business to Entity B, the receiving body, in accordance with the FSBTGR Act. Both entities are authorised deposit-taking institutions for the purposes of the Banking Act 1959. The parties satisfied all of the relevant procedural and substantive provisions determined by the Australian Prudential Regulation Authority (APRA), including preparation of a statement under section 20 of the FSBTGR Act (section 20 statement). The section 20 statement provided that the consequences for parties of the transfer of assets and liabilities under the FSBTGR Act are taken to be the same as if the transfer involved a sale of the assets of the transferring body to the receiving body. APRA approved the transfer of business and issued a certificate of transfer pursuant to section 18 of the FSBTGR Act.", "Reasons_for_Decision": "Summary: The FSBTGR Act was enacted to enhance stability in the Australian financial sector by facilitating the merging of eligible entities and otherwise unviable institutions. Under this Act, APRA, in approving the transfer, is required to have regard to the interests of the members of such entities and the financial sector as a whole. The FSBTGR Act empowers APRA to approve, and in some circumstances to compel amalgamations of eligible entities for the purpose of enhancement of the Australian financial sector. For practical purposes, the aim of the FSBTGR Act is to enable APRA to provide certainty that an endorsed transfer is effective at law to ensure that the rights and liabilities of the transferring entity survive in the new entity. This certainty is achieved by APRA issuing a certificate of transfer pursuant to section 18 of the FSBTGR Act stating that the transfer is to take effect on the date specified. Broadly, section 22 of the FSBTGR Act provides that when APRA issues a certificate of transfer, the receiving body becomes the successor in law of the transferring body. In particular, all the assets and liabilities of the transferring body become assets and liabilities of the receiving body without any additional formality. Further, the totality of duties, obligations, immunities, rights and privileges applying to the transferring body apply to the receiving body. Subject to the relevant circumstances of each case of voluntary total transfer of business sanctioned under the FSBTGR Act the Commissioner will aim to administer the tax law in such a way that it complements the operation of the FSBTGR Act and promotes stated objectives of the legislation. In practice this will be accomplished by adopting adjustments on the basis of acceptable valuations.", "Date_of_Decision": "26 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 977", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of business Revenue assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004886", "Unmatched_Content": "This ATO ID is currently under review. | This ATO ID was amended by replacing references to the Financial Sector (Transfers of Business) Act 1999 with references to the Financial Sector (Business Transfer and Group Restructure) Act 1999. | Keywords Acquisition of business Revenue assets"}
{"ATO_ID_Number": "ATO ID 2003/261", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Qualifying Security: loan agreement - repayment of principal based on sale value of trees at time of harvest", "Issue": "Is a loan agreement, where the repayment of the principal and any potential return on the principal is based on the sale value of trees at the time of harvest, a qualifying security under subsection 159GP(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The loan is not a qualifying security under subsection 159GP(1) of the ITAA 1936 as the eligible return on the security cannot be determined at the time the loan was issued.", "Facts": "The taxpayer entered into an agreement with a Government Authority for that authority to plant and maintain a tree plantation on third party land. Under the agreement, all costs associated with the plantation are to be borne by the taxpayer and all income resulting from the harvest belongs to the taxpayer. The taxpayer then entered into an agreement with an unrelated party who would fund the plantation expenses and be entitled to receive all the income resulting from the harvest. Under another agreement the taxpayer provided a loan to that party to meet 50% of the plantation expenses. In return, the taxpayer receives 60% of the harvest revenue which is applied to reduce the loan and any excess is deemed, under the agreement, to be interest on the loan.", "Reasons_for_Decision": "Summary: Subsection 159GP(1) of the ITAA 1936 requires, among other things, that a security must have an eligible return for it to be a qualifying security. Under subsection 159GP(3) of the ITAA 1936, a security has an eligible return where, at the time of issue, it is reasonably likely that the sum of the payments (other than periodic interest payments) to an investor under the security will exceed the issue price of the security. In effect, the eligible return is the amount of the excess. As the return on the loan is subject to the profitability of the harvest at a future date it cannot be determined at the time the loan is issued that it is reasonably likely there will be an eligible return. Accordingly, the loan is not a qualifying security for the purposes of Division 16E of Part III of the ITAA 1936.", "Date_of_Decision": "9 April 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 159GP(1) subsection 159GP(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/3 | Taxation Determination TD 94/95", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deferred interest securities Variable return securities", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003261", "Unmatched_Content": "References to subsection 159GQ(2) and subsection 159GQ(3) have been removed as they are not quoted in this ATO ID | Related Public Rulings (including Determinations) Taxation Ruling TR 96/3 Taxation Determination TD 94/95 | Keywords Deferred interest securities Variable return securities"}
{"ATO_ID_Number": "ATO ID 2003/848", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 16E: appropriate method to calculate 'accrual amounts'", "Issue": "Can the Commissioner exercise a discretion to allow an alternative method to the one specified in Division 16E of the Income Tax Assessment Act 1936 (ITAA 1936) for calculating the 'accrual amount'?", "Decision": "No. Division 16E of the ITAA 1936 does not provide for the exercise of a Commissioner's discretion in relation to the use of a formula or method for calculating accrual amounts under Division 16E that differs from the formula specified in the legislation.", "Facts": "The taxpayer receives income under arrangements which fall within the application of Division 16E of the ITAA 1936. The taxpayer uses a commercially available software package to work out the principal and interest components of the payments received or to be received. The taxpayer claims that the use of this financial model does not result in any material difference to the amounts that should be brought to account under the formula set out in subsection 159GQB(1) in Division 16E.", "Reasons_for_Decision": "Summary: Division 16E of the ITAA 1936 sets out the timing of taxation consequences for holders and issuers of certain securities. It contains a formula for working out the amount to be included in assessable income of the holder and the amount to be allowed as a deduction to the issuer. Subsection 159GQ(1) of the ITAA 1936 requires the holder to work out the accrual amount for each accrual period as determined by the operation of sections 159GQB and 159GQA respectively. Subsection 159GQB(1) sets out a formula to be used in complying with section 159GQ. There is no discretion available to the Commissioner to sanction the use of a different formula for calculating the 'accrual amount' required by section 159GQB of the ITAA 1936. Accordingly, approval to use the alternative method cannot be given.", "Date_of_Decision": "17 February 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 159GQ section 159GQA section 159GQB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Securities Securities valuation Securities transactions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003848", "Unmatched_Content": "Keywords Securities Securities valuation Securities transactions"}
{"ATO_ID_Number": "ATO ID 2002/336", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of payments received by carer - payments made by insurance company", "Issue": "Are the payments received by the taxpayer from an insurance company for taking care of their spouse, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The payments received are assessable income under subsection 6-5(2) of the ITAA 1997 because the payments received are for services rendered.", "Facts": "The taxpayer's spouse suffered injuries at work and requires the services of a home based carer on a full time basis. The insurance company have agreed to accept the taxpayer as the spouse's carer. The taxpayer will undertake weekly carer's duties and will be paid at an hourly rate. Payments to the taxpayer are made under the appropriate section in the worker's compensation legislation.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income includes income according to ordinary concepts, known as ordinary income. Ordinary income has generally been held to include three categories, namely, income from rendering personal service, income from property and income from carrying on a business. In this instance, the taxpayer is paid by an insurance company to provide home care to an incapacitated spouse. As the amounts received are payments received for personal services rendered they are income according to ordinary concepts. The income will be assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "17 October 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Carer payments", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002336", "Unmatched_Content": "Updated for clarification."}
{"ATO_ID_Number": "ATO ID 2002/759", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of payments made under a New Zealand Income Protection Policy", "Issue": "Are monthly payments received by an Australian resident taxpayer under a New Zealand (NZ) income protection policy assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The monthly payments received by an Australian resident taxpayer under a NZ income protection policy are assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer emigrated from NZ and is now a resident of Australia for taxation purposes. The taxpayer holds an NZ income protection policy. This policy provides for regular income replacement payments if the holder becomes permanently disabled. The taxpayer became permanently disabled and receives monthly income replacement payments under the NZ income protection policy.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes the ordinary income they derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Regular income replacement payments under an income protection policy have the character of ordinary income (ATOID 2002/175). The payments the taxpayer receives from the income protection policy are a substitute for salary income that they would have received had they not become disabled. As such, they are assessable under subsection 6-5(2) of the ITAA 1997. In determining liability to tax on foreign sourced income received by an Australian resident taxpayer it is necessary to consider not only the income tax laws but also any applicable double tax agreement (DTA) contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Subsection 4(2) of the Agreements Act provides that the Agreements Act overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 4 to the Agreements Act contains the DTA between Australia and NZ (the NZ Convention). The NZ Convention operates to avoid the double taxation of income received by Australian and NZ residents. It is necessary to establish how the payments received by the taxpayer are categorised for the purposes of Australia's DTAs. Taxation Determination TD 93/151 deals with how periodic workers' compensation payments made by Comcare are characterised for the purposes of Australia's DTAs. Taxation Determination TD 93/151 provides at paragraph 1: ' The term \"pension\" is not defined in any of the DTAs and therefore takes the meaning it has under domestic law. A pension is defined in the Macquarie Dictionary as \"1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. an allowance or annuity.\" The meaning of the term \"pension\" was considered by Hill J. in the Federal Court in Tubemakers of Aust Ltd v FC of T 93 ATC 4207. His Honour concluded that the essential characteristic of a pension is only that there be periodical payments.' Paragraph 1 of TD 93/151 goes on to provide that the Comcare payments are fixed periodical payments and that they are pensions within the ordinary meaning of that term and therefore fall within the Pensions Articles for the purposes of Australia's DTAs. While the payments the taxpayer is receiving are not paid by Comcare, they are similar to Comcare payments in that they are fixed periodical payments made in consideration of injury or loss sustained. As such the payments the taxpayer receives are considered to be a pension for the purposes of the NZ Agreement. Article 18 of the NZ Convention deals with the taxation treatment of pensions. It provides that pensions (including government pensions) sourced in NZ and paid to a resident of a Australia are taxable only in Australia. The monthly payments received under the NZ Income Protection Policy by the Australian resident taxpayer are a pension for the purposes of the NZ Convention and are taxable in Australia. Accordingly, the payments received by the taxpayer are ordinary income and are therefore assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "7 May 2002", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/151", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/175", "Subject_References": "Accident & disability insurance Assessable income Double tax agreements Foreign income Foreign pension Foreign pension income Income protection insurance New Zealand", "Case_References": "Tubemakers of Aust Ltd v. FC of T 93 ATC 4207 (1993) 25 ATR 183", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002759", "Unmatched_Content": "This ATO ID was amended by replacing the reference to article 19 to the tax treaty between Australian and New Zealand with Article 18 contained in the new tax treaty which took effect from 19 March 2010. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 93/151 | Keywords Accident & disability insurance Assessable income Double tax agreements Foreign income Foreign pension Foreign pension income Income protection insurance New Zealand"}
{"ATO_ID_Number": "ATO ID 2002/822", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of payments to participants in market research sessions", "Issue": "Is a payment that was offered to the taxpayer as an incentive to participate in a market research session, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A payment that was offered to the taxpayer as an incentive to participate in a market research session is assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer was recruited to participate in a market research session. This essentially involved the taxpayer giving their views and suggestions on various products under development which were shown to the taxpayer during the session. The taxpayer was told at the time they were approached to participate in the market research session that they would be paid for their attendance. The organisation that was conducting the market research intended that the offer of payment act as an incentive for the taxpayer to participate in the market research session. The payment was conditional on the taxpayer attending the session. The taxpayer has attended only one market research session. The taxpayer was subsequently paid for their attendance at the session.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. In determining whether an amount is ordinary income, the courts have established the following principles: Relevant factors in determining whether a payment is ordinary income include: Taxation Ruling IT 2639, at paragraph 3, defines 'income from personal services' as 'income that an individual taxpayer earns predominantly as a direct reward for his or her personal efforts by, for example, the provision of services, exercise of skills or the application of labour.' The payment to a taxpayer for services rendered is assessable income, even though the taxpayer does not provide those services as an employee or in carrying on a business ( Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418; 71 ATC 4195; (1971) 2 ATR 563). The courts have held that a voluntary payment or gift is generally ordinary income in the hands of the recipient where the receipt is the product of services rendered by the recipient ( FC of T v. Harris (1979) 37 FLR 325; 79 ATC 4383; (1979) 10 ATR 84). Although the taxpayer might attend only one session and hence receive just the one payment, the absence of regularity of payment in this instance does not indicate that the payment is not ordinary income. The predominant character of the payment is of remuneration for the taxpayer's services. Further, the taxpayer has an expectation that they will be paid for those services. Although not decisive, the fact that the consultant intended the payment as an incentive for the taxpayer to participate in the consultant's market research sessions is indicative that the payment is properly characterised as ordinary income in the hands of the taxpayer. The payment to the taxpayer was made in return for the services that they provided by participating in the market research. The payment falls within the meaning of income from personal services. The income received will therefore be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "5 August 2002", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2639 | Taxation Ruling TR 92/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assessable income Producing assessable income Personal services Ordinary income Gifts", "Case_References": "Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 71 ATC 4195 (1971) 2 ATR 563", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002822", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2639 Taxation Ruling TR 92/15 | Keywords Assessable income Producing assessable income Personal services Ordinary income Gifts"}
{"ATO_ID_Number": "ATO ID 2002/644", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Prize", "Issue": "Is a prize awarded to the taxpayer assessable income under either section 6-5 or section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The prize is not ordinary or statutory income and therefore is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997. Rather, it is a non assessable windfall gain.", "Facts": "The taxpayer is employed as a researcher. The taxpayers research was published in scientific journals and discussed at conferences. It was not the type of research that leads to products that can be patented. A scientific organisation nominated the taxpayer for a research prize. Nominations of candidates for this award are only accepted from approved nominating organisations active in the specific fields. The purpose of the prize was to recognise, encourage and stimulate achievements that contribute significantly to broadening knowledge and technical development within specific fields. The prize also aims to entice young people to seek a career in particular industries. Candidates are not allowed to nominate themselves for this prize. The taxpayer won the research prize and as a result received a significant cash lump sum.", "Reasons_for_Decision": "Summary: A prize or gift will be assessable income if it is : Under subsection 6-5(1) of the ITAA 1997 an amount is assessable income if it is income according to ordinary concepts (ordinary income). Generally, a gift or prize is regarded as a personal windfall gain and not as ordinary income unless the taxpayer has received the prize or gift because of, in respect of, or in relation to any income-producing activity of the taxpayer. In determining whether a prize or gift is ordinary income, the courts have established that consideration of the whole of the circumstances is necessary and that the following factors need to be taken into account : Taxation Ruling IT 2145 deals with the question of the 'BHP Awards for the Pursuit of Excellence' (BHP Awards). These BHP Awards are made to Australians who have made outstanding contributions to the pursuit of excellence in their particular fields. IT 2145 provides that although these awards will sometimes be made with regard to achievements directly related to a winner's vocation the nature of the award is that of a personal windfall or gain not having the qualities of income. The taxpayer's prize winning research was undertaken during the course of their employment as a researcher. In addition to any employer use of the research, the research was published in various scientific journals and discussed at conferences. The publication and discussion of the research was in addition and separate to any employment obligations/responsibilities. It was the dissemination of the research through the mediums of journals and conferences that gave rise to the nomination for the prize. When the above factors are applied to the conditions under which the prize was awarded and the taxpayer's individual circumstances, the prize money does not take on the character of ordinary income as receipt of the prize is one step removed from the taxpayer's employment. That is, it was not received because of or in relation to their duties as an employee. In particular: Furthermore, the taxpayer's circumstances can be distinguished from those court or tribunal decisions where prize money has been considered to constitute ordinary income. In Case V6 88 ATC 140; (1987) 19 ATR 3044 a partner in a newsagency business won a prize in a newspaper sales competition. The Administrative Appeals Tribunal held that the taxpayer was in the newspaper business and the prize was attracted as a result of that business activity and therefore the taxpayer received the prize because of, or in relation to the business or income-producing activity. In Kelly v. FC of T (1985) 80 FLR 155; (1985)16 ATR 478; 85 ATC 4283 an employee footballer won a cash award for being the best and fairest player. The court held that the prize was clearly incidental to the taxpayer's employment as a footballer and that he was eligible to receive the payment by virtue of that employment. This sort of prize was a normal incident of that employment. The circumstances outlined in the above cases can be contrasted with those of the recipient of this prize, as the taxpayer is not carrying on a business, nor was the prize in relation to their employment or a normal incident of that employment. The prize arose out of the publication of the taxpayer's research, rather than being attributable to their role as an employee. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 15-2 of the ITAA 1997. Section 15-2 of the ITAA 1997 provides that the value to the taxpayer of all gratuities and benefits provided to them in respect to, or for or in relation directly or indirectly to, any employment will be included in their assessable income. The issue in this case is whether the prize was granted 'in relation directly to or indirectly to, employment ....' In particular, whether the prize was granted 'indirectly' in relation to the taxpayer's employment. The leading cases in connection with this question are Dixon's Case and Scott's Case . In both cases it was decided that the phrase 'an indirect consequence of employment' was not an open ended concept. Rather, there must still be a connection between the payment and the employment such that the receipt 'is in a relevant sense a product' of the employment. It cannot be said that the prize was a product of the taxpayer's employment. Rather it was a reward to the taxpayer for their intellectual ability and the introduction of new research findings in the relevant field. The value of the prize is therefore not caught by section 15-2 of the ITAA 1997. As the prize received by the taxpayer does not constitute either ordinary or statutory income, it is not assessable income under either section 6-5 or section 6-10 of the ITAA 1997.", "Date_of_Decision": "21 March 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) section 6-10 section 10-5 section 15-2", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2145", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Prizes & awards Assessable income test Ex gratia payments Ex gratia payment income Windfall gains", "Case_References": "Squatting Investment Co Ltd v. Federal Commissioner of Taxation (1953) 86 CLR 570 (1953) 5 AITR 496 (1953) 10 ATD 126", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002644", "Unmatched_Content": "Replace references to paragraph 26(e) of the ITAA 1936 with section 15-2 of the ITAA 1997 effective 14 September 2006. | Removed reference to paragraph 26(e) of the ITAA 1936 and inserted section 15-2 of the ITAA 1997. | Related Public Rulings (including Determinations) Taxation Ruling IT 2145 | Keywords Prizes & awards Assessable income test Ex gratia payments Ex gratia payment income Windfall gains"}
{"ATO_ID_Number": "ATO ID 2012/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reduction in shortfall interest charge: credit amendment: assessable recoupment", "Issue": "If an amount of shortfall interest charge (SIC) is reduced following a credit amendment to a taxpayer's assessment, is the amount of the reduction in the SIC an assessable recoupment for the purposes of section 20-20 of the Income Tax Assessment Act 1997 (ITAA 1997) so that it must be included in the taxpayer's assessable income under subsection 20-35(1) of the ITAA 1997?", "Decision": "Yes. The amount of the reduction in SIC is an assessable recoupment for the purposes of section 20-20 of the ITAA 1997 so that it must be included in the taxpayer's assessable income under subsection 20-35(1) of the ITAA 1997 for the year of income in which the Commissioner gives the taxpayer a notice of amended assessment giving effect to the reduction.", "Facts": "A taxpayer omitted to include an amount of interest income in their tax return for the 2008-09 income year. The taxpayer's affairs were reviewed by the Commissioner and the shortfall identified. The taxpayer was issued with an amended assessment on 1 December 2009 which increased the taxpayer's tax liability for the 2008-09 income year. On the same day, the taxpayer also received a notice of their liability to pay SIC on the shortfall amount. The taxpayer claimed a deduction for the SIC in their income tax return for the 2009-10 income year. On 15 December 2010, the taxpayer objected to the amended assessment for the 2008-09 income year as the taxpayer argued that the Commissioner had incorrectly included interest attributable to the taxpayer's partner in the taxpayer's assessable income. The objection was allowed and an amended assessment was given to the taxpayer on 1 February 2011, reducing the taxpayer's liability for tax and SIC. The taxpayer did not include the amount of the reduction in SIC in their assessable income for the 2010-11 income year.", "Reasons_for_Decision": "Summary: A taxpayer is entitled to a tax deduction for an amount of SIC they incur: paragraph 25-5(1)(c) of the ITAA 1997. SIC is incurred for the purposes of paragraph 25-5(1)(c) of the ITAA 1997 in the year of income the Commissioner gives a taxpayer a notice of amended assessment: see Taxation Determination TD 2012/2. However, if some of this expenditure is recouped, it may result in the amount being treated as an assessable recoupment. Under section 20-35 of the ITAA 1997, your assessable income includes an assessable recoupment of a loss or outgoing if you can deduct the whole of the loss or outgoing for the current year or you have deducted or can deduct the whole of the loss or outgoing for an earlier income year. The meaning of an assessable recoupment is set out in section 20-20 of the ITAA 1997. Recoupment of a loss or outgoing includes any kind of recoupment, reimbursement, refund, insurance, indemnity or recovery however described and a grant in respect of the loss or outgoing: subsection 20-25(1) of the ITAA 1997. In this situation, the taxpayer has recouped an amount as their liability for SIC has been reduced as a result of an objection that has been allowed. The taxpayer has already claimed a deduction for this amount in the 2009-10 income year. The amount will be an assessable recoupment under subsection 20-20(2) of the ITAA 1997 if it is considered to be received by way of insurance or indemnity and the taxpayer can deduct or has already claimed a deduction for it. In this case the recoupment is not received by way of insurance. The term 'indemnity' as used in subsection 20-20(2) of the ITAA 1997 is not a defined term and is given its ordinary meaning. The issue of whether an amount is received by way of indemnity for the purposes of the predecessor provision to subsection 20-20(2) of the ITAA 1997 (paragraph 26(j) of the Income Tax Assessment Act 1936 ) has been considered in a number of cases including: Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105; (1951) 9 ATD 337; 5 AITR 214, Robert v. Collier's Bulk Liquid Transport Pty Ltd (1959) VR 280, Goldsbrough Mort & Co Ltd v. FC of T (1976) 76 ATC 4343; (1976) 6 ATR 580 and Commercial Banking Company of Sydney Limited v. FC of T 83 ATC 4208 (1983); 14 ATR 142. These cases make it clear that an amount received by way of indemnity is not restricted to payments received under a contract of indemnity. The cases also make it clear that an amount received by way of indemnity would include a receipt pursuant to an antecedent obligation (whether by virtue of a contract, statute or a breach of some common law duty of care) to make good or compensate for a loss which arises after the obligation comes into existence. The reduction in the amount of SIC incurred by the taxpayer as a result of the allowed objection can be considered to be an amount received to make good or compensate the taxpayer for a loss which arises after the original obligation to pay SIC came into existence. Therefore the amount can be considered to fall within the broad meaning of the term indemnity. The reduction in SIC can be considered to be an assessable recoupment under subsection 20-20(2) of the ITAA 1997 as the amount is received by way of indemnity and the taxpayer claimed a deduction for the amount in the 2009-10 income year. Nonetheless, subsection 20-20(3) of the ITAA 1997 provides that an amount you have received as recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if you can deduct an amount for the loss or outgoing for the current year or you have deducted or can deduct an amount for the loss or outgoing for an earlier income year under a provision listed in section 20-30 of the ITAA 1997. Tax related expenses under section 25-5 of the ITAA 1997 are listed in item 1.3 of the table in subsection 20-30(1) of the ITAA 1997. In these circumstances, if the reduction in SIC is not considered to have been received by way of insurance or indemnity, the reduction will still be an assessable recoupment as the taxpayer is entitled to a deduction and has deducted an amount of SIC under paragraph 25-5(1)(c) of the ITAA 1997. This is a provision dealing with tax related expenses and is one of the expenses listed in the table in subsection 20-30(1) of the ITAA 1997. The reduction in SIC is therefore considered to be an assessable recoupment in accordance with section 20-20 of the ITAA 1997 and should be included in the taxpayer's assessable income for the 2010-11 income year under subsection 20-35(1) of the ITAA 1997.", "Date_of_Decision": "27 June 2012", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 26(j)", "Related_Public_Rulings_and_Determinations": "TD 2004/21 | TD 2012/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/218 | ATO ID 2011/82", "Subject_References": "amendment of assessments assessable recoupments indemnity shortfall interest charge tax related expenses", "Case_References": "Commercial Banking Company of Sydney Limited v FC of T (1983) 70 FLR 433 83 ATC 4208 (1983) 14 ATR 142", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201259", "Unmatched_Content": "Minor amendment to second paragraph - changed reference to 'an ATO auditor' to 'the Commissioner' | Related ATO Interpretative Decisions | ATO ID 2009/119 has been withdrawn | Related Public Rulings (including Determinations) TD 2004/21 TD 2012/2 | Keywords amendment of assessments assessable recoupments indemnity shortfall interest charge tax related expenses"}
{"ATO_ID_Number": "ATO ID 2010/218", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable recoupment: recoupment - grant of the right to create renewable energy certificates - solar system on a rental property", "Issue": "Is the grant to the taxpayer of a right to create Renewable Energy Certificates (certificates), arising through the operation of the Renewable Energy (Electricity) Act 2000 (REE Act), an assessable recoupment for the purposes of section 20-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The grant to the taxpayer of a right to create certificates, arising through the operation of the REE Act, is an assessable recoupment under subsection 20-20 of the ITAA 1997. The right to create the certificates is considered to be a recoupment because it is a grant in respect of a loss or outgoing. The recoupment is assessable because the taxpayer can deduct an amount for the loss or outgoing under the ITAA 1997.", "Facts": "The taxpayer acquires and installs a large capacity residential photovoltaic system (solar system), on the roof of their rental property. The taxpayer is the owner of the solar system. The solar system is an eligible small generation unit (SGU) for the purposes of the REE Act. The REE Act supports the Federal Government's Renewable Energy Target (RET) scheme which was established to encourage additional electricity generation from renewable energy sources. Under the RET scheme, eligible parties, including owners of SGUs, can create certificates. The number of certificates that can be created is based on a formula that takes into account the rated power output of the system and the zone in which the system is located. Upon ownership and installation of a SGU, a statutory right arises under the REE Act entitling the taxpayer to create certificates. A certificate is a commodity in the Renewable Energy Certificate (REC) market. Under the RET scheme, the taxpayer gains a financial benefit from the right to create certificates by choosing to either: The electricity account at the rental property will be in the taxpayer's name. The taxpayer will be in receipt of assessable income in the form of the quarterly feed-in tariff payments made by the electricity retailer in respect of the electricity generated and fed into the electricity grid from the solar system on their rental property. The solar system is a depreciating asset for which the taxpayer can claim decline in value deductions under Division 40 of the ITAA 1997. The taxpayer is not carrying on a property rental business.", "Reasons_for_Decision": "Summary: Under Subdivision 20-A of the ITAA 1997, certain amounts received by way of insurance, indemnity or other recoupment are assessable income if the amounts are not income under ordinary concepts or otherwise assessable. Under subsection 20-20(2) of the ITAA 1997, an amount you have received as recoupment of a loss or outgoing is an assessable recoupment if: In order to determine if the taxpayer's right to create certificates is an assessable recoupment it must first be considered whether the right acquired is a recoupment. Recoupment is a defined term and has the meaning given by subsection 20-25(1) of the ITAA 1997. Under paragraph 20-25(1)(b), a recoupment of a loss or outgoing includes a grant in respect of the loss or outgoing. A grant is not a defined term and therefore must be given its ordinary meaning. The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01, defines a grant as 'that which is granted, as a privilege or right, a sum of money, as for a student's maintenance, or a tract of land'. In Taxation Ruling TR 2006/3 the term 'grant' is defined to mean that which is granted, as a privilege or right, including a sum of money by government to encourage business. The Ruling states at paragraph 97 that: ... It is essential to determine what the grant is actually for. The question as to the nature and quality of any payment must be determined by reference to the agreement or the terms which created in the recipient the right to the government grant... The taxpayer's right to create certificates under the REE Act is intended to provide the taxpayer with a financial benefit whether they assign their rights to create certificates or create the certificates themselves. In this sense, the scheme effectively provides a financial incentive to the taxpayer to purchase an eligible solar system. Given this intention and the objectives of the RET scheme, it is clear that the right to create certificates arising under the REE Act constitutes a grant. This is because the grant of the right to create certificates provides a financial benefit in kind to the taxpayer under the scheme. For the grant to be a recoupment it must be 'in respect of' the loss or outgoing. The meaning of 'in respect of' has not been considered in the context of section 20-25 of the ITAA 1997. However a number of judicial decisions have considered the meaning of the phrase in relation to other areas of the law. In Federal Commissioner of Taxation v. Scully (2000) 201 CLR 148; 2000 ATC 4111; (2000) 43 ATR 718, consideration of the words 'in respect of' highlighted the importance of the context in which the phrase appears and resulted in the requirement that there be some 'discernible rational link' between the two subject matters. J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; 44 ATR 22 also supported this interpretation, stating that 'in respect of' requires 'a nexus, some discernible and rational link', which is sufficient for the purposes of the particular legislation. In this case, the subject of the grant, being the right to create certificates, is dependent on ownership and installation of a solar system. The taxpayer incurs an outgoing to own and install the solar system. Upon ownership and installation of the solar system the taxpayer is granted the right to create certificates. The entitlement to the grant is therefore a result of the outgoing to acquire and install the solar system. In this case, the required discernable, rational, material link is present between the grant and the outgoing. The grant is therefore in respect of the loss or outgoing for the solar system for the purposes of paragraph 20-25(1)(b) of the ITAA 1997. As the grant of the right to create certificates is a grant in respect of the outgoing for the solar system under paragraph 20-25(1)(b) of the ITAA 1997, there is a recoupment of a loss or outgoing under section 20-25. For the recoupment of the loss or outgoing to be an assessable recoupment under subsection 20-20(2) of the ITAA 1997, the amount the taxpayer receives must be by way of insurance or indemnity. It is clear in this case that the recoupment will not be received by way of insurance. Indemnity is not a defined term and therefore must be given its ordinary meaning. The Macquarie Dictionary , [Multimedia], version 5.0.0, 1/10/01, definition of indemnity includes compensation for damage or loss sustained. The issue of whether an amount is received by way of indemnity for the purposes of the predecessor provision to subsection 20-20(2) of the ITAA 1997 (paragraph 26(j) of the Income Tax Assessment Act 1936 ) has been considered in a number of cases including: Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105; (1951) 9 ATD 337; 5 AITR 214, Robert v. Collier's Bulk Liquid Transport Pty Ltd (1959) VR 280, Goldsbrough Mort & Co Ltd v FC of T (1976) 76 ATC 4343, 6 ATR 580 ( Goldsbrough ); and Commercial Banking Company of Sydney Limited v. FC of T 83 ATC 4208 (1983); 14 ATR 142 ( Commercial Banking ). These cases make it clear that an amount received by way of indemnity is not restricted to amounts received under a contract of indemnity. This was made clear by Hunt J. in Commercial Banking who, referring to the decision in Goldsbrough , stated ... his Honour was correct in ruling that the expression \"by way of... indemnity\" should not be construed narrowly in the sense of \"pursuant to a contract of indemnity\". The cases also make it clear that an amount received 'by way of indemnity' would include a receipt pursuant to an antecedent obligation (whether by virtue of a contract, statute or a breach of some common law duty of care) to make good or compensate for a loss which arises after the obligation comes into existence. Therefore, the phrase 'by way of indemnity' broadens the range of receipts to be considered an assessable recoupment under subsection 20-20(2) of the ITAA 1997 to include receipts other than amounts received under a contract of indemnity. The granting of the right to the taxpayer to create certificates satisfies the antecedent statutory obligation arising under the REE Act to partially compensate the taxpayer for the outgoing to own and install the solar system. That being so, the value of the right granted is an amount received by way of indemnity. As the taxpayer can deduct an amount for the loss or outgoing of the solar system under Division 40 of the ITAA 1997, the recoupment, being the grant of the right to create certificates, will be an assessable recoupment under subsection 20-20(2) of the ITAA 1997.", "Date_of_Decision": "15 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 20-A section 20-20 subsection 20-20(2) section 20-25 subsection 20-25(1) paragraph 20-25(1)(b) section 20-40 Division 40", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/31 | Taxation Ruling TR 2006/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Recoupment of, or grant in respect of relevant expenditure Losses Assessable recoupments Indemnity", "Case_References": "Federal Commissioner of Taxation v Scully (2000) 201 CLR 148 2000 ATC 4111 (2000) 43 ATR 718", "Other_References": "Renewable Energy (Electricity) Act 2000 The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010218", "Unmatched_Content": "Related ATO Interpretative Decisions | ATO ID 2009/119 was withdrawn on 3 April 2014. | Related Public Rulings (including Determinations) Taxation Determination TD 2006/31 Taxation Ruling TR 2006/3 | Keywords Recoupment of, or grant in respect of relevant expenditure Losses Assessable recoupments Indemnity"}
{"ATO_ID_Number": "ATO ID 2006/72", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Election funding received by political parties from the Australian Electoral Commission", "Issue": "Is election funding received by a political party from the Australian Electoral Commission assessable income under subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Election funding received by a political party from the Australian Electoral Commission is not assessable income under subsection 6-5(1) of the ITAA 1997.", "Facts": "Following a federal election or by-election, the federal government, through the Australian Electoral Commission, distributes election funding where candidates or groups secure more than 4% of the total number of eligible votes in a particular electorate. The purpose of the election funding is to assist the payment of election expenses and the amount paid is based on the number of first preference votes gained. The election funding is paid by the Australian Electoral Commission to a candidate's political party unless the candidate is contesting the election as an independent.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts, which is called ordinary income. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business. In addition, characteristics of ordinary income that have evolved from case law include receipts that: The election funding received by a political party does not exhibit the characteristics of ordinary income as described to such an extent as to be characterised as income according to ordinary concepts. The election funding also does not relate to, or result from the performance of any personal services rendered by the political party, nor is it income from property. While a political party may derive assessable income from investments or activities of a business nature, the election funding is not considered to be income from the proceeds of any business activity carried on by the political party. Accordingly, the election funding received by a political party is not assessable as ordinary income under subsection 6-5(1) of the ITAA 1997. In addition we do not consider the election funding, when received by a political party, is assessable under any of the statutory income provisions of the ITAA 1997.", "Date_of_Decision": "15 March 2006", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(1) subdivision 20-A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Carrying on a business Election funding Political organisations Parliament election expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200672", "Unmatched_Content": "Remove reference to withdrawn Taxation Ruling IT 2258 | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/10 | Keywords Carrying on a business Election funding Political organisations Parliament election expenses"}
{"ATO_ID_Number": "ATO ID 2004/336", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: rebate of ongoing management fees", "Issue": "Is the rebate of ongoing management fees for an investment in a unit trust assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rebate of ongoing management fees for an investment in a unit trust is assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer has invested an amount in a unit trust. The prospectus for the unit trust provided a choice of different fee structures: Ongoing management fees are paid by the trust to a fund manager for managing the trust's assets. These fees are expenses of the trust and are taken into account in calculating its net income and resulting distribution of net trust income to unit holders. Investors who chose the Entry Fee option receive a partial rebate of the ongoing management fees on a regular periodic basis. Their annual Taxation Statement from the unit trust shows the rebate of ongoing management fees and their share of net trust income as separate items and a note on the Statement advises that although the rebate is included in non-primary production income, it is not part of the investor's trust income distribution. It also states that the tax treatment of the rebate is unclear. The fund manager pays the rebate directly to the investors who chose the Entry Fee option from the unit trust's prospectus. It is only paid to those investors and is not part of the net trust income distributed to all unit holders.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that the assessable income of an Australian resident includes income according to ordinary concepts. Whether or not a particular amount is income according to ordinary concepts depends on the nature and character of the receipt in the hands of the taxpayer. The prospectus sets out the conditions for the taxpayer's entitlement to the rebate. As the taxpayer has satisfied those conditions this means that the rebate of ongoing management fees is therefore expected and can be relied upon by the taxpayer as they know that they are entitled to the rebate. Under the terms of the prospectus, the rebate is payable on a regular periodic basis. Therefore the receipt of the rebate of ongoing management fees by the taxpayer has the necessary element of being an expected periodical payment as in Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82; (1952) 5 ATR 443. Even if payment of the rebate was on a one-off basis, it would still be assessable income (see Federal Commissioner of Taxation v. The Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693; Westfield Limited v. Federal Commissioner of Taxation (1991) 28 FCR 333; 91 ATC 4234; (1991) 21 ATR 1398 and Warner Music Australia Pty Ltd v. Federal Commissioner of Taxation (1996) 70 FCR 197; 96 ATC 5046; (1996) 34 ATR 171 and also Taxation Ruling TR 92/3). Therefore, as the receipts of rebate of ongoing management fees have the character of ordinary income, they are assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "6 April 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Investment income", "Case_References": "Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 (1952) 10 ATD 82", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004336", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 92/3 | Keywords Investment income"}
{"ATO_ID_Number": "ATO ID 2009/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: assessability of rental income received by Australian resident from the United Kingdom", "Issue": "Is the rental income received by an Australian resident from real property located in the United Kingdom (UK) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rental income received by an Australian resident from real property located in the UK is assessable under subsection 6-5(2) of the ITAA 1997. However, the taxpayer is entitled to a foreign income tax offset under Division 770 of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia. The taxpayer owns real property located in the UK and receives rental income from the property. The taxpayer has paid UK tax on the rental income.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Rental income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty, contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland and the Notes to the agreement (the 2003 UK Convention). The 2003 UK Convention operates to avoid double taxation of income received by Australian and UK residents. Article 6(1) of the 2003 UK Convention provides that income derived by a resident of Australia from real property may be taxed by the country in which the real property is situated. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the country of residence of the taxpayer may also tax the income subject to the laws of that country, unless the tax treaty explicitly prevents it. As the taxpayer is a resident of Australia who owns real property situated in the UK, the rental income derived by the taxpayer may be taxed in Australia and the UK. Consequently the rental income received by the Australian resident from real property located in the UK is assessable under subsection 6-5(2) of the ITAA 1997. Article 22(1)(a) of the 2003 UK Convention provides that, subject to the provisions of the laws of Australia, a credit against Australian tax payable shall be allowed for UK tax paid (in accordance with the law of Australia) where tax has been paid under UK law and in accordance with the 2003 UK Convention. As UK tax has been paid by the taxpayer in respect of the same income that is subject to tax by the taxpayer in Australia, Australia is required to provide taxation relief under the 2003 UK Convention. Division 770 of the ITAA 1997 allows a foreign income tax offset for foreign tax that a taxpayer has paid on income that is included in the taxpayer's assessable income. The general rule under section 770-10 of the ITAA 1997 is that, to qualify for an offset for an income year, the taxpayer must have paid foreign income tax on an amount that is included in its assessable income for that year, though there are exceptions in certain situations, such as where the tax has been deducted as source, or otherwise paid on the taxpayer's behalf (section 770-130 of the ITAA 1997). As UK tax has been imposed and paid on the rental income which is included in the taxpayer's assessable income in Australia, the taxpayer is entitled to a foreign income tax offset.", "Date_of_Decision": "19 August 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) Division 770 section 770-10 section 770-130", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Rental property Rental property income United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200993", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Rental property Rental property income United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/82", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income received from Switzerland: foreign tax credits", "Issue": "Is rental income derived by an Australian resident taxpayer in respect of real property situated in Switzerland assessable income pursuant to subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rental income derived by a resident taxpayer from sources in Switzerland is assessable under subsection 6-5(2) of the ITAA 1997. A foreign tax credit will be allowable in respect of the Swiss income tax paid on the rental income derived.", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer derived rental income in respect of real property situated in Switzerland. The taxpayer has or will pay income tax imposed in Switzerland on the rental income derived.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Rental income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Therefore as the taxpayer is an Australian resident, rental income derived from sources within Australia or Switzerland will be assessable income pursuant to subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 15 to the Agreements Act contains the tax treaty between Australia and Switzerland (Swiss Agreement). The Swiss Agreement operates to avoid the double taxation of income received by Australian and Swiss residents. The application of a double tax agreement is at first instance the role of the source country. In this case, Switzerland is entitled to assert source country taxing rights. Australia is treated as the country of residence. Article 6(1) of the Swiss Agreement provides that rental income derived by an Australian resident from real property situated in Switzerland may be taxed in Switzerland. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the taxpayer's country of residence may also tax the income subject to the laws of that country, unless the double tax agreement specifically prevents it. The Swiss Agreement does not exclude the rental income from being taxable in Australia. Therefore, the rental income may be taxed in both Australia and Switzerland. Article 22(1) of the Swiss Agreement provides that tax paid under the law of Switzerland and in accordance with the Agreement, in respect of income derived by a person who is a resident of Australia from sources in Switzerland, shall be allowed as a credit against Australian tax payable in respect of that income. Accordingly, as the rental income derived by the Australian resident taxpayer from real property located in Switzerland is assessable under subsection 6-5(2) of the ITAA 1997, the taxpayer will be entitled to a foreign tax credit for the Swiss income tax paid. If the Swiss tax is less than the Australian tax payable then the taxpayer will be entitled to a full credit for the Swiss tax paid. Where the Swiss tax is greater that the Australian tax payable, the taxpayer is entitled only to a credit equal to the value of the Australian tax payable and cannot recover any excess Swiss tax paid.", "Date_of_Decision": "24 December 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Rental property Rental property income Switzerland", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200582", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will by replaced by a foreign tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Rental property Rental property income Switzerland"}
{"ATO_ID_Number": "ATO ID 2005/207", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income received from real property situated in the United Kingdom (UK) by a dual resident of Australia and the UK", "Issue": "Is rental income received by a taxpayer who is a dual resident of Australia and the United Kingdom (UK) from real property situated in the UK included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Rental income received by a taxpayer who is a dual resident of Australia and the UK from real property situated in the UK is not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the UK for taxation purposes. The taxpayer maintains residences in Australia and the UK which is available to the taxpayer at all times continuously. The taxpayer spends time in Australia and the UK during the year. The taxpayer's personal and economic ties are predominantly in the UK. The taxpayer receives rental income from real property situated in the UK.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Rental income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the double tax convention between Australia and the UK (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. As the taxpayer is a dual resident of Australia and of the UK, it is necessary to consider the tie breaker rules in the 2003 UK Convention. Article 4(3) of the 2003 UK Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the 2003 UK Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(3) of the 2003 UK Convention provides that if an individual is a resident of both Australia and UK, they shall be deemed to be a resident of the State: The terms 'permanent home' and 'personal and economic relations' are otherwise undefined in the 2003 UK Convention. Article 3(3) of the 2003 UK Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the 2003 UK Convention. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer maintains residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in the UK. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer's personal and economic ties are closer with the UK than with Australia. Accordingly, the taxpayer will be treated as a resident of the UK for the purposes of applying the provisions of the 2003 UK Convention. Article 6(1) of the 2003 UK Convention provides that income from real property may be taxed by the country in which such real property is situated. While Article 6(1) of the 2003 UK Convention allocates a non-exclusive taxation right to the UK based on the location of the real property (that is, its source), it does not expressly address Australia's taxation rights. Paragraph 23 of Taxation Ruling 2001/13 provides guidance on the interpretation of the phrase 'may be taxed' in an article of a double tax agreement (DTA): What the phrase 'may be taxed' normally means is that the country mentioned (the source country) has a non-exclusive entitlement to tax the income. Under normal international tax principles, the other (residence) country may also continue to tax its residents (where its domestic law so provides) on the income, wherever sourced, unless the DTA explicitly prevents it from doing so. This supports the view that Article 6(1) of the 2003 UK Convention provides the residence country with a taxing right. Accordingly, where both the country of source and country of residence for treaty purposes are the same, the other Contracting State is prevented from taxing the income because it has not been allocated a taxing right. Accordingly, Article 6(1) of the 2003 UK Convention prevents Australia from taxing rental income derived from real property situated in the UK by a taxpayer who is treated solely as a resident of the UK under the tie-breaker rules in Article 4(3) of the 2003 UK Convention. Therefore, the UK sourced rental income received by the taxpayer does not form part of the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "1 July 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign source income Income tax International tax Rental property income United Kingdom", "Case_References": "", "Other_References": "OECD Model Tax Convention and Commentary", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005207", "Unmatched_Content": "This ATO ID was amended by removing references to habitual abode, a test which is not reflected in the 2003 UK Convention. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Foreign source income Income tax International tax Rental property income United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/256", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income received by a dual resident of Australia and the UK", "Issue": "Is the rental income received from Australia by a dual resident assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rental income received from Australia by a dual resident is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of the UK under the tie breaker tests in Article 4(3) of Schedule 1 to the International Tax Agreements Act 1953 (Agreements Act). The taxpayer is also a resident of Australia for income tax purposes. The taxpayer receives rental income from a property located in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Rental income received by the taxpayer is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the Convention and Notes between Australia and the UK (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 6(1) of the 2003 UK Convention provides that income derived by a resident of the UK from real property may be taxed in Australia in which the real property is situated. Paragraph 66 of Taxation Ruling TR 98/17 states that the terms of the relevant double tax agreement should be referred to when determining the tax liability of the individual taxpayer where the tie-breaker tests in an agreement provide that a dual resident be treated solely as a resident of a treaty country for the purposes of the double tax agreement. However, the taxpayer's Australian resident status is not lost for the general operation of the domestic law and the taxpayer continues to be eligible, for example, for the tax-free threshold. The rental income derived by the taxpayer may be taxed in Australia as the property is located in Australia under article 6(1) of the 2003 UK Convention. As the taxpayer is a resident of Australia, the rental income received from Australia will be assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "21 July 2005", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Non resident individuals Prescribed dual resident Rental property income United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005256", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/17 | Keywords Double tax agreements International tax Non resident individuals Prescribed dual resident Rental property income United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/302", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian rental income derived by a resident of the United States", "Issue": "Is the income derived from a rental property in Australia by a resident of the United States assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived from a rental property in Australia by a resident of the United States is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of the United States for taxation purposes. The taxpayer is a non-resident of Australia for income tax purposes. The taxpayer owns real property in Australia from which they derive rental income.", "Reasons_for_Decision": "Summary: Under subsection 6-5(3) of the ITAA 1997, the assessable income of a non-resident taxpayer includes: Rental income from real property is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on income received by a non resident, it is necessary to consider not only the income tax laws but any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997, so that these Acts are read as one. Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the United States (the United States Convention). Schedule 2A of the Agreements Act contains the protocol amending the United States Convention (the United States Protocol). The United States Agreement and United States Protocol operate to avoid double taxation of income received by Australian and United States residents. Article 6(1) of the United States Agreement provides that income from real property may be taxed by the country in which the real property is situated. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the taxpayer's country of residence may also tax the income subject to the laws of that country, unless the double tax agreement explicitly prevents it. Article 27(1)(a) of the United States Agreement provides that income derived by a resident of the United States which, under Article 6(1), may be taxed in Australia, shall be deemed to be income from sources in Australia for Australian tax purposes. Therefore, the income received from a rental property in Australia by a non-resident taxpayer is assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "11 October 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/589", "Subject_References": "Double tax agreements International tax Rental property income United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005302", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Rental property income United States"}
{"ATO_ID_Number": "ATO ID 2004/589", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian rental income derived by a resident of Singapore", "Issue": "Is the income derived from a rental property in Australia by a resident of Singapore assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived from a rental property in Australia by a resident of Singapore is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a non-resident of Australia for income tax purposes. The taxpayer is a resident of Singapore for income tax purposes. The taxpayer owns real property in Australia from which they derive rental income.", "Reasons_for_Decision": "Summary: Under subsection 6-5(3) of the ITAA 1997, the assessable income of a non-resident taxpayer includes: Rental income from real property is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on income received by a non resident, it is necessary to consider not only the income tax laws but any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997, so that these Acts are read as one. Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singaporean Agreement). Schedule 5A of the Agreements Act contains the protocol amending the Singaporean Agreement (the Singaporean Protocol). The Singaporean Agreement and Singaporean Protocol operate to avoid double taxation of income received by Australian and Singaporean residents. Article 4A(1) of the Singaporean Agreement provides that income from real property may be taxed by the country in which the real property is situated. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the taxpayer's country of residence may also tax the income subject to the laws of that country, unless the double tax agreement explicitly prevents it. Article 17 of the Singaporean Agreement provides that income derived by a resident of Singapore which, under Article 4A, may be taxed in Australia, shall be deemed to be income from sources in Australia for Australian tax purposes. Therefore, the income received from a rental property in Australia by a non-resident taxpayer is assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "22 June 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) paragraph 6-5(3)(a) paragraph 6-5(3)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1082 | ATO ID 2001/224", "Subject_References": "Double tax agreements International tax Rental property income Singapore", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004589", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Rental property income Singapore"}
{"ATO_ID_Number": "ATO ID 2004/777", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income received from real property situated in the US by a dual resident of Australia and the United States", "Issue": "Is rental income received by a taxpayer who is a dual resident of Australia and the United States (US) from real property situated in the US included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Rental income received by a taxpayer who is a dual resident of Australia and the US from real property situated in the US is not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer maintains residences in Australia and the US which are available to the taxpayer at all times continuously. The taxpayer spends time in Australia and the US during the year. The taxpayer's personal and economic ties are predominantly in the US. The taxpayer receives rental income from real property situated in the US.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Rental income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the United States Protocol (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. The US Protocol entered into force in Australia on 13 May 2003 and has effect in respect of income tax other than withholding taxes for any year of income beginning on or after 1 July 2004. For withholding taxes on dividends, interest and royalties, it has effect from 1 July 2003. As the taxpayer is a dual resident of Australia and of the US, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and US, they shall be deemed to be a resident of the State: Article 4(2) of the US Convention further provides that in determining an individual's permanent home, regard shall be given to the place where the individual dwells with their family, and in determining the country with which an individual's personal and economic relations are closer, regard shall be given to their citizenship (if the individual is a citizen of one of the countries). The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the US Convention. Article 3(2) of the US Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the US Convention. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer maintains residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in the US. In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. This is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the taxpayer's circumstances. As the taxpayer and the taxpayer's family spend time at their homes in Australia and the US as part of their usual pattern of activity, the taxpayer has a habitual abode in both countries. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has personal and economic ties with Australia and the US. Coupled with the fact that the taxpayer is a US citizen, it is considered that the taxpayer's personal and economic ties are closer with the US than with Australia. Accordingly, the taxpayer will be treated as a resident of the US for the purposes of applying the provisions of the US Convention. Article 6(1) of the US Convention provides that income from real property may be taxed by the country in which such real property is situated. While Article 6(1) of the US Convention allocates a non-exclusive taxation right to the US based on the location of the real property (that is, its source), it does not expressly address Australia's taxation rights. Paragraph 23 of Taxation Ruling 2001/13 provides guidance on the interpretation of the phrase 'may be taxed' in an article of a DTA: What the phrase 'may be taxed' normally means is that the country mentioned (the source country) has a non-exclusive entitlement to tax the income. Under normal international tax principles, the other (residence) country may also continue to tax its residents (where its domestic law so provides) on the income, wherever sourced, unless the DTA explicitly prevents it from doing so. This supports the view that Article 6(1) of the US Convention provides the residence country with a taxing right. Accordingly, where both the country of source and country of residence for treaty purposes are the same, the other Contracting State is prevented from taxing the income because it has not been allocated a taxing right. Accordingly, Article 6(1) prevents Australia from taxing rental income derived from real property situated in the US by a taxpayer who is treated solely as a resident of the US under the tie-breaker rules in Article 4(2) of the US Convention. Therefore, the US sourced rental income received by the taxpayer does not form part of the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "8 September 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International law Rental property income Resident/residency Treaties United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004777", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International law Rental property income Resident/residency Treaties United States"}
{"ATO_ID_Number": "ATO ID 2003/526", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of lump sum payment - for life time right to reside in a property - rent in advance", "Issue": "Is a lump sum amount received by the taxpayer, for granting a life time right to reside in their investment property, ordinary income for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where the tenant has a right to a pro rata refund if they leave the property?", "Decision": "Yes. A lump sum amount received by the taxpayer, for granting a life time right for a relative to reside in their investment property, is ordinary income for the purposes of section 6-5 of the ITAA 1997 where the tenant has a right to a pro rata refund if they leave the property.", "Facts": "The taxpayer owns an investment property. The taxpayer's relative wished to rent the property. The relative has made a lump sum payment in exchange for a life time right to reside in the property. The relative or their estate will be entitled to receive a pro-rata refund of any unexpired portion of the lump sum payment on vacating the property. The refund will be determined by calculating the period of occupancy multiplied by the market value of the weekly rent and subtracted from their lump sum.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Ordinary income is defined as income according to ordinary concepts (subsection 6-5(1) of the ITAA 1997). Factors like periodicity, recurrence, regularity or services performed have been identified by the courts as indicating that an amount is income according to ordinary concepts. However an amount received in a lump sum can also be ordinary income depending on the nature of the lump sum payment. If the purpose of the lump sum payment is to provide a substitute for an income stream then that lump sum may take on the character of those payments it is intended to replace. In the circumstances here the issue is whether this lump sum was intended to replace future rental income and whether it amounted to a lump sum payment of prepaid rent. We can take some guidance on this issue from Taxation Ruling TR 2002/14 which deals with the characterisation of receipts on the granting of occupancy rights in the context of retirement villages. Although this ruling applies to the taxation of retirement village operators the principles discussed in determining whether an amount is pre paid rent are relevant here. Paragraph 129 of TR 2002/14 summarises the circumstances where a lump sum should be accounted for as prepaid rent as being where: In the circumstances here the taxpayer has received a lump sum payment in exchange for the use and occupation of the rental property by the relative. The taxpayer will be required to refund any unexpired portion of the pre paid rent to the relative or the relative's estate. The amount of any refund is calculated by reference to the current market value of the rental during their occupation of the dwelling and subtracted from the lump sum payment. The intention of the parties is that the lump sum payment in advance is for the relative's use and enjoyment of the property. The effect of the way the refund is calculated means that the tenant is effectively paying a weekly rental for the period of their occupancy. Therefore, the lump sum payment has the character of rent received in advance. The rent received in advance is to be bought to account progressively. This is supported by paragraph 130 of TR 2002/14 which states that rent paid in advance to retirement village operators should be brought to account over the period for which the payment is made, in accordance with the principles laid down in Arthur Murray (NSW) Pty Ltd v. Federal Commissioner of Taxation (1965) 114 CLR 314; [1965] HCA 58; (1965) 14 ATD 98; (1965) 9 AITR 673. The principles arising out of Arthur Murray may be summarised as follows: An annual rental income calculated on the applicable market rate is to be included in the taxpayer's assessable income under section 6-5 of ITAA 1997 for each succeeding financial year.", "Date_of_Decision": "29 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1) subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "Arthur Murray (NSW) Pty Ltd v. Federal Commissioner of Taxation (1965) 114 CLR 314 [1965] HCA 58 (1965) 14 ATD 98 (1965) 9 AITR 673", "Other_References": "", "Business_Line": "Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003526", "Unmatched_Content": "Minor formatting change. Insert medium neutral case citation. | Insert medium neutral case citation | Related Public Rulings (including Determinations) Taxation Ruling TR 2002/14"}
{"ATO_ID_Number": "ATO ID 2003/718", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income from real property situated in the United States of America", "Issue": "Is the rental income received by an Australian resident taxpayer from a real property located in the United States of America (US) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rental income received by an Australian resident taxpayer from a real property located in the US is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer owns real property located in the US. The taxpayer receives rental income from that property. The taxpayer did not pay income tax in the US as the taxpayer made an overall loss from the renting out of the property.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Rental income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement, contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid double taxation of income received by Australian and US residents. Article 6(1) of the US Convention provides that income from real property may be taxed by the country in which the real property is situated. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the country of residence of the taxpayer may also tax the income subject to the laws of that country, unless the double tax agreement explicitly prevents it. Accordingly, the rental income received by the Australian resident taxpayer from the real property located in the US is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "28 July 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 79D", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Rental property Rental property income United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003718", "Unmatched_Content": "This ATO ID has been amended to add a note regarding former section 79D of the Income Tax Assessment Act 1936 (ITAA 1936) which has been repealed with effect from 1 July 2008. The ATO ID is still current. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Rental property Rental property income United States"}
{"ATO_ID_Number": "ATO ID 2003/1079", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income received from real property situated in the People's Republic of China", "Issue": "Is the rental income received by an Australian resident taxpayer from real property situated in the People's Republic of China (China), assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rental income received by an Australian resident taxpayer from real property situated in China is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer owns real property that is situated in China. The taxpayer receives rental income from that property.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Rental income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 28 to the Agreements Act contains the double tax agreement between Australia and China (the Chinese Agreement). The Chinese Agreement operates to avoid the double taxation of income received by Australian and Chinese residents. Article 6 of the Chinese Agreement provides that rental income from real property situated in China may be taxed in China. The Chinese Agreement does not exclude the rental income from being taxable in Australia. Therefore, the rental income may be taxed in Australia and China. Article 23(2) of the Chinese Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in China will be allowed against Australian tax payable on income from Chinese sources. As the taxpayer is a resident of Australia for tax purposes, the rental income received from real property situated in China is assessable under subsection 6-5(2) of the ITAA 1997. If tax is paid in China in relation to the rental income, the taxpayer will be entitled to a foreign income tax offset under Division 770 of the ITAA 1997. As the taxpayer is a resident of Australia for tax purposes, the rental income received from real property situated in China is assessable under subsection 6-5(2) of the ITAA 1997. If tax is paid in China in relation to the rental income, a foreign tax credit will be allowed.", "Date_of_Decision": "10 October 2003", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) Division 770", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "China Double tax agreements Foreign income Foreign income tax offsets International tax Rental property income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031079", "Unmatched_Content": "This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords China Double tax agreements Foreign income Foreign income tax offsets International tax Rental property income"}
{"ATO_ID_Number": "ATO ID 2003/1082", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of rental income received by Sri Lankan resident from real property situated in Australia", "Issue": "Is the rental income received by a non-resident taxpayer from real property located in Australia assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rental income received by a non-resident taxpayer from real property located in Australia is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a non-resident of Australia for income tax purposes. The taxpayer is a resident of Sri Lanka for income tax purposes. The taxpayer owns real property situated in Australia. The taxpayer receives rental income from that property.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Rental income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax, it is necessary to consider not only the income tax laws but also any applicable double tax agreement, contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 31 to the Agreements Act contains the double tax convention between Australia and the Democratic Socialist Republic of Sri Lanka (the Sri Lankan Agreement). The Sri Lankan Agreement operates to avoid double taxation of income received by Australian and Sri Lankan residents. Article 6(1) of the Sri Lankan Agreement provides that income from real property may be taxed by the country in which the real property is situated. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the country of residence of the taxpayer may also tax the income subject to the laws of that country, unless the double tax agreement explicitly prevents it. Article 22(1) of the Sri Lankan Agreement provides that income derived by a resident of Sri Lanka which, under Article 6, may be taxed in Australia shall be deemed to be income from sources in Australia for Australian tax purposes. Accordingly, the rental income received by a non-resident taxpayer from real property situated in Australia is assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "12 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Rental property income Sri Lanka", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031082", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Rental property income Sri Lanka"}
{"ATO_ID_Number": "ATO ID 2006/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a scholarship received by an Australian resident from a Swiss university", "Issue": "Is the scholarship income received by an Australian resident taxpayer from a Swiss university assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The scholarship income received by an Australian resident taxpayer from a Swiss university is not assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt income under section 51-10 of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer was a resident of Switzerland immediately before visiting Australia. The taxpayer undertakes full-time studies in Australia. The taxpayer receives scholarship income from a Swiss University. The taxpayer is in Australia for the purpose of their studies and to be with their spouse. The taxpayer intends to reside in Australia permanently.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The educational scholarship is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth Law. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 51-10 of the ITAA 1997, which deals with income from a scholarship. Section 51-10 of the ITAA 1997 provides an exemption for certain education and training payments. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that a scholarship, bursary, educational allowance or educational assistance received by a full-time student at a school, college or university is exempt from tax unless the conditions in section 51-35 of the ITAA 1997 apply. Section 51-35 of the ITAA 1997 sets out the various circumstances under which payments to students will not be exempt. None of these circumstances described in section 51-35 of the ITAA 1997 apply to the taxpayer. In determining liability to Australian tax on income received by an Australian resident from a foreign country, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 15 to the Agreements Act contains the tax treaty between Australia and Switzerland (the Swiss Agreement) and the Protocol. The Swiss Agreement and Protocol operate to avoid the double taxation of income received by Australian and Swiss residents. Article 20 of the Swiss Agreement provides that where a student who was a resident of Switzerland immediately before visiting Australia, and who is temporarily present in Australia solely for the purpose of their education, receives payments from sources outside Australia for the purpose of maintenance or education, those payments shall be exempt from tax in Australia. The taxpayer intends to live permanently in Australia. Therefore, Article 20 of the Swiss Agreement does not apply, as the taxpayer is not temporarily present in Australia solely for the purpose of their eduction. As the taxpayer is a full-time student at a university, the scholarship income received by the taxpayer is exempt income under section 51-10 of the ITAA 1997. Accordingly, the scholarship income received by the taxpayer is not assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "30 January 2006", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(2) section 6-20 section 11-15 section 51-10 section 51-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Exempt income International tax Scholarships, fellowships & bursaries Switzerland", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200639", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Exempt income International tax Scholarships, fellowships & bursaries Switzerland"}
{"ATO_ID_Number": "ATO ID 2002/220", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption of summer vacation scholarship income - provided for research", "Issue": "Is a summer vacation scholarship exempt from tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when the purpose of the scholarship is to enable the recipient to engage in and gain experience in research?", "Decision": "Yes. A summer vacation scholarship is provided principally for educational purposes when the purpose of the scholarship is to enable the recipient to engage in and gain experience in research and is exempt from tax under section 51-10 of the ITAA 1997.", "Facts": "The taxpayer, who is undertaking a full-time undergraduate course at a university, was awarded a summer vacation scholarship by the university. The university's stated purpose in providing the scholarship is to assist recipients to engage in and gain experience in research during the university summer vacation period. A member of the academic staff or a post-graduate student supervised the taxpayer's research.", "Reasons_for_Decision": "Summary: Section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997) exempts from tax income which a full-time student at a school, college or university receives from a scholarship, bursary educational allowance or educational assistance. However, paragraph 51-35(e) of the ITAA 1997excludes from exemption a payment under a scholarship where the scholarship is not provided principally for educational purposes. In Chesterman v. Federal Commissioner of Taxation (1923) 32 CLR 362 (at 385-6) Isaacs J said that for purposes to be educational they must provide for the giving or imparting of instruction. Rath J in FC of T v. Hall (1975) 5 ATR 450; 75 ATC 4156 held that research conducted under supervision at a university is instructional in character and therefore educational. As the university provided the scholarship to the taxpayer for the purposes of engaging in and gaining experience in research, the scholarship was provided principally for educational purposes. Income provided by the scholarship is therefore exempt under section 51-10 of the ITAA 1997.", "Date_of_Decision": "13 February 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 51-10 paragraph 51-35(e)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/221 | ATO ID 2002/222", "Subject_References": "Exempt income Scholarships, fellowships & bursaries", "Case_References": "Chesterman v. Federal Commissioner of Taxation 32 CLR 362", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002220", "Unmatched_Content": "Keywords Exempt income Scholarships, fellowships & bursaries"}
{"ATO_ID_Number": "ATO ID 2002/221", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption of summer vacation scholarship income - provided for employment", "Issue": "Is a summer vacation scholarship exempt from tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997) when the scholarship is provided to give the recipient summer vacation employment with a university research group?", "Decision": "No. A summer vacation scholarship is not provided principally for educational purposes when the scholarship provided to give the recipient summer vacation employment with a university research group and will not be exempt under section 51-10 of the ITAA 1997.", "Facts": "The taxpayer, who is undertaking a full-time undergraduate course at a university, was awarded a summer vacation scholarship by the university for the duration of the university summer vacation period. The university's stated purpose for providing the scholarship is to give recipients summer vacation employment with a research group of the university.", "Reasons_for_Decision": "Summary: Section 51-10 of the ITAA 1997 exempts from tax income received by a full-time student at a school, college or university from a scholarship, bursary educational allowance or educational assistance. However, paragraph 51-35(e) of the ITAA 1997 excludes from exemption a payment under a scholarship where the scholarship is not provided principally for educational purposes. As the university provided the scholarship to the taxpayer for the purposes of employment, the scholarship was not provided principally for educational purposes. Income provided by the scholarship is therefore excluded from exemption by paragraph 51-35(e) of the ITAA 1997.", "Date_of_Decision": "13 February 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 51-10 paragraph 51-35(e)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/220 | ATO ID 2002/222", "Subject_References": "Exempt income Scholarships, fellowships & bursaries", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002221", "Unmatched_Content": "Keywords Exempt income Scholarships, fellowships & bursaries"}
{"ATO_ID_Number": "ATO ID 2002/222", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption of summer vacation scholarship income - meaning of full-time student", "Issue": "Is a part-time summer vacation scholarship received by a student who is undertaking a full-time undergraduate course exempt from tax under section 51-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A student who is undertaking a full-time undergraduate course is a full-time student during the period they are in receipt of a summer vacation scholarship. The part-time summer vacation scholarship is exempt from tax under section 51-10 of the ITAA 1997.", "Facts": "The taxpayer, who is undertaking a full-time undergraduate course at a university, was awarded a summer vacation scholarship by the university to enrol in the university's summer vacation program. For the purpose of determining the fees applicable, the taxpayer's enrolment constituted a part-time academic summer program. The part-time summer vacation scholarship is principally for educational purposes.", "Reasons_for_Decision": "Summary: Section 51-10 of the ITAA 1997 exempts from tax income received by a full-time student at a school, college or university from a scholarship, bursary educational allowance or educational assistance. As the taxpayer is undertaking a full-time undergraduate course, they meet the requirement of section 51-10 of the ITAA 1997 that they be a full-time student. The fact that the program for which the taxpayer was provided the scholarship was undertaken while on university vacation does not alter their status as a full-time student. Nor is this status altered by the fact that the taxpayer's summer vacation enrolment may have constituted a part-time academic summer program.", "Date_of_Decision": "13 February 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 51-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/220 | ATO ID 2002/221", "Subject_References": "Exempt income Scholarships, fellowships & bursaries", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002222", "Unmatched_Content": "Keywords Exempt income Scholarships, fellowships & bursaries"}
{"ATO_ID_Number": "ATO ID 2014/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of losses incurred on the disposal or redemption of 'traditional securities' by a complying superannuation fund", "Issue": "Can a complying superannuation fund claim a deduction under section 70B of the Income Tax Assessment Act 1936 (ITAA 1936) for the full amount of a loss it incurred on the disposal or redemption of a traditional security where the traditional security is not a segregated current pension asset as defined in subsection 295-385(3) of the Income Tax Assessment Act 1997 (ITAA 1997) and section 295-390 of the ITAA 1997 applies to exempt some of the income of the fund?", "Decision": "Yes. A complying superannuation fund can claim a deduction under section 70B of the ITAA 1936 for the full amount of a loss it incurred on the disposal or redemption of a traditional security where the traditional security is not a segregated current pension asset as defined in subsection 295-385(3) of the ITAA 1997 and section 295-390 of the ITAA 1997 applies to exempt some of the income of the fund.", "Facts": "A complying superannuation fund with current pension liabilities did not segregate any assets for the sole purpose of discharging those liabilities. Accordingly, the fund did not have any segregated current pensions assets as defined in section 295-385 of the ITAA 1997. As part of its investment strategy, the fund acquired various securities which were either redeemed or otherwise disposed of during the income year. Each security was a traditional security as defined in section 26BB of the ITAA 1936. At the time of disposal or redemption, the fund realised a loss in respect of some of the traditional securities.", "Reasons_for_Decision": "Summary: Under section 295-385 of the ITAA 1997, a complying superannuation fund may set aside assets to be invested, held in reserve or otherwise dealt with for the sole purpose of enabling the fund to discharge all or part of its current pension liabilities; that is, its liabilities in respect of superannuation income stream benefits that are payable by the fund at that time. Assets that have been segregated for this purpose are known as segregated current pension assets. However, it is not mandatory for a fund to take steps to segregate assets under section 295-385. Under subsection 295-385(1) of the ITAA 1997 the ordinary income and statutory income of a complying superannuation fund for an income year that is derived from its segregated current pension assets is exempt from income tax. Where a fund has current pension liabilities but chooses not to segregate its assets, section 295-390 of the ITAA 1997 provides that, subject to certain conditions being met, a proportion of the ordinary and statutory income of a complying superannuation fund (other than income to which subsection 295-390(2) applies) is exempt from income tax. The fund must calculate the proportion of income that is exempt income using the statutory formula set out in subsection 295-390(3). Section 70B of the ITAA 1936 allows a deduction for a loss on the disposal or redemption of a traditional security in the income year in which the disposal or redemption takes place. However, the availability of the deduction is limited by a number of exceptions set out in subsections 70B(2A) to 70B(4). Subsection 70B(2A) of the ITAA 1936 provides that a loss on disposal or redemption of a traditional security made by a complying superannuation fund is not allowable as a deduction where the traditional security was a segregated current pension asset. However, section 70B of the ITAA 1936 does not provide for any particular treatment of a loss made by a fund in respect of a traditional security that is held by a fund that does not segregate its assets. Therefore, a complying superannuation fund that does not have segregated current pension assets is entitled to claim a deduction for the full amount of a loss on the disposal or redemption of a traditional security in the year in which the disposal or redemption takes place provided the conditions of section 70B of the ITAA 1936 are satisfied and none of the exceptions apply to the loss. This is the case even if section 295-390 of ITAA 1997 applies to exempt some of the income of the fund in that income year.", "Date_of_Decision": "29 July 2014", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 section 26BB section 70B subsection 70B(2A) subsection 70B(4)", "Related_Public_Rulings_and_Determinations": "TR 93/17 | TR 96/14 | TD 2009/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "superannuation traditional securities segregated current pension assets expense apportionment deductions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups & International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201426", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 93/17 TR 96/14 TD 2009/14 | Keywords superannuation traditional securities segregated current pension assets expense apportionment deductions"}
{"ATO_ID_Number": "ATO ID 2004/885", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financial Sector (Business Transfer and Group Restructure) Act 1999 : transfer of traditional securities", "Issue": "Where a credit union business is voluntarily transferred to another eligible credit union business, pursuant to the provisions of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (FSBTGR Act) what are the acquisition costs the receiving body is taken to have incurred in respect of traditional securities at the effective date of transfer, for the purposes of section 26BB of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "The receiving body is taken to have incurred acquisition costs in respect of traditional securities, for the purposes of section 26BB of the ITAA 1936, equal to the amount of debt owing on the securities at the effective date of transfer.", "Facts": "Entity A, the transferring body, has transferred its business to Entity B, the receiving body, in accordance with the FSBTGR Act. Both entities are authorised deposit-taking institutions (ADIs) for the purposes of the Banking Act 1959. The parties satisfied all of the relevant procedural and substantive provisions determined by the Australian Prudential Regulation Authority (APRA), including preparation of a statement under section 20 of the FSBTGR Act (section 20 statement). The section 20 statement provided that the consequences for parties of the transfer of assets and liabilities under the FSBTGR Act are taken to be the same as if the transfer involved a sale of the assets of the transferring body to the receiving body. APRA approved the transfer of business and issued a certificate of transfer pursuant to section 18 of the FSBTGR Act.", "Reasons_for_Decision": "Summary: The FSBTGR Act was enacted to enhance stability in the Australian financial sector by facilitating the merging of eligible entities and otherwise unviable institutions. Under this Act, APRA, in approving the transfer, is required to have regard to the interests of the members of such entities and the financial sector as a whole. The FSBTGR Act empowers APRA to approve, and in some circumstances to compel amalgamations of eligible entities for the purpose of enhancement of the Australian financial sector. For practical purposes, the aim of the FSBTGR Act is to enable APRA to provide certainty that an endorsed transfer is effective at law to ensure that the rights and liabilities of the transferring entity survive in the new entity. This certainty is achieved by APRA issuing a certificate of transfer pursuant to section 18 of the FSBTGR Act stating that the transfer is to take effect on the date specified. Broadly, section 22 of the FSBTGR Act provides that when APRA issues a certificate of transfer, the receiving body becomes the successor in law of the transferring body. In particular, all the assets and liabilities of the transferring body become assets and liabilities of the receiving body without any additional formality. Further, the totality of duties, obligations, immunities, rights and privileges applying to the transferring body apply to the receiving body. Subject to the relevant circumstances of each case of voluntary total transfer of business sanctioned under the FSBTGR Act the Commissioner will aim to administer the tax law in such a way that it complements the operation of the FSBTGR Act and promotes the stated objectives of the legislation. In practice this will be accomplished by adopting adjustments on the basis of acceptable valuations.", "Date_of_Decision": "26 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 26BB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of business Disposal of business Traditional securities", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004885", "Unmatched_Content": "This ATO ID is currently under review. | This ATO ID was amended by replacing references to the Financial Sector (Transfers of Business) Act 1999 with references to the Financial Sector (Business Transfer and Group Restructure) Act 1999. | Keywords Acquisition of business Disposal of business Traditional securities"}
{"ATO_ID_Number": "ATO ID 2003/982", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Are UK treasury bonds 'traditional securities'?", "Issue": "Do United Kingdom (UK) treasury bonds satisfy the definition of a 'traditional security' under subsection 26BB(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for Australian tax law purposes?", "Decision": "Yes. The UK treasury bonds in question do satisfy the definition of 'traditional securities' under subsection 26BB(1) of the ITAA 1936 for Australian tax law purposes.", "Facts": "1. The taxpayer became the residual beneficiary in the will of their late relative. 2. Part of estate is in English Treasury Bonds. 3. The bonds were purchased by the relative after the 10 May 1989. 4. The bonds generate income paid twice a year in Sterling. 6. No withholding tax is deducted when interest is paid to Australia.", "Reasons_for_Decision": "Summary: Subsection 26BB(1) of the ITAA 1936 defines the term 'Traditional Security'. A traditional security is a security that was acquired by the taxpayer after 10 May 1989. The traditional security must not have an eligible return. However, if it does have an eligible return it may still be a traditional security if two further conditions are satisfied. Firstly, the precise amount of the eligible return is ascertainable at the time of issue and secondly that it is not issued at a discount of greater then 1.5% multiplied by the number of years, including fractions of a year, of the term of the security. Traditional securities do not bear deferred interest nor are they capital indexed. If securities amount to trading stock of the taxpayer they will not be characterised as traditional securities. The term 'security' is defined in subsection 159GP(1) of the ITAA 1936; Security means: (a) stock, a bond, debenture, certificate of entitlement, bill of exchange, promissory note or other security; (b) a deposit with a bank or other financial institution; (c) a secured or unsecured loan; or (d) any other contract, whether or not in writing, under which a person is liable to pay an amount or amounts, whether or not the liability is secured. An eligible return as discussed above has the meaning given by subsection 159GP(3) of the ITAA 1936. This provision tells us that a return will be an eligible return if at the time of issue it is reasonably likely that the sum of all payments received in relation to the security, (excluding periodic interest payments), will exceed the issue price. The difference between these two amounts will be the eligible return. The provision cites three main reasons why an eligible return may arise being; All of the taxpayer's UK bonds give rise to a redemption price that is lower than the issue price. None of the prospectuses contain deferred interest clauses, nor are they capital indexed and they were not issued at a discount. At no time has the taxpayer been carrying on a business of trading UK treasury bonds. Therefore the bonds in question can not be characterised as trading stock. The UK Treasury bonds in question clearly satisfy the meaning of the term 'security' as set out in subsection 159GP(1) of the ITAA 1936. The UK Treasury bonds also satisfy the further conditions set out in subsection 26BB(1) of the ITAA 1936 defining 'traditional securities'. Therefore, bonds of this nature are traditional securities for the purposes of the tax law under subsection 26BB(1) of the ITAA 1936.", "Date_of_Decision": "24 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 26BB(1) subsection 159GP(1) subsection 159GP(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Traditional securities", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003982", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/14 | Keywords Traditional securities"}
{"ATO_ID_Number": "ATO ID 2003/1192", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: gains on conversion of convertible notes", "Issue": "Is a gain on the conversion of a convertible note into an ordinary share assessable income pursuant to section 26BB of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Section 26BB operates so that a gain on the conversion of a convertible note into an ordinary share is not included in assessable income if the note is a traditional security issued after 14 May 2002.", "Facts": "The taxpayer purchased a number of convertible notes (the notes) with the following features: There is no suggestion that the parties have not dealt at arm's length. The notes are not trading stock of the taxpayer. When the notes were issued, it was not reasonably likely that a share in the issuer company would be worth more than the issue price of a note prior to the maturity date.", "Reasons_for_Decision": "Summary: Subsection 26BB(2) of the ITAA 1936 treats gains on the disposal or redemption of 'traditional securities' as assessable income in that income year. A 'security' that does not have an 'eligible return' will be a 'traditional security' (subsection 26BB(1) of the ITAA 1936). The definition of 'security' in subsection 159GP(1) of the ITAA 1936 includes a 'debenture'. 'Debenture' is defined in subsection 6(1) of the ITAA 1936 as including 'notes and any other securities of the company'. Since the convertible notes are debentures, they are a 'security'. An 'eligible return' exists where, 'at the time the security is issued it is reasonably likely' that the sum of all payments on the security (not including periodic interest) is greater than the issue price (subsection 159GP(3) of the ITAA 1936). In this instance, if the shares are redeemed for cash there is no eligible return. This is because the notes would be redeemed for their face value. If the notes are converted into shares, the shares must be given a monetary value (section 21 of the ITAA 1936). This value should be the market value of the shares (Taxation Ruling TR 96/14 paragraph 101; Case 88 13 CTBR (NS) 571 per Member Thompson at 586). There is an eligible return if at the time the notes are issued it is reasonably likely that the value of the shares will exceed the face value of the notes when converted. In this instance there is no such likelihood. As a result, the notes do not have an 'eligible return'. Because the notes do not have an eligible return and are not trading stock, they are a traditional security. Ordinarily this would mean that the amount of any gain on their redemption or conversion would be assessable income to the taxpayer (subsection 26BB(2) of the ITAA 1936). However, subsection 26BB(4) of the ITAA 1936 overrides this rule in this instance because: Subsection 26BB(4) was inserted into the ITAA 1936 by item 17 of Schedule 1 of the New Business Tax System (Taxation of Financial Arrangements) Act (No 1) 2003 and applies to traditional securities issued after 7:30pm legal time in the Australian Capital Territory on 14 May 2002. Since the notes were issued after this date, the effect of subsection 26BB(4) of the ITAA 1936 is that any gain on the conversion of the notes into shares will not be included in assessable income by subsection 26BB(2) of the ITAA 1936.", "Date_of_Decision": "18 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 26BB subsection 159GP(1) subsection 159GP(3) subsection 6(1) section 21", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible notes Traditional securities", "Case_References": "Case 88 13 CTBR (NS) 571", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031192", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/14 | Keywords Convertible notes Traditional securities"}
{"ATO_ID_Number": "ATO ID 2014/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Product: superannuation income stream", "Issue": "Are amounts paid by the trustee of a superannuation fund to a fund member a superannuation income stream benefit under subsection 307-70(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the amounts paid are attributable to an account balance of the member and the trustee has agreed to protect part of the member's account balance for an agreed period of time?", "Decision": "Yes. Amounts paid by the trustee of a superannuation fund to a fund member are a superannuation income stream benefit under subsection 307-70(1) of the ITAA 1997 where the amounts are attributable to an account balance of the member and the trustee has agreed to protect part of the member's account balance for an agreed period of time.", "Facts": "The trustee of a superannuation fund offered eligible members of the fund the option to receive pension benefits that satisfied the minimum annual payment requirements in sub-subregulation 1.06(9A)(a) of the Superannuation Industry (Supervision) Regulations 1994 (SISR). Under this option, the trustee maintains an account balance that is attributable to the member. The account balance reflects the value of the member's entitlement to receive benefits from the trustee, and is calculated by reference to the value of assets that the trustee holds to support its obligation to the member. The trustee also offered the eligible members the option to protect all or part of their account balance. Under this option, the trustee agreed that if the account balance was less than a predetermined amount (the protected amount) at a given time in the future (the end of the protection period), then the trustee would credit the amount of the difference to the account balance. This would effectively increase the account balance at the end of the protection period to the protected amount. The amount that is credited to the member's account under the protection option will then become part of the member's account balance that is used for the purpose of determining the minimum amount that will be paid as pension benefits each year so as to satisfy the pension minimum payment amount requirements in sub-subregulation 1.06(9A)(a) of the SISR. The protected amount is calculated by reference to the account balance at the time the protection option was selected, any earnings credited to the account until the end of the protection period, any fees imposed by the trustee and an agreed level of withdrawals (including pension payments) that could be made from the account during the protection period. The protected amount is increased by amounts credited to the account and decreased by fees imposed and withdrawals from the account. However, the protected amount is not reduced where the trustee makes negative investment returns on the assets held in relation to the account balance. This outcome arises even where there is a reduction in the actual account balance of the member. An eligible member chose both the option to receive pension benefits and also the option to protect their account balance. The trustee entered into an arrangement with another entity (X entity) in order to ensure that it would have sufficient assets to support its obligation to the member in relation to the account balance protection option. X entity agreed that it would pay to the trustee at the end of the protection period an amount equal to the amount by which the account balance at that time was less than the protected account balance amount. This agreement only covered the one member of the fund. Separate agreements would be entered into if other members selected the protection option.", "Reasons_for_Decision": "Summary: Under subsection 307-70(1) of the ITAA 1997, a superannuation income stream benefit is a superannuation benefit specified in the Income Tax Assessment Regulations 1997 (ITAR 1997) that is paid from a superannuation income stream. A 'superannuation benefit' is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 307-5 of the ITAA 1997. Subsection 307-5(1) states that a 'superannuation benefit' is a payment described in the table which includes under item 1, 'a payment to you from a superannuation fund because you are a fund member'. Under subsection 307-70(2) of the ITAA 1997 a 'superannuation income stream' has the meaning given by the ITAR 1997. Regulation 995-1.01 of the ITAR 1997 provides that a 'superannuation income stream' means (among other things) a pension for the purposes of the Superannuation Industry (Supervision) Act 1993 (SISA), in accordance with subregulation 1.06(1) of the SISR. A benefit will be treated as a pension under subregulation 1.06(1) of the SISR, if: Sub-subregulation 1.06(9A)(a) of the SISR applies to 'a pension in relation to which there is an account balance attributable to the beneficiary'. The sub-subregulation requires that the pension payments are made at least annually and that the total payments in any year are at least equal the amount calculated under Clause 1 of Schedule 7 to the SISR. A pension that satisfies the requirements of sub-subregulation 1.06(9A)(a) of the SISR is defined under subregulation 1.03(1) of the SISR to be an account-based pension. In this case, the amount of the pension benefits that will be paid by the trustee to the member is determined by reference to the balance of the account established in relation to the member. This account reflects the value of the assets that the trustee holds to support its liability to the member. When the trustee receives the payment from X entity and credits this amount to the account of the member, there is an increase in the account balance to include the amount paid in relation to the protection option chosen by the member. This increase in the account balance for the amount of the protection does not in itself change the nature of the payments that are being made to the member. Rather, the amount credited to the account affects the amount of the payments that will be made each year to the member. Also, there is no change in the terms and conditions under which these amounts are paid from the account. The amount of the payments continues to be determined by reference to the account balance which includes the credited amount from that point. Accordingly, there is a continuation of the same pension that was already being paid by the trustee. The provision of benefits as described above are in relation to an account-based pension. These benefits are paid at least annually and the total of the payments in any year is at least the amount calculated under Clause 1 of Schedule 7 of the SISR. The provision of the benefits is therefore identified as a payment of a pension in accordance with sub-subregulation 1.06(9A)(a) of the SISR. This pension is a 'superannuation income stream' as defined in regulation 995-1.01 of the ITAR 1997. This payment would be described as a 'superannuation benefit' as it is a payment from a superannuation fund to a fund member as provided under subsection 307-5(1) of the ITAA 1997. Accordingly, this payment is a superannuation income stream benefit.", "Date_of_Decision": "7 February 2014", "Year_of_Income": "Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 section 307-5 subsection 307-5(1) section 307-70 subsection 307-70(1) subsection 307-70(2) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2013/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/151", "Subject_References": "Superannuation interest Superannuation pension", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20145", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2013/5 | Keywords Superannuation interest Superannuation pension"}
{"ATO_ID_Number": "ATO ID 2007/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Australian state government pension received by a Sri Lankan resident", "Issue": "Is an Australian government pension received by a Sri Lankan resident assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An Australian government pension received by a Sri Lankan resident is not assessable under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a Sri Lankan resident and is not an Australian resident. The taxpayer received a state government pension in respect of services rendered in connection with a business carried on by the government in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-10(5) of the ITAA 1997 provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) includes annuities and superannuation pensions as assessable income. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to also consider any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 31 to the Agreements Act contains the double tax agreement between Australia and Democratic Socialist Republic of Sri Lanka (the Sri Lankan Agreement). Article 19 of the Sri Lankan Agreement deals with government service pensions. Article 19(3) of the Sri Lankan Agreement provides that Article 18 of the Sri Lankan Agreement applies where the government pension in respect of services rendered in connection with a business carried on by a local authority of Australia. The state government pension received by the taxpayer is in respect of services rendered in connection with a business carried on by the state government, a local authority of Australia. Accordingly, Article 18 of the Sri Lankan Agreement will apply. Article 18(1) of the Sri Lankan Agreement provides that pensions paid to a Sri Lankan resident is taxable only in Sri Lanka. The taxpayer is a resident of Sri Lanka and is not an Australian resident. Accordingly, the Australian state government pension will be taxable only in Sri Lanka.", "Date_of_Decision": "4 January 2007", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International CoE Non resident individuals Non resident interest withholding tax Sri Lanka", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200721", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords International CoE Non resident individuals Non resident interest withholding tax Sri Lanka"}
{"ATO_ID_Number": "ATO ID 2007/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an allocated pension from an Australian superannuation fund received by a Sri Lankan resident", "Issue": "Is an allocated pension paid by an Australian superannuation fund to a Sri Lankan resident assessable under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An allocated pension paid by an Australian superannuation fund to a Sri Lankan resident is not assessable under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a Sri Lankan resident and is not an Australian resident. The taxpayer received an allocated pension from an Australian superannuation fund.", "Reasons_for_Decision": "Summary: Subsection 6-10(5) of the ITAA 1997 provides that a foreign resident taxpayer's assessable income includes statutory income from all Australian sources and other statutory income included by a provision on a basis other than having an Australian source. Section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) includes annuities and superannuation pensions as assessable income. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 31 to the Agreements Act contains the double tax agreement between Australia and Democratic Socialist Republic of Sri Lanka (the Sri Lankan Agreement). Article 18 of the Sri Lankan Agreement deals with pensions and annuities. Article 18(1) of the Sri Lankan Agreement provides that pensions paid to a Sri Lankan resident is taxable only in Sri Lanka. The taxpayer is a resident of Sri Lanka and is not an Australian resident. Accordingly, the allocated pension received from an Australian superannuation fund is taxable only in Sri Lanka.", "Date_of_Decision": "4 January 2007", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/501", "Subject_References": "Double tax agreements International CoE Non resident individuals Superannuation pensions Sri Lanka", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200722", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International CoE Non resident individuals Superannuation pensions Sri Lanka"}
{"ATO_ID_Number": "ATO ID 2006/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Australian pension received by a resident of Malta", "Issue": "Is the taxpayer, a resident of Malta, assessable on their Australian sourced pension(s) under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer, a resident of Malta, is not assessable on their Australian sourced pension(s) under subsection 6-5(3) of the ITAA 1997.", "Facts": "Taxpayer receives a part age pension, Comsuper pension, and an allocated pension from Commonwealth Bank. The taxpayer is an Australian citizen who departed Australia in 2005 to live in Malta permanently. The taxpayer ceased to be a resident of Australia for taxation purposes when they departed Australia in 2005.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. Statutory income from all Australian sources, or included by a provision on a basis other than having an Australian source, is also included in a non resident's assessable income under subsection 6-10(5) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non resident it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and ITAA 1997 so that those Acts are read as one. Schedule 24 of the Agreements Act contains the tax treaty between Australia and Malta (the Maltese Agreement). The Maltese Agreement operates to avoid the double taxation of income received by Australian and Maltese residents. Article 18 of the Maltese Agreement deals with pensions and annuities. Article 18(1) of the Maltese Agreement provides that an Australian sourced pension paid to an individual who is a resident of Malta shall be taxable only in Malta. As the taxpayer is a resident of Malta, the Australian sourced pension they receive will not be assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "21 December 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(3) subsection 6-10(5) section 10-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign pension income Non resident individual Tax free threshold Resident/residency", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200623", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign pension income Non resident individual Tax free threshold Resident/residency"}
{"ATO_ID_Number": "ATO ID 2006/296", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian sourced superannuation pension income derived by Austrian resident", "Issue": "Is the Australian sourced Commonwealth Superannuation Scheme (CSS) pension income derived by a resident of Austria assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Although the Australian sourced CSS pension paid to a resident of Austria is ordinarily assessable under subsection 6-5(3) of the ITAA 1997, Article 19(2)(b) of the Austrian Agreement contained in Schedule 27 of the International Tax Agreements Act 1953 (the Agreements Act) applies, and the pension is not taxable in Australia.", "Facts": "The taxpayer is a resident of Austria for taxation purposes. The taxpayer is a citizen of Austria. The taxpayer receives a pension from the CSS in respect of the taxpayer's employment with the Australian Public Service.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Pensions are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 27 to the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income derived by Australian and Austrian residents and also to prevent fiscal evasion with respect to taxes on income. Paragraph (2) of Article 19 of the Austrian Agreement deals with Government Service pensions. Subparagraph (2)(a) of Article 19 states that a pension paid by Australia in respect of services rendered to Australia shall be taxable in Australia. This includes ComSuper pension payments, such as the CSS pension payments, to a person who was employed in the Australian Public Service. However, subparagraph (2)(b) of Article 19 provides that such pensions shall be taxable only in Austria if the individual is a resident of, and a citizen or national of Austria. Accordingly, as the taxpayer is a resident and citizen of Austria, the pension income derived by the taxpayer from the CSS in Australia is not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "4 October 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation pensions Double tax agreements Austria", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006296", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Superannuation pensions Double tax agreements Austria"}
{"ATO_ID_Number": "ATO ID 2004/126", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a Comsuper pension paid to Netherlands resident", "Issue": "Is a Comsuper pension received by a resident of the Netherlands assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A Comsuper pension received by a resident of the Netherlands is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of the Netherlands for tax purposes. The taxpayer was an employee of the Australian government. The taxpayer receives a superannuation pension from Comsuper in respect of their employment with the Australian government.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Pensions are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 10 to the Agreements Act contains the double tax agreement and protocol between Australia and the Netherlands (the Netherlands Agreement). Schedule 10A to the Agreements Act contains the Second Protocol to the Netherlands Agreement (the Second Protocol). The Netherlands Agreement and the Second Protocol operate to avoid the double taxation of income received by residents of Australia and the Netherlands. Article 19(1) of the Netherlands Agreement provides that remuneration, including a pension, paid to an individual in respect of services rendered in the discharge of governmental functions to Australia or to a political sub-division of Australia or to a local authority of Australia, may be taxed in Australia. Paragraph 23 of Taxation Ruling TR 2001/13 states that the phrase 'may be taxed' normally means the source country has a non-exclusive entitlement to tax the income. However, the country of residence of the taxpayer may also tax the income subject to the laws of that country, unless the double tax agreement explicitly prevents it. As the taxpayer receives a pension in respect of services rendered in the discharge of governmental functions to Australia, the pension may be taxed in Australia and in the Netherlands. Accordingly, the Comsuper pension received by the taxpayer will be assessable under subsection 6-5(3) of the ITAA 1997. Note: Article 23(3) of the Netherlands Agreement provides that to avoid double taxation of residents of the Netherlands, the Netherlands shall allow as a deduction from the Netherlands tax so computed for such items of income, as may be taxed in both Australia and the Netherlands according to Article 19. Broadly, the amount of this deduction shall be the lesser of the Australian tax payable and the Netherlands tax payable.", "Date_of_Decision": "22 January 2004", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Netherlands Superannuation pension income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004126", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords International tax Netherlands Superannuation pension income"}
{"ATO_ID_Number": "ATO ID 2004/298", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Australian government service pension received by a US resident who is an Australian citizen", "Issue": "Is the Australian government service pension received by a United States (US) resident taxpayer who is an Australian citizen, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Australian government service pension received by the US resident taxpayer is assessable under subsection 6-5(3) of the ITAA 1997 as Australia has sole taxing rights over a government service pension paid to an Australian citizen who is a resident of the US.", "Facts": "The taxpayer is a non-resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer receives a government service pension from Comsuper. The taxpayer is an Australian citizen. The taxpayer is not currently a US citizen.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes all ordinary income derived from all Australian sources. Pension payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the United States Protocol (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Article 18 of the US Convention specifically deals with the taxation of pensions and annuities income. This Article provides that, subject to Article 19 of the US Convention, the US has the sole taxing rights over pensions and annuities income paid to an individual who is a resident of the US. Article 19 of the US Convention provides that wages, salaries and similar remuneration, including pensions, paid from the funds of the Australian government for labour or personal services performed as an employee in the discharge of governmental functions to an Australian citizen, shall be taxable only in Australia. Therefore, the Comsuper pension that the taxpayer receives will be assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "22 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Annuities & superannuation pensions Allocated annuities and pensions Foreign income Double tax agreements Residence in Australia Residence of individuals Non resident individuals Resident/residency Superannuation pension income United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004298", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Annuities & superannuation pensions Allocated annuities and pensions Foreign income Double tax agreements Residence in Australia Residence of individuals Non resident individuals Resident/residency Superannuation pension income United States"}
{"ATO_ID_Number": "ATO ID 2004/773", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Australian state government service pension received by a Chinese resident who is an Australian citizen", "Issue": "Is the Australian state government service pension received by a Chinese resident taxpayer who is an Australian citizen, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Australian state government service pension received by a Chinese resident who is an Australian citizen is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is an Australian citizen. The taxpayer is a non-resident of Australia for taxation purposes. The taxpayer is a resident of China for taxation purposes. The taxpayer receives a state government pension. The taxpayer receives the pension in respect of previous services rendered to the state government in the capacity of an employee. The pension is paid from a superannuation fund operated by the state government. The taxpayer is not a citizen or national of China.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident includes all ordinary income derived from all Australian sources. Pension payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 28 to the Agreements Act contains the double tax agreement between Australia and the People's Republic of China (the Chinese Agreement). The Chinese Agreement operates to avoid the double taxation of income received by Australian and Chinese residents. Article 18 of the Chinese Agreement specifically deals with the taxation of pensions. This Article provides that, subject to Article 19 of the Chinese Agreement, China has the sole taxing rights over pensions paid to an individual who is a resident of China. Article 19(2) of the Chinese Agreement provides that: Any pension paid by, or out of funds created by, Australia or a political subdivision or local authority of Australia to an individual in respect of services rendered to Australia or subdivision or authority shall be taxable only in Australia. However, any such pension shall be taxable only in China if the individual is a resident of, and a citizen or national of, China. The taxpayer receives a pension in respect of services rendered to an Australian state government and is not a citizen or national of China. The pension is paid from a superannuation fund operated by an Australian state government. Accordingly Article 19(2) of the Chinese Agreement provides that the pension shall be taxable only in Australia. Therefore, the Australian state government pension that the taxpayer receives will be assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "15 September 2004", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "China Foreign income Double tax agreements Residence in Australia Residence of individuals Non resident individuals Resident/residency Superannuation pension income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004773", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords China Foreign income Double tax agreements Residence in Australia Residence of individuals Non resident individuals Resident/residency Superannuation pension income"}
{"ATO_ID_Number": "ATO ID 2004/971", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian pension income derived by Spanish resident", "Issue": "Is the Australian sourced Public Sector Superannuation (PSS) Scheme pension income derived by a resident of Spain assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Although the Australian sourced PSS Scheme pension paid to a resident of Spain is ordinarily assessable under subsection 6-5(3) of the ITAA 1997, Article 19(2)(b) of the Spanish Agreement contained in Schedule 39 of the International Tax Agreements Act 1953 (the Agreements Act) applies, and the pension is not taxable in Australia.", "Facts": "The taxpayer is a resident of Australia, but will move to Spain in the future to reside there on a permanent basis. From the date of taxpayer's arrival in Spain (to live there permanently), the taxpayer will be a resident of Spain for taxation purposes. The taxpayer is a citizen of Spain. In Australia, the taxpayer was an employee of the Australian Public Service. The taxpayer receives a pension from the Public Sector Superannuation (PSS) Scheme in respect of the taxpayer's employment with the Australian Public Service.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Pensions are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 39 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Spain (the Spanish Agreement). The Spanish Agreement operates to avoid the double taxation of income derived by Australian and Spanish residents and also to prevent fiscal evasion with respect to taxes on income. Paragraph (2) of Article 19 of the Spanish Agreement deals with Government Service pensions. Subparagraph (2)(a) of Article 19 states that a pension paid by Australia in respect of services rendered to Australia shall be taxable in Australia. This includes ComSuper pension payments, such as the PSS Scheme pension payments, to a person who was employed in the Australian Public Service. However, subparagraph (2)(b) of Article 19 provides that such pensions shall be taxable only in Spain if the individual is a resident of, and a citizen or national of, Spain. Therefore, as a resident and citizen of Spain, the pension income derived by the taxpayer from the PSS Scheme in Australia is not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "24 November 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation pensions Double tax agreements Spain", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004971", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Superannuation pensions Double tax agreements Spain"}
{"ATO_ID_Number": "ATO ID 2003/154", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Veterans' Affairs pension paid to a Thai resident", "Issue": "Is a war veteran's pension paid by the Commonwealth Department of Veterans' Affairs to a resident of Thailand assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the war veteran's pension paid to a resident of Thailand is assessable under subsection 6-5(3) of the ITAA 1997, Article 18 of Schedule 30 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the pension income is not taxable in Australia.", "Facts": "The taxpayer is a resident of Thailand for tax purposes. The taxpayer receives war veteran's pension payments from the Commonwealth Department of Veterans' Affairs in Australia. The taxpayer is a citizen of Australia and not of Thailand.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Pension income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 30 to the Agreements Act contains the double tax agreement between Australia and Thailand (the Thai Agreement). The Thai Agreement operates to avoid the double taxation of income received by Australian and Thailand residents. Article 18 of the Thai Agreement provides that, subject to Article 19, a pension paid to a resident of Thailand is only taxable in Thailand. Paragraph (2) of Article 19 of the Thai Agreement provides that a pension paid by Australia in respect of services rendered in the discharge of governmental functions shall only be taxable in Australia. However, a pension is taxable only in Thailand if the person is a resident of, and a citizen or national of Thailand. 'Services rendered in the discharge of governmental functions' are principally of an employment nature and the pension must relate to that employment. This includes, for example, ComSuper pension payments to a person who was employed in the Australian Public Service. The taxpayer is a resident of Thailand receiving a war veteran's pension from the Australian Commonwealth Department of Veterans' Affairs. The pension does not relate to services rendered in the discharge of governmental functions. Therefore paragraph (2) of Article 19 of the Thai Agreement does not apply. Consequently, as the taxpayer is a resident of Thailand, Article 18 of the Thai Agreement applies and the pension income is not taxable in Australia. The pension income is therefore not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "12 February 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Thailand Veterans' payments War pensions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003154", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Thailand Veterans' payments War pensions"}
{"ATO_ID_Number": "ATO ID 2003/290", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian government service pension received by Swedish resident", "Issue": "Is an Australian government service pension received by a resident of Sweden, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Australian government service pension received by a resident of Sweden is assessable under subsection 6-5(3) of the ITAA 1997, however the taxpayer will be entitled to a deduction from tax in Sweden for tax paid in Australia.", "Facts": "The taxpayer is an Australian citizen who worked in the Defence Forces of the Commonwealth of Australia. The taxpayer is a resident of Sweden for tax purposes. The taxpayer receives a superannuation pension from Comsuper.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Pensions are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 17 to the Agreements Act contains the agreement between Australia and Sweden (the Swedish Agreement). Paragraph (3) of Article 18 of the Swedish Agreement provides that a government pension paid by Australia to a Swedish resident that was in respect of services to Australia may be taxed in Australia if the person is a citizen of Australia. Taxation Ruling IT 2665 outlines the Commissioner's position on the treatment of Swedish government pensions paid to Australian residents. Paragraph 3 of IT 2665 states that: Swedish government service pensions or social security pensions paid to a resident of Australia who is a citizen of Sweden may be taxed by both countries under the Australia/Sweden Double Taxation Agreement Applying the principle of reciprocity, Australia therefore has the right to tax Australian government service pension income of an Australian citizen who is a resident of Sweden. To eliminate double taxation of income, paragraph (3) of Article 24 of the Swedish Agreement provides that where a resident of Sweden derives income which may be taxed in Australia, Sweden will allow a deduction from tax on the income of the person, an amount equal to the tax paid in Australia. The amount of the deduction is not to exceed that part of the income tax, as computed before the deduction is given, which is appropriate to the income which may be taxed in Australia. Accordingly, the Australian government service pension income received by the resident of Sweden will be assessable in Australia under subsection 6-5(3) of the ITAA 1997. The taxpayer will be entitled to a deduction from Swedish tax for the amount of tax paid in Australia.", "Date_of_Decision": "17 February 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2665", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/380", "Subject_References": "Foreign pension income Double tax agreements Sweden", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003290", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2665 | Keywords Foreign pension income Double tax agreements Sweden"}
{"ATO_ID_Number": "ATO ID 2002/1064", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income - a 'member' of a Superannuation scheme", "Issue": "Is a taxpayer who is in receipt of an Australian Government superannuation pension and living overseas, a 'resident' as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A taxpayer who is in receipt of an Australian Government superannuation pension and living overseas, is not a resident as defined in subsection 6(1) of the ITAA 1936 as they do not pass the superannuation tests.", "Facts": "The taxpayer previously lived and worked in Australia. They left Australia to permanently reside in another country. The taxpayer does not intend to return to Australia. The taxpayer is not a resident of Australia under the 'resides test', 'domicile test' or '183 day test' (refer Taxation Ruling IT 2650 Income tax: Residency - permanent place of abode outside Australia ). The taxpayer is in receipt of a Public Sector Superannuation Scheme (PSS) pension - an Australian Government superannuation pension.", "Reasons_for_Decision": "Summary: Subsection 6(1) of the ITAA 1936 defines a 'resident' or 'resident of Australia' to be: Accordingly, a taxpayer will be considered to be a resident of Australia if they are a 'member' of the superannuation scheme established by deed under the Superannuation Act 1990. The PSS was a superannuation scheme established by deed under the Superannuation Act 1990. Part 3 of the Superannuation Act 1990 specifies who is a member of the PSS. Generally this would include a permanent or temporary employee of the Australian Public Service (APS). As the taxpayer is no longer employed by the APS they do not fall within the category of persons specified in Part 3 of the Superannuation Act 1990. Therefore the taxpayer is not a 'member' of the superannuation scheme for the purposes of the definition of 'resident' under sub-subparagraph (a)(iii)(A) of the definition of 'resident' in subsection 6(1) of the ITAA 1936. Sub-subparagraph (a)(iii)(B) of the definition of 'resident in subsection 6(1) of the ITAA 1936 has no application to the taxpayer as they neither are or were a member of the Commonwealth Superannuation Scheme (the superannuation scheme established by the the Superannuation Act 1976 ). Therefore the taxpayer, although they are in receipt of a PSS pension, is not a resident of Australia under the definition of resident in subsection 6(1) of the ITAA 1936.", "Date_of_Decision": "1 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2650", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1065", "Subject_References": "Non resident individuals Resident/residency Superannuation pension income Annuities & superannuation pensions", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021064", "Unmatched_Content": "updated to reflect current terminology | amended to update legislative references and to improve clarity | Related Public Rulings (including Determinations) Taxation Ruling IT 2650 | Keywords Non resident individuals Resident/residency Superannuation pension income Annuities & superannuation pensions"}
{"ATO_ID_Number": "ATO ID 2002/1065", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income - non resident taxpayer in a non Double Tax Agreement country in receipt of Australian sourced pension", "Issue": "Is a non-resident taxpayer's Australian superannuation pension included in their assessable income under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A non-resident taxpayer's Australian superannuation pension will be included in their assessable income under section 27H of the ITAA 1936.", "Facts": "The taxpayer is not a resident of Australia. They are a resident of a foreign country. Australia does not have a double tax agreement with this foreign country. The taxpayer previously resided and worked in Australia. They are in receipt of an Australian superannuation pension.", "Reasons_for_Decision": "Summary: Subsections 6-5(3) and 6-10(5) of the Income Tax Assessment Act 1997 provides that the assessable income of a non resident includes both the ordinary and statutory income derived from all Australian sources. Annuities and contributory pensions are specifically made assessable under section 27H of the ITAA 1936. The taxpayer's Australian superannuation pension will be assessable under this section. As the taxpayer is a non-resident the Australian pension will be taxed at non-resident tax rates. In determining whether or not an amount of income received by a non-resident is assessable in Australia, it is necessary to also consider any double tax agreement Australia may have with the country in which the taxpayer resides. However, as the country where the taxpayer is currently residing does not have a double tax agreement with Australia the assessability of Australian sourced income is determined on the basis of Australian domestic law. Therefore, the receipt of an Australian superannuation pension by a non resident taxpayer will be included in their assessable income under section 27H the ITAA 1936.", "Date_of_Decision": "1 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-10(3) subsection 6-10(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1064", "Subject_References": "Assessable income Double tax agreements Non resident individuals Superannuation pension income Resident/residency", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021065", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Assessable income Double tax agreements Non resident individuals Superannuation pension income Resident/residency"}
{"ATO_ID_Number": "ATO ID 2012/48", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation lump sum paid from a foreign superannuation fund to an Australian resident where an annuity may be paid subsequently: applying section 305-75 of the ITAA 1997", "Issue": "Where an individual receives a superannuation lump sum from a foreign superannuation fund in circumstances where an annuity may be paid subsequently from that fund, is the amount of the 'applicable fund earnings' in relation to the lump sum calculated by taking a proportionate approach to calculate the amounts referred to in subsection 305-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A proportionate approach is not used to calculate the 'applicable fund earnings' under subsection 305-75(3) of the ITAA 1997.", "Facts": "The individual was a resident of a foreign country. Whilst they were a foreign resident, the individual commenced a pension plan with a foreign superannuation fund, and made contributions to the plan. The individual immigrated to Australia and became an Australian resident for tax purposes. The individual has remained an Australian resident for tax purposes at all times since. The individual continued to make contributions to the plan with the foreign superannuation fund while an Australian resident for tax purposes. No amount was transferred to the foreign superannuation fund from another foreign superannuation fund. More than six months after becoming an Australian resident, the foreign superannuation fund paid a superannuation lump sum to the individual. The superannuation lump sum was only a part of the total amount to which the individual was entitled. The individual expects, but is not required, to commence an annuity from the fund at some later time.", "Reasons_for_Decision": "Summary: Division 305 of the ITAA 1997 sets out the tax treatment of superannuation benefits received by individuals from non-complying superannuation plans. Subdivision 305-B of the ITAA 1997 deals specifically with superannuation lump sums from foreign superannuation funds. Section 305-70 of the ITAA 1997 applies to superannuation lump sums received by an individual from a foreign superannuation fund more than six months after the individual either becomes an Australian resident or terminates their foreign employment. In accordance with subsection 305-70(2) of the ITAA 1997, an individual who receives a superannuation lump sum from a foreign superannuation fund must include in their assessable income, so much of the lump sum as equals their 'applicable fund earnings'. The assessable portion is effectively subject to tax at the individual's marginal tax rate. In accordance with subsection 305-70(3) of the ITAA 1997, the remainder of the superannuation lump sum is not assessable income and is not exempt income. The amount of an individual's 'applicable fund earnings' is worked out under section 305-75 of the ITAA 1997. In general terms, this amount is the earnings that have accrued to the individual in the foreign superannuation fund since the person became an Australian resident. Where an individual becomes an Australian resident after the start of the period to which the lump sum relates (but before they receive it) the amount of their 'applicable fund earnings' is worked out using the method in subsection 305-75(3) of the ITAA 1997. Subparagraph 305-75(3)(a)(i) and paragraph 305-75(3)(b) of the ITAA 1997 respectively require the following to be identified: Both of these provisions express an intention to take account of the total amount of an individual's benefits or interest in the foreign superannuation fund. That is certainly clear when also considered with subsection 305-75(4) of the ITAA 1997, which applies when a series of superannuation lump sums is to be paid from the fund. Even though subsection 305-75(4) of the ITAA 1997 states how the section is applied if the relevant superannuation lump sum is not the first lump sum paid from a foreign superannuation fund, nothing explains if, or how, the provision applies if the amount vested in the individual can be taken in more than one form, such as a combination of superannuation lump sum and annuity. It is the Commissioner's view that where an individual is paid a superannuation lump sum that represents only a part of the amount vested in them at the time of payment, there is no basis for applying a proportionate approach in working out the 'applicable fund earnings'. Having regard to the facts, the method requires the following amounts to be determined: Paragraph 305-75(3)(b) of the ITAA 1997 clearly requires the total amount that was vested in the individual when the lump sum was paid to be used in the calculation of the applicable fund earnings. The sum of the amounts specified in subparagraphs 305-75(3)(a)(i) and 305-75(3)(a)(ii) of the ITAA 1997 are then subtracted from the amount referred to in paragraph 305-75(3)(b) of the ITAA 1997 as part of the calculation. This amount is multiplied by the proportion of the total number of days the person was an Australian resident during the period from the start day to the day the lump sum is paid (see ATO Interpretative Decision ATO ID 2009/124 Lump sums received from superannuation funds by Australian residents: relevant periods under subsection 305-75(3) of the ITAA 1997 ). In this case, that proportion will be 1. The result is the individual's 'applicable fund earnings'. However, the amount included in assessable income cannot exceed the amount of the lump sum as a result of subsection 305-70(2) of the ITAA 1997. Subsection 305-70(2) of the ITAA 1997 states that only so much of the lump sum as equals the 'applicable fund earnings' is included in the assessable income. Therefore, the assessable income will be limited to the amount of the lump sum in any case where the lump sum is less than the applicable fund earnings.", "Date_of_Decision": "24 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 305 Subdivision 305-B section 305-70 subsection 305-70(2) subsection 305-70(3) section 305-75 subsection 305-75(3) subparagraph 305-75(3)(a)(i) subparagraph 305-75(3)(a)(ii) paragraph 305-75(3)(b) subsection 305-75(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/124 | ATO ID 2012/49", "Subject_References": "Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds Lump sum - superannuation benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201248", "Unmatched_Content": "Keywords Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds Lump sum - superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2012/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation lump sum paid from a foreign superannuation fund to an Australian resident at the same time as an annuity commenced: applying section 305-75 of the ITAA 1997", "Issue": "Where, at the same time, an individual is paid a superannuation lump sum and commences an annuity from a foreign superannuation fund, is the amount of 'applicable fund earnings' in relation to the superannuation lump sum calculated by taking a proportionate approach to the amounts referred to in subsection 305-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of 'applicable fund earnings' in relation to the superannuation lump sum is calculated by taking a proportionate approach to the amounts referred to in subsection 305-75(3) of the ITAA 1997.", "Facts": "The individual was a resident of a foreign country. Whilst they were a foreign resident, the individual commenced a pension plan with a foreign superannuation fund, and made contributions to the plan. The individual immigrated to Australia and became an Australian resident for tax purposes. The individual has remained an Australian resident for tax purposes at all times since. The individual continued to make contributions to the plan with the foreign superannuation fund while an Australian resident for tax purposes. No amount was transferred to the foreign superannuation fund from another foreign superannuation fund. More than six months after becoming an Australian resident, the foreign superannuation fund paid a superannuation lump sum to the individual. The superannuation lump sum represented only a third of the amount the individual was entitled to receive from the fund. At the same time as paying the superannuation lump sum, the foreign superannuation fund commenced to pay an annuity to the individual using the remainder of the amount in the foreign superannuation fund.", "Reasons_for_Decision": "Summary: Division 305 of the ITAA 1997 sets out the tax treatment of superannuation benefits received by individuals from non-complying superannuation plans. Subdivision 305-B of the ITAA 1997 deals specifically with superannuation lump sums from foreign superannuation funds. Section 305-70 of the ITAA 1997 applies to superannuation lump sums received by an individual from a foreign superannuation fund more than six months after the individual either becomes an Australian resident or terminates their foreign employment. In accordance with subsection 305-70(2) of the ITAA 1997, an individual who receives a superannuation lump sum from a foreign superannuation fund must include in their assessable income, so much of the lump sum as equals their 'applicable fund earnings'. The assessable portion is effectively subject to tax at the individual's marginal tax rate. In accordance with subsection 305-70(3) of the ITAA 1997, the remainder of the superannuation lump sum is not assessable income and is not exempt income. The amount of an individual's 'applicable fund earnings' is worked out under section 305-75 of the ITAA 1997. In general terms, this amount is the earnings that have accrued to the individual in the foreign superannuation fund since the person became an Australian resident. Where an individual becomes an Australian resident after the start of the period to which the lump sum relates (but before they receive it) the amount of their 'applicable fund earnings' is worked out using the method in subsection 305-75(3) of the ITAA 1997. Subparagraph 305-75(3)(a)(i) of the ITAA 1997 and paragraph 305-75(3)(b) of the ITAA 1997 respectively require the following to be identified: Both of these provisions express an intention to take account of the total amount of an individual's benefits or interest in the foreign superannuation fund. That is certainly clear when also considered with subsection 305-75(4) of the ITAA 1997, which applies when a series of superannuation lump sums is to be paid from the fund. Even though subsection 305-75(4) of the ITAA 1997 states how the section is applied if the relevant superannuation lump sum is not the first lump sum paid from a foreign superannuation fund, nothing explains if, or how, the provision applies if the amount vested in the individual can be taken in more than one form, such as a combination of superannuation lump sum and annuity. It is the Commissioner's view that where an individual commences an annuity from the foreign superannuation fund at the same time as the superannuation lump sum is paid from the fund, subsection 305-75(3) of the ITAA 1997 is applied having regard only to the individual's lump sum entitlement. That is, regard is had only to so much of each of the relevant vested amounts that was, at the relevant times, payable as a lump sum. The part of the vested amount that relates to the annuity must be disregarded. For example, if the rules of the foreign superannuation fund require the individual to be paid an annuity from the fund but allow the individual to choose, as in this case, to receive a superannuation lump sum of one-third of the vested amount, subsection 305-75(3) of the ITAA 1997 is applied on a proportionate basis, that is, to only one-third of the individual's total vested interest in the fund. This approach ensures that the individual is not assessed on earnings that have, in effect, accrued in relation to the annuity that will be paid from the foreign superannuation fund. It is also consistent with the previous approach taken in ATO Interpretative Decision ATO ID 2002/284 Superannuation, retirement and employment termination: Lump sum and pension from overseas superannuation fund. Amount to which section 27CAA of the ITAA 1936 applies (Withdrawn) in respect of former section 27CAA of the Income Tax Assessment Act 1936 (ITAA 1936), the predecessor to Subdivision 305-B of the ITAA 1997. Subdivision 305-B is intended to replicate the effect of section 27CAA of the ITAA 1936. Paragraph 2.86 of the Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 stated: The existing tax treatment of superannuation benefits paid from non-complying superannuation plans will be maintained, however the terminology applying to these benefits will be simplified. In summary: ... • Superannuation lump sum benefits paid from 'foreign superannuation funds' continue to be taxed on the earnings while the person was an Australian resident. The view in ATO ID 2002/284 was also consistent with the approach set out in Income Tax Ruling IT 2272 Income Tax: eligible termination payments and superannuation pensions - determination of undeducted contributions and undeducted purchase price which provides a basis for apportionment between a lump sum and annuity paid from a superannuation fund. Having regard to the facts, the method in subsection 305-75(3) of the ITAA 1997 for calculating 'applicable fund earnings' requires the following amounts to be determined: The sum of the amounts specified in subparagraph 305-75(3)(a)(i) of the ITAA 1997 and subparagraph 305-75(3)(a)(ii) of the ITAA 1997 are then subtracted from the amount referred to in paragraph 305-75(3)(b) of the ITAA 1997 as part of the calculation. The resulting amount is multiplied by the proportion of the total number of days the person was an Australian resident during the period from the start day to the day the lump sum is paid (see ATO Interpretative Decision ATO ID 2009/124 Lump sums received from foreign superannuation funds: relevant periods under subsection 305-75(3) of the ITAA 1997 ). In this case the proportion will be 1. The result is the individual's 'applicable fund earnings'.", "Date_of_Decision": "24 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 305 Subdivision 305-B section 305-70 subsection 305-70(2) subsection 305-70(3) section 305-75 subsection 305-75(3) subparagraph 305-75(3)(a) subparagraph 305-75(3)(a) subparagraph 305-75(3)(a) paragraph 305-75(3)(b)", "Related_Public_Rulings_and_Determinations": "Income Tax Ruling IT 2272", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/284 | ATO ID 2009/124 | ATO ID 2012/48", "Subject_References": "Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds Lump sum - superannuation benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201249", "Unmatched_Content": "Related Public Rulings (including Determinations) Income Tax Ruling IT 2272 | Keywords Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds Lump sum - superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2010/119", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Swedish pensions derived by an Australian resident", "Issue": "Are the Swedish Government service pension and social security pension derived by an Australian resident taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 ( ITAA 1997)?", "Decision": "Yes. The Swedish Government service pension and the social security pension derived by an Australian resident taxpayer are assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer is a citizen of Sweden. The taxpayer receives a pension paid by the Swedish Government in respect of services rendered to that government. The pension received by the taxpayer is not the type of pension that falls within the definition of section 27H of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer also receives a Swedish social security pension. The taxpayer pays Swedish tax on both pensions.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. In the present case, the Swedish Government service pension and the Swedish social security pension are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Taxation Agreements Act 1953 ( the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 17 of the Agreements Act contains the tax treaty between Australia and Sweden (the Swedish Agreement). This Agreement operates to avoid the double taxation of income received by Australian and Swedish residents. The relevant article in the Swedish Agreement is Article 18 which deals with Pensions and Annuities. Article 18(1) provides that, subject to Article 18(3), any pension paid to a resident of Australia shall be taxable only in Australia. Article 18(3) provides that pensions paid by Sweden to any individual in respect of services rendered to Sweden and pensions paid under the social security scheme of Sweden and where the individual is a Swedish citizen may be taxed in Sweden. There is nothing under Article 18(3) or any other provision of the Swedish Agreement that precludes Australia from also taxing the pensions, in accordance with the domestic law, where it is derived by an Australian resident taxpayer. The absence of the word 'only' after 'may be taxed' in Article 18(3) is significant and can be contrasted with Article 18(1) which includes the word 'only'. As the taxpayer is an Australian resident for taxation purposes, the Swedish Government service pension and Swedish social security pension derived by the taxpayer from Sweden will be assessable income under subsection 6-5(2) of the ITAA 1997. Article 24(1) operates to require the Swedish tax paid in respect of income derived by a person who is a resident of Australia to be allowed as a credit against Australian tax payable in respect of that income. As Swedish tax has been paid by the taxpayer in respect of the pensions that will also be subject to tax by the taxpayer in Australia, the taxpayer will be entitled to a foreign income tax offset under Division 770 of the ITAA 1997.", "Date_of_Decision": "18 March 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Denmark Double tax agreements Double tax relief Finland Foreign pension Sweden", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010119", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Denmark Double tax agreements Double tax relief Finland Foreign pension Sweden"}
{"ATO_ID_Number": "ATO ID 2010/153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Malaysian Government service pension derived by an Australian resident", "Issue": "Is a Malaysian Government service pension derived by an Australian resident taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Malaysian Government service pension is assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer is a surviving spouse of the original recipient of the Malaysian Civil Service Pension. This is a pension paid by the Malaysian Government in respect of services rendered by the taxpayer's spouse to that government (that is, Government service pension). The type of pension received by the taxpayer is not the type of pension that falls within the definition of section 27H of the Income Tax Assessment Act 1936 . Upon the death of the spouse, the taxpayer became entitled to and is paid the pension. The services rendered by the spouse were not in connection with a trade or business carried on by the Government of Malaysia. The Malaysian Government service pension has been taxed in Malaysia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. In the present case, the Malaysian Civil Service Pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Taxation Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 16 of the Agreements Act contains the tax treaty between Australia and Malaysia (the Malaysian Agreement). Schedule 16A and Schedule 16B of the Agreements Act contain the Protocol and Second Protocol to the Malaysian Agreement respectively (the Protocols). The Malaysian Agreement and Protocols operate to avoid the double taxation of income received by Australian and Malaysian residents. The relevant article in the Malaysian Agreement is Article 18 which covers Government service. Article 17 of the Malaysian Agreement, which covers Pensions and annuities, is not applicable since it specifically excludes pensions referred to in Article 18, that is, Government service pensions. Article 18(2) provides that a pension paid for services rendered to the Malaysian Government shall be taxable in Malaysia. There is nothing under Article 18 or any other provision of the Malaysian Agreement that precludes Australia from also taxing the Government service pension, in accordance with its domestic law, where it is derived by an Australian resident. The absence of the word 'only' after 'shall be taxable' in Article 18(2) is significant and can be contrasted with Article 17(1) which includes the word 'only'. In Chong v. FC of T (2000) 44 ATR 295; 2000 ATC 4315, Goldberg J said at ATR 307; ATC 4326: ... on the proper construction of Article 18(2), a Government service pension paid by Malaysia is taxable in Australia. Article 18(2) does not provide that Malaysia alone is to have the power to tax government pensions; nor does it restrict or limit Australia from so doing. As the taxpayer is an Australian resident for taxation purposes, the pension income derived from Malaysia will be assessable income under subsection 6-5(2) of the ITAA 1997. Under Article 22 of the Malaysian Agreement, Government service pensions are deemed to be income from sources in Malaysia. Accordingly, where Malaysia exercises its right under Article 18(2) to tax the Malaysian Civil Service Pension, Article 23(3)(a) operates to require the Malaysian tax paid to be allowed as a credit against Australian tax payable in respect of that income. As Malaysian tax has been paid by the taxpayer in respect of the pension that will also be subject to tax by the taxpayer in Australia, the taxpayer will be entitled to a foreign income tax offset under Division 770 of the ITAA 1997.", "Date_of_Decision": "18 March 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Double tax relief Foreign pension Malaysia", "Case_References": "Chong v FC of T (2000) 44 ATR 295 2000 ATC 4315", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010153", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Double tax relief Foreign pension Malaysia"}
{"ATO_ID_Number": "ATO ID 2010/154", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Netherlands pensions derived by an Australian resident", "Issue": "Are the Netherlands Government service pension and social security pension derived by an Australian resident taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Netherlands Government service pension and social security pension are assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer receives a pension paid by the Netherlands Government in respect of services rendered to that government. The pension paid is not in respect of services rendered in connection with any trade or business carried on by the Netherlands Government. The type of pension received by the taxpayer is not the type of pension that falls within the definition of section 27H of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer also receives a Netherlands social security pension. The Netherlands Government service pension has been taxed in the Netherlands.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. In the present case, the Netherlands Government service pension and the social security pension are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Taxation Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 10 to the Agreements Act contains the tax treaty and Protocol between Australia and the Kingdom of the Netherlands (the Netherlands Agreement). Schedule 10A to the Agreements Act contains the Second Protocol to the Netherlands Agreement (the Second Netherlands Protocol). The Netherlands Agreement and the Second Netherlands Protocol operate to avoid the double taxation of income received by Australian and Netherlands residents. The relevant articles in the Netherlands Agreement are Article 18 which covers Pensions and Annuities and Article 19 which covers Government Service. Article 18(1) provides that a pension (including a social security pension, but not including a pension to which Article 19 applies) payable to a resident of Australia shall be taxable only in Australia. Article 19(1) provides that a pension paid for services rendered by the taxpayer to the Netherlands Government may be taxed by the Netherlands (see note below). However, where such a pension is paid in respect of services rendered in connection with any trade or business carried on by the Netherlands Government, Article 19(2) provides for the pension to be taxed only by Australia under Article 18. There is nothing under Article 19 or any other provision of the Netherlands Agreement that precludes Australia from also taxing the Government service pension, in accordance with its domestic law, where it is derived by an Australian resident. The absence of the word 'only' after 'may be taxed' in Article 19(1) is significant and can be contrasted with Article 18(1) which includes the word 'only'. As the taxpayer is an Australian resident for taxation purposes, the taxpayer will be assessed under subsection 6-5(2) of the ITAA 1997 in Australia on the Netherlands Government service pension and the social security pension income derived from the Netherlands. Where the Netherlands exercises its right under Article 19(1) to tax the Government service pension, Article 23(1) and paragraph (5) of the Protocol operate to require the Netherlands tax paid to be allowed as a credit against Australian tax payable in respect of the Government service pension. As Netherlands tax has been paid by the taxpayer in respect of the Government service pension that will also be subject to tax by the taxpayer in Australia, the taxpayer will be entitled to a foreign income tax offset under Division 770 of the ITAA 1997.", "Date_of_Decision": "18 March 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Double tax relief Foreign pension Netherlands", "Case_References": "", "Other_References": "The Netherlands State Secretary of Finance - Resolution IFZ96/863M, dated 28 June 1996", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010154", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Double tax relief Foreign pension Netherlands"}
{"ATO_ID_Number": "ATO ID 2007/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of periodic insurance payments received by an Australian resident from Denmark", "Issue": "Are the foreign insurance payments received by a resident of Australia from a Danish pension and insurance company assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The foreign insurance payments received by a resident of Australia from a Danish pension and insurance company are assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer and the taxpayer's employer contributed to an insurance policy issued by a Danish pension and insurance company. The taxpayer receives periodic insurance payments from the Danish pension and insurance company when the taxpayer's ability to work was reduced by a certain percentage. The purpose of the payments was to provide a regular source of income to financially support the taxpayer while the taxpayer's ability to work was reduced.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 27A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) defines a pension to mean a pension within the meaning of the Superannuation Industry (Supervision) Act 1993 or a pension within the meaning of the Retirement Savings Accounts Act 1997 . However, those definitions refer to specific requirements imposed under Australian superannuation law. The Commissioner has issued Taxation Determination TD 93/151 which discusses the meaning of a pension for tax treaty purposes in the context of workers compensation payments. Paragraph 1 of TD 93/151 states that a pension is defined in The Macquarie Dictionary , 2001, 3 rd edn, The Macquarie Library Pty Ltd, NSW as: '1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. an allowance or annuity.' The meaning of the term 'pension' was also considered by Hill J. in the Federal Court in Tubemakers of Australia Ltd v. F C of T 93 ATC 4207; (1993) 25 ATR 183. His Honour concluded that the essential characteristic of a pension is only that there be periodical payments. The payments received by the taxpayer acquire the characteristic of a pension as they were fixed periodical payments made to replace earnings normally earned by the taxpayer during the period the taxpayer's ability to work was reduced. As the taxpayer's pension payments were received from Denmark, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997, so that those Acts are read as one. Schedule 18 of the Agreements Act contains the tax treaty between Australia and the Kingdom of Denmark (the Danish Agreement). The Danish Agreement operates to avoid the double taxation of income received by Australian and Danish residents. Article 18(1) of the Danish Agreement provides that subject to Article 18(3) a pension payable to a resident of Australia shall be taxable only in Australia. As the pension is not paid in respect of services rendered to the Danish Government, Article 18(3) of the Danish Agreement does not apply. Consequently, as the taxpayer is a resident of Australia, Article 18(1) of the Danish Agreement applies and the pension payments are assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "19 January 2007", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27A(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/151", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/175 | ATO ID 2003/1056 | ATO ID 2005/283", "Subject_References": "Disability superannuation pension Denmark Exempt income Foreign income International tax Insurance Periodical sickness or accident compensation payments", "Case_References": "Tubemakers of Australia Ltd v. FC of T 93 ATC 4207 (1993) 25 ATR 183", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200727", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 93/151 | Keywords Disability superannuation pension Denmark Exempt income Foreign income International tax Insurance Periodical sickness or accident compensation payments"}
{"ATO_ID_Number": "ATO ID 2007/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of certain New Zealand workers' compensation payments made to an Australian resident", "Issue": "Are payments made to the taxpayer, an Australian resident, under section 60 of the Accident Compensation Act 1982 ( New Zealand ) included in assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The payments made to the taxpayer, an Australian resident, under section 60 of the Accident Compensation Act are included in the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.", "Facts": "While employed in New Zealand, the taxpayer sustained a workplace injury. Subsequent to this, the taxpayer became an Australian resident. As a consequence of sustaining the workplace injury, the taxpayer received workers' compensation payments weekly from the Accident Compensation Corporation (ACC) in New Zealand under section 60 of the Accident Compensation Act. The Accident Compensation Act has been subsequently repealed and replaced in New Zealand by the Accident Rehabilitation and Compensation Insurance Act 1992 (effective 1.7.1992), then the Accident Insurance Act 1998 (effective 1.7.1999) and then the Injury Prevention, Rehabilitation and Compensation Act 2001 (effective 1.4.2002).", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes the ordinary income they derived directly or indirectly from all sources, whether in or out of Australia, during the income year. For income tax purposes, an amount paid to compensate for a loss generally acquires the character of that for which it is substituted ( Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; (1952) 10 ATD 82; (1952) 5 AITR 443). Compensation payments which substitute income have been held by the courts to be income under ordinary concepts ( Federal Commissioner of Taxation v. Inkster (1989) 24 FCR 53; 89 ATC 5142; (1989) 20 ATR 1516, Tinkler v. FC of T 79 ATC 4641; (1979) 10 ATR 411, and Case Y47 91 ATC 433; Case 7328 (1991) 22 ATR 3422). In determining liability to tax on foreign sourced income received by an Australian resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (the New Zealand Convention). The New Zealand Convention operates to avoid the double taxation of income received by Australian and New Zealand residents. Subsection 4(1) of the Agreements Act provides that the Agreements Act incorporates the ITAA 1997 and those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited situations that are not relevant in the present case). Article 18 of the New Zealand Convention provides that pensions (including government pensions) and other similar periodic remuneration sourced in New Zealand and paid to a resident of Australia are taxable only in Australia. The term 'pension' is not defined in the New Zealand Convention. Article 3(3) of the New Zealand Convention provides that any term not defined in the Convention shall, unless the context otherwise requires, have the meaning which it has at that time under the law of that State relating to the taxes to which the Convention applies. In relation to the meaning of the term 'pension', Taxation Determination TD 93/151, which deals with how periodic workers' compensation payments made by Comcare are characterised for the purposes of Australia's tax treaties, states at paragraph 1: A pension is defined in the Macquarie Dictionary as '1. A fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. An allowance or annuity.' The meaning of the term 'pension' was considered by Hill J. in the Federal Court in Tubemakers of Australia Ltd v FCT (1993) 25 ATR 183. His Honour concluded that the essential characteristic of a pension is that there be periodical payments. Subsection 60(1) of the New Zealand Accident Compensation Act provides that an earner who suffers personal injury by accident and does not completely recover from incapacity due to the accident will be paid earnings related compensation. Subsection 60(1) also stipulates how the amount of the compensation is calculated based on the assessment made by the ACC. The payments fall within the Macquarie dictionary meaning of 'pension' in that they are a fixed periodical payments made in consideration of injury or loss sustained. Furthermore, the payments have the essential characteristic of a pension as per Hill J in the Tubemakers Case in that they are periodical payments made weekly. The compensation payments made to the taxpayer from the New Zealand ACC are therefore a pension for the purposes of the New Zealand Convention. As the workers' compensation payments are related to earnings, they are ordinary income and are included in the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "7 March 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/151", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Compensation income Double tax agreements Foreign pension income Income International tax New Zealand Treaties", "Case_References": "Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540 (1952) 10 ATD 82 (1952) 5 AITR 443", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200749", "Unmatched_Content": "This ATO ID has been amended by replacing the reference to article 19 to the tax treaty between Australian and New Zealand with Article 18 contained in the new tax treaty which took effect from 19 March 2010. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 93/151 | Keywords Compensation income Double tax agreements Foreign pension income Income International tax New Zealand Treaties"}
{"ATO_ID_Number": "ATO ID 2006/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Czech Republic pension received by Australian resident", "Issue": "Is a Czech Republic government pension received by an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A Czech Republic government pension received by an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a government pension from the Czech Republic. The pension is a social security pension paid by the Czech Republic government.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited situations). Schedule 40 to the Agreements Act contains the double tax agreement between Australia and the Czech Republic (The Czech Agreement). The Czech Agreement operates to avoid the double taxation of income received by Australian and Czech residents. Article 18(1) of the Czech Agreement provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia. Accordingly, as the taxpayer is a resident of Australia, the Czech Republic government pension is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "22 December 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Czech Republic Double tax agreements Foreign pension income International tax Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200622", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Czech Republic Double tax agreements Foreign pension income International tax Treaties"}
{"ATO_ID_Number": "ATO ID 2006/161", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign source income: pension - temporary residents", "Issue": "Is the taxpayer, who is a temporary resident of Australia, assessable in Australia on United Kingdom (UK) sourced pension income?", "Decision": "No. The taxpayer who is a temporary resident of Australia is not assessable in Australia on UK sourced pension income.", "Facts": "The taxpayer is a resident of Australia for the purposes of Australian tax. The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer derived pension income from the UK while the taxpayer was a temporary resident of Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The pension income derived by the taxpayer from the UK is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, Subdivision 768-R of the ITAA 1997 provides tax relief for most foreign income derived by temporary residents of Australia. In particular, section 768-910 of the ITAA 1997 provides that ordinary income derived from a foreign source, excluding employment related income and capital gains on shares and rights acquired under employee share schemes, is non-assessable non-exempt income when derived by a temporary resident of Australia. The taxpayer's pension income from the UK, being ordinary income from a foreign source, is non-assessable non-exempt income under subsection 768-910(1) of the ITAA 1997 as the taxpayer was a temporary resident of Australia when the taxpayer derived it. Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income, it is not assessable income. Therefore, the taxpayers pension income from the UK is not assessable income.", "Date_of_Decision": "23 June 2006", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(3) Subdivision 768-R section 768-910 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/162 | ATO ID 2006/163", "Subject_References": "Foreign pension income International tax Resident/residency United Kingdom Temporary resident Non-assessable non-exempt income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006161", "Unmatched_Content": "Keywords Foreign pension income International tax Resident/residency United Kingdom Temporary resident Non-assessable non-exempt income"}
{"ATO_ID_Number": "ATO ID 2006/162", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxing rights over United Kingdom sourced pension income under the United Kingdom Convention where taxpayer is a temporary resident of Australia", "Issue": "Does the Australia - United Kingdom Double Taxation Convention (the UK Convention) prevent the United Kingdom (UK) from taxing UK sourced pension income derived by a temporary resident of Australia which is non-assessable non-exempt income for Australian tax purposes?", "Decision": "No. The UK Convention does not prevent the UK from taxing UK sourced pension income derived by a temporary resident of Australia which is non-assessable non-exempt income for Australian tax purposes.", "Facts": "The taxpayer is a resident of Australia for the purposes of Australian tax. The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer derived pension income from the UK while the taxpayer was a temporary resident of Australia. The taxpayer's UK sourced pension income is non-assessable non-exempt income under subsection 768-910(1) of the ITAA 1997", "Reasons_for_Decision": "Summary: Schedule 1 to the International Agreements Act 1953 contains the UK Convention. Article 17(1) of the UK Convention provides that pensions, including governmental pensions, and annuities paid to a resident of Australia, shall be taxable only in Australia. On its own, Article 17(1) would prevent the UK from taxing UK sourced pension income derived by Australian residents. However, Article 23(2) of the UK Convention provides that where, under the Convention, income is relieved from taxation in the UK (in this case, due to the UK not having a taxing right under Article 17(1)) and the individual is also exempt from tax in Australia by virtue of being a temporary resident within the meaning of the applicable tax laws in Australia, then the UK is no longer required to provide the aforementioned relief from taxation under the convention. The expression 'exempt from tax' is not defined in the UK Convention, nor is it defined in Australia's domestic tax laws. Accordingly, the expression takes its ordinary meaning. The Macquarie Dictionary defines the term 'exempt' as 'released from, or not subject to, an obligation, liability, etc.: exempt from taxes; one who is exempt from, or not subject to, an obligation, duty, etc.'. The ordinary meaning of the expression 'exempt from tax' therefore applies to situations where a person or a particular item of income is not subject to tax. Accordingly, for the purposes of Article 23(2) of the UK Convention, the taxpayer is exempt from tax in Australia in respect to the UK pension income because of their temporary residence status under Australia's tax law. Therefore, due to the application of Article 23(2) of the UK Convention, the UK's right to tax the UK sourced pension income is not restricted by Article 17(1) of the UK Convention.", "Date_of_Decision": "23 June 2006", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 768-910(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/161", "Subject_References": "Double tax agreements Foreign pension income International tax Resident/residency United Kingdom Temporary resident Non-assessable non-exempt income", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No.1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006162", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Foreign pension income International tax Resident/residency United Kingdom Temporary resident Non-assessable non-exempt income"}
{"ATO_ID_Number": "ATO ID 2006/163", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign source income: pensions - non-assessable non-exempt income and temporary residents", "Issue": "Can is the taxpayer, a temporary resident of Australia, who derived pension income from the United Kingdom (UK) which is non-assessable non exempt income under Australia's temporary residents measure, choose to have the pension income taxed in Australia?", "Decision": "No. The taxpayer, who is a temporary resident of Australia cannot choose to have pension income from the UK, which is non-assessable non-exempt income under Australia's temporary residents measure, taxed in Australia.", "Facts": "The taxpayer is a resident of Australia for the purposes of Australian tax. The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer derived pension income from the UK while the taxpayer was a temporary resident of Australia. The taxpayer's UK sourced pension income is non-assessable non-exempt income under subsection 768-910(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension income derived by the taxpayer from the UK is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Section 768-910 of the ITAA 1997 provides that foreign income, other than employment related income and capital gains on shares and rights acquired under employee share schemes, is non-assessable non-exempt income when derived by a person who is a temporary resident of Australia. Accordingly, UK pension income is non-assessable non-exempt income when derived by a person who is a temporary resident of Australia. Subsection 6-15(3) of the ITAA 1997 provides that if an amount that is non-assessable non-exempt income, it is not assessable income. As such, the taxpayer's pension income from the UK is not assessable income. Subdivision 768-R does not allow a person who is a temporary resident to make an election to have foreign source income, which is non-assessable non-exempt income, treated as assessable income for Australian tax purposes. Therefore, the taxpayer cannot choose to have their UK pension income, which is non-assessable non-exempt income, taxed in Australia.", "Date_of_Decision": "23 June 2006", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) Subdivision 768-R section 768-910 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/161 | ATO ID 2006/162", "Subject_References": "Double tax agreements Foreign pension income International tax Resident/residency United Kingdom Temporary resident", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006163", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign pension income International tax Resident/residency United Kingdom Temporary resident"}
{"ATO_ID_Number": "ATO ID 2006/212", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Temporary residents of Australia: residency status under the Australia-United Kingdom Double Taxation Convention", "Issue": "Is a taxpayer, who is a temporary resident of Australia, a resident of Australia for the purposes of the Australia-United Kingdom Double Taxation Convention (the UK Convention)?", "Decision": "Yes. A taxpayer, who is a temporary resident of Australia, is a resident of Australia for the purposes of the UK Convention.", "Facts": "The taxpayer is a resident of Australia for the purposes of Australian tax. The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer derived pension income from the United Kingdom while the taxpayer was a temporary resident of Australia.", "Reasons_for_Decision": "Summary: Schedule 1 to the International Tax Agreements Act 1953 contains the UK Convention. Article 4(1) of the UK Convention provides that a person is a resident of Australia, for the purposes of this Convention, if the person is a resident of Australia for the purposes of Australian tax. However, Article 4(2) states that a person is not a resident of Australia, for the purposes of the UK Convention, where that person is liable to tax in Australia in respect of income or gains from sources in Australia only. A taxpayer is 'liable to tax' in respect of foreign income or gains, if a provision of Australia's tax laws imposes a liability to tax foreign income or gains of that taxpayer, irrespective of whether that taxpayer actually derives foreign income or gains. Under section 768-910 of the ITAA 1997, not all foreign income derived by a temporary resident is non-assessable non-exempt income. A temporary resident of Australia remains liable to Australian tax on foreign income that is either employment related income or consists of capital gains on shares and rights acquired under employee share schemes. As temporary residents are liable to tax in Australia on certain income and gains from sources outside Australia, Article 4(2) of the UK Convention will not exclude them from being a resident for the purposes of the Convention. As a result, the taxpayer is a resident of Australia for the purposes of the UK Convention.", "Date_of_Decision": "3 August 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 768-910 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/14 | Taxation Ruling TR 97/19", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign pension income International tax Resident/residency Temporary resident United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006212", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2005/14 Taxation Ruling TR 97/19 | Keywords Double tax agreements Foreign pension income International tax Resident/residency Temporary resident United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/357", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Romanian pension received by Australian resident", "Issue": "Is a pension received by an Australian resident from Romania assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A pension received by an Australian resident from Romania is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a pension from Romania. The pension is a social security pension paid by the Romanian government. Eligibility for the pension is based on the taxpayer's age and years of employment experience. The taxpayer was not required to make any contributions in order to receive the pension.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes all ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax of foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 45 to the Agreements Act contains the double tax agreement and protocol between Australia and Romania (the Romanian Agreement). The Romanian Agreement operates to avoid double taxation of income received by Australian and Romanian residents. Article 18(1) of the Romanian Agreement provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia. Accordingly, as the taxpayer is a resident of Australia, the pension received by the taxpayer from Romania is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "23 April 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreement Foreign pension income Romania Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004357", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreement Foreign pension income Romania Treaties"}
{"ATO_ID_Number": "ATO ID 2004/809", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of UK Armed Forces pension received by an Australian resident on or after 1 July 2004", "Issue": "Is a pension received by an Australian resident taxpayer from the United Kingdom (UK) Armed Forces Pensions Scheme assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The pension received by the Australian resident taxpayer from the UK Armed Forces Pensions Scheme is assessable under section 27H of the ITAA 1936.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a pension from the UK Armed Forces Pensions Scheme.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about assessable income. The listed provisions include amounts in assessable income that are not ordinary income or which vary or replace the rules that would otherwise apply for certain kinds of ordinary income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign pension scheme to provide superannuation benefits are included in assessable income. In determining liability to Australian tax, it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that the Acts are read as one. Schedule 1 to the Agreements Act contains the double tax agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (UK Convention) and 2003 United Kingdom Notes. Article 17 of the UK Convention provides that pensions paid to a resident of Australia shall be taxable only in Australia. Therefore, the pension received by the taxpayer from the UK Armed Forces Pensions Scheme is taxable only in Australia. As the taxpayer is a resident of Australia for income tax purposes, the pension income is included in the taxpayer's assessable income under section 27H of the ITAA 1936.", "Date_of_Decision": "4 June 2004", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1077", "Subject_References": "Double tax agreements Foreign income Foreign pension income United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004809", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Foreign pension income United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/851", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of South African government pension received by an Australian resident", "Issue": "Is the South African government pension paid to an Australian resident taxpayer included in their assessable income under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The South African government pension paid to an Australian resident taxpayer is not included in their assessable income under section 27H of the ITAA 1936.", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer receives a South African government pension which was in respect of services rendered in the discharge of governmental functions in South Africa.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign scheme to provide superannuation benefits are included in assessable income. In determining liability to Australian tax on foreign sourced income received by a resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 42 to the Agreements Act contains the double tax agreement and the protocol between Australia and South Africa (South African Agreement). The South African Agreement operates to avoid the double taxation of income received by Australian and South African residents. Article 19(2)(a) of the South African Agreement provides that any pension paid by, or out of the funds created by South Africa, or a political subdivision or a local authority of South Africa to an individual in respect of services rendered in the discharge of governmental functions shall be taxable in South Africa. However, Article 19(2)(b) provides that such a pension shall be taxable only in Australia if the individual is a resident of, and a citizen or national of Australia; and the services in respect of which that pension is paid were performed in Australia. As the services in respect of which that pension is paid were performed in South Africa, that pension shall not be taxable in Australia. Accordingly, the South African government service pension will be subject to tax only in South Africa and does not form part of the taxpayer's assessable income under section 27H of the ITAA 1936.", "Date_of_Decision": "31 August 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) section 6-10 subsection 6-10(4) section 10-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign pension International tax South Africa", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004851", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign pension International tax South Africa"}
{"ATO_ID_Number": "ATO ID 2003/140", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of pension received from the government of Belgium by an Australian citizen", "Issue": "Is the Belgian government pension received by an Australian resident taxpayer assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The Belgian government pension received by an Australian resident taxpayer is assessable under section 27H of the ITAA 1936 as the taxpayer is a citizen of Australia.", "Facts": "The taxpayer is an Australian citizen and a resident of Australia for income tax purposes. The taxpayer had contributed to a Belgian government pension scheme while employed by the government of Belgium. The taxpayer receives a pension from the Belgian government pension scheme.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the year. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign scheme to provide superannuation benefits are included in assessable income. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 13 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Belgium (Belgian Agreement). The Belgian Agreement operates to avoid the double taxation of income received by Australian and Belgian residents. Article 19 of the Belgian Agreement deals with government service pensions. Paragraph (2) of Article 19 of the Belgian Agreement provides that any pension paid to an individual in respect of services rendered in the discharge of governmental functions in Belgium will be taxable only in Australia if the recipient is a citizen and a resident of Australia. As the taxpayer is an Australian citizen and a resident of Australia for income tax purposes, the Belgian government pension is assessable under section 27H of the ITAA 1936.", "Date_of_Decision": "5 February 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Belgium Double tax agreements Foreign income Foreign pension International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003140", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Belgium Double tax agreements Foreign income Foreign pension International tax"}
{"ATO_ID_Number": "ATO ID 2003/179", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Swiss superannuation pension received by Australian resident", "Issue": "Is a Swiss superannuation pension received by an Australian resident taxpayer assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A Swiss superannuation pension received by an Australian resident taxpayer is assessable under section 27H of the ITAA 1936.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a superannuation pension from Switzerland. The superannuation pension does not relate to the Swiss legislation relating to military insurance.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-10 of the ITAA 1997 further provides that a taxpayer's assessable income includes statutory income amounts which are not ordinary income but are included in assessable income by another provision. Subsection 6-10(4) of the ITAA 1997 states that the assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from foreign superannuation funds or foreign scheme to provide superannuation benefits are included in assessable income. In determining liability to Australian tax on foreign sourced income received by a resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 15 to the Agreements Act contains the agreement between Australia and Switzerland (Swiss Agreement). Article 18 of the Swiss Agreement specifies how pensions and annuities are to be taxed. Paragraph (1) of Article 18 of the Swiss Agreement provides that pensions and annuities paid to a resident of Australia are taxable only in Australia. Subparagraph (b) of paragraph (3) of Article 18 of the Swiss Agreement provides that pensions received from Switzerland under the legislation concerning military insurance will be exempt from Australian tax if they are exempt from Swiss tax. The superannuation pension received by the taxpayer is not related to military insurance and therefore is not exempt from tax under subparagraph (b) of paragraph (3) of Article 18 of the Swiss Agreement. As the taxpayer is an Australian resident for income tax purposes, the superannuation pension is assessable under section 27H of the ITAA 1936.", "Date_of_Decision": "10 March 2003", "Year_of_Income": "Year ended 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005 Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double Tax Agreements Foreign pension Foreign pension income International tax Superannuation Switzerland", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003179", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double Tax Agreements Foreign pension Foreign pension income International tax Superannuation Switzerland"}
{"ATO_ID_Number": "ATO ID 2003/180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Swiss government pension received by Australian resident", "Issue": "Is a Swiss government pension received by an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A Swiss government pension received by an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a government pension from Switzerland. The pension does not relate to the Swiss legislation relating to military insurance.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions and annuities are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 15 to the Agreements Act contains the agreement between Australia and Switzerland (the Swiss Agreement). Paragraph (1) of Article 18 of the Swiss Agreement provides that pensions and annuities paid to a resident of Australia are taxable only in Australia. Subparagraph (b) of paragraph (3) of Article 18 of the Swiss Agreement provides that pensions received from Switzerland under the legislation concerning military insurance will be exempt from Australian tax if they are exempt from Swiss tax. The pension received by the taxpayer is not related to military insurance and therefore is not exempt from tax under subparagraph (b) of paragraph (3) of Article 18 of the Swiss Agreement. As the taxpayer is an Australian resident for income tax purposes, the Swiss government pension is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "10 March 2003", "Year_of_Income": "Year ended 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005 Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double Tax Agreements Foreign pension Foreign pension income International tax Switzerland", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003180", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double Tax Agreements Foreign pension Foreign pension income International tax Switzerland"}
{"ATO_ID_Number": "ATO ID 2003/293", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of foreign pension: restricted use of funds", "Issue": "Is the taxpayer assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936) on foreign superannuation pension income where they cannot use the funds outside of that foreign country?", "Decision": "Yes. The taxpayer is assessable under section 27H of the ITAA 1936 on foreign superannuation pension income where they cannot use the funds outside of that foreign country as the income has been derived by the taxpayer.", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer receives a superannuation pension from a foreign country. This pension is paid into a bank account held by the taxpayer in the foreign country. The taxpayer is able to use the funds within the foreign country but is not able to transfer or use those funds outside of that foreign country. Australia does not have a double tax agreement with the foreign country.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those other provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and superannuation pensions are included in assessable income. An amount paid as a superannuation pension would form part of assessable income under section 27H of the ITAA 1936. The issue is however whether the taxpayer has derived that income. Whether a taxpayer is assessable on income where the usage of that income has certain restrictions placed on it was considered by the High Court in Blankfield v. Federal Commissioner of Taxation (1972) 127 CLR 610; 72 ATC 4177; (1972) 3 ATR 258 ( Blankfield's Case ). In that case a former South African resident who took up residence in Australia was, because of South African restrictions placed on the export of currency and assets, unable to have remitted to him certain credit balances in his bank accounts and dividends and interest from his investments in South Africa. The court in Blankfield's Case decided that the dividends and interest amounts had been paid to the taxpayer at the time they were credited to his South African accounts. His title to those amounts was unaffected by his inability to deal with those amounts as a result of the South African restrictions. He had derived the income and therefore it formed part of his assessable income. The pension amounts have been credited to the taxpayer's bank account in the foreign country. The taxpayer's title to those amounts is not affected by the restrictions placed on their use by the foreign country. Therefore, the pension income has been derived by the taxpayer and forms part of their assessable income for taxation purposes. Accordingly, the taxpayer is assessable under section 27H of the ITAA 1936 on the foreign superannuation pension income.", "Date_of_Decision": "18 February 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign pension income Derived", "Case_References": "Blankfield v. Federal Commissioner of Taxation (1972) 127 CLR 610 72 ATC 4177 (1972) 3 ATR 258", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003293", "Unmatched_Content": "Keywords Foreign pension income Derived"}
{"ATO_ID_Number": "ATO ID 2003/409", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an annuity received by resident taxpayer from the United States of America", "Issue": "Is the annuity income received by a resident taxpayer from the United States of America (US) assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The annuity income received by a resident taxpayer from the US is assessable under section 27H of the ITAA 1936.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives periodically at stated times, annuity payments from a US resident insurance company.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary derived directly or indirectly from all sources during the income year. Subsection 6-10(4) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes statutory income from all sources, whether in or out of Australia. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuity amounts are included in the assessable income of the taxpayer (excluding, in the case of an annuity that has been purchased, the deductible amount in relation to the annuity for the year of income (as determined by the section)). In determining liability to Australian tax on foreign sourced income received by a resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. In the event of inconsistent provisions, the Agreements Act overrides the ITAA 1936 and ITAA 1997 (except in some limited situations). Schedule 2 to the Agreements Act contains the double tax convention between Australia and the United States of America (the US Convention). Schedule 2A of the Agreements Act contains the protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid double taxation of income received by Australian and US residents. Paragraph (3) of Article 18 of the US Convention provides that annuities paid to an individual who is a resident of Australia shall be taxable only in Australia. Paragraph (5) of Article 18 of the US Convention defines 'annuities' as stated sums paid periodically at stated times during life, or during a specified or ascertainable number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered or to be rendered). The annuity received by the taxpayer from the US resident insurance company comes within the definition of an 'annuity' under paragraph (5) of Article 18 of the US Convention. As the taxpayer is a resident of Australia for income tax purposes, paragraph (3) of Article 18 of the US Convention applies and the annuity income received from the US will form part of the assessable income of the taxpayer under section 27H of the ITAA 1936.", "Date_of_Decision": "14 May 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-10(4) section 10-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Annuity income Double tax agreements Foreign income International tax Treaties United States of America", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003409", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Annuity income Double tax agreements Foreign income International tax Treaties United States of America"}
{"ATO_ID_Number": "ATO ID 2003/544", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Belgian retirement pension received by Australian resident", "Issue": "Is the Belgian retirement pension received by an Australian resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Belgian retirement pension received by an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a retirement pension from Belgium. The pension is paid by the Belgian Government under the Belgian Social Security system. The taxpayer did not make any contributions to obtain the pension.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Pensions and annuities are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 13 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Belgium (the Belgian Agreement). Schedule 13A to the Agreements Act contains the protocol amending the Belgian Agreement (the Belgian Protocol). The Belgian Agreement and the Belgian Protocol operate to avoid the double taxation of income derived by Australian and Belgian residents. Article 18(1) of the Belgian Agreement provides that pensions and annuities paid to a resident of Australia will be taxable only in Australia. As the taxpayer is a resident of Australia for income tax purposes, the assessable income of the taxpayer will include the Belgian retirement pension received under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "20 June 2003", "Year_of_Income": "Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Belgium Double tax agreements Foreign pension income International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003544", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Belgium Double tax agreements Foreign pension income International tax"}
{"ATO_ID_Number": "ATO ID 2003/1022", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a European Union pension received by a resident taxpayer", "Issue": "Is a pension paid by an institution of the European Union (EU) received by a resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A pension paid by an institution of the EU received by a resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is a former employee of an institution of the EU. The taxpayer receives a pension in respect of their previous employment with the institution.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. A pension received in respect of previous employment is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Australia has entered into double taxation agreements with a number of the member countries of the EU. However, Australia does not have a double taxation agreement with the EU. Accordingly, as the taxpayer is a resident of Australia, the pension received by the taxpayer in respect of former employment with an institution of the EU is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "5 November 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "European Union Foreign pension income Foreign tax credits", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031022", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords European Union Foreign pension income Foreign tax credits"}
{"ATO_ID_Number": "ATO ID 2003/1028", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Sri Lankan government service pension: Australian resident and citizen", "Issue": "Is a Sri Lankan government service pension received by an Australian resident taxpayer who is an Australian citizen assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A Sri Lankan government service pension received by an Australian resident taxpayer who is an Australian citizen is assessable under section 27H of the ITAA 1936.", "Facts": "The taxpayer is an Australian citizen and is also an Australian resident for income tax purposes. The taxpayer receives a Sri Lankan government service pension for services rendered to the government.", "Reasons_for_Decision": "Summary: Subsection section 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income also includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10 (4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign scheme for paying superannuation benefits are included in assessable income. In determining liability to Australian tax on foreign source income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 31 to the Agreements Act contains the agreement between Australia and the Democratic Socialist Republic of Sri Lanka (Sri Lankan Agreement). The Sri Lankan Agreement operates to avoid the double taxation of income received by Australian and Sri Lankan residents. Article 19 of the Sri Lankan Agreement deals with government service pensions. Subparagraph (2)(a) of Article 19 provides that any pension paid by Sri Lanka to an individual in respect of services rendered to Sri Lanka will be taxable only in Sri Lanka. However, subparagraph (2)(b) of Article 19 provides that a pension paid by Sri Lanka to an individual in respect of services rendered to Sri Lanka will be taxable only in Australia if the individual is a resident of, and a citizen or national of Australia. The taxpayer is an Australian citizen and is also a resident of Australia for income tax purposes. Accordingly, the Sri Lankan government service pension forms part of the taxpayer's assessable income under section 27H of the ITAA 1936.", "Date_of_Decision": "18 February 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign pension income Sri Lanka", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031028", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign pension income Sri Lanka"}
{"ATO_ID_Number": "ATO ID 2003/1055", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of pension income from entitlement transferred under German divorce law to ex-spouse of Australian resident", "Issue": "Is pension income paid to a resident taxpayer's ex-spouse in respect of an entitlement that has been legally transferred to the ex-spouse under German family law, assessable income of the taxpayer under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The pension income paid to a resident taxpayer's ex-spouse in respect of an entitlement that has been legally transferred to the ex-spouse under German family law is not assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997. Only the amount that the taxpayer receives in respect of their remaining entitlement is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a German citizen and a resident of Australia for income tax purposes. The taxpayer receives pension income from a superannuation fund in respect of previous employment in Germany. The taxpayer divorced their spouse under German law. As part of the divorce proceedings, the taxpayer's pension entitlement was divided and a portion thereof transferred to the ex-spouse. The transfer was ordered by a German Court pursuant to section 1587 of the German Civil Code ( Burgerliches Gesetzbuch ). This provision, which is part of a number of provisions about divorce, deals with the equalisation of accrued gains between spouses in divorce proceedings. Under the transfer, the ex-spouse obtained a separate entitlement to a pension from the superannuation fund. The superannuation fund has created a separate account in the name of the ex-spouse from which the ex-spouse now receives a pension in proportion with the entitlement transferred. The transfer of the entitlement to the ex-spouse is irrevocable by the taxpayer. If the ex-spouse dies before the taxpayer, the entitlement transferred reverts to the taxpayer. If the taxpayer dies before the ex-spouse, the entitlement transferred does not expire and may be enforced against the heir/s of the taxpayer. The taxpayer has no further rights in respect to the entitlement transferred to the ex-spouse or to the pension income derived from that entitlement. The payments made to the ex-spouse are not maintenance payments for German law purposes. The ex-spouse is subject to German tax on the amount of pension income received.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Pensions and annuities are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-5(4) provides that in working out whether you derived an amount of ordinary income and if so, when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct. The taxpayer receives pension income from a German superannuation fund. A presently existing right to income, including a pension, is a chose-in-action (that is, an intangible right enforceable by legal or equitable action) which is capable of assignment. The taxpayer's legal entitlement to the pension income from the superannuation fund has changed as a result of the transfer of part of the entitlement to the taxpayer's ex-spouse in accordance with German family law. The taxpayer has no further rights in respect of the entitlement transferred - the entitlement will only revert to the taxpayer upon the ex-spouse's death while the ex-spouse's entitlement is unaffected should the taxpayer die. The transfer of the entitlement to the ex-spouse is recognised and permitted by the superannuation fund and is accordance with German law. The transfer of the entitlement to the ex-spouse is a valid assignment for general law purposes. The pension income that relates to the entitlement transferred to the ex-spouse can no longer be said to have been derived by the taxpayer as the taxpayer has no legal entitlement to receive that pension income. However, a valid assignment under general law may not be effective for tax purposes. Section 102B of the ITAA 1936 applies where a right to receive income from property is transferred, otherwise than by a will or codicil, by a person to an associate for a period that will or may terminate (other than by death of any person or legal disability of the transferee) before the prescribed date. The prescribed date is defined in subsection 102A(1) of the ITAA 1936 to be the day before the expiration of 7 years from the time the income was first paid to the transferee. In such cases, the income derived by the property is treated as if the transfer had not been made and remains the income of the transferor. In this case, the transfer may not terminate before the prescribed date unless the ex-spouse dies. As the transfer may not terminate before the prescribed date, section 102B of the ITAA 1936 does not apply. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 9 to the Agreements Act contains the double tax agreement between Australia and the Federal Republic of Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. Article 18 of the German Agreement provides that pensions and annuities paid to residents of Australia are taxable only in Australia. The pension income paid to the ex-spouse that relates to the entitlement transferred is not income of the taxpayer as the taxpayer has no legal entitlement to that income. Therefore, Article 18 of the German Agreement does not apply to the taxpayer in respect of that pension income. However, the pension income that the taxpayer receives in respect of their own entitlement will be taxable in Australia under Article 18 of the German Agreement. Accordingly, the pension income paid to the ex-spouse will not be assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1936. As the taxpayer is an Australian resident, the pension income that the taxpayer receives in respect of their own entitlement will be assessable under subsection 6-5(2) of the ITAA 1936.", "Date_of_Decision": "17 November 2003", "Year_of_Income": "Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 102A(1) section 102B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/243", "Subject_References": "Assignment of rights & entitlements Consideration for assignment Double tax agreements Foreign pension Germany Income alienation Superannuation pensions Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031055", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Assignment of rights & entitlements Consideration for assignment Double tax agreements Foreign pension Germany Income alienation Superannuation pensions Treaties"}
{"ATO_ID_Number": "ATO ID 2003/1095", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Irish pension received by an Australian resident", "Issue": "Is a pension received from the Republic of Ireland (Ireland) by a resident taxpayer assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A pension received from Ireland by an Australian resident taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Ireland. The taxpayer is a resident of Australia for Australian tax purposes and for the purposes of the double tax agreement between Australia and Ireland contained in Schedule 20 to the International Tax Agreements Act 1953 (the Agreements Act). The taxpayer receives a pension from Ireland.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 20 to the Agreements Act contains the double tax agreement between Australia and Ireland (the Irish Agreement). The Irish Agreement operates to avoid the double taxation of income received by Australian and Irish residents. Article 19(1) of the Irish Agreement provides that pensions and annuities paid to a resident of Australia shall be taxable only in Australia. Accordingly, as the taxpayer is a resident of Australia, the Irish pension received by the taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "18 November 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign pension income Double tax agreements International law Republic of Ireland Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031095", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign pension income Double tax agreements International law Republic of Ireland Treaties"}
{"ATO_ID_Number": "ATO ID 2003/1153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Austrian disability pension", "Issue": "Is a foreign disability pension received by a resident of Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The foreign disability pension received by a resident of Australia is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian citizen and an Australian resident for taxation purposes. The taxpayer receives a foreign disability pension from Pensionsversicherungsanstalt der Arbeiter , a government pension fund. The pension is not in respect of government services.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. A disability pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and ITAA 1997 so that those Acts are read as one. Schedule 27 to the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid the double taxation of income received by Australian and Austrian residents. Article 18(1) of the Austrian Agreement provides that a pension payable to a resident of Australia shall be taxable only in Australia. As the taxpayer is a resident of Australia, their pension will be assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "4 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Austria Double tax agreements Foreign income International tax Pension income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031153", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Austria Double tax agreements Foreign income International tax Pension income"}
{"ATO_ID_Number": "ATO ID 2003/1193", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Indian government service pension received by a resident taxpayer", "Issue": "Is an Australian resident taxpayer's Indian sourced government service pension assessable under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The Australian resident taxpayer's Indian sourced government service pension is assessable under section 27H of the ITAA 1936.", "Facts": "The taxpayer is an Australian resident for taxation purposes. The taxpayer is an Australia citizen. The taxpayer is retired and receives a government service pension from the Indian government.", "Reasons_for_Decision": "Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 6-10 of the ITAA 1997, provides that a taxpayer's assessable income also includes statutory income amounts that are not ordinary income, but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia. Section 10-5 of the ITAA 1997 lists provisions about particular kinds of assessable income. Included in this list is section 27H of the ITAA 1936 which provides that annuities and pensions paid from a foreign superannuation fund or foreign superannuation schemes for the payment of superannuation benefits are included in assessable income. In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax law but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 35 to the Agreements Act contains the double tax agreement between the government of Australia and the government of the Republic of India (Indian Agreement). Article 19 of the Indian Agreement refers to the basis of taxation for government service. Under this article, pensions paid from the funds of the Indian government, for services performed by an employee of the Indian government in discharging government functions of India, to an individual who is an Australian citizen and resident of Australia, is taxable only in Australia. As the taxpayer is an Australian citizen and also a resident of Australia receiving an Indian government service pension, Australia has the sole right under the Indian Agreement to tax the income. The taxpayer's Indian government service pension is therefore assessable under section 27H of the ITAA 1936.", "Date_of_Decision": "10 March 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign income Foreign pension income India International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031193", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign income Foreign pension income India International tax"}
{"ATO_ID_Number": "ATO ID 2001/770", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Deceased Spouse Pension - deceased Consular", "Issue": "Is the foreign deceased spouse pension received by a taxpayer assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The foreign deceased spouse pension received by the taxpayer is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer was born overseas and is currently an Australian resident receiving a foreign deceased spouse pension. The pension does not contain an age pension component. The taxpayer is the spouse of a deceased Consular.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income it is not included in the assessable income of a taxpayer (section 6-15 of the ITAA 1997). The Consular Privileges & Immunities Act 1972 (CPIA) gives domestic legal effect to the agreements Australia has made as a party to the Vienna Convention on Consular Relations (the Convention). Specifically, subsection 5(1) of the CPIA gives effect to Article 49 of the Convention, which concerns the exemption of income from taxes. Subsection 5(4) of the CPIA provides that the exemption from tax on income applies for years commencing on or after 1 July 1972. Article 49 of the Convention makes reference to exemption from income tax for all consular officers and employees and members of their families forming part of their households but with the exception of tax on private income. As the taxpayer's spouse is no longer a Consular or a member of the Consular staff, the exemption will not apply to the pension of the taxpayer. Therefore, the pension income received by the taxpayer is assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "23 August 2001", "Year_of_Income": "Year ended 30 June 1999 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2) section 6-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign pension Foreign pension income Diplomatic privileges and immunities", "Case_References": "", "Other_References": "Vienna Convention on Consular Relations Article 49", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001770", "Unmatched_Content": "Keywords Foreign pension Foreign pension income Diplomatic privileges and immunities"}
{"ATO_ID_Number": "ATO ID 2010/214", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Alienation of personal services income of a foreign resident and the interaction with the core provisions for assessable income", "Issue": "Where an Australian resident personal services entity derives foreign sourced income that is the personal services income of a foreign resident individual, is the income included in the assessable income of the foreign resident individual under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where an Australian resident personal services entity derives foreign sourced income that is the personal services income of a foreign resident individual, the income is not included in the assessable income of the foreign resident individual under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is an individual who is not a resident of Australia for taxation purposes. An Australian resident company derives foreign sourced ordinary income which is the foreign resident's personal services income within the meaning of that term in subsection 84-5(1) of the ITAA 1997. The personal services income by virtue of subsection 86-15(1) of the ITAA 1997 is statutory income of the taxpayer for the purposes of subsection 6-10(2) of the ITAA 1997. The Australian resident company is a personal services entity within the meaning of that term in subsection 86-15(2) of the ITAA 1997. The exceptions to subsection 86-15(1) of the ITAA 1997 contained in subsections 86-15(3), (4) and (5) of the ITAA 1997 do not apply in this case.", "Reasons_for_Decision": "Summary: Division 6 of the ITAA 1997 provides the core provisions relating to assessable income, and all other provisions of the ITAA 1997 are subject to these rules. Subsection 6-10(5) of the ITAA 1997 provides: If you are a foreign resident, your assessable income includes: (a) your statutory income from all Australian sources; and (b) other statutory income that a provision includes in your assessable income on some basis other than having an Australian source. Subsection 86-15(1) of the ITAA 1997 provides: Your assessable income includes an amount of ordinary income or statutory income of a personal services entity that is your personal services income. Accordingly, personal services income of a foreign resident individual will not be included in the assessable income of the individual under subsection 6-10(5) of the ITAA 1997 unless: As the income in question is foreign sourced it is not included in the foreign resident taxpayer's assessable income under paragraph 6-10(5)(a) of the ITAA 1997. For the income to be included as assessable income pursuant to paragraph 6-10(5)(b), subsection 86-15(1) of the ITAA 1997 would need to be a provision that includes income in a foreign resident's assessable income on a basis other than it having an Australian source. Paragraph 6-10(5)(b) of the ITAA 1997 was introduced by the Income Tax Assessment Bill 1996. The Explanatory Memorandum to that Bill (the EM) makes it clear that the alternative rule in paragraph 6-10(5)(b) was only intended to apply in limited circumstances. The relevant part of the EM states: Most ordinary and statutory income from foreign sources is not assessable to foreign residents. However, there are limited cases where an amount is assessed on a specifically expressed basis ... (emphasis added) The EM goes on to cite the capital gains tax (CGT) provisions as an example of a provision that operates in this way. The relevant CGT provisions for foreign residents are now contained in Division 855 of the ITAA 1997. Rather than taxing foreign residents on Australian sourced capital gains, Division 855 only taxes foreign residents on capital gains from CGT assets that are 'taxable Australian property'. By only including capital gains from CGT assets that are 'taxable Australian property' in the assessable income of a foreign resident, the CGT provisions provide an alternative to the ordinary source rule in paragraph 6-10(5)(a) of the ITAA 1997. This alternative has a clearly defined scope which focuses on the connection the capital gain has with Australia. By contrast, subsection 86-15(1) of the ITAA 1997 does not provide any requirements that the personal services income have any connection with Australia. In addition, if subsection 86-15(1) was considered to be a provision that included amounts in assessable income on a basis other than having an Australian source, its application would be much wider than could be considered an appropriate alternative to the ordinary source rule. Under this view of subsection 86-15(1), foreign sourced income of a foreign resident would be assessable income in Australia. Consequently, relying on the: it is considered that subsection 86-15(1) of the ITAA 1997 is not a provision that includes amounts in assessable income on a basis other than having an Australian source for the purposes of paragraph 6-10(5)(b) of the ITAA 1997. Accordingly, the foreign sourced personal services income of the foreign resident individual is not included in the assessable income of the individual under subsection 6-10(5) of the ITAA 1997.", "Date_of_Decision": "17 November 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 6 subsection 6-5(2) subsection 6-10(2) subsection 6-10(5) paragraph 6-10(5)(a) paragraph 6-10(5)(b) subsection 84-5(1) subsection 86-15(1) subsection 86-15(2) subsection 86-15(3) subsection 86-15(4) subsection 86-15(5) Division 855", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/7 | Taxation Ruling TR 2001/8 | Taxation Ruling TR 2003/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident entities Foreign source income Personal services income Alienation of personal services income Assessable income of a personal services entity", "Case_References": "", "Other_References": "The Explanatory Memorandum to the Income Tax Assessment Bill 1996", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010214", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/7 Taxation Ruling TR 2001/8 Taxation Ruling TR 2003/6 | Keywords Non resident entities Foreign source income Personal services income Alienation of personal services income Assessable income of a personal services entity"}
{"ATO_ID_Number": "ATO ID 2004/967", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interaction between Division 7A of the Income Tax Assessment Act 1936 (ITAA 1936) and Part 2-42 of the Income Tax Assessment Act 1997 (ITAA 1997)", "Issue": "Is a loan, that is a deemed dividend under section 109D of the Income Tax Assessment Act 1936 (ITAA 1936), included in the assessable income of the taxpayer under section 44 of the ITAA 1936 where:", "Decision": "No. Where income is derived by a private company that is personal services income of the taxpayer within the meaning of subsection 84-5(1) of the ITAA 1997 and is included in the taxpayer's assessable income under subsection 86-15(1) of the ITAA 1997, a loan made by the private company to the taxpayer out of profits from that income and treated as a dividend under section 109D of Division 7A of the ITAA 1936, will not be included in the taxpayer's assessable income under section 44 of the ITAA 1936.", "Facts": "The taxpayer is a shareholder of a private company. The private company is a personal services entity and its ordinary income is the personal services income of the taxpayer. In the income year, the private company derived ordinary income of $125,000 from the personal efforts or skills of the taxpayer and incurred expenses of $25,000. These expenses are allowable deductions and relate to the taxpayer's personal services income. The private company is not conducting a personal services business within the meaning of Division 87 of the ITAA 1997 and an amount of $100,000 was included in the taxpayer's assessable income in that year. In the following income year, the private company made a loan of $100,000 to the taxpayer which represented the personal services income included in the taxpayer's assessable income in the prior year. The loan was not an excluded loan and was not repaid by the end of the income year in which it was made. As at 30 June in the income year the loan was made, the private company had a distributable surplus of $100,000 for the purposes of section 109Y of the ITAA 1936.", "Reasons_for_Decision": "Summary: As the private company is a personal services entity within the meaning of subsection 86-15(2) of the ITAA 1997, and is not conducting a personal services business within the meaning of Division 87 of the ITAA 1997, $100,000 is included in the assessable income of the taxpayer for the income year under subsection 86-15(1) of the ITAA 1997. Subsection 109D(1) of the ITAA 1936 provides that a private company is taken to pay a dividend to a shareholder or their associate at the end of the private company's year of income if the private company makes a loan to the shareholder or their associate during the year which is not fully repaid before the lodgement day for the current year and Subdivision D of Division 7A of the ITAA 1936 does not apply. The amount of the dividend is the lesser of the amount of the loan that has not been repaid and the private company's distributable surplus (subsection 109D(1AA) and section 109Y of the ITAA 1936). As the loan to the taxpayer is not an excluded loan under Subdivision D of Division 7A of the ITAA 1936, and has not been repaid by the end of the income year in which it was made, the taxpayer is taken to receive a dividend of $100,000 under section 109D of the ITAA 1936 for that income year. Under section 109Z of the ITAA 1936, the dividend is taken to have the necessary characteristics to be included in the assessable income of the taxpayer under section 44 of the ITAA 1936. These characteristics are that the dividend is taken to be paid: However section 86-35 of the ITAA 1997 will apply to exclude the dividend from the assessable income of the taxpayer. Section 86-35 of the ITAA 1997 treats any later payments of personal services income that have been included in the assessable income of the taxpayer under subsection 86-15(1) of the ITAA 1997 as being neither assessable nor exempt income of the taxpayer.", "Date_of_Decision": "15 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 44 subsection 44(1) Division 7A subdivision D of Division 7A section 109D subsection 109D(1) subsection 109D(1AA) section 109Y section 109Z", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2003/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Shareholder loans Deemed dividends Private companies Personal Services Income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004967", "Unmatched_Content": "Update wording to reflect changes to legislation in subsection 109D(1) of the ITAA 1936 | Include reference to subsection 109D(1AA) of the ITAA 1936 | Remove reference to subsection 6(1) of the ITAA 1936 | Include reference to subsection 109D(1) of the ITAA 1936 | Remove reference to section 8-1 of the ITAA 1997 | Remove reference to section 82-20 of the ITAA 1997 | Related Public Rulings (including Determinations) Taxation Ruling TR 2003/6 | Keywords Shareholder loans Deemed dividends Private companies Personal Services Income"}
{"ATO_ID_Number": "ATO ID 2002/568", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Alienation of Personal Services Income - Prior Year Losses", "Issue": "Can a company claim a deduction for prior year losses, which arose from operating a wholesaling business, against personal services income received by the company, where the personal services income is subject to the alienation measures contained in Part 2-42 of the Income Tax Assessment Act 1997 ('ITAA 1997').", "Decision": "No, losses from the sale of goods, including prior year losses, cannot be offset against personal services income that is subject to the alienation measure in Part 2-42 of the ITAA 1997.", "Facts": "The company accumulated losses from trading as a wholesaler between the years 1996 and 1999. The company temporarily ceased trading during the 1999-2000 tax year and does not expect to trade as a wholesaler in the future.. The company's income is now derived from the personal services of an individual. The company is not conducting a personal services business.", "Reasons_for_Decision": "Summary: Personal services income is defined in section 84-5 of the ITAA 1997 as: 'Your *ordinary income or *statutory income, or the ordinary income or statutory income of any other entity, is your personal services income if the income is mainly a reward for your personal efforts or skills (or would mainly be such a reward if it was your income).' The income from wholesaling was from the sale of goods and not mainly from the personal efforts or skills of an individual. As such, the company's wholesaling activities would not fall into the definition of personal services income in section 84-5 of the ITAA 1997. The company's current contracting activities fall within the definition of personal services income because the income is mainly a reward for the personal efforts of skills of an individual. Section 86-15 of the ITAA 1997 provides that personal services income that is not from conducting a personal services business or promptly paid as salary and wages is attributed to the individual who provided the services. Section 86-20 of the ITAA 1997 allows the amount attributed under section 86-20 to be reduced by the deductions to which the entity is entitled. The alienation of personal services income measure clarifies what deductions can be claimed against affected personal services income and limits some deductions. To reduce the attributed amount under section 86-15 of the ITAA 1997 the deduction must be one to which the personal services entity is entitled under section 86-60 of the ITAA 1997. Firstly, for an amount to be deductible it must relate to the gaining or producing of an individual's personal services income. The losses from wholesaling in prior years are not an amount that relates to the gaining or producing of the personal services income of the individual. Secondly, the outgoing must be an allowable deduction under another provision of the ITAA 1997, such as the general deduction provision in section 8-1 of the ITAA 1997. Thirdly, section 86-60 of the ITAA 1997 operates to determine if the circumstances that apply to the entity were to apply to the individual, whether a deduction would be allowable under Division 85 of the ITAA 1997. A deduction is only available to the personal services entity if the individual would have been entitled to deduct that same amount incurred, given the same circumstances as the personal services entity. Losses generated from non personal services income activities, such as wholesaling, cannot be deducted from personal services income. This is because Step 1 of the method statement in section 86-20 of the ITAA 1997 only refers to deductions that relate to the personal services income. Given that the company is not considered to be conducting a personal services business, it can only deduct those amounts stated in the method statement outlined in section 86-20 of the ITAA 1997 against the personal services income. However, the losses from wholesaling can be offset against any other income the company may have in accordance with Division 36 of the ITAA 1997.", "Date_of_Decision": "6 February 2002", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 8-1 Section 84-5 Division 36 Section 86-15 Section 86-20 Section 86-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "PSI non-employees deductions entitlements PSI alienation of personal services income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002568", "Unmatched_Content": "Updated legal reference Grammatical corrections | Keywords PSI non-employees deductions entitlements PSI alienation of personal services income"}
{"ATO_ID_Number": "ATO ID 2002/802", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Alienation of Personal Services Income - Personal Services Entity", "Issue": "Is the taxpayer a personal services entity within the meaning of subsection 86-15(2) of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. The taxpayer is a personal services entity within the meaning of subsection 86-15(2) of the ITAA 1997.", "Facts": "The taxpayer is a company with two shareholders. Both shareholders and an unrelated third party are employees of the taxpayer. The taxpayer pays each employee an annual salary in monthly instalments. The taxpayer has contracted to supply the three employees to a licensed dealer in securities ('the Dealer'). In turn the individuals have been appointed by the dealer as proper authority holders ('PAH') under subsection 94(2) of the then Corporations Act 1989 . Under the contract the taxpayer receives commissions determined by reference to corporate advisory transactions as well as equity and derivatives business written by the individuals for the Dealer. The three individuals perform the usual functions of a PAH for the Dealer. Contractually, the functions are performed in each individual's personal capacity and not as an employee of the taxpayer. The individuals are not entitled to any remuneration from the Dealer. The taxpayer is not itself involved in advising clients or dealing in securities.", "Reasons_for_Decision": "Summary: A personal services entity is defined in subsection 86-15(2) of the ITAA 1997 as follows: (2) A personal services entity is a company, partnership or trust whose *ordinary income or *statutory income includes the personal services income of one or more individuals. Personal services income is defined under section 84-5 of the ITAA 1997 as follows: (1) Your ordinary income or statutory income, or the ordinary income or statutory income of any other entity, is your personal services income if the income is mainly a reward for your personal efforts or skills (or would mainly be such a reward if it was your income). Under the contract the taxpayer has been engaged to supply the Dealer with the individuals and it is the taxpayer and not the individuals who is entitled to payments of commission. The amounts received by the taxpayer, pursuant to the contract, constitute the ordinary income of the taxpayer within the meaning of section 6-5 of the ITAA 1997. As the amounts received by the taxpayer are calculated by reference to corporate advisory transactions as well as equity and derivative business written by the individuals, the amounts received are mainly a reward for the personal efforts or skills of the individuals within the meaning of subsection 84-5(1) of the ITAA 1997. Accordingly the ordinary income of the taxpayer includes the personal services income of the individuals and the taxpayer is a personal services entity as defined in subsection 86-15(2) of the ITAA 1997.", "Date_of_Decision": "21 February 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 84-5(1) subsection 86-15(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/7 | Taxation Ruling TR 2001/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/803 | ATO ID 2002/804 | ATO ID 2002/805", "Subject_References": "Alienation of personal services income Assessable income of a personal services entity Personal services income PSE assessable income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002802", "Unmatched_Content": "Insertion of section 6-5 ITAA 1997 The addition of the words \"the then\" before \"Corporations Act 1989\" for clarification purposes, as the act no longer exists in that form | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/7 Taxation Ruling TR 2001/8 | Keywords Alienation of personal services income Assessable income of a personal services entity Personal services income PSE assessable income"}
{"ATO_ID_Number": "ATO ID 2002/803", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Alienation of Personal Services Income - Results test", "Issue": "Does the taxpayer satisfy the results test contained in section 87-18 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "No. The taxpayer does not satisfy the results test in section 87-18 of the ITAA 1997.", "Facts": "The taxpayer is a company with two shareholders. Both shareholders and an unrelated third party are employees of the taxpayer. The taxpayer pays each employee an annual salary in monthly instalments. The taxpayer has contracted to supply the three employees to a licensed dealer in securities ('the Dealer'). In turn the individuals have been appointed as proper authority holders ('PAH') under subsection 94(2) of the then Corporations Act 1989 . Under the contract the taxpayer receives commissions determined by reference to corporate advisory transactions as well as equity and derivatives business written by the individuals for the Dealer. The three individuals perform the usual functions of a PAH for the Dealer. Contractually, the functions are performed in each individual's personal capacity for the Dealer and not as an employee of the taxpayer. The individuals are not entitled to any remuneration from the Dealer. The taxpayer is not itself involved in advising clients or dealing in securities.", "Reasons_for_Decision": "Summary: The results test is set down in section 87-18 of the ITAA 1997. Subsection (3) deals with personal services entities and provides as follows: (3) A *personal services entity meets the result test in an income year if, in relation to at least 75% of the *personal services income of one or more individuals that is included in the personal services entity's *ordinary income or *statutory income during the income year: (a) the income is for producing a result; and (b) the personal services entity is required to supply the *plant and equipment, or tools of trade, needed to perform the work from which the personal services entity produces the result; and (c) the personal services entity is, or would be, liable for the cost of rectifying any defect in the work performed. The taxpayer merely supplies the individuals to the Dealer and does nothing else. That is, the arrangement is for the hire of the individuals to the Dealer. The first condition of the results test requires the personal services income be from producing a result. The meaning of 'producing a result' is explained in Taxation Ruling TR 2001/8 to be inter alia , a contract to achieve a specified outcome. In essence, for a contract to be for producing a result, there must be some task required where it is left to the performing party to determine who and how the task is to be performed. Entitlement to payment in turn must be tied to completing the task. The contract between the taxpayer and the Dealer merely contemplates the supply (or hire) of the individuals. A contract for hire is not a contract for producing a result within the case law meaning or the meaning explained in TR 2001/8. Under a contract for hire, there is nothing created or produced by the supplying party. There is simply the provision of a pre-existing asset (in this case human capital). As the first condition of the results test is not satisfied it is unnecessary to consider the other conditions. All three conditions must be satisfied to meet the results test.", "Date_of_Decision": "21 February 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 87-18 subsection 87-18(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/7 | Taxation Ruling TR 2001/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/802 | ATO ID 2002/804 | ATO ID 2002/805", "Subject_References": "Alienation of personal services income Assessable income of a personal services entity Personal services income PSBD results test", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002803", "Unmatched_Content": "Update applicable Act. Grammatical corrections. | The addition of the words 'The then' before ' Corporations Act 1989 ' for clarification purposes as the Act no longer exists in that form. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/7 Taxation Ruling TR 2001/8 | Keywords Alienation of personal services income Assessable income of a personal services entity Personal services income PSBD results test"}
{"ATO_ID_Number": "ATO ID 2002/804", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Alienation of Personal Services Income - Unrelated Clients Test", "Issue": "Does the taxpayer satisfy the unrelated clients test contained in section 87-20 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "No. The taxpayer does not satisfy the unrelated clients test contained in section 87-20 of the ITAA 1997.", "Facts": "The taxpayer is a company with two shareholders. Both shareholders and an unrelated third party are employees of the taxpayer. The taxpayer pays each employee an annual salary in monthly instalments. The taxpayer has contracted to supply the three employees to a licensed dealer in securities ('the Dealer'). In turn the individuals have been appointed as proper authority holders ('PAH') under subsection 94(2) of the then Corporations Act 1989 . Under the contract the taxpayer receives commissions determined by reference to corporate advisory transactions as well as equity and derivatives business written by the individuals for the Dealer. More than 80% of the taxpayer's income is from the Dealer. The three individuals perform the usual functions of a PAH for the Dealer. Contractually, the functions are performed in each individual's personal capacity and not as an employee of the taxpayer. The individuals are not entitled to any remuneration from the Dealer. The taxpayer is not itself involved in advising clients or dealing in securities.", "Reasons_for_Decision": "Summary: The unrelated clients test is set out in section 87-20 of the ITAA 1997. The section provides that a personal services entity meets the unrelated clients test if: When 80% or more of an individual's personal services income comes from one source and the taxpayer does not satisfy the results test, the taxpayer cannot self-assess whether the unrelated clients test is met. For the individual's income to be taken to have been earnt in the course of conducting a personal services business in these circumstances, subsection 87-15(3) of the ITAA 1997 ('the 80% test') requires that a personal services business determination be obtained by the taxpayer from the Commissioner. The amounts received by the taxpayer under the contract is the personal services income of the three individuals. As 80% or more of the personal services income of each individual comes from the Dealer, and the taxpayer does not satisfy the results test, a personal services business determination must be obtained from the Commissioner for each individual in order for each individual's personal services income to be taken to be earnt in the course of conducting a personal services business. Section 87-65 of the ITAA 1997 specifies the matters about which the Commissioner must be satisfied to issue a personal services business determination to a personal services entity. Subsection 3 provides as follows: (3) The Commissioner must not make the determination unless satisfied that, in the income year during which the determination first has effect, or is taken to first have had effect: (a) the entity: (i) could reasonably be expected to meet, or met, the results test under section 87-18, the employment test under section 87-25, the business premises test under section 87-30 or more than one of those tests; or (ii) but for unusual circumstances applying to the entity that year, could reasonably have been expected to meet, or would have met, at least one of the 4 personal services business tests; In view of this section, the Commissioner cannot issue a personal services business determination on the basis of the unrelated clients test unless unusual circumstances have prevented the taxpayer from passing the test during the income year. Taxation Ruling TR 2001/8 provides at paragraph 96: 96. The term 'unusual circumstances' used in sub paragraphs 87-60(3)(a)(ii) and 87-65(3)(a)(ii) refers to exceptional circumstances that are temporary, with the likelihood that the usual circumstances will resume in the short term. As there are no unusual circumstances which could be characterised as exceptional and temporary the Commissioner cannot issue a Personal Services Business Determination to the taxpayer on the basis of the unrelated clients test. There are special rules, contained in section 87-40 of the ITAA 1997, which allow agents to apply the unrelated clients test even though 80% or more of their income comes from one source. These special rules, subject to certain conditions being met, treat the clients of the principal as the source of the agent's personal services income for the purposes of the 80% test. The special rules also treat the clients of the principal as the clients of the agent for the purposes of the unrelated clients test. The first condition of the special rules is set out in paragraph 87-40(2)(a) of the ITAA 1997 which provides as follows: '(2) Subsection 87-15(3) and section 87-20 apply, in the manner specified in this section, to the individual or the *personal services entity if: (a) the individual or personal services entity is an agent of another entity (the principal) but not the principal's employee; ........' The word agent is not defined for the purposes of section 87-40 and therefore takes its common law or ordinary meaning. The taxpayer is not an agent of the Dealer and therefore the taxpayer is not eligible for the special rules in subsections 87-40(4) and 87-40(5) of the ITAA 1997.", "Date_of_Decision": "21 February 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 87-15(3) section 87-20 section 87-40 subsection 87-65(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/7 | Taxation Ruling TR 2001/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/802 | ATO ID 2002/803 | ATO ID 2002/805", "Subject_References": "Alienation of personal services income Personal services income PSBD normal circumstances unrelated clients test PSBD unusual circumstances unrelated clients test", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002804", "Unmatched_Content": "Update applicable Act. Grammatical correction. | The addition of the words 'The then' before ' Corporations Act 1989 ' for clarification purposes as the Act no longer exists in that form | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/7 Taxation Ruling TR 2001/8 | Keywords Alienation of personal services income Personal services income PSBD normal circumstances unrelated clients test PSBD unusual circumstances unrelated clients test"}
{"ATO_ID_Number": "ATO ID 2002/805", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Alienation of Personal Services Income - Employment Test", "Issue": "Does the taxpayer satisfy the employment test in section 87-25 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "No. The taxpayer does not satisfy the Employment Test contained in section 87-25 of the ITAA 1997.", "Facts": "The taxpayer is a company with two shareholders. Both shareholders and an unrelated third party are employees of the taxpayer. The taxpayer pays each employee an annual salary in monthly instalments. The taxpayer has contracted to supply the three employees to a licensed dealer in securities ('the Dealer'). In turn the individuals have been appointed as proper authority holders ('PAH') under subsection 94(2) of the then Corporations Act 1989 . Under the contract the taxpayer receives commissions determined by reference to corporate advisory transactions as well as equity and derivatives business written by the individuals for the Dealer. The three individuals perform the usual functions of a PAH for the Dealer. Contractually, the relevant functions are performed in each individual's personal capacity and not as an employee of the taxpayer. The individuals are not entitled to any remuneration from the Dealer. The three individuals are the only entities that the taxpayer engages to perform work. The taxpayer is not itself involved in advising clients or dealing in securities.", "Reasons_for_Decision": "Summary: The employment test is set out in section 87-25 of the ITAA 1997. Subsection 87-25(2) deals with personal services entities and provides as follows: (2) A personal services entity meets the employment test in an income year if: (a) the entity engages one or more other entities to perform work, other than: (i) individuals whose personal services income is included in the entity's *ordinary income or *statutory income; or (ii) *associates of the entity that are not individuals; and The Commissioner's views on categorising each item of ordinary income as the personal services income of an individual (or otherwise) are set out in Taxation Ruling TR 2001/7 (see paragraphs 44 and 45). The commission entitlements of the taxpayer represent discrete items of ordinary income and each item of ordinary income is mainly a reward for the efforts or skills of a particular individual. Therefore, each item of commission income to which the taxpayer becomes entitled must be tagged as the personal services income of one of the individuals. To whom a particular item of commission income is to be tagged depends upon whose efforts or skills were involved in generating the income for the Dealer and the consequential commission entitlement of the taxpayer. Each of the individuals have discrete amounts of personal services income included in the ordinary income of the taxpayer. Subparagraph 87-25(2)(a)(i) of the ITAA 1997 prevents an individual who earns personal services income from being included for the purposes of the employment test.. As the taxpayer does not engage any other entity to perform work the taxpayer is unable to satisfy the employment test in section 87-25 of the ITAA 1997.", "Date_of_Decision": "21 February 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 84-5(1) section 87-25", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/7 | Taxation Ruling TR 2001/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/2 | ATO ID 2002/3 | ATO ID 2002/4", "Subject_References": "Alienation of personal services income Personal services income PSBD unusual circumstances employment test PSBD unusual circumstances unrelated clients test", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002805", "Unmatched_Content": "Update applicable Act. Grammatical correction. | The addition of the words 'The then' before ' Corporations Act 1989 ' for clarification purposes as the Act no longer exists in that form. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/7 Taxation Ruling TR 2001/8 | Keywords Alienation of personal services income Personal services income PSBD unusual circumstances employment test PSBD unusual circumstances unrelated clients test"}
{"ATO_ID_Number": "ATO ID 2011/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Primary production: conditions for election to spread or defer profit on disposal or death of livestock", "Issue": "For the purposes of satisfying the condition in subparagraph 385-100(1)(a)(iii) of the Income Tax Assessment Act 1997 (ITAA 1997), was the taxpayer's disposal of livestock 'because' pasture was destroyed by drought?", "Decision": "No. For the purposes of satisfying the condition in subparagraph 385-100(1)(a)(iii) of the ITAA 1997, the taxpayer's disposal of livestock was not 'because' pasture was destroyed by drought.", "Facts": "During the income year the taxpayer sold part of his grazing property together with some livestock. He did so in order to obtain funds so that he could give financial help to his son who was planning to set up his own business but was unable to secure bank finance for the venture. Other factors relevant at the time of disposal were that: The taxpayer sought to make an election to defer the tax profit on the disposal of the livestock under section 385-110 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Under section 385-110 of the ITAA 1997, a primary producer can elect to defer, for concessional tax treatment, the tax profit arising from certain disposals of livestock. The qualifying conditions that must be met in order to make an election are set out in section 385-100 of the ITAA 1997. The threshold condition is that the disposal occurs because of an event listed in paragraph 385-100(1)(a) of the ITAA 1997. In this case, the taxpayer may be eligible to make an election in terms of subparagraph 385-100(1)(a)(iii) of the ITAA 1997 if the disposal of livestock is 'because pasture or fodder is destroyed by fire, drought or flood'. The Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 defines 'because' to mean 'for the reason that; due to the fact that'. It follows that 'because' denotes a causal relationship between the destruction of pasture or fodder by drought and the disposal of livestock. A similar expression, 'by reason of', was considered in Human Rights and Equal Opportunity Commission v. Mount Isa Mines Limited [1993] FCA 535. In construing that expression in the context of the Sex Discrimination Act 1984 , Lockhart J said at paragraph 55: In my opinion the phrase \"by reason of\" ... should be interpreted as meaning \"because of\", \"due to\", \"based on\" or words of similar import which bring something about or cause it to occur. The phrase implies a relationship of cause and effect .... Whether it can be said that the destruction of pasture by drought brings about or is the cause of the disposal of livestock, for the purposes of subparagraph 385-100(1)(a)(iii) of the ITAA 1997, turns on whether there is a sufficiently close relationship to establish cause and effect. In weighing the meaning of the language used and the closeness or sufficiency of the relationship that needs to exist it is critical to examine the legislative context of the expression. The importance of context as an aid to establishing what Parliament intended is illustrated in Vickers v. Minister for Business and Consumer Affairs and Others (1982) 43 ALR 389. That case considered the meaning of a provision in the Customs Act 1901 that required the possession of money in a bank account to arise 'by reason of' dealing in narcotics. Morling J at page 497 observed that 'the phrase ... implies a relationship of cause and effect between the sale or dealing in narcotics and the possession of the bank account'. In finding that there was a sufficient causal relationship, his honour rejected the argument that the intervening transaction to deposit the proceeds from the narcotics dealing into a bank account broke the causal relationship. His honour noted at page 408 that this construction, having regard to the manifest intention of the legislation to deprive a person of a financial advantage from dealing in narcotics, 'promotes the purpose or object underlying the Act and is thus to be preferred to one that does not.' The legislative context in which subparagraph 385-100(1)(a)(iii) of the ITAA 1997 appears is therefore an important indicator of its intended scope. The immediate context of Division 385 of the ITAA 1997 is about providing tax relief for primary producers in specified circumstances. Broadly, this concession is in the form of a choice to either spread or defer a liability to tax in respect of profits from the forced disposal of livestock. The legislative history of the concession from its inception in 1945 reveals a consistent policy to confine the scope of the tax relief to those primary producers who are forced to dispose of livestock because of a specified event. Originally, the enactment was limited to the case of pastoralists forced to dispose of livestock because of land resumption for soldier resettlement. The Explanatory Memorandum to the Income Tax Assessment Bill 1945 emphasised that tax relief in these situations was 'equitable' given that the profit arises from a sale that a pastoralist is obliged to make. In this sense the special circumstances of a forced sale with the resulting abnormal amount of income provided the rationale for the concession in its original form. In 1952 the concession was expanded to include the circumstances of natural disaster now covered by subparagraph 385-100(1)(a)(iii) of the ITAA 1997. The Explanatory Memorandum to the Income Tax and Social Services Contributions Assessment Bill (no.3) 1952 also underscores the involuntary nature of a disposal caused by a natural disaster that the provision targets. It states: The amendment to section 36 ... is designed to afford taxation relief to pastoralists who are forced to sell live-stock because of the destruction of pastures or fodder through the ravages of fire, drought or flood .... Pastoralists seeking to take advantage of this concession will be required to establish that the sale was genuinely occasioned by the loss or destruction of pastures or fodder and that the loss was the result of fire, drought or flood. The concession was further enlarged in 1955 to cover compulsory disposals because of tick eradication and, in 1961, to include additional classes of compulsory disposals caused by disease and land contamination. Division 385 of the ITAA 1997 rewrote and consolidated these rules. Consistently with the old law, the Explanatory Memorandum to the Tax Law Improvement Bill 1997 describes the Division as conferring 'special treatment ... for a forced disposal ... caused by a specified event'. These specified events listed in subsection 385-100(1) of the ITAA 1997 cover disposals where the operation of a law compels that outcome. This can be seen in the case of a disposal because of the operation of the law governing land resumption, tick eradication, disease control and property contamination. The other forced event dealt with in subparagraph 385-100(1)(a)(iii) of the ITAA 1997 is a natural disaster being fire, flood or drought that destroys pasture and fodder thereby compelling the disposal of livestock. The legislative context strongly indicates that to come within the terms of the subparagraph, the natural disaster and consequent destruction of pasture must be the compelling and decisive reason for the livestock disposal. Only where it can be concluded that the disposal of the livestock was effectively forced because of the destruction of pasture or fodder will there be a sufficient causal relationship for the purposes of the provision. In these circumstances, the relationship of cause and effect is established. Conversely, if the destruction of pasture is just a background factor or an incidental or remote reason for the disposal, the necessary nexus is not established. No special tax treatment will be available under the provision because the element of compulsion is lacking. In the present case, the taxpayer disposed of the livestock together with the property carrying the livestock. The decisive reason for the sale was to enable him to give his son financial assistance. Although the pasture was affected by drought, this was only a background factor or an incidental reason for the disposal of the cattle. The destruction of pasture by drought was not the compelling or decisive reason for the disposal of the livestock. There is an insufficient causal nexus between the destruction of pasture and the disposal of the livestock to establish that the disposal occurred 'because' pasture was destroyed by drought. Accordingly, the taxpayer's disposal of livestock was not 'because' pasture was destroyed by drought for the purposes of satisfying the condition in subparagraph 385-100(1)(a)(iii) of the ITAA 1997.", "Date_of_Decision": "6 December 2010", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 385 section 385-100 subsection 385-100(1) paragraph 385-100(1)(a) subparagraph 385-100(1)(a)(iii) section 385-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deaths Disposal of trading stock Primary production Taxpayer elections", "Case_References": "Human Rights and Equal Opportunity Commission v Mount Isa Mines Limited [1993] FCA 535", "Other_References": "Explanatory Memorandum to the Income Tax Assessment Bill 1945 Explanatory Memorandum to the Tax Law Improvement Bill 1997 The Explanatory Memorandum to the Income Tax and Social Services Contributions Assessment Bill (no.3) 1952 The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20116", "Unmatched_Content": "Keywords Deaths Disposal of trading stock Primary production Taxpayer elections"}
{"ATO_ID_Number": "ATO ID 2010/200", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of withdrawals from a New Zealand income equalisation account", "Issue": "When a taxpayer withdraws an amount previously deposited into a New Zealand income equalisation account, is the withdrawn amount assessable income of the taxpayer under Division 6 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. When a taxpayer withdraws an amount deposited into a New Zealand income equalisation account, the withdrawn amount is not assessable income of the taxpayer under Division 6 of the ITAA 1997. The income that was previously deposited into the account is assessable under subsection 6-5(2) of the ITAA 1997 in the income year in which the income is derived by the taxpayer.", "Facts": "The taxpayer is a resident of Australia. The taxpayer is a primary producer who carries on a forestry business in New Zealand. The taxpayer is a participant in a New Zealand income equalisation scheme (NZ IES). The NZ IES is a form of forward tax averaging in New Zealand, designed to enable primary producers to even out the effects of fluctuating incomes on their tax liabilities over a period of five years. Under the NZ IES, a person who derives income from forestry in New Zealand may deposit amounts from that income into a New Zealand income equalisation account with the New Zealand Commissioner of Inland Revenue. A taxpayer can apply to withdraw an amount that they have deposited into the income equalisation account. The New Zealand legislation refers to withdrawals as refunds. The New Zealand Commissioner of Inland Revenue must refund the amount provided that the amount has been held in the account for at least one year (and in other limited circumstances). The taxpayer derived income from the forestry business in New Zealand in a previous income year, and deposited a portion of that income into a New Zealand income equalisation account. In New Zealand, the taxpayer's forestry income is assessable in the income year in which it is derived. The taxpayer's deposit into the New Zealand income equalisation account is deductible against New Zealand assessable income in the income year in which the deposit is made. The taxpayer applies for a withdrawal from their New Zealand income equalisation account in the current income year, and the New Zealand Commissioner of Inland Revenue refunds the amount. When an amount is withdrawn from an account, the amount is assessable in New Zealand, usually in the year in which the person applied for the refund.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Income from a forestry business is ordinary income for the purpose of subsection 6-5(2) and is derived when the taxpayer initially receives it. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (New Zealand Convention). Article 7(1) of the New Zealand Convention allows Australia to tax the profits of an enterprise of Australia. Article 3(1)(g) of the New Zealand Convention defines 'enterprise of a Contracting State' as an enterprise carried on by a resident of that State. Hence the forestry business carried on in New Zealand by the Australian resident taxpayer is an enterprise of Australia. As the New Zealand Convention does not disturb Australia's right to tax the forestry income, the income is assessable under subsection 6-5(2) of the ITAA 1997 in the income year in which the taxpayer receives it. The taxpayer is not entitled to a deduction in Australia for the deposits into the New Zealand income equalisation account (see ATO ID 2010/203). When the taxpayer receives a refund of an amount deposited into the account, they receive money which represents money that they previously earned and deposited into the account. This is akin to a taxpayer withdrawing an amount that they have deposited in a bank account, which is not income according to ordinary concepts. Consequently, the taxpayer does not derive ordinary income when they withdraw an amount that they have deposited in a New Zealand income equalisation account. Australia's farm management deposit scheme in Division 393 of the ITAA 1997 does not apply to include an amount of a withdrawal in assessable income because a New Zealand income equalisation account deposit with the New Zealand Commissioner of Inland Revenue is not a 'farm management deposit'. There are no other provisions in Australia's income tax legislation which would include an amount of a withdrawal from a New Zealand income equalisation account in assessable income. Consequently, when a taxpayer withdraws an amount deposited into a New Zealand income equalisation account, the withdrawn amount is not assessable income of the taxpayer under Division 6 of the ITAA 1997.", "Date_of_Decision": "21 October 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 6 subsection 6-5(2) Division 393 Division 770", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/201 | ATO ID 2010/202 | ATO ID 2010/203", "Subject_References": "Foreign income Income equalisation deposits scheme Primary production Primary production income", "Case_References": "", "Other_References": "", "Business_Line": "Individuals & Small Business", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010200", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign income Income equalisation deposits scheme Primary production Primary production income"}
{"ATO_ID_Number": "ATO ID 2010/202", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Income Tax Offset: refunds from a New Zealand income equalisation account", "Issue": "Is a taxpayer who is a participant in a New Zealand Income Equalisation Scheme entitled to a foreign income tax offset under section 770-10 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of New Zealand tax paid on refunds from their New Zealand income equalisation account?", "Decision": "Yes. The taxpayer is entitled to a foreign income tax offset under section 770-10 of the ITAA 1997 in respect of New Zealand tax paid on refunds from their New Zealand income equalisation account.", "Facts": "The taxpayer is a resident of Australia and is not a company. The taxpayer carries on a forestry business in New Zealand. The taxpayer is a participant in a New Zealand income equalisation scheme (NZ IES). The NZ IES is a form of forward tax averaging in New Zealand, designed to enable primary producers to even out the effects of fluctuating incomes on their tax liabilities over a period of five years. Under the NZ IES, a taxpayer who derives income from forestry may deposit amounts from that income into a New Zealand income equalisation account, and may apply to withdraw amounts from the account. The New Zealand legislation refers to withdrawals as refunds. The taxpayer derived income ($100,000) from the forestry business in the 2008-09 income year, and deposited $55,000 of that income into an income equalisation account. In New Zealand, the income was assessable in that year, and the taxpayer was entitled to a deduction equal to the amount deposited in the income equalisation account. In the 2009-10 income year, the taxpayer applied for a refund of $20,000 from the account and received the refund. The taxpayer's account was credited with $1,650 interest on 31 March 2010. In the 2010-11 income year, the taxpayer applies for a refund of $36,650 (the remainder of the deposit and the interest) and receives the refund. A refunded amount is treated as income in New Zealand in the year of the application, and forms part of the taxpayer's taxable income in New Zealand in that year. The taxpayer pays New Zealand income tax on the refunded amounts. The New Zealand income tax is 'foreign income tax' for the purpose of subsection 770-10(1) of the ITAA 1997. In Australia, the income from the forestry business was assessable under subsection 6-5(2) of the ITAA 1997 for the 2008-09 income year (see ATO ID 2010/200). The interest income was assessable under that section in Australia for the 2009-10 income year (see ATO ID 2010/201).", "Reasons_for_Decision": "Summary: Subsection 770-10(1) of the ITAA 1997 provides: You are entitled to a tax offset for an income year for foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year. In respect of In order to determine whether the taxpayer is entitled to a foreign income tax offset, it is necessary to determine whether the New Zealand tax is paid 'in respect of' the amounts which were included in their assessable income in Australia in 2008-09 and 2009-10 income years. The meaning of the phrase 'in respect of' was considered in Taxation Ruling TR 2009/6 Income tax : entitlement to foreign income tax offsets under section 770-10 of the Income Tax Assessment Act 1997 where income is derived from investing in fiscally transparent foreign entities . Paragraph 72 of TR 2009/6 explains that the phrase 'in respect of' in subsection 770-10(1) of the ITAA 1997 is intended to draw a nexus between foreign income tax paid and an amount included in a taxpayer's Australian assessable income, where the imposition of such foreign income tax would, apart from the application of Division 770 of the ITAA 1997, result in the taxpayer being exposed to double taxation in respect of that income. All of the taxpayer's forestry income and interest are taxed in Australia in the year in which they are derived, and, in effect, the taxpayer's forestry income deposited into the New Zealand income equalisation account and interest accrued in that account are taxed in New Zealand in the year in which the amounts are refunded from the account. Therefore, if Australia were to tax the forestry income and interest and not provide a foreign income tax offset, the taxpayer would effectively bear double taxation on the income. The New Zealand tax is paid on the amounts refunded from the New Zealand income equalisation account, rather than on the income which was derived from the forestry business and interest. However, the amounts deposited into the account are from income derived from the forestry operations, and interest on that income. Consequently refunds from the account represent amounts of previously deposited forestry income or the interest on such deposits. Therefore, there is sufficient nexus, for the purposes of subsection 770-10(1) of the ITAA 1997, between the New Zealand income tax paid on the refunded amounts and the amount of forestry income and interest which was included in the taxpayer's assessable income in Australia. Timing The entitlement to a foreign income tax offset does not arise until the taxpayer has included an amount in their assessable income for an income year and has also paid foreign income tax in respect of that amount. The taxpayer has $100,000 included in their assessable income in Australia in 2008-09 income year. However, when the taxpayer lodges their Australian 2008-09 tax return, they have not paid foreign income tax on the amount that is deposited into the New Zealand income equalisation account (because they were entitled to a deduction in New Zealand equal to the amount deposited). The taxpayer has interest of $1,650 included in their assessable income in Australia in 2009-10 income year. However, the taxpayer has not paid foreign income tax on the interest, when they lodge their Australian 2009-10 tax return (because it is not taxed in New Zealand until it is withdrawn). Foreign income tax is paid in respect of the income derived from the forestry business and interest in New Zealand in the income year in which the taxpayer applies for a refund from the New Zealand income equalisation account (the 2009-10 and 2010-11 income years). The taxpayer satisfies the requirements of subsection 770-10(1) of the ITAA 1997 when the New Zealand tax is paid on the refund. The foreign income tax offset is for the income year in which the amount is included in their assessable income in Australia (the 2008-09 and 2009-10 income years). Therefore, the taxpayer must request an amendment of their assessments for the income years in which the forestry income and interest were included in their assessable income in Australia in order to claim the foreign income tax offset in respect of the tax paid in New Zealand on the withdrawals. At the time when the taxpayer prepares their Australian income tax return for 2008-09 income year, the taxpayer would have had assessable income of $100,000 and a foreign income tax offset in respect of the New Zealand tax paid in that year on the $45,000 which was not deposited into their account. Once the taxpayer had paid tax in New Zealand on the first refund of $20,000, they could apply to have their 2008-09 assessment amended to include a foreign income tax offset in respect of the New Zealand tax paid on the additional $20,000. Once the taxpayer had paid tax in New Zealand on the second refund of $36,650, they could apply to have their 2008-09 assessment amended again to include a foreign income tax offset in respect of the New Zealand tax paid on the additional $35,000, and their 2009-10 assessment amended to include a foreign income tax offset in respect of the New Zealand tax paid on the additional $1,650. The assessments can be amended at any time during the period of four years starting immediately after the taxpayer pays the foreign tax (section 770-190 of the ITAA 1997).", "Date_of_Decision": "21 October 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) Division 770 section 770-10 subsection 770-10(1) section 770-190", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2009/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/200 | ATO ID 2010/201 | ATO ID 2010/203", "Subject_References": "Foreign income Primary production Primary production income Income equalisation deposits scheme", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010202", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2009/6 | Keywords Foreign income Primary production Primary production income Income equalisation deposits scheme"}
{"ATO_ID_Number": "ATO ID 2002/773", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Primary Production Income - special dividends", "Issue": "Are the special dividends received by the taxpayer classed as primary production income in accordance with subsection 392-80(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the special dividends received by the taxpayer are classed as primary production income in accordance with subsection 392-80(2) of the ITAA 1997.", "Facts": "The taxpayer operates a primary production business through a partnership structure. The partnership received franked and unfranked special dividends from the purchaser of the partnership's primary production produce. The special dividend calculation was based upon the level of primary production sales generated for a specific period by the partnership.", "Reasons_for_Decision": "Summary: In accordance with subsection 392-80(2) of ITAA 1997, assessable primary production income is the basic assessable income derived from, or resulting from, carrying on a primary production business. The definition of 'assessable primary production income' in the former Division 16 of the Income Tax Assessment Act 1936 , uses the connective phrase, 'in consequence of the carrying on of a business of primary production'. The Explanatory Memorandum in relation to the Income Tax Assessment Amendment Bill (No. 2) 1978, indicates that 'in consequence of' was intended to be limited to situations in which assessable income is included as assessable income by virtue of specific provisions of the ITAA and is directly as a result of conducting the primary production business. In AAT Case 6254 ; AAT Case X82 21 ATR 3708; 90 ATC 599, Dr Gerber observed: 'The term 'in consequence of' connotes causality. It was a question of fact whether the interest was 'caused' to be derived as the 'predominant' or 'proximate' or 'direct' result of the carrying on of the business of primary production.' The occasion of deriving income from special dividends was as a consequence of the sale of primary production produce. The calculation of the dividend is such that there is sufficient causal nexus between the sale of produce and the dividend, so as to make the supply of produce the occasion of the payment.", "Date_of_Decision": "29 May 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 Division 16", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Business income Primary production income", "Case_References": "AAT Case 6254; AAT Case X82 21 ATR 3708 90 ATC 599", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002773", "Unmatched_Content": "Keywords Business income Primary production income"}
{"ATO_ID_Number": "ATO ID 2002/99", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Norfolk Island Resident - Tax-free threshold", "Issue": "Is the taxpayer, a resident of Norfolk Island, entitled to the tax-free threshold in Schedule 7 to the Income Tax Rates Act 1986 (the Rates Act)?", "Decision": "Yes. A Norfolk Island resident taxpayer is entitled to the tax-free threshold in Schedule 7 to the Rates Act as they are a resident of Australia for tax purposes.", "Facts": "The taxpayer is a Norfolk Island resident who receives Australian sourced income.", "Reasons_for_Decision": "Summary: The rates of tax on taxable income for resident taxpayers are contained in Part 1 of Schedule 7 to the Rates Act. The tax-free threshold applicable to resident taxpayers is defined in section 3 of the Rates Act. The term 'resident taxpayer' is defined in section 3 of the Rates Act to be a taxpayer who is not a 'prescribed non-resident'. Section 3 of the Rates Act defines 'prescribed non-resident' as a person who, at all times during the year of income, is a non-resident, not being a person whom certain pensions, allowances or benefits are payable to and subject to tax in Australia. Section 4 of the Rates Act provides that the Income Tax Assessment Act 1936 (ITAA 1936) is incorporated and shall be read as one with the Rates Act. As the term 'resident' is not further defined in the Rates Act it is necessary to look to the general definition of the term in section 6 of the ITAA 1936, which defines 'resident' or 'resident of Australia' as a person who resides in Australia. Subsection 7A(2) of the ITAA 1936 provides that the ITAA 1936 has effect as if Norfolk Island were part of Australia. As Norfolk Island is deemed to be part of Australia, a person who resides in Norfolk Island is deemed to reside in Australia and is therefore a resident of Australia for tax purposes. Furthermore, as the taxpayer is not considered to be a non-resident, the definition of a prescribed non-resident under section 3 of the Rates Act is not satisfied and instead the definition of resident taxpayer is met. As a deemed resident taxpayer, the Norfolk Island resident is therefore entitled to apply the tax rates in Part I of Schedule 7 to the Rates Act, including the entitlement to the tax-free threshold.", "Date_of_Decision": "19 October 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 6 subsection 7A(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Norfolk Island Resident/residency Tax free threshold", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200299", "Unmatched_Content": "Correction of typo, Note: this ATO ID is not affected by changes to the law with effect from 1 July 2016 under Tax and Superannuation Laws Amendment (Norfolk Island Reforms) Act 2015. | Updated legislative references and adjusted wording to better reflect the legislation and improve clarity. | Keywords Norfolk Island Resident/residency Tax free threshold"}
{"ATO_ID_Number": "ATO ID 2006/282", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Singapore resident receiving Australian sourced excluded royalties", "Issue": "Are royalties that are sourced in Australia, from the granting of copyright derived by a Singapore resident, included in assessable income under section 15-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Royalties that are sourced in Australia, from the granting of copyright derived by a Singapore resident, are included in assessable income under section 15-20 of the ITAA 1997.", "Facts": "The taxpayer is a Singapore resident and a non-resident of Australia for income tax purposes. The taxpayer wrote a book which was published in Australia under a contract. The taxpayer owned the copyright over the book. The taxpayer received payments in relation to the Australian publication of the book based upon the number of units sold. Australian tax was not withheld from the payment by the Australian publisher. The taxpayer's income tax assessment for the 2005 income year imposed non-resident marginal tax rates on the receipts from the publisher. The taxpayer is required to pay income tax on the gross amount in Singapore.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of a non resident includes statutory income from all Australian sources (subsection 6-10(5) (a) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 15-20 of the ITAA 1997 which deals with royalties. Section 15-20 of the ITAA 1997 provides that assessable income includes an amount you receive as, or by way of, royalty within the ordinary meaning of 'royalty' (disregarding the definition of royalty in subsection 995-1(1) of the ITAA 1997) if the amount is not assessable as ordinary income under section 6-5 of the ITAA 1997. In other words, royalty payments that are not already assessable income under section 6-5 of the ITAA 1997 (as ordinary income), are assessable as statutory income under section 15-20 of the ITAA 1997 and are included in assessable income under section 6-10 of the ITAA 1997. Subsection 6(1) of the ITAA 1936 provides that the term 'royalty' includes any amount paid or credited, and whether the payment or credit is periodical or not, to the extent to which it is consideration for the use of, or the right to use any copyright. Taxation Ruling IT 2660 discusses the ordinary meaning of 'royalty' and how that meaning is extended by the definition in subsection 6(1) of the ITAA 1936. At paragraph 10 of IT 2660 it states that at common law, a royalty: '... is a payment made in return for the right to exercise a beneficial privilege or right (eg ... to use a copyright...). ...Amongst other things, copyright can cover music, literary and artistic works...' The payment which the taxpayer received as a result of the publication of their book in Australia, falls within the meaning of royalty. It is a payment they have received in consideration of the Australian use of the taxpayer's copyright. In determining liability to tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). The taxpayer is a resident of Singapore, a country with which Australia has entered into a tax treaty. Therefore, the tax treaty between Australia and Singapore (the Singapore Agreement) and the protocols to that agreement contained in Schedules 5 and 5A of the Agreements Act respectively, must be considered in determining whether the excluded royalty paid to the taxpayer is taxable in Australia. Section 7 of the Agreements Act gives the Singapore Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the Income Tax Assessment Act 1936 and ITAA 1997 must be read as one with the Agreements Act. Article 10(1) of the Singapore Agreement provides that 'the Australian tax on royalties derived by a Singapore resident who is beneficially entitled to the royalties shall not exceed 10 percent of the gross amount of the royalties.' Article 10(3) of the Singapore Agreement provides that In this Article \"royalties\" means payments or credit, whether periodical or not and however described or computed, to the extent to which they are received as consideration for- but does not include royalties or other payments in respect of the operation of mines or quarries or of the exploitation of natural resources or payments to the extent to which they are received as consideration for the use of, or the right to use, motion picture films, tapes for use in connection with radio broadcasting or films or video tapes for use in connection with television. The Explanatory Memorandum to Income Tax (International Agreements) Bill 1969, states that, article 10(1) limits to 10 per cent the Australian tax on the gross royalties paid to a Singapore resident. Article 10(3) defines the term 'royalties' in a way that gives it a somewhat more restricted meaning than the term has for the general purposes of the Income Tax Assessment Act. Under article 10(3) 'royalties' means, in general, industrial royalties (including various 'know-how' payments) but does not include literary and artistic copyright, film and related royalties, or royalties or other payments in respect of the operation of mines or quarries or of the exploitation of natural resources. The tax in the country of source, on the payments which are not treated as 'royalties' for the purposes of the Singapore Agreement, will therefore not be limited to 10 per cent. It should be noted that the definition of royalties in the tax treaty is exclusive, whereas the definition in subsection 6(1) of the ITAA 1936 is inclusive. Consequently, any general law royalties which do not fall within the definition in article 10 of the Singapore Agreement may be royalties for Australian domestic tax law purposes (as per paragraph 10 of IT 2660) but will not be royalties for the Singapore Agreement purposes. Article 16A of the Singapore Agreement provides that Items of income which are not expressly mentioned in the foregoing Articles of this Agreement shall be taxable according to the laws of (Australia) relating to tax. Under the Singapore Agreement, the royalty payment received by the taxpayer is excluded from meaning of 'a royalty' given by article 10, and consequently, from the operation of that article. Subsection 17A (4) of the Agreements Act deals with basic and excluded royalties. Subsection 17A (4) provides that if: section 128B of the Assessment Act (which deals with liability for withholding tax) does not apply to the excluded royalties. The royalties received by the taxpayer are excluded from the operation of Article 10 of the Singapore agreement by the definition of royalty in Article 10(3) and will accordingly, be excluded from the withholding tax provisions of Section 128B of the ITAA 1936. However, excluded royalties retain the characteristics of 'a royalty' as defined by subsection 6(1) of the ITAA 1936 and paragraph 10 of IT 2660. Section 15-20 of the ITAA 1997 assesses the amount of excluded royalties received by the taxpayer that are not otherwise assessable as 'ordinary income'.", "Date_of_Decision": "10 August 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 128B", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2660", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Non resident royalty withholding tax Royalties Royalty article Royalty income Singapore Treaties", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006282", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2660 | Keywords Double tax agreements International tax Non resident royalty withholding tax Royalties Royalty article Royalty income Singapore Treaties"}
{"ATO_ID_Number": "ATO ID 2006/307", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Whether payments for use of broadcasting and apparatus licences fall within the domestic law definition of a royalty", "Issue": "Are payments for the exclusive right to use a broadcasting licence and an apparatus licence 'royalties' under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Payments for the exclusive right to use a broadcasting licence and an apparatus licence are not royalties under subsection 6(1) of the ITAA 1936.", "Facts": "An owner of a Broadcasting Licence and an Apparatus Licence (the Licensor Entity) entered into an agreement with another entity (the Licensee) for the exclusive right to use the two licences for a certain period of time. The Licensee is required to pay an annual fee to the Licensor Entity for the use of both of the licences. The fee is calculated as a percentage of the gross earnings of the Licensee for the 12 month period. The Broadcasting Licence is issued under sections 36 and 38 of the Broadcasting Services Act 1992. The Apparatus Licence is issued under section 102 of Part 3.3 of the Radiocommunications Act 1992.", "Reasons_for_Decision": "Summary: The definition of 'royalty' or 'royalties' in subsection 6(1) of the ITAA 1936 is an inclusive definition. This means that the definition of the term includes not only the types of payments listed in the definition, but also payments that are royalties within the ordinary meaning of the term. The ordinary meaning of a royalty has been considered by the Courts on many occasions. In Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630; 11 ATD 1 the Full Court of the High Court of Australia described the essence of a royalty. The court said at pages 641 and 642 that: ... the modern applications of the term seem to fall under two heads, namely the payments which the grantees of monopolies such as patents and copyrights receive under licences and payments which the owner of the soil obtains in respect of the taking of some special thing forming part of it or attached to it which he suffers to be taken. In the case of monopolies and the like the essential idea seems to be payment for each thing produced or sold or each performance or exhibition in pursuance of the licence. In the same way in the case of things taken from the land the essential notion seems to be that the payment is made in respect of the taking of something which otherwise might be considered to belong to the owner of the land in virtue of his ownership. In other words it is inherent in the conception expressed by the word that the payments should be made in respect of the particular exercise of the right to take the substance and therefore should be calculated either in respect of the quantity or value taken on the occasions upon which the right is exercised. A royalty, under the common law meaning of the term, therefore covers payments for the use of intellectual property or natural resources taken from the land, provided the quantum of the payment corresponds with the quantum of the use of the relevant property or resource. With respect to that part of the payment that relates to the use of the Broadcasting Licence, the Licensee is paying for the exclusive right to use the Broadcasting Licence, which provides the underlying right to use a specific band of radiofrequency spectrum. Radiofrequency spectrum forms part of the range of electromagnetic spectrum within which radio waves are transmitted. It is a natural phenomenon that is not created, like an item of intellectual property is created. The bands of radiofrequency spectrum used by the Licensee cannot be removed from the electromagnetic spectrum in the way that natural resources can be removed from the land. Rather, the Licensee simply utilises the bands of radiofrequency spectrum to transmit their information. The amount of the payment for the use of the Broadcasting Licence is also not calculated in respect of any quantity or value taken from the exercise of the right. The payment is calculated as a percentage of the Licensee's gross earnings from its overall radio broadcasting business. Consequently, the payment for the exclusive use of the Broadcasting Licence is not a royalty within the common law ordinary meaning of the term. The payment for the exclusive use of the Broadcasting Licence is also not a royalty under paragraph 6(1)(db) of the ITAA 1936. This part of the royalty definition relates to payments for the use of 'sounds' transmitted by various forms of technology in connection with radio broadcasting. The payment must therefore be for the use of sound content, such as a song or radio program, used in radio broadcasting in order to be a royalty under this aspect of the definition. The Licensee is not paying for the use of any sound content. The payment is also not a royalty under paragraph 6(1)(dc) of the ITAA 1936. Although, this part of the royalty definition relates to the use of the radiofrequency spectrum along which sounds can be transmitted, it only relates to spectrum specified in a 'spectrum licence' under the Radiocommunications Act 1992. A spectrum licence is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as having the meaning given by section 5 of the Radiocommunications Act 1992. A spectrum licence is defined under section 5 of the Radiocommunications Act 1992 to mean a spectrum licence issued under Part 3.2 of the Radiocommunications Act 1992. As the Broadcasting Licence is issued under the Broadcasting Services Act 1992, not under Part 3.2 of the Radiocommunications Act 1992, it is not a spectrum licence for the purposes of paragraph 6(1)(dc). Accordingly, the payment for the use of the Broadcasting Licence is not a royalty under paragraph 6(1)(dc) of the ITAA 1936. With respect to that part of the payment that relates to the Apparatus Licence, the Licensee is paying for the exclusive right to use the Apparatus Licence, and the underlying right conferred by that licence for the authorisation to operate one or more specified radiocommunications devices. The payment for the exclusive use of the Apparatus Licence is not a royalty within the ordinary meaning of the term. In exercising their right under the licence, the Licensee is neither using intellectual property created by the Licensor Entity, nor taking a natural resource belonging to the Licensor Entity, as per the two heads of the common law meaning of a royalty. The payment for the exclusive use of the Apparatus Licence is also not a royalty under paragraph 6(1)(b) of the ITAA 1936. This aspect of the definition relates to payments for the use of or right to use any industrial, commercial or scientific equipment. While, a radiocommunication device of a type covered by an Apparatus Licence is 'commercial equipment' for the purposes of this provision, the payment for the use of the Apparatus Licence is not a payment for the 'use of or right to use' a radiocommunication device, such as a payment for the 'rental' or 'hire' of a radiocommunication device. The payment for use of the Apparatus Licence gives the Licensee the right to be Government 'authorised' to operate certain radiocommunication devices, if and when it later obtains access to any such devices. The Apparatus Licence does not involve the Licensor Entity providing any radiocommunication devices to the Licensee, nor is the Licensee using or gaining access to use any such devices under the licence.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/308 | ATO ID 2006/309", "Subject_References": "Non resident royalty withholding tax Radio broadcasting Royalties Royalty income Spectrum licences United Kingdom", "Case_References": "Stanton v. Federal Commissioner of Taxation (1955) 92 CLR 630 11 ATD 1", "Other_References": "Taxation Ruling IT 2660", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006307", "Unmatched_Content": "Keywords Non resident royalty withholding tax Radio broadcasting Royalties Royalty income Spectrum licences United Kingdom"}
{"ATO_ID_Number": "ATO ID 2012/15", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Derivation of Income: unbilled supply of energy", "Issue": "Does the taxpayer derive assessable income for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) where it supplies electrical and gas energy to New South Wales (NSW) mass market customers but that supply remains unbilled at the end of the income year?", "Decision": "Yes. The taxpayer derives assessable income for the purposes of section 6-5 of the ITAA 1997 where it supplies electrical and gas energy to NSW mass market customers but that energy remains unbilled at the end of the income year.", "Facts": "The taxpayer is an energy retailer, purchasing electrical and gas energy from the relevant national wholesale markets and subsequently on-selling that energy to mass market customers located in NSW. The taxpayer has no control over the supply of electricity and gas to mass market customers. Energy is supplied through the distribution network simultaneously with customer demand. With full retail competition in the energy industry in NSW, mass market customers are able to choose their supplier. Distribution Network Operators (DNOs) connect customers' premises to the supply networks, deliver the electricity or gas and read customers' meters. The DNOs charge the taxpayer for those services. The taxpayer passes those costs on to its customers when it bills them for energy supplied. Except for a small percentage with time-of-use ('smart') electricity meters that are read remotely by DNOs on a daily basis, customer premises are equipped with accumulation meters that are physically read by meter readers visiting the premises. DNOs provide the taxpayer with meter reading data for each customer. The taxpayer then determines the quantity of energy consumed by each customer, calculates the amount owed, by reference to scheduled fees and charges, and bills the customer accordingly. Meter readings are taken by DNOs in line with each customer's usual billing cycle, except where a special meter reading is required (for example, where a customer vacates the premises). The taxpayer does not have the ability to determine the time at which DNOs read customers' meters, with the exception of special meter readings. The taxpayer may estimate the amount of energy consumed in a range of circumstances, including where the meter is found to be defective, the meter cannot be accessed or a meter reading has not been taken. The supply of electrical and gas energy to mass market customers in NSW is principally governed by the Electricity Supply Act 1995 , Electricity Supply (General Regulation 2001, Gas Supply Act 1996 and the Gas Supply (Natural Gas Retail Competition) Regulation 2001. The legislation and regulations provide for two types of contracts between energy retailers and mass market customers - a standard form customer supply contract and a negotiated customer supply contract. Under the legislation and regulations, mass market customers with a standard form customer supply contract must be billed at least once every three months, but shorter billing periods can be accommodated. Customers with a negotiated customer supply contract can negotiate a different billing period. Neither the standard form customer supply contract nor the negotiated customer supply contract expressly or impliedly points to an agreement for the supply of energy over an entire period. Under the contracts, customers assume responsibility to pay for all energy as consumed, regardless of whether that energy relates to an entire billing period or not. The billing frequency under the contracts is at least once every three months, or a different agreed billing frequency. Unlike the facts in FC of T v. Australian Gas Light Co 83 ATC 4800; (1983) 15 ATR 105 ( AGL case ), there is no statutory provision in NSW prohibiting an energy retailer from demanding payment until an account has been rendered to the customer showing consumption by reference to actual meter readings for the billing period. The Independent Pricing and Regulatory Tribunal (IPART) is responsible for setting maximum average energy rates for mass market customers that have a standard form customer supply contract. Mass market customers that have a negotiated customer supply contract do not have regulatory price protection. The usual billing cycles of the taxpayers' customers are staggered and consequently a significant number of customers' meters are not read on, and bills are not generated for the period up to, the last day of the income year. The taxpayer uses the accruals or earnings method of accounting for determining when income is derived. The taxpayer uses a complex methodology to estimate the unbilled supply of energy at the end of the income year and includes that amount as unbilled revenue in its financial accounts in accordance with Australian Accounting Standard AASB 118 Revenue (AASB 118).", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that an Australian resident's assessable income includes ordinary income derived from all sources during the income year. The supply of electricity and gas to mass market customers in NSW is made in the ordinary course of the taxpayer's business and income derived from those supplies is income according to ordinary concepts. Under the accruals or earnings method of accounting, the point of derivation of income occurs when a 'recoverable debt' is created. This means the point of time at which a taxpayer is legally entitled to an ascertainable amount as the result of having performed an agreed task ( Henderson v. Federal Commissioner of Taxation (1969) 119 CLR 612; 69 ATC 4049; (1969) 1 ATR 133 ( Henderson's case ). A taxpayer may have a recoverable debt even though, at the time, they cannot legally enforce the recovery of the debt. Whether there is, in law, a recoverable debt is a question to be determined by reference to the contractual agreements that give rise to the legal entitlement to payment, the general law and any relevant statutory provisions. In establishing if a recoverable debt has been created at the point of supply, it is necessary to determine whether there are further steps (or conditions precedent) to be taken (or met) before the taxpayer becomes entitled to payment ( Gasparin v. Commissioner of Taxation (1994) 50 FCR 73; 94 ATC 4280; (1994) 28 ATR 130 and Farnsworth v. Federal Commissioner of Taxation (1949) 78 CLR 504; (1949) 9 ATD 33 ( Farnsworth's case )). In the AGL case , the court decided that the taxpayers operated under exceptional circumstances which meant that certain conditions precedent were required to be satisfied before a customer's liability for unbilled gas matured into a recoverable debt. The taxpayers in the AGL case operated as statutory monopolies in respect of which gas prices were regulated by an independent body. The determination of tariffs was related to the billing cycle. The taxpayers were obliged to supply gas to their customers on a quarterly basis. Regulations made under the statute prohibited the taxpayers from demanding payment for gas until an account had been rendered. Further, an account could not be rendered until the customer's gas meter had been read to determine the amount of gas consumed for the quarter. The court found that the reading of a customer's meter and notice to the customer of measured consumption were conditions precedent to the existence of a debt. However, it is necessary to draw a distinction between conditions precedent to a recoverable debt being created and impediments to the collection of a recoverable debt ( Barratt v. FC of T 91 ATC 4869; (1991) 22 ATR 691). An impediment to the recovery of a debt (such as the inability to sue for recovery until the expiration of a number of days) does not defer the time at which income is derived. Section 22 of the Sale of Goods Act 1923 (NSW ) provides that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred ( AGL Victoria Pty Ltd v. David Neil Lockwood and Allianz Australia Insurance Limited [2003] VSC 453). Under the terms and conditions of the taxpayer's energy supply contracts, customers assume responsibility for all energy consumed regardless of whether that energy relates to an entire billing period or not. Further, paragraph 14 of AASB 118 requires a transfer to the buyer of the significant risks and rewards of ownership of the goods before bringing to account an amount for unbilled revenue. Mass market customers consume energy when it passes the meter and enters the system that services their addresses. At that point, the taxpayer loses its dispositive power over the energy and the customers are contractually committed to pay, at some future date, for energy they have consumed at that point in time. The taxpayer's entitlement to payment for energy consumed is unconditional at this point. The income earning process is complete and the taxpayer has an existing right to demand payment of an ascertainable amount. The raising of a bill is not a condition precedent to a recoverable debt being created, but rather the mechanism by which the debt collection process commences. The exceptional circumstances that led the court in the AGL case to decide that conditions precedent existed so that a recoverable debt was not created at the point of supply are not evident in the legislative, regulatory and market environment in which the taxpayer operates. Distinguishing features of that environment are: Given the circumstances in which the taxpayer earns its income by supplying energy to customers on a continuous basis, the inclusion of an estimate of income relating to unbilled supplies at year end (in keeping with the taxpayer's accounting practice) does not produce a misleading result but, on the contrary, gives a 'substantially correct reflex' of the taxpayer's true income: ( Commissioner of Taxes (SA) v. Executor Trustee and Agency Co of South Australia Ltd (1938) 63 CLR 108; (1938) 5 ATD 98). In order for income to be derived, the amount must be ascertainable (Farnsworth's case). However, that does not mean that the exact amount needs to be ascertained - a reasonable estimate based on a bona fide judgement or opinion to form an approximation of an ascertainable amount is sufficient ( Australia and New Zealand Banking Group Ltd v. Commissioner of Taxation (1994) 48 FCR 268; 94 ATC 4026; (1994) 27 ATR 559). The figure determined as income may be the result of estimation, as well as of calculation, and its determination may involve the acceptance of opinions, expert or otherwise ( Henderson's case ). In accordance with AASB 118, the taxpayer can and does reliably estimate the amount of income that is unbilled at the end of the income year when preparing its financial statements. Accordingly, the taxpayer derives assessable income under subsection 6-5(2) of the ITAA 1997 for energy supplied to customers but remaining unbilled at the end of the income year. The Commissioner considers that the amount of that assessable income is the estimated amount recognised by the taxpayer for financial accounting purposes.", "Date_of_Decision": "16 December 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2095 | Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assessable income Derivation of income", "Case_References": "AGL Victoria Pty Ltd v David Neil Lockwood and Allianz Australia Insurance Limited [2003] VSC 453", "Other_References": "Australian Accounting Standard AASB 118 Revenue", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201215", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2095 Taxation Ruling TR 98/1 | Keywords Assessable income Derivation of income"}
{"ATO_ID_Number": "ATO ID 2007/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Life insurance company: assessment of premiums 'paid' to the company", "Issue": "Is a life insurance risk premium that is due, but remains unpaid to a life insurance company at the end of the income year, included in assessable income under paragraph 320-15(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) as an amount that has been 'paid to the company'?", "Decision": "Yes. A life insurance risk premium that is due, but remains unpaid to a life insurance company at the end of the income year, is included in assessable income under paragraph 320-15(1)(a) of the ITAA 1997 as an amount that has been 'paid to the company'.", "Facts": "A life insurance company entered into a contract for a life insurance policy providing risk cover on 29 May 2006. The premium on the policy was payable monthly in arrears, with the first premium being due on 29 June 2006. However, the premium was not paid by the policy holder until 4 July 2006. The income tax year for the company ended on 30 June 2006. The value of the net risk component of the policy under subsection 320-85(4) of the ITAA 1997 as at 30 June 2006 was calculated on an 'accruals' basis, with the first premium not being treated as an anticipated future cash flow in the liability calculation of the net risk component of the policy. If the first premium had been treated as an anticipated future cash flow, this would have reduced the net risk component of the policy.", "Reasons_for_Decision": "Summary: Paragraph 320-15(1)(a) of the ITAA 1997 provides that the assessable income of a life insurance company includes the total amount of life insurance premiums paid to the company in the income year. Accordingly, in determining whether a life insurance premium is assessable it is necessary to determine the meaning of the word 'paid' in paragraph 320-15(1)(a) of the ITAA 1997. As the word 'paid' is not defined in the ITAA 1997 it should be interpreted having regard to its ordinary meaning in the context in which it is used. The meaning of the word 'paid' was considered in Allen v. Thorn Electrical Industries Limited [1968] 1 QB 487; [1967] 2 All ER 1137 ( Allen's case) in the context of the Prices and Incomes Act 1966 (UK) which had placed a freeze on wages. The employer company contended that the word meant 'actually paid' whilst the employees contended that it meant 'contracted to be paid'. In Allen's case Lord Denning said at QB 503; All ER 1142: In my opinion, therefore, in these sections the words, \"the rate of remuneration paid for the same kind of work\" before a particular date, mean \"the rate of remuneration contracted to be paid for the same kind of work done\" before that date. The word 'paid' is a descriptive term rather than a technical term that, as Allen's case demonstrates, can be interpreted in certain contexts to be broader than just amounts that have actually been paid. In Newcastle City Council v. GIO General Limited (1997) 191 CLR 85; McHugh J observed at CLR 112 ...a court is permitted to have regard to the words used in the legislature in their legal and historical context and, in appropriate cases, to give them meaning that will give effect to any purpose of the legislation that can be deduced from that context. The approach of interpreting words in their context so as to give effect to the purpose of a provision is given legislative support in section 15AA of the Acts Interpretation Act 1901 which provides: In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object. The context in which the word 'paid' must be considered is Division 320 of the ITAA 1997. The object of the Division is given in section 320-5 of the ITAA 1997 as providing a basis for taxing life insurance companies in a way that is broadly comparable to the way that other entities that derive similar kinds of income are taxed. To achieve this object Division 320 identifies certain amounts that are included in the assessable income and certain amounts that a life insurance company can deduct. The approach adopted in Division 320 of the ITAA 1997 to achieve this object includes matching cash flows with the corresponding changes in liabilities. The correct reflex of the year's activities for risk policies emerges from comparing premium income with the corresponding changes in policy liabilities, and policy benefits with the corresponding change in policy liabilities. Under the Division 320 model, paragraph 320-15(1)(a) of the ITAA 1997 operates to assess premiums, while movements in the net risk components of life insurance policies are assessable under paragraph 320-15(1)(h) of the ITAA 1997 or deductible under section 320-85 of the ITAA 1997. This matching process was judicially recognised in RACV Insurance Pty Ltd v. Federal Commissioner of Taxation 74 ATC 4169; (1974) 4 ATR 610 as the appropriate basis for the taxation of insurance business prior to the enactment of specific rules for the taxation of insurance businesses. It is clear from the structure and scheme of Division 320 of the ITAA 1997 that these statutory rules were intended to preserve and reinforce, rather than vary or detract from, these principles. The relevant provisions of Division 320 of the ITAA 1997 use terms such as 'paid' and 'received or recovered' in relation to cash flows. For risk business, the movements in liabilities under the net risk component of polices are deductible and assessable. It is the net effect of cash flows and liability changes in an income year which reveals the tax law outcome. Recognising amounts such as premiums, claims and recoveries only on a cash basis would mean that in some cases cash flows would be taken into account in a different income year from the related increases or decreases in the corresponding policy liabilities. If cash flows and their related policy liability movements are recognised in different years, there could be significant distortions, and the taxable income would not be an appropriate reflex of the company's financial performance for a particular year. A purposive and contextual interpretation of the word 'paid' in paragraph 320-15(1)(a) of the ITAA 1997 is therefore appropriate to ensure that the basis of recognising cash flows for income tax purposes is consistent with the basis for recognising the taxable income effects of the corresponding liability. Division 320 of the ITAA 1997 does not require that either a cash or accruals recognition basis apply in all circumstances, but rather requires that cash flows such as premiums must be recognised for income tax purposes in a way which is consistent with the way that the corresponding changes in policy liabilities are recognised for income tax purposes. Applying these principles to the life insurance company's risk policy, the appropriate taxable income position emerges when cash flows are recognised in a way that is consistent with the calculation of the corresponding liabilities under the net risk components of the policy. The net risk component of the life insurance company's life insurance policy was calculated on an 'accruals' basis, and in particular, the premium that was due and payable to the life insurance company at the end of the income year was not included in the liability calculations as an anticipated future cash flow. Therefore, a correct reflex of the taxable income only arises when the life insurance premium that is due and payable at the end of the income year is included in assessable income of the life insurance company for the year ended 30 June 2006 under paragraph 320-15(1)(a) of the ITAA 1997. Accordingly, the premiums paid to the life insurance company for the purposes of paragraph 320-15(1)(a) of the ITAA 1997 include the life insurance premium that was due and payable to the life insurance company at the end of the income year, as this results in an appropriate matching of the premium to the movement in net risk liabilities of the life insurance company under Division 320 of the ITAA 1997.", "Date_of_Decision": "25 January 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 320 section 320-5 paragraph 320-15(1)(a) paragraph 320-15(1)(h) section 320-85 subsection 320-85(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Insurance & insurance industry Life insurance policies Life insurance company Accrual basis accounting Cash basis accounting", "Case_References": "Allen v. Thorn Electrical Industries Ltd. [1968] 1 QB 487 [1967] 2 All ER 1137", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200741", "Unmatched_Content": "Keywords Insurance & insurance industry Life insurance policies Life insurance company Accrual basis accounting Cash basis accounting"}
{"ATO_ID_Number": "ATO ID 2003/796", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of lump sum receipt on novation of hedging contracts", "Issue": "Does a taxpayer's right to receive a lump sum upon novation of commodity hedging contracts give rise to assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A taxpayer's right to receive a lump sum upon novation of commodity hedging contracts gives rise to assessable income under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer entered into various commodity hedge contracts to minimise the risk of price fluctuations arising from the sale of a commodity produced by the taxpayer's group members. This was the sole business activity of the taxpayer. In accordance with the taxpayer's business practices, the taxpayer may either buy the underlying commodity at the market price from its group members, or cash settle the commodity hedging contracts. The taxpayer exited the entirety of their commodity hedge contracts by novating their rights and obligations under each of those commodity hedge contracts to the 'New Party'. At the time of novation, the contract price at which the taxpayer was entitled to sell the underlying commodity, was more than the market price of the underlying commodity. In order to obtain the rights and obligations arising under the commodity hedge contracts, the New Party made a lump sum payment to the taxpayer equal to the difference between the market price of the commodity and the hedge contract price.", "Reasons_for_Decision": "Summary: Whether the right to receive a lump sum upon novation of the hedging contracts gives rise to assessable income under section 6-5 of the ITAA 1997 depends upon whether the receipt is of a revenue character, and if it is, whether it can be said that a receipt has been derived at that time. In the present case, the taxpayer entered into the commodity hedging contracts in relation to its ordinary business activities. If those individual hedge contracts were held to maturity or closed out early, the taxpayer would derive assessable income from the delivery into the contracts of the commodity or via the cash settlement of those contracts. Notwithstanding that the taxpayer has terminated all of its commodity hedge contracts by novation, any amount received would constitute assessable income of the taxpayer, since the lump sum receipt on novation is a receipt which would otherwise be a series of revenue receipts that would be derived from the commodity hedge contracts. The character of such a receipt does not change because it is received in a lump sum. Accordingly, such a receipt would constitute a revenue receipt in the hands of the taxpayer (Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693). At the time of novation, a gain has 'come home' to the taxpayer. The taxpayer has a right without contingency to a quantifiable amount that is recoverable by action at that time and is not obligated to take any further steps to be entitled to payment ( Federal Commissioner of Taxation v. Australian Gas Light Co; 83 ATC 4800; (1983) 15 ATR 105; Arthur Murray (NSW) Pty Ltd v. Federal Commissioner of Taxation 114 CLR 314; 14 ATD 98; (1965) 9 AITR 673; Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73; 94 ATC 4280; (1994) 28 ATR 130; Barratt v. Federal Commissioner of Taxation (1992) 36 FCR 222; 92 ATC 4275; (1992) 23 ATR 339). Therefore, a taxpayer's right to receive a lump sum upon novation of commodity hedging contracts gives rise to assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "1 August 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commodity transactions Derived Financial derivatives Financial instruments Forward sales Forward transactions Hedging Novation Producing assessable income", "Case_References": "Arthur Murray (NSW) Pty Ltd v. Federal Commissioner of Taxation 114 CLR 314 14 ATD 98 (1965) 9 AITR 673", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003796", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Commodity transactions Derived Financial derivatives Financial instruments Forward sales Forward transactions Hedging Novation Producing assessable income"}
{"ATO_ID_Number": "ATO ID 2007/101", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: deductible balancing adjustment amount for plant started to be constructed before 1 July 2001", "Issue": "Can the taxpayer deduct an amount under subsection 40-285(2) of the Income Tax Assessment Act 1997 (ITAA 1997) equal to the cost to it of constructing plant on land it leases under a sublease agreement at the time the taxpayer terminates the sublease?", "Decision": "No. The taxpayer cannot deduct any amount under subsection 40-285(2) of the ITAA 1997 because Division 40 of the ITAA 1997 does not apply to plant whose construction started before 1 July 2001, nor had the taxpayer deducted amounts for plant under the depreciation provisions in former Division 42 of the ITAA 1997, nor could the taxpayer have deducted amounts under that Division for the plant if the taxpayer had used it, or had it installed ready for use, for the purpose of producing assessable income before 1 July 2001.", "Facts": "The taxpayer subleased land from an entity (the sublessor) in 1995. The land was to be developed and used in the taxpayer's business. The sublessor is not an exempt Australian government agency or an exempt foreign government agency. The land was leased to the sublessor by an exempt Australian government agency. Subsequent to securing the sublease from the sublessor and during the remainder of 1995, the taxpayer incurred capital expenditure on constructing improvements on the site intended for use in its production process. The improvements were attached to the land. Problems encountered with the development of the site, together with the fact that significant further expenditure was required before production could start, caused the taxpayer to cease further development. The taxpayer had not deducted amounts for the plant under former Division 42 of the ITAA 1997. In 2007 the taxpayer terminated the sublease.", "Reasons_for_Decision": "Summary: An amount may be deducted under subsection 40-285(2) of the ITAA 1997 if: Division 40 of the ITAA 1997 applies to depreciating assets a taxpayer constructed if the construction started after 30 June 2001. However, section 40-10 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997) ensures that Division 40 of the ITAA 1997 applies to certain plant held by a taxpayer at 1 July 2001, or of which a taxpayer was the owner or quasi-owner at the end of 30 June 2001. In particular, Section 40-10 of the IT(TP)A 1997 applies if, among other things, the taxpayer: The taxpayer in this case started constructing the plant before 1 July 2001 and did not deduct amounts for it under former Division 42 of the ITAA 1997. Therefore, for section 40-10 of the IT(TP)A 1997 to apply to effectively transition the plant into Division 40 of the ITAA 1997, the taxpayer would need to have been able to deduct amounts for the plant under former Division 42 of the ITAA 1997 if the taxpayer had used it, or had it installed ready for use, for the purpose of producing assessable income before 1 July 2001. The depreciation provisions in former Division 42 of the ITAA 1997 applied to assessments for the 1997-98 income year and later income years until the introduction of Division 40 of the ITAA 1997 which took effect on 1 July 2001. To deduct an amount for depreciation of plant for an income year under former Division 42 of the ITAA 1997, the taxpayer must have been the owner or quasi-owner of the plant in that year (former section 42-15 of the ITAA 1997). The common law principle is that if an improvement is attached to land, it becomes part of the land and is legally owned by the landowner. In this case the taxpayer is not the owner of the plant attached to the land as the taxpayer does not own the subleased land. The meaning of 'quasi-owner' relevant to this case is contained in former section 42-310 of the ITAA 1997. Under that section, a taxpayer is a quasi-owner of plant only if, among other things, the plant is attached to land the taxpayer holds under a quasi-ownership right granted by an exempt Australian government agency or an exempt foreign government agency. For the purpose of former Division 42 of the ITAA 1997, a quasi-ownership right over land means a lease of the land; an easement in connection with the land; or any other right, power or privilege over the land, or in connection with the land (subsection 995-1(1) of the ITAA 1997). This same definition of quasi-ownership right over land applies for the purposes of Division 40 of the ITAA 1997. Relevantly, paragraph 1.41 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001, which introduced Division 40 of the ITAA 1997 states (at paragraph 1.41): An entity has a quasi-ownership right if it is the successive owner of such a right. For example, a sublessee will have a quasi-ownership right. The quasi-ownership right need not be held from an Australian government or government agency, a requirement for depreciation under the current law. As the taxpayer in this case holds a sublease of the subject land, it has a quasi-ownership right over the land. However, to be the quasi-owner of plant under former section 42-310 of the ITAA 1997, the taxpayer's quasi-ownership right over land must have been granted by an exempt Australian government agency or an exempt foreign government agency. The former meaning of 'exempt Australian government agency' in subsection 995-1(1) of the ITAA 1997 was: The meaning of 'exempt foreign government agency' in subsection 995-1(1) of the ITAA 1997 covers certain governments and authorities of governments of foreign countries. The lease of the subject land to the sublessor was granted by an exempt Australian government agency. However, the sublessor is not itself an exempt Australian government agency or an exempt foreign government agency. Former section 54AA of the Income Tax Assessment Act 1936 (ITAA 1936) provided that a taxpayer who was the lessee of land under a Crown lease and who installed property on the land was the deemed owner of the property for the purposes of the former depreciation provisions in the ITAA 1936. Since the meaning of 'lessee of land under a Crown lease' in that section was effectively adopted by former Division 42 of the ITAA 1997 as the meaning of 'quasi-owner' when that Division replaced the depreciation provisions in the ITAA 1936, it is relevant to consider the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 1992, which inserted a number of amendments to former section 54AA of the ITAA 1936 to broaden its application. That Explanatory Memorandum stated: Also covered are \"sub-interests\" in land such as sub-leases and licences in relation to easements. For instance, a Commonwealth authority may hold a lease of land granted by a State and a sub-lease of that land granted by the authority would constitute a Crown lease. Similarly, a State authority may hold an easement over private lands for the purposes of installing water or gas pipes. A licence or other right in relation to that easement granted by the authority will again constitute a Crown lease. It is clear from the examples given in the Explanatory Memorandum that, while a Crown lease could include 'sub-interests' such as a sublease of land and a licence in relation to an easement, it was necessary that the sublease or licence be granted by (in the language of the ITAA 1936 provision) an 'eligible government body' (the equivalent of 'exempt Australian government agency' and 'exempt foreign government agency' for the purposes of former Division 42 of the ITAA 1997). In this case, as the sublease of the subject land was not granted to the taxpayer by an exempt Australian government agency or an exempt foreign government agency, the taxpayer is not the quasi-owner of the plant for the purpose of former Division 42 of the ITAA 1997. As the taxpayer is neither the owner nor the quasi-owner for the purpose of former Division 42 of the ITAA 1997, it follows that it could not have deducted amounts under that Division for the plant, even if it had been used, or installed ready for use, for the purpose of producing assessable income before 1 July 2001. This means that Division 40 of the ITAA 1997 does not apply to the plant and at the time the taxpayer, by terminating the sublease, stops holding the land under a quasi-ownership right, it will not be entitled to any deduction under subsection 40-285(2) of the ITAA 1997.", "Date_of_Decision": "2 March 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 54AA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Balancing adjustment deduction Grant of quasi ownership of plant Plant attached to land Quasi owner of plant Quasi-ownership right Uniform capital allowances system", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 1992", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007101", "Unmatched_Content": "Keywords Balancing adjustment deduction Grant of quasi ownership of plant Plant attached to land Quasi owner of plant Quasi-ownership right Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2003/185", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: deductible balancing adjustment if a depreciating asset is not used", "Issue": "Is a taxpayer entitled to a deduction under subsection 40-285(2) of the Income Tax Assessment Act 1997 (ITAA 1997) without any reduction under section 40-290 of the ITAA 1997 if a depreciating asset that was acquired for use for a taxable purpose is sold for less than its cost before it is used, or installed ready for use, for any purpose?", "Decision": "Yes. If a depreciating asset is sold before it has been used, or installed ready for use, for less than its cost an amount can be deducted under subsection 40-285(2) of the ITAA 1997. Section 40-290 of the ITAA 1997 will not reduce the amount of that deduction.", "Facts": "A taxpayer purchased a number of machines, as part of a bona fide plan to establish a business. The machines were delivered to the taxpayer's premises, but put aside until refurbishment of the premises was completed and the equipment could be installed. During the refurbishment process, the taxpayer's application to local council to operate the business was not approved and the taxpayer was unable to go ahead with the plan. Each machine was subsequently sold for less than its cost. For example, a machine that cost $5,000 was sold for $4,000.", "Reasons_for_Decision": "Summary: An amount may be deducted under subsection 40-285(2) of the ITAA 1997 if: The amount to be deducted is the difference between those amounts. Subsection 40-290(1) of the ITAA 1997 reduces the amount worked out under section 40-285 of the ITAA 1997 if deductions for the decline in value for the depreciating asset have been reduced under section 40-25 of the ITAA 1997. Subsection 40-25(2) of the ITAA 1997 reduces deductions for decline in value where the depreciating asset is not used wholly for a taxable purpose. Each machine is a depreciating asset within the definition in section 40-30 of the ITAA 1997. If they had been used, or installed ready for use, for any purpose the decline in value would have been worked out under Subdivision 40-B of the ITAA 1997. A balancing adjustment event has occurred for the machines because the taxpayer stopped holding them when they were sold (paragraph 40-295(1)(a) of the ITAA 1997). Therefore an amount is deductible under subsection 40-285(2) of the ITAA 1997 subject to any reduction under section 40-290 of the ITAA 1997. A depreciating asset does not start to decline in value until its start time occurs, which is generally when it is first used, or installed ready for use, by a taxpayer for any purpose (section 40-60 of the ITAA 1997). The adjustable value of a depreciating asset that has not started to decline in value is the cost of the asset (paragraph 40-85(1)(a) of the ITAA 1997). There has been no reduction in the deduction for the decline in value of the machines under section 40-25 of the ITAA 1997 because they have not started to decline in value. Therefore section 40-290 of the ITAA 1997 does not reduce the amount of the deduction under subsection 40-285(2) of the ITAA 1997. In the example the machine's adjustable value is its cost, being $5,000. The termination value of the machine is $4,000, being the amount received for it (subsection 40-305(1) of the ITAA 1997). A deduction for the amount of $1,000 is therefore available under subsection 40-285(2) of the ITAA 1997.", "Date_of_Decision": "30 January 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-25 Subsection 40-25(2) Section 40-30 Section 40-60 Paragraph 40-85(1)(a) Subsection 40-285 Subsection 40-285(2) Section 40-290 Subsection 40-290(1) Paragraph 40-295(1)(a) Subsection 40-305(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003-186", "Subject_References": "Balancing adjustment deduction Balancing adjustment event Taxable purpose", "Case_References": "", "Other_References": "Guide to Depreciating Assets 2013 NAT 1996", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003185", "Unmatched_Content": "Updated reference name and NAT details. | Removed 'Captital Allowances CoE' | Keywords Balancing adjustment deduction Balancing adjustment event Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2003/186", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: assessable balancing adjustment if a depreciating asset is not used", "Issue": "Is a taxpayer required to include an amount in assessable income under subsection 40-285(1) of the Income Tax Assessment Act 1997 (ITAA 1997) without any reduction under section 40-290 of the ITAA 1997 if a depreciating asset that was acquired for use for a taxable purpose is sold for more than its cost before it is used, or installed ready for use, for any purpose?", "Decision": "Yes. If a depreciating asset is sold before it has been used, or installed ready for use, for more than its cost an amount must be included in assessable income under subsection 40-285(1) of the ITAA 1997. Section 40-290 of the ITAA 1997 will not reduce the amount to be included.", "Facts": "A taxpayer purchased a number of machines, as part of a bona fide plan to establish a business. The machines were delivered to the taxpayer's premises, but put aside until refurbishment of the premises was completed and the equipment could be installed. During the refurbishment process, the taxpayer's application to local council to operate the business was not approved and the taxpayer was unable to go ahead with the plan. Each machine was subsequently sold for more than its cost. For example, a machine that cost $5,000 was sold for $6,000.", "Reasons_for_Decision": "Summary: An amount is included in assessable income under subsection 40-285(1) of the ITAA 1997 if: Subsection 40-290(1) of the ITAA 1997 reduces the amount worked out under section 40-285 of the ITAA 1997 if deductions for the decline in value for the depreciating asset have been reduced under section 40-25 of the ITAA 1997. Subsection 40-25(2) of the ITAA 1997 reduces deductions for decline in value where the depreciating asset is not used wholly for a taxable purpose. Each machine is a depreciating asset within the definition in section 40-30 of the ITAA 1997. If they had been used, or installed ready for use, for any purpose the decline in value would have been worked out under Subdivision 40-B of the ITAA 1997. A balancing adjustment event has occurred for the machines because the taxpayer stopped holding them when they were sold (paragraph 40-295(1)(a) of the ITAA 1997). Therefore an amount is to be included in assessable income under subsection 40-285(1) of the ITAA 1997 subject to any reduction under section 40-290 of the ITAA 1997. A depreciating asset does not start to decline in value until its start time occurs, which is generally when it is first used, or installed ready for use, by a taxpayer for any purpose (section 40-60 of the ITAA 1997). The adjustable value of a depreciating asset that has not started to decline in value is the cost of the asset (paragraph 40-85(1)(a) of the ITAA 1997). There has been no reduction in the deduction for the decline in value of the machines under section 40-25 of the ITAA 1997 because they have not started to decline in value. Therefore section 40-290 of the ITAA 1997 does not reduce the amount included in assessable income under subsection 40-285(1) of the ITAA 1997. In the example the machine's adjustable value is its cost, being $5,000. The termination value of the machine is $6,000, being the amount received for it (subsection 40-305(1) of the ITAA 1997). The assessable amount under subsection 40-285(1) of the ITAA 1997 is $1,000.", "Date_of_Decision": "30 January 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-25 Subsection 40-25(2) Section 40-30 Section 40-60 Paragraph 40-85(1)(a) Subsection 40-285 Subsection 40-285(1) Section 40-290 Subsection 40-290(1) Paragraph 40-295(1)(a) Subsection 40-305(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/185", "Subject_References": "Assessable balancing adjustment amount Balancing adjustment event Taxable purpose", "Case_References": "", "Other_References": "Guide to Depreciating Assets 2013 NAT 1996", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003186", "Unmatched_Content": "Other references and Keywords | Keywords Assessable balancing adjustment amount Balancing adjustment event Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2003/461", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment - pre-CGT depreciating asset disposed of after 30 June 2001", "Issue": "Does subsection 40-285(5) of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997) apply to reduce an amount included in the taxpayer's assessable income under subsection 40-285(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer has acquired an item of plant before 20 September 1985?", "Decision": "Yes. The amount included in the taxpayer's assessable income under subsection 40-285(1) of the ITAA 1997 is reduced as the item of plant was acquired before 11.45 am, by the legal time in the Australian Capital Territory on 21 September 1999 and the capital gain or loss would have been disregarded under Part 3-1 of the ITAA 1997 as the item of plant is a pre-CGT asset at the time of the balancing adjustment event under subparagraph 40-285(5)(b)(iv) of the IT(TP)A 1997.", "Facts": "A taxpayer purchased an item of plant before 20 September 1985 for $15,000. The taxpayer used the item of plant wholly for a taxable purpose. The item of plant was sold after 30 June 2001 for $18,000. The adjustable value of the item of plant is nil.", "Reasons_for_Decision": "Summary: Subsections 40-285(1) and 40-285(4) of the IT(TP)A 1997 provides that depreciating assets held on 1 July 2001 will be subject to the balancing adjustment provisions under Division 40 of the ITAA 1997. Subsection 40-285(1) of the ITAA 1997 applies to a balancing adjustment event that occurs after 30 June 2001 on a depreciating asset whose decline in value is or would have been worked out under Subdivision 40-B of the ITAA 1997. Paragraph 40-285(1)(b) of the ITAA 1997 provides that the amount to be included in assessable income is the difference between the asset's termination value and its adjustable value. Subparagraph 40-285(5)(b)(iv) of the IT(TP)A 1997 provides transitional measures if any capital gain or capital loss would be disregarded because the asset was a pre-CGT asset at the time of the balancing adjustment event. The assessable balancing adjustment amount calculated under subsection 40-285(1) of the ITAA 1997 is reduced by the following formula as contained in subsection 40-285(6) of the IT(TP)A 1997: [Termination value - Cost] x [1 - (Sum of reductions / Total decline)] As the depreciating asset was a pre-CGT asset at the time of the balancing adjustment event, the assessable balancing adjustment amount calculated under subsection 40-285(1) of the ITAA 1997 is reduced by an amount as calculated under the formula contained in subsection 40-285(6) of the IT(TP)A 1997. In general, a pre-CGT asset is an asset that was acquired before 20 September 1985 under Part 3-1 of the ITAA 1997. In this case, the balancing adjustment amount to be included in the taxpayer's assessable income as calculated under subsection 40-285(1) of the ITAA 1997 is $18,000, being the difference between $18,000 and $0. However, as the item of plant is a pre-CGT asset as it was acquired before 20 September 1985, subsection 40-285(5) of the IT(TP)A 1997 will have the effect of reducing the balancing adjustment amount by an amount as calculated under the formula contained in subsection 40-285(6) of the IT(TP)A 1997. The reduction amount as worked out using the formula is: $18,000 - $15,000 X (1 - ($0/$15,000)) = $3,000 X 1 = $3,000. Therefore, the amount to be included by the taxpayer in their assessable income in respect of the item of plant is $15,000 - that is, $18,000 minus $3,000.", "Date_of_Decision": "11 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-285(1) paragraph 40-285(1)(b) Subdivision 40-B Division 40 Part 3-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Adjustable value of a depreciating asset Balancing adjustment event Balancing adjustments Termination value", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003461", "Unmatched_Content": "Sum of reductions is the sum of the reductions in your deductions for the asset because you did not use it for a particular purpose. | Total decline is the decline in value of the depreciating asset since you started to hold it. | Keywords Adjustable value of a depreciating asset Balancing adjustment event Balancing adjustments Termination value"}
{"ATO_ID_Number": "ATO ID 2002/617", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Uniform Capital Allowances - Balancing adjustment on the death of the owner of a depreciating asset.", "Issue": "What is the balancing adjustment amount under section 40-285 of the Income Tax Assessment Act 1997 (ITAA 1997) for the owner of a depreciating asset when the asset passes to the legal personal representative on the death of the owner?", "Decision": "The balancing adjustment amount worked out under section 40-285 of the ITAA 1997 is nil.", "Facts": "The taxpayer, a sole trader, purchased a depreciating asset costing $20,000 on 28 August 2001. The decline in value of the asset was worked out under Subdivision 40-B of the ITAA 1997. The taxpayer used the asset solely for the purpose of producing assessable income. The taxpayer died on 28 February 2002 and the asset passed to the legal personal representative. At the time of death, the asset's adjustable value was $17,000.", "Reasons_for_Decision": "Summary: The taxpayer stopped holding the asset at the time of their death. Accordingly, a balancing adjustment event occurred for the asset under paragraph 40-295(1)(a) of the ITAA 1997. To work out the balancing adjustment amount, section 40-285 of the ITAA 1997 requires a comparison of the asset's termination value and its adjustable value just before the balancing adjustment event occurred. If the termination value is more than the adjustable value, the excess is included in the assessable income under subsection 40-285(1) of the ITAA 1997 as an assessable balancing adjustment amount. If the termination value is less than the adjustable value, the difference can be deducted under subsection 40-285(2) of the ITAA 1997 as a deductible balancing adjustment amount. When the taxpayer stopped holding the asset and the asset passed to the legal personal representative, item 9 of the termination value table in subsection 40-300(2) of the ITAA 1997 provides that the termination value of the asset is its adjustable value at the time of death (ie $17,000). As the termination value and the adjustable value are the same, the balancing adjustment amount is nil. Consequently, there is no amount to be either included in assessable income under subsection 40-285(1) of the ITAA 1997 or deducted under subsection 40-285(2) of the ITAA 1997. There are no capital gains tax implications for the asset because:", "Date_of_Decision": "5 April 2002", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-B section 40-285 subsection 40-285(1) subsection 40-285(2) paragraph 40-295(1)(a) item 9, subsection 40-300(2) section 104-235 subsection 118-24(1) subsection 118-24(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/618 | ATO ID 2002/619", "Subject_References": "Balancing adjustment event Termination value Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002617", "Unmatched_Content": "Replace 'depreciable asset' with 'depreciating asset' for consistency | Replace references to 'Mr A' with 'the taxpayer' for consistency | Insert explanations of the calculation of the balancing adjustment amount and when it is assessable or deductible | Insert reference to subsection 118-24(1) and 118-24(2) of the ITAA 1997 | Keywords Balancing adjustment event Termination value Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/618", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Uniform Capital Allowances - Depreciating asset passes from Legal Personal Representative (LPR) to a beneficiary", "Issue": "What is the balancing adjustment amount under section 40-285 of the Income Tax Assessment Act 1997 (ITAA 1997) for the LPR when the LPR passes a depreciating asset to a beneficiary of a deceased estate?", "Decision": "The balancing adjustment amount worked out under section 40-285 of the ITAA 1997 is $4,000.", "Facts": "A sole trader purchased a depreciating asset costing $20,000 on 28 August 2001. The decline in value of the asset was worked out under Subdivision 40-B of the ITAA 1997. The sole trader used the asset solely for the purpose of producing assessable income. When the sole trader died on 28 February 2002 the asset passed to the LPR. At the time of death the asset's adjustable value was $17,000. The LPR subsequently passed the asset to a beneficiary of the sole trader's estate. The market value of the asset just before the LPR stopped holding it was $21,000. The LPR did not use the asset, or have it installed ready for use, for any purpose.", "Reasons_for_Decision": "Summary: The LPR stopped holding the asset at the time the asset passed to the beneficiary. Accordingly, a balancing adjustment event occurred for the asset under paragraph 40-295(1)(a) of the ITAA 1997. To work out the balancing adjustment amount, section 40-285 of the ITAA 1997 requires a comparison of the asset's termination value with its adjustable value just before the balancing adjustment event occurred. If the termination value is more than the adjustable value, the excess is included in the assessable income under subsection 40-285(1) of the ITAA 1997 as an assessable balancing adjustment amount. If the termination value is less than the adjustable value, the difference can be deducted under subsection 40-285(2) of the ITAA 1997 as a deductible balancing adjustment amount. The LPR did not use the asset, or have it installed ready for use, for any purpose. In these circumstances, paragraph 40-85(1)(a) of the ITAA 1997 provides that the adjustable value of the asset in the hands of the LPR is its cost. Section 40-175 of the ITAA 1997 provides that the cost of an asset consists of two elements. Where a depreciating asset passes to an LPR because a person dies, item 12 of the table in subsection 40-180(2) of the ITAA 1997 specifies that the first element of the cost of the asset is the asset's adjustable value at the time of death. In this case there is no second element of cost. Consequently, the adjustable value of the asset in the hands of the LPR is $17,000. The passing of the asset from the LPR to the beneficiary was not a dealing between persons at arm's length. Accordingly, item 6 of the termination value table in subsection 40-300(2) of the ITAA 1997 specifies that the termination value of the asset is its market value just before the LPR stopped holding it (ie $21,000). As the asset's termination value is more than its adjustable value, the difference between the termination value of $21,000 and the adjustable value of $17,000 (ie $4,000) is an assessable balancing adjustment amount that is included in the LPR's assessable income under subsection 40-285(1) of the ITAA 1997. There are no capital gains tax implications for the asset as a result of its passing from the LPR to the beneficiary because:", "Date_of_Decision": "05 April 2002", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-B paragraph 40-85(1)(a) section 40-175 item 12, subsection 40-180(2) section 40-285 subsection 40-285(1) subsection 40-285(2) paragraph 40-295(1)(a) item 2, subsection 40-300(2) section 104-235 subsection 118-24(1) subsection 118-24(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/617 | ATO ID 2002/619", "Subject_References": "Assessable balancing adjustment amount Balancing adjustment event Cost of a depreciating asset First element of cost Legal personal representatives Termination value Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002618", "Unmatched_Content": "Insert explanations of the calculation of the balancing adjustment amount and when it is assessable or deductible Expand the explanation on calculation of the cost and consequently the adjustable value Condense the explanation on CGT event K7 | Insert reference to Division 40, section 40-175 and subsection 118-24(2) Delete references to paragraph 40-195(1)(a), subparagraph 40-285(1)(a)(ii) and subparagraph 40-285(2)(a)(ii) | Insert additional keywords | Keywords Assessable balancing adjustment amount Balancing adjustment event Cost of a depreciating asset First element of cost Legal personal representatives Termination value Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/619", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Uniform Capital Allowances - Disposal of depreciating asset by a beneficiary of a deceased estate", "Issue": "What is the balancing adjustment amount under section 40-285 of the Income Tax Assessment Act 1997 (ITAA 1997) for a beneficiary who disposes of a depreciating asset inherited from a deceased estate?", "Decision": "The balancing adjustment amount worked out under section 40-285 of the ITAA 1997 is nil.", "Facts": "A sole trader purchased a depreciating asset costing $20,000 on 28 August 2001. The decline in value of the asset was worked out under Subdivision 40-B of the ITAA 1997. The sole trader used the asset solely for the purpose of producing assessable income. When the sole trader died on 28 February 2002 the asset passed to the legal personal representative. The legal personal representative subsequently passed the asset to a beneficiary of the sole trader's estate. The market value of the asset at the time the beneficiary started to hold it was $21,000. The beneficiary soon sold the asset for $21,000. Neither the legal personal representative nor the beneficiary used the asset, or had it installed ready for use, for any purpose.", "Reasons_for_Decision": "Summary: The beneficiary stopped holding the asset at the time it was sold. Accordingly, a balancing adjustment event occurred for the asset under paragraph 40-295(1)(a) of the ITAA 1997. To work out the balancing adjustment amount, section 40-285 of the ITAA 1997 requires a comparison of the asset's termination value with its adjustable value just before the balancing adjustment event occurred. The beneficiary did not use the asset, or have it installed ready for use, for any purpose. In these circumstances, paragraph 40-85(1)(a) of the ITAA 1997 provides that the adjustable value of the asset in the hands of the beneficiary is its cost. Section 40-175 of the ITAA 1997 provides that the cost of an asset consists of two elements. Where a beneficiary starts to hold an asset inherited from a deceased estate, item 13 of the table in subsection 40-180(2) of the ITAA 1997 specifies that the first element of the cost of the asset to the beneficiary is the asset's market value when the beneficiary started to hold it, reduced by any capital gain in relation to the asset that was disregarded by the deceased under section 128-10 of the ITAA 1997 or by the legal personal representative under subsection 128-15(3) of the ITAA 1997. Generally, section 128-10 of the ITAA 1997 and subsection 128-15(3) of the ITAA 1997 will apply to disregard a capital gain in relation to a depreciating asset if one of the exclusions in subsection 118-24(2) of the ITAA 1997 applies. One of the exclusions is when the capital gain or capital loss is made from CGT event K7 (section 104-235 of the ITAA 1997) happening. As the sole trader used the asset solely for the purposes of producing assessable income and the legal personal representative did not use the asset, or have it installed ready for use, for any purpose, CGT event K7 did not happen to the asset. The other exclusions in subsection 118-24(2) of the ITAA 1997 also do not apply. As a result, there was no capital gain for either to disregard. Accordingly, the first element of the cost of the asset is its market value at the time the beneficiary started to hold it (ie $21,000). In this case there is no second element of cost and the adjustable value of the asset in the hands of the beneficiary is $21,000. When the beneficiary sells the asset, under paragraph 40-300(1)(b) of the ITAA 1997, the termination value of the asset is the amount the beneficiary is taken to have received under section 40-305 of the ITAA 1997. In this case, it is the amount the beneficiary received (ie $21,000). As the termination value and the adjustable value of the asset are the same, the balancing adjustment amount worked out under section 40-285 is nil. There are no capital gains tax implications for the disposal of the asset by the beneficiary for the following reasons:", "Date_of_Decision": "05 April 2002", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-B paragraph 40-85(1)(a) section 40-175 item 13, subsection 40-180(2) section 40-285 paragraph 40-295(1)(a) paragraph 40-300(1)(b) section 40-305 section 104-235 subsection 118-24(1) subsection 118-24(2) section 128-10 subsection 128-15(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/617 | ATO ID 2002/618", "Subject_References": "Balancing adjustment event Cost of a depreciating asset First element of cost Termination value Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002619", "Unmatched_Content": "Insert explanation of the calculation of the amount of balancing adjustment Expand on explanation of the calculation of adjustable value and termination value | Insert reference to Division 40, Subdivision 40-B, section 40-175, paragraph 40-300(1)(b), section 40-305, and subsection 118-24(2) Delete references to item 1, subsection 40-305(1) | Insert additional keywords | Keywords Balancing adjustment event Cost of a depreciating asset First element of cost Termination value Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2012/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating assets - grant of indefeasible right of use", "Issue": "When the taxpayer enters into an Indefeasible Right of Use (IRU) agreement giving indefeasible rights to use a telecommunications cable system held by the taxpayer, permitting traffic on that system up to the permitted right to use and so allocating that amount of capacity of the telecommunications cable system, are the depreciating assets that are held by the taxpayer and that form the cable system split into two or more separate assets for the purposes of Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) by application of section 40-115 of the ITAA 1997?", "Decision": "No. When the taxpayer enters into an IRU agreement giving indefeasible rights to use of a telecommunications cable system, the depreciating assets (such as each segment of the cable system) that are held by the taxpayer and that form the cable system are not split into two or more separate assets for the purposes of Division 40 of the ITAA 1997 by section 40-115 of the ITAA 1997 or otherwise.", "Facts": "The taxpayer owns a telecommunications cable system. For the purposes of section 40-30 of the ITAA 1997 the telecommunications cable system is made up of separate depreciating assets. Each separate segment of the cable system, being the segment that operates to carry information from one place where information carried by the system is input to and provided by the system to the next such place in the system, is a composite item that is a separate depreciating asset whose components are not in that context separate depreciating assets. For the purposes of section 40-40 of the ITAA 1997 each depreciating asset (each segment of the cable system) is held by the taxpayer. The taxpayer enters into IRU agreements with other parties who wanted IRUs to send and receive data by means of the system, and so wanted to be able to provide traffic on the system up to the agreed amount of capacity of the telecommunications cable system. The taxpayer's holding of the depreciating assets making up the telecommunications cable system for the purposes of section 40-40 of the ITAA 1997 is unaffected by the taxpayer's grant of an IRU. The taxpayer charges each grantee of an IRU in respect of the administration and maintenance of the telecommunications cable system. The taxpayer is able to enter into further IRU agreements to provide IRUs to use the telecommunications cable system, each assuring rights to carry information and so providing some of the capacity of the cable system.", "Reasons_for_Decision": "Summary: When a depreciating asset is split into two or more depreciating assets so that section 40-115 of the ITAA 1997 applies, the taxpayer no longer holds the original asset; instead the taxpayer now holds the assets into which the original asset has been split. In the context of Division 40 of the ITAA 1997, the splitting of a depreciating asset occurs when there is a change in how it is employed such that it is considered to decline in value as at least two other assets. Following the split it would reasonably be expected that future employment of the resulting assets affects a separate decline in value of the assets through and over the time of their separate use, such that the calculation of each decline would be separate (though the rates of decline of each asset might still coincide). For most tangible assets, a physical separation or division of the original asset into two or more physical assets might ordinarily be expected. However, subsection 40-115(3) of the ITAA 1997 recognises that the splitting of a depreciating asset that is an item of intellectual property can occur when you grant or assign an interest in your asset. For example, under the law governing patents a patent may be partially assigned for a place in, or a part of, the patent area (see Section 14(2) of the Patents Act 1990 ) effectively splitting the patent (previously a single depreciating asset) into the part assigned and the remainder of the patent. Where this occurs the grant or assignment of the interest amounts to a division of the original rights held in the item of intellectual property including division as to time, place and the class of acts or acts permitted. Where this occurs, subsection 40-115(3) of the ITAA 1997 has application. Although the IRU over the cable system granted by the taxpayer amounts in a sense to an economic ownership interest over some of the transmission capacity of the cable system, and the IRU is itself recognised under paragraph 40-30(2)(e) of the ITAA 1997 as a depreciating asset, it does not represent a split or division of the physical depreciating assets the taxpayer holds and whose available transmission capacity has been allocated to some extent by the grant of the IRU. The taxpayer holds each separate segment of the cable system that is operated to carry information from one place to the next in the system. These segments of the cable system have not been physically separated or divided into two or more separate assets. They are depreciating assets that decline in value over the time they are employed in the cable system, and not differently according to the period of any IRU or IRUs. The taxpayer's holding interest in the depreciating assets making up the cable system is its holding of segments of the cable system which are operated to carry information from one place to the next in the system. The taxpayer continues to use these segments of the cable system it holds by obtaining fees from the grantee in respect of use, administration and maintenance of the cable system. The taxpayer is also able to enter into further IRU agreements to provide access to capacity of the cable system. Consequently when the taxpayer enters into an IRU agreement for rights of access to some of the capacity of the cable system, the depreciating assets held by the taxpayer and that form the cable system are not split into two or more separate assets and therefore section 40-115 of the ITAA 1997 has no application in this circumstance.", "Date_of_Decision": "1 May 2012", "Year_of_Income": "year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-30 Paragraph 40-30(2)(e) section 40-40 section 40-115 subsection 40-115(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/1 | ATO ID 2011/2", "Subject_References": "Depreciating assets Indefeasible right to use Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201238", "Unmatched_Content": "Keywords Depreciating assets Indefeasible right to use Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2008/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event where a service provider gives up cable and cable support equipment to another entity", "Issue": "Does a balancing adjustment event occur for a depreciating asset under subsection 40-295(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where a taxpayer gives up cable and cable support equipment they provided in the course of constructing and installing an interconnection facility?", "Decision": "No. A balancing adjustment event does not occur under subsection 40-295(1) of the ITAA 1997 because the cable and cable support infrastructure given up in the course of constructing and installing an interconnection facility was not, before being given up, a depreciating asset held by a taxpayer.", "Facts": "The taxpayer carries on the business of a service provider. In order to establish and expand its business it entered into an agreement with another entity to create a service capability. To create this capability, the taxpayer was required to connect its network to the other entity's network. The taxpayer incurs expenditure on labour and materials, including cables and cable support equipment, in order to design, build and install an interconnection facility to connect its network with the other entity's network. The interconnection facility is a depreciating asset. Under the agreement, both the taxpayer and the other entity have access to the interconnection facility which is established on the other entity's premises. Property in and title to the material installed in the other entity's premises is retained by the taxpayer with the exception of certain cables and cable support equipment which becomes the property of the other entity upon installation.", "Reasons_for_Decision": "Summary: Subsection 40-295(1) of the ITAA 1997 states that a balancing adjustment event occurs for a depreciating asset if: For a balancing adjustment event to occur for a depreciating asset under subsection 40-295(1) of the ITAA 1997, the taxpayer must have first held a depreciating asset. A depreciating asset is broadly defined in subsection 40-30(1) of the ITAA 1997 as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. At any relevant time before the cable and cable support equipment was installed ready for use, the uncompleted work was not in a condition that enabled it to function or to be used as a depreciating asset. It therefore would not be considered to be a depreciating asset. At the time the taxpayer acquired the completed interconnection facility, it did not contain the cable and cable support equipment. The subsequent completion of cable and cable support equipment enabled it to be recognised as a depreciating asset. However, upon completion it was held by the other entity and not the taxpayer. At the time the other entity acquired the completed cable and cable support equipment, it was a different asset from that held by the taxpayer. Consequently, a balancing adjustment event does not occur under subsection 40-295(1) of the ITAA 1997 where the taxpayer gives up cable and cable support equipment they provided in the course of constructing and installing an interconnection facility.", "Date_of_Decision": "27 July 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-30(1) subsection 40-295(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/91 | ATO ID 2008/93", "Subject_References": "Balancing adjustment event Hold a depreciating asset Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200892", "Unmatched_Content": "Keywords Balancing adjustment event Hold a depreciating asset Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2006/168", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event occurring on the granting of a licence to exploit a patented invention", "Issue": "Does a balancing adjustment event occur for a depreciating asset under section 40-295 of the Income Tax Assessment Act 1997 (ITAA 1997) when an entity is granted a licence to exploit another entity's patent?", "Decision": "Yes. A balancing adjustment event occurs for a depreciating asset under section 40-295 of the ITAA 1997 because company B is taken to have stopped holding part of a depreciating asset.", "Facts": "Company A (non-resident of Australia for taxation purposes) enters into a licence agreement with company B (resident for taxation purposes) for the exploitation by company A of company B's patented invention. Company B retains all propriety rights to the patent while company A is granted exclusive rights to exploit the invention protected by the patent in a foreign jurisdiction for a fixed period of time. The rights company A has been granted in respect of the licence agreement under foreign law are similar to the rights that would have been granted for such an agreement in Australia under Australian law.", "Reasons_for_Decision": "Summary: A balancing adjustment is required if a balancing adjustment event occurs for a depreciating asset whose decline is worked out under Subdivision 40-B of the ITAA 1997 (section 40-285 of the ITAA 1997). Paragraph 40-295(1)(a) of the ITAA 1997 provides that a balancing adjustment event occurs when an asset stops being held by an entity. For depreciating assets satisfying the definition of the term 'intellectual property' in subsection 995-1(1) of the ITAA 1997, the granting or assigning of an interest in the asset is treated as if the asset is split into two assets with the holder ceasing to hold the part of the original asset that represents the interest granted or assigned to the other entity (subsection 40-115(3) of the ITAA 1997). Therefore in the present case, company B's patent is split into: The rights that company A enjoys are recognised as an item of intellectual property (subsection 995-1(1) of the ITAA 1997) and company B has stopped holding that depreciating asset. Therefore, a balancing adjustment event occurs when the licence in the patent is granted to company A by company B.", "Date_of_Decision": "30 May 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-115(3) section 40-285 section 40-295 paragraph 40-295(1)(a) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/493 | ATO ID 2006/167 | ATO ID 2006/169", "Subject_References": "Balancing adjustment event Balancing adjustments Intellectual property rights Patents Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006168", "Unmatched_Content": "Keywords Balancing adjustment event Balancing adjustments Intellectual property rights Patents Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2006/327", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - 'section 73BA depreciating asset' - existing full-scale test model - discontinued use", "Issue": "Does a balancing adjustment event occur under paragraph 40-295(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) for the existing full-scale test model of the taxpayer's 'section 73BA depreciating asset' if the taxpayer discontinues use of the test model because it could not operate in the manner required?", "Decision": "Yes. A balancing adjustment event does occur under paragraph 40-295(1)(b) of the ITAA 1997 for the existing test model of the taxpayer's 'section 73BA depreciating asset' because the taxpayer stopped using the asset, or having it installed ready for use, for any purpose and expected never to use it, or have it installed ready for use, again.", "Facts": "The taxpayer is an 'eligible company', as defined in subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936), that carries on 'research and development activities' (R&D activities) as defined in subsection 73B(1). The taxpayer has registered its R&D activities in the manner contemplated by subsection 73BD(1) of the ITAA 1936. The subject matter of the taxpayer's R&D activities is an item of equipment capable of performing a specific manufacturing process. The taxpayer's R&D activities encompass not only designing and developing the item of equipment but also testing the performance of the asset against the requisite specifications. As an integral part of the R&D activities, the taxpayer built a full-scale model of the item of equipment for the purpose of testing the asset's capacity to perform the specific manufacturing process at a commercially viable level. The test model is not an item of trading stock of the taxpayer and the expenditure on the test model does not represent 'feedstock expenditure' within the meaning of that term in subsection 73B(1) of the ITAA 1936. The test model was constructed after 29 January 2001 and no deduction under subsection 73B(15AA) of the ITAA 1936 is allowable in relation to it (see subsection 73B(15AAAA) of the ITAA 1936). However, testing revealed that the existing model could not operate in the manner required and that a major revision of the equipment's design and functionality was needed to successfully continue with the R&D activities. The existing test model is a 'section 73BA depreciating asset' as defined in section 73BB of the ITAA 1936 and the taxpayer started to hold that asset from when they first built it. For the period of time that the taxpayer utilised the asset for monitoring and testing purposes in its R&D activities, deductions under subsection 73BA(2) of the ITAA 1936 have been allowed. In view of the major revision required, any further use of the existing test model was abandoned in favour of building a completely new test model. As many of the components of the existing test model were of significant value, the existing test model was dismantled and those components of value retained and stored. Other less valuable components were discarded. Some of the components retained from the existing test model were ultimately used as components in the new test model even though both the functionality and physicality of the new test model were materially different to the existing test model.", "Reasons_for_Decision": "Summary: Section 73BF of the ITAA 1936 requires a balancing adjustment to be made to the assessable income of an 'eligible company' if a balancing adjustment event happens in relation to the company's 'section 73BA depreciating asset' and the taxpayer has been allowed deductions for the asset wholly under section 73BA of the ITAA 1936. Although not relevant here, if deductions for the taxpayer's asset have also been allowed under section 40-25 of the ITAA 1997, a balancing adjustment is also required to be made under section 40-285 (as modified by section 40-292) of the ITAA 1997. As stated in the facts, the taxpayer is an 'eligible company' and the existing test model is a 'section 73BA depreciating asset'. The taxpayer has been allowed deductions for the asset wholly under section 73BA of the ITAA 1936. A balancing adjustment event for the purposes of section 73BF of the ITAA 1936 has the meaning of that phrase in section 40-295 of the ITAA 1997. As far as is relevant here, paragraph 40-295(1)(b) of the ITAA 1997 states that a balancing adjustment event occurs for a depreciating asset if the holder of the asset stops using it, or having it installed ready for use, for any purpose and expects never to use it, or have it installed ready for use, again. When the existing test model could not operate in the manner required, the taxpayer decided that it could no longer be usefully employed to test the taxpayer's R&D activities. Consequently, a completely new test model was built by the taxpayer involving material differences in design, functionality and physicality. The taxpayer had no other use for the existing test model and, so, proceeded to dismantle it and discard some of its components. The fact that components of value were retained or that some of them were ultimately re-used in building the new test model does not detract from the view that the taxpayer permanently stopped using the existing test model, or having it installed for use, for any purpose and expected never to use it, or have it installed ready for use, again. Accordingly, a balancing adjustment event occurred under paragraph 40-295(1)(b) of the ITAA 1997 for the existing test model of the taxpayer's 'section 73BA depreciating asset'.", "Date_of_Decision": "25 August 2006", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(15AA) subsection 73B(15AAAA) section 73BA subsection 73BA(2) section 73BB subsection 73BD(1) section 73BF", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/328", "Subject_References": "Balancing adjustment event Depreciating assets Depreciating asset - section 73BA Research and development plant Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006327", "Unmatched_Content": "Keywords Balancing adjustment event Depreciating assets Depreciating asset - section 73BA Research and development plant Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2005/190", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - depreciating asset that failed to work - attempts to make the asset work were abandoned", "Issue": "Did a balancing adjustment event occur under paragraph 40-295(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) for a depreciating asset, which never worked and attempts to repair the asset were abandoned?", "Decision": "Yes. As the taxpayer had not used a depreciating asset, never had it installed ready for use and had decided never to use it, a balancing adjustment event occurred under paragraph 40-295(1)(c) of the ITAA 1997.", "Facts": "The taxpayer purchased a depreciating asset to be used in their business. The depreciating asset was to be used entirely for a taxable purpose. The depreciating asset failed to work from the time of purchase. Attempts to repair the depreciating asset were unsuccessful and the supplier refused to provide a replacement. The matter was then taken to Court and the taxpayer was successful, but the supplier went into liquidation before the taxpayer could enforce the Court's findings. The taxpayer decided not to continue to keep attempting to make the asset work, but continued to hold the asset.", "Reasons_for_Decision": "Summary: Paragraph 40-295(1)(c) of the ITAA 1997 provides that a balancing adjustment event occurs for a depreciating asset if the taxpayer has not used it and: A depreciating asset which does not work during the period that it is held by a taxpayer and proves to be unable to work cannot be said to have been used or installed ready for use during that period. Under these circumstances, the taxpayer's abandonment of attempts to repair the depreciating asset is evidence that a decision was made by the taxpayer to never use the asset. At the time of abandonment of attempts to make the asset work there occurred a balancing adjustment event under paragraph 40-295(1)(c) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 40-295(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Balancing adjustment event Depreciating asset Uniform capital allowances", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005190", "Unmatched_Content": "Title, Date of Decision, Keywords | Keywords Balancing adjustment event Depreciating asset Uniform capital allowances"}
{"ATO_ID_Number": "ATO ID 2004/261", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - demolition of depreciating asset", "Issue": "Does a balancing adjustment event occur for the taxpayer's depreciating asset under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) if the taxpayer demolishes the asset?", "Decision": "Yes. The demolition of the taxpayer's depreciating asset constitutes a balancing adjustment event occurring for the asset under paragraph 40-295(1)(a) of the ITAA 1997 because the taxpayer stops holding the asset.", "Facts": "The taxpayer affixed to their land a new depreciating asset to replace an older model of the asset. The new asset was installed at a different site on the land to the old asset. The old asset continued to be used until the new one was fully operational. Once replaced, it was necessary for safety reasons to remove the old depreciating asset. Removal of the old asset commenced almost immediately after the new asset became fully operational. Removing the old asset involved some dismantling by the taxpayer and some demolition by an external contractor.", "Reasons_for_Decision": "Summary: Subsection 40-295(1) of the ITAA 1997 states that a balancing adjustment event occurs for a depreciating asset if: In this case, the taxpayer is the legal owner of the old depreciating asset and a holder of it under item 10 of the table in section 40-40 of the ITAA 1997. The old asset ceased to exist once it was dismantled, demolished and removed in the circumstances described. That is, at the completion of this process, there is no depreciating asset for the taxpayer to hold. In these circumstances, the taxpayer stops holding the old depreciating asset causing a balancing adjustment event to occur for the asset under paragraph 40-295(1)(a) of the ITAA 1997.", "Date_of_Decision": "24 December 2003", "Year_of_Income": "Year ended 31 December 2003 Year ended 31 December 2004 Year ended 31 December 2005 Year ended 31 December 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 subsection 40-295(1) paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/259 | ATO ID 2004/260", "Subject_References": "Balancing adjustments Balancing adjustments on disposal of plant Capital Allowances CoE Termination value Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004261", "Unmatched_Content": "Keywords Balancing adjustments Balancing adjustments on disposal of plant Capital Allowances CoE Termination value Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2003/112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event on the theft of a depreciating asset", "Issue": "Does a balancing adjustment event occur for a depreciating asset under paragraph 40-295(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) on the theft of the asset?", "Decision": "No. The theft of a depreciating asset does not, of itself, constitute a balancing adjustment event occurring for the asset under paragraph 40-295(1)(b) of the ITAA 1997.", "Facts": "The taxpayer owned a depreciating asset at the time it was stolen. The taxpayer used the asset wholly for a taxable purpose. The asset was insured against the event of theft.", "Reasons_for_Decision": "Summary: Subsection 40-295(1) states that a balancing adjustment event occurs for a depreciating asset if: For a balancing adjustment event to occur for a depreciating asset under paragraph 40-295(1)(b) of the ITAA 1997, the taxpayer must stop using the asset (or having it installed ready for use) for any purpose and expect never to use it (or have it installed ready for use) again. While the theft of a depreciating asset would prevent immediate use of the asset by the taxpayer, there must also be an expectation that the asset will never be used (or installed ready for use) again. This requires an assessment of the prospects of recovery of the asset and of the asset being in a state capable of being used (or installed ready for use) again. The assessment must be carried out on a case by case basis. This means that the theft of a depreciating asset does not, of itself, immediately cause a balancing adjustment event to occur for the asset under paragraph 40-295(1)(b) of the ITAA 1997. Even though a balancing adjustment may occur for a stolen asset under paragraph 40-295(1)(b) of the ITAA 1997 the taxpayer may remain the legal owner of the asset and, therefore, a holder of it under Item 10 of the table in section 40-40 of the ITAA 1997.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 subsection 40-295(1) paragraph 40-295(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/782 | ATO ID 2003/110 | ATO ID 2003/111", "Subject_References": "Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Hold a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003112", "Unmatched_Content": "Related ATO Interpretative Decisions | Keywords Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Hold a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2003/218", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - amalgamation of incorporated associations", "Issue": "Did a balancing adjustment event occur, under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997), for a depreciating asset on the amalgamation of two incorporated associations under the Associations Incorporation Act 1981 (Qld) (AIA (Qld))?", "Decision": "Yes. A balancing adjustment event did occur, under paragraph 40-295(1)(a) of the ITAA 1997, for a depreciating asset on the amalgamation of two incorporated associations under the AIA (Qld).", "Facts": "A and B are unrelated incorporated associations under the AIA (Qld). A and B amalgamated under Part 9, Division 2 of the AIA (Qld) to form C, a new and legally separate incorporated association. A certificate of incorporation issued to C as a result of the amalgamation. The members of both A and B agreed to amalgamate from a certain date and to adopt their respective associations' existing common rules and constitution for C. The members of A and B also agreed to transfer or donate their respective associations' assets to C.", "Reasons_for_Decision": "Summary: Paragraph 40-295(1)(a) of the ITAA 1997 provides that a balancing adjustment event occurs for a depreciating asset if an entity stops holding the asset. A holder of an asset in any particular circumstance is set out in section 40-40 of the ITAA 1997. In the present case, A and B own their respective depreciating assets and are holders of them pursuant to Item 10 of the table in section 40-40 of the ITAA 1997. Section 79 of the AIA (Qld) defines an 'old association' to be an incorporated association that with one or other incorporated associations apply to form a new association. A 'new association' is defined in section 79 of the AIA (Qld) to be an incorporated association that is incorporated as a result of an application to amalgamate by at least two old associations. The legislation governing the amalgamation of associations does not provide for the continuation of the amalgamating entities (that is, A and B) within the form of the new entity (that is, C). The amalgamation is effected by the incorporation of a new association. Section 86 of the AIA (Qld) provides that upon the incorporation of a new association as a result of an amalgamation of old associations, the assets and liabilities of the old associations become the assets and liabilities of the new association. The transfer of A's and B's depreciating assets to the newly incorporated C causes A and B to stop holding their respective assets because ownership (and, in this case holding) of the assets passes to C. Consequently, a balancing adjustment event occurs under paragraph 40-295(1)(a) of the ITAA 1997 for the depreciating assets held by A and B.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-40 Paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/219 | ATO ID 2003/220 | ATO ID 2003/221", "Subject_References": "Balancing adjustments Balancing adjustment event Capital allowances CoE Depreciating assets Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003218", "Unmatched_Content": "Keywords Balancing adjustments Balancing adjustment event Capital allowances CoE Depreciating assets Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2003/625", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: use and balancing adjustment events", "Issue": "Has a balancing adjustment event occurred under section 40-295 of the Income Tax Assessment Act 1997 (ITAA 1997) for an employee use motor vehicle that is subsequently provided for the private use of the shareholders of a company upon cessation of trading?", "Decision": "No. A balancing adjustment event has not occurred under section 40-295 of the ITAA 1997. The company has not ceased to hold the vehicle and the provision of the vehicle to the shareholders constitutes a use of the vehicle by the company.", "Facts": "A company purchased a vehicle in the 2001-02 income year. The cost of the vehicle did not exceed the car limit of $55,134. The vehicle was provided to the two employee shareholders as a fringe benefit until 30 June 2002. On 30 June 2002 the company ceased business activity and has no intention of resuming. The company retains ownership of the vehicle, which from 1 July 2002, will be used solely for private purposes by the shareholders. All expenses relating to the vehicle will be paid directly by the shareholders.", "Reasons_for_Decision": "Summary: Section 40-295 of the ITAA 1997 provides that a balancing adjustment event occurs for a depreciating asset if you stop holding the asset; or you stop using it, or having it installed ready for use, for 'any' purpose and you expect never to use it, or have it installed ready for use, again. The company is the holder of the vehicle under item 10 in the table in section 40-40 of the ITAA 1997. As the company has not disposed of the vehicle, the company remains the holder of the asset. Therefore, no balancing adjustment event has occurred for the vehicle under paragraph 40-295(1)(a) of the ITAA 1997. The use of a depreciating asset can take many forms, ranging from the active use of a machine in a business' manufacturing process to the passive use of a statue as a decorative piece. A use that would result in the decline in value of a depreciating asset need not be physical. In Council of the City of Newcastle v. Royal Newcastle Hospital (1957) 96 CLR 493, it was considered that land which was owned by the public hospital was used for the purposes of the Local Government Act 1919 (NSW). The majority of the high court inferred that passive use, as distinct from active use, was sufficient. Furthermore, a depreciating asset need not be used, or installed ready for use, for a taxable purpose in order to decline in value for the purposes of Division 40 of the ITAA 1997. However a deduction for the decline in value of a depreciating asset is only allowable to the extent it is used for a taxable purpose. Therefore, the use of a depreciating asset for a non-taxable purpose will reduce the holder's entitlement to a deduction under section 40-25 of the ITAA 1997. Taxable purpose means for the purpose of producing assessable income. As the company has ceased trading it is no longer undertaking activities that produce assessable income. From the point in time when the company ceased trading, any use of the company's assets is for a non-taxable purpose. The provision of the company vehicle to a shareholder is a use, albeit not for a taxable purpose. Therefore, no balancing adjustment event has occurred for the vehicle under paragraph 40-295(1)(b) of the ITAA 1997. As no balancing adjustment event has occurred at this time there is no need to work out a balancing adjustment amount under section 40-285 of the ITAA 1997.", "Date_of_Decision": "25 June 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-40 section 40-285 section 40-295 paragraph 40-295(1)(a) paragraph 40-295(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Balancing adjustment calculation Balancing adjustment event Hold a depreciating asset", "Case_References": "Council of the City of Newcastle v. Royal Newcastle Hospital (1957) 96 CLR 493 (High Court) (1959) 100 CLR 1 (Privy Council)", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003625", "Unmatched_Content": "Keywords Balancing adjustment calculation Balancing adjustment event Hold a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2003/756", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - end of non-novated luxury car lease term", "Issue": "Does a balancing adjustment event occur for a luxury car under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) on the expiration of the lease in the circumstances of section 242-85 of the ITAA 1997?", "Decision": "No. Even though the lessee changes from being a holder of the car under item 1 of the table in section 40-40 of the ITAA 1997 to being a holder of the car under item 10 of that table, a balancing adjustment event under paragraph 40-295(1)(a) of the ITAA 1997 does not occur for the car because the lessee does not stop holding it.", "Facts": "The taxpayer is the lessee of a luxury car with the effect that Division 242 of the ITAA 1997 applies to the arrangement. The taxpayer and the lessor are the only parties to the arrangement which does not involve full or partial novation as described in Taxation Ruling TR 1999/15. At the end of the lease term, the taxpayer acquired the car from the lessor for an amount equal to the residual value of the car. As a result, the provisions of section 242-85 of the ITAA 1997 apply.", "Reasons_for_Decision": "Summary: Former Division 42A of former Schedule 2E to the Income Tax Assessment Act 1936 (ITAA 1936) (repealed on 1 July 2010 and replaced with Division 242 of the ITAA 1997) applies to the lease of a luxury car. Under subsection 242-15(2) of the ITAA 1997 (formerly subsection 42A-15(2) of former Schedule 2E to the ITAA 1936), the lessee is taken to own the car until the lease ends. During that period of 'ownership', the lessee is the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. As the lease term has ended, the 'ownership' period under subsection 242-15(2) of the ITAA 1997 has ceased and item 1 of the table in section 40-40 of the ITAA 1997 no longer applied from that time. On the acquisition of the car, the lessee becomes the holder of it under item 10 of the table in section 40-40 of the ITAA 1997. However, section 242-85 of the ITAA 1997 (formerly section 42A-85 of former Schedule 2E to the ITAA 1936) provides that where, at the end of the lease, 'an amount is paid to the lessor by, or on behalf of, the lessee to acquire the car', the lessee is taken to continue to be the owner of the car until the lessee disposes of it (see subparagraph 242-85(c)(i) of the ITAA 1997; formerly paragraph 42A-85C of former Schedule 2E to the ITAA 1936). The effect of this provision is to provide a continuous holding of the car by the lessee. A balancing adjustment event occurs for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if a holder of the asset stops holding it. The change from the taxpayer being a holder as lessee under item 1 of the table in section 40-40 of the ITAA 1997 to being a holder as owner under item 10 of the table in section 40-40 of the ITAA 1997 does not, in this case, cause the taxpayer to stop holding the car at any time because the effect of subparagraph 242-85(c)(i) of the ITAA 1997 is to provide a continuous holding of the car by the taxpayer. Consequently, no balancing adjustment event occurred for the car under paragraph 40-295(1)(a) of the ITAA 1997.", "Date_of_Decision": "5 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Former Division 42A of former Schedule 2E (repealed on 1 July 2010)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/15", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/757 (Withdrawn)", "Subject_References": "Balancing adjustment event Capital Allowances Luxury cars Luxury car lease", "Case_References": "", "Other_References": "", "Business_Line": "Private Wealth", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003756", "Unmatched_Content": "Legislation repealed on 1 July 2010. New Legislative references inserted. | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/15 | Keywords Balancing adjustment event Capital Allowances Luxury cars Luxury car lease"}
{"ATO_ID_Number": "ATO ID 2003/759", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - early termination of novated luxury car lease arrangement", "Issue": "Does a balancing adjustment event occur for a luxury car under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) on the early termination of a novation arrangement between an employee and employer?", "Decision": "Yes. A balancing adjustment event does occur for the car under paragraph 40-295(1)(a) of the ITAA 1997 because the termination of the novation arrangement causes the employer to stop holding the car.", "Facts": "The taxpayer entered into a three year finance lease of a luxury car. The taxpayer, an employee, also entered into an arrangement with their employer to fully novate the lease. The novation arrangement was terminated 12 months later because the employee ceased to be employed by the employer.", "Reasons_for_Decision": "Summary: Former Division 42A of Former Schedule 2E to the Income Tax Assessment Act 1936 (ITAA 1936) (repealed on 1 July 2010 and replaced with Division 242 of ITAA 1997) applies to the lease of a luxury car. Ordinarily, the taxpayer, as the lessee of a luxury car, is the holder of the car pursuant to item 1 of the table in section 40-40 of the ITAA 1997. Under a fully novated lease, however, the employer is the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. In that case, the employer is the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. When the novation arrangement was terminated because the employee ceased being employed, the employer stopped being the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. Consequently, the employer stopped holding the car because item 1 of the table in section 40-40 of the ITAA 1997 no longer applied. Instead, the employee, as the lessee of the luxury car, started to hold the car under item 1 of the table in section 40-40 of the ITAA 1997. A balancing adjustment event occurs for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if a holder of the asset stops holding it. In this case, the employer stopped holding the car because the arrangement that caused them to hold it was terminated. Accordingly, a balancing adjustment event occurred under paragraph 40-295(1)(a) of the ITAA 1997 for the car held by the employer at the time the novation arrangement was terminated.", "Date_of_Decision": "5 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Former Division 42A of Schedule 2E (repealed on 1 July 2010)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/15", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/760 | ATO ID 2003/761 | ATO ID 2003/762", "Subject_References": "Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car lease", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003759", "Unmatched_Content": "Legislative reference repealed on 1 July 2010. New legislative reference inserted. | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/15 | Keywords Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car lease"}
{"ATO_ID_Number": "ATO ID 2003/760", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - novation of luxury car lease following termination of earlier novation", "Issue": "Does a balancing adjustment event occur for a luxury car under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) if, following the early termination of a novation arrangement with one employer, the employee novated the car lease to another employer?", "Decision": "Yes. A balancing adjustment event does occur for the car under paragraph 40-295(1)(a) of the ITAA 1997 because the second novation causes the employee lessee to stop holding the car.", "Facts": "The taxpayer entered into a three year finance lease of a luxury car. The taxpayer, an employee, also entered into an arrangement with their employer to fully novate the lease. The novation arrangement was terminated 12 months later because the employee ceased to be employed by the employer. Following the employee's engagement by another employer, the taxpayer fully novated the lease to the new employer.", "Reasons_for_Decision": "Summary: Former Division 42A of former Schedule 2E to the Income Tax Assessment Act 1936 (ITAA 1936) (repealed on 1 July 2010 and replaced with Division 242 of the ITAA 1997) applies to the lease of a luxury car. Ordinarily, the taxpayer, as the lessee of a luxury car, is the holder of the car pursuant to item 1 of the table in section 40-40 of the ITAA 1997. Under a fully novated lease, however, the employer is the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. In this case, the first employer was the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997 until the novation arrangement was terminated. When the first novation arrangement was terminated because the employee ceased to be employed by the first employer, that employer stopped being the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. Consequently, the first employer stopped holding the car because item 1 of the table in section 40-40 of the ITAA 1997 no longer applied. Instead, the employee, as the lessee of the luxury car, started to hold the car under item 1 of the table in section 40-40 of the ITAA 1997. When the employee fully novated the lease to the second employer, the second employer became the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936 and, for the reasons described above, the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. A balancing adjustment event occurs for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if a holder of the asset stops holding it. In this case, the employee stopped holding the car when there was a fully novated lease with the second employer. Accordingly, a balancing adjustment event occurred under paragraph 40-295(1)(a) of the ITAA 1997 for the car held by the employee at the time the employee fully novated the lease to the second employer.", "Date_of_Decision": "5 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Former Division 42A of Schedule 2E (Repealed on 1 July 2010)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/15", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/759 | ATO ID 2003/761 | ATO ID 2003/762", "Subject_References": "Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car leases", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003760", "Unmatched_Content": "Legislation repealed on 1 July 2010. New Legislataive reference inserted. | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/15 | Keywords Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car leases"}
{"ATO_ID_Number": "ATO ID 2003/761", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - end of novated luxury car lease arrangement", "Issue": "Does a balancing adjustment event occur for a luxury car under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) at the end of a novation arrangement between an employee and employer?", "Decision": "Yes. A balancing adjustment event does occur for the car under paragraph 40-295(1)(a) of the ITAA 1997 because, at the end of the novation arrangement, the employer stops holding the car.", "Facts": "The taxpayer entered into a three year finance lease of a luxury car. The taxpayer, an employee, also entered into an arrangement with their employer to fully novate the lease. Both the novation arrangement and the lease agreement operated for their full term.", "Reasons_for_Decision": "Summary: Former Division 42A of former Schedule 2E to the Income Tax Assessment Act 1936 (ITAA 1936) (repealed on 1 July 2010 and replaced with Division 242 of the Income Tax Assessment Act 1997 (ITAA 1997) applies to the lease of a luxury car. Ordinarily, the taxpayer, as the lessee of a luxury car, is the holder of the car pursuant to item 1 of the table in section 40-40 of the ITAA 1997. Under a fully novated lease, however, the employer is the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. In that case, the employer is the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. At the end of the novation arrangement, the employer stopped being the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. Consequently, the employer stopped holding the car because item 1 of the table in section 40-40 of the ITAA 1997 no longer applied. The employee did not hold the car during the lease period. At the end of the novated lease period, the finance company, as the legal owner of the luxury car, started to hold the car under item 10 of the table in section 40-40 of the ITAA 1997. A balancing adjustment event occurs for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if a holder of the asset stops holding it. In this case, the employer stopped holding the car because the novation arrangement that caused them to hold it had ended. Accordingly, a balancing adjustment event occurred under paragraph 40-295(1)(a) of the ITAA 1997 for the car held by the employer at the time the novation arrangement ended.", "Date_of_Decision": "5 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Former Division 42A of former Schedule 2E (repealed on 1 July 2010)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/15", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/759 | ATO ID 2003/760 | ATO ID 2003/762", "Subject_References": "Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car lease", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003761", "Unmatched_Content": "Legislation repealed on 1 July 2010. New Legislative reference inserted | Inserted Division 242 of the ITAA 1997 | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/15 | Keywords Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car lease"}
{"ATO_ID_Number": "ATO ID 2003/762", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event - acquisition of car by employee at end of novated luxury car lease arrangement", "Issue": "Does a balancing adjustment event occur for a luxury car under paragraph 40-295(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) if, at the end of a novated lease arrangement, the employee acquires the car from the lessor?", "Decision": "Yes. A balancing adjustment event occurs for the car under paragraph 40-295(1)(a) of the ITAA 1997 because the acquisition of the car by the employee causes the lessor to stop holding the car.", "Facts": "The taxpayer entered into a three year finance lease of a luxury car. The taxpayer, an employee, also entered into an arrangement with their employer to fully novate the lease. Both the novation arrangement and the lease agreement operated for their full term. At the end of that time the employee acquired the car from the lessor finance company for its residual value.", "Reasons_for_Decision": "Summary: Former Division 42A of former Schedule 2E to the Income Tax Assessment Act 1936 (ITAA 1936) (repealed on 1 July 2010 and replaced with Division 242 of the ITAA 1997) applies to the lease of a luxury car. Ordinarily, the taxpayer, as the lessee of a luxury car, is the holder of the car pursuant to item 1 of the table in section 40-40 of the ITAA 1997. Under a fully novated lease, however, the employer is the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. In that case, the employer is the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. At the end of the novation arrangement, the employer stopped being the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. Consequently, the employer stopped holding the car because item 1 of the table in section 40-40 of the ITAA 1997 no longer applied. The taxpayer did not hold the car because the lease had also ended. Instead, the finance company, as the legal owner of the luxury car, started to hold the car under item 10 of the table in section 40-40 of the ITAA 1997. A balancing adjustment event occurs for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 if a holder of the asset stops holding it. In this case, the finance company stopped holding the car because, on the acquisition of the car by the employee, it was no longer the legal owner of the car under item 10 of the table in section 40-40 of the ITAA 1997. Accordingly, a balancing adjustment event occurred under paragraph 40-295(1)(a) of the ITAA 1997 for the car held by the finance company at the time the employee acquired the car from the finance company.", "Date_of_Decision": "5 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Former Division 42A of Schedule 2E (Repealed on 1 July 2010)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/15", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/759 | ATO ID 2003/760 | ATO ID 2003/761", "Subject_References": "Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car lease", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003762", "Unmatched_Content": "Legislation repealed on 1 July 2010. New Legislataive reference inserted. | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/15 | Keywords Balancing adjustment event Capital Allowances CoE Hold a depreciating asset Luxury cars Luxury car lease"}
{"ATO_ID_Number": "ATO ID 2003/825", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: balancing adjustment event for a depreciating asset that is no longer used", "Issue": "Does a balancing adjustment event occur under paragraph 40-295(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997), for a depreciating asset, which the taxpayer stopped using prior to 1 July 2001, and expected never to use again?", "Decision": "Yes. Division 40 of the ITAA 1997 applies to the asset and a balancing adjustment event occurred under paragraph 40-295(1)(b) of the ITAA 1997 for the depreciating asset.", "Facts": "The taxpayer commenced a business as a sub-distributor of a kind of dispensing machine. The taxpayer purchased several machines on business commencement. The taxpayer used the machines solely for a taxable purpose and deducted amounts for the machines under Division 42 of the ITAA 1997. The taxpayer found that the machines were faulty and unable to be used in the business. Prior to 1 July 2001, the taxpayer stopped operating the machines and sold the majority of them. The remaining machines had a market value of zero at the time the taxpayer stopped using them. During the 2001-02 income year, the taxpayer decided it would never use the remaining machines again.", "Reasons_for_Decision": "Summary: From 1 July 2001, Division 40 of the ITAA 1997 provides a set of general rules that applies across a variety of depreciating assets including plant. In particular, paragraph 40-295(1)(b) of the ITAA 1997 provides that a balancing adjustment event occurs for a depreciating asset you held if you stop using it, or having it installed ready for use, for any purpose and you expect never to use it, or have it installed ready for use again. For a balancing adjustment event that occurs under paragraph 40-295(1)(b) of the ITAA 1997, there is no requirement that the depreciating asset be sold or otherwise disposed of. Where you have deducted or could have deducted amounts for plant under Division 42 of the ITAA 1997, Division 40 of the Income Tax (Transitional Provisions) Act 1997 ensures that Division 40 of the ITAA 1997 applies to the asset that you held on or before 1 July 2001. Therefore, a balancing adjustment event occurred under paragraph 40-295(1)(b) of the ITAA 1997 for the unsold machines at some time in the 2001-02 income year when the taxpayer decided it would never use them again. The termination value of the machines is equal to their market value at the time the taxpayer stopped using them, which was zero. A further balancing adjustment event could arise under paragraph 40-295(1)(a) of the ITAA 1997 when the taxpayer stops holding the machines.", "Date_of_Decision": "22 August 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 40-295(1)(a) paragraph 40-295(1)(b) Division 40 Division 42", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/190", "Subject_References": "Balancing adjustments Balancing adjustment event Depreciating assets Hold a depreciating asset Termination value Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003825", "Unmatched_Content": "Delete abbreviation in 3 rd paragraph as it is not necessary. | Related ATO Interpretative Decisions | ATO ID 2003/457 was withdrawn 1 July 2005 and replaced by ATO ID 2005/190. | Keywords Balancing adjustments Balancing adjustment event Depreciating assets Hold a depreciating asset Termination value Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/997", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 40: balancing adjustment event - when it occurs", "Issue": "When does a balancing adjustment event occur under section 40-295 of the Income Tax Assessment Act 1997 (ITAA 1997) if the depreciating assets held by the leasing partnership are disposed of as a result of the call or the put option over the assets being exercised?", "Decision": "A balancing adjustment event occurs for the depreciating assets at the time the leasing partnership (the holder) stops holding the asset.", "Facts": "A partnership purchased various depreciating assets under a manufacture and supply agreement. It immediately leased the assets on commercial terms to an unrelated entity that had been awarded a franchise by another unrelated entity to operate a business in which the assets are used. As part of an arrangement with the partnership, the franchisor was granted a call option over the leased assets so that, on exercising the option in certain circumstances to purchase the assets, the franchisor can make the assets available to a subsequent franchisee. In another arrangement between the leasing partnership and an unrelated risk indemnifier, the risk indemnifier was granted a put option over the leased assets to enable the partnership in certain circumstances to dispose of the assets to the residual risk indemnifier.", "Reasons_for_Decision": "Summary: A balancing adjustment event occurs for a depreciating asset if you stop holding the asset (paragraph 40-295(1)(a) of the ITAA 1997). The sale of the depreciating assets would, under either the put or the call option, constitute a balancing adjustment event for the assets held by the leasing partnership. The balancing adjustment event for each asset would occur at the time when the leasing partnership stops holding the asset. When that time occurs is a question of fact. The call option to purchase an asset is exercised by giving the required notice. A period of time is then provided to complete the acquisition. Both events do not necessarily occur at the same time. The relevant agreement specifies that disposal of the asset under the call option is effected by sale and purchase or by allocation. In the case of disposal by sale and purchase the relevant agreement provides that, generally, the transfer of legal and equitable title to the purchaser and the delivery of possession of an asset must occur on the Completion Date. In this case, a balancing adjustment event will occur for the asset on the Completion Date for the asset because the leasing partnership would stop holding the asset at that time. In the case of disposal by allocation, the relevant agreement provides that, generally, the transfer is effected by an allocation statement with the delivery of possession of an asset occurring at the allocation time. In this case, a balancing adjustment event will occur for the asset at the allocation time applicable to the asset because the leasing partnership would stop holding the asset at that time. The put option to sell an asset may be exercised by giving the required notice. The disposal is required to be effected by the expiry date. Both events may not necessarily occur at the same time. The relevant agreement provides that, generally, the purchase of an asset under the option, its transfer to the purchaser and the transfer of title to the asset must occur on the expiry date. To the extent that the sale of a depreciating asset is completed in those terms, a balancing adjustment event occurs for an asset on the expiry date because the leasing partnership stops holding the depreciating asset at that time.", "Date_of_Decision": "12 July 2002", "Year_of_Income": "2000", "Legislative_References": "Income Tax Assessment Act 1997 section 40-295 paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Balancing adjustment event Depreciating asset Division 40", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002997", "Unmatched_Content": "Keywords Balancing adjustment event Depreciating asset Division 40"}
{"ATO_ID_Number": "ATO ID 2002/1017", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances - Balancing adjustment event", "Issue": "Does a balancing adjustment event occur for a depreciating asset under section 40-295 of the Income Tax Assessment Act 1997 (ITAA 1997) where the asset is transferred from Club A to Club B upon the amalgamation of two clubs?", "Decision": "Yes. A balancing adjustment event occurs for a depreciating asset under paragraph 40-295(1)(a) of the ITAA 1997 as Club A has stopped holding the asset. Club A stops holding the asset when it is transferred to Club B.", "Facts": "Club A and Club B are companies limited by guarantee and both are registered under the Registered Clubs Act 1976 (NSW) . Club A is amalgamating with Club B within the terms of paragraph 17A(1)(b) of the Registered Clubs Act 1976 (NSW) which states that a reference to the amalgamation of 2 or more registered clubs is a reference to an amalgamation effected by the continuation of one of those clubs and the dissolution of the other club or clubs. As a result of the amalgamation Club A is to be dissolved and Club B is to take over its assets. Club B had previously loaned an amount to Club A. The loan was secured by mortgage and made on condition that Club A would repay the loan within a period of 12 months or amalgamate with Club B. The loan was not repayable if the clubs amalgamated. The members of both clubs voted at a general meeting to amalgamate. Club A was placed in voluntary liquidation. The liquidator transferred the assets of Club A to Club B.", "Reasons_for_Decision": "Summary: Paragraph 40-295(1)(a) of the ITAA 1997 provides that a balancing adjustment event occurs when an asset stops being held by an entity. The table in section 40-40 of the ITAA 1997 sets out who holds a depreciating asset. Item 10 of that table provides that the owner, or if there is both a legal and equitable owner, the legal owner of a depreciating asset is the holder of the asset. When the depreciating asset is transferred from club A to club B by the liquidator, club A is no longer the owner of the asset and has therefore stopped holding the asset and a balancing adjustment event therefore occurs in terms of paragraph 40-295(1)(a) of the ITAA 1997.", "Date_of_Decision": "29 August 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1016 | ATO ID 2002/1018", "Subject_References": "Balancing adjustment event Depreciating assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021017", "Unmatched_Content": "Keywords Balancing adjustment event Depreciating assets"}
{"ATO_ID_Number": "ATO ID 2011/99", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Small business entity: roll-over relief - disposal of assets of partnership to former partners", "Issue": "Can roll-over relief be chosen pursuant to subsection 328-243(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if all the assets that were allocated to the partnership's general small business pool are disposed of to the former partners and, just after the disposals, no former partner has an interest in each of the assets that were allocated to the pool?", "Decision": "No. Roll-over relief cannot be chosen pursuant to subsection 328-243(1) of the ITAA 1997 if all the assets that were allocated to the partnership's general small business pool are disposed of to the former partners and, just after the disposals, no former partner has an interest in each of the assets that were allocated to the pool, as the condition at paragraph 328-243(1)(c) is not met.", "Facts": "All legislative references are to the ITAA 1997 unless otherwise specified. A partnership (of two partners) conducted a business. The partnership was a small business entity (SBE) which allocated all its depreciating assets to its general small business pool. The partners dissolved the partnership and each started to carry on business as a sole trader. As a result, all of the assets held by the partnership were disposed of to the former partners. The disposal of each asset by the partnership is a balancing adjustment event for that asset of the kind mentioned in subsection 40-295(2). Just after the disposals, neither former partner had an interest in each of the assets that were allocated to the general small business pool. At that time, one former partner exclusively holds some of the assets and the other exclusively holds the remainder of the assets.", "Reasons_for_Decision": "Summary: Broadly, an SBE that chooses to use Subdivision 328-D must use a general small business pool to calculate deductions for all depreciating assets it holds unless the assets are specifically excluded (sections 328-175, 328-180 and 328-185). An SBE deducts amounts for its depreciating assets allocated to a general small business pool as if they were a single asset (subsection 328-185(1)). Roll-over relief under subsection 40-340(3) can be chosen pursuant to subsection 328-243(1) if, amongst other things, the transferor and the transferee jointly choose the roll-over relief. Specifically, for the roll-over relief to be chosen, paragraph 328-243(1)(c) requires a joint choice by the entity or entities that have the requisite interest in the assets for which the balancing adjustment events occurred. It provides that: (c) the entity or entities that had an interest in the assets just before the balancing adjustment events occurred (the transferor) and the entity or entities that have an interest in the assets just after the events occurred (the transferee) jointly choose the roll-over relief; In determining whether the condition in paragraph 328-243(1)(c) is met, the interpretative issue that arises is whether or not, for the purpose of that paragraph, the requirement that the transferee 'have an interest in the assets' just after the events occurred is only met if the transferee has, at that time, an interest in each of the assets for which the events occurred. In reaching the correct interpretation of paragraph 328-243(1)(c), regard may be had to the purpose of elective roll-over relief under subsection 328-243(1) in order to verify that the interpretation of the paragraph promotes the purpose underlying the Act (section 15AA of the Acts Interpretation Act 1901 ). The purpose of subsection 328-243(1) can be ascertained from the Explanatory Memorandum (EM) to the Tax Laws Amendment (2004 Measures No 7) Bill 2005 which substituted that subsection in its current form. Paragraph 7.13 of the EM stated: 7.13 The extended roll-over relief will benefit STS [Simplified Tax System] taxpayers by removing the balancing adjustment, or taxing point, that would otherwise arise in relation to depreciating assets at the time the ownership change occurs. This will ensure that a taxable gain or loss will only arise upon disposal of the depreciating assets. This amendment ensures that consistent treatment applies to depreciating assets under the STS regime compared with the uniform capital allowances regime. This purpose is supported by a statutory construction of the consequences of the application of subsection 328-243(1). The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute ( Project Blue Sky Inc v. Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355). If a taxpayer has used the uniform capital allowances regime to calculate deductions for decline in value of the depreciating assets they hold and has chosen roll-over relief under subsection 40-340(3) in respect of a change in interest in one or more of those assets which satisfies the requirements of subsection 40-295(2), the principle consequence of the roll-over relief is that a 'balancing adjustment' is deferred until there is a balancing adjustment event to which no roll-over relief is applied. For roll-over relief to be available under subsection 328-243(1), all of the assets that were held by the transferor and allocated to the transferor's general small business pool must stop being held by the transferor and instead all be held by the transferee (subsection 328-243(2)). A consequence of choosing the roll-over relief is that the transferor does not subtract the taxable purpose proportions of the termination values of depreciating assets allocated to the SBE pool and for which balancing adjustment events occurred (paragraph 328-245(1)(a)). Accordingly, the choice of the roll-over relief in these circumstances can ensure that the closing pool balance would not be reduced to an amount less than zero and consequently that no amount is included in the transferor's assessable income under section 328-215. In other words, a taxing point will not arise as a result of the balancing adjustment events occurring for each of the assets. Another consequence of roll-over relief is that the amount that could be deducted for the transferor's general small business pool for the income year (BAE year) in which the balancing adjustment events occurred is to be split equally between the transferor and transferee (subsection 328-247(1)). After the BAE year, the transferor cannot deduct any amount for the general small business pool (subsection 328-247(2)) and the transferee deducts amounts for the assets transferred and allocated to the general small business pool using Subdivision 328-D (subsection 328-220(3)). In that circumstance, the practical effect is that it is the transferee that treats the pool as a single depreciating asset with deductions being based on the closing pool balance of the general small business pool for the BAE year. The legislative design of Subdivision 328-D ensures a small business entity deducts amounts for all the assets allocated to a general small business pool as if they were a single asset. If roll-over relief is chosen, the transfer of all of the depreciating assets to the transferee amounts, in practical effect, to a transfer to the transferee of the undeducted balance of the general small business pool as if it were a single asset. The transferee uses this amount, worked out under the Subdivision as the closing pool balance, to calculate whether a taxing point will arise as a result of the balancing adjustment events occurring for each of the assets transferred and allocated to the general small business pool. In this way, a choice of roll-over relief can effectively defer the taxing point (that would have otherwise arisen as a result of the balancing adjustment events occurring for each of the assets) until all of the pool of assets are disposed of by the transferee. Accordingly, consistency of roll-over relief between Division 40 and Division 328 is achieved by ensuring that the assets allocated to a general small business pool and for which balancing adjustment events satisfying subsection 40-295(2) have occurred are treated as a single asset. In this context, the requirement at paragraph 328-243(1)(c) that the transferee must have an interest in the assets just after the balancing adjustment events occurred is a requirement that the transferee have an interest in each of the assets for which the events occurred. This requirement is met if each of the assets that were allocated to the general small business pool is held, just after the events occurred, by a single entity, for example a reconstituted partnership as transferee or a former partner. It cannot be met if the assets that were allocated to the pool are, just after the events occurred, held by more than one entity. In this case, the disposal of all of the assets that were allocated to the general small business pool to the former partners resulted in some of those assets being held exclusively by one former partner and the remainder being held exclusively by the other. In other words, just after the balancing adjustment events occurred each former partner holds the assets disposed of to it, and does not hold, nor have an interest in, the assets disposed of to the other former partner. In that circumstance, there is no entity or entities that have an interest in each of the assets for which balancing adjustment events occurred (that is, an interest in each of the assets that were held by the partnership before its dissolution). Accordingly, there is no transferee that can choose, jointly with the transferor, the roll-over relief. It follows that the condition at paragraph 328-243(1)(c) cannot be met and that the roll-over relief cannot be chosen pursuant to subsection 328-243(1).", "Date_of_Decision": "28 November 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-295(2) subsection 40-340(3) Subdivision 328-D section 328-175 section 328-180 section 328-185 subsection 328-185(1) section 328-215 subsection 328-220(3) section 328-243 subsection 328-243(1) paragraph 328-243(1)(c) subsection 328-243(2) paragraph 328-245(1)(a) section 328-247 subsection 328-247(1) subsection 328-247(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Small Business Entities Balancing adjustment roll-over relief Partnership asset General small business pool", "Case_References": "Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 (1998) 194 CLR 355", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No 7) Bill 2005", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201199", "Unmatched_Content": "Amended to include the unabbreviated term for STS [Simplified Tax System] for clarity as the unabbreviated term was not previously used in the document. | Correction of grammatical error and readability. SBE Pool replaced by general small business pool | Keywords Small Business Entities Balancing adjustment roll-over relief Partnership asset General small business pool"}
{"ATO_ID_Number": "ATO ID 2003/624", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Applicability of paragraph 45-5(5)(c) of the ITAA 1997 to disposal by a partnership of its interest in a leased asset to a company", "Issue": "Does paragraph 45-5(5)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) apply in respect of the disposal by the partnership of a partnership asset in circumstances where roll-over relief would be available under section 40-340 of the ITAA 1997?", "Decision": "Yes. Paragraph 45-5(5)(c) of the ITAA 1997 applies to the partnership to the extent that roll-over relief was available to the partnership under section 40-340 of the ITAA 1997 when the partnership asset was disposed of to a wholly-owned company.", "Facts": "In 1993, X Ltd, Y Ltd and Z Ltd formed a partnership to provide a lease facility to A in respect of plant. The partners intend to establish a company to acquire their interests in the partnership asset (leased plant). After the company has acquired the partnership assets, the company will deduct further amounts for the decline in value of the leased plant. The disposal to the company will otherwise satisfy the factual requirements of section 40-340 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Paragraph 45-5(5)(c) of the ITAA 1997 excludes from assessable income any amount that would have been included but for the roll-over relief in section 40-340 of the ITAA 1997. Section 45-10 of the ITAA 1997 is concerned with disposals of certain interests in a partnership involving either leased plant or a lease. Section 45-5 of the ITAA 1997 is the general provision relating to disposals of interests in either leased plant or a lease itself. Although paragraph 45-5(5)(c) of the ITAA 1997 specifically excludes from assessable income amounts to the extent that roll-over relief is available under section 40-340 of the ITAA 1997, there is no similar exclusion in section 45-10 of the ITAA 1997. The explanatory memorandum relating to the New Business Tax System (Integrity and Other Measures) Bill 1999 (which introduced Division 45) states at paragraph 1.26 in relation to subsection 45-5(5) of the ITAA 1997: Amounts will not be included in assessable income under Division 45 to the extent that they are already directly included in assessable income by another provision (eg as a balancing charge), or would be included except for specific relieving provisions (eg where it is subject to roll-over relief to a related entity). Section 45-10 of the ITAA 1997 is concerned with disposals by the partners of their interests. The disposal of an interest in a partnership or partnership asset by a partner is not in itself subject to roll-over relief under Division 40 of the ITAA 1997. The table at section 40-340 of the ITAA 1997 is concerned only with a disposal by a 'partnership' of an asset to a wholly owned company, (Item 2). This is consistent with the approach in Division 40 of the ITAA 1997 that the 'holder' for capital allowance purposes is the partnership and not the individual partners, (section 40-40 of the ITAA 1997, at Item 7 of the table). Accordingly, paragraph 45-5(5)(c) of the ITAA 1997 will apply to the partnership to the extent that roll-over relief was available to the partnership under section 40-340 of the ITAA 1997 when the partnership asset was disposed of to a wholly-owned company.", "Date_of_Decision": "24 June 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Section 45-5 Section 45-10 Section 40-340", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Disposal of partnership interest in plant Partnership asset Plant balancing adjustment roll-over relief Termination of leases", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003624", "Unmatched_Content": "Keywords Disposal of partnership interest in plant Partnership asset Plant balancing adjustment roll-over relief Termination of leases"}
{"ATO_ID_Number": "ATO ID 2003/1133", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: roll-over relief - transfer of low-value pool assets from partnership to wholly-owned company", "Issue": "Does automatic roll-over relief under subsection 40-340(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply if the asset the taxpayer disposed of was allocated to a low-value pool?", "Decision": "No. Automatic roll-over relief under subsection 40-340(1) of the ITAA 1997 only applies where the general balancing adjustment rules of Subdivision 40-D apply to the asset.", "Facts": "The taxpayer is a common law partnership. The partnership holds, pursuant to item 7 of the table in section 40-40 of the ITAA 1997, a number of low-cost depreciating assets that it allocated to a low-value pool for the 2002 income year. During the 2003 income year, all of the partnership's assets were transferred to a company wholly-owned by the partners. The transfer of assets by the partnership to the company constituted a balancing adjustment event for the partnership assets in accordance with paragraph 40-295(1)(a) of the ITAA 1997. The transfer satisfied all of the conditions for automatic roll-over relief in item 2 of the table in subsection 40-340(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subdivision 40-D of the ITAA 1997 contains the general balancing adjustment rules that apply to depreciating assets whose decline in value is worked out under the general provisions of Subdivision 40-B of the ITAA 1997. Under these balancing adjustment rules, the difference between the asset's termination value and its adjustable value is either included in, or deducted from, the holder's assessable income for the income year in which the balancing adjustment event occurs (section 40-285 of the ITAA 1997). However, subsection 40-345(1) of the ITAA 1997 prevents section 40-285 from applying so that no balancing adjustment arises if the taxpayer meets the conditions for automatic roll-over relief set out in subsection 40-340(1) of the ITAA 1997. Subdivision 40-E of ITAA 1997 contains a number of provisions that specifically apply for depreciating assets allocated to a low-value pool. Section 40-440 of the ITAA 1997 sets out how to work out the decline in value of pooled assets. Section 40-445 of the ITAA 1997 sets out the balancing adjustment rules for pooled assets. Under these balancing adjustment rules, the taxable use percentage of the asset's termination value is applied to reduce the closing pool balance and, if the termination value exceeds the closing pool balance, the excess is included in assessable income. The specific balancing adjustment rules in Subdivision 40-E of the ITAA 1997 apply for depreciating assets allocated to a low-value pool, in preference to the general balancing adjustment rules in Subdivision 40-D of the ITAA 1997 that apply for most other depreciating assets. This means roll-over relief under subsection 40-340(1) of the ITAA 1997 does not apply for depreciating assets allocated to a low-value pool. In this case, the transfer of the assets by the partnership to the company is a balancing adjustment event in accordance with paragraph 40-295(1)(a) of the ITAA 1997. However, as the assets were allocated to a low-value pool, the specific balancing adjustment rules in Subdivision 40-E of the ITAA 1997 apply. This means automatic roll-over relief under subsection 40-340(1) of the ITAA 1997 does not apply.", "Date_of_Decision": "28 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 Sub Division 40-B Subdivision 40-D section 40-285 paragraph 40-295(1)(a) subsection 40-340(1) subsection 40-345(1) Subdivision 40-E section 40-440 section 40-445", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/911 (withdrawn)", "Subject_References": "Balancing adjustment amount Balancing adjustment roll-over relief Capital allowances CoE Depreciating assets Low-value pool Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031133", "Unmatched_Content": "Legislative references section | Include reference to Subdivision 40-B | Correct grammatical error | Include reference to section section 40-40 Include reference to Subdivision 40-D Remove reference to section 40-340 Remove reference to subsection 40-345(2) Remove reference to subsection 40-345(2) Include reference to Subdivision 40-E Remove reference to subsection 40-440(1) | Related ATO Interpretative Decisions | Add '(withdrawn)' after ATO ID 2003/911 | Keywords Balancing adjustment amount Balancing adjustment roll-over relief Capital allowances CoE Depreciating assets Low-value pool Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/782", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Theft of a depreciating asset - involuntary disposal", "Issue": "Is the theft of a computer and printer an involuntary disposal under section 40-365 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. The theft of a computer and printer is an involuntary disposal under section 40-365 of the ITAA 1997.", "Facts": "The taxpayer's computer and printer were stolen in May 2002. The assets were insured and a claim was made with the insurance company. The insurance company provided a replacement computer and printer. The replacement assets were used wholly for a taxable purpose.", "Reasons_for_Decision": "Summary: Section 40-365 of the ITAA 1997 allows a taxpayer to exclude some or all of a balancing adjustment amount from their assessable income where a depreciating asset is lost or destroyed. A taxpayer can make this choice to the extent that the amount is applied in reduction of the cost or opening adjustable value of one or more replacement assets. It is considered that the theft of a depreciating asset falls within the meaning of the words lost or destroyed because the taxpayer is deprived of the use of the asset and no longer possesses the asset. The taxpayer may therefore exclude some or all of the amount that would otherwise be included in assessable income to the extent that the amount is applied in reduction of the cost of one or more replacement assets.", "Date_of_Decision": "17 June 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-365 subsection 40-365(3) subsection 40-365(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/783", "Subject_References": "Disposal of depreciating asset Involuntary disposal Theft of asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002782", "Unmatched_Content": "Keywords Disposal of depreciating asset Involuntary disposal Theft of asset"}
{"ATO_ID_Number": "ATO ID 2006/167", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: termination value on the granting of a licence to exploit a patented invention", "Issue": "Is company A's undertaking to pay 50% of the revenue it earns from the exploitation of the patented invention owned by company B included in the termination value (section 40-300 of the Income Tax Assessment Act 1997 (ITAA 1997)) of part of company B's patent?", "Decision": "No. Company A's undertaking to pay 50% of the revenue it earns from the exploitation of the patented invention owned by company B is not included in the termination value of part of company B's patent because the undertaking is not received for the asset for the purposes of paragraph 40-300(1)(b) of the ITAA 1997.", "Facts": "A balancing adjustment occurs upon company A entering into a licence agreement with company B. The licence permitted company A to exploit, in a foreign jurisdiction, the technology, patents and know-how owned by company B in an invention. Under the licence company A was obliged to pay 50% of the revenue it earned from exploiting all of the technology patents and know-how owned by company A in the foreign jurisdiction. The royalty is payable monthly in arrears and was negotiated at arm's length. Company A was not required to pay any amount either as prepaid royalties or as consideration for entering into the licence agreement. The licence agreement contains provision for company A to sublicense authority to other parties to exploit the patented invention and for company B to terminate the agreement and any sub licences granted upon certain acts or omissions by company A. Failure by company A to pay the required royalty amounts is included in the agreement as a termination event.", "Reasons_for_Decision": "Summary: A balancing adjustment event will occur if a taxpayer stops holding part of a depreciating asset (note in subsection 40-295(3) of the ITAA 1997). A balancing adjustment is required if the taxpayer worked out or would have worked out a decline in value for the asset under Subdivision 40-B of the ITAA 1997 (section 40-285 of the ITAA 1997). For the purposes of working out a balancing adjustment under section 40-285 of the ITAA 1997, the termination value of a depreciating asset has the meaning given by section 40-300 of the ITAA 1997. Section 40-300 provides that the termination value of a depreciating asset is, in certain cases, an amount specified in the table in subsection 40-300(2) of the ITAA 1997. Where those cases do not apply, paragraph 40-300(1)(b) of the ITAA 1997 states that the termination value is the amount under section 40-305 of the ITAA 1997 that you are taken to have received for the asset. The termination value is worked out at the time when the balancing adjustment event occurs. In the present case, a balancing adjustment event occurs when company B enters into the licence agreement with company A. No amount specified in the table in subsection 40-300(2) of the ITAA 1997 applies. Section 40-305 of the ITAA 1997 treats certain benefits (set out in the table in paragraph 40-305(1)(b) of the ITAA 1997), including non-cash benefits, as having been received for the asset under the balancing adjustment event. Company B does not receive, nor is it entitled to receive, any money as a result of the actual licensing transaction with company A. Instead company B is entitled to royalties of 50% of the revenue company A gains when using the licence. A right to income carries attributes associated with property and therefore is potentially within the meaning of the term 'non-cash benefit' as defined in subsection 995-1(1) of the ITAA 1997. However, even though the right to income may be a non-cash benefit, the issue is whether this non-cash benefit is an amount company B is taken to have received under section 40-305 of the ITAA 1997 for the asset. In order for an amount to be included in termination value, section 40-300 of the ITAA 1997 requires a necessary connection between the relevant amount in the table in paragraph 40-305(1)(b) of the ITAA 1997 and the depreciating asset. It is reasonable to conclude that company A's undertaking to pay royalties relates to the exploitation of the patent and thus is a promise to pay for the exploitation of the invention during the period the agreement remains in force. The agreement can be terminated upon certain acts occurring including a failure by company A to pay royalties. Company A does not pay an amount for entering into the licence agreement, and the royalties do not contain any embedded capital amount. Therefore, whilst the right to the royalty is 'property' for the purposes of the definition of a 'non-cash benefit' as it relates to item 4 in the table in paragraph 40-305(1)(b) of the ITAA 1997, it is not property the taxpayer is taken to have received under section 40-305 of the ITAA 1997 for the asset.", "Date_of_Decision": "30 May 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 40-285 subsection 40-295(3) section 40-300 paragraph 40-300(1)(b) subsection 40-300(2) section 40-305 paragraph 40-305(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/168 | ATO ID 2006/169", "Subject_References": "Balancing adjustment event Balancing adjustments Capital Allowances CoE Depreciating assets Intellectual property rights Patents Termination value Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006167", "Unmatched_Content": "Keywords Balancing adjustment event Balancing adjustments Capital Allowances CoE Depreciating assets Intellectual property rights Patents Termination value Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/160", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: termination value - assigning depreciating assets to terminate a liability", "Issue": "Is the termination value of a depreciating asset assigned in satisfaction of liabilities arising from defaults under, and early termination of, a lease agreement ,the amount of those liabilities under section 40-305 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Item 2 in the table in section 40-305 of the ITAA 1997 provides that the termination value of a depreciating asset, where all or part of a liability is terminated, is the amount of the liability or part when it is terminated.", "Facts": "The taxpayer entered into a three year lease of a commercial property. The lease agreement set a minimum amount of annual rent to be paid and contained provisions which required the lessee to pay interest on overdue rent, expenses incurred by the lessor in curing defaults and also damages in respect of repudiation or breach of covenant. Damages could include a charge for rent for the balance of the lease term, but the lessor was required to mitigate the amount of damages by obtaining a replacement lessee. The taxpayer's business was unprofitable and the premises were vacated. At that time rent was in arrears and the unexpired term of the lease was two years. The taxpayer and lessor formally agreed to a settlement whereby the lessor accepted a depreciating asset in complete satisfaction of any and all of the taxpayer's liabilities arising from any default, and the early termination of the lease agreement.", "Reasons_for_Decision": "Summary: Section 40-300 of the ITAA 1997 provides that the termination value of a depreciating asset is worked out as at the time when a balancing adjustment event occurs. The termination value is, in certain circumstances, an amount specified in the table in subsection 40-300(2) of the ITAA 1997. Otherwise, the termination value is the amount taken to have been received under section 40-305 of the ITAA 1997. As no item in the table in subsection 40-300(2) of the ITAA 1997 applies, the termination value is worked out under section 40-305 of the ITAA 1997. Item 2 in the table in section 40-305 of the ITAA 1997 provides that the termination value of a depreciating asset, where all or part of a liability is terminated, is the amount of the liability or part when it is terminated. The taxpayer has assigned the legal title of a depreciating asset to the lessor in order to terminate all liabilities arising under the lease agreement. The termination value of the depreciating asset under item 2 in the table in section 40-305 of the ITAA 1997 is therefore the amount of those liabilities when terminated. The amount of the lessee's liability under the lease is not specified in the settlement agreement. It cannot be easily quantified as the amount of any damages is unknown. However the value of the asset assigned by the taxpayer can be determined. Goods and Services Tax Ruling (GSTR) 2001/6 expresses a view that where parties are dealing at arm's length, the goods, services or other things exchanged are of equal GST inclusive market value. Consistent with that principle, we accept that, in the absence of other evidence, the market value of the depreciating asset the taxpayer assigned is a fair indicator of the amount of the liability terminated and may, in these circumstances, be used for the purposes of item 2 in the table in section 40-305 of the ITAA 1997.", "Date_of_Decision": "22 October 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 40-300 subsection 40-300(2) section 40-305", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2001/6.", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Termination value", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004160", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2001/6. | Keywords Termination value"}
{"ATO_ID_Number": "ATO ID 2003/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: termination value of a depreciating asset that has been stolen", "Issue": "If a balancing adjustment event occurs for a depreciating asset that has been stolen, what is the termination value of the asset for the purpose of working out the balancing adjustment amount under Subdivision 40-D of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The termination value of a stolen depreciating asset under a balancing adjustment event is the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction pursuant to Item 8 of the table in subsection 40-300(2) of the ITAA 1997.", "Facts": "The taxpayer owned a depreciating asset at the time it was stolen. The taxpayer used the asset wholly for a taxable purpose. The asset was insured against the event of theft.", "Reasons_for_Decision": "Summary: A balancing adjustment event may occur for a depreciating asset that is stolen because the asset stops being used (or installed ready for use) for any purpose and it is expected that it will never be used (or installed ready for use) again (paragraph 40-295(1)(b) of the ITAA 1997). In this case, Item 1 of the table in subsection 40-300(2) of the ITAA 1997 applies to prescribe a termination value of the market value of the asset when it ceased to be used (or installed ready for use). Item 8 of the table in subsection 40-300(2) of the ITAA 1997 may also apply to a stolen depreciating asset because the theft of an asset may fall within the meaning of the phrase 'lost or destroyed'. In this case, a termination value of the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction is prescribed. If more than one item in the table in subsection 40-300(2) of the ITAA 1997 applies, the subsection specifies that the value under the last applicable item is to be used. The termination value of a stolen depreciating asset under a balancing adjustment event is, therefore, the amount or value received or receivable under an insurance policy or otherwise for the loss or destruction pursuant to Item 8 of the table in subsection 40-300(2) of the ITAA 1997. If no amount or value is received or receivable under an insurance policy or otherwise for the loss or destruction of the depreciating asset, the termination value is nil.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 40-295(1)(b) subsection 40-300(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/782 | ATO ID 2003/110 | ATO ID 2003/112", "Subject_References": "Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Termination value", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003111", "Unmatched_Content": "Keywords Losses from fraud, theft & embezzlement Capital Allowances CoE Balancing adjustment event Termination value"}
{"ATO_ID_Number": "ATO ID 2003/219", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: termination value - amalgamation of incorporated associations", "Issue": "Is the amount taken to have been received under Item 1 of the table in paragraph 40-305(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) nil if, on the amalgamation of two existing incorporated associations into one new incorporated association under the Associations Incorporation Act 1981 (Qld) (AIA (Qld)), no amount is received by the existing associations for transferring their assets to the new association?", "Decision": "Yes. The amount taken to have been received under Item 1 of the table in paragraph 40-305(1)(b) of the ITAA 1997 on the amalgamation of the existing associations is nil if no amount is received by them for the transfer of their depreciating assets. However, other items in the table in paragraph 40-305(1)(b) of the ITAA 1997 may also apply.", "Facts": "A and B are unrelated incorporated associations under the AIA (Qld). A and B amalgamated under Part 9, Division 2 of the AIA (Qld) to form C, a new and legally separate incorporated association. A certificate of incorporation issued to C as a result of the amalgamation. The members of both A and B agreed to amalgamate from a certain date and to adopt their respective associations' existing common rules and constitution for C. The members of A and B also agreed to transfer or donate their respective associations' assets to C.", "Reasons_for_Decision": "Summary: Section 79 of the AIA (Qld) defines an 'old association' to be an incorporated association that with one or other incorporated associations apply to form a new association. A 'new association' is defined in section 79 of the AIA (Qld) to be an incorporated association that is incorporated as a result of an application to amalgamate by at least two old associations. The legislation governing the amalgamation of associations does not provide for the continuation of the amalgamating entities (that is, A and B) within the form of the new entity (that is, C). The amalgamation is effected by the incorporation of a new association. The amalgamation of A and B to form C causes a balancing adjustment event to occur, under paragraph 40-295(1)(a) of the ITAA 1997, for the depreciating assets held by A and B. The termination value of a depreciating asset under a balancing adjustment event is worked out as at the time when the balancing adjustment event occurs. In certain circumstances, the termination value is the amount specified in section 40-300 of the ITAA 1997. Otherwise, the termination value is an amount worked out under section 40-305 of the ITAA 1997 (subsection 40-300(1) of the ITAA 1997). As no item in the table in subsection 40-300(2) of the ITAA 1997 applies, the termination value is worked out under section 40-305 of the ITAA 1997. The termination value under section 40-305 of the ITAA 1997 is taken to be the greater of the sum of the applicable amounts set out in paragraphs 40-305(1)(a) or (b) of the ITAA 1997. Item 1 of the table in paragraph 40-305(1)(b) of the ITAA 1997 includes in termination value an amount received under a balancing adjustment event. Section 86 of the AIA (Qld) provides that upon the incorporation of a new association as a result of an amalgamation of old associations, the assets and liabilities of the old associations become the assets and liabilities of the new association. This means that no amount is received by A and B for the transfer of their depreciating assets to C. As no amount is received under the balancing adjustment event, the termination value under Item 1 of paragraph 40-305(1)(b) of the ITAA 1997 is nil. However, Item 2 of the table in paragraph 40-305(1)(b) of the ITAA 1997 may also apply.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 40-295(1)(a) section 40-300 subsection 40-300(1) subsection 40-300(2) section 40-305 paragraph 40-305(1)(a) paragraph 40-305(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1016 | ATO ID 2003/218 | ATO ID 2003/220 | ATO ID 2003/221", "Subject_References": "Balancing adjustment event Capital allowances CoE Depreciating assets Termination value Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003219", "Unmatched_Content": "Keywords Balancing adjustment event Capital allowances CoE Depreciating assets Termination value Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2002/933", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Termination value of a car - car limit & GST", "Issue": "If the balancing adjustment event for a car to which the car limit under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997) applied is a taxable supply, is the adjustment, under section 40-325 of the ITAA 1997, made after the termination value is first reduced by the amount of the GST payable on the supply?", "Decision": "Yes. If the balancing adjustment event for a car to which the car limit under section 40-230 of the ITAA 1997 applied is a taxable supply, the adjustment under section 40-325 of the ITAA 1997 is made after the termination value is first reduced by the amount of the GST payable on the supply under subsection 27-95(1) of the ITAA 1997.", "Facts": "A taxpayer registered for GST acquired a car on 1 July 2001. The cost of the car was $79,500. The car was used solely for a creditable purpose and the maximum input tax credit of $5,012 was claimed. The car limit applied to reduce the first element of cost of the car to the amount of $55,134. The car was later sold for $38,000 including GST.", "Reasons_for_Decision": "Summary: Generally the termination value of a depreciating asset is the amount you receive for the asset on its disposal. The termination value of a depreciating asset is reduced under subsection 27-95(1) of the ITAA 1997 if the balancing adjustment event is a taxable supply. The reduction is the amount of the GST payable on the supply. The termination value of a car to which the car limit applied is further adjusted by section 40-325 of the ITAA 1997. This section applies a fraction to the termination value worked out after the reduction by subsection 27-95(1) of the ITAA 1997. The fraction is: Car limit + Amounts included in the second element of the car's cost / Total cost of the car (ignoring the car limit) This adjustment recognises that the car limit has reduced the cost of the car otherwise available to work out the decline in value and reduces the car's termination value to an amount proportional to the amount used to work out the car's decline in value. In working out the fraction used to adjust the termination value, the total cost of the car (ignoring the car limit) is the cost after applying Subdivision 27-B of the ITAA 1997. As the cost of a car is reduced by the amount of input tax credit to which an entity is entitled before the car limit applies, this amount is also excluded from the total cost of the car when working out the fraction under section 40-325 of the ITAA 1997. The taxpayer is registered for GST and purchased a car for $79,500 on 1 July 2001. The car was used solely for a creditable purpose. The first element of cost ($79,500) is reduced by the maximum input tax credit ($5,012) to $74,488. The first element of cost is further reduced to the car limit of $55,134. The car was sold on 30 June 2002 for $38,000 including GST. No amounts were included in the second element of the car's cost. The car's termination value is worked out as follows: Reduction for GST under subsection 27-95(1) of the ITAA 1997 Reduction under section 40-325 of the ITAA 1997 The car's termination value is $25,569.", "Date_of_Decision": "18 September 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 27-95(1) section 40-230 section 40-325", "Related_Public_Rulings_and_Determinations": "TD 2006/40", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Termination value Car limit", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": true, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002933", "Unmatched_Content": "Related ATO Interpretative Decisions | Removed as it is no longer current. | Related rulings / determinations | Inserted reference to TD 2006/40 as it replaces ATO ID 2002/693. | Related Public Rulings (including Determinations) TD 2006/40 | Keywords Goods and services tax Termination value Car limit"}
{"ATO_ID_Number": "ATO ID 2002/1016", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances - Termination value", "Issue": "What is the termination value of depreciating assets under Subdivision 40-D of the Income Tax Assessment Act 1997 (ITAA 1997) for assets transferred from Club A to Club B upon the amalgamation of the two clubs, where a liability to repay an amount to Club B is terminated?", "Decision": "The termination value of a depreciating asset under Subdivision 40-D of the ITAA 1997 is the amount taken to be received under item 2 in the table in subsection 40-305(1) of the ITAA 1997. The item specifies that where all or part of a liability to pay an amount is terminated, the termination value is the amount of the liability or part when it is terminated.", "Facts": "Club A and Club B are companies limited by guarantee and both are registered under the Registered Clubs Act 1976 (NSW). Club A is amalgamating with Club B within the terms of paragraph 17AB(2)(b) of the Registered Clubs Act 1976 (NSW) which states that a reference to the amalgamation of 2 or more registered clubs is a reference to an amalgamation effected by the continuation of one of those clubs and the dissolution of the other club or clubs. As a result of the amalgamation, Club A is to be dissolved and Club B is to take over its assets. Club B had previously loaned an amount to Club A. The loan was secured by mortgage and made on condition that Club A would repay the loan within a period of 12 months or amalgamate with Club B. The loan was not repayable if the clubs amalgamated. The members of both clubs voted at a general meeting to amalgamate. Club A was placed in voluntary liquidation. The liquidator transferred the assets of Club A to Club B.", "Reasons_for_Decision": "Summary: Termination value is worked out as at the time when the balancing adjustment event occurs. It is the amount specified in either subsection 40-300(1) or section 40-305 of the ITAA 1997. Item 2 in the table in subsection 40-305(1) of the ITAA 1997 applies to the circumstances of the transfer of depreciating assets by Club A. The item specifies that the amount taken to have been received where all or part of a liability to pay an amount is terminated is the amount of the liability or part when it is terminated. The transfer of assets to Club B is a necessary step in the amalgamation that satisfies the condition for non-repayment of the loan. The termination of the liability to repay the loan relates to more than the transfer of the depreciating assets. In the terms of Item 2 in the table in subsection 40-305(1) of the ITAA 1997, the termination value is the amount of the liability to which the transfer of the depreciating assets relates. That is, the amount of the loan, that no longer has to be repaid, that relates to the asset being transferred. Taxation Determination TD 98/24 states that the market values of the various components the payment was made for will be an acceptable basis for apportionment where there is no specific allocation in the agreement.", "Date_of_Decision": "30 August 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 40-300(1) Section 40-305", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 98/24", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1017", "Subject_References": "Balancing adjustment event Termination value Depreciating assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021016", "Unmatched_Content": "Facts and Reasons for Decision | Minor editorial amendments. | Removal of reference to repealed paragraph 17A(1)(b) of the Registered Clubs Act 1976 (NSW). Inserted paragraph 17AB(2)(b) of the Registered Clubs Act 1976 (NSW). | Included reference to paragraph 17AB(2)(b) of the Registered Clubs Act 1976 (NSW) | Related ATO Interpretative Decisions | Removal of reference to withdrawn ATO ID 2002/1018 | Related Public Rulings (including Determinations) Taxation Determination TD 98/24 | Keywords Balancing adjustment event Termination value Depreciating assets"}
{"ATO_ID_Number": "ATO ID 2011/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - return of an equity interest", "Issue": "If the head company of a consolidated group is taken to have issued an equity interest to another entity and later purchases the equity interest from that entity for an amount that is less than the issue price, is the expenditure incurred by the head company an amount that, for that other entity, is a return of an equity interest for the purpose of subparagraph 40-880(9)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. If the head company of a consolidated group is taken to have issued an equity interest to another entity and later purchases the equity interest from that entity for an amount that is less than the issue price, the expenditure incurred by the head company is an amount that, for that other entity, is a return of an equity interest for the purpose of subparagraph 40-880(9)(b)(i) of the ITAA 1997.", "Facts": "All statutory references are to the ITAA 1997 unless otherwise stated. Sub Co is a subsidiary member of Head Co's consolidated group. Head Co is the head company. Sub Co and a third party entered into an agreement whereby Sub Co issued convertible notes to the third party. Because of the single entity rule, Head Co is taken to have issued the convertible notes to the third party. The convertible notes were an equity interest for the purposes of Division 974. In a later income year Head Co itself purchased the convertible notes from the third party. The expenditure incurred by Head Co to purchase the convertible notes was less than the amount paid by the third party when the convertible notes were issued to it. The expenditure incurred by Head Co was capital expenditure incurred in relation to its current business for the purposes of paragraph 40-880(2)(a).", "Reasons_for_Decision": "Summary: Subparagraph 40-880(9)(b)(i) states that: You cannot deduct anything under this section for an amount of expenditure you incur: (b) to the extent that, for another entity, the amount is a *return on or of: (i) an *equity interest Head Co incurred the capital expenditure to purchase the convertible notes from the third party vendor. The third party vendor is 'another entity' for the purposes of subparagraph 40-880(9)(b)(i). The convertible notes were an equity interest held by that third party. They were therefore an equity interest of another entity. The expenditure incurred by Head Co to acquire the equity interest is an amount incurred by it to acquire another entity's equity interest. The interpretative issue is the meaning of the expression 'return of' in the context of subparagraph 40-880(9)(b)(i). In this case, the specific question associated with this issue is, for an amount of expenditure to be a return of another entity's equity interest, must the expenditure exactly correspond with the amount paid by that other entity when it acquired the equity interest? The word 'return' is defined in subsection 995-1(1) to mean: Return on a *debt interest or *equity interest does not include a return of an amount invested in the interest. It is clear that this definition does not resolve the meaning of the expression 'return of' for the purposes of subparagraph 40-880(9)(b)(i). Recourse must therefore be had to the ordinary meaning of the expression. The Macquarie Dictionary revised 5th Edition relevantly defines the word 'return' as: 18. the act or fact of returning; a going or coming back; a bringing, sending, or giving back. 20. reciprocation, repayment, or requital: profits in return for outlay The word 'of' is relevantly defined as: 9. objective relation An amount that, for another entity, is a 'return of an equity interest' is therefore an amount which gives back to that entity a sum for its interest in equity. Here, the amount Head Co has given back to the third party is a sum that is a requital for the third party selling its equity interest. In other words, it is a return of the third party's investment in equity. The ordinary meaning of the expression 'return of' does not introduce a requirement that the amount given back to another entity must exactly correspond with the amount paid by that entity when it acquired the equity interest. It is not uncommon, for example, for an entity to incur expenditure to buy back its shares at market value. The market value will usually differ from the issue price. This would not of itself disqualify the expenditure from being an amount that, for another entity, is a return of an equity interest. The explanatory memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 (the EM) provides some guidance as to the meaning of the expression 'return of' for the purpose of subparagraph 40-880(9)(b)(i). Although the EM gives the example of payments made by a company to buy back its own shares as an expenditure which is excluded by subsection 40-880(9) the EM makes it clear that expenditures excluded by the provision are not limited to the examples given. The relevant paragraphs of the EM state: Returns of capital 2.79 Some capital amounts are not considered legitimate blackhole expenditures as they comprise the transfer or distribution of funds, repayments, or do not give rise to any income tax consequences. As such, the expenditure does not represent an economic loss to the taxpayer and is not deductible. [Schedule 2, item 30, subsection 40-880(9).] 2.80 Expenditures excluded by this provision include, but are not limited to: • dividends paid by companies; • distributions by trustees; • margin calls; • payments made by a company to buy back its own shares; and • repayments of loan principal. Therefore, if Head Co (because of the single entity rule) is taken to have issued an equity interest to another entity and later purchases the equity interest from that entity, for an amount that is less than the issue price, its expenditure is an amount that, for another entity, is a return of an equity interest for the purpose of subparagraph 40-880(9)(b)(i).", "Date_of_Decision": "3 October 2011", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(a) subsection 40-880(9) paragraph 40-880(9)(b) subparagraph 40-880(9)(b)(i) Division 974 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2010/D7", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/79", "Subject_References": "Blackhole expenditure Business related costs Capital expenditure Equity Non-share equity interest", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 The Macquarie Dictionary, 5th Edn, The Macquarie Library Pty Ltd, NSW, 2009", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201178", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2010/D7 | Keywords Blackhole expenditure Business related costs Capital expenditure Equity Non-share equity interest"}
{"ATO_ID_Number": "ATO ID 2011/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - return of an equity interest", "Issue": "If the taxpayer's subsidiary issues an equity interest to an entity and the taxpayer later purchases the equity interest from that entity, is the expenditure incurred by the taxpayer an amount that, for that other entity, is a return of an equity interest for the purpose of subparagraph 40-880(9)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. If the taxpayer's subsidiary issues an equity interest to an entity and the taxpayer later purchases the equity interest from that entity, the expenditure incurred by the taxpayer is an amount that, for that other entity, is a return of an equity interest for the purpose of subparagraph 40-880(9)(b)(i) of the ITAA 1997.", "Facts": "All statutory references are to the ITAA 1997 unless otherwise stated. The taxpayer is the majority owner of a subsidiary company (the subsidiary). The taxpayer, the subsidiary and a third party entered into an agreement whereby the subsidiary issued convertible notes to the third party. In a later income year the taxpayer purchased the convertible notes from the third party. The convertible notes were an equity interest for the purposes of Division 974. The expenditure incurred by the taxpayer to purchase the convertible notes was capital expenditure incurred in relation to its current business for the purposes of paragraph 40-880(2)(a).", "Reasons_for_Decision": "Summary: Subparagraph 40-880(9)(b)(i) states that: You cannot deduct anything under this section for an amount of expenditure you incur: (b) to the extent that, for another entity, the amount is a *return on or of: (i) an *equity interest The taxpayer incurred the capital expenditure to purchase the convertible notes from the third party vendor. The third party vendor is 'another entity' for the purposes of subparagraph 40-880(9)(b)(i). The convertible notes were an equity interest in the subsidiary held by that third party. They were therefore an equity interest of another entity. The expenditure incurred by the taxpayer to acquire the equity interest is an amount incurred by it to acquire another entity's equity interest. The interpretative issue is the meaning of the expression 'return of' in the context of subparagraph 40-880(9)(b)(i). In this case, the specific question associated with this issue is whether, for an amount to be a return of another entity's equity interest, the expenditure must be incurred by the taxpayer who issued the equity interest? The word 'return' is defined in subsection 995-1(1) to mean: Return on a *debt interest or *equity interest does not include a return of an amount invested in the interest. It is clear that this definition does not resolve the meaning of the expression 'return of' for the purposes of subparagraph 40-880(9)(b)(i). Recourse must therefore be had to the ordinary meaning of the expression. The Macquarie Dictionary revised 5th Edition relevantly defines the word 'return' as: 18. the act or fact of returning; a going or coming back; a bringing, sending, or giving back. 20. reciprocation, repayment, or requital: profits in return for outlay The word 'of' is relevantly defined as: 9. objective relation An amount that, for another entity, is a 'return of an equity interest' is therefore an amount which gives back to that entity a sum for its interest in equity. Here, the amount the taxpayer has given back to the third party is a sum that is a requital for the third party selling its equity interest in the subsidiary. In other words, it is a return of an equity interest. The ordinary meaning of the expression 'return of' does not introduce a requirement that the issuer of the equity interest must be the party that incurs the amount that is a return of the equity interest. This is particularly so in the context of subparagraph 40-880(9)(b)(i) which looks at the amount from the perspective of 'another entity'. It focuses on the entity that held the equity interest and is concerned with 'another entity' being given an amount (by the taxpayer) that is a return of its equity interest. Although it is common for an equity interest to be bought back by the entity which issued the interest this does not mean that subparagraph 40-880(9)(b)(i) is restricted in its application to only that circumstance. The explanatory memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 (the EM) provides some guidance as to the meaning of the expression 'return of' for the purpose of subparagraph 40-880(9)(b)(i). Although the EM gives the example of payments made by a company to buy back its own shares as an expenditure which is excluded by subsection 40-880(9) the EM makes it clear that expenditures excluded by the provision are not limited to the examples given. The relevant paragraphs of the EM state: Returns of capital 2.79 Some capital amounts are not considered legitimate blackhole expenditures as they comprise the transfer or distribution of funds, repayments, or do not give rise to any income tax consequences. As such, the expenditure does not represent an economic loss to the taxpayer and is not deductible. [Schedule 2, item 30, subsection 40-880(9).] 2.80 Expenditures excluded by this provision include, but are not limited to: • dividends paid by companies; • distributions by trustees; • margin calls; • payments made by a company to buy back its own shares; and • repayments of loan principal. Therefore if the taxpayer's subsidiary issues an equity interest to an entity and the taxpayer later purchases the equity interest from that entity, the expenditure incurred by the taxpayer to purchase the equity interest from that entity is an amount that, for that other entity, is a return of an equity interest for the purpose of subparagraph 40-880(9)(b)(i).", "Date_of_Decision": "3 October 2011", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(a) subsection 40-880(9) paragraph 40-880(9)(b) subparagraph 40-880(9)(b)(i) Division 974 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2010/D7", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/78", "Subject_References": "Blackhole expenditure Business related costs Capital expenditure Equity Non-share equity interest", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 The Macquarie Dictionary, 5th Edn, The Macquarie Library Pty Ltd, NSW, 2009", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201179", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2010/D7 | Keywords Blackhole expenditure Business related costs Capital expenditure Equity Non-share equity interest"}
{"ATO_ID_Number": "ATO ID 2010/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - limitation of deduction - in relation to a lease or other legal or equitable right", "Issue": "Does paragraph 40-880(5)(d) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to limit the taxpayer's deduction under section 40-880 of the ITAA 1997 for a Capital Appreciation Payment that it makes to the lessee upon termination of a lease?", "Decision": "Yes. Paragraph 40-880(5)(d) of the ITAA 1997 applies so that the taxpayer has no deduction under section 40-880 of the ITAA 1997 for the Capital Appreciation Payment that it makes to the lessee upon termination of a lease.", "Facts": "The taxpayer carries on a business of operating a retirement village on land that it owns. The retirement village contains a number of residential units and facilities in respect of which the taxpayer provides general services for which they charge a fee. As part of their business of operating the village, they lease the residential units to residents for a term of 99 years. Pursuant to the lease agreement, the resident agrees to pay to the taxpayer on the date the lease agreement is entered into an ingoing contribution to secure a right to reside in the retirement village. The ingoing contribution includes an interest-free loan to the taxpayer, which makes up the majority of the contribution, and a smaller amount for the purchase of fixtures, fittings and furnishings. The amount of the loan is based on an estimate of the market value of the right to reside at the time the lease is entered into. Pursuant to the lease agreement, the taxpayer must repay the loan to the resident on termination of the lease. Also on termination of the lease, the resident is entitled to receive an amount referred to as the Capital Appreciation Payment. The Capital Appreciation Payment is capital expenditure incurred by the taxpayer, calculated by reference to the amount by which the ingoing contribution paid by the new incoming resident exceeds the ingoing contribution earlier paid by the outgoing resident. The taxpayer's capital expenditure was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 and the taxpayer's deduction for that expenditure under section 40-880 of the ITAA 1997 is not limited by subsection 40-880(3) of the ITAA 1997.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997 unless otherwise stated) Section 40-880 provides a deduction over five income years for certain business related capital expenditure. Paragraph 40-880(5)(d) provides that you cannot deduct anything under section 40-880 for an amount of expenditure you incur to the extent that it is in relation to a lease or other legal or equitable right. A 'lease or other legal or equitable right' is not defined in the legislation. However, in respect of paragraph 40-880(5)(d), paragraph 2.68 of the Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: This exclusion replicates that found in the repealed section 40-880, having been added in 2002 in the context of the Government's review of the treatment of expenditure incurred on leases or other legal or equitable rights. The 2005-6 Budget announced that the Government would take a case-by-case approach in relation to the taxation of rights. Since that paragraph states that the exclusion contained in paragraph 40-880(5)(d) replicates that found in the repealed section 40-880, it is relevant to consider the former paragraph 40-880(3)(d). In discussing the former paragraph 40-880(3)(d), paragraph 3.67 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 states: The Government is reviewing the treatment of expenditure incurred in relation to leases or other legal or equitable rights as part of the consideration of the recommendations of the Review of Business Taxation. The appropriate income tax treatment of capital expenditure incurred in relation to these leases and rights will be determined as part of that review. Consequently, capital expenditure on leases or other legal or equitable rights will be excluded from deduction under section 40-880. For example expenditure representing lease surrender payments incurred in closing down your business will not be deductible under section 40-880. It is therefore relevant to consider what 'leases and rights' were considered in the recommendations of the Review of Business Taxation in order to determine the intended scope of the expression 'in relation to a lease or other legal or equitable right' in paragraph 40-880(5)(d) and the former paragraph 40-880(3)(d). Section 10 of the Review of Business Taxation, A Tax System Redesigned, Report, July 1999 , made recommendations in relation to the taxation of leases and rights. While that report did not explain what was encompassed by the expression 'leases and rights', it can reasonably be inferred that it was referring to the sorts of 'leases and rights' outlined in the Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 Volume 1, February 1999 , which included 'leases and similar contracts which provide rights over physical assets'. On the facts, the lease arrangements between the taxpayer and the residents are of the type considered by the Review of Business Taxation (in the context of its review of the taxation of leases and rights) to be leases that would be covered by paragraph 40-880(5)(d). However, for paragraph 40-880(5)(d) to apply in this case, the capital expenditure, being the Capital Appreciation Payment, incurred by the taxpayer must be 'in relation to' the lease. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case, Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some 'association' which is 'relevant' or 'appropriate'. The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. Federal Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936 . He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient. Thus, whether capital expenditure is incurred to any extent 'in relation to' a lease or other legal or equitable right will depend on whether there is a sufficient and relevant connection between the incurrence of the expenditure and in this case, the lease. In this case, the Capital Appreciation Payment is calculated by reference to the amount by which the ingoing contribution paid by the new incoming resident exceeds the ingoing contribution earlier paid by the outgoing resident. Although the Capital Appreciation Payment is dependent upon an increase in value of the right to reside over the term of the lease, the payment is required to be made by the taxpayer to discharge their contractual liability to the outgoing resident under the terms of the lease between the taxpayer and the outgoing resident. As such, the Capital Appreciation Payment will be 'in relation to' the lease as a sufficient and relevant connection exists. Subsection 40-880(6) provides that the exception in paragraph 40-880(5)(d) does not apply to expenditure that is incurred to preserve (but not enhance) the value of goodwill if the expenditure is incurred in relation to a legal or equitable right and the value to the taxpayer of the right in question is solely attributable to the effect that the right has on goodwill. The taxpayer is in the business of operating a retirement village, which includes leasing the units that it owns to residents. The Capital Appreciation Payment, was incurred by the taxpayer to pay an obligation arising from the termination of a lease as part of the normal trading operations of the business and therefore, the Capital Appreciation Payment has value to the taxpayer that is not solely attributable to goodwill. As such, the operation of paragraph 40-880(5)(d) is not impacted by subsection 40-880(6). Accordingly, paragraph 40-880(5)(d) applies to prevent a deduction that might otherwise be available under section 40-880 in respect of the Capital Appreciation Payment incurred by the taxpayer.", "Date_of_Decision": "14 January 2010", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 26(g)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital Allowances CoE Leasing Retirement villages Uniform capital allowances system", "Case_References": "PMT Partners Pty Ltd (In Liquidation) v Australian National Parks & Wildlife Service (1995) 184 CLR 301", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 Review of Business Taxation, A Tax System Redesigned, Report, July 1999 Review of Business Taxation, A Platform for Consulation, Discussion Paper 2 Volume 1, February 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201030", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Leasing Retirement villages Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2010/69", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - could be taken into account in working out the amount of a capital gain or capital loss - time allowed to amend assessment expired", "Issue": "If the amendment period in section 170 of the Income Tax Assessment Act 1936 (ITAA 1936) has expired and the taxpayer's capital expenditure forms part of the cost base of a capital gains tax (CGT) asset but was not taken into consideration when working out the taxpayer's net capital gain for the relevant income year, is that capital expenditure 'taken into account in working out a capital gain or capital loss from a CGT event' for the purpose of paragraph 40-880(5)(f) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. As the taxpayer's capital expenditure forms part of the cost base of a CGT asset, it could be taken into account in working out the amount of a capital gain from a CGT event for the purposes of paragraph 40-880(5)(f) of the ITAA 1997. The application of paragraph 40-880(5)(f) of the ITAA 1997 is not affected by the expiry of amendment periods prescribed by section 170 of the ITAA 1936.", "Facts": "The taxpayer sold a business which they had carried on - they disposed of all of the assets of the business, including the goodwill. A CGT event happened to the assets when the taxpayer disposed of them and, as a result, the taxpayer included a net capital gain in their assessable income for the income year in which the CGT event happened. Subsequently, the purchaser of the business commenced legal action against the taxpayer for allegedly misrepresenting the value of the goodwill of the business. For several income years after the one in which the CGT event happened, the taxpayer incurred legal fees in relation to the legal action. The legal fees are capital expenditure incurred in relation to a business the taxpayer used to carry on for the purposes of paragraph 40-880(2)(b) of the ITAA 1997. The fees are also incidental costs of the disposal of the goodwill of the business and form part of the cost base of the goodwill. The amount of the capital gain made from the CGT event happening to the goodwill was worked out using a cost base of the goodwill which did not include the legal fees. Therefore, the legal fees were not reflected in the net capital gain included in the taxpayer's assessable income in the year in which the CGT event happened. The time allowed by section 170 of the ITAA 1936 to amend the taxpayer's assessment for the income year in which the CGT event happened has expired.", "Reasons_for_Decision": "Summary: Section 40-880 of the ITAA 1997 allows certain business capital expenditure to be deducted in equal proportions over five income years. Paragraph 40-880(5)(f) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 for an amount of expenditure you incur to the extent that 'it could, apart from this section, be taken into account in working out the amount of a capital gain or capital loss from a CGT event'. In most cases, capital proceeds and cost base (or reduced cost base) are taken into account in working out the amount of a capital gain or capital loss from a CGT event. Therefore, capital expenditure which reduces capital proceeds from a CGT event or forms part of the cost base (or reduced cost base) of a CGT asset could be taken into account in working out the amount of a capital gain or capital loss from a CGT event for the purposes of paragraph 40-880(5)(f) of the ITAA 1997. In the present case, the capital expenditure forms part of the cost base of the goodwill and, therefore, could be taken into account in working out the capital gain made from the CGT event that happened to the goodwill. However, an issue arises where the expenditure is then not reflected in the net capital gain included in the taxpayer's assessable income for the income year in which the CGT event happened because the time allowed by section 170 of the ITAA 1936 to amend the taxpayer's assessment for that income year has expired. Whether capital expenditure could be taken into account in working out the amount of a capital gain or capital loss from a CGT event for the purposes of paragraph 40-880(5)(f) of the ITAA 1997 pays no regard to the inability of the taxpayer to amend the net capital gain for the income year in which the CGT event happened. Expenditure could be taken into account in working out the amount of a capital gain or capital loss from a CGT event even though it was not able to be reflected in the net capital gain included in a taxpayer's assessable income for an income year and the time allowed by section 170 of the ITAA 1936 to amend the taxpayer's assessment for that income year has expired. In the present case, the legal fees form part of the cost base of the goodwill of the business. Therefore, the legal fees could be taken into account in working out the amount of a capital gain or capital loss from a CGT event for the purposes of paragraph 40-880(5)(f) of the ITAA 1997, despite the fact that the time allowed by section 170 of the ITAA 1936 to amend the taxpayer's assessment for the income year in which the CGT event happened has expired.", "Date_of_Decision": "17 March 2010", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(b) paragraph 40-880(5)(f)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital gains Capital losses Net capital gains", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201069", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital gains Capital losses Net capital gains"}
{"ATO_ID_Number": "ATO ID 2010/91", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses: misrepresentation", "Issue": "Does paragraph 40-880(5)(f) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to prevent a deduction under section 40-880 of the ITAA 1997 if the expenditure incurred could be used in working out the amount of a capital gain or capital loss for an income year in which the provisions of the Income tax Assessment Act 1936 (ITAA 1936) apply?", "Decision": "Yes.", "Facts": "The taxpayer carried on a business. In a year prior to the introduction to the ITAA 1997 they sold the business assets, including the goodwill, which is a CGT asset. The capital gain on disposal of the goodwill was calculated in accordance with subsection 160Z(1) of Part IIIA of the ITAA 1936. The taxpayer included a net capital gain in their assessable income under former subsection 160ZO(1) of the ITAA 1936 for the income year in which the business assets were disposed of. Subsequently, the purchaser of the business commenced legal action against the taxpayer for allegedly misrepresenting the value of the goodwill of the business. The taxpayer incurred legal fees in relation to the legal action. Some of these legal fees were incurred on or after 1 July 2005. The legal fees incurred on or after 1 July 2005 are capital expenditure incurred in relation to a business the taxpayer used to carry on for the purposes of paragraph 40-880(2)(b) of the ITAA 1997. The fees are also incidental costs of the disposal of the goodwill for the purposes of former subsection 160ZH(7) of the ITAA 1936 and form part of the cost base of the goodwill.", "Reasons_for_Decision": "Summary: Paragraph 40-880(5)(f) of the ITAA 1997 provides that a taxpayer can not deduct anything under section 40-880 for an amount of expenditure you incur to the extent that it could apart form section 40-880 be taken into account in working out the amount of a capital gain or capital loss from a CGT event. If the sale of the business had occurred after the introduction of the ITAA 1997, paragraph 40-880(5)(f) of the ITAA 1997 would have prevented the legal fees from being deducted under section 40-880 as they would have been included in working out a capital gain or loss from a CGT event. The CGT regime in the ITAA 1997 is an event based regime. The now repealed CGT provisions of the ITAA 1936 did not operate on an event based basis but rather on the basis of acquisition and disposal of an asset, to which end certain transactions are 'deemed' to have effected a disposal. However, as the idea behind the now repealed CGT regime in the ITAA 1936 and the CGT provisions of the ITAA 1997 is to bring all capital gains and capital losses to account, most of the deeming provisions to effect a disposal under the repealed ITAA 1936 are substantially mirrored in the ITAA 1997. Paragraph 40-880(5)(f) of the ITAA 1997 will apply to the CGT provisions in the ITAA 1936 which are mirrored in the ITAA 1997. Therefore, even though the legal expenses are included in calculating a capital gain on the disposal of the goodwill under the provisions of the ITAA 1936, this does not prevent paragraph 40-880(5)(f) of the ITAA 1997 from applying.", "Date_of_Decision": "14 April 2010", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(b) subsection 40-880(5)(f)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure CGT cost base Deductions & expenses Legal expenses", "Case_References": "", "Other_References": "Taxation Determination TD 93/44", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201091", "Unmatched_Content": "Keywords Capital expenditure CGT cost base Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2010/132", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - expenditure in relation to a proposed business", "Issue": "Is the capital expenditure incurred by the taxpayer 'in relation to a business proposed to be carried on' for the purposes of paragraph 40-880(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The capital expenditure is not incurred 'in relation to a business proposed to be carried on' for the purposes of paragraph 40-880(2)(c) of the ITAA 1997 as there is not a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and the proposed business. The object of the expenditure was to discharge the taxpayer's personal contractual obligations rather than to serve a need or object of the proposed business.", "Facts": "The taxpayer was employed under an employment contract for a fixed term. The taxpayer terminated the contract before the end of the term so that he could commence carrying on a business. As a consequence of terminating the contract early, the taxpayer was liable to pay compensation to his employer and he incurred capital expenditure to satisfy this liability.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Subject to the limitations and exceptions contained in subsections 40-880(3) to (9), paragraphs 40-880(2)(a), (b) and (c) allow a deduction for capital expenditure you incur in relation to your business, or in relation to a business that used to be carried on or a business that is proposed to be carried on. Subsection 40-880(1) describes the object of section 40-880 to make certain business capital expenditure deductible over five years. The expression 'business capital expenditure' connotes capital expenditure that has the essential character of business expenditure. This is confirmed by paragraph 2 25 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 (EM to the Bill) which notes: 'The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business'. The words 'in relation to' indicate that the expenditure in question must be sufficiently relevant to the current, former or proposed business to impress on it the character of a business expense of that particular business. The legislation does not define the expression 'in relation to' and so it takes its ordinary meaning. The Macquarie Dictionary defines 'related' as 'associated; connected'. Accordingly, the expenditure and the business need to be associated or connected for the expenditure to be described as being 'in relation to' the business. However, although the phrase 'in relation to' uses wide words of connection, the intended width of the relationship between the two connected subjects must be considered against their legislative context. This principle of interpretation was applied by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT ), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. The legislative context of section 40-880 indicates that the closeness of the association or connection must objectively support the conclusion that the expenditure is a business expense of the particular business. This is the same idea conveyed by the then Treasurer in media release no. 045 on 10 May 2005 that announced a systemic tax treatment for 'legitimate business expenses, known as blackhole expenditures.' The adjective 'legitimate' emphasises that the expenditure in question must be a genuine business expense of a particular proposed, current or former business. Whether capital expenditure is truly a business expense turns on the particular facts and circumstances and is a matter of impression and judgement. Determining whether the expenditure has the character of a business expense can be approached by asking what the expenditure is for, in the sense of identifying the need or object that the expenditure serves. If the facts show that the expenditure satisfies the ends of the relevant business then it will have the character of a business expense. The EM to the Bill at paragraph 2 26 gives the following examples of the type of expenditure that has the requisite connection with a proposed business for the purposes of paragraph 40-880(2)(c): There are various pre-business expenses that would be incurred 'in relation to' a proposed business. These include, but are not limited to, expenditures to investigate the viability of the business (eg, feasibility studies or market research), establishment costs (such as the costs of establishing the business structure), or expenses that are a necessary precedent to the business being carried on (costs of market testing or putting in a tender). These categories of expenditure demonstrate an immediate connection with the proposed business in the sense that the expenditure is directed to meeting an objective or requirement that arises out of the proposed business. Feasibility studies and market testing, for example, provide information in the context of making commercial decisions about the scope and focus of the business that is proposed. Similarly, the cost of establishing the business structure is directly related to the proposed business because it is an integral step in being able to carry on the business operations. In contrast, the expenditure to compensate for the early termination of the employment contract does not have the character of an expense that satisfies an objective or requirement of the business. Rather, the payment was made to satisfy the taxpayer's personal obligations under his employment contract. The purpose of the payment was to discharge the taxpayer from his obligation to perform the contract. The expenditure is relevantly related to the employment contract, not to the proposed business. By ending the employment relationship the taxpayer was able to carry on a business without being in breach of his contractual obligations. Although in this sense there is a connection between the expenditure and the proposed business, it is not a connection that is sufficiently close to satisfy the description of being 'in relation to' the proposed business. The necessary connection is not established merely because the payment would not have been made but for the decision to commence carrying on a business. The compensation payment cannot be characterised as expenditure that serves a need or object of the proposed business. That is, the expenditure is not an expense of the business the taxpayer proposes to carry on. It is not directed to meeting the anticipated commercial requirements of the proposed business. Rather, its purpose is to free the taxpayer from the contractual obligation that would otherwise prevent him from carrying on his own business. In the circumstances, there is not a sufficient and relevant connection between the taxpayer's incurrence of the expenditure on the compensation payment and the proposed business. Accordingly, the expenditure is not incurred in relation to the proposed business for the purposes of paragraph 40-880(2)(c). The expenditure cannot be deducted under section 40-880.", "Date_of_Decision": "17 June 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(1) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure", "Case_References": "PMT Partners Pty Ltd (In Liquidation) v Australian National Parks & Wildlife Service (1995) 184 CLR 301", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 The Macquarie Dictionary, 2001 , rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010132", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2010/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - expenditure in relation to a lease not obtained", "Issue": "Where a lease is not obtained, is capital expenditure incurred in trying to obtain the lease expenditure incurred 'in relation to a lease' for the purposes of paragraph 40-880(5)(d) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where a lease is not obtained, capital expenditure incurred in trying to obtain the lease is not expenditure incurred in relation to a lease for the purposes of paragraph 40-880(5)(d) of the ITAA 1997. There is no lease for the purposes of paragraph 40-880(5)(d) of the ITAA 1997.", "Facts": "The taxpayer was the lessee of land on which they carried on a business. When the lease expired the lessor decided not to renew it. Instead tenders were called. The taxpayer incurred legal expenses and consultants' fees in preparing an expression of interest and lease renewal negotiations. The taxpayer's expression of interest was unsuccessful and the land was leased to another unrelated party. The legal expenses and consultants' fees incurred by the taxpayer are capital expenditure in relation to the taxpayer's business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Paragraph 40-880(5)(d) provides that you cannot deduct anything under section 40-880 for an amount of expenditure that you incur to the extent that it is in relation to a lease or other legal or equitable right. Capital expenditure is incurred 'in relation to a lease' if it brings a lease into existence or it has a sufficient and relevant connection with a lease that is in existence. As the taxpayer in this case was ultimately unsuccessful in obtaining a lease there is no lease for the purposes of paragraph 40-880(5)(d). Therefore, the capital expenditure incurred by the taxpayer in trying to obtain a lease cannot be said to be in relation to a lease for the purposes of paragraph 40-880(5)(d).", "Date_of_Decision": "1 September 2010", "Year_of_Income": "Year ending 30 June 2010 Year ending 30 June 2011 Year ending 30 June 2012 Year ending 30 June 2013 Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(a) paragraph 40-880(5)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/93 | ATO ID 2007/109 | ATO ID 2007/111 | ATO ID 2009/36 | ATO ID 2010/30", "Subject_References": "Blackhole Expenditure Capital Allowances CoE Capital Expenditure Leasing", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010157", "Unmatched_Content": "Keywords Blackhole Expenditure Capital Allowances CoE Capital Expenditure Leasing"}
{"ATO_ID_Number": "ATO ID 2009/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - business transfer arrangement establishing rights to intellectual property", "Issue": "Is some part of the price the taxpayer paid to acquire a business of franchising, capital expenditure on acquiring confidential information, trade secrets and know-how of the business for which a deduction may be allowable under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. No part of the price the taxpayer paid to acquire a business of franchising is capital expenditure on acquiring confidential information, trade secrets and know-how of the business, because the character of the transaction and the nature of the assets acquired prescribe that the purchase price was paid to acquire the various rights that collectively constitute the business acquired. The whole of the capital expenditure incurred by the taxpayer was incurred on those rights and, therefore, is excluded from deduction under section 40-880 of the ITAA 1997 by the operation of paragraphs 40-880(5)(a) and 40-880(5)(f) of the ITAA 1997.", "Facts": "The taxpayer, a member of a corporate group, entered into an agreement with another member of the same corporate group to acquire a business that franchised to other members of the group the right to use a branded business format of undertaking a specific type of business operation. The existing franchisor's agreements granted the franchisees the exclusive right to use, within a specific territory, the collection of commercially recognised 'intellectual property' that enables use of a brand name and the business format that delivers the franchisee its custom. The 'intellectual property' is described in these agreements as intellectual property rights, both registered and unregistered, in respect of trade marks, business names, domain names, patents, designs, colour schemes, get-up, copyright, trade secrets, know-how, business processes, computer programs and confidential information. The business format incorporates a very detailed and specific set of operating procedures and processes, rules, policies and guidelines that prescribes all aspects of the operation of the business. These documents ensure that the franchisor's procedures etcetera, are effectively followed by the franchisee for the purpose of carrying on the franchisee's business. Upon acquisition of the business, the taxpayer carried on as franchisor in the same way. The franchise agreements impose strict controls over the manner and circumstances in which and by whom the various rights may be exercised. In addition, the employment contracts of the staff of franchisees are required to contain confidentiality clauses preventing use or disclosure of the documents and their content other than as authorised. The sale agreement also contained a number of conditions including: the vendor was required to assign to the taxpayer all of the existing franchise agreements; the directors of the vendor were required to enter restrictive covenants which prevented them from any future use of any information they hold in relation to the business; and any beneficial right to confidentiality under existing franchise and employment contracts of the vendor was assigned to the taxpayer. The sale agreement attributed part of the purchase price to that part of the business format described as confidential information, trade secrets and know-how.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated. Section 40-880 provides a deduction over five income years for certain capital expenditure incurred in relation to a business. It is, therefore, a prerequisite requirement that capital expenditure be incurred for the provision to be capable of applying to the expenditure. The subject matter of the sale agreement in this case is enunciated as the acquisition of all the vendor's right, title and interest in all of the 'intellectual property' that collectively make up a branded business format. Confidential information, trade secrets and know-how are described in the sale agreement as a separately identifiable part of the business format and a part of the sale price was attributed to it. In determining whether a part of the purchase price was incurred to acquire the confidential information, trade secrets and know-how, it is crucial to ascertain precisely what was acquired. This, in turn, requires consideration of: (i) the nature of the business acquired; (ii) the nature and character of the assets acquired; and (iii) the nature of the particular transaction under which the business was acquired and its business assets delivered to the purchaser. The business of franchising in this case is carried on by granting to others the right to use, within a specified territory, the 'intellectual property' that enables use of a brand name and the business format that delivers the franchisee its custom. This 'intellectual property' is enunciated in the existing franchise agreements as trade marks, business names, domain names, patents, designs, colour schemes, get-up, copyright, trade secrets, know-how, business processes, computer programs and confidential information. The nature of the assets utilised in this business are all the 'intellectual property' rights held, maintained and developed to licence for a fee the brand name and associated business format. The particular nature of information is that, of itself, it can not in reality be sold ( Moriarty (Inspector of Taxes) v. Evans Medical Supplies Ltd [1957] 3 All ER 718). In considering the nature of dealings with information, it is necessary to consider both how the information is used and the nature of the transaction that purports to deal with it ( Rolls-Royce Ltd v. Jeffrey (Inspector of Taxes) [1962] 1 All ER 801). The confidential information, trade secrets and know-how described in the sale contract refers to the ideas and concepts upon which the business format was developed. Those ideas and concepts are, in effect, embedded and preserved in the documents and other subject matter which give expression to the business format (they may also be reflected in patents and registered designs). The taxpayer is the holder of the copyright in this subject matter providing it with the right to copy the subject matter to the exclusion of every other person. The taxpayer's copyright would be infringed by any person, other than the taxpayer, who makes a reproduction, adaptation or copy of a substantial part of the subject matter, without the licence of the taxpayer. The taxpayer gains effective control of the disclosure of the ideas and concepts through the assignment of the legal and equitable rights to confidentiality under the existing franchises and employment contracts and the creation of contractual rights to confidentiality under the restrictive covenants entered into by the directors of the vendor. Critically, it is the protection of copyrights, registered designs, patents and the right to maintain confidentiality which enable the taxpayer to carry on the business of deriving licences fees by granting exclusive use, within specific territories, of the branded business format that delivers custom to the franchisee. The fact that the sale agreement describes confidential information, trade secrets and know-how as a separate item within the business format and attributes a part of the purchase price to it does not determine the character of the transaction. The character of the transaction and the nature of the business acquired prescribe that the purchase price necessarily relates to the assets that comprise the various rights that enable the taxpayer to carry on the business. Consequently, the Commissioner considers that the purchase price, provided by the taxpayer as consideration for the acquisition of the business, is provided for all of the rights in relation to the trade marks, business names, domain names, patents, registered designs, copyrights, maintaining confidentiality and conducting the business. The price paid to acquire the business is, therefore, properly and wholly referable to those rights and not in any part referable to mere information which is neither real nor personal property. The rights held under copyrights, patents and registered designs are items of intellectual property for the purposes of the income tax law and are included in the definition of a depreciating asset under paragraph 40-30(2)(c). The remaining assets listed above are CGT assets pursuant to paragraph 108-5(1)(b). A deduction under section 40-880 is not allowed to the extent that the capital expenditure is taken into account in some way elsewhere in the income tax law. The capital expenditure incurred on acquiring the depreciating assets listed above forms part of the cost of the depreciating assets and is, therefore, excluded from deduction under section 40-880 by the operation of paragraph 40-880(5)(a). The expenditure incurred on acquiring the CGT assets listed above could be taken into account in working out the amount of a capital gain or capital loss from a CGT event because the expenditure forms part of the cost base of those assets. The expenditure will, therefore, be excluded from deduction under section 40-880 by the operation of paragraph 40-880(5)(f).", "Date_of_Decision": "26 November 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 40-30(2)(c) section 40-880 paragraph 40-880(5)(a) paragraph 40-880(5)(f) paragraph 108-5(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Cost of a depreciating asset Deduction for depreciating assets Deductions & expenses First element of cost Intellectual property rights Know how Uniform capital allowances system", "Case_References": "Moriarty (Inspector of Taxes) v. Evans Medical Supplies Ltd [1957] 3 All ER 718", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20093", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Cost of a depreciating asset Deduction for depreciating assets Deductions & expenses First element of cost Intellectual property rights Know how Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2009/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - amount you can deduct - income year in which business ceases", "Issue": "Can the taxpayer deduct, under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997), the balance of any undeducted qualifying expenditure for the income year in which it stops carrying on the business to which the expenditure relates?", "Decision": "No. The taxpayer cannot deduct, under section 40-880 of the ITAA 1997, the balance of any undeducted qualifying expenditure for the income year in which it stops carrying on the business to which the expenditure relates. Subsection 40-880(2) of the ITAA 1997 prescribes that a deduction is allowed for qualifying expenditure in equal proportions over a period of five income years starting in the year in which the expenditure is incurred.", "Facts": "During the 2005-06 income year the taxpayer, a company, incurred capital expenditure that qualified for deduction as business related costs under section 40-880 of the ITAA 1997. The taxpayer deducted 20% of the qualifying expenditure under section 40-880 of the ITAA 1997 for each of the 2005-06, 2006-07 and 2007-08 income years. The company ceased carrying on the business to which the expenditure related during the 2008-09 income year. It is also proposed that the taxpayer be wound up during the 2008-09 income year.", "Reasons_for_Decision": "Summary: Subject to the limitations and exceptions contained in subsections 40-880(3) to (9) of the ITAA 1997, subsection 40-880(2) of the ITAA 1997 provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: That is, subsection 40-880(2) of the ITAA 1997 prescribes that 20% of the qualifying expenditure is deductible for the income year in which the expenditure is incurred and then 20% for each of the next four income years. Subject to the application of the non-commercial loss provisions in Division 35 of the ITAA 1997, the deduction allowable under section 40-880 of the ITAA 1997 for any particular income year is determined as at the time the expenditure is incurred and does not necessarily depend on the business to which the expenditure is related being carried on during the year of deduction. Subsection 40-880(2) of the ITAA 1997 recognises this by allowing a deduction in relation to a business that 'is, was or will be' carried on. There is no basis in section 40-880 of the ITAA 1997 to allow a deduction for an amount greater than 20% of the qualifying expenditure for any income year or to alter the timing of that deduction. In this case, the taxpayer incurred the qualifying expenditure in the 2005-06 income year and deducted 20% of the expenditure for each of the 2005-06, 2006-07 and 2007-08 income years. Under section 40-880 of the ITAA 1997, the taxpayer is entitled to deduct 20% of the expenditure for each of the 2008-09 and 2009-10 income years notwithstanding the taxpayer ceased to carry on the business to which the qualifying expenditure related during the 2008-09 income year. If, however, the taxpayer is wound up during the 2008-09 income year, it will be unable to claim a deduction for the 2009-10 income year as it was the entity that incurred the qualifying expenditure and it will not exist for any part of that income year. Entitlement to deduction under section 40-880 of the ITAA 1997 is limited to the taxpayer who incurs the qualifying expenditure and the entitlement to that deduction is not transferable to any other taxpayer.", "Date_of_Decision": "7 January 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9) Division 35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Deductions & expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20096", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2009/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - ornamental trees or shrubs", "Issue": "Is the taxpayer's capital expenditure on acquiring and planting trees and shrubs an amount incurred for ornamental trees or shrubs for the purpose of subparagraph 40-840(2)(d)(vii) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure on acquiring and planting trees and shrubs is an amount incurred for ornamental trees or shrubs for the purpose of subparagraph 40-840(2)(d)(vii) of the ITAA 1997 because the primary purpose of their acquisition and planting was for decorative purposes.", "Facts": "The taxpayer carries on their business on land they lease from the land owner. The taxpayer constructed on the land that they lease a new building from which they carry on their business. The construction included landscaping works annexed to the land on the new building site. The capital expenditure incurred by the taxpayer on landscaping works included the cost of purchasing and planting trees and shrubs and the cost of purchasing and laying turf and mulch. As the taxpayer's business is permitted to be carried on from the new building for a finite period only, the taxpayer's business is also a project for the purposes of the project pool provisions in Subdivision 40-I of the ITAA 1997. The contract for the construction of the new building included capital expenditure on landscaping works on the building site. The acquisition and planting of trees and shrubs was part of the decorative and aesthetic theme on the new building site. The expenditure was incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: Broadly speaking, section 40-830 of the ITAA 1997 allows a deduction over the project life for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2) of the ITAA 1997, the amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c) of the ITAA 1997 is one of the amounts specified in paragraph 40-840(2)(d) of the ITAA 1997. In order for the capital expenditure to be a project amount within subparagraph 40-840(2)(d)(vii) of the ITAA 1997, the amount must be incurred for ornamental trees or shrubs. The expression 'ornamental trees or shrubs' is not defined for the purposes of the project pool provisions of Subdivision 40-I of the ITAA 1997 and therefore, it will take its ordinary meaning shaped by the context in which it is found. The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, relevantly defines the word 'ornamental' as: Similarly, The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW, defines the word 'ornamental' as: 1. used for ornament: ornamental plants. 2. such as to ornament; decorative. 3. of or relating to ornament. 4. something ornamental. 5. a plant cultivated for decorative purposes. In light of these dictionary definitions, we consider that an ornamental tree or shrub is, for the purposes of the project pool provisions, one where its primary purpose is decorative. That is, its primary purpose is to add to the visual and aesthetic effect of the project; for example, by beautifying the appearance of the project or by decorating the surroundings of the project. As such, a tree or shrub which is generally used in horticulture, for example a fruit tree or plantation tree, may be an ornamental tree or shrub where its primary purpose was decorative. For example a nut tree that is planted primarily to beautify the surroundings will be ornamental. A tree or shrub will also be an ornamental tree or shrub if its primary purpose is decorative but it also has another lesser purpose of providing a practical function. For example, trees planted for the primary purpose of beautifying a garden may also have the benefit of being a privacy screen, a windbreak or used to delineate a boundary Only the direct costs of acquiring and planting ornamental trees or shrubs are amounts incurred for ornamental trees or shrubs. These direct costs include the purchasing of the tree or shrub, initial fertilising and top soil enhancement and other costs attributable to the establishment of the tree or shrub into its long term growing medium. Ongoing maintenance costs incurred, for example, to water the trees or shrubs on an on-going basis do not form part of amounts incurred for ornamental trees or shrubs. In this case, the taxpayer has incurred capital expenditure on acquiring and planting trees and shrubs as part of the landscaping works on the new building site. The trees and shrubs are included as part of the new building site's decorative or aesthetic theme and are for those purposes only. As such, the taxpayer has incurred capital expenditure for ornamental trees or shrubs for the purpose of subparagraph 40-840(2)(d)(vii) of the ITAA 1997 because the ornamental trees and shrubs were acquired and planted primarily for decorative purposes.", "Date_of_Decision": "24 April 2009", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 40-I section 40-830 section 40-840 subsection 40-840(2) paragraph 40-840(2)(a) paragraph 40-840(2)(c) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(vii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/36", "Subject_References": "Australian Taxation Office Capital Allowances CoE Capital Works Deductions Centres of Expertise Deductions & expenses Project amount Project pool", "Case_References": "", "Other_References": "The Australian Oxford Dictionary, 2004, Oxford University Press, Melbourne The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200935", "Unmatched_Content": "Related ATO Interpretative Decisions | Removed ATO ID 2009/37 as it was withdrawn on 10 December 2010. | Keywords Australian Taxation Office Capital Allowances CoE Capital Works Deductions Centres of Expertise Deductions & expenses Project amount Project pool"}
{"ATO_ID_Number": "ATO ID 2009/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - in relation to a lease or other legal or equitable right", "Issue": "Is the taxpayer's capital expenditure on landscaping land, that it leases from one party and subleases to other parties, incurred in relation to a lease or other legal or equitable right for the purpose of paragraph 40-880(5)(d) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's capital expenditure on landscaping land, that it leases from one party and subleases to other parties, is not incurred in relation to a lease or other legal or equitable right for the purpose of paragraph 40-880(5)(d) of the ITAA 1997 because there is not a sufficient and relevant connection between the taxpayer's expenditure and any of the leases.", "Facts": "The taxpayer carries on businesses on land they lease (head lease) from the land owner. The taxpayer does not have any right or option to purchase the land during the course of or at the end of the lease. The land is not treated as a capital gains tax (CGT) asset of the taxpayer. One of those businesses, not the taxpayer's core business, is a business of sub-leasing premises to third parties (sub-leases). The taxpayer constructed on the land that they lease a new building from which they carry on their core business. The construction included landscaping works annexed to the land on the new building site. The capital expenditure incurred by the taxpayer on landscaping works includes the cost of purchasing and planting trees and shrubs and the cost of purchasing and laying turf and mulch. The new building is not sited within the proximity of any of the premises sub-leased by the taxpayer. The expenditure on landscaping works does not have any impact on the market value of the sub-leases. The sub-leased premises have no connection with the taxpayer's core business of which the new building is part other than being sited on the land covered by the head lease. In respect of the head lease, the expenditure incurred on the landscaping works in insignificant when compared with the original outlay for the head lease. Also, the land area of the landscaping works is insignificant when compared with the total area covered by the head lease. The expenditure incurred on the landscaping works does not have any impact on the market value of the head lease The taxpayer's capital expenditure was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 and the taxpayer's deduction for that expenditure under section 40-880 of the ITAA 1997 is not limited under subsection 40-880(3) of the ITAA 1997. The expenditure was incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: Section 40-880 of the ITAA 1997 provides a deduction over five income years for certain business related capital expenditure. Paragraph 40-880(5)(d) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 of the ITAA 1997 for an amount of expenditure you incur to the extent that it is in relation to a lease or other legal or equitable right. In respect of paragraph 40-880(5)(d) of the ITAA 1997, paragraph 2.68 of the Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 (the EM) states: This exclusion replicates that found in the repealed section 40-880, having been added in 2002 in the context of the Government's review of the treatment of expenditure incurred on leases or other legal or equitable rights. The 2005-06 Budget announced that the Government would take a case-by-case approach in relation to the taxation of rights. Since that paragraph states that the exclusion contained in paragraph 40-880(5)(d) of the ITAA 1997 replicates that found in the repealed section 40-880 of the ITAA 1997, it is relevant to consider the repealed paragraph 40-880(3)(d) of the ITAA 1997. In discussing that exclusion, paragraph 3.67 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 stated: The Government is reviewing the treatment of expenditure incurred in relation to leases or other legal or equitable rights as part of the consideration of the recommendations of the Review of Business Taxation. The appropriate income tax treatment of capital expenditure incurred in relation to these leases and rights will be determined as part of that review. Consequently, capital expenditure on leases or other legal or equitable rights will be excluded from deduction under section 40-880. For example, expenditure representing lease surrender payments incurred in closing down your business will not be deductible under section 40-880. It is therefore relevant to consider what 'leases and rights' were considered in the recommendations of the Review of Business Taxation in order to determine the intended scope of the phrase 'in relation to a lease or other legal or equitable right' in paragraph 40-880(5)(d) of the ITAA 1997 and former paragraph 40-880(3)(d) of the ITAA 1997. Section 10 of the Review of Business Taxation, A Tax System Redesigned, Report, July 1999, made recommendations in relation to the taxation of leases and rights. While that report did not explain what was encompassed by the expression 'leases and rights', it can reasonably be inferred that it was referring to the sorts of 'leases and rights' outlined in the Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 Volume 1, February 1999, which included 'leases and similar contracts which provide rights over physical assets'. On the facts, the sub-leases and the head lease are of the type considered by the Review of Business Taxation (in the context of its review of the taxation of leases and rights) to be leases that would be covered by paragraph 40-880(5)(d) of the ITAA 1997. However, for paragraph 40-880(5)(d) of the ITAA 1997 to apply in this case, the capital expenditure incurred by the taxpayer on landscaping works must be 'in relation to' to the sub-leases or the head lease. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case, Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some 'association' which is 'relevant' or 'appropriate'. The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. Federal Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936. He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient. Thus, whether capital expenditure is incurred to any extent 'in relation to' a lease or other legal or equitable right will depend on whether there is a sufficient and relevant connection between the incurrence of the expenditure and in this case, the sub-leases or the head lease. On the facts of this case, the sub-leases do not form part of the core business being carried on by the taxpayer. Instead, the sub-leases relate to another separately identifiable business that the taxpayer carries on. The expenditure incurred by the taxpayer on landscaping works is in relation to the new building, which forms part of the taxpayer's core business. The expenditure on landscaping works was not incurred for the purpose or expected effect of increasing or preserving the value of the rights in relation to the sub-leases. In addition, the sub-leased properties are not within proximity of the new building site. In these circumstances, there is not a sufficient and relevant connection between the capital expenditure incurred by the taxpayer on the landscaping works and the sub-leases. Although the head lease relates to the entire land leased by the taxpayer and includes the land on which the new building is situated, the expenditure incurred by the taxpayer on landscaping works is insignificant when compared with the original outlay for the head lease and the land area of those works is insignificant when compared with the total area covered by the head lease. In addition, the expenditure on the landscaping works will not have any impact on the market value of the head lease. In these circumstances, there is not a sufficient and relevant connection between the capital expenditure incurred by the taxpayer on the landscaping works and the head lease. Accordingly, the taxpayer's capital expenditure on landscaping land that it leases from one party and subleases to other parties is not incurred in relation to a lease or other legal or equitable right for the purpose of paragraph 40-880(5)(d) of the ITAA 1997.", "Date_of_Decision": "24 April 2009", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) subsection 40-880(2)(a) subsection 40-880(3) subsection 40-880(5)(d) former paragraph 40-880(3)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/35 | ATO ID 2009/37", "Subject_References": "Australian Taxation Office Blackhole expenditure Capital Allowances CoE Capital Works Deductions Centres of Expertise Deductions & expenses", "Case_References": "PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 Review of Business Taxation, A Tax System Redesigned, Report, July 1999 Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 Volume 1, February 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200936", "Unmatched_Content": "Keywords Australian Taxation Office Blackhole expenditure Capital Allowances CoE Capital Works Deductions Centres of Expertise Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2009/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - capital expenditure", "Issue": "Can the taxpayer claim a deduction under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) for a payment made voluntarily by them to extinguish a liability incurred by a company of which they were previously a director and shareholder?", "Decision": "No. The taxpayer can not claim a deduction under section 40-880 of the ITAA 1997 for the payment made voluntarily by them because the payment does not constitute capital expenditure.", "Facts": "The taxpayer was a director and a shareholder of a company. The company carried on a business and incurred a business related liability, which it did not pay. The company ceased trading and was subsequently liquidated. The taxpayer satisfied the liability that was incurred by the company by voluntarily paying the amount of the liability directly to the company's creditor. The taxpayer had not provided any personal guarantee in respect of the liability incurred by the company. There was no ancillary agreement between the company and the taxpayer for the company to reimburse the taxpayer for the amount paid. The amount was not paid by the taxpayer in the form of a loan to the company.", "Reasons_for_Decision": "Summary: Section 40-880 of the ITAA 1997 allows a deduction over five income years for certain business-related capital expenditure. Therefore, for expenditure to be considered for deduction under section 40-880, it must be capital expenditure. The judgment of Dixon J in Sun Newspapers Ltd. and Associated Newspapers Ltd. v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 23; (1938) 1 AITR 403 ( Sun Newspapers ) is the leading authority on the distinction between revenue and capital expenditure. In Sun Newspapers , Dixon J referred to what are now considered guidelines in determining whether a loss or outgoing is of a capital or revenue nature: There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment. The character of the advantage sought provides important direction. It provides the best guidance as to the nature of the expenditure as it says most about the essential character of the expenditure itself. The decision of the High Court in G.P. International Pipecoaters v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 emphasised this, stating: The character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid: Sun Newspapers Ltd and Associated Newspapers Ltd v FCT (1938) 61 CLR 337, at 363; 1 AITR 353; ... In relation to the character of the advantage sought by the expenditure it is necessary to examine whether the expenditure secures an enduring benefit for the business. This test was outlined in British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205 at 213 - 214 by Viscount Cave where he stated: But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. If expenditure produces some asset or advantage of a lasting character for the benefit of the organisation or profit-earning structure it will be considered to be capital expenditure. As stated in Anglo-Persian Oil Co. Ltd. v Dale (1932) 145 L.T at 262 per Rowland J; Sun Newspapers at 355 per Latham J, an enduring benefit does not require that the taxpayer obtain an actual asset, but a benefit which endures, in the way that fixed capital endures. Menzies J in John Fairfax & Sons Pty Ltd v. Federal Commissioner of Taxation (1959) 101 CLR 30; (1959) 11 ATD 510; (1959) 7 AITR 346 concludes that a capital expense can also result in the reduction of capital. In Foley Brothers Pty Ltd v. FC of T (1965) 13 ATD 562; (1965) 9 AITR 635, outgoings incurred for the purpose of altering the organisation or structure of the profit-yielding subject (including its demise) were considered to be of a capital nature. In this case, the payment that was made by the taxpayer was a voluntary payment, made privately under no obligation and in return for no benefit from either the company's creditor or the company. The payment was not made for the purpose of altering the profit-yielding structure of the company. Although the company was being wound up, on these particular facts, the payment does not have a sufficient connection with the demise of the profit-yielding structure of the company. As a result, there is no enduring benefit from the payment and the taxpayer's voluntary payment can not be of a capital nature. As a deduction under section 40-880 of the ITAA 1997 requires that the expenditure be capital expenditure, the taxpayer can not deduct the voluntary payment made to the company's creditor under section 40-880.", "Date_of_Decision": "27 May 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/23", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital Allowances CoE Centres of Expertise Deductions & expenses", "Case_References": "Sun Newspapers Ltd. and Associated Newspapers Ltd. v. Federal Commissioner of Taxation (1938) 61 CLR 337 (1938) 5 ATD 23 (1938) 1 AITR 403", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200939", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/23 | Keywords Blackhole expenditure Capital Allowances CoE Centres of Expertise Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2009/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - business proposed to be carried on", "Issue": "Was a business 'proposed to be' carried on for the purposes of paragraph 40-880(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) at the time the taxpayer incurred their capital expenditure?", "Decision": "Yes. A business was 'proposed to be' carried on for the purposes of paragraph 40-880(2)(c) of the ITAA 1997 at the time the taxpayer incurred their capital expenditure because as at that time the taxpayer demonstrated a commitment of some substance to commence to carry on the business and there was sufficient identity about the business proposed to be carried on, and it was reasonable to conclude the business was proposed to be carried on within a reasonable time.", "Facts": "The taxpayer, an individual, incurred capital expenditure on travel to various locations in assessing a number of particular businesses being carried on within a specific industry for their suitability to the taxpayer's plan to acquire an existing business they proposed to carry on. The taxpayer's travel included travel to attend meetings with the businesses' vendors, view the businesses' premises', meet with industry suppliers to those businesses and undertake competitor analysis. The taxpayer had extensive employment history in the relevant industry and had experience in strategic planning and analysis of potential business acquisitions in that industry. At the time the expenditure was incurred the taxpayer had: However, for various reasons a business was never acquired.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: On the facts of this case, the relevant paragraph to consider is paragraph 40-880(2)(c) because the expenditure was incurred prior to the commencement of the proposed business. Subsection 40-880(7) states: You cannot deduct an amount under paragraph 2(c) in relation to a *business proposed to be *carried on unless, having regard to any relevant circumstances, it is reasonable to conclude that the business is proposed to be carried on within a reasonable time. In considering the term 'proposed to be', paragraphs 2.31, 2.32 and 2.33 of the Explanatory Memorandum to Tax Laws Amendment (2006 measures No. 1) Bill 2006 (the EM) state: 2.31 For a business to be proposed to be carried on for the purposes of this provision, the taxpayer needs to be able to demonstrate a commitment of some substance to commence the business, and sufficient identity about the business that is proposed to be carried on. The deductibility of expenses in advance of the business being carried on will rest on the facts of each case, but this commitment and identity must be tangible; that is, there would need to be some evidence that would enable an objective assessment of the existence of that commitment and identity. 2.32 Further guidance as to the level of commitment required to deduct pre-business expenditure is provided by subsection 40-880(7). In essence, this requires that, having regard to relevant circumstances, it must be reasonable to conclude that the commitment exists. One of these circumstances is that the business be proposed to be carried on within a reasonable time. This may vary according to the industry or the nature of the business and would recognise the long lead times that may be involved. [Schedule 2, item 30, paragraph 40-880(2)(c), subsection 40-880(7)]. 2.33 Such commitment could be shown by, but is not limited to, at least some of the following: • a business plan; • the establishment of a business premises; • research into the likely markets or profitability of the business; and • capital investment in assets of the business. Eligibility for deduction under section 40-880 is established as at the time when the expenditure is incurred (see paragraph 2.40 of the EM). Therefore, as at the time the taxpayer incurred the relevant capital expenditure they need to demonstrate, for the purposes of paragraph 40-880(2)(c), a commitment of some substance to commence to carry on the business and sufficient identity about the business proposed to be carried on. At the time the taxpayer incurred the capital expenditure on travel, they had identified a specific business model and concept for carrying on the business acquired as well as having made decisions as to the activities that the business would carry on. For this purpose, the taxpayer had already undertaken significant investigative/analytical work that enabled them to identify particular existing businesses against which to test their business model and concept. The taxpayer had extensive industry knowledge and a history of employment in the relevant industry and left their employment to find a suitable business to acquire and operate. They had also identified the business structure through which the business would carry on and identified the business trading name. The taxpayer took a targeted approach to identification of the potential acquisition business by narrowing the scope of the possible acquisition business to a limited number of businesses of a specific type within the relevant industry and visiting and evaluating these specific businesses. These factors demonstrate a commitment of some substance to commence to carry on a business and sufficient identity about the business proposed to be carried on, as at the time the expenditure was incurred. The substance of the taxpayer's commitment and the sufficiency of the business identity was not diminished by reason only that a number of existing businesses were being considered. As any business to be acquired was an existing operating business and was to continue trading throughout the purchase period and continue immediately after the purchase, it is reasonable to conclude that a business was proposed to be carried on within a reasonable time. Accordingly, a business was proposed to be carried on for the purposes of paragraph 40-880(2)(c) at the time that the taxpayer incurred their capital expenditure. This view is not negated by the fact that no business was subsequently acquired.", "Date_of_Decision": "11 June 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 Division 35 section 40-880 subsection 40-880(2) paragraph 40-880(2)(c) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/107 | ATO ID 2008/108", "Subject_References": "Blackhole expenditure Business income Capital expenditure Carrying on a business Commencement of business Deductions & expenses Income", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200942", "Unmatched_Content": "Keywords Blackhole expenditure Business income Capital expenditure Carrying on a business Commencement of business Deductions & expenses Income"}
{"ATO_ID_Number": "ATO ID 2009/73", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - when eligibility for deduction is established", "Issue": "Was the capital expenditure the taxpayer incurred after they acquired a business incurred in relation to 'your business' for the purposes of paragraph 40-880(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997), even though the services to which their expenditure relates were provided both before and after the business was acquired?", "Decision": "Yes. The capital expenditure the taxpayer incurred after they acquired the business was incurred in relation to 'your business' for the purposes of paragraph 40-880(2)(a) of the ITAA 1997 because eligibility for a deduction under section 40-880 of the ITAA 1997 is determined as at the time the expenditure is incurred.", "Facts": "The taxpayer is an Australian resident company that carries on a business wholly for a taxable purpose. The taxpayer acquired the business of another entity under an agreement. Upon completion of the agreement (completion), the taxpayer acquired the business of the other entity which it operated as a separate internal division of the taxpayer's existing business. The taxpayer incurred capital expenditure on legal fees for services provided by a legal service provider in the course of the acquisition of the business of the other entity. The services were provided by the legal service provider both before and after completion. The capital expenditure on legal fees was incurred by the taxpayer after completion. At that time the expenditure was incurred by the taxpayer, there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and the business acquired by the taxpayer.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated. In this case, the capital expenditure the taxpayer incurred on legal fees in acquiring the business of the other entity was for services provided both before and after completion. As a portion of the capital expenditure on legal fees incurred by the taxpayer was for services provided before completion at a time when the business of the other entity was 'a business proposed to be carried on', it is necessary to consider whether the expenditure is incurred 'in relation to your business' (paragraph 40-880(2)(a)) or 'in relation to a business proposed to be carried on' (paragraph 40-880(2)(c)). In discussing eligibility for deduction under section 40-880, paragraph 2.40 of the Explanatory Memorandum to Tax Laws Amendment (2006 Measures No.1) Bill 2006 states: Eligibility for deduction is a once only up-front test established as at the time when the expenditure is incurred. Notwithstanding that a portion of the capital expenditure on legal fees incurred by the taxpayer was for services performed by the legal service provider prior to completion, the taxpayer did not incur the capital expenditure on legal fees until after completion, at which time the business of the other entity had already been acquired. As noted above, eligibility for deduction under section 40-880 is established as at the time when the expenditure is incurred by the taxpayer. In this case, as at the time the expenditure was incurred by the taxpayer, the business of the other entity was no longer 'a business proposed to be carried on', but instead, a business carried on by the taxpayer, being the separate internal division. Therefore, the capital expenditure the taxpayer incurred was incurred 'in relation to your business' for the purposes of paragraph 40-880(2)(a) and not 'in relation to a business proposed to be carried on' for the purposes of paragraph 40-880(2)(c).", "Date_of_Decision": "20 July 2009", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) paragraph 40-880(2)(a) paragraph 40-880(2)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/74", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Centres of Expertise", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No.1) Bill 2006", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200973", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Centres of Expertise"}
{"ATO_ID_Number": "ATO ID 2009/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - undivided amount of capital expenditure - several discrete matters - dissection of amount", "Issue": "Should the undivided amount of capital expenditure the taxpayer incurred on legal fees to resolve and defend several discrete legal matters be dissected as between each legal matter for the purpose of considering deductibility of the expenditure under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The undivided amount of capital expenditure the taxpayer incurred on legal fees should be dissected as between each discrete legal matter for the purpose of considering deductibility of the expenditure under section 40-880 of the ITAA 1997 because only part of the undivided expenditure is attributable to each distinct and severable matter.", "Facts": "The taxpayer, a company, incurred capital expenditure on legal fees to resolve and defend several matters brought against it and its two director/shareholders. One of the directors/shareholders of the taxpayer (shareholder X) previously carried on a business in partnership (the partnership business) with two other parties. The other director/shareholder (shareholder Y) was an employee of the partnership business. Shareholder X was alleged to have breached the partnership agreement by leaving the partnership business without giving adequate notice. In addition, prior to the termination of the partnership, shareholder X and shareholder Y were alleged to have established a company which carried on a business in direct competition with the partnership business. The other two partners of the former partnership took legal action against the taxpayer and its directors/shareholders on several matters. Generally the legal fees incurred by the taxpayer related to: While all of the legal services and advice were provided by the same supplier, the legal fees were invoiced to the taxpayer as an undivided amount even though they related to resolving and defending the two distinct legal matters above.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated. Subject to the limitations and exceptions contained in subsection 40-880(3) to subsection 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: In the present case, the legal fees were invoiced as an undivided amount but were incurred on resolving and defending various legal matters relating to both the business the taxpayer carries on and the former partnership business. Separate legal advice and services were provided in respect of each distinct and severable legal matter. An issue arises in these particular circumstances around whether such expenditure should be dissected between each of the businesses to which the expenditure relates for the purpose of considering the deductibility of the expenditure under section 40-880. As the legal matters are distinct and severable from each other, as was the advice and services provided in respect of them, it is appropriate to dissect the undivided amount, and that amount is capable of dissection, into amounts expended in respect of each legal matter. Therefore, the expenditure should be dissected between each of the businesses to which the expenditure relates. As the expenditure in this case can be dissected, the limitations and exclusions contained in subsection 40-880(3) to subsection 40-880(9) are to be applied to each amount separately. Therefore, as the capital expenditure incurred in defending the establishment and carrying on of the taxpayer's business in competition with the partnership business is expenditure in relation to the taxpayer's business for the purposes of paragraph 40-880(2)(a), that expenditure will be subject to the limitation in subsection 40-880(3). As the capital expenditure incurred to establish the termination date of the former partnership is expenditure in relation to a business that used to be carried on by another entity (being the partnership business) for the purposes of paragraph 40-880(2)(b), that expenditure will be subject to the limitation in subsection 40-880(4). Both amounts will be subject to the limitations and exceptions in subsection 40-880(5) to subsection 40-880(9).", "Date_of_Decision": "21 July 2009", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) paragraph 40-880(2)(d) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/84", "Subject_References": "Blackhole expenditure Capital Allowances CoE Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200983", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2008/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to a business proposed to be carried on", "Issue": "Was the taxpayer's capital expenditure incurred 'in relation to a business proposed to be carried on' for the purposes of paragraph 40-880(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's capital expenditure was not incurred 'in relation to a business proposed to be carried on' for the purposes of paragraph 40-880(2)(c) of the ITAA 1997 because it is not reasonable to conclude, at the time the expenditure was incurred, that a commitment by the taxpayer to commence business exists.", "Facts": "The taxpayer conducts a business on a purpose designed site. They carry on the business wholly for a taxable purpose. A necessary part of the taxpayer's business is the maintenance of a licence from a government authority to carry on that business. In order for the taxpayer to maintain the necessary licence from the government authority, they must comply with a condition that they provide the government authority with a financial assurance in respect of the licence. The financial assurance is intended to provide a guarantee that, amongst other things, certain remedial costs in respect of the taxpayer's business are not borne by the community. The taxpayer sought to satisfy their obligation to provide a financial assurance by incorporating a company (the company) into which the taxpayer subscribed capital to establish a pool of funds. The subscription of capital occurred by the taxpayer subscribing for shares in the company upon its establishment and then on a quarterly basis until the fund reached (and maintained) the maximum amount required by the government authority. The taxpayer is expected to fund any remedial action from their own resources and not from the financial assurance fund. That is, the company will not use the money in the fund to carry out remedial action on behalf of the taxpayer as a matter of course. This is only done in circumstances where the taxpayer fails to carry out that action themselves. In this respect, the company has the ability to undertake the remedial work itself (or assume responsibility for the work being done). The government authority is also able to claim against the fund for reimbursement if the government authority is required to undertake remedial action. The share subscription is capital expenditure incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: All references to legislation in this Interpretative Decision are to the ITAA 1997 unless otherwise stated. Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: To ascertain whether paragraph 40-880(2)(c) applies in this case, any proposed business of the company must be considered. Subsection 40-880(7) states that: You cannot deduct an amount under paragraph 2(c) in relation to a *business proposed to be *carried on unless, having regard to any relevant circumstances, it is reasonable to conclude that the business is proposed to be carried on within a reasonable time. In considering the term 'proposed to be', paragraphs 2.31 and 2.32 of the Explanatory Memorandum to Tax Laws Amendment (2006 measures No. 1) Bill 2006 (the EM) state: 2.31 For a business to be proposed to be carried on for the purposes of this provision, the taxpayer needs to be able to demonstrate a commitment of some substance to commence the business, and sufficient identity about the business that is proposed to be carried on. The deductibility of expenses in advance of the business being carried on will rest on the facts of each case, but this commitment and identity must be tangible; that is, there would need to be some evidence that would enable an objective assessment of the existence of that commitment and identity. 2.32 Further guidance as to the level of commitment required to deduct pre-business expenditure is provided by subsection 40-880(7). In essence, this requires that, having regard to relevant circumstances, it must be reasonable to conclude that the commitment exists... In the present case, the taxpayer is expected to undertake any remedial action in respect of their business operation from their own financial resources and not from the financial assurance. Further if the taxpayer does not take remedial action, the government authority will be able to claim against the fund for reimbursement if the government authority is required to undertake the remedial action. In these circumstances, the fund will only be accessed by the government authority where the taxpayer fails to carry out remedial action themselves. The company will also have the ability to undertake the remedial action itself in respect of the site operated by the taxpayer. However, the company will not use the money in the fund to carry out remedial action on behalf of the taxpayer as a matter of course. This is only done in circumstances where the taxpayer fails to carry out those actions or it is agreed between the company and the government authority that instead of the government authority, the company will attend to the remedial action. Further, the company is not permitted to operate as a trading company. In all the circumstances the company will act primarily as a repository for the fund and it is not reasonable to conclude that a commitment by the company to commence a business exists. Whilst it is in the bounds of possibility that the company may carry on a business in the future in the event it is required to attend to the clean-up requirements of the taxpayer, that possibility is not sufficient to satisfy the requirements of paragraph 40-880(2)(c) and subsection 40-880(7). Accordingly, there is no issue of the taxpayer's share subscription expenditure being incurred in relation to a business proposed to be carried on for the purposes of paragraph 40-880(2)(c).", "Date_of_Decision": "29 January 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) Paragraph 40-880(2)(c) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/94 | ATO ID 2008/43 | ATO ID 2008/45", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200844", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2008/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to your business", "Issue": "Was the taxpayer's capital expenditure incurred 'in relation to your business' for the purposes of paragraph 40-880(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure was incurred 'in relation to your business' for the purposes of paragraph 40-880(2)(a) of the ITAA 1997 because there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and the taxpayer's business.", "Facts": "The taxpayer conducts a business on a purpose designed site. They carry on the business wholly for a taxable purpose. A necessary part of the taxpayer's business is the maintenance of a licence from a government authority to carry on that business. In order for the taxpayer to maintain the necessary licence from the government authority, they must comply with a condition that they provide the government authority with a financial assurance in respect of the licence. The financial assurance is intended to provide a guarantee that, amongst other things, certain remedial costs in respect of the taxpayer's business are not borne by the community. The taxpayer sought to satisfy their obligation to provide a financial assurance by incorporating a company (the company) into which the taxpayer subscribed capital to establish a pool of funds. The subscription of capital occurred by the taxpayer subscribing for shares in the company upon its establishment and then on a quarterly basis until the fund reached (and maintained) the maximum amount required by the government authority. The shares do not grant any rights to the taxpayer to receive dividends, appoint a director, vote at meetings of the company or receive a return of funds they have paid to the company for the shares. The shares may, however, be transferred for valuable consideration as part of a sale of the taxpayer's business. The taxpayer also subscribed a separate nominal amount for one voting share, the cost of which is excluded from the expenditure under consideration. The taxpayer is expected to fund any remedial action from their own resources and not from the financial assurance fund. That is, the company will not use the money in the fund to carry out remedial action on behalf of the taxpayer as a matter of course. This is only done in circumstances where the taxpayer fails to carry out that action themselves. In this respect, the company has the ability to undertake the remedial work itself (or assume responsibility for the work being done). The government authority is also able to claim against the fund for reimbursement if the government authority is required to undertake remedial action. The share subscription is capital expenditure incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: All references to legislation in this Interpretative Decision are to the ITAA 1997 unless otherwise stated. Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: As the taxpayer carries on a business and incurred the expenditure under consideration here, it is necessary to consider whether paragraph 40-880(2)(a) is satisfied. In considering the phrase 'in relation to' contained within subsection 40-880(2), paragraph 2.25 of the Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 (the EM) states: The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business. The concept used to establish this character or requisite relationship between the expenditure incurred by the taxpayer and the business carried on (current, past or prospective) is 'in relation to'. The connector 'in relation to' allows the appropriate latitude to enable the deductibility of qualifying capital expenditure incurred before the business commences or after it has ceased. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case, Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some \"association\" which is \"relevant\" or \"appropriate\". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936. He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient. It is therefore necessary to consider the legislative context of subsection 40-880(2) in order to determine whether there is a sufficient and relevant connection between the incurrence of the expenditure and a particular business. In discussing the types of business capital expenditure to which subsection 40-880(2) applies, paragraphs 2.19 and 2.20 of the EM state: 2.19 Expenditure on the structure by which an entity carries on (or used to or proposes to carry on) their business and on the profit yielding structure of the business would ordinarily be expected to be of a capital nature. Capital expenditure can also relate to a business's trading operations or the entity that will carry on the business. 2.20 The structure covers the legal entity (such as a company) or the legal relationship (such as a partnership or trust) that is the entity that carries on the business for a taxable purpose and that holds the business assets. These paragraphs indicate that capital expenditure incurred on the structure by which an entity carries on, or used to or proposes to carry on their business, on the profit yielding structure of the business, or relating to the business's trading operations, are capable of being described as capital expenditure incurred 'in relation to' that business for the purposes of subsection 40-880(2). Whether such capital expenditure is incurred 'in relation to' the particular business will depend on whether there is a sufficient and relevant connection between the incurring of the expenditure and that business on the facts of the particular case. In the present case, a necessary part of the taxpayer's business is the maintenance of a licence from the government authority to carry on that business. In order for the taxpayer to maintain the necessary licence from the government authority, they must comply with a condition that they provide the authority with a financial assurance in respect of the licence. The taxpayer sought to satisfy their obligation to provide a financial assurance by incorporating a company into which the taxpayer subscribed capital to establish a pool of funds. The subscription of capital occurred by the taxpayer subscribing for shares in the company upon its establishment and then on a quarterly basis until the fund reached (and maintained) the maximum amount required by the government authority. The incurrence of capital expenditure by the taxpayer in subscribing for shares in the company is an integral step in the process of establishing a pool of funds which will be used to provide the government authority with the necessary financial assurance. The provision of a financial assurance by the taxpayer to the government authority is a condition of the taxpayer maintaining the necessary licence from the authority for the taxpayer to carry on their business. In these circumstances, there is a sufficient and relevant connection between the taxpayer's incurrence of the expenditure in subscribing for shares in the company and the taxpayer's business. Accordingly, the capital expenditure the taxpayer incurred in subscribing for shares is capital expenditure the taxpayer incurred in relation to their business for the purposes of paragraph 40-880(2)(a). However, subsections 40-880(3) - 40-880(9) set out further limitations and exceptions to the amount that can be deducted under section 40-880. In this case paragraph 40-880(5)(f) applied to the taxpayer's share subscription expenditure to exclude any deduction under section 40-880 for that expenditure. The expenditure was included in the first element of the CGT cost base of the shares.", "Date_of_Decision": "29 January 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) Paragraph 40-880(2)(a) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) Paragraph 40-880(5)(f) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/87 | ATO ID 2007/91 | ATO ID 2007/109 | ATO ID 2008/43 | ATO ID 2008/44", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure", "Case_References": "First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 30 ATR 207 95 ATC 4145", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200845", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2008/107", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - business proposed to be carried on", "Issue": "Was the business 'proposed to be' carried on for the purposes of paragraph 40-880(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The business was 'proposed to be' carried on for the purposes of paragraph 40-880(2)(c) of the ITAA 1997, as the taxpayer demonstrated a commitment of some substance to commence the business, and, sufficient identity about the business proposed to be carried on and it is reasonable to conclude the business was proposed to be carried on within a reasonable time.", "Facts": "The taxpayer incurred capital expenditure to incorporate a company. The taxpayer became a director and shareholder of the company upon its incorporation. The taxpayer intended the company to carry on a business. Within two months of its incorporation, the company: For various reasons, the company never traded and the taxpayer resigned as director after several months. The business never commenced. The taxpayer incurred the capital expenditure after 30 June 2005 to incorporate the company.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of 5 income years starting in the year in which you incur it, capital expenditure you incur: To ascertain whether paragraph 40-880(2)(c) applies in this case, any business proposed to be carried on must be considered. Subsection 40-880(7) states that: You cannot deduct an amount under paragraph 2(c) in relation to a *business proposed to be *carried on unless, having regard to any relevant circumstances, it is reasonable to conclude that the business is proposed to be carried on within a reasonable time. In considering the term 'proposed to be', paragraphs 2.31, 2.32 and 2.33 of the Explanatory Memorandum to Tax Laws Amendment (2006 measures No. 1) Bill 2006 ('the EM') state: 2.31 For a business to be proposed to be carried on for the purposes of this provision, the taxpayer needs to be able to demonstrate a commitment of some substance to commence the business, and sufficient identity about the business that is proposed to be carried on. The deductibility of expenses in advance of the business being carried on will rest on the facts of each case, but this commitment and identity must be tangible; that is, there would need to be some evidence that would enable an objective assessment of the existence of that commitment and identity. 2.32 Further guidance as to the level of commitment required to deduct pre-business expenditure is provided by subsection 40-880(7). In essence, this requires that, having regard to relevant circumstances, it must be reasonable to conclude that the commitment exists. One of these circumstances is that the business be proposed to be carried on within a reasonable time. This may vary according to the industry or the nature of the business and would recognise the long lead times that may be involved. [Schedule 2, item 30, paragraph 40-880(2)(c ), subsection 40-880(7)]. 2.33 Such commitment could be shown by, but is not limited to, at least some of the following: • a business plan; • the establishment of a business premises; • research into the likely markets or profitability of the business; and • capital investment in assets of the business. Eligibility for deduction under section 40-880 is established as at the time when the expenditure is incurred: see paragraph 2.40 of the EM. Therefore, at the time the taxpayer incurred the capital expenditure to incorporate the company, they needed to demonstrate, for the purposes of paragraph 40-880(2)(c), a commitment of some substance to commence the business and sufficient identity about the business proposed to be carried on by the company. Soon after the company's incorporation, the company entered into a lease for business premises and rent was paid for 2 months. Within the following months business cards were printed, the business premises fitted out, an insurance policy taken out and a 'partnership agreement' entered into with another entity to enable the company to supply certain services to clients. This demonstrates a commitment of some substance to commence the business, and sufficient identity about the business proposed to be carried on. Furthermore, given the close proximity in time from when the taxpayer's expenditure on company establishment fees was incurred and when the above activities were conducted, it is reasonable to conclude that this commitment existed at the time the taxpayer incurred the expenditure. It is also reasonable to conclude that the business was proposed to be carried on within a reasonable time. Accordingly, the business was proposed to be carried on by the company for the purposes of paragraph 40-880(2)(c). This view is not negated by the fact that the company's business did not commence.", "Date_of_Decision": "6 March 2008", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 35 section 40-880 subsection 40-880(2) Paragraph 40-880(2)(a) Paragraph 40-880(2)(b) Paragraph 40-880(2)(c) Paragraph 40-880(2)(d) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Commencement of business Incorporation expenses Non commercial losses Capital Allowances CoE", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No.1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008107", "Unmatched_Content": "Keywords Blackhole expenditure Commencement of business Incorporation expenses Non commercial losses Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2008/108", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - business not proposed to be carried on", "Issue": "Is there a business 'proposed to be' carried on for the purposes of paragraph 40-880(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. There is not a business 'proposed to be' carried on for the purposes of paragraph 40-880(2)(c) of the ITAA 1997 as the taxpayer failed to demonstrate that, as at the time they incurred the expenditure, there existed sufficient identity about the business to be carried on.", "Facts": "The taxpayer incurred capital expenditure travelling to another country to investigate the viability of a business venture in that country. Before incurring the expenditure, the taxpayer conducted some research into the viability of the business venture and developed a business plan. At the time they incurred the expenditure, decisions had not been made as to: Following the taxpayer's return to Australia, a decision was made not to proceed with the business venture. The taxpayer incurred the capital expenditure after 30 June 2005.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of 5 income years starting in the year in which you incur it, capital expenditure you incur: On the facts of this case, the relevant paragraph to consider is paragraph 40-880(2)(c) because the expenditure was incurred prior to the commencement of any business. In considering the phrase 'a business proposed to be carried on', paragraphs 2.31, 2.32 and 2.33 of the Explanatory Memorandum to Tax Laws Amendment (2006 measures No. 1) Bill 2006 ('the EM') state: 2.31 For a business to be proposed to be carried on for the purposes of this provision, the taxpayer needs to be able to demonstrate a commitment of some substance to commence the business, and sufficient identity about the business that is proposed to be carried on. The deductibility of expenses in advance of the business being carried on will rest on the facts of each case, but this commitment and identity must be tangible; that is, there would need to be some evidence that would enable an objective assessment of the existence of that commitment and identity. 2.32 Further guidance as to the level of commitment required to deduct pre-business expenditure is provided by subsection 40-880(7). In essence, this requires that, having regard to relevant circumstances, it must be reasonable to conclude that the commitment exists. One of these circumstances is that the business be proposed to be carried on within a reasonable time. This may vary according to the industry or the nature of the business and would recognise the long lead times that may be involved. [Schedule 2, item 30, paragraph 40-880(2)(c), subsection 40-880(7)]. 2.33 Such commitment could be shown by, but is not limited to, at least some of the following: • a business plan; • the establishment of a business premises; • research into the likely markets or profitability of the business; and • capital investment in assets of the business. Eligibility for deduction under section 40-880 is established as at the time when the expenditure is incurred: see paragraph 2.40 of the EM. Therefore, for the purposes of paragraph 40-880(2)(c), a taxpayer needs to demonstrate that, as at the time they incurred the relevant expenditure, there existed a commitment of some substance to commence the business and sufficient identity about the business to be carried on. In this case, some research into the viability of the business venture was conducted and a business plan was prepared. However, decisions as to how the business would be structured, what activities would be carried on, and how and where they would be carried on, had not been made at the time that the expenditure was incurred by the taxpayer. The fact that no clear decision had been made on any of these issues at the time of the taxpayer's incurrence of the expenditure indicates that it has not been demonstrated that sufficient identity about the business to be carried on existed at that time. Accordingly, we consider that the capital expenditure that the taxpayer incurred to investigate the viability of a business venture in the other country is not, for the purposes of paragraph 40-880(2)(c), capital expenditure that they incurred in relation to a business proposed to be carried on.", "Date_of_Decision": "23 April 2008", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) Paragraph 40-880(2)(c) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Business income Capital expenditure Carrying on a business Commencement of business Deductions & expenses Income International travel Overseas travel expenses Travel expenses", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008108", "Unmatched_Content": "Keywords Blackhole expenditure Business income Capital expenditure Carrying on a business Commencement of business Deductions & expenses Income International travel Overseas travel expenses Travel expenses"}
{"ATO_ID_Number": "ATO ID 2008/146", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - capital expenditure incurred - non-contractual customer relationships", "Issue": "Is that part of the contract purchase price of depreciating assets that the taxpayer attributed, for accounting purposes, to non-contractual customer relationships, deductible under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Section 40-880 of the ITAA 1997 has no application to that part of the contract purchase price of depreciating assets that the taxpayer attributed, for accounting purposes, to non-contractual customer relationships because the taxpayer did not incur any capital expenditure on such relationships.", "Facts": "The taxpayer is the holder of a large number of physically similar depreciating assets. Each asset is attached to land in different but strategically important locations. The taxpayer carries on a business of leasing the use of the depreciating assets to multiple customers. In order to expand their income producing capacity, the taxpayer contracted to acquire more of this type of depreciating asset. The subject matter of the purchase contract was the acquisition of multiple depreciating assets in different locations for a single contract price. The transaction did not represent the acquisition of the vendor's business. The purchase contract required the assignment to the taxpayer of the existing lease agreements in relation to the assets acquired. A nominal value was placed on the existing leases but payment of that value was contingent on the vendor making a call for the payment. Customers with existing leases in relation to the assets acquired were under no obligation to renew those leases on expiry. For accounting purposes, the taxpayer attributed part of the contract purchase price of the depreciating assets to an asset titled 'non-contractual customer relationships'. The term 'non-contractual customer relationships' was used to describe the anticipated economic benefit which may arise for the taxpayer in the event that the existing leases are renewed. The amount the taxpayer attributed to this asset was derived from a discounted value of the estimated excess earnings from the future leases.", "Reasons_for_Decision": "Summary: Section 40-880 of the ITAA 1997 provides a deduction over five income years for certain capital expenditure incurred in relation to a business. It is, therefore, a prerequisite requirement that capital expenditure be incurred for the provision to be capable of applying to the expenditure. The subject matter of the purchase contract in this case is clearly enunciated as the acquisition of the depreciating assets. It is equally clear that the consideration provided by the taxpayer for those assets was the entire contract price. The assignment of existing leases was not a subject matter of the contract. Rather, the assignment of existing leases was a condition only of the contract. The placement of a nominal value (and its contingent payment) on the existing leases reflected the incidental or ancillary nature of their assignment in relation to the depreciating assets themselves. The contract makes no separate or other identifiable reference to non-contractual customer relationships. That is not unexpected because the purchase contract does not create any rights in the taxpayer in relation to those relationships. On the contrary, there is no obligation on the part of an existing customer to renew their lease upon expiry of the current one. The economic benefit that was identified by the taxpayer for accounting purposes was derived from the discounted value of excess earnings from new leases that are anticipated will be entered into upon the expiry of an existing lease. This anticipation is based primarily on the qualities of the depreciating asset being leased, particularly its strategic location. It is also based, but to a lesser extent, on the quality of the management of that asset by the taxpayer over the term of the existing lease. In other words, the anticipation of attracting the renewal of existing leases substantially derives from the primary feature of strategic location of the depreciating assets themselves and cannot be detached from them. This also means that any value of that expectation is more appropriately vested in the depreciating asset itself. For all of these reasons, no part of the contract purchase price of the depreciating assets is attributable to the non-contractual customer relationships identified by the taxpayer for accounting purposes. It follows that no capital expenditure has been incurred by the taxpayer on such relationships and section 40-880 of the ITAA 1997 is not capable of applying.", "Date_of_Decision": "29 August 2008", "Year_of_Income": "Year ended 31 December 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(5)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Blackhole expenditure Capital expenditure Depreciating assets Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008146", "Unmatched_Content": "Keywords Blackhole expenditure Capital expenditure Depreciating assets Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2008/163", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - taxable purpose", "Issue": "Is the taxpayer's business carried on wholly for a taxable purpose for the purposes of subsection 40-880(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's business is not carried on wholly for a taxable purpose for the purposes of subsection 40-880(3) of the ITAA 1997 because, at the time the relevant capital expenditure was incurred, there was no evidence that the part of the taxpayer's business that was represented by its holding of shares in offshore subsidiaries was carried on for a taxable purpose.", "Facts": "The taxpayer, a company, incurred capital expenditure in soliciting and evaluating bids for the acquisition of the shares in the taxpayer and in implementing a Scheme of Arrangement for the acquisition of the shares. The shares in the taxpayer were subsequently acquired by an unrelated entity. At the time the expenditure was incurred, the business carried on by the taxpayer included the business of being a holding company. An integral part of that holding company business is the taxpayer's holding of shares in a significant number of wholly-owned offshore subsidiaries. At the time the expenditure was incurred, there was no evidence of a policy for the payment of dividends to the taxpayer. In addition, the taxpayer was unable to predict whether there would ever be a declaration of dividend in its favour from any of the subsidiaries. The taxpayer expected that all other activities of its business would be carried on for the purpose of gaining or producing assessable income. The capital expenditure was incurred by the taxpayer in relation to its business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997. For the purposes applying that paragraph, the relevant business is the combined business of the taxpayer and not merely its business of being a holding company.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated Subsection 40-880(3) provides that you can only deduct the expenditure, for a business that you carry on, used to carry on or propose to carry on, to the extent that the business is carried on, was carried on or is proposed to be carried on for a taxable purpose. In this case, the relevant business for the purposes of the application of subsection 40-880(3) is the combined business of the taxpayer to which paragraph 40-880(2)(a) applies. Paragraphs 2.46 and 2.47 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 relevantly state: The definition of 'taxable purpose' is provided by subsection 40-25(7) of the ITAA 1997 and covers various purposes, including the purpose of producing assessable income. The term purpose of producing assessable income is further defined in subsection 995-1(1) of the ITAA 1997 as being something done: • for the purpose of gaining or producing assessable income; or • in carrying on a business for the purpose of gaining or producing assessable income. A taxpayer whose business is not carried on for a taxable purpose cannot deduct expenditure to that extent. This limitation is not an annual test: that is, it is not to limit deductions to only the income years in which the business is carried on for a taxable purpose. The test as to the taxable purpose of the business is applied - as at the time the expenditure is incurred - to the taxable purpose of the business by reference to all known and predictable facts in all years. The application of subsection 40-880(3) requires that the taxpayer determine, as at the time the capital expenditure was incurred, the extent to which the taxpayer's business is carried on for a taxable purpose by reference to all known and predictable facts in all years. In considering the taxable purpose of the taxpayer's business in this case, it is necessary to look at all of the activities of the taxpayer, including its holding of shares in offshore subsidiaries as part of the business of being a holding company. At the time the capital expenditure was incurred, there was no evidence of a policy for the payment of dividends to the taxpayer. In addition, the taxpayer was unable to predict whether there would ever be a declaration of dividend in its favour from any of the subsidiaries. The taxpayer engaged an independent expert to evaluate the amount of the offer by the unrelated entity for the shares in the taxpayer. The expert's report, which was provided to the former shareholders as part of the acquisition process, analysed the underlying value of the taxpayer's business operations to work out whether the offer for the shares represented fair value for shareholders. The report was prepared on the basis of known circumstances affecting the taxpayer's business at that time. It, therefore, provides objective evidence as to the known and predictable facts and expectations of the taxpayer in respect of the taxpayer's business as at the time the capital expenditure was incurred. The expert's report does not make any reference to the receipt of dividends from offshore subsidiaries. Therefore, taking into account all known and predictable facts as at the time the expenditure was incurred, it cannot be concluded that the taxpayer held its investments in the offshore subsidiaries for the purpose of producing assessable dividend income. To the extent that the business of being a holding company is not carried on for the purpose of gaining or producing assessable income, it is not carried on for a taxable purpose in applying subsection 40-880(3). As the taxpayer's business of being a holding company is not carried on wholly for a taxable purpose, it follows that the combined business of the taxpayer is not carried on wholly for a taxable purpose. As a result, any deduction under section 40-880 needs to be reduced to reflect the extent to which the taxpayer's combined business is not carried on for a taxable purpose. The extent to which that business is not carried on for a taxable purpose is the extent to which the taxpayer's combined business relates to the part of the business of being a holding company that is not carried on for a taxable purpose.", "Date_of_Decision": "8 September 2008", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-25(7) section 40-880 subsection 40-880(2) paragraph 40-880(2)(a) subsection 40-880(3) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/110", "Subject_References": "Blackhole expenditure Capital Allowances CoE Taxable purpose Centres of Expertise", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No.1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008163", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Taxable purpose Centres of Expertise"}
{"ATO_ID_Number": "ATO ID 2007/87", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - in relation to your business", "Issue": "Was the taxpayer's capital expenditure incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 because there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and the taxpayer's business.", "Facts": "The taxpayer conducts a bus charter business as a sole trader. They carry on that business wholly for a taxable purpose. Based on photographs and information provided by the seller, the taxpayer paid a holding deposit on a second-hand bus to replace an older bus being used in the taxpayer's business. The second-hand bus was located in another State. The taxpayer incurred capital expenditure on an airfare to travel to where that bus was located so as to take delivery of the bus and drive it back to where their business is carried on. The taxpayer also incurred capital expenditure on having new tyres fitted to the bus in anticipation of driving it back to their place of business. After inspecting the bus, the taxpayer decided not to continue with the purchase. While the taxpayer had their deposit refunded, they decided to leave the new tyres fitted to the second hand bus because it was not worth their time, effort and cost of removing and returning the new tyres and finding other replacement tyres. The original tyres had been discarded when the new tyres were fitted. The taxpayer incurred further capital expenditure on an airfare to return to their place of business. The expenditure was incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: Section 40-880 of the ITAA 1997 potentially applies to the expenditure because the expenditure was incurred on or after 1 July 2005: see section 3 and Schedule 2 Item 51(1) to the Tax Laws Amendment (2006 Measures No.1) Act 2006 . Subject to the limitations and exceptions contained in subsections 40-880(3) to (9) of the ITAA 1997, subsection 40-880(2) of the ITAA 1997 provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: In considering the phrase 'in relation to' contained within subsection 40-880(2) of the ITAA 1997, paragraph 2.25 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business. The concept used to establish this character or requisite relationship between the expenditure incurred by the taxpayer and the business carried on (current, past or prospective) is 'in relation to'. The connector 'in relation to' allows the appropriate latitude to enable the deductibility of qualifying capital expenditure incurred before the business commences or after it has ceased. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some \"association\" which is \"relevant\" or \"appropriate\". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. Federal Commissioner of Taxation (1995) 56 FCR 320; (1995) 95 ATC 4145; (1995) 30 ATR 207, Hill J. considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936 . He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient. It is therefore necessary to consider the legislative context of subsection 40-880(2) of the ITAA 1997 in order to determine whether there is a sufficient and relevant connection between the incurrence of the expenditure and the taxpayer's business. In discussing the types of business capital expenditure to which subsection 40-880(2) of the ITAA 1997 applies, the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: These paragraphs indicate that capital expenditure incurred on the structure by which an entity carries on (or used to or proposes to carry on) their business, on the profit yielding structure of the business, or relating to the business's trading operations, are capable of being described as capital expenditure incurred 'in relation to' that business for the purposes of subsection 40-880(2) of the ITAA 1997. Whether such capital expenditure is incurred 'in relation to' the particular business will depend on whether there is a sufficient and relevant connection between the incurring of the expenditure and that business on the facts of the particular case. A necessary part of the taxpayer's trading operations of a bus charter business is having buses which are suitable for charter. The acquisition of buses for use in the taxpayer's bus charter business is an integral part of that business. The taxpayer's incurrence of capital expenditure on an airfare to the location of the second-hand bus and the bus tyres were an integral step in the process of purchasing another bus to replace an older bus that the taxpayer was using in their business. The taxpayer incurred expenditure on the airfare solely in order to inspect such a bus and take delivery of it. The taxpayer incurred expenditure on tyres so the bus they intended to purchase was in a suitable condition to undertake the drive back to the State where they carried on their business. Although the purchase of the bus did not eventuate, in a practical sense the taxpayer incurred expenditure in order to purchase a bus for use in their bus charter business. As a consequence of the taxpayer's decision (after inspecting the bus) not to continue with the purchase of the bus, the taxpayer incurred further capital expenditure on a return airfare. The taxpayer was required to purchase this airfare to return to their place of business solely and directly because they did not proceed with the purchase of the bus they had flown to inspect and take delivery of for use in their business. In the circumstances, there is a sufficient and relevant connection between the taxpayer's incurrence of the expenditure on both airfares and bus tyres and their business. Accordingly, the capital expenditure incurred on the airfares and bus tyres is capital expenditure the taxpayer incurred in relation to their business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997.", "Date_of_Decision": "6 February 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-880(2) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) paragraph 40-880(2)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/88 | ATO ID 2007/89", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Depreciating assets", "Case_References": "First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 95 ATC 4145 (1995) 30 ATR 207", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200787", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Depreciating assets"}
{"ATO_ID_Number": "ATO ID 2007/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - limitation to deduction - cost of depreciating asset", "Issue": "Is the taxpayer's deduction under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure they incurred in relation to their business limited to any extent by paragraph 40-880(5)(a) of the ITAA 1997?", "Decision": "No. The taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure they incurred in relation to their business is not limited to any extent by paragraph 40-880(5)(a) of the ITAA 1997 because the expenditure does not form part of the cost of a depreciating asset that they hold, used to hold or will hold.", "Facts": "The taxpayer conducts a bus charter business as a sole trader. They carry on that business wholly for a taxable purpose. Based on photographs and information provided by the seller, the taxpayer paid a holding deposit on a second hand-bus to replace an older bus being used in the taxpayer's business. The second-hand bus was located in another State. The taxpayer incurred capital expenditure on an airfare to travel to where that bus was located so as to take delivery of the bus and drive it back to where their business is carried on. The taxpayer also incurred capital expenditure on having new tyres fitted to the bus in anticipation of driving it back to their place of business. After inspecting the bus, the taxpayer decided not to continue with the purchase. The taxpayer subsequently purchased a return airfare back to their place of business. While the taxpayer had their deposit refunded, they decided to leave the new tyres fitted to the second-hand bus because it was not worth their time, effort and cost of removing and returning the new tyres and finding other replacement tyres. The original tyres had been discarded when the new tyres were fitted. The taxpayer's capital expenditure was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 and the taxpayer's deduction for that expenditure under section 40-880 of the ITAA 1997 is not limited under subsection 40-880(3) of the ITAA 1997. The expenditure was incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: Subsections 40-880(5) to 40-880(9) of the ITAA 1997 set out limitations and exclusions to deductibility under section 40-880 of the ITAA 1997. In particular, paragraph 40-880(5)(a) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 of the ITAA 1997 for an amount of expenditure you incur to the extent that it forms part of the cost of a depreciating asset that you hold, used to hold or will hold. While the taxpayer's incurrence of capital expenditure on the airfare to inspect the bus was an integral step in the process of seeking to hold the second-hand bus, the taxpayer did not hold the bus at any stage and will never hold it. The deduction the taxpayer is otherwise entitled to under section 40-880 of the ITAA 1997 for their capital expenditure on the airfare is, therefore, not excluded by paragraph 40-880(5)(a) of the ITAA 1997. The capital expenditure on the return airfare to the taxpayer's place of business was incurred as a consequence of the taxpayer's decision on inspection not to purchase the second-hand bus. If the taxpayer had continued with the purchase of the second-hand bus the return airfare would not have been purchased. In other words, the expenditure was only incurred because the taxpayer did not hold the bus and will never hold the bus. As such, the deduction the taxpayer is otherwise entitled to under section 40-880 of the ITAA 1997 for their capital expenditure on the return airfare is, therefore, not excluded by paragraph 40-880(5)(a) of the ITAA 1997. Subsection 40-30(4) of the ITAA 1997 states that whether a particular composite item is itself a depreciating asset or whether its components are separate depreciating assets is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case. How taxpayers determine that question is discussed in paragraph 1.15 of the revised explanatory memorandum for the New Business Tax System (Capital Allowances) Bill 2001. That paragraph states: Taxpayers will be required to exercise judgement in identifying the depreciating asset where the asset is made up of different parts and components. In doing this, the 'functionality' test that is used as a basis of identifying a 'unit of plant' in the existing plant depreciation rules can be used. (Specific reference to a 'unit' or an 'item' is not necessary to attract the test, as the definition of a depreciating asset is based on a life in effective use, and the depreciating asset must be identifiable as having its own life in such use.) The 'functionality' test has been applied in such cases as Ready Mixed Concrete (Vic) Pty Ltd v. FC of T 69 ATC 4038; (1969) 1 ATR 123, FC of T v. Tully Co-operative Sugar Milling Assoc Ltd 83 ATC 4495; (1983) 14 ATR 495, Monier Colourtile Pty Ltd v. FC of T 84 ATC 4846; (1984) 15 ATR 1256, Case S51 85 ATC 380; 28 CTBR (NS) Case 57 , and Case T33 86 ATC 293; 29 CTBR (NS) Case 35 . In this case it is considered that the bus is the composite item and is itself the relevant depreciating asset. The tyres which the taxpayer paid for and had fitted to the bus are a component of this depreciating asset and are not themselves separate depreciating assets in this case for the purpose of Division 40 of the ITAA 1997. The bus tyres as a set or individually are not functionally complete in themselves. They perform their function only as part of the bus. Accordingly, the taxpayer's expenditure on the bus tyres is not expenditure which forms part of the cost of a depreciating asset that they hold, used to hold or will hold because they do not hold, have not held and will not hold the bus to which the tyres were fitted. The deduction the taxpayer is otherwise entitled to under section 40-880 of the ITAA 1997 for their capital expenditure on the bus tyres is not excluded by paragraph 40-880(5)(a) of the ITAA 1997.", "Date_of_Decision": "6 February 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-30(4) subsection 40-880(5) paragraph 40-880(5)(a) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2002/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/87 | ATO ID 2007/89", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Depreciating assets First element cost", "Case_References": "Ready Mixed Concrete (Vic) Pty Ltd v. FC of T 69 ATC 4038 (1969) 1 ATR 123", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200788", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2002/5 | Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Depreciating assets First element cost"}
{"ATO_ID_Number": "ATO ID 2007/89", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - limitation to deduction - taken into account for capital gains tax (CGT) purposes.", "Issue": "Is the taxpayer's deduction under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure they incurred in relation to their business excluded to any extent by paragraph 40-880(5)(f) of the ITAA 1997?", "Decision": "Yes. The taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure they incurred in relation to their business is excluded in part by paragraph 40-880(5)(f) of the ITAA 1997 because the expenditure on bus tyres will be taken into account in working out the capital gain or loss from a CGT event.", "Facts": "The taxpayer conducts a bus charter business as a sole trader. They carry on that business wholly for a taxable purpose. Based on photographs and information provided by the seller, the taxpayer paid a holding deposit on a second-hand bus to replace an older bus being used in the taxpayer's business. The second-hand bus was located in another State. The taxpayer incurred capital expenditure on an airfare to travel to where that bus was located so as to take delivery of the bus and drive it back to where their business is carried on. The taxpayer also incurred capital expenditure on having new tyres fitted to the bus in anticipation of driving it back to their place of business. After inspecting the bus, the taxpayer decided not to continue with the purchase. The taxpayer subsequently purchased a return airfare back to their place of business. While the taxpayer had their deposit refunded, they decided to leave the new tyres fitted to the second hand bus because it was not worth their time, effort and cost of removing and returning the new tyres and finding other replacement tyres. The original tyres had been discarded when the new tyres were fitted. The taxpayer's capital expenditure was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 and the taxpayer's deduction for that expenditure under section 40-880 of the ITAA 1997 is not limited under subsection 40-880(3) of the ITAA 1997. The expenditure was incurred after 30 June 2005.", "Reasons_for_Decision": "Summary: Subsections 40-880(5) to 40-880(9) of the ITAA 1997 set out limitations and exclusions to deductibility under section 40-880 of the ITAA 1997. In particular, paragraph 40-880(5)(f) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 of the ITAA 1997 for an amount of expenditure you incur to the extent that it could, apart from section 40-880, be taken into account in working out the amount of a capital gain or capital loss from a CGT event. In this case, the taxpayer incurred capital expenditure on airfares and new bus tyres. As the taxpayer did not proceed with the purchase of the bus, there is no question of whether the airfares could be taken into account in calculating a capital gain or capital loss from a CGT event for the purposes of paragraph 40-880(5)(f) of the ITAA 1997. On the other hand, the taxpayer did purchase the new bus tyres. The tyres are CGT assets as defined in section 108-5 of the ITAA 1997 and the taxpayer's expenditure on purchasing them is included in the cost base of the tyres. It follows that the taxpayer's expenditure on purchasing the new bus tyres will be taken into account in working out the capital gain or loss from a CGT event that happens to the tyres and paragraph 40-880(5)(f) of the ITAA 1997 does apply. Accordingly, the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure they incurred on bus tyres is excluded by paragraph 40-880(5)(f) of the ITAA 1997 because the expenditure will be taken into account in working out the capital gain or loss from a CGT event.", "Date_of_Decision": "6 February 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(a) subsection 40-880(3) subsection 40-880(5) paragraph 40-880(5)(f) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9) subsection 108-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/87 | ATO ID 2007/88", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Capital gains tax CGT cost base Depreciating assets First element cost", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200789", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Capital gains tax CGT cost base Depreciating assets First element cost"}
{"ATO_ID_Number": "ATO ID 2007/91", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to your business", "Issue": "Was the capital expenditure the taxpayer incurred before the demerger date incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. All the capital expenditure the taxpayer incurred before the demerger date was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 because there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and one of the businesses the taxpayer was carrying on.", "Facts": "The taxpayer is an Australian resident company that carries on several industry related businesses solely for a taxable purpose. All but one of the taxpayer's businesses were carried on domestically - the other business was carried on internationally. The taxpayer's Board of Directors decided to demerge the international business from the domestic businesses to, amongst other things, better focus the core activities and growth opportunities of the respective businesses. The demerger had the effect of splitting the shareholder's investment in the taxpayer into two separate investments. The taxpayer continued to carry on the domestic businesses while a new entity carried on the international business. The process to demerge the international business from the domestic businesses included: The capital expenditure the taxpayer incurred on or after 1 July 2005 on effecting the demerger ('the demerger costs') comprised fees for: The taxpayer incurred the demerger costs solely to ensure that the demerger of the international business happened. The capital expenditure the taxpayer incurred on effecting the demerger of the international business was incurred both before and after the demerger date. The capital expenditure incurred after the demerger date was for goods and services provided and received prior to the demerger date.", "Reasons_for_Decision": "Summary: Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9) of the ITAA 1997, subsection 40-880(2) of the ITAA 1997 provides that you can deduct, in equal proportions over a period of 5 income years starting in the year in which you incur it, capital expenditure you incur: In considering the phrase 'in relation to' contained within subsection 40-880(2) of the ITAA 1997, paragraph 2.25 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 ('the EM') states: The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business. The concept used to establish this character or requisite relationship between the expenditure incurred by the taxpayer and the business carried on (current, past or prospective) is 'in relation to'. The connector 'in relation to' allows the appropriate latitude to enable the deductibility of qualifying capital expenditure incurred before the business commences or after it has ceased. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT) , at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case, Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some \"association\" which is \"relevant\" or \"appropriate\". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936 . He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient. It is therefore necessary to consider the legislative context of subsection 40-880(2) of the ITAA 1997 in order to determine whether there is a sufficient and relevant connection between the incurrence of the expenditure and a particular business. In discussing the types of business capital expenditure to which subsection 40-880(2) applies, paragraphs 2.19 and 2.20 of the EM state: Expenditure on the structure by which an entity carries on (or used to or proposes to carry on) their business and on the profit yielding structure of the business would ordinarily be expected to be of a capital nature. Capital expenditure can also relate to a business's trading operations or the entity that will carry on the business. The structure covers the legal entity (such as a company) or the legal relationship (such as a partnership or trust) that is the entity that carries on the business for a taxable purpose and that holds the business assets. These paragraphs indicate that capital expenditure incurred on the structure by which an entity carries on, or used to or proposes to carry on their business, on the profit yielding structure of the business, or relating to the business's trading operations, are capable of being described as capital expenditure incurred 'in relation to' that business for the purposes of subsection 40-880(2) of the ITAA 1997. Whether such capital expenditure is incurred 'in relation to' the particular business will depend on whether there is a sufficient and relevant connection between the incurring of the expenditure and that business on the facts of the particular case. The statement in paragraph 2.48 of the EM - '[t]he business to which the expenditure relates is that most relevant to the expenditure' - indicates that when there is such a connection between the incurring of the expenditure and more than one business, the expenditure is treated for the purposes of subsection 40-880(2) of the ITAA 1997 as incurred in relation to the business that is most relevant to the expenditure. In identifying for the purposes of subsection 40-880(2) of the ITAA 1997 the business that is most relevant to the expenditure, it is necessary to look to the character of the expenditure and what it achieved rather than simply the broad intent of its incurrence. The broad intent in this case was the taxpayers' Board's thinking as to benefits intended or expected to flow to the taxpayer that directed their decision towards the object of demerging the international business. The capital expenditure the taxpayer incurred before the demerger was legal fees, accountant's fees and investment banker's fees. For this expenditure the taxpayer was provided with a variety of services and advice to effect the Scheme of Arrangement (an integral part of ensuring the demerger of the international business would happen) and the other inextricably linked activities which would ensure that the demerger of the international business would happen. The character of this expenditure is as part of changing the structure by which the international business would be carried on through its demerger from the taxpayer. Accordingly, the business that is most relevant to the expenditure is the international business. In the circumstances, there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure on legal, accountant's and investment banker's fees and the international business, and that business is the most relevant to that expenditure. Accordingly, paragraph 40-880(2)(a) of the ITAA 1997 applies to the capital expenditure that the taxpayer incurred before the demerger date as it is capital expenditure incurred in relation to the international business the taxpayer carried on prior to the demerger date.", "Date_of_Decision": "6 February 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-880 subsection 40-880(2) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) paragraph 40-880(2)(d) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/92 | ATO ID 2007/93", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure", "Case_References": "First Provincial Building Society Ltd v. Commissioner of Taxation (1995) 56 FCR 320 95 ATC 4145 (1995) 30 ATR 207", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200791", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2007/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to a business that used to be carried on", "Issue": "Was the capital expenditure the taxpayer incurred after the demerger date incurred 'in relation to a business that used to be carried on' for the purpose of paragraph 40-880(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. All the capital expenditure the taxpayer incurred after the demerger date was incurred 'in relation to a business that used to be carried on' for the purpose of paragraph 40-880(2)(b) of the ITAA 1997 because there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure on goods and services provided and received before the demerger and a business the taxpayer used to carry on.", "Facts": "The taxpayer is an Australian resident company that carries on several industry related businesses solely for a taxable purpose. All but one of the taxpayer's businesses were carried on domestically - the other business was carried on internationally. The taxpayer's Board of Directors decided to demerge the international business from the domestic businesses to, amongst other things, better focus the core activities and growth opportunities of the respective businesses. The demerger had the effect of splitting the shareholder's investment in the taxpayer into two separate investments. The taxpayer continued to carry on the domestic businesses while a new entity carried on the international business. The process to demerge the international business from the domestic businesses included: The capital expenditure the taxpayer incurred on or after 1 July 2005 on effecting the demerger ('the demerger costs') comprised fees for: The taxpayer incurred the demerger costs solely to ensure that the demerger of the international business happened. The capital expenditure the taxpayer incurred on effecting the demerger of the international business was incurred both before and after the demerger date. The capital expenditure incurred after the demerger date was for goods and services provided and received prior to the demerger date.", "Reasons_for_Decision": "Summary: Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9) of the ITAA 1997, subsection 40-880(2) of the ITAA 1997 provides that you can deduct, in equal proportions over a period of 5 income years starting in the year in which you incur it, capital expenditure you incur: In considering the phrase 'in relation to' contained within subsection 40-880(2) of the ITAA 1997, paragraph 2.25 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 ('the EM') states: The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business. The concept used to establish this character or requisite relationship between the expenditure incurred by the taxpayer and the business carried on (current, past or prospective) is 'in relation to'. The connector 'in relation to' allows the appropriate latitude to enable the deductibility of qualifying capital expenditure incurred before the business commences or after it has ceased. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT) , at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case, Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some \"association\" which is \"relevant\" or \"appropriate\". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936 . He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient. It is therefore necessary to consider the legislative context of subsection 40-880(2) of the ITAA 1997 in order to determine whether there is a sufficient and relevant connection between the incurrence of the expenditure and a particular business. In discussing the types of business capital expenditure to which subsection 40-880(2) applies, paragraphs 2.19 and 2.20 of the EM state: Expenditure on the structure by which an entity carries on (or used to or proposes to carry on) their business and on the profit yielding structure of the business would ordinarily be expected to be of a capital nature. Capital expenditure can also relate to a business's trading operations or the entity that will carry on the business. The structure covers the legal entity (such as a company) or the legal relationship (such as a partnership or trust) that is the entity that carries on the business for a taxable purpose and that holds the business assets. These paragraphs indicate that capital expenditure incurred on the structure by which an entity carries on, or used to or proposes to carry on their business, on the profit yielding structure of the business, or relating to the business's trading operations, are capable of being described as capital expenditure incurred 'in relation to' that business for the purposes of subsection 40-880(2) of the ITAA 1997. Whether such capital expenditure is incurred 'in relation to' the particular business will depend on whether there is a sufficient and relevant connection between the incurring of the expenditure and that business on the facts of the particular case. The statement in paragraph 2.48 of the EM - '[t]he business to which the expenditure relates is that most relevant to the expenditure' - indicates that when there is such a connection between the incurring of the expenditure and more than one business, the expenditure is treated for the purposes of subsection 40-880(2) of the ITAA 1997 as incurred in relation to the business that is most relevant to the expenditure. In identifying for the purposes of subsection 40-880(2) of the ITAA 1997 the business that is most relevant to the expenditure, it is necessary to look to the character of the expenditure and what it achieved rather than simply the broad intent of its incurrence. The broad intent in this case was the taxpayers' Board's thinking as to benefits intended or expected to flow to the taxpayer that directed their decision towards the object of demerging the international business. The capital expenditure the taxpayer incurred after the demerger was legal fees, accountant's fees and investment banker's fees which related to goods and services rendered pre-demerger. For this expenditure the taxpayer was provided with a variety of services and advice to effect the Scheme of Arrangement (an integral part of ensuring the demerger of the international business would happen) and the other inextricably linked activities which would ensure that the demerger of the international business would occur. The character of this expenditure is as part of changing the structure by which the international business would be carried on through its demerger from the taxpayer. Accordingly, the business that is most relevant to the expenditure is the international business. In the circumstances, there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure on legal, accountant's and investment banker's fees and the international business, and that business is the most relevant to that expenditure. Accordingly, paragraph 40-880(2)(b) of the ITAA 1997 applies to the capital expenditure the taxpayer incurred after the demerger date for goods and services provided and received before the demerger date as it is capital expenditure the taxpayer incurred in relation to a business (the international business) that it used to carry on prior to the demerger date.", "Date_of_Decision": "6 February 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-880 subsection 40-880(2) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) paragraph 40-880(2)(d) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(6) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/91 | ATO ID 2007/93", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure", "Case_References": "First Provincial Building Society Ltd v. Commissioner of Taxation (1995) 56 FCR 320 95 ATC 4145 (1995) 30 ATR 207", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200792", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2007/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - lease or other legal or equitable right", "Issue": "Does paragraph 40-880(5)(d) of the Income Tax Assessment Act 1997 (ITAA 1997), which excludes a deduction under section 40-880 for an amount of expenditure incurred to the extent that 'it is in relation to a lease or other legal or equitable right', apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred both before and after the demerger date?", "Decision": "No. Paragraph 40-880(5)(d) of the ITAA 1997 does not apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred both before and after the demerger date.", "Facts": "The taxpayer is an Australian resident company that carries on several industry related businesses solely for a taxable purpose. All but one of the taxpayer's businesses were carried on domestically - the other business was carried on internationally. The taxpayer's Board of Directors decided to demerge the international business from the domestic businesses to, amongst other things, better focus the core activities and growth opportunities of the respective businesses. The demerger had the effect of splitting the shareholder's investment in the taxpayer into two separate investments. The taxpayer continued to carry on the domestic businesses while a new entity carried on the international business. The process to demerge the international business from the domestic businesses included: The capital expenditure the taxpayer incurred on effecting the demerger ('the demerger costs') comprised fees for: The taxpayer incurred the demerger costs solely to ensure that the demerger of the international business happened. The capital expenditure the taxpayer incurred on effecting the demerger of the international business was incurred both before and after the demerger date. The capital expenditure incurred after the demerger date was for goods and services provided and received prior to the demerger date. The capital expenditure the taxpayer incurred before the demerger date was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997. The capital expenditure the taxpayer incurred after the demerger date was incurred 'in relation to a business that used to be carried on' for the purpose of paragraph 40-880(2)(b) of the ITAA 1997. The taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred both before and after the demerger date is not limited under subsection 40-880(3) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Paragraph 40-880(5)(d) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 of the ITAA 1997 for an amount of expenditure you incur to the extent that 'it is in relation to a lease or other legal or equitable right'. In respect of paragraph 40-880(5)(d) of the ITAA 1997, paragraph 2.68 of the Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 1) Bill 2006 ('the EM') states: This exclusion replicates that found in the repealed section 40-880, having been added in 2002 in the context of the Government's review of the treatment of expenditure incurred on leases or other legal or equitable rights. The 2005-06 Budget announced that the Government would take a case-by-case approach in relation to the taxation of rights. Since that paragraph states that the exclusion contained in paragraph 40-880(5)(d) of the ITAA 1997 replicates that found in the repealed section 40-880 of the ITAA 1997, it is relevant to consider the repealed paragraph 40-880(3)(d) of the ITAA 1997. In discussing that exclusion, paragraph 3.67 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 stated: The Government is reviewing the treatment of expenditure incurred in relation to leases or other legal or equitable rights as part of the consideration of the recommendations of the Review of Business Taxation. The appropriate income tax treatment of capital expenditure incurred in relation to these leases and rights will be determined as part of that review. Consequently, capital expenditure on leases or other legal or equitable rights will be excluded from deduction under section 40-880. For example, expenditure representing lease surrender payments incurred in closing down your business will not be deductible under section 40-880. It is therefore relevant to consider what 'leases and rights' were considered in the recommendations of the Review of Business Taxation in order to determine the intended scope of the phrase 'in relation to a lease or other legal or equitable right' in paragraph 40-880(5)(d) of the ITAA 1997 and former paragraph 40-880(3)(d) of the ITAA 1997. The proposed review of the taxation of 'leases and rights' was discussed at pages 213-280 of the Review of Business Taxation, A Platform for Consultation , Discussion Paper 2 Volume I, February 1999. Specifically, at paragraph 8.1 on page 217, the following is stated: What is a lease or right? Leases and rights are essentially arrangements for transferring some or all of the benefits of ownership of an asset from the owner to the recipient of the lease or right. The following kinds of rights contracts are covered by the discussion: • leasing and similar contracts which provide rights over physical assets, for example, leases of equipment; • contracts giving rights over intangible assets, such as spectrum licences and rights in films, patents, copyright, and industrial designs; • indefeasible rights of use over assets, such as telecommunication cables; • profits á prendre , that is, a right to take a product such as standing timber from another person's land; • contracts for services; • restrictive covenants; and • rights to receivables arising from 'rights' contracts, for example, lease receivables. There is also a reference at paragraph 9.4 on page 233 of that document that 'service contracts that are, in substance, broadly similar to leases' were part of the review. Further, there is a reference at paragraph 10.1 on page 269 of that document to the effect that rights under franchise agreements were also part of the review. Section 10 of the Review of Business Taxation, A Tax System Redesigned , Report, July 1999, made recommendations in relation to the taxation of leases and rights. While that report did not explain what was encompassed by the expression 'leases and rights', it can reasonably be inferred that it was referring to the sorts of 'leases and rights' outlined in the Review of Business Taxation, A Platform for Consultation , Discussion Paper 2 Volume 1, February 1999, referred to above. On the facts, there are no leases or other legal or equitable rights of the types considered by the Review of Business Taxation (in the context of its review of the taxation of leases and rights) in relation to which the expenditure referred to in the facts could reasonably be said to have been incurred. The Review of Business Taxation was concerned with the proper taxation treatment of 'receipts and expenditure associated with leases and rights on a consistent basis': see paragraph 8.3 on page 217. What receipts and expenditure are so associated with leases and rights as to call for consistent treatment? That depends on what the overall framework is within which treatment should be consistent. Division 40 of the ITAA 1997 does not apply in the context of a generalised 'tax value method' treatment, and that generalised treatment was the context of the Review of Business Taxation's discussion of receipts and expenditures associated with leases and rights. In the context of the income tax law, what receipts and expenditures are so associated with leases and rights as to be within the scope of paragraph 40-880(5)(d) of the ITAA 1997 may therefore require a closer connection than the connection contemplated in the publications of the Review. Although it could be said that the expenditure was to some extent incurred in relation to the shares held by the shareholders in the new entity that carries on the international business and that a share is a bundle of rights (albeit the bundle of rights forms one piece of property (see paragraphs 20-26 of Taxation Ruling TR 94/30 and section 1070A of the Corporations Act 2001 ), shares do not appear to be among the type of rights that the Review of Business Taxation considered in the context of its review of the taxation of leases and rights. For the foregoing reasons, paragraph 40-880(5)(d) of the ITAA 1997 does not apply so as to reduce the taxpayer's deduction under section 40-880 in respect of capital expenditure it incurred as set out in the facts.", "Date_of_Decision": "6 February 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-880 paragraph 40-880(2)(a) paragraph 40-880(2)(b) subsection 40-880(3) paragraph 40-880(5)(d) former paragraph 40-880(3)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/30", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/91 | ATO ID 2007/92", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment Bill (No. 5) 2002 Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 Volume I, February 1999. Review of Business Taxation, A Tax System Redesigned, Report, July 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200793", "Unmatched_Content": "This ATO ID has been amended to clarify the facts. | Related Public Rulings (including Determinations) Taxation Ruling TR 94/30 | Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2007/95", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: business related costs - limitation of deduction - business of another entity", "Issue": "Is the taxpayer's deduction under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure they incurred in relation to a business proposed to be carried on limited by subsection 40-880(4) of the ITAA 1997?", "Decision": "Yes. The taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure they incurred in relation to a business proposed to be carried on is limited by subsection 40-880(4) of the ITAA 1997 because the business was proposed to be carried on by another entity for other than a taxable purpose and the capital expenditure is not to any extent in connection with the taxpayer deriving assessable income from that business.", "Facts": "The taxpayer is an Australian resident company that carries on its business solely for a taxable purpose. As part of their growth strategies for the taxpayer, the taxpayer's Board of Directors decided to insert an overseas resident holding company above the taxpayer to hold 100% of the taxpayer's issued shares and seek to have shares in the overseas holding company listed on an overseas stock exchange. This process was colloquially referred to as the overseas 'listing strategy'. The Board considered that the overseas listing strategy would, for example, provide access to a larger pool of equity capital which, ultimately, could be used to acquire assets for the taxpayer and to grow the business of the taxpayer. The proposed steps to insert the overseas holding company above the taxpayer involved: The taxpayer incurred capital expenditure on legal, accounting and independent expert fees on or after 1 July 2005. For this expenditure, the taxpayer was provided with services and advice to assist in progressing and executing the overseas listing strategy. In particular, the services and advice were directed to developing and implementing the steps necessary to insert the overseas holding company above the taxpayer (including the proposed Scheme of Arrangement) and list the company on that overseas stock exchange. The proposed business of the overseas holding company was not proposed to be carried on for a taxable purpose to any extent. The business that is most relevant to the taxpayer's capital expenditure is the business proposed to be carried on by the overseas holding company. The taxpayer's capital expenditure is incurred in relation to that business.", "Reasons_for_Decision": "Summary: Subsection 40-880(4) of the ITAA 1997 provides that you can only deduct the expenditure, for a business that another entity used to carry on or proposes to carry on, to the extent that: (a) the business was carried on or is proposed to be carried on for a taxable purpose; and (b) the expenditure is in connection with: (i) your deriving assessable income from the business; and (ii) the business that was carried on or is proposed to be carried on. The relevant business for the purposes of the application of subsection 40-880(4) of the ITAA 1997 (the business proposed to be carried on by the overseas holding company) was not proposed to be carried on for a taxable purpose to any extent. Furthermore, the capital expenditure the taxpayer incurred is not to any extent in connection with the taxpayer deriving assessable income from the proposed business of the overseas holding company for the purpose of subparagraph 40-880(4)(b)(i) of the ITAA 1997. Relevantly, the Explanatory Memorandum to the Tax Laws Amendment (2006 Measure No 1) Bill 2006 states at paragraphs 2.54 and 2.55: The expenditure must be in connection with the taxpayer deriving their assessable income from the business. [ Schedule 2, item 30, paragraph 40-880(4)(b) ] This is to provide a proxy for the relationship between the taxpayer and 'their' (ie, the taxpayer) business, where the taxpayer that incurs the expenditure is not the same as the taxpayer that carries on the business. Deriving assessable income refers to the entitlement to a share in the profits from the business. The way in which the profit is derived can be direct or indirect. The expenditure also needs to be 'in connection with' the business that was carried on or is proposed to be carried on. In this case, the proposed business was the business of the overseas holding company, which would hold 100% of the shares in the taxpayer. As such, the taxpayer would not be in a position to derive assessable income, being an entitlement to a share in the profits (derived either directly or indirectly) from the overseas holding company's business. It is the taxpayer's shareholders, who were to become shareholders in the overseas holding company under the proposed Scheme of Arrangement, who were to be in such a position rather than the taxpayer. Accordingly, there is a 100% limitation imposed by both paragraphs 40-880(4)(a) and 40-880(b) of the ITAA 1997 on deductibility by the taxpayer of the capital expenditure it incurred. In other words, the taxpayer cannot deduct any amount under section 40-880 of the ITAA 1997 for the capital expenditure it incurred.", "Date_of_Decision": "1 February 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(4) paragraph 40-880(4)(a) paragraph 40-880(4)(b) subparagraph 40-880(4)(b)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/94", "Subject_References": "Blackhole expenditure Capital Allowances CoE", "Case_References": "First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 30 ATR 207 (1995) 95 ATC 4145", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200795", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2007/109", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to your business", "Issue": "Was the taxpayer's capital expenditure incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure was incurred 'in relation to your business' for the purpose of paragraph 40-880(2)(a) of the ITAA 1997 because there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and the taxpayer's business.", "Facts": "The taxpayer, a public company limited by shares that carried on business for a taxable purpose, was approached by an unrelated entity with a proposal for the two companies to merge. The taxpayer had not been actively seeking any such offers at the time the offer was made but decided to proceed with the merger. The merger was implemented by a scheme of arrangement in accordance with Part 5.1 of the Corporations Act 2001 . The scheme of arrangement involved the existing shares in the taxpayer being transferred from the taxpayer's members to the unrelated entity in exchange for the taxpayer's members being issued shares in the unrelated entity. The result of the arrangement was the taxpayer becoming a wholly owned subsidiary of the unrelated entity. The taxpayer displayed the following characteristics: In order to implement the merger, the taxpayer was required to change its characteristics so that customers of the taxpayer would no longer have to be members of the taxpayer and the restrictions on the issue of shares removed. This required the taxpayer's constitution to be amended. The changes to the taxpayer's constitution would permit the taxpayer to pay a dividend to its members. A dividend was subsequently paid by the taxpayer to all existing shareholders in the taxpayer. The taxpayer incurred the following capital expenditure in respect of evaluating the merger proposal, changing its constitution and implementing the scheme of arrangement: The expenditure was incurred on or after 1 July 2005. The taxpayer's business activities continued after the scheme of arrangement was completed. The nature of the taxpayer's business activities did not materially alter as a result of the scheme of arrangement.", "Reasons_for_Decision": "Summary: Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9) of the ITAA 1997, subsection 40-880(2) of the ITAA 1997 provides that you can deduct, in equal proportions over a period of five income years starting in the year in which you incur it, capital expenditure you incur: In considering the phrase 'in relation to' contained within subsection 40-880(2) of the ITAA 1997, paragraph 2.25 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business. The concept used to establish this character or requisite relationship between the expenditure incurred by the taxpayer and the business carried on (current, past or prospective) is 'in relation to'. The connector 'in relation to' allows the appropriate latitude to enable the deductibility of qualifying capital expenditure incurred before the business commences or after it has ceased. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some \"association\" which is \"relevant\" or \"appropriate\". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. FC of T 95 ATC 4145; (1995) 30 ATR 207, Hill J. considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936 . He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient (at ATC 4155; ATR 218). It is therefore necessary to consider the legislative context of subsection 40-880(2) of the ITAA 1997 in order to determine whether there is a sufficient and relevant connection between the incurrence of the expenditure and the taxpayer's business. In discussing the types of business capital expenditure to which subsection 40-880(2) of the ITAA 1997 applies, the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: 2.19. Expenditure on the structure by which an entity carries on (or used to or proposes to carry on) their business and on the profit yielding structure of the business would ordinarily be expected to be of a capital nature. Capital expenditure can also relate to a business's trading operations or the entity that will carry on the business. 2.20. The structure covers the legal entity (such as a company) or the legal relationship (such as a partnership or trust) that is the entity that carries on the business for a taxable purpose and that holds the business assets. These paragraphs indicate that capital expenditure incurred on the structure by which an entity carries on (or used to or proposes to carry on) their business, on the profit yielding structure of the business, or relating to the business's trading operations, are capable of being described as capital expenditure incurred 'in relation to' that business for the purposes of subsection 40-880(2) of the ITAA 1997. Whether such capital expenditure is incurred 'in relation to' the particular business will depend on whether there is a sufficient and relevant connection between the incurring of the expenditure and that business on the facts of the particular case. The evaluation of the merger proposal involved the taxpayer considering how the implementation of the proposal would affect the structure by which the taxpayer carried on its business, the profit yielding structure of that business and the business's trading operations. The implementation of the proposal presented to the taxpayer required the taxpayer to undertake structural changes to change its constitution and to undertake a statutory scheme of arrangement relating to the holding of the taxpayer's share capital. Additionally, the taxpayer's business's trading operations were to be affected so as to better compliment the business trading operations undertaken by the unrelated entity. On the facts, there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure on evaluating the merger proposal and the taxpayer's business. The constitutional change undertaken by the taxpayer involved changing the taxpayer's constitution such that shareholders in the taxpayer would no longer be limited to only one share in the taxpayer or the right to only one vote in respect of the taxpayer's affairs. Such a change represents a change to the structure by which the taxpayer carried on its business and on the facts there is a sufficient and relevant connection between the taxpayer's incurrence of capital expenditure in undertaking that change and the taxpayer's business. The scheme of arrangement involved the issued shares in the taxpayer being transferred to the unrelated entity in exchange for shares in the unrelated entity being issued to the members of the taxpayer, thereby resulting in the taxpayer becoming a wholly owned subsidiary of the unrelated entity. This was effected through the taxpayer implementing a scheme of arrangement in accordance with Part 5.1 of the Corporations Act, which by its nature imposed statutory obligations upon the taxpayer. For example, paragraph 412(1)(a) of the Corporations Act required the taxpayer to provide its members with an explanatory statement including information that was material to the taxpayer's members making the decision whether or not to agree to the scheme of arrangement as well as any material interests of the taxpayer's directors in the scheme of arrangement. On the facts, there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure to implement the scheme of arrangement in accordance with Part 5.1 of the Corporations Act and the taxpayer's business. In the circumstances, there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure on the evaluation of the merger proposal, undertaking the process of constitutional change and the implementation of the scheme of arrangement and its business. Accordingly, the capital expenditure was incurred by the taxpayer in relation to its business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997.", "Date_of_Decision": "27 April 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) paragraph 40-880(2)(d) subsection 40-880(3) subsection 40-880(5) paragraph 40-880(5)(d) paragraph 40-880(5)(f) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/110 | ATO ID 2007/111 | ATO ID 2007/112", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Taxable purpose Uniform capital allowances system", "Case_References": "First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 30 ATR 207 95 ATC 4145", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007109", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Taxable purpose Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2007/110", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to your business - carried on for a taxable purpose", "Issue": "Was the taxpayer's business carried on wholly for a taxable purpose for the purposes of subsection 40-880(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's business was carried on wholly for a taxable purpose for the purposes of subsection 40-880(3) of the ITAA 1997 because the taxpayer's business was both being carried on for a taxable purpose and the taxpayer did not, as at the time the relevant capital expenditure was incurred, anticipate (by reference to all known and predictable facts in all years) entering into any activities that would result in the taxpayer deriving exempt or non-assessable non-exempt income.", "Facts": "The taxpayer, a public company limited by shares that carried on business for a taxable purpose, was approached by an unrelated entity with a proposal for the two companies to merge. The taxpayer had not been actively seeking any such offers at the time the offer was made but decided to proceed with the merger. The taxpayer incurred capital expenditure on or after 1 July 2005 in respect of evaluating the merger proposal, changing its constitution to facilitate the merger, and implementing the scheme of arrangement. The capital expenditure was incurred in relation to its business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997. As at the time the capital expenditure was incurred, the taxpayer did not anticipate entering into any activities that would result in the taxpayer deriving exempt or non-assessable non-exempt income.", "Reasons_for_Decision": "Summary: Subsection 40-880(3) of the ITAA 1997 provides that 'you can only deduct the expenditure, for a business that you carry on, used to carry on or propose to carry on, to the extent that the business is carried on, was carried on or is proposed to be carried on for a taxable purpose'. The business referred to in this subsection is the business to which the relevant paragraph in subsection 40-880(2) of the ITAA 1997 applies. In this case it is paragraph 40-880(2)(a) of the ITAA 1997 that applies and therefore the issue is the extent to which the business that the taxpayer carries on is carried on for a taxable purpose. The Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: 2.46 The definition of 'taxable purpose' is provided by subsection 40-25(7) of the ITAA 1997 and covers various purposes, including the purpose of producing assessable income. The term purpose of producing assessable income is further defined in subsection 995-1(1) of the ITAA 1997 as being something done: • for the purpose of gaining or producing assessable income; or • in carrying on a business for the purpose of gaining or producing assessable income. The application of subsection 40-880(3) of the ITAA 1997 requires that the taxpayer determine, as at the time the capital expenditure was incurred, the extent to which the taxpayer's business will be carried on for a taxable purpose by reference to all known and predictable facts in all years. The taxpayer did not derive any exempt income or non-assessable non-exempt income for the income year in which it incurred the capital expenditure. Additionally, the Scheme Booklet and Disclosure Statement issued by the taxpayer to its members outlines the impacts of the merger on the taxpayer's business. The information provided to the members was on the basis of existing circumstances affecting the taxpayer's business at the time the Booklet and Statement was prepared. It therefore provides objective evidence as to the known and predictable facts and expectations of the taxpayer in respect of the taxpayer's business as at the time the capital expenditure was incurred. The Scheme Booklet and Disclosure Statement do not make any reference to activities that would result in the taxpayer deriving exempt or non-assessable non-exempt income. As the taxpayer, as at the time it incurred the capital expenditure, carried on its business for a taxable purpose and did not anticipate (by reference to all known and predictable facts in all years) entering into any activities that would result in the taxpayer deriving exempt or non-assessable non-exempt income, the taxpayer's business was carried on wholly for a taxable purpose for the purposes of subsection 40-880(3) of the ITAA 1997.", "Date_of_Decision": "27 April 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-880 subsection 40-25(7) subsection 40-880(2) paragraph 40-880(2)(a) subsection 40-880(3) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/109 | ATO ID 2007/111 | ATO ID 2007/112", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Taxable purpose Uniform capital allowances system", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007110", "Unmatched_Content": "2.47 A taxpayer whose business is not carried on for a taxable purpose cannot deduct expenditure to that extent. This limitation is not an annual test: that is, it is not to limit deductions to only the income years in which the business is carried on for a taxable purpose. The test as to the taxable purpose of the business is applied - as at the time the expenditure is incurred - to the taxable purpose of the business by reference to all known and predictable facts in all years. | Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Taxable purpose Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2007/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - lease or other legal or equitable right", "Issue": "Does paragraph 40-880(5)(d) of the Income Tax Assessment Act 1997 (ITAA 1997) apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred 'in relation to your business'?", "Decision": "No. Paragraph 40-880(5)(d) of the ITAA 1997 does not apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred in relation to its business.", "Facts": "The taxpayer, a public company limited by shares that carried on business for a taxable purpose, was approached by an unrelated entity with a proposal for the two companies to merge. The taxpayer had not been actively seeking any such offers at the time the offer was made but decided to proceed with the merger. The merger was implemented by a scheme of arrangement in accordance with Part 5.1 of the Corporations Act 2001 . The scheme of arrangement involved the existing shares in the taxpayer being transferred from the taxpayer's members to the unrelated entity in exchange for the taxpayer's members being issued shares in the unrelated entity. The result of the arrangement was the taxpayer becoming a wholly owned subsidiary of the unrelated entity. The taxpayer incurred capital expenditure on or after 1 July 2005 in respect of evaluating the merger proposal, changing its constitution to facilitate the merger, and implementing the scheme of arrangement. The capital expenditure was incurred in relation to its business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Paragraph 40-880(5)(d) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 of the ITAA 1997 for an amount of expenditure you incur to the extent that 'it is in relation to a lease or other legal or equitable right'. In respect of paragraph 40-880(5)(d) of the ITAA 1997, paragraph 2.68 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: This exclusion replicates that found in the repealed section 40-880, having been added in 2002 in the context of the Government's review of the treatment of expenditure incurred on leases or other legal or equitable rights. The 2005-06 Budget announced that the Government would take a case-by-case approach in relation to the taxation of rights. Since that paragraph states that the exclusion contained in paragraph 40-880(5)(d) of the ITAA 1997 replicates that found in the repealed section 40-880 of the ITAA 1997, it is relevant to consider the repealed paragraph 40-880(3)(d) of the ITAA 1997. In discussing that exclusion, paragraph 3.67 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 stated: The Government is reviewing the treatment of expenditure incurred in relation to leases or other legal or equitable rights as part of the consideration of the recommendations of the Review of Business Taxation. The appropriate income tax treatment of capital expenditure incurred in relation to these leases and rights will be determined as part of that review. Consequently, capital expenditure on leases or other legal or equitable rights will be excluded from deduction under section 40-880. For example, expenditure representing lease surrender payments incurred in closing down your business will not be deductible under section 40-880. It is therefore relevant to consider what 'leases and rights' were considered in the recommendations of the Review of Business Taxation in order to determine the intended scope of the phrase 'in relation to a lease or other legal or equitable right' in paragraph 40-880(5)(d) of the ITAA 1997 and former paragraph 40-880(3)(d) of the ITAA 1997. The proposed review of the taxation of 'leases and rights' was discussed at pages 213-280 of the Review of Business Taxation, A Platform for Consultation , Discussion Paper 2 Volume I, February 1999. Specifically, at paragraph 8.1 on page 217, the following is stated: What is a lease or right? Leases and rights are essentially arrangements for transferring some or all of the benefits of ownership of an asset from the owner to the recipient of the lease or right. The following kinds of rights contracts are covered by the discussion: • leasing and similar contracts which provide rights over physical assets, for example, leases of equipment • contracts giving rights over intangible assets, such as spectrum licences and rights in films, patents, copyright, and industrial designs • indefeasible rights of use over assets, such as telecommunication cables • profits á prendre, that is, a right to take a product such as standing timber from another person's land • contracts for services • restrictive covenants; and • rights to receivables arising from 'rights' contracts, for example, lease receivables. There is also a reference at paragraph 9.4 on page 233 of that document that 'service contracts that are, in substance, broadly similar to leases' were part of the review. Further, there is a reference at paragraph 10.1 on page 269 of that document to the effect that rights under franchise agreements were also part of the review. Section 10 of the Review of Business Taxation, A Tax System Redesigned , Report, July 1999, made recommendations in relation to the taxation of leases and rights. While that report did not explain what was encompassed by the expression 'leases and rights', it can reasonably be inferred that it was referring to the sorts of 'leases and rights' outlined in the Review of Business Taxation, A Platform for Consultation , Discussion Paper 2 Volume 1, February 1999, referred to above. On the facts, there are no leases or other legal or equitable rights of the types considered by the Review of Business Taxation (in the context of its review of the taxation of leases and rights) in relation to which the expenditure referred to in the facts could reasonably be said to have been incurred. The Review of Business Taxation was concerned with the proper taxation treatment of 'receipts and expenditure associated with leases and rights on a consistent basis' (see paragraph 8.3 on page 217). What receipts and expenditure are so associated with leases and rights as to call for consistent treatment? That depends on what the overall framework is within which treatment should be consistent. Division 40 of the ITAA 1997 does not apply in the context of a generalised 'tax value method' treatment, and that generalised treatment was the context of the Review of Business Taxation's discussion of receipts and expenditures associated with leases and rights. In the context of the income tax law, what receipts and expenditures are so associated with leases and rights as to be within the scope of paragraph 40-880(5)(d) of the ITAA 1997 may therefore require a closer connection than the connection contemplated in the publications of the Review. Although it could be said that the expenditure as stated in the facts above was incurred in a sense in relation to the shares in the taxpayer held by members of the taxpayer and that a share is a bundle of rights (albeit the bundle of rights forms one piece of property - see paragraphs 20 to 26 of Taxation Ruling TR 94/30 and section 1070A of the Corporations Act), shares do not appear to be among the type of rights that the Review of Business Taxation considered in the context of its review of the taxation of leases and rights. Further, the application of paragraph 40-880(5)(d) of the ITAA 1997 to expenditure incurred in relation to shares only in the same way as the expenditure being considered in facts set out above would defeat the apparent Parliamentary intention to allow a deduction under section 40-880 of the ITAA 1997 as it formerly stood, an intention clearly meant to continue in relation to the present revised version of the section, for certain types of capital expenditure that are clearly incurred in relation to shares in that sense. In discussing the capital expenditure which may be deductible under subsection 40-880(2) of the ITAA 1997, paragraph 2.22 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 states: Taxpayers can deduct the following specific types of capital expenditure: • expenditure to establish your business structure • expenditure to convert your business structure to a different structure • expenditure to raise equity for your business • expenditure to defend your business against a takeover • costs to your business of unsuccessfully attempting a takeover; and • costs to stop carrying on your business, The Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 provides further guidance as to expenditure that previously fell within these specific types of capital expenditure. In particular, it states: Paragraph 40-880(1)(d) - expenditure to defend against a takeover 3.54 Paragraph 40-880(1)(d) allows deductions for capital expenditure incurred by a taxpayer to defend their business against a takeover. The use of the words defend and against in paragraph 40-880(1)(d) means that there must be resistance of the attempted takeover for paragraph 40-880(1)(d) to apply. 3.55 Item 44 inserts an example immediately after the paragraph. It deals with a situation in which a public limited company launches a hostile takeover bid for another public limited company. The target company must take certain steps prescribed by the Corporations Act 2001. The capital expenditure it incurs in following those steps is covered by this paragraph. 3.56 The following types of expenditure incurred in defending a takeover under the Corporations Act 2001 could come within paragraph 40-880(1)(d) to the extent to which they are capital expenditure: • legal and accounting costs • stockbrokers fees • compliance fees under the Corporations (Fees) Regulations 2001 • consultancy fees paid for public relations, merchant bankers and the media • printing, advertising and mailing of documents produced for shareholders • costs of independent evaluations of the takeover offer • the salary or wages of individuals employed specifically to undertake takeover defence activities; and • the preparation of and issuing of Part B statements or Part D statements. If paragraph 40-880(5)(d) of the ITAA 1997 were to apply to expenditure incurred in relation to shares only in the same way as the expenditures stated in the facts above, that would defeat the apparent Parliamentary intention to allow a deduction under section 40-880 of the ITAA 1997 in respect of the expenditure of the sort referred to in paragraphs 3.56 and 3.58 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 as examples of expenditure to defend your business against a takeover and costs to your business of unsuccessfully attempting a takeover. Where your business is threatened with takeover, or where you attempt a takeover of a business, it must be by way of an attempt to acquire the equity in the business. So capital expenditure on those topics will relate to the equity in the sense that it relates to the acquisition of the equity. Much of the expenditure as stated in the facts above is of the nature referred to in paragraph 3.56 referred to above. But this cannot be intended to be in relation to the legal or equitable rights which the equity embodies, for the purpose of the operation of paragraph 40-880(5)(d) of the ITAA 1997. For the foregoing reasons, paragraph 40-880(5)(d) of the ITAA 1997 does not apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 in respect of capital expenditure it incurred as set out in the facts.", "Date_of_Decision": "27 April 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-880 subsection 40-880(2) paragraph 40-880(2)(a) subsection 40-880(3) subsection 40-880(5) paragraph 40-880(5)(d) former paragraph 40-880(1)(d) former paragraph 40-880(1)(e) former paragraph 40-880(3)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/30", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/109 | ATO ID 2007/110 | ATO ID 2007/112", "Subject_References": "Black hole expenditure Capital Allowances CoE Capital expenditure Taxable purpose Uniform capital allowances system", "Case_References": "First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 30 ATR 207 95 ATC 4145", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2002 Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 Volume I, February 1999 Review of Business Taxation, A Tax System Redesigned, Report, July 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007111", "Unmatched_Content": "to the extent that they do not fall within the limitations and exclusions. These expenditures were previously deductible under the provision replaced by the measure. | 3.57 Due to the amendments discussed in paragraphs 3.63 to 3.71, expenditure such as the costs of acquiring shares as a defensive manoeuvre engaged in by a company under threat of a takeover will not be deductible under paragraph 40-880(1)(d). Such costs are recognised in the cost base of the shares under the capital gains and losses provisions. | Paragraph 40-880(1)(e) - costs of unsuccessfully attempting a takeover | 3.58 Paragraph 40-880(1)(e) allows deductions for capital expenditure incurred in unsuccessfully attempting a takeover. Item 45 inserts an example immediately after the paragraph. It will deal with a situation in which a public company tries unsuccessfully to take over another public company. The company attempting the takeover must take certain steps prescribed by the Corporations Act 2001 in the course of attempting the takeover. The capital expenditure it incurs in following those steps is covered by this paragraph. | 3.59 Examples of capital expenditure associated with a takeover under the Corporations Act 2001 that could come within paragraph 40-880(1)(e) to the extent to which they are capital expenditure are similar to those outlined in paragraph 3.56. | Related Public Rulings (including Determinations) Taxation Ruling TR 94/30 | Keywords Black hole expenditure Capital Allowances CoE Capital expenditure Taxable purpose Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2007/112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - could not be taken into account in working out a capital gain or loss from a CGT event", "Issue": "Does paragraph 40-880(5)(f) of the Income Tax Assessment Act 1997 (ITAA 1997) apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred 'in relation to your business'?", "Decision": "No. Paragraph 40-880(5)(f) of the ITAA 1997 does not apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure it incurred in relation to its business.", "Facts": "The taxpayer, a public company limited by shares that carried on its business wholly for a taxable purpose, was approached by an unrelated company with a proposal for them to merge. The taxpayer had not been seeking any such offers at the time that the offer was made but decided to proceed with the merger after evaluating the proposal. The merger was implemented by a scheme of arrangement which involved the existing shares in the taxpayer being transferred from the taxpayer's members to the unrelated entity in exchange for the taxpayer's members being issued shares in the unrelated entity. The result of the arrangement was the taxpayer became a wholly owned subsidiary of the unrelated entity. The taxpayer incurred capital expenditure on or after 1 July 2005 in respect of evaluating the merger proposal, changing its constitution to facilitate the merger, and the implementing the scheme of arrangement. The expenditure comprised legal fees; various consulting fees; member communication expenses and other related miscellaneous expenses. The capital expenditure was incurred in relation to the taxpayer's business for the purposes of paragraph 40-880(2)(a) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 40-880 of the ITAA 1997 allows certain business capital expenditure to be deducted in equal proportions over five income years. Paragraph 40-880(5)(f) of the ITAA 1997 provides that you cannot deduct anything under section 40-880 for an amount of expenditure you incur to the extent that 'it could, apart from this section, be taken into account in working out the amount of a capital gain or capital loss from a CGT event'. In most cases, capital proceeds and cost base (or reduced cost base) are taken into account in working out a capital gain or capital loss from a capital gains tax (CGT) event. The expenditure could be taken into account in capital proceeds if it reduced the capital proceeds from a CGT event. However, no CGT event happens in respect of which there are capital proceeds that are reduced by the expenditure. The expenditure could be taken into account in cost base (or reduced cost base) if it forms part of the cost base (or reduced cost base) of a CGT asset. However, the taxpayer's expenditure does not form part the cost base (or reduced cost base) of any CGT asset. Further, the expenditure does not fit the description of any amount that forms part of the calculation of a capital gain or loss from a CGT event that is worked out without reference to either or both capital proceeds and cost base (or reduced cost base). For the foregoing reasons, paragraph 40-880(5)(f) of the ITAA 1997 does not apply so as to reduce the taxpayer's deduction under section 40-880 of the ITAA 1997 in respect of capital expenditure it incurred as set out in the facts.", "Date_of_Decision": "27 April 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 paragraph 40-880(2)(a) paragraph 40-880(5)(f)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/109 | ATO ID 2007/110 | ATO ID 2007/111", "Subject_References": "Capital Allowances CoE Capital expenditure Capital gains tax CGT capital proceeds CGT cost base CGT events CGT reduced cost base Losses and Capital Gains Tax CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007112", "Unmatched_Content": "Keywords Capital Allowances CoE Capital expenditure Capital gains tax CGT capital proceeds CGT cost base CGT events CGT reduced cost base Losses and Capital Gains Tax CoE"}
{"ATO_ID_Number": "ATO ID 2007/123", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - in relation to a business that used to be carried on", "Issue": "Was the capital expenditure incurred by the taxpayer incurred 'in relation to a business that used to be carried on' for the purpose of paragraph 40-880(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The capital expenditure the taxpayer incurred was incurred 'in relation to a business that used to be carried on' for the purpose of paragraph 40-880(2)(b) of the ITAA 1997, because there was a sufficient and relevant connection between the taxpayer's incurrence of the expenditure and a business that used to be carried on, and that business is the most relevant to the expenditure.", "Facts": "The taxpayer is a company that carries on business entirely for a taxable purpose. The taxpayer incurred, after 30 June 2005, capital expenditure to settle certain legal proceedings brought against it by the liquidator of another company (the company in liquidation). It was alleged that the taxpayer had wrongfully received money that belonged to the company in liquidation arising from that company's business activities and that deprivation of that money led to an inability of the company in liquidation to pay its trade debts.", "Reasons_for_Decision": "Summary: All legislative references in this Interpretative Decision are to the ITAA 1997 unless otherwise noted. Subject to the limitations and exceptions contained in subsections 40-880(3) to 40-880(9), subsection 40-880(2) provides that you can deduct, in equal proportions over a period of 5 income years starting in the year in which you incur it, capital expenditure you incur: In considering the phrase 'in relation to' contained within subsection 40-880(2), paragraph 2.25 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 ('the EM') states: The provision is concerned with expenditure that has the character of a business expense because it is relevantly related to the business. The concept used to establish this character or requisite relationship between the expenditure incurred by the taxpayer and the business carried on (current, past or prospective) is 'in relation to'. The connector 'in relation to' allows the appropriate latitude to enable the deductibility of qualifying capital expenditure incurred before the business commences or after it has ceased. The phrase 'in relation to' was considered by the High Court in PMT Partners Pty Ltd (In Liquidation) v. Australian National Parks & Wildlife Service (1995) 184 CLR 301. Brennan CJ, Gaudron and McHugh JJ observed, in considering the application of the Commercial Arbitration Act 1985 (NT), at 313: Inevitably, the closeness of the relation required by the expression 'in or in relation to' in s 48 of the Act, indeed, in any instrument - must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears. In that case Toohey and Gummow JJ also observed: It is apparent that the words 'in or in relation to' are particularly wide. ... Cases concerning the interpretation of this phrase in other statutory contexts are of limited assistance. However, the cases do show that the words are prima facie broad and designed to catch things which have sufficient nexus to the subject. The question of sufficiency of nexus is, of course, dependent on the statutory context. (at 330) ... The connection which is required by the phrase 'in relation to' is a question of degree. There must be some \"association\" which is \"relevant\" or \"appropriate\". The question of the relevance or appropriateness of the connection is a question which cannot be divorced from the particular statutory context. (at 331) In First Provincial Building Society Limited v. FC of T 95 ATC 4145; 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of paragraph 26(g) of the Income Tax Assessment Act 1936 . He considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship is insufficient (at ATC 4155; ATR 218). It is therefore necessary to consider the legislative context of subsection 40-880(2) in order to determine whether there is a sufficient and relevant connection between the incurrence of the expenditure and a particular business. In discussing the types of business capital expenditure to which subsection 40-880(2) applies, the EM states: 2.19. Expenditure on the structure by which an entity carries on (or used to or proposes to carry on) their business and on the profit yielding structure of the business would ordinarily be expected to be of a capital nature. Capital expenditure can also relate to a business's trading operations or the entity that will carry on the business. 2.20. The structure covers the legal entity (such as a company) or the legal relationship (such as a partnership or trust) that is the entity that carries on the business for a taxable purpose and that holds the business assets. These paragraphs indicate that capital expenditure incurred on the structure by which an entity carries on, or used to or proposes to carry on their business, on the profit yielding structure of the business, or relating to the business's trading operations, are capable of being described as capital expenditure incurred 'in relation to' that business for the purposes of subsection 40-880(2). Whether such capital expenditure is incurred 'in relation to' the particular business will depend on whether there is a sufficient and relevant connection between the incurring of the expenditure and that business on the facts of the particular case. The statement in paragraph 2.48 of the EM - '[t]he business to which the expenditure relates is that most relevant to the expenditure' - indicates that when there is such a connection between the incurring of the expenditure and more than one business, the expenditure is treated for the purposes of subsection 40-880(2) as incurred in relation to the business that is most relevant to the expenditure. In identifying for the purposes of subsection 40-880(2) the business that is most relevant to the expenditure, it is necessary to look to the character of the expenditure rather than simply the broad intent of its incurrence. The broad intent in this case was the taxpayer's Director's thinking as to benefits intended or expected to flow to the taxpayer that directed their decision towards the object of settling the legal action. The taxpayer incurred capital expenditure to settle the legal proceedings against it. The plaintiff's claims against the taxpayer were that the taxpayer had wrongfully received money that belonged to the company in liquidation arising from that company's business activities and that deprivation of that money led to an inability of the company in liquidation to pay its trade debts. The capital expenditure bears the character of expenditure incurred in relation to the trading operations of the company in liquidation. It is considered that the business that is most relevant to the capital expenditure is the business that used to be carried on by the company in liquidation. In the circumstances, there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure and the business that used to be carried on by the company in liquidation, and that business is the most relevant to that expenditure. Accordingly, the capital expenditure was incurred in relation to the business that used to be carried on by the company in liquidation and falls within the ambit of paragraph 40-880(2)(b).", "Date_of_Decision": "31 May 2007", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) paragraph 40-880(2)(a) paragraph 40-880(2)(b) paragraph 40-880(2)(c) paragraph 40-880(2)(d) subsection 40-880(3) subsection 40-880(4) subsection 40-880(5) subsection 40-880(7) subsection 40-880(8) subsection 40-880(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/124", "Subject_References": "Blackhole expenditure Capital Allowances CoE", "Case_References": "First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 30 ATR 207 95 ATC 4145", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No.1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007123", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2007/124", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: business related costs - limitation of deduction - business of another entity", "Issue": "Is the taxpayer's deduction under section 40-880 of the Income Tax Assessment Act 1997 (ITAA 1997), for capital expenditure they incurred in relation to a business that used to be carried on, limited by subsection 40-880(4) of the ITAA 1997?", "Decision": "Yes. The taxpayer's deduction under section 40-880 of the ITAA 1997 for capital expenditure they incurred in relation to a business that used to be carried on is limited by subsection 40-880(4) of the ITAA 1997, because the capital expenditure is not to any extent in connection with the taxpayer deriving assessable income from that business.", "Facts": "The taxpayer is a company that carries on business entirely for a taxable purpose. The taxpayer incurred, after 30 June 2005, capital expenditure to settle certain legal proceedings brought against it by the liquidator of another company (the company in liquidation). It was alleged that the taxpayer had wrongfully received money that belonged to the company in liquidation arising from that company's business activities and that deprivation of that money led to an inability of the company in liquidation to pay its trade debts. In this case there is a sufficient and relevant connection between the taxpayer's incurrence of the capital expenditure and the business that used to be carried on by the company in liquidation, and that business is most relevant to that expenditure. Accordingly, the taxpayer's capital expenditure was incurred in relation to that business. The business that used to be carried on by the company in liquidation was carried on entirely for a taxable purpose. The taxpayer was not a shareholder of the company in liquidation nor was it otherwise in a position to derive any assessable income from the company in liquidation.", "Reasons_for_Decision": "Summary: All legislative references in this Interpretative Decision are to the ITAA 1997 unless otherwise noted Subsection 40-880(4) provides that: you can only deduct the expenditure, for a business that another entity used to carry on or proposes to carry on, to the extent that: the business was carried on or is proposed to be carried on for a taxable purpose; and the expenditure is in connection with: (i) your deriving assessable income from the business; and (ii) the business that was carried on or is proposed to be carried on. The relevant business for the purposes of subsection 40-880(4) - the business that used to be carried on by the company in liquidation - was carried on entirely for a taxable purpose. However, the capital expenditure incurred by the taxpayer is not, for the purposes of subparagraph 40-880(4)(b)(i), to any extent in connection with the taxpayer deriving assessable income from the business that used to be carried on by the company in liquidation. Relevantly, paragraphs 2.54 and 2.55 of the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 state: The expenditure must be in connection with the taxpayer deriving their assessable income from the business. [Schedule 2, item 30, paragraph 40-880(4)(b)] This is to provide a proxy for the relationship between the taxpayer and 'their' (ie, the taxpayer) business, where the taxpayer that incurs the expenditure is not the same as the taxpayer that carries on the business. Deriving assessable income refers to the entitlement to a share in the profits from the business. The way in which the profit is derived can be direct or indirect. The expenditure also needs to be 'in connection with' the business that was carried on or is proposed to be carried on. The taxpayer was not a shareholder in the company in liquidation. The taxpayer was never in a position to derive assessable income, being an entitlement to a share in the profits (derived either directly or indirectly) from the business that used to be carried on by the company in liquidation. Accordingly, there is a 100 per cent limitation imposed by paragraph 40-880(4)(b) on deductibility by the taxpayer of the capital expenditure it incurred. In other words, the taxpayer cannot deduct any amount under section 40-880 for the capital expenditure it incurred.", "Date_of_Decision": "31 May 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-880 subsection 40-880(2) paragraph 40-880(4) paragraph 40-880(4)(a) paragraph 40-880(4)(b) paragraph 40-880(4)(b)(i) paragraph 40-880(4)(b)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/123", "Subject_References": "Blackhole expenditure Capital Allowances CoE", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No.1) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007124", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2009/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: carbon sink forest - cost of land", "Issue": "Is a deduction allowed for the cost of land as capital expenditure incurred for the establishment of trees under Subdivision 40-J of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A deduction is not allowed for the cost of land under Subdivision 40-J of the ITAA 1997 because the cost is attributable to the land rather than to the establishment of the trees.", "Facts": "A company purchases 30 hectares of land suitable for growing trees for the purpose of sequestering carbon in the 2008-09 income year. In the same year the company incurs capital expenditure to establish trees on the land for the primary and principal purpose of carbon sequestration by the trees.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997). Broadly speaking, Subdivision 40-J allows a deduction for capital expenditure incurred in establishing trees that meet the requirements for constituting a carbon sink forest. One of these requirements is that the trees must occupy a continuous land area in Australia of 0.2 hectares or more. A deduction may be allowed under subsection 40-1005(1) for an amount if you incur capital expenditure that is covered under section 40-1010 in relation to particular trees established in the income year. Under section 40-1010 expenditure is covered in relation to particular trees if, amongst other things: The Explanatory Memorandum to the Tax Laws Amendment (2008 Measures No. 2) Bill 2008 (EM) states that establishment occurs when the trees are planted, grown from seed or deliberately regenerated from natural seed sources in their long term growing medium, in the ground, in a permanent way. It is therefore expenditure that is incurred to establish the particular trees in the ground rather than expenditure for the ground that is covered under the section. This is reflected in the type of expenditure that is set out in the EM as examples of expenditure that is for the establishment of the trees. Those types of expenditure are all related to establishing the trees in their long term growing medium which in the case of a carbon sink forest is the ground. This is also consistent with statements in the EM that expenditure for rights that allow access to land and expenditure on assets separate from the trees, such as: are not expenditure to establish the trees. The cost of purchasing land to be used for establishing trees in a carbon sink forest is not expenditure for establishing the trees, as the cost is attributable to the land rather than to the establishment of the trees. Accordingly, a deduction is not allowed for the cost of land, as capital expenditure incurred for the establishment of trees, under Subdivision 40-J of the ITAA 1997.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-1005(1) section 40-1010 Subdivision 40-J", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/46", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Carbon sequestration rights Establishment expenditure for horticultural plants Forestry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2008 Measures No. 2) Bill 2008", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200960", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2006/46 | Keywords Capital expenditure Carbon sequestration rights Establishment expenditure for horticultural plants Forestry"}
{"ATO_ID_Number": "ATO ID 2011/72", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Small Business Entities: depreciating Asset Lease or Short-Term Hire Agreement", "Issue": "Is the hiring out of a depreciating asset by a Small Business Entity taxpayer to an unrelated entity for a total period of hire of nine weeks including extensions of the initial term, considered to be a 'depreciating asset lease' for the purposes of subsection 328-175(6) of the Income Tax Assessment Act 1997 ?", "Decision": "No. The hiring out of a depreciating asset by a Small Business Entity taxpayer to an unrelated entity for a total period of hire of nine weeks including extensions of the initial term, is not considered to be a 'depreciating asset lease' as the hiring out is a 'short-term hire agreement' as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 .", "Facts": "All legislative references are to the Income Tax Assessment Act 1997 unless expressed otherwise. The taxpayer is a Small Business Entity (SBE) within the meaning prescribed by section 328-110. The taxpayer carries on a business of hiring scaffolding to the commercial construction industry. The scaffolding is a depreciating asset within the meaning of that term in section 40-30. The taxpayer entered a hire agreement to hire scaffolding to an unrelated entity (the customer) for a period of four weeks for a set weekly hire fee for a particular construction project. The parties agreed to the following additional periods of hire: There was no further agreement for hire of the same scaffolding to the customer or a related entity of the customer.", "Reasons_for_Decision": "Summary: SBE taxpayers may choose to apply Subdivision 328-D for calculating deductions for depreciating assets if they satisfy the requirements of section 328-175. Certain types of depreciating assets are specifically excluded from Subdivision 328-D. One exclusion is where a depreciating asset is being let, or might reasonably be expected to be let predominantly on a 'depreciating asset lease' (subsection 328-175(6)). A 'depreciating asset lease' is defined in subsection 995-1(1) and does not include a 'short-term hire agreement'. Accordingly, if a depreciating asset is hired out under a short-term hire agreement, subsection 328-175(6) does not operate to exclude the taxpayer from choosing to apply Subdivision 328-D in respect of that asset. The term 'short-term hire agreement' is defined in subsection 995-1(1) as follows: A short-term hire agreement is an agreement for the intermittent hire of an asset on an hourly, daily, weekly or monthly basis. However, an agreement for the hire of an asset is not a short-term hire agreement if, having regard to any other agreements for the hire of the same asset to the same entity or an *associate of that entity, there is a substantial continuity of hiring so that the agreements together are for longer than a short-term basis. In this instance, there is an agreement for the intermittent hire of scaffolding on a weekly basis for an initial period of four weeks. However, a further four week and one week period of hire were agreed to in succession. The definition of the term 'short-term hire agreement' excludes an agreement where, having regard to any other agreements for the hire of the same asset to the same entity or an associate of that entity, there is a substantial continuity of hiring so that the agreements together are for longer than a short-term basis. As it is not sufficiently clear what is a short-term basis or a substantial continuity of hiring, extrinsic materials may be referred to. The Explanatory Memorandum to the New Business Tax System (Simplified Tax System) Act 2001 (the Explanatory Memorandum) introduced Division 328 in respect of the simplified tax system. While Division 328 has been updated to refer to SBE taxpayers, the Explanatory Memorandum is still relevant in considering the interpretation of the exclusion to a 'short-term hire agreement'. The Explanatory Memorandum states: 5.26 ...Short-term hirings of the same asset to the same entity, or associates of that entity, will not be regarded as a short-term hire agreement if they are reasonably continuous and total a period longer than a few months. The defined term, 'short-term hire agreement', is also used in Division 242 in respect of leases of luxury cars. Schedule 2E of the Income Tax Assessment Act 1936 (ITAA 1936) was the predecessor to Division 242 and it specifically stated in section 42A-125 of Schedule 2E of the ITAA 1936 that consecutive short-term hire agreements should not exceed 6 months. When Division 242 replaced Schedule 2E of the ITAA 1936, section 42A-125 was removed. However, paragraph 4.41 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Act 2010 which introduced Division 242 states: 4.41 The Schedule 2E definition of 'short-term hire agreement' relies, in part, on the rule in section 42A-125 about treating consecutive short-term hiring agreements as leases. The existing definition of 'short-term hire agreement' in the ITAA 1997 already broadly captures that idea, so section 42A-125 is omitted. A small difference is that section 42A-125 applies to consecutive periods totalling over six months, while the ITAA 1997 definition refers to agreements that add up to 'longer than a short term basis'. The explanatory memorandum that added that definition referred to that period as being 'longer than a few months' (see paragraph 5.26 of the explanatory memorandum to the New Business Tax System (Simplified Tax System) Bill 2000), so the two ideas are substantially the same. Unless the circumstances indicate otherwise, it will be accepted that an agreement for the intermittent hire of an asset; or a succession of agreements for hire of the same asset to the same entity or an associate of that entity, that does not exceed 6 months in total will be considered a 'short-term hire agreement' as defined in subsection 995-1(1). In the present instance, the taxpayer and customer agreed to a weekly hire for an initial four week period followed by an additional four weeks and then one week. Having regard to these agreements, it is considered that the hiring out of the scaffolding for a total period of 9 weeks does not amount to a substantial continuity of hiring and therefore will be a short-term hire agreement. In these circumstances, the hiring out of the scaffolding by the taxpayer is not a 'depreciating asset lease' for the purposes of subsection 328-175(6).", "Date_of_Decision": "11 April 2011", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 40-30 Division 242 Division 328 Subdivision 328-D section 328-110 section 328-175 subsection 328-175(6) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating asset Depreciating asset lease", "Case_References": "", "Other_References": "Explanatory Memorandum to New Business Tax System (Simplified Tax System ) Act 2001 Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Act 2010", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201172", "Unmatched_Content": "Remove reference to section 40-425 | Keywords Depreciating asset Depreciating asset lease"}
{"ATO_ID_Number": "ATO ID 2010/14", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: cost - computer software - annual licence fees", "Issue": "Are the annual licence fees paid by the taxpayer for the use of tax and accounting software included in the cost of depreciating assets for the purposes of Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The annual licence fees for both the tax and accounting software are outgoings that the taxpayer can deduct under section 8-1 of the ITAA 1997. Accordingly, the rights to use the software are not items of 'in-house software' (as defined in subsection 995-1(1) of the ITAA 1997) and are not 'depreciating assets' (as defined in section 40-30 of the ITAA 1997).", "Facts": "The taxpayer incurred annual fees under two licence agreements: one agreement is associated with the use of tax software and the other is associated with the use of accounting software. Tax Software The taxpayer's outgoings were incurred to licence software used to produce tax returns for the purpose of carrying on their business. Under the licensing agreement with the software developer, the taxpayer pays an annual licence fee and acquires the right to use the software developed for a particular income year for 12 months. The software provided to the taxpayer for a given year is supplied as a software package. The software is able to produce returns for the current year and the previous 3 years. For example, software for the 2002-03 income year is able to produce tax returns for the 2002-03, 2001-02, 2000-01 and 1999-2000 years. At the end of the 12 month licence period the software stops operating. The taxpayer is not obliged to continue licensing the software after any 12 month licence period. Computer disks containing the new income year's software and an updated user's guide are sent to the taxpayer if the new annual licence fee is paid. All proprietary rights in the software remain vested with the software developer. The taxpayer does not acquire the software but only the rights to use the software for 12 months. Payment of the annual licence fee also entitles the taxpayer to receive updates to the product and unlimited telephone support throughout the year. Accounting Software The taxpayer's outgoings were incurred to licence accounting software used to prepare financial reports for the purpose of carrying on their business. Under the licensing agreement with the software developer, the taxpayer pays an annual licence fee and acquires the right to use the software for 12 months. The taxpayer receives the software package in the first year that it licences the software. The software is not developed for a particular income year and is capable of producing financial reports for all years up to the current year. The taxpayer is not obliged to continue licensing the software after any 12 month licence period. Payment of the following year's licensing fee entitles the taxpayer to continue using the software for a further 12 months. If the taxpayer chooses not to continue licensing the software, it must return the software and documentation to the software developer. Payment of the annual licence fee also entitles the taxpayer to receive updates to the software every 6 months. The updates ensure the software is compliant with changes to the relevant accounting standards.", "Reasons_for_Decision": "Summary: Subsection 40-30(2) of the ITAA 1997 provides that in-house software, that is not trading stock, is a depreciating asset. The definition of 'in-house software' in subsection 995-1(1) of the ITAA 1997 excludes computer software, or a right to use computer software, for which you can deduct amounts under a provision of the ITAA 1997 outside of Divisions 40 and 328 of the ITAA 1997. Therefore, where amounts can be deducted for software (or the right to use software) under another provision, such as section 8-1 of the ITAA 1997, the software is not in-house software and will not be a depreciating asset for the purposes of Division 40. The software licence fees are incurred by the taxpayer in carrying on their business of providing accounting and tax services for the purpose of gaining assessable income. A loss or outgoing cannot be deducted under section 8-1 of the ITAA 1997 to the extent that it is a loss or outgoing of capital, or of a capital nature (paragraph 8-1(2)(a) of the ITAA 1997). The issue is whether the annual licence fees for the tax and accounting software are on capital or revenue account. The lead Australian authority on this issue is the judgment of Dixon J in Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 23; (1938) 1 AITR 403. Dixon J outlined the following three matters to be considered in distinguishing between revenue and capital outgoings at 363: (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it, that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment. The advantage sought by the taxpayer from paying the annual licence fees is to secure the rights to use the tax and accounting software in their business. To this end, the fixed licence period of 12 months applying to each software product suggests the expenditure is of a recurrent nature and does not provide any enduring benefit. Further, the payment of the licence fee on a year-to-year basis represents a periodic outlay that covers the use of the software for a period that is commensurate with those payments. Each annual licence fee features all the traditional characteristics of an outgoing on revenue account, that is, it does not give rise to any enduring benefit for the taxpayer; and it is a recurrent, repeated or continual cost to the business rather than a final or 'once and for all' payment. For these reasons it is considered that the annual software licence fees are not outgoings of capital or of a capital nature. The taxpayer is entitled to deduct the outgoings under section 8-1 of the ITAA 1997. Consequently, the taxpayer's rights to use the tax and accounting software are not items of in-house software (as defined in subsection 995-1(1) of the ITAA 1997) and are not depreciating assets (as defined in section 40-30 of the ITAA1997).", "Date_of_Decision": "2 September 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 40-30 subsection 40-30(2) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cost of a depreciating asset Depreciating assets In-house software Intangible depreciating assets Second element of cost Uniform capital allowances system", "Case_References": "Sun Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR 337 (1938) 5 ATD 23 (1938) 1 AITR 403", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201014", "Unmatched_Content": "Keywords Cost of a depreciating asset Depreciating assets In-house software Intangible depreciating assets Second element of cost Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2009/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: legal expenses incurred after taxpayer starts to hold depreciating assets - second element of cost", "Issue": "Does the taxpayer's capital expenditure on legal fees for services related to acquiring the depreciating assets of another entity, but not incurred until after the depreciating assets were acquired, form part of the second element of cost of the depreciating assets under subsection 40-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. As the capital expenditure on legal fees was incurred after the taxpayer started to hold the depreciating assets and was incurred for services which contributed to bringing the depreciating assets to their present condition, it forms part of the second element of cost of the depreciating assets under subsection 40-190(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident company that carries on a business wholly for a taxable purpose. The taxpayer acquired the business, including the depreciating assets, of another entity under an agreement. The taxpayer became the legal owner of the depreciating assets under the agreement when completion took place and started to hold the depreciating assets under item 10 of the table in section 40-40 of the ITAA 1997 at that time. The taxpayer incurred capital expenditure on legal fees for services provided by a legal service provider in the course of the acquisition of the business. The legal service provider rendered the following services, both before and after completion of the agreement, to the taxpayer in relation to the acquisition of the business: A portion of the legal fees incurred in the course of the acquisition of the business was for services related to acquiring the depreciating assets. The capital expenditure on legal fees was incurred by the taxpayer after completion of the agreement and after taxpayer started to hold the depreciating assets.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated The cost of a depreciating asset consists of both the first and second elements (section 40-175). The first element of cost is worked out as at the time when the taxpayer began to hold the depreciating asset. Generally, the first element of cost is the amount paid, or taken to have been paid, to hold the asset (sections 40-180 and 40-185). The second element of cost is worked out after the taxpayer has started to hold the depreciating asset. This element includes capital expenditure incurred in bringing the asset to its present condition and location (section 40-190). On the facts of this case, the capital expenditure on legal fees was incurred after completion of the agreement such that it was not incurred as at the time when the taxpayer began to hold the depreciating assets. Therefore, the expenditure is precluded from inclusion in the first element of cost of the depreciating assets because the first element of cost is worked out as at the time when the taxpayer began to hold the depreciating assets. As the expenditure is precluded from being included in the first element of cost of the depreciating assets, it is necessary to consider whether a portion of the capital expenditure on legal fees forms part of the second element of cost of the depreciating assets. Paragraphs 2.71 - 2.74 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 (EM) provide guidance on what is included in the second element of cost of a depreciating asset: 2.71 The second element of a depreciating asset's cost is essentially what was paid for economic benefits that contribute to its present condition and location from time to time. This is worked out at any time after the taxpayer began to hold the asset [Schedule 1, item 1, subsections 40-190(1) and (2)]. When taxpayers need to know the asset's cost, they work out what it has cost them to that point to bring the asset to its current condition and location from time to time - that may include costs of bringing the asset to a condition or location which has since been changed. (Emphasis added) What is an 'economic benefit'? 2.72 An economic benefit is a thing of value that can be measured in money. However, the benefit does not need to be capable of being converted into money. Economic benefits can be assets, services or some combination of both. They are the things added or used up to bring the asset to its location or condition from time to time. Second element expenses need not increase the actual market value of a depreciating asset, but ordinarily will (because they will generally be improvements). (Emphasis added) What is present condition and location? 2.73 An asset's 'condition' refers to its general form, state or order. This condition is represented by all of the economic benefits embodied in the asset. The second element of cost for depreciating assets includes all payments for economic benefits that are embodied in a depreciating asset (e.g. improvements but not repairs deductible under section 25-10 of the ITAA 1997 and refer also to paragraph 2.88). 2.74 The second element of cost will also include transportation costs that bring the asset to its present location (from time to time). These paragraphs indicate that the second element of cost of a depreciating asset is the amount a taxpayer is taken to have paid for economic benefits which contribute to bringing the asset to its present condition or location. That is, it is only necessary for one of these requirements to be met. This view is supported by Example 1 to section 40-190 which provides that payments made for economic benefits which contribute to the present condition of a depreciating asset are included in the second element of cost of that asset. Example 1 to section 40-190 relevantly states: Example 1: Andrew adds a new tray and canopy to his ute. The materials and labour that go into the addition are economic benefits that Andrew received and that contribute to the ute's present condition. The payments he makes for those economic benefits are included in the second element of the ute's cost. In this case, in order for the taxpayer to become the legal owner of the depreciating assets, the legal service provider drafted the agreement to include the transfer of ownership of those assets and attended to the steps necessary for the agreement's completion. Upon completion the taxpayer started to hold the depreciating assets. The portion of the capital expenditure on legal fees incurred by the taxpayer that relates to the services rendered to transfer ownership of the depreciating assets will be an economic benefit. As noted above, in explaining the concept of 'present condition', paragraph 2.73 of the EM states that an asset's 'condition' refers to its general form, state or order. In this case, we consider that the transfer of ownership of the depreciating assets brings the depreciating assets to their present condition. Accordingly, the portion of the capital expenditure on legal fees that relates to the services rendered to transfer ownership of the depreciating assets will be an economic benefit that contributes to bringing the depreciating assets to their present condition. For the purposes of section 40-195, the relevant portion of the capital expenditure on legal fees that is reasonably attributable to the services that contributed to bringing the depreciating assets to their present condition is to be taken into account as part of their cost. The relevant portion of the taxpayer's capital expenditure on legal fees for services related to acquiring the depreciating assets of another entity, but not incurred until after the depreciating assets were acquired, will therefore form part of the second element of cost of the depreciating assets under subsection 40-190(2).", "Date_of_Decision": "20 July 2009", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 section 40-175 section 40-180 section 40-185 section 40-190 subsection 40-190(2) section 40-195", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/73", "Subject_References": "Blackhole expenditure Capital Allowances CoE Capital expenditure Centres of Expertise Cost of a depreciating asset Depreciating assets Second element of cost", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200974", "Unmatched_Content": "Keywords Blackhole expenditure Capital Allowances CoE Capital expenditure Centres of Expertise Cost of a depreciating asset Depreciating assets Second element of cost"}
{"ATO_ID_Number": "ATO ID 2008/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: cost of depreciating asset - instalment costs", "Issue": "Does the taxpayer's capital expenditure incurred in supplying cable and cable support equipment to another entity in order to connect their interconnection facility to the other entity's network, form part of the first element of cost of the interconnection facility they hold, pursuant to subsection 40-180(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The first element of cost of the taxpayer's interconnection facility includes, pursuant to subsection 40-180(3) of the ITAA 1997, capital expenditure incurred by the taxpayer in supplying the cable and cable support equipment.", "Facts": "The taxpayer carries on the business of a service provider. In order to establish and expand its business it entered into an agreement with another entity to create a service capability. To create this capability, the taxpayer was required to connect its network to the other entity's network. The taxpayer incurred capital expenditure on labour and materials, including cables and cable support equipment, in order to design, build and install an interconnection facility to connect its network with the other entity's network. The interconnection facility constituted a depreciating asset held by the taxpayer. Under the agreement, both the taxpayer and the other entity have access to the interconnection facility which is established on the other entity's premises. Property in and title to the material installed in the other entity's premises is retained by the taxpayer with the exception of certain cables and cable support equipment which become the property of the other entity upon installation.", "Reasons_for_Decision": "Summary: The cost of a depreciating asset consists of two elements (section 40-175 of the ITAA 1997). The first element of cost is worked out as at the time when the holder of the asset starts to hold it (section 40-180 of the ITAA 1997) while the second element of cost is worked out by the holder after that time (section 40-190 of the ITAA 1997). The relevant depreciating asset in this case is the composite item (an interconnection facility), installed at an access point, which serves the function of connecting the taxpayer's network to the other entity's network. The means by which a taxpayer may hold a depreciating asset may vary. In this case, the taxpayer holds the interconnection facility through having entered into an agreement with the other entity for the construction, installation and use of the facility. Under the terms of that agreement the taxpayer retains ownership of the interconnection facility and therefore is the holder under item 10 of the table in section 40-40 of the ITAA 1997. Subsection 40-180(3) of the ITAA 1997 includes in the first element of cost of a depreciating asset amounts the holder of the asset is taken to have paid in relation to starting to hold the asset if those amounts are directly connected with holding the asset. The taxpayer's capital expenditure in supplying the cables and cable support equipment which become the property of the other entity is incurred in the course of constructing and installing the interconnection facility. The relationship that exists between the cost of supplying cables and cable support equipment and the putting in place of the taxpayer's interconnection facility is a vital one which is not diminished by the fact that title in these materials passes to a third party upon installation. There is, therefore, a clear and direct link between the capital expenditure incurred by the taxpayer in supplying the cables and cable support equipment and the taxpayer starting to hold the interconnection facility. Accordingly, the first element of cost of the interconnection facility includes, pursuant to subsection 40-180(3) of the ITAA 1997, capital expenditure incurred by the taxpayer in supplying the cables and cable support equipment.", "Date_of_Decision": "27 July 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 section 40-175 section 40-180 subsection 40-180(3) section 40-190", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/91 | ATO ID 2008/92", "Subject_References": "Cost of a depreciating asset Depreciating assets First element of cost Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200893", "Unmatched_Content": "Keywords Cost of a depreciating asset Depreciating assets First element of cost Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2007/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Depreciating assets previously held by an exempt entity: reasonable attribution of pre-existing audited book value", "Issue": "For the purposes of determining the pre-existing audited book value of each privatised asset, has there been a reasonable attribution of the total book value specified in the balance sheet of the exempt entity to each privatised asset for the purposes of subsection 58-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. For the purposes of determining the pre-existing audited book value of each privatised asset, there has been a reasonable attribution of the total audited book value specified in the balance sheet of the exempt entity to each privatised asset for the purposes of subsection 58-85(2) of the ITAA 1997 as the taxpayer has used an attribution method and process that gives a reasonable attribution to each privatised asset.", "Facts": "The taxpayer (the purchaser) acquired depreciating assets including rail transport trackwork from an exempt entity. Each depreciating asset became a privatised asset under paragraph 58-5(5)(d) of the ITAA 1997 once acquired by the purchaser. The purchaser chose, under section 58-65 of the ITAA 1997, to use the undeducted pre-existing audited book value (UPABV) to work out the first element of cost of each privatised asset that was included in the audited accounts of the exempt entity at 30 June 1996. The balance sheet of the exempt entity at the balance date did not specify a value for each separate privatised asset but specified a total value for two or more assets including the privatised assets. The accounts of the exempt entity showed values for the asset group 'trackwork and infrastructure' which, in effect, aggregated values for general preparatory earthwork assets and each privatised asset (rail transport trackwork). In order to determine a pre-existing audited book value (PABV) for each privatised asset, the purchaser engaged experts to reconstruct the cost of earthwork for each rail transport trackwork depreciating asset. Consistent with established industry practice, the experts undertook a highly sophisticated analysis of the total reconstructed cost of the earthworks to establish the cost of general preparatory earthworks which are not part of the privatised rail transport trackwork assets. Taking into account the relative cost of general preparatory earthworks and based on differentiated track and terrain, the experts established the proportion of the construction cost of each trackwork segment that related to the rail transport trackwork privatised assets. A weighted average proportion was then applied to the overall book value in the balance date audited accounts for the asset group that included rail transport trackwork to determine how much of the total value specified for the asset group was attributable to each privatised asset.", "Reasons_for_Decision": "Summary: All legislative references in this Interpretative Decision are to the ITAA 1997 Division 58 sets out special rules that apply in calculating deductions for the decline in value of a depreciating asset under Subdivision 40-B. An 'asset sale situation' occurs where a taxable entity acquired a business from the Commonwealth, a State, a Territory or an exempt entity and also acquires a depreciating asset in connection with the acquisition of the business. In an asset sale situation, a depreciating asset the purchaser acquires from the Commonwealth, a State, a Territory or an exempt entity is a privatised asset. Under section 58-65 a taxpayer that is the purchaser of a privatised asset can choose to use the UPABV of a privatised asset as the basis of its deductions for the decline in value of the asset under Division 40. Under section 58-85 the PABV is taken to be the specified value shown for the asset in the balance sheet, at the balance date, of an exempt entity where the conditions in paragraphs 58-85(1)(a) to 58-85(1)(c) are satisfied. Subsection 58-85(2) allows a PABV to be attributed in circumstances where a balance sheet did not specify an audited book value for a privatised asset but specified a total value for two or more assets that include the privatised asset. In that situation, so much of the total value as is reasonably attributable to the privatised asset is taken to be its PABV. In this case, the method and process the taxpayer used to attribute a portion of the total audited book value specified in the balance sheet for numerous assets to each rail transport trackwork privatised asset is accepted as a 'reasonable attribution' of that total value for the purpose of subsection 58-85(2) because:", "Date_of_Decision": "22 February 2007", "Year_of_Income": "Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-B Division 58 paragraph 58-5(5)(d) section 58-65 section 58-85 paragraph 58-85(1)(a) paragraph 58-85(1)(b) paragraph 58-85(1)(c) subsection 58-85(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Decline in value Depreciating assets Asset sale situation Privatised assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200785", "Unmatched_Content": "This ATO ID was amended by adding 'the Commonwealth, a State, a Territory or' to the description of an entity that is exempt for Division 58 purposes. This reflects a change to the law that was introduced by Act No 78 of 2007, effective from 1 July 2005. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Minor grammatical amendment. | Related ATO Interpretative Decisions | Removed reference to ATO ID 2003/489 which has been withdrawn. | Keywords Decline in value Depreciating assets Asset sale situation Privatised assets"}
{"ATO_ID_Number": "ATO ID 2007/86", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Depreciating assets previously held by an exempt entity: availability of pre-existing audited book value to partially completed assets which are work in progress", "Issue": "If, at the balance date relevant under section 58-85 of the Income Tax Assessment Act (ITAA 1997) for the determination of the pre-existing audited book value of the taxpayer's privatised asset, a partially completed asset constituted work in progress of an exempt entity, is the taxpayer entitled to a pre-existing audited book value when it acquires the completed depreciating asset?", "Decision": "No. At the balance date relevant under section 58-85 for determination of the pre-existing audited book value of the taxpayer's privatised asset the partially completed asset constituting work in progress of an exempt entity was not a depreciating asset and, therefore, was not the privatised asset acquired by the taxpayer.", "Facts": "The taxpayer acquired, from an exempt entity, a depreciating asset that was rail transport trackwork. The rail transport trackwork became a privatised asset under paragraph 58-5(5)(d) of the ITAA 1997 once acquired by the taxpayer. The taxpayer wanted to choose, under section 58-65 of the ITAA 1997, to use the undeducted pre-existing audited book value to work out the first element of cost of each privatised asset that was included in the audited accounts of the exempt entity at 30 June 1996. The trackwork was completed by the time of its acquisition in 2003. However, at 30 June 1996 the rail transport trackwork was still under construction. This asset was included in the audited accounts for 1995-96 income year of the exempt entity as work in progress.", "Reasons_for_Decision": "Summary: All legislative references in this Interpretative Decision are to the ITAA 1997 Division 58 sets out special rules that apply in calculating deductions for the decline in value of a depreciating asset under Division 40. In an asset sale situation, a depreciating asset the purchaser acquires from the Commonwealth, a State, a Territory or an exempt entity is a privatised asset. An asset sale situation occurs where a taxable entity acquired a business from the Commonwealth, a State, a Territory or an exempt entity and also acquires a depreciating asset in connection with the acquisition of the business. Under section 58-85 the pre-existing audited book value (PABV) is taken to be the specified value shown for the privatised asset in the balance sheet, at the balance date, of an exempt entity, where the conditions in paragraphs 58-85(1)(a) to 58-85(1)(c) are satisfied. In order to determine a value for a privatised asset, the requirements in section 58-85 mean that the asset (in the audited accounts for 1995-96 income year of the tax exempt entity) has to be the same asset as the privatised asset. At the relevant balance date, in this case, the asset was uncompleted rail transport track work. It was included in the audited accounts as work in progress and, to the extent that it is an asset, is a different asset from the completed trackwork the taxpayer acquired from the tax exempt entity. At the relevant balance date, the uncompleted rail transport trackwork was not in a condition that enabled it to function or to be used as a depreciating asset. It therefore would not be considered to be a depreciating asset. At the time the taxpayer acquired the completed trackwork, it was a different asset. The subsequent completion of its construction enabled it to be recognised as a depreciating asset and, therefore, a privatised asset. Accordingly, a PABV for the work in progress asset which was under construction at 30 June 1996 is not available to the taxpayer under section 58-85. Where there is no PABV for a privatised asset, claims for decline in value will be based on the notional written down value of the asset as worked out under section 58-75", "Date_of_Decision": "22 February 2007", "Year_of_Income": "Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Division 58 paragraph 58-5(5)(d) section 58-65 section 58-75 section 58-85 paragraph 58-85(1)(a) paragraph 58-85(1)(b) paragraph 58-85(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/259", "Subject_References": "Decline in value Depreciating assets Asset sale situation Privatised assets", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200786", "Unmatched_Content": "This ATO ID was amended by adding 'the Commonwealth, a State, a Territory or' to the description of an entity that is exempt for Division 58 purposes. This reflects a change to the law that was introduced by Act No 78 of 2007, effective from 1 July 2005. | Keywords Decline in value Depreciating assets Asset sale situation Privatised assets"}
{"ATO_ID_Number": "ATO ID 2006/260", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: cost - section 73BA depreciating asset - full-scale test model - refinement expenses", "Issue": "Does the taxpayer's capital expenditure on refining the full-scale test model of their 'section 73BA depreciating asset' form part of the asset's cost for the purpose of working out the taxpayer's 'notional Division 40 deduction' under section 73BC of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The taxpayer's capital expenditure on refining the full-scale test model of their 'section 73BA depreciating asset' does form part of the asset's cost because the expenditure constitutes a second element of cost of the asset under section 40-190 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "The taxpayer is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936, that carries on 'research and development activities' (R&D activities) as defined in subsection 73B(1). The taxpayer has registered its R&D activities in the manner contemplated by subsection 73BD(1) of the ITAA 1936. The subject matter of the taxpayer's R&D activities is an item of equipment capable of performing a specific manufacturing process. The taxpayer's R&D activities encompass not only designing and developing the item of equipment but also testing the performance of the asset against the requisite specifications. As an integral part of the R&D activities, the taxpayer built a full-scale model of the item of equipment for the purpose of testing the asset's capacity to perform the specific manufacturing process at a commercially viable level. The test model is not an item of trading stock of the taxpayer and the expenditure on the test model does not represent 'feedstock expenditure' within the meaning of that term in subsection 73B(1) of the ITAA 1936. The test model was constructed after 29 January 2001 and no deduction under subsection 73B(15AA) of the ITAA 1936 is allowable in relation to it (see subsection 73B(15AAAA) of the ITAA 1936). The test model is a 'section 73BA depreciating asset' as defined in section 73BB of the ITAA 1936 and the taxpayer started to hold that asset from when they first built it. However, testing revealed that the model did not operate at the requisite level and required some refinement of its functionality. Capital expenditure on labour and materials was incurred for this purpose. The process of refining the test model's functionality involved continuous and various modification, adaptation and retesting over a further period of about 18 months. While this process resulted in the removal of some components from the test model and their replacement with other components, neither the functionality nor the physicality of the test model was altered to any material extent. Following this period of refinement, the taxpayer was satisfied that the test model was capable of performing the required functionality for the specific manufacturing process at a commercially viable level. The taxpayer then proceeded to replicate and market the item of equipment.", "Reasons_for_Decision": "Summary: Subsection 73BA(2) of the ITAA 1936 provides a deduction to an 'eligible company' for a 'section 73BA depreciating asset' if the company has a 'notional Division 40 deduction' for the asset. As stated in the facts, the taxpayer is an 'eligible company', the full-scale test model is a 'section 73BA depreciating asset' and the taxpayer started to hold the asset from when they first built it. An 'eligible company' has a 'notional Division 40 deduction' for a 'section 73BA depreciating asset' if, taking into account certain assumptions, it would be entitled to a deduction for the asset under section 40-25 of the ITAA 1997. One of those assumptions is contained in subsection 73BC(2) of the ITAA 1936 and requires the asset to be used for the purpose of carrying on the eligible company's R&D activities. As stated in the facts, the taxpayer satisfies this requirement. Deductions under section 40-25 of the ITAA 1997 are worked out by reference to, inter alia, the concept of cost in Subdivision 40-C of the ITAA 1997. It follows that a deduction under section 73BA of the ITAA 1936 is also worked out by reference to the concept of cost in Subdivision 40-C of the ITAA 1997. Although not relevant here, another assumption in subsection 73BC(4) of the ITAA 1936 requires certain 'section 73BA depreciating asset expenditure' that would otherwise form part of cost under Subdivision 40-C of the ITAA 1997 to be ignored or treated in some other way. Under Subdivision 40-C of the ITAA 1997, the cost of a depreciating asset consists of two elements (section 40-175 of the ITAA 1997). The first element of cost is worked out as at the time when the holder of the asset starts to hold it (section 40-180 of the ITAA 1997) while the second element of cost is worked out by the holder after that time (section 40-190 of the ITAA 1997). As the taxpayer started to hold the test model from when it was first built and the capital expenditure to refine it was incurred after that time, the expenditure does not form part of the first element of cost of the test model. The second element of cost of a depreciating asset is the amount a holder of the asset is taken to have paid under section 40-185 of the ITAA 1997 for each economic benefit that has contributed to bringing the asset to its present condition and location from time to time since they started to hold the asset. The taxpayer's capital expenditure on refining the test model did not materially alter the asset's functionality or physicality. Therefore, the expenditure did not create a new or separate depreciating asset. The expenditure merely improved the existing functionality of the existing test model to a commercially viable level. An improvement of this nature impacts on the 'condition' of the existing test model. The condition of a depreciating asset refers to its form, state or order. Accordingly, the taxpayer's capital expenditure on refining the full-scale test model of their 'section 73BA depreciating asset' does form part of the asset's cost for the purpose of working out the taxpayer's 'notional Division 40 deduction' under section 73BC of the ITAA 1936 because the expenditure constitutes a second element of cost of the asset pursuant to section 40-190 of the ITAA 1997.", "Date_of_Decision": "11 August 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(15AA) subsection 73B(15AAAA) section 73BA subsection 73BA(2) section 73BB section 73BC subsection 73BC(2) subsection 73BC(4) subsection 73BD(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/259", "Subject_References": "Cost of a depreciating asset Depreciating assets Depreciating asset - section 73BA Research and development plant Second element of cost Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006260", "Unmatched_Content": "Keywords Cost of a depreciating asset Depreciating assets Depreciating asset - section 73BA Research and development plant Second element of cost Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2006/275", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: second element of cost - balancing adjustment event - reasonably attributable costs", "Issue": "Does the taxpayer's capital expenditure on demolishing and removing their timber mill buildings form part of the second element of cost of those assets under paragraph 40-190(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure on demolishing and removing their timber mill buildings does form part of the second element of cost of those assets under paragraph 40-190(2)(b) of the ITAA 1997 because the timber mill buildings are depreciating assets to which Division 40 of the ITAA 1997 applies and the expenditure is reasonably attributable to a balancing adjustment event occurring for those assets.", "Facts": "The taxpayer ceased to carry on their business of milling timber for a taxable purpose. The taxpayer incurred capital expenditure on demolishing and removing their timber mill buildings as part of various activities to return the land to its natural state. The expenditure was incurred after 30 June 2005.", "Reasons_for_Decision": "Summary: Timber mill buildings are depreciating assets within the meaning of that term in section 40-30 of the ITAA 1997. However, Division 40 of the ITAA 1997 does not apply to depreciating assets that are capital works if the taxpayer can deduct, or could deduct in certain specified circumstances, amounts for the works under Division 43 of the ITAA 1997 (subsection 40-45(2) of the ITAA 1997). While timber mill buildings are capital works within the meaning of that term in section 43-20 of the ITAA 1997, amounts cannot generally be deducted for them under Division 43 of the ITAA 1997 because capital expenditure in respect of their construction or acquisition is specifically excluded from construction expenditure upon which the deduction is based (subparagraphs 43-70(2)(f)(vi) and 43-70(2)(fa)(iii) of the ITAA 1997). It follows that the taxpayer's timber mill buildings are depreciating assets to which Division 40 of the ITAA 1997 applies. Paragraph 40-190(2)(b) of the ITAA 1997 includes in the second element of cost of a depreciating asset capital expenditure that is reasonably attributable to a balancing adjustment event occurring for the asset. When the taxpayer demolished and removed their timber mill buildings, a balancing adjustment event occurred for those assets under paragraph 40-295(1)(a) of the ITAA 1997 because the assets ceased to exist and the taxpayer stopped holding them. The cost of demolishing and removing the timber mill buildings is directly and integrally attributable to the balancing adjustment event that occurred for the assets. Accordingly, the taxpayer's capital expenditure on demolishing and removing their timber mill buildings does form part of the second element of cost of those assets under paragraph 40-190(2)(b) of the ITAA 1997 because the timber mill buildings are depreciating assets to which Division 40 of the ITAA 1997 applies and the expenditure is reasonably attributable to the balancing adjustment occurring for those assets.", "Date_of_Decision": "15 August 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-30 subsection 40-45(2) paragraph 40-190(2)(b) paragraph 40-295(1)(a) Division 43 section 43-20 subparagraph 40-70(2)(f)(vi) subparagraph 43-70(2)(fa)(iii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/276", "Subject_References": "Balancing adjustment event Depreciating assets Second element of cost Timber industry Timber mill buildings Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006275", "Unmatched_Content": "Keywords Balancing adjustment event Depreciating assets Second element of cost Timber industry Timber mill buildings Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2006/328", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: cost - 'section 73BA depreciating asset' - new full-scale test model - re-use of components from earlier test model", "Issue": "Does the cost of the new full-scale test model of the taxpayer's 'section 73BA depreciating asset' include, pursuant to subsection 40-180(3) of the Income Tax Assessment Act 1997 (ITAA 1997), the cost attributed to those components of an earlier test model that have been re-used in building the new test model?", "Decision": "Yes. The first element of cost of the new test model does include, pursuant to subsection 40-180(3) of the ITAA 1997, the cost attributed to those components of the earlier test model that have been re-used in building the new test model.", "Facts": "The taxpayer is an 'eligible company', as defined in subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936), that carries on 'research and development activities' (R&D activities) as defined in subsection 73B(1). The taxpayer has registered its R&D activities in the manner contemplated by subsection 73BD(1) of the ITAA 1936. The subject matter of the taxpayer's R&D activities is an item of equipment capable of performing a specific manufacturing process. The taxpayer's R&D activities encompass not only designing and developing the item of equipment but also testing the performance of the asset against the requisite specifications. As an integral part of the R&D activities, the taxpayer built a full-scale model of the item of equipment for the purpose of testing the asset's capacity to perform the specific manufacturing process at a commercially viable level. The test model is not an item of trading stock of the taxpayer and the expenditure on the test model does not represent 'feedstock expenditure' within the meaning of that term in subsection 73B(1) of the ITAA 1936. The test model was constructed after 29 January 2001 and no deduction under subsection 73B(15AA) of the ITAA 1936 is allowable in relation to it (see subsection 73B(15AAAA) of the ITAA 1936). However, testing revealed that the existing model could not operate in the manner required and that a major revision of the equipment's design and functionality was needed to successfully continue with the R&D activities. The existing test model is a 'section 73BA depreciating asset' as defined in section 73BB of the ITAA 1936 and the taxpayer started to hold that asset from when they first built it. For the period of time that the taxpayer utilised the asset for monitoring and testing purposes in its R&D activities, deductions under subsection 73BA(2) of the ITAA 1936 have been allowed. In view of the major revision required, any further use of the existing test model was abandoned in favour of building a completely new test model. This caused a balancing adjustment event to occur for the existing test model under paragraph 40-295(1)(b) of the ITAA 1997. As many of the components of the existing test model were of significant value, the existing test model was dismantled and those components of value retained and stored. Other less valuable components were discarded. Some of the components retained from the earlier test model were ultimately used as components in the new test model even though both the functionality and physicality of the new test model were materially different to the earlier test model. The new test model is also a 'section 73BA depreciating asset' which the taxpayer started to hold from when they first built it. As with the earlier test model, the taxpayer's R&D activities encompass testing the performance of the new test model against the revised specifications. When completed, the new test model will also not be an item of trading stock of the taxpayer and the expenditure on it will not represent 'feedstock expenditure' within the meaning of that term in subsection 73B(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subsection 73BA(2) of the ITAA 1936 provides a deduction to an 'eligible company' for a 'section 73BA depreciating asset' if the company has a 'notional Division 40 deduction' for the asset. As stated in the facts, the taxpayer is an 'eligible company', the new test model is a 'section 73BA depreciating asset' and the taxpayer started to hold the asset from when they first built it. An 'eligible company' has a 'notional Division 40 deduction' for a 'section 73BA depreciating asset' if, taking into account certain assumptions, it would be entitled to a deduction for the asset under section 40-25 of the ITAA 1997. One of those assumptions is contained in subsection 73BC(2) of the ITAA 1936 and requires the asset to be used for the purpose of carrying on the eligible company's R&D activities. As stated in the facts, the taxpayer satisfies this requirement. Deductions under section 40-25 of the ITAA 1997 are worked out by reference to, inter alia, the concept of cost in Subdivision 40-C of the ITAA 1997. It follows that a deduction under section 73BA of the ITAA 1936 is also worked out by reference to the concept of cost in Subdivision 40-C (subject to certain assumptions in subsection 73BC(4) of the ITAA 1936 that are not relevant here). The cost of a depreciating asset consists of two elements (section 40-175 of the ITAA 1997). The first element of cost is worked out as at the time when the holder of the asset starts to hold it (section 40-180 of the ITAA 1997) while the second element of cost is worked out by the holder after that time (section 40-190 of the ITAA 1997). As the components from the earlier test model were used as components in the new test model and the taxpayer started to hold the new test model from when it was first built, the first element of cost of the new test model includes the cost of the components re-used. As stated in the facts, abandoning any further use of the earlier test model caused a balancing adjustment event to occur for that asset under paragraph 40-295(1)(b) of the ITAA 1997 because the taxpayer stopped using the asset, or having it installed ready for use, for any purpose and expected never to use it, or install it ready for use, again. The termination value of the asset under this balancing adjustment event is prescribed by item 1 of the table in subsection 40-300(2) of the ITAA 1997 to be the market value of the asset when the taxpayer stopped using it or having it installed ready for use. Even though a balancing adjustment event occurred for the earlier test model, the taxpayer continued to hold it. In these circumstances, the first element of cost of the earlier test model is effectively re-set by item 3 of the table in subsection 40-180(2) of the ITAA 1997 to be the asset's termination value at the time of the balancing adjustment event (see also subsections 40-285(3) and (4) of the ITAA 1997. When the earlier test model was dismantled, it was split into two or more assets in the manner described in section 40-115 of the ITAA 1997 (although the split did not cause a balancing adjustment event to occur - see subsection 40-295(3) of the ITAA 1997). The cost of each separate asset is prescribed by item 1 of the table in subsection 40-180(2) of the ITAA 1997 to be the amount worked out under section 40-205 of the ITAA 1997. Section 40-205 states that the first element of cost of each separate asset includes a reasonable proportion of the original asset's adjustable value just before it was split. The adjustable value of the original asset at that time is, as stated earlier, the cost prescribed by item 3 of the table in subsection 40-180(2) (see also section 40-85 of the ITAA 1997 for the meaning of adjustable value of a depreciating asset at a particular time). Section 40-205 provides a mechanism for attributing the adjustable value of a depreciating asset to the other assets into which it is split even though the split assets may not, of themselves, be depreciating assets. The taxpayer built the new test model from a variety of components - some were purchased from other parties and some of those retained from the earlier test model were re-used. Subsection 40-180(3) of the ITAA 1997 includes in the first element of cost of a depreciating asset amounts the holder of the asset is taken to have paid in relation to starting to hold the asset if those amounts are directly connected with holding the asset. The components of the earlier test model that are re-used in building the new test model are, clearly, directly connected with starting to hold the new test model. The cost of those components is taken, for the purposes of subsection 40-180(3), to be the amount attributed to them by the combined operation of item 1 of the table in subsection 40-180(2) and section 40-205 of the ITAA 1997. Accordingly, the first element of cost of the new test model includes, pursuant to subsection 40-180(3) of the ITAA 1997, the cost attributed to the components of the earlier test model that have been re-used in building the new test model.", "Date_of_Decision": "25 August 2006", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(15AA) subsection 73B(15AAAA) section 73BA subsection 73BA(2) subsection 73BA(2) section 73BB subsection 73BC(2) subsection 73BC(4) subsection 73BD(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/327", "Subject_References": "Cost of a depreciating asset Depreciating assets Depreciating asset - section 73BA First element of cost Research and development plant Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006328", "Unmatched_Content": "Keywords Cost of a depreciating asset Depreciating assets Depreciating asset - section 73BA First element of cost Research and development plant Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2005/197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: cost - novation of luxury car lease immediately following termination of earlier novation", "Issue": "Is the first element of cost of a luxury car reduced to the car limit under section 40-230 of the Income Tax Assessment Act 1997 (ITAA 1997) if, following the early termination of a novation arrangement with one employer, the employee immediately novated the car lease to a new employer?", "Decision": "Yes. If the car is a luxury car at the time the car lease is novated to the new employer the first element of cost of the car for the new employer is reduced to the car limit under section 40-230 of the ITAA 1997.", "Facts": "A luxury car is provided to the employee via a novated lease. The car cost $100,000 when new. The first employer commenced the lease of the car on 1 July 2003. The employee terminated their employment with this employer on 30 June 2004. At this time, the amount taken to be the cost of acquisition of the car by the lessor from the first employer under former subsection 42A-105(3) of former Schedule 2E to the Income Tax Assessment Act 1936 (ITAA 1936), was $80,000 (being the market value on the termination of the lease as required by former paragraph 42A-105(3)(b) of former Schedule 2E to the ITAA 1936). The employee commenced employment with the new employer on 1 July 2004, which is also the date the luxury car lease was novated to the new employer. The luxury car limit for the 2004-05 income year is $57,009. The employee remains with the second employer until the remaining two years of the lease have expired.", "Reasons_for_Decision": "Summary: Balancing adjustment event - first employer Former Division 42A of former Schedule 2E to the ITAA 1936 applies to the lease of a luxury car. Ordinarily the employee, as the lessee of a luxury car, is the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. However, under a fully novated lease, the employer is the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. In that case, the employer is the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. When the novation arrangement was terminated because the employee ceased being employed by the first employer, the employer stopped being the lessee of the car for the purposes of former Division 42A of former Schedule 2E to the ITAA 1936. Consequently, the employer stopped holding the car because item 1 of the table in section 40-40 of the ITAA 1997 no longer applied. At this time the lessor again becomes the holder of the car. This is because, on early termination of the novation arrangement the car is taken to have been disposed of by the lessee by way of sale to the lessor and to have been acquired by the lessor on the early termination of the lease. The cost of acquisition by the lessor is taken to have been the amount worked out using the formula in former subsection 42A-105(5) of former Schedule 2E to the ITAA 1936 or the market value, if it is impractical to use the formula. In this arrangement, this amount is $80,000. Note that there is not a formula under sub-section 242-90(3) of ITAA 1997 (which replaced subsection 42A-105(5) of the ITAA 1936). The cost of acquisition by the lessor is the market value of the car at the time the lease ended. In addition, the employee also became the lessee of the luxury car at that time and started to hold the car under item 1 of the table in section 40-40 of the ITAA 1997. Result of novation to new employer and cost to that employer Taxation Ruling TR 1999/15, at paragraphs 25 to 29, explains that the new novation is a new lease. The second employer becomes the lessee after entering into the lease and also becomes the holder of the car under item 1 of the table in section 40-40 of the ITAA 1997. Where the new novated lease is a luxury car lease, the cost will be the base value that the second employer uses when working out its decline in value under section 40-70 of the ITAA 1997. The cost of a depreciating asset that is held consists of two elements. The first element is worked out as at the time when you began to hold the asset. In this case, it will be the amount that the employer is taken to have paid to hold the asset under section 40-185 of the ITAA 1997. Under item 1 of the table in subsection 40-185(1) of the ITAA 1997, the cost is the amount you pay to hold a depreciating asset or to receive a benefit. The note accompanying subsection 40-185(1) of the ITAA 1997 makes it clear that the amount you pay under item 1 includes amounts taken to be the consideration for the acquisition of the car under former section 42A-20 of former Schedule 2E to the ITAA 1936 (or from 1 July 2010, subsection 242-90(3) of the ITAA 1997). Because the new novation occurs immediately after the termination of the first novated lease the amount taken to be paid by the lessor when that luxury car lease was terminated under former subsection 42A-105(3) of former Schedule 2E to the ITAA 1936 will be the amount to be used for the purposes of former section 42A-20 of former Schedule 2E to the ITAA 1936. If the intervening period between the termination of the first novation and the new novation were longer, the taxation effects of the intervening transactions (e.g. the balancing adjustment event that occurs because of the employee's novation to the new employer) may have to be taken into account. The amount taken to have been received under former 42A-105(3) of former Schedule 2E to the ITAA 1936 for the purposes of this example was $80,000. This is the amount that the second employer is taken to have paid to hold the car from 1 July 2004. The amount of $80,000 is the first element of cost of the car for the second employer. It exceeds the car limit for that year and is therefore reduced (by the operation of section 40-230 of the ITAA 1997) to that limit, namely $57,009.", "Date_of_Decision": "7 June 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 section 40-70 section 40-185 subsection 40-185(1) subsection 40-230 Div 242 section 242-20 subsection 242-90(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/15 | Taxation Determination TD 93/142", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/760", "Subject_References": "Balancing adjustment calculation Car limit Cost adjustments Cost of a depreciating asset Hold a depreciating asset Luxury car lease Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005197", "Unmatched_Content": "Legislation repealed on 1 July 2010. Added 'former' to references to the repealed law where required and inserted New Legislative references | Reasons for Decision Paragraph 5 | Minor changes to existing content. Addition of a Note distinguishing the replacement provision from the repealed provision in relation to a cost formula | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/15 Taxation Determination TD 93/142 | Keywords Balancing adjustment calculation Car limit Cost adjustments Cost of a depreciating asset Hold a depreciating asset Luxury car lease Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/116", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: cost of depreciating asset - motor home construction", "Issue": "Do all of the taxpayer's costs of constructing a motor home form part of the first element of cost of a depreciating asset they hold under section 40-180 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's cost of constructing a motor home forms part of the first element of cost of a depreciating asset under section 40-180 of the ITAA 1997.", "Facts": "The taxpayer carries on the business of constructing motor homes and renting them on completion. To construct the motor homes the taxpayer acquires a cab chassis and employs a third party to construct the home unit. Once this is done the taxpayer then incurs electrical, mechanical, fibre glassing, lighting and plumbing costs to affix the home unit to the cab chassis.", "Reasons_for_Decision": "Summary: The cost of a depreciating asset consists of both first and second elements (section 40-175 of the ITAA 1997). The first element of cost is worked out as at the time you begin to hold the asset. Generally the first element of cost is the amount paid, or taken to have been paid, to hold the asset (sections 40-180 and 40-185 of the ITAA 1997). The second element of cost is worked out after you have begun to hold the asset and includes the amount you are taken to have paid for economic benefits that have contributed to bringing the asset to its present condition and location (section 40-190 of the ITAA 1997). The relevant depreciating asset in this case is the completed motor home. The means by which a taxpayer may hold a depreciating asset may vary. In this case the taxpayer holds the motor home through having constructed it. The expenses that are incurred by the taxpayer to construct the motor home are first elements of cost because they are amounts that the taxpayer has paid to hold the motor home.", "Date_of_Decision": "22 January 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 40-180 section 40-185 section 40-190", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/11 | Draft Taxation Ruling TR 2017/D1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cost of a depreciating asset First element of cost Second element of cost", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004116", "Unmatched_Content": "This ATO ID has been amended to clarify that there may be some other second element costs in addition to the costs referred to in the ATO ID. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Related Public Rulings (including determinations | Remove Taxation Determination TD 2002/5 as it has been withdrawn and replace with TR 2017/D1 | Related Public Rulings (including Determinations) Taxation Ruling TR 94/11 Draft Taxation Ruling TR 2017/D1 | Keywords Cost of a depreciating asset First element of cost Second element of cost"}
{"ATO_ID_Number": "ATO ID 2004/493", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset-cost - expenditure incurred to acquire a patent licence", "Issue": "Does the capital expenditure the taxpayer incurred to acquire the licence to a patent form part of the cost of a depreciating asset pursuant to section 40-185 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The capital expenditure that the taxpayer incurred to acquire the licence to a patent does form part of the cost of a depreciating asset pursuant to section 40-185 of the ITAA 1997.", "Facts": "The taxpayer has acquired a licence for a patent, from the patent holder, for substantial consideration under a Patent Licence Agreement. The agreement allows the taxpayer an exclusive licence to enjoy, commercialise and exploit the patents, trade secrets, licensors' improvements and to manufacture, have manufactured, use, market and sell the products. The agreement also allows the taxpayer to grant sublicences.", "Reasons_for_Decision": "Summary: The rights a licensee of a patent holds under a Commonwealth patent is an item of intellectual property pursuant to the definition of that term in subsection 995-1(1) of the ITAA 1997. An item of intellectual property is a depreciating asset pursuant to the definition of that term in section 40-30 of the ITAA 1997. The costs of a depreciating asset include capital amounts that are taken to have been paid to hold the asset (section 40-185 and 40-220 of the ITAA 1997).", "Date_of_Decision": "7 June 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-30 section 40-185 section 40-220 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/810 | ATO ID 2002/812 | ATO ID 2002/832", "Subject_References": "Intellectual property rights Patents Depreciating assets Cost of a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004493", "Unmatched_Content": "Keywords Intellectual property rights Patents Depreciating assets Cost of a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2004/887", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financial Sector (Business Transfer and Group Restructure) Act 1999: transfer of a depreciating asset", "Issue": "Where a credit union business is voluntarily transferred to another eligible credit union business, pursuant to the provisions of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (FSBTGR Act) what is the cost the receiving body is taken to have paid in respect of a depreciating asset at the effective date of transfer, for the purposes of Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The receiving body is taken to have paid, for the purposes of Division 40 of the ITAA 1997, an amount equal to the adjustable value of the asset at the effective date of transfer.", "Facts": "Entity A, the transferring body, has transferred its business to Entity B, the receiving body, in accordance with the FSBTGR Act. Both entities are authorised deposit-taking institutions for the purposes of the Banking Act 1959. The parties satisfied all of the relevant procedural and substantive provisions determined by the Australian Prudential Regulation Authority (APRA), including preparation of a statement under section 20 of the FSBTGR Act (section 20 statement). The section 20 statement provided that the consequences for parties of the transfer of assets and liabilities under the FSBTGR Act are taken to be the same as if the transfer involved a sale of the assets of the transferring body to the receiving body. APRA approved the transfer of business and issued a certificate of transfer pursuant to section 18 of the FSBTGR Act.", "Reasons_for_Decision": "Summary: The FSBTGR Act was enacted to enhance stability in the Australian financial sector by facilitating the merging of eligible entities and otherwise unviable institutions. Under this Act, APRA, in approving the transfer, is required to have regard to the interests of the members of such entities and the financial sector as a whole. The FSBTGR Act empowers APRA to approve, and in some circumstances to compel amalgamations of eligible entities for the purpose of enhancement of the Australian financial sector. For practical purposes, the aim of the FSBTGR Act is to enable APRA to provide certainty that an endorsed transfer is effective at law to ensure that the rights and liabilities of the transferring entity survive in the new entity. This certainty is achieved by APRA issuing a certificate of transfer pursuant to section 18 of the FSBTGR Act stating that the transfer is to take effect on the date specified. Broadly, section 22 of the FSBTGR Act provides that when APRA issues a certificate of transfer, the receiving body becomes the successor in law of the transferring body. In particular, all the assets and liabilities of the transferring body become assets and liabilities of the receiving body without any additional formality. Further, the totality of duties, obligations, immunities, rights and privileges applying to the transferring body apply to the receiving body. Subject to the relevant circumstances of each case of voluntary total transfer of business sanctioned under the FSBTGR Act the Commissioner will aim to administer the tax law in such a way that it complements the operation of the FSBTGR Act and promotes the stated objectives of the legislation. In practice this will be accomplished by adopting adjustments on the basis of acceptable valuations.", "Date_of_Decision": "26 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of business Depreciating assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004887", "Unmatched_Content": "This ATO ID is currently under review. | This ATO ID was amended by replacing references to the Financial Sector (Transfers of Business) Act 1999 with references to the Financial Sector (Business Transfer and Group Restructure) Act 1999. | Keywords Acquisition of business Depreciating assets"}
{"ATO_ID_Number": "ATO ID 2003/220", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: first element of cost (no amount paid) - amalgamation of incorporated associations", "Issue": "Is the amount taken to have been paid under Item 1 of the table in paragraph 40-185(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) nil if, on the amalgamation of two existing incorporated associations into one new incorporated association under the Associations Incorporation Act 1981 (Qld) (AIA (Qld)), no amount is paid by the new association for the transfer of the old associations' assets to it?", "Decision": "Yes. The amount taken to have been paid under Item 1 of the table in paragraph 40-185(1)(b) of the ITAA 1997 is nil if no amount is paid by the new association for the transfer of the old associations' depreciating assets to it. However, other items in the table in paragraph 40-185(1)(b) of the ITAA 1997 may also apply.", "Facts": "A and B are unrelated incorporated associations under the AIA (Qld). A and B amalgamated under Part 9, Division 2 of the AIA (Qld) to form C, a new and legally separate incorporated association. A certificate of incorporation issued to C as a result of the amalgamation. The members of both A and B agreed to amalgamate from a certain date and to adopt their existing respective associations' common rules and constitution for C. The members of A and B also agreed to transfer or donate their respective associations' assets to C.", "Reasons_for_Decision": "Summary: Section 79 of the AIA (Qld) defines an 'old association' to be an incorporated association that with one or other incorporated associations apply to form a new association. A 'new association' is defined in section 79 of the AIA (Qld) to be an incorporated association that is incorporated as a result of an application to amalgamate by at least two old associations. The legislation governing the amalgamation of associations does not provide for the continuation of the amalgamating entities (that is, A and B) within the form of the new entity (that is, C). The amalgamation is effected by the incorporation of a new association. The amalgamation of A and B to form C causes a balancing adjustment event to occur under paragraph 40-295(1)(a) of the ITAA 1997 for the depreciating assets held by A and B. The amalgamation also has the effect that C starts to hold the assets as the new owner of them (Item 10 of the table in section 40-40 of the ITAA 1997). The first element of cost of a depreciating asset is worked out as at the time when the asset starts to be held. In certain circumstances, the cost is the amount specified in section 40-180 of the ITAA 1997. Otherwise, the cost is worked out under section 40-185 of the ITAA 1997 (subsection 40-180(1) of the ITAA 1997). As no item in the table in subsection 40-180(2) of the ITAA 1997 applies, the cost is worked out under section 40-185 of the ITAA 1997. The cost under section 40-185 of the ITAA 1997 is taken to be the greater of the sum of the applicable amounts set out in paragraphs 40-185(1)(a) or (b) of the ITAA 1997. Item 1 of the table in paragraph 40-185(1)(b) of the ITAA 1997 includes in cost an amount paid to hold a depreciating asset. Section 86 of the AIA (Qld) provides that upon the incorporation of a new association as a result of the amalgamation of old associations, the assets and liabilities of the old associations become the assets and liabilities of the new association. This means that no amount is paid by C for the transfer of the depreciating assets from A and B. As no amount is paid by C to hold the assets, the cost under Item 1 of the table in paragraph 40-185(1)(b) of the ITAA 1997 is nil. However, other items in the table in paragraph 40-185(1)(b) of the ITAA 1997 may also apply.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 section 40-180 subsection 40-180(1) subsection 40-180(2) section 40-185 paragraph 40-185(1)(a) paragraph 40-185(1)(b) paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/218 | ATO ID 2003/219 | ATO ID 2003/221", "Subject_References": "Balancing adjustment event Capital allowances CoE Depreciating assets First element of cost Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003220", "Unmatched_Content": "The amendment renders the ATO ID technically correct. | Keywords Balancing adjustment event Capital allowances CoE Depreciating assets First element of cost Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2003/221", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: first element of cost (increase in liability) - amalgamation of incorporated associations", "Issue": "Does Item 2 of the table in paragraph 40-185(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) apply in working out the first element of cost of depreciating assets started to be held by a new incorporated association on the amalgamation of two existing incorporated associations under the Associations Incorporation Act 1981 (Qld) (AIA (Qld))?", "Decision": "Yes. Item 2 of the table in paragraph 40-185(1)(b) of the ITAA 1997 does apply in working out the cost of depreciating assets started to be held by a new incorporated association on the amalgamation of two existing incorporated associations under the AIA (Qld).", "Facts": "A and B are unrelated incorporated associations under the AIA (Qld). A and B amalgamated under Part 9, Division 2 of the AIA (Qld) to form C, a new and legally separate incorporated association. A certificate of incorporation issued to C as a result of the amalgamation. The members of both A and B agreed to amalgamate from a certain date and to adopt their existing respective association's common rules and constitution for C. The members of A and B also agreed to transfer or donate their respective association's assets to C.", "Reasons_for_Decision": "Summary: Section 79 of the AIA (Qld) defines an 'old association' to be an incorporated association that with one or other incorporated associations apply to form a new association. A 'new association' is defined in section 79 to be an incorporated association that is incorporated as a result of an application to amalgamate by at least two old associations. The legislation governing the amalgamation of associations does not provide for the continuation of the amalgamating entities (that is, A and B) within the form of the new entity (that is, C). The amalgamation is effected by the incorporation of a new association. The amalgamation of A and B to form C causes a balancing adjustment event to occur under paragraph 40-295(1)(a) of the ITAA 1997 for the depreciating assets held by A and B. The amalgamation also has the effect that C starts to hold the assets as the new owner of them (Item 10 of the table in section 40-40 of the ITAA 1997). The first element of cost of a depreciating asset is worked out as at the time when the asset starts to be held. In certain circumstances, the cost is the amount specified in section 40-180 of the ITAA 1997. Otherwise, the cost is worked out under section 40-185 of the ITAA 1997 (subsection 40-180(1) of the ITAA 1997). As no item in the table in subsection 40-180(2) of the ITAA 1997 applies, the cost is worked out under section 40-185 of the ITAA 1997. The cost under section 40-185 of the ITAA 1997 is taken to be the greater of the sum of the applicable amounts set out in paragraphs 40-185(1)(a) or (b) of the ITAA 1997. Item 2 of the table in paragraph 40-185(1)(b) of the ITAA 1997 includes in cost the amount of the liability (or increase in liability) incurred (or increased) to hold a depreciating asset. Section 86 of the AIA (Qld) provides that upon the incorporation of a new association as a result of the amalgamation of old associations, the assets and liabilities of the old associations become the assets and liabilities of the new association. This means that in addition to starting to hold the assets of A and B, C assumes the liabilities of the old associations. In the present case, the liabilities referred to in Item 2 of paragraph 40-185(1)(b) of the ITAA 1997 encompass all of the liabilities assumed under the amalgamation. In this case, all of the liabilities assumed relate to all of the assets transferred, including depreciating assets. A reasonable attribution of the total amount of all of the liabilities assumed needs to be made to the depreciating assets. The amount so attributed is taken, under Item 2 of paragraph 40-185(1)(b) of the ITAA 1997 (see section 40-195 of the ITAA 1997), to have been paid to hold the depreciating assets. The relative market value of all the assets transferred is a reasonable basis on which to attribute the liabilities to the depreciating assets.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 section 40-180 subsection 40-180(1) subsection 40-180(2) section 40-185 paragraph 40-185(1)(a) paragraph 40-185(1)(b) section 40-195 section 40-295 paragraph 40-295(1)(a)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 98/24", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/218 | ATO ID 2003/219 | ATO ID 2003/220", "Subject_References": "Balancing adjustment event Capital allowances CoE Depreciating assets First element of cost Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003221", "Unmatched_Content": "Include paragraph 40-295(1)(a) | Include the words \"of the ITAA 1997\" | Related Public Rulings (including Determinations) Taxation Determination TD 98/24 | Keywords Balancing adjustment event Capital allowances CoE Depreciating assets First element of cost Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2003/514", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: travel expenses associated with modifying a depreciating asset - second element of cost", "Issue": "Does capital expenditure incurred by the holder of a depreciating asset in travelling interstate to have a depreciating asset modified, form part of the second element of cost of the asset under subsection 40-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The capital expenditure incurred on an interstate trip to have the depreciating asset modified forms part of the second element of cost under subsection 40-190(2) of the ITAA 1997.", "Facts": "A taxpayer purchased a motor vehicle overseas and had it imported to Australia. The taxpayer incurred expenditure to travel interstate to have the vehicle modified to comply with Australian standards. The vehicle is used to transport heavy and bulky equipment to worksites as required in the course of the taxpayer's business.", "Reasons_for_Decision": "Summary: The cost of a depreciating asset consists of both the first and second elements (section 40-175 of the ITAA 1997). The first element of cost is worked out at the time you begin to hold the asset. Generally the first element of cost is the amount paid, or taken to have been paid, to hold the asset (sections 40-180 and 40-185 of the ITAA 1997). The second element of cost is worked out after the taxpayer has begun to hold the asset. This element includes capital expenditure incurred in bringing the asset to its present condition and location (section 40-190 of the ITAA 1997). The costs incurred by the taxpayer in travelling interstate to have the motor vehicle modified are wholly directed at putting the vehicle in a position where it could be used to transport heavy and bulky equipment to work sites in the course of the taxpayer's business. The expenditure has resulted in an improvement to the vehicle's condition, and forms part of the second element of cost under subsection 40-190(2) of the ITAA 1997.", "Date_of_Decision": "19 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-175 section 40-190 subsection 40-190(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/884 | ATO ID 2002/920 | ATO ID 2003/515 | ATO ID 2003/516", "Subject_References": "Cost of a depreciating asset Second element of cost Uniform capital allowances system", "Case_References": "", "Other_References": "Guide to Depreciating Assets", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003514", "Unmatched_Content": "Keywords Cost of a depreciating asset Second element of cost Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2003/515", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: motor vehicle accessories - second element of cost", "Issue": "Does capital expenditure incurred by a taxpayer in acquiring and attaching a towbar and a specially designed roof rack to a motor vehicle, form part of the second element of cost under subsection 40-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Capital expenditure incurred in acquiring and attaching a towbar and a specially designed roof rack to a vehicle does form part of the motor vehicle's second element of cost under subsection 40-190(2) of the ITAA 1997.", "Facts": "A taxpayer incurred expenditure to acquire and attach a towbar and a specially designed roof rack to a motor vehicle they hold, to enable it to be used more efficiently in transporting heavy and bulky parts and equipment to work sites as required in the course of the taxpayer's business. These improvements were done subsequent to the vehicle being held. The towbar and roof racks are bolted to the motor vehicle and the taxpayer has no intention of removing them. The taxpayer bought the items with the express purpose of permanently attaching them to that particular vehicle and as the vehicle is imported, the specifications of the items would prohibit the use of the items on other vehicles. If the vehicle was to be disposed of, the towbar and roof racks would not be removed or sold separately. The ability of the vehicle to perform its required function of transporting parts and equipment to work sites would be severely limited if the items were to be removed as they are an integral part of the vehicle's hauling capacity.", "Reasons_for_Decision": "Summary: The cost of a depreciating asset consists of both the first and second elements (section 40-175 of the ITAA 1997). The first element of cost is worked out at the time you begin to hold the asset. Generally the first element of cost is the amount paid, or taken to have been paid, to hold the asset (sections 40-180 and 40-185 of the ITAA 1997). The second element of cost is worked out after the taxpayer has begun to hold the asset. This element includes capital expenditure incurred in bringing the asset to its present condition and location (section 40-190 of the ITAA 1997). The capital expenditure incurred by the taxpayer in the acquisition and attaching of the towbar and roof rack to the motor vehicle forms part of the second element of cost under subsection 40-190(2) of the ITAA 1997, as it brings the vehicle to its present condition. These additions enhance the vehicle's capacity to transport equipment and parts that are used in the taxpayer's business.", "Date_of_Decision": "19 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-175 section 40-190 subsection 40-190(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/514 | ATO ID 2003/516", "Subject_References": "Cost of a depreciating asset Second element of cost Uniform capital allowances system", "Case_References": "", "Other_References": "NAT 1996-6.2002", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003515", "Unmatched_Content": "Keywords Cost of a depreciating asset Second element of cost Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2003/516", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: deposit paid for improvement before depreciating asset held - second element of cost", "Issue": "Does capital expenditure incurred by a taxpayer, before they become the holder of a depreciating asset, on a deposit paid to secure the supply of goods and services that will improve the asset once it is held, form part of the second element of cost of the asset under subsection 40-190(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. As the economic benefit (that is, the goods and services) was supplied after the taxpayer began to hold the depreciating asset and has contributed to its present condition, the expenditure incurred forms part of the second element of cost under subsection 40-190(2) of the ITAA 1997.", "Facts": "The taxpayer paid a deposit to secure the supply of goods and services required to modify an imported motor vehicle so it can be used in Australia. The deposit was paid before the taxpayer began to hold the asset which was to be modified. The actual modification work took place after the taxpayer had begun to hold the vehicle. The balance of the payment was paid once the modification to the motor vehicle was completed. The company that was contracted to conduct the modifications is unrelated to the taxpayer and the supplier of the vehicle.", "Reasons_for_Decision": "Summary: The cost of a depreciating asset consists of both the first and second elements (section 40-175 of the ITAA 1997). The first element of cost is worked out at the time you begin to hold the asset. Generally the first element of cost is the amount paid, or taken to have been paid, to hold the asset (sections 40-180 and 40-185 of the ITAA 1997). The fact that the expenditure on the deposit was not directed at holding the asset and was not reflected in the condition of asset at the time it was acquired, precludes it from being a first element of cost. The second element of cost is worked out after you have begun to hold the asset and includes the amount you are taken to have paid for economic benefits that have contributed to bringing the asset to its present condition and location (section 40-190 of the ITAA 1997). The supply of goods and services is an economic benefit. The deposit was paid to secure the performance of an economic benefit that would bring the depreciating asset to a certain condition after it was held. Although the deposit was paid before the asset was held, the economic benefit was not provided until after the asset was held. The expenditure incurred on the deposit is included in the motor vehicle's second element of cost under subsection 40-190(2) of the ITAA 1997 as it was paid for an economic benefit that has contributed to bringing the motor vehicle to its present condition since the taxpayer began to hold it.", "Date_of_Decision": "19 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-175 section 40-180 section 40-185 section 40-190", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/514 | ATO ID 2003/515", "Subject_References": "Cost of a depreciating asset First element of cost Second element of cost Uniform capital allowances system", "Case_References": "", "Other_References": "NAT 1996-6.2002", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003516", "Unmatched_Content": "This ATO ID has been amended to clarify that there may be some other second element costs in addition to the costs referred to in the ATO ID. | Keywords Cost of a depreciating asset First element of cost Second element of cost Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2003/931", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Cost - enhancement and support fees for in-house software", "Issue": "Do separate monthly fees, paid specifically for the provision of any enhancements or support necessary for in-house software to remain current, form part of the second element of cost of the in-house software as worked out under Subdivision 40-C of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Monthly fees, paid for the supply of any enhancements necessary for in-house software to remain current and any technical support required, that are not capital in nature do not form part of the second element of cost of in-house software.", "Facts": "The taxpayer purchased a software licence for use in its business. Multiple changes to regulations in the taxpayer's industry required the software to be modified regularly in order for it to perform its function in the taxpayer's business. The taxpayer also paid, under a separate agreement with the software provider, an ongoing monthly fee for regular updating of the software and technical support in the use of its software licence.", "Reasons_for_Decision": "Summary: In-house software is defined in subsection 995-1(1) of the ITAA 1997 as computer software, or a right to use computer software (ie a licence) that you acquire or develop (or have another entity develop), that is mainly for your use in performing the functions for which the software was developed, and for which no amount is deductible outside Divisions 40 and 328 of the ITAA 1997. Paragraph 40-30(2)(d) of the ITAA 1997 provides that in-house software, that is not trading stock, is a depreciating asset. The taxpayer's software licence is within the definition of in-house software and is therefore a depreciating asset. The second element of a depreciating asset's cost is the amount the taxpayer is taken to have paid for each economic benefit that has contributed to bringing the asset to its present condition and location from time to time since the taxpayer started to hold the asset (section 40-190 of the ITAA 1997). In some circumstances, the enhancement and support fees may provide an economic benefit and would be included in the second element of cost. However, section 40-220 of the ITAA 1997 reduces the cost of a depreciating asset by any portion of it that is not of a capital nature. The regular payment of the fees and particularly the temporary advantage obtained from the payment of the fees, led to the determination that these expenses are not of a capital nature. As such, section 40-220 of the ITAA 1997 excludes these expenses from the second element of cost of a depreciating asset. Generally, these types of expenses are deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "31 January 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 40-30(2)(d) section 40-190 section 40-220 Subdivision 40-C subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cost of a depreciating asset Depreciating assets In-house software Intangible depreciating assets Second element of cost", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003931", "Unmatched_Content": "Keywords Cost of a depreciating asset Depreciating assets In-house software Intangible depreciating assets Second element of cost"}
{"ATO_ID_Number": "ATO ID 2003/1085", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: whether first element of cost of depreciating asset reduced by grants received", "Issue": "Is the first element of cost of a depreciating asset the taxpayer started to hold, as worked out under Subdivision 40-C of the Income Tax Assessment Act 1997 (ITAA 1997), reduced by an appropriate portion of the grants the taxpayer received to finance the purchase of such assets?", "Decision": "No. The cost of a depreciating asset the taxpayer started to hold is, pursuant to item 1 of the table in subsection 40-185(1) of the ITAA 1997, the amount the taxpayer paid to acquire the asset and that amount is not reduced by any portion of the grants the taxpayer received to finance the purchase of such assets.", "Facts": "The taxpayer received a number of grants from a state government body for the specific purpose of acquiring certain depreciating assets used in the course of and for the purposes of their business. The taxpayer complied with the strict requirement that the grants only be expended for the specific purpose for which they were paid. The grants are included in the assessable income of the taxpayer as ordinary income. The amount of each grant is determined strictly on an objective basis. That is, although there are general rules that guide the taxpayer's decisions in respect of asset acquisitions, the grants are not specifically linked to the quantity or quality of the assets acquired, their cost or to any particular asset. The grants simply provide a source of finance from which the assets are acquired. Generally, the taxpayer acquires the assets from commercial retail sources.", "Reasons_for_Decision": "Summary: The cost of a depreciating asset is a component in working out the amount you can deduct for its decline in value under Division 40 of the ITAA 1997. The cost of a depreciating asset you hold consists of two elements, the first and second element of cost, and is worked out under Subdivision 40-C of the ITAA 1997 (section 40-175 of the ITAA 1997). The first element of cost is worked out as at the time you start to hold the asset (subsection 40-180(1) of the ITAA 1997). Except in special cases where the first element of cost is attributed specifically by a particular item in paragraph 40-180(2) of the ITAA 1997, the first element of cost is the amount you are taken to have paid to hold a depreciating asset pursuant to section 40-185 of the ITAA 1997. As no item in the table in subsection 40-180(2) of the ITAA 1997 applies in this case, the first element of cost of a depreciating asset the taxpayer starts to hold is worked out under section 40-185 of the ITAA 1997. Item 1 of the table in subsection 40-185(1) of the ITAA 1997 includes in first element of cost an amount the taxpayer pays to hold a depreciating asset. The taxpayer clearly pays an amount to purchase the asset and, in this case, to start holding the asset. The grants simply provide a source from which those payments are made. There is little other connection between the general pool of grant money available to purchase such assets and the particular depreciating asset actually acquired. The cost of a depreciating asset is adjusted in certain circumstances. For example: None of the adjustments to cost provided in Subdivision 40-C of the ITAA 1997 apply to the cost of a depreciating asset the taxpayer started to hold. Therefore, there is no basis on which to reduce the first element of cost of a depreciating asset the taxpayer started to hold by any part of the grants they received to finance the purchase of such assets. It follows that the cost of a depreciating asset the taxpayer starts to hold, by paying an amount of money to acquire the asset, is that amount, and that amount is not reduced by any portion of the grants received by the taxpayer for the purpose of acquiring such assets.", "Date_of_Decision": "6 November 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-175 subsection 40-180(2) section 40-185 subsection 40-185(1) section 40-215 section 40-220", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1086", "Subject_References": "Capital allowances Cost adjustments Cost of a depreciating asset First element of cost Government grants income Recouped expenses Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031085", "Unmatched_Content": "Keywords Capital allowances Cost adjustments Cost of a depreciating asset First element of cost Government grants income Recouped expenses Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/716", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Depreciation - whether depreciation rates increased by 20% loading for purposes of undeducted PABV calculations", "Issue": "If a purchaser acquires a pre-20 August 1980 unit of plant to which former Subdivision 58-C of the Income Tax Assessment Act 1997 (ITAA 1997) applies, is the depreciation rate used to calculate the undeducted pre-existing audited book value (\"PABV\") of the unit increased by a 20% loading?", "Decision": "Yes, the depreciation rate used to calculate the undeducted PABV of the unit is increased by the 20% loading that would have applied under the subsection 55(6) of the Income Tax Assessment Act 1936 (ITAA 1936) as in force immediately before the commencement of section 7 of the Taxation Laws Amendment Act (No 2) 1992 (former subsection 55(6) of the ITAA 1936).", "Facts": "The arrangement may be summarised as follows:", "Reasons_for_Decision": "Detailed Reasoning - Choice under Division 58 to calculate depreciation deductions for transitional plant by reference to undeducted PABV: Division 58 of ITAA 1997 sets out special rules for calculating depreciation deductions and balancing adjustments in respect of certain plant previously owned by an exempt entity. Division 58 as originally enacted was repealed and replaced with the current streamlined Division 58 which applies to privatisations occurring on or after 1 July 2001: see item 244 of Schedule 2 of New Business Tax System (Capital Allowances-Transitional and Consequential) Act 2001 . Former Subdivision 58-C of the ITAA 1997 applies to plant acquired by a purchaser in connection with the acquisition of a business from a TEV on or after 4 August 1997 and before 1 July 2001. Under former subsection 58-155(1) of the ITAA 1997, the purchaser must choose to calculate depreciation deductions in relation to a unit of such plant by reference to either (a) the notional written down value of the unit; or (b) the undeducted PABV of the unit. Where a purchaser chooses (b), the opening cost of the unit to the purchaser for depreciation purposes is taken to be the sum of (i) the undeducted PABV of the unit in relation to the TEV; and (ii) any incidental costs to the purchaser in respect of acquiring the unit: see former subsection 58-220(1) of the ITAA 1997. The calculation of the undeducted PABV of a unit depends on whether the date of the PABV (i.e. the PABV test time) is one year or more before the privatisation date. If it is, the PABV must be reduced by PABV notional depreciation assumed to have been allowed to the TEV in respect of the unit: see former paragraph 58-265(b) of the ITAA 1997. In calculating this PABV notional depreciation, the unit is assumed to have been used wholly for the purpose of producing assessable income by the TEV for the period beginning at the PABV test time and ending immediately before the privatisation time: see former section 58-245 of the ITAA 1997. | Detailed Reasoning - Depreciation rates used for calculating PABV notional depreciation: The depreciation rates used for PABV notional depreciation purposes are calculated by reference to the relevant depreciation regime that would have applied to the unit under ITAA 1936 and/or ITAA 1997 as determined by the date upon which the TEV originally acquired the unit. A general discussion of the various depreciation regimes that have applied under ITAA 1936 is contained in Taxation Ruling IT 2685: Income Tax: Depreciation. The \"broadbanding\" depreciation regime (refer paragraphs 33 - 47 of IT 2685), which commenced in the 1992 income year, applied to most plant acquired before 27 February 1992. Under the broadbanding rules, basic depreciation rates for most plant were increased by a standard 20% loading: see former subsection 55(6) of ITAA 1936. Note that the 20% loading did not apply to some plant (\"excluded units\"), such as certain motor vehicles: see former paragraph 55(6)(b) of ITAA 1936. Former paragraph 58-255(b) of ITAA 1997 provides that, if this 20% loading under the broadbanding rules had applied in relation to the TEV's assumed assessable use of the unit, the 20% loading is to be taken into account in calculating the depreciation rate to be used for PABV notional depreciation purposes. | Detailed Reasoning - Applying the tax law to this arrangement: The purchaser has chosen to calculate depreciation deductions in relation to each unit of old plant by reference to its undeducted PABV. As the period between the PABV date (30 June 1996) and the privatisation date is more than one year, each PABV must be notionally depreciated for this period to calculate the undeducted PABV of the old plant in relation to the TEV. As the old plant was acquired by the TEV before 27 February 1992 the depreciation rates used for PABV notional depreciation purposes are calculated by reference to the broadbanding depreciation regime. As the 20% loading under the broadbanding rules would have applied to the TEV's assumed assessable use of the old plant (not being excluded units) during the 1997 - 2000 income years up until the privatisation date, this 20% loading is to be taken into account in calculating the depreciation rates to be used for PABV notional depreciation purposes. Example On 1 August 1980, the TEV acquired a unit of plant. The Commissioner's determination of its effective life at that time was 40 years. On 1 October 1999 the purchaser acquired the unit in connection with the acquisition of a business from the TEV for consideration of $82,000. The purchaser did not incur any incidental costs in respect of the acquisition. The purchaser uses the unit wholly for the purposes of producing assessable income. The unit had a PABV of $90,000 at the test time, which is 30 June 1996. The purchaser chooses to calculate depreciation deductions and balancing adjustments by reference to the undeducted PABV of the unit. As the period between the PABV test time (30 June 1996) and the privatisation date (1 October 1999) is more than one year, the PABV of the unit must be notionally depreciated for this period to calculate its undeducted PABV in relation to the TEV. For PABV notional depreciation purposes, the purchaser selects (under former section 58-250 of the ITAA 1997) that TEV will use the prime cost method of depreciation. As the unit was originally acquired by the TEV prior to 27 February 1992, the depreciation rate used for PABV notional depreciation purposes is calculated by reference to the broadbanding depreciation regime. The 20% loading under the broadbanding rules would have applied to the TEV's assumed assessable use of the unit in the period from 1 July 1996 to 1 October 1999. Therefore, that 20% loading is to be taken into account in calculating the depreciation rate to be used for PABV notional depreciation purposes. This results in a prime cost depreciation rate of 3% for PABV notional depreciation purposes, calculated as follows: basic depreciation rate of 2.5% (1/40 x 100%) increased by 20% loading (2.5% x 1.2 = 3%). The undeducted PABV of the unit in relation to the TEV is calculated as follows:", "Date_of_Decision": "22 May 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 58-10 paragraph 58-150(1)(b) paragraph 58-150(1)(c) subsection 58-155(1) subsection 58-220(1) section 58-245 section 58-250 paragraph 58-255(b) paragraph 58-265(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2685", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciation rates Depreciation loadings Notional depreciation", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002716", "Unmatched_Content": "Less PABV notional depreciation | Undeducted PABV (Cost to the Purchaser) | Related Public Rulings (including Determinations) Taxation Ruling IT 2685 | Keywords Depreciation rates Depreciation loadings Notional depreciation"}
{"ATO_ID_Number": "ATO ID 2002/810", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital expenditure incurred in successfully seeking to obtain a patent", "Issue": "Is capital expenditure incurred, by the inventor of a new manufacturing process in successfully seeking to obtain a patent for the process, deductible under section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The capital expenditure incurred in successfully seeking to obtain the patent will form part of the cost of the patent. A deduction for the decline in value of the patent is allowable under section 40-25 of the ITAA 1997.", "Facts": "The taxpayer has invented a new manufacturing process and has applied for and been granted a patent for the process. Capital expenditure incurred by the taxpayer include fees for advice from a patent lawyer about the application for a patent and statutory application fees. The taxpayer intends to exploit the patent for income producing purposes.", "Reasons_for_Decision": "Summary: The rights a patentee holds under a Commonwealth patent is an item of intellectual property pursuant to the definition of that term in subsection 995-1(1) of the ITAA 1997. An item of intellectual property is a depreciating asset pursuant to the definition of that term in section 40-30 of the ITAA 1997. The cost of a depreciating asset includes capital amounts that are taken to have been paid to hold the asset (sections 40-185 and 40-220 of the ITAA 1997). Expenditure incurred by the taxpayer in obtaining a patent for the manufacturing process include fees for advice from a patent lawyer about the application for a patent and statutory application fees. Expenditure of this type is considered to be of a capital nature and form part of the cost of a depreciating asset. A deduction for the decline in value of a depreciating asset is allowable to the extent the asset is used for a taxable purpose.", "Date_of_Decision": "10 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-30 section 40-185 section 40-220 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/811 | ATO ID 2002/812 | ATO ID 2002/832", "Subject_References": "Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating assets Cost of a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002810", "Unmatched_Content": "Keywords Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating assets Cost of a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2002/811", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital expenditure on a project developing a manufacturing process: successful application for patent", "Issue": "Where an inventor of a new manufacturing process has been successful in obtaining a patent for the process, is capital expenditure incurred by the inventor in devising, testing and refining the process deductible under section 40-25 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. Where a patent is granted, a deduction for the decline in value of the patent is allowable under section 40-25 of the ITAA 1997. The capital expenditure incurred in devising, testing and refining the process will form part of the cost of the patent.", "Facts": "The taxpayer has invented a new manufacturing process and has applied for and been granted a patent for the process. Capital expenditure was incurred by the taxpayer in devising, testing and refining the process. The taxpayer intends to exploit the patent for income producing purposes.", "Reasons_for_Decision": "Summary: The rights a patentee holds under a Commonwealth patent is an item of intellectual property pursuant to the definition of that term in subsection 995-1(1) of the ITAA 1997. An item of intellectual property is a depreciating asset pursuant to the definition of that term in section 40-30 of the ITAA 1997. The cost of a depreciating asset includes capital amounts that are taken to have been paid to hold the asset (sections 40-185 and 40-220 of the ITAA 1997). Expenditure of the type incurred by the taxpayer in devising, testing and refining the manufacturing process are considered to be of a capital nature and form part of the cost of a depreciating asset. A deduction for the decline in value of a depreciating asset is allowable to the extent the asset is used for a taxable purpose.", "Date_of_Decision": "10 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-30 section 40-185 section 40-220 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/810 | ATO ID 2002/812 | ATO ID 2002/832", "Subject_References": "Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating asset Cost of a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002811", "Unmatched_Content": "Keywords Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating asset Cost of a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2002/818", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Depreciating assets - reasonable attribution of cost", "Issue": "If a number of depreciating assets are purchased for a single undissected amount, would a reasonable method of attribution of cost to each asset, under section 40-195 of the Income Tax Assessment Act 1997 (ITAA 1997), be to apportion the single purchase amount among each of the depreciating assets in proportion to their market value at the time of purchase?", "Decision": "Yes, to apportion the single purchase amount among each of the depreciating assets in proportion to their market value at the time of purchase would be a reasonable method of attribution cost to each asset under section 40-195 of the ITAA 1997.", "Facts": "The taxpayer purchased, in an arm's length transaction, an existing business. The business comprised different classes of assets, including depreciating assets. While the parties to the transaction allocated the contract price to each class of assets, the amount allocated to each class was not further allocated to each asset in the class.", "Reasons_for_Decision": "Summary: If you pay a single undissected amount for 2 or more things that include at least one depreciating asset, section 40-195 of the ITAA 1997 requires you to take into account as part of the asset's cost only that part of what you paid that is reasonably attributable to the asset. What is reasonable will often depend on the particular circumstances. If property, including depreciating assets, is acquired under a contract and parties dealing with each other at arm's length allocate the overall contract price to the separate assets in the contract, the Commissioner will accept such an allocation for the purpose of working out the cost of the depreciating assets under Subdivision 40-C of the ITAA 1997. An allocation in these circumstances to only a class of assets will also be acceptable but, in the case of depreciating assets, the purchaser will then need to make their own reasonable apportionment of the amount so allocated to the class of assets to each of the assets in that class. In making their apportionment, it is expected that the purchaser will generally have regard to and be able to justify their reasonable apportionment based on the relevant market values of the separate depreciating assets at the time of the making of the contract. The Commissioner does not accept that the adjustable value of a depreciating asset necessarily represents the market value of the asset.", "Date_of_Decision": "19 April 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-195 Subdivision 40-C", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 98/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating assets Cost of a depreciating asset Apportionment of cost", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002818", "Unmatched_Content": "Amended to comply with ATO ID guidelines | Related Public Rulings (including Determinations) Taxation Determination TD 98/24 | Keywords Depreciating assets Cost of a depreciating asset Apportionment of cost"}
{"ATO_ID_Number": "ATO ID 2002/915", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: first element of cost of a depreciating asset", "Issue": "Is the first element of cost of a depreciating asset, under section 40-180 of the Income Tax Assessment Act 1997 ('ITAA 1997'), the market value of the asset at the time the holder starts to hold it, where the asset is acquired by redeeming reward points under a consumer loyalty program?", "Decision": "Yes. The first element of cost of a depreciating asset under section 40-180 of the ITAA 1997 is the market value of the asset at the time the holder started to hold it, where the asset is acquired by redeeming reward points under a consumer loyalty program.", "Facts": "A taxpayer, an individual, received reward points as a consequence of the use of a personal credit card and membership of a consumer loyalty program. The taxpayer redeemed the reward points under the consumer loyalty program by acquiring a fax/printer. The taxpayer is the owner of the fax/printer and uses it for a taxable purpose.", "Reasons_for_Decision": "Summary: The tables in sections 40-180 and 40-185 of the ITAA 1997 provide the rules for working out the amount of the first element of cost of a depreciating asset. The first element of cost is either amounts that have been paid or are taken to have been paid, or a specific amount in particular cases. Item 9 of the table in subsection 40-180(2) of the ITAA 1997 provides that where a depreciating asset started to be held under an arrangement that was private or domestic in nature to the holder of the asset, the first element of cost is the market value of the asset at that time. Rewards, including depreciating assets, are generally received under a consumer loyalty program as a consequence of a personal (that is, non-employment/non-business) contractual relationship between an individual taxpayer and the consumer loyalty program organisation. The taxpayer customer is dealing with the consumer loyalty program supplier (such as a credit card provider), in a personal capacity, and in accordance with the normal arm's length relationship that exists between consumers and suppliers. This characteristic was recognised in Payne v. Commissioner of Taxation (1996) 66 FCR 299; (1996) 96 ATC 4407; (1996) 32 ATR 516 and Taxation Ruling TR 1999/6. Where the reward received under a consumer loyalty program and held by a taxpayer is a depreciating asset, item 9 of the table in subsection 40-180(2) of the ITAA 1997 applies and the first element of cost of the asset is specifically provided to be the market value of the asset at the time the holder started to hold it.", "Date_of_Decision": "26 August 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-180 section 40-185", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciation Uniform capital allowances system Cost of a depreciating asset First element of cost", "Case_References": "Payne v. Commissioner of Taxation (1996) 66 FCR 299 (1996) 96 ATC 4407 (1996) 32 ATR 516", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002915", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 1999/6 | Keywords Depreciation Uniform capital allowances system Cost of a depreciating asset First element of cost"}
{"ATO_ID_Number": "ATO ID 2002/1035", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 40: cost - depreciating asset", "Issue": "Does the first element of the cost of depreciating assets purchased by the leasing partnership include the amount paid for the assets under the manufacture and supply agreement pursuant to paragraph 40-185(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the amount paid for the depreciating assets under the manufacture and supply agreement is taken to be, under Item 1 of the table in paragraph 40-185(1)(b) of the ITAA 1997, an amount paid to hold the depreciating assets.", "Facts": "A partnership purchased various depreciating assets under a manufacture and supply agreement. The parties to the agreement are not associated and the agreement was negotiated on an arms length basis. The purchase price under the agreement was paid by instalments over the period of the agreement. Supply of the assets to the partnership was staggered over the period of the contract as the construction, testing and delivery of each asset was completed. The final contract price instalment for an asset was made on the contracted last delivery date.", "Reasons_for_Decision": "Summary: The first element of cost of a depreciating asset is: The first element of cost is worked out as at the time when a holder starts to hold an asset. A partnership will start to hold a depreciating asset at the time the asset becomes a partnership asset. For a number of special cases the first element of cost is attributed directly by subsection 40-180(2) of the ITAA 1997, regardless of the amount the holder paid or the value of the benefit it provided. None of the items in the table in subsection 40-180(2) of the ITAA 1997 applied in the present case. If the first element of cost of a depreciating asset is an amount worked out under section 40-185 of the ITAA 1997, the first element of cost is the greater of: The contract price paid by the leasing partnership pursuant to the manufacture and supply agreement is an amount that is taken to have been paid by it to hold a depreciating asset under Item 1 of the table in paragraph 40-185(1)(b) of the ITAA 1997. This item covers money paid to create a depreciating asset (e.g. labour and materials) as well as a simple purchase price. It also covers payments incidental to starting to hold the asset (e.g. stamp duty).", "Date_of_Decision": "12 July 2002", "Year_of_Income": "2000", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-180(2) section 40-185 paragraph 40-185(1)(a) paragraph 40-185(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cost Depreciating asset Division 40 First element of cost", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021035", "Unmatched_Content": "Keywords Cost Depreciating asset Division 40 First element of cost"}
{"ATO_ID_Number": "ATO ID 2001/316", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of Division 58 of the Income Tax Assessment Act 1997 - tracing back to a PABV in the accounts of a predecessor exempt entity", "Issue": "If a transition entity (\"TE\") chooses under paragraph 58-20(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to calculate depreciation deductions and balancing adjustments under the pre-existing audited book value (\"PABV\") method, can the TE use the plant values specified in the balance sheet as at 30 June 1996 of a predecessor exempt entity (\"HoldCL\") as the latest PABVs of that transitional plant?", "Decision": "Yes. If TE makes this choice, the latest PABV of a transitional unit of plant under section 58-10 of the ITAA 1997 will be an amount equal to the specified value of the unit in HoldCL's balance sheet as at 30 June 1996.", "Facts": "The arrangement may be summarised as follows:", "Reasons_for_Decision": "Detailed Reasoning - The tax law:: Under subsection 58-20(1) of the ITAA 1997 a transition entity must, in relation to every unit of transitional plant, choose whether depreciation deductions for periods after the transition time are to be calculated by reference to either (a) the notional written down value of the unit; or (b) the undeducted PABV of the unit. If the transition entity chooses (b), the provisions in sections 58-90 to 58-145 have effect in relation to the unit. The calculation rules in those provisions are based on the PABV of the unit at the test time: see paragraph 58-105(a). The meaning of the PABV of a unit is set out in section 58-10. Under subsection 58-10(1) of the ITAA 1997 a unit of plant is taken to have a PABV equal to its value specified in the balance sheet of an exempt entity as at the balance date where: The provisions of subsection 58-10(1) of the ITAA 1997 do not require the audited balance sheet to be a balance sheet of the transition entity. They only require it to be a balance sheet of an exempt entity. It is the unit of plant - not the exempt entity - that is taken to have the PABV. As a result, a transition entity can rely upon the annual accounts of a predecessor exempt entity to obtain a PABV for a transitional unit if none of the transition entity's own balance sheets satisfies the requirements of section 58-10 of the ITAA 1997. The example at paragraph 3.27 of the explanatory memorandum relating to Division 58 of the ITAA 1997 illustrates this point. It states: A State Government Department owns a number of power stations. The annual accounts of the Department included an audited book value of the depreciable plant in those power stations. The audited book value would satisfy the conditions set out in new subsection 58-10(1). In order to privatise the power stations, the Government Department transfers those power stations to 3 corporatised State Government GBEs. The GBEs are sold to the private sector one month later, before audited accounts are prepared. In this case, the privatised entity may adopt the latest PABV (providing it is before 4 August 1997) of the State Government Department. In this way the provisions of subsection 58-10(1) of the ITAA 1997 give effect to one of the further details announced in Treasurer's Press Release No. 2 of 1998 dated 14 January 1998. In announcing that \"a PABV contained in a predecessor exempt entity's accounts may be 'traced through' to successor exempt entities\" the Treasurer said: Predecessor entities Privatisations often involve the break-up of an exempt entity (\"predecessor exempt entity\") through the allocation of its assets to smaller exempt entities (\"successor exempt entity\"). The ATO has advised that a strict reading of the 4 August announcement would suggest that the vast majority of successor exempt entities would not have a PABV if they were allocated assets from a predecessor exempt entity at any time after 30 June 1996. The Government does not consider that such an outcome would be appropriate. I therefore announce that where there is no PABV of an asset in a successor entity, the purchaser will be entitled to trace back the ownership of the asset through any relevant predecessor exempt entities in order to identify the relevant PABV. | Detailed Reasoning - Applying the tax law to this arrangement:: TE is a transition entity and must make the choice under subsection 58-20(1) of the ITAA 1997 referred to above in relation to every unit of plant that was owned by it at the transition time. If TE makes a choice under paragraph 58-20(1)(b) of the ITAA 1997 in relation to a particular transitional unit, the value specified for that unit in TE's first annual accounts (i.e., balance sheet as at 30 June 1997) will not satisfy the requirements of subsection 58-10(1) because the final audit report on those accounts was not signed by the auditor before 4 August 1997. HoldCL is a predecessor exempt entity of TE in relation to the transitional units. The value specified for a transitional unit in HoldCL's balance sheet as at 30 June 1996 satisfies the requirements of subsection 58-10(1) of the ITAA 1997. Therefore, if TE makes a choice under paragraph 58-20(1)(b) in relation to a transitional unit, the latest PABV of that transitional unit will be an amount equal to the specified value of the unit in HoldCL's balance sheet as at 30 June 1996.", "Date_of_Decision": "22 May 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 58-10 section 58-20 section 58-90 section 58-145", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt use of plant", "Case_References": "", "Other_References": "Explanatory Memorandum relating to Division 58 of ITAA 1997 Treasurer's Press Release No.2 of 1998, dated 14 January 1988.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001316", "Unmatched_Content": "Keywords Exempt use of plant"}
{"ATO_ID_Number": "ATO ID 2010/31", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 250: assets put to tax preferred use", "Issue": "Will Division 250 of the Income Tax Assessment Act 1997 (ITAA 1997) apply in respect of capital expenditure incurred by a taxpayer under Subdivision 40-I of the ITAA 1997, where the taxpayer is not otherwise entitled to a capital allowance in relation to a decline in value of an asset or expenditure in relation to an asset for the purposes of Divisions 40 and 43 of the ITAA 1997?", "Decision": "No.", "Facts": "The taxpayer is an entity which was set up to design, construct, finance, operate and maintain an asset that is being put to a tax preferred use for the purposes of section 250-60 of the ITAA 1997. The taxpayer incurs expenditure on the construction of the asset. The asset is constructed on behalf of and for the benefit of the tax preferred entity. The taxpayer is not entitled to capital allowances under Divisions 40 or 43 of the ITAA 1997 in relation to the asset. The taxpayer also incurs other capital expenditure associated with the project as well as other business related costs which are deductible under Subdivision 40-I of the ITAA 1997.", "Reasons_for_Decision": "Summary: In accordance with section 250-10 of the ITAA 1997, Division 250 can only apply to an asset if the general test in section 250-15 of the ITAA 1997 is first satisfied. 250-15 General test This Division applies to you and an asset at a particular time if: (a) the asset is being *put to a tax preferred use; and (b) the *arrangement period for the *tax preferred use of the asset is greater than 12 months; and (c) *financial benefits in relation to the tax preferred use of the asset have been, will be or can reasonably be expected to be, *provided to you (or a *connected entity) by: (i) a *tax preferred end user (or a connected entity); or (ii) any *tax preferred entity (or a connected entity); or (iii) any entity that is not an Australian resident; and The taxpayer will not be entitled to capital allowances under Division 40 or Division 43 of the ITAA 1997 in relation to the asset which is being put to tax preferred use. It will however, be entitled to capital allowances under Subdivision 40-I of the ITAA 1997 in relation to certain other capital expenditure incurred by the taxpayer. The expenditure by itself will not give rise to a separate asset to which Division 250 of the ITAA 1997 can apply. The expenditure will not give rise to capital allowances in relation to the decline in value of an asset for the purposes of subparagraph 250-15(d)(i) of the ITAA 1997. Further, for the purposes of subparagraph 250-15(d)(ii) of the ITAA 1997, the expenditure incurred is not in relation to an asset for which the taxpayer will be entitled to capital allowances under either Divisions 40 or 43 of the ITAA 1997. Division 250 of the ITAA 1997 will not apply in respect of the expenditure.", "Date_of_Decision": "31 August 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 250-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Deductions & expenses Exempt entities", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201031", "Unmatched_Content": "Keywords Capital expenditure Deductions & expenses Exempt entities"}
{"ATO_ID_Number": "ATO ID 2007/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: water facilities - irrigation water provider", "Issue": "Is an entity's business the supply of water as required by the definition of 'irrigation water provider' in subsection 40-515(6) of the Income Tax Assessment Act 1997 (ITAA 1997) at the time when it constructs water facilities, where the entity is required to conduct its business in two separate but consecutive phases - the first being the construction of the water facilities; and the second being the supply of water through the subsequent operation of the water facilities?", "Decision": "Yes. The entity's business is the supply of water as required by the definition of irrigation water provider in subsection 40-515(6) of the ITAA 1997 at the time when it constructs the water facilities because the scope of the entity's business is twofold, being both the construction of the water facilities and the supply of water through the subsequent operation of the water facilities.", "Facts": "An entity is established as a wholly Government owned entity for the purpose of constructing, owning and operating a water infrastructure project. The entity carries out its business activities in two separate but consecutive phases. The first phase requires the entity to incur capital expenditure on the construction of water facilities as defined in subsection 40-520(1) of the ITAA 1997. Once the construction of the water facilities is completed, the entity can start the second phase of its business which is the supply of water primarily and principally to entities for use in primary production businesses on land in Australia, through the subsequent operation of the water facilities.", "Reasons_for_Decision": "Summary: Subsection 40-515(6) of the ITAA 1997 defines an 'irrigation water provider' as follows: An irrigation water provider is an entity whose business is primarily and principally the supply (otherwise than by using a motor vehicle) of water to entities for use in primary production businesses on land in Australia. As part of the process of considering whether an entity is an irrigation water provider, it is necessary to determine whether the entity is an entity whose business is the supply of water. This is of particular relevance in circumstances where the entity carries out its business activities in two separate but consecutive phases - the first phase being the construction of the water facilities; and the second phase being the supply of water through the subsequent operation of the water facilities. For the purpose of making this determination, it is necessary to establish the overall scope of the entity's business and whether that business is the supply of water. Identifying the scope of a business depends on whether the courts adopt a broad or narrow formulation of those activities that constitute part of the subject business. If a court adopts a broad formulation of the business, its related or incidental activities are more likely to be treated as part of a single business. For example, in G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 ( GP International Pipecoaters Case ), in the process of considering the scope of the taxpayer's business, the Full Bench of the High Court rejected the suggestion that the taxpayer's business was confined to the coating of natural gas pipelines to the exclusion of the production of the pipe-coating: It is impossible to treat the business of the taxpayer as limited to the coating of the pipe when the construction of the pipe-coating plant was an integral part of the work which the taxpayer was bound to perform. Australian courts have tended in recent times to take a fairly broad view of the scope of a business and therefore it is considered appropriate for the Commissioner to adopt a broad view when determining the scope of the entity's business. As a result of the entity being a company newly established for the purpose of developing the water infrastructure project, it is a matter of pure necessity that it carries out its business activities in two separate but consecutive phases. As concluded in the GP International Pipecoaters Case , the business of a taxpayer cannot be limited to one activity when another activity was an integral part of the work which the taxpayer was bound to perform. In adopting a broad view, it is therefore considered that it is appropriate for the Commissioner to have regard to both phases of the entity's business activities that is, the initial construction phase and the subsequent supply phase, in the process of considering the overall scope of the entity's business activities. The business of the entity cannot be limited to the initial construction phase when the subsequent supply phase was an integral part of the work which the entity was bound to perform. Both phases are interlinked, have a clear and direct connection with each other, and support each other in a genuine commercial way. The entity's business is twofold, being both the construction of the water facilities and the supply of water primarily and principally to entities for use in primary production businesses on land in Australia through the subsequent operation of the water facilities. Therefore, at the time when it constructs the water facilities, the entity's business is the supply of water as required by the definition of 'irrigation water provider' in subsection 40-515(6) of the ITAA 1997.", "Date_of_Decision": "20 December 2006", "Year_of_Income": "Year ending 30 June 2005 Year ending 30 June 2006 Year ending 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-515(6) subsection 40-520(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/36 | ATO ID 2007/37", "Subject_References": "Capital expenditure Decline in value Depreciating assets Irrigation & water supply equipment Uniform capital allowances system", "Case_References": "GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 (1990) 21 ATR 1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200735", "Unmatched_Content": "Keywords Capital expenditure Decline in value Depreciating assets Irrigation & water supply equipment Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2007/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: application of Division 58 of the Income Tax Assessment Act 1997 to water facilities", "Issue": "Does Subdivision 58-B of the Income Tax Assessment Act 1997 (ITAA 1997) modify the way in which the transition entity works out the decline in value under section 40-540 of Subdivision 40-F of the ITAA 1997 of water facilities which are privatised assets at the transition time?", "Decision": "No. The rules in Subdivision 58-B will not modify the way in which the transition entity works out the decline in value under section 40-540 of the ITAA 1997 of water facilities which are privatised assets at the transition time.", "Facts": "The taxpayer is a transition entity for the purposes of Division 58 of the ITAA 1997. All the shares in the taxpayer were sold under a sale process that was an entity sale situation within the meaning of that term in Division 58. The transition time for the purposes of Division 58 was the date of the sale of the shares. The transition entity owns water facilities as defined under subsection 40-520(1) of the ITAA 1997 that are privatised assets for the purposes of Division 58. The taxpayer is entitled to a deduction for the decline in value of the water facilities under paragraph 40-515(1)(a) of Subdivision 40-F of the ITAA 1997 at the transition time.", "Reasons_for_Decision": "Summary: All legislative references in the Interpretative Decision are to the ITAA 1997. Division 58 applies to an entity that is a transition entity in an entity sale situation where the income of an exempt entity becomes, to any extent, taxable. Subdivision 58-B contains the operative provisions of Division 58. The purpose of the rules in Subdivision 58-B is detailed in section 58-60 which provides as follows: This Subdivision sets out rules that affect the way in which the transition entity or the purchaser work out the decline in value of, and balancing adjustments for, privatised assets under Division 40 after the transition time or the acquisition time. It is apparent from a consideration of the rules in Subdivision 58-B, that those rules only operate to modify the way in which a transition entity works out the decline in value of each privatised asset when that decline in value is worked out under Subdivision 40-B. For example, Subdivision 58-B operates to modify the way in which the transition entity works out the cost, adjustable value, effective life, and the method of decline in value used for each privatised asset. There is no reasonable interpretative approach which can be used to apply the modifying rules in Subdivision 58-B to Subdivision 40-F. Subdivision 40-F does not use the concepts of cost, adjustable value, effective life or method of decline in value (in the sense required by Subdivision 58-B) in working out deductions for water facilities. It is, therefore, not considered appropriate to read into Division 58 any modifications that have not expressly been included. Division 58 clearly applies to an entity sale situation where the transition entity is eligible for an expenditure based deduction under paragraph 40-515(1)(a) in respect of capital expenditure incurred on the construction of the privatised assets held by the transition entity just before the transition time. However, it is considered that the rules in Subdivision 58-B have no effect on the ordinary operation of the rules in Subdivision 40-F. The rules in Subdivision 40-F will therefore apply to work out the decline in value of the privatised assets after the transition time without any modification. This view is supported by paragraph 12.97 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Bill 2001 which inserted new Division 58 on the introduction of Division 40, and which (to the extent it is relevant here) states: Under the new Division 58 calculation rules, taxpayers will simply use the ordinary Division 40 rules with some minor modifications for all privatised depreciating assets. Taxpayers will no longer be required to apply rules contained in superseded depreciation regimes. Transition entities will now work out actual deductions for decline in value (after the transition time) of a privatised depreciating asset in the same way as a purchaser does in an asset sale situation, but subject to the requirement that a transition entity cannot change methods of depreciation for an asset. Therefore, Division 58 does not alter the ordinary operation of Subdivision 40-F and the transition entity will be able to work out the decline in value of each of the privatised assets that are water facilities under section 40-540 of Subdivision 40-F after the transition time without any modification.", "Date_of_Decision": "20 December 2006", "Year_of_Income": "Year ending 30 June 2005 Year ending 30 June 2006 Year ending 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-B Subdivision 40-F paragraph 40-515(1)(a) subsection 40-520(1) section 40-540 Division 58 Subdivision 58-B section 58-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/35 | ATO ID 2007/37", "Subject_References": "Decline in value Depreciating assets Transitional entity", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200736", "Unmatched_Content": "Amended to update leg refs | Keywords Decline in value Depreciating assets Transitional entity"}
{"ATO_ID_Number": "ATO ID 2006/151", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: installed ready for use and held in reserve", "Issue": "Are the depreciating assets that entity A holds 'used' or 'installed ready for use' for the purpose of working out the decline in value of their depreciating assets under either subsection 40-70(1) or 40-75(1) of the Income Tax Assessment Act 1997 (ITAA 1997) given the circumstances of entity A as described in the facts below?", "Decision": "No. The depreciating assets that entity A holds are not 'used' or 'installed ready for use' for the purpose of working out the decline in value of their depreciating assets under either subsection 40-70(1) or 40-75(1) of the ITAA 1997 given the circumstances of entity A as described in the facts below.", "Facts": "Entity A is a company that has been incorporated as a joint venture company. The purpose of the joint venture is to operate a manufacturing plant to provide benefits to the joint venturers. Entity A is the taxpayer claiming the decline in value for depreciating assets that it holds. Entity A does not separately use the depreciating assets to operate the manufacturing plant. Entity A has two wholly owned subsidiaries, entity B and entity C. Entity B was incorporated to operate the manufacturing plant. Entity A makes available the assets to entity B which constitute the components and setting for the manufacturing plant through a purported but undocumented rental arrangement for all the income years in question. Entity C was incorporated to employ staff and provide them to staff entity B under a hiring arrangement for all the income years in question. Thus, actual physical operation of the assets entity A holds requires the other entity's inputs. Entity A does not physically operate the assets. Entity B commenced operation of the manufacturing plant in the same income year that entity A acquired the assets comprising the plant. Entity B operated the manufacturing plant for two income years and then ceased operations due to a downturn in the industry. Entity B has not recommenced operations. A single staff member has been retained to maintain the depreciating assets on a monthly basis. Entity A has continued to charge entity B rent in respect of the assets on a book entry basis only.", "Reasons_for_Decision": "Summary: In order to work out the decline in value of a depreciating asset for an income year under the diminishing value method or prime cost method provided in Division 40 of the ITAA 1997 (subsections 40-70(1) or 40-75(1) of the ITAA 1997 respectively), the taxpayer must enter a value into the respective formulae for the number of 'days held' for the asset. The term 'days held' is defined in subsection 40-70(1) of the ITAA 1997 as the number of days the taxpayer held the asset in the income year from its start time, ignoring any days in that year when the taxpayer did not use the asset, or have it installed ready for use, for any purpose. Using a value of less than 365 in the 'days held' component of the formulae reduces the total amount by which the value of an asset can be declined for an income year, where, for example, the asset is disposed of during the year, or where the taxpayer stops using the asset but continues to hold it. These are events that end or suspend the decline of the asset in the holder's hands because it is neither being used, nor held ready for use when these types of events occur. The fact that these types of events end or suspend the decline in value of a depreciating asset is consistent with the definition of a depreciating asset in section 40-30 of the ITAA 1997 which provides that a depreciating asset is one that has a limited effective life and can reasonably be expected to decline in value over the time it is used. For tangible depreciating assets, physical employment or operation of the asset would generally be expected for an asset to be considered to be 'used'. However, entity A has asserted that its use of the assets is through its making them available to entity B to use, through the purported rental arrangement. Such employment of assets is accepted as 'used' in the context of the passive 'use' discussed in City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1 but in question in this case is whether entity A's purported arrangement with entity B can be considered extant since the cessation of the manufacturing plant's operations. To answer this question it is first useful to consider if entity B 'uses' or has 'installed ready for use' A's assets since the cessation of operation of the manufacturing plant. 'Used' is a word of wide import and its meaning in any particular case will depend on the context in which the word is employed and the purpose for which the thing in question has been acquired or created ( Newcastle City Council v. Royal Newcastle Hospital (1956) 96 CLR 493). In the context of Division 40 of the ITAA 1997, the use of a depreciating asset requires the employment of the asset in such a way that it can reasonably be expected to decline in value through and over the time of that use. In Queensland Meat Export Co. Ltd. v. DC of T (1939) 5 ATD 176; (1939) 1 AITR 490 the court noted that merely turning the machinery over by hand once a week over a period of five years did not constitute a use that could fairly be held to create any wear and tear on the plant. The court held the words 'wear and tear' involve a certain degree of use of the plant in the ordinary course of manufacture of goods or treatment of stock. In their view the use of plant on a maintenance basis did not justify any deduction for wear and tear in respect of such plant. In entity B's case there is also no physical use of the depreciating assets for manufacturing that would result in any decline in value. However, it needs to be considered whether the depreciating assets are installed ready for use. 'Installed ready for use' is defined in subsection 995-1(1) of the ITAA 1997 as installed ready for use and held in reserve. This means that the relevant asset must not only be installed ready for use, but also 'held in reserve'. In interpreting the expression 'held in reserve' in Tax Determination TD 2007/4, the Commissioner adopts the approach taken by Mr Beddoe in Case X46 90 ATC 378 at 381; AAT Case 5877 (1990) 21 ATR 3411 at 3414) where he noted that the concept of plant that was installed ready for use but held in reserve is not so wide as to embrace income-producing operations which may be undertaken at some time in the future. Further, Mr Beddoe noted that the sense those words are used in is to set aside for future use, upon the happening of some contingency occurring, in the taxpayer's existing income-producing activities or, in other words, to keep back or save for future use in those present income-producing operations. Consequently, it needs to be considered whether entity B has present income-producing activity for which it may be holding the assets in reserve. Use in present income producing activity As noted by Hill J in Evans v. FC of T 89 ATC 4540; (1989) 20 ATR 922 'the question of whether a particular activity constitutes a business is often a difficult one involving as it does questions of fact and degree'. This particular decision turns on its own facts and involves a process of weighing up all the indicators that are considered relevant by the courts. Taxation Ruling TR 97/11 summarises the indicators of carrying on a business that have been set down by the courts at paragraph 13 (although TR 97/11 states the Tax Office view on whether a taxpayer is carrying on a primary production business, the general indicia set down by the courts in relation to carrying on a business apply to all taxpayers undertaking this consideration). In this case, an objective consideration of the indicators leads to the conclusion that entity B does not have an existing income-producing activity. Operation of the manufacturing plant ceased over two years ago. The facts of the case indicate that there is no significant commercial activity, there is no prospect of a profit being made from the activity and there has been no business activity carried on by entity B for over two years for which it has actually received any income. As there has been a discontinuation of business by entity B the depreciating assets cannot be considered to be installed ready for use and held in reserve in entity B's present income producing activity. As such, the depreciating assets are not considered to be installed ready for use from the period of cessation of operation of the manufacturing plant. In the context of entity B not using the assets for any purpose and not continuing business, and in view of the closeness of the relationship between the entities (entity A's apparent control of the entire undertaking of the entities), it can subsequently be considered whether entity A's making the assets available to entity B under the purported rental agreement constitutes use of the assets, or having the assets installed ready for use, by entity A. Given the facts that: the conclusion is that entity A's purported rental arrangement with entity has not been extant since the cessation of the manufacturing plant's operation. entity A is in fact not using the assets nor does it have them installed ready for use nor does it have a present income producing activity that involves the assets. Entity A too, in respect of any endeavour involving the assets, has discontinued business. Accordingly, entity A should reduce the number used in the formulae in subsections 40-70(1) or 40-75(1) of the ITAA 1997 in respect of 'days held' by the number of days it held the depreciating assets but did not use them or have them installed ready for use, that is, from the point in time when the manufacturing plant ceased operations.", "Date_of_Decision": "2 June 2006", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-70(1) subsection 40-75(1) subsection 40-30(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/11 | Tax Determination TD 95/52 | Tax Determination TD 2007/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Allowances CoE Deduction for depreciating assets Plant installed ready for use", "Case_References": "City of Newcastle v. Royal Newcastle Hospital (1959) 100 CLR 1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006151", "Unmatched_Content": "This ATO ID has been amended to clarify the reference to TD 2007/5. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/11 Tax Determination TD 95/52 Tax Determination TD 2007/5 | Keywords Capital Allowances CoE Deduction for depreciating assets Plant installed ready for use"}
{"ATO_ID_Number": "ATO ID 2004/146", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: installed ready for use - aircraft requiring major repairs", "Issue": "Was a charter aircraft installed ready for use for the purpose of applying subsection 40-60(2) of the Income Tax Assessment Act 1997 (ITAA 1997), although it required major repairs prior to being able to be made available for use?", "Decision": "No. The aircraft was not installed ready for use under subsection 40-60(2) of the ITAA 1997 until the major repairs were completed and the aircraft was able to be made available for charter.", "Facts": "A taxpayer purchased an aircraft to be let on a charter basis for the purpose of producing assessable income. The aircraft was purchased with a certificate of airworthiness which provided that it was ready to fly. However, soon after purchase it was discovered that the aircraft was in need of major repairs. The aircraft was not used for any private or income producing purpose from the time of purchase until the major repairs were undertaken. The major repairs were completed and the aircraft was placed into charter.", "Reasons_for_Decision": "Summary: Section 40-25 of the ITAA 1997 states that you can deduct an amount equal to decline in value for an income year of a depreciating asset that you held for any time during the year. A depreciating asset starts to decline in value from when its start time occurs (Subsection 40-60(1) of the ITAA 1997). Subsection 40-60(2) of the ITAA 1997 provides that the start time of a depreciating asset occurs when it is when it is first used, or installed ready for use, for any purpose. The aircraft is a depreciating asset that is held by the taxpayer. The requirement to be installed ready for use was considered in (1956) 6 CTBR (NS) Case 24 , where a majority of the Board of Review held that an incomplete item of plant could not satisfy the requirement of being 'installed ready for use'. Mr McCaffery, a member of the board, stated: It is therefore possible for a taxpayer to hold an asset, without the 'start time' occurring with respect to that asset, in cases where the taxpayer has not prepared the asset for immediate use. Thus, an asset will not be 'used' or 'installed ready for use' if it remains in its shipping container or is not fully assembled. For the purpose of applying section 40-60 of the ITAA 1997, the aircraft was not used or installed ready for use until the major repairs were completed and the aircraft was able to be made available for charter. The depreciating asset's start time occurred when the aircraft was able to be made available for charter because it was installed ready for use at that time.", "Date_of_Decision": "28 January 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-60 subsection 40-60(1) subsection 40-60(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Aircraft Plant installed ready for use Start time Uniform capital allowances system", "Case_References": "Case 24 (1956) 6 CTBR (NS) 154", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004146", "Unmatched_Content": "Keywords Aircraft Plant installed ready for use Start time Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/1010", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 40: preservation of accelerated depreciation", "Issue": "If a taxpayer can work out the decline in value of a depreciating asset using the prime cost formula in subsection 40-75(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as modified by paragraph 40-10(3)(b) of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997), does the formula have to be adjusted if any of the events in subsection 40-75(2) of the ITAA 1997 occur?", "Decision": "No. The taxpayer continues to use the prime cost formula in subsection 40-75(1) of the ITAA 1997 as modified only by paragraph 40-10(3)(b) of the IT(TP)A 1997. In certain circumstances, transitional rules apply to preserve in Division 40 of the ITAA 1997 the use of accelerated rates of depreciation that applied to certain plant acquired before 1 July 2001. One of these transitional provisions is paragraph 40-10(3)(b) of the IT(TP)A 1997. It modifies the prime cost formula in subsection 40-75(1) of the ITAA 1997 by: Accordingly, the modified prime cost formula becomes: (Cost of the plant under Division 42 plus any second element of cost after 30 June 2001) * [days held/365] * accelerated rate that was being used under Division 42 This modification has the effect of preserving accelerated rates of depreciation in the hands of a continuing holder of the asset. Another transitional provision that makes the same modification to the prime cost formula is section 40-340 of the IT(TP)A 1997. It preserves accelerated rates of depreciation in the hands of a subsequent holder if the asset was rolled-over from a former holder who was using accelerated rates. If an event under subsection 40-75(2) of the ITAA 1997 occurs, the prime cost formula must be adjusted as set out in subsection 40-75(3) of the ITAA 1997. These adjustments are: However, because these components in the formula have already been replaced under paragraph 40-10(3)(b) of the IT(TP)A 1997, the adjustments required by subsection 40-75(3) of the ITAA 1997 will have no effect on the modified prime cost formula.", "Facts": "", "Reasons_for_Decision": "Summary: In certain circumstances, transitional rules apply to preserve in Division 40 of the ITAA 1997 the use of accelerated rates of depreciation that applied to certain plant acquired before 1 July 2001. One of these transitional provisions is paragraph 40-10(3)(b) of the IT(TP)A 1997. It modifies the prime cost formula in subsection 40-75(1) of the ITAA 1997 by: Accordingly, the modified prime cost formula becomes: (Cost of the plant under Division 42 plus any second element of cost after 30 June 2001) * [days held/365] * accelerated rate that was being used under Division 42 This modification has the effect of preserving accelerated rates of depreciation in the hands of a continuing holder of the asset. Another transitional provision that makes the same modification to the prime cost formula is section 40-340 of the IT(TP)A 1997. It preserves accelerated rates of depreciation in the hands of a subsequent holder if the asset was rolled-over from a former holder who was using accelerated rates. If an event under subsection 40-75(2) of the ITAA 1997 occurs, the prime cost formula must be adjusted as set out in subsection 40-75(3) of the ITAA 1997. These adjustments are: However, because these components in the formula have already been replaced under paragraph 40-10(3)(b) of the IT(TP)A 1997, the adjustments required by subsection 40-75(3) of the ITAA 1997 will have no effect on the modified prime cost formula.", "Date_of_Decision": "7 September 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-75(1) subsection 40-75(2) subsection 40-75(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Prime cost method Accelerated depreciation Effective life Cost of plant Second element of cost Decline in value", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021010", "Unmatched_Content": "Keywords Prime cost method Accelerated depreciation Effective life Cost of plant Second element of cost Decline in value"}
{"ATO_ID_Number": "ATO ID 2006/287", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: choice of determining effective life", "Issue": "Is the transition entity obliged to make a choice, after the transition time, of determining the effective life of the depreciating asset it holds at the transition time, in accordance with subsection 40-95(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The transition entity is obliged to make a choice, after the transition time, of determining the effective life of the depreciating asset it holds at the transition time, in accordance with subsection 40-95(1) of the ITAA 1997.", "Facts": "The taxpayer is a transition entity for the purposes of Division 58 of the ITAA 1997. All the shares in the taxpayer were sold under a sale process that was an entity sale situation within the meaning of that term in Division 58. The transition time for the purpose of Division 58 was the time of the sale of the shares. The transition entity owns and uses a tangible depreciating asset (within the meaning of that term in section 40-30 of the ITAA 1997) that it held just before the transition time and that is a privatised asset for the purposes of Division 58. At the transition time the transition entity holds and uses that same tangible depreciating asset. The depreciating asset was not an asset to which any of subsections 40-95(4)-(6) inclusive applies. The transition entity did not apply section 40-102 (about the capped life of certain depreciating assets) in working out the first element of cost of the privatised asset for the purpose of Division 58.", "Reasons_for_Decision": "Summary: Broadly, Division 40 of the ITAA 1997 allows you to deduct the decline in value of a depreciating asset you hold over its effective life, to the extent you use the asset for a taxable purpose. The calculation of the decline in value of a depreciating asset for an income year is based on, among other things, its effective life. In determining the effective life of a depreciating asset, subsection 40-95(1) of the ITAA 1997 provides that you must choose either an effective life determined by the Commissioner for the asset, or to work out the effective life of the asset yourself under section 40-105 of the ITAA 1997. This choice of determining effective life must be made for the income year in which the asset's start time occurs (subsection 40-95(3)). Section 40-60 of the ITAA 1997 defines the start time of a depreciating asset to be when you first use it, or have it installed ready for use, for any purpose. Division 58 of the ITAA 1997 applies to an entity that is a transition entity in an entity sale situation (where the income of an exempt entity becomes, to any extent, taxable). Subdivision 58-B sets out rules that affect the way in which a transition entity works out the decline in value of privatised assets under Division 40 of the ITAA 1997, after the transition time. In particular, subsection 58-70(2) provides that Division 40 applies to a privatised asset held by the transition entity as if the asset had not been used, or installed ready for use, for any purpose before the transition time. Notwithstanding prior use of the asset before the transition time, the requirement in subsection 58-70(2) of the ITAA 1997 that in an entity sale situation the use of a depreciating asset before the transition time be ignored, means that, in conjunction with section 40-60 of the ITAA 1997, the start time of a depreciating asset held by a transition entity is effectively the time after the transition time at which the transition entity first uses the asset, or has it installed ready for use, for any purpose. The note to subsection 40-60(2) confirms that previous use by a transition entity is ignored for the purpose of that subsection. Accordingly, the start time of the depreciating asset held by the transition entity is effectively the time immediately after the transition time. With the exception of paragraph 58-90(2)(a) of the ITAA 1997 (which deals with the circumstance where a capped effective life applied to the asset) Division 58 is silent as to determining the effective life of the depreciating asset that is to be used to calculate its decline in value after the transition time. Division 58 does not alter the ordinary operation of Division 40 in respect of either the choice about determining effective life of the depreciating asset the transition entity can make under subsection 40-95(1) of the ITAA 1997, or the requirement under that subsection that the transition entity must make that choice. Therefore when the transition entity makes the choice in subsection 40-95(1) of the ITAA 1997 of determining the effective life of the depreciating asset, the choice is made as if the asset had not been used before the transition time. The intention that section 40-95 of the ITAA 1997, including the choice of determining effective life required by subsection 40-95(1), apply to a transition entity for a depreciating asset it holds after the transition time, is supported by paragraph 12.97 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 , which inserted new Division 58 on introduction of Division 40, and which (to the extent it is relevant here) states: Under the new Division 58 calculation rules, taxpayers will simply use the ordinary Division 40 rules with some minor modifications for all privatised depreciating assets. Taxpayers will no longer be required to apply rules contained in superseded depreciation regimes. Transition entities will now work out actual deductions for decline in value (after the transition time) of a privatised depreciating asset in the same way as a purchaser does in an asset sale situation, but subject to the requirement that a transition entity cannot change methods of depreciation for an asset. Division 58 imposes no restriction on or exception to a transition entity's choice of determining effective life of a depreciating asset it holds after the transition time. Accordingly, the ordinary operation of section 40-95 of the ITAA 1997 occurs and the transition entity can and must make a choice under subsection 40-95(1) of determining the effective life of the depreciating asset it holds after the transition time. The requirement in subsection 40-95(3) of the ITAA 1997 that the transition entity's choice must be made for the income year in which the asset's start time occurs, is met if the choice is made by the transition entity for the income year in which the transition time occurs.", "Date_of_Decision": "21 September 2006", "Year_of_Income": "Year ending 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-30 section 40-60 subsection 40-60(2) section 40-95 subsection 40-95(1) subsection 40-95(3) subsection 40-95(4) subsection 40-95(4B) subsection 40-95(4C) subsection 40-95(5) subsection 40-95(5B) subsection 40-95(5C) subsection 40-95(6) section 40-102 section 40-105 subsection 58-70(2) paragraph 58-90(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/288 | ATO ID 2006/289", "Subject_References": "Commissioner's determination of effective life Decline in value Depreciating assets Effective life Entity sale situation Privatised assets Self-assessment of effective life Start time Transition entity Transition time", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006287", "Unmatched_Content": "Keywords Commissioner's determination of effective life Decline in value Depreciating assets Effective life Entity sale situation Privatised assets Self-assessment of effective life Start time Transition entity Transition time"}
{"ATO_ID_Number": "ATO ID 2006/288", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: recalculating effective life", "Issue": "Must the transition entity recalculate the depreciating asset's effective life from a later income year where the conditions in subsection 40-110(2) of the Income Tax Assessment Act 1997 (ITAA 1997) are satisfied?", "Decision": "Yes. The transition entity must recalculate the depreciating asset's effective life from a later income year where the conditions in subsection 40-110(2) of the ITAA 1997 are satisfied.", "Facts": "The taxpayer is a transition entity for the purposes of Division 58 of the ITAA 1997. All the shares in the taxpayer were sold under a sale process that was an entity sale situation within the meaning of that term in Division 58. The transition time for the purpose of Division 58 was the time of the sale of the shares. The transition entity owns and uses a tangible depreciating asset (within the meaning of that term in section 40-30 of the ITAA 1997) that it held just before the transition time and that is a privatised asset for the purposes of Division 58. At the transition time the transition entity holds and uses that same tangible depreciating asset. The depreciating asset was not an asset to which any of subsections 40-95(4)- 6) inclusive applies. The transition entity did not apply section 40-102 (about the capped life of certain depreciating assets) in working out the first element of cost of the privatised asset for the purpose of Division 58.", "Reasons_for_Decision": "Summary: Broadly, Division 40 of the ITAA 1997 allows you to deduct the decline in value of a depreciating asset you hold over its effective life, to the extent you use the asset for a taxable purpose. The calculation of the decline in value of a depreciating asset for an income year is based on, among other things, its effective life. The transition entity must make a choice of determining the effective life of a tangible depreciating asset for the income year in which the asset's start time occurs (subsections 40-95(1) and (3) of the ITAA 1997). Subsection 40-110(2) of the ITAA 1997 deals with circumstances in which you must recalculate a depreciating asset's effective life from a later income year. You must recalculate a depreciating asset's effective life from a later income year if one of the conditions in subparagraphs 40-110(2)(a)(i)-(iii) is met and the asset's cost is increased in that year by at least 10%. You may conclude that the effective life is the same. The recalculation required under subsection 40-110(2) must be done using section 40-105 of the ITAA 1997 (about self-assessing effective life) as required by subsection 40-110(4). Division 58 of the ITAA 1997 applies to an entity that is a transition entity in an entity sale situation. Subdivision 58-B sets out rules that affect the way in which a transition entity works out the decline in value of privatised assets under Division 40 after the transition time. However, Division 58 is silent as to the requirement to recalculate a depreciating asset's effective life from a later income year where the conditions in subsection 40-110(2) of the ITAA 1997 are satisfied. The intention that the requirement to recalculate effective life from a later income year imposed by subsection 40-110(2) apply to a transition entity, is supported by paragraph 12.97 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 , which inserted new Division 58 on introduction of Division 40, and which (to the extent it is relevant here) states: Under the new Division 58 calculation rules, taxpayers will simply use the ordinary Division 40 rules with some minor modifications for all privatised depreciating assets. Taxpayers will no longer be required to apply rules contained in superseded depreciation regimes. Transition entities will now work out actual deductions for decline in value (after the transition time) of a privatised depreciating asset in the same way as a purchaser does in an asset sale situation, but subject to the requirement that a transition entity cannot change methods of depreciation for an asset. Division 58 of the ITAA 1997 imposes no limitation on a transition entity's requirement to recalculate the effective life of a depreciating asset after the transition time where the conditions in subsection 40-110(2) of the ITAA 1997 are satisfied. The ordinary operation of subsection 40-110(2) occurs. Accordingly, the requirement in subsection 40-110(2) that the transition entity must recalculate the effective life of the depreciating asset it holds from a later income year applies where the conditions in that subsection are satisfied.", "Date_of_Decision": "21 September 2006", "Year_of_Income": "Year ending 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-30 subsection 40-95(1) subsection 40-95(3) subsection 40-95(4) subsection 40-95(4B) subsection 40-95(4C) subsection 40-95(5) subsection 40-95(5B) subsection 40-95(5C) section 40-102 section 40-105 subsection 40-110(2) subparagraph 40-110(2)(a)(i) subparagraph 40-110(2)(a)(ii) subparagraph 40-110(2)(a)(iii) subsection 40-110(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/287 | ATO ID 2006/289", "Subject_References": "Decline in value Depreciating assets Effective life Entity sale situation Privatised assets Recalculating effective life Self-assessment of effective life Transition entity Transition time", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006288", "Unmatched_Content": "Keywords Decline in value Depreciating assets Effective life Entity sale situation Privatised assets Recalculating effective life Self-assessment of effective life Transition entity Transition time"}
{"ATO_ID_Number": "ATO ID 2006/289", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: choosing to recalculate effective life", "Issue": "Can the transition entity choose, from a later income year, to recalculate the effective life of the depreciating asset it holds at the transition time in accordance with subsection 40-110(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The transition entity can choose, from a later income year, to recalculate the effective life of the depreciating asset it holds at the transition time in accordance with subsection 40-110(1) of the ITAA 1997.", "Facts": "The taxpayer is a transition entity for the purposes of Division 58 of the ITAA 1997. All the shares in the taxpayer were sold under a sale process that was an entity sale situation within the meaning of that term in Division 58. The transition time for the purpose of Division 58 was the time of the sale of the shares. The transition entity owns and uses a tangible depreciating asset (within the meaning of that term in section 40-30 of the ITAA 1997) that it held just before the transition time and that is a privatised asset for the purposes of Division 58. At the transition time the transition entity holds and uses that same tangible depreciating asset. The depreciating asset was not an asset to which any of subsections 40-95(4)-(6) inclusive applies. The transition entity did not apply section 40-102 (about the capped life of certain depreciating assets) in working out the first element of cost of the privatised asset for the purpose of Division 58.", "Reasons_for_Decision": "Summary: Broadly, Division 40 of the ITAA 1997 allows you to deduct the decline in value of a depreciating asset you hold over its effective life, to the extent you use the asset for a taxable purpose. The calculation of the decline in value of a depreciating asset for an income year is based on, among other things, its effective life. The transition entity must make a choice of determining the effective life of a tangible depreciating asset for the income year in which the asset's start time occurs (subsections 40-95(1) and (3) of the ITAA 1997). Subsection 40-110(1) of the ITAA 1997 deals with the circumstances in which you may choose to recalculate the effective life of a depreciating asset from a later year. You may choose to recalculate the effective life from a later income year if the effective life you have been using is no longer accurate because of changed circumstances relating to the nature of the use of the asset. The recalculation must be done using section 40-105 of the ITAA 1997 (about self-assessing effective life) as required by subsection 40-110(4), and may be made whether the effective life you have been using was that determined by the Commissioner under section 40-100 of the ITAA 1997 or self-assessed under section 40-105 of the ITAA 1997. Division 58 of the ITAA 1997 applies to an entity that is a transition entity in an entity sale situation. Subdivision 58-B sets out rules that affect the way in which a transition entity works out the decline in value of privatised assets under Division 40 after the transition time. However, Division 58 is silent as to the choice to recalculate the effective life of a depreciating asset from a later income year where the circumstances in subsection 40-110(1) of the ITAA 1997 are satisfied. The intention that the choice in subsection 40-110(1) be available to a transition entity for a depreciating asset, is supported by paragraph 12.97 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001 , which inserted new Division 58 on introduction of Division 40, and which (to the extent it is relevant here) states: Under the new Division 58 calculation rules, taxpayers will simply use the ordinary Division 40 rules with some minor modifications for all privatised depreciating assets. Taxpayers will no longer be required to apply rules contained in superseded depreciation regimes. Transition entities will now work out actual deductions for decline in value (after the transition time) of a privatised depreciating asset in the same way as a purchaser does in an asset sale situation, but subject to the requirement that a transition entity cannot change methods of depreciation for an asset. Division 58 of the ITAA 1997 imposes no restriction on a transition entity's choice to recalculate the effective life of the depreciating asset from a later income year, where the circumstances in subsection 40-110(1) of the ITAA 1997 are satisfied. Accordingly, the transition entity can choose, after the transition time, and where the circumstances in that subsection are satisfied, to recalculate the effective life of the depreciating asset from a later income year.", "Date_of_Decision": "21 September 2006", "Year_of_Income": "Year ending 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-30 subsection 40-95(1) subsection 40-95(3) section 40-100 section 40-102 section 40-105 subsection 40-110(1) subsection 40-110(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/287 | ATO ID 2006/288", "Subject_References": "Commissioner's determination of effective life Decline in value Depreciating assets Effective life Entity sale situation Privatised assets Recalculating effective life Self-assessment of effective life Transition entity Transition time", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006289", "Unmatched_Content": "Keywords Commissioner's determination of effective life Decline in value Depreciating assets Effective life Entity sale situation Privatised assets Recalculating effective life Self-assessment of effective life Transition entity Transition time"}
{"ATO_ID_Number": "ATO ID 2003/754", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Division 40 - use of effective life former holder was using where 'same user' rule applies", "Issue": "For the purposes of the 'same user' rule in subsection 40-95(5) of the Income Tax Assessment Act 1997 (ITAA 1997), was the former holder of a depreciating asset using an effective life to work out their decline in value deduction for that asset if they were using a rate in their calculation formula?", "Decision": "No. The former holder was not using an effective life for the purposes of the 'same user' rule in subsection 40-95(5) of the ITAA 1997 to work out their decline in value deduction because the rate they were using was accelerated and does not bear any direct relationship to the effective life of the asset.", "Facts": "The taxpayer acquired a depreciating asset after 30 June 2001 in circumstances where the 'same user' rule in subsection 40-95(5) of the ITAA 1997 applied to the acquisition. The asset was being written off by the former holder (who had acquired the plant prior to 11.45am, by legal time in the Australian Capital Territory, on 21 September 1999) using an 'accelerated' diminishing value rate set out in former Subdivision 42-D of the ITAA 1997. The taxpayer did not allocate the asset to a low-value pool (Subdivision 40-E of the ITAA 1997).", "Reasons_for_Decision": "Summary: The amount you deduct for the decline in value of a depreciating asset under Division 40 of the ITAA 1997 is generally worked out by using the formula for either the diminishing value method or the prime cost method (sections 40-70 and 40-75 of the ITAA 1997 (See Note). A choice of the method you use is generally available (subsection 40-65(1) of the ITAA 1997). However, because of the application of the 'same user' rule in subsection 40-65(3) of the ITAA 1997 the taxpayer must use the diminishing value method because the former holder used that method. The formula the taxpayer must use for the diminishing value method is contained in subsection 40-70(1) of the ITAA 1997 (see note). A component of this formula is the asset's effective life. A choice of the effective life you use is generally available (subsection 40-95(1) of the ITAA 1997). However, because of the application of the 'same user' rule in subsection 40-95(5) of the ITAA 1997 the taxpayer must use the same effective life that the former holder was using (paragraph 40-95(5)(c) of the ITAA 1997). The former holder was using the diminishing value method formula in former subsection 42-160(1) of the ITAA 1997 because they acquired the asset before 21 September 1999. That formula contains a diminishing value 'rate' component which is set out in former Subdivision 42-D of the ITAA 1997. While the starting point of working out that rate is the effective life of the plant, the rate incorporates a factor of loading and a factor of broad banding. The result is a rate of depreciation that is 'accelerated' in comparison to the effective life of the plant. In these circumstances, the former holder is not 'using' an effective life for the purposes of paragraph 40-95(5)(c) of the ITAA 1997. This means that the taxpayer must, under subsection 40-95(6) of the ITAA 1997, use an effective life determined by the Commissioner.", "Date_of_Decision": "15 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-65(1) subsection 40-65(3) section 40-70 subsection 40-70(1) section 40-75 subsection 40-95(1) subsection 40-95(5) paragraph 40-95(5)(c) subsection 40-95(6) subsection 42-160(1) (repealed as of 30 June 2001)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/753", "Subject_References": "Accelerated depreciation Capital Allowances CoE Commissioner's determination of effective life Decline in value Decline in value methods Diminishing value Diminishing value method Depreciating assets Effective life Plant acquired post 21 September 1999 Removal of accelerated depreciation Retention of accelerated depreciation", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003754", "Unmatched_Content": "This ATO ID has been amended in order to provide advice regarding changes to operation of the law for assets which start to be held on or after 10 May 2006. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated keywords, leglislative references, formatting and related ATO IDs. | Keywords Accelerated depreciation Capital Allowances CoE Commissioner's determination of effective life Decline in value Decline in value methods Diminishing value Diminishing value method Depreciating assets Effective life Plant acquired post 21 September 1999 Removal of accelerated depreciation Retention of accelerated depreciation"}
{"ATO_ID_Number": "ATO ID 2002/180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Effective life of depreciating asset - choice of Commissioner's determination", "Issue": "If a taxpayer chooses to use the Commissioner's determination of effective life for a depreciating asset, which effective life should be used under subsection 40-95(2) of the Income Tax Assessment Act 1997 if the taxpayer enters into a contract before 1 July 2001 for the construction of the asset and the construction commences after 30 June 2001?", "Decision": "Under subsection 40-95(2) of the ITAA 1997 the effective life that should be used is the one in force at the time when the taxpayer entered into the contract to acquire the depreciating asset provided the asset is used, or installed ready for use, for any purpose within 5 years of the time the contract was entered into. Otherwise, the taxpayer must use the Commissioner's determination that is in force at the time the depreciating asset is first used, or installed ready for use, for any purpose.", "Facts": "The taxpayer entered into a contract before 1 July 2001 (but after 21 September 1999) for the construction by another taxpayer of particular items of plant. Construction of the items is to commence after 30 June 2001. The contract represents, in effect, an end to end process consisting of all design, engineering, procurement, construction management, project management, commissioning, start-up and performance testing activities necessary to deliver a final working product within two income years. Because of the taxpayer's practical expertise, some of its personnel may be required, from time to time and to varying extents, to assist the contractor. If this does occur, the contractor is to assume full responsibility for the supervision, direction and work product of the taxpayer's personnel and the taxpayer is to remain responsible for its employment obligations to the personnel.", "Reasons_for_Decision": "Summary: Division 40 of the ITAA 1997 generally applies to depreciating assets you start to hold under a contract entered into after 30 June 2001 (see Item 2 of Schedule 1 to the New Business Tax System (Capital Allowances) Act 2001 ). However, section 40-12 of the Income Tax (Transitional Provisions) Act 1997 also brings into the application of Division 40 of the ITAA 1997 plant acquired under a contract entered into before 1 July 2001 but which you start to hold after 30 June 2001. Paragraph 40-95(2)(a) of the ITAA 1997 provides that a taxpayer's choice of an effective life determined by the Commissioner is limited to one in force at the time when the taxpayer enters into the contract to acquire the asset, the time when the taxpayer otherwise acquires it or the time when the taxpayer starts to construct the asset provided the asset's start time occurs within 5 years of the respective time. Utah Development Co v. Federal Commissioner of Taxation 14 ATR 601; 83 ATC 4545 and Tully Co-op Sugar Milling Assoc Ltd v. Federal Commissioner of Taxation 13 ATR 410 and 14 ATR 495; 82 ATC 4454 and 83 ATC 4495 both involved the question of whether, in the circumstances of those cases, a unit of property had been acquired or constructed for the purposes of the former investment allowance provisions (see sections 82AA - AQ of the Income Tax Assessment Act 1936 ). These cases are reviewed in Taxation Ruling IT 2142 which provides some principles to be applied in relation to the meaning of the words 'acquisition' and 'construction'. It specifies that the intent of the legislation being considered in these cases is that the concepts of acquisition and construction should between them cover all cases though they may well apply at different times in the development of a project. The conclusion is drawn that the construction test would apply if construction is wholly by or under the control of the taxpayer, whether using the taxpayer's employees or sub-contactors. On the other hand, if the work of an independent contractor is neither under the control of the taxpayer nor integrated into the taxpayer's business, the taxpayer could not usually be said to have constructed the unit himself. Broadly, then, the construction test would apply provided the taxpayer plays the predominant role in construction. In other cases, the acquisition test will apply. It is considered that the observations are equally applicable to those same words in the context of Division 40 of the ITAA 1997. The facts support the view that construction is not under the control of the taxpayer, is not integrated into its business and that the taxpayer is not playing a dominant role in the construction process. This remains so even though the taxpayer will sometimes assist the contractor by providing the services of some of its personnel. The essence of the contract is to deliver to the taxpayer a finished operating product according to its negotiated requirements. In these circumstances, it is considered that the taxpayer has entered into a contract to acquire the plant. This means that paragraph 40-95(2)(a) of the ITAA 1997 would apply to limit the taxpayer's choice of Commissioner's determination to the one in force at the time of entering into the contract, provided the assets are used, or installed ready for use, for any purpose within 5 years of that time. If the assets are not used, or installed ready for use, within that period, paragraph 40-95(2)(c) of the ITAA 1997 will apply to limit the taxpayer's choice to the Commissioner's determination that is in force at the time the assets are first used, or installed ready for use, for any purpose.", "Date_of_Decision": "4 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 Section 82AA Section 82AB Section 82ABA Section 82AC Section 82AD Section 82AE Section 82AF Section 82AG Section 82AH Section 82AHA Section 82AI Section 82AIA Section 82AJ Section 82AJA Section 82AK Section 82AL Section 82AM Section 82AN Section 82AO Section 82AP Section 82APA Section 82AQ", "Related_Public_Rulings_and_Determinations": "IT 2142 (as amended 2/4/85)", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Effective life Commissioner's determination of effective life Acquisition of plant Date of acquisition of plant", "Case_References": "Utah Development Co v. Federal Commissioner of Taxation 14 ATR 601", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002180", "Unmatched_Content": "Related Public Rulings (including Determinations) IT 2142 (as amended 2/4/85) | Keywords Effective life Commissioner's determination of effective life Acquisition of plant Date of acquisition of plant"}
{"ATO_ID_Number": "ATO ID 2012/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: holder of a depreciating asset - right to remove", "Issue": "Does the taxpayer have a right to remove depreciating assets for the purpose of item 2 of the table in section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997) if the taxpayer has the right to remove the assets during the term of its quasi-ownership right over land, but does not have the right to remove the assets at the end of the term of the quasi-ownership right?", "Decision": "Yes. As the taxpayer has the right to remove the depreciating assets during the term of its quasi-ownership right and the meaning of 'right to remove' in item 2 of the table in section 40-40 of the ITAA 1997 is not limited to the right to remove assets at the end of the term of a quasi-ownership right, the taxpayer has a right to remove for the purpose of item 2 of the table in section 40-40.", "Facts": "The taxpayer entered into a lease of land and depreciating assets. The taxpayer's lease over the land constitutes a quasi-ownership right over the land. The depreciating assets are fixed to the land. Under the lease agreement, during the term of the lease, the taxpayer has the right to remove obsolete assets and to remove assets as the taxpayer considers necessary or desirable in the proper conduct of its business. Once assets are removed from the land, the taxpayer becomes their legal owner. The term of the lease is substantially longer than the effective life of the assets such that they will be replaced during the term of the lease. The taxpayer does not have a right to remove the assets at the end of the term of the lease for the purpose of item 2 of the table in section 40-40 of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Division 40 provides a deduction for the decline in value of a depreciating asset a taxpayer holds to the extent the asset is used for a taxable purpose. The table in section 40-40 identifies the holder of a depreciating asset. Item 10 of the table in section 40-40 provides that a taxpayer holds a depreciating asset if they are the owner of the asset, or the legal owner, if there is both a legal and equitable owner. However, there are other items in the table which identify a holder in various other circumstances even though they are not the asset's owner. Item 2 of the table in section 40-40 provides that if a depreciating asset is fixed to land over which there is a quasi-ownership right and the owner of the right has a right to remove the asset, then the asset is held by the owner of the quasi-ownership right for as long as the right to remove the asset exists. For the purposes of Division 40, this item effectively overcomes the common law presumption that ownership of assets affixed to land rests with the owner of the land. Paragraph 1.43 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 ('the EM') explains the policy intent of item 2 of the table in section 40-40: Where...a depreciating asset is fixed to land where the owner of the quasi-ownership right has a right to remove the asset, the uniform capital allowance system recognises them as the holder while the right of removal exists. Right of removal is consistent with the established legal concept, connoting a right to remove the asset for the benefit of the holder of the right, with the removed item being for their rather than the landowner's benefit. Often the right of removal will extend beyond the term of the quasi-ownership right, allowing the quasi-owner reasonable time to remove the asset; they will remain a holder of the asset until that right ends, as until then they might exercise the right and remove the asset, and so continue to hold the asset. That paragraph also contains an example (Example 1.5) of the application of item 2 of the table in section 40-40 to a taxpayer who has the right to remove fixtures while the lease subsists and for a reasonable time afterwards. Paragraph 1.43 of the EM and Example 1.5 refer to the situation where a taxpayer has a right to remove assets at the end of the term of a quasi-ownership right. However, the words 'right to remove the asset' and 'while the right to remove exists' in item 2 of the table in section 40-40 do not limit the application of the item to a situation where a taxpayer has a right to remove at the end of the term of the quasi-ownership right. It is considered that the taxpayer's right to remove in this case is consistent with the policy intent as outlined in paragraph 1.43 of the EM. The right of the taxpayer to remove obsolete assets and those which it considers necessary or desirable to remove for the proper conduct of its business is a right to remove for the benefit of the taxpayer. As the taxpayer obtains legal title to the assets that are removed, the removed assets are for the taxpayer's benefit rather than the lessor's benefit. Therefore, as the taxpayer has the right to remove the depreciating assets during the term of its quasi-ownership right and the meaning of 'right to remove' in item 2 of the table in section 40-40 is not limited to the right to remove assets at the end of the term of a quasi-ownership right, the taxpayer has a right to remove for the purpose of item 2 of the table in section 40-40.", "Date_of_Decision": "25 January 2012", "Year_of_Income": "Year ending 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Decline in value Economic owner Fixture on land Hold a depreciating asset Legal owner Quasi-ownership right", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20129", "Unmatched_Content": "Keywords Decline in value Economic owner Fixture on land Hold a depreciating asset Legal owner Quasi-ownership right"}
{"ATO_ID_Number": "ATO ID 2012/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Hire purchase agreement: holder of an asset", "Issue": "Upon entering into an arrangement for the term purchase of a depreciating asset, which provides the purchaser with a right to sell the asset to the owner (or an entity nominated by the owner) at a predetermined price at the end of the term of the arrangement, does the purchaser start to hold the asset under Item 6 of the table in section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Upon entering into the arrangement for the term purchase of a depreciating asset, which provides the purchaser with a right to sell the asset to the owner (or an entity nominated by the owner) at a predetermined price at the end of the term of the arrangement, the purchaser starts to hold the asset under Item 6 of the table in section 40-40 of the ITAA 1997.", "Facts": "The purchaser enters into an arrangement for the purchase by instalments of a depreciating asset. Under the arrangement, the asset remains the property of the owner (the legal owner) until all the payment obligations of the term purchase are met. Other relevant features of the arrangement include the following:", "Reasons_for_Decision": "Summary: Division 40 of the ITAA 1997 provides a deduction for the decline in value of a depreciating asset a taxpayer holds to the extent the asset is used for a taxable purpose (section 40-25 of the ITAA 1997). The table in section 40-40 of the ITAA 1997 identifies the holder of a depreciating asset in any particular circumstance. The basic (or default) rule is that the taxpayer holds the asset if they are the owner (the legal owner) of the asset (Item 10 of the table in section 40-40 of ITAA 1997). However, there are items that identify a holder in various other circumstances even though they are not the asset's owner. One of these circumstances is contained in Item 6 of the table in section 40-40 of the ITAA 1997 and applies where: During the term of this arrangement, the purchaser will possess the asset and has the right to become its legal owner upon meeting all the payment obligations of the term purchase arrangement. Where the right to sell is exercised, the asset is disposed of at the direction of the purchaser and the disposal will benefit the purchaser in meeting their final payment obligations under the arrangement. The purchaser will also become the legal holder of the asset for the instant in time before the asset is transferred to the nominated party who subsequently acquires the asset. Where the right to sell is not exercised, the purchaser will become the legal owner upon meeting its final payment obligations. Irrespective of whether the right to sell is exercised, the purchaser will become the legal owner of the asset (albeit only for an instant where the purchaser decides to exercise the right to sell) when the purchaser completes its payment obligations under the terms of the agreement. It is also reasonable to expect that the purchaser will complete its payment obligations under the arrangement because its payment obligations are unconditional and absolute and the owner can be expected to pursue the payment of debts incurred by the purchaser under these arrangements. Consequently, the tests contained in Item 6 of the table in section 40-40 of the ITAA 1997 are satisfied by the purchaser upon entering into the arrangements set out above for the purchase of the depreciating asset. Upon entering into the arrangement, the asset stops being held by the owner and starts to be held by the purchaser.", "Date_of_Decision": "20 September 2012", "Year_of_Income": "year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-25 Item 6 of the table in section 40-40 Item 10 of the table in section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Decline in value Economic Holder Hold a depreciating asset Lease financing Reasonable to expect Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201280", "Unmatched_Content": "Keywords Decline in value Economic Holder Hold a depreciating asset Lease financing Reasonable to expect Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2011/71", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 40: Item 6 in section 40-40 - right as against the former holder to possess the asset immediately", "Issue": "Does the sole beneficiary of a trust have the right, as against the former holder (the trustee), to possess the trust asset immediately in accordance with item 6 of section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997) by reason of a right to demand transfer of legal title to the asset from the trustee?", "Decision": "No. The sole beneficiary of the trust estate does not have the right as against the former holder to possess the trust asset immediately in accordance with item 6 of section 40-40 of the ITAA 1997. Prior to the beneficiary asking for ownership of the asset to be transferred to them, they do not have the right as against the former holder to possess the asset immediately.", "Facts": "A unit trust is established for the purpose of acquiring an asset which is to be leased to an unrelated third party. The trustee acquires the asset and enters into a lease agreement with the third party. The terms of the lease agreement are such that the third party will not have a right to obtain ownership of the asset. The trust deed provides that the trustee has the same powers in respect of the trust asset as if it was the beneficial owner of the asset acting in its personal capacity. These powers include the power to deal with the asset and the power to mortgage, charge or otherwise give security over any asset on such terms as the trustee thinks fit. The trust deed also provides that the beneficiary may require the trustee to transfer ownership of the asset to the beneficiary at any time or dispose of the asset at the direction and for the benefit of the beneficiary. The beneficiary is not in possession of the asset and the trustee has not been required to transfer ownership of the asset to them.", "Reasons_for_Decision": "Summary: You must hold a depreciating asset before you are entitled to claim a deduction for its decline in value under Division 40 of the ITAA 1997. The table in section 40-40 of the ITAA 1997 sets out who holds a depreciating asset. Essentially, the legal owner of a depreciating asset is the holder of the asset under item 10 of the table in section 40-40 of the ITAA 1997 unless any other item in the table applies. In this case the legal owner is the trustee and they will be the holder unless another item in the table applies. The only other item in the table which could potentially apply is item 6. Under item 6 the economic owner, rather than the legal owner, will hold an asset where the specified conditions are satisfied. The third party lessee will not hold the asset as economic owner under item 6 because the condition in item 6(b) is not satisfied (it does not have a right to obtain ownership of the asset). However, the beneficiary will satisfy this condition. Item 6(a) requires that the economic owner must possess the asset, or have a right against the former holder to possess the asset immediately. The beneficiary of the trust does not possess the asset as the asset is possessed by the lessee. To comply with item 6(a) it is therefore necessary that the beneficiary has a right as against the trustee to possess the asset immediately. The beneficiary is not the legal owner and there is no deed, agreement or legal rule that gives the beneficiary the right to immediate possession of the asset. The trust deed provides that the trustee has the power to deal with the asset and the power to mortgage, charge or otherwise give security over any asset on such terms as the trustee thinks fit. These powers are not consistent with the beneficiary having a right to possess the asset immediately. The trust deed merely allows the beneficiary to demand the transfer of ownership of the asset. The ability to demand transfer of ownership, of itself, does not give the beneficiary a right to immediate possession. In the absence of an agreement or legal rule that gives the beneficiary the express right to immediate possession the only way they can obtain that right is by the actual demand for the transfer of ownership. In this case the demand has not been made. When the demand is made this will be a step in the process of the beneficiary becoming the legal owner and once they become the legal owner they will hold under item 10. Paragraph 1.33 of the Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 provides the following guidance about the requisite right: Where the economic holder does not have actual possession but only a right against the apparent holder to possession, that right must be immediate, unconditional and non-contingent. That is, there must not be any thing to be done before that economic owner has the right to gain actual possession of the asset. For example, a taxpayer may have a call option over a depreciating asset the taxpayer does not hold but until that option is exercised there is no immediate right to possession and the option-holder will not hold the asset. Although, under the trust deed, the beneficiary is able to demand transfer of legal ownership they have not done so. The beneficiary is not the legal owner, does not possess the asset and does not have the right to possess the asset immediately. This means that they are not the holder under section 40-40 of the ITAA 1997.", "Date_of_Decision": "25 August 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Decline in value Deduction for depreciating assets Economic owner Hold a depreciating asset Legal owner", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201171", "Unmatched_Content": "Keywords Decline in value Deduction for depreciating assets Economic owner Hold a depreciating asset Legal owner"}
{"ATO_ID_Number": "ATO ID 2009/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: holding depreciating assets - tax law partnership", "Issue": "Does the entity, commonly referred to as a 'tax law partnership', hold depreciating assets under item 7 of the table in section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997) ?", "Decision": "No. The entity, commonly referred to as a 'tax law partnership', does not hold depreciating assets under item 7 of the table in section 40-40 of the ITAA 1997.", "Facts": "A number of individuals own, as tenants in common, a single residential property from which they derive rental income. This association of individuals satisfies the definition of partnership in subsection 995-1(1) of the ITAA 1997 because they are in receipt of ordinary income jointly. The property includes depreciating assets.", "Reasons_for_Decision": "Summary: Item 7 of the table in section 40-40 of the ITAA 1997 (Item 7) provides that a 'partnership' and not the particular partner is the holder of a depreciating asset that is a 'partnership asset'. Whilst the word 'partnership' is defined for the purposes of the ITAA 1997, the meaning of the expression 'partnership asset' is not defined for the purposes of Item 7. Furthermore it is important to bear in mind in considering the meaning of the expression that analysing each word separately and then seeking to reconstruct the terms used by reference to the definitions can lead to an artificial interpretation. As stated in Visa International Service Association v. Reserve Bank of Australia [2003] FCA 977; (2003) 131 FCR 300 at 293, citing Collector of Customs v. Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389, at 398-401, the expression 'is a collocation of words selected as a whole and that sense must be given to the expressions read together as an entirety rather than to individual words added to each other'. What is relevant is to consider whether there are any explicit statements in the legislation or in the extrinsic material that accompanied the expression which might provide assistance in establishing its meaning. Paragraphs 1.45 and 1.46 of the Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 (EM), which introduced section 40-40 of the ITAA 1997, states: 1.45 Property which has become partnership property or a partnership asset at general law is beneficially owned by all of the partners, even if only one partner is the legal owner. Where a depreciating asset is or becomes a partnership asset, it is appropriate to identify the partnership as being the economic owner of the asset. Thus, the partnership, and not any individual partner, is regarded as holding the asset. This is consistent with the structure of the income tax law, under which the partnership is a notional taxpayer arriving at a tax position which is then allocated out between the partners. [Schedule 1, item 1, section 40-40, item 7 in the table] 1.46 Whether a particular depreciating asset is a partnership asset is determined in accordance with partnership law. This is a question of fact that can only be determined from the terms of the partnership agreement and/or inferences drawn from the conduct of the partners towards the asset. In this context, it is the Commissioner's view that the phrase 'partnership asset' used in Item 7 is intended to carry its common law meaning. That is, it refers to assets of a partnership that are used for the purpose of the business carried on by the partnership. Accordingly, even though the employment of depreciating assets for the purpose of receiving income jointly may be enough to recognise a 'tax law partnership' (see definition of 'partnership' in subsection 995-1(1) of the ITAA 1997), the meaning of the phrase 'partnership asset' does not extend to assets employed in that manner if they are not owned in partnership to carry on a partnership business. Consequently the entity, recognised as being a 'tax law partnership', does not hold depreciating assets under Item 7. Note : where depreciating assets are jointly owned, subsection 40-35(1) of the ITAA 1997 provides that it is each joint holder's interest in an asset and not the actual asset itself (the underlying asset) that is the relevant depreciating asset for the purposes of Division 40 of the ITAA 1997. The joint owners of depreciating assets individually hold their legal interest in jointly held assets under item 10 of the table in section 40-40 of the ITAA 1997.", "Date_of_Decision": "4 August 2009", "Year_of_Income": "Year ending 30 June 2008 Year ending 30 June 2009 Year ending 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 54(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/134", "Subject_References": "Decline in value Deduction for depreciating assets Depreciating assets Hold a depreciating asset Interest in underlying asset Jointly held depreciating asset Legal owner Partnership asset Capital Allowances CoE", "Case_References": "Visa International Service Association v. Reserve Bank of Australia (2003) 131 FCR 300 [2003] FCA 977", "Other_References": "Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 Guide to depreciating assets (NAT 1996-06)", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009135", "Unmatched_Content": "Name of the document amended to 'Capital Allowances: holding depreciating assets - tax law partnership' for greater clarity. | Removed reference to ATO ID 2003/439 which has been withdrawn. | Guide to depreciating assets (NAT 1996-06) added to replace ATO ID 2003/439. | Correct citation of Visa International Service Association v. Reserve Bank of Australia [2003] FCA 977; (2003) 131 FCR 300. Remove discussion on Taxation Ruling IT 2398 | Correct citation of Visa International Service Association v. Reserve Bank of Australia [2003] FCA 977; (2003) 131 FCR 300. | Keywords Decline in value Deduction for depreciating assets Depreciating assets Hold a depreciating asset Interest in underlying asset Jointly held depreciating asset Legal owner Partnership asset Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2009/156", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: quasi-ownership right over land - meaning of lease", "Issue": "Is the taxpayer the owner of a quasi-ownership right over land for the purposes of subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the taxpayer is the owner of a quasi-ownership right over land because it has a lease of the land as a tenant at will.", "Facts": "The taxpayer conducts a primary production business on land owned by an associated entity. The taxpayer occupies the land with the consent of the owner and pays the rates, land taxes, insurance and other holding costs in return for the right to occupy. Although there is no written agreement, the parties' conduct indicates that the owner has agreed to allow the taxpayer the right of exclusive possession of the land.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Subsection 995-1(1) defines 'quasi-ownership right over land' to mean: 'Lease' is not defined in the ITAA 1997 and so takes its ordinary meaning according to the common law. LexisNexis Butterworths, Halsbury's Laws of Australia , Volume 16 (at 24 November 2009), 245 'Leases and Tenancies', paragraph 245-1 discusses the meaning of a lease of land as follows: A 'lease' or 'tenancy' of land is a means by which a lesser estate in the land than that originally held by the grantor (termed the 'lessor') is transferred, creating an on going relationship, to another person (termed the 'lessee'), so as to give the lessee exclusive possession of the demised premises for an ascertainable period of time, with the grantor retaining a reversionary interest in the property. The term 'lease' may refer to the grant, that which is granted and the document by which it is granted. A lease is a demise and as such confers an interest in rem in the legal estate of the subject matter of the lease. One usual incident of this interest is an obligation to pay rent. (footnotes removed) What constitutes 'exclusive possession' is explained in LexisNexis Butterworths, Halsbury's Laws of Australia , Volume 16 (at 24 November 2009), 245 'Leases and Tenancies', at paragraph 245-15: 'Exclusive possession' is a right which permits the holder to exclude other persons from the property. A lessee having exclusive possession of the demised premises can restrict all persons, including the lessor, from the demised premises, subject to any contrary statutory provision and certain exceptions. (footnotes removed) The right to exclusive possession of land is the decisive characteristic that distinguishes a lease from a licence that only confers a right to occupy. This principle was confirmed by the High Court in Radaich v. Smith (1959) 101 CLR 209; [1959] ALR 1253. In determining whether a lease has been granted, the Courts will look to the substance of the transaction and the conduct of the parties to characterise the rights that have been created. If the substance of the agreement points to an intention to confer a right to exclusive possession, then there will be a lease, regardless of the type of tenancy that is created. The tenancy may be for a fixed term, or may be a periodic lease or a tenancy at will. A tenancy at will is a type of lease and therefore the occupier of land under such a tenancy will be the owner of a quasi-ownership right over land as defined in subsection 995-1(1). LexisNexis Butterworths, Halsbury's Laws of Australia , Volume 22 (at 24 November 2009), 355 'Real Property' at paragraph 355-2130 notes that: The usual way for a tenancy at will to come into existence is for the tenant to take possession of the property in question with the landlord's consent without paying rent. It may also result from the tenant holding over at the expiration of the lease with the landlord's consent and paying no rent. (footnotes removed) Furthermore at paragraph 245-85 Halsbury's Laws of Australia also comments about a tenancy at will as follows: While it can be expressly created, it is more frequently held to arise by implication. Occupation without the payment of rent is a usual feature of the tenancy at will. (footnotes removed) In this case, the taxpayer has entered into possession of the land with the consent of the landowner. The parties' conduct shows that the landowner has granted the taxpayer the right to exclusive possession of the land in return for it paying the costs associated with the ownership of the land. These circumstances indicate that there is an implied agreement between the parties allowing the taxpayer to occupy the land as a tenant at will. Accordingly, the taxpayer has a lease of the land which is a quasi-ownership right over land under paragraph 995-1(1)(a).", "Date_of_Decision": "7 December 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1) paragraph 995-1(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Quasi-ownership right Tenancy", "Case_References": "Radaich v Smith (1959) 101 CLR 209 [1959] ALR 1253", "Other_References": "LexisNexis Butterworths, Halsbury's Laws of Australia, Volume 22 (at 24 November 2009), 355 'Real Property' LexisNexis Butterworths, Halsbury's Laws of Australia, Volume 16 (at 24 November 2009), 245 'Leases and Tenancies'", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009156", "Unmatched_Content": "Keywords Quasi-ownership right Tenancy"}
{"ATO_ID_Number": "ATO ID 2007/84", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: starting to hold a depreciating asset previously held by an exempt entity", "Issue": "Does the taxpayer 'acquire' a depreciating asset from the Commonwealth, a State, a Territory or an exempt entity as required in paragraph 58-5(4)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) where it starts to hold the depreciating asset under section 40-40 of the ITAA 1997 which immediately before was held by an exempt entity?", "Decision": "Yes. The taxpayer does acquire a depreciating asset from the Commonwealth, a State, a Territory or an exempt entity as required in paragraph 58-5(4)(a) of the ITAA 1997 where it starts to hold the depreciating asset under section 40-40 of the ITAA 1997 which immediately before was held by an exempt entity because the taxpayer is the first entity to hold the asset whose income is to any extent assessable.", "Facts": "The exempt entity earned fees from the use of its assets that were not assessable for income tax purposes. Its assets are improvements to land and fixtures on land that fall within the definition of depreciating asset as set out in subsection 40-30(3) of the ITAA 1997. The taxpayer, whose business relates to the leasing of a certain class of fixtures and improvements to land, commenced management of the exempt entity's depreciating assets under a long term lease and related agreements. Subsequent to the execution of the lease and pursuant to item 2 of the table in section 40-40 of the ITAA 1997, the taxpayer became the holder of the depreciating assets. The taxpayer's income is assessable.", "Reasons_for_Decision": "Summary: All legislative references in this Interpretative Decision are to the ITAA 1997 Division 58 sets out special rules that apply in calculating deductions for the decline in value of a depreciating asset under Subdivision 40-B. Division 58 applies in two defined situations: Subsection 58-5(4) defines an asset sale situation. The definition is satisfied where an entity whose income is assessable acquires a depreciating asset from the Commonwealth, a State, a Territory or an exempt entity (paragraph 58-5(4)(a)) and the asset is acquired in connection with the acquisition of a business from the Commonwealth, State, Territory or exempt entity (paragraph 58-5(4)(b)). The asset sale situation requires the identification of an acquisition. 'Acquire' is not defined in Division 58 and takes its ordinary meaning, shaped by the context in which it appears. The meaning given in the Macquarie Dictionary , 2001, rev. 3 rd edn, The Macquarie Library Pty Ltd, NSW of 'acquire' is 'to come into possession of; get as one's own'. In the context of obtaining a deduction for decline in value under Division 40, it is unclear whether the word 'acquire' requires the taxpayer to become a specific type of holder (for example, an owner under item 10 of the table in section 40-40) or a holder under any item in the table in section 40-40. Section 15AA of the Acts Interpretation Act 1901 provides: In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation. The essential purpose of Division 58 is to modify the rules under which a depreciating asset of the Commonwealth, a State, a Territory or an exempt entity is brought into the tax system for the purposes of calculating a deduction for its decline in value. Division 58 sought to provide consistency in the application of entity sale and asset sale situations. Paragraph 3.10 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No.2) 1999, to the extent that is relevant here, explains this policy: The proposed measures ensure that where depreciable assets of an exempt entity enter the tax net and that transfer is in connection with the acquisition of a business, the purchaser should obtain the same opening value for depreciation purposes irrespective of whether the transition of the assets into the tax net occurs by way of entity sale or asset sale. Upon the introduction of Division 40, a new Division 58 was introduced. The general outline of the Explanatory Memorandum to the New Business Tax System (Capital Allowances - Transitional and Consequential) Bill 2001 which inserted new Division 58 stated that existing regimes using different terms and concepts required amendments to ensure that assets subject to the current law moved smoothly into the uniform capital allowance system. There was no change either implicitly or explicitly in the underlying policy of Division 58 and the new Division 58 was drafted to interact with Division 40 in the same way it had interacted with former Division 42. Thus one would be led to expect that 'acquiring a depreciating asset' under Division 58 would have effect for the purposes of covering the intended range of scenarios under the holding rules in section 40-40. It follows then that Division 58 applies to depreciating assets which start to be held under any item in the table in section 40-40 which brings the asset into the tax system. This view is supported by the clear policy objective that Division 58 be applied consistently irrespective of whether the transition occurs by way of entity sale or asset sale. An approach to interpretation of Division 58 that applies the holding rules in section 40-40 inconsistently between the entity sale situation and the asset sale situation would defeat this underlying policy. Under an entity sale situation, Division 58 affects the way Division 40 applies to depreciating assets held by an entity (under any item in the table in section 40-40) upon it becoming taxable on its income. Therefore, a requirement in the application of an asset sale situation for holding by a taxpayer under one specific item in the table in section 40-40 (for example, item 10) is not a preferred interpretation. It would be inconsistent with the clear policy objective of Division 58. The Commissioner considers that the requirement in subsection 58-5(4) for the purchaser to acquire the depreciating asset from the Commonwealth, a State, a Territory or an exempt entity should be interpreted as satisfied where a depreciating asset of an exempt entity starts to be held by a taxable entity. This interpretation is consistent with the entity sale requirement in subsection 58-5(2) which is satisfied where the income of the exempt entity which holds the asset becomes, to any extent, assessable. This view is supported by paragraph 4.40 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 2002 which introduced consequential amendments to the Division and which (to the extent it is relevant here) states: Division 58 sets out special rules that apply in calculating deductions for the decline in value of depreciating assets and balancing adjustments for assets which were held by an exempt entity and are subsequently held by a taxable entity. In this case, despite not becoming the legal owner of the depreciating asset the taxpayer starts to hold the depreciating asset under section 40-40 when it becomes a lessee with a right to remove the asset. Immediately before the taxpayer became the asset's holder, the depreciating asset was held by an exempt entity. In these circumstances the taxpayer has acquired a depreciating asset from the Commonwealth, a State, a Territory or an exempt entity as required in paragraph 58-5(4)(a).", "Date_of_Decision": "22 February 2007", "Year_of_Income": "Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-B subsection 40-30(3) section 40-40 Division 58 subsection 58-5(2) subsection 58-5(4) paragraph 58-5(4)(a) paragraph 58-5(4)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Decline in value Depreciating assets Entity sale situation Asset sale situation Privatised assets", "Case_References": "", "Other_References": "Treasurer's Press Release No. 84 dated 4 August 1997 Explanatory Memorandum to Taxation Laws Amendment Bill (No.2) 1999 Explanatory Memorandum to New Business Tax System (Capital Allowances - Transitional and Consequential) Bill 2001 Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 2002 The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200784", "Unmatched_Content": "This ATO ID was amended by adding 'the Commonwealth, a State, a Territory or' to the description of an entity that is exempt for Division 58 purposes. This reflects a change to the law that was introduced by Act No 78 of 2007, effective from 1 July 2005. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Update quotation from section 15AA of the Acts Interpretation Act 1901 | Keywords Decline in value Depreciating assets Entity sale situation Asset sale situation Privatised assets"}
{"ATO_ID_Number": "ATO ID 2007/170", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Investment Product: reasonable to expect - holder of depreciating assets", "Issue": "In the circumstances described in the facts below is it 'reasonable to expect' that the taxpayer will become the holder of depreciating assets under item 6 of the table in section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997) by exercising their right as against the legal owner or that the assets will be disposed of at their direction and for their benefit?", "Decision": "Yes. It is 'reasonable to expect' that the taxpayer will become the holder of the depreciating assets by exercising its right as against the legal owner or that the depreciating assets will be disposed of at their direction and for their benefit in accordance with item 6 of the table in section 40-40 of the ITAA 1997.", "Facts": "The taxpayer nominates a commercial property to be purchased by an unrelated entity (Entity A). Entity A obtains the finance to purchase the property by borrowing a percentage of the purchase price from a funding trustee and by using funds raised through the issue of debentures to the taxpayer. Once the purchase of the property is settled, Entity A enters into a five year lease with the taxpayer. The taxpayer immediately subleases the property. The sublease is on substantially the same terms as the head lease except the sublessee has no option to purchase the property. The rent from subleasing the property is used firstly to meet outgoings in relation to the property and secondly to meet the interest on the principal outstanding on Entity A's loan. The balance is then applied to repay the principal on Entity A's loan. At the end of the five year lease period the taxpayer may renew the lease for another five years (subject to there being only 3 additional renewal periods); exercise their option to purchase the property; find a buyer to purchase the property and direct Entity A to sell the property to that buyer; or they may arrange for Entity A to sell the property on their behalf. The taxpayer can assign, to another party, their interest in the lease and the option to purchase the property. If the taxpayer exercises the option to purchase the property the taxpayer pays the initial purchase price paid by Entity A plus transaction costs. The taxpayer cannot borrow funds in order to purchase the property. The return the taxpayer receives on the debentures depends entirely on the net sale proceeds and the rental performance of the property as amounts are only paid on the debentures after Entity A's secured loan in relation to the property has been repaid. The property contains assets which are depreciating assets subject to Division 40 of the ITAA 1997.", "Reasons_for_Decision": "Summary: In broad terms, the holder of a depreciating asset is its economic owner. There may be several economic owners of a depreciating asset. The economic owners are the entities that are able to access the asset's economic benefits while stopping other entities from doing the same. Under item 6 of the table in section 40-40 of the ITAA 1997, the economic owner of a depreciating asset is an entity other than its apparent holder (for example, the legal owner) where the other entity possesses, or has a right against the apparent holder to possess, the asset immediately and has a right to become the holder of the asset and it is reasonable to expect that the right will be exercised, or that the asset will be disposed of at the direction and for the benefit of the economic owner. The taxpayer satisfies the requirement of it being reasonable to expect that they will become the holder of the existing assets by exercising their right for reasons directly associated with the taxpayer's specific obligations under the lease and economic considerations relating to the arrangement. This is because the taxpayer must, at the end of the last lease period, either: Further, under the terms of the arrangement: An objective analysis of the economic factors related to the arrangement indicate that: As the taxpayer has an immediate right to possess the depreciating assets, has the option to purchase the property and the depreciating assets and it is reasonable to expect that the taxpayer will become the holder of the depreciating assets or that the depreciating assets will be disposed of at the direction and for the benefit of the taxpayer, the taxpayer is regarded as the holder of the depreciating assets under item 6 of the table in section 40-40 of the ITAA 1997.", "Date_of_Decision": "14 August 2007", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/171", "Subject_References": "Decline in value Deduction for depreciating assets Economic owner Hold a depreciating asset Legal owner", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007170", "Unmatched_Content": "Keywords Decline in value Deduction for depreciating assets Economic owner Hold a depreciating asset Legal owner"}
{"ATO_ID_Number": "ATO ID 2007/171", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Investment Product: subleases property to another entity - right to immediately possess depreciating assets", "Issue": "Does the taxpayer have the right to immediately possess the depreciating assets, contained in a property if the taxpayer subleases the property to another entity, pursuant to item 6 of the table in section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer has the right to immediately possess the depreciating assets, contained in a property that the taxpayer subleases to another entity, pursuant to item 6 of the table in section 40-40 of the ITAA 1997.", "Facts": "The taxpayer nominates a commercial property to be purchased by an unrelated entity (Entity A). Once purchase of the property is settled, Entity A enters into a five year lease with the taxpayer and the taxpayer immediately subleases the property. The sublease is on substantially the same terms as the head lease except the sublessee has no option to purchase the property. The taxpayer can assign their interest in the lease and the option to purchase the property to another party.", "Reasons_for_Decision": "Summary: Section 40-25 of the ITAA 1997 provides to a holder of a depreciating asset an annual deduction for the decline in value of the asset as worked out under Division 40 of the ITAA 1997. The table in section 40-40 of the ITAA 1997 identifies a holder of a depreciating asset in any particular circumstance. The default rule is that the holder of a depreciating asset is the asset's owner (item 10 of the table in section 40-40). However, there are items that identify a holder in various other circumstances even though they are not the asset's owner. One of these circumstances is contained in item 6 of the table in section 40-40 of the ITAA 1997 which specifies that where one entity otherwise holds a depreciating asset but: the second entity is the holder of the depreciating asset to the exclusion of the first entity. As the taxpayer subleases the property immediately after entering into a lease with Entity A, the taxpayer does not have possession of the depreciating assets. Therefore, it is necessary to consider whether the taxpayer has the right to immediate possession of the depreciating assets. What is meant by an immediate right to possess is explained by paragraph 1.33 of the Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 which states: Where the economic holder does not have actual possession but only a right against the apparent holder to possession, that right must be immediate, unconditional and non-contingent. That is, there must not be any thing to be done before that economic owner has the right to gain actual possession of the asset. For example, a taxpayer may have a call option over a depreciating asset the taxpayer does not hold but until that option is exercised there is no immediate right to possession and the option-holder will not hold the asset. A lease creates a contract under which the lessor grants to a lessee the right to possess a defined interest in the premises for a fixed term. It creates both rights and obligations, principally the lessor's right to receive rent and obligation to grant the lessee quiet enjoyment of the premises, and the lessee's right to possession of the premises and corresponding obligation to pay rent (per Thomas J. in Wattie and Anor v. Commissioner of Inland Revenue 18 NZTC 13 297 at 13 316). A sublease is a transfer of less than the whole of the tenant's interest in the lease; for example, a transfer of the unexpired term of the lease less one month or less one day. The sublessor will retain a reversion in the lease; that is, the property will return to them at the end of the lease. Accordingly, the lease agreement between the taxpayer and the Entity A gives the taxpayer an immediate, unconditional and non-contingent right to possess the assets as against the Entity A, namely the legal owner. Although the taxpayer subleases the property and the depreciating assets to a third party, the taxpayer transfers less than their whole interest in the lease and right to exclusive possession reverts to the taxpayer at the end of that sublease. Therefore the taxpayer has the right to immediately possess the depreciating assets in the property, that it leases and has the option to purchase, pursuant to item 6 of the table in section 40-40 of the ITAA 1997.", "Date_of_Decision": "20 August 2007", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/170", "Subject_References": "Decline in value Deduction for depreciating assets Economic owner Hold a depreciating asset Legal owner", "Case_References": "Wattie and Anor v. Commissioner of Inland Revenue 18 NZTC 13 297", "Other_References": "Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007171", "Unmatched_Content": "Keywords Decline in value Deduction for depreciating assets Economic owner Hold a depreciating asset Legal owner"}
{"ATO_ID_Number": "ATO ID 2005/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: depreciating assets - capital works - deductions for decline in value", "Issue": "Does Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a structural improvement constructed by the taxpayer if an amount cannot be deducted under Division 43 of the ITAA 1997 for reasons other than those in paragraphs 40-45(2)(a) and 40-45(2)(b) of the ITAA 1997?", "Decision": "Yes. Division 40 applies to the structural improvement constructed by the taxpayer if a deduction is not available under Division 43 of the ITAA 1997 for reasons other than those in paragraphs 40-45(2)(a) and 40-45(2)(b) of the ITAA 1997.", "Facts": "A taxpayer enters into a contract with a company to provide specialised equipment and services. As part of conducting these activities, the taxpayer incurs expenditure on the construction of a set down area that allows the taxpayer to park the equipment, and a concrete wash down pad consisting of a rectangular cement slab that allows the taxpayer to wash down the equipment. Both the set down area and the concrete wash down pad are constructed on land subject to a lease which is held by the company engaging the services of the taxpayer. That company has agreed to allow the taxpayer to construct the set down area and the concrete wash down pad on the land it leases. The taxpayer has a right to exclusive possession of the set down area and the concrete wash down pad for the duration of the contract. The taxpayer has no rights or obligations in respect of the assets after the contract has expired. The set down area and the concrete wash down pad are structural improvements and capital works to which Division 43 of the ITAA 1997 could apply provided the relevant conditions are met. The set down area and the concrete wash down pad are also depreciating assets within the meaning of section 40-30 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Broadly speaking, section 40-25 of the ITAA 1997 allows to a holder of a depreciating asset, an annual deduction for the decline in value of the asset. Both the set down area and concrete wash down pad are improvements to land to which Division 40 of the ITAA 1997 applies as if they were assets separate from the land (subsection 40-30(3) of the ITAA 1997). They are also depreciating assets, as set out in subsection 40-30(1) of the ITAA 1997, because they are assets that have a limited effective life and can reasonably be expected to decline in value over the time they are used. The table in section 40-40 of the ITAA 1997 identifies a holder of a depreciating asset in any particular circumstance. Item 3 of that table specifies that where there is: An improvement to land (whether a fixture or not) subject to a quasi-ownership right (including any extension or renewal of such a right) made, or itself improved, by any owner of the right for the owner's own use where the owner of the right has no right to remove the asset. the owner of the quasi-ownership right (while it exists) will be a holder of the depreciating asset. Under subsection 995-1(1) of the ITAA 1997, a quasi-ownership right over land includes any right in connection with the land. The right of the taxpayer to exclusive possession of the assets during the term of the contract is a quasi-ownership right over the land. The taxpayer has also made the improvements for their own use and has no right to remove them. Therefore, the taxpayer holds the assets under item 3 of the table in section 40-40 of the ITAA 1997. However, subsection 40-45(2) of the ITAA 1997 provides that Division 40 of the ITAA 1997 does not apply to depreciating assets if they are capital works for which the taxpayer can, or could in certain circumstances, deduct amounts under Division 43 of the ITAA 1997: This means there is no deduction available for the set down area and the concrete wash down pad under Division 40 of the ITAA 1997 if amounts are able to be deducted under Division 43 of the ITAA 1997 for them. Division 40 also does not apply to the assets if there is no deduction available under Division 43, if the only reason that such deduction is not available is because either or both of the requirements referred to in paragraphs 40-45(2)(a) and 40-45(2)(b) of the ITAA 1997 have not been met. Therefore, it is necessary to determine whether the set down area and concrete wash down pad are capital works for which a deduction is available under Division 43. The limestone set down area and concrete wash down pad fall within the type of structural improvements described in subsection 43-20(3) of the ITAA 1997. They are therefore structural improvements for the purposes of subsection 43-20(2). Section 43-10 of the ITAA 1997 provides that an amount may be deducted for capital works for an income year if: Note 2 to section 43-10 of the ITAA 1997 states that: Amongst other things, the definition of your area ensures that only owners and certain lessees of capital works, and certain holders of quasi-ownership rights over land on which capital works are constructed, can deduct an amount under this Division. Subdivision 43-C of the ITAA 1997 defines the terms 'your area' and 'your construction expenditure'. Section 43-110 of the ITAA 1997 provides that: 'You can only get a deduction under this Division for an income year if you own, lease or hold part of a construction expenditure area of capital works. The area you own, lease or hold is called your area .' Section 43-120 of the ITAA 1997 clarifies the terms 'your area' and your construction expenditure' with regard to lessees and quasi-ownership right holders. The section requires that a quasi-ownership right over land be granted by an exempt government agency. The taxpayer does not lease the land on which the capital works are constructed, nor does the taxpayer hold the land on which the capital works are constructed under a quasi-ownership right granted by an exempt government agency. Therefore, there is no 'your area' in relation to the taxpayer. No deduction is allowable under Division 43 for capital expenditure incurred on the construction of capital works because the expenditure does not meet the requirements of section 43-10. The requirement that there be 'your area' is not one of those referred to under either paragraph 40-45(2)(a) or paragraph 40-45(2)(b) of the ITAA 1997. Therefore, the set down area and the concrete wash down pad are not excluded from Division 40 of the ITAA 1997and it will apply to these depreciating assets where the necessary conditions are otherwise met.", "Date_of_Decision": "26 October 2004", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-25 section 40-30 subsection 40-30(1) subsection 40-30(3) section 40-40 subsection 40-45(2) paragraph 40-45(2)(a) paragraph 40-45(2)(b) Division 43 section 43-10 subsection 43-20(2) subsection 43-20(3) Subdivision 43-C section 43-110 section 43-120 section 43-140 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/758 (withdrawn) | ATO ID 2004/564 (withdrawn)", "Subject_References": "Capital expenditure Construction costs Deductions & expenses Depreciating assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200521", "Unmatched_Content": "Keywords Capital expenditure Construction costs Deductions & expenses Depreciating assets"}
{"ATO_ID_Number": "ATO ID 2004/252", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: hold - application of item 6 of the hold table", "Issue": "Does the taxpayer, who possesses and uses a depreciating asset under a genuine lease agreement immediately before entering into a hire purchase arrangement for the asset, hold the asset under item 6 of the table in section 40-40 of the Income Tax Assessment Act (ITAA 1997) during the term of the lease?", "Decision": "No. The taxpayer does not hold the depreciating asset under item 6 of the table in section 40-40 of the ITAA 1997 during the term of the lease because the lease agreement does not provide the taxpayer with sufficient rights to enable them to become a holder under any item of the table in section 40-40.", "Facts": "The taxpayer (the lessee) possesses and uses a tangible depreciating asset under a genuine lease agreement (that is, the lease satisfies all of the requirements of Taxation Ruling IT 28). Within the lease agreement the lessor acknowledges and agrees, provided no event of default occurs, that on the expiry of the lease they will immediately grant to the lessee a new hire of the depreciating asset under a hire purchase arrangement on such terms as are agreed between the lessor and the lessee. The lease agreement does not impact on the purchase price to be financed under the hire purchase arrangement - it continues to be the market value of the asset at the time the hire purchase arrangement is entered into. The interim lease was entered into because the financing arrangements for the asset were not settled by the time the asset was required for use by the lessee.", "Reasons_for_Decision": "", "Date_of_Decision": "16 March 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-25 Section 40-40", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 28", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Allowances CoE Hire purchase Hold a depreciating asset Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004252", "Unmatched_Content": "Reason for Decision: Broadly speaking, Division 40 of the ITAA 1997 provides a deduction for the decline in value of a depreciating asset a taxpayer holds to the extent the asset is used for a taxable purpose (section 40-25 of the ITAA 1997). The table in section 40-40 of the ITAA 1997 identifies a holder of a depreciating asset in any particular circumstance. The default rule is that a taxpayer holds an asset if they are the owner of it (item 10 of the table in section 40-40 of the ITAA 1997). However, there are items in the table that identify a taxpayer as a holder in various other circumstances even though they are not the asset's owner. | One of these other circumstances is contained in item 6 of the table in section 40-40 of the ITAA 1997 and applies where: | It is accepted that the taxpayer possesses the asset under the lease agreement. It is not accepted, however, that the lease agreement provides the taxpayer with the requisite right to become a holder of the asset. The lease agreement creates mutual rights and obligations on each party to enter into a hire purchase arrangement at the end of the lease term but those rights (and obligations) do not, of themselves, amount to a right to become a holder of the asset. That right may, however, exist in the hire purchase arrangement. In these circumstances, it is not accepted that the potential inclusion of the requisite right in a subsequent hire purchase arrangement that is yet to be finalised is sufficient to say that such a right exists under the lease agreement. | The lease agreement is a genuine one under which the payments reflect the use only of the asset by the taxpayer and in no any way relate to the purchase price of the asset. In addition, the need to enter into the lease agreement arose out of a genuine timing difficulty in financing the asset and was not designed to transfer tax benefits as between the parties. | Item 6 of the table in section 40-40 of the ITAA 1997 also requires the reasonable expectation test to be satisfied. For similar reasons to those outlined above in respect of the existence of a right to become a holder, this test can only be satisfied on its second application. That is, the test in relation to the lease agreement could only be met if it was reasonable to expect that the taxpayer would become a holder of the asset under the hire purchase arrangement. It is not possible to come to a reasonable expectation about what will happen under an arrangement that has not been finalised. | Related Public Rulings (including Determinations) Taxation Ruling IT 28 | Keywords Capital Allowances CoE Hire purchase Hold a depreciating asset Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2004/957", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: depreciating asset - hold - fixtures on land", "Issue": "Does the taxpayer hold, under item 10 of the table in section 40-40 of the Income Tax Assessment 1997 (ITAA 1997), a depreciating asset they affix to land they lease if an unrelated statutory provision provides that the taxpayer retains legal ownership of the asset?", "Decision": "No. The taxpayer does not hold the depreciating asset under item 10 of the table in section 40-40 of the ITAA 1997 because they hold the asset under item 2 of that table.", "Facts": "The taxpayer affixed to land they lease from an unrelated entity a depreciating asset they own. The taxpayer uses the asset in carrying on their business. The terms of the lease provide the taxpayer with the right to remove the depreciating asset. A statutory provision which applies to the taxpayer's particular circumstances provides that the taxpayer retains legal ownership of the asset even though it is affixed to another entity's land.", "Reasons_for_Decision": "Summary: Subsection 40-25(1) of the ITAA 1997 allows a taxpayer to deduct an amount for the decline in value of a depreciating asset they hold. To be a holder of a depreciating asset, one of the 10 items in the table in section 40-40 of the ITAA 1997 must apply. The first nine items in the table apply to specific kinds of depreciating assets. Item 10 applies to any depreciating asset. Because the specific items apply in preference to the general item, item 10 applies as a default rule. That is, item 10 may apply if none of the other nine items apply. The legal owner of a depreciating asset is a holder of the asset under item 10 of the table in section 40-40 of the ITAA 1997 unless another item in the table specifically prevents them from being a holder. The taxpayer is the legal owner of the asset because of the application of the statutory provision and, therefore, may be a holder of the asset under this item. Item 2 of the table in section 40-40 of the ITAA 1997 provides that if a depreciating asset is fixed to land over which there is a quasi-ownership right and the owner of the right has a right to remove the asset, then the asset is held by the owner of the quasi-ownership right for as long as the right to remove the asset exists. The taxpayer is a holder of the depreciating asset under this item because their lease constitutes a quasi-ownership right over the land and they have a right to remove the asset. For the purposes of Division 40 of the ITAA 1997, this item effectively displaces the common law presumption that ownership of assets affixed to land rests with the owner of the land. The statutory provision also displaces that common law presumption. For the purposes of identifying a holder of a depreciating asset under Division 40 of the ITAA 1997, however, the taxpayer is a holder of the depreciating asset under item 2 of the table in section 40-40 of the ITAA 1997 because it applies in preference to item 10 of that table.", "Date_of_Decision": "16 November 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-25(1) section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/958", "Subject_References": "Depreciating asset Capital Allowances CoE Hold a depreciating asset Fixtures on land", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004957", "Unmatched_Content": "Keywords Depreciating asset Capital Allowances CoE Hold a depreciating asset Fixtures on land"}
{"ATO_ID_Number": "ATO ID 2003/149", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: second application of 'reasonable to expect' test to hold a depreciating asset", "Issue": "Is the 'reasonable to expect' test contained in Item 6 of the hold table in section 40-40 of the Income Tax Assessment Act 1997 (ITAA 1997) satisfied by the particular call option the sublessee holds under their sublease if the lessee was treated as the holder of the asset under an earlier application of the test?", "Decision": "Yes. The 'reasonable to expect' test contained in Item 6 of the hold table in section 40-40 of the ITAA 1997 is satisfied by the particular call option held by the sublessee under their sublease because of the nature of the call option and the weighting of factors influencing the sublessee to exercise the option.", "Facts": "The taxpayer (the sublessee) purchased a depreciating asset which they immediately sold to an unrelated entity (the lessor). The lessor immediately leased the asset to an entity (the lessee) associated with the taxpayer and the lessee immediately subleased the asset to the taxpayer. Other relevant features of the arrangement are:", "Reasons_for_Decision": "", "Date_of_Decision": "11 December 2002", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-25 Item 6 of the table in section 40-40 Item 10 of the table tin section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Allowances CoE Economic holder Hold a depreciating asset Lease financing Reasonable to expect Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003149", "Unmatched_Content": "Reason for Decision: Division 40 of the ITAA 1997 provides a deduction for the decline in value of a depreciating asset a taxpayer holds to the extent the asset is used for a taxable purpose (section 40-25 of the ITAA 1997). The table in section 40-40 of the ITAA 1997 identifies the holder of a depreciating asset in any particular circumstance. The basic (or default) rule is that the taxpayer holds when they are the owner of the asset (Item 10 of the table in section 40-40 of (ITAA 1997). However, there are items that identify a holder in various other circumstances even though they are not the asset's owner. | One of these circumstances is contained in Item 6 of the table in section 40-40 of ITAA 1997 and applies where: | On the first application of Item 6 of the hold table in section 40-40 of the ITAA 1997, the lessee (and not the lessor) is the holder of the asset because: | On a second application of Item 6 of the hold table, the taxpayer (and not the lessee) is the holder of the asset because: | The reasonable to expect test is satisfied in the particular circumstances of the second application of the test because: | Keywords Capital Allowances CoE Economic holder Hold a depreciating asset Lease financing Reasonable to expect Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/1037", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 40: hold - partnership depreciating asset subject to a call option", "Issue": "Is the leasing partnership a holder of the depreciating assets under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the leasing partnership is a holder of the depreciating assets pursuant to Item 7 of the table in section 40-40 of the ITAA 1997.", "Facts": "A partnership purchased various depreciating assets under a manufacture and supply agreement. It immediately leased the assets on a commercial basis to an unrelated entity that had been awarded a franchise by another unrelated entity to operate a business in which the assets are used. As part of an arrangement with the partnership, the franchisor was granted a call option over the leased assets so that, on exercising the option to purchase the assets, the franchisor can make the assets available to a subsequent franchisee in certain circumstances.", "Reasons_for_Decision": "", "Date_of_Decision": "12 July 2002", "Year_of_Income": "2000", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating asset Division 40 Hold Partnership asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021037", "Unmatched_Content": "Reason for Decision: In broad terms, the holder of a depreciating asset is its economic owner. There may be several economic owners of a depreciating asset. The economic owners are the entities that are able to access the asset's economic benefits while stopping other entities from doing the same. | The leasing partnership holds legal title to the depreciating assets. | In some cases, however, for an entity to hold an asset in a particular way excludes another entity from being an economic owner of the asset. In these cases, the legal owner may not be the economic owner. | One case in which the economic owner of a tangible asset is an entity other than its apparent holder (for example, the legal owner) is where the other entity possesses, or has the right against the apparent holder to possess, the asset immediately and has a right to become the holder of the asset and it is reasonable to expect that the right will be exercised. In this situation, the other entity is treated as the holder of the depreciating asset to the exclusion of the apparent holder (Item 6 of the table in section 40-40 of the ITAA 1997). | The franchisor holds a call option (exercisable in certain circumstances including where the lease is terminated early by the lessor or the franchise agreement terminates early) the exercise of which would require the lessor to sell the depreciating assets to the franchisor or a person nominated by the franchisor. The franchisor does not have actual possession of the assets and the right to possession it does have under the call option is not immediate but conditional and contingent. In these circumstances, Item 6 of the table in section 40-40 of the ITAA 1997 does not apply to treat the franchisor as a holder of the assets while the call option remains unexercised. | Another specific case which recognises that an economic owner of a depreciating asset is its holder to the exclusion of other entities is a depreciating asset that is a partnership asset. | Whether a particular depreciating asset is a partnership asset for the purpose of Division 40 of the ITAA 1997 is determined in accordance with partnership law. This is a question of fact that can only be determined from the terms of the partnership agreement and/or inferences drawn from the conduct of the partners towards the asset. | A depreciating asset that is a partnership asset is held by the partnership and not by any particular partner, either alone or jointly with the other partners (Item 7 of the table in section 40-40 of the ITAA 1997). | The transaction documents evidence the simple case where the leasing partnership acquired, under contract, assets from partnership funds that are put to use exclusively in the partnership leasing business. | Keywords Depreciating asset Division 40 Hold Partnership asset"}
{"ATO_ID_Number": "ATO ID 2003/946", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Low-value pools - allocating substantially identical assets", "Issue": "Can a depreciating asset which cost less than $1,000 be allocated to a low-value pool under section 40-425 of the Income Tax Assessment Act 1997 (ITAA 1997) even if the total cost of all substantially identical items acquired by the taxpayer in that income year exceeded $1,000?", "Decision": "Yes. Regardless of the total cost of all substantially identical items acquired during the income year, if the item is a depreciating asset which cost less than $1,000 and the cost is not immediately deductible under subsection 40-80(2) of the ITAA 1997, it can be allocated to the low-value pool under section 40-425 of the ITAA 1997, provided the other conditions of the provision are met.", "Facts": "A taxpayer acquired, in one purchase, several blinds for the windows in a rental property. The cost of each blind was between $100 and $500, but the total cost of the blinds exceeded $1,000. The blinds are substantially identical as they are: The only difference between the blinds is their size, which is dictated by the size of the window in the relevant room.", "Reasons_for_Decision": "", "Date_of_Decision": "10 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 40-425. subsection 40-425(1). subsection 40-425(2). subsection 40-425(4). subsection 40-80(2).", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/80", "Subject_References": "Capital Allowances CoE Low value pool Substantially identical depreciating assets Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003946", "Unmatched_Content": "Reason for Decision: Subsection 40-425(1) of the ITAA 1997 gives taxpayers the choice to allocate low-cost assets to a low-value pool for the income year in which they start to use them, or have them installed ready for use, for a taxable purpose. | A low-cost asset is a depreciating asset, except a horticultural plant, whose cost is less than $1,000 (after GST credits or adjustments) as at the end of the income year in which you start to use it, or have it installed ready for use, for a taxable purpose (subsection 40-425(2) of the ITAA 1997). | Whether a particular item is a depreciating asset is a question of fact and degree which is determined in the light of all of the circumstances of the particular case. In some situations an item may be part of a larger depreciating asset and not be a depreciating asset by itself. | In this case, each of the blinds is a separate depreciating asset. As their costs range from $100 to $500, each of the blinds meets the definition of a low-cost asset provided in subsection 40-425(2) of the ITAA 1997. | A deduction is not allowable under section 40-425 of the ITAA 1997 if the expenditure meets the requirements for an immediate deduction under subsection 40-80(2) of the ITAA 1997. | The taxpayer's expenditure on the blinds does not qualify for an immediate deduction under subsection 40-80(2) of the ITAA 1997. The expenditure fails to meet the conditions of that provision. In particular, the total cost of substantially identical items that the taxpayer started to hold in the income year exceeds $300. | As each depreciating asset has cost less than $1,000 it can be allocated to the low-value pool under section 40-425 of the ITAA 1997. | For the purposes of allocating depreciating assets to the low-value pool under section 40-425 of the ITAA 1997, it is not by itself determinative if identical, or substantially identical, low-cost assets are acquired by the taxpayer during the income year. | Keywords Capital Allowances CoE Low value pool Substantially identical depreciating assets Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2011/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: primary production - water facilities - sprinkler system used for frost protection", "Issue": "Is an overhead sprinkler system used by the taxpayer solely for frost protection a 'water facility' as defined in paragraph 40-520(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An overhead sprinkler system used by the taxpayer solely for frost protection is a water facility as defined in paragraph 40-520(1)(a) of the ITAA 1997 because the system is plant that is primarily and principally for the purpose of conveying water.", "Facts": "The taxpayer carries on a primary production business of growing orchards on land in Australia. The taxpayer installed an overhead sprinkler system consisting of pipes, pumps and sprinklers. The sprinkler system is an item of plant. The system can be used for both regular irrigation and frost protection. The taxpayer uses the system solely for frost protection. An existing under tree irrigation system is used for regular watering of the orchards. An overhead sprinkler system is commonly used as a method of frost protection. The overhead sprinkler system supplies water to the surface of the ice-coated plant tissue at regular rapid intervals to maintain an ice/water interface until the temperature of the surrounding air has risen above 0º C and all ice formations on the plants have melted. As long as a film of water surrounds the surface of the ice-coated plant tissue, the release of heat in the transformation of water into ice ensures that the temperature of the plant tissue would not drop below 0º C (most plants do not suffer frost damage until the temperature drops below 0º C because the freezing point of the plant tissue liquid is below that of water). The design of the overhead sprinkler system, including sprinkler rotation speed, water application rate and uniformity of water distribution over the orchard ensures that the system is able to provide maximum protection using a minimum amount of water by supplying just the right amount of water at the right frequency to ensure a continuous ice/water interface over the required area.", "Reasons_for_Decision": "Summary: The term 'water facility' is defined in subsection 40-520(1) of the ITAA 1997 to include plant or a structural improvement, or a repair of a capital nature, or an alteration, addition or extension, to plant or a structural improvement, that is primarily and principally for the purpose of conserving or conveying water (paragraph 40-520(1)(a)). As the overhead sprinkler system is an item of plant, the relevant issue here is whether the system is 'primarily and principally for the purpose of conserving or conveying water'. The predecessors of Subdivision 40-F of the ITAA 1997 [note that the provisions of Subdivision 40-F recast in a condensed form, and with minimal alteration, the rules of Subdivision 387-B of the ITAA 1997 (repealed as of 30 June 2001) that were previously transitioned into the ITAA 1997 from section 75B of the Income Tax Assessment Act 1936 (ITAA 1936) (repealed as of 14 September 2006)], required that a taxpayer must have incurred the expenditure on a water facility 'primarily and principally for the purpose of conserving or conveying water' (emphasis added). In considering this term for the purposes of former section 75B of the ITAA 1936, Taxation Determination TD 94/9 considers the test requires an examination of the primary and principal function or purpose of the result produced by incurring the expenditure where the expenditure is incurred for a dual purpose. Subdivision 40-F of the ITAA 1997 has retained this test in stating the conditions that must be satisfied for a deduction to be allowed (subsection 40-525(1) of the ITAA 1997). However, the current definition also separately specifies that in order to be considered to be a water facility, plant must be primarily and principally for the purpose of conserving or conveying water. In spite of this change, there has been no change in the threshold purpose required under each of these provisions. Accordingly, it is considered that the principles stated in TD 94/9 applies equally to paragraph 40-520(1)(a) of the ITAA 1997. Further, the principles can be applied to any expenditure incurred (not just where the expenditure is incurred for a dual purpose) to determine whether the expenditure meets the threshold purpose. An overhead sprinkler system can be used to convey water for use in different ways. The carrying of water through the pumps and network of pipes, the uniformity of the distribution of the water, the water application rate and the frequency of the wetting are different aspects of conveying and delivering water. For any particular system of conveying water, these aspects could vary to suit the use for which the water is conveyed. That is, an overhead sprinkler system can be used to both water plants and prevent frost damage. If the former is the relevant use, the system would have a certain water application rate and frequency of wetting to convey and deliver water in a way that is appropriate for the needs of the plants at various stages of growth taking into account the climatic and seasonal conditions. If frost protection is the relevant use, the system would have a different water application rate and frequency of wetting to convey and deliver water in a way that is appropriate for that use. In either case, the primary and principal function of the overhead sprinkler system is to convey water and deliver it for a particular use. In this case, the expenditure incurred by the taxpayer was to acquire the sprinkler system for the primary and principal purpose of conveying water to the orchard in a way that is appropriate for frost protection. Frost protection is a result produced by the application of water in a certain way when the temperature reaches a certain point. The sprinkler system provides the mechanism for which water can be conveyed and used in a particular way so that a particular result can be achieved by the application of water. It follows that the result produced by the expenditure is the conveyance of water for a particular use. It is of no difference that the taxpayer uses the sprinkler system to deliver water for frost protection rather than irrigation as both uses satisfy the test specified in paragraph 40-520(1)(a) of the ITAA 1997. Therefore, an overhead sprinkler system to convey water to the orchard in a way that is appropriate for frost protection and used by the taxpayer solely for frost protection is a 'water facility' as defined in paragraph 40-520(1)(a) of the ITAA 1997.", "Date_of_Decision": "19 March 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 former section 75B", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Irrigation & water supply equipment Primary production expenses Primary production structural improvement expenses Water conservation & conveying expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20113", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 94/9 | Keywords Irrigation & water supply equipment Primary production expenses Primary production structural improvement expenses Water conservation & conveying expenses"}
{"ATO_ID_Number": "ATO ID 2009/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: irrigation water provider - primary and principal activity", "Issue": "Is the taxpayer an irrigation water provider within the meaning of that term in subsection 40-515(6) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, because revenues and costs to the taxpayer of engaging each of its business activities is a valid basis of comparison of the relative precedence of the business activities to the taxpayer in this case, and based on that comparison, the taxpayer is an irrigation water provider within the meaning of that term in subsection 40-515(6) of the ITAA 1997.", "Facts": "The taxpayer's business supplies bulk water for a number of uses, including use by entities in primary production businesses on land in Australia. The business also provides water supply industry-specific consultancy and management services. The business accounts of the taxpayer provide separate figures for revenue derived and costs incurred (including asset impairment) in engaging in each business activity - including each type of bulk water use. The taxpayer's revenue derived from and costs incurred in engaging in the supply of water to entities for use in primary production businesses are greater than 50 per cent of the revenue and costs of the taxpayer's total business activity.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Subsection 40-515(6) defines an 'irrigation water provider' as follows: An irrigation water provider is an entity whose *business is primarily and principally the supply (otherwise than by using a *motor vehicle) of water to entities for use in *primary production businesses on land in Australia. In order to determine whether the taxpayer satisfies subsection 40-515(6), it is necessary to understand the meaning to be attributed to 'primarily and principally' in this context, the scope and nature of the taxpayer's business and to apply that meaning to the business of the taxpayer. The Tax Laws Amendment (2004 Measures No. 6) Act 2005 introduced the concept of an 'irrigation water provider' in subsection 40-515(6) to the income tax law. The extrinsic materials, including the explanatory memorandum to the Bill for this Act do not provide any guidance as to the meaning that Parliament intended the expression 'primarily and principally' to take in this context. The meaning of the expression 'primarily and principally' has not been judicially considered in this context, however, the meaning of the expression 'primarily and principally' has been considered by Australian courts in relation to other legislation. In Parker Pen (Aust) Pty Ltd v. Export Development Grants Board (1983) FCA 77; (1983) 46 ALR 612, Lockhart J said, in considering whether advertising expenditure was incurred primarily and principally for the purpose of creating or seeking opportunities, or creating or increasing demand, for export sales by the entity incurring the expense (at ALR 619-20): Sub-s. 4(1) uses the adverbs 'primarily' and 'principally'. It is a curious use of language. The words have different derivations and sometimes different connotations. For example, one meaning of 'primarily' is at first or originally. 'Principally' does not bear this meaning. I have looked at various dictionaries. They all define the adjectives 'primary' and 'principal' and some define the adverbs 'primarily' and 'principally'. The modern meanings given in the dictionaries to these words is much the same. For example, Collins Dictionary of the English Language, Australian edition edited by G.A. Wilkes, defines 'primarily' so far as relevant, as 'principally; chiefly; mainly'. The Macquarie Dictionary defines the adverb 'principally' as 'chiefly; mainly'. It is in this sense that the words are to be understood in sub-s.4(1). Notwithstanding the tractability of the English language I do not think that the two adverbs have separate work to perform in the sub-section. In my view the draftsman used both words to emphasise that it is only where the Board is satisfied that expenditure has been incurred mainly or chiefly (to use neutral adverbs) for the required purpose that the expenditure answers the description of 'eligible expenditure'. The scope of the term 'primarily and principally' was considered in St George Leagues Club v. Commissioner of Land Tax (NSW) (1983) 14 ATR 826; 83 ATC 4736 ( St George ), where Lee J said, in considering whether a block of land was used primarily and principally for water skiing (at ATR 833; ATC 4743-4): The expression \"primarily and principally\" is not the same as \"solely\" and does not deny exemption in a case where there is some other user of the whole or part which, however, does not prevent a conclusion that the land is used \"primarily and principally\" for the purposes of the sport under consideration. This may give rise to questions of fact and degree in some cases, but on the evidence in the present case there can be no doubt that the whole of the land is used \"primarily and principally\" for the purposes of water-skiing and, accordingly, it is within the exemption provided under para.(h). These cases indicate that the question of what the taxpayer's business primarily and principally is can be determined as the chief or main, but not necessarily the sole, business of the taxpayer. The St George case above indicates that land may have a primary and principal use notwithstanding that it is used for more than one purpose. This principle can equally be applied to determining what the business of a taxpayer primarily and principally is. In Hope v. The Council of the City of Bathurst (1980) 144 CLR 1; 80 ATC 4386; (1981) 12 ATR 231 ( Hope ), Mason J. considered the meaning of the phrase 'carrying on business' when he said (at CLR 8-9; ATC 4390; ATR 236): ... activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis. Based on the Hope case, a business can best be determined by identifying the activities engaged in on an ongoing basis for the purpose of profit. It follows that determining what a taxpayer's business primarily and principally is, can be determined by identifying the chief or main activity the taxpayer engages in on an ongoing basis for the purpose of profit. In regard to a taxpayer who carries on more than one business activity, it is necessary to decide appropriate criteria upon which the relative precedence of the business activities to the taxpayer can be measured. What criteria are appropriate will depend upon the facts and circumstances of the conduct of the particular business activities and the information available. Further, the measurable attributes of the activities engaged in that are most useful in this regard will also depend on the facts in each case. In the taxpayer's factual circumstances, revenue and costs are the measurable attributes common to all the taxpayer's business activities that provide an indication of the scope and nature of the business activities undertaken. The fact that both the taxpayer's revenue derived from and costs incurred in engaging in the supply of water to entities for use in primary production businesses are greater than those in relation to any of the other activities supports the conclusion that the taxpayer in this instance is an irrigation water provider. In this case, the revenue and costs related to the relevant business activity are actually greater than 50 per cent of the revenue and costs of the taxpayer's total business activity however, it does not appear to be necessary in this statutory context for the chief or main activity to constitute 50 per cent or more, that is - the absolute majority, of the taxpayer's business activities - rather that the relevant activity merely be foremost amongst the business activities.", "Date_of_Decision": "9 September 2008", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-515(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Irrigation expenses Wholly or principally Supply of water", "Case_References": "Parker Pen (Aust) Pty Ltd v. Export Development Grants Board (1983) FCA 77 (1983) 46 ALR 612", "Other_References": "Explanatory memorandum to the Tax Laws Amendment (2004 Measures No. 6) Bill 2005", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20094", "Unmatched_Content": "Keywords Irrigation expenses Wholly or principally Supply of water"}
{"ATO_ID_Number": "ATO ID 2004/15", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: second hand commercial water facilities", "Issue": "Is a taxpayer entitled to a deduction under section 40-515 of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure incurred on the acquisition of a second hand water facility?", "Decision": "No. Subsection 40-555(1) of the ITAA 1997 provides that no deduction is available for capital expenditure on the acquisition of a water facility if any person has deducted or can deduct an amount under Subdivision 40-F of the ITAA 1997 for any income year for earlier capital expenditure on the construction, manufacture or previous acquisition of that water facility.", "Facts": "A taxpayer has acquired second hand commercial irrigation equipment from an Australian based farming machinery dealer. The equipment is bought and sold by the dealer as a single self-contained unit. The equipment's capacity is far in excess of domestic requirements (that is, size, water pressure, spray arc etcetera.) The taxpayer intends to use the irrigation equipment in a primary production business undertaken in Australia. The taxpayer does not know and can not find out who the previous owner was and if they claimed, or were entitled to claim, a deduction for the water facility under Subdivision 40-F of the ITAA 1997. The water facility is not put to a tax preferred use so Division 250 of the ITAA 1997 does not apply to the capital expenditure.", "Reasons_for_Decision": "Summary: Paragraph 40-515(1)(a) of the ITAA 1997 provides that you can deduct an amount equal to the decline in value for an income year (as worked out under Subdivision 40-F of the ITAA 1997) of a water facility. Subsection 40-520(1) of the ITAA 1997 defines a water facility as plant or a structural improvement, or an alteration, addition or extension to plant or a structural improvement, that is primarily and principally for the purpose of conserving or conveying water. Examples of water facilities include dams, tanks, bores, wells, irrigation channels, pipes, pumps, water towers and windmills. Subsection 40-525(1) of the ITAA 1997 requires that the capital expenditure you incurred on the construction, manufacture, installation or acquisition of the water facility must have been incurred primarily and principally for the purpose of conserving or conveying water for use in a primary production business that you conduct on land in Australia. Primary production business is defined in subsection 995-1(1) of the ITAA 1997. However, subsection 40-555(1) of the ITAA 1997 provides that no deduction is available for capital expenditure on the acquisition of a water facility if any person has deducted or can deduct an amount under Subdivision 40-F of the ITAA 1997 for any income year for earlier capital expenditure on the construction, manufacture or previous acquisition of that water facility. (A water facility and an alteration, addition or extension to that facility are not the same water facility for the purposes of that subsection.) Section 40-525 of the Income Tax (Transitional Provisions) Act 1997 provides that a taxpayer is taken as having deducted or being able to deduct an amount under Subdivision 40-F of the ITAA 1997 for expenditure on a water facility if the taxpayer has deducted or could have deducted an amount for it under former Subdivision 387-B of the ITAA 1997 or section 75B of the Income Tax Assessment Act 1936. In some instances a taxpayer who acquires a second hand water facility, particularly one not permanently affixed to land, will not know and will not be able to find out whether the previous owner claimed or was entitled to a deduction under Subdivision 40-F of the ITAA 1997. In such a case the onus of proof would be on the taxpayer to prove that a previous entitlement had not existed if they wish to claim a deduction for the decline in value of a water facility. In certain circumstances it may not be unreasonable to conclude that an entitlement has previously existed for a water facility based on the facts and balance of probabilities. The main factor influencing such a conclusion would be the inherently commercial nature of the item which is of the type, function and configuration ordinarily used in primary production businesses. Where the water facility provides for capacity that is in excess of that generally used for a private purpose it is not unreasonable to conclude that it was previously employed to conserve or convey water in a primary production business in Australia. A further indicator that such an conclusion is not unreasonable is that the water facility is obtained from an Australian based farming machinery dealer who regularly acquires such equipment from local primary producers. Based on the conclusion that a previous entitlement has existed, no deduction is allowable under Subdivision 40-F of the ITAA 1997 for capital expenditure incurred on the acquisition of second hand commercial water facilities. This conclusion will be made unless the taxpayer has proof to the contrary. Furthermore, subsection 40-50(1) of the ITAA 1997 provides that no deduction for the decline in value of a depreciating asset is allowed under Subdivision 40-B of the ITAA 1997 where you or another taxpayer has deducted or can deduct an amount under Subdivision 40-F of the ITAA 1997.", "Date_of_Decision": "17 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-50(1) paragraph 40-515(1)(a) subsection 40-520(1) section 40-525 subsection 40-525(1) section 40-540 subsection 40-555(1) Subdivision 40-B Subdivision 40-F Division 250 Subdivision 387-B subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Dam, bore & windmill construction expenses Primary production Primary production structural improvement expenses Uniform capital allowances system Water conservation & conveying expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200415", "Unmatched_Content": "Related ATO Interpretative Decisions | Remove ATO ID 2003/234 as it has been withdrawn. | Remove reference to subsection 40-555(2) of the ITAA 1997. Include reference to Division 250 of the ITAA 1997. | Keywords Capital expenditure Dam, bore & windmill construction expenses Primary production Primary production structural improvement expenses Uniform capital allowances system Water conservation & conveying expenses"}
{"ATO_ID_Number": "ATO ID 2014/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - in-house software", "Issue": "Does computer software developed by the taxpayer for conjunctive use within its company group satisfy the definition of in-house software in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the computer software developed by the taxpayer does satisfy the definition of in-house software in subsection 995-1(1) of the ITAA 1997.", "Facts": "To improve group-wide business performance, the taxpayer developed a single, fully integrated series of software applications for use by itself and all the other entities of the company group of which it was a member. The aim of the software was to allow the group businesses to leverage off each other through common processes metrics. The software ensured that the group's master data was common and that appropriate group reports, compliance requirements and key performance indicators could be developed. In this context, a conjoint use of the software and its function was necessary in order for the software to perform the functions for which it was developed. The software was not developed for the purpose of licencing to others.", "Reasons_for_Decision": "Summary: In-house software is defined in subsection 995-1(1) of the ITAA 1997 as computer software, or a right to use computer software, that you acquire, develop or have another entity develop that is mainly for you to use in performing the functions for which the software was developed and for which you cannot deduct amounts outside Division 40 and Division 328 of the ITAA 1997. The functions of the computer software developed by the taxpayer provide a single integrated series of software applications necessitating a conjoint use of the software and its functions by all entities of the company group of which the taxpayer was a member. The question arises as to whether the development of the software for the conjoint use by all the entities of the company group is development mainly for the taxpayer to use in performing the functions for which it was developed. The meaning of in-house software is consistent with the type of software that was treated under former Division 46 of the ITAA 1997. Paragraph 1.18 of the explanatory memorandum to the New Business Tax System (Capital Allowances) Bill 2001 explained that the treatment of 'in-house software' was not intended to be an in-substance change from the way software was treated under former Division 46. Paragraph 31 of the explanatory memorandum to the Taxation Laws Amendment (Software Depreciation) Bill 1999 provided the following explanation:- New Division 46 is intended to apply to software which is acquired or developed for use within the business. It is not intended to extend to situations where software development for exploitation is the business. In this case, the software and its functions were not developed for a separate or distinct use by the taxpayer. It was equally not developed for separate or distinct use by other entities of the company group. Rather, the taxpayer developed the computer software and its functions to be embedded into the common business practices of itself and of the entities within its company group. The software was not developed for the purpose of licencing to others. In the context of the intended treatment of in-house software within Division 40, the Commissioner is of the view that in-house software is software that is developed, by or for an entity, to be mainly for the entity to use within its organisation in performing the functions for which the computer software was developed. A conjunctive use of the computer software by other members of the company group is consistent with the software being mainly used by the taxpayer as the use by the other members assists the taxpayer's use of the software within its business organisation. Accordingly, the computer software developed by the taxpayer satisfies the definition of in-house software in subsection 995-1(1) of the ITAA 1997.", "Date_of_Decision": "21 March 2014", "Year_of_Income": "Year of income ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Division 46 (repealed as of 1 July 2001) Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Computer software Depreciating assets Depreciation of software In-house software Uniform capital allowance system", "Case_References": "", "Other_References": "Explanatory memorandum to the Taxation Laws Amendment (Software Depreciation) Bill 1999 (Cth) Explanatory memorandum to the New Business Tax System (Capital Allowances) Bill 2001 (Cth)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201416", "Unmatched_Content": "Keywords Computer software Depreciating assets Depreciation of software In-house software Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2010/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: mining, quarrying or prospecting right - interest in a licence", "Issue": "If the taxpayer is the registered holder of a 40 per cent share in a licence for the recovery and exploration of petroleum from two separate oil fields, are there two corresponding 'interests' in the licence for the purpose of paragraph (c) of the definition of 'mining, quarrying or prospecting right' in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer's 'interest' in the licence for the purpose of paragraph (c) of the definition of 'mining, quarrying or prospecting right' in subsection 995-1(1) of the ITAA 1997 is the 40 per cent share in the licence. The taxpayer has no separate equitable interest in relation to the licence or in relation to the oil fields for the purpose of paragraph (c) of the definition.", "Facts": "The relevant Government authority approved the transfer to the taxpayer of a 40 per cent share in a licence to recover and explore for petroleum from two separate oil fields. The taxpayer is registered as the legal owner of the share in the licence. The taxpayer had no other registered dealings in relation to the licence. The licence is a licence under an Australian law to mine, quarry or prospect for minerals, petroleum or quarry materials for the purpose of the definition of 'mining, quarrying or prospecting right' in subsection 995-1(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Subsection 995-1(1) relevantly defines a mining, quarrying or prospecting right as follows: The word 'interest' in paragraph (c) is not defined for the purposes of the ITAA 1997 and takes its ordinary meaning in the context in which it appears in the legislation. The Macquarie Dictionary relevantly defines 'interest' as: a share in the ownership of property, in a commercial or financial undertaking, or the like; any right of ownership in property, commercial undertakings, etc. Therefore, in the context of paragraph (c) of the definition of 'mining, quarrying or prospecting right' in subsection 995-1(1) of the ITAA 1997, an 'interest' in a licence is a share in the ownership of, or any right of ownership in, the licence. Ownership of property may be legal or equitable. Judicial authority establishes that the legal owner of property has the whole right of property but has no separate equitable interest in it as the equitable interest is absorbed in the legal ownership. Where the legal and equitable ownership of property is severed so that it does not vest in only one person, the equitable interest is separately recognised to confer on the equitable owner the protection of equitable principles. The principle that there is no separate existence of the legal and equitable interest in property where one person holds both interests was applied by the Privy Council in Commissioner of Stamp Duties (Qld) v. Livingston (1964) 112 CLR 12; [1964] 3 All ER 692 where Viscount Radcliffe at CLR 22; All ER 699 denied that: for all purposes and at every moment of time the law requires the separate existence of two different kinds of estate or interest in property, the legal and the equitable....When the whole right of property is in a person, as it is in an executor, there is no need to distinguish between the legal and equitable interest in that property, any more than there is for the property of a full beneficial owner...... Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines. In DKLR Holding Co (No 2) Pty Ltd v. Commissioner of Stamp Duties (NSW ) (1982) 149 CLR 431; 40 ALR 1, the High Court also considered whether there is a dualism of legal and equitable estates where there is one absolute owner of land. Gibbs CJ observed at CLR 442; ALR 9 that: the legal owner of the land...had the whole right of property in the land, but had no separate equitable estate in it, for its equitable estate was absorbed in the legal estate... Aicken J at CLR 463; ALR 27 expressed the principle as follows: If one person has both the legal estate and the entire beneficial interest in the land he holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable. In this case, the taxpayer has a single entire interest as legal owner of the percentage share in the licence. Therefore, the taxpayer has no separate equitable interest in relation to the licence. There have been no dealings in relation to the licence that require the creation of an equitable interest to be separately recognised. Accordingly, the taxpayer has no separate equitable interest in the licence that corresponds with the separate oil fields within the meaning of paragraph (c) of the definition. The taxpayer's 'interest' in the licence for the purpose of paragraph (c) of the definition of 'mining, quarrying or prospecting right' in subsection 995-1(1) of the ITAA 1997 is its legal ownership of the percentage share in the licence.", "Date_of_Decision": "18 December 2009", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Equitable interests Legal owner Mining & petroleum Mining & exploration licences & permits Petroleum mining & exploration licences & permits", "Case_References": "Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 [1964] 3 All ER 692", "Other_References": "The Macquarie Dictionary, 2001, 3rd Edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201045", "Unmatched_Content": "Status of this decision: This interpretative decision is currently being reviewed as a result of a recent court/tribunal decision. Refer to Decision Impact Statement : Mitsui Co (Australia) Ltd v Commissioner of Taxation (Published 21 October 2014) .However, the decision continues to represent the Tax Office view on this issue unless or until it is withdrawn. | Keywords Equitable interests Legal owner Mining & petroleum Mining & exploration licences & permits Petroleum mining & exploration licences & permits"}
{"ATO_ID_Number": "ATO ID 2009/130", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - mining, quarrying or prospecting right", "Issue": "Are the right to recover petroleum and the right to explore for petroleum under a production licence granted by the relevant State Department to the taxpayer, separate depreciating assets from the production licence within the meaning of that term in section 40-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The right to recover petroleum and the right to explore for petroleum under a production licence are not separate depreciating assets from the production licence within the meaning of that term in section 40-30 of the ITAA 1997.", "Facts": "All legislative references are to the ITAA 1997 unless otherwise stated. A production licence was granted by the relevant State Department to the taxpayer to recover petroleum from the production licence area (right to recover petroleum). It was a condition of the grant of the production licence that the taxpayer continued to appraise and explore the production licence area to determine whether additional recoverable petroleum existed in the area and to exploit such petroleum where commercially viable (right to explore for petroleum). The exploration permit previously granted by the relevant State Department to the taxpayer to explore for petroleum in respect of the production licence area was extinguished in respect of that area when the production licence was granted. The production licence granted by the relevant State Department to the taxpayer is a mining, quarrying or prospecting right within the meaning of that term in subsection 995-1(1). As the production licence authorises the taxpayer to recover petroleum in the production licence area, the production licence is an asset described in column 2 of item 2 of the table in subsection 40-95(10) as 'a mining, quarrying or prospecting right relating to mining operations to obtain petroleum'.", "Reasons_for_Decision": "Summary: A depreciating asset is broadly defined in subsection 40-30(1) as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Whether a composite item is itself a depreciating asset or whether its components are separate depreciating assets is a question of fact and degree to be determined in light of all the circumstances of the particular case (subsection 40-30(4)). Paragraph 1.15 of the Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 (the EM) indicates that the functionality test should be applied when identifying particular depreciating assets. Paragraph 1.15 of the EM states: Taxpayers will be required to exercise judgment in identifying the depreciating asset where the asset itself is made up of different parts and components. In doing this, the ' functionality' test that is used as a basis of identifying a 'unit of plant' in the existing plant depreciation rules can be used. (Specific reference to a 'unit' or an 'item' is not necessary to attract the test, as the definition of a depreciating asset is based on a life in effective use and the depreciating asset must be identifiable as having its own life in such use.) [Schedule 1, item 1, subsection 40 - 30(4)] (emphasis added) The Commissioner's views in Taxation Ruling TR 94/11 are a guide to what represents a separate unit or item, and are relevant in determining whether, as a question of fact and degree, a composite item is itself a depreciating asset. An item is generally itself a single item (rather than a number of separate units) if it has one or more of the characteristics listed in paragraph 3 of TR 94/11. The basic test put forward in TR 94/11 is a 'function test'. The ruling contains guidelines about the function test and explains how it must be applied to the particular factual circumstances of each case. A composite item is itself a depreciating asset that has a separate function, and is functionally complete in itself, even though it may not be self-contained or isolated. The function of the thing being considered need only be separately definable or identifiable rather than be self contained or isolated, and be capable of performing its own intended discrete function. The relevant types of function that the item performs are those that are sufficiently complete, definable and identifiable so as to give the item subjected to those uses the characteristics of a single depreciating asset in the taxpayer's operations. Factors such as physical separability and whether an item can be separately acquired also need to be considered in deciding whether an item may be a separate depreciating asset. In this case, the thing that might be considered a composite item is the production licence granted by the relevant State Department to the taxpayer (the production licence) which may be made up of different components, being the right to recover petroleum and the right to explore for petroleum in the production licence area. It is therefore necessary to determine whether the production licence is the relevant depreciating asset within the meaning of that term in section 40-30 or alternatively, whether its components, being the right to recover petroleum and the right to explore for petroleum in the production licence area, are the relevant depreciating assets. It is considered that both the right to recover petroleum and the right to explore for petroleum in the production licence area are solely derived from the grant of the production licence by the relevant State Government to the taxpayer. This view is reinforced by the fact that the rights are not, of themselves, functionally discrete or capable of separation from the production licence, nor are they items that can be acquired independently of the production licence. For example, once the production licence has been granted to the taxpayer, there are no residual rights from the exploration permit to explore the production licence area for petroleum. It follows that the right to explore for petroleum is solely derived from the grant of the production licence and that right has no independent function or existence from the production licence. It is considered that the production licence is a separately identifiable item that performs its own intended discrete function and is therefore, functionally complete in itself. The function of the production licence is to allow the taxpayer to recover petroleum and to explore for petroleum within the production licence area. Based on this functionality, the production licence, rather that its component rights, is itself the depreciating asset in these circumstances. It is the production licence, and not the rights to recover and explore for petroleum in the production licence area, that is the asset which is identifiable as having its own life in effective use. As the production licence is a mining, quarrying or prospecting right that authorises the taxpayer to recover petroleum in the production licence area, it is an asset described as a mining, quarrying or prospecting right relating to mining operations to obtain petroleum. The effective life of such an asset is described in column 3 of item 2 of the table in subsection 40-95(10) as the taxpayer's estimate of the period until the end of 'the life of the petroleum field or proposed petroleum field to which the right relates'. The production licence is therefore an asset that has a limited effective life and can reasonably be expected to decline in value. Accordingly, the production licence is itself the depreciating asset within the meaning of that term in section 40-30.", "Date_of_Decision": "16 September 2009", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 40-30 section 40-30(1) section 40-30(4) section 40-95(10) section 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating assets Mining & petroleum Mining & exploration licences & permits", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009130", "Unmatched_Content": "Status of this decision: This interpretative decision is currently being reviewed as a result of a recent court/tribunal decision. Refer to Decision Impact Statement : Mitsui Co (Australia) Ltd v Commissioner of Taxation (Published 21 October 2014) .However, the decision continues to represent the Tax Office view on this issue unless or until it is withdrawn. | Related Public Rulings (including Determinations) Taxation Ruling TR 94/11 | Keywords Depreciating assets Mining & petroleum Mining & exploration licences & permits"}
{"ATO_ID_Number": "ATO ID 2008/50", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - improvement to land - gully dam", "Issue": "Is the taxpayer's gully dam a depreciating asset within the meaning of subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's gully dam is a depreciating asset because, as an improvement to land, it is treated as an asset separate from the land and, in its particular separate state, satisfies the meaning of that term in subsection 40-30(1) of the ITAA 1997.", "Facts": "The taxpayer has constructed a gully dam on land which they lease to a third party who uses the land for agricultural operations. The dam was constructed by building a wall across an existing gully and is used to impound water. A state government authority provided the taxpayer with some guidelines for the construction of the dam. No other formal design was sought by the taxpayer. The contractor who constructed the dam for the taxpayer provided the ultimate construction design as they had constructed many similar dams in the area. The land on which the dam was constructed was cleared several years ago and surveyed last year to determine an appropriate structure. The materials used in construction of the dam wall were excavated clay and its overburden (comprising soil of varying quality). The materials used were obtained from the excavation of the existing gully. If there had not been sufficient soil or clay for the construction of the dam wall from the excavation of the gully the taxpayer would have sourced more soil or clay from elsewhere on their land. The extracted materials were separated and then reintroduced in a specific way so as to construct the dam wall. The dam consists of: The dam will deteriorate over time because erosion, the growth of trees and water seepage will compromise the impermeable clay sealing of the dam. If tree roots grow through the structure of the dam, water then 'tracks' the roots, dragging soil and clay material with it which eventually causes the dam to fail. The taxpayer is not carrying on a business of primary production and is not an irrigation water provider.", "Reasons_for_Decision": "Summary: (All references to legislation within this Interpretative Decision are to the ITAA 1997) A depreciating asset is broadly defined in subsection 40-30(1) as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Paragraph 40-30(1)(a) provides that land, prima facie , cannot constitute a depreciating asset. Subsection 40-30(3) operates to limit this exception by providing that an improvement to land , or a fixture on land, is to be recognised as an asset separate from the land for the purpose of applying Division 40. For an improvement to land to be a depreciating asset the improvement must not be 'land' within the ordinary meaning of that word. The term improvement to land is not defined however the concept of an improvement to land has been widely considered in case law. The principles that can be extracted from the relevant cases, when considered in the context of Division 40, provide that an improvement to land is an identifiable alteration to the land that enhances the usefulness of the land to the user. To determine if an improvement to land is other than land in its ordinary meaning, the improvement to land must be found to have a discrete and identifiable function separate to merely existing as the solid substance of the exposed surface of the earth. This gully dam, constructed using specified materials, is performing a discrete and identifiable function of collecting, storing and stopping the flow of water that enhances the usefulness of the land. Therefore, it is considered that the gully dam is not land for the purposes of paragraph 40-30(1)(a). The dam has a discrete and identifiable function separate to merely existing as the exposed surface of the earth. Having established that the taxpayer holds an improvement to land that is other than land in its ordinary meaning, it is necessary to determine if that improvement is also a 'depreciating asset' under subsection 40-30(1) - specifically, whether it has a limited effective life and can reasonably be expected to decline in value over the time it is used (see Note 1 at subsection 40-30(3)). Although an asset must decline in value over the time that it is used, it is not necessary for this to occur uniformly over time. It is sufficient that it will decline in value by the end of its effective life. While the overburden that was used as an embankment on either side of the impermeable clay could be economically maintained for an indefinite period, the same cannot be said of the clay itself. The clay that was formed to provide both the foundation for and the core of the dam wall will suffer deterioration from continual use and exposure to the elements and, therefore, the dam can reasonably be expected to decline in value over the time it is used. The meaning of effective life is contained in section 40-100 (for the Commissioner's determination) and in section 40-105 (for self-assessment). Broadly, the effective life of the dam in this case is how long it can be used by anyone for producing assessable income, having regard to the period within which it is likely to be scrapped or abandoned. The dam will deteriorate over time because erosion, the growth of trees and water seepage will compromise the clay sealing of the dam. It is therefore considered that the dam has a limited effective life. As the dam is an improvement to land; has a limited effective life; and can reasonably be expected to decline in value over the time it is used, the dam is a depreciating asset for the purposes of subsection 40-30(1).", "Date_of_Decision": "20 February 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 40-25 section 40-30 subsection 40-30(1) Paragraph 40-30(1)(a) subsection 40-30(3) subsection 40-45(2) section 40-100 subsection 40-105(1)", "Related_Public_Rulings_and_Determinations": "TR 2012/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/11 (Withdrawn) | ATO ID 2007/12 (Withdrawn)", "Subject_References": "Decline in value Depreciating assets Effective life Improvement to land", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200850", "Unmatched_Content": "Updated wording for technical clarity. | Wording updated to improve clarity. | Related Public Rulings (including Determinations) | New ATO Taxation Ruling added | Related ATO Interpretative Decisions | Related ATO ID's identified as withdrawn | Related Public Rulings (including Determinations) TR 2012/7 | Keywords Decline in value Depreciating assets Effective life Improvement to land"}
{"ATO_ID_Number": "ATO ID 2006/169", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - rights under the law of a foreign country in respect of a licence to exploit a patented invention", "Issue": "Are the rights that company A has the benefit of under the law of a foreign country in respect of a licence to exploit a patented invention 'intellectual property' as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rights that company A has the benefit of under the law of a foreign country in respect of a licence to exploit a patented invention are 'intellectual property' as defined in subsection 995-1(1) of the ITAA 1997.", "Facts": "Company A (non-resident of Australia for taxation purposes) enters into a licence agreement with company B (resident of Australia for taxation purposes) for the exploitation by company A of company B's patented invention. Under the agreement, company B retains all propriety rights to the patent while company A is granted exclusive rights to exploit the invention subject to the patent in a foreign jurisdiction for a fixed period of time. The rights company A has the benefit of under the law of a foreign country in respect of the licence agreement are similar to the rights that would have been available under Australian law in respect of such an agreement in Australia.", "Reasons_for_Decision": "Summary: To work out a balancing adjustment amount under section 40-285 of the ITAA 1997, a depreciating asset for which the balancing adjustment event occurred needs to be identified. Paragraph 40-30(2)(c) of the ITAA 1997 provides that items of intellectual property are depreciating assets provided they are not trading stock. Intellectual property is defined in subsection 995-1(1) of the ITAA 1997. The definition states: ...an item of intellectual property consists of the rights (including equitable rights) that an entity holds under a Commonwealth law as: (a) the patentee, or a licensee, of a patent; or (b) the owner, or a licensee, of a registered design; or (c) the owner, or a licensee, of a copyright; Under this definition, rights under a foreign law will constitute an item of intellectual property if they are equivalent to rights (including equitable rights) that an entity holds as the patentee or a licensee of a patent under an act of an Australian Parliament. The definition of 'intellectual property' in subsection 995-1(1) of the ITAA 1997 is a rewrite of the definition of 'unit of industrial property' contained in former subsection 124K(1) of the Income Tax assessment Act 1936 (ITAA 1936). Under the former subsection 124K(1) of the ITAA 1936, a 'unit of industrial property' was defined as: (a) rights possessed by a person under a law of Australia as: (i) the grantee or proprietor of a patent for an invention; or (ii) the owner of a copyright; or (iii) the owner of a registered design; or (iv) a licensee under such a patent, copyright or design; and includes equitable rights in respect of such a patent, copyright or design or in respect of a licence under such a patent, copyright or design; or Under the Patents Act 1990 , a patent confers exclusive rights on the proprietor to prevent others from exploiting the invention subject to the patent. On the other hand, the right of a licensee to exploit a patented invention is not generally determined under the Patents Act but from the terms and conditions expressed or implied in each licence. However, where a patent owner enters into a specifically enforceable contract to grant a licence in a patent to a licensee, an equitable interest is created. Pending payment of the licence fee, the licensee in the patent has an equitable interest in the patent which reflects the extent to which equitable remedies are available to protect his contractual rights and the vendor is under obligations in equity which attach to the patent (see commentary on equitable interests in Kern Corp Ltd v. Walter Reid Trading Pty Ltd (1987) 163 CLR 164 at 191-192 and Stern v. McArthur (1988) 165 CLR 489 at 521-522)). Consequentially, a licensee of a patent has equitable rights in respect of the licence in the patent which qualify as 'a unit of industrial property' as defined in former subsection 124K(1) of the ITAA 1936. The words in the definition of intellectual property contained in ITAA 1997 have expressed the same idea in a different form of words to those contained in the definition of 'unit of industrial property' in subsection 124K(1) of the ITAA 1936. In this regard, the ideas are not different just because different forms of words were used (subsection 1-3(2) of the ITAA 1997). In this case, the rights company A has the benefit of under foreign law in respect of the licence are similar to the rights that would have been available to it in Australia for such an agreement between an Australian licensee and a non-resident patentee. Therefore, the equitable rights enjoyed by company A under the licence in the foreign jurisdiction are 'intellectual property' under the definition in subsection 995-1(1) of the ITAA 1997.", "Date_of_Decision": "30 May 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 124K(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/493 | ATO ID 2006/167 | ATO ID 2006/168", "Subject_References": "Balancing adjustment event Balancing adjustments Depreciating assets Intellectual property rights Patents Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006169", "Unmatched_Content": "or of equivalent rights under a foreign law. | Keywords Balancing adjustment event Balancing adjustments Depreciating assets Intellectual property rights Patents Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2006/259", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - section 73BA depreciating asset - full-scale test model", "Issue": "Is the full-scale test model of an item of equipment, which is the subject matter of the taxpayer's research and development (R&D) activities, a 'section 73BA depreciating asset' within the meaning of that term in section 73BB of the Income Tax Assessment Act 1936 (ITAA 1936) for which the taxpayer has a 'notional Division 40 deduction' within the meaning of section 73BC of the ITAA 1936?", "Decision": "Yes. The full-scale test model is a 'section 73BA depreciating asset' because the test model is a tangible depreciating asset that is used by the taxpayer, an 'eligible company', for the purpose of carrying on their R&D activities and the taxpayer has a 'notional Division 40 deduction' for the asset.", "Facts": "The taxpayer is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936, that carries on 'research and development activities' as defined in subsection 73B(1). The taxpayer has registered its R&D activities in the manner contemplated by subsection 73BD(1) of the ITAA 1936. The subject matter of the taxpayer's R&D activities is an item of equipment capable of performing a specific manufacturing process. The taxpayer's R&D activities encompass not only designing and developing the item of equipment but also testing the performance of the asset against the requisite specifications. As an integral part of the R&D activities, the taxpayer built a full-scale model of the item of equipment for the purpose of testing the asset's capacity to perform the specific manufacturing process at a commercially viable level. The test model is not an item of trading stock of the taxpayer and the expenditure on the test model does not represent 'feedstock expenditure' within the meaning of that term in subsection 73B(1) of the ITAA 1936. The test model was constructed after 29 January 2001 and no deduction under subsection 73B(15AA) of the ITAA 1936 is allowable in relation to it (see subsection 73B(15AAAA) of the ITAA 1936). Testing revealed that the model did not operate at the requisite level and required some refinement of its functionality. The process of refining the test model's functionality involved continuous and various modification, adaptation and retesting over a further period of about 18 months. While this process resulted in the removal of some components from the test model and their replacement with other components, neither the functionality nor the physicality of the test model was altered to any material extent. Following this period of refinement, the taxpayer was satisfied that the test model was capable of performing the required functionality for the specific manufacturing process at a commercially viable level. The taxpayer then proceeded to replicate and market the item of equipment.", "Reasons_for_Decision": "Summary: As far as is relevant here, the combined effect of sections 73BB and 73BC of the ITAA 1936 is to define a 'section 73BA depreciating asset' as one for which the taxpayer has a 'notional Division 40 deduction': that is, where it is a tangible depreciating asset for which an 'eligible company' could deduct an amount under section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997) if certain assumptions were made about the requirements for deductibility under that section. The taxpayer's item of equipment is, clearly, a tangible asset. An 'eligible company' is defined in subsection 73B(1) of the ITAA 1936 to mean a body corporate incorporated under a law of the Commonwealth or of a State or Territory. As stated in the facts, the taxpayer is an 'eligible company'. Section 40-25 of the ITAA 1997 provides an annual deduction to a holder of a depreciating asset for the decline in value of the asset as worked out under Division 40 of the ITAA 1997. Subject to some specific exclusions, a depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used (subsection 40-30(1) of the ITAA 1997). The definition of depreciating asset is, therefore, based on a life in effective use such that a depreciating asset is identified by having its own life in that use. This means that a depreciating asset will generally be identified by its functionality. It follows that an asset may be a depreciating asset if it is in a condition that enables it to function or to be used as a depreciating asset even though the asset requires further refinement to its functionality or use. 'Used' is a word of wide import and its meaning in any particular case will depend on the context in which the word is employed and the purpose for which the thing in question has been acquired or created (see Newcastle City Council v. Royal Newcastle Hospital (1956) 96 CLR 493). In the context of carrying on R&D activities, it is sufficient that the asset can perform the functionality for which it was designed for the asset to be used. For the full-scale test model that the taxpayer built, functions that are relevant to the asset being used include: testing the functionality of the item of equipment; monitoring the performance of the item of equipment; providing data on each of these matters for further analysis; and modifying or adapting the asset as part of the refinement process. Accordingly, the full-scale test model built by the taxpayer is a depreciating asset. This is the case even though the test model was commercially incomplete in the sense that it needed further refinement before it could be commercially exploited. As the legal owner of the asset, the taxpayer also holds the asset under item 10 of the table in section 40-40 of the ITAA 1997. As far as is relevant here, a 'notional Division 40 deduction' is available for a 'section 73BA depreciating asset' if, pursuant to section 73BC of the ITAA 1936, the asset is used for the purpose of carrying on the eligible company's R&D activities. As stated in the facts, the taxpayer does use the asset for this purpose. Accordingly, the full-scale test model is a 'section 73BA depreciating asset' because the asset is a tangible depreciating asset and the taxpayer is entitled to a 'notional Division 40 deduction' for the asset when the taxpayer, an eligible company, uses it for the purpose of carrying on its R&D activities.", "Date_of_Decision": "11 August 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(15AA) subsection 73B(15AAAA) section 73BB section 73BC subsection 73BD(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/260", "Subject_References": "Depreciating assets Depreciating asset - section 73BA Research and development plant Uniform capital allowances system", "Case_References": "Newcastle City Council v. Royal Newcastle Hospital (1956) 96 CLR 493", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006259", "Unmatched_Content": "Keywords Depreciating assets Depreciating asset - section 73BA Research and development plant Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/271", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - breakwater", "Issue": "Is the taxpayer's breakwater and all of its associated infrastructure a single depreciating asset within the meaning of that term in subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The breakwater is a single depreciating asset, and separate from all of its associated infrastructure, within the meaning of that term in subsection 40-30(1) of the ITAA 1997. Various items of infrastructure may also be separate depreciating assets.", "Facts": "The taxpayer provides facilities and services within the water transport industry. On 30 June 1992, the taxpayer started constructing a breakwater to improve the effectiveness and efficiency of the facilities and services that it provides. The construction of the breakwater was completed on 30 June 1993. The breakwater was constructed of multiple layers of rock and was specially designed to take into account the particular facilities and services it provides and the natural elements in which they are provided. The infrastructure attached to the breakwater included several wharves, sand pumping equipment, power lines, a road and a conveyor system. The breakwater was specially designed to take into account particular activities within the harbour.", "Reasons_for_Decision": "Summary: Whether a composite item is itself a depreciating asset or whether its components are separate depreciating assets is a question of fact and degree to be determined in light of all the circumstances of the particular case (subsection 40-30(4) of the ITAA 1997). The Commissioner's views in Taxation Ruling TR 94/11 are a guide to what represents a separate unit or item, and are relevant in determining whether, as a question of fact and degree, a composite item is itself a depreciating asset. An item is generally itself a single item (rather than being a number of separate units) if it has one or more of the characteristics listed at paragraph 3 of TR 94/11. The basic test put forward in TR 94/11, on the basis of the authorities summarised therein, is a 'function test'. The ruling contains guidelines about the function test and explains how it must be applied to the particular factual circumstances of each case. A composite item is itself a depreciating asset that has a separate function, and is functionally complete in itself, even though it may not be self-contained or isolated. The function of the thing being considered need only be separately definable or identifiable rather than be self contained or isolated, and be capable of performing its own intended discrete function. The relevant types of function that the item performs are those that are sufficiently complete, definable and identifiable so as to give the item subjected to those uses the characteristics of a single depreciating asset in respect of the taxpayer's operations. It is considered that the breakwater is a separately identifiable item and performs its own intended discrete function. The main functions of the breakwater are to: The wharves, powerlines and other items have their own discrete function. These attachments are separate from the stone breakwater and may constitute depreciating assets in their own right. Accordingly, the breakwater is itself a depreciating asset within the meaning of that term in subsection 40-30(1) of the ITAA 1997. Taxation Ruling TR 94/11", "Date_of_Decision": "5 March 2004", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-30(1) subsection 40-30(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/269 | ATO ID 2004/270", "Subject_References": "Depreciating assets Improvement to land Structural improvement expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004271", "Unmatched_Content": "Keywords Depreciating assets Improvement to land Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2004/721", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: depreciating asset - cost of connection of pipeline gas", "Issue": "Is payment of an amount equal to the cost of connection of pipeline gas a depreciating asset as defined in subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Payment of an amount equal to the cost of connection of pipeline gas is not a depreciating asset as defined in subsection 40-30(1) of the ITAA 1997.", "Facts": "The taxpayer leased land and a factory (the leased property) from which it conducted its business operations. In order to service the leased property with pipeline gas, the taxpayer entered into an arrangement with a gas company to connect them to the gas company's supply network. In order to connect the taxpayer the gas company had to install gas pipelines, meters and mains (gas works) within the boundaries of the leased property and also extending beyond those boundaries. The taxpayer paid the gas company an amount equal to the cost to the gas company of extending their gas pipeline network to the leased property.", "Reasons_for_Decision": "Summary: A depreciating asset is defined in subsection 40-30(1) of the ITAA 1997 to be an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used but excludes land, trading stock, and intangible assets except for those listed in subsection 40-30(2) of the ITAA 1997. Payment of an amount equal to the cost of connection of pipeline gas is not for a physical asset or an intangible asset. Nor can it be said to have an effective life. It is unlikely that an asset has started to be held for the purposes of Division 40 of the ITAA 1997. As such, it cannot satisfy the definition of depreciating asset in subsection 40-30(1) of the ITAA 1997. If it were contended, in the alternative, that the asset was the right to have gas supplied to the leased property, it is also considered that such an asset is not a depreciating asset within the definition in subsection 40-30(1) of the ITAA 1997. The right to have gas supplied to the leased property is an intangible asset. However, it is not an intangible asset as listed in subsection 40-30(2) of the ITAA 1997, therefore it is not a depreciating asset for the purposes of Division 40 of the ITAA 1997.", "Date_of_Decision": "22 July 2004", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-30(1) subsection 40-30(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Depreciating assets Intangible assets", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004721", "Unmatched_Content": "Keywords Capital expenditure Depreciating assets Intangible assets"}
{"ATO_ID_Number": "ATO ID 2004/858", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: depreciating asset - intangible asset inclusions-intellectual property does not include trade mark", "Issue": "Is a trade mark a depreciating asset as defined in subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, a trade mark is not a depreciating asset as defined in subsection 40-30(1) of the ITAA 1997.", "Facts": "The taxpayer has registered a number of trade marks and incurred the following expenses:", "Reasons_for_Decision": "Summary: A depreciating asset is defined in subsection 40-30(1) of the ITAA 1997 to be an asset that has a limited effective life and can reasonably be expected to decline in value over the time that it is used. The definition excludes land, trading stock and intangible assets, except for those intangible assets listed in subsection 40-30(2) of the ITAA 1997. A trade mark is not a tangible asset and is an intangible asset. Therefore, to be a depreciating asset in Division 40 of the ITAA 1997, it needs to be an intangible asset of a kind listed in subsection 40-30(2). A trade mark is defined in section 17 of the Trade Marks Act 1995 as: 'a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.' As a trade mark is a sign, it does not fit within paragraphs (a), (b) and (d) to (g) of the items listed in subsection 40-30(2), being: * denotes a term defined in section 995-1 of the ITAA 1997 However, paragraph 40-30(2)(c) of the ITAA 1997 provides that items of intellectual property, are depreciating assets, if they are not trading stock. Intellectual property is defined in section 995-1(1) of the ITAA 1997. The definition states: an item of intellectual property consists of the rights (including equitable rights) that an entity holds under a Commonwealth law as: (a) the patentee, or a licensee, of a patent; or (b) the owner, or a licensee, of a registered design; or (c) the owner, or a licensee, of a copyright; This definition of intellectual property does not include trade marks. For the purpose of applying the meaning of intellectual property in the ITAA 1997, a trade mark is not an item of intellectual property. In subsection 40-30(2), a trade mark is not included in any of the items listed. As a trade mark is not of a kind listed in subsection 40-30(2), but is an intangible asset, it is excluded from being a depreciating asset, by paragraph 40-30(1)(c) of the ITAA 1997.", "Date_of_Decision": "6 October 2004", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 subsection 40-30(1) subsection 40-30(2) paragraph 40-30(2)(c) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating assets Intangible assets Trade marks", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004858", "Unmatched_Content": "or of equivalent rights under a foreign law. | Keywords Depreciating assets Intangible assets Trade marks"}
{"ATO_ID_Number": "ATO ID 2004/982", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: depreciating asset - copyright in computer program", "Issue": "For the purposes of working out a balancing adjustment amount under section 40-285 of the Income Tax Assessment Act 1997 (ITAA 1997), if a taxpayer develops a computer program by integrating purchased software and an algorithm that they have created and then sells the computer program, including all intellectual property rights subsisting in that program, is the depreciating asset for which the balancing adjustment event occurred the copyright in the last version of the program before it was sold?", "Decision": "Yes. The depreciating asset for which the balancing adjustment event occurred is the copyright in the last version of the computer program before it was sold.", "Facts": "The taxpayer integrated an interface software program which they had purchased with an algorithm that they had created, so as to develop a new computer program. Although the taxpayer had developed the new program to a prototype stage and had undertaken some external testing of it, the program had not been developed to the standard of a commercial product. The taxpayer intended to generate income from the copyright in the new program through licence fees received from others using the program, while the taxpayer owned the copyright. However, the taxpayer recognised that they did not have the financial resources or the technical skills to develop the computer program to operate as a commercially viable product. Another party purchased the program in its current state of development and all intellectual property rights subsisting in it so that the other party could derive licensing fees from the use of the copyright in such a fully commercial product.", "Reasons_for_Decision": "Summary: To work out a balancing adjustment amount under section 40-285 of the ITAA 1997, a depreciating asset for which the balancing adjustment event occurred needs to be identified. As defined in the ITAA 1997, intellectual property includes rights that an entity has under a Commonwealth law as the owner, or a licensee of a copyright or of equivalent rights under a foreign law (section 995-1 of the ITAA 1997). The taxpayer created the algorithm and integrated it with the interface program to create the new computer program in which copyright subsists. The creation of the new program by the taxpayer entitled the taxpayer to the intellectual property rights as owner of the copyright in that new combined program. As an item of intellectual property, copyright (in a computer program) is a depreciating asset (paragraph 40-30 (2) (c) of the ITAA 1997.) If an item is made up of different components, it is necessary to determine whether the composite item is a single depreciating asset or whether the components are separate depreciating assets. This is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case (subsection 40-30(4) of the ITAA 1997). The 'function' test can be used to identify any relevant depreciating asset. The relevant function can include actual, intended and possible uses of the items. Taxation Ruling TR 94/11 provides some guidelines to assist in making the determination. Some of the factors to be considered in applying the 'function' test include whether the item: Factors such as the mechanical independence of an item, physical separability and whether an item can be separately acquired also need to be considered in deciding whether an item may be a separate depreciating asset. The new computer program was developed by the taxpayer to be used and function in deriving assessable income by exploiting the copyright in the program so as to derive licences fees, and not to use the software in their own operations. If the new computer program could be said to be a separate item from the copyright in the program, the new computer program would not be a depreciating asset, as it is not 'in-house software', and is merely information. Broadly, 'in-house software' is computer software, or a right to use computer software, that a taxpayer acquires, develops or has another entity develop that is mainly for the taxpayer to use in performing the function for which the software was developed (section 995-1 of the ITAA 1997). If a depreciating asset has been sold, a balancing adjustment event has occurred, because the taxpayer stopped holding it (paragraph 40-295(1)(a) of the ITAA 1997). The relevant function in this situation was the use to which the computer program was designed to be put. As the computer program was solely created so as to be exploited to derive licence fees, a depreciating asset, copyright, was sold. For the purposes of working out the balancing adjustment amount under section 40-285 of the ITAA 1997, the depreciating asset for which the balancing adjustment event occurred is the copyright in the latest version of the computer program before it was sold.", "Date_of_Decision": "19 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 40-30 subsection 40-30(2) subsection 40-30(4) section 40-285 paragraph 40-295(1)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating assets Uniform capital allowances system Capital allowances CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004982", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 94/11 | Keywords Depreciating assets Uniform capital allowances system Capital allowances CoE"}
{"ATO_ID_Number": "ATO ID 2003/672", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: shipping channel - depreciating asset", "Issue": "Is a commercial shipping channel or any of its significant features a depreciating asset within the meaning of that term in subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Each of the significant features of the shipping channel is a depreciating asset within the meaning of that term in subsection 40-30(1) of the ITAA 1997 because of their commercial obsolescence.", "Facts": "The taxpayer undertook a project that was generally designed to increase the commercial capacity of a shipping channel (the channel). The significant features of the channel are a 'main channel' (a body of water that connects points of the channel to each other), a 'berthing pocket' (a section of the channel immediately adjacent to a wharf that can accommodate fully laden marine craft berthed at low tide) and a 'swing basin' (a circular facility to allow marine craft to turn 180 degrees). The project was undertaken in sections with each section involving a particular aspect (for example: deepening, widening or extending) of each channel feature and was carried out over a considerable period of time.", "Reasons_for_Decision": "Summary: Composite asset Whether a particular composite item is itself a depreciating asset or whether its components are separate depreciating assets is a question of fact and degree which can only be determined in the light of all the circumstances of the particular case (subsection 40-30(4) of the ITAA 1997). The channel comprises a number of features. While each of those features complement each other to provide the complete operation of the channel, they are, of themselves, physically separate, significant and functionally discrete. The channel, therefore, comprises a number of distinct items and is not, itself, one single item. Improvement to land Subsection 40-30(3) of the ITAA 1997 requires Division 40 to be applied to an improvement to land, whether the improvement is removable or not, as if the improvement was an asset separate from land. Each of the features of the channel constitutes an improvement to land because they are effected to the bed (or land) over which the water flows (see ATO ID 2003/669 on Capital works: shipping channel - structural improvement). Depreciating asset Depreciating asset is defined in subsection 40-30(1) of the ITAA 1997 as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. The definition specifically excludes, amongst other things, land (paragraph 40-30(1)(a)). Land Land is excluded from the definition of depreciating asset because it does not generally have a limited effective life. In the context of Division 40 of the ITAA 1997, it is land in its natural state or the ordinary meaning of land, rather than its legal meaning (where improvements to land are treated as part of land) that is intended to be excluded. This interpretation is supported by the requirement in subsection 40-30(3) of the ITAA 1997 to treat improvements to land separately from the land. Limited effective life Broadly, the meaning of effective life is explained in section 40-100 of the ITAA 1997 (for the Commissioner's determination) and in section 40-105 of the ITAA 1997 (for self assessment). Effective life is affected by obsolescence. Commercial obsolescence is identified in Taxation Ruling 2009/4 as a factor to be considered in working out effective life. Commercial obsolescence, in particular, impacts upon the channel in this case because of the technological advancement in shipping and the encroaching urbanisation on available channel facilities. This obsolescence is, in the present case, reasonably predictable and, therefore, provides the necessary limitation to effective life to satisfy the definition of depreciating asset. In the absence of obsolescence, it is arguable that the improvements may not have a limited effective life because they are of a permanent nature (assuming they are maintained in reasonably good order and condition) and can be economically maintained in reasonably good order and condition for an indefinite period. Decline in value Depreciating assets are not limited to things that lose value steadily over their effective lives or that only ever decline in value. Depreciating assets may hold their value for a time, or even increase it for a time. The test of a depreciating asset requires only that the asset lose its value overall (or down to no more than scrap value) by the end of its effective life. In this case, the channel will lose its value when, for commercial reasons, its effective life comes to an end.", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 subsection 40-30(1) paragraph 40-30(1)(a) subsection 40-30(3) subsection 40-30(4) section 40-100 section 40-105", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2000/18 (withdrawn) | Taxation Ruling TR 2009/4", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/669 | ATO ID 2003/670 | ATO ID 2003/671 | ATO ID 2003/673", "Subject_References": "Depreciating assets Capital allowances CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003672", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2000/18 (withdrawn) Taxation Ruling TR 2009/4 | Keywords Depreciating assets Capital allowances CoE"}
{"ATO_ID_Number": "ATO ID 2003/820", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: bowling greens constructed from natural materials", "Issue": "Can a taxpayer deduct an amount under either Division 43 or Subdivision 40-B of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure incurred in the construction of a bowling green from natural materials?", "Decision": "No. The taxpayer cannot deduct an amount under either Division 43 or Subdivision 40-B of the ITAA 1997 for capital expenditure incurred in the construction of a bowling green from natural materials.", "Facts": "The taxpayer is a sporting club and constructed a bowling green from natural materials.", "Reasons_for_Decision": "Summary: In order to deduct an amount for the bowling green constructed from natural materials under Division 43 of the ITAA 1997, the bowling green must first be a capital work to which Division 43 of the ITAA 1997 applies. Subsection 43-20(2) of the ITAA 1997 provides that Division 43 of the ITAA 1997 applies to capital works being structural improvements begun after 26 February 1992. Subsection 43-20(3) of the ITAA 1997 gives some examples of those structural improvements. In particular, paragraph 43-20(3)(a) of the ITAA 1997 lists sealed roads, sealed driveways, sealed car parks, sealed airport runways, bridges, pipelines, lined road tunnels, retaining walls, fences, concrete or rock dams and artificial sports fields as examples of structural improvements. Further, subsection 43-20(4) of the ITAA 1997 provides that Division 43 of the ITAA 1997 does not apply to certain structural improvements. In particular, paragraph 43-20(4)(b) of the ITAA 1997 excludes structural improvements being earthworks that merely create artificial landscapes, for example, grass golf course fairways and greens, gardens, and grass sports fields. In the Explanatory Memorandum that accompanied the introduction of Division 10D of the Income Tax Assessment Act 1936 (ITAA 1936), an antecedent of Division 43 of the ITAA 1997, paragraph 9.21 makes the following statement: 'Also excluded are artificial landscapes such as grass golf fairways and greens, grass sports fields such as bowling greens, ovals etc. and gardens.' Hence, a bowling green constructed from natural materials would be within paragraph 43-20(4)(b) of the ITAA 1997. Therefore, a bowling green constructed from natural materials is not a capital work to which Division 43 of the ITAA 1997 applies. Consequently, an amount cannot be deducted under Division 43 of the ITAA 1997 for this type of bowling green. In order to deduct an amount for the bowling green constructed from natural materials under Subdivision 40-B of the ITAA 1997, the bowling green must first satisfy the definition of a depreciating asset in section 40-30 of the ITAA 1997. That definition requires, amongst other things, that the asset have a limited effective life and that it can reasonably be expected to decline over the time it is used. A bowling green constructed from natural materials is permanent (assuming it is maintained in reasonably good order and condition) and it can be economically maintained in reasonably good order and condition for an indefinite period. Therefore, the bowling green constructed from natural materials does not have a limited effective life and it would not reasonably be expected to decline over time. Consequently, an amount cannot be deducted under Subdivision 40-B of the ITAA 1997 for this type of bowling green because it does not satisfy the definition of a depreciating asset in section 40-30 of the ITAA 1997.", "Date_of_Decision": "25 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 40-B section 40-30 subsection 40-30(1) Division 43 section 43-20 subsection 43-20(2) subsection 43-20(3) subsection 43-20(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/821", "Subject_References": "Construction expenditure area Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003820", "Unmatched_Content": "Keywords Construction expenditure area Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/755", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Depreciating Asset - Marine Park Permit", "Issue": "Is a marine park permit a depreciating asset as defined in subsection 40-30(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, a marine park permit is not a depreciating asset as defined in subsection 40-30(1) of the ITAA 1997.", "Facts": "The taxpayer paid a lump sum amount to obtain a marine park permit. The permit is valid for a number of years and allows the taxpayer to use their vessel to access certain areas of the marine park that was not previously accessible given the type of licence the taxpayer was holding. It is expected that the expanded marine park access will provide economic benefits for the taxpayer's business.", "Reasons_for_Decision": "Summary: A depreciating asset is defined in subsection 40-30(1) of the ITAA 1997 to be an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used but excludes land, trading stock and intangible assets except for those intangible assets listed in subsection 40-30(2) of the ITAA 1997 that are not trading stock. The term 'intangible asset' in section 40-30 of the ITAA 1997 is not defined and therefore takes on its ordinary meaning. The Macquarie Dictionary [MultiMedia], version 5.0.0, 1/10/01 relevantly defines 'intangible' as: adjective 1. incapable of being perceived by the sense of touch, as incorporeal or immaterial things. ... 3. (of an asset) existing only in connection with something else, as the goodwill of a business. and 'asset' as: noun 1. a useful thing or quality: *This ability to roll the eyes was a great asset on this sort of expedition. -criena rohan, 1963. 2. an item of property, as a building, a piece of equipment, etc. 3. an economic resource: *And even the best-intentioned Australian governors saw the future of the Aboriginal as becoming an asset in the developing cash economy. -c.d. rowley, 1970. Further, the phrase 'intangible asset' is defined as; noun an asset, such as a patent, copyright, brand name, etc., which has no physical properties but which can be identified, given a monetary value, and therefore recorded on a balance sheet. These definitions are mirrored in Australian Accounting Standards Board AASB 138 Intangible Assets which states: An asset is a resource: and An intangible asset is an identifiable non-monetary asset without physical substance. From this, the essential elements of an 'intangible asset' are that: A marine park permit is a licence granted by the Government, which allows a taxpayer to access certain areas of the park. It has no physical substance as it is a right of access and it is non-monetary. It is an economic resource as it is expected that the taxpayer will derive economic benefits from being able to access areas of the marine park from which they would otherwise be excluded. The marine park permit is able to be given a monetary value. Therefore, it is an intangible asset. It is not an item of intellectual property as defined in subsection 995-1(1) of the ITAA 1997. Nevertheless, a marine park permit is not an intangible asset listed in subsection 40-30(2) of the ITAA 1997, therefore it is not a depreciating asset for the purposes of Division 40 of the ITAA 1997. However, the marine park permit would fall under the meaning of a statutory licence as defined under subsection 124-140(3) of the ITAA 1997 and is a capital gains tax asset within the meaning of section 108-5 of the ITAA 1997.", "Date_of_Decision": "13 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 section 40-30 subsection 40-30(1) subsection 40-30(2) section 108-5 subsection 124-140(3) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "Australian Accounting Standards Board AASB 138 Intangible Assets", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002755", "Unmatched_Content": "Inserted section 40-30, section 108-5 and subsection 124-140(3). Omitted paragraph 124-140(3)(a). | Related Public Rulings (including Determinations) | Omitted Capital Gains Cell Determination TD 34 as this was withdrawn on 19 November 2008. | Corrected title of reference | Include discussion on the meaning of the term 'intangible asset'."}
{"ATO_ID_Number": "ATO ID 2003/491", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: plant - rail transport trackwork", "Issue": "Is the expenditure on the rail transport trackwork excluded from being construction expenditure by paragraph 43-70(2)(e) of the Income Tax Assessment Act 1997 (ITAA 1997) because it is expenditure on plant within the meaning of that term in section 45-40 of the ITAA 1997?", "Decision": "Yes. The expenditure on the rail transport trackwork is excluded from being construction expenditure by paragraph 43-70(2)(e) of the ITAA 1997 because it is expenditure on plant within the meaning of that term in section 45-40 of the ITAA 1997.", "Facts": "The taxpayer incurred capital expenditure to construct rail transport trackwork on which it operates a passenger rail service business. The rail transport trackwork is a composite item that consists of several components, including rails, sleepers, ballast, and the earthworks or embankments on which the ballast, sleepers and rails are laid, and integral bridges, girders, culverts and tunnels.", "Reasons_for_Decision": "Summary: The rail transport trackwork is a structural improvement that is a capital works for the purposes of Division 43 of the ITAA 1997. This Division generally allows a deduction for capital expenditure incurred in respect of the construction of capital works. However, construction expenditure does not include, among other things, expenditure on plant (paragraph 43-70(2)(e) of the ITAA 1997). 'Plant' is defined in section 45-40 of the ITAA 1997 to take its ordinary meaning and to include certain other things. None of the inclusions are applicable to the rail transport trackwork. This means that for the trackwork to be excluded from being construction expenditure, it would need to be expenditure on plant within the ordinary meaning of that term. Taxation Ruling TR 1999/2 (TR 1999/2) provides the following overview of the ordinary meaning of plant: '20. '[Plant] in its ordinary sense...includes whatever apparatus is used by a business man for carrying on his business, - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business': Lindley LJ in Yarmouth v France (1887) 19 QBD 647 at 658.' Using capital works for the purpose of the taxpayer's income producing activities does not, of itself, make capital works plant. For something that is a structural improvement to constitute plant, it must not merely be a setting in which the income producing activities are carried on and become an integral part of that activity ( J. Lyons & Co Ltd v. The Attorney-General [1944] 1 All ER 477). The distinction was drawn in that case between the setting in which a business is carried on and the apparatus used in carrying on a business. However, it was also said in Jarrold (Inspector of Taxes) v. John Good & Sons, Ltd 40 TC 681; (1963) 1 All ER 141 that the two concepts are not always necessarily mutually exclusive, and that plant may perform its function passively. The rail transport trackwork is readily identifiable as part of the permanent means or apparatus used in carrying on business and by which assessable income is produced. It is designed to function in harmony with rolling stock plant and peculiar to the taxpayer's specific business operations. It has the character of plant because it is sufficiently functionally integrated with the income producing operations and process. Only by integration of the trackwork components into a functioning unit is the functioning of the rolling stock and the carriage of passengers possible. The rail transport trackwork provides more than the general setting or environment in which income-producing activities are conducted. In the same way as railway rolling stock, it serves a functional purpose in the business operations within that setting, sufficient to make it 'an essential part in the efficient and economic operation' of the taxpayer's business ( Wangaratta Woollen Mills Ltd v. Federal Commissioner of Taxation (1969) 119 CLR 1;69 ATC 4095; (1969) 1 ATR 329). The rail transport trackwork is consequently plant within the ordinary meaning of that term and is therefore, excluded from construction expenditure by paragraph 43-70(2)(e) of the ITAA 1997.", "Date_of_Decision": "29 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 paragraph 43-70(2)(e) section 45-40 subsection 45-40(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/11 | Taxation Ruling TR 1999/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/489 | ATO ID 2003/490", "Subject_References": "Capital Allowances CoE Deduction for depreciating assets Depreciable plant Plant attached to land Railways Structural improvement expenses", "Case_References": "Yarmouth v. France (1887) 19 QBD 647", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003491", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 94/11 Taxation Ruling TR 1999/2 | Keywords Capital Allowances CoE Deduction for depreciating assets Depreciable plant Plant attached to land Railways Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2003/671", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: shipping channel - plant", "Issue": "Is a commercial shipping channel or any of its significant features plant within the meaning of that term in section 45-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Neither the shipping channel nor any of its significant features are plant within the meaning of that term in section 45-40 of the ITAA 1997. This is because they are the setting within which income producing activities are undertaken.", "Facts": "The taxpayer undertook a project that was generally designed to increase the commercial capacity of a shipping channel (the channel). The significant features of the channel are a 'main channel' (a body of water that connects points of the channel to each other), a 'berthing pocket' (a section of the channel immediately adjacent to a wharf that can accommodate fully laden marine craft berthed at low tide) and a 'swing basin' (a circular facility to allow marine craft to turn 180 degrees). The project was undertaken in sections with each section involving a particular aspect (for example: deepening, widening or extending) of each channel feature and was carried out over a considerable period of time.", "Reasons_for_Decision": "Summary: The project will create various structural improvements including a main channel, a berthing pocket and a swing basin (see ATO ID 2003/669 on Capital Works: shipping channel- structural improvement). These improvements are capital works for the purposes of Division 43 of the ITAA 1997. This Division generally allows a deduction for capital expenditure incurred in respect of the construction of capital works. However, construction expenditure does not include, among other things, expenditure on plant (paragraph 43-70(2)(e) of the ITAA 1997). 'Plant' is defined in section 45-40 of the ITAA 1997 to take its ordinary meaning and to include certain other things. None of the inclusions are applicable to the capital works being considered here. This means that for the works to be excluded from being construction expenditure, they would need to be expenditure on plant within the ordinary meaning of that term. Taxation Ruling TR 1999/2 (TR 1999/2) provides the following overview of the ordinary meaning of plant: '20. '[Plant] in its ordinary sense...includes whatever apparatus is used by a business man for carrying on his business, - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business': Lindley LJ in Yarmouth v. France (1887) 19 QBD 647 at 658.' Using capital works for the purpose of the taxpayer's income producing activities does not, of itself, make capital works plant. For something that is a structural improvement to constitute plant, it must not merely be a setting in which the income producing activities are carried on ( J. Lyons & Co Ltd v. The Attorney-General [1944] 1 All ER 477). The distinction was drawn in that case between the setting in which a business is carried on and the apparatus used in carrying on a business. However, it was also said in Jarrold (Inspector of Taxes) v. John Good & Sons, Ltd 40 TC 681; (1963) 1 All ER 141 that the two concepts are not always necessarily mutually exclusive. In those cases where structural improvements have been held to be plant, the improvements were significantly integrated with the income producing operations. They played an active part in an industrial process and often were physically integrated with items of machinery. For example: The capital works being considered here are not of the same character and do not operate in the same way as the structural improvements described above, and consequently, are not plant within the ordinary meaning of that term. The Full High Court in Goldsworthy Mining Ltd v. Federal Commissioner of Taxation (1975) 132 CLR 463; 75 ATC 4023; (1975) 5 ATR 199 further held that the dredging improvements to the sea bed in that case were not plant.", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 43-70(2)(e) section 45-40", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/669 | ATO ID 2003/670 | ATO ID 2003/672 | ATO ID 2003/673", "Subject_References": "Depreciable plant Structural improvement expenses Capital allowances CoE", "Case_References": "Inland Revenue Commissioners v. Barclay Curle & Co Ltd [1968] TC 221", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003671", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 1999/2 | Keywords Depreciable plant Structural improvement expenses Capital allowances CoE"}
{"ATO_ID_Number": "ATO ID 2002/752", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Plant - photovoltaic solar system", "Issue": "Is a photovoltaic solar system (the system) plant within the meaning of that term in section 45-40 of the Income Tax Assessment Act 1997 (ITAA 1997) with the result that capital expenditure on the system is excluded, by paragraph 43-70(2)(e) of the ITAA 1997, from the meaning of construction expenditure for the purposes of Division 43 of the ITAA 1997?", "Decision": "Yes. A photovoltaic solar system is plant within the meaning of that term in section 45-40 of the ITAA 1997 and is, therefore, excluded from construction expenditure by paragraph 43-70(2)(e) of the ITAA 1997.", "Facts": "A photovoltaic solar system comprises modules of photovoltaic cells, a roof mounting frame, various fixings, electrical wiring and conduits and inverters. The photovoltaic cells absorb solar energy and convert it to 'direct current' (DC) which is then conveyed to the inverters to change the DC power into useable 'alternating current' (AC) power. The photovoltaic cell modules are generally affixed to the roof of a property with a mounting frame, while the inverters may be installed at some other points within the property. All of the components are connected and interface by means of electrical wiring.", "Reasons_for_Decision": "Summary: Division 43 of the ITAA 1997 allows a deduction for certain capital expenditure on capital works that are buildings, structural improvements or improvements to a building or structural improvements that are owned and used by the taxpayer for the purpose of producing assessable income (section 43-140 of the ITAA 1997). Expenditure on plant, however, is specifically excluded from construction expenditure that might otherwise qualify for deduction (paragraph 43-70(2)(e) of the ITAA 1997). The meaning of plant is contained in section 45-40 of the ITAA 1997 and includes machinery. Extending the ordinary meaning of plant to include machinery essentially means that machinery will always be plant for income tax purposes, irrespective of whether or not it is annexed or affixed to land or buildings (see Carpentaria Transport Pty Ltd v. FC of T 20 ALD 769; 90 ATC 4590; 21 ATR 513). A photovoltaic solar system is considered to be machinery because of the multiple mechanical functions it performs, including receiving, conveying and converting the solar energy into useable power. It is also considered that the integrated and interdependent components and functions of the system collectively form the machine which is, therefore, plant.", "Date_of_Decision": "24 April 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-10 paragraph 43-70(2)(e) section 45-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/751", "Subject_References": "Depreciable Plant Plant attached to land Unit of depreciable plant", "Case_References": "Carpentaria Transport Pty Ltd v. Federal Commissioner of Taxation (1990) 20 ALD 769 (1990) 21 ATR 513 90 ATC 4590", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002752", "Unmatched_Content": "Keywords Depreciable Plant Plant attached to land Unit of depreciable plant"}
{"ATO_ID_Number": "ATO ID 2011/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: immediately deductible expenditure - contractor providing geophysical surveying services to entities in the mining and mineral exploration industries", "Issue": "Is a taxpayer contracted to provide geophysical surveying services to entities in the mining and mineral exploration industries carrying on a business of, or a business that included, exploration or prospecting for minerals for the purposes of subparagraph 40-80(1)(c)(iii) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A taxpayer contracted to provide geophysical surveying services to entities in the mining and mineral exploration industries is not considered to be carrying on a business of, or a business that included, exploration or prospecting for minerals for the purposes of subparagraph 40-80(1)(c)(iii) of the ITAA 1997.", "Facts": "All legislative references are to the ITAA 1997 unless otherwise stated. The taxpayer carries on a business that provides geophysical surveying services on a contract basis to entities in the mining and mineral exploration industries. The geophysical surveys that the taxpayer conducts for these entities produce results which indicate to those entities whether minerals that are obtainable by mining operations are present at a particular location. The taxpayer does not hold any mining, quarrying or prospecting rights. The taxpayer does not obtain any interest in minerals, the presence of which may be indicated by the geophysical surveys. The taxpayer does not profit in any way from the minerals obtainable by mining operations that may be indicated as present at the particular location. The taxpayer incurred expenditure on acquiring a depreciating asset that was necessary to enable the taxpayer to provide some of the geophysical surveying services in the conduct of its business. The taxpayer first used the depreciating asset to conduct geophysical surveys for a mining and mineral exploration entity (the entity). The entity contracted the taxpayer to provide the geophysical surveying services for the purpose of carrying out the entity's exploration or prospecting for minerals obtainable by mining operations. The depreciating asset is thus first used for that exploration or prospecting and therefore, the first use of the depreciating asset satisfies paragraph 40-80(1)(a). The taxpayer does not conduct mining operations for the purposes of subparagraph 40-80(1)(c)(i), nor does the taxpayer propose to carry on mining operations for the purposes of subparagraph 40-80(1)(c)(ii).", "Reasons_for_Decision": "Summary: Subsection 40-80(1) provides that the decline in value of a depreciating asset you hold is the asset's cost if the conditions in paragraphs (a), (b) and (c) of that subsection are met. Paragraph 40-80(1)(c) requires that you satisfy one or more of the following subparagraphs at the asset's start time, namely: For the purpose of considering whether the taxpayer has satisfied subparagraph 40-80(1)(c)(iii), it is necessary to understand the meaning of the expressions contained in that subparagraph. Subsection 995-1(1) provides that a 'business' includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee. The Commissioner does not dispute that the taxpayer is carrying on a business within the meaning of that term in subsection 995-1(1). The taxpayer's business activities consist of contracting with mining and mineral exploration entities to conduct geophysical surveying services for remuneration. Subsection 995-1(1) also provides that 'exploration or prospecting' has the meaning given by section 40-730. Subsection 40-730(4) provides an inclusive definition of the activities that constitute 'exploration or prospecting'. For mining in general, geophysical surveys are specifically included in exploration or prospecting by subparagraph 40-730(4)(a)(i). Therefore, geophysical surveys such as those conducted by the taxpayer will fall within the definition of 'exploration or prospecting' for the purposes of Division 40. Apart from the terms 'business' and 'exploration or prospecting', none of the other expressions contained in subparagraph 40-80(1)(c)(iii) are defined for the purposes of the ITAA 1997. For instance, the meaning of the expressions: are not defined for the purposes of the ITAA 1997. For the purposes of considering the meaning of these expressions, it is relevant to consider whether there are any explicit statements in the legislation or the extrinsic material that accompanied it which might provide assistance in establishing the meaning of the expressions (see section 15AB of the Acts Interpretation Act (Cth) 1901 ). In discussing the wording contained in subparagraph 40-80(1)(c), clause 7.14 of the Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 (the EM) makes it clear that the expression 'such operations' in subparagraphs 40-80(1)(c)(ii) and (iii) means 'mining operations'. Subsection 995-1(1) provides that 'mining operations' has the meaning given by section 40-730. Paragraph 40-730(7)(a) relevantly provides that mining operations means - 'mining operations on a mining property for extracting minerals (except petroleum) from their natural site ... for the purpose of producing assessable income'. In this case, the taxpayer does not conduct mining operations and therefore does not satisfy subparagraph 40-80(1)(c)(i), nor does the taxpayer propose to carry on mining operations for the purposes of subparagraph 40-80(1)(c)(ii). Subparagraph 40-80(1)(c)(iii) will therefore be satisfied if the taxpayer is carrying on a business of, or a business that included, exploration or prospecting for minerals or quarry materials obtainable by mining operations , and expenditure on the asset was necessarily incurred in carrying on that business. (emphasis added) In discussing the wording contained in paragraph 40-80(1)(c), clause 7.14 of the EM provides no assistance in establishing the meaning of the expression 'carry on a business of, or a business that included, exploration or prospecting for minerals or quarry materials obtainable by [mining] operations' for the purposes of subparagraph 40-80(1)(c)(iii). All clause 7.14 of the EM does is paraphrase the expression, which does not assist in understanding its meaning. Nor does the expression gain meaning by a consideration of the definitions of the terms 'business'; 'exploration or prospecting'; or 'mining operations'. As noted above, the definition of 'exploration or prospecting' in subsection 40-730(4) is an inclusive definition which identifies a list of activities that are included in the definition of 'exploration or prospecting'. One such activity is geophysical surveys. Subparagraph 40-80(1)(c)(iii) requires that a taxpayer 'carry on a business of ... exploration or prospecting for minerals ... obtainable by mining operations ...'. It is the Commissioner's view that to carry on such a business of exploration or prospecting would require a taxpayer to be doing more than simply conducting one of the activities listed in the definition of 'exploration or prospecting'. For instance, it does not necessarily follow that a taxpayer who does not conduct exploration or prospecting activities in the form of geophysical surveying for minerals on their own account, but as a service on a contract basis for other entities is itself carrying on a business of, or a business that included, exploration or prospecting for minerals or quarry materials obtainable by mining operations for the purposes of subparagraph 40-80(1)(c)(iii). | Detailed Reasoning - Purposive approach to statutory interpretation: Australian courts have on many occasions considered the use of a purposive approach to statutory interpretation, saying that statutory provisions should be interpreted in a way that promotes the objects of the provision. Support for adopting an interpretation of a statutory provision which conforms with the legislative intent can be found in the High Court decision in Cooper Brookes (Wollongong) Pty Ltd v. Federal Commissioner of Taxation (1981) 147 CLR 297; 81 ATC 4292; (1981) 11 ATR 949, and the subsequent line of authority in Australia in which narrow literal interpretations have been avoided in favour of purposive ones that allow the recognised legislative intent to operate. The purposive approach is founded on the notion that the intent of the Legislature is to be ascertained from, amongst other things, the context of the provision in question. In CIC Insurance Ltd v. Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2, Brennan CJ, Dawson, Toohey and Gummow JJ said: [T]he modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses 'context' in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. Further, as McHugh, Gummow, Kirby and Hayne JJ noted in Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355 at 381; [1998] HCA 28 at [69] (footnotes omitted): The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined 'by reference to the language of the instrument viewed as a whole'. In Commissioner for Railways (NSW) v. Agalianos , Dixon CJ pointed out that 'the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed'. Thus, the process of construction must always begin by examining the context of the provision that is being construed. | Detailed Reasoning - Support from sections 15AA and 15AB of the Acts Interpretation Act 1901: Section 15AA of the Acts Interpretation Act 1901 directs that in the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object. Section 15AB of the Acts Interpretation Act 1901 permits reference to extrinsic material in the interpretation of a provision of an Act to confirm the meaning of that provision taking into account its context and the underlying object or purpose of the Act. | Detailed Reasoning - Consideration of the statutory context, purpose and policy intent of subsection 40-80(1): In Australia, mining and mineral exploration is regulated by State Governments. The object of each State's mining legislation is to encourage and facilitate the discovery and development of its mineral resources. To this end, the State Government issues exploration rights which permit exploration or prospecting for mineral deposits which are suitable for being mined. The exploration rights are mining, quarrying or prospecting rights that are depreciating assets within the meaning of subsection 40-30(2). Broadly speaking, before an entity begins exploration or prospecting for minerals, they must be granted an exploration right by the relevant State Government. Carrying on a business of exploration or prospecting for minerals is a high-risk undertaking, with the risk borne by the holder of the exploration right. It is recognised that the success rate for exploration or prospecting programmes is very low. Accordingly, it is uncertain whether the holder of an exploration right will see any return on the expenditure they incur on exploration or prospecting for minerals obtainable by mining operations. The basis of the concessional treatment of exploration or prospecting expenditure, including of the cost of depreciating assets first used for exploration and prospecting, is and has always been that the rewards from the exploitation of the results of exploration or prospecting are inherently uncertain. Subsection 40-80(1) reflects the Parliament's adoption of the recommendations of the Review of Business Taxation, which included in its recommendations ( A Tax System Redesigned, Report July 1999, Section 4 : Core concepts and principles , at p167): Mining and quarrying exploration and prospecting expenditure Applying the recommended treatment of expenditure and assets without recognising the valuation difficulties associated with the results of exploration and prospecting expenditure would mean that the tax treatment of this expenditure would depend on the results of the exploration or prospecting activity. Unsuccessful expenditure would be deductible at the time the activity was abandoned, while successful expenditure would enter the cost base of the project. That is the accounting approach. It has long been a feature of the current law to allow an immediate deduction for exploration and prospecting expenditure. Allowing continuation of immediate deductibility is justified on the basis that the value of the associated asset cannot be immediately measured. The most recent expression of this policy was in the Policy Transition Group : Report to the Australian Government : Mining and Petroleum Exploration published in December 2010 where it was stated that: Under Division 40 of the Income Tax Assessment Act 1997 expenditure incurred in exploring or prospecting for minerals, petroleum and quarry materials can be immediately deducted subject to the taxpayer passing certain tests. Expenditure on depreciating assets that are first used for exploration can also be written off immediately. These tax concessions acknowledge the high-risk nature of exploration and economic benefits that result from it. Considered together, the provisions of subparagraphs 40-80(1)(c)(i) and 40-80(1)(c)(ii) are designed to allow the holder of a depreciating asset an immediate deduction for the asset's cost if the holder is engaged in risk based on the uncertainty of being able to profitably exploit the results of the exploration or prospecting activities in which the asset was first used. In distinct contrast, where the holder of a depreciating asset that is an exploration right contracts another entity (the contractor) to conduct the exploration or prospecting activities, such as geophysical surveys, the contractor does not engage in any risk based on utilising the results of the exploration or prospecting activities. Irrespective of whether the contractor's business exclusively or partially involves the provision of exploration or prospecting activities on a contract basis, a contracted supplier of geophysical surveying services would not profit from the exploitation of the results of their exploration or prospecting activities, nor would they be rewarded through the sale of the results of those activities. They are rewarded, not by exploiting or selling the results of their exploration or prospecting activities, but by being remunerated for the service they provide to other entities (who in turn may or will exploit and profit from the results of the exploration or prospecting activities). Having regard to the statutory context, purpose and the policy intent of subsection 40-80(1), to construe the meaning of the expression 'carry on a business of, or a business that included, exploration or prospecting for minerals or quarry materials obtainable by [mining] operations' for the purposes of subparagraph 40-80(1)(c)(iii) as extending to a taxpayer which carries on a business that provides exploration or prospecting activities on a contract basis is incorrect. The better construction is that subparagraph 40-80(1)(c)(iii) only extends to entities who bear the economic risks of exploration or prospecting. The Commissioner considers that subparagraph 40-80(1)(c)(iii) recognises and assists entities in mineral exploration industries, such as 'junior explorers', who explore or prospect for new mineral discoveries in the hope of marketing those discoveries to larger mining concerns, as opposed to developing or exploiting what is found themselves. That is, mineral exploration companies who, as part of their business model, do not seek to involve themselves in mining operations. These are perhaps the entities in the mining and minerals exploration industry that proportionally bear the greatest risk of all and who accordingly attract immediate deduction in respect of the cost of the depreciating assets they first use in their exploration or prospecting activities. This construction would make the interpretation of the meaning of subparagraph 40-80(1)(c)(iii) consistent with the statutory context evidenced in subparagraphs 40-80(1)(c)(i) and 40-80(1)(c)(ii) as discussed above. It is also consistent with the underlying policy intent of subsection 40-80(1) and gives effect to the intention to provide immediate deductions for the cost of depreciating assets first used for exploration or prospecting to taxpayers whose return on that expenditure depends on the uncertain value of the results of exploration or prospecting. In this case, the taxpayer as a contractor is rewarded regardless of the results of their exploration or prospecting activities. This form of reward for services is not consistent with the nature of the engagement with risk and the uncertainty of reward that is evident when considering all of the subparagraphs of paragraph 40-80(1)(c) as a whole, nor with the underlying policy intent of subsection 40-80(1), which as noted above is to acknowledge the high-risk nature of exploration or prospecting and economic benefits that result from it. Accordingly, a taxpayer contracted to provide geophysical surveying services to entities in the mining and mineral exploration industries is not considered to be carrying on a business of, or a business that included, exploration or prospecting for minerals for the purposes of subparagraph 40-80(1)(c)(iii).", "Date_of_Decision": "11 March 2011", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 subsection 40-30(2) subsection 40-80(1) paragraph 40-80(1)(a) paragraph 40-80(1)(c) subparagraph 40-80(1)(c)(i) subparagraph 40-80(1)(c)(ii) subparagraph 40-80(1)(c)(iii) section 40-730 subsection 40-730(4) subparagraph 40-730(4)(a)(i) paragraph 40-730(7)(a) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Contractors Exploration or prospecting Surveyors", "Case_References": "Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 81 ATC 4292 (1981) 11 ATR 949", "Other_References": "Revised Explanatory Memorandum to the New Business Tax System (Capital Allowances) Bill 2001 Review of Business Taxation: A Tax System Redesigned, Report July 1999 Policy Transition Group Report to the Australian Government: Mining and Petroleum Exploration", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201125", "Unmatched_Content": "Status of this decision: This interpretative decision is currently being reviewed as a result of a recent court/tribunal decision. Refer to Decision Impact Statement : Mitsui Co (Australia) Ltd v Commissioner of Taxation (Published 21 October 2014) .However, the decision continues to represent the Tax Office view on this issue unless or until it is withdrawn. | Keywords Contractors Exploration or prospecting Surveyors"}
{"ATO_ID_Number": "ATO ID 2008/72", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: mining site rehabilitation - payment to purchaser of mining tenement to assume liability and indemnify taxpayer", "Issue": "Where the taxpayer makes a payment to the purchaser as part of the sale of mining tenements to assume liabilities arising in respect of the tenements under mining, land and environment laws and to indemnify the taxpayer against same, and mining site rehabilitation is conducted by or on behalf of the purchaser upon the tenements after the sale, is the taxpayer's payment expenditure they incur on mining site rehabilitation as required by subsection 40-735(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, the taxpayer's payment is not expenditure they incur on mining site rehabilitation as required by subsection 40-735(1) of the ITAA 1997 because there is not a sufficient connection or close association between the taxpayer's payment and the acts of restoration or rehabilitation that are carried out after the transfer of the mining tenements to the purchaser.", "Facts": "The taxpayer operates a mine for a number of years. The taxpayer enters an agreement to sell the mining tenements and assets to another entity (the purchaser). The agreement contains the condition that the purchaser assumes all current and future liabilities in respect of the mining tenements and land under mining, land and environmental laws and indemnifies the taxpayer against same. The agreement requires that the taxpayer pay the purchaser an amount to remediate and rehabilitate the tenements and manage same. All rehabilitation and restoration activities undertaken upon the tenements after the sale are undertaken by the purchaser or the purchaser's agents.", "Reasons_for_Decision": "Summary: Subsection 40-735(1) of the ITAA 1997 provides for an immediate deduction in the year that expenditure is incurred by the taxpayer on mining site rehabilitation. Mining site rehabilitation is defined in subsection 40-735(4) of the ITAA 1997 as an act of restoring or rehabilitating a site or part of a site to a reasonable approximation of the condition it was in before mining or exploration activities first started on the site, whether these activities were started by the taxpayer or someone else. Expenditure is not incurred 'on' a certain thing unless there is a sufficient connection and close association between the expenditure and the thing that is the purpose, object or effect of the expenditure ( Robe River Mining Co Pty Ltd v. Federal Commissioner of Taxation (1989) 21 FCR 1; (1989) 89 ATC 4606; (1989) 20 ATR 768). Expenditure should not be taken to also be directed at other, quite separate, ends. Accordingly, for the purpose of subsection 40-735(1) of the ITAA 1997, the term 'on' takes a restrictive interpretation. That is, expenditure 'on' mining site rehabilitation means only expenditure directly associated with an act or acts of restoring or rehabilitating a mining site. Objectively, the taxpayer makes a payment to the purchaser as consideration for the purchaser assuming all liabilities in relation to the mining tenements and land under mining, land and environmental laws and to purchase the related indemnity. While future acts of restoration or rehabilitation of the mine site are required to satisfy some of those liabilities, there is no direct relationship between the payment and any specific acts of the purchaser. In addition, the liabilities that the purchaser assumes extend beyond the liability to perform acts of restoration or rehabilitation of the mine site. It follows that in this case there is not a sufficient connection or close association between the taxpayer's payment and the acts of restoration or rehabilitation that are carried out after the transfer of the mining tenements to the purchaser. Therefore, the payment is not expenditure incurred by the taxpayer 'on' mining site rehabilitation, as required by subsection 40-735(1) of the ITAA 1997.", "Date_of_Decision": "18 February 2008", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 40-735(1) 40-735(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/71", "Subject_References": "Deductions & expenses Disposal of mining & exploration rights Environmental protection activities Environmental protection expenses Mine rehabilitation expenses Mining & exploration rights Mining & petroleum Mining leases & tenements Mining property Mining site rehabilitation", "Case_References": "Robe River Mining Co Pty Ltd v. Federal Commissioner of Taxation (1989) 21 FCR 1 89 ATC 4606 20 ATR 768", "Other_References": "", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200872", "Unmatched_Content": "Keywords Deductions & expenses Disposal of mining & exploration rights Environmental protection activities Environmental protection expenses Mine rehabilitation expenses Mining & exploration rights Mining & petroleum Mining leases & tenements Mining property Mining site rehabilitation"}
{"ATO_ID_Number": "ATO ID 2003/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: identical or substantially identical depreciating assets", "Issue": "Are a curtain, venetian blind and holland blind installed in a rental property identical or substantially identical depreciating assets for the purpose of paragraph 40-80(2)(d) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A curtain, venetian blind and holland blind installed in a rental property are not identical or substantially identical depreciating assets for the purpose of paragraph 40-80(2)(d) of the ITAA 1997.", "Facts": "The taxpayer owns a residential property that is rented (or available for rent) on a commercial basis at all times. The taxpayer purchased and installed all of the following items in the property during the same income year:", "Reasons_for_Decision": "Summary: The taxpayer is entitled to deduct the decline in value of each item under section 40-25 of the ITAA 1997 because each item is a depreciating asset that the taxpayer holds and uses wholly for a taxable purpose. Under subsection 40-80(2) of the ITAA 1997 the decline in value of a depreciating asset in an income year is the asset's cost if all of the following tests are satisfied: Each of the curtain, venetian blind and holland blind is a separate depreciating asset. The identical or substantially identical test contained in paragraph 40-80(2)(d) of the ITAA 1997 effectively denies an immediate deduction for the cost of a depreciating asset (that might otherwise be available because of subsection 40-80(2) of the ITAA 1997) if you start to hold in the same income year other depreciating assets that are identical or substantially identical and the total cost of those assets is more than $300. In this case, the decline in value of the assets is worked out by reference to their respective effective life or, if chosen, through the low-value pool mechanism. Whether depreciating assets are identical or substantially identical is a question of fact. Assets are identical if they are the same in all respects. Assets are substantially identical if they are the same in most respects even though there may be some minor or incidental differences. Factors that need to be considered include colour, shape, function, texture, composition, operation, brand and design. The weighting of each factor may vary from asset to asset. Broadly speaking, the curtain, venetian blind and holland blind are similar because they are forms of window coverings. In that sense, their function is also similar because they provide privacy, control the amount of light entering the window and offer aesthetic qualities. However, these similarities in this case do not make the assets identical or even substantially identical. The assets are different in a number of ways, some of which are more significant than others. The assets are of a different construction, operation and composition, they are of a different design and colour and they are for different rooms of the house that contain different window openings. The nature and extent of these differences support the view that they are neither identical nor substantially identical depreciating assets for the purpose of paragraph 40-80(2)(d) of the ITAA 1997.", "Date_of_Decision": "18 December 2002", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-25. Subsection 40-80(2) Paragraph 40-80(2)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Decline in value methods Depreciating assets costing $300 or less Immediate deduction for depreciating assets Substantially identical depreciating assets Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200380", "Unmatched_Content": "Keywords Decline in value methods Depreciating assets costing $300 or less Immediate deduction for depreciating assets Substantially identical depreciating assets Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2003/172", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: non existence of the 'replacement basis' for claiming decline in value deductions", "Issue": "Following the discontinuance of the 'replacement basis' of claiming depreciation deductions for certain units of plant under former Division 42 of the Income Tax Assessment Act 1997 (ITAA 1997), can the taxpayer now claim a deduction for decline in value under Division 40 of the ITAA 1997 in respect of the cost of the plant initially purchased?", "Decision": "No. The taxpayer cannot claim a deduction under Division 40 of the ITAA 1997 in respect of the cost of the plant initially purchased.", "Facts": "The taxpayer purchased an initial quantity of plant items when it first started business many years ago. The taxpayer chose to claim depreciation deductions for this plant on a replacement basis. The cost of the plant initially purchased was capitalised in the taxpayer's books of account where it continues to be recorded at that amount without being amortised. Depreciation deductions in respect of the cost of the plant initially purchased have not been claimed.", "Reasons_for_Decision": "Summary: There was a longstanding Tax Office practice that permitted taxpayers to treat the initial purchase of certain units of plant as not depreciable (or otherwise deductible) but to claim an immediate deduction for the cost of their replacement. The practice principally related to low cost items that had very long or indeterminate lives, were difficult to keep track of and were subject to frequent replacement through loss or breakage. In the absence of this practice, depreciation deductions may not have been available for the plant because their effective life was often difficult or impossible to estimate. In 1991, the law was amended to allow an immediate write-off for units of plant costing $300 or less or having an effective life of less than three years. At that time, the Tax Office discontinued its administrative practice of allowing a deduction on a replacement basis for plant that was otherwise immediately deductible because of these new provisions (see paragraph 63 of Taxation Ruling IT 2685). For some taxpayers, the $300 immediate write-off provisions were replaced with a new system of deductions which applied from 1 July 2000 (see former Subdivision 42-M of the ITAA 1997). That system allowed certain taxpayers to pool units of plant costing less than $1,000 each and to write off the pool value under the diminishing value method using an effective life of four years. From 1 July 2001, the uniform capital allowance system (UCA) applies to most depreciating assets, including those acquired before that date. The UCA continues to provide an immediate deduction for certain assets costing $300 or less (see subsection 40-80(2) of the ITAA 1997) and a substantially similar pooling mechanism to the former Subdivision 42-M of the ITAA 1997 (see Subdivision 40-E of the ITAA 1997). In addition, the Simplified Tax System (STS) is available to certain small business taxpayers from 1 July 2001. The STS allows eligible taxpayers who decide to use it an immediate write-off for depreciating assets costing less than $1000 and pooling arrangements for other depreciating assets (see Subdivision 328-D of the ITAA 1997). Because of these various changes in the law that now provide a variety of alternative treatments for depreciating assets of low cost, the remaining part of the replacement practice was discontinued for assets first used (or installed ready for use) for the purpose of producing assessable income after 30 June 2000 (see paragraph 76 of Taxation Ruling TR 2000/18). Broadly speaking, the UCA provides a deduction for the decline in value of depreciating assets that are held and used for a taxable purpose. In the present case, it is accepted that the nature of the assets and the context of their use would require them to be regularly replaced. While records of individual plant items were not kept, it is reasonable to conclude that none of the items initially purchased are still held because of the passage of time and of their nature and use. A deduction under Division 40 of the ITAA 1997 would not, therefore, be available because the assets are no longer held. It follows that they also could not be used for a taxable purpose. In any event, when a taxpayer adopted the replacement basis in order to claim an immediate deduction for the cost of replacement plant an essential element of the practice was to treat the plant initially purchased as not depreciable. In effect, the taxpayer relinquished any entitlement to depreciation deductions in respect of the plant initially purchased when the replacement basis was adopted. Accordingly, there is no entitlement to claim a deduction for the decline in value of the plant initially purchased by reference to its purchase price. Due to the passage of time, it is also considered impractical and inappropriate to amend all of the taxpayer's income tax assessments, where this is otherwise available under the law, since the inception of the business to allow a depreciation deduction in respect of the cost of the plant initially purchased. This would also require the disallowance of all the immediate deductions allowed for the replacement items and substituting a depreciation deduction based on the effective lives of those replacement items.", "Date_of_Decision": "14 October 2002", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subsection 40-80(2) Subdivision 40-E Division 42 Subdivision 42-M Subdivision 328-D", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2685 | Taxation Ruling TR 2000/18", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Effective life Depreciable plant & articles Capital Allowances CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003172", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2685 Taxation Ruling TR 2000/18 | Keywords Effective life Depreciable plant & articles Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2004/714", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: landcare operation - revegetation expenditure - carbon sequestration rights", "Issue": "Is the taxpayer entitled to a deduction under section 40-630 of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure incurred on revegetating an area of their rural land they used in carrying on a business of primary production?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 40-630 of the ITAA 1997 for capital expenditure incurred in revegetating an area of their rural land they used in carrying on a business of primary production.", "Facts": "The taxpayer is a landholder of some 400 hectares on which they conduct a business of cattle farming. The taxpayer decided to revegetate 20 hectares of land with indigenous species for the specific purpose of ameliorating land degradation. The taxpayer spent a significant amount of money on revegetating by planting seedlings on those 20 hectares. As a secondary consideration, the taxpayer also intends selling any carbon sequestration rights that will be generated to recover some of these costs. The taxpayer has entered into a profit a prendre agreement with an entity for the sale of the carbon sequestration rights relating to the 20 hectares of land.", "Reasons_for_Decision": "Summary: Capital expenditure on a landcare operation is deductible for the income year in which it is incurred, under section 40-630 of the ITAA 1997, provided the operation is for: The taxpayer satisfies these conditions because they are carrying on a primary production business on the land. Therefore, a deduction is available to the taxpayer under section 40-630 of the ITAA 1997 if the expenditure is on a 'landcare operation' as defined in section 40-635 of the ITAA 1997. The revegetating of the 20 hectares comes within the definition of 'landcare operation' under subparagraph 40-635(1)(e)(iii) if it is an operation primarily and principally for the purpose of preventing or fighting land degradation (except by erecting fences on the land). The meaning of primarily and principally in this context is explained in Taxation Determination TD 94/9. Paragraph 3 of that taxation determination states: Where the expenditure is incurred for a dual purpose, the 'primarily and principally' test does not require a consideration of the subjective or objective purpose or motives of the taxpayer in incurring the expenditure. The test requires an examination of the primary and principal function or purpose of the result produced by incurring the expenditure. Whether the revegetation was done primarily and principally to prevent or fight land degradation is a question of fact which can only be answered by reference to the facts of each particular case. In this case, the primary and principal objective in revegetating the land was to ameliorate land degradation. The sale of the rights to the carbon sequestered by the trees is only an ancillary consideration, rather than the primary and principal purpose of the revegetation. Therefore, a deduction is allowable in accordance with section 40-630 of the ITAA 1997 for the capital expenditure incurred on revegetating the land.", "Date_of_Decision": "18 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 40-630 section 40-635 subparagraph 40-635(1)(e)(iii)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/320 | ATO ID 2004/321 | ATO ID 2004/323", "Subject_References": "Afforestation expenses Carbon sequestration rights Environmental protection expenses Landcare operations", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004714", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 94/9 | Keywords Afforestation expenses Carbon sequestration rights Environmental protection expenses Landcare operations"}
{"ATO_ID_Number": "ATO ID 2002/110", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Landcare operation - shed", "Issue": "Is construction of a shed, a landcare operation under subparagraph 40-635(1)(e)(iii) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The construction of a shed is not a landcare operation under subparagraph 40-635(1)(e)(iii) of the ITAA 1997.", "Facts": "The taxpayer operates a produce farm. The taxpayer is proposing to construct a shed on the property for the purpose of storing produce that has been harvested when soil and weather conditions are favourable. This will minimise the adverse effect on the soils caused by heavy machinery compacting those soils during a forced harvest under adverse conditions. Without adequate storage facilities, there is a very real risk that crops may not be harvested and the land is at great risk of erosion and further degradation through uncontrolled weed infestation.", "Reasons_for_Decision": "Summary: Section 40-630 of the ITAA 1997 allows a deduction for capital expenditure incurred in a year of income on a landcare operation, to be allowed as a deduction, the capital expenditure must be on a landcare operation as set out under section 40-635 of the ITAA 1997. In particular, subparagraph 40-635(1)(e)(iii) of the ITAA 1997 states: '(e) an operation primarily and principally for the purpose of: ... (iii) preventing or fighting land degradation (except by erecting fences on the land); ...' This subparagraph requires that the operation be primarily and principally for the purpose of preventing or fighting land degradation. The meaning of primarily and principally in this context is explained in Taxation Determination TD 94/9. Paragraph 3 of that taxation determination states, 'Where the expenditure is incurred for a dual purpose, the 'primarily and principally' test does not require a consideration of the subjective or objective purpose or motives of the taxpayer in incurring the expenditure. The test requires an examination of the primary and principal function or purpose of the result produced by incurring the expenditure.' The construction of a shed will enable the taxpayer to store produce. This will allow the taxpayer to harvest when soil and weather conditions are favourable. This may eliminate forced harvesting under adverse conditions where heavy machinery severely compacts and erodes the soil and prevents timely cultivation and planting of erosion control crops. The primary or principal purpose of the shed is to be used as a facility to store produce. The use of the shed may enable the taxpayer to harvest the crops in more favourable conditions and may indirectly assist in the elimination of soil erosion. However, the shed itself does not prevent or fight land degradation. In summary, the construction of the shed is not an operation primarily and principally for the purpose of preventing or fighting land degradation.", "Date_of_Decision": "24 December 2001", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-630 Paragraph 40-635(1)(e) subparagraph 40-635(1)(e)(iii)", "Related_Public_Rulings_and_Determinations": "TD 94/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Uniform capital allowances system Fixture on land Improvement to land Primary production expenses Soil conservation expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002110", "Unmatched_Content": "Related Public Rulings (including Determinations) TD 94/9 | Keywords Uniform capital allowances system Fixture on land Improvement to land Primary production expenses Soil conservation expenses"}
{"ATO_ID_Number": "ATO ID 2014/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: capital works - construction expenditure - costs to build temporary roads and restoration costs", "Issue": "Is the capital expenditure incurred to build temporary roads and to restore the area afterwards pursuant to a development approval, 'construction expenditure' as defined in subsection 43-70(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The capital expenditure incurred to build temporary roads and restore the area afterwards pursuant to a development approval is 'construction expenditure' as defined in subsection 43-70(1) of the ITAA 1997.", "Facts": "The taxpayer derived assessable income from providing short-term accommodation in cabins constructed on their land. The taxpayer undertook a project to construct new cabins on their property. Based on the operation of paragraph 43-20(1)(a) of the ITAA 1997, the new cabins are capital works to which Division 43 of the ITAA 1997 applies. The taxpayer obtained a development approval (also known as a planning approval) from the council for the construction of the cabins. The development approval imposed a condition requiring the taxpayer to construct temporary roads to access the site during the construction period and to restore the area after used. The temporary roads are on public land adjoining the taxpayer's land. The taxpayer incurred capital expenditure on building the temporary roads and restoring the area afterwards as part of their project to construct new cabins.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless expressed otherwise. A deduction for capital works under Division 43 is based on the amount of construction expenditure. 'Construction expenditure' is defined in subsection 43-70(1) as capital expenditure incurred in respect of the construction of capital works. Subsection 43-70(1) is a broad statement of inclusion, which is then subject to the specific exclusions set out in subsection 43-70(2). The costs for building temporary roads and restoring the area afterwards are not specifically excluded in subsection 43-70(2). Other than the specific exclusions in subsection 43-70(2), the phrase 'in respect of' in subsection 43-70(1) is another factor to take into account when determining if an amount qualifies as construction expenditure. The breadth of the words 'in respect of' indicates some connection or relation between the expenditure and the construction of the capital works. It is not only expenditure incurred in constructing the new cabins, but also expenditure incurred 'in respect of' the construction of the new cabins that will qualify for a deduction under Division 43. The Joint Explanatory Memorandum to the Income Tax Assessment Bill 1996 and Taxation Ruling TR 97/25 provide examples of construction expenditure that support this reading of subsection 43-70(1). For instance, preliminary expenses such as architects' fees, engineering fees and the cost of foundation excavation expenses are considered to be causally connected with, and therefore 'in respect of', the construction of the capital works. In the present case, the building of temporary roads and restoring the area afterwards are necessary conditions attached to the development approval. These enforceable requirements are set by council and must be completed as part of the taxpayer's cabins building project, thus are considered to be costs that flowed as a direct consequence of constructing the new cabins. There is a sufficient connection between the expenditure and the construction of the cabins. Accordingly, the capital expenditure is considered to be in respect of the construction of cabins, and is construction expenditure as defined in subsection 43-70(1). Note: Notwithstanding that the works on building temporary roads are on public land adjoining the taxpayer's land, the works are regarded as construction expenditure attributable to a 'construction expenditure area' in respect of that taxpayer under Division 43. Thus, any deductions that are allowable to the taxpayer will arise upon the completion of the construction of the cabins and apply for any income year during which the taxpayer uses the area for the purpose of producing assessable income.", "Date_of_Decision": "27 November 2014", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 paragraph 43-20(1)(a) subsection 43-70(1) subsection 43-70(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/138 | ATO ID 2006/213 | ATO ID 2006/235", "Subject_References": "Capital Allowances Capital Works Deductions Capital expenditure", "Case_References": "", "Other_References": "Joint Explanatory Memorandum to the Income Tax Assessment Bill 1996", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201437", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Capital Allowances Capital Works Deductions Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2012/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 250 - tax preferred use of an asset", "Issue": "Will paragraph 250-60(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) and subparagraph 250-60(1)(b)(i) of the ITAA 1997 be satisfied and an asset be put to a tax preferred use for the purposes of subsection 250-60(1) of the ITAA 1997 if the asset is leased by a lessor that is a tax preferred entity to a taxable entity that uses the asset but not on behalf of a tax preferred end user?", "Decision": "No. Paragraph 250-60(1)(a) of the ITAA 1997 and subparagraph 250-60(1)(b)(i) of the ITAA 1997 will not be satisfied and an asset will not be put to a tax preferred use for the purposes of subsection 250-60(1) of the ITAA 1997 if the asset is leased by a lessor that is a tax preferred entity to a taxable entity that uses the asset but not on behalf of a tax preferred end user.", "Facts": "A taxable entity (Lessee Co) will lease assets from a tax preferred entity (Exempt Lessor) under circumstances where Lessee Co will be the holder of the assets that are depreciating assets for the purposes of Division 40 of the ITAA 1997 and holder under a quasi ownership right of the assets that are capital works for the purposes of Division 43 of the ITAA 1997. Lessee Co uses the assets wholly within Australia in the carrying out of its business and does not use the assets on behalf of a tax preferred entity, including Exempt Lessor.", "Reasons_for_Decision": "Summary: Subsection 250-60(1) of the ITAA 1997 provides that an asset is put to a tax preferred use if under paragraph 250-60(1)(a) of the ITAA 1997 an end user (or a connected entity) holds rights as lessee under a lease of the asset and under paragraph 250-60(1)(b) of the ITAA 1997 the asset is used by or on behalf of a tax preferred end user. Paragraph 250-50(1)(a) of the ITAA 1997 provides the an entity is an end user of an asset if the entity uses or effectively controls the use of the asset. Subsection 250-50(4) of the ITAA 1997 provides that an entity is taken to be an end user of an asset if the entity holds rights as a lessee under a lease of the asset. Paragraph 36 of Taxation Ruling TR 96/22 provides that property may be simultaneously used by more than one entity, and that a person may use property notwithstanding that someone else is using or occupying it. Property that is subject to a lease may be simultaneously used by the lessee and by the lessor. Lessee Co would be an end user under subsections 250-50(1) of the ITAA 1997 and 250-50(4) of the ITAA 1997, and would satisfy paragraph 250-60(1)(a) of the ITAA 1997 but it uses the asset for its own benefit and does not use the asset on behalf of a tax preferred entity. Exempt Lessor will use the asset to derive rent and will thereby be an end user under subsection 250-50(1) of the ITAA 1997. Although an asset may be used by both a lessee and a lessor, subsection 250-60(1) of the ITAA 1997 provides that the tax preferred use of the asset is that of the lessee in paragraph 250-60(1)(a) of the ITAA 1997 and the requirement in subparagraph 250-60(1)(b)(i) of the ITAA 1997 is whether at that time the asset is to be used by or on behalf of an end user who is a tax preferred end user. It is the use by the lessee and not the use by the lessor that is tested against subparagraph 250-60(1)(b)(i) of the ITAA 1997. Paragraph 250-60(1)(a) of the ITAA 1997 and subparagraph 250-60(1)(b)(i) of the ITAA 1997 will be satisfied and an asset will be put to a tax preferred use if the lessee is an end user that is a tax preferred entity, or the lessee uses the asset on behalf of an end user who is a tax preferred end user. As the lessee who uses the asset is a taxable entity and uses the asset wholly within Australia and does not use the asset on behalf of a tax preferred end user, subparagraph 250-60(1)(b)(i) of the ITAA 1997 will not be satisfied and the asset will not be put to a tax preferred use for the purposes of subsection 250-60(1) of the ITAA 1997.", "Date_of_Decision": "1 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 250 paragraph 250-50(1) paragraph 250-50(1)(a) subsection 250-50(4) subsection 250-60(1) paragraph 250-60(1)(a) subparagraph 250-60(1)(b) subparagraph 250-60(1)(b)(i) Division 40 Division 43", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/22", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt use of plant Income Lease and hire income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201237", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/22 | Keywords Exempt use of plant Income Lease and hire income"}
{"ATO_ID_Number": "ATO ID 2015/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: Capital Allowances: project pools - project amount - site preparation costs", "Issue": "Is the taxpayer's capital expenditure on relocating utilities, such as electricity lines and water pipelines from the construction site of a depreciating asset, an amount incurred for site preparation costs for depreciating assets for the purpose of subparagraph 40-840(2)(d)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure on relocating utilities, such as electricity lines and water pipelines is an amount incurred for site preparation costs for a depreciating asset for the purpose of subparagraph 40-840(2)(d)(ii) of the ITAA 1997, because this expenditure was necessary in making the site ready for the construction of the depreciating asset.", "Facts": "The taxpayer is undertaking a project of a finite life which involves the construction of a depreciating asset. The taxpayer will carry on the project for a taxable purpose. The construction of the depreciating asset was necessary before the project could start to operate. In order to commence construction of the depreciating asset, the taxpayer incurred expenditure on relocating existing utilities, such as electricity lines and water pipelines from the construction site. This expenditure does not form part of the cost of a depreciating asset that the taxpayer holds or held, and is not deductible outside of Subdivision 40-I of the ITAA 1997. The expenditure was incurred on or after 1 July 2005.", "Reasons_for_Decision": "Summary: Broadly speaking, Subdivision 40-I of the ITAA 1997 allows a deduction over the project life for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2) of the ITAA 1997, the amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c) of the ITAA 1997, is one of the amounts specified in paragraph 40-840(2)(d) of the ITAA 1997. In order for the capital expenditure to be a project amount within subparagraph 40-840(2)(d)(ii) of the ITAA 1997, the amount must be incurred for site preparation costs for depreciating assets (except for horticultural plants, in draining swamp or low-lying land or in clearing land). The word 'preparation' is not defined for the purposes of Subdivision 40-I of the ITAA 1997 and therefore, will take its ordinary meaning shaped by the context in which it is found. The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne, relevantly defines the word 'preparation' as: n. The action or process of preparing or being prepared for use or consideration Similarly, the word 'prepare' is defined as: 1. Make (something) ready for use or consideration. Based on the ordinary meaning, the phrase 'site preparation' for the purposes of Subdivision 40-I of the ITAA 1997 includes doing things to make the site ready for its intended use. Therefore, capital expenditure incurred by a taxpayer to prepare a site for the construction of a depreciating asset may constitute site preparation costs for depreciating assets in accordance with subparagraph 40-840(2)(d)(ii) of the ITAA 1997 provided it is not for horticultural plants, in draining swamp or low-lying land or in clearing land. The expenditure is not for horticultural plants, or for draining swamp or low lying land. 'Clearing land' is not defined for the purposes of Subdivision 40-I of the ITAA 1997 and therefore, the words will take their ordinary meaning shaped by the context in which they are found. The Macquarie Dictionary Online defines 'clearing' as, inter alia: 35. To remove trees, undergrowth, etc., from (an area of land). As the expenditure was incurred in moving utilities, not trees or other items of undergrowth, it is not for clearing land. In this case, the taxpayer incurred capital expenditure on relocating utilities such as electricity lines and water pipelines. Without the taxpayer relocating the utilities from the construction site, the depreciating asset could not have been built. This expenditure was necessarily incurred to make the site ready for its intended use and accordingly such relocation expenses fall within the intended meaning of site preparation costs in subparagraph 40-840(2)(d)(ii) of the ITAA 1997. Accordingly, the capital expenditure constitutes an amount incurred for site preparation costs for a depreciating asset for the purpose of subparagraph 40-840(2)(d)(ii) of the ITAA 1997.", "Date_of_Decision": "8 May 2015", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 40-I section 40-830 section 40-840 subsection 40-840(2) paragraph 40-840(2)(a) paragraph 40-840(2)(b) paragraph 40-840(2)(c) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2009/35", "Subject_References": "Capital allowances Project pool Project amount Site preparation", "Case_References": "", "Other_References": "Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne The Macquarie Dictionary Online, 2013, 6th edition, Macquarie Dictionary Publishers Pty Ltd", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201512", "Unmatched_Content": "Keywords Capital allowances Project pool Project amount Site preparation"}
{"ATO_ID_Number": "ATO ID 2012/17", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project - transport capital expenditure", "Issue": "For the purposes of the project pool provisions of Subdivision 40-I of the Income Tax Assessment Act 1997 (ITAA 1997), do the taxpayer's mining operations that are designed to take advantage of enhancements to a shipping channel, which in turn are, along with other works, designed specifically to accommodate the bulk transport of the products on the taxpayer's mining operations, carried out by a Port Authority for the exportation of minerals constitute a project for which its contribution to the Port Authority's earthworks expenditure can be allocated to a project pool?", "Decision": "Yes. For the purposes of the project pool provisions of Subdivision 40-I of the ITAA 1997, the taxpayer's mining operations that are designed to take advantage of enhancements to a shipping channel, which in turn are, along with other works, designed specifically to accommodate the bulk transport of the products on the taxpayer's mining operations, carried out by a Port Authority for the exportation of minerals constitutes a project for which its contribution to the Port Authority's earthworks expenditure can be allocated to a project pool.", "Facts": "All legislative references are to the ITAA 1997 unless otherwise stated. The taxpayer's business is mining operations as defined in subsection 40-730(7). In order to export minerals extracted from its mining operations, the taxpayer entered into arrangements with a Port Authority to establish structural improvements to facilitate the overseas shipment of the minerals extracted from its mine. Subsequently, the Port Authority undertook earthworks specifically designed in combination with other works to enhance the shipping channel to accommodate large ships employed for the bulk transportation of minerals extracted from the taxpayer's mine. The taxpayer made a contribution to the Port Authority's costs in carrying out its earthworks. The taxpayer's contribution to the costs of the Port Authority in carrying out its earthworks qualifies as transport capital expenditure because it satisfies the tests established by the combination of paragraphs 40-865(1)(d) and 40-865(2)(a). The nexus that exists between the payment of the contribution and the benefit accruing to the taxpayer's mining operations resultant from the earthworks undertaken by the Port Authority provides the relevant connection necessarily required by section 40-865 for the earthworks contribution to be incurred in carrying on of the taxpayer's business for a taxable purpose (mining operations as defined in subsection 40-730(7) must be carried on for the purpose of producing assessable income which is, as defined in subsection 40-25(7), a taxable purpose). The taxpayer expects that its mining operations will have a finite commercial life.", "Reasons_for_Decision": "Summary: Broadly speaking, the project pool provisions of Subdivision 40-I allow a taxpayer to deduct certain capital expenditure that qualifies under section 40-840 as a project amount, to be pooled and written off on the basis of the effective life of the project. For mining capital expenditure (section 40-860) or transport capital expenditure (section 40-865) to be a project amount, subsection 40-840(1) requires that a direct connection with carrying on of the mining operations in relation to which the mining capital expenditure or with the business in relation to which the transport capital expenditure is incurred. For other amounts of capital expenditure to be a project amount, paragraph 40-840(2)(c) requires a direct connection between the expenditure and the project you carry on or propose to carry on for a taxable purpose. If the capital expenditure is a project amount, subsection 40-830(1) allows the taxpayer to allocate the project amount to the project pool for that project. Once allocated, subsection 40-830(2) allows the taxpayer to deduct amounts for the project amount over the life of that project by applying the formula in subsection 40-830(3). To constitute a project for this purpose, the project must have a finite life. Consistent with this legislative design, for a project amount to be allocated to a project pool it must be directly connected with a project it carries on. Identifying the business undertaking or activities of the taxpayer that is directly connected to transport capital expenditure for the purposes of qualifying the expenditure as a project amount therefore identifies the undertaking to which the transport capital expenditure belongs. Provided this undertaking can be objectively determined to have a finite life and therefore meets the requirements of a project for the purposes of Subdivision 40-I, the project pool that belongs to this project is the relevant project pool to which the project amount can be allocated. In this case, the taxpayer can objectively determine that its business activities of mining operations will have a finite commercial life. Further, the expenditure contribution the taxpayer incurs is incurred in carrying on a business of mining operations, for the purpose of the project pool provisions, and is transport capital expenditure within the meaning of paragraphs 40-865(1)(d) and 40-865(2)(a) - that is, by way of contribution to the port authority's capital expenditure on structural improvements that are necessarily constructed for the port authority's transport facility. Consequently, identifying the project for which the taxpayer's expenditure contribution can satisfy the requirement for a project amount within subparagraph 40-840(1)(c)(ii) involves identifying the relevant business undertaking or activities of the taxpayer to which the expenditure contribution is directly connected. Despite the taxpayer's passive involvement in undertaking the earthworks that are necessary for the export shipping capacity its business ultimately requires, the earthworks carried out by the Port Authority is not a business undertaking or activity carried out by the taxpayer. In contrast, the mining operation of the taxpayer that export of the minerals extracted through the port is clearly a business undertaking or activity carried out by the taxpayer. The enhancements to the port's shipping channel, made possible by the earthworks carried out by the Port Authority, were deliberately designed to facilitate the export of minerals extracted from the taxpayer's mining operations. The expenditure contribution is, for that reason, directly connected to the taxpayer's mining operations that profit from the advantage this contribution produces. Pursuant to subparagraph 40-840(1)(c)(ii), the taxpayer's mining operations advantaged by incurring the earthworks contribution is therefore activities capable of being carried on in a project the taxpayer operates in relation to which it could allocate the earthworks contribution to a pool. These activities have a finite project life. Accordingly the taxpayer's mining operations that are designed to take advantage from enhancements to a shipping channel, which in turn are, along with other works, designed specifically to accommodate the bulk transport of the products on the taxpayer's mining operations, carried out specifically by the Port Authority for the purpose of facilitating the exportation of the taxpayer's minerals, constitute a project for which the taxpayer's contribution to the Port Authority's earthworks expenditure can be allocated to the taxpayer's mining project's project pool.", "Date_of_Decision": "9 February 2012", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 40-I subsection 40-25(7) subsection 40-730(7) subsection 40-830(1) section 40-840 subsection 40-840(1) subparagraph 40-840(1)(c)(ii) paragraph 40-840(2)(c) section 40-860 section 40-865 paragraph 40-865(1)(d) paragraph 40-865(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Minerals & quarry materials transport Mining expenses Project amount Project pool Taxable purpose Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201217", "Unmatched_Content": "Keywords Minerals & quarry materials transport Mining expenses Project amount Project pool Taxable purpose Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2012/100", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Project - activities directly connected with carrying on mining operations", "Issue": "For the purposes of the project pool provisions of Subdivision 40-I of the Income Tax Assessment Act 1997 (ITAA 1997) does the taxpayer's project, for which its mining capital expenditure qualifies as a project amount under subparagraph 40-840(1)(c)(i), include 'minerals treatment' activities that were directly connected with carrying on the mining operations to which the expenditure relates?", "Decision": "Yes. For the purposes of the project pool provisions of Subdivision 40-I of the ITAA 1997 the taxpayer's project, for which its mining capital expenditure qualifies as a project amount under subparagraph 40-840(1)(c)(i), includes 'minerals treatment' activities that were directly connected with carrying on the mining operations to which the expenditure relates.", "Facts": "All legislative references are to the ITAA 1997 unless otherwise stated. The taxpayer is a mining company which holds a mining lease upon which an ore body was discovered and proven. The taxpayer instigated a mining project and incurred mining capital expenditure in preparing the site for extracting minerals from the ore body discovered on the mining lease. The aim of the project was to produce a revenue stream from the production of the mineral sought in carrying on the mining operations. The taxpayer's mining capital expenditure qualified under subsection 40-840(1) as 'project amounts'. These amounts were allocated to a project pool under subsection 40-830(1). As planned, extraction of the proven ore body ceased within six months of starting. The ore extracted was stockpiled at the mining site and 'minerals treatment' (within the meaning of this term as defined in subsection 40-875(2)) of the stockpiled ore continued for another two years.", "Reasons_for_Decision": "Summary: The project pool provisions of Subdivision 40-I allow a taxpayer to deduct, over time, certain capital expenditure associated with a project that qualifies as a project amount under section 40-840. The Subdivision also ensures that any capital expenditure connected with mining, petroleum and quarrying companies' operations, that was previously able to be deducted under the former Division 330, and not captured by an earlier Subdivision in Division 40 will be captured. In this regard, mining capital expenditure and transport capital expenditure that does not form part of the cost of a depreciating asset and is not deductible under another provision of the Act qualifies as a project amount under subsection 40-840(1) where subparagraphs 40-840(1)(c)(i) or 40-840(1)(c)(ii) is satisfied. Subparagraph 40-840(1)(c)(i) requires that the mining capital expenditure be directly connected with the carrying on of the mining operations in relation to which the expenditure is incurred, and paragraph 40-840(1)(c)(ii) requires that the transport capital expenditure be directly connected with the carrying on of the business in relation to which the expenditure is incurred. Paragraph 40-730(7)(a) provides that 'mining operations' means mining operations on a mining property for extracting minerals (except petroleum) from their natural site...for the purpose of producing assessable income. Based on this, subsection 40-840(1) will not only recognise, as project amounts for inclusion in a taxpayer's project pool, capital expenditure amounts incurred on extractive 'mining operations' as defined in paragraph 40-730(7)(a), but also amounts incurred in the wider context of the project's operations. This flexibility is required so that Subdivision 40-I can capture all of the capital expenditure previously recognised by Division 330 where a miner undertakes to carry on a mining operation or where a non-miner (a taxpayer who does not carry on mining operations) undertakes to carry on a business by providing a transport facility for the exclusive use of miners. Section 40-860 provides a definition of 'mining capital expenditure' and section 40-865 provides a definition of 'transport capital expenditure' which includes the capital expenditure previously recognised as 'allowable capital expenditure' and 'transport capital expenditure'. In particular to this case, the following capital expenditure incurred by the taxpayer is mining capital expenditure within the meaning of this term as defined in section 40-860: Subsection 40-875(2) lists the specific activities which are defined to mean 'minerals treatment'. Consequently, the interaction of section 40-860 and subparagraph 40-840(1)(c)(i) has the effect of recognising not only extractive operations as operations for which qualifying mining capital expenditure project amounts can be allocated to a miner's project pool, but also 'minerals treatment' (within the meaning of this term as defined in subsection 40-875(2)) that is directly connected with the extraction. A project does not need identifying in assessing whether an amount of mining capital expenditure or transport capital expenditure will be a project amount under subsection 40-840(1). However, the identification of the project is necessary for the purposes of calculating a deduction for the project amounts allocated to a project pool. This is because the method of calculation is based on the project life to which the project pool relates which requires the identification of the particular project. In The Macquarie Dictionary [multimedia], version 5.0.0, 1/10/01 'project' means: something that is contemplated, devised or planned; a plan; a scheme; an undertaking. In referring to the project life of a project, section 40-845 refers to the time that elapses between when the project starts to operate until it stops operating. This requirement has the clear connotation of a project as an activity or a series of related activities. A project may then be described as an activity or a series of related activities that are undertaken to achieve a specific purpose or outcome. Relevantly, project amounts qualifying under subparagraph 40-840(1)(c)(i) are incurred in carrying on activities that are directly connected with carrying on the mining operations to which the expenditure relates. Thus one is led to expect that a project for which project amounts qualifying under subparagraph 40-840(1)(c)(i) can be allocated to a project pool, includes minerals treatment where this activity is undertaken for a purpose or outcome that is directly connected with carrying on the mining operation in relation to which the taxpayer's project pool amounts were incurred. In this case, the relevant mining operations (for which the taxpayer's allocated project amounts are incurred) were established to produce a revenue stream from the production of the mineral sought in carrying on those mining operations. This undertaking necessitates that the activities of the project include minerals treatment of the ore extracted. Therefore, the project, identified for the purposes of determining the project life over which the allocated project amounts are to be deducted,, includes the minerals treatment activities undertaken in carrying on the mining operations to which the project amounts relate.", "Date_of_Decision": "13 December 2012", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-I paragraph 40-730(7)(a) subsection 40-830(1) section 40-840 subsection 40-840(1) subparagraph 40-840(1)(c)(i) subparagraphs 40-840(1)(c)(ii) section 40-845 section 40-860 paragraph 40-860(1)(e) paragraph 40-860(1)(f) section 40-865 subsection 40-875(2) Division 330", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Mining operations Project amount Project pool Uniform capital allowances system", "Case_References": "", "Other_References": "The Macquarie Dictionary [multimedia], version 5.0.0, 1/10/01", "Business_Line": "Administration, Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2012100", "Unmatched_Content": "Keywords Mining operations Project amount Project pool Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2007/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project - carry on for a taxable purpose", "Issue": "Do the taxpayer's activities in obtaining specific standards of treatment from certain sewerage treatment providers amount to carrying on a project for a taxable purpose within the project pool provisions of Subdivision 40-I of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's activities in obtaining specific standards of treatment from certain sewerage treatment providers amount to carrying on a project for a taxable purpose within the project pool provisions of Subdivision 40-I of the ITAA 1997.", "Facts": "The taxpayer's business is managing a water catchment area and supplying water that complies with specific standards of water quality. Water, below the standard required by the taxpayer, flowed through various shire council water reticulation systems either untreated or through shire council sewerage treatment plants into the taxpayer's water catchment infrastructure. The taxpayer identified that a contributing factor towards this sub standard water was a failure by certain sewerage treatment providers to both meet the taxpayer's water standards and address a backlog of required sewerage treatment plant upgrades. In order to achieve the higher standards of water treatment it required, the taxpayer entered into an agreement with the regulator of sewerage treatment providers. In return for the providers expediting a number of separately identified works aimed at improving water quality, the taxpayer would pay part of the cost of those works. An improvement in water quality was to be achieved by both the repair and upgrade of council sewage treatment infrastructure and by the creation of new council sewerage treatment infrastructure within the taxpayer's catchment area. The agreement required supervision by the taxpayer to ensure the completion of specified work targets and progress payments in line with the forecasted due dates. Each of the separate works to be undertaken had different start and end dates and were conducted in different localities. The taxpayer is considered to have paid an amount to create or upgrade community infrastructure within paragraph 40-840(2)(d) of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references in this Interpretative Decision are to the Income Tax Assessment Act 1997 . Broadly speaking, section 40-830 allows a deduction over the project life for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2), the amount must be capital expenditure which, among other things, is directly connected with a project you carry on or propose to carry on for a taxable purpose (paragraph 40-840(2)(c)). Paragraph 40-840(2)(c) refers to projects that taxpayers 'carry on or propose to carry on'. This means that a 'project' for the purposes of the project pool provisions of Subdivision 40-I requires something more than a passive involvement. It requires some active participation by the taxpayer. Further, it is inherent in the meaning of 'project life' in section 40-845 and in the calculation of the amount of the deduction in subsection 40-830(3) that a 'project' for the purposes of the legislation is something that has a finite life - a finite period from when it starts to operate until it stops operating. Ordinarily, the nature of the project will establish whether the project will operate for a finite period. Despite there being a number of separately identifiable works undertaken, all of the separate works are aimed at obtaining specific standards of water treatment from the sewage treatment providers in the taxpayer's catchment area. This necessitated entering into the agreement and actively administering the performance of the agreement to ensure the achievement of the agreed outcomes. Therefore, the activities of supervising the completion of specific work targets and progress payments in line with the forecast due dates of the agreement are activities undertaken by the taxpayer for the one distinct project. That is, obtaining from certain sewerage treatment providers water treatment of a required standard. The project starts to operate when the agreement is executed. The project will stop operating when the standard of water treatment required under the agreement is achieved. A further aspect of paragraph 40-840(2)(c) is that the taxpayer must carry on or propose to carry on the project for a taxable purpose. So far as is relevant here, 'taxable purpose' is 'the purpose of producing assessable income' (subsection 40-25(7)). Something is done for the 'purpose of producing assessable income' (as defined in subsection 995-1(1)) if it is done: For a project to be carried on for the purpose of producing assessable income: A project is carried on in the course of carrying on an existing business for the purpose of gaining or producing assessable income if the carrying on of that project occurs in the course of and as an integral part of carrying on that business (paragraph 30 of Taxation Ruling TR 2005/4). In the present case, the taxpayer's activities in obtaining specific standards of treatment from certain sewerage treatment providers do not amount to a project that the taxpayer carries on for the purpose of gaining or producing assessable income because, of themselves, the activities are not capable of the production of assessable income. However, the taxpayer's activities do amount to a project that the taxpayer carries on in carrying on a business for the purpose of gaining or producing assessable income. The taxpayer's business includes ensuring the water quality of the water catchment area and it is part of the taxpayer's business to pay amounts to other entities for the purpose of improving the standard of water quality in its catchment and administering how that money is spent. Accordingly, the taxpayer's activities do amount to a project that the taxpayer carries on for a taxable purpose and that project ends when the higher treatment quality required by the taxpayer is achieved.", "Date_of_Decision": "17 November 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-25(7) section 40-830 subsection 40-830(3) subsection 40-840(2) paragraph 40-840(2)(c) paragraph 40-840(2)(d) section 40-845 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Project amount Project life Project pool Capital Allowances CoE Uniform capital allowances system Taxable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20073", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2005/4 | Keywords Project amount Project life Project pool Capital Allowances CoE Uniform capital allowances system Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2005/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - taxable purpose", "Issue": "Does the taxpayer's subdivision of their parcel of land which will make them a capital gain when realised constitute a project carried on for a taxable purpose within the project pooling provisions of Subdivision 40-I of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The project is not a project being carried on for a taxable purpose by the taxpayer within the project pooling provisions of Subdivision 40-I of the ITAA 1997.", "Facts": "The taxpayer owns a parcel of land on which they carried on a primary production business. Subsequently, the taxpayer commenced to subdivide the land into two parcels to maximise the return on the sale of the property. The taxpayer incurred expenditure on legal advice and various consultants in relation to the subdivision. The amount received by the taxpayer from the realisation of the subdivision will be taken into account in working out a net capital gain to be included in the taxpayer's assessable income.", "Reasons_for_Decision": "Summary: Section 40-830 of the ITAA 1997 allows a deduction over the project life for project amounts allocated to a project pool. To be a 'project amount' under subsection 40-840(2) of the ITAA 1997, an amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) and 40-840(2)(b) of the ITAA 1997, must also satisfy paragraph 40-840(2)(c) of the ITAA 1997; namely, that it must be directly connected with a project that the taxpayer carries on or proposes to carry on for a taxable purpose. 'Taxable purpose' is defined in subsection 40-25(7) of the ITAA 1997 to be the purpose of producing assessable income; the purpose of exploration or prospecting; the purpose of mining site rehabilitation; or environmental protection activities. The phrase 'purpose of producing assessable income' is defined in subsection 995-1(1) of the ITAA 1997 to mean something done: Therefore, a project is carried on or proposed to be carried on for the purpose of producing assessable income if it is carried on or proposed to be carried on: Accordingly, to satisfy the 'taxable purpose' requirement, a taxpayer's project must be an income-producing activity. In this case, the taxpayer's project is subdividing and selling a capital asset, being their former farming land. As stated in paragraph 36 of Taxation Ruling TR 92/3, the courts have often said that a profit on the mere realisation of an investment is not income, even if the taxpayer goes about the realisation in an enterprising way ( Californian Copper Syndicate (Limited and Reduced) v. Harris (1904) 5 TC 159; Allied Pastoral Holdings Pty Ltd v. FC of T 83 ATC 4015; (1983) 13 ATR 835; Statham & Anor v. FC of T 89 ATC 4070; (1989) 20 ATR 228). The amount the taxpayer receives from the sale of the subdivided land will be taken into account in working out a net capital gain to be included in their assessable income. In this case, the holding of a parcel of land as an investment which makes a capital gain upon realisation means that the asset is not being used to gain or produce assessable income for the taxable purpose required by the project pooling provisions even though a net capital gain is statutorily required to be included in assessable income. As the test in paragraph 40-840(2)(c) of the ITAA 1997 is not satisfied, there is no project being carried on for a taxable purpose within the project pooling provisions of Subdivision 40-I of the ITAA 1997.", "Date_of_Decision": "6 May 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 40-I subsection 40-25(7) section 40-830 subsection 40-840(2) paragraph 40-840(2)(a) paragraph 40-840(2)(b) paragraph 40-840(2)(c) paragraph 40-840(2)(d) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/3 | Taxation Ruling TR 2005/4", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/206 | ATO ID 2003/1090", "Subject_References": "Capital Allowances CoE Project amount Project pool Taxable purpose Uniform capital allowances system", "Case_References": "Californian Copper Syndicate (Limited and Reduced) v. Harris (1904) 5 TC 159", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005157", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 92/3 Taxation Ruling TR 2005/4 | Keywords Capital Allowances CoE Project amount Project pool Taxable purpose Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/253", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - feasibility studies - information", "Issue": "Is the taxpayer's expenditure to acquire the results of a feasibility study, commissioned by another entity for that entity's project, a project amount within paragraph 40-840(2)(d) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's expenditure is a project amount within paragraph 40-840(2)(d) of the ITAA 1997 because it is an amount incurred to obtain information associated with the taxpayer's project within subparagraph 40-840(2)(d)(v) of the ITAA 1997.", "Facts": "The taxpayer proposed to carry on a project for a taxable purpose on a particular block of land. Another entity had earlier commissioned a feasibility study for the same type of project on the same land. The taxpayer incurred expenditure to obtain from that entity the results of that feasibility study. The documents obtained by the taxpayer from the other entity included a research report which indicated the suitability of the land for the taxpayer's project and financial modelling and an evaluation which could be applied for the taxpayer's project. The taxpayer used that information in carrying on their project.", "Reasons_for_Decision": "Summary: Broadly speaking, section 40-830 of the ITAA 1997 allows a deduction over the project life for project amounts allocated to a project pool. To be a project amount within subsection 40-840(2) of the ITAA 1997, an amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c), is one of the amounts specified in subparagraphs 40-840(2)(d)(i) to 40-840(2)(d)(vii). The amount specified in subparagraph 40-840(2)(d)(iii) is an amount incurred for feasibility studies for the project. The amount specified in subparagraph 40-840(2)(d)(v) is an amount incurred to obtain information associated with the project. | Detailed Reasoning - Project Amount - Feasibility Studies: For an amount incurred for a feasibility study to fall within subparagraph 40-840(2)(d)(iii) of the ITAA 1997, the feasibility study must be one specifically commissioned or undertaken by the taxpayer for the very project they are carrying on or proposing to carry on. A feasibility study commissioned or undertaken by another taxpayer for a project that entity was carrying on or proposing to carry does not meet the requirements of the subparagraph for this taxpayer. Accordingly, the capital expenditure is not a 'project amount' within subparagraph 40-840(2)(d)(iii) for this taxpayer. | Detailed Reasoning - Project Amount - Information: The taxpayer incurred the expenditure to obtain the information contained in the feasibility study and that information is directly associated with the taxpayer's project. Accordingly, the capital expenditure is a 'project amount' within subparagraph 40-840(2)(d)(v) of the ITAA 1997 for this taxpayer.", "Date_of_Decision": "15 October 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-840(2) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(iii) subparagraph 40-840(2)(d)(v)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Allowances CoE Feasibility study expenses Project amount Project pool Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004253", "Unmatched_Content": "Keywords Capital Allowances CoE Feasibility study expenses Project amount Project pool Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2004/254", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - feasibility studies", "Issue": "Is the capital expenditure incurred by the taxpayer an amount for feasibility studies for the project they proposed to carry on within subparagraph 40-840(2)(d)(iii) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's capital expenditure is an amount incurred for feasibility studies for the project within subparagraph 40-840(2)(d)(iii) of the ITAA 1997.", "Facts": "The taxpayer was unsuccessful in a tender for the development of a multimillion dollar mixed-use property. The tender was a central activity in pursuing the taxpayer's project of acquiring, developing, leasing and managing the property for a determinate project life for the purpose of producing rental and associated assessable income. On losing the tender, the taxpayer abandoned the project. The taxpayer had incurred a significant amount of expenditure in engaging external consultants to estimate the design and construction costs of the proposed development. All information provided by the consultants was specific to the property and cannot be used for any other property development.", "Reasons_for_Decision": "Summary: Broadly, section 40-830 of the ITAA 1997 allows a deduction over the project life or on earlier project abandonment for project amounts allocated to a project pool. To be a 'project amount' as defined in subsection 40-840(2) of the ITAA 1997, the amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c), is one of the amounts specified in paragraph 40-840(2)(d). For the capital expenditure to be a project amount under subparagraph 40-840(2)(d)(iii), the amount must be incurred for feasibility studies for the project. A feasibility study is a process undertaken to gather specific information to analyse and assess technical, financial, economic, market or other viability in order to make an informed decision about the potential success of an activity or series of activities. A feasibility study has pre-determined criteria (such as level of investment, rate of return, operating costs) against which viability is assessed. A feasibility study is 'for the project' if it is commissioned or undertaken by the taxpayer for the purpose of obtaining the required data for the specific project the taxpayer is carrying on or proposes to carry on for a taxable purpose. The work commissioned by the taxpayer constitutes a feasibility study as that work was commissioned to obtain information on a specific aspect of the project the taxpayer proposed to carry on for a taxable purpose. The amount incurred is a 'project amount' under subparagraph 40-840(2)(d)(iii) of the ITAA 1997.", "Date_of_Decision": "9 September 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-840(2) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(iii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/728", "Subject_References": "Capital Allowances CoE Feasibility study expenses Project amount Project pool Uniform capital allowance system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004254", "Unmatched_Content": "Keywords Capital Allowances CoE Feasibility study expenses Project amount Project pool Uniform capital allowance system"}
{"ATO_ID_Number": "ATO ID 2004/580", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - start to deduct amounts", "Issue": "Can the taxpayer start to deduct, under subsection 40-830(2) of the Income Tax Assessment Act 1997 (ITAA 1997) an amount for project amounts allocated to a project pool before the project starts to operate?", "Decision": "No. The taxpayer cannot start to deduct an amount under subsection 40-830(2) of the ITAA 1997 for project amounts they allocate to a project pool until the project starts to operate.", "Facts": "The taxpayer had identified with some certainty a project they proposed to carry on for a taxable purpose over a determinate period. The taxpayer was required to lodge a development permit application with supporting material to the local government authority for approval to proceed with their project. Prior to receiving that approval, the taxpayer incurred capital expenditure that was a project amount within subsection 40-840(2) of the ITAA 1997. The amount was allocated to a project pool.", "Reasons_for_Decision": "Summary: Broadly, section 40-830 of the ITAA 1997 allows a deduction over the project life of a project for project amounts allocated to a project pool. Project life is worked out by estimating how long it will be from when the project starts to operate until it stops operating (section 40-845 of the ITAA 1997). Some projects within the ambit of subsection 40-840(2) of the ITAA 1997 consist of two stages: a preparatory stage (a setting up stage) and an operational stage (when the taxpayer carries on activities for a taxable purpose). Such projects start at the beginning of the preparatory stage. They start to operate at the beginning of the operational stage. This means that the time when a project starts may be earlier than the time when the project starts to operate. A deduction for project amounts allocated to a project pool is based on project life (section 40-830 of the ITAA 1997) and becomes available for the first income year when the project starts to operate (section 40-855 of the ITAA 1997). As mentioned above, project life is worked out by reference only to the period of the operational stage of the project. As the taxpayer's project has not yet reached an operational stage, the taxpayer cannot start deducting amounts under subsection 40-830(2) of the ITAA 1997.", "Date_of_Decision": "1 June 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-830(2) subsection 40-840(2) section 40-845 section 40-855", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/581 | ATO ID 2004/582 | ATO ID 2004/583", "Subject_References": "Capital Allowances CoE Project amount Project life Project pool Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004580", "Unmatched_Content": "Keywords Capital Allowances CoE Project amount Project life Project pool Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/581", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project - abandonment", "Issue": "Is the taxpayer's project abandoned for the purposes of subsection 40-830(4) of the Income Tax Assessment Act 1997 (ITAA 1997) if progress of the project is delayed?", "Decision": "No. The taxpayer's project is not abandoned simply because there is uncertainty about the progress of the project.", "Facts": "The taxpayer had identified with some certainty a project that they proposed to carry on for a taxable purpose over a determinate period. The taxpayer was required to lodge a development permit application with supporting material to the local government authority for approval to proceed with the project. The taxpayer incurred capital expenditure that constituted a project amount within subsection 40-840(2) of the ITAA 1997. The amount was allocated to a project pool. A letter from the local government indicated that, whilst it was not issuing a formal objection to the development at that stage, it did not support the development application as presented. The taxpayer intends to address the local government's concerns in relation to the application in an attempt to obtain local government support for the development.", "Reasons_for_Decision": "Summary: Broadly, section 40-830 of the ITAA 1997 allows a deduction over the project life of a project for project amounts allocated to a project pool. If the project is abandoned, sold or otherwise disposed of in an income year, a deduction is available under subsection 40-830(4) of the ITAA 1997 for that year in relation to the sum of the closing pool value of the pool for the previous income year and any project amounts allocated to the pool for the current income year. According to the decision in Kallooar v. R [1964] 50 WWR 602, something is considered to be abandoned if it is given up completely and finally. On that basis, the temporary cessation of a project will not constitute abandonment: the cessation must be permanent. A project will be abandoned if it would be objectively determined that it will not proceed. In this case, the taxpayer was informed by the local government that they did not support the development in its current form. A formal rejection of the application has not been issued by the local government. It is possible, and the taxpayer proposes to pursue this course, that a development permit will still be granted if the taxpayer can successfully address the concerns raised by the local government. In these circumstances, the taxpayer's inability to progress the project does not constitute abandonment.", "Date_of_Decision": "1 June 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-830(4) subsection 40-840(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/728 | ATO ID 2004/580 | ATO ID 2004/582 | ATO ID 2004/583", "Subject_References": "Capital Allowances CoE Project amount Project pool Uniform capital allowances system", "Case_References": "Kallooar v. R [1964] 50 WWR 602", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004581", "Unmatched_Content": "Keywords Capital Allowances CoE Project amount Project pool Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/582", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - environmental assessments", "Issue": "Was the taxpayer's expenditure an amount incurred for environmental assessments for the project they proposed to carry on within subparagraph 40-840(2)(d)(iv) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's expenditure was an amount incurred for environmental assessments for their project within subparagraph 40-840(2)(d)(iv) of the ITAA 1997.", "Facts": "The taxpayer had identified with some certainty a project that they proposed to carry on for a taxable purpose for a determinate period. The taxpayer was required to lodge environmental assessment reports with a development permit application to the local government authority for approval to proceed with their project. Reports to the local government were required for noise, ecological and traffic assessments, soil testing, and stormwater management. The taxpayer incurred capital expenditure in engaging external specialists to conduct the studies and produce these reports for the project.", "Reasons_for_Decision": "Summary: Broadly, section 40-830 of the ITAA 1997 allows a deduction over the project life of a project for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2) of the ITAA 1997, an amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c) of the ITAA 1997, is one of the amounts specified in subparagraphs 40-840(2)(d)(i) to 40-840(2)(d)(vii) of the ITAA 1997. The amount specified in subparagraph 40-840(2)(d)(iv) of the ITAA 1997 is an amount incurred for environmental assessments for the project. An environmental assessment is the undertaking of a study, the preparing or obtaining of a report or other documentation, or the carrying out of any other activity for the purpose of assessing the impact or likely impact of the project on the environment. For these purposes, the meaning of environment is not limited to the natural environment. The works commissioned by the taxpayer are environmental assessments as the works were commissioned to assess the impacts or likely impacts of their project on the environment. It follows that each amount incurred is a 'project amount' under subparagraph 40-840(2)(d)(iv) of the ITAA 1997.", "Date_of_Decision": "1 June 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-840(2) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(iv)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/580 | ATO ID 2004/581 | ATO ID 2004/583", "Subject_References": "Capital Allowances CoE Project amount Project pool Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004582", "Unmatched_Content": "Keywords Capital Allowances CoE Project amount Project pool Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/583", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - information", "Issue": "Was the taxpayer's expenditure an amount incurred to obtain information associated with the project they proposed to carry on within subparagraph 40-840(2)(d)(v) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's expenditure was an amount incurred to obtain information associated with their project within subparagraph 40-840(2)(d)(v) of the ITAA 1997.", "Facts": "The taxpayer had identified with some certainty a project that they proposed to carry on for a taxable purpose for a determinate period. The taxpayer was required to lodge a development permit application with supporting material to the local government authority for approval to proceed with the project. The taxpayer incurred capital expenditure in engaging a town planner for the preparation and submission of the application. The taxpayer also paid for a report on access and services (for example, how and where to access utilities and services such as power and telecommunication) for their project.", "Reasons_for_Decision": "Summary: Broadly, section 40-830 of the ITAA 1997 allows a deduction over the project life of a project for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2) of the ITAA 1997, an amount must be capital expenditure which, in addition to satisfying paragraphs 40-840(2)(a) to 40-840(2)(c) of the ITAA 1997, is one of the amounts specified in subparagraphs 40-840(2)(d)(i) to 40-840(2)(d)(vii) of the ITAA 1997. The amount specified in subparagraph 40-840(2)(d)(v) of the ITAA 1997 is an amount incurred to obtain information associated with the project. Information is associated with the project if the information obtained is about the substance of the project. In the case of a project which the taxpayer proposes to carry on, there would have to be some certainty of the subject of the project before it could be shown that the information being obtained was associated with the project. The information about access and services and the information produced by the town planner was information about the substance of a project sufficiently identified to make application for a development permit with the local government authority. Accordingly, the taxpayer's expenditure was an amount incurred to obtain information associated with their project within subparagraph 40-840(d)(2)(v) of the ITAA 1997.", "Date_of_Decision": "1 June 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-840(2) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(v)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/207 | ATO ID 2004/253 | ATO ID 2004/580 | ATO ID 2004/581 | ATO ID 2004/582", "Subject_References": "Capital Allowances CoE Project amount Project pool Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004583", "Unmatched_Content": "Keywords Capital Allowances CoE Project amount Project pool Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2003/206", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Project Pool - carry on a project for a taxable purpose", "Issue": "Do the taxpayer's activities in looking for an existing business to acquire amount to carrying on a project for a taxable purpose within paragraph 40-840(2)(c) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Looking for an existing business to acquire is not, of itself, a project which is carried on for a taxable purpose within paragraph 40-840(2)(c) of the ITAA 1997.", "Facts": "The taxpayer was interested in acquiring and operating an existing business of a particular type. The taxpayer inspected a number of businesses in various locations and, in doing so, incurred expenditure on accommodation, air fares, car rental and parking.", "Reasons_for_Decision": "Summary: Section 40-830 of the ITAA 1997 allows a deduction for project amounts allocated to a project pool over the life of the project. If a project is abandoned, sold or otherwise disposed of, a deduction is available for the balance of the undeducted pool amount for the year of disposal. To be a project amount within the meaning of that term in subsection 40-840(2) of the ITAA 1997, the expenditure must, among other things, be directly connected with a project that is carried on or proposed to be carried on for a taxable purpose (paragraph 40-840(2)(c) of the ITAA 1997). So far as is relevant here, taxable purpose means the purpose of producing assessable income (subsection 40-25(7) of the ITAA 1997). Something is done for the purpose of producing assessable income if it is done for the purpose of gaining or producing assessable income or in carrying on a business for the purpose of gaining or producing assessable income (subsection 995-1(1) of the ITAA 1997). For a project to be carried on for a taxable purpose the project itself (including the activities constituting the project) must not only be carried on for that purpose but must be capable of income production. In the present case, it is accepted that the taxpayer had a genuine intention to acquire an existing business. It is also accepted that the taxpayer would carry on any business acquired for a taxable purpose. However, while the taxpayer's activities of looking for and inspecting existing businesses may be a project, they do not amount to a project that was carried on for a taxable purpose because, of themselves, the activities were not capable of income production. At best, the activities were directed to and may have ultimately led to the acquisition of an income producing business. Such activities are too remote and too general to amount to a project that is carried on for a taxable purpose. Whether a business is acquired or not is not determinative of whether the activities of looking for one to acquire amount to a project that is carried on for a taxable purpose.", "Date_of_Decision": "6 February 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 40-25(7) Section 40-830 Subsection 40-840(2) Paragraph 40-840(2)(c) Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Pooling Project amount Project pool Taxable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003206", "Unmatched_Content": "Keywords Capital expenditure Pooling Project amount Project pool Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2003/207", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Project Pool - obtaining information", "Issue": "Is the taxpayer's expenditure an amount incurred to obtain information associated with the project within subparagraph 40-840(2)(d)(v) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. None of the expenditure is an amount incurred to obtain information associated with the project within subparagraph 40-840(2)(d)(v) of the ITAA 1997.", "Facts": "The taxpayer sought to acquire an existing business of a particular type with the intention of operating it themself. After considering a number of businesses for sale, the taxpayer entered into a contract to acquire a particular business. Completion of the contract was subject to certain conditions. As a result of one of the conditions not being met, the taxpayer terminated the contract. The taxpayer incurred solicitor's fees for advice about the contract, accountant's fees for liaison services between the contracting parties and a financial institution and fees for advice about the condition that ultimately failed the contract.", "Reasons_for_Decision": "Summary: Section 40-830 of the ITAA 1997 allows a deduction for project amounts allocated to a project pool over the life of the project. If a project is abandoned, sold or otherwise disposed of, a deduction is available for the balance of the undeducted pool amount for the year of disposal. To be a project amount within the meaning of that term in subsection 40-840(2) of the ITAA 1997, the expenditure must, among other things, be one of the amounts specified in paragraph 40-840(2)(d) of the ITAA 1997. Subparagraph 40-840(2)(d)(v) of the ITAA 1997 specifies an amount incurred to obtain information associated with the project. To satisfy the requirement of subparagraph 40-840(2)(d)(v) of the ITAA 1997, the information obtained must be directly associated with the project itself (including its constituent activities) and that project must be one that is or is proposed to be carried on for a taxable purpose. All of the expenditure incurred by the taxpayer, however, was directed to the acquisition of the business. The acquisition of a business is not, of itself, a project carried on for a taxable purpose even though a business that is acquired might be operated for that purpose. Accordingly, the taxpayer's expenditure was not incurred for the purpose of obtaining information associated with a project to be carried on for a taxable purpose and, therefore, does not satisfy the requirement contained in subparagraph 40-840(2)(d)(v) of the ITAA 1997.", "Date_of_Decision": "6 February 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-830 Subsection 40-840(2) Paragraph 40-840(2)(d) Subparagraph 40-840(2)(d)(v)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Pooling Project amount Project pool Taxable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003207", "Unmatched_Content": "Keywords Capital expenditure Pooling Project amount Project pool Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2003/208", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Project Pool - feasibility studies", "Issue": "Is the taxpayer's expenditure an amount incurred for feasibility studies for the project within subparagraph 40-840(2)(d)(iii) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. None of the expenditure is an amount incurred for feasibility studies for the project within subparagraph 40-840(2)(d)(iii) of the ITAA 1997.", "Facts": "The taxpayer sought to acquire an existing business of a particular type with the intention of operating it themself. After considering a number of businesses for sale, the taxpayer entered into a contract to acquire a particular business. Completion of the contract was subject to certain conditions. As a result of one of the conditions not being met, the taxpayer terminated the contract. The taxpayer incurred solicitor's fees for advice about the contract, accountant's fees for liaison services between the contracting parties and a financial institution and fees for advice about the condition that ultimately failed the contract.", "Reasons_for_Decision": "Summary: Section 40-830 of the ITAA 1997 allows a deduction for project amounts allocated to a project pool over the life of the project. If a project is abandoned, sold or otherwise disposed of, a deduction is available for the balance of the undeducted pool amount for the year of disposal. To be a project amount within the meaning of that term in subsection 40-840(2) of the ITAA 1997, the expenditure must, among other things, be one of the amounts specified in paragraph 40-840(2)(d) of the ITAA 1997. Subparagraph 40-840(2)(d)(iii) of the ITAA 1997 specifies an amount incurred for feasibility studies for the project. The term 'feasibility studies' is not defined for the purposes of the project pooling provisions of Subdivision 40-I of the ITAA 1997 and is not otherwise defined in the income tax law. The Macquarie Dictionary (Revised Third Edition) 2001 defines feasibility study as a survey or analysis of the need, value and practicability of a proposed enterprise. The Oxford Dictionary of Business (Third Edition) 2002 defines feasibility study as an investigation to determine which of a range of decisions is likely to give a satisfactory return in a financial appraisal or economic appraisal of the alternatives. Broadly speaking then, a feasibility study may be described as a process to gather and analyse sufficient information to adequately consider technical, financial, economic or market viability factors in order to make an informed decision about the potential success of a proposed activity. A feasibility study may also have pre-determined criteria (such as level of investment, rate of return, operating costs) against which the viability of the activity is assessed. To satisfy the requirement of subparagraph 40-840(2)(d)(iii) of the ITAA 1997, a feasibility study must directly address the project itself (including its constituent activities) and that project must be one that is or is proposed to be carried on for a taxable purpose. All of the expenditure incurred by the taxpayer, however, was directed to the acquisition of the business. The acquisition of a business is not, of itself, a project carried on for a taxable purpose even though a business that is acquired might be operated for that purpose. Accordingly, the taxpayer's expenditure was not incurred for the purpose of establishing the feasibility of a project to be carried on for a taxable purpose and, therefore, does not satisfy the requirement contained in subparagraph 40-840(2)(d)(iii) of the ITAA 1997.", "Date_of_Decision": "6 February 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Section 40-830 Subsection 40-840(2) Paragraph 40-840(2)(d) Subparagraph 40-840(2)(d)(iii) Subdivision 40-I", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Feasibility studies Pooling Project amount Project pool Taxable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003208", "Unmatched_Content": "Keywords Capital expenditure Feasibility studies Pooling Project amount Project pool Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2003/728", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - abandonment", "Issue": "Is the taxpayer's project abandoned within subsection 40-830(4) of the Income Tax Assessment Act 1997 (ITAA 1997) if the taxpayer's tender for the development - a key activity in the project - is unsuccessful and the development is proceeded with by an unrelated party?", "Decision": "Yes. The taxpayer's project has been abandoned because an unrelated party is proceeding with the development.", "Facts": "The taxpayer was unsuccessful in a tender for the development of a multimillion dollar mixed-use property. The tender was a central activity in pursuing the taxpayer's project of acquiring, developing, leasing and managing the property for a determinate project life entirely for the purpose of producing rental and associated assessable income. The taxpayer incurred a significant amount of expenditure in engaging external consultants to estimate the design and construction costs of the proposed development, to assess the impact of the development on the local environment, and to prepare documents for the tender. All information provided by the consultants was specific to the property and cannot be used for any other property development. As the development has been commenced by the successful tenderer, a party unrelated to the taxpayer, the taxpayer will not be proceeding with its project.", "Reasons_for_Decision": "Summary: Broadly speaking, section 40-830 of the ITAA 1997 allows a deduction over the project life for project amounts allocated to a project pool. If a project is abandoned, sold or otherwise disposed of in an income year, a deduction is available under subsection 40-830(4) for that year in relation to the sum of the pool's closing pool value for the previous income year and any project amounts allocated to the pool for the current income year. As the taxpayer has not started to do the things which themselves will produce assessable income, the project has not started to operate for a taxable purpose. However, the taxpayer's project started when the taxpayer first commenced to gather information for, and committed itself to, the tender. For the purposes of subsection 40-830(4) of the ITAA 1997, a project can be abandoned any time after it starts, even before it starts to operate for a taxable purpose. According to the decision in Kallooar v R [1964] 50 WWR 602, something is considered to be abandoned if it is given up completely and finally. On that basis, the temporary cessation of a project will not constitute abandonment: the cessation must be permanent. A project will be abandoned if it is objectively determined that it will no longer proceed. As the taxpayer's tender was unsuccessful and there is no possibility that the project will proceed, the taxpayer's project has been abandoned within subsection 40-830(4) of the ITAA 1997.", "Date_of_Decision": "1 August 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-830(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Abandonment Project amount Project pool", "Case_References": "Kallooar v R [1964] 50 WWR 602", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003728", "Unmatched_Content": "Keywords Abandonment Project amount Project pool"}
{"ATO_ID_Number": "ATO ID 2003/1001", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: project pools - project amount - community infrastructure", "Issue": "Is the taxpayer's expenditure an amount paid to create or upgrade community infrastructure for a community associated with their project within subparagraph 40-840(2)(d)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer's expenditure is an amount paid to create or upgrade community infrastructure for a community associated with their project within subparagraph 40-840(2)(d)(i) of the ITAA 1997.", "Facts": "The taxpayer's business is managing a transport facility that it owns. An adjacent heavily utilised public road provides access to the facility. It is estimated that most of the traffic on the road uses the road to access the facility. Due to the large number of heavy vehicles using the road and lack of regular maintenance of the road, the road surface was in poor condition. The taxpayer considered that the road needed to be upgraded to safely service current traffic volumes accessing the facility and to adequately service increased future traffic volumes accessing the facility. As part of the taxpayer's project to improve access to their transport facility by upgrading that road, the taxpayer paid a significant amount of money to the construction group of the relevant state road authority to carry out the necessary road upgrade.", "Reasons_for_Decision": "Summary: Broadly speaking, section 40-830 of the ITAA 1997 allows a deduction over the project life for project amounts allocated to a project pool. To be a 'project amount' within subsection 40-840(2) of the ITAA 1997, the amount must be capital expenditure which, among other things, is one of the amounts specified in paragraph 40-840(2)(d) of the ITAA 1997. In order for the capital expenditure to be a project amount within subparagraph 40-840(2)(d)(i), the amount must be paid to create or upgrade community infrastructure for a community associated with the project. What is meant by 'community infrastructure'? As 'community infrastructure' is not a defined term in the ITAA 1997 and there are no extrinsic materials providing any guidance as to its meaning, reference is made to the ordinary meaning of the words. According to The Butterworths Australian Legal Dictionary (1997), the word 'infrastructure' refers to 'the framework of key facilities which supports communities and their industrial and commercial activities'. More specifically, it states that 'infrastructure' 'comprises communications, transportation systems, electricity generation and distribution, water supply networks, sewerage, roads, housing, schools and universities, health services, entertainment facilities and community support services'. The Australian Oxford Dictionary (1999),Oxford University Press, Melbourne relevantly states that the word 'community' means 'all the people living in a specified locality', 'a specific locality, including its inhabitants', 'a body of people having a religion, a profession, etc., in common ( Melbourne's large Greek community )', and 'a monastic, socialistic, etc. body practising common ownership'. In Hollow & Kaye v State Planning Authority (1983) 45 LGRA 39 at 45, Wells J commented that the word 'community' has a much wider significance than the word 'locality'. Wells J also commented that whilst in its widest sense the word 'community' could embrace the entire population of a particular State, it could also apply to a much smaller population such as the people residing within a particular locality. Based on the above, the amount paid to upgrade the public road is an amount paid to create or upgrade community infrastructure. What is meant by 'for a community associated with the project'? These words require a broad association between the community and the project. The community may be associated with the project because the project serves that community or that community services the project. In this case, the taxpayer upgraded a public road (adjacent to their transport facility) which is used by members of the public to access the transport facility and for other purposes. Based on the above, the public road is community infrastructure for a community associated with the project. Conclusion Creating or upgrading community infrastructure for a community associated with the project may be a condition imposed for the project to proceed. However, it is not necessary that the creation or upgrade be obligatory. In undertaking to pay an amount to upgrade the public road, the taxpayer incurred capital expenditure which is a project amount, being an amount paid to create or upgrade community infrastructure for a community associated with the project within subparagraph 40-840(2)(d)(i) of the ITAA 1997.", "Date_of_Decision": "15 October 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-840(2) paragraph 40-840(2)(d) subparagraph 40-840(2)(d)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Community infrastructure Project Project amount Project pools Capital Allowances CoE Uniform capital allowances system", "Case_References": "Hollow & Kaye v State Planning Authority (1983) 45 LGRA 39", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031001", "Unmatched_Content": "Keywords Community infrastructure Project Project amount Project pools Capital Allowances CoE Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/812", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital expenditure incurred in unsuccessfully seeking to obtain a patent", "Issue": "Is capital expenditure, incurred by the inventor of a new manufacturing process in unsuccessfully seeking to obtain a patent for the process, deductible under section 40-830 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. Where the application for the granting of a patent is unsuccessful the capital expenditure incurred in seeking to obtain the patent may be deductible under section 40-830 of the ITAA 1997 provided certain conditions are met.", "Facts": "The taxpayer invented a new manufacturing process and had applied for, but was unsuccessful in being granted a patent for the process. Capital expenditure incurred by the taxpayer include fees for advice from a patent lawyer about the application for a patent and statutory application fees. The taxpayer had intended to exploit the patent for income producing purposes but has now abandoned the project.", "Reasons_for_Decision": "Summary: Expenditure incurred by the taxpayer include fees for advice from a patent lawyer about the application for a patent and statutory application fees that was associated with the taxpayer's proposed project. The proposed project was the exploitation, for taxable purposes, of a patent granted for the manufacturing process. A depreciating asset does not exist as no patent was granted. Section 40-830 of the ITAA 1997 provides a deduction for 'project amounts' that are allocated to a project pool. Section 40-840 of the ITAA 1997 defines 'project amount' to be capital expenditure that: Qualifying project amounts are generally deductible over the life of the project (subsection 40-830(3) of the ITAA 1997). However the undeducted balance of a project pool is also deductible for the year in which a project is abandoned (subsection 40-830(4) of the ITAA 1997). As the taxpayer was unsuccessful in being granted the patent then the following has occurred: In these circumstances, the relevant expenditure will be deductible under section 40-830 of the ITAA 1997.", "Date_of_Decision": "10 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-830 subsection 40-830(3) subsection 40-830(4) subparagraph 40-840(2)(d)(vi)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/810 | ATO ID 2002/811 | ATO ID 2002/832", "Subject_References": "Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating assets Cost of a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002812", "Unmatched_Content": "Keywords Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating assets Cost of a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2002/832", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital expenditure on a project developing a manufacturing process: unsuccessful application for patent", "Issue": "Where an inventor of a new manufacturing process is unsuccessful in obtaining a patent for the process, is capital expenditure incurred by the inventor in devising, testing and refining the process deductible under section 40-830 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes. Where the application for the granting of a patent is unsuccessful the capital expenditure incurred in devising, testing and refining the process is deductible under section 40-830 of the ITAA 1997 provided certain conditions are met.", "Facts": "The taxpayer has invented a new manufacturing process and was unsuccessful in obtaining a patent for the process. Capital expenditure was incurred by the taxpayer in devising, testing and refining the process. The taxpayer had intended to exploit the patent for income producing purposes but has now abandoned the project.", "Reasons_for_Decision": "Summary: Expenditure incurred by the taxpayer in devising, testing and refining the manufacturing process provided information that was associated with the taxpayer's proposed project. The proposed project was the exploitation, for taxable purposes, of a patent granted for the manufacturing process. A depreciating asset does not exist as no patent was granted. Section 40-830 of the ITAA 1997 provides a deduction for 'project amounts' that are allocated to a project pool. Section 40-840 of the ITAA 1997 defines 'project amount' to be capital expenditure that: Qualifying project amounts are generally deductible over the life of the project (subsection 40-830(3) of the ITAA 1997). However the undeducted balance of a project pool is also deductible for the year in which a project is abandoned (subsection 40-830(4) of the ITAA 1997). As the taxpayer was unsuccessful in being granted the patent then the following has occurred: In these circumstances, the relevant expenditure will be deductible under section 40-830 of the ITAA 1997.", "Date_of_Decision": "10 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 40-185 section 40-220 section 40-830 subsection 40-830(3) subsection 40-830(4) subparagraph 40-840(2)(d)(v)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/810 | ATO ID 2002/811 | ATO ID 2002/812", "Subject_References": "Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating asset Cost of a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002832", "Unmatched_Content": "Keywords Intellectual property rights Intellectual property development expenses Inventors Patents Depreciating asset Cost of a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2009/69", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: tax break - investment commitment time - option to delay construction", "Issue": "For the purposes of working out the investment commitment time under subparagraph 41-25(1)(a)(i) of the Income Tax Assessment Act 1997 (ITAA 1997), is the taxpayer's option under a purchase contract to delay the time at which construction of a depreciating asset commences an option to which subsection 41-25(4) of the ITAA 1997 applies?", "Decision": "No. The taxpayer's option to delay the time at which construction of the depreciating asset commences is not an option to which subsection 41-25(4) of the ITAA 1997 applies. It is not an option to enter into a contract under which the taxpayer holds the asset. The purchase contract is the contract under which the taxpayer will hold the asset.", "Facts": "The taxpayer entered into a contract in August 2008 to acquire a new depreciating asset. Under the purchase contract, the taxpayer had the option to delay the time at which the manufacturer started to construct the asset. Under the purchase contract, when construction was complete, the taxpayer started to hold the depreciating asset as the legal owner under item 10 of the table in section 40-40 of the ITAA 1997.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997 unless otherwise stated) Subparagraph 41-25(1)(a)(i) states that the investment commitment time for an amount, which is included in the first element of cost, is the time at which you enter into a contract under which you hold the asset at the time, or will hold at a later time. However, subsection 41-25(4) states that, for the purposes of section 41-25, you do not enter into a contract under which you hold an asset merely because you acquire an option to enter into such a contract. Therefore, if a taxpayer enters into a contract which includes an option to enter into a contract to become the holder of a depreciating asset at a later point in time, the investment commitment time is deemed to be when the option is exercised, rather than the date of the original contract. In this case, the taxpayer entered into a purchase contract in August 2008 under which they would hold the depreciating asset as the legal owner at a later time. The option under the purchase contract was not an option to enter into a contract to become the holder of the depreciating asset at a later point in time. The exercise of the option would merely delay the time at which the construction of the asset would commence. Therefore, the taxpayer's option under the purchase contract to delay the time at which construction of the depreciating asset would commence is not an option to which subsection 41-25(4) applies. The investment commitment time is when the taxpayer entered into the purchase contract in August 2008.", "Date_of_Decision": "8 July 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 41-25 subparagraph 41-25(1)(a)(i) subsection 41-25(4) section 40-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Allowances CoE Investment allowances", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200969", "Unmatched_Content": "Keywords Capital Allowances CoE Investment allowances"}
{"ATO_ID_Number": "ATO ID 2009/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: tax break - investment commitment time - depreciating asset subject to hire purchase agreement", "Issue": "If a depreciating asset is subject to a hire purchase agreement, is the investment commitment time under paragraph 41-25(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) the time at which the hire purchase agreement is entered into?", "Decision": "Yes. If a depreciating asset is subject to a hire purchase agreement, the investment commitment time under paragraph 41-25(1)(a) of the ITAA 1997 is the time at which the hire purchase agreement is entered into as this is the contract under which the taxpayer holds the asset.", "Facts": "The taxpayer placed an order with a supplier in August 2008 for a new depreciating asset and paid a deposit at that time. The asset was delivered to the taxpayer in April 2009. At that time, the taxpayer entered into the hire purchase agreement with a financier for the asset. The taxpayer did not become the legal owner of the asset prior to entering into the hire purchase agreement. When the hire purchase agreement was entered into, the taxpayer became the holder of the asset under item 6 of the table in section 40-40 of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated. Paragraph 41-25(1)(a) states that the investment commitment time for an amount which is included in the first element of cost of a depreciating asset is the time at which you: Under item 6 of the table in section 40-40, the hirer of a depreciating asset subject to a hire purchase agreement will be the holder if they: In this case, the right of possession and the right to become the depreciating asset's legal owner are rights acquired by the taxpayer under the hire purchase agreement. Therefore, the taxpayer became the holder of the depreciating asset under item 6 of the table in section 40-40 when they entered into the hire purchase agreement. By entering into the hire purchase agreement, the taxpayer has entered into a contract under which they hold the asset for the purposes of subparagraph 41-25(1)(a)(i). The taxpayer may become the legal owner of the asset in the future and, therefore, hold the asset under item 10 of the table in section 40-40, by exercising their right as against the financier to acquire the asset. However, the purchase order is not the contract under which they hold the asset at that time. The taxpayer's right to become the legal owner at that time is not a right exercised under the purchase order and the taxpayer does not become the legal owner of the asset at that time under the purchase order. Therefore, the purchase order placed with the supplier in August 2008 is not a contract under which the taxpayer holds the depreciating asset or will hold at a later time. The taxpayer did not construct the asset (subparagraph 41-25(1)(a)(ii)) and, as they entered into a contract under which they hold the asset, they did not start to hold the asset in 'some other way' (subparagraph 41-25(1)(a)(iii)). Only subparagraph 41-25(1)(a)(i) is relevant in this case. Accordingly, the investment commitment time is when the taxpayer entered into the hire purchase agreement in April 2009 as that is the time at which the taxpayer entered into the contract under which they hold the depreciating asset.", "Date_of_Decision": "21 July 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 paragraph 41-25(1)(a) subparagraph 41-25(1)(a)(i) subparagraph 41-25(1)(a)(ii) subparagraph 41-25(1)(a)(iii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Investment allowances", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200981", "Unmatched_Content": "Keywords Investment allowances"}
{"ATO_ID_Number": "ATO ID 2009/137", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: granting a right of use - other than a taxable purpose", "Issue": "Did the taxpayer use their depreciating asset for a 'taxable purpose', within the meaning of that phrase in paragraph 40-25(7)(a) of the Income Tax Assessment Act 1997 (ITAA 1997), by reason only that they made a capital gain from granting another entity a right to use the asset?", "Decision": "No. The taxpayer did not use their depreciating asset for a taxable purpose, within the meaning of that phrase in paragraph 40-25(7)(a) of the ITAA 1997, because the making of a statutory capital gain is too remote to constitute something done for the purpose of gaining or producing assessable income or in carrying on a business for that purpose.", "Facts": "The taxpayer is the only holder of a depreciating asset. The taxpayer does not use the asset, directly or indirectly, for the purpose of gaining or producing ordinary income or in carrying on a business for that purpose and the taxpayer does not hold the asset for either purpose. The taxpayer granted to an unrelated entity, on an arms length basis, a right to use the asset. The consideration received for the grant is not ordinary income of the taxpayer. CGT event D1 (see section 104-35 of the ITAA 1997) happened as a result of the taxpayer granting the right to the other entity. The capital gain the taxpayer made from this CGT event was taken into account in working out the net capital gain that was included in the taxpayer's assessable income for the income year in which the right was granted.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Subsection 40-25(1) provides to a holder of a depreciating asset an annual deduction for the decline in value of the asset as worked out under Division 40. A depreciating asset declines in value with its use (or installation ready for use) for any purpose. Subsection 40-25(2) provides a reduction in the annual deduction by the part of the asset's decline in value that is attributable to the holder's use of the asset during the income year for a purpose other than a taxable purpose. It is accepted that the granting of a right to use the depreciating asset to the other entity for valuable consideration represents a use, albeit an indirect use, of the asset by the taxpayer. The issue in the present case is whether this use by the taxpayer constitutes a use for a taxable purpose when that use results only in the taxpayer making a statutory capital gain. For present purposes, a 'taxable purpose' is defined in paragraph 40-25(7)(a) as the purpose of producing assessable income. Pursuant to subsection 995-1 (1), something is done for the purpose of producing assessable income if it is done: As stated in the facts, the taxpayer does not use (or hold) the depreciating asset, directly or indirectly, for the purpose of gaining or producing ordinary income or in carrying on a business for that purpose. The taxpayer's indirect use of the asset by granting a right of use to another entity results only in the taxpayer making a statutory capital gain. The making of a capital gain is the result of a statutory process and is independent of any purpose the taxpayer may have had of gain from granting the right. While it so happens in this case that the taxpayer's capital gain was taken into account in calculating a net capital gain that was included in their assessable income for the relevant income year (see section 102-5), this will depend entirely on the particular taxpayer's taxation circumstances in the relevant income year. In a CGT context, the capital gain does not arise from the asset but from the grant of the right to use the asset. The fact that no part of the cost base of an asset is taken into account in working out the amount of a capital gain or capital loss when a right is granted or created in relation to an underlying asset is based on the principle that no part of the underlying asset is used to generate the capital gain. It follows that the taxpayer did not use their depreciating asset for a taxable purpose within the meaning of that phrase in paragraph 40-25(7)(a) because the making of a statutory capital gain is too remote to constitute something done for the purpose of gaining or producing assessable income or in carrying on a business for that purpose.", "Date_of_Decision": "5 February 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 40-25(7) 40-25(7)(a) 102-5 104-35 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2589", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Depreciating assets Net capital gains Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009137", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2589 | Keywords Capital gains Depreciating assets Net capital gains Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2004/958", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital allowances: depreciating asset - use for a purpose other than a taxable purpose", "Issue": "Does the taxpayer use their depreciating assets for a purpose other than a taxable purpose if they grant to a partnership of themself and another entity the exclusive use of the assets to enable the partnership to provide each partner with a service that each partner separately uses wholly for a taxable purpose as defined in paragraph 40-25(7)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer does not use their depreciating assets for a purpose other than a taxable purpose because granting the exclusive use of the assets to the partnership to enable the taxpayer to access a service that they use wholly in carrying on their business for the purpose of producing assessable income is a use of the assets by the taxpayer for a taxable purpose.", "Facts": "As part of an arrangement, the taxpayer and an unrelated entity become joint holders of various depreciating assets. They also constitute a general law partnership to manage the arrangement. The taxpayer and the other entity provide the exclusive use of their jointly held depreciating assets as well as other depreciating assets they separately hold to the partnership. The combination of assets enables the partnership to provide services to each of the partners. None of the assets are partnership assets under item 7 of the table in section 40-40 of the ITAA 1997. The taxpayer uses the services provided by the partnership to provide, as an integral part of its on-going business, a product to its retail customers.", "Reasons_for_Decision": "Summary: Subsection 40-25(1) of the ITAA 1997 allows a taxpayer to deduct an amount for the decline in value of a depreciating asset they hold. The deduction is reduced, under subsection 40-25(2) of that Act, in respect of any use of the asset by the holder for a purpose other than a taxable purpose. A taxable purpose is defined in subsection 40-25(7) of the ITAA 1997 and includes the 'purpose of producing assessable income' (paragraph 40-25(7)(a) of the ITAA 1997). This phrase is defined in subsection 995-1(1) of the ITAA 1997 to effectively require the depreciating asset to be used either: The taxpayer uses their depreciating assets by granting the partnership exclusive use of the assets. The taxpayer's use of their assets in this way secures for them a service that they use in the course of carrying on their business. There is, therefore, a clear and direct connection between the taxpayer's use of the assets and the carrying on of their business for the purpose of producing assessable income. The use of the assets in these particular circumstances comes within the second limb of the definition of 'purpose of producing assessable income' in subsection 995-1(1) of the ITAA 1997. The taxpayer uses their assets wholly in this way and, therefore, wholly for a taxable purpose as defined in paragraph 40-25(7)(a) of the ITAA 1997. Therefore, the taxpayer does not use their depreciating assets for a purpose other than a taxable purpose.", "Date_of_Decision": "16 November 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-25(1) subsection 40-25(2) subsection 40-25(7) paragraph 40-25(7)(a) section 40-40 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/957", "Subject_References": "Capital Allowances CoE Deductions for depreciating assets Taxable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004958", "Unmatched_Content": "Keywords Capital Allowances CoE Deductions for depreciating assets Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2002/1083", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 40: taxable purpose - commercial leasing", "Issue": "Does the leasing of depreciating assets held by a partnership constitute use for a taxable purpose under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the leasing partnership will use the assets for a taxable purpose by entering into a lease agreement which provides for the receipt of a stream of assessable rental payments.", "Facts": "A partnership purchased various depreciating assets under a manufacture and supply agreement. It immediately leased the assets on commercial terms to an unrelated entity that had been awarded a franchise by another unrelated entity to operate a business in which the assets are used. Under the lease agreement, the lessee is required to make quarterly payments of rent to the leasing partnership for use of the assets.", "Reasons_for_Decision": "Summary: A taxable purpose includes the purpose of producing assessable income (subsection 40-25(7) of the ITAA 1997). Something is done for the purpose of producing assessable income if it is done for the purpose of gaining or producing assessable income or in carrying on a business for the purpose of gaining or producing assessable income (subsection 995-1(1) of the ITAA 1997). The lease agreement provides that the lessee must make quarterly payments of rent to the lessor for use of the depreciating assets. Lease rental payments received by the leasing partnership from the lessee in these circumstances are assessable income of the leasing partnership. Use by the leasing partnership for this purpose constitutes use for a taxable purpose.", "Date_of_Decision": "12 July 2002", "Year_of_Income": "2000", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-25(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Depreciating asset Division 40 Partnership asset Taxable purpose", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021083", "Unmatched_Content": "Keywords Depreciating asset Division 40 Partnership asset Taxable purpose"}
{"ATO_ID_Number": "ATO ID 2010/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Frankable distributions and non-share dividends", "Issue": "Can a non-share dividend be a frankable distribution when a company has no accounting profits or retained earnings?", "Decision": "No. Non-share dividends are unfrankable if a company has no accounting profits or retained earnings.", "Facts": "A company engages in the business of trading in financial instruments. Due to a large negative movement in the value of its instruments, the company reported an accounting loss for the financial year. However, the company has taxable income in the corresponding income year. The company issues an instrument which give rise to non-share equity interests in the company and pays a distribution on the instrument based on its net operating profit, excluding unrealised gains and losses. The company is prohibited from declaring any dividend on its ordinary shares by section 254T of the Corporations Act 2001 (Corporations Act) as it has no accounting profits or retained earnings [1] .", "Reasons_for_Decision": "Summary: Prior to 28 June 2010 section 254T of the Corporations Act requires all dividends 'be paid out of profits of the Company'. The effect of this provision is that a company may pay dividends out of its accounting profits or retained earnings. Although profits are no longer referred to in section 254T of the Corporations Act the concept of profits as the source of dividend payment continues to be relevant to the payment of a dividend in compliance with section 254T, and to the assessment and franking of dividends for taxation purposes. However, not all amounts that are paid by a company that are dividends for the purposes of the Corporations Act or taxation purposes are frankable. The Explanatory Memorandum to the Corporations Amendment (Corporate Reporting Reform) Act 2010 states at paragraph 3.18 that: 3.18 Subject to the operation of the current imputation integrity rules, theses distributions will be frankable under section 202-40 of the ITAA 1997. According to subsection 202-40(2) of the Income Tax Assessment Act 1997 (ITAA 1997), a non-share dividend is a frankable distribution to the extent that it is not unfrankable. Paragraph 215-15(1)(b) of the ITAA 1997 provides that a non-share dividend is unfrankable if, immediately before the payment, the amount of the available frankable profits of the entity is nil, or less than nil. A company's available frankable profits at a particular time is worked out using the following formula in subsection 215-20(1) of the ITAA 1997: Maximum frankable amount - [Committed share dividends + Undebited non-share dividends] where: maximum frankable amount means the maximum amount of *frankable *distributions (other than *non-share dividends) that the *corporate tax entity could pay at that time having regard to its available profits at that time. Maximum frankable amount - [Committed share dividends + Undebited non-share dividends] Subsection 215-20(1) of the ITAA 1997 was enacted in the New Business Tax System (Consolidation and Other Measures) Act (No. 1) 2002 and was intended as a rewrite of section 160APAAAB of the Income Tax Assessment Act 1936 (ITAA 1936), itself introduced by the New Business Tax System (Debt and Equity) Act 2001 as part of the 'Debt/Equity rules' contained in Division 974 of the ITAA 1997. According to paragraph 2.85 of the Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001 (the EM), the purpose of section 160APAAAB of the ITAA 1936 was to prevent the use of non-share dividends to stream franking credits in circumstances where there was previously no such opportunity, by introducing 'the general requirement that they be debited to realised profits to be frankable.'. That is, section 160APAAAB of the ITAA 1936 and subsequently subsection 215-20(1) of the ITAA 1997 were intended to restrict a company's ability to pay frankable non-share dividends to the conditions which would need to be met for the company to pay a dividend on its ordinary equity. The purpose of section 160APAAAB of the ITAA 1936 and subsection 215-20(1) of the ITAA 1997 indicates that the expression 'available profits' in subsection 215-20(1) refers to the profits from which a company can pay dividends. This purpose will be given effect to if the term 'profits' in that context is construed as accounting profits or retained earnings, so that it includes any unrealised gains and losses recognised directly in profit and loss. There is no basis for construing the expression 'available profits' so as to necessarily exclude unrealised gains and losses since a company's capacity to pay dividends is already calculated after regard to any unrealised gains and losses recognised directly in profit and loss. Therefore, because the company has no accounting profits or retained earnings, it has no 'available profits' for the purposes of subsection 215-20(1) of the ITAA 1997 and will not be able to pay frankable non-share dividends. Therefore, distributions paid by the company on the instrument will be unfrankable.", "Date_of_Decision": "10 December 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 202-40(2) subsection 215-15(1) section 202-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Frankable dividends", "Case_References": "", "Other_References": "EM to the New Business Tax System (Debt and Equity) Bill 2001", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201021", "Unmatched_Content": "Insert 3 opening paragraphs to take into account the new section 254T of the Corporations Act 2001 | Insert footnote regarding the new section 254T | Adding the word 'to' in the second sentence in the third last paragraph | Keywords Frankable dividends"}
{"ATO_ID_Number": "ATO ID 2010/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Distributions subsequent to a capital reduction pursuant to section 258F of the Corporations Act 2001", "Issue": "Will any amounts paid out of a company's current year profits or future retained earnings subsequent to the proposed accounting entry constitute an unfrankable dividend pursuant to paragraph 202-45(e) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Amounts paid out of the company's current year profits or future retained earnings subsequent to the proposed accounting entry will not constitute an unfrankable dividend pursuant to paragraph 202-45(e) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident company. The taxpayer has made regular fully franked dividend payments in the past. Throughout the years, the taxpayer has accumulated accounting losses. The taxpayer wishes to eliminate these accumulated accounting losses from its Financial Statements. It will achieve this by reducing its share capital by the amount of the accumulated losses pursuant to section 258F of the Corporations Act 2001 , on the basis that the company can no longer identify assets that are represented by that amount of its share capital, or the share capital has been lost. The reduction of share capital will be recorded as a debit to the company's share capital account. No shares will be cancelled and the amount used to remove the accumulated losses will not create a positive balance of Retained Earnings. Any future distributions would be funded from future profits.", "Reasons_for_Decision": "Summary: Section 202-45 of the ITAA 1997 lists the distributions that are unfrankable. Paragraph 202-45(e) of the ITAA 1997 lists one of those distributions as: a distribution that is sourced, directly or indirectly, from a company's share capital account. Paragraph 6.6 of the Explanatory Memorandum (EM) accompanying the Tax Law Amendment (2007 Measure No. 3) Bill 2007 which amended paragraph 202-45(e) of the ITAA 1997 provides an overview on the changes made to the former provisions. It states: The dividend tainting rules (section 46G to 46M of the ITAA 1936) will be repealed. Consequential amendments will: • ensure that distributions from a share capital account (including tainted share capital account) continue to be unfrankable; and ... At paragraphs 6.10 and 6.11, the EM also provides discussion on the operation of paragraph 202-45(e) of the ITAA 1997 as follows: 6.10 A distribution will be sourced directly from a company's share capital account if an accounting debit is made to the share capital account for the making of the distribution. 6.11 A distribution will be sourced indirectly from a company's share capital account if, for example, a company transfers an amount from its share capital account into a distributable profits reserve and subsequently makes a distribution to shareholders that is debited against the distributable profits reserve in circumstances where it is reasonable to conclude that the distribution represents the amount transferred from the share capital account. From the wording of paragraphs 6.10 and 6.11, the operation of the new provision is to prevent an amount from being a frankable distribution if it is debited to an entity's share capital account or represents an amount transferred from the share capital account to another account to facilitate its distribution. In the present circumstances, it is clear that there will not be a distribution out of the taxpayer's profits to its shareholders in any form pursuant to the proposed accounting entry. The accounting entry will be made in order to eliminate the balance of accumulated losses. It does not have a flow-on distribution which would enable the company's shareholders to receive any distributions that are sourced directly or indirectly in the companies share capital account. The proposed accounting entry would, in essence, reduce the company's share capital. From a Corporations Law perspective, section 258F of the Corporations Act 2001 allows a company to reduce its share capital by cancelling any paid-up capital that is lost or is not represented by available assets. Following the accounting entry, any future distributions would be sourced from current year profits or accumulations of retained earnings. Any distributions from these sources post the capital reduction would not be unfrankable pursuant to paragraph 202-45(e) of the ITAA 1997.", "Date_of_Decision": "12 January 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 202-45(e)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/90", "Subject_References": "Capital reductions Distributions Frankable dividends Unfranked dividends", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2007 Measures No. 3) Bill 2007 - Chapter 6 Repeal of dividend tainting rules", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201025", "Unmatched_Content": "Keywords Capital reductions Distributions Frankable dividends Unfranked dividends"}
{"ATO_ID_Number": "ATO ID 2010/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "US Limited Partnership: whether it is a company for the purposes of Article 10 of the US Convention", "Issue": "Is a United States (US) limited partnership (US LP), which is treated as a partnership for US federal tax purposes, a company for the purposes of Article 10 of the Convention between Australia and the US contained in Schedules 2 and 2A to the International Tax Agreements Act 1953 (the US Convention)?", "Decision": "No. A US LP which is treated as a partnership for US federal tax purposes is not a company for the purposes of Article 10 of the US Convention. For the purpose of the US Convention, US LP is neither a 'body corporate' nor 'an entity which is treated as a company or body corporate for tax purposes'. Consequently it is not a company for the purposes of Article 10 of the US Convention, and does not qualify for either of the reduced rates for certain cross-border inter-corporate dividends flowing between Australia and the US.", "Facts": "US LP is a limited partnership established under US (Delaware) state law (the Delaware Revised Uniform Limited Partnership Act (DRULPA)). A limited partnership under the DRULPA is formed upon the execution and filing of a certificate of limited partnership under section 17-201 of the DRULPA. As a limited partnership formed under the DRULPA, US LP is an unincorporated hybrid business entity having features commonly associated with both a business carried on by partners as partners and with a company. The DRULPA does not incorporate a limited partnership, nor does it provide that a limited partnership is a body corporate. US LP is a separate legal entity, and exists as such until cancellation of the certificate of limited partnership under paragraph 17-201(b) of the DRULPA. Section 15-201 of the DRULPA also provides that US LP has separate legal personality distinct from its partners. US LP is 'for all purposes a partnership', per section 15-202 of the DRULPA. US LP is treated as a partnership (and so is fiscally transparent) for US federal tax purposes and not as a taxable unit. All income derived by US LP is subject to US tax in the hands of its US resident partners. All partners are US resident corporations. US LP is a 'person' under Article 3(1)(a) of the US Convention. US LP is a 'resident' of the US for tax treaty purposes within the meaning of Article 4(1)(b)(iii) of the US Convention, because Article 4(1)(b)(iii) treats a US partnership as a US resident for tax treaty purposes to the extent that the income it receives is subject to US income tax either in its hands or in the hands of a partner. US LP is not treated as a company by the US for tax treaty purposes because it is treated as a partnership for US federal tax purposes. US LP owns all the shares in an Australian resident company. During the income year the Australian resident company paid an unfranked dividend (not assessable income and not exempt income) to US LP, which was legally and beneficially entitled to that dividend. US LP would be taxed as a company under Australian domestic law (Division 5A of the Income Tax Assessment Act 1936 , ITAA 1936) if it derived Australian source assessable income. US LP is not a resident of Australia under section 94T of Division 5A of the ITAA 1936. US LP is not a 'foreign hybrid limited partnership' under section 830-10 of the Income Tax Assessment Act 1997 (ITAA 1997) as it is not a CFC (per paragraph 830-10(1)(e)) of the ITAA 1997.", "Reasons_for_Decision": "Summary: To qualify for benefits under the US Convention the claimant must first be a 'person' and a 'resident' for the purposes of the US Convention. In this case US LP, being a US domestic partnership, is both a 'person' and a US 'resident' according to the terms of the US Convention. Note that the US Convention is unusual in that it applies treaty benefits for income derived through fiscally transparent entities such as a partnership, at the level of the entity (in this instance US LP). Article 10 of the US Convention provides that certain cross-border inter-corporate dividends flowing between Australia and the US are either: The words of the US Convention are quite specific. For the reduced dividend withholding tax rates under Article 10(2)(a) or Article 10(3) of the US Convention to apply to an unfranked dividend paid by an Australian resident company, the person beneficially entitled to the dividend must be a 'company'. Here, the 'person' beneficially entitled to the dividends paid by the Australian resident company is US LP. Article 3(1)(b) of the US Convention defines 'company' for the purposes of the Convention 'unless the context otherwise requires', to mean 'any body corporate or any entity which is treated as a company or body corporate for tax purposes'. Accordingly, for the purposes of our analysis, US LP will be a 'company' for the purposes of the US Convention if: unless the context of the US Convention otherwise requires. (a) Is US LP a ' company' for the purpose of the US Convention by virtue of being a ' body corporate' ? US LP is not a 'company' for the purpose of the US Convention by virtue of being a 'body corporate' for Australian purposes. The term 'body corporate' is not defined in the US Convention. Thus, in accordance with Article 3(2) of the US Convention, the term will generally take its meaning from the taxation laws of the country applying the tax treaty (being in this case Australia), 'unless the context otherwise requires'. As 'body corporate' is not defined in Australia's domestic income tax law legislation, the ordinary meaning of the term in Australia may then apply (see the tax treaty interpretation principles set out in paragraphs 63 to 71 of Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements). The Butterworths Australian Legal Dictionary , 1997 defines a 'body corporate' as 'an artificial legal entity having separate legal personality'. The Macquarie Dictionary , Fourth edition, 2005 defines 'body corporate' in its legal context, as 'a person, association or group of persons legally incorporated in a corporation'. Generally a 'body corporate' is established under an Act of Parliament or under a statutory procedure of registration, such as the Corporations Act 2001 (refer to paragraphs 22-23 of Taxation Ruling IT 2634 and paragraphs 30-34 of Miscellaneous Taxation Ruling MT 2006/1). As US LP is created under Delaware state law and has a legal personality under that law, it should be recognised as a legal entity in Australia in accordance with the principle in Chaff and Hay Acquisition Committee v. Hemphill (1947) 74 CLR 375. While US LP is a legal entity having legal personality, it is essentially quite different in character from the bodies which are incorporated under corporations law in Australia. For example, while a corporation continues in existence until it is dissolved notwithstanding changes in its membership or business, a limited partnership formed under the DRULPA is usually formed for a limited period of time and terminates in the same way as a partnership. A corporation in Australia has perpetual succession, a personality that is continuous and free transferability of interests. US LP does not. Further, the partners of US LP derive the profits made by US LP, and a partner's individual share of the profits in US LP is ascertained in accordance with its interest in US LP, rather than on the basis of distributions made. Notwithstanding, as US LP is an artificial legal entity having a form of separate legal personality, it is prima facie a 'body corporate' under the ordinary meaning of the term in Australia. Although, generally a 'body corporate' has the 'ability to continue in existence indefinitely and to keep its identity regardless of changes to its membership' (see paragraph 30 of MT 2006/1) and US LP does not enjoy such a continued existence. But, as highlighted above, the requirement in Article 3(2) of the US Convention to in this case interpret an undefined term such as 'body corporate' in accordance with Australian taxation law, applies only if the 'context' does not require an alternative interpretation, see paragraphs 72 to 76 of TR 2001/13. Thus, it is essential to derive the meaning of the term 'body corporate' from the 'context' in the relevant tax treaty - including the function of the Article in question. Taxation Ruling TR 2001/12 notes at paragraph 45 that 'the accepted international rules for treaty interpretation focus particularly on the context of a text finalised between negotiating countries'. The meaning of a term must be an accurate representation of the 'bargain' or 'consensus ad idem' which objective evidence shows has been reached by the negotiating countries (see paragraph 74 of TR 2001/13). Paragraph 75 of TR 2001/13 notes that treaty 'context' should be taken in its broadest sense, and that includes the full range of materials open to consideration under Articles 31 and 32 of the Vienna Convention on the Law of Treaties. In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717 (at CLR 344, ATC 4720); the judges agreed that the OECD Model Taxation Convention's OECD Model Convention and the associated commentaries are relevant to the interpretation of tax treaties based on the OECD Model, see paragraph 102 of TR 2001/13. Paragraph 104 of TR 2001/13 accordingly provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting tax treaties. Paragraph 12 of the OECD Commentary on Article 3 emphasises that the interpretation set out in the 'undefined terms' provision applies 'only if the context does not require an alternative interpretation'. It adds that the 'context' is determined in particular by the intention of the Contracting States, as well as 'the meaning given to the term in question in the legislation of the other Contracting State (an implicit reference to the principle of reciprocity on which the Convention is based)'. However, US federal tax law does not specifically define the term 'body corporate'. In this case, the OECD Commentary on the definition of 'company' is particularly relevant to the context of the term 'body corporate'. Paragraph 3 of the OECD Commentary on Article 3 provides the following: 3. The term \"company\" means in the first place any body corporate. In addition, the term covers any other taxable unit that is treated as a body corporate according to the tax laws of the Contracting State in which it is organised . The definition is drafted with special regard to the Article on dividends . The term \"company\" has a bearing only on that Article, paragraph 7 of Article 5, and Article 16. [Emphasis added] It follows from the OECD Commentary's statement that the second limb of the term covers any other taxable unit , that the first limb of the definition of 'company' is designed to deal only with entities which are bodies corporate under general law and also taxable units under tax law (which is a central consideration in applying the terms of Australia's tax treaties). While the requirement for the entity to also be a 'body corporate' for tax law purposes under the first limb is not explicit, treaties should be interpreted more 'liberally' than domestic legislation to smooth over the gaps, imprecision and ambiguities in the treaty text in a way that addresses the context and meets the object and purpose of the treaty, (see Fothergill v. Monarch Airlines Ltd , [1981] A.C. 251; per Lord Diplock; Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; (1990) 90 ATC 4717; (1990) 21 ATR 531 per Dawson J; Commissioner of Taxation v. Lamesa Holdings BV , (1997) 77 FCR 597; (1997) 97 ATC 4752; (1997) 36 ATR 589 per Burchett, Hill and Emmett JJ, Courts Plc [2005] BVC 2003 and paragraphs 90-94 of TR 2001/13). Where the context of a term allows a specific tax law meaning and a non-tax law meaning, the former should prevail (see paragraph 68 of TR 2001/13). In addition, it is clear from the OECD Commentary on Article 3 that the question of whether a dividend recipient is an entity 'treated as a body corporate' for tax purposes must be made by reference to 'the tax laws of the Contracting State in which it is organised' - and not the state of source. Thus, paragraph 3 of the OECD Commentary on Article 3 provides with regard to the terms 'company' and 'body corporate' that the relevant taxation laws to consider are those of the country in which the entity was created (i.e. being the domestic laws that apply to the entity). The 'context' requires an examination of US taxation law and not Australian taxation law to determine whether a US entity is a 'company' for the purpose of qualifying for the reduced rate of withholding tax on inter-corporate dividends. Hence, in determining whether an entity is treated as a 'body corporate' for tax treaty purposes, reference is not made to the tax law of the country applying the treaty (in this case Australia), unless the entity was organised there. Specifically, as indicated above, the 'context' surrounding the terms 'company' and 'body corporate' in the US Convention, for the purpose of US LP qualifying for the either of the reduced rates of withholding tax on the unfranked dividends paid by the Australian resident company, requires an examination of US taxation law. Accordingly, to determine whether US LP is a 'body corporate' under the US Convention, the relevant consideration is where US LP was organised. US LP was not organised in Australia, but in the US. Hence, the potential Australian tax treatment of US LP (that is, that the entity can be treated as a company for Australian tax purposes by virtue of Division 5A of the ITAA 1936) is irrelevant. Rather, only the US tax treatment of US LP is relevant. US LP is not a taxable unit and so is not treated and taxed as a 'body corporate' for US federal tax purposes - but is treated and taxed as a partnership. Finally and importantly, paragraph 3 of the OECD Commentary on Article 3 emphasises that the definition of 'company' is ' drafted with special regard to the Article on dividends' and 'the term \"company\" has a bearing only on that Article, paragraph 7 of Article 5, and Article 16.' Paragraphs 10-11 of the OECD Commentary on Article 10 explains the rationale behind reduced taxation rates for inter-corporate dividends as follows: 10. On the other hand, a lower rate (5 per cent) is expressly provided in respect of dividends paid by a subsidiary company to its parent company. If a company of one of the States owns directly a holding of at least 25 per cent in a company of the other State, it is reasonable that payments of profits by the subsidiary to the foreign parent company should be taxed less heavily to avoid recurrent taxation and to facilitate international investment. The realisation of this intention depends on the fiscal treatment of the dividends in the State of which the parent company is a resident . ... 11. If a partnership is treated as a body corporate under the domestic laws applying to it, the two Contracting States may agree to modify sub-paragraph (a) of paragraph 2 in a way to give the benefits of the reduced rate provided for parent companies also to such partnership. (Emphasis added) Paragraph 2 of Article 10 of the OECD Model Tax Convention is not materially different from paragraph 2 of Article 10 in the US Convention, with the exception of the differences in the percentage holding thresholds in the respective treaties. Klaus Vogel on Double Tax Conventions , Vogel, K et al 1997, 3rd edition, Kluwer Law, The Hague, makes the following statements (at pages 583-584 and 599) about paragraph 2 of Article 10 of the OECD Model Tax Convention: Art. 10 is still completely geared to the 'classical' system of company taxation ... and is, consequently, based on the conception that it is appropriate to subject income derived by a company (within the meaning of Art. 3(1)(b)MC) to a tax of its own distinct and separate from the tax imposed on the distributions received by a company's shareholders ... the maximum rates on inter-company dividends should differ from those on 'all other' dividends. ... Such preferential treatment, however, applies only where direct investments are held by companies and does not apply where a substantial interest is held by an individual or a partnership. ... If, under the law of its State of residence, a partnership is considered a body corporate, but is ... not itself subjected to tax ... there would be no justification for allowing it to benefit from the limited rate of 5 per cent, because its interposition actually does not result in any double taxation. It is apparent, from all of the above, that the intention of Article 10(2) of the OECD Model Tax Convention is to provide reduced rates of withholding tax for dividends derived by companies from direct investments on a reciprocal basis. It would be contrary to the intention of Article 10(2) if the reduced inter-corporate dividend withholding tax rate was to apply where the tax law of the resident country treated the beneficial owner of the dividends as a partnership. Specifically, in the case of US LP, it would be inappropriate for a partnership formed under US state law and treated as a partnership for US tax purposes, to be able to access the inter-corporate rate of withholding tax for dividends under either Article 10(2) or Article 10(3) of the US Convention. The purpose behind Article 10(2) and 10(3) is to prevent multiple layers of taxation of corporate economic groups. Where the recipient does not have tax imposed (that is, because it is treated as a partnership in its state of residence), the rationale for granting the reduction in (or exemption from) withholding tax disappears. The context of Article 10 and the OECD Commentary requires the implicit inclusion in the first limb of the definition of 'company', that a 'body corporate' is a taxable unit under the relevant taxation laws. Further, the relevant taxation laws are clearly the domestic laws affecting the entity - that is, those laws under which the entity is organised or created. US LP is not a taxable unit and not a 'body corporate' for US tax purposes. Therefore, US LP does not satisfy the first limb of the meaning of the term 'company' in Article 3(1)(b) of the US Convention. It follows that US LP will not be a 'company' for the purposes of Article 10 of the US Convention by virtue of being a 'body corporate' for Australian purposes. (b) Is US LP a ' company' for the purpose of the US Convention under the second limb of the meaning of the term ' company' - that Is to say, is US LP an entity that is treated as a ' company' or ' body corporate' for tax purposes ? The OECD Commentary on the definition of 'company' (outlined above) makes it clear that, under the second limb of the definition, the determination is to be made by reference to the laws of the State in which the entity is organised (in this case US federal tax law). US LP is not taxed as a 'company' or 'body corporate' for US federal tax purposes. Rather it is treated and taxed as a partnership. This is essentially because, although US LP has a form of separate legal personality under Delaware state law, the US federal tax position is that while state law attributes of an entity control various aspects of business relations, they are not controlling under US tax law (unless the tax law so provides) - see Morrissey v. Commissioner of Internal Revenue , 296 U.S. 344 (1935); United States v. R Kintner ; 216 F.2d 418 (9th Cir. 1954); McNamee v. Dept of the Treasury , 2007 U.S. App. LEXIS 12016, 488 F.3d 100, (2nd Cir. 2007). In general, under the US 'check-the-box' (CTB) Treasury Regulations, any separate business entity other than an incorporated entity may choose its classification for tax purposes. Specifically, US CTB Treasury Regulations §301.7701-2(b)(1) and §301.7701-3(a) do not allow an entity organized under a Federal or State statute, that refers to the organization as 'incorporated', 'corporation', 'body corporate', or 'body politic', to elect its classification. Instead, such an entity is taxed as a corporation; see Checking in on \" Check-the-Box \", Loyola of Los Angeles Law Review [Vol. 42:451], by Heather M. Field. The DRULPA does not refer to a limited partnership created under its provisions as 'incorporated', a 'corporation', 'body corporate' or 'body politic' and US LP is not mandatorily taxed as a corporation. Rather, US LP is taxed as a partnership unless it elects to be taxed as a corporation. As no such election was made by US LP, it is not a taxable unit and is not taxed as a corporation under the tax laws of the US. Hence, US LP is not an 'entity that is treated as a company or body corporate for tax purposes' and so does not satisfy the second limb of the meaning of the term 'company' for the purposes of the US Convention. | Detailed Reasoning - Conclusion: For the purpose of the US Convention, US LP is neither a 'body corporate' nor an 'entity that is treated as a company or body corporate for tax purposes'. Consequently it is not a 'company' for the purpose of Article 10 of the US Convention, and does not qualify for either of the reduced rates for certain cross-border inter-corporate dividends flowing between Australia and the US. This is consistent with the US position for tax treaty purposes which is that a US partnership which does not elect to be taxed as a corporation will not be a 'company' for US treaty purposes. The Issues in International Taxation No. 6 ' The Application of the OECD Model Tax Convention to Partnerships' report includes the US response to the OECD Partnership Report at page 127. This response states that US partnerships (including limited partnerships such as Delaware limited partnerships, but also US LLCs and LLPs) not electing to be treated as corporations are not considered to be companies for the purposes of US tax treaties.", "Date_of_Decision": "23 October 2009", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 Division 5A section 94T section 128D", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2634 | Miscellaneous Taxation Ruling MT 2006/1 | Taxation Ruling TR 2001/12 | Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATOID 2008/62 | ATOID 2008/80 | ATOID 2010/9 | ATOID 2010/27", "Subject_References": "Bodies corporate Limited partnerships Non resident companies Non resident partnerships Unfranked dividends", "Case_References": "Chaff and Hay Acquisition Committee v Hemphill (1947) 74 CLR 375 [2005] BVC 2003", "Other_References": "Butterworths Australian Legal Dictionary, 1997 Checking in on \"Check-The-Box \", Loyola of Los Angeles Law Review [Vol. 42:451], Heather M. Field International Taxation No. 6 'The Application of the OECD Model Tax Convention to Partnerships' Klaus Vogel on Double Tax Conventions, Vogel, K et al 1997, 3rd edition, Kluwer Law, The Hague Macquarie Dictionary, Fourth edition, 2005 OECD Model Tax Convention and Commentary", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201081", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2634 Miscellaneous Taxation Ruling MT 2006/1 Taxation Ruling TR 2001/12 Taxation Ruling TR 2001/13 | Keywords Bodies corporate Limited partnerships Non resident companies Non resident partnerships Unfranked dividends"}
{"ATO_ID_Number": "ATO ID 2002/857", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Proposed share capital reduction", "Issue": "Will the return of capital trigger the application of section 45A of the Income Tax Assessment Act 1936 ('ITAA 1936') to enable the Commissioner to treat the distribution as a dividend for income tax purposes?", "Decision": "No. It is considered the return of capital does not trigger the streaming of dividends in terms of section 45A. Section 45C is not invoked.", "Facts": "The sole shareholder had acquired all the issued share capital from a company incorporated and resident in the USA. Following the acquisition the company was subsequently \"migrated\" and is now an Australian resident. Additional capital had resulted from earlier conversions to equity of all debt resulting in the company being 100% financed by equity. Retained earnings have been accumulated since incorporation in the USA and there is no pattern of distribution of dividends. The financing profile of the company was considered to be undergeared so that the company wished to obtain additional debt financing to increase its gearing levels to an optimum commercially acceptable level. The company proposed to borrow funds to undertake a distribution of share capital by way of a capital reduction and the return of capital has clearly been established as by way of borrowings and has not been paid out of profits.", "Reasons_for_Decision": "Summary: Section 45A relates to dividend streaming where capital benefits are received by \"advantaged shareholders\" to the detriment of \"disadvantaged shareholders\". As there is only one shareholder (the taxpayer) no particular shareholder would derive a greater benefit than another shareholder. The capital reduction is accepted as being made to the sole shareholder for purposes of optimum commercially acceptable gearing levels.", "Date_of_Decision": "29 June 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 Section 45A Section 45C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/858 | ATO ID 2002/859 | ATO ID 2002/860", "Subject_References": "Share capital Capital reductions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002857", "Unmatched_Content": "Keywords Share capital Capital reductions"}
{"ATO_ID_Number": "ATO ID 2002/858", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Proposed share capital reduction", "Issue": "Will a return of capital trigger the application of section 45B of the Income Tax Assessment Act 1936 ('ITAA 1936') to enable the Commissioner to regard the capital reduction as paid in substitution for dividends that would be treated as dividends for taxation purposes?", "Decision": "No. It is accepted that section 45B will not apply in respect of the return of capital and the distribution will not be treated as a dividend for income tax purposes.", "Facts": "The sole shareholder had acquired all the issued share capital from a company incorporated and resident in the USA. Following the acquisition the company was subsequently \"migrated\" to Australia and is now an Australian resident. Additional capital had resulted from earlier conversions to equity of all debt resulting in the company being 100% financed by equity. Retained earnings have been accumulated since incorporation in the USA and there is no pattern of distribution of dividends The financing profile of the company was considered to be undergeared so that the company wished to obtain additional debt financing to increase its gearing levels to an optimum commercially acceptable level. The company proposed to borrow funds to undertake a distribution of share capital by way of a capital reduction and the return of capital has clearly been established as by way of borrowings and has not been paid out of profits.", "Reasons_for_Decision": "Summary: The distribution paid out of capital had been motivated by commercial objectives and was achieved by way of specific borrowings for that purpose. While mutually accepted that a scheme exists in respect of the capital benefit paid to the sole shareholder and a tax benefit would result in the year ended 30 June 2001, para.45B(2)(c ) was not applied in view of the dominant purpose of the capital reduction ie. to introduce commercial debt levels into the company. The Commissioner will not make a determination in terms of subsection 45B(3) that section 45C applies in relation to the capital benefit.", "Date_of_Decision": "29 June 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 Section 45B Section 45C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/857 | ATO ID 2002/859 | ATO ID 2002/860", "Subject_References": "Share capital Capital reduction", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002858", "Unmatched_Content": "Keywords Share capital Capital reduction"}
{"ATO_ID_Number": "ATO ID 2002/859", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Proposed share capital reduction", "Issue": "Will section 160ARDM of the Income Tax Assessment Act 1936 ('ITAA 1936') apply with respect to \"tainting\" of a share capital account?", "Decision": "The share capital account, as defined in section 6D, is not considered to be a \"tainted\" share account in terms of Division 7B of the ITAA 1936.", "Facts": "The company had operated with a share capital which was increased at various intervals since 1995 by way of a debt /equity transfer. Amounts have not been transferred from any other accounts.", "Reasons_for_Decision": "Summary: \"Dividend\" does not include money paid or debited against the share capital account. However, an account that is \"tainted\" for purposes of Division 7B is excluded from the share capital account. A \"tainted\" share capital account does not apply if the amount credited to the account is a debt transferred under a debt/equity swap and does not exceed the lesser of the value of the shares issued by the debtor and the amount of the debt being extinguished under the debt/equity swap.", "Date_of_Decision": "29 June 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 6D section 160ARDM", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/857 | ATO ID 2002/858 | ATO ID 2002/860", "Subject_References": "Share capital Capital reductions Tainted share capital account", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002859", "Unmatched_Content": "Keywords Share capital Capital reductions Tainted share capital account"}
{"ATO_ID_Number": "ATO ID 2002/860", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Proposed share capital reduction", "Issue": "Whether subsection 6(4) of the Income Tax Assessment Act 1936 ('ITAA 1936') will apply to deem a return of capital from the share capital account to be a dividend for income tax purposes.", "Decision": "No. Subsection 6(4) of the ITAA 1936 would not apply to deem the return of capital to be a dividend for income tax purposes.", "Facts": "The financing profile of the company was considered to be undergeared so that the company wished to obtain additional debt financing to increase its gearing levels to an optimum commercially acceptable level. As such, the company proposed to borrow funds to undertake a distribution of share capital by way of a capital reduction and the return of capital has clearly been established as by way of borrowings and not paid out of profits.", "Reasons_for_Decision": "Summary: A dividend defined in subsection 6(1 ) of the ITAA 1936 includes any distribution made by a company to any of its shareholders but does not include moneys debited against an amount standing to the credit of the share capital account. An exception exists in terms of subsection 6(4) if paid under an arrangement between the parties involved. The previous shareholder contributed the capital by way of a debt/equity swap which was not related to the distribution to be paid out of the share capital account.", "Date_of_Decision": "29 June 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 Subsection 6(1) Subsection 6(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/857 | ATO ID 2002/858 | ATO ID 2002/859", "Subject_References": "Share capital Capital reductions Tainted share capital account", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002860", "Unmatched_Content": "Keywords Share capital Capital reductions Tainted share capital account"}
{"ATO_ID_Number": "ATO ID 2009/94", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "On-market Share Buyback", "Issue": "Will the journal entry made to the consolidated financial statements of Head Co for the purpose of recognising Head Co's on-market share buyback result in 'tainting' of the company's share capital account under Division 197 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A journal entry made in a consolidated group's financial statements is not a transfer into the share capital account of Head Co under subsection 197-5(1) of the ITAA 1997.", "Facts": "Head Co is the legal head entity of a consolidated group and head company of a tax consolidated group. Head Co is an Australian resident for taxation purposes. Head Co commenced an on-market share buyback of its shares. The consolidated group expects to make the following journal entries due to the on market share buyback, in accordance with Australian Accounting Standards Board 3 'Business Combinations' (AASB 3): The first journal entry is made in the general ledger of Head Co: The result of both entries produces the following net outcome in the consolidated accounts:", "Reasons_for_Decision": "Detailed Reasoning - Division 197 of the ITAA 1997: The share capital tainting provisions in Division 197 of the ITAA 1997 provide for a franking debit to arise in a company's franking account and require distributions to be unfrankable when certain transfers are made to a company's share capital account. The following extract from the Explanatory Memorandum (the EM) accompanying the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 and New Business Tax System (Untainting Tax) Bill 2006 containing the share capital tainting provisions explains the purpose of those provisions: [1] The share capital tainting rules are integrity rules designed to prevent a company from disguising a distribution of profits as a tax-preferred capital distribution by transferring profits into its share capital account and subsequently making distributions from that account. Division 197 of the ITAA 1997 applies to an amount that is transferred into the company's share capital account from another of the company's accounts, provided the company is an Australian resident before the time of transfer (subsection 197-5(1) of the ITAA 1997). A company's share capital account will become tainted if such a transfer occurs, unless the account was already tainted (subsection 197-50(1) of the ITAA 1997). | Detailed Reasoning - When is an amount transferred from one account to another account?: Division 197 of the ITAA 1997 does not define when an amount is transferred from one account to another. However, the EM states that: | Detailed Reasoning - The first journal entry: Division 197 of the ITAA 1997 will not apply to taint the share capital account of Head Co because the first journal entry made does not constitute a transfer from another account into the share capital account of Head Co. Rather, it constitutes a reduction of the share capital account of Head Co. | Detailed Reasoning - The second journal entry: Subsection 197-5(1) of the ITAA 1997 does not apply to the second journal entry that was made for consolidated accounting purposes in accordance with AASB 3 as it does not appear in the general ledger of Head Co. Accordingly, there is no tainting of Head Co's share capital account under subsection 197-5(1) of the ITAA 1997. It is the entries a legal entity makes to its general ledger that will be determinative, and not the entries that are made to reflect a consolidated accounting position, as Division 197 of the ITAA 1997 is considered to operate on a legal entity basis.", "Date_of_Decision": "14 August 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 197-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Share capital Tainted share capital account", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 and New Business Tax System (Untainting Tax) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200994", "Unmatched_Content": "Keywords Share capital Tainted share capital account"}
{"ATO_ID_Number": "ATO ID 2004/319", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reduction in a shareholder's equity interest by the way of share buy-back: section 45B does not apply", "Issue": "Will a return of capital to a shareholder whose equity interest is reduced trigger the application of section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) to enable the Commissioner to treat the distribution as a dividend for taxation purposes?", "Decision": "No. Section 45B of the ITAA 1936 will not apply in respect of the return of capital component of the buy-back consideration paid to a shareholder whose equity interest is reduced. The distribution of share capital will not be treated as a dividend for income tax purposes.", "Facts": "Company A is equally owned by family companies B and C. Both companies B and C are Australian resident companies. Most of the company A shares were issued pre-CGT, that is, before 20 September 1985. The original owner of shares in company B died and ownership of the shares passed to that shareholder's children. Company A is primarily operated and managed by persons associated with company C. The shareholders in company B wish to reduce company B's equity interest in company A. Company A proposes to undertake a selective share buy-back of almost all the shares held by company B at the price of $3.85 per share. A nominal shareholding is to be retained by company B. The buy-back is to consist entirely of pre-CGT shares. The buy-back consideration is to be debited to the share capital account at $2 per share (the original subscription price) with the remaining balance of $1.85 debited against retained profits. Company A has confirmed that there have not been any transfers to share capital account that would constitute to the tainting of the share capital account for the purposes of Division 7B of Part IIIAA of the ITAA 1936.", "Reasons_for_Decision": "Summary: A purpose of section 45B of the ITAA 1936 is to ensure that amounts paid in substitution for dividends are treated as unfranked dividends for income tax purposes. Section 45B of the ITAA 1936 applies if: The proposed share buy-back is a 'scheme' contemplated by section 45B of the ITAA 1936 that provides a shareholder (company B), with a capital benefit, as defined by subsection 45B(5) of the ITAA 1936. As part of the buy-back consideration consists of a distribution of a capital on which no tax is payable, company B would 'obtain a tax benefit' (within meaning of the phrase in subsection 45B(9) of the ITAA 1936). Subsection 45B(8) of the ITAA 1936 lists the circumstances that are relevant to determining whether any person has a more than incidental purpose of enabling a person to obtain a tax benefit. Significantly, under the proposed share buy-back: After considering all the relevant circumstances, it cannot reasonably be concluded that there exists the requisite level of purpose of providing a tax benefit to company B by way of the capital reduction. Therefore, section 45B of the ITAA 1936 does not apply to deem the return of capital under the proposed share buy-back to be a dividend.", "Date_of_Decision": "29 October 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Section 45B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/858 | ATO ID 2003/486", "Subject_References": "Share capital Capital reduction", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004319", "Unmatched_Content": "Retrospective tax law changes have effect for a period before the date of enactment once the legislation is passed. See Administrative treatment of retrospective legislation . | Keywords Share capital Capital reduction"}
{"ATO_ID_Number": "ATO ID 2004/417", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Off-market share buy-back: Division 16K applies", "Issue": "Does Division 16K of the Income Tax Assessment Act 1936 (ITAA 1936) apply to treat the amount received for shares sold 'off-market' back to the issuing company as an assessable dividend?", "Decision": "Yes. Division 16K of the ITAA 1936 applies to treat the amount received for shares sold off-market back to the issuing company as an assessable dividend.", "Facts": "An Australian resident individual purchased 100 shares in a company that is not listed on a stock exchange for $10,000. The company bought back 90 shares from the shareholder for $10,000. No part of the purchase price was debited against the company's share capital account.", "Reasons_for_Decision": "Summary: Under section 159GZZZK of the ITAA 1936, where a company buys a share in itself from a shareholder in the company (a share buy-back), the share is not a share that is listed on a stock exchange and the buy-back is not made in the ordinary course of trading on that stock exchange, the buy-back is an off-market purchase. As the 90 shares sold to the company were not listed on the stock exchange the buy-back by the company is an off-market purchase. Under paragraph 159GZZZM(a) of the ITAA 1936, the purchase price in respect of a buy-back is, if the seller as a shareholder has received or is entitled to receive an amount or amounts of money as a result of or in respect of the buy-back, that amount or the sum of those amounts. In this case, the purchase price of the 90 shares bought back by the company was $10,000. Under subsection 159GZZZP(1) of the ITAA 1936, where a buy-back of a share is an off-market purchase, the difference between the purchase price and the part (if any) of the purchase price which is debited against amounts standing to the credit of the company's share capital account, is a dividend. The dividend is taken to be paid by the company to the seller in the company out of profits derived by the company on the day the buy-back occurs. The dividend is required to be included in the seller's assessable income under section 44 of the ITAA 1936. As no amount was debited against amounts standing to the credit of the company's share capital account, the full amount of the buy-back purchase price ($10,000) is taken to be a dividend paid by the company to the shareholder.", "Date_of_Decision": "6 April 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 44 section 159GZZZK paragraph 159GZZZM(a) subsection 159GZZZP(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Dividend income Share buy backs", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004417", "Unmatched_Content": "Retrospective tax law changes have effect for a period before the date of enactment once the legislation is passed. See Administrative treatment of retrospective legislation . | Keywords Deemed dividends Dividend income Share buy backs"}
{"ATO_ID_Number": "ATO ID 2003/1094", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: On-market share buy-backs - application of section 45B", "Issue": "Does section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) apply to a company's on-market share buy-back?", "Decision": "No. Section 45B of the ITAA 1936 will not apply to the on-market buy-back.", "Facts": "A company listed on the Australian Stock Exchange (ASX) undertakes an on-market share buy-back. The arrangement does not relate to a demerger. The buy-back is conducted in accordance with the ASX Listing Rules. The amount paid by the company to buy back shares is debited to its share capital account.", "Reasons_for_Decision": "Summary: Subsection 45B(2) of the ITAA 1936 states that the section applies where: 'Scheme' is defined broadly, including 'any agreement, arrangement, understanding, promise or undertaking' (section 177A of the ITAA 1936). A share buy-back arrangement would come within this definition. 'Capital benefit' includes the distribution to a person of share capital (subsection 45B(5) of the ITAA 1936). Since a share buy-back involves the distribution of share capital, it represents a capital benefit. In this case the share buy-back is not made in relation to a demerger, so that the meaning of 'demerger benefit' does not need to be considered. The 'relevant taxpayer' in this instance would include any of the shareholders who sell their shares back to the company. Where the relevant taxpayer would have a greater tax liability if they receive a dividend rather than a capital benefit, they obtain a 'tax benefit' (subsection 45B(9) of the ITAA 1936). Some taxpayers, for example, would make a capital gain and could also be entitled to the CGT discount. This may produce less income tax than if dividend income had been included in assessable income and subject to the full rate of personal income tax. Accordingly, it is reasonable to conclude that some taxpayers will obtain a tax benefit from the buy-back. It is then necessary to consider whether there was a purpose of enabling the vendor shareholders to obtain a tax benefit. The relevant circumstances to consider in reaching this conclusion are listed in subsection 45B(8) of the ITAA 1936. In this instance the on-market buy-back is conducted through the ASX's Stock Exchange Automated Trading System (SEATS) and complies with the ASX Listing Rules. Because shares must be purchased from any willing vendor, the company cannot control whether vendors obtain a tax benefit from the arrangement. All shareholders have an equal and arm's length opportunity to obtain the capital benefit. The money paid by the company for the shares is not attributable to profits of the company. On weighing these factors it would be concluded that there is no more than an incidental purpose that shareholders receive a tax benefit. Accordingly, the conditions of subsection 45B(2) of the ITAA 1936 are not satisfied. Section 45B of the ITAA 1936 does not apply to an on-market share buy-back arrangement of this kind.", "Date_of_Decision": "27 November 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 45B section 177A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital benefit Share buy backs", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031094", "Unmatched_Content": "Keywords Capital benefit Share buy backs"}
{"ATO_ID_Number": "ATO ID 2004/653", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Return of Capital - section 45A does not apply", "Issue": "Does section 45A of the Income Tax Assessment Act 1936 (ITAA 1936) apply such that the Commissioner is able to make a determination under subsection 45A(2) of the ITAA 1936 that section 45C of the ITAA 1936 applies to treat the amount of a return of capital as an unfranked dividend paid out of the profits of the company?", "Decision": "No. Section 45A of the ITAA 1936 does not apply to treat the amount of a return of capital as an unfranked dividend paid out of the profits of the company.", "Facts": "The company distributed funds to its shareholders as a return of capital in proportion to their shareholding. The return of capital was debited to the company's share capital account and funded out of its existing borrowing facilities.", "Reasons_for_Decision": "Summary: Section 45A of the ITAA 1936 applies in circumstances where capital benefits are streamed to certain shareholders who derive a greater benefit from the receipt of capital (the advantaged shareholders) and it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received or would receive dividends. By distributing an amount as a return of capital, the company will provide shareholders with a 'capital benefit' (as defined in paragraph 45A(3)(b) of ITAA 1936). However, there is nothing in the arrangement to indicate that there is a 'streaming' of capital benefits to some shareholders and dividends to other shareholders as all shareholders will receive the capital return in direct proportion to their shareholding. Therefore section 45A of the ITAA 1936 does not apply to the distribution.", "Date_of_Decision": "08 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 45A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/857", "Subject_References": "Share capital Capital reductions Return of capital on shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004653", "Unmatched_Content": "Keywords Share capital Capital reductions Return of capital on shares"}
{"ATO_ID_Number": "ATO ID 2004/654", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Return of Capital - section 45B applies", "Issue": "Does section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) apply such that the Commissioner is able to make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies to treat the amount of the return of capital as an unfranked dividend paid out of the profits of the company?", "Decision": "Yes. Section 45B of the ITAA 1936 applies to treat the amount of the capital reduction as an unfranked dividend paid out of the profits of the company.", "Facts": "The company distributed funds to its shareholders as a return of capital in proportion to their shareholding and additional to an ordinary dividend which it regularly paid at half-yearly intervals. The return of capital was debited to the company's share capital account and funded out of the company's existing borrowing facilities. The company had generated greater than usual profits in the preceding year and had used surplus cash to repay borrowings. The distribution would restore the company's gearing to a normal level.", "Reasons_for_Decision": "Summary: The purpose of section 45B of the ITAA 1936 is to ensure that amounts paid in substitution for dividends are treated as unfranked dividends for income tax purposes. Subsection 45B(2) of the ITAA 1936 sets out the conditions under which section 45B of the ITAA 1936 applies. This section applies if: The distribution is a 'scheme' within the broad meaning of that term, for the purposes of section 45B of the ITAA 1936. The meaning of 'provided with a capital benefit' is found in subsection 45B(5) of the ITAA 1936. A person is provided with a capital benefit if: As the distribution is debited against the company's share capital account, there is a provision of a capital benefit as defined by subsection 45B(5) of the ITAA 1936. A further requirement of subsection 45B(2) of the ITAA 1936 is that a taxpayer (the relevant taxpayer) must obtain a tax benefit. The relevant taxpayer need not be the person who is provided with the capital benefit. Obtaining a tax benefit is defined in subsection 45B(9) of the ITAA 1936 to mean circumstances where the amount of tax payable, or any other amount payable under the income tax law by the relevant taxpayer would, apart from this section, be less than the amount that would have been payable, or would be payable at a later time than it would have been payable, if the capital benefit had been a dividend. Shareholders would obtain a tax benefit, within the meaning of subsection 45B(9) of the ITAA 1936, as the amount of tax payable from treatment of a return of capital distribution under the capital gains and losses provisions would, apart from the operation of section 45B, be less than the amount that would be payable if the distribution had instead been a dividend. Subsection 45B(8) of the ITAA 1936 sets out circumstances that are relevant to determining whether any person has the requisite degree of purpose of enabling a taxpayer to obtain a tax benefit. Paragraph 45B(8)(a) of the ITAA 1936 refers to the extent to which the distribution is attributable to the profits of the company. The distribution is effectively sourced from profits. Although the distribution is to be funded directly by drawing from existing borrowing facilities, the ultimate source of the surplus is the profits that had produced surplus funds to repay earlier borrowings. The company's business structure had remained intact and its recent operations had not included any significant divestment. This suggests that no surplus equity capital had been generated. Borrowings to fund the distribution would not result in a substantial change to gearing levels having regard to the variation in those levels in the preceding 18 month period. Paragraph 45B(8)(b) of the ITAA 1936 refers to the pattern of distributions. Although the company had a regular pattern of dividend payments, the company had recently accumulated substantial retained profits. The ordinary half-year dividend was not commensurate with the increased level of profits. The regularity of dividend payments was therefore not sufficient to indicate that the requisite degree of purpose was not present. Paragraphs 45B(8)(c) to (g) of the ITAA 1936 concern the particular taxation status of shareholders. As the company has a diverse range of shareholders, these factors tend neither toward nor against the existence of the requisite degree of purpose. Paragraph 45B(8)(h) of the ITAA 1936 requires a comparison of the respective interests held by shareholders after the distribution. As the distribution is proportional, to all shareholders, it is indicative of being in substitution for a dividend. Paragraphs 45B(8)(i) and (j) of the ITAA 1936 refer to factors that are not relevant to the distribution. Paragraph 45B(8)(k) of the ITAA 1936 refers to matters listed in section 177D of the ITAA 1936. Having regard to the 'relevant circumstances' in paragraph 45B(8)(a), (b) and (h) of the ITAA 1936 it is concluded that the requisite degree of purpose of enabling a shareholder to obtain a tax benefit exists. Paragraph 45B(8)(k) of the ITAA 1936 circumstances have therefore not been separately considered. As all the conditions of subsection 45B(2) of the ITAA 1936 have been satisfied, section 45B applies to the distribution. Subsection 45B(3) of the ITAA 1936 permits the Commissioner to make a determination that section 45C of the ITAA 1936 applies to treat the distribution as an unfranked dividend.", "Date_of_Decision": "08 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 45B section 45C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/788 | ATO ID 2002/858", "Subject_References": "Capital benefits Share capital Capital reductions Return of capital on shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004654", "Unmatched_Content": "Keywords Capital benefits Share capital Capital reductions Return of capital on shares"}
{"ATO_ID_Number": "ATO ID 2009/87", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Share Capital Tainting: option premium for the purposes of section 197-25 of the Income Tax Assessment Act 1997", "Issue": "Are amounts, that are credited as tax assets that are greater than debited tax expenses in relation to the Employee Share Scheme (ESS) of employer XYZ Pty Ltd (XYZ), option premiums under section 197-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The amounts are not option premiums under section 197-25 of the ITAA 1997. Therefore the provision cannot be applied to exclude transfers from XYZ's option premium reserve account into its share capital account.", "Facts": "XYZ records tax effect entries to account for the provision of shares or rights under its ESS. XYZ recognises future tax deduction available as a deferred tax asset in the tax effect entries. The share based expense is recognised over the vesting period based on the actuarial valuation of the options/rights on grant date. The deferred tax asset recognised in the particular period is based on the actuarial valuation of the options/rights, as at the end of each income tax period. Therefore, a difference arises between the share based expense and the extent of the deferred tax asset recognised when the valuations are unequal. The deferred tax asset ultimately recognised by XYZ was dependent upon the actual tax deduction available to XYZ in relation to exercised options under the ESS. In relation to the following, the valuation of the options at grant date is $30 million and the valuation of the shares for the income tax period is $20 million. The tax effect entries are as follows: A $9 million (30% of $30 million) increase in deferred tax asset is determined for an income year. In this year the $6 million (30% of $20 million) income tax expense decrease recognised is less than the deferred tax asset recognised. As such, the excess amount is credited to XYZ's option premium reserve. XYZ uses its option premium reserve account as a holding account for recording the necessary adjustments required prior to an actual amount of the share based expense including the tax impact of the share based expense, can be determined on the exercise of the options. Assuming all the options are exercised in the expected financial year, the tax benefit is realised. When XYZ purchases the shares on market for its participating employees, the deferred tax asset is crystallised and XYZ claims a tax deduction for $9 million. Once the actual taxation deduction is known, the tax benefit realised is transferred from their option premium reserve account to their share capital account.", "Reasons_for_Decision": "Detailed Reasoning - What are option premiums?: The legislation does not explain or define what option premiums are. Section 197-25 of the ITAA 1997 prevents amounts from tainting the share capital account if the amounts are transferred from option premium reserves and the amounts are 'premiums in respect of those options'. The exclusion only applies to amounts transferred to a share capital account from an option premium reserve. In ascertaining what amounts are included in 'premiums in respect of those options', paragraph 4.19 of the Explanatory Memorandum (EM) accompanying the Taxation Laws Amendment (2006 Measures No. 3) Bill 2006 highlights the intended meaning of option premiums by providing that: A company's share capital account does not become tainted if an amount is transferred from an option premium reserve to its share capital where the amount transferred represents option premiums that were received by the company in consideration for the issue of the options that have been exercised. (emphasis added) | Detailed Reasoning - Dictionary Definitions: An 'option' is: A 'premium' is: An 'option premium' is: In applying the interpretative principle formulated in Falconer v. Pedersen [1974] VR 185 that: One must interpret the phrase as used in its context, assisted as it may be, but not necessarily bound, by one of a variety of dictionary definitions, we conclude that the use of the term 'option premiums' in the EM is consistent with the dictionary definitions provided above. In this context, option premiums are amounts provided by employees as consideration for the contractual right to acquire shares in XYZ. Effectively the amounts of option premiums provided should equal the value of the services provided by employees. The value of the services provided would be the value recorded against the 'employee expense' account. Therefore, any amounts that do not reflect the value of the services provided by employees will not be option premiums. | Detailed Reasoning - What are not option premiums?: Within the transactions that occur in relation to the tax effect entries for performance options/rights, subsection 197-5(1) of the ITAA 1997 will apply when amounts in XYZ's option premium reserve account are transferred into their share capital account. Further, section 197-25 of the ITAA 1997 will not apply to exclude the transfers from Division 197 of the ITAA 1997 as the tax effect entry amounts in XYZ's option premium reserve account do not constitute option premiums. The excess amount created in the deferred tax asset via the deductible expense, which is greater than the decrease in the income tax expense account, is not an option premium. The Tax Office view is that the amounts are not option premiums because the amounts cannot be classified as consideration to acquire options to purchase shares in XYZ. This also means that the amounts cannot be premiums in respect of the options. Once the transfer of the amount is made to XYZ's share capital account, the account will be tainted under subsection 197-5(1) of the ITAA 1997 and the exclusion in section 197-25 of the ITAA 1997 will not apply.", "Date_of_Decision": "15 July 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 197-5(1) section 197-5 section 197-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Tainted share capital account", "Case_References": "Falconer v. Pedersen [1974] VR 185", "Other_References": "Taxation Laws Amendment (2006 Measures No.3) Bill 2006 (80 of 2006) Fact sheet Share capital tainting Paragraph 4.19 of the EM accompanying the Tax laws Amendment (2006 Measures No.3) Bill 2006 The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 McLaren J, Simpson M, Toohey M, Law of Investments, 2nd ed, LBC, Sydney 2000, p 398 Australian Dictionary of Banking and Finance, LBC, Sydney, 2000. Webster's New World Finance and Investment Dictionary, Wiley Publishing, USA, 2003 Butterworths Australian Legal Dictionary, Butterworths, Australia, 1997. Oxford Dictionary of Australian Investment Terms, 6th ed, Oxford University Press, Melbourne, 2003 Black's Law Dictionary, 8th ed, Thomson West, USA, 2004 Butterworths Encyclopaedic Australian Dictionary, [Multimedia], LexisNexis,Australia, 9/9/04", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200987", "Unmatched_Content": "Income tax expense (Benefit) | Keywords Employee share schemes & options Tainted share capital account"}
{"ATO_ID_Number": "ATO ID 2014/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: undeducted construction expenditure - period where no capital works deduction is available", "Issue": "Is the undeducted construction expenditure, calculated under Subdivision 43-G of Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997), affected by the period that capital works deductions are not available to the taxpayer?", "Decision": "No. The undeducted construction expenditure, calculated under Subdivision 43-G of Division 43 of the ITAA 1997, is not affected by the period that capital works deductions are not available to the taxpayer.", "Facts": "During the year of income, the taxpayer owned a residential rental property that was constructed after 26 February 1992. From its purchase, the property was rented to tenants, or made available for rental, for the purpose of producing assessable income through deriving rental income. During the year of income, the property became vacant. Instead of attempting to rent the property, the taxpayer sought to sell it. At the time of attempting to sell the property, the intended use of the property to produce assessable income through deriving rental income was discontinued. In order to sell the property, it was placed on the market. Despite having the property available for sale for a number of months, the property did not sell. At the end of that period the property was once again made available for rental.", "Reasons_for_Decision": "Summary: The undeducted construction expenditure calculated under Subdivision 43-G of Division 43 of the ITAA 1997 is the part of the construction expenditure that is left to write off. For capital works constructed after 26 February 1992, the undeducted construction expenditure is calculated under sections 43-230 and 43-235 of the ITAA 1997. Broadly, the undeducted construction expenditure is the original construction expenditure less the aggregate of amounts calculated at the rate of 2.5% per annum of that expenditure, from the time the capital works, or a part of it, was first used by any entity for any purpose after completion of the relevant construction. For the purpose of the calculation of the undeducted construction expenditure under sections 43-230 and 43-235 of the ITAA 1997, the capital works can be used by any entity for any purpose after the relevant construction is completed and, therefore, is not affected by the period that the capital works deduction is not available to the taxpayer. During the period that the property was for sale and was not available for rental, no capital works deductions were available to the taxpayer under section 43-10 of the ITAA 1997. However, this period does not affect the taxpayer's calculation of the undeducted construction expenditure under sections 43-230 and 43-235 of the ITAA 1997.", "Date_of_Decision": "7 November 2014", "Year_of_Income": "Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 Subdivision 43-G section 43-10 section 43-230 section 43-235", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Capital works deduction Construction expenditure area", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201438", "Unmatched_Content": "Keywords Building depreciation Capital works deduction Construction expenditure area"}
{"ATO_ID_Number": "ATO ID 2004/593", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: attempted sale of residential rental property - ceasing to use in a deductible way", "Issue": "Under section 43-10 of the Income Tax Assessment Act 1997 (ITAA 1997), does the taxpayer use the capital works in a deductible way during a period in an income year?", "Decision": "No. Under section 43-10 of the ITAA 1997, the taxpayer does not use the capital works in a deductible way during a period in an income year.", "Facts": "During the year of income the taxpayer owned a residential rental property that was constructed after 18 July 1985. During the period that it was owned, the property was rented to tenants, or made available for rental, for the purpose of producing assessable income through deriving rental income. In a year of income commencing after 30 June 1997 the property became vacant. Instead of attempting to rent the property, the taxpayer sought to sell it. At the time of attempting to sell the property, the intended use of the property to produce assessable income through deriving rental income was abandoned. In order to sell the property, it was placed on the market during the year of income. While the property was vacant the taxpayer incurred capital expenditure on structural improvements to the property in preparation for its sale. Despite having the property available for sale for a number of months, the property did not sell. At the end of that period the property was once again made available for rental. Construction of the structural improvements to the property had been completed before the property was again made available for rental.", "Reasons_for_Decision": "Summary: Section 43-10 of the ITAA 1997 provides that an amount may be deducted for capital works for an income year if the capital works have a construction expenditure area, there is a pool of construction expenditure for that area and 'your area' (the area) is used in a deductible way. More specifically, the area must be used in a deductible way as prescribed by Table 43-140 in section 43-140 of the ITAA 1997 (Table 43-140). Generally, capital works are used in a deductible way in an income year if used for the purpose of producing assessable income (subsection 43-140(1) of the ITAA 1997). Sections 43-160 and 43-165 of the ITAA 1997 contain rules which affect the uses of capital works described in Table 43-140. In general terms, section 43-160 of the ITAA 1997 provides that the area is taken to be used for a particular purpose (relevantly, the purpose of producing assessable income) if it is maintained ready for use for that purpose, has not been used for another purpose, and its use for that purpose has not been abandoned. Section 43- 165 of the ITAA 1997 provides, among other things, that the area is taken to be used for a particular purpose if its use for that purpose temporarily ceases because of the construction of an extension, alteration or improvement, or the making of repairs. Construction of the structural improvements to the property began after it had ceased being available for rental. As the property was intended to be sold, there was intended to be a permanent cessation of use of the property in a deductible way. For the period from when construction of the structural improvements was completed until the property was again made available for rental, the taxpayer's area was not maintained ready for use for the purpose of producing assessable income and its use for that purpose had been abandoned. Further, the use of the property for the purpose of producing assessable income had ceased, in preparation for its sale, and not because of the construction of the structural improvements the taxpayer subsequently made. Neither section 43-160 of the ITAA 1997 nor section 43-165 of the ITAA 1997 apply to the taxpayer's area. As the property, including structural improvements that were constructed, was not used for the purpose of producing assessable income during the period it was unavailable for rental, the taxpayer's area was not used in a deductible way during that period.", "Date_of_Decision": "21 April 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 section 43-140 subsection 43-140(1) section 43-160 section 43-165", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/594", "Subject_References": "Building alteration and renovation expenses Building depreciation Construction costs Capital Allowances CoE Rental property Structural improvement expenses", "Case_References": "", "Other_References": "Rental Properties 2002-3 (NAT 1729-6.2003)", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004593", "Unmatched_Content": "Keywords Building alteration and renovation expenses Building depreciation Construction costs Capital Allowances CoE Rental property Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2004/623", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: using your area in a deductible way", "Issue": "Does the taxpayer use their area in a deductible way set out in the table in section 43-140 of the Income Tax Assessment Act 1997 (ITAA 1997) if capital works owned by the taxpayer are leased to a related company and the only amount received for an initial period is an amount for outgoings of the leased property?", "Decision": "Yes. The taxpayer does use their area in a deductible way set out in the table in section 43-140 of the ITAA 1997 if the only amount received during an initial period is for outgoings of the leased property.", "Facts": "The taxpayer and their spouse constructed an industrial building in 2001 and leased it to a related company. They are the sole directors and shareholders of the company. The company began its business operations in the same year. The company has only been required to pay amounts for outgoings such as rates, insurance and land tax for the building and property during an initial period of 18 months. As the company has had inadequate cash flow and has traded at a loss, it has not been required to pay an additional amount for rent. The sales revenue of the company has increased significantly since the company's inception. The company will be able to pay rent from the next year. The building is a capital work to which Division 43 of the ITAA 1997 applies. The expenditure incurred by the taxpayer to construct the building is construction expenditure as defined in section 43-70 of the ITAA 1997. The capital works have a construction expenditure area and there is a pool of construction expenditure for that area as required under section 43-10 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 43-10 of the ITAA 1997 provides that an amount may be deducted for capital works for an income year if: Table 43-140 (Current year use) in section 43-140 (Using your area in a deductible way) of the ITAA 1997 sets out the various ways that an area must be used for that income year. Capital works begun after 30 June 1997 must be used, among other things, for the purpose of producing assessable income. Something is done for the purpose of producing assessable income if it is done for the purpose of gaining or producing assessable income; or in carrying on a business for the purpose of gaining or producing assessable income (section 995-1 of the ITAA 1997). Generally, a mere lease of property does not constitute carrying on a business. 'Purpose of producing assessable income' has been considered in relation to the use of plant and depreciating assets in Pettigrew v. FC of T 90 ATC 4124; (1990) 20 ATR 1833 ( Pettigrew ) and Reef Networks Pty Ltd v. DFC of T 2004 ATC 4001; (2003) 54 ATR 509 ( Reef ). Those cases recognised that considering whether plant or a depreciating asset was used for the 'purpose of' was different to considering whether a loss or outgoing is 'incurred in gaining or producing' assessable income under either subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936) or section 8-1 of the ITAA 1997. In particular, Justice Hill in Pettigrew noted that in contrast with subsection 51(1) of the ITAA 1936 the purpose of which section 54 of the ITAA 1936, which incorporates 'purpose of producing assessable income' as a test, speaks is the purpose of the use to which the plant is put in the year of income. It is not concerned with motive, however subjective purpose may not be irrelevant. Hely J in Reef stated that the determination of the purpose for which the asset under consideration in that case was used was a matter of objective characterisation. These statements are also relevant in the application of section 43-140 of the ITAA 1997. Although the requirements of subsection 51(1) of the ITAA 1936 and section 8-1 of the ITAA 1997 differ from that of section 43-140 of the ITAA 1997, the principles developed in the application of those sections may provide assistance in the application of that section. It has been well established that the assessable income referred to in section 8-1 and its predecessors is not required to be the assessable income of the year of income but it may be the assessable income of a past or future year ( Spassked Pty Ltd v. FC of T 2003 ATC 4184; (2003) 52 ATR 337). The assessable income referred to in section 43-140 may also be that of future years. The purpose referred to in section 43-140 of the ITAA 1997 is an objective characterisation and will normally be apparent from the use to which the capital works are put. If that use is in a regular income producing activity then it will satisfy the condition. However, where lengthy periods of time pass before the production of assessable income from the use in question the possibility of other uses arises. This is consistent with the statement in FC of T v. Brand 95 ATC 4633; (1995) 31 ATR 326 that: ... The temporal hiatus may suggest that the outgoing was incurred for some purpose other than the gaining or producing of assessable income. In this case the use of the building by the taxpayer is to lease it to the company to use as a base of operations. The taxpayer is receiving less than a commercial rent because of initial cash flow difficulties of the company. This has enabled the taxpayer to receive a commercial rent within the next year. The current use of the building is producing some assessable income now and contributing to the production of assessable income in a future period. Taking all the circumstances together, including the period for which an amount that is lower than a commercial rent has been received, it is considered that the building is being used for the purpose of producing assessable income and not for any other purpose. If the period for which the non-commercial amount was received became significant, it could suggest that it was being used for some other purpose.", "Date_of_Decision": "28 April 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 43-10 section 43-70 section 43-140 Division 43 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Construction expenditure area Producing assessable income Rental property income", "Case_References": "Pettigrew v. FC of T 90 ATC 4124 (1990)20 ATR 1833", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004623", "Unmatched_Content": "Keywords Building depreciation Construction expenditure area Producing assessable income Rental property income"}
{"ATO_ID_Number": "ATO ID 2003/513", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: using an apartment in the '4% manner'", "Issue": "Is the area the taxpayer owns within a building being used, for the purpose of satisfying the '4% manner' test in section 43-145 of the Income Tax Assessment Act 1997 (ITAA 1997), to operate a hotel?", "Decision": "No. The area is not being used to operate a hotel because the area is an apartment for the purpose of section 43-145 of the ITAA 1997.", "Facts": "The taxpayer acquired a fully furnished accommodation area within a building that contains a large number of similar accommodation areas. About one third of the areas are permanently occupied by their respective owners while the remaining two thirds are owned by investors under a service agreement. The taxpayer acquired their area 'off the plan' and entered into the service agreement that required them to also acquire a complete furniture package with the area and to enter into a lease back arrangement with another unrelated entity to manage the building for the purpose of providing short-term accommodation for travellers. The nature, composition and standard of the building's accommodation areas are substantially the same. Each accommodation area is self-contained in the sense that it comprises: The building also comprises a number of common facilities including: The cafe/bar trades daily between the hours of 6 am and 10 pm. Reception and room services are also available during these times. Construction of the building began during the 1999-2000 income year.", "Reasons_for_Decision": "Summary: To the extent that is relevant here, Division 43 of the ITAA 1997 provides a deduction for certain capital expenditure incurred in respect of the construction of income producing buildings that are used to provide short term accommodation for travellers. In broad terms, a taxpayer's deduction relates to the construction expenditure area they own, lease or hold under certain quasi-ownership rights. The rate of deduction depends on, among other things, the date construction of the building began and the use of their construction expenditure area (section 43-25 of the ITAA 1997). For buildings that started to be constructed after 30 June 1997, a deduction at the rate of 4% (the 4% manner) is available if, broadly speaking, the area: The third circumstance of use is not relevant to the taxpayer's circumstances. The meanings of 'hotel building' and 'apartment building' are provided in paragraphs 43-95(1)(b) and 43-95(2)(b) respectively of the ITAA 1997. The meanings refer to the use of the building as described in time period 2 of Column 3 of the table in section 43-145 of the ITAA 1997. That use refers to the area being a hotel (or similar) or an apartment (or similar). Whether an area is used to operate a hotel or is an apartment in respect of buildings that started to be constructed after 30 June 1997 is a question of fact that needs to be decided on a case by case basis. In considering that question, however, the inherent nature, features and characteristics of the accommodation area, in preference simply to its mode of operation, are influential. A significant feature of a hotel is its sole occupancy rooms where the essence of what is provided is the accommodation area itself (bedroom). This remains the case even though other incidental facilities or services, such as a bar fridge or tea/coffee making, is provided. A full range of other facilities or services, such as laundry or meals, may also be available but, generally, these are not contained within the accommodation area itself. These facilities or services may be provided from other common areas within the building or from external sources. They may also incur a charge separate from the accommodation charge. Another feature of a hotel is the significant provision of common food and beverage (particularly alcohol) facilities and other forms of entertainment. On the other hand, a significant feature of an apartment is the multiple facilities and services that are contained within the accommodation area itself (apartment). That is, the accommodation area is often equipped with its own kitchen, laundry, dining and living area in addition to the bedroom. That is not to say that other facilities and services are not provided commonly. This type of accommodation is also often owned under strata-title or other similar arrangements. It is recognized that in more recent times, the facilities and services offered collectively by hotels and apartments have progressively become less distinguishable. However, this similarity goes to the manner in which the respective establishments are operated rather than to the inherent character of their respective accommodation areas. The respective accommodation areas have remained substantially the same. This means that an apartment will always be treated as an apartment if it possesses the inherent character of an apartment, even though the broader accommodation facility of which it is a part provides substantially similar facilities and services as a hotel. This approach is necessary to preserve the distinction the law intentionally drew between a hotel and an apartment at the time that law was introduced. In the present case, the inherent character of the taxpayer's area is an apartment because it comprises all of the substantial accommodation facilities and services of an apartment. Because the taxpayer's area is an apartment and the taxpayer does not satisfy the additional test of owning, leasing or holding nine other apartments in the same building, the taxpayer's area is not being used in the 4% manner as prescribed in section 43-145 of the ITAA 1997 (see also Rental Properties (NAT 1729)).", "Date_of_Decision": "30 May 2003", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-25 paragraph 43-95(1)(b) paragraph 43-95(2)(b) section 43-145", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/77 (withdrawn)", "Subject_References": "Building depreciation Buildings Capital Allowances Centre of Expertise Construction expenditure area Traveller accommodation construction expenses Accommodation industry", "Case_References": "", "Other_References": "Rental Properties (NAT 1729)", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003513", "Unmatched_Content": "Amended to improve clarity and update references | Keywords Building depreciation Buildings Capital Allowances Centre of Expertise Construction expenditure area Traveller accommodation construction expenses Accommodation industry"}
{"ATO_ID_Number": "ATO ID 2003/600", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: deductibility of expenditure on capital works constructed at a private residence", "Issue": "Can a taxpayer claim a deduction under section 43-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for construction expenditure incurred on capital works, undertaken at their private home, to provide storage and parking for assets used in a business operated from the site?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 43-10 of the ITAA 1997 for construction expenditure incurred on capital works begun after 30 June 1997 which are used in a deductible way at the rate of 2.5% per annum.", "Facts": "A taxpayer owns and lives in a residential home. The taxpayer also operates a business out of that property. In the 2001-02 income year a shed was constructed to store materials, tools and works-in-progress, and an area was excavated and a retaining wall constructed to enable vehicles used exclusively in the business to be parked onsite. Given the nature of the taxpayer's business there is no other business premises, as most work is undertaken at building sites. Neither the shed nor the parking space created by the excavation and retaining wall will be used for a private purpose. A separate private carpark and driveway also exists. Both of the capital works are situated away from the private residence.", "Reasons_for_Decision": "Summary: Division 43 of the ITAA 1997 provides a deduction for capital works attributable to a construction expenditure area that is owned or leased by the taxpayer and used during the income year for the purposes of producing assessable income. Eligible capital works include buildings begun in Australia after 21 August 1979, and structural improvements, such as sealed driveways, sealed car parks and retaining walls, begun after 26 February 1992 (paragraph 43-20(1)(a) and subsection 43-20(2) of the ITAA 1997). Earthworks that are not integral to the installation or construction of a structure are excluded from the definition of capital works covered by this Division (paragraph 43-20(4)(a) of the ITAA 1997). Construction expenditure is capital expenditure incurred in respect of the construction of capital works. Although certain land preparation costs are excluded (subsection 43-70(2) of the ITAA 1997), the cost of excavating for the construction of a retaining wall is included in the construction expenditure. However, the value of an owner/builder's contribution to the capital works does not form part of construction expenditure (Taxation Ruling TR 97/25). The table in section 43-140 of the ITAA 1997 provides, that to be used in a deductible way, capital works which began after 30 June 1997 must be used for the purposes of producing assessable income. The shed will be used to store works-in-progress, spare materials and tools and the retaining wall is necessary to create parking space for vehicles used in the business to produce assessable income. However, if any part of the capital works is used mainly for, or in association with, residential accommodation, including where it constitutes the whole or part of an individual's home, section 43-170 of the ITAA 1997 provides that such capital works are not taken to be used for the purpose of producing assessable income. Taxation Determination TD 93/21 states that a taxpayer is only entitled to a deduction for improvements at their residential home if the improvements relate to an area which is separate and distinct from the home and set aside for carrying on their business. As the garage and the retaining wall are constructed for the sole purpose of carrying on a business and are positioned away from the residential home in their own self contained areas, these capital works are considered to be separate and distinct areas from the residential home. Section 43-170 of the ITAA 1997 does not apply to the capital works. They satisfy the requirement to be used in a deductible way under section 43-140 of the ITAA 1997. Subsection 43-25(1) of the ITAA 1997 provides that the rate of deduction for capital works which began after 26 February 1992 is 2.5% per annum. However, a deduction is not allowed prior to the completion of the capital works (section 43-30 of the ITAA 1997). The deduction in the first year must be reduced by the number of days in the income year that had passed before the construction was completed. Therefore, the taxpayer is entitled to a deduction for construction expenditure incurred on capital works begun after 30 June 1997 under section 43-10 of the ITAA 1997.", "Date_of_Decision": "12 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 paragraph 43-20(1)(a) subsection 43-20(2) paragraph 43-20(4)(a) subsection 43-25(1) section 43-30 subsection 43-70(2) section 43-140 section 43-170", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25 | Taxation Determination TD 93/21", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Construction expenditure area Pool of construction expenditure", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003600", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 Taxation Determination TD 93/21 | Keywords Building depreciation Construction expenditure area Pool of construction expenditure"}
{"ATO_ID_Number": "ATO ID 2003/706", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: construction of driveway at private residence", "Issue": "Can a taxpayer claim a deduction under section 43-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for construction expenditure incurred in constructing a driveway, at their private residence, which is only used partially for work vehicles?", "Decision": "No. The taxpayer can not claim a deduction under section 43-10 of the ITAA 1997. In order to claim a deduction under Division 43 of the ITAA 1997 the capital works must be used in a deductible way (that is, to produce assessable income) under section 43-140. If any part of the capital works constitutes part of the home, section 43-170 provides that such capital works are taken not to be used for the purpose of producing assessable income.", "Facts": "A taxpayer is contracted to a company to drive their heavy duty trucks, prime movers, etc. The taxpayer parks the vehicles at their own residence. Expenditure was incurred in reinforcing the driveway to accommodate the weight of the vehicles. The company did not contribute to paying the costs incurred in the construction of the driveway. Prior to the construction of the reinforced driveway, the driveway was gravel which was unusable by the heavy trucks during the winter months due to water and mud and the weight of the vehicles causing bogging. Without the driveway the trucks were left on the street leaving them open to vandalism, theft and council penalties. The only driveway at the residence runs from the single entrance to the property to the private garage alongside the house.", "Reasons_for_Decision": "Summary: Division 43 of the ITAA 1997 provides a deduction for capital works attributable to a construction expenditure area that is owned or leased by the taxpayer and used during the income year for the purposes of producing assessable income. Eligible capital works include buildings begun in Australia after 21 August 1979, and structural improvements, such as sealed driveways, sealed car parks and retaining walls, begun after 26 February 1992 (paragraph 43-20(1)(a) and subsection 43-20(2) of the ITAA 1997). The table in section 43-140 of the ITAA 1997 provides, that to be used in a deductible way, capital works which began after 30 June 1997 must be used for the purposes of producing assessable income. The driveway will be used to park vehicles used in the business to produce assessable income. However, if any part of the capital works is used mainly for, or in association with, residential accommodation, including where it constitutes the whole or part of an individual's home, section 43-170 of the ITAA 1997 provides that such capital works are not taken to be used for the purpose of producing assessable income. Taxation Determination TD 93/21 states that a taxpayer is only entitled to a deduction for improvements at their residential home if the improvements relate to an area which is separate and distinct from the home and set aside for carrying on their business. A driveway constructed at a taxpayer's private residence is normally considered to be part of the home. In this case, the driveway is not located away from the residential home and will be used partially for private vehicles. The driveway is not considered to be a separate and distinct area from the residential home which is set aside for the production of assessable income. Section 43-170 of the ITAA 1997 therefore applies to the capital works which provides that they are taken not to be used to produce assessable income. Therefore, no deduction is allowed under Division 43 of the ITAA 1997 for the construction expenditure incurred on these capital works as they do not satisfy the requirement to be used in a deductible way under section 43-140 of the ITAA 1997.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 paragraph 43-20(1)(a) subsection 43-20(2) section 43-140 section 43-170", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25 | Taxation Determination TD 93/21 | Taxation Determination TD 92/190", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/600 | ATO ID 2003/490", "Subject_References": "Building depreciation Construction expenditure area Pool of construction expenditure Structural improvement expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003706", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 Taxation Determination TD 93/21 Taxation Determination TD 92/190 | Keywords Building depreciation Construction expenditure area Pool of construction expenditure Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2003/912", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Capital Works - not used - taken to be used for a particular purpose", "Issue": "In order to apply section 43-140 of the Income Tax Assessment 1997 (ITAA 1997), does a taxpayer use a building for the purposes of producing assessable income if no income producing activities occur in that building during part of a year of income?", "Decision": "Yes. Because the building was not used for any other purpose, the taxpayer intended to use it for the purpose of producing assessable income and had maintained it ready for that use, section 43-160 of the ITAA 1997 provides that it is taken to be used for the purposes of producing assessable income.", "Facts": "The taxpayer is a company that carries on a business which operates subject to government certifications and licences regulating its activities. The taxpayer constructed a building from which to carry out its business operations. The construction of the building commenced in the 2001 income year and was completed 12 months later. As soon as the building was completed, it was used for the taxpayer's business operations. The building was certified for use as intended by the taxpayer from its completion. However, shortly after the building commenced to be used in the taxpayer's business, changes in the taxpayer's business environment resulted in the taxpayer being legally unable to operate its business from the building for several months. During this period, the building was not used for any purpose or in any manner, but was available for the taxpayer's immediate use as part of its business operations, once the legal impediment to the continuation of its business operations was removed. The building has been fully utilised in the taxpayer's business operations since June 2003.", "Reasons_for_Decision": "Summary: Section 43-10 of the ITAA 1997 provides that a deduction for capital works is available subject to several requirements. One pre-requisite for its application is that the capital works are used in a deductible way, as set out in Table 43-140 of section 43-140 of the ITAA 1997. The building is capital works as specified in subsection 43-20(1) of the ITAA 1997. Capital works begun after 30 June 1997 are used in a deductible way in an income year if they are used for the purpose of producing assessable income (subsection 43-140(1) of the ITAA 1997). Section 43-160 of the ITAA 1997 provides that a part of your capital works is taken to be used for a particular purpose if: Prior to the period when it could not be used, the building had already been used by the taxpayer in its business operations, and its operational capacity was being preserved. Therefore, the building was 'maintained ready for use' for the purpose of producing assessable income. Even though the building was not used for a period of time, it was intended to be used, and was actually used again later for the purpose of producing assessable income. Therefore the taxpayer's use, or intended use, of the building meets the requirements of paragraphs (b) and (c) of section 43-160 of the ITAA 1997.", "Date_of_Decision": "25 September 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 subsection 43-20(1) subsection 43-140(1) section 43-160", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003912", "Unmatched_Content": "Keywords Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2010/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: destruction and balancing deduction - using 'your area' immediately before destruction of capital works", "Issue": "Is the use requirement in paragraph 43-40(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) satisfied in respect of a vacant house that was demolished, if before it was vacated, the house was used for private accommodation for a period since it was last used for the purpose of producing assessable income?", "Decision": "No. The use requirement under paragraph 43-40(1)(c) of the ITAA 1997 is not satisfied, in respect of a vacant house that was demolished, if before it was vacated, the house was used for private accommodation for a period since it was last used for the purpose of producing assessable income. A deduction is not available under section 43-40 of the ITAA 1997 for the undeducted construction expenditure for the house when the house is demolished.", "Facts": "The taxpayer acquired a house in mid 2004. It was listed with a property manager for holiday letting and was used for short term rentals throughout the period it was owned by the taxpayer. The house was capital works as set out under subsection 43-20(1) of the ITAA 1997 and was the taxpayer's 'your area' for the purposes of subsection 43-115(1) of the ITAA 1997. The taxpayer had claimed a deduction under subsection 43-10(1) of the ITAA 1997 in respect of the house. At the date of its destruction, there was an amount of undeducted construction expenditure for the house as worked out under Subdivision 43-G of the ITAA 1997. In 2005, the taxpayer engaged the services of an architect to redevelop the site on which the house was located. The house was not let in the last few months before its destruction although it remained listed with a property manager. During this period, the taxpayer temporarily resided in the house on several occasions for weeks at a time in order to hold meetings with the architect, builder, and interior decorator. Several weeks before the house was demolished, the taxpayer sold their main residence and moved into the house. During this period, the taxpayer cleared it for demolition. The taxpayer moved out of the house just prior to its demolition.", "Reasons_for_Decision": "Summary: Broadly, subsection 43-40(1) of the ITAA 1997 provides that you can deduct an amount if all or a part of your area is destroyed in an income year. However the deduction is subject to meeting the following conditions set out in paragraphs 43-40(1)(a) to 43-40(1)(c) of the ITAA 1997: As the requirements of paragraph (a) and (b) have been satisfied the issue to be considered is whether the taxpayer has satisfied paragraph 43-40(1)(c) of the ITAA 1997. Paragraph 43-40(1)(c) of the ITAA 1997 has two limbs. The first limb is satisfied if 'your area' was used immediately before the destruction in the way that applies to it under Table 43-140 of the ITAA 1997 (the required use for a house constructed in the relevant periods is use 'for the purpose of producing assessable income': see 'Time period 2' in Table 43-140). If not, the second limb allows a deduction if no entity has used the area for any purpose since it was last used by the taxpayer for the purpose of producing assessable income. Therefore, the requirements of paragraph 43-40(1)(c) of the ITAA 1997 establish that the threshold condition that must be satisfied before a deduction is allowed is that the last use of the capital works was for the required purpose (in this case, the purpose of producing assessable income). In considering if the requirements of paragraph 43-40(1)(c) of the ITAA 1997 are satisfied the meaning of 'immediately before the destruction' must be considered. The provisions of section 43-160 of the ITAA 1997 are also relevant in this consideration. That section provides that a part of your area is taken to be used, for use or available for use for a particular purpose at a time if, at that time: The expression 'immediately before' was considered by Hill, Finn and Sackville JJ in Macquarie Health Corporation Ltd & Ors v. FC of T (1999) 43 ATR 650; 2000 ATC 4015. Their Honours stated at ATR 673 and ATC 4035-4036 that: The term \"immediately before\", like other expressions incorporated into statutes, must take its meaning from the statutory context: R v Justices of Berkshire (1878) 4 QBD 469 at 471, per Cockburn CJ; Loizos v Carlton and United Breweries Ltd (1994) 117 FLR 135 at 137-139 (S Ct NT, CA), per Kearney J. In Litster v Forth Dry Dock and Engineering Co Ltd (In Receivership ) [1990] 1 AC 546, Lord Oliver observed (at 567) that \"[t]he expression 'immediately before' is one which takes its meaning from its context, but in its ordinary signification it involves the notion that there is, between two relevant events, no intervening space, lapse of time or event of any significance. If, for instance the question is whether a deceased person was seized of property immediately before his death, attention is focused upon the very instant at which the death occurred.\" In Litster itself, his Lordship considered that the expression \"employed immediately before the transfer\" required the Court to consider whether the contract of employment was subsisting at the moment of transfer: at 575. In other cases, of which Loizos gives examples (at 138-139), the expression has been construed as encompassing a relatively short interval of time between the two identified events. In the context of paragraph 43-40(1)(c) of the ITAA 1997, immediately before refers to a relatively short period of time between the last use of your area and its destruction. In this case, the house was not let in the last few months before its destruction. This and the activities undertaken in preparation for its destruction as well as the taking up of residence prior to destruction show that the taxpayer's use, or intended use, of the house for the purpose of producing assessable income had been abandoned in the period leading up to the destruction. Therefore, the house was not used for the purpose of producing assessable income immediately before the destruction. For the same reasons, the house cannot, under section 43-160 of the ITAA 1997, be taken to be used for the purpose of producing assessable income immediately before its destruction. Accordingly, the first limb of paragraph 43-40(1)(c) of the ITAA 1997 is not satisfied. As the house was not used for the purpose of producing assessable income immediately before the destruction, paragraph 43-40(1)(c) of the ITAA 1997 can only be satisfied if no entity has used the house for any purpose since it was last used by the taxpayer for the purpose of producing assessable income (that is, the last use of the house must be for the purpose of producing assessable income). In this case the house was last used to provide private accommodation for the taxpayer. Therefore, the second limb of 43-40(1)(c) of the ITAA 1997 is also not satisfied. Accordingly, a deduction is not available under section 43-40 of the ITAA 1997 for the undeducted construction expenditure following its demolition.", "Date_of_Decision": "5 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-10(1) subsection 43-20(1) section 43-40 subsection 43-40(1) paragraph 43-40(1)(c) paragraph 43-40(1)(a) paragraph 43-40(1)(b) section 43-160 subsection 43-115(1) Table 43-140 Subdivision 43-G Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Construction expenditure area", "Case_References": "Macquarie Health Corporation Ltd &amp Ors V FC of T 2000 ATC 4015 43 ATR 650", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201035", "Unmatched_Content": "Keywords Deductions & expenses Construction expenditure area"}
{"ATO_ID_Number": "ATO ID 2010/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: destruction - deduction and balancing calculations - reasonable reduction of balancing deduction", "Issue": "Is it reasonable to reduce an amount that would otherwise be deductible for undeducted construction expenditure under step 2 of section 43-250 of the Income Tax Assessment Act 1997 (ITAA 1997) by an amount based upon the period of time the capital works were not used, by any owner, in the way set out in Table 43-140 (current year use) of the ITAA 1997?", "Decision": "Yes. It is reasonable to reduce an amount that would otherwise be deductible for undeducted construction expenditure under step 2 of section 43-250 of the ITAA 1997 by an amount based upon the period of time the capital works were not used, by any owner, in the way set out in Table 43-140 of the ITAA 1997.", "Facts": "The taxpayer acquired a building during the 2003-04 income year. The building was not used for the purpose of producing assessable income prior to its acquisition by the taxpayer. The taxpayer moved into the property and used it as their residence. During the 2004-05 income year the taxpayer decided to rent the building and listed it with a real estate agent. The taxpayer continued to reside in the building until the commencement of a tenancy agreement that was entered into during the 2005-06 income year. Soon after the agreement commenced, the tenant, with the approval of the taxpayer, undertook demolition and renovation work to the property. As part of this process, structural features of the building were demolished. Minor electrical and plumbing work was also carried out at this time. The taxpayer did not receive and was not entitled to receive any amount for the partial destruction of the property. The building was capital works as set out under subsection 43-20(1) of the ITAA 1997 and was the taxpayer's 'your area' for the purposes of subsection 43-115(1) of the ITAA 1997. There was an amount of undeducted construction expenditure for the building when part of it was destroyed. The taxpayer satisfied the requirements to allow a deduction for the undeducted construction expenditure set out in paragraphs 43-40(1)(a) to 43-40(1)(c) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Broadly, subsection 43-40(1) of the ITAA 1997 provides that you can deduct an amount if all or a part of your area is destroyed in an income year and that the amount of the deduction is to be calculated under section 43-250 of the ITAA 1997. The method statement in section 43-250 of the ITAA 1997 contains two steps. Step 1 is to calculate the amount (if any) by which the undeducted construction expenditure for the part of the taxpayer's capital works that were destroyed exceeds the amounts the taxpayer has received or is entitled to receive for the destruction of that part. The taxpayer did not receive and was not entitled to receive an amount for the partial destruction of the capital works. Accordingly, the Step 1 amount will be the undeducted construction expenditure in respect of the part of the capital works that was destroyed. Step 2 of the method statement reduces the amount of any deduction that may otherwise be available if, among other things, the taxpayer or another person was not allowed a deduction for the capital works under Division 43 of the ITAA 1997 (see paragraph (b) in Step 2 of the method statement in section 43-250 of the ITAA 1997). The reduction under Step 2 must be reasonable. A deduction is not allowable under Division 43 of the ITAA 1997 where the capital works is not used in the way set out in Table 43-140 (current year use) of the ITAA 1997 (paragraph 43-10(2)(c) of the ITAA 1997). The building was not used for the purpose of producing assessable income prior to its acquisition by the taxpayer. The taxpayer used the building as their residence until the commencement of the tenancy agreement. The building was used to produce assessable income (the required use as set out in Table 43-140 (Current year use)) from that time. The previous owners and the taxpayer were therefore not allowed a deduction under Division 43 of the ITAA 1997 in respect of the part of the capital works that was destroyed. Accordingly, Step 2 of the Method statement contained in section 43-250 of the ITAA 1997 requires the taxpayer to reduce the undeducted construction expenditure in Step 1 by a reasonable amount. Section 43-250 of the ITAA 1997 was amended by the Taxation Laws Amendment Act (No. 1) 1998 in respect to Step 2 of the Method statement to the effect that 'the reduction under this step must be reasonable'. In discussing this amendment, the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 1997 explains that section 43-250 of the ITAA 1997 was being amended to: Ensure that the amount of the balancing deduction is reduced to take account of any period during which the capital works were: Accordingly, it is reasonable to reduce an amount that would otherwise be deductible for undeducted construction expenditure under Step 2 of section 43-250 of the ITAA 1997 by an amount based upon the period of time the capital works were not used, by any owner, in the way set out in Table 43-140 of the ITAA 1997.", "Date_of_Decision": "11 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-20(1) subsection 43-40(1) paragraph 43-40(1)(c) paragraph 43-40(1)(a) paragraph 43-40(1)(b) section 43-160 subsection 43-115(1) Table 43-140 subsection 43-40(2) section 43-250 Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Construction expenditure area Deductions & expenses", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 1997 Taxation Laws Amendment Act (No. 1) 1998", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201036", "Unmatched_Content": "Keywords Capital expenditure Construction expenditure area Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2004/860", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: balancing deduction - a right to receive an amount - future insurance proceeds", "Issue": "Where the insured capital works were destroyed, did the owner have a right to receive an amount for the destruction of works, as described in section 43-250 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. For the purposes of applying section 43-250 of the ITAA 1997, the taxpayer had a right to receive an amount for the destruction of works, being a right to insurance proceeds.", "Facts": "The taxpayer purchased a residential rental property in 2001. They carried out extensive renovations during a period of three months from the purchase date to the time the property was first rented out. Capital works deductions were claimed for the renovation expenditure under section 43-10 of the ITAA 1997. The taxpayer had entered into a contract of insurance over the property. In the income year ended 30 June 2003, the property was completely destroyed as a result of an arson attack. Fire was a specified event in the insurance policy, but the fact of arson meant that payment of a claim by the insurance company was not certain. At the time of preparing the income tax return for that income year, the taxpayer had not received any amount of insurance proceeds, and the insurer had not determined any amount due to the taxpayer. At that time it was expected that, if the taxpayer received any insurance payout, it would not be until the income year ended 30 June 2005. The taxpayer's return was lodged prior to determination of the payout.", "Reasons_for_Decision": "Summary: Section 43-40 of the ITAA 1997 allows a taxpayer to deduct an amount for the destruction of capital works (called a balancing deduction) if all or part of their capital works are destroyed in an income year and: The balancing deduction under section 43-40 of the ITAA 1997 is allowed in the income year in which the destruction occurs and is calculated under section 43-250 of the ITAA 1997. On the facts in this case, the deduction is equal to the undeducted construction expenditure at the date of the destruction of the capital works less the amounts the taxpayer received or has a right to receive for the destruction of the capital works. The amounts the taxpayer has received or has a right to receive for the destruction of the capital works includes an amount received under an insurance policy for the destruction of the capital works (section 43-255 of the ITAA 1997). The taxpayer's insurance policy was a contract of insurance. In Medical Defence Union Ltd v Department of Trade (1979) 2 All ER 421 Megarry V-C held that a contract of insurance provides the insured with the right to money or money's worth on the occurrence of a specified event. During the income year ended 30 June 2003, under the taxpayer's contract of insurance, a specified event occurred. By virtue of the contract between the two parties, a right to receive an amount under the insurance policy arose at the time the capital works were destroyed by fire, being the specified event. While the exact amount of the insurance proceeds was not known at that time, there was an amount that the taxpayer had a right to receive, for the purposes of the calculation needed to be made in section 43-250 of the ITAA 1997. The amount of the right could not be correctly quantified until the taxpayer either received insurance proceeds in fulfilment of the insurance contract entitlements or was notified that no amount would be paid. In preparing a tax return for the year during which the fire occurred, the taxpayer needed to make an estimate of the likely payout and include it in calculating the amount of deduction under section 43-40. If necessary, an amendment could later be made to the tax return for the income year ended 30 June 2003 where the proceeds did not equal the amount taken into account as the amount representing the right received for destruction of capital works.", "Date_of_Decision": "17 September 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-10 section 43-40 section 43-250 section 43-255", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/861 | ATO ID 2004/862", "Subject_References": "Building depreciation Destruction of assets Insurance", "Case_References": "Medical Defence Union Ltd v Department of Trade (1979) 2 All ER 421", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004860", "Unmatched_Content": "Keywords Building depreciation Destruction of assets Insurance"}
{"ATO_ID_Number": "ATO ID 2004/861", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: balancing deduction - partly deductible capital works - insurance received - reasonable apportionment of insurance proceeds", "Issue": "If capital works are destroyed and Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) had applied to only part of the capital works, in working out the deduction allowable under section 43-40 and set out in section 43-260, is it reasonable to apportion the insurance proceeds receivable by the taxpayer by taking into account the relative replacement costs of the deductible and non-deductible capital works?", "Decision": "Yes. A reasonable approach is an apportionment of the insurance proceeds based on the relative replacement costs of the capital works to which Division 43 of the ITAA 1997 does apply, and those to which the Division does not apply.", "Facts": "The taxpayer purchased a residential rental property and carried out extensive renovations to the house. The house and the renovations were capital works under Division 43 of the ITAA 1997. Because of its construction date, the original building was not a capital work to which Division 43 of the ITAA 1997 applied. However, the taxpayer's improvements were carried out at a later time such that the resultant improvements were deductible capital works. The house (including the renovations) was completely destroyed by fire and a balancing deduction was allowable under section 43-40 of the ITAA 1997 in respect of the renovations. The taxpayer expected to receive a lump sum insurance payout in respect of the building, including the renovations. The insurance policy had been entered into on a replacements basis.", "Reasons_for_Decision": "Summary: Section 43-40 of the ITAA 1997 allows a taxpayer to deduct an amount for the destruction of capital works (called a balancing deduction) if all or part of their capital works are destroyed in an income year and they meet certain requirements for the deduction. On the facts of this case, the amount of the balancing deduction the taxpayer can deduct under section 43-40 of the ITAA 1997 is equal to the undeducted construction expenditure at the date of the destruction of the capital works, less the amounts the taxpayer has received or has a right to receive for the destruction of the capital works. If an amount is received or receivable by a taxpayer in respect of the destruction of both: the taxpayer must make a reasonable apportionment of the amount (section 43-260 of the ITAA 1997). What is reasonable will often depend on the particular circumstances. As stated by Windeyer J in Giris Pty Ltd v. Federal Commissioner of Taxation (1969) 119 CLR 365; 69 ATC 4015; (1969) 1 ATR 3, there are no absolute, precise or objectively determinable tests of what is reasonable or unreasonable. Court decisions illustrate that reasonableness should be viewed objectively. The test looks at whether the actions of the person would be the same as the actions of a reasonable person in the same set of circumstances. It is reasonable, in this context, to apportion the insurance proceeds based on the relative costs of replacing the deductible and non-deductible capital works. This means that the proportion of the insurance proceeds that is used in calculating the balancing deduction is the proportion of the total cost of replacing the destroyed building (as it existed at the time of destruction) which relates to replacing the renovations. As required by subsection 262A(1D) of the Income Tax Assessment Act 1936, the taxpayer may need to show at a later time how the apportionment was worked out.", "Date_of_Decision": "17 September 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-40 section 43-260", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/860 | ATO ID 2004/862", "Subject_References": "Construction expenditure area Pool of construction expenditure Insurance", "Case_References": "Giris Pty Ltd v. Federal Commissioner of Taxation (1969) 119 CLR 365 69 ATC 4015 (1969) 1 ATR 3", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004861", "Unmatched_Content": "Keywords Construction expenditure area Pool of construction expenditure Insurance"}
{"ATO_ID_Number": "ATO ID 2004/862", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: balancing deduction - treatment of insurance proceeds for destroyed capital works where proceeds received in later year", "Issue": "Under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997), if a taxpayer receives insurance proceeds in respect of the destruction of capital works that occurred in a previous year, can the taxpayer choose to offset the proceeds against the construction cost of the replacement capital works?", "Decision": "No. Under Division 43 of the ITAA 1997, section 43-250 of the ITAA 1997 provides that amounts received for the destruction of capital works are taken into account in working out any balancing deduction for those destroyed capital works. This does not change if the proceeds are received in a later year and applied towards the construction of replacement capital works.", "Facts": "The taxpayer purchased a residential rental property in 2001. They carried out extensive renovations during a period of three months from the purchase date to the time the property was first rented out. Capital works deductions were claimed for the renovation expenditure under section 43-10 of the ITAA 1997. The taxpayer had entered into a contract of insurance over the property. In the income year ended 30 June 2003, the property was completely destroyed as a result of an arson attack. Fire was a specified event in the insurance policy, but the fact of arson meant that payment of a claim by the insurance company was not certain. At the time of preparing the income tax return for that income year, the taxpayer had not received any amount of insurance proceeds and the insurer had not determined any amount due to the taxpayer. At that time it was expected that, if the taxpayer received any insurance payout, it would not be until the income year ended 30 June 2005. The taxpayer's return was lodged prior to determination of the payout. The taxpayer intended to use any insurance proceeds received for the destruction of the original capital works to build new capital works on the site.", "Reasons_for_Decision": "Summary: Section 43-40 of the ITAA 1997 allows a deduction up to the amount of undeducted construction expenditure at the time of destruction of capital works. This amount is calculated as set out in the formula in section 43-250 of the ITAA 1997, and is reduced by the amount of any insurance proceeds received in respect of the destruction of those capital works, or any right to receive such proceeds. If the proceeds are received at a later time, under section 43-250, this amount reduces the deduction for the destroyed capital works. The taxpayer may need to adjust the amount previously claimed as calculated under section 43-250. The receipt of the insurance proceeds in a year after destruction of the capital works is in respect of the original capital works. The subsequent expenditure of those proceeds is in respect of the new capital works. Because section 43-250 of the ITAA applies, there is no basis in Division 43 of the ITAA 1997 on which the taxpayer can reduce a pool of construction expenditure for replacement capital works, by any portion of the insurance proceeds they received for the destruction of the original capital works, even though the insurance proceeds were used to finance the construction of the replacement capital works.", "Date_of_Decision": "17 September 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-10 section 43-40 section 43-250", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/860 | ATO ID 2004/861 | ATO ID 2003/1086", "Subject_References": "Capital expenditure Construction expenditure area Destruction of assets Insurance Pool of construction expenditure", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004862", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Capital expenditure Construction expenditure area Destruction of assets Insurance Pool of construction expenditure"}
{"ATO_ID_Number": "ATO ID 2003/786", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: destruction of capital works on leased premises", "Issue": "Can a lessee claim a deduction under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) for an amount of undeducted construction expenditure for capital works which were demolished at the end of the lease to restore the premises to the condition they were in at the beginning of the lease?", "Decision": "Yes. A lessee can claim a deduction (balancing deduction) calculated under section 43-250 of the ITAA 1997 at the time the capital works are destroyed if the conditions in section 43-40 of the ITAA 1997 are met.", "Facts": "A partnership operated a shop from leased premises to produce assessable income. Capital expenditure was incurred after 26 February 1992 to fit out the shop. A deduction under section 43-10 of the ITAA 1997 was available for the construction expenditure on the capital works represented by the fit out. The premises were leased continuously from the time the construction commenced until the fit out was demolished and the lease was terminated. The fit out was demolished in order to return the premises to its original state as required under the lease agreement.", "Reasons_for_Decision": "Summary: Section 43-40 of the ITAA 1997 provides for the deduction of an amount if all or part of 'your area' is destroyed in an income year and: For a lessee who has incurred construction expenditure, 'your area' is the part of the construction expenditure area to which that expenditure is attributed that has been leased continuously since the construction of the capital works was completed (section 43-120 of the ITAA 1997). A deduction was available to the lessee under Division 43 of the ITAA 1997 for the construction expenditure incurred in respect of the fit out of the shop from the time the construction was completed as it was used in a deductible way (that is, to produce assessable income; section 43-140 of the ITAA 1997). The area was used continuously in a deductible way until the fit out was demolished and the lease was terminated. This satisfies the requirements of (a) and (c) above. Paragraph 18 of Taxation Ruling TR97/25 states that section 43-40 of the ITAA 1997 applies both to the voluntary and involuntary destruction of capital works. The deliberate destruction of capital works does not affect the entitlement to the balancing deduction. At the time the capital works were demolished and the lease was terminated, the construction expenditure had not been fully deducted. The amount of undeducted construction expenditure for capital works incurred after 26 February 1992 is calculated under sections 43-230 and 43-235 of the ITAA 1997. Generally this amount will be the original construction expenditure less any amounts previously claimed, or able to be claimed had the capital works been used wholly in a deductible way. The balancing deduction is allowed in the income year in which the destruction occurs and is calculated under section 43-250 of the ITAA 1997. Generally, the balancing deduction is equal to the amount of undeducted construction expenditure less any insurance and salvage receipts and adjustments arising from using the area for a non-taxable purpose.", "Date_of_Decision": "17 July 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 section 43-40 section 43-120 section 43-140 section 43-230 section 43-235 section 43-250", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Construction expenditure area Capital Allowances CoE", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003786", "Unmatched_Content": "Insert the word \"former\" when referring to Division 10C or 10D. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Deductions & expenses Construction expenditure area Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2003/833", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: demolition expenditure and deduction for destruction", "Issue": "Can demolition costs increase the amount of deduction allowable under section 43-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Demolition costs can increase the amount of deduction allowable under section 43-40 of the ITAA 1997, to the extent that these costs reduce the amounts received for disposing of the destroyed capital works, as set out in paragraph 43-255 (b) of the ITAA 1997.", "Facts": "The taxpayer was previously entitled to deduct an amount under Division 43 of the ITAA 1997 for a building that it owned. The taxpayer voluntarily demolished the building and was entitled to a deduction under section 43-40 of the ITAA 1997 for the destruction of capital works. The taxpayer incurred $5,000 demolition costs. The undeducted construction expenditure for the building at the date of its destruction was $50,000.", "Reasons_for_Decision": "Summary: Section 43-40 of the ITAA 1997 allows a taxpayer to immediately deduct, in the income year in which the capital works was destroyed, the amount of construction expenditure that has not yet been deducted, provided the conditions in section 43-40 are met. Expenditure on demolishing existing structures is not an amount that can contribute to a deduction for capital works under section 43-10 of the ITAA 1997. This is because it is not construction expenditure (paragraph 43-70(2)(b) of the ITAA 1997). However, such expenditure is taken into account in calculating a deduction under section 43-40 of the ITAA 1997. The amount deductible under section 43-40 of the ITAA 1997 is calculated using the method statement set out in section 43-250 of the ITAA 1997. Step 1 in section 43-250 provides that the balancing deduction amount is the undeducted construction expenditure for the destroyed capital works that exceeds the amounts you have received, or have a right to receive, for the destruction of the capital works. Section 43-255 of the ITAA 1997 provides that the amounts you have received or have a right to receive for the destruction of the capital works include: Thus, in calculating the balancing deduction under section 43-250 of the ITAA 1997, demolition expenditure acts to offset the lessening of deduction that occurs because of the fact that an amount has been received for disposing of the destroyed capital works. The following examples illustrate the operation of sections 43-250 and 43-255 of the ITAA 1997 where different amounts are received for disposing of destroyed capital works. Step 2 in section 43-250 of the ITAA 1997 does not apply. | Detailed Reasoning - Example 1: The taxpayer did not receive any amount for the destruction of the building, but did receive $6,000 salvage receipts for disposing of the destroyed building. The reduction amount calculated as being received for the destruction under section 43-255 of the ITAA 1997 is $1,000. This amount is calculated under paragraph 43-255(b) of the ITAA 1997 as the $6,000 received for disposing of the property less the $5,000 demolition costs. The balancing amount under section 43-250 of the ITAA 1997 is $49,000 ($50,000-$1,000). | Detailed Reasoning - Example 2: The taxpayer did not receive any amount for the destruction of the building, but did receive $4,000 salvage receipts for disposing of the destroyed building. The reduction amount calculated as being received for the destruction under section 43-255 of the ITAA 1997 is zero. This amount is calculated under paragraph 43-255(b) of the ITAA 1997 by reducing the $4,000 received amount to zero by the demolition expenditure of $5,000. The $1,000 excess of demolition expenditure over the amount received for disposing of the destroyed building is not deductible under Division 43 of the ITAA 1997. The balancing deduction amount under section 43-250 of the ITAA 1997 is $50,000 ($50,000-$0). There may be capital gains tax implications under Part 3-1 of the ITAA 1997 for the balance of the demolition expenditure incurred that is not taken into account in calculating the balancing deduction under section 43-250 of the ITAA 1997 (in this example, $1,000). | Detailed Reasoning - Example 3: The taxpayer did not receive any amount for the destruction of the building, and did not receive any amounts for disposing of the destroyed building. The reduction amount calculated as being received for the destruction under section 43-255 of the ITAA 1997 is zero. The $5,000 excess of demolition expenditure over the amount received for disposing of the destroyed building is not deductible under Division 43 of the ITAA 1997. The balancing deduction under section 43-250 of the ITAA 1997 is $50,000 ($50,000 - $0). There may be capital gains tax implications under Part 3-1 of the ITAA 1997 for the balance of the demolition expenditure incurred (in this example, $5,000). | Detailed Reasoning - Example 4: The taxpayer received an amount under an insurance policy of $1,000 for the destruction of the building and salvage receipts of $1,000 for disposing of the destroyed building. The amount received under paragraph 43-255(a) of the ITAA 1997 is $1,000. The amount received under paragraph 43-255(b) of the ITAA 1997 is zero. This latter amount is the $1,000 salvage receipts reduced by the $5,000 demolition expenditure amount. The $4,000 excess of demolition expenditure over the amount received for disposing of the destroyed building is not deductible under Division 43 of the ITAA 1997. The sum of the amounts in paragraphs 43-255(a) and (b) is $1,000. The balancing deduction under section 43-250 of the ITAA 1997 is 49,000 ($50,000 - $1,000). There may be capital gains tax implications under Part 3-1 of the ITAA 1997 for the balance of the demolition expenditure incurred (in this example, $4,000).", "Date_of_Decision": "29 August 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 section 43-40 paragraph 43-70(2)(b) section 43-250 paragraph 43-255(a) paragraph 43-255(b) section 43-255 Division 43 Part 3-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/703 | ATO ID 2002/514", "Subject_References": "Building depreciation Construction expenditure area Demolition expenses Destruction of assets", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003833", "Unmatched_Content": "Keywords Building depreciation Construction expenditure area Demolition expenses Destruction of assets"}
{"ATO_ID_Number": "ATO ID 2009/96", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works - reclaimed land - structural improvement", "Issue": "Is the reclaimed land behind a seawall a capital work that is a structural improvement; or an extension, alteration or improvement to a structural improvement under section 43-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The reclaimed land behind a seawall is not a capital work that is a structural improvement, or an extension, alteration or improvement to a structural improvement under section 43-20 of the ITAA 1997 because the reclaimed land does not constitute a building, construction or any kind of significant feature. It is improved land that can be used for many purposes.", "Facts": "The taxpayer operates a maritime port on land and in the immediately adjacent waters and channels. The taxpayer will undertake significant dredging works to deepen its shipping channel. In order to dispose of the resulting dredging waste and to increase the area of land to be employed in its future operations, the taxpayer will use that material dredged from the site of the shipping channel to reclaim submerged and semi-submerged land that is adjacent to its dry land. The taxpayer intends that buildings and transport facilities will eventually be constructed on the reclaimed land. To reclaim the submerged and semi-submerged land, the material dredged from the site of the shipping channel will be deposited on the sea bed in such a way that it will build up the area to the point of no longer being submerged, that is, it will exist as dry land. These works are to be controlled and overseen by engineers. The controlled placement of the various materials is critical to the permanent stability of the reclaimed land.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997 unless otherwise stated). Subsection 43-20(2) provides that Division 43 applies to 'capital works' that are structural improvements, or extensions, alterations or improvements to those structural improvements. Subsection 43-20(3) provides the following examples of structural improvements to which Division 43 applies: sealed roads, sealed driveways, sealed car parks, sealed airport runways, bridges, pipelines, lined road tunnels, retaining walls, fences, concrete or rock dams and artificial sports fields; and.... earthworks that are integral to the construction of a structural improvement... The term structural improvement is not defined and the explanatory memorandum to the Bill that introduced Division 43 does not provide any guidance. The term 'structural' connotes some form of building or construction. This indicates the requirement for the creation of a significant feature. The term 'improvement' is not necessarily to be understood as indicating a qualitative character in the sense that it makes something better in some sense or more valuable. It equally applies to describe an alteration in characteristics ( NT86/8971 and Commissioner of Taxation [1988] AATA 220; (1988) 19 ATR 3691; 88 ATC 694). Section 124ZFB of the Income Tax Assessment Act 1936 (ITAA 1936) was the predecessor to section 43-20 and the Commissioner is of the view that the former and current provision express the same idea. Section 1-3 states that the ITAA 1997 contains provisions of the ITAA 1936 in a rewritten form and that if the ITAA 1997 appears to have expressed the same idea in a different form of words in order to use a clearer or simpler style, the ideas are not to be taken to be different. The explanatory memorandum to Taxation Laws Amendment Bill No 3 of 1992 (No. 93 of 1992), which introduced section 124ZFB of the ITAA 1936, states (at paragraph 9.18) that earthworks which affect the general usefulness of the land are not treated as integral to the construction of a structure. The reclaimed land will be land of improved general usefulness and suitable for many purposes. As such, the reclaimed land will not constitute a building, construction or any kind of significant feature. Although the works that will culminate in the reclaimed land are strictly supervised and controlled to achieve a stable and enduring result, the works objectively result in improvement to land alone, that is, merely land on which any type of construction may occur in the future. Therefore, the reclaimed land does not constitute a structural improvement as contemplated for the general purposes of Division 43. Furthermore, the reclaimed land, because of its usefulness for many purposes, will not be integral to the subsequent construction of any structures built on that land. It follows that the reclaimed land behind a seawall does not constitute a structural improvement or an extension, alteration or improvement to a structural improvement under section 43-20.", "Date_of_Decision": "24 August 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 1-3 section 43-20 subsection 43-20(2) subsection 43-20(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/669 | ATO ID 2003/670", "Subject_References": "Capital Works Deductions Structural improvement expenses Capital Allowances CoE", "Case_References": "NT86/8971 and Commissioner of Taxation [1988] AATA 220 (1988) 19 ATR 3691 88 ATC 694", "Other_References": "Explanatory memorandum to Taxation Laws Amendment Bill (No. 3) 1992", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200996", "Unmatched_Content": "Keywords Capital Works Deductions Structural improvement expenses Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2004/137", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: application of Division 43 - pre-1979 building - relocation", "Issue": "Can the taxpayer deduct an amount under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) for the purchase price or original construction expenditure of a second hand house that is relocated to the taxpayer's land where it is subsequently altered and improved?", "Decision": "No. The taxpayer cannot deduct an amount under Division 43 of the ITAA 1997 for the purchase price or original construction expenditure of the house because it is a building that was begun in Australia before 21 August 1979 and Division 43 does not apply (paragraph 43-20(1)(a) of the ITAA 1997).", "Facts": "In the year ending 30 June 2003, the taxpayer was successful in a tender to purchase and remove a second hand timber house from a block of land. The amount paid by the taxpayer for the house was similar to the market value of second hand building materials. The house had been built prior to 21 August 1979. The taxpayer paid a lump sum to a licensed builder to remove and relocate the house onto the taxpayer's block of land, so that it could be used as residential rental property. The relocated house was subsequently placed on new stumps at the new location, with construction works then carried out to improve the house to a rentable state. The house was available for rent after all of the construction activity was completed.", "Reasons_for_Decision": "Summary: Division 43 of the ITAA 1997 allows a deduction for certain construction expenditure on some income producing capital works. A deduction under this Division is dependent, among other things, on whether there are capital works to which the Division applies and whether the capital works have construction expenditure, as defined in section 43-70 of the ITAA 1997. Subsection 43-20(1) states that Division 43 of the ITAA 1997 applies to capital works begun in Australian after 21 August 1979 and being a building, or an extension, alteration or improvement to a building. A deduction for capital works under Division 43 of the ITAA 1997 is based on the amount of construction expenditure, rather than the acquisition costs of a capital work. The relocation of the house does not alter the time when the capital works were constructed. The previously constructed building continues to exist, but has simply changed location. As the house was built before 21 August 1979, it is a building that is a capital work to which Division 43 of the ITAA 1997 does not apply. Therefore, the taxpayer cannot deduct an amount for the original construction expenditure in respect of the relocated building. As the taxpayer did not construct a new building, the purchase price, even though it was similar to the market value of second hand material, is not construction expenditure in respect of the relocated building, and therefore the taxpayer cannot deduct an amount for the purchase price of the relocated building. However, the alterations or improvements carried out on the building at the new location are separate capital works from the relocated building. An amount for the construction expenditure in respect of these new capital works may be deductible under Division 43 of the ITAA 1997.", "Date_of_Decision": "2 February 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-20(1) paragraph 43-20(1)(a) section 43-70 Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/136 (withdrawn) | ATO ID 2004/138 | ATO ID 2004/822", "Subject_References": "Buildings Removal & relocation expenses Capital expenditure Construction expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004137", "Unmatched_Content": "Keywords Buildings Removal & relocation expenses Capital expenditure Construction expenses"}
{"ATO_ID_Number": "ATO ID 2004/270", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: structural improvement - breakwater", "Issue": "Is the taxpayer's breakwater a qualifying structural improvement for the purpose of subsection 43-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The breakwater is a qualifying structural improvement for the purpose of subsection 43-20(2) of the ITAA 1997.", "Facts": "The taxpayer provides facilities and services within the water transport industry. On 30 June 1992, the taxpayer started constructing a breakwater to improve the effectiveness and efficiency of the facilities and services that it provides. The construction of the breakwater was completed on 30 June 1993. The breakwater was constructed of multiple layers of rock and was specially designed to take into account the particular facilities and services it provides, and the natural elements in which they are provided. The infrastructure attached to the breakwater included several wharves, sand pumping equipment, power lines, a road and a conveyor system. The breakwater was specially designed to take into account particular activities within the harbour.", "Reasons_for_Decision": "Summary: In Division 43 of the ITAA 1997, the term 'capital works' includes certain structural improvements (or extensions, alterations or improvements to those structural improvements) (subsection 43-20(2) of the ITAA 1997). The term 'structural improvement' is not defined, but some examples of structural improvements to which Division 43 of the ITAA 1997 applies are described in subsection 43-20(3) of the ITAA 1997. Subsection 43-20(4) of the ITAA 1997 also provides some examples of structural improvements to which Division 43 does not apply. The term 'structural' connotes some form of building or construction. The term 'improvement' is not necessarily a qualitative character in the sense that it makes something better in some sense or more valuable. It equally applies to describe an alteration in characteristics ( Case V108 88 ATC 694; AAT Case 4484 (1988) 19 ATR 3691). The design and construction of the breakwater is a complex and sophisticated engineering undertaking. It is not an earthwork of the type set out in subsection 43-20(4) of the ITAA 1997. The breakwater constitutes a structural improvement for the purposes of subsection 43-20(2) of the ITAA 1997 and is of the type described in subsection 43-20(3) of the ITAA 1997.", "Date_of_Decision": "5 March 2004", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-20(2) subsection 43-20(3) subsection 43-20(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/669 | ATO ID 2001/78 (withdrawn) | ATO ID 2004/269 | ATO ID 2004/271 | ATO ID 2007/142 | ATO ID 2007/160", "Subject_References": "Construction expenditure area Improvement to land Structural improvement expenses", "Case_References": "Case V108 88 ATC 694", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004270", "Unmatched_Content": "Keywords Construction expenditure area Improvement to land Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2003/669", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: shipping channel - structural improvement", "Issue": "Does a project undertaken to increase the commercial capacity of a shipping channel comprise qualifying structural improvements under subsection 43-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The significant features of the shipping channel created by the project are qualifying structural improvements for the purposes of subsection 43-20(2) of the ITAA 1997.", "Facts": "The taxpayer undertook a project that was principally designed to increase the commercial capacity of a shipping channel (the channel). The significant features of the channel include a 'main channel' (a body of water that connects points of the channel to each other), a 'berthing pocket' (a section of the channel immediately adjacent to a wharf that can accommodate fully laden marine craft berthed at low tide) and a 'swing basin' (a circular facility to allow marine craft to turn 180 degrees). The project was undertaken in sections with each section involving a particular aspect (for example: deepening, widening or extending) of each channel feature and was carried out over a considerable period of time.", "Reasons_for_Decision": "Summary: In Division 43 of the ITAA 1997, the term 'capital works' includes certain structural improvements (or extensions, alterations or improvements to those structural improvements)(subsection 43-20(2) of the ITAA 1997). The term 'structural improvement' is not defined but some examples of structural improvements to which Division 43 of the ITAA 1997 applies are described in subsection 43-20(3) of the ITAA 1997. Subsection 43-20(4) also provides some examples of structural improvements to which Division 43 does not apply. The term 'structural' connotes some form of building or construction. The term 'improvement' is not necessarily a qualitative character in the sense that it makes something better in some sense or more valuable. It equally applies to describe an alteration in characteristics ( Case V108 88 ATC 694; AAT Case 4484 (1988) 19 ATR 3691). While there were some differences in the reasons of the Full High Court in Dampier Mining Company Limited v. Federal Commissioner of Taxation (1981) 147 CLR 408; 81 ATC 4329; (1981) 11 ATR 928, it was generally agreed that dredging was an improvement to either the seabed or the waterway. The structural improvements under consideration here are distinguishable from the simple land filling addressed in ATO ID 2009/96 (see ATO ID 2003/670 on Capital Works: shipping channel - excluded earthworks) The project to deepen, widen and extend the various features of the channel is a complex and sophisticated engineering undertaking for both the design and implementation phases. It encompasses multiple disciplines including ship handling and maritime and environmental engineering. In these circumstances, the creation of the significant features of the channel constitute structural improvements for the purposes of 43-20(2) of the ITAA 1997 and are of the type described in subsection 43-20(3) of the ITAA 1997.", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 subsection 43-20(2) subsection 43-20(3) subsection 43-20(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/670 | ATO ID 2003/671 | ATO ID 2003/672 | ATO ID 2003/673 | ATO ID 2001/78 (withdrawn) | ATO ID 2009/96", "Subject_References": "Structural improvement expenses Uniform capital allowances system Capital Allowances CoE", "Case_References": "Dampier Mining Company Limited v. Federal Commissioner of Taxation (1981) 147 CLR 408 81 ATC 4329 (1981) 11 ATR 928", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003669", "Unmatched_Content": "Keywords Structural improvement expenses Uniform capital allowances system Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2003/670", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: shipping channel - excluded earthworks", "Issue": "Does a project to increase the commercial capacity of a shipping channel comprise excluded earthworks as described in subsection 43-20(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The significant features of the shipping channel created by the project are not excluded by subsection 43-20(4) of the ITAA 1997 from being qualifying structural improvements, because they are not earthworks within the meaning of that term.", "Facts": "The taxpayer undertook a project that was generally designed to increase the commercial capacity of a shipping channel (the channel). The significant features of the channel are a 'main channel' (a body of water that connects points of the channel to each other), a 'berthing pocket' (a section of the channel immediately adjacent to a wharf that can accommodate fully laden marine craft berthed at low tide) and a 'swing basin' (a circular facility to allow marine craft to turn 180 degrees). The project was undertaken in sections with each section involving a particular aspect (for example: deepening, widening or extending) of each channel feature and was carried out over a considerable period of time.", "Reasons_for_Decision": "Summary: In Division 43 of the ITAA 1997, the term 'capital works' includes certain structural improvements (or extensions, alterations or improvements to those structural improvements)(subsection 43-20(2) of the ITAA 1997). The significant channel features created by the project are structural improvements (see ATO ID 2003/669 on Capital Works: shipping channel- structural improvement). Division 43 does not apply, however, to structural improvements that are merely earthworks (subsection 43-20(4) of the ITAA 1997). The term 'earthworks' is not defined but generally connotes some form of excavation, movement and/or placement of earth. The illustrative examples described in paragraph 43-20(4)(a) of the ITAA 1997 indicate a nature and extent of work that is relatively simple and unsophisticated. The works undertaken in this case are not of that type. The project to deepen, widen, and extend the various features of the existing channel is a complex and sophisticated engineering undertaking for both the design and implementation phases. It encompasses multiple disciplines, including ship handling and maritime and environmental engineering. In these circumstances, the creation of the significant features, means that these capital works do not constitute earthworks for the purposes of paragraph 43-20(4)(a) of the ITAA 1997.", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-20(2) subsection 43-20(4) paragraph 43-20(4)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/669 | ATO ID 2003/671 | ATO ID 2003/672 | ATO ID 2003/673", "Subject_References": "Structural improvement expenses Capital allowances CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003670", "Unmatched_Content": "Keywords Structural improvement expenses Capital allowances CoE"}
{"ATO_ID_Number": "ATO ID 2003/821", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: bowling greens constructed from synthetic or artificial materials", "Issue": "Can a taxpayer deduct an amount under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) for capital expenditure incurred in the construction of a bowling green from synthetic or artificial materials?", "Decision": "Yes. The taxpayer can deduct an amount under Division 43 of the ITAA 1997 for capital expenditure incurred in the construction of a bowling green from synthetic or artificial materials.", "Facts": "The taxpayer is a sporting club and constructed a bowling green from synthetic or artificial materials.", "Reasons_for_Decision": "Summary: In order to deduct an amount for the bowling green constructed from synthetic or artificial materials under Division 43 of the ITAA 1997, the bowling green must first be a capital work to which Division 43 of the ITAA 1997 applies. Subsection 43-20(2) of the ITAA 1997 provides that Division 43 of the ITAA 1997 applies to capital works being structural improvements begun after 26 February 1992. Subsection 43-20(3) of the ITAA 1997 gives some examples of those structural improvements. In particular, paragraph 43-20(3)(a) of the ITAA 1997 lists sealed roads, sealed driveways, sealed car parks, sealed airport runways, bridges, pipelines, lined road tunnels, retaining walls, fences, concrete or rock dams and artificial sports fields as examples of structural improvements. Further, subsection 43-20(4) of the ITAA 1997 provides that Division 43 of the ITAA 1997 does not apply to certain structural improvements. In particular, paragraph 43-20(4)(b) of the ITAA 1997 excludes structural improvements being earthworks that merely create artificial landscapes, for example, grass golf course fairways and greens, gardens, and grass sports fields. Therefore, a bowling green constructed from synthetic or artificial materials would be a structural improvement under paragraph 43-20(3)(a) of the ITAA 1997 and would not be excluded under paragraph 43-20(4)(b) of the ITAA 1997. As such, a bowling green constructed from synthetic or artificial materials is a capital work to which Division 43 of the ITAA 1997 applies. Consequently, an amount can be deducted under Division 43 of the ITAA 1997 for this type of bowling green.", "Date_of_Decision": "25 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 subsection 43-20(2) subsection 43-20(3) paragraph 43-20(3)(a) subsection 43-20(4) paragraph 43-20(4)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/820", "Subject_References": "Construction expenditure area Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003821", "Unmatched_Content": "Add \"paragraph 43-20(3)(a)\" and \"paragraph 43-20(4)(b)\"under Income Tax Assessment Act 1997. Delete \"section 43-20\" under Income Tax Assessment Act 1997. | Keywords Construction expenditure area Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2014/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Cost of trading stock you cease to hold that is taken to be construction expenditure area of capital works", "Issue": "Does a sale and buyback of capital works that is deemed to occur in accordance with subsection 70-110(1) of the Income Tax Assessment Act 1997 (ITAA 1997) due to a major restructure of the taxpayer's operations, give rise to a construction expenditure area in accordance with subsection 43-75(3) of the ITAA 1997?", "Decision": "Yes. There is a construction expenditure area in accordance with subsection 43-75(3) of the ITAA 1997 where there is a deemed sale and buyback of capital works in accordance with subsection 70-110(1) of the ITAA 1997 due to a major restructure of the taxpayer's operations.", "Facts": "The taxpayer holds certain capital works as trading stock. The taxpayer constructed the capital works on land that it owned in the course of a business that included the construction and sale of capital works. As the capital works were held as trading stock when they were constructed, the taxpayer did not incur capital expenditure. As part of a major restructure of the taxpayer's operations, the taxpayer stops holding the capital works as trading stock. Instead, the capital works will be used by the taxpayer to produce assessable income other than by sale in the ordinary course of business (that is, other than as trading stock).", "Reasons_for_Decision": "Summary: In accordance with subsection 43-75(3) of the ITAA 1997, there is taken to be a construction expenditure area if: 43-75(3) There is taken to be a construction expenditure area for capital works purchased by an entity from another entity if: (a) the capital works would have had a construction expenditure area but for the fact that the other entity did not incur capital expenditure in constructing the capital works; and (b) the other entity is not an associate of the entity; and (c) the other entity constructed the capital works on land that it owned or leased in the course of a business that included the construction and sale of capital works of that kind. Note: Subsection (3) makes capital works purchased from a speculative builder eligible for deduction in the hands of the first and subsequent purchasers. Sometime during the major restructure of the taxpayer's operations, the capital works stopped being held as trading stock as they were no longer held for sale in the ordinary course of business by the taxpayer. Thus, section 70-110 of the ITAA 1997 has application as there is a genuine change in use of the capital works per paragraph 1.28 of the Supplementary Explanatory Memorandum (EM) to Tax Law Improvement Bill (TLIB 1997), which states: 1.28 These proposed rules will only apply to genuine changes in an assets use. Whether there is a genuine change is determined objectively. For example, if an asset is still held for trading, then putting it to another minor use will not amount to a conversion from trading stock. On the other hand, if a taxpayer stops carrying on business, any remaining stock will be converted to another use. If a taxpayers dominant purpose in converting trading stock to another use is to obtain a tax benefit, Part IVA (the general anti-avoidance provision) will apply and the Commissioner may cancel that tax benefit. Subsection 70-110(1) of the ITAA 1997 states: 70-110(1 ) If you stop holding an item as trading stock, but still own it, you are treated as if: (a) just before it stopped being trading stock, you had sold it to someone else (at arm's length and in the ordinary course of business) for its cost; and (b) you had immediately bought it back for the same amount. The context of the deemed sale and re-acquisition in subsection 70-110(1) of the ITAA 1997 is to treat the event as being between unrelated third parties. In this case, there is a 'deemed sale' by the taxpayer at the time just before the capital works stopped being trading stock and an immediate 're-acquisition' of the capital works. The EM to TLIB 1997, which introduced subsection 70-110(1) of the ITAA 1997 states: 1.27 The taxpayer will also be treated as immediately re-purchasing the asset for its cost. That amount will be relevant to working out the assets cost base for other income tax purposes (for example, for calculating a capital gain or loss if the asset is sold later, or for working out any later depreciation). While not expressly stated in section 70-110 of the ITAA 1997 or the EM, both the examples in section 70-110 of the ITAA 1997 and the EM suggests that the deeming is meant to have broad application to other parts of the Act, particularly where it is necessary to determine a cost of the asset for income tax purposes via the deemed re-acquisition that is taken to occur by the application of paragraph 70-110(b) of the ITAA 1997. The deemed sale and re-acquisition under subsection 70-110(1) of the ITAA 1997 satisfies the requirements of subsection 43-75(3) of the ITAA 1997 as it is taken to be between unrelated third parties. In the context of subsection 43-75(3), the statutory deeming in section 70-110 of the ITAA 1997 also extends the transaction to not being a transaction between associates. As the taxpayer constructed the capital works, which were held as trading stock, on land the taxpayer owned in the course of a business that included the construction and sale of capital works, the requirements of subsection 43-75(3) are satisfied. Note: This ATO Interpretative Decision (ATO ID) only applies in situations where there is a genuine change of use of the capital works, as opposed to situations where taxpayers are temporarily using the capital works to produce assessable income other than by sale in the ordinary course of business (putting the capital works that is trading stock to another minor use), such as those found in ATO ID 2003/377 and paragraphs 32 and 34 of Taxation Ruling TR 97/25. In all cases, if a taxpayer's dominant purpose in converting trading stock to another use is to obtain a tax benefit, Part IVA (the general anti-avoidance provision) will apply and the Commissioner may cancel that tax benefit.", "Date_of_Decision": "18 February 2014", "Year_of_Income": "Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-75(3) section 70-110 subsection 70-110(1) paragraph 70-110(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/377", "Subject_References": "Capital Works Deductions Trading Stock", "Case_References": "", "Other_References": "Supplementary Explanatory Memorandum (EM) to Tax Law Improvement Bill 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20148", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Capital Works Deductions Trading Stock"}
{"ATO_ID_Number": "ATO ID 2012/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: your area - assignee of that lessee's lease", "Issue": "Is the taxpayer who enters into the novation of a lease 'an assignee' of the earlier lessee's lease for the purposes of paragraph 43-120(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer who enters into the novation of a lease is not 'an assignee' of the earlier lessee's lease for the purposes of paragraph 43-120(2)(b) of the ITAA 1997 because the novated lease is a new lease, not the assignment of an existing lease.", "Facts": "The taxpayer entered into a deed of novation for a lease of property which included capital works. The earlier lessee incurred the construction expenditure on the capital works and was entitled to deduct that expenditure under Division 43 of the ITAA 1997. The earlier lessee continuously leased the property since construction of the capital works was completed until the date the lease was novated. At the time of the novation there was an amount of undeducted construction expenditure in relation to the capital works.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise stated. Broadly, Division 43 allows you to deduct an amount for construction expenditure on certain income producing capital works for an income year. A deduction is dependent, among other things, on whether you have a construction expenditure area that is 'your area' for the capital works. 'Your area' has the meaning given in sections 43-115 and 43-120. Section 43-115 applies if you own the construction expenditure area. If you lease the area, section 43-120 applies. Subsection 43-120(2) applies where you lease all or part of the construction expenditure area but the construction expenditure was incurred by an earlier lessee. That subsection requires the part of the construction expenditure area you lease to be continuously leased since the construction was completed by the lessee who incurred the expenditure or an assignee of that lessee's lease. 'Assignee' is not defined in the ITAA 1997. The Explanatory Memorandum to the Income Tax Assessment Bill 1996 that inserted section 43-120 in the ITAA 1997 offers the following limited guidance: Your area - lessees and holders of quasi-ownership rights If you lease (or hold quasi-ownership rights) your area is: • the part of the area you lease (or hold) on which you have incurred construction expenditure ; or • the area you acquired by assignment from the lessee or holder who incurred the expenditure (or one of their successors). The explanatory memorandum does not expand further on the meaning of the word 'assignee'. Subsection 43-120(2) is the Tax Law Improvement rewrite of the former subsections 124ZA(8) and 124ZF(8) of the Income Tax Assessment Act 1936 (ITAA 1936). Although the former provisions used the word 'assignment' instead of 'assignee', in accordance with the rule in section 1-3, the different form of the words is not taken to have a different meaning. Reference to the former provisions and the associated explanatory memoranda, provides no additional guidance about the meaning of 'assignee'. The word 'assignee' is a legal technical word and in the absence of a contrary intention it should be interpreted accordingly. This approach is confirmed by O'Connor J in Attorney-General (New South Wales) v. Brewery Employees Union of New South Wales (1908) 6 CLR 469 at 531: Where words have been used which have acquired a legal meaning it will be taken, prima facie, that the legislature has intended to use them with that meaning unless a contrary intention clearly appears from the context. To use the words of Denman J in R v. Slator (1881) 8 QBD 267 at 272: 'but it always requires the strong compulsion of other words in an Act to induce the Court to alter the ordinary meaning of a well known legal term'. LexisNexis Butterworths, Halsbury's Laws of Australia , Volume 16 (at 11 November 2011) explains an assignment at paragraph 245-1530: An assignment is the transfer by agreement of the interest held by one person (the assignor) to another person (the assignee) and includes another party taking over the residue of the term of a lease, or where possession is given up for the remainder of the term...An assignment does not constitute the creation of a new lease. Paragraphs 245-1550 and 245-1555 note the consequences to the lessor and the lessee (the assignor) upon assignment do not alter the contract between the lessor and the assignor. An assignment can be distinguished from a novation. The essential feature distinguishing novation from assignment, as observed by the High Court in Olsson v. Dyson (1969) 120 CLR 365, is that in the case of novation the parties to the contract mutually agree to discharge that contract and a new contract is formed in substitution for the old contract. In this case the taxpayer entered into a deed of novation. This means that the earlier lessee's lease was terminated. The Commissioner considers that the expression 'assignee of that lessee's lease' means the entity to whom the rights under the existing lease are transferred. Where the earlier lessee's lease is terminated the new lessee is not an assignee of that lessee's lease. An entity that holds a lease as the result of the novation of a lease (which necessarily requires the termination of the earlier lessee's lease) is therefore not an assignee of that earlier lessee's lease. This interpretation accords with the intended operation of Division 43. A lessee's right to deduct construction expenditure is dependent on the area being continuously leased since construction was completed. If an existing lease is assigned, the right to the deduction passes on to the assignee. However, if that lease terminates, the right to the deduction vests in the owner of the capital works (subsection 43-125(2)). The Commissioner's preferred interpretation is also supported by the following extract from Second Reading Speech to the Income Tax Assessment Amendment Bill (No. 2) 1980 which introduced the former section 124ZA of the ITAA 1936: Where a person constructs a building on leasehold land, or otherwise incurs building costs as a lessee, that person will, subject to other requirements being met, qualify for the allowance while remaining the lessee. If the lease is assigned, entitlement to the deduction will pass to the assignee. If the lease terminates, any residual entitlement will pass to the owner to whom the building reverts. In this case, the taxpayer entered into a deed of novation for a lease of property which included capital works. The novation resulted in the termination of the former lease between the lessor and the earlier lessee and the creation of a new lease. The novation is not an assignment of the earlier lessee's lease. Therefore, the taxpayer is not 'an assignee' of the earlier lessee's lease.", "Date_of_Decision": "24 November 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 124ZA subsection 124ZA(8) subsection 124ZF(8)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assignment of lease Building depreciation Construction expenditure area Novation", "Case_References": "Attorney-General (New South Wales) v Brewery Employees Union of New South Wales (1908) 6 CLR 469", "Other_References": "LexisNexis Butterworths, Halsbury's Laws of Australia, Volume 16 (at 11 November 2011), 245 'Leases and Tenancies' Second Reading Speech to the Income Tax Assessment Amendment Bill (No. 2) 1980", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20124", "Unmatched_Content": "However, the area must have been leased or held continuously since the construction was completed. You would have continuously leased an area even if your original lease had expired provided you have renewed the lease in a timely manner, for example under an option in the lease or by negotiation with the building owner. | Keywords Assignment of lease Building depreciation Construction expenditure area Novation"}
{"ATO_ID_Number": "ATO ID 2009/134", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: your area - tax law partnership", "Issue": "Does the entity, commonly referred to as a tax law partnership, 'own' part of the construction expenditure area under subsection 43-115(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for the purpose of establishing whether the entity is entitled to a deduction for capital works under Division 43 of the ITAA 1997?", "Decision": "No. The entity, a tax law partnership, does not 'own' part of the construction expenditure area under subsection 43-115(1) of the ITAA 1997. Each joint owner of the capital works owns a part of the construction expenditure area for the purpose of establishing whether each of them is entitled to a deduction under Division 43 of the ITAA 1997.", "Facts": "A number of individuals own, as tenants in common, a single residential property from which they derive rental income. This association of individuals satisfies the definition of partnership in subsection 995-1(1) of the ITAA 1997 because they are in receipt of ordinary income jointly. The property is a building to which Division 43 of the ITAA 1997 applies.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Section 43-110 provides that: 'You can only get a deduction under this Division for an income year if you own, lease or hold part of a construction expenditure area of capital works. The area you own, lease or hold is called your area.' 'Your area' is the means used to establish the required connection or interest that an entity must have in relation to the capital works in order to be entitled to a deduction. In respect of owners, subsection 43-115(1) provides that 'your area' is the part of the construction expenditure area that you 'own'. The issue arises whether the entity, a 'tax law partnership', is identified, for the purposes of having a 'your area' under subsection 43-115(1), as owning that part of the construction expenditure area or whether the provision applies to the owners of the residential property. A 'tax law partnership', as described in the second limb of paragraph (a) of the subsection 995-1(1) definition of partnership (an expansion of the legal meaning of the word) is 'an association of persons (other than a company or a *limited partnership) ... in receipt of *ordinary income or *statutory income jointly ...' (and not carrying on business as partners). It is considered that the expanded definition of partnership contained in subsection 995-1(1) does not make available to the ensuing statutory entity the connection or interest that an entity must have in relation to the capital works in order to 'own' part of the construction expenditure area. This view is consistent with the fact that the reference to 'in receipt of ordinary income or statutory income jointly' in the definition of 'partnership' in subsection 995-1(1) does not take into account ownership of an asset, but purely focuses on how the income from an asset is received by the tax law partnership. The assets (including the capital works) associated with the tax law partnership are owned distinctly as interests as tenants in common. These interests are capable of being dealt with by each owner at their liberty and are not interests that must be held and applied exclusively for the purposes of a partnership and in accordance with a partnership agreement. The owners are not partners at law, but instead owners whose income is derived jointly from their common possession, but individual ownership of the property. The requirement of Division 43 to 'own' their part of the construction expenditure area is therefore satisfied by the owners individually in respect of their legal interest and not by the tax law partnership. Accordingly, the 'tax law partnership', does not 'own' capital works for the purposes of having a 'your area' under subsection 43-115(1). Each joint owner of the capital works owns a part of the construction expenditure area for the purpose of establishing whether each of them is entitled to a deduction under Division 43.", "Date_of_Decision": "4 August 2009", "Year_of_Income": "Year ending 30 June 2008 Year ending 30 June 2009 Year ending 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-110 subsection 43-115(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/135", "Subject_References": "Capital Works Deductions Construction expenditure area Legal owner Pool of construction expenditure Capital Allowances CoE", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009134", "Unmatched_Content": "Minor grammatical corrections | Keywords Capital Works Deductions Construction expenditure area Legal owner Pool of construction expenditure Capital Allowances CoE"}
{"ATO_ID_Number": "ATO ID 2004/410", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: your area - earlier lessee's expenditure", "Issue": "Does entering into a sublease of a structural improvement give the taxpayer an interest in a construction expenditure area that meets the definition of 'your area' contained in subsection 43-120(2) of the Income Tax Assessment Act 1997 (ITAA 1997) where the construction expenditure on the structural improvement was incurred by the sublessor?", "Decision": "No. The taxpayer's interest in a construction expenditure area does not meet the definition of 'your area' in subsection 43-120(2) of the ITAA 1997 because the interest was not acquired by way of assignment of a lease.", "Facts": "The taxpayer entered into a sublease of the sea bed that has a floating marina berth constructed upon it. The marina berth is part of a floating marina that was constructed by the sublessor of the sublease. The floating marina is a series of floating pontoons attached to concrete piles that are driven into the sea bed. The pontoons surround the concrete piles with heavy rubber rollers allowing the pontoons to rise and fall with the tide. The pontoons are prevented from moving horizontally by the piles. The pontoons form numerous berthing sections. Access to the berthing sections is provided by walkways. The pontoons are capital works to which Division 43 of the ITAA 1997 applies. The expenditure incurred by the sublessor to construct the marina is construction expenditure as defined in section 43-70 of the ITAA 1997. The capital works have a construction expenditure area and there is a pool of construction expenditure for that area as required under section 43-10 of the ITAA 1997. The taxpayer receives rental income from letting the marina berth.", "Reasons_for_Decision": "Summary: Broadly speaking, Division 43 of the ITAA 1997 allows you to deduct an amount for construction expenditure on certain income producing capital works for an income year. More specifically, section 43-10 of the ITAA 1997 provides that an amount may be deducted for capital works for an income year if there is a construction expenditure area, a pool of construction expenditure for that area and you use 'your area' in a required way (including to produce assessable income; section 43-140 of the ITAA 1997). The first two conditions are satisfied in this case. 'Your area' has the meaning given in sections 43-115 and 43-120 of the ITAA 1997. How 'your area' is determined under those sections depends on whether you are an owner or lessee (or holder of a quasi-ownership right) of the part of the capital work on which the construction expenditure is incurred. For a lessee 'your area' is the part of the construction expenditure area that has been continuously leased from the time of completion by the lessee who incurred the expenditure. Subsection 43-120(2) of the ITAA 1997 provides that if an earlier lessee incurred the expenditure, 'your area' is that part of the construction expenditure area that has been continuously leased from the time of completion by that lessee or an assignee of that lessee's lease. It is only the original lessee who incurred the construction expenditure or an assignee of that lessee's lease that can have a 'your area'. The taxpayer did not obtain their lease by way of assignment from the sublessor who incurred the expenditure. The taxpayer is a sublessee, not an assignee of the sublessor's lease. Therefore, the acquisition of a sublease does not give the taxpayer an interest in a construction expenditure area that meets the definition of 'your area' contained in subsection 43-120(2) of the ITAA 1997.", "Date_of_Decision": "26 March 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 section 43-70 section 43-115 section 43-120 subsection 43-120(2) section 43-140 Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Buildings Construction expenditure area Structural improvement expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004410", "Unmatched_Content": "Keywords Building depreciation Buildings Construction expenditure area Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2004/825", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: construction expenditure area -your area - earlier lessee's expenditure", "Issue": "Does the taxpayer have an area defined by subsection 43-120(2) of the Income Tax Assessment Act 1997 (ITAA 1997) as 'your area' where the taxpayer purchases the interest in a sublease from a company incurring the construction expenditure on the capital works?", "Decision": "No. That part of the construction expenditure area that the taxpayer leases has not been continuously leased since the construction was completed by either the lessee who incurred the expenditure or an assignee of the constructing lessee's lease.", "Facts": "Company A owned land that it wished to develop. Company A granted Company B a 199 year lease over the land ('the head lease'), whereupon Company B constructed a unit complex on the land. When the construction was completed Company B leased, with a term less than that of the head lease, the whole complex to Company C ('the sublease'), which leased back to Company B separately each of the completed units in the complex ('the sub-subleases'). The sub-subleases terminated one day before the sublease. Company B then sold its interest in the sub-subleases to other parties. The taxpayer purchased the interest in one of the sub-subleases to rent the unit for the purpose of producing assessable income. After Company B had sold all of its interest in the sub-subleases to the other parties it assigned its interest in the head lease to Company C.", "Reasons_for_Decision": "Summary: Broadly speaking, Division 43 of the ITAA 1997 allows you to deduct an amount for construction expenditure on certain income producing capital works for an income year. A deduction is dependent, among other things, on whether you have a construction expenditure area that is 'your area', as defined in Subdivision 43-C of the ITAA 1997, for the capital work. 'Your area' has the meaning given in sections 43-115 and 43-120 of the ITAA 1997. How 'your area' is determined under those sections depends on whether you are an owner or a lessee (or holder of a quasi-ownership right) of the part of the capital work on which the construction expenditure is incurred. Subsection 43-120(2) of the ITAA 1997 applies where you are a lessee and the construction expenditure was incurred by an earlier lessee. The provision provides that 'your area' is that part of the construction expenditure area that has been continuously leased from the time of completion by the lessee who incurred the expenditure or an assignee of that lessee's lease. It is only the original lessee who incurred the construction expenditure or an assignee of that lessee's lease that can have 'your area'. In this case, 'that lessee's lease' is the head lease of which Company B is the lessee because the construction expenditure was incurred by Company B under the head lease and before the sublease was entered into. The taxpayer is the assignee of one of the sub-subleases by way of purchasing the interest in the sub-sublease from Company B. However, the taxpayer is not an assignee of the head lease because the head lease between Company A and Company B is a different lease to any of the sub-subleases between Company C and Company B even though Company B is the lessee of the head lease and the sub-subleases. The part of construction expenditure area the taxpayer leases has not been continuously leased by the taxpayer since construction was completed by the lessee who incurred the expenditure (that is, Company B) or an assignee of Company B's lease (that is, the head lease). The taxpayer does not have 'your area' as defined in subsection 43-120(2) of the ITAA 1997.", "Date_of_Decision": "31 August 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 Subdivision 43-C section 43-115 section 43-120 subsection 43-120(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/410", "Subject_References": "Assignment of lease Building depreciation Construction expenditure area", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004825", "Unmatched_Content": "minor changes to add clarity to a paragraph | Keywords Assignment of lease Building depreciation Construction expenditure area"}
{"ATO_ID_Number": "ATO ID 2003/673", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: shipping channel - separate construction expenditure areas", "Issue": "Are multiple construction expenditure areas created, pursuant to subsection 43-75(6) of the Income Tax Assessment Act 1997 (ITAA 1997), within a single project that is designed to increase the commercial capacity of a shipping channel?", "Decision": "Yes. Multiple expenditure areas are created, pursuant to subsection 43-75(6) of the ITAA 1997 because the project undertakes the construction of separate capital works.", "Facts": "The taxpayer undertook a project that was generally designed to increase the commercial capacity of a shipping channel (the channel). The significant features of the channel are a 'main channel' (a body of water that connects points of the channel to each other), a 'berthing pocket' (a section of the channel immediately adjacent to a wharf that can accommodate fully laden marine craft berthed at low tide) and a 'swing basin' (a circular facility to allow marine craft to turn 180 degrees). The project was undertaken in sections with each section involving a particular aspect (for example: deepening, widening or extending) of each channel feature and was carried out over a considerable period of time.", "Reasons_for_Decision": "Summary: You can deduct an amount for capital works for an income year if, among other things, the capital works have a construction expenditure area (subsection 43-10(1) and paragraph 43-10(2)(a) of the ITAA 1997). It is accepted that the project work on the channel's significant features constitute structural improvements that are capital works (subsection 43-20(2) of the ITAA 1997) (see ATO ID 2003/669 on Capital Work:- shipping channel- structural improvement) and that construction expenditure (as defined in section 43-70 of the ITAA 1997) has been incurred in respect of the capital works. Identifying the construction expenditure area depends on the particular facts of each case. This is of practical importance for a number of reasons, including that the construction of capital works must be complete before the construction expenditure area is determined (subsection 43-75(4) of the ITAA 1997), and a deduction is not available before the completion of construction of the capital works even though the works may be used before completion (section 43-30 of the ITAA 1997). 'Construction expenditure area', is defined in subsection 43-75(1) of the ITAA 1997. In particular, a separate construction expenditure area is created each time an entity undertakes the construction of capital works (subsection 43-75(6)). While all of the capital works are part of a broader project, each section of the project is a separate construction expenditure area. The nature and extent of each section is different, each section is physically located at different sites; each feature of the channel, although complementary with each other, has a distinct function or operation; and each section was undertaken at a different time and for a different period.", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 43-10(2)(a) subsection 43-20(2) subsection 43-30 subsection 43-70 subsection 43-75(1) subsection 43-75(4) subsection 43-75(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/669 | ATO ID 2003/670 | ATO ID 2003/671 | ATO ID 2003/672", "Subject_References": "Structural improvement expenses Capital allowances CoE Construction expenditure area", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003673", "Unmatched_Content": "Keywords Structural improvement expenses Capital allowances CoE Construction expenditure area"}
{"ATO_ID_Number": "ATO ID 2003/879", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: deductibility of levy paid for the cost of reinstalling overhead electricity cables underground", "Issue": "Can a taxpayer claim a deduction under section 43-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for a levy paid as a contribution towards the capital expenditure in respect of reinstalling overhead electricity cables underground?", "Decision": "No. The taxpayer is not entitled to a deduction under section 43-10 of the ITAA 1997, as the taxpayer does not own, lease or hold part of a construction expenditure area of capital works as prescribed by sections 43-115 and 43-120 of the ITAA 1997.", "Facts": "The taxpayer owned a rental property from which assessable income was earned. The electricity supply to the property was converted from overhead mains to underground power during the 2001 income year through a joint state government and local council project by the installation of underground cables. The underground cables were installed largely on council land and owned by the council. The taxpayer contributed to the cost of reinstalling overhead mains underground by way of a levy.", "Reasons_for_Decision": "Summary: Section 43-10 of the ITAA 1997 provides that an amount may be deducted for capital works for an income year if there is a construction expenditure area, a pool of construction expenditure for that area and 'your area' is used in a deductible way (including the use of 'your area' to produce assessable income (section 43-140 of the ITAA 1997). Subsection 43-20(2) of the ITAA 1997 provides that Division 43 of the ITAA 1997 applies to capital works that are structural improvements or extensions, alterations, or improvements to structural improvements whose construction commenced after 26 February 1992. It is considered that the installation of underground electricity cables is a structural improvement and is therefore a capital work under subsection 43-20(2) of the ITAA 1997. Section 43-110 of the ITAA 1997 explains that a taxpayer can only get a deduction for an income year if the taxpayer owns, leases or holds part of a construction expenditure area of capital works. The area a taxpayer owns, leases or holds is called 'your area'. In this case, the taxpayer is not entitled to a deduction under Division 43 of the ITAA 1997 for the levy paid as the taxpayer did not own, lease or hold part of the construction expenditure area of capital works being the underground cables. In other words, the taxpayer did not own the underground cables attached to their rental property. Nor were they granted a lease of the cables or did they hold the cables under a quasi-ownership right over land granted by an exempt Australian government agency (sections 43-115 and 43-120 of the ITAA 1997).", "Date_of_Decision": "23 September 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 subsection 43-20(2). section 43-110. section 43-115. section 43-120.", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/46", "Subject_References": "Capital expenditure Construction expenditure area Pool of construction expenditure Rental property", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003879", "Unmatched_Content": "Related ATO Interpretative Decisions | Remove listed ATO ID's as both have been withdrawn. ATO ID 2001/665 has been replaced with ATO ID 2012/46 which has been inserted. | Change from \"15 September 2014\" to \"16 March 2018\". | Keywords Capital expenditure Construction expenditure area Pool of construction expenditure Rental property"}
{"ATO_ID_Number": "ATO ID 2007/142", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: expenditure on acquiring land", "Issue": "Are the costs incurred in constructing the taxpayer's rock wall excluded from being 'construction expenditure' because they are 'expenditure on acquiring land' pursuant to paragraph 43-70(2)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The costs incurred in constructing the rock wall are not 'expenditure on acquiring land' pursuant to paragraph 43-70(2)(a) of the ITAA 1997 as the rockwall is not 'land'.", "Facts": "The taxpayer's business is the provision of port facilities for shipping vessels for the purpose of loading and unloading goods, including providing facilities (such as leased land) and services supporting that activity. The taxpayer constructed a substantial rock wall enclosing an area of the seabed, adjacent to an existing area of reclaimed port land used by the taxpayer. Over time, substantial amounts of material dredged from shipping channels that are maintained by the taxpayer are permanently placed within the confines of the rock wall as a means of disposing of the material. The taxpayer will use the area enclosed by the rock wall as the basis for reclaimed land (port expansion land). Over time, the level of the retained material rises to the extent planned above the enclosed area's sea level. After water extraction and compaction, separately walled-off areas within the rock wall are sequentially capped with additional sand to become port expansion land that the taxpayer uses wholly for a taxable purpose in its business. The port expansion land substantially increases the capacity of the taxpayer to effectively and efficiently provide the facilities and services by which it derives income. The taxpayer previously held a right to occupy the areas (seabed) upon and around which the rock wall was constructed and held 'quasi-ownership rights' over that land. The rock wall is a structural improvement for the purposes of subsection 43-20(2) of the ITAA 1997 and the costs of constructing it are 'construction expenditure' under subsection 43-70(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: While the costs of constructing the rock wall are 'construction expenditure' under subsection 43-70(1) of the ITAA 1997, paragraph 43-70(2)(a) excludes 'expenditure on acquiring land' from 'construction expenditure'. The term 'expenditure on acquiring land' is not defined in the ITAA 1997. 'Acquire' has the ordinary meanings 'to come into possession of; get as one's own; to gain for oneself through one's actions or efforts'. 'Land' has the ordinary meanings of 'the solid substance of the earth's surface; the exposed part of the earth's surface, as distinguished from the submerged part; ground.' (The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW) Expenditure is not incurred 'on' a certain thing unless there is a sufficient connection and close association between the expenditure and the purpose, object or effect of the expenditure (Robe River Mining Co Pty Ltd v. FC of T 89 ATC 4606; (1989) 20 ATR 768). Expenditure should not be taken to also be directed to other, quite separate, ends. Accordingly, for the purpose of paragraph 43-70(2)(a) of the ITAA 1997 the term 'on' takes a restrictive interpretation. That is, expenditure 'on acquiring' a nominated thing (here, 'land') means only expenditure directly associated with the act of acquiring a thing that is, when it is acquired, 'land' within its ordinary meaning. The taxpayer did not incur expenditure on acquiring a thing that can be understood as land in the process of constructing the rock wall. The rock wall construction costs comprised the purchase of rock, geotextile material, services of builders, services of transporters, and so on. By the combination of those purchased materials and services, the taxpayer purchased what was necessary to construct a rock wall. The taxpayer already held 'quasi-ownership rights' over the land. They did not incur any expenditure in acquiring the land on which the rock wall stands, or on acquiring (while either submerged or raised above sea level) the land the rock wall confines. The expenditure incurred in constructing the rock wall did not include any expenditure on acquiring land in the ordinary sense. What the taxpayer got or gained for itself by the act of constructing the rock wall was, fundamentally, the rock wall itself. On completion of its construction, the rock wall was not 'land' within the relevant ordinary meaning of that word ('the solid substance of the earth's surface'). It does not matter that the rock wall has a predominant function of allowing and facilitating future port expansion by its role in permanently enclosing any reclaimed land. Identifying that functionality does not give the rock wall the character of land. Nor does it mean that it is 'land' that the taxpayer has acquired, in the context of paragraph 43-70(2)(a) of the ITAA 1997. The reclaimed land at all stages is separate and distinct from the rock wall - those two things are separately identifiable as a matter of visual identity and as to the manner of their formation. The costs are so directly and wholly incurred to construct the rock wall that they cannot reasonably be said to be 'on acquiring land'. The better view is that they are expenditure on constructing a structural improvement, being expenditure on acquiring a rock wall. The fact that the wall permanently encloses reclaimed land within the future port expansion area does not cause a change in the character of the rock wall construction expenditure. No land was acquired for the purpose of paragraph 43-70(2)(a) of the ITAA 1997 by reason of expenditure incurred in creating the thing that is the rock wall. For the reasons outlined above, the expenditure incurred in constructing the rock wall is not excluded from being construction expenditure pursuant to paragraph 43-70(2)(a) of the ITAA 1997.", "Date_of_Decision": "31 May 2007", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 subsection 43-20(2) subsection 43-70(1) paragraph 43-70(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Works Deductions Improvement to land Structural improvement expenses", "Case_References": "Robe River Mining Co Pty Ltd v. FC of T 89 ATC 4606 (1989) 20 ATR 768", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007142", "Unmatched_Content": "This ATO ID was amended to clarify the Reasons for Decision by making minor changes to paragraphs 8 - 11. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Remove reference to ITAA 1997 | Remove unnecessary spaces | Change rockwall to two words | Keywords Capital Works Deductions Improvement to land Structural improvement expenses"}
{"ATO_ID_Number": "ATO ID 2007/160", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: plant - rock wall", "Issue": "Is the taxpayer's rock wall \"plant\" within the meaning of that term in section 45-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The rock wall is not plant within the meaning of that term in section 45-40 of the ITAA 1997. The rock wall is part of the setting within which the taxpayer's income producing activities are undertaken.", "Facts": "The taxpayer's business is the provision of port facilities for shipping vessels for the purpose of loading and unloading goods, including providing facilities (such as leased land) and services supporting that activity. The taxpayer constructed a substantial rock wall enclosing an area of the seabed adjacent to an existing area of reclaimed port land used by the taxpayer. Over time substantial amounts of material dredged from shipping channels that are maintained by the taxpayer are permanently placed within the confines of the rock wall as a means of disposing of the material. The taxpayer will use the area enclosed by the rock wall as the basis for reclaimed land (port expansion land). Over time, the level of the retained material rises to the extent planned above the enclosed area's sea level. After water extraction and compaction, separately walled-off areas within the rock wall are sequentially capped with additional sand to become port expansion land that the taxpayer uses wholly for a taxable purpose in its business. The port expansion land substantially increases the capacity of the taxpayer to effectively and efficiently provide the facilities and services by which it derives income.", "Reasons_for_Decision": "Summary: The rock wall is a structural improvement that qualifies as capital works for the purposes of Division 43 of the ITAA 1997. That Division allows a deduction for construction expenditure incurred in respect of the construction of capital works. However, construction expenditure excludes, among other things, expenditure on plant (paragraph 43-70(2)(e) of the ITAA 1997). 'Plant' is defined in section 45-40 of the ITAA 1997 to take its ordinary meaning and to include certain other things. None of the inclusions are applicable to the rock wall being considered here. This means that for the capital expenditure on the rock wall to be excluded from being construction expenditure, it would need to be expenditure on plant within the ordinary meaning of that term. Taxation Ruling TR 1999/2 provides the following overview of the ordinary meaning of plant: 20. '[Plant] in its ordinary sense...includes whatever apparatus is used by a business man for carrying on his business, - not his stock-in-trade which he buys or makes for sale; but all goods and chattels, fixed or moveable, live or dead, which he keeps for permanent employment in his business': Lindley LJ in Yarmouth v. France (1887) 19 QBD 647 at 658. Using capital works for the purpose of the taxpayer's income producing activities does not, of itself, make the capital works plant. For something that is a structural improvement to constitute plant, it must not merely be a setting in which the income producing activities are carried on ( J. Lyons & Co Ltd v. The Attorney-General (1944) 1 All ER 477, [1944] Ch 281). Where the function of the structural improvement is no more than to provide a location on which income producing activities can be carried on, then this will be another form of setting which indicates that the item is not plant. As noted in the UK case of Benson (Inspector of Taxes) v. Yard Arm Club Ltd [1979] 2 All ER 336; (1979) 1 WLR 347; (1979) 53 TC 67, per Buckley LJ (endorsing Templeman J in St John's School (Mountford and Knibbs) v. Ward (Inspector of Taxes) [1974] STC 69 at 77; 49 Tax Cas 524 at 533): If one asks the same question here - namely whether the chemistry laboratory and the gymnasium are the premises in which the business is carried on or are part of the plant with which the business is carried on - the answer must be the former. Education is not carried out with these particular buildings but in these particular buildings... In those cases where structural improvements have been held to be plant, the improvements were significantly integrated with the income producing operations. They played an active part in an industrial process and often were physically integrated with items of machinery. For example: In this case, the predominant function of the rock wall is to provide a 'setting' that: is concerned with protection of the site of the dredged material; and facilitates creation of land that will expand the location upon which the taxpayer's business is carried on. The rock wall is a necessary adjunct of a dredged material disposal process but that process has secondary relevance to the predominant function of the rock wall, which delineates and protects the site of the dredged material that is the basis for port expansion land. Accordingly, the capital expenditure incurred in constructing the rock wall is not expenditure on plant of the taxpayer within the meaning of that term in section 45-40 of the ITAA 1997. Division 40 of the ITAA 1997 does not apply to the structural improvement because subsection 40-45(2) of the ITAA 1997 excludes capital works for which you can deduct amounts under Division 43 of the ITAA 1997.", "Date_of_Decision": "31 May 2007", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 subsection 40-45(2) Division 43 paragraph 43-70(2)(e) section 45-40", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/142", "Subject_References": "Capital Works Deductions Plant attached to land", "Case_References": "Yarmouth v. France (1887) 19 QBD 647", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007160", "Unmatched_Content": "Add quotation mark around plant to avoid ambiguity and add comma after plant. | Insert space between rock and wall | Removal of space after open brackets | Add 3 dots at the end of quote. | Replace commas with semicolon to separate case references. | Insert Division 40, Division 43, subsection 40-45(2) and sort in logical order. | Related Public Rulings (including Determinations) Taxation Ruling TR 1999/2 | Keywords Capital Works Deductions Plant attached to land"}
{"ATO_ID_Number": "ATO ID 2006/213", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: Capital works - construction expenditure - preliminary expense", "Issue": "Is the expenditure incurred by a builder of a residential unit complex in South Australia on an insurance policy that insures the owner of the residential unit complex against the risk of loss from the building not being completed included in construction expenditure as defined in subsection 43-70(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The expenditure incurred on this particular type of insurance policy is construction expenditure as defined in subsection 43-70(1) of the ITAA 1997 as the expenditure is incurred in respect of the construction of capital works.", "Facts": "A residential unit complex was constructed by a builder in South Australia in 2003. The builder was required, under section 34 of the Building Work Contractors Act 1995 (SA) (BWCA 1995), to obtain an insurance policy that insured the building owner against the risk of loss from the building not being completed due to the insolvency, death or disappearance of the builder. Section 34 of the BWCA 1995 prevented the builder from undertaking any building work until such an insurance policy was in place. Under the BWCA 1995, builders were required to take out this type of insurance policy on behalf of the homeowner for each and every contract that they entered into. Section 34 of the BWCA 1995 prevented the builder from undertaking any building work until such an insurance policy was in place. The residential unit complex is capital works to which Division 43 of the ITAA 1997 applies.", "Reasons_for_Decision": "Summary: A deduction for capital works under Division 43 of the ITAA 1997 is based on the amount of construction expenditure. Construction expenditure is defined in subsection 43-70(1) of the ITAA 1997 as 'capital expenditure incurred in respect of the construction of capital works'. The Explanatory Memoranda to the Income Tax Assessment Bill (No. 2) 1980 (Cth) and Income Tax Assessment Bill 1983 (Cth) (the Explanatory Memoranda), which inserted former Division 10C and 10D into the Income Tax Assessment Act 1936 , state that construction costs include such preliminary expenses as architects' fees, engineering fees and the cost of foundation excavations. This is reflected in paragraph 9 of Taxation Ruling TR 97/25 Income tax: property development: deduction for capital expenditure on construction of income producing capital works, including buildings and structural improvements (TR 97/25), which also considers that the costs of building permits form part of preliminary expenses. The insurance policy is required by section 34 of the BWCA 1995. The policy must be obtained to permit the building work on the capital works to commence and has a direct connection with the construction of the capital works (being the residential unit complex). It is therefore incurred in respect of the construction of the capital works and is included within construction expenditure as defined by subsection 43-70(1) of the ITAA 1997.", "Date_of_Decision": "2 June 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Division 10C Division 10D", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1098 | ATO ID 2004/137 | ATO ID 2004/138 | ATO ID 2004/822", "Subject_References": "Buildings Capital expenditure Construction costs", "Case_References": "", "Other_References": "Explanatory Memorandum to Income Tax Assessment Bill (No. 2) 1980 Explanatory Memorandum to Income Tax Assessment Bill 1983", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006213", "Unmatched_Content": "Included reference to the BWCA requiring a new policy for each building contract. | Updated references to Bills and ATO view documents. Amended references to the Taxation Ruling to reflect the ATO view. | Insert the word \"former\" when referring to Division 10C or 10D. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Buildings Capital expenditure Construction costs"}
{"ATO_ID_Number": "ATO ID 2006/235", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: capital works - construction expenditure - landscaping design", "Issue": "Is the capital expenditure incurred by the taxpayer on a landscaping design 'construction expenditure' as defined in section 43-70 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The capital expenditure incurred by the taxpayer on a landscaping design is not 'construction expenditure' as defined in section 43-70 of the ITAA 1997 because the expenditure forms part of the expenditure on landscaping which is specifically excluded from 'construction expenditure'.", "Facts": "A severe storm damaged the garden of the taxpayer's rental property. The taxpayer incurred capital expenditure in engaging the services of a landscaping architect to re-design the rental property's garden. The landscaping architect provided the taxpayer with a landscaping design. The taxpayer subsequently carried out the landscaping works according to the landscaping design. Some of the landscaping works carried out were capital works to which Division 43 of the ITAA 1997 applied as they constituted more than earthworks that merely created artificial landscapes.", "Reasons_for_Decision": "Summary: A deduction under Division 43 of the ITAA 1997 for capital works is dependent, among other things, on whether there is construction expenditure for the capital works. Construction expenditure is defined in subsection 43-70(1) of the ITAA 1997 as 'capital expenditure incurred in respect of the construction of capital works'. Taxation Ruling TR 97/25 deals with the operation of Division 43 of the ITAA 1997 and provides at paragraph 9 that construction expenditure includes preliminary expenses such as architect fees, engineering fees, foundation excavation expenses and costs of building permits. These expenses are accepted as being 'in respect of' the construction of capital works. Subsection 43-70(2) of the ITAA 1997 excludes certain expenditure from 'construction expenditure'. Expenditure on landscaping is so excluded (paragraph 43-70(2)(d)). For expenditure to be incurred 'on' landscaping, there must be a sufficient connection and close association between the expenditure and the actual landscaping work. It is not limited to expenditure incurred directly on the actual landscaping, but does not extend to expenditure more remote in purpose ( Robe River Mining Co Pty Ltd v. Commissioner of Taxation (1989) 21 FCR 1; 89 ATC 4606; (1989) 20 ATR 768; Pine Creek Goldfields Ltd v. FC of T 99 ATC 4382; (1999) 41 ATR 471; QCT Resources Limited v. FC of T 97 ATC 4432; (1997) 36 ATR 184). The landscaping design was prepared specifically for the taxpayer's landscaping work, and the taxpayer carried out the landscaping according to the design. The landscaping design was an integral part of the taxpayer's landscaping works. There is a sufficient connection between the expenditure incurred on the landscaping design and the actual landscaping work. Therefore, the expenditure incurred on the landscaping design is part of the expenditure 'on' landscaping. It follows that the expenditure incurred on the landscaping design is not 'construction expenditure' as defined in section 43-70 of the ITAA 1997.", "Date_of_Decision": "21 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-70 subsection 43-70(1) subsection 43-70(2) paragraph 43-70(2)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1098", "Subject_References": "Capital expenditure Construction costs Landscaping expenses", "Case_References": "Robe River Mining Co Pty Ltd v. Commissioner of Taxation (1989) 21 FCR 1 89 ATC 4606 (1989) 20 ATR 768", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006235", "Unmatched_Content": "Reason for Decision and Related Public Rulings (including Determinations) | Remove references to Taxation Ruling TR 2002/1 (withdrawn effective from 12 April 2017). | Remove reference to ITAA 1997 | Include reference to Taxation Ruling TR 2002/1 | Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Capital expenditure Construction costs Landscaping expenses"}
{"ATO_ID_Number": "ATO ID 2005/277", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: construction expenditure area", "Issue": "Does the taxpayer have a 'construction expenditure area' of capital works, as provided for in section 43-75 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer does not have a 'construction expenditure area' of capital works, as provided for in section 43-75 of the ITAA 1997, because the expenditure it incurs in constructing the works is not capital expenditure in its hands.", "Facts": "The taxpayer, an entity that carries on a construction business for the purpose of producing assessable income, entered into a fixed price long-term contract with an unrelated entity to construct works on land held on a leasehold basis by the unrelated entity (the lessee entity). The works are capital works to which Division 43 of the ITAA 1997 applies. The contract was entered into after 30 June 1997. Under the terms of the construction contract, the taxpayer has access to the land under a license for the construction period to construct capital works on the site, and has no proprietary right in the works. The taxpayer will make progress payments to its subcontractors in order to fulfil its obligation under the construction contract. The taxpayer will receive a construction payment upon its completion of the works for the lessee entity. The income from the contract is received by the taxpayer in the ordinary course of its construction business. The taxpayer will determine its taxable income from the long term construction contract on an 'estimated profits' basis as described in Taxation Ruling IT 2450: Recognition of Income from Long Term Construction Contracts.", "Reasons_for_Decision": "Summary: Section 43-10 of the ITAA 1997 provides that you can only deduct an amount for capital works for an income year if, among other things, the capital works have a 'construction expenditure area'. For capital works begun after 30 June 1997, the 'construction expenditure' area of capital works means the part of the capital works on which the construction expenditure was incurred that, at the time it was incurred by an entity, was to be owned or leased by the entity or held by the entity under certain quasi-ownership rights (section 43-75 of the ITAA 1997). Accordingly, a threshold requirement for a taxpayer to deduct an amount for an income year under section 43-10 of the ITAA 1997 is that it incurs 'construction expenditure'. 'Construction expenditure' is defined in subsection 43-70(1) pf the ITAA 1997 as capital expenditure incurred in respect of the construction of capital works, subject to the exclusions listed at subsection 43-70(2). In deciding whether the taxpayer has a 'construction expenditure area' for the capital works, the relevant issue is whether the outgoings the taxpayer incurs in carrying out the construction services is capital expenditure of the taxpayer. Broadly speaking, business expenditure is deductible as a general (revenue nature) deduction if it has the necessary and relevant connection with the operation or activities which directly gain or produce assessable income ( Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; 11 ATD 147; 6 AITR 379, Federal Commissioner of Taxation v. Smith (1981) 147 CLR 578; (1981) 11 ATR 538; (1981) 81 ATC 4114, Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). Provided that a loss or outgoing can be objectively viewed as a necessary or natural consequence of the taxpayer's income earning activities, it will be 'incidental and relevant' to the income earning activities of the taxpayer and deductible as a revenue deduction under section 8-1 of the ITAA 1997, except to the extent that it is a loss or outgoing of capital or of a capital nature (see discussion of the High Court in Steele v. Deputy Commissioner of Taxation (1999) 197 CLR 459; 99 ATC 4242; (1999) 41 ATR 139). The established principles on the distinction between capital and income are well known; see for example, Dixon J's judgement in Sun Newspapers Ltd & Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87 (Sun Newspapers Case), and the Full Federal Court decision in FC of T v. Email (1999) 99 ATC 4868 at 4873; 42 ATR 698 at 704). The character of the advantage sought provides important direction. It provides the best guidance as to the nature of the expenditure as it says most about the essential character of the expenditure itself. The decision of the High Court in G.P. International Pipecoaters v. Federal Commissioner of Taxation (90 ATC 4413; (1990) 170 CLR 124; 21 ATR 1) emphasised this, stating: the character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid: Sun Newspapers Ltd and Associated Newspapers Ltd v FCT (1938) 61 CLR 337, at 363; 1 AITR 353; ... The nature or character of the expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature, then the expenses incurred in gaining the advantage will also be of a capital nature. Here, the taxpayer carries on its construction business for the purpose of producing assessable income. The intention or purpose of the taxpayer in entering into the construction works is to make a gain or profit in carrying out activities that are in the ordinary course of its business operations. It receives the construction payment in the ordinary course of its business and incurs expenditure in the ordinary course of its business in providing the construction services. The liability the taxpayer discharges by making the expenditure it incurs in providing those services is its obligation to construct the works as required under the contract. In exchange, the nature of the asset acquired is the construction payment. The character of the advantage sought by the taxpayer is the fulfilment of its obligations to deliver construction services to the lessee entity, allowing derivation of its ordinary business income. The services of the subcontractors are secured by a periodical outlay to cover their use and enjoyment for periods commensurate with the payment, and according to the principle in the Sun Newspapers Case, the advantage has no lasting qualities. The expenditure made in providing the construction services does not create an enduring benefit for the taxpayer. In this case the taxpayer's expenditure is incurred as a consequence of the day to day activities from which the business gains assessable income and the object of the expenditure is devoted toward a revenue purpose. The expenditure is not capital, or of a capital nature when outlaid by the taxpayer because it is incurred in the ordinary course of carrying on its business in providing construction services. The taxpayer incurs its expenditure as revenue costs, accounted for under the estimated profits basis, as they are incurred. Accordingly, the expenditure the taxpayer incurs carrying out the works under the construction contract is not capital expenditure in the taxpayer's hands. As the taxpayer does not incur capital expenditure in providing construction services, it does not have a construction expenditure area of capital works for the purpose of section 43-75 of the ITAA 1997.", "Date_of_Decision": "19 August 2005", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 43-10 section 43-70(1) section 43-70(2) section 43-75", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2450", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/278", "Subject_References": "Capital expenditure Construction costs Construction expenditure area", "Case_References": "Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344 11 ATD 147 6 AITR 379", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005277", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2450 | Keywords Capital expenditure Construction costs Construction expenditure area"}
{"ATO_ID_Number": "ATO ID 2004/138", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: construction expenditure - house relocation expenses", "Issue": "Is the expenditure incurred by the taxpayer for relocation activities carried out before placing the moved house on the taxpayer's land construction expenditure as defined in section 43-70 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The relocation expenditure incurred by the taxpayer is not construction expenditure as defined in section 43-70 of the ITAA 1997 because it is not expenditure in respect of the construction of capital works.", "Facts": "In the year ending 30 June 2003, the taxpayer was successful in a tender to purchase and remove a second hand timber house from a block of land. As part of the arrangement the taxpayer was required to pay an amount for clearing the land from which the house had been removed. The taxpayer paid a lump sum to a licensed builder to remove and relocate the house onto the taxpayer's block of land, so that it could be used as a residential rental property. Some of this amount paid was for transporting the house to the new location and police escort during the transportation. The relocated house was subsequently placed on new stumps at the new location, with construction works then carried out to improve the house to a rentable state. The house was available for rent after all of the construction activity was completed.", "Reasons_for_Decision": "Summary: A deduction under Division 43 of the ITAA 1997 is dependent, among other things, on whether the capital works have construction expenditure. Construction expenditure is capital expenditure incurred in respect of the construction of capital works (subsection 43-70(1) of the ITAA 1997). Subsection 43-70(2) of the ITAA 1997 excludes certain expenditure forming part of the construction expenditure. Some capital works to which Division 43 of the ITAA 1997 applies are a building, an extension, alteration or improvement to a building (subsection 43-20(1) of the ITAA 1997), and structural improvements (subsection 43-20(2) of the ITAA 1997). The expenditure in question is capital in nature. The expenditure on relocating the house to the new location is not expenditure that is part of construction cost of a building, an extension, alteration or improvement to a building. A new building was not constructed, as the previous building still existed and retained its status as capital works to which Division 43 of the ITAA 1997 can apply. (In respect of original construction expenditure of the building, Division 43 of the ITAA 1997 applies to the extent that the requirements of the Division are otherwise met: see ATO ID 2004/137 on Capital Works: application of Division 43 - pre-1979 building - relocation). Cost attributable to the process of moving the building is not construction expenditure in respect of an improvement or alteration to the building. For the purposes of applying Division 43 of the ITAA 1997, the relocation of an existing previously constructed building can not be said to be construction expenditure, and does not result in an alteration or improvement to the building. Accordingly, the capital expenditure incurred on clearing land on which the house formerly stood, transporting the house to the new location, including police escort during the transportation, is not construction expenditure in respect of capital works as defined in section 43-70 of the ITAA 1997. However, the capital expenditure incurred on placing the relocated house on the taxpayer's land, such as constructing the concrete footings and installing new stumps, being an improvement or alteration to a building, is construction expenditure in respect of capital works, as defined in section 43-70 of the ITAA 1997.", "Date_of_Decision": "2 February 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-20(1) subsection 43-20(2) section 43-70 subsection 43-70(1) subsection 43-70(2) Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/136 (withdrawn) | ATO ID 2004/137 | ATO ID 2004/822", "Subject_References": "Buildings Removal & relocation expenses Capital expenditure Construction expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004138", "Unmatched_Content": "Keywords Buildings Removal & relocation expenses Capital expenditure Construction expenses"}
{"ATO_ID_Number": "ATO ID 2003/377", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital works: interim rental of trading stock by property developer", "Issue": "Can the taxpayer, a property developer, claim a capital works deduction under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of a building that they developed and otherwise held as trading stock for an interim period the building was rented out?", "Decision": "No. The taxpayer cannot claim a capital works deduction under Division 43 of the ITAA 1997 in respect of a building that is trading stock, even though the building was rented out for an interim period, because the construction expenditure on the building is revenue and not capital expenditure.", "Facts": "The taxpayer carries on a business of property development. The taxpayer bought a block of land on which they constructed a building. The building was an integral part of the property development business. The building was constructed for the sole purpose of resale and was always held as trading stock. During the period from when the building was completed until it was sold, the building was rented out.", "Reasons_for_Decision": "Summary: Broadly speaking, Division 43 of the ITAA 1997 provides a deduction for certain expenditure on income producing capital works, including a building. The deduction is based, amongst other things, on the construction expenditure in respect of the building. Subsection 43-70(1) of the ITAA 1997 broadly defines construction expenditure as capital expenditure incurred on the construction of capital works. A building held by a property developer for sale in the ordinary course of their development business is trading stock of the developer. Expenditure incurred on trading stock in the ordinary sense of that term will be on revenue account 'in almost all cases that can be envisaged' ( Federal Commissioner of Taxation v. Raymor (NSW) Pty Ltd (1990) 24 FCR 90; 90 ATC 4461; (1990) 21 ATR 458). The building was developed and otherwise held by the taxpayer as an item of trading stock. The interim rental of the building does not alter that position. In these circumstances, the taxpayer cannot claim a capital works deduction under Division 43 of the ITAA 1997 in respect of the building because the construction expenditure on it is revenue and not capital.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 43-70(1) Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Buildings Capital allowances CoE Real estate as trading stock Rental property Trading stock", "Case_References": "Federal Commissioner of Taxation v. Raymor (NSW) Pty Ltd (1990) 24 FCR 90 90 ATC 4461", "Other_References": "", "Business_Line": "PGH", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003377", "Unmatched_Content": "Keywords Building depreciation Buildings Capital allowances CoE Real estate as trading stock Rental property Trading stock"}
{"ATO_ID_Number": "ATO ID 2003/553", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: effect of input tax credits on construction expenditure", "Issue": "Is the construction expenditure that is used to calculate a capital works deduction under Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997) reduced, pursuant to section 27-20 of the ITAA 1997, by the amount of any input tax credit entitlement related to that expenditure?", "Decision": "Yes. In calculating a deduction under Division 43 of the ITAA 1997, the construction expenditure is reduced, pursuant to section 27-20 of the ITAA 1997, by the amount of any input tax credit entitlement related to that expenditure.", "Facts": "The taxpayer bought a new house from a speculative builder and was entitled, under Division 43 of the ITAA 1997, to a capital works deduction in respect of it. The builder was entitled to an input tax credit in relation to their construction cost of the house.", "Reasons_for_Decision": "Summary: The deduction allowed under Division 43 of the ITAA 1997 for capital works is calculated by reference to the amount of construction expenditure incurred by the entity that was the owner, lessee or quasi-owner of the capital works at the time the works were undertaken. Subsections 43-75(3) and 43-85(2) of the ITAA 1997 make capital works purchased from a speculative builder eligible for deduction in the hands of the first and subsequent purchasers. In these circumstances, it is the expenditure incurred by the builder that is used in calculating the deduction that may be available to such a purchaser. In calculating the amount a taxpayer may be able to deduct, section 27-20 of the ITAA 1997 requires that an element in the calculation that is an amount paid or payable be treated as not including any amount of input tax credit related to that amount. In terms of section 27-20 of the ITAA 1997, the calculation of a deduction under Division 43 of the ITAA 1997 is an amount the taxpayer may be able to deduct. The construction expenditure incurred by the builder is an amount paid or payable and, in turn, is an element in the calculation. There is an input tax credit related to the payment because the section only requires that 'any' input tax credit be related to the payment. It follows that the construction expenditure used in calculating the deduction under Division 43 of the ITAA 1997 is reduced, under section 27-20 of the ITAA 1997, by the amount of any input tax credit entitlement of the builder in relation to their construction expenditure on the building.", "Date_of_Decision": "21 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 27-20 subsection 43-75(3) subsection 43-85(2) Division 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Capital Allowances CoE Capital expenditure Construction costs Input tax credit entitlement Input tax credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003553", "Unmatched_Content": "Keywords Building depreciation Capital Allowances CoE Capital expenditure Construction costs Input tax credit entitlement Input tax credits"}
{"ATO_ID_Number": "ATO ID 2003/795", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: remedial painting for newly acquired rental property", "Issue": "Does the cost of remedial painting for a newly acquired rental property constitute construction expenditure under section 43-70 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The cost of remedial painting for a newly acquired rental property constitutes construction expenditure under section 43-70 of the ITAA 1997.", "Facts": "The taxpayer purchased a residential rental property during the 2001-02 income year. At the time of acquisition, the interior painting of the property was in a state of disrepair. After settling the purchase contract, but before the property was advertised for rental, the taxpayer paid to have the whole interior of the property painted.", "Reasons_for_Decision": "Summary: Broadly speaking, Division 43 of the ITAA 1997 provides a deduction for construction expenditure on capital works. Capital works generally include improvements to buildings (subsection 43-20(1) of the ITAA 1997). The taxpayer's rental property is a building to which Division 43 of the ITAA 1997 applies and the painting commissioned by the taxpayer is an improvement to that building. Construction expenditure is capital expenditure incurred in respect of the construction of capital works (subsection 43-70(1) of the ITAA 1997). Subsection 43-70(2) of the ITAA 1997 lists a number of expenditures that are excluded from the definition of construction expenditure. None of those exclusions apply in this case. Expenditure incurred in remedying defects, damage or deterioration in existence at the date of acquisition (initial repairs) is capital in nature. This means that such expenditure is not deductible under section 25-10 of the ITAA 1997. It is immaterial whether or not the taxpayer was aware of the need for the repairs at the time of acquisition or if the purchase price reflected the need for repairs (paragraphs 5 and 59-61 of Taxation Ruling TR 97/23; Law Shipping Co Ltd v Commrs of IR (1923) 12 TC 621 and W. Thomas & Co Pty Ltd v. Federal Commissioner of Taxation (1965) 115 CLR 58; 14 ATD 78; (1965) 9 AITR 710). It follows that remedial painting of the type described here (that is, initial repairs) is qualifying construction expenditure for the purposes of Division 43 of the ITAA 1997.", "Date_of_Decision": "3 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 25-10 subsection 43-20(1) section 43-70 subsection 43-70(1) subsection 43-70(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling 97/23 | Taxation Ruling 97/25 | Taxation Determination 98/19", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Building depreciation Capital Allowances CoE Capital expenditure Deductions & expenses Initial repair expenses", "Case_References": "Law Shipping Co Ltd v Commrs of IR (1923) 12 TC 621", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003795", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling 97/23 Taxation Ruling 97/25 Taxation Determination 98/19 | Keywords Building depreciation Capital Allowances CoE Capital expenditure Deductions & expenses Initial repair expenses"}
{"ATO_ID_Number": "ATO ID 2003/1086", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Works: whether pool of construction expenditure reduced by grants received", "Issue": "Is the pool of construction expenditure for the taxpayer's construction expenditure area, for the purposes of Division 43 of the Income Tax Assessment Act 1997 (ITAA 1997), reduced by an appropriate portion of the grants the taxpayer received to finance the construction of such capital works?", "Decision": "No. The pool of construction expenditure for the taxpayer's construction expenditure area is, pursuant to section 43-70 of the ITAA 1997, the capital expenditure the taxpayer incurred in respect of the construction of the capital works and is not reduced by any portion of the grants the taxpayer received to finance the construction of such capital works.", "Facts": "The taxpayer received a number of grants from a state government body for the specific purpose of constructing certain capital works used in the course of and for the purposes of their business. The taxpayer complied with the strict requirement that the grants only be expended for the specific purpose for which they were paid. The grants are included in the assessable income of the taxpayer as ordinary income. The amount of each grant is determined strictly on an objective basis. That is, although there are general rules that guide the taxpayer's decisions in respect of capital works, the grants are not specifically linked to the quantity or quality of the capital works constructed, their cost or to any particular capital works. The grants simply provide a source of finance from which capital works are constructed. The capital works the taxpayer constructs otherwise qualify for deduction under Division 43 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Broadly speaking, Division 43 of the ITAA 1997 allows a deduction for certain capital expenditure on qualifying capital works that are owned, leased or held by an entity to the extent that the works are used by the entity for the purpose of producing assessable income. The deduction is based, at least in part, on a pool of construction expenditure for the entity's particular area. This is defined in section 43-85 of the ITAA 1997 as 'so much of the construction expenditure incurred by an entity .....as is attributable to the construction expenditure area'. A separate construction expenditure area is created each time an entity undertakes the construction of capital works (subsection 43-75(6) of the ITAA 1997). 'Construction expenditure' is capital expenditure incurred in respect of the construction of capital works (section 43-70(1) of the ITAA 1997). Construction expenditure is determined on the basis of the actual cost incurred in respect of the construction of the capital works (Taxation Ruling TR 97/25). There is no basis in Division 43 of the ITAA 1997 on which the taxpayer must reduce a pool of construction expenditure for capital works it constructed by any portion of the grants it received to finance the construction of such capital works. Therefore, deductions allowable under Division 43 of the ITAA 1997 in respect of the amounts of construction expenditure the taxpayer incurred on capital works can be calculated without applying any portion of the grants to reduce those amounts.", "Date_of_Decision": "6 November 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 43-70 section 43-75 subsection 43-75(6) section 43-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1085", "Subject_References": "Building depreciation Capital allowances Construction expenditure area Government grants income Pool of construction expenditure Structural improvement expenses Uniform capital allowances system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031086", "Unmatched_Content": "Corrected reference to ATO ID 2003/1085 | Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Building depreciation Capital allowances Construction expenditure area Government grants income Pool of construction expenditure Structural improvement expenses Uniform capital allowances system"}
{"ATO_ID_Number": "ATO ID 2002/1098", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consultants fee in relation to building an investment property", "Issue": "Is the taxpayer entitled to a capital works deduction under section 43-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for a consultant fee in relation to building an investment property?", "Decision": "Yes. The taxpayer is entitled to deduct an amount for capital works under section 43-10 of the ITAA 1997 for a consultant fee in relation to building an investment property.", "Facts": "The taxpayer engaged the services of a consultant in building an investment property. The consultant fee related to the services of the consultant in holding discussions and negotiations regarding the property, providing supervision during construction, reporting to and liaising with the taxpayer and ensuring the property was completed to the required standard and within budget.", "Reasons_for_Decision": "Summary: Section 43-10 of the ITAA 1997 provides a deduction of an amount for capital works in respect of certain 'construction expenditure' incurred in respect of the construction of capital works. Section 43-20 of the ITAA 1997 recognises three categories of capital works: The building of the investment property qualifies as capital works under section 43-20 of the ITAA 1997. Section 43-70 of the ITAA 1997 defines 'construction expenditure' as capital expenditure in respect of the construction of capital works. Taxation Ruling TR 97/25 deals with the operation of Division 43 and provides at paragraph 9 that construction expenditure includes preliminary expenses such as architect fees, engineering fees, foundation excavation expenses and costs of building permits. These expenses are accepted as being in respect of the construction of capital works. Given the tasks that the consultant is required to perform, it is considered to be similar in character to those costs accepted as preliminary expenses forming part of the construction expenditure. The consulting service is an integral part of the taxpayer's investment property project and is sufficiently related to the actual construction of the building itself as to form part of the construction expenditure. Consequently, the taxpayer is entitled to a deduction of an amount for capital works under section 43 of the ITAA 1997 for the consultant fee in relation to building an investment property.", "Date_of_Decision": "11 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 43 section 43-10 section 43-20 section 43-70", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/25", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Construction costs Consulting fee expenses Landlord expenses Rental expenses Newly constructed buildings and structures Capital Allowances", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021098", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/25 | Keywords Construction costs Consulting fee expenses Landlord expenses Rental expenses Newly constructed buildings and structures Capital Allowances"}
{"ATO_ID_Number": "ATO ID 2005/275", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Primary production: election to spread profit from forced disposal of livestock - election of new partnership to be treated as a continuation of an old partnership", "Issue": "If two new partnerships take over the assets of an old primary production partnership, can the new partnerships elect under section 385-165 of the Income Tax Assessment Act 1997 (ITAA 1997) to be a continuation of the old partnership?", "Decision": "No. Neither of the two partnerships can elect to be a continuation of the old partnership because neither of the new partnerships takes over the relevant primary production business of the old partnership.", "Facts": "A family partnership (old partnership) was dissolved during the 2004-05 income year. The assets of the old partnership were divided between two new partnerships. The new partnerships used these assets to carry on separate businesses. Partners in each of the new partnerships were entitled to 40% of the income of the old partnership. The old partnership carried on a primary production business and in the 2001-02 income year made a profit from the forced disposal of livestock. The old partnership made an election under Subdivision 385-E of the ITAA 1997 to spread the profit from the forced disposal of livestock over the 2001-02 income year and the next four income years. For the 2004-05 income year, each new partnership sought to make an election under section 385-165 of the ITAA 1997 to be treated as a continuation of the old partnership", "Reasons_for_Decision": "Summary: Broadly speaking, subsection 385-165(1) of the ITAA 1997 allows a new partnership to elect to be treated as a continuation of an old partnership and obtain the benefit of elections made by the old partnership under Subdivisions 385-E, 385-F or 385-G of the ITAA 1997. It states: Under Subdivision 385-E, 385-F or 385-G a new partnership can elect to be treated as a continuation of an old partnership that would otherwise cease to exist if: (a) it immediately takes over the relevant primary production business of the old partnership; and (b) partners, together entitled to at least 25% of the income of the new partnership were also partners in the old partnership. In order for the election under section 385-165 of the ITAA 1997 to be effective, paragraph 385-165(1)(a) of the ITAA 1997 requires the new partnership to continue to carry on the relevant primary production business of the dissolved partnership. In determining whether the new partnership meets this requirement, it is necessary to: This involves examining all the things done and the activities carried on by the dissolved partnership in the course of that business and in this case examining all activities of each new partnership to see if they are carrying on the business formerly conducted by the dissolved partnership. The question of whether the new partnerships continue to carry on the relevant primary production business formerly conducted by the dissolved partnership is a matter of fact and degree to be determined on a case by case basis. Merely dividing the assets of the dissolved partnership and using them in the conduct of a separate business by each new partnership means that neither of the new partnerships takes over the relevant primary production business of the old partnership. Accordingly, neither partnership is able to elect to be treated as a continuation of the old partnership under section 385-165 of the ITAA 1997.", "Date_of_Decision": "26 August 2005", "Year_of_Income": "30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 385-E Subdivision 385-F Subdivision 385-G section 385-165 subsection 385-165(1) paragraph 385-165(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Primary production Taxpayer elections", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005275", "Unmatched_Content": "Keywords Primary production Taxpayer elections"}
{"ATO_ID_Number": "ATO ID 2005/344", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Consolidation: Single entity rule and commercial debt forgiveness", "Issue": "Do the commercial debt forgiveness rules in Division 245 of the Income Tax Assessment Act 1997 (ITAA 1997), apply where a commercial debt owed by a member of a consolidated group is forgiven by another member of the same consolidated group?", "Decision": "No. The single entity rule (SER) in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) will prevent Division 245 of the ITAA 1997 from applying to the head company where a commercial debt owed by a member of a consolidated group is forgiven by another member of the same consolidated group.", "Facts": "Finance Co and Borrower Co are wholly owned by Head Co. Prior to Head Co's election to form a consolidated group, Finance Co lent funds to Borrower Co for an investment (the debt is a commercial debt), which ultimately went bad. Finance Co claimed a deduction under section 25-35 of the ITAA 1997 but no forgiveness of the debt occurred at that time for the purposes of section 245-35 of the ITAA 1997. Head Co and its subsidiaries, including Finance Co and Borrower Co, formed a consolidated group. The loan owing from Borrower Co to Finance Co is waived, released or otherwise extinguished, after the date of consolidation.", "Reasons_for_Decision": "Summary: Prima facie, the release, waiver or extinguishment of the debt by Finance Co gives rise to commercial debt forgiveness for the purposes of Division 245 of the ITAA 1997. However, due to the operation of the single entity rule contained in section 701-1 of the ITAA 1997, the forgiveness of the debt, which in this case comprises the cessation of rights and obligations between members of a consolidated group, is ignored. The debt forgiveness is ignored because the single entity rule deems subsidiary members to be parts of the head company rather than separate entities during the period that they are members of the consolidated group (an entity cannot transact with itself). Taxation Ruling TR 2004/11 at paragraph 8 states: Consequently, the SER has the effect that: (a) the actions and transactions of a subsidiary member are treated as having been undertaken by the head company; (b) the assets a subsidiary member of the group owns are taken to be owned by the head company (with the exception of intra-group assets) while the subsidiary remains a member of the consolidated group; (c) assets where the rights and obligations are between members of a consolidated group (intra-group assets) are not recognised for income tax purposes during the period they are held within the group whether or not the asset, as a matter of law, was created before or during the period of consolidation; and (d) dealings that are solely between members of the same consolidated group (intra-group dealings) will not result in ordinary or statutory income or a deduction to the group's head company. Accordingly, the forgiveness of the loan is not recognised for the purposes of other provisions of the income tax law, including Division 245 of the ITAA 1997. This intent is clearly articulated in TR 2004/11 at paragraphs 26, 27, 32 and 33.", "Date_of_Decision": "29 November 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 25-35 section 701-1 Division 245 section 245-35", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11 | Taxation Determination TD 2004/33 | Taxation Determination TD 2004/65 | Taxation Determination TD 2004/68 | Taxation Determination TD 2004/69 | Taxation Determination TD 2004/83 | Taxation Determination TD 2004/84 | Taxation Determination TD 2004/85 | Taxation Determination TD 2005/23", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/3 | ATO ID 2005/345 | ATO ID 2005/346", "Subject_References": "Consolidation Consolidated group Single entity rule Commercial debt forgiveness", "Case_References": "", "Other_References": "Consolidation Reference Manual C2-4-245 ; C9-1-220 ; C9-1-110", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005344", "Unmatched_Content": "This ATO ID has been amended as Division 245 has been transferred from the ITAA 1936 to the ITAA 1997 under the recent Tax Laws Amendment (Transfer of Provisions) Act 2010. | Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 Taxation Determination TD 2004/33 Taxation Determination TD 2004/65 Taxation Determination TD 2004/68 Taxation Determination TD 2004/69 Taxation Determination TD 2004/83 Taxation Determination TD 2004/84 Taxation Determination TD 2004/85 Taxation Determination TD 2005/23 | Keywords Consolidation Consolidated group Single entity rule Commercial debt forgiveness"}
{"ATO_ID_Number": "ATO ID 2014/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness: gross forgiven amount", "Issue": "Where a creditor forgives a commercial debt as part of a settlement agreement and also pays the debtor an additional amount under the agreement that is assessable income of the debtor, does that amount reduce the gross forgiven amount of the debt under paragraph 245-85(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The additional amount will not reduce the gross forgiven amount of the debt under Paragraph 245-85(1)(a) of the ITAA 1997.", "Facts": "The taxpayer entered into a business arrangement with an unrelated entity. As part of the arrangement the taxpayer owed a commercial debt to the entity (the creditor). The taxpayer threatened to sue the creditor for misrepresentation in relation to the business arrangement. The dispute was settled by formal agreement between the parties after 1 July 2010. Under the agreement the creditor forgave the balance of the commercial debt owed by the taxpayer at the time of the agreement and also paid an additional settlement amount to the taxpayer. The forgiven amount of debt was not assessable income of the taxpayer. The additional settlement amount paid was assessable income of the taxpayer. Neither party is in the business of moneylending.", "Reasons_for_Decision": "Summary: Division 245 of the ITAA 1997 applies to any commercial debt that has been forgiven after 1 July 2010. Under paragraph 245-85(1)(a) of the ITAA 1997 the gross forgiven amount of a debt is reduced by: any amount that, under a provision of this Act other than this Division, has been, or will be, included in your assessable income for any income year as a result of the forgiveness of the debt. The phrase 'included in the assessable income for any income year as a result of the forgiveness of the debt' refers to a situation where the forgiveness of the debt results in an amount being included in your assessable income. There must be a causal connection between the forgiveness of the debt and the amount being included in assessable income. In this case, the additional amount is separate from the debt forgiveness. The additional amount is a payment made as a result of the settlement agreement. The forgiveness of the debt is also part of the terms of the settlement agreement. The forgiveness of the debt did not cause the amount to be included in the assessable income of the taxpayer. As the amount being included in the assessable income of the taxpayer did not 'result from the forgiveness of the debt', that amount does not fall within paragraph 245-85(1)(a) of the ITAA 1997. Note: Section 245 of the ITAA 1997 replaced section 245-10 of Schedule C to the Income Tax Assessment Act 1936 (ITAA 1936). Although section 245 of the ITAA 1997 is effective from 1 July 2010, the provision is identical to section 245-10 of Schedule C to the ITAA 1936, which was effective from 27 June 1996.", "Date_of_Decision": "31 October 2014", "Year_of_Income": "Year ending 30 June 2015", "Legislative_References": "Income Tax Assessment Act 1997 Division 245 section 245-10 paragraph 245-85(1)(a)", "Related_Public_Rulings_and_Determinations": "Keywords Commercial debt Commercial debt forgiveness Debt forgiven Debt waivers Gross forgiven amount | ISSN: 1445-2782", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commercial debt Commercial debt forgiveness Debt forgiven Debt waivers Gross forgiven amount", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201433", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2003/590", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness - debt forgiven because of inability to repay and reasons of love and affection.", "Issue": "Where a Debtor is unable to repay part of a debt can paragraph 245-40(c) of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) operate to cause the Schedule not to apply to the forgiveness of that part of the debt where the balance of the debt is forgiven by the creditor for reasons of natural love and affection?", "Decision": "No. Paragraph 245-40(c) of Schedule 2C to the ITAA 1936 will only operate to exclude the balance of the debt that the debtor could have repaid.", "Facts": "Debtor incurred a debt from Creditor, a natural person. The debt was a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936. The whole of the debt was forgiven by Creditor after 27 June 1996. At the time of forgiveness Debtor had the ability to repay one third of the debt which Creditor forgave for reasons of natural love and affection.", "Reasons_for_Decision": "Summary: Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C applies where a forgiveness of a commercial debt occurs after 27 June 1996. Paragraph 245-40(c) of Schedule 2C to the ITAA 1936 provides that Schedule 2C does not apply where the debt is forgiven for reasons of natural love and affection. Section 245-245 of Schedule 2C to the ITAA 1936 defines debt for the purposes of the Schedule as 'includes a part of a debt' As the Creditor had two distinct reasons for the forgiveness it is considered that two acts of forgiveness have occurred in these circumstances, in relation to the two respective parts of the overall debt. Firstly, it is accepted that the forgiveness in respect of the one third part of the debt that Debtor was able to repay, is excluded from the operation of Schedule 2C to the ITAA 1936 pursuant to paragraph 245-40(c) thereof. Secondly, the balance of the debt that Debtor was unable to repay has also been forgiven pursuant to subsection 245-35(1) of Schedule 2C to the ITAA 1936 but that forgiveness is not excluded by paragraph 245-40(c) thereof, because it was forgiven due to an inability to repay, rather than for reasons of natural love and affection.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C, section 245-10 Schedule 2C, section 245-25 Schedule 2C, section 245-35 Schedule 2C, paragraph 245-40(c) Schedule 2C, section 245-245", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt forgiveness Debt waivers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003590", "Unmatched_Content": "Keywords Debt forgiveness Debt waivers"}
{"ATO_ID_Number": "ATO ID 2011/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness: whether the notional value of a debt can be less than its face value if the debtor is solvent", "Issue": "Can the notional value of a fixed term debt for the purposes of the debt forgiveness rules in subsection 245-55(1) of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) be less than its face value if the debtor is solvent at all times?", "Decision": "Yes. In determining the notional value of the debt under subsection 245-55(1) of Schedule 2C to the ITAA 1936, the first applicable amount as calculated under subsection 245-55(2) can be less than the face value of the debt where, because of the debt's fixed term and fixed interest rate, the value of the debt has become less than the prevailing market rate of interest.", "Facts": "In 2006 Debtor raised finance by issuing $10,000 unsecured notes carrying a fixed rate of return to unrelated creditors, including Creditor. The maturity date of the notes was 2016 and Creditor could only terminate the note earlier with the approval of Debtor. At all times Debtor had the capacity to pay all its debts as and when they became due. In 2009, because of the Global Financial Crisis, the rate of the return on the notes became far less than the prevailing rate of interest that would have been payable on notes with otherwise equivalent terms. Having surplus funds available Debtor made a public offer to all the holders of the notes to redeem them at a discount to their face value. Having severe liquidity problems Creditor (and others) accepted the offer as it was unable to sell the note for more than the amount offered by Debtor. Sections 245-60 and 245-61 of Schedule 2C to the ITAA 1936 do not apply to these debts. Debtor was not entitled to any deduction for the purposes of paragraph 245-55(3)(b) of Schedule 2C to the ITAA 1936 in respect of market variables.", "Reasons_for_Decision": "Summary: The notional value of a debt under subsection 245-55(1) of Schedule 2C to the ITAA 1936 is the lesser of the first applicable amount calculated under subsection 245-55(2) and the second applicable amount calculated under subsection 245-55(3). The first applicable amount is to be determined on the assumption (as per the facts of this case) that Debtor had the capacity to pay all its debts when the debts were incurred and when they were forgiven. Although Debtor had the capacity to fully repay its debts, the value of Creditor's note had become less than its face value because the fixed interest rate it carried was less than the relevant prevailing interest rate and Creditor had no power to demand either its early repayment or an increase in its interest rate. In view of the fact that Creditor was unable to sell the note for a greater amount to a third party it is considered that the value of the note as an asset of Creditor at the time of forgiveness upon redemption is the amount paid by Debtor. The second applicable amount is to be determined on the assumption that there has been no change in the market variables prior to the forgiveness of the debt. If the market variable of interest rates had not changed due to the Global Financial Crisis, the value of the notes would have remained the same, being their face value. The second applicable amount is therefore the face value of the debt. As the first applicable amount being the amount paid by Debtor to redeem the note is less than the second applicable amount (face value of the debt) the notional value of the debt is the discounted amount paid by the Debtor upon redemption.", "Date_of_Decision": "24 February 2011", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C subsection 245-55(1) Schedule 2C subsection 245-55(2) Schedule 2C subsection 245-55(3) Schedule 2C paragraph 245-55(3)(b) Schedule 2C section 245-60 Schedule 2C section 245-61", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt forgiveness", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201122", "Unmatched_Content": "Keywords Debt forgiveness"}
{"ATO_ID_Number": "ATO ID 2007/167", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial Debt Forgiveness: whether a debt used to acquire a subordinated note can be a non-recourse debt", "Issue": "Whether a subordinated note can be 'property' for the purposes of determining if a debt is non-recourse for the purposes of section 245-60 of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936).", "Decision": "Yes. The term 'property' in the context of section 245-60 of Schedule 2C to the ITAA 1936 is not limited to real property and can encompass financial instruments such as subordinated notes.", "Facts": "Debtor incurred the relevant debt in borrowing money from creditor. Debtor used the relevant money to acquire a subordinated note. The debt constituted a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936. The debt was subsequently forgiven for the purposes of section 245-35 of Schedule 2C to the ITAA 1936 by creditor after debtor defaulted in payment of the debt. Creditor's rights in respect of debtor's default were limited in the manner specified by subsection 245-60(1) of Schedule 2C to the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 245-60 of Schedule 2C to the ITAA 1936 provides a special rule for working out the notional value of a non-recourse debt. To constitute a non-recourse debt under that section the rights of the creditor in the event of default in the payment of the debt or the payment of interest must be limited in one or more ways listed in subsection 245-60(1) of Schedule 2C to the ITAA 1936. This is the case in the present circumstances. Furthermore, the definition requires that the debt was incurred directly in respect of the financing of the acquisition, construction or development of property. In this instance the debt was incurred directly in debtor acquiring the subordinated note. The term 'property' is not defined for the purposes of section 245-60 of Schedule 2C to the ITAA 1936 and therefore takes its ordinary meaning.", "Date_of_Decision": "29 June 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C, section 245-25 Schedule 2C, section 245-35 Schedule 2C, section 245-60 Schedule 2C, subsection 245-60(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/168", "Subject_References": "Borrowings & loans Commercial debt Commercial debt forgiveness Dealings & transactions Non recourse loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007167", "Unmatched_Content": "Keywords Borrowings & loans Commercial debt Commercial debt forgiveness Dealings & transactions Non recourse loans"}
{"ATO_ID_Number": "ATO ID 2007/168", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial Debt Forgiveness: whether the interim use of bridging finance precludes a debt from being non-recourse", "Issue": "Does a commercial debt constitute a non-recourse debt pursuant to section 245-60 of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936) to the extent it is used to repay bridging finance that was solely incurred in the acquisition of the relevant property?", "Decision": "Yes. A commercial debt constitutes a non-recourse debt pursuant to section 245-60 of Schedule 2C to the ITAA 1936 to the extent it is used to repay bridging finance that was solely incurred in the acquisition of the relevant property.", "Facts": "Debtor acquired 'property' for the purposes of section 245-60 of Schedule 2C to the ITAA 1936. That property was only acquired based upon the understanding that it would be funded using the relevant debt, a debenture. Due to delays in organising the debenture, debtor had to initially pay for the property using short term bridging finance from a related party. The bridging finance and the debenture both constituted commercial debts as defined in section 245-25 of Schedule 2C to the ITAA 1936. The debenture was forgiven for the purposes of section 245-35 of Schedule 2C to the ITAA 1936 in the relevant year of income. The rights of the debenture holder were limited in regards to the property in the requisite manner specified in subsection 245-60(1) of Schedule 2C to the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C to the ITAA 1936 applies where a forgiveness of a commercial debt occurs after 27 June 1996. Subsection 245-60(2) of Schedule 2C to the ITAA 1936 provides that the notional value of a non-recourse debt as defined, is the lesser of the amount of the debt and its market value at the time of forgiveness. In this instance the rights of the creditor are limited in the requisite manner prescribed in subsection 245-60(1) of Schedule 2C to the ITAA 1936. However, section 245-60 of Schedule 2C to the ITAA 1936 also requires such debts to be 'incurred directly in respect of the financing of the cost of acquisition, construction or development of property...'. The term 'directly' is not defined in the section and its meaning in that particular context has not been considered by the courts. However, Bowen CJ and French J of the Federal Court in their majority decision in Commissioner of Taxation v. Faywin Investments (1990) 22 FCR 461; 90 ATC 4361; (1990) 21 ATR 256 examined the meaning of 'directly' in the context of a provision about conferring a tax deduction for capital outlays expended in producing a film. Having regard to the concessional nature of that provision they stated, that '...the requirement that moneys expended be expended \"directly\" in production is no more than a requirement that there be a sufficiently close connection between the outlay and the production process'. Similarly, in Goods and Services Tax Ruling GSTR 2003/7 at paragraph 22 the Commissioner ruled in the context of subsection 38-190(1) of the New Tax System (Goods and Services Tax) Act 1999 that 'directly connected with' contemplates a very close link or association. Based upon the particular facts it is evident that but for the debenture the relevant property would not have been acquired using the bridging finance, or indeed at all. Therefore the debenture constitutes a non-recourse debt for the purposes of section 245-60 of Schedule 2C to the ITAA 1936.", "Date_of_Decision": "29 June 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C, section 245-10 Schedule 2C, section 245-25 Schedule 2C, section 245-35 Schedule 2C, section 245-60 Schedule 2C, subsection 245-60(1) Schedule 2C, subsection 245-60(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2003/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/167", "Subject_References": "Borrowings & loans Commercial debt Commercial debt forgiveness Dealings & transactions Non recourse loans", "Case_References": "Commissioner of Taxation v. Faywin Investments Pty Ltd (1990) 22 FCR 461 90 ATC 4361 (1990) 21 ATR 256", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007168", "Unmatched_Content": "Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2003/7 | Keywords Borrowings & loans Commercial debt Commercial debt forgiveness Dealings & transactions Non recourse loans"}
{"ATO_ID_Number": "ATO ID 2004/570", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness: notional value - debt becomes non-recourse", "Issue": "For a forgiven debt to satisfy the definition of a non-recourse debt under subsection 245-60(1) of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936), must it have been non-recourse at all times since the debt was incurred?", "Decision": "No. A forgiven debt satisfies that definition provided that at the time of forgiveness of the debt, the rights of the creditor were limited to all or any of the rights specified in paragraphs 245-60(1)(a),(b) or (c) of Schedule 2C to the ITAA 1936.", "Facts": "Debtor incurred a debt that was a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936. The relevant agreement between Creditor and Debtor provided that in the event of Debtor making certain payments over two years, the rights of Creditor in relation to the balance of the debt then outstanding would be limited in a way specified in subsection 245-60(1) of Schedule 2C to the ITAA 1936. Debtor made those requisite payments. After 27 June 1996 the (now) non-recourse balance of the debt was forgiven by Creditor such that subsection 245-35(1) of Schedule 2C to the ITAA 1936 applied.", "Reasons_for_Decision": "Summary: Section 245-10 of Schedule 2C to the ITAA 1936 provides that Schedule 2C to the ITAA 1936 applies where the forgiveness of a commercial debt occurs after 27 June 1996. The notional value of a non-recourse debt is calculated under section 245-60 of Schedule 2C to the ITAA 1936. For subsection 245-60(2) of Schedule 2C to the ITAA 1936 to apply to calculate the notional value of a forgiven debt, the relevant debt must satisfy the definition of a 'non-recourse debt' in subsection 245-60(1) of Schedule 2C. In the present circumstances the debt could not possibly satisfy that definition until Debtor had made the requisite payments. The definition of a non-recourse debt in subsection 245-60(1) of Schedule 2C to the ITAA 1936 is based upon two concepts: In the absence of an explicit time in subsection 245-60(1) of Schedule 2C to the ITAA 1936, for determining whether a debt is a non-recourse debt, it is appropriate to make such a determination at the time of forgiveness of the debt, as the term is only of relevance in determining a notional value under subsection 245-60(2) of Schedule 2C upon forgiveness of the debt.", "Date_of_Decision": "5 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C section 245-10 section 245-25 subsection 245-35(1) section 245-60 subsection 245-60(1) paragraph 245-60(1)(a) paragraph 245-60(1)(b) paragraph 245-60(1)(c) subsection 245-60(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CDF notional value Debt forgiveness Debt waivers Non recourse loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004570", "Unmatched_Content": "Keywords CDF notional value Debt forgiveness Debt waivers Non recourse loans"}
{"ATO_ID_Number": "ATO ID 2005/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial Debt Forgiveness - interaction with Subdivision 165-CD of the Income Tax Assessment Act 1997 - no net forgiven amount", "Issue": "Does subsection 165-115ZA(2) of the Income Tax Assessment Act 1997 (ITAA 1997) still nullify the operation of section 165-115ZA in respect of a relevant debt interest, where the Loss Company does not have a net forgiven amount to be applied under Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936), if that debt interest is forgiven?", "Decision": "Yes. Subsection 165-115ZA(2) of the ITAA 1997 nullifies the operation of section 165-115ZA where section 245-10 in Schedule 2C to the ITAA 1936 applies, which is not dependent upon there being a net forgiven amount under subsection 245-85(2) of Schedule 2C.", "Facts": "Loss Company has an alteration time under section 165-115L of the ITAA 1997 on 1 January 2002. In respect of that alteration time Loss Company has an overall loss under subsection 165-115R(5) of the ITAA 1997. Creditor Company has a 'relevant debt interest' as defined in subsection 165-115Y(1) of the ITAA 1997 of $40,000 in Loss Company. That debt is a 'commercial debt', as defined in section 245-25 of Schedule 2C to the ITAA 1936, of Loss Company. Creditor Company released Loss Company from that $40,000 debt on 6 June 2002 for no consideration. Having regard to the business of Creditor Company, that debt is not a moneylending debt as defined in subsection 245-245(1) of Schedule 2C to the ITAA 1936. The release of the debt constituted a forgiveness under section 245-35 of Schedule 2C to the ITAA 1936. The market value of the debt at time of forgiveness was $40,000 as Loss Company was solvent at all relevant times.", "Reasons_for_Decision": "Summary: Subsection 165-115ZA(2) of the ITAA 1997 nullifies the application of section 165-115ZA to the ITAA 1997 that would otherwise require reductions to reduced cost base of relevant debt interest(s) where section 245-10 of Schedule 2C to the ITAA 1936 also applies at the same time or a later time. Subsection 245-10(1) of Schedule 2C to the ITAA 1936 provides that subject to subsection (2) thereof, that Division 245 (Schedule 2C) of the ITAA 1936 applies to the forgiveness of a commercial debt. In the present instance, Loss Company will have no net forgiven amount under subsection 245-85(2) of the ITAA 1936 in respect of the debt forgiveness, as Loss Company (as debtor) will be taken by subsection 245-65(2) of the ITAA 1936 to have paid consideration equal to the market value of the debt at the time of forgiveness. The absence of a net forgiven amount does not mean that section 245-10 of Schedule 2C to the ITAA 1936 has not applied. Accordingly, no reduction to the reduced cost base of the $40,000 relevant debt interest is required under Subdivision 165-CD of the ITAA 1997 because of subsection 165-115ZA(2) thereof.", "Date_of_Decision": "22 December 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C section 245-10 subsection 245-10(1) subsection 245-10(2) section 245-25 section 245-35 subsection 245-65(2) subsection 245-85(2) subsection 245-245(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/11 | ATO ID 2005/13", "Subject_References": "Commercial debt forgiveness Debt interest Net forgiven amount", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200512", "Unmatched_Content": "Keywords Commercial debt forgiveness Debt interest Net forgiven amount"}
{"ATO_ID_Number": "ATO ID 2005/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial Debt Forgiveness - interaction with Subdivision 165-CD of the Income Tax Assessment Act 1997 - deductible revenue losses", "Issue": "Where a loss company is calculating the amount of its undeducted tax losses for the purposes of subsection 165-115R(5) of the Income Tax Assessment Act 1997 (ITAA 1997), does that amount reflect any reduction to those losses that may be subsequently required as a debtor to be made under Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The reductions made by Schedule 2C to the ITAA 1936 to tax losses as deductible revenue losses have the effect of deeming such reduced losses as not having been incurred by the debtor.", "Facts": "Loss Company has an alteration time on 1 October 2002 under section 165-115L of the ITAA 1997 due to changes in its ownership. Loss Company has the following undeducted tax losses before considering the application of Schedule 2C to the ITAA 1936: On 1 December 2002, Loss Company has a forgiveness of a commercial debt that it owes. As a result of that forgiveness, Loss Company has a total net forgiven amount of $100,000 under subsection 245-105(1) of Schedule 2C to the ITAA 1936. These abovementioned $40,000 and $50,000 tax losses constitute the only deductible revenue losses that Loss Company has for the purposes of section 245-110 of Schedule 2C to the ITAA 1936 for the forgiveness year of income. Apart from those amounts, the only other amount that Loss Company is required to take into account in calculating its overall loss under subsection 165-115R(5) of the ITAA 1997 is $60,000 of unrealised losses under paragraph 165-115R(3)(e) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 165-115ZA(3) of the ITAA 1997 requires that the reduced cost base of an equity or debt interest is to be reduced immediately before the 'relevant time.' In this case, subsection 165-115ZA(3) of the ITAA 1997 provides that the 'relevant time' is the alteration time that was identified by section 165-115L of the ITAA 1997. Schedule 2C to the ITAA 1936 does not precisely state when its adjustments are to take effect. Under Schedule 2C to the ITAA 1936, the undeducted tax losses of $40,000 and $50,000 will both be reduced to zero by section 245-115 of Schedule 2C of the ITAA 1936 through applying Loss Company's total net forgiven amount of $100,000. Whilst such reductions do not occur until after the end of the forgiveness year of income, they have the effect of retrospectively reducing the tax losses as calculated, in this instance to zero, rather than merely prospectively reducing the undeducted balance(s) of those losses. Accordingly, in calculating Loss Company's overall loss under subsection 165-115R(5) of the ITAA 1997 the $50,000 and $40,000 tax losses will not be taken into account by that subsection, and Loss Company's overall loss will be $60,000.", "Date_of_Decision": "22 December 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C subsection 245-105(1) subsection 245-110 section 245-115", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/11 | ATO ID 2005/12", "Subject_References": "Commercial debt forgiveness Tax loss Total net forgiven amount", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200513", "Unmatched_Content": "Keywords Commercial debt forgiveness Tax loss Total net forgiven amount"}
{"ATO_ID_Number": "ATO ID 2005/30", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial Debt Forgiveness: loss transfer agreements", "Issue": "Can a loss company validly transfer a prior year tax loss under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) after a commercial debt it owes is forgiven for the purposes of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936), where the deduction year is the forgiveness year of income?", "Decision": "No. Such a tax loss cannot be validly transferred to the extent that it is required to be reduced under Schedule 2C to the ITAA 1936 as a deductible revenue loss of the loss company.", "Facts": "Loss Company incurred a tax loss of $1,000 in the 1998 income year. On 30 April 1999, Loss Company, as a debtor, was forgiven a commercial debt which resulted in it having a total net forgiven amount of $800 under subsection 245-105(1) of Schedule 2C to the ITAA 1936 for the 1999 forgiveness year. On 10 July 1999 Loss Company entered into a loss transfer agreement pursuant to Subdivision 170-A of the ITAA 1997, to transfer the $1,000 prior year tax loss in respect of a deduction year ended 30 June 1999. The loss transfer of $1,000 would satisfy the requirements of Subdivision 170-A of the ITAA 1997, if Schedule 2C of the ITAA 1936 was found to have no impact on the tax loss. Loss Company has no other prior year tax losses.", "Reasons_for_Decision": "Summary: Where a commercial debt owed by an entity is forgiven after 27 June 1996, the total net forgiven amount of a debtor for a forgiveness year of income, must be applied in accordance with the commercial debt forgiveness provisions of Schedule 2C to the ITAA 1936, to successively reduce the entity's deductible revenue losses, deductible net capital losses, deductible expenditures and the relevant cost base of certain CGT assets. The 'total net forgiven amount', as defined by subsection 245-105(1) of Schedule 2C to the ITAA 1936, is the sum of the net forgiven amounts of the debtor, calculated in accordance with Subdivision 245-D of Schedule 2C to the ITAA 1936, for the forgiveness year of income. In this instance, Loss Company has a total net forgiven amount of $800 for the 1999 forgiveness year of income. Tax losses deductible under sections 36-15 or 36-17 of the ITAA 1997 can be deductible revenue losses as defined in section 245-110 of Schedule 2C to the ITAA 1936. However, tax losses are only deductible revenue losses for the purposes of Schedule 2C to the ITAA 1936 to the extent that they would be an allowable deduction to the debtor in the forgiveness year of income or a later year of income, based on the assumption that the debtor had derived sufficient assessable income. Schedule 2C to the ITAA 1936 does not precisely state when a debtor must quantify its deductible revenue losses. Subsection 245-105(4) of Schedule 2C merely provides that a debtor's total net forgiven amount is to be applied before the debtor furnishes the Commissioner with their return in respect of the forgiveness year. A debtor could generally calculate the net forgiven amount in respect of a forgiven debt at the time of forgiveness. However it cannot with relative certainty calculate its total net forgiven amount in respect of all forgiven debts until the forgiveness year of income has ended. Accordingly, the Commissioner reasonably considers that a debtor's deductible revenue losses are to be ascertained by reference to such losses that are in existence immediately after the end of the forgiveness year of income. Subsection 170-45(1) of the ITAA 1997 provides that a loss company cannot transfer an amount of a tax loss in excess of the amount that it would have carried forward to its next income year, if it did not make the loss transfer. If the company did not make the loss transfer, the $1,000 prior year tax loss would be a deductible revenue loss as defined by section 245-110 of Schedule 2C of the ITAA 1997. As a result, the $1,000 prior year loss is reduced by the total net forgiven amount of $800 to $200 pursuant to subsection 245-105(5) of Schedule 2C to the ITAA 1936. Therefore, the loss transfer agreement is only effective in transferring the remaining $200 prior year tax loss, pursuant to Subdivision 170-A of the ITAA 1997, as this is the only amount of tax loss that it would have been able to have carried forward to the next income year if the loss transfer agreement had not been made (Taxation Ruling TR 98/12 details the Commissioner's view on loss transfers, in particular see paragraph 96 - insufficient loss example).", "Date_of_Decision": "17 January 2005", "Year_of_Income": "Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C subsection 245-105(1) subsection 245-105(4) Subdivision 245-D section 245-110", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CDF revenue losses Commercial debt forgiveness Group company loss transfers Total net forgiven amount", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200530", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/12 | Keywords CDF revenue losses Commercial debt forgiveness Group company loss transfers Total net forgiven amount"}
{"ATO_ID_Number": "ATO ID 2004/981", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness - Capital loss", "Issue": "Can a creditor that is an exempt entity, as defined by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), agree to forgo under section 245-90 of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936), a capital loss as the result of the forgiveness of a commercial debt?", "Decision": "No. Any capital loss that the creditor otherwise would have made in respect of the forgiveness is disregarded under section 118-70 of the ITAA 1997 such that the creditor has no entitlement to a capital loss that it can forgo.", "Facts": "A commercial debt owed by a debtor company was forgiven on 22 March 2004. The forgiveness meant that the debtor had a net forgiven amount for the purposes of Schedule 2C to the ITAA 1936. The relevant creditor company was an exempt entity as defined in subsection 995-1(1) of the ITAA 1997. The creditor and debtor were under common ownership at all relevant times. The creditor would have made a capital loss in respect of the forgiveness that was disregarded by section 118-70 of the ITAA 1997. The creditor and debtor want to make an agreement under subsection 245-90(2) of Schedule 2C to the ITAA 1936 in respect of the relevant forgiveness.", "Reasons_for_Decision": "Summary: The creditor and debtor satisfy the conditions in subsection 245-90(1) of Schedule 2C to the ITAA 1936. However, in order to make an agreement to forgo all or part of a capital loss it is necessary that the creditor be otherwise entitled to that loss. Whilst the creditor did incur a capital loss in respect of the forgiveness that capital loss is disregarded by section 118-70 of the ITAA 1997 such that the creditor has no entitlement to a capital loss that it can forgo. The disregarding of a capital loss under section 118-70 of the ITAA 1997 is compulsory and not dependent on any choice being made by the creditor.", "Date_of_Decision": "9 December 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C section 245-90 subsection 245-90(1) subsection 245-90(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Commercial debt forgiveness Common ownership Net forgiven amount", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004981", "Unmatched_Content": "Keywords Capital losses Commercial debt forgiveness Common ownership Net forgiven amount"}
{"ATO_ID_Number": "ATO ID 2007/137", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial Debt Forgiveness: whether a loan used by a foreign resident debtor solely to derive foreign income is a commercial debt", "Issue": "Where the interest payments incurred by a foreign resident debtor in respect of a loan are not deductible under subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), because the loan is solely used to gain or produce foreign income, is the loan a 'commercial debt' under section 245-25 of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The loan is not a 'commercial debt' under section 245-25 of Schedule 2C to the ITAA 1936 because no part of the interest paid or payable in respect of the loan is deductible under subsection 8-1(1) of the ITAA 1997.", "Facts": "Foreign Co borrowed money from Aus Co. Foreign Co is a foreign resident. Foreign Co has used the loan from Aus Co to carry on a business for the sole purpose of gaining or producing income in a foreign tax jurisdiction. Aus Co proposes to forgive the loan.", "Reasons_for_Decision": "Summary: A 'commercial debt' is defined in section 245-25 of Schedule 2C to the ITAA 1936. Paragraph 245-25(2)(a) of Schedule 2C to the ITAA 1936 provides that a debt is a commercial debt if the whole or any part of interest, or of an amount in the nature of interest, paid or payable in respect of the debt is or would be allowable as a deduction to the debtor. Under subsection 8-1(1) of the ITAA 1997, Foreign Co can only deduct the interest payments on the loan from Aus Co to the extent that they are incurred in gaining or producing its assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing its assessable income. The reference to 'assessable income' in subsection 8-1(1) of the ITAA 1997 means income that is assessable in Australia. At all times, Foreign Co has used the loan to carry on a business for the sole purpose of gaining or producing income in a foreign tax jurisdiction that is not assessable in Australia. Therefore, no part of the interest paid or payable by Foreign Co in respect of the loan is deductible under subsection 8-1(1) of the ITAA 1997 because it is solely incurred in gaining or producing income that is not assessable in Australia. As a result, the loan is not a 'commercial debt' under section 245-25 of Schedule 2C to the ITAA 1936.", "Date_of_Decision": "22 June 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C section 245-25 paragraph 245-25(2)(a) subsection 245-25(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commercial debt Debt forgiveness Foreign income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007137", "Unmatched_Content": "Keywords Commercial debt Debt forgiveness Foreign income"}
{"ATO_ID_Number": "ATO ID 2004/377", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness: commercial debt - non-share equity interest", "Issue": "Can an instrument which satisfies the definition of a 'non-share equity interest in a company' in Subdivision 974-C of the Income Tax Assessment Act 1997 (ITAA 1997), constitute a commercial debt for the purposes of section 245-25 of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A non-share equity interest can be a commercial debt for the purposes of section 245-25 of Schedule 2C to the ITAA 1936.", "Facts": "Debtor legally owed a debt to Creditor that constituted a non-share equity interest as defined in Subdivision 974-C of the ITAA 1997. Interest paid by Debtor to Creditor in respect of the debt would have been deductible to Debtor but for the operation of section 26-26 of the ITAA 1997. After the 1st of July 2001, Creditor formally forgave the relevant debt.", "Reasons_for_Decision": "Summary: Section 245-10 of Schedule 2C to the ITAA 1936 provides that Division 245 of the ITAA 1936 applies to the forgiveness of a commercial debt if the forgiveness occurs after 27 June 1996. The amount owed by Debtor to Creditor satisfies the definition of 'debt' in subsection 245-15(1) of Schedule 2C to the ITAA 1936, which provides: Subject to this section, a debt is an enforceable obligation imposed by law on a person to pay an amount to another person. Division 974 of the ITAA 1997 does not operate to modify that definition so as to preclude a non-share equity interest constituting such a debt. Subsection 995-1(1) of the ITAA 1997 defines a 'non-share equity interest in a company' as meaning: an *equity interest in the company that is not solely a *share. * denotes a term defined in subsection 995-1(1) of the ITAA 1997 Subsection 995-1(1) of the ITAA 1997 defines 'equity interest in a company' as having the meaning given by Subdivision 974-C of the ITAA 1997. In the present instance, it is a fact that the relevant debt constitutes an equity interest by Creditor in Debtor for the purposes of Subdivision 974-C of the ITAA 1997. Subsection 974-10(1) of the ITAA 1997 provides that an object of Division 974 is to establish a test for determining whether a scheme gives rise to a debt or an equity interest for particular taxation purposes. Division 974 does not have application for the purposes of all taxation law. The definition of commercial debt in section 245-25 of Schedule 2C to the ITAA 1936 is not expressly made subject to the defined terms 'debt interest' or 'equity interest' used in Division 974 of the ITAA 1997. Therefore, a debt in legal form would nonetheless constitute 'debt' for the purposes of section 245-15 of Schedule 2C to the ITAA 1936, even if such debts were classified as 'non-share equity interests in a company' pursuant to Division 974 of the ITAA 1997. Subsection 245-25(2) of Schedule 2C to the ITAA 1936 provides that a debt is a commercial debt if the whole or any part of the interest paid or payable in respect of the debt is or would be allowable as a deduction to the debtor apart from the operation of an exception provision. Section 26-26 of the ITAA 1997 is an exception provision within the meaning of subsection 245-25(5) of Schedule 2C to the ITAA 1936. Accordingly, the debt owed by Debtor to Creditor constitutes a commercial debt as defined in section 245-25 of Schedule 2C to the ITAA 1936.", "Date_of_Decision": "13 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C Division 245 section 245-10 section 245-15 section 245-25 subsection 245-25(2) subsection 245-25(4) subsection 245-25(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt forgiveness Debt waivers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004377", "Unmatched_Content": "Keywords Debt forgiveness Debt waivers"}
{"ATO_ID_Number": "ATO ID 2012/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commercial debt forgiveness: whether a perpetual note is a debt", "Issue": "Is a 'perpetual note' a debt for the purposes of former subsection 245-15(1) of Schedule 2C to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The issuer of the perpetual note (Debtor) had no enforceable obligation to pay the note holder the face value of the note before it was redeemed at a discount by mutual agreement. As such, the perpetual note did not satisfy the definition in former subsection 245-15(1) of Schedule 2C to the ITAA 1936 of a debt as being: 'an enforceable obligation imposed by law on a person to pay an amount to another person.'", "Facts": "Debtor issued to investors unsecured notes that had no maturity date. Unless and until Debtor defaulted or became insolvent (neither of which has occurred), the terms of the notes provided that their holders had no legal rights to enforce repayment of the notes by Debtor. Debtor, having surplus funds available in 2009, made an offer to all the holders of the perpetual notes to redeem them at a 30% discount to their face value. Having severe liquidity problems because of the Global Financial Crisis, a significant number of holders accepted the offer. They were promptly paid the agreed 70% of the face value of their notes, which were then cancelled by Debtor.", "Reasons_for_Decision": "Summary: In Tasman Group Services Pty Ltd v. Commissioner of Taxation of the Commonwealth of Australia 2008 ATC 20-002; (2008) 69 ATR 257, Heerey J. considered the meaning of 'debt' for the purposes of subsection 245-15(1) of Schedule 2C to the ITAA 1936. Heerey J. decided that it is not necessary that a debt be immediately enforceable at the time of forgiveness in order to satisfy subsection 245-15(1) of Schedule 2C to the ITAA 1936. The short answer is that there is still an enforceable obligation imposed by law to pay a creditor even if the time for payment is postponed or deferred. In terms of the legislative purpose of Div 245, there is just as much an economic benefit for a debtor if his creditor forgives a debt which is not yet due for payment as there is when the debt is due, or overdue. This aspect of Heerey J's decision was confirmed by the Full Federal Court ( Federal Commissioner of Taxation v. Tasman Group Services Pty Ltd (2009) 180 FCR 128; 2009 ATC 20-138; (2009) 74 ATR 739). However, in contrast to the loans considered by Heerey J, the notes in this case were 'perpetual' and the holders of the notes never had any future enforceable legal rights to compel Debtor to repay the face value of their notes. As explained at paragraph 73 of Taxation Ruling TR 2002/15 concerning perpetual notes: On either view we consider that, at least prior to an event of default, there is no loan evidencing a debt due that the Holders can sue for in the sense set out in the judgment of Hill J in ANZ Savings. Therefore, the perpetual notes did not constitute debts for the purposes of subsection 245-15(1) of Schedule 2C to the ITAA 1936.", "Date_of_Decision": "2 April 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 Former subsection 245-15(1) of Schedule 2C", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt Forgiveness Perpetual note", "Case_References": "Tasman Group Services Pty Ltd v FC of T 2008 ATC 20-002 2009 ATC 20-138", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201225", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2002/15 | Keywords Debt Forgiveness Perpetual note"}
{"ATO_ID_Number": "ATO ID 2003/983", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Characterisation of a 15 year convertible note", "Issue": "Do the convertible notes issued by an entity give rise to a debt interest under Division 974 of the Income Tax Assessment Act 1997 (the ITAA 1997)?", "Decision": "Yes. The convertible notes issued by the Issuer to the Holder give rise to a debt interest since they satisfy the debt test in section 974-20 of the ITAA 1997. Although the convertible notes also satisfy Item 4 in the table in subsection 974-75(1) of the ITAA 1997, the notes are prevented from being equity interests by virtue of paragraph 974-70(1)(b) of the ITAA 1997.", "Facts": "A company (Issuer) raises finance with the issue of 15 year convertible notes on 1 July 2001. The notes are purchased by Holder for $9.00 each. The notes have coupons of 7% pa that are paid annually on 1 July. The obligation to pay the coupon is not subject to any contingency and cannot be deferred or waived in any circumstance. Issuer may terminate the arrangement at any time after 1 July 2007. Upon redemption of the notes, whether early by Issuer or at maturity, Holder can choose to have the notes redeemed for $9.00 in cash, or converted into shares at a ratio of four shares in Issuer for each note. Issuer's shares are currently trading at $1.75 per share. Issuer's ordinary debt rate is 8% pa.", "Reasons_for_Decision": "Summary: For instruments issued on or after 1 July 2001, Division 974 of the ITAA 1997 provides rules that govern the classification of debt and equity interests for tax purposes. Pursuant to subsection 974-70(1) of the ITAA 1997, in order to give rise to an equity interest, a scheme must satisfy the equity test in subsection 974-75(1) of the ITAA 1997 and the interest must not also be characterised as a debt interest under Subdivision 974-B. Since the convertible notes may convert into an equity interest in the company they satisfy the basic test for an equity interest pursuant to Item 4 in the table in subsection 974-75(1) of Subdivision 974-C of the ITAA 1997. In these circumstances to be considered an equity interest, the scheme must also be a 'financing arrangement' (subsection 974-75(2) of the ITAA 1997). The arrangement between Issuer and Holder in relation to the notes falls within the ambit of a 'scheme' which is defined very broadly in subsection 995-1(1) to include 'any arrangement'. Issuer issued the notes to raise finance, therefore the scheme is a financing arrangement under paragraph 974-130(1)(a) of Subdivision 974-F of the ITAA 1997. To determine whether the interest is also characterised as a debt interest, it is necessary to examine the debt test contained in subsection 974-20(1) of Subdivision 974-B of the ITAA 1997. The debt test will be satisfied if: As discussed above, the scheme in this case constitutes a 'financing arrangement' (paragraph 974-20(1)(a) of the ITAA 1997). Issuer receives a financial benefit under the scheme amounting to $9.00 for each convertible note purchased by Holder (paragraph 974-20(1)(b) of the ITAA 1997). In return, Issuer has an obligation to pay the note holder an annual coupon of 7% of $9.00 on each note for the term of the note. The coupon payments are not subject to any contingency and cannot be deferred or waived in any circumstance. The company also has an obligation to repay the investment of $9.00 at maturity or earlier termination, provided that the note holder does not exercise its right to convert the note into shares. A right of this sort does not of itself make the obligation to repay the investment contingent (subsection 974-135(4) of the ITAA 1997). It is considered that in this case, Issuer has an effectively non-contingent obligation to repay the investment (paragraph 974-20(1)(c) of the ITAA 1997). Under subsection 974-35(1) of the ITAA 1997, where the performance period for the arrangement exceeds 10 years the financial benefit is calculated in present value terms; otherwise the financial benefit is calculated in nominal terms. Further, when calculating the value of the financial benefit provided it is assumed that the interest arising from the scheme is held for the rest of its life (subsection 974-35(2) of Subdivision 974-B). Once 6 years has passed, Issuer may redeem the notes at any time, however, it has no effectively non-contingent obligation to do so. In the absence of any such obligation, the existence of the option to terminate early is to be disregarded in determining the length of the life of the interest (subsection 974-40(2) of the ITAA 1997). Therefore, the note is taken to have a performance period of 15 years and the value of the benefit provided by Issuer is calculated in present value terms in accordance with the formula set out in subsection 974-50(4) of the ITAA 1997: Financial Benefit Provided = Amount or value of financial benefit in nominal terms / [1 + Adjusted benchmark rate of return] n where the adjusted benchmark rate of return is 75% of the ordinary debt rate of Issuer (section 974-145 of the ITAA 1997) that is, 75% x 8% = 6%. n is the number of years in the period starting on the day on which the test interest is to be provided. Therefore the financial benefit provided by Issuer = ($9.00 x 7%)/(1 + 6%) 1 + ($9.00 x 7%)/(1 + 6%) 2 + ... + ($9.00 + [$9.00 x 7%])/(1 + 6%) 15 = $9.87 As this is greater than the value of the financial benefit of $9.00 received by Issuer, it can be said that it is substantially more likely that not that the value of the benefit provided by Issuer is at least equal to the value of the benefit received by Issuer (paragraph 974-20(1)(d) of the ITAA 1997). Neither the value provided, nor the value received, equal nil (paragraph 974-20(1)(e) of the ITAA 1997). Therefore the convertible notes give rise to a debt interest. In this case the interest meets the requirements of both the test for a debt interest and the basic test for an equity interest. However, since the debt test prevails over the equity test, the interest is a debt interest under Division 974 of the ITAA 1997.", "Date_of_Decision": "28 October 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 974-20 section 974-35 subsection 974-40(2) subsection 974-50(4) subsection 974-70(1) section 974-75 paragraph 974-130(1)(a) subsection 974-135(4) section 974-145 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible notes Debt test Equity test Value of financial benefit/s Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003983", "Unmatched_Content": "Keywords Convertible notes Debt test Equity test Value of financial benefit/s Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2012/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: application of subsection 230-15(5) of the Income Tax Assessment Act 1997 to a dividend on a debt interest", "Issue": "Can subsection 230-15(5) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to limit deductions under subsection 230-15(4A) of the ITAA 1997 for a loss that is a dividend on a redeemable preference share (RPS) which is a debt interest under Division 974 of the ITAA 1997?", "Decision": "Yes. Where a loss that is a dividend on a RPS, which is a debt interest for the purposes of Division 974 of the ITAA 1997, exceeds the benchmark rate of return for the debt interest increased by 150 basis points, subsection 230-15(5) of the ITAA 1997 can apply to limit the deductions allowable under subsection 230-15(4A) of the ITAA 1997.", "Facts": "The taxpayer is a company which has issued a RPS. The RPS is characterised as a debt interest for the purposes of Division 974 of the ITAA 1997. The RPS is a financial arrangement as defined in section 230-45 of the ITAA 1997. The terms of the RPS allow a non-cumulative dividend to be paid each year. If all non-cumulative dividends are paid over the life of the RPS the return on the RPS will exceed the benchmark rate of return (as defined in section 974-145 of the ITAA 1997) increased by 150 basis points. All financial arrangements of the taxpayer are subject to Division 230 of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Subsection 230-15(2) provides the general test for deductibility of a loss under Division 230. The deduction will be available to the extent the loss is made in gaining or producing the relevant taxpayer's assessable income or is necessarily made in carrying on a business for that purpose. Where a loss is made to secure a permanent or enduring benefit it may not have the requisite nexus to gaining or producing of assessable income or carrying on a business for that purpose (see for example Macquarie Finance Ltd v. Commissioner of Taxation (2005) 146 FCR 77; 2005 ATC 4829; (2005) 61 ATR 1. Similarly a loss may not be deductible where it is in substance a distribution of profit as the liability to pay the amount will be contingent on the existence of profits, rather than being incurred in the course of deriving income. Therefore such a loss does not have the requisite nexus to gaining or producing assessable income as it constitutes the application of profits already derived. As stated by Dixon J in Federal Commissioner of Taxation v. The Midland Railway Co of Western Australia Ltd (1952) 85 CLR 306; (1952) 9 ATD 372; at CLR 316: ...a distribution of the share of profits has not been considered to be an outgoing incurred for the purpose of earning profits and so to be antecedently deductible as a trade expense before the ascertainment of the taxable fund... Subsection 230-15(4) modifies the operation of subsection 230-15(2), effectively removing these two obstacles to deductibility. Subsection 230-15(4) does this by stating that these characteristics (on their own) will not prevent a loss from being deductible under subsection 230-15(2). The loss must still otherwise satisfy the requirements of subsection 230-15(2) to be deductible under this provision. In the case of a distribution of profits, even disregarding the fact that the liability to make the payment is dependent on the availability of profits, it is not possible to otherwise identify an actual nexus to gaining or producing assessable income. Subsection 230-15(4A) contains rules to facilitate the deductibility of a loss where that loss can be said to be a dividend on a debt interest. The scope of the deduction is determined by the assumptions in paragraphs 230-15(4A)(a) to 230-15(4A)(c) and the test in subsection 230-15(2). That is, a loss that can be said to be a dividend on a debt interest will be deductible to the extent that a deduction would be available under subsection 230-15(2) if the payment of the dividend was the incurring of an equivalent amount of interest on the same finance. The deductibility of an amount of interest is typically determined through an examination of the purpose of the borrowing and the use to which the borrowed funds are put ( Federal Commissioner of Taxation v. Munro (1926) 38 CLR 153; Fletcher & Ors v. Federal Commissioner of Taxation (1991) 173 CLR 1; 91 ATC 4950; (1991) 22 ATR 613). Therefore if the funds in respect of which the dividend was paid or provided were used in, or borrowed for the purpose of, gaining or producing assessable income (or carrying on a business for that purpose), the assumptions in subsection 230-15(4A) prima facie supply a nexus for the purposes of subsection 230-15(2). It is clear from the structure of section 230-15 that the extent to which a loss is deductible under subsection 230-15(2) will be affected by the benchmark rate of return rule in subsection 230-15(5) if subsection 230-15(4) is relied upon to enable the nexus in subsection 230-15(2) to be satisfied. Although subsection 230-15(4A) is itself a source of a deduction, it does so by reference to 'the extent to which it would have been a deductible loss under subsection (2)'. The assumptions in subsection 230-15(4A) do not overcome the fact that the dividend is actually the post-derivation application of profit. In considering whether the dividend would have been a deductible loss under subsection 230-15(2) if the assumptions in paragraphs 230-15(4A)(a) to 230-15(4A)(c) are made, it is therefore still necessary to have regard to the modifications to subsection 230-15(2) under subsection 230-15(4). That is, even if the assumptions in paragraphs 230-15(4A)(a) to 230-15(4A)(c) are made, the loss will not be deductible unless regard is had to one or both of the things provided for in subsection 230-15(4). The reference to subsection 230-15(4) in paragraph 230-15(4A)(c) supports the conclusion that a deduction under subsection 230-15(4A) inherently requires the application of subsection 230-15(4) (and incorporates the latter through the reference to subsection 230-15(2)). Subsection 230-15(5) imposes a 'cap' on deductions for a loss on a debt interest to the extent that the compounded internal rate of return exceeds the benchmark rate of return for the debt interest increased by 150 basis points. This is done by 'turning off' subsection 230-15(4), and its effect of removing obstacles to deductibility under subsection 230-15(2). Although subsection 230-15(5) on its terms only expressly affects the application of subsection 230-15(4), the interrelationship between the subsections is such that deductibility of an amount under subsection 230-15(4A) must be compared with the position under subsection 230-15(2), as affected by subsections 230-15(4) and 230-15(5). As such, where the dividends on the RPS result in the return on the RPS exceeding the benchmark rate of return increased by 150 basis points, the cap in subsection 230-15(5) can apply in determining a deduction for such losses under subsection 230-15(4A).", "Date_of_Decision": "19 March 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 subsection 230-15(2) subsection 230-15(4) subsection 230-15(4A) paragraph 230-15(4A)(a) paragraph 230-15(4A)(b) paragraph 230-15(4A)(c) subsection 230-15(5) section 230-45 Division 974", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income tax Taxation of Financial Arrangements CoE", "Case_References": "Federal Commissioner of Taxation v Munro (1926) 38 CLR 153", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201219", "Unmatched_Content": "Keywords Income tax Taxation of Financial Arrangements CoE"}
{"ATO_ID_Number": "ATO ID 2006/230", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Revolving credit facility: Facility Agreement - debt interest", "Issue": "If each respective drawdown under a Facility Agreement passes the debt test in section 974-20 of the Income Tax Assessment Act 1997 (ITAA 1997), will the Facility Agreement itself be treated as the debt interest under Division 974 of the ITAA 1997?", "Decision": "No. Even though each respective drawdown under the Agreement passes the debt test in section 974-20 of the ITAA 1997, the Facility Agreement itself is not a debt interest under Division 974 of the ITAA 1997.", "Facts": "A Company (the Borrower) enters into a syndicated loan Facility Agreement with arms length parties (the Lenders). The Lenders will commit to advance funds in staged drawdowns up to an agreed credit limit, provided certain pre-requisites are met. These include the completion and service by the Borrower to the Lenders a valid Notice of Drawdown stating, amongst other things, the amount to be drawn down and the term required. The loan Facility Agreement itself will terminate in 5 years and each drawdown can be for a maximum term of 6 months provided that the term will be completed before the loan Facility Agreement terminates. Each successful Notice of Drawdown imports the terms and conditions contained in the Facility Agreement. There is an effectively non-contingent obligation to repay the principal advanced under each drawdown, with an accrued market rate of interest thereon, at the end of the term of the drawdown. As a consequence, each respective drawdown under the Facility Agreement will pass the debt test in section 974-20 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 974-15(1) of the ITAA 1997 provides that: A scheme gives rise to a debt interest in an entity if the scheme, when it comes into existence, satisfies the debt test in subsection 974-20(1) in relation to the entity. Section 995-1 of the ITAA 1997 defines 'scheme' to mean any arrangement or any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. Thus, while it could be argued that the entering into the Facility Agreement by the Borrower will constitute a scheme under this wide definition, that scheme would not of itself be a scheme that satisfies the debt test at the date it comes into existence, as required by subsection 974-15(1) of the ITAA 1997. For example, at the instance the Facility Agreement is entered into there would not exist any effectively non-contingent obligations between either of the parties to the arrangement. Rather, it will be the 'action' of drawing down an Advance in accordance with the terms of the Facility Agreement that will be the 'scheme' that is tested to see if that drawdown passes the debt test. In this regard subsection 974-55(1) provides: If a scheme, or 2 or more related schemes, give rise to a debt interest in an entity, the debt interest: (a) consists of the interest that carries the right to receive a financial benefit that the entity or a connected entity has an effectively non-contingent obligation to provide under the scheme or any of the schemes; and (c) is taken to be issued by the entity; and (d) is issued when the entity (or a connected entity of the entity) first receives a financial benefit under the scheme or any of the schemes; and (e) is on issue while an effectively non-contingent obligation of the entity (or a connected entity of the entity) to provide a financial benefit under the scheme or any of the schemes remains unfulfilled. While each successful Notice of Drawdown imports the terms and conditions contained in the Facility Agreement to each drawdown, it does not result in a conclusion that, if the debt test is passed on each respective drawdown, it is the Facility Agreement itself that is the debt interest. Rather, the 'interest that carries the right to receive a financial benefit that the entity or a connected entity has an effectively non-contingent obligation to provide under the scheme' would be each separate and respective drawdown. At the time the Facility Agreement is entered, the Borrower only has a contingent right to receive a financial benefit under the scheme. This contingent right will crystallise into an effectively non-contingent right once the Borrower satisfies all the necessary pre-requisites under the Facility Agreement, and the Lenders thereafter advance the funds. Thus, the debt interest will not arise until such an Advance is actually drawn down, and each drawdown made under the terms of the Facility Agreement will form a separate debt interest for the purposes of Division 974 of ITAA 1997. The related scheme provisions in section 974-15 have no application to the Advances because each Advance will individually give rise to a debt interest: refer to subsection 974-15(3) of the ITAA 1997.", "Date_of_Decision": "19 July 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 974-15 section 974-20 section 974-55 section 974-150 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Debt interest Debt test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006230", "Unmatched_Content": "This ATO ID has been amended to update legislative references. | Keywords Debt equity borderline Debt interest Debt test"}
{"ATO_ID_Number": "ATO ID 2003/200", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: Redeemable Preference Share", "Issue": "Will Redeemable Preference Shares (RPS), that are redeemable at the option of the issuer and provide for dividend returns that are contingent on profits, be characterised as debt interests pursuant to Subdivision 974-B of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, the RPS will not be characterised as debt interests pursuant to Subdivision 974-B of the ITAA 1997. The RPS will be characterised as an equity interest as defined in subsection 974-70(1) of the ITAA 1997.", "Facts": "The arrangement involves a company issuing RPS at a specified issue price with terms that provide for payment of a fixed cumulative dividend and redemption being at the discretion of the issuing company. Any dividends payable on the RPS are payable in priority to dividends paid to ordinary shareholders. Where the directors of the issuing company elect to redeem the RPS, the holders are entitled to receive payment of the par value and any premiums on the RPS together with any dividend accrued whether declared or not. The issuing company has a past history of profitability and a dividend has always been paid. As a result, the issuing company contends that the payment of a dividend is dependent only on its willingness to pay, and the non-payment of a dividend is a materially remote possibility.", "Reasons_for_Decision": "Summary: The RPS are an equity interest as defined in subsection 974-70(1) of the ITAA 1997 because: the issue of RPS is a scheme (as defined in subsection 995-1(1) of the ITAA 1997) that falls within one of the equity tests in the equity interest table contained in subsection 974-75(1) of the ITAA 1997 (an RPS gives rise to an interest as a member (shareholder) of the issuing company, Item 1 in the equity interest table); and the RPS are not characterised as, and do not from part of a larger interest that is characterised as, a debt interest (as defined in subsection 974-15(1) of the ITAA 1997) in the issuing company. The RPS will not be characterised as a debt interest because they fail to satisfy two elements of the debt test as set out in subsection 974-20(1) of the ITAA 1997. That is, The RPS will not give rise to an effectively non-contingent obligation (as defined in section 974-135 of the ITAA 1997) because the issuing company does not have an obligation, either in substance or effect, to pay a dividend or redeem the RPS and pay an amount equal to the par value and any premiums on the RPS together with any dividend accrued, whether declared or not. Subsection 975-135(3) of the ITAA 1997 provides that an obligation is non-contingent if it is not contingent on any event, condition or situation (including the economic performance of the entity) other than the ability or willingness of an entity to meet the obligation. The issuing company's ability to pay a dividend will depend on the existence of profits, because it can only pay a dividend out of profits pursuant to the operation of the Corporations Act 2001 . Accordingly, if there are no profits, the issuing company will not have an effectively non-contingent obligation to pay a dividend. The effectively non-contingent nature of an obligation is not affected if the obligation is subject only to the ability or willingness of the issuer company to meet the obligation (subsection 974-135(3) of the ITAA 1997) or if any contingency is so artificial or contrived as to suggest that the occurrence of the contingency is immaterially remote or a theoretical rather than a real possibility (subsection 974-135(6) of the ITAA 1997). However, past profitability and the past payment of dividends do not result in the conclusion that there is sufficient certainty of future profitability or certainty as to future economic performance to support a view that a dividend will become payable. Accordingly, it cannot be concluded that there is an effectively non-contingent obligation to provide the required financial benefit. In addition, the issuing company will not have an effectively non-contingent obligation to redeem the RPS and pay an amount, because redemption is at the discretion of the directors and there is no compulsion on the directors of the issuing company to redeem the RPS at a specified date or time. Given that there is no established point in time where the issuing company is under an obligation to redeem the RPS, if the directors of the issuing company never exercise their discretion to redeem the RPS, the RPS will never be redeemed and no payments will be owing. As a result of the issuing company not having an effectively non-contingent obligation to pay a dividend or redeem the RPS, it cannot be said that it is substantially more likely than not that the value of the financial benefits provided will equal or exceed the value of the financial benefit received. Only the value of those financial benefits that the issuing company has an effectively non-contingent obligation to provide are taken into account in determining whether the requirement in paragraph 974-20(1)(d) of the ITAA 1997 is satisfied.", "Date_of_Decision": "11 October 2002", "Year_of_Income": "Year ended 31 December 2001", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 974-15(1) Subsection 974-20(1) Subsection 974-70(1) Subsection 974-75(1) Section 974-135 Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003200", "Unmatched_Content": "Keywords Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/527", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Redeemable preference shares: debt interest under Division 974", "Issue": "Do redeemable preference shares issued by a taxpayer company give rise to a debt interest under Division 974 of the Income Tax Assessment Act (ITAA 1997) if the term to maturity is less than 10 years?", "Decision": "Yes. Redeemable preference shares issued by a taxpayer company give rise to a debt interest under Division 974 of the ITAA 1997 provided all of the requirements of the test for a debt interest are satisfied.", "Facts": "The taxpayer is an Australian resident company which issued redeemable preference shares ('RPS') to a non-resident investor. Under the terms of the RPS, the holder of a RPS is entitled to a cumulative dividend in respect of each dividend period. The payment of a dividend is subject to: The RPS have a maturity date of five years after the issue date. The amount that must be redeemed at maturity is the issue price plus any accrued dividends outstanding on the RPS on the redemption date.", "Reasons_for_Decision": "Summary: For the issue of RPS to give rise to a debt interest under Division 974 of the ITAA 1997 it must be a scheme that, at the time the scheme comes into existence, satisfies the debt test in subsection 974-20(1) of the ITAA 1997. The subscription for, and issue of, RPS in the taxpayer company constitutes a scheme under the broadly defined meaning of that term. The debt test is satisfied if all of the following five criteria are satisfied: Under subsection 974-20(1) of the ITAA 1997, this requirement does not have to be met if the entity is a company and item 1 of the table in subsection 974-75(1) of the ITAA 1997 is satisfied. A scheme satisfies item 1 of the table in subsection 974-75(1) of the ITAA 1997 if it gives rise to an interest in the company as a member or stockholder of the company. A member of a company includes a shareholder or stockholder (section 995-1 of the ITAA 1997). The taxpayer is a company and the interest arising from the scheme, that is, RPS, will give rise to an interest in the company as a member of the company. Therefore, item 1 of the table in subsection 974-75(1) is satisfied. The concept of financial benefit is defined in section 974-160 of the ITAA 1997. A financial benefit was conferred on the taxpayer company by the provision of money by the non-resident investor in subscribing for the RPS. The taxpayer company has therefore received a financial benefit under the scheme. The concept of an effectively non-contingent obligation (ENCO) is defined by section 974-135 of the ITAA 1997. There is an ENCO to provide a financial benefit if, having regard to the pricing, terms and conditions of the scheme there is in substance an ENCO to provide such a benefit (subsection 974-135(1)). The ENCO criterion applies to both the provision of financial benefits under the scheme and to the termination of the scheme (subsection 974-135(2) of the ITAA 1997). Redemption of a preference share is not taken to be contingent merely because of a requirement of corporations law (see section 254K of the Corporations Act 2001 ) for the redemption to be financed out of profits or a fresh issue of shares (subsection 974-135(5)). The payment of dividends on the RPS is not effectively non-contingent because that payment is dependent on there being sufficient profits available and the exercise, by directors, of their discretion to declare a dividend. However, under the terms of the RPS issue, the issue price of the RPS plus any accrued dividends is payable on the maturity date. Therefore, under the terms of the RPS and having regard to subsection 974-135(5) of the ITAA 1997, the taxpayer has, on redemption of the RPS, an ENCO to provide a financial benefit to the parent company. The general rules for the valuation of financial benefits are contained in section 974-35 of the ITAA 1997. The value of the financial benefit is calculated in nominal terms if the performance period for the interest is 10 years or less (subparagraph 974-35(1)(a)(i)). The period within which the taxpayer's ENCO is to be satisfied is five years. The value of the financial benefit to be provided by the taxpayer company on the maturity date is at least equal to the value of the financial benefit received by the taxpayer company. Both the value received and value provided are positive amounts. As all the debt test requirements are satisfied in relation to the RPS scheme, the RPS give rise to a debt interest.", "Date_of_Decision": "16 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-20(1) section 974-35 subsection 974-75(1) section 974-135 section 974-160 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/528 | ATO ID 2003/529 | ATO ID 2003/530", "Subject_References": "Debt equity borderline Redeemable preference share Debt test Effectively non-contingent obligation", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003527", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Debt equity borderline Redeemable preference share Debt test Effectively non-contingent obligation"}
{"ATO_ID_Number": "ATO ID 2003/529", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt and Equity Financing: obligation to withhold tax on a return on a debt interest under Division 974", "Issue": "Does the obligation to withhold tax in respect of a dividend, on redeemable preference shares which are classed as a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), arise at the time the dividend is paid, or is applied or dealt with in any way on behalf of the recipient or as the recipient directs?", "Decision": "Yes. For non-resident withholding tax purposes, dividends on redeemable preference shares which are classed as a debt interest are treated as interest. The obligation to withhold tax therefore arises at the time the dividend is paid, or is applied or dealt with in any way on behalf of the recipient or as the recipient directs.", "Facts": "The taxpayer is an Australian resident company. During 2002, the taxpayer company declared dividends on redeemable preference shares ('RPS). The recipient of these dividends is a non-resident investor. The RPS constitute a debt interest under Division 974 of the ITAA 1997 and are therefore, non-equity shares for income tax purposes.", "Reasons_for_Decision": "Summary: For the purposes of Division 11A of the Income Tax Assessment Act 1936 (ITAA 1936), 'interest' is defined to include 'an amount...that is a dividend paid in respect of a non-equity share' (paragraph 128A(1AB)(d) of the ITAA 1936). Consequently, the RPS dividends will be treated as income derived by a non-resident that consists of interest to which section 128B of the ITAA 1936 applies. The taxpayer company's obligation to withhold is therefore determined by section 12-245 of Schedule 1 to the Taxation Administration Act 1953 (TAA). Section 12-245 imposes an obligation to withhold tax on interest (within the meaning of Division 11A of Part III of the ITAA 1936) it pays to a recipient who has an address outside Australia. The obligation to withhold is timed to payment, which has an extended meaning for withholding tax collection purposes (section 11-5 of Schedule 1 to the TAA). The taxpayer company is therefore obliged to withhold tax on a RPS dividend that has not been paid (in the ordinary sense) to the non-resident company but has been reinvested, accumulated, capitalised, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the non-resident company or as the non-resident company directs (subsection 128A(2) of the ITAA 1936). Therefore, for non-resident withholding tax purposes, dividends on redeemable preference shares which are classed as a debt interest are treated as interest and the obligation to withhold tax therefore, arises at the time the dividend is paid.", "Date_of_Decision": "16 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128A(1AB) subsection 128A(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/527 | ATO ID 2003/528 | ATO ID 2003/530", "Subject_References": "Debt equity borderline Redeemable preference share Non-resident interest withholding tax Non-equity share", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003529", "Unmatched_Content": "Keywords Debt equity borderline Redeemable preference share Non-resident interest withholding tax Non-equity share"}
{"ATO_ID_Number": "ATO ID 2003/665", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Redeemable preference shares: interaction between sections 974-20 and 974-30 of the ITAA 1997", "Issue": "Is the redeemable preference share (RPS) issued by a Subsidiary Company (Sub Co) to the Holding Company (Hold Co) classified for the purposes of the debt/equity rules as a debt interest? It is recognised that an issue for the purposes of the debt test in section 974-20 of the Income Tax Assessment Act 1997 (ITAA 1997) is what financial benefits are received and provided on the issue of the RPS.", "Decision": "Yes. The RPS issued by Sub Co to the Hold Co would be classified as a debt interest under section 974-20 of the ITAA 1997. Whilst the RPS will also satisfy the the requirements of item 1 of the table in section 974-75 of the ITAA 1997, the RPS will not give rise to an equity interest test as a scheme cannot give rise to an equity interest where it is also characterised as a debt interest (refer to subsection 974-70(1)(b) of the ITAA 1997).", "Facts": "Sub Co issues shares to a connected entity, Hold Co, in exchange for cash of $100. The terms of the instrument are as follows: The redemption payment is contingent solely on the Corporations Act requirements and is otherwise effectively non-contingent.", "Reasons_for_Decision": "Summary: The RPS is an equity interest as defined in subsection 974-70(1) of the ITAA 1997 because the issue of the RPS is a scheme (as defined in subsection 995-1(1)), that gives rise to an interest set out in the table contained in subsection 974-75(1). Specifically, a RPS is an interest as a member or shareholder of the issuing company as the interest is in the form of a share. It therefore satisfies the requirements of Item 1 of the table in subsection 974-75(1). Subsection 974-20(1) of the ITAA 1997 outlines the test to be used to determine if a scheme gives rise to a debt interest. The scheme in this case is the arrangement between Sub Co and Hold Co for the issue of the RPS in return for the investment of $100. | Detailed Reasoning - 1. Is the scheme a financing arrangement?: Yes. The arrangement between Sub Co and Hold Co for the issue of the RPS in return for the investment of $100 is a scheme that is entered into to raise finance for Sub Co. The finance raised is $100 for each RPS. | Detailed Reasoning - 2. Does Sub Co receive a financial benefit under the arrangement?: Yes. Sub Co receives a financial benefit under the arrangement. The value of the financial benefit is the price paid by Hold Co for the RPS, being $100. | Detailed Reasoning - 3. Does Sub Co have an effectively non-contingent obligation to provide a financial benefit in the future?: Yes. The redemption date of the RPS is 31/12/2007. The redemption is contingent only on Corporations Act requirements of being out of a fresh issue of shares or profits (section 254K of Chapter 2H of Part 2H.2 of the Corporations Act). It is otherwise effectively non-contingent. Subsection 974-135(5) of the ITAA 1997 states that an obligation to redeem a preference share is not contingent merely because there is a legislative requirement for the redemption amount to be met out of profits or a fresh issue of equity interests. In this case, there is an effectively non-contingent obligation by Sub Co to pay Hold Co $100 on redemption on 31/12/2007. | Detailed Reasoning - 4. Is the value of the financial benefit provided greater than or equal to the value of the financial benefit received?: Yes. The performance period of the scheme must end no later than 10 years after the interest arising from the scheme is issued. Therefore, pursuant to subsection 974-35(1)(a)(i) of the ITAA 1997, the value of the financial benefit is calculated in nominal terms. As the redemption amount is $100 and it is equal to the financial benefit received, the test is satisfied. It can be said that it is substantially more likely than not that the value of the financial benefits provided will equal or exceed the value of the financial benefit received. The issue of the RPS by Sub Co to the Hold Co would therefore be classified as a debt interest under section 974-20 of the ITAA 1997 as: Although the issue of the RPS also satisifies item 1 of the table in subsection 974-75(1) of the ITAA 1997, the RPS cannot give rise to an equity interest as the RPS is characterised as a debt interest (refer to subsection 974-70(1)(b) of the ITAA 1997).", "Date_of_Decision": "24 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 974-5(4) subsection 974-15(1) section 974-20 subsection 974-20(1) paragraph 974-20(1)(b) paragraph 974-20(1)(c) paragraph 974-20(4)(b) section 974-30 paragraph 974-30(1)(b) subsection 974-70(1) paragraph 974-70(1) section 974-75 subsection 974-135(5) subsection 974-75(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/200", "Subject_References": "Debt test Debt equity borderline Redeemable preference shares", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003665", "Unmatched_Content": "dividends at 5% per annum, contingent on profits | $100 on 31/12/2007, contingent only on Corporations Act 2001 requirements of being out of a fresh issue of shares or profits | Sub Co, a subsidiary of Hold Co | Hold Co, the holding company of Sub Co | Keywords Debt test Debt equity borderline Redeemable preference shares"}
{"ATO_ID_Number": "ATO ID 2003/898", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: whether redeemable preference shares are an equity interest or a debt interest", "Issue": "Are the redeemable preference shares issued by an entity a debt interest pursuant to Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The redeemable preference shares issued by Issuer to Holder are debt interests since they satisfy the debt test in section 974-20 of Subdivision 974-B of Division 974 of the ITAA 1997. Although the redeemable preference shares also satisfy the equity test in section 974-75 of the ITAA 1997, the debt test prevails over the equity test by virtue of the tie-breaker rule in paragraph 974-70(1)(b) and the objective provision of subsection 974-5(4) of the ITAA 1997.", "Facts": "A company (Issuer) issues redeemable preference shares on 15 August 2001. Holder purchases the shares for their face value of $2.00 each. The shares are to be redeemed at their face value after eight years, or earlier if a takeover offer is made and accepted by the board of the company. Dividends are to be paid annually at 7.25% of the issue price when dividends on ordinary shares are paid. Issuer is not permitted to pay a dividend on its ordinary shares unless and until all arrears of dividends on the redeemable preference shares have been paid.", "Reasons_for_Decision": "Summary: For instruments issued on or after 1 July 2001, Division 974 of the ITAA 1997 provides rules that govern the classification of debt and equity interests for tax purposes. Since the redeemable preference shares are shares in legal form they give rise to a membership interest. Item 1 of the table contained in subsection 974-75(1) of Subdivision 974-C of the ITAA 1997 is satisfied. However, the shares do not give rise to an equity interest in the company as they do not satisfy the requirements of paragraph 974-70(1)(b) of the ITAA 1997. That is, the shares are also characterised as a debt interest in the company (see reasoning below) and the debt test prevails over the equity test (refer to: the objective provision in sub-section 974-5(4) of the ITAA 1997, subsection 974-15(1) and paragraph 974-70(1)(b) of the ITAA 1997). However, should the interest also satisfy the debt test it will be a debt interest, rather than an equity interest, by virtue of the application of the tie-breaker rule in sub-section 974-5(4) of the ITAA 1997. The debt test is contained in subsection 974-20(1) of Subdivision 974-B of the ITAA 1997. For the redeemable preference shares, the debt test will be satisfied if there is a 'scheme' under which: The arrangement between Issuer and Holder in relation to the redeemable preference shares falls within the ambit of a scheme which is defined very broadly in subsection 995-1(1) of the ITAA 1997 to include 'any arrangement'. Issuer receives a financial benefit under the scheme to the extent of $2.00 paid for each redeemable preference share issued. Since the payment of an annual dividend on the redeemable preference shares is contingent upon the availability of profits, Issuer does not have an effectively non-contingent obligation to pay the dividends. However, Issuer does have an effectively non-contingent obligation to repay the issue price of $2.00 per share on redemption. The value of the benefit received by Issuer at issue date is the price of the security, i.e. $2.00 per share. In return, Issuer provides Holder with a financial benefit that amounts to, at the least, a return of Holder's capital of $2.00 per share. Since the shares are due for redemption after eight years the benefits received and provided under the scheme are valued in nominal terms pursuant to paragraph 974-35(1)(a)(i) of the ITAA 1997. Therefore it can be said that it is substantially more likely than not that the value provided by Issuer will be at least equal to the value received by Issuer. Therefore the redeemable preference shares satisfy the debt test and are a scheme which gives rise to a debt interest in the entity pursuant to subsection 974-15(1) of the ITAA 1997.", "Date_of_Decision": "26 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-5(4) section 974-15 subsection 974-15(1) section 974-20 subsection 974-20(1) paragraph 974-35(1)(a) section 974-70 paragraph 974-70(1)(b) subsection 974-75(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Redeemable preference shares Financial instruments Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003898", "Unmatched_Content": "This ATO ID has been amended to improve clarity and to replace the reference to subsection 975-15(1) with the correct reference to subsection 974-15(1) of the ITAA 1997. | Keywords Redeemable preference shares Financial instruments Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/972", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity financing: unsecured notes that may be converted into preference shares", "Issue": "Does the issue of an unsecured note that provides for conversion to a preference share in the event of the issuer's default give rise to a debt interest?", "Decision": "Yes. The issue of an unsecured note that provides for conversion to a preference share in the event of the issuer's default satisfies both the equity test in subsection 974-75(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and the debt test in section 974-20 of the ITAA 1997. However, the tiebreaker rule in paragraph 974-70(1)(b) of the ITAA 1997 applies so that the issue of the note gives rise to a debt interest.", "Facts": "An Australian resident company has raised capital by issuing unsecured notes (notes). The notes are issued on the following terms:", "Reasons_for_Decision": "Summary: Division 974 of the ITAA 1997 classifies an interest in a company as a debt interest or an equity interest for tax purposes according to the economic substance of the rights and obligations of an arrangement rather than merely its legal form. The debt test in section 974-20 of the ITAA 1997 is satisfied if all of the following five steps are satisfied: Step 1: Is there a scheme? Yes. The term 'scheme' is broadly defined in subsection 995-1(1) of the ITAA 1997. There is a scheme in the form of an arrangement or course of action to raise capital by issuing the notes. Step 2: Is the scheme a financing arrangement? Yes. The issue of the notes raises finance for the company and is therefore a financing arrangement as defined by section 974-130 of the ITAA 1997. Step 3: Does the issuing entity receive a financial benefit under the arrangement? Yes. The company receives a financial benefit from the issue of the notes by receipt of subscription money. The concept of financial benefit is broadly defined in section 974-160 of the ITAA 1997. Step 4: Does the issuing entity or a connected have an effectively non-contingent obligation to provide a financial benefit? Yes. The concept of an effectively non-contingent obligation (ENCO) is defined by section 974-135 of the ITAA 1997. There is an ENCO to provide a financial benefit if, having regard to the pricing, terms and conditions of the scheme there is in substance an ENCO to provide such a benefit (subsection 974-135(1) of the ITAA 1997). The ENCO criterion applies to both the provision of financial benefits under the scheme and to the termination of the scheme (subsection 974-135(2) of the ITAA 1997). The company does have an ENCO as it is obliged under the terms of the notes to: Step 5: Is it substantially more likely than not that the financial benefit to be provided will be at least equal to or exceed the financial benefit received? Yes. If there is an ENCO, the fifth step of the debt test requires that it be substantially more likely than not that the financial benefit provided to the noteholders will be at least equal to the value of the financial benefit the company received. The value of the financial benefit is calculated in nominal terms if the performance period for the interest must end 10 years or less after the interest is issued (subparagraph 974-35(1)(a)(i) of the ITAA 1997). The period within which the taxpayer's ENCO is to be satisfied is four years. The nominal value of the financial benefit, being the repayment of principal plus the interest payments, to be provided by the company will at least equal the amount subscribed on issue of the notes. As the entire debt test requirements are satisfied in relation to the issue of the notes it gives rise to a debt interest. In determining what an equity interest is, the rules contain a table in section 974-75 of the ITAA 1997 that lists interests in a company that, as a general rule, are equity interests. As noteholders can elect to convert their notes into preference shares if an interest payment or principal repayment on the notes is not made by the time the payment becomes due the notes are an interest that satisfy item four in the equity interests table in subsection 974-75(1) of the ITAA 1997. The notes are a convertible interest as defined by section 974-165 of the ITAA 1997 because they can be converted into preference shares of the company if the company defaults on the interest payments payable on the notes. In such situations, that is, where an interest satisfies both the debt and the equity tests (hybrid interest), the tiebreaker rule in paragraph 974-70(1)(b) of the ITAA 1997 applies, resulting in the interest being a debt interest.", "Date_of_Decision": "9 October 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 974-20 section 974-160 subsection 974-135(1) subsection 974-135(2) subparagraph 974-35(1)(a)(i) subsection 974-75(1) paragraph 974-70(1)(b) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt interest Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003972", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Debt interest Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/1040", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: whether short term trade finance gives rise to debt interest under Division 974", "Issue": "Will trade finance borrowings under a short-term trade finance facility give rise to a debt interest in the taxpayer entity as defined in Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The trade finance borrowings under a short-term trade finance facility will give rise to a debt interest in the taxpayer entity under Division 974 of the ITAA 1997.", "Facts": "The taxpayer's main business activity consists of importing and exporting commodities. The taxpayer buys and on-sells these commodities. Commonly, there is a timing mismatch between the time of purchase and sale. The contracts for the acquisition and sale of commodities are financed by a short-term trade finance facility. The short-term trade finance facility allows the taxpayer to direct the financier to issue a letter of credit in favour of the supplier and to then pay the supplier once the financier is satisfied that the commodities are available and ready for delivery. In return for issuing the letter of credit, the taxpayer undertakes to pay the financier, an amount equal to the sum advanced by the financier to the supplier, including interest and reimbursement of expenses incurred by the financier. The trade finance facility between the taxpayer and the financier limits the term of the borrowing to no more than 180 days.", "Reasons_for_Decision": "Summary: Division 974 of the ITAA 1997 sets out the tests that determine whether an interest is characterised as debt or equity. Subsection 974-15(1) of the ITAA 1997 provides that a 'scheme' gives rise to a 'debt interest' if all the requirements of the debt test, as set out in subsection 974-20(1) of the ITAA 1997, are met. These requirements are: Under subsection 974-150(1) of the ITAA 1997, the term 'scheme' has the meaning given in subsection 995-1(1) of the ITAA 1997. Under subsection 995-1(1) of the ITAA 1997, the term scheme is defined to mean 'any arrangement, or any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise'. In the present case, the trade finance borrowings the taxpayer acquires under the trade finance facility would be a scheme pursuant to that definition. The trade finance borrowings are classified as a debt interest as those borrowings satisfy all the requirements of the debt test. That is:", "Date_of_Decision": "20 October 2003", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 974-15 section 974-20 section 974-30 section 974-35 section 974-130 section 974-135 section 974-150 section 974-160 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1041 | ATO ID 2003/1042", "Subject_References": "Debt equity borderline Debt test Financing arrangement Short term schemes", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031040", "Unmatched_Content": "Keywords Debt equity borderline Debt test Financing arrangement Short term schemes"}
{"ATO_ID_Number": "ATO ID 2003/1041", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: whether short term trade finance gives rise to debt interest exception under Division 974", "Issue": "Will trade finance borrowings under a short-term trade finance facility that is a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), be excepted from being a debt interest under section 974-25 of the ITAA 1997?", "Decision": "No. The short term trade finance facility will not be excepted from being a debt interest under section 974-25 of the ITAA 1997 because it does not satisfy the requirements set out in that section.", "Facts": "The taxpayer's main business activity consists of importing and exporting commodities. The taxpayer buys and on-sells these commodities. Commonly, there is a timing mismatch between the time of purchase and sale. The contracts for the acquisition and sale of commodities are financed by a short-term trade finance facility. The short-term trade finance facility allows the taxpayer to direct the financier to issue a letter of credit in favour of the supplier and to then pay the supplier once the financier is satisfied that the commodities are available and ready for delivery. In return for issuing the letter of credit, the taxpayer undertakes to pay the financier, an amount equal to the sum advanced by the financier to the supplier, including interest and reimbursement of expenses incurred by the financier. Under the short-term trade finance facility, the funds cannot be used for any other purpose except for international trade transactions. The trade finance facility between the taxpayer and the financier limits the term of the borrowing to no more than 180 days. Typically borrowed funds under the facility are repaid within 100 days.", "Reasons_for_Decision": "Summary: To determine whether a scheme falls within the debt interest exception as set out in subsection 974-25(1) of the ITAA 1997 it is necessary to determine that: In the present case the scheme (as defined in subsection 995-1(1) of the ITAA 1997) is the short-term trade finance facility. Whilst the trade finance borrowings under the short-term trade finance facility might be paid within 100 days, the scheme fails the first condition that a substantial part of the financial benefit provided is not a liquid or monetary asset (subparagraph 974-25(1)(a)(i) of the ITAA 1997). The letter of credit available under the trade finance facility would constitute a monetary or liquid asset because the letter of credit is equivalent to money or money's worth. The financial benefit the taxpayer receives is the money or credit provided by the financier to the supplier on the taxpayer's behalf and is taken to have been provided to the taxpayer (subsection 974-30(2) of the ITAA 1997). Therefore, the scheme comprising of the short term borrowings will not satisfy the exception to the debt test.", "Date_of_Decision": "20 October 2003", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 974-15 section 974-20 section 974-25 section 974-30 section 974-160 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1040 | ATO ID 2003/1042", "Subject_References": "Debt test Short term schemes Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031041", "Unmatched_Content": "Keywords Debt test Short term schemes Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2002/1114", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes - Return on a Debt Interest, Division 974, Income Tax Assessment Act 1997", "Issue": "Will an amount of accrued interest paid or credited to the benefit of a convertible note holder pursuant to one scheme be treated as a return on a debt interest as defined in Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), if a subsequent scheme operates to recharacterise the convertible note from a debt interest to a non-share equity interest pursuant to that Division of the ITAA 1997?", "Decision": "Yes. The accrued interest paid or credited to the benefit of a convertible note holder before the subsequent scheme comes into existence will be treated as a return on a debt interest.", "Facts": "A convertible note to which Division 974 of the ITAA 1997 applies gives rise to a debt interest under that Division. The issuer is proposing: Under the first amendment, the interest obligation that had accrued daily on the convertible note according to the original terms of issue, from the 'Interest Payment Date' (as defined in the convertible note agreement) to the date that the first amendment comes into existence, will become due and payable at that time rather than on the next scheduled 'Interest Payment Date'. The return accrued will be paid or credited at the time the first amendment is accepted by the note holders. Where the return accrued is credited to the benefit of the note holders, the note holders will have an indefeasible entitlement to that accrued amount and may draw upon that amount at any time without contingency. The provisions of the first amendment, if accepted by the noteholders, will be implemented regardless of whether the second amendment is accepted.", "Reasons_for_Decision": "Summary: An amount paid or credited for the benefit of the convertible note holders at the time the first amendment to the convertible note terms are accepted will be treated as a return on a debt interest as: Even though the return may be credited rather than physically paid, the convertible note holder will receive an indefeasible right to payment of the accrued interest obligation under the convertible note agreement. As a result, the obligation to pay the accrued interest on the convertible note will be treated as discharged and consequently treated as a return paid to the holder of the debt interest.", "Date_of_Decision": "18 March 2002", "Year_of_Income": "Other/Substituted Accounting Period 2004", "Legislative_References": "Income Tax Assessment Act 1997 division 974", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible notes Debt equity borderline", "Case_References": "", "Other_References": "Explanatory Memorandum: New Business Tax System (Debt and Equity) Act 2001", "Business_Line": "Office Of the Chief Tax Counsel", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021114", "Unmatched_Content": "This Interpretative Decision was originally issued as ATO ID 2002/1114, however it was inadvertantly loaded as ATO ID 2002/1055. This error has been corrected so that the decision is now displayed as 2002/1114. | Keywords Convertible notes Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2011/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: interaction between Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997) and the definition of a financial arrangement (equity interest or right or obligation in relation to an equity interest) in Division 230 of the ITAA 1997", "Issue": "Will a debenture, issued pursuant to a debenture deed poll, constitute a financial arrangement under subsection 230-50(1) of ITAA 1997)? Answer Yes. The debenture will constitute a financial arrangement under subsection 230-50(1) of the ITAA 1997.", "Decision": "", "Facts": "On 1 November 2010, the taxpayer subscribed for a debenture in Company A, an unrelated entity. The debenture is issued to raise finance for Company A. The debenture is issued pursuant to a debenture deed poll entered into between the taxpayer and Company A. The payment of coupons on the debenture is at the absolute discretion of the directors of Company A. The debenture is perpetual and is redeemable only on the winding up of Company A. The debenture gives rise to an equity interest in Company A under subsection 974-70(1) as it satisfies the equity test in subsection 974-75(1) and is not characterised as, or forms part of a larger interest that is characterised as a debt interest in Company A. Division 230 of the ITAA 1997 applies to the taxpayer from 1 July 2010. The taxpayer has elected to apply the fair value method in Division 230 to its financial arrangements. The taxpayer is required by the accounting standards to classify or designate, in its financial reports, its equity financial arrangements as at fair value through profit or loss.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Broadly, Division 230 applies to arrangements that satisfy the definition of a financial arrangement. An arrangement is a financial arrangement if it satisfies either the: Specifically, subsection 230-50(1) provides that an equity interest, as defined, constitutes the financial arrangement. Therefore, for the purposes of subsection 230-50(1), there is no requirement to identify the rights and obligations that comprise the arrangement through an analysis of the factors in subsection 230-55(4). An equity interest is defined in subsection 995-1(1) as having the meaning given by, in the case of a company, Subdivision 974-C. A scheme gives rise to an equity interest in a company if, when the scheme comes into existence, the scheme satisfies the equity test and the interest is not characterised as, and does not form part of a larger interest that is characterised as a debt interest in the company under Subdivision 974-B; refer to subsection 974-70(1). A scheme satisfies the equity test if it gives rise to an interest set out in the table in subsection 974-75(1). The scheme gives rise to an interest that satisfies item 3 of the Equity interests table in subsection 974-75(1) as the debenture carries a right to a return from Company A and the right to the return is at the discretion of Company A. The debenture is a financing arrangement for the purposes of subsection 974-75(2) as it is used to raise finance for Company A. The scheme will not give rise to a debt interest in Company A as it does not satisfy the debt test in subsection 974-20(1); refer to subsection 974-15(1). Accordingly the scheme will give rise to an equity interest in Company A under subsection 974-70(1). Subsection 230-50(1) provides that you have a financial arrangement if you have an equity interest and the equity interest constitutes the financial arrangement. Where a scheme gives rise to an equity interest in a company because of an item of the table in subsection 974-75(1), the equity interest consists of the interest referred to in that item; refer to subsection 974-95(1). In this case, the scheme gives rise to an interest (the debenture) that is an equity interest. Accordingly, the debenture will constitute a financial arrangement under subsection 230-50(1). As the taxpayer has made the fair value election Division 230 will apply to gains and losses made from the financial arrangement.", "Date_of_Decision": "22 February 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 230-45(1) section 230-50 subsection 230-50(1) subsection 230-55(4) subsection 974-15(1) subsection 974-20(1) subsection 974-70(1) subsection 974-75(1) subsection 974-75(2) subsection 974-95(1) subsection 995-1(1) Division 230 Subdivision 974-B Subdivision 974-C", "Related_Public_Rulings_and_Determinations": "Draft Taxation Determination TD 2010/D3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Arrangement Taxation of Financial Arrangements CoE Equity test", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201119", "Unmatched_Content": "Related Public Rulings (including Determinations) Draft Taxation Determination TD 2010/D3 | Keywords Arrangement Taxation of Financial Arrangements CoE Equity test"}
{"ATO_ID_Number": "ATO ID 2010/53", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Imputation: benchmark rule and non-share equity interests", "Issue": "Whether a non-share equity interest for the purposes of Subdivision 974-C of the Income Tax Assessment Act 1997 (ITAA 1997) is treated as a membership interest for the purposes of Division 203 of the ITAA 1997.", "Decision": "Yes.", "Facts": "Sub Co is a subsidiary member of an Australian tax consolidated group whose head company is Head Co. Sub Co has issued a financing instrument, being a non-share equity interest, to an entity (X Co) that is not a member of the consolidated group. Any distribution by Sub Co to X Co constitutes a frankable distribution to which subsection 709-85(2) of the ITAA 1997 applies. The instrument is not a share or stock in legal form and its holder is not entitled to be registered as a member of Sub Co.", "Reasons_for_Decision": "Summary: Subdivision 709-A (including section 709-85) of the ITAA 1997 concerns how the franking accounts operate in relation to a tax consolidated group. Subsection 709-85(2) of the ITAA 1997 applies so that the imputation system in Part 3-6 of the ITAA 1997 (Divisions 200-220) operates as if a non-share distribution that is a frankable distribution made by a subsidiary member of a tax consolidated group to an entity that is not a member of the consolidated group were a frankable distribution made by the head company of the consolidated group to a member of the head company. That means the imputation and franking consequences flowing from the operation of the imputation rules will apply in respect of the distributions made by the subsidiary: refer paragraph 10.22 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002. A corporate tax entity (including a company) must frank all frankable distributions made within a particular franking period to the same extent. This is known as the benchmark rule: refer sections 203-5 and 203-25 of the ITAA 1997. It follows that any distributions on the instrument will be subject to the benchmark rule unless all of the criteria in subsection 203-20(1) of the ITAA 1997 are met by Head Co. Subsection 203-20(1) of the ITAA 1997 provides that: The *benchmark rule does not apply to a company in a *franking period if either: (a) the company satisfies each of the following criteria: (i) at all times during the franking period, the company is a *listed public company; (ii) the company cannot make a *distribution on one *membership interest during the franking period without making a distribution under the same resolution on all other membership interests; (iii) the company cannot *frank a distribution made on one membership interest during the franking period without franking distributions made on all other membership interests under the same resolution with a *franking credit worked out using the same *franking percentage; or A question arises, in determining whether the conditions in subparagraphs 203-20(1)(a)(ii) and (iii) of the ITAA 1997 are met, as to whether a non-share equity interest in a company, is treated as a 'membership interest' in that company for the purposes of section 203-20 of the ITAA 1997. The term 'membership interest' in an entity is defined in subsection 995-1(1) of the ITAA 1997 to have the meaning given by section 960-135 of the ITAA 1997. Section 960-135 of the ITAA 1997 provides that if you are a member of an entity, (a) each interest, or set of interests, in the entity; or (b) each right, or set of rights, in relation to the entity, by virtue of which you are a member of the entity, is a membership interest of yours in the entity. The term 'member' in relation to an entity is defined in subsection 995-1(1) of the ITAA 1997 to have the meaning given by section 960-130 of the ITAA 1997. Item 1 of the table in section 960-130 of the ITAA 1997 provides that a member of a company is a member or stockholder of the company. On the facts of this case, X Co, the holder of the instrument that gives rise to the non-share equity interest in Sub Co, is not a member of Sub Co pursuant to section 960-130 of the ITAA 1997. As such, the non-share equity interest does not constitute a membership interest in Sub Co. However, it is considered that the non-share equity interest held by X Co is treated as a membership interest in Head Co for the purposes of Part 3-6 of the ITAA 1997 by virtue of subsection 709-85(2) of the ITAA 1997. It is further considered that this interpretation is consistent with the provision in Subdivision 215-A of the ITAA 1997, which governs the application of the imputation system in Part 3-6 of the ITAA 1997 (including Divisions 203 and 215) to non-share equity interests. Specifically, section 215-1 of Subdivision 215-A of the ITAA 1997 provides that the imputation system applies to a non-share equity interest in the same way as it applies to a membership interest, and to an equity holder in an entity who is not a member of the entity in the same way as it applies to a member of the entity. Section 215-1 was inserted into the ITAA 1997 by Act No. 48 of 2002. The provision was intended as a rewrite of former section 160AOA of the Income Tax Assessment Act 1936 (ITAA 1936), which was introduced as part of the New Business Tax System (Debt and Equity) Act 2001 to provide that the imputation provisions apply to non-share equity interests in the same way as they apply to shares (that are not 'non-equity shares') in order to give consistent treatment to all kinds of equity interests. Thus references to shares in the imputation provisions can be read as including non-share equity interests: refer paragraph 2.72 of the Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001. Furthermore, the non-share equity interest in Sub Co is treated as a non-share equity interest in Head Co for the purposes of Subdivision 974-C of the ITAA 1997: refer to the single entity rule in section 701-1 of the ITAA 1997 and Taxation Ruling TR 2004/11. The debt/equity rules in Division 974 of the ITAA 1997 determine whether the return on an interest in an entity may be frankable or deductible. The definition of equity interests and related concepts of equity holders and non-share dividends are generally used in all the provisions of the income tax law dealing with the taxation of returns on financing instruments, including the imputation provisions although an interest that is an equity interest under Division 974 of the ITAA 1997 may not necessarily be a membership interest for consolidation purposes. Refer paragraph 3.3 of the Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001; and paragraph 3.70 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002. Having regard to the foregoing, it is considered that non-share equity interests in a company are subject to the benchmark rule in section 203-25 of the ITAA 1997 and are relevant in determining whether the conditions in subparagraphs 203-20(1)(a)(ii) and (iii) of the ITAA 1997 are met. Accordingly, the non-share equity interest held by X Co is treated as a membership interest in Head Co for the purposes of Division 203 of the ITAA 1997.", "Date_of_Decision": "11 December 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 203-5 section 203-20 subsection 203-20(1) section 203-25 section 215-1 Subdivision 215-A Part 3-6 section 701-1 section 709-85 subsection 709-85(1) subsection 709-85(2) Subdivision 709-A section 960-130 section 960-135 section 974-75 subsection 974-75(1) subsection 974-75(2) Subdivision 974-C Division 974 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - franking Debt equity borderline Distributions Equity test Head company Imputation system Member of an entity Membership interest in an entity Non-equity share Non-share equity interest Shares Single entity rule", "Case_References": "", "Other_References": "ATO Practice Statement Law Administration PS LA 2001/8 Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001 Explanatory Memorandum to the New Business Tax System (Imputation) Bill 2002 Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201053", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Consolidation Consolidation - franking Debt equity borderline Distributions Equity test Head company Imputation system Member of an entity Membership interest in an entity Non-equity share Non-share equity interest Shares Single entity rule"}
{"ATO_ID_Number": "ATO ID 2003/331", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financing arrangement", "Issue": "If subsection 974-70(2) of the Income Tax Assessment Act 1997 (ITAA 1997) does not apply, is a cross currency swap that is used solely to allow the conversion of the income streams received under an arrangement from foreign dollars to Australian dollars an equity interest?", "Decision": "No. If subsection 974-70(2) of the ITAA 1997 does not apply, a cross currency swap that is used solely to allow the conversion of the income streams received under an arrangement from foreign dollars to Australian dollars is not an equity interest.", "Facts": "An Australian resident Trust wishes to subscribe for convertible debentures issued by Y, an overseas division of X Corporation. X Corporation enters into a cross currency swap with the Trust under which the Trust pays to X Corporation the Australian dollar proceeds raised from the issue of its units in the initial exchange under the swap. X Corporation pays to the Trust the equivalent amount in the foreign currency of the country in which Y is resident. The Trust uses this foreign currency to subscribe for non-share equity interests issued by Y. The Trust pays to X Corporation any foreign currency amounts it receives as dividends on these convertible debentures. X Corporation pays to the Trust the equivalent Australian Dollar amount. The Trust uses these Australian dollar amounts to pay distributions on its units. On the facts of the case the interests are not treated as giving rise to an equity interest in a company under subsection 974-70(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: While subsection 974-130(3) of the ITAA 1997 provides inter alia, that a derivative that is used solely for managing financial risk is generally not a scheme entered into or undertaken to raise finance, consideration must be had of all the relevant circumstances and features of the arrangement to determine whether, in substance, it is appropriately characterised as a financing arrangement or not (refer paragraph 2.7 of the Explanatory Memorandum relating to the New Business Tax System (Debt and Equity) Bill 2001 ). In this case after the initial exchanges the cross-currency swap merely allows conversion of the income streams received under the arrangement from foreign dollars to Australian dollars. A consideration of all the relevant circumstances and features of this arrangement lead to the conclusion that the cross currency swap is not a financing arrangement but rather, that it is a derivative that is used for managing financial risk.", "Date_of_Decision": "30 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-70(2) section 974-130", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline", "Case_References": "", "Other_References": "Explanatory Memorandum relating to the New Business Tax System (Debt and Equity) Bill 2001) - paragraph 2.7", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003331", "Unmatched_Content": "Keywords Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2004/56", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Distribution statements for non-share equity interests", "Issue": "Can the holder of a non-share equity interest, as determined by Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), rely upon a distribution statement provided by an Australian issuer in accordance with Subdivision 202-E of the ITAA 1997?", "Decision": "Yes. The statutory obligation on an Australian issuer to provide a distribution statement generally entitles the holder to rely upon the statement to ascertain the extent, if any, of the frankable distribution. However, should the holder know that the distribution is other than a frankable distribution or that the distribution statement is fraudulent, then the holder's entitlement to rely upon the distribution statement is effectively displaced.", "Facts": "An Australian resident company issues a financing instrument on 1 July 2001 to a resident taxpayer. The instrument gives rise to a non-share equity interest under the debt and equity tests contained in Division 974 of the ITAA 1997. The company makes a frankable distribution for an income year ending on or after 30 June 2002 to the holder of the instrument and provides the holder with a distribution statement.", "Reasons_for_Decision": "Summary: A non-share equity interest is an equity interest in a company that is not solely a share (subsection 995-1(1) of the ITAA 1997). Money or other property distributed or an amount credited to the holder of a non-share equity interest, as the holder of that interest, are a 'non-share distribution' (section 974 -115 of the ITAA 1997). The distribution is a 'non-share dividend' as defined under section 974-120 of the ITAA 1997 to the extent that the distribution is not debited against the company's share capital or non-share capital account. Generally, under subsection 202-40(2) of the ITAA 1997, a 'non-share dividend' is a 'frankable distribution' but only to the extent that it is not specifically listed as unfrankable in section 202-45 of the ITAA 1997. Where an Australian company makes a 'frankable distribution' it is obligated under Subdivision 202-E of the ITAA 1997, in particular section 202-75 of the ITAA 1997, to provide a 'distribution statement' to the recipient. Section 215-1 of the ITAA 1997 provides for the imputation system within Part 3-6 of the ITAA 1997 to apply to a non-share equity interest. The holder is entitled to rely upon the issuer's distribution statement stating the franked distribution amount and franking credit for the purpose of ascertaining a tax offset provided within Subdivision 207-A of the ITAA 1997. The statutory obligation on the issuer to provide a distribution statement generally entitles the holder to rely upon the statement to ascertain the extent, if any, of the frankable distribution. However, should the holder know that the distribution is other than a frankable distribution or that the distribution statement is fraudulent, then the holder's entitlement to rely upon the distribution statement is effectively displaced.", "Date_of_Decision": "12 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 202-40(2) section 202-45 section 202-75 Subdivision 207-A section 215-1 section 974-115 section 974-120 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Equity test Financing arrangement Franked dividends Imputation system Non-share equity interest", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200456", "Unmatched_Content": "Reference to 'section 207-5' replaced with 'Subdivision 207-A'. | Amend reference to 'subsection 202-45' and replace with 'section 202-45' | Keywords Debt equity borderline Equity test Financing arrangement Franked dividends Imputation system Non-share equity interest"}
{"ATO_ID_Number": "ATO ID 2004/430", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: related scheme", "Issue": "Will the issue of loan notes and shares that must be subscribed to together, but can subsequently be dealt with separately, be treated as related schemes under section 974-155 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The loan notes and shares will be treated as related schemes because they satisfy the definition of a related scheme as contained in section 974-155 of the ITAA 1997.", "Facts": "A company intends raising funds to finance its investments via the issue of two different types of securities: ordinary shares and loan notes. The shares and loan notes will be issued under the one agreement. An investor subscribing to the company will be required to acquire both the shares and loan notes. The shares and loan notes may be dealt with independently of each other by the investors after they have been acquired from the company.", "Reasons_for_Decision": "Summary: Section 974-155 of the ITAA 1997 sets out the circumstances in which two or more schemes are to be treated as related schemes for the purposes of Division 974 of the ITAA 1997. In the present case, the loan notes and the shares each constitute a scheme as defined in subsection 995-1(1) of the ITAA 1997. The loan notes and shares will satisfy the broad definition of a related scheme (subsection 974-155(1) of the ITAA 1997). Subsection 974-155(1) of the ITAA 1997 provides that 'subject to subsection (3), 2 schemes are related to one another if they are related to one another in any way'. This is qualified by subsection 974-155(3) of the ITAA 1997 which states that two schemes are not related to one another 'merely because: (a) one refers to the other; or (b) they have a common party'. In the arrangement in question, there is a relationship between the shares and the loan notes - a subscriber to the investment must purchase both the shares and the loan notes. This is a relationship that extends beyond one scheme merely referring to the other, or a relationship simply being due to the existence of a common party. Notwithstanding that the shares and loan notes give rise to a related scheme pursuant to the operation of subsection 974-155(1) of the ITAA 1997, whether the related schemes give rise to a debt interest or an equity interest as defined in Division 974 of the ITAA 1997 will be determined by the operation of the other relevant provisions within that Division.", "Date_of_Decision": "14 May 2004", "Year_of_Income": "Year ended 30 June 2002 Year ended 20 June 2003 Year ended 20 June 2004 Year ended 20 June 2005 Year ended 20 June 2006 Year ended 20 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1) section 974-155", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/870", "Subject_References": "Debt/equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004430", "Unmatched_Content": "Keywords Debt/equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/325", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-share distribution", "Issue": "In the absence of subsection 974-70(2) of the Income Tax Assessment Act 1997 (ITAA 1997) applying, can distributions in a trust which is not taxed as a company under either Division 6B or Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936) be characterised as a non-share distribution?", "Decision": "No. In the absence of subsection 974-70(2) of the ITAA 1997 applying, distributions in a trust which is not taxed as a company under either Division 6B or Division 6C of the ITAA 1936 cannot be characterised as a non-share distribution.", "Facts": "Trust 1 raises funds by issuing units to investors. Trust 1 uses these funds to acquire units in Trust 2. The units entitle Trust 1 to all of the income and capital of Trust 2 except in certain exceptional circumstances. Trust 2 uses the funds to subscribe for a non-share equity interest. Any non-share dividend received by Trust 2 will be distributed to Trust 1 which in turn distributes its net income to its investors. Trust 1 and Trust 2 are not taxed as companies under either Division 6B or Division 6C of the ITAA 1936. The interests are not treated as giving rise to an equity interest in a company under subsection 974-70(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 995-1 of the ITAA 1997 provides that 'non-share distribution has the meaning given by section 974-115.' The meaning of non-share distribution in section 974-115 of the ITAA 1997 is prefaced by the words 'a company'. Section 974-115 provides that: A company makes a non-share distribution to you if: (a) you hold a non-share equity interest in the company; and (b) the company: (i) distributes money to you; or (ii) distributes other property to you; or (iii) credits an amount to you; Trust 1 and Trust 2 cannot make a non-share distribution as they are not companies, nor do the related scheme provisions apply to treat the arrangement as giving rise to an equity interest in a company.", "Date_of_Decision": "30 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 974-115 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003325", "Unmatched_Content": "as the holder of that interest. | Keywords Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/326", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Equity interests in companies", "Issue": "In the absence of subsection 974-70(2) of the Income Tax Assessment Act 1997 (ITAA 1997) applying, can units in a trust, which is not taxed as a company under either Division 6B or Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936), be characterised as an equity interest?", "Decision": "No. In the absence of subsection 974-70(2) of the ITAA 1997 applying, units in a trust, which is not taxed as a company under either Division 6B or Division 6C of the ITAA 1936 cannot be characterised as an equity interest.", "Facts": "Trust 1 raises funds by issuing units to investors. Trust 1 uses these funds to acquire units in Trust 2. The units entitle Trust 1 to all of the income and capital of Trust 2 except in certain exceptional circumstances. Trust 2 uses these funds to subscribe for a non-share equity interest issued by Y. Trust 1 and Trust 2 are not taxed as companies under either Division 6B or Division 6C of the ITAA 1936. The interests are not treated as giving rise to an equity interest in a company under subsection 974-70(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: The use of the term 'equity interest' in Subdivision 974-C of the ITAA 1997 is qualified in that it must be an equity interest in a company. As the units in Trust 1 and Trust 2 are not interests in a company these units will not give rise to an equity interest as defined by sections 974-75 or 974-80 of the ITAA 1997.", "Date_of_Decision": "30 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Division 6B Division 6C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003326", "Unmatched_Content": "Keywords Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/327", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes and the debt/equity borderline", "Issue": "In the absence of subsection 974-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997) applying, will a convertible debenture that pays interest at the discretion of the issuer and which may convert into an equity interest but has no effectively non-contingent obligations to provide a financial benefit to the holder, or a connected entity of the holder, be characterised as an equity interest under section 974-70 of the ITAA 1997?", "Decision": "Yes. In the absence of subsection 974-15(2) of the ITAA 1997 applying, a convertible debenture that pays interest at the discretion of the issuer and which may convert into an equity interest but has no effectively non-contingent obligations to provide a financial benefit to the holder, or a connected entity of the holder, will be characterised as an equity interest under section 974-70 of the ITAA 1997.", "Facts": "A trust subscribes for convertible debentures issued by X Corporation. Interest payments will only be made on the convertible debenture where a committee of X Corporation has declared interest to be payable. The convertible debenture will convert into a preference share in X Corporation upon the occurrence of a Conversion Event as defined in the Convertible Debenture Deed. The interest is not treated as giving rise to a debt interest in a company under subsection 974-15(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: The issue of the convertible debenture by X Corporation is a scheme as defined in section 995-1 of the ITAA 1997. The scheme is a financing arrangement of either X Corporation or a connected entity of X Corporation as the funds raised by the issue of the convertible debenture are used by Y, a division of X Corporation, in its business operations. The convertible debenture will be an equity interest under subsection 974-75(1) of the ITAA 1997 for any or all of the following reasons: a) returns are at the discretion of the issuer. This is an equity interest as per Item 3 in the table in subsection 974-75 (1) of the ITAA 1997; and b) the convertible debentures are an interest that may or will convert into a share. This is an equity interest as per Item 4 in the table in subsection 974-75 (1) of the ITAA 1997. The convertible debenture will not pass the debt test as the issuer does not have an effectively non-contingent obligation to provide a financial benefit to the holders as: a) interest will only be paid where a committee has declared interest be payable; b) X Corporation does not have an effectively non-contingent obligation to redeem the convertible debenture. The obligation to redeem is contingent on the occurrence of an event, condition or situation; c) the only obligation on X Corporation upon the occurrence of a Conversion Event, is to convert the convertible debenture into a share. Subsection 974-30(1) of the ITAA 1997 provides that the issue of an equity interest in the entity or a connected entity of the entity, or an amount that is to be applied in respect the issue of an equity interest in the entity or a connected entity of the entity, does not constitute the provision of a financial benefit; and d) the pricing terms and conditions of the share to which the convertible debenture will or may convert are not such that the payment of interest on the convertible debenture would become in substance an effectively non-contingent obligation.", "Date_of_Decision": "30 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-15(2) subsection 974-30(1) subsection 974-75(1) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible notes Debt equity borderline Debt test Effectively non-contingent obligation", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003327", "Unmatched_Content": "Keywords Convertible notes Debt equity borderline Debt test Effectively non-contingent obligation"}
{"ATO_ID_Number": "ATO ID 2003/666", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Meaning of 'equity interest' in paragraph 974-30(1)(b) of the ITAA 1997", "Issue": "Does the term 'equity interest' in paragraph 974-30(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) have its general legal meaning or the meaning given to the term in Subdivision 974-C of the ITAA 1997?", "Decision": "The meaning of the term 'equity interest' in paragraph 974-30(1)(b) of the ITAA 1997 is the meaning given to the term in Subdivision 974-C.", "Facts": "A company issues redeemable preference shares to a connected entity in exchange for an amount of cash. The redeemable preference shares have a term of five years and redemption for that same amount of cash is contingent only on Corporations Act 2001 requirements of the redemption being out of a fresh issue of shares or profits.", "Reasons_for_Decision": "Summary: Subdivision 2-C of the ITAA 97 explains how to identify defined terms and how to find the associated definitions. Section 2-10 of the ITAA 1997 provides: However, not all defined terms are identified in this way. Section 15 of Subdivision 2-C of the ITAA 1997 outlines in what circumstances terms are not identified by an asterisk. Subsection 2-15(1) states: 'Once a defined term has been identified by an asterisk, later occurrences of the term in the same subsection are not usually asterisked.' This raises the question as to whether the context in which the term 'equity interest' is used in subsection 974-30(1)(b) of the ITAA 1997 leads to the conclusion that the term should not have the meaning it would bear were it to be asterisked, that is, the meaning given to it in Subdivision 974-C of the ITAA 1997. An examination of that context clearly indicates that the term 'equity interest' ought to bear the meaning given to it in Subdivision 974-C of the ITAA 1997. It is clear that 974-30(1)(b) of the ITAA 1997 is intended to operate with 974-30(1)(a) to ensure that, broadly, neither the issue of, nor an amount to be applied in respect of the issue of, a Subdivision 974-C 'equity interest' can be a 'financial benefit' for, inter alia, the purposes of the debt test. Subsection 974-30(1)(b) was enacted to prevent the policy expressed in subsection 974-30(1)(a) being circumvented by an amount being applied in respect of the issue of a Subdivision 974-C 'equity interest', rather than a Subdivision 974-C 'equity interest' being directly issued. Subsection 974-10(2) of the ITAA 1997 states that '[a]nother object of the Division is that the test referred to in subsection (1) is to operate on the basis of the economic substance of the rights and obligations arising under the *scheme or schemes rather than merely on the basis of the legal form of the scheme or schemes.' Therefore, the meaning of the term 'equity interest' in paragraph 974-30(1)(b) of the ITAA 1997 is the meaning given to the term in Subdivision 974-C of the ITAA 1997.", "Date_of_Decision": "24 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 2-10 subsection 2-15(1) Division 974 subsection 974-10(2) paragraph 974-30(1)(a) paragraph 974-30(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Equity test Debt equity borderline Redeemable preference shares", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003666", "Unmatched_Content": "Keywords Equity test Debt equity borderline Redeemable preference shares"}
{"ATO_ID_Number": "ATO ID 2003/900", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: whether converting preference shares are an equity interest or a debt interest", "Issue": "Are converting preference shares issued by an entity an equity interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The converting preference shares are an equity interest since the converting preference shares are shares in legal form and therefore they satisfy the equity test in subsection 974-75(1) of Subdivision 974-C of Division 974 of the ITAA 1997. The converting preference shares do not impose an effectively non-contingent obligation on the entity to provide a financial benefit. They fail the debt test in Subdivision 974-B of Division 974 of the ITAA 1997 and are not debt interests. Therefore the converting preference shares issued by the entity create an equity interest in the entity under subsection 974-70(1) of Subdivision 974-C of Division 974 of the ITAA 1997.", "Facts": "A bank issues converting preference shares on 1 July 2001 at an issue price of $100 each. Dividends are paid annually at 7.25% of the issue price at the same time that dividends on ordinary shares are paid. Five years after their issue date, each converting preference share mandatory converts into four ordinary shares of the bank. Each ordinary share has a par value of $25.", "Reasons_for_Decision": "Summary: For instruments issued on or after 1 July 2001, Division 974 of the ITAA 1997 provides rules that govern the classification of debt and equity interests for tax purposes. Since the converting preference shares are shares in legal form they give rise to a membership interest. Item 1 of the table contained in subsection 974-75(1) of Subdivision 974-C of Division 974 of the ITAA 1997 is satisfied and the converting preference shares satisfy the equity test. However, paragraph 974-70(1)(b) of the ITAA 1997 provides that despite satisfying the equity test in subsection 974-75(1), a scheme cannot give rise to an equity interest if it is also characterised as, or forms part of a larger interest that is characterised as, a debt interest by application of the debt test. The debt test is contained in subsection 974-20(1) of Subdivision 974-B of Division 974 of the ITAA 1997. For the converting preference shares, the debt test will be satisfied if there is a 'scheme' which is a financing arrangement for the entity, and under which: The arrangement between the bank and the holder in relation to the converting preference shares falls within the ambit of a scheme, which is defined very broadly in subsection 995-1(1) of the ITAA 1997 to include 'any arrangement'. The bank receives a financial benefit under the arrangement to the extent of the $100 paid for each converting preference share purchased by the holder. The payment of an annual dividend on the converting preference shares is contingent on the availability of profits to the bank; therefore the bank does not have an effectively non-contingent obligation to pay dividends. Furthermore, the conversion after five years of the preference shares into ordinary shares is not a financial benefit since paragraph 974-30(1)(a) of the ITAA 1997 provides that an issue of an equity interest in an entity does not constitute the provision of a financial benefit by the entity. Since the only financial benefit that Division 974 of the ITAA 1997 recognises in this arrangement is the dividend, the payment of which is not effectively non-contingent, the converting preference shares fail the debt test in subsection 974-20(1) of Subdivision 974-B of Division 974 of the ITAA 1997. Therefore, the converting preference shares are an equity interest under subsection 974-70(1) of Subdivision 974-C of Division 974 of the ITAA 1997.", "Date_of_Decision": "26 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-5(4) subsection 974-20(1) paragraph 974-30(1)(a) subsection 974-70(1) paragraph 974-70(1)(b) subsection 974-75(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Financial instruments Preference shares Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment centre of Expertise.", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003900", "Unmatched_Content": "Keywords Financial instruments Preference shares Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/901", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-share equity interest", "Issue": "If an equity interest in a company is composed of related interests where at least one of the interests is not a share, is the interest a 'non-share equity interest'?", "Decision": "Yes. Part of the interest is not a share and the interest is therefore a non-share equity interest.", "Facts": "A company issues an equity interest to raise finance for its business operations. The equity interest comprises a number of related interests. At least one of the related interests is not a share.", "Reasons_for_Decision": "Summary: A 'non-share equity interest' in a company is defined under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as 'an equity interest in the company that is not solely a share'. For the equity interest to be a non-share equity interest, it must be an interest that is not 'solely' a share. The ordinary meaning of the word 'solely' is defined in the Macquarie Dictionary to be - 'as the only one or ones; exclusively or only'. The equity interest in question is not solely a share because one of the related interests that comprise the equity interest issued by the company is not a share. Therefore, the equity interest in question is a 'non-share equity interest'.", "Date_of_Decision": "26 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non-share equity interest Debt equity borderline", "Case_References": "", "Other_References": "Australian Macquarie Dictionary", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003901", "Unmatched_Content": "Keywords Non-share equity interest Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/1020", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exception Provision: commercial debt forgiveness", "Issue": "Is section 26-26 of the Income Tax Assessment Act 1997 (ITAA 1997) an 'exception provision' for the purposes of subsection 245-25(5) of Division 245, Schedule 2C of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Section 26-26 of the ITAA 1997 is an exception provision for the purposes of subsection 245-25(5) of Division 245, Schedule 2C to the ITAA 1936.", "Facts": "An entity has issued an instrument which is a non-share equity interest for the purposes of Division 974 of the ITAA 1997. A non-share distribution has been made in respect of that interest.", "Reasons_for_Decision": "Summary: Subsection 26-26(1) of the ITAA 1997 denies a deduction for a non-share distribution or a return that has accrued on a non-share equity interest. A non-share equity interest in a company is defined under subsection 995-1(1) of the ITAA 1997 as 'an equity interest in the company that is not solely a share'. The meaning of a non-share equity interest thus includes an interest that is debt in legal form but is classified as an equity interest pursuant to Division 974 of the ITAA 1997. An exception provision is defined under subsection 245-25(5) of Schedule 2C to the ITAA 1936 as a provision that has the effect of preventing a deduction that would otherwise be allowable, but it does not include paragraphs 8-1(2)(a), 8-1(2)(b) and 8-1(2)(c) of the ITAA 1997. Section 26-26 of the ITAA 1997 is an exception provision under subsection 245-25(5) of Schedule 2C to the ITAA 1936. A distribution made in relation to a non-share equity interest under Division 974 of the ITAA 1997 would, but for section 26-26 of the ITAA 1997, ordinarily be deductible to the issuer under section 8-1 of the ITAA 1997. Section 26-26 of the ITAA 1997 operates to deny this deduction.", "Date_of_Decision": "6 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2C section 245-25 Schedule 2C subsection 245-25(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1115", "Subject_References": "Commercial debt Commercial debt forgiveness Non-share equity interest Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031020", "Unmatched_Content": "Keywords Commercial debt Commercial debt forgiveness Non-share equity interest Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/1021", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Classification of certain converting preference shares under Division 974 of the ITAA 1997", "Issue": "Is a converting preference share which is issued on terms that it will convert to ordinary shares in the issuer if the issuer is listed on the Stock Exchange, or be bought back at a premium if the issuer is not so listed, an equity interest pursuant to Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The converting preference share is an equity interest in terms of subsection 974-70(1) of Division 974 of the ITAA 1997.", "Facts": "A converting preference share is issued on terms that it will convert to ordinary shares in the issuer, if the issuer is listed on the Stock Exchange; or be bought back at a premium, if the issuer is not so listed. The payment of dividends is at the discretion of the directors and the dividends are non-cumulative. The issuer has applied for its shares to be listed. Listing for this particular issuer at this time is a real possibility.", "Reasons_for_Decision": "Summary: (a) The test for an equity interest The converting preference share is an equity interest in the issuer in terms of subsection 974-70(1) of the ITAA 1997, as it satisfies the equity test in subsection 974-75(1) and does not pass the debt test in subsection 974-20(1). The converting preference share is an interest in a company as a member or stockholder of that company. Therefore, Item 1 of subsection 974-75(1) of the ITAA 1997 is satisfied and the converting preference share passes the basic test for an equity interest. As a scheme cannot give rise to an equity interest if it is also classified as a debt interest (refer to paragraph 974-70(1)(b) of the ITAA 1997), it is necessary to determine, not only if the interest satisfies an item in the equity table, but also whether satisfies the test for a debt interest pursuant to subsection 974-20(1) of the ITAA 1997. (b) The test for a debt interest Subsection 974-20(1) of the ITAA 1997 provides the test for a debt interest. It lists various essential elements which must be met if a scheme is to satisfy the debt test. Those elements are that: The issue of the converting preference share is a scheme as defined in subsection 995-1(1) of the ITAA 1997. This scheme is a financing arrangement in terms of paragraph 974-130(1)(a) as it raises finance for the issuer. Therefore paragraph 974-20(1)(a) is satisfied. As the issuer receives a financial benefit, being the issue price of the converting preference share, paragraph 974-20(1)(b) of the ITAA 1997 is satisfied. As the obligation to pay dividends on the converting preference share is at the discretion of the directors and the dividend is non-cumulative, the company does not have an effectively non-contingent obligation to provide a financial benefit in the form of a dividend. If the company is listed, the converting preference share will be converted to ordinary shares upon maturity. If the company is not listed, the converting preference share will be bought back at a premium. Pursuant to paragraph 974-30(1)(a) of the ITAA 1997, a conversion of the converting preference share into ordinary shares is not a provision of a financial benefit. Buying back the converting preference share at a premium is a provision of a financial benefit within the meaning of paragraph 974-160(1)(a) of the ITAA 1997. Accordingly this question becomes whether the issuer has an effectively non-contingent obligation to buy back the converting preference share at a premium. There is an effectively non-contingent obligation to take an action under a scheme if, having regard to the pricing, terms and conditions of the scheme, there is in substance or effect a non-contingent obligation to take that action (subsection 974-135(1) of the ITAA 1997). An obligation is non-contingent if it is not contingent on any event, condition or situation (including the economic performance of the entity having the obligation or a connected entity of that entity), other than the ability or willingness of that entity or connected entity to meet the obligation (subsection 974-135(3) of the ITAA 1997). In determining whether there is in substance or effect a non-contingent obligation to take the action, one must have regard to the artificiality, or the contrived nature, of any contingency on which the obligation to take the action depends (subsection 974-135(6) ITAA 1997). The Explanatory Memorandum to the New Business Tax System (Debt and Equity) Act 2001 states: 2.178 ... In addition, consistent with the principle inherent in the debt test of focusing on economic substance rather than legal form, where a contingency is so remote as to be effectively inoperative (immaterially remote) it is as if the contingency did not exist and it should be disregarded. 2.179 In some circumstances it will be clear that a particular contingency is immaterially remote for these purposes. These will be cases where there is only a theoretical rather than a real possibility of the contingency occurring. If the issuer's shares are listed, the issuer does not have an obligation to provide a financial benefit. Provision of a financial benefit by the issuer, that is, buying back the converting preference share at a premium, is contingent on the issuer not being listed. As the listing of the issuer is a real possibility, the listing of the issuer's shares is not an immaterially remote contingency. The issuer therefore does not have an effectively non-contingent obligation to buy back the converting preference share at a premium, that is, provide a financial benefit. Thus the scheme does not satisfy the debt test. The converting preference share is therefore an equity interest in terms of subsection 974-70(1) of Division 974 of the ITAA 1997.", "Date_of_Decision": "5 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-20(1) paragraph 974-20(1)(a) paragraph 974-20(1)(b) paragraph 974-20(1)(c) Paragraph 974-30(1)(a) Subsection 974-70(1) subsection 974-75(1) paragraph 974-130(1)(a) subsection 974-135(1) subsection 974-135(3) subsection 974-135(6) subsection 974-160(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/900", "Subject_References": "Conversion of securities Debt test Effectively non-contingent obligation Equity test Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031021", "Unmatched_Content": "Keywords Conversion of securities Debt test Effectively non-contingent obligation Equity test Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2002/1111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes - Non-Share Equity Interest, Division 974, Income Tax Assessment Act 1997", "Issue": "Will a convertible note that is characterised as a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997) be recharacterised as a non-share equity interest under that Division of the ITAA 1997, if a scheme of arrangement materially alters the terms of the convertible note to ensure that the convertible note holders convert their notes into equity of the issuer on their maturity?", "Decision": "Yes. At the time the scheme of arrangement is entered into, the resultant material change to the terms of the convertible note will result in the note no longer satisfying the debt test in Division 974 of the ITAA 1997. The materially amended convertible note will give rise to an equity interest in accordance with subsection 974-70(1) of the ITAA 1997. That equity interest will be a non-share equity interest as defined in subsection 995-1(1) of the ITAA 1997.", "Facts": "The company has on issue a 5 year, 10 per cent convertible note. That convertible note is characterised as a debt interest for the purposes of Division 974 of the ITAA 1997. The company proposes to amend the terms of the convertible note through a scheme of arrangement. The scheme of arrangement will result in the holders of the convertible note agreeing, in consideration for the receipt of additional shares now, to accept shares in the issuer at the maturity of the convertible note rather than redeem their investment for cash. Under the scheme of arrangement the holders would continue to receive their regular coupon payments until maturity.", "Reasons_for_Decision": "Summary: The proposed scheme of arrangement would be a material amendment to the terms of the convertible notes. A material change has the effect of treating the interest as coming into existence at the time the material change arises pursuant to the operation of paragraph 974-110(1)(c) of the ITAA 1997. The debt and equity tests are to be applied at that time to determine the character of the interest as a result of the material change. Under subsection 974-70(1) of the ITAA 1997 an equity interest arises if, at the time the scheme comes into existence, it satisfies one of the items in the equity interest table in subsection 974-75(1) of the ITAA 1997 and is not a debt interest or part of a wider interest that gives rise to a debt interest. Subsection 974-75(2) further requires that a scheme giving rise to an equity interest in a company must be a financing arrangement (the latter term having the meaning given by section 974-130 of the ITAA 1997), in cases where the equity interest in the company is an interest other than that of a member or stockholder. The amended convertible note would give rise to a scheme as defined in subsection 995-1(1) of the ITAA 1997. The amended convertible note would be an interest that will convert into an equity interest in the company and as such, it would satisfy Equity Interest Item 4(b) of the table in subsection 974-75(1) of the ITAA 1997. The amended convertible note would be a financing arrangement within the meaning of section 974-130 of the ITAA 1997 because the convertible note was entered into to raise finance for the company. Accordingly, the proposed amended convertible note will, prima facie, give rise to an equity interest in the company. The equity interest will be prima facie be treated as a non-share equity interest as defined in subsection 995-1(1) of the ITAA 1997 as it is an equity interest that is not solely a share. Although the proposed amended convertible note would fall within one of the items of the table of requirements of the equity test, if the interest also qualifies as a debt interest (or forms part of a larger interest that is characterised as a debt interest), paragraph 974-70(1)(b) of the ITAA 1997 prevents the interest from being classified as an equity interest. In such cases, the interest would be treated as a debt interest. However, the convertible note under consideration does not give rise to a debt interest for the purposes of subsection 974-15(1) of the ITAA 1997, as it fails to satisfy the requirements of the debt test set out in subsection 974-20(1) of the ITAA 1997 after the material change. Specifically, the requirements of paragraph 974-20(1)(d) will not be met as it is not 'substantially more likely than not' that the value of the effectively non-contingent obligations (defined in section 995-1 to have the meaning given in section 974-135 of the ITAA 1997) to be provided by the issuer company in the future will be at least equal to the value of the financial benefit received by the company, that is the amount invested by the note holders. The proposed amendment of the convertible note terms will result in the holders ultimately converting the investment into ordinary shares of the company. However, the conversion into an equity interest in the company does not constitute the provision of a financial benefit (subparagraphs 974-30(1)(a) and (b) of the ITAA 1997). Whilst the company's obligations to make interest payments on the convertible notes give rise to effectively non-contingent obligations to provide financial benefits in the future, those amounts would not equal the financial benefit received by the issuer (the amount invested by the note holders). As a result, the debt test in subsection 974-20(1) of the ITAA 1997 would not be satisfied and the interest would be characterised as a non-share equity interest at the time the conversion terms are materially altered.", "Date_of_Decision": "18 March 2002", "Year_of_Income": "Other/Substituted Accounting Period 2004", "Legislative_References": "Income Tax Assessment Act 1997 division 974 section 974-130 section 974-135 subsection 974-5(4) subsection 974-20(1) subsection 974-70(1) subsection 974-70(2) subsection 974-75(1) subsection 995-1(1) paragraph 974-20(1)(d) paragraph 974-30(1)(a) paragraph 974-30(1)(b) paragraph 974-110(1)(a) paragraph 974-110(1)(b) paragraph 974-110(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible Notes Debt equity borderline", "Case_References": "", "Other_References": "Explanatory Memorandum: New Business Tax System (Debt and Equity) Act 2001", "Business_Line": "Office of the Chief tax Counsel", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021111", "Unmatched_Content": "Keywords Convertible Notes Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2002/1112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes - Non-Share Capital Account, Division 164, Income Tax Assessment Act 1997", "Issue": "If a non-share equity interest arises as a result of a material amendment to the terms of a convertible note will the issuer company have a non-share capital account pursuant to Division 164 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A company will be treated under Division 164 of the ITAA 1997 as having a non-share capital account if a non-share equity interest is issued on or after 1 July 2001.", "Facts": "A company issued convertible notes that give rise to a debt interest for the purposes of Division 974 of the ITAA 1997. The issuer company proposes to materially alter the terms of the convertible notes by a scheme of arrangement. As a consequence of the amended terms, the convertible notes will be recharacterised as non-share equity interests for the purposes of Division 974 of the ITAA 1997 from the time that the proposed scheme comes into existence.", "Reasons_for_Decision": "Summary: Division 164 of the ITAA 1997 was introduced by the New Business Tax System (Debt and Equity) Act 2001 . The object of Division 164 of the ITAA 1997, as set out in subsection 164-5 of the ITAA 1997, is to allow for the recording of contributions to the company in respect of non-share equity interests. The Division allows for distributions made to be characterised as either non-share dividends or as returns of non-share capital. Under Division 974 of the ITAA 1997, a non-share equity interest is defined in subsection 995-1(1) of the ITAA 1997 as an equity interest in a company that is not solely a share. Where a company materially amends the terms of an interest on or after 1 July 2001 and that interest is characterised as a non-share equity interest, it will be treated as having a notional account called a non-share capital account pursuant to subsection 164-10 of Division 164 of the ITAA 1997. That account will, in accordance with subsection 164-15(2) of the ITAA 1997, be credited by an amount equal to the market value of the consideration received by the taxpayer at the time the company issued the interest (at the date the convertible note was first issued) adjusted for any amount recorded in the company's share capital account in respect of that interest and any amount returned to the holder of the interest before its change from debt to equity.", "Date_of_Decision": "18 March 2002", "Year_of_Income": "Other/Substituted Accounting Period 2004", "Legislative_References": "Income Tax Assessment Act 1997 division 164 section 164-5 section 164-10 subsection 164-15(2) division 974 item 4 of subsection 974-75(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible notes Debt equity borderline", "Case_References": "", "Other_References": "Explanatory Memorandum: New Business Tax System (Debt and Equity) Act 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021112", "Unmatched_Content": "Keywords Convertible notes Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2002/1113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes - Non-Share Distribution as a Frankable Non-Share Dividend", "Issue": "Where a scheme of arrangement alters the character of a convertible note from a debt interest to a non-share equity interest, will subsequent non-share distributions made by a non-bank issuer be treated as frankable non-share dividends under section 160APA of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A non-share distribution paid by a non-bank issuer on the convertible note will be a frankable dividend as defined in section 160APA of the ITAA 1936 where: (i) the distribution is paid in respect of the convertible note when it is a non-share equity interest is a non-share dividend and not a distribution of non-share capital; and (ii) the non-share dividend is not a non-share dividend to which subsection 160APA(gb) of the ITAA 1936 applies.", "Facts": "Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997) applies to convertible notes issued by a non-bank issuer. The convertible notes are a debt interest pursuant to Division 974 of the ITAA 1997. The non-bank issuer is proposing to enter into a scheme of arrangement in respect of those convertible notes which will have the effect of ensuring that the holders of the convertible notes at their maturity convert their notes into shares of the issuer. The terms of the scheme of arrangement provide that the note holders will continue to receive interest payments on the non-share equity interests until maturity.", "Reasons_for_Decision": "Summary: A frankable dividend is defined in section 160APA of the ITAA 1936 to include...'(a) a dividend within the meaning of section 6; or...(aaa) a non-share dividend.....but does not include ......(gb) a non-share dividend that is taken by section 160APAAAB not to be a frankable dividend '. A non-share dividend for the purposes of the ITAA 1997 takes its definition from subsection 995-1(1) of the ITAA 1997. This definition provides that a non-share dividend has the meaning given by section 974-120 of the ITAA 1997. Section 974-120 of the ITAA 1997 provides that all non-share distributions are non-share dividends to the extent to which those distributions do not represent a return of non-share capital or share capital. In turn, section 974-115 of the ITAA 1997 provides that a non-share distribution arises where you hold a non-share equity interest in a company and the company, as a result of you being a non-share equity interest holder, distributes money to you, distributes other property to you or credits an amount to you. In the present case, the distributions on the non-share equity interest would give rise to a non-share distribution because the distributions would be paid as a result of the note holder being a holder of a non-share equity interest. Those non-share distributions - the regular interest payments on the convertible note - would not represent distributions of non-share capital or share capital. Accordingly, the distributions paid on the non-share equity interest [the convertible note] would be non-share dividends as defined pursuant to the operation of sections 974-115 and 974-120 of the ITAA 1997. Section 160APA of the ITAA 1936 would, by virtue of the definition contained in subsection 160APA(aa) of the ITAA 1936, treat the non-share dividends as a frankable dividend, subject to section 160APAAAB not applying to treat the non-share dividend as a non-frankable non-share dividend. Section 160APAAAB of the ITAA 1936 will apply to treat a non-share dividend as a non-frankable non-share dividend where the 'available frankable profits' requirements set out in that section are not satisfied.", "Date_of_Decision": "18 March 2002", "Year_of_Income": "Other/Substituted Accounting Period 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 974 -115 section 974-120 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible notes Debt equity borderline", "Case_References": "", "Other_References": "Explanatory Memorandum: New Business Tax System (Debt and Equity) Act 2001", "Business_Line": "Office of the Chief Tax Counsel", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021113", "Unmatched_Content": "This Interpretative Decision was originally issued as ATO ID 2002/1113, however it was inadvertantly loaded as ATO ID 2002/1054. This error has been corrected so that the decision is now displayed as 2002/1113. This ATOID has equal application to section 202-40 of the Income Tax Assessment Act 1997 (ITAA 1997). All reference to section 160APA of the Income Tax Assessment Act 1936 (ITAA 1936) should therefore be taken as including reference to section 202-40. This ATOID has equal application to Subdivision 215-B of the ITAA 1997. All reference to section 160APAAAB of the ITAA 1936 should therefore be taken as including reference to subdivision 215-B. Please note the part concerning Class C franking debits (i.e. subsection 160APAAAB(8)-(10)of the ITAA 1936) was repealed with no replacement. Any discussion in this ATOID that refers to Class C franking debits ceased to be applicable from 14 September 2006. | Keywords Convertible notes Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2002/1115", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes - Non deductible distribution, Section 26-26, Income Tax Assessment Act 1997", "Issue": "Will distributions paid on a convertible note that is a non-share equity interest be treated as non-deductible distributions pursuant to section 26-26 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "A company issuer that distributes money to the holder of a non-share equity interest as a result of the holder being a holder of that non-share equity interest, will be treated as having made a non-share distribution as defined in section 974-115 of the ITAA 1997, to the holder of that interest. Paragraph 26-26(1)(a) of the ITAA 1997 would operate to deny a deduction in respect of those non-share distributions.", "Facts": "A company that issues convertible notes which Division 974 of the ITAA 1997 characterises as a debt interest is proposing to enter into a scheme of arrangement in respect of those notes. If the note holders and shareholders accept the scheme of arrangement, it will ensure that the note holders will convert their notes on maturity into shares of the issuer rather than seek a return of the face value of the notes. Under the scheme of arrangement, the 'interest payments' on the convertible note will continue until maturity of the convertible note. All payments made under the convertible note from the date the scheme of arrangement is entered into will represent payment obligations accrued by the company over the period that the convertible note is a non-share equity interest.", "Reasons_for_Decision": "Summary: The amounts paid by the company to the note holders whilst the convertible note is a non-share equity interest will be non-share distributions as defined in section 974-115 of the ITAA 1997. Those amounts paid will give rise to non-share distributions as the distributions represent amounts of money distributed to the holder of a non-share equity interest as non-share equity interest holders. By virtue of the operation of paragraph 26-26(1)(a) of the ITAA 1997, those non-share distributions would not be deductible to the company.", "Date_of_Decision": "18 March 2002", "Year_of_Income": "Other/Substituted Accounting Period 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 974-115 paragraph 26-26(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Convertible Notes Debt equity borderline", "Case_References": "", "Other_References": "Explanatory Memorandum: New Business Tax System (Debt and Equity) Act 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021115", "Unmatched_Content": "Keywords Convertible Notes Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2004/611", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: application of Division 974 to material changes made to a loan agreement", "Issue": "Will any material changes or alterations made to a loan agreement with the terms described in the facts below form a new scheme for the purposes of classifying the loan as a debt or equity interest in accordance with Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The effect of a material change to the loan agreement will mean that a new scheme has been entered into for the purposes of the application of Division 974 of the ITAA 1997.", "Facts": "A Company maintains accounts with a number of related entities that deposit funds into separate sub accounts. The Company refers to these lenders as its 'Depositors'. The Company has entered into written Cash Management Account agreements with each of the Depositors. These agreements have common terms, but in particular: The loan is classified as a debt interest under Division 974 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 974-110 of the ITAA 1997 contains rules which ensure that the general requirement under Division 974 of the ITAA 1997 that the debt and equity tests are applied to schemes at the time the scheme comes into existence does not prevent Division 974 applying where the scheme has changed in a material way. In particular subsection 974-110(1) of ITAA 1997 provides that if: The effect of section 974-110 of the ITAA 1997 is to put an imperative on the issuer to retest the instrument under Division 974 of the ITAA 1997 every time there is a change to an existing scheme to ensure it is not a material change that changes its classification under Division 974 from debt to equity or vice versa. The section can apply to an interest a number of times so that, for example, an interest that is debt when issued may change to equity because of one subsequent change and then back to debt because of a later change. This has the result that if at the end of the initial term the parties agree to extend the term of the loan, it will be necessary for the issuer to test the new arrangement to determine whether it is a debt or equity interest in accordance with Division 974 of the ITAA 1997.", "Date_of_Decision": "21 June 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 974-110", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Debt interest", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004611", "Unmatched_Content": "Keywords Debt equity borderline Debt interest"}
{"ATO_ID_Number": "ATO ID 2003/664", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financing Arrangement: commitments obtained by cash or letters of credit", "Issue": "Does the obtaining of commitments by cash or letters of credit fall within the definition of financing arrangement for the purposes of section 974-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The obtaining of commitments by cash or letters of credit does not fall within the definition of financing arrangement for the purposes of section 974-130 of the ITAA 1997.", "Facts": "The taxpayer provides wholesale payment and back-office services to financial sector customers in the cash and derivative markets. The taxpayer is both buyer and seller to its customers and carries the credit risk that either or both parties may not settle a contract. In managing this financial risk, the taxpayer has obtained commitments from its key customers to share certain financial risks, for which it pays a fee. The fee is calculated on the amount of the commitment - not the amount of any cash deposited. Critically, customer's commitments are not required in cash. What is required is the assurance that these resources will be available if required, to cover a loss occasioned by, or arising from, the default of a customer. This assurance is achieved by requiring customers to back up their commitment in cash, or other form, including bank letters of credit. Critically, again, the form of the commitment required is exercised at the option of the customer, there being requirement by the taxpayer as to what portion must be contributed in cash (which is left to the customer). The cash from the commitments is part of the risk management process. It is not required for working capital and is merely invested in short term securities. The taxpayer, upon which it pays a market rate of interest on the cash commitments it received. Whilst the taxpayer has the power to set the fee, that power is limited by commercial constraints which both recognise and compensate customers for the assumption of risk. If the fee is set too low, customers would determine that the return was not commensurate with the risk and terminate the relationship. If the rate is excessive, management is failing in its duty to maximise shareholder returns. Part of the taxpayer group's capital base is specifically set aside to meet the risk of customer default. It has had a positive cash position for the past 10 years. It has not borrowed money from external sources during this period for operational reasons. It has funded significant capital expenditure from internally generated cash, - the only exception being minor capital expenditure on computer hardware, which was leased for other reasons. For the past six years the proportion of customers commitments held in cash, as opposed to other forms including letters of credit, has varied from 27% to 50%.", "Reasons_for_Decision": "Summary: Section 974-130 of the ITAA 1997 defines a financing arrangement. Paragraph 974-130(1)(a) provides: A scheme is a financing arrangement for an entity if it is entered into or undertaken: (a) to raise finance for the entity (or a connected entity of the entity) .... Although cash is certainly lodged, which is a liability on the balance sheet and adds to the capital base of the taxpayer group and it earns a return on same, the holistic factual arrangements have been considered, including the following matters: The taxpayer derives most of its income from the fees it charges for the provision of its services provided. Thousands of transactions are conducted each year and these funds are derived by the taxpayer outright. The small market rate of interest which is retained or the amount otherwise retained from customers' commitments deposited as cash funds presently exercised entirely at the option of customers, would not appear to be a major motivation to the taxpayer but rather arises from prudential and financial security needs. Having regard to the above factual circumstances, it is considered reasonable and appropriate to respond to the holistic fact pattern and unique circumstances of the arrangements described, together with their fundamental prudential motivation and genesis. Accordingly, it is reasonable to conclude that the arrangements described are not 'to raise finance'. Rather, what we have here is a suite of measures put in place to effectively manage a holistic arrangement and the financial risk of customers defaulting on either end of a transaction. Basically, it is a security arrangement to ensure the economic and financial position and responsibilities of the taxpayer and customers in the event of such a default. The risk falls on the taxpayer to meet the credit shortfall and it manages this by spreading the risk via a strategy that includes a combination of investments of cash funds held on deposit, together with other securities and third party insurance. Critically, there is no obligation on customers to deposit funds in cash. The form of commitment required is optionally exercised by the customer and includes letters of credit from a bank which is acceptable to the taxpayer's prudential requirements. A fee is paid to customers in respect of the commitment they make in relation to the Guarantee/Assurance Fund. Specifically this is the defaulting customer's commitment and customers' commitments respectively of this fund. Where the commitment is satisfied by an amount of cash deposited by a customer, an additional amount is returned to the customer which is based on a market rate of interest. The total average return is calculated each month. The taxpayer pays the earnings rate less the spread. The commitment funds are not used for any capital fund raising, as the taxpayer has significant and substantial funds held in cash reserves together with large sums presently allocated to the Guarantee/Assurance Fund. Accordingly, the obtaining of commitments by cash or letters of credit does not fall within the definition of financing arrangement for the purposes of section 974-130 of the ITAA 1997.", "Date_of_Decision": "12 March 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 974-1 section 974-130", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003664", "Unmatched_Content": "Keywords Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2003/752", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest free loan to private company repayable if shareholding is sold or the company is sold: application of the debt-equity interest provisions", "Issue": "Whether an interest-free loan from a shareholder to a company, repayable in certain specified circumstances, will be treated as a debt or an equity interest for the purposes of Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Decision": "The loan will be treated as an equity interest for the purposes of Division 974 of the ITAA 1997", "Facts": "A family company, 'Company ABC Ltd', requires capital funds. A shareholder of 'Company ABC Ltd' agrees to lend the capital funds to 'Company ABC Ltd' on the following terms: The shareholder owns 90% of the share capital in 'Company ABC Ltd', as well as 90% of the voting rights. The remaining 10% of the shares are held by other family members.", "Reasons_for_Decision": "Summary: Whether the Loan Meets the Equity Test Subsection 974-70(1) of the ITAA 1997 provides: A scheme gives rise to an equity interest in a company if, when the scheme comes into existence: (a) the scheme satisfies the equity test in subsection 974-75(1) in relation to the company because of the existence of an interest; and (b) the interest is not characterised as, and does not form part of a larger interest that is characterised as, a debt interest in the company, or in a connected entity of the company, under Subdivision 974-B. Subsection 974-75(1) of the ITAA 1997 provides that a scheme satisfies the equity test in relation to a company if it gives rise to an item set out in the table contained in that subsection. The table then specifies four qualifying items, for example, The interest in question is considered to satisfy Item 3 of the table in subsection 974-75(1) of the ITAA 1997. The Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001 states that: 'Item 3 in the table in subsection 974-75(1) of the ITAA 1997 covers interests that provide a return (whether on or of the investment) to the holder which is at the discretion of the issuer or a connected entity.' The term 'connected entity' is defined in subsection 995-1(1) of the ITAA 1997 to mean: The word 'associate' is then defined in subsection 995-1(1) of the ITAA 1997 to have the same meaning as that term does in section 318 of the Income Tax Assessment Act 1936 (ITAA 1936) Subsection 318(2) of the ITAA 1936 defines associates of a company. Pursuant to that provision, an associate of a company can be any other entity, including a person, where that entity/person has a majority voting interest in the company. In this case, the shareholder who provides the loan to 'Company ABC Ltd' holds a majority voting interest in the company and is thus an associate of that company for the purposes of the definition of 'connected entity'. As the shareholder is a connected entity of 'Company ABC Ltd', and that shareholder can control whether a return is to be paid on the loan by electing to sell his/her shares, then that return is at the discretion of the shareholder. As a result, item 3 in the table at subsection 974-75(1) of the ITAA 1997, is satisfied. It is pointed out that this type of loan is not an at-call loan for the purpose of subsection 974-75(4) of the ITAA 1997 as the loan is not repayable on demand by a connected entity. Rather, it is repayable only upon the satisfaction of certain specified circumstances. The loan thus constitutes an equity interest. The equity test is however, subject to the debt test in that if an interest satisfies both the debt test and the equity test, it is treated as a debt interest and not an equity interest by virtue of the application of subsection 974-5(4) of the ITAA 1997. Whether the Loan Meets the Debt Test Subsection 974-20(1) of the ITAA 1997 provides: A scheme satisfies the debt test in this subsection in relation to an entity if: It is clear that these tests are not satisfied in this matter as the entity, 'Company ABC Ltd', does not have an effectively non-contingent obligation to provide a financial benefit to the shareholder. 'Company ABC Ltd' is required to repay the principal only if certain prerequisites are met, that is, if the shareholder wishes to sell his/her shares, or if the company is to be sold. This is a contingency in both legal form and economic substance; these contingencies are not artificial, but genuinely make the repayment of the principal a contingent matter. Furthermore, even if the repayment of principal was non-contingent, the debt test would still not be satisfied as the return paid is of principal only. It is not a benefit that will be substantially more likely than not to exceed the value of the capital received by the entity. As the loan may extend for more than ten years before it is repaid, section 974-35 of the ITAA 1997 requires that the valuation of the financial benefit to be provided by 'Company ABC Ltd' must be in present value terms. As no interest is payable, the present value of the financial benefit to be provided must be less than the value of the financial benefit received, (the latter equalling the nominal value of the loan). Therefore, the interest-free loan from a shareholder to a company, repayable in these certain specified circumstances, will be treated as an equity interest for the purposes of Subdivision 974-C of the ITAA 1997.", "Date_of_Decision": "4 August 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 974-A section 974-5 section 974-10 Subdivision 974-B section 974-15 section 974-20 subsection 974-20(1) section 974-35 subsection 974-35(1) Subdivision 974-C section 974-70 subsection 974-70(1) section 974-75 subsection 974-75(1) subsection 974-75(4) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Debt interest Debt test Equity interest Equity test Loans", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003752", "Unmatched_Content": "Updated to include relevant keywords | Updated to include omitted legislation | Updated to reflect legislative changes and references to legislation | Keywords Debt equity borderline Debt interest Debt test Equity interest Equity test Loans"}
{"ATO_ID_Number": "ATO ID 2003/870", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity Borderline: characterisation of related schemes", "Issue": "Will the issue of loan notes and shares that are related schemes under section 974-155 of the Income Tax Assessment Act 1997 (ITAA 1997) give rise to a debt or an equity interest pursuant to the operation of Division 974 of the ITAA 1997?", "Decision": "The related schemes will give rise to a debt interest as they will satisfy the requirements of a debt interest as defined in subsection 974-15(1) of the ITAA 1997.", "Facts": "A company intends raising funds via the issue of two different types of securities, ordinary shares and loan notes. The shares and the loan notes will be issued under the one agreement. An investor subscribing to the company will be required to acquire both the shares and the loan notes. The subscription price for each loan note will be one hundred dollars ($100). The subscription price for each share will be one dollar ($1). The loan notes will be redeemed within 10 years of date of issue. Interest will be payable on the loan notes at 10% per annum compounding. The issuer has the choice of paying interest on the specified payment dates or capitalising the interest. Interest capitalised will not be payable until the loan notes are redeemed.", "Reasons_for_Decision": "Summary: The constituent schemes (namely, the shares and the loan notes) give rise to a debt interest because they satisfy the criteria under which related schemes give rise to a debt interest (paragraphs 974-15(2)(a) to 974-15(2)(c) of the ITAA 1997). The constituent schemes do not satisfy all of the criteria under which related schemes give rise to an equity interest (paragraphs 974-70(2)(a) to 974-70(2)(c) of the ITAA 1997). Paragraph 974-15(2)(a) of the ITAA 1997 requires that 'the entity enters into, participates in or causes another entity to enter into or participate in the constituent schemes...' This requirement is met, because the company will require any investor who wishes to invest, to subscribe to both the loan notes and the shares. Paragraph 974-15(2)(b) of the ITAA 1997 requires that the operation of the constituent schemes (the loan notes and the shares) in combination (the 'notional scheme'), would satisfy the debt test in subsection 974-20(1) of the ITAA 1997. To satisfy the debt test, paragraphs 974-20(1)(a) to 974-20(1)(e) of the ITAA 1997 must be satisfied. These paragraphs are satisfied because: The value of the financial benefits provided and the value of the financial benefits received are both not nil (paragraph 974-20(1)(e) of the ITAA 1997). Paragraph 974-15(2)(c) of the ITAA 1997 requires that it be reasonable to conclude that the entity intended that the combined economic effects of the constituent schemes to be the same as, or similar to, the economic effects of a debt interest. The constituent schemes, in combination, do have an economic effect that is equivalent to a debt interest. The issuer has in substance and effect an obligation to repay the total investment amount on the loan notes and interest whether capitalised or not. Having regard to the investment amounts attributable to the loan notes and shares, and that each individual share is to be subscribed to with a loan note, the obligations of the issuer to repay the amounts arising under the loan notes will exceed the entire investment amount. Accordingly, it would be reasonable to conclude that the company intended the combined economic effects of the constituent schemes to be similar to the economic effects of a debt interest. The constituent schemes would not satisfy the criteria necessary for the related schemes to be characterised as an equity interest (paragraphs 974-70(2)(a) to 974-70(2)(c) of the ITAA 1997). The constituent schemes would not to give rise to an equity interest as required under paragraph 974-70(2)(b) of the ITAA 1997 because those constituent schemes would not give rise to an equity interest under subsection 974-70(1) of the ITAA 1997 given that the interest would be characterised as a debt interest. In addition, it could not be said that it is reasonable to conclude that the entity intended the combined economic effects of the constituent schemes to be the same as, or similar to, the economic effects of an equity interest (paragraph 974-70(2)(c) of the ITAA 1997).", "Date_of_Decision": "16 September 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-15(1) subsection 974-15(2) subsection 974-20(1) subsection 974-20(2) subsection 974-20(3) subsection 974-20(4) subsection 974-35(1) subsection 974-70(1) subsection 974-70(2) subsection 974-130(1) subsection 974-160(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Financing arrangement Debt equity borderline", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003870", "Unmatched_Content": "Keywords Financing arrangement Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2014/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Right to Future Income: whether fees for services provided by a Responsible Entity, under a contract or agreement, in respect of a managed investment scheme is a non-deductible right to future income?", "Issue": "Is a right to future income under a contract or agreement for the provision of management and investment services entered into in the course of the entity's fund management business, a non-deductible right to future income under subsection 701-63(4) of the Income Tax Assessment Act 1997 (ITAA 1997), under the Interim Rules in Part 2 of Schedule 3 to the Tax Laws Amendment (2012 Measures No 2) Act 2012?", "Decision": "Yes.", "Facts": "ABC Returns (the Fund) is a managed investment scheme which is registered under Part 5C.1 of the Corporations Act 2001 (Cth). The constitution of this registered scheme (the Fund Constitution) is binding on the Responsible Entity and the members of the Fund. The Fund is a listed Fund on the Australian Securities Exchange. [1] The Fund Constitution sets out the entitlement of the Responsible Entity to receive management and investment performance fees (the management services fees), payable from the Fund's assets. The management services fees may be deducted from the unit holders' returns on their investment or from the assets of the Fund directly. The unit holders (the Fund members) have the following rights in accordance with Chapter 5C of the Corporations Act 2001: ZCo is a public company that holds a licence to act as a Responsible Entity under section 601FA of the Corporations Act 2001. ZCo, as the Responsible Entity of the Fund, is the Trustee of the Fund and the Fund Manager. On 1 July 2010 ZCo joins HCo's tax consolidated group. The Interim Rules apply to this joining. ZCo's right to management services fees is recognised by ZCo as an asset for consolidation tax cost setting purposes, and has a positive value at the joining time (taking into account all the related obligations). The asset receives a tax cost reflective of its market value at the joining time.", "Reasons_for_Decision": "Summary: All legislative references are to the Income Tax Assessment Act 1997, as they applied under the Interim Rules, unless otherwise indicated. The right to future income (RTFI) provisions provide recognition for the tax cost of an asset that is a right where the conditions in subsection 701-55(5C) are satisfied. The broad effect of the RTFI provisions in the Interim Rules, is to enable a deduction under section 716-405 for the tax cost of an asset that is a valuable right to receive an amount, under a contract or agreement, for the performance of work or services or the provision of goods (other than trading stock) where that right: ZCo's right to management services fees satisfies the requirements of being a right to future income under subsection 701-63(5). That is, the right is under a contract or agreement (between ZCo as the Responsible Entity and each unit holder of the Fund (that is, the unit holders, collectively), where the right to fees is in respect of the performance of work or services. The management services fees, which are payable from the unit holders' returns on their investment or from the assets of the Fund directly, have a value of greater than nil taking into account all the obligations and conditions relating to the right. This right to future income is a non-deductible right to future income, pursuant to subsection 701-63(4), if: A *right to future income that is a right of an entity under a contract or agreement with another entity (the customer) is a non-deductible right to future income in relation to the entity to the extent that the value of the right to future income: (a) ... (b) is attributable to a period (if any) during which the customer can unilaterally cancel the contract or agreement without paying compensation or a penalty; or (c) if there is a period during which the customer can unilaterally cancel the contract or agreement, but must pay compensation or a penalty - is attributable to that period, but not to that compensation or penalty. At the broadest level, the purpose of subsection 701-63(4) is to treat as non-deductible RTFI any value under a contract or agreement that is referrable to the future expectancy as to the rights under the contract continuing, where that value is dependent on the customer deciding to remain a customer of the business. Only the value referable to the non-cancellable component (or the payment of damages or compensation by the customer for the cancellation of the contract, if any) will fall for consideration as a deductible right to future income. The policy intent of paragraph 701-63(4)(b), as expressed at paragraph 3.77 of the Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No 2) Bill 2012, is: 3.77 A right to future income under a contract or agreement entered into by a joining entity with the customer is uncertain if the customer can unilaterally cancel the contract or agreement at any time without paying compensation or a penalty. In this regard, the right is not an existing right to future income but is a mere expectation that cannot be attributed to those existing rights. Therefore, the right is a non-deductible right to future income that is treated as goodwill. The deductibility of a right to future income is dependent on whether the right satisfies the requirements of subsection 701-63(4). In particular, where the right to future income is attributable to a period (if any) where the customer can unilaterally cancel the contract, paragraphs 701-63(4)(b) or (c) may apply resulting in the right being a non-deductible right to future income. In the present case ZCo's dealings satisfy the requirement of a right to income arising from the fund management services provided under a contract or agreement with another entity (the customer). Although the management and investment services are specifically in respect of the assets under management, the ultimate recipients of the services are the Fund members. Accordingly it is each Fund member (or alternatively the Fund members acting in concert) that is the relevant 'entity', within the meaning of subsection 960-100(1), for the purposes of determining whether ZCo's right to management services fees is a non-deductible RTFI. The members of the Fund collectively, that is the unit holders acting together, can unilaterally cancel the contract, without ZCo's agreement. Specifically, sections 601FM and 601NB of the Corporations Act 2001 provide for the removal of the Responsible Entity or for the winding up of the Fund, respectively. The member (or members) of the Fund can participate in the necessary resolutions to either remove the Responsible Entity under section 601FM or wind up the scheme under section 601NB. Whether the member (or members) are successful under section 601FM or section 601NB, and the potential difficulty or likelihood of success in actually bringing about the change, are not relevant to the legislative test of whether the member (or members) - the customer- 'can unilaterally cancel' the contract or agreement. Instead the legislative test is focused on whether the customer (the member or members) 'can' bring to an end the current Responsible Entity's right to future income without the agreement of ZCo. The removal of ZCo as the Responsible Entity or the winding up of the Fund, at the direction of members, can both bring about the termination of ZCo as the Responsible Entity and end its right to receive future income. Thus, collectively the Fund members are able to unilaterally cancel the contract or agreement by removing or replacing the Responsible Entity or winding up the Fund. The ability of the members to collectively give effect to the necessary resolution means that there is a mere expectancy with respect to ZCo's right to management services fees. Accordingly, the right to management services fees is a non-deductible RTFI and as such would not satisfy the necessary conditions in subsection 701-55(5C) for HCo to be eligible to claim a deduction for the tax cost of that right. This non-deductible RTFI is instead treated as an asset forming part of goodwill.", "Date_of_Decision": "16 December 2014", "Year_of_Income": "2002 onwards where the interim rule applies", "Legislative_References": "Income Tax Assessment Act 1997 subsection 701-63(4) subsection 701-63(5) section 716-410 subsection 701-55(5C) subsection 960-100(1) Division 230", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "right to future income Fund management Managed investment scheme non deductible right to future income fund management contract unilaterally cancel tax cost setting amount", "Case_References": "MTM Funds Management Ltd v. Cavalane Holdings Pty Ltd [2000] NSWSC 922 (2000) 158 FLR 121", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2012 Measures No 2) Bill 2012", "Business_Line": "Tax Counsel Network", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201443", "Unmatched_Content": "Keywords right to future income Fund management Managed investment scheme non deductible right to future income fund management contract unilaterally cancel tax cost setting amount"}
{"ATO_ID_Number": "ATO ID 2013/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: residual tax cost setting rules: pre rules: deductibility under section 8-1 of the ITAA 1997 of the tax cost setting amount of a commodity swap contract in the joining time income year", "Issue": "Can the head company of a consolidated group claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the tax cost setting amount of a commodity swap contract held by a joining entity in the joining income year if the pre rules version of subsection 701-55(6) of the ITAA 1997 applies in the circumstances described below?", "Decision": "No, the head company of a consolidated group cannot claim a deduction under section 8-1 of the ITAA 1997 for the tax cost setting amount of a commodity swap contract held by a joining entity in the joining income year when the pre rules version of subsection 701-55(6) of the ITAA 1997 applies. Subsection 701-55(6) of the pre rules does not deem a loss or outgoing equal to the tax cost setting amount to have been incurred at the joining time. Therefore the requirements for deductibility under section 8-1 of the ITAA 1997 are not satisfied at that time. Furthermore, the 'cost' of the commodity swap contract is not the subject of a deduction under section 8-1 of the ITAA 1997.", "Facts": "An entity enters into a commodity swap contract for the purpose of hedging the financial risks of movements in the spot price of a commodity associated with its business. The swap contract is entered into in the ordinary course of the entity's business. However it is not held for the purpose of gaining a profit from its disposal. The entity does not outlay any amount to enter into this swap contract or to acquire it. The swap contract is created by the exchange of promises. The amounts that the entity is entitled to receive from the counterparty, and the amounts the entity owes the counterparty, under the swap contract are netted off in regular settlement periods. As a result only one payment is either made or received by the entity for each settlement period. However, the swap contract imposes gross but offsetting liabilities on each counterparty. Therefore, the gross receipts and gross outgoings paid under the swap contract are respectively assessable income under section 6-5 of the ITAA 1997 and allowable deductions under section 8-1 of the ITAA 1997. Subsequently, the entity joined a consolidated group as a subsidiary member. At the joining time, the swap contract is considered to be an asset for the purposes of Part 3-90 of the ITAA 1997. The tax costs of all of the assets of the entity are set in accordance with section 701-10 of the ITAA 1997. The head company does not outlay any additional amounts in relation to the swap contract. For the income years under consideration, the pre rules apply to the head company in relation to the entity which joins the consolidated group.", "Reasons_for_Decision": "Summary: (All references are to the ITAA 1997 unless otherwise stated). An amount will be deductible under section 8-1 if it is a loss or outgoing incurred in gaining or producing assessable income, or in carrying on a business for that purpose. In Federal Commissioner of Taxation v. Visy Industries USA Pty Ltd (2012) 205 FCR 317; [2012] FCAFC 106; 2012 ATC 20-340 ( Visy ), the Full Federal Court considered whether an amount expended in entering into or acquiring a hedge contract would be deductible under section 8-1. The Court found that where an amount of expenditure was made to enter into an indemnity, which hedged against potential losses on another profit-making transaction, then that amount would be deductible under section 8-1, on the basis that the hedge was entered into in the course of carrying on the taxpayer's business (albeit not in the ordinary course of that business) (at [52], [60] and [75]). The Court also found that where such an amount satisfies the requirements of section 8-1, the amount will be deductible in the year it is incurred, regardless of whether it is part of a wider profit-making transaction. When the entity joined the consolidated group, Part 3-90 operated to deem certain facts in relation to the swap contract. For the purpose of working out the head company's income tax liability: In addition, the tax cost of the swap contract is set at its tax cost setting amount under section 701-10. Under the entry history rule, the swap contract is taken to have been entered into and held by the head company under the same circumstances as it was entered into and held by the entity before the joining time. Consequently, the head company is taken to have entered into the swap contract in the ordinary course of its business, for the purpose of hedging the financial risks of movements in the spot price of a commodity associated with its business. In accordance with Visy , if any amount can be said to have been incurred by the head company in entering into or acquiring the swap contract, it would be deductible under section 8-1 at that time. If section 8-1 was to apply in relation to the swap contract, subsection 701-55(6) would operate to deem each swap contract's 'cost' to be equal to its tax cost setting amount. However, subsection 701-55(6) does not deem a loss or outgoing equal to the tax cost setting amount of the swap contract to have been incurred by the head company at the joining time nor, even if it did, does it deem the tax cost setting amount to have been incurred to acquire the swap contract. It is a principle of statutory interpretation that deeming provisions must be construed strictly and only for the purpose for which they are resorted to ( Federal Commissioner of Taxation v. Comber (1986) 10 FCR 88 at 96). It is not a necessary implication of deeming an asset to have a 'cost' at the joining time equal to the asset's tax cost setting amount that there has been a loss or outgoing incurred at the joining time equal to that amount or that the amount was incurred to acquire the asset. Furthermore, subsection 701-55(6) only operates where another provision is to apply in relation to the asset, that is, will apply independently of subsection 701-55(6), and then it operates to substitute the tax cost setting amount for the cost of the asset. If the cost of the asset is not material to the operation of the relevant provision, subsection 701-55(6) has no effect. In this case, section 8-1 has no application to the asset as such; would not apply apart from subsection 701-55(6); and insofar as it can be said to apply at all, applies to losses and outgoings incurred under the swap contract and not its cost. Therefore, section 8-1 cannot be said to apply to the swap contract, and subsection 701-55(6) does not operate. Consequently, section 8-1 does not allow a deduction for the tax cost setting amount of the swap contract in the income year that the entity joined the consolidated group.", "Date_of_Decision": "12 August 2013", "Year_of_Income": "Year ending 30 June 2007 Year ending 30 June 2008 Year ending 30 June 2009 Year ending 30 June 2010 Year ending 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 701-1 section 701-5 section 701-10 subsection 701-55(6)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2050 | Taxation Ruling IT 2682", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/47", "Subject_References": "assets consolidation-joining financial derivatives swaps tax cost set amount", "Case_References": "Federal Commissioner of Taxation v. Comber (1986) 64 ALR 451 (1986) 10 FCR 88 (1986) 17 ATR 413 86 ATC 4171", "Other_References": "", "Business_Line": "Interpretative Assistance, Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201346", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2050 Taxation Ruling IT 2682 | Keywords assets consolidation-joining financial derivatives swaps tax cost set amount"}
{"ATO_ID_Number": "ATO ID 2013/47", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: tax cost setting - deductibility under section 8-1 of the ITAA 1997 of the tax cost setting amount of a commodity swap contract at the maturity of the swap contract", "Issue": "Can the head company of a consolidated group claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the tax cost setting amount of a commodity swap contract held by a joining entity when the contract matures in the circumstances described below?", "Decision": "No, the head company of a consolidated group cannot claim a deduction under section 8-1 of the ITAA 1997 for the tax cost setting amount of a commodity swap contract held by a joining entity when the contract matures. No loss arises upon maturity of the swap contract.", "Facts": "An entity enters into a commodity swap contract for the purpose of hedging the financial risks of movements in the spot price of a commodity associated with its business. The swap contract is entered into in the ordinary course of the entity's business. However it is not held for the purpose of gaining a profit from its disposal. The entity does not outlay any amount to enter into this swap contract or to acquire it. The swap contract is created by the exchange of promises. The amounts that the entity is entitled to receive from the counterparty, and the amounts the entity owes the counterparty, under the swap contract are netted off in regular settlement periods. As a result only one payment is either made or received by the entity for each settlement period. However, the swap contract imposes gross but offsetting liabilities on each counterparty. Therefore, the gross receipts and gross outgoings paid under the swap contract are respectively assessable income under section 6-5 of the ITAA 1997 and allowable deductions under section 8-1 of the ITAA 1997. The swap contract matures when all periods provided for in the contract have expired. Subsequently, the entity joined a consolidated group as a subsidiary member. At the joining time, the swap contract is considered to be an asset for the purposes of Part 3-90 of the ITAA 1997. The tax costs of all of the assets of the entity are set in accordance with section 701-10 of the ITAA 1997. The head company does not outlay any additional amounts in relation to the swap contract.", "Reasons_for_Decision": "Summary: (All references are to the ITAA 1997 unless otherwise stated). When the entity joins the consolidated group, Part 3-90 operates to deem certain facts in relation to the swap contract. For the purpose of working out the head company's income tax liability: In addition, the tax cost of the swap contract is set at its tax cost setting amount under section 701-10. Under the entry history rule, the swap contract is taken to have been entered into and held by the head company under the same circumstances as it was entered into and held by the entity before the joining time. Consequently, the head company is taken to have entered into the swap contract in the ordinary course of its business, for the purpose of hedging the financial risks of movements in the spot price of a commodity associated with its business. Similarly after the joining time, under the single entity rule and the entry history rule, the head company is taken to hold and deal with the swap contract as the entity did. This means that it is taken to hold the swap contract for the same purpose for which it was held before the joining time, until the swap contract comes to an end. A loss may be deductible under section 8-1 where the initial outlay in relation to an asset did not itself constitute a loss or outgoing incurred, and that asset is subsequently lost. This is in accordance with Guinea Airways Ltd v. Federal Commissioner of Taxation (1950) 83 CLR 584, where the taxpayer paid for aircraft spare parts which were not deductible on purchase. The parts were stockpiled by the taxpayer and were later destroyed by bombing during the Second World War. The taxpayer sought a deduction for the destroyed parts upon their destruction. Latham CJ noted (at 589): The claim of the company is not a claim for deduction of the amount expended in purchasing the spare parts and stores or of the value of those actually used. It is a claim in respect of their loss. An asset is lost and a loss incurred where the benefit or value of the asset is forgone and cannot be recovered or realised, for instance, where an asset was destroyed, or where a debt is not recovered to its full value (Parsons, RW 1985, Income Taxation in Australia: Principles of Income, Deductibility and Tax Accounting , The Law Book Company Limited, Sydney, at paragraph [6.52]). In contrast, when the swap contract reaches maturity, the benefits under the contract will have been fully realised by the entity. It has had the benefit of hedging the financial risks associated with its business for the entire time that the swap contract has been in place. Therefore, none of the value of the asset (the swap contract) can be said to have been lost. Rather, when the swap contract comes to an end the asset can be said to have run its course. In this way, there cannot be said to be a loss to the head company upon the maturity of the swap contract. Notwithstanding this, a loss may be deductible upon the ending of an asset where the asset is part of an entity's circulating capital. In Commercial and General Acceptance Ltd v. Federal Commissioner of Taxation (1977) 137 CLR 373; 77 ATC 4375; (1977) 7 ATR 716, Gibbs J observed (at CLR 377) that 'the line of distinction between fixed and circulating capital is not precisely drawn'. Mason J, however, went further (at CLR 383): The distinction between fixed and circulating capital was described by Jenkins L.J. in Reynolds and Gibson v. Crompton (1950) 33 T.C. 288 at p. 303, as 'debatable'. His Lordship went on to say that 'circulating capital' is 'simply an expression used to denote capital expended in the course of the trade with a view to disposal at a profit of the assets produced or acquired by means of such expenditure, and represented at different stages of its career by cash, assets into which the cash has been converted, and debts owing from customers to whom those assets have been sold'. See the same case on appeal Crompton v. Reynolds and Gibson (1952) 1 All E.R. 888 at pp. 893-895. However, it cannot be said that the swap contract here fits this description, as it is not an asset produced or acquired with a view to disposal at a profit. Rather, it was entered into for the purpose of managing the financial risk to the entity's business by hedging against movements in the spot price of a commodity. By this definition, the swap contract is not part of the entity's circulating capital, meaning that no deductible loss will arise upon its maturity (or ending). Furthermore, if an amount were to be received on the maturity of the swap contract, the amount received is properly characterised as ordinary income in its own right ( Commercial and General Acceptance Ltd v. Federal Commissioner of Taxation (1977) 137 CLR 373 at 382-383 per Mason J; Federal Commissioner of Taxation v. Montgomery (1999) 198 CLR 639 at 675-6 [110] - [111] per Gaudron, Gummow, Kirby and Hayne JJ). Therefore, amounts incurred on entry into the swap contract, or for acquiring the swap contract, are not deferred and taken into account in calculating the profit or loss on maturity of the swap contract. Such outgoings are deductible in the year in which they are incurred ( Federal Commissioner of Taxation v. Visy Industries USA Pty Ltd [2012] FCAFC 106; 2012 ATC 20-340 at [84]). Therefore, section 8-1 does not allow the head company to claim that a loss has been made from, or deduct any amount in relation to, the entity's swap contract upon its maturity. The condition in section 8-1 requiring there to be a loss or an outgoing has not been satisfied. It follows that the tax cost setting amount of the swap contract cannot be deducted under section 8-1 upon the maturity of the contract.", "Date_of_Decision": "12 August 2013", "Year_of_Income": "Year ending 30 June 2007 Year ending 30 June 2008 Year ending 30 June 2009 Year ending 30 June 2010 Year ending 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 701-1 section 701-5 section 701-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2050 | Taxation Ruling IT 2682", "Related_ATO_Interpretative_Decisions": "ATO ID 2013/46", "Subject_References": "assets loss consolidation-joining financial derivatives swaps tax cost set amount", "Case_References": "Commercial and General Acceptance Ltd v. Federal Commissioner of Taxation (1977) 137 CLR 373 77 ATC 4375 7 ATR 716", "Other_References": "Parsons, RW 1985, Income Taxation in Australia: Principles of Income, Deductibility and Tax Accounting, The Law Book Company Limited, Sydney.", "Business_Line": "Interpretative Assistance, Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201347", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2050 Taxation Ruling IT 2682 | Keywords assets loss consolidation-joining financial derivatives swaps tax cost set amount"}
{"ATO_ID_Number": "ATO ID 2009/153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: entry Allocable Cost Amount - identifying the relevant asset for the purposes of section 705-56 of the ITAA 1997", "Issue": "Where there is a leasing arrangement that is a finance lease for accounting purposes and the leased asset is held by the lessor for tax purposes; is the relevant asset for the purpose of allocating the entry Allocable Cost Amount (ACA) to determine the tax cost setting amount for an asset in accordance with section 705-20 of the Income Tax Assessment Act 1997 (ITAA 1997), the underlying depreciable asset that generates an income stream for the joining entity?", "Decision": "Yes. Section 705-56 of the ITAA 1997 provides that the relevant asset, as between an asset held as an underlying depreciating asset under a finance lease and the associated income stream, to be recognised for the purpose of allocating the entry ACA of the joining entity is the underlying depreciating asset.", "Facts": "XCo leases goods to small business and individual customers. The type of goods XCo ordinarily leases include retail IT equipment and retail electrical appliances. The underlying depreciable assets leased to its customers are at all relevant times legally owned by XCo. For accounting purposes, these leases are treated as finance leases (in accordance with AASB 117). Accordingly, the accounting balance sheet discloses an amount receivable under the terms of the lease as an asset with only the interest component of a periodic lease instalment recognised as revenue. For tax purposes, these leases are effectively treated as operating leases. Accordingly, XCo's tax balance sheet discloses the underlying physical asset as an asset (and XCo claims a deduction for tax depreciation). In this way, the full amount of a periodic lease instalment is recognised as income for tax purposes. On 1 July 2006 X Co joined the ACo tax consolidated group (the joining time). Therefore, for tax purposes, the tax cost base of the assets held by X Co were recalculated (by performing an ACA calculation and allocating that ACA amongst the various assets now held by the A Co tax consolidated group).", "Reasons_for_Decision": "Summary: When an entity joins a consolidated group, new tax costs for the assets of the joining subsidiary are set as a result of allocating the ACA to the assets of the joining entity. Consequently, the relevant assets of the joining entity need to be identified for this purpose. A general definition of 'asset' is not provided in the legislation. However, paragraph 5 of TR 2004/13 'Income tax: the meaning of an asset for the purposes of Part 3-90 of the Income Tax Assessment Act 1997 ' (TR 2004/13) provides that an asset, for the purpose of the tax cost setting rules, is anything recognised in commerce and business as having economic value to the joining entity at the joining time for which a purchaser of its membership interests would be willing to pay. The business or commercial assets of a joining entity would include the things that would be expected to be identified by a prudent vendor and purchaser as having value in the making of a sale agreement in respect of all the membership interests in an entity and its business. Further, paragraph 6 of TR 2004/13 provides that the commercial or business meaning of an asset in Part 3-90 is not limited to assets that would be recognised under accounting standards or statements of accounting concepts. Under TR 2004/13, both the underlying depreciating asset and the joining entity's right to receive lease payments could be considered the relevant asset. Section 705-56 of the ITAA 1997 provides a specific modification for tax cost setting in relation to finance leases. The section requires the leasing arrangement to a finance lease in accordance with the accounting standards or statements of accounting concepts. For a lessor the section operates so that only one asset in relation to the lease. That is, either the underlying depreciating asset or the joining entity's right to receive lease payments, is allocated ACA. For a lessor, how section 705-56 of the ITAA 1997 applies is affected by whether the lessor is taken to 'hold' the asset just before the joining time. This is determined in accordance with section 40-40 of the ITAA 1997 Given that XCo remains the legal owner of the asset throughout the term of the lease, item 10 of the table in section 40-40 of the ITAA 1997 would apply to treat XCo as the holder of the underlying depreciating asset that is subject to the lease. As XCo is the holder of the asset under section 40-40 of the ITAA 1997, then subsections 705-56(2) and (5) of the ITAA 1997 operate such that the right to receive lease payments is treated as having a tax cost of nil; and the underlying depreciating asset is treated as a reset cost base asset whose cost is set by the allocation of ACA. Therefore it is the underlying depreciating asset, albeit that the asset is subject to a finance lease for accounting purposes, that will be allocated ACA under the tax cost setting process. It is noted that subsection 705-56(2) of the ITAA 1997 only resolves the issue of which asset between the underlying depreciating assets held for tax purposes under a finance lease and the income stream generated by the leasing business in respect of the depreciating assets is to be treated as the preferred asset for consolidation cost setting purposes. This does not prevent intangible assets of the leasing business such as goodwill or the lease contracts from also being recognised as assets for consolidation cost setting.", "Date_of_Decision": "2 December 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 40-40 section 705-20 section 705-56", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Allocation of the Allocable Cost Amount Assets Consolidation Finance lease Tax Cost is set", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009153", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/13 | Keywords Allocation of the Allocable Cost Amount Assets Consolidation Finance lease Tax Cost is set"}
{"ATO_ID_Number": "ATO ID 2007/50", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - retained cost base assets - identification of", "Issue": "Where a right to have something done under a contract qualifies as a retained cost base asset of the joining entity at the joining time under paragraph 705-25(5)(c) of the Income Tax Assessment Act 1997 (ITAA 1997), should the entirety of the contract be treated as a single retained cost base asset under that provision?", "Decision": "No. Where a right to have something done under a contract qualifies as a retained cost base asset of the joining entity at the joining time under paragraph 705-25(5)(c) of the ITAA 1997, the entirety of the contract should not be treated as a single retained cost base asset under that provision.", "Facts": "SubCo (the joining entity) entered into a contract with XCo (an unrelated party), the term of the contract being 20 years. Under the contract: SubCo chose to pay the prepayment upon entering into the contract. Later, SubCo became a subsidiary member of a consolidated group headed by HCo.", "Reasons_for_Decision": "Summary: In order for the contract to qualify as a single retained cost base asset, it would be necessary for the contract to constitute a single, separately identifiable asset of SubCo at the joining time. This is consistent with the discussion in Taxation Ruling TR 2005/10, which explains (in the context of paragraphs 705-25(5)(a) and 705-25(5)(b) of the ITAA 1997) that a retained cost base asset must be an asset of a joining entity at the joining time and one that is separately identifiable (paragraphs 4 and 12 of TR 2005/10). The meaning of an asset is undefined for the purposes of Part 3-90 of the ITAA 1997. However, guidance on the meaning of an asset for Part 3-90 purposes is provided in Taxation Ruling TR 2004/13. TR 2004/13 explains that: 4. Assets are recognised for the purpose of the consolidation cost setting rules on the basis that a head company of a consolidated group is acquiring a joining entity. All the assets of the joining entity therefore need to be identified. The total costs (both direct and indirect) of acquiring the joining entity are allocated to the underlying assets of the joining entity. 5. Accordingly, an asset for the purpose of the tax cost setting rules is anything recognised in commerce and business as having economic value to the joining entity at the joining time for which a purchaser of its membership interests would be willing to pay. This is consistent with the discussion in Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002, at paragraph 5.19 as to what constitutes an asset for Part 3-90 of the ITAA 1997 purposes: An asset, for the purpose of the cost setting rules, is anything of economic value which is brought into a consolidated group by an entity that becomes a subsidiary member of the group. In the present case, the contract would be something that a purchaser of SubCo's membership interests would be willing to pay for. Accordingly, the contract qualifies as an asset of SubCo at the joining time. The remaining issue is whether the contract is a single, separately identifiable asset. Paragraph 26 of TR 2004/13 states that 'the extent to which the assets of the entity should be separately identified or treated as composite assets would depend on the nature of the asset and the business being carried on by the entity and the circumstances of the particular case.' Taxation Ruling TR 2004/13 implies that where an asset is recognised for income tax purposes then that may also be indicative of the extent to which the assets of a joining entity should be separately identified (paragraph 33 of TR 2004/13). For example, the capital gains tax (CGT) treatment of assets may be instructive (see for example, paragraphs 26 and 33 of TR 2004/13). Taxation Determination TD 93/86 states that for CGT purposes, the totality of rights under a contract are generally considered to be the one asset. However, 'whether all of the rights comprise one single asset, or each right is a separate asset, will depend on the facts of each case' (paragraph 1 of TD 93/86). Paragraph 705-25(5)(c) of the ITAA 1997 implicitly identifies 'a right to have something done under an arrangement' as a separately identifiable asset in certain circumstances. In the present case, the contract consists of a set of rights and obligations. All rights to the provision of entitlements which arise under the contract by reason of the prepayment qualify as a retained cost base asset under paragraph 705-25(5)(c) of the ITAA 1997. Paragraph 705-25(5)(c) provides that a retained cost base asset includes: The requirements in paragraph 705-25(5)(c) of the ITAA 1997 are satisfied in the present case because: SubCo's rights that qualify as a retained cost base asset under paragraph 705-25(5)(c) of the ITAA 1997 do not constitute the full set of rights under the contract. Thus, the entirety of the contract cannot qualify as a single, separately identifiable asset for the purposes of Part 3-90 of the ITAA 1997 and hence it is not a single retained cost base asset under paragraph 705-25(5)(c). Subsection 705-35 of the ITAA 1997 explains that a reset cost base asset is an asset that is neither a retained cost base asset nor an excluded asset (defined under subsection 705-35(2) of the ITAA 1997 to mean an asset in respect of which the joined group's allocable cost amount (ACA) for the joining entity is required to be reduced). The remaining bundle of rights under the contract do not qualify as a retained cost base asset under paragraphs 705-25(5)(a) to 705-25(5)(c) of the ITAA 1997; nor is it an excluded asset under subsection 705-35(2) of the ITAA 1997 (since the joined group's ACA for SubCo is not required to be reduced in respect of the remaining bundle of rights). Accordingly, the remaining bundle of rights under the contract qualify as a reset cost base asset.", "Date_of_Decision": "8 March 2007", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-90 paragraph 705-25(5)(a) paragraph 705-25(5)(b) paragraph 705-25(5)(c) section 705-35 subsection 705-35(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/86 | Taxation Ruling TR 2004/13 | Taxation Ruling TR 2005/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation - assets Cost setting rules Joining entity Joining time Retained cost base asset Tax cost setting rules", "Case_References": "", "Other_References": "Explanatory Memorandum to New Business Tax System (Consolidation) Bill (No.1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200750", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/86 Taxation Ruling TR 2004/13 Taxation Ruling TR 2005/10 | Keywords Consolidation - assets Cost setting rules Joining entity Joining time Retained cost base asset Tax cost setting rules"}
{"ATO_ID_Number": "ATO ID 2005/339", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Consolidation - depreciating assets", "Issue": "Can section 701A-10 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997) apply to a head company in respect of an internally created asset that is a depreciating asset in the hands of a joining entity, though it was not a depreciating asset for income tax purposes in the hands of the entity that created the asset?", "Decision": "Yes, but the section can only apply to internally created assets which meet the income tax definition of a depreciating asset applying at the joining time during the whole of their existence.", "Facts": "On 1 July 2002, Head Company X forms a consolidated group with its wholly owned subsidiaries, Company B and Company C. Company B created an asset which has not always met the definition of a depreciating asset in accordance with the income tax definition of a depreciating asset applicable at the joining time. The asset was transferred to Company C before the group consolidated. Company C holds it as a depreciating asset.", "Reasons_for_Decision": "Summary: Subsection 701A-10(1) of the IT(TP)A 1997 only applies to depreciating assets. This is because paragraph 701A-10(1)(a) of the IT(TP)A 1997 refers to 'a depreciating asset'. Subsequent references within the section to 'the asset' obtain their meaning from the first use of the term 'asset' in paragraph 701A-10(1)(a) of the IT(TP)A 1997 being a 'depreciating asset'. The internally created asset must have had the characteristics of a depreciating asset as defined under section 40-30 of the Income Tax Assessment Act 1997 (ITAA 1997) during the whole of its existence. The internally created asset must also be an asset within the meaning of that term under subsection 705-35(1) of the ITAA 1997. In this instance, Company B's internally created asset was an identifiable source of value to C and was therefore an asset for the purposes of subsection 705-35(1) of the ITAA 1997. However, it did not meet the definition of a depreciating asset under section 40-30 of the ITAA 1997 continuously from the time of its creation. It may not have met the definition of a depreciating asset under section 40-30 because it was held as trading stock or for some other reason that excluded it from the definition. Therefore, section 701A-10 of the IT(TP)A 1997 will not apply to Head Company X even though Company C holds the asset as a depreciating asset at the joining time.", "Date_of_Decision": "29 September 2005", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax (Transitional Provisions) Act 1997 subsection 701A-10(1) paragraph 701A-10(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/741", "Subject_References": "Adjustable value of a depreciating asset Adjusted market value of the consolidated group Consolidation Consolidation - assets Consolidation - joining", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005339", "Unmatched_Content": "Keywords Adjustable value of a depreciating asset Adjusted market value of the consolidated group Consolidation Consolidation - assets Consolidation - joining"}
{"ATO_ID_Number": "ATO ID 2004/197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Consolidation - treatment of work-in-progress", "Issue": "Can the work-in-progress (that is classed as trading stock) of an entity joining a consolidated group be a retained cost base asset for the purposes of Division 705 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Work-in-progress (that is classed as trading stock) can be a retained cost base asset for the purposes of Division 705 of the ITAA 1997, provided that the joining entity is a continuing majority-owned entity from 27 June 2002 to the time when it becomes a subsidiary member of a consolidated group.", "Facts": "Company C runs a construction and development business. Company C has a work-in-progress account. The amount of the work-in-progress is included in Company C's balance sheet as an asset. The work-in-progress is trading stock under section 70-10 of the ITAA 1997. Company C has been continually owned by Company A (75% of share holding) and Company B (25% of shareholding) since 1 June 2002, till the change of ownership occurred on 1 August 2002. On 1 July 2002, Company A and its wholly-owned subsidiaries (Company D and Company E) form a consolidated group. On 1 August 2002, Company A purchases Company B's 25% shareholding in Company C, with the consequence that Company C is now 100% wholly-owned and must join the consolidated group.", "Reasons_for_Decision": "Summary: The allocable cost amount is the amount that is allocated to the assets (except excluded assets) of an entity joining a consolidated group, or to the assets (except excluded assets) of a subsidiary member of a consolidated group on formation, to determine the tax cost of those assets at that time. All assets of the joining entity or assets of the subsidiary members of a consolidated group on formation can be categorised into a retained cost base asset, a reset cost base asset, or an excluded asset. Subsection 705-25(5) of the ITAA 1997 defines a retained cost base asset as Australian currency (other than trading stock or collectables), or a right to receive a specified amount of Australian currency (for example, a debt or a bank deposit), or an entitlement that is subject to a prepayment. According to subsection 705-35(2) of the ITAA 1997, an asset is an excluded asset for consolidation purposes if an amount has been deducted in respect of the asset in working out the allocable cost amount. A reset cost base asset is an asset that is not a retained cost base asset or an excluded asset. Taken at face value, trading stock of an entity cannot be a retained cost base asset as it does not satisfy the definition in subsection 705-25(5) of the ITAA 1997. However, subsection 701A-5(3) of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997) specifies that trading stock is to be treated as a retained cost base asset when an entity becomes a subsidiary member of a consolidated group under certain circumstances. The circumstances exist where the entity is a continuing majority-owned entity. Subsection 701A-1(1) of the IT(TP)A 1997 provides that a continuing majority-owned entity is an entity that is majority owned at all times from the start of 27 June 2002 until the entity becomes a subsidiary member of a consolidated group on or after 1 July 2002. In this case, the majority of Company C's ownership has remained unchanged from 27 June 2002 until the date Company C became a member of the consolidated group, satisfying the requirements of subsection 701A-1(1) of the IT(TP)A 1997. As Company C has become a subsidiary member of a consolidated group, the requirements of subsection 701A-5(3) of the ITAA 1997 are also satisfied. Consequently, the work-in-progress account of Company C (a kind of trading stock) is a retained cost base asset for the purposes of Division 705 of the ITAA 1997.", "Date_of_Decision": "28 October 2003", "Year_of_Income": "Years ended 30 June 2003 and 2004", "Legislative_References": "Income Tax (Transitional Provisions) Act 1997 subsection 701A-1(1) subsection 701A-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - assets Allocable cost amount Cost setting rules Reset cost base asset Retained cost base asset trading stock work-in-progress", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004197", "Unmatched_Content": "Keywords Consolidation Consolidation - assets Allocable cost amount Cost setting rules Reset cost base asset Retained cost base asset trading stock work-in-progress"}
{"ATO_ID_Number": "ATO ID 2003/741", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - trading stock", "Issue": "Does section 701A-10 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997) apply to a head company in respect of an asset that was an item of trading stock in the hands of the creator and which is transferred to a subsidiary member of the group who holds it as a depreciating asset before the group consolidates?", "Decision": "No. This section only applies to internally created assets which at the time of creation were depreciating assets. Trading stock is specifically excluded from being a depreciating asset under paragraph 40-30(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "Head Company X forms a consolidated group with its wholly owned subsidiaries, Company B and Company C. Company B creates and owns an item of trading stock. The asset was transferred to Company C before the group consolidated. Company C holds it as a depreciating asset at the time the group consolidates.", "Reasons_for_Decision": "Summary: Subsection 701A-10(1) of the IT(TP)A 1997 only applies to assets that were depreciating assets in the hands of the creator. This is because paragraph 701A-10(1)(a) of the IT(TP)A 1997 refers to 'a depreciating asset'. Subsequent references within the section to 'the asset' obtain their meaning from the first occurring use of the term 'asset' in paragraph 701A-10(1)(a) of the IT(TP)A 1997 being a 'depreciating asset'. Therefore, paragraph 701A-10(1)(d) of the IT(TP)A 1997 only refers to expenditure incurred in constructing or creating a depreciating asset. Paragraph 40-30(1)(b) of the ITAA 1997 specifically excludes trading stock from the definition of a depreciating asset. Subsection 40-30(2) of the ITAA 1997 reiterates the exclusion of trading stock from the definition of a depreciating asset. Consequently, trading stock cannot be a depreciating asset and is not considered under section 701A-10 of the IT(TP)A 1997. In this instance, Company B's internally created asset was not a depreciating asset at the time of creation because of the operation of paragraph 40-30(1)(b) of the ITAA 1997. Accordingly, the conditions in paragraph 701A-10(1)(d) of the IT(TP)A 1997 are not met. Therefore, section 701A-10 of the IT(TP)A 1997 will not apply to the head company.", "Date_of_Decision": "11 June 2003", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax (Transitional Provisions) Act 1997 section 701A-10 subsection 701A-10(1) paragraph 701A-10(1)(a) paragraph 701A-10(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/741", "Subject_References": "Adjustable value of a depreciating asset Adjusted market value of the consolidated group Consolidation Consolidation - assets Consolidation - joining", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003741", "Unmatched_Content": "Keywords Adjustable value of a depreciating asset Adjusted market value of the consolidated group Consolidation Consolidation - assets Consolidation - joining"}
{"ATO_ID_Number": "ATO ID 2008/122", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidations: a company interposed between the shareholders and the head companies of two separate consolidated groups", "Issue": "Can a new shelf company, interposed above two companies each of which is the head company of a separate consolidated group, make a choice under subsection 124-380(5) if the Income Tax Assessment Act 1997 (ITAA 1997) to continue the existence of two consolidated groups as a single consolidated group, after the interposition?", "Decision": "No. A new shelf company interposed between the shareholders and the head companies of two separate consolidated groups cannot make a choice under subsection 124-380(5) of the ITAA 1997 to continue the existence of both consolidated groups as a single consolidated group, as it would be contrary to the intention of subsection 124-380(5). Neither can the two groups continue to exist as two separate consolidated groups.", "Facts": "A Co and B Co are the head companies of two separate consolidated groups (CG1 and CG2 respectively). A single new shelf company, X Co, is interposed between two companies, A Co and B Co, and the shareholders of the two companies. Prior to the interposition of X Co, the shares in each of A Co and B Co were held by the same individual shareholders and in the same proportions. The shareholders of A Co and B Co exchanged all their shares in A Co and B Co for shares in X Co in the same proportions that they originally held in A Co and B Co. All of the requirements for roll-over relief under Subdivision 124-G of the ITAA 1997, aside from those in subsections 124-380(5) and 124-380(6) of the ITAA 1997 about the choice to be made by the interposed company regarding continuation of a consolidated group, are met.", "Reasons_for_Decision": "Summary: For a member of a company to choose to obtain roll-over under Subdivision 124-G of the ITAA 1997 where there has been a reorganisation of the company's affairs, the requirements of subsection 124-380(5) of the ITAA 1997 must be satisfied (section 124-360 of the ITAA 1997). Subsection 124-380(5) of the ITAA 1997 requires: If: (a) immediately before the completion time, the original company is the *head company of a *consolidated group; and (b) immediately after the completion time, the interposed company is the head company of a *consolidatable group consisting only of itself and the *members of the group immediately before the completion time All of the provisions in Subdivision 124-G of the ITAA 1997, including subsection 124-380(5) of the ITAA 1997, are worded in the singular. However, so long as there is no contrary intention, words in the plural number include the singular, and vice versa (section 23 of the Acts Interpretation Act 1901). In considering whether a contrary intention appears, it is appropriate to consider the section in its setting in the legislature, and to consider the substance of the legislation as a whole (Blue Metal Industries Limited v. Dilley and Anor (1969) 117 CLR 651). Although Subdivision 124-G of the ITAA 1997 is worded in the singular, and provides for the reorganisation of a company's affairs it does not exclude reorganisation of more than one company from roll-over relief provided they use the same interposed shelf company and maintain economic interests in the underlying assets of each company. Such a reorganisation will remain within the spirit and intent of the roll-over relief under Subdivision 124-G (paragraphs 1 to 15 of the Addendum to Taxation Ruling TR 97/18). However, where the company subject to the reorganisation is the head company of a consolidated group, the provisions of Subdivision 124-G of the ITAA 1997 are to be considered along with sections 703-65 to 703-80 of the ITAA 1997. These sections set out the effects of a choice to continue the existence of a consolidated group under subsection 124-380(5) of the ITAA 1997. The effect of sections 703-65 to 703-80 of the ITAA 1997, also worded in singular form, include that the consolidated group is taken not to have ceased to exist, and that the interposed company replaces the former head company as the head company of the ongoing consolidated group. It is deemed that all things that happened to the original head company (prior to the insertion of the new head company) are taken to have happened to the new head company. The intention of the provisions is to allow a consolidated group to continue in existence in certain cases where nothing of substance has changed within the group, thereby reducing unnecessary compliance costs and aiding in protecting the integrity of the consolidation regime (paragraph 2.7 of the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.1) 2002). Adopting a plural construction of subsection 124-380(5) and sections 703-65 to 703-80 of the ITAA 1997 would be contrary to that intention. The interposition above two consolidated groups is a substantial change and would mean that the interposed company had to be taken to have always been either and both the two separate head companies. In a circumstance where there is a reorganisation of the affairs of two companies, each being the head company of a consolidated group, a choice cannot be made to continue the existence of both consolidated groups as a new single consolidated group. Each of the consolidated groups will cease to exist when the respective head companies cease to be head companies (paragraph 703-5(2)(a) of the ITAA 1997). X Co cannot make a choice under subsection 124-380(5) of the ITAA 1997 because the conditions in subsection 124-380(5) for making the choice are not met. The members of the consolidatable group of which X Co is the head company after the interposition do not consist of either only X Co and the members of the consolidated group CG1, or only X Co and the members of consolidated group CG2. Both consolidated groups CG1 and CG2 will cease to exist when their respective head companies, A Co and B Co, cease to be head companies.", "Date_of_Decision": "30 July 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Act Interpretation Act 1901 section 23", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/18 | Addendum to TR 97/18", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/216", "Subject_References": "Consolidation Consolidated group CGT roll-over relief CGT exchange of shares in one company for shares in another company (124-G)", "Case_References": "Blue Metal Industries Limited v. Dilley and Anor (1969) 117 CLR 651", "Other_References": "Chapter 2 - Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008122", "Unmatched_Content": "the interposed company must choose that the consolidated group is to continue in existence at and after the completion time. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/18 Addendum to TR 97/18 | Keywords Consolidation Consolidated group CGT roll-over relief CGT exchange of shares in one company for shares in another company (124-G)"}
{"ATO_ID_Number": "ATO ID 2006/98", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: CGT event E3 - restructure of membership interests supporting components of life insurance business", "Issue": "The head company of a consolidated group is treated as a life insurance company. The consolidated group includes two subsidiary members that are unit trusts. The first unit trust is held under the virtual PST of the head company. The underlying assets of this unit trust are segregated to support virtual PST life insurance policy liabilities. The underlying assets of the second unit trust are not segregated and form part of the ordinary assets of the head company. That unit trust can be said to be held under the 'ordinary component' of the head company. Each trust will issue an additional unit to the other component of the head company's life insurance business resulting in each trust ceasing to be a subsidiary member of the consolidated group. When the unit trusts cease to be subsidiary members of the consolidated group, will CGT Event E1 'Creation of a trust over a CGT asset' apply to the head company?", "Decision": "No. CGT event E1 'Creation of a trust over a CGT asset' will not apply to the head company in regard to the unit trusts leaving the consolidated group.", "Facts": "Head Co is the head company of a consolidated group. Under section 713-505 of the Income Tax Assessment Act 1997 (ITAA 1997), Head Co is treated as a life insurance company for the purposes of applying the income tax law. Investment policies are issued to trustees of superannuation funds and to ordinary (non-superannuation) policyholders. The assets supporting these policies are held through two subsidiary member unit trusts: It is proposed to issue an additional unit from each unit trust to other 'components' of Head Co for market value, namely: Therefore, in accordance with subsection 713-10(2) of the ITAA 1997, Trust V and Trust O will cease to be subsidiary members of the consolidated group.", "Reasons_for_Decision": "Summary: Subsection 104-55(1) of the ITAA 1997 provides that CGT event E1 happens: ...if you create a trust over a *CGT asset by declaration or settlement. * denotes a term defined in section 995-1 of the ITAA 1997. Under the proposal, the respective unit trusts currently held under the virtual PST and the 'ordinary component' will issue other/ additional units to the 'ordinary component' and to the virtual PST respectively. As a consequence of the issue of these other/additional units, the relevant unit trusts will cease to be subsidiary members of the consolidated group. This will happen because of the application of subsection 713-510(2) of the ITAA 1997 and not as a result of a disposal of membership interests to another entity or person outside the group. Although the unit trusts will cease to be subsidiary members of the consolidated group, this will not result in a change in either the legal or beneficial ownership of any assets. The units in the trusts and the assets held according to the terms of the trusts will continue to be beneficially owned by the head company. Given that the pre-existing units will continue, the deconsolidation of the unit trusts will not result in the creation of a trust over a CGT asset. In addition, the second requirement of subsection 104-55(1) of the ITAA 1997 will not be met as the deconsolidation of the unit trusts from the consolidated group will not constitute an act of 'declaration or settlement'.", "Date_of_Decision": "30 March 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-55(1) section 713-505 subsection 713-510(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT events CGT events E1-E9 - trusts Consolidation Life insurance company Virtual pooled superannuation trusts Complying superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200698", "Unmatched_Content": "The terms 'virtual PST', 'virtual PST asset' and 'virtual PST life insurance policy' were repealed by First Home Saver Accounts (Consequential Amendment) Act 2008, effective 26 June 2008. They were replaced by the terms 'complying superannuation/FSHA asset pool' 'complying superannuation/FSHA asset' and 'complying superannuation/FSHA life insurance policy' respectively. From this date, references to 'virtual PST life insurance policy liabilities' in the following document can also be replaced with the term 'complying superannuation/FSHA liabilities'. | Keywords Capital gains tax CGT events CGT events E1-E9 - trusts Consolidation Life insurance company Virtual pooled superannuation trusts Complying superannuation funds"}
{"ATO_ID_Number": "ATO ID 2010/100", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: entry history rule - characterisation of foreign exchange gains and losses", "Issue": "Where: does the entry history rule in section 701-5 of the Income Tax Assessment Act 1997 (ITAA 1997) result in the head company's foreign exchange gains and losses on those borrowings being characterised, for income tax purposes, as though the head company (Head Co) entered into the borrowings in the ordinary course of carrying on a finance business?", "Decision": "Yes. Head Co is taken, under the entry history rule in section 701-5 of the ITAA 1997, to have entered into the borrowings in the ordinary course of carrying on a finance business.", "Facts": "Head Co, together with its wholly-owned subsidiaries, formed a consolidated group on 1 July 2002. After that date, Head Co's business for income tax purposes consisted of manufacturing and construction. Head Co's finance subsidiary, Fin Co, borrowed foreign currency denominated funds from third-party financiers and on-lent the proceeds to Head Co's other wholly-owned subsidiaries who used the funds in their manufacturing and construction businesses. Before the formation of the Head Co consolidated group, Fin Co was considered to be carrying on the business of a finance company for the purpose of characterising foreign exchange gains and losses on its borrowings. Some of the borrowings entered into by Fin Co before the formation of the Head Co consolidated group were repaid after the formation time.", "Reasons_for_Decision": "Summary: The entry history rule is contained in section 701-5 of the ITAA 1997. It provides: 701-5 Entry history rule For the head company core purposes in relation to the period after the entity becomes a *subsidiary member of the group, everything that happened in relation to it before it became a subsidiary member is taken to have happened in relation to the *head company. Note 1 : Other provisions of this Part may affect the tax history that is inherited (e.g. asset cost base history is affected by section 701-10 and tax loss history is affected by Division 707). Note 2 : Section 73BAC of the Income Tax Assessment Act 1936 overrides this rule for the purposes of the research and development incremental expenditure provisions. Note 3 : Section 165-212E overrides this rule for the purposes of the same business test. In the present case, the carrying on of the finance business was something that 'happened' to Fin Co before the formation time. That history was inherited by Head Co, as the head company of its consolidated group, under the entry history rule which requires the pre-consolidation business of Fin Co to be treated as having been carried out by Head Co itself prior to consolidation. The entry history rule applies for the purposes of determining Head Co's income tax liability and/or its tax losses, for income years ending after 1 July 2002. Those purposes would include the recognition for income tax purposes of any foreign currency gains and losses made by the group after the formation time. The Explanatory Memorandum to the New Business Tax System (Consolidation) Act (No. 1) 2002 confirms that the history that is inherited includes both past events and the circumstances which provide those events with a factual context. For example, at paragraph 2.32, it confirms that a consequence of the entry history rule is that a head company is entitled to certain deductions associated with expenditure incurred by a subsidiary member prior to it joining a consolidated group. In doing this, the rule must not only logically explain the expenditure by deeming the head company to have incurred it; it must also explain why that expenditure was incurred. If the rule did not do this, it may not be possible to determine whether the expenditure meets the statutory requirements of the relevant deduction. Taxation Determination TD 2005/23 addresses the situation where a debt was written off in respect of money lent by a subsidiary member in the ordinary course of its business of lending money before it became a member of a consolidated group. The view is taken that the head company of the consolidated group can satisfy subsection 25-35(1) of the ITAA 1997 in relation to the debt that is written off as bad by a subsidiary member after it has joined the group. The Commissioner concludes that the combined effect of the single entity rule in section 701-1 of the ITAA 1997 and entry history rule in that case is that: The question of characterisation addressed by the entry history rule is separate from the question of gain and loss recognition addressed by the single entity rule. The single entity rule and entry history rule apply on their own terms to mutually exclusive points in time. The single entity rule applies during the period that Fin Co is a member of the consolidated group. In contrast, the entry history rule applies to things which happened before Fin Co became such a member. The single entity rule does not erase the history inherited by the head company in respect of Fin Co's borrowings entered into before the formation of Head Co's consolidated group. For the purposes of characterising any foreign exchange gains and losses on repayment of the borrowings from third-party financiers, Head Co is taken, under the entry history rule, to have entered into the borrowings in the ordinary course of carrying on a finance business.", "Date_of_Decision": "23 April 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 25-35(1) section 701-1 section 701-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11 | Taxation Determination TD 2005/23", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - tax liabilities Foreign exchange gains and losses Single entity rule", "Case_References": "", "Other_References": "Chapter 2 - Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010100", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 Taxation Determination TD 2005/23 | Keywords Consolidation Consolidation - tax liabilities Foreign exchange gains and losses Single entity rule"}
{"ATO_ID_Number": "ATO ID 2007/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: entry history rule - head company's entitlement to deductions for capital expenditure previously incurred by a subsidiary member", "Issue": "Under the entry history rule, is the head company of a consolidated group entitled to deductions under Subdivision 40-F of the Income Tax Assessment Act 1997 (ITAA 1997) where:", "Decision": "Yes. The effect of the entry history rule in section 701-5 of the ITAA 1997 is that the head company is entitled to claim deductions under Subdivision 40-F of the ITAA 1997 in respect of this capital expenditure, incurred prior to the joining time, by the entity.", "Facts": "In the year ended 30 June 2005, ACo incurred capital expenditure on the construction and maintenance of a dam that was used to conserve and convey water for the use of other entities that were conducting primary production businesses. At the time that the expenditure was incurred, ACo was an irrigation water provider (as defined in subsection 40-515(6) of the ITAA 1997) and the dam was a water facility (as defined in subsection 40-520(1) of the ITAA 1997). On 1 July 2005, ACo became a subsidiary member of a consolidated group (the 'BCo group'). BCo is the head company of the BCo group.", "Reasons_for_Decision": "Summary: Section 701-5 of the ITAA 1997, which contains the entry history rule, states: For the head company core purposes in relation to the period after the entity becomes a *subsidiary member of the group, everything that happened in relation to it before it became a subsidiary member is taken to have happened in relation to the *head company. * Denotes a term defined in section 995-1 of the ITAA 1997. The head company core purposes set out in subsection 701-1(2) of the ITAA 1997 are working out the head company's liability to income tax or a loss of the head company for an income year. Paragraph 2.32 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002 (the EM) states that: As a consequence of the entry history rule a head company may be entitled to certain deductions for expenditure incurred by a joining entity prior to it joining the group. Examples are entitlements to deductions for expenditure on borrowing expenses, gift deductions (where the entitlement to the deduction is spread), water facilities, connecting power or telephone lines, certain business related costs and expenditure allocated to a project pool. The EM confirms that it is intended that the entry history rule encompasses entitlements for deductions (including deductions in respect of water facilities) in respect of expenditure incurred by an entity before it becomes a subsidiary member of a consolidated group. BCo is therefore entitled to deductions under Subdivision 40-F of the ITAA 1997 in respect of the capital expenditure incurred prior to the joining time by ACo.", "Date_of_Decision": "21 December 2006", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 701-1(2) section 701-5 Subdivision 40-F", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/35 | ATO ID 2007/36", "Subject_References": "Consolidation - joining Decline in value Deductions for depreciating assets Inherited history rules Joining entity Water conservation & conveying expenses", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002 Paragraph 2.32. Consolidation reference manual (26 October 2005 edition) at C9-5-150 .", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200737", "Unmatched_Content": "Keywords Consolidation - joining Decline in value Deductions for depreciating assets Inherited history rules Joining entity Water conservation & conveying expenses"}
{"ATO_ID_Number": "ATO ID 2006/254", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: exit history rule and the holding period and related payments rule", "Issue": "A unit trust ceases to be a subsidiary member of a consolidated group taking with it shares previously held by the head company for income tax purposes under the single entity rule (SER) in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997). After leaving the group the trustee of the unit trust receives a franked dividend on the shares. For the purpose of determining whether the trustee is a section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) qualified person in relation to the dividend, will the exit history rule in section 701-40 of the ITAA 1997 deem the trustee of the unit trust: Therefore, any days on which the head company had a materially diminished risk of loss or opportunities for gain in respect of the shares under subsection 160APHO(3) of the ITAA 1936, will be deemed to be days on which the entity had a materially diminished risk of loss or opportunities for gain in respect of the shares under subsection 160APHO(3).", "Decision": "Therefore, any days on which the head company had a materially diminished risk of loss or opportunities for gain in respect of the shares under subsection 160APHO(3) of the ITAA 1936,will be days on which the trustee will be deemed to have had a materially diminished risk of loss or opportunities for gain in respect of the shares under subsection 160APHO(3).", "Facts": "A unit trust ceases to be a subsidiary member of a consolidated group, and leaves the group, taking with it shares previously held by the head company for income tax purposes under the SER in section 701-1 of the ITAA 1997. The trustee of the unit trust receives franked dividends on these shares after leaving the group. The trustee must determine whether it is a qualified person under section 160APHO of the ITAA 1936 in relation to the dividends. If the trustee is not a qualified person in relation to the dividends, then paragraph 207-145(1)(e) of the ITAA 1997 will prevent the trustee from grossing up the section 95 of the ITAA 1936 assessable income of the trust for the relevant income year (or section 701-30 of the ITAA 1997 non membership period) to include the franking credits received, and the franking credits will not be distributed to the beneficiary of the trust.", "Reasons_for_Decision": "Summary: The rules to determine whether a taxpayer is a qualified person in relation to a dividend are set out in Division 1A of Part 111AA of the ITAA 1936 and explained in the Explanatory Memorandum to Taxation Laws Amendment Bill (No. 2) 1999 (EM to TLAB (No 2) 1999). Broadly speaking, to be a qualified person in relation to a dividend, a taxpayer must satisfy the holding period rule and the related payments rule (paragraph 4.11 of EM to TLAB (No 2) 1999). However, the need to apply the rules each time a dividend is paid (and the qualification period required to be met) depends on whether the taxpayer or an associate has made, or will make, a related payment in respect of the dividend. A related payment is not a defined term, but examples are provided at subsection 160APHN(3) of the ITAA 1936. The holding period rule applies where the shares or interests in shares were acquired on or after 1 July 1997 (unless the taxpayer had become contractually obliged to acquire the shares before 7.30pm AEST 13 May 1997) or after 3.00pm AEST 31 December 1997, if acquired by a trust (excluding a widely held public share trading trust, unless established after 3.00pm AEST, 31 December 1997). The holding period rule applies where no related payment has, or will be made, in respect of the dividend, and requires the shares to have been continuously held at risk throughout the primary qualification period (paragraph160APHO(1)(a)). The EM to TLAB (No 2) 1999 at paragraph 4.19 states that: the holding period rule is a once-and-for-all test. It sets an initial threshold which only has to be crossed once. Therefore once a taxpayer is a qualified person in relation to a dividend or distribution by virtue of the fact that the taxpayer has held the relevant shares or interest for more than 45 days, the taxpayer is taken to be a qualified person for the purposes of the rule in relation to future dividends paid on those shares or interest. The related payments rule applies where the taxpayer or an associate, has made or will make, a related payment in respect of the dividend under an arrangement entered into after 7.30pm AEST13 May 1997 (whether or not the shares or interests in shares were acquired before that time). Paragraph 4.21 of the EM to TLAB (No 2) 1999 notes that the related payments rule is not a once and for all test. The rule must be applied each time an obligation to make a related payment arises, in respect of the dividend paid on the share. Where the related payments rule applies, the taxpayer must have continuously held the shares at risk for the secondary qualification period (as per paragraph160APHO(1)(b) of the ITAA 1936). Although a dividend must be paid to trigger section 160APHO of the ITAA 1936, and qualifying person status is expressed as being in relation to the dividend, the dividend does not determine qualifying person status. As discussed in paragraphs 4.6 to 4.9 of the EM to TLAB (No 2) 1999, to be a section 160APHO of the ITAA 1936 qualified person, the recipient of the franked dividend must be the true economic owner of the shares, as one of the underlying principles of the imputation system is that the benefits of imputation should only be available to the true economic owners. The rules test for economic ownership excludes any days on which the holder of the shares (on which a dividend has been paid) had a materially diminished risk of loss or opportunity for gain in respect of the shares from the days included in the primary or secondary qualification period calculation. Under sections 160APHM and 160APHJ of the ITAA 1936, a taxpayer will have a materially diminished risk in respect of the shares where the taxpayer's net equity position on that day in relation to the shares is less than 0.30. The net equity position is worked out by reference to the concept of delta. Therefore, although section 160APHO of the ITAA 1936 is triggered by the dividend payment, qualifying person status is determined by taxpayer attributes in relation to the shares, these attributes being how long the shares have been held, and whether they have been held 'at risk' for the required period. Under the exit history rule in section 701-40 of the ITAA 1997, everything that happened in relation to the shares (including because of any application of the entry history rule in section 701-5) while the shares were held by the head company, is taken to have happened in relation to the leaving entity (being the trustee of the trust) as if the shares had been an asset of the leaving entity. The only limitation on history which may be inherited by the trustee in relation to the shares, is that the history, or everything that happened in relation to the shares must be relevant to the trust's section 95 of the ITAA 1936 net income calculation, in the income year (or section 701-30 of the ITAA 1997 non membership period) after exit from the group. [Refer to section 701-65 which links the section 95 of the ITAA 1936 net income definition to the subsection 701-1(3) of the ITAA 1997 entity core purposes definition]. For the purposes of the holding period and related payments rule, a taxpayer is taken to hold the shares from the time the taxpayer acquires the shares, until the time the taxpayer disposes of the shares (refer to paragraph 4.29 of the EM to TLAB (No 2) 1999). For the purpose of calculating the period for which a taxpayer is taken to have held the shares during a qualification period, section 160APHI of the ITAA 1936 ensures the calculation operates on a LIFO (last-in-first-out), basis and also takes into account disposals of related securities by the taxpayer and associates. When the leaving entity (the trust) exits the consolidated group taking the shares with it, the exit history rule in section 701-40 of the ITAA 1997 will deem the trustee of the trust to have acquired the shares at the time acquired by the head company, and to have been the holder of the shares for the purpose of section 160APHO of the ITAA 1936 since that time. Where the head company has applied and passed the paragraph 160APHO(1)(a) of the ITAA 1936 holding period rule, in respect of a dividend paid on shares, and these same shares leave the consolidated group with the trustee of the trust, the exit history rule in section 701-40 if the ITAA 1997 will deem the trustee to have also applied and passed the paragraph 160APHO(1)(a) holding period rule (at the time applied and passed by the head company). Where the head company has not applied and passed the holding period rule in paragraph 160APHO(1)(a) of the ITAA 1936, in respect of a dividend paid on shares, and these same shares leave the consolidated group with the trustee of the trust, then the trustee will be required to apply the paragraph 160APHO(1)(a) holding period rule in relation to a dividend paid on these shares after exit. If a related payment arrangement exists in relation to a dividend paid on shares held by the trustee after exit from the group, the trustee will be required to apply the paragraph 160APHO(1)(b) of the ITAA 1936 related payments rule to this dividend. In each of these situations the exit history rule in section 701-40 of the ITAA 1997 will deem the trustee of the trust to have acquired the shares at the time acquired by the head company, and to have entered into the net position in relation to the shares as entered into by the head company. The trustee will therefore inherit the head company's net position or delta in relation to the shares as if it had been the holder of the shares on the days held by the head company. Therefore, any days on which the head company had a materially diminished risk of loss or opportunities for gain in respect of the shares under subsection 160APHO(3) of the ITAA 1936 will be the days on which the trustee will be deemed to have had a materially diminished risk of loss or opportunities for gain in respect of the shares under subsection 160APHO(3).", "Date_of_Decision": "25 August 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 section 701-40 subsection 701-40(2) paragraph 207-145(1)(e) section 701-30 section 701-5 section 701-65 subsection 701-1(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - exiting Holding period rule Franking credits Franked dividends Related payment rule", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Bill (No. 2) 1999", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006254", "Unmatched_Content": "Keywords Consolidation Consolidation - exiting Holding period rule Franking credits Franked dividends Related payment rule"}
{"ATO_ID_Number": "ATO ID 2006/338", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Acquisition of the beneficial ownership of all of the shares in a subsidiary member of a consolidated group by another consolidated group", "Issue": "Does section 45-15 of the Income Tax Assessment 1997 (ITAA 1997) apply to deem a disposal and acquisition of certain depreciating assets (the affected assets) for their market value where:", "Decision": "No. Section 45-15 of the ITAA 1997 does not apply to deem a disposal and acquisition of the affected assets for their market value where the time that the beneficial ownership of all of the shares in the subsidiary is acquired is identical to the time it becomes a member of the purchasing consolidated group.", "Facts": "ACo is the head company of a consolidated group (ACo group). BCo is a subsidiary member of the ACo group. DCo is the head company of another consolidated group (DCo group). BCo legally owns depreciating assets that are used in a leasing business. These assets are leased to entities that are not members of the ACo group. ACo, as the head company of the ACo group, has been claiming deductions (under Division 40 of the ITAA 1997) for the decline in value of the assets. ACo, as the head company of the ACo group, enters into a contract to sell all of the shares in BCo to the DCo group. Under the terms of the sale agreement, it is only on settlement that DCo becomes the beneficial owner of BCo's shares and is also entitled to be registered as the owner of those shares (which is the time that BCo becomes a member of the DCo group). Just before the shares in BCo are acquired by the DCo group, the written down value of the depreciating assets that have been used in the leasing business is less than the market value of those assets. These assets continue to be legally owned by BCo and will therefore leave the ACo group at the time that BCo ceases to be a member of that group.", "Reasons_for_Decision": "Summary: The tax cost setting rules in Divisions 701 and 705 of Part 3-90 of the ITAA 1997 apply when an entity joins a consolidated group as a subsidiary member. These rules operate to allocate the cost to the head company of acquiring the subsidiary to the assets of the subsidiary member at the joining time. Subsection 705-10(3) of the ITAA 1997 provides that the reason for recognising the head company's costs in this way is to align the costs of assets with the costs of membership interests and to allow for the preservation of this alignment until the entity ceases to be a member of a consolidated group. One of the reasons stated for this alignment process is the prevention of double taxation of gains and duplication of losses. When an entity that is a subsidiary member of a consolidated group (the vendor group) leaves that group, Division 711 of the ITAA 1997 effectively reverses the tax cost setting process so that the cost base of the membership interests that the head company holds in the subsidiary is derived from the net value of the assets that cease to be assets of the head company when the entity leaves the group. This provides the basis for determining the head company's capital gain or loss on the disposal of the membership interests in the subsidiary. Under section 711-20 of the ITAA 1997, the first step in the exit cost setting process (this step is about determining the terminating value of assets that are leaving the consolidated group) with respect to depreciating assets (including those used in the leasing business) utilises the adjustable (or written down) values of those assets. Section 45-1 of the ITAA 1997 states that Division 45 of the ITAA 1997 was designed to prevent tax being avoided through certain transactions including the disposal of shares in companies that had leased depreciating assets and deductions had been claimed for the decline in value of those assets. Section 45-15 of the ITAA 1997 applies where the beneficial ownership of more than 50% of the shares in a company that is a 100% subsidiary of a wholly-owned group is acquired by an entity and the market value of certain depreciating assets exceeds their written down value. Where the conditions in section 45-15 of the ITAA 1997 are met, the subsidiary is treated as if, at the time the beneficial ownership of the shares are acquired, it has disposed of and immediately reacquired the affected depreciating assets for their market value. This would mean that the subsidiary would be taken to have experienced a balancing adjustment event (as defined in section 40-295 of the ITAA 1997) and would therefore have an assessable balancing charge amount under section 40-285 of the ITAA 1997. The entity that is actually to be assessed on the balancing charge amount depends on the interaction between Part 3-90 of the ITAA 1997 and section 45-15 of the ITAA 1997. When the subsidiary ceases to be a member of a consolidated group, Division 711 of the ITAA 1997 operates so that the net value of the assets that leave the vendor group, provide the basis for determining the head company of the vendor group's capital gain or loss on the disposal of the membership interests in the subsidiary. The tax cost setting process under Division 711 ensures that the capital gain or loss that will be made by the head company of the vendor group on the disposal of the membership interests in the subsidiary incorporates the adjustable or written down values of the assets that have been used in the leasing business. This tax cost setting process therefore encompasses amounts that would otherwise be assessable as a result of the operation of section 45-15 of the ITAA 1997 (deeming a disposal and reacquisition of the affected assets). Where the beneficial ownership of all of the shares in the company are acquired by the consolidated group (the 'purchasing group') at the identical time to the transfer time that applies in subparagraph 703-33(1)(a)(i) of the ITAA 1997, the tax cost setting rules that apply, operate at the same time as the deemed acquisition and disposal of the affected assets for their market value (if section 45-15 of the ITAA 1997 also applied). The tax cost setting rules have specific application to set the tax cost of the assets (within the meaning of section 701-55 of the ITAA 1997) of the subsidiary when it becomes a member of the purchasing group. The tax cost set under Divisions 701 and 705 of the ITAA 1997 for any depreciating assets (including the affected assets) will provide the basis for determining the quantum of any deductions that the head company of the purchasing group can subsequently claim for the decline in value of those assets. In Goodwin v. Phillips (1908) 7 CLR 1 at 17 Isaacs J addressed an apparent conflict between two provisions of state law and said: The provisions of the two enactments cannot in such case stand together and operate at the same time and for the same purpose, but with varying effect, upon the same set of circumstances. Where a subsidiary exits one consolidated group and immediately joins another, at the instant in time that section 45-15 of the ITAA 1997 is meant to apply, it is considered that the rules in section 45-15 and the tax cost setting provisions in Divisions 701, 705 and 711 of the ITAA 1997 cannot all 'operate at the same time and for the same purpose, but with varying effect, upon the same set of circumstances.' It is considered that the tax cost setting rules have specific application to situations involving a subsidiary member joining or leaving a consolidated group and that section 45-15 of the ITAA 1997 does not apply where the time that the beneficial ownership of all of the membership interests in the subsidiary is acquired is identical to the time that the subsidiary becomes a member of the purchasing group. Part 3-90 of the ITAA 1997 provides a complete legislative framework that specifically addresses the situation where an entity exits one consolidated group and immediately joins another.", "Date_of_Decision": "14 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 40-85 section 40-285 section 40-295 section 45-15 section 701-55 section 703-30 section 703-33 section 705-5 subsection 705-10(1) subsection 705-10(2) subsection 705-10(3) section 711-1 section 711-25 section 975-500 section 975-505 Part 3-90 Division 701 Division 705 Division 711", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Adjustable value of a depreciating asset Allocable cost amount Consolidated group Consolidation Consolidation - exiting Cost setting rules Division 45 Joining entity Joining time Leaving entity Leaving time Over-depreciation of an asset Tax cost setting amount Terminating value for a head company", "Case_References": "Goodwin v. Phillips (1908) 7 CLR 1", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006338", "Unmatched_Content": "Keywords Adjustable value of a depreciating asset Allocable cost amount Consolidated group Consolidation Consolidation - exiting Cost setting rules Division 45 Joining entity Joining time Leaving entity Leaving time Over-depreciation of an asset Tax cost setting amount Terminating value for a head company"}
{"ATO_ID_Number": "ATO ID 2005/244", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: consolidated group - entity leaving with a liability - application of commercial debt forgiveness rules", "Issue": "Where an entity exits a consolidated group with a liability that is owed to a non-group member, will the commercial debt forgiveness rules in Division 245 in Schedule 2C of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the head company of that consolidated group?", "Decision": "No. The commercial debt forgiveness rules in Division 245 in Schedule 2C of the ITAA 1936 will not apply to the head company of a consolidated group when a member of the group exits that group, taking a liability owed to a non-group member with it.", "Facts": "As part of an arrangement, an Australian resident entity that is a member of a consolidated group issues a debt instrument to an entity that is not a member of the consolidated group. The debt instrument raises an obligation on the issuer to pay the holder all amounts of principle, interest and other amounts payable in respect of the debt instrument. During the time that the non-member entity holds the debt instrument, the issuer of the debt instrument exits the consolidated group as a result of the exercise of a call option held by the debt instrument holder over shares in the issuer.", "Reasons_for_Decision": "Summary: While the entity that issues the debt instrument remains a member of the consolidated group, its liabilities under the debt instrument are treated as liabilities of the head company of the group for the purposes of determining the income tax liability of the head company, that is, for head company core purposes as provided in subsection 701-1(2) of the Income Tax Assessment Act 1997 (ITAA 1997). This is due to the operation of the single entity rule in section 701-1 of the ITAA 1997. When the entity that issues the debt instrument leaves the consolidated group, its liabilities under the debt instrument are again recognised as its own for the purposes of determining its income tax liability once outside the group, that is, for entity core purpose as provided in subsection 701-1(3) of the ITAA 1997. This is due to the operation of the exit history rule in section 701-40 of the ITAA 1997 and the fact that the single entity rule ceases to apply to the exiting entity. The cessation of the application of the single entity rule to the exiting entity in relation to the consolidated group will not of itself trigger the operation of the debt forgiveness rules in relation to the head company of that consolidated group. Only the non-member entity, as holder of the rights to have the issuing entity's obligations under the debt instrument met, is in the position to forgive those obligations. Further, the debt forgiveness rules in Division 245 of Schedule 2C of the ITAA 1936 will only apply if the non-member entity forgives the obligations under those debt instruments in accordance with the definition provided in clause 245-35 of Division 245 of Schedule 2C of the ITAA 1936.", "Date_of_Decision": "20 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 subsection 701-1(2) subsection 701-1(3) section 701-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commercial debt forgiveness Consolidated group Consolidation - exiting Leaving entity Put options Single entity rule", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005244", "Unmatched_Content": "Keywords Commercial debt forgiveness Consolidated group Consolidation - exiting Leaving entity Put options Single entity rule"}
{"ATO_ID_Number": "ATO ID 2004/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Entry history rule debts included in assessable income of a subsidiary member prior to consolidation", "Issue": "Will a head company of a consolidated group be taken, in terms of paragraph 25-35(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997), to have previously included in its assessable income a debt which was included in the assessable income of a subsidiary member before it joined the consolidated group?", "Decision": "Yes. The effect of the entry history rule of section 701-5 of the ITAA 1997 is such that a head company will be taken to have previously included in its assessable income a debt which was included in the assessable income of a subsidiary member before it joined the consolidated group.", "Facts": "On 1 July 2002 a consolidated group came into existence consisting of the head company and a subsidiary member. Prior to that date the subsidiary member derived, on an accruals basis, an amount of income which was included in its assessable income. At the time of consolidation the relevant debt was still outstanding. The subsidiary member has since commenced legal proceedings in order to recover the debt. It is likely that some part of the debt will ultimately be written off as bad.", "Reasons_for_Decision": "Summary: In order for a taxpayer to be able to claim a bad debt deduction under paragraph 25-35(1)(a) of the ITAA 1997 the debt must have been included in its assessable income. In this regard subsection 25-35(1) of the ITAA 1997 states: 'You can deduct a debt (or part of a debt) that you write off as bad in the income year if: (a) it was included in your assessable income for the income year or for an earlier income year; or...' The single entity rule of section 701-1 of the ITAA 1997 provides that if an entity is a subsidiary member of a consolidated group during a period, then it is taken to be a part of the head company during that period for the purposes of calculating the income tax liability or losses for the income year in which the period occurs or any later income years. This means that a write off by a subsidiary member of a debt that it brings into a consolidated group will be taken for the purposes of section 25-35 of the ITAA 1997 to be a debt write-off by the head company itself. Where the amount has been included in an entity's assessable income prior to joining a consolidated group the only way the head company can satisfy the requirement in paragraph 25-35(1)(a) of the ITAA 1997 is through an application of the 'entry history rule' set out at section 701-5 of the ITAA 1997. In this regard, section 701-5 of the ITAA 1997 states: 'For the head company core purposes in relation to the period after the entity becomes a *subsidiary member of the group, everything that happened in relation to it before it became a subsidiary member is taken to have happened in relation to the *head company.' * denotes a term defined in section 995-1 of the ITAA 1997 The entry history rule is rephrased in the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002. In this regard paragraph 2.31 states: 'Everything that happened in relation to an entity before it became a subsidiary member of a consolidated group is taken to have happened in relation to the head company for the purposes of calculating the head company's income tax liability or tax losses after it becomes a member.' What this means here is that while the subsidiary member actually included the debt in its pre-consolidation assessable income, the head company will be taken to have included the debt in its own assessable income. This conclusion is supported by the discussion on 'What history is inherited?' set out at paragraph 2.32 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002. In this regard the paragraph states: 'As a consequence of the entry history rule a head company may be entitled to certain deductions for expenditure incurred by a joining entity prior to it joining the group. Examples are entitlements to deductions for expenditure on borrowing expenses, gift deductions (where the entitlement to the deduction is spread), water facilities, connecting power or telephone lines, certain business related costs and expenditure allocated to a project pool. A head company may also be entitled to a deduction for a debt that is brought into a consolidated group which subsequently goes bad.'", "Date_of_Decision": "19 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Section 701-1 Section 701-5 Subsection 25-35(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 92/18", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/4", "Subject_References": "Bad debts Consolidation Consolidation - formation Inherited history rules Single entity rule", "Case_References": "", "Other_References": "Consolidation reference manual (23 May 2003 edition) at C9-5-150 Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002 paras 2.31 and 2.32", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20043", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 92/18 | Keywords Bad debts Consolidation Consolidation - formation Inherited history rules Single entity rule"}
{"ATO_ID_Number": "ATO ID 2004/727", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: entry history rule and the tax costs of assets belonging to a chosen transitional entity", "Issue": "Does the entry history rule in section 701-5 of the Income Tax Assessment Act 1997 (ITAA 1997) have the effect that, if a head company elects that an entity is a 'chosen transitional entity' under section 701-5 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997), the tax costs of the assets of that entity are the existing tax costs on the date the head company forms a consolidated group, even though the tax costs of the assets of that 'chosen transitional entity' may have previously been set in accordance with subsection 701-10(4) of the ITAA 1997 when held by another head company of a consolidated group?", "Decision": "Yes. If the tax costs of an entity's assets were set in accordance with subsection 701-10(4) of the ITAA 1997 when an entity became a member of a consolidated group, the setting of the tax costs form part of the assets' tax history. Under the exit history rule in section 701-40 of the ITAA 1997, the assets' tax histories are inherited by the entity that takes the assets out of the consolidated group. If that entity subsequently becomes a subsidiary member of a new consolidated group and is treated as a 'chosen transitional entity' under section 701-5 of the IT(TP)A 1997 by the new head company, the entity's tax history will include the history of the assets' tax cost setting and subsequent tax cost adjustments while they were the assets of a subsidiary member of the first consolidated group. This history is inherited by the head company of the new consolidated group under the entry history rule in section 701-5 of the ITAA 1997. If the entity was not eligible to be treated as a 'chosen transitional entity' by the new head company, the entry history rule, as it relates to the tax cost of an entity's assets, is overridden by the requirement to have tax costs of the entity's assets set in accordance with subsection 701-10(4) of the ITAA 1997.", "Facts": "Company A was a wholly-owned subsidiary of HeadCo X. HeadCo X formed a consolidated group on 1 July 2002. HeadCo X did not elect to treat Company A as a 'chosen transitional entity' so the tax costs of Company A's assets were set under the tax cost setting rules. Some months later during the 2002-03 income year, Company A ceased to be a member of HeadCo X's consolidated group when it became a wholly-owned subsidiary of HeadCo Y. Company A left HeadCo X's consolidated group with the same assets as it had when it entered. On 1 July 2003, HeadCo Y formed a consolidated group of which Company A was subsidiary member. HeadCo Y elected to treat Company A as a 'chosen transitional entity'.", "Reasons_for_Decision": "Summary: HeadCo X formed a consolidated group on 1 July 2002. Its subsidiary, Company A is a 'transitional entity' according to the definition in paragraph 701-1(1)(b) of the IT(TP)A 1997. Consequently, HeadCo X could make the choice to treat Company A as a 'chosen transitional entity', as defined in section 701-5 of the IT(TP)A 1997. HeadCo X did not make the choice to treat Company A as a chosen transitional entity. The tax costs of Company A's assets were set in accordance with the cost setting rules in Division 705 of the ITAA 1997. The setting of the tax costs of Company A's assets becomes part of the tax history of those assets. When Company A ceases to be a member of HeadCo X's consolidated group, it inherits the tax histories of the assets it takes with it under the exit history rule in section 701-40 of the ITAA 1997. On 1 July 2003, HeadCo Y formed a consolidated group, in which Company A became a subsidiary member. Its subsidiary, Company A is a 'transitional entity' according to the definition in paragraph 701-1(1)(b) of the IT(TP)A 1997. HeadCo Y chooses to treat Company A as a 'chosen transitional entity'. Subsection 701-10(4) of the ITAA 1997 will not apply to Company A's assets because of the operation of section 701-15 of the IT(TP)A 1997. HeadCo Y will inherit Company A's tax history under the entry history rule in section 701-5 of the ITAA 1997. This will include the tax costs set for Company A's assets when it had been a subsidiary member of HeadCo X's consolidated group.", "Date_of_Decision": "28 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 701-5 subsection 701-10(4) section 701-40 Division 705 section 705-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Chosen transitional entity Consolidation Consolidation - formation Head company Inherited history rules Non-chosen transitional entity Transitional entity", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004727", "Unmatched_Content": "Keywords Chosen transitional entity Consolidation Consolidation - formation Head company Inherited history rules Non-chosen transitional entity Transitional entity"}
{"ATO_ID_Number": "ATO ID 2004/875", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - trust - unit trust", "Issue": "Does Division 6B of the Income Tax Assessment Act 1936 (ITAA 1936) apply to treat a public unit trust as a corporate unit trust when the trust leaves a consolidated group with assets the trust acquired during the period of consolidation from third parties outside the consolidated group?", "Decision": "No. The trust would not be a corporate unit trust in terms of section 102J of the ITAA 1936. The exit history rule in section 701-40 of the Income Tax Assessment Act 1997 ((ITAA 1997) applies such that the property that the trust takes with it when it leaves the consolidated group would always have been property of the trust. Accordingly, the trust will not be an eligible unit trust because at no time before the property became the property of the unit trust, would the property have been the property of the company or an associate of the company. Therefore, the trust would not be a corporate unit trust.", "Facts": "A listed public company which has a number of subsidiary companies formed a consolidated group. The head company acquired all the units in a unit trust and the unit trust became a subsidiary member of the consolidated group. During the period of consolidation, the unit trust acquired property assets from third parties outside the consolidated group. After operating as a consolidated group for a period of time, a stapled group consisting of the property investment unit trust and the head company was formed. The head company issued units to its shareholders so that the unit trust was now owned by the head company's shareholders. These units were stapled to the shares in the head company to form the stapled group. When the unit trust left the consolidated group, it took with it the property assets which had been acquired by the unit trust from outside the consolidated group.", "Reasons_for_Decision": "Summary: Exit History Rule The exit history rule is contained in section 701-40 of the ITAA 1997: Subsection 701-40(1) of the ITAA 1997 details the circumstances in which the provision will have application. When determining the income or loss of an entity that has ceased to be a member of a consolidated group because the Single Entity Rule (SER) ceases to apply to it, the history of any of the items mentioned in subsection 701-40(2) of the ITAA 1997 that is to be taken into account, is determined by subsection 701-40(3) of the ITAA 1997. Subsection 701-40(2) of the ITAA 1997 details the assets, liabilities and businesses which are covered by section 701-40 of the ITAA 1997. The assets, liabilities and businesses are those that became assets etc. of the entity because the SER ceased to apply to the entity when it left the consolidated group. Subsection 701-40(3) of the ITAA 1997 is the operative provision which states that when we are working out the income or loss of an entity that ceased to be a member of a consolidated group everything that happened to any item in subsection 701-40(2) of the ITAA 1997 while it was that of the head company is taken to have happened to it as if it belonged to the entity. In addition, the history of the assets etc. that is inherited includes the history of those assets that the head company inherited because of any application of the entry history rule. Therefore, everything that happened to an asset etc. of a joining entity, which was taken to have happened to it as though it was an asset of the head company because of an application of the entry history rule, is now taken to have happened to it as if it belonged to the leaving entity. Consequently, any asset etc that leaves a consolidated group with an entity because the SER ceases to apply to that entity will be treated as if it belonged to the leaving entity from the time it was acquired by the entity that held it at the time the SER began to apply. The effect of the exit history rule on the potential application of Division 6B of the ITAA 1936 In so far as is relevant to this trust, it would be a corporate unit trust in terms of section 102J of the ITAA 1936 if it is: The trust is a resident public unit trust. A trust is an eligible unit trust, as defined in section 102F of the ITAA 1936, if a property that, at any time during the year of income or a preceding year of income, was property of the unit trust became property of the unit trust in pursuance of an arrangement that is a prescribed arrangement in relation to company and, at any time before the property became property of the unit trust, the property was the property of the company or an associate of the company. Therefore, the trust would be an eligible unit trust if any of the trust's property became so under a prescribed arrangement in relation to a company and the property was previously that of the company or an associate of the company. However, because of the exit history rule, the property of the trust will be treated as though it always belonged to the unit trust. Hence, even if there was prescribed arrangement in terms of section 102E of the ITAA 1936, the conditions set down in section 102F of the ITAA 1936 cannot be met (i.e. the property cannot previously have been property of the company or an associate) and Division 6B of the ITAA 1936 cannot apply.", "Date_of_Decision": "28 October 2004", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 102E section 102F section 102J", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Corporate unit trusts Inherited history rules Leaving entity Single entity rule Trusts Unit trusts", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004875", "Unmatched_Content": "Keywords Corporate unit trusts Inherited history rules Leaving entity Single entity rule Trusts Unit trusts"}
{"ATO_ID_Number": "ATO ID 2013/50", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Imputation: Head Company ceases to be an exempting entity when it becomes a deemed former exempting entity", "Issue": "Has a head company 'ceased to be an exempting entity' for the purposes of section 208-155 of the Income Tax Assessment Act 1997 (ITAA 1997) if the head company is deemed by section 709-165 of the ITAA 1997 to have 'become a former exempting entity' at the joining time?", "Decision": "Yes. A head company has ceased to be an exempting entity for the purposes of section 208-155 of the ITAA 1997 if section 709-165 of the ITAA 1997 deems it to become a former exempting entity at the joining time. This is because the deeming under section 709-165 necessarily implies that the head company has also ceased to be an exempting entity.", "Facts": "Head Company (Head Co) is the head company of the ABC income tax consolidated group (the ABC Group). Head Co, as head company, elected to form a consolidated group for Australian income tax purposes on 1 July 2006. Subsidiary Company (Sub Co) is an Australian resident company for Australian income tax purposes. On 1 July 2010 (the joining time) Head Co acquired all the shares in Sub Co and Sub Co became a subsidiary member of the ABC Group. At the joining time: Under section 709-165 of the ITAA 1997, Head Co was deemed to become a former exempting entity at the joining time.", "Reasons_for_Decision": "Summary: Division 208 of the ITAA 1997 contains provisions relating to exempting entities and former exempting entities for the purpose of the imputation system. These rules are designed to prevent franking credit trading schemes involving corporate tax entities that are effectively owned by persons for whom franking credits have little value (that is, foreign residents or exempt entities). Such corporate tax entities are referred to as 'exempting entities'. When an exempting entity becomes a former exempting entity, its franking account is converted to an exempting account , and the entity starts a new franking account. The exempting account is quarantined so that distributions franked with exempting credits only confer a franking benefit for 'eligible continuing substantial members'. Section 208-155 of the ITAA 1997 sets out the test for determining whether a member of a former exempting entity is an 'eligible continuing substantial member' in relation to a distribution made by the former exempting entity to the member. To qualify, the member must satisfy the conditions set out in section 208-155 at both: For a consolidated group, section 208-155 of the ITAA 1997 must be read in the context of Subdivision 709-B of the ITAA 1997 which modifies the operation of Division 208 of the ITAA 1997. Relevantly, section 709-165 of the ITAA 1997 applies if: This being the case, item 1 of the table in subsection 709-165(2) of the ITAA 1997 will apply to deem that the head company becomes a former exempting entity at the joining time. However, in applying section 208-155 of the ITAA 1997, an issue arises with regard to the second test time. Because under section 709-165 of the ITAA 1997 the head company is deemed to be a former exempting entity without ever having been an exempting entity in its own right, in a literal sense it has not ceased to be an exempting entity. However, for the purpose of section 208-155 of the ITAA 1997, the expression 'the head company becomes a former exempting entity at the joining time ' in item 1 of the table in subsection 709-165(2) of the ITAA 1997, is taken to necessarily imply that the head company has also 'ceased to be an exempting entity'. This is taken to have occurred at the joining time. This interpretation maintains the objectives of Division 208 of the ITAA 1997 and any member who subsequently receives a distribution will need to be an 'eligible continuing substantial member' in order to benefit from the exempting credits sourced from the joining entity. In the current situation, Head Co is deemed to have become a former exempting entity at the time Sub Co joined the ABC Group, being 1 July 2010. At this time Head Co is also considered to have ceased to be an exempting entity for the purpose of section 208-155 of the ITAA 1997.", "Date_of_Decision": "12 September 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 208-10 section 208-155 Subdivision 709-B section 709-165 subsection 709-165(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "foreign income exempting profits & receipts head company", "Case_References": "", "Other_References": "", "Business_Line": "Interpretative Advice, Public Groups & International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201350", "Unmatched_Content": "Keywords foreign income exempting profits & receipts head company"}
{"ATO_ID_Number": "ATO ID 2005/67", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Departure from Benchmark Rule: Commissioner's determination", "Issue": "Will the Commissioner exercise his discretion under section 203-55 of the Income Tax Assessment Act 1997 (ITAA 1997) to permit the entity to frank two distributions at a franking percentage that differs from the entity's benchmark franking percentage for that franking period?", "Decision": "No. The Commissioner will not exercise his discretion under section 203-55 of the ITAA 1997 to permit the entity to frank two distributions at a franking percentage that differs from the entity's benchmark franking percentage for that franking period as the required extraordinary circumstances do not exist.", "Facts": "Company A, company B and company C are all Australian resident public companies and ultimately 100% subsidiaries of Foreign company, a foreign company listed on an overseas stock exchange. The Australian companies have a substituted accounting period which commences on 1 January and concludes on 31 December each year. The Australian companies are franking entities and will have franking periods of six months ending 30 June and 31 December. The Australian companies propose to form a Multiple Entry Consolidated (MEC) group retrospectively from 1 January 2004 with Company A as the provisional head company. In August 2004, company B paid to Foreign company a distribution that, in an abundance of caution, was franked to 0%. At that time, the MEC group had not finalised its franking account balance to take into consideration tax consolidation and therefore was unable to determine whether sufficient franking credits existed to frank the distribution to 100%. Subsequent to the August 2004 distribution, the MEC group determined that there were sufficient franking credits to frank the August 2004 distribution to 100%. Company B and company C propose to make, by 31 December 2004, distributions franked to 100%.", "Reasons_for_Decision": "Summary: Section 203-25 of the ITAA 1997 provides that all frankable distributions made by a corporate tax entity within a franking period must be franked to the franking percentage set as the benchmark for that period. This is called the benchmark rule. The Commissioner has the power to permit a departure from the benchmark rule under section 203-55 of the ITAA 1997. Subsection 203-55(1) of the ITAA 1997 provides that Commissioner may, on application by an entity, permit the entity to frank a distribution at a franking percentage that differs from the entity's benchmark franking percentage for the franking period in which the distribution is made. Subsection 203-55(2) of the ITAA 1997 further provides that the Commissioner's powers under this section may only be exercised in extraordinary circumstances. In determining if the requisite extraordinary circumstances exist, subsection 203-55(3) of the ITAA 1997 requires that the Commissioner have regard to the following:", "Date_of_Decision": "17 February 2005", "Year_of_Income": "Year ending 31 December 2004", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 128B(3)(ga)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commissioner's discretion Consolidation Consolidation - franking Distributions Dividend streaming arrangements Frankable dividends Franking accounts Franking credits Imputation system Unfranked dividends", "Case_References": "", "Other_References": "Explanatory Memorandum - New Business Tax System (Imputation) Act 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200567", "Unmatched_Content": "Keywords Commissioner's discretion Consolidation Consolidation - franking Distributions Dividend streaming arrangements Frankable dividends Franking accounts Franking credits Imputation system Unfranked dividends"}
{"ATO_ID_Number": "ATO ID 2010/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Australian financial institution (AFI): application of paragraph (d) in the definition of an AFI under subsection 317(1) of the Income Tax Assessment Act 1936 to the head company of a consolidated group", "Issue": "Is the head company of a consolidated group, which is treated as if it were a life insurance company pursuant to section 713-505 of the Income Tax Assessment Act 1997 (ITAA 1997), eligible to be declared an AFI under paragraph (d) of the definition of AFI in subsection 317(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The head company of a consolidated group, that is not registered as a life insurance company under the Life Insurance Act 1995 , but which is treated as if it were a life insurance company pursuant to section 713-505 of the ITAA 1997, is not eligible to be declared to be an AFI under paragraph (d) of the definition of AFI in subsection 317(1) of the ITAA 1936.", "Facts": "H Co is the head company of a consolidated group which includes numerous subsidiary members. H Co is not registered as a life insurance company under the Life Insurance Act 1995 . Sub Co is a subsidiary member of H Co's consolidated group. Sub Co, is registered as a life insurance company under the Life Insurance Act 1995 .", "Reasons_for_Decision": "Summary: Section 713-505 of the ITAA 1997 provides that: This Act, and the Income Tax Rates Act 1986 , apply to the *head company of a *consolidated group as if it were a *life insurance company for an income year if one or more life insurance companies are *subsidiary members of the group at any time during that year. Section 713-505 of the ITAA 1997 applies to H Co (as head company of the consolidated group) because Sub Co (being a subsidiary member of the consolidated group) is actually registered as a life insurance company under the Life Insurance Act 1995 . The amendments to the consolidation rules in Part 3-90 of the ITAA 1997 that included the enactment of section 713-505 of the ITAA 1997 are discussed in the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.2) of 2002 (Cth) (EM), as follows: 1.11 The head company of a consolidated group that has one or more subsidiary members that are life insurance companies at any time during the income year will also be taken to be a life insurance company for the purposes of applying the income tax law. 1.12 This will ensure that the special provisions in the income tax law that apply to life insurance companies apply appropriately to the head company of a consolidated group that has subsidiary members that are life insurance companies. 1.13 That is, for example: • the provisions in Division 320 of the ITAA 1997 will apply to the head company to, among other things: - identify statutory income, exempt income (including management fees that qualify for transitional relief under section 320-40) and specific deductions; - allocate taxable income into two classes - the complying superannuation class and the ordinary class; - establish and maintain virtual PST assets; - allocate assessable income and allowable deductions to the virtual PST component of the complying superannuation class of taxable income; and - establish and maintain segregated exempt assets; Part X of the ITAA 1936 is not referred to in the EM in relation to section 713-505 of the ITAA 1997. The expression 'as if' contained in section 713-505 of the ITAA 1997 is a variant of the expression 'deemed' and is interpreted in the same manner. (Pearce, DC & Geddes, RS 2006, Statutory Interpretation in Australia , 6th ed, LexisNexis Butterworths, Chatswood, at p. 149). Griffith CJ in Muller v. Dalgety & Co Ltd (1909) 9 CLR 693 at 696 stated: The word \"deemed\" may be used in either sense, but it is more commonly used for the purpose of creating what James LJ and Lord Cairns LC called a \"statutory fiction\"... that is, for the purpose of extending the meaning of some term to a subject matter which it does not properly designate. When used in that sense it becomes very important to consider the purpose for which the statutory fiction is introduced. In Commissioner of Taxation v. Comber (1986) 10 FCR 88; 86 ATC 4171; (1986) 17 ATR 413, the Full Federal Court applied this principle in holding that section 109 of the ITAA 1936, which deemed a director's retiring allowance to be a dividend paid by a company, did not extend to giving the payment the qualities of being paid to a shareholder, and paid out of profits, so as to make the amount assessable under section 44 of the ITAA 1936. Fisher J stated (86 ATC at 4177): ...deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to ... It is improper in my view to extend by implication the express application of such a statutory fiction. It is even more improper so to do if such an extension is unnecessary, the express provision being capable by itself of sensible and rational application. While H Co is treated 'as if it were a *life insurance company', H Co is not an AFI pursuant to paragraph (d) of the definition of 'AFI' in subsection 317(1) of the ITAA 1936 unless it meets the particular requirements of that paragraph. Paragraph (d) of the definition of AFI in subsection 317(1) of the ITAA 1936 provides that: \"AFI\" or \"Australian financial institution\": means any of the following entities: ... (d) a life assurance company; ... Subsection 6(1) of the ITAA 1936 provides that 'life assurance company has the meaning given to life insurance company by the Income Tax Assessment Act 1997'. Section 995-1 of the ITAA 1997 provides that 'life insurance company means a company registered under the Life Insurance Act 1995' . Therefore, paragraph (d) of the definition of 'AFI' in subsection 317(1) of the ITAA 1936 operates to require that the relevant entity be registered as a life insurance company under the Life Insurance Act 1995 . To conclude otherwise would entail concluding that the definition of 'life insurance company' in section 995-1 of the ITAA 1997 was modified by the operation of section 713-505 of the ITAA 1997. This conclusion could not be correct because the intended operation of section 713-505 is dependent upon the definition of 'life insurance company' in section 995-1 not being modified by the former section's operation.", "Date_of_Decision": "18 December 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 713-505 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Australian financial institution foreign subsidiaries Consolidation Head company Life insurance company", "Case_References": "Muller v Dalgety & Co Ltd (1909) 16 ArgLR 17 (1909) 9 CLR 693", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.2) of 2002 (Cth) Pearce, DC & Geddes, RS 2006, Statutory Interpretation in Australia 6th ed, LexisNexis Butterworths, Chatswood", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201026", "Unmatched_Content": "Keywords Australian financial institution foreign subsidiaries Consolidation Head company Life insurance company"}
{"ATO_ID_Number": "ATO ID 2005/257", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: who is responsible for lodgement of a company return when a liquidator has been appointed?", "Issue": "Is the liquidator appointed to wind up a company responsible for lodgement of the company's income tax return when they have control of the financial records of the company?", "Decision": "Yes. Where the liquidator has control of the financial records relating to the income tax affairs of the company, the liquidator is required to lodge the return for the full income year.", "Facts": "A liquidator is appointed to wind up Insolvent Company on 1 December in a particular income year. The financial records of Insolvent Company are handed to the liquidator as required under the Corporations Act 2001 , on 1 February of the same income year. As part of the winding up process, several transactions occurring in the beginning of the income year are reversed by the liquidator. The public officer of Insolvent Company no longer has access to, or control of, the financial records.", "Reasons_for_Decision": "Summary: Section 254 of the Income Tax Assessment Act 1936 (ITAA 1936) makes a liquidator personally responsible for the income tax requirements and liabilities arising under the ITAA 1936 from the time of their appointment. Thus, it is clear that the liquidator of Insolvent Company has responsibility for lodging an income tax return in respect of the period commencing from their appointment on 1 December of the income year. This responsibility overrides the responsibility of the public officer to lodge the return, which arises as a result of section 252 of the ITAA 1936. Taxation Determination TD 94/68 Income Tax: who is responsible for lodgement of a company income tax return if both a receiver/manager and a liquidator have been appointed?, provides guidance in the situation where conflicting duties to lodge arise, as may occur when a liquidator is appointed to a company. In the above situation, both the public officer and liquidator have legal obligations to lodge a return. However, in TD 94/68, the Commissioner accepts that in some cases not all persons who are obligated to lodge returns have control of the financial records necessary to do so. Accordingly, the Commissioner will look to the person or persons who have control of the financial records to lodge a return for the whole of the income year. In this case, the public officer of Insolvent Company has no control over the records they need to compile and lodge an accurate income tax return for Insolvent Company. The liquidator has the records and also has information relating to transactions that occurred prior to their appointment. Accordingly, the Commissioner will look to the liquidator of Insolvent Company for lodgement of the return for the full year.", "Date_of_Decision": "6 September 2005", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 252 section 254", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/68", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Insolvency Lodgment compliance Lodgment exemptions Lodgment of tax returns Lodgment requirements Ownership, interests, control & rights Tax administration Tax returns", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005257", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 94/68 | Keywords Insolvency Lodgment compliance Lodgment exemptions Lodgment of tax returns Lodgment requirements Ownership, interests, control & rights Tax administration Tax returns"}
{"ATO_ID_Number": "ATO ID 2003/654", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - voluntary deregistration subsidiary", "Issue": "Does a subsidiary cease to be eligible to be a member of a consolidated group under subsection 703-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997) when it is deregistered at the end of a voluntary deregistration process?", "Decision": "Yes. A subsidiary ceases to be eligible to be a member of a consolidated group under subsection 703-15(2) of ITAA 1997 when it is deregistered at the end of a voluntary deregistration process.", "Facts": "Company A, a head company, and its wholly-owned subsidiary, Company B, consolidate. After consolidation all of Company B's assets, liabilities and deductions are transferred to Company A. Company B's directors apply for deregistration after the transfer. Company B satisfies all the requirements for a voluntary deregistration under section 601AA of the Corporations Act 2001. Australian Securities and Investments Commission deregistered the company in accordance with the rules contained in Part 5A.1 of the Corporations Act 2001.", "Reasons_for_Decision": "Summary: The eligibility criteria to be a subsidiary member of a consolidated group are detailed in subsection 703-15(2) of the ITAA 1997. Broadly, to be a member of a consolidated group a subsidiary must be a wholly-owned resident company, trust or partnership. For example, if the member ceases to be a resident it is no longer eligible to be a subsidiary member. Equally, if it ceases to be wholly-owned it is no longer eligible to be a subsidiary member. 'Wholly-owned' is defined in section 703-30 of the ITAA 1997. A subsidiary company is wholly-owned if the head company beneficially owns all the membership interests in the subsidiary company. In this case, Company A's beneficial ownership of its shares in Company B is not affected until Company B is deregistered and the shares cease to exist. Accordingly, Company B ceases to be eligible to be a member of the consolidated group at the time of deregistration and is consequently no longer a member.", "Date_of_Decision": "20 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 703-15(2) section 703-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - membership Member of a group Liquidation Voluntary liquidation Wholly owned Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003654", "Unmatched_Content": "Keywords Consolidation Consolidation - membership Member of a group Liquidation Voluntary liquidation Wholly owned Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2003/739", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - liquidation of a head company", "Issue": "Does a wholly-owned subsidiary company have its tax cost setting amount calculated under section 711-15 of the Income Tax Assessment Act 1997 (ITAA 1997) if the head company of a consolidated group is deregistered after liquidation?", "Decision": "Yes. As part of the liquidation process, the head company's assets (its shares in its subsidiary) will be disposed of. The subsidiary will exit the group when the beneficial ownership of the subsidiary's shares changes. The subsidiary must have its tax cost setting amount calculated under section 711-15 of the ITAA 1997 when the beneficial ownership in those shares changes.", "Facts": "Company A is the holding company of Company B. Company B is a wholly-owned subsidiary of Company A. Company A successfully chooses to consolidate from 1 July 2003. A consolidated group, comprising of Company A and Company B is formed. Company A has a liquidator appointed after that date. Company A no longer has beneficial ownership of its shares in Company B as a result of the liquidation process. All profits from the change in ownership of its assets and other profits and capital reserves are distributed to its creditors and shareholders. Company A is deregistered after Company B has left the group.", "Reasons_for_Decision": "Summary: Under subsection 703-5(2) of the ITAA 1997, a consolidated group ceases to exist when the head company ceases to be a head company. A head company ceases to be eligible to be a head company when it can no longer meet the requirements of Item 1 in the table contained in subsection 703-15(2) of the ITAA 1997. Deregistration is the final step in liquidation and completes the liquidation process (section 601AC of the Corporations Act 2001 ). A company ceases to exist when it is deregistered (subsection 601AD(1) of the Corporations Act 2001). Accordingly, a company that has been deregistered cannot meet the requirements of Item 1, which, among other things, requires a head company to be a company as defined by section 995-1 the ITAA 1997. A company means: Company A ceases to be company at the time of its deregistration and simultaneously ceases to be eligible to be a head company. As a result, the consolidated group ceases to exist. In order for Company A to be deregistered, it can no longer have beneficial or equitable ownership of assets or retain profits. Any profits from the change in ownership of its assets must be distributed amongst its creditors and contributories (shareholders). Thus, Company A's beneficial ownership of its shares in Company B must be disposed of, and the resultant profits distributed, before liquidation can be completed and deregistration can occur. Section 701-15 of the ITAA 1997 aligns the cost to the head company of the membership interest of the entity that leaves the group with the assets of that entity reduced by its liabilities, just before the entity ceases to be a subsidiary member of the group. In this instance, Company B leaves the group at the point in time when Company A's beneficial ownership in its shares changes. Section 701-60 of the ITAA 1997 explains which is the relevant section for calculating the tax cost setting amount. In this case, Item 2 of the table in section 701-60 of the ITAA 1997 explains that if the asset's tax cost is set by section 701-15 the tax cost setting amount is worked out in accordance with section 711-15 (for single exits) or 711-55 (for multiple exits). Section 711-15 of the ITAA 1997 outlines the steps involved in calculating the tax cost setting amount where there is no multiple exit. As Company B is the only subsidiary to leave the group, section 711-15 will apply, requiring Company B's tax cost setting amount for its membership interests (that is, its shares) to be calculated. Note 1: Section 701-40 of the ITAA 1997 (the exit history rules) will ensure that the assets leaving the group with Company B will retain their tax history. Note 2: a head company is required by Item 3 of the table in subsection 703-60(1) to provide the Commissioner with a notice of events effecting consolidated group. In the event of liquidation, it is expected the liquidator will perform this duty on behalf of the liquidated company.", "Date_of_Decision": "5 May 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 701-15 section 701-40 section 701-60 subsection 703-5(2) subsection 703-15(2) subsection 703-60(1) section 711-15 section 711-55 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - exiting Insolvency Liquidation Member of a group Provisional liquidation Voluntary liquidation Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003739", "Unmatched_Content": "Keywords Consolidation Consolidation - exiting Insolvency Liquidation Member of a group Provisional liquidation Voluntary liquidation Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2003/964", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: subsidiary in liquidation - membership of consolidated group", "Issue": "Is a wholly-owned subsidiary company eligible to be a member of a consolidated group, under paragraph 703-15(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997), if it is in liquidation at the time that the consolidated group is formed?", "Decision": "Yes. A wholly-owned subsidiary company is eligible to be a member of a consolidated group, under paragraph 703-15(2)(b) of the ITAA 1997, even though it is in liquidation at the time that the consolidated group is formed.", "Facts": "An Australian resident head company and its wholly-owned resident subsidiary companies, Subsidiary A and Subsidiary B, consolidate. Prior to the time of consolidation, a liquidator has been appointed to wind up Subsidiary B. At the time of consolidation, the liquidation process was continuing. Subsidiary B had not yet been deregistered.", "Reasons_for_Decision": "Summary: The criteria for eligibility to be a subsidiary member of a consolidated group are contained in item 2 of the table in subsection 703-15(2) of the ITAA 1997. One of the requirements for a subsidiary company to be a member of a consolidated group is that it must be a wholly owned subsidiary of the head company. To be a member of a consolidated group, a subsidiary company must be: The definition of a 'wholly-owned subsidiary' is contained in subsection 703-30(1) of the ITAA 1997. A subsidiary entity is wholly-owned by the holding entity if all the membership interests in that subsidiary are beneficially owned by the holding entity, or its wholly-owned subsidiaries, or a combination of the holding entity and its wholly-owned subsidiaries. The appointment of a liquidator to a company does not affect a shareholder's beneficial ownership of their shares in the liquidating company, although those shares may be worthless. Accordingly, the appointment of a liquidator to Subsidiary B will not affect Subsidiary A's membership interests in Subsidiary B. Subsidiary B will satisfy the definition of 'wholly-owned subsidiary' contained in section 703-30 of the ITAA 1997, and is eligible to be a member of the consolidated group as it satisfies the criteria for eligibility contained in item 2 of the table in subsection 703-15(2) of the ITAA 1997 .", "Date_of_Decision": "1 October 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 703-15(2) paragraph 703-15(2)(b) section 703-30 subsection 703-30(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - formation Liquidation Member of a group Ownership, interests, control & rights Subsidiary member of a consolidatable group Subsidiary member of a consolidated group Voluntary liquidation Wholly owned Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003964", "Unmatched_Content": "This ATO ID was amended to improve clarity | Keywords Consolidation Consolidation - formation Liquidation Member of a group Ownership, interests, control & rights Subsidiary member of a consolidatable group Subsidiary member of a consolidated group Voluntary liquidation Wholly owned Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2003/965", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - assessability of liquidator's distributions", "Issue": "Are distributions received by the head company of a consolidated group from the liquidator of a subsidiary member of that group, in the course of the subsidiary's liquidation, deemed dividends under section 47 of the Income Tax Assessment Act 1936 (ITAA 1936)", "Decision": "No. Distributions made by the liquidator of a subsidiary member of a consolidated group to another member of that group are not assessable because of the effect of the single entity rule contained in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "Company A is the head company of a consolidated group. Company B is a subsidiary member of the consolidated group and is wholly-owned by Company A. Company B is placed in liquidation by its shareholder, Company A. The liquidator makes distributions to Company A in the course of winding up Company B.", "Reasons_for_Decision": "Summary: Subsection 701-1(1) of the ITAA 1997 states that: If an entity is a *subsidiary member of a *consolidated group for any period, it and any other subsidiary member of the group are taken for the purposes covered by subsections (2) and (3) to be parts of the *head company of the group, rather than separate entities, during that period. Note: * denotes a term defined in subsection 995-1(1) of the ITAA 1997 Paragraph 701-1(2)(a) of the ITAA 1997 includes the purpose of working out the amount of the *head company's liability (if any) for income tax calculated by reference to any income year in which any of the period occurs or any later income year. A distribution by a liquidator of a wholly-owned subsidiary member of a consolidated group to its shareholder company is treated as a distribution by the taxpayer to itself because section 701-1 of the ITAA 1997 treats the subsidiary as part of the head company (the taxpayer in question). As a consequence, the transaction is not recognised for income tax purposes and section 47 of the ITAA 1936 cannot be applied to the distribution. Accordingly, the distribution made by company B's liquidator to Company A, in the course of winding up Company B, is treated as if Company A had made the distribution to itself. There are no tax consequences for the liquidator's distribution to Company A.", "Date_of_Decision": "1 October 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 47", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company Consolidated group Consolidation Consolidation - tax liabilities Liquidation Member of a group Ownership, interests, control & rights Single entity rule Subsidiary company Subsidiary member of a consolidated group Voluntary liquidation Wholly owned Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003965", "Unmatched_Content": "Keywords Company Consolidated group Consolidation Consolidation - tax liabilities Liquidation Member of a group Ownership, interests, control & rights Single entity rule Subsidiary company Subsidiary member of a consolidated group Voluntary liquidation Wholly owned Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2005/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: value and loss donor rules - a loss can only be taken into account for the value donor rule or loss donor rule but not both", "Issue": "Can a choice be made by the transferee, under subsection 707-327(4) of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A), to 'donate' a loss where:", "Decision": "No. Subsection 707-327(6) of the IT(TP)A prevents the transferee from making a choice, under subsection 707-327(4) of the IT(TP)A, to treat the loss as if it was included in another bundle of losses.", "Facts": "Head Co forms a consolidated group before 1 July 2004. The members of the consolidated group at the time the group forms are Head Co, Donor Co and Sub Co. Head Co and Donor Co were members of the same wholly-owned group prior to 1 July 2000 and Sub Co became a member of the wholly-owned group during the 2000-01 income year. At the time the group forms, tax losses are transferred, under Subdivision 707-A of the ITAA 1997, from Head Co and Sub Co to Head Co, as the head company of the consolidated group. The respective income years for which each of these tax losses were originally incurred are shown in the diagram. All of the conditions in section 707-325 of the IT(TP)A are satisfied for Donor Co to be a value donor in respect of Head Co and for Head Co to be a value donor in respect of Sub Co. In working out the available fractions for 'Bundle Head Co' and 'Bundle Sub Co', the following 'donations' of value are made: Both of the losses in 'Bundle Head Co' are included in the 'total of real loss-maker's Division 170 of the ITAA 1997 losses in bundle' (as defined in subsection 707-325(4) of the IT(TP)A) in the application of section 707-325 of the IT(TP)A in respect of Donor Co. Head Co seeks to choose, under subsection 707-327(4) of the IT(TP)A, to treat the tax loss originally incurred by Head Co for the 2001-02 income year as if it is included in Bundle Sub Co for the purposes of utilising that loss.", "Reasons_for_Decision": "Summary: Subsection 707-327(4) of the IT(TP)A states: If the transferee mentioned in subsection 707-325(1) chooses, sections 707-310, 707-335 (except paragraph 707-335(2)(a)) and 707-340 of the Income Tax Assessment Act 1997 (and subsections 707-315(3) and (4) of that Act, so far as they relate to those sections) operate as if, at the initial transfer time: (a) the bundle of losses included the loss; and (b) the loss was not included in any other bundle of losses. Effectively, the result of the choice under 707-327(4) of the IT(TP)A is that a loss that is in one bundle (the value donor bundle) can be treated as if it is included in another bundle of losses (the real loss-maker bundle) for the purposes of utilising that loss. Head Co is a value donor to Sub Co and, if all of the conditions outlined in section 707-327 of the IT(TP)A are met, a loss in Bundle Head Co could be chosen to be treated as if it was included in Bundle Sub Co, for the purposes of utilising that loss. However, subsection 707-327(6) of the IT(TP)A states: Subsection (4) does not apply in relation to the loss if it was covered by paragraphs 707-325(1)(d) and (e) and subsection 707-325(2) in an application of section 707-325 separate from the application of that section mentioned in paragraph (1)(a) of this section. Note: This means that a loss that provided a basis for section 707-325 to apply in relation to the working out of the available fraction for a bundle of losses cannot be treated under this section as if it were included in another bundle of losses. Effectively, subsection 707-327(6) of the IT(TP)A prevents a choice being made under subsection 707-327(4) of the IT(TP)A to donate a loss from the value donor bundle if, in a separate application of section 707-325 of the IT(TP)A: Head Co is a real loss-maker in relation to the donation of modified market value from Donor Co. Therefore, the effect of subsection 707-327(6) of the IT(TP)A is that neither of the losses in Bundle Head Co could be donated to another bundle of losses. In other words, because both of the losses in Bundle Head Co are Division 170 losses in respect of Donor Co, those losses cannot be donated to another bundle of losses. Head Co, as the transferee, cannot make a choice, under subsection 707-327(4) of the IT(TP)A, to treat the tax loss (that was originally incurred by Head Co for the 2001-02 income year) in Bundle Head Co as if it was included in Bundle Sub Co because subsection 707-327(6) of the IT(TP)A prevents this choice being made in respect of this loss.", "Date_of_Decision": "10 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 170 Subdivision 707-A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Available fraction Bundle of losses Consolidation - joining Consolidation - losses Joining entity Joining time Modified market value Transfer of losses Value donor Wholly owned", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200559", "Unmatched_Content": "This ATO ID has been amended to improve clarity. | This section has the effect that the utilisation of the loss will be affected by the available fraction for the bundle of losses. | Keywords Available fraction Bundle of losses Consolidation - joining Consolidation - losses Joining entity Joining time Modified market value Transfer of losses Value donor Wholly owned"}
{"ATO_ID_Number": "ATO ID 2004/182", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: effect of 'not at arm's length' transactions on modified market value", "Issue": "Is the purpose of a non-arm's length transaction (that is an event described in paragraph 707-325(4)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)) relevant in determining if a reduction is required to be made to the modified market value (MMV) of the entity under subsection 707-325(2) of the ITAA 1997?", "Decision": "No. The purpose of a non-arm's length transaction is not relevant in determining if a reduction is required to be made to the MMV of the entity under subsection 707-325(2) of the ITAA 1997.", "Facts": "After 8 December 2000 (and in the four years before the joining time) Entity B is involved in a non-arm's length transaction. Entity B becomes a member of a consolidated group at a particular time (the joining time) and as at that time, the MMV is required to be determined for the purpose of calculating the available fraction for a bundle of losses. As a result of the non-arms' length transaction, Entity B's MMV at the joining time is greater than it would have been had the transaction not taken place.", "Reasons_for_Decision": "Summary: The basic rule for working out the MMV of an entity that becomes a member of a consolidated group at a particular time is contained in subsection 707-325(1) of the ITAA 1997. It provides that the MMV of an entity at a particular time is the market value of the entity at that time based on certain assumptions (including the assumptions that the entity had no losses of any sort and the balance of its franking account at that time was nil). Subsection 707-325(2) of the ITAA 1997 provides that if: then the MMV worked out under subsection 707-325(1) of the ITAA 1997 is reduced by the amount worked out under subsection 707-325(3) of the ITAA 1997. Subsection 707-325(4) of the ITAA 1997 contains the events that are referred to in subsection 707-325(2) of the ITAA 1997. Paragraph 707-325(4)(b) of the ITAA 1997 identifies one of the events as a transaction that did not take place at arm's length that involved an entity or an associate of the entity (or the trustee of the entity, if the entity is a trust) at the time of the transaction. If an event described in subsection 707-325(4) of the ITAA 1997 occurs before 9 December 2000, Section 707-329 of the Income Tax (Transitional Provisions) Act 1997 requires that event be disregarded in calculating the MMV of an entity. Therefore, if there has been a transaction that did not take place at arm's length that involved an entity: then a reduction is required to be made (as calculated under subsection 707-325(3) of the ITAA 1997) to the MMV of the entity. The requirement for a reduction to be made to the MMV of an entity under subsection 707-325(2) of the ITAA 1997 (that is, as a result of an event, being a non-arm's length transaction that involved the entity) is not conditional on any purpose in respect of that event. As all of the conditions in subsection 707-325(2) of the ITAA 1997 exist, there will need to be a reduction made to the MMV of Entity B. The reduction will be calculated under subsection 707-325(3) of the ITAA 1997.", "Date_of_Decision": "13 February 2004", "Year_of_Income": "Income year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 707-325 subsection 707-325(1) subsection 707-325(2) subsection 707-325(3) subsection 707-325(4) paragraph 707-325(4)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Available fraction Bundle of losses Consolidation - event Consolidation - losses Consolidation - non-arm's length transaction Consolidation - reduction Joining entity Modified market value Transferred losses", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004182", "Unmatched_Content": "History: this ATO ID was amended on 26 March 2004. Material has been relocated within the document in order to improve clarity. This ATO ID has been amended to remove reference to ATO ID 2004/183 which has been withdrawn. A reference to TR 2004/9 has been added which covers the issue in the withdrawn ATO ID. | Related Public Rulings (including Determinations) Taxation Ruling TR 2004/9 | Keywords Available fraction Bundle of losses Consolidation - event Consolidation - losses Consolidation - non-arm's length transaction Consolidation - reduction Joining entity Modified market value Transferred losses"}
{"ATO_ID_Number": "ATO ID 2004/389", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - modified market value and a third party debt/equity swap", "Issue": "Does a debt/equity swap, undertaken between 3 parties, constitute an event for the debtor under paragraph 707-325(4)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) for the purpose of the rule to prevent the inflation of modified market value ('anti-inflation rule')?", "Decision": "Yes. A debt/equity swap undertaken between 3 parties is considered to be an event for the debtor as described in paragraph 707-325(4)(a) of the ITAA 1997.", "Facts": "The finance company of a consolidatable group, Fin Co (the debtor), borrows funds from an unrelated third party, Bank Co (the creditor). Under a subsequent arrangement, the head company of the consolidatable group, Head Co, issues shares to Bank Co, in exchange for the discharge of the outstanding debt. The arrangement takes place after 8 December 2000 and less than four years prior to Head Co forming a consolidated group. The transaction increases the market value of Fin Co.", "Reasons_for_Decision": "Summary: The basic rule for working out the modified market value of an entity that becomes a member of a consolidated group is contained in subsection 707-325(1) of the ITAA 1997. It provides that the modified market value of an entity at the joining time is the market value of the entity at that time based on certain assumptions. Subsection 707-325(2) of the ITAA 1997 provides that if: there are one or more events described in subsection 707-325(4) of the ITAA 1997; that occurred in the four years before the time an entity becomes a member of a consolidated group; and the modified market value of the entity calculated under subsection 707-325(1) of the ITAA 1997 exceeds what it would have been if none of those events occurred, then the modified market value worked out under subsection 707-325(1) of the ITAA 1997 is reduced by the amount worked out under subsection 707-325(3) of the ITAA 1997. Subsection 707-325(4) of the ITAA 1997 contains the events that are referred to in subsection 707-325(2) of the ITAA 1997. Paragraph 707-325(4)(a) of the ITAA 1997 identifies one of the events as an injection of capital into the entity or an associate of the entity. An injection of capital that occurred in the four years before the joining time can only be disregarded if it is made: into a listed public company through a dividend reinvestment scheme (paragraph 707-325(5)(a) of the ITAA 1997), or in association with the acquisition of shares under an employee share scheme meeting certain conditions (paragraph 707-325(5)(b) of the ITAA 1997), or on or before 8 December 2000 (section 707-329 of the Income Tax (Transitional Provisions) Act 1997 ). The distinguishing features of a 3 party debt/equity swap are such that the creditor releases the debtor from the obligation to repay the debt (or part of the debt) in exchange for an associate of the debtor issuing equity (usually shares) to the creditor. Under the arrangement, the creditor acquires membership interests in the associate in return for releasing the debtor from a debt of equivalent value. This arrangement is considered to be an event as described in paragraph 707-325(4)(a) of the ITAA 1997 for the purposes of the anti-inflation rule. The event is an injection of capital into an associate of the debtor. The anti-inflation rule is triggered as the modified market value of the debtor exceeds what it would have been had the arrangement not taken place. The wealth of the debtor has increased by virtue of it no longer having an obligation to repay loan funds. As Head Co has issued shares to Bank Co, an event of an injection of capital into Head Co has occurred. The event triggers the anti-inflation rule with regard to Fin Co as the injection occurs in Head Co (an associate of Fin Co under section 318 of the Income Tax Assessment Act 1936 ) and had the effect of increasing Fin Co's modified market value at the joining time over what it would have been had the transaction not taken place. As the transaction took place after 8 December 2000 and in the four years prior to Head Co forming a consolidated group, this event is not disregarded for purposes of the anti-inflation rule. A reduction in the modified market value of Fin Co may be required under subsection 707-325(2) of the ITAA 1997. This arrangement also constitutes an event with regard to Head Co. However, in the absence of any other events involving Head Co, the anti-inflation rule is not triggered for Head Co as its modified market value at the joining time is not greater than it would otherwise have been had the arrangement not taken place. The value attributable to Head Co beneficially owning Fin Co (where the increase in value is reflected) is disregarded in determining Head Co's modified market value by paragraph 707-325(1)(c) of the ITAA 1997.", "Date_of_Decision": "23 April 2004", "Year_of_Income": "Income year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 707-325 subsection 707-325(1) paragraph 707-325(1)(c) subsection 707-325(2) subsection 707-325(3) subsection 707-325(4) paragraph 707-325(4)(a) subsection 707-325(5) paragraph 707-325(5)(a) paragraph 707-325(5)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of shares Associate Consolidatable group Consolidation Consolidation - event Consolidation - losses Consolidation - reduction Debt waivers Injection of capital Joining entity Modified market value", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004389", "Unmatched_Content": "This ATO ID has been updated to improve clarity, and to remove references to related ATO ID 2004/387 and related ATO ID 2004/388 as these have been withdrawn. A reference to TR 2004/9 has been added as this explains the Commissioner's view on the meaning of the phrase 'injection of capital' and also contains analysis of debt/equity swaps. | Related Public Rulings (including Determinations) Taxation Ruling TR 2004/9 | Keywords Acquisition of shares Associate Consolidatable group Consolidation Consolidation - event Consolidation - losses Consolidation - reduction Debt waivers Injection of capital Joining entity Modified market value"}
{"ATO_ID_Number": "ATO ID 2004/835", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - modified market value and a non-arm's length loan", "Issue": "Is there more than one event, as described in subsection 707-325(4) of the Income Tax Assessment Act 1997 (ITAA 1997) for the purpose of preventing the inflation of the modified market value (integrity rule), in respect of a non-arm's length loan where the terms and conditions of the loan remain unchanged?", "Decision": "No. The only event, as described in subsection 707-325(4) of the ITAA 1997, is the non-arm's length loan transaction. There is no event subsequent to that transaction.", "Facts": "Entity A becomes a member of a consolidated group and, as at the joining time, the modified market value of Entity A is determined for the purpose of calculating an available fraction for a bundle of losses. Prior to joining the consolidated group, Entity A borrowed funds at less than a commercial rate of interest in a transaction that did not take place at arm's length. The terms and conditions of the loan remain unchanged.", "Reasons_for_Decision": "Summary: The basic rule for working out the modified market value of an entity that becomes a member of a consolidated group is contained in subsection 707-325(1) of the ITAA 1997. It provides that the modified market value of an entity at the joining time is the market value of the entity at that time based on certain assumptions. Subsection 707-325(2) of the ITAA 1997 provides that if: then the modified market value worked out under subsection 707-325(1) of the ITAA 1997 is reduced by the amount worked out under subsection 707-325(3) of the ITAA 1997. Subsection 707-325(4) of the ITAA 1997 contains the two events that are referred to in subsection 707-325(2) of the ITAA 1997. Paragraph 707-325(4)(a) of the ITAA 1997 identifies one event as an injection of capital into the entity or an associate. Paragraph 707-325(4)(b) of the ITAA 1997 identifies the other event as a transaction that did not take place at arm's length that involved the entity or an associate. Under section 707-329 of the Income Tax (Transitional Provisions) Act 1997 , events that occurred before 9 December 2000 are disregarded in calculating the modified market value of an entity. As Entity A borrowed the funds in a transaction that did not take place at arm's length, it is an event as described in paragraph 707-325(4)(b) of the ITAA 1997 at the time the funds were borrowed. Entity A has an ongoing benefit of not having to pay a commercial rate of interest which may affect its market value at the joining time. However, for the purposes of subsection 707-325(4) of the ITAA 1997, there is considered to be no injection of capital nor any non-arm's length transaction in relation to the ongoing continuation of the loan at unchanged terms and conditions. The only event for purposes of the integrity rule is the transaction where Entity A borrows the funds. Therefore, this integrity rule would have no application if the transaction (borrowing of the funds) occurred prior to 9 December 2000 or more than four years before the joining time.", "Date_of_Decision": "14 October 2004", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 707-325 subsection 707-325(1) subsection 707-325(2) subsection 707-325(3) subsection 707-325(4) paragraph 707-325(4)(a) paragraph 707-325(4)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/182", "Subject_References": "Arms length transactions Available fraction Borrowings & loans Bundle of losses Consolidation - event Consolidation - losses Consolidation - non-arm's length transaction Consolidation - reduction Group company loss transfers Joining entity Modified market value Non arms length transactions Transferred losses", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004835", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/9 | Keywords Arms length transactions Available fraction Borrowings & loans Bundle of losses Consolidation - event Consolidation - losses Consolidation - non-arm's length transaction Consolidation - reduction Group company loss transfers Joining entity Modified market value Non arms length transactions Transferred losses"}
{"ATO_ID_Number": "ATO ID 2009/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: eligibility to be a subsidiary member of a consolidated group - residence and the single entity rule", "Issue": "Does the single entity rule in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) apply for the purpose of determining whether an entity satisfies the 'Australian residence requirements' in column 3 of item 2 of the table in subsection 703-15(2) of the ITAA 1997?", "Decision": "No. The single entity rule does not apply in determining whether an entity satisfies the 'Australian residence requirements' in column 3 of item 2 of the table in subsection 703-15(2) of the ITAA 1997. The satisfaction of the Australian residence requirements for subsidiary membership of a consolidated group is a condition precedent to the application of the single entity rule. As a consequence, intra-group transactions are taken into account in determining whether that entity satisfies these requirements.", "Facts": "HCo, the head company of a consolidated group consisting of itself, Sub1 and Sub2 acquires all of the membership interests in OSCo, a company which was incorporated outside Australia. OSCo enters into agreements in Australia to provide management services to Sub1 and Sub2 and consequently derives any assessable income pursuant to the contracts from sources in Australia. OSCo is an Australian resident for the purpose of paragraph (b) of the definition of 'resident' or 'resident of Australia' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) since it carries on business in Australia and has its central management and control in Australia. OSCo is not a prescribed dual resident as defined in subsection 6(1) of the ITAA 1936. OSCo also satisfies the 'Income tax treatment requirements' and 'Ownership requirements' in columns 2 and 4 respectively of item 2 of the table in subsection 703-15(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Column 3 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 sets out the 'Australian residence requirements' for an entity to be a subsidiary member of a consolidated group at a particular time in an income year. If the entity is a company, it must be an 'Australian resident' but not a 'prescribed dual resident'. Subsection 995-1(1) of the ITAA 1997 provides that the term 'Australian resident' means a person who is a 'resident of Australia' for the purposes of the ITAA 1936. Paragraph (b) of the definition of 'resident' or 'resident of Australia' in subsection 6(1) of the ITAA 1936 outlines the residency requirements for a company including a company which was not incorporated in Australia. OSCo satisfies the 'Australian residence requirements' in column 3 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 because OSCo: OSCo also meets the requirements in columns 2 and 4 of item 2 of the table in subsection 703-15(2) of the ITAA 1997. Accordingly, OSCo becomes a subsidiary member of the consolidated group of which HCo is the head company at the particular time when OSCo meets all the requirements of being a subsidiary member in item 2 of the table in subsection 703-15(2) of the ITAA 1997. The single entity rule in subsection 701-1(1) of the ITAA 1997 provides: If an entity is a *subsidiary member of a *consolidated group for any period, it and any other subsidiary member of the group are taken for... [core purposes] ...to be parts of the *head company of the group, rather than separate entities, during that period. [Emphasis added.] The single entity rule only applies ' if an entity is a subsidiary member of a consolidated group for any period...' [italics added]. Therefore, the satisfaction of the Australian residence requirements for subsidiary membership of a consolidated group is one of the conditions precedent to the application of the single entity rule. It follows that the single entity rule cannot be relevant in determining whether an entity, such as OSCo, meets the 'Australian residence requirements' in column 3 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 in order for it to become or remain a subsidiary member of a consolidated group. In determining whether OSCo continues to satisfy the 'Australian residence requirements' in subsection 703-15(2) of the ITAA 1997 and remains a subsidiary member of the consolidated group, transactions between OSCo and other members of the consolidated group (such as Sub1 and Sub2) are taken into account.", "Date_of_Decision": "15 December 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - membership Residence of companies Single entity rule", "Case_References": "", "Other_References": "Chapter 2 - Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002 Consolidation Reference Manual (26 October 2005) at C1-1", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20098", "Unmatched_Content": "Keywords Consolidation Consolidation - membership Residence of companies Single entity rule"}
{"ATO_ID_Number": "ATO ID 2009/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: MEC group - interposition of a partnership of foreign resident wholly-owned subsidiaries of a top company, between the top company and an eligible tier-1 company", "Issue": "Will the insertion of a partnership, all the partners of which are foreign resident wholly-owned subsidiary companies of the top company, between the top company and an eligible tier-1 company member of the multiple entry consolidated (MEC) group cause the eligible tier-1 company to cease to be an eligible tier-1 company of the top company?", "Decision": "No. The insertion of a partnership in which all the partners are foreign resident wholly-owned subsidiaries of the top company will not cause the eligible tier-1 company member to cease to be an eligible tier-1 company of the top company. A partner's interests in the partnership are membership interests for the purposes of determining under section 703-30 of the Income Tax Assessment Act 1997 (ITAA 1997) whether the partnership is a wholly-owned subsidiary of the top company. The partnership will be a wholly-owned subsidiary of the top company (provided the partners beneficially own their interests in the partnership). As the partners and the partnership are wholly-owned subsidiaries of the top company, the eligible tier-1 company above which the partnership is inserted will continue to be a wholly-owned subsidiary of the top company, and an eligible tier-1 company member of the MEC group.", "Facts": "X Co is the top company of a multiple entry consolidated group (MEC group 1) derived from the eligible tier-1 company members, A Co and B Co. A Co and B Co made the choice to form MEC group 1 and have continued to be X Co's only eligible tier-1 companies since the group formed. A Co is a directly held, wholly-owned subsidiary of X Co. B Co is a wholly-owned subsidiary of Y Co, a wholly-owned foreign resident subsidiary of X Co. Y Co incorporates two new wholly-owned foreign resident subsidiary companies, W Co and Z Co. W Co and Z Co form a partnership (WZ Partnership) and Y Co transfers all of the shares in B Co to the WZ Partnership. The WZ Partnership is a general partnership formed under a foreign partnership law which provides that the partnership is not a separate legal entity distinct from its partners. W Co and Z Co are entitled to all of the rights and benefits conferred on them as partners of the WZ Partnership under the general law and the WZ Partnership Agreement.", "Reasons_for_Decision": "Summary: The residency and ownership requirements for a company to be a top company are in subsection 719-20(1) of the ITAA 1997. The insertion of the WZ Partnership will not change the residency or ownership structure of X Co. It will continue to meet the requirements in subsection 719-20(1) of the ITAA 1997 to be a top company. The requirements for a company to be an eligible tier-1 company are in sections 719-15 and 719-20 of the ITAA 1997. The insertion of the partnership does not affect the tax treatment, residency or ownership structure of A Co. It continues to meet all of the requirements in sections 719-15 and 719-20 of the ITAA 1997 to be an eligible tier-1 company of X Co. The insertion of the WZ Partnership between the top company (X Co) and B Co will not affect the tax treatment or residency of B Co, but will change the structure of the ownership of B Co. B Co will, however, continue to be a wholly-owned subsidiary of X Co and, therefore, an eligible tier-1 company of X Co. B Co is a wholly-owned subsidiary of X Co because it is a wholly-owned subsidiary of WZ Partnership which is a wholly-owned subsidiary of X Co (section 703-30 of the ITAA 1997). WZ Partnership is a wholly-owned subsidiary of X Co because all of the membership interests in WZ Partnership are beneficially owned by X Co's wholly-owned subsidiaries, W Co and Z Co. The partnership is a wholly-owned subsidiary of the partners W Co and Z Co because they beneficially own all of the membership interests in WZ Partnership (section 703-30 of the ITAA 1997).", "Date_of_Decision": "17 June 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 703-30 section 719-15 section 719-20 subsection 719-20(1) section 960-130 section 960-135", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2008/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - multiple entry consolidated group Consolidation - membership Consolidation - partnerships Membership interest of a partnership", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200944", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2008/24 | Keywords Consolidation Consolidation - multiple entry consolidated group Consolidation - membership Consolidation - partnerships Membership interest of a partnership"}
{"ATO_ID_Number": "ATO ID 2009/149", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: membership rules - foreign hybrid company", "Issue": "Is a United States limited liability company (US LLC) that is a foreign hybrid company in relation to an income year and is a wholly-owned subsidiary of the head company of a consolidated group for a period during the income year, a member of the consolidated group during that period?", "Decision": "Yes. A US LLC that is a foreign hybrid company in relation to an income year and is a wholly-owned subsidiary of the head company of a consolidated group for a period during the income year, is a member of the consolidated group during that period.", "Facts": "On 1 September 2009, H Co, the head company of a consolidated group, becomes the beneficial owner of all of the membership interests in a limited liability company, LL Co, formed under the laws of the state of Delaware in the United States of America. H Co remains the beneficial owner of the membership interests at the end of the income year, 30 June 2010. At the end of the income year, LL Co satisfies all of the conditions in subsection 830-15(1) of the Income Tax Assessment Act 1997 (ITAA 1997), and so is a foreign hybrid company in relation to the income year.", "Reasons_for_Decision": "Summary: Where a company is a foreign hybrid company in relation to an income year, section 830-20 of the ITAA 1997 provides that the 'foreign hybrid tax provisions' apply to the company as if the company were a partnership. The definition of the term 'foreign hybrid tax provisions', in subsection 995-1(1) of the ITAA 1997, includes the ITAA 1997 (other than Subdivision 830-A and 830-B). Accordingly, the membership rules for consolidated groups in Division 703 of the ITAA 1997 are foreign hybrid tax provisions. As LL Co is a foreign hybrid company in relation to the income year, Division 703 of the ITAA 1997 applies to LL Co as if it were a partnership. Paragraph 703-15(1)(b) of the ITAA 1997 provides that an entity is a member of a consolidated group while the entity is a subsidiary member of the group. An entity is a subsidiary member of a consolidated group if the conditions in columns 2, 3 and 4 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 are satisfied. The condition in column 2 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 is satisfied if the entity is a company, trust or partnership, subject to certain conditions and exceptions regarding its income tax treatment that are not applicable for present purposes. The condition in column 3 of that item is satisfied if the entity is a company or trust satisfying certain Australian residence requirements, or is a partnership. To satisfy the condition in column 4 of that item, the entity must be a 'wholly-owned subsidiary' of the head company, according to the definition of that term in section 703-30 of the ITAA 1997. LL Co satisfies the conditions in columns 2 and 3 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 because it is treated as a partnership. This is irrespective of LL Co being, in fact, a company and, in that circumstance, not satisfying the residence requirements in column 3(a) of that item. During the period that all of the membership interests in LL Co are beneficially owned by H Co, LL Co is a wholly-owned subsidiary of H Co as defined in section 703-30 of the ITAA 1997, so satisfies the condition in column 4 of item 2 of the table in subsection 703-15(2) of the ITAA 1997 during that period. LL Co is therefore a member of the consolidated group while it is a wholly-owned subsidiary of H Co, from 1 September 2009 to 30 June 2010.", "Date_of_Decision": "4 December 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-90 Division 703 paragraph 703-15(1)(b) subsection 703-15(2) section 703-30 Subdivision 830-A Subdivision 830-B subsection 830-15(1) section 830-20 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - membership Foreign hybrid company Foreign hybrids Head company International tax Subsidiary member of a consolidated group", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009149", "Unmatched_Content": "Keywords Consolidation Consolidation - membership Foreign hybrid company Foreign hybrids Head company International tax Subsidiary member of a consolidated group"}
{"ATO_ID_Number": "ATO ID 2008/32", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: membership - eligibility to form a consolidated group where a subsidiary member holds shares in the head company", "Issue": "Does a consolidatable group exist where a subsidiary member holds some membership interests in the head company?", "Decision": "Yes. A consolidatable group exists where a subsidiary member holds some membership interests in the head company, provided that the other conditions in subsection 703-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997) are also satisfied.", "Facts": "A Co is a private company that intends to be the head company of a consolidated group. B Co is a private company that holds approximately 40% of the shares in A Co. A Co enters into an arrangement whereby it issues shares in itself to the shareholder of B Co as consideration for the acquisition of all B Co's shares. Consequently, B Co becomes a wholly-owned subsidiary of A Co. However, B Co will still retain its shareholding in A Co until such time as this shareholding is redeemed by A Co. After B Co becomes a wholly-owned subsidiary of A Co, but prior to the share buy-back by A Co of the shares that B Co holds in A Co, A Co chooses to form a consolidated group pursuant to section 703-50 of the ITAA 1997.", "Reasons_for_Decision": "Summary: A consolidated group comes into existence when a head company makes a choice to consolidate a consolidatable group. Under section 703-10 of the ITAA 1997, a consolidatable group consists of a single Australian resident head company and at least one wholly-owned resident subsidiary member (which may be a company, trust or partnership). Section 703-20 of the ITAA 1997 prevents certain types of entities from being a head company or subsidiary member of a consolidatable or consolidated group and section 703-25 of the ITAA 1997 provides specific Australian resident requirements for trusts. The criteria for eligibility to be a head company of a consolidated group are contained in item 1 of the table in subsection 703-15(2) of the ITAA 1997. To be a head company, the entity must: On the basis that A Co meets the criteria contained in item 1 of the table in subsection 703-15(2) of the ITAA 1997, it is eligible to be the head company. The criteria for eligibility to be a subsidiary member of a consolidated group are contained in item 2 of the table in subsection 703-15(2) of the ITAA 1997. To be a subsidiary member, the entity must: The definition of a 'wholly-owned subsidiary' is contained in section 703-30 of the ITAA 1997. A subsidiary entity is wholly-owned by the head company if all the membership interests in that subsidiary are beneficially owned by the head company or its wholly-owned subsidiaries, or a combination of the head company and its wholly-owned subsidiaries. The term membership interest refers to all the interests and rights that you have in a company, partnership or trust by virtue of which you are a member. B Co meets the above criteria. It is taxed at the company tax rate; it is not one of the excluded entities listed in section 703-20 of the ITAA 1997; it is an Australian resident and all of its membership interests will be owned by A Co. Since A Co is eligible to be the head company of a consolidatable group and B Co is eligible to be a subsidiary member, together they constitute a consolidatable group and are therefore eligible to form a consolidated group under section 703-50 of the ITAA 1997.", "Date_of_Decision": "7 February 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 703-10 section 703-15 section 703-20 section 703-25 section 703-30 section 703-50", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/619", "Subject_References": "Consolidated group Consolidation Consolidation - membership Head company Membership interest in an entity Subsidiary member of a consolidated group Wholly owned subsidiary", "Case_References": "", "Other_References": "Consolidation Reference manual (26 October 2005) at C1-1", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200832", "Unmatched_Content": "Keywords Consolidated group Consolidation Consolidation - membership Head company Membership interest in an entity Subsidiary member of a consolidated group Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2008/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: membership - transitional foreign-held subsidiary acquires a wholly-owned subsidiary after formation", "Issue": "Does subsection 701C-10(8) of the Income Tax Transitional Provisions Act 1997 (IT(TP)A 1997) prevent a company from becoming a subsidiary member of a consolidated or multiple entry consolidated (MEC) group when it is directly acquired by members of the group including one or more transitional foreign-held subsidiary (TFHS) members?", "Decision": "No. Subsection 701C-10(8) of the IT(TP)A 1997 only applies where the acquired entity is a company in which a foreign resident entity, of the type described in paragraph 701C-10(8)(c) of the IT(TP)A 1997 (or a nominee of such an entity), holds a direct interest. It cannot apply where all of the membership interests in a company are directly acquired by members of the consolidated or MEC group including TFHS members of the group, because the members of the group are all Australian residents.", "Facts": "HC is the head company of a consolidated group formed prior to 1 July 2004. F Co is a company that is a foreign resident and is a wholly-owned subsidiary of HC. X Co is a wholly-owned subsidiary of F Co and has been a member of the consolidated group as a transitional foreign-held subsidiary since the group formed. After formation of the group, X Co acquires beneficial ownership of all of the membership interests in N Co, and N Co becomes a wholly-owned subsidiary of X Co. N Co meets all of the income tax treatment and Australian residence requirements to be a subsidiary member of the consolidated group.", "Reasons_for_Decision": "Summary: For an entity to be a subsidiary member of a consolidated group at any particular time the requirements set out in item 2 of the table in subsection 703-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997) must be met. For MEC groups the requirements are set out in section 719-5 of the ITAA 1997 and section 719-10 of the ITAA 1997. Where there are one or more foreign resident entities interposed between the entity and the head company the requirements in section 701C-10 of the IT(TP)A 1997 (for companies), or section 701C-15 of the IT(TP)A 1997 (for trusts and partnerships), must be met. Subsection 701C-10(8) of the IT(TP)A 1997 is a timing requirement for existing consolidated groups and MEC groups, and provides that where the entity is a company that is directly held, all or in part, by a foreign resident entity of a kind described in paragraph 701C-10(8)(c) of the IT(TP)A 1997 (or a nominee of such an entity) it must have been a subsidiary member continuously since the group formed, and it must have been at least partly held by a foreign resident entity of that kind (or a nominee of such an entity) at the formation time. As subsection 701C-10(8) of the IT(TP)A 1997 can only apply to a company in which a foreign resident entity of the type described in paragraph 701C-10(8)(c) of the IT(TP)A 1997 (or a nominee of such an entity) holds an interest, it cannot apply to a company in which all of the membership interests become directly held by members of the consolidated or MEC group, including TFHS members of the group, because the members of the group are all Australian residents. Because no foreign resident entity holds a membership interest in N Co, subsection 701C-10(8) of the IT(TP)A 1997 does not apply to prevent N Co becoming a subsidiary member. N Co is a wholly-owned subsidiary of the head company, satisfies all of the income tax treatment and Australian residence requirements, and meets all of the other requirements of section 701C-10 of the IT(TP)A 1997. N Co therefore becomes a subsidiary member of the consolidated group, as a transitional foreign-held indirect subsidiary, when X Co acquires it.", "Date_of_Decision": "11 February 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 item 2 of the table in subsection 703-15(2) section 719-5 section 719-10", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2005/40 | Taxation Determination TD 2005/44", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidated group Consolidation Consolidation - membership Consolidation - multiple entry consolidated group Member of a group Subsidiary member of a consolidated group Subsidiary member of a MEC group Transitional foreign-held indirect subsidiaries Transitional foreign-held subsidiaries Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200833", "Unmatched_Content": "This ATO ID has been amended to improve clarity. | Related Public Rulings (including Determinations) Taxation Determination TD 2005/40 Taxation Determination TD 2005/44 | Keywords Consolidated group Consolidation Consolidation - membership Consolidation - multiple entry consolidated group Member of a group Subsidiary member of a consolidated group Subsidiary member of a MEC group Transitional foreign-held indirect subsidiaries Transitional foreign-held subsidiaries Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2007/64", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: life insurance - head company treated as a life insurance company", "Issue": "Does section 713-505 of the Income Tax Assessment Act 1997 (ITAA 1997) treat the head company as if it were a life insurance company for the purpose of granting it access to Division 9AA of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Section 713-505 of the ITAA 1997 does not treat the head company as if it were a life insurance company for the purpose of granting it access to Division 9AA of the ITAA 1936.", "Facts": "Head Co was registered as a friendly society for a period which included the day 9 May 1995. On 1 July 1999 Head Co was a life insurance company. Head Co's life insurance business was subsequently transferred to Life Insurance Ltd. As a result, Head Co terminated its life insurance registration under the Life Insurance Act 1995 (Life Act). Head Co is the head company of a consolidated group of which Life Insurance Ltd is a subsidiary member. Life Insurance Ltd is a life insurance company registered under the Life Act. Head Co does not have capital divided into shares held by its members. Head Co proposes to demutualise.", "Reasons_for_Decision": "Summary: Division 9AA of the ITAA 1936 provides a framework for the taxation consequences of certain transactions associated with the demutualisation of insurance companies and affiliated companies (see Chapter 5 of the Explanatory Memorandum to the Taxation Laws Amendment Bill (No.4) of 1995 (Cth)). Division 9AA of the ITAA 1936 applies to a mutual insurance company that is either a life insurance company or a general insurance company. Head Co satisfies the conditions listed in paragraph 121AB(1)(c) of the ITAA 1936. Therefore, provided Head Co is an insurance company on the demutualisation resolution day, the taxation consequences associated with the demutualisation will be determined under Division 9AA of the ITAA 1936. 'Insurance company' is defined in subsection 121AB(2) of the ITAA 1936 as a life insurance company or a general insurance company. A life insurance company is defined in subsection 121AB(3) of the ITAA 1936 as a company registered under the Life Act. Where there is a consolidated group, the single entity rule in subsection 701-1(1) of the ITAA 1997 means that the head company of the consolidated group is the only entity recognised for income tax purposes. The subsidiary members are taken to be parts of the head company for those purposes. Subdivision 713-L of the ITAA 1997 sets out special rules for a head company of a consolidated group where a life insurance company is a subsidiary member of the group (see section 713-500 of the ITAA 1997). Specifically, section 713-505 of the ITAA 1997 states that: This Act, and the Income Tax Rates Act 1986, apply to the *head company of a *consolidated group as if it were a *life insurance company for an income year if one or more life insurance companies are *subsidiary members of the group at any time during that year. * denotes a term defined subsection 995-1(1) of the ITAA 1997 The aim of the provision is to ensure that the special provisions in the income tax law that apply to life insurance companies apply appropriately to the head company of a consolidated group that has one or more subsidiary members that are life insurance companies. The context of the amendments to the Consolidation rules in Part 3-90 of the ITAA 1997 and which included the enactment of section 713-505 of the ITAA 1997 is described in paragraph 1.3 of the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.2) of 2002 (Cth) (The EM): The income tax law contains special provisions for taxing life insurance companies. Those provisions need to apply appropriately to the head companies of consolidated groups that have life insurance company members. The EM (at paragraph 1.4) makes particular reference to Division 320 of the ITAA 1997, whose stated object in subsection 320-5(1) of the ITAA 1997 is: ...to provide for the taxation of *life insurance companies in a broadly comparable way to other entities that derive similar kinds of income. The EM further elaborates on the context of section 713-505 of the ITAA 1997 at paragraph 1.6 as follows: Division 320, which is complemented by special provisions in other parts of the income tax law, ensures that the different types of business of life insurance companies is taxed consistently with income derived on similar types of business carried on by other entities. Division 9AA of the ITAA 1936 is not listed in the examples provided in the EM of situations where the head company will be treated as a life insurance company. This leaves open the question of whether Division 9AA was intended to be accessed by a head company of a consolidated group that has one or more subsidiary members that are life insurance companies. The expression 'as if' contained in section 713-505 of the ITAA 1997, is a variant of the expression 'deemed' and is interpreted in the same manner. (Pearce, DC & Geddes, RS 2006, Statutory Interpretation in Australia , 6 th ed, LexisNexis Butterworths, Chatswood, at p. 149). This deeming rule in section 713-505 of the ITAA 1997 provides that the income tax laws are to apply to the head company as if the head company was a 'life insurance company' but does not expressly deem these laws to apply to the head company as if it was a 'mutual insurance company'. The issue which arises is whether the deeming rule in section 713-505 can be extended by implication into the definition of a 'mutual insurance company' (as defined in subsection 121AB(1) of the ITAA 1936). Griffith CJ in Muller v. Dalgety & Co Ltd (1909) 9 CLR 693 at 696 stated: The word \"deemed\" may be used in either sense, but it is more commonly used for the purpose of creating what James LJ and Lord Cairns LC called a \"statutory fiction\"...that is, for the purpose of extending the meaning of some term to a subject matter which it does not properly designate. When used in that sense it becomes very important to consider the purpose for which the statutory fiction is introduced. In Commissioner of Taxation v. Comber (1986) 10 FCR 88; 86 ATC 4171; (1986) 17 ATR 413, the Full Federal Court applied this principle in holding that section 109 of the ITAA 1936, which deemed a director's retiring allowance to be a dividend paid by a company, did not extend to giving the payment the qualities of being paid to a shareholder, and paid out of profits, so as to make the amount assessable under section 44 of the ITAA 1936. Fisher J stated: ...deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to...It is improper in my view to extend by implication the express application of such a statutory fiction. It is even more improper so to do if such an extension is unnecessary, the express provision being capable by itself of sensible and rational application. Section 713-505 of the ITAA 1997 has a sensible and rational application without its application being extended into the definition of a 'mutual insurance company' because it facilitates the appropriate taxation of consolidated groups that conduct life insurance businesses. The legislative scheme of section 121AB of the ITAA 1936 requires that the definition be satisfied by an 'insurance company' as defined in subsections 121AB(2) and 121AB(3) of the ITAA 1936 and not by conjoining section 713-505 of the ITAA 1997 and section 121AB of the ITAA 1936. Section 713-505 of the ITAA 1997 does not treat a head company as if it were a life insurance company for the purposes of determining the taxation consequences to its members in the event of a demutualisation. That is, section 713-505 of the ITAA 1997 does not operate to deem Head Co to be a life insurance company for the purposes of Division 9AA of the ITAA 1936. Head Co retains its identity as a non-insurance mutual entity. Section 713-505 of the ITAA 1997 merely treats Head Co as if it were a life insurance company for the purpose of ensuring that the special provisions for taxing Life Insurance Ltd (being the company registered under the Life Act) apply appropriately to Head Co. Section 713-505 of the ITAA 1997 does not operate to confer on Head Co registration under the Life Act (as required under Division 9AA of the ITAA 1936). Therefore, Division 9AA of the ITAA 1936 will not apply in the event of a demutualisation of Head Co.", "Date_of_Decision": "13 March 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 320 subsection 320-5(1) Part 3-90 subsection 701-1(1) Subdivision 713-L section 713-500 section 713-505 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT demutualisation Consolidation Head company Life insurance company Single entity rule", "Case_References": "Muller v. Dalgety & Co Ltd (1909) 9 CLR 693", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.2) of 2002 (Cth) Explanatory Memorandum to the Taxation Laws Amendment Bill (No.4) of 1995 (Cth) Pearce, DC & Geddes, RS 2006, Statutory Interpretation in Australia 6th ed, LexisNexis Butterworths, Chatswood", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200764", "Unmatched_Content": "This ATO ID has been amended to improve clarity. | Keywords CGT demutualisation Consolidation Head company Life insurance company Single entity rule"}
{"ATO_ID_Number": "ATO ID 2006/100", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: membership - restructure of membership interests supporting components of life insurance business", "Issue": "The head company of a consolidated group is treated as a life insurance company. The consolidated group includes two subsidiaries that are unit trusts. The first unit trust is held under the virtual PST of the head company. The underlying assets of this unit trust are segregated to support virtual PST life insurance policy liabilities. The underlying assets of the second unit trust are not segregated and form part of the ordinary assets of the head company. That unit trust can be said to be held under the 'ordinary component' of the head company.", "Decision": "", "Facts": "Head Co is the head company of a consolidated group. Under subsection 713-505 of the ITAA 1997, Head Co is treated as a life insurance company for the purposes of applying the income tax law. Investment policies are issued to trustees of superannuation funds and to ordinary (non-superannuation) policyholders. The assets supporting these policies are held through two subsidiary member unit trusts: It is proposed to issue an additional unit from each unit trust to other 'component' of Head Co for market value, namely:", "Reasons_for_Decision": "Summary: Section 713-510 of the ITAA 1997 modifies the membership rules contained in Division 703 of the ITAA 1997 where a consolidated group has a member that is a life insurance company. Subsection 713-510(2) of the ITAA 1997 provides that: an entity cannot continue to be a *subsidiary member of a *consolidated group of which a *life insurance company is a *member if: (a) the *life insurance company owns, either directly or indirectly through one or more interposed entities, all the *membership interests in the entity and, had the entity not been a subsidiary member of the group, either: (i) some, but not all of the membership interests described in subsection (3) (the key interests ) would be *virtual PST assets of the life insurance company; or (ii) some, but not all, of the key interests would be segregated exempt assets of the life insurance company; or In accordance with subsection 713-510(3) of the ITAA 1997: the key interests are the *membership interests the *life insurance company owns directly in: (a) the entity; or (b) an interposed entity. As a consequence of issuing the additional unit by Trust V and by Trust O, some, but not all of the key interests in each unit trust would be virtual PST assets. Therefore, consistent with paragraph 713-510(2)(a) of the ITAA 1997, each trust cannot continue to be a subsidiary member of the consolidated group. The unit trusts will cease to be subsidiary members of the consolidated group.", "Date_of_Decision": "30 March 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 320 Division 703 section 713-505 section 713-510 subsection 713-510(2) paragraph 713-510(2)(a) subsection 713-510(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - membership Life insurance company Virtual pooled superannuation trusts Complying superannuation/FSHA asset pool Complying superannuation/FSHA asset Complying superannuation/FSHA liabilities Complying superannuation/FSHA life insurance policy", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006100", "Unmatched_Content": "The terms 'virtual PST', 'virtual PST asset' and 'virtual PST life insurance policy' were repealed by First Home Saver Accounts (Consequential Amendment) Act 2008, effective 26 June 2008. They were replaced by the terms 'complying superannuation/FSHA asset pool' 'complying superannuation/FSHA asset' and 'complying superannuation/FSHA life insurance policy' respectively. From this date, references to 'virtual PST life insurance policy liabilities' in the following document can also be replaced with the term 'complying superannuation/FSHA liabilities'. | * denotes a term defined in section 995-1 of the ITAA 1997. | Keywords Consolidation Consolidation - membership Life insurance company Virtual pooled superannuation trusts Complying superannuation/FSHA asset pool Complying superannuation/FSHA asset Complying superannuation/FSHA liabilities Complying superannuation/FSHA life insurance policy"}
{"ATO_ID_Number": "ATO ID 2006/206", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Public trading trust - choice to form a consolidated group", "Issue": "Can a public trading trust (PTT) choose to form a consolidated group under section 713-130 of the Income Tax Assessment Act 1997 (ITAA 1997) on the day it acquires its first wholly-owned subsidiaries during its income year, where that day is not the first day of that income year?", "Decision": "No. A PTT can only make an effective choice to form a consolidated group where the requirements of both paragraph 713-130(a) (the trust must wholly-own at least one subsidiary member) and paragraph 713-130(b) (the choice must be made on the first day of the PTT's income year) of the ITAA 1997 are satisfied.", "Facts": "PT Trust is a public trading trust for the purposes of Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to an income year. PT Trust acquired the membership interests in its first wholly-owned subsidiary partway through that income year.", "Reasons_for_Decision": "Summary: Section 713-130 of the ITAA 1997 allows corporate unit trusts (CUT) and PTTs to form a consolidated group provided certain conditions are met. Specifically the provision states that: A trust may make a choice under section 703-50 (Choice to consolidate a consolidatable group), as if the trust were a company (the assumed company ), but only if: (a) the assumed company could make the choice, if it beneficially owned the *membership interests in other entities that are legally owned by the trustee; and (b) the day specified in the choice is the first day of an income year for which the trust is a *corporate unit trust or a *public trading trust. * denotes a term defined in section 995-1 of the ITAA 1997 Paragraph 713-130(a) of the ITAA 1997 requires that the PTT (or CUT) must be able to consolidate, that is, it must be a head company of a consolidatable group'. This requires the PTT to wholly-own the membership interests in at least one subsidiary entity. The definition of 'wholly-owned subsidiary' in subsection 703-30(1) of the ITAA 1997 requires the membership interests in the subsidiary entity to be beneficially owned by the PTT. As the unit holders have a proprietary interest in the underlying assets of the PTT, the trustee owns the assets legally, but not beneficially (see Charles v. Federal Commissioner of Taxation (1954) 90 CLR 598; (1954) 10 ATD 328. To overcome this, paragraph 713-130(a) makes the assumption that the PTT beneficially owns the membership interests in the subsidiary entity that are legally owned by the trustee. Paragraph 713-130(b) of the ITAA 1997 contains a further requirement, that only allows the choice to be made on the first day of the income year for which the trust is a PTT. The Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 2) Bill 2004 (the EM) clarifies the meaning of paragraph 713-130(b) at paragraph 2.30 which states: The amendment comes into effect from the commencement of the consolidation regime (i.e. 1 July 2002) [ Schedule 2, Part 1, item 1 ]. However, the date of effect of making this choice is the first day of a CUT or PTT's income year [ Schedule 2, Part 2, item 2, paragraph 713-130(b) ]. This does not mean it must be the first income year in which an entity becomes a CUT or a PTT. It means the election does not have effect unless the day specified in the choice is the first day of a CUT or a PTT's income year. [Emphasis added] Both the conditions provided in paragraph 713-130(a) and (b) must be satisfied on the day specified if PT Trust's choice to form a consolidated group is to be effective. PT Trust qualifies as a PTT at the beginning of the income year in which it acquired its first subsidiary entities. However, it did not hold the membership interests in those subsidiary entities on the first day of that income year. Consequently, PT Trust does not satisfy the requirements of paragraph 713-130(a) on the first day of that income year in which it becomes part of a consolidatable group. The first day where both paragraphs 713-130(a) and (b) are satisfied will be the first day of PT Trust's subsequent income year. Consequently, this must be the day specified in the choice to consolidate in order for PT Trust's choice to be effective.", "Date_of_Decision": "13 July 2006", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 703-50 section 713-130 paragraph 713-130(a) paragraph 713-130(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidatable group Consolidated group Consolidation Consolidation - formation Formation time Public trading trusts", "Case_References": "Charles v. Federal Commissioner of Taxation (1954) 90 CLR 598 (1954) 10 ATD 328", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2004 Measures No. 2) Bill 2004 - paragraph 2.30", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006206", "Unmatched_Content": "Keywords Consolidatable group Consolidated group Consolidation Consolidation - formation Formation time Public trading trusts"}
{"ATO_ID_Number": "ATO ID 2006/325", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidated Group: mutuality principle", "Issue": "Where mutuality applies to the head entity of a consolidated group, are insurance premiums received by an insurance company which is a member of that group, but not itself a mutual entity, mutual receipts?", "Decision": "No. The insurance premiums are not mutual receipts.", "Facts": "Head Co is the head company of a consolidated group of which Insurance Ltd is a member. Head Co is an unlisted public company which is limited by guarantee. It does not have shareholders and its members are a particular industry group. Head Co claims it is an entity to which the principle of mutuality has applied. Insurance Ltd is a licensed insurer incorporated overseas but has its central management and control in Australia and is a general insurance company for the purposes of Division 321 of Schedule 2J of the Income Tax Assessment Act 1936 (ITAA 1936). It is a company limited by shares 100% owned by Head Co. Insurance Ltd sells professional indemnity insurance to both members and non-members of Head Co. The approximate proportion of policyholders that are members and non-members is 75% to 25%.", "Reasons_for_Decision": "Summary: One of the primary indicia of mutual receipts is whether they are included in the common fund of the entity and subject to the reasonable relationship principle. Insurance Ltd's premiums were received under insurance contracts. As this is a commercial arrangement the receipt of the premiums is not attributable to the membership interests in a common fund, the premiums are not mutual receipts. The decision of the High Court of Australia in Sydney Water Board Employees' Credit Union Ltd v. Federal Commissioner of Taxation (1973) 129 CLR 446; 73 ATC 4129; (1973) 4 ATR 157 (the Sydney Water Board Case ) provides the authority for this conclusion. In this case the taxpayer contended that the mutuality principle applied where interest paid to it by members on moneys borrowed from the taxpayer, was not assessable income in its hands. The company's rules indicated that any surplus resulting from the taxpayer's operations or any rebate of interest paid during a financial year shall only be made to members who had obtained loans from the company. Having regard to the relationship which existed between taxpayer and its borrowing members and the nature of the transactions, it was apparent that the mutuality principle had no application. The taxpayer lent money to members under individual contracts of loan by which the borrowers were bound to pay the stipulated interest to taxpayer for its benefit. The taxpayer borrowed money from its members under individual contracts of loan by which it was bound to pay interest to them. The Sydney Water Board Case provides support for the view that where there is insufficient identity between contributors and participators in a distribution of surplus, the mutuality principle will not apply. Also, the distribution of surplus in this case resulted from the taxpayer's use of its general funds and did not constitute payment from a common fund. Although Head Co is a mutual entity the insurance business of Insurance Ltd is not part of Head Co members' common fund. The surplus of funds from Insurance Ltd arises from the contractual relationship between Insurance Ltd and its policy holders rather than the reasonable relationship between Head Co and its members. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Schedule 2J of the ITAA 1936 should be read as referring to Division 321 of the ITAA 1997.", "Date_of_Decision": "24 November 2006", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 Division 321 section 321-45 section 701-1", "Related_Public_Rulings_and_Determinations": "TR 2004/5 | TR 2004/11 | TD 1999/38 | TD 93/194", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation General insurance Insurance income Member of a group Mutuality principle Professional indemnity insurance Single entity rule", "Case_References": "Sydney Water Board Employees Credit Union Ltd v. Federal Commissioner of Taxation (1973) 129 CLR 446 73 ATC 4129 (1973) 4 ATR 157", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill 2002 Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006325", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Related Public Rulings (including Determinations) TR 2004/5 TR 2004/11 TD 1999/38 TD 93/194 | Keywords Consolidation General insurance Insurance income Member of a group Mutuality principle Professional indemnity insurance Single entity rule"}
{"ATO_ID_Number": "ATO ID 2005/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: meaning of a day for purposes of Part 3-90 of the ITAA 1997", "Issue": "Must an eligible subsidiary member of a consolidatable group close its current financial year at midnight on the day prior to the day from which the head company's choice to consolidate becomes effective?", "Decision": "Yes. The word 'day' takes its ordinary meaning as it is not defined in the Income Tax Assessment Act 1997 (ITAA 1997) or in the Acts Interpretation Act 1901(Cth) . In this instance, the eligible subsidiary's day cannot be said to have ended if trading and other transactions are being carried on. Accordingly, the eligible subsidiary member's income tax return for the year preceding consolidation must include all transactions up until midnight on the day before consolidation occurs. The administrative convenience, in which an earlier closing of a company's financial year, is not acceptable in this instance.", "Facts": "Prior to 1 July Company B has been a 100% wholly-owned subsidiary of Company A. Company A chooses to consolidate with effect from 1 July of the income year. Company B becomes a subsidiary member of the consolidated group for income tax purposes from the date the choice takes effect. Company B trades 24 hours per day, 7 days per week. For income tax purposes, Company B regularly closed its books at 4:00pm on 30 June each year. It commenced its new financial year immediately after the closure of its books for each preceding financial year. Between 4:00pm and 12:00am on the 30th June prior to the consolidation group forming, Company B earned a significant amount of assessable income, and incurred no deductions. Company A closes its books at midnight on 30 June each financial year. It commences its new financial year from midnight, immediately after the closure of its books for the preceding financial year.", "Reasons_for_Decision": "Summary: The word 'day' is not defined in: Consequently, the word day must be given its ordinary meaning. In a business and commercial context, the word 'day' is generally regarded as meaning a civil day, which is the 24 hour period from midnight to midnight. In some situations, a civil day may be regarded as a different 24 hour period, for example, where businesses or individuals cease trading, employment or their income earning activities prior to midnight on an ongoing basis. For the purposes of making a choice to consolidate under section 703-50 of the ITAA 1997, the day referred to in the choice reflects the civil day of the head company (normally regarded as the 24 hour period from midnight to midnight). Thus, company A's choice to consolidate takes effect from midnight in the morning of 1 July. Prior to the choice becoming effective, each subsidiary member of a consolidatable group is responsible for managing its own income tax affairs, and lodging its own income tax returns. Company B is therefore responsible for lodging its own income tax return for the income year immediately prior to the choice taking effect. Section 995-1 of the ITAA 1997 defines an income year as: income year: the basic meaning is given by subsections 4-10(2) and 9-5(2). Some provisions refer to a particular income year. (They may describe it in different ways: for example, as the income year ending on 30 June 1998, or the 1997-98 income year.) For an entity that adopts an accounting period in place of the particular income year, the reference includes: (a) the adopted accounting period; or (b) if the adopted accounting period ends under section 18A of the Income Tax Assessment Act 1936: (i) in relation to the commencing of the income year - the adopted accounting period (as ending under that section); or (ii) in relation to the ending of the income year - the accounting period ending under that section on the day on which the adopted accounting period would (but for that section) have ended. Subsection 4-10(2) of the ITAA 1997 states: Your income tax is worked out by reference to your taxable income for the income year. The income year is the same as the *financial year, except in these cases: for a company, the income year is the previous financial year; if you have an accounting period that is not the same as the financial year, each such accounting period or, for a company, each previous accounting period is an income year. Subsection 9-5(2) of the ITAA 1997 provides a similar definition of an income year. Section 995-1 of the ITAA 1997 defines 'financial year' as follows: financial year means a period of 12 months beginning on 1 July. Paragraph 22(1)(e) of the Acts Interpretation Act 1901 provides a similar definition: financial year means a period of 12 months commencing on 1 July. For the purposes of these definitions, the day of '1 July' is the civil day. That is, the 24 hour period from midnight to midnight on 1 July. Company B's commercial practice was to treat its civil day for income tax purposes as the 24 hour period from 4:00pm to 4:00pm, and thus its income year as ending at 4:00pm on 30 June, with a new income year commencing from 4:00pm on the same day. However, the use of the administrative convenience on the last day of company B's income year prior to consolidation is unacceptable as it conflicts with the requirement for company B to lodge a return disclosing all of the income it has earned during the income year - which includes the time from 4:00pm to midnight on 30 June.", "Date_of_Decision": "16 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 18 section 18A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1180", "Subject_References": "Consolidation Consolidation - continuity of ownership test Consolidation - exiting Consolidation - formation Consolidation - membership Consolidation - tax liabilities Effect of an Australian law Formation time Leaving time Measurement days Member of a group Non-membership period Working days", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200563", "Unmatched_Content": "Note 1: The Commissioner can allow you to adopt an accounting period ending on a day other that 30 June. See section 18 of the ITAA 1936. | Note 2: An accounting period ends, and a new accounting period starts, when a partnership becomes, or ceases to be, a VCLP, an AFOF or a VCMP. See section 18A of the ITAA 1936. | Keywords Consolidation Consolidation - continuity of ownership test Consolidation - exiting Consolidation - formation Consolidation - membership Consolidation - tax liabilities Effect of an Australian law Formation time Leaving time Measurement days Member of a group Non-membership period Working days"}
{"ATO_ID_Number": "ATO ID 2005/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Membership and Discretionary Trusts", "Issue": "If a trust is settled pursuant to a Deed that permits the trustee to add and remove persons to a defined class of objects, will that trust be eligible to be a member of a consolidated group as provided in item 2 of paragraph 703-15(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A trust settled pursuant to a Deed that permits the trustee to add and remove persons to a defined class of objects will be eligible to be a member of the consolidated group as provided in item 2 of paragraph 703-15(2)(b) of the ITAA 1997.", "Facts": "A trust is settled pursuant to a Deed. The trustee is a resident of Australia for the purposes of that definition in section 6 of the Income Tax Assessment Act 1936 (ITAA 1936). None of the conditions in item 7 of subsection 703-20 of the ITAA 1997 exist in relation to that trust. The trust Deed identifies classes of objects from whom the trustee may nominate to benefit under the trust Deed. The trustee has only nominated members of a consolidated group. The trust Deed confers power on the trustee to add or remove objects from the pre-existing classes of objects.", "Reasons_for_Decision": "Summary: Section 703-15 of the ITAA 1997 defines the entities capable of being a member of either a consolidated or consolidatable group. For a trust to be a wholly-owned subsidiary of a consolidated group all the membership interests in the trust must be beneficially owned by either the holding entity, and/or one or more wholly-owned subsidiaries of the holding entity. Subsection 960-130(1) of the ITAA 1997 stipulates that a member of a trust is any beneficiary, unit holder or object of the trust. Section 960-135 of the ITAA 1997 states that a membership interest is: by virtue of which you are a member of the entity. The United Kingdom Court of Chancery Division decision in Re Manisty's Settlement [1973] 2 All ER 1203 held that a power conferred on a trustee to add members to an pre-existing class of objects was valid. Conferring a power on a trustee to nominate any person as an object of a trust, will not result in the conferral of 'interests' or 'rights' on a broad range of persons. This view is confirmed by the New South Wales Supreme Court of Appeal decision in Hartigan Nominees Pty Ltd v. Rydge (1992) 29 NSWLR 405, where at 425 Mahoney J A states: As I have indicated, a class of possible beneficiaries under a discretionary trust may be wide and may be capable, as in this case, of significant extension. I doubt that it is the duty of a trustee to seek out such persons and inform them of the possibility that, in certain circumstances, they may acquire rights under the trust. I do not think that, for example, where property may be appointed among a group of employees, past, present and future, of a company, the trustee has a duty to seek out and convey information of this kind. For the purposes of section 960-135 of the ITAA 1997, the mere existence of a power to extend a pre-existing class of objects of a trust will not confer any rights on persons outside of that class, who may at some future point in time be added to that class via the powers conferred on the trustee(s). Therefore, a trust settled pursuant to a Deed that permits the trustee to add and remove persons to a defined class of objects will be eligible to be a member of the consolidated group as provided in item 2 of paragraph 703-15(2)(b) of the ITAA 1997.", "Date_of_Decision": "3 November 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 6", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - formation Consolidation - membership Wholly owned trusts", "Case_References": "Re Manisty's Settlement Trusts [1973] 2 All ER 1203", "Other_References": "R P Meagher, W M C Gummow and J R F Lehane, Equity: Doctrines and Remedies, 3rd ed., Butterworths, Sydney, 1992. D Barnett, The nature of a beneficiary's interest in the assets of an express trust, (2004) 10 Australian Property Law Journal Consolidation Reference Manual, Part C1-1: Eligibility tests and rules", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200574", "Unmatched_Content": "Keywords Consolidation Consolidation - formation Consolidation - membership Wholly owned trusts"}
{"ATO_ID_Number": "ATO ID 2005/214", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: subsidiary member", "Issue": "Will the beneficial ownership timing rule set out in section 703-33 of the Income Tax Assessment Act 1997 (ITAA 1997) be prevented from applying where the seller and the buyer of shares in a company first became associates of one another at the 'transfer time'?", "Decision": "No. The beneficial ownership timing rule will not be prevented from applying because the seller and the buyer of shares in a company are not associates of one another during the period referred to in paragraph 703-33(1)(d) of the ITAA 1997.", "Facts": "HCo is the head company of a consolidated group. XCo, which is not a member of the HCo consolidated group, beneficially owned all of the shares issued by SubCo. XCo sold all of its SubCo shares to HCo by way of a contract. At settlement XCo stopped being entitled to be registered as the holder of the shares in SubCo and HCo became entitled to be registered as the holder of those shares. Under the terms of the contract HCo paid XCo consideration for the SubCo shares by way of issuing shares in itself to XCo at settlement. The number of shares that HCo issued to XCo was sufficient for HCo to commence to be an associate of XCo in terms of section 318 of the Income Tax Assessment Act 1936 from that time.", "Reasons_for_Decision": "Summary: Section 703-33 of the ITAA 1997 is a provision which provides a timing overlay to section 703-30 of the ITAA 1997 in certain circumstances. One of the requirements which needs to be satisfied for the timing rule to apply is set out in paragraph 703-33(1)(d) of the ITAA 1997. This provision requires that: Although HCo and XCo were associates of one another from the transfer time, they were not associates of one another during the period starting when the contract was entered into and ending at the transfer time. The requirement that the seller and buyer not be associates, as well as the requirement in paragraph 703-33(1)(c) of the ITAA 1997 that they deal with each other at arms length in relation to the contract, is a limitation to protect against collusion. In this regard paragraph 12.18 of the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures Bill (No. 2) 2002 (EM) states: Further, the timing rule will only apply to dealings at arm's length between parties that are not associates. This limitation protects against collusion between vendor and purchaser to effect a joining or leaving time that is not in accordance with the true transfer of ownership for other purposes. (Emphasis added) In the example above, transfer time was at the same time that settlement occurred. XCo had no influence over HCo until it acquired its interest in HCo which also occurred at transfer time. The associate relationship between HCo and XCo only arose 'as a result' of settlement of the contract at transfer time. Irrespective of the words of the EM it is evident from a reading of the provisions that section 703-33 of the ITAA 1997 is only intended to be prevented from applying where the associate relationship arises prior to the transfer time. This is clearly the case because the provision is directed at determining the transfer time. Accordingly, while XCo and HCo were associates of one another 'from' the transfer time they were not associates of one another 'during the period' starting when the contract was entered into and 'ending at the transfer time'. This being the case, the beneficial ownership timing rule will not be prevented from applying because the seller and the buyer of shares in a company are not associates of one another during the period referred to in paragraph 703-33(1)(d) of the ITAA 1997.", "Date_of_Decision": "7 July 2005", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 703-30 section 703-33 paragraph 703-33(1)(c) paragraph 703-33(1)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/619", "Subject_References": "Acquisition of shares Associate Consolidation Consolidation - membership Member of a group Shares Subsidiary member of a consolidatable group Subsidiary member of a consolidated group Wholly owned Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005214", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2005/5 | Keywords Acquisition of shares Associate Consolidation Consolidation - membership Member of a group Shares Subsidiary member of a consolidatable group Subsidiary member of a consolidated group Wholly owned Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2004/354", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - choice to consolidate - cannot amend date specified in effective choice", "Issue": "Where an entity has made a choice to consolidate in accordance with subsection 703-50(1) of the Income Tax Assessment Act 1997 (ITAA 1997), can the date specified in the choice be changed if the group discovers that it was able to consolidate from a date earlier than the date notified to the Commissioner?", "Decision": "No - subsection 703-50(2) of the ITAA 1997 expressly states that the date of consolidation specified in the choice cannot be amended, once a company has notified the Commissioner of an effective choice to form a consolidated group under subsection 703-50(1) of the ITAA 1997.", "Facts": "A head company provided the Commissioner with its choice to form a consolidated group with effect from 1 July 2003. The choice was made in accordance with subsection 703-50(1) of the ITAA 1997. All of the information recorded in the notice is correct. That is, it contains everything required to be included in the approved form, accurately identifies all the members of the group and accurately reflects the decision of the head company's directors to consolidate from 1 July 2003. Since making the choice, the head company has discovered that the group was in fact eligible to consolidate from an earlier date than that specified in the choice provided to the Commissioner. The head company wishes to change the date of effect to that earlier date.", "Reasons_for_Decision": "Summary: Subsection 703-50(1) of the ITAA 1997 sets out the conditions for making a choice to consolidate: Subsection 703-50(2) of the ITAA 1997 provides that the date of effect specified in the choice cannot be amended once an effective choice to consolidate has been made in accordance with subsection 703-50(1) of the ITAA 1997. Where a choice to consolidate has been made in accordance with subsection 703-50(1) of the ITAA 1997 but the Commissioner is satisfied that the choice contains information that is incorrect in a material particular, the combined effect of subsections 703-50(5) and (6) of the ITAA 1997 is that the choice has no effect unless the Commissioner gives the company written notice that the choice is effective. However, the Commissioner is not able to give effect under subsection 703-50(6) to a notice which does not satisfy the conditions of subsection 703-50(1) of the ITAA 1997. In this case, the head company has made the choice to consolidate in accordance with subsection 703-50(1) of the ITAA 1997. That is, the choice contained everything required in the approved form and correctly identified all members of the consolidated group. Further, the Commissioner is satisfied that, even though a consolidatable group existed at an earlier date, the choice contains no materially incorrect information because it accurately reflects the decision of the head company's directors to consolidate from 1 July 2003. Accordingly, the head company is bound by its choice to consolidate with effect from 1 July 2003.", "Date_of_Decision": "18 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 703-50(1) subsection 703-50(2) subsection 703-50(3) subsection 703-50(5) subsection 703-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/356", "Subject_References": "Consolidation - formation Formation time Head Company", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004354", "Unmatched_Content": "A note has been added about the application of amendments to section 703-50 contained in Tax Laws Amendment (2010 Measures No. 1) Act 2010 (No. 56 of 2010)(Schedule 5, Part 18). The note does not change the view expressed in this ATO ID. ATO ID 2004/354 is amended to remove the reference to ATO ID 2004/355, which was withdrawn following the decision in MW McIntosh Pty Ltd v. FC of T (2008) FCA 1949. | Keywords Consolidation - formation Formation time Head Company"}
{"ATO_ID_Number": "ATO ID 2004/356", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - choice to consolidate - choice does not have effect", "Issue": "Can the date specified in a choice to form a consolidated group under section 703-50 of the Income Tax Assessment Act 1997 (ITAA 1997) be changed, if the group was ineligible to consolidate from the original date notified to the Commissioner?", "Decision": "No, the original choice to form a consolidated group would be ineffective.", "Facts": "A company provided the Commissioner with its choice to form a consolidated group with effect from 1 July 2002. It has since been discovered that the group was in fact ineligible to consolidate from the date originally specified in the notice. The head company wishes to change the date of effect to a later date.", "Reasons_for_Decision": "Summary: Subsection 703-50(1) of the ITAA 1997 sets out the conditions for making a choice to consolidate: Where any of the conditions in subsection 703-50(1) of the ITAA 1997 are not satisfied, the choice made by the company will be ineffective. Where a choice to consolidate has been made in accordance with subsection 703-50(1) of the ITAA 1997 but the Commissioner is satisfied that the choice contains information that is incorrect in a material particular, the combined effect of subsections 703-50(5) and (6) of the ITAA 1997 is that the choice has no effect unless the Commissioner gives the company written notice that the choice is effective. However, the Commissioner is not able to give effect under subsection 703-50(6) to a notice which does not satisfy the conditions of subsection 703-50(1) of the ITAA 1997. In nominating 1 July 2002 as the date of effect, the requirements in subsection 703-50 (1) of the ITAA 1997 were not satisfied because there was no consolidatable group at that time.", "Date_of_Decision": "18 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 703-50 subsection 703-50(1) subsection 703-50(3) subsection 703-50(5) subsection 703-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/354", "Subject_References": "Consolidation Consolidation - formation Formation time Head Company", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004356", "Unmatched_Content": "A note has been added about the application of amendments to section 703-50 contained in Tax Laws Amendment (2010 Measures No. 1) Act 2010 (No. 56 of 2010)(Schedule 5, Part 18). The note does not change the view expressed in this ATO ID. This ATO ID has been amended following the decision in MW McIntosh Pty Ltd & Anor v. FC of T (2008) FCA 1949 | Keywords Consolidation Consolidation - formation Formation time Head Company"}
{"ATO_ID_Number": "ATO ID 2004/735", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: testing 'continuing majority-owned entity' status for a demerged entity in a multi-tiered corporate structure", "Issue": "Will C Ltd, whose parent company B Ltd was demerged under Division 125 of the Income Tax Assessment Act 1997 (ITAA 1997) from the A Ltd Group, be a 'continuing majority-owned entity' (CMOE) as defined in subsection 701A-1(1) of the Income Tax Transitional Provisions Act 1997 (IT(TP)A 1997)?", "Decision": "Yes, C Ltd is a CMOE based on the following:", "Facts": "A demerger of B Ltd and its wholly owned subsidiary C Ltd took place from the A Ltd Group after 27 June 2002. The result of the demerger was that immediately after the demerger A Ltd shareholders held all the shares in B Ltd. At all times from 27 June 2002 until the demerger all the shares in C Ltd were owned directly by A Ltd. As part of the demerger, A Ltd firstly sold all the shares in C Ltd to B Ltd, and then A Ltd sold the shares in B Ltd to the shareholders of A Ltd. There has been more than a 50% continuity of ownership of membership interests (measured by the market value of registered shareholders) for the period 27 June 2002 until immediately before the consolidation formation time. This continuity is shown in the A Ltd share register until immediately before the demerger, and in the B Ltd share register from immediately after the demerger until the consolidation formation time.", "Reasons_for_Decision": "Summary: As C Ltd holds trading stock, it is necessary for consolidation asset cost setting purposes for the B Ltd Group to determine whether C Ltd is a CMOE, as defined in subsection 701A-1 of the IT(TP)A 1997. If C Ltd is a CMOE, trading stock held at the date of formation of the consolidated group will be treated as a retained cost base asset under section 701A-5 of the IT(TP)A 1997. If C Ltd is not a CMOE, trading stock will be treated as a reset cost base asset for asset cost setting purposes under Division 705 of the ITAA 1997. A CMOE is an entity for which a person or persons continued to be the majority owners of the entity from the start of 27 June 2002 until the entity became a subsidiary member of a consolidated group (paragraph 701A-(1)(b) of the IT(TP)A 1997). A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity (subsection 701A-1(2) of the IT(TP)A 1997). Subsection 701A-1(2) of the IT(TP)A 1997 refers to beneficial ownership directly or indirectly through interposed entities. A worked example in the Consolidation Reference Manual at C2-4-855 also shows that, in determining whether there was a change in the majority ownership of joining entities after 27 June 2002 to the date an entity becomes a member of a consolidated group, it is necessary to trace the ultimate beneficial owners and ignore any entities interposed between the ultimate beneficial owners and the joining entity. As continuing majority ownership testing requires tracing through to the ultimate beneficial owners, in testing whether C Ltd is a CMOE it is necessary to 'look through' A Ltd (pre demerger) and B Ltd (post demerger) to their ultimate beneficial shareholders. C Ltd will be a CMOE if the ultimate beneficial shareholders of A Ltd (pre demerger) continued to hold more than 50% of the shares of B Ltd (post demerger) until the consolidation formation time. A Ltd and B Ltd have stated that there has been more than 50% continuity of ownership interests (measured by market value of registered shareholders) for the period 27 June 2002 to the consolidation formation time; for A Ltd until immediately before the demerger and for B Ltd immediately after the demerger until the consolidation formation time. It is relevant to note that the B Ltd demerger was structured so that the shareholders in A Ltd (pre demerger) received shares in B Ltd (post demerger) based on their original shareholding proportions, such that each shareholder's proportionate interest in the demerged B Ltd group was the same as their proportionate interest in A Ltd. Therefore, apart from a minor change in ownership of less than 5% between the registered shareholdings of A Ltd and B Ltd resulting from the demerger, the demerger itself should not have caused any change in ownership, at least at the registered shareholder level. As the demerger itself caused the registered shareholdings of A Ltd to change by less than 5% as compared to that of B Ltd, it is unlikely that the ultimate beneficial owners of the shares would have changed by 50% or more as a result of the demerger. So even without proving that there has been continuity of ownership by actually tracing to the ultimate beneficial owners of A Ltd and B Ltd, a conclusion may be made that there has been continuing majority ownership of C Ltd before and after the demerger. The example at C2-4-855 in the Consolidation Reference Manual states that in most cases it will be clear whether or not there has been a change in the majority ultimate beneficial ownership of an entity. By implication, it should normally only be necessary to prove a change in majority ownership where this has clearly occurred. Based on the minor change between A Ltd's and B Ltd's registered ownership due to the demerger, it is likely that there would also have been only a minor change to the ultimate beneficial ownership due to the demerger. As there has been more than 50% continuity of registered share ownership from 27 June 2002 until the demerger and from then until the formation time, it is concluded that C Ltd is a CMOE for the purposes of subsection 701A-1(1) of the IT (TP) Act 1997. Therefore, trading stock held by C Ltd will be a retained cost base asset for the purposes of the tax cost setting rules in Division 705 of the ITAA 1997.", "Date_of_Decision": "16 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax (Transitional Provisions) Act 1997 subsection 701A-1(1) subsection 701A-1(2) subsection 701A-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/452 | ATO ID 2004/197", "Subject_References": "Consolidation - continuity of ownership test Cost setting rules Formation time Joining entity Joining time Minerals as trading stock Retained cost base asset Trading stock", "Case_References": "", "Other_References": "Consolidations Reference Manual C2-4-855", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004735", "Unmatched_Content": "Keywords Consolidation - continuity of ownership test Cost setting rules Formation time Joining entity Joining time Minerals as trading stock Retained cost base asset Trading stock"}
{"ATO_ID_Number": "ATO ID 2012/50", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Part IVA: multiple entry consolidated group - cancel tax benefit", "Issue": "Does Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to cancel the tax benefit obtained by an Australian resident company in respect of the financing cost of an off-shore investment made by an Australian MEC group?", "Decision": "Yes. Part IVA of the ITAA 1936 applies to cancel the tax benefit, being interest incurred and claimed as a deduction under section 25-90 of the Income Tax Assessment Act 1997 (ITAA 1997), obtained by the Australian resident entity.", "Facts": "Prior to the relevant transactions, an international group of companies was controlled by a US resident company, US Head Co which owned US Sub Co amongst other entities. Aust Co was the head entity of a tax consolidated group consisting of four Australian resident entities that operated the US Head Co business in Australia, and wholly owned by US Sub Co through a US resident intermediate holding company. Then, the following transactions and events took place: No income was recognised as having been derived overseas in relation to amounts represented by interest deductions claimed in Australia. The RPS carried a sufficient voting interest of greater than 10% such that the dividends were non-portfolio dividends as defined in section 317 of the ITAA 1936 and therefore non-assessable non-exempt income of the Australian MEC group pursuant to section 23AJ of the ITAA 1936. Aust Co as provisional head entity of the MEC group claimed interest expenses on the Promissory Note pursuant to sections 25-85 and 25-90 of the ITAA 1997. US Head Co at the time it borrowed to purchase US New Co was in a Net Operating Loss (NOL) position for US income tax purposes. The additional annual interest US Head Co incurred in the course of financing its acquisition of US New Co would add to its NOL position. The Australian group was in a tax positive position prior to and throughout the period of investment. The stated purpose for the transfer of US LLC to New Aust Co was to provide commercial benefits arising from the Australian group having greater access to US clients in respect of the business of US New Co. The ownership changes effected by the transaction were said to facilitate this access.", "Reasons_for_Decision": "Summary: For the purposes of considering Part IVA of the ITAA 1936, the following conclusions were made: Had the Scheme not been carried out, ownership of US LLC would not have been transferred to New Aust Co by transferring RPS in US LLC in return for a Promissory Note issued by New Aust Co. The stated commercial purpose of the transfer could have been achieved by simpler means not involving ownership transfers. The dominant purpose of the scheme under section 177D of the ITAA 1936 was concluded to be the obtaining of the tax benefits. Entry into the scheme had no financial impact on US Head Co and its worldwide group of companies aside from the tax savings derived by the Australian part of the group. Since New Aus Co. was a wholly owned subsidiary of US Sub Co, any commercial benefits were economically owned by US Sub Co. and not Aust Co which was merely a sister company. The main purpose of the scheme was to take advantage of the tax capacity of the Australian group to decrease the total amount of the income tax incurred by the international group. This was accomplished by a contrived scheme that generated allowable deductions in Australia without off-setting assessable income being derived in Australia or anywhere else. There was a lack of evidence and credibility concerning the commercial benefits said to arise from the scheme as compared to the tax benefits. Accordingly, Part IVA of the ITAA 1936 applies to cancel the tax benefit obtained by an Australian resident company in respect of the financing cost of an off-shore investment.", "Date_of_Decision": "1 June 2012", "Year_of_Income": "Year ended 31 December 2005 Year ended 31 December 2006 Year ended 31 December 2007 Year ended 31 December 2008 Year ended 31 December 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 177A(1) subparagraph 177C(1)(b) section 177D section 317", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interest expense Part IVA Tax benefits under tax avoidance schemes Redeemable preference shares Consolidation - multiple entry consolidated group", "Case_References": "", "Other_References": "", "Business_Line": "Tax Counsel Network", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201250", "Unmatched_Content": "Keywords Interest expense Part IVA Tax benefits under tax avoidance schemes Redeemable preference shares Consolidation - multiple entry consolidated group"}
{"ATO_ID_Number": "ATO ID 2011/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: meaning of sole or predominant currency in which you keep your 'accounts'", "Issue": "Can Austco-1, as head company of a tax consolidated group choose the United States Dollars (USD) as its 'applicable functional currency' under Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997) when more than 50% of the 'accounts' of all the members of the tax consolidated group are kept in Australian Dollars AUD but the 'accounts' kept in USD account for a majority of the net profit made by the Austco tax consolidated group?", "Decision": "No. Austco-1, as head company of a tax consolidated group cannot choose the USD as its 'applicable functional currency' under Subdivision 960-D of the ITAA 1997 when more than 50% of the 'accounts' of all the members of the tax consolidated group are kept in AUD but the 'accounts' kept in USD account for a majority of the net profit made by the Austco tax consolidated group.", "Facts": "The Austco tax consolidated group is a Multiple Entry Consolidated (MEC) group with two entry points into Australia. Austco-1 and Austco-2 are the two eligible tier-1 companies in the Austco tax consolidated MEC group. Austco-1 is the provisional head company of the Austco tax consolidated MEC group. Austco-1 changed its functional currency (the currency of the primary environment in which the entity operates) from AUD to USD for Australian Statutory Accounts purposes in accordance with paragraphs 9 to 13 of Australian Accounting Standard AASB 121. As a result, entries are made and transactions are recorded in the accounts of Austco-1 in USD. Austco-2 continues to keep its accounts in AUD for Australian Statutory Accounts purposes in accordance with Australian Accounting Standard AASB 121. Thus, accounts are kept in a mixture of USD and AUD across the Austco tax consolidated group. The number of accounts kept in AUD is approximately 60% of the total accounts used in the Austco tax consolidated group, while the remaining 40% of the total accounts used in the Austco tax consolidated group are kept in USD. Hence, the predominant currency in which the transactions of the Austco tax consolidated group are recorded is AUD. However, the accounts kept in USD account for the largest transactions in monetary terms and the majority of the net profit made by the Austco tax consolidated group.", "Reasons_for_Decision": "Summary: Under item 1 of the table in subsection 960-60(1) of the ITAA 1997, an Australian resident who is required to prepare financial reports under section 292 of the Corporations Act 2001 may choose to use the 'applicable functional currency'. For an Australian resident making a choice under item 1 of the table in subsection 960-60(1) of the ITAA 1997, the 'applicable functional currency' is defined in subsection 960-70(1) of the ITAA 1997 to be the sole or predominant foreign currency in which they kept their 'accounts' at the time they made the choice. Subsection 960-70(4) of the ITAA 1997 defines 'accounts' to mean: Paragraph 3.54 of the Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No.1) 2003 (EM) notes that: What is the applicable functional currency? 3.54 The applicable functional currency will depend on the factual circumstances surrounding the entity's operations. Broadly, an entity's applicable functional currency is the sole or predominant currency in which its accounts are kept at the time when the choice was made ... This aligns the commercial rationale for accounting in a foreign currency with the use of that currency for income tax purposes. The EM goes on to state at 3.59 that: What are accounts? 3.59 For all entities, the term 'accounts' denotes ledgers, journals, statements of financial performance, profit and loss accounts, balance sheets and statements of financial position and includes statements, reports and notes attached to, or intended to be read, with such items ... These terms are intended to be interpreted broadly and in light of their ordinary commercial connotations. Taxation Determination TD 2006/4 notes at paragraphs 10-13 that: 10. The test of whether or not a particular foreign currency is the predominant one in which an entity keeps its 'accounts' (as defined), is a quantitative one, as it involves an examination of those 'accounts' in terms of the unit of measurement used (see, for example, FC of T v. FH Faulding & Co Ltd (1950) 83 CLR 594)'. 11. In this respect, no one component of those defined as making up these 'accounts' takes on any greater or lesser weight in reaching this conclusion, which is essentially one of fact and degree. For example, if an entity kept a dual ledger system and two sets of journals (that is in both a foreign currency and Australian currency), while its management accounts were kept in a foreign currency - we would accept that, on a quantitative basis, the entity kept its 'accounts' predominantly in a foreign currency. 12. This accords broadly with the meaning given in the Explanatory Memorandum to the Taxation Laws Amendment (Foreign Income) Bill 1990 (EM), to the phrase contained in former subsection 391(2) of Part X of the ITAA 1936, 'a single or predominant currency in which eligible amounts ... are expressed in the accounts ... .' ... The definition of 'accounts' in section 317 of Part X of the ITAA 1936, that applied for this purpose, closely resembles the definition of this term in subsection 960-70(4). 13. At page 297 of the EM it was stated: Whether or not there is a predominant foreign currency is not to be determined by the volume or size of the transactions. Rather, the test will turn on whether or not there is a particular foreign currency used for the basic record keeping of the CFC. The commercial rationale mentioned in paragraph 3.54 of the EM is contained in Accounting Standard AASB 121 'The Effects of Changes in Foreign Exchange Rates' (AASB 121). Broadly, AASB 121 requires an entity to keep its accounts in the currency of the primary economic environment in which that entity operates. However, AASB 121 also requires (at paragraph 17) that each individual entity determines its own functional currency in accordance with paragraphs 9 to 14 of AASB 121. Further, paragraph 38 of AASB 121 provides that when a group contains individual entities with different functional currencies, the results and financial position of each entity should be expressed in a common presentation currency. Accordingly, individual entities within a consolidated group for accounting purposes may be required under Australian law to keep their accounts in different accounting functional currencies in accordance with AASB 121. It can be seen that the determination of the functional currency for accounting purposes and the 'applicable functional currency' for income tax purposes, particularly in the context of a tax consolidated group, depends upon different considerations. In this regard Taxation Determination TD 2007/24 provides that: 1. ... For the purposes of item 1 of subsection 960-60(1) of the Income Tax Assessment Act 1997 (ITAA 1997), the 'applicable functional currency' for the head company of a consolidated group is determined by looking at the 'accounts' of all the members of the consolidated group - and not just at the 'accounts' of the head company. 2. Whether there is such a currency under this view will depend on whether there is one particular foreign currency that is the currency predominantly used for the basic record keeping of the consolidated group. ... 6. The single entity rule in section 701-1 provides that if an entity is a subsidiary member of a consolidated group for any period, it and any other subsidiary member of the group are taken for 'head company core purposes' and 'entity core purposes' to be part of the head company, rather than separate entities for that period. The intended operation of the single entity rule is to apply the income tax laws for these purposes to a consolidated group, as if it was a single entity being the head company. 7. Calculation of the head company's liability for income tax, where this involves an application of item 1 of subsection 960-60(1), will come within the meaning of 'head company core purposes' for the purposes of section 701-1. The single entity rule in this context, will therefore affect the meaning of 'applicable functional currency' in subsection 960-70(1). It is clear from TD 2006/4 that it is the quantity of 'accounts' kept in a particular currency that is determinative in ascertaining the sole or predominant currency in which an entity keeps its 'accounts' for the purposes of subsection 960-70(1) of the ITAA 1997. It is equally clear from TD 2007/24 that the 'applicable functional currency' of the head company of a tax consolidated group, for the purposes of item 1 of subsection 960-60(1) and subsection 960-70(1) of the ITAA 1997, is determined by the quantity of 'accounts' kept in a particular currency across the entire tax consolidated group. | Detailed Reasoning - Conclusion: In accordance with the requirements of AASB 121, Austco-1 keeps its accounts in USD and Austco-2 keeps its accounts in AUD. Therefore, as the entities which make up the MEC group keep their accounts in different currencies, there is no 'sole' currency in which the MEC group keeps its 'accounts' for the purposes of subsection 960-70(1) of the ITAA 1997. Accordingly we must then determine the 'predominant' currency in which the tax consolidated group keeps its 'accounts', by examining the quantity of 'accounts' kept by the tax consolidated group in each 'currency'. When examined as a whole, 60% of the tax consolidated group's 'accounts' are kept in AUD, with the remaining 40% being kept in USD. Therefore, the AUD is the predominant currency in which the 'accounts' of Austco-1 as head company of the Austco tax consolidated group are kept for the purposes of subsection 960-70(1) of the ITAA 1997. As the predominant currency in which Austco-1 as head company of the Austco tax consolidated group keeps its 'accounts' is AUD, Austco-1 is unable to choose to use the USD as its 'applicable functional currency' under subsection 960-60(1) of the ITAA 1997. Accordingly, for income tax purposes (i.e. in the calculation of its taxable income or tax loss), Austco-1 as head company of the Austco tax consolidated group must translate all foreign currency denominated amounts to (and record all entries in) AUD. This includes assessable income that it is taken to have derived and allowable deductions it is taken to have incurred because of the operation of the single entity rule in section 701-1 of Part 3-90 of the ITAA 1997.", "Date_of_Decision": "22 September 2011", "Year_of_Income": "30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 subdivision 960-D subsection 960-60(1) subsection 960-60(1) Item 1 subsection 960-70(1) subsection 960-70(4)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/4 | Taxation Determination TD 2007/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounts Applicable functional currency Consolidated group Functional currency Functional currency choice Multiple entry consolidated group Sole or predominant currency", "Case_References": "FC of T v. FH Faulding & Co Ltd (1950) 83 CLR 594", "Other_References": "Australian Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No.1) 2003 Explanatory Memorandum to the Taxation Laws Amendment (Foreign Income) Bill 1990", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201188", "Unmatched_Content": "and includes statements, reports and notes attached to, or intended to be read with, any of the foregoing. | Related Public Rulings (including Determinations) Taxation Determination TD 2006/4 Taxation Determination TD 2007/24 | Keywords Accounts Applicable functional currency Consolidated group Functional currency Functional currency choice Multiple entry consolidated group Sole or predominant currency"}
{"ATO_ID_Number": "ATO ID 2010/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: multiple entry consolidated group - special conversion event", "Issue": "Can a special conversion event happen under section 719-40 of the Income Tax Assessment Act 1997 (ITAA 1997) to a potential MEC (multiple entry consolidated) group, which is also a consolidated group, when the head company of the consolidated group and another eligible tier-1 company (ET-1 company) of the same top company, which is not a member of any consolidated group or MEC group become ET-1 companies of another top company at the same time?", "Decision": "No. A special conversion event cannot happen to the potential MEC group when both the head company of the consolidated group and the other ET-1 company become ET-1 companies of another top company at the same time.", "Facts": "X Co and Y Co are both ET-1 companies of top company, TC1. X Co is the head company of a consolidated group (the X Co consolidated group). Y Co is not a member of any consolidated (or MEC) group. All of the membership interests in X Co and Y Co are later acquired at the same time (the acquisition time) by a foreign resident company, TC2. At the acquisition time, X Co and Y Co meet all of the requirements to be ET-1 companies of TC2, and TC2 meets all of the requirements to be the top company.", "Reasons_for_Decision": "Summary: Section 719-40 of the ITAA 1997 states that a special conversion event (SCE) happens when the set of requirements in that section are met. The opening words of section 719-40 of the ITAA 1997 provide that a SCE will happen at a particular time to a potential MEC group derived from an ET-1 company of a top company. Subsection 719-40(1) of the ITAA 1997 identifies the ET-1 company and the top company of the potential MEC group to which the SCE happens, and the time at which the SCE happens. Paragraph 719-40(1)(b) of the ITAA 1997 requires that the ET-1 company identified in the opening words of subsection 719-40(1) must also be the head company of a consolidated group immediately before the time at which the SCE happens. Paragraph 719-40(1)(c) of the ITAA 1997 requires that, at that time (the particular time at which the SCE happens), one or more other companies become ET-1 companies of the top company. The time at which the other company, or companies, become ET-1 companies of the top company, is therefore the particular time at which the SCE happens. To meet the requirements in the opening words of subsection 719-40(1) of the ITAA 1997 and paragraphs 719-40(1)(b) and 719-40(1)(c) of the ITAA 1997, the head company of the consolidated group must be an ET-1 company of the top company at and immediately before the time of the SCE. The head company (also the company identified in the opening words of section 719-40 of the ITAA 1997) of the consolidated group must, therefore, be an ET-1 company of the entity which is the top company at the time the SCE happens, immediately before one or more other companies become ET-1 companies of that top company. This interpretation is supported by paragraph 4 18 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002, which states: 4.18 A special conversion event will happen if the head company of a consolidated group is an eligible tier-1 company of a top company and one or more other companies subsequently become eligible tier-1 companies of the same top company . [Schedule 1, item 2, paragraphs 719-40(1)(a) to (c)] (emphasis added) The head company of the consolidated group, X Co, is not an ET-1 company of TC2 (the company which is the top company at the time when the SCE would otherwise happen) immediately before the time Y Co becomes an ET-1 company of TC2. As the requirement in paragraph 719-40(1)(b) of the ITAA 1997 is not met, a SCE will not happen to the potential MEC group derived from X Co at the time X Co and Y Co become ET-1 companies of TC2 (the acquisition time).", "Date_of_Decision": "18 December 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 719-40 subsection 719-40(1) paragraph 719-40(1)(b) paragraph 719-40(1)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Potential MEC group Consolidated group Consolidation - multiple entry consolidated group Special conversion event Eligible tier-1 company Head company", "Case_References": "", "Other_References": "Explanatory memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20104", "Unmatched_Content": "Keywords Potential MEC group Consolidated group Consolidation - multiple entry consolidated group Special conversion event Eligible tier-1 company Head company"}
{"ATO_ID_Number": "ATO ID 2010/141", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: MEC group - non eligible tier-1 company subsidiary member of a MEC group becoming an eligible tier-1 company member of that same MEC group", "Issue": "Does a 'non-eligible tier-1 company' subsidiary member of a MEC (multiple entry consolidated) group cease to be a member of the group, if, at a particular time, the membership interests in it are transferred to a foreign resident member of the same wholly-owned group, so that it becomes an eligible tier-1 company of the top company and a member of the MEC group at that time?", "Decision": "No. A 'non-eligible tier-1 company' subsidiary member of a MEC group will not cease to be a member of the group, if, at a particular time, membership interests in it are transferred to a foreign resident member of the same wholly-owned group, and at that time it becomes an eligible tier-1 company of the top company and a member of the MEC group.", "Facts": "TCo, FCo, ACo, BCo and SubCo are members of a wholly-owned group. ACo and BCo are eligible tier-1 companies of top company TCo. FCo is a foreign resident company and is a wholly-owned subsidiary of TCo. SubCo is a wholly-owned subsidiary of BCo. ACo and BCo have chosen to form a MEC group. ACo is the provisional head company (PHC) of the MEC group. SubCo is a 'non-eligible tier-1 company' subsidiary member of the MEC group. As part of a global restructure, BCo disposes of all its membership interests in SubCo to FCo, at a particular time. As a consequence of the disposal, SubCo becomes a wholly-owned subsidiary of FCo and qualifies as an eligible tier-1 company of TCo at the same time. ACo, as the PHC of the MEC group makes a written choice under paragraph 719-5(4)(c) of the Income Tax Assessment Act 1997 (ITAA 1997), for SubCo to become an eligible tier-1 company member of the MEC group with effect from the time SubCo became an eligible tier-1 company of TCo. ACo notifies the Commissioner in the approved form as required by section 719-77 of the ITAA 1997.", "Reasons_for_Decision": "Summary: At any particular time the members of MEC group, formed by a choice under section 719-50 of the ITAA 1997, will consist of the potential MEC group derived from those eligible tier-1 companies that were a party to the choice under section 719-50 and which continue to be eligible tier-1 companies of the top company at that particular time (subsection 719-5(2) of the ITAA 1997). The members of the potential MEC group comprise of the eligible tier-1 companies from which that potential MEC group is derived, and any of their wholly owned subsidiaries, which would satisfy the membership requirements prescribed in subsection 719-10(1) of the ITAA 1997. An entity will be a 'non-eligible tier-1 company' subsidiary member of a potential MEC group at a particular time, if it satisfies the requirements in the table in subsection 719-10(1) of the ITAA 1997 or is an entity (transitional foreign-held subsidiary) that meets the requirements in sections 701C-10 and 701C-15 of the Income Tax (Transitional Provisions) Act 1997 . An entity, other than a transitional foreign-held subsidiary, that is a 'non-eligible tier-1 company' subsidiary member of a potential MEC group will cease to be a member of the potential MEC group at the time it fails to satisfy the requirements in the table in subsection 719-10(1) of the ITAA 1997. At that same time, the 'non-eligible tier-1 company' subsidiary member will also cease to be a member of the MEC group derived from that potential MEC group (subsection 719-5(2) of the ITAA 1997). Column 3 of the table in subsection 719-10(1) of the ITAA 1997 requires that the 'non-eligible tier-1 company' subsidiary member be a wholly-owned subsidiary of one or more eligible tier-1 companies. When the membership interests in SubCo stop being wholly owned by BCo, it stops being a wholly-owned subsidiary of an eligible tier-1 company and fails to satisfy the ownership requirements in Column 3 of the table in subsection 719-10(1) of the ITAA 1997. Therefore, at that time, SubCo will cease to be a member of the potential MEC group and the MEC group. At that same time, SubCo qualifies as an eligible tier-1 company of the top company, TCo. For a company to be an eligible tier-1 company at a particular time, it must satisfy the requirements in section 719-15 of the ITAA 1997 and paragraph 719-20(1)(b) of the ITAA 1997. When a company becomes an eligible tier-1 company of the top company of an existing MEC group, the PHC of the MEC group may make a written choice that the new eligible tier-1 company is to become a member of the group with effect from the time at which the company became an eligible tier-1 company of the top company (subsection 719-5(4) of the ITAA 1997). SubCo, by satisfying the requirements in section 719-15 of the ITAA 1997 and paragraph 719-20(1)(b) of the ITAA 1997, qualifies as an eligible tier-1 company of the top company, TCo, at the same time it stopped being a member of the potential MEC group and the MEC group. ACo, as the PHC of the MEC group, makes a written choice under subparagraph 719-5(4)(c)(ii) of the ITAA 1997, for SubCo to become a member of the MEC group from the time SubCo became an eligible tier-1 company. As SubCo becomes an eligible tier-1 company member of the MEC group at the same time it stopped being a 'non-eligible tier-1 company' subsidiary member of the same group, there was no moment in time that SubCo was not a member of the MEC group. The sequence of events around the transfer of the membership interests in SubCo to FCo, and ACo making the choice in subparagraph 719-5(4)(c)(ii) of the ITAA 1997 for SubCo to become a member as an eligible tier-1 company and notifying the Commissioner of this choice under section 719-77 of the ITAA 1997, prevent SubCo being regarded as ceasing to be a subsidiary member of the MEC group at any particular time.", "Date_of_Decision": "26 July 2010", "Year_of_Income": "Substituted accounting period year ended 31 March 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 719-5(2) subsection 719-5(4) paragraph 719-5(4)(c) subparagraph 719-5(4)(c)(ii) subsection 719-10(1) section 719-15 section 719-25 section 719-77", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/170 | ATO ID 2006/171", "Subject_References": "Choice to form Consolidation - multiple entry consolidated group Eligible tier-1 company Member of a group Potential MEC group Provisional head company Subsidiary member of a MEC group Top company Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010141", "Unmatched_Content": "Keywords Choice to form Consolidation - multiple entry consolidated group Eligible tier-1 company Member of a group Potential MEC group Provisional head company Subsidiary member of a MEC group Top company Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2007/165", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: MEC group - appointment of a replacement provisional head company - MEC group reduced to a single eligible tier-1 company", "Issue": "If a multiple entry consolidated (MEC) group is reduced to a single eligible tier-1 (ET-1) company member that is not the provisional head company (PHC), can that ET-1 company appoint itself to be the PHC of the MEC group under subsection 719-60(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The single remaining ET-1 company of the MEC group can, if it is qualified to be a PHC under section 719-65 of the ITAA 1997, appoint itself as the PHC, as the reference to plural ET-1 companies in subsection 719-60(3) of the ITAA 1997 will be taken to be a reference to a singular ET-1 company.", "Facts": "", "Reasons_for_Decision": "Summary: If a cessation event happens to the PHC of a MEC group, subsection 719-60(3) of the ITAA 1997 provides for the appointment of a replacement PHC. Subsection 719-60(3), is worded in the plural and provides that: If a cessation event happens to the provisional head company of a MEC group, then: the eligible tier-1 companies that are or were members of the MEC group immediately after the cessation event may make a choice in writing, jointly appointing one of those companies to be the provisional head company of the group. The appointment is taken to have come into force immediately after the cessation event. (bolding added). Under section 23 of the Acts Interpretation Act 1901 , so long as there is no contrary intention, words in the plural number include the singular, and vice versa. Therefore, providing there is no intention to the contrary, the plural wording in subsection 719-60(3) of the ITAA 1997 will not prevent the application of the provision to allow the single remaining ET-1 company of the MEC group, to appoint itself as the new PHC. In considering whether a contrary intention appears it is appropriate to consider the section in its setting in the legislature, and to consider the substance of the legislation as a whole ( Blue Metal Industries Limited and Anor v. Dilley and Anor (1969) 117 CLR 651). Although a MEC group can only come into existence with two or more ET-1 companies, there is a clear policy objective to allow a MEC group, once formed, to continue to exist with a single ET-1 company. Under section 719-5 of the ITAA 1997 a MEC group consists of the potential MEC group derived from whichever one or more ET-1 company members continue to be ET-1 companies of the top company. Provided the identity of the top company does not change, a MEC group will continue to exist so long as the potential MEC group continues to exist and there continues to be a PHC (subsection 719-5(7) of the ITAA 1997). A potential MEC group can be derived from one ET-1 company, and will cease to exist, under section 719-10 of the ITAA 1997, when there are no longer any ET-1 companies from which it is derived. A MEC group can, therefore, continue to exist with a single ET-1 company provided that the ET-1 company is the PHC. There is nothing in Division 719 of the ITAA 1997 to indicate that where all but one of the ET-1 companies in a MEC group leaves it was intended that the group continue only if the remaining ET-1 company is the entity that was the PHC just before the group reduced to the last remaining ET-1 company. When X Co leaves the MEC group it ceases to be an ET-1 company of TC and is no longer qualified under subsection 719-65(1) of the ITAA 1997 to be the PHC. A cessation event happens to X Co under subsection 719-60(6) of the ITAA 1997. As there is no intention to the contrary, the plural words in subsection 719-60(3) of the ITAA 1997 include the singular, and Y Co, the single remaining ET-1 company, can appoint itself as the PHC of the MEC group after the cessation event happens to X Co.", "Date_of_Decision": "6 August 2007", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Acts Interpretation Act 1901 section 23", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cessation event Consolidation Consolidation - multiple entry consolidated group Head company of a MEC group Provisional head company Choice", "Case_References": "Blue Metal Industries Limited and Anor v. Dilley and Anor (1969) 117 CLR 651", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007165", "Unmatched_Content": "This ATO ID has been updated as the legislation has been amended by Tax Laws Amendment (2010 Measures No. 1) Act 2010 (No. 56 of 2010)(Schedule 5, Part 18). Subsection 719-60(3) of the Income Tax Assessment Act 1997 (ITAA 1997) no longer requires the choice to appoint a provisional head company after formation of a group, to be given to the Commissioner. Instead the choice is to be made in writing and section 719-79 of the ITAA 1997 requires the relevant information about the choice to be notified to the Commissioner in the approved form. The amendment has effect from 1 July 2002, unless the provisional head company makes a choice in writing on or before 30 June 2010 for the amendment to apply from 10 February 2010. | Keywords Cessation event Consolidation Consolidation - multiple entry consolidated group Head company of a MEC group Provisional head company Choice"}
{"ATO_ID_Number": "ATO ID 2006/145", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Special conversion event - cessation of consolidated group", "Issue": "Does a consolidated group cease to exist when a special conversion event happens under section 719-40 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to it?", "Decision": "Yes. A consolidated group will cease to exist when a special conversion event happens under section 719-40 of the ITAA 1997 in relation to it, because paragraph 703-5(2)(b) of the ITAA 1997 applies in relation to the head company of the consolidated group when it becomes a member of a multiple entry consolidated (MEC) group.", "Facts": "H Co, an Australian resident, is the head company of a consolidated group and is an eligible tier-1 company of the top company, X Co. On 1 January 2004, X Co acquires all of the membership interests in two other Australian resident companies, A Co and B Co, in a way that they both become eligible tier-1 companies of X Co at the same time. A Co and B Co are not members of a MEC group just before being acquired by X Co. Immediately after the acquisition, neither A Co nor B Co beneficially owns any membership interests in H Co, nor does any other member of the potential MEC group. H Co makes the choice in writing under paragraph 719-40(1)(e) of the ITAA 1997 specifying A Co and B Co have become eligible tier-1 companies and stating that a MEC group is to come into existence as a result of A Co and B Co becoming eligible tier-1 companies of X Co. H Co, when lodging its income tax return for the 2003-2004 income year in October 2004, informs the Commissioner the details of the choice, in the approved form, as required by section 719-78 of the ITAA 1997. The MEC group comes into existence on 1 January 2004 and comprises the potential MEC group derived from H Co and its wholly-owned subsidiaries, and the other eligible tier-1 companies, A Co and B Co. H Co is the provisional head company of the MEC group.", "Reasons_for_Decision": "Summary: When a MEC group comes into existence under paragraph 719-5(1)(b) of the ITAA 1997 due to a special conversion event happening under section 719-40 of the ITAA 1997, the company that was the head company of the consolidated group becomes a member of the MEC group. Paragraph 703-5(2)(b) of the ITAA 1997 provides that the consolidated group ceases to exist when the head company of the consolidated group becomes a member of a MEC group. The members of the MEC group comprise the head company and the wholly-owned subsidiary members of the former consolidated group - generally, the eligible tier-1 companies and their subsidiaries. Paragraph 703-5(2)(b) of the ITAA 1997 is not restricted in its application to cases where the head company becomes a member of an existing MEC group.", "Date_of_Decision": "17 May 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 703-5(2)(b) paragraph 719-5(1)(b) section 719-40 paragraph 719-40(1)(e) section 719-78 Subdivision 719-BA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/146 | ATO ID 2006/147 | ATO ID 2006/148", "Subject_References": "Cessation Cessation event Consolidation Consolidation - multiple entry consolidated group Eligible tier-1 company New eligible tier-1 members of a MEC group Notifiable event Potential MEC group Provisional head company Special conversion event Subsidiary member of a MEC group Choice to form", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006145", "Unmatched_Content": "History note: This ATO ID has been amended to reflect the changes to paragraph 719-40(1)(e) of the Income Tax Assessment Act 1997 (ITAA 1997), the introduction of section 719-78 of the ITAA 1997 and Subdivision 719-BA of the ITAA 1997. The amendments to this ATO ID do not affect the answer to the issue raised in this ATO ID. Date of amendment: 03.06.2010 | Keywords Cessation Cessation event Consolidation Consolidation - multiple entry consolidated group Eligible tier-1 company New eligible tier-1 members of a MEC group Notifiable event Potential MEC group Provisional head company Special conversion event Subsidiary member of a MEC group Choice to form"}
{"ATO_ID_Number": "ATO ID 2006/146", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Special conversion event - MEC group coming into existence", "Issue": "Does a multiple entry consolidated (MEC) group come into existence under paragraph 719-5(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) when a special conversion event happens under section 719-40 of the ITAA 1997?", "Decision": "Yes. A MEC group comes into existence under paragraph 719-5(1)(b) of the ITAA 1997 when a special conversion event happens under section 719-40 of the ITAA 1997.", "Facts": "H Co, an Australian resident, is the head company of a consolidated group and is an eligible tier-1 company of the top company, X Co. On 1 January 2004, X Co acquires all of the membership interests in two other Australian resident companies, A Co and B Co, in a way that they both become eligible tier-1 companies of X Co at the same time. A Co and B Co are not members of a MEC group just before being acquired by X Co. Immediately after the acquisition, neither A Co nor B Co beneficially owns any membership interests in H Co, nor does any other member of the potential MEC group. H Co makes the choice in writing under paragraph 719-40(1)(e) of the ITAA 1997 specifying A Co and B Co have become eligible tier-1 companies and stating that a MEC group is to come into existence as a result of A Co and B Co becoming eligible tier-1 companies of X Co. H Co, when lodging its income tax return for the 2003-2004 income year in October 2004, informs the Commissioner the details of the choice, in the approved form, as required by section 719-78 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 719-40 of the ITAA 1997 provides that a special conversion event happens at a particular time to a potential MEC group (a potential MEC group has the meaning given by section 719-10 of the ITAA 1997) derived from an eligible tier-1 company of a top company, if the eligible tier-1 company is the head company of a consolidated group, and the conditions set out in section 719-40 are satisfied. Because the conditions in section 719-40 are satisfied, a special conversion event happens at the time A Co and B Co become eligible tier-1 companies of the top company. Therefore, a MEC group comes into existence when the special conversion event happened on 1 January 2004: see paragraph 719-5(1)(b) of the ITAA 1997. Subject to subsection 719-5(4) of the ITAA 1997, subsection 719-5(3) of the ITAA 1997 says a MEC group that results from a special conversion event consists of the potential MEC group derived from time to time from whichever one or more of the following companies that continue to be eligible tier-1 companies of the top company:", "Date_of_Decision": "17 May 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 719-5(1)(b) subsection 719-5(3) subsection 719-5(4) section 719-10 section 719-40 paragraph 719-40(1)(e) section 719-78 Subdivision 719-BA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/145 | ATO ID 2006/147 | ATO ID 2006/148", "Subject_References": "Consolidation Consolidation - multiple entry consolidated group Eligible tier-1 company Member of a group Provisional head company Special conversion event Choice to form", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006146", "Unmatched_Content": "History note: This ATO ID has been amended to reflect the changes to paragraph 719-40(1)(e) of the Income Tax Assessment Act 1997 (ITAA 1997), the introduction of section 719-78 of the ITAA 1997 and Subdivision 719-BA of the ITAA 1997. The amendments to this ATO ID do not affect the answer to the issue raised in this ATO ID. Date of amendment 03.06.2010 | Keywords Consolidation Consolidation - multiple entry consolidated group Eligible tier-1 company Member of a group Provisional head company Special conversion event Choice to form"}
{"ATO_ID_Number": "ATO ID 2006/147", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Special conversion event - application of sections 701-15 and 701-50", "Issue": "Do sections 701-15 and 701-50 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to set the tax cost of membership interests in entities that cease to be subsidiary members of a consolidated group due to that group ceasing to exist when a special conversion event happens under section 719-40 of the ITAA 1997 in relation to it?", "Decision": "Yes. Sections 701-15 and 701-50 of the ITAA 1997 apply to set the tax cost of membership interests when entities cease to be subsidiary members of a consolidated group due to that group ceasing to exist when a special conversion event happens under section 719-40 of the ITAA 1997 in relation to it.", "Facts": "H Co, an Australian resident, is the head company of a consolidated group and is an eligible tier-1 company of the top company, X Co. On 1 January 2004, X Co acquires all of the membership interests in two other Australian resident companies, A Co and B Co, in a way that they both become eligible tier-1 companies of X Co at the same time. A Co and B Co are not members of a multiple entry consolidated group (MEC group) just before being acquired by X Co. Immediately after the acquisition, neither A Co nor B Co beneficially owns any membership interests in H Co, nor does any other member of the potential MEC group. H Co makes a choice in writing under paragraph 719-40(1)(e) of the ITAA 1997 specifying A Co and B Co have become eligible tier-1 companies and stating that a MEC group is to come into existence as a result of A Co and B Co becoming eligible tier-1 companies of X Co. H Co, when lodging its income tax return for the 2003-2004 income year in October 2004, informs the Commissioner the details of its choice, in the approved form, as required by section 719-78 of the ITAA 1997. The MEC group comes into existence on 1 January 2004 and comprises the potential MEC group derived from H Co and its wholly-owned subsidiaries, and the other eligible tier-1 companies, A Co and B Co. H Co is the provisional head company of the MEC group.", "Reasons_for_Decision": "Summary: When the head company of a consolidated group becomes a member of a MEC group as a result of a special conversion event, the group ceases to exist by operation of paragraph 703-5(2)(b) of the ITAA 1997. The subsidiary members of the consolidated group cease to be members of the group. Sections 701-15 and 701-50 of the ITAA 1997 apply to set the tax cost of membership interests in those entities which cease to be subsidiary members of a consolidated group. Subsection 701-15(3) of the ITAA 1997 provides that the tax cost of each membership interest the head company of the consolidated group holds in an entity that ceases to be a subsidiary member of the consolidated group, is set just before the entity ceases to be a subsidiary member of the consolidated group, at the membership interest's tax cost setting amount. Section 701-50 of the ITAA 1997 applies to set the tax cost of membership interests that one subsidiary member holds in another member of the consolidated group, where both entities leave the consolidated group at the same time because of an event that happens to one of them.", "Date_of_Decision": "17 May 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 701-15 subsection 701-15(3) section 701-50 subsection 703-5(2)(b) section 719-40 paragraph 719-40(1)(e) section 719-78", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/145 | ATO ID 2006/146 | ATO ID 2006/147 | ATO ID 2006/148", "Subject_References": "Consolidation Consolidation - consolidated group Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Provisional head company Special conversion event Subsidiary member of a consolidated group Choice to form", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006147", "Unmatched_Content": "History note: The decision in this ATO ID will only apply to a special conversion event that happened before 27 October 2006 and the head company of the group did not make a choice, within the prescribed time, to apply Subdivision 719 BA of the Income Tax Assessment Act 1997 (ITAA 1997) to the special conversion event. This ATO ID has been amended to reflect the changes to paragraph 719-40(1)(e) of the ITAA 1997 and the introduction of section 719-78 of the ITAA 1997. The amendments to this ATO ID do not affect the answer to the issue raised in this ATO ID. Date of amendment: 03.06.2010 | Keywords Consolidation Consolidation - consolidated group Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Provisional head company Special conversion event Subsidiary member of a consolidated group Choice to form"}
{"ATO_ID_Number": "ATO ID 2006/148", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: Special conversion event - application of section 701-10", "Issue": "When a special conversion event happens under section 719-40 of the Income Tax Assessment Act 1997 (ITAA 1997) and a multiple entry consolidated (MEC) group comes into existence under paragraph 719-5(1)(b) of the ITAA 1997, does section 701-10 of the ITAA 1997 apply to set the tax cost to the head company of the assets of entities that were subsidiary members of the consolidated group in relation to the special conversion event, and then become subsidiary members, other than eligible tier-1 company members, of the MEC group?", "Decision": "Yes. When a special conversion event happens under section 719-40 of the ITAA 1997 and a MEC group comes into existence under paragraph 719-5(1)(b) of the ITAA 1997, section 701-10 of the ITAA 1997 will apply to set the tax cost of assets of subsidiary members of the consolidated group that become subsidiary members, other than eligible tier-1 company members, of the MEC group.", "Facts": "H Co, an Australian resident, is the head company of a consolidated group and is an eligible tier-1 company of the top company, X Co. On 1 January 2004, X Co acquires all of the membership interests in two other Australian resident companies, A Co and B Co, in a way that they both become eligible tier-1 companies of X Co at the same time. A Co and B Co are not members of a MEC group just before being acquired by X Co. Immediately after the acquisition, neither A Co nor B Co beneficially owns any membership interests in H Co, nor does any other member of the potential MEC group. H Co makes a choice in writing under paragraph 719-40(1)(e) of the ITAA 1997 specifying A Co and B Co have become eligible tier-1 companies and stating that a MEC group is to come into existence as a result of A Co and B Co becoming eligible tier-1 companies of X Co. H Co, when lodging its income tax return for the 2003-2004 income year in October 2004, informs the Commissioner the details of its choice, in the approved form, as required by section 719-78 of the ITAA 1997. The MEC group comes into existence on 1 January 2004 and comprises the potential MEC group derived from H Co and its wholly-owned subsidiaries, and the other eligible tier-1 companies, A Co and B Co. H Co is the provisional head company of the MEC group.", "Reasons_for_Decision": "Summary: When an entity becomes a subsidiary member of a consolidated group or MEC group, the assets of the entity are taken to be the assets of the head company under the single entity rule in section 701-1 of the ITAA 1997, and the group's cost of acquiring the entity is treated as the head company's cost of acquiring the assets of the entity. Entities that were subsidiary members of the former consolidated group become members of the MEC group, when the MEC group comes into existence. The tax cost of the assets of each of these entities is set by section 701-10 of the ITAA 1997. Item 1 of the table in section 701-60 of the ITAA 1997 says that where an asset's tax cost is set by section 701-10, the asset's tax cost setting amount is worked out in accordance with Division 705 of the ITAA 1997.", "Date_of_Decision": "17 May 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 section 701-10 section 701-60 Division 705 paragraph 719-5(1)(b) section 719-40 paragraph 719-40(1)(e) section 719-78", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/145 | ATO ID 2006/146 | ATO ID 2006/147", "Subject_References": "Consolidation Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Provisional head company Special conversion event Subsidiary member of a consolidated group Choice to form", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006148", "Unmatched_Content": "History note: The decision in this ATO ID will only apply to a special conversion event that happened before 27 October 2006 and the head company of the group did not make a choice, within the prescribed time, to apply Subdivision 719 BA of the Income Tax Assessment Act 1997 (ITAA 1997) to the special conversion event. This ATO ID has been amended to reflect the changes to paragraph 719-40(1)(e) of the ITAA 1997 and the introduction of section 719-78 of the ITAA 1997. The amendments to this ATO ID do not affect the answer to the issue raised in this ATO ID. Date of amendment: 03.06.2010 | Keywords Consolidation Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Provisional head company Special conversion event Subsidiary member of a consolidated group Choice to form"}
{"ATO_ID_Number": "ATO ID 2006/170", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: MEC group - eligible tier-1 company (wholly-owned by non-resident) and its wholly-owned subsidiary cease to be members of the MEC group", "Issue": "Can section 104-520 (CGT event L5) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the head company of a MEC (multiple entry consolidated) group with respect to an eligible tier-1 (ET-1) company which is wholly-owned by a non-resident company, when both the ET-1 company and its wholly-owned subsidiary cease to be members of the MEC group?", "Decision": "No. Section 104-520 (CGT event L5) of the ITAA 1997 will not apply to the head company of the MEC group with respect to an ET-1 company which is wholly-owned by a non-resident company, when both the ET-1 company and its wholly-owned subsidiary cease to be members of the MEC group.", "Facts": "B Co is a wholly-owned subsidiary of A Co, a non-resident company. The ultimate parent company for A Co and B Co is Top Co, another non-resident company. B Co and Head Co are ET-1 companies of Top Co. They, with C Co, a wholly-owned subsidiary of B Co, are a MEC group with Head Co as the head company. Top Co sells all the membership interests in A Co, the non-resident company, together with its wholly-owned subsidiaries B Co and C Co, to a third party which is not a wholly owned subsidiary of Top Co.", "Reasons_for_Decision": "Summary: CGT event L5, in section 104-520 of the ITAA 1997, happens where the following conditions are satisfied: Subsection 104-520(2) of the ITAA 1997 and subsection 104-520(3) of the ITAA 1997 respectively provide that CGT event L5 happens to the head company of the consolidated or MEC group at the time the entity ceases to be a subsidiary member of the group and the capital gain is equal to the amount remaining. | Detailed Reasoning - Will B Co, an ET-1 company which is wholly-owned by a non-resident company, cease to be a subsidiary member of the MEC group?: For paragraph 104-520(1)(a) of the ITAA 1997 to be satisfied, an entity must cease to be a subsidiary member of a consolidated or MEC group. Section 719-25 of the ITAA 1997 provides that all members of a MEC group, other than the head company, are subsidiary members of the group. In this instance as B Co is not the head company of the MEC group, it is a subsidiary member. When Top Co disposes of its interests in A Co, the non-resident company, B Co ceases to be a subsidiary member of the MEC group, consequently paragraph 104-520(1)(a) of the ITAA 1997 will be satisfied. | Detailed Reasoning - Will Head Co have to work out an allocable cost amount for B Co, an ET-1 company that is wholly-owned by a non-resident company?: For paragraph 104-520(1)(b) of the ITAA 1997 to be satisfied, the consolidated or MEC group must calculate an allocable cost amount, under section 711-20 of the ITAA 1997, for the entity ceasing to be a subsidiary member and there must be a negative amount remaining after applying step 4 of the calculation in section 711-20. Division 711 of the ITAA 1997 applies to MEC groups by virtue of section 719-2 of the ITAA 1997. Subsection 711-5(1) of the ITAA 1997 provides that Division 711 has effect for head company and entity core purposes (subsections 701-1(2) and 701-1(3) of the ITAA 1997), where an entity ceases to be a subsidiary member of a consolidated group. The operation of Division 711 of the ITAA 1997 is modified for MEC groups by Subdivision 719-J of the ITAA 1997. In particular, subsection 719-510(1) of the ITAA 1997 provides that the leaving entity, referred to in subsection 711-15(1) of the ITAA 1997, is a subsidiary member of the old group that is an ET-1 company. The leaving entity that is referred to in subsection 711-15(1) is an entity in whom membership interests are held by members of the old group. The application of subsection 719-510(1) of the ITAA 1997 in conjunction with subsection 711-15(1) of the ITAA 1997, ensures that Division 711 of the ITAA 1997 will only apply to work out the MEC group's allocable cost amount, under section 711-20 of the ITAA 1997, for an ET-1 company that ceases to be a subsidiary member of the MEC group if some of the membership interests in the ET-1 company are held by members of the MEC group. In this instance B Co, the ET-1 company that ceases to be a subsidiary member of the MEC group, is wholly-owned by A Co, a non-resident company. A Co fails to meet the residency requirements set out in the table in subsection 719-10(2) of the ITAA 1997 and is therefore, not a member of the MEC group. As none of the members of the MEC group holds membership interests in B Co, one of the ET-1 companies, Division 711 of the ITAA 1997 would not apply in respect of B Co when it ceases to be a subsidiary member of the MEC group. A Co's interests in B Co are pooled interests (section 719-560 of the ITAA 1997). The head company of the MEC group, Head Co, will not be required to work out an allocable cost amount for B Co, therefore paragraph 104-520(1)(b) of the ITAA 1997 will not be satisfied. Because paragraph 104-520(1)(b) of the ITAA 1997 will not be satisfied, CGT event L5 cannot happen to Head Co with respect to B Co, an ET-1 company of the MEC group, when both B Co and its wholly-owned subsidiary, C Co, cease to be subsidiary members of the MEC group.", "Date_of_Decision": "19 April 2006", "Year_of_Income": "Year ended 31 December 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 104-520 paragraph 104-520(1)(a) paragraph 104-520(1)(b) subsection 104-520(2) subsection 104-520(3) paragraph 104-520(1)(a) Division 711 section 711-20 Subdivision 719J section 719-2 section 719-25 subsection 719-510(1) section 719-560", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/171", "Subject_References": "Allocable cost amount Calculation of the allocable cost amount Capital gains tax CGT events CGT events L1-L8 - consolidated and MEC groups Consolidation Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Head company Head company of a MEC group Interposed foreign resident Leaving entity Leaving time Member of a group Pooled interests Potential MEC group Provisional head company Subsidiary member of a MEC group Tax cost setting amount Time of CGT event Top company Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006170", "Unmatched_Content": "Keywords Allocable cost amount Calculation of the allocable cost amount Capital gains tax CGT events CGT events L1-L8 - consolidated and MEC groups Consolidation Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Head company Head company of a MEC group Interposed foreign resident Leaving entity Leaving time Member of a group Pooled interests Potential MEC group Provisional head company Subsidiary member of a MEC group Tax cost setting amount Time of CGT event Top company Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2006/171", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: MEC group - wholly-owned subsidiary of an eligible tier-1 (ET-1) company ceases to be a member of the MEC group at the same time as the ET-1 company", "Issue": "Can section 104-520 (CGT event L5) of the Income Tax Assessment Act 1997 apply to the head company of a MEC (multiple entry consolidated) group with respect to a wholly-owned subsidiary of an eligible tier-1 (ET-1) company of the MEC group when both the ET-1 company and its wholly-owned subsidiary cease to be members of the MEC group?", "Decision": "Yes. Section 104-520 (CGT event L5) of the ITAA 1997 can apply to the head company of a MEC group with respect to a wholly-owned subsidiary of an ET-1 company of the MEC group when both the ET-1 company and its wholly-owned subsidiary cease to be members of the MEC group. CGT event L5 will happen where, in working out the MEC group's allocable cost amount for the wholly-owned subsidiary of the ET-1 company, there is a negative amount remaining after applying step 4 of the calculation in section 711-20 of the ITAA 1997.", "Facts": "C Co is a wholly-owned subsidiary of B Co, which is a wholly-owned subsidiary of A Co, a non-resident company. The ultimate parent company for A Co, B Co and C Co is Top Co, another non-resident company. B Co and Head Co are ET-1 companies of Top Co. They, with C Co, a wholly-owned subsidiary of B Co, are a MEC group, with Head Co as the head company. Top Co sells the membership interests in A Co, the non-resident company, together with its wholly-owned subsidiaries B Co and C Co, to a third party which is not a wholly owned subsidiary of Top Co.", "Reasons_for_Decision": "Summary: CGT event L5, in section 104-520 of the ITAA 1997, happens where the following conditions are satisfied: Subsection 104-520(2) of the ITAA 1997 and subsection 104-520(3) of the ITAA 1997 respectively provide that CGT event L5 happens to the head company of the consolidated or MEC group at the time the entity ceases to be a subsidiary member of the group and the capital gain is equal to the amount remaining. | Detailed Reasoning - Will C Co cease to be a subsidiary member of the MEC group?: For paragraph 104-520(1)(a) of the ITAA 1997 to be satisfied an entity must cease to be a subsidiary member of a consolidated or MEC group. C Co is wholly-owned by B Co, an ET-1 company in the MEC group. C Co will cease to be a subsidiary member of the MEC group when B Co ceases to be a subsidiary member. B Co will cease to be a subsidiary member of the MEC group when Top Co disposes of its interests in A Co, the non-resident company. Therefore the requirement in paragraph 104-520(1)(a) of the ITAA 1997 will be satisfied. | Detailed Reasoning - Will Head Co have to work out an allocable cost amount for C Co?: Paragraph 104-520(1)(b) of the ITAA 1997 requires the consolidated or MEC group to calculate an allocable cost amount, under section 711-20 of the ITAA 1997, for the entity ceasing to be a subsidiary member and that there be a negative amount remaining after applying step 4 of the calculation in section 711-20. Subsection 701-15(3) of the ITAA 1997 provides that for each membership interest that the head company of the group holds or, under the single entity rule (section 701-1 of the ITAA 1997), is taken to hold, in an entity that ceases to be a subsidiary member, the interests' tax cost is set at its tax cost setting amount just before the entity ceases to be a subsidiary member. Section 701-50 of the ITAA 1997 ensures that for entity core purposes, when an entity ceases to be a subsidiary member (leaving entity) of a consolidated group and it holds membership interests in another leaving entity, the tax cost of the those membership interests is set at their tax cost setting amount. Item 2 of the table in section 701-60 of the ITAA 1997 provides that the tax cost of the membership interests in an entity that leaves the group is the amount worked out in accordance with section 711-15 of the ITAA 1997 or section 711-55 of the ITAA 1997. Item 4 of the table in section 701-60 provides that where section 701-50 of the ITAA 1997 applies, the interests' tax cost is worked out in accordance with section 711-55. Subsection 711-15(1) of the ITAA 1997 provides that the tax cost of the membership interests in a leaving entity that are held by members of the old group is determined by first working out the old group's allocable cost amount under section 711-20 of the ITAA 1997. Section 711-55 of the ITAA 1997 applies where there is more than one entity ceasing to be a subsidiary member (leaving entities) of a consolidated group because of an event happening to one of them and both members of the old group and the entities ceasing to be subsidiary members of the group, hold membership interests in the leaving entities. The table in subsection 711-20(1) of the ITAA 1997 sets out the manner in which the old group's allocable cost amount for the leaving entity is worked out. Item 5 of the table in subsection 711-20(1) provides that the old group's allocable cost amount will be the positive amount remaining after applying step 4 of the allocable cost amount calculation otherwise, the old group's allocable cost amount will be nil. Subsection 711-5(1) of the ITAA 1997 provides that Division 711 of the ITAA 1997 has effect for both head company and entity core purposes (subsections 701-1(2) and 701-1(3) of the ITAA 1997) when an entity ceases to be a subsidiary member of a consolidated group. Through the application of section 719-2 of the ITAA 1997, Division 711 of the ITAA 1997 will have the same effect for an entity that ceases to be a member of a MEC group. As both B Co and C Co will cease to be subsidiary members of the MEC group because of an event that happens to B Co, section 711-55 of the ITAA 1997 will apply to the membership interests B Co holds in C Co. Therefore Head Co, the head company of the MEC group, will be required to work out an allocable cost amount for the C Co under section 711-20 of the ITAA 1997. If, in working out this allocable cost amount, there is a negative amount remaining after applying step 4 of the calculation in section 711-20 of the ITAA 1997, the allocable cost amount and the tax cost setting amount for the membership interests that B Co holds in C Co will be nil. If, in respect of C Co, there is a negative amount remaining after applying step 4 of the calculation in subsection 711-20 of the ITAA 1997, this amount will be the capital gain that arises for Head Co, the head company of the MEC group, under CGT event L5. This capital gain will arise at the time B Co and C Co cease to be subsidiary members of the MEC group.", "Date_of_Decision": "19 April 2006", "Year_of_Income": "Year ended 31 December 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 104-520 paragraph 104-520(1)(a) paragraph 104-520(1)(b) subsection 104-520(2) subsection 104-520(3) subsection 701-15(3) section 701-50 section 701-60 Division 711 subsection 711-5(1) section 711-15 subsection 711-15(1) section 711-20 subsection 711-20(1) section 711-55 section 719-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/170", "Subject_References": "Allocable cost amount Calculation of the allocable cost amount Capital gains tax CGT events CGT events L1-L8 - consolidated and MEC groups Consolidation Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Head company Head company of a MEC group Interposed foreign resident Leaving entity Leaving time Member of a group Pooled interests Potential MEC group Provisional head company Subsidiary member of a MEC group Tax cost setting amount Time of CGT event Top company Wholly owned subsidiary", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006171", "Unmatched_Content": "Keywords Allocable cost amount Calculation of the allocable cost amount Capital gains tax CGT events CGT events L1-L8 - consolidated and MEC groups Consolidation Consolidation - exiting Consolidation - multiple entry consolidated group Cost of membership interests Cost setting rules Eligible tier-1 company Head company Head company of a MEC group Interposed foreign resident Leaving entity Leaving time Member of a group Pooled interests Potential MEC group Provisional head company Subsidiary member of a MEC group Tax cost setting amount Time of CGT event Top company Wholly owned subsidiary"}
{"ATO_ID_Number": "ATO ID 2005/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: MEC Consolidation: eligible tier-1 company de-registered", "Issue": "For the purposes of section 719-50 of the Income Tax Assessment Act 1997 (ITAA 1997), are A Co and B Co able to make the choice to consolidate a potential multiple entity consolidated (MEC) group by virtue of subsection 719-50(4) of the ITAA 1997 from 1 January 2003 notwithstanding that B Co has since been de-registered?", "Decision": "Yes. Under section 719-50 of the ITAA 1997, A Co and B Co are able to make the choice to consolidate the potential MEC group by virtue of subsection 719-50(4) of the ITAA 1997 from 1 January 2003 notwithstanding that B Co has since been de-registered. B Co is taken to have authorised A Co, the company that will be the head company of the MEC group, to make the choice to form a MEC group on behalf of B Co.", "Facts": "A Co and B Co are direct entry points for investment in Australia by T Co and were both eligible tier-1 companies. On 1 January 2003 A Co and B Co comprised a potential MEC group. B Co was de-registered late in 2004. Between 1 January 2003 and the date B Co was de-registered A Co and B Co were wholly owned subsidiaries of T Co, a company registered overseas. Neither A Co nor B Co has previously been a member of a consolidated group or a MEC group. A Co and B Co did not give the Commissioner a notice of choice to form a MEC group before B Co was de-registered. Mr Y, a director of B Co before it was de-registered, has made a statutory declaration that B Co would have been a party to a choice to appoint A Co the provisional head company of a MEC group including A Co and B Co forming on 1 January 2003 if B Co had continued to exist. A Co will give the notice of choice to the Commissioner on the day A Co lodges its return for the year ended 31 December 2003.", "Reasons_for_Decision": "Summary: Subsection 719-50(1) of the ITAA 1997 provides for two or more eligible tier-1 companies, as defined in section 719-15 of the ITAA 1997, in existence at the start of a particular day after 30 June 2002 to make a choice that a potential MEC group derived from those companies be consolidated on and after that day. Where a company ceases to be an eligible tier-1 company before the choice is given to the Commissioner, subsection 719-50(4) of the ITAA 1997 may apply. Subsection 719-50(4) will apply if paragraphs 719-50(4)(a), 719-50(4)(b) and 719-50(4)(c) of the ITAA 1997 are satisfied. Paragraph 719-50(4)(a) will be satisfied if, as a result of the choice, an eligible tier-1 company will be the head company of the group. Paragraph 719-50(4)(b) will be satisfied if another eligible tier-1 company ceased to exist before the notice of the choice was given to the Commissioner. Paragraph 719-50(4)(c) will be satisfied if 'having regard to the relevant circumstances, it would be reasonable to conclude that the other company would have been a party to the choice if the other company had continued to exist.' Paragraph 4.117 of the Explanatory Memorandum to New Business Tax System (Consolidation) Bill (No.1) 2002 does not specify what circumstances would be considered relevant for the purposes of paragraph 719-50(4)(c) of the ITAA 1997. If paragraphs 719-50(4)(a), 719-50(4)(b) and 719-50(4)(c) of the ITAA 1997 are satisfied, an eligible tier-1 company that was de-registered can be taken to have authorised the eligible tier-1 company that will be the head company of the MEC group to make the choice on behalf of the de-registered company. As B Co was not already a member of a consolidated group or a MEC group before it was de-registered, it could have made the choice under subsection 719-50(1) of the ITAA 1997 before it was de-registered. The statutory declaration by Mr Y confirms that B Co would have been a party to the choice if B Co had continued to exist. Paragraph 719-50(4)(c) of the ITAA 1997 is therefore satisfied. For the purposes of subsection 719-50(4) of the ITAA 1997, A Co can be taken to be authorised by B Co under paragraph 719-50(4)(d) of the ITAA 1997 to make the choice to form a MEC group on behalf of B Co.", "Date_of_Decision": "28 January 2005", "Year_of_Income": "Year ended 31 December 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 719-15 section 719-50 subsection 719-50(1) paragraph 719-50(4)(a) paragraph 719-50(4)(b) paragraph 719-50(4)(c) paragraph 719-50(4)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Choice to form Consolidation - multiple entry consolidated group", "Case_References": "", "Other_References": "Explanatory Memorandum to New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200560", "Unmatched_Content": "Keywords Choice to form Consolidation - multiple entry consolidated group"}
{"ATO_ID_Number": "ATO ID 2004/961", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: meaning of the term 'the company' in Item 4 in the table in subsection 707-320(2) of the Income Assessment Act 1997 (ITAA 1997) in the context of a multiple entry consolidated (MEC) group", "Issue": "Where a MEC group is in existence, does 'the company' in Item 4 in the table in subsection 707-320(2) of the ITAA 1997 refer to the entire MEC group rather than an individual member of the MEC group?", "Decision": "Yes, 'the company' in Item 4 in the table in subsection 707-320(2) of the ITAA 1997 refers to the MEC group rather than an individual member of the MEC group.", "Facts": "Aus Co 1, Aus Co 2 and Aus Co 3 are eligible tier-1 companies of a MEC group with Aus Co 1 as the head company. Aus Co 1 had carried forward tax losses which were transferred to itself (under Subdivision 707-A of the ITAA 1997) as the head company of the MEC group. Some of the tax losses in this bundle of losses will be utilised under the available fraction method. Subsequent to the date of consolidation, Aus Co 1 issued additional shares to a foreign company within the wholly-owned group for cash consideration.", "Reasons_for_Decision": "Summary: Item 4 in the table in subsection 707-320(2) of the ITAA 1997 is one of the adjusting events whereby existing available fractions are reduced or maintained by multiplying them by the factor identified in the relevant item. Item 4 involves an increase in the market value of the company to which the losses in the bundle were most recently transferred as a result of a post-consolidation injection of capital or non-arm's length transaction. The reference to 'the company' in Item 4 in the table in subsection 707-320(2) of the ITAA 1997 is interpreted as a reference to the MEC group as a single entity. The single entity rule in section 701-1 of the ITAA 1997 states that subsidiary members of a consolidated group are taken for head company core purposes and entity core purposes to be parts of the head company of the group, rather than separate income tax entities. Therefore, 'the company' is Aus Co 1 in its capacity as the head company of the MEC group and, by virtue of the single entity rule, the subsidiary members are parts of Aus Co 1. The 'market value of the company' in Item 4 in the table in subsection 707-320(2) is a reference to the market value of the entire MEC group. The single entity rule applies in the context of a MEC group through the operation of section 719-2 of the ITAA 1997. This section provides that the provisions relating to consolidated groups (other than Divisions 703 and 719 of the ITAA 1997) have the same effect in relation to MEC groups. Therefore, references made to a consolidated group in Division 707 of the ITAA 1997 are to be read as a reference to a MEC group. Section 719-25 of the ITAA 1997 ensures that the single entity rule can apply appropriately to a MEC group by providing that the remaining members of a MEC group, other than the head company, are the subsidiary members of the group. The single entity rule applies in the context of subsection 707-320(2) of the ITAA 1997 as this provision is within the meaning of the head company core purposes. In particular, the subsection operates to reduce or maintain the available fraction for a bundle of losses. Available fractions are used to determine the limits for utilisation of transferred losses by the head company of a consolidated group. As this affects the working out of the head company's liability for income tax for income years post-consolidation, it falls within the meaning of head company core purposes. There is no legislative intention to override the single entity rule in respect of Item 4 in the table in subsection 707-320(2) of the ITAA 1997. This is supported by the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002, which states at paragraph 8.61: A group's available fractions are adjusted if the group's market value is increased as a result of capital injected into the group or a non-arm's length transaction involving the group. and at paragraph 8.96: Post-consolidation, the events are only relevant if they trigger an increase in the market value of the whole group. This can only occur in this context as a result of an injection of capital or non-arm's length transaction involving entities external to the group. Further, there is a note after subsection 707-320(1) of the ITAA 1997 which states that: The value for the transferee will be worked out on the basis that subsidiary members of the consolidated group headed by the transferee are part of the transferee, because of section 701-1 (the single entity rule). Although this note is in respect of the market value of the transferee as part of the calculation of the available fraction for a bundle of losses, it signals the intention that the single entity rule applies throughout section 707-320 of the ITAA 1997. Thus, 'the company' in Item 4 in the table in subsection 707-320(2) is Aus Co 1 in its capacity as the head company of the MEC group, rather than on a stand-alone basis.", "Date_of_Decision": "1 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 703 Division 707 Subdivision 707-A section 701-1 section 707-320 subsection 707-320(1) subsection 707-320(2) Division 719 section 719-2 section 719-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Available fraction Bundle of losses Consolidation Consolidation - event Consolidation - losses Consolidation - market value Consolidation - multiple entry consolidated group Consolidation - non-arm's length transaction Consolidation - tax liabilities Eligible tier-1 company Injection of capital Head company of a MEC group Single entity rule Subsidiary member of a MEC group Transferred losses", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004961", "Unmatched_Content": "This ATO ID has been amended by removing references to provisional head company as losses are transferred under Subdivision 707-A to the head company of the group. | Keywords Available fraction Bundle of losses Consolidation Consolidation - event Consolidation - losses Consolidation - market value Consolidation - multiple entry consolidated group Consolidation - non-arm's length transaction Consolidation - tax liabilities Eligible tier-1 company Injection of capital Head company of a MEC group Single entity rule Subsidiary member of a MEC group Transferred losses"}
{"ATO_ID_Number": "ATO ID 2010/181", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: tax sharing agreement - the head company's due time for a group liability following an amendment to a nil assessment", "Issue": "For the purposes of Division 721 of the Income Tax Assessment Act 1997 (ITAA 1997), is the 'head company's due time' for a liability to income tax the day the liability is due and payable specified in a notice of amended assessment for the 2004-05 (or subsequent) income year, where there was no liability to income tax for that income year prior to the service of the notice?", "Decision": "Yes. For the purposes of Division 721 of the ITAA 1997, the head company's due time for the liability to income tax is the day the liability is due and payable specified in the notice of amended assessment, where no liability to income tax for the income year arose prior to the service of the notice.", "Facts": "The taxpayer, the head company of a consolidatable group, made a choice under section 703-50 of the ITAA 1997 to consolidate the group from 1 July 2004. On the basis of its original income tax return for its 2004-05 income year, the taxpayer had no taxable income and no liability to income tax for that year. Subsequently, the Commissioner gave the taxpayer a notice of amended assessment in relation to its 2004-05 income year, raising a liability for income tax.", "Reasons_for_Decision": "Summary: Under section 701-1 of the ITAA 1997 (the single entity rule), the head company of a consolidated group is the only entity of the group that is recognised under the income tax law. Consistent with that principle, the head company is liable, in the first instance, for all the income-tax related liabilities of the group. The object of Division 721 of the ITAA 1997, set out in section 721-5 of the ITAA 1997, is to secure the payment of these 'group liabilities', should the head company fail to meet all such liabilities by the time they become due and payable. The time when a group liability is due and payable is called the 'head company's due time' for that liability. Division 721 operates if a group liability is not paid or otherwise discharged in full by that time. Subsection 721-15(1) of the ITAA 1997 then makes the head company and those entities ('contributing members') that were subsidiary members of the group for at least part of the period to which the group liability relates jointly and severally liable to pay the liability. The joint and several liability arises just after the head company's due time for the group liability (subsection 721-15(4) of the ITAA 1997). However, subsection 721-15(3) of the ITAA 1997 states that this does not happen if the group liability is covered by a tax sharing agreement (TSA). Section 721-25 of the ITAA 1997 specifies the requirements for a group liability to be covered by a TSA, including that the TSA must be in existence before the head company's due time for the liability. If the group liability is covered by a TSA, the contributing members that are party to the TSA become liable to pay their 'contribution amounts' under the TSA just after the head company's due time for the liability (section 721-30 of the ITAA 1997) if the liability has not been paid or discharged in full by that time. In summary, the head company's due time for a group liability determines when Division 721 of the ITAA 1997 comes into operation, and therefore: In relation to the taxpayer's 2004-05 income year, subsection 166A(3) of the Income Tax Assessment Act 1936 (ITAA 1936) deemed the Commissioner to have made an assessment and served notice that there was no taxable income and that no income tax was payable, on the day the return was lodged. Because no liability to income tax arose, subsection 204(1A) of the ITAA 1936 would not have applied to fix the head company's due time for income tax. However, once the Commissioner had amended the taxpayer's assessment for its 2004-05 income year and issued a notice of amended assessment, the taxpayer did have a liability to income tax for that income year. The head company's due time for that liability was fixed by subsection 204(2) of the ITAA 1936 to be the 21st day after the day on which the Commissioner gave the taxpayer notice of the amended assessment (or such later time as the Commissioner may have allowed under section 255-10 of Schedule 1 to the Taxation Administration Act 1953 ). Therefore, for the purposes of Division 721 of the ITAA 1997, the head company's due time for the liability was the day the liability was due and payable specified in the notice of amended assessment. This was because no liability to income tax for the income year arose prior to the issuing of the notice of amended assessment.", "Date_of_Decision": "30 August 2010", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 166A(3) subsection 204(1A) subsection 204(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Amendment of assessments Consolidation - tax liabilities Deemed assessments Group liability Head company Head company's due time Tax sharing agreement", "Case_References": "", "Other_References": "Explanatory Memorandum to New Business Tax System (Consolidation) Bill (No. 1) 2002, Chapter 11", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010181", "Unmatched_Content": "Keywords Amendment of assessments Consolidation - tax liabilities Deemed assessments Group liability Head company Head company's due time Tax sharing agreement"}
{"ATO_ID_Number": "ATO ID 2006/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: income and deductions - restructure of membership interests supporting components of life insurance business", "Issue": "The head company of a consolidated group is treated as a life insurance company. The consolidated group includes two subsidiary members that are unit trusts. The first unit trust is held under the virtual PST of the head company. The underlying assets of this unit trust are segregated to support virtual PST life insurance policy liabilities. The underlying assets of the second unit trust are not segregated and form part of the ordinary assets of the head company. That unit trust can be said to be held under the 'ordinary component' of the head company. Each trust will issue an additional unit to the other component of the head company's life insurance business resulting in each trust ceasing to be a subsidiary member of the consolidated group. When these unit trusts cease to be subsidiary members of the consolidated group and the units are recognised for income tax purposes:", "Decision": "", "Facts": "Head Co is the head company of a consolidated group. Under section 713-505 of the ITAA 1997, Head Co is treated as a life insurance company for the purposes of applying the income tax law. Investment policies are issued to trustees of superannuation funds and to ordinary (non-superannuation) policyholders. The assets supporting these policies are held through two subsidiary member unit trusts: It is proposed to issue an additional unit from each unit trust to other 'components' of Head Co for market value, namely: Therefore, in accordance with subsection 713-510(2) of the ITAA 1997, Trust V and Trust O will cease to be subsidiary members of the consolidated group.", "Reasons_for_Decision": "Summary: Section 6-1 of the ITAA 1997 provides that assessable income consists of: | Detailed Reasoning - CGT event A1: Under subsection 104-10(1) of the ITAA 1997, CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) of the ITAA 1997 provides that: You dispose of a *CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law... * denotes a term defined in section 995-1 of the ITAA 1997. When the unit trusts cease to be members of the consolidated group, the respective tax cost setting amounts for the group's membership interests in the unit trusts will be set by section 701-15 of the ITAA 1997. This cost setting process does not set the tax costs of the underlying assets of a leaving entity but rather is a mechanism used to set the tax costs of membership interests in a leaving entity. Therefore, any unrealised gains or losses on the underlying assets of the unit trusts that exit the consolidated group will be reflected in any realised gains or losses on the future disposal of the membership interests (being the units in the unit trusts). The exit of the unit trusts from the consolidated group will not cause a change in ownership of the underlying assets of those unit trusts. Although the unit trusts will cease to be members of the consolidated group, the head company will continue to hold all the units in those trusts and will therefore continue to have a beneficial interest in the underlying assets of the unit trusts. CGT event A1 will only happen where there is a change in the ownership of the units in the unit trusts from a member of the consolidated group to another entity or person outside the group. No other CGT events apply in respect of the unit trusts ceasing to be subsidiary members of the consolidated group. | Detailed Reasoning - Division 320 of the ITAA 1997: Among other things, Subdivision 713-L of the ITAA 1997 sets out special rules for the head company of a consolidated group where a life insurance company is a subsidiary member of the group. In particular, section 713-505 treats the head company as a life insurance company. It states: This Act, and the Income Tax Rates Act 1986, apply to the head company of a consolidated group as if it were a life insurance company for an income year if one or more life insurance companies are subsidiary members of the group at any time during that year. This rule ensures that the special provisions in the income tax law (such as Division 320 of the ITAA 1997) that apply to life insurance companies will continue to apply to the consolidated group. (see paragraph 1.10 of Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No. 2) 2002) Section 320-15 of the ITAA 1997 specifically includes additional amounts in the assessable income of life insurance companies. Additionally, Subdivision 320-C specifies particular deductions that are available to a life insurance company. The exit of the unit trusts from the consolidated group and the recognition of the units for tax purposes, will not give rise to additional amounts (in respect of the underlying assets) being included in the assessable income of the head company by virtue of section 320-15 of the ITAA 1997. Similarly, the exit of the unit trusts will not give rise to particular deductions, in respect of the underlying assets, being available to the head company by virtue of Subdivision 320-C of the ITAA 1997. Despite the exit of the unit trusts from the consolidated group, the units in the trusts and any underlying assets held according to the terms of the trusts will continue to be beneficially owned by the head company. Whilst the exit of unit trusts from the consolidated group will not directly result in the production of assessable income or deductible losses or outgoings under Division 320 of the ITAA 1997, there may be Division 320 consequences arising under section 320-180 of the ITAA 1997 because of a valuation of virtual PST assets and virtual PST liabilities under section 320-175 of the ITAA 1997. The exit of the unit trusts will mean that the single entity rule under section 701-1 of the ITAA 1997 will no longer apply to those unit trusts. The membership interests in those unit trusts will be recognised for income tax purposes. Consequently, for the purposes of Division 320 and segregation of assets, the virtual PST assets of the head company will include the membership interests (being units) in the unit trusts. | Detailed Reasoning - Assessable income and deductions according to ordinary concepts: Under subsection 6-5(1) of the ITAA 1997, your assessable income includes income according to ordinary concepts, which is called ordinary income. In accordance with subsection 6-5(2) of the ITAA 1997: If you are an Australian resident, your assessable income includes the *ordinary income you derived directly or indirectly from all sources, whether or not in or out of Australia, during the income year. Subsection 8-1(1) of the ITAA 1997 provides that: You can deduct from your assessable income any loss or outgoing to the extent that: (a) it is incurred in gaining or producing your assessable income; or (b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income. The exit of the unit trusts from the consolidated group will not produce any income assessable under subsection 6-5(1) of the ITAA 1997, nor will it produce any loss or outgoing deductible under subsection 8-1(1) in respect of the underlying assets. Although the unit trusts will cease to be subsidiary members of the consolidated group, the units in the trusts and the underlying assets held according to the terms of the trusts will continue to be beneficially owned by the head company.", "Date_of_Decision": "30 March 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 Subdivision 713-L section 713-505 subsection 713-510(2) subsection 104-10(1) subsection 104-10(2) section 701-15 section 713-510 section 6-1 section 6-10 section 6-5 section 713-505 Division 320 Subdivision 320-C section 320-15 section 320-175 section 320-180 subsection 6-5(1) subsection 6-5(2) subsection 8-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event A1-disposal of a CGT asset Consolidation Cost setting rules Life insurance company Virtual pooled superannuation trusts Complying superannuation funds", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No. 2) 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200697", "Unmatched_Content": "The terms 'virtual PST', 'virtual PST asset' and 'virtual PST life insurance policy' were repealed by First Home Saver Accounts (Consequential Amendment) Act 2008, effective 26 June 2008. They were replaced by the terms 'complying superannuation/FSHA asset pool' 'complying superannuation/FSHA asset' and 'complying superannuation/FSHA life insurance policy' respectively. From this date, references to 'virtual PST life insurance policy liabilities' in the following document can also be replaced with the term 'complying superannuation/FSHA liabilities'. | Keywords CGT event A1-disposal of a CGT asset Consolidation Cost setting rules Life insurance company Virtual pooled superannuation trusts Complying superannuation funds"}
{"ATO_ID_Number": "ATO ID 2006/99", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: tax consequences on exit - restructure of membership interests supporting components of life insurance business", "Issue": "The head company of a consolidated group is treated as a life insurance company. The consolidated group includes two subsidiary members that are unit trusts. The first unit trust is held under the virtual PST of the head company. The underlying assets of this unit trust are segregated to support virtual PST life insurance policy liabilities. The underlying assets of the second unit trust are not segregated and form part of the ordinary assets of the head company. That unit trust can be said to be held under the 'ordinary component' of the head company. Each trust will issue an additional unit to the other component of the head company's life insurance business resulting in each trust ceasing to be a subsidiary member of the consolidated group. When the unit trusts cease to be subsidiary members of the consolidated group and the units are recognised for income tax purposes:", "Decision": "", "Facts": "Head Co is the head company of a consolidated group. Under section 713-505 of the ITAA 1997, Head Co is treated as a life insurance company for the purposes of applying the income tax law. Investment policies are issued to trustees of superannuation funds and to ordinary (non-superannuation) policyholders. The assets supporting these policies are held through two subsidiary member unit trusts: Each trust has substantial assets and nil or insignificant liabilities. It is proposed to issue an additional unit from each unit trust to other 'components' of Head Co for market value, namely: Therefore, in accordance with subsection 713-510(2) of the ITAA 1997, Trust V and Trust O will cease to be subsidiary members of the consolidated group.", "Reasons_for_Decision": "Summary: When an entity ceases to be a subsidiary member of a consolidated group, the tax cost of each membership interest that the head company holds in that entity is set under subsection 701-15(3) of the ITAA 1997 (referred to as its 'tax cost setting amount'). Under subsection 701-55(5) that tax cost setting amount is taken to be the cost base of each membership interest for the purpose of applying Part 3-1 or 3-3 of the ITAA 1997 (in the determination of capital gains and losses). In addition, under subsection 701-55(6) of the ITAA 1997, the tax cost setting amount is taken to be the cost of each membership interest for the purpose of any provisions not specifically mentioned in section 701-55. This would therefore include for the purpose of applying section 6-5 of the ITAA 1997. Section 6-1 of the ITAA 1997 provides that assessable income consists of: | Detailed Reasoning - Division 320 of the ITAA 1997: Among other things, Subdivision 713-L of the ITAA 1997 sets out special rules for the head company of a consolidated group where a life insurance company is a subsidiary member of the group. In particular, section 713-505 treats the head company as a life insurance company. It states: This Act, and the Income Tax Rates Act 1986 , apply to the *head company of a *consolidated group as if it were a life insurance company for an income year if one or more life insurance companies are *subsidiary members of the group at any time during that year. * denotes a term defined in section 995-1 of the ITAA 1997. This rule ensures that the special provisions in the income tax law (such as Division 320 of the ITAA 1997) that apply to life insurance companies will continue to apply to the consolidated group. (see paragraph 1.10 of Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures ) Bill (No. 2) 2002) Section 320-15 of the ITAA 1997 specifically includes additional amounts in the assessable income of life insurance companies. In addition, Subdivision 320-C specifies particular deductions that are available to a life insurance company. The issue of the additional unit to the virtual PST arguably represents a 'transfer of assets other than money' to the virtual PST. Paragraph 320-15(1)(e) of the ITAA 1997 includes in the assessable income of a life insurance company, the amount included in assessable income under section 320-200 where an asset (other than money) is transferred: Division 320 of the ITAA 1997 allows for the following transfers of assets to a virtual PST: The issue of the additional unit to the virtual PST of the head company will not produce any assessable income for the head company under paragraph 320-15(1)(e) of the ITAA 1997. Such a transfer would not be made as a consequence of there being a deficiency in assets as described in subsection 320-180(3). Additionally, the transfer would not satisfy the circumstances described in section 320-185 of the ITAA 1997. Subsection 320-87(3) of the ITAA 1997 specifically allows a deduction for assets (other than money) that are transferred by a life insurance company: The issue of the additional unit to the virtual PST of the head company will not produce any deductions under subsection 320-87(3) of the ITAA 1997. Such a transfer would not be made as a consequence of there being a deficiency in assets as described in subsection 320-180(3), nor would the transfer satisfy the circumstances described in section 320-185. Further, the issue of the additional unit to the 'ordinary component' cannot be said to represent a 'transfer of assets other than money' from the virtual PST and to which paragraph 320-15(1)(e) and subsection 320-87(3) of the ITAA 1997 apply. The issue of the unit will not represent a transfer of existing virtual PST assets. | Detailed Reasoning - CGT event A1: Under subsection 104-10(1) of the ITAA 1997, CGT event A1 happens if you dispose of a CGT asset. You dispose of a CGT asset if a change in ownership happens from you to another entity, whether because of some act or event or by operation of law (see subsection 104-10(2)). The issue of the additional unit to the virtual PST and to the 'ordinary component' will not constitute a disposal under CGT event A1 as it will not result in a change in ownership. Although the unit trusts will cease to be subsidiary members of the consolidated group, the head company will continue to hold all the units in those trusts and will therefore continue to have a beneficial interest in the underlying assets of the unit trusts. | Detailed Reasoning - CGT event L5: Under subsection 104-520(1) of the ITAA 1997, CGT event L5 happens if: As a consequence, for the head company core purposes (subsection 701-1(2) of the ITAA 1997 refers), under subsection 104-520(3), the head company makes a capital gain equal to the amount remaining. Therefore, if in working out the head company's allocable cost amount for the leaving entities (being the unit trusts), the amount after applying step 4 in the table in section 711-20 of the ITAA 1997 is negative, CGT event L5 will happen. CGT event L5 will not happen in this case as the unit trusts have insignificant, if any, liabilities. | Detailed Reasoning - Assessable income and deductions according to ordinary concepts: Under subsection 6-5(1) of the ITAA 1997, your assessable income includes income according to ordinary concepts, which is called ordinary income. In accordance with subsection 6-5(2) of the ITAA 1997: If you are an Australian resident, your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether or not in or out of Australia, during the income year. Subsection 8-1(1) of the ITAA 1997 provides that: You can deduct from your assessable income any loss or outgoing to the extent that: (a) it is incurred in gaining or producing your assessable income; or (b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income. The exit of the unit trusts from the consolidated group will not produce any income assessable under subsection 6-5(1) of the ITAA 1997, nor will it produce any loss or outgoing deductible under subsection 8-1(1) in respect of an actual or notional disposal of the units in the trusts. Although the unit trusts will cease to be subsidiary members of the consolidated group, the units in the trusts will continue to be beneficially owned by the head company.", "Date_of_Decision": "30 March 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 713-L section 6-1 section 6-10 section 6-5 section 320-15 subsection 320-180(1) subsection 320-180(3) subsection 104-10(1) subsection 104-10(2) paragraph 320-15(1)(e) subsection 104-520(1) subsection 104-520(3) section 711-20 subsection 701-1(2) Division 320 Subdivision 320-C section 320-185 subsection 320-185(1) subsection 320-185(2) subsection 320-185(3) subsection 320-195(2) subsection 320-195(3) section 713-510 subsection 713-510(2) subsection 701-15(3) subsection 701-55(5) subsection 701-55(6) section 713-505 subsection 320-87(3) subsection 6-5(1) subsection 6-5(2) subsection 8-1(1) section 320-200", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event A1-disposal of a CGT asset CGT events L1-L8 - consolidated and MEC groups Consolidation Consolidation - tax liabilities Life insurance company Virtual pooled superannuation trusts Complying superannuation/FSHA asset pool Complying superannuation/FSHA liabilities Complying superannuation/FSHA life insurance policy", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No. 2) 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200699", "Unmatched_Content": "The terms 'virtual PST' and 'virtual PST life insurance policy' were repealed by First Home Saver Accounts (Consequential Amendment) Act 2008, effective 26 June 2008. They were replaced by the terms 'complying superannuation/FSHA asset pool' and 'complying superannuation/FSHA life insurance policy' respectively. From this date, references to 'virtual PST life insurance policy liabilities' in the following document can also be replaced with the term 'complying superannuation/FSHA liabilities'. | Keywords CGT event A1-disposal of a CGT asset CGT events L1-L8 - consolidated and MEC groups Consolidation Consolidation - tax liabilities Life insurance company Virtual pooled superannuation trusts Complying superannuation/FSHA asset pool Complying superannuation/FSHA liabilities Complying superannuation/FSHA life insurance policy"}
{"ATO_ID_Number": "ATO ID 2006/109", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: transfer testing - transferring losses to the head company of a MEC group after cessation of another MEC group", "Issue": "If does the same business test period under subsection 707-125(2) of the ITAA 1997 include the period of time from cessation of the former MEC group until just before formation of the new MEC group?", "Decision": "Yes. The same business test period under subsection 707-125(2) of the ITAA 1997 includes the period that the former head company is not a member of either MEC group, this being the period from cessation of the former MEC group until just before joining the new MEC group.", "Facts": "A MEC group (former MEC group) forms with H Co appointed as the provisional head company. The top company is FormerTop Co. At the time the group forms, tax losses are transferred, under Subdivision 707-A of the ITAA 1997, to H Co. On a subsequent day (the acquisition day), a third party foreign company, NewTop Co acquires 100% of the shares in H Co and one of the other eligible tier-1 companies, A Co. The remaining eligible tier-1 companies in the former MEC group do not fulfil the conditions in Subdivision 719-B to allow the MEC group to continue. H Co and the other eligible tier-1 company jointly choose to form a new MEC group at the start of the following day (the formation day). H Co is appointed as the provisional head company of the new MEC group and A Co is an eligible tier-1 company. NewTop Co is the top company of the new MEC group.", "Reasons_for_Decision": "Summary: As a result of NewTop Co acquiring the shares in H Co and A Co, a cessation event, as described in subsection 719-60(6) of the ITAA 1997, happens to H Co. The cessation event occurs at the time during the acquisition day (the cessation time) when H Co no longer qualifies to be the head company of the former MEC group due to it now being owned by NewTop Co. H Co and A Co exit the former MEC group at the cessation time and exist as stand-alone entities with the single entity rule in section 701-1 of the ITAA 1997 no longer having application. The former MEC group ceases to exist at the cessation time as paragraph 719-5(7)(c) of the ITAA 1997 provides that a MEC group continues to exist until there ceases to be a provisional head company. As a result, there will be a period of time separating the cessation of the former MEC group and the formation of the new MEC group. For the period from cessation time until the end of the acquisition day, H Co is treated as a stand-alone entity and not part of either MEC group. H Co is required to apply the modified same business test, as described in section 707-125 of the ITAA 1997, to establish whether the tax losses that remain unutilised are transferred to itself in the capacity of the head company of the new MEC group. Under subsection 707-125(2) of the ITAA 1997, the same business test period includes the trial year. The trial year starts 12 months prior to joining time and ends just after the joining time. The joining time is the start of the formation day. The test time is just before the end of the income year in which H Co, as the head company of the former MEC group, made the losses. This is the income year in which the losses were originally transferred to H Co. Therefore, the same business test period includes that part of the acquisition day commencing from the cessation time, where H Co was a stand-alone company and not part of either MEC group. The modified same business test in section 707-125 of the ITAA 1997 will test the business of H Co as a stand-alone company in this part of the same business test period against the business of the former MEC group at the test time.", "Date_of_Decision": "14 March 2006", "Year_of_Income": "31 December 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 section 707-125 subparagraph 707-125(2) subdivision 719-B paragraph 719-5(7)(c) subsection 719-60(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Cessation event MEC group Provisional head company Eligible tier-1 company Same business test Same business test period Modified same business test Test time Previously transferred tax losses Single entity rule Consolidation - joining Consolidation - losses Joining entity Joining time Transfer of losses", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006109", "Unmatched_Content": "This ATO ID was amended to clarify references to \"head company\" | Keywords Consolidation Cessation event MEC group Provisional head company Eligible tier-1 company Same business test Same business test period Modified same business test Test time Previously transferred tax losses Single entity rule Consolidation - joining Consolidation - losses Joining entity Joining time Transfer of losses"}
{"ATO_ID_Number": "ATO ID 2005/345", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: Consolidation: Single entity rule and assessable recoupment", "Issue": "Do the assessable recoupment rules in Subdivision 20-A of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a debt between members of the same consolidated group?", "Decision": "No. The single entity rule (SER) in section 701-1 of the ITAA 1997 will prevent Subdivision 20-A of the ITAA 1997 from applying to the head company in respect of a debt owed by a member of the consolidated group to another member of the same consolidated group.", "Facts": "Finance Co and Borrower Co are wholly owned by Head Co. Prior to Head Co's election to form a consolidated group, Finance Co lent funds to Borrower Co for an investment, which ultimately went bad. Finance Co wrote the debt off in its books of account and claimed a deduction for a bad debt under one of the listed provisions in the tables in section 20-30 of the ITAA 1997. Head Co and its subsidiaries, including Finance Co and Borrower Co, formed a consolidated group. Subsequently, Finance Co recouped the debt owed from Borrower Co.", "Reasons_for_Decision": "Summary: Prima facie, the recoupment of the debt by Finance Co gives rise to an assessable recoupment for the purposes of Subdivision 20-A of the ITAA 1997. However, due to the operation of the single entity rule contained in section 701-1 of the ITAA 1997, both the payment by Borrower Co and the recoupment by Finance Co are treated as having been undertaken by the head company and are ignored. The recoupment of the debt is ignored because the single entity rule deems subsidiary members to be parts of the head company rather than separate entities during the period that they are members of the consolidated group. Taxation Ruling TR 2004/11 at paragraph 8 states: Consequently, the single entity rule has the effect that: (a) the actions and transactions of a subsidiary member are treated as having been undertaken by the head company; (b) the assets a subsidiary member of the group owns are taken to be owned by the head company (with the exception of intra-group assets) while the subsidiary remains a member of the consolidated group; (c) assets where the rights and obligations are between members of a consolidated group (intra-group assets) are not recognised for income tax purposes during the period they are held within the group whether or not the asset, as a matter of law, was created before or during the period of consolidation; and (d) dealings that are solely between members of the same consolidated group (intra-group dealings) will not result in ordinary or statutory income or a deduction to the group's head company. Accordingly, the recoupment of the debt is not recognised for the purposes of provisions of the income tax law, including Subdivision 20-A of the ITAA 1997. This intent is clearly articulated in TR 2004/11 at paragraphs 26, 27, 32 and 33.", "Date_of_Decision": "21 October 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 20-A section 20-30 section 25-35 section 701-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11 | Taxation Determination TD 2004/33 | Taxation Determination TD 2004/65 | Taxation Determination TD 2004/68 | Taxation Determination TD 2004/69 | Taxation Determination TD 2004/83 | Taxation Determination TD 2004/84 | Taxation Determination TD 2004/85 | Taxation Determination TD 2005/23", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/3 | ATO ID 2005/344 | ATO ID 2005/346", "Subject_References": "Assessable recoupments Consolidation Consolidated group Debt forgiveness Single entity rule", "Case_References": "", "Other_References": "Consolidation Reference Manual C2-4-245 ; C9-1-220 ; C9-1-110", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005345", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 Taxation Determination TD 2004/33 Taxation Determination TD 2004/65 Taxation Determination TD 2004/68 Taxation Determination TD 2004/69 Taxation Determination TD 2004/83 Taxation Determination TD 2004/84 Taxation Determination TD 2004/85 Taxation Determination TD 2005/23 | Keywords Assessable recoupments Consolidation Consolidated group Debt forgiveness Single entity rule"}
{"ATO_ID_Number": "ATO ID 2004/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation:- limit on utilisation of concessional losses", "Issue": "Is the taxpayer, a head company of a consolidated group, subject to any restrictions on the utilisation of transferred losses after the third income year ending after the losses were transferred, where the utilisation of those losses is affected by section 707-350 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997)?", "Decision": "No. Subsection 707-350(3) of the IT(TP)A 1997 provides that in the third or later income year after the initial transfer time, the head company of a consolidated group can recoup all of the unutilised concessional losses in a bundle. Subject to the recoupment tests being met and sufficient income or gains being available, concessional losses can be utilised without restriction after the third income year, if the head company did not utilise all those losses by that time.", "Facts": "A consolidated group comprising of Company A (head company) and Company B (its wholly-owned subsidiary) forms before 1 July 2004. A bundle of losses incurred by Company B (the real loss-maker) are transferred to Company A at the date of consolidation. Some of the transferred losses in this bundle are concessional losses because they satisfy the conditions in subsection 707-350(1) of the IT(TP)A 1997: A concessional loss in this bundle has not been fully utilised by the end of the third income year ending after the date of consolidation. The head company, Company A, satisfies the recoupment tests for utilisation of this concessional loss in later income years.", "Reasons_for_Decision": "Summary: Subsection 707-350(3) of the IT(TP)A 1997 provides that in the third or later income year after the initial transfer time, the head company of a consolidated group can recoup all of the unutilised concessional losses in a bundle of losses. The Explanatory Memorandum to New Business Tax System (Consolidation) Bill (No. 1) 2002 describes the effect of subsection 707-350(3) of the IT(TP)A 1997 at paragraph 9.62: If, after the third income year, the group still has undeducted losses of this sort, then it may use them without restriction (i.e. the limit ceases to apply, though the general loss recoupment tests do apply). Utilisation of concessional losses for an income year is limited to the maximum amount calculated by the table in subsection 707-350(3) of the IT(TP)A 1997. That subsection effectively requires that the total amount of concessional losses of each sort in a bundle is divided into three equal portions. The head company can only utilise a maximum of one portion (that is, one third) of those losses in the first year. In the second income year the head company can utilise the difference between 2/3 of those losses and the amount of those losses utilised in the first income year. Any amount of a loss that remains unutilised at the end of the second income year is not subject to any further restriction with respect to the limit in subsequent income years. Item 3 in the table in subsection 707-350(3) of the IT(TP)A 1997 applies to the third income year ending after the initial transfer time, or a later income year. The loss that is available to be utilised is the maximum difference between: No further restrictions apply. In this case, Company A has not fully utilised a concessional loss in the bundle by the end of the third year. Item 3 in the table in subsection 707-350(3) of the IT(TP)A 1997 determines that the maximum amount of losses available for utilisation in the third and subsequent income years, is the amount not yet utilised.", "Date_of_Decision": "5 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax (Transitional Provisions) Act 1997 subsection 701D-10(1) section 707-350 subsection 707-350(1) subsection 707-350(2) subsection 707-350(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Concessional losses Consolidation Consolidation - continuity of ownership test Consolidation - losses Transferred losses Unused carry forward losses", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No.1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200412", "Unmatched_Content": "This ATO ID has been amended to clarify references in the Decision to losses after the third year, and to include an additional condition regarding transitional foreign loss-makers in the Facts. | Keywords Concessional losses Consolidation Consolidation - continuity of ownership test Consolidation - losses Transferred losses Unused carry forward losses"}
{"ATO_ID_Number": "ATO ID 2004/295", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - GST input tax credits", "Issue": "Where a subsidiary member of a consolidated group is entitled to an input tax credit, is section 27-5 of the Income Tax Assessment Act 1997 (ITAA 1997) taken into consideration by the head company in working out the amount of the income tax liability or loss of the head company?", "Decision": "Yes. Section 27-5 of the ITAA 1997 provides in these circumstances that the head company of a consolidated group cannot claim as an income tax deduction the subsidiary's input tax credits in working out the amount of the head company's income tax liability or loss. The operation of the 'single entity rule' in section 701-1 of the ITAA 1997 treats the subsidiary as part of the head company for the head company core purposes.", "Facts": "Company A, a head company and its wholly-owned subsidiary company, Company B, are members of a consolidated group. Company B carries on an enterprise and is registered for GST. Company B makes taxable supplies, incurs GST liability and receives a credit for the GST paid on inputs ('input tax credits') as part of its normal operations.", "Reasons_for_Decision": "Summary: The 'single entity rule' in section 701-1 of the ITAA 1997 operates to treat the subsidiary members of a consolidated group to be parts of the head company, for the purposes of working out the amount of the head company's income tax liability or loss (see subsection 701-1(2) of the ITAA 1997). Subsidiary members of the group are consequently treated as parts of the head company rather than as separate income tax entities. In this case, Company B is treated as part of Company A for the purpose of working out Company A's income tax liability or loss. Section 27-5 of the ITAA 1997 provides that a taxpayer cannot deduct as an outgoing or loss any amount relating to an input tax credits to which that taxpayer is entitled. Accordingly, amounts relating to input tax credit entitlements of a subsidiary company are not deductible to a head company of the group for the core purposes of working out the amount of the head company's income tax liability or loss. Thus, the outgoings giving rise to Company B's input tax credits are not an allowable income tax deduction for Company A.", "Date_of_Decision": "25 March 2004", "Year_of_Income": "30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Section 27-5 Section 701-1 Subsection 701-1(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - tax liabilities Head company Single entity rule Goods and services tax Input tax credits Deductions", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004295", "Unmatched_Content": "Keywords Consolidation Consolidation - tax liabilities Head company Single entity rule Goods and services tax Input tax credits Deductions"}
{"ATO_ID_Number": "ATO ID 2004/296", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - GST payable and assessable income", "Issue": "Where GST is payable by a subsidiary member of a consolidated group, is section 17-5 of the Income Tax Assessment Act 1997 (ITAA 1997) taken into consideration by the head company in working out the amount of the income tax liability or loss of the head company?", "Decision": "Yes. The GST payable by a subsidiary member in these circumstances is excluded from the assessable income of the head company under section 17-5 of the ITAA 1997 in working out the amount of the head company's income tax liability or loss. The operation of the 'single entity rule' in section 701-1 of the ITAA 1997 treats the subsidiary as part of the head company for the head company core purposes.", "Facts": "Company A, a head company and its wholly-owned subsidiary company, Company B, are members of a consolidated group. Company B carries on an enterprise and is registered for GST. Company B makes taxable supplies, incurs GST liability and receives a credit for the GST paid on inputs ('input tax credits') as part of its normal operations.", "Reasons_for_Decision": "Summary: The 'single entity rule' in section 701-1 of the ITAA 1997 operates to treat the subsidiary members of a consolidated group to be parts of the head company, for the core purposes of working out the amount of the head company's income tax liability or loss (see subsection 701-1(2) of the ITAA 1997). Subsidiary members of the group are consequently treated as parts of the head company rather than as separate income tax entities. In this case, Company B is treated as part of Company A for the purpose of working out Company A's income tax liability or loss. Section 17-5 of the ITAA 1997 specifically excludes the GST payable on a taxable supply from being included in the assessable income or exempt income of a taxpayer. Accordingly, the GST payable by the subsidiary company is excluded from the assessable income of the head company of the group for the core purposes of working out the amount of the head company's income tax liability or loss. Thus, the GST payable by Company B is excluded from Company A's assessable or exempt income.", "Date_of_Decision": "25 March 2004", "Year_of_Income": "30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Section 17-5 Section 701-1 Subsection 701-1(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - tax liabilities Goods and services tax Head company Single entity rule Assessable income", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004296", "Unmatched_Content": "Keywords Consolidation Consolidation - tax liabilities Goods and services tax Head company Single entity rule Assessable income"}
{"ATO_ID_Number": "ATO ID 2004/364", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - extent a tax loss is transferred from a corporate tax entity to a head company", "Issue": "Is the extent to which a tax loss is transferred from a corporate tax entity to a head company under subsection 707-120(1) of the Income Tax Assessment Act 1997 (ITAA 1997), determined as if a choice is made by the corporate tax entity, under section 36-17 of the ITAA 1997, to deduct the maximum amount of the tax loss that could be deducted in the trial year?", "Decision": "Yes. The amount of a tax loss that is transferred to the head company of a consolidated group at the joining time by a corporate tax entity is determined as if the corporate tax entity had chosen, under section 36-17 of the ITAA 1997, to deduct the maximum amount of the tax loss that could be deducted in the trial year.", "Facts": "A company that becomes a member of a consolidated group has a carry-forward tax loss which satisfies the relevant transfer tests in Subdivision 707-A of the ITAA 1997 for the loss in respect of the trial year.", "Reasons_for_Decision": "Summary: Under subsection 707-120(1) of the ITAA 1997, the tax loss is transferred from the company to the head company of the consolidated group to the extent it could be utilised by the company for the trial year under the assumptions in that subsection. The trial year is defined in subsection 707-120(2) of the ITAA 1997 as the period ending just after the joining time and is the notional loss claim year for transfer testing purposes. The words 'to the extent' in subsection 707-120(1) of the ITAA 1997 are interpreted to mean 'to the maximum extent'. This gives effect to an object of Subdivision 707-A of the ITAA 1997: that a loss is transferred to the head company of a consolidated group if the joining entity could have utilised the loss had it not joined the group. The company could utilise all of the tax loss if, instead of joining the consolidated group, it continued as a separate entity for income tax purposes provided it continued to satisfy the loss recoupment tests and derived sufficient income. The assumption in paragraph 707-120(1)(b) of the ITAA 1997 is consistent with this interpretation. Paragraph 707-120(1)(b) of the ITAA 1997 assumes that utilisation of a loss for the trial year is not limited by the joining entity's income or gains for the trial year. Under section 36-17 of the ITAA 1997, a corporate tax entity can choose the amount of a prior year tax loss it can deduct in a later year of income. The definition of a corporate tax entity in section 960-115 of the ITAA 1997 includes a company as well as certain other types of entities (for example, a corporate limited partnership). It is inferred that the company is taken to have made the choice under section 36-17 of the ITAA 1997 to deduct all of the tax loss in the trial year. Accordingly, the amount of the tax loss that will be transferred to the head company will be the maximum amount that could have been deducted by the company in the trial year. As a consequence, this allows the head company as the 'owner' of the tax loss to make a choice under section 36-17 of the ITAA 1997 as to how much of the transferred tax loss it will deduct from its income when it utilises the loss.", "Date_of_Decision": "20 April 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 36-17 Subdivision 707-A section 707-120 subsection 707-120(1) paragraph 707-120(1)(b) subsection 707-120(2) section 960-115", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidated group Consolidation Consolidation - losses Corporate tax entity Head company Joining entity Joining time Tax loss Transfer of losses Trial year", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004364", "Unmatched_Content": "Keywords Consolidated group Consolidation Consolidation - losses Corporate tax entity Head company Joining entity Joining time Tax loss Transfer of losses Trial year"}
{"ATO_ID_Number": "ATO ID 2004/939", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - Cancelling the transfer of a group loss", "Issue": "Where a company (the new head company) acquires the head company of a consolidated group (the former head company) and tax losses, as set out in the table below, are transferred from the former head company, can the new head company choose to cancel the transfer of the group loss under subsection 707-145(1) of the Income Tax Assessment Act 1997 (ITAA 1997) without it resulting in the cancellation of the transfer of any of the previously transferred losses?", "Decision": "Yes. The transfer of the group loss can be cancelled under subsection 707-145(1) of the ITAA 1997 without it resulting in the cancellation of the transfer of any of the previously transferred losses.", "Facts": "Big Head Co acquires 100% of the shares in Small Head Co, the head company of another consolidated group. At the time Small Head Co joins the Big Head Co consolidated group the following losses are available for transfer to Big Head Co:", "Reasons_for_Decision": "Summary: Section 707-145 of the ITAA 1997 allows a head company a choice to cancel the transfer of a loss. When the choice is exercised, section 707-150 of the ITAA 1997 operates to prevent the loss being utilised by any entity for an income year ending after the joining time. The Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002 (EM) clearly indicates that the cancellation can be made on a loss by loss basis. At paragraph 8.71 the EM states: A head company can choose to cancel the transfer of a loss. The choice is made on a loss by loss (as opposed to bundle by bundle) basis. Additionally, paragraph 8.72 of the EM states: A head company may choose to cancel a loss to: • avoid adjusting the available fractions for its existing loss bundles under adjustment event 3 (though it would need to cancel all its incoming losses to achieve this); or • achieve a better outcome under adjustment event 2 which caps available fractions when both group and previously transferred losses are transferred. The second bullet point explains that the cancellation of the transfer of a loss is to achieve a better outcome when a group loss and previously transferred losses are transferred at the same joining time. If it was not possible to cancel the transfer of an individual loss, then this intent could not be achieved. Each loss of a sort that is transferred at a particular time will, as a result of subsection 707-140(1) of the ITAA 1997, be taken to be made by the head company in the year of transfer. A consequence of this provision is that there could be more than one loss of the same sort being made in the same income year. However, each loss maintains its distinct identity as there is no provision that permits pooling of such losses into a single loss. A bundle of losses is created by subsection 707-315(1) of the ITAA 1997 whenever a loss of any sort is transferred for the first time (the 'initial transfer time'). The bundle consists of each loss that is transferred under Subdivision 707-A of the ITAA 1997 at the initial transfer time from a joining entity that joins the group at that time, provided the loss had not been transferred under that Subdivision before that time. The bundle exists until all losses within that bundle have been fully utilised or otherwise reduced to nil. The note to subsection 707-315(3) of the ITAA 1997 states: Note: A bundle continues to exist even if the losses in it are transferred again under Subdivision 707-A of the ITAA 1997 after the initial transfer time. This confirms that losses continue to stay in their original bundle regardless of whether the head company to which they were first transferred subsequently joins another consolidated group and that they retain their separate identities. This analysis is supported by paragraph 8.9 of the EM: Loss bundles are formed when losses are transferred to a group for the first time by the entity that actually made them. All of the losses transferred by the entity that actually made them constitute a single bundle of losses. A loss bundle remains intact if it is transferred again. The group loss transferred from Small Head Co will constitute a separate bundle that comes into existence upon its transfer to Big Head Co. The two bundles may contain losses that, as a result of section 707-140 of the ITAA 1997, are taken to have been incurred in the same income year as losses contained in other bundles of Big Head Co. There is no 'pooling' of any of these losses between or within the two bundles. Big Head Co can choose to cancel the transfer of the group loss without affecting the transfer of any of the previously transferred losses.", "Date_of_Decision": "5 November 2004", "Year_of_Income": "Year ended 31 March 2005", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 707-A section 707-120 section 707-140 section 707-145 section 707-150 section 707-315", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bundle of losses Consolidation Consolidation - losses Group losses Transfer of losses Transferred losses Available fraction", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004939", "Unmatched_Content": "The tax losses transferred to the former head company at the time it elected to form a consolidated group (\"the formation time\"). | The tax loss incurred by the former head company for the non-membership period commencing at formation time and ending just before the time the former head company becomes a subsidiary member of the consolidated group headed by the new head company. | Keywords Bundle of losses Consolidation Consolidation - losses Group losses Transfer of losses Transferred losses Available fraction"}
{"ATO_ID_Number": "ATO ID 2004/959", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: loss transfer testing - pattern of distributions test - a non-fixed trust holds fixed entitlements to 50% or more of the income or capital of a company", "Issue": "Does section 707-130 of the Income Tax Assessment Act 1997 (ITAA 1997) apply in determining whether a non-fixed trust passes the pattern of distributions test where:", "Decision": "Yes. When Subdivision 165-F of the ITAA 1997 is applicable in determining whether the subsidiary member satisfies the COT in respect of the loss in the trial year, section 707-130 of the ITAA 1997 is applicable in determining whether the non-fixed trust passes the pattern of distributions test (as determined in section 269-60 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936)) in respect of the loss.", "Facts": "Company A becomes a member of a consolidated group at a particular time (the joining time). At the joining time, a tax loss is available for transfer, under Subdivision 707-A of the ITAA 1997, from Company A to Head Co (the head company of the consolidated group). Head Co holds fixed entitlements to all of the income and capital of Company A at all times during the ownership test period. Trust B is a non-fixed trust that holds fixed entitlements to a 50% or greater share of the income of Head Co at all times during the ownership test period.", "Reasons_for_Decision": "Summary: Subsection 707-120(1) of the ITAA 1997 provides that a loss is transferred from a joining entity to the head company of a consolidated group to the extent that the loss could have been utilised by the joining entity for an income year consisting of the trial year, assuming: The trial year is defined in subsection 707-120(2) of the ITAA 1997. It consists of the period generally starting 12 months before the joining time and ending just after the joining time. Paragraph 707-110(2)(a) of the ITAA 1997 provides that an entity utilises a tax loss to the extent that it is deducted from an amount of the entity's assessable or exempt income. Subdivision 165-A of the ITAA 1997 contains the conditions for determining if a company is able to deduct a tax loss under Division 36 of the ITAA 1997. Section 165-10 of the ITAA 1997 provides that a company cannot deduct a tax loss unless it meets the conditions in section 165-12 of the ITAA 1997 (that is, it satisfies the COT) or it meets the condition in section 165-13 of the ITAA 1997 (that is, it satisfies the same business test). Subdivision 165-F of the ITAA 1997 contains special provisions relating to situations where fixed entitlements to a share of the income or capital of a company are held by one or more non-fixed trusts. Section 165-215 of the ITAA 1997 provides that a company that does not meet the conditions in the COT in respect of a loss is nevertheless taken to satisfy the COT, if it meets all the relevant conditions contained in that section. These conditions relate broadly to situations where non-fixed trusts (other than family trusts) hold, directly or indirectly, fixed entitlements to a 50% or greater share of the income or capital of the company. Subsection 165-215(5) of the ITAA 1997 states: It must be the case that, for each non-fixed trust (other than an excepted trust) that, at any time during the *ownership test period, held directly or indirectly a fixed entitlement to a share of the income or capital of the company, section 267-20 of Schedule 2F to the Income Tax Assessment Act 1936 would not have prevented the non-fixed trust from deducting the *tax loss concerned if it, rather than the company, had incurred the tax loss. * denotes a term defined in section 995-1 of the ITAA 1997. In circumstances where Subdivision 165-F of the ITAA 1936 is applicable to determining if Company A satisfies the COT in respect of the loss in the trial year, it will be necessary to determine whether Trust B would have been able to deduct the tax loss had it incurred the loss instead of Company A (as specified in subsection 165-215(5) of the ITAA 1997). One of the requirements in section 267-20 of Schedule 2F to the ITAA 1936 to be met, to allow a non-fixed trust to deduct a tax loss, is that (if applicable) the trust passes the pattern of distributions test for the income year. Section 707-130 of the ITAA 1997 modifies the pattern of distributions test when determining whether a joining entity, that is a non-fixed trust, is able to transfer a loss to the head company of a consolidated group. These modifications ensure that the pattern of distributions test is able to be appropriately applied as a transfer test. Given that subsection 165-215(5) of the ITAA 1997 treats the non-fixed trust as having incurred the loss, it is appropriate that the modifications in section 707-130 of the ITAA 1997 will apply in determining if the non-fixed trust passes the pattern of distributions test, despite the fact that the non-fixed trust is not the joining entity. If the pattern of distributions test is relevant in determining whether Trust B could have deducted the loss, the modifications in section 707-130 of the ITAA 1997 will apply in determining whether Trust B passes the pattern of distributions test. This will ensure that the pattern of distributions test is appropriately applied to Trust B, despite the fact that Trust B is not a joining entity.", "Date_of_Decision": "2 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 267-20 section 269-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/960", "Subject_References": "Consolidation Consolidation - joining Consolidation - losses Consolidation - pattern of distributions test Continuity of ownership test Joining entity Joining time Non fixed trusts Transfer of losses Trial year Utilise a loss", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004959", "Unmatched_Content": "Keywords Consolidation Consolidation - joining Consolidation - losses Consolidation - pattern of distributions test Continuity of ownership test Joining entity Joining time Non fixed trusts Transfer of losses Trial year Utilise a loss"}
{"ATO_ID_Number": "ATO ID 2004/960", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: transfer testing - continuity of ownership test -a non-fixed trust holds fixed entitlements to 50% or more of the income or capital of the head company", "Issue": "Does Subdivision 165-F of the Income Tax Assessment Act 1997 (ITAA 1997) apply in determining whether a company satisfies the continuity of ownership test (COT) in respect of the loss in the trial year where:", "Decision": "Yes. Subdivision 165-F of the ITAA 1997 is applicable in determining if the subsidiary member satisfies the COT in respect of the loss in the trial year.", "Facts": "Company A becomes a member of a consolidated group at a particular time (the joining time). At the joining time, a tax loss is available for transfer, under Subdivision 707-A of the ITAA 1997, from Company A to Head Co (the head company of the consolidated group). Head Co holds fixed entitlements to all of the income and capital of Company A at all times during the ownership test period. Trust B is a non-fixed trust that holds fixed entitlements to a 50% or greater share of the income of Head Co at all times during the ownership test period.", "Reasons_for_Decision": "Summary: Subsection 707-120(1) of the ITAA 1997 provides that a loss is transferred from a joining entity to the head company of a consolidated group to the extent that the loss could have been utilised by the joining entity for an income year consisting of the trial year, assuming: The trial year is defined in subsection 707-120(2) of the ITAA 1997. It consists of the period generally starting 12 months before the joining time and ending just after the joining time. Paragraph 707-110(2)(a) provides that an entity utilises a tax loss to the extent that it is deducted from an amount of the entity's assessable or exempt income. Subdivision 165-A of the ITAA 1997 contains the conditions for determining if a company is able to deduct a tax loss under Division 36 of the ITAA 1997. Section 165-10 of the ITAA 1997 provides that a company cannot deduct a tax loss unless it meets the conditions in section 165-12 of the ITAA 1997 (that is, it satisfies the COT) or it meets the condition in section 165-13 of the ITAA 1997 (that is, it satisfies the same business test). Subdivision 165-F of the ITAA 1997 contains special provisions relating to situations where fixed entitlements to a share of the income or capital of a company are held by one or more non-fixed trusts. Section 165-215 of the ITAA 1997 provides that a company that does not meet the conditions in the COT in respect of a loss is nevertheless taken to satisfy the COT, if it meets the conditions contained in that section. These conditions relate broadly to situations where non-fixed trusts (other than family trusts) hold, directly or indirectly, fixed entitlements to a 50% or greater share of the income or capital of the company. As Trust B indirectly holds fixed entitlements to a 50% or greater share of the income of Company A, Subdivision 165-F of the ITAA 1997 is applicable when determining whether Company A satisfies the COT in respect of the loss in the trial year.", "Date_of_Decision": "1 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 36 Subdivision 165-A section 165-10 section 165-12 section 165-13 Subdivision 165-F Section 165-215 Subdivision 707-A paragraph 707-110(2)(a) subsection 707-120(1) subsection 707-120(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/959", "Subject_References": "Consolidation - continuity of ownership test Consolidation - joining Consolidation - losses Continuity of ownership test Joining entity Joining time Non fixed trusts Transfer of losses Trial year Utilise a loss", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004960", "Unmatched_Content": "Keywords Consolidation - continuity of ownership test Consolidation - joining Consolidation - losses Continuity of ownership test Joining entity Joining time Non fixed trusts Transfer of losses Trial year Utilise a loss"}
{"ATO_ID_Number": "ATO ID 2003/971", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: losses - transferee's adjusted market value", "Issue": "Is the market value attributable to losses transferred to the transferee at the initial transfer time, ignored in determining the transferee's adjusted market value at that time for the purposes of subsection 707-320(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Any market value attributable to losses transferred to the transferee at the initial transfer time, is ignored in determining the transferee's adjusted market value at that time for the purposes of subsection 707-320(1) of the ITAA 1997. This is because losses do not contribute to the group's earning capacity.", "Facts": "Company A, and its wholly owned subsidiary, Company B form a consolidated group on 1 July 2003. Company B has unused losses from a prior income year. A bundle of losses is formed when losses are transferred (note 1) from Company B to Company A, the head company of the consolidated group at the joining time.", "Reasons_for_Decision": "Summary: The head company of a consolidated group (the transferee) is required to calculate the available fraction for this bundle of losses where at least one of the losses in the bundle is not a concessional loss. The available fraction for a bundle of losses is calculated in accordance with the formula in subsection 707-320(1) of the ITAA 1997. The denominator in that formula requires the ascertainment of the adjusted market value of the head company (note 2) at the initial transfer time. The adjusted market value of the transferee at the initial transfer time is its market value as at that time, subject to certain assumptions stated in subsection 707-320(1) of the ITAA 1997. One of these assumptions is that 'the transferee did not have a loss of any sort for an income year ending before that time'. Under section 707-115 of the ITAA 1997, only losses that have been made for an income year ending before the joining time may be transferred to the head company of a consolidated group (note 3). It follows that any loss transferred to the head company at the initial transfer time must be for an income year ending before that time. This is the case notwithstanding the fact that, under subsection 707-140(1) of the ITAA 1997, the Act is to operate as if the head company had made the loss for the income year in which the transfer occurs. Subsection 707-140(1) of the ITAA 1997 applies for the purposes of income years ending after the joining time. It enables the head company to use the transferred loss (subject to limitations) in working out its taxable income. However, that subsection does not seek to undo the fact that the loss was actually incurred in an earlier income year - an income year which ended before the initial transfer time. Consequently, under subsection 707-320(1) of the ITAA 1997, for the purposes of determining the head company's adjusted market value at the initial transfer time, it must be valued as if it had no such losses. This interpretation is consistent with the explanation contained in paragraph 8.81 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002, which states: The adjusted market value of the head company to which the losses are initially transferred (i.e. the transferee) is the head company's market value at the transfer time, ignoring any losses it has and assuming that its franking account balance is nil. The value of these attributes is ignored because they did not contribute to the group's earning capacity. Accordingly, under the formula, Company A's adjusted market value at the initial transfer time must be worked out as if Company A did not have any losses for prior income years, even though Company B has transferred such losses to it. Note 1: Subject to the transfer tests contained in Subdivision 707-A of the ITAA 1997. Note 2: Under the single entity principle the value of the head company includes the value of subsidiaries including the loss entity. Note 3: Under subsection 701-30(8) of the ITAA 1997, a non-membership period loss is treated as a loss for an income year ending at the end of the non-membership period.", "Date_of_Decision": "1 October 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 701-30(8) section 707-115 subsection 707-140(1) subsection 707-320(1) Subdivision 707-A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Adjusted market value of the consolidated group Available fraction Bundle of losses Consolidation Consolidation - joining Consolidation - losses Transferred losses Utilise a loss", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No. 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003971", "Unmatched_Content": "Keywords Adjusted market value of the consolidated group Available fraction Bundle of losses Consolidation Consolidation - joining Consolidation - losses Transferred losses Utilise a loss"}
{"ATO_ID_Number": "ATO ID 2003/1180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation - entity rules - not subsidiary for whole year", "Issue": "Is there a de minimis period in respect of section 701-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. There is no de minimis period in respect of section 701-30 of ITAA 1997. If an entity is not a member of the consolidated group for the whole of the income year the entity is obliged to calculate its income tax position for the non-membership period even if that period is only one day.", "Facts": "Subsidiary company has been in existence for some years. Subsidiary company becomes a subsidiary member of the consolidated group on 2 July 2004. Both the head company and the subsidiary company are 30 June balancing companies.", "Reasons_for_Decision": "Summary: Subsection 701-30(2) of the ITAA 1997 states that it has effect for the entity core purposes if: Subsidiary company is not a member of the consolidated group on 1 July 2004. Thus, it has a non-membership period of one day, as it was not a subsidiary member of the group for the entire income year. There is no provision in section 701-30 that allows for a de minimis period or creates an exception to the non-membership period as defined in paragraph 701-30(2)(b) of the ITAA 1997. Accordingly, the subsidiary company will be required to calculate its tax position in respect of the period of the year in which it was not a member of a consolidated group.", "Date_of_Decision": "26 September 2003", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 701-30 subsection 701-30(2) paragraph 701-30(2)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Entity rules Membership Non-membership period", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031180", "Unmatched_Content": "Keywords Consolidation Entity rules Membership Non-membership period"}
{"ATO_ID_Number": "ATO ID 2009/64", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: single entity rule and issue of non-share equity", "Issue": "Will the issue of non-share equity interests by a subsidiary member of a consolidated group give rise to a credit in the non-share capital account of the subsidiary (and not the head company) pursuant to section 164-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The requirement to maintain a non-share capital account does not constitute a core purpose to which the single entity rule (SER) in section 701-1 of the ITAA 1997 applies. As such, the issue of the non-share equity interests by the subsidiary member will give rise to a credit in its non-share capital account (and not the head company) pursuant to section 164-15 of the ITAA 1997.", "Facts": "Sub Co is a subsidiary member of a consolidated group whose head company is Head Co. Sub Co receives consideration for the issue of convertible notes to Third Party Co who is not a member of the consolidated group. The convertible notes qualify as an equity interest under the debt/equity rules in Division 974 of the ITAA 1997 and are non-share equity interests in Sub Co as defined in subsection 995-1(1) of the ITAA 1997 (as they represent an equity interest in Sub Co that is not solely a share).", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Division 164 requires a company that issues non-share equity interests to have a non-share capital account. The maintenance of a non-share capital account enables a non-share distribution on non-share equity interests to be characterised as either a non-share dividend or a non-share capital return. There is a requirement in section 164-15 to credit the non-share capital account when a company issues non-share equity interests in itself. The amount of the credit is broadly the market value of the consideration received for the issue of the interests. The consolidation regime in Part 3-90 allows a wholly-owned group of entities to be treated as a single entity for income tax purposes. The SER in section 701-1 is the central principle giving effect to this treatment. The SER operates to treat subsidiary members of the consolidated group as parts of the head company of the group, rather than separate entities, while they are members of the group. SER treatment only operates for the purposes outlined in subsections 701-1(2) and 701-1(3). These purposes are the head company core purposes and entity core purposes which are stated to be: Taxation Ruling TR 2004/11 outlines the Tax Office view that the single entity principle operates in a manner to provide outcomes broadly reflecting a single company operating by divisions. Paragraph 4 of TR 2004/11 provides guidance in relation to the extent of core purposes: The requirement to maintain the non-share capital account does not impact on the income tax liability or loss calculated for either Sub Co or Head Co. The account records Third Party Co's contributions and characterises a return on that investment as either a dividend or capital return. This characterisation only affects Third Party Co's income tax position. Paragraph 12 of TR 2004/11 outlines that the SER does not affect the income tax position of an entity that is not a member of a consolidated group: There is no specific provision extending the SER to the requirement to maintain a non-share capital account. Also, the consolidation regime does not make any express provision for the contributions received by a subsidiary member to be credited to a non-share capital account of the head company of the consolidated group. It follows that the 'company' identified in Division 164 as being required to establish the non-share capital account is Sub Co and not Head Co. Therefore the consideration received in respect of the convertible notes will require Sub Co (and not Head Co) to credit its own non-share capital account in accordance with section 164-15.", "Date_of_Decision": "3 July 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 164 Division 974 section 164-15 section 701-1 subsection 701-1(2) subsection 701-1(3) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/65", "Subject_References": "Consolidation Consolidated group Head company Non-share equity interest Single entity rule Subsidiary member of a consolidated group", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200964", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Consolidation Consolidated group Head company Non-share equity interest Single entity rule Subsidiary member of a consolidated group"}
{"ATO_ID_Number": "ATO ID 2009/65", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidations: single entity rule and payment of non-share dividends", "Issue": "In the following situation: is it the available frankable profits, within the meaning of Subdivision 215-B of the Income Tax Assessment Act 1997 (ITAA 1997), of the subsidiary member (and not the head company of the consolidated group) that are considered?", "Decision": "Yes. Establishing the extent to which a non-share dividend is a frankable distribution does not constitute a core purpose to which the single entity rule (SER) in section 701-1 of the ITAA 1997 applies. As such, the available frankable profits of the subsidiary member (and not the head company) are considered when applying Subdivision 215-B of the ITAA 1997.", "Facts": "Sub Co is a subsidiary member of a consolidated group whose head company is Head Co. Sub Co issues convertible notes to Third Party Co who is not a member of the consolidated group. The convertible notes qualify as an equity interest under the debt/equity rules in Division 974 of the ITAA 1997. The convertible notes are non-share equity interests in Sub Co as defined in subsection 995-1(1) of the ITAA 1997 as they represent an equity interest in Sub Co that is not solely a share. Sub Co pays a non-share dividend to Third Party Co.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997). Subdivision 215-B deals with determining whether non-share dividends are frankable distributions. Section 215-15 provides that non-share dividends can only be frankable to the extent there are 'available frankable profits' in the entity that pays the non-share dividend. The available frankable profits are determined by the formula provided in subsection 215-20(1). (An entity can anticipate future available frankable profits in working out the amount of available frankable profits - refer to section 215-25). The consolidation regime in Part 3-90 allows a wholly-owned group of entities to be treated as a single entity for income tax purposes. The SER in section 701-1 is the central principle giving effect to this treatment. The SER operates to treat subsidiary members of the consolidated group as parts of the head company of the group, rather than separate entities, while they are members of the group. SER treatment only operates for the purposes outlined in subsections 701-1(2) and 701-1(3). These purposes are head company core purposes and entity core purposes which are stated to be: Accordingly, on joining a consolidated group a subsidiary member loses its individual income tax identity and is treated as part of the head company for the purposes of working out the tax liability of the head company and the subsidiary member. Taxation Ruling TR 2004/11 outlines the Tax Office view that the single entity principle operates in a manner to provide outcomes broadly reflecting a single company operating by divisions. Paragraph 4 of TR 2004/11 provides guidance in relation to the extent of core purposes: Paragraph 12 of TR 2004/11 outlines that the SER does not affect the income tax position of an entity that is not a member of a consolidated group: In determining the extent to which the non-share distribution is a frankable distribution under Subdivision 215-B, it is necessary to decide whether it is the available profits of the head company or the available profits of the issuing subsidiary member that are examined. The answer depends on whether the determination of a frankable distribution is a matter relevant and/or incidental to determining the head company or subsidiary member's liability to income tax or loss (core purposes). The payment of a frankable distribution does not impact on the income tax liability or loss calculated for either the issuing subsidiary member or the head company of the consolidated group. The receipt of a frankable distribution only affects the recipient's (who is not a member of the consolidated group) income tax position. It follows that the non-share dividend paid to Third Party Co on the convertible notes will be eligible to be a frankable distribution to the extent of the available frankable profits of Sub Co (and not Head Co).", "Date_of_Decision": "3 July 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Part 3-6 Subdivision 215-A Subdivision 215-B section 215-1 section 215-15 subsection 215-20(1) section 215-25 Part 3-90 Division 701 section 701-1 subsection 701-1(2) subsection 701-1(3) Subdivision 709-A section 709-55 section 709-85 subsection 709-85(1) section 960-135 Division 974 Subdivision 974-E subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/64", "Subject_References": "Consolidated group Distributions Franked dividends Franking accounts Franking credits Head company Non-share equity interest Single entity rule Subsidiary member of a consolidated group", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200965", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Consolidated group Distributions Franked dividends Franking accounts Franking credits Head company Non-share equity interest Single entity rule Subsidiary member of a consolidated group"}
{"ATO_ID_Number": "ATO ID 2009/161", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: treatment of transactions of an offshore branch of a subsidiary member of a consolidated group with other members of the group under the single entity rule", "Issue": "Is the offshore branch of a subsidiary member of a consolidated group treated as if it were a branch of the head company of that group for the purposes of determining the income tax liability (or loss) of that head company.", "Decision": "Yes. For the purposes of determining the head company's income tax liability (or loss), the single entity rule (SER) in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) applies so that the offshore branch of a subsidiary member of a consolidated group is treated as if it were a branch of the head company of that consolidated group.", "Facts": "Sub Co is an Australian resident company that is a subsidiary member of a consolidated group whose head company is Head Co. Sub Co has a permanent establishment in a foreign country through which it carries on its business in that country (branch operations). Head Co enters into an agreement with Sub Co in relation to its branch operations.", "Reasons_for_Decision": "Summary: The offshore branch of an Australian resident entity comprises the operations carried on at or through a permanent establishment of that entity in another country. The SER in section 701-1 of the ITAA 1997 provides that, for head company core purposes and entity core purposes (as defined in subsections 701-1(2) and 701-1(3) of the ITAA 1997 respectively), a subsidiary member of a consolidated group is taken to be part of the head company for the period during which it is a member of the group. Taxation Ruling TR 2004/11 at paragraph 8 provides that:: As a consequence, the SER has the effect that: Further, the taxation ruling at paragraph 35 provides: In summary, the SER ensures that the income tax laws will apply to a consolidated group on the basis that the group is a single entity with all of the actions and transactions undertaken by the subsidiary members of the group being imputed to the head company... Therefore, for the purposes of determining Head Co's income tax liability (or loss), the offshore branch of Sub Co is treated as if it were an offshore branch of Head Co. Accordingly, the determination of the income and expenses of Head Co that are attributable to the branch operations for the purpose of determining Head Co's income tax liability (or loss) will involve determining the income derived and costs incurred by Head Co, which will include relevant income derived and costs incurred by Sub Co, in the course of the branch's operations.", "Date_of_Decision": "16 December 2009", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Single entity rule Head company Permanent establishment Foreign branches & subsidiaries of Australian companies", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009161", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Consolidation Single entity rule Head company Permanent establishment Foreign branches & subsidiaries of Australian companies"}
{"ATO_ID_Number": "ATO ID 2006/201", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: effect on head company of a consolidated group of an election made by a subsidiary member under section 775-150", "Issue": "Where an entity makes an election under section 775-150 of the Income Tax Assessment Act 1997 (ITAA 1997) and at the time of making the election the entity is a subsidiary member of a consolidated group, will the election be taken to have been validly made by the head company of the consolidated group?", "Decision": "No. The election will not be taken to have been validly made by the head company of the consolidated group.", "Facts": "On 15 June 2005 Head Co, as head company of a consolidatable group, lodges its return for the year ended 31 December 2004 and makes a choice under section 703-50 of the ITAA 1997 to form a consolidated group commencing from 1 January 2004. The consolidated group formed comprises Head Co as the head company, and Sub Co as the subsidiary member. On 6 February 2004, Sub Co made an election under section 775-150 of Division 775 of the ITAA 1997 to apply rules about disregarding certain foreign exchange (forex) realisation gains and forex realisation losses. Sub Co made the election under section 775-150 of the ITAA 1997 in its own name and on its own behalf. It did this at a time when it was not known that it was to become a subsidiary member of a consolidated group. Head Co did not make any election under section 775-150 of the ITAA 1997.", "Reasons_for_Decision": "Summary: An election made under section 775-150 of the ITAA 1997 will affect the working out of an entity's liability to income tax, and is therefore within the head company or entity core purposes contained in subsections 701-1(2) and 701-1(3) of the ITAA 1997 respectively. The retrospective nature of the choice to form a consolidated group under section 703-50 of the ITAA 1997 and the operation of the single entity rule (SER), contained in subsection 701-1(1) of the ITAA 1997, means that Sub Co is treated as a part of the Head Co at the time Sub Co made the election under section 775-150 of the ITAA 1997. As outlined at subparagraph 8(a) of Taxation Ruling TR 2004/11, the effect of the SER is to treat the actions and transactions of a subsidiary member as having been undertaken by the head company of the group. However, at the time that Sub Co made the election under section 775-150 of the ITAA 1997, it was unaware of its status as a subsidiary member of the consolidated group. Sub Co made the election in its own right, only intending the election to affect its own relevant transactions. Even if the SER applies to attribute the election to the Head Co as head company of the consolidated group, it is clear from the wording of section 775-150 and related provisions of the ITAA 1997 that the election can only be made on a whole of entity basis. There is no legislative opportunity to elect under section 775-150 that only the relevant transactions of Sub Co are to be affected by the election. In relation to elections made under section 775-150 of the ITAA 1997 and in relation to the particular facts detailed above, an election made by a subsidiary member will be viewed as an attempt to make a partial election and as such will not be taken to have been validly made by the head company of a consolidated group. Accordingly, the election made by Sub Co under section 775-150 of the ITAA 1997 is not a valid election made by Head Co as head company of the consolidated group.", "Date_of_Decision": "29 March 2006", "Year_of_Income": "Period from 1 January 2004 to 31 December 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 section 703-50 section 775-150 Division 775", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Choice to form Consolidation Consolidation - multiple entry consolidated group Foreign exchange gains and losses Single entity rule Taxpayer elections Transitional election", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006201", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Choice to form Consolidation Consolidation - multiple entry consolidated group Foreign exchange gains and losses Single entity rule Taxpayer elections Transitional election"}
{"ATO_ID_Number": "ATO ID 2005/281", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: disposal of intra-group asset - traditional security that is a debt", "Issue": "Where a traditional security: is acquired back by the head company of that group and later sold to a non-group entity, does section 26BB or section 70B of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the head company of that group in relation to the sale of that intra-group asset?", "Decision": "No. Neither a gain nor a loss will arise under sections 26BB or 70B of the ITAA 1936 respectively to the head company of a consolidated group from the sale of this intra-group asset. The relevant transaction is in substance equivalent to the head company's borrowing of money or the obtaining of credit from another entity, and therefore, has the equivalent effect of issuing a security that is a debt.", "Facts": "As part of an arrangement, an Australian resident entity that is a member of a consolidated group will issue two debt instruments to an entity that is resident offshore (the offshore entity) in return for the face value of the each of the debt instruments. The interest rate applicable to the debt instruments is between 0% and 0.5%. Each debt instrument constitutes a traditional security. Immediately after their issue, the offshore entity will then sell the securities back to the head company of the consolidated group for the face value of each debt instrument. At the end of this arrangement, or at the occurrence of specified events terminating the arrangement, the head company of the consolidated group will sell the debt instruments back to the offshore entity for the face value of each debt instrument, plus any payable or accrued unpaid interest.", "Reasons_for_Decision": "Summary: When the head company acquires the traditional securities that were issued to the offshore entity by the member of the group, they become intra-group assets (that is, assets where the rights and obligations are between members of a consolidated group). At that time, the Single Entity Rule (SER) in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) operates such that these intra-group assets are not recognised for income tax purposes during the period that they are held within the consolidated group (see Taxation Ruling TR 2004/11 subparagraph 8(c)). When the head company sells the traditional securities back to the offshore entity, as the traditional securities are in substance debt instruments, the principle provided in Taxation Determination TD 2004/33 will apply. From the head company's perspective, it has entered into an arrangement where there is a creation of a liability to pay an amount to a third party. In other words, the relevant transaction is, in substance, equivalent to the head company's borrowing of money or the obtaining of credit from another entity, and therefore has the equivalent effect of issuing a security that is a debt. This is also consistent with the principles provided in Taxation Determination TD 2004/84 which deals with the application of Division 16E of the ITAA 1936 to the assignment of the principal of an intra-group debt. The disposal concept in sections 26BB and 70B of the ITAA 1936 is equivalent to the transfer concept in Division 16E of the ITAA 1936 and the issue concept and the transfer concept are mutually exclusive in Division 16E. As the ATO view expressed in the above taxation determination is that the assignment of an intra-group debt that effectively amounts to the borrowing by the head company is the issue of a security, it cannot amount to the transfer of a security for Divisions 16E purposes. Therefore, it cannot amount to the disposal of a security for the purpose of sections 26BB or 70B of the ITAA 1936.", "Date_of_Decision": "27 July 2005", "Year_of_Income": "30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 26BB section 70B Division 16E", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11 | Taxation Determination TD 2004/33 | Taxation Determination TD 2004/84", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidated group Single entity rule Traditional securities", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005281", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 Taxation Determination TD 2004/33 Taxation Determination TD 2004/84 | Keywords Consolidated group Single entity rule Traditional securities"}
{"ATO_ID_Number": "ATO ID 2005/346", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Consolidation: single entity rule and tax cost setting amount of intra-group debt asset", "Issue": "Does the single entity rule in section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997) prevent the use of the tax cost setting amount that has been set under section 701-10 of the ITAA 1997 for an intra-group debt asset when the debt is extinguished or otherwise comes to an end in the group?", "Decision": "Yes. The single entity rule in section 701-1 of the ITAA 1997 will prevent the use of the tax cost setting amount of an intra-group asset, including a debt asset.", "Facts": "Finance Co and Borrower Co are wholly owned by Head Co. Prior to Head Co's election to form a consolidated group, Finance Co lent $100 to Borrower Co. Head Co and its subsidiaries, including Finance Co and Borrower Co, formed a consolidated group. An ACA (allocable cost amount) was calculated for Finance Co and $100 was allocated to the debt asset, which is a retained cost base asset under section 705-25 of the ITAA 1997. The debt is subsequently forgiven.", "Reasons_for_Decision": "Summary: Due to the operation of the single entity rule contained in section 701-1 of the ITAA 1997, the intra group debt asset does not become an asset of the head company. This is because the single entity rule deems subsidiary members to be parts of the head company rather than separate entities during the period that they are members of the consolidated group (an entity cannot transact with itself). Section 701-55 of the ITAA 1997 sets the tax cost of each asset of a joining entity at the asset's tax cost setting amount. This includes assets that do not become assets of the head company because they are not recognised as a consequence of the single entity rule (subsection 701-10(2) of the ITAA 1997). As a consequence of the non-recognition of these intra-group assets, their tax cost setting amounts cannot be taken into account for the purposes of other provisions of the income tax law. This is expressly reinforced by subsection 701-58(2) of the ITAA 1997, for the avoidance of doubt.", "Date_of_Decision": "29 November 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 701-1 section 701-10 subsection 701-10(2) section 701-55 subsection 701-58(2) section 705-25", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11 | Taxation Determination TD 2004/33 | Taxation Determination TD 2004/65 | Taxation Determination TD 2004/68 | Taxation Determination TD 2004/69 | Taxation Determination TD 2004/83 | Taxation Determination TD 2004/84 | Taxation Determination TD 2004/85 | Taxation Determination TD 2005/23", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/3 | ATO ID 2005/344 | ATO ID 2005/345", "Subject_References": "Consolidation Consolidated group Commercial debt forgiveness Single entity rule Tax cost setting amount", "Case_References": "", "Other_References": "Consolidation Reference Manual C2-4-245 ; C9-1-220 ; C9-1-110", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005346", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 Taxation Determination TD 2004/33 Taxation Determination TD 2004/65 Taxation Determination TD 2004/68 Taxation Determination TD 2004/69 Taxation Determination TD 2004/83 Taxation Determination TD 2004/84 Taxation Determination TD 2004/85 Taxation Determination TD 2005/23 | Keywords Consolidation Consolidated group Commercial debt forgiveness Single entity rule Tax cost setting amount"}
{"ATO_ID_Number": "ATO ID 2011/51", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: application of subsection 701-55(2) of the ITAA 1997 where no method to work out the decline in value applied before the joining time", "Issue": "Does subsection 701-55(2) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to enable the head company of a consolidated group to deduct an amount for the decline in value of a depreciating asset under Division 40 of the ITAA 1997 where:", "Decision": "Yes. Subsection 701-55(2) of the ITAA 1997 applies such that the head company can deduct an amount for the decline in value of the asset under Division 40 of the ITAA 1997 for the period after the joining time.", "Facts": "Head Co acquired all the shares in Join Co on 1 September 2010. At that time, Join Co became a subsidiary member of the consolidated group. The assets of Join Co include copyright in film (Film Copyright) which was acquired after 1 July 2004 for nominal consideration. The Film Copyright consists of rights held under the Copyright Act 1968 as owner of copyright in cinematograph film as opposed to any interest in the cinematograph film itself. The Minister of the Arts has not issued a certificate that the film is a qualifying Australian film and Screen Australia has not issued a certificate for the producer offset concerning the film. Accordingly, the concessional provisions in Division 10B and 10BA of the Income Tax Assessment Act 1936 and section 376-55 of the ITAA 1997 do not apply. The Film Copyright is a depreciating asset as it is an item of intellectual property for the purposes of paragraph 40-30(2)(c) of the ITAA 1997. Join Co did not work out the decline in value of the asset as there was a nominal cost for the purposes of Subdivision 40-C of the ITAA 1997. At the joining time the Film Copyright was recognised by Head Co as a depreciating asset and had its tax cost set at the asset's tax cost setting amount. The Film Copyright is used in the business conducted by Join Co both prior to and after the joining time.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Due to the operation of the single entity rule in section 701-1, the assets of a subsidiary member are taken, for the purpose of working out the head company's income tax liability, to be held by the head company (with the exception of intra-group assets) while the subsidiary remains a member of the consolidated group. Therefore, after the joining time, the head company becomes entitled to any deductions available for the decline in value of the depreciating assets owned by the subsidiary member. Deductions for the decline in value of depreciating assets are worked out under Division 40. However, paragraphs 701-55(2)(a) to (e) provide a number of modifying rules to be made in applying Division 40 to a depreciating asset owned by an entity that joins a consolidated group. These rules facilitate how Division 40 applies to the depreciating asset after the joining time. It is considered that the paragraphs that follow the introductory words of subsection 701-55(2) are assumptions and consequences rather than pre-conditions for the subsection to apply. Paragraph 701-55(2)(b) and subsequent paragraphs can only apply where a method for working out the decline in value applied just before the joining time. In this case, Join Co had not chosen one of the two available methods (diminishing value method or prime cost method) which can apply to Film Copyright acquired on or after 1 July 2004. Nor can it be said that a particular method applied to the Film Copyright prior to the joining time. The capital allowance provisions in Division 40 do not prescribe a method in the absence of a choice by a taxpayer. Therefore only paragraph 701-55(2)(a) is relevant in determining how Division 40 applies to the Film Copyright. Paragraphs 701-55(2)(b) - (e) will not apply to modify the application of Division 40 to the Film Copyright as no method of decline in value was chosen by Join Co just before the joining time. Instead, Division 40 will apply on its own terms from the joining time to set the method of decline in value and effective life for the Film Copyright. The Film Copyright will be taken to be acquired by Head Co at the joining time for a payment equal to the Film Copyright's tax cost setting amount under paragraph 701-55(2)(a). As Head Co, pursuant to the single entity rule, uses the Film Copyright, there will be a 'start time' under subsection 40-60(2) allowing it to deduct an amount for the decline in value of the asset. Deductions are allowable to Head Co in the income year in which the start time occurs and later income years whilst it continues to hold the Film Copyright. Head Co will be free to choose the method of decline in value and effective life of the Film Copyright pursuant to Division 40.", "Date_of_Decision": "27 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Subdivision 40-C subsection 40-25(1) paragraph 40-30(2)(c) subsection 40-60(2) subsection 40-65(1) section 376-55 section 701-1 subsection 701-55(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - assets Consolidation - joining Copyright Cost of a depreciating asset Decline in value Deduction for depreciating assets Depreciating assets Diminishing value method Head company Hold a depreciating asset Intangible deprecia", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201151", "Unmatched_Content": "Keywords Consolidation Consolidation - assets Consolidation - joining Copyright Cost of a depreciating asset Decline in value Deduction for depreciating assets Depreciating assets Diminishing value method Head company Hold a depreciating asset Intangible deprecia"}
{"ATO_ID_Number": "ATO ID 2010/40", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: tax cost setting rules - acquisition of a MEC group", "Issue": "Does Subdivision 705-C of the Income Tax Assessment Act 1997 (ITAA 1997) apply where a single entity, that is not a member of a consolidated group or a multiple entry consolidated (MEC) group, acquires all the membership interests in the head company and the other eligible tier-1 companies of a MEC group and immediately makes a choice to form a consolidated group?", "Decision": "No. Subdivision 705-C of the ITAA 1997 does not apply where a single entity, that is not a member of a consolidated group or MEC group, acquires all the membership interests in the head company and the other eligible tier-1 companies of a MEC group and immediately makes a choice to form a consolidated group.", "Facts": "A Co and B Co are eligible tier-1 companies of top company, X Co. A Co has a wholly owned subsidiary, S Co. A Co and B Co make a choice under section 719-50 of the ITAA 1997 to form a MEC group with A Co appointed as the provisional head company. Later, Z Co, an Australian resident company which is not a member of a consolidated group or MEC group, acquires all of the membership interests in A Co and B Co. Z Co immediately makes a choice under section 703-50 of the ITAA 1997 to form a consolidated group with Z Co as head company and A Co, B Co and S Co as subsidiary members.", "Reasons_for_Decision": "Summary: Subdivision 705-C of the ITAA 1997 modifies Division 701 of the ITAA 1997 (the core rules) and Subdivision 705-A of the ITAA 1997 (tax cost setting amount for assets where a single entity joins a consolidated group) when an existing consolidated group acquires another consolidated group. Where a MEC group is acquired by another MEC group or a consolidated group, the MEC cost setting rules in Subdivision 719-C of the ITAA 1997 are modified to align with Subdivision 705-C. Subsection 705-175(1) of the ITAA 1997 sets out the circumstances in which Subdivision 705-C of the ITAA 1997 applies: This Subdivision applies if all of the *members of a *consolidated group (the acquired group ) become members of another consolidated group (the acquiring group ) at a particular time (the acquisition time ) as a result of the *acquisition of *membership interests in the *head company of the acquired group. Subsection 705-175(1) of the ITAA 1997 applies only where an existing consolidated group acquires all the membership interests in the acquired group. The words 'become members of another consolidated group' (emphasis added) indicate that there must be an existing consolidated group as the acquiring group. This view is supported by the Guide to Subdivision 705-C in section 705-170 of the ITAA 1997 and the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.1) 2002 (see paragraph 1.16). Section 719-170 of the ITAA 1997 modifies subsection 705-175(1) of the ITAA 1997 for MEC groups where all the members of a MEC group become members of a consolidated group or another MEC group as a result of the acquisition of membership interests in the head company and the other eligible tier-1 companies of the acquired MEC group. Under subsection 719-170 of the ITAA 1997, an eligible tier-1 company of an acquired MEC group is treated in a similar manner as head company of an acquired group for the purposes of subsection 705-175(1) of the ITAA 1997. Consistent with the operation of Subdivision 705-C of the ITAA 1997, section 719-170 of the ITAA 1997 applies only where the acquiring group is either an existing consolidated group or an existing MEC group. This view is supported by the Notes 1 and 2 to subsection 719-170(2) of the ITAA 1997 and the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.2) 2002 which both explain how the modifications in section 719-170 of the ITAA 1997 operate in situations where a MEC group is acquired by another group (see paragraphs 2.14 to 2.20). Subsection 705-175(1) of the ITAA 1997 does not apply where the members of the acquired group become members of a consolidated group that forms because a choice is made to consolidate the consolidatable group arising from the acquisition of the acquired group. Although that choice may have effect from the date on which the acquired group is acquired, it is not sufficient to satisfy the requirements of subsection 705-175(1). Z Co is not a member of a consolidated group or a MEC group at the time it acquires the membership interests in A Co and B Co. The consolidated group formed with Z Co as the head company and all the former members of the MEC group, A Co, B Co and S Co, as subsidiary members, only comes into existence when Z Co makes a choice, under section 703-50 of the ITAA 1997, to consolidate the group. This choice may have effect from the date on which the membership interests in A Co and B Co are acquired, but it is not sufficient to satisfy the requirements of subsection 705-175(1) of the ITAA 1997, as modified by section 719-170 of the ITAA 1997. Accordingly, Subdivision 705-C of the ITAA 1997 does not apply where a single entity, which is not a member of a consolidated group or a MEC group, acquires all the membership interests in the head company and eligible tier-1 companies of a MEC group and then makes the choice to form a consolidated group", "Date_of_Decision": "15 January 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 701 section 703-50 Division 705 Subdivision 705-A Subdivision 705-B Subdivision 705-C section 705-170 subsection 705-175(1) Division 711 section 719-50 Subdivision 719-C section 719-170 subsection 719-170(2) Subdivision 719-J Subdivision 719-K", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/160", "Subject_References": "Consolidation Consolidated group Consolidation - formation Consolidation - joining Consolidation - multiple entry consolidated group Eligible tier-1 company Head company Head company of a MEC group Subsidiary member of a consolidated group Subsidiary mem", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201040", "Unmatched_Content": "Keywords Consolidation Consolidated group Consolidation - formation Consolidation - joining Consolidation - multiple entry consolidated group Eligible tier-1 company Head company Head company of a MEC group Subsidiary member of a consolidated group Subsidiary mem"}
{"ATO_ID_Number": "ATO ID 2009/120", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax cost setting amount: leaving time - tax cost setting amount of membership interests that also constitute liabilities under accounting standards", "Issue": "At the time a subsidiary member of a consolidated group leaves the group, does item 2 or item 3 of the table in section 701-60 of the Income Tax Assessment Act 1997 (ITAA 1997) apply in relation to the membership interests in the leaving member that are also liabilities in accordance with accounting standards?", "Decision": "At the time the subsidiary member leaves the consolidated group, item 2 rather than item 3 of the table in section 701-60 of the ITAA 1997 applies in relation to the membership interests in the leaving member.", "Facts": "The head company of a consolidated group (Head Co) holds certain membership interests (the membership interests) in a subsidiary member (Sub Co). These membership interests also constitute liabilities in accordance with accounting standards. On entry into the consolidated group, the cost of the membership interests was included in the step 1 amount of the allocable cost amount (ACA) calculation. In accordance with Taxation Determination TD 2004/74, the membership interests were not added as a liability at step 2. At a future date, Sub Co ceases to be a subsidiary member of the consolidated group.", "Reasons_for_Decision": "Summary: When Sub Co ceases to be a subsidiary member, the tax cost setting amount of Head Co's membership interests in Sub Co will be set under subsection 701-15(3) of the ITAA 1997. Section 701-60 of the ITAA 1997, inter alia, sets out the basis for determining the tax cost setting amount of membership interests. Section 701-60 of the ITAA 1997 provides: 701-60 Tax cost setting amount The asset's tax cost setting amount is worked out using this table. Tax cost setting amount Item If the asset's tax cost is set by : The asset's tax cost setting amount is : 1 section 701-10 (Cost to head company of assets of joining entity) the amount worked out in accordance with Division 705 2 section 701-15 (Cost to head company of membership interests in entity that leaves group) the amount worked out in accordance with section 711-15 or 711-55 3 section 701-20 (Cost to head company of assets consisting of certain liabilities owed by entity that leaves group) or section 701-45 (Cost of assets consisting of liabilities owed to entity by members of the group) the *market value of the asset 4 section 701-50 (Cost of certain membership interests of which entity becomes holder on leaving group) the amount worked out in accordance with section 711-55 Note 1: The tax cost setting amount of certain interests in partnership assets is worked out under Subdivision 713-E. Note 2: The tax cost setting amount of certain assets of a life insurance company is worked out under Subdivision 713-L. In the present case, the conditions for item 2 are satisfied. Section 701-15 of the ITAA 1997 will apply for the purposes of setting the tax cost of the membership interests when Sub Co ceases to be a subsidiary member. The question arises whether section 701-20 of the ITAA 1997 and consequently, item 3 of the table in section 701-60 of the ITAA 1997 will apply. At first look, it would appear that the conditions for section 701-20 applying are met in relation to the membership interests which also constitute liabilities owed by Sub Co to Head Co (refer subsection 701-20(2) of the ITAA 1997). On closer examination, it is arguable that the reference to an 'asset of the head company' in section 701-20 of the ITAA 1997, viewed in the context of section 701-15 of the ITAA 1997, does not contemplate assets which are membership interests that are dealt with in section 701-15. Section 701-15 refers to membership interests in the entity that leaves the group while section 701-20 refers to an asset of the head company. This would suggest that the reference to an 'asset of the head company' in section 701-20 was intended to contemplate assets other than membership interests falling within section 701-15. That is, the two provisions cover different situations. This is consistent with the observation that while the heading to section 701-15 of the ITAA 1997 refers to 'cost to head company of membership interests', section 701-20 of the ITAA 1997 refers to 'certain liabilities'. The former is a reference to all membership interests while the latter covers certain liabilities. This would appear to suggest that section 701-20 was never intended to interfere with the subject of section 701-15. Furthermore, there is no provision which acts as a 'tie-breaker' to determine which item in the table in section 701-60 of the ITAA 1997 applies where two items can potentially apply. Therefore, a construction which adopts the view that sections 701-15 and 701-20 of the ITAA 1997 are mutually exclusive also precludes the absurd result that a particular membership interest has two provisions applying, both of which purport to set its tax cost at the tax cost setting amount. In addition, paragraphs 2.62 to 2.64 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No 1) 2002 appears to support the view that section 701-15 of the ITAA 1997 covers membership interests while section 701-20 of the ITAA 1997 covers a different category of things being liabilities of the leaving entity (or assets of the head company) that are not membership interests: 2.62 Where a subsidiary member leaves a consolidated group the head company recognises, just before the time the entity leaves, the membership interests in the leaving entity. These membership interests would not be recognised whilst the entity was a member of the group. The cost for the membership interests is set at a cost equal to the head company's cost for the net assets that the leaving entity takes with it. This preserves the alignment between the cost for membership interests in the entity and its assets. The rules for working out the cost for the net assets are explained in Chapter 5. [Schedule 1, item 2, section 701-15] 2.63 Where a number of related entities leave the group, at the one time, the same principle (discussed in paragraph 2.62) applies to the membership interests held by one entity in any of the other entities (see Chapter 5). [Schedule 1, item 2, section 701-50] 2.64 Where a subsidiary member leaves a consolidated group with a liability owing to a member of the group, the liability is recognised for income tax purposes as an asset of the head company just before the time it leaves. The cost for income tax purposes of such an asset at the time it leaves is set at its market value at that time. Such an asset would not be recognised whilst the entity was a group member because intra-group transactions are ignored under the single entity rule. [Schedule 1, item 2, section 701-20 and item 3 in the table in section 701-60] It is therefore considered that it is section 701-15 of the ITAA 1997 and consequently only item 2 of the table in section 701-60 of the ITAA 1997 that will apply in working out the tax cost setting amount of the membership interests upon Sub Co ceasing to be a subsidiary member. This outcome is also consistent with the treatment on entry. The relevant membership interests in this case were recognised as membership interests for the purposes of step 1 of the entry ACA process. Such membership interests were not treated as liabilities at step 2 (refer Taxation Determination TD 2004/74). Section 701-15 of the ITAA 1997, upon exit, is intended to preserve the alignment of the head company's cost for membership interests in each entity and its assets (refer subsection 701-15(2) of the ITAA 1997).", "Date_of_Decision": "29 September 2009", "Year_of_Income": "Year ended 30 September 2009 Year ended 30 September 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 701-15 subsection 701-15(3) section 701-20 subsection 701-20(2) section 701-60", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/74", "Related_ATO_Interpretative_Decisions": "ATO ID - 2009/121", "Subject_References": "Accounting liabilities Cost of membership interests Leaving entity", "Case_References": "", "Other_References": "Paragraphs 2.62 to 2.64 of the Explanatory Memorandum to the New Business Tax System (Consolidation) Bill (No 1) 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009120", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2004/74 | Keywords Accounting liabilities Cost of membership interests Leaving entity"}
{"ATO_ID_Number": "ATO ID 2009/121", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax cost setting amount: leaving time - membership interests that also constitute liabilities under accounting standards", "Issue": "At the time a subsidiary member of a consolidated group leaves the group, are membership interests in the leaving member that are also liabilities in accordance with accounting standards, included at step 4 under subsection 711-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The membership interests are not included at step 4 under subsection 711-20(1) of the ITAA 1997 at the leaving time.", "Facts": "The head company (Head Co) of a consolidated group holds certain membership interests (the membership interests) in a subsidiary member (Sub Co). These membership interests also constitute liabilities in accordance with accounting standards. On entry into the consolidated group, the cost of the membership interests was included in the step 1 amount of the allocable cost amount (ACA) calculation. In accordance with Taxation Determination TD 2004/74, the membership interests were not added as a liability at step 2. At a future date, Sub Co ceases to be a subsidiary member of Head Co's tax consolidated group.", "Reasons_for_Decision": "Summary: When Sub Co ceases to be a subsidiary member, the tax cost setting amount of Head Co's membership interests in Sub Co will be set under subsection 701-15(3) of the ITAA 1997. Item 2 of the table in section 701-60 of the ITAA 1997 will apply such that the tax cost setting amount of the membership interests will be determined in accordance with section 711-15 of the ITAA 1997. Step 4 of the table in subsection 711-20(1) of the ITAA 1997 refers to the amount worked out under section 711-45 of the ITAA 1997. Relevantly, subsection 711-45(1) of the ITAA 1997 provides: For the purposes of step 4 in the table in subsection 711-20(1 ), the step 4 amount is worked out by adding up the amounts of each thing (an accounting liability ) that, in accordance with * accounting standards , or statements of accounting concepts made by the Australian Accounting Standards Board, is a liability of the leaving entity at the leaving time that can or must be identified in the entity 's statement of financial position. On one view, subsection 711-45(1) of the ITAA 1997 is an addition of all 'accounting liabilities' notwithstanding that certain liabilities may also constitute membership interests. The better view, however, is that subsection 711-45(1) of the ITAA 1997 does not contemplate liabilities which also constitute membership interests in the leaving entity. In determining the proper construction of subsection 711-45(1) in this respect, it is necessary to consider its text and context including a consideration of the surrounding provisions. The provision expressly refers to 'for the purposes of step 4 in the table in subsection 711-20(1)'. Regard must be given to the broader object underpinning the process in the table in subsection 711-20(1) of the ITAA 1997. Subsection 711-5(2) of the ITAA 1997 states the object of Division 711 of the ITAA 1997: Object 711-5(2 ) The object of this Division is, when entities cease to be * subsidiary members, to preserve the alignment of the * head company 's costs for *membership interests in entities and their assets that is established when entities become subsidiary members. Note : The reasons for preserving this alignment are set out in subsection 705-10(3 ). 711-5(3 ) This is achieved by recognising the * head company 's cost for those interests, just before the leaving time, as an amount equal to the cost of the leaving entity 's assets at the leaving time reduced by the amount of its liabilities. 711-5(4 ) If multiple entities cease to be * subsidiary members at the same time, the cost of any *membership interests that one holds in another is treated in a similar way. Under Taxation Determination TD 2004/74, the membership interests in the present scenario would be included at step 1 and not recognised at step 2 of the entry ACA calculation. If the object upon exit, as set out in section 711-5 of the ITAA 1997, is to preserve the alignment of the head company's costs for membership interests in entities and their assets, it would follow that such membership interests should not be included at step 4 of the exit ACA calculation. Furthermore, the language in subsections 711-5(2) and 711-5(3) of the ITAA 1997 also suggests that membership interests and liabilities are mutually exclusive. Accordingly, it is considered that the 'accounting liabilities' under subsection 711-45(1) of the ITAA 1997 do not contemplate liabilities constituting membership interests in Sub Co. They are therefore not included at step 4 of the table in section 711-20 of the ITAA 1997.", "Date_of_Decision": "29 September 2009", "Year_of_Income": "Year ended 30 September 2009 Year ended 30 September 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 701-15 subsection 701-15(3) section 711-5 subsection 711-5(2) subsection 711-5(3) section 711-15 section 711-20 subsection 711-20(1) section 711-45 subsection 711-45(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/74", "Related_ATO_Interpretative_Decisions": "ATO ID - 2009/120", "Subject_References": "Accounting liabilities Cost of membership interests Leaving entity", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009121", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2004/74 | Keywords Accounting liabilities Cost of membership interests Leaving entity"}
{"ATO_ID_Number": "ATO ID 2009/160", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: tax cost setting rules - acquisition of a consolidated group", "Issue": "Does Subdivision 705-C of the Income Tax Assessment Act 1997 (ITAA 1997) apply where a single entity, that is not a member of a consolidated group, acquires all the membership interests in the head company of a consolidated group and immediately makes a choice to form a consolidated group?", "Decision": "No. Subdivision 705-C of the ITAA 1997 does not apply where a single entity, that is not a member of a consolidated group, acquires all the membership interests in the head company of a consolidated group and immediately makes a choice to form a consolidated group.", "Facts": "X Co is an Australian resident company and not a member of any consolidated group. X Co acquires all of the membership interests in B Co, the head company of the B Co consolidated group. X Co chooses, under section 703-50 of the ITAA 1997, to form, with immediate effect, a consolidated group of which it is the head company, and all of the former members of the B Co consolidated group are subsidiary members.", "Reasons_for_Decision": "Summary: Division 705 of the ITAA 1997 sets out the tax cost setting rules for the assets of an entity that becomes a subsidiary member of a consolidated group. Subdivision 705-C of the ITAA 1997 contains specific rules for when an existing consolidated group is acquired by another consolidated group. Subdivision 705-C of the ITAA 1997 modifies Division 701 of the ITAA 1997 (the core rules) and Subdivision 705-A of the ITAA 1997 (tax cost setting amount where a single entity joins a consolidated group) so that the tax cost setting amount for assets of an acquired consolidated group that become those of an acquiring consolidated group reflects the cost to the latter group of acquiring the former. Subsection 705-175(1) of the ITAA 1997 sets out the circumstances in which Subdivision 705-C of the ITAA 1997 applies: This Subdivision applies if all of the *members of a *consolidated group (the acquired group ) become members of another consolidated group (the acquiring group ) at a particular time (the acquisition time ) as a result of the *acquisition of *membership interests in the *head company of the acquired group.. Subsection 705-175(1) of the ITAA 1997 applies only where an existing consolidated group acquires all the membership interests in the acquired group. The words 'become members of another consolidated group' (emphasis added) indicate that there must be an existing consolidated group as the acquiring entity. This view is supported by the Guide to Subdivision 705-C and the Explanatory Memorandum to the New Business Tax System (Consolidation and Other Measures) Bill (No.1) 2002 (see paragraph 1.16). Subsection 705-175(1) of the ITAA 1997 does not apply where the members of the acquired group become members of a consolidated group that forms because a choice is made to consolidate the consolidatable group arising from the acquisition of the acquired group. Although that choice may have effect from the date on which the acquired group is acquired, it is not sufficient to satisfy the requirements of subsection 705-175(1) of the ITAA 1997. X Co is not a member of a consolidated group at the time it acquires the membership interests in B Co, the head company of the acquired consolidated group. The consolidated group formed with X Co as the head company and all the former members of the B Co consolidated group as subsidiary members, only comes into existence when X Co makes a choice, under section 703-50 of the ITAA 1997, to consolidate the group. This choice may have effect from the date on which the B Co consolidated group is acquired, but it is not sufficient to satisfy the requirements of subsection 705-175(1) of the ITAA 1997. Accordingly, where a single entity, that is not a member of a consolidated group, acquires all the membership interests in a consolidated group and then makes the choice to form a consolidated group, the tax cost setting modifications in Subdivision 705-C of the ITAA 1997 will not apply.", "Date_of_Decision": "16 December 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 701 section 703-50 Division 705 Subdivision 705-A Subdivision 705-B Subdivision 705-C subsection 705-175(1) Division 711", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/74", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidated group Head Company Tax cost setting rules Consolidation Consolidation - formation Consolidation - joining Subsidiary member of a consolidated group", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009160", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2006/74 | Keywords Consolidated group Head Company Tax cost setting rules Consolidation Consolidation - formation Consolidation - joining Subsidiary member of a consolidated group"}
{"ATO_ID_Number": "ATO ID 2008/164", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Step 2 of entry: allocable cost amount - deferred tax liabilities", "Issue": "Is a deferred tax liability which is attributable to an exploration permit and which is measured by a head company of a consolidated group having regard to the deduction available following the application of subsection 40-80(1) of the Income Tax Assessment Act 1997 (ITAA 1997), an accounting liability for the purposes of section 705-70 of the ITAA 1997?", "Decision": "No. The amount of a deferred tax liability attributable to an exploration permit, measured by the head company by having regard to the $nil tax value of the asset that would arise after joining time following the application of subsection 40-80(1) of the ITAA 1997, is not an amount within the ambit of section 705-70 of the ITAA 1997.", "Facts": "ACo Pty Ltd (ACo) is the head company of a tax consolidated group effective from 1 July 2003. BCo Pty Ltd (BCo) was the head company of the former BCo tax consolidated group. BCo elected to enter the tax consolidation regime effective 1 July 2002. On 2 March 2005, BCo tax consolidated group joined ACo's tax consolidated group. An asset of BCo is an exploration permit granted after 30 June 2001. Exploration activities were conducted before and after joining ACo's tax consolidated group. The market value of the exploration permit is substantially higher than BCo's carrying amount of the asset for accounting purpose. Exploration expenditure for the non-membership period to 1 March 2005 was claimed by BCo as a tax deduction under subsection 40-730(1) of the ITAA 1997. The reset tax cost of the exploration permit upon joining ACo's tax consolidated group is $10,000. ACo as the head company of the consolidated group claims a tax deduction of $10,000 for the decline in value of the exploration permit under subsection 40-25(1) of the ITAA 1997 in the income year ended 30 June 2005. Following that deduction, the tax value of the exploration permit is reduced to $nil. AASB 1020 (1989) was adopted by both ACo and BCo. UIG Abstract 52 (December 2003) is the relevant accounting guidance on tax consolidation accounting.", "Reasons_for_Decision": "Summary: Section 705-60 of the ITAA 1997 sets out the steps to be followed when working out the allocable cost amount (ACA) for an entity joining a consolidated group. There are eight steps in the ACA calculation. It is step 2 of the calculation, the amount of a joining entity's liabilities, which needs to be considered in this situation. The step 2 amount is worked out under subsection 705-70(1) of the ITAA 1997, subject to adjustments under subsection 705-70(1A) and sections 705-75 to 705-85 of the ITAA 1997. Subsection 705-70(1) of the ITAA 1997 provides: For the purposes of step 2 in the table in section 705-60, the step 2 amount is worked out by adding up the amounts of each thing (an accounting liability) that, in accordance with *accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board, is a liability of the joining entity at the joining time that can or must be recognised in the entity's statement of financial position. For an amount of an accounting liability to be counted under subsection 705-70(1) of the ITAA 1997, the liability must be an accounting liability of the joining entity at the joining time. Joining time in the context of subsection 705-70(1) is interpreted as if the single entity rule did not apply (paragraph 16 of Taxation Ruling TR 2004/14). In the present case, the joining time is the acquisition date of BCo on 2 March 2005. A deferred tax liability which is attributable to an asset held by the joining entity at the joining time can in certain circumstances constitute an accounting liability that is taken into account at step 2 of the ACA process under subsection 705-70(1A) of the ITAA 1997. Subsection 705-70(1A) states: Where liability valued differently for joined group However, if, in accordance with those *accounting standards or statements, the amount of an accounting liability of the joining entity would be different when it became an accounting liability of the joined group, the different amount is treated as the amount of the liability. An accounting liability that is referred to in subsection 705-70(1A) of the ITAA 1997 is a liability that is properly recognised and measured at the joining time in the joined group. Where the amount of the deferred tax liability in the joined group under subsection 705-70(1A) of the ITAA 1997 - measured by applying the same accounting standards and authoritative pronouncements and using the same accounting policies used to measure the amount of the deferred tax liability in the joining entity under subsection 705-70(1) of the ITAA 1997 - is different from the amount calculated under subsection 705-70(1), then it is the amount calculated under subsection 705-70(1A) that is relevant in determining step 2 of the ACA. When the accounting liability is a deferred tax liability recognised in the statement of financial position of the joining entity as attributable to an asset held by the joining entity at joining time, the amount of that deferred tax liability can be different from the amount of the deferred tax liability that would be attributed to the asset in the hands of the joined group simply because the relatives from which the deferred tax liability attributed to an asset is calculated - accounting value and tax value - can be different for the joining entity and the joined group. Subsequent to BCo joining ACo's tax consolidated group, ACo as the holder of the exploration permit because of the operation of the single entity rule has a depreciating asset for which a tax cost is set through the ACA process (sections 701-10 and 705-35 of the ITAA 1997). Subsection 701-55(2) of the ITAA 1997 gives meaning to the expression an 'asset's tax cost is set' for the purposes of specified capital allowance provisions. Under subsection 701-55(2), the exploration permit is taken to be acquired by the head company, ACo, at the tax cost setting amount at the joining time. As ACo has met the requirements of subsection 40-80(1) of the ITAA 1997, the decline in value of the depreciation asset (being the exploration permit) is equal to its cost. A deduction is available under subsection 40-25(1) of the ITAA 1997 to the head company of the joined group, ACo, as holder of the exploration permit, but that deduction does not occur at the joining time. Rather, a deduction is but a step in the calculation of taxable income for an income year: section 4-15 of the ITAA 1997. Any deduction for decline in value of the exploration permit acquired by ACo at the joining time is not relevant until after the joining time when it is taken into account in calculating the taxable income of ACo as head company for the year ended 30 June 2005. Therefore, a deferred tax liability of the joined group measured from a tax value of $nil which arises after the deduction under subsection 40-25(1) of the ITAA 1997 (following the application of subsection 40-80(1) of the ITAA 1997) is taken into account can only arise after joining time. No deferred tax liability of that amount would have been attributable to the exploration permit as an accounting liability of the joining entity, BCo, as at the joining time within the ambit of subsection 705-70(1) of the ITAA 1997. Nor would it have been the amount of the deferred tax liability when it became an accounting liability of the joined group within the ambit of subsection 705-70(1A) of the ITAA 1997.", "Date_of_Decision": "25 November 2007", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 4-15 subsection 40-25(1) subsection 40-80(1) section 701-10 subsection 701-55(2) section 705-35 section 705-60 subsection 705-70(1) subsection 705-70(1A) section 705-75 section 705-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounting liabilities Allocable cost amount Consolidation Consolidated group Deferred tax liabilities Joining entity Joining time", "Case_References": "", "Other_References": "AASB 1020 (1989) UIG Abstract 52 (December 2003)", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008164", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/14 | Keywords Accounting liabilities Allocable cost amount Consolidation Consolidated group Deferred tax liabilities Joining entity Joining time"}
{"ATO_ID_Number": "ATO ID 2007/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Continuing Majority-Owned Entity Test", "Issue": "Can the trading stock assets of an entity that becomes a subsidiary member of a consolidated group be retained cost base assets for the purposes of Division 705 of Income Tax Assessment Act 1997 (ITAA 1997) where the subsidiary member fails to meet the requirements of section 701A-1 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997)?", "Decision": "No. The trading stock assets of a subsidiary member are not eligible to be treated as retained cost base assets where the subsidiary member fails to meet the requirement of section 701A-1 of the IT(TP)A 1997.", "Facts": "From 1 July 2001, YCo (a listed Australian public company) owned 90% of the shares in ACo which held all of the shares in BCo. There has been no change to the underlying majority ownership of YCo from 27 June 2002. On 1 July 2003 ACo and BCo form a tax consolidated group with ACo as the head company. On the same day YCo and its subsidiary members also formed a consolidated group. On 1 July 2004 A Co acquires 100% of D Co's consolidated group of which ECo is a subsidiary member. On 1 July 2005 ACo and its subsidiary members (BCo, DCo and ECo) join YCo's consolidated group upon YCo acquiring the remaining membership interest in ACo from ZCo. BCo, D Co and ECo, as individual entities, hold trading stock assets just before becoming a subsidiary member of YCo's consolidated group.", "Reasons_for_Decision": "Summary: The integrity measures in relation to trading stock (section 701A-5 of the IT(TP)A 1997) and internally generated assets (section 701A-10 of the IT(TP)A 1997) apply to an entity that is a continuing majority-owned entity under section 701A-1 of the IT(TP)A 1997. An entity is a continuing majority-owned entity if that entity becomes a subsidiary member of a consolidated group on or after 1 July 2002 and a person or persons continued to be the majority owners of the entity from the start of 27 June 2002 until the entity became a subsidiary member of the group (subsection 701A-1(1) of the IT(TP)A 1997). A person or persons are the majority owners of an entity if they beneficially own, directly or indirectly through one or more interposed entities, membership interests in the entity whose market value is more than 50% of the market value of all of the membership interests in the entity (subsection 701A-1(2) of the IT(TP)A 1997). The majority owner/s referred to in subsection 701A-1(2) of the IT(TP)A 1997 are the ultimate beneficial owners. Paragraph 1 of Taxation Determination TD 2004/88 states that: In determining whether there has been a change in the majority ownership of an entity, for the purpose of applying the continuing majority-owned entity test in section 701A-1 of the Income Tax (Transitional Provisions) Act 1997 ('IT(TP)A 1997'), it is necessary to trace through all interposed entities to the ultimate beneficial owners of the entity. To determine continuing majority-ownership it is therefore necessary to 'look through' a consolidated group to ascertain the ultimate beneficial owners of each individual entity that become a subsidiary member. That is, the continuing majority-owned entity test under section 701A-1 of the IT(TP)A 1997 is applied at the individual entity level since the section requires an examination of the individual entity's ultimate beneficial ownership starting from 27 June 2002 until becoming a subsidiary member of a consolidated group. If an entity is a continuing majority-owned entity, the operation of Part 3-90 of the ITAA 1997 is modified in relation to each asset of a continuing majority-owned entity that is trading stock just before the entity becomes a subsidiary member of the entity's designated group (section 701A-5 of the IT(TP)A 1997). In this case, it is necessary to look at ACo, BCo, DCo and ECo and test whether each individual entity is majority owned at all times from the start of 27 June 2002 until the entity became a subsidiary member of YCo's consolidated group. There has been no change in the ultimate beneficial ownership of ACo and BCo throughout the test period. Therefore, ACo and BCo as individual entities satisfy the continuing majority-owned entity requirement under section 701A-1 of the IT(TP)A 1997. In respect of DCo and ECo, the acquisition by ACo of the shares in DCo in 2004 means a person or persons did not continue to be the majority owners of those entities in the test period of 27 June 2002 until the entities became a subsidiary member of YCo's consolidated group. Therefore, DCo and ECo are not continuing majority-owned entities under section 701A-1 of the IT(TP)A 1997. Even though ACo is a continuing majority-owned entity, it does not hold trading stock as an individual entity on a 'look through' basis in order for section 701A-5 of the IT(TP)A 1997 to apply. BCo on the other hand is a continuing majority-owned entity and holds trading stock as an individual entity. Thus, the trading stock assets held by BCo are eligible to be treated as retained cost base assets. The trading stock assets held by DCo and ECo are not eligible to be treated as retained cost base assets because those entities are not continuing majority-owned entities under section 701A-1 of the IT(TP)A 1997.", "Date_of_Decision": "14 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax (Transitional Provisions) Act 1997 section 701A-1 subsection 701A-1(1) paragraph 701A-1(1)(a) paragraph 701A-1(1)(b) subsection 701A-1(2) section 701A-5 section 701A-10", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/88", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/197 | ATO ID 2004/735", "Subject_References": "Consolidated group Reset cost base asset Retained cost base asset Subsidiary member of a consolidated group Trading stock", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200739", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2004/88 | Keywords Consolidated group Reset cost base asset Retained cost base asset Subsidiary member of a consolidated group Trading stock"}
{"ATO_ID_Number": "ATO ID 2007/40", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: retained cost base assets - purchased receivables of a joining entity", "Issue": "Are the rights over discrete debts contained within purchased debt ledgers of the joining entity at the joining time prevented from being retained cost base assets under paragraph 705-25(5)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) because the vendor may 'buy back' those rights in certain circumstances?", "Decision": "No. The rights over discrete debts contained within purchased debt ledgers of the joining entity at the joining time are not prevented from being retained cost base assets under paragraph 705-25(5)(b) of the ITAA 1997 because the vendor may 'buy back' those rights in certain circumstances .", "Facts": "At the joining time, Sub Co's (the joining entity's) assets include rights over discrete debts that had been legally assigned to it prior to the joining time. The agreement, which effected the assignment of the rights over the debts, set out a number of circumstances in which a 'buy back' of the rights could occur.", "Reasons_for_Decision": "Summary: Paragraph 705-25(5)(b) of the ITAA 1997 provides that a retained cost base asset includes: (b) a right to receive a specified amount of....Australian currency, other than a right that is a marketable security within the meaning of section 70B of the Income Tax Assessment Act 1936 .... Taxation Ruling TR 2005/10 explains that the expression 'a right to receive a specified amount of Australian currency' in paragraph 705-25(5)(b) of the ITAA 1997 is a reference to 'an indefeasible, present right to the actual or constructive receipt of a fixed, nominal amount of Australian currency' (paragraphs 9 and 20 of TR 2005/10). Paragraph 25 of TR 2005/10 states that an indefeasible, present right does not exist where the 'actual right....is liable to be defeated or terminated by the operation of a condition subsequent or conditional limitation'. Taxation Ruling TR 2005/10 does not explain what the expression 'condition subsequent' means. However, the meaning of that expression is defined in The CCH Macquarie Concise Dictionary of Modern Law (Sydney: CCH Australia Limited, 1988) as 'an event the occurrence of which deprives a previous act of its effect'. The expression is similarly defined in Osborn's Concise Law Dictionary (London: Sweet & Maxwell, 1983) as 'one which destroys or divests the right upon the happening of the event'. Butterworths Concise Australian Legal Dictionary (Sydney: LexisNexis Butterworths, 3 rd ed, 2004) describes a condition subsequent as 'a condition, being a future event upon the occurrence of which the parties agree to terminate their obligations and the relations created by the contract (or either or both of the parties obtain the right to terminate the further performance of the contract) ( National Australia Bank Ltd v. KDS Construction Services Pty Ltd (in liq) (1987) 163 CLR 668; (1987) 76 ALR 27). The agreement effecting the assignment of the rights over the debts to Sub Co sets out circumstances within which a 'buy back' of those rights may occur. The expression 'buy back' suggests that those circumstances do not deprive the original assignment of its effect (since a 'buy back', or re-assignment, cannot occur unless the original assignment was effective); or terminate the obligations and relations created under the agreement. Therefore, the terms which allow a 'buy back' to occur do not qualify as 'conditions subsequent'. Accordingly, the fact that the vendor may 'buy back' the rights over the discrete debts in certain circumstances does not in itself prevent those rights from qualifying as retained cost base assets under paragraph 705-25(5)(b) of the ITAA 1997.", "Date_of_Decision": "14 February 2007", "Year_of_Income": "Year ending 30 June 2007 Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 70B", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation - assets Cost setting rules Joining entity Joining time Retained cost base asset Tax cost setting rules", "Case_References": "National Australia Bank Ltd v. KDS Construction Services Pty Ltd (in liq) (1987) 163 CLR 668 (1987) 76 ALR 27", "Other_References": "Bird R, Osborn's Concise Law Dictionary (London: Sweet & Maxwell, 1983) Butterworths Concise Australian Legal Dictionary (Sydney: LexisNexis Butterworths, 3rd ed, 2004) The CCH Macquarie Concise Dictionary of Modern Law (Sydney: CCH Australia Limited, 1988)", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200740", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2005/10 | Keywords Consolidation - assets Cost setting rules Joining entity Joining time Retained cost base asset Tax cost setting rules"}
{"ATO_ID_Number": "ATO ID 2007/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: tax cost setting amount - exemption from the application of a reduction in the tax cost setting amount of a privatised asset", "Issue": "Does A, the head company of a consolidated group, which has, over a period of time, acquired 100% of the membership interests in B, the head company of another group, meet the conditions for exemption from the application of subsection 705-47(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provided by paragraph 705-47(5)(b) of the ITAA 1997 in that A and B were not associates just before the joining time?", "Decision": "No. Because of the period of time taken by A to acquire 100% of the membership interests of B, for the purposes of subsection 705-47(5) of the ITAA 1997, A is an associate of B just before the joining time.", "Facts": "B is the head company of the B consolidated group which was formed on 1 July 2002. Prior to the formation of the B consolidated group, B, an Australian resident, held a number of privatised assets that were subject to the operation of Division 58 of the ITAA 1997. A, an Australian resident, is the head company of the A consolidated group. At 1 August 2004 A held approximately 5% of the interests in B, acquired on-market, and announced its intention to acquire 100% of the interests in B through an off-market takeover bid. As at 1 October 2004, A held an ownership interest of 75% in B and on 31 October 2004, A announced that its off-market take-over bid had closed and that compulsory acquisition of the outstanding interests in B would proceed. At that time it held approximately 95% of the interests in B. It was decided that B would join the A consolidated group upon A acquiring 100% of the interests in B on 1 December 2004.", "Reasons_for_Decision": "Summary: Division 58 of the ITAA 1997 sets out the rules for calculating deductions for the decline in value of, and balancing adjustments for, depreciating assets previously owned by, or purchased from, a tax-exempt entity. Broadly, Division 58 applies where a tax-exempt entity becomes taxable to any extent (an 'entity sale') or, as in this case, where a taxable entity acquires depreciating assets from an exempt entity in connection with the acquisition of a business from the exempt entity (an 'asset sale'). The effect of Division 58 of the ITAA 1997 is to limit the first element of the cost of a privatised asset. As tax exempt entities are not subject to balancing charge events, the absence of Division 58 would potentially enable values to be shifted into depreciating assets and higher tax benefits to be claimed by the newly privatised business. Division 58 ensures that the depreciation deductions are capped until such time as the privatised asset is disposed of in an asset sale and a special balancing adjustment (SBA) occurs. Where the asset is disposed of in an entity sale, prior to the SBA occurring, the depreciation deductions remain capped. Section 705-47 of the ITAA 1997 was introduced to ensure the appropriate interaction of Division 58 of the ITAA 1997 with the consolidation provisions of that Act. Where a company holds a privatised asset at the time of consolidation, the cost allocated to that asset is restricted, for depreciation purposes, by reference to the Division 58 capped amount. Section 705-47 also applies to limit the cost of a privatised asset held by a consolidated group which joins another consolidated group. However, exemption from the application of subsection 705-47(2) of the ITAA 1997 is provided by subsections 705-47(3) to 705-47(5) of the ITAA 1997. Paragraph 705-47(3)(a) of the ITAA 1997 is satisfied where the old head company is not an exempt entity. Paragraph 705-47(3)(b) of the ITAA 1997 then requires the conditions of either of subsections 705-47(4) or (5) of the ITAA 1997 to be met. Under subsection 705-47(5) of the ITAA 1997, the head company of the earlier group needs to have held the asset for more than 24 months and the purchasing entity, the head company of the joined group, just before the joining time, must not be an associate of the head company of the earlier (joining) group. Paragraph 318(2)(d) of the Income Tax Assessment Act 1936 defines associates of a company ('primary entity') to include another entity ('controlling entity') where: A was, therefore, an associate of B at the time A held a majority voting interest (greater than 50% interest in it) and since A held 75% of the interest in B at 1 October 2004, it therefore held a majority voting interest in B at least two months before 100% ownership of B was achieved. One of the defining terms used in the conditions of paragraph 705-47(5)(b) of the ITAA 1997 is 'just before the joining time'. The announcement of the cash take-over offer on 1 August 2004, while it is a point at which the parties were not associates, cannot be considered to be just before the joining time. It must therefore be concluded that A, as head company of the joined consolidated group, and B, as head company of the joining group, do not meet the conditions for exemption from the application of subsection 705-47(2) of the ITAA 1997 provided by paragraph 705-47(5)(b) of the ITAA 1997, in that A and B were associates just before the joining time.", "Date_of_Decision": "7 March 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 58 section 705-47 subsection 705-47(2) subsection 705-47(3) subsection 705-47(4) subsection 705-47(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt entities Consolidation", "Case_References": "", "Other_References": "Treasury Paper No. 20 of 4 December 2003 Tax Laws Amendment (2004 Measures No. 2) Act 2004 Explanatory Memorandum", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200774", "Unmatched_Content": "Keywords Exempt entities Consolidation"}
{"ATO_ID_Number": "ATO ID 2007/118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: consolidated group - allocable cost amount for a leaving entity - the exit step 4 amount", "Issue": "When a subsidiary member leaves a consolidated group, are liabilities that are extinguished by virtue of the transaction that causes the entity to leave the group (being the issue of shares in that entity to an entity outside the group), included at step 4 of the calculation of allocable cost amount (ACA) under section 711-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. When the subsidiary member leaves the consolidated group, liabilities that are extinguished by virtue of the transaction that causes the entity to leave the group (being the issue of shares in that entity to an entity outside the group) are included at step 4 of the calculation of ACA under section 711-20 of the ITAA 1997.", "Facts": "A Co is the head company of a consolidated group and Sub Co is a subsidiary member of that group. The group consolidated on 1 July 2003. At the joining time Sub Co recognised in its statement of financial position a $100 loan liability owed to creditor A (an entity outside the consolidated group). On 1 July 2004, the directors of Sub Co resolved to issue new shares to creditor A in full satisfaction of the outstanding debt and signed Directors Minutes to that effect. On 2 July 2004 new shares in Sub Co are issued and registered to creditor A, and Sub Co ceases to be a subsidiary member of the consolidated group. The issue of the shares extinguished the liability of Sub Co and also caused the Sub Co to leave the group. Immediately prior to the issue of the new shares, Sub Co had a $100 loan liability owing to creditor A.", "Reasons_for_Decision": "Summary: When an entity (the leaving entity) ceases to be a subsidiary member of a consolidated group the tax cost of each membership interest in the leaving entity that the head company of the group holds in the entity is set just before the entity ceases to be a member of the group at its tax cost setting amount (see section 701-15 of the ITAA 1997). The tax cost setting amount of each membership interest in the leaving entity is worked out by determining the head company's ACA for the leaving entity in accordance with the five step process (the exit ACA process) set out under section 711-20 of the ITAA 1997. The ACA is then allocated in accordance with section 711-15 of the ITAA 1997 (where there are no multiple exits) or section 711-55 of the ITAA 1997 (where there are multiple exits). The ACA process on exit aligns the cost of membership interests in a leaving entity with the cost of the net assets in the entity at the leaving time (see subsections 701-15(2) and 711-5(2) of the ITAA 1997). The cost of the net assets is the cost of the leaving entity's assets at the leaving time reduced by the amount of its liabilities (see subsection 711-5(3) of the ITAA 1997). For the purposes of aligning the cost of the net assets with the cost of the membership interests, all the assets and liabilities in the leaving entity must be considered just before the entity ceases to be a subsidiary member of the consolidated group. At issue in the present case is the amount worked out under step 4 of the exit ACA process. Step 4 subtracts from the total of the previous three steps of the calculation, amounts in respect of accounting liabilities of a leaving entity at the leaving time, as well as particular amounts that are treated as liabilities of the leaving entity under the exit ACA rules. The liabilities subtracted are the liabilities that can or must be identified in the statement of financial position of the leaving entity at the leaving time (see subsection 711-45(1) of the ITAA 1997). The starting point in working out the step 4 amount is subsection 711-45(1) of the ITAA 1997. That subsection specifically provides that: For the purposes of step 4 in the table in subsection 711-20(1), the step 4 amount is worked out by adding up the amounts of each thing (an accounting liability ) that, in accordance with accounting standards, or statements of accounting concepts made by the Australian Accounting Standards Board, is a liability of the leaving entity at the leaving time that can or must be identified in the entity's statement of financial position. (emphasis added) Subsection 711-5(1) of the ITAA 1997 introduces the concept of the leaving time and states: This Division [Division 711] has effect....if an entity (the leaving entity ) ceases to be a subsidiary member of a consolidated group (the old group ) at a particular time (the leaving time ). The phrase 'leaving time' takes its meaning from context. Even though: we consider that on a purposive construction of Division 711 of the ITAA 1997 having regard to the object set out in subsection 711-5(2) of the ITAA 1997, the words 'at the leaving time' in Division 711 cannot be construed as the point in time when the entity has left the group. The context for subsection 711-45(1) of the ITAA 1997 is the preparation of a notional statement of financial position (balance sheet) for the leaving entity by applying accounting standards and other authoritative pronouncements of the Australian Accounting Standards Board. At the leaving time, in the context of subsection 711-45(1), means just before the leaving entity ceases to be a subsidiary member of the consolidated group. This interpretation accords with the tax cost setting process on exit which is to set the tax cost of the membership interest just before the entity ceases to be a subsidiary member (see subsection 701-15(3) of the ITAA 1997). Accordingly, as the $100 loan liability is an accounting liability that can or must be identified in Sub Co's notional statement of financial position immediately before it ceased to be a subsidiary member of the consolidated group, it is subtracted at step 4 of the exit ACA process.", "Date_of_Decision": "1 June 2007", "Year_of_Income": "Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 701-15(3) section 701-60 subsection 711-5(1) subsection 711-20(1) section 711-15 section 711-20 section 711-45 subsection 711-45(1) section 711-55", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/14 | Taxation Ruling TR 2006/6 | Taxation Determination TD 2005/53", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounting liabilities Allocable cost amount Calculation of the allocable cost amount Consolidated group Consolidation Cost of membership interests Leaving entity Leaving time Tax cost setting amount", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007118", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/14 Taxation Ruling TR 2006/6 Taxation Determination TD 2005/53 | Keywords Accounting liabilities Allocable cost amount Calculation of the allocable cost amount Consolidated group Consolidation Cost of membership interests Leaving entity Leaving time Tax cost setting amount"}
{"ATO_ID_Number": "ATO ID 2007/127", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: life insurance - demutualisation of friendly society and application of CGT event L5", "Issue": "Does Subdivision 705-C of the Income Tax Assessment Act 1997 (ITAA 1997) apply where all the newly issued shares in a head company of a consolidated group are acquired by the head company of another consolidated group, as a result of implementing 'Demutualisation method 3' as prescribed in Division 9AA of the Income Tax Assessment Act 1936 (ITAA 1936), so that 'CGT event L5' either does not occur or is not relevant with respect to a subsidiary member of the first mentioned group?", "Decision": "Yes, Subdivision 705-C of the ITAA 1997 will apply where all the newly issued shares in a head company of a consolidated group are acquired by a head company of another consolidated group, as a result of implementing 'Demutualisation method 3' as prescribed in Division 9AA of the ITAA 1936, so that 'CGT event L5' will not occur with respect to a subsidiary member of the first mentioned group.", "Facts": "Head co is a friendly society that proposes to demutualise pursuant to section 121AH of the ITAA 1936, adopting Demutualisation method 3. Under this method, in connection with the implementation of the demutualisation: List* means a list referred to in subsection 163(3) of the Corporations Act 2001 (Cth) which must accompany an application to change from a company limited by guarantee to a company limited by shares, setting out prescribed details about each person to whom shares will be issued on such change of type. Until the time of demutualisation, Head co is a head company of a consolidated group, the members of which are Head co and one other wholly-owned subsidiary, Sub Co. Holding co is the head company of another consolidated group. At the point in time that the Holding co acquires all the newly issued shares in Head co, the consolidated group of which Head co is the head company ceases to exist.", "Reasons_for_Decision": "Summary: Paragraph 703-5(2)(a) of the ITAA 1997 provides that a consolidated group continues to exist until the head company of the group ceases to be a head company. The consolidated group, of which Head co is the head company, continues to exist up until the time that Head co issues all its shares to Holding co, being one of the steps involved in the adoption of Demutualisation method 3 pursuant to section 121AH of the ITAA 1936. From this point in time, Head co ceases to be a head company as it fails to satisfy all the conditions specified in Table 1 of subsection 703-15(2) of the ITAA 1997. In particular, it becomes a wholly-owned subsidiary of another company that qualifies as a head company. Consequently the consolidated group, of which Head co is the head company, ceases to exist at the point in time that Head co issues all its shares to Holding co. Ordinarily, the tax cost of membership interests in each entity that ceases to be a subsidiary member of a consolidated group, being Sub co in this case, would be set under section 701-15 of the ITAA 1997, at an amount worked out through section 701-60 of the ITAA 1997 in accordance with Division 711 of the ITAA 1997. However, where Subdivision 705-C of the ITAA 1997 applies, subsection 705-180(1) of the ITAA 1997 precludes the operation of certain provisions in Division 701, including sections 701-15 and 701-60 of the ITAA 1997. Subsection 705-180(1) of the ITAA 1997 states: If, because an entity ceases to be a subsidiary member of the acquired group when this Subdivision applies, a provision of Division 701 (other than section 701-25) would otherwise apply, in relation to the acquired group for the head company core purposes set out in subsection 701-1(3), the provision does not so apply. Consequently, a tax cost is not determined for the membership interests in a leaving entity, under section 701-15 of the ITAA 1997, where Subdivision 705-C of the ITAA 1997 applies. Subsection 705-175(1) of the ITAA 1997 provides that Subdivision 705-C of the ITAA 1997 applies if all the members of a consolidated group (the acquired group) become members of another consolidated group (the acquiring group) at a particular time (the acquisition time) as a result of the acquisition of membership interests in the head company of the acquired group. In this case, the members of the acquired group are Head co and Sub co, the head company of which is Head co. Head co and Sub co will become members of the acquiring group when Holding co acquires all the membership interests in Head co. Consequently, Subdivision 705-C of the ITAA 1997 applies in this instance to modify the rules in Division 701 and Subdivision 705-A of the ITAA 1997 such that sections 701-15 and 701-60 of the ITAA 1997 will not apply and a tax cost is not determined for the membership interests in Sub co. According to subsection 104-520(1) of the ITAA 1997, CGT event L5 happens where: In this case, the first condition required for CGT event L5 to happen is satisfied as Sub co ceases to be a subsidiary member of a consolidated group. The second condition required for the application of CGT event L5 is not satisfied because the group is not required to determine an allocable cost amount for Sub co as a consequence of the application of Subdivision 705-C of the ITAA 1997. Consequently, CGT event L5 does not apply.", "Date_of_Decision": "15 June 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 104-520 paragraph 703-5(2)(a) section 703-15 section 701-60", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/38", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Calculation of the allocable cost amount Capital gains tax CGT events CGT events L1-L8 - consolidated and MEC groups Leaving entity", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007127", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2006/38 | Keywords Calculation of the allocable cost amount Capital gains tax CGT events CGT events L1-L8 - consolidated and MEC groups Leaving entity"}
{"ATO_ID_Number": "ATO ID 2006/96", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: life insurance - tax cost setting amount for membership interests where unit trusts cease to be subsidiary members of a consolidated group", "Issue": "The head company of a consolidated group is treated as a life insurance company. The consolidated group includes two subsidiary members that are unit trusts. The first unit trust is held under the virtual PST of the head company. The underlying assets of this unit trust are segregated to support virtual PST life insurance policy liabilities. The underlying assets of the second unit trust are not segregated and form part of the ordinary assets of the head company. That unit trust can be said to be held under the 'ordinary component' of the head company. Each unit trust will issue an additional unit to the other component of the head company's life insurance business resulting in each trust ceasing to be a subsidiary member of the consolidated group. Will the income tax consequences of each unit trust leaving the consolidated group be determined in accordance with the rules under Division 711 of the Income Tax Assessment 1997 (ITAA 1997)?", "Decision": "Yes. When each unit trust ceases to be a subsidiary member of the consolidated group, the income tax consequences will be determined in accordance with the rules contained in Division 711 of the ITAA 1997. The tax cost setting amount for the group's membership interests in each unit trust will be worked out in accordance with section 711-15 of the ITAA 1997.", "Facts": "Head Co is the head company of a consolidated group. Under subsection 713-505 of the ITAA 1997, Head Co is treated as a life insurance company for the purposes of applying the income tax law. Investment policies are issued to trustees of superannuation funds and to ordinary (non-superannuation) policyholders. The assets supporting these policies are held through two subsidiary member unit trusts: It is proposed to issue an additional unit from each unit trust to other 'components' of Head Co for market value, namely: Therefore, in accordance with subsection 713-510(2) of the ITAA 1997, Trust V and Trust O will cease to be subsidiary members of the consolidated group.", "Reasons_for_Decision": "Summary: In accordance with subsection 701-15(1) of the ITAA 1997: If the entity ceases to be a *subsidiary member of the group, this section has effect for the head company purposes, so far as they relate to the income year in which the entity ceases to be a subsidiary member or any later income year. Under subsection 701-15(2), the stated object of section 701-15 is: ...to preserve the alignment of the *head company's costs for *membership interests in each entity and its assets by recognising, when an entity ceases to be a *subsidiary member of the group, the cost of those interests as an amount equal to the cost of the entity's assets at that time reduced by the amount of its liabilities. Accordingly, under subsection 701-15(3) of the ITAA 1997: For each *membership interest that the *head company of the group holds in an entity that ceases to be a *subsidiary member, the interest's *tax cost is set just before the entity ceases to be a subsidiary member at the interest's *tax cost setting amount. * denotes a term defined in section 995-1 of the ITAA 1997. An asset's tax cost setting amount is worked out in accordance with section 701-60 of the ITAA 1997. In accordance with item 2 in the table in section 701-60 of the ITAA 1997, the tax cost setting amounts for the respective membership interests in the unit trusts that leave the consolidated group will be worked out in accordance with either section 711-15 or section 711-55. There is no multiple exit in terms of section 711-55 of the ITAA 1997. The trusts cease to be subsidiary members of the consolidated group because of the happening of two separate events. One event is the issue of an additional unit by Trust V which causes Trust V to exit the group. The other event is the issue of an additional unit by Trust O which causes Trust O to exit the group. Each event only causes one trust to exit the consolidated group. Therefore, as section 711-55 of the ITAA 1997 does not apply, the tax cost setting amount for each membership interest in each unit trust will be worked out in accordance with section 711-15.", "Date_of_Decision": "30 March 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 320 subsection 713-510(2) section 701-15 subsection 701-15(1) subsection 701-15(2) subsection 701-15(3) section 701-60 Division 711 section 711-15 section 713-505 section 711-55", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidation - assets Consolidation - exiting Cost setting rules Leaving entity Life insurance company Virtual pooled superannuation trusts Complying superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200696", "Unmatched_Content": "The terms 'virtual PST', 'virtual PST asset' and 'virtual PST life insurance policy' were repealed by First Home Saver Accounts (Consequential Amendment) Act 2008, effective 26 June 2008. They were replaced by the terms 'complying superannuation/FSHA asset pool' 'complying superannuation/FSHA asset' and 'complying superannuation/FSHA life insurance policy' respectively. From this date, references to 'virtual PST life insurance policy liabilities' in the following document can also be replaced with the term 'complying superannuation/FSHA liabilities'. | Keywords Consolidation Consolidation - assets Consolidation - exiting Cost setting rules Leaving entity Life insurance company Virtual pooled superannuation trusts Complying superannuation funds"}
{"ATO_ID_Number": "ATO ID 2004/96", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: chosen transitional entity - owned profits in transitional group and adjustment to allocable cost amount", "Issue": "Does an adjustment under section 705-160 of the Income Tax Assessment Act 1997 (ITAA 1997) occur in the first non-chosen subsidiary, where it is above a chosen transitional entity, for a step 3 amount in a non-chosen subsidiary below the chosen transitional entity?", "Decision": "No. Section 705-160 of the ITAA 1997 will not result in adjustments in the allocation of tax cost setting amounts in the first non-chosen subsidiary above a chosen transitional entity where the step 3 amount arises in a non-chosen subsidiary below the chosen transitional entity.", "Facts": "The group is a transitional group as defined by section 701-1 of the Income Tax (Transitional Provisions) Act 1997 (IT(TP)A 1997). Head company has made the choice for C Co to be a chosen transitional entity in accordance with section 701-5 of the IT(TP)A 1997. W Co has a step 3 amount for the purposes of the table in section 705-60 of the ITAA 1997 and in subsection 701-20(5) of the IT(TP)A 1997.", "Reasons_for_Decision": "Summary: Section 701-20 of the (IT(TP)A 1997 provides that a transitional group's allocable cost amount (ACA) for each non-chosen subsidiary must be worked out in a special way when the group includes a chosen transitional entity. The ACA for each non-chosen subsidiary is the sum of the head company adjusted allocable amount for the non-chosen subsidiary and, for each sub-group that exists in relation to the non-chosen subsidiary, the sum of each sub-group's notional allocable cost amount for the non-chosen subsidiary (subsection 701-20(3) of the IT(TP)A 1997). This group includes a chosen transitional entity so the ACA for all non-chosen subsidiaries must be calculated according to the rules in section 701-20 of the IT(TP)A 1997. There are no sub-groups which exist in relation to A Co or B Co. The ACA of A Co and B Co will therefore be determined by the head company adjustable allocable amount for these entities. In calculating the head company adjustable allocable amount for A Co and B Co, paragraph 701-20(4)(a) of the IT(TP)A 1997 requires the holding of all sub-group membership interests to be disregarded. The sub-group membership interests in the existing transitional group are the membership interests C Co holds in D Co and the membership interests D Co holds in W Co (paragraph 701-20(6)(b) of the IT(TP)A 1997). Because the sub-group membership interests are disregarded, the requirements of section 705-160 of the ITAA 1997 cannot be satisfied. Although A Co (the entity in paragraph 705-160(4)(a) of the ITAA 1997) holds membership interests in B Co (the second entity in paragraph 705-160(4)(b) of the ITAA 1997), B Co does not hold membership interests directly or indirectly in a third entity with a step 3 amount because of paragraph 701-20(4)(a) of the IT(TP)A 1997. The step 3 amount of W Co under the table in section 705-60 of the ITAA 1997 will not therefore result in any section 705-160 adjustments in the working out of the section 705-35 of the ITAA 1997 tax cost setting amounts in A Co which would affect the calculation of the ACA for B Co in this transitional group.", "Date_of_Decision": "12 December 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 705-35 section 705-60 section 705-160 paragraph 705-160(4)(a) paragraph 705-160(4)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/649", "Subject_References": "Allocable cost amount Allocation of the allocable cost amount Chosen transitional entity Consolidation Consolidation - assets Consolidation - formation Cost setting rules Non-chosen subsidiary Tax cost setting amount Transitional group", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200496", "Unmatched_Content": "Keywords Allocable cost amount Allocation of the allocable cost amount Chosen transitional entity Consolidation Consolidation - assets Consolidation - formation Cost setting rules Non-chosen subsidiary Tax cost setting amount Transitional group"}
{"ATO_ID_Number": "ATO ID 2003/649", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: chosen transitional entity - with owned losses - adjustment to allocation of allocable cost amount", "Issue": "Does section 705-160 of the Income Tax Assessment Act 1997 (ITAA 1997) increase the market value of a joining entity's membership interests in a chosen transitional entity with owned losses, when determining the tax cost setting amount of the joining entity's assets?", "Decision": "No. The requirements of section 705-160 of the ITAA 1997 will not be satisfied. Thus, the section will not operate to increase the market value of a joining entity's membership interests in a chosen transitional entity when determining the tax cost setting amount of the joining entity's assets.", "Facts": "Holding company, Company G and Company L are residents of Australia. Company G is wholly-owned by Holding company and Company G wholly owns Company L. There are no other members in the consolidatable group. Holding company successfully chooses to form a consolidated group before 1 July 2004. Company G and Company L were wholly owned by the Holding company before 1 July 2003 and have remained wholly-owned subsidiaries. On the date of consolidation, Holding company (which has become the head company of the consolidated group) decides that: Company G is not a chosen transitional entity, and Company L is a chosen transitional entity.", "Reasons_for_Decision": "Summary: Subsection 705-160(1) of the ITAA 1997 states that the object of section 705-160 is to prevent a distortion under section 705-35 of the ITAA 1997 in the allocation of the allocable cost amount (ACA) to a joining entity where the joining entity has direct or indirect membership interests in a second subsidiary member that has undistributed owned profits or accrued losses. The Explanatory Memorandum to New Business Tax System (Consolidation, Value shifting, Demergers and Other Measures) Bill 2002 (which inserted section 705-160 into the ITAA 1997) describes the distortion prevented by section 705-160 of the ITAA 1997 at paragraph 1.71: ...In the absence of section 705-160, the losses of a subsidiary member would reduce both: • The amount of the allocable cost amount that is allocated to membership interests, which represent direct or indirect interests in the subsidiary member with the losses (the unintended effect); and • The allocable cost amount for the subsidiary member with the losses (the intended effect of step 5 in working out the allocable cost amount). Section 701-15 of the Income tax (Transitional Provisions) Act 1997 states that section 701-10 and subsection 701-35(4) of the ITAA 1997 do not apply to the assets of a chosen transitional entity. This means that no ACA is worked out for the chosen transitional entity and no tax cost is set for its assets (see Explanatory Memorandum to New Business Tax System (Consolidation, Value shifting, Demergers and Other Measures) Bill 2002, paragraph 1.88). In this case, Company L is a chosen transitional entity, and no allocable cost amount (ACA) calculation is performed in respect of it. Consequently, no step 5 adjustment arises in respect of its losses. Subsection 705-160(2) of the ITAA 1997 provides that if: As an ACA calculation is not required for Company L (the second entity in the consolidated group), no adjustment is required to be made under step 5. Therefore condition (c) in subsection 705-160(2) of the ITAA 1997 is not met. Consequently, the modifications to the ACA calculation specified in subsection 705-160(2) of the ITAA 1997 will not apply. In other words, section 705-160 of the ITAA 1997 has no application to the allocation of ACA to the higher tier membership interests in the chosen transitional entity. Accordingly, for the purposes of determining the tax cost setting amount of the joining entity's assets, the market value of the joining entity's membership interests in the chosen transitional entity will not be increased.", "Date_of_Decision": "2 July 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 701-10 section 701-35(4) section 705-35 section 705-160 subsection 705-160(1) subsection 705-160(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Allocation of the allocable cost amount Chosen transitional entity Consolidation Consolidation - assets Consolidation - formation Tax cost setting rules Tax cost setting amount Profit/loss adjustment amount", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003649", "Unmatched_Content": "Keywords Allocation of the allocable cost amount Chosen transitional entity Consolidation Consolidation - assets Consolidation - formation Tax cost setting rules Tax cost setting amount Profit/loss adjustment amount"}
{"ATO_ID_Number": "ATO ID 2009/152", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Benchmark rate of return: Mandatorily Redeemable Preference Share (MRPS)", "Issue": "When determining the benchmark rate of return for a test interest under subsection 974-145(2) of the Income Tax Assessment Act 1997 (ITAA 1997), can that benchmark rate be adjusted to take into account differences between the test interest and the benchmark interest other than those relating to the characteristics listed in paragraphs 974-145(1)(a) to 974-145(1)(f) of the ITAA 1997?", "Decision": "No. The benchmark rate of return for a test interest cannot be adjusted to take into account differences other than those relating to the characteristics listed in paragraphs 974-145(1)(a) to 974-145(1)(f) of the ITAA 1997.", "Facts": "A company issued mandatorily redeemable preference shares (MRPS). The MRPS are mandatorily redeemable for their issue price nine years from their date of issue and are characterised as debt interests for the purposes of Division 974 of the ITAA 1997. The MPRS give their holders only a contingent right to dividends as any dividends are conditional upon the availability of distributable profits of the Company and upon the board exercising its discretion to pay a dividend. The funds raised by the issue of the MRPS are used by the Company for the purposes of gaining or producing its assessable income. Due to the operation of sections 8-1 and 25-85 of the ITAA 1997, the Company is entitled to an income tax deduction for the return paid on the MPRS to the extent that the annually compounded internal rate of return does not exceed the benchmark rate of return for the interest increased by 150 basis points. The Company, in determining the benchmark rate of return, could find no ordinary debt interest which satisfied the criteria of subsection 974-145(1) of the ITAA 1997 that is there was no ordinary debt interest issued by the Company or an equivalent entity immediately before the test interest issued which: had a comparable maturity date; was issued in the same market and currency; had the same credit status; and had the same degree of subordination to debts owed to the ordinary creditors of the Company. The Company thus determined the benchmark rate of return by reliance on subsection 974-145(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 995-1(1) defines \"benchmark rate of return\" for an interest as having the meaning given by section 974-145 of the ITAA 1997. The benchmark rate of return for an interest is determined in the first instance under subsection 974-145(1) of the ITAA 1997, by comparing the test interest with an \"ordinary debt interest\" that bears the same specified characteristics as the test interest. An \"ordinary debt interest\" is defined in subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 974-140 of the ITAA 1997. If an 'ordinary debt interest' with the requisite characteristics is found, the benchmark rate of return equals the annually compounded internal rate of return on that ordinary debt interest. No adjustments are made to the benchmark rate of return so determined to accommodate any differences between the ordinary debt interest and the test interest (including, of course, differences based on the discretionary dividend characteristics of the test interest under consideration here). If no ordinary debt interest with the specified characteristics can be found, subsection 974-145(2) of the ITAA 1997 instructs that an ordinary debt interest which is the next closest interest to the test interest in respect to those characteristics be found. This subsection then allows appropriate adjustments to the benchmark rate of return to take account of the differences between that next closest interest and the test interest. It is logical to make such adjustments for differences relating to the factors listed in subsection 974-145(1) of the ITAA 1997 because those are the differences which necessitated the move from the best benchmark interest under subsection 974-145(1)(1) to the next best in subsection 974-145(1)(2). There is however no reason to make adjustments for other, new differences (such as the discretionary dividend characteristics of the test interest), which cannot be taken into account in the case where the best or closest ordinary debt interest can be found under subsection 974-145(1) of the ITAA 1997. It is thus considered that the structure of section 974-145 of the ITAA 1997 and a logical reading of that provision clarifies that the \"differences\" referred to in subsection 974-145(2) of the ITAA 1997 are limited to those relating to the factors listed in subsection 974-145(1) of the ITAA 1997. Support for this interpretation can be found in the operation and clear policy intent of the statutory provisions employing the concept of the benchmark rate of return. For example, section 25-85 of the ITAA 1997 uses the concept to limit deductions for dividends or other contingent returns on interests that satisfy the debt test. Paragraphs 2.138 and 2.139 of the Explanatory Memorandum to the New Business Tax System (Debt and Equity) Act 2001 describe the provision as a revenue safeguard that limits deductible payments on debt/equity hybrids where returns are \"considerably in excess of the interest payable on an equivalent interest without any equity component (i.e. straight debt)\". Accordingly, deductions are capped by reference to a benchmark rate of return \" on an equivalent straight debt interest , increased by a margin [150 basis points] to recognise the premium paid for the increased risk of non-payment because of the contingency\" [emphasis added]. It would defeat the clear policy intent of this provision to allow a benchmark interest to have an equity component. This would be the outcome if a broad interpretation of \"differences\" in subsection 974-145(2) of the ITAA 1997 allowed adjustments to the benchmark rate of return to reflect the equity characteristics of the test interest. Furthermore, such an interpretation would undermine the intentionally limited accommodation of the equity component of the test interest through the 150 basis point margin. Accordingly, in determining the benchmark rate of return for the MPRS, the annually compounded internal rate of return on an interest that is closest to the MPRS, cannot be adjusted to take into account differences between that interest and the MPRS apart from differences based on factors listed in subsection 974-145(1) of the ITAA 1997. This includes not allowing an adjustment to take into account the discretionary nature of any dividend entitlement on the MPRS.", "Date_of_Decision": "24 September 2009", "Year_of_Income": "Year ending 31 December 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 25-85 section 974-140 section 974-145 subsection 974-145(1) subsection 974-145(2) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Non-equity share", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009152", "Unmatched_Content": "Keywords Debt equity borderline Non-equity share"}
{"ATO_ID_Number": "ATO ID 2009/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-portfolio dividends: returns on redeemable preference shares - debt interests", "Issue": "Is a return on a redeemable preference share, which is a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), non-assessable non-exempt income under section 23AJ of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes, a return on a redeemable preference share, which is a debt interest under Division 974 of the ITAA 1997, is non-assessable non-exempt income under section 23AJ of the ITAA 1936 because the return is a dividend and the other requirements of section 23AJ are satisfied.", "Facts": "Austco is an Australian resident company. Austco holds redeemable preference shares (for its own benefit) in a company, Forco, which is a foreign resident and not a resident of Australia for the purposes of Australian tax. The shares are not eligible finance shares or widely distributed finance shares for the purposes of the definition of non-portfolio dividend in subsection 317(1) of the ITAA 1936. The shares are debt interests under Division 974 of the ITAA 1997. Austco's voting interest in Forco for the purposes of section 334A of the ITAA 1936 is 48% of the voting power. Forco pays a return on the shares, which is a distribution out of profit, to Austco. Forco is a controlled foreign company and Austco is an attributable taxpayer in respect of Forco for the purposes of Part X of the ITAA 1936. At the time of the payment of the return on the shares, Austco does not have an attribution surplus under section 370 of the ITAA 1936 in respect of Forco.", "Reasons_for_Decision": "Summary: Section 23AJ of the ITAA 1936 provides that a non-portfolio dividend (as defined in subsection 317(1) of the ITAA 1936) is non-assessable non-exempt income of a company if: Subsection 317(1) of the ITAA 1936 defines a non-portfolio dividend as: Under subsection 6(1) of the ITAA 1936, 'dividend' includes any distribution made by a company to any of its shareholders (subject to exclusions that are not presently relevant). The meaning of 'dividend' in subsection 6(1) applies for the purposes of that Act, including Part X unless the contrary intention appears. Accordingly, the meaning of 'dividend' in the definition of non-portfolio dividend is the ordinary meaning of the term as extended by subsection 6(1) of the ITAA 1936. The return paid to Austco out of the profits of Forco is a distribution by a company to its shareholder and is, therefore, a dividend under subsection 6(1) of the ITAA 1936 and the definition of non-portfolio dividend in subsection 317(1) of the ITAA 1936. Whether a payment is a dividend under subsection 6(1) of the ITAA 1936 is not affected by Division 974 of the ITAA 1997 as Division 974 does not modify the meaning of the term in subsection 6(1), nor the meaning of non-portfolio dividend in subsection 317(1) of the ITAA 1936. Paragraph 2.16 of the Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001 confirms this as set out below: Shares that satisfy the debt test (e.g. compulsorily redeemable preference shares) are still shares for the purposes of the income tax law and returns on them are still dividends. As the shares are not eligible finance shares or widely distributed finance shares in the present case, the dividend is not an eligible finance share dividend or a widely distributed finance share dividend under subsection 317(1) of the ITAA 1936. As Austco has a voting interest of 48% in Forco, it has a voting interest which amounts to at least 10% of the voting power in Forco. Therefore, the distribution is a non-portfolio dividend as defined in subsection 317(1) of the ITAA 1936 for the purposes of section 23AJ of the ITAA 1936. The remaining requirements of section 23AJ of the ITAA 1936 are satisfied because: Paragraph 1 of Taxation Determination TD 2006/51 states that section 23AJ of the ITAA 1936 does not apply to dividends to the extent that a dividend is non-assessable non-exempt income under section 23AI of the ITAA 1936. As Austco does not have an attribution surplus in respect of Forco, no attribution debit arises under section 372 of the ITAA 1936 when the dividend is paid by Forco to Austco. Therefore, section 23AI of the ITAA 1936 does not apply to make the dividend non-assessable non-exempt income under that section. As all of the elements of section 23AJ of the ITAA 1936 are satisfied in the present case and the dividend is not non-assessable non-exempt income under section 23AI of the ITAA 1936, the return on the redeemable preference share which is a debt interest under Division 974 of the ITAA 1997 is non-assessable non-exempt income of Austco under section 23AJ of the ITAA 1936.", "Date_of_Decision": "2 December 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 23AI section 23AJ Part X subsection 317(1) section 334A", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2006/51", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt interest Dividend income Foreign income Non portfolio foreign income", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Debt and Equity) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009157", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2006/51 | Keywords Debt interest Dividend income Foreign income Non portfolio foreign income"}
{"ATO_ID_Number": "ATO ID 2007/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Redeemable Preference Shares: accumulated dividends forming part of redemption amount", "Issue": "For the purposes of subsection 974-135(5) of the Income Tax Assessment Act 1997 (ITAA 1997), does the 'redemption amount' in respect of a redeemable preference share include any accumulated but unpaid dividends that the company has an effectively non-contingent obligation to pay on redemption?", "Decision": "Yes. For the purposes of subsection 974-135(5) of the ITAA 1997, the 'redemption amount' in respect of a redeemable preference share does include accumulated but unpaid dividends that the company has an effectively non-contingent obligation to pay on redemption.", "Facts": "X Company Pty Ltd enters into a financing arrangement whereby it issues a redeemable preference share (RPS) to investors. Under the terms of issue, X Company Pty Ltd is under an effectively non-contingent obligation to redeem the RPS for its 'redemption amount' after twelve years. The RPS gives the shareholder a right to an annual fixed dividend entitlement on 30 June of each year over the life of the share provided X Company Pty Ltd has sufficient profits at that time to pay the dividend. Any dividends that are not declared and paid in full will accumulate and become due and payable on redemption, forming part of the 'redemption amount'. The shares are all fully paid up.", "Reasons_for_Decision": "Summary: Subsection 974-135(5) of the ITAA 1997 provides that an obligation to redeem a preference share is not contingent merely because there is a legislative requirement for the redemption amount to be met out of profits or a fresh issue of equity interests. Further, regulation 974-135C of the Income Tax Regulations 1997 provides that an obligation to redeem or buy back a preference share in relation to a company is not a contingent obligation merely because a requirement exists, under a law, to the effect that the redemption or buy back must not prejudice the company's ability to pay its creditors or must not cause the company's remaining assets to become insufficient to pay any of the company's debts. These provisions have the effect of disregarding a contingency which would otherwise exist. Under the terms of issue, dividends on the RPS accumulate and the amount of any unpaid dividend entitlement is to be included in the 'redemption amount' payable by X Company Pty Ltd upon redemption of the RPS. On a plain reading of the provision, there is no basis for restricting 'redemption amount' in subsection 974-135(5) of the ITAA 1997 to only the issue price component of the redemption amount if it is defined to also include any accumulated but unpaid dividends (so that the holder is entitled to a fixed dividend regardless of whether that dividend is declared). Nor is there anything in the extrinsic materials relating to the provision that suggests a different outcome was intended. In such a case, subsection 974-135(5) of the ITAA 1997 will apply to the whole of the redemption amount (including the accumulated dividends which the issuer has an effectively non-contingent obligation to pay on redemption).", "Date_of_Decision": "5 March 2007", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-135(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/527", "Subject_References": "Debt equity borderline Debt test Equity test Redeemable preference shares Effectively non-contingent obligation", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200752", "Unmatched_Content": "Keywords Debt equity borderline Debt test Equity test Redeemable preference shares Effectively non-contingent obligation"}
{"ATO_ID_Number": "ATO ID 2006/102", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt/Equity: the timing of the deductibility of returns on a non equity share", "Issue": "Where a redeemable preference share (RPS) is categorised as a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), does section 25-85 of the ITAA 1997 allow a deduction to be claimed under section 8-1 of the ITAA 1997 on an accruals basis from the date of issue of the RPS?", "Decision": "No. The dividend will not be deductible on an accruals basis from the date of issue of the RPS. It will only be deductible under section 8-1 of the ITAA 1997 on or after the date of each payment.", "Facts": "A company, which has a tax year ending 30 June, issues non-cumulative, mandatory RPS on 1 January 2004. The RPS will be mandatorily redeemed for cash on 1 January 2009. A dividend will be paid annually at the rate of 7.5% per annum on the 31 July each year. The RPS will be classified as a debt interest pursuant to Division 974 of the ITAA 1997.", "Reasons_for_Decision": "Summary: A return paid on a debt interest would be deductible where it meets the general deduction criteria of section 8-1 of the ITAA 1997. Where the return would not otherwise meet the general deduction criteria, it may still be deductible (up to a limit not exceeding the benchmark rate of return plus 150 basis points), by virtue of section 25-85 of the ITAA 1997. Section 25-85 of the ITAA 1997 deals with certain returns that an entity pays on a debt interest (subsection 25-85(1) of the ITAA 1997). It provides that a deduction will not be prevented merely because the return is contingent on economic performance, or secures a permanent or enduring benefit for the entity or a connected entity (subsection 25-85(2) of the ITAA 1997). Furthermore, where the return is a dividend, subsection 25-85(3) of the ITAA 1997 applies so that the return will be deductible to the extent that it would be deductible under section 8-1 of the ITAA 1997 if: In the present case, the financial benefit to be provided takes the form of a return on a debt interest which is a legal form share. The return will thus be in the form of a dividend. The term 'dividend' is defined in subsection 6(1) of the Income Tax Assessment Act 1936 and includes 'any distribution made by a company to any of its shareholders, whether in money or other property'. Generally, in order to deduct an outgoing under section 8-1 of the ITAA 1997, it must have been incurred. Paragraph 25-85(3)(a) of the ITAA 1997 specifically fixes the point in time at which a dividend is incurred for the purposes of section 8-1 of the ITAA 1997. Thus, the 'payment' of the dividend is to be treated as the point in time in which, had the return been interest, the liability would have been incurred by the entity. The linkage of incurring to the actual payment of the return has the result that the liability is not incurred until the dividend is paid. Paragraph 25-85(3)(b) of the ITAA 1997 then provides for a linkage between the 'interest' incurred (being the dividend that has been paid), and the finance raised by the entity from issuing the RPS to enable a determination to be made as to whether the 'interest' satisfies the positive limbs of section 8-1 of the ITAA 1997. However, the meaning of the term 'incurred' in paragraph 25-85(3)(b) is to be found in paragraph 25-85(3)(a) of the ITAA 1997. As the dividends in this case have not been paid, but only accrued, no deduction is allowable by virtue of sections 8-1 and 25-85 of the ITAA 1997.", "Date_of_Decision": "31 August 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 25-85 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Debt interest Non-equity share", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006102", "Unmatched_Content": "Keywords Debt equity borderline Debt interest Non-equity share"}
{"ATO_ID_Number": "ATO ID 2006/103", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Performance period for a stapled instrument under Division 974 of the ITAA 1997", "Issue": "Where a financing arrangement that satisfies the related scheme provisions consists of an instrument with effectively non-contingent obligations and a term of 10 years, stapled to a perpetual instrument which has no effectively non-contingent obligations, are the financial benefits received or provided under the scheme calculated under section 974-35 of the Income Tax Assessment Act 1997 (ITAA 1997) using nominal terms?", "Decision": "Yes. The financial benefits received or provided under the related scheme will be calculated using nominal terms as subsection 974-35(3) of the ITAA 1997 provides that the performance period for the purposes of subsection 974-35(1) of the ITAA 1997 is the period within which, under the terms on which the interest is issued, the effectively non-contingent obligations of the issuer, and any connected entity of the issuer, to provide a financial benefit in relation to the interest have to be met.", "Facts": "X company Pty Limited enters into a financing arrangement whereby it issues a redeemable preference share which is legally stapled to one of its ordinary shares. The redeemable preference share is redeemable in year 10 for at least its fact value. The ordinary shares are perpetual and any dividend payments thereon are contingent on the company having profits and the directors declaring that a dividend be payable. The scheme is a related scheme.", "Reasons_for_Decision": "Summary: Section 974-35 of the ITAA 1997 sets out the manner in which the value of a financial benefit to be provided or received under the scheme is to be calculated. Paragraph 974-35(1)(a) of the ITAA 1997 provides that the value of a financial benefit to be provided or received is to be calculated in nominal terms if the performance period ends no later than 10 years after the interest arising from the scheme is issued or, in present value terms if the performance period must, or may, end more than 10 years after the interest arising from the scheme is issued. Subsection 974-35(3) of the ITAA 1997 defines the performance period as: the period within which, under the terms on which the interest is issued, the effectively non-contingent obligations of the issuer, and any connected entity of the issuer, to provide a financial benefit in relation to the interest have to be met. As the only effectively non-contingent obligations are in relation to the redeemable preference shares, namely the return of at least the issue price at year 10, it is their performance period that is used to value the financial benefits provided and received under the related scheme. In drawing this conclusion it is noted that while the ordinary shares have a term of greater than 10 years, in that they are perpetual, they do not influence the performance period determination as there are no effectively non-contingent obligations on the issuer in relation to these ordinary shares. Thus, in accordance with subsection 974-35(3) of the ITAA 1997 as the performance period ends no later than 10 years after the interests arising from the notional scheme will be issued the effectively non-contingent financial benefits must be valued in nominal terms.", "Date_of_Decision": "31 August 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 974-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Debt test Equity test", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006103", "Unmatched_Content": "Keywords Debt equity borderline Debt test Equity test"}
{"ATO_ID_Number": "ATO ID 2006/125", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Term subordinated notes issue: deferred interest and the existence of an effectively non-contingent obligation", "Issue": "For the purposes of paragraph 974-20(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997), is an issuer of a term subordinated note under an 'effectively non-contingent obligation' to provide financial benefits as payments of interest every fifth year where the issuer may, in its absolute discretion, elect to defer the payment of amounts of interest that become due quarterly until the end of each 5 year period?", "Decision": "Yes. For the purposes of paragraph 974-20(1)(c) of the ITAA 1997 the issuer will have an effectively non-contingent obligation to provide a financial benefit as a payment of interest every fifth year.", "Facts": "The arrangement involves a company issuing a term subordinated note for a term of 15 years. Interest is due on a quarterly basis at the Bank Bill Swap Rate (BBSW) plus a margin. Interest becomes due on each quarterly Interest Payment Date. However, at each Interest Payment Date other than at the end of years 5, 10 and 15 the issuer may elect, in its absolute discretion, to defer the payment of interest. All amounts of interest due must be paid no later than the end of years 5, 10 and 15 respectively. The principal sum must be repaid at the end of year 15. Deferred interest will compound from each Interest Payment Date until the date of payment at the standard interest rate (that is, at the Bank Bill Swap Rate plus the margin).", "Reasons_for_Decision": "Summary: One of the key elements of the debt test in subsection 974-20(1) of the ITAA 1997 is that the issuer must have an 'effectively non-contingent obligation' to provide a financial benefit or benefits (paragraph 974-20(1)(c) of the ITAA 1997). A financial benefit is defined under section 974-160 of the ITAA 1997 to include anything of economic value. Accordingly, each payment of interest will constitute the provision of a financial benefit. Subsection 974-135(1) of the ITAA 1997 states that there is an 'effectively non-contingent obligation' to take an action under a scheme if, having regard to the pricing, terms and conditions of the scheme, there is in substance or effect a non-contingent obligation to take that action. In determining whether the issuer has an effectively non-contingent obligation it is necessary to have regard to the issuer's obligation to pay interest. As noted above, the payment of amounts of interest that fall due within each 5 year period can be deferred at the issuer's discretion until no later than the end of that 5 year period. Payment of the amounts of interest that fall due within a 5 year period cannot be deferred by the issuer beyond the end of each 5 year period. Having regard to the pricing, terms and conditions of the scheme, the issuer has in substance or effect a non-contingent obligation to provide financial benefits as interest payments at the end of years 5, 10 and 15 for the purposes of paragraph 974-20(1)(c) of the ITAA 1997 of the debt test under subsection 974-20(1). Whether the instrument gives rise to a debt interest under subsection 974-15(1) of the ITAA 1997 will depend upon whether the remaining elements of subsection 974-20(1) of the ITAA 1997 are satisfied.", "Date_of_Decision": "20 April 2006", "Year_of_Income": "30 September 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 974-15 subsection 974-15(1) section 974-20 subsection 974-20(1) section 974-135 subsection 974-135(1) section 974-160", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Debt interest Effectively non-contingent obligation", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006125", "Unmatched_Content": "Keywords Debt equity borderline Debt interest Effectively non-contingent obligation"}
{"ATO_ID_Number": "ATO ID 2006/273", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 974: application of the debt test to Certificates of Deposit", "Issue": "Will the Certificate of Deposit issued by the taxpayer be characterised as a debt interest for the purposes of Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Certificate of Deposit issued by the taxpayer will be characterised as a debt interest for the purposes of Division 974 of the ITAA 1997.", "Facts": "A company raises finance by way of Certificates of Deposit. The Certificates of Deposit have the following terms:", "Reasons_for_Decision": "Summary: Subsection 974-15(1) of the ITAA 1997 provides that: A scheme gives rise to a debt interest in an entity if the scheme, when it comes into existence, satisfies the debt test in subsection 974-20(1) in relation to the entity. The tests for a debt interest are contained in subsection 974-20(1) of the ITAA 1997. That subsection states: A scheme satisfies the debt test in this subsection in relation to an entity if: (a) the scheme is a financing arrangement for the entity; and (b) the entity, or a connected entity of the entity, receives, or will receive, a financial benefit or benefits under the scheme; and (c) the entity has, or the entity and a connected entity of the entity each has, an effectively non-contingent obligation under the scheme to provide a financial benefit or benefits to one or more entities after the time when: (i) the financial benefit referred to in paragraph (b) is received if there is only one; or (ii) the first of the financial benefit referred to in paragraph (b) is received if there are more than one; and These requirements of the debt test in relation to the Certificates of Deposit are discussed below. | Detailed Reasoning - (a) Is there a scheme that is a financing arrangement for the entity?: Section 995-1 of the ITAA 1997 defines 'scheme' to mean any arrangement or any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. Thus, the issue of a Certificate of Deposit by the taxpayer will fall within this definition of a scheme. The scheme is being entered into or undertaken by the company with the intention to raise finance and therefore, the scheme is a financing arrangement for the entity. | Detailed Reasoning - (b) Does the entity or a connected entity of the entity, receive, or will receive, a financial benefit or benefits under the scheme?: Subsection 974-160(1) of the ITAA 1997 provides in part that: The investment amount of the Certificate of Deposit will thus constitute a financial benefit when received by the company as it will be something of economic value. (c) Does the entity or a connected entity of the entity have an effectively non-contingent obligation to provide a financial benefit or benefits to one or more entities after the time when the financial benefit is received? 'Effectively non-contingent obligation' is defined in section 974-135 of the ITAA 1997. Subsection 974-135(1) of the ITAA 1997 states: \"There is an effectively non-contingent obligation to take an action under a *scheme if, having regard to the pricing, terms and conditions of the scheme, there is in substance or effect a non-contingent obligation (see subsection (3), (4) and (6)) to take that action.\" Subsection 974-135(3) of the ITAA 1997 then provides: \"An obligation is non-contingent if it is not contingent on any event, condition or situation (including the economic performance of the entity having the obligation or a *connected entity of that entity), other than the ability or willingness of that entity or connected entity to meet the obligation.\" Considering these legislative requirements, the company will have an effectively non-contingent obligation to provide a financial benefit, as the company has an effectively non-contingent obligation under the terms, pricing and conditions of the scheme to pay back the amount invested with interest thereon on maturity. | Detailed Reasoning - (d) Is it substantially more likely than not that the financial benefit provided will at least equal the financial benefit received?: Section 974-35 of the ITAA 1997 sets out the manner in which the value of a financial benefit to be provided or received under the scheme is to be calculated. Paragraph 974-35(1)(a) of the ITAA 1997 provides that the value of a financial benefit to be provided or received is to be calculated in nominal terms, if the performance period ends no later than 10 years after the interest arising from the scheme is issued or, in present value terms if the performance period must, or may, end more than 10 years after the interest arising from the scheme is issued. As the performance period of the Certificates of Deposit must be no longer than 10 years, (the combined initial term and reinvestment terms cannot exceed 10 years when added together), nominal values will be used to value any effectively non-contingent obligations. Valuing the effectively non-contingent obligations in nominal terms has the result that it is substantially more likely than not that the value of the financial benefits provided by the company on maturity will at least be equal to the value of the financial benefits received. | Detailed Reasoning - (e) The value provided and the value received are not both nil: The value provided and the value received will not both be nil. | Detailed Reasoning - Conclusion: As all the requirements of the debt test are satisfied, the Certificates of Deposit will give rise to a debt interest pursuant to section 974-20 of the ITAA 1997.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-15 subsection 974-20 section 974-35 subsection 974-130 subsection 974-135 subsection 974-150 subsection 974-160 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/272 | ATO ID 2006/274", "Subject_References": "Debt equity borderline Debt interest Debt test", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006273", "Unmatched_Content": "This ATO ID has been amended to improve clarity. | The scheme does not need to satisfy paragraph (a) if the entity is a company and the interest arising from the scheme is an interest covered by item 1 of the table in subsection 974-75(1) (interest as a member or stockholder of the company.) | Keywords Debt equity borderline Debt interest Debt test"}
{"ATO_ID_Number": "ATO ID 2006/319", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Calculating the annually compounded internal rate of return referred to within subsection 25-85(5) for the purposes of subsection 25-85(3) of the Income Tax Assessment Act 1997.", "Issue": "For the purpose of deducting a dividend pursuant to subsection 25-85(3) of the Income Tax Assessment Act 1997 (ITAA 1997), is the annually compounded internal rate of return (IRR) under subsection 25-85(5) of the ITAA 1997 calculated in each income year in which a dividend is paid, having regard to the amount of that dividend and the amount of dividends paid in previous years?", "Decision": "Yes. For the purpose of deducting a dividend pursuant to subsection 25-85(3) of the ITAA 1997, the annually compounded IRR under subsection 25-85(5) of the ITAA 1997 is to be calculated in each income year in which a dividend is paid, having regard to the amount of that dividend and the amount of dividends paid in previous years. This is the case irrespective of whether the dividends are cumulative or not.", "Facts": "A resident Australian Company issues a redeemable preference share (RPS) that is characterised as a debt interest under Division 974 of the ITAA 1997. It has the following terms:- Dividends were not paid on the RPS in Year 3 due to insufficient profits but were deferred and paid in Year 4 together with the Year 4 dividend. The funds so raised are used by the Company in gaining or producing its assessable income.", "Reasons_for_Decision": "Summary: Section 25-85 of the ITAA 1997 allows certain returns in respect of debt interests to be deductible (subject to the limit of the benchmark rate of return increased by 150 basis points) where, as in this case, the deduction would not otherwise meet the general deductibility criteria under section 8-1 of the ITAA 1997. Subsection 25-85(3) of the ITAA 1997 provides a number of conditions that must be satisfied for the return to be deductible in an income year if the return under the debt interest is a dividend. These conditions were satisfied in respect of the dividends paid on the RPSs. Subsection 25-85(5) of the ITAA 1997 determines the rate that is deductible to the issuer in respect of a return that is paid under the debt interest. The subsection stipulates that: Subject to regulations made for the purposes of subsection (6), subsections (2) and (3) do not apply to the return to the extent to which the annually compounded internal rate of return exceeds the benchmark rate of return for the interest increased by 150 basis points. The term 'annually compounded internal rate of return' is not defined in the ITAA 1997. Broadly, the annually compounded IRR is the annual rate at which the amount originally invested, together with all the cash flows, accumulates to equal the value of the assets at the end of the period (alternatively the discount rate or opportunity cost of capital at which the net present value of a transaction is equal to zero). The words in section 25-85 of the ITAA 1997, in particular subsection 25-85(5) of the ITAA 1997, show a clear intention that one must look at the actual return in the year in which the return is paid in calculating an annually compounding IRR. This is supported by Example 2.14 in the explanatory memorandum to the Bill introducing section 25-85 (New Business Tax System (Debt and Equity) Bill 2001). The annually compounded IRR for the RPS at the time of issue is 10.00% p.a. This is calculated on the following cash flow pattern (expected): However, the annually compounded IRR must be calculated on an annual basis for each year of income in which a dividend is paid. Applying this conclusion to the Year 4 dividend payment has the following outcome. In Year 1 the annually compounded IRR is still 10.00% as, at that point in time, the deferral of the third year dividend payment to the fourth year is not known or expected. However, as stated in the facts, in year 4 the dividend payment is $20 because the Year 3 dividend payment was missed and thus the annually compounded IRR is calculated in that year using the following cash flow pattern (actual and expected): Annual Compounded IRR = 9.82% The annually compounded IRR in Year 4 is 9.82% p.a. This rate is then compared to the benchmark rate of return as increased by 150 basis points in ascertaining the amount that will be deductible pursuant to section 25-85 of the ITAA 1997. The benchmark rate together with the 150 basis points is 10.00%. As the annually compounded rate calculated in year 4 (9.82%) is less than the benchmark rate adjusted by 150 basis points (10.00%), the entire $20 dividend is allowed as a deduction in that year of income.", "Date_of_Decision": "31 October 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 25-85", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/102", "Subject_References": "Debt equity borderline Incurred Non-equity share", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006319", "Unmatched_Content": "$10 (BBSW = 10.00%; therefore 10.00% x $100 ) | Keywords Debt equity borderline Incurred Non-equity share"}
{"ATO_ID_Number": "ATO ID 2002/794", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 974 - non share equity interests", "Issue": "Is an investment in an unsecured note to be issued by a company to a director a non-share equity interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), if the returns and the repayment of the investment are contingent upon the profitability of the company?", "Decision": "Yes. The unsecured note, to be issued by a company to a director, is a non-share equity interest under Division 974 of the ITAA 1997 as the returns and the repayment of the investment are contingent upon the economic performance of the company.", "Facts": "The taxpayer is a private investment company that is wholly owned by two corporate shareholders. The taxpayer intends to issue a finance raising unsecured note with no fixed maturity date, to its director. The payment of returns on the note, and repayment of the investment amount, will be contingent on the existence of company profits. The returns on the unsecured note are to be calculated as a percentage of the after-tax income of the taxpayer company.", "Reasons_for_Decision": "", "Date_of_Decision": "24 June 2002", "Year_of_Income": "Year ending 30 June 2002 to 30 June 2007", "Legislative_References": "Income Assessment Act 1997 Division 974 Subsection 974-5(4) Subsection 974-15(1) Subsection 974-20(1) Subsection 974-60(1) Subsection 974-70(1) Subsection 974-75(1) Subsection 974-130(1) Section 974-135 Subsection 974-160(1) Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline", "Case_References": "", "Other_References": "Explanatory memorandum: New Business Tax System (Debt and Equity) Act 2001", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002794", "Unmatched_Content": "Reasons For The Decision: The debt and equity rules apply to: | The debt test under section 974-20 of the ITAA 1997 and the equity test under section 974-70 of the ITAA 1997 are used to determine whether a scheme or combination of schemes give rise to a debt interest or an equity interest, respectively. | A scheme that gives rise to a legal form share (an interest as a member in the company) will give rise to an equity interest at the time it comes into existence, if it does not satisfy the debt test. Unless a financing arrangement scheme satisfies the debt test at the time it comes into existence, that scheme will give rise to an equity interest other than a legal form share (non-share equity interest as defined in section 995-1(1) of the ITAA 1997) in a company, if the interest satisfies one of the equity tests contained in subsection 974-75(1) of the ITAA 1997. Namely the interest: | The unsecured note will give rise to a non-share equity interest in the company because: | Keywords Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2009/51", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Borrowing expenses passed on to a subsidiary", "Issue": "Where a parent company incurs expenditure for borrowing money and on-lends part of those borrowings to a subsidiary, can the subsidiary claim a deduction under subsection 25-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for a proportion of the borrowing expenses passed on to it by the parent company?", "Decision": "No. The subsidiary did not incur the expenditure in borrowing money.", "Facts": "A non-resident parent company entered into a credit facility under which it incurred borrowing expenses. A draw down was made by the parent company in order to acquire an unsecured loan note issued by a resident subsidiary. Pursuant to the terms of the unsecured loan note, the subsidiary was only liable to pay interest at a fixed rate on the borrowing. It was not liable to pay an amount for establishing the note. The unsecured loan note was subsequently discharged and, at a later date, the subsidiary was invoiced an amount by the parent company in respect of borrowing costs.", "Reasons_for_Decision": "Summary: Subsection 25-25(1) of the ITAA 1997, allows a deduction for expenditure incurred for borrowing money to the extent the money is used for the purpose of producing assessable income. Section 25-25 of the ITAA 1997 expresses the same intent as former section 67 of the Income Tax Assessment Act 1936 (ITAA 1936) so that case law concerning section 67 also provides guidance on the application of section 25-25. In Ure v. FC of T 81 ATC 4100 at ATC 4112; (1981) 11 ATR 484 at ATR 498, Deane and Sheppard JJ made the following comments on the operation of subsection 67(1) of the ITAA 1936: The words 'expenditure incurred... in borrowing money' in the context of section 67(1) of the Act refer in our view, to the 'cost' of borrowing as distinct from the 'cost' of the money. The expenditure on account of legal expenses and valuation fees was plainly a 'cost' of borrowing: it was incurred in relation to the actual establishment of the relevant loan. And further, at ATC 4113; ATR 498: It seems to us to be preferable to interpret the reference to expenditure incurred in borrowing as including payment to be made during the life of the loan pursuant to a contractual obligation which was incurred at the time of borrowing as an incident of establishing the loan. Under the terms of the unsecured loan note, the subsidiary borrowed funds from the parent company. At the time of borrowing, there was no contractual obligation imposed on the subsidiary to pay an amount for establishment of the loan. As the later invoicing of an amount to the subsidiary was not incurred at the time of borrowing as an incident of establishing the loan, no amount of the expenditure is deductible to the subsidiary under subsection 25-25(1) of the ITAA 1997.", "Date_of_Decision": "22 June 2009", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 67", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Expenses of borrowing", "Case_References": "Ure v. FC of T 81 ATC 4100 (1981) 11 ATR 484", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200951", "Unmatched_Content": "Keywords Deductions & expenses Expenses of borrowing"}
{"ATO_ID_Number": "ATO ID 2004/889", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Financial Sector (Business Transfer and Group Restructure) Act 1999: transfer of debts", "Issue": "Where a credit union business is voluntarily transferred to another eligible credit union business, pursuant to the provisions of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (FSBTGR Act) is the receiving body taken to have bought debts from the transferring body equal to the amount of the debts as at the effective date of the transfer?", "Decision": "Yes.", "Facts": "Entity A, the transferring body, has transferred its business to Entity B, the receiving body, in accordance with the FSBTGR Act. Both entities are authorised deposit-taking institutions for the purposes of the Banking Act 1959. The parties satisfied all of the relevant procedural and substantive provisions determined by the Australian Prudential Regulation Authority (APRA), including preparation of a statement under section 20 of the FSBTGR Act (section 20 statement). The section 20 statement provided that the consequences for parties of the transfer of assets and liabilities under the FSBTGR Act are taken to be the same as if the transfer involved a sale of the assets of the transferring body to the receiving body. APRA approved the transfer of business and issued a certificate of transfer pursuant to section 18 of the FSBTGR Act.", "Reasons_for_Decision": "", "Date_of_Decision": "26 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 25-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of business Bad debts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004889", "Unmatched_Content": "This ATO ID is currently under review. | Reason for Decision: The FSBTGR Act was enacted to enhance stability in the Australian financial sector by facilitating the merging of eligible entities and otherwise unviable institutions. Under this Act, APRA, in approving the transfer, is required to have regard to the interests of the members of such entities and the financial sector as a whole. | The FSBTGR Act empowers APRA to approve, and in some circumstances to compel amalgamations of eligible entities for the purpose of enhancement of the Australian financial sector. For practical purposes, the aim of the FSBTGR Act is to enable APRA to provide certainty that an endorsed transfer is effective at law to ensure that the rights and liabilities of the transferring entity survive in the new entity. | This certainty is achieved by APRA issuing a certificate of transfer pursuant to section 18 of the FSBTGR Act stating that the transfer is to take effect on the date specified. | Broadly, section 22 of the FSBTGR Act provides that when APRA issues a certificate of transfer, the receiving body becomes the successor in law of the transferring body. In particular, all the assets and liabilities of the transferring body become assets and liabilities of the receiving body without any additional formality. Further, the totality of duties, obligations, immunities, rights and privileges applying to the transferring body apply to the receiving body. | Subject to the relevant circumstances of each case of voluntary total transfer of business sanctioned under the FSBTGR Act as originally enacted, the Commissioner will aim to administer the tax law in such a way that it complements the operation of the FSBTGR Act and promotes the stated objectives of the legislation. In practice this will be accomplished by adopting adjustments on the basis of acceptable valuations. | This ATO ID was amended by replacing references to the Financial Sector (Transfers of Business) Act 1999 with references to the Financial Sector (Business Transfer and Group Restructure) Act 1999. | Keywords Acquisition of business Bad debts"}
{"ATO_ID_Number": "ATO ID 2010/187", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: contributions to meals - shearing Industry", "Issue": "Are contributions by a shearing industry employee towards the cost of meals provided by their employer deductible if the employee is paid at the 'not found' rate?", "Decision": "Yes. Provided the taxpayer is travelling away from home overnight in the course of their duties as a shearing industry employee and meets the substantiation requirements in Division 900 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the expense, an amount paid as a contribution towards the cost of meals provided by the employer is deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is a shearing industry employee and is engaged as part of a shearing team. The taxpayer's employment requires travel away from home and staying overnight at properties where shearing is carried out. The employer provides the taxpayer with accommodation and meals when the taxpayer is travelling away from home. The taxpayer is paid at the 'not found' (meals not included) rate of pay as set out in the relevant industrial agreement and makes a contribution at a prescribed rate towards the cost of meals provided by the employer.", "Reasons_for_Decision": "Summary: The deductibility of meal expenses where an employee is required by the circumstances of their employment to live temporarily away from home was considered by the Federal Court in Roads and Traffic Authority of New South Wales v. Federal Commissioner of Taxation (1993) 43 FCR 223; [1993] FCA 314; 93 ATC 4508; (1993) 26 ATR 76. Hill J stated (at FCR 240; FCA paragraph 72; ATC 4521; ATR 92): Where a taxpayer is required by his employer, and for the purposes of his employer, to reside, for periods at a time, away from home and at the work site, and that employee incurs expenditure for the cost of sustenance, or indeed other necessary expenditure which, if the taxpayer had been living at home, would clearly be private expenditure, the circumstance in which the expenditure is incurred, that is to say, the occasion of the outgoing operates to stamp that outgoing as having a business or employment related character. As the taxpayer is travelling away from home overnight and incurring the meal expense in the course of carrying out their duties as an employee, the contribution paid by the taxpayer is an outgoing incurred in producing the taxpayer's wages as a shearing industry employee and is deductible under section 8-1 of the ITAA 1997. As the contribution is a 'work expense' under subsection 900-30(1) of the ITAA 1997, deductibility is conditional on satisfying the substantiation requirements in Division 900. This means the taxpayer must retain written evidence of the amount claimed unless the total amount of work expenses (excluding meal allowance or travel allowance expenses) is less than the threshold set out in section 900-35 of the ITAA 1997.", "Date_of_Decision": "12 October 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Division 900 subsection 900-30(1) section 900-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Domestic travel expenses Employee allowances Meal & food allowances Travel allowances", "Case_References": "Roads and Traffic Authority of NSW v Federal Commissioner of Taxation (1993) 43 FCR 223 [1993] FCA 314 93 ATC 4508 (1993) 26 ATR 76", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010187", "Unmatched_Content": "Inserted medium neutral case citation | Inserted medium neutral case citations | Keywords Domestic travel expenses Employee allowances Meal & food allowances Travel allowances"}
{"ATO_ID_Number": "ATO ID 2002/495", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of meal expenses - live-in carer", "Issue": "Is the taxpayer who is a live-in carer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the cost of their meals?", "Decision": "No. The taxpayer who is a live-in carer is not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of their meals.", "Facts": "The taxpayer is employed as a personal carer. They provide care for 24 hours per day in the home of the person they are caring for. They provide this care for a number of days each week. The taxpayer provides their own food for their daily meals. They are not paid an allowance for these meals.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income or non-assessable non-exempt income. Expenditure on the daily necessities of life (eg food and drink) is generally a private expense and is not incurred in gaining or producing assessable income. The issue of the deductibility of meals was considered by the Full Federal Court in FC of T v. Cooper (1991) 29 FCR 177; [1991] FCA 164; (1991) 21 ATR 1616; 91 ATC 4396 where Hill J stated (FCR at page 201; FCA at paragraph 56; ATR at page 1638; ATC at page 4415) Food and drink are ordinarily private matters, and the essential character of expenditure on food and drink will ordinarily be private rather than having the character of a working or business expense. However, the occasion of the outgoing may operate to give to expenditure on food and drink the essential character of a working expense in cases such as those illustrated of work-related entertainment or expenditure incurred while away from home. The reference to 'expenditure incurred while away from home' means the taxpayer must be travelling for work purposes. Where a taxpayer is required to travel for work purposes, the cost of meals may be deductible. Examples are an office worker attending an interstate conference or an 'on-road' salesman. The taxpayer cannot be considered to be travelling for work as they continue to perform their employment duties at their ordinary place of work. The taxpayer's circumstances do not change the essential character of the expense as private or domestic in nature. The expenditure incurred by the taxpayer on meals is private or domestic in nature and is not incurred in gaining or producing assessable income. Therefore, the cost of meals incurred by the taxpayer is not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "30 January 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions and expenses Meal and food expenses", "Case_References": "FC of T v. Cooper (1991) 29 FCR 177 [1991] FCA 164 (1991) 21 ATR 1616 91 ATC 4396", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002495", "Unmatched_Content": "Inserted authorised report and medium neutral citations for case | Inserted authorised report and medium neutral citation | Adjusted wording to improve clarity | Additional wording added to improve clarity Amended for clarity and style | Keywords Deductions and expenses Meal and food expenses"}
{"ATO_ID_Number": "ATO ID 2012/91", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of net amounts on borrowings", "Issue": "Can a net amount be a loss or outgoing incurred by a taxpayer within the meaning of section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where the net amount is the excess of interest expense incurred by the taxpayer on borrowings to fund a particular asset over the income derived by the taxpayer from the asset?", "Decision": "No. A net amount which is the excess of interest expense incurred by the taxpayer on borrowings to fund a particular asset over the income derived by the taxpayer from the asset, cannot be the loss or outgoing incurred by the taxpayer within the meaning of section 8-1 of the ITAA 1997.", "Facts": "A foreign bank is incorporated and resident of a foreign country for Australian tax purposes. The foreign bank carries on business operations through a fixed place of business in Australia (Australian branch operations). The foreign bank maintains general reserve liquid assets (liquid reserve assets). The foreign bank incurs interest expense on borrowings that fund the liquid reserve assets. The foreign bank derives interest and other income from the liquid reserve assets. The interest expense incurred exceeds the income derived from the liquid reserve assets. Such excess is referred to as a 'net loss' or 'negative spread'. The bank includes the whole or part of such net amount as a 'cost' of particular operations of the bank in the accounts used by the bank for its internal management purposes.", "Reasons_for_Decision": "Summary: A 'net amount' cannot be the loss or outgoing incurred under section 8-1 of the ITAA 1997 (previously subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936)) unless, if the net amount were instead a profit, such net amount would be assessable income derived for the purposes of applying the general income provision in section 6-5 of the ITAA 1997 (previously subsection 25(1) of the ITAA 1936): refer to AVCO Financial Services v. Federal Commissioner of Taxation (1982) 150 CLR 510; (1982) 13 ATR 63; 82 ATC 4246, Coles Myer Finance v. Federal Commissioner of Taxation (1993) 176 CLR 640; (1993) 25 ATR 95; 93 ATC 4214 at ATC 4224, 4230 and 4231 and Federal Commissioner of Taxation v. Energy Resource of Australia (1996) 185 CLR 66; (1996) 33 ATR 52; 96 ATC 4536. Refer also to Federal Commissioner of Taxation v. Citibank (1993) 44 FCR 434; (1993) 26 ATR 423; 93 ATC 4691 at 4701 for how a net amount may be assessable income only if 'the gross receipts used in the calculation of net profit were itself not income in ordinary concepts'. Accordingly the relevant amount incurred by the bank under section 8-1 of the ITAA 1997 is the interest expense incurred by the foreign bank on the borrowings funding the liquid reserve assets (which was subtracted by the bank in calculating the 'net loss' or 'negative spread' included as a 'cost' in its management accounts). The income derived by the foreign bank for the purpose of applying section 6-5 of the ITAA 1997 includes the income derived by the bank from the assets (that is, the amount of income from which the interest expense was subtracted by the bank in calculating the amount of the 'net loss' or 'negative spread').", "Date_of_Decision": "25 October 2012", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/90 | ATO ID 2012/92", "Subject_References": "Deductions & expenses Interest expenses", "Case_References": "AVCO Financial Services v Federal Commissioner of Taxation (1982) 150 CLR 510 (1992) 13 ATR 63 82 ATC 4246", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201291", "Unmatched_Content": "Keywords Deductions & expenses Interest expenses"}
{"ATO_ID_Number": "ATO ID 2010/160", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of card payment fee incurred in paying income tax liability under section 25-5, section 25-25 or section 8-1 of the ITAA 1997", "Issue": "Can a salary or wage earner claim a deduction under sections 25-5, 25-25 or 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a card payment fee they are charged by the Australian Taxation Office (ATO) for using a credit card to pay their personal income tax debt?", "Decision": "No. A salary or wage earner cannot claim a deduction under sections 25-5, 25-25 or 8-1 of the ITAA 1997 for a card payment fee they are charged by the ATO for using a credit card to pay their personal income tax debt.", "Facts": "The taxpayer is a salary or wage earner and uses a credit card to pay their personal income tax debt. The taxpayer agrees to pay the card payment fee charged by the ATO in order to pay their personal income tax debt by using their credit card. On accepting the charge, a contract is formed between the ATO and the taxpayer for the payment of the card payment fee. The payment is then processed and the taxpayer's card is charged separately for the amount of the card payment fee and the amount of the liability they are paying. In using the credit card to pay their personal income tax debt, the taxpayer borrows money from the credit card provider.", "Reasons_for_Decision": "Summary: Subsection 25-5(1) of the ITAA 1997 allows deductions for expenditure incurred by a taxpayer to the extent that it is for managing their 'tax affairs'. Section 995-1 of the ITAA 1997 defines 'tax' to mean income tax assessed under either the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936) and imposed by any other Act. The context and structure of section 25-5 of the ITAA 1997 makes it clear that 'tax affairs' is intended to have a wide operation. The section is wide enough to cover a card payment fee incurred as a direct consequence of paying an income tax debt. However, paragraph 25-5(2)(c) of the ITAA 1997 expressly denies a deduction for 'expenditure for borrowing money', including payments of interest, in respect of money borrowed and spent on managing certain aspects of your tax affairs, including payments of: If a taxpayer uses a credit card and that use results in the card issuer providing credit, then the taxpayer has borrowed money from the credit card provider (Taxation Ruling TR 2000/2 at paragraph 43). In Ure v. FC of T 81 ATC 4100; (1981) 11 ATR 484 ( Ure's Case ), Deane and Sheppard JJ, in discussing what constituted expenditure in borrowing money for the purpose of the former section 67 of the ITAA 1936, said: The words \"expenditure incurred... in borrowing money\" in the context of sec. 67(1) of the Act, refer in our view to the \"cost of the borrowing\" as distinct from the \"cost\" of the money. The expenditure on account of legal expenses and valuation fees was plainly a \"cost\" of the borrowing: it was incurred in relation to the actual establishment of the relevant loan. ... Ordinarily, we would have little hesitation in concluding that guarantee fees paid by a borrower in respect of a guarantee necessary for the establishment of a loan were expenditure incurred in borrowing money for the purposes of sec. 67(1) of the Act... (Emphasis added) The phrase 'expenditure incurred ... in borrowing money' as used in the former subsection 67(1) of the ITAA 1936 is narrower than the phrase 'expenditure for borrowing money' in paragraph 25-5(2)(c) of the ITAA 1997. This is because in addition to the types of expenditure discussed in Ure's Case , paragraph 25-5(2)(c) of the ITAA 1997 explicitly includes interest as a type of expenditure in borrowing money. Beyond this, for present purposes there is no material difference between the concept of 'expenditure incurred in borrowing money' used in the former subsection 67(1) of the ITAA 1936 and 'expenditure for borrowing money' used in paragraph 25-5(2)(c) of the ITAA 1997. It follows 'expenditure for borrowing money' under paragraph 25-5(2)(c) of the ITAA 1997 must be broad enough to include 'costs of the borrowing' as contemplated by Deane and Sheppard JJ in Ure's Case . The proper characterisation of a card payment fee is a question of fact to be decided on a case by case basis by reference to the precise circumstances of each case. Based on the facts here, the card payment fee is incurred by the taxpayer as a necessary step in the process of borrowing money from the credit card provider. It is a 'cost of the borrowing' in the sense contemplated by Deanne and Sheppard JJ in Ure's Case . Further, as a question of fact, the borrowed monies are used to pay income tax. Therefore, the card payment fee is properly characterised as a cost of borrowing monies used to pay for expenses incurred in managing the taxpayer's tax affairs. Therefore, while the taxpayer has incurred an outgoing which is incurred in 'managing their tax affairs' within the meaning of paragraph 25-5(1)(a) of the ITAA 1997, it is also 'expenditure for borrowing money' to pay for expenses incurred in managing their tax affairs identified by paragraph 25-5(2)(c) of the ITAA 1997. It follows that the fee is not deductible under section 25-5 of the ITAA 1997. Subsection 25-25(1) of the ITAA 1997 allows a deduction for expenditure incurred 'for borrowing money to the extent that you use the money for the purpose of producing assessable income'. As previously stated above, if a taxpayer uses a credit card and that use results in the card issuer providing credit, then the taxpayer has borrowed money from the credit card provider (Taxation Ruling TR 2000/2 at paragraph 43). Section 67 of the Income Tax Assessment Act 1936 (ITAA 1936), the previous version of section 25-25 of the ITAA 1997, was considered in Ure v. FCT 81 ATC 4100; (1981) 11 ATR 484 ( Ure's Case). Deane and Sheppard JJ, in discussing what constituted expenditure incurred in borrowing money for the purpose of the former section 67 of the ITAA 1936, said: The words \"expenditure incurred... in borrowing money\" in the context of sec. 67(1) of the Act, refer in our view to the \"cost of the borrowing\" as distinct from the \"cost\" of the money. The expenditure on account of legal expenses and valuation fees was plainly a \"cost\" of the borrowing: it was incurred in relation to the actual establishment of the relevant loan. ... Ordinarily, we would have little hesitation in concluding that guarantee fees paid by a borrower in respect of a guarantee necessary for the establishment of a loan were expenditure incurred in borrowing money for the purposes of sec. 67(1) of the Act... (Emphasis added) For present purposes there are no material differences between the former section 67 of the ITAA 1936 and section 25-25 of the ITAA 1997. Consequently, this explanation applies equally to section 25-25 of the ITAA 1997. The proper characterisation of a card payment fee is a question of fact to be decided on a case by case basis by reference to the precise circumstances of each case. Based on the facts, the card payment fee incurred by the taxpayer is a necessary step in the process of borrowing money from the credit card provider. It is an 'expenditure incurred in borrowing money' in the sense contemplated by Deanne and Sheppard JJ in Ure's Case. The definition of 'purpose of producing assessable income' in section 995-1 of the ITAA 1997 covers both: The construction of this definition covers essentially the same ground as the positive limbs of section 8-1 of the ITAA 1997. The application of section 8-1 of the ITAA 1997 in the context of a card payment fee does not raise any novel or difficult issues. It is essentially a question of applying the well known judicial 'tests' or 'interpretive approaches' to the particular facts. See for example the High Court's decisions in Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93; 2001 ATC 4027; (2001) 46 ATR 228 per Gleeson CJ, Kirby and Hayne JJ; Federal Commissioner of Taxation v. Day (2008) 236 CLR 163; 2008 ATC 20-064; (2008) 70 ATR 14 per Gummow, Hayne, Heydon and Kiefel JJ; Spriggs v. Federal Commissioner of Taxation ; Riddell v. Federal Commissioner of Taxation (2009) 239 CLR 1; 2009 ATC 20-109; (2009) 72 ATR 148. It is necessary to determine if there is a sufficient connection between the incurrence of the card payment fee and the process by which the taxpayer gains or produces their assessable income. Given the nature of the fee this question will generally be answered by a careful analysis of the objective circumstances that gave rise to the liability being discharged by the use of the card. A careful analysis of the character of the fee indicates that it is not an expense incurred in earning the taxpayers assessable income - salary or wages. It is a payment out of income after it has been earned. It is clear from the authorities that such outgoings do not satisfy the tests for deductibility for a salary or wage earner under section 8-1 of the ITAA 1997 ( Ure v. FC of T 81 ATC 4100; (1981) 11 ATR 484; Cliffs International Inc. v. FC of T 85 ATC 4374; (1985) 16 ATR 601; Case V48 88 ATC 380; AAT Case 4, 178 (1988)19 ATR 3334; Case 14 / 98 98 ATC 201; AAT Case 13, 135 (1998) 39 ATR 1105). It follows that the fee is not incurred for the purpose of producing assessable income. Therefore no deduction is available under section 25-25 of the ITAA 1997 for the card payment fee incurred by the taxpayer in paying their personal income tax debt.", "Date_of_Decision": "2 September 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 25-5 subsection 25-5(1) paragraph 25-5(1)(a) paragraph 25-5(2)(c) section 25-25 subsection 25-25(1) section 995-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2000/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Tax related expenses", "Case_References": "Federal Commissioner of Taxation v. Payne (2001) 202 CLR 93 2001 ATC 4027 (2001) 46 ATR 228", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010160", "Unmatched_Content": "Included sections 25-25 and 8-1 of the ITAA 1997 | Includes relevant sections of ITAA 1997, TAA 1953 and case references | Related Public Rulings (including Determinations) Taxation Ruling TR 2000/2 | Keywords Deductions & expenses Tax related expenses"}
{"ATO_ID_Number": "ATO ID 2013/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Physical water purchased on acquisition of a primary production business", "Issue": "Is the cost of physical water stored on a farm at the time of acquiring the primary production business an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A deduction is not allowable under section 8-1 of the ITAA 1997 for the cost of the physical water stored on a farm where it is included as part of the cost of acquiring the primary production business.", "Facts": "Taxpayer settled a purchase contract to purchase a primary production business. The parties to the contract were at arm's length. At the time of settlement of the contract, there was water in farm storages (for example, dams). The water was harvested from water licences and allocations by the vendor and will be used by the taxpayer for crop irrigation in the primary production business. The volume of water was accurately estimated at the time of settlement. The sale contract was silent as to the value of the water in storage at settlement date.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed where the losses or outgoings are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or another provision of the ITAA 1997 prevents the taxpayer from deducting them. The purchase of harvested physical water in storage is clearly incurred in gaining or producing assessable income of the taxpayer. This is because the payment is made to acquire physical water necessary to irrigate the taxpayer's crop, and thereby earn assessable income from the crop. As such, the payment is incidental and relevant to the income earning activities of the taxpayer ( Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236). The payment is not of a private or domestic nature or incurred in gaining or producing exempt income and no other provision of the ITAA 1997 prevents a deduction of the amount. Therefore, the amount will be an allowable deduction under section 8-1 of the ITAA 1997 provided it is not capital or of a capital nature. Expenditure that strengthens and preserves the business entity or the profit-yielding subject is capital expenditure ( Sun Newspapers Ltd & Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87;) ( Sun Newspapers ). In Sun Newspapers Dixon J discussed at CLR 359; ATD 93-94 the distinction between capital and revenue expenditure by saying that it: ...corresponds with the distinction between the business entity, structure, or organisation set up or established for the earning of profit and the process by which such organisation operates to obtain regular returns by means of regular outlay, the difference between the outlay and returns represent profit or loss. His Honour discussed that the capital/revenue distinction reflected the difference between the profit-yielding subject and the process of operating it. At CLR 360; ATD 94 Dixon J stated that: ...expenditure and outlay upon establishing , replacing and enlarging the profit yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. The latter can be considered, estimated and determined only in relation to a period or interval of time, the former as at a point of time (emphasis added). It is considered that expenditure incurred in respect of the acquisition of physical water in storage as part of the acquisition of a business is not deductible to the purchaser under section 8-1 of the ITAA 1997 because it is of a capital nature. Such expenditure is capital in nature because it has the character of that which relates to the profit-yielding structure of the business ( Sun Newspapers ) rather than being incurred as part of the cost of trading operations to produce income. All the components of the business acquired, including the physical water, are considered to be expenditure on the profit-yielding subject, rather than an independent expenditure as part of the day-to-day activities of carrying on the business. The characterisation of the expenditure is determined by the character of the overall transaction that it is a part of. The expenditure relates to the acquisition of the means of production or to the implements or articles employed in work and is different from the continuous flow of working expenses relating to the process of operating the business. The expenditure arises at one point in time only. It was paid by the taxpayer as an integral and inseparable part of the purchase price in return for acquiring the business. It is therefore a capital outgoing. In QCT Resources Limited v. Commissioner of Taxation (1997) 97 ATC 4079; (1997) 34 ATR 504 ( QCT Resources ), Drummond J at ATC 4086; ATR 512-513 confirmed this view by stating: .....where part of the cost of acquiring a new business of a kind not previously conducted by the purchaser is an outgoing which will be similar in kind to revenue outgoings which the purchaser can expect to make in the future, once it commences to trade: in this situation, the character of the advantage sought by making the particular outlay is the same as that sought from making the other outlays which together comprise the price paid for acquiring the capital asset, viz, the new business as a going concern. From a practical and business point of view, there is no justification for characterising one component of the stated price paid to acquire such an asset differently from any of its other components: the entire price has to be paid to acquire the new business. The Federal court's decision in QCT Resources was upheld on appeal to the Full Federal Court. Accordingly, as part of the acquisition of the primary production business, a deduction is not allowable under section 8-1 of the ITAA 1997 for the cost of the physical water stored on the farm. This cost is of capital in nature.", "Date_of_Decision": "28 August 2013", "Year_of_Income": "Years ending 31 December 2013, 31 December 2014 and 31 December 2015", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "deductions & expenses capital expenditure", "Case_References": "Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 8 ATD 431 (1949) 4 AITR 236", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201349", "Unmatched_Content": "Keywords deductions & expenses capital expenditure"}
{"ATO_ID_Number": "ATO ID 2012/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of outgoings incurred for the acquisition of purchased pools of debts", "Issue": "Where a taxpayer uses a profit emerging basis as the appropriate method of determining assessable income for the purposes of section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), are the outgoings incurred in the acquisition of the debts deductible under section 8-1 of the ITAA 1997?", "Decision": "No. A deduction is not allowable under section 8-1 of the ITAA 1997 for the purchase price of the pools at the time of acquisition.", "Facts": "The taxpayer is an Australian resident who's business is to acquire for valuable consideration, pools of unpaid loans (for example: credit card and personal) and billing receivables held by its clients (the pools). The pools are acquired by the taxpayer at a discount to their face value and the taxpayer subsequently seeks to collect the debts contained within the pools. The acquisition of the pools of unpaid loans occurs by way of acquisition/assignment agreements. Under these agreements, the taxpayer has the full rights to the unpaid debts, including the right to collect each discrete debt within the pool. The taxpayer has adopted a 'profit emerging' basis as the appropriate means of determining assessable income for the purposes of section 6-5 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 provides in relation to a taxpayer's year of income that: 8-1(1) You can deduct from your assessable income any loss or outgoing to the extent that: (a) it is incurred in gaining or producing your assessable income; or (b) it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income. Paragraph 8-1(1)(b) of the ITAA 1997 entitles a taxpayer, where they are carrying on a business, to deduct an amount for a loss or outgoing if it is necessarily incurred for the purpose of gaining or producing assessable income. However, the loss or outgoing is subject to the tests within subsection 8-1(2) of the ITAA 1997. Paragraph 8-1(2)(a) of the ITAA 1997 precludes a taxpayer from claiming a deduction where the loss or outgoing can be characterised as being capital in nature. The outgoing that arises upon the purchase of the pools of unpaid loans in this case are clearly incurred in the course of the taxpayer's business and used to produce or gain their assessable income. The necessary inquiry is whether the loss or outgoing is capital in nature. This is determined by reference to the various principles that have been established through the case law. The nature of the outgoings in relation to the pools The judgment of Dixon J in Sun Newspapers & Anor v. Federal Commissioner of Taxation (1938) 61 CLR 337 at page 363 ( Sun Newspapers ) provides the leading distinction for characterising expenditure as revenue or capital in nature. Essentially, after reviewing the existing authorities Dixon J observed that the distinction should be determined by reference to certain practical business considerations, described in the following terms: There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment. In the present circumstances, the individual debts which form the pool are acquired with the intention of collecting the debts within the legal limitations governing enforcement and collection for example limitation by statute etc. Therefore, the individual debts, or pools overall, can reasonably be characterised as forming the core assets used and relied upon by the taxpayer to derive a profit in the operation of its business. Further, the taxpayer's outlay can reasonably be regarded as once-off in regard to securing the right to the assignments under the various pools. Accordingly, it is reasonable to characterise the acquisition of the pools as part of the taxpayer's business structure or its 'profit-yielding subject'. This was articulated by Dixon J in his judgment in Sun Newspapers at pages CLR 359 to 360: 'The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure, or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay, the difference between the outlay and returns representing profit or loss. The business structure or entity or organization may assume any of an almost infinite variety of shapes and it may be difficult to comprehend under one description all the forms in which it may be manifested... But in spite of the entirely different forms, material and immaterial, in which it may be expressed, such sources of income contain or consist in what has been called a \"profit-yielding subject \" the phrase of Lord Blackburn in United Collieries Ltd. v. Inland Revenue Commissioners' [(1930) SC 215, at p. 220; (1929) 12 Tax Cas. 1248, at p. 1254] For without the pools, the taxpayer would be unable to neither conduct its business nor be able to gain or produce what is in essence its gains or profits, being constituents of its assessable income. In this case, the pools are an integral part of the taxpayer's business structure and the process used to obtain a return or profit is by the process of working the pools in the expectancy of collecting an amount owing under each debt. This reflects the fact that the debts are a legal chose in action which comprises a bundle or proprietary rights. Therefore, the outgoing incurred in relation to the acquisition of the pools being the 'profit-yielding subject' of the business, are properly characterised as capital in nature. Generally, a business is able to operate on two types of capital, fixed or circulating capital. The distinction between fixed and circulating capital as a principle was articulated by Lord Hanworth in Mallet v Staveley Coal and Iron Company Limited (1928) 2 KB 405; 13 TC 772; [1928] All ER Rep. 644 at pages 645-646. Essentially, fixed capital is that \"...which is laid out in the fixed plant, whereby the opportunity of making profits or gains is secured\". In contrast, circulating capital is that \"...which is turned over and over in the course of the business which is carried on\". The taxpayer in this case uses available sources to fund its acquisitions of the pools. It does so in the expectation that these acquisitions will be turned to account and return a profit. This is similar to where the taxpayer is in the business of finance and money is characterised as its' circulating capital (see AVCO Financial Services v. Federal Commissioner of Taxation (1982) 150 CLR 510; 82 ATC 4246; (1982) 13 ATR 63). Thus, the taxpayer's circulating capital is expended with the acquisition of each pool in the expectation that collections will provide a return of the capital expended and more. This, clearly, is an outgoing of circulating capital and any return would generally constitute a mixture of circulating capital and profit. In the case of the taxpayer in the business of finance, money expended as circulating capital in the process of generating profit is precluded from deduction as a revenue expense.", "Date_of_Decision": "2 April 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1 section 8-1(1) Paragraph 8-1(1)(b) section 8-1(2) Paragraph 8-1(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/39", "Subject_References": "Accounting & record keeping Assignment of rights & entitlements Business income Capital assets Debt related transactions Profits", "Case_References": "Sun Newspapers Ltd and Associated Newspapers Ltd v Federal Commissioner of Taxation (1938) 61 CLR 337 (1938) 5 ATD 87", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201226", "Unmatched_Content": "Keywords Accounting & record keeping Assignment of rights & entitlements Business income Capital assets Debt related transactions Profits"}
{"ATO_ID_Number": "ATO ID 2011/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: guard dog expenses", "Issue": "Are the costs incurred in training a guard dog to protect business premises deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The training costs are not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer purchased a dog for use solely as a guard dog to protect equipment and supplies at the taxpayer's business premises. The taxpayer incurred expenses in having the dog complete guard dog training.", "Reasons_for_Decision": "Summary: A guard dog used to provide security for business premises is considered to be a working beast or plant, as it serves a productive function of the business. Consequently, the guard dog is a capital asset of the business. Under section 8-1 of the ITAA 1997, expenditure incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of producing assessable income, is deductible if it is not capital or of a capital, private or domestic nature. The leading authority on the distinction between revenue and capital outgoings is the judgment of Dixon J in Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 23; 1 AITR 403. Dixon J set out three matters to be considered (at CLR 363): In applying these factors to the guard dog training expenses, clearly the training is a once-off expense calculated to produce a benefit for the business for the working life of the dog, that is, an enduring benefit. The outgoing is not incurred over the life of the benefit but as a preliminary expense in obtaining the benefit of a guard dog. Accordingly, the expense is of a capital nature and is not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "10 August 2001", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Working animals", "Case_References": "Lunney & Anor v Federal Commissioner of Taxation (1958) 100 CLR 478 (1958) 11 ATD 404 7 ATR 166", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201118", "Unmatched_Content": "Keywords Deductions & expenses Working animals"}
{"ATO_ID_Number": "ATO ID 2011/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of salary or wages to the extent that employees are engaged in the self-construction of depreciating assets", "Issue": "Is expenditure incurred by a taxpayer on salary or wages an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), to the extent that the relevant employees perform work on projects to construct and upgrade depreciating assets of the taxpayer?", "Decision": "No. Expenditure incurred by a taxpayer on salary or wages is not an allowable deduction under section 8-1 of the ITAA 1997, to the extent that the relevant employees perform work on projects to construct and upgrade depreciating assets of the taxpayer as it is capital or capital in nature.", "Facts": "The taxpayer is a public utility that owns and operates a large distribution network. The taxpayer employs a large workforce split into business units. A key responsibility of two of its business units (comprising approximately 80% of the taxpayer's total employees) involves the design, planning and co-ordination and on-site construction work of projects to expand and upgrade the taxpayer's distribution network. The construction projects involve the construction and upgrading of assets which are depreciating assets within the meaning of that term in section 40-30 of the ITAA 1997. The same business units are also responsible for the operation and maintenance of the taxpayer's network. The taxpayer has a large annual construction budget and prepares an annual capital works plan detailing the various construction projects to be undertaken each year. All employees in the relevant business units engage, to varying degrees, in some construction work as part of their normal regular duties. Further, employees may work on multiple construction projects (either concurrently or successively) as part of their normal regular duties. The taxpayer keeps records, for accounting purposes, of the time spent by employees, in the relevant business units, working on capital construction projects. Whilst the time spent by individual employees varies, on average, 60% of the overall time of all employees in these two business units is spent working on construction projects and 40% of their overall time is spent on operational and maintenance activities. The taxpayer also engages external contractors to work on construction projects. Approximately 60% of the work on the constructions projects is undertaken by the taxpayer's internal employees, and the remaining 40% is undertaken by external contractors. For accounting purposes, the taxpayer uses a full absorption costing system (which capitalises relevant contract payments and the amount of salary or wages that relates to the amount of time spent by employees working on construction projects) to determine the cost of its self-constructed depreciating assets.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under section 8-1 of the ITAA 1997 to the extent that the loss or outgoing is of a capital nature. The words 'to the extent that' indicate that an expense may be apportioned if it is partly deductible and partly non-deductible: Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; 4 AITR 236 ( Ronpibon ); Ure v. Federal Commissioner of Taxation (1981) 50 FLR 219; 81 ATC 4100; (1981) 11 ATR 484. However, where apportionment is necessary, the method adopted must be 'fair and reasonable' in all the circumstances: Ronpibon . In the present case, the expenditure incurred on salary or wages for periods when the relevant employees were working on the relevant project is expenditure incurred in gaining or producing assessable income. However, the expenditure will not be deductible to the extent that it is a loss or outgoing of capital or of a capital nature. The decision of the High Court in Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403 ( Sun Newspapers ) is the leading authority on the distinction between revenue and capital expenditure. The general rule is found in the frequently quoted statement of Dixon J where he said: The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity structure or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay ... As general conceptions it may not be difficult to distinguish between the profit yielding subject and the process of operating it. In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. In Sun Newspapers , Dixon J stated that there are three matters to be considered when deciding whether expenditure is revenue or capital in nature. These are: The character of the advantage sought by making the outgoing is the chief, if not the critical, factor that distinguishes revenue from capital outgoings: GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1. To a similar end, in Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 8 ATD 190; (1946) 3 AITR 436, Dixon J said that the distinction between an outgoing of capital and one on account of revenue 'depends upon what it is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured'. When considering the character of expenditure incurred on salary or wages, in Commissioner of Taxation v. Star City Pty Ltd (2009) 175 FCR 39; 2009 ATC 20-093; (2009) 72 ATR 431 ( Star City ), Jessop J said that '[m]erely to look at the legal rights and obligations which existed as between the payer and the payee (that is the employer and the employee) would be of no assistance in the task of characterisation'. In this respect, we consider that it is appropriate to have regard to the actual work done by the relevant employees in determining what the expenditure on salary or wages was calculated to effect from a practical and business point of view. Further, it is clear that expenditure incurred in relation to salary or wages paid to employees engaged wholly in affairs of capital is properly characterised as capital in nature: Goodman Fielder Wattie Ltd v. Federal Commissioner of Taxation (1991) 29 FCR 376; 91 ATC 4438; (1991) 22 ATR 26; Star City . The fact that expenditure on salary or wages is incurred periodically is not determinative. Recurrence is not a test; it is not more than a consideration, the weight of which depends upon the nature of the expenditure: Broken Hill Theatres Pty Ltd v. Federal Commissioner of Taxation (1952) 85 CLR 423; 9 ATD 423; 5 AITR 296; Sun Newspapers . As Pincus and Ryan JJ said in Commissioner of Taxation v. Mount Isa Mines Ltd (1991) 28 FCR 269; (1991) 21 ATR 1294; (1991) 91 ATC 4154 '[i]t happens in many businesses, particularly large ones, that the making of capital expenditure of one sort or another is almost continual'. In the present case, the taxpayer employs a large workforce to enable it to undertake construction projects in the continual expansion and upgrade of its distribution network. The relevant employees are engaged, in a systematic manner and as part of their normal regular duties, in the construction and upgrading of the taxpayer's depreciating assets. The depreciating assets constructed and upgraded by the relevant employees form part of the taxpayer's distribution network (that is, the taxpayer's profit-yielding structure) and result in a benefit of an enduring kind to the taxpayer. For these reasons, to the extent that the expenditure incurred on salary or wages for periods when the relevant employees were working on the relevant project relates to work undertaken to upgrade or expand the taxpayer's distribution network, the expenditure incurred by the taxpayer on salary or wages will be capital in nature. Accordingly, the taxpayer will not be entitled to a deduction under section 8-1 of the ITAA 1997 for this expenditure. As the taxpayer identifies the amount of time spent by each employee in carrying out activities that relate to the expansion and upgrading of the taxpayer's distribution network for accounting purposes, we consider that, in all the circumstances, it is fair and reasonable to apportion the expenditure incurred on the salary or wages of those employees on a similar basis for the purposes of section 8-1 of the ITAA 1997.", "Date_of_Decision": "12 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Subdivision 40-C section 40-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/43 | ATO ID 2011/44", "Subject_References": "Deductions & expenses Capital expenditure Labour expenses Salary & wages expenses", "Case_References": "Broken Hill Theatres Pty Ltd v. Federal Commissioner of Taxation (1952) 85 CLR 423 9 ATD 423 5 AITR 296", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201142", "Unmatched_Content": "Keywords Deductions & expenses Capital expenditure Labour expenses Salary & wages expenses"}
{"ATO_ID_Number": "ATO ID 2011/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of labour on-costs to the extent that employees are engaged on the self-construction of depreciating assets", "Issue": "Is expenditure incurred by a taxpayer on certain labour on-costs an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), to the extent that the relevant employees perform work on projects to construct and upgrade depreciating assets of the taxpayer?", "Decision": "No. Expenditure incurred by a taxpayer on certain labour on-costs is not an allowable deduction under section 8-1 of the ITAA 1997, to the extent that the relevant employees perform work on projects to construct and upgrade depreciating assets of the taxpayer as it is capital or capital in nature.", "Facts": "The taxpayer is a public utility that owns and operates a large distribution network consisting of depreciating assets. The taxpayer employs a large workforce split into business units. A key responsibility of two of its business units (comprising approximately 80% of the taxpayer's total employees) involves the design, planning, co-ordination and on-site construction work of projects to expand and upgrade the taxpayer's distribution network. The construction projects involve the construction and upgrading of assets which are depreciating assets within the meaning of that term in section 40-30 of the ITAA 1997. The same business units are also responsible for the operation and maintenance of the taxpayer's network. The taxpayer has a large annual construction budget and prepares an annual capital works plan detailing the various construction projects to be undertaken each year. All employees in the relevant business units engage, to varying degrees, in some construction work as part of their normal regular duties. Further, employees may work on multiple construction projects (either concurrently or successively) as part of their normal regular duties. The taxpayer keeps records, for accounting purposes, of the time spent by employees, in the relevant business units, working on capital construction projects. Whilst the time spent by individual employees varies, on average, 60% of the overall time of all employees in these two business units is spent working on construction projects and 40% of their overall time was spent on operational and maintenance activities. The taxpayer incurs expenditure on labour on costs in respect of these employees to cover employee allowances; leave payments, payroll tax and workers compensation. For accounting purposes, the taxpayer uses a full absorption costing system (which capitalises these labour on-costs that relate to the amount of time spent by employees working on construction projects) to determine the cost of its self-constructed depreciating assets.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under section 8-1 of the ITAA 1997 to the extent that the loss or outgoing is of a capital nature. The words 'to the extent that' indicate that an expense may be apportioned if it is partly deductible and partly non-deductible: Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; 4 AITR 236 ( Ronpibon ); Ure v. Federal Commissioner of Taxation (1981) 50 FLR 219; 81 ATC 4100; (1981) 11 ATR 484. However, where apportionment is necessary, the method adopted must be 'fair and reasonable' in all the circumstances: Ronpibon . In the present case, the expenditure incurred on certain labour on-costs for periods when the relevant employees were working on the relevant project is expenditure incurred in gaining or producing assessable income. However, the expenditure will not be deductible to the extent that it is a loss or outgoing of capital or capital in nature. The decision of the High Court in Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403 ( Sun Newspapers ) is the leading authority on the distinction between revenue and capital expenditure. The general rule is found in the frequently quoted statement of Dixon J where he said: The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure, or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay ... As general conceptions it may not be difficult to distinguish between the profit yielding subject and the process of operating it. In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. In Sun Newspapers , Dixon J stated that there are three matters to be considered when deciding whether expenditure incurred is revenue or capital in nature. These are: The character of the advantage sought by making the outgoing is the chief, if not the critical, factor that distinguishes revenue from capital outgoings: GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1. To a similar end, in Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 8 ATD 190; (1946) 3 AITR 436, Dixon J said that the distinction between an outgoing of capital and one on account of revenue 'depends upon what it is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured'. In Philip Morris Ltd v. Commissioner of Taxation (1979) 38 FLR 383; (1979) 10 ATR 44; 79 ATC 4352, it was held that labour on-cost payments on account of sick pay, tea money, holiday pay and payroll tax ought to be treated, for the purposes of calculating the cost of trading stock, as if the payments had been made on account of salary or wages earned by the relevant employee in that year of income (see also paragraph 11 of Taxation Ruling IT 2350 , and paragraph 117 of Taxation Ruling TR 98/2 ). In our view, it is appropriate to adopt a similar approach for the purposes of determining whether, and the extent to which, expenditure incurred on labour on-costs is revenue or capital in nature. In other words, the relevant expenditure ought to be treated as if it was expenditure incurred on salary or wages paid to the relevant employee. When considering the character of expenditure incurred on salary or wages, in Commissioner of Taxation v. Star City Pty Ltd (2009) 175 FCR 39; 2009 ATC 20-093; (2009) 72 ATR 431 ( Star City ), Jessup J said that '[m]erely to look at the legal rights and obligations which existed as between the payer and the payee (that is, the employer and the employee) would be of no assistance in the task of characterisation'. In this respect, we consider that it is appropriate to have regard to the actual work done by the relevant employees in determining what the expenditure on salary or wages was calculated to effect from a practical and business point of view. Further, it is clear that expenditure incurred in relation to salary or wages paid to employees engaged wholly in affairs of capital is properly characterised as capital in nature: Goodman Fielder Wattie Ltd v. Federal Commissioner of Taxation (1991) 29 FCR 376; 91 ATC 4438; (1991) 22 ATR 26; Star City . The fact that expenditure on salary or wages is incurred periodically is not determinative. Recurrence is not a test; it is not more than a consideration, the weight of which depends upon the nature of the expenditure: Broken Hill Theatres Pty Ltd v. Federal Commissioner of Taxation (1952) 85 CLR 423; 9 ATD 423; 5 AITR 296; Sun Newspapers . As Pincus and Ryan JJ said in Commissioner of Taxation v. Mount Isa Mines Ltd (1991) 28 FCR 269; (1991) 21 ATR 1294; (1991) 91 ATC 4154 '[i]t happens in many businesses, particularly large ones, that the making of capital expenditure of one sort or another is almost continual'. In the present case, the taxpayer employs a large workforce to enable it to undertake construction projects in the continual expansion and upgrade of its distribution network. The relevant employees are engaged, in a systematic manner and as part of their normal regular duties, in the construction and upgrading of the taxpayer's depreciating assets. The depreciating assets constructed and upgraded by the relevant employees form part of the taxpayer's distribution network (that is, the taxpayer's profit yielding structure) and result in a benefit of an enduring kind to the taxpayer. For these reasons, to the extent that the expenditure incurred on labour on-costs for periods when the relevant employees were working on the relevant project relates to work undertaken to upgrade or expand the taxpayer's distribution network, the expenditure incurred by the taxpayer on labour add-on costs will be capital in nature. Accordingly, the taxpayer will not be entitled to a deduction under section 8-1 of the ITAA 1997 for this expenditure. As the taxpayer identifies the amount of time spent by each employee in carrying out activities that relate to the expansion and upgrading of the taxpayer's distribution network for accounting purposes, we consider that, in all the circumstances, it is fair and reasonable to apportion the expenditure incurred on the labour on-costs of those employees on a similar basis for the purposes of section 8-1 of the ITAA 1997.", "Date_of_Decision": "12 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Subdivision 40-C section 40-30 section 290-60", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2350 | Taxation Ruling TR 98/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/42 | ATO ID 2011/44", "Subject_References": "Deductions & expenses Capital expenditure Labour expenses", "Case_References": "Broken Hill Theatres Pty Ltd v. Federal Commissioner of Taxation (1952) 85 CLR 423 9 ATD 423 5 AITR 296", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201143", "Unmatched_Content": "Minor typographical errors | Formatting and punctuation | Siebel/TDMS Reference Number | Reference number corrected to 1-2ZNNO8S | Related Public Rulings (including Determinations) Taxation Ruling IT 2350 Taxation Ruling TR 98/2 | Keywords Deductions & expenses Capital expenditure Labour expenses"}
{"ATO_ID_Number": "ATO ID 2011/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of vehicle running costs to the extent that vehicles are used in the self-construction of depreciating assets", "Issue": "Is expenditure incurred by a taxpayer on vehicle running costs an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), to the extent that the vehicles are used on projects to construct and upgrade depreciating assets of the taxpayer?", "Decision": "No. Expenditure incurred by a taxpayer on vehicle running costs is not an allowable deduction under section 8-1 of the ITAA 1997, to the extent that the vehicles are used on projects to construct and upgrade depreciating assets of the taxpayer as it is capital or capital in nature.", "Facts": "The taxpayer is a public utility that owns and operates a large distribution network consisting of depreciating assets. The taxpayer employs a large workforce split into business units. A key responsibility of two of its business units (comprising approximately 80% of the taxpayer's total employees) involves the design, planning and co-ordination and on-site construction work of projects to expand and upgrade the taxpayer's distribution network. The construction projects involve the construction and upgrading of assets which are depreciating assets within the meaning of that term in section 40-30 of the ITAA 1997. The same business units are also responsible for the operation and maintenance of the taxpayer's network. The taxpayer has a large annual construction budget and prepares an annual capital works plan detailing the various construction projects to be undertaken each year. The taxpayer employs a large fleet of commercial vehicles. All vehicles used by employees in the relevant business units are used, to varying degrees, in undertaking some construction work as part of their normal regular usage. Further, the vehicles may be used on multiple construction projects (either concurrently or successively) as part of their normal regular usage. Whilst the usage of individual vehicles varies, on average, 60% of the overall usage of all commercial vehicles in these two business units is on construction projects and 40% of their overall usage is on operational and maintenance activities. The taxpayer incurs expenditure on various running costs for the relevant commercial vehicles. These running costs include fuel, repairs, maintenance, registration and insurance. For accounting purposes, the taxpayer uses a full absorption costing system (which capitalises the vehicle running costs that relate to the amount of time that the vehicles are used on construction projects) to determine the cost of its self-constructed depreciating assets.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under section 8-1 of the ITAA 1997 to the extent that the loss or outgoing is of a capital nature. The words 'to the extent that' indicate that an expense may be apportioned if it is partly deductible and partly non-deductible: Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; 4 AITR 236 ( Ronpibon ); Ure v. Federal Commissioner of Taxation (1981) 50 FLR 219; 81 ATC 4100; (1981) 11 ATR 484. However, where apportionment is necessary, the method adopted must be 'fair and reasonable' in all the circumstances: Ronpibon . In the present case, the expenditure incurred on vehicle running costs for periods when the relevant vehicles were used on the relevant project is expenditure incurred in gaining or producing assessable income. However, the expenditure will not be deductible to the extent that it is a loss or outgoing of capital or of a capital nature. The decision of the High Court in Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403 ( Sun Newspapers ) is the leading authority on the distinction between revenue and capital expenditure. The general rule is found in the frequently quoted statement of Dixon J where he said: The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure, or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay ... As general conceptions it may not be difficult to distinguish between the profit yielding subject and the process of operating it. In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. In Sun Newspapers , Dixon J stated that there are three matters to be considered when deciding whether expenditure is revenue or capital in nature. These are: The character of the advantage sought by making the outgoing is the chief, if not the critical, factor that distinguishes revenue from capital outgoings: GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1. To a similar end, in Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 8 ATD 190; (1946) 3 AITR 436, Dixon J said that the distinction between an outgoing of capital and one on account of revenue 'depends upon what it is calculated to effect from a practical and business point of view, rather than upon the juristic classification of the legal rights, if any, secured'. When considering the character of expenditure on vehicle running costs, it is appropriate to consider the taxpayer's actual use of the relevant vehicle. For example, expenditure on vehicle running costs may be capital to the extent that the vehicle is used to inspect blocks of land as potential factory sites: Case Q19 83 ATC 68; (1983) 26 CTBR (NS) 545. The fact that expenditure on vehicle running costs is incurred periodically is not determinative. Recurrence is not a test; it is not more than a consideration, the weight of which depends upon the nature of the expenditure: Broken Hill Theatres Pty Ltd v. Federal Commissioner of Taxation (1952) 85 CLR 423; 9 ATD 423; 5 AITR 296; Sun Newspapers . As Pincus and Ryan JJ said in Commissioner of Taxation v. Mount Isa Mines Ltd (1991) 28 FCR 269; (1991) 21 ATR 1294; (1991) 91 ATC 4154 '[i]t happens in many businesses, particularly large ones, that the making of capital expenditure of one sort or another is almost continual'. In the present case, the taxpayer employs a large fleet of commercial vehicles to enable it to undertake construction projects in the continual expansion and upgrade of its distribution network. The vehicles are used, in a systematic manner and as part of their normal regular usage, to construct and upgrade the taxpayer's depreciating assets. The depreciating assets constructed and upgraded when using the relevant vehicles form part of the taxpayer's distribution network (that is, the taxpayer's profit-yielding structure) and result in a benefit of an enduring kind to the taxpayer. For these reasons, to the extent that the expenditure incurred on vehicle running costs for periods when the relevant vehicles were used on the relevant project relates to work undertaken to upgrade or expand the taxpayer's distribution network, the expenditure incurred by the taxpayer on vehicle running costs will be capital in nature. Accordingly, the taxpayer will not be entitled to a deduction under section 8-1 of the ITAA 1997 for this expenditure. As the taxpayer identifies the amount of time each vehicle is used in carrying out activities that relate to the expansion and upgrading of the taxpayer's distribution network for accounting purposes, we consider that, in all the circumstances, it is fair and reasonable to apportion the expenditure incurred on vehicle running costs on a similar basis for the purposes of section 8-1 of the ITAA 1997.", "Date_of_Decision": "12 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Subdivision 40-C section 40-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/42 | ATO ID 2011/43", "Subject_References": "Deductions & expenses Capital expenditure Motor vehicle expenses", "Case_References": "Broken Hill Theatres Pty Ltd v. Federal Commissioner of Taxation (1952) 85 CLR 423 9 ATD 306 5 AITR 296", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201144", "Unmatched_Content": "Minor citation error corrected | Formatting and punctuation | Minor grammatical error corrected | Keywords Deductions & expenses Capital expenditure Motor vehicle expenses"}
{"ATO_ID_Number": "ATO ID 2010/37", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: tax indemnity payment", "Issue": "Is a deduction available under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a tax indemnity payment made to an investor pursuant to an obligation in a research and development syndicate (R&D syndicate) arrangement, if the giving of such indemnities and entering into such arrangements is a regular part of the taxpayer's business operations as a developer/supplier of technological products and holding company?", "Decision": "Yes, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for a tax indemnity payment made to an investor where the giving of tax indemnities was a regular feature of the R&D syndicate arrangements entered into by the taxpayer and it is a regular part of the taxpayer's business operations to enter into such arrangements.", "Facts": "The taxpayer is a developer and supplier of technological products. The taxpayer has a number of subsidiaries. One of these subsidiaries, 'Researcher', owned core technology that is able to be licensed to other parties. Research and Development (R&D) was a vital part of the business conducted by the taxpayer and its subsidiaries. It was a regular part of the taxpayer's business operations, as a developer/supplier of technological products and a holding company to its subsidiaries, to enter into R&D syndication arrangements (as a lender, licensor, contractor or indemnity provider). In this particular case, two of the taxpayer's subsidiaries other than Researcher formed a R&D syndicate with a subsidiary of a financial institution. The taxpayer, Researcher, the financial institution, and its subsidiary, entered into a principal agreement which included the following relevant features: Tax indemnities were a regular feature of the R&D syndicate arrangements entered into by the taxpayer as the taxpayer could only attract investors by ensuring that a minimum return to investors in R&D syndicates was maintained. This was done by compensating the investor in the event that expected tax benefits (such as the availability of R&D tax concessions) were disallowed and protecting investors from any additional tax liability. In the absence of the tax indemnity, the investor (financial institution) and its subsidiaries/associates would not have entered into the particular R&D syndication. The Commissioner disallowed a portion of the core technology expenditure contrary to an assumption in the agreement. In accordance with the principal agreement, the taxpayer was obliged to make the tax indemnity payment to the financial institution.", "Reasons_for_Decision": "Summary: Subsection 8-1(1) of the ITAA 1997 allows a deduction for any loss or outgoing to the extent that (a) it is incurred in gaining or producing assessable income or (b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, subsection 8-1(2) of the ITAA 1997 provides that a loss or outgoing is not deductible to the extent that it is capital or of a capital nature; of a private or domestic nature; incurred in relation to gaining or producing exempt income or non-assessable non-exempt income; or a provision of the ITAA 1997 prevents its deduction. A loss or outgoing is 'incurred in gaining or producing assessable income' or 'necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income' if the occasion of the loss or outgoing is found in whatever is productive of the assessable income, or in the carrying on of a business for the production of assessable income (see Mason J in A.G.C (Advances) Ltd v. Federal Commissioner of Taxation (1975) 132 CLR 175; 75 ATC 4057; (1975) 5 ATR 243 citing Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; 4 AITR 236). Where the tax deductibility of an indemnity payment is being considered, the occasion for the outgoing is to be found in the giving of the indemnity and not the payment of the indemnity itself ( FC of T v. Email Ltd (1999) 42 ATR 698; 99 ATC 4868 ( Email )). In Email , the issue before the Full Federal Court was whether an indemnity payment was capital or of a capital nature (the parties having agreed that the outgoing was necessarily incurred in carrying on a business). In determining whether the indemnity payment is capital or of a capital nature, the Full Federal Court said that it is the character of the advantage sought which will generally provide the greatest guidance for it tells most about the essential character of the outgoing itself and that it is the character of the advantage which the indemnity was calculated to effect, not directly the character of the payments themselves which must fall for consideration. The Full Federal Court also said in Email that the identification of what expenditure is calculated to effect involves both a consideration of the character of the expenditure and in many cases an examination of the business structure and the operations of the business in the course of which the expenditure has been incurred. In that case, in considering the character of the advantage which the indemnity was calculated to effect, the Full Federal Court focussed on the immediate advantage which the giving of the indemnity was designed to effect (in that particular case, it was the sale of the shares at the maximum possible price) rather than the 'ultimate' advantage (which was the expected dividend flow from the subsidiaries to the taxpayer). Consequently, in Email , the Full Federal Court concluded that the advantage was not of a revenue nature. The Full Federal Court in Email indicated that the provider of a guarantee/indemnity will be able to claim a deduction where the guarantee/indemnity is given in a context which has a sufficient nexus with the income producing activities of the provider. Thus, it considered that the Court in Morley v. Lawford and Company (1928) 14 TC 229 ( Morley ) was correct in holding that moneys paid under a guarantee by a firm of contractors to ensure preference in the allotment of contracts for work at an exhibition was deductible because it was wholly and exclusively laid out for the purposes of the taxpayer's trade. In particular, the Full Federal Court stated the following in relation to the Morley case: No doubt that case was correctly decided and would probably be decided in the same way in Australia under subsection 51(1). The guarantee was so much a part of the taxpayer's trading operations that it was properly to be regarded as a revenue outgoing. The required connection between the giving of a guarantee and the taxpayer's income producing activities was also found in Case A58 (1969) 69 ATC 330; (1969) 15 CTBR (NS) Case 33 . In that case the giving of guarantees were a regular and normal incident of the taxpayer's income earning activities as it was part of the ordinary business of a holding company to guarantee bank overdrafts of tenants of its hotels as an inducement to the tenant to continue to purchase its liquor supplies from the taxpayer's subsidiaries. Accordingly, the No. 2 Board of Review held, by majority, that the payment of the guarantee was incurred in the course of the gaining of the taxpayer's assessable income and was not of a capital nature. In this case, entering into R&D syndication arrangements (as a lender, licensor, contractor, and indemnity provider) was a regular part of the taxpayer's business operations as a developer/supplier of technological products and a holding company to its subsidiaries. The giving of tax indemnities were a regular feature of the R&D syndicates entered into by the taxpayer and, for this particular R&D syndicate, was a condition of the investor and its subsidiaries/associates' participation in the syndicate arrangement. The immediate advantage which the giving of the indemnity by the taxpayer was designed to effect was to induce the investor and its subsidiary to enter into the R&D syndicate arrangement thereby producing income and new products (for their current markets) for the taxpayer's subsidiaries. The tax indemnity payment is thus incurred in the course of the gaining of the taxpayer's assessable income and is not of capital or of a capital nature The indemnity is also not private or domestic in nature, was not incurred in relation to the gaining or producing of exempt income or non-assessable non-exempt income and a provision of the Act does not prevent the taxpayer from deducting it. Therefore, a deduction for the indemnity payment is allowable to the taxpayer under section 8-1 of the ITAA 1997.", "Date_of_Decision": "18 July 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 subsection 8-1(1) subsection 8-1(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/657", "Subject_References": "Deductions & expenses Guarantees Indemnity", "Case_References": "AGC (Advances) Ltd v Federal Commissioner of Taxation (1975) 132 CLR 175 75 ATC 4057 (1975) 5 ATR 243", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201037", "Unmatched_Content": "Keywords Deductions & expenses Guarantees Indemnity"}
{"ATO_ID_Number": "ATO ID 2008/91", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: deductibility of expenditure on cables and cable support equipment by a service provider", "Issue": "Is expenditure incurred by a taxpayer on cables and cable support equipment which it gives up in the course of connecting its network to another entity's network in order to obtain the use of the other entity's network, an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The expenditure incurred by the taxpayer on cables and cable support equipment which it gives up in the course of connecting its network to another entity's network in order to obtain the use of the other entity's network is not an allowable deduction under section 8-1 of the ITAA 1997. Such expenditure is capital in nature.", "Facts": "The taxpayer carries on the business of a service provider. In order to establish and expand its business it entered into an agreement with another entity to create a service capability available through the interconnection of its network and the other entity's network. The service capability created is a resource that the taxpayer can use to create a customer base and also to expand the size of that customer base. To create this service capability, the taxpayer was required to connect its network to the other entity's network. In practical terms, this connection was achieved by the taxpayer installing its own equipment into the relevant buildings of the other entity and connecting its equipment to each building through a set of cables and cable support equipment. Under the agreement, property in and title to the equipment installed in the other entity's premises is retained by the taxpayer with the exception of the cables and cable support equipment which becomes the property of the other entity upon installation. The taxpayer's rights of access to the use of the other entity's network lasts for the term of the agreement, as renewed.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under section 8-1 of the ITAA 1997 where the loss or outgoing is of a capital, private or domestic nature, or is incurred in producing exempt income, or where another provision of the ITAA 1997 prevents a deduction. As the taxpayer is carrying on the business of a service provider, the expenditure incurred by the taxpayer on the cables and cable support equipment will be expenditure incurred in carrying on a business for the purpose of gaining or producing assessable income. The only relevant question then in determining whether a deduction is allowed under section 8-1 of the ITAA 1997 is whether the expenditure incurred by the taxpayer on the cables and cable support equipment is capital in nature. The decision of the High Court in Sun Newspapers Ltd. and Associated Newspapers Ltd. v. Federal Commissioner of Taxation (1938) 61 CLR 337 (1938) 5 ATD 23; (1938) 1 AITR 403 ( Sun Newspapers Case ) is the leading authority on the distinction between revenue and capital expenditure. The general rule is found in the frequently quoted statement of Dixon J where he said: The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity structure or organization set up or established for the earning of profit and the process by which such an organization operates to obtain regular returns by means of regular outlay ... As general conceptions it may not be difficult to distinguish between the profit yielding subject and the process of operating it. In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. In the Sun Newspapers Case , Dixon J stated that there are three matters to be considered when deciding whether expenditure incurred is revenue or capital in nature. These are: The character of the advantage sought provides important direction. It provides the best guidance as to the nature of the expenditure because it says the most about the essential character of the expenditure itself. The decision of the High Court in G P International Pipecoaters Pty Ltd v. Commissioner of Taxation (1990) 170 CLR 124 at 137; (1990) 90 ATC 4413 at 4419; (1990) 21 ATR 1 at 7 emphasised this, stating: The character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid: Sun Newspapers Ltd. and Associated Newspapers Ltd. v. Federal Commissioner of Taxation (1938) 61 C.L.R 337, at p.363 .... In relation to the character of the advantage sought by the expenditure it is necessary to examine whether the expenditure secures an enduring benefit for the business. This test was outlined in British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205 at 213 - 214 by Viscount Cave where he stated: But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. As noted above, when the matters stated by Dixon J in the Sun Newspapers Case are considered, the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. The nature or character of the expenditure will therefore follow the advantage that is sought to be gained by incurring the expenditure. If the advantage to be gained is of a capital nature, then the expenditure incurred in gaining the advantage will also be of a capital nature. It is then appropriate for the nature of the expenditure incurred by the taxpayer on the cables and cable support equipment to be characterised by reference to the advantage that is sought to be gained by incurring the expenditure. In this case, the expenditure incurred by the taxpayer on the cables and cable support equipment is an integral part of achieving the connection between the taxpayer's network and the other entity's network. This connection secures the taxpayer's ability to provide its customers with access to a service capability and is not diminished by the fact that title in the cables and cable support equipment passes to the other entity upon installation. The advantage that is sought to be gained by the incurring of the expenditure is the taxpayer's ability to provide its customers with access to the service capability. This is a resource that the taxpayer can sell to create a customer base and also to expand the size of that customer base, thereby resulting in an enlargement of the profit yielding structure of its business. It is considered that the expenditure is correctly characterised as establishing and enlarging the profit-yielding structure of the taxpayer's business rather than being a working expense. As pointed out in the Sun Newspapers Case , expenditure incurred by a business that establishes or enlarges the profit yielding structure of the business is considered to be capital in nature. Further, it is considered that the expenditure incurred by the taxpayer on the cables and cable support infrastructure will secure an enduring benefit for the taxpayer's business. The enduring benefit obtained is the ongoing ability to provide access to a service capability which is a resource that the taxpayer can sell to establish and expand its customer base. This is an asset or an advantage for the enduring benefit of trade which continues to exist notwithstanding that property in and title to the cables and cable support equipment passes to the other entity upon installation. The advantage for which the expenditure on the cables and cable support equipment was paid is of a permanent and enduring character and an indispensable part of the profit-yielding structure of the taxpayer. The fact that the taxpayer's ability to provide the service capability lasts for the term of the agreement, as renewed, and is not everlasting does not alter this conclusion. This approach was confirmed by Latham CJ in the Sun Newspapers Case where he said: It is true that the payments did not result in obtaining a new capital asset of a material nature, but they did obtain a very real benefit or advantage for the companies, namely, the exclusion of what might have been serious competition. When the words \"permanent\" or \"enduring\" are used in this connection it is not meant that the advantage which will be obtained will last forever. The distinction which is drawn is that between more or less recurrent expenses involved in running a business and an expenditure for the benefit of the business as a whole. And Dixon J in the Sun Newspapers Case where he said: ... the lasting character of the advantage is not necessarily a determining factor. The fact that the expenditure by the taxpayer on the cables and cable support equipment is not a once and for all payment, but is recurrent in the sense that expenditure on cables and cable support equipment is required in each of the relevant buildings of the other entity, will not prevent a conclusion that the expenditure in question is capital in nature. It is not appropriate to place much weight on the mere fact that a type of expenditure is recurrent. As pointed out by Dixon J in the Sun Newspapers Case : Recurrence is not a test, it is not more than a consideration the weight of which depends upon the nature of the expenditure. For these reasons, the expenditure incurred by the taxpayer on cables and cable support equipment will be capital in nature. Accordingly, the taxpayer will not be entitled to a deduction under section 8-1 of the ITAA 1997 for expenditure incurred by the taxpayer on cables and cable support equipment which it gives up in the course of connecting its network to another entity's network in order to obtain the use of the other entity's network.", "Date_of_Decision": "27 July 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/92 | ATO ID 2008/93", "Subject_References": "Capital expenditure Deductions & expenses", "Case_References": "British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200891", "Unmatched_Content": "Keywords Capital expenditure Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2002/1005", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Travel expenses incurred in respect of work-related items", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for travel expenses incurred in order to purchase and maintain work related items?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for travel expenses incurred in order to purchase and maintain work related items.", "Facts": "The taxpayer is an employee in an industry which requires them to wear protective clothing and use various tools. The taxpayer incurs travel expenses in order to purchase and wash their protective clothing and to purchase various tools used in their employment. The travel is undertaken in the taxpayer's own time.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Travel expenses incurred by a taxpayer which are incidental and relevant to the derivation of their assessable income are deductible under section 8-1 of the ITAA 1997. A number of significant court decisions have determined that, for an expense to satisfy the tests in section 8-1 of the ITAA 1997: The requisite connection is not shown by demonstrating only that there is some causal connection between the expenditure and derivation of the income, nor by demonstrating that the expenditure was incurred 'in connection with' the derivation of assessable income or 'for the purpose of' deriving assessable income. What must be shown is closer and more immediate connection. The expenditure must be incurred 'in the course of' gaining or producing the assessable income. In Cooper's Case , Lockhart J stated: 'The question whether additional expenditure of the taxpayer is deductible under s51(1) cannot be answered simply by a process of reasoning that, because expenditure of this type is a prerequisite to the earning of the taxpayer's assessable income (in the sense that it is necessary if assessable income is to be derived), it must be incidental and relevant to the derivation of income. It does not follow that such expenditure is incurred in or in the course of gaining or producing the assessable income.' The cost of purchasing a work related item, used by the taxpayer in the course of their duties, may be deductible under section 8-1 of the ITAA 1997, or Division 40 of the ITAA 1997 if the item is a depreciating asset. The cost of maintaining a work related item used by the taxpayer in the course of their duties, for example laundering protective clothing (Taxation Ruling TR 98/5) may also be deductible under section 8-1 of the ITAA 1997. These expenses are considered to have a sufficient nexus with gaining or producing of assessable income. However, the travel undertaken by the taxpayer was not travel in the course of their duties. It was travel undertaken in order to prepare themselves for later carrying out their duties. It may have been a prerequisite (using the terminology in Cooper's Case ) to the earning of the taxpayer's assessable income but it was not expenditure incurred in, or in the course of, gaining or producing assessable income. It is expenditure incurred in order to put the taxpayer in the position to earn assessable income. As such the requisite connection between the expense and the earning of income does not exist. Consequently, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for travel expenses incurred in respect of the purchase and maintenance of the work related items.", "Date_of_Decision": "8 September 2002", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Division 40", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Laundry & dry cleaning expenses Protective clothing expenses Tools of trade expenses Travel expenses Protective clothing", "Case_References": "Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478 [1958] HCA 5 (1958) 7 AITR 166 (1958) 11 ATD 404", "Other_References": "", "Business_Line": "Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021005", "Unmatched_Content": "Update minor formatting errors Inserted medium neutral case citations | Inserted medium neutral case citations | Update minor formatting errors Update minor grammatical errors Add medium neutral case references | Add medium neutral case reference | Related Public Rulings (including Determinations) Taxation Ruling TR 98/5 | Keywords Laundry & dry cleaning expenses Protective clothing expenses Tools of trade expenses Travel expenses Protective clothing"}
{"ATO_ID_Number": "ATO ID 2012/90", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: Internal estimates of notional funding cost", "Issue": "In determining the profits attributable to a foreign bank's Australian permanent establishment under the business profits article of a relevant tax treaty, can the bank deduct an amount it estimates would be the funding cost if assets employed in its Australian branch operations had been funded under certain terms and conditions?", "Decision": "No. In determining the profits attributable to a foreign bank's Australian permanent establishment under the business profits article of a relevant tax treaty, the bank cannot deduct an amount it estimates would be the funding cost if assets employed in its Australian branch operations had been funded under certain terms and conditions.", "Facts": "A foreign bank is incorporated in a country ( home country ) with which Australia has entered into an agreement for the relief of double taxation ( relevant tax treaty ). The foreign bank is a tax resident of the home country under both Australian domestic law and the relevant tax treaty. The foreign bank is regulated by its home country banking regulator. The foreign bank carries on business operations through a fixed place of business in Australia (Australian branch operations). APRA has granted a restricted Australian banking licence for the foreign bank's Australian branch operations. The Australian branch operations constitute business carried on by foreign bank through an Australian permanent establishment for the purposes of applying the relevant article (usually article 7) of the relevant tax treaty ( business profits article ). Accordingly, profits attributable to Australian branch operations may be taxed by Australia. The foreign bank includes an amount as a 'cost' of, or 'charge' to, its 'Australian branch' in its 'Australian branch accounts' or in its accounts used for its internal management purposes. The amount of such 'cost' or 'charge' is the amount determined by the bank as the estimated additional interest cost if assets employed in its Australian branch operations, that were funded by Australian dollar borrowings by the bank, had instead been funded by more expensive longer term Australian dollar borrowings of a duration or term equal to the average duration or term of the bank's global borrowings.", "Reasons_for_Decision": "Summary: Subsection 3(2) of the International Tax Agreements Act 1953 (IAA) provides that the reference, in the business profits article of the relevant tax treaty, to profits attributable to business carried by the foreign bank through its Australian permanent establishment, is a reference to the Australian taxable income derived by the foreign bank from the business carried on through its Australian permanent establishment. Refer also to paragraph 3.29 of Taxation Ruling TR 2001/11 Income tax : international transfer pricing - operation of Australia's permanent establishment attribution rules . Accordingly, in the case of costs of a foreign bank carrying on banking business through an Australian permanent establishment, it is necessary to consider section 8-1 of Income Tax Assessment Act 1997 (ITAA 1997) and Part IIIB of Income Tax Assessment Act 1936 (ITAA 1936). | Detailed Reasoning - Section 8-1 of ITAA 1997: Interest expense incurred by the foreign bank is deductible under section 8-1 of ITAA 1997, in determining the profit of the foreign bank taxable in Australia under the business profits article of the relevant tax treaty, to the extent the interest expense is: The above requirements of section 8-1 of the ITAA 1997 and subsection 3(2) of IAA are consistent with paragraph 3 of the business profits article of the relevant tax treaty, namely: '...there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment...' Internal 'charges', such as amounts 'charged' to particular business operations of a company in its management accounts for 'transactions' with other of the taxpayer's business operations, are not a loss or outgoing incurred for the purposes of applying section 8-1 of ITAA 1997: refer Max Factor & Co v. Federal Commissioner of Taxation (1984) 84 ATC 4060. A loss or outgoing must be incurred by a non-resident in order to be deductible under section 8-1 of the ITAA 1997 in determining the non-resident's Australian taxable income from its business carried on through its Australian permanent establishment for the purposes of applying the business profits article of the relevant tax treaty. Refer also to paragraphs 1.8, 1.10, 1.15 to 1.17, 3.36 and 4.4 (last sentence) of Taxation Ruling TR 2001/11. It is noted that paragraph 3.47 and paragraph 3.48 of TR 2001/11 are only relevant in relation to attributing income or expenditure to the non-resident's relevant functions and assets. The amount treated by the foreign bank as a 'cost' of, or 'charge' to, its 'Australian branch' in its 'Australian branch accounts', or in its accounts used for its internal management purposes, is not an amount of interest expense or other loss or outgoing incurred by the bank. The bank has funded assets employed by the bank in its Australian branch operations with Australian dollar borrowings for which it incurs interest expense in carrying on its Australian branch operations. For completeness it is noted that would not be possible to reasonably treat the 'cost' or 'charge' as a reasonable proxy for any actual interest or other funding costs incurred by the foreign bank globally to fund the assets employed in its Australian branch operations. In this respect we note: | Detailed Reasoning - Part IIIB of ITAA 1936: Part IIIB needs to be considered if the foreign bank does not make an election under section 160ZZVB. The conditions for operation of sections 160ZZZ and 160ZZZA of ITAA 1936 are not satisfied because the hypothesised more expensive longer term Australian dollar borrowings (for which the bank determined the estimated additional interest cost) do not comprise or represent \"an amount [that] has been made available by a foreign bank for use by an Australian branch of the bank and is recorded in the bank's accounting records as having been provided by the bank to the branch\". If the foreign bank does make an election under section 160ZZVB Taxation Ruling TR 2005/11 does not apply to permit the deduction of the 'cost' or 'charge' because the 'cost' or 'charge' is not in relation to: a bank internally transfer[ing] funds to or from a PE in the ordinary course of carrying on business through that PE [paragraph 1 of TR 2005/11]. Accordingly, the amount of such 'cost' or 'charge' is not deductible under section 8-1 of ITAA 1997 in determining the Australian taxable income of the foreign bank in accordance with the business profits article of the relevant tax treaty.", "Date_of_Decision": "25 October 2012", "Year_of_Income": "Income year ended 30 June 2009 Income year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 160ZZZ section 160ZZZA section 160ZZVB", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/11 | Taxation Ruling TR 2005/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/91 | ATO ID 2012/92", "Subject_References": "Deductions & expenses Interest allocation Interest expenses Permanent Establishment", "Case_References": "Max Factor & Co v Federal Commissioner of Taxation (1984) 84 ATC 4060", "Other_References": "", "Business_Line": "Large Business and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201290", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/11 Taxation Ruling TR 2005/11 | Keywords Deductions & expenses Interest allocation Interest expenses Permanent Establishment"}
{"ATO_ID_Number": "ATO ID 2012/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction: interest expense to fund general reserve liquid assets", "Issue": "In determining the profits attributable to a foreign bank's Australian permanent establishment under the business profits article of a tax treaty, is interest expense incurred by the foreign bank on its borrowings that fund the bank's general reserve liquid assets, managed and controlled for use outside Australia, deductible by the bank under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. In determining the profits attributable to the foreign bank's Australian permanent establishment under the business profits article of a tax treaty, interest expense incurred by a foreign bank on its borrowings that fund the bank's general reserve liquid assets, managed and controlled for use outside Australia, is not deductible by the bank under section 8-1 of ITAA 1997.", "Facts": "A foreign bank is incorporated in a country ( home country ) with which Australia has entered into an agreement for the relief of double taxation ( relevant tax treaty ). The foreign bank is a tax resident of the home country under both Australian domestic law and the relevant tax treaty. The foreign bank is regulated by its home country banking regulator. The foreign bank carries on business operations through a fixed place of business in Australia ( Australian branch operations ). APRA has granted a restricted Australian banking licence for the foreign bank's Australian branch operations. The Australian branch operations constitute business carried on by foreign bank through an Australian permanent establishment for the purposes of applying the relevant article (usually article 7) of the relevant tax treaty ( business profits article ). Accordingly, profits attributable to the Australian branch operations may be taxed by Australia. The foreign bank maintains general reserve liquid assets ( liquid reserve assets ) as required by its home country banking regulator. Under rules imposed by its home country banking regulator: The liquid reserve assets are managed and controlled for use outside of Australia. The foreign bank derives interest and other income from the liquid reserve assets. The foreign bank incurs interest expense on borrowings that fund the liquid reserve assets. The amount of the interest expense incurred exceeds the income derived from the liquid reserve assets in the income year.", "Reasons_for_Decision": "Summary: Subsection 3(2) of the International Tax Agreements Act 1953 (IAA) provides that the reference, in the business profits article of the relevant tax treaty, to profits attributable to business carried by the foreign bank through its Australian permanent establishment, is a reference to the Australian taxable income derived by the foreign bank from the business carried on through its Australian permanent establishment. Refer also to paragraph 3.29 of Taxation Ruling TR 2001/11. Accordingly, in the case of costs of a foreign bank carrying on banking business through an Australian permanent establishment, it is necessary to consider section 8-1 of ITAA 1997 and Part IIIB of ITAA 1936. | Detailed Reasoning - Section 8-1 of ITAA 1997: Interest expense incurred by the foreign bank is deductible under section 8-1 of ITAA 1997, in determining the profit of the foreign bank taxable in Australia under the business profits article of the relevant tax treaty, to the extent the interest expense is: The above requirements of section 8-1 of the ITAA 1997 and subsection 3(2) of IAA are consistent with paragraph 3 of the business profits article of the relevant tax treaty, namely: '...there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment...' The interest expense incurred by the foreign bank on its borrowings that fund the liquid reserve assets does not satisfy the requirements of section 8-1 of the ITAA 1997 because no part of that interest expense was: The purpose of the borrowing and use of the borrowed funds for which the foreign bank incurred the interest expense was to fund the liquid reserve assets. The liquid reserve assets are not managed or controlled for use in the course of the business operations carried on by the foreign bank through its Australian fixed place of business. In relation to how the purpose of borrowing and the use or application of the borrowed funds are relevant in determining if interest satisfies the required nexus in section 8-1 of the ITAA 1997, refer to Kidston Goldmines Ltd v. Federal Commissioner of Taxation (1991) 30 FCR 77 at 85; (1991) 22 ATR 168; 91 ATC 4538 at 4545 to 4546, Spassked Pty Ltd v. Federal Commissioner of Taxation (2007) FCAFC 205; (2007) 67 ATR 900; 2007 ATC 5406 at 5424 and IEL Finance Ltd v. Federal Commissioner of Taxation [2010] FCA 898; 2010 ATC 20-209 at [14]; (2010) 272 ALR 640; [2011] ALMD 1946; (2010) 79 ATR 820. There is, at best, a contingent connection between any part of the interest or other income derived from the liquid reserve assets managed and controlled for use by the foreign bank outside Australia and the business operations carried on by the foreign bank through its Australian permanent establishment for the purpose of gaining or producing the bank's assessable income. General reserve liquid assets of a foreign bank are inherently available to fund all kinds of future net cash outflows of the bank. The measurement, at any particular point in time, of the estimated future net cash flow needs of the Australian branch operations of the foreign bank in particular scenarios under the bank's method for determining the level or amount of its liquid reserve assets in accordance with rules imposed by its home country banking regulator, does not of itself enable the Commissioner to conclude that a particular part of the loss or outgoing for interest costs of funding any such liquid reserve assets (or a particular part of the income from the assets), acquired as a result of that measurement, is thereby a loss or outgoing incurred in (or income derived in) the course of the business operations carried on by the foreign bank through its Australian branch. This conclusion is consistent with paragraph 3.42 and paragraph 4.32 of Taxation Ruling TR 2001/11 Income tax : international transfer pricing - operation of Australia's permanent establishment attribution rules : 3.42 To the extent that funds borrowed by an entity are used in connection with the business carried on through its PE, the interest expense incurred by the entity on those borrowings is attributable to the PE. ... 4.32 For each activity involving the PE it is necessary to identify the assets used (both tangible and intangible) and the risks assumed. In addition, it may be necessary to identify the liabilities and capital that are attributable to funding those assets and covering risks. On the assumption that a PE exists, it is the assets used (not owned) that matter, and the risks that are assumed, implicitly or explicitly, that have to be considered. If the foreign bank did, in the future, fund liabilities of its Australian branch operations from the proceeds of disposal of any of the liquid reserve assets, any interest expense incurred by the bank to fund such liabilities would thereby commence to be incurred in the course of the bank's Australian branch operations. A conclusion that the foreign bank could instead be treated as having incurred in the course of its Australian branch operations, for the purpose of applying section 8-1, a particular part of the interest expenses it incurs in funding the liquid reserve assets, no part of which are managed or controlled for use in the course of the Australian branch operations, would transgress the fundamental income tax principle that costs that are not yet incurred (in the course of the Australian branch operations) are not deductible in reducing Australian taxable income (from those Australian branch operations): refer to New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179 at 207 (per Dixon J); (1938) 12 ALJ 313; (1938) 5 ATD 36 at 49-50; [1939] ALR 1, Emu Bay Railway Company Ltd. v. FC of T (1944) 7 ATD 455 at 460; (1944) 71 CLR 596 at 606; (1944) HCA 28, Federal Commissioner of Taxation v. James Flood Pty. Ltd (1953) 88 CLR 492 at 506 to 507; (1953) ALJ 481; (1953) 10 ATD 240 at 244; (1953) ALR 903; Nilsen Development Laboratories Pty. Ltd . & Ors v. Federal Commissioner of Taxation (1981) 144 CLR 616 at 62; (1981) 55 ALJR 97; (1981) 33 ALR 161; (1981) 11 ATR 505; (1981) 81 ATC 4031 at 4036 to 4037. Chapter 4 of TR 2001/11 sets out how profits are attributed to a permanent establishment based on an analysis of the functions undertaken by the permanent establishment, the assets used in performing the functions of the permanent establishment and the risks assumed by the permanent establishment as a result of carrying out its functions. For example, paragraph 4.36 of TR 2001/11 refers to how risks arise from the functions performed and the assets employed in the business operations carried on through the permanent establishment, and are therefore relevantly attributable to where those functions are performed. Paragraph 4.37 of TR 2001/11 cannot apply because the foreign bank's Australian branch operations did not \"joint[ly] ... carry... out a single economic function\" with the foreign bank's 'head office' in relation to holding or managing the liquid reserve assets for which the relevant interest expense was incurred by the foreign bank. The acquisition of general reserve assets by a foreign bank could not constitute a 'hedge' of the kind referred to in paragraph 4.37 of TR 2001/11. General reserve assets are inherently available to fund all kinds of future cash demands on the bank and are not relevantly attributable to other particular assets or operations. It is also noted that the foreign bank would be required by the home country banking regulator to maintain a sufficient level of qualifying 'liquid assets' to satisfy the foreign bank's relevantly estimated future net cash outflows. For example, as measured under the Basel III '30-day Liquidity Coverage Ratio' and the 'Net Stable Funding Ratio': refer to Basel Committee ' Basel III : International framework for liquidity risk measurement, standards and monitoring' of December 2010. Paragraph 4.38 of TR 2001/11 cannot apply because the interest expense incurred by the foreign bank on borrowing that funds the liquid reserve assets was \"directly related to a particular function\" undertaken by the foreign bank, other than in the course of its Australian branch operations. | Detailed Reasoning - Part IIIB of ITAA 1936: Part IIIB needs to be considered if the foreign bank does not make an election under section 160ZZVB of the ITAA 1936. The conditions for operation of sections 160ZZZ of the ITAA 1936 and 160ZZZA of the ITAA 1936 are not satisfied because the liquid reserve assets are not \"an amount [that] has been made available by a foreign bank for use by an Australian branch of the bank and is recorded in the branch's accounting records as having been provided by the bank to the branch\". If the foreign bank does make an election under section 160ZZVB of the ITAA 1936, Taxation Ruling TR 2005/11 does not apply to permit deduction of the interest expense since it is not interest expense incurred in relation to: 'a bank internally transfer[ing] funds to or from a PE in the ordinary course of carrying on business through that PE [paragraph 1 of TR 2005/11]'.", "Date_of_Decision": "25 October 2012", "Year_of_Income": "Income year ended 30 June 2009 Income year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 Section 160ZZZ Section 160ZZZA Section 160ZZVB", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/11 | Taxation Ruling TR 2005/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/90 | ATO ID 2012/91", "Subject_References": "Deductions & expenses Interest allocation Interest expenses Permanent establishment", "Case_References": "Kidston Goldmines Ltd v Federal Commissioner of Taxation (1991) 30 FCR 77 (1991) 22 ATR 168 91 ATC 4538", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201292", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/11 Taxation Ruling TR 2005/11 | Keywords Deductions & expenses Interest allocation Interest expenses Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2006/217", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Securitisation Vehicle: financial institution - treatment of interest income and expenses", "Issue": "For income tax purposes, can a securitisation vehicle which is not a financial institution account for interest income derived under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and interest expenditure incurred under section 8-1 of the ITAA 1997 using a straight line daily accruals method?", "Decision": "Yes. For income tax purposes, a securitisation vehicle which is not a financial institution can account for interest income derived under section 6-5 of the ITAA 1997 and interest expenditure incurred under section 8-1 of the ITAA 1997 using a straight line daily accruals method.", "Facts": "A company is established as a securitisation vehicle solely for the purpose of securitising assets and providing finance for a public-private partnership project (the project). The securitisation vehicle will undertake the following primary financing activities: The securitisation vehicle will receive interest from the amounts on-lent to the project. The securitisation vehicle will pay interest to the holders of the bonds and debentures. The securitisation vehicle prepares its financial accounts using an accruals basis of accounting with both interest expense and interest income being accounted for on a daily accruals basis.", "Reasons_for_Decision": "Summary: Taxation Ruling TR 93/27 deals with the basis of assessment of interest derived and incurred by financial institutions. Paragraphs 7 to 9, in brief, provide that 'the straight line daily accruals method is the appropriate basis on which financial institutions should bring interest income and expense to account for taxation purposes'. Paragraph 21 of TR 93/27 defines, for the purposes of the Ruling, the term 'financial institution' as follows: ... a 'financial institution' for the purposes of this ruling is a taxpayer that principally, and in the ordinary course of its business operations, derives assessable income by lending or investing funds obtained by way of deposit or borrowing. Generally speaking, taxpayers that are not moneylenders are excluded from the application of this Ruling. In considering the definition of 'moneylender' in the English Money-Lenders Act 1900 , MacCardie LJ in Edgelow v. MacElwee [1918] 1 KB 205 said at 206: ... There must be more than occasional and disconnected loans. There must be a business of money-lending, and the word 'business' imports the notion of system, repetition and continuity ... The line of demarcation cannot be defined with closeness or indicated by any specific formula. Each case must depend on its peculiar features. It is ever a question of degree. Farwell J when considering the same legislation in Litchfield v. Dreyfus [1906] 1 KB 584 said at 589: Speaking generally, a man who carries on a money-lending business is one who is ready and willing to lend to all and sundry, provided that they are from his point of view eligible. In Hungier v. Grace (1972) 127 CLR 210, a case concerning the definition of 'money lender' in subsection 3(1) of the Money Lenders Act 1958 (Vic) , Barwick CJ said at 219 'It is, of course, possible to carry on the business of a money-lender with only one borrower'. However, Walsh J said at 224: The fact that loans were made to one borrower only is not decisive against a finding that the making of them constituted the carrying on of a business of moneylending. I think that it provides a very strong indication against that finding when it is accompanied by the circumstance that it was not the lender who stipulated the terms for repayment of the loans. The securitisation vehicle neither principally derives its assessable income through the lending of money nor does it invest funds by way of deposit or borrowing. Rather, its working capital, other than the portion on-lent to the project, is predominantly invested in acquiring a payment stream. Whilst the terms of the loan with the unrelated entity are at commercial rates, it is a stipulated part of the overall arrangement that the securitisation vehicle lend to the project a portion of the funds it has raised. It makes no loans to any other entity. In terms of paragraph 21 of TR 93/27, the securitisation vehicle does not principally, and in the ordinary course of its business operations, derive assessable income by way of lending or investing funds. Nor, based on the case law referred to above, is the securitisation vehicle considered to be a moneylender. It therefore follows that it is not a financial institution. Whilst the securitisation vehicle is not considered to be a financial institution, it does share certain characteristics with those institutions. It is established solely for the purpose of raising finance for the particular project. It obtains its funds through borrowing and it pays interest on those borrowed funds. It also derives some of its assessable income through lending a portion of those borrowed funds and receiving interest. Given these factors, it is considered the reasoning for acceptance of the accounting accrual method in TR 93/27 is equally applicable in this situation as it gives 'a substantially correct reflex' of the securitisation vehicle's interest income ( Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Limited (1938) 63 CLR 108 at 154). In determining when interest is assessable under section 6-5 of the ITAA 1997 it is necessary to determine when it is derived. In Federal Commissioner of Taxation v. Australian Guarantee Corp. Ltd . (1984) 2 FCR 483; 84 ATC 4642; (1984) 15 ATR 982 ( AGC ) Beaumont J stated: Although the bare statement that interest is, or will be, 'earned' is not itself determinative of the time at which or the period during which interest will be derived, ordinarily, where interest is accruing from day to day, it is, I think, appropriate to describe that interest as being 'earned' on such a daily basis in point of time, even if not payable until a later date. Further, in my opinion, the period in which interest is accruing due may properly be regarded as the period in which interest is thus being earned. The interest derived by the securitisation vehicle from on-lending funds to the project accrues from day to day. Even though it may not be payable until a later date it is being earned on a daily basis. Based on the reasoning of Beaumont J referred to above, the period in which the interest is accruing is the period in which the interest is being earned. In determining when interest is deductible under section 8-1 of the ITAA 1997, it is necessary to determine when it is incurred. In determining when interest expenditure is incurred, the courts have looked to see if there is a presently existing liability and whether generally accepted accounting practice would apply to allocate the expense over particular income tax periods ( Alliance Holdings Limited v. FC of T 81 ATC 4637; (1981) 12 ATR 509 ( AGC ) (supra)). In AGC (supra), Toohey J said (at ATC 4650; ATR 992): This court should be slow to disallow a method of calculating the amount of an outgoing if what is claimed is fairly referable to the year in question. In my view, the amount claimed by the taxpayer as interest on deferred interest debentures for the year ended 30 September 1978 was an outgoing incurred by the taxpayer in the relevant year. It was calculated in accordance with sound accounting practice, designed to give a true picture of the taxpayer's financial operations, and it was an approach not precluded by the language of the Act. The securitisation vehicle has a presently existing liability to pay interest on the issued bonds and debentures. In order to arrive at an amount of outgoing fairly referable to the income year, it has adopted a daily accruals method of calculation. This approach accords with sound accounting practice and provides a 'substantially correct reflex' of outgoings incurred during an income year. Accordingly, as the securitisation vehicle has an interest expense accruing de die in diem (day by day) and an interest income stream that accrues daily, it is appropriate for it to tax account for its interest income and expense on a straight line daily accruals basis. This decision, so far as it relates to the question of whether a securitisation vehicle is a financial institution, can be contrasted and distinguished with that in ATO ID 2005/260. There, the factual situation differed and consideration was primarily being given to the meaning of the term 'providing finance' pursuant to Article 11(3)(b) of Schedule 2 of the International Tax Agreements Act 1953 as amended by Schedule 2A of the US Protocol.", "Date_of_Decision": "28 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 93/27", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accrual basis accounting Accrued interest Financial institutions Interest expenses Interest income Securitisation", "Case_References": "Alliance Holdings Ltd v. FC of T 81 ATC 4637 (1981) 12 ATR 509", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006217", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 93/27 | Keywords Accrual basis accounting Accrued interest Financial institutions Interest expenses Interest income Securitisation"}
{"ATO_ID_Number": "ATO ID 2006/244", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of notional interest charged on an outstanding amount for the purchase of an underlying share that is the subject of an endowment warrant", "Issue": "Is the notional interest charged by an issuer on any outstanding amount for the purchase of an underlying share that is the subject of an endowment warrant deductible to the holder of the endowment warrant under subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The notional interest charged by an issuer on any outstanding amount for the purchase of an underlying share that is the subject of an endowment warrant will not be allowable as a deduction to the holder of the endowment warrant under subsection 8-1(1) of the ITAA 1997.", "Facts": "The taxpayer is the holder of an endowment warrant which may be traded on the Australian Stock Exchange (ASX). The taxpayer is not in the business of trading in endowment warrants or other securities. The endowment warrant is an agreement for the sale and purchase of a share in an ASX listed company (the underlying share), the completion of which is at the option of the holder of the endowment warrant. That is, the endowment warrant gives the holder the right to purchase the underlying share (a call option), exercisable at a date typically known as the completion date. The issue price of an endowment warrant is typically between 30%-65% of the market value of the underlying share at the time of issue. The endowment warrant does not confer on the holder any interest or right in respect of the underlying share, and thus the holder has no entitlement to receive any dividends or other distributions in respect of that share. It is only if the holder exercises their option to complete the purchase on the completion date that the holder will have an interest in the underlying share. To complete the purchase of the underlying share, the holder makes a final payment on the completion date. This final payment will be a variable amount (predominantly comprised of an amount typically known as the outstanding amount). The outstanding amount is established at the start of the issue of the endowment warrant. In broad terms, the outstanding amount will be the difference between the market value of the underlying share at the time of issue (plus any issuer costs, profit and premium) and the issue price of the endowment warrant. During the period of the endowment warrant, the balance of the outstanding amount will be: Generally, the completion date for the endowment warrant will be 30 business days after the earlier of the expiry date (generally 10 years from the date of purchase) and the date when the outstanding amount is reduced to zero. If the holder does not complete the purchase of the underlying share (that is, the holder does not exercise their right of purchase under the endowment warrant), the endowment warrant lapses, or terminates.", "Reasons_for_Decision": "Summary: Subsection 8-1(1) of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they: The taxpayer does not incur any loss or outgoing under the endowment warrant as a result of the debit adjustments to the outstanding amount in respect of the notional interest charges. There is no obligation incurred or actual expenditure made by the holder, nor does any other depletion of the holder's resources occur as a result of these debit adjustments to the outstanding amount. Accordingly, the notional interest charged by an issuer on any outstanding amount for the purchase of an underlying share that is the subject of an endowment warrant will not be allowable as a deduction to the holder of the endowment warrant under subsection 8-1(1) of the ITAA 1997. On the completion date, the outstanding amount (as adjusted) will be relevant in determining final payment to be made by the holder if it exercises its option to complete the purchase of the underlying share. The entire final payment (including any part made up of adjustments for the notional interest charge) is a capital amount paid in respect of the acquisition of the underlying share. Subsection 8-1(2) of the ITAA 1997 provides that a loss or outgoing of capital, or of a capital nature cannot be deducted under section 8-1 of the ITAA 1997.", "Date_of_Decision": "13 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 subsection 8-1(1) subsection 8-1(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2606", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interest expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006244", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Related Public Rulings (including Determinations) Taxation Ruling IT 2606 | Keywords Interest expenses"}
{"ATO_ID_Number": "ATO ID 2005/356", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of interest payments by a foreign resident to another foreign resident where no withholding tax has been deducted from the payments", "Issue": "If a foreign resident (the payer) pays interest to another foreign resident, and deducts no withholding tax from the payment as the payer is not required to withhold under Subdivision 12-F of the Taxation Administration Act 1953 (ITAA 1953), will the payer be denied a deduction for that interest under section 26-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where a foreign resident pays interest to another foreign resident and deducts no withholding tax from the payment, as the payer is not required to withhold under Subdivision 12-F of the TAA, section 26-25 of the ITAA 1997 will not operate to deny the payer a deduction for the interest.", "Facts": "The taxpayer is a foreign resident. The taxpayer pays interest to another foreign resident. The taxpayer does not incur interest in carrying on a business at or through a permanent establishment in Australia.", "Reasons_for_Decision": "Summary: Section 26-25 of ITAA 1997 provides that a taxpayer cannot claim a deduction for interest expenses if the taxpayer fails to withhold an amount under Subdivision 12-F of Schedule 1 to the TAA 1953 when required to do so. Section 12-245 of Subdivision 12-F of the Schedule sets out the circumstances requiring an entity to withhold an amount from an interest payment it makes to an overseas entity. However, section 12-300 of Subdivision 12-F of the Schedule provides that there is no requirement to withhold if no withholding tax is payable on the interest. Thus it is necessary to consider whether withholding tax is payable on the interest in question. Sub-paragraph 128B(2)(b)(ii) of the ITAA 1936 imposes withholding tax on interest paid to a non-resident by another non-resident if the interest is an outgoing incurred by the payer in carrying on a business at or through a permanent establishment in Australia. As the taxpayer does not incur interest in carrying on a business at or through a permanent establishment in Australia, there is no withholding tax obligation under subparagraph s128B(2)(b)(ii) and no amount is required to be withheld under Subdivision 12-F of Schedule 1 to the TAA 1953. As a result, section 26-25 will not operate to deny the payer a deduction for the interest.", "Date_of_Decision": "29 November 2005", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 26-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interest expenses Non resident interest withholding tax Permanent establishment", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005356", "Unmatched_Content": "Keywords Interest expenses Non resident interest withholding tax Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2005/357", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Thin Capitalisation: exemption - special purpose entities", "Issue": "Does Division 820 (the thin capitalisation provisions) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to restrict the deductibility of interest incurred by an entity which was solely established for the purpose of borrowing funds for use in a debt securitisation arrangement?", "Decision": "No. Division 820 (the thin capitalisation provisions) of the ITAA 1997 does not apply to restrict the deductibility of interest incurred by an entity solely established for the purpose of borrowing funds for use in a debt securitisation arrangement because section 820-39 of the ITAA 1997 applies.", "Facts": "The taxpayer is a Limited Liability Company established in a foreign country. The taxpayer's sole purpose is to borrow money from foreign investors to buy receivables in a securitisation arrangement. The taxpayer's return on investment and return of investment is contingent on the recoverability of the receivables. The taxpayer is carrying on a business. The taxpayer is funded almost entirely by debt. The taxpayer is wholly owned by a charitable trust. The taxpayer is considered by Moody's to be insolvency-remote and has been rated Prime-1 being the best rating and means 'a superior ability to repay short-term debt obligations'.", "Reasons_for_Decision": "Summary: The ability of a foreign resident taxpayer to deduct interest against its Australian income is subject to the thin capitalisation provisions. Subsection 820-39(1) of the ITAA 1997 provides that the thin capitalisation provisions do not apply to restrict the deductibility of interest incurred by a taxpayer if the conditions in subsection 820-39(3) apply. The conditions in subsection 820-39(3) are that: In the present case, the taxpayer was established for the sole purpose of borrowing funds to buy receivables as part of a securitisation arrangement. As part of the arrangement, the taxpayer has assumed some or all of the economic risks associated with the underlying receivable, since the taxpayer's return is contingent on the recoverability of the receivable. In other words, at least part of the credit risk on the receivables has passed from the original debtor to the taxpayer. Thus, paragraph (a) is satisfied. Paragraph (b) is satisfied because the taxpayer is funded almost entirely by debt through issue of short-term notes to investors. Paragraph (c) is also satisfied because Moody's, being an internationally recognised rating agency, has considered the taxpayers to be insolvency-remote and given the taxpayers a Prime-1 rating, being the highest rating on credit worthiness. As the taxpayers have satisfied the requirements of subsection 820-39(1) of the ITAA 1997, the thin capitalisation provisions do not apply to restrict the deductibility of interest paid in the course of their business.", "Date_of_Decision": "29 November 2005", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 Division 820 section 820-1 section 820-39 subsection 820-39(3) subsection 820-39(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Inward investment vehicle Thin capitalisation Thin capitalisation by non residents", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005357", "Unmatched_Content": "Delete reference to 830-39 and replace with 820-39 | Replace 'securitization' with 'securitisation' | Keywords Inward investment vehicle Thin capitalisation Thin capitalisation by non residents"}
{"ATO_ID_Number": "ATO ID 2004/175", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-resident borrowings: apportionment of interest deduction", "Issue": "Can a non-resident taxpayer claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for interest payments on a loan taken out to purchase units in Australian based unit trusts which have generated both assessable and non-assessable trust distributions?", "Decision": "Yes. Where a non-resident taxpayer has borrowed money to acquire units in Australian based unit trusts, the taxpayer is entitled to claim a deduction for only that amount of interest that can be attributed to the assessable income derived from Australian sources.", "Facts": "The taxpayer is a non-resident for taxation purposes. The taxpayer borrowed money to acquire units in two Australian based unit trusts. The taxpayer received distributions from the unit trusts comprising: The Australian other income (non-primary production) is derived from sources within Australia and is not exempt income.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income. However a loss or outgoing is not deductible to the extent that it is capital, or of a capital, private or domestic nature, or related to the earning of exempt income. The deductibility of interest on a loan is determined by looking at the use to which the borrowed funds were put. Where the funds were used to purchase an income producing asset, interest on the loan would normally be allowable as an income tax deduction under the general provisions of section 8-1 of the ITAA 1997. Taxation Ruling IT 2684 considers the deductibility of interest on money borrowed used to acquire units in a property unit trust. At paragraph 7 of IT 2684 it is stated that 'an interest expense is apportionable if the money is borrowed for the purpose of, or applied in, producing both assessable and non-assessable income, rather than producing only assessable income'. Where apportionment is required, paragraph 8 of IT 2684 provides that interest is deductible in the same ratio as the assessable income component of any distributions for the particular income year bears to the total distributions. In this situation, not all of the income received from the unit trust distributions constitutes assessable income. The foreign income, foreign capital gains, Australian franked dividends and the unfranked dividends upon which withholding tax was paid, have not been included in the non-resident's assessable income (by virtue of their non-resident status). As a result, only that portion of the loan interest expense that relates to the assessable unit trust distributions constitutes an allowable deduction under section 8-1 of the ITAA 1997. In applying IT 2684, the amount of interest for which a deduction can be claimed is calculated in accordance with the following formula: [(total assessable income) / (total distribution received)] x total interest payments. where:", "Date_of_Decision": "19 February 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) section 6-20 section 8-1 section 136-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2684", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Interest expenses Non resident individuals", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004175", "Unmatched_Content": "Related ATO Interpretative Decisions | Remove listed ATO IDs as both have been withdrawn. | Change from \"18 August 2014\" to \"14 August 2017\". | Related Public Rulings (including Determinations) Taxation Ruling IT 2684 | Keywords Deductions & expenses Interest expenses Non resident individuals"}
{"ATO_ID_Number": "ATO ID 2004/543", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of interest payments that are exempt from withholding tax", "Issue": "If the taxpayer company pays interest on overseas borrowings and deducts no withholding tax from the payment but the payment is one to which section 128F of the Income Tax Assessment Act 1936 (ITAA 1936) applies is the taxpayer denied a deduction for that interest under section 26-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where a taxpayer company pays interest on overseas borrowings and deducts no withholding tax from the payment but the payment is one to which section 128F of ITAA 1936 applies, section 26-25 of ITAA 1997 will not operate to deny the taxpayer a deduction for the interest.", "Facts": "The taxpayer company is an Australian resident. It is a member of, and acts as the finance entity for, a group of companies and trusts. The group is considering the following proposal to obtain funding from a placement to lenders in the USA: The taxpayer will issue debentures in the USA in circumstances such that the interest paid will be exempted under subsection 128F(2) from withholding tax. The taxpayer is 100% owned by one of the group's trusts and will remain an Australian resident at all material times. The taxpayer will lend the monies to the trust which will then use the monies to refinance the trust's existing borrowings.", "Reasons_for_Decision": "Summary: Section 26-25 of the ITAA 1997 provides that a taxpayer cannot deduct interest under ITAA 1997 if the taxpayer is required to withhold an amount from the interest under subdivision 12-F of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) but fails to do so. Sections 12-245, 12-250 and 12-255 of Subdivision 12-F of the Schedule set out the circumstances requiring an entity to withhold an amount from, respectively, However, section 12-300 provides that there is no requirement to withhold if no withholding tax is payable on the interest. Thus it is necessary to consider whether withholding tax is payable on the interest in question. Withholding tax on interest paid to non-residents and, in certain circumstances, to residents carrying on business through an overseas permanent establishment, is imposed under section 128B of the ITAA 1936. Certain interest payments, however, are exempted, including payments to which subsection 128F(2) of the ITAA 1936 applies. The taxpayer proposes that the interest payments it will make on the debentures proposed to be issued will be so exempt. Where interest is exempted under 128F(2) no amount will required to be withheld under subdivision 12-F of Schedule 1 to the TAA 1953, and section 26-25 of the ITAA 1997 will not operate to deny the payer of that interest a deduction for it if the payer is otherwise entitled to it.", "Date_of_Decision": "4 June 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 128B section 128F(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debentures Non-resident interest withholding tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004543", "Unmatched_Content": "Keywords Debentures Non-resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2004/848", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of an amount to a resident taxpayer who has not deducted withholding tax on an amount paid to a non-resident", "Issue": "Does section 26-25 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to deny a deduction otherwise available under section 8-1 of the ITAA 1997 in respect of 'interest' payments made by the taxpayer to a non-resident entity?", "Decision": "No. Section 26-25 of the ITAA 1997 will not apply to deny a deduction otherwise available under section 8-1 of the ITAA 1997 in respect of 'interest' payments made by the taxpayer as the payments made to the non-resident are not interest as defined under Division 11A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer entered into an agreement to appoint the non-resident as their exclusive marketer and distributor for their products. The key terms of the agreement are summarised as follows: The non-resident receives a commission from the taxpayer for sales made under the agreement and carries the credit risks by guaranteeing payments for products sold to its clients. On receiving the Bill of Lading, the non-resident pays a percentage of the value of the products in the shipment to the taxpayer as the 'Provisional Payment'. The remainder of the purchase price is paid at the time the non-resident receives monies from its clients. However, the non-resident must make payment in full to the taxpayer in respect of any outstanding monies from any sales to its clients which are beyond the general sales terms between the non-resident and its clients. For each shipment a 'notional account' will be maintained by the non-resident on behalf of the taxpayer. The 'Provisional Payments' are subject to adjustments in accordance with the agreement. The non-resident earns 'interest' from the taxpayer where there is a debit balance in the 'notional account'. The use of 'notional account' enables the non-resident to derive further income (in addition to its commission income) and provides some protection against currency fluctuations and changes in commodity prices whilst the goods are in transit. Simple 'interest' is calculated daily on the outstanding debit balance of the 'notional account' maintained until the shipment is finalised. Title to the products passes to the non-resident upon its receipt of the Bill of Lading.", "Reasons_for_Decision": "Summary: Section 26-25 of the ITAA 1997 denies a deduction under section 8-1 of the ITAA 1997 for interest (interest within the meaning of Division 11A of Part III of the ITAA 1936), where the taxpayer is required to withhold an amount from the interest in accordance with section 12-245 of the Taxation Administration Act 1953 (TAA) and the taxpayer either fails to withhold the amount or fails to comply with certain other requirements. Section 12-245 of the TAA provides that an entity must withhold an amount from interest (within the meaning of Division 11A of Part III of the ITAA 1936) it pays to a non-resident entity. Generally, interest is an amount paid for the use of borrowed funds. The term interest, at least with respect to its ordinary meaning, is not specifically defined in Division 11A of Part III of the ITAA 1936. It is accordingly necessary to look elsewhere for that meaning of the term. However, subsection 128A(1A) of the ITAA 1936 extends the ordinary meaning of interest and includes amounts that are in the nature of interest (paragraph 128(1A)(a)). The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines interest as 'a payment, or a sum paid, for the use of money borrowed (the principal), or for the forbearance of a debt'. Similarly, the Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne defines interest as 'money paid for use of money lent, or for not requiring repayment of debt'. There are several decided cases where the courts reveal a number of essential characteristics of interest. With reference to the decisions from these cases, it is possible to establish that an amount is interest if: (Re Euro Hotel (Belgravia) Ltd (1975) 51 TC 293, Riches v. Westminster Bank Limited [1947] AC 390 at 400; [1947] 1 All ER 469, Bennett v. Ogston (1930) 15 TC 374, Willingale (HM Inspector of Taxes) v. International Commercial Bank Limited (1978) 52 TC 242; [1978] 2 WLR 452, Chow Yoong Hong v. Choong Fah Rubber Manufactory [1961] 3 All 1163; [1962] AC 209) In this case it is necessary to decide whether these four conditions exist in order to establish that the amount in question is interest. | Detailed Reasoning - Is there a relationship of debtor and creditor?: There are no clauses in the agreement which imply that the taxpayer must pay the debit balance of the notional amount to the non-resident at any time or that the non-resident has any right to return the goods to recover monies. The non-resident is not a 'lender', nor is the taxpayer a creditor of the non-resident in respect of the debit balance of the notional amount. The non-resident pays for the products it acquires from the taxpayer in accordance with a complicated formula which ultimately allows the non-resident to make a profit which is calculated as a percentage of the ultimate sale price for on-selling the product plus a small profit calculated as 'interest' plus a fee for taking the credit risk in selling to the ultimate buyer. | Detailed Reasoning - Is the 'interest' calculated with reference to a sum of money?: It is clear from the method used to calculate the 'interest' set out in the contract that it is calculated with reference to a sum of money. | Detailed Reasoning - Is the 'interest' payable for the use of money and in the nature of compensation for deprivation of use of money?: It cannot be said that the 'interest charge' is payable for the use of money and in the nature of compensation for the deprivation of the use of money. The 'interest' is nothing more than a unit of calculation used to calculate the final price. | Detailed Reasoning - Does the 'interest' accrue over time?: The 'interest' in respect of each shipment which is the subject of the ruling is calculated by charging simple interest daily on any debit amount in the notional account. Clearly it does accrue over time. However, because there is no relationship of debtor and creditor and because the 'interest' is not payable for the use of money, nor is it in the nature of compensation for deprivation of use of money, the 'interest' in question is not interest in the ordinary meaning of the word. | Detailed Reasoning - Is the 'interest' in the nature of interest?: Paragraph 128A(1AB)(a) of the ITAA 1936 provides that the term interest includes amounts that are \"in the nature of interest\". This paragraph is directed at bringing into the interest withholding net amounts that are called something other than interest but are in fact interest. As the amount in question is not in fact interest, subsection 128A(1AB) of the ITAA 1936 has no application in the present case. | Detailed Reasoning - Effect of any relevant double taxation agreement: There is a double taxation agreement between Australia and the relevant country of the non-resident in this case. However, as the payments in question also fail to qualify as 'interest' for the purposes of the Article covering interest within that agreement, it has no additional bearing on this case. | Detailed Reasoning - Conclusion: As the 'interest' payments made under the agreement are not interest within the meaning of Division 11A of Part III of the ITAA 1936, the taxpayer has no obligation, under section 12-245 of the TAA, to withhold amounts from 'interest' payments it paid to the non-resident. As a result, section 26-25 of the ITAA 1997 will not apply to deny a deduction otherwise available under section 8-1 of the ITAA 1997.", "Date_of_Decision": "23 December 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128A(1AB) subsection 128A(1AC) subsection 128A(1AD) section 128B subsection 128B(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Non resident interest withholding tax", "Case_References": "Riches v. Westminster Bank Limited [1947] 1 All ER 469 [1947] 1 AC 390", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004848", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Non resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2003/674", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest expense: Capital protected products without a separately identifiable put option entered into before 16 April 2003", "Issue": "Where an investor enters into a capital protected product before 16 April 2003 and that product does not contain a separately identifiable put option, is all the interest expense incurred on the capital protected product deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. All the interest paid on such a capital protected product is deductible.", "Facts": "An investor acquires a capital protected product before 16 April 2003. Under the terms of the capital protected product the investor obtains a limited recourse loan to acquire a portfolio of shares and units that are listed on the Australian Stock Exchange. The investor acquires the shares and units for the purposes of deriving future dividend income and trust distributions. Under the terms of the limited recourse loan, the lender's recourse against the investor in respect of the principal on the loan is limited to the amount which the lender can obtain by enforcing its rights in respect of the shares and units purchased under the capital protected loan arrangement. The cost of this capital protection feature is reflected in the rate of interest charged on the loan made available under the capital protected product.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. In Commissioner of Taxation v. Firth (2002) 120 FCR 450; 2002 ATC 4346; (2002) 50 ATR 1 ( Firth's Case ), the Full Federal Court allowed the taxpayer a tax deduction for all the interest charged on a limited recourse loan. In Firth's Case the capital protection feature was integral to the loan and not distinct or severable from it. On 16 April 2003 the Treasurer announced in Press Release No. 019 (Taxation of Capital Protected Products) that the ITAA 1997 would be amended to ensure that part of the expense on a capital protected product is attributed to the cost of the capital protection feature, is not interest and is not deductible where this cost is capital in nature, in respect of capital protected arrangements, including extensions to existing capital protected arrangements, entered into on or after 9.30am Canberra time 16 April 2003. In this case, all the interest on the capital protected product is deductible as the capital protected arrangement is:", "Date_of_Decision": "24 June 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1.", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of shares Instalment warrants Interest expenses Non recourse loans", "Case_References": "Commissioner of Taxation v. Firth (2002) 120 FCR 450 2002 ATC 4346 (2002) 50 ATR 1", "Other_References": "Treasurer's Press Release No. 019 of 16 April 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003674", "Unmatched_Content": "Keywords Acquisition of shares Instalment warrants Interest expenses Non recourse loans"}
{"ATO_ID_Number": "ATO ID 2003/1073", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Timing of deductions for prepaid interest expenditure where the payment includes an amount in advance and an amount in arrears", "Issue": "For the purposes of determining the timing of a deduction under the prepayment rules contained in Subdivision H of Division 3 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936), what is the 'eligible service period' for interest expenditure which includes an amount paid in advance and an amount paid in arrears?", "Decision": "The 'eligible service period' for the amount paid in advance commences on the date on which the expenditure is incurred and ends on the last day to which the payment of interest relates. The amount paid in arrears is wholly deductible when paid.", "Facts": "On 31 May 2003 an individual taxpayer entered into a five year loan agreement for funds borrowed to produce assessable income from a passive investment. Under the terms of the loan agreement, the taxpayer was required to make an initial interest payment on 30 June 2003 to cover interest on the borrowed funds up to 30 June 2004. This initial payment comprised the interest in arrears for the month of June 2003 and an amount in advance for the 12 month period ending on 30 June 2004. Interest is then payable 12 months in advance on 30 June of each succeeding year.", "Reasons_for_Decision": "Summary: A prepaid expense is expenditure incurred in one year for things to be done (in whole or in part) in a later year of income. Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for the purposes of gaining or producing such income, except where the outgoings are of a capital, private or domestic nature, or relate to the gaining or producing of exempt income. The prepayment rules affect the timing of deductions for prepaid expenditure where, inter alia , that expenditure would ordinarily be immediately deductible under section 8-1 of the ITAA 1997 and it is not excluded expenditure. The interest on the money borrowed to make the passive investment is an allowable deduction under section 8-1 of the ITAA 1997. Subsection 82KZL(1) of the ITAA 1936 provides that the 'eligible service period' in relation to an amount of expenditure incurred under an agreement is the period during which the thing is to be done under the agreement in return for the expenditure. It begins on the day the thing under the agreement commences to be done or on the day the expenditure is incurred, whichever is later. It continues until the last day the thing under the agreement ceases to be done or 10 years, whichever is earlier. Paragraph 82KZL(2)(a) of the ITAA 1936 further provides that the eligible service period in respect of a payment of interest is the period to which the payment of interest relates and not the period of the loan. In this case, the 'eligible service period' commenced on 30 June 2003. This is the later of the day the thing under the agreement commenced being done and the day the expenditure was incurred. Any prepaid expenditure incurred on that day for interest relating to a later income year will be subject to the prepayment rules. However, for an individual taxpayer who does not incur the expenditure in carrying on a business, that portion of the expenditure will be deductible in the 2002-03 income year because the eligible service period is 12 months or less and it ends on or before the last day of the next income year (subsection 82KZM(1) of the ITAA 1936). That portion of the payment made in respect of the month of June 2003 is not subject to the prepayment rules and is deductible in the 2002-03 income year. This is because it was incurred in that year and was not a prepaid expense.", "Date_of_Decision": "14 November 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 82KZL paragraph 82KZL(2)(a) subsection 82KZM(1) Subdivision H of Division 3 of Part III", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Advance expenses & payments Advanced payments expense post 20/9/99 Interest expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031073", "Unmatched_Content": "Keywords Advance expenses & payments Advanced payments expense post 20/9/99 Interest expenses"}
{"ATO_ID_Number": "ATO ID 2003/1119", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Timing of deductions for prepaid interest on money borrowed to acquire instalment warrants over stapled securities", "Issue": "Will subsection 82KZME(5) of the Income Tax Assessment Act 1936 (ITAA 1936) apply to prepaid interest expenditure incurred in respect of an investment in instalment warrants over stapled securities so that the expenditure is excluded from the tax shelter rules contained in sections 82KZME and 82KZMF of the ITAA 1936?", "Decision": "Yes. Prepaid interest on money borrowed to acquire instalment warrants over stapled securities falls within the exception contained in subsection 82KZME(5) of the ITAA 1936 and is excluded from the operation of sections 82KZME and 82KZMF of the ITAA 1936.", "Facts": "The taxpayer is an individual taxpayer who enters into an agreement to acquire instalment warrants over stapled securities. The taxpayer is not a trader in financial products and is not treated for taxation purposes as carrying on a business of investing in stapled securities or the underlying shares and units. Under the terms and conditions of the agreement the taxpayer borrows money to acquire the instalment warrants and is required to pay 12 months interest in advance on 31 May 2004. At all times during the term of the agreement the taxpayer retains beneficial ownership of the underlying stapled securities. Each stapled security comprises a share in a company stapled to a unit in a unit trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272-105 in Schedule 2F to the ITAA 1936. The share and the unit that constitute the stapled security are jointly quoted on Australian Securities Exchange Limited (ASX). The taxpayer either obtains, or can reasonably be expected to obtain, dividends or trust income and no other income under the agreement except for a capital gain. All aspects of the agreement are conducted at arm's length.", "Reasons_for_Decision": "Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, except where the outgoings are of a capital, private or domestic nature, or relate to the gaining or producing of exempt income. The prepaid interest on the money borrowed to acquire the instalment warrants over the stapled securities is an allowable deduction under section 8-1 of the ITAA 1997. The acquisition of the instalment warrants confer on the taxpayer beneficial ownership of the underlying stapled securities and ultimately the shares and units that constitute the stapled securities. The shares and the units are issued and continue to exist as separate assets and the stapling of the instruments merely reflects restrictions placed on them by ASX. Accordingly, the prepaid interest incurred in acquiring the instalment warrants over the stapled securities is also necessarily incurred by the taxpayer in acquiring the shares and units that constitute the stapled securities. Sections 82KZME and 82KZMF of the ITAA 1936 (the tax shelter rules) prevent prepaid expenditure made under certain agreements relating to tax shelter arrangements from being immediately deductible under section 8-1 of the ITAA 1997. Instead, prepaid expenditure under these agreements is required to be deducted on a proportional basis over the period to which it relates or 10 years, whichever is less. The instalment warrant agreement entered into by the taxpayer is considered an arrangement to which the tax shelter rules apply. The taxpayer does not have day to day control over the operation of the agreement and in the income year in which the prepaid expenditure is made the taxpayer's allowable deductions under the agreement exceed the assessable income from it. Subsections 82KZME(5) to 82KZME(9) of the ITAA 1936 provide certain exceptions to the tax shelter rules. Generally, where any of these exceptions apply, an individual taxpayer who does not incur the expenditure in carrying on a business may be eligible to claim an immediate deduction where the eligible service period is 12 months or less and it ends on or before the last day of the next income year (section 82KZM of the ITAA 1936). Subsection 82KZME(5) of the ITAA 1936 provides an exception from the tax shelter rules for prepaid expenditure incurred on certain negatively geared investments. The relevant parts of the legislation have the effect of excluding prepaid interest on money borrowed to acquire shares that are listed for quotation in the official list of an approved stock exchange and units in a trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272-105 in Schedule 2F to the ITAA 1936. The shares and units that constitute the stapled securities are quoted jointly on ASX. That is, instead of the two securities being quoted and traded separately on ASX they are quoted and traded jointly. A requirement for quotation is that the entities whose securities are stapled are admitted to the official list of ASX. Although ASX allows the entities to meet the listing requirements collectively each entity is admitted to the official list. Accordingly, the shares that, in part, constitute the stapled securities are listed for quotation in the official list of ASX. As the prepaid interest is incurred in acquiring units in a trust that has at least 300 beneficiaries and is a widely held unit trust as defined in section 272-105 in Schedule 2F to the ITAA 1936 and shares that are listed for quotation (albeit jointly) in the official list of ASX the prepaid interest is excluded from the operation of the tax shelter rules.", "Date_of_Decision": "3 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 82KZM section 82KZME section 82KZMF section 272-105", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Advance expenses & payments Advanced payments expense post 20/9/99 Instalment warrants Interest expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031119", "Unmatched_Content": "Keywords Advance expenses & payments Advanced payments expense post 20/9/99 Instalment warrants Interest expenses"}
{"ATO_ID_Number": "ATO ID 2003/1197", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 240: deductibility of 'notional interest' to the notional buyer under a hire purchase agreement", "Issue": "Is the taxpayer, the notional buyer under a hire purchase agreement to which Division 240 of the Income Tax Assessment Act 1997 (ITAA 1997) applies, entitled to deduct 'notional interest' under section 240-50 of the ITAA 1997?", "Decision": "Yes. The taxpayer, as the notional buyer under the hire purchase agreement, is entitled to deduct 'notional interest' for an income year to the extent that the taxpayer would, apart from Division 240 of the ITAA 1997, have been entitled to deduct 'arrangement payments' for that income year if no part of those payments were capital in nature.", "Facts": "In January 2000, the taxpayer entered into an arrangement with a plant supplier for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The arrangement conferred upon the taxpayer an option to purchase a plant. It was reasonably likely that the option to purchase would be exercised by, or in respect of, the taxpayer. The term of the hire purchase agreement was 48 months with an option to terminate early. The agreement was terminated at the end of 18 months. The taxpayer acquired the plant at the end of the 18 months.", "Reasons_for_Decision": "Summary: Division 240 of the ITAA 1997 deals with hire purchase agreements (as defined in subsection 995-1(1) of the ITAA 1997) entered into after 27 February 1998. The broad scheme of the Division is to treat such hire purchase agreements as a sale of the relevant goods to the hirer (notional buyer) combined with a loan from the supplier (notional seller) to the notional buyer. The taxpayer was the 'notional buyer' as the taxpayer was a party to the arrangement and under the arrangement, the taxpayer had the right to use the plant on hire (subsection 240-17(2) of the ITAA 1997). Section 240-55 of the ITAA 1997 provides that a notional buyer cannot deduct 'arrangement payments' (as defined in section 240-65 of the ITAA 1997) that the notional buyer makes under the arrangement, but those payments are taken into account in calculating 'notional interest' (as prescribed by section 240-60 of the ITAA 1997) that may be deducted under section 240-50 of the ITAA 1997. Subsection 240-50(1) of the ITAA 1997 provides that a notional buyer is only entitled to deduct notional interest for an income year to the extent that the notional buyer would, apart from Division 240 of the ITAA 1997, have been entitled to deduct arrangement payments for that income year if no part of those payments were capital in nature. Accordingly, the taxpayer, as the notional buyer under a hire purchase agreement to which Division 240 of the ITAA 1997 applies, is entitled to deduct 'notional interest' calculated as prescribed by section 240-60 of the ITAA 1997 to the extent that the relevant goods are used for the purpose of producing assessable income.", "Date_of_Decision": "22 December 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 Division 240 subsection 240-17(2) section 240-50 section 240-55 section 240-60 section 240-65 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/462 | ATO ID 2003/1196 | ATO ID 2003/1198", "Subject_References": "Hire purchase Lease & hire expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031197", "Unmatched_Content": "Keywords Hire purchase Lease & hire expenses"}
{"ATO_ID_Number": "ATO ID 2002/607", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of interest on loan taken out to pay a tax debt", "Issue": "Is a deduction allowable under either section 8-1 or section 25-5 of the Income Tax Assessment Act 1997 (ITAA 1997) for interest incurred by an individual taxpayer on a loan taken out in order to pay a tax debt?", "Decision": "No. A deduction is not allowable under either section 8-1 or section 25-5 of the ITAA 1997 for interest incurred by an individual taxpayer on a loan taken out in order to pay a tax debt.", "Facts": "The taxpayer, an individual with investment income, had a large tax debt which wass due for payment. The taxpayer borrowed funds to pay this tax debt and incurred interest on the loan.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. The interest expense was not incurred by the taxpayer in earning their assessable income and also is private in nature. Therefore no deduction is allowable to the taxpayer under section 8-1 of the ITAA 1997. Subsection 25-5(1) of the ITAA 1997 allows a deduction for expenditure incurred in managing the taxpayer's tax affairs. However, paragraph 25-5(2)(c) of the ITAA 1997 specifically precludes a deduction under subsection 25-5(1) of the ITAA 1997 for expenses associated with borrowing money by an individual taxpayer (including payments of interest) to pay a tax liability. The interest expense incurred by the individual taxpayer is therefore not deductible under subsection 25-5(1) of the ITAA 1997.", "Date_of_Decision": "1 August 2001", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 subsection 25-5(1) paragraph 25-5(2)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions and expenses Interest expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002607", "Unmatched_Content": "Change 'has' to 'had' within facts, to maintain grammatical correctness. | Keywords Deductions and expenses Interest expenses"}
{"ATO_ID_Number": "ATO ID 2002/1092", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest expenses - loan taken out after business ceased", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for interest incurred on a loan taken out after the cessation of a business?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for interest incurred on a loan taken out after the cessation of a business.", "Facts": "The taxpayer commenced operating a business, using leased premises. After the business ceased, they failed to pay the rent due under the lease. The lessor took legal action to recover the debt. After negotiations it was agreed that the taxpayer would pay the rent. The taxpayer took out a loan to pay the overdue rent from a bank and incurred interest expenses on that loan.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. No loan existed at the time the business was being operated but a loan was taken out a number of years after the business ceased. Whether a deduction is allowable will depend on whether the occasion for incurring the interest '...is to be found in the business operations directed towards the gaining or production of assessable income generally...' ( Placer Pacific Management Pty v. Federal Commissioner of Taxation (1995) 95 ATC 4459; (1995) 31 ATR 253). In this case, unlike Federal Commissioner of Taxation v. Jones (Jones Case) (2002) 2002 ATC 4135; (2002) 49 ATR 188 and Federal Commissioner of Taxation v. Brown (1999) 43 ATR 1; 99 ATC 4600, the interest expense has no direct relationship to the previous income earning activities. In the Jones Case the Federal Court stated: Whether the occasion for a loss or outgoing lies in business operations so as to be deductible under s 51 or s 8-1 requires a judgment about the nexus between the loss or outgoing and the business operations; there must be \"sufficient proximity\" between the loss or outgoing and the business operations: FCT v Brown (1999) 43 ATR 1 at 9; 99 ATC 4600 at 4607. In this case, there is not 'sufficient proximity', as the loan was taken out after the business ceased and it has only an indirect relationship to the previous business operations. That is, it did not arise out of the income producing activities but was merely in respect of those activities. The taxpayer is therefore not entitled to a deduction under section 8-1 of the ITAA 1997 for the interest incurred on the loan taken out after the business activities ceased.", "Date_of_Decision": "28 October 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Interest expenses", "Case_References": "Placer Pacific Management Pty Ltd v. Federal Commissioner of Taxation (1995) 95 ATC 4459 (1995) 31 ATR 253", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021092", "Unmatched_Content": "Reword the sentence from 'borrowed the loan' to 'took out a loan' | Reword the sentence from 'only came into existence a number of years after it ceased' to 'a loan was taken out a number of years after the business ceased' | Un-italicize the word 'and' | Add an additional 'it' after 'and' and before 'has only an indirect relationship' | Add additional wording 'to a deduction' after 'Is a taxpayer entitled' | Keywords Deductions & expenses Interest expenses"}
{"ATO_ID_Number": "ATO ID 2002/1106", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Notes", "Issue": "Whether interest paid on Notes subsequent to an amendment to the Unsecured Note Trust Deed (Trust Deed) to allow Noteholders additional shares on conversion, is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes", "Facts": "The Company issued a prospectus prior to 1 July 2000 to raise funds from the issue of subordinated unsecured redeemable Notes. The Notes were issued subject to the terms and conditions contained in the Trust Deed. The purpose of the fund raising was to facilitate the restructuring of the Group's debt facility. Some key characteristics of the Notes are: After 1 July 2001 the Company made a return of capital to shareholders. The Company and Trustee offered Noteholders a new conversion period prior to the return of capital. The Trustee agreed to adjust the conversion terms in the Trust Deed after the capital return.", "Reasons_for_Decision": "Detailed Reasoning - Sections 82R and 82SA of the Income Tax Assessment Act 1936 (ITAA 1936): The tests detailed in section 82SA have been passed, therefore section 82R of that Act will not be triggered and the interest will be deductible under section 8-1 of the ITAA 1997. ATO ID 2001/321 can be distinguished from the current circumstances because in that case the proposed amendment to the conversion formula would also have resulted in the failure of the minimum conversion price test. Since 1 July 2001, most convertible interests fall within the ambit of Division 974 of ITAA 1997., However Division 3A of ITAA 1936 continues to have application when dealing with Controlled Foreign Companies (CFCs). For interests created prior to 1 July 2001, a transition period of 3 years was allowed, if so elected, to follow Division 3A.", "Date_of_Decision": "26 March 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 Section 82R Section 82SA", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2657", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/321 | ATO ID 2002/1110 | ATO ID 2003/983", "Subject_References": "Convertible notes Interest expenses Expenses of borrowing", "Case_References": "FC of T v. Total Holdings (Aust) Pty Ltd (1979) 9 ATR 885 79 ATC 4279", "Other_References": "Explanatory Memorandum relating to sections 82R and 82SA of the ITAA 1936 Explanatory Memorandum relating to Division 974 of the ITAA 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021106", "Unmatched_Content": "This ATO ID has been amended to insert an explanatory paragraph at the conclusion of the Reasons for Decision | Related Public Rulings (including Determinations) Taxation Ruling IT 2657 | Keywords Convertible notes Interest expenses Expenses of borrowing"}
{"ATO_ID_Number": "ATO ID 2001/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest expense: Funds Borrowed", "Issue": "Whether interest on funds borrowed to acquire the share of the taxpayer's spouse (the spouse) in a property, to be kept for investment purposes is deductible.", "Decision": "The interest is deductible under section 8-1 to the extent that the borrowed funds are used for the purposes of producing assessable income.", "Facts": "The taxpayer and the taxpayer's spouse own a property as joint tenants. The taxpayer has obtained an independent valuation of the property. The taxpayer intends to borrow an amount of money equal to one half of the value of the property to fund the purchase of the spouse's half share in the property. After the acquisition of the spouse's half share the taxpayer intends to let the property to tenants.", "Reasons_for_Decision": "Summary: Interest is deductible under section 8-1 of the Income Tax Assessment Act 1997 to the extent that it is incurred in gaining or producing assessable income or in carrying on a business for that purpose, except to the extent that the expense is of a capital, private or domestic nature or incurred in gaining or producing exempt income. Whether interest has been incurred in the course of producing assessable income generally depends on the use to which the borrowed funds have been put. The 'use' test, established in FC of T v Munro (1926) 38 CLR 153, is the basic test for the deductibility of interest, and looks at the application of the borrowed funds as the main criterion. The interest incurred will be deductible to the extent that the property is used to produce assessable income.", "Date_of_Decision": "9 January 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Arms length transactions Associated persons Disposal of real estate Negative gearing Non arms length transactions Principal residence Rental expenses Rental property Rental property loan interest expenses Tax planning, avoidance and evasion", "Case_References": "FC of T v Munro (1926) 38 CLR 153", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200179", "Unmatched_Content": "Keywords Arms length transactions Associated persons Disposal of real estate Negative gearing Non arms length transactions Principal residence Rental expenses Rental property Rental property loan interest expenses Tax planning, avoidance and evasion"}
{"ATO_ID_Number": "ATO ID 2001/321", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Note", "Issue": "Whether a proposal to amend the conversion ratio of a pre-qualifying convertible note issue contravenes section 82SA of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "The proposal to amend the conversion ratio of a pre-qualifying convertible note issue does not pass all the tests detailed by subsection 82SA(1) of the ITAA 1936. Consequently subsection 82SA(2) of the ITAA 1936 would apply to deny interest deductions to the note issuer in respect of the note issue.", "Facts": "The issuer of a pre-qualifying convertible note is proposing to amend the notes' conversion formula, in order to provide an incentive for noteholders to exercise their option to convert earlier than they otherwise might. The issuer, by way of the proposed amendment to the conversion formula, is seeking to increase noteholders' entitlement to ordinary shares that will be allotted or transferred upon the exercise of each convertible note. Early conversion is available and at the option of the noteholder. The availability of cheaper funding from other sources has prompted the note issuer to propose to amend the note conversion formula. The decision to hold the convertible note to maturity or accept the issuer's proposal, and therefore exercise the option to convert early, rests with the noteholder.", "Reasons_for_Decision": "Summary: An interest payment, or a payment in the nature of interest, made by an issuer under a convertible note that satisfies section 82SA of the ITAA 1936, will not be denied a deduction under section 8-1 Income Tax Assessment Act 1997 (ITAA 1997) through the operation of section 82R of the ITAA 1936. The proposed amendment to the terms of the note issue will not pass the tests detailed by subsection 82SA(1) of the ITAA 1936. Both subparagraphs 82SA(1)(d)(ii) and (xi) of the ITAA 1936 have application to the matter. Subparagraph 82SA(1)(d)(xi) of the ITAA 1936 contains the conversion price test, which determines the minimum amount payable by each noteholder for each share allotted or transferred on conversion. Sub-paragraph 82SA(1)(d)(ii) of the ITAA 1936 operates to ensure that the conversion price test is not circumvented. The proposed amendment of the conversion ratio of the convertible note effectively reduces the amount payable for each share on conversion and does not pass the tests contained in subparagraphs 82SA(1)(d) (ii) and (xi) of the ITAA 1936. By virtue of the failure of the tests in subparagraphs 82SA(1)(d)(ii) and (xi) of the ITAA 1936, subsection 82SA(2) of the ITAA 1936 will operate such that subsection 82SA(1) of the ITAA 1936 will be deemed to never have had effect to this convertible note. Consequently section 82R of the ITAA 1936 will apply in respect of the convertible note, and interest payments or payments in the nature of interest, including past and future payments, will be denied a deduction to the issuer. Subsection 170(10) of the ITAA 1936 authorises the reopening of assessments to give effect to subsection 82SA(2) of the ITAA 1936.", "Date_of_Decision": "4 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 82SA section 82R section 170", "Related_Public_Rulings_and_Determinations": "IT 2204 | IT 2334 | IT 2427 | IT 2657 | IT 2653 | TD 92/160 | TD 94/49", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Conversion of securities Convertible notes", "Case_References": "", "Other_References": "Explanatory Memoranda relating to section 82SA of the ITAA 1936 Explanatory Memoranda relating to section 82S of the ITAA 1936", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001321", "Unmatched_Content": "Related Public Rulings (including Determinations) IT 2204 IT 2334 IT 2427 IT 2657 IT 2653 TD 92/160 TD 94/49 | Keywords Conversion of securities Convertible notes"}
{"ATO_ID_Number": "ATO ID 2010/195", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Car expenses: business kilometres - travel to tax agent", "Issue": "Are kilometres travelled by a taxpayer to consult with a tax agent included in the business kilometres used for determining car expense deductions under Division 28 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Kilometres travelled by a taxpayer to consult with a tax agent are included in the business kilometres used for determining car expense deductions under Division 28 of the ITAA 1997.", "Facts": "The employee taxpayer uses a tax agent to prepare their individual tax return. The taxpayer travelled 4500 kilometres by car in the income year in relation to the taxpayer's income-earning activities. The taxpayer also travelled 600 kilometres by car in visiting the tax agent for the purposes of managing the taxpayer's tax affairs.", "Reasons_for_Decision": "Summary: Division 28 of the ITAA 1997 sets out the rules for working out deductions for car expenses. The table in section 28-15 of the ITAA 1997 summarises the basic requirements of the four methods of calculating car expense deductions and subsection 28-12(2) of the ITAA 1997 provides that you must use one of the four methods unless an exception applies, otherwise you cannot deduct anything for car expenses. For each of the four alternative methods, 'business kilometres' are defined as kilometres the car travelled in the course of: Section 25-5 of the ITAA 1997 provides for deductions for tax-related expenses. Subsection 25-5(5) of the ITAA 1997 states: Under some provisions of this Act it is important to decide whether you used property for the purpose of producing assessable income. For provisions of that kind, your use of property is taken to be for that purpose insofar as you use the property for: (a) managing your tax affairs; or (b) complying with an obligation imposed on you by a Commonwealth law, insofar as that obligation relates to the tax affairs of another entity. Subsection 25-5(5) of the ITAA 1997 provides the example of a computer purchased for preparing tax returns. Whilst the computer is a capital asset, to the extent it is used for preparing tax returns its decline in value is taken to be an income-producing expense under the subsection. A car is an item of property that may be used for the purpose of producing assessable income. To the extent that a car held by a taxpayer is used for managing the taxpayer's tax affairs or complying with an obligation imposed by a Commonwealth law relating to the tax affairs of another entity, its use is deemed by subsection 25-5(5) of the ITAA 1997 to be for an income-producing purpose. Car travel for the purpose of visiting the tax agent is therefore counted as 'business kilometres' for the purposes of Division 28 of the ITAA 1997. In the present case, the taxpayer has travelled in excess of 5000 business kilometres in the income year. If none of the exceptions in Subdivision 28-J of the ITAA 11997 applies, the taxpayer can claim a deduction for the car expenses using one of the following four alternative methods:", "Date_of_Decision": "27 August 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 Division 28 Subdivision 28-C Subdivision 28-D Subdivision 28-E Subdivision 28-F Subdivision 28-J section 25-5 subsection 25-5(5) subsection 28-12(2) section 28-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Tax related expenses Motor vehicle expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010195", "Unmatched_Content": "Keywords Tax related expenses Motor vehicle expenses"}
{"ATO_ID_Number": "ATO ID 2004/393", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: motor vehicle expenses - insurance policy excess", "Issue": "Is the taxpayer, a delivery driver, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the payment of the excess under their employer's motor vehicle insurance policy?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for the payment of the excess under their employer's motor vehicle insurance policy.", "Facts": "The taxpayer was employed as a delivery driver. The taxpayer used their own motor vehicle to carry out their employment duties. The taxpayer's use of their motor vehicle for work related purposes was covered under their employer's business vehicle insurance policy. The taxpayer retained their own private motor vehicle insurance to cover them for their private use of their motor vehicle. The taxpayer's employment agreement provides that they are liable to pay any insurance excess that arises out of any claim against their employer's insurance provider, for any motor vehicle accident that occurs whilst driving their motor vehicle for work related purposes. The taxpayer was involved in a motor vehicle accident, whilst driving their motor vehicle in the course of their employment, for which they were found to be at fault. As a result of this accident, a claim was made against the employer's insurance provider and an excess was payable. The taxpayer paid the excess in relation to this claim.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 4 AITR 236; (1949) 8 ATD 431, the Court established that, for a loss or outgoing to be an allowable deduction, there must be a nexus between the outgoing and the assessable income so that the expenditure is incidental and relevant to the taxpayer's income-producing or business operations. Case T22 86 ATC 223; Case 25 (1986) 29 CTBR (NS) 173 (Case T22) recognised that liabilities arising out of motor vehicle accidents may be incidental and relevant to the taxpayer's income earning activities. That case dealt with the deductibility of liabilities arising out of a motor vehicle accident for which the taxpayer admitted fault. The Board of Review found that an accident and any ensuing liability is a normal risk of using public roads for business purposes. In finding that the taxpayer was entitled to a deduction for the liabilities he incurred as a result of the accident damage, the Board stated that amongst other things: ...in the circumstances of the accident, the vehicle driven by him was the immediate cause of damage to the other vehicles which, in turn gave rise to the expense in issue. In the circumstances, we are of the opinion that the expenses are incidental and relevant to gaining or producing the taxpayer's assessable income... It is considered that the principles espoused in Case T22 are equally relevant to the circumstances here. This taxpayer was involved in a motor vehicle accident whilst driving their motor vehicle on public roads in the course of their employment. The taxpayer's employment agreement provided that they were liable to pay any insurance excess that arose out of a claim made in relation to any motor vehicle accident that occurred whilst driving their motor vehicle for work related purposes. The insurance excess was only payable in respect of a claim arising out of the work related use of the taxpayer's motor vehicle. The excess was payable by the taxpayer regardless of whether any other party was involved in the work related motor vehicle accident, and whether or not any damage was sustained by the taxpayer's own motor vehicle. The expense in paying the insurance excess, which could arise only in relation to work related motor vehicle accidents, was incurred as a result of the taxpayer's conditions of employment. As such the expense was incidental and relevant to the gaining or producing of the taxpayer's assessable income. Therefore, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for the payment of the insurance excess.", "Date_of_Decision": "5 April 2004", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Insurance Insurance excess under an insurance policy Motor vehicle insurance Motor vehicles", "Case_References": "Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 [1949] HCA 15 (1949) 4 AITR 236 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004393", "Unmatched_Content": "Inserted medium neutral citation Amended minor typographical error | Inserted medium neutral case citation | Keywords Deductions & expenses Insurance Insurance excess under an insurance policy Motor vehicle insurance Motor vehicles"}
{"ATO_ID_Number": "ATO ID 2004/613", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction: global positioning system installed in employer provided motor vehicle", "Issue": "Is the taxpayer disallowed a deduction in respect of the installation of a global positioning system (GPS) in their employer provided motor vehicle pursuant to section 51AF of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The taxpayer is not disallowed a deduction in respect of the installation of a GPS in their employer provided motor vehicle pursuant to section 51AF of the ITAA 1936.", "Facts": "The taxpayer has an employer provided motor vehicle. The employer provided motor vehicle is a sedan. The motor vehicle is provided for the taxpayer's exclusive use and the taxpayer is entitled to use it for private purposes. The taxpayer purchased and installed a portable GPS in this vehicle. The GPS is an electronic street directory/course plotting tool. The GPS was used by the taxpayer for work purposes and the taxpayer would be entitled to a deduction under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) for the decline in value of the GPS.", "Reasons_for_Decision": "Summary: Section 51AF of the ITAA 1936 operates to deny a deduction for car expenses incurred by an employee in relation to a car which is provided by the employer for the exclusive use of the employee and which the employee is entitled to use for private purposes. The term 'car' has the meaning given by section 995-1 of the ITAA 1997 which defines it as 'a motor vehicle (except a motor cycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers'. Subsection 51AF(2) of the ITAA 1936 also provides that the phrase 'car expense' has the meaning given by section 28-13 of the ITAA 1997, which defines car expense as 'a loss or outgoing to do with a car' including 'a loss or outgoing to do with operating a car and the decline in value of a car'. The definition of car expense in section 28-13 of the ITAA 1997 has its antecedence in subsection 82KT(1) of the ITAA 1936. Accordingly, discussion on the meaning of 'car expenses' in subsection 82KT(1) of the ITAA 1936 is relevant for the purposes of section 28-13 of the ITAA 1997. In AAT Case 7273 (1991) 22 ATR 3402; Case Y43 91 ATC 412, the Tribunal found that the phrase 'car expenses', for the purposes of subsection 82KT(1) of the ITAA 1936 should not be read to encompass any and all expenses connected to an employer provided car. Rather, the scope of 'car expenses' is to be defined by taking into account the context and the purpose of the provision, and the issue is whether the expenses are 'in respect of a car expense that relates to the car'. In the Tribunal's view: the disallowance of car expenses is primarily put in place to prevent \"double dipping\", in which an employee claims expenses already factored into the formulas used to calculate fringe benefits tax assessed to the employer. That being so, the better construction is that expenses such as parking fees and bridge tolls in the present case, linked to the car, but generated for reasons other than the direct operation of the car and not otherwise factored into the tax regime, should not be disallowed. Accordingly, under this view expenses linked to the car which are generated other than by the direct operation of the car would not usually be caught by section 51AF of the ITAA 1936. The taxpayer's employer provided sedan is a 'car' as defined in section 995-1 of the ITAA 1997. The car is provided for the taxpayer's exclusive use and the taxpayer is entitled to use the car for private purposes. The taxpayer has installed a GPS in the car to assist them to locate client addresses. The taxpayer would be entitled to a deduction for the decline in value of the GPS under Division 40 of the ITAA 1997. The GPS has no bearing on the operation of the car itself. As such, the expenditure on the GPS is generated for 'reasons other than the direct operation of the car' and so does not fall within the definition of 'car expenses' for the purposes of section 28-13 of the ITAA 1997. As an outgoing on the GPS is not a 'car expense' a deduction in respect of the GPS will not be disallowed under section 51AF of the ITAA 1936.", "Date_of_Decision": "31 May 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 51AF subsection 51AF(2) subsection 82KT(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/612 | ATO ID 2004/614", "Subject_References": "Car expenses Motor vehicle expenses", "Case_References": "AAT Case 7273 (1991) 22 ATR 3402", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004613", "Unmatched_Content": "Updated to include Division 40 of the ITAA 1997 | Keywords Car expenses Motor vehicle expenses"}
{"ATO_ID_Number": "ATO ID 2004/614", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction: installing a portable global positioning system in a motor vehicle", "Issue": "Is the taxpayer entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the expenses they incurred in installing a portable global positioning system (GPS) in their employer provided motor vehicle?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for the expenses they incurred in installing a portable GPS in their employer provided motor vehicle as the expenditure on the GPS is of a capital nature.", "Facts": "The taxpayer is employed as a sales representative. The taxpayer's employment duties include travelling to new and existing clients located within their assigned area. The taxpayer purchased and installed a portable GPS in their employer provided motor vehicle. The GPS unit that the taxpayer installed in their employer provided motor vehicle enables them to more easily locate client addresses within their assigned area. The GPS is used only for work purposes.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The courts have established that, for an expense to be an allowable deduction, there must be a sufficient connection between the outgoing and the assessable income such that the expenditure is incidental and relevant to the taxpayer's income producing activities ( Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 4 AITR 236; (1949) 8 ATD 431, and it must have the essential character of an outgoing incurred in gaining assessable income ( Lunney & Hayley v. Federal Commissioner of Taxation (1958) 100 CLR 478; [1958] HCA 5; (1958) 7 AITR 166); (1958) 11 ATD 404). The travel requirements of the taxpayer's employment provide a sufficient connection between the expenses they incurred on the GPS and their salary, such that the expenditure is incidental and relevant to the derivation of the assessable income from their employment. The taxpayer only uses the GPS to locate client addresses (for work purposes). In these circumstances the essential character of the expenditure is not private or domestic in nature. However, the expenditure the taxpayer incurred on the GPS is a one-off expense without any element of being a recurrent expenditure. It brought into existence an enduring asset used in the derivation of the taxpayer's assessable income. The GPS is to provide the taxpayer with a long-term benefit in their income earning activities. In these circumstances the taxpayer's expenditure on the GPS is of a capital nature rather than of a revenue nature. As the expenditure the taxpayer incurred on the GPS is capital in nature, they are precluded from claiming a deduction for the GPS by paragraph 8-1(2)(a) of the ITAA 1997.", "Date_of_Decision": "31 May 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/612 | ATO ID 2004/613", "Subject_References": "Car expenses Motor vehicle expenses", "Case_References": "Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 [1959] HCA 15 (1949) 4 AITR 236 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004614", "Unmatched_Content": "Updated to correct grammatical error Inserted medium neutral citation for cases | Inserted medium neutral citation | Keywords Car expenses Motor vehicle expenses"}
{"ATO_ID_Number": "ATO ID 2002/362", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of car expenses incurred in maintaining investment properties owned by a superannuation fund", "Issue": "Is a taxpayer entitled to a deduction under section 28-12 of the Income Tax Assessment Act 1997 (ITAA 1997) for car expenses, where they are incurred in maintaining and inspecting an investment property owned by a private superannuation fund?", "Decision": "No. The taxpayer is not entitled to a deduction under section 28-12 of the ITAA 1997 for car expenses incurred in maintaining and inspecting an investment property owned by a private superannuation fund.", "Facts": "The taxpayer is a beneficiary under a private superannuation fund but was not 'presently entitled' to any income from the superannuation fund in the year of income. The taxpayer is one of the Trustees of the superannuation fund. The superannuation fund owns investment properties. The taxpayer owns the car which is used to travel to the investment properties for the purpose of inspection and maintenance. The costs of maintaining the car are incurred by the taxpayer.", "Reasons_for_Decision": "Summary: Section 28-12 of the ITAA 1997 allows a deduction for car expenses using one of the two methods under Division 28 of the ITAA 1997. Subdivisions 28-C and 28-F then prescribe how to calculate the deduction referrable to each method. Both of the methods rely on the concept of 'business kilometres' travelled during the year. A 'business kilometre' is defined in subsection 28-25(3) and 28-90(4) of the ITAA 1997 to mean: '....the kilometres the car travelled in the course of producing your assessable income or your travel between workplaces.....' The term 'producing your assessable income' has the same meaning as those words used in section 8-1 of the ITAA 1997. Under section 8-1 of the ITAA 1997 a loss or outgoing will not be deductible if it is incurred in gaining or producing the assessable income of a person other than the one who incurs it ( FC of T v. Munro (1926) 38 CLR 153; [1926] HCA 58). In order for a deduction to be allowable, there must be a nexus between the incurring of the outgoing and the assessable income being derived. Private superannuation funds are constituted as trusts. The term 'present entitlement' is central to the trust provisions. The methods of taxing the income of trusts depends on whether the taxpayer is 'presently entitled' to the income of the trust or not. In general, the term 'presently entitled' means that the beneficiary of a trust estate has a present or immediate right to demand payment of a share of the net trust income from the trustee. The taxpayer was not presently entitled to any of the income from the superannuation fund in the income year they incurred the car expenses and did not receive any income from the superannuation fund. There was no nexus between the incurring of the car expenses to travel to the investment properties owned by the superannuation fund and any assessable income from the superannuation fund. Accordingly, the travel does not meet the definition of 'business kilometres' travelled in subsections 28-25(3) and 28-90(4) of the ITAA 1997. Therefore, the deduction for the car expenses incurred in travelling to inspect the investment properties owned by the superannuation fund is not allowable under section 28-12 of the ITAA 1997.", "Date_of_Decision": "25 January 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Division 28 section 28-12 Subdivision 28-C subsection 28-25(3) Subdivision 28-F subsection 28-90(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Personal superannuation funds Rental expenses Travel expenses Rental property Self-managed superannuation funds Trust beneficiaries", "Case_References": "FC of T v. Munro 38 CLR 153 [1926] HCA 58", "Other_References": "", "Business_Line": "Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002362", "Unmatched_Content": "Amended in order to reflect a legislative change to Division 28 Inserted medium neutral citation | Inserted medium neutral citation | Keywords Personal superannuation funds Rental expenses Travel expenses Rental property Self-managed superannuation funds Trust beneficiaries"}
{"ATO_ID_Number": "ATO ID 2002/938", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses incurred to preserve a financing arrangement", "Issue": "Are legal fees incurred by a taxpayer in defending the financing arrangement for the purchase of a motor vehicle deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Legal expenses incurred by a taxpayer in defending the financing arrangement for the purchase of a motor vehicle are not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer entered into a hire purchase financing arrangement for a new motor vehicle which is used solely for business purposes. An error was made which resulted in an understatement of the purchase price being financed. This error had the effect of reducing the amount of monthly instalments payable by the taxpayer. The lessor and the taxpayer were unable to settle the dispute and the lessor proceeded with legal action. The taxpayer incurred legal expenses in defending the legal action.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 8 ATD 190; (1946) 3 AITR 436 per Dixon J). The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. Where legal expenses arise as a consequence of the day to day activities of a business, the object of the expenditure is devoted towards a revenue end and the legal expenses are deductible ( Herald & Weekly Times v. Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 2 ATD 169). However, where the expenditure is devoted towards a structural rather than an operational purpose, the expenditure is of a capital nature and the expenses are not deductible ( Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403). In the case Kennedy Holdings and Property Management Pty Ltd v. Federal Commissioner of Taxation (1992) 39 FCR 495; (1992) 92 ATC 4918; (1992) 24 ATR 321, a payment by a lessor to the lessee to terminate the lease in order to grant a new and more profitable lease to a new tenant, was held to be capital in nature and not deductible. The payment secured a permanent advantage, that is, the surrender of the lease with the option to renew. Although the taxpayer's vehicle is used to produce income, the expenditure was incurred to protect the financing arrangement which determined the cost of the asset from which the taxpayer derived income. The advantage sought in preserving the financial arrangement is capital in nature. Accordingly, the legal expenses incurred by the taxpayer in relation to the financing arrangement are considered capital and not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "12 September 2002", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal action Legal expenses Finance charges Hire purchase", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 (1946) 8 ATD 190 (1946) 3 AITR 436", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002938", "Unmatched_Content": "Minor adjustment to remove the inverted commas in ('ITAA 1997') | Keywords Legal action Legal expenses Finance charges Hire purchase"}
{"ATO_ID_Number": "ATO ID 2002/1004", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: car lease residual values", "Issue": "What are the minimum residual values for leased cars effective from 1 July 2002?", "Decision": "The percentage of cost to be used to determine minimum residual values for leased assets with an effective life of eight (8) years are:", "Facts": "The Commissioner has amended his determination for the effective life for cars from 6 & 2/3 years to 8 years. The changes, which take effect from 1 July 2002, only affect assets acquired on or after this date.", "Reasons_for_Decision": "", "Date_of_Decision": "17 October 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 28 | Taxation Determination TD 93/142", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lease residual values Residual values", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021004", "Unmatched_Content": "Reason for Decision: Taxation Ruling IT 28 and Taxation Determination TD 93/142 set out percentages of cost to be used to determine minimum residual values able to be used for leased items. However, they contain no reference to the percentage that should be used for plant and equipment having an effective life of 8 years. | The figures in the table above follow the methodology set out in TD 93/142. | Related Public Rulings (including Determinations) Taxation Ruling IT 28 Taxation Determination TD 93/142 | Keywords Lease residual values Residual values"}
{"ATO_ID_Number": "ATO ID 2014/34", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Section 82KK: anti-avoidance - supply of goods or provision of services by an associate", "Issue": "Does the anti-avoidance provision of subsection 82KK(2) of the Income Tax Assessment Act 1936 (ITAA 1936) have application to a loss or outgoing that the taxpayer incurs in respect of the provision of legal services by an associate?", "Decision": "Yes. Subsection 82KK(2) of the ITAA 1936 applies to a loss or outgoing that a taxpayer incurs in respect of the provision of legal services by the associate.", "Facts": "During the 2014 income year an associate of the taxpayer provided legal services to the taxpayer. The associate issued an invoice for their services to the taxpayer in the same income year. The taxpayer is on accruals basis of accounting. The associate is on a cash basis, and will accordingly return the income in the income year received. The preconditions in subsections 82KK(1) and 82KK(5) of the ITAA 1936 as well as other preconditions in subsection 82KK(2) of the ITAA 1936 are satisfied.", "Reasons_for_Decision": "Summary: Subsection 82KK(2) of the ITAA 1936 has application in relation to the supply of goods or services where the supply of goods or the provision of services to which the loss or outgoing applies occurs in the same income year. Subsection 82KK(2) of the ITAA 1936 excludes losses or outgoings where the loss or outgoing is in respect of the supply of goods or the provision of services at a time that occurs after, or during a period that occurs after or extends beyond, the end of the relevant year of income. Paragraph 82KK(2)(a) of the ITAA 1936 does not exclude the application of subsection 82KK(2) to the 'supply of goods or the provision of services' altogether. In this case: Therefore, the anti-avoidance provision of subsection 82KK(2) of the ITAA 1936 applies to the taxpayer.", "Date_of_Decision": "22 October 2014", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 82KK(1) subsection 82KK(2) subsection 82KK(5) paragraph 82KK(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Anti avoidance Legal services Associate", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201434", "Unmatched_Content": "Include additional sentence for clarity. | Keywords Anti avoidance Legal services Associate"}
{"ATO_ID_Number": "ATO ID 2009/54", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of an amount paid on the cash settlement of an exercised option", "Issue": "When is an amount paid on the cash settlement of an exercised option deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "An amount paid on the cash settlement of an exercised option is deductible under section 8-1 of the ITAA 1997 when the option is exercised.", "Facts": "The taxpayer, a commodity producer, is exposed to fluctuating prices on the sale of its commodities. In order to offset the risk of fluctuating prices the taxpayer adopts various hedging strategies designed to ensure its commodity sales revenue, together with any gains or losses on its hedging transactions, is within an acceptable range. These strategies involve the sale and/or the acquisition of commodity options, or the use of commodity option transactions in combination with other derivatives. As part of this strategy the taxpayer sold an option which gave the counterparty the right, but not the obligation, to buy a certain quantity of a particular commodity at a fixed price (the strike price) on the expiry date of the option. The option was exercised on the expiry date. The contract was cash settled, as intended by the parties and provided for under the contract, with the taxpayer agreeing to pay an amount equal to the difference between the strike price and the market price of the commodity on the expiry date. The taxpayer made the payment 12 days after the expiry date.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for losses or outgoings to the extent they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, provided the losses or outgoings are not capital, private or domestic in nature. Taxation Ruling TR 97/7 provides broadly that a taxpayer incurs an outgoing at the time a present money debt is owed that cannot be escaped. The term incurred also covers losses or outgoings to which a taxpayer is 'definitively committed' or is 'completely subjected'. There has to be a presently existing liability which must be more than 'impending, threatened or expected' ( New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179; (1938) 5 ATD 36; (1938) 1 AITR 366; Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492; (1953) 5 AITR 579; (1953) 10 ATD 240; Nilsen Development Laboratories Pty Ltd & Ors v. Federal Commissioner of Taxation (1981) 144 CLR 616; (1981) 81 ATC 4031; (1981) 11 ATR 505. The option sold by the taxpayer is part of its hedging strategies, which form an integral part of its business, designed to protect its revenue in the event of a fall in the price of the commodity it produces for sale. The amounts paid on cash settling the option is an outgoing necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. The outgoing is not capital or of a capital nature. The amount paid on cash settling the option is incurred at the time the option is exercised. It is at this time that a presently existing liability is created and the outgoing is incurred for the purposes of section 8-1 of the ITAA 1997.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ending 31 December 2004 Year ending 31 December 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/53 | ATO ID 2009/55 | ATO ID 2009/56", "Subject_References": "Call options Commodity transactions Deductions & expenses Financial derivatives Financial instruments Hedging Incurred Ordinary course of business Put options", "Case_References": "New Zealand Flax Investments Ltd v Federal Commissioner of Taxation (1938) 61 CLR 179 (1938) 5 ATD 36 (1938) 1 AITR 366", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200954", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 | Keywords Call options Commodity transactions Deductions & expenses Financial derivatives Financial instruments Hedging Incurred Ordinary course of business Put options"}
{"ATO_ID_Number": "ATO ID 2009/55", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of premiums payable on the acquisition of options", "Issue": "When are premiums payable on options acquired by a commodity producer for the purpose of hedging commodity price risk allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Premiums payable on the options acquired to hedge commodity price risk are allowable deductions under section 8-1 of the ITAA 1997 in the income year in which they are due and payable.", "Facts": "The taxpayer, a commodity producer, is exposed to fluctuating prices on the sale of its commodities. In order to offset the risk of fluctuating prices the taxpayer adopts various hedging strategies designed to ensure its commodity sales revenue, together with any gains or losses on its hedging transactions, is within an acceptable range. These strategies involve the sale and/or the acquisition of options, or the use of option transactions in combination with other derivatives. On acquiring the options the taxpayer becomes liable to pay a premium to the seller which represents a non-refundable payment for the rights conveyed by the option. Each premium is paid two days after the acquisition of the option.", "Reasons_for_Decision": "Summary: The options acquired by the taxpayer as part of its hedging strategies are an integral part of its business, designed to protect its revenue in the event of a fall in the price of the commodity it produces for sale. Section 8-1 of the ITAA 1997 allows a deduction for losses or outgoings to the extent they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, provided the losses or outgoings are not capital, private or domestic in nature. Taxation Ruling TR 97/7 provides broadly that a taxpayer incurs an outgoing at the time a present money debt is owed that cannot be escaped. The term incurred also covers losses or outgoings to which a taxpayer is 'definitively committed' or is 'completely subjected'. There has to be a presently existing liability which must be more than 'impending, threatened or expected' ( New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179; (1938) 5 ATD 36; (1938) 1 AITR 366; Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492; (1953) 5 AITR 579; (1953) 10 ATD 240; Nilsen Development Laboratories Pty Ltd v. Federal Commissioner of Taxation (1981) 144 CLR 616; (1981) 81 ATC 4031; (1981) 11 ATR 505. The premiums payable on options acquired to hedge the taxpayer's revenue stream are a necessary outgoing made in the normal course of the maintenance of the taxpayer's business of selling commodities. The premiums payable are necessarily incurred in carrying on a business for the purposes of producing assessable income. They are not capital or of a capital nature and are deductible under section 8-1 of the ITAA 1997. The taxpayer incurs a liability to pay a premium to the seller at the time of acquiring the option. It is at this time that a presently existing liability is created and the outgoing is incurred for the purposes of section 8-1 of the ITAA 1997.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ending 31 December 2004 Year ending 31 December 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/53 | ATO ID 2009/54 | ATO ID 2009/56", "Subject_References": "Call options Commodity transactions Deductions & expenses Financial derivatives Financial instruments Hedging Incurred Put options", "Case_References": "New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179 (1938) 5 ATD 36 (1938) 1 AITR 366", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200955", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 | Keywords Call options Commodity transactions Deductions & expenses Financial derivatives Financial instruments Hedging Incurred Put options"}
{"ATO_ID_Number": "ATO ID 2009/56", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of premiums receivable on the sale of options", "Issue": "When are premiums receivable on options sold by a commodity producer as part of a strategy to hedge commodity price risk, assessed under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Premiums receivable on options sold to hedge commodity price risk, are derived as assessable income under section 6-5 of the ITAA 1997 in the income year in which they are due and receivable.", "Facts": "The taxpayer, a commodity producer, is exposed to fluctuating prices on the sale of its commodities. In order to offset the risk of fluctuating prices the taxpayer adopts various hedging strategies designed to ensure its commodity sales revenue, together with any gains or losses on its hedging transactions, is within an acceptable range. These strategies involve the sale and the acquisition of options, or the use of option transactions in combination with other derivatives. On selling the options the taxpayer becomes entitled to receive a premium from the purchaser, which represents a non-refundable receipt for the rights conveyed by the option. Each premium is received two days after the sale of the option. The options sold by the taxpayer as part of its hedging strategies are an integral part of its business, designed to protect its revenue in the event of a fall in the price of the commodity it produces for sale.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. In Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 at 427-428; 71 ATC 4195 at 4200; (1971) 2 ATR 563 at 569-570, Gibbs J, in considering the meaning of the word 'derived' said: The word \"derived\" is not necessarily equivalent in meaning to \"earned\". \"Derive\" in its ordinary sense, according to the Oxford English Dictionary, means \"to draw, fetch, get, gain, obtain (a thing from a source)\". It has become well established that unless the Act makes some specific provision on the point the amount of income derived is to be determined by the application of ordinary business and commercial principles and that the method of accounting to be adopted is that which \"is calculated to give a substantially correct reflex of the taxpayer's true income\" (Commissioner of Taxes (South Australia) v The Executor, Trustee and Agency Company of South Australia Limited (Carden's Case) (1938), 63 CLR 108, at pp 152-4; 1 AITR 416, at pp 441-2). His Honour then quoted Dixon J, with whom Rich and McTiernan JJ concurred, in Carden's Case : Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realised or immediately realisable form. A gain has 'come home' to the taxpayer if a debt is presently recoverable by action or the taxpayer is not obligated to take any further steps to be entitled to payment (be it actual or constructive payment) ( FC of T v. Australian Gas Light Co 83 ATC 4800; (1983) 15 ATR 105; Henderson v. Federal Commissioner of Taxation (1970) 119 CLR 612; 70 ATC 4016; (1970) 1 ATR 596; Arthur Murray (N.S.W.) Pty Ltd v. Federal Commissioner of Taxation (1965) 114 CLR 314; 14 ATD 98; (1965) 9 AITR 673; J Rowe & Son Pty Ltd v. Federal Commissioner of Taxation (1971) 124 CLR 421; 71 ATC 4157; (1971) 2 ATR 497. In addition, where a debt is presently recoverable by action, generally, there will be a present right to receive an amount in question. That amount will be quantifiable and not subject to any contingency or defeasibility ( Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73; 94 ATC 4280; (1994) 28 ATR 130; Barratt & Ors v. Federal Commissioner of Taxation (1992) 36 FCR 222; 92 ATC 4275; (1992) 23 ATR 339, Farnsworth v. Federal Commissioner of Taxation (1949) 78 CLR 504; (1949) 9 ATD 33; (1949) 4 AITR 258. The premiums receivable on options sold as part of a strategy to reduce the risk of adverse commodity price movements and therefore protect the taxpayer's revenue stream are derived in carrying on a business for the purpose of producing assessable income and are assessable under section 6-5 of the ITAA 1997. The taxpayer is due to receive the premium from the purchaser when the option is sold and does not have to take any further steps to be entitled to the premium. It is at this time that a present entitlement to the premium exists and comes home to the taxpayer in a realisable form and the amount receivable is derived for the purposes of section 6-5 of the ITAA 1997.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ended 31 December 2004 Year ended 31 December 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(4)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/53 | ATO ID 2009/54 | ATO ID 2009/55", "Subject_References": "Call options Commodity transactions Derived Financial derivatives Financial instruments Hedging Ordinary course of business Put options", "Case_References": "Brent v. Federal Commissioner of Taxation (1971) 125 CLR 418 71 ATC 4195 (1971) 2 ATR 563 71 ATC 4195", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200956", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4) | Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 | Keywords Call options Commodity transactions Derived Financial derivatives Financial instruments Hedging Ordinary course of business Put options"}
{"ATO_ID_Number": "ATO ID 2009/58", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exchange Traded Options: deductibility of premiums payable", "Issue": "Where an individual taxpayer carries on the business of trading in exchange traded options (ETOs), are the premiums payable from that activity deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) at the time an ETO Contract is registered with the Australian Clearing House (ACH)?", "Decision": "Yes. Where an individual taxpayer carries on the business of trading in ETOs, the premiums payable from that activity are deductible under section 8-1 of the ITAA 1997 at the time an ETO Contract is registered with the ACH.", "Facts": "The taxpayer is an individual who carries on the business of trading in ETOs over listed shares on the Australian Securities Exchange's Options Market. The taxpayer routinely and systematically takes (buys) and writes (sells) ETOs with the expectation of profit. The taxpayer uses a broker to trade in ETOs. After taking an ETO contract it is registered with the ACH. On registration the taxpayer becomes obliged to pay a premium. This premium represents an unconditional fee for taking the ETO contract.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income provided the losses or outgoings are not capital, private or domestic in nature. Taxation Ruling TR 97/7 provides a broad guide that a taxpayer incurs an outgoing at the time a present money debt is owed that cannot be escaped. It is not necessary that money has been physically paid out in order for that outgoing to have been incurred (see W Nevill & Company Ltd v. Federal Commissioner of Taxation (1937) 56 CLR 290; (1937) 4 ATD 187; (1937) 1 AITR 67). However, what is necessary is that there is a presently existing liability which must be more than 'impending, threatened or expected' ( New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179 at 207; (1938) 5 ATD 36 at 49; (1938) 1 AITR 366 at 378). The taxpayer is in the business of trading in ETOs. Buying ETO contracts form an integral part of the conduct of that business. The premiums due on buying ETO contracts are necessarily incurred in carrying on a business for the purpose of producing assessable income and are deductible under section 8-1 of the ITAA 1997. The premium on a bought ETO contract is incurred when the ETO contract is registered with the ACH. It is at that point in time that a presently existing liability is created and the outgoing is incurred for the purposes of section 8-1 of the ITAA 1997.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/57 | ATO ID 2009/59", "Subject_References": "Call options Carrying on a business Deductions & expenses Put options", "Case_References": "W Nevill & Company Ltd v. Federal Commissioner of Taxation (1937) 56 CLR 290 (1937) 4 ATD 187 (1937) 1 AITR 67", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200958", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 | Keywords Call options Carrying on a business Deductions & expenses Put options"}
{"ATO_ID_Number": "ATO ID 2006/313", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Share option trading", "Issue": "Can a taxpayer carrying on the business of trading in exchange-traded options (ETOs) deduct from assessable income under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) the market value of sold ETO positions that remain open at the end of the taxpayer's income year?", "Decision": "No. A taxpayer carrying on the business of trading in ETOs is not entitled to deduct from assessable income the market value of sold ETO positions that remain open at the end of their income year.", "Facts": "The taxpayer carries on the business of transacting in ETOs on the Australian Securities Exchange (ASX) options market by selling (writing) ETOs in the expectation they will expire unexercised. The taxpayer sells an ETO to establish a position in the options market. This is referred to in the market as having an open sold position. The position remains open until one of the following occurs: When the taxpayer sells an ETO, they are entitled to receive a premium in return for writing the option at the time the option is written. The taxpayer returns the premium as assessable income under section 6-5 of the ITAA 1997 at the time the ETO is written. At the end of the taxpayer's income year, the taxpayer has ETOs that remain in the open position as they have not been exercised, closed out, or expired.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, provided that the losses or outgoings are not capital, private or domestic in nature. Taxation Ruling TR 97/7 provides (at paragraph 5) that, as a broad guide, you incur an outgoing at the time you owe a present money debt that you cannot escape. Taxation Ruling TR 94/26 provides guidance on the meaning of the term 'incurred'. In particular, paragraph 3 states: In most cases where a loss has not been realised or an outgoing has not been made, a presently existing pecuniary liability, at the end of the relevant income year, will be a necessary prerequisite to an expense being 'incurred' for the purposes of subsection 51(1) ( Coles Myer Finance 93 ATC 4220; 25 ATR 95; Nilsen Development Laboratories Pty Ltd & Ors v. FC of T 81 ATC 4031; 11 ATR 505)... The market value of the taxpayer's open sold ETO positions represents the cost to the taxpayer to acquire offsetting ETOs in the same contract series. Effectively it is the cost to the taxpayer to close out the positions. At the end of the income year the taxpayer is not under any obligation to close out their open sold ETO positions. The market value of the taxpayer's open sold ETO positions is not a loss or outgoing incurred by the taxpayer as there is no presently existing liability to pay an amount to close out the ETOs. It is possible that the ETOs will never be closed out as they may be exercised by the buyer or expire unexercised. The taxpayer only incurs a loss or outgoing for the purposes of section 8-1 of the ITAA 1997 when they close-out their open positions by buying identical ETOs to those that they originally sold.", "Date_of_Decision": "10 November 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Section 8-1 Section 6-5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7 | Taxation Ruling TR 94/26", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/526", "Subject_References": "Call options Deductions & expenses Producing assessable income Put options", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006313", "Unmatched_Content": "Updated grammatical issues. | Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 Taxation Ruling TR 94/26 | Keywords Call options Deductions & expenses Producing assessable income Put options"}
{"ATO_ID_Number": "ATO ID 2005/99", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: wine equalisation tax", "Issue": "Is the taxpayer, a wholesaler of grape wine, entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), for the gross Wine Equalisation Tax (WET) liability of the taxpayer?", "Decision": "Yes. The taxpayer, a wholesaler of grape wine, is entitled to a deduction, under section 8-1 of the ITAA 1997, for the gross WET liability of the taxpayer.", "Facts": "The taxpayer carries on a business as a wholesaler of grape wine. The taxpayer has had taxable dealings in wine and has a wine equalisation tax (WET) liability under the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act).", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under the section where the loss or outgoing is of a capital, private or domestic nature, or is incurred in producing exempt income, or where another provision prevents a deduction. A loss or outgoing is incurred in gaining or producing assessable income, or necessarily incurred in gaining or producing assessable income, if there is a sufficient nexus or relationship between the loss or outgoing and the production of assessable income so that the loss or outgoing is incidental and relevant to the gaining or producing of assessable income ( Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 236. In the case of a wine wholesaler who incurs a WET liability, there is a sufficient nexus between the incurring of the expense and the income produced from selling the wine. The WET incurred by the wine wholesaler is a cost that is necessarily incurred in carrying on a business for the purpose of producing assessable income. The WET liability is not of a capital, domestic or private nature and is not incurred in gaining exempt income. Although subsection 27-15(1) of the ITAA 1997 provides that a taxpayer cannot deduct a payment made under Division 33 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), subsection 27-15(2) of the ITAA 1997 clarifies that section 27-15 does not apply to the extent that the net amount was increased because of a WET liability. Therefore, no provision of the ITAA 1997 or ITAA 1936 prevents the WET liability included in a net amount under Division 33 of the GST Act from being deductible. This is confirmed by the explanatory memorandum to A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999 which, once enacted, inserted section 27-15 into the ITAA 1997. The explanatory memorandum states: 3.26 Wine equalisation tax or luxury car tax included in a net amount for Division 33 purposes will be deductible providing the criteria for deductibility are otherwise satisfied. [Item 14, new subsection 27-15(2)] The deductibility of gross WET liability is consistent with the treatment the courts have given to other taxes and charges, excluding income tax, such as; payroll tax ( Layala Enterprises Pty Ltd (In Liquidation) v. Commissioner of Taxation (1998) 86 FCR 348; 98 ATC 4858; (1998) 39 ATR 502), stamp duty associated with revenue transactions and land tax ( Moffatt v. Webb (1913) 16 CLR 120). Therefore, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997, for the gross WET liability of the taxpayer.", "Date_of_Decision": "06 January 2005", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 27-15 subsection 27-15(1) subsection 27-15(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Wine equalisation tax Incurred Wholesale trade Wine", "Case_References": "Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 8 ATD 431 (1949) 4 AITR 236", "Other_References": "Explanatory Memorandum to A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200599", "Unmatched_Content": "Remove reference to subsection 51(1) of the ITAA 1936 | Insert keyword 'incurred, 'wholesale trade' and 'wine' | Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 | Keywords Deductions & expenses Wine equalisation tax Incurred Wholesale trade Wine"}
{"ATO_ID_Number": "ATO ID 2004/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Allowable deduction: instalment sales contract - payment to vacate on default", "Issue": "Is a deduction allowable under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the amount paid by the taxpayer to persuade a person to vacate a residential property, following their default under an instalment sales contract?", "Decision": "Yes. The amount paid to the defaulting purchaser is an allowable deduction under section 8-1 of the ITAA 1997 as it was incurred in carrying on the business of the taxpayer and it is not a loss or outgoing of a capital nature.", "Facts": "The taxpayer carries on a business of buying and selling residential properties. The properties are sold under instalment sales contracts with vendor finance. The instalment sales contract has the following features: The taxpayer did not use the properties for any other purpose prior to sale. The properties were sold for an amount that was in excess of the amount paid by the taxpayer to acquire the property. Each property was sold within six months of it being acquired by the taxpayer. The properties are trading stock for the purposes of subdivision 70-C of the ITAA 1997. During the year, a purchaser defaulted under an instalment sales contract. The interest paid was brought to account as assessable income under section 6-5 of the ITAA 1997 at the time of receipt. The forfeited deposit and instalments retained by the taxpayer will be brought to account under section 6-5 of the ITAA 1997 as ordinary income at the time of the default. The taxpayer paid an amount to the defaulting purchaser to persuade them to vacate the property. The taxpayer made this payment for the purpose of ensuring that the property was handed over in good condition and repair and to facilitate a quick re-sale of the property under an instalment sales contract. The property was then resold under an instalment sales contract.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are incurred in gaining or producing exempt income. In paragraph 9 of Taxation Ruling TR 95/33 the Commissioner states that an outgoing will be characterised as necessarily incurred in carrying on the business of the taxpayer for the purpose of earning the assessable income where the expenditure has the necessary connection with the operations or activities which more directly gain or produce assessable income. The judgment of Dixon J in Sun Newspapers Ltd v. FC of T (1938) 61 CLR 337 (1938) 5 ATD 87 (the Sun Newspapers Case) is a leading exposition of the matters that must be examined in order to differentiate whether an amount is capital or revenue in nature. Accordingly the following indicators, consistent with the matters raised by Dixon J, in the Sun Newspapers Case point towards an expense being capital in nature: The amount paid by the taxpayer to the defaulting purchaser to persuade them to vacate the property, is incurred in carrying on the taxpayer's business of selling residential properties under instalment sales contracts with vendor finance. The payment is not a loss or outgoing of a capital nature. Accordingly, a deduction is allowable under section 8-1 of the ITAA 1997 for the amount.", "Date_of_Decision": "28 November 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 70-C 6-5 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/33", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/25 | ATO ID 2004/26 | ATO ID 2004/27 | ATO ID 2004/28", "Subject_References": "Capital expenditure Deductions & expenses Sale by instalments", "Case_References": "Associated Newspapers Ltd & Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337 (1938) 5 ATD 87", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200429", "Unmatched_Content": "Updated legislative reference | Related Public Rulings (including Determinations) Taxation Ruling TR 95/33 | Keywords Capital expenditure Deductions & expenses Sale by instalments"}
{"ATO_ID_Number": "ATO ID 2004/403", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: meaning of 'incurred' - estimate of future warranty costs", "Issue": "Is the taxpayer, a manufacturer of goods, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for an amount representing an estimate of its liability for future warranty costs, in respect of goods sold during the income year?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 because the amount representing an estimate of its liability for future warranty costs is not a loss or outgoing that the taxpayer has incurred during the income year.", "Facts": "The taxpayer is a manufacturer of goods. The taxpayer provides a warranty to customers that its goods are free from defects in material and workmanship under normal use and service. Under the terms of the warranty, the taxpayer is required to repair or replace any qualifying defects in the goods that arise during the warranty period. The taxpayer contends that, due to the nature of its goods, all faults arising under the warranty would be inherent in the good at the time of sale. The taxpayer has used its records of prior year warranty claims to estimate its liability for future warranty costs in respect of goods sold during the year of income. The future warranty costs include the taxpayer's estimated salary and wages, parts and travel and freight costs to be paid in rectifying the defects.", "Reasons_for_Decision": "Summary: To qualify for deduction under section 8-1 of the ITAA 1997, a loss or outgoing must have been 'incurred'. Taxation Rulings dealing with warranty and repair costs clearly explain that manufacturers, distributors or dealers can not deduct amounts for estimated future warranty repair costs, as the costs in repairing items under warranty, are not incurred until such time as the repairs are made (Taxation Ruling TR 93/20, par 109). This is because even though a legal liability to make the repairs may have arisen, there will be no loss or outgoing until a liability to make payments relating to the repair is incurred. Taxation Ruling IT 2648 paragraph 38 states that: ... Warranty repair costs will be incurred and are deductible in the course of effecting the repairs, e.g. when the dealer purchases spare parts and assumes a liability to pay repairers' wages. In contrast, it has been held that claims by a manufacturer who made provision for the costs of indemnifying its dealers against warranty claims, were allowable in the year the warranty commenced. In Inland Revenue, Commissioner of (NZ) v. Mitsubishi Motors New Zealand Ltd [1995] 3 NZLR 513; (1995) 31 ATR 350; 95 ATC 4711 ( Mitsubishi Motors ), the taxpayer motor vehicle manufacturer sold its vehicles through dealers. The dealers provided a warranty to purchasers that they would repair or replace qualifying defects arising in the vehicles during the warranty period and the taxpayer agreed to indemnify its dealers against the cost of warranty claims. The taxpayer claimed a deduction for an amount representing an estimate of its liability to indemnify dealers against future warranty claims in respect of vehicles sold during the income year. The Privy Council accepted the taxpayer's estimate and inferred, as the warranty period was limited to 12 months, that any qualifying defects arising in the vehicles must have been inherent at the time of sale. Hence, the Privy Council held that the taxpayer was definitively committed to, and could deduct its estimated indemnity expenditure in the income year of sale of the vehicles, because the taxpayer's liability to indemnify the dealers arose at the time of sale. It does not follow from Mitsubishi Motors that an amount can be deducted for an estimate of future warranty costs inrespect of which no loss or outgoing has arisen (or been 'incurred'). Taxation Ruling TR 97/7 explains the meaning of 'incurred'. Paragraph 5 states, as a broad guide, that 'you incur an outgoing at the time you owe a present money debt that you cannot escape'. Paragraph 6 provides, in accordance with case law, that: Taxation Ruling TR 97/15 paragraph 54 states that the decision in Mitsubishi Motors was based on the important fact that the event giving rise to the taxpayer's liability had occurred before the end of the income year, and the liability was capable of reasonable estimation. The event giving rise to the taxpayer's liability was found by the Privy Council to be the sale of a motor vehicle with an inherent defect which would manifest itself within the warranty period. It was at this time, in the income year of sale of the vehicles, that the taxpayer owed a present money debt to indemnify its dealers which it could not escape. In comparison, the event giving rise to the taxpayer's liability in the present case has not occurred before the end of the income year. The taxpayer is liable to repair or replace any qualifying defects in the goods that arise during the warranty period (rather than to pay an indemnity amount as in Mitsubishi Motors ) and its liability arises in the course of effecting the repairs . It is only at this time, in the income year that the repairs are effected, that the taxpayer owes a present money debt which it cannot escape. Until then, the liability is no more than pending, threatened or expected, even in respect of goods which may have an inherent defect. Therefore, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 because the amount representing the estimate of its liability for future warranty costs, is not incurred in the income year of sale of the goods.", "Date_of_Decision": "1 September 2003", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7 | Taxation Ruling IT 2648 | Taxation Ruling TR 93/20 | Taxation Ruling TR 97/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounting liabilities Accrued expenses Contingent liabilities Deductions & expenses Warranty charges", "Case_References": "Inland Revenue, Commissioner of (NZ) v. Mitsubishi Motors New Zealand Ltd [1995] 3 NZLR 513 31 ATR 350 95 ATC 4711", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004403", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 Taxation Ruling IT 2648 Taxation Ruling TR 93/20 Taxation Ruling TR 97/15 | Keywords Accounting liabilities Accrued expenses Contingent liabilities Deductions & expenses Warranty charges"}
{"ATO_ID_Number": "ATO ID 2004/494", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Payment for risk coverage to mutual entity", "Issue": "Is the total amount of the payment to the mutual entity for risk coverage an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The total amount of the payment to the mutual entity for risk coverage will be an allowable deduction under section 8-1 of the ITAA 1997.", "Facts": "A mutual entity will offer risk coverage to a specific industry group, members of which carry on business for the production of assessable income. This mutual risk product is provided to members of the industry group by making subscriptions to a mutual entity. The risk cover is renewed annually by making further subscriptions. The mutual entity will reinsure a significant amount of the risk with established reinsurance companies but will also 'self-insure' a substantial amount of the risk. The motivation for entering into this arrangement is that suitable insurance coverage could not be obtained from established insurance companies at a reasonable cost. The mutual entity has relied on expert advice in establishing this arrangement and in maintaining the arrangement. The mutual entity has established extensive risk management processes which conform to quality standards.", "Reasons_for_Decision": "Summary: To determine whether an amount is deductible under section 8-1 of the ITAA 1997 all the facts and circumstances of the case must be ascertained. This is clear from an examination of the following judicial decisions such as Colonial Mutual Life Assurance Society Ltd. v. Federal Commissioner of Taxation (1953) 89 CLR 428; (1953) 10 ATD 274; (1953) 5 AITR 597 ( Colonial ) and Hallstroms Pty. Ltd. v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 8 ATD 190; (1946) 3 AITR 436. In Colonial Fullager J., in discussing the advantage the taxpayer sought to obtain from the outlay, stated: The questions which commonly arise in this type of case are (1) What is the money really paid for? and (2) Is what is really paid for, in truth and substance a capital asset? To determine that a member is actually paying money for risk coverage for property damage and public liability one must establish that, on the facts, the mutual entity is in the business of risk coverage especially as the mutual entity will have significant self-insurance retention. The issue in W.D. & H.O. Wills (Australia) Pty Ltd v. Commissioner of Taxation (1996) 65 FCR 298; 96 ATC 4223; (1996) 32 ATR 168 was the tax deductibility of premiums paid to an associated company for risk cover which was not available from third party insurers at an acceptable rate. Sackville J stated that: In my view the premiums paid to Matila [the associated company] by Wills in respect of health risks should be characterised as necessarily incurred in carrying on Wills' business as a manufacturer and distributor of tobacco products. The composite policy was intended to and did provide coverage against major risks arising out of business operations. This follows from the terms of the policy and the circumstances which give rise to the perceived need to obtain coverage from a related company. The risks insured went to the very heart of Wills' business. The absence of available coverage through the open insurance market created a commercial need to develop a strategy for covering those risks. The connection between the premiums and the Wills' business is, in my opinion, clear. A critical issue to determine is whether the amount paid to the mutual entity for risk coverage is reasonable having regard to the nature of the risks undertaken and the state of the insurance market relating to such risks. The facts, as stated above, support the conclusion that the amounts that will be paid to the mutual entity are solely for risk coverage for property damage and public liability risk cover and are therefore an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "2 April 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Fire insurance General insurance General insurance industry Insurance expenses Public trading trusts Unit trust distributions Unit trusts", "Case_References": "Colonial Mutual Life Assurance Society Ltd. v. Federal Commissioner of Taxation (1953) 89 CLR 428 (1953) 10 ATD 274 (1953) 5 AITR 597", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004494", "Unmatched_Content": "Keywords Deductions & expenses Fire insurance General insurance General insurance industry Insurance expenses Public trading trusts Unit trust distributions Unit trusts"}
{"ATO_ID_Number": "ATO ID 2004/648", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: annual operating fee paid by taxi licensee", "Issue": "Is the taxpayer, a taxi driver who carries on a business under their own taxi licence, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the cost of the annual operating fee?", "Decision": "Yes. The taxpayer, a taxi driver who carries on a business under their own taxi licence, is entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of the annual operating fee.", "Facts": "The taxpayer carries on a business of taxi driving. The taxpayer holds a taxi licence granted by the government of the State in which they operate. Under the terms of the licence agreement, the taxpayer pays an up-front annual operating fee, described as payment for the right to operate under their taxi licence for a period of twelve months. If the annual operating fee is not paid promptly upon falling due, the licence is revoked. The right to operate under the taxi licence is not transferable or assignable.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a general deduction for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. For losses and outgoings incurred in carrying on a business 'necessarily incurred in' is taken to mean 'clearly appropriate or adapted for' ( Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; (1949) 4 AITR 326). The expenditure the taxpayer has incurred is integral to the production of their business income and is in the nature of an advance payment of an ongoing operational cost. As such it is considered that there is sufficient connection for it to be taken as 'necessarily incurred in' the course of carrying on that business. However, it must also be determined whether or not the expenditure is excluded from deductibility on the basis that it is capital in nature. The following characteristics are accepted as an indication that an outgoing is on capital account ( Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403): In the taxpayer's circumstances, the expenditure in question is part of the process by which they operate to obtain regular returns by means of regular outlay. The expenditure does not confer a lasting or enduring benefit and is, by its nature, recurrent and ongoing. Given this, it is considered that the expenditure in question is not capital in nature. Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of the annual operating fee.", "Date_of_Decision": "21 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Government fee expenses Statutory licence expenses Taxi expenses Taxi industry", "Case_References": "Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 8 ATD 431 (1949) 4 AITR 326", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004648", "Unmatched_Content": "Keywords Deductions & expenses Government fee expenses Statutory licence expenses Taxi expenses Taxi industry"}
{"ATO_ID_Number": "ATO ID 2004/656", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital v. Revenue: acquisition of a subscriber base", "Issue": "Is the cost to an Internet Service Provider (ISP) of acquiring a subscriber base, as part of the acquisition of another ISP business, an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The cost of acquiring a subscriber base is not an allowable deduction under section 8-1 of the ITAA 1997 as it is an outgoing of capital, or of a capital nature.", "Facts": "The taxpayer carries on the business of an ISP. In order to expand its business and acquire new customers the taxpayer embarked on a series of acquisitions of other ISPs. Under the terms of the acquisition agreements, vendors were to cease their activities and were prohibited from operating in the same business as the taxpayer for specified periods. Under each acquisition agreement the taxpayer, for a single lump sum payment, acquired the ISP business including prepaid customer contracts and goodwill, plant and equipment, customer data, intellectual property, business names, logos and trademarks. In some instances, the principal and some employees of the acquired ISP were given employment with the taxpayer. Each agreement provided for an allocation of the total consideration to the separate assets acquired. A separate amount was allocated to that part of the consideration representing the subscriber base and, for accounting purposes, the cost of acquiring the subscriber base of competitors was reflected as goodwill and amortised over a specified period.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing incurred in gaining or producing assessable income, or that is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income except to the extent that such loss or outgoing is, inter alia, of capital, or of a capital nature. The classic formulation of the matters to be considered in determining whether a loss or outgoing is of a capital or revenue nature is that of Dixon J in Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403 ( Sun Newspapers ) where his Honour said: There are, I think, three matters to be considered, (a) the character of the advantage sought, and in this its lasting qualities may play a part, (b) the manner in which it is to be used, relied upon or enjoyed, and in this and under the former head recurrence may play its part, and (c) the means adopted to obtain it; that is, by providing a periodical reward or outlay to cover its use or enjoyment for periods commensurate with the payment or by making a final provision or payment so as to secure future use or enjoyment. More recently in GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 the High Court pointed out that the character of expenditure is ordinarily determined by reference to the nature of the asset acquired and that the character of the advantage sought by the making of the expenditure is a critical factor in determining the character of what is paid. In the present instance, from a practical and business point of view, the expenditure: In considering this issue, where the accounting treatment adopted by the taxpayer is not contrary to legal principle, the way the taxpayer records an item in its books of account can be considered a reflection of the character of the expenditure. Whilst not determinative, the accounting treatment may assist in ascertaining its true nature. It forms part of the overall picture which must be considered in determining the correct characterisation of the payments (see Travelodge Papua New Guinea Ltd v. Chief Collector of Taxes (1985) 16 ATR 867; 85 ATC 4432). In this instance, the taxpayer has treated the cost of acquiring the subscriber base as goodwill and amortised the expenditure over a specified period. Taking into consideration all the factors above, the outgoing made by the taxpayer in acquiring a subscriber base, as part of the acquisition of an ISP business, is considered to be capital, or of a capital nature. This view is consistent with that expressed in Taxation Ruling TR 2000/1 which deals with the tax consequences of the acquisition and disposal of insurance registers. The registers are a record of the rights of an insurance agent to future income from renewals and also provide a record of policyholders that an agent has an exclusive right to deal with on behalf of an insurance company. Consequently, there are similarities to subscriber bases acquired by ISPs. Paragraph 13 of TR 2000/1 states: Expenditure incurred by an agent acquiring an insurance register would be of a capital nature ... irrespective of the legal form of the transaction and consequently not allowable as a deduction under section 8-1 of the Act. Further, at paragraph 85, in considering the capital-revenue distinction the Ruling has regard to the judgment of Latham J in Sun Newspapers where his Honour said at 355: It is true that the payments did not result in obtaining a new capital asset of a material nature, but they did obtain a very real benefit or advantage for the companies, namely, the exclusion of what might have been serious competition. Regard has also been had to the judgments in BP Australia Ltd v. Federal Commissioner of Taxation (1965) 112 CLR 386; (1965) 14 ATD 1; (1965) 9 AITR 615 ( BP Australia ) and National Australia Bank v. Federal Commissioner of Taxation (1997) 80 FCR 352; 97 ATC 5153; (1997) 37 ATR 378 ( NAB ). In BP Australia the company claimed deductions for amounts paid as trade ties to service station proprietors so that those proprietors would deal exclusively in its products for a fixed period. The payments were calculated by reference to expected sales by the service stations. The Privy Council held that the real object of the outgoing was not the tied network but the orders that would flow from it. The tie agreements were a temporary solution that were of a recurrent nature. The advantage sought was the promotion of sales by up to date marketing methods which had become necessary and the expenditure was therefore deductible as being on revenue, rather than capital, account. In NAB the bank was required to pay a lump sum (but further amounts were payable if loan quotas were exceeded) to the Commonwealth in order to have the exclusive right to make advances to Australian Defence Force personnel for a 15 year period. The Full Federal Court held that the payment was of a revenue nature as it did not enlarge the framework within which the Bank carried on its activities. Rather, it was incurred as part of the process by which the Bank operated to obtain regular returns by means of regular outlay. The Full Court determined that the payment was in the nature of a marketing expense and had a revenue rather than capital aspect. Unlike the BP Australia and NAB cases, it could not be said the advantage sought by the taxpayer in this instance was in the nature of marketing. The expenditure outlaid by the taxpayer for a single lump sum payment on each acquisition served to enlarge its operations by increasing its market share and removing competitors, and not the process by which it operated to obtain regular returns by regular outlay. In L D Nathan & Co Ltd v. IRC (NZ) (1970) ATR 810 and Commissioner of Inland Revenue v. L. D. Nathan & Co. Ltd. (1971) 2 ATR 503, [1972] NZLR 209 (Court of appeal (NZ)), the taxpayer purchased the business of a competitor and sought to claim a deduction in respect of identified amounts paid under the purchase agreement for the list of their competitor's customers. The New Zealand Court of Appeal, relying on the authority of the Australian cases, Sun Newspapers and BP Australia , held that the cost was capital in nature. In determining whether an item of expenditure falls to be capital or revenue no one single factor is determinative. Rather, all relevant factors must be considered collectively. After examining all the relevant factors it is considered that the expenditure in acquiring the subscription bases of other ISPs is capital in nature.", "Date_of_Decision": "27 April 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/16 | Taxation Ruling TR 2000/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/621", "Subject_References": "Capital expenditure Deductions & expenses", "Case_References": "Sun Newspapers v FCT (1938) 61 CLR 337 (1938) 5 ATD 87 (1938) 1 AITR 403", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004656", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 1999/16 Taxation Ruling TR 2000/1 | Keywords Capital expenditure Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2004/657", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction: tax indemnity payment", "Issue": "Is a deduction allowable under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for payments made under a tax indemnity clause in a contract for sale of shares in the year in which the expenditure was incurred?", "Decision": "No. A deduction is not allowable under section 8-1 of the ITAA 1997 as the payments are capital or of a capital nature.", "Facts": "The taxpayer agreed to sell its shares in a wholly owned subsidiary to an unrelated company during the 1997-98 income year. In the Sale Agreement the taxpayer agreed to indemnify the purchaser for any tax relating to the period the subsidiary was owned by the taxpayer and for which the purchaser become liable over a period of 6 years from the date of the Sale Agreement. Several years after the subsidiary was sold, the subsidiary became liable to tax as a result of income tax audits relating to the period during which it was owned by the taxpayer. In the 2000-01 and 2001-02 income years, the purchaser acted on the indemnity clause and the taxpayer had to pay amounts to the purchaser in respect of tax paid by the subsidiary as a result of the income tax audits.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earnings of exempt income. The Full Federal Court in Federal Commissioner of Taxation v. Email Ltd [1999] FCA 1177; (1999) 42 ATR 698; 99 ATC 4868 ( Email ) considered the deductibility of payments made pursuant to indemnities. In that case a holding company, in the seven years following the sale of shares by its subsidiary, paid amounts under indemnities it had granted on the sale of the shares. The Court held that the indemnity payments were not deductible. The occasion for the outgoings was found in the giving of the indemnity, not directly in the outgoings themselves. The immediate advantage which the indemnity was calculated to effect was the sale of the shares at the maximum price possible. The advantage to the taxpayer was an increase in the value of its shares in its subsidiary, which went to the dividend yielding structure of the taxpayer rather than to the process by which the dividends were earned and was thus of a capital nature. In the circumstances here the outgoings were paid under the tax indemnity given by the taxpayer to the purchaser and which was contained in the Sale Agreement. It is considered that the decision in Email applies to these circumstances. The occasion for the outgoings is to be found in the giving of the tax indemnity which goes to achieving the sale and enhancing the sale price of the shares in the subsidiary. Accordingly the amounts are outgoings of capital or of a capital nature and are not allowable deductions under section 8-1 of the ITAA 1997.", "Date_of_Decision": "8 June 2004", "Year_of_Income": "year ended 30 June 2001 year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions Indemnity", "Case_References": "Federal Commissioner of Taxation v. Email Ltd [1999] FCA 1177 (1999) 42 ATR 698 99 ATC 4868", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004657", "Unmatched_Content": "Keywords Deductions Indemnity"}
{"ATO_ID_Number": "ATO ID 2004/795", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: deductibility of hydraulic fracture stimulation", "Issue": "Is the taxpayer entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), for the expenses incurred in performing a hydraulic fracture stimulation in a hydrocarbon production well, where it is the first fracture stimulation undertaken at that production zone within the well, for the purpose of initiating or increasing the flow of gas from a hydrocarbon bearing formation?", "Decision": "No. The taxpayer is not entitled to a deduction, under section 8-1 of the ITAA 1997, for the expenses incurred in performing a hydraulic fracture stimulation in a hydrocarbon production well, where it is the first fracture stimulation undertaken at that production zone within the well, for the purpose of initiating or increasing the flow of gas from a hydrocarbon bearing formation. Such expenses are capital in nature.", "Facts": "The taxpayer conducts a business of oil and gas exploration and production. The taxpayer has engaged a contractor to perform hydraulic fracture stimulation in hydrocarbon production wells owned by the taxpayer on a number of occasions. The hydraulic fracture stimulations performed resulted in either an increase in the rate of flow of gas from the hydrocarbon bearing formation in the production zone where the hydraulic fracture stimulation occurred, or resulted in the taxpayer gaining access to a hydrocarbon bearing formation that was previously inaccessible from that hydrocarbon production well.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under the section where the loss or outgoing is of a capital, private or domestic nature, or is incurred in producing exempt income, or where another provision prevents a deduction. The expenses incurred in undertaking hydraulic fracture stimulation on a hydrocarbon production well are clearly incurred in the gaining or producing of assessable income from the hydrocarbon mining business. The only relevant question then in determining whether a deduction is allowed under section 8-1 of the ITAA 1997 is whether the costs of undertaking hydraulic fracture stimulation are of a capital nature. The decision of the High Court in Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337 (Sun Newspapers Case) is a leading authority on the distinction between revenue and capital expenditure. The general rule is found in the frequently quoted statement of Dixon J at 359 where he said: 'The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure, or organisation set up or established for the earning of profit and the process by which such an organisation operates to obtain regular returns by means of regular outlay,...' Dixon J further commented at 360: 'In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue.' In the Sun Newspapers Case Dixon J stated at 363 that there are three matters to consider when deciding whether an expense is revenue or capital in nature. These are: In a more recent decision the High Court in G P International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124 added emphasis to the first point above. The court stated at 137: ...for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. In relation to the character of the advantage sought by the outgoing it is necessary to examine whether the expenditure secures an enduring benefit for the business. This test was outlined in British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205, by Viscount Cave at 213-214: But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. In the case of hydraulic fracture stimulation performed for the first time at any given production zone in a hydrocarbon production well there is an enduring benefit obtained from the performance of the hydraulic fracture stimulation. The enduring benefit obtained is the increase in efficiency that results from the fracturing process or the ability to access new hydrocarbon bearing formations that cannot be accessed without hydraulic fracture stimulation. The performance of hydraulic fracture stimulation improves the profit making structure of the operation as a whole by either increasing the flow of gas from formations currently accessed, and thereby increasing the efficiency and profitability of these formations, or by accessing new gas bearing formations. This is consistent with the statement of Lockhart J in Commissioner of Taxation v. Ampol Exploration Limited (1986) 13 FCR 545; 86 ATC 4859; (1986) 18 ATR 102 ( Ampol Exploration Case ) where he stated at FCR 562; ATC 4872; ATR 119: Where expenses are incurred in establishing, developing, extending or rejuvenating a mine, they will generally be of a capital nature since they are incurred for the purpose of bringing a capital asset into existence or enhancing it. The operation of hydraulic fracture stimulation falls within the categories spoken of by Lockhart J as the purpose of the operation is to extend or otherwise enhance the mine. This is also the case where multiple hydraulic fracture stimulations are performed at the start of a well's production life. This is because the character of the advantage sought does not change simply because multiple hydraulic fracture stimulations are necessary to achieve what may take only a single hydraulic fracture stimulation in another well. As the costs of performing hydraulic fracture stimulation are of a capital nature they will not be deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "27 August 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/36", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/796 | ATO ID 2004/797", "Subject_References": "Exploration or prospecting Minerals, petroleum or mining operations Mining & petroleum Mining operations", "Case_References": "Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004795", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/36 | Keywords Exploration or prospecting Minerals, petroleum or mining operations Mining & petroleum Mining operations"}
{"ATO_ID_Number": "ATO ID 2004/797", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: deductibility of repeat hydraulic fracture stimulation resulting in increased gas flow or access to other formations", "Issue": "Is the taxpayer entitled to a deduction, under either section 8-1 or section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997), for expenses incurred in performing a repeat hydraulic fracture stimulation, at the same production zone within a hydrocarbon production well where a hydraulic fracture stimulation has previously been undertaken, where the procedure increases the rate of gas flow beyond what was achieved after the first hydraulic fracture stimulation or allows access to hydrocarbon bearing formations, or other gas reserves, that were not accessible after the first hydraulic fracture stimulation?", "Decision": "No. The taxpayer is not entitled to a deduction, under either section 8-1 or section 25-10 of the ITAA 1997, for expenses incurred in performing a repeat hydraulic fracture stimulation, at the same production zone within a hydrocarbon production well where a hydraulic fracture stimulation has previously been undertaken, where the procedure increases the rate of gas flow beyond what was achieved after the first hydraulic fracture stimulation or allows access to hydrocarbon bearing formations, or other gas reserves, that were not accessible after the first hydraulic fracture stimulation. Such expenses are capital in nature.", "Facts": "The taxpayer conducts a business of oil and gas exploration and production. The taxpayer has previously performed hydraulic fracture stimulation at a certain production zone within a hydrocarbon production well. Since that hydraulic fracture stimulation was performed the fractures in the hydrocarbon bearing formation have become blocked and the rate of flow of gas from that formation into the well has dropped. The taxpayer engages a contractor to perform a repeat hydraulic fracture stimulation in the same production zone as the previous hydraulic fracture stimulation. The repeat hydraulic fracture stimulation results in the rate of flow of gas (from the hydrocarbon bearing formation into the well) increasing beyond the levels achieved after the initial hydraulic fracture stimulation. The repeat hydraulic fracture stimulation also results in access to gas reserves that were inaccessible following the initial hydraulic fracture stimulation.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under the section where the loss or outgoing is of a capital, private or domestic nature, or is incurred in producing exempt income, or where another provision prevents a deduction. The expenses incurred in undertaking hydraulic fracture stimulation on a hydrocarbon production well are clearly incurred in the gaining or producing of assessable income from the hydrocarbon mining business. The only relevant question then in determining whether a deduction is allowed under section 8-1 of the ITAA 1997 is whether the costs of undertaking hydraulic fracture stimulation are of a capital nature. The decision of the High Court in Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337 ( Sun Newspapers Case ) is a leading authority on the distinction between revenue and capital expenditure. The general rule is found in the frequently quoted statement of Dixon J at 359 where he said: The distinction between expenditure and outgoings on revenue account and on capital account corresponds with the distinction between the business entity, structure, or organisation set up or established for the earning of profit and the process by which such an organisation operates to obtain regular returns by means of regular outlay,... Dixon J further commented at 360: In the same way expenditure and outlay upon establishing, replacing and enlarging the profit-yielding subject may in a general way appear to be of a nature entirely different from the continual flow of working expenses which are or ought to be supplied continually out of the returns or revenue. In the Sun Newspapers Case Dixon J stated at 363 that there are three matters to consider when deciding whether an expense is revenue or capital in nature. These are: In a more recent decision the High Court in G P International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124 added emphasis to the first point above. The court stated at 137: ...for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. In relation to the character of the advantage sought by the outgoing it is necessary to examine whether the expenditure secures an enduring benefit for the business. This test was outlined in British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205, by Viscount Cave at 213-214: But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. There will be an enduring benefit obtained from a repeat hydraulic fracture stimulation that is performed at the same production zone within a hydrocarbon production well where a hydraulic fracture stimulation has previously been undertaken and the procedure increases the rate of gas flow beyond what was achieved after the first fracture stimulation or allows access to hydrocarbon bearing formations, or other gas reserves, that were not accessible after the first fracture stimulation. The enduring benefit obtained is the increase in efficiency that results from the fracturing process or the ability to access new hydrocarbon bearing formations that were not accessed by the previous hydraulic fracture stimulation. The performance of a repeat hydraulic fracture stimulation in this situation improves the profit making structure of the operation as a whole by either increasing the flow of gas from formations currently accessed, and thereby increasing the efficiency and profitability of these formations, or by accessing new gas bearing formations. This is consistent with the statement of Lockhart J in Commissioner of Taxation v. Ampol Exploration Limited (1986) 13 FCR 545; 86 ATC 4859; (1986) 18 ATR 102 (Ampol Exploration Case) where he stated at FCR 562; ATC 4872; ATR 119: Where expenses are incurred in establishing, developing, extending or rejuvenating a mine, they will generally be of a capital nature since they are incurred for the purpose of bringing a capital asset into existence or enhancing it. The operation of the repeat hydraulic fracture stimulation in this situation falls within the categories spoken of by Lockhart J as the result of the operation is the extension or otherwise enhancement of the mine. As the costs of performing a repeat hydraulic fracture stimulation in this situation are of a capital nature they will not be deductible under section 8-1 of the ITAA 1997. Section 25-10 of the ITAA 1997 allows a deduction for expenditure incurred in making repairs to an asset, unless the expense is capital in nature. Whether a particular expense qualifies as a repair is considered by Taxation Ruling TR 97/23. That ruling states at paragraph 15: Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. In the High Court decision in W Thomas & Co Pty Ltd v. FC of T (1965) 115 CLR 58 Windeyer J commented at 72 that: Repair involves a restoration of a thing to a condition it formerly had without changing its character. In the current situation the hydrocarbon production well has not been repaired for the purposes of section 25-10 of the ITAA 1997. This is because the procedure resulted in more than a mere restoration of the well's efficiency of function to its former condition, rather the well has been improved due to new gas bearing formations becoming accessible and the rate of gas flow increasing beyond what was achieved following the initial hydraulic fracture stimulation. As outlined above, in relation to section 8-1 of the ITAA 1997, the expenses incurred in performing a repeat hydraulic fracture stimulation in the current situation are capital in nature. They are therefore excluded from deductibility under section 25-10 of the ITAA 1997.", "Date_of_Decision": "27 August 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 25-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/36 | Taxation Ruling TR 97/23", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/795 | ATO ID 2004/796", "Subject_References": "Exploration or prospecting Minerals, petroleum or mining operations Mining & petroleum Mining operations", "Case_References": "Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004797", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/36 Taxation Ruling TR 97/23 | Keywords Exploration or prospecting Minerals, petroleum or mining operations Mining & petroleum Mining operations"}
{"ATO_ID_Number": "ATO ID 2003/271", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reimbursement of redundancy payments under contract for sale of a business", "Issue": "Is an amount paid by the taxpayer to the former owner of a business to reimburse the cost of redundancy payments made by the former owner an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An amount paid by the taxpayer to the former owner of a business to reimburse the cost of redundancy payments made by the former owner is not an allowable deduction under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer and related companies acquired a business from its former owner. Under the terms of the contract of sale and in order to ensure the smooth transition of the operation of the business to the taxpayer and related companies, the former owner of the business agreed to provide the services of their employees to the taxpayer on an interim basis. The taxpayer did not enter into a contract of employment with the employees of the former owner. Under the contract of sale both the taxpayer and the former owner were required to take all reasonable steps to convince those employees to accept an offer of permanent employment with the taxpayer. The former owner was also required to provide work, as far as practical, to those employees who did not accept the offer of permanent employment with the taxpayer. Where employees did not accept the offer of permanent employment with the taxpayer and were unable to be placed in other areas of the former owner's business they were entitled to receive a redundancy payment. Under the terms of the contract of sale the taxpayer agreed to reimburse the former owner for the cost of those redundancies, up to an agreed monetary limit. The taxpayer agreed to this term in order to facilitate securing the services of the former owner's employees for the interim period. This payment (the redundancy amount) had no direct connection with, and was not a payment for, the provision of the services provided by the employees of the previous owner. The taxpayer paid the redundancy amount to the former owner.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income or in carrying on a business for that purpose, except to the extent the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The taxpayer and related companies acquired a business from the former owner and any costs associated with the acquisition of that business or the restructure of that business would generally be considered capital in nature rather than costs of running or operating that business ( Associated Newspapers Ltd & Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403). The redundancy amount paid by the taxpayer to the former owner was to subsidise the previous owner's costs in transferring the business to the taxpayer. The taxpayer at no time assumed the liability to make the redundancy payments to the former owner's employees. Nor did the former owner assign such liability to the taxpayer. The payment of the redundancy amount to the former owner does not constitute a payment made in the course of carrying on the taxpayer's new business. The decision to provide reimbursement of employee redundancy payments to the former owner was made and carried out as part of the purchase and restructure of the business which the taxpayer and related companies proposed to carry on. The decision to implement the acquisition of the business in this particular manner, and to pay the redundancy amount to the former owner, was part of the restructure of the business acquired by the taxpayer and related companies rather than an ongoing expense incurred in running that business ( British Insulated & Helsby Cables v. Atherton [1926] AC 205). The payment is not an allowable deduction as there is no nexus between the payment of the redundancy amount and the ongoing business activities of the taxpayer. The redundancy amount was a payment made with regard to the restructure of the former owner's business activities and the new business structure of the taxpayer and related companies. This payment was in the nature of a capital expense. Accordingly it is not an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "12 December 2002", "Year_of_Income": "Period from 1 January 2001 to 31 December 2001 Period from 1 January 2002 to 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Eligible termination payment Redundancy and retrenchment", "Case_References": "Associated Newspapers Ltd & Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337 (1938) 5 ATD 87", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003271", "Unmatched_Content": "Keywords Capital expenditure Eligible termination payment Redundancy and retrenchment"}
{"ATO_ID_Number": "ATO ID 2003/797", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of outgoing on novation of hedge contracts", "Issue": "Does a payment made by a taxpayer in respect of novation of hedge contracts which were entered into to set the future sale price of a commodity produced by the taxpayer's group members give rise to an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The payment made by the taxpayer on novation of the hedge contracts is deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer entered into a number of contracts in order to hedge against price fluctuations of a commodity produced by the taxpayer's group members. The taxpayer was in the business of providing treasury activities for its group members. The taxpayer had a history of hedging its group members' production through the use of hedge contracts. In accordance with the taxpayer's business practices, the taxpayer can either buy the underlying commodity at the market price from its group members and deliver the commodity into the hedge contracts, or cash settle the commodity hedging contracts. The taxpayer novated the hedge contracts to another entity (the 'New Party'). Consequently, the New Party took on equivalent rights and obligations in relation to those hedge contracts. The hedge contracts were 'out of the money', as the price at which the taxpayer was to deliver the underlying commodity (the 'Contract Price') was less than the market price of the underlying commodity as at the date of novation. The taxpayer made a payment to the New Party being the difference between the Contract Price and the market price of the underlying commodity as at the date of novation. After the novation transactions there were no contractual obligations in force that precluded the taxpayer from entering into hedge contracts in the future. Further, after the novation, the taxpayer continued to provide other treasury functions to group members.", "Reasons_for_Decision": "Summary: For a payment to be an allowable deduction under section 8-1 of the ITAA 1997, the payment must be made in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income, and notwithstanding this, the payment must not be an outgoing of capital, or of a capital nature. | Detailed Reasoning - Was the payment necessarily incurred in carrying on a business for the purpose of producing assessable income?: Entering into the hedge contracts was a part of the taxpayer's normal business operations. The elimination of the hedging contracts through novation meant that the taxpayer was no longer required to settle the contracts for less than the market price of the commodity, or alternatively buy the commodity from its group members at the market price which was higher than the Contract Price receivable under the hedge contracts. That is, the payment was designed to eliminate or minimise a threatened and recurrent drain on the taxpayer's assessable income. ( W Nevill & Co Ltd v. Federal Commissioner of Taxation (1937) 56 CLR 29; 4 ATD 187 (1937) 1 AITR 67; Metals Exploration Ltd v. Federal Commission of Taxation 86 ATC 4505; (1986) 17 ATR 786) Having regard to the above, it is considered that the payment made was necessarily incurred by the taxpayer in carrying on its business. | Detailed Reasoning - Was the outgoing of capital or of a capital nature?: Notwithstanding the above, if the payment on novation of the hedge contracts was of capital or of a capital nature it would not be deductible in accordance with paragraph 8-1(2)(a) of the ITAA 1997. The factors to consider when determining whether an outgoing is of capital or of a capital nature have been established by case law, (in particular Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; 5 ATD 23; (1938) 1 AITR 403; Foley Bros Pty Limited v. Federal Commissioner of Taxation (1965) 13 ATD 562; (1965) 9 AITR 635 and Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; 8 ATD 190; (1946) 3 AITR 436) and include: In the present case, while the expenditure was incurred once-and-for-all (which might point to the outgoing being of capital or of a capital nature), it was directed at dealing with the taxpayer's ordinary business activities of providing the treasury function to its group members, which of itself is a revenue item. The advantage sought by the taxpayer was to rid itself of the obligations under the hedge contracts, which may have resulted in a reduction of its assessable income. Therefore, the character of this advantage is considered to be of a revenue nature. The advantage gained by novation of the hedge contracts did not result in a benefit of an enduring nature, since each hedge contract related to part only of the group's commodity production. In addition, the payment on novation did not alter the profit-yielding structure of the taxpayer's business or the framework in which the taxpayer produced its assessable income, as subsequent to the novation of the hedge contracts, the taxpayer continued to provide a treasury function for group members. Further, the taxpayer was not precluded from entering into commodity hedge contracts in the future. Given the above, the outgoing is not considered to be of capital or of a capital nature. Therefore, a payment made by a taxpayer in respect of novation of hedge contracts which were entered into to set the future sale price of a commodity produced by the taxpayer's group members gives rise to an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "4 August 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Call options Commodity transactions Dealings & transactions Deductions & expenses Financial derivatives Forward rate agreements Forward sales Forward transactions Hedging Incurred Novation Put options", "Case_References": "Foley Brothers Pty Ltd v. FC of T 13 ATD 562 (1965) 9 AITR 635", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003797", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Call options Commodity transactions Dealings & transactions Deductions & expenses Financial derivatives Forward rate agreements Forward sales Forward transactions Hedging Incurred Novation Put options"}
{"ATO_ID_Number": "ATO ID 2003/827", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of long service leave payments after sale of business", "Issue": "Is a taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for payments made to the purchaser of the taxpayer's business in relation to long service leave amounts paid by the purchaser to the taxpayer's previous employees?", "Decision": "No. A taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for payments made to the purchaser of the taxpayer's business in relation to long service leave amounts paid by the purchaser to the taxpayer's previous employees.", "Facts": "The taxpayer had previously carried on a business. The taxpayer sold the business to another party (the purchaser). The taxpayer had no legal liability to make long service payments to their former employees after the sale of their business. The purchaser, as the current employer, was legally liable for the payment of long service leave. The long service leave entitlement was calculated taking into account the employees' previous period of service with the taxpayer. When the business was sold the sale agreement required the taxpayer to deposit a sum of money, equal to the notionally accrued long service leave entitlements of their employees, into their solicitor's trust account. These funds were remitted, from the trust account, to the purchaser if and when the purchaser was obliged to make long service leave payments to the taxpayer's former employees. Payments to the purchaser were made out of the solicitor's trust account a number of years after the business was sold.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. The issue to be considered is whether these payments were incurred by the taxpayer in carrying on their previous business income earning activities. The issue of the deductibility of payments for long service leave made after the sale of a business was considered by the High Court in Federal Commissioner of Taxation v. Foxwood (Tolga) Pty Ltd (1981) 147 CLR 278; 11 ATR 859; (1981) 81 ATC 4261 ( Foxwood Tolga) . In that case the purchaser of a business agreed to take over all the employees from the vendor (the taxpayer) and became liable to pay all their holiday and long service leave payments. Under the Industrial Conciliation and Arbitration Act 1961 (Qld) none of the employees were entitled to be paid for their accrued long service leave on the transfer of the business but each employee's period of service with the vendor would be taken into account in calculating their leave entitlement. The vendor made a payment to the purchaser representing the accrued entitlements of each employee for long service leave and claimed a deduction for this payment. In dealing with the issue of this deduction Gibbs CJ said (at CLR p 286, ATR p 863 ATC p 4264): The effect of the contract for the sale of the business, and the transfer of the services of the employees to the purchaser, was that the taxpayer was not liable, and never could become liable, to pay anything to his former employees in respect of long service leave. ... By this part of the payment the taxpayer made a contribution to assist the purchaser of the business to discharge obligations which would be expected to bind the purchaser in the future. It was not an unreasonable provision to make in a contract for sale of the business. A payment of that kind was not incidental or relevant to the gaining or producing of the taxpayer's income or clearly appropriate to or adapted for that purpose; it was incidental and relevant to the sale of the business. The High Court therefore disallowed the deduction for the payment for accrued long service leave on the basis that the vendor had no liability to pay anything to their former employees. As such, the payment was not incidental or relevant to the carrying on of its business but rather was incidental and relevant to the sale of the business. The taxpayer's circumstances here are similar to those of the vendor's in Foxwood Tolga. The taxpayer had no legal liability to pay long service leave to their former employees. The taxpayer made payments, under the terms of the sale agreement, to assist the purchaser with their liability for long service leave. The payments made were not incidental or relevant to carrying on the taxpayer's previous business activities. Rather they were an incident of, and arose out of the agreement for, the sale of the taxpayer's business. Therefore the payments were not incurred in gaining or producing their assessable income and therefore were not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "25 July 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Long Service Leave", "Case_References": "Federal Commissioner of Taxation v. Foxwood (Tolga) Pty Ltd (1981) 147 CLR 278 (1981) 11 ATR 859 81 ATC 4261", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003827", "Unmatched_Content": "Amendment to clarify topic | Removal of unnecessary comma | Amendment of grammatical error - insertion of apostrophe | Amendment to clarify meaning | Keywords Long Service Leave"}
{"ATO_ID_Number": "ATO ID 2003/896", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Bank branching legislation: the application of section 160ZZZI", "Issue": "Is the taxpayer, a foreign bank (Foreign Parent) entitled to a deduction under section 160ZZZI of Part IIIB of the Income Tax Assessment Act 1936 (ITAA 1936) for a payment made by an Australian branch of the foreign bank (Bank Branch) if the derivative contract or agreement under which the payment is made was first entered into by the bank through its head office or a branch outside Australia?", "Decision": "Yes. Section 160ZZZI of the ITAA 1936 would not operate to deny the taxpayer, a foreign bank, a deduction for what would be an otherwise deductible payment made by its Australian branch under a derivative contract, simply because the derivative contract itself was entered into offshore.", "Facts": "Foreign Parent proposes to move its derivatives book from off-shore to Bank Branch in Australia. The reasons for such a transfer must be accepted as commercially sound by the Tax Office. Whilst Foreign Parent and Bank Branch are both part of the same legal entity, it would be expected that:", "Reasons_for_Decision": "Summary: Part IIIB of the ITAA 1936 may apply to derivative transactions. 'Derivative transaction' is defined in section 160ZZV of the ITAA 1936 as: ...a transaction entered into for the purpose of eliminating, reducing or altering the risk of adverse financial consequences that might result from changes in rates of interest or changes in rates of exchange between currencies, or for the purpose of making a profit from such changes, but does not include a transaction for the provision of finance or a foreign exchange transaction. Section 160ZZZE of the ITAA 1936 recognises inter-branch derivative transactions for Australian tax purposes where the transactions are reflected in the accounting records of an Australian branch. While section 160ZZZE of the ITAA 1936 recognises inter-branch derivative transactions, section 160ZZZI of the ITAA 1936 provides that: any transaction entered into by a foreign bank otherwise than through its Australian branch:....that is a derivative transaction....is to be disregarded for the purpose of determining whether a deduction is allowable to the bank under this Act. Whether a payment or payments made by an Australian branch of a foreign bank can be recognised for tax purposes if the derivative contract or agreement under which they are made was first entered into by the bank through its head office or a branch outside Australia depends on whether the expression 'transaction entered into' as used in section 160ZZV and 160ZZZI of the ITAA 1936, comprehends only the initial entering into of a contract or agreement for the purpose of alleviating or profiting from changes in interest or foreign exchange rates, or whether it comprehends each and every step by which a contract or agreement entered into for that purpose is carried into effect. If the expression has the latter meaning, then it does not follow from the mere fact that a derivative contract is entered into offshore that any subsequent steps transacted through the Australian branch must be disregarded. The word 'transaction' is not defined for the purposes of Part IIIB of the ITAA 1936. Nor is it more generally defined for the purposes of the ITAA 1936 or the Income Tax Assessment Act 1997 . 'Transaction' should therefore take its ordinary meaning. According to the Collins English Dictionary the ordinary meaning of 'transaction' is: something that is transacted, esp. a business deal or negotiation; the act of transacting'. The verb 'to transact' is defined as 'to do, conduct, or negotiate (business, a deal etc). Section 15AA of the Acts Interpretation Act 1901 requires the purpose or object underlying an Act to be preferred to a construction that would not promote that purpose or object. Since the legislative purpose of section 160ZZZI of the ITAA 1936 is not readily apparent from its position within Part IIIB of the ITAA 1936 it is appropriate to have regard to the Explanatory Memorandum accompanying the Bill that inserted Part IIIB of the ITAA 1936. The Memorandum indicates that if a bank does in fact 'incur a cost through its Australian branch' then that cost should not be disregarded because it is a direct cost of the branch rather than an indirect cost requiring attribution to the branch. It follows that section 160ZZZI of the ITAA 1936 should be not be interpreted in such a way that a foreign bank could be denied a deduction for a payment actually made by the Australian branch to a third party. Indeed, to interpret the section that way would be patently unreasonable since; short of opting out of Part IIIB of the ITAA 1936 altogether, there would be no mechanism whereby the bank could avail itself of a deduction for the funds expended. Consistent with this the expression 'transaction entered into ... that is a derivative transaction' in section 160ZZZI of the ITAA 1936 is to be interpreted as referring to each and every payment or receipt made under a derivative contract. On this interpretation, each and every payment made by an Australian branch will be excluded from the operation of section 160ZZZI of the ITAA 1936 on the basis that it is a '[derivative] transaction entered into by [the] foreign bank ... through its Australian branch'. This interpretation of the provision accords with the purposes underlying Part IIIB of the ITAA 1936.", "Date_of_Decision": "24 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 160ZZZI section 160ZZV section 160ZZZE", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign banks Financial derivatives", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003896", "Unmatched_Content": "Keywords Foreign banks Financial derivatives"}
{"ATO_ID_Number": "ATO ID 2003/922", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of payments to credit union members in respect of financial hardship", "Issue": "Is the taxpayer, a credit union within the meaning of subsection 23G(1) of the Income Tax Assessment Act 1936 (ITAA 1936), entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenditure incurred in providing financial assistance to members suffering financial hardship?", "Decision": "No. The payments do not have a sufficient connection to the gaining or producing of the taxpayer's assessable income or the carrying on of the taxpayer's business for the purpose of gaining or producing assessable income within the meaning of section 8-1 of the ITAA 1997.", "Facts": "The taxpayer provides its members with financial, lending and deposit services including various savings and investment account options, insurance, travel services, financial and retirement counselling. The taxpayer's Constitution includes the object of providing grants, programs and services to its Members to assist them to meet their financial, economic and social needs. The Constitution also provides for a Financial Assistance Fund (the fund), which is to be financed from the taxpayer's interest income received from loans and overdrafts during the year. Payments from the fund include financial assistance to hospitalised, sick, poor or needy members of the taxpayer (financial hardship payments). The financial hardship payment is in the form of an unconditional money grant. Payments from the fund are entirely at the discretion of the taxpayer's Board of Directors. The availability of financial hardship payments was published in the taxpayer's Annual Report three years prior to the year in which the deduction is claimed, but not in subsequent years' Annual Reports. The taxpayer characterises these payments as a form of advertising expense.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are incurred in gaining or producing exempt income Under section 8-1 of the ITAA 1997, the deductibility of the payments depends upon the connection between the payments and the gaining or producing of the taxpayer's assessable income, or the carrying on of the taxpayer's business for the purpose of gaining or producing assessable income. Expenditure incurred in advertising and/or marketing is deductible under section 8-1 of the ITAA 1997 to the extent that it sufficiently relates to the production of assessable income or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. In National Australia Bank v. Federal Commissioner of Taxation (1997) 80 FCR 352; 97 ATC 5153; (1997) 37 ATR 378 the Full Federal Court recognised the use of advertising, promotion and marketing strategies in the banking and finance industry, aimed at attracting and maintaining customers. The Court accepted that expenditure with a close nexus with advertising, promotion or marketing is likely to be deductible. Marketing strategies may include sponsorship to raise and broaden a company's profile so that it can continue to attract customers. Through a sponsorship relationship a credit union may become better known, building strong ties with the community. Such involvement may include supporting disadvantaged groups and individuals. In the present case, the financial hardship payments support disadvantaged members. However, assistance is not provided to the community but only to the taxpayer's own members. Nor is there evidence (apart from the brief statement in the earlier year's Annual Report) of the promotion of these payments in order to increase the taxpayer's profile in the community. In assisting members suffering financial hardship, the taxpayer is providing a service to its members consistent with the social responsibility objects of its Constitution. These objects reflect the taxpayer's foundation as a co-operative within an ethnic community. Whilst the payments may also possess an element of promotion or marketing, it is considered that they are more closely connected with the taxpayer's undertaking to its members in its Constitution than in carrying on the taxpayer's income producing business. Such promotion as there is, does not promote the advantages of doing business with the taxpayer, but merely the advantage of membership. Accordingly, the requirements for deductibility under section 8-1 of the ITAA 1997 are not met as the expenses were not incurred in earning the taxpayer's assessable income.", "Date_of_Decision": "28 August 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/923", "Subject_References": "Advertising and promotion expenses Credit unions Financial services industry Financial services industry expenses", "Case_References": "National Australia Bank Ltd v. Federal Commissioner of Taxation (1997) 80 FCR 352 (1997) 37 ATR 378 97 ATC 5153", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003922", "Unmatched_Content": "Keywords Advertising and promotion expenses Credit unions Financial services industry Financial services industry expenses"}
{"ATO_ID_Number": "ATO ID 2003/923", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of payments to credit union members in respect of monetary gifts", "Issue": "Is the taxpayer, a credit union within the meaning of subsection 23G(1) of the Income Tax Assessment Act 1936 (ITAA 1936), entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenditure incurred in providing monetary gifts on the occasion of the birth of a baby to a member, death of a member and as a subsidy for the preparation of a will?", "Decision": "No. The payments do not have a sufficient connection to the gaining or producing of the taxpayer's assessable income or the carrying on of the taxpayer's business for the purpose of gaining or producing assessable income within the meaning of section 8-1 of the ITAA 1997.", "Facts": "The taxpayer provides its members with financial, lending and deposit services including various savings and investment account options, insurance, travel services, financial and retirement counselling. The taxpayer's Constitution includes the object of providing grants, programs and services to its Members to assist them to meet their financial, economic and social needs. The Constitution also provides for a Financial Assistance Fund (the fund), which is to be financed from the taxpayer's interest income received from loans and overdrafts during the year. Payments from the fund include lump sum amounts on the occasion of the birth of a baby to a member, death of a member and as a subsidy for the preparation of a will (birth, death and will preparation payments). Various policy documents describe the purpose of the birth, death and will preparation payments as promoting the goodwill of the taxpayer in the community; promoting the taxpayer's products and services and expansion of the membership base. Payments from the fund are at the discretion of the taxpayer's Board of Directors. The birth, death and will preparation payments are in the form of a lump sum. The availability of these payments is disclosed in the taxpayer's Annual Reports. The taxpayer states that they are also publicised in the taxpayer's Official Newsletter and at each Annual General Meeting. The taxpayer characterises these payments as a form of advertising expense.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are incurred in gaining or producing exempt income Under section 8-1 of the ITAA 1997, the deductibility of the payments depends upon the connection between the payments and the gaining or producing of the taxpayer's assessable income, or the carrying on of the taxpayer's business for the purpose of gaining or producing assessable income. Expenditure incurred in advertising and/or marketing is deductible under section 8-1 of the ITAA 1997 to the extent that it sufficiently relates to the production of assessable income or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. In National Australia Bank v. Federal Commissioner of Taxation (1997) 80 FCR 352; 97 ATC 5153; (1997) 37 ATR 378 ( National Australia Bank Case ) the Full Federal Court recognised the use of advertising, promotion and marketing strategies in the banking and finance industry, aimed at attracting and maintaining customers. The Court accepted that expenditure with a close nexus with advertising, promotion or marketing is likely to be deductible. The Full Federal Court in Federal Commissioner of Taxation v. Manchester Unity IOOF (1994) 50 FCR 85; 94 ATC 4309; (1994) 28 ATR 251 acknowledged that advertising of particular products designed to attract members has a spin-off effect on other products. In contrast, the birth, death and will preparation payments do not promote a specific income-producing product. However, like sponsorship arrangements, they could potentially raise the profile of the taxpayer amongst recipients of the payments and those who hear about them. In the National Australia Bank Case , the bank purchased from the Commonwealth government the exclusive right to provide Commonwealth subsidised loans to Australian Defence Force personnel for a period of 15 years. The payment to the Commonwealth was considered to be a marketing expense since it secured 'the practical certainty that most of those ADF personnel who qualified for a subsidy and wanted a home loan would become customers of the Bank'. By granting loans to the ADF personnel the bank also expected to gain revenue from other products provided to the home loan customers. The Full Federal Court found that the payment was made as part of a marketing strategy implemented in the course of conducting the bank's business of selling home loans and other products which generated its interest income. The National Australia Bank made a payment to acquire a specific customer base for a specific product. In the present case, the payments are unrelated to any of the taxpayer's products or services and are made to existing members who are not necessarily customers. The availability of the subsidy in the National Australia Bank Case secured a 'practical certainty' that the bank would obtain custom as a result of the payment for the right. There is no similar expectation here that any of the members receiving payments would become customers of the taxpayer as a result of receiving a birth, death or will preparation payment. An early case recognised that income-producing benefits could flow from non-specific promotional expenditure. In Colonial Mutual Life Assurance Society Ltd v. Federal Commissioner of Taxation (1933) 49 CLR 171; (1933) 2 ATD 308 the taxpayer (CML), a life insurance society, claimed a deduction for expenditure on a 'welfare service' under which CML voluntarily provided a nursing service for assured persons and issued pamphlets on matters relating to health. Starke J found that the expenditure was exclusively incurred in gaining life insurance premium income. However, the deduction was denied because premium income was not taxable income within the meaning of paragraph 20(5)(a) of the Income Tax Assessment Act 1922 . The object of the welfare service in CML was to attract life insurance business to the company; hence the service was available to 'assured persons', that is, persons holding policies with the company. Consequently, had the premiums been assessable income, there would have been a nexus between the expenditure and the derivation of income. The present case is distinguishable in that the payments are primarily directed at attracting membership. Eligibility for a birth, death or will payment is determined on the basis of membership, regardless of whether the member might also be a customer or future customer. Accordingly, the payments do not reveal a connection with the production of assessable income. Although policy documents declare a purpose of promoting the goodwill, products and services of the taxpayer, there is little evidence of the promotion of the payments from the fund in the community. The payments are mentioned without detail in the Annual Reports and member newsletters. Presumably some promotion would also occur by word of mouth. Such promotion as there is, does not promote the advantages of doing business with the taxpayer but merely the advantage of membership. Accordingly, the requirements for deductibility under section 8-1 of the ITAA 1997 are not met as the expenses were not incurred in earning the taxpayer's assessable income.", "Date_of_Decision": "28 August 2003", "Year_of_Income": "Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/922", "Subject_References": "Advertising and promotion expenses Credit unions Financial services industry Financial services industry expenses", "Case_References": "National Australia Bank Ltd v. Federal Commissioner of Taxation (1997) 80 FCR 352 (1997) 37 ATR 378 97 ATC 5153", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003923", "Unmatched_Content": "Keywords Advertising and promotion expenses Credit unions Financial services industry Financial services industry expenses"}
{"ATO_ID_Number": "ATO ID 2003/1109", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction for Reinsurance Premiums", "Issue": "Is a general insurance company entitled to a deduction under section 321-25 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) for a reinsurance premium paid during a year of income?", "Decision": "No. A general insurance company is not entitled to a deduction under section 321-25 of Schedule 2J to the ITAA 1936 for a reinsurance premium paid during a year of income.", "Facts": "A general insurance company paid a reinsurance premium under a reinsurance policy during the year. The reinsurance policy provides that the reinsurer will indemnify the general insurance company for claims paid up to an agreed amount.", "Reasons_for_Decision": "Summary: Section 321-25 of the ITAA 1936 provides that a general insurance company can deduct amounts paid during the year of income in respect of claims under general insurance policies. The phrase 'in respect of' denotes a relationship or connection between two things or subject matters. In Technical Products Pty. Ltd. v. State Government Insurance (Qld) (1989) 167 CLR 45 at 47, Brennan, Deane and Gaudron JJ stated: The words \"in respect of\" have a very wide meaning. Indeed, they have a chameleon-like quality in that they commonly reflect the context in which they appear ... That nexus will not, however, exist unless there be some discernible and rational link... In a separate judgment, Dawson J at CLR 51 stated: The words \"in respect of\" require some material connection between the two matters referred to ... a merely coincidental or extraneous connection between those two things can hardly be sufficient... Accordingly, an amount is paid 'in respect of claims' under general insurance policies where, in the context in which section 321-25 of the ITAA 1936 appears, there is a discernible and rational link, or a sufficient nexus or material connection between the expense and claims under general insurance policies. Interpreting a phrase in the context in which it appears was discussed in Cooper Brookes (Wollongong) Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR 297; 81 ATC 4292; (1981) 11 ATR 949. Gibbs CJ stated, 'Of course, no part of a statute can be considered in isolation from its context - the whole must be considered.' Applying this principle, section 321-25 of the ITAA 1936 must be read in the context of Subdivision 321-A of the ITAA 1936. Accordingly, section 321-25 of the ITAA 1936 must be read in conjunction with sections 321-10, 321-15 and 321-20 of the ITAA 1936. Section 321-15 of the ITAA 1936 allows a deduction to a general insurance company for the value of the excess of the outstanding claims liability for the current income year over the value of the previous year's outstanding claims liability. Where the current year's value of outstanding claims liability is less than the value of the previous year's liability, section 321-10 of the ITAA 1936 includes that difference in the general insurance company's assessable income. The method for calculating the outstanding claims liability is provided for under section 321-20 of the ITAA 1936. Subparagraphs 321-20(a)(i) and 321-20(a)(ii) of the ITAA 1936 require that the value of outstanding claims liability, at the end of the year of income, is to be based on proper and reasonable estimates of what is appropriate to set aside and invest in order to meet the liabilities for outstanding claims and direct settlement costs associated with those outstanding claims. When some part of the outstanding claims liability ceases to be outstanding because that part is paid, section 321-25 of the ITAA 1936 operates to allow a general insurance company a deduction for that amount. The overall effect of section 321-25 of the ITAA 1936 is to allow the nominal value of that liability at the time of settlement and discharge. The interaction of sections 321-10, 321-15 and 321-25 of the ITAA 1936 requires that the same expense items be used in arriving at the outstanding claims liability value and the amount paid in respect of claims under general insurance policies. Guided by section 321-20 of the ITAA 1936, costs directly associated with the settlement and payment of claims are considered to be amounts paid in respect of claims under general insurance policies for the purpose of section 321-25 of the ITAA 1936. These expense items have a material, discernible and rational connection to claims under general insurance policies. Although the ultimate benefit to the general insurance company from the reinsurance premium is the receipt of recoveries to be used to meet the payment of claims, it cannot be said that the reinsurance premium was paid in respect of the settlement and discharge of those claims. The link between the reinsurance premium and the claim is too tenuous and distant to be regarded as being a material, discernible and rational connection. Accordingly, the reinsurance premium is not deductible under section 321-25 of the ITAA 1936. Note: Although the reinsurance premium is not deductible under section 321-25 of the ITAA 1936, it may, subject to satisfying the tests in section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), be deductible under that provision. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Section 321-20 of the ITAA 1997 has, however, been clarified to include reference to section 148(1) of the ITAA 1936, which relates to reinsurance with non-residents. Therefore, from 1 July 2010, all references to sections 321-10 to 321-25 of the ITAA 1936 should be read as referring to Sections 321-10 to 321-25 of the ITAA 1997.", "Date_of_Decision": "3 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 148(1) section 321-10 section 321-15 section 321-20 subparagraph 321-20(a)(i) subparagraph 321-20(a)(ii) section 321-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "General insurance Reinsurance & reinsurers", "Case_References": "Technical Products Pty. Ltd. v. State Government Insurance Office (Qld) (1989) 167 CLR 45", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031109", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2002/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of Damages Payment", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a damages payment, paid by the taxpayer in a discrimination case?", "Decision": "No. The taxpayer is not entitled to claim a deduction for the damages payment under section 8-1 of the ITAA 1997 as these expenses were not incurred in relation to the gaining or producing of assessable income.", "Facts": "The taxpayer was the proprietor of a service business. The taxpayer personally refused service to a group of people. This group then made a claim of discrimination to the Anti-Discrimination Tribunal and sought damages compensation. In its decision, the Tribunal found that the taxpayer had personally discriminated. It ordered that the taxpayer pay the affected individuals of the group an amount for damages compensation.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the loss or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income. The refusal of service did not arise from the carrying on of the taxpayer's business, which is to provide service to patrons within the constraints of the law. This situation is distinguished from that in the Herald & Weekly Times Ltd v. Federal Commissioner of Taxation (1932-33) 48 CLR 113; (1932) 39 ALR 46; (1932) 6 ALJR 314; [1933] VLR 112; 2 ATD 169 where the need to pay damages arose directly from the taxpayer's income producing activity. The compensation for damages payment will not be deductible as it does not satisfy subsection 8-1 of the ITAA 1997.", "Date_of_Decision": "12 December 2001", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Compensation expenses", "Case_References": "Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932-33) 48 CLR 113 39 ALR 46 6 ALJR 314 [1933] VLR 112 2 ATD 169", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200263", "Unmatched_Content": "Keywords Deductions & expenses Compensation expenses"}
{"ATO_ID_Number": "ATO ID 2002/84", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Boat as an office", "Issue": "Is a taxpayer able to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses relating to a boat used as an office.", "Decision": "No. The taxpayer is not able to claim a deduction under section 8-1 of the ITAA 1997 for expenses relating to a boat used as an office.", "Facts": "The taxpayer purchased a boat and uses it as an office and took it to some work sites. The taxpayer is claiming expenses relating to the acquisition and maintenance of the boat.", "Reasons_for_Decision": "Summary: Section 26-50 of the ITAA 1997 states that any loss or outgoing in relation to the acquisition, retention, ownership of, rights, or maintenance of a boat is not an allowable deduction. However, subsection 26-50(3) of the ITAA 1997 does not stop you deducting a loss or outgoing for a leisure facility if at all times in the income year: None of the above criteria apply to the taxpayer's situation. The use of the boat was at times convenient but it was not essential for the efficient conduct of the business. In Sinclair v. FC of T 2001 ATC 2092; (2000) 47 ATR 1001 it was considered that a business could have been carried out with equal efficiency based in another location rather than on a boat. Therefore the expenses relating to the boat are not deductible because of the operation of section 26-50 of the ITAA 1997.", "Date_of_Decision": "26 November 2001", "Year_of_Income": "Year ended 30 June 1996 Year ended 30 June 1997 Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 26-50 subsection 26-50(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Leisure & recreational facility expenses Ships & boats", "Case_References": "Sinclair v. FC of T 2001 ATC 2092 47 ATR 1001", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200284", "Unmatched_Content": "Replaced subsection 26-50(5) of the ITAA 1997 with subsection 26-50(3) of the ITAA 1997 | Partly rewritten for clarification | Keywords Deductions & expenses Leisure & recreational facility expenses Ships & boats"}
{"ATO_ID_Number": "ATO ID 2002/208", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of visa expenses - temporary business visa to remain in Australia", "Issue": "Is a taxpayer entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in applying for a visa to remain in Australia?", "Decision": "No. The taxpayer is not entitled to claim a deduction under section 8-1 of the ITAA 1997 for expenses incurred in applying for a visa to remain in Australia because the expense was not incurred in gaining or producing assessable income.", "Facts": "The taxpayer arrived and remained legally in Australia on a visa. The visa was conditional that certain requirements were met. The taxpayer's circumstances changed and the conditions on the visa were not satisfied. The taxpayer's options were to: Soon after arrival in Australia the taxpayer commenced employment as an employee. The employer agreed to sponsor the taxpayer by providing employment for the taxpayer to stay in Australia as a prerequisite to a further visa application. The taxpayer sought to remain in Australia and was successful in obtaining a temporary business visa from the Department of Immigration and Multicultural Affairs. The taxpayer incurred expenses (legal expenses, labour market testing, medical certificate, etc) in obtaining the temporary business visa.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 broadly allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature. The courts have considered the meaning of 'incurred in gaining or producing the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words \"incurred in gaining or producing assessable income\" mean in the course of gaining or producing such income.' The expenditure must therefore be related to the production of assessable income. The purpose of obtaining the temporary business visa was to allow the taxpayer to live in Australia rather than earn assessable income as an employee. Alternatively, the cost of making application for a temporary business visa is considered private in nature and not deductible under section 8-1 of the ITAA 1997 because the purpose for applying for a temporary business visa was for the taxpayer to remain legally in Australia. Accordingly, the expenses for applying for the temporary business visa are not deductible under section 8-1 of the ITAA 1997 because they were not incurred in gaining or producing assessable income and are also private in nature.", "Date_of_Decision": "5 October 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Work related expenses", "Case_References": "Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation 78 CLR 47 56 ALR 785 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002208", "Unmatched_Content": "Reason for decision & Facts | Keywords Deductions & expenses Work related expenses"}
{"ATO_ID_Number": "ATO ID 2002/861", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Whether repayment of monies loaned by Government to the taxpayer will be an allowable deduction?", "Issue": "Whether funds applied by a Co-operative company towards the repayment of monies loaned by the government will be an allowable deduction under paragraph 120(1)(c) of the Income Tax Assessment Act 1936 ('ITAA 1936')?", "Decision": "Yes. Repayment of monies loaned to a co-operative company by the government will be an allowable deduction under paragraph 120(1)(c) ITAA 1936. The application of the monies must occur within the year in respect of which the deduction is claimed. Any repayments in excess of the total assessable income of the year in which they are made would not be an allowable deduction.", "Facts": "A co-operative company entered into a loan facility with the government to fund capital works . The co-operative company plans to apply assessable income from its activities for repayment of the monies loaned by the government. Under the terms of the facility letter, the government has consented to the prepayment of the principal of the loan on the condition that the co-operative company provide an auditor's certificate as to the solvency of the co-operative company at the time of each payment.", "Reasons_for_Decision": "Summary: Paragraph 120(1)(c) (ITAA 1936) states as follows: '[Bonuses, dividends etc allowable deductions] So much of the assessable income of a co-operative company as: (a) ... (b) ... (c) in the case of a company having as its primary object that specified in paragraph 117(1)(b)-is applied by the company for or towards the repayment of monies loaned to the company by a government of the Commonwealth or a State to enable the company to acquire assets which are required for the purpose of carrying on the business of the company or to pay that government for assets so required which the company has taken over from that government; To be defined as a co-operative company for the benefit of the deduction, the company will need to fulfil the requirements of section 117 ITAA 1936 , which defines a co-operative, and section 118 ITAA 1936 , which describes the circumstances in which a co-operative will not be treated as a co-operative company in a particular year of income. Sub-section 117(1) ITAA 1936 defines a co-operative as: ' ...a company... the rules of which limit the number of shares which may be held by, or by and on behalf of, any one shareholder, and prohibit the quotation of the shares for sale or purchase at any stock exchange or in any other public manner whatever...and which in either case is established for the purpose of carrying on any business having as its primary object or objects one or more of the following: (a) ... (b) the acquisition of commodities or animals from its shareholders for disposal or distribution...' Section 118 ITAA 1936 deems a co-operative company not to be a co-operative company for a year of income if: '...the value of the commodities and animals disposed of to, or acquired from, its shareholders by the company...is less respectively than 90% of the total value of commodities and animals disposed of or acquired by the company...that company shall in respect of that year be deemed not to be a co-operative company.' The co-operative company satisfies the requirements of section 117 ITAA 1936 and section 118 ITAA 1936. Repayment of monies loaned to the co-operative company will be an allowable deduction under paragraph 120(1)(c).", "Date_of_Decision": "30 November 2001", "Year_of_Income": "31 December 2001", "Legislative_References": "Income Tax Assessment Act 1936 Paragraph 120(1)(c) Section 117 Section 118", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Co-operatives Borrowings & loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002861", "Unmatched_Content": "Reasons for Decision: shall be an allowable deduction: | Provided that the deduction under paragraph (c) shall not be allowed unless shares representing not less than 90% of the value of the company are held by persons who supply the company with the commodities or animals which the company requires for the purposes of its business.' | Keywords Co-operatives Borrowings & loans"}
{"ATO_ID_Number": "ATO ID 2002/932", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Anti-avoidance provisions: control by an exempt end-user of the use of property owned by the taxpayer for the purposes of Division 16D", "Issue": "Does an exempt authority 'control' for the purposes of Division 16D of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) the use of property, where that exempt authority would not be considered by the Commissioner to control the use of the property under section 51AD of the ITAA 1936?", "Decision": "No, an exempt authority will not control for the purposes of Division 16D of the ITAA 1936 the use of property, where that exempt authority would not also control the use of that property under section 51AD of the ITAA 1936.", "Facts": "Arrangement entailed the taxpayer and a company owned by a state authority that was an 'exempt public body' as defined under subsection 159GE(1) of the ITAA 1936, being involved in a commercial venture. The facts of the arrangement did not establish that the exempt public body controlled the use of the property for the purposes of section 51AD of the ITAA 1936.", "Reasons_for_Decision": "Summary: The control test in Division 16D of the ITAA 1936 was not satisfied by any exempt entity. An arrangement will constitute a 'qualifying arrangement' under subsection 159GG(1) of the ITAA 1936 where a person (referred to as an 'end-user') either uses, or controls the use of property owned by another person, and where any of the tests in subsection 159GG(1) are satisfied. Subsection 159GE(1) defines 'control' as meaning effectively control. Where an arrangement is found to be a 'qualifying arrangement' and the end-user is an 'exempt public body' as defined under subsection 159GE(1) of the ITAA 1936, then the arrangement will be treated as if it were a loan by the taxpayer to enable the end-user to acquire the leased property. Effectively this means those tax deductions for the cost of or capital expenditure incurred on, the leased property (other than interest payments on funds borrowed to fund the acquisition) will not be deductible to the taxpayer. Taxation Ruling IT 2602 addresses control of the use of a privately owned power station by exempt state electricity authorities for the purposes of subparagraph 51AD(4)(b)(ii) of the ITAA 1936. Paragraph 6 of that Ruling notes that 'control' is defined in subsection 51AD(1) of the ITAA 1936 as meaning effectively control. The arrangement did not indicate that the exempt entity would effectively control the use of the property for the purposes of section 51AD of the ITAA 1936. As effective control by an exempt entity of the use of the property was not established for the purposes of section 51AD, effective control of the use of the property by the exempt entity was not established for the purposes of Division 16D of the ITAA 1936 either.", "Date_of_Decision": "15 August 2002", "Year_of_Income": "2003", "Legislative_References": "Income Tax Assessment Act 1936 Subsection 51AD(1) Subparagraph 51AD(4)(b)(ii) Subsection 159GE(1) Subsection 159GG(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/22 | Taxation Ruling TR 96/22 | Taxation Ruling IT 2602", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Ownership, interests, control & rights Non recourse loans Tax exempt body", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002932", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/22 Taxation Ruling TR 96/22 Taxation Ruling IT 2602 | Keywords Ownership, interests, control & rights Non recourse loans Tax exempt body"}
{"ATO_ID_Number": "ATO ID 2001/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: scholarship payments made by a non-profit organisation", "Issue": "Can a non-profit association claim the payment of sponsorships, awards and scholarships as allowable deductions against interest income?", "Decision": "No. The payment of sponsorships, awards and scholarships are not deductible against interest income derived by the non-profit organisation.", "Facts": "A non-profit association has paid various sponsorships, awards and scholarships for the benefit of its members. The funds to pay these amounts have been derived from interest earned from the investment of bequests from members.", "Reasons_for_Decision": "Summary: The legislative requirements for general deductions are set out in section 8-1 of the Income Tax Assessment Act 1997 . The first requirement is that expenditure must be an outgoing incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income. The expenditure must have the necessary and relevant connection with the operation or activities which directly gain or produce assessable income ( Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; Federal Commissioner of Taxation v. DP Smith (1981) 147 CLR 578; (1981) 11 ATR 538; 81 ATC 4114; Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431). Non-profit organisations not formed with a profit making purpose, but operating for the benefit of its members will generally be taxable non-profit organisations. Some examples of this are body corporates, social clubs, professional associations, and political parties. The assessable income of non-profit organisations such as this organisation essentially consists of interest, dividends or other income derived from the investment of moneys held in its funds or income from activities directly involving the public. Deductions for expenditure incurred are only allowed in respect of expenses relating directly to the gaining of such assessable income (e.g., bank fees). The scholarship and award expenses are not deductible, as they are not incurred in gaining or producing assessable income of the non-profit association. The payment of sponsorships, awards and scholarships is not relevant or necessary to earning income from the investment of moneys bequeathed by members.", "Date_of_Decision": "29 March 1999", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "TR 2015/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Advertising and promotion expenses Associations, organisations and societies Deductions and expenses Prizes and awards Scholarships, fellowships and bursaries", "Case_References": "Charles Moore & Co (WA) Pty Ltd v Federal Commissioner of Taxation (1956) 95 CLR 344 (1956) 11 ATD 147", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200181", "Unmatched_Content": "Please note: This ATO ID was withdrawn in error on 21 October 2005. This error was corrected on 21 October 2005 and this ATO ID has been current since its release. This ATO ID was amended to clarify title, the reasons for decision and update case references. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Minor rephrasing of question and answer | New paragraph inserted regarding non-profit organisations operating for the benefit of their members. | References to IT 2084 and IT 2505 removed, and reference to TR 2015/3 inserted. | Amended to update references and other minor amendments. | Related Public Rulings (including Determinations) TR 2015/3 | Keywords Advertising and promotion expenses Associations, organisations and societies Deductions and expenses Prizes and awards Scholarships, fellowships and bursaries"}
{"ATO_ID_Number": "ATO ID 2001/87", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility: General Licence Fee (Franchise Agreement)", "Issue": "Whether a general licence fee payable under a franchise agreement is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Decision": "No. The general licence fee is a capital amount and is not deductible under section 8-1 (ITAA 1997).", "Facts": "The taxpayer enters into a 5 year (renewable) franchise agreement with a petroleum company for the operation of a service station. The franchise agreement requires the taxpayer to pay a general licence fee by advance instalments over 5 years. The amount is refundable and is paid annually. The agreement can be renewed for a further term of 5 years and at the expiry of that time can be 'held over' by the franchisee under similar terms and conditions. If the agreement is terminated within 3 years, a term in the agreement stipulates that the franchiser may retain that part of the general licence fee paid in advance applicable to the expired term of the agreement, but must refund to the franchisee the remainder of any of the fee. The taxpayer suggests that, as the general licence fee is payable annually and refundable, it is akin to rental. The taxpayer argues that the amount is distinguishable from a 'once-and-for-all' capital payment and accordingly should be treated on revenue account.", "Reasons_for_Decision": "Summary: For the payment of the general licence fee to be deductible, it must fall under the provisions of Division 8 (ITAA 1997). Section 8-1 of Division 8 (ITAA 1997) allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed under section 8-1 (ITAA 1997) for expenses to the extent to which they are of a capital, private or domestic nature. In determining the essential character of the general licence fee it is first necessary to clarify what the payment actually represents. Based on the facts, the general license fee is regarded as a fee paid by the taxpayer in exchange for permission from the franchiser to operate a business under the franchiser's name and on the franchiser's premises (see Labrilda Pty Ltd v DFC of T 96 ATC 4304; 32 ATR 206). The courts have held that expenditure is of a capital nature where it is made with a view to bringing into existence an asset or an advantage for the 'enduring benefit' of a business. In determining whether the license fee is capital, and therefore non deductible, it is necessary to consider whether the fee can properly be characterised as the price paid for the right to carry on a particular business. If this is so, then it would appear to be a non-deductible capital outgoing (see Labrilda Pty Ltd v. DFC of T 96 ATC 4304; 32 ATR 206 which is highly comparable with this particular issue). The 'enduring benefit' in this situation is essentially the right to acquire a business structure and to have access to, and use of, intellectual property. In situations where a licence is granted to use intellectual property, relevant case law indicates that the payment may be of a capital nature. This is also the case, notwithstanding that the amount payable may be payable by way of instalments (see Trustee of Earl Haig v. IRC (1939) 22 TC 725; also see Green (H.M. Inspector of Taxes) v. Favourite Cinemas Ltd (1930) 15 TC 390). The fact that a general licence fee (or a small part of it) is potentially refundable, is not considered to be determinative in ascertaining whether such a payment should be regarded as a 'once-and-for-all' payment (see John Fairfax & Sons Pty Ltd v . FC of T (1959) 101 CLR 30). The character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid (see GP International Pipecoaters Pty Ltd v. FC of T (1990) 170 CLR 124). Based on the facts, the character of the advantage sought by the payment of the general licence fee is the creation, enlargement and enhancement of the business structure of the taxpayer's specific business. It is not part of the process by which the taxpayer operates to obtain regular returns by means of regular outlay. As the general licence fee is properly characterised as the price paid for the right to carry on a business it is accordingly a non-deductible capital outgoing.", "Date_of_Decision": "27 October 1999", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 Division 8 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of business Deductions and expenses Franchising Intellectual property use expenses", "Case_References": "Labrilda Pty Ltd v. DFC of T 96 ATC 4303 32 ATR 206", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200187", "Unmatched_Content": "Keywords Acquisition of business Deductions and expenses Franchising Intellectual property use expenses"}
{"ATO_ID_Number": "ATO ID 2001/432", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions - credit notes issued for the provision of free services", "Issue": "Does the issue of a credit note for the provision of your own labour free of charge constitute a deductible expense under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The provision of your own labour does not constitute a deductible expense. A tax deduction under the general deduction provisions of section 8-1 of the ITAA 1997 is only allowed where you incur an actual 'loss' or 'outgoing'.", "Facts": "The taxpayer, an individual, operates a small business which provides services to other businesses and householders. In order to generate new and repeat business, the taxpayer intends to run a promotional or advertising campaign offering customers and potential customers the chance to win $x worth of services if they use any of the taxpayer's services within a selected period. Winners will receive a credit note with a specified dollar value, which may be redeemed at their leisure.", "Reasons_for_Decision": "Summary: To qualify for a deduction under the general deduction provisions of section 8-1 of the ITAA 1997, a loss or outgoing must have been incurred. For the purposes of the income tax provisions, you incur an outgoing at the time you owe a present money debt that you cannot escape. For a fuller discussion concerning the meaning of 'incur' in this context, see Taxation Ruling TR 97/7. In Federal Commissioner of Taxation v. Ilbery (1981) 12 ATR 563; (1981) 38 ALR 172; (1981) 58 FLR 191; 81 ATC 4661 Toohey J considered the meaning of the word 'outgoings' and emphasised that it should be read in conjunction with the rest of the section with particular reference to the word 'incurred'. A loss or outgoing, to be deductible, must also constitute actual expenditure. Lending weight to this assertion is the Commissioner's published view in Capital Gains Tax CGT Determination Number 60 that the value of a taxpayer's own labour cannot have a value attributed to it for inclusion in the cost base of an asset. In view of the above, it is clear that the provision of one's own labour does not constitute a deductible expense as no money debt has been incurred.", "Date_of_Decision": "21 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "TR 97/7 | Capital Gains Tax CGT Determination Number 60", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses", "Case_References": "Federal Commissioner of Taxation v. Ilbery (1981) 12 ATR 563 (1981) 38 ALR 172 (1981) 58 FLR 191 81 ATC 4661", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001432", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 97/7 Capital Gains Tax CGT Determination Number 60 | Keywords Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2007/188", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Failure to withhold from a royalty payment to a non-resident and the effect on the payment's deductibility", "Issue": "Does the payment of an administrative penalty amount imposed under section 16-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA), for failure to withhold from a royalty paid to a non-resident, constitute a payment of withholding tax for the purposes of subsection 26-25(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The payment of an administrative penalty amount imposed under section 16-30 of Schedule 1 to the TAA, for failure to withhold from a royalty paid to a non-resident, constitutes a payment of withholding tax for the purposes of subsection 26-25(3) of the ITAA 1997.", "Facts": "An Australian resident entity (the payer) made a royalty payment to an overseas person who is a non-resident. An overseas person, for the purposes of section 12-280 of Subdivision 12-F of Schedule 1 to the TAA, is the recipient of the royalty who, from the payer's records has an address outside of Australia. The royalty income was not exempt from withholding tax under Division 11A of the Income Tax Assessment Act 1936 (ITAA 1936). The payer was required to withhold an amount from the payment under Subdivision 12-F in Schedule 1 to the TAA but failed to do so. Consequently, the payer was liable to pay the Commissioner an administrative penalty under section 16-30 of the TAA, equal to the amount it should have withheld. The payer paid the penalty and no remission was sought or granted.", "Reasons_for_Decision": "Summary: Subsection 128B(5A) of the ITAA 1936 imposes a withholding tax liability on a non-resident who derives royalty income which is paid by a person who is a resident (subparagraph 128B(2B)(b)(i) of the ITAA 1936) or by a non-resident who incurs the royalty in carrying on business in Australia at or through a permanent establishment in Australia (subparagraph 128B(2B)(b)(ii) of the ITAA 1936). As subparagraph 128B(2B)(b)(i) of the ITAA 1936 applies in this case, the payer should have withheld an amount from the royalty payment to an overseas person as required by section 12-280 of Subdivision 12-F of Schedule 1 to the TAA. As a result, the payer was liable to pay and paid the Commissioner an administrative penalty equal to that amount in accordance with section 16-30 in Schedule 1 to the TAA. An administrative penalty paid under section 16-30 of Schedule 1 to the TAA for not withholding from a royalty payment is not income tax payable under section 128B of the ITAA 1936. However, paragraph 18-35(1)(a) of Schedule 1 to the TAA states that where an entity fails to withhold an amount in relation to the royalty payment and pays an equal amount of penalty imposed under section 16-30 of the TAA or the general interest charge (GIC) in relation to that penalty to the Commissioner, the person liable to pay the withholding tax on the royalty payment, being the non-resident, is entitled to a credit equal to the amount of the penalty or GIC paid. Where the penalty is paid in full the effect, is ordinarily, to extinguish the liability for the withholding tax on that royalty. In that sense the withholding tax payable on the royalty may be said to be paid. But, subsection 26-25(1) of the ITAA 1997 provides that an entity that fails to withhold an amount from a royalty as required by Subdivision 12-F of the TAA is precluded from claiming a deduction for the royalty. However, subsection 26-25(3) of the ITAA 1997 provides that if, apart from subsection 26-25(1) of the ITAA 1997, the entity can deduct the royalty for an income year, it will be deductible for that year if the withholding tax payable for the royalty is paid. Accordingly, the relevant amount of withholding tax is regarded as having been paid for the purposes of subsection 26-25(3) of the ITAA 1997 when the Australian entity pays the administrative penalty equal to the amount it should have withheld and that amount is subsequently credited to the non-resident's account in accordance with paragraph 18-35(1)(a) of the TAA. Hence, as the payer paid an administrative penalty equal to the withholding tax it should have withheld from the royalty payment, the withholding tax is taken to be paid for the purposes of subsection 26-25(3) of the ITAA of the ITAA 1997.", "Date_of_Decision": "1 October 2007", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 128B subparagraph 128B(2B)(b)(i) subparagraph 128B(2B)(b)(ii) subsection 128B(5A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Non-resident royalty withholding tax Withholding tax credits Withholding taxes Failure to withhold", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007188", "Unmatched_Content": "Keywords International tax Non-resident royalty withholding tax Withholding tax credits Withholding taxes Failure to withhold"}
{"ATO_ID_Number": "ATO ID 2012/65", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: student services and amenities fee", "Issue": "Can a taxpayer, who is entitled to deduct self-education expenses incurred in respect of a course of higher education, deduct the student services and amenities fee charged by the higher education provider?", "Decision": "Yes. A taxpayer, who is entitled to deduct self-education expenses incurred in respect of a course of higher education, can deduct the student services and amenities fee charged by the higher education provider under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "In 2005, the Higher Education Support Act 2003 (HESA) was amended to abolish compulsory up-front student union fees. This led to a decline in student guilds and the generally non-academic services they provided for students. The HESA was further amended in October 2011 to allow higher education institutions to charge, from 1 January 2012, a fee to students for student services and amenities of a non-academic nature, such as sporting and recreational activities, employment and career advice, financial advice and food services. The taxpayer is studying a course at a higher education institution to gain qualifications in a profession, business or trade in circumstances where relevant self-education expenses are deductible. The higher education institution charges students who undertake a course at the institution a student services and amenities fee of $250.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 98/9 addresses the circumstances in which work or business related self-education expenses are deductible under section 8-1 of the ITAA 1997. The ruling explains when a course of study will have a relevant connection to a taxpayer's current employment or business activities so that self-education expenses are incurred in gaining or producing assessable income. Self-education expenses that are not work or business related may nevertheless be deductible under section 8-1 of the ITAA 1997 where the student's continuing entitlement to particular income (for example, a taxable scholarship) is conditional on enrolment and satisfactory progress in the relevant course of study: Federal Commissioner of Taxation v. Anstis (2010) 241 CLR 443; (2010) 76 ATR 735; (2010) 2010 ATC 20-221.. Where a taxpayer is entitled to deduct self-education expenses in respect of the course of higher education, because the expenses are work or business related or are otherwise incurred in gaining or producing assessable income, and the student services and amenities fee is imposed as a compulsory levy on students at the institution, the fee is incurred by the taxpayer in undertaking the course of study. It is not considered to be an outgoing of a private nature. The fee is deductible under section 8-1 of the ITAA 1997. A taxpayer who obtains a loan from the Commonwealth under Part 3-5 of the Higher Education Support Act 2003 to pay the student services and amenities fee (SA-HELP assistance) incurs the fee for section 8-1 of the ITAA 1997 purposes. The fee would be deductible in the income year in which the taxpayer obtains SA-HELP assistance.", "Date_of_Decision": "11 July 2012", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "TR 98/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "deductions & expenses self-education expenses", "Case_References": "FC of T v Anstis (2010) 241 CLR 443 (2010) 76 ATR 735 (2010) 2010 ATC 20-221", "Other_References": "", "Business_Line": "SMB/IND", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201265", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 98/9 | Keywords deductions & expenses self-education expenses"}
{"ATO_ID_Number": "ATO ID 2002/902", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of damages paid for breach of employment contract - repayment of self education expense", "Issue": "Can a taxpayer claim a deduction for damages paid for a breach of employment contract under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer cannot claim a deduction for damages paid for a breach of employment contract under section 8-1 of the ITAA 1997 because the payment is not related to the earning of assessable income.", "Facts": "The taxpayer undertook a self-education course that was sponsored by the taxpayer's employer. The terms of the sponsorship contained in the employment contract were that the: The taxpayer did not continue employment with the employer for the agreed period after completion of the self-education course. The taxpayer's employer requested payment for damages, being the self-education expenses paid on behalf of the taxpayer and the taxpayer complied with the request.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 4 AITR 236; (1949) 8 ATD 431 the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable income it must be incidental and relevant to that end. The words \"incurred in gaining or producing assessable income\" mean in the course of gaining or producing such income.' The expenditure must therefore be related to the production of assessable income. The payment for damages (being repayment of self-education expenses) to the employer by the taxpayer is not related to the earning of assessable income. The payment represents expenditure incurred by the taxpayer for breaching the terms of the employment contract. Therefore, the expenditure for damages cannot be said to have been incurred as a self-education expense. Accordingly, the damages paid for breach of employment contract in relation to the self-education expense claim is not an allowable deduction under section 8-1 of the ITAA 1997 as it was not incurred in gaining or producing assessable income.", "Date_of_Decision": "12 November 1998", "Year_of_Income": "Year ended 30 June 1998 Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self-education expenses Deduction and expenses Damages expenses Breach of contract", "Case_References": "Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 [1949] HCA 15; (1949) 4 AITR 236 (1949) 8 ATD 431", "Other_References": "CDS 10261", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002902", "Unmatched_Content": "Minor grammatical amendments | Minor grammatical amendments Amendment to case name Insert medium neutral citation: [1949] HCA 15 | Minor grammatical amendment | Keywords Self-education expenses Deduction and expenses Damages expenses Breach of contract"}
{"ATO_ID_Number": "ATO ID 2001/329", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Overseas travel expenses - airfares", "Issue": "Are airfares incurred by a taxpayer who was on a work exchange program in the United Kingdom, deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Expenses incurred on airfares for the taxpayer to travel to and from the United Kingdom are allowable under section 8-1 of the ITAA 1997, as they are directly connected to their existing employment duties.", "Facts": "The taxpayer was involved in a work exchange program with an organisation in the United Kingdom. The exchange program allowed the taxpayer to undertake similar employment duties overseas to those in their current employment in Australia. The exchange was encouraged by the taxpayer's employer, who organised the necessary licences. Although not necessarily leading to an increase in income, the experience was beneficial to the taxpayer's career as a whole. The taxpayer continued to be paid by his Australian employer while he was undertaking the work exchange program in the United Kingdom. The taxpayer incurred the cost of airfares for travel to and from the United Kingdom.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital nature, private or domestic nature or relate to the earning of exempt income. In Case V82 88 ATC 577; AAT Case 4374 (1988) 19 ATR 3552 a teacher on an exchange program to Canada was allowed a proportion of his travel costs. As the taxpayer's exchange service was part of his employment, it was not possible to find that no part of the expenditure claimed was incurred in gaining or producing the income derived directly from that exchange service. But for the fact that the income which the taxpayer derived while in Canada was exempt from Australian tax, the essential character of the whole of the expenditure claimed would be that of expenditure incurred in gaining or producing assessable income. Although, no financial advantage was gained by the taxpayer in respect to the travel, it was acknowledged by the Department of Education, that the experience in Canada would be of benefit to the taxpayer when he returned. It was decided in that case to allow a deduction equal to 75% of the expenditure incurred, with the remaining 25% being an expense in earning the salary received while in Canada. As the Canadian income was exempt from tax in Australia, the portion of the expenditure applicable to that income was not deductible in Australia. The 75/25 apportionment was based on a reasonable estimate since no exact division of the items of expenditure was possible. In this case, the taxpayer's participation in the work exchange program is part of his employment. There is a direct connection between the work the taxpayer does in the United Kingdom and the taxpayer's income earning activities in Australia. The essential character of the travel costs is that of expenditure incurred in order to gain or produce assessable income because the experience gained in the United Kingdom will assist the taxpayer with his existing employment duties. The cost of the taxpayer's airfares is therefore an allowable deduction under section 8-1 of the ITAA 1997 as the expense has a direct nexus with the taxpayer's current employment in Australia.", "Date_of_Decision": "22 June 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Work related expenses Overseas travel expenses", "Case_References": "Case V82 88 ATC 577", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001329", "Unmatched_Content": "This ATO ID was amended to improve clarity and to remove reference to repealed section 23AG of the Income Tax Assessment Act 1936 . This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Inserted fact from original case for clarity | Inserted case name for ATR citation | Removal of repeated words. | Amendments made to improve clarity. | Related ATO Interpretative Decisions | Removal of withdrawn ATO interpretative decisions. | Keywords Exempt income Work related expenses Overseas travel expenses"}
{"ATO_ID_Number": "ATO ID 2001/615", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of travel insurance", "Issue": "Is the taxpayer entitled to a deduction for travel insurance under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer is not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.", "Facts": "The taxpayer was granted an International Teaching Fellowship in Canada. The taxpayer incurred expenses for airfares and travel insurance.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Expenses such as insurance policies invariably cover items that are generally private in nature, for example illness, loss of baggage, and theft or damage to belongings. In Case T78 [1986] AATA 318; 86 ATC 1094 the Administrative Appeals Tribunal (Tribunal) allowed a deduction to a barrister for airfares to attend a work-related course. However, the Tribunal held that his claim for travel insurance was expenditure of a private nature. In Waters v. FC of T [2010] AATA 846; 2010 ATC 10-157 the Tribunal held that a taxpayer who had acquired travel (including medical) insurance prior to commencing work overseas was not entitled to a deduction for this expenditure. The expenditure could not be regarded as being incurred by Mr Waters 'in the course of' gaining or producing his assessable income, and was otherwise not deductible as it was an expense of a private or domestic nature. The taxpayer is therefore not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.", "Date_of_Decision": "23 July 2001", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Overseas travel expenses", "Case_References": "Case T78 [1986] AATA 318 86 ATC 1094", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001615", "Unmatched_Content": "Minor punctuation error corrected | Included abbreviation Included summary of a more recent relevant case Relocated second sentence of second paragraph to create new paragraph | Included case reference for a more recent relevant case and medium neutral reference for Case T78 | Keywords Overseas travel expenses"}
{"ATO_ID_Number": "ATO ID 2005/246", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: car parking expenses relating to a primary place of employment", "Issue": "Will paragraph 51AGA(1)(d) of the Income Tax Assessment Act 1936 (ITAA 1936) operate to deny a deduction for car parking expenses incurred in relation to a primary place of employment, where a taxpayer's travel from home to their primary place of employment is broken by travel to a different place of employment?", "Decision": "No. Paragraph 51AGA(1)(d) of the ITAA 1936 will not operate to deny a deduction for car parking expenses incurred in relation to a primary place of employment, where a taxpayer's travel between home and a non primary place of employment is not considered to be part of travel between home and their primary place of employment.", "Facts": "The taxpayer is employed at two unrelated places of work. The taxpayer travels from home to a place of part time employment in the morning of each working day where they work for approximately an hour. The taxpayer then travels to their primary place of employment where they incur car parking expenses. When the taxpayer leaves their primary place of employment they travel back to the place of part time employment where they work for approximately one and a half hours. They then travel from their place of part time employment to their home.", "Reasons_for_Decision": "Summary: Subsection 51AGA(1) of the ITAA 1936 specifically deals with the deductibility of car parking expenses and provides that a deduction will not be allowed to an employee in certain situations. Paragraph 51AGA(1)(d) of the ITAA 1936 provides that one of the conditions that must be satisfied for a deduction for car parking expenses to be denied is that the car is used in connection with travel by the employee between their place of residence and their primary place of employment. The taxpayer undertakes a number of journeys in the course of a working day to enable them to undertake work at two separate places of employment. To determine whether paragraph 51AGA(1)(d) of the ITAA 1936 operates to deny a car parking expense it is necessary to consider whether the series of journeys which the taxpayer undertakes to enable them to engage in their various employment activities, is considered to be travel between their place of residence and their primary place of employment. Miscellaneous Tax Ruling MT 2027 which deals with home to work travel for the purposes of fringe benefits tax, indicates that the nature of travel between home and work will not change where incidental tasks are undertaken en-route in the travel from home to work. The taxpayer completes a range of duties at their part time employment, both before and after their work at their primary place of employment. These duties are totally separate and distinct from those undertaken at the taxpayer's primary place of employment and are clearly more than incidental tasks in the sense indicated in MT 2027. It is considered that the overall journey between the taxpayer's home and their primary place of employment and the return trip to their home is broken into a number of distinct and separate journeys, such that each is in effect a separate travel event. The travel from home in the first instant, therefore ends at the place of their part time employment and not at the primary place of employment. A similar outcome applies to the travel that occurs after the taxpayer leaves the primary place of employment. Therefore, it is considered that in these circumstances, the car has not been used in connection with travel by the taxpayer between their place of residence and their primary place of employment for the purposes of paragraph 51AGA(1)(d) of the ITAA 1936. Accordingly, paragraph 51AGA(1)(d) of the ITAA 1936 will not operate to deny a deduction for car parking expenses incurred in relation to the taxpayer's primary place of employment.", "Date_of_Decision": "25 July 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 51AGA(1) paragraph 51AGA(1)(d)", "Related_Public_Rulings_and_Determinations": "MT 2027", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Parking expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005246", "Unmatched_Content": "Related Public Rulings (including Determinations) MT 2027 | Keywords Deductions & expenses Parking expenses"}
{"ATO_ID_Number": "ATO ID 2004/659", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: travel and incidental expenses - legal action to recover unpaid wages", "Issue": "Is a taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for travel and incidental expenses incurred in relation to a legal action to recover unpaid wages?", "Decision": "Yes. A taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for travel and incidental expenses incurred in relation to a legal action to recover unpaid wages.", "Facts": "The taxpayer worked for their employer on a casual basis. The taxpayer considered that they were paid below award rates as set out in the relevant employment agreement. The taxpayer took legal action to recover the unpaid wages plus interest. As part of the legal process the taxpayer incurred the following costs:", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining '...whether expenditure has the character of a capital or revenue payment... the advantage for which the expenditure was incurred must be identified and the manner in which it \"is to be relied upon or enjoyed\" must be considered...' ( Magna Alloys & Research Pty Ltd v. Federal Commissioner of Taxation 80 ATC 4542 at 4548; 11 ATR 276 at 283). In the present case the advantage sought was the recovery of an amount on revenue account, that is unpaid wages plus interest. As such, the character of the expenditure is also of a revenue nature. In addition, as the occasion for the incurring of the expenses was to recover unpaid wages plus interest, both of which are assessable as ordinary income, there is a sufficient connection between the taxpayer's expenses and the gaining or producing of their assessable income. Therefore, the taxpayer's expenses were incurred in gaining or producing their assessable income. Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for travel and incidental expenses incurred in relation to a legal action to recover unpaid wages.", "Date_of_Decision": "16 June 2004", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/29", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses Travel expenses", "Case_References": "Magna Alloys & Research Pty Ltd v. Federal Commissioner of Taxation (1980) 11 ATR 276 80 ATC 4542", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004659", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/29 | Keywords Legal expenses Travel expenses"}
{"ATO_ID_Number": "ATO ID 2004/847", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: work related travel - privately accrued consumer loyalty points", "Issue": "Is the taxpayer entitled to the value of an airline ticket as a work related deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), where the taxpayer acquires the airline ticket by redeeming privately accrued consumer loyalty points?", "Decision": "No. The taxpayer is not entitled to the value of an airline ticket as a work related deduction under section 8-1 of the ITAA 1997, where the taxpayer acquires the airline ticket by redeeming privately accrued consumer loyalty points.", "Facts": "The taxpayer is an employee and uses their personal consumer loyalty program points to acquire an airline ticket for work related purposes. The consumer loyalty points were accrued through the taxpayer's private expenditure. The loyalty points redeemed to acquire the airline ticket were subtracted from the taxpayer's accumulated reward points. It is a condition of the consumer loyalty program that any accumulated points and the rights they confer cannot be sold, transferred, assigned or otherwise dealt with.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for that purpose. However where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income they will not be deductible. In addition, losses or outgoings will not be deductible under section 8-1 of the ITAA 1997 where another provision prevents it. Subsection 21(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that: where, upon any transaction, any consideration is paid or given otherwise than in cash, the money value of that consideration shall, for the purposes of this Act, be deemed to have been paid or given. The Federal Court in Payne v. FC of T (1996) 66 FCR 299; 96 ATC 4407; (1996) 32 ATR 516 ( Payne's Case ), held that a flight reward received by an employee taxpayer was not assessable on the basis of the reasoning in FC of T v. Cooke and Sherden 80 ATC 4140 (1980) 10 ATR 696, because the flight reward was not 'money' or 'money's worth' and it was not convertible into cash. In this case, the taxpayer acquired an airline ticket by voluntarily redeeming points under their consumer loyalty program. The redemption of the taxpayer's loyalty points is a 'transaction' according to the wide meaning given to the word under case law. As the consideration for the airline ticket was not paid or given in cash, the value of the consideration attributable to the airline ticket is determined according to subsection 21(1) of the ITAA 1936. Under the taxpayer's consumer loyalty program, the loyalty points cannot be transferred or assigned. For the purposes of subsection 21(1) of the ITAA 1936, the money value of the consideration given by the taxpayer is $nil because the consumer loyalty points are not convertible into cash ( Payne's Case ). To be eligible for a deduction under section 8-1 of the ITAA 1997 a taxpayer must incur a loss or outgoing. Here, the taxpayer has not incurred a loss or outgoing of any pecuniary value because the consideration deemed to be paid or given for the transaction is nil. Therefore, the taxpayer will not be entitled to a deduction under section 8-1 of the ITAA 1997 for the airline ticket acquired through the consumer loyalty program.", "Date_of_Decision": "6 August 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Non cash considerations Rewards programs", "Case_References": "Payne v. FC of T (1996) 66 FCR 299 (1996) 32 ATR 516 96 ATC 4407", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004847", "Unmatched_Content": "Keywords Deductions & expenses Non cash considerations Rewards programs"}
{"ATO_ID_Number": "ATO ID 2001/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: travel expenses in relation to medical treatment", "Issue": "Whether a taxpayer in receipt of a disability pension is entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for travel expenses incurred in order to obtain medical treatment?", "Decision": "The travel expenses are of a private nature and, as such, are not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is in receipt of a disability pension and suffers from a medical condition. As a result of this condition, the taxpayer is severely restricted in the ability to move about freely in public places, especially without an escort or companion. The taxpayer has also developed other medical conditions which are related to age. The taxpayer is required to make monthly visits to a general hospital and because of the condition the taxpayer finds it necessary to travel in the secure environment of a taxi to make these regular visits for medical treatment. The disability pension is paid to the taxpayer regardless of whether the taxpayer visits the hospital on a monthly basis.", "Reasons_for_Decision": "Summary: The travel expenditure incurred by the taxpayer in travelling to and from the taxpayer's residence to the hospital for medical treatment is not relevant or incidental to the earning or receipt of the disability pension income, but rather these expenses are of a private nature. To be deductible under section 8-1 of the ITAA 1997, the expenditure must be incurred in gaining or producing the assessable income, but expenditure which is essentially of a private nature is not deductible. It is a long standing principle that a taxpayer does not satisfy section 8-1 of the ITAA 1997 merely by demonstrating some causal connection between the expenditure and the derivation of income. What must be shown is a closer and more immediate connection. The expenditure must be incurred 'in the course of' gaining or producing the assessable income ( Lunney v. Commissioner of Taxation, Hayley v. FC of T (1958) 100 CLR 478; [1958] HCA 5; (1958) 11 ATD 404; (1958) 7 AITR 166). These principles have been affirmed by the High Court in Commissioner of Taxation v. Payne (2001) 202 CLR 93; [2001] HCA 3; 2001 ATC 4027; (2001) 46 ATR 188. As the taxpayer is not able to establish the requisite connection between travel to the hospital and receipt of the disability pension, and expenses incurred in obtaining medical treatment are considered to be private in nature, the travel expenses are not deductible under section 8-1 of the ITAA 1997", "Date_of_Decision": "19 August 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/73", "Subject_References": "Domestic travel expenses Medical expenses rebates Travel expenses", "Case_References": "Commissioner of Taxation v Payne (2001) 202 CLR 93 [2001] HCA 3 2001 ATC 4027 (2001) 46 ATR 188", "Other_References": "", "Business_Line": "Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200136", "Unmatched_Content": "Amended further for clarity | Amended to include medium neutral citation and authorised report, ATC and ATR citations. | Minor typographical error removed | Keywords Domestic travel expenses Medical expenses rebates Travel expenses"}
{"ATO_ID_Number": "ATO ID 2001/415", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Travel Expenses to Inspect Trust Property", "Issue": "Is a trust entitled to claim a deduction for travel expenses incurred by the trustee to inspect the premises of a company of which the trust is a shareholder?", "Decision": "No, the expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as they are not incurred in relation to the gaining or producing of assessable income.", "Facts": "The trust owned shares in a company as a long term investor. The company organised an educational tour to one of its facilities for its shareholders to inspect. The trustee and a beneficiary of the trust accepted the offer. The expenses incurred included travel costs, travel insurance and taxi fares. The trust was a small shareholder of the company.", "Reasons_for_Decision": "Summary: For an expense to be an allowable deduction it must be incurred in gaining or producing assessable income in accordance with section 8-1 of the ITAA 1997. Although the trust is entitled to receive dividends in respect of the shares that it owns, the amount of dividends that the trust will receive from its shareholding will neither increase nor decrease as a result of the trustee undertaking the inspection trip. Therefore, it is not possible to establish a connection between the dividends included in the assessable income of the trust and the travel expenses incurred. Furthermore, it is not possible to establish a connection between the travel expenses and the share value of the shares that the trust holds As it is not possible to establish a connection between the travel expenses incurred and the assessable income gained from the shares, the travel expenses are not an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "5 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Travel expenses Deductions & expenses Shares Shareholders", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001415", "Unmatched_Content": "Inserted a comma in the second paragraph. | Keywords Travel expenses Deductions & expenses Shares Shareholders"}
{"ATO_ID_Number": "ATO ID 2004/489", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: deductibility of employer contributions to a worker entitlement fund - leave contributions", "Issue": "Is the taxpayer, an employer, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for annual leave and long service leave contributions made to a worker entitlement fund?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for annual leave and long service leave contributions made to the worker entitlement fund.", "Facts": "The taxpayer is required by a proposed industrial instrument to make annual leave and long service leave contributions to the worker entitlement fund nominated in the industrial instrument. The taxpayer intends to make annual leave and long service leave contributions to the nominated worker entitlement fund on behalf of its workers. The leave contributions are placed into actual member accounts by the worker entitlement fund.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings | Detailed Reasoning - 1. Incurred in gaining or producing assessable income: In carrying on business activities, the taxpayer is required to make the contribution to the proposed worker entitlement fund as a result of their legal obligations under the proposed industrial instrument. There is a connection between the business activities being carried on by the taxpayer and the taxpayer's obligation to provide for worker entitlements. Under the proposed worker entitlement fund deed, the taxpayer may obtain a reimbursement (up to the amount in the employee's member account) for a payment made to an entitled employee. The taxpayer has no right to a refund of a payment into an employee members account, only a reimbursement. The contributions to the worker entitlement fund are non refundable payments made directly to actual member accounts. The taxpayer is required to make the contributions to meet its legal obligations in carrying on business activities. As such, the contributions have been incurred by the taxpayer and have a sufficient connection with the income producing activities to give rise to a deduction for the taxpayer. | Detailed Reasoning - 2. Is the amount capital in nature?: Whether the payment of worker entitlements to the worker entitlement fund are revenue or capital in nature depends on the character of the payment when made by the taxpayer ( G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1). When the taxpayer makes the contribution/s to the worker entitlement fund, the taxpayer is meeting their recurring legal obligations to make contributions for their workers' entitlements. This obligation is recurrent and is a factor which points toward the amount being revenue in nature. As stated by Hill J in Walstern v. Federal Commissioner of Taxation [2003] FCA 1428; 2003 ATC 5076; (2003) 54 ATR 423 However it cannot be said that the question whether a payment is a one-off payment or whether it is a recurrent payment is a matter irrelevant to whether the outgoing is capital. In a case such as the present where the payment operates to create the capital of a trust fund the outlay will ordinarily be seen as capital both because of the lasting qualities enjoyed and the fact that what is being made is a final payment to secure future benefits. However, if a contribution is one of a number of 'recurrent' contributions for employees, so that it can be seen to be part of the ordinary flow of business expenditure of a taxpayer, the character of the outlay will take on a different complexion. The taxpayer is making repetitive contributions as required by the proposed industrial instrument to discharge an immediate obligation, and the obligation is directly connected to the income earning capacity of the business and is part of the immediate ordinary flow of business expenditure. As such, the payment of the contributions is revenue in nature. | Detailed Reasoning - 3. Is the contribution precluded from deduction by section 26-10?: Section 26-10 of the ITAA 1997 provides that an outgoing for leave is not deductible except where the outgoing is an amount which is paid in the income year to the individual to whom the leave relates (or if the individual is deceased, to their dependant or legal representative), or it is an accrued leave transfer payment that is made in the income year. The contributions made by the taxpayer to the worker entitlement fund are contributions made to discharge the taxpayer's immediate legal obligations in respect to worker entitlements. While the contribution is calculated with reference to the worker's future leave entitlements, the immediate outgoing of the taxpayer is not an outgoing for leave. As such the taxpayer's contribution to the worker entitlement fund is not affected by the operation of 26-10 of the ITAA 1997.", "Date_of_Decision": "1 March 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 26-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/490", "Subject_References": "Annual leave Deductions & expenses Long service leave", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 (1990) 21 ATR 1", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004489", "Unmatched_Content": "Keywords Annual leave Deductions & expenses Long service leave"}
{"ATO_ID_Number": "ATO ID 2001/748", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: company obtains psychological counselling for employee director.", "Issue": "Are expenses incurred by an employer for an employee to visit a clinical psychologist for stress counselling sessions deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Expenses associated with psychological counselling as a result of stress suffered by an employee are deductible to an employer in accordance with paragraph 8-1(1)(b) of the ITAA 1997.", "Facts": "The taxpayer is a company. An employee of the company suffered from work-related stress which adversely affected the employee's ability to properly perform work-related tasks. This employee is also a director of the company. The company paid for the employee to attend counselling sessions with a clinical psychologist. The employee will attend the counselling sessions over a period of time covering more than one financial year.", "Reasons_for_Decision": "Summary: Under paragraph 8-1(1)(b) of the ITAA 1997 a taxpayer carrying on a business is entitled to deduct outgoings or losses which are necessarily incurred in carrying on the business for the purpose of gaining assessable income. Taxation Ruling TR 95/33, at paragraphs 36 to 38, indicates that 'necessarily' does not mean that the outgoing must be unavoidable or logically necessary but, rather, that the outgoing must be clearly appropriate or adapted for the ends of the business. For practical purposes, it is for the person carrying on the business to be the judge of what outgoings are necessarily incurred. Where an outgoing is voluntary, the expense must be reasonably capable of being seen as appropriate to the carrying on of the business. Where the dominant motive of an expense is to provide a benefit to a director, this does not, of itself, prevent the outgoing from being necessarily incurred in carrying on the business. In this case, the taxpayer is paying for an employee to attend counselling sessions for treatment of work-related stress. Although the employee is also a director of the company and will receive a personal benefit from this expenditure, the business also stands to benefit from a reduction of the ill-effects on the employee of the work-related stress. As a result, the outgoing is necessarily incurred in the carrying on of the business and is therefore deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "31 October 2001", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(1)(b)", "Related_Public_Rulings_and_Determinations": "TR 95/33", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001748", "Unmatched_Content": "This ATO ID was amended to clarify the title, facts and reasons for decision. | Related Public Rulings (including Determinations) TR 95/33 | Keywords Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2002/319", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Beverage Analyst - purchase of wine for tasting", "Issue": "Is the taxpayer, a food and beverage analyst, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenditure incurred in purchasing wine for tasting?", "Decision": "No. The taxpayer, a food and beverage analyst, is not entitled to a deduction under section 8-1 of the ITAA 1997 for expenditure incurred in purchasing wine for tasting.", "Facts": "The taxpayer is a food and beverage analyst whose main role is compiling new wine lists for restaurants. To maintain their knowledge, the taxpayer purchases several cases of mixed wine for tasting and assessment at their private residence. The taxpayer is not required by their employer to incur this expenditure although they did arrange for the taxpayer to receive a discount price on purchase. The taxpayer consumes approximately 1/4 of the bottle for tasting and the remainder for private use.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In establishing a connection, it must be shown that the outgoing is relevant and incidental to the gaining of assessable income. In most circumstances the purchasing of wine for tasting purposes would be considered a private expense. In some limited circumstances this expense may be characterised as an income producing expense and may be an allowable deduction. However, there is an onus on the taxpayer to prove that such an outlay should be an allowable deduction. This was highlighted in Case P30 82 ATC 139; 25 CTBR (NS) 30 Case 94 when the Board of Review disallowed a claim for the purchase of newspapers by a real estate salesman. The real estate salesman would gather information from the daily papers to assist him in selling real estate. The salesman was however, unable to demonstrate that his income was affected by expenditure on the newspapers. The expense retained its private character and the deduction was not allowed. The taxpayer is not required to incur the expense by their employer. While knowledge acquired from the wine tastings may assist the taxpayer to carry out employment duties more efficiently, the expense is not necessarily incurred in order to earn that income. The tasting of the wines at the taxpayer's home has the character of a private expense. The connection is too general or tenuous to allow a deduction for any portion of the cost. Accordingly, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost incurred in purchasing the wine.", "Date_of_Decision": "30 August 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Work related expenses Private or domestic expenses", "Case_References": "Case P30 / Case 94 82 ATC 139 25 CTBR (NS) 30", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002319", "Unmatched_Content": "Minor amendments to clarity content | Minor amendments to clarify content | Update case citation. Replace Case P30 25 CTBR (NS); Case 94 82 ATC 139 with Case P30 82 ATC 139; 25 CTBR (NS) 30 Case 94. Changed salesperson to salesman to maintain consistency. | Case 94 25 CTBR (NS) 30 Case P30 82 ATC 139 | Keywords Work related expenses Private or domestic expenses"}
{"ATO_ID_Number": "ATO ID 2002/341", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions - employee pays employer company's operating expenses", "Issue": "Can the taxpayer claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred by them on behalf of their employer?", "Decision": "No. The taxpayer cannot claim a deduction under section 8-1 of the ITAA 1997 for expenses incurred by the taxpayer on behalf of their employer, as the expenses were incurred for the purposes of generating the assessable income of the employer, rather than the assessable income of the taxpayer.", "Facts": "The taxpayer is a shareholder, director and employee of a small private company. The taxpayer is responsible for the management and day to day operations of the company. The taxpayer is often required to pay the company's expenses out of their salary and wages. The taxpayer did not receive director's fees or dividend income from the company in the income year.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing your assessable income and is not: An outgoing is considered to be incurred in gaining or producing assessable income if there is a sufficient connection between the outgoing and the activities which produce or are expected to produce assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47). The essential character of an outgoing is generally determined objectively. As a general rule, an outgoing will not be deductible unless it is incurred in gaining or producing the assessable income of the taxpayer who incurs it. In Case U134 87 ATC 780; Case 92 (1987) 18 ATR 3646 the taxpayer was a shareholder and director of a family company who paid some of the company's expenses but was not reimbursed by the company for these expenses. The taxpayer did not receive any directors fees from the company in the relevant income year. The Administrative Appeals Tribunal held that the expenses were not deductible as the taxpayer incurred the expenses in his capacity as a director but did not derive any assessable income in that capacity. The taxpayer incurred the expenses in order to produce the assessable income of the company rather than the taxpayer's own salary and wages. There is no sufficient or direct connection between the expense and the taxpayer's assessable income for the income year. Accordingly, the taxpayer cannot claim a deduction under section 8-1 of the ITAA 1997 for the expenses incurred on behalf of the company.", "Date_of_Decision": "8 March 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/738", "Subject_References": "Deductions & expenses Business income Work related expenses", "Case_References": "Ronpibon Tin NL v FC of T 78 CLR 47", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002341", "Unmatched_Content": "Keywords Deductions & expenses Business income Work related expenses"}
{"ATO_ID_Number": "ATO ID 2002/472", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of wages paid by an employee to another person", "Issue": "Is the taxpayer, who is an employee, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for wages paid to another person?", "Decision": "No. The taxpayer, who is an employee, is not entitled to a deduction under section 8-1 of the ITAA 1997 for wages paid to another person.", "Facts": "The taxpayer is employed as a salaried lecturer. Another person has contributed to the preparation of course material, student reports and correspondence for the taxpayer. The taxpayer considers that without this assistance they would not have been able to fulfil all the duties of their employment. The taxpayer paid a portion of their gross income to the other person for this assistance.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The Board of Review considered the deductibility of wages paid by an employee in Case M55 80 ATC 366; (1980) 24 CTBR (NS) Case 30. In that case an employee pathologist was denied a deduction for wages paid to his wife to take messages for him when he was on call. The Board considered that the expenditure was not incurred in gaining or producing the assessable income and was of a private or domestic nature. Dr Beck stated at ATC page 368, CTBR (NS) page 242: 'If an employee pays another party to render some of the services for which the employee is paid this expenditure is not a cost of deriving the income. It can be regarded as a cost of lightening the work load, of gaining time off, of filling a gap in the employees competence, or, perhaps of rendering service beyond that which he is being paid for, and all expenditure of this kind is private and hence specifically excluded ...[from being deductible]' Where a taxpayer pays another to perform part of or assist with the duties of their employment it is not an expense which is incurred by the taxpayer in gaining or producing their employment income. In addition, the wages paid would be an outgoing of a private or domestic nature. Note: In some circumstances the payment of wages by an employee to an assistant may be deductible. In Frisch v Federal Commissioner of Taxation [2008] AATA 462; 2008 ATC 10-031; (2008) 72 ATR 551, the Tribunal found that wages paid by the taxpayer who was disabled to an assistant, who provided certain services to enable the taxpayer to work as a law clerk, were deductible. The reasons for this decision are discussed in the Decision Impact Statement.", "Date_of_Decision": "7 February 2002", "Year_of_Income": "Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Salary and wages expenses Wages", "Case_References": "Case M55 / Case 30 80 ATC 366 (1980) 24 CTBR (NS) 239", "Other_References": "Decision Impact Statement - Frisch v Federal Commissioner of Taxation", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002472", "Unmatched_Content": "Amended for clarity Added note on Frisch case with link to the Decision Impact Statement | Added case reference to Frisch and Decision Impact Statement | Keywords Deductions & expenses Salary and wages expenses Wages"}
{"ATO_ID_Number": "ATO ID 2002/484", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Pay TV expenses", "Issue": "Is the taxpayer, an accountant, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 for pay TV subscription fees paid to access a professional education channel?", "Decision": "Yes, there is a sufficient nexus between the income producing activities of the taxpayer and the content of the pay TV channel so that the subscription fee is an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 . The connection fee however, is a capital expense and not an allowable deduction. The subscription fee for the base pay TV channels is private expenditure under paragraph 8-1(2)(b) of the Income Tax Assessment Act 1997 and is not an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 .", "Facts": "The taxpayer is employed as an accountant and subscribes to pay TV in order to access a professional education channel. The professional education channel is a tier channel and is not included in the standard base package supplied by the pay TV operator. The professional education channel has received accreditation from the Accountant's Governing Body to deliver content that specifically meets the needs of its members and does not show any content of an entertainment nature. The taxpayer incurs the following expenses, connection fee; subscription for base package and additional subscription for the professional education channel.", "Reasons_for_Decision": "Summary: In order for an expenditure to be deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), it must have the essential character of an outgoing incurred in gaining assessable income ( Lunney v. FCT (1958) 100 CLR 478). There must be a sufficient nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FCT (1949) 78 CLR 47). The expenditure must not be capital, private or domestic in nature. The base package provided by the pay TV operators is an entertainment product and is essentially of a private or domestic nature. The subscription fee for the base product would therefore not qualify as an allowable deduction under section 8-1 of the ITAA 1997. Any initial connection cost or one-off membership fee will not be an allowable deduction as they are of capital and/or private nature ( Case M53 80 ATC 357; (1980) 24 CTBR(NS) 234). Taxation Ruling TR 98/14 Income tax: employee journalists - allowances, reimbursements and work related deductions (TR 98/14) discusses whether a deduction is allowable for Pay TV expenses by journalists. The TR 98/14 states that even though a taxpayer may be able to use part of the information obtained in the course of their work, the benefit gained is usually remote and the proportion of the expense that relates to work is incidental to the private expenditure. However it also provides that in some instances a journalist may be required to access pay TV as a direct consequence of his/her employment. The content of the education program has received accreditation from the Accountant's Governing Body and the content of the program specifically meets the needs of its member accountants. The entire education channel relates to the taxpayer's work and is incidental and relevant to the taxpayer's employment as an accountant. The taxpayer is entitled to a deduction for the additional subscription fee for access to the education channel under section 8-1 of the ITAA 1997.", "Date_of_Decision": "6 July 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "TR 98/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Continuing professional development expenses Private or domestic expenses Self education expenses Work related expenses", "Case_References": "Lunney v. FCT (1958) 100 CLR 478", "Other_References": "Previously Released as CDS10390", "Business_Line": "Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002484", "Unmatched_Content": "Reword the sentence from 'Can a taxpayer claim' to 'Is the taxpayer entitled to' | Add 'an' before 'expenditure' | Add additional wording 'allowable' before 'deduction'; | Replace 'one off' with 'one-off'; | Singularise 'membership fees'; | Replace 'expense' with 'nature' | Replace '1998/14' with '98/14'; | Add 'the' before TR 98/14; | Reword the sentence 'it is also provided' to 'it also provides'; | Replace 'their' with 'his/her'; | Add 'education' before 'channel'; | Reword the sentence 'will be able to claim' to 'is entitled to'. | Related Public Rulings (including Determinations) TR 98/14 | Keywords Deductions & expenses Continuing professional development expenses Private or domestic expenses Self education expenses Work related expenses"}
{"ATO_ID_Number": "ATO ID 2002/663", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions & Expenses: Sum paid in settlement of a harassment and victimisation claim", "Issue": "Is the sum paid by the taxpayer in settlement of a sexual harassment and victimisation claim deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The sum paid by the taxpayer in settlement of a sexual harassment and victimisation claim is not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is an employee. The duties of the taxpayer did not include advising other employees on their work performance. Another employee lodged a complaint of sexual harassment and victimisation against the taxpayer with the relevant Government Authority. The taxpayer denied the allegations made. The matter proceeded to the relevant Government Authority where it was resolved through a conciliation agreement. The taxpayer agreed to pay a settlement amount for pain, suffering and cost. In exchange all parties agreed to take no further action.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. For the settlement sum to constitute an allowable deduction, it must be shown that it was incidental or relevant to the production of the taxpayer's assessable income ( Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). In determining whether a deduction for the settlement sum is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must also be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; (1946) 8 ATD 190). Therefore expenses as a result of legal action are generally deductible if the expenses arise out of the day to day activities of the taxpayer's business ( Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 39 ALR 46; (1932) 2 ATD 169) and the legal action has more than a peripheral connection to the taxpayer's income producing activities ( Magna Alloys and Research Pty Ltd v. FC of T (1980) 49 FLR 183; (1980) 11 ATR 276; 80 ATC 4542). Similarly, in the FC of T v. Rowe (1995) 60 FCR 99; (1995) 31 ATR 392; 95 ATC 4691, the court accepted that legal expenses incurred in defending the manner in which a taxpayer performed his employment duties were allowable. No significance was placed by the court on the taxpayer's status as an employee. Generally, the treatment of a settlement sum or damages payment will follow the treatment of the other legal costs incurred in relation to a particular matter. Legal expenses incurred by a taxpayer in defending a sexual harassment and victimisation claim made by another employee do not arise as a consequence of the performance of the taxpayer's duties by which they derive their assessable income. Accordingly, the settlement sum paid by the taxpayer in relation to the sexual harassment and victimisation claim is not an allowable deduction under section 8-1 of the ITAA 1997 as it was not incurred in gaining or producing assessable income.", "Date_of_Decision": "17 December 2001", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/66 | ATO ID 2002/664", "Subject_References": "Negotiated settlements Deductions & expenses Legal expenses", "Case_References": "Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 4 AITR 236 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002663", "Unmatched_Content": "Keywords Negotiated settlements Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/1068", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Driver - deductibility of contributions to a traffic fund", "Issue": "Is the taxpayer, employed as a driver, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for contributions paid into a traffic fund?", "Decision": "No. The taxpayer, employed as a driver, is not entitled to a deduction under section 8-1 of the ITAA 1997 for contributions paid into a traffic fund.", "Facts": "The taxpayer is employed as a driver. The taxpayer contributes to a traffic fund by way of a weekly levy. The fund provides the following benefits for members:", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private, or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for the traffic fund levy is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the levy follows the advantage that is sought to be gained by incurring the expense. If the advantage to be gained is of a capital or private nature, then the expenses incurred in gaining the advantage will also be of a capital or private nature. The payment of the levy is in the nature of an indemnity whereby the fund agrees to indemnify the taxpayer upon the occurrence of a future potential economic loss. The payment does not relate to a specific economic loss, rather a loss that may be incurred due to the imposition of any traffic fine or related legal expense. While the costs involved in obtaining some specific legal services may have a connection with earning the taxpayer's assessable income, the payment of the levy has no such connection. The taxpayer has not incurred this expense in earning their assessable income, rather the expense is in the nature of a capital expense incurred in order to secure a potential future benefit unrelated to the taxpayer's day to day activities. Furthermore, penalties or fines imposed for breaches of the law committed whilst exercising a trade or undertaking employment are not deductible. The nature of the penalty or fine severs it from constituting an income-producing expense ( Madad v. Federal Commissioner of Taxation (1984) 4 FCR 420; (1984) 55 ALR 379; (1984) 84 ATC 4739; (1984) 15 ATR 1118). The principle objective of the fund is to indemnify members against future economic loss arising out of breaches of the traffic code. Thus the levy paid by the taxpayer to the traffic fund is considered to be too remote from the earning of the taxpayer's assessable income. The traffic fund levy cannot be described as an expense incurred by the taxpayer in earning their assessable income. Accordingly, the taxpayer is not entitled to a deduction for the amount of the levy under section 8-1 of the ITAA 1997.", "Date_of_Decision": "4 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Associations & membership expenses Deductions & expenses Fines expenses Legal action Legal expenses Trade union & employee associations Work related expenses", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021068", "Unmatched_Content": "amended to update legislative references and to improve clarity | Keywords Associations & membership expenses Deductions & expenses Fines expenses Legal action Legal expenses Trade union & employee associations Work related expenses"}
{"ATO_ID_Number": "ATO ID 2003/173", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Gifts or contributions of money made by an executor under the terms of a will", "Issue": "Are monetary gifts or contributions made by the executor of a deceased estate, pursuant to a will, allowable deductions under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Monetary gifts or contributions made by the executor of a deceased estate, pursuant to a will, are not allowable deductions under Division 30 of the ITAA 1997.", "Facts": "The taxpayer is appointed the trustee and executor of a will. The testator devised and bequeathed a portion of their estate to two institutions. The institutions are not the Australiana Fund, public libraries, museums or art galleries in Australia, or institutions in Australia which are a combination of a public library, museum and/or art gallery. The trustee and executor is empowered to sell, call in and convert into money the whole or any part of the residuary estate at such times, in such manner, at such price and upon such terms as they think appropriate. Various CGT assets were held by the trustee and executor on behalf of the estate. The trustee and executor disposed of the CGT assets. In accordance with the terms of the will, the executor and trustee made distributions to the institutions. The distributions were made from the proceeds of the sale of the CGT assets.", "Reasons_for_Decision": "Summary: Subsection 30-15(2) of the ITAA 1997 specifically provides that a testamentary gift or contribution is not deductible under section 30-15 of the ITAA 1997. Income tax legislation does not provide a definition of or any specific guidance as to what is meant by the word 'testamentary'. The word therefore bears its ordinary meaning. The Australian Oxford English Dictionary defines 'testamentary' to mean 'of or by or in a will.' The meaning of 'testamentary' was considered by Kekewich J in Re Clemow, Yeo v Clemow [1900] 2 Ch 182. He referred to the Century Dictionary definition of 'testamentary 'as 'relating or appertaining to a will or wills; also relating to administration of the estates of deceased persons.' The term 'will' is defined in the Butterworths Australian Legal Dictionary as: a legal document which a person, the testator, makes provision for an executor to be appointed to administer their estate after their death to discharge liabilities and to distribute property as directed to beneficiaries as specified. A gift made by an executor in accordance with the terms of a will is a testamentary gift or contribution. Consequently, a gift or contribution that is made under will is not deductible under section 30-15 of the ITAA 1997. Accordingly, the taxpayer is not entitled to a deduction under Division 30 of the ITAA 1997 for any monetary gifts or contributions made as executor of a deceased estate.", "Date_of_Decision": "7 March 2003", "Year_of_Income": "30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 30 section 30-15 subsection 30-15(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductible gift recipients Executors Gifts & donations Wills", "Case_References": "Re Clemow, Yeo v Clemow [1900] 2 Ch 182", "Other_References": "Explanatory Memorandum to the Tax Law Improvement Act 1997 The Australian Oxford English Dictionary Butterworths Australian Legal Dictionary", "Business_Line": "Business and Personal Taxes Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003173", "Unmatched_Content": "Keywords Deductible gift recipients Executors Gifts & donations Wills"}
{"ATO_ID_Number": "ATO ID 2003/727", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of payments to charitable institutions nominated by clients", "Issue": "Is the taxpayer (a mortgage broker) entitled to a deduction under Division 30 of the Income Tax Assessment Act 1997 (ITAA 1997) or under section 8-1 of the ITAA 1997 for contributing a percentage of the taxpayer's trailing commission to a charitable institution nominated by the taxpayer's client, where the taxpayer undertakes to make such a contribution at the time of arranging the loan?", "Decision": "Yes. Although the taxpayer is not entitled to a deduction under Division 30 of the ITAA 1997 as the contribution of a percentage of their trailing commission to a charitable institution nominated by their client that is undertaken to be made at the time of arranging the loan is not a gift, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 as the contribution is an expense incurred in gaining or producing the taxpayer's assessable income.", "Facts": "The taxpayer carries on a business of mortgage broking. The taxpayer receives trailing commissions from the loan originator over the life of the loan when the taxpayer successfully arranges a loan, with the loan originator, for a client. At the time of arranging a loan for a client, the taxpayer undertakes to contribute a specified percentage of the trailing commissions from the loan originator to an eligible organisation that is nominated by this client. The taxpayer's business charter specifies that a client can only nominate an organisation to receive the contributions if that organisation's core objectives and activities contribute to the local community or to society as a whole. An eligible organisation can be, but does not need to be, a registered charitable institution or deductible gift recipient. However, organisations that have political alliances or are involved in political activities are not eligible to receive contributions. Provided that the organisation nominated by the client is an eligible organisation, the taxpayer does not have any discretion to refrain from contributing the specified percentage of the trailing commission to that organisation. An organisation that is nominated by a client is called a 'supported organisation'. In this case, the supported organisation is a charitable institution. The taxpayer encourages supported organisations to use their list of subscribers and members to market the possibility of taking out loans using the taxpayer's mortgage broking services as the more loans that are taken out by using the taxpayer's services, the more funds the supported organisation will receive.", "Reasons_for_Decision": "Summary: Division 30 of the ITAA 1997 deals with the deductibility of gifts and certain contributions. The table in section 30-15 of the ITAA 1997 specifies a list of gifts and contributions that a taxpayer can deduct. As the taxpayer does not make contributions to organisations that have political alliances or are involved in political activities, the contribution of a percentage of the trailing commission to the charitable institution is deductible under Division 30 of the ITAA 1997 only if that contribution is a gift. The term 'gift' is not defined in the income tax legislation, and thus takes on its ordinary meaning. The meaning of the word 'gift' had been considered by the High Court in Federal Commissioner of Taxation v. McPhail (1968) 117 CLR 111; (1968) 15 ATD 16; (1968) 10 AITR 552 (McPhail's Case). Owen J confirmed that the word 'gift' was used in the sense in which it is understood 'in ordinary parlance'. He noted that the Shorter Oxford Dictionary defined the act of giving as 'a transfer of property in a thing voluntarily and without any valuable consideration'. He then went on to say: 'But it is, I think, clear that to constitute a \"gift\", it must appear that the property transferred was transferred voluntarily and not as the result of a contractual obligation to transfer it and that no advantage of a material character was received by the transferor by way of return.' Therefore, the contribution of specified percentage of the trailing commissions will constitute a 'gift' if: The two tests in McPhail's Case have been applied in a long line of cases. In Case [2000] AATA 100; Case 3/2000 2000 ATC 132; (2000) 43 ATR 1337, a contract for the purchase of land required the purchaser to pay $8.1 million to the vendor and $2.7 million to an unrelated charity. The AAT applied McPhail's Case and upheld a private ruling that the payment to the charity was a contractual payment and not a gift. At the time of arranging the loan for a client, the taxpayer undertakes to contribute a percentage of the trailing commissions from the loan originator to a charitable institution that is nominated by this client. The charitable institution nominated by the client is an eligible organisation and the taxpayer does not have any discretion to refrain from contributing the specified percentage of the trailing commission to that charitable institution. It is considered that the taxpayer's lack of discretion to refrain from making the contribution, once the client takes out the loan, indicates that the contribution is made as a result of a contractual obligation. Further, it is considered that the taxpayer would receive an advantage of a material character by way of return because the supported organisation would be motivated to use its mailing list of members and subscribers to promote the taxpayer's mortgage broking business as the preferred mortgage broking services to its members. Accordingly, it is considered that the contribution of the specified percentage of the trailing commission does not satisfy both the requirements of a 'gift'. As the contribution is not a gift, the taxpayer is not entitled to a deduction under Division 30 of the ITAA 1997. Under section 8-1 of the ITAA 1997, an outgoing is deductible to the extent that it is incurred in gaining or producing assessable income; or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income; and the outgoing is not of a capital, private or domestic nature. In Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236, the High Court stated, 'that for an expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income, it must be incidental and relevant to that end'. It is considered that the contribution of a percentage of the trailing commission to the charitable institution nominated by the client is an outgoing that is incidental and relevant to the earning of the commission from the loan originator. This outgoing is not of a capital, private or domestic nature. Therefore, where the taxpayer undertakes to make such a contribution at the time of arranging the loan, the taxpayer is entitled to deduct under section 8-1 the contributed percentage of the trailing commission to the charitable institution nominated by the taxpayer's client.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 Division 30 section 30-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Gifts to organisations Advertising & promotion expenses", "Case_References": "FCT v McPhail (1968) 117 CLR 111 (1968) 15 ATD 16 (1968) 10 AITR 552", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003727", "Unmatched_Content": "This ATO ID has been amended to improve clarity This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Wording amended to clarify content | Amendment to correct error in case citation Amendment to correct grammatical error | Notes 2 and 3 added to clarify content | Keywords Deductions & expenses Gifts to organisations Advertising & promotion expenses"}
{"ATO_ID_Number": "ATO ID 2010/15", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Payments by a life insurance company to correct unit pricing errors", "Issue": "Are payments by a life insurance company, to current and former policyholders to correct unit pricing errors, amounts paid in 'respect of claims' under life insurance policies for the purposes of subsection 320-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Payments by a life insurance company, to current and former policyholders to correct unit pricing errors, are amounts paid in 'respect of claims' under life insurance policies for the purposes of subsection 320-80(3) of the ITAA 1997.", "Facts": "A life insurance company paid amounts to some of its current and former policyholders to correct unit pricing errors in relation to the investment-linked life insurance policies issued by the company. The life insurance company maintained one or more accounts in relation to each of the policies in order to determine its liability to the policyholder. The accounts recorded amounts such as premiums paid by the policyholder, investment earnings credited under the policy, fees charged under the policy and claims paid to the policyholder. Each of these accounts was maintained in units. The value of the policyholder's entitlement under the policy was determined by reference to the number of units and the value of these units. The life insurance company conducted a review of its unit pricing methodology and determined that the methodology adopted in the calculation of unit prices was inappropriate in some cases and should be changed as it did not treat policyholders fairly in relation to each other. The life insurance company determined that its failure to treat policyholders fairly in relation to each other gave rise to a breach of its common law duty to act in good faith towards the policyholders. The life insurance company notified the Australian Securities and Investments Commission (ASIC) that it considered that it had breached an obligation under Chapter 7 of the Corporations Act 2001 (Corporations Act), specifically its obligation under paragraph 912A(1)(a) of the Corporations Act which required the life insurance company to provide its financial services 'fairly'. The life insurance company was required by section 912B of the Corporations Act to have arrangements in place to compensate policyholders who suffered loss or damage because the life insurance company breached its obligations under Chapter 7 of the Corporations Act. The payments made to the policyholders to correct the unit pricing errors satisfied the life insurance company's obligations under section 912B. The payment to each policyholder will, as far as is possible, put the policyholder in the position they would have been in had the unit prices been determined appropriately in the first place. The amounts paid are not a risk component of a claim as defined in subsection 320-80(2) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 320-80(3) of the ITAA 1997 provides that, except as provided by subsection 320-80(1) of the ITAA 1997, a life insurance company cannot deduct amounts paid in respect of claims under life insurance policies. Subsection 320-80(1) provides that a life insurance company can deduct an amount paid in respect of the risk components of claims paid under life insurance policies. In order to determine whether subsection 320-80(3) of the ITAA 1997 applies, it is necessary to determine whether the amounts paid by the life insurance company can be characterised as amounts 'in respect of claims'. The word 'claim' is not defined for these purposes and should be interpreted having regard to its ordinary meaning in the context in which it is used. In Walton v. National Employers Insurance Association [1973] 2 NSWLR 73, Bowen JA considered a claim to be a demand for something as due, an assertion of a right to something. The Macquarie Dictionary defines the term 'claim' as including 'a payment demanded in accordance with an insurance policy, etc.' In Scully v. Commissioner of Taxation (1998) 84 FCR 41; 98 ATC 4671; (1998) 39 ATR 213, the term 'in respect of' was explained as follows: The words \"in respect of personal injury\" are to be given a meaning which extends beyond what would otherwise be included by use of the expression \"for personal injury\"... The question raised in the present case concerns the reach of the more comprehensive expression \"in respect of\". These words, construed according to their natural and ordinary meaning, have a very wide ambit but they must reflect the context in which they are used and therefore have limits... Accordingly, it is considered that the meaning of the term 'in respect of claims' is wider than the meaning of the word 'claims' and in the context of section 320-80 of the ITAA 1997 'in respect of claims' includes claims and also amounts in the nature of claims. In determining whether the amounts paid are 'in respect of claims' it is necessary to consider the context in which the term is used and the interaction of section 320-80 of the ITAA 1997 with the other provisions of Division 320 of the ITAA 1997. In Newcastle City Council v. GIO General Limited (1997) 191 CLR 85; McHugh J observed at CLR 112: ...a court is permitted to have regard to the words used in the legislature in their legal and historical context and, in appropriate cases, to give them meaning that will give effect to any purpose of the legislation that can be deduced from that context. The approach of interpreting words in their context so as to give effect to the purpose of a provision is given legislative support in section 15AA of the Acts Interpretation Act 1901 which provides: In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object. Section 320-80 of the ITAA 1997 is a specific deduction provision for dealing with amounts paid to policyholders. In the context of the taxing mechanism in Division 320 of the ITAA 1997, an appropriate outcome only arises if amounts representing an obligation to policyholders in their capacity as policyholders are only deductible where the conditions of section 320-80 are satisfied. The obligation to pay the amounts arises because the life insurance company has entered into a contract with a policyholder and has breached its duty of good faith to the policyholder. However in making the payment the life insurance company is also able to meet its obligation under the Corporations Act to make arrangements to compensate the policyholder. This does not change the character of the payment, which is in the nature of a claim arising by virtue of the policy held by the policyholder. The amounts being paid to policyholders are directly connected with the obligations of the life insurance company under the life insurance policies and are in the nature of claims. Accordingly, in the context of Division 320 of the ITAA 1997, the amounts paid to policyholders by the life insurance company are considered to be amounts that are 'in respect of claims' for the purposes of subsection 320-80(1) of the ITAA 1997.", "Date_of_Decision": "21 December 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 Division 320 section 320-80 subsection 320-80(1) subsection 320-80(2) subsection 320-80(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Compensation claims Investment linked policies Life insurance company Life insurance policies", "Case_References": "Walton v National Employers Insurance Association [1973] 2 NSWLR 73", "Other_References": "The Macquarie Dictionary, 2001, rev third edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201015", "Unmatched_Content": "Keywords Compensation claims Investment linked policies Life insurance company Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2002/199", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction for ordinary bundled endowment policies issued by a friendly society", "Issue": "How does section 320-75 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to ordinary bundled endowment policies issued by a friendly society?", "Decision": "Section 320-75 of the ITAA 1997 allows a deduction for the investment component of ordinary bundled endowment policies issued by a friendly society.", "Facts": "A friendly society issues ordinary bundled endowment policies, and charges a fee for administering these policies.", "Reasons_for_Decision": "Summary: Section 320-75 of the ITAA 1997 allows a deduction for a component of premiums in respect of ordinary non-participating investment policies. An ordinary bundled endowment policy issued by a friendly society is an ordinary non-participating investment policy. If the policy is issued before 1 July 2001, the amount allowed as a deduction under section 320-75 of the ITAA 1997 is the sum of the net premium less the amount that an actuary determines (having regard to the change over in the income year in the sum of the net current termination values of the policies and the movements in those values during the year) to be attributable to fees and charges (including risk charges) If the policy is issued after 1 July 2001, the amount allowed as a deduction under section 320-75 of the ITAA 1997 is the lesser of : The current termination value of the policy is the surrender value of the policy.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "Year ended 30 June 2001 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 Section 320-75", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/197 | ATO ID 2002/198 | ATO ID 2002/200 | ATO ID 2002/201", "Subject_References": "Life assurance Endowment insurance", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002199", "Unmatched_Content": "Keywords Life assurance Endowment insurance"}
{"ATO_ID_Number": "ATO ID 2002/200", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amount Paid Under An Ordinary Bundled Endowment Policy of a Friendly Society Upon The Death or Disability of a Policyholder", "Issue": "How does section 320-80 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to an amount paid under an ordinary bundled endowment policy of a friendly society on the death or disability of the insured.?", "Decision": "Paragraph 320-80(2)(c) of the ITAA 1997 specifies how the risk component of an amount paid under an ordinary bundled endowment policy of a friendly society on the death or disability of the insured is determined.", "Facts": "A friendly society pays an amount under an ordinary bundled endowment policy on the death or disability of the insured.", "Reasons_for_Decision": "Summary: An ordinary bundled endowment policy issued by a friendly society has a risk component and an investment component. A friendly society is entitled to a deduction for the risk component of such a policy for an amount paid on the death or disability of the insured. Paragraph 320-80(2)(c) of the ITAA 1997 is the relevant provision which determines the amount relating to the risk component of the policy. The risk component under paragraph 320-80(c) of the ITAA 1997 is the amount paid under the policy on the death or disability of the insured reduced by the current termination value of the policy (calculated by an actuary) immediately before the death, or the occurrence of the disability, of the insured person.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "Year ended 30 June 2001 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 320-80(2)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/197 | ATO ID 2002/198 | ATO ID 2002/199 | ATO ID 2002/201", "Subject_References": "Life assurance Endowment insurance", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002200", "Unmatched_Content": "Keywords Life assurance Endowment insurance"}
{"ATO_ID_Number": "ATO ID 2002/201", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction for increase in value of liabilities under net risk components of ordinary endowment policies issued by a friendly society", "Issue": "How is the increase in value of liabilities under net risk components of ordinary endowment policies issued by a friendly society determined?", "Decision": "The increase in value of liabilities under net risk components of ordinary endowment policies issued by a friendly society is determined under subsection 320-85(4) of the Income Tax Assessment Act 1997 (ITAA 1997). The amount allowed as a deduction to a friendly society is the sum of the policy liabilities (as defined in the Valuation Standard), as calculated by an actuary in respect of the net risk component of policies less the sum of any cumulative losses for the net risk component of policies.", "Facts": "A friendly society issues bundled ordinary endowment policies.", "Reasons_for_Decision": "Summary: Section 320-85 of the ITAA 1997 allows a deduction for increases in the value of liabilities under the net risk component of policies over an income year. If there is a decrease in the value of the policies under the net risk component of policies over the income year, the decrease is included in the assessable income of the friendly society under paragraph 320-15(h) of the ITAA 1997. The increase in value of liabilities under net risk components of ordinary endowment policies issued by friendly society is determined under subsection 320-85(4) of the ITAA 1997. The amount allowed as a deduction is the sum of the policy liabilities (as defined in the Valuation Standard), as calculated by an actuary in respect of the net risk component of policies less the sum of any cumulative losses for the net risk component of policies. To calculate the \"net risk component\" ( as defined in subsection 995-1(1) of the ITAA 1997) of the policy liabilities, the actuary of a friendly society would have regard to the current termination value, and may adopt a pragmatic approach using reasonable assumptions. The actuary could for example, take into consideration the method used in paragraph 320-55(3)(b)(ii) of the ITAA 1997 to calculate the risk component.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "Year ended 30 June 2001 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 Section 320-85 Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/197 | ATO ID 2002/198 | ATO ID 2002/199 | ATO ID 2002/200", "Subject_References": "Life assurance Endowment insurance", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002201", "Unmatched_Content": "Keywords Life assurance Endowment insurance"}
{"ATO_ID_Number": "ATO ID 2011/95", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Managed investment scheme: restructure and appointment of a replacement Responsible Entity", "Issue": "Does paragraph 82KZMGA(1A)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) apply where, due to the insolvency of a former Responsible Entity and the appointment of a new Responsible Entity, the taxpayer's interest in a Managed Investment Scheme (MIS) is terminated as a result of the taxpayer and other participants in the MIS jointly approving changes to the MIS structure necessary to facilitate the continuation of the scheme?", "Decision": "Yes, paragraph 82KZMGA(1A)(a) of the ITAA 1936 applies where, due to the insolvency of a former Responsible Entity and the appointment of a new Responsible Entity, the taxpayer's interest in a MIS is terminated as a result of the taxpayer and other participants in the MIS jointly approving changes to the MIS structure necessary to facilitate the continuation of the scheme.", "Facts": "The taxpayer is an initial participant in a forestry MIS. As an initial participant, the taxpayer paid an amount under an agreement as part of a MIS in June 2008 and claimed a deduction in that income year pursuant to section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and section 82KZMG of the ITAA 1936. In 2011, due to the insolvency of the former Responsible Entity (RE), a new RE was appointed and the taxpayer and other participants jointly approved changes to the MIS structure necessary to facilitate the continuation of the scheme. As a result of the restructure, the land and trees held under the scheme were sold; thus terminating the taxpayer and other participants' interests in the MIS. The termination of the taxpayer's interest in the MIS is a Capital Gains Tax (CGT) event for the purposes of section 82KZMGA of the ITAA 1936. At the time of acquiring their interest in the MIS, the taxpayer could not have reasonably foreseen the disposal of their interest by virtue of the insolvency of the former RE because there were no objective indications at that time of any financial difficulties on the part of the former RE.", "Reasons_for_Decision": "Summary: Subsection 82KZMGA(1) of the ITAA 1936 operates to disallow a deduction pursuant to section 8-1 of the ITAA 1997 and section 82KZMG of the ITAA 1936 if a CGT event happens in relation to a forestry interest within four years after the end of the income year in which an amount is first paid by the taxpayer under the agreement in which the interest is held. However, subsection 82KZMGA(1A) of the ITAA 1936 provides that where the CGT event happens because of circumstances outside the control of the taxpayer (paragraph 82KZMGA(1A)(a)), the deduction is not disallowed, provided the taxpayer could not have reasonably foreseen the CGT event happening when they acquired their interest (paragraph 82KZMGA(1A)(b)). The termination of a taxpayer's interest as a consequence of the insolvency of a former RE is a CGT event, the happening of which is genuinely outside of the taxpayer's control. The taxpayer had no control over the solvency of the former RE; its failure ultimately leading to the decision, to sell the trees and land, that directly caused the CGT event. There is no objective evidence that, at the time of acquiring their interest in the MIS, the taxpayer could have reasonably foreseen the disposal of their interest by virtue of the insolvency of the former RE. As a result, subsection 82KZMGA(1A) of the ITAA 1936 applies and the taxpayer's previously claimed deductions will not be affected.", "Date_of_Decision": "10 November 2011", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 section 82KZMG section 82KZMGA subsection 82KZMGA(1) subsection 82KZMGA(1A) paragraph 82KZMGA(1A)(a) paragraph 82KZMGA(1A)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital Gains Capital Gains Tax CGT Events Deductions and Expenses Forestry", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201195", "Unmatched_Content": "Keywords Capital Gains Capital Gains Tax CGT Events Deductions and Expenses Forestry"}
{"ATO_ID_Number": "ATO ID 2004/178", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of amount provided as security", "Issue": "Can a taxpayer claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the amount provided as security to a bank to obtain a bank guarantee to satisfy the security requirements of an insurance provider?", "Decision": "No. The taxpayer cannot claim a deduction under section 8-1 of the ITAA 1997 for the amount provided as security to a bank to obtain a bank guarantee to satisfy the security requirements of an insurance provider.", "Facts": "The taxpayer's insurer required a $10,000 bank guarantee as security before insurance policies with the taxpayer would be written. The taxpayer's bank provided a Banker's Undertaking to the taxpayer's insurer to distribute funds to the maximum aggregate sum of $10,000 when requested by the taxpayer's insurer. The taxpayer's bank required $10,000 to be deposited by the taxpayer in a term deposit in the taxpayer's name with them. The taxpayer's insurer is authorised to access the money held in term deposit and disperse it to cover legal or rectification costs when settling insurance claims made against the taxpayer. Distributions to the taxpayer's insurer from the taxpayer's bank would reduce the term deposit balance held in the taxpayer's name. The taxpayer cannot access the funds held in the term deposit until six years have expired from the completion time of the taxpayer's last job that is insured with the insurer.", "Reasons_for_Decision": "Summary: A taxpayer can deduct a loss or outgoing from their assessable income under section 8-1 of the ITAA 1997 to the extent to which it is incurred in gaining or producing their assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing their assessable income. As the term 'incurred' is not defined in the ITAA 1997, regard may be had to the ordinary meaning of the term as found in judicial decisions. The High Court in Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492; (1953) 10 ATD 240; (1953) 5 AITR 579 provided that a loss or outgoing will be 'incurred' where the taxpayer is 'definitely committed' or has 'completely subjected' themselves to the loss or outgoing in gaining or producing their assessable income. No loss or outgoing is incurred at the time the $10,000 is provided as security, as the taxpayer is not definitely committed or completely subjected to the loss or outgoing. The $10,000 will only be accessed by the bank if and when an insurance claim is settled against the taxpayer and not when the security is originally provided. Although the taxpayer is restricted in the manner they may access the security after entering into the arrangement with the bank, this restriction is not sufficient to characterise the taxpayer as being definitely committed or completely subjected to the loss or outgoing. Furthermore, even if the taxpayer could be characterised as being definitely committed or completely subjected to the loss or outgoing, the contingent nature of the arrangement would impact on the deductibility of the security. Barwick CJ in Nilsen Development Laboratories Pty Ltd v. Federal Commissioner of Taxation (1981) 144 CLR 616; 81 ATC 4031; (1981) 11 ATR 505 provided that an impending, threatened, or expected loss or outgoing is not deductible, '... no matter how certain it is in the year of income that that loss or expenditure will occur in the future'. At the time the $10,000 is provided as security, potential amounts payable are merely impending, threatened, or expected losses or outgoings. Accordingly, even if the taxpayer could be characterised as being definitely committed or completely subjected to the loss or outgoing, as potential amounts payable are merely impending, threatened, or expected, the loss or outgoing cannot be characterised as being incurred. Accordingly, as no loss or outgoing has been incurred by the taxpayer, no deduction is available under section 8-1 of the ITAA 1997. Note: amounts withdrawn from the taxpayer's term deposit to meet payment demands by the taxpayer's insurer may be deductible under section 8-1 of the ITAA 1997 in the income year the loss or outgoing is incurred.", "Date_of_Decision": "23 January 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1068", "Subject_References": "Incurred Insurance expenses", "Case_References": "Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492 (1953) 10 ATD 240 (1953) 5 AITR 579", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004178", "Unmatched_Content": "Keywords Incurred Insurance expenses"}
{"ATO_ID_Number": "ATO ID 2004/968", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: management fees debited to an allocated pension account", "Issue": "Is the taxpayer, a retiree in receipt of an allocated pension, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the management fees debited to their allocated pension account?", "Decision": "No. The taxpayer, a retiree in receipt of an allocated pension, is not entitled to a deduction under section 8-1 of the ITAA 1997 for the management fees debited to their allocated pension account as the fees have already been deducted when calculating the amount of pension included in assessable income.", "Facts": "The taxpayer, a retiree, is in receipt of an allocated pension. The taxpayer is paid a yearly amount of pension between a prescribed minimum and maximum limit. These limits are calculated each year according to the taxpayer's age and balance of their allocated pension account. The yearly amount of their pension payment(s) is withdrawn from their allocated pension account balance. The allocated pension account balance comprises: The fund manager invests the allocated pension amount and any earnings are credited to the taxpayer's allocated pension account. If the investments generate a loss this is debited to the allocated pension account. The fund manager incurs costs in managing the investments of the allocated pension amount. A proportion of these costs are passed on to the taxpayer in the form of a management fee which is debited to the taxpayer's allocated pension account each year. The management fee is an amount equal to a set percentage of the balance of the allocated pension account as at the end of the financial year.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a taxpayer to deduct from their assessable income any loss or outgoing to the extent it is incurred in gaining or producing assessable income. Taxation Determination TD 95/60 provides the Commissioner's view that on-going management fees are expenditure incurred in 'servicing' an investment portfolio and therefore allowable deductions under section 8-1 of the ITAA 1997. The allocated pension payments are included in the taxpayer's assessable income under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936). The amount of pension included in the taxpayer's assessable income under section 27H of the ITAA 1936 is the yearly amount of their pension payment that is withdrawn from their available allocated pension account balance after the annual management fees have been debited. Therefore the on-going management fees have been taken into account before the pension payment has been made and included in the taxpayer's assessable income. The taxpayer has therefore only been assessed on the 'net' amount of their pension, that is after the management fees have been taken into account. Accordingly no further deduction is allowable to the taxpayer under section 8-1 of the ITAA 1997 for these on-going management fees.", "Date_of_Decision": "3 November 2004", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 27H", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 95/60", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Allocated annuities & pensions Management fees expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004968", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 95/60 | Keywords Allocated annuities & pensions Management fees expenses"}
{"ATO_ID_Number": "ATO ID 2002/658", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of Approved Deposit Fund Management or Administration Fees", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for management or administration fees charged by the trustee of an Approved Deposit Fund (ADF) that are offset against the accumulated net earnings available to members of the fund?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for management or administration fees charged by the trustee of an ADF as they have not been incurred in gaining or producing assessable income of the taxpayer.", "Facts": "The taxpayer received a redundancy payment from their employer. The taxpayer rolled over the lump sum payment into an ADF. The trustee of the ADF charges ongoing management or administration fees against the income of the fund. The effect of the fees is to reduce the accumulated net earnings available to the taxpayer.", "Reasons_for_Decision": "Summary: An ADF is a trust fund that is bound by the ordinary principles of trust law. The trustee of the fund assumes responsibility for managing the assets, deriving income from those assets and paying expenses, such as management or administration fees, incurred in earning that income. As an ADF is liable to pay tax on its investment income, the ADF would be entitled to claim a deduction against its investment income for the administration or management fees charged by the trustee to manage the fund's assets. The fees are incurred by the fund even though the consequential effect is to lower the accumulated net earnings available to members of the fund. The ADF may document its payment of the fees as a debit against the members accounts or deduct it from the gross earnings before crediting the net amount to its members accounts. This does not alter the fact that the fees are actually incurred by the ADF. Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. When the taxpayer withdraws their deposits and accumulated earnings (net of fees) available from their ADF account, the amount becomes assessable income in their hands as an eligible termination payment (ETP). The taxpayer has not, however, incurred the management or administration fees in deriving this assessable income. As the taxpayer has not incurred the management or administration fees, no deduction is allowable under section 8-1 of the ITAA 1997.", "Date_of_Decision": "27 March 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Administration expenses Fee expenses Financial services fee expenses Financial services industry expenses Management fees expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002658", "Unmatched_Content": "Keywords Administration expenses Fee expenses Financial services fee expenses Financial services industry expenses Management fees expenses"}
{"ATO_ID_Number": "ATO ID 2012/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Lease Document Expenses: deductibility when a property used partly for the production of assessable income", "Issue": "In the context of subsection 25-20(2) of the Income Tax Assessment Act 1997 (ITAA 1997), does the phrase 'will use' refer to intention at the time the relevant outgoing is incurred?", "Decision": "No. In the context of subsection 25-20(2) of the ITAA 1997 the phrase 'will use' is a reference to actual use of the property.", "Facts": "The taxpayer acquired the leasehold of a residential property during the income year and incurred stamp duty on transfer. The property was tenanted for three months to a third party after which time the tenants vacated the premises and the taxpayer took up residence for the balance of the income year.", "Reasons_for_Decision": "", "Date_of_Decision": "1 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 25-20 subsection 25-20(1) subsection 25-20(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/245", "Subject_References": "Deductions & expenses Lease & hire expenses Other references The Macquarie Dictionary, 2005, 4th edition, The Macquarie Library Pty Ltd, NSW", "Case_References": "Rayfield v Hands [1958] 2 All ER 194", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201236", "Unmatched_Content": "Reason for Decision: Subsection 25-20(1) of the ITAA 1997 provides that a deduction is allowable for the cost of preparing, registering or stamping a lease of property or an assignment or surrender of a lease of property, where the property has been or will be used solely for the purposes of producing assessable income. | Property used partly for that purpose | If you have used, or will use, the leased property only partly for that purpose, you can deduct the expenditure to the extent that you have used, or will use, the leased property for that purpose. | The proper construction of this subsection turns on what is meant by the phrase 'will use'. However, neither the phrase 'will use', nor its constituent words, are defined and therefore adopt their ordinary meaning in the legislative context in which they occur. | The context of section 25-20 of the ITAA 1997 is to provide a deduction for certain lease document expenses to the extent the leased property is used for income producing purposes. The context is one concerning use and requiring apportionment in cases where usage is not entirely for income producing purposes. A construction which makes subsection 25-20(1) of the ITAA 1997 redundant in some instances of non-income producing use is at odds with this scheme of section 25-20 of the ITAA 1997. | to employ for some purpose, put into service, turn to account. | However, the ordinary meaning of the verb 'will' varies depending on usage. In the current context, the word, 'will' places a future tense on the word 'use' such that the compound expression 'will use' is concerned with future use as opposed to a likelihood or resolve concerning use at the point in time the relevant outgoing is incurred. A similar construction was favoured in Rayfield v. Hands [1958] 2 All ER at 196 in which it was held the operation of the word 'will' on 'take' in the context there under consideration meant 'resultant prospective eventuality'. | It would be an incongruous outcome were a deduction available merely by reference to intention at the time an outgoing is incurred. If that were the test, a change in intention immediately following incurrence would entitle a deduction even though the property was never put to an income producing use. | Therefore, in circumstances where there is a change in use following acquisition part way through the income year, such that the premises are not wholly used for income producing purposes, an apportionment of the stamp duty outgoing which is reasonable in the circumstances is required under subsection 25-20(2) of the ITAA 1997. | Keywords Deductions & expenses Lease & hire expenses Other references The Macquarie Dictionary, 2005, 4th edition, The Macquarie Library Pty Ltd, NSW"}
{"ATO_ID_Number": "ATO ID 2005/147", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: taxi licences", "Issue": "Is a taxpayer who carries on a business of on leasing taxi licences to taxi cab operators, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the cost of leasing taxi licences?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of leasing taxi licences.", "Facts": "The taxpayer carries on a business of on leasing taxi licences to taxi cab operators. The taxpayer is currently leasing taxi licences from the government which has made further taxi licences available for lease to the taxi industry. The taxpayer applied for additional taxi licences each of which permits the holder to operate a taxi cab for a period of fifty years. According to the lease conditions, the full consideration payable for leasing each taxi licence is by means of a once-only payment in advance.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a general deduction for losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in gaining or producing assessable income. However, no deduction is allowed where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. For losses and outgoings incurred in carrying on a business, the term 'necessarily incurred in' is taken to mean 'clearly appropriate or adapted for' ( Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 326). The expenditure the taxpayer has incurred is integral to the production of their business income and therefore the expenditure is considered to be 'necessarily incurred in' the course of carrying on that business. However, it must also be determined whether or not that expenditure is excluded from deductibility on the basis that it is of a capital nature. The decision in Sun Newspapers and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403) ( Sun Newspapers Case ) is a leading authority on the distinction between revenue and capital expenditure. The test laid down in this case involves the consideration of three matters, none of which is in itself decisive: In relation to the first two matters it is necessary to examine whether the expenditure secures an enduring benefit for the business ( British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205). The cost to the taxpayer of leasing taxi licenses gives rise to an advantage which has a lasting and enduring character. Under the terms of the lease the taxpayer is permitted to operate a taxi cab licence for a duration of fifty years which brings into existence an asset of enduring benefit for the business. Further, the expenditure enlarges the profit yielding structure by increasing the number of taxi licenses which the taxpayer can on lease for income producing purposes. The third matter involves a consideration of whether the outlay is a periodic one covering the use of the asset or advantage during each period or whether the outlay is calculated as a single final provision for the future use or enjoyment of the asset or advantage. The advance payments made by the taxpayer for the lease of taxi licences are once only and therefore do not represent recurrent expenditure for the taxpayer's business. Having considered the matters arising from the test in the Sun Newspapers Case, it is concluded that the cost of leasing the taxi licences is an outgoing of a capital nature and therefore the taxpayer is not entitled to a deduction for that cost under section 8-1 of the ITAA 1997.", "Date_of_Decision": "24 May 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Advance expenses & payments Deductions & expenses Lease & hire expenses Taxi expenses Taxi industry", "Case_References": "British Insulated and Helsby Cables v. Atherton (1926) AC 205", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005147", "Unmatched_Content": "Keywords Advance expenses & payments Deductions & expenses Lease & hire expenses Taxi expenses Taxi industry"}
{"ATO_ID_Number": "ATO ID 2002/245", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Lease Expenses - business purchase does not proceed", "Issue": "Are legal expenses incurred in the preparation of a lease allowable deductions, under section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997), when the purchase of the business, to which the lease related does not proceed?", "Decision": "No. The legal expenses are not deductible under section 25-20 of the ITAA 1997.", "Facts": "The taxpayer, an individual, decided to purchase a business. A purchase price and an expected change over date were agreed upon with the owner of the business. Legal expenses were incurred with regard to the proposed lease of the property from which the business operated. The offer of lease was withdrawn and the taxpayer did not proceed with the purchase of the business.", "Reasons_for_Decision": "Summary: Section 25-20 of the ITAA 1997 allows a deduction for expenditure incurred in preparing, stamping and registering a lease of property which is used, or will be used, for the purpose of producing assessable income. Such expenditure is of a capital nature and, apart from section 25-20 of the ITAA 1997, would not be deductible. In this case the taxpayer did not proceed with the business purchase or the lease and, therefore, did not and could not derive any assessable income from the property subject to the lease. As the taxpayer did not enter into a lease and therefore did not and could not use the property to derive assessable income, the requirements of section 25-20 of the ITAA 1997 were not met. Therefore no deduction is allowed for the legal expenses incurred in preparing the proposed lease.", "Date_of_Decision": "20 December 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 25-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Lease & hire expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002245", "Unmatched_Content": "Keywords Deductions & expenses Lease & hire expenses"}
{"ATO_ID_Number": "ATO ID 2002/1091", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Lease expenses - deductions for lease payments after business ceased", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for rent paid after the cessation of a business?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for rent paid after the cessation of a business.", "Facts": "The taxpayer operated a business. They entered into a fixed term lease agreement for their business premises. The business ceased prior to the expiration of the lease. The taxpayer failed to pay the rent due under the lease after the business ceased. They did not use the premises for any other purpose after the business ceased. The lessor took legal action to recover the unpaid rent. After negotiations the taxpayer paid the outstanding rent.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing to the extent to which it is incurred in gaining or producing assessable income except where the loss or outgoing is of a capital, private or domestic nature, or relate to the earning of exempt income. In Placer Pacific Management Pty v. Federal Commissioner of Taxation 95 ATC 4459; (1995) 31 ATR 253 the Court said: In our view AGC should be taken as establishing the proposition that provided the occasion of a business outgoing is to be found in the business operations towards the gaining or producing of assessable income generally, the fact that the outgoing was incurred in a year later than the year in which the income was incurred and the fact in the meantime business in the ordinary sense may have ceased will not determine the issue of deductibility. The decisions in Federal Commissioner of Taxation v. Brown (1999) 43 ATR 1; 99 ATC 4600, and Evenden v. Federal Commissioner of Taxation 99 ATC 2297; (1999) 42 ATR 1208 support the view that the principle applies equally to recurring expenses such as rent. It follows that if the rent has been incurred then it may be an allowable deduction, notwithstanding that the business ceased, provided that the occasion of the rent arose out of the previous business operations. An expense is incurred if a taxpayer is 'definitively committed' or has 'completely subjected' itself to the liability even though the taxpayer has not paid the amount ( Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 88 CLR 492; (1953) 10 ATD 240; (1953) 5 AITR 579). Under the fixed term lease the taxpayer had a contractual obligation to pay the rent notwithstanding that the business ceased. It follows that the taxpayer was 'definitively committed' and had 'completely subjected' themselves to the expense. That obligation arose out of the taxpayer's previous business activities which gave rise to assessable income earned in earlier years. Accordingly the taxpayer is entitled to a deduction for the rent which was paid after the cessation of their business.", "Date_of_Decision": "28 October 2002", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Interest expenses Rental expenses", "Case_References": "Placer Pacific Management Pty Ltd v. Federal Commissioner of Taxation (1995) 31 ATR 253 95 ATC 4459", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021091", "Unmatched_Content": "Reword the sentence 'all losses and outgoings to the extent which they are' to 'a loss or outgoing to the extent which it is' | Replace 'outgoings are' with 'loss or outgoing is' | Replace 'it' with 'the taxpayer' | Replace 'they were' with 'the taxpayer was' | Minor punctuation amendment | Keywords Deductions & expenses Interest expenses Rental expenses"}
{"ATO_ID_Number": "ATO ID 2001/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Leasing of mining equipment: Whether a 'Qualifying Arrangement'", "Issue": "Whether a lease of mining equipment by an Australian entity to an overseas mining company can be characterised as a 'qualifying arrangement' under Division 16D of the Income Tax Assessment Act 1936(ITAA 1936). If so, whether the Commissioner of Taxation will exercise his discretion under subsection 159GG(4), in favour of the taxpayer, to treat the lease as a 'non-qualifying' arrangement.", "Decision": "Yes. The arrangement would be characterised as a 'qualifying arrangement' under Division 16D of the Income Tax Assessment Act 1936 . However, the Commissioner of Taxation would not exercise his discretion in favour of the taxpayer under subsection 159GG(4).", "Facts": "An Australian entity leases equipment to an overseas mining company. The equipment is to be used in the company's mining operations. The lessor proposes to enter into an arm's length residual value put option for a guaranteed residual value amount payable on termination of the lease.", "Reasons_for_Decision": "Summary: Where an arrangement is found to be a 'qualifying arrangement' then for the purposes of calculating the taxable income of a lessor, such a lease will be treated as though it were a loan by the lessor to enable the lessee to acquire the leased property. Effectively this means those tax deductions for the cost of, or capital expenditure incurred on, the leased property (other than interest payments on funds borrowed to fund the acquisition) will not be deductible to the lessor. Section 159GG (Division 16D of the Income Tax Assessment Act 1936 ) prescribes a number of tests to determine whether an arrangement is a 'qualifying arrangement'. Note that if any of the conditions listed in section 159GG are satisfied then the arrangement will be a 'qualifying arrangement'. In this particular case, the following factors indicate that the arrangement is a 'qualifying arrangement' for section 159GG purposes Subsection 159GG(4) of the Income Tax Assessment Act 1936 provides the Commissioner of Taxation with a discretion to treat an otherwise 'qualifying arrangement' as a 'non-qualifying arrangement'. Based on the facts it is not considered that this discretion should be exercised given that the effect of the arrangement is to effect a transfer of the risk of ownership with a consequent benefit to the lessee in a reduction in the charge for use of the equipment.", "Date_of_Decision": "6 November 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 Division 16D Section 159GG subparagraph 159GG(1)(a)(i) subparagraph 159GG(1)(a)(iv) subparagraph 159GG(1)(b)(ii) paragraph 159GG(1)(c) subsection 159GG(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lease financing Lease residual values Associated persons Repairs and maintenance expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200160", "Unmatched_Content": "This ATO ID has been amended to delete references to draft Taxation Ruling TR94/D25 which was withdrawn on 25 August 1999 by TR94/D25 - Notice of Withdrawal. | Keywords Lease financing Lease residual values Associated persons Repairs and maintenance expenses"}
{"ATO_ID_Number": "ATO ID 2010/131", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses: payment in lieu of notice under an employment contract", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in seeking entitlements under an employment contract for payment in lieu of notice on termination of employment?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in seeking entitlements under an employment contract for payment in lieu of notice on termination of employment.", "Facts": "The taxpayer was employed under an employment contract that provided for 6 months' pay in lieu of notice on termination of employment. The taxpayer's employment was terminated and the employer refused to make the lump sum payment in lieu of notice provided for under the employment contract. The payment in lieu of notice did not form part of a genuine redundancy payment or early retirement scheme payment in terms of Division 83 of the ITAA 1997. The taxpayer took legal action and the Court enforced the taxpayer's contractual entitlement to the lump sum payment in lieu of notice of termination and also awarded interest and costs. The taxpayer incurred legal expenses in relation to this matter.", "Reasons_for_Decision": "Summary: Broadly, section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a revenue nature, then the expenses incurred in gaining the advantage will also be of a revenue nature. It follows also that the character of legal expenses is not determined by the success or failure of the legal action. The question of deductibility of legal expenses under section 8-1 of the ITAA 1997 to enforce a contractual entitlement to a lump sum payment in lieu of notice was considered in Romanin v. Commissioner of Taxation [2008] FCA 1532; 2008 ATC 20-055; (2008) 73 ATR 760. In that case, McKerracher J held, at FCA paragraph 52, in terms of positive limb nexus: In my view, the requisite connection exists between the outgoing claimed (legal expenses) and the incurrence of assessable income. On this point, I accept Mr Romanin's submission that he pursued proceedings in the Commission to obtain income that was contractually owed to him and that the costs incurred in doing so are deductible under s8-1(1) of the ITAA. In terms of the negative limbs, McKerracher J held, at FCA paragraph 56, that: It is true that payment was for a lump sum in lieu of 12 months income (less other income received) but the amount was described in the orders pursuant to the Commission's judgment as remuneration, was computed by reference to his entitlement to income, was set off against other income actually earned and is a financial reward for exertion that would have been carried out had his employment not been (invalidly) terminated. Income is of course received by people and entities in a variety of ways. The payment in a lump sum of the sum which would otherwise be income by way of regular payments, does not of itself, in my view change the character of the payment . [Emphasis added.] That is, the character of the advantage sought was held to be on revenue rather than capital account. Therefore, in the circumstances here, the same conclusion follows. That is, the taxpayer's legal expenses in enforcing payment of their contractual entitlement to payment in lieu of notice are outgoings with nexus to assessable income and where the character of the advantage sought is on revenue account. The legal expenses are therefore deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "12 May 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Employment termination Legal action Legal expenses Employment contracts", "Case_References": "Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946) 72 CLR 634 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010131", "Unmatched_Content": "Keywords Deductions & expenses Employment termination Legal action Legal expenses Employment contracts"}
{"ATO_ID_Number": "ATO ID 2010/209", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses incurred in pursuit of an assessable workers compensation payment for lost earnings", "Issue": "Can the taxpayer claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in pursuing a workers compensation payment for lost earnings?", "Decision": "Yes. The taxpayer can claim a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in pursuing a workers compensation payment for lost earnings.", "Facts": "The taxpayer was injured in the workplace and claimed workers compensation. The taxpayer's claim for workers compensation was rejected and legal assistance was sought with legal expenses incurred. The taxpayer was successful in their claim and received an assessable compensation payment for lost earnings.", "Reasons_for_Decision": "Summary: Broadly, section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. If the advantage to be gained is of a revenue nature, then the expenses incurred in gaining the advantage will also be of a revenue nature. In the same way, if the advantage to be gained is of a capital nature then the expenses incurred in gaining the advantage will also be of a capital nature. It follows also that the character of legal expenses is not determined by the success or failure of the legal action. The question of deductibility of legal expenses under section 8-1 of the ITAA 1997 to enforce a contractual entitlement to a lump sum payment in lieu of notice was considered in Romanin v. Commissioner of Taxation [2008] FCA 1532; 2008 ATC 20-055; (2008) 73 ATR 760. In that case, McKerracher J held, at FCA paragraph 52, in terms of positive limb nexus: In my view, the requisite connection exists between the outgoing claimed (legal expenses) and the incurrence [sic] of assessable income. On this point, I accept Mr Romanin's submission that he pursued proceedings in the Commission to obtain income that was contractually owed to him and that the costs incurred in doing so are deductible under s8-1(1) of the ITAA. In terms of the negative limbs, McKerracher J held, at FCA paragraph 56, that: It is true that payment was for a lump sum in lieu of 12 months income (less other income received) but the amount was described in the orders pursuant to the Commission's judgment as remuneration, was computed by reference to his entitlement to income, was set off against other income actually earned and is a financial reward for exertion that would have been carried out had his employment not been (invalidly) terminated. Income is of course received by people and entities in a variety of ways. The payment in a lump sum of the sum which would otherwise be income by way of regular payments, does not of itself, in my view change the character of the payment . [Emphasis added.] That is, the character of the advantage sought was held to be on revenue rather than capital account. Therefore, in the circumstances here, the same conclusion follows. That is, the taxpayer's legal expenses in order to obtain the workers compensation payments are outgoings with nexus to assessable income, where the character of the advantage sought is on revenue account. The legal expenses are therefore deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "9 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/505", "Subject_References": "Deductions & expenses Compensation income Legal action Legal expenses", "Case_References": "Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946) 72 CLR 634 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010209", "Unmatched_Content": "Keywords Deductions & expenses Compensation income Legal action Legal expenses"}
{"ATO_ID_Number": "ATO ID 2007/136", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses: shareholder resisting further share issue", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in opposing a further share issue in a company in which the taxpayer owns shares?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in opposing a further share issue in a company in which the taxpayer owns shares.", "Facts": "The taxpayer owns shares in a Company A. Company A undertook an expansion of capital by offering shares to the existing membership. The first dividend declared after this share issue resulted in the taxpayer receiving less dividend income than would have been received based on the shareholding prior to the new issue. The taxpayer took legal action against the company and the board of directors in order to void the share issue. The court validated the share issue. The taxpayer incurred legal expenses during the court proceedings.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature, then the expenses incurred in gaining the advantage will also be of a capital nature. Legal expenses may be of a revenue nature and therefore deductible if they arise out of the day to day activities of the taxpayer's business or income producing activity ( Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 2 ATD 169). Where however, expenditure is devoted towards a structural rather than an operational purpose, the expenditure is of a capital nature and the expenses are not deductible ( Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; (1938) 5 ATD 87; (1938) 1 AITR 403). Outgoings incurred in the preservation of an existing capital asset have been held to be capital in nature ( John Fairfax & Sons Pty Limited v. Federal Commissioner of Taxation (1959) 101 CLR 30; (1959) 7 AITR 346; (1959) 11 ATD 510). The taxpayer incurred legal expenses in seeking to stop a further share issue by the company in which the taxpayer owns shares. The advantage sought to be obtained by pursuing the legal action was to preserve the taxpayer's existing equity interest in the company, being the taxpayer's existing proportion of the company's total issued shares, and the enduring benefit that attaches to that equity interest. The legal expenses are accordingly capital in nature. As the legal expenses incurred by the taxpayer are of a capital nature, a deduction is not allowable under section 8-1 of the ITAA 1997.", "Date_of_Decision": "25 June 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/29", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/4 | ATO ID 2001/42 | ATO ID 2002/1081 | ATO ID 2003/315 | ATO ID 2004/214", "Subject_References": "Capital expenditure Deductions & expenses Legal expenses Shareholders", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 (1946) 8 ATD 190 (1946) 3 AITR 436", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007136", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/29 | Keywords Capital expenditure Deductions & expenses Legal expenses Shareholders"}
{"ATO_ID_Number": "ATO ID 2004/214", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses: costs to maintain beneficiary's amount of their entitlement to trust income", "Issue": "Is the taxpayer entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), for legal expenses they incurred in defending a legal action that sought to reduce the amount of their entitlement to trust income?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses they incurred in defending a legal action that sought to reduce the amount of their entitlement to trust income, as the expenses are revenue in nature and were incidental and relevant to the gaining or producing of their assessable income.", "Facts": "The taxpayer is a beneficiary of a testamentary trust established in accordance with their parent's will. Under the terms of the will, the taxpayer's other parent is to receive an annuity from the trust income to be increased annually to reflect any increase in the Consumer Price Index. The taxpayer and their sibling are residuary beneficiaries, and are to receive equally the balance of the net annual income of the trust. There is no provision for winding up the trust and distributing corpus/capital during their surviving parent's lifetime. The surviving parent commenced legal action seeking to increase their annuity entitlement, and thereby reduce the amount of the net annual trust income available for equal distribution between the taxpayer and their sibling. The matter was resolved by private settlement, resulting in an increase in the annuity payments to the surviving parent. The taxpayer incurred legal expenses in defending the legal action to maintain the amount of trust income they are to receive annually, under the terms of their parent's will.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; (1946) 8 ATD 190, the Court established that in determining whether a deduction is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered. The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. Dixon J stated at CLR 647 that: ...legal expenses...take the quality of an outgoing of a capital nature or of an outgoing on account of revenue from the cause or purposes of incurring the expenditure. We are, therefore, remitted to a consideration of the object in view when the legal proceedings were undertaken, or of the situation which impelled the taxpayer to undertake them. Legal expenses incurred by a taxpayer in maintaining the amount of partnership income to which they were entitled was held to be revenue in nature and incurred in the course of gaining or producing assessable income ( Creer v. Federal Commissioner of Taxation (1994) 28 ATR 442; 94 ATC 4454). Similarly, in this case, the taxpayer incurred legal expenses to maintain the amount of trust income to which they were entitled under the terms of their late parent's will. The surviving parent was not attacking the taxpayer's right to receive income. Rather, they were disputing the amount of income to which the taxpayer was entitled. The object the taxpayer had in view when the legal proceedings were undertaken was to maintain the amount of income to which they were entitled (under the terms of their late parent's will), and the situation which prompted them to undertake the proceedings was the denial of a proportion of their previously accepted share of income from the testamentary trust. Therefore, their legal expenses are revenue in nature. In addition, the occasion of the incurrence of the legal expenses was the legal proceedings to maintain their level of assessable income from the testamentary trust. As such, there is a sufficient connection between taxpayer's legal expenses and the gaining or producing of their assessable income. Therefore, the taxpayer's legal expenses were incurred in the course of gaining or producing their assessable income. Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for your legal expenses.", "Date_of_Decision": "25 February 2004", "Year_of_Income": "Income year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses Trust distributions Wills", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004214", "Unmatched_Content": "Keywords Legal expenses Trust distributions Wills"}
{"ATO_ID_Number": "ATO ID 2004/367", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: legal expenses - defending right to practise", "Issue": "Is the taxpayer, who is carrying on a business of providing professional services, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in defending their right to practise in that profession?", "Decision": "No. The taxpayer, who is carrying on a business of providing professional services, is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in defending their right to practice in that profession.", "Facts": "The taxpayer, a member of a professional association, is carrying on a business of providing professional services. The taxpayer was convicted of criminal offences. The offences did not arise from the day to day conduct of the taxpayer's business activities. Following the taxpayer's conviction, disciplinary proceedings were commenced against them by the professional association. As a result of the disciplinary proceedings the taxpayer was suspended from practising for an indefinite period. The taxpayer incurred legal expenses and costs in relation to their defence to the disciplinary proceedings.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income they will not be deductible (subsection 8-1(2) of the ITAA 1997). In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634, (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature, then the expenses incurred in gaining the advantage will also be of a capital nature. The courts, on a number of occasions, have determined legal expenses to be an allowable deduction if the expenses arise out of the day to day activities of the taxpayer's business ( Magna Alloys & Research Pty Ltd v. Federal Commissioner of Taxation 80 ATC 4542; (1980) 11 ATR 276). The action out of which the legal expenses arise has to have more than a peripheral connection to the taxpayer's business or income earning activities. The expense may arise out of litigation concerning the taxpayer's professional conduct. ( Putnin v. Federal Commissioner of Taxation (1991) 27 FCR 508; 91 ATC 4097; (1991) 21 ATR 1245 and Elberg v. Federal Commissioner of Taxation (1998) 82 FCR 440; 98 ATC 4454; (1998) 38 ATR 623). However if the expenses were incurred in protecting the underlying profit yielding structure or assets of the business they are considered to be capital in nature and will not be deductible. In Case V140 88 ATC 874; AAT Case 4596 (1988) 19 ATR 3859 ( Case V140 ), a solicitor was denied a deduction for legal expenses incurred in defending certain allegations before the Statutory Committee of the Law Society of New South Wales, concerning the solicitor's trust account. The Committee ordered the taxpayer be suspended from practice for a period of twelve months, and to pay the costs of the Law Society. The Administrative Appeals Tribunal (AAT) held that the payments made by the taxpayer were not deductible under subsection 51(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as the payments were characterised as capital expenditure. Further, in Case X84 90 ATC 609; AAT Case 6528 (1990) 21 ATR 3721 ( Case X84 ), the AAT held that legal expenses incurred by a medical practitioner in defending charges brought against him at a Medical Disciplinary Tribunal inquiry, were not deductible under subsection 51(1) of the ITAA 1936 because the expenditure was incurred to protect a structural asset, that is, their registration as a medical practitioner, and was of a capital nature. In the circumstances here, the criminal offences did not arise out of the day to day carrying on of the taxpayer's business. The expenses were incurred in defending disciplinary proceedings held to review the taxpayer's right to continue practising in their profession. The taxpayer's right to practise is part of the profit yielding structure of their business, and legal expenses incurred in protecting that structure are of a capital nature. Therefore, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for the costs incurred in defending their right to practice.", "Date_of_Decision": "5 December 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 51(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital expenditure Deductions & expenses Legal expenses", "Case_References": "Elberg v. Federal Commissioner of Taxation (1988) 82 FCR 440 98 ATC 4454 (1998) 38 ATR 623", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004367", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/9 | Keywords Capital expenditure Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2003/145", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses: defending a writ served on a director of a trustee company.", "Issue": "Is a trustee company, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in defence of a writ served on a director of the trustee company?", "Decision": "Yes. A trustee company is entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in defence of a writ served on a director of the trustee company.", "Facts": "The trustee company was a share trader and acquired a substantial number of shares in Company A. One of the directors of the trustee company was appointed a director of Company A due to the substantial number of shares held by the trustee company. The trustee company sold its shares in Company A to a third party, Company B, and the trustee company was assessed on the profit. The share price in Company A declined and Company B subsequently incurred a significant loss. Company B commenced an action to recover damages from the director of the trustee company in relation to the sale of the shares. Legal fees were incurred by the trustee company in defending the action brought against the director of the trustee company in relation to the sale of the shares.", "Reasons_for_Decision": "Summary: Section 8-1of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature. For legal expenses to constitute an allowable deduction, it must be shown that they are incidental or relevant to the production of the taxpayer's assessable income or business operations. ( Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). Also, in determining whether a deduction for legal expenses is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. Legal expenses are generally deductible if they arise out of the day to day activities of the taxpayer's business. ( Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 39 ALR 46; (1932) 2 ATD 169) and the legal action has more than a peripheral connection to the taxpayer's income producing activities ( Magna Alloys and Research Pty Ltd v. FC of T 80 ATC 4542; (1980) 11 ATR 276;). The legal action arose as a direct result of the sale of the shares in Company A, by a director acting on behalf of the taxpayer, in the normal course of the taxpayer's business. The legal action therefore has a direct connection with the taxpayer's income producing activities. The resulting legal expenses were incurred by the trustee company to defend the actions of the director and were a normal incident of the day to day trading activities undertaken by the trustee company to generate assessable income. As such, the legal expenses were necessarily incurred in carrying on the trustee company's business and are deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "29 January 2003", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Legal expenses", "Case_References": "Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 4 AITR 236 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003145", "Unmatched_Content": "Keywords Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2003/484", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction: legal expenses - landlord defending a damages claim in respect of injuries suffered by a third party on their rental property", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses that they incurred in defending a claim for damages, in respect of injuries allegedly suffered by a person who was visiting a tenant at their rental property?", "Decision": "Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses that they incurred in defending a claim for damages, in respect of injuries allegedly suffered by a person who was visiting a tenant at their rental property.", "Facts": "The taxpayer and their spouse jointly own an income producing rental property. A third party (the plaintiff) commenced legal proceedings for negligence claiming damages (the damages claim) against the taxpayer and their spouse, in respect of injuries suffered whilst visiting the tenant of the rental property. The injuries were said to have occurred as a result of the condition of the rental property. The taxpayer and their spouse have incurred legal expenses in defending the damages claim.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Generally, legal expenses have been held to be deductible if the expenses have arisen as a consequence of the taxpayer's income earning activities provided that the legal expenses are not of a capital, private or domestic nature ( Herald & Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; 2 ATD 169 ( Herald & Weekly Times ), Putnin v. Federal Commissioner of Taxation (1991) 27 FCR 508; 91 ATC 4097; (1991) 21 ATR 1245 ( Putnin's Case ) and Federal Commissioner of Taxation v. Snowden & Willson Pty Ltd (1958) 99 CLR 431; 11 ATD 463; (1958) 7 AITR 308 ( Snowden's Case )). The principles established in Herald & Weekly Times are not confined to recurring or common expenses ( Putnin's Case and Snowden's Case ). Legal expenses can be characterised as an outgoing on revenue account or an outgoing of a capital nature depending on the cause or purpose for which the legal expenses were incurred ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 3 AITR 436; 8 ATD 190). The principles espoused in Herald & Weekly Times were applied in Case C12 (1952) 3 TBRD 100 ( Case C12 ). That case dealt with the trustees of a deceased estate, who let a city property to a number of tenants. A tenant's injured employee claimed damages against the trustees in respect of injuries she sustained on the rental premises. The Board, in allowing the trustees a deduction for the amount that they paid to settle the claim, stated that: [the trustees] became liable... because they had let rooms to tenants...It was in the capacity of landlord that the outgoing was incurred...the expense incurred resulted from a risk which, to a landlord, is ever present...the expense claimed as a deduction was one which arose out of the letting of the building to tenants for the purpose of producing assessable income, and that it can properly be regarded as having been incurred 'in the course of' gaining or producing that assessable income...I cannot see that the outgoing produced \"an enduring benefit\" of any sort. I can see no justification ...for capitalising the expense. It seems to me to be one which should properly be set against revenue account. The taxpayer and their spouse incurred the legal expenses in their capacity as landlords of the rental property. The expenses arose out of the letting of the premises to a tenant for the purposes of producing assessable income. There is a clear connection between their legal expenses and their rental income such that the expenses are incidental and relevant to the generation of their assessable rental income. There was no enduring benefit produced by the expenditure and therefore it is appropriate to treat the expense as being on revenue account. Therefore, the taxpayer and their spouse are entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses that they have incurred in defending the damages claim.", "Date_of_Decision": "26 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cessation Legal expenses Rental expenses Rental property", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 8 ATD 190 (1946) 3 AITR 436", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003484", "Unmatched_Content": "Keywords Cessation Legal expenses Rental expenses Rental property"}
{"ATO_ID_Number": "ATO ID 2003/801", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction: Legal expenses incurred by a company director who did not receive any director's fees or share of profits", "Issue": "Are legal expenses incurred by a company director, who did not receive any directors fees or share of profits, in relation to an Australian Securities and Investments Commission (ASIC) investigation deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Legal expenses incurred by a company director, who did not receive any directors fees or share of profits, in relation to an ASIC investigation are not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is a director, joint shareholder and an employee of a company. A directors' agreement provided the taxpayer with a potential entitlement to director's fees and a share of profits as a director of and shareholder in the company. The taxpayer did not receive any director's fees or a share of profits. However, they did receive remuneration as an employee of the company. The taxpayer incurred legal expenses in their capacity as a company director following an investigation by the ASIC into the activities of the company. As a result of its investigations, ASIC suspended the licence of the company and placed it under administration. The taxpayer engaged solicitors to advise them and liaise with ASIC in relation to the investigation and consequences of the investigation.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. For legal expenses to constitute an allowable deduction, it must be shown that they were incidental or relevant to the production of the taxpayer's assessable income, (Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). The fundamental requirement that there must be a sufficient nexus between a particular expense and the assessable income such that the expense is incidental and relevant to the gaining of assessable income was also recognised in Case U134 87 ATC 780; (1987) 18 ATR 3646. That case involved a taxpayer who was a director of and a shareholder in a family company. The taxpayer did not receive any payments from the company for his services as a director of the company. However, the taxpayer did receive a dividend from the company. In disallowing the claim, the Tribunal held that: ...the outgoings were incurred in his capacity as a director and are consequently not sufficiently related to the carrying on the business of being a shareholder. Additionally, as no allowance was paid to him in his capacity as a director, it cannot be said that the expenses were incurred in gaining or producing assessable income in that capacity. Accordingly, if a taxpayer does not derive any assessable income from their position as a director of a company and they incur expenses in respect of their position as a director, they would not be entitled to a deduction under section 8-1 of the ITAA 1997 as the expenses would not have been incurred in gaining or producing assessable income in their capacity as a director. The taxpayer did not receive any payments from the company for the services that they provided to the company in their capacity as a director of the company, that is, they did not gain or produce any income in their capacity as a director of the company, Therefore, they will not be able to satisfy the basic requirement of section 8-1 of the ITAA 1997 as the legal expenses were not incurred in gaining or producing their assessable income. Accordingly, the legal expenses the taxpayer incurred in relation to the ASIC investigation are not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "19 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses Directors fee expenses", "Case_References": "Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 4 ATR 236 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003801", "Unmatched_Content": "Keywords Legal expenses Directors fee expenses"}
{"ATO_ID_Number": "ATO ID 2002/170", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of legal expenses - Breaches of management contract over a rental property", "Issue": "Are legal expenses incurred by a taxpayer seeking damages for breaches to a management contract over a former investment property, allowable as a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Legal expenses incurred by a taxpayer seeking damages for breaches to a management contract over a former investment property are allowable as a deduction under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer owned a property that was used to produce assessable income during the year of income. The taxpayer entered into a contract with a property manager in relation to the management of the rental property. The terms of the contract include: The property manager breached the above conditions and the taxpayer incurred legal expenses to recover:", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Legal expenses can be characterised as an outgoing on revenue account or an outgoing of a capital nature depending on the cause or purpose for which the legal expenses were incurred ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; 8 ATD 190; (1946) 3 AITR 436). Where the legal expenses arise as a consequence of the day to day activities of a business, and the object of the expenditure is devoted towards a revenue purpose, the legal expenses are deductible ( Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; [1932] HCA 56; 2 ATD 169). As the legal expenses were incurred during the year of income for damages based on revenue account (lost rents and unauthorised expenditure on repairs and maintenance), the expenditure is related to gaining or producing assessable income. The taxpayer is therefore entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in seeking damages for breaches to the management contract over the investment property.", "Date_of_Decision": "31 August 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions Legal expenses Rental property", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34 8 ATD 190 (1946) 3 AITR 436", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002170", "Unmatched_Content": "Updated to add medium neutral case citations | Keywords Deductions Legal expenses Rental property"}
{"ATO_ID_Number": "ATO ID 2002/193", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses incurred in gaining compensation for loss of salary and wage income", "Issue": "Are the legal expenses incurred in obtaining a Total and Permanent Disability benefit for loss of salary and wage income an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The legal expenses incurred in obtaining a Total and Permanent Disability benefit for loss of salary and wage income are an allowable deduction under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer received a lump sum payment in respect of a Total and Permanent Disability benefit. The benefit was paid as compensation for the loss of salary and wage income, and not for the loss of income earning capacity. The benefit forms part of the taxpayer's taxable income in the year in which it is received. The taxpayer incurred legal expenses in obtaining this payment.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing assessable income and is not: In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered (Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634); [1946] HCA 34. The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. If the advantage to be gained is of a revenue nature, then the costs incurred in gaining the advantage will also be of a revenue nature. The legal expenses were incurred by the taxpayer in order to obtain compensation for the loss of salary and wage income, and not for the loss of income earning capacity. Thus, the advantage which the taxpayer sought in incurring the legal expenses was an advantage of a revenue rather than capital nature. Further, the legal expenses were not private or domestic in nature, were not incurred in gaining or producing exempt income or non-assessable non-exempt income, and were not an outgoing prohibited from being deductible by a section of the ITAA 1997 or the ITAA 1936. Therefore, the legal expenses are deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "01 February 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 The Act", "Related_Public_Rulings_and_Determinations": "TR 2012/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Compensation expenses Legal expenses", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002193", "Unmatched_Content": "Updated to include reference to loss of salary and wage income. | Updated to include case law precedent from Hallstroms Pty Ltd v FC of T and provide clarity of reasoning. | Updated to include case reference. | Updated to include reference to TR 2012/8. | Related Public Rulings (including Determinations) TR 2012/8 | Keywords Compensation expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/207", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses incurred by executor of deceased estate", "Issue": "Are legal expenses incurred by an executor of a deceased estate in defending an action against a will deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An executor of a deceased estate cannot claim legal expenses incurred in defending an action against a will as a deduction under section 8-1 of the ITAA 1997.", "Facts": "The will of a deceased person nominated the taxpayer as the executor of the estate. The will provided for distributions to be made to specific beneficiaries. The will was contested by several beneficiaries as to their entitlements. The taxpayer as executor: The matter was resolved through the court mediation process resulting in increased distributions to certain beneficiaries.", "Reasons_for_Decision": "Summary: Section 8-1 of ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 8 ATD 431 the High Court stated that: For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words \"incurred in gaining or producing the assessable income\" mean in the course of producing such income. The expenditure must be related to the production of assessable income. The legal expenses incurred were not for the purpose of producing assessable income of the estate but for determining the beneficiaries correct entitlement to distributions of the corpus of the estate. The taxpayer is therefore not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in defending an action against the will.", "Date_of_Decision": "12 October 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/705", "Subject_References": "Legal expenses Deceased estate Executors", "Case_References": "Ronpibon Tin NL & Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 [1949] HCA 15 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002207", "Unmatched_Content": "Related ATO Interpretative Decisions | Keywords Legal expenses Deceased estate Executors"}
{"ATO_ID_Number": "ATO ID 2002/213", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - Release from existing employment to take up new employment", "Issue": "Is a taxpayer entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in obtaining a release from their previous employment to facilitate a transfer to their current employment?", "Decision": "No. The taxpayer is not entitled to claim a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in obtaining a release from their previous employment to facilitate a transfer to their current employment.", "Facts": "The taxpayer was an employee in full time employment with their former employer. The taxpayer received an offer of full time employment from another employer that offered: The taxpayer incurred legal expenses in obtaining release from their former employer to take up the new offer of employment.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin & NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 8 ATD 431 the High Court stated that: For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing assessable it must be incidental and relevant to that end. The words \"incurred in gaining or producing the assessable income\" mean in the course of gaining or producing such income. The expenditure must therefore be related to the production of assessable income and not incurred at a point too soon to be deductible ( FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541; (1971) 45 ALJR 426). The legal expenses incurred by the taxpayer to obtain a release from their former employer are: The taxpayer is therefore not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in obtaining a release from the former employer to take up the new employment offer.", "Date_of_Decision": "19 October 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses Employment contracts Employment termination", "Case_References": "Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 [1949] HCA 15 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002213", "Unmatched_Content": "Updated citations and punctuation | Keywords Legal expenses Employment contracts Employment termination"}
{"ATO_ID_Number": "ATO ID 2002/391", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - recovery of unused annual leave and unused long service leave from ex-employer", "Issue": "Is the taxpayer entitled to claim a deduction under 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the legal expenses they incurred in order to recover their unused annual leave and unused long service leave from their ex-employer?", "Decision": "Yes. The legal expenses directly relate to the gaining or producing assessable income and are deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer ceased employment with their employer. The employer refused to pay the taxpayer amounts in respect of unused annual leave and unused long service leave. The taxpayer took action through the Industrial Relations Commission. The taxpayer incurred legal costs in obtaining a judgement in respect of the unused annual leave and unused long service leave. The Commission ordered the ex-employer to pay the taxpayer an amount representing the taxpayer's unused annual leave and unused long service leave.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing assessable income and is not: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the year. Salary and wages, including annual leave payments, is considered ordinary income as it is paid directly as a result of the personal services an employee renders for their employer. However, unused annual leave and unused long service leave (although acquired through personal services and thus characterised as ordinary income) are considered to be forms of statutory income under section 6-10 of the ITAA 1997. Section 73-10 of the ITAA 1997 provides concessional tax treatment for unused annual leave received as a lump sum. Section 83-30 of the ITAA 1997 provides concessional tax treatment for unused long service leave received as a lump sum. Although the tax treatment of these amounts is different from salary and wages (including payments in respect of leave taken) earned during the course of employment, it does not alter the character of the payments as ordinary income. The legal expenses incurred by the taxpayer in order to obtain the unused annual leave and unused long service leave resulted in the taxpayer gaining assessable income. There is a clear connection between the assessable income and the expense. The expenses were not incurred in respect of income that was capital, private or domestic in nature. Accordingly, the legal expenses were incurred in gaining the taxpayer's assessable income and are deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "7 March 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 subsection 6-5(2) section 83-10 section 83-30", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Compensation income Legal expenses", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002391", "Unmatched_Content": "Replace Section 26AC and Section 26 AD of the ITAA 1936 with Section 83-10 and Section 83-80 of the ITAA 1997. | Keywords Compensation income Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/402", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: Embezzlement/fraud/defalcation by partner - deductibility of expenditure.", "Issue": "Whether expenditure incurred by the partnership in the form of legal fees and investigation fees to ascertain the details and extent of the fraud by a partner is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Expenditure incurred by the partnership in the form of legal fees and investigation fees to ascertain the details and extent of the fraud by a partner is not deductible under section 8-1 of the ITAA 1997.", "Facts": "The partnership provides specialised services through offices in Australia. During a review of the partnership accounts, it was discovered that a partner had been engaged in fraudulent conduct with regard to out of pocket expenses over a number of periods. The partnership engaged forensic accountants to investigate the transactions. A comprehensive review was undertaken of all client ledgers for which the fraudulent partner was responsible or in respect of which he had some involvement during the relevant period. Where client files had been closed and archived, these were re-opened and included as part of the investigation. Legal advice was also sought on the manner in which issues arising from the fraud should be dealt with. The cost of the investigation and legal advice has been included as an expense in the partnership's Profit & Loss Statement for the year in question.", "Reasons_for_Decision": "Summary: To be deductible under section 8-1 of the ITAA1997 the expense must be incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income and not be capital, private or domestic in nature. In Hallstroms Pty Ltd v. FC of T (1946) 72 CLR 634, Dixon J at 647 stated that 'legal expenses ... take the quality of an outgoing of a capital nature or of an outgoing on account of revenue from the cause or purpose of incurring the expenditure. We are, therefore, remitted to a consideration of the object in view when the legal proceedings were undertaken, or of the situation which impelled the taxpayer to undertake them.' Here, the investigation and legal fees were incurred to determine the exact nature and extent of the fraud. The expenditure also served the purpose of preserving the firm's reputation, both with existing and potential clients. In Ash's case, Latham CJ at 275 expressed the view that although the ultimate purpose of the payments to the defrauded clients may have been to preserve the credit of the taxpayer and so maintain the business as a profit-earning enterprise, this feature did not deprive them of their capital nature. In Smithkline Beecham Laboratories (Australia) Ltd v. FCT (1993) 26 ATR 260 at 265 - 266, Hill J stated that expenditure incurred to preserve or protect a business as such will ordinarily be expenditure of capital. Here, the investigation and legal expenses were incurred to preserve the firm's reputation with existing and potential clients. The expenditure was incurred for the purpose of securing an enduring benefit to the firm, namely its client base, and is therefore capital in nature. Therefore, the purpose of the legal expenditure, being to preserve the reputation of the firm, was primarily a capital expense. The expenses were in large a measure to protect an enduring benefit. In the circumstances the expenditure in relation to both the forensic accountants and the legal expenses for the purpose of meeting the fraud are of a capital nature and therefore non-deductible.", "Date_of_Decision": "14 March 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 8-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Losses from fraud, theft & embezzlement", "Case_References": "Hallstroms Pty Ltd v. FC of T 72 CLR 634", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": true, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002402", "Unmatched_Content": "Remove 'taxpayer is a partner of a' and replaced with 'partnership'. Replace 'providing' with provides. Remove 'of the taxpayer '. Replace 'taxpayer' with 'partnership'. | Keywords Losses from fraud, theft & embezzlement"}
{"ATO_ID_Number": "ATO ID 2002/664", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions & Expenses: Legal fees incurred in defending a claim of harassment and victimisation", "Issue": "Are legal fees incurred by the taxpayer in defending a sexual harassment and victimisation charge deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The legal fees incurred by the taxpayer in defending a sexual harassment and victimisation charge are not deductible under section 8-1 of the ITAA 1997 as they were not incurred in gaining or producing assessable income.", "Facts": "The taxpayer is an employee. The duties of the taxpayer do not include advising other employees on their work performance. Another employee lodged a complaint of sexual harassment and victimisation against the taxpayer with the relevant Government Authority. The taxpayer denied the allegations and in defending the charge engaged a solicitor for which they paid certain costs. The matter proceeded to the relevant Government Authority where it was resolved through a conciliation agreement.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income except where the outgoings of a capital, private or domestic nature, or relate to the earning of exempt income. For legal expenses to constitute an allowable deduction, it must be shown that they were incidental or relevant to the production of the taxpayer's assessable income, ( Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15; (1949) 4 AITR 236; (1949) 8 ATD 431). Also, in determining whether a deduction for legal expenses is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. Legal expenses are generally deductible if they arise out of the day to day activities of the taxpayer's business. ( Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; [1932] HCA 56; (1932) 39 ALR 46; (1932) 2 ATD 169) and the legal action has more than a peripheral connection to the taxpayer's income producing activities ( Magna Alloys and Research Pty Ltd v. FC of T (1980) 49 FLR 183; [1980] FCA 150; (1980) 11 ATR 276; 80 ATC 4542). Similarly, in FC of T v. Rowe (1995) 60 FCR 99; (1995) 31 ATR 392; 95 ATC 4691, the court accepted that legal expenses incurred in defending the manner in which a taxpayer performed his employment duties were allowable. No significance was placed by the court on the taxpayer's status as an employee. In Case U102 87 ATC 621; AAT Case 72 (1987) 18 ATR 3515 the taxpayer took defamation action against comments made with regard to the management of a trust fund of which he was a trustee. It was found that the expenses were not incidental to the proper execution of the office of trustee but rather were to maintain the taxpayer's personal reputation. In Case W94 89 ATC 792; AAT Case 5376 (1989) 20 ATR 4001 the taxpayer, a public servant incurred legal fees in defending and then appealing against disciplinary charges of improper conduct resulting from his compulsive gambling. It was found that the expenses incurred where not incidental or relevant to the gaining of the taxpayer's assessable income. It was the conduct of the taxpayer through his compulsive gambling which led to the charges which, in turn, led to him incurring legal costs. The expenses incurred were not incidental or relevant to the gaining of the taxpayer's assessable income. The legal expenses incurred by the taxpayer in defending the sexual harassment and victimisation claim made by another employee arose from the personal conduct of the taxpayer. They did not arise from the performance of the taxpayer's duties from which they derived assessable income. Therefore, the legal fees incurred by the taxpayer are not an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "17 December 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/663", "Subject_References": "Deductions & expenses Legal expenses", "Case_References": "AAT Case 72 (1987) 18 ATR 3515", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002664", "Unmatched_Content": "Insert medium neutral citation | Remove irrelevant keyword | Keywords Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/666", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - taking defamation action", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in taking defamation action?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in taking defamation action.", "Facts": "The taxpayer is an employee. A letter was published allegedly containing defamatory comments about the taxpayer's abilities and experience. The taxpayer took defamation action against the author of the letter. The claims listed in the action were damages, aggravated damages, costs and interest. The basis of the taxpayer's action was that they had been held up to public ridicule and contempt and had suffered damage to their credit and reputation and continued to suffer damage to their credit and reputation. There was no indication that the taxpayer's employment was at risk. The defamation action was eventually settled and the taxpayer received a letter retracting the comments. In the course of the defamation action the taxpayer incurred legal expenses.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature, then the expenses incurred in gaining the advantage will also be of a capital nature. The courts, on a number of occasions, have determined legal expenses to be an allowable deduction if the expenses arise out of the day to day activities of the taxpayer's business. The action out of which the legal expense arises has to have more than a peripheral connection to the taxpayer's business or income earning activities. The expense may arise out of litigation concerning the taxpayer's professional conduct. In FC of T v. Rowe (1995) 60 FCR 99; (1995) 31 ATR 392; 95 ATC 4691, the court accepted that legal expenses incurred in defending the manner in which a taxpayer performed his employment duties were allowable. No significance was placed by the court on the taxpayer's status as an employee. However, there must be an evident connection between the expenditure in instituting the proceedings and the taxpayer's earning activities. Legal expenses are also capital or private in nature where the legal action taken is to protect the taxpayer's personal good name and reputation ( Case U102 87 ATC 621; AAT Case 72 (1987) 18 ATR 3515). The taxpayer's legal expenses were not sufficiently connected with the income earning activities of the taxpayer and were essentially private or capital in nature and character. The need for them arose out of the taxpayer's reaction to what they saw as damage to their credit and reputation. The taxpayer's legal expenses incurred in taking defamation action are therefore not deductible under section 8-1 of the ITAA 1997 as they are considered to be insufficiently connected with the taxpayer's income earning activities and are private or capital in nature.", "Date_of_Decision": "27 February 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Legal expenses", "Case_References": "AAT Case 72 (1987) 18 ATR 3515", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002666", "Unmatched_Content": "Remove irrelevant facts and insert further facts | Add medium neutral citation | Remove irrelevant keywords | Keywords Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/674", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - personal injury damages award", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in obtaining a personal injury damages award?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in obtaining a personal injury damages award.", "Facts": "The taxpayer took their employer to court to recover damages for an injury suffered by the taxpayer that occurred at work. The taxpayer wanted recognition from their employer that the injury was work related and also sought monetary compensation for injury suffered. The taxpayer obtained a personal injury damages award. The taxpayer incurred legal expenses in relation to this matter.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered (Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature, then the expenses incurred in gaining the advantage will also be of a capital nature. An amount paid to compensate for loss generally acquires the character of that for which it is substituted (Federal Commissioner of Taxation v. Dixon (1952) 86 CLR 540; [1952] HCA 65; (1952) 5 AITR 443; (1952) 10 ATD 82). Lump sum damages awarded at common law for a personal injury claim generally do not form part of a taxpayer's assessable income (ATO ID 2004/943). The personal injury damage award received by the taxpayer is capital in nature and does not form part of the taxpayer's assessable income. The legal expenses incurred in obtaining the payment will consequently be capital in nature as they follow the advantage that is sought to be gained by incurring the expenses. Accordingly, no deduction is allowable under section 8-1 of the ITAA 1997 to the taxpayer for the legal expenses incurred in obtaining the personal injury damages award.", "Date_of_Decision": "22 January 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/943", "Subject_References": "Deductions & expenses Legal action Legal expenses Personal injury awards", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002674", "Unmatched_Content": "Amend for clarity and style Include medium neutral citations | Include medium neutral citations | Keywords Deductions & expenses Legal action Legal expenses Personal injury awards"}
{"ATO_ID_Number": "ATO ID 2002/692", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - defending a driving charge", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in defending a driving charge?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in defending a driving charge.", "Facts": "The taxpayer's employment duties required them to drive a motor vehicle. In the course of their employment the taxpayer was involved in a car accident. As a result of this accident the taxpayer was found guilty of a dangerous driving charge. The taxpayer appealed and was found not guilty. In the course of defending the charge the taxpayer incurred legal expenses. The taxpayer was of the view that if they had not been acquitted of the charge they would have lost their driver's licence and their job.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a private nature, then the expenses incurred in gaining the advantage will also be of a private nature. The taxpayer used their car on a day to day basis in the course of their employment and the legal expenses incurred in defending the dangerous driving charge arose as a consequence of the taxpayer's employment activities. Whilst the courts on a number of occasions have determined legal expenses to be an allowable deduction if the expenses arise out of the day to day activities of the taxpayer's business or employment, the taxpayer's reason for defending the charge was to enable them to maintain their driver's licence (right to drive) and as a consequence, their job. The right to drive on public roads does not cease to be a private right merely because the taxpayer is employed in some capacity which involves the use of the public road system (Taxation Determination TD 93/108). Accordingly, legal expenses are of a private nature if they are incurred to protect a taxpayer's right to drive a car, even if their employment requires them to hold a driver's licence ( Case P55 82 ATC 253; (1982) 25 CTBR (NS) Case 109 and Case Q99 83 ATC 491; (1983) 27 CTBR (NS) Case 27). As the taxpayer incurred the legal expenses to enable them to maintain their driver's licence, the expenses are private in nature. Therefore, the legal expenses are not an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "5 April 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/108", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Employees Legal action Legal expenses", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002692", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/108 | Keywords Deductions & expenses Employees Legal action Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/768", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - preparing a loan agreement", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in drawing up a loan agreement?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in drawing up a loan agreement.", "Facts": "The taxpayer made a loan to a company at commercial interest rates. The loan is secured by a mortgage over commercial premises. The taxpayer engaged a solicitor to draw up a loan agreement that would protect their interests. The taxpayer incurred legal expenses in relation to this matter.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431 the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words \"incurred in gaining or producing the assessable income\" mean in the course of producing such income.' The expenditure must therefore be related to the production of assessable income and not be incurred at a point too soon to be deductible (FC of T v. Maddalena (1971) 2 ATR 541; 71 ATC 4161). The legal expenses incurred by the taxpayer to draw up the loan agreement were not incurred in the course of gaining or producing the assessable income from the investment. The expenditure occurred at a point too soon to be part of the income producing process. It is expenditure that is associated with putting the income earning investment in place. Accordingly, the legal expenses incurred by the taxpayer are not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "18 April 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Legal action Legal expenses", "Case_References": "Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 4 AITR 236 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002768", "Unmatched_Content": "Keywords Deductions & expenses Legal action Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/799", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - Strata Title Common Property", "Issue": "Are legal expenses paid to secure tenants' enjoyment of strata title common property deductible under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "Yes, the legal expenses paid to secure tenants' enjoyment of strata title common property are deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is a registered proprietor of a Strata Plan lot. They and their tenants have been denied access to part of the common property by another strata proprietor. Legal expenses were incurred in attempting to regain access to part of the common property. The dispute between the taxpayer and the other proprietor has not settled, despite an order in the taxpayer's favour from the Strata Title Referee.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 provides that expenses will generally be deductible if their essential character is that the expenditure has a sufficient connection with the operations or activities that more directly gain or produce assessable income, provided that the expenses are not of a capital, private or domestic nature. In this case, the expenses are not of a private of domestic nature, but may be capital, as the legal action taken relates to access to a capital item. Case law provides examples of situations where taxpayers have attempted to prevent damage to, or a reduction in value of, capital assets. In AAT Case 5012 (1989) 20 ATR 3425; Case W30 89 ATC 300, the taxpayers merely sought retention of the status quo so as to avoid perceived damage to their business ( FC of T v. Snowden & Willson Pty Ltd (1958) 99 CLR 431; John Fairfax & Sons Pty Ltd v FC of T (1959) 101 CLR 30 applied). No asset was acquired and no added benefit accrued to the partnership. All that accrued was the limitation of the nuisance. Therefore, the legal costs were not outgoings of a capital nature ( Sun Newspapers Ltd v. FC of T (1938) 61 CLR 337 applied). As a proprietor and tenant in common, the taxpayer is entitled to access and use the common property under the Strata Plan. In taking legal action against the other strata proprietor, they have not sought any new asset, advantage or right. The desired outcome of their legal action was merely to ensure the continued enjoyment of the area and to limit any adverse effects on the rental income from the unit and the common property. Therefore, the legal expenses are deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "23 July 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Strata titles Legal expenses", "Case_References": "AAT Case 5012 (1989) 20 ATR 3425", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002799", "Unmatched_Content": "Keywords Strata titles Legal expenses"}
{"ATO_ID_Number": "ATO ID 2002/814", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of accounting and legal fees", "Issue": "Whether accounting and legal fees incurred in appealing to the Federal Court on a Sales Tax dispute are deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA1997).", "Decision": "Yes. Accounting and legal fees incurred in appealing to the Federal Court on a Sales Tax dispute are deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer manufactures two types of plant. The taxpayer maintained that sales tax was not payable on any sales of the plant. The taxpayer was subsequently audited by the ATO resulting in an amended assessment issuing. The taxpayer lodged a Notice of Objection against the assessment. The objection was disallowed. The taxpayer appeared before the AAT who confirmed the ATO decision. The taxpayer then lodged an appeal with the Federal Court. In an out of Court settlement it was agreed that the taxpayer would pay a substantially lesser amount of sales tax than was originally claimed by the ATO. The taxpayer incurred accounting and legal fees in respect of this matter.", "Reasons_for_Decision": "Summary: Apart from the deductibility under specific provisions of the tax law, the deductibility of accounting and legal expenses is to be considered under section 8-1 of the ITAA 1997. Accounting and legal expenses which are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income (paragraph 8 1(1)(b) of the ITAA 1997) and are not of a capital nature, or do not fall within any of the other exceptions in subsection 8-1(2), are deductible. Where a taxpayer is carrying on a business, the cost of preparing a return for any business-related tax such as sales or payroll tax is deductible under section 8-1 of the ITAA 1997 as that cost can be reasonably seen as desirable or appropriate in pursuit of the taxpayer's business objectives in earning assessable income ( Magna Alloys & Research Pty Ltd v. FC of T (1980) 49 FLR 183; [1980] FCA 150; (1980) 11 ATR 276; 80 ATC 4542). The cost of objecting or appealing against any resulting assessment is also deductible. The cost of obtaining professional advice on matters relating to these taxes would also be deductible. Objecting against a sales tax assessment would meet the test for deductibility referred to above. Therefore, the taxpayer is entitled to a deduction for the accounting and legal expenses they have incurred. This decision is supported by the decision of the Federal Court in Jezareed Pty Ltd v. FC of T (1989) 23 FCR 529; [1989] FCA 150; (1989) 20 ATR 683; 89 ATC 4459 where a retail motor trader was allowed a deduction of nearly $500,000 in fees paid for advice and administrative work in relation to a sales tax minimisation scheme.", "Date_of_Decision": "5 April 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounting expenses Legal expenses Precedent", "Case_References": "Jezareed Pty Ltd v. Federal Commissioner of Taxation (1989) 23 FCR 529 [1989] FCA 150 20 ATR 683 89 ATC 4459", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002814", "Unmatched_Content": "Keywords Accounting expenses Legal expenses Precedent"}
{"ATO_ID_Number": "ATO ID 2002/1081", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses - to establish rights to intellectual property", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in establishing their rights in relation to written materials authored by them?", "Decision": "No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in establishing their rights in relation to written materials authored by them.", "Facts": "The taxpayer is an employee. The taxpayer authored written materials for use in their employment. The taxpayer's employer proposed selling the materials to another person. The taxpayer incurred legal expenses in seeking legal advice to establish their rights in relation to the written materials.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In determining whether a deduction for legal expenses is allowable under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34; (1946) 3 AITR 436; (1946) 8 ATD 190). The nature or character of the legal expenses follows the advantage that is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature, then the expenses incurred in gaining the advantage will also be of a capital nature. Legal expenses may be of a revenue nature and therefore deductible if they arise out of the day to day activities of the taxpayer's business or income producing activity ( Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; [1932] HCA 56; (1932) 2 ATD 169). Where however, expenditure is devoted towards a structural rather than an operational purpose, the expenditure is of a capital nature and the expenses are not deductible ( Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; [1938] HCA 73; (1938) 5 ATD 87; (1938) 1 AITR 403). Outgoings incurred in the preservation of an existing capital asset have been held to be capital in nature ( John Fairfax & Sons Pty Limited v. Federal Commissioner of Taxation (1959) 101 CLR 30; [1959] HCA 4; (1959) 7 AITR 346; (1959) 11 ATD 510). The taxpayer incurred legal expenses in seeking advice to establish their rights in relation to the written materials authored by them. The advantage sought to be obtained by seeking legal advice was to establish their right to the materials. The legal expenses are capital in nature as they relate to the asset rather than the derivation of income from that asset. Accordingly, as the legal expenses incurred by the taxpayer are of a capital nature, a deduction is not allowable under section 8-1 of the ITAA 1997.", "Date_of_Decision": "21 November 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/136", "Subject_References": "Capital expenditure Intellectual property rights Legal expenses Ownership, interests, control & rights", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34 (1946) 3 AITR 436 (1946) 8 ATD 190", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021081", "Unmatched_Content": "Updated to add medium neutral case citation | Updated to include related ATO ID | Keywords Capital expenditure Intellectual property rights Legal expenses Ownership, interests, control & rights"}
{"ATO_ID_Number": "ATO ID 2001/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: Legal Expenses (Opposing building application)", "Issue": "Whether expenses incurred in opposing a building application are deductible to the owners of a rental property.", "Decision": "The expenses incurred in opposing a building application are not deductible to the owners of the rental property.", "Facts": "The taxpayers own a rental property. The property has views that enhance the prospects of renting the property. Owners of the adjacent property lodged a building application that would have blocked almost one half of the views from the taxpayers' property. After accepting submissions, the Council refused the application. In actively objecting to the application, the taxpayers incurred various expenses including telephone, postage, travelling and legal costs. They argue that these expenses are a legitimate cost of maximising the profit of an ongoing business (the renting of the property) and that Case W30 89 ATC 300; AAT Case 5012 (1989) 20 ATR 3425 supports this view.", "Reasons_for_Decision": "Summary: The taxpayers are not 'carrying on a business' and therefore cannot claim a business deduction under subsection 51(1) of the Income Tax Assessment Act 1936. IT 2423 (Withholding tax : whether rental income constitutes proceeds of business - permanent establishment - deduction for interest) states that in order to judge whether a business of letting property exists, the scale of operations must be looked at. Deriving income from renting one or two residential properties would not normally be thought of as a business. Therefore, the taxpayers are not allowed a deduction under the 'second limb' of subsection 51(1) as they are not 'carrying on a business' and Case W30 89 ATC 300; AAT Case 5012 (1989) 20 ATR 3425 does not apply to their situation. Neither are the expenses deductible under the 'first limb' of subsection 51(1) as being incurred in gaining or producing assessable income. In Broken Hill Theatres Pty Ltd v FC of T (1952) 85 CLR 423; 9 ATD 306 it was held that expenses incurred in opposing the granting of a licence to a competitor which would have seen a reduction in the taxpayer's income were capital costs. Similarly, the expenses incurred by the taxpayers in challenging the building application can be attributed to the preservation of their income earning structure and are thus non-deductible capital costs.", "Date_of_Decision": "18 December 1996", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 51(1)", "Related_Public_Rulings_and_Determinations": "TR 93/32 | IT 2423", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses Rental expenses Carrying on a business Capital expenditure", "Case_References": "FC of T v McDonald 87 ATC 4541 (1989) 18 ATR 957", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20014", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 93/32 IT 2423 | Keywords Legal expenses Rental expenses Carrying on a business Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2001/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: Legal expenses in course of employment", "Issue": "Are legal expenses incurred by an employee in the course of employment an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Legal expenses incurred by an employee in the course of employment are an allowable deduction under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer, as part of their employment duties, was instructed to write a paper. Subsequently, the taxpayer was reprimanded for comments included in the paper. The taxpayer, being concerned about the possibility of being dismissed from the position as a result of the comments, sought legal advice.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 provides that a loss or an outgoing is an allowable deduction if it is incurred in producing assessable income or in carrying on a business for the production of assessable income unless that loss or outgoing is capital or of a private or domestic nature. Legal expenses are generally deductible if they arise out of the day to day activities of the taxpayer's business (Herald and Weekly Times Ltd v. Federal Commissioner of Taxation (1932) 48 CLR 113; (1932) 39 ALR 46; (1932) 2 ATD 169) and the legal action has more than a peripheral connection to the taxpayer's income producing activities ( Magna Alloys and Research Pty Ltd v. FC of T (1980) 49 FLR 183; (1980) 11 ATR 276; 80 ATC 4542). Similarly, in FC of T v. Day [2008] HCA 53 and FC of T v. Rowe (1995) 31 ATR 392; 95 ATC 4691, the courts accepted that legal expenses incurred in defending the manner in which a taxpayer performed his employment duties were allowable. No significance was placed by the court on the taxpayer's status as an employee. The taxpayer has incurred legal expenses in defending themself against criticism of the taxpayer's work practices. The evidence indicates that, in carrying out the actions that led to the criticism, the taxpayer was doing no more than executing their employment duties. Consequently, the legal expenses incurred are an allowable deduction.", "Date_of_Decision": "6 October 1997", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses", "Case_References": "FC of T v Rowe (1995) 31 ATR 392 95 ATC 4691", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200127", "Unmatched_Content": "Minor wording inclusion of ITAA 1997"}
{"ATO_ID_Number": "ATO ID 2001/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: Legal expenses in recovery of misappropriated funds", "Issue": "Are legal expenses incurred in attempting to recover misappropriated funds deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Legal expenses incurred in attempting to recover misappropriated funds are not deductible under section 8-1 of the ITAA 1997.", "Facts": "A taxpayer who is an employee of a unit trust pays $50,000 for units in the trust. The person to whom the payment is made (a principal in the business) misappropriates the money; the money is never transferred to the trust. The taxpayer incurs legal expenses in attempting to recover the misappropriated funds.", "Reasons_for_Decision": "Summary: In determining whether a deduction is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v FC of T (1946) 72 CLR 634; 8 ATD 190 per Dixon J). The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. Where the legal expenses arise as a consequence of the day to day activities of a business, the object of the expenditure is devoted towards a revenue end and the legal expenses are deductible ( Herald & Weekly Times v FC of T 48 CLR 113; 2 ATD 169). Where, however, the expenditure is devoted towards a structural rather than operational purpose, the expenditure is of a capital nature and the expenses are not deductible ( Sun Newspapers Ltd v FC of T (1938) 61 CLR 337; 5 ATD 87). The taxpayer has incurred legal expenses to recover money misappropriated by a principal of the business. The legal fees were incurred by the taxpayer in his capacity as an investor with the object of recovering invested capital. As such, the legal expenses are of a capital nature and are not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "20 January 1997", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions and expenses Legal expenses", "Case_References": "Herald & Weekly Times Ltd v FC of T 48 CLR 113 2 ATD 169", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200142", "Unmatched_Content": "Update reference to subsection 51(1) ITAA 1936 to section 8-1 of the ITAA 1997. | Keywords Deductions and expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2001/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal expenses: Challenging Search Warrants", "Issue": "Whether legal expenses incurred by a firm of solicitors in challenging the validity of search warrants are allowable deductions under subsection 51(1) of the Income Tax Assessment Act 1936.", "Decision": "The legal expenses incurred by a firm of solicitors in challenging the validity of search warrants are allowable deductions under subsection 51(1) of the Income Tax Assessment Act 1936.", "Facts": "The Federal Police by authority of two search warrants, seize moneys deposited by certain of the taxpayer's existing clients along with documents and records relating to the deposits of the moneys. The deposits had been made to cover legal costs relating to criminal proceedings. The taxpayer has never before received warrants seizing documents and funds in its possession. The taxpayer brings an action to challenge the validity of the warrants. The taxpayer does not charge the expenses incurred in challenging the warrants to any client. The taxpayer is ultimately successful in having the search warrant relating to the seizure of the documents declared void and of no effect and having the various documents returned. However, the firm is unsuccessful in having the warrant relating to the seizure of moneys deposited overturned. The taxpayer's dominant purpose in challenging the warrants is to defend the practice of the firm of accepting funds in advance from clients who are subject to criminal charges. The taxpayer encourages this practice as it makes good commercial sense: the firm is assured of being paid for its costs and outlays in a timely manner and the risk that the firm will incur a bad debt is also reduced or eliminated.", "Reasons_for_Decision": "Summary: The legal expenses are not incurred by the taxpayer for any purpose other than defending its business method of accepting money in advance from clients in relation to costs and outlays in criminal matters, defending funds in a trust account, and protecting the trail of documents which governed deposit of these funds. The decision to challenge the warrants is thus related to an integral part of the taxpayer's business, namely the receiving of funds in advance to cover anticipated expenses. The expenditure is necessarily incurred in carrying on the business for the purpose of gaining assessable income. Furthermore, the negative limbs of subsection 51(1) of the Income Tax Assessment Act 1936 have no application: the legal expenses are not capital in nature. The expenditure incurred by the taxpayer produces no benefit of an enduring nature nor does it relate to the preservation of a capital asset (compare Case V140 88 ATC 875, 19 ATR 3859 where there was a threatened extinction of the taxpayer's business when the police executed the search warrants). Finally, the fact that the expenses are unusual and the taxpayer has not on previous occasion needed to take such legal action does not prevent the expenses being deductible (see for example FC of T v Snowden and Wilson Pty Ltd (1958) 99 CLR 431).", "Date_of_Decision": "20 July 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 51(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions and expenses Legal expenses Legal practitioners", "Case_References": "FC of T v Snowden & Wilson Pty Ltd (1958) 99 CLR 431", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200183", "Unmatched_Content": "Keywords Deductions and expenses Legal expenses Legal practitioners"}
{"ATO_ID_Number": "ATO ID 2001/322", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses and Credit Card Expenses", "Issue": "Are credit card and legal expenses incurred by the taxpayer on behalf of the taxpayer's employer deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, credit card and legal expenses incurred by the taxpayer on behalf of the taxpayer's employer are not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer was employed as a purchasing officer. The taxpayer was issued with a personal corporate credit card. The taxpayer used the card to incur expenses on behalf of the employer. These were general expenses, not expenditure for items required for the performance of the taxpayer's duties. The employer ceased business and the taxpayer was sued by the credit card company for the amount owing on the card. The taxpayer incurred legal expenses in defending the court action. The taxpayer settled the court action by paying an amount of money to the credit card company.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. It must be considered, therefore, whether the legal and credit card expenses were incurred by the taxpayer in gaining or producing their assessable income. In Case W101 89 ATC 821; (1989) 20 ATR 3421 a taxpayer obtained a corporate credit card as required by his employer who directed him to charge to the credit card the air fares for three of the companies executives. Before the taxpayer could be reimbursed by the employer for these expenses the company went into receivership. The taxpayer initially resisted the attempts of the credit card company to recover the debt from him, but eventually paid the debt. The Tribunal disallowed the deduction claimed by the taxpayer for the cost of legal expenses and for the amount of the credit card debt he was required to pay. The outgoings were held not to have been incurred in the course of gaining or producing the taxpayer's assessable income. Rather, it was held that the expense could be regarded as more in the nature of a loan to the company. The circumstances are similar here in that the taxpayer obtained a credit card at the direction of the employer, and then used this card to incur expenditure on behalf of the employer. The expenses were incurred to meet the general expenses of the employer and did not relate directly to the performance of the taxpayer's duties. There is no evidence that there was any connection between the purchases made and the derivation of the taxpayer's assessable income. The expenditure was not incurred by the taxpayer in order to earn income as an employee. These expenses are therefore not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "27 August 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Work related expenses Legal expenses Credit cards", "Case_References": "Case W101 89 ATC 821 (1989) 20 ATR 3421", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001322", "Unmatched_Content": "Keywords Work related expenses Legal expenses Credit cards"}
{"ATO_ID_Number": "ATO ID 2001/549", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - Defamation Action", "Issue": "Are the legal expenses incurred by the taxpayer to prevent defamatory statements being made by a colleague an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, the legal expenses incurred by the taxpayer to prevent defamatory statements being made by a colleague are an allowable deduction under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is an employee. A colleague disagreed with the taxpayer's work performance and began action to have the taxpayer replaced. The colleague sent the taxpayer abusive e-mails and a letter stating that the taxpayer was not fulfilling the requirements of the position. Copies of the e-mail and the letter were forwarded by the colleague to the taxpayer's manager. The taxpayer incurred expenses in engaging a solicitor to provide advice. The colleague received a letter from the taxpayer's solicitor warning that his actions were grounds for a defamation action and requesting the actions cease.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. Legal expenses are deductible provided the legal action: When the principal reason for incurring the legal expenses is defending the actions of the taxpayer in carrying out their employment duties through which they gain or produce assessable income, such expenses are characterised as being of a revenue nature and are deductible ( Inglis v. FC of T 87 ATC 2037; and Case V116 88 ATC 737; AAT Case 4502 (1988) 19 ATR 3703). The taxpayer is an employee who incurred legal expenses defending actions undertaken in carrying out employment duties through which assessable income is gained. Therefore, the legal expenses are an allowable deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "18 October 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Legal expenses", "Case_References": "The Herald and Weekly Times Ltd v. FC of T (1932) 48 CLR 113", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001549", "Unmatched_Content": "Keywords Deductions & expenses Legal expenses"}
{"ATO_ID_Number": "ATO ID 2001/622", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - to obtain superannuation payment before retirement age", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in obtaining their superannuation lump sum payment before retirement age?", "Decision": "No, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in obtaining their superannuation lump sum payment before retirement age.", "Facts": "The taxpayer ceased work before retirement age as a result of a medical condition. The taxpayer wanted to have access to their superannuation lump sum payment before they reached retirement age. The taxpayer incurred legal expenses in order to pursue early payment of the superannuation lump sum. The taxpayer received a superannuation lump sum payment during the current year of income.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered (Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34). The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. The legal expenses were not incurred by the taxpayer in asserting their right to the superannuation payment but rather for early withdrawal of the monies from the taxpayer's superannuation fund. The early withdrawal of monies from the taxpayer's superannuation fund is an issue of a private nature. There is an insufficient nexus between incurring the legal expenses and the gaining of assessable income. The legal expenses are also private in nature and therefore not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "31 August 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions and expenses Legal expenses Lump sum superannuation payments Superannuation", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001622", "Unmatched_Content": "Keywords Deductions and expenses Legal expenses Lump sum superannuation payments Superannuation"}
{"ATO_ID_Number": "ATO ID 2001/667", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Legal Expenses - to recoup full entitlement to a superannuation lump sum payment", "Issue": "Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for legal expenses incurred in recouping their full entitlement to a lump sum superannuation payment?", "Decision": "No, the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for legal expenses incurred in recouping their full entitlement to a lump sum superannuation payment.", "Facts": "The taxpayer received a partial lump sum payment from their employer's superannuation fund. The taxpayer took legal action, and incurred legal expenses, in order to receive their full entitlement to their full lump sum superannuation payment. The superannuation payment received by the taxpayer was for the loss of their future earning capacity calculated until their retirement age. The taxpayer received the balance of their lump sum superannuation entitlement in the current income year. The lump sum payment received qualified as a superannuation benefit. The taxpayer included the taxable component of the superannuation benefit in their assessable income.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature. In determining whether a deduction for legal expenses is allowed under section 8-1 of the ITAA 1997, the nature of the expenditure must be considered ( Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634); [1946] HCA 34. The nature or character of the legal expenses follows the advantage which is sought to be gained by incurring the expenses. If the advantage to be gained is of a capital nature then the expenses incurred in gaining the advantage will also be of a capital nature. The fact that a capital payment is specifically brought to account as assessable income will not change the nature of the payment. An amount that is capital in nature will remain capital notwithstanding that it is specifically included in the assessable income of the taxpayer The lump sum superannuation benefit, being a payment for the loss of the taxpayer's earning capacity, is a capital receipt. The taxpayer incurred the legal expenses in order to obtain the superannuation benefit. Although the taxable component of the superannuation benefit is included in the taxpayer's assessable income, the superannuation benefit retains its character as a capital receipt. As the legal expenses were incurred in gaining a capital sum they will also be of a capital nature and are therefore not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "11 September 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 307-8 subsection 301-20(1) subsection 301-35(1) subsection 301-95(1) subsection 301-105(1) subsection 301-115(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/622", "Subject_References": "Legal expenses Employer sponsored superannuation funds Lump sum superannuation benefits", "Case_References": "Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634 [1946] HCA 34", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001667", "Unmatched_Content": "Updated legislative terms | Updated legislative terms and case reference | Updated legislative references | Add medium neutral case reference | Keywords Legal expenses Employer sponsored superannuation funds Lump sum superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2004/856", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction for fees incurred to obtain currency exchange rates", "Issue": "If a taxpayer is charged a fee for the provision of a rate of exchange used to translate the value of their foreign income, is this fee deductible under section 25-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Reasonable fees charged for the provision of a rate of exchange used to translate the value of a taxpayer's foreign income for tax purposes are deductible under section 25-5 of the ITAA 1997.", "Facts": "The taxpayer derives foreign income. The Tax Office does not provide information on currency exchange rates in the particular currency the taxpayer's foreign income is denominated in. The taxpayer obtains reasonable exchange rates from an independent external source that commonly quotes foreign exchange rates, for the purpose of translating their foreign income into Australian dollars in accordance with Subdivision 960-C of the ITAA 1997. The taxpayer is charged a small fee from the exchange rate provider for the provision of such rates.", "Reasons_for_Decision": "Summary: Section 25-5 of the ITAA 1997 provides that certain tax-related expenses are deductible. Paragraphs 25-5(1)(a) and 25-5(1)(b) of the ITAA 1997 respectively provide that a taxpayer can deduct expenditures they incur to the extent that the expenditure is for managing tax affairs or for complying with an obligation imposed on them by a Commonwealth law, insofar as that obligation relates to the tax affairs of an entity. The expenditure may relate to a past, present or future year of income of the entity. Section 25-5 of the ITAA 1997 does not specify what constitutes managing tax affairs. However, it is considered that managing tax affairs includes activities required to prepare income tax returns (see ATO Interpretative Decision ATO ID 2003/955). Just as the cost of acquiring valuations required to comply with tax obligations or otherwise relating to the management of tax affairs will be deductible under section 25-5 of the ITAA 1997 (see Taxation Determinations TD 93/92; TD 2003/10 and TD 2003/11), so too will the cost of acquiring exchange rates required to translate foreign amounts into Australian dollars for taxation purposes. Therefore, any reasonable fees the taxpayer incurs to obtain exchange rates required to translate their foreign currency denominated income to Australian dollars in accordance with the requirements of Subdivision 960-C of the ITAA 1997 will be deductible under section 25-5 of the ITAA 1997, at the time such fees are incurred.", "Date_of_Decision": "22 October 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 960-C section 25-5 paragraph 25-5(1)(a) paragraph 25-5(1)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/92 | Taxation Determination TD 2003/10 | Taxation Determination TD 2003/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/955", "Subject_References": "Deductions & expenses Foreign currency translation Foreign exchange rates Tax related expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004856", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 93/92 Taxation Determination TD 2003/10 Taxation Determination TD 2003/11 | Keywords Deductions & expenses Foreign currency translation Foreign exchange rates Tax related expenses"}
{"ATO_ID_Number": "ATO ID 2009/100", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Complying superannuation fund: deductibility of premiums on 'whole of life policy' - subsection 295-465(1) of the ITAA 1997", "Issue": "Is the trustee of a superannuation fund entitled to a deduction worked out under Item 1 of the table in subsection 295-465(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for a premium paid for a whole of life policy where the premium is dissected between an entry fee and the investment component of the policy?", "Decision": "No, the trustee of a superannuation fund is not entitled to a deduction worked out under Item 1 of the table in subsection 295-465(1) of the ITAA 1997 for a premium paid for a whole of life policy where the premium is dissected between an entry fee and the investment component of the policy.", "Facts": "The trustee of a superannuation fund paid a single premium to a life insurance company for a policy titled a 'whole of life policy'. Under the policy the trustee of the superannuation fund could select an investment option in relation to the policy. An entry fee of 6% of the premium is charged under the policy. In addition, annual policy fees and a 1.5% exit fee are also charged under the policy. The life insurance company will invest the balance of the premium (after the entry fee has been deducted) in accordance with the investment option selected by the trustee of the superannuation fund. The policy provides that a benefit is payable when either of the following occurs: The benefit payable on death of the insured member of the superannuation fund is 101% of the surrender value of the policy. The benefit payable on the surrender of the policy by the trustee of the superannuation fund is the surrender value of the policy. The surrender value of the policy is determined as the amount of premiums received, less fees charged under the policy (including the 6% entry fee) plus or minus any amounts that the life insurance company may add to or deduct from the value of the policy in relation to the investment returns of the life insurance company from the investment of the premium.", "Reasons_for_Decision": "Summary: Subsection 295-465(1) of the ITAA 1997 allows the trustee of a complying superannuation fund a deduction in respect of a premium payable under an insurance policy where the policy is, wholly or partly, in respect of a current or contingent liability of the fund to provide benefits referred to in section 295-460 of the ITAA 1997 for members of the fund. The amount of the deduction for a whole of life policy is specified in Item 1 of the table to subsection 295-465(1) of the ITAA 1997 to be 30% of the premium. A whole of life policy is defined in subsection 295-480(1) of the ITAA 1997 as an insurance policy that satisfies certain conditions. One of these conditions is that the premium is not dissected (refer to paragraph 295-480(1)(b) of the ITAA 1997). The design of subsection 295-465(1) of the ITAA 1997 indicates that the intent of Item 1 of the table to subsection 295-465(1) is to allow a deduction in relation to whole of life policies where the amount of the premium that is attributable to the risk component (that is, death or disability cover) is bundled with the amount of the premium attributable to the other components of the policy. The concept of bundling the components of a policy is discussed in Taxation Ruling TR 2003/14: Life insurance companies: the actuarial determination of fees and charges. Paragraph 6 of TR 2003/14 states that: A bundled policy includes a traditional whole of life or endowment policy. The components of the policy in respect of investment, risk and administration are bundled (that is, not readily identified) in the way the terms of the policy are defined and the manner the business is managed. Segregation of the components of the policy is impractical and inconsistent with the nature and management of the business. The policy entered into between the trustee of the superannuation fund and the life insurance company clearly identifies an investment component (being the amount of the premium less the 6% entry fee paid). The policy also includes an annual policy fee and an exit fee. The explicit nature of these fees indicates that the investment and other components of the policy are not bundled. While the policy does not specify how much of the fees relate to the risk and administration components of the policy, it is clear that these components of the policy are separate and distinct from the investment component of the policy. Paragraph 295-480(1)(b) of the ITAA 1997 requires that the premium on an insurance policy not be dissected. The explicit identification of the entry fee indicates that the amount of the premium has been dissected between the investment component and other components. Therefore, the policy does not satisfy paragraph 295-480(1)(b) and is not a whole of life policy as defined in subsection 295-480(1) of the ITAA 1997. As the policy does not satisfy paragraph 295-480(1)(b) of the ITAA 1997, it is not necessary to consider whether the policy satisfies the conditions in the definition of a whole of life policy in paragraphs 295-480(1)(a) and (c) of the ITAA 1997. Accordingly, as the policy is not a whole of life policy as defined in subsection 295-480(1) of the ITAA 1997, the trustee is not entitled to a deduction worked out under Item 1 of the table in subsection 295-465(1) of the ITAA 1997. | Detailed Reasoning - Note: Although the trustee of the superannuation fund is not entitled to a deduction worked out under Item 1 of the table in subsection 295-465(1) of the ITAA 1997, a deduction may be allowable in respect of the premium if one of the other Items of the table in subsection 295-465(1) apply and the other requirements of subsection 295-465(1) are met.", "Date_of_Decision": "28 August 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 295-460 subsection 295-465(1) subsection 295-480(1) paragraph 295-480(1)(a) paragraph 295-480(1)(b) paragraph 295-480(1)(c)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2003/14", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/99", "Subject_References": "Complying superannuation funds Death benefits - superannuation benefits Life insurance company Life insurance policies Insurance bonds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009100", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2003/14 | Keywords Complying superannuation funds Death benefits - superannuation benefits Life insurance company Life insurance policies Insurance bonds"}
{"ATO_ID_Number": "ATO ID 2009/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Funds: exchange traded options - tax treatment of premiums payable", "Issue": "Where a self-managed superannuation fund (SMSF) trades exchange traded options (ETOs), are the premiums payable from that activity deductible under either section 8-1 or section 25-40 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where an SMSF trades exchange traded options (ETOs), the premiums payable from that activity are not deductible under either section 8-1 or section 25-40 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "The taxpayer is a self managed superannuation fund (SMSF) that is a complying superannuation fund. The taxpayer buys ETOs over listed shares on the Australian Securities Exchange's Options Market. The taxpayer does not hold the ETOs until expiry but closes out open positions by selling ETOs from the same series.", "Reasons_for_Decision": "Summary: A loss made on a transaction would ordinarily be an allowable deduction under section 8-1 of the ITAA 1997 where the transaction is entered into as an ordinary incident of carrying on a business, or where the loss arose from a business operation or commercial transaction that was for the purpose of profit-making. Alternatively, a loss made on a transaction would ordinarily be an allowable deduction under section 25-40 of the ITAA 1997 where the loss arises from the carrying on or carrying out of a profit-making undertaking or plan, and any profit from the transaction would have been included in assessable income under section 15-15 of the ITAA 1997. However, paragraph 295-85(2)(a) of the ITAA 1997 provides that where a CGT event happens to a CGT asset of a complying superannuation fund, sections 8-1 and 25-40 of the ITAA 1997 will not apply, and instead the CGT provisions will apply. An exception to this is contained in paragraph 295-85(3)(b) of the ITAA 1997 for CGT assets of the Fund that are An option is a CGT asset as defined in subsection 108-5(1) of the ITAA 1997. Options are specifically cited as an example of a CGT asset (see Note 1 to subsection 108-5(2) of the ITAA 1997). When the Fund opens a position by buying an ETO, no immediate taxation consequences arise. CGT Event C2 will happen to the Fund when its position under an ETO is closed out where the close-out results in the cancellation, release or discharge of the ETO (ATO ID 2005/164). Therefore, unless an ETO falls within one of the exceptions listed in paragraph 295-85(3)(b) of the ITAA 1997, the CGT provisions will be the only provisions to apply. An ETO does not satisfy either subparagraph 295-85(3)(b)(ii) or 295-85(3)(b)(iii) of the ITAA 1997. Further, an ETO is not one of the specifically listed instruments in subparagraph 295-85(3)(b)(i) of the ITAA 1997. In relation to the phrase 'or other security' in subparagraph 295-83(3)(b)(i) of the ITAA 1997 it is necessary to look at the history of section 295-85 of the ITAA 1997 to determine what instruments are included within the meaning of the phrase. Section 295-85 of the ITAA 1997 represents a rewrite of section 304 of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 303(1) of the ITAA 1936 set out the meaning of 'security' for the purposes of section 304 of the ITAA 1936. The Explanatory Memorandum to the Bill that introduced sections 303 and 304 of the ITAA 1936 provides that. \"security\" ...for these purposes is defined in a similar way in Division 16E.\" The subsection 303(1) of the ITAA 1936 definition of security is now contained in paragraph 295-85(3)(b) of the ITAA 1997. Paragraph 3.1 of the Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006 that introduced section 295-85 of the ITAA 1997, states that the rewritten provisions in Subdivision 295-B of the ITAA 1997 (including section 295-85) do not change the law as it operated under the previous ITAA 1936 provisions. Therefore, subsection 295-85(2) of the ITAA 1997 will apply CGT as the primary code of taxation for superannuation funds unless the ETO is a security as understood for the purposes of Division 16E of the ITAA 1936. The Explanatory Memorandum accompanying Tax Laws Amendment Bill (No.2 ) 1986 which introduced Division 16E of the ITAA 1936 provided: \"security\" has been defined very widely...so as to encompass as many financial transactions as possible where there may be a deferral in the payment of income .\" The Commissioner has previously stated in Taxation Ruling TR 96/14, that the Division 16E of the ITAA 1936 definition of 'security' contained in subsection 159GP(1) of the ITAA 1936 applies only to debt securities or contracts that create debt-like obligations. Likewise, paragraph 295-85(3)(b) of the ITAA 1997 only encompasses debt securities or contracts that create debt-like obligations and therefore the phrase 'or other security' in subparagraph 295-85(3)(b)(i) of the ITAA 1997, covers only debt arrangements. An ETO is a contract to buy or sell a financial product such as a share. The terms of an ETO are standardised and set by the ASX. ETOs are held until expiry or exercise, or are closed out by entering into an equal but opposite position. An ETO is not a debt security and therefore it will not fall within the meaning of the phrase 'or other security' for the purposes of subparagraph 295-85(3)(b)(i) of the ITAA 1997. Subparagraph 295-85(3)(b)(iv) of the ITAA 1997 is broader than subparagraph 295-85(3)(b)(i) of the ITAA 1997. Like paragraph 159GP(1)(d) of the ITAA 1936 it includes a broad range of contracts under which there is a liability to pay an amount. However, TR 96/14 states that, in having regard to paragraphs (a), (b) and (c) of the definition of 'security', only those contracts that have 'debt-like obligations' will usually fall under paragraph (d) of the definition of 'security'. In accordance with TR 96/14, there are not sufficient debt-like obligations attaching to an ETO for it to fall under paragraph (d) of the definition of 'security'. Further, deferral of income is not a feature of an ETO arrangement. Therefore, an ETO will not satisfy paragraph 295-85(3)(iv) of the ITAA 1997. Accordingly, an ETO is not an asset that falls within any of the exceptions listed in paragraph 295-85(3)(b) of the ITAA 1997. Further, an ETO is not trading stock (ATO ID 2004/526). Therefore, the exception for trading stock in subsection 295-85(4) of the ITAA 1997 will not apply. As no exceptions in either subsection 295-85(3) or 295-85(4) of the ITAA 1997 apply to the Fund, a deduction for the premiums paid is not an allowable deduction under either section 8-1 or 25-40 of the ITAA 1997. This is the case regardless of the profit-making intention of the Fund in buying ETOs. Instead the premiums payable will form part of the cost base of the ETO. When the Fund buys an ETO, they acquire an asset (the ETO) for the amount paid for it (that is, the premium) plus any additional costs such as brokerage fees and the Australian Clearing House (ACH) fee These costs together form the cost base of the ETO (section 109-5 of the ITAA 1997). On the close out of the position, the Fund makes a capital gain or loss equal to the difference between the cost base of the ETO and the amount received on its expiry or termination (subsection 104-25(3) of the ITAA 1997).", "Date_of_Decision": "28 September 2009", "Year_of_Income": "Income years ending 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 303(1) section 304 Division 16E subsection 159GP(1) paragraph 159GP(1)(a) paragraph 159GP(1)(d)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/14 | Taxation Determination TD 2006/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/526 | ATO ID 2005/164 | ATO ID 2006/313", "Subject_References": "Self managed superannuation funds Financial derivatives Capital Gains Tax", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment Bill (No. 2) 1986 Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009111", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/14 Taxation Determination TD 2006/25 | Keywords Self managed superannuation funds Financial derivatives Capital Gains Tax"}
{"ATO_ID_Number": "ATO ID 2007/144", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of superannuation contributions made for directors of a passive investment company", "Issue": "Can a family investment company claim a deduction under section 82AAC of the Income Tax Assessment Act 1936 (ITAA 1936) for superannuation contributions made for the benefit of the directors of the company during the 2006-07 year of income in circumstances where the company derived its assessable income from passive investments it held during the year of income?", "Decision": "Yes. A family investment company can claim a deduction under section 82AAC of the ITAA 1936 for superannuation contributions made for the benefit of the directors of the company during the 2006-07 year of income in circumstances where the company derived its assessable income from passive investments it held during the year of income, provided that the directors are entitled to payment for their services.", "Facts": "The taxpayer is a family investment company (the company). The current shareholders of the company are the two directors who own one ordinary share each. The directors are also employees of another company (company B) which made superannuation contributions for the directors during the 2006-07 year of income. The company is not an associate of company B. The company derived its assessable income for the 2006-07 year of income from passive investments it held by way of a fixed investment portfolio during the year of income. The investment activities undertaken by the company in the 2006-07 year of income do not constitute a business. The directors did not receive any directors' fees during the 2006-07 year of income. The company made superannuation contributions to a complying superannuation fund during the 2006-07 year of income for the purposes of making provision for superannuation benefits payable for the directors. Under the company's articles of association the directors are to be paid such remuneration as is from time to time determined by the company in general meeting. In a general meeting on 1 May 2007 the company made a determination in accordance with its articles of association to pay directors' fees of $100 to each director for the 2006-07 year of income. The directors' fees for the 2006-07 year of income were paid to the directors on 1 July 2007.", "Reasons_for_Decision": "Summary: The amount of a contribution made by a taxpayer is allowable as a deduction to the taxpayer for the year of income in which the contribution was made if the conditions in subsection 82AAC(1) of the ITAA 1936 are satisfied. Those conditions are as follows: In the circumstances of this case, the company made contributions for the benefit of its directors in the 2006-07 year of income. The contributions were made: Therefore, the first two limbs of subsection 82AAC(1) of the ITAA 1936 have been satisfied. However, for the company to claim a deduction for the contributions one or more of the three conditions in paragraph 82AAC(1)(c) of the ITAA 1936 must also be satisfied. Relevantly, subparagraph 82AAC(1)(c)(iii) of the ITAA 1936 will be satisfied if the other person was an 'employee' for the purposes of the SGAA. The definition of 'employee' for the purposes of the SGAA is contained in section 12 of that Act. A director of a company is an employee of the company by virtue of subsection 12(2) of the SGAA, which states: A person who is entitled to payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate is, in relation to those duties, an employee of the body corporate. A director of a company is 'a member of the executive body of a body corporate' for the purposes of subsection 12(2) of the SGAA. However, as can be seen by the wording of subsection 12(2), the director of a company must also be 'entitled to payment' for the duties they perform as a director to qualify as an employee under the SGAA. It has long been held that the directors of a company are not entitled to payment for the services they provide as directors unless it is specifically provided for in the company's constitution or approved by shareholders (see Hutton v. West Cork Railway Co (1883) 23 Ch D 654 and Re George Newman & Co [1895] 1 CH 674 ( Re George Newman & Co )). In Re George Newman & Co the UK Court of Appeal said: Directors have no right to be paid for their services, and cannot pay themselves or each other, or make presents to themselves out of the company's assets, unless authorised to do so by the instrument which regulates the company or by the shareholders at properly convened meetings. The shareholders, at a meeting duly convened for the purpose can, if they think proper, remunerate directors for their trouble or make presents to them for their services out of assets properly divisible among the shareholders themselves. In this situation, the director's remuneration is determined by reference to the company's articles of association which state that the directors are to be paid such remuneration as is determined by the company in general meeting. In a general meeting on 1 May 2007 the company made a determination in accordance with its articles of association to pay directors' fees of $100 to each director for the 2006-07 year of income. As the company has made a determination to pay directors' fees of $100 to the directors for the 2006-07 year of income, the directors are 'entitled to payment' in terms of subsection 12(2) of the SGAA and are therefore employees for the purposes of the SGAA. The fact that the directors' fees were not paid until the next financial year (2007-08) does not change this. Accordingly, in the year of income in which the contributions are made, the company will satisfy subparagraph 82AAC(1)(c)(iii) of the ITAA 1936 in respect of the directors. As the company has satisfied one of the three conditions in paragraph 82AAC(1)(c) of the ITAA 1936 (that is, subparagraph 82AAC(1)(c)(iii) of the ITAA 1936), and is only required to satisfy one of the three conditions, the company does not have to satisfy the other two conditions (that is, subparagraphs 82AAC(1)(c)(i) and 82AAC(1)(c)(ii) of the ITAA 1936). By satisfying one of the elements of subsection 82AAC(1)(c) of the ITAA 1936, the company has satisfied the third limb of subsection 82AAC(1) of the ITAA 1936. Since the company has satisfied all three limbs of subsection 82AAC(1), the company is entitled to claim a deduction for the contributions it made for the benefit of the directors in the 2006-07 year of income. In this situation, the fact that the company derived its income from passive investments it held by way of a fixed investment portfolio during the 2006-07 year of income does not prevent the company from claiming a deduction for the contributions. As the company is not an associate of company B, the company can claim a deduction for the amount of the contribution up to the age based deduction limit that applies to each director under subsection 82AAC(2) of the ITAA 1936 for the 2006-07 year of income.", "Date_of_Decision": "8 June 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 82AAC subsection 82AAC(1) paragraph 82AAC(1)(a) paragraph 82AAC(1)(b) paragraph 82AAC(1)(c) subparagraph 82AAC(1)(c)(i) subparagraph 82AAC(1)(c)(ii) subparagraph 82AAC(1)(c)(iii) subsection 82AAC(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Contributions for employees - allowable deductions Superannuation contributions for employees Superannuation contributions - deductions & rebates", "Case_References": "Hutton v. West Cork Railway Co [1883] 23 Ch D 654", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007144", "Unmatched_Content": "Note: the above analysis will only apply until 30 June 2007 as subsection 82AAC(1) of the ITAA 1936 has been repealed by the Superannuation Legislation Amendment Simplification Act (2007). The views in the ATO ID are relevant to decisions involving section 290-60 and paragraph 290-70(aa) or paragraph 290-90(4)(aa) of the ITAA 1997 in the 2007-08 income year and later income years. | Keywords Contributions for employees - allowable deductions Superannuation contributions for employees Superannuation contributions - deductions & rebates"}
{"ATO_ID_Number": "ATO ID 2006/214", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Traditional Securities: deduction of loss on disposal or redemption", "Issue": "Does subsection 70B(4) of the Income Tax Assessment Act 1936 (ITAA 1936) operate to reduce the amount of a deduction under subsection 70B(2) of the ITAA 1936 for a loss on the disposal of a traditional security where the holder has knowledge that the issuer is unable or unwilling to discharge all liability to pay amounts under the security?", "Decision": "Yes. Where the other requirements of the subsection are met, subsection 70B(4) of the ITAA 1936 will apply to a holder of a traditional security who has knowledge that the issuer is unable or unwilling to discharge all liability to pay amounts under the security.", "Facts": "A taxpayer was a director and principal shareholder of a private company. The private company incurred interest in respect of a loan to purchase shares in a public company. Several years later the private company had financial difficulties. As a result of the private company's inability to pay the loan interest the taxpayer borrowed funds from an associate to pay the private company's interest liability on its behalf. Under a right of indemnity the private company became liable to repay the borrowed funds to the taxpayer. The right of indemnity is a traditional security. As a director and principal shareholder of the private company, the taxpayer was fully aware at all times of the private company's financial status. Ultimately the private company became insolvent and was not able to meet its liability to the taxpayer under the right of indemnity. The taxpayer sold their right of indemnity to a third party and claimed a deduction for a loss on the disposal of the traditional security.", "Reasons_for_Decision": "Summary: Subsection 70B(2) of the ITAA 1936 allows a deduction for the amount of any loss on the disposal or redemption of a traditional security. Where a traditional security is disposed of on or after 1 July 1992, subsection 70B(4) of the ITAA 1936 may operate, in certain circumstances, to deny a deduction under subsection 70B(2) of the ITAA 1936 in respect of so much of the amount of the loss as is a loss of capital or is a loss of a capital nature. One of the requirements of subsection 70B(4) of the ITAA 1936, contained in paragraph 70B(4)(e) of the ITAA 1936, is the need to draw the conclusion that, having regard to: It has been argued that because subsection 70B(4) of the ITAA 1936 uses the words 'apprehension or belief' the subsection does not apply where the holder had 'knowledge', rather than 'apprehension or belief', that the issuer was unable or unwilling to discharge all liability to pay amounts under the security. We do not accept that subsection 70B(4) of the ITAA 1936 necessarily requires the holder, in a subjective sense, to have the requisite apprehension or belief. In our view the test is an objective test. In the present circumstances, as director and principal shareholder of the private company, the taxpayer had knowledge of the private company's financial circumstances. The taxpayer had a level of awareness greater than apprehension or belief. If regard is had to the taxpayer's understanding of the issuer's financial position - that is, that the private company was unable to pay amounts due - it would be concluded that the disposal occurred for the reason, or for reasons which included the reason, that the private company would be unable to pay amounts due on its security. Accordingly, the deductible loss (if any) on the disposal or redemption of such a security cannot include an amount of capital or of a capital nature.", "Date_of_Decision": "28 July 2006", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 subsection 70B(2) subsection 70B(4)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Financial instruments Securities Traditional securities", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006214", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/14 | Keywords Financial instruments Securities Traditional securities"}
{"ATO_ID_Number": "ATO ID 2005/284", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: sponsorship of motor cycle racing", "Issue": "Can the taxpayer claim an income tax deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in sponsoring motor cycle racing?", "Decision": "Yes. The taxpayer is entitled to claim an income tax deduction for expenses incurred in sponsoring motor cycle racing under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer operates a business. The taxpayer intends to sponsor motor cycle racing in the belief that the exposure arising from the sponsorship will benefit his business in the form of advertising. The taxpayer will provide sponsorship for up to four motor cycle riders. This will include paying the day to day costs such as fuel, repairs, spare parts and safety clothing only. The motor cycles and a support vehicle as well as the clothing and caps worn by the riders will carry the taxpayer's business name. In addition, the taxpayer intends to hand out business cards at the motor cycle events to stimulate interest in his business through his position as sponsor of the sporting event. The taxpayer will not pay the costs of purchasing motor cycles.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income. Losses or outgoings are incurred in gaining or producing assessable income where they are 'incidental and relevant to that end' ( Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236). Where a taxpayer is carrying on a business for the purpose of gaining or producing assessable income, the commercial and practical implications of the term 'necessarily incurred' imply that voluntary expenditure incurred for business needs may be deductible. It is the taxpayer who decides whether the expenditure 'is dictated by the business ends to which it is directed' ( Federal Commissioner of Taxation v. Snowden & Willson Pty Ltd (1958) 99 CLR 431; (1958) 11 ATD 463; (1958) 7 AITR 308 ( Snowden & Willson's Case )). This was further supported in Magna Alloys & Research Pty Ltd v. Federal Commissioner of Taxation (1980) ATC 4542; (1980) 11 ATR 276, when the Court stated: For practical purposes and within the limits of reasonable human conduct, it is for the man who is carrying on the business to be the judge of what outgoings are necessarily incurred In this case, the taxpayer intends to provide sponsorship in the belief that the exposure from that sponsorship will benefit his business in the form of advertising and will generate future income. As it is the taxpayer who determines the nature of the expenditure to be undertaken in the conduct of their business (Snowden & Willson's Case) the expenses associated with the taxpayer's sponsorship of motor cycle racing are deductible under section 8-1 of the ITAA 1997. They are in the nature of advertising expenses and are directed to enhance the income producing activities of the taxpayer's business and are not excluded on the basis of being capital or of a private or domestic nature.", "Date_of_Decision": "29 September 2005", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Advertising & promotion expenses Deductions & expenses", "Case_References": "Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 8 ATD 431 (1949 4 AITR 236", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005284", "Unmatched_Content": "Minor changes to formatting | Keywords Advertising & promotion expenses Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2003/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Undeducted Purchase Price - Relevant Number", "Issue": "Should the annual deductible amount of the undeducted purchase price (UPP) of a superannuation pension be recalculated using the taxpayer's life expectancy upon the taxpayer's divorce?", "Decision": "Yes. The annual deductible amount of the UPP of a superannuation pension should be recalculated using the taxpayer's life expectancy upon the taxpayer's divorce.", "Facts": "The taxpayer receives a superannuation pension from an unfunded defined benefit scheme. The annual deductible amount of the superannuation pension was originally determined based on the ex-spouse's life expectancy. Subsequent to the pension commencing the taxpayer became divorced. According to the governing rules of the fund, the pensioner must be legally married at the time of death for the pension to revert to the spouse.", "Reasons_for_Decision": "Summary: Subsection 27H(2) of the Income Tax Assessment Act 1936 (ITAA 1936) provides the formula for calculating the deductible amount to be applied against the gross pension or annuity payments received during a year of income. The formula under subsection 27H(2) is as follows: (A(B - C)) / D Where: Subsection 27H(4) of the ITAA 1936 defines 'relevant number', as meaning: The Commissioner will not exercise his discretion under paragraph 27H(4)(c) of the ITAA 1936 to determine the relevant number unless he considers it appropriate to do so. In Administrative Appeals Tribunal Case Z19 92 ATC 204; AAT Case 7904 (1992) 23 ATR 1143, Member Fayle stated that: 'The deduction is to be calculated by reference to ascertainable criteria with a general application and not by some administrative decision based on individual preferences unrelated to the tests laid down in the legislation. To replace the statutory tests in subs (2) with some other test or opinion where the statutory test clearly applies would be to make the taxing measure arbitrary. There can be no scope to overlook the statutory test where its application cannot give rise to a harsh or an unreasonable incidence with regard to the object of the provision.' In circumstances, where a taxpayer's superannuation pension becomes non-reversionary following a divorce, or subsequently becomes reversionary upon remarriage, it is considered appropriate to redetermine the relevant number. In Case U89 87 ATC 513; AAT Case 67 (1987) 18 ATR 3484, Senior Member P M Roach stated that: 'when there is no prospect of any person becoming entitled to an annuity following the death of the contributor-annuitant the 'undeducted purchase price' is appropriately related by the Commissioner to the period of his life expectancy.' As there is no longer the prospect of any other person becoming entitled to the taxpayer's superannuation pension following the taxpayer's death, it is considered appropriate to recalculate the deductible amount of the pension using the taxpayer's life expectancy as the relevant number.", "Date_of_Decision": "25 February 2003", "Year_of_Income": "Year ended 30 June 1996 Year ended 30 June 1997 Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27H(2) subsection 27H(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Marriage breakdown Life expectancy Undeducted purchase price Undeducted purchase price commissioner's discretion", "Case_References": "AAT Case U89 87 ATC 513.", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200360", "Unmatched_Content": "Keywords Marriage breakdown Life expectancy Undeducted purchase price Undeducted purchase price commissioner's discretion"}
{"ATO_ID_Number": "ATO ID 2002/457", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Payments for surcharge liabilities", "Issue": "Is a payment made by a member to an unfunded defined benefits provider, for the purpose of reducing the debit balance of the member's surcharge debt account, deductible under section 290-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A deduction is not available under section 290-150 of the ITAA 1997 for a payment made by a member for the purpose of reducing the debit balance of their surcharge debt account.", "Facts": "The member is a member of an unfunded defined benefits provider. The member expects that on retirement they will be paid a pension. The member received advice that the pension paid to them will be reduced to meet any outstanding superannuation surcharge liabilities. The member wishes to make advance payments to meet future superannuation surcharge liabilities.", "Reasons_for_Decision": "Summary: Section 290-150 of the ITAA 1997 sets out the conditions to be met in order for a member to be able to claim a deduction for a superannuation contribution. Subsection 290-150(1) requires that the contribution is made for the purpose of providing superannuation benefits for the person (regardless of whether the benefits are payable to a SIS dependant if the person dies before or after becoming entitled to the benefits). A payment made for the purpose of reducing the debit balance of the member's surcharge debt account does not satisfy this criterion. Instead, it is viewed as a payment made for the purpose of reducing an accumulated surcharge liability. As an aside, section 26-60 of the Income Tax Assessment Act 1997 states that a deduction is not allowable in respect of a payment of a superannuation contributions surcharge liability.", "Date_of_Decision": "30 November 2001", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 section 26-60 section 290-150", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions Superannuation contributions surcharge Superannuation contributions - deductions & rebates Defined benefits superannuation fund", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002457", "Unmatched_Content": "Amended to reflect the re-write of the provision into the 1997 Act. | Keywords Superannuation contributions Superannuation contributions surcharge Superannuation contributions - deductions & rebates Defined benefits superannuation fund"}
{"ATO_ID_Number": "ATO ID 2002/678", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 31 - 'material benefit' for entering into a conservation covenant", "Issue": "Can a taxpayer, a landowner who enters into a conservation covenant, be entitled to an income tax deduction under Division 31 of the Income Tax Assessment Act 1997 (ITAA 1997) where it benefits because of the covenant?", "Decision": "Yes, a deduction will be allowable - provided the other requirements of Division 31 are met - if the benefits received are not money, property or other material benefits provided for entering into the covenant.", "Facts": "An entity has entered into a conservation covenant with a deductible gift recipient (DGR). The land is owned by the entity. The DGR has paid for all administrative costs for the covenant. It has also reimbursed the landowner's legal costs for the covenant. At the time of the covenant, the landowner and the DGR also entered into a management agreement. Under the agreement, the DGR provides advice, expertise and services in relation to the covenanted land. The landowner receives a fencing grant under a government program for land subject to conservation covenant. The local government rates payable by the landowner on the covenanted land are lowered because of the covenant. The landowner entered into the covenant to improve the saleability of other land it is developing on the other side of the road. The value of the developed land has increased because of the covenant.", "Reasons_for_Decision": "Summary: An income tax deduction is allowable to a landowner for entering into a conservation covenant over its land where the conditions of Division 31 of the ITAA 1997 are met. These conditions include that the landowner 'must not receive any money, property or other material benefit for entering into the covenant' (paragraph 31-5(2)(b) of the ITAA 1997). While the landowner has benefited from the lower rates and the fencing grant, they were not received 'for entering into the covenant'. It is not enough that a conservation covenant is merely prerequisite to receiving an otherwise unrelated benefit. Accordingly, the rate reduction and fencing grant do not prevent a deduction under Division 31. Any increase in the value of the land on the other side of the road is not a 'material benefit for entering into the covenant'. While there has been an increase in the value of the other land because of the covenant, this is not sufficient to conclude that a material benefit has been received for entering into the covenant. Also, the landowner's motive of improving the saleability of the other land does not prevent a deduction. A philanthropic or altruistic motive or intention is not a requirement for deduction under Division 31. Any benefit to the landowner from the DGR under the management agreement is too remote from the covenant. The advice, expertise and services are not 'for entering into the covenant'. Accordingly, they do not prevent deduction under Division 31. On the facts, the agreement was not made pursuant to a non-arms' length arrangement between the landowner and the DGR to disguise consideration for the covenant. The meeting or reimbursing of the legal and administrative costs by the DGR is not considered to preclude deduction under Division 31. [ Note: the allowing of a deduction under Division 31 can also have implications for the capital proceeds for CGT event D4 under section 104-47 of the ITAA 1997.]", "Date_of_Decision": "26 June 2002", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Division 31", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Gifts & donations Conditional gifts Deductible gift recipients Gifts to organisations Heritage conservation rebates", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002678", "Unmatched_Content": "Keywords Gifts & donations Conditional gifts Deductible gift recipients Gifts to organisations Heritage conservation rebates"}
{"ATO_ID_Number": "ATO ID 2001/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Undeducted Purchase Price (UK AFPS)", "Issue": "Do pensions paid to former members of the UK Armed Forces Pensions Scheme (AFPS) have an undeducted purchase price?", "Decision": "The \"pension abatement\" does not constitute undeducted purchase price.", "Facts": "Members of the AFPS do not contribute directly to the AFPS. However an adjustment known as the 'pension abatement' is made to the recommended salaries to take into account the relative benefits over those available to civilians.", "Reasons_for_Decision": "Summary: The taxpayer considered that the 'pension abatement' meant that members of the AFPS had purchased their pensions. However, the 'pension abatement' is not a contribution by the member. It is an employer contribution somewhat analogous to a salary sacrifice arrangement whereby the member receives a reduced salary in return for superannuation benefits. As such there is no undeducted purchase price of an AFPS pension.", "Date_of_Decision": "22 May 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27A(1) subsection 27A(5C) section 27H", "Related_Public_Rulings_and_Determinations": "TR 93/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Undeducted purchase price", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20013", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 93/13 | Keywords Undeducted purchase price"}
{"ATO_ID_Number": "ATO ID 2001/618", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation, retirement & employment termination - Reduced Life Expectancy", "Issue": "Can a taxpayer, suffering from a medical condition, use a reduced life expectancy factor to calculate the deductible amount of an allocated pension under subsection 27H(2) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Regulation 9 of the Income Tax Regulations 1936 (ITR 1936) specifies the Australian Life Tables (as published by the Australian Government Actuary) are to be used for the purposes of subsection 27H(2) of the ITAA 1936.", "Facts": "The taxpayer:", "Reasons_for_Decision": "Summary: Subsection 27H(2) of the ITAA 1936 provides the formula for calculating the deductible amount to be applied against the gross pension or annuity payments received during a year of income. The formula under subsection 27H(2) is as follows: (A (B - C)) / D Where: Subsection 27H(4) of the ITAA defines 'relevant number', as meaning: ' (a) where the annuity is payable for a term of years certain - the number of years in the term; (b) where the annuity is payable during the lifetime of a person and not thereafter - the life expectation factor of the person; and (c) in any other case - the number that the Commissioner considers appropriate having regard to the number of years in the total period during which the annuity will be, or may reasonably be, expected to be payable.' Regulation 9 of the ITR 1936 states that for the purposes of the definition of 'life expectation factor' in subsection 27H(4) of the ITAA 1936, the Australian Life Tables published by the Australian Government Actuary are to be used. There can be no change to life expectation factors for a person suffering from a medical condition. Due to amendments made to the definition of 'annuity' in subsection 27H(4) of the Income Tax Assessment Act 1936 (ITAA 1936) for the 2007-08 and later income years, the above analysis will only apply to a pension paid from a foreign superannuation fund or scheme or an annuity. The views in this ATO ID are relevant to decisions involving superannuation income streams that commenced being paid before 1 July 2007 and to which section 307-125 of the Income Tax (Transitional Provisions) Act 1997 applies.", "Date_of_Decision": "12 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27H(2) subsection 27H(4)", "Related_Public_Rulings_and_Determinations": "IT 2157", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation, retirement & employment termination Annuities & superannuation pensions Undeducted purchase price Deductible amount Life expectancy", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001618", "Unmatched_Content": "Related Public Rulings (including Determinations) IT 2157 | Keywords Superannuation, retirement & employment termination Annuities & superannuation pensions Undeducted purchase price Deductible amount Life expectancy"}
{"ATO_ID_Number": "ATO ID 2006/218", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Are prepaid audit fees 'excluded expenditure'?", "Issue": "Are the prepaid fees that are incurred by a company for the audit of its financial reports, an amount of expenditure required to be incurred by a law of the Commonwealth, a State or a Territory and therefore 'excluded expenditure' for the purposes of the prepayment rules in the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Audit fees incurred by a company are not 'excluded expenditure'. Although section 301 of the Corporations Act 2001 requires that a public company must have its financial reports for a financial year audited, there is no provision in the Corporations Act (or in any other Act of the Commonwealth, a State or a Territory) which specifies an amount that must be charged for the audit. Accordingly, the prepaid fees are not required to be incurred by a law of the Commonwealth, a State or a Territory.", "Facts": "The taxpayer is a public company listed on the Australian Stock Exchange. It is neither a small business nor a simplified tax system (STS) taxpayer. In accordance with section 301 of the Corporations Act the taxpayer is required to have its financial reports audited each financial year. On 1 June 2006 the taxpayer contracts with an accounting firm to provide audit services for the following 12 months. Under the terms of the contract the taxpayer is required to prepay the full audit fee of $10,000.", "Reasons_for_Decision": "Summary: A prepaid expense is expenditure incurred in one year for things to be done (in whole or in part) in a later year of income. The prepayment rules contained in Subdivision H of Division 3 of Part III of the ITAA 1936 affect the timing of deductions for prepaid expenditure. Certain types of expenditure are excluded from the prepayment rules. In so far as is relevant for present purposes subsection 82KZL(1) of the ITAA 1936 defines 'excluded expenditure' to mean an amount of expenditure 'required to be incurred by a law, or by an order of a court, of the Commonwealth, a State or a Territory'. The phrase is intended to cover statutory fees and charges that are incurred by taxpayers such as car registration fees. Although the taxpayer is required by the Corporations Act to have its financial statements audited these fees are not statutory fees or charges. There is no statutory provision that specifies an amount that the taxpayer must be charged for the audit of its accounts. Nor are the fees paid to a Governmental body. Accordingly, the prepaid audit fees are not 'excluded expenditure' and the taxpayer will not be entitled to an immediate deduction for those fees in the 2005-06 income year when they were incurred. Instead the taxpayer will be required to apportion the deduction for the expenditure over the period in which the services are provided in accordance with the rules contained in Subdivision H of Division 3 of Part III of the ITAA 1936.", "Date_of_Decision": "27 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 82KZL(1)", "Related_Public_Rulings_and_Determinations": "Income Tax Ruling IT 2625", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Advance expenses & payments", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006218", "Unmatched_Content": "Related Public Rulings (including Determinations) Income Tax Ruling IT 2625 | Keywords Advance expenses & payments"}
{"ATO_ID_Number": "ATO ID 2004/398", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "'Excluded expenditure' under the prepayment rules and the impact of GST in determining whether an amount of expenditure is less than $1,000", "Issue": "Can a taxpayer, who is registered for goods and services tax (GST), claim an immediate deduction for prepaid expenditure when:", "Decision": "Yes. A taxpayer can claim an immediate deduction as the GST exclusive amount of the expenditure is less than $1,000 and the prepayment rules exclude amounts of expenditure less than $1,000.", "Facts": "On 30 June 2003 a taxpayer that is registered for GST prepays expenditure for services to be provided by another registered entity over the period 1 July 2003 to 30 June 2004. The services to be provided are a taxable supply under section 9-5 of the A New Tax System (Goods and Services) Act 1999 (GST Act) and the taxpayer has acquired the services solely for a creditable purpose. The amount of the prepaid expenditure is $1,045, which includes GST of $95. The taxpayer's prepaid expenditure is a loss or outgoing deductible under subsection 8-1(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Prepaid expenditure that is deductible under section 8-1 of the ITAA 1997 is subject to the prepayment rules contained in Subdivision H of Division 3 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936). The prepayment rules do not apply to 'excluded expenditure' which is defined in subsection 82KZL(1) of the ITAA 1936 to include an amount of expenditure less than $1,000. Section 27-5 of the ITAA 1997 provides that a taxpayer cannot deduct, under the ITAA 1997, a loss or outgoing it incurs to the extent that the loss or outgoing includes an amount relating to an input tax credit to which it is entitled. Section 27-5 reflects the principle outlined in section 27-1 of the ITAA 1997 that, generally speaking, input tax credits, GST and adjustments under the GST Act are disregarded in working out deductions. In order to determine whether the taxpayer is entitled to an input tax credit for the loss or outgoing, consideration must be given to the GST Act. Section 11-20 of the GST Act provides that an entity is entitled to an input tax credit for any creditable acquisition that it makes. Under section 11-5 of the GST Act, an entity makes a creditable acquisition if all of the following requirements are met: In this instance, the taxpayer has acquired the services solely for a creditable purpose, the supply to the taxpayer is a taxable supply and it is registered for GST. By making the prepayment of $1,045, the taxpayer has also provided consideration for the supply. As all of the requirements have been met, the taxpayer is making a creditable acquisition under section 11-5 of the GST Act and is entitled to an input tax credit for the acquisition. The amount of the input tax credit equals the GST component of the loss or outgoing, that is $95. As the taxpayer is entitled to an input tax credit section 27-5 of the ITAA 1997 applies so that the taxpayer can only claim the GST exclusive amount as a deduction under section 8-1 of the ITAA 1997. Accordingly, the deduction allowable to the taxpayer under section 8-1 of the ITAA 1997 for the prepaid expenditure will be reduced by the input tax credit of $95. As the resulting deduction of $950 is less than $1,000 it is 'excluded expenditure' and the prepayment rules do not apply. The GST exclusive amount of $950 is therefore deductible on 30 June 2003.", "Date_of_Decision": "3 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 11-5 section 11-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/555", "Subject_References": "Adjustments Advance expenses & payments Creditable purpose Deductions & expenses Goods and services tax GST net amounts & adjustments GST supplies & acquisitions Income tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004398", "Unmatched_Content": "Keywords Adjustments Advance expenses & payments Creditable purpose Deductions & expenses Goods and services tax GST net amounts & adjustments GST supplies & acquisitions Income tax"}
{"ATO_ID_Number": "ATO ID 2003/849", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility: 'annual financing costs' paid in advance under a fixed interest commercial bill facility - date incurred", "Issue": "Are 'annual financing costs', paid in advance under a Fixed Rate Commercial Bill Facility, incurred on the date that the facility is drawn down and on the subsequent anniversary date of the drawdown, given that the purpose for which the facility is drawn satisfies the conditions for deductibility under the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The 'annual financing costs', paid in advance under a Fixed Rate Commercial Bill Facility, are incurred on the date that the facility is drawn down and on the subsequent anniversary date of the drawdown.", "Facts": "The taxpayer is an individual who borrows funds to purchase shares which are held as an investment. The taxpayer funds the share purchase with a fixed rate commercial bill facility (the facility) offered by the Bank. The facility has a limit of $100,000 and a two year term commencing when the facility is drawn. Under the facility agreement the taxpayer makes three payments only: Bills drawn under the facility have a tenor of approximately 90 days. On or before a drawdown date (including a roll-over date), the Bank uses authorities provided by the taxpayer to draw, sign and present the bills which the taxpayer has requested the Bank to accept and discount on the drawdown date so that each bill: The taxpayer may prevent the roll-over of a fixed rate bill by providing the Bank with written notice that they do not wish to roll the bill. However, should the taxpayer do so, they must compensate the Bank for any losses that it might incur in replacing the bill in the market place at the fixed yield.", "Reasons_for_Decision": "Summary: The deductibility of the financing costs falls for consideration under several specific sections of the Income Tax Assessment Act 1936 (ITAA 1936). Division 16E of the ITAA 1936 spreads the return on a 'qualifying security' over the term of the security and includes in assessable income that amount, calculated in accordance with the division that is attributable to each of a number of particular years of income. Section 70B of the ITAA 1936, on the other hand, includes a loss on the disposal or redemption of a 'traditional security' in the assessable income of the taxpayer in the year of income in which the disposal or redemption occurs. For Division 16E of the ITAA 1936 to apply, the facility must first satisfy the definition of 'security' in subsection 159GP(1) of the ITAA 1936 which specifies a number of criteria. The funds accessed under the facility are obtained from issuing bills of exchange pursuant to the facility, however, the facility agreement is not itself a bill of exchange. In K D Morris & Sons Pty Ltd (in liq) v. Bank of Queensland (1980) 146 CLR 165 the High Court considered the true view of a bill facility was that of a single contract, namely the facility, rather than a complex of as many contracts as there were periodic roll over operations and their accompanying drawing and accepting of bills under the facility. Nor is the facility a loan. For the facility to be characterised as a loan there must exist the legal relation of lender and borrower ( Inland Revenue Commissioners v. Rowntree and Co. Ltd. [1948] 1 ALL ER 482). The facility does not give rise to a loan of money nor is there a promise to repay. Essentially, the funds raised under the facility are obtained from bank bills and buying bills at a discount is quite distinct from money lending. The absence of a discount does not alter the thrust of the arguments put by the authorities in any significant way. Nor can the facility agreement be said to be a contract under which a person is 'liable to pay' an amount or amounts. The taxpayer must decide to draw down on the bills for the Bank to become entitled to receive the financing cost. Since the facility gives the taxpayer the right but not the obligation to draw bills it cannot be said that the taxpayer is 'liable to pay' the financing cost under a contract. Since the facility is not a 'security' as defined in section 159GP(1) of the ITAA 1936, Division 16E of the ITAA 1936 does not apply to the facility. Since section 70B of the ITAA 1936 uses the same definition of 'security' it also has no application. The deductibility of the financing costs also falls for consideration under Subdivision H of Division 3 of Part III of the ITAA 1936 which contains some specific provisions for certain prepaid amounts. The Subdivision spreads a prepaid amount over the period that things are done in relation to the expenditure. For an individual taxpayer with expenditure that was not incurred in carrying on a business section 82KZM of the ITAA 1936 is the operative section of this subdivision. One of the conditions to be met before this section can apply is that the 'eligible service period' in relation to an amount of expenditure starts when that which is to be done under the agreement is required to commence and ends when it is required to cease. Under the facility two annual payments are made. When the taxpayer makes the first of these payments the Bank is required to purchase the taxpayer's bill at its face value. Further, pursuant to the facility, the Bank is required to purchase any subsequent bills that are issued in the first year at their face value. However, the Bank's obligations in relation to this amount of expenditure do not extend beyond the first year. The obligation on the Bank to purchase bills at their face value in the second year only arises upon payment of the second annual financing. Therefore the financing costs can be said to give rise to two separate 'eligible service periods' each of which have duration of less than 12 months. The 'eligible service periods' do not extend beyond the subsequent year of income. Consequently, subsection 82KZM(1) of the ITAA 1936 does not apply to the financing costs paid by the taxpayer. Given that the cost of the funds is an allowable deduction under section 8-1 of the ITAA 1997 it remains to be determined when the deduction is to be allowed. If the Bank were to purchase the bills at a discount when they were drawn, the taxpayer's obligation to pay the discount amount clearly arises at the time the relevant bills are drawn and the deduction for the discount is apportioned on a straight line basis between two years of income where relevant ( Coles Myer Finance Limited v. Federal Commissioner of Taxation (1993) 176 CLR 640; 93 ATC 4214; (1993) 25 ATR 95). Although the taxpayer in Coles Myer Finance was a finance company, the Commissioner takes the view that the decision applies to all taxpayers, including individuals, who use commercial bills to raise funds to be used in their income producing business or activity and whose taxable income is calculated on an accruals basis (Taxation Ruling TR 93/2). However, as the Bank purchases the bills from the taxpayer at their face value rather than at a discount, there is no difference between the amount at which a particular bill is sold and the amount at which that bill is redeemed. Therefore, there is no gain or loss on any of the individual bill transactions to be deductible under section 8-1 of the ITAA 1997. Rather, the loss or outgoing that falls for consideration for deduction arises from the payment of each financing cost. Provided that the taxpayer pays the Bank the annual financing cost specified in the Bank's Letter of Offer, the Bank will accept the bills drawn by the taxpayer in the ensuing year. Further the Bank covenants to purchase the bills from the taxpayer at their face value. The first financing cost is paid in advance on the draw down date. Therefore, the taxpayer incurs the financing cost on the date that it is paid. The amount is deductible in full in the year of income in which the payment is made.", "Date_of_Decision": "29 August 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 93/21", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commercial bills", "Case_References": "K D Morris & Sons Pty Ltd (in liq) v. Bank of Queensland Ltd (1980) 146 CLR 165", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003849", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Related Public Rulings (including Determinations) Taxation Ruling TR 93/21 | Keywords Commercial bills"}
{"ATO_ID_Number": "ATO ID 2010/203", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of deposits into a New Zealand income equalisation account", "Issue": "Is a taxpayer, a participant in a New Zealand Income Equalisation Scheme, entitled to a deduction for a deposit made into a New Zealand income equalisation account?", "Decision": "No. The taxpayer, a participant in a New Zealand Income Equalisation Scheme, is not entitled to a deduction for the deposit made into a New Zealand income equalisation account.", "Facts": "The taxpayer is a resident of Australia. The taxpayer is a primary producer who carries on a forestry business in New Zealand. The taxpayer is a participant in a New Zealand income equalisation scheme (NZ IES). The NZ IES is a form of forward tax averaging in New Zealand, designed to enable primary producers to even out the effects of fluctuating incomes on their tax liabilities over a period of five years. Under the NZ IES, a taxpayer who derives income from forestry in New Zealand may deposit amounts from that income into a New Zealand income equalisation account. The amounts are paid to the New Zealand Commissioner of Inland Revenue and are deposited into a Crown bank account. Amounts in the Crown bank account are the property of the Crown. A taxpayer can apply to withdraw an amount that they have deposited into the income equalisation account. The New Zealand legislation refers to withdrawals as refunds. The New Zealand Commissioner of Inland Revenue must refund an amount provided that the amount has been held in the account for at least one year (and in other limited circumstances). The taxpayer derived income from forestry in New Zealand and deposited a portion of that income into a New Zealand income equalisation account in the current income year. In New Zealand, the taxpayer's forestry income is assessable in the income year in which it is derived. The taxpayer's deposit into the New Zealand income equalisation account is deductible against New Zealand assessable income in the income year in which the deposit is made. When an amount is refunded from an account, the amount is assessable in New Zealand, usually in the year in which the person applied for the refund.", "Reasons_for_Decision": "Summary: Subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a person can deduct from their assessable income any loss or outgoing to the extent that it is incurred in gaining or producing assessable income or it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. Hence an amount will not be deductible under subsection 8-1(1) of the ITAA 1997 unless it is a loss or outgoing. The term 'loss or outgoing' is not defined in Australia's tax legislation. Therefore the term is presumed to take its ordinary meaning. Paragraph 26 of Taxation Ruling TR 2008/5 explains that an amount that is not a cost or expenditure will not be a loss or outgoing. The taxpayer's deposit into the New Zealand income equalisation account is not a cost or expenditure. Although the deposited amount becomes Crown property while it is in the account, the taxpayer does not lose their entitlement to that amount. This is because when a taxpayer satisfies the requirements for a refund, the New Zealand Commissioner of Inland Revenue must refund an amount at the taxpayer's request. Therefore, a deposit into a New Zealand income equalisation account is not a loss or outgoing. As the deposit into a New Zealand income equalisation account is not a loss or outgoing, no deduction is available under subsection 8-1(1) of the ITAA 1997. There are no other provisions in Australia's income tax legislation which could allow a deduction for a deposit into a New Zealand income equalisation account. (Australia's farm management deposit scheme in Division 393 of the ITAA 1997 does not apply to allow a deduction because a New Zealand income equalisation account deposit with the New Zealand Commissioner of Inland Revenue is not a 'farm management deposit'.) As a result, the taxpayer is not entitled to a deduction for the deposit into the New Zealand income equalisation account.", "Date_of_Decision": "21 October 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 8-1(1) Division 393", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2008/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/200 | ATO ID 2010/201 | ATO ID 2010/202", "Subject_References": "Foreign income Deductions & expenses Income equalisation deposits scheme Primary production Primary production income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010203", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2008/5 | Keywords Foreign income Deductions & expenses Income equalisation deposits scheme Primary production Primary production income"}
{"ATO_ID_Number": "ATO ID 2011/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading stock: natural increase - relevance of survival rates", "Issue": "When will Atlantic salmon bred in a land-based nursery as part of an aquaculture business become an 'animal that you hold as live stock' for the purposes of section 70-55 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Atlantic salmon bred in a land-based nursery as part of an aquaculture business become an 'animal you hold as live stock' for the purposes of section 70-55 of the ITAA 1997 when they reach the 'fry' stage of development.", "Facts": "The taxpayer conducts an aquaculture business producing Atlantic salmon for sale. The operations of the business are carried out at a land-based nursery and at sea farms. Each brood female produces about 3000 eggs which are fertilised and incubated in the nursery. The hatched offspring go through a number of distinct growth stages: The ordinary survival rates in the taxpayer's aquaculture operations during the hatching and development stages up to transfer are:", "Reasons_for_Decision": "Summary: Division 70 of the ITAA 1997 provides special rules to account for trading stock for income tax purposes. Its key features are described in section 70-5 of the ITAA 1997. The purpose of these rules is to produce an overall result that properly reflects trading stock activities during the income year. As explained by Professor Ross Parsons in Income Taxation in Australia (1985) at page 792 (paragraph [14.1]): Allowing a deduction of an outlay that is the cost of trading stock would bring about an unacceptable distortion in the operation of the Assessment Act, were it not for the provisions of s. 28 [now section 70-35 of the ITAA 1997]. That section in its most common operation will negative the allowance of the deduction by bringing in a like amount as income, if the item of stock has not been disposed of by the end of the year of income. In effect, the deduction of cost is deferred till the year of income in which the stock is realised and there is a matching receipt of assessable income. Trading stock is defined in section 70-10 of the ITAA 1997 to include live stock, which may include aquatic species, for example, freshwater crayfish ( Taxation Determination TD 2017/7 ) and abalone ( ATO Interpretative Decision 2003/44 ). Subsection 70-55(1) of the ITAA 1997 provides for the cost of an 'animal you hold as live stock' that you acquired by natural increase. 'Live stock' is defined in section 995-1 of the ITAA 1997 not to include animals used as beasts of burden or working beasts in a business that is not a primary production business (this definition is essentially unchanged from the former definition in subsection 6(1) of the Income Tax Assessment Act 1936 ). In Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105; [1951] HCA 66: (1951) 9 ATD 337; (1951) 5 AITR 214, the High Court considered the former definition, holding that, by inference, it includes all animals used in a business of primary production (at CLR 110, per Dixon and Fullagar JJ). Carrying on a primary production business is defined in section 995-1 of the ITAA 1997 to include carrying on a business of 'maintaining animals for the purpose of selling them or their bodily produce (including natural increase)'. The Macquarie Dictionary relevantly defines 'maintain' to mean 'to keep in existence'; 'preserve' and 'to provide with the means of existence'. In relation to living things this includes the provision of food and other necessities for life and growth. The carrying on of a business requiring the maintenance of animals as live stock, therefore, assumes there to be a stable population of those animals and that a large proportion of them are not expected to be lost due to ordinary mortality factors. This view is consistent with the purposes of the trading stock provisions, which effectively defer a deduction for the cost of acquiring an animal as live stock, including by natural increase, until the animal is sold. For these reasons, the ordinary survival rates of progeny in a business of primary production are a relevant consideration in determining when the progeny becomes an 'animal you hold as live stock' acquired by natural increase for the purposes of section 70-55 of the ITAA 1997. In this case the taxpayer breeds Atlantic salmon in a land-based nursery as part of an aquaculture business, which is a primary production business. The animals the taxpayer maintains are live stock for the purposes of Division 70 of the ITAA 1997. The fry stage is when juvenile Atlantic salmon become free-feeding and take on the appearance of small fish. At this point they are transferred to tanks and the period of rearing and maintenance begins. From the information supplied by the taxpayer, from the fry stage the mortality rates of the juvenile fish are low and the population has stabilised to reflect the number of fish that will be held for sale. For these reasons, Atlantic salmon bred in a land-based nursery as part of an aquaculture business become an 'animal you hold as live stock' for the purposes of section 70-55 of the ITAA 1997 when they reach the 'fry' stage of development.", "Date_of_Decision": "3 March 2011", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination 2017/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/44 | ATO ID 2003/726", "Subject_References": "Livestock breeding Trading stock Livestock natural increase", "Case_References": "Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 [1951] HCA 66 (1951) 9 ATD 337 (1951) 5 AITR 214", "Other_References": "Parsons, R 1985 Income Taxation in Australia Law Book Co Ltd, Sydney The Macquarie Dictionary [Online]", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201123", "Unmatched_Content": "Incubation survival (to become 'eyed eggs') | Trough survival (successfully hatched into alevin) | First feeding survival (successfully feeding, at fry stage) | Grow-out survival (successfully grown to transfer size) | Successfully graded for transfer (size, colour, shape, age) | Amended quoted wording to match those in section 70-55 of the ITAA 1997. | Related Public Rulings (including Determinations) | Inserted Taxation Determination TD 2017/7 (which replaced Income Tax Ruling 2667) | Added reference to section 995-1 of the ITAA 1997. | Updated reference to The Macquarie Dictionary | Related Public Rulings (including Determinations) Taxation Determination 2017/7 | Keywords Livestock breeding Trading stock Livestock natural increase"}
{"ATO_ID_Number": "ATO ID 2004/392", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions: water access expenses", "Issue": "Is the taxpayer, a primary producer, allowed a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the cost of a water access fee?", "Decision": "No. The taxpayer is not allowed a deduction under section 8-1 of the ITAA 1997 for the cost of the water access fee.", "Facts": "The taxpayer operates a primary production business growing crops. The taxpayer enters into an agreement with a commercial water supplier for the supply of reclaimed water. The agreement covers a period of many years. Under the agreement, the taxpayer is required to pay a water access fee in each of the first 6 years of the agreement. After the sixth year no further water access fee is payable. The water access fee provides the taxpayer with access to a certain number of megalitres of water each year and compensates the water supplier for the cost of connecting pipes to the taxpayer's property. The taxpayer separately pays for the water actually used in each year. The first payment of the water access fee is payable on the signing of the agreement and is referred to by the parties to the agreement as a 'sign on' fee. The water access fee is not a water licence and is not a right attached to the land.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed where the losses or outgoings are of a capital, private or domestic nature, or are incurred in gaining or producing exempt income, or another provision prevents the taxpayer from deducting them. The payment of the water access fee is clearly incurred in gaining or producing the assessable income of the taxpayer. This is because the payments are made to secure the right to access water necessary to irrigate the taxpayer's crop, and thereby earn assessable income from the crop. As such the payments are incidental and relevant to the income earning activities of the taxpayer ( Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431). The payments are not of a private or domestic nature or incurred in gaining or producing exempt income and no other provision prevents a deduction of the amount. Therefore, the amounts will be an allowable deduction under section 8-1 of the ITAA 1997 so long as the amounts are not capital or of a capital nature. When considering whether expenditure has the character of revenue or capital Brennan J in Magna Alloys & Research Pty Ltd v. Federal Commissioner of Taxation (1980) 11 ATR 276; 80 ATC 4542, said at ATR 283; ATC 4548: It is necessary to ascertain in each case what expenditure is for, because a \"bare payment of money is itself devoid of character\", as Stephen J said in Cliffs International Inc , supra, at p. 4071. When the question is whether expenditure has the character of capital or of a revenue payment, as in the two cases last cited, the advantage for which the expenditure was incurred must be identified and the manner in which it \"is to be relied upon or enjoyed\" must be considered ( Sun Newspapers Ltd v. FC of T ; Associated Newspapers Ltd v. FC of T (1938) 61 CLR 337 at 363). The role of the advantage in the income-earning undertaking requires examination. When determining whether an outgoing is of a capital nature it is the character of the advantage sought by the taxpayer, and not the description given to the outgoing by the parties, which is the relevant issue ( Federal Commissioner of Taxation v. South Australian Battery Makers Pty Ltd (1978) 140 CLR 645; 78 ATC 4412; (1978) 8 ATR 879). Therefore, in the current case it is necessary to examine the actual benefit obtained by the taxpayer on payment of the initial amount, rather than to rely on the description provided by the parties of the amount being a 'sign on' fee. In return for the payments the taxpayer receives access to a set number of megalitres of water each year for the life of the agreement. The payments secure for the taxpayer an enduring benefit - that is, access to a set number of megalitres of water for a number of years. As the payments secure an enduring benefit for the taxpayer, the payments are of a capital nature ( Bell & Moir Corporation Pty Ltd v. Federal Commissioner of Taxation (1999) 42 ATR 421; 99 ATC 4738). As the payments are of a capital nature, they will not be deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "31 March 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/276 (Withdrawn)", "Subject_References": "Capital expenditure Deductions & expenses", "Case_References": "Ronpibon Tin N.L. and Tongkah Compound N.L. v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 8 ATD 431", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004392", "Unmatched_Content": "Issue, Decision and Reasons for decision | Minor punctuation and text change | Keywords Capital expenditure Deductions & expenses"}
{"ATO_ID_Number": "ATO ID 2004/718", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Forest operations and carbon sequestration activities: deductibility of costs of planting and maintaining forests", "Issue": "Is the taxpayer entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), for the costs of planting and maintaining trees in forests, where those forests are planted and maintained in the ordinary course of forestry activities, whilst also carrying on carbon sequestration activities?", "Decision": "Yes. The taxpayer is entitled to a deduction, under section 8-1 of the ITAA 1997, for the costs of planting and maintaining trees in forests, where those forests are planted and maintained in the ordinary course of forestry activities. The deductibility of these expenses is not altered by the fact that the taxpayer also derives income from carbon sequestration activities that are carried on in conjunction with the forestry activities.", "Facts": "The taxpayer has acquired several thousand hectares of land and has commenced forestry operations on the land. The forest is managed on a continuing cycle of planting, harvesting and replanting. The planting is staggered so that a similar area of forest is planted each year until the first age class is ready for final harvesting. The carbon accounts for the planted estate are measurable over one rotation (usually around 30 years for a certain type of planted forest managed for the relevant timber product). Carbon emissions from harvesting are balanced by growth elsewhere in the forest estate. The taxpayer retains title to the trees and carbon sequestration rights from those trees. The taxpayer derives income from the harvesting of the timber products from the trees that it manages in its forest. The taxpayer enters into contracts for the sale of the carbon sequestration rights with various third parties who require the rights to offset carbon dioxide emissions from their business operations. The taxpayer is required to maintain the level of sequestered carbon in the forest, over which carbon sequestration rights have been created, for at least 100 years.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent that they are incurred in gaining or producing the taxpayer's assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are necessarily incurred in gaining or producing exempt income. The costs of planting and maintaining the trees in the forest are incurred in producing the taxpayer's assessable income as the costs have a sufficient connection with the income that is earned from the forestry operations carried on by the taxpayer. This is because the trees that are planted and maintained will eventually be felled and sold as timber thus producing the taxpayer's assessable income. The costs of planting and maintaining the trees in the forest are not capital as the continual planting and harvesting of trees is part of the ongoing business operations of the taxpayer. The planting of the trees does not establish a capital asset as the trees are planted for the purpose of timber production and the trees will eventually become trading stock of the taxpayer when they are felled. A taxpayer who is engaged in 'forest operations' is a primary producer for income tax purposes if those forestry activities constitute the carrying on of a business. The definition of a 'primary production' business in section 995-1 of the ITAA 1997 includes: Where a taxpayer plants or tends trees in a forest with the intention to fell them they will be engaged in 'forest operations' and will be entitled to the various deductions described in Taxation Ruling TR 95/6. As the taxpayer is planting the trees with the intention to fell them for timber in the normal course of forestry operations a deduction is allowed, under section 8-1 of the ITAA 1997, for the costs of planting and maintaining the trees in those forests. The deductibility of these expenses is not altered by the fact that the taxpayer also derives income from carbon sequestration activities that are carried on in conjunction with the forestry activities.", "Date_of_Decision": "27 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 995-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/320 | ATO ID 2004/321 | ATO ID 2004/714 | ATO ID 2004/768", "Subject_References": "Afforestation expenses Carbon sequestration rights Forestry Plantation forestry Primary production", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004718", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/6 | Keywords Afforestation expenses Carbon sequestration rights Forestry Plantation forestry Primary production"}
{"ATO_ID_Number": "ATO ID 2004/768", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Carbon sequestration: deduction for cost of planting trees", "Issue": "Is the taxpayer entitled to a deduction, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), for the costs incurred in planting trees to be grown for the purposes of carbon sequestration, where the trees are not intended to be felled?", "Decision": "No. The taxpayer is not entitled to a deduction, under section 8-1 of the ITAA 1997, for the costs incurred in planting trees to be grown for the purposes of carbon sequestration, where the trees are not intended to be felled. Such expenditure is capital in nature.", "Facts": "The taxpayer is carrying on carbon sequestration activities. The taxpayer has leased land from land owners for the purpose of planting forests for carbon sequestration purposes. The taxpayer intends to plant trees on the leased land and leave them undisturbed for at least 100 years. The taxpayer does not intend to harvest the trees for timber. The taxpayer has entered into a formal agreement with the land owners. Under the agreement the taxpayer holds all right, title and interest in the forest, and all right and title and interest in any carbon sequestration right. All carbon sequestration rights vest in the taxpayer. The taxpayer has incurred costs in purchasing seedlings and in planting the trees. The taxpayer intends to derive assessable income from trading in the carbon sequestered by the trees.", "Reasons_for_Decision": "Summary: A deduction is allowed under section 8-1 of the ITAA 1997 for losses or outgoings to the extent that the loss or outgoing is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, a deduction is not allowed under the section where the loss or outgoing is of a capital, private or domestic nature, or is incurred in producing exempt income, or where another provision prevents a deduction. In order for a deduction to be allowable under section 8-1 of the ITAA 1997 there must be a sufficient nexus or connection between the expenditure and the earning of assessable income. As the taxpayer is purchasing and planting the trees for the purpose of deriving assessable income from the use of the carbon sequestered by those trees there is a sufficient connection between the expense of purchasing and planting the seedlings and the income earned from the carbon sequestration activities. The only relevant question then in determining the deductibility of those expenses under section 8-1 of the ITAA 1997 is whether the expenses are capital in nature. The decision of the High Court in Sun Newspapers Ltd and Associated Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337; [1938] HCA 73 ( Sun Newspapers Case ) is a leading authority on the distinction between revenue and capital expenditure. In the Sun Newspapers Case Dixon J stated that there are three matters to consider when deciding whether an expense is revenue or capital in nature. These are: In a more recent decision the High Court in G P International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 added emphasis to the first point above. The court stated: ...for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. In relation to the character of the advantage sought by the outgoing it is necessary to examine whether the expenditure secures an enduring benefit for the business. This test was outlined in British Insulated and Helsby Cables Ltd v. Atherton [1926] AC 205, by Viscount Cave at 213-214: But when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital. The costs incurred by the taxpayer in purchasing and planting the seedlings are capital in nature because they secure for the taxpayer an enduring benefit being the establishment of the trees from which the taxpayer will obtain its income through the carbon sequestered by those trees. As the trees are not intended to be felled they will become capital assets of the business when planted. This expenditure is correctly characterised as establishing the profit yielding structure of the business rather than being a working expense. As the costs of purchasing and planting the trees is capital in nature no deduction is allowed for these costs under section 8-1 of the ITAA 1997.", "Date_of_Decision": "27 August 2004", "Year_of_Income": "Year ended 30 June 2004.", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/320 | ATO ID 2004/321 | ATO ID 2004/322 | ATO ID 2004/718", "Subject_References": "Afforestation expenses Carbon sequestration rights Forestry Plantation forestry", "Case_References": "Associated Newspapers Ltd and Sun Newspapers Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 337 [1938] HCA 73", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004768", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/6 | Keywords Afforestation expenses Carbon sequestration rights Forestry Plantation forestry"}
{"ATO_ID_Number": "ATO ID 2002/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Share farming expenses", "Issue": "Is a deduction available to a taxpayer who is not the property owner under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a half share of share farming expenses?", "Decision": "No. A deduction is not available under section 8-1 of the ITAA 1997 for a half share of share farming expenses as the taxpayer never incurs the expenses.", "Facts": "The taxpayer is a share farmer. All share farming income is placed in a separate bank account in the property owners' name. All share farming expenses are incurred in the property owners' name and are paid for by the property owner from this bank account each month. The share farmer has no access to this bank account. Under the share farming agreement, the share farmer receives a payment equal to 50% of the share farming income after the deduction of farm expenses.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that a deduction is allowable for all losses or outgoings to the extent that they are incurred in gaining assessable income. In this case, the taxpayer never incurs the farm expenses. These expenses are incurred solely by the property owner, who pays for them from a separate bank account. As the taxpayer does not incur the share farming expenses a deduction for these expenses is not available under section 8-1 of the ITAA 1997.", "Date_of_Decision": "17 December 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Primary production", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200297", "Unmatched_Content": "Keywords Deductions & expenses Primary production"}
{"ATO_ID_Number": "ATO ID 2002/775", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of vaccination expenses - sole trader", "Issue": "Is a sole trader or employer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for medical expenses incurred to vaccinate against Q fever, which is a well recognised occupational hazard in the cattle industry?", "Decision": "Yes. The medical expenses are necessarily incurred in carrying on a business for the purpose of gaining assessable income and are, therefore, deductible in accordance with paragraph 8-1(1)(b) of the ITAA 1997.", "Facts": "The individual operates a business as a sole trader or employer. As a direct consequence of carrying on that business, the individual is regularly exposed to cattle that may be infected with Q fever. Q fever is a well recognised occupational hazard within the cattle industry. As a result of the probability of coming into direct contact with potentially infected animals, the taxpayer incurred medical expenses to vaccinate against Q fever.", "Reasons_for_Decision": "Summary: Paragraph 8-1(1)(b) of the ITAA 1997 allows an individual to deduct from his or her assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, the loss or outgoing is not deductible if it is of capital, private or domestic nature. Generally, a deduction is not allowable for the cost of vaccinations to protect against infectious diseases in the work place as this is a personal medical expense and, therefore, of a private nature (see Taxation Ruling TR 95/8 Income Tax : employee cleaners - allowances, reimbursements and work-related deductions ). However, in this particular case, the disease being vaccinated against is not one which affects the general community but is restricted to persons who come into close contact with cattle. In Mansfield v. FC of T 96 ATC 4001; (1995) 31 ATR 367 the Federal Court of Australia decided that expenses of a private or personal nature may be an allowable deduction where the working environment is sufficiently abnormal and unique as to make the essential character of the expenditure work-related rather than private in nature. However, whether such an expense is either private or work-related involves questions of fact and degree, and something out of the ordinary is usually necessary for the essential character of the expenditure to be seen as work-related (see Taxation Ruling TR 2003/16 Income Tax : deductibility of protective items ). In this particular case, it is considered that exposure to Q fever is an incident of working within the cattle industry rather than a more general risk to the public. Therefore, any medical expenses incurred to vaccinate against the risk of contracting Q fever by a sole trader or employer, who carries on a business which involves direct contact with cattle, are regarded as arising from the carrying on of that business. Consequently, the medical expenses are of a business nature and an allowable deduction in accordance with paragraph 8-1(1)(b) of the ITAA 1997.", "Date_of_Decision": "12 June 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/8 | Taxation Ruling TR 2003/16", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Medical expenses Occupational health & safety expenses Sole traders", "Case_References": "Mansfield v. FC of T 96 ATC 4001 31 ATR 367", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002775", "Unmatched_Content": "Amended for clarity/merged ATO ID 2002/776. | Related Public Rulings (including Determinations) Taxation Ruling TR 95/8 Taxation Ruling TR 2003/16 | Keywords Deductions & expenses Medical expenses Occupational health & safety expenses Sole traders"}
{"ATO_ID_Number": "ATO ID 2002/846", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deduction for the cost of installing waste treatment system", "Issue": "Is the cost of installing a waste treatment (septic) system deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The cost of installing a waste treatment system is not deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer, an individual, is a joint owner of a property on which cattle are bred and fattened. A septic system was installed to manage effluent disposal on the property. The source of the effluent is the waste water from the toilets, kitchen, laundry and bathroom of the private residence located on the property.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, no deduction is allowed to the extent that the losses or outgoings are of a capital, private or domestic nature or are incurred in gaining or producing exempt income. The test of deductibility under section 8-1 of the ITAA 1997 is that 'it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income' ( Ronpibon Tin NL and Tongkah Compound NL v. FC of T (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). The septic system is for the treatment of effluent from the taxpayer's private residence. The expenditure is not incidental and relevant to the gaining of assessable income. Nor has the expenditure been necessarily incurred in carrying on a business. Therefore, the expenditure is not deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "16 July 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Individual taxpayers Partnerships Primary production expenses", "Case_References": "Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 4 AITR 263 (1949) ATD 432.", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002846", "Unmatched_Content": "Keywords Deductions & expenses Individual taxpayers Partnerships Primary production expenses"}
{"ATO_ID_Number": "ATO ID 2001/740", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Expenditure incurred in reinstalling an overhead powerline underground.", "Issue": "Is the taxpayer entitled to claim a deduction for expenditure incurred in reinstalling an overhead powerline underground under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer is not entitled to claim a deduction for reinstalling the powerline underground as the expense is capital in nature. Capital expenses are not deductible under paragraph 8-1(2)(a) of the ITAA 1997.", "Facts": "The taxpayer owns a rural property on which primary production activities are carried on. The taxpayer is seeking to expand the primary production activities carried on. To do this it will be necessary to place an overhead powerline underground. Under the arrangement with the electricity provider, if the taxpayer wants the powerline placed underground, the taxpayer will be responsible for any expenses incurred. The electricity transmitted by the line is used partly for business and partly for private purposes.", "Reasons_for_Decision": "Summary: The reinstallation of an overhead powerline underground would be regarded as capital expenditure. According to the decision in British Insulated & Helsby Cables Ltd v. Atherton [1926] AC 205 if an enduring benefit is gained then the expenditure is to be regarded as being capital. Placing the overhead powerline underground is a once only expense and the taxpayer has gained an enduring benefit as a result of incurring this expenditure.", "Date_of_Decision": "31 October 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Capital expenditure", "Case_References": "British Insulated and Helsby Cables v. Atherton [1926] AC 205", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001740", "Unmatched_Content": "Keywords Deductions & expenses Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2002/806", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax - Expenditure deduction for partial demolition of dwelling", "Issue": "Is the value attributable to the portion of a dwelling that was demolished an expense incurred in redeveloping the property under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "No. The value of the portion of the original dwelling that was demolished during the redevelopment is not an allowable deduction under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer purchased two blocks of land for redevelopment. One house straddled both blocks of land. The taxpayer partially demolished the house, resulting in separate dwellings on each of the blocks. The taxpayer then made additions to each of those dwellings.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature or relate to the earning of exempt income. The cost of demolishing part of the existing dwelling is expenditure of a capital nature. Therefore, no deduction is allowed under section 8-1 of the ITAA 1997 for expenses related to the partial demolition. In addition, the notional value of the portion of the dwelling that was demolished does not constitute expenditure incurred, rather, it is part of the capital cost of the property at the time of acquisition.", "Date_of_Decision": "14 June 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2002/633", "Subject_References": "Capital gains tax Capital expenditure Deductions & expenses Demolition expenses Redevelopment expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002806", "Unmatched_Content": "Keywords Capital gains tax Capital expenditure Deductions & expenses Demolition expenses Redevelopment expenses"}
{"ATO_ID_Number": "ATO ID 2002/919", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of Bond for Rental Premises", "Issue": "Is the taxpayer entitled to claim a deduction for a bond paid for premises leased for use in their business under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997')?", "Decision": "No. The expense incurred in paying the bond is of a capital nature and not deductible in accordance with paragraph 8-1(2)(a) of the ITAA 1997.", "Facts": "The taxpayer operates a business activity from rented premises. In order to secure the lease on the rented premises, the taxpayer was required to pay a bond to the owner of the premises. The payment of the bond gives the taxpayer the right to use the premises for their business activity until the lease expires. Upon expiry of the lease, the bond will be refunded to the taxpayer if the premises are left in good condition and there are no rent payments outstanding.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. The payment of a bond in relation to the lease of premises to be used for business purposes is clearly incurred in producing the assessable income of that business, but the outgoing may be capital in nature. The taxpayer was required to pay the bond in order to obtain access to the property for the period of the lease. The bond is a form of security which ensures the property is able to used by the taxpayer until the lease expires. Therefore, the payment of the bond provides an enduring benefit which allows the conduct of the taxpayer's business activity from the premises for a specified period of time. The payment does not relate to the daily activities of the business. Accordingly, the bond is capital in nature and not deductible in accordance with paragraph 8-1(2)(a) of the ITAA 1997.", "Date_of_Decision": "16 August 2002", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & Expenses Rental expenses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002919", "Unmatched_Content": "Keywords Deductions & Expenses Rental expenses"}
{"ATO_ID_Number": "ATO ID 2004/796", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: deductibility of repeat hydraulic fracture stimulation - no access to further formations or increased gas flow", "Issue": "Is the taxpayer entitled to a deduction, under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997), for expenses incurred in performing a repeat hydraulic fracture stimulation, at the same production zone within a hydrocarbon production well where a hydraulic fracture stimulation has previously been undertaken, where the procedure simply returns the rate of gas flow back to the rate achieved after the first fracture stimulation without accessing further hydrocarbon bearing formations?", "Decision": "Yes. The taxpayer is entitled to a deduction, under section 25-10 of the ITAA 1997, for expenses incurred in performing a repeat hydraulic fracture stimulation, at the same production zone within a hydrocarbon production well where a hydraulic fracture stimulation has previously been undertaken, where the procedure simply returns the rate of gas flow back to the rate achieved after the first fracture stimulation without accessing further hydrocarbon bearing formations.", "Facts": "The taxpayer conducts a business of oil and gas exploration and production. The taxpayer has previously performed hydraulic fracture stimulation at a certain production zone within a hydrocarbon production well. Since that hydraulic fracture stimulation was performed the fractures in the hydrocarbon bearing formation have become blocked and the rate of flow of gas from that formation into the well has dropped. The taxpayer engages a contractor to perform a repeat hydraulic fracture stimulation in the same production zone as the previous hydraulic fracture stimulation. The repeat hydraulic fracture stimulation results in the rate of flow of gas (from the hydrocarbon bearing formation into the well) returning to the levels achieved after the initial hydraulic fracture stimulation. The repeat hydraulic fracture stimulation does not increase the rate of flow of gas beyond what was achieved with the first hydraulic fracture stimulation, or allow access to any hydrocarbon bearing formations, or other gas reserves, that were not previously accessible. The process simply restores the rate of gas flow to the previous level.", "Reasons_for_Decision": "Summary: Section 25-10 of the ITAA 1997 allows a deduction for expenditure incurred in making repairs to an asset, unless the expense is capital in nature. Whether a particular expense qualifies as a repair is considered by Taxation Ruling TR 97/23. That ruling states at paragraph 15: Repair for the most part is occasional and partial. It involves restoration of the efficiency of function of the property being repaired without changing its character and may include restoration to its former appearance, form, state or condition. In the High Court decision in W Thomas & Co Pty Ltd v. Federal Commissioner of Taxation (1965) 115 CLR 58 Windeyer J commented at 72 that: Repair involves a restoration of a thing to a condition it formerly had without changing its character. A repeat hydraulic fracture stimulation will be considered to be a repair of the hydrocarbon production well when it is performed in the same production zone within the well where a hydraulic fracture stimulation has previously been undertaken and the repeat fracture stimulation simply returns the rate of gas flow back to the rate achieved after the first fracture stimulation without accessing further hydrocarbon bearing formations or other gas reserves. In this situation the asset (the hydrocarbon production well) has had its efficiency of function restored to its former state by the process of hydraulic fracture stimulation. The expense is considered a repair because the well has been restored to its former condition without changing its character. The expense of hydraulic fracture stimulation in this situation is not considered to be capital in nature as there is no enduring benefit obtained from the performance of the repeat fracture stimulation. This is because the procedure simply returns the well to its former state rather than enhancing the production capacity of the well, or increasing the level of gas reserves accessed by the well. As the expenditure on the repeat hydraulic fracture stimulation is not capital in nature the expense will be deductible under section 25-10 of the ITAA 1997.", "Date_of_Decision": "27 August 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 25-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/36 | Taxation Ruling TR 97/23", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/795 | ATO ID 2004/797", "Subject_References": "Exploration or prospecting Minerals, petroleum or mining operations Mining & petroleum Mining operations", "Case_References": "W Thomas & Co Pty Ltd v. Commissioner of Taxation (1965) 115 CLR 58", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004796", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 95/36 Taxation Ruling TR 97/23 | Keywords Exploration or prospecting Minerals, petroleum or mining operations Mining & petroleum Mining operations"}
{"ATO_ID_Number": "ATO ID 2003/222", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Repairs: replacement of kitchen cupboards in a rental property", "Issue": "Can the taxpayer deduct expenditure on the replacement of kitchen cupboards installed in a rental property as repairs under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The taxpayer cannot deduct the expenditure as repairs under section 25-10 of the ITAA 1997 because it is capital in nature.", "Facts": "The taxpayer has owned and rented a residential property for many years. While the property was tenanted, the taxpayer replaced the old kitchen fittings, including the cupboards. The old cupboards had deteriorated through water damage and wear and tear. The new fittings are of a similar size, design and quality as the originals. The new cupboards are of the same type and standard of material (or the modern equivalent of that material) as the old ones. The layout and design of the kitchen did not alter substantially from that of the original. The differences are:", "Reasons_for_Decision": "Summary: Broadly speaking, section 25-10 of the ITAA 1997 allows a deduction for expenditure on repairs to income producing premises and depreciating assets provided the expenditure is not capital in nature. On the facts provided, it is accepted that the replacement of the cupboards did not result in a significant improvement in the efficiency or function of the kitchen. However, if the cupboards are a separately identifiable thing representing an entirety in themselves and the expenditure on replacing the kitchen cupboards results in an improvement or a renewal or reconstruction of an entirety, the expenditure is not a repair but is capital in nature (Taxation Ruling TR 97/23). In Lindsay v Federal Commissioner of Taxation (1961) 106 CLR 377; [1961] HCA 93, the High Court (Kitto J) held that expenditure incurred to renew a slipway was a renewal of an entirety and was not deductible as a repair under section 53 of the Income Tax Assessment Act 1936 (which was rewritten as section 25-10 of the ITAA 1997). This conclusion was drawn on the basis that his Honour considered the slipway to be a separately identifiable capital item, maintaining its own function. Substantially the whole of the old slipway had been demolished and replaced by a new slipway, comprising all new components and was a renewal of a separately identifiable item and not a repair. These principles equally apply here. The kitchen cupboards are separately identifiable capital items with their own function and are, therefore, an entirety in themselves. Their replacement is a renewal of an entirety and the expenditure is not deductible as a repair under section 25-10 of the ITAA 1997. The expenditure is capital in nature.", "Date_of_Decision": "24 December 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 53", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/23", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/223", "Subject_References": "Repairs in entirety Rental property", "Case_References": "Lindsay v Federal Commissioner of Taxation (1961) 106 CLR 377 [1961] HCA 93", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003222", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/23 | Keywords Repairs in entirety Rental property"}
{"ATO_ID_Number": "ATO ID 2002/1001", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Repairs - Refrigeration unit", "Issue": "Is a taxpayer entitled to claim a deduction for the cost of replacing the refrigeration unit of a refrigerated milk truck under section 25-10 of the Income Tax Assessment Act 1997 (ITAA 1997) as a repair by replacement of defective subsidiary parts of a whole.", "Decision": "Yes, the taxpayer is entitled to claim a deduction for repairs under section 25-10 of the ITAA 1997 for the cost of replacing the refrigeration unit of a refrigerated milk truck.", "Facts": "The taxpayer operates several refrigerated trucks. The taxpayer replaced the refrigeration motor in one of its trucks with a new unit. The new unit performs the same functions as the one it replaces.", "Reasons_for_Decision": "Summary: Section 25-10 of the ITAA 1997 states that a taxpayer can deduct expenditure they incur for repairs to premises (or part of premises) or a depreciating asset that they held or used solely for the purpose of producing assessable income. Taxation Ruling TR 97/23 Income tax: deductions for repairs explains that the word 'repairs' ordinarily means remedying or making good defects in, damage to, or deterioration of, property to be repaired (being defects, damage or deterioration in a mechanical and physical sense) and contemplates the continued existence of the property. If however the work done amounts to a renewal of the entirety rather than a replacement of subsidiary parts of a whole then the expenditure is not deductible under section 25-10 of the ITAA 1997 as a repair. Taxation Ruling TR 97/23 states that property is more likely to be an entirety if it is 'a unit of property' as the expression has been used in the income tax law. Whether a thing is a functionally complete unit or simply a component in a larger system which is itself the 'unit of property' is a question of fact and degree which can only be determined in the light of all of the circumstances of a particular case. In Ready Mixed Concrete (Vic) Pty Ltd v. Federal Commissioner of Taxation (1969) 118 CLR 177; [1969] HCA 12; (1969) 1 ATR 123; 69 ATC 4038 it was held that a transit mixer did not form part of a total vehicle comprising the mixer and the truck. The truck was held to be performing the function of delivery. Whereas the mixer performed the function of mixing, as a step in the production of concrete in the condition required for pouring. Similarly the refrigeration truck has two discrete functions (delivery and cold storage). However, unlike the mixer, the refrigeration unit can not be separately identified as having a discrete function. The discrete function of cold storage is shared by both the insulated van and the refrigeration unit and can not be performed until both these parts come together. The replacement refrigeration unit is an integral part of the refrigerated van (which is in turn located on the truck chassis) that is incapable of providing a useful function (cold storage) without the other part of the income producing property and as such is not separately identified in the taxpayer's business as an item of plant. The restoration of the effectiveness of the refrigeration van by replacing the refrigeration unit is therefore a repair and not expenditure of a capital nature. Accordingly, the taxpayer is entitled to claim the cost of replacing the refrigeration unit under section 25-10 of the ITAA 1997.", "Date_of_Decision": "11 October 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 25-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/11 | Taxation Ruling TR 97/23", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Repairs & maintenance expenses Repairs in entirety Depreciation Depreciable plant Decline in value Depreciating asset Acquisition of plant", "Case_References": "Ready Mixed Concrete (Vic) Pty Ltd v. Federal Commissioner of Taxation (1969) 118 CLR 177 [1969] HCA 12 1 ATR 123 69 ATC 4038", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021001", "Unmatched_Content": "Amended to improve clarity and update case references. | Related Public Rulings (including Determinations) | Remove Taxation Ruling IT 43 (Withdrawn). | Related Public Rulings (including Determinations) Taxation Ruling TR 94/11 Taxation Ruling TR 97/23 | Keywords Repairs & maintenance expenses Repairs in entirety Depreciation Depreciable plant Decline in value Depreciating asset Acquisition of plant"}
{"ATO_ID_Number": "ATO ID 2005/84", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: Deductions under section 73BA of the ITAA 1936 in relation to an asset acquired or constructed pre-29 January 2001", "Issue": "Can deductions be claimed under section 73BA of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to a pre-29 January 2001 plant/depreciating asset?", "Decision": "Yes. Deductions can be claimed under section 73BA of the ITAA 1936 for a pre-29 January 2001 plant/depreciating asset.", "Facts": "The company is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936. The company undertook 'research and development activities' within the meaning of subsection 73B(1) of the ITAA 1936 from the 1999-2000 income year to the 2001-02 income year. The company acquired an item of plant/depreciating asset (the asset) prior to 29 January 2001 for use by the company in carrying on its research and development activities. However, the company did not use the asset exclusively for the purposes of carrying on its 'research and development activities' in the relevant income years.", "Reasons_for_Decision": "Summary: A deduction for 'qualifying plant expenditure' (as defined by subsection 73B(4) of the ITAA 1936) is available under subsection 73B(15) of the ITAA 1936, where, in the year of income, the company has commenced using, or continues to use, a unit of plant 'exclusively' for the purposes of carrying on 'research and development activities' by, or on behalf of, the company. Subsections 73B(4) and 73B(5) of the ITAA 1936, require actual exclusive use of the plant for the purpose of carrying on research and development activities by or on behalf of the company, in order for the company to have an amount of 'qualifying plant expenditure' in relation to that year of income or any succeeding year of income. Section 73BA of the ITAA 1936 allows a deduction in respect of a 'section 73BA depreciating asset' for a year of income (that is, allows a deduction where an eligible company has a notional Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997) deduction in respect of an asset used, or installed ready for use, for research and development). Section 73BA of the ITAA 1936 applies to assessments for the income year in which 1 July 2001 occurs and for later income years. There is no exclusion of the operation of section 73BA of the ITAA 1936 on the basis of the time of the asset's acquisition or construction. Division 40 of the ITAA 1997 can apply to an asset acquired or constructed prior to 29 January 2001 because of the operation of section 40-10 of the Income Tax (Transitional Provisions) Act 1997 , as amended by the New Business Tax System (Capital Allowances - Transitional and Consequential) Act 2001, which states that Division 40 of the ITAA 1997 will apply to assets acquired or constructed prior to 1 July 2001, where Division 42 of the ITAA 1997 applied in respect of that asset. Therefore, an asset which was acquired or constructed prior to 29 January 2001, but which did not meet the requirements for a deduction under section 73B(15) of the ITAA 1936, because it was not used, or installed ready for use, 'exclusively' for research and development, 'will' be eligible for a deduction under section 73BA of the ITAA 1936, to the extent that it has a base value/adjustable value. The deduction for the decline in value will then be based on the notional Division 40 of the ITAA 1997 deduction. However, subsection 73B(20) and 73BA(7) of the ITAA 1936 and section 8-10 of the ITAA 1997 will prevent a deduction for the same expenditure being allowed under more than one provision. Therefore, expenditure in relation to a pre-29 January 2001 asset may be claimed under section 73BA of the ITAA 1936 to the extent that it has a base/adjustable value (if the requirements of that section are met), even where the expenditure previously qualified for a deduction under subsection 73B(15) of the ITAA 1936.", "Date_of_Decision": "28 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(15) subsection 73B(20) subsection 73B(21) subsection 73B(4) subsection 73B(5) subsection 73B(1) section 73BA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/85", "Subject_References": "Depreciating assets Research and development plant", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200584", "Unmatched_Content": "Keywords Depreciating assets Research and development plant"}
{"ATO_ID_Number": "ATO ID 2005/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: Deductions under section 73BA of the ITAA 1936 in relation to an asset that becomes an asset of the head company under subsection 701-1(1) of the ITAA 1997", "Issue": "Can a deduction be claimed under section 73BA of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to an asset that becomes an asset of the head company under subsection 701-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) upon consolidation?", "Decision": "Yes. A deduction can be claimed under section 73BA of the ITAA 1936 in relation to an asset that becomes an asset of the head company under subsection 701-1(1) of the ITAA 1997 upon consolidation.", "Facts": "The company is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936. The company undertook 'research and development activities' within the meaning of subsection 73B(1) of the ITAA 1936 from the 1999-2000 income year to the 2003-04 income year. The company acquired an asset on 1 July 1999 (prior to 29 January 2001) for use in its 'research and development activities'. Deductions were allowed under subsection 73B(15) of the ITAA 1936 in respect of this expenditure, and the expenditure has been claimed in full over the 1999-2000, 2000-01 and 2001-02 income years. On 1 July 2002, the company became a subsidiary member of a consolidated group and the tax cost of the asset was reset in accordance with subsection 701-10(4) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Under subsection 701-10(4) of the ITAA 1997, each asset's tax cost is set at the time the entity becomes a subsidiary member of the group at the asset's tax cost setting amount. The expression 'tax cost is set' has the meaning given by section 701-55 of the ITAA 1997, which provides, where apply in relation to the asset, the expression means, inter alia, that the provisions apply as if the asset were acquired at the particular time for a payment equal to its tax cost setting amount. Here 'particular time' refers to the time of the consolidating event or entry into a consolidated group. Generally, where the assets tax cost is set by section 701-10 of the ITAA 1997 (cost to head company of assets that entity brings into the group), the asset's 'tax cost setting amount' is worked out in accordance with Division 705 of the ITAA 1997. The tax cost of each asset of a joining entity is based on a share of the allocable cost amount (ACA) of that subsidiary. The ACA consists of the cost of the membership interests in the entity together with its liabilities, which become liabilities of the group. Adjustments are made to reflect certain undistributed profits, distributions and losses of the joining entity and certain deductions to which the head company becomes entitled. Generally, the cost setting process requires market valuing of a joining subsidiary's assets at the joining time. Once the tax cost of the asset is set, then the head company may be allowed a deduction under Division 40 of the ITAA 1997 and/or section 73BA of the ITAA 1936, in relation to the asset if the requirements for claiming a deduction under those sections have been met.", "Date_of_Decision": "28 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(15) subsection 73B(1) section 73BA section 73BAF", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/84", "Subject_References": "Consolidation Consolidation - assets Depreciating assets Research and development plant Tax cost setting rules", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200585", "Unmatched_Content": "Keywords Consolidation Consolidation - assets Depreciating assets Research and development plant Tax cost setting rules"}
{"ATO_ID_Number": "ATO ID 2014/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: building expenditure", "Issue": "Does the exclusion for 'expenditure incurred in the acquisition or construction of a building' in the definition of 'research and development expenditure' in subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936) only include structural elements that form the building?", "Decision": "No. 'Building' for the purposes of subsection 73B(1) of the ITAA 1936 also includes 'a part of' a building. For this purpose, 'a part of' a building takes on its ordinary meaning and refers to structural components of a building that make up the whole building. It also includes items that have a separate identifiable nature that nevertheless become an integral part of a building enabling the building to function as the setting for the taxpayer's income-producing activities.", "Facts": "The taxpayer is a construction company undertaking some research and development (R&D) in relation to its buildings. Its expenditure on the construction of the buildings is incurred on revenue account. This means that an item of the taxpayer that is trading stock cannot be a depreciating asset for the purposes of Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997). The construction involves the development, design, build and demonstration of a highly automated end-to-end batch manufacturing process, involving physically separate structures connected by pipes and conductors to facilitate the automated manufacturing process. Some of the structures are heavily customised to support the R&D activity, and house specialised process plant equipment. In the year ended 30 June 2010 the taxpayer registered the construction of the structures as its R&D project with Innovation Australia under section 39J of the Industry Research and Development Act 1986 . The taxpayer is an eligible company as defined in subsection 73B(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subsection 73B(14) of the ITAA 1936 provides a concessional deduction for 'research and development expenditure' where certain conditions are met. The definition of 'research and development expenditure' in subsection 73B(1) excludes, among other things, ...expenditure incurred in the acquisition or construction of a building or of an extension, alteration or improvement to a building. This exclusion is commonly referred to as the 'building exclusion'. 'Building' is defined in subsection 73B(1) of the ITAA 1936 as including 'a part of a building', but is not further defined in the ITAA 1936. Therefore, it takes its ordinary meaning as no contrary intention is evident: Kennedy Cleaning Services Pty Ltd v. Petkoska (2000) 200 CLR 286 at 304; ATO ID 2012/5 Income tax : Research and Development : building expenditure . The Macquarie Dictionary (5th ed 2012 online) defines 'part', relevantly for the present purposes, as: 1. a portion or division of a whole, separate in reality, or in thought only; a piece, fragment, fraction, or section; a constituent. 2. an essential or integral attribute or quality. Judicial consideration of the ordinary meaning of the phrase 'a part of' reveals the following key elements: The term 'part' of a building in its ordinary sense also includes fixtures. Additionally, part of a building can include a permanent, fixed and structurally delineated section of the building capable of being the subject of a separately identifiable legal or equitable interest, such as a single floor of a multi-storey building (Taxation Ruling TR 2013/2 Income tax : school or college building funds ). Thus, an item that is annexed, affixed, or adjunct to the building but in such a way that it loses its separate character and becomes integral to the building forms 'part of' a building (Taxation Ruling TR 2007/9 Income tax : circumstances when an item used to create a particular atmosphere or ambience for premises used in a cafe, restaurant, licensed club, hotel, motel or retail shopping business constitutes an item of plant , paragraphs 8-9). Applying the above considerations to the R&D context, it is concluded that the expression 'a part of' a building refers to both: Whether an item becomes integral to, or part of, the fabric of the building once it is attached or affixed to the structure is a question of fact and degree, having regard to: This interpretation also applies to the interpretation of the term 'a part of a building' in subparagraph 355-225(1)(a)(i) of the ITAA 1997 insofar as it applies to the R&D tax incentive program found in Division 355 of the ITAA 1997, applicable to income years commencing on or after 1 July 2011. In the present case, as the construction involves the development, design, build and demonstration of a highly automated end-to-end batch manufacturing process, the building exclusion will apply to both the structural elements that form the physically separate structures ('buildings') and those items that have a separate identifiable nature that nevertheless become an integral part of those structures ('parts of a building'), enabling the structures to function as the setting for the automated end-to-end batch manufacturing process.", "Date_of_Decision": "4 March 2014", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) (now repealed) subsection 73B(14) (now repealed)", "Related_Public_Rulings_and_Determinations": "TR 2013/2 | TR 2007/9", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/5", "Subject_References": "Eligible research & development expenditure Capital expenditure", "Case_References": "Case 11/97 (1997) 35 ATR 1022 97 ATC 173", "Other_References": "The Macquarie Dictionary Online © Macquarie Dictionary Publishers Pty Ltd.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201411", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 2013/2 TR 2007/9 | Keywords Eligible research & development expenditure Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2012/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: building expenditure", "Issue": "Does the exclusion for 'expenditure incurred in the acquisition or construction of a building' in the definition of 'research and development expenditure' in subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936), include revenue expenditure?", "Decision": "Yes. Expenditure incurred by a taxpayer in the acquisition or construction of a building, whether on capital or revenue account, is excluded from being 'research and development expenditure' as defined in subsection 73B(1) of the ITAA 1936.", "Facts": "A property developer acquired and subdivided land for development. On one parcel of land the property developer is constructing a commercial building under contract for a purchaser. The building plans contain a design for an innovative heating system which runs throughout the external walls. In the year ended 30 June 2010 the property developer registered the heating system as its research and development (R&D) project with Innovation Australia under section 39J of the Industry Research and Development Act 1986 . The property developer's expenditure related to the construction of the building was incurred on revenue account. This expenditure includes an amount incurred on installing the heating system in such a way as to deny any basis on which that system might be regarded as a separate asset. The property developer is an eligible company as defined in subsection 73B(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subsection 73B(14) of the ITAA 1936 allows a concessional deduction for 'research and development expenditure', should certain conditions be met. 'Research and development expenditure' is defined in subsection 73B(1) of the ITAA 1936 and excludes, relevantly for these purposes, ...expenditure incurred in the acquisition or construction of a building or of an extension, alteration or improvement to a building. This exclusion is referred to as 'the building exclusion'. 'Building' is defined in subsection 73B(1) of the ITAA 1936, as including 'part of a building'. However, the other parts of the building exclusion are not defined. In Kennedy Cleaning Services Pty Ltd v. Petkoska , (2000) 200 CLR 286 at 304, the High Court confirmed that the words of a statutory definition should be given their ordinary meaning unless the contrary is clearly intended. In determining the scope of the exclusion, consider first the meaning of 'acquisition or construction'. In Tully Co-operative Sugar Milling Association Ltd v. FC of T 82 ATC 4454; (1982) 13 ATR 410, the Supreme Court of Queensland considered these terms in relation to the eligibility of new units of property for deduction under former section 82AB of the ITAA 1936. Thomas J said that the consistent use of both 'acquisition or construction' as alternatives strengthened the view that: ... a taxpayer could acquire an item of property such as a new... pump, and ... could claim this deduction on the footing that he had acquired a new unit. But if he acquired it as a component of a larger new unit of property which he was himself constructing... it would be unnecessary for him to claim the deduction to which he would be entitled from acquiring the pump. He would be entitled to claim the full \"expenditure... in respect of the ... construction by him of a new unit of eligible property\" and that expenditure would include the cost of acquiring the pump. His Honour allowed the objection in part and the Commissioner appealed to the Full Federal Court ( FC of T v. Tully Co-operative Sugar Milling Association Limited 83 ATC 4495; (1983) 14 ATR 495). The Full Court did not specifically address the above proposition. However, it held there was no error in how the primary judge had approached the case. Further, Fox J stated: As I see it, the intention of the legislature is that 'acquisition' and 'construction' are between them intended to cover all cases, although they will commonly have application at different times in the development of a project. In the circumstances here the heating system is part of the external walls of the building and is an integral part of the building. The expenditure on installing the heating system is incurred in the 'acquisition or construction' of a building. There is nothing in the ordinary meaning of the expressions used in the building exclusion which limits their application to expenditure on capital account. Therefore, it is necessary to look at whether there is anything else which may indicate that the ordinary meaning was not to apply in construing the building exclusion. The proper interpretation requires the relevant context be considered in the first instance, and by using 'context' in its broadest sense ( CIC Insurance Ltd v. Bankstown Football Club Ltd (1997) 187 CLR 384 at 408). Part of the relevant context is the legislative history. The precursor to section 73B of the ITAA 1936, section 73A of the ITAA 1936, was introduced in 1946 to 'enlarge the deductions allowable in respect of scientific research expenditure' (EM to the Income Tax Assessment Bill 1946, clause 11). Subsection 73A(1) of the ITAA 1936 provided for a deduction of an amount, '(other than any amount which is allowable as a deduction under any other section of this Act)', for a person carrying on a business for: Section 73A of the ITAA 1936 therefore contained an exclusion in relation to expenditure on buildings not dissimilar from that later introduced in subsection 73B(1) of the ITAA 1936. However, paragraph 73A(1)(b) of the ITAA 1936 was only capable of applying to expenditure of a capital nature, and hence, only had practical application where the expenditure had already met that requirement. The relevant capital expenditure excluded from deduction under paragraph 73A(1)(b) was eligible for a three year write off under subsection 73A(2) of the ITAA 1936, where the building was 'of use for scientific research purposes only'. As paragraph 73A(1)(b) of the ITAA 1936 applies only to capital expenditure, for building expenditure incurred on revenue account to be deductible it would have to be a payment to which paragraph 73A(1)(a) of the ITAA 1936 applies. As payments to an approved research institute are in the nature of the performance of a service, it is highly unlikely they could have involved expenditure on buildings. When section 73B of the ITAA 1936 was introduced in 1986 it contained the building exclusion as it is currently expressed. Although section 73B differed from section 73A of the ITAA 1936 (which was not repealed at that time), in some key aspects, it broadly followed the scheme of section 73A in its treatment of building expenditure. Neither section 73B of the ITAA 1936 nor the relevant explanatory memorandum prescribed that expenditure attracting the concession had to be capital or revenue in nature. It did however, under subsection 73B(17) of the ITAA 1936, provide for a three year write-off for building expenditure of a capital nature, in circumstances where the building was exclusively used for research and development (R&D) purposes. Subsection 73B(17) of the ITAA 1936 was subject to strict integrity measures, and was repealed in 1988 to: ...ensure more efficient use of the revenue available for research and development activities by focusing upon more productive, and innovative, investments (Second Reading Speech to the Taxation Laws Amendment Bill (No 5) 1987 Taxation Laws Amendment Act (No. 5) 1988 in the House of Representatives, by the Minister assisting the Treasurer) Building expenditure of a capital nature incurred on R&D activities has not attracted concessional treatment since. There is no evidence of an intention that building expenditure on capital account was to be subject to these strict rules but that building expenditure on revenue account was not. There is therefore nothing which requires an interpretation of the building exclusion which would result in building expenditure of a capital nature being ineligible for concessionary treatment, while allowing building expenditure of a revenue nature to be immediately deductible at 125% (initially 150%), and not subject to any integrity measures. Therefore, there is no basis for reading down the building exclusion to apply to building expenditure of a capital nature only. The exclusion takes its ordinary meaning, and refers to all relevant building expenditure, whether incurred on revenue or capital account. Accordingly, expenditure incurred on the acquisition or construction of the heating system, in circumstances where that system is an integral part of a building, whether on revenue or capital account, is excluded from the definition of 'research and development expenditure', and is not deductible under subsection 73B(14) of the ITAA 1936.", "Date_of_Decision": "20 January 2012", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73A (now repealed) subsection 73B(1) (now repealed) subsection 73B(14) (now repealed) subsection 73B(17) (now repealed)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Eligible research & development expenditure Capital expenditure", "Case_References": "Kennedy Cleaning Services Pty Ltd v Petkoska (2000) 200 CLR 286", "Other_References": "Guide to the Research and Development Tax Concession, Part C", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20125", "Unmatched_Content": "Keywords Eligible research & development expenditure Capital expenditure"}
{"ATO_ID_Number": "ATO ID 2010/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "R&D tax concession: meaning of 'primarily' in paragraph 73B(14C)(c) of the Income Tax Assessment Act 1936", "Issue": "Can the requirement in paragraph 73B(14C)(c) of the Income Tax Assessment Act 1936 ( ITAA 1936), that activities need to be carried on 'wholly or primarily on behalf of the foreign company' be met, where the relevant activities are not carried out by the eligible company solely on behalf of the foreign company?", "Decision": "Yes. The requirement in paragraph 73B(14C)(c) of the ITAA 1936 can be met if the R&D activities are carried on chiefly or mainly on behalf of the foreign company.", "Facts": "Company A is a 'foreign company', as defined in subsection 73B(1) of the ITAA 1936. Company B is an 'eligible company' for the purposes of subsection 73B(1) of the ITAA 1936, and a wholly owned subsidiary of Company A. Company B carries out certain activities which come within the definition of 'Australian-centred research and development activities' in subsection 73B(1) of the ITAA 1936. Company A retains all of the intellectual property (IP) generated from these Australian-centred research and development activities that are carried out by Company B. Company A pays Company B a fee equal to the costs incurred on carrying out these activities, plus an agreed mark-up. Paragraphs (a) and (b), and (d) to (g) (inclusive), of subsection 73B(14C) of the ITAA 1936, are all satisfied in relation to Company B's expenditure. Company B has registered its R&D activities with Innovation Australia for the relevant year of income. An agreement exists between Company A and Company B under which the parties will cooperate to fund, develop and licence the results from carrying out the activities in question. Under the agreement, Company A has the right to commercially exploit or otherwise use these results, except in certain limited situations in which it can allow Company B to do so without any fee being charged. Company A initiated this agreement and stipulated the scope of the activities to be carried out in accordance with its terms.", "Reasons_for_Decision": "Summary: An eligible company may claim a deduction under subsection 73B(14C) of the ITAA 1936 for expenditure on foreign owned R&D where the prerequisites of that subsection are met. Paragraph 73B(14C)(c) of the ITAA 1936 requires that expenditure incurred by an eligible company, Company B, for the purpose of carrying on of Australian-centred R&D activities, be on activities carried on 'wholly or primarily on behalf of the foreign company', Company A, as identified under paragraph 73B(14C)(a) of the ITAA 1936: that is, a foreign company with which the eligible company is grouped with at the time the expenditure is incurred. As Company B may benefit in some situations from the conduct of the activities in question, it cannot be said that they are carried on 'wholly on behalf of' the foreign company, Company A. The question then becomes whether nevertheless it can be concluded that these activities are carried on 'primarily on behalf of' the foreign company, Company A. There is no direct authority on this point. In Parker Pen (Aust) Pty Ltd v. Export Development Grants Board ( 1983) 67 FLR 234; (1983) 46 ALR 612, Lockhart J considered the meaning of the expression 'primarily and principally' for the purposes of subsection 4(1) of the Export Market Development Grants Act 1974 (Cth). His Honour thought that in the context in question these adverbs essentially meant the same, as 'chiefly' or 'mainly'. The decision provides some guidance to the meaning of paragraph 73B(14C)(c) of the ITAA 1936. Thus, activities which are carried out 'primarily' on behalf of the foreign company will be those carried out by the eligible company chiefly or mainly on its behalf. Factors that will be relevant in determining whether the research and development activities in question have been carried out wholly or primarily on behalf of the relevant foreign company are: In this case the foreign company, Company A: These factors all point to the Australian-centred R&D activities being carried out chiefly or mainly on behalf of the foreign company, Company A. Hence, paragraph 73B(14C)(c) of the ITAA 1936 is satisfied in this case in respect of Company B's expenditure.", "Date_of_Decision": "24 March 2010", "Year_of_Income": "Year ended 31 December 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(14C) subsection 73B(1)", "Related_Public_Rulings_and_Determinations": "Class Ruling CR 2009/45", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development expenses Overseas research & development expenditure Grouped entities for research and development", "Case_References": "Parker Pen (Aust) Pty Ltd v Export Development Grants Board (1983) 67 FLR 234 (1983) 46 ALR 612", "Other_References": "Guide to the R & D Tax Concession Part C Expenditure on Research and Development", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201074", "Unmatched_Content": "Related Public Rulings (including Determinations) Class Ruling CR 2009/45 | Keywords Research & development expenses Overseas research & development expenditure Grouped entities for research and development"}
{"ATO_ID_Number": "ATO ID 2009/107", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "R&D tax concession: is a company 'not at risk' if it can expect to recover its R&D expenditure because of the good technical prospects of its activities (rather than merely because of the terms of the relevant arrangement)?", "Issue": "Under section 73CA of the Income Tax Assessment Act 1936 (ITAA 1936), is a company 'not at risk' in respect of an amount of expenditure if:", "Decision": "No, the company is not considered to be 'not at risk'. Section 73CA of the ITAA 1936 therefore does not reduce the extent to which the company may claim a deduction under section 73B of the ITAA 1936 in respect of the expenditure.", "Facts": "ABC Pty Ltd (ABC) makes a contract with XYZ Pty Ltd (XYZ) under which ABC promises to develop a new type of machine. The machine is to be designed, built and tested to achieve certain specifications that have previously not been achieved. ABC will need to undertake a program of research and development to meet its contractual obligations. The contract requires XYZ to pay ABC a fixed fee of $1 million if, and only if, ABC delivers the machine successfully and on time. However, ABC is confident, based on its extensive experience and technical capability, that it can deliver the machine in accordance with the contract and so will earn that fee. At no time does ABC have any other arrangement or understanding with anybody, whether formal or informal, that allows ABC, or an associate of ABC, to receive any money back in respect of its expenditure. Nor is there any basis for suggesting that the terms of the contract do not reflect the true arrangement between the parties. ABC expends $750,000 on research and development activities in an effort to meet its contractual obligation. The expenditure meets the requirements of section 73B of the ITAA 1936 (assume for the purpose of this ATO ID that subsection 73B(9) of the ITAA 1936 does not apply on these facts).", "Reasons_for_Decision": "Summary: Section 73CA of the ITAA 1936 applies if the Commissioner is satisfied that, when the relevant expenditure was incurred, the company was not at risk in respect of the whole or a part of the expenditure. The concept of a company being 'not at risk' in respect of expenditure is defined in subsection 73CA(5) of the ITAA 1936. The subsection reads as follows: The two critical elements of this provision for present purposes are that, for subsection 73CA(5) of the ITAA 1936 to apply to ABC, it must be the case that because of the matters specified in paragraphs 73CA(5)(a) and 73CA(b) of the ITAA 1936, ABC (or an associate) could reasonably have expected to receive an amount as a direct or indirect result of the expenditure being incurred. What matters do paragraphs 73CA(a) and 73CA(b) of the ITAA 1936 cover? Arguably, they could be read as extending to practically all matters, particularly given the references to any 'circumstance' that existed or was likely to exist. However, the Tax Office does not take this view. The following factors all suggest a more specific focus: For these reasons, the Tax Office considers that the two paragraphs direct attention to the features of the relationship between the parties involved in the arrangements under which the expenditure is incurred. In this respect the paragraphs can extend to any combination of formal contracts, side-arrangements, informal understandings, options and the like. But they do not extend to such matters as the technical, scientific or commercial prospects of the relevant research and development activities themselves. Therefore, the subsection is attracted if in any event, as a result of incurring the expenditure, some consideration could reasonably have been expected to be received because of the arrangement among those parties, even if, in particular, the expenditure fails to produce the intended technical result. In other words, the question is whether one can predict from the contractual arrangement itself, without regard to other matters of the type referred to above, that the incurrence of the expenditure will result in the receipt of consideration. By contrast, subsection 73CA(5) of the ITAA 1936 does not apply to a company that, at the relevant time, could not reasonably expect to receive any consideration from any source in the event that the expenditure would result in technical failure. This would be so even if the company reasonably ought to have had a high degree of confidence that the project would succeed technically. That degree of technical confidence is not one of the matters specified in paragraphs 73CA(5)(a) and (b) of the ITAA 1936. Therefore it cannot be taken into account as a possible cause of an expectation of a receipt of consideration resulting from the expenditure (taxpayers should however remember that the expenditure concerned can only qualify for a deduction in the first place under section 73B of the ITAA 1936 if it meets certain criteria under that section, which in some cases relate to the level of innovation and technical risk involved). In ABC's case, the question posed by subsection 73CA(5) of the ITAA 1936 is whether the Commissioner can make the prediction that ABC can, because of the terms of the contract with XYZ, reasonably be expected to receive consideration from XYZ as a result of incurring the expenditure? The answer is no. Given ABC's technical confidence, one could have a reasonable expectation that ABC would get a return from its expenditure under the terms of the contract, being the $1 million fee. However, it cannot be said that that reasonable expectation is held because of the terms of the arrangement itself. It is held because ABC's technical confidence is a good ground for expecting that ABC will earn its fee under the contract. Whether any return will flow is dependent on whether the technology is successfully developed, and not solely on what the contract says or on any other aspect of the arrangement between ABC and XYZ. By contrast, section 73CA of the ITAA 1936 could well be attracted by an arrangement of any kind between parties (that is, whether formal or informal) under which it is apparent from the terms and features of the arrangement itself that the investing company is likely to receive money back as a direct or indirect result of incurring expenditure, regardless of whether the technology is successfully developed (subsection 73B(9) of the ITAA 1936 may also potentially apply in such a case).", "Date_of_Decision": "9 September 2009", "Year_of_Income": "All income years, whether beginning before or after date of decision.", "Legislative_References": "Income Tax Assessment Act 1936 section 73B section 73CA section 124ZAM", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2635", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/68", "Subject_References": "Research & development expenses R&D risk", "Case_References": "Faywin Investment Pty Ltd v FCT 89 ATC 5024 (1989) 20 ATR 1282", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009107", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2635 | Keywords Research & development expenses R&D risk"}
{"ATO_ID_Number": "ATO ID 2007/122", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: feedstock expenditure", "Issue": "Is expenditure incurred by an eligible company on the manufacture of a product 'feedstock expenditure', as defined by subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Expenditure incurred by the company on the manufacture of the product is 'feedstock expenditure', as defined by subsection 73B(1) of the ITAA 1936.", "Facts": "The taxpayer is an 'eligible company,' as defined in subsection 73B(1) of the ITAA 1936. The company's commercial activities include the manufacture, storage and sale of a product. During storage, an invisible chemical reaction occurs in the product causing corrosion of a storage facility. The company undertakes 'research and development activities' which include developing corrosion resistant materials to house the product, and trialling these materials in the existing storage facility under normal conditions. The development and trialing of these materials are 'research and development activities' within paragraph (a) of the definition in subsection 73B(1) of the ITAA 1936. The manufacture of the product used in the trial is a 'research and development activit[y]' within paragraph (b) of the definition in subsection 73B(1) of the ITAA 1936, being an activity 'carried on for a purpose directly related' to the carrying on of the core activities of the development and trial of materials. These 'research and development activities' are registered with the Industry Research and Development Board under section 39J of the Industry Research and Development Act 1986 . The company has incurred expenditure on the acquisition of product ingredients, and the manufacture and storage of the product. The product is manufactured, stored and sold in the course of the company's usual commercial activities. The product and its constituent ingredients are 'materials or goods' for the purposes of the definition of 'feedstock expenditure' in subsection 73B(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subsection 73B(14) of the ITAA 1936 allows a company to claim a deduction for the amount of its research and development expenditure multiplied by 1.25. The definition of 'research and development expenditure' in subsection 73B(1) of the ITAA 1936 excludes 'feedstock expenditure' but 'includes any eligible feedstock expenditure that the company has ... in respect of related research and development activities'. Subsection 73B(1) of the ITAA 1936 defines 'feedstock expenditure as follows: \"feedstock expenditure\" , in relation to an eligible company, means expenditure incurred by the company in acquiring or producing materials or goods to be the subject of processing or transformation by the company in research and development activities, and includes expenditure incurred by the company on any energy input directly into the processing or transformation. Under subsection 73B(1A) of the ITAA 1936, 'eligible feedstock expenditure' is the amount by which the company's 'feedstock input' exceeds its 'feedstock output' in respect of the year of income in relation to related research and development activities. 'Residual feedstock expenditure' is deductible under subsection 73B(14B) of the ITAA 1936, but only at the rate of 100 per cent. 'Residual feedstock expenditure' is defined in subsection 73B(1) of the ITAA 1936, to mean the lesser of the company's feedstock input or feedstock output in respect of the year of income in relation to related research and development activities. Also relevant are the definitions of 'feedstock input' and 'feedstock output' in subsection 73B(1) of the ITAA 1936. The former is the actual feedstock expenditure in respect of goods or materials that were processed or transformed by the company in the relevant research and development activities, and the latter is the proceeds from the sale of, or the sale value of product(s) obtained in relation to that feedstock input expenditure. The provisions described above (the feedstock provisions) operate in the following manner: The feedstock provisions thus operate as a code for dealing with the cost of acquiring or producing the goods or materials in question, whether or not those goods or materials have been wholly consumed or partially consumed in the course of the research and development activities. The scheme of these provisions also caters for situations in which products obtained from one round of processing or transformation become themselves subsequently, materials or goods that are to be the subject of some processing or transformation in the course of the eligible company carrying out specific research and development activities. The definition of 'feedstock expenditure' applies to materials or goods acquired or produced, and which are 'to be the subject of processing or transformation in research and development activities'. The word 'in' is typically read as meaning 'in the course of' (Amalgamated Zinc (De Bavay's) Ltd v. Federal Commissioner of Taxation (1935) 54 CLR 295; (1935) 3 ATD 288). Neither the term 'processing' or the phrase 'processing or transformation' are defined in the ITAA 1936 or the Income Tax Assessment Act 1997 (ITAA 1997). Accordingly they will have their ordinary meanings, having regard to the purpose and context of the provisions in which they appear ( Chaudhri v. FC of T 2001 ATC 4214; (2001) 47 ATR 126; [2001] FCA 554). The Macquarie Dictionary , 2005, 4 th edn, The Macquarie Library Pty Ltd, NSW) definition of process includes: noun 1 a systematic series of actions directed to some end: the process of making butter . 2. a continuous action, operation, or series of changes taking place in a definite manner: the process of decay ... verb (t) 11. to treat or prepare by some particular process, as in manufacturing. 12. to convert (an agricultural commodity) into marketable form by some special process. In Australia, the meaning of 'processing' has been judicially considered in relation to various items which qualify for exemption from sales tax. In Davies Coop & Co v. Federal Commissioner of Taxation (1948) 77 CLR 299; (1948) 8 ATD 320, the High Court said: The suggestion is that \"processing or treatment\" means manufacturing activities involving the use of material which disappears and cannot be discovered in the final product. There is no satisfactory reason for limiting the words to chemical processes or to processes like cleaning or polishing. A mere mixture of substances or a mechanical arrangement of substances may be a necessary part of a process in order to produce a marketable product. (77 CLR 299 at 311 per Latham CJ.) In FC of T v. Hamersley Iron Pty. Ltd 81 ATC 4582; (1981) 12 ATR 429, Frame Set & Match Pty Ltd v. FC of T 2000 ATC 4589; [2000] FCA 1168 and Lindsay Transport Pty Ltd v. FCT (2006) 63 ATR 190; [2006] FCA 822 (subject to appeal), also all decided in a sales tax context, it has been held that processing can occur even where the relevant object experiences no actual or apparent physical change in its form, nature or condition during (or as a result of) the process in question. In the first of these cases the Supreme Court of Victoria held that individual fragments of mineral had been processed by a particular machine, where all that was involved was that these fragments had been blended and 'intentionally and usefully, rearranged vis-á-vis another'. These cases show that for the purposes of sales tax legislation, 'processing' can be found to have occurred where it does not produce a new or different product, where it causes a change which is not visible, such as a change in temperature, or where it causes no change at all. United Kingdom courts have also interpreted the term 'process' broadly in connection with capital allowances legislation, such that physical alteration or the creation of a new product is not essential in subjecting goods to a process (see Kilmarnock Equitable Cooperative Society Ltd v. Inland Revenue Commissioners [1966] SLT 224; Buckingham (Inspector of Taxes) v. Securitas Properties Ltd [1980] 1 WLR 380; Vibroplant Ltd v Holland (Inspector of Taxes) [1981] 1 All ER 526 ( Vibroplant )). However, in Vibroplant Dillon J indicated that subjecting something to a 'process' involved a 'substantial measure of uniformity of treatment or system', and that where something was the subject of individual treatment, this would not amount to it having been subjected to a process. The terms 'transformation' or 'transform' are not defined in the ITAA 1936 or the ITAA 1997. The Macquarie Dictionary definition of transformation includes: noun 1. the act of transforming. 2. the state of being transformed. 3. change in form, appearance, nature, or character... transform verb (t) 1. to change in form; change to something of a different form; metamorphose. 2. to change in appearance, condition, nature, or character, especially completely or extensively. Thus, transformation normally involves a change in form, appearance, condition, nature or character, and arguably has a narrower meaning than 'processing'. The purpose of the feedstock provisions also needs to be considered in interpreting the terms in question. The introduction of the feedstock provisions addressed previous concerns surrounding the availability of a deduction at the full concessional rate for the cost of goods or materials processed or transformed in research and development activities, even though the proceeds from the sale of the resulting product were only taxed at 100 per cent. The provisions are not necessarily limited to expenditure on acquiring or producing raw materials or trading stock, though that is an obvious application. The provisions are apt to apply, for example, to situations in which goods or materials acquired or produced are intended for sale, but prior to this, intended to be the subject of processing or transformation in research and development activities. In such cases the same mischief arises as where goods and materials are input into a 'product' for sale, but prior to sale subject to processing or transformation in research and development activities. The purpose and scheme of the feedstock provisions therefore does not support a narrow meaning being given to the terms 'processing' or 'transformation'. Rather, the meaning to be given to them should be one that recognises the many and varied types of activities than can come within the definition of 'research and development activities'. Such activities by their nature, can take many different forms, and may often involve the analysis of changes in the composition of substances that are not visible to the naked eye. The ordinary meanings of these terms, as obtained from the dictionary definitions referred to, conform with the purpose and context of the feedstock provisions. The manufacture of the product in question involves both processing and transformation of the constituent ingredients, as they are changed from their form pre-manufacture into the form of the product. As this processing or transformation of the ingredients occurs in the course of one aspect of the research and development activities carried out by the company (the manufacture of the product to be used in the trial), the expenditure incurred in acquiring these ingredients is 'feedstock expenditure'. The chemical reaction occurring during storage of the product also points to there being 'processing or transformation' of the product at this stage, even though there has been no visible change in the product's appearance. As this processing or transformation of the product involves goods or materials and also occurs in the course of the research and development activities carried out by the company (the development and trial of the relevant materials), the expenditure incurred on the manufacture or production of the product is also 'feedstock expenditure'.", "Date_of_Decision": "7 June 2007", "Year_of_Income": "1 October 2004 to 30 September 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(1A) subsection 73B(14) subsection 73B(14B) subsection 73B(34)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development feedstock expenditure", "Case_References": "Amalgamated Zinc (De Bavay's) Ltd v. Federal Commissioner of Taxation (1935) 54 CLR 295 (1935) 3 ATD 288", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007122", "Unmatched_Content": "Keywords Research & development feedstock expenditure"}
{"ATO_ID_Number": "ATO ID 2006/68", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: application of section 73CA of the ITAA 1936 to a reimbursement arrangement - expenditure 'not at risk'", "Issue": "Does section 73CA of the Income Tax Assessment Act 1936 (ITAA 1936) apply where an eligible company is entitled to reimbursement for expenditure on research and development activities in the form of a fee paid by a related entity?", "Decision": "Yes. Section 73CA of the ITAA 1936 applies in this case to amounts calculated by reference to the eligible company's own expenditure on research and development activities, as it is possible to conclude, for the purposes of the section, that the company is 'not at risk' in respect of this expenditure.", "Facts": "Company X is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936. It registers its research and development (R&D) activities with the Industry, Research and Development Board, (the Board), under section 39J of the Industry Research and Development Act 1986 , (IR&D Act 1986). The company claims a deduction for its expenditure on these R&D activities, at the rate of 125%, under section 73B of the ITAA 1936. Company X owns certain intellectual property connected with the conduct of the R&D activities, and has contracted with an associated company, company Y, to allow company Y to use this property for initial market testing and commercial promotion. This occurs under the 'first agreement'. Under a second, but related, agreement, company X pays amounts to company Y, as and when company Y manages and contracts with third parties in relation to the actual conduct of the R&D activities. The fees payable under the first agreement exactly match the amounts payable under the second agreement, and whilst there is evidence of the R&D activities being carried out on behalf of company X, there is little evidence in support of the claim that company Y uses the intellectual property in a way consistent with the terms, or commensurate with the fees set under the first agreement.", "Reasons_for_Decision": "Summary: Subsection 73CA(1) of the ITAA 1936 provides that section 73CA of the ITAA 1936 is to be 'read and construed as if it were part of section 73B' of the ITAA 1936. The effect of section 73CA of the ITAA 1936 is to limit the research and development deduction available under section 73B of the ITAA 1936 based on the extent that an eligible company claiming the deduction is 'at risk' in relation to its research and development (R&D) expenditure. Subsections 73CA(2), 73CA(3) and 73CA(4) of the ITAA 1936 provide that where the Commissioner is satisfied that, at the time the expenditure was incurred, the eligible company was 'not at risk' with respect to the whole or a part of its R&D expenditure, then the amount of the deduction available to the company under section 73B of the ITAA 1936 will be proportionately reduced. Where the eligible company's expenditure is 'not at risk' at all, the deduction reduces to the amount of its actual expenditure on the R&D activities. In this respect, subsection 73CA(5) of the ITAA 1936 sets out the basis for how the Commissioner is to be satisfied that when the expenditure in question was incurred, the eligible company (in this case, company X), was 'not at risk in respect of the whole or a part of' that expenditure. Broadly, under subsection 73CA(5) of the ITAA 1936 the Commissioner is required to identify what, if any, is the 'consideration' which in his opinion the company (or an 'associate') could reasonably have expected to receive, at the time of, and because, directly or indirectly as the result of, incurring that expenditure. Under paragraphs (a) and (b) of the subsection, the Commissioner is entitled in this process, to examine matters present before or at the time of incurring the expenditure, as well as matters present after this time. In Taxation Ruling IT 2635, paragraph 18 says in respect of section 73CA of the ITAA 1936: Where a claimant [company] has received (or become entitled to receive) a recoupment or grant in respect of its R&D expenditure, then to the extent of such grant or recoupment the claimant is not at risk for the expenditure. At paragraph 19 of IT 2635 mention is made of the fact that whether or not certain matters 'result in a recoupment should involve a substance approach with regard to the economic realities and not just contractual form: see Dampier Mining Co. Ltd. v. FCT 78 ATC 4237 at 4249; (1978) 8 ATR 835 at 848'. In the case to hand the Commissioner identifies the consideration relevant to subsection 73CA(5) of the ITAA 1936 as the amounts company X is entitled to receive from company Y under the first agreement. Having regard to the circumstances in which both the first and second agreements were entered into, and carried out, he concludes that the substance of the arrangement is that company Y is fully reimbursing or recouping company X in respect of company X's expenditure on the relevant R&D activities. He concludes these reimbursement amounts are consideration company X could reasonably have expected to receive at the time of incurring its expenditure on the R&D activities, directly as the result of incurring this expenditure. Therefore, the Commissioner concludes for the purposes of subsection 73CA(2) of the ITAA 1936, that company X is 'not at risk' in respect of the whole of this expenditure. The practical effect of this is that company X's deduction in relation to this expenditure is reduced to 100% of the expenditure.", "Date_of_Decision": "24 February 2006", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 73B subsection 73B(1) section 73CA subsection 73CA(1) subsection 73CA(2) subsection 73CA(3) subsection 73CA(4) subsection 73CA(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2635", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Research & development expenses Section 73CA guaranteed returns to investors", "Case_References": "Dampier Mining Co Ltd v. FC of T 78 ATC 4237 (1978) 8 ATR 835", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200668", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2635 | Keywords Deductions & expenses Research & development expenses Section 73CA guaranteed returns to investors"}
{"ATO_ID_Number": "ATO ID 2006/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: subsection 73B(3B) - partnership", "Issue": "Is there a 'partnership' under subsection 73B(3B) of the Income Tax Assessment Act 1936 (ITAA 1936), where two companies collaborate to conduct research and development activities, and to engage the services of a third to conduct some of these activities on their behalf?", "Decision": "Yes. The collaboration between the two companies results in a 'partnership' under subsection 73B(3B) of the ITAA 1936, as the joint conduct of the research and development activities is 'taken to constitute carrying on business with a view to profit'.", "Facts": "The taxpayers are both eligible companies (as defined in subsection 73B(1) of the ITAA 1936), jointly conducting a project of research and development (R&D) activities. These two companies engage a third company (researcher co), to carry out some of the R&D activities on their behalf. Part of the terms and conditions under which researcher co is engaged involve it contributing to a pool to fund some of these activities, as well as supplying certain of its own intellectual property towards the conduct of some of the research in question. The two eligible companies agree to share in the results of the R&D activities, as well as in the net proceeds from any commercial exploitation of those results. Under this agreement, which is separate from that under which researcher co is engaged, each company acts as agent for the other in the conduct of the activities and mutual rights and obligations between the two eligible companies are created. However, the agreement between them and researcher co does not give rise to any mutual rights and obligations between those parties. In the years of income in question no commercial exploitation of any results of the R&D activities occurs.", "Reasons_for_Decision": "Summary: Subsection 73B(3B) of the ITAA 1936 states: In determining whether a relationship between persons for the purpose of engaging in research and development activities constitutes a partnership for the purposes of this Act, the engaging by those persons in those activities is to be taken to constitute carrying on business with a view to profit. Subsection 6(1) of the ITAA 1936 provides that 'partnership' has the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997), and that the term 'this Act', includes the ITAA 1997. In subsection 995-1(1) of the ITAA 1997 the term 'partnership' is relevantly defined to mean: At the time subsection 73B(3B) of the ITAA 1936 was introduced in 1989, the definition of 'partnership' was in this Act, and relevantly read: partnership means an association of persons carrying on business as partners ... [not otherwise relevant]. The strong similarity between the two definitions of 'partnership' is evident. The former definition has been held to embody the common law meaning of partnership, which is an association of persons carrying on business in common with a view to profit ( Rose v. Federal Commissioner of Taxation (1951) 83 CLR 118; (1951) 9 ATD 334; (1951) 5 AITR 197 (Rose)). The Explanatory Memorandum to Taxation Laws Amendment Bill (No 4) 1989, in relation to the introduction of subsections 73B(3A) and 73B(3B) into the ITAA 1936, stated at page 8: The Bill will ensure that partners in a partnership of otherwise eligible companies will not be denied the special deduction for expenditure on R&D activities. This will remove a doubt that has been expressed over the present law to the effect that such companies are not eligible for the deduction on the basis that it is the partnership, rather than the partner companies, which incurs the expenditure. The concept of a 'partnership' for this purpose will not be limited to more common concepts of a partnership; the fact that the companies are not carrying on business with a view to profit will not preclude acceptance that a partnership exists for the purposes of the amendment. The above passage is consistent with the decision in Rose, in recognising that the requirement of carrying on business in common with a view to profit was already part of the then existing definition of 'partnership'. However, the last sentence in this passage also demonstrates that the amendment to be brought about by subsection 73B(3B) of the ITAA 1936, was to deem the existence of a 'partnership', in situations where this condition was not met, but there was the engaging in R&D activities jointly by otherwise eligible companies. The passage quoted above also illustrates that the context of the amendment was one in which other elements of the common law concept of partnership would exist, such as the relationship of agency and the presence of mutual rights and obligations (see the authorities referred to in The Duke Group Ltd (in liq) v. Pilmer & ors [1999] SASC 97 at [920] to [956]), and the only factor affecting the categorisation of the association between the companies as a partnership was the absence of carrying on business with a view to profit. Put another way, this context does not support any broader interpretation of subsection 73B(3B) of the ITAA 1936, that would deem all relationships between eligible companies for the purpose of engaging in research and development as partnerships 'for the purposes of this Act'. There is no suggestion, for example, that the fact that one eligible company might engage another to conduct R&D activities on its behalf was intended to make the two of them members of a deemed partnership. Here, the two eligible companies would be a partnership at common law, (and hence under the relevant part quoted above of the definition of 'partnership' in subsection 995-1(1) of the ITAA 1997), but for the fact that they do not in the years in question, carry on business in common with a view to profit. Under subsection 73B(3B) of the ITAA 1936 the fact that they engage jointly in the conduct of R&D activities means that in determining whether their relationship concerning this conduct is a 'partnership', the engaging together in the conduct of these activities is taken to be the carrying on of a business with a view to profit. Hence, because of the operation of subsection 73B(3B) of the ITAA 1936, the two eligible companies come within the definition of 'partnership' in the ITAA 1997. Researcher co stands in a different position. Although in one respect connected with the conduct of the R&D activities as a contract researcher, its relationship with the two eligible companies is materially different from that between these companies. Most importantly, the elements of mutuality and agency that exist between partners are not to be found in the relationship between the two eligible companies and researcher co. Under subsection 73B(3B) of the ITAA 1936, researcher co is not a member of the partnership deemed to exist between the two eligible companies.", "Date_of_Decision": "15 March 2006", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(3A) subsection 73B(3B) subsection 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development expenditure by partnerships", "Case_References": "Duke Group Ltd (in liq) v. Pilmer & ors [1999] SASC 97", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200674", "Unmatched_Content": "Keywords Research & development expenditure by partnerships"}
{"ATO_ID_Number": "ATO ID 2006/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: deduction for 'core technology expenditure' where purchase consideration comprises allotment of shares", "Issue": "Does the term 'core technology expenditure' for the purposes of subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936) include the acquisition of core technology by an eligible company, where the purchase consideration to acquire the core technology consists of the allotment of shares in the eligible company?", "Decision": "No. The term 'core technology expenditure' for the purposes of subsection 73B(1) of the ITAA 1936 does not include the acquisition of core technology by an eligible company, where the purchase consideration to acquire the core technology consists of the allotment of shares in the eligible company.", "Facts": "The company is an 'eligible company', and undertakes 'research and development activities' as defined by subsection 73B(1) of the ITAA 1936. These activities were registered with the Industry Research and Development Board under section 39J of the Industry Research and Development (Cth) Act 1986 , for the 2003-04 income year. In the 2003-04 income year, the company entered into an agreement to acquire a patent. The patent is 'core technology' within the meaning of subsection 73B(1AB) of the ITAA 1936, in relation to the particular 'research and development activities' of the company. The consideration given by the eligible company for the patent was an issue of shares in the eligible company to the vendor of the patent. This was a direct exchange under a single agreement. It was not intended, nor was it the case, that the liability to acquire the patent for a particular sum was incurred as a pecuniary liability and subsequently settled by an issue of shares in a separate transaction.", "Reasons_for_Decision": "Summary: Subsection 73B(12A) of the ITAA 1936 states that, Subject to this section, if: there is allowable as a deduction from the company's assessable income of the year of income so much of the amount worked out using the formula in subsection (12B) in respect of that core technology expenditure as does not exceed one-third of the amount of that related research and development expenditure. The company is an eligible company, as defined by subsection 73B(1) of the ITAA 1936, and the agreement to purchase the patent was entered into after 5 pm legal time in the Australian Capital Territory, on 23 July 1996. To meet the requirements of this provision, the company must have incurred 'expenditure' in relation to the core technology consisting of the patent. The question is whether the issue and allotment of shares qualifies as 'expenditure'. In Lowry v. Consolidated African Selection Trust Ltd (1940) AC 648; [1940] 2 All ER 544, the House of Lords held that the issue of shares to a company's employees did not involve the company in any expense for the purpose of its trade. Similarly, in Ord Forrest Pty Ltd v. FC of T [1974] 130 CLR 124; (1974) 4 ATR 230; 74 ATC 4034 the High Court found that an allotment of shares by a company does not involve any conveyance or transfer by the company of property of the company. In Pilmer v. Duke Group Ltd (in liq) (2001) 207 CLR 165 (the Kia Ora case). McHugh, Gummow, Hayne and Callinan JJ said that: If attention is confined to the transaction in which Kia Ora did engage, it gave up, or lost, only the money which it outlaid and the opportunity of turning the shares which it did issue to some other more advantageous use in a different transaction. Otherwise it gave nothing up by issuing and allotting the shares (at CLR 192). . . . The answer to the inquiry [about what Kia Ora gave up or lost because it made the takeover] must be that Kia Ora outlaid cash and whatever may have been the administrative costs of issuing the shares. If a claim had been made, it may well be that some allowance would be made for the consequential effect on its capacity to raise other equity or debt finance. Otherwise, however, it gave up, or lost nothing by the issue of its shares (at CLR 195). Therefore, the expense or outlay involved in issuing and allotting shares comprises only the administrative costs of the issue, and not any value placed upon the shares themselves. A commitment by a company to issue and allot its shares is not itself a commitment to any loss, outgoing or expenditure by the company. Nor does the company incur any loss, outgoing or expenditure when it actually issues and allots the shares. The eligible company issued shares to the vendor in consideration for the acquisition of the relevant core technology. This purchase did not involve any expenditure by the company and so the company cannot be said to have incurred an amount of 'core technology expenditure' as required for a deduction under subsection 73B(12A) of the ITAA 1936. Therefore, no deduction is allowable to the company under that subsection, in respect of the value of the shares issued to acquire the core technology. However, this is not to deny the existence of a valid contract under which the company has issued its shares for consideration in-kind. This is matched by the consideration in-kind (the patents) to be provided by the shareholder. The effect of this transaction, from the perspective of the company, is that it has acquired an asset for consideration.", "Date_of_Decision": "30 August 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(12A) subsection 73B(1) subsection 73B(12C) section 73B section 73B(1AB) section 73BA section 73BB(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research and development expenses Core technology expenses Financial arrangements", "Case_References": "Lowry v. Consolidated African Selection Trust Ltd (1940) AC 648 ([1940] 2 ALL ER 545", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200692", "Unmatched_Content": "Keywords Research and development expenses Core technology expenses Financial arrangements"}
{"ATO_ID_Number": "ATO ID 2006/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: consolidated group - deductibility for head company - expenditure incurred by subsidiary as a corporate trustee", "Issue": "Does subsection 73B(3) of the Income Tax Assessment Act 1936 (ITAA 1936) prevent the head company of a consolidated group from claiming a deduction under section 73B of the ITAA 1936 for research and development expenditure incurred by a subsidiary member of the consolidated group in its capacity as a corporate trustee?", "Decision": "No. Subsection 73B(3) of the ITAA 1936 does not prevent the head company of a consolidated group from claiming a deduction under section 73B of the ITAA 1936 for research and development expenditure incurred by a subsidiary member of the consolidated group in its capacity as a corporate trustee.", "Facts": "In the relevant income year, a company is the head company of a consolidated group for the purposes of Part 3-90 of the Income Tax Assessment Act 1997 (ITAA 1997). The head company is not a corporate trustee or nominee company. The subsidiary members of the consolidated group include a trust and the corporate trustee of the trust. The trust is not a public trading trust for the purposes of Division 6C of the ITAA 1936. The corporate trustee is an eligible company as defined in subsection 73B(1) of the ITAA 1936. In its capacity as trustee of the trust, the corporate trustee carries out eligible research and development activities as defined in subsection 73B(1) of the ITAA 1936 and is registered with the Industry Research and Development Board under section 39J of the Industry Research and Development Act 1986 in relation to those activities in the relevant income year. In its capacity as trustee of the trust, the corporate trustee also incurs research and development expenditure that otherwise meets the relevant requirements for related amounts to be allowable as deductions under section 73B of the ITAA 1936 (apart from subsection 73B(3) of the ITAA 1936) in the relevant income year.", "Reasons_for_Decision": "Summary: One requirement that must be satisfied for a deduction to be allowable under section 73B of the ITAA 1936, is that the claimant must be an 'eligible company', as defined under subsection 73B(1) of the ITAA 1936. Under this provision, an eligible company means a body corporate incorporated under a law of the Commonwealth or of a State or Territory. Subsection 73B(3) of the ITAA 1936 indicates that the reference to the incurring of expenditure by an eligible company in section 73B of the ITAA 1936 does not include reference to expenditure incurred by the company in the capacity of a trustee or nominee. The exception to this rule is where the expenditure is incurred on or after 1 July 1988 in the capacity of a trustee of a public trading trust for the purposes of Division 6C of the ITAA 1936 in relation to the year of income in which the expenditure is incurred. To determine whether subsection 73B(3) of the ITAA 1936 prevents a deduction for the expenditure incurred, it is necessary to consider how the single entity rule impacts on the operation of subsection 73B(3) of the ITAA 1936. Section 701-1 of the ITAA 1997 (the single entity rule) provides that if an entity is a subsidiary member of a consolidated group for any period, it and any other subsidiary member of the group are taken for 'head company core purposes' and 'entity core purposes' to be part of the head company, rather than separate entities during that period. The intended operation of the single entity rule is to apply the income tax laws to a consolidated group as if it were a single entity (being the head company) (see Taxation Ruling TR 2004/11). Therefore, it is the head company that will lodge an income tax return and claim allowable deductions. To determine whether it can claim a deduction for the expenditure in question under section 73B of the ITAA 1936, the head company must consider whether subsection 73B(3) of the ITAA 1936 prevents entitlement to that deduction. For the purposes of subsection 73B(3) of the ITAA 1936, it must be determined whether the expenditure is incurred by a company in the capacity of a trustee or nominee (the public trading trust exception is not relevant in this case). In the relevant income year, the subsidiary members of the consolidated group include the trust and corporate trustee. The single entity rule in section 701-1 of the ITAA 1997 treats the abovementioned subsidiary members as parts of the head company rather than separate entities for the purposes of working out liability for income tax or losses. The head company is deemed to undertake the eligible research and development activities and incur the research and development expenditure, rather than the corporate trustee (in its capacity as trustee), as it does not exist as a separate entity for the relevant income tax purposes in the income year in question. The head company is not a corporate trustee or nominee company. Hence, subsection 73B(3) of the ITAA 1936 does not apply to the head company and therefore, does not prevent it from claiming a deduction under section 73B of the ITAA 1936.", "Date_of_Decision": "10 April 2006", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 73B subsection 73B(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/136 | ATO ID 2006/137 | ATO ID 2006/138", "Subject_References": "Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research and development expenditure Innovation segment LB & I segments Research & development expenses Single entity rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006135", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research and development expenditure Innovation segment LB & I segments Research & development expenses Single entity rule"}
{"ATO_ID_Number": "ATO ID 2006/136", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: consolidated group - effect of single entity rule - R & D activities of subsidiary deemed to be carried out on behalf of head company", "Issue": "Is the effect of the single entity rule (section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997)) such that the head company of a consolidated group is considered to have carried out on its own behalf the research and development activities carried out by or on behalf of its subsidiary member for the purposes of the definition of research and development expenditure, in subsection 73B(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Research and development activities carried out by or on behalf of a subsidiary member of the consolidated group are considered to be carried out by or on behalf of the head company of that group.", "Facts": "In the relevant income year, a company is the head company of a consolidated group for the purposes of Part 3-90 of the ITAA 1997. 'Research and development activities' (as defined in subsection 73B(1) of the ITAA 1936 are carried out by and/or on behalf of a subsidiary member of the consolidated group in the relevant year (the subsidiary member effectively owns the results, controls the conduct and bears the financial risk of the research and development activities undertaken). The subsidiary member was part of the consolidated group for the whole of the relevant income year.", "Reasons_for_Decision": "Summary: 'Research and development expenditure', 'salary expenditure' and 'contracted expenditure' are defined in subsection 73B(1) of the ITAA 1936 (note that research and development expenditure is defined to include salary expenditure and contracted expenditure). Paragraph (c) of the definition of 'research and development expenditure' and the definition of 'salary expenditure' require that the research and development activities are carried out by or on behalf of the eligible company. Similarly, the definition of the term 'contracted expenditure', requires that the research and development activities are carried out on behalf of the eligible company. As the company is the head company of a consolidated group, it is necessary to consider how subsection 73B(1) of the ITAA 1936 applies when affected by the single entity rule. Section 701-1 of the ITAA 1997 (the single entity rule) provides that if an entity is a subsidiary member of a consolidated group for any period, it and any other subsidiary member of the group are taken for 'head company core purposes' and 'entity core purposes' to be part of the head company, rather than separate entities during that period. The intended operation of the single entity rule is to apply the income tax laws to the consolidated group as if it were a single entity (being the head company) (see Taxation Ruling TR 2004/11). The subsidiary member of the consolidated group is treated as part of the head company, rather than as a separate entity for the purposes of working out income tax liability or losses. The single entity rule results in actions and transactions of the subsidiary member (including the carrying out of research and development activities or the engaging of another to carry out research and development activities on the subsidiary member's behalf) being treated as if undertaken by the head company. Therefore, any research and development activities carried out by, or on behalf of the subsidiary member are taken to be carried out by, or on behalf of the head company, as required by the definition of research and development expenditure and associated definitions in subsection 73B(1) of the ITAA 1936.", "Date_of_Decision": "10 April 2006", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/135 | ATO ID 2006/137 | ATO ID 2006/138", "Subject_References": "Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research and development expenditure Innovation segment LB & I segments Research & development expenses Research & development expenses on own behalf Single entity rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006136", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research and development expenditure Innovation segment LB & I segments Research & development expenses Research & development expenses on own behalf Single entity rule"}
{"ATO_ID_Number": "ATO ID 2006/137", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: consolidated group - R & D activities of subsidiary member deemed to be carried out on behalf of head company - not on behalf of another person", "Issue": "Does subsection 73B(9) of the Income Tax Assessment Act 1936 (ITAA 1936), when affected by the single entity rule (section 701-1 of the Income Tax Assessment Act 1997 (ITAA 1997), prevent the head company of a consolidated group from claiming a deduction under section 73B of the ITAA 1936, for expenditure on research and development activities carried out on behalf of a subsidiary member of the consolidated group?", "Decision": "No Research and development activities carried out 'on behalf of' a subsidiary member of the consolidated group are taken to be carried out on behalf of the head company, and not on behalf of any other person, for the purposes of subsection 73B(9) of the ITAA 1936.", "Facts": "In the relevant income year, a company is the head company of a consolidated group for the purposes of Part 3-90 of the ITAA 1997. 'Research and development activities' (as defined in subsection 73B(1) of the ITAA 1936), are carried out by an unrelated entity 'on behalf of' a subsidiary member of the consolidated group (the subsidiary member effectively owns the results, controls the conduct and bears the financial risk of the research and development activities undertaken). The research and development activities are not undertaken on behalf of any other person. The subsidiary member formed part of the consolidated group for the whole of the relevant income year.", "Reasons_for_Decision": "Summary: Subsection 73B(9) of the ITAA 1936 provides that a deduction is not allowable under section 73B of the ITAA 1936 in respect of expenditure incurred by an eligible company for the purpose of carrying on research and development activities 'on behalf of any other person'. Expenditure of that kind is disregarded for the purposes of determining a deduction under section 73B. As the company in question is the head company of a consolidated group, it is necessary to consider how subsection 73B(9) applies when affected by the single entity rule. Section 701-1 of the ITAA 1997 (the single entity rule) provides that if an entity is a subsidiary member of a consolidated group for any period, it and any other subsidiary member of the group are taken for 'head company core purposes' and 'entity core purposes' to be part of the head company, rather than separate entities during that period. The intended operation of the single entity rule is to apply the income tax laws to the consolidated group as if it were a single entity (being the head company) (see Taxation Ruling TR 2004/11). The subsidiary member of the consolidated group is treated as part of the head company, rather than a separate entity for the purposes of working out income tax liability or losses. The single entity rule results in actions and transactions of the subsidiary member (including the carrying out of research and development activities or the engaging of another to carry out research and development activities on the subsidiary member's behalf) being treated as undertaken by the head company. As the subsidiary member is treated as part of the head company rather than as a separate person for the purposes of applying subsection 73B(9) of the ITAA 1936, any research and development activities carried out on behalf of the subsidiary member are not taken to be carried out on behalf of another company. Therefore, subsection 73B(9) of the ITAA 1936 does not prevent the head company from claiming a deduction under section 73B of the ITAA 1936, if the other requirements for claiming such a deduction are met.", "Date_of_Decision": "17 April 2006", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(9)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/135 | ATO ID 2006/136 | ATO ID 2006/138", "Subject_References": "Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research & development expenditure Innovation segment LB & I segments Research & development expenditure on own behalf Research & development expenses Single entity rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006137", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research & development expenditure Innovation segment LB & I segments Research & development expenditure on own behalf Research & development expenses Single entity rule"}
{"ATO_ID_Number": "ATO ID 2006/138", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: consolidated group - R & D activities of two subsidiary members - only one registered", "Issue": "Can the head company of a consolidated group claim deductions under section 73B of the Income Tax Assessment Act 1936 (ITAA 1936) for research and development expenditure incurred by a subsidiary member where the only member of the consolidated group registered in relation to the relevant research and development activities is another subsidiary member?", "Decision": "Yes. The head company can claim a deduction under section 73B of the ITAA 1936 in respect of the research and development expenditure of the subsidiary member.", "Facts": "In the relevant income year, company A is the head company of a consolidated group for the purposes of Part 3-90 of the Income Tax Assessment Act 1997 (ITAA 1997). Company B and company C are 100% controlled subsidiaries of company A and are also subsidiary members of the consolidated group in the relevant income year. Company B and company C are eligible companies as defined in subsection 73B(1) of the ITAA 1936. In the relevant income year, company B and company C are participants in a joint venture, the manager of which carries out eligible research and development activities (as defined under subsection 73B(1) of the ITAA 1936) on their behalf. Apart from the operation of subsection 73B(10) of the ITAA 1936, the expenditure on these activities otherwise meets the relevant requirements for related amounts to be allowable as deductions under section 73B of the ITAA 1936. Only company B is registered with the Industry Research and Development Board under section 39J of the Industry Research and Development Act 1986 (IR&D Act), in relation to the joint venture research and development activities in the relevant income year. The joint venture research and development activities registered under section 39J of the IR&D Act by company B are the same activities on which company C incurred its expenditure.", "Reasons_for_Decision": "Summary: For deductions to be allowable under section 73B of the ITAA 1936, a number of eligibility requirements must be satisfied. These eligibility requirements include that the company is an 'eligible company' and that 'research and development activities' are undertaken and registered with the IR&D Board in accordance with section 39J of the IR&D Act (see subsection 73B(10) of the ITAA 1936). The terms 'eligible company' and 'research and development activities' are defined in subsection 73B(1) of the ITAA 1936. The company must also incur expenditure that is deductible under section 73B of the ITAA 1936 and meet any associated eligibility requirements for that expenditure. It is necessary to consider whether the head company is considered to be an eligible company that is registered for the research and development activities undertaken by company C, as the expenditure meets all other relevant requirements for related amounts to be allowable as deductions under section 73B of the ITAA 1936. Section 73BAB of the ITAA 1936 provides that sections 73B to 73Z of the ITAA 1936 apply to the head company of a consolidated group as if it were an eligible company and were registered under section 39J of the IR&D Act in relation to particular activities during any period that a subsidiary member of the group is an eligible company and is registered for those activities in respect of that year of income. It is important to note that section 73BAB of the ITAA 1936 uses the words 'a subsidiary member'. Further, the wording of the provision also indicates that 'a subsidiary member' must meet both requirements: it must be both an eligible company; and registered under section 39J of the IR&D Act in relation to the research and development activities, for the head company to be taken to meet those requirements for the purposes of section 73B of the ITAA 1936. Although company C is an eligible company, it is not registered for the research and development activities in question. The Macquarie Dictionary (5th Edition) definitions of 'a' include: some; another; one; any. As section 73BAB of the ITAA 1936 uses the words 'a subsidiary member', the head company can consider if any, or another subsidiary member, is an eligible company that is registered under section 39J of the IR&D Act in relation to the same joint venture research and development activities on which company C incurred its research and development expenditure. Company B (another joint venture participant and a member of the consolidated group) is an eligible company that is registered under section 39J of the IR&D Act in respect of the same joint venture research and development activities. Therefore, section 73BAB of the ITAA 1936 applies to the head company as if it is an eligible company that is registered for the joint venture activities under section 39J of the IR&D Act, as these requirements are met by its subsidiary member company B. The expenditure on these activities otherwise meets the relevant requirements for the amounts to be allowable as deductions under section 73B of the ITAA 1936. Therefore in the relevant period, company A (the head company) can deduct under section 73B of the ITAA 1936 expenditure incurred on research and development activities by company C.", "Date_of_Decision": "10 April 2006", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 73B section 73BAB", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/135 | ATO ID 2006/136 | ATO ID 2006/137", "Subject_References": "Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research and development expenditure Innovation segment LB & I segments Research & development expenses Single entity rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006138", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/11 | Keywords Australian Taxation Office Consolidation Consolidation - tax liabilities Deductions & expenses Eligible research and development expenditure Innovation segment LB & I segments Research & development expenses Single entity rule"}
{"ATO_ID_Number": "ATO ID 2006/238", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: unpaid wages", "Issue": "Can an eligible company claim a deduction for certain 'unpaid wages' under subsection 73B(14) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The company cannot claim a deduction under subsection 73B(14) of the ITAA 1936 in respect of the 'unpaid wages' that have not been incurred by the company.", "Facts": "The company is an 'eligible company' which undertakes on its own behalf 'research and development activities', as defined by subsection 73B(1) of the ITAA 1936. The company's 'research and development activities' are registered with the Industry Research and Development Board (IRDB) under section 39J of the Industry Research and Development Act 1986 (IR&D Act), as required by subsection 73B(10) of the ITAA 1936, and the company has an 'R&D Plan' in respect of the relevant income year(s), in accordance with subsection 73B(2BA) of the ITAA 1936. The company has entered into an oral contract for services with an entity, the express terms of which include: Over several years, the entity performed 'research and development activities' for the company in accordance with the oral contract. However, at the end of each week the company determined it could not afford to pay the entity $500 and so paid only $50 per week. To be able to pay the balance the company would require sufficient funds to be able to do so, which it did not have, and it would need to decide that making payment would not jeopardise its operations. The entity accepted the payment of $50 per week and continued to perform its side of the oral agreement. Further, the entity did not make any demand for payment of the 'unpaid wages' of $450 each week and did not otherwise attempt to enforce the payment terms of the oral contract. Neither the company nor the entity sought to bring the oral contract to an end. The company treated the 'unpaid' wages as current liabilities in its books of account. However, at no time was it in a position to pay the 'unpaid wages', as it derived no income and was continually in a loss position.", "Reasons_for_Decision": "Summary: For deductions to be allowable under section 73B of the ITAA 1936, a number of eligibility requirements must be satisfied. These eligibility requirements include that the company is an 'eligible company' and that 'research and development activities' are undertaken and are registered with the IRDB under section 39J of the IR&D Act (see subsection 73B(10) of the ITAA 1936). The terms 'eligible company' and 'research and development activities' are defined in subsection 73B(1) of the ITAA 1936. The company must also incur expenditure that is deductible under section 73B of the ITAA 1936 and meet any associated eligibility requirements for that expenditure. | Detailed Reasoning - Meaning of 'incurred' and 'incurs' in subsections 73B(1) and (14): Taxation Ruling TR 97/7 sets out the general principles which apply in determining whether a particular outgoing has been 'incurred'. Broadly, an outgoing is incurred when you owe a present money debt which you cannot escape. Although an amount need not actually be paid to be 'incurred', it must be a presently existing pecuniary liability to which you are 'definitively committed' and 'completely subjected' in the year of income ( Federal Commissioner of Taxation v. James Flood Pty Ltd (1953) 10 ATD 240 at p 244; (1953) 88 CLR 492 at p 506). It must also be more than 'contingent, pending, threatened or expected', no matter how certain it is in the year of income that the loss or outgoing will be incurred in the future ( Federal Commissioner of Taxation v. James Flood Pty Ltd (supra); Hooker Rex Pty Ltd v. Federal Commissioner of Taxation (1988) 88 ATC 4392 at p 4400; (1988) 19 ATR 1241 at p 1249). See also Merrill Lynch International (Australia) Limited v. Federal Commissioner of Taxation (2001) 113 FCR 79; [2001] FCA 1127. Treating an amount as a liability for accounting purposes is not determinative of whether that amount has been incurred. This is a legal question, answered by referring to the relevant circumstances, including the terms of any relevant contract(s). | Detailed Reasoning - Ascertaining the terms of the oral contract: It is not disputed as between the company and the entity (the parties to the oral contract) that their agreement includes terms to the effect that the entity is to be paid $500 per week to undertake research and development, and that this amount falls due at the end of each week. However, as stated by the High Court in Equuscorp Pty Ltd v. Glengallan Investments Pty Ltd (2005) 218 CLR 471; [2004] HCA 55, it is not the belief or intention of the parties that defines their legal rights and obligations. In construing the oral agreement, all the relevant facts must be looked at objectively in order to identify the terms of the contract ( Re Combined Security Systems & Designs Pty Ltd; Hawthorne v. Harris (Unreported, QG 3026 of 2994, Federal Court of Australia, Drummond J, 28 February 1995); Handbury v. Nolan (1977) 13 ALR 339). In particular, it must be determined from all the relevant evidence and the objective framework of facts whether the agreement includes a term that the sum of $500 per week is owing to the entity at the end of each week ( Codelfa Constructions Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337 at 353). Although there are some factors in support of the contention that $500 per week is owing at the end of each week, it is considered that, in line with the decision in Green v. Wilden Pty Ltd [2005] WASC 83, greater weight should be placed on the subsequent conduct of the parties. This leads to the conclusion that objectively, the relevant terms of the oral contract in the relevant years are: the company was and is only liable for the amounts of salary actually paid ($50 per week) or, in the case of future years, actually to be paid; and the balance said to be owing to the entity ($450 per week) will only be owing if the company concludes that it has sufficient funds to do so, and that making payment will not jeopardise its operations. As it is not a true term of the oral contract between the company and the entity that the amount of $500 is owing at the end of each week, there is no debt at the end of the week for the $450 which has not been paid. Consequently, there is no presently existing liability in respect of the unpaid amounts and they will not be expenses 'incurred' by the company according to the principles set out above. | Detailed Reasoning - Estoppel by convention: In the alternative, where an objective construction of the contract does uphold the payment term asserted, the enforceability of that term may be affected by estoppel by convention. If the entity is estopped from demanding payment of the full amount promised, such that the unpaid amounts are only owing at the election of the company when it determines it has sufficient funds to do so, the liability for the unpaid amounts is contingent. Consequently, such an amount will not be 'incurred' at the end of each week. The principle of estoppel by convention was described by Lord Denning MR in Amalgamated Investment & Property Co. Ltd v. Texas Commerce International Bank [1982] 1 QB 84 at 120 and by Gillard J in Powercor Australia Ltd v. Pacific Power [1999] VSC 110 at [450]-[451]. In general, if parties to a contract put a particular interpretation upon its terms by their course of dealing, and conduct their mutual affairs in reliance upon that interpretation, then they may be bound by their interpretation where it is contrary to the express terms of the contract. | Detailed Reasoning - Conclusion: The unpaid amounts of salary or wages represent at best, only contingent liabilities, and not presently existing liabilities to which the company is definitely committed in the years of income in question. Therefore, the company has not incurred the unpaid salary and a deduction is not available under subsection 73B(14).", "Date_of_Decision": "14 August 2006", "Year_of_Income": "30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(2BA) subsection 73B(10) subsection 73B(14)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 97/7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Incurred Research & development expenses Research & development salary expenditure", "Case_References": "Amalgamated Investment & Property Co. Ltd v. Texas Commerce International Bank [1982] 1 QB 84", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006238", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 97/7 | Keywords Deductions & expenses Incurred Research & development expenses Research & development salary expenditure"}
{"ATO_ID_Number": "ATO ID 2005/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: deductibility of returns on a non-share equity interest under section 73B of the ITAA 1936", "Issue": "Are returns on a non-share equity interest deductible under the research and development provisions contained in section 73B of the Income Tax Assessment Act 1936 (ITAA 1936))?", "Decision": "No. Section 73B of the ITAA 1936 must be read subject to subsection 26-26(1) of the Income Tax Assessment Act 1997 (ITAA 1997) which prevents a deduction on a non-share distribution or a return that has accrued on a non-share equity interest.", "Facts": "The company is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. The company undertakes 'research and development activities' within the meaning of subsection 73B(1) of the ITAA 1936. The company entered into a financing arrangement after 1 July 2001 and has incurred 'interest expenditure' within the meaning of subsection 73B(1) of the ITAA 1936, during the year of income in the financing of research and development activities.", "Reasons_for_Decision": "Summary: Subsection 73B(14A) of the ITAA 1936 provides that if an eligible company incurs interest expenditure during a year of income, the amount of that expenditure is allowable as a deduction from the company's assessable income in the year of income. Subsection 73B(1) of the ITAA 1936, defines 'interest expenditure', for the purposes of subsection 73B(14A) of the ITAA 1936, as interest or an amount in the nature of interest incurred by the company during the year of income in the financing of research and development expenditure. Subsection 26-26(1) of the ITAA 1997, provides that a company cannot deduct under this Act : Subsection 995-1(1) of the ITAA 1997 defines 'this Act' to include the ITAA 1936. Subsection 26-26(1) of the ITAA 1936 essentially prevents any deduction for distributions in respect of a non-share equity interest. Non-share equity interest is defined in section 995-1 of the ITAA 1997 to mean an equity interest in a company that is not solely a share. Subsection 73B(14A) of the ITAA 1936 was introduced in 1996 by the Taxation Laws Amendment Act No. 3 1996 (TLAA No. 3 1996). On the other hand, section 26-26 of the ITAA 1997 was introduced as part of the debt/equity measures contained in the New Business Tax (Debt & Equity) Act 2001 (an Act later than the TLAA No. 3 1996). One of the objects of the debt/equity measures is to deal with the tax treatment of returns on financing arrangements (that is whether they may be frankable or may be deductible) (see subsection 974-10(1) of the ITAA 1997). To give effect to this object, section 26-26 of the ITAA 1997 was one of the provisions inserted to deny a deduction on distributions on financing arrangements that are characterised as equity interests. More importantly, there is nothing to indicate that the research and development provisions (in so far as they deal with the tax treatment of returns on financing arrangements) are to be excluded from the debt/equity measures. Therefore, subsection 73B(14A) of the ITAA 1936 is to be read subject to subsection 26-26(1) of the ITAA 1997. This means that to the extent an 'interest expenditure' as defined in subsection 73B(1) of the ITAA 1936 is also a non-share distribution or a return that has accrued on a non-share equity interest, that amount is not deductible pursuant to subsection 26-26(1) of the ITAA 1997. Subsection 73B(14A) of the ITAA 1936 does not change this outcome.", "Date_of_Decision": "11 February 2005", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(14) subsection 73B(14A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt equity borderline Non-share equity interest Research and development expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200561", "Unmatched_Content": "Keywords Debt equity borderline Non-share equity interest Research and development expenses"}
{"ATO_ID_Number": "ATO ID 2005/358", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: 'Aggregate research and development amount' where core technology expenditure not deducted", "Issue": "Where an eligible company chooses not to deduct an amount of core technology expenditure under subsection 73B (12A) of the Income Tax Assessment Act 1936 (ITAA 1936), is the amount included in the company's 'aggregate research and development amount' as defined in subsection 73B(1) of the ITAA 1936?", "Decision": "Yes. The amount allowable as a deduction under subsections 73B(12) or (12A) of the ITAA 1936 for core technology expenditure is included in the 'aggregate research and development amount' of an eligible company.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. The company incurred expenditure on 'research and development activities' (as defined in subsection 73B(1) of the ITAA 1936) in the year of income Y3 (2 years after the income year Y1 referred to below). The company registered the research and development activities with the Industry, Research and Development Board (the Board) under section 39J of the Industry Research and Development Act 1986 (IR&D Act 1986). The company has an R&D plan that complies with guidelines formulated by the Board under section 39KA of the IR&D Act 1986, as required by subsection 73B(2BA) of the ITAA 1936. The company purchased 'core technology', as defined in subsection 73B(1) of the ITAA 1936, in relation to its registered 'research and development activities', being 'core technology' within the meaning of section 73B(1AB) of the ITAA 1936. The company incurred 'core technology expenditure' as defined in subsection 73B(1) of the ITAA 1936 in the year of income Y1 in relation to the acquisition of that 'core technology'. During the year of income Y3, the company incurred research and development expenditure that was related to the 'core technology'. The company was entitled to claim a deduction in relation to the 'core technology expenditure' under section 73B(12A) of the ITAA 1936 in relation to the year of income Y3. The company did not claim any 'core technology' expenditure in the year of income Y3.", "Reasons_for_Decision": "Summary: Subsection 73B(1) of the ITAA 1936 defines the term 'aggregate research and development amount' to include, in addition to other amounts: Subsection 73B(12A) of the ITAA 1936 allows a deduction for core technology expenditure where an eligible company has incurred core technology expenditure in respect of core technology (the relevant core technology). A deduction is available under this subsection where the expenditure is incurred under a contract entered into at or after 5 pm, by legal time in the Australian Capital Territory, on 23 July 1996, and the company has incurred research and development expenditure that is related to the relevant core technology. The deduction allowable under subsection 73B(12A) of the ITAA 1936 is limited to one third of the related research and development expenditure. During the year of income Y3, the company incurred research and development expenditure that is related to the relevant core technology. Subsection 73B(12A) of the ITAA 1936 entitles the company to a deduction in relation to the 'core technology expenditure' incurred in the year of income Y1 up to one third of the related research and development expenditure. The purpose of the concept of 'aggregate research and development amount' in subsection 73B (1) of the ITAA 1936 is to fix a requirement of a minimum level of the sum of certain types of expenditure that may qualify for deduction (expenditure threshold test). It is also relevant to determining eligibility for tax offset under section 73J of the ITAA 1936. The eligibility for a deduction in relation to the expenditure is being tested prior to any assessment being made. It follows that the elements of the subsection 73B(1) definition of 'aggregate research and development amount', test for the potential for the specified types of expenditure to be deductible (should the other requirements for deductibility be met), rather than testing whether or not they have been deducted. Therefore, although the company chose not to claim a deduction for core technology expenditure, the core technology deduction calculated in accordance with subsection 73B(12A) of the ITAA 1936, is included in the company's 'aggregate research and development amount' in the year of income Y3.", "Date_of_Decision": "17 November 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 73B(1AB) subsection 73B(2BA) subsection 73B(12) subsection 73B(12A) section 73J", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Aggregate research & development amount Deductions & expenses Research & development core technology expenditure Research & development expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005358", "Unmatched_Content": "Keywords Aggregate research & development amount Deductions & expenses Research & development core technology expenditure Research & development expenses"}
{"ATO_ID_Number": "ATO ID 2004/808", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: 'group membership period' and effect of viable business transfer", "Issue": "Is a viable business transfer necessary for an eligible company to claim the research and development additional deduction under section 73Y of the Income Tax Assessment Act 1936 (ITAA 1936), where that company has:", "Decision": "No. An eligible company which has met the eligibility requirements of subsection 73Q(1) of the ITAA 1936, can be eligible to claim the research and development additional deduction under section 73Y of the ITAA 1936 without a viable business transfer, even where it has experienced this change in control.", "Facts": "Company A is an eligible company which undertakes research and development activities in Australia. For the 2003-04 year of income, and for each of the preceding three years of income, Company A has deducted amounts for 'incremental expenditure' under subsection 73B(14) of the ITAA 1936. 'Incremental expenditure' is defined by section 73P of the ITAA 1936. Company A was wholly owned by Company D until 30 April 2004 when it was acquired by Company E. No change to the business of Company A occurred. Company D and Company E are foreign companies which are not liable to tax in Australia. They cannot and do not claim deductions for research and development in Australia. Company A acquired 100% of shares in both Company B1 and Company B2 on 30 June 2003. Both Company B1 and Company B2 are eligible companies and undertake research and development activities in Australia. Both have deducted amounts for 'incremental expenditure' under subsection 73B(14) of the ITAA 1936, for the 2003-04 year of income. The group is not consolidated and does not intend to consolidate.", "Reasons_for_Decision": "Summary: Subsection 73Q(1) of the ITAA 1936 allows an eligible company to deduct an amount under section 73Y of the ITAA 1936, if that company: Company A has deducted amounts for 'incremental expenditure', as defined by section 73P of the ITAA 1936, under subsection 73B(14) of the ITAA 1936, for the 2003-04, 2002-03, 2001-02 and 2000-01 years of income. Company A is therefore eligible to claim the additional deduction under section 73Y of the ITAA 1936. | Detailed Reasoning - Group membership period: Subsection 73R(2) of the ITAA 1936, requires Company A to work out which companies are grouped with it under section 73L of the ITAA 1936, on the last day of the Y 0 year of income (section 73P of the ITAA 1936 provides that Y 0 is the year of income for which an eligible company is working out its assessable income and deductions. Y -1 , Y -2 and Y -3 are, respectively, the three years preceding the Y 0 year of income). Here, the last day of Y 0 is 30 June 2004. At 30 June 2004, Company A was grouped with Company B1, Company B2 and Company E. Company A, Company B1, Company B2 and Company E are therefore 'primary group members'. Note that Company A is itself a primary group member. Company A must also work out the day before the last day of the Y 0 year of income or the first day of the Y -3 year of income (here 1 July 2000), whichever is the later, when any primary group member was controlled by a person other than the person who controlled it on the last day of Y 0 . The period between this day and the last day of the Y 0 year of income is 'that' company's (that is, the company of whom control has changed) 'group membership period'. Control of Company A changed on 30 April 2004 when it was acquired by Company E. As this is the later date, Company A's 'group membership period' is 30 April 2004 to 30 June 2004 (inclusive). Control of Company B1 and Company B2 changed on 30 June 2003 when they were acquired by Company A. However, control of Company B1 and Company B2 also changed again, on 30 April 2004, when Company A was acquired by Company E, so their group membership periods are also 30 April 2004 to 30 June 2004 (inclusive). | Detailed Reasoning - Calculating the additional deduction: Sections 73T to 73V of the ITAA 1936 require a company seeking to claim the additional deduction to calculate its 'R&D spend' for each of the Y 0 , Y -1 , Y -2 and Y -3 years of income. 'R&D spend' is defined by section 73P of the ITAA 1936 as 'the sum of: Paragraph (a) relates to the group membership period of the claimant (that is Company A) whereas paragraph (b) is concerned with the group membership period of the particular other group member (that is, Company B1 or Company B2, as relevant). The R&D Spend for Company A for Y 0 will include only the incremental expenditure it incurred during the portion of its group membership period that falls within the Y 0 year of income. That is, the incremental expenditure incurred from between 30 April 2004 and 30 June 2004. We have called this amount of expenditure 'XA'. To this amount, is added the incremental expenditure of Company B1 and Company B2 incurred during the portion of their respective group membership periods that fall within the Y 0 year of income. We have called these amounts 'XB1' and 'XB2'. The total of 'XA', 'XB1' and 'XB2' equals Company A's R&D spend for the Y 0 year of income. We have called this total amount 'XX'. (There were no intra-group transactions). No part of Company A's group membership period covers the Y -1 , Y -2 or Y -3 years of income. Therefore the amounts included under paragraph (a) of the definition of 'R&D spend' for each of these income years is zero. Similarly, no part of the group membership periods of Company B1 and Company B2 fall within the Y -1 , Y -2 and Y -3 years of income, so the amounts included in Company A's 'R&D spend' under paragraph (b) of the definition in section 73P of the ITAA 1936, for each of these years is also zero. R&D Spend for Company A is therefore: Section 73W of the ITAA 1936 provides that the premium amount is based on the excess of the current year R&D Spend over the average R&D Spend for the previous three years, less any adjustment where annual incremental expenditure during the three year history fluctuated by more than 20%. Under subsection 73X(1) of the ITAA 1936 the premium amount will only be distributed between group members who increased the incremental expenditure incurred during their individual group membership period for the Y 0 year of income above the level of incremental expenditure incurred during their individual group membership period for the Y -1 year. These group members are called 'increasing members'. Company A incurred an amount of incremental expenditure ($XP) in the Y 0 year of income during its group membership period. However, as Company A's group membership period is 30 April 2004 to 30 June 2004, Company A has incurred nil incremental expenditure during its group membership period for the Y -1 year. Company A is therefore an 'increasing member' and can claim a deduction under section 73Y of the ITAA 1936 for the amount worked out under subsection 73Y(2) of the ITAA 1936. Company A's entitlement to this deduction arises without there having been any written agreement concerning it becoming a group member with a viable business ('a viable business transfer' agreement), for the purposes of subsection 73R(4) and subsection 73R(5) of the ITAA 1936.", "Date_of_Decision": "16 September 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73Q(1) section 73B section 73P section 73R section 73T section 73U section 73V section 73X section 73Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research and development expenses Research and development additional deduction Viable business transfer", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004808", "Unmatched_Content": "Keywords Research and development expenses Research and development additional deduction Viable business transfer"}
{"ATO_ID_Number": "ATO ID 2008/115", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Eligibility for Tax Offset: R&D tax offset and exempt entity ownership exception", "Issue": "Does the exception in subsection 73J(2) of the Income Tax Assessment Act 1936 (ITAA 1936) apply, to prevent an eligible company choosing the tax offset under section 73I of the ITAA 1936, where the less than 25% exempt entity ownership requirement may not be breached if actual and potential future interests are taken into account?", "Decision": "Yes. The exception in subsection 73J(2) of the ITAA 1936 applies if the interests actually owned, by an entity or entities referred to in the subsection, carry at least 25% of the voting power in the eligible company or the right to receive at least 25% of a distribution of income or capital by the eligible company. It does not matter that the less than 25% requirement may not be breached if both actual and potential future interests are taken account of.", "Facts": "Company A is an eligible company which undertakes research and development (R&D) activities in Australia. All the conditions for Company A to be able to claim the R&D tax offset in section 73I of the ITAA 1936 are satisfied, other than the exception in subsection 73J(2) of the ITAA 1936. For the 'tax offset year' in question (refer subsection 73I(1) of the ITAA 1936), Company B (an affiliate of an exempt entity for the purposes of subsection 73J(2) of the ITAA 1936), legally owns shares in Company A. These shares carry 27% of the voting power in Company A and the right to receive that same percentage of a distribution of income or capital by Company A. Company A has issued to Company B and other entities, a number of convertible notes in Company A. These other entities are neither exempt entities nor affiliates of any exempt entity. The convertible notes give the holders the right to acquire shares in Company A in certain circumstances, but they do not carry any voting rights in Company A or rights to a distribution of income or capital by Company A. Both the existing shares and any shares to be acquired on conversion of the notes, are, or will be, 'interests' in Company A for the purposes of subsection 73J(2) of the ITAA 1936. If a certain number of the convertible notes held by entities other than Company B are converted into shares, the voting power and the right to distributions of income or capital owned by Company B will fall below the 25% condition in subsection 73J(2) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subsection 73J(2) of the ITAA 1936 prevents an eligible company from choosing the tax offset, instead of a deduction, under section 73I of the ITAA 1936, if an exempt entity, the affiliates of an exempt entity, an exempt entity together with its affiliates, or two or more exempt entities, at any time during the tax offset year, legally or beneficially own, or have the right to acquire, the legal or beneficial ownership of: In the case in question an affiliate of an exempt entity, Company B, legally owns shares in the eligible company, Company A, which carry the rights described in subsection 73J(2) of the ITAA 1936. However, Company A has also issued convertible notes carrying the right to acquire shares in it to Company B and other entities. If Company B's present interests and its possible acquisition of interests in the future in Company A are taken together, they may not carry between them at least 25% of the voting power in the company or the right to receive at least 25% of any distribution of income or capital by Company A. This is on the presumption that the other holders of the convertible notes convert them into shares and so dilute the shareholding of Company B below the 25% limit. The question of whether subsection 73J(2) of the ITAA 1936 applies in such a case requires an examination of the purpose and context of the provision. Subsection 73J(2) of the ITAA 1936 applies where the relevant affiliate 'legally or beneficially owns', or 'has the right to acquire', the relevant interests. The provision therefore has two limbs, which represent two alternatives. The first limb looks at present interests in the eligible company while the second limb is concerned with the possible acquisition of interests in the future. If the relevant affiliate has interests which fall within the first limb of the exception, it will not be necessary to consider the second limb. Conversely, if the first limb is not satisfied, the second limb of the subsection may still apply, to prevent the eligible company from choosing the R&D tax offset. This interpretation supports the purpose of the provision, which is to prevent an eligible company from being able to choose the tax offset if an exempt entity, or affiliate of an exempt entity, legally or beneficially own interests in the company of the prescribed type, or legally or beneficially owns rights to acquire such interests. An alternative interpretation is that in subsection 73J(2) of the ITAA 1936, the word 'or', as used the second time in the expression, 'legally or beneficially own or have the right to acquire', means 'or, as well' (see for example, Minister for Immigration and Ethnic Affairs v. Baker (1997) 73 FCR 187 at 194-5). For present purposes it is not necessary to decide this point as it does not affect the decision. The R&D tax offset is intended to provide a tax concession to eligible small companies, by enabling them to 'cash out' their otherwise deductible R&D expenditure (refer to paragraphs 5.4 and 5.5 of the Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Bill 2001). However, some of these small companies may be owned by exempt entities, such as universities or other tax exempt research bodies, and/or their affiliates. These entities not only receive the benefit of being tax exempt, but may also receive other forms of government support. The purpose of subsection 73J(2) of the ITAA 1936 is to prevent such exempt entities from benefiting from ownership of an eligible company which might otherwise be able to claim the R&D tax offset. An alternative view of subsection 73J(2) of the ITAA 1936 is that when deciding whether it applies it is necessary to take account of both the interests actually held in the eligible company and those which might be acquired in the future. Testing of whether the less than 25% requirement is met then takes place in relation to the sum of both types of interests. This view is not accepted. The preferred construction of subsection 73J(2) of the ITAA 1936 is one that supports the purpose of the exception and does not allow that purpose to be defeated by granting rights to non exempt persons which might never be exercised. In this case there is an affiliate of an exempt entity which actually owns interests in the eligible company which come within the first limb of the exception. It is not necessary to consider the operation of the second limb. As the first limb is satisfied, subsection 73J(2) of the ITAA 1936 applies to prevent Company A from choosing the tax offset under section 73I of the ITAA 1936.", "Date_of_Decision": "5 August 2008", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 73I subsection 73J(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/660 | ATO ID 2003/895 | ATO ID 2005/23", "Subject_References": "Research & development tax offset Grouped entities for research and development Grouped taxpayers for R&D - control", "Case_References": "Minister for Immigration and Ethnic Affairs v. Baker (1997) 73 FCR 187 153 ALR 463", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008115", "Unmatched_Content": "Keywords Research & development tax offset Grouped entities for research and development Grouped taxpayers for R&D - control"}
{"ATO_ID_Number": "ATO ID 2005/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development Tax Offset: legal ownership of interests in a company by an exempt entity", "Issue": "Does an exempt entity legally own interests in a company within the meaning of subsection 73J(2) of the Income Tax Assessment Act 1936 (ITAA 1936), where the Corporations Act 2001 requirements for membership of a company have not been met?", "Decision": "No. The exception in subsection 73J(2) of the ITAA 1936 will not operate to preclude a company from choosing a tax offset under section 73I of the ITAA 1936 where the exempt entity is not a member of the company under the Corporations Act.", "Facts": "Section 231 of the Corporations Act states that a person is a member of a company if they are a member of the company on its registration. Under section 120 of the Corporations Act, a person becomes a member of a company on registration if the person is specified in the application with their consent as a proposed member of the company. Section 175 of the Corporations Act, provides that a register of members kept under section 168 of the Corporations Act, is only evidence of the matters contained in it, in the absence of evidence to the contrary. On the company's Application for registration as an Australian company, lodged with the Australian Securities and Investment Commission (ASIC), an exempt entity was included as member of the company, with an interest totalling more than 25% of shares in the company. The exempt entity was also recorded as a member of the company in its register of members kept under the Corporations Act. The company is an eligible company within the definition in subsection 73B(1) of the ITAA 1936. It incurred research and development expenditure during the year of income and satisfied the eligibility requirements of subsection 73J(1) of the ITAA 1936. The exempt entity had not at any time consented to become a member of the company, and nor had it authorised any payment from its own funds as consideration for the shares registered in its name.", "Reasons_for_Decision": "Summary: Section 73J of the ITAA 1936 provides that an eligible company will be eligible to choose a tax offset instead of a deduction for research and development expenditure if it satisfies the requirements of subsection 73J(1) of the ITAA 1936. However, even though the requirements of subsection 73J(1) of the ITAA 1936 may be satisfied, subsection 73J(2) of the ITAA 1936 prevents an eligible company from choosing the tax offset for the relevant year, if an exempt entity, the affiliates of an exempt entity, an exempt entity together with its affiliates, or two or more exempt entities, at any time during the tax offset year, legally or beneficially own, or have the right to acquire, the legal or beneficial ownership of: For the purpose of subsection 73J(2) of the ITAA 1936, 'interest' is used in the ordinary sense to denote 'a legal concern, title or right (in property)'. To fall within the exception, the relevant entity or entities must 'legally or beneficially own . . .' the prescribed interests. In this case those interests are the shares in the eligible company. Legal owners of shares in a company are referred to as 'members' under the Corporations Act. Under section 231 of the Corporations Act, a person is member of a company if they are a member of the company on its registration. Section 120 of the Corporations Act provides that a person becomes a member of a company on registration if the person is specified in the application with their consent as a proposed member of the company. (emphasis added) Under section 176 of the Corporations Act, in the absence of evidence to the contrary, a register kept under section 168 of the Corporations Act, is proof of the matters shown in the register. The exempt entity was specified in the company's Application for registration as a member holding more than the 25% stipulated by subsection 73J(2) of the ITAA 1936. The contemporaneous register of members also shows the exempt entity as the legal owner of more than 25% of shares in the company. However, the exempt entity had not consented to become a member of the company. Therefore, sections 231 and 120 of the Corporations Act did not operate to make the exempt entity a member of the company upon registration. Therefore, at the relevant times, the exempt entity did not legally own a relevant interest in the company for the purposes of subsection 73J(2) of the ITAA 1936. On the facts there is also no basis on which to conclude that any exempt entity beneficially owned any such relevant interests. Subsection 73J(2) of the ITAA 1936 therefore, does not preclude the eligible company from claiming the research and development tax offset.", "Date_of_Decision": "17 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 73I section 73J", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deductions & expenses Research & development expenses R&D tax offset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200523", "Unmatched_Content": "Keywords Deductions & expenses Research & development expenses R&D tax offset"}
{"ATO_ID_Number": "ATO ID 2005/86", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development Tax Offset: 'R&D group turnover' where ownership of interests in an eligible company by an entity in capacity as trustee", "Issue": "Where an eligible company is controlled by a person in a capacity as trustee, is the 'value of supplies' made by this person, as defined by subsection 73H(2) of the Income Tax Assessment Act 1936 (ITAA 1936), based only on those supplies made by it as trustee?", "Decision": "Yes. The 'value of supplies' made by the person in its capacity as trustee, to be included in the 'R&D group turnover' of the eligible company under section 73K of the ITAA 1936, is based only on those supplies made by this person as trustee of the relevant trust estate.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936, and is an Australian company limited by shares. Trustee Company owns interests in the eligible company which carry the right to receive more than 50% of distributions of income or capital by the eligible company. Trustee Company is a wholly owned subsidiary of Parent, and also a trustee of a unit trust. Under the terms of the trust deed, no unit holder has any rights in relation to the voting power of the eligible company, nor does any unit holder have any right with regard to distributions of income or capital by the eligible company. The unit trust has not made any distributions in the last four years of income and no person(s) otherwise control the trust estate within the meaning of subsection 73L(4) of the ITAA 1936. The eligible company does not own interests in any company under subsection 73L(3) of the ITAA 1936 and does not control any trust estate or partnership under subsections 73L(3), 73L(4) or 73L(5) of the ITAA 1936. Nor is the eligible company affiliated with any person(s) under section 73M of the ITAA 1936.", "Reasons_for_Decision": "Summary: In addition to the other eligibility criteria set out in section 73J of the ITAA 1936, paragraph 73J(1)(d) of the ITAA 1936 states that an eligible company is eligible to choose the tax offset for the tax offset year, being the 2003-04 income year, if the R&D group turnover of the company for that year is less than $5,000,000. 'R&D group turnover' is defined by section 73K of the ITAA 1936, as the sum of: (a) the value of supplies the company made in the year of income; and (b) the value of supplies made in the year of income by other persons while they were grouped with the company; 'Value of supplies' is defined in section 73H of the ITAA 1936. Section 73L of the ITAA 1936 determines whether a person is grouped with another person, for the purposes of paragraph (d) of subsection 73J(1) of the ITAA 1936 and section 73K of the ITAA 1936. Under subsection 73L(1) of the ITAA 1936, a person is grouped with another person at a time in a year of income if, at that time: The eligible company does not own any interests in any other person within the meaning of subsection 73L(3) of the ITAA 1936. Nor does it control any trust estate or partnership under subsections 73L(3), 73L(4) or 73L(5) of the ITAA 1936. Further, the eligible company is not an affiliate of any person under section 73M of the ITAA 1936. The question therefore is to determine whether any person controls the eligible company under subsection 73L(3) of the ITAA 1936. Subsection 73L(3) of the ITAA 1936 states that: A person controls another person if the first person, or the first person together with the first person's affiliates: (a) legally or beneficially own, or have the right to acquire the legal or beneficial ownership of, interests in the other person that carry between them the right to receive more than 50% of any distribution of income or capital by the other person; or (b) if the other person is a company - legally or beneficially own or have the right to acquire the legal or beneficial ownership of, interests in the company that carry between them the right to exercise or control the exercise of, more than 50% of the voting power in the company. Under the terms of the trust deed, no unit holder has any rights in relation to the voting power of the eligible company, nor does any unit holder have any rights with regard to distributions of income or capital by the eligible company. Trustee Company does own relevant interests concerning the eligible company and is therefore the relevant person for the purposes of subsection 73L(3) of the ITAA 1936. Under this subsection Trustee Company does control the eligible company as its ownership of these interests entitles it to greater than the required percentage of distributions of income or capital by the eligible company. However, the question of whose turnover should be included for the purposes of section 73K of the ITAA 1936 remains. Trustee Company owns the relevant interests in the eligible company as trustee of the unit trust and not in any private or other capacity. For that reason, the value of supplies relevant for section 73K of the ITAA 1997 purposes are those made by Trustee Company as trustee for the unit trust. It is therefore the value of supplies of the unit trust made by Trustee Company as trustee, that is included in the R&D group turnover of the eligible company. The value of supplies made by Trustee Company in any capacity other than as trustee for the unit trust is not relevant here. A further step is to determine whether any other person is grouped with Trustee Company as trustee of the unit trust, so as to affect the calculation of the eligible company's 'R&D group turnover'. That is, whether any other person controls or is otherwise grouped with the unit trust. On the facts, no other person is grouped with the unit trust under subsection 73L(4) of the ITAA 1936 and Trustee Company does not control the unit trust under subsection 73L(4) of the ITAA 1936. Therefore, the value of supplies made by Parent will not be included in the eligible company's 'R&D Group turnover'. In conclusion, the 'R&D group turnover' of the eligible company, is the sum of the value of supplies made by it together with the value of supplies made by Trustee Company as trustee of the unit trust.", "Date_of_Decision": "14 March 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 73J(1)(d) section 73H section 73K section 73L", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Grouped entities for research and development Grouped taxpayers for R&D - control Research & development group turnover Research & development tax offset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200586", "Unmatched_Content": "Reasons for Decision: reduced by [not presently relevant]: | Keywords Grouped entities for research and development Grouped taxpayers for R&D - control Research & development group turnover Research & development tax offset"}
{"ATO_ID_Number": "ATO ID 2005/152", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: group membership period under section 73R of the ITAA 1936", "Issue": "Where a company, now controlled by a person under section 73L of the Income Tax Assessment Act 1936 (ITAA 1936), was previously not controlled by any person within the meaning of that section, has there been change in control of the company for the purposes of paragraph 73R(2)(a) of the ITAA 1936?", "Decision": "Yes. Where a company, now controlled by a person under section 73L of the ITAA 1936, was previously not controlled by any person within the meaning of that section, there has been change in control for the purposes of paragraph 73R(2)(a) of the ITAA 1936.", "Facts": "Company S is an Australian company, which can deduct an amount for 'incremental expenditure' (as defined by section 73P of the ITAA 1936) under subsection 73B(13) or 73B(14) of the ITAA 1936 for the 2003-04 year of income, and has deducted an amount for incremental expenditure under one or both of those subsections for each of the preceding three years. Company S has been a wholly owned subsidiary of company B since 1 July 2003. Previously, company S was 50% owned by company B and 50% owned by company A. Company A and company B were not affiliates of each other within the meaning of section 73M of the ITAA 1936 at any of the relevant times. Prior to becoming a wholly owned subsidiary of company B, company S was not grouped with company A or company B under section 73L of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 73R of the ITAA 1936 sets out the rules for determining whether an eligible company that has deducted or can deduct an amount under subsection 73B(13) or 73B(14) of the ITAA 1936 is a group member in relation to another company that has deducted or can deduct such an amount, and their respective group membership periods. The steps set out in the method statement contained in section 73R of the ITAA 1936 must be undertaken for each eligible company working out its additional deduction under section 73Y of the ITAA 1936. Step 2 of the method statement states: Work out the day before the last day of the Y 0 year of income, or the first day of the Y -3 year of income, whichever is the later, when a company that is a primary group member: (a) was controlled, as mentioned in section 73L, by a person other than a person who controlled it as at the last day of the Y 0 year of income; or (b) acted, or could be expected to act, in accordance with the directions or wishes of a person other than a person in accordance with whose directions or wishes it acted, or could be expected to act, as at the last day of the Y 0 year of income. The question is what is meant by the phrase in paragraph 73R(2)(a) of the ITAA 1936, 'was controlled, as mentioned in section 73L, by a person other than a person who controlled [the company] as at the [relevant day]'. Paragraph 4.17 of the Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Bill 2001 (Explanatory Memorandum) says: Step 2 . . . determines the group membership period of the primary group members. The primary group members group membership period extends from the day their control changed which caused them to come into the group to the last day of the income year. The group membership period will not commence before the first day of the income year 3 years before the current income year. Section 73R of the ITAA 1936 clearly operates where a company was, at all relevant times, controlled by a person or persons under section 73L of the ITAA 1936. However, on a literal interpretation, the words used would not recognize a change in control where, previously, no person(s) controlled the company within the meaning of section 73L of the ITAA 1936. However, paragraph 4.17 of the Explanatory Memorandum indicates that the day upon which the company came into the group of which it was a member of the last day of the Y 0 year of income, was envisaged as defining the group membership period. Further, where a company was not previously controlled by any person(s), it cannot be said that the person who controlled the company on the last day of the Y 0 year of income, controlled the company for the whole of the relevant period. A literal interpretation of subsection 73R(2) of the ITAA 1936, would suggest that though there has been a 'change in control' of the company (in terms of its group as determined under section 73L of the ITAA 1936), its group membership period would nevertheless be the maximum that the subsection allows for, that is, four years. Such an interpretation would defeat the purpose of the provision, being to recognize the start of the group membership period as the time that a relevant change of control occurs, even if no person or persons previously controlled the company under section 73L of the ITAA 1936. Here, there has been a change in control causing the company to come into the group of which it was a member on the last day of the Y 0 year of income. Further, this type of change is envisaged by paragraph 4.17 of the Explanatory Memorandum. On this basis, paragraph 73R(2)(a) of the ITAA 1936 is interpreted to apply where a change in control is the result of a company not controlled by any person within the meaning of section 73L of the ITAA 1936, coming under a person(s) control. Therefore, the group membership period of company S is the period between the day upon which the company commenced to be controlled under section 73L of the ITAA 1936 (by the person who controlled it on the last day of the Y 0 year of income) and the last day of the Y 0 year of income.", "Date_of_Decision": "23 May 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 73L section 73R subsection 73R(2) paragraph 73R(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/808", "Subject_References": "Research & development expenses Grouped entities for research and development", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005152", "Unmatched_Content": "The period between this day and the last day of the Y 0 year of income is that company's group membership period. | Keywords Research & development expenses Grouped entities for research and development"}
{"ATO_ID_Number": "ATO ID 2004/701", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: 'R&D group turnover' - value of supplies made in the year of income - contract for provision of services", "Issue": "What amounts are included in the 'value of supplies' under paragraph 73K(1)(b) of the definition of 'R&D group turnover', in the Income Tax Assessment Act 1936 (ITAA 1936), for a year of income, for a company that has entered into an agreement for the provision of services over a number of years of income, where no precise portion of the consideration expressly relates to services provided in a specific year of income?", "Decision": "The amount to be included in the 'value of supplies' under paragraph 73K(1)(b) of the definition of 'R&D group turnover', in the ITAA 1936, depends on making a reasonable estimate of that portion of the consideration related to the supplies, made under the agreement for the relevant year of income.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. It undertook 'research and development activities' (as defined in subsection 73B(1) of the ITAA 1936) in the relevant year of income. The eligible company incurred expenditure on these activities. The eligible company was grouped with another company in the manner described in section 73L of the ITAA 1936 during the relevant year of income. Under section 73K of the ITAA 1936, when determining its' 'R&D group turnover', the eligible company was required to include 'the value of supplies made in the year of income by other persons while they were grouped with the company'. In the relevant year of income, the company grouped with the eligible company in the manner described in section 73L of the ITAA 1936, provided mortgage brokering services, including originating and managing mortgages, dealing with general client enquiries, monitoring client loans and discharging loans. These services were provided over a number of years and the total consideration for the services in the agreement was specified as a single amount. The agreement did not specify individual amounts of consideration for the services supplied for each year of the agreement. Further, the obligation to pay this single amount of consideration was to be discharged by the other party making regular payments. However, these payments were set on a purely arbitrary basis, and did not represent what the consideration would have been if the agreement had been only for the year of income in question.", "Reasons_for_Decision": "Summary: Section 73I of the ITAA 1936 provides that an eligible company can choose a tax offset rather than a deduction for research and development expenditure. Section 73J of the ITAA 1936 provides that an eligible company can only choose the tax offset if: 'R&D group turnover' of an eligible company for a year of income is defined in section 73K of the ITAA 1936 and subsection 73K(1) of the ITAA 1936 provides that it is the sum of: 'Value of the supplies' is defined in subsection 73H(2) of the ITAA 1936 according to whether the supplies are 'taxable supplies' or 'other' supplies, made during the year in the course of carrying on a business or in the course of carrying on research and development activities. The definition draws on the concepts of value of taxable supplies and prices, as defined by section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). However, common to both of these concepts is that of consideration, as defined in subsection 9-15(1) of the GST Act. The agreement entered into by the company grouped with the eligible company for R&D purposes did not tie any specific fee, or any portion of any such fee, to any specific service or function to be performed by the company under the agreement. The timing and payment of consideration provided for services under the agreement was not determinative of when a supply was made for the purposes of determining the 'value of supplies made' for the calculation of the eligible company's 'R&D group turnover'. In Roadshow Distributors Pty Ltd v. Commissioner of State Revenue (Vic) 1 VR 523; 97 ATC 4271; 35 ATR 376 Tadgell JA considered apportionment of consideration due under particular distribution agreements was required, in order to properly apply certain stamp duty provisions. By way of obiter, his Honour indicated that making a reasonable estimate on sensible commercial grounds would be an appropriate basis of apportionment. Accordingly, in this case a reasonable estimate on sensible commercial grounds, of the portion of the total consideration related only to those services provided in the year of income in question, is required. It is this amount that is used in calculating the 'R&D group turnover' under section 73K of the ITAA 1936 for the purposes of determining the eligible company's entitlement to the research and development tax offset under section 73J of the ITAA 1936.", "Date_of_Decision": "19 July 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 73B subsection 73B(1) section 73BA section 73BH section 73L section 73K subsection 73K(1) paragraph 73K(1)(b) section 73I section 73J section 73Y subsection 73H(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/343 | ATO ID 2004/702 | ATO ID 2004/703", "Subject_References": "Research and Development Expenses R&D Tax Offset R&D Group Turnover", "Case_References": "Roadshow Distributors Pty Ltd v. Commissioner of State Revenue (Vic) [1998] 1 VR 523 97 ATC 4271 35 ATR 376", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004701", "Unmatched_Content": "Keywords Research and Development Expenses R&D Tax Offset R&D Group Turnover"}
{"ATO_ID_Number": "ATO ID 2004/702", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: 'R&D group turnover' - value of supplies made in the year of income - interest payments", "Issue": "In calculating the 'value of supplies' under paragraph 73K(1)(b) of the definition of 'R&D group turnover', in the Income Tax Assessment Act 1936 (ITAA 1936), for a company that conducts business as a lender, are amounts of interest in respect of loans that were settled in a prior year of income, as well as interest in respect of loans that were settled in the current year of income, included?", "Decision": "Yes. The 'value of supplies' under paragraph 73K(1)(b) of the definition of 'R&D group turnover' in the ITAA 1936, for the relevant year of income, includes the amount of interest receivable by the company on all outstanding loans, regardless of when those loans were written.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. It undertook 'research and development activities' (as defined in subsection 73B(1) of the ITAA 1936) in the 2003 year of income. The eligible company incurred expenditure on these activities. The eligible company was grouped with another company in the manner described in section 73L of the ITAA 1936 during the relevant year of income. Under section 73K of the ITAA 1936, when determining its' 'R&D group turnover', the eligible company was required to include 'the value of supplies made in the year of income by other persons while they were grouped with the company'. In the relevant year of income, the company grouped with the eligible company in the manner described in section 73L of the ITAA 1936, acted as a lender providing mortgage loans. During the relevant year of income, the company grouped with the eligible company received, on a monthly basis, interest payments from borrowers in respect of Settled Loans that were written both during the relevant income year, and during earlier years of income, that were not discharged.", "Reasons_for_Decision": "Summary: Section 73I of the ITAA 1936 provides that an eligible company can choose a tax offset rather than a deduction for research and development expenditure. Section 73J of the ITAA 1936 provides that an eligible company can only choose the tax offset if: 'R&D group turnover' of an eligible company for a year of income is defined in section 73K of the ITAA 1936 and subsection 73K(1) of the ITAA 1936 provides that it is the sum of: 'Value of the supplies' is defined in subsection 73H(2) of the ITAA 1936 as including supplies (both taxable and other) made during the year in the course of carrying on a business or in the course of carrying on research and development activities. The value of taxable supplies and prices of other supplies are as defined by section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Section 40-5 of the GST Act provides that a financial supply is input taxed, and that the meaning of what is a financial supply is covered in the regulations. Financial supplies are not taxable supplies, and will thus, be 'other supplies', for the purposes of section 73K of the ITAA 1936. Regulation 40-5.09 of the GST Act provides the criteria for a financial supply, including that there be either a provision, acquisition or disposal of an interest mentioned in either subregulation (3) or (4). Item 2 in subregulation (3) specifies that a relevant interest will be 'An interest in or under ... a debt, credit arrangement or right to credit, including a letter of credit'. 'Credit arrangement' is not defined in either the GST Act or the GST Regulations. The Commissioner's view of a 'financial supply' is outlined in Goods and Services Tax Ruling GSTR 2002/2. Paragraphs 37 to 42 of that ruling discuss what will be consideration relating to a loan. Paragraph 37 of GSTR 2002/2 says: When an entity borrows money from a lender on terms that include payment of interest, it creates an interest in a debt that includes the payment of interest. The lender creates and supplies an interest in a credit arrangement. ... (emphasis added) Schedule 2 to GSTR 2002/2 sets out certain details pertaining to financial interests and related supplies by financial supply providers and financial supply facilitators. Note 1 to this Schedule states: Fees, charges and payments received or charged for a supply are generally regarded as consideration (or part of the consideration) for a financial supply rather than a financial supply themselves. For example, interest payable on money loan or deposited is generally regarded as part of the consideration for the use of money (a debt). (emphasis added) Subsection 73K(3) of the ITAA 1936, provides that the face value of the debt representing the amount borrowed, being, the loan 'principal', is disregarded for the purposes of calculating the R&D group turnover. Notwithstanding that the relevant GST regulations appear to identify the provision of a financial supply as a one-off event, they do not rule out the possibility that allowing a borrower to participate in a credit arrangement, can be a provision of an interest to that borrower on an ongoing basis. Therefore, for the purposes of section 73K of the ITAA 1936 and the meaning of 'R&D group turnover', the relevant supply is both made at the start of the loan agreement and continues to be made until that agreement ends. In accordance with section 73K of the ITAA 1936 and the section 73H of the ITAA 1936 definition of the value of the supplies, in this case the interest accrued on loans outstanding for a year of income, is the relevant amount that is included in 'R&D group turnover', irrespective of when the loans were first entered into. The supply is the ongoing use of the money lent to the borrowers, and the interest received by the company grouped with the eligible company represents consideration for these continual supplies, reflecting the ongoing nature of the supplies being made. The ongoing supplies are to be distinguished from the initial provision of those monies at the time at which the credit arrangement is entered into. Accordingly, the 'value of supplies made' under section 73K of the ITAA 1936 by the other company in the relevant year of income, includes the interest accrued on loans outstanding for the relevant year of income, irrespective of when the loans were entered into by this company. It is this amount that is used in calculating the 'R&D group turnover' under section 73K of the ITAA 1936 for the purposes of determining the eligible company's entitlement to the research and development tax offset under section 73J of the ITAA 1936. Paragraph 73K(3)(b) of the ITAA 1936 provides that 'R&D group turnover' will not include any repayment of principal in relation to supplies constituted by loans.", "Date_of_Decision": "19 July 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 73K subsection 73K(1) subsection 73K(3) paragraph 73K(1)(b) paragraph 73K(3)(b) section 73B subsection 73B(1) section 73I section 73J section 73L section 73BA section 73BH section 73Y section 73H subsection 73H(2)", "Related_Public_Rulings_and_Determinations": "Goods and Services Tax Ruling GSTR 2002/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/343 | ATO ID 2004/701 | ATO ID 2004/703", "Subject_References": "Research and Development Expenses R&D group turnover R&D Tax Offset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004702", "Unmatched_Content": "A comparison table which provides the replacement provisions in the A New Tax System (Goods and Services Tax) Regulations 2019 for regulations which are referenced in this ATO ID is available. | Related Public Rulings (including Determinations) Goods and Services Tax Ruling GSTR 2002/2 | Keywords Research and Development Expenses R&D group turnover R&D Tax Offset"}
{"ATO_ID_Number": "ATO ID 2004/703", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: 'R&D group turnover' - supplies made in the course of carrying on business", "Issue": "In calculating the 'value of supplies' under paragraph 73K(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936) of the definition of 'R&D group turnover', for a company that has carried on a business of acting as a lender in providing mortgage loans, is the amount received for the assignment of its loan portfolio a supply made 'in the course of carrying on a business' in the terms of the definition of 'value of supplies' in sub-section 73H(2) of the ITAA 1936?", "Decision": "No. The assignment agreement entered into by the company was a special circumstance or unusual event and was not within 'the course of carrying on a business' in terms of the definition of 'value of supplies' in subsection 73H(2) of the ITAA 1936.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. It undertook 'research and development activities' (as defined in subsection 73B(1) of the ITAA 1936) in the relevant year of income. The eligible company incurred expenditure on these activities. The eligible company was grouped with another company in the manner described in section 73L of the ITAA 1936 during the relevant year of income. Under section 73K of the ITAA 1936, when determining its' 'R&D group turnover', the eligible company was required to include 'the value of supplies made in the year of income by other persons while they were grouped with the company'. In the relevant year of income, the company grouped with the eligible company in the manner described in section 73L of the ITAA 1936, acted as a lender providing mortgage loans. During the relevant year of income, as a result of unilateral actions taken by a third party, the company grouped with the eligible company ceased to provide loans, and entered into an agreement to assign the entire loan portfolio of undischarged mortgages. Consideration was received by the company grouped with the eligible company as a result of assigning the loan portfolio during the relevant year of income.", "Reasons_for_Decision": "Summary: Subsection 73K(1) of the ITAA 1936, provides that the 'R&D group turnover' of an eligible company for a year of income is the sum of: 'Value of the supplies' is defined in subsection 73H(2) of the ITAA 1936 as including supplies (both taxable and other) made during the year in the course of carrying on a business or in the course of carrying on research and development activities. The value of taxable supplies and prices of other supplies are as defined by section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The 'R&D group turnover' rules are substantially based on those found in Subdivision 328-F of the Income Tax Assessment Act 1997 (ITAA 1997), concerning eligibility to be an STS taxpayer. One difference between them can, however, be found in the fact that the equivalent STS concept, 'value of the business supplies', as defined in subsection 995-1(1) of the ITAA 1997, requires the supplies to have been made in the ordinary course of carrying on business, whereas the word ordinary does not appear in the 'R&D group turnover' rules. The difference in wording would seem though, to be inadvertent. Thus, paragraph 3.13 of the Explanatory Memorandum to Taxation Laws Amendment (Research and Development) Bill 2001, being that which introduced section 73K of the ITAA 1936, says: The value of the supplies a taxpayer makes during an income year is the sum of the values of the supplies the taxpayer made during the year in the ordinary course of carrying on business or in the course of carrying on R&D activities and is calculated exclusive of GST payable on supplies. ...(emphasis added) The Explanatory Memorandum relating to the introduction of section 73K of the ITAA 1936, supports the proposition that the relevant 'R&D group turnover' rules should be interpreted as if the word, 'ordinary' appeared before 'course of carrying on a business', in subsection 73H(2) of the ITAA 1936. The Commissioner's views on what will be in the 'ordinary' course of carrying on business, for the purposes of calculating STS group turnover, are set out in paragraphs 20 to 23, of Taxation Ruling TR 2002/11 (TR 2002/11) and paragraph 21 provides that: a supply is made in the ordinary course of carrying on a business if it is a supply of the kind regularly or customarily made by the entity in the course of carrying on its business, arising out of no special circumstance or unusual event. The unilateral action of third parties, indicates that the assignment transaction by the company that was grouped with the eligible company was not 'in the course of carrying on a business', in accordance with the subsection 73H(2) of the ITAA 1936 interpretation of 'value of supplies'. This is supported by notion that the company's pivotal role and function was to provide mortgage loans. It cannot, therefore, be concluded that the company entered into the assignment agreement in the 'ordinary' course of carrying on business as a lender, but rather, that it was entered into as a 'special circumstance or unusual event', within the meaning of paragraph 21 of TR 2002/11. Accordingly, the consideration received under the assignment agreement by the company that is grouped with the eligible company is not to be included in the 'value of supplies made' under section 73K of the ITAA 1936 for the purposes of determining the eligible company's 'R&D group turnover' during the relevant year of income.", "Date_of_Decision": "19 July 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 73K(1)(b) subsection 73H(2) subsection 73B(1) section 73L section 73K subsection 73K(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/11", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/343 | ATO ID 2003/701 | ATO ID 2003/702", "Subject_References": "Research and Development Expenses R&D group turnover R&D Tax Offset", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment (Research and Development) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004703", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2002/11 | Keywords Research and Development Expenses R&D group turnover R&D Tax Offset"}
{"ATO_ID_Number": "ATO ID 2004/973", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: Additional deduction for incremental expenditure where a company has a transitional substituted accounting period in relation to the 'deduction year'", "Issue": "If an eligible company lodges a return of income for a period other than 12 months, will this period represent the 'year of income' (the 'deduction year' ) for the purposes of determining the company's eligibility to claim an additional deduction for incremental expenditure, and also represent the 'Y 0 year' when calculating 'R&D spend'?", "Decision": "No. The 'deduction year' for the purposes of section 73Q of the Income Tax Assessment Act 1936 (ITAA 1936), and the 'Y 0 year', when calculating the 'R&D spend' under section 73P of the ITAA 1936, for the purposes of sections 73U, 73V, 73W and 73Y of the ITAA 1936, will be the 12 month period preceding the last day of the period, for which the company will lodge its transitional period return.", "Facts": "The company is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936. It undertakes research and development activities in Australia and is examining its eligibility under section 73Q of the ITAA 1936 to claim an additional deduction under section 73Y of the ITAA 1936, for a 'year of income', (referred to as 'the deduction year' in subsection 73Q(1) of the ITAA 1936). The eligible company is allowed to adopt a substituted accounting period under section 18 of the ITAA 1936. A condition of granting this approval is that the eligible company will lodge a return for a transitional period other than 12 months (covering income and deductions relating to a period greater than 12 months), in relation to 'the deduction year'.", "Reasons_for_Decision": "Summary: Eligibility to claim an additional deduction for incremental expenditure under section 73Q of the ITAA 1936 is determined for a 'year of income'). That is, the requirements for eligibility set down in this section need to be met for this period, (referred to in the section as 'the deduction year '). The meaning of 'year of income' was considered in the AAT decision of Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091; 99 ATC 2015 (Norwich), where Mr BH Pascoe stated: I am further satisfied that the reference to \"year of income\" or part of a year of income must mean a period of a year as is generally understood as a period of 12 months. Sections 73P to 73Y of the ITAA 1936 relate to eligibility for, and claiming of, an additional deduction for certain incremental research and development expenditure. Sections 73R to 73W of the ITAA 1936 require certain calculations to be made, involving amounts of 'R&D spend' incurred in the 'Y 0 , Y -1 , Y -2 and Y -3 ' years (refer to subsection 73P(6) of the ITAA 1936, for the definitions of these last terms). The definition of 'R&D spend' in subsection 73P(2) of the ITAA 1936 refers to the 'incremental expenditure' of the eligible company, for a relevant 'year of income'. The definition of the 'Y 0 ' year of income in paragraph 73P(6)(a) of the ITAA 1936 is the year of income for which an eligible company is working out its assessable income and deductions. Therefore, the 'Y 0 ' year of income, and the 'year of income' (also referred to as 'the deduction year ') in section 73Q of the ITAA 1936, are the same 12 month period, in accordance with the interpretation of 'year of income' outlined in Norwich. Accordingly, 'the deduction year ,' concerning eligibility to claim an additional deduction for incremental expenditure, and the total incremental expenditure amounts of the eligible company incurred in the 'Y0' year of income, which are to be included under the definition of 'R&D spend', are determined using the eligible company's 'year of income'. In this case, this is the 12 month period preceding the last day of the period for which the company is to lodge its transitional period return.", "Date_of_Decision": "19 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 18 section 73B subsection 73B(1) section 73P subsection 73P(2) subsection 73P(6) paragraph 73P(6)(a) section 73Q subsection 73Q(1) section 73R section 73S section 73T section 73U section 73V section 73W section 73X section 73Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/989 | ATO ID 2003/990 | ATO ID 2003/991", "Subject_References": "Innovation segment Research & development incremental tax concession Substituted accounting period Transitional & changeover arrangements", "Case_References": "Norwich Superannuation Services Pty Ltd v. Federal Commissioner of Taxation (1998) 41 ATR 1091 99 ATC 2015", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004973", "Unmatched_Content": "Keywords Innovation segment Research & development incremental tax concession Substituted accounting period Transitional & changeover arrangements"}
{"ATO_ID_Number": "ATO ID 2003/343", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "R&D tax offset: 'R&D group turnover' - licence fees payable over more than one year of income", "Issue": "What amount is included by the company in calculating the amount of 'R&D group turnover' for the purposes of determining the company's entitlement to the research and development (R&D) tax offset under section 73J of the Income Tax Assessment Act 1936 (ITAA 1936), where a licence fee under an agreement is payable over four years of income?", "Decision": "The amount included in the calculation of the company's 'R&D group turnover' for the current year of income, for the purposes of determining its entitlement to the R&D tax offset under section 73J of the ITAA 1936, is only so much of the relevant licence fee as represents the value of the supplies made under the agreement for the current year of income.", "Facts": "A company carries on a business involving high levels of research and development and holds a number of patents relating to its work. Over the years the company has entered into a number of licence agreements as part of its business. The company entered into a non-exclusive, non-transferable licence agreement with a company resident overseas for the use of patented technology for the life of certain patents, due to expire five years after entering the agreement. The total licence fee under the agreement is set as a lump sum, payable by instalments over four years of income, but with no specific portion attributable to each of the four years. The company's aggregate research and development amount for the current year of income exceeds $20,000. The aggregate research and development amount for the company and other taxpayers with which it is grouped does not exceed $1,000,000 for the current income year. The value or price of the rights granted for the current year of income is not quantified in the licence agreement.", "Reasons_for_Decision": "Summary: Section 73I of the ITAA 1936 provides that an eligible company can choose a tax offset rather than a deduction for research and development expenditure. Section 73J of the ITAA 1936 provides that an eligible company can only choose the tax offset if: 'R&D group turnover' is defined in section 73K of the ITAA 1936 to include the value of supplies the company made in the year of income. 'Value of supplies' is defined in section 73H of the ITAA 1936. For 'taxable supplies' it is the value of those supplies and for 'other supplies' it is the price of those supplies, made during the year in the course of carrying on a business or in the course of carrying on research and development activities. The value of taxable supplies and prices of other supplies are as defined by section 9-75 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Section 9-5 of the GST Act provides that a taxable supply excludes supplies that are 'GST-free'. Paragraph 9-30(1)(a) of the GST Act provides that supplies are GST-free if they are GST-free under Division 38 of the GST Act. Item 4 of the table in subsection 38-190(1) of the GST Act states that a supply of rights is GST-free if 'the rights are for use outside Australia'. However, the supply will only be GST-free if it is not connected with Australia (subsection 38-190(2) of the GST Act). The granting of the rights relating to the patents are supplies which are GST-free as they are for use outside of, and are not connected with, Australia. The rights are therefore 'other supplies', and consequently the 'price' of those supplies must be used in the calculation of the company's 'R&D group turnover'. 'Price' is defined in subsection 9-75(1) of the GST Act to be the amount of money or, if not expressed as an amount of money, the GST inclusive market value. As the supply is made over a number of years, the relevant test concerns the value or price of the supplies made, rather than the part of the total consideration received or receivable, in the current income year. Taxation Ruling TR 2002/11 (in the context of the Simplified Tax System (STS)), states at paragraph 32: 32. An entity needs to include the value of a supply in its *STS group turnover for an income year if the supply is made during that income year..... The entity must do so even if it or the grouped entity does not receive consideration for the supply in the same income year in which the supply is made. This means that an entity's *STS group turnover for an income year may include the value of supplies that have been made, but for which the entity or grouped entity has not yet been paid. To determine what part of the total consideration given for the rights granted over the entire period of the agreement relates to the current income year, an apportionment of this consideration based on market price was adopted (see the example in paragraph 40 of Taxation Ruling TR 93/12). Adopting this method, it is inferred that the value of the rights supplied for the current year of income does not exceed that part of the total consideration actually due and payable in this year. Accordingly, it is that amount that is used in calculating the 'R&D group turnover' under section 73K of the ITAA 1936 for the purposes of determining the company's entitlement to the R&D tax offset under section 73J of the ITAA 1936.", "Date_of_Decision": "21 February 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 73B section 73BA section 73BH section 73H section 73I section 73J section 73K section 73Y", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/11 | Taxation Ruling TR 93/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development expenses Research & development segment", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003343", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) Taxation Ruling TR 2002/11 Taxation Ruling TR 93/12 | Keywords Research & development expenses Research & development segment"}
{"ATO_ID_Number": "ATO ID 2003/660", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development Tax Offset: Exempt entities and affiliates with at least 25% of the voting rights or rights to distribution of income or capital in the company", "Issue": "Is a company eligible under section 73J of the Income Tax Assessment Act 1936 (ITAA 1936) to choose a research and development tax offset when two or more exempt entities, together with their affiliates, at any time during the tax offset year, own interests in the company carrying between them at least 25% of voting rights or rights to a distribution of income or capital?", "Decision": "No. The company will not be eligible under section 73J of the ITAA 1936 to choose a research and development tax offset when two or more exempt entities, together with their affiliates, at any time during the tax offset year own interests in the company carrying between them at least 25% of voting rights or rights to a distribution of income or capital, because subsection 73J(2) of the ITAA 1936 will prevent the choice.", "Facts": "During the tax offset year, the shareholdings in the company were comprised of a number of tax paying entities and tax exempt entities. One of the tax paying entities was an affiliate of one of the tax exempt entities. The total shareholdings of the tax exempt entities in the company did not exceed 25%. The total shareholdings of the tax exempt entities and the affiliate of one of the tax exempt entities in the company exceeded 25%. The shareholdings carried with them voting rights and rights to distributions of income or capital. The company incurred research and development expenditure during the income year and satisfied the eligibility requirements of subsection 73J(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 73J of the ITAA 1936 provides that a company will be eligible to choose a tax offset rather than a deduction for research and development expenditure if it satisfies certain requirements contained in subsection 73J(1) of the ITAA 1936. However, even though the requirements of subsection 73J(1) of the ITAA 1936 may be satisfied, subsection 73J(2) of the ITAA 1936 provides that an eligible company will not be able to choose the tax offset for the relevant year, if: Subsection 73J(2) of the ITAA 1936 does not prescribe four separate tests. Rather, as paragraph 3.10 of the Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Act 2001 (the Explanatory Memorandum) states: ... a company will not be eligible for the tax offset where at least 25% of the voting power or 25% of the right to distributions from the company is held, legally or beneficially by an exempt person (or 2 or more exempt persons), or the affiliates of an exempt person, or any combination thereof [emphasis added]. Indeed, under the ordinary rules of statutory interpretation, there is a presumption that words in the singular include the plural and vice versa. The primary authority in Australia in relation to that presumption is Blue Metal Industries v. Dilley (1969) 117 CLR 651. At page 656, the Privy Council stated that: It follows that the mere fact that the reading of words in a section suggests an emphasis on singularity as opposed to plurality is not enough to exclude plurality. Words in the singular will include the plural unless contrary intention appears. But in considering whether a contrary intention appears there need be no confinement of attention to any one particular section of an Act. It must be appropriate to consider the section in its setting in the legislation and furthermore to consider the substance and tenor of the legislation as a whole. This common law rule was enacted by section 23 of the Acts Interpretation Act 1901 (Cth), which provides that '[i]n any Act, unless the contrary intention appears ... words in the singular number include the plural and words in the plural number include the singular'. Neither the words of subsection 73J(2) of the ITAA 1936, nor the Explanatory Memorandum, disclose any intention to confine the operation of the exception to companies in whom the requisite ownership of interests is held by two or more exempt entities together, or by a single exempt entity together with its affiliates. To the contrary, the Explanatory Memorandum demonstrates that the subsection was intended to cover situations in which the prohibited ownership consists of the holdings of two or more exempt entities together with their affiliates. The combined shareholdings of the company during the tax offset year of tax exempt entities and an affiliate of one of the tax exempt entities exceeded 25%. Accordingly, the company will be ineligible to choose a tax offset because two or more exempt entities, together with their affiliates, at any time during the tax offset year owned interests in the company carrying between them at least 25% of voting rights or rights to a distribution of income or capital.", "Date_of_Decision": "17 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Acts Interpretation Act 1901 section 23", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development segment", "Case_References": "Blue Metal Industries Limited v. Dilley and Anor (1969) 117 CLR 651", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Act 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003660", "Unmatched_Content": "Keywords Research & development segment"}
{"ATO_ID_Number": "ATO ID 2003/895", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development Tax Offset: Exempt entity registered holder of shares but tax paying entity beneficial owner", "Issue": "Is an eligible company able to choose the research and development tax offset under section 73I of the Income Tax Assessment Act 1936 (ITAA 1936), where an exempt entity is the registered holder of all the shares in the company, but those shares are beneficially owned by an individual who is not an exempt entity?", "Decision": "Yes. The eligible company can choose the research and development tax offset under section 73I of the ITAA 1936 and will not be prevented from doing so because of the exception in subsection 73J(2) of the ITAA 1936.", "Facts": "The company is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. The company satisfies the conditions of eligibility to choose the tax offset under subsection 73J(1) of the ITAA 1936. An exempt entity is the registered holder of all the shares in the company, and hence, the legal owner of those shares. The shares carry the right to exercise 100% of the voting power in the company, and the right to receive all distributions of income and capital. The shares are 'interests' for the purposes of subsection 73J(2) of the ITAA 1936. The exempt entity holds these interests on trust for an individual, who is not an exempt entity. Under this trust the individual is beneficially entitled to all income and capital distributions, and entitled to have the voting power in the company exercised as they direct. The exempt entity, although the legal owner of the interests, cannot enjoy the benefits of them in any way, or dispose of them for its own benefit.", "Reasons_for_Decision": "Summary: An eligible company is able to choose a research and development tax offset under section 73I of the ITAA 1936 rather than a deduction. However, to choose the tax offset, the company must satisfy certain conditions under subsection 73J(1) of the ITAA 1936. Even though those conditions may be met, subsection 73J(2) of the ITAA 1936 excludes certain eligible companies from claiming the tax offset. Under subsection 73J(2) of the ITAA 1936, an eligible company is not able to choose the tax offset for a relevant year of income if an exempt entity, the affiliates of an exempt entity, an exempt entity together with its affiliates, or two or more exempt entities, at any time during the year, legally or beneficially own, or have the right to acquire, the legal or beneficial ownership of: interests in the company that carry between them the right to exercise or control the exercise of, at least 25% of the voting power in the company; or interests in the company that carry between them the right to receive at least 25% of any distribution of income or capital by the company. The exempt entity is the registered holder and legal owner of all of the shares in the company. However, the person who beneficially owns all of these shares is not an exempt entity. The question of whether subsection 73J(2) of the ITAA 1936 applies in such a case requires an examination of the purpose and context of the subsection. The proper construction of subsection 73J(2) of the ITAA 1936 is determined by having regard to the context of the provision and the issue ( CIC Insurance Ltd v. Bankstown Football Club Ltd (1995) 187 CLR 384 at 408). The broad purpose of the research and development tax offset is to provide a tax concession to eligible small companies, by enabling them to 'cash out' their otherwise deductible research and development expenditure (refer to paragraphs 5.4 and 5.5 of the Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Bill 2001). However, some of these small companies may be owned by exempt entities, such as universities or other tax exempt research bodies. These not only receive the benefit of being tax exempt, but may also receive other forms of government support. The purpose of subsection 73J(2) of the ITAA 1936 in this context, is to prevent such exempt entities from benefiting from ownership of an eligible company that might otherwise be able to cash out its research and development expenditure. This does not explain though why subsection 73J(2) of the ITAA 1936 refers to the exempt entity either legally or beneficially owning the relevant interests, in contrast, for example, to the grouping rules in section 152-30 of the Income Tax Assessment Act 1997 , which refer only to beneficial ownership. The explanation can be found in circumstances where it has been held that it is not possible to identify a beneficial owner (see for example Linter Textiles Australia Ltd (in liq) v. FC of T [2003] FCAFC 63; 2003 ATC 4458; (2003) 52 ATR 502, and the situation referred to in Taxation Determination TD 2000/27). Tests of control or ownership which refer only to beneficial ownership may therefore fail to operate appropriately in such cases. It cannot be concluded therefore from this context, that subsection 73J(2) of the ITAA 1936 was intended to operate where both a legal owner and a separate beneficial owner can be identified. In such a case there would be no point denying the legal owner the benefit of the eligible company being able to choose the research and development tax offset, as it would be the beneficial owner only who could enjoy any benefit from this. The relevant purpose of subsection 73J(2) of the ITAA 1936 then is to prevent an eligible company from being able to choose the tax offset if an exempt entity legally owns sufficient interests in the company, of the type in question, and there is no beneficial owner who can be identified. In such a case it will be the exempt entity as the legal owner who would, but for the subsection, be able to benefit. The better construction of the subsection is one that promotes this purpose (section 15AA of the Acts Interpretation Act 1901 (Cth)). The beneficial owner of the relevant interests in the company can be identified and they are not an exempt entity. Therefore, the exception in subsection 73J(2) of the ITAA 1936 does not apply. Accordingly, the company can choose the research and development tax offset under section 73I of the ITAA 1936.", "Date_of_Decision": "11 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Acts Interpretation Act 1901 section 15AA", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2000/27", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/660", "Subject_References": "Research and development legally own", "Case_References": "CIC Insurance Ltd v. Bankstown Football Club Ltd (1995) 187 CLR 384", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Research and Development) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003895", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2000/27 | Keywords Research and development legally own"}
{"ATO_ID_Number": "ATO ID 2003/989", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development Tax Offset: eligibility where a group member company has a substituted accounting period", "Issue": "If an eligible company is grouped with another company that has a different accounting period, is it the eligible company's 'tax offset year' that is used when determining the group 'aggregate research and development amount' and the 'R&D group turnover' amount, and not the 'year of income' of the group member?", "Decision": "Yes. The eligible company's tax offset year is used when calculating the group aggregate research and development amount for the purposes of paragraph 73J(1)(c) of the Income Tax Assessment Act 1936 (ITAA 1936) and the R&D group turnover for the purposes of paragraph 73J(1)(d) of the ITAA 1936.", "Facts": "The company is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. It undertakes research and development activities in Australia. This company wants to determine its eligibility under section 73J of the ITAA 1936 to choose the tax offset in section 73I of the ITAA 1936 ('the R&D tax offset'). The eligible company has a normal Australian accounting period, ending on 30 June. The eligible company is grouped with another company under section 73L of the ITAA 1936. The company which is grouped with the eligible company has a substituted accounting period.", "Reasons_for_Decision": "Summary: Sections 73I, 73J and 73K of the ITAA 1936 govern eligibility for, and claiming of, the R&D tax offset. Subsection 73I(1) of the ITAA 1936, allows an eligible company to choose this tax offset instead of a deduction for a 'year of income' (also referred to in this subsection as the 'tax offset year'). The meaning of 'year of income' was considered in Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091; 99 ATC 2015 where the Administrative Appeals Tribunal held that the term referred to a period of 12 months. Subsection 73J(1) of the ITAA 1936 outlines the eligibility criteria for entitlement to choose the tax offset, some of which are applied on a group basis. It says: An eligible company is eligible to choose the tax offset for the tax offset year if: (a) ........... and (b) its aggregate research and development amount for the tax offset year exceeds $20,000; and (c) the aggregate research and development amount for the tax offset year of the company and of taxpayers with which it is grouped (while they are grouped in that year) is not more than $1,000,000; and (d) the R&D group turnover of the company for that year is less than $5,000,000. The 'R&D group turnover' is calculated under section 73K of the ITAA 1936 in accordance with paragraph 73J(1)(d) of the ITAA 1936 for the 'tax offset year'. As the name suggests, for the eligible company, for the relevant year, it is calculated by taking the situation of group members into account. The 'tax offset year' referred to in paragraph 73J(1)(c) of the ITAA 1936 is the year of income for which the eligible company wants to determine whether it can choose the R&D tax offset, instead of certain deductions (see subsection 73I(1) of the ITAA 1936). It follows that the reference to 'that year' in paragraph 73J(1)(d) of the ITAA 1936 is to the same year. The company which is grouped with the eligible company however, has a substituted accounting period. This means that its year of income ends on a date other than 30 June (refer to section 18 of the ITAA 1936 and the subsection 6(1) definition, ITAA 1936 of 'year of income'). Nevertheless, when calculating the amounts referred to in: the calculations are performed using only the one 12 month period, being the tax offset year of the eligible company. Note: The same result would also arise if the eligible company lodged a return of income for the year of income equating to the tax offset year, for a period greater or lesser than 12 months. That is, if the eligible company, following it being granted a substituted accounting period, lodged a return of income for the transitional period not equalling 12 months, the calculations required for the purposes of paragraphs 73J(1)(c) and (d) of the ITAA 1936 would still be performed using the 12 month period that is the tax offset year of the eligible company.", "Date_of_Decision": "10 October 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 18 section 73B subsection 73B(1) section 73L section 73J subsection 73J(1) paragraph 73J(1)(c) paragraph 73J(1)(d) section 73K", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/990 | ATO ID 2003/991", "Subject_References": "Research & development segment Substituted accounting period", "Case_References": "Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091 99 ATC 2015", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003989", "Unmatched_Content": "Keywords Research & development segment Substituted accounting period"}
{"ATO_ID_Number": "ATO ID 2003/990", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: additional deduction for incremental expenditure where a group member company has a substituted accounting period", "Issue": "If an eligible company is grouped with another company that has a different accounting period, is the 'year of income' referred to in paragraph (b) of the definition of 'R&D spend' in subsection 73P(2) of the Income Tax Assessment Act 1936 (ITAA 1936) that of the eligible company, and not that of the group member?", "Decision": "Yes. The eligible company's 'year of income' is used when calculating an amount under paragraph (b) of the definition of 'R&D spend' in subsection 73P(2) of the ITAA 1936, for the purposes of sections 73U, 73V, 73W and 73Y of the ITAA 1936.", "Facts": "The company is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936. It undertakes research and development activities in Australia and is examining its entitlement under section 73Y of the ITAA 1936 to an additional deduction relating to 'incremental expenditure', as defined in subsection 73P(2) of the ITAA 1936, for a year of income (referred to as the 'deduction year' in subsection 73Q(1) of the ITAA 1936). The eligible company has a normal Australian accounting period ending on 30 June. It satisfies the requirements in subsection 73Q(1) of the ITAA 1936 to be entitled to an additional deduction under section 73Y of the ITAA 1936. The eligible company is grouped with another company under section 73L of the ITAA 1936. The company which is grouped with the eligible company, has a substituted accounting period, and lodged a transitional return (covering income and deductions relating to a period greater than 12 months), for the period equating to the year of income immediately prior to the deduction year.", "Reasons_for_Decision": "Summary: Calculation of the amount of the additional deduction allowable under section 73Y of the ITAA 1936 requires working out the eligible company's 'premium amount' under section 73W of the ITAA 1936, as well as any apportionment of the premium amount under section 73X of the ITAA 1936. It is not possible however, to calculate the premium amount without also calculating the eligible company's 'running average' for the deduction year, under section 73U of the ITAA 1936. In section 73U of the ITAA 1936 the deduction year is referred to as the 'Y0 year of income', which 'is the year of income for which an eligible company is working out its assessable income and deductions' (refer to the definitions of particular years of income identified by 'Y' and a further identifier in subsection 73P(6) of the ITAA 1936). In order to work out the eligible company's premium amount for the Y0 year of income, under section 73W of the ITAA 1936, it needs to calculate, for this year of income, its: Under subsection 73U(1) of the ITAA 1936, calculation of the eligible company's running average requires calculating one third of the sum of its R&D spend for each of the 'Y-1', 'Y-2', and 'Y-3' years of income. The 'Y-1' year of income of the eligible company is the year of income immediately before the Y0 year of income, the 'Y-2' year of income is the year of income 2 years before, and the 'Y-3' year of income is the year of income 3 years before, as in the definitions in subsection 73P(6) of the ITAA 1936. The definition of R&D spend in subsection 73P(2) of the ITAA 1936 is therefore critical to the calculation of the amount of the additional deduction allowable under section 73Y of the ITAA 1936. This definition states: R&D spend of an eligible company for a year of income means the sum of: the incremental expenditure of the eligible company for the year of income incurred during its group membership period; and the incremental expenditure of each group member of the eligible company for the year of income incurred during its group membership period.' [emphasis added] In this case, there is another company which is a group member of the eligible company. This other company has a substituted accounting period, which means that, unlike the position of the eligible company, its year of income ends on a date other than 30 June (refer to section 18 of the ITAA 1936, and the subsection 6(1), ITAA 1936 definition of year of income). As well, this other company, as a condition of being allowed to adopt the substituted accounting period, has lodged a return of income for a period greater than 12 months, in relation to the comparable year immediately before the eligible company's deduction year or Y0 year of income. Two questions therefore arise: A key feature of the scheme of sections 73Q to 73Y, in calculating the amount of any additional deduction relating to changes in incremental expenditure when compared to a running average, concerns examining the position of the eligible company. Consistent with this scheme is the fact that when the term 'year of income' is used in the definition of R&D spend, it refers to the year of income of the eligible company (for example, in section 73W of the ITAA 1936, the R&D spend for the 'Y0' year of income is referred to, and the 'Y0' year of income is that of the eligible company in paragraph 73P(6)(a) of the ITAA 1936). Therefore, the year of income to be used each time in calculating the relevant amount of R&D spend of the group member, is that of the eligible company. The substituted accounting period of the group member will not be relevant when the eligible company is calculating the amount it claims as an additional deduction under section 73Y of the ITAA 1936. The meaning of 'year of income' in this context means the same as it does elsewhere in the ITAA 1936, that is, a period of 12 months (see Norwich Superannuation Services Pty Ltd v. F C of T (1998) 41 ATR 1091; 99 ATC 2015). Note: The same result would also arise if the group member, lodged a return of income for the comparable year of the eligible company's deduction year or any of the three prior years for a substituted accounting period or a period greater than or less than 12 months.", "Date_of_Decision": "10 October 2003", "Year_of_Income": "The definition of R&D spend in subsection 73P(2) of the ITAA 1936 is therefore critical to the calculation of the amount of the additional deduction allowable under section 73Y of the ITAA 1936. This definition states: R&D spend of an eligible company for a year of income means the sum of: the incremental expenditure of the eligible company for the year of income incurred during its group membership period; and the incremental expenditure of each group member of the eligible company for the year of income incurred during its group membership period.' [emphasis added]", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 73B subsection 73B(1) section 73L section 73P subsection 73P(2) subsection 73P(6) section 73Q subsection 73Q(1) section 73U section 73V section 73W section 73X section 73Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/989 | ATO ID 2003/991", "Subject_References": "Research & development segment Substituted accounting period", "Case_References": "Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091 99 ATC 2015", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003990", "Unmatched_Content": "Year of income: Year ended 30 June 2003 Year ended 30 June 2002 | Keywords Research & development segment Substituted accounting period"}
{"ATO_ID_Number": "ATO ID 2003/991", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: additional deduction for incremental expenditure where a company has a transitional substituted accounting period", "Issue": "If an eligible company in one of the three years prior to the deduction year, has lodged a return of income for a period other than 12 months, will this period represent any of the 'Y-1, Y-2 or Y-3' years when calculating 'R&D spend'?", "Decision": "No. The 'Y-1, Y-2 and Y-3' years will be the 12 month periods preceding the eligible company's 'Y0' year (the 'year of income' of the eligible company), when calculating 'R&D spend' for the purpose of sections 73T, 73U, 73V, 73W and 73Y of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The eligible company undertakes research and development activities in Australia, and is seeking to determine its entitlement to an additional deduction for incremental tax expenditure (section 73Y of the ITAA 1936). The eligible company is allowed to adopt a substituted accounting period under section 18 of the ITAA 1936 (the year of income for which the additional deduction under section 73Y of the ITAA 1936 is sought). The eligible company lodged a transitional substituted accounting period return, covering income and deductions for a period greater than 12 months, in one of the three years prior to the deduction year.", "Reasons_for_Decision": "Summary: The definition of 'R&D spend' in subsection 73P(2) of the ITAA 1936 refers to the 'incremental expenditure' of the eligible company, for a relevant 'year of income'. The meaning of 'year of income' was considered in the AAT decision of Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091; 99 ATC 2015 ( Norwich ), where BH Pascoe stated at 2018: I am further satisfied that the reference to \"year of income\" or part of a year of income must mean a period of a year as is generally understood as a period of 12 months. Sections 73P to 73Y of the ITAA 1936 relate to eligibility for, and claiming of an additional deduction for certain incremental research and development expenditure. Sections 73R to 73W of the ITAA 1936 require certain calculations to be made, incorporating therein amounts of 'R&D spend' incurred in the 'Y0, Y-1, Y-2 and Y-3' years. The definition of the 'Y0'year of income in paragraph 73P(6)(a) of the ITAA 1936 is the year of income for which an eligible company is working out its assessable income and deductions. The 'Y-1, Y-2 and Y-3' 'years of income' are defined in subsection 73P(6) of the ITAA 1936 as being the 'year of income' one, two and three years (respectively) prior to the Y0 'year of income'. They are, therefore, the 'years of income', (being 12 month periods, in accordance with the interpretation of 'year of income' as outlined in Norwich ), that are one, two and three years prior to that of the 'Y0' year of income of the eligible company. Accordingly, the incremental expenditure amounts of the eligible company which are to be included under the definition of 'R&D spend' are determined using the eligible company's 'Y0' 'year of income' and the three 12 month periods preceding it, representing the 'Y-1, Y-2 and Y-3' years of income.", "Date_of_Decision": "13 October 2003", "Year_of_Income": "Period from 1 December 2001 to 30 November 2002 Period from 1 December 2002 to 30 November 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 73B(1) subsection 6(1) subsection 73B(13) subsection 73B(14) section 73L subsection 73L(1) subsection 73L(2) subsection 73L(3) section 73P subsection 73P(6) section 73W section 73R subsection 73R(1) section 73S section 73T section 73U section 73V section 73X section 73Y section 73Z", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/989 | ATO ID 2003/990", "Subject_References": "Research & development segment Substituted accounting period", "Case_References": "Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091 99 ATC 2015", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003991", "Unmatched_Content": "Keywords Research & development segment Substituted accounting period"}
{"ATO_ID_Number": "ATO ID 2002/985", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development - 3 Year History - Additional Deduction", "Issue": "Does the taxpayer satisfy the requirement of establishing a three year history outlined in paragraph 73Q(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936), for the three years preceding the 2002 financial year?", "Decision": "Yes. The taxpayer was in receipt of an Research & Development (R&D) Start Grant for the 1999 and 2000 financial years and was registered with the Industry Research and Development Board (IRDB), under section 39J of the Industry Research and Development Act 1986 (IR&DA) for the 2001 financial year.", "Facts": "The taxpayer is a company incorporated in Australia. The taxpayer and other parties applied for a grant under the IRDB's R&D Start Program. The grant was approved and the date of commencement of the R&D Start Grant was 1 July 1998 with a completion date of 30th June 2001. The grant was approved in relation to research and development activities to be undertaken in the 1999, 2000 and 2001 financial years. The applicant and the other parties agreed to execute the R&D Start Grant agreement (the agreement) in accordance with the conditions attaching to the grant. One of the conditions in the agreement states that the grant is made to the taxpayer and the other parties for the eligible project as described in the agreement. The grant was calculated as 50% of the estimated project costs as outlined by the taxpayer and the other parties. This grant was to be allocated to all parties according to their individual contribution to the project and their actual individual costs. The grant was paid in 6 monthly progressive payments contingent on the IRDB being satisfied that the relevant milestones were achieved, all progress reports submitted when due, and that they met all other obligations. In the agreement it also states that within 1 month of the date of the agreement the taxpayer and the other parties must establish a project management committee in relation to the project. The management committee must comprise the people named in the agreement. The agreement also states that the IRDB may terminate the agreement if the taxpayer and the other parties breach certain conditions or obligations. In the event that this action was taken, the IRDB may request repayment of all or part of the grant together with interest from either the taxpayer and the other parties. Therefore the taxpayer and the other parties are liable to repay all or part of the grant together with interest if the IRDB acts to terminate the agreement. The taxpayer has also advised that in the 2001 financial year they were registered under section 39J of the Industry Research and Development Act 1986 , with the IRDB for the purposes of the Research and Development Tax Concession.", "Reasons_for_Decision": "Summary: Section 73Q of the ITAA 1936 discusses the eligibility criteria for claiming an additional deduction under section 73Y of the ITAA 1936. Subsection 73Q(1) of the ITAA 1936 states that an eligible company is eligible to claim an additional deduction under section 73Y for a year of income (the \"deduction year\") if the company: '(a) can deduct an amount for incremental expenditure under subsection 73B(13) or (14) for the deduction year; and (b) has deducted or can deduct an amount for incremental expenditure under that subsection for each of the preceding 3 years of income.' The taxpayer wants advice as to whether they satisfy the requirements of paragraph 73Q(1)(b) of the ITAA 1936 where the 'deduction year' is the 2002 financial year. An 'eligible company' is defined in subsection 73B(1) of the ITAA 1936 to mean 'a body corporate incorporated under a law of the Commonwealth or of a State or Territory'. The taxpayer is a body corporate incorporated under a law of the Commonwealth and is therefore an 'eligible company' for the purposes of section 73Q of the ITAA 1936. The taxpayer will satisfy the requirement of paragraph 73Q(1)(b) of the ITAA 1936 if they have deducted and could deduct an amount for incremental expenditure under subsection 73B(13) or (14) for each of the preceding three years of income. 'Incremental expenditure' is defined in subsection 73P(2) of the ITAA 1936 to mean 'expenditure that is research and development expenditure except: A deduction for 'research and development expenditure' is allowed under subsection 73B(13) or (14) of the ITAA 1936 but a prerequisite to claiming an amount under these provisions is the requirement contained in subsection 73B(10) of the ITAA 1936. It provides that an eligible company must be registered for that year of income, in relation to the research and development activities under section 39J of the IR&DA. The taxpayer was registered under section 39J of the IR&DA for the 2001 financial year, but was not registered for the 1999 or 2000 financial years and therefore could not deduct an amount in relation to those years under subsection 73B(13) or (14) of the ITAA 1936. However, subsection 73Q(3) of the ITAA 1936 provides that 'for the purposes of paragraph (1)(b), subsection (2) of this section and subsection 73R(1), the eligible company or any of its group members is treated as if it had deducted or can deduct an amount for incremental expenditure under subsection 73B(13) or (14) for a year of income if the company received a start grant in respect of that year of income'. A 'start grant' is defined in subsection 73P(2) of the ITAA 1936 to mean 'a subsidy or grant paid to an eligible company: The 'Board' as used in paragraph (a) above, is defined in subsection 73B(1) of the ITAA 1936 to mean 'the Industry Research and Development Board established by the Industry Research and Development Act 1986'. The taxpayer and other parties are entitled to receive an R&D Start Grant for the 1999 and 2000 years under the R&D Start Program. Therefore where the 'deduction year' for the purposes of section 73Q of the ITAA 1936 is the 2002 financial year, the taxpayer satisfies the requirement set out in paragraph 73Q(1)(b) of the ITAA 1936, that they have or can deduct an amount for incremental expenditure under subsection 73B(13) or (14) of the ITAA 1936 for each of the preceding three years of income. For the 1999 and 2000 financial years they were entitled to receive a start grant and subsection 73Q(3) deems that they satisfy paragraph 73Q(1)(b) for these years and for the 2001 financial year they were registered under section 39J of the IR&DA. The expenditure listed in the application for registration with the IRDB indicates that they have expenditure that would qualify as incremental expenditure for the 2001 financial year.", "Date_of_Decision": "18 July 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment 1936 subsection 73B(1) subsection 73B(10) subsection 73B(13) subsection 73B(14) subsection 73P(2) section 73Q subsection 73Q(1) paragraph 73Q(1)(b) subsection 73Q(3) subsection 73R(1) section 73Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002985", "Unmatched_Content": "Keywords Research & development expenses"}
{"ATO_ID_Number": "ATO ID 2010/150", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and development: clawback (section 73C) for grants and recouped expenditure where the grant or recoupment may be subject to a repayment obligation", "Issue": "Does section 73C of the Income Tax Assessment Act 1936 (ITAA 1936) apply to a government payment that is received in respect of research and development activities if the receipt might be subject to a repayment obligation that may arise upon the happening of certain subsequent events?", "Decision": "Yes, section 73C of the ITAA 1936 applies to a government payment that is received in respect of research and development activities even though the receipt might be subject to a repayment obligation that may arise upon the happening of certain subsequent events. Subsequent repayment in an income year following the receipt of the grant does not alter the application of clawback in the year of receipt.", "Facts": "Funding is made available under a Commonwealth government program to successful applicants for the purpose of undertaking activities associated with the systematic work necessary for installing and establishing processes, systems and services that enable a new product, process or service to be effectively brought to market. The program aims to build capacity and opportunities for conversion of ideas into commercial ventures and increasing the global competitiveness of Australia. An eligible company (as defined in subsection 73B(1) of the ITAA 1936), has applied for funding under this program. Certain expenditure incurred in relation to projects supported by this funding will also be directly in respect of eligible research and development activities for which expenditure is claimed under section 73B of the ITAA 1936. The funding agreement provides that following receipt of a quarterly progress report from the eligible company the Commonwealth will make a progress payment equal to an agreed percentage of the expenditure incurred. The Commonwealth is not obliged to make the progress payment unless it is satisfied that the eligible company has expended a sufficient amount in order to meet all eligible expenditure incurred to date and that the eligible company has made sufficient progress on the project. The funding agreement provides that the receipt of the government payment is subject to a potential repayment obligation that aligns with the success of the project. The project is considered successful if a specified accumulated sales level arising out of or in connection with the project is achieved. The funding receivable under this program is not characterised as a loan as the essential feature of a loan (a definite obligation to repay the principal sum) is absent on entering into the funding agreement.", "Reasons_for_Decision": "Summary: Section 73C of the ITAA 1936 will apply where: The practical effect of the clawback provisions in section 73C of the ITAA 1936 only arises however, where the eligible company has become entitled to claim deductions under sections 73B, 73BA or 73BH of the ITAA 1936 (refer to subsections 73C(8) and (9)). Whether the amounts received under the agreement with the Commonwealth qualify as either a 'grant' or 'recoupment' for the purposes of section 73C of the ITAA 1936 will depend on the circumstances in which they are paid, and the circumstances of the person who receives them. Recoupment is not defined in the ITAA 1936. However, the meaning of the term 'recoupment' was considered by the Supreme Court of Victoria in Dampier Mining Co Ltd v. FC of T 78 ATC 4237; (1978) 8 ATR 835, in relation to former Division 10AAA of the ITAA 1936. In determining that the taxpayer there was 'entitled to recoupment' in respect of the expenditure concerned, Jenkinson J stated: I think that recoupment connotes restoration of what has been expended without countervailing detriment to him who incurred the expenditure. On appeal to the Full Federal Court ( Dampier Mining Co Ltd v. Federal Commissioner of Taxation [1979] FCA 93; 79 ATC 4469; (1979) 10 ATR 193), Deane J (Brennan and Fisher JJ agreeing) equated the concept of expenditure being recouped with the taxpayer being reimbursed in respect of its expenditure. In this matter the Commonwealth provides funding on receipt of a progress report from the eligible company which details, among other things, expenditure incurred on the project to date. On favourable assessment of this report the Commonwealth pays the eligible company an amount equal to an agreed percentage of the expenditure incurred. This operates to reimburse the eligible company and restores the company to its former position in respect of this expenditure. As a result, the eligible company has not experienced any financial detriment in relation to the agreed amount of expenditure. To the extent that the expenditure incurred is in respect of research and development activities, the payment of funding by the Commonwealth is therefore a 'recoupment' of this expenditure for the purposes of section 73C of the ITAA 1936. Where the eligible company has claimed deductions in relation to this expenditure, as indicated above, then section 73C will have practical operation. In the absence of any express rule to reverse the effect of section 73C of the ITAA 1936 upon repayment of the recoupment, any subsequent repayment of the funding received under the program, or part of it, will not affect the application of the clawback provisions in the year the grantee received or became entitled to receive the funding or result in any reversal of this application of section 73C in a future year of income. Accordingly, section 73C of the ITAA 1936 applies to a government payment that is received in respect of research and development activities, even though the receipt may be subject to a repayment obligation that may arise upon the happening of certain subsequent events. Subsequent repayment in an income year following the receipt of the funding does not alter the application of the clawback provisions in the year of receipt.", "Date_of_Decision": "6 August 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 73C section 73B section 73L", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2006/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/147 | ATO ID 2004/568 | ATO ID 2004/871", "Subject_References": "Government grants income Research & development expenses", "Case_References": "Dampier Mining Co Ltd v FC of T 78 ATC 4237 (1978) 8 ATR 835", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010150", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2006/3 | Keywords Government grants income Research & development expenses"}
{"ATO_ID_Number": "ATO ID 2004/567", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: application of clawback against expenditure incurred on acquisition or construction of pre-29 January 2001 plant", "Issue": "Is the total amount of expenditure incurred by a company on acquiring or constructing an item of pre-29 January 2001 plant, in relation to 'research and development activities' in a year of income, 'relevant expenditure' on 'research and development activities' that formed or form part of a particular project for the purposes of section 73C of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The total expenditure, incurred in the year of income, is 'relevant expenditure' on 'research and development activities' that formed or form part of a project, for the purposes of section 73C of the ITAA 1936.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. The company commenced a project of 'research and development activities' (as defined in subsection 73B(1) of the ITAA 1936) in the 2000 year of income, and incurred expenditure on these activities. In the 2001 year of income, the company applied for and received approval for a Government grant in relation to the project. The company continued the project in the 2001 year of income and registered the 'research and development activities' for this year with the Industry, Research and Development Board. The company incurred expenditure in the 2001 year of income on acquiring or constructing plant prior to 29 January 2001, in relation to the project as an integral and pre ordained part of the project, and to be used exclusively in the project.", "Reasons_for_Decision": "Summary: Section 73C of the ITAA 1936 deals with situations where an eligible company has received, or become entitled to receive, a recoupment of, or a grant in respect of, expenditure it has incurred on research and development activities that formed or form part of a particular project carried on by or on behalf of the company. In subsection 73C(2) of the ITAA 1936 this expenditure is referred to as 'relevant expenditure'. Under section 73C of the ITAA 1936, the company needs to take account of the amount of the recoupment or grant in calculating the amount of certain deductions it may be able to claim at concessional rates, under section 73B of the ITAA 1936. Under paragraph 73C(3)(b) of the ITAA 1936, the amount of the recoupment or grant is doubled to produce what is called 'the initial clawback amount'. The precise application of the initial clawback amount in reducing the amount of the company's expenditure on research and development activities that is able to be claimed at a concessional rate (for example, at a 125% under subsection 73B(14) of the ITAA 1936), depends on whether this expenditure was incurred partly before and partly on or after 21 November 1987, or wholly on or after 21 November 1987. Subsection 73C(7) of the ITAA 1936 applies to the situation, as in the present case, where the relevant expenditure has been incurred by the eligible company wholly on or after 21 November 1987. The rule in sub-subparagraph 73C(7)(c)(i)(A) of the ITAA 1936 means that the initial clawback amount is applied firstly to the company's relevant expenditure in the 2001 year of income, being the year ('the receipt or entitlement to receipt year') in which the company first either received, or became entitled to receive, the underlying grant amount. The eligible company incurred expenditure during the 2001 year of income on acquiring or constructing pre-29 January 2001 plant. This expenditure was incurred exclusively in relation to 'research and development activities' as defined in subsection 73B(1) of the ITAA 1936, which formed part of a project. The Explanatory Memorandum to the Taxation Laws Amendment Bill (No 4) 1989 (The Explanatory Memorandum), which inserted section 73C of the ITAA 1936, is relevant. The variation to example 3 in the Explanatory Memorandum makes reference to clawback being applicable to the entire amount of the qualifying plant expenditure incurred during the year on research and development activities, rather than the deductible component of the qualifying plant expenditure under section 73B of the ITAA 1936 for the year of income. Accordingly, the total amount of pre-29 January plant expenditure incurred in the 2001 year of income, is considered to be 'relevant expenditure' when undertaking the clawback calculation in section 73C of the ITAA 1936. This results in a deduction for the eligible company in relation to this expenditure at a rate of 100 per cent over three years.", "Date_of_Decision": "17 June 2004", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 73B subsection 73B(1) subsection 73B(14) section 73C subsection 73C(2) subsection 73C(3) paragraph 73C(3)(b) subsection 73C(7) sub-subparagraph 73C(7)(c)(i)(A)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 98/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/568 | ATO ID 2004/569", "Subject_References": "Research & development expenditure recoupment", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill (No 4) 1989", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004567", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 98/1 | Keywords Research & development expenditure recoupment"}
{"ATO_ID_Number": "ATO ID 2004/568", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: clawback - when has a company received, or become entitled to receive, a grant or recoupment", "Issue": "Has an eligible company received, or become entitled to receive, the total agreed amount of an approved Government grant, for the purposes of applying section 73C of the Income Tax Assessment Act 1936 (ITAA 1936), where the grant has been approved but the total agreed amount has not yet been paid?", "Decision": "No. However, an eligible company has received, or become entitled to receive, Government grant instalment payments when they have been paid.", "Facts": "The taxpayer is an 'eligible company' as defined in subsection 73B(1) of the ITAA 1936. It commenced a project of 'research and development activities' (as defined in subsection 73B(1) of the ITAA 1936) in the 2000 year of income. It incurred expenditure on these activities. The company continued the project in the 2001 year of income and registered the 'research and development activities', with the Industry, Research and Development Board. Expenditure was also incurred on these activities. In the 2001 year of income, the company also applied for and received approval for a Government grant in relation to the project. The grant was paid to the company over the 2001 and 2002 years of income in instalments when certain conditions were met. In certain circumstances, the Commonwealth is not obliged to make an instalment payment. For example, if:", "Reasons_for_Decision": "Summary: Subsection 73C(2) of the ITAA 1936 deals with situations where an eligible company has received, or become entitled to receive, a recoupment of, or a grant in respect of, expenditure it has incurred on research and development activities that formed or form part of a particular project carried on by or on behalf of the company. In subsection 73C(2) of the ITAA 1936 this expenditure is referred to as 'relevant expenditure'. Under section 73C of the ITAA 1936 the company needs to take account of the amount of the recoupment or grant in calculating the amount of certain deductions it may be able to claim at concessional rates, under section 73B of the ITAA 1936. Under paragraph 73C(3)(b) of the ITAA 1936 the amount of the recoupment or grant is doubled to produce what is called 'the initial clawback amount'. The precise application of the initial clawback amount in reducing the amount of the company's expenditure on research and development activities that is able to be claimed at a concessional rate (for example, at a 125% rate under subsection 73B(14) of the ITAA 1936), depends on whether this expenditure was incurred partly before and partly on or after 21 November 1987, or wholly on or after 21 November 1987. Subsection 73C(7) of the ITAA 1936 applies to the situation, as in the present case, where the relevant expenditure has been incurred by the company wholly on or after 21 November 1987. To apply paragraphs 73C(7)(b) and 73C(7)(c) of the ITAA 1936, however, the company needs to determine which is the first year in which it has received, or become entitled to receive, the amount of the grant taken into account in calculating the initial clawback amount. The grant in question was approved in the 2001 year of income but only partly received in that year, with the remainder received in the 2002 year of income after specified milestones and conditions had been met and satisfied. The ordinary meaning of 'becoming entitled to receive an amount' is that there is an absolute or unconditional entitlement to receive the amount. Part of the entry for 'entitle' in the The Macquarie Dictionary , 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW is: ... furnish with grounds for laying claim. Similarly, part of the entry for 'entitle' in Black's Law Dictionary , Black, HC, 1991, Abridged 6th edn, West Pub. Co, St Paul: ...To qualify for, to furnish with proper grounds for seeking or claiming The company in this case did not have proper grounds for claiming the entire amount of the grant in the 2001 year of income, but only that part that was paid as the milestones and conditions were completed or satisfied. Accordingly, for the purposes of subsection 73C(2) of the ITAA 1936, the eligible company did not receive, and was not entitled to receive, the unpaid agreed amount of Government grant instalment payments during the 2001 year of income. However, the eligible company did receive the Government grant instalments paid during that year. Note: An eligible company which had not achieved any required milestones or conditions and had not received any instalment payments but had a total agreed amount of a Government grant approved during a year of income, would not be deemed to have received or be entitled to receive any of that total agreed amount during that year of income.", "Date_of_Decision": "17 June 2004", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 73B subsection 73B(1) subsection 73B(14) section 73C section 73C(1) section 73C(2) paragraph 73C(3)(b) subsection 73C(7) paragraph 73C(7)(b) paragraph 73C(7)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/567 | ATO ID 2004/569", "Subject_References": "Research & development expenditure recoupment", "Case_References": "", "Other_References": "The Macquarie Dictionary, 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW. Black's Law Dictionary, Black, HC, 1991, Abridged 6th edn, West Pub. Co, St Paul.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004568", "Unmatched_Content": "Keywords Research & development expenditure recoupment"}
{"ATO_ID_Number": "ATO ID 2004/871", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: clawback (section 73C) for grants and recouped expenditure and the Pharmaceutical Industry Investment Program", "Issue": "Must a company apply the 'clawback' provisions of section 73C of the Income Tax Assessment Act 1936 (ITAA 1936) to all or part of the payments received under the Pharmaceutical Industry Investment Program (PIIP)?", "Decision": "Yes. The clawback provisions of section 73C of the ITAA 1936 apply to the research and development (R&D) component of PIIP payments received, as the requirements of subsection 73C(2) are satisfied.", "Facts": "The taxpayer is an 'eligible company', as defined in subsection 73B(1) of the ITAA 1936, and was selected to participate in the PIIP. The PIIP was introduced by the Commonwealth to encourage a sustainable pharmaceutical industry in Australia, increase research and development and production value added activity in relation to the Australian pharmaceutical industry and compensate, in part, the pharmaceutical industry for the impact on the activities of the industry by the Commonwealth exercising its monopsony purchasing power under the Pharmaceutical Benefits Scheme (PBS). The Commonwealth did so by paying higher prices on nominated products supplied by the participating companies in return for those companies agreeing to: A company's 'annual entitlement' in relation to the PIIP, is the maximum amount that the Commonwealth will pay the company in a financial year. In the relevant income year, the R&D component of the taxpayer's 'annual entitlement' was calculated as follows: 20% * (Eligible R&D Activity Target - Base for R&D) Targets in relation to 'eligible R&D activity' refer to the agreed value of 'eligible R&D activity' to be undertaken by the company and the commitments of the company in relation to 'eligible R&D activity' in the relevant year. The taxpayer's agreed value of 'eligible R&D activity' linked back to targets provided to the Commonwealth by the taxpayer in its application for entry into the PIIP, which were comprised of forecasted expenditure in relation to certain identified research and development projects. The taxpayer incurred expenditure on 'eligible R&D activity' forming particular projects carried on by it in the relevant income year, and reported this information to the Commonwealth in Quarterly and Annual Monitoring Reports. The definition of 'eligible R&D activity' for the purposes of the PIIP is very similar to the definition of 'research and development activities' in subsection 73B(1) of the ITAA 1936. As a consequence, expenditure on 'eligible R&D activity' incurred by the taxpayer for the purposes of PIIP was also 'relevant expenditure' for the purposes of section 73C of the ITAA 1936 in the relevant income year. The taxpayer elected to receive PIIP payments as notional price increases and therefore, payments were directly paid to the taxpayer from the Commonwealth on a quarterly basis. These payments were easily divisible into separate components for R&D and PVA. The taxpayer was not entitled to receive these amounts in any earlier income year than the year those payments were received. The R&D component of the PIIP was calculated by reference to the actual expenditure on 'eligible R&D activity', up to the limit of the company's 'annual entitlement'.", "Reasons_for_Decision": "Summary: Subsection 73C(2) of the ITAA 1936 determines whether 'clawback' applies, as provided for under the relevant other provisions in section 73C of that Act. The subsection provides that clawback will apply if an 'eligible company' that has incurred 'relevant expenditure' (on or after 1 July 1985), has received or become entitled to receive a 'recoupment of, or grant in respect of' all or part of that relevant expenditure, from certain sources, including the Commonwealth. 'Relevant expenditure' refers to expenditure on 'research and development activities' that formed or form part of a particular project carried on by or on behalf of the company (paragraph 73C(2)(a) of the ITAA 1936). The taxpayer is an eligible company that incurred relevant expenditure on or after 1 July 1985. The entity also received PIIP payments in the relevant income year from the Commonwealth. The issue to be decided is therefore whether the PIIP payments were a 'recoupment of, or grant in respect of' that relevant expenditure. 'recoupment of....' The meaning of the term 'recoupment' was considered in Dampier Mining Co Ltd v. FC of T 78 ATC 4237; (1978) 8 ATR 835, in relation to former Division 10AAA of the ITAA 1936. In determining that the company was 'entitled to a recoupment' in respect of expenditure concerned, Jenkinson J stated: I think that recoupment connotes restoration of what has been expended without countervailing detriment to him who incurred the expenditure. In the present issue, the Commonwealth, was aware that the taxpayer intended to incur expenditure on 'eligible R&D activity' relating to identified projects (which formed R&D activity targets), as provided in the taxpayer's application for entry into the PIIP. The Commonwealth was notified that the taxpayer incurred expenditure on 'eligible R&D activity' in Quarterly and Annual Monitoring Reports in relation to identified projects and determined the extent of PIIP payments in part by reference to that expenditure. As such, the payments were made to partly reimburse the taxpayer for that expenditure and were a 'recoupment of' that expenditure. To the extent that this expenditure was also relevant expenditure under subsection 73C(2) of the ITAA 1936, there was a recoupment of that 'relevant expenditure' for the purposes of the subsection in the relevant income year. 'grant in respect of....' 'Grant' is not defined in the ITAA 1936, and the meaning of 'grant' found in section 73C of the ITAA 1936 has not been considered judicially. Osborne's Concise Law Dictionary (8th edition) defines grant as: The allocation of rights, money etc by the Crown or Parliament to particular persons or for particular purposes. In the relevant income year, PIIP payments were made by the Commonwealth Government (or crown) as a form of financial assistance, to encourage a sustainable pharmaceutical industry in Australia. These payments were made for certain purposes, including compensating, in part, the pharmaceutical industry for the impact of the PBS and to increase R&D and PVA activity in the Australian pharmaceutical industry. Hence, PIIP payments received by the taxpayer, in the relevant income year, were a 'grant' for the purposes of section 73C of the ITAA 1936. The meaning of 'in respect of' has not been considered in the context of section 73C of the ITAA 1936. However, a number of judicial decisions have considered the meaning of the phrase in relation to other areas of the law. In FC of T v. Scully 2000 ATC 4111; (2000) 43 ATR 718, consideration of the words 'in respect of' highlighted the importance of the context in which the phrase appears and resulted in the requirement that there be some 'discernible rational link' between the two subject matters. J & G Knowles & Associates Pty Ltd v. Federal Commissioner of Taxation (2000) 96 FCR 402; 2000 ATC 4151; (2000) 44 ATR 22 also supported this interpretation, stating that 'in respect of' requires 'a nexus, some discernible and rational link', which is sufficient for the purposes of the particular legislation. In the context of the present issue, the incurrence of the relevant expenditure therefore must be a sufficient and material reason for the payment of the grant or recoupment. The Commonwealth was aware that the taxpayer intended to incur expenditure on 'eligible R&D activity' relating to identified projects (which formed R&D activity targets), as specified in the taxpayer's application for entry into the PIIP and agreed to make payments to the taxpayer which were dependent on the level of its intended and actual expenditure. Further, the actual payment had an identifiable, separate component, calculated by reference to the actual expenditure on 'eligible R&D activity'. To the extent that this 'eligible R&D activity' expenditure was also relevant expenditure, a material link between the PIIP payments for R&D and the relevant expenditure existed in the income year in question. That portion of the PIIP payments relating to this relevant expenditure was 'in respect of' that relevant expenditure for the purposes of subsection 73C(2) of the ITAA 1936. Therefore, subsection 73C(2) of the ITAA 1936 is satisfied, and the clawback provisions of section 73C of the ITAA 1936, apply to the R&D PIIP payments received by the taxpayer.", "Date_of_Decision": "30 September 2004", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1936 section 73C subsection 73C(2) paragraph 73C(2)(a) subsection 73B(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/568", "Subject_References": "Australian Taxation Office Innovation segment LB&I segments Research & development expenditure recoupment Research & development expenses", "Case_References": "Dampier Mining Co Ltd v. FC of T 78 ATC 4237 8 ATR 835", "Other_References": "Osborne's Concise Law Dictionary (8th edition)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004871", "Unmatched_Content": "Keywords Australian Taxation Office Innovation segment LB&I segments Research & development expenditure recoupment Research & development expenses"}
{"ATO_ID_Number": "ATO ID 2001/753", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Section 73C Income Tax Assessment Act 1936 (ITAA 1936) and the Automotive Competitiveness and Investment Scheme", "Issue": "If a taxpayer receives credits under the Commonwealth Government's Automotive Competitiveness and Investment Scheme (ACIS) (which are calculated with reference to investment in approved research and development (R & D) plant and equipment or investment in approved (R & D)), do the clawback provisions in respect of expenditure on (R & D) activities (relevant expenditure) contained in section 73C of the ITAA 1936 apply? If so, does section 73C of the ITAA 1936 apply to all relevant expenditure, within the meaning of that term in paragraph 73C(2)(a) of the ITAA 1936, used in the calculation of a particular credit?", "Decision": "Section 73C of the ITAA 1936 applies and it applies to all relevant expenditure used in the calculation of a particular credit. This is because each ACIS credit represents a separate grant in respect of the (R & D) expenditure used in the calculation of the credit. To the extent that the (R & D) expenditure used in the calculation is also relevant expenditure for the purposes of section 73C of the ITAA 1936, the credit will represent a grant in respect of that relevant expenditure.", "Facts": "The ACIS The Automotive Competitiveness & Investment Scheme (ACIS) is a Government initiative to encourage investment, innovation, research and development and production in the automotive industry. In a press release dated 17 October 2000 The Minister for Industry Science and Resources Senator Nick Minchin said '...the main objective of ACIS was to encourage investment, innovation, research and development, and production in the automotive industry.' This is reflected in the purpose clause of section 3 of the ACIS Administration Act 1999 which states: 'The purpose of this Act is to provide transitional assistance to encourage competitive investment and innovation in the Australian automotive industry in order to achieve sustainable growth, both in the Australian market and internationally, in the context of trade liberalisation.' The scheme began on 1 January 2001 and runs until 31 December 2005. Participants receive a quarterly issue of import duty credits which may be used to offset customs duty payable on eligible automotive imports. So far as is relevant to the (R & D) tax concession, eligible participants who are Automotive Component Producers (ACPS), Automotive Machine Tool and Tooling Producers (AMTPS) or Automotive Service Providers (ASPS), or Motor Vehicle Producers (MVPS) where the (R & D) relates to production of components, tools or services for a third party, will be able to claim a duty credit equal to: The credit is calculated on the moving average of investment over the previous 12 quarters commencing with investment recorded from 1 January 1999. This credit is placed in a register in the participants name and can be used to discharge customs duty payable on eligible automotive imports or it can be sold or otherwise transferred to a third party. The scheme is capped at $2b over the 5 years and there are limits on the benefits available to an individual firm. Operation of section 73C of the ITAA 1936 Section 73C of the ITAA 1936 was introduced by Act No 167 of 1989 to replace the former subsection 73B(8) of the ITAA 1936. Under subsection 73B(8) of the ITAA 1936 the receipt of a grant or recoupment in respect of any of the (R & D) expenditure was sufficient to fully deny a deduction for (R & D) expenditure under section 73B of the ITAA 1936. In introducing section 73C of the ITAA 1936 the Minister for Industrial Relations and Minister Assisting the Treasurer said in his second reading speech: 'A company that receives a government grant or recoupment in respect of expenditure on a research and development project will no longer suffer a total loss of the deduction entitlements. Instead, a formula is being introduced to reduce the deduction otherwise allowable by reference to the grant or recoupment.' Subsection 73C(2) of the ITAA 1936 states that: 'This section applies where: (a) an eligible company has, at any time on or after 1 July 1985, incurred expenditure (in this section called the \"relevant expenditure\") on research and development activities that form or formed part of a particular project carried on by or on behalf of the company; and (b) the company has, whether before or after the commencement of this section, received, or become entitled to receive, a recoupment of, or a grant in respect of, the whole or any part of the relevant expenditure by or from the Commonwealth, a State or a Territory, an STB (within the meaning of Division 1AB) or an authority constituted by or under a law of the Commonwealth , of a State or of a Territory, or another person has received or become entitled to receive such a recoupment or grant where the other person is, at the time of receipt or entitlement, grouped with the first-mentioned company as mentioned in section 73L.' Subsection 73C(3) of the ITAA 1936 states: 'Where this section applies to a company in respect of relevant expenditure in relation to a particular project: (a) the relevant expenditure is subject to the application of clawback in accordance with this section; and (b) for the purposes of this section the initial clawback amount in relation to the relevant expenditure is an amount equal to twice the amount, or twice the total of the amounts, as the case may be, that the company has received, or become entitled to receive, as a recoupment of, or as a grant in respect of, any of the relevant expenditure as mentioned in paragraph (2)(b).' Where the relevant expenditure consists wholly of expenditure incurred on or after 21 November 1987 subsection 73C(7) of the ITAA 1936 contains the formula for applying clawback. Under paragraph 73C(7)(a) of the ITAA 1936, if the initial clawback amount is equal to or greater than the relevant expenditure then clawback applies to the whole of that expenditure. Under paragraph 73C(7)(b) of the ITAA 1936, if the initial clawback amount is less than the relevant expenditure then clawback applies to so much of the relevant expenditure as does not exceed the initial clawback amount. Paragraph 73C(7)(c) of the ITAA 1936 contains rules as to the order of applying clawback to relevant expenditure as mentioned in paragraph 73C(7)(b) of the ITAA 1936. Section 170 of the ITAA 1936 gives the Commissioner power to amend any assessment subject to the rules contained in the section. Subsection 170(10A) of the ITAA 1936 states: 'Nothing in this section prevents the amendment, at any time, of an assessment to increase the liability of a taxpayer for the purpose of giving effect to section 73B, 73C, 73CB, or 73D, 73BH, 73BA, 73BF, 73BM, 73C. 73CB, 73D, 73I or 73Y.'", "Reasons_for_Decision": "Summary: Does section 73C of the ITAA 1936 apply? Section 73C of the ITAA 1936 limits the ability of a company to obtain benefits from both the tax concession and government grants or recoupments in respect of the same research and development expenditure. In order for section 73C of the ITAA 1936 to operate there must be a grant received in respect of, or a recoupment of, relevant expenditure within the meaning of that term in paragraph 73C(2)(a) of the ITAA 1936. The Shorter Oxford Dictionary meaning of grant is: 'consent to a request; agree to do; agree to, promise undertake, consent to do; accede to, consent to fulfil; concede as an indulgence, bestow as a favour, allow a person to have; give or confers possession, a right formally; transfer (property) legally; yield, give up; admit, acknowledge.' Osborne's Concise Law Dictionary (8th edition) gives the meaning as: 'the allocation of rights, money etc by the Crown or Parliament to particular persons or for particular purposes.' Under the ACIS scheme an eligible participant is bestowed or conferred a right, that being the right to duty credits which are placed in the participant's name in a register until such time as they use them to offset customs duty or sell them to another. In these circumstances a participant obtains a grant at the time that the duty credit is calculated and recorded in the register. That part of the duty credit calculated with reference to the amount of approved R & D expenditure would be a grant in respect of that R & D expenditure. The words 'in respect of' are difficult of definition, but they have the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer. (Trustees Executors & Agency Co Ltd v. Reilly [1941] VLR 110 at 111, per Mann CJ). The words 'in respect of' were again given a very wide meaning in Technical Products Pty Ltd v. State Government Insurance (Qld) (1989) 167 CLR 45 at 47 which was quoted in Fraser v DCT (1996) 138ALR 689 at 700, per Beaumont J. The use of the approved R & D expenditure in the calculation of the credit would provide the required connection or relationship between the credit (ie the grant) and the R & D expenditure. Does section 73C of the ITAA 1936 apply to all expenditure on R & D activities used in the calculation of a particular credit Each of the credits represents a separate grant in respect of R & D expenditure (see above). The credits are calculated as a percentage of the moving average of expenditure on R & D over the previous 12 quarters. To the extent that this expenditure on R & D is 'research and development expenditure' on 'research and development activities' within the definition of those terms in subsection 73B(1) of the ITAA 1936, the grant will have been received in respect of the all relevant expenditure used in the calculation of that particular credit despite the fact that the R & D expenditure may have been incurred and claimed in an earlier year. Paragraph 73C(7)(c) of the ITAA 1936 contains rules as to the order of applying clawback to the relevant expenditure. These rules allow for an adjustment of R & D expenditure claims in earlier years where a grant is received in respect of that expenditure in a later year. Subsection 170(10A) of the ITAA 1936 allows the Commissioner to amend an assessment at any time to give effect to section 73C of the ITAA 1936. Therefore if the credit is calculated with reference to relevant expenditure of earlier years the Commissioner can amend those earlier years to apply the clawback rules in section 73C of the ITAA 1936.", "Date_of_Decision": "7 May 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 73B subsection 73B(1) subsection 73B(8) section 73C paragraph 73C(2)(a) paragraph 73C(7)(a) paragraph 73C(7)(b) paragraph 73C(7)(c) subsection 73C(3) section 73CB section 73D section 73BH section 73BA section 73BF section 73BM section 73I section 73L section 73Y Subsection 170(10A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development expenses Precedent", "Case_References": "Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110", "Other_References": "Shorter Oxford Dictionary Osborne's Concise Law Dictionary (8th) edition Press Release 00/474 of Minister for Industry Science & Resources", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001753", "Unmatched_Content": "Keywords Research & development expenses Precedent"}
{"ATO_ID_Number": "ATO ID 2010/207", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductions and expenses: reimbursement to trust account of stolen trust monies", "Issue": "Is the reimbursement to a trust of stolen trust monies held for disbursement to clients deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The reimbursement to the trust of stolen trust monies is deductible under section 8-1 of the ITAA 1997.", "Facts": "The firm operates as a real estate agency whose activities include the receipt, holding and disbursement of monies held on trust for various rental clients. A safe containing cash held on trust was stolen. The cash was to have been banked to the firm's trust account. The theft was reported to the police but the safe and its contents were never recovered. Over the ensuing months the firm was required to use its own funds to reimburse the rental trust account to enable disbursement of trust monies to its clients. The firm did not have insurance cover for this loss and has, therefore, not been compensated for the loss.", "Reasons_for_Decision": "Summary: In Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; (1956) 6 AITR 379 ( Charles Moore ) the High Court held that, as the daily banking of takings by a department store was an ordinary part of its income-producing activities, the loss of the takings by armed robbery en route to the bank was deductible as a loss incurred in gaining or producing assessable income. The Court referred to the following statement by Rich J in Commissioner of Taxation (NSW) v. Ash (1938) 61 CLR 263 at 277; (1938) 5 ATD 76; (1938) 1 AITR 447: There is no difficulty in understanding the view that involuntary outgoings and unforeseen or unavoidable losses should be allowed as deductions when they represent that kind of casualty, mischance or misfortune which is a natural or recognized incident of a particular trade or business the profits of which are in question. These are characteristic incidents of the systematic exercise of a trade or the pursuit of a vocation. The Court in Charles Moore held (at CLR 351) that the loss was not on capital account: 'we are here dealing with a loss incurred in an operation of business concerned with the regular inflow of revenue, not with a loss of or concerning part of the \"profit yielding subject\".' The use of a trust by the real estate agency to hold monies belonging to clients is an ordinary part of the business operations of a real estate business. Whilst the monies were not the property of the real estate agency, their loss by theft required the real estate agency to make good the loss, in keeping with its obligations to clients under the trust. Such a reimbursement to the trust was 'a natural or recognized incident' of the real estate business and constituted a loss incurred in gaining or producing its assessable income or, alternatively, necessarily incurred in carrying on a business for the purpose of gaining or producing its assessable income. For the same reasons as given by the Court in Charles Moore , the loss of the trust monies was not a loss of capital or of a capital nature to the real estate agency. The loss to the taxpayer represented by the reimbursement to the trust is therefore deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "10 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accountability of trustees Constructive trusts Deductions & expenses Losses from fraud, theft & embezzlement Trust accounts", "Case_References": "Commissioner of Taxation (NSW) v Ash (1938) 61 CLR 263 (1938) 5 ATD 76 (1938) 1 AITR 447", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010207", "Unmatched_Content": "Keywords Accountability of trustees Constructive trusts Deductions & expenses Losses from fraud, theft & embezzlement Trust accounts"}
{"ATO_ID_Number": "ATO ID 2001/318", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility: Theft by a person other than an employee", "Issue": "Whether a loss of cash takings by a taxpayer carrying on a business through theft by a person who is not an employee is deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Decision": "Yes. The loss is deductible under section 8-1 of the ITAA 1997.", "Facts": "Prior to banking, the cash takings of a business were held in a safe at the taxpayer's business premises. The cash was stolen from the safe during business hours. The cash takings were included in the assessable income of the business as part of sales. It is unlikely that an employee stole the money.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. In this case the loss arose as a direct result of the taxpayer's income earning activities. The loss is not of a capital nature because it was incurred in an operation of the business concerned with the regular inflow of revenue. The loss was not associated with the 'profit yielding structure' of the business. See Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147; (1956) 6 AITR 379. The loss is not of a private or domestic nature because the money had not yet been appropriated for private purposes. The taxpayer is, therefore, entitled to a deduction for the loss.", "Date_of_Decision": "8 August 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Losses from fraud, theft & embezzlement", "Case_References": "Charles Moore & Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344 (1956) 11 ATD 147 (1956) 6 AITR 379", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001318", "Unmatched_Content": "This ATO ID was amended to improve clarity and update case references. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Related ATO Interpretative Decisions | ATO ID 2001/86 was withdrawn on 1 April 2010. | Keywords Losses from fraud, theft & embezzlement"}
{"ATO_ID_Number": "ATO ID 2009/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading Stock: live stock - working beast - birds for display in a tourist park", "Issue": "Is a bird used for display in a tourist park trading stock for the purposes of section 70-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A bird used for display in a tourist park is not trading stock for the purposes of section 70-10 of the ITAA 1997 because the bird is a working beast used in a business other than a primary production business.", "Facts": "The taxpayer operates a tourist park. Birds are purchased for display in the tourist park. The birds are kept in cages and do not perform tricks. They are not for sale generally, but might sometimes be sold if there is a large population explosion of a certain type. Generally, the natural increase of the birds corresponds with deaths and escapes, and the only stock acquired is to increase the variety on display.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997). Subsection 70-10(1) states that trading stock includes: The use of the word 'includes' in the definition of trading stock in subsection 70-10(1) signifies that a thing may be trading stock for the purposes of the provision if it meets the requirements in paragraphs 70-10(1)(a) or 70-10(1)(b) or is otherwise trading stock within the ordinary meaning of that term. However the thing must not fall within the negative definition at subsection 70-10(2). Birds purchased by a tourist park for display are not trading stock either within its ordinary meaning or under paragraph 70-10(1)(a) because, even though the birds may be sold occasionally if there is a large population explosion of a certain kind, they are not held for purposes of sale or exchange in the ordinary course of the business of a tourist park. Birds purchased by a tourist park for display may be trading stock under paragraph 70-10(1)(b) if they are live stock for the purposes of that paragraph. In Peterborough Royal Foxhound Show Society v. Commissioners of Inland Revenue [1936] 1 All ER 813, Lawrence J said that 'the words \"live stock\" are ordinarily and properly used in contrast with dead stock and include all live animals and birds the breeding of which is regulated by man'. The definition of livestock was also considered in Federal Commissioner of Taxation v Wade [1951] 9 ATD 337. In that case, Dixon and Fullagar JJ stated that the definition of livestock, by inference, makes it clear that all animals used in a primary production business are included as live stock. The term 'live stock' is also defined in subsection 995-1(1). Rather than outlining what is considered to be live stock, this definition states that live stock does not include animals used as beasts of burden or working beasts in a business other than a business of primary production. As a tourist park is not a primary production business (as defined in subsection 995-1(1)), birds used for display in a tourist park would be live stock as defined in subsection 995-1(1) if the birds are neither used as beasts of burden or working beasts in the business. Birds used for display in a tourist park are not beasts of burden, in accordance with the ordinary meaning of that term. In Riddle v. FC of T (1952) 9 ATD 391; (1952) 5 AITR 225, the High Court considered that 'the Act contemplates that the words \"working beast\" may apply to beasts used outside primary production'. In that case, it was considered that a racehorse which was trained and kept for racing was a working beast used in a business other than primary production because it was common usage to say that a racehorse was 'in work'. However, the High Court did not go further to explain what would make a beast, which is not a horse, a working beast. Case V144 88 ATC 906; AAT Case 4609 (1988) 19 ATR 3880 is helpful in this respect. In that case, an observation was made that: If dogs are used to provide security for business premises against intruders, there is no reason in principle why they should not be considered as 'working beasts' or 'plant', as much serving the productive functions of the business as any piece of inanimate equipment. It is considered that if an animal serves a productive function of the business then the animal may be described as a working beast. Birds used for display in a tourist park serve a productive function of the business. Therefore, birds used for display in a tourist park are used as working beasts in a business other than a primary production business and are specifically excluded from the definition of live stock. Accordingly, birds purchased by a tourist park for display are not trading stock under paragraph 70-10(1)(b). As birds purchased by a tourist park for display are not trading stock under its ordinary meaning or under paragraph 70-10(1)(a) or 70-10(1)(b), they are not trading stock of such a business.", "Date_of_Decision": "15 April 2009", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 subsection 40-30(1) section 70-10 paragraph 70-10(1)(a) paragraph 70-10(1)(b) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2008/26", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/18", "Subject_References": "Depreciating assets Trading stock Working animals", "Case_References": "Federal Commissioner of Taxation v Wade [1951] 9 ATD 337", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200925", "Unmatched_Content": "section 70-10 updated to subsection 70-10(1). Subsection 2 was added to the legislation in 2012 | Minor change required to reflect addition of another subsection to the relevant provision. Substance of the law unchanged. | Related ATO Interpretative Decisions | Withdrawn and replaced by ATO ID 2011/18 and TD 2008/26 | Related Public Rulings (including Determinations) Taxation Determination TD 2008/26 | Keywords Depreciating assets Trading stock Working animals"}
{"ATO_ID_Number": "ATO ID 2009/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Shares acquired and disposed of in an options trading business: trading stock", "Issue": "Where an individual taxpayer carries on the business of trading in exchange traded options (ETOs), are shares acquired and disposed of as part of that activity trading stock for the purposes of section 70-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where an individual taxpayer carries on the business of trading in ETOs, shares acquired and disposed of as part of that activity are trading stock for the purposes of section 70-10 of the ITAA 1997.", "Facts": "The taxpayer is an individual who carries on the business of trading in ETOs over listed shares on the Australian Securities Exchange's (ASX) Options Market. The taxpayer routinely and systematically takes (buys) and writes (sells) ETOs with the expectation of profit. The taxpayer uses a broker to trade in ETOs. The taxpayer sold a put option contract over a listed share. At a later date the taxpayer purchased a put option contract over the same contract series but did not request the broker to treat the purchase as a closing transaction. The taxpayer was exercised against on the sold put option which resulted in the taxpayer acquiring the underlying shares. After acquiring the shares the taxpayer exercised its bought put option to sell the shares to another party.", "Reasons_for_Decision": "Summary: Section 70-10 of the ITAA 1997 defines trading stock to include anything produced, manufactured or acquired which is held for the purposes of manufacture, sale or exchange in the ordinary course of business. In Federal Commissioner of Taxation v. Sutton Motors (Chullora) Wholesale Pty Ltd (1985) 157 CLR 277; 85 ATC 4398; (1985) 16 ATR 567 the meaning of the term 'trading stock' was considered. Making reference to its 'traditional and narrower denotation' the Court said, CLR at 281-282; ATC at 4400; ATR at 570: That denotation is of goods held by a trader in such goods for sale or exchange in the ordinary course of his trade. When used in relation to 'a business', as the term is used in the Act generally (see section 28) and in subsection 82D(1) in particular, that central meaning comprehends the goods held on hand in the business for the purpose of sale or exchange in the ordinary course of trade. In Patcorp Investments Ltd v. Federal Commissioner of Taxation (1976) 140 CLR 247; 76 ATC 4225; (1976) 6 ATR 420 Gibbs J said, 'the expression \"trading stock\" is defined in s 6(1) of the Act to include anything purchased for the purposes of sale'. Shares may not always be trading stock in the hands of their owner, even where their owner may be considered a share trader. Whether a particular parcel of shares constitute trading stock will be determined by the circumstances in which they are held ( Investment and Merchant Finance Corporation Ltd v. Federal Commissioner of Taxation (1971) 125 CLR 249; 71 ATC 4140; (1971) 2 ATR 361 ( IMFC )). In considering whether an item is trading stock, it is also relevant to consider whether the person acquiring the item would be engaged in trading in that item. A further relevant issue is not the nature of the business carried on but whether the person was a trader in the goods ( John v. Federal Commissioner of Taxation (1989) 166 CLR 417; 89 ATC 4101; (1989) 20 ATR 1). In IMFC , Walsh J said: But when shares are bought by a dealer in shares and it is intended that they are to be resold and that this will probably occur in the not distant future, I do not think they are to be denied the description of trading stock, either because the trader expects or intends that they will be sold at less than their cost price or because he seeks to obtain a commercial advantage from the transaction . . . As part of the more general conduct of carrying on the taxpayer's business of trading in options, shares are acquired in situations where a sold put option is exercised. In this instance, the shares are held for the purpose of sale and such sale takes place shortly after acquisition. The shares are not purchased for investment and are not held on capital account. Having regard to the above it is considered that the shares acquired in conducting the taxpayer's options trading business, being those shares acquired under the sold put option which were disposed of on exercise of the bought put option, are trading stock for the purposes of Division 70 of the ITAA 1997.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 70-10 Division 70", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/7", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/57 | ATO ID 2009/58", "Subject_References": "Acquisition of shares Carrying on a business Disposal of shares Income Shares Trading stock", "Case_References": "Federal Commissioner of Taxation v Sutton Motors (Chullora) Wholesale Pty Ltd (1985) 157 CLR 277 85 ATC 4398 (1985) 16 ATR 567", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200959", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/7 | Keywords Acquisition of shares Carrying on a business Disposal of shares Income Shares Trading stock"}
{"ATO_ID_Number": "ATO ID 2009/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Definition of trading stock: meaning of 'for purposes of...exchange'", "Issue": "Where a right granted to a taxpayer by a second party gives the taxpayer the exclusive right to nominate a third party to take a lease over property owned by the second party, will the right be exchanged (for the purposes section 70-10 of the Income Tax Assessment Act 1997 (ITAA 1997)) when the taxpayer nominates the third party?", "Decision": "No. The right will not be exchanged (for the purposes section 70-10 of the ITAA 1997) when the taxpayer nominates the third party because the context of the word 'exchange' in the definition of trading stock requires the passing of ownership in the right.", "Facts": "Under a principal contract, a taxpayer is granted exclusive non-transferable rights by a second party. Each right entitles the taxpayer to nominate a third party to take a lease over an item of property owned by the second party. The second party is bound under the principal contract with the taxpayer to grant the lease over the item of property to the nominated third party. The third party pays the taxpayer consideration for exercising the right in its favour. Upon exercise, the right held by the taxpayer ceases to exist. The rights are choses in action of the taxpayer.", "Reasons_for_Decision": "Summary: Trading stock is relevantly defined in section 70-10 of the ITAA 1997 as including 'anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a business.' Thus a thing can only be trading stock where it is capable of sale or exchange in the ordinary course of a business. The ITAA does not define 'exchange' for the purposes of the definition, nor are there any court authorities on the meaning of the term 'exchange' in the definition of trading stock. Therefore 'exchange' should take its ordinary meaning, having regard to its legislative context and the purpose or object of the statute. The meaning of 'exchange' is relevantly defined in The Australian Oxford Dictionary (OUP 1999) to mean: the act or an instance of giving one thing and receiving another in its place. ... and in The Macquarie Dictionary (on-line version 5.0.0, 1 January 2001) to mean: to part with for some equivalent; give up (something) for something else. The giving of a thing ordinarily implies the continued existence of the thing given. However, to part with, or give up a thing does not necessarily require the continued existence of the thing parted with or given up, although in many or most circumstances it may do so. Thus the ordinary meaning of the term 'exchange' appears to cover two kinds of situation: In Federal Commissioner of Taxation v. Suttons Motors (Chullora) Wholesale Pty Ltd (1985) 157 CLR 277; 85 ATC 4398; (1985) 16 ATR 567, the majority of the High Court noted that the definition of trading stock builds on the ordinary meaning of the expression 'trading stock' as attributed to it by legal and commercial people. The majority noted that shares and land had both been held to be capable of being trading stock and stated: Its traditional and narrower denotation still lies at the centre of that meaning and is adequate for present purposes. That denotation is of goods held by a trader in such goods for sale or exchange in the ordinary course of his trade. When used in relation to \"a business\", as the term is used in the Act generally (see sec. 28) and in sec. 82D(1) in particular, that central meaning comprehends the goods held on hand in the business for the purpose of sale or exchange in the ordinary course of trade. The High Court in John v. Federal Commissioner of Taxation (1989) 166 CLR 417; 89 ATC 4101; (1989) 20 ATR 1 ( John ) stated that the definition of trading stock 'presupposes that the person by whom [goods] are produced, manufactured, acquired or purchased is or will be engaged in trade in those goods.' It is clear from the context in John and the other authorities that the trading activity to which the definition applies involves the passing of ownership of the things traded. In the Commissioner's view the terms 'sale' and 'exchange' in the expression 'sale or exchange in the ordinary course of a business' are complementary or correlative terms which are intended to cover trading activity in which ownership of the thing traded passes. In the usual case the consideration is money but in some cases something other than money may be received as consideration, as in a barter transaction. Thus as the right is not capable of being sold or transferred, the right cannot be trading stock for the purposes of section 70-10 of the ITAA 1997. This position is consistent with the treatment of tangible assets in Taxation Ruling TR 98/8, which addresses whether materials and spare parts used by tradespersons in providing services are trading stock. To be trading stock, such assets must retain their individual character or nature and not be used up or significantly changed in the performance of the services.", "Date_of_Decision": "22 July 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 70-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Trading stock", "Case_References": "Federal Commissioner of Taxation v Suttons Motors (Chullora) Wholesale Pty Ltd (1985) 157 CLR 277 85 ATC 4398 (1985) 16 ATR 567", "Other_References": "The Australian Oxford Dictionary (OUP 1999) The Macquarie Dictionary (on-line version 5.0.0, 1 January 2001)", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200997", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/8"}
{"ATO_ID_Number": "ATO ID 2008/130", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax treatment of securitisation of leases", "Issue": "Does an entity that acquires motor vehicles, leases them and assigns all of its rights under the leases including an amount specified as the residual value of the motor vehicles, to a special purpose vehicle under a securitisation arrangement, hold the motor vehicles as trading stock for the purposes of Division 70 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The entity does not, in the circumstances described above, hold the motor vehicles as trading stock for the purposes of Division 70 of the ITAA 1997.", "Facts": "An entity carries on a business of originating leases in motor vehicles and financing the leases through a securitisation arrangement. The entity acquires motor vehicles from suppliers and leases them for private or business use. Immediately after a lease is entered into with a customer, the entity assigns its rights under the lease, including an amount specified as the residual value of the motor vehicle, to a trust, which is a special purpose securitisation vehicle (the SPV) in consideration for the net present value of those rights. The SPV does not obtain any ownership interest in a motor vehicle by accepting this assignment. The SPV issues marketable securities which it sells to investors, the proceeds of which it uses to pay the entity for the receivables. The entity uses the payment from the SPV to pay for the vehicles. It derives its income from managing and administering the collection of lease payments over the life of the lease. Upon termination of a vehicle lease, the vehicle is sold. The entity transfers title to the vehicle to the new owner but the proceeds of the sale belong to the SPV.", "Reasons_for_Decision": "Summary: The term 'trading stock' is defined in section 70-10 of the ITAA 1997 as including anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a business. The definition is not exhaustive and relies on the ordinary meaning of 'trading stock', or its alternative expression 'stock-in-trade'. The ordinary meaning denotes 'goods held by a trader in such goods for sale or exchange in the ordinary course of his trade' ( Federal Commissioner of Taxation v. Sutton Motors (Chullora) Wholesale Pty Ltd (1985) 157 CLR 277; (1985) 85 ATC 4398; (1985) 16 ATR 567). An important element of the definition requires a particular relation to exist between the thing and the business carried on by the entity - the thing must be 'held for purposes of manufacture, sale or exchange in the ordinary course of a business' (Professor R. W. Parsons in Income Taxation in Australia , Electronic edition, 2001, University of Sydney Library, Sydney). This has been affirmed by High Court authorities including John v. Federal Commissioner of Taxation (1989) 166 CLR 417; (1989) 89 ATC 4101; (1989) 20 ATR 1 where the Court stated: [the definition of trading stock] presupposes that the person by whom [the goods] are produced, manufactured, acquired or purchased is or will be engaged in trade in those goods. ... Thus the relevant issue is not the nature of the business carried on but rather whether the person is a trader in the goods which are claimed to be trading stock. [emphasis added] Clearly the first part of the trading stock definition in section 70-10 of the ITAA 1997 is met in the present case, as the entity acquires motor vehicles which are 'things'. Secondly, the motor vehicles must be 'held for purposes of manufacture, sale or exchange in the ordinary course of a business'. It was accepted in Federal Commissioner of Taxation v. Cyclone Scaffolding Pty Ltd (1987) 18 FCR 183; (1987) 87 ATC 5083; (1987) 19 ATR 674 ( Cyclone Scaffolding ) and related cases ( Memorex Pty Ltd v. FCT (1987) 19 ATR 553; (1987) 87 ATC 5034, FCT v. GKN Kwikform Services Pty Ltd (1991) 21 ATR 1532; (1991) 91 ATC 4336, Federal Commissioner of Taxation v. Hyteco Hiring Pty Ltd (1992) 39 FCR 502; (1992) 24 ATR 218; (1992) 92 ATC 4694 ( Hyteco )) that, for income tax purposes, an asset could be held either as trading stock or as a depreciating asset but not simultaneously as both. As Wilcox J noted in Cyclone Scaffolding , this would present a conceptual problem, as depreciating plant is ordinarily treated as a capital asset while trading stock is held on revenue account. In R & D Holdings Pty Ltd v. Deputy Commissioner of Taxation [2006] FCA 981; (2006) 2006 ATC 4472; (2006) 64 ATR 71 ( R&D Holdings ), Finn J held that the taxpayer held a property for section 70-10 of the ITAA 1997 purposes 'at the relevant time for the dual profit making purposes of sale or lease of subdivided lots'. That case, however, concerned land that in the relevant income year was under development and was intended to be subdivided predominantly for purposes of sale. Here the entity holds chattels, which are not susceptible to subdivision, in circumstances where there is no ambiguity of purpose - the intention is to lease them. R & D Holdings is not authority for the proposition that in these circumstances the chattels are held as trading stock. While the entity acquires the vehicles with an intention of eventually disposing of them on the termination of each respective lease, this fact does not mean that the entity holds the vehicles for the purpose of sale. In Hyteco the Court held that forklift trucks which were used in the business as hire vehicles and disposed of at the end of their useful life were not held for purpose of sale but for the purpose of lease. Similarly, in the present case, the vehicles are not held for the purpose of sale during the term of the lease for the purposes of the definition in section 70-10 of the ITAA 1997. In addition, any disposal of a motor vehicle at the end of the lease would not be made in the ordinary course of the entity's business. In Hyteco the Federal Court held that the disposal, even at a profit, of ex-hire equipment was an affair of capital and not made in the ordinary course of the taxpayer's business of leasing and hiring equipment. Therefore the entity does not hold the motor vehicles for purposes of sale in the ordinary course of its business, as required by the definition of 'trading stock' in section 70-10 of the ITAA 1997.", "Date_of_Decision": "2 July 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 70-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 81", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of trading stock Assignment of rights & entitlements Closing stock Disposal of trading stock Residual values Securitisation", "Case_References": "Federal Commissioner of Taxation v. Sutton Motors (Chullora) Wholesale Pty Ltd (1985) 157 CLR 277 (1985) 85 ATC 4398 (1985) 16 ATR 567", "Other_References": "Parsons, R.W. Income Taxation in Australia, 2001, electronic edition, University of Sydney (originally published 1985, The Law Book Company, Sydney)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008130", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 81 | Keywords Acquisition of trading stock Assignment of rights & entitlements Closing stock Disposal of trading stock Residual values Securitisation"}
{"ATO_ID_Number": "ATO ID 2004/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading stock: residential properties instalment sales contracts", "Issue": "Are residential properties 'trading stock' within the meaning of section 70-10 of the Income Tax Assessment Act 1997 (ITAA 1997), when they are held by a taxpayer engaged in a business of selling them under instalment sales contracts with vendor finance?", "Decision": "Yes. The residential properties held by the taxpayer are 'trading stock' for the purposes of section 70-10 of the ITAA 1997, provided they are held for sale in the ordinary course of the business of selling properties under instalment contracts. Facts The taxpayer carries on a business of buying and selling residential properties. The properties are sold under instalment sales contracts with vendor finance. The instalment sales contract has the following features: The taxpayer did not use the properties for any other purpose prior to sale. The properties were sold for an amount that was in excess of the amount paid by the taxpayer to acquire the property. Each property was sold within six months of it being acquired by the taxpayer. The term 'trading stock' is defined in section 70-10 of the ITAA 1997 as including anything produced, manufactured or acquired that is held for the purposes of manufacture, sale or exchange in the ordinary course of carrying on a business. Since the decision of the High Court in St Hubert's Island Pty Ltd v. Federal Commissioner of Taxation (1978) 138 CLR 210; 78 ATC 4104; (1978) 8 ATR 452 it has been clear that land may be 'trading stock'. Paragraph 1.9 of the Supplementary Explanatory Memorandum - Senate, which accompanied the Tax Law Improvement Act 1997 stated that 'The expression \"in the ordinary course of a business\" was added to the definition to make clear that merely holding an asset for manufacture, sale or exchange will not make it trading stock.' In John v. Federal Commissioner of Taxation (1989) 166 CLR 417 at 429; (1989) 20 ATR 1 at 8; 89 ATC 4101 at 4107 (the John Case) the majority of the High Court held that an item will be trading stock if 'the person is a trader in the goods which are claimed to be trading stock.' In addition, in the John Case the High Court stated that the relevant purpose did not need to be a dominant purpose. The taxpayer is engaged in a business activity that consists of selling residential properties under instalment contracts. In selling the properties under an instalment contract, the taxpayer also derived interest income over the period of the sale contracts. Whilst the taxpayer may have held the property in order to derive this interest income, the property was also held for the purpose of sale. In addition, the properties were held for the purpose of sale in the ordinary course of the taxpayer's business of selling residential properties under instalment contracts. Accordingly, the residential properties held by the taxpayer and sold under instalment sales contracts are 'trading stock' for the purposes of section 70-10 of the ITAA 1997", "Facts": "", "Reasons_for_Decision": "Summary: The term 'trading stock' is defined in section 70-10 of the ITAA 1997 as including anything produced, manufactured or acquired that is held for the purposes of manufacture, sale or exchange in the ordinary course of carrying on a business. Since the decision of the High Court in St Hubert's Island Pty Ltd v. Federal Commissioner of Taxation (1978) 138 CLR 210; 78 ATC 4104; (1978) 8 ATR 452 it has been clear that land may be 'trading stock'. Paragraph 1.9 of the Supplementary Explanatory Memorandum - Senate, which accompanied the Tax Law Improvement Act 1997 stated that 'The expression \"in the ordinary course of a business\" was added to the definition to make clear that merely holding an asset for manufacture, sale or exchange will not make it trading stock.' In John v. Federal Commissioner of Taxation (1989) 166 CLR 417 at 429; (1989) 20 ATR 1 at 8; 89 ATC 4101 at 4107 (the John Case) the majority of the High Court held that an item will be trading stock if 'the person is a trader in the goods which are claimed to be trading stock.' In addition, in the John Case the High Court stated that the relevant purpose did not need to be a dominant purpose. The taxpayer is engaged in a business activity that consists of selling residential properties under instalment contracts. In selling the properties under an instalment contract, the taxpayer also derived interest income over the period of the sale contracts. Whilst the taxpayer may have held the property in order to derive this interest income, the property was also held for the purpose of sale. In addition, the properties were held for the purpose of sale in the ordinary course of the taxpayer's business of selling residential properties under instalment contracts. Accordingly, the residential properties held by the taxpayer and sold under instalment sales contracts are 'trading stock' for the purposes of section 70-10 of the ITAA 1997", "Date_of_Decision": "28 November 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 70-80 section 70-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/26 | ATO ID 2004/27 | ATO ID 2004/28 | ATO ID 2004/29", "Subject_References": "Sale by instalments Trading stock", "Case_References": "Federal Commissioner of Taxation v. St Hubert's Island Pty Ltd (in liq) (1978) 138 CLR 210 78 ATC 4104 (1978) 8 ATR 452", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200425", "Unmatched_Content": "Keywords Sale by instalments Trading stock"}
{"ATO_ID_Number": "ATO ID 2004/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading stock: residential properties instalment sales contracts - stock on hand", "Issue": "Are residential properties 'trading stock on hand' of the taxpayer at the end of the income year for the purposes of section 70-35 of the Income Tax Assessment Act 1997 (ITAA 1997) when the properties are the subject of instalment contracts which have yet to reach settlement?", "Decision": "Yes. The residential properties are 'trading stock on hand' at the end of the income year for the purposes of section 70-35 of the ITAA 1997, as the taxpayer has not lost dispositive power over the properties.", "Facts": "The taxpayer carries on a business of buying and selling residential properties. The properties are sold under instalment sales contracts with vendor finance. The instalment sales contract has the following features: The taxpayer did not use the properties for any other purpose prior to sale. The properties were sold for an amount that was in excess of the amount paid by the taxpayer to acquire the property. Each property was sold within six months of it being acquired by the taxpayer. The properties are trading stock for the purposes of subdivision 70-C of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 70-35 of the ITAA 1997 compares the value of trading stock on hand at the start of the income year with the value of trading stock on hand at the end of the income year, for the purpose of working out the assessable income and deductions of a taxpayer. The properties are 'trading stock on hand' of the taxpayer, provided the taxpayer has dispositive power over the properties. The test of dispositive power was applied in the decision of the High Court of Australia in Farnsworth v. Federal Commissioner of Taxation (1949) 78 CLR 504; (1949) 9 ATD 33; (1949) 4 AITR 25. In that case, a fruit grower had delivered dried fruit to a packing house where it had been mixed with other growers' fruit. The High Court held that the fruit was not stock on hand of the taxpayer. In the leading judgment, Dixon J (with whom McTiernan J agreed) at page 518 relied on the fact that the taxpayer had no dispositive power over the fruit, and no power to direct or control the disposal of it by the packing house. The issue of whether real property was 'trading stock on hand' was considered in Gasparin v. Federal Commissioner of Taxation (1994) 50 FCR 73 ; 94 ATC 4280; (1994) 28 ATR 130 (the Gasparin Case). In that case, the court found that the allotments of land remained trading stock on hand until settlement. Von Doussa J at page 81 stated: The allotments in question remained registered in the name of the vendors until settlement. Until then the vendors had not lost all dispositive power, and had not ceased to have any proprietary interest in the land. If, for any reason a purchaser under an unsettled contract of sale did not proceed, the vendors could elect to treat the contract at an end, and resell the allotment. Prior to settlement, under the contracts of sale the purchasers undoubtedly acquired interests in equity and rights to specific performance, but the vendors did not become bare trustees for the purchasers. The vendors retained substantial interests in the allotments which they enjoyed as beneficial owners... Under the relevant instalment contracts, the purchaser pays for the property by monthly instalments over a lengthy period, such as 25 years. Title to the property does not pass to the purchaser until the final instalment is paid. The purchaser is licensed to occupy the premises from the date of possession. If the purchaser defaults under an instalment contract, the taxpayer retains the deposit and instalments and may resell the property. Based on the decision in the Gasparin Case, the taxpayer does not lose dispositive power over the properties until settlement. This is the case even though the time between when the taxpayer enters into the contract and settlement occurring is a lengthy period, such as 25 years. Therefore, the properties, the subject of instalment contracts, will be 'trading stock on hand' of the taxpayer for the purposes of section 70-35 of the ITAA 1997 at the end of the income year.", "Date_of_Decision": "28 November 2003", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 70-C section 70-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/25 | ATO ID 2004/27 | ATO ID 2004/28 | ATO ID 2004/29", "Subject_References": "Sale by instalments Real estate as trading stock Trading stock on hand Real estate transactions", "Case_References": "Farnsworth v. Federal Commissioner of Taxation (1949) 78 CLR 504 (1949) 9 ATD 33 (1949) 4 AITR 25", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200426", "Unmatched_Content": "Keywords Sale by instalments Real estate as trading stock Trading stock on hand Real estate transactions"}
{"ATO_ID_Number": "ATO ID 2004/526", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Options trading", "Issue": "Are exchange traded options (ETOs) trading stock as defined in section 70-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. ETOs are not 'trading stock' as defined in section 70-10 of the ITAA 1997.", "Facts": "The taxpayer carries on the business of transacting in ETOs on the Australian Securities Exchange (ASX) options market by routinely and systematically taking (buying) and writing (selling) ETOs in the expectation of profit. The taxpayer takes or writes an ETO to establish a position in the options market. This is referred to in the market as having an 'open position'. The taxpayer then determines how best to realise that position by: At 30 June 2003, the end of the taxpayer's income year, the taxpayer holds ETOs that have been bought in the open position and have not been closed out, exercised or expired.", "Reasons_for_Decision": "Summary: The process of transacting in the options market differs from trading on securities markets as participants do not buy or sell a physical instrument. Rather, a subsidiary of ASX, ASX Clear Pty Limited sets the option contracts (contract series) that a participant can transact in. When a transaction occurs in the options market, a buyer takes a 'bought position' and the seller takes a 'sold position'. The ASX's standard terms and conditions governing ETOs provide that the rights and obligations under the ETO contracts cannot be transferred between parties. Therefore, if the taxpayer has a bought position in an ETO contract series, they cannot transfer or assign the particular ETO to another party. Section 70-10 of the ITAA 1997 defines trading stock to include anything produced, manufactured or acquired which is held for the purposes of manufacture, sale or exchange in the ordinary course of business. While the taxpayer buys options in the ordinary course of the taxpayer's business, they are not bought for the purpose of sale or exchange. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW, defines sale as, 'transfer of property for money or credit'. Exchange is defined as, 'to part with for some equivalent; give up (something) for something else; to replace by another or something else;...transfer for a recompense'. By closing out its position, allowing a particular option to lapse or exercising it, the taxpayer has not been involved in a transaction where there is either a sale or exchange. Closing out extinguishes a right or contingent obligation consequent upon entering into a separate transaction opposite to the position previously taken. There has been no sale or exchange. Similarly, allowing an option to lapse does not involve any element of sale or exchange. The exercise of an option results in the taxpayer buying or selling the underlying security at a pre-agreed price but does not involve any sale or exchange of an ETO. Consequently ETOs do not fall within the definition of trading stock in section 70-10 of the ITAA 1997.", "Date_of_Decision": "16 June 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 70-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Call options Put options Trading stock Trading stock valuation", "Case_References": "", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004526", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Call options Put options Trading stock Trading stock valuation"}
{"ATO_ID_Number": "ATO ID 2004/532", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: business of subdivision - time when land becomes trading stock", "Issue": "When does land that was originally acquired and used for farming purposes and later ventured into a business of subdivision, development and sale, become trading stock of the taxpayer for the purposes of Division 70 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Land that was originally acquired and used for farming purposes and later ventured into a business of subdivision, development and sale, becomes trading stock of the taxpayer, for the purposes of Division 70 of the ITAA 1997, when it is ventured into a business of development, subdivision and sale.", "Facts": "The taxpayer originally acquired land for farming purposes. The taxpayer later ventured the land into a business of subdivision, development and sale. The taxpayer intends to sell the land in subdivided lots. At the end of the current year, the land has not yet been subdivided into separate lots ready for sale. The proceeds from the sale of the subdivided land will be assessable under section 6-5 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Under section 70-10 of the ITAA 1997 trading stock is defined to include anything produced, manufactured or acquired that is held for the purposes of manufacture, sale or exchange in the ordinary course of a business. Taxation Determination TD 92/124A clarifies that land will be treated as trading stock for income tax purposes if it is held for the purpose of resale and a business activity which involves dealing in land has commenced. The decision in Federal Commissioner of Taxation v. St Hubert's Island Pty Ltd (1978) 138 CLR 210; 78 ATC 4104; (1978) 8 ATR 452 confirms that broadacre land (that is, not yet subdivided) is trading stock of a property developer. As the taxpayer is regarded as being in the business of subdivision, development and sale of land, the proceeds from the sale of the subdivided land will be assessable under section 6-5 of the ITAA 1997. The taxpayer's land will be treated as trading stock when the land is ventured into the business of development, subdivision and sale. When an asset is ventured into the business of development, subdivision and sale is a matter of fact. However, TD 92/124 provides guidance that a business activity is taken to have commenced when a taxpayer embarks on a definite and continuous cycle of operations designed to lead to the sale of the land.", "Date_of_Decision": "17 December 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 Division 70 section 70-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/128", "Subject_References": "Business income Carrying on a business Income Ordinary course of business Real estate as trading stock Subdivided farm land", "Case_References": "Federal Commissioner of Taxation v St Hubert's Island (1976) 6 ATR 183 (1976) 76 ATC 4080", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004532", "Unmatched_Content": "Keywords Business income Carrying on a business Income Ordinary course of business Real estate as trading stock Subdivided farm land"}
{"ATO_ID_Number": "ATO ID 2003/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading Stock: Valuation of Abalone", "Issue": "Is the 'cost' of abalone for the purposes of paragraph 70-45 (1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) calculated using the full absorption cost method for all expenses of acquisition and production?", "Decision": "No. The 'cost' of abalone for the purposes of paragraph 70-45 (1)(a) of the ITAA 1997 is not calculated using the full absorption cost method for all expenses of acquisition and production.", "Facts": "Abalone are being bred in a land based marine operation. A substantial labour force is employed full time in the complex operation of producing mature stock. Breeding stock are taken from their natural environment and are placed in a temperature and light controlled holding area. The breeding stock are then separated by gender and induced to release their eggs and sperm. The eggs and sperm are analysed and then combined for fertilisation. The fertilised eggs are then placed in trays where they hatch into a free swimming larval stage. The larvae then complete the final stage of development and transform into miniature abalone known as spat, which are placed into a nursery where they remain for several months. They are then held in grow out bins until ready for sale. The final grow out stage is the most labour intensive stage with the staff undertaking feeding, cleaning, monitoring and water sampling.", "Reasons_for_Decision": "Summary: Under subsection 70-45(1) of the ITAA 1997 the taxpayer must elect to value each item of trading stock on hand at the end of the income year at either Trading stock includes livestock (paragraph 70-10(a) of the ITAA 1997). Abalone produced for sale are considered to be trading stock both within the ordinary meaning of the term and as live stock for the purpose of section 70-10 of the ITAA 1997. Taxation Ruling IT 2350 recognises that the courts have established the following general propositions about how a taxpayer values manufactured trading stock at 'cost price' under subsection 31(1) of the Income Tax Assessment Act 1936 (ITAA 1936): Section 70-45 of the ITAA, which replaces subsection 31(1) of the ITAA 1936, is compatible with the case law and rulings relating to subsection 31(1) of the ITAA 1936. Under paragraph 70-45(1)(a) of the ITAA 1997, trading stock is valued at 'cost' rather than 'cost price'. The Commissioner accepts that the production of abalone does not constitute manufacture. However, the same principles of valuing manufactured trading stock apply such that the absorption cost method is the appropriate method to use to include those costs sufficiently associated with the production of trading stock. On this basis, all costs of production in bringing abalone to a saleable condition would need to be added to the acquisition cost of the abalone. However in order to be consistent with accepted practice in relation to the rearing and maintenance of livestock generally, the ongoing production costs will be allowed as a deduction as and when they are incurred in the normal carrying on of the abalone business. As such, 'cost' would include only those expenses incurred up until the abalone reach the spat stage of development and expenses of production thereafter would be deductible as incurred. Accordingly, the 'cost' of abalone for the purposes of paragraph 70-45(1)(a) of the ITAA 1997 does not need to be calculated using the full absorption cost method for all expenses of acquisition and production.", "Date_of_Decision": "21 November 2002", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Subsection 31(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/756", "Subject_References": "Trading stock", "Case_References": "Australasian Jam Co Pty Ltd v. Federal Commissioner of Taxation (1953) 88 CLR 23 (1953) 10 ATD 217 (1953) AITR 566.", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200344", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2003/203", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Part IVA and disposal of trading stock where an election is made", "Issue": "Does Part IVA of the Income Tax Assessment Act 1936 (ITAA 1936) apply where a taxpayer is undergoing a corporate restructure which involves the interposition of a partnership and makes an election under subsection 70-100(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Where the taxpayer is undergoing a corporate restructure which involves the interposition of a partnership and makes an election under subsection 70-100(4) of the ITAA 1997, Part IVA of the ITAA 1936 will not apply as a 'tax benefit' will not be obtained.", "Facts": "The taxpayer proposes to undergo a corporate restructure and simplification process in relation to particular assets that it owns, which will result in one company holding all assets. The restructure will involve the transfer of trading stock from the taxpayer to a partnership. The partnership will comprise of the taxpayer and a subsidiary, in which each partner will hold a 50% interest in the partnership. The transfer of assets will involve a 2-stage process, in which the trading stock will be transferred to the partnership, followed by the partnership transferring the trading stock to the subsidiary. The subsidiary will ultimately own 100% of the taxpayer's trading stock. An election will be made under subsection 70-100(4) of the ITAA 1997 to treat the assets having been disposed of for what would have been their value as trading stock of the transferor on hand at the date of transfer.", "Reasons_for_Decision": "Summary: Part IVA of the ITAA 1936 contains general anti-avoidance provisions designed to prevent the avoidance of tax. Part IVA of the ITAA 1936 will only apply where a scheme has been entered into or carried out to obtain a tax benefit and it can be concluded the dominant purpose of entering the scheme was to obtain a tax benefit. In such situations, the Commissioner can apply the provisions to deny the tax benefit obtained. Paragraph 177C(2)(a) of the ITAA 1936 provides for an exclusion to obtaining a tax benefit where it relates to the non-inclusion of an amount in assessable income where it is attributable to an election being made as provided for under the ITAA 1936 or ITAA 1997. The exclusion will only apply where the scheme was not entered into or carried out for the purpose of creating any circumstance or state of affairs to enable such an election being made. Taxation Determination TD 96/3 clearly enables an election to be made where there is a transfer of trading stock from a sole trader to a partnership and from the partnership to a trustee of a discretionary trust, on the basis that at least a 25% ownership interest in the assets is maintained and where all parties sign an agreement. Therefore, TD 96/3 allows the interposition of a partnership as part of a 2-stage transfer and a subsequent election being made, without a determination ultimately being made that Part IVA of the ITAA 1936 applies to the transaction. However, TD 96/3 does not consider the potential application of Part IVA of the ITAA 1936 to this, directly comparable, arrangement. It is reasonable to conclude, therefore, that the Commissioner does not consider that Part IVA of the ITAA 1936 should apply to this arrangement, on the basis that the creation of the 2-stage transfer, with elections, did not prevent the application of the exclusion provided for by paragraph 177C(2)(a) of the ITAA 1936. The interposition of the partnership to enable the election to be made will not prevent the operation of the exclusion in paragraph 177C(2)(a) of the ITAA 1936. As there is no 'tax benefit', Part IVA of the ITAA 1936 will not apply.", "Date_of_Decision": "24 July 2002", "Year_of_Income": "Year ended 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Part IVA paragraph 177C(2)(a)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 96/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interposed partnerships Disposal of trading stock Election Part IVA", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003203", "Unmatched_Content": "Omitted reference to Case Decision Summary CDS 10334. | Related Public Rulings (including Determinations) Taxation Determination TD 96/3 | Keywords Interposed partnerships Disposal of trading stock Election Part IVA"}
{"ATO_ID_Number": "ATO ID 2003/357", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading stock value: disposal by exempt entity - outside ordinary course of business", "Issue": "Is a taxpayer who acquires an item of trading stock from a tax exempt entity that disposed of it outside the ordinary course of its business, treated as having bought the item for its market value for the purposes of section 70-95 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A taxpayer who acquires an item of trading stock from a tax exempt entity that disposed of it outside the ordinary course of its business, is treated as having bought the item for its market value for the purposes of section 70-95 of the ITAA 1997.", "Facts": "The taxpayer is fully owned by a tax exempt entity. It took over the business of the tax exempt entity. All assets (including trading stock) were transferred to the taxpayer.", "Reasons_for_Decision": "Summary: Section 70-95 of the ITAA 1997 states: If an entity disposes of an item of the entity's trading stock outside the ordinary course of business, the entity acquiring the item is treated as having bought it for the amount included in the disposing entity's assessable income under section 70-90. Sub-section 70-90(1) of the ITAA 1997 states: If you dispose of an item of your trading stock outside the ordinary course of a business: (a) that you are carrying on; and (b) of which the item is an asset The tax exempt entity disposed of its trading stock outside the ordinary course of its business. A literal reading of sections 70-90 and 70-95 of the ITAA 1997 may suggest that the taxpayer is treated as having bought the trading stock for a nil amount on the basis that the entity from which they acquired the trading stock is exempt from tax and includes no amount in its assessable income under section 70-90. However, in Federal Commissioner of Taxation v. Angus (1961) 105 CLR 489; (1961) 12 ATD 277 the High Court looked at the interaction between paragraph 23(q) (an exempting provision that has now been repealed) and subsection 97(1) of the Income Tax Assessment Act 1936 . At pp515-516 Menzies J stated (at CLR 515-516): The argument ran that what is included in assessable income of a taxpayer cannot be exempt income. It is, however, commonly found in the Act that the assessable income of a taxpayer shall include certain things: see ss. 26 and 44. This form of words, however does not mean that special provisions such as s. 23 (q) can have no application, and indeed, the contrary was decided in Reid v Federal Commissioner of Taxation . The meaning of a general provision that something shall be included in the assessable income of a taxpayer is always subject to any particular provision which would exempt that income from income tax . [emphasis added] In view of this the tax exempt organisation will include in its assessable income the market value of the items of trading stock disposed of (section 70-90 of the ITAA 1997), notwithstanding that its income will be exempt under section 50-1 of the ITAA 1997. Accordingly, section 70-95 of the ITAA 1997 will apply to treat the taxpayer as having bought the trading stock for its market value.", "Date_of_Decision": "9 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 23(q) (repealed) subsection 97(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Disposal of trading stock Exempt entities", "Case_References": "Federal Commissioner of Taxation v. Angus (1961) 105 CLR 489 (1961) 12 ATD 277", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003357", "Unmatched_Content": "your assessable income includes the market value of the item on the day of the disposal. | Keywords Disposal of trading stock Exempt entities"}
{"ATO_ID_Number": "ATO ID 2003/663", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: trading stock - surrender of land to State for boundary redescription", "Issue": "Does a taxpayer who owns land held as trading stock dispose of trading stock outside the ordinary course of business for the purposes of section 70-90 of the Income Tax Assessment Act 1997 (ITAA 1997) when the taxpayer surrenders title to the land under State legislation, in order for the State to issue the taxpayer with a new title that redescribes the boundary of the land?", "Decision": "No. A taxpayer who owns land held as trading stock does not dispose of trading stock outside the ordinary course of business for the purposes of section 70-90 of the ITAA 1997, when the taxpayer surrenders the title to the land under State legislation, in order for the State to issue the taxpayer with a new title that redescribes the boundary of the land.", "Facts": "The taxpayer is a landowner that holds land as trading stock. The taxpayer's land boundaries comprise a combination of fixed line boundaries and a geographical feature. Works on the land were carried out. The boundary of the part of the land where the works were carried out is defined by the geographical feature. The works on the land disrupted the natural tidal flow and caused sand to build up over time resulting in accretions (an area of land growth) to the land. The relevant State legislation provides that land that becomes raised above the boundary defined by the geographical feature because of the carrying out of works belongs to the State. In the absence of this provision, the accretions would fall within the boundaries of the taxpayer's land because the boundary of the land is defined by the high water mark. In accordance with development requirements, the taxpayer was required to redefine the boundaries of the property to effectively exclude physical accretions to the land that had occurred over time. The only method provided for the correction of boundaries under the relevant State legislation is for the taxpayer to surrender the title of the land to the State, to enable the State to cancel the existing title and to issue a new title to the taxpayer showing the correct boundaries.", "Reasons_for_Decision": "Summary: Section 70-90 of the ITAA 1997 provides that a taxpayer's assessable income includes the market value of an item of trading stock if the taxpayer disposes of the item outside the ordinary course of the taxpayer's business. The taxpayer holds land as trading stock. Therefore, it is necessary to determine whether the taxpayer has made a disposal of an item of trading stock when the taxpayer surrenders the title deed to the land under State legislation, in order for the State to issue the taxpayer with a new title that redescribes the boundary of the land to exclude certain accretions to the land. Accreted land The relevant State legislation provides that any land that has accreted to land owned by the taxpayer due to the carrying out of works belongs to the State. In this case, the accretions were due to the carrying out of works. Therefore there was no issue of the taxpayer disposing the accreted land since it did not lawfully belong to the taxpayer. Original land The taxpayer was indisputably the owner of the original land which did not arise from accretion. Although the State law requires that the title be 'surrendered' (to correct the boundaries), the surrender is only the first step in the process stipulated for boundary correction, with the State being obligated to issue a replacement title setting out the exact area of land already owned by the taxpayer. In the process of surrendering and reissue of the title, it is clear that any land surrendered because its boundaries have significantly changed by gradual and imperceptible degrees will be held on trust for the registered owner. It has long been established at common law that a disposal of property will only occur where a proprietary right or interest passes at law or equity to another person or entity. ( Glennon v. Federal Commissioner of Taxation ; Carrigan v. Federal Commissioner of Taxation (1972) 127 CLR 503; 72 ATC 4181; (1972) 3 ATR 263 per Walsh J). As the State holds the land on trust for the registered owner, the registered owner still has the beneficial interest in the land. The surrender of the title to the State does not have the effect that the taxpayer is no longer the owner of the land and the issue of a new title does not give, devolve or confer any interest in the land upon the taxpayer. At all times the taxpayer retains beneficial ownership of the land. In these circumstances, it is considered that no disposal of the land has occurred. Therefore, the taxpayer does not dispose of trading stock outside the ordinary course of business, for the purposes of section 70-90 of the ITAA 1997, when the taxpayer surrenders the title to the land under State legislation, in order for the State to issue the taxpayer with a new title that redescribes the boundary of the land.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 70-90(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/518", "Subject_References": "Disposal of assets Disposal of trading stock Disposals not in the ordinary course of business Equitable interests Land tenure & title Legal title Trading stock", "Case_References": "Glennon v Federal Commissioner of Taxation", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003663", "Unmatched_Content": "Add a , after \"does not give\" in paragraph seven. | Change from 15 September 2014 to 4 August 2017. | Keywords Disposal of assets Disposal of trading stock Disposals not in the ordinary course of business Equitable interests Land tenure & title Legal title Trading stock"}
{"ATO_ID_Number": "ATO ID 2003/726", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Definition of live stock and animal embryos", "Issue": "Does the definition of live stock, in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), include animal embryos?", "Decision": "No. The definition of live stock, in subsection 995-1(1) of the ITAA 1997, does not include animal embryos.", "Facts": "The taxpayer is carrying on a business of primary production. Animal embryos are acquired and held for the purpose of artificially breeding live stock.", "Reasons_for_Decision": "Summary: The term 'live stock' is defined in subsection 995-1(1) of the ITAA 1997: live stock does not include animals used as beasts of burden or working beasts in a business other than a primary production business. Rather than outlining what is considered to be live stock this definition merely states which animals are not considered to be live stock. However, in Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105; (1951) 9 ATD 337; (1951) 5 AITR 214 ( Wade's Case ), the High Court considered that this definition infers that all animals that are used in primary production are included in the definition of live stock. Per Dixon and Fullagar JJ: There is a definition of livestock which, by inference, makes it clear that all animals are to be included in the case of a business of primary production. Live stock are specifically included in the definition of trading stock by virtue of paragraph 70-10(b) of the ITAA 1997, and will therefore always be considered to be trading stock. This means that the purchase and sale of live stock will always be on revenue account regardless of how the live stock are actually used in the business. This was made clear in Wade's Case where dairy cattle were considered trading stock (even though it was the milk rather than the cattle that the taxpayer actually traded in), and compensation received for the loss of the dairy cattle was found to be income rather than capital. In contrast, in AAT Case 8671 (1993) 25 ATR 1130; Case 17/93 93 ATC 214, Dr P Gerber found that the cost of cattle embryos acquired for implantation into recipient cows was 'surely an outgoing of capital'. This indicates that Dr Gerber did not consider the embryos to be live stock, the purchase of which would always be on revenue account as a purchase of trading stock. Taxation Ruling TR 93/9 also suggests that embryos are not live stock. Paragraph 7 of that Ruling discusses when an item becomes trading stock and draws a distinction between embryos and live animals. The Ruling refers to the process by which 'an embryo grows into a live animal' indicating that an embryo is something less than a live animal. Taxation Ruling TR 93/9 equates the process by which an embryo grows into a live animal with the process by which seed grows into a crop or raw materials are made into a manufactured article. Therefore, just as seed is not a harvested crop, and raw materials are not manufactured goods, neither are embryos live stock. Example two of TR 93/9 provides further support for this conclusion. The example used in the Ruling states that embryos purchased by a cattle farmer for the purpose of implanting in cows are not held as trading stock by the farmer. This is consistent with the decision of Dr Gerber mentioned above and illustrates that embryos are not livestock as the live stock of a cattle farmer would always be held as trading stock. For these reasons, it is considered that the definition of live stock in subsection 995-1(1) of the ITAA 1997 does not include animal embryos. Although animal embryos are not considered live stock, they will still be considered trading stock under paragraph 70-10(a) of the ITAA 1997 if they are held for sale or exchange in the ordinary course of a business.", "Date_of_Decision": "30 July 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1) paragraph 70-10(a) paragraph 70-10(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 93/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Livestock breeding Livestock industry Primary production", "Case_References": "Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105 9 ATD 337 (1951) 5 AITR 214", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003726", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 93/9 | Keywords Livestock breeding Livestock industry Primary production"}
{"ATO_ID_Number": "ATO ID 2002/625", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disposal of Trading Stock", "Issue": "Can the election under subsection 70-100(4) of the Income Tax Assessment Act 1997 (ITAA 1997) be exercised in respect of trading stock, distributed to beneficiaries on winding up of a deceased estate, so that the trading stock is brought to account at its closing value rather than its market value?", "Decision": "No. The election under subsection 70-100(4) of the ITAA 1997 cannot be exercised.", "Facts": "The assets of a deceased estate included a large parcel of land. The executors of the estate commenced a business of land subdivision in which the subdivided lots were treated as trading stock. The executors, having administered the estate for a number of years, decided to transfer the remaining lots as an in specie distribution to the beneficiaries of the deceased estate, so that the estate could be wound up.", "Reasons_for_Decision": "Summary: In order for an election to be made under subsection 70-100(4) of the ITAA 1997, there must first be a partial change in the ownership of an item of trading stock. Immediately after the change, the entity that held the item must no longer be the item's sole owner but must still retain an interest in the item in accordance with subsection 70-100(1) of the ITAA 1997. An entity includes a trust, a trustee and a beneficiary in accordance with section 960-100 of the ITAA 1997. Thus, it must be determined which entity (the trust, the trustee and/or the beneficiaries) held an ownership interest in the land before its transfer and which, if any, held an interest after the transfer. While it is accepted that the beneficiaries of the deceased estate have a beneficial interest in the assets of the deceased estate whether fully administered or not, the legal ownership of the trust property prior to the transfer is in the trustee who holds it for the benefit of the beneficiaries. Thus, it is considered that the beneficiaries cannot be said to own the trading stock prior to the transfer. After the transfer, the trustee who held ownership of the land previously has not retained an interest in it. The land is owned entirely by the beneficiaries to whom it has been transferred. Therefore, as the conditions of subsection 70-100(1) of the ITAA 1997 have not been satisfied, the election under subsection 70-100(4) of the ITAA 1997 cannot be exercised.", "Date_of_Decision": "11 March 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 960-100 subsection 70-100(1) subsection 70-100(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Disposal of trading stock Trading stock valuation Deceased estates", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002625", "Unmatched_Content": "minor editorial/grammatical amendments | Keywords Disposal of trading stock Trading stock valuation Deceased estates"}
{"ATO_ID_Number": "ATO ID 2002/780", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Forced disposal of livestock - drought conditions", "Issue": "Can a taxpayer's property be considered drought affected for the purposes of Subdivision 385-E of the Income Tax Assessment Act 1997 (ITAA 1997) if it has not been officially acknowledged as such by a competent authority?", "Decision": "Yes. The taxpayer's property will satisfy the requirements of Subdivision 385-E of the ITAA 1997 providing objective evidence supports the conclusion the property is drought affected.", "Facts": "The taxpayer is in the business of primary production. Current fodder levels are extremely low due to very dry conditions. There is a forced disposal of live stock because of the low fodder levels. The taxpayer's property has not been officially declared in drought by a competent authority.", "Reasons_for_Decision": "Summary: Subdivision 385-E of the ITAA 1997 encompasses sections 385-90 to 385-125 and is titled, 'Primary producer can elect to spread or defer tax on profit from forced disposal or death of live stock'. Subsection 385-95(1) prescribes that where a taxpayer in primary production business is forced to dispose of live stock because 'pasture or fodder is destroyed by fire, drought or flood', an election may be made to spread the tax profit from such forced disposal over five years. The subsection does not require official acknowledgment of drought by a competent authority. In Case 60 (1963) 11 CTBR (NS) 361; Case P25 (1963-64) 14 TBRD 127, Member Mr R.E. O'Neill stated: 'In considering whether a disposal of livestock is \"in consequence of the loss or destruction of pastures or fodder\" by reason of drought, it seems to me that a sound approach is to consider, not the magnitude of rainfall deficiency in a particular period, but rather the effects upon pastures of any rainfall deficiencies in light of other factors....' As such, the taxpayer's property does not need to be officially acknowledged as in drought by a competent authority before the taxpayer makes the election under subsection 385-95(1) of the ITAA 1997, if objective evidence supports the conclusion that the property is in fact drought affected, and those conditions caused the disposal of the livestock.", "Date_of_Decision": "28 June 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subsection 385-95(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 95/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Primary production income Disposal of trading stock Livestock disposal Primary production Livestock industry", "Case_References": "Case 60 (1963) 11 CTBR (NS) 361", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002780", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 95/6 | Keywords Primary production income Disposal of trading stock Livestock disposal Primary production Livestock industry"}
{"ATO_ID_Number": "ATO ID 2002/937", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Value of livestock to be included in assessable income at date of death of taxpayer", "Issue": "Can the legal personal representative of a deceased taxpayer elect under subsection 70-105(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to value livestock transferred from the deceased taxpayer at the livestock's closing value rather than its market value?", "Decision": "Yes. The election under subsection 70-105(3) of the ITAA 1997 can be exercised by the legal personal representative of a deceased taxpayer as they continued to carry on that business using the same livestock.", "Facts": "The taxpayer died in a prior income year. The taxpayer carried on a business as a cattle farmer immediately prior to their death. The legal personal representative of the deceased carried on the business of cattle farming during the period of the administration of the estate. The cattle were sold during the income year immediately following the year in which the taxpayer died.", "Reasons_for_Decision": "Summary: Section 70-105 of the ITAA 1997 looks at the trading stock implications upon death of a taxpayer. Ordinarily, the assessable income of the taxpayer must include the market value of the trading stock at the time of death. However, under subsection 70-105(3) of the ITAA 1997, the legal personal representative of the taxpayer can elect that a different amount be included in assessable income. They may elect that the value of the trading stock be the amount that would have been the value (under Subdivision 70-C of the ITAA 1997) as at the end of an income year ending on the date of death. Subsection 70-105(5) of the ITAA 1997 states that an election under subsection 70-105(3) of the ITAA 1997 can only be made if the legal personal representative of the taxpayer carries on the business after the date of death and the trading stock continues to be used as trading stock in that business. The deceased taxpayer's cattle business was being operated by their legal personal representative during the period of the administration of the estate. The cattle were not sold until the income year following the year in which the taxpayer died. As the business was carried on after the date of death and the trading stock continued to be used as trading stock in that business, the legal personal representative can make an election under subsection 70-105(3) of the ITAA 1997. The effect of this election is to allow the transfer of the cattle at the book value amount in the livestock account, instead of market value. This means that the amount that needs to be included as assessable income in the date of death return is the book value amount from the livestock account, calculated at the date of death.", "Date_of_Decision": "11 September 2002", "Year_of_Income": "Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1997 section 70-105 subsection 70-105(3) subsection 70-105(5) Subdivision 70-C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deaths Disposal of trading stock Trading stock Trading stock valuation Livestock valuation", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002937", "Unmatched_Content": "This ATO ID has been amended to improve clarity and to update legislative references. | Keywords Deaths Disposal of trading stock Trading stock Trading stock valuation Livestock valuation"}
{"ATO_ID_Number": "ATO ID 2010/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: real risk of forfeiture - minimum term of employment and good leaver provisions", "Issue": "Will rights to acquire shares acquired by employees under an employee share scheme satisfy the condition in subsection 83A-105(3) of the Income Tax Assessment Act 1997 (ITAA 1997), where the conditions of the scheme provide that the rights will be forfeited if a minimum term of employment is not completed and the scheme contains good leaver provisions?", "Decision": "Yes. Rights to acquire shares acquired by employees under an employee share scheme will satisfy the condition in subsection 83A-105(3) of the ITAA 1997, where:", "Facts": "The company operates a scheme under which rights to acquire shares in the company are provided at a discount to employees of the company, under an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997. The employee share scheme is designed to motivate, reward and retain employees and align their interests with the interests of the company. The company operates the scheme in accordance with the conditions of the scheme. Under the conditions of the scheme, the rights will vest according to the following vesting schedule provided that the employee is still employed by the company at the vesting date: The employee cannot dispose of the rights. When the rights vest the employee is automatically issued with shares in the company. The employee does not pay anything for the shares. The conditions of the scheme do not restrict the employee from disposing of the shares acquired on vesting of the rights. If the employee ceases employment prior to the vesting of the rights the rights will be forfeited. However, if the employee ceases employment because of death, invalidity, bona fide redundancy or retirement (unless the retirement happens within 6 months of the date of grant of the rights) the rights will vest according to the vesting schedule. If the employee retires within 6 months of the date of grant of the rights the rights will be forfeited. Retirement is defined, for this scheme, as ceasing employment with the company when the employee is at least 55 years of age and has completed at least 10 years of service with the company.", "Reasons_for_Decision": "Summary: Division 83A of the ITAA 1997 provides for the taxation of ESS interests (shares, stapled securities and rights to acquire shares and stapled securities) acquired under an employee share schemes at a discount. The discount given in relation to an ESS interest acquired under an employee share scheme is included in an employee's assessable income in the income year in which the interest is acquired under Subdivision 83A-B of the ITAA 1997 unless Subdivision 83A-C of the ITAA 1997 applies. If Subdivision 83A-C of the ITAA 1997 applies to the ESS interest, the employee will include an amount in the income year in which the ESS deferred taxing point for the ESS interest occurs. Subdivision 83A-C of the ITAA 1997 applies, instead of Subdivision 83A-B, to an ESS interest when the conditions in subsection 83A-105(1) of the ITAA 1997 are met. If the ESS interest is a right, the condition under paragraph 83A-105(1)(d) and subsection 83A-105(3) of the ITAA 1997 requires that when the employee acquires the interest: | Detailed Reasoning - Real risk of forfeiture: Subsection 83A-105(3) of the ITAA 1997 is to be interpreted by considering the ordinary meaning of the words having regard to the legislative context and the object or purpose of Division 83A of the ITAA 1997. 'Real' is defined in The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne as 'actually existing as a thing or occurring in fact' and 'genuine; rightly so called; not artificial or merely apparent'. The Explanatory Memorandum (EM) to the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009, which inserted Division 83A into the ITAA 1997, explains the purpose of having a real risk of forfeiture test to qualify for treatment under Subdivision 83A-C of the ITAA 1997 as follows: Providing for the deferral of tax in these situations recognises that the employee may never have a chance to recognise the economic value of the ESS interest, and that having employee remuneration 'at risk' in this manner is consistent with the purpose of concessionally taxing employee share schemes, namely to align the interests of employees and employers. The EM explains the real risk of forfeiture test at paragraph 1 156 and 1 158: The 'real risk of forfeiture test' does not require employers to provide schemes in which their [ESS interests] are at significant or substantial risk of being lost. However, real is regarded as something more than a mere possibility. Something is not a real risk if a reasonable person would disregard the risk as highly unlikely to occur or as nothing more than a rare eventuality or possibility. ... The 'real risk of forfeiture' test is intended to provide for deferral of tax when there is a real alignment of interests between the employee and employer, through the employee's benefits being at risk. The test is a principle based test, intended to deny deferral of tax where schemes contrive to present a nominal risk of forfeiture without complying with the intent of the proposed law. Therefore, for the 'real risk of forfeiture' condition to be met for an ESS interest acquired by an employee under an employee share scheme, a reasonable person must consider that: In considering whether a condition in a scheme imposes a real risk of forfeiture, regard should be had to whether a reasonable person would consider that there is a genuine connection between the forfeiture condition and aligning the interests of the employee and employer. If the risk of forfeiture is over a very short period of time to gain access to a relatively long period of deferral the risk will not be considered real. Good leaver conditions that allow rights to be retained in the event of death, invalidity or bona fide redundancy do not prevent the rights being at a real risk of forfeiture provided that the scheme is operated in accordance with the conditions and employees do not routinely receive the benefit of the rights regardless of their reason for ceasing employment. | Detailed Reasoning - Employees who do not satisfy the definition of retirement: The scheme has been designed to motivate, reward and retain employees. The scheme operates so that employees who are granted rights have an interest in remaining employed with the company, and in the company performing well, as they will be provided with shares in the company when their rights vest in 1, 2 and 3 years from the date of grant if they are still employed at that time. A condition imposing a minimum employment period of 12 months is considered to give rise to more than a 'mere' or 'rare' possibility of forfeiture and to be a condition genuinely directed to retaining employees and aligning their interests with the interest of the company. The conditions that allow the rights to be retained in the event of death, invalidity or bona fide redundancy do not prevent the rights being at a real risk of forfeiture because they only operate when special circumstances occur that are outside the control of the employee. They do not prevent the risk of forfeiture for the employee if they cease employment in normal circumstances from being real. The good leaver provisions are consistent with the genuine purpose of the scheme to align the interests of the employee and employer and only provide relief for employees in unfortunate circumstances. Therefore, employees who do not satisfy the definition of retirement will have a real risk, under the conditions of the employee share scheme, of forfeiting or losing the rights acquired under the scheme and the rights will satisfy the condition in subsection 83A-105(3) of the ITAA 1997. If an employee is not at least 55 years of age with 10 years of service at the time they acquire the rights, they are considered to be in the same position as any other employee even if they may satisfy the retirement definition at some time during the forfeiture period. | Detailed Reasoning - Employees who satisfy the definition of retirement: Under the conditions of this scheme, an employee who is at least 55 years of age and has completed 10 years of service as at the date the rights are granted must be employed with the company for a further 6 months from the date of grant of the rights before they will be entitled under the conditions of the scheme to vesting of the rights without risk of forfeiture. In considering whether a minimum employment period of 6 months gives rise to a real risk of forfeiture, the Commissioner will consider whether the risk is genuine having regard to the deferral period provided under the scheme. In this case, the rights will vest according to the vesting schedule. Therefore, there is a maximum 3 year deferral period from the time that the rights are granted, with a 6 month forfeiture period for employees of at least 55 years of age with 10 years of service at the time they acquire the rights. In these circumstances, the Commissioner is of the view that these employees will be subject to a real risk of forfeiture.", "Date_of_Decision": "5 March 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 83A Subdivision 83A-B Subdivision 83A-C subsection 83A-105(1) subsection 83A-105(3) paragraph 83A-105(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options", "Case_References": "", "Other_References": "The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201061", "Unmatched_Content": "Keywords Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2008/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: replacement rights received on company takeover", "Issue": "Where rights acquired by an employee under an employee share scheme are replaced by rights to acquire shares in a new company in connection with a 100% takeover by that company, will the new rights, which have substantially different attributes, be regarded as matching rights in the original employer company, for the purposes of section 83A-130 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The rights to acquire shares in the new company acquired by the employee in connection with a 100% takeover by that company as a replacement for rights to acquire shares in the original employer company will not be regarded as matching rights in the original company for the purposes of section 83A-130 of the ITAA 1997, because the new rights have substantially different attributes.", "Facts": "The employee was granted rights to acquire shares in their employer company under an employee share scheme to which Division 83A of the ITAA 1997 applies. The attributes of the rights included an exercise period and an exercise price and the vesting of the rights was subject to performance conditions being satisfied by the company. In a later year (before the rights were exercised), a company (the new company) effected a 100% takeover of the original employer company (the old company), within the meaning of sections 975-505 and 995-1 of the ITAA 1997. After the takeover, the employee was employed by the new company. As a consequence of the takeover, the employee's rights in the old company were replaced by rights to acquire shares in the new company. The attributes of the new rights are such that, providing the employee remains employed by the new company until the vesting date, the rights will be automatically converted into fully paid ordinary shares in the new company at that time.", "Reasons_for_Decision": "Summary: Section 83A-130 of the ITAA 1997 ensures that employees are not adversely affected by takeovers and restructures, by allowing taxpayers who have deferred tax under an employee share scheme to roll-over an employee share scheme deferred taxing point that would otherwise occur due to a corporate restructure [1] . Where section 83A-130 of the ITAA 1997 applies, ESS interests [2] acquired by an employee in a new company are treated as if they are a continuation of ESS interests acquired by the employee in the old company. To treat the acquisition of rights acquired as a consequence of a takeover or restructure resulting in an old company being a 100% subsidiary as a continuation of ESS interests acquired by the employee in the old company, subsection 83A-130(2) requires that: The EM provides guidance as to factors that are considered relevant in determining the extent that ESS interests in a new company can reasonably be regarded as matching ESS interests in an old company. In order to be regarded as reasonably matching, paragraph 1.255 of the EM states that the attributes of the shares or rights immediately before the restructure need to be the same, or substantially the same, immediately after the restructure. To determine whether the rights granted to the employee as a consequence of the old company becoming a 100% subsidiary of the new company are matching rights for the purposes of section 83A-130 of the ITAA 1997, it is therefore appropriate to compare the relative attributes of the rights acquired by the employee before and after the takeover. The attributes of the rights to acquire shares in the old company included a specified exercise period and an exercise price and vesting of the rights was subject to performance conditions being satisfied. By contrast, the attributes of the rights to acquire shares in the new company acquired after the takeover, are such that these rights will be automatically converted into shares in the new company at the vesting date, subject to continuing employment by the employee. Having regard to the relative attributes of the old and new rights, it is considered that the attributes of the rights in the old company are substantially different to the attributes of the rights in the new company such that it is not reasonable to regard them as matching rights for the purposes of section 83A-130 of the ITAA 1997. Therefore, the new rights will not be treated as if they are a continuation of the rights acquired by the employee in the old company, for the purposes of the application of Division 83 of the ITAA 1997.", "Date_of_Decision": "14 April 2008", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 83A Section 83A-130 Section 975-505 Section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Takeovers & mergers Shares", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200859", "Unmatched_Content": "Changed reference from subpara 139DQ(1)(a)(ii) and Division 13A of the ITAA 1936 to Division 83A and section 83A-130 of the ITAA 1997 | Changed reference from Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 7) Bill 2004 to the Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009 | Changed wording to accord with the Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009 | Keywords Employee share schemes & options Takeovers & mergers Shares"}
{"ATO_ID_Number": "ATO ID 2006/186", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme: replacement shares received on takeover", "Issue": "Where a share acquired by an employee under an employee share scheme (ESS) has had a cessation time within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936 (Division 13A of the ITAA 1936), and that share is subsequently replaced by another share in connection with a 100% takeover, will the replacement share be treated as if it were a continuation of the original share, in accordance with Subdivision DA of Division 13A of the ITAA 1936?", "Decision": "No. The replacement share acquired by the employee in connection with a 100% takeover, will not be treated as if it were a continuation of the original share, in accordance with Subdivision DA of Division 13A of the ITAA 1936.", "Facts": "The employee acquired qualifying shares (within the meaning of section 139CD of the ITAA 1936) in their employer under an ESS. The employee did not make an election under section 139E of the ITAA 1936 in respect of the shares. The employee includes the discount in relation to the shares in their assessable income in the year the cessation time happens. In the following year, the employer company is taken over and the employee's original shares are replaced with shares in the new company. The replacement shares are considered to be 'matching shares' as described in section 139DQ of the ITAA 1936. The employee is employed by the new company after the takeover. Shares in the new company are ordinary shares. When the employee receives the replacement shares, they do not hold a legal or beneficial interest in more than 5% of the shares in the new company, nor is the employee in a position to cast, or control the casting of, more than 5% of the maximum number of votes that may be cast at a general meeting of the new company.", "Reasons_for_Decision": "Summary: Where a taxpayer holds a qualifying share and has not made an election under section 139E of the ITAA 1936 covering the share (a deferred share), the discount in relation to the deferred share is included in the taxpayer's assessable income in the year of income in which the cessation time occurs, pursuant to subsection 139B(3) of the ITAA 1936. However, where a cessation time as described in section 139CA of the ITAA 1936 occurs as a result of a takeover or restructure, Subdivision DA of Division 13A of the ITAA 1936 can apply in appropriate circumstances. This Subdivision, which came into effect from 1 April 2005, was implemented to provide relief from the possible early application of the provisions of sections 139CA or 139CB of the ITAA 1936 (determination of a cessation time) as a result of takeovers and restructures that occur after 1 July 2004. Where these provisions do apply, replacement shares or rights acquired by an employee under a restructure or a takeover are treated as if they are a continuation of the original shares or rights, and as a consequence, the restructure or takeover does not trigger an early cessation time. The object of Subdivision DA as set out in section 139DP of the ITAA 1936 relevantly states that: The object of this Subdivision is to allow this Division to continue to apply, in appropriate circumstances, to 100% takeovers or restructures of companies that have employee share schemes. Where deferred shares have had a cessation time happen that is unrelated to a 100% takeover or restructure of a company, the discount in relation to the deferred shares is included in a taxpayer's assessable income in the year of income in which the cessation time occurs. If those shares are subsequently replaced as a result of a 100% takeover or restructure of the company, it is clear that in accordance with the objects of Subdivision DA as stated in section 139DP of the ITAA 1936, this is not an appropriate circumstance for this Subdivision to apply. Thus, where shares acquired by an employee under an ESS have had a cessation time and the shares are subsequently replaced, the replacement shares will not be treated as if they were a continuation of the original shares, in accordance with Subdivision DA of Division 13A of the ITAA 1936. Note: Division 13A of Part III of the ITAA 1936 was repealed by the Tax Law Amendment (2009 Budget Measures No. 2) Act 2009 (133 of 2009). Division 83A of the Income Tax Assessment Act 1997 applies to shares, rights and stapled securities acquired under an employee share scheme on or after 1 July 2009.", "Date_of_Decision": "10 July 2006", "Year_of_Income": "30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A of Part III Subdivision DA of Division 13A subsection 139B(3) section 139CA section 139CB section 139CD section 139DP section 139DQ section 139E", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes and options", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006186", "Unmatched_Content": "Updated to include a note regarding the repeal of Division 13A of Part III of the ITAA 1936. | Keywords Employee share schemes and options"}
{"ATO_ID_Number": "ATO ID 2002/542", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme - Late section 139E Election request - not within a reasonable time", "Issue": "Will the Commissioner exercise his discretion under subsection 139E(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to allow the taxpayer to make a late election where a taxpayer only became aware of section 139E of the ITAA 1936 some time after the lodgement of the taxpayer's tax return?", "Decision": "No. The Commissioner will not exercise his discretion under subsection 139E(2) of the ITAA 1936 to accept the taxpayer's late election, where a taxpayer only became aware of section 139E of the ITAA 1936 some time after the lodgement of the taxpayer's tax return.", "Facts": "The taxpayer was granted rights to acquire shares from their employer (an overseas company) through an employee share scheme. The rights were qualifying rights under section 139CD of the ITAA 1936 and were issued at a discount. The taxpayer did not make an election under subsection 139E(1) of the ITAA 1936 to include the discount on the qualifying rights in assessable income of the year the qualifying rights were acquired. Twelve months after lodging their income tax return, the taxpayer requested that the Commissioner exercise his discretion and accept a late election as that was when the taxpayer was made aware that an election could have been made for the rights. The taxpayer's grounds for extension were:", "Reasons_for_Decision": "Summary: A taxpayer who acquires qualifying rights may make an election to include the discount in assessable income in the year of acquisition (subsections 139B(2) and 139E(1) of the ITAA 1936). A written election must be made before the taxpayer lodges the return of income for that year, or within such further time as the Commissioner allows (subsection 139E(2) of the ITAA 1936). The taxpayer did not make an election to include the discount in assessable income in the year of acquisition. The taxpayer requested that the Commissioner's discretion be exercised to accept a late election. When considering whether to exercise the discretion contained in subsection 139E (2) of the ITAA 1936, the Commissioner considers the following factors: When the rights were granted, international employees were provided with information that indicated that they seek advice on the taxation treatment for the rights in their country of residence. The taxpayer's explanation of the time delay between the date of lodgement of the income tax return and the date of the late election was that the taxpayer was unaware of the Australian taxation treatment of the rights. The taxpayer did not seek Australian taxation advice as suggested in the material provided by the employer, but rather assumed that the tax treatment would be the same as in the overseas country. Based on the taxpayer's explanation for the 12 month time delay between lodgement of the return and the request for the late election, the Commissioner does not consider the explanation warrants an extension of time to make a late election. The discount given on the qualifying rights, calculated under either subsections 139CC(3) or 139CC(4) of the ITAA 1936, needs to be included in the taxpayer's assessable income in the income year in which the cessation time occurs (subsection 139B(3) of the ITAA 1936).", "Date_of_Decision": "28 March 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A subsection 139B(2) subsection 139B(3) subsection 139CC(3) subsection 139CC(4) section 139 CD subsection 139E(1) subsection 139E(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/402 | ATO ID 2001/607", "Subject_References": "Employee share schemes & options Commissioner's discretion", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002542", "Unmatched_Content": "Keywords Employee share schemes & options Commissioner's discretion"}
{"ATO_ID_Number": "ATO ID 2010/103", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: timing of deduction for money provided to the trustee of an employee share trust", "Issue": "Does section 83A-210 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to determine the timing of the deduction allowable to an employer in respect of money provided to a trust to purchase shares in excess of the number required to meet obligations arising from the grant of options under an employee share scheme?", "Decision": "Yes. Section 83A-210 of the ITAA 1997 applies to determine the timing of the deduction, but only in respect of the amount of money provided to the trust to purchase shares in excess of the number required to meet obligations arising in the year of income from the grant of options, under an employee share scheme.", "Facts": "The employer operates an employee share scheme (the scheme) as part of its remuneration strategy. Under the scheme the employer grants its employees options to acquire shares in the employer. The options are granted to the employees for nil consideration and are subject to vesting conditions. The options are ESS interests within the meaning of subsection 83A-10(1) of the ITAA 1997. On vesting, the options become exercisable and employees are entitled to be provided with shares in the employer. To facilitate the operation of the scheme the employer has established a trust for the purpose of acquiring and holding shares in order to provide participating employees with shares when they exercise the options granted under the scheme. Under an arrangement, the employer provides the trust with an amount of money that is in excess of the amount necessary to acquire sufficient shares to satisfy its potential obligations arising from the grant of options under the scheme in the year of income. The money provided by the employer to the trust under this arrangement is deductible under section 8-1 of the ITAA 1997. The trustee uses all the money provided by the employer to acquire shares in the employer. The shares which are in excess of the number required to satisfy its obligations in relation to options already granted under the scheme are intended to meet its obligations from the grant of options in the following year. The trustee holds the shares pending allocation of the shares to the participating employees when the options are exercised.", "Reasons_for_Decision": "Summary: The provision of money to the trustee of an employee share trust by the employer for the purpose of remunerating its employees under an employee share scheme is an outgoing in carrying on the employer's business and is deductible under section 8-1 of the ITAA 1997. The deduction under section 8-1 of the ITAA 1997 would generally be allowable in the income year in which the employer incurred the outgoing but under certain circumstances, the timing of the deduction is specifically determined under section 83A-210 of the ITAA 1997. Section 83A-210 of the ITAA 1997 provides that if: Section 83A-210 of the ITAA 1997 will only apply if there is a relevant connection between the money provided to the trustee and the acquisition of ESS interests (directly or indirectly) by the employee under an employee share scheme in relation to the employee's employment. An ESS interest in a company is defined in subsection 83A-10(1) of the ITAA 1997 as either a beneficial interest in a share in the company or a beneficial interest in a right to acquire a beneficial interest in a share in the company. An option granted to an employee under the scheme will be an ESS interest as it is a right to acquire a beneficial interest in a share in a company. A share purchased by the trustee to satisfy the option to acquire shares under the scheme, for an employee in relation to the employee's employment, is itself provided under the same scheme. The granting of the beneficial interests in the options, the provision of the money to the trustee under the arrangement, the acquisition and holding of the shares by the trustee and the allocation of shares to the participating employees are all interrelated components of the employee share scheme. All the components of the scheme must be carried out so that the scheme can operate as intended. As one of those components, the provision of money to the trustee necessarily allows the scheme to proceed. Consequently, the provision of money to the trustee is considered to be for the purpose of enabling the participating employees, indirectly as part of the employee share scheme, to acquire the options. A deduction for the purchase of shares to satisfy the obligation arising from the grant of options is therefore allowable to the employer in the year in which the money was paid to the trustee, under section 8-1 of the ITAA 1997. However, the amount of money used by the trustee to purchase excess shares is intended to meet obligations arising from a future grant of options. The excess payment therefore occurs before the employees acquire the relevant options under the scheme. Section 83A-210 of the ITAA 1997 will apply and the excess payment will be deductible to the employer in the year of income when the relevant options are subsequently granted to the employees.", "Date_of_Decision": "19 April 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 subsection 83A-10(1) section 83A-210", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010103", "Unmatched_Content": "Keywords Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2011/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: employee share scheme - director solely remunerated by issue of options", "Issue": "Is a director of a listed company who was remunerated only by way of the issue of options entitled to the deferral concession under former Division 13A of Part III (Division 13A) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Where a director's only remuneration was in the form of options issued by the company, the director is not entitled to the deferral concession under former Division 13A of the ITAA 1936.", "Facts": "An Australian listed public company issued options to acquire shares in the company to a director of the company as a reward and incentive for their services. The options were issued prior to 1 July 2009 and were rights provided under an employee share scheme within the meaning of former Division 13A of the ITAA 1936. The director did not pay anything for the options. The options entitled the director, on payment of an exercise price, to acquire a corresponding number of shares in the company. Neither the director nor any associated entity received, or was entitled to receive, any other remuneration for the director's services. The director was at all relevant times an Australian resident within the meaning of subsection 6(1) of the ITAA 1936. Neither former section 26AAC of the ITAA 1936, nor Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997) applies in relation to the receipt of the options.", "Reasons_for_Decision": "Summary: Former Division 13A of the ITAA 1936 provides for the taxation treatment of shares and rights acquired prior to 1 July 2009 under employee share schemes. Taxpayers were eligible to have the assessment in relation to the discount from rights deferred until a later year of income provided the rights were qualifying rights within the meaning of the former section 139CD of the ITAA 1936. One of the conditions in former section 139CD of the ITAA 1936 for rights to be qualifying is that the company is the employer of the taxpayer or a holding company of the employer of the taxpayer. 'Employer' is relevantly defined by former subsection 139GA(3) of the ITAA 1936 to be a person who pays, or is liable to pay, work and income support related withholding payments and benefits. 'Work and income support related withholding payments and benefits' are in turn relevantly defined in subsection 6(1) of the ITAA 1936 to include: As the director's only remuneration from the company was in the form of options provided under an employee share scheme, no payment was made to the Director from which an amount must be withheld under a provision of Subdivision 12-B in Schedule 1 to the TAA. The options granted to the director are rights acquired under an employee share scheme within the meaning of former Division 13A of the ITAA 1936. While they are non-cash benefits, former paragraph 14-5(3)(d) of Division 14 in Schedule 1 to the TAA (as applicable at the time the director received the options) specifically excludes such employee share scheme benefits from the operation of that Division. Thus the company was not at the time the options were provided, the employer of the taxpayer or a holding company of the employer of the taxpayer. Accordingly, the rights acquired by the director are not qualifying rights. As the rights are not qualifying rights, the director is not eligible for the deferral concession under former Division 13A of the ITAA 1936. The discount is assessable in the year of income in which the rights were acquired.", "Date_of_Decision": "25 July 2011", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 26AAC Division 13A of Part III section 139CD subsection 139GA(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Directors remuneration", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201162", "Unmatched_Content": "Keywords Employee share schemes & options Directors remuneration"}
{"ATO_ID_Number": "ATO ID 2003/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: Permanent Employees requirement for Qualifying Shares", "Issue": "Will shares acquired by a taxpayer under an employee share scheme be qualifying shares under section 139CD of the Income Tax Assessment Act 1936 (ITAA 1936), if an employer has no permanent employees for the purposes of subsection 139CD(5) of the ITAA 1936?", "Decision": "Yes. Shares acquired by a taxpayer under an employee share scheme will be qualifying shares under section 139CD of the ITAA 1936, if an employer has no permanent employees for the purposes of subsection 139CD(5) of the ITAA 1936.", "Facts": "The taxpayer is an employee of a company. The taxpayer acquired discounted shares under the company operated employee share scheme. The scheme has restrictions on the disposal of shares. The only employees of the company are full-time or permanent part-time, none of whom have been employed by the company for more than 36 months. The directors of the company are also entitled to shares under the employee share scheme. The shares satisfy the first, second, third, fifth and sixth conditions of section 139CD of the ITAA 1936.", "Reasons_for_Decision": "Summary: The taxing point for the discount given on shares acquired under an employee share scheme depends on whether the shares are qualifying shares, and if the taxpayer has made an election under section 139E of the ITAA 1936. Section 139CD of the ITAA 1936 sets out the six conditions that need to be satisfied for a share to be a qualifying share for the purposes of Division 13A of the ITAA 1936. The taxpayer's shares will be qualifying shares if the fourth condition relating to permanent employees in subsection 139CD(5) of the ITAA 1936 is satisfied, as all other conditions are met. This fourth condition requires that at least 75 per cent of permanent employees of the company were, or at some earlier time had been, entitled to acquire shares under the employee share scheme. A permanent employee of a company is defined as a full-time employee or permanent part-time employee with at least 36 months of service (subsection 139GB(1) of the ITAA 1936). A director is excluded from being a 'permanent employee' of the company (subsection 139GB(2) of the ITAA 1936). The employees and directors of the company are not 'permanent employees' for the purposes of the fourth condition in subsection 139CD(5) of the ITAA 1936. As there are no 'permanent employees' of the company, the fourth condition is satisfied. Accordingly, the taxpayer's shares are qualifying shares for the purposes of section 139CD of the ITAA 1936. As the shares are qualifying shares under section 139CD of the ITAA 1936, the discount is included in the taxpayer's assessable income in the income year of acquisition if an election is made (subsection 139B(2) of the ITAA1936) or in the income year that the cessation time occurs (subsection 139B(3) of the ITAA 1936). Note 1: For shares acquired on or after 26 June 2005, section 139CD of the ITAA 1936 imposes an additional condition that needs to be satisfied for a share to be a qualifying share for the purposes of Division 13A of the ITAA 1936. That is, in the case of a share that a taxpayer acquired while engaged in foreign service, section 139CDA of the ITAA 1936 must apply to the share. Note 2: Division 13A of Part III of the ITAA 1936 was repealed by the Tax Law Amendment (2009 Budget Measures No. 2) Act 2009 (133 of 2009). Division 83A of the Income Tax Assessment Act 1997 applies to shares, rights and stapled securities acquired under an employee share scheme on or after 1 July 2009.", "Date_of_Decision": "24 September 2002", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A subsection 139B(2) subsection 139B(3) section 139CD subsection 139CD(5) section 139E subsection 139GB(1) subsection 139GB(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share ownership Acquisition of shares Shares Employee share schemes & options Share discounts on employee share schemes Permanent employees", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200324", "Unmatched_Content": "Added note regarding amendment to subsection 139CD(1) imposing additional condition for qualifying shares where employee is engaged in foreign service. Added note regarding repeal of Division 13A of Part III of the ITAA 1936, replaced with Division 83A of the ITAA 1997, as of 1 July 2009. | Keywords Employee share ownership Acquisition of shares Shares Employee share schemes & options Share discounts on employee share schemes Permanent employees"}
{"ATO_ID_Number": "ATO ID 2003/189", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme: employee loses rights for no valuable consideration", "Issue": "Is a right to acquire a share granted to a taxpayer, an employee, under an employee share scheme, never acquired by the taxpayer for the purposes of Division 13A of the Income Tax Assessment Act 1936 (ITAA 1936) because of subsection 139DD(1) of the ITAA 1936, if no valuable consideration was received by the taxpayer for the loss of the right?", "Decision": "Yes. A right to acquire a share granted to a taxpayer, an employee, under an employee share scheme, is never acquired by the taxpayer for the purposes of Division 13A of the ITAA 1936 because of subsection 139DD(1) of the ITAA 1936, if no valuable consideration was received by the taxpayer for the loss of the right.", "Facts": "The taxpayer was granted rights to acquire shares in their employer's company under an employee share scheme. The taxpayer paid no consideration to acquire the rights. Some rights were cancelled while the taxpayer was employed by the company, others were forfeited on the taxpayer ceasing to be an employee and the remainder lapsed after ceasing employment. The taxpayer received no valuable consideration for the loss of the rights. The taxpayer did not exercise the rights.", "Reasons_for_Decision": "Summary: For the purposes of Division 13A of the ITAA 1936, a right to acquire a share in a company is never acquired by an employee under subsection 139DD(1) of the ITAA 1936 if the following two conditions are satisfied: The taxpayer has not received valuable consideration for the loss of those rights. The rights cease to exist as they have been cancelled, forfeited or lapsed. The taxpayer has lost the rights without having exercised them. Accordingly, as the taxpayer satisfies the two conditions, the rights are never acquired by the taxpayer for the purposes of Division 13A of the ITAA 1936. If the discount given on the rights has been included in the taxpayer's assessable income, either in the year of acquisition, due to an election, or the year of cessation time, subsection 139DD(4) of the ITAA 1936 enables the assessment to be amended to exclude the discount. Note - If the taxpayer receives valuable consideration for rights that have not been exercised, the taxpayer does not lose the rights for the purposes of Division 13A of the ITAA 1936.", "Date_of_Decision": "19 November 2002", "Year_of_Income": "Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A subsection 139DD(1) subsection 139DD(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Forfeiture of rights & entitlements Share discounts on employee share schemes", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003189", "Unmatched_Content": "Keywords Forfeiture of rights & entitlements Share discounts on employee share schemes"}
{"ATO_ID_Number": "ATO ID 2003/1130", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: fractional interest in a share", "Issue": "Is the market value of a fractional interest in a share, acquired by a taxpayer through an employee share scheme, calculated by applying the same fraction to the market value of a full share in the company for the purposes of subsections 139CC(2) and (4) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The market value of the fractional interest in a share is calculated by using that fraction against the market value of a full share in the same company.", "Facts": "The taxpayer is an Australian resident employee of an overseas company. The company offers their employees shares in an employee share scheme. The taxpayer acquired a legal interest in a fraction of a share. The taxpayer also acquired a beneficial interest in shares held in an employee share scheme trust.", "Reasons_for_Decision": "Summary: A share is acquired under an employee share scheme if A taxpayer who acquires a fractional interest in a share does so under section 139G of the ITAA 1936 because they acquire a legal or beneficial interest in the share. This recognises an acquisition of a fractional interest in a share. The market value of the share is calculated in accordance with sections 139FA, 139FAA and section 139FB of the ITAA 1936. In establishing the discount given on the fractional interest in a share, under subsections 139CC(2) and (4) of the ITAA 1936, the market value of that fractional interest is calculated based on the same fraction that it represents of the market value of a full share. The discount given on the fractional interest in a share is included in the taxpayer's assessable income, either in the year of acquisition, due to an election (subsection 139B(2)), or the year of cessation time (subsection 139B(3) of the ITAA 1936).", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 139B(2) section 139B(3) section 139C(1) section 139C(3) section 139CC(2) section 139CC(4) section 139FA section 139FAA section 139FB section 139G", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Shares Market Value Discount Beneficial Ownership Legal Ownership", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031130", "Unmatched_Content": "Keywords Employee share schemes & options Shares Market Value Discount Beneficial Ownership Legal Ownership"}
{"ATO_ID_Number": "ATO ID 2002/250", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme: Market valuation of unlisted rights, Table 1 percentage", "Issue": "Does a taxpayer use the lower Table 1 percentage under subsection 139FM(1) of the Income Tax Assessment Act 1936 (ITAA 1936), to calculate the market value of an unlisted right acquired under an employee share scheme, where the calculation percentage or exercise period is the top of one range and the bottom of another range in that table?", "Decision": "Yes. The note at the end of section 139FN of the ITAA 1936 provides that the lower Table 1 percentage under subsection 139FM(1) of the ITAA 1936 is used where the calculation percentage or exercise period falls within two ranges of that table.", "Facts": "The taxpayer was granted unlisted rights to acquire shares under an employee share scheme for no consideration. The taxpayer was required to pay an amount in order to exercise the rights. The exercise period of the rights was less than 10 years. The taxpayer's calculation percentage under subsection 139FK(1) of the ITAA 1936 is equal to or greater than 50% but less than 110%.", "Reasons_for_Decision": "Summary: For the purposes of calculating the discount of a right under subsections 139CC(2) and 139CC(4) of the ITAA 1936, the market value of a right is determined on the particular day (valuation day) under section 139F of the ITAA 1936. The valuation day is the date of acquisition of the right if an election under section 139E of the ITAA 1936 has been made. However, if the taxpayer has not made an election and the rights are not exercised at cessation time under subsection 139CB(1) of the ITAA 1936, the valuation day is the date of cessation time. Sections 139FJ to 139FN of the ITAA 1936 provides the method for calculating the market value of an unlisted right to acquire a share on the valuation day. Where the calculation percentage determined under subsection 139FK(1) of the ITAA 1936 is equal to or greater than 50% but less than 110%, section 139FL of the ITAA 1936 provides that Table 1 in subsection 139FM(1) is to be used to work out the market value of the right. The market value is calculated by selecting the percentage (Table 1 percentage) that corresponds to the period in months from the valuation day until the last day on which the right may be exercised and the calculation percentage. The Table 1 percentage is then multiplied by the amount or lowest amount that must be paid to exercise the right to determine the market value. If the exercise period or the calculation percentage is in the top of one range and also the bottom of another range in Table 1, the note at the end of section 139FN of the ITAA 1936 states that the Table 1 percentage is taken to be in the lower range and not in the higher range. The taxpayer will therefore use the lower range to determine the Table 1 percentage for calculating the market value of the right on the valuation day where either the calculation percentage or the exercise period is in two ranges.", "Date_of_Decision": "21 September 2001", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 139CB(1) subsection 139CC(2) subsection 139CC(4) section 139E section 139F section 139FJ subsection 139FK(1) section 139FL subsection 139FM(1) section 139FN subsection 139FN(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002250", "Unmatched_Content": "Keywords Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2002/454", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Schemes & Options - Valuation of Shares", "Issue": "Should valuations prepared by an overseas tax authority (OTA) for unlisted ordinary shares, in an overseas company, be accepted by the Commissioner of Taxation as a reasonable method of calculating the arms length value of those shares in terms of paragraph 139FB(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The valuations are acceptable, as a reasonable method has been used by the OTA to calculate the arm's length value of the shares in terms of paragraph 139FB(1)(b) of the ITAA 1936.", "Facts": "The company (X) is a wholly owned subsidiary of an overseas company (Y). X is based in Australia whilst Y is based overseas. As part of it's remuneration strategy Y issued share options to its employees. The share plan is structured in such a way that it is tax effective in the overseas country and provides qualifying shares under section 139CD of the ITAA 1936. Neither the options nor the ordinary shares of Y are listed on any stock exchange. In order for the employees to take advantage of the beneficial tax treatment in the overseas country they must have an approved valuation of the shares over which they have options. This valuation was obtained from the OTA. The OTA used a deductive method to value the shares. They compared the rights attached to ordinary shares such as the right to participate in dividends and the right to vote with the rights attached to preference shares issued to the company's venture capital investors. These rights were then benchmarked by the OTA against other similar companies to establish an appropriate discount to calculate the ordinary share price of Y. The methodology used by the OTA is similar to the methodology, which would be used by a registered company auditor in Australia, to establish the market value of a share. The valuations are valid only for 28 days and incorporate the latest issue price of the preference shares and other relevant factors.", "Reasons_for_Decision": "Summary: The discretionary power in section 139FB of the ITAA 1936 allows some flexibility with respect to the calculation of an arm's length value for unlisted shares. What is important is the outcome, in that the particular method adopted does produce an arm's length market value. The method used by the OTA achieves a fair commercial valuation of the company's ordinary shares. The valuation of the ordinary shares of Y, current at the time of issue of employee options, issued by the OTA, is accepted as a reasonable method of valuing the ordinary shares of the company for the purposes of section 139FB of the ITAA 1936.", "Date_of_Decision": "15 February 2002", "Year_of_Income": "Year ended 30 June 2001 Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 139FB section 139CD paragraph 139FB(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002454", "Unmatched_Content": "Keywords Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2012/45", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme: value of right where exercise price of right can not be determined", "Issue": "Where former section 139FE of the Income Tax Assessment Act 1936 (ITAA 1936) refers to an exercise price which 'can not be determined', is this a reference to an exercise price which can not be determined on the particular day on which a right is being valued?", "Decision": "Yes. The reference in former section 139FE of the ITAA 1936 to an exercise price which 'can not be determined' is a reference to an exercise price which can not be determined on the particular day on which a right is being valued.", "Facts": "The taxpayer acquired options from their employer in relation to their employment under a share option plan. The options were acquired at a discount to their market value. The options were rights acquired under an employee share scheme pursuant to former section 139C of the ITAA 1936. The options did not meet the 'qualifying rights' conditions set down in former section 139CD of the ITAA 1936. At the time the rules of the share option plan were adopted, the board of the company was preparing to make an initial public share offer. Under the rules of the plan, the exercise price of the options was to be determined by reference to the initial public share offer. If the offer was successfully completed, the exercise price was to be equal to the price at which the shares were offered to the public pursuant to the offer document. If the offer was not successfully completed by a particular future date, the exercise price was then to be a price determined by the directors of the company. Shares were offered to the public at a price of $4.00 per share. The taxpayer acquired the options before the required date of completion of the public offer. The public offer was then successfully completed by the required date.", "Reasons_for_Decision": "Summary: As the options did not meet the qualifying rights conditions set down in former section 139CD of the ITAA 1936, the taxpayer was required to include any assessable discount in relation to the acquisition of the options in their taxation return for the income year in which they acquired the options. According to former subsection 139CC(2) of the ITAA 1936, the discount is calculated as the 'market value of the share or right at the time when it was acquired by the taxpayer less any consideration paid or given by the taxpayer as consideration for the acquisition of the share or right'. In determining the market value of the right, former subsection 139FE(1) of the ITAA 1936 states that 'if the lowest amount that must be paid to exercise a right to acquire a share is nil or can not be determined, the market value of the right on a particular day is the same as the market value of the share on that day'. When former subsection 139FE(1) of the ITAA 1936 refers to an amount which 'can not be determined', it is a reference to an exercise price which can not be determined on the particular day on which the right is being valued. The right is being valued on the date of acquisition. The taxpayer acquired the options before the date of completion of the initial public offer. The exercise price was only determined to be $4.00 at the date of the completion of the initial public offer. Thus, pursuant to the share option plan, the exercise price on the particular day of acquisition had not yet been determined and therefore could not be determined on that particular day. Accordingly, pursuant to former section 139FE of the ITAA 1936, the market value of the options on the day they were acquired was equal to the market value of the shares on that particular day.", "Date_of_Decision": "22 May 2012", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 139C subsection 139CC(2) section 139CD section 139FE subsection 139FE(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Market value cost base", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201245", "Unmatched_Content": "Keywords Employee share schemes & options Market value cost base"}
{"ATO_ID_Number": "ATO ID 2010/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: whether interests in a corporate limited partnership are ordinary shares", "Issue": "Is an interest in a corporate limited partnership treated as an ordinary share for the purposes of the ordinary share condition in subsection 83A-35(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An interest in a corporate limited partnership is treated as an ordinary share for the purposes of the ordinary share condition in subsection 83A-35(4) of the ITAA 1997 if the interest does not give the holder preferential rights with respect to distributions out of profits or capital, or on winding up of the limited partnership.", "Facts": "A business is operated through a limited partnership structure. The limited partnership satisfies the definition of a corporate limited partnership in subsection 995-1(1) of the ITAA 1997 and is treated for income tax purposes as a company. The limited partnership operates a remuneration scheme under which it provides interests in the limited partnership (limited partner units) to selected employees at a discount, as part of its remuneration and retention strategy. The rights and obligations of a partner in the limited partnership are set out in the partnership agreement, including the partner's entitlement to distributions. The partnership agreement provides that all distributions to partners are made to the partners on a pro rata basis in accordance with the number of units that the partner holds in the limited partnership divided by the total number of units held by all partners in the limited partnership (partner's sharing percentage). On dissolution of the limited partnership, the partners are entitled to share in the distribution out of partnership assets after the satisfaction of the claims of all creditors, on a pro rata basis in accordance with the partner's sharing percentage.", "Reasons_for_Decision": "Summary: Division 83A of the ITAA 1997 provides for the taxation of ESS interests acquired under employee share schemes at a discount. An ESS interest in a company is defined in subsection 83A-10(1) of the ITAA 1997 as either a beneficial interest in a share in the company or a beneficial interest in a right to acquire a beneficial interest in a share in the company. The Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009 (EM), which inserted Division 83A into the ITAA 1997, at paragraph 1.385 notes that the employee share scheme rules also apply to interests in corporate limited partnerships in the same way as the rules apply to shares in companies. Corporate limited partnership is defined in subsection 995-1(1) of the ITAA 1997 to have the meaning given by section 94D of the Income Tax Assessment Act 1936 (ITAA 1936). Under section 94D of the ITAA 1936, a limited partnership is a corporate limited partnership for the 1995-96 or later years of income if the exceptions in that section do not apply. A limited partnership is relevantly defined in subsection 995-1(1) of the ITAA 1997 as an association of persons (other than a company) carrying on business as partners or in receipt of ordinary income or statutory income jointly, where the liability of at least one of those persons is limited. Where limited partnerships are corporate limited partnerships, they are taxed as companies through modifications to a number of provisions in the income tax law. More relevantly, a reference to: Therefore, the limited partner units are ESS interests for the purposes of Division 83A of the ITAA 1997. The limited partner units are acquired under an employee share scheme within the meaning of subsection 83A-10(2) of the ITAA 1997 as they are acquired under a scheme in which ESS interests in a company (in this case the corporate limited partnership) are provided to employees in relation to the employees' employment. Generally, an individual will include the discount given in relation to an ESS interest acquired under an employee share scheme in their assessable income in the income year in which the ESS interest is acquired (up-front taxation) or have an amount in relation to the ESS interest included in their assessable income in the income year in which the ESS deferred taxing point for the ESS interest occurs (deferral taxation). Where the ESS interest is either eligible for the up-front tax concession in Subdivision 83A-B or the deferral concession in Subdivision 83A-C of the ITAA 1997, one of the conditions that applies to the upfront tax concession (subsection 83A-35(4) of the ITAA 1997) or the deferral concession (paragraph 83A-105(1)(b) of the ITAA 1997) is that, when the individual acquires the ESS interest, all of the ESS interests available for acquisition under the employee share scheme must relate to ordinary shares (ordinary share condition). In this instance, the interests available for acquisition under the employee share scheme are limited partner units. The ordinary share condition will be satisfied if the limited partner units are treated as ordinary shares for the purposes of Division 83A of the ITAA 1997. Ordinary share is not defined in the ITAA 1997. Therefore 'ordinary share' takes its ordinary meaning, having regard to its legislative context and the purpose or object of Division 83A of the ITAA 1997. In Norman v. Norman (1990) 19 NSWLR 314, McLelland J, when considering whether certain shares were ordinary shares, noted at 315 and 316 that: The expression 'ordinary shares' is [not] defined ... in the articles of association nor in the Companies Act 1961 which was in force at the time of incorporation of the company. Counsel were unable to refer me to any authority in which the expression has been defined. In my opinion in ordinary usage the meaning of the expression 'ordinary shares' is, and was in 1971, shares other than preference shares. The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne, defines ordinary shares as 'shares entitling holders to a dividend from net profits (cf. preference shares)' and preference shares are defined as 'shares or stock whose entitlement to dividends takes priority over that of ordinary shares'. In the Glossary of sharemarket terms , ASX Limited, viewed 23 February 2010, http://www.asx.com.au, an ordinary share is defined as 'a class of shares which have no preferential rights as to either dividends out of profits or capital on a winding up' and preference shares are defined as 'shares that rank before ordinary shares in the event of liquidation'. The EM at paragraph 1.164 in relation to the ordinary share condition in Subdivision 83A-C of the ITAA 1997 (also see paragraph 1.121 of the EM in relation to the ordinary share condition for the up-front tax concession) notes that: Deferred taxation is restricted to interests over ordinary shares to encourage the alignment of employee and employer interests. ESS interests that are not ordinary shares, such as preference shares, may have less 'risk' associated with them because they pay a more stable income stream and have priority over ordinary shares if the company winds up. They are therefore less likely to align the shareholder's interest with that of the company. Whether a share is an ordinary share in a company for the purposes of the condition in subsection 83A-35(4) of the ITAA 1997 is to be determined by considering the rights attached to the share in relation to distributions of profits and capital and on winding up of the company, as compared to other shares in the company. Shares that have a priority as to dividends or distributions in the event of winding up are preference shares. If shares are not preference shares, they are ordinary shares. Therefore, the limited partner units acquired by employees under the employee share scheme are treated as ordinary shares for the purposes of Division 83A of the ITAA 1997, because they do not have preferential rights over any other interest in the partnership as to distributions of profits or capital of the limited partnership, or any priority rights on winding up of the limited partnership.", "Date_of_Decision": "10 March 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 94D section 94J section 94P", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Limited partnerships", "Case_References": "Norman v Norman (1990) 19 NSWLR 314", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No.2) Bill 2009 The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne Glossary of sharemarket terms, ASX Limited, viewed 23 February 2010", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201062", "Unmatched_Content": "Keywords Employee share schemes & options Limited partnerships"}
{"ATO_ID_Number": "ATO ID 2009/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of discount on options granted under an employee share scheme by an Australian resident company to a director who is a resident of South Africa", "Issue": "Is the discount on options granted under an employee share scheme to a taxpayer, a South African resident, in respect of services provided in Australia by the taxpayer as a non-executive director of an Australian resident company, assessable income under subsection 6-10(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The discount on options granted under an employee share scheme to a taxpayer, a South African resident, in respect of services provided in Australia by the taxpayer as a non-executive director of an Australian resident company is assessable income under subsection 6-10(5) of the ITAA 1997.", "Facts": "The taxpayer is a resident of South Africa for taxation purposes and is a non-resident for Australian tax purposes. The taxpayer acted as a non-executive director of an Australian resident company under the terms of a contract entered into in Australia. The Australian resident company granted options to the taxpayer at a discount, in respect of the services provided in Australia by the taxpayer, as a non-executive director of the Australian resident company. The options were issued under an employee share scheme within the meaning of Division 13A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936).", "Reasons_for_Decision": "Summary: Subsection 6-10(5) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes statutory income from all Australian sources and other statutory income that a provision includes as assessable income on some basis other than having an Australian source. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is sections 139 to 139GH (Division 13A of Part III) of the ITAA 1936 which provides for the taxation of shares and rights acquired under employee share acquisition schemes. Pursuant to subsection 139B(1) of the ITAA 1936, the discount given in relation to a share or right acquired under an employee share scheme is included in the taxpayer's assessable income. Under subsection 139B(1A) of the ITAA 1936, the discount is not included in the taxpayer's assessable income to the extent that the discount is given in relation to the taxpayer's relevant engagement in foreign service while a non-resident. The discount on the options granted to the taxpayer, in respect of services provided by the taxpayer as a non-executive director of the Australian company, is a discount given in relation to a right acquired under an employee share scheme pursuant to subsection 139B(1) of the ITAA 1936. As the taxpayer provided the services in Australia, the exclusion of subsection 139B(1A) of the ITAA 1936 does not apply. Accordingly, the discount is statutory income to be included in the taxpayer's assessable income as determined under Division 13A of Part III of the ITAA 1936. In determining liability to Australian tax, it is necessary to consider not only the income tax laws, but also any applicable tax treaties contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 42 to the Agreements Act contains the tax treaty between Australia and the Republic of South Africa (the South African Agreement). This Agreement operates to avoid the double taxation of income received by Australian and South African residents. Article 16 of the South African Agreement provides that directors' 'fees and other similar payments' derived by a resident of South Africa, in the capacity as a member of the board of directors of a company which is a resident of Australia, may be taxed in Australia. Taxation Ruling TR 2001/13 provides the Commissioner's views on interpreting tax treaties. Paragraph 104 of TR 2001/13 provides that the 'OECD Model Tax Convention on Income and on Capital' and Commentary will often need to be considered in interpreting tax treaties. Paragraph 108 of TR 2001/13 provides that often the changes that have occurred to the relevant OECD Commentaries over time will need to be examined and considered. Article 16 of the South African Agreement is virtually identical to that contained in the OECD Model Tax Convention on Income and on Capital. Paragraph 1.1 of the OECD Commentary on Article 16 of the OECD Model Tax Convention on Income and on Capital states that: Member countries have generally understood the term 'fees and other similar payments' to include benefits in kind received by a person in that person's capacity as a member of the board of directors of a company (e.g. stock-options, the use of a residence or automobile, health or life insurance coverage and club memberships). Paragraph 3.1 of the OECD Commentary on Article 16 further provides that the article will apply to any benefit derived from the option itself until it has been exercised, sold or otherwise alienated (for example upon cancellation or acquisition by the company or issuer). The discount is a benefit that constitutes 'fees and other similar payments' to which Article 16 of the South African Agreement applies. Therefore, Australia, being the country of source, has the right to tax the discount derived by the taxpayer as a member of the board of directors of the company. Accordingly, the discount on options granted under an employee share scheme will be included in the taxpayer's assessable income under subsection 6-10(5) of the ITAA 1997.", "Date_of_Decision": "3 March 2009", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A of Part III subsection 139B(1) subsection 139B(1A) sections 139 - 139GH", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/180", "Subject_References": "Directors fee income Directors remuneration Double tax agreements Employee share schemes & options Foreign income International tax Non resident individuals South Africa", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital Condensed Version, 17 July 2008", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200913", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Directors fee income Directors remuneration Double tax agreements Employee share schemes & options Foreign income International tax Non resident individuals South Africa"}
{"ATO_ID_Number": "ATO ID 2001/402", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme - Late Section 139E Election", "Issue": "Will the Commissioner exercise his discretion under subsection 139E(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to allow the taxpayer to make a late election?", "Decision": "Yes, the Commissioner will exercise his discretion under subsection 139E(2) of the ITAA 1936 to accept the taxpayer's late election, as the Commissioner:", "Facts": "The taxpayer was granted rights to acquire shares from their employer through an employee share scheme. The taxpayer did not pay any consideration for those rights. The rights are qualifying rights under section 139CD of the ITAA 1936 and were issued at a discount. The taxpayer did not make an election under subsection 139E(1) of the ITAA 1936 to have the discount on the qualifying rights included in assessable income prior to the lodgment of their income tax return for the relevant income year, being the year in which the rights were acquired. Two years after lodging their income tax return, the taxpayer requested that the Commissioner exercise his discretion and accept a late election. The taxpayer's grounds for extension are: These circumstances commenced prior to the taxpayer lodging their income tax return and continued until after their request for the late election.", "Reasons_for_Decision": "Summary: A taxpayer who acquires qualifying rights may make an election to include the discount in their assessable income in the year of acquisition (subsections 139B(2) and 139E(1) of the ITAA 1936). The written election must be made before the taxpayer lodges their return of income for that year, or within such further time as the Commissioner allows (subsection 139E(2) of the ITAA 1936). The taxpayer did not make an election in respect of their qualifying rights prior to the lodgment of their income tax return for the relevant income year. Accordingly, the taxpayer requested the Commissioner to exercise his discretion under subsection 139E(2) of the ITAA 1936 to accept their late election. When considering whether to exercise the discretion contained in subsection 139E(2) of the ITAA 1936, the Commissioner considers the following factors: At the time when the election should have been made, the taxpayer was experiencing health and family difficulties. In addition, the taxpayer was regularly travelling overseas. The Commissioner accepts that these circumstances led to the taxpayer failing to make an election in the relevant income year. Since the time that the taxpayer lodged their income tax return, the taxpayer has been suffering from a serious health problem, in addition to managing a young family. The Commissioner accepts that the ongoing health problems and family circumstances led to a substantial delay between the time they lodged their income tax return and the time of the late election. The Commissioner considers that it would be fair and equitable to grant the extension of time to make the election as it puts the taxpayer in an equivalent position to that which the Commissioner may have expected under normal circumstances. Accordingly, the Commissioner will exercise his discretion and accept the late election. The discount given on the rights will be included in the taxpayer's assessable income for the relevant income year.", "Date_of_Decision": "5 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 139B subsections 139E(1) subsections 139B(2) section 139CD section 139E subsection 139E(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commissioner's discretion Employee share schemes & options", "Case_References": "", "Other_References": "National Office Minute dated 11 April 2001 from INB TTN - \"Exercise of the Commissioner's Discretion under s139E(2).\"", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001402", "Unmatched_Content": "Keywords Commissioner's discretion Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2001/607", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme - Late 139E election - uncertainty of issue date of rights", "Issue": "Will the Commissioner exercise his discretion under subsection 139E(2) of the Income Tax Assessment Act 1936 (ITAA1936) to allow the taxpayer to make a late election?", "Decision": "Yes. The Commissioner will exercise his discretion in subsection 139E(2) of the ITAA 1936 to accept the taxpayer's late election, as the Commissioner:", "Facts": "The taxpayer was granted rights to acquire shares from their employer through an employee share scheme. The taxpayer did not pay any consideration for the rights. The rights are qualifying rights under section 139CD of the ITAA 1936 and were issued at a discount. The taxpayer did not make an election under subsection 139E(1) of the ITAA 1936 to include the discount on the qualifying rights in assessable income of the year the qualifying rights were acquired. Seventeen months after lodging the income tax return, the taxpayer requested that the Commissioner exercise his discretion and accept a late election. The taxpayer's grounds for extension are:", "Reasons_for_Decision": "Summary: A taxpayer who acquires qualifying rights may make an election to include the discount in assessable income in the year of acquisition (subsections 139B(2) and 139E(1) of the ITAA 1936). The written election must be made before the taxpayer lodges the return of income for that year, or within such further time as the Commissioner allows (subsection 139E(2) of the ITAA 1936). The taxpayer did not make an election in respect of the qualifying rights in the relevant income year. The taxpayer requested that the Commissioner's discretion be exercised to accept a late election. When considering whether to exercise the discretion contained in subsection 139E(2) of the ITAA 1936, the Commissioner considers the following factors: The Commissioner accepts that the taxpayer is unable to make an election until the employer company advised the date of acquisition of the qualifying rights. This advice was not available when the relevant income tax return was lodged. The Commissioner noted that the taxpayer requested a late election shortly after the employer company advised the issue date of the qualifying rights. Accordingly, the Commissioner considers it appropriate to exercise his discretion and accept the late election under subsection 139E(2) of the ITAA 1997. The discount given on the rights will be included in the taxpayer's assessable income for the relevant income year.", "Date_of_Decision": "23 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A section 139CD subsection 139E(1) subsection 139E(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Taxpayer elections Employee share schemes & options Share discounts on employee share schemes", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001607", "Unmatched_Content": "This ATO ID has been amended to remove from the reference list a document which is not available to the public. | Keywords Taxpayer elections Employee share schemes & options Share discounts on employee share schemes"}
{"ATO_ID_Number": "ATO ID 2010/155", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme: assessability to an employer of the option exercise price paid by an employee", "Issue": "Where under an employee share scheme an employee is granted a right to acquire a share from an employee share trust which requires the employee to pay an amount (the exercise price) to the employer, will the amount paid by the employee to the employer be included in the employer's assessable income under section 6-5 of the Income Tax Assessment 1997 (ITAA 1997)?", "Decision": "Yes. The exercise price paid by the employee to the employer will be included in the employer's assessable income under section 6-5 of the ITAA 1997 as the receipt of the payment is a product of the employer's business or is incidental to the conduct of the employer's business.", "Facts": "An employer establishes an employee share scheme (ESS) which is operated through an employee share trust. The ESS is part of the employer's overall remuneration strategy to motivate and reward employees. Under the ESS an employee is granted rights to acquire shares in the employer company. The rights are granted at a discount and in relation to the employee's employment. The rights may be exercised after three years on payment of an amount (exercise price) by the employee to the employer. After the rights are granted but before the rights are exercised, the employer contributes money to the employee share trust to fund the acquisition of shares that the trustee will provide to the employee on exercise of the rights. The trustee acquires the shares either on market or through subscription for shares in the employer company. When subscribing for shares in the employer, the trustee pays the full subscription price and the employer accounts for the subscription as an addition to share capital. On exercise of the rights, the employee pays the exercise price to the employer.", "Reasons_for_Decision": "Summary: Under subsection 6-5(1) of the ITAA 1997, assessable income includes amounts that are income according to ordinary concepts. Whether a particular receipt has the character of the derivation of income depends upon its quality in the hands of the recipient: Scott v. Federal Commissioner of Taxation (1966) 117 CLR 514; (1966) 14 ATD 286; (1966) 10 AITR 367, GP International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; (1990) 21 ATR 1; 90 ATC 4413. A receipt that is part of the proceeds of a taxpayer's business, or a product of or incidental to the conduct of the business, is income of the taxpayer according to ordinary concepts even though the amount may not be regarded as a usual or normal receipt, as illustrated by the following cases. In HR Sinclair Ltd v. Federal Commissioner of Taxation (1966) 114 CLR 537; (1966) 14 ATD 194, the High Court determined that a refund of royalty payments made to a saw miller in respect of royalties paid in previous years was part of the proceeds of the taxpayer's business and properly formed part of the taxpayer's assessable income in the year of receipt. In Automatic Totalisators Ltd v. Federal Commissioner of Taxation (1968) 119 CLR 666; (1968) 15 ATD 170; (1968) 10 AITR 763, the High Court found that a rebate of payroll tax paid to the taxpayer as a consequence of increased export sales in previous years was a trading receipt and assessable income of the taxpayer. In FC of T v. Reynolds (1981) 11 ATR 629; 81 ATC 4131, the taxpayer was permitted by a lessor to sell a leased truck that he used in his log hauling business and to retain the surplus of the proceeds of sale over the payout figure for the lease. The Supreme Court of Tasmania determined that the surplus that the taxpayer retained was incidental to the taxpayer's conduct of his business and was therefore assessable income. The ESS is part of the remuneration strategy of the employer and as such is an integral part of the conduct of the employer's business. In accordance with the ESS, the trustee either acquires the shares on market or it subscribes for the issue of shares using the funds provided by the employer. If the trustee subscribes for the issue of shares, it pays the full subscription price for the shares and the company receives a contribution of share capital from the trustee. The subscription price received by the company from the trustee is a capital receipt of the company. Whether the trustee acquires shares on market, or by subscription, the payment of the exercise price by the employee to the employer is not a payment for the issue of a share in the capital of the company, but rather a payment, under the terms of the ESS, for the delivery of a share from the trustee of the employee share trust. The exercise price is a receipt of the company derived in the course of operating the ESS as an integral part of its business operations. The payment of the exercise price by an employee to the employer is a contribution towards or consideration for the provision of a benefit that is an incidence of employment. The payment of the exercise price reduces the benefit provided to the employee, and more importantly, the cost to the employer of providing that benefit. Therefore, the receipt by the employer of the exercise price paid by the employee to acquire a share under the ESS is properly regarded as either a product of, or incidental to, the conduct of the employer's business and is included in the employer's assessable income as income according to ordinary concepts under section 6-5 of the ITAA 1997", "Date_of_Decision": "15 July 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/1074", "Subject_References": "Employee share schemes & options", "Case_References": "Scott v Federal Commissioner of Taxation (1966) 117 CLR 514 (1966) 14 ATD 286 (1966) 10 AITR 367", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010155", "Unmatched_Content": "Keywords Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2009/85", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Scheme: rights to acquire shares at a future time authorised by shareholders", "Issue": "Where shareholders at the Annual General Meeting (AGM) of a company authorise the company to grant in the future, to an employee, a right to acquire a share in the company, when is the right acquired by the employee for the purposes of Division 13A of Part III (Division 13A) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "A right to acquire a share will be acquired by the employee for the purposes of Division 13A of the ITAA 1936, when following authorisation by shareholders at the AGM, the company enters into a contract with the employee to grant a right to acquire a share in the company.", "Facts": "An employee is an executive of a public company. A resolution is put to shareholders at the AGM to authorise the company to grant rights to acquire shares in the company to the employee. The resolution put to shareholders is approved at the AGM. The company subsequently entered into a contract with the employee to grant the employee rights to acquire shares in the company. The rights to acquire shares are rights acquired under an employee share scheme for the purposes of Division 13A of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 139G of the ITAA 1936 provides that an employee acquires a right for the purposes of Division 13A of the ITAA 1936 in various circumstances including the time when another person creates a right (being a right to acquire a share) in the employee. When the shareholders at the AGM approved the resolution to allow the company at some time in the future, to grant rights to acquire shares in the company to the employee, no contractual obligations were created between the company and the employee at that time. Therefore, the resolution did not create a right in the employee within the meaning of section 139G of the ITAA 1936. However, when the company subsequently entered into a contract with the employee to grant rights to acquire shares in the company, a right (to acquire a share) was created in the employee within the meaning of section 139G of the ITAA 1936. Therefore, a right to acquire a share was acquired by the employee under an employee share scheme for the purposes of Division 13A of the ITAA 1936 when the company entered into a contract with the employee to grant a right to acquire a share in the company.", "Date_of_Decision": "24 July 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 Division 13A of Part III section 139G", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/66", "Subject_References": "Employee share schemes & options", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200985", "Unmatched_Content": "Keywords Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2007/217", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee share scheme: whether payments by an employer company to a trustee to acquire shares to be later provided to employees result in the company deriving assessable income", "Issue": "Where, in respect of rights granted to an employee under an employee share scheme, an employer makes contributions to the trustee of a trust, which are used by the trustee to obtain shares which are to be provided to the employee on the exercise of those rights, will the employer derive ordinary income assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) at the time the contributions are made or at the time the shares are provided?", "Decision": "No. The contributions by the employer to the trustee of the trust will not result in the employer deriving ordinary income assessable under section 6-5 of the ITAA 1997 at the time the contributions are made or at the time the shares are provided.", "Facts": "An employer company has established an employee share acquisition scheme. Under the scheme employees acquire rights to acquire shares in the company. The rights are acquired for nil consideration and are subject to vesting conditions. On vesting, the rights become exercisable and employees are entitled to be provided with shares in the company. To provide shares to employees under the scheme, the employer company makes contributions to the trustee of a discretionary trust established for the purposes of the scheme (pre-funding arrangement). Under the terms of the trust deed, the trustee applies the funds to acquire shares in the employer company and holds the shares on trust in anticipation of the rights vesting. Dividend income from the shares held by the trustee is applied by the trustee to acquire further shares. The trustee is assessed on this income under section 99A of the Income Tax Assessment Act 1936 (ITAA 1936). The amount of the employer company's contributions under the pre-funding arrangement is calculated to meet its estimated future liability to provide shares under the scheme and takes into account the trustee's tax and administration costs. When an employee exercises a right in accordance with the scheme, the trustee transfers a share to the employee for nil consideration. It is expected that the total value of shares that will be distributed to employees on the exercise of rights will exceed the total amount of the payments made by the employer company under the pre-funding arrangement.", "Reasons_for_Decision": "Summary: The pre-funding arrangement is comparable to a hedge against a future liability where the extent of the liability is uncertain. While it is expected that the share price at the vesting day will be higher than when the trustee acquired the share, any financial advantage that might flow to the employer company from the pre-funding arrangement is contingent on an increase in the price. It is not possible for the employer company to estimate the extent of any advantage it might gain under the pre-funding arrangement, as that is dependent on the extent to which rights vest and the share price at the time rights are exercised. At the time the payments are made, any gain to the employer company is contingent and unascertainable. It is not capable of being reflected in the company's accounts. These facts contrast with the facts in Federal Commissioner of Taxation v. Orica Ltd (1998) 194 CLR 500; (1998) 98 ATC 4494; (1998) 39 ATR 66 ( Orica ) and Commissioner of Taxation v. Unilever Australia Securities Ltd (1995) 56 FCR 152; (1995) 95 ATC 4117; (1995) 30 ATR 134 ( Unilever ). In those cases a taxpayer company contracted with a third party who promised to meet its future liabilities to redeem debentures issued by the company some years previously. The consideration provided by the company under the liability assumption agreement was approximately equal to the present value of the future liabilities and was less than the principal amount of the debentures. The liability assumption agreement did not result in the defeasance of the company's primary liability under the debentures at law but did, for practical purposes, relieve it of its future obligations. In each case the court held that the difference between the amount paid as consideration under the liability assumption agreement and the amount the company would have had to pay in the future to redeem the debentures was a gain to the company - a capital gain in the case of Orica and income under ordinary concepts in the case of Unilever . In Unilever the gain was held to come home to the company at the time the debentures were redeemed. In the case of Orica Ltd, the Federal Court subsequently held that the capital gain was deemed to come home to the taxpayer at the time the assumption agreement was made, by virtue of section 160U of the ITAA 1936 (see Orica Ltd & Anor v. Federal Commissioner of Taxation [2001] FCA 31; (2001) 2001 ATC 4039; (2001) 46 ATR 218). In Orica and Unilever the liability assumption agreement gave rise to a notional gain that was reflected in the company's accounts for the income year in which the company made the payment. There was no element of risk mitigation against an uncertain future liability, unlike the present case. In addition, the arrangements in Orica and Unilever were contractual and gave rise to contractual rights. In this case, the pre-funding arrangement was not contractual and involved payments to a trustee. For this reason the broader context has greater significance in determining the nature of the payments by the employer company. That context includes the various relationships and agreements that make up the plan and the commercial and intangible benefits that flow to the employer company from its nature as an employee incentive. The payments relate to these benefits, which are enjoyed by the employer company from the commencement of the scheme and are not dependent on the exercise of rights by employees. In the context of the plan as a whole, for income tax purposes, payments made under the pre-funding arrangement are regarded as being outgoings on revenue account that constitute a business expense of the employer company; they are not treated as payments towards the discharge of its future liability. For these reasons , the employer company's payments under the pre-funding arrangement do not result in the company deriving income under section 6-5 of the ITAA 1997, either at the time the payments are made or at the time the trustee discharges the company's liability to employees by providing shares.", "Date_of_Decision": "22 November 2007", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/181 | ATO ID 2002/1074", "Subject_References": "Debt defeasance Employee share schemes & options", "Case_References": "Federal Commissioner of Taxation v. Orica Ltd [1998] HCA 33 (1998) 194 CLR 500 (1998) 39 ATR 66 98 ATC 4494", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007217", "Unmatched_Content": "Keywords Debt defeasance Employee share schemes & options"}
{"ATO_ID_Number": "ATO ID 2002/965", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax -Trustee not assessable on employer contributions made to it under the employer's employee share scheme", "Issue": "Will the Trustee of an employee share scheme Trust be assessed under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) on contributions it receives from an employer made to it for the purpose of and under the employer's employee share scheme?", "Decision": "No. The Trustee of the employee share scheme Trust will not be assessed under sections 6-5 or 6-10 of the ITAA1997 on contributions made to it by an employer for the purpose of and under the employer's employee share scheme.", "Facts": "The employer's employee share scheme complies with the provisions of Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer is a Trustee appointed for the purpose of and under the employer's employee share scheme to administer the scheme. The employer contributes amounts to the Trustee for the purpose of and under its employee share scheme.", "Reasons_for_Decision": "Summary: The funds provided to the Trustee are used in accordance with the Trust Deed and Plan Rules for the sole purpose of and under the employee share scheme. The contributions constitute capital receipts to the Trustee, and are not assessable under sections 6-5 or 6-10 of the ITAA 1997.", "Date_of_Decision": "21 August 2002", "Year_of_Income": "Year ending 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employee share schemes & options Assessable income Capital receipts Trust", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002965", "Unmatched_Content": "Repealed Division 13A of the ITAA 1936 replaced with Division 83A of the ITAA 1997, the new employee share scheme provisions. | Changed to 2010 to enable current provisions to be the relevant provisions. | Keywords Employee share schemes & options Assessable income Capital receipts Trust"}
{"ATO_ID_Number": "ATO ID 2002/966", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax - Proceeds from disposal of shares or rights by Trustee of an employee share scheme on behalf of employees not assessable to Trustee", "Issue": "Will the taxpayer, a Trustee of an employee share scheme Trust, be assessable under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 ('ITAA 1997') on the proceeds of the disposal, by the Trustee on the behalf of an employee or an associate of the employee, of shares or rights acquired by the employee or the associate under the employee share scheme?", "Decision": "No. The taxpayer, a Trustee of an employee share scheme Trust, will not be assessable under sections 6-5 or 6-10 of the ITAA 1997 on the proceeds of the disposal, by the Trustee on behalf of an employee or an associate of the employee, of shares or rights acquired by the employee or associate under the employee share scheme.", "Facts": "The employee share scheme complies with the provisions of Division 13A of the Income Tax Assessment Act 1936 ('ITAA 1936'). A Trustee is appointed to administer the scheme. Upon the employee or associate of the employee becoming absolutely entitled to the shares or rights, the shares or rights acquired by the employee or associate under the employee scheme are disposed of by the Trustee at the employee's or associate's request. The trustee distributes the proceeds to the employee or associate.", "Reasons_for_Decision": "Summary: The Trustee taxpayer holds the shares for the benefit of the employee or associate of the employee for the purpose of and under the employee share scheme. After the employee or associate acquires the shares or rights under the scheme, the Trustee disposes of them at the request of the employee or associate. The Trustee is not a share trader in relation to these transactions for the purpose of the Act. It does not trade in these shares or rights in its own right. Any proceeds from the disposal of the shares or rights are distributed to the employee or the associate and not held for the benefit of the Trustee. The proceeds are not assessable income under sections 6-5 or 6-10 of the ITAA 1997.", "Date_of_Decision": "22 August 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income tax Assessable income Employee share schemes & options Share discounts on employee share schemes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002966", "Unmatched_Content": "Keywords Income tax Assessable income Employee share schemes & options Share discounts on employee share schemes"}
{"ATO_ID_Number": "ATO ID 2010/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains and foreign residents: meaning of 'holds' for the purposes of a foreign resident's direct participation interest in a Part X Australian company", "Issue": "Does a foreign resident company that enters into a contract for the disposal of part of its 'direct participation interest' in an Australian resident company within the meaning of section 960-190 of the Income Tax Assessment Act 1997 (ITAA 1997), continue to 'hold' that part of its interest until the completion of the contract for the purpose of determining a 12 month period within the meaning of subparagraph 855-25(1)(a)(ii) of the ITAA 1997?", "Decision": "Yes. A foreign resident company that enters into a contract for the disposal of part of its 'direct participation interest' in an Australian resident company within the meaning of section 960-190 of the ITAA 1997, continues to 'hold' that part of its interest until the completion of the contract, for the purpose of determining a 12 month period within the meaning of subparagraph 855-25(1)(a)(ii) of the ITAA 1997.", "Facts": "The taxpayer is a foreign resident company. On 15 December 2006 the taxpayer held 100% of the ordinary shares in an Australian resident company (Aus Co) which is a company within the meaning of Part X of the Income Tax Assessment Act 1936 (ITAA 1936). All of the taxpayer's shares in Aus Co were membership interests within the meaning of Subdivision 960-G of the ITAA 1997. Further, all these shares passed the 'principal asset test' in section 855-30 of the ITAA 1997, at all times. On 1 December 2007, the taxpayer entered into a contract for the disposal of 95% of its shares in Aus Co to a third party. For the purposes of the CGT provisions, this 95% shareholding was disposed of and CGT event A1 happened, at the time that the contract was entered into, that is, on 1 December 2007 (per subsection 104-10(3) of the ITAA 1997). Until the completion of the contract for the disposal of 95% of the shares in Aus Co on 1 February 2008, the taxpayer was the only member registered on Aus Co's register of members. The taxpayer disposed of the remaining 5% of the shares in Aus Co in September 2008. CGT event A1 happened at the time that the contract for the disposal of the remaining 5% shareholding was entered into, that is, in September 2008.", "Reasons_for_Decision": "Summary: The question at issue relates to whether a capital gain or capital loss from the CGT event that happened at the time of the disposal of the remaining 5% of the shares in Aus Co in September 2008, can be disregarded under subsection 855-10(1) of the ITAA 1997. For a capital gain or capital loss to be disregarded under subsection 855-10(1) of the ITAA 1997, the taxpayer must be a foreign resident just before the CGT event happens and the CGT event must happen in relation to a CGT asset that is not 'taxable Australian property'. 'Taxable Australian property' is defined in section 855-15 of the ITAA 1997 and includes an 'indirect Australian real property interest' which is defined in section 855-25 of the ITAA 1997. | Detailed Reasoning - Indirect Australian real property interests: Subsection 855-25(1) of the ITAA 1997 provides that a 'membership interest' held by an entity (the holding entity) in another entity (the test entity) at a time, is an 'indirect Australian real property interest' at that time - if the interest passes both: As all of the taxpayer's shares in Aus Co are membership interests within the meaning of Subdivision 960-G of the ITAA 1997 and passed the 'principal asset test' at all times, these shares will come within the definition of an 'indirect Australian real property interest' if they pass the 'non-portfolio interest test' contained in paragraph 855-25(1)(a) of the ITAA 1997. | Detailed Reasoning - Subparagraph 855-25(1)(a)(ii) - requires the 'non-portfolio interest test' to be passed throughout a 12 month period: For present purposes, in order to be an 'indirect Australian real property interest' at a certain time (in this case, when CGT event A1 happened in September 2008), subparagraph 855-25(1)(a)(ii) of the ITAA 1997 requires a holding entity to 'hold' a 'membership interest' in a test entity (Aus Co) at that time - being an interest that passed the 'non-portfolio interest test' in section 960-195 of the ITAA 1997 'throughout a 12 month period that began no earlier than 24 months before that time and ended no later than that time'. Subparagraph 855-25(1)(a)(ii) of the ITAA 1997 is an integrity measure to counter 'staggered' sell downs. | Detailed Reasoning - Non-portfolio interest test: Section 960-195 of the ITAA 1997 provides that an interest held by an entity (the holding entity) in another entity (the test entity) passes the 'non-portfolio interest test' at a time, if the sum of the direct participation interests held by the holding entity and its associates in the test entity at that time is 10% or more. | Detailed Reasoning - Direct participation interests: Item 1 of the table in subsection 960-190(1) of the ITAA 1997 provides that if the test entity is a company within the meaning of Part X of the ITAA 1936, the 'direct participation interest' that the holding entity 'holds' in the test entity is the 'direct control interest' it 'holds' within the meaning of section 350 of Part X of the ITAA 1936. | Detailed Reasoning - Direct control interest in section 350 of the ITAA 1936: Paragraph 350(1)(a) of the ITAA 1936 relevantly provides that an entity 'holds a direct control interest in a company' at a particular time equal to the percentage that the entity 'holds' at that time, of the total paid-up share capital of the company. Meaning of ' holds' for the purposes of the direct control interest The meaning of the term 'holds' is not defined for the purposes of applying section 350 of the ITAA 1936 (as modified for the present purposes by paragraph 855-25(2)(a) and subsection 960-190(2) of the ITAA 1997). Accordingly, the term 'holds' is given its ordinary meaning , unless this would lead to any absurdity or inconsistency within the context in which the term is used. The words 'hold' and 'held' in legislation relating to shares in companies has been examined judicially. In In re Wala Wynaad Indian Gold Mining Company (1882) 21 Ch. D. 849, Chitty J stated: Now what is the meaning of the word \"held\"? I think that the word \"held\" there has no specific technical meaning. I think it is sufficient that the shares have been registered in the contributory's name at the period mentioned ... That plainly shows that the term \"held\" has no specific force, but shares are held by the person in whose name they are registered. ... In the High Court decision in Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 CLR 353; (1949) 9 ATD 5: (1949) 4 AITR 195, Dixon J quoted with approval from Chitty J's judgement. Subsequently, in Dalgety Downs Pastoral Co Pty. Ltd. v. Federal Commissioner of Taxation (1952) 86 CLR 335; (1952) 10 ATD 55; (1952) 5 AITR 386, the High Court (Webb, Fullagar and Kitto JJ) relevantly stated (at CLR 341-342): Dixon J. so held in Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 CLR 353, basing his conclusion upon the view that in the terminology of company law shares are said to be \"held\" by the person who is registered as a shareholder in respect thereof, and that s. 80(5), being concerned with voting power, should be treated as using that terminology. We share this view. Indeed it is not too much to say that the verb \"hold\" and its variants, when used in relation to shares in companies, normally refers to the legal ownership of the shares according to the register of members. The Companies Acts of the United Kingdom and of the several States of the Commonwealth have uniformly used the word in this sense, and common usage has followed their example. Before a different meaning is accepted, some justification must be found in the context, or the subject-matter. See also the High Court decision in Federal Commissioner of Taxation v. Patcorp Investments Limited (1976) 140 CLR 247; 76 ATC 4225; (1976) 6 ATR 420. Consistent with the above cases, the majority of the High Court in Federal Commissioner of Taxation v. Linter Textiles Australia Ltd . ( in liq ) (2005) 220 CLR 592; [2005] HCA 20; 2005 ATC 4255; (2005) 59 ATR 177 stated: 23. When used in relation to companies, \"hold\" normally refers to legal ownership established by reference to the register of members. ... 57. The 1964 Act replaced \"beneficially held\" with \"beneficially owned\" as the criterion for determining substantial continuity of shareholding and the 1973 Act continued that criterion. Given the outcome in Dalgety Downs , the change evidently was made to assist the taxpayer, by allowing the taxpayer to go beyond the face of the share register. The Commissioner considers that the ordinary meaning of the term 'holds' as outlined above does not lead to any absurdity or inconsistency within the context in which the term is used for present purposes. See also paragraphs 55-61 of Taxation Ruling TR 2004/7. Accordingly, the term 'holds' for present purposes refers to legal ownership established by reference to the register of members. The taxpayer was registered on Aus Co's register of members as a member in relation to all of the shares in Aus Co, including the 95% interest in respect of which the taxpayer entered into a contract of disposal in December 2007, until the completion of the contract for the disposal of this interest on 1 February 2008. Therefore, the taxpayer 'held' all of the shares in Aus Co, including the 95% interest to which CGT event A1 happened in December 2007, throughout the period from 15 December 2006 to 1 February 2008. Thus, the taxpayer held a 'direct control interest' and hence a 'direct participation interest' of 10% or more in Aus Co from 15 December 2006 to 1 February 2008. It follows that, in determining whether the 5% interest disposed of in September 2008 was an 'indirect Australian real property interest' at that time, the entire 100% interest held by the taxpayer in Aus Co passed the 'non-portfolio interest test' throughout a 12 month period that began no earlier than 24 months (that is, no earlier than September 2006) before September 2008 for the purposes of subparagraph 855-25(1)(a)(ii) of the ITAA 1997. This means that the taxpayer's remaining 5% interest in Aus Co was an 'indirect Australian real property interest', because this 5% interest passed the 'non-portfolio interest test' as set out in subparagraph 855-25(1)(a)(ii) of the ITAA 1997 as well as the principal asset test in section 855-30 of the ITAA 1997. As such, the taxpayer's 5% interest in Aus Co was 'taxable Australian property' at the time of its disposal in September 2008. Therefore, any capital gain or capital loss made by the taxpayer from the disposal of the 5% interest in Aus Co in September 2008 cannot be disregarded under subsection 855-10(1) of the ITAA 1997. The taxpayer will have made a capital gain if the capital proceeds from the disposal of the shares in Aus Co were more than the cost base of the shares. Alternatively, the taxpayer will have made a capital loss if the capital proceeds from the disposal of the shares in Aus Co were less than the reduced cost base of the shares: subsection 104-10(4) of the ITAA 1997. The resulting capital gain or capital loss must be taken into account in working out the taxpayer's net capital gain or net capital loss for the income year in which the disposal of the 5% interest occurred.", "Date_of_Decision": "31 March 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 subsection 104-10(3) subsection 104-10(4) subsection 855-10(1) section 855-15 section 855-25 subsection 855-25(1) paragraph 855-25(1)(a) subparagraph 855-25(1)(a)(ii) paragraph 855-25(2)(a) section 855-30 Subdivision 960-G section 960-190 subsection 960-190(1) subsection 960-190(2) section 960-195", "Related_Public_Rulings_and_Determinations": "TR 2004/7 - 'Income tax: capital gains: application of Division 149 of the Income Tax Assessment Act 1997 and Division 20 of Part IIIA of the Income Tax Assessment Act 1936 to public entities'", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/46", "Subject_References": "Capital gains CGT Disposal of shares International tax", "Case_References": "In Re Wala Wynaad Indian Gold Mining Company (1882) 21 Ch D 849", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201088", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 2004/7 - 'Income tax: capital gains: application of Division 149 of the Income Tax Assessment Act 1997 and Division 20 of Part IIIA of the Income Tax Assessment Act 1936 to public entities' | Keywords Capital gains CGT Disposal of shares International tax"}
{"ATO_ID_Number": "ATO ID 2009/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Whether a United States head lessor of substantial equipment carries on business in Australia through a deemed permanent establishment under the United States Convention", "Issue": "Does Australia have a right to tax a United States head lessor under Article 7(1) of Schedule 2 of the International Agreements Act 1953 (Agreements Act) where they lease equipment to an Australian resident company who subleases the equipment to third parties in Australia?", "Decision": "No. Australia does not have a right to tax a United States head lessor under Article 7(1) of Schedule 2 of the Agreements Act where they lease equipment to an Australian resident company who subleases the equipment to third parties in Australia.", "Facts": "The taxpayer is a United States resident for the purposes of the US Convention. The taxpayer is carrying on the business of leasing substantial equipment. The taxpayer leases substantial equipment to an Australian resident entity who subleases the equipment to third parties. The third parties operate the equipment within Australia for more than 12 months. The taxpayer receives lease payments from the Australia resident entity in accordance with the lease agreement. The lease agreement is not a hire-purchase agreement for the purposes of the US Convention. The taxpayer entered into the lease agreement with the Australian resident entity in May 1993 outside Australia. However, the equipment that is the subject of the lease was previously leased by the taxpayer to the Australian resident entity under an earlier lease agreement which terminated upon the entering into of the new lease in May 1993. The negotiations for the new lease took place predominantly outside Australia during the period from December 1989 to May 1993. However, only the drafting of the lease was carried out in Australia. Up until the commencement of the new lease in May 1993, the equipment remained in the possession of the Australian resident entity and was located in Australia during this time. There is no requirement in the lease for the equipment to be physically located or used in Australia by the Australian resident entity. At the end of the lease period, the lease agreement requires that the Australian resident entity return the equipment to the taxpayer at an address in the United States. The taxpayer does not lease the equipment through an office, dependent agent or any other fixed place of business in Australia. The taxpayer does not undertake any maintenance or inspection activities for the equipment while it is used in Australia, as this is the responsibility of the Australian resident entity under the lease agreement.", "Reasons_for_Decision": "Summary: Schedule 2 to the Agreements Act contains the tax treaty between Australia and the United States (the US Convention). Article 7(1) of the US Convention allocates Australia a right to tax profits of an enterprise of the United States (US) where that enterprise carries on business in Australia through a permanent establishment in Australia. Article 5 of the US Convention Article 5(4)(b) of the US Convention deems a US enterprise to have a permanent establishment in Australia where: it maintains substantial equipment for rental or other purposes within that other State (excluding equipment let under a hire-purchase agreement) for a period of more than 12 months. Based on the ordinary meaning of the terms within the expression 'maintains ... for rental or other purposes ... within Australia' and the context in which the expression is used in Article 5(4)(b) of the US Convention, the Commissioner considers the expression applies to situations where the actions of a US lessor enterprise are directed toward keeping its substantial equipment present within Australia for leasing purposes. Accordingly, a US lessor enterprise will be considered to maintain substantial equipment within Australia where the lessor: For the purposes of paragraph (a) above, a US lessor enterprise is considered to direct or otherwise require that the equipment be used by the lessee within Australia if there is a requirement in the lease that they be physically located or used within Australia. However, a lessor would not be considered to direct or otherwise require that the equipment be used by the lessee within Australia where the equipment is of a general nature such that it can be used in most locations, the lessor has no requirement as to where the lessee ultimately uses the equipment, and it simply eventuates that the lessee brings the equipment to Australia and uses it in Australia. The same principles apply whether the US lessor enterprise is a head lessor or sublessor in a chain of leases over the equipment. Where the US lessor enterprise is a head lessor, the Commissioner considers the actions of the US lessor alone (that is as distinct from those of the lessee or any sublessees) to determine whether the US lessor is maintaining the equipment for rental or other purposes within Australia. In situations where the leased equipment is: The Commissioner considers that the actions of the US lessor enterprise are directed towards keeping the equipment in Australia. This will be the case regardless of whether the US lessor enterprise brought the equipment to Australia to make them available for leasing, had the equipment constructed in Australia, or simply allowed them to remain in Australia for the purpose of leasing following the expiry of a previous lease contract. This will also be the case regardless of whether the lease agreement requires the leased equipment be used in Australia during the lease, or whether the US lessor enterprise makes the equipment available for lease worldwide and they are then used by the lessee in Australia. Accordingly, the actions of the taxpayer are considered to be directed towards keeping the equipment in Australia because: Therefore, the taxpayer is considered to be maintaining substantial equipment for rental purposes within Australia for a period of more than 12 months. Accordingly, the taxpayer is deemed to have a permanent establishment in Australia under Article 5(4)(b) of the US Convention in relation this equipment leasing activity. Article 7 of the US Convention However, Australia will only have a taxing right under Article 7(1) of the US Convention over the leasing profits attributable to this deemed permanent establishment where the taxpayer is considered to be carrying on its leasing business in Australia through its deemed permanent establishment. Maintaining leased equipment in Australia that gives rise to a deemed permanent establishment (for example, because the lessor directs that it be used by the lessee within Australia) does not necessarily mean, of itself, that the US lessor enterprise is carrying on its business in Australia through that permanent establishment. Whilst the deemed permanent establishment is the 'activity' of maintaining the equipment for rental or other purposes within Australia (as opposed to being 'a fixed place of business' permanent establishment under Article 5(1) of the US Convention) it is a consideration of the entirety of activities undertaken in Australia by the lessor that determines whether the lessor is carrying on business in Australia. Accordingly, where the lease contracts are entered into outside Australia and the activities of the lessor in Australia only consist of the drafting of the lease but not the receipt of lease rentals, the Commissioner considers that this mere leasing of equipment by the US lessor enterprise in Australia will not, of itself, constitute the carrying on of business in Australia through the deemed permanent establishment. The Commissioner considers that for business to be carried on in Australia through the deemed permanent establishment, a US lessor enterprise would need to be undertaking more of the activities constituting its leasing business within Australia, for example, undertaking inspection or maintenance checks on the equipment in Australia, or conducting lease negotiations in Australia. The taxpayer does not carry on any of its leasing business activities through its deemed permanent establishment in Australia other than the activity of maintaining the equipment within Australia for rental purposes. Accordingly, the taxpayer is not considered to be carrying on business through its deemed permanent establishment in Australia. Therefore, Australia does not have a taxing right over the taxpayer's leasing profits under Article 7(1) of the US Convention.", "Date_of_Decision": "18 January 2008", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "International Agreements Act 1953 Schedule 2 Article 5(4)(b) Schedule 2 Article 7(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Equipment royalties International tax Non resident royalty withholding tax Royalties Royalty article Treaties Permanent establishment", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200921", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Equipment royalties International tax Non resident royalty withholding tax Royalties Royalty article Treaties Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2005/301", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Activities from the 'operation of ships' in Australia by a Singapore company", "Issue": "Do the activities of a Singapore resident company in Australia constitute the 'operation of ships' under Article 7(1) of Schedule 5 to the International Agreements Act 1953 (Agreements Act)?", "Decision": "Yes. The activities by the Australian office of the Singapore Company will constitute the 'operation of ships' pursuant to Article 7(1) of Schedule 5 of the Agreements Act.", "Facts": "The company is a resident of Singapore for the purposes of the Singapore Double Tax Agreement (Singapore Agreement) as set out in Schedule 5 of the Agreements Act. The company also has an office located in Australia. The company's core business consists of the provision of international shipping services. The Australian office of the company effectively acts as an 'intermediary' whereby it will source cargo from parties who are typically commodity owners or shippers themselves, who need transportation. The cargo is transported on ships chartered by the company. The cargo is exported directly from Australia to a foreign country and no goods are transported from Australia to another port in Australia. The Australian office of the company also sources vessels for charter and identifies potential vessels to charter. The Australian office of the company will increase the scope of its existing services and will be involved in providing the following services:", "Reasons_for_Decision": "Summary: Schedule 5 of the Agreements Act contains the Singapore Agreement. The Singapore Agreement operates to avoid double taxation of income received by Australian and Singaporean residents. Article 7 of the Singapore Agreement deals with the taxation treatment of profits derived from shipping and air transport. The effect of this Article is that the right to tax profits from the operation of ships or aircraft is generally reserved to the country of residence of the operator. In this case the country of residence of the operator is Singapore. Where Article 7 applies to the company, Australia will not have taxing rights over profits covered by this Article. That means that Australia will not require the Singaporean company to include an amount in assessable income under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997). Of particular relevance is Article 7(1) which provides that: profits from the operation of ships... derived by a resident of one of the Contracting States shall be taxable only in that State. To determine whether the activities of the Australian office of the company constitute 'profits from the operation of ships' reference is made to Taxation Ruling TR 2001/13 - Income tax: Interpreting Australia's Double Tax Agreements. Under this Ruling, regard may be had to the OECD Model Tax Convention and the OECD Commentary on the Model Tax Convention (and subsequent revisions to that Commentary) to assist in the interpretation of double tax agreements. The OECD Commentary was also considered by the Full Federal Court in McDermott Industries (Aust.) Pty Ltd v. Federal Commissioner of Taxation [2005] FCAFC 67; 2005 ATC 4398; 59 ATR 358 which examined the Singapore Agreement. The present OECD Commentary on the taxation of profits from shipping notes that: profits obtained purely from the carriage of passengers or cargo... would be unduly restrictive when interpreting the Article, in view of the development of shipping and for practical considerations as well (see C(8)-2 of the OECD Model Commentary). On that basis the OECDs current view is that this Article: covers other classes of profits as well ie. those which by reason of their nature or their close relationship with the profits directly obtained from the transport may all be placed in a single category' (see C(8)-2 of the OECD Model Commentary). Having regard to TR 2001/13 and the OECD commentary, the proposed expanded services by the company in its Australian office will constitute the 'operation of ships' for the purposes of Article 7(1) of the Singapore Agreement. Accordingly, any profits that arise from the proposed services shall only be taxable in Singapore. Therefore, these profits will not be included in assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "19 August 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 5 Article 7", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/41 | ATO ID 2004/111 | ATO ID 2004/314", "Subject_References": "Double tax agreements Income Shipping Shipping income Singapore", "Case_References": "McDermott Industries (Aust.) Pty Ltd v. Federal Commissioner of Taxation [2005] FCAFC 67 2005 ATC 4398 59 ATR 358", "Other_References": "OECD Commentary on the Model Tax Convention on Income and Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005301", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Income Shipping Shipping income Singapore"}
{"ATO_ID_Number": "ATO ID 2004/69", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of maintenance payments received by Canadian resident from Australia", "Issue": "Are maintenance payments sourced in Australia and received by a Canadian resident taxpayer assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Maintenance payments sourced in Australia and received by a Canadian resident taxpayer will be not assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a Canadian resident for income tax purposes. The taxpayer is separated from their spouse and divorce proceedings are pending. The taxpayer's spouse resides and works in Australia. The taxpayer receives maintenance payments from their estranged spouse.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from Australian sources during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 51-50 of the ITAA 1997 which deals with maintenance payments. Paragraph 51-50(2)(a) of the ITAA 1997 provides that periodic maintenance payments made to a person who is, or was, a spouse of the maintenance payer are exempt from income tax. In determining liability to tax on foreign sourced income received by a non-resident taxpayer it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 3 to the Agreements Act contains the double tax agreement between Australia and Canada (the Canadian Convention). Schedule 3A to the Agreements Act contains the protocol amending the Canadian Convention (the Canadian Protocol). The Canadian Convention and the Canadian Protocol operate to avoid the double taxation of income received by Australian and Canadian residents. Article 18(3) of the Canadian Convention provides that alimony or other maintenance payments arising in Australia and paid to a resident of Canada shall be taxable only in Australia. Therefore the maintenance payments received by the Canadian resident taxpayer may only be taxed by Australia. However, as the maintenance payments are exempt under paragraph 51-50(2)(a) of the ITAA 1997, the payments are not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "9 January 2004", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) subsection 6-15(2) section 11-15 section 51-50 paragraph 51-50(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Maintenance payments Canada Double tax agreement Exempt income Foreign income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200469", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Maintenance payments Canada Double tax agreement Exempt income Foreign income"}
{"ATO_ID_Number": "ATO ID 2003/477", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of workers compensation payments made to a resident of India", "Issue": "Are the workers' compensation payments received by the taxpayer, a resident of India, from an Australian entity assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the workers' compensation payments received by the taxpayer, a resident of India, from an Australian entity are assessable under subsection 6-5(3) of the ITAA 1997, Article 18(1) of Schedule 35 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the workers compensation payments are not taxable in Australia.", "Facts": "The taxpayer is a resident of India for income tax purposes. The taxpayer was injured at work while employed in Australia. The taxpayer receives periodical workers compensation payments from an Australian resident entity.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from Australian sources. The workers' compensation payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. The taxpayer is a resident of India, a country with which Australia has entered into a double tax agreement. Therefore, the double tax agreement between Australia and the Republic of India contained in Schedule 35 to the Agreements Act (the Indian Agreement) must be considered in determining whether the workers' compensation received by the taxpayer is taxable in Australia. Section 11Z of the Agreements Act gives the Indian Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1997 must be read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions with some limited exceptions (subsection 4(2) of the Agreements Act). Article 18(1) of the Indian Agreement provides that pensions or annuities paid to a resident of India will be taxable only in India. The term 'pension' is not defined in the Indian Agreement. Taxation Determination TD 93/151 considers the application of pension articles in Australia's double tax agreements in the context of periodic compensation payments made by Comcare. Taxation Determination TD 93/151 refers to the dictionary definition of pension. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'pension' as 'a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc'. TD93/151 also refers to the conclusion of Hill J. in Tubemakers of Australia Ltd v. FC of T (1993) 25 ATR 183; 93 ATC 4207 that the essential characteristic of a pension is only that there be periodical payments. Workers' compensation payments received are fixed periodical payments made in consideration of an injury suffered by the taxpayer. Therefore, the workers' compensation payments received by the taxpayer from the Australian entity are within the meaning of a pension under Article 18(1) of the Indian Agreement. Consequently, as the taxpayer is a resident of India, Article 18(1) of the Indian Agreement applies and the workers' compensation payments are not assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "12 June 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/151", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double Tax Agreements India International tax Pension Workers compensation", "Case_References": "Tubemakers of Australia Ltd v. FC of T (1993) 25 ATR 183 93 ATC 4207", "Other_References": "The Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003477", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 93/151 | Keywords Double Tax Agreements India International tax Pension Workers compensation"}
{"ATO_ID_Number": "ATO ID 2010/28", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled foreign companies: financial intermediary business - foreign exchange gains on repayment or other disposal of loans", "Issue": "Does 'income... derived from the lending of money' within the meaning of paragraph (b) of the definition of 'financial intermediary business' in subsection 317(1) of the Income Tax Assessment Act 1936 (ITAA 1936), include any assessable profit or gain derived as a result of a change in the rate of foreign exchange between the time a loan or borrowing designated in a foreign currency was made and the time the loan or borrowing, respectively, was repaid or otherwise disposed?", "Decision": "No. The amount of any assessable profit or gain derived as a result of a change in the rate of foreign exchange between the time a loan or borrowing designated in a foreign currency was made and the time the loan or borrowing, respectively, was repaid, or otherwise disposed of, is not 'income... derived from the lending of money' within the meaning of paragraph (b) of the definition of 'financial intermediary business' in subsection 317(1) of the ITAA 1936.", "Facts": "A non-resident subsidiary of an Australian resident company is a controlled foreign company (CFC) as defined in subsection 317(1) and section 340 of the ITAA 1936. The activities of the CFC include making loans to associated entities and borrowing from associated entities in foreign currency.", "Reasons_for_Decision": "Summary: Paragraph (b) of the definition of 'financial intermediary business' in section 317 of the ITAA 1936 requires that the business must be either a 'banking business' or, 'a business whose income is principally derived from the lending of money'. If the sole or principal business of an AFI subsidiary is 'financial intermediary business' as defined, the AFI subsidiary may be able to satisfy the requirements of subparagraph 439(1)(a)(iv) and/or sections 449 or 450 of the ITAA 1936 (which operate to exclude certain types of otherwise 'adjusted tainted income,' 'passive income' or 'tainted services income'). '[I]ncome ... derived from the lending of money' is income arising by reason of the provision of loan funds, for example, interest or other amounts assessable to the lender that are payable under the terms of the loan. In this sense, 'income ... derived from lending' is necessarily legally distinguished from income from a business which includes (or is characterised by) lending, such as a banking business. Any assessable profit or gain that arises by reason of a change in the rate of foreign exchange between the time a loan or borrowing designated in a foreign currency is made by the CFC and the time the loan or borrowing, respectively, was repaid or otherwise disposed of is not 'income ... derived from the lending of money' in the requisite sense. Such assessable profit or gain is instead contingent upon, and arises from, the relevant movement (upwards or downwards, as the case may be) in the Australian dollar exchange rate for the relevant foreign currency between the relevant times. The requirement in paragraph (b) of the definition of 'financial intermediary business' in subsection 317(1) of the ITAA 1936 reflects a characterising feature of a business of financial intermediation through money lending. In Commercial Banking Co. of Sydney Ltd. v. Federal Commissioner of Taxation (1950) 81 CLR 263; 9 ATD 112; 4 AITR 406, in holding that the principal business of a bank was the lending of money, Dixon J said (at 81 CLR 304) that: The profit-making side of his [a banker's] activities is in putting out the money so as to increase it, and that substantially means to obtain interest. In the same case Latham CJ said at 81 CLR 295: In determining whether the lending of money is the principal business of a taxpayer it is proper to look at the business of the taxpayer in relation to its proceeds, that is the income which it produces. In the present case seventy-five per cent of the income is interest derived from the lending of money and the activity of gaining that income is, from the point of view of proceeds of the business of the taxpayer, the principal business activity of the taxpayer. In my opinion, therefore, the Board of Review properly held that the principal business of the bank was the lending of money ... In the Privy Council decision in American Leaf Blending Co Sdn Bhd v. Director-General of Inland Revenue [1979] AC 676; [1978] 3 WLR 985; [1978] 3 All ER 1185; Lord Diplock noted [1978] 3 All ER 1185 at 1189: The gains or profit from the business of a bank or moneylender are largely derived from interest received on money lent. The concessional rules in subparagraph 439(1)(a)(iv) and sections 449 and 450 of the ITAA 1936 apply if, and only if, the AFI subsidiary is a bank or satisfies the requirement that its assessable income principally consists of income from lending. In particular, section 450 of the ITAA 1936 distinguishes between income from the lending of money (for example, interest income) and the other kinds of income that may be derived by an eligible AFI subsidiary in the course of undertaking a business that principally derives its income from the lending of money. The key to understanding section 450 of the ITAA 1936 is that the sole or principal business must be a 'financial intermediary business' before income from the disposal of specified kinds of financial assets will be afforded concessional treatment in applying the active income test.", "Date_of_Decision": "18 December 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 317(1) section 340 subparagraph 439(1)(a)(iv) section 449 section 450", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/29 | ATO ID 2008/109 | ATO ID 2007/1", "Subject_References": "Australian financial institution foreign subsidiaries Controlled foreign companies International tax", "Case_References": "Commercial Banking Co of Sydney Ltd v Federal Commissioner of Taxation (1950) 81 CLR 263 9 ATD 112 4 AITR 406", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201028", "Unmatched_Content": "Keywords Australian financial institution foreign subsidiaries Controlled foreign companies International tax"}
{"ATO_ID_Number": "ATO ID 2010/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled foreign companies: financial intermediary business - currency forward agreements and currency swap agreements hedging foreign currency transactions", "Issue": "Does 'income... derived from the lending of money' within the meaning of paragraph (b) of the definition of 'financial intermediary business' in subsection 317(1) of the Income Tax Assessment Act 1936 (ITAA 1936) include any assessable profit or gain derived by an Australian financial institution (AFI) subsidiary under a currency swap agreement or currency forward agreement that hedges a borrowing, share issue or loan, by the AFI subsidiary which is designated in a foreign currency.", "Decision": "No. The amount of any assessable profit or gain under a currency swap agreement or currency forward agreement that hedges a borrowing, share issue or loan by the AFI subsidiary designated in a foreign currency is not 'income... derived from the lending of money' within the meaning of paragraph (b) of the definition of 'financial intermediary business' in subsection 317(1) of the ITAA 1936.", "Facts": "A non-resident subsidiary of an Australian resident company is a controlled foreign company (CFC) as defined in subsection 317(1) and section 340 of the ITAA 1936. The CFC enters into a currency swap agreement or currency forward agreement in order to hedge against movements in the rate of exchange for the foreign currency in which the CFC has borrowed, issued shares or made loans.", "Reasons_for_Decision": "Summary: Paragraph (b) of the definition of 'financial intermediary business' in section 317 of the ITAA 1936 requires that the business must be either: a 'banking business' or, 'a business whose income is principally derived from the lending of money'. If the sole or principal business of an AFI subsidiary is 'financial intermediary business' as defined, the AFI subsidiary may be able to satisfy the requirements of subparagraph 439(1)(a)(iv) and/or sections 449 or 450 of the ITAA 1936 (which operate to exclude certain types of otherwise 'adjusted tainted income,' 'passive income' or 'tainted services income'). '[I]ncome ... derived from the lending of money' is income arising by reason of the provision of loan funds, for example, interest or other amounts assessable to the lender that are payable under the terms of the loan. In this sense, 'income ... derived from lending' is necessarily legally distinguished from income from a business which includes (or is characterised by) lending, such as a banking business. Any assessable profit or gain that arises from the execution or disposal of a currency swap agreement or currency forward agreement entered into by the CFC to hedge a borrowing, share issue or loan designated in a foreign currency is not 'income ... derived from the lending of money' in the requisite sense. Such assessable profit or gain arises under the terms of an agreement which is not the lending of money and is instead contingent on the particular terms of the swap agreement or the forward agreement (including any relevant movement in rate(s) of foreign exchange determinative of the rights and liabilities under the agreement). The requirement in paragraph (b) of the definition of 'financial intermediary business' in subsection 317(1) of the ITAA 1936 reflects a characterising feature of a business of financial intermediation through money lending. In Commercial Banking Co. of Sydney Ltd. v. Federal Commissioner of Taxation (1950) 81 CLR 263; 9 ATD 112; 4 AITR 406, in holding that the principal business of a bank was the lending of money, Dixon J said (at 81 CLR 304) that: The profit-making side of his [a banker's] activities is in putting out the money so as to increase it, and that substantially means to obtain interest. In the same case, Latham CJ said at 81 CLR 295: In determining whether the lending of money is the principal business of a taxpayer it is proper to look at the business of the taxpayer in relation to its proceeds, that is the income which it produces. In the present case seventy-five per cent of the income is interest derived from the lending of money and the activity of gaining that income is, from the point of view of proceeds of the business of the taxpayer, the principal business activity of the taxpayer. In my opinion, therefore, the Board of Review properly held that the principal business of the bank was the lending of money... In the Privy Council decision in American Leaf Blending Co Sdn Bhd v. Director-General of Inland Revenue [1979] AC 676; [1978] 3 WLR 985; [1978] 3 All ER 1185; Lord Diplock noted [1978] 3 All ER 1185 at 1189: The gains or profit from the business of a bank or moneylender are largely derived from interest received on money lent. The concessional rules in subparagraph 439(1)(a)(iv) and sections 449 and 450 of the ITAA 1936 apply if, and only if, the AFI subsidiary is a bank or satisfies the requirement that its assessable income principally consists of income from lending. In particular, section 450 of the ITAA 1936 distinguishes between income from the lending of money (for example, interest income) and the other kinds of income that may be derived by an eligible AFI subsidiary in the course of undertaking a business that principally derives its income from the lending of money. The key to understanding section 450 of the ITAA 1936 is that the sole or principal business must be a 'financial intermediary business' before income from the disposal of specified kinds of financial assets will be afforded concessional treatment in applying the active income test.", "Date_of_Decision": "18 December 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 317(1) section 340 subparagraph 439(1)(a)(iv) section 449 section 450", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/28 | ATO ID 2008/109 | ATO ID 2007/1", "Subject_References": "Australian financial institution foreign subsidiaries Controlled foreign companies International tax", "Case_References": "Commercial Banking Co of Sydney Ltd v Federal Commissioner of Taxation (1950) 81 CLR 263 9 ATD 112 4 AITR 406", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201029", "Unmatched_Content": "Keywords Australian financial institution foreign subsidiaries Controlled foreign companies International tax"}
{"ATO_ID_Number": "ATO ID 2008/109", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled foreign companies: financial intermediary business", "Issue": "Does income derived from the 'lending of money' for the purposes of paragraph (b) of the definition of 'financial intermediary business' in section 317 of the Income Tax Assessment Act 1936 (the ITAA 1936) include a profit or gain derived by an Australian financial institution (AFI) subsidiary from the sale of loans prior to maturity or a fee received from the seller on acquisition of loans from third parties?", "Decision": "No. The amount of profit or gain derived by an AFI subsidiary from the sale of loans prior to maturity and a fee received from the seller on the acquisition of loans from third parties will not constitute income derived from the 'lending of money' within the meaning of paragraph (b) of the definition of 'financial intermediary business' in section 317 of the ITAA 1936.", "Facts": "The subsidiary is a non resident member of a wholly owned group of an Australian bank. The subsidiary is a controlled foreign company (CFC) as defined in sections 317 and 340 of the ITAA 1936. The subsidiary is an AFI subsidiary as defined in sections 317 and 326 of the ITAA 1936. The AFI subsidiary does not carry on a banking business however it will advance loans to offshore entities. The AFI subsidiary will sell some of the loans it has advanced prior to maturity on a regular basis to provide a pool of circulating capital. The AFI subsidiary will also acquire loans from third parties resulting in the AFI subsidiary assuming the rights of a lender under a loan within the meaning of section 342 of the ITAA 1936. The AFI subsidiary will receive a fee from the original lender on the successful acquisition of the third party loans.", "Reasons_for_Decision": "Summary: Paragraph (b) of the definition of 'financial intermediary business' in section 317 of the ITAA 1936 requires that income of the relevant business of the CFC be principally 'income...derived from the lending of money'. This requires, at the least, that the income that is principally derived has a 'sufficiently proximate relationship' ( Kidston Goldmines Limited v. Federal Commissioner of Taxation (1991) 30 FCR 77; 91 ATC 4538; (1991) 22 ATR 168 ( Kidston Goldmines ), per Hill J) to the furnishing of loan funds by the relevant CFC. Income from the lending of money is income from property and necessarily takes its character from, and has its source in, the loans by the lender. This can be contrasted with income from a business operation, such as a mining operation the subject of the decision in Kidston Goldmines , which is not produced from property but from the various transactions and activities that are together productive of the income. In contrast to income from profit making operations or a business, 'income...from...lending' is income which is necessarily derived from the loan transaction itself. This is reflected in the inherent income character of interest as income from property. The profit from making loans is a characterising, but not exclusive, feature of the business of banking. Thus, in referring in Commercial Banking Co. of Sydney Limited v. Federal Commissioner of Taxation (1950) 81 CLR 263; (1950) 9 ATD 112; (1950) 4 AITR 406 to 'putting out...money so as to increase it' and thus to profit substantially by way of interest, Dixon J was necessarily referring to making profit from lending itself. A profit from the sale of property, including a profit from the sale of a lender's rights under a loan, will not be income of the seller for income tax purposes unless it is part of, or incidental to, the seller's business operations or comprises profit from a profit making venture (isolated or not) in accordance with the principles set out in Federal Commissioner of Taxation v. Myer Emporium Limited (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693. Thus, the character of a profit from sale of a loan, whether or not assessable in the hands of the seller for income tax purposes, is fundamentally different from the character of income from the property in the loan that is sold. A profit on sale necessarily takes its character from, and has its source in, the sale (and the business or venture which is pursued by the sale); not in what is sold. This difference in character is reflected in the calculation of the profit or loss on sale that is assessable or deductible, respectively, for income tax purposes. This calculation is the difference between the cost of acquisition and the sale proceeds, which has no necessary connection to the quantum or nature of the income from the property itself. The same analogy can be drawn on any 'fee' earned for acquiring loans from third parties in that the fee is not income from lending. Any fee received from the seller of the loans is separate from, and does not affect, the amount owing under those loans. The special rules relating to AFI subsidiaries in Subdivision F of Part X of the ITAA 1936 are considered to support the above interpretation of paragraph (b) of the definition in section 317 of the ITAA 1936 of 'financial intermediary business'. These special rules provide concessional treatment within the CFC rules for the various separately identifiable activities such as trading in financial instruments considered part of the normal business activities of an AFI subsidiary which is a 'financial intermediary'. This is outlined in the discussion of the financial intermediation concession in Taxation of Foreign Source Income: An Information Paper April 1989 (the 1989 Information Paper) and the drafting of the special rules. The 1989 Information Paper states that: Financial Intermediary Income 4.38 Given the classification of interest as passive income, most types of income derived by foreign companies engaged in financial intermediation (e.g., banks) would be regarded on this basis as tainted income. But financial intermediation is undeniably a genuine business activity and an exclusion for interest derived in the active conduct of such a business is warranted. 4.39 The income of a financial institution can be divided broadly into the following categories: (a) interest on loans, and income from fees for services provided, to: (i) unrelated persons who are not Australian residents (ii) Australian residents; and (iii) non-Australian related parties The 1989 Information Paper does not suggest that income from the broad categories will constitute income from lending within the meaning of paragraph (b) in section 317 of the ITAA 1936 of the financial intermediary business definition. For example, rental and leasing income would not constitute income from lending of money. Also the special rules contained in section 450 of the ITAA 1936 distinguishes between income from the lending of money and the other broad categories of income derived by an AFI subsidiary, for example, income from the disposal or trading of a tainted financial asset The key to understanding section 450 of the ITAA 1936 is that the sole or principal business must be a financial intermediary business before the income from 'trading activities' is afforded concessional treatment. Furthermore, the 1989 Information Paper and the words contained in section 450 of the ITAA 1936 disclose the relevant distinction between a business which produces income that is principally derived from lending of money and the separately identifiable business of trading or regular disposal of loans commonly associated with a financial institution. It is concluded that a profit or gain derived by an AFI subsidiary from the sale of loans prior to maturity and a fee received from the seller on acquisition of loans from third parties does not come within the ambit of income derived from the 'lending of money' for the purposes of paragraph (b) of the definition of 'financial intermediary business' in section 317 of the ITAA 1936.", "Date_of_Decision": "3 June 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 Subdivision F of Part X section 317 section 326 section 340 section 442 section 450", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/1", "Subject_References": "Australian financial institution foreign subsidiaries Controlled foreign companies International tax", "Case_References": "Kidston Goldmines Ltd v. Federal Commissioner of Taxation (1991) 30 FCR 77 (1991) 22 ATR 168 91 ATC 4538", "Other_References": "Taxation of Foreign Source Income: An Information Paper April 1989", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008109", "Unmatched_Content": "4.40 In terms of this categorisation: | Keywords Australian financial institution foreign subsidiaries Controlled foreign companies International tax"}
{"ATO_ID_Number": "ATO ID 2006/265", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled foreign companies: amalgamation of two controlled foreign companies - transfer of assets", "Issue": "Will the transfer of the assets from the amalgamating entity to the amalgamated entity give rise to a 'disposal' of the assets for the purposes of Part X of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The proposed amalgamation will give rise to a 'disposal' of the assets within the meaning of that term in section 317 of the ITAA 1936.", "Facts": "A resident company wholly owns an overseas subsidiary (Z Co). Z Co wholly owns another subsidiary (Y Co). Z Co and Y Co amalgamate under specific legislation in their jurisdiction of residence. Z Co will continue as the amalgamated company. Under the terms of the legislation, the amalgamated company will succeed to all the assets, liabilities and obligations of Y Co. The shares in Y Co will then be cancelled without payment or other consideration.", "Reasons_for_Decision": "Summary: The transfer of the underlying assets as part of the amalgamation process constitutes a change in ownership of those assets. An entity with a separate legal personality to the amalgamating entity is holding the assets after the transfer. Therefore, the assets have been disposed of by the amalgamating entity, Y Co, and acquired by the amalgamated entity, Z Co.", "Date_of_Decision": "2 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 317", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/266", "Subject_References": "Controlled foreign companies Disposal of assets International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006265", "Unmatched_Content": "Keywords Controlled foreign companies Disposal of assets International tax"}
{"ATO_ID_Number": "ATO ID 2006/266", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled foreign companies: amalgamation of two controlled foreign companies - cancellation of shares", "Issue": "Will the cancellation of the shares in an amalgamating entity in the course of an amalgamation give rise to a 'disposal' of the shares by the amalgamated entity for the purposes of Part X of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The cancellation of the shares will give rise to a 'disposal' by the amalgamated entity within the meaning of that term in section 317 of the ITAA 1936.", "Facts": "A resident company wholly owns an overseas subsidiary (Z Co). Z Co wholly owns another subsidiary (Y Co). Z Co and Y Co amalgamate under specific legislation in their jurisdiction of residence. Z Co will continue as the amalgamated company. Under the terms of the legislation, the amalgamated company will succeed to all the assets, liabilities and obligations of Y Co. The shares in Y Co will then be cancelled without payment or other consideration.", "Reasons_for_Decision": "Summary: The definition of disposal in section 317 of the ITAA 1936 is an inclusive definition only. 'Disposal' is defined in that section as including: The Macquarie Dictionary , 2001, rev. 3 rd edn, The Macquarie Library Pty Ltd, NSW defines 'disposal' as: 1. the act of disposing, or of disposing of, something; arrangement. 2. a disposing of as by gift or sale; bestowal or assignment... 'Dispose' is defined as, in the context of 'dispose of a': 1. to deal with definitely; get rid of. b. to make over or part with, as by gift or sale. In Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105; (1951) 9 ATD 337 Dixon and Fullagar JJ, when considering the term 'disposed of' said: The words \"disposed of\" are not words possessing a technical legal meaning, although they are frequently used in legal instruments. Speaking generally, they cover all forms of alienation. This case was considered in Taxation Ruling TR 96/14 and it was concluded that the comments do not go as far as suggesting that a general, unqualified understanding of those clauses means that all acts of disposal must necessarily effect an alienation. The ordinary meaning of the word includes acts of alienation and also includes acts resulting in something 'being dealt with definitely' and acts that 'get rid of' something. A cancellation results in the shares ceasing to exist; they are no longer 'owned' by the amalgamated entity. In other words, the amalgamated entity has 'dealt with definitely' or has positively acted to 'get rid of' the shares. Therefore, the cancellation of the shares is a disposal.", "Date_of_Decision": "2 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Section 317", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/14", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/265", "Subject_References": "Controlled foreign companies Disposal of assets International tax", "Case_References": "Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105 (1951) 9 ATD 337", "Other_References": "Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006266", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/14 | Keywords Controlled foreign companies Disposal of assets International tax"}
{"ATO_ID_Number": "ATO ID 2003/800", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Associates: A partnership as an associate of a natural person", "Issue": "Is a partnership, in which a company acting as trustee is a partner, an associate of shareholders of that company where the shareholders are natural persons?", "Decision": "No. A partnership, in which a company acting as trustee is a partner, is not an associate of shareholders of that company where the shareholders are natural persons.", "Facts": "A Pty Ltd ('the company') is trustee of the B trust ('the trust'). The company has two shareholders ('the shareholders'). The shareholders are natural persons. The company and the shareholders are beneficiaries of the trust. The company, as trustee of the trust, is a partner ('the partner') in D ('the partnership'). The other partner is otherwise unrelated to the company, the trust and the shareholders.", "Reasons_for_Decision": "Summary: As the shareholders of the company are natural persons, subsection 318(1) of the Income Tax Assessment Act 1936 (ITAA 1936) is relevant. Under subsection 318(1) of the ITAA 1936 the associates of a natural person (other than in the capacity of trustee) are: The relevant paragraph is paragraph 318(1)(b) of the ITAA 1936. As the shareholders are not partners in the partnership, the partnership is not an associate of the shareholders under paragraph 318(1)(b) of the ITAA 1936.", "Date_of_Decision": "30 June 2003", "Year_of_Income": "Year ended 30 June 2003 Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 318(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Associate Partnerships", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003800", "Unmatched_Content": "Keywords Associate Partnerships"}
{"ATO_ID_Number": "ATO ID 2001/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "International tax: Treatment of Income Pursuant to s 324", "Issue": "Whether an amount of income 'subject to tax' pursuant to section 324 of the Income Tax Assessment Act 1936, where two controlled foreign corporations (CFCs) are a consolidated group (under Country A's tax law - being a listed broad exemption country for Australian tax purposes) and, as a result of that consolidation, the item is not included in gross income for the purposes of Country A's tax laws.", "Decision": "The relevant income, which is not being required to be included in the company group's gross income, is effectively exempt from Country A tax. As a result, the income is not included in the tax base of the Country A tax law and is, therefore, not 'subject to tax' pursuant to section 324 of the Income Tax Assessment Act 1936.", "Facts": "The taxpayer is an Australian resident shareholder in two Country A companies. The particular shareholding classifies the companies as CFCs for Australian tax purposes. The companies are, for the tax purposes of Country A, a group. The companies engage in various intra-group transactions. The Country A tax laws provide that amounts derived from an intra-group transaction shall not be gross income.", "Reasons_for_Decision": "Summary: Section 324 of the Income Tax Assessment Act 1936 generally provides that a particular item of income is taken to be 'subject to tax' in a listed country (as defined in section 320 of the Income Tax Assessment Act 1936 ) if foreign tax is payable under a tax law of that country because the item is included in the tax base of that law. Taxation Determination TD 96/38 provides guidance in respect to what situations are considered to satisfy the requirements of section 324 of the Income Tax Assessment Act 1936 . However, Taxation Determination TD 96/38 does not cover situations where an item of income arising from an intra-group transaction is not required to be included in gross income by the operation of certain provisions in the listed country. The Explanatory Memorandum to the Taxation Laws Amendment (Foreign Income) Act 1990 (being the statute which inserted section 320 of the Income Tax Assessment Act 1936 ), explains that receipts which are specifically or implicitly exempt from tax in another country are not included in the tax base of a foreign tax law. The relevant income, not being required to be included in the company group's gross income, is effectively exempt from Country A tax. As a result, the income is not included in the tax base of the Country A tax law and is, therefore, not 'subject to tax' pursuant to section 324 of the Income Tax Assessment Act 1936.", "Date_of_Decision": "3 September 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 324", "Related_Public_Rulings_and_Determinations": "TD 96/38", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Controlled foreign companies Foreign attributable income Foreign income exempting profits & receipts Listed countries", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Foreign Income) Act 1990", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200162", "Unmatched_Content": "Related Public Rulings (including Determinations) TD 96/38 | Keywords International tax Controlled foreign companies Foreign attributable income Foreign income exempting profits & receipts Listed countries"}
{"ATO_ID_Number": "ATO ID 2004/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income: retention benefit paid to ADF member while serving overseas on eligible duty", "Issue": "Is a retention benefit paid under the Military Superannuation and Benefits Act 1991 (MSBA 1991) to a resident taxpayer serving overseas as part of a military operation included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A retention benefit paid under the MSBA 1991 to a resident taxpayer serving overseas as part of a military operation is not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997 as the income is exempt under section 23AD of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer is a member of the Australian Defence Force (ADF). The taxpayer served overseas as part of a military operation. The Chief of the Defence Force issued a certificate declaring that ADF members deployed on the military operation were on eligible duty for the purposes of section 23AD of the ITAA 1936. The taxpayer received a retention benefit under the MSBA 1991. The taxpayer received the retention benefit while serving overseas on eligible duty.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the income of an Australian resident includes ordinary income derived from all sources, whether in or out of Australia, during the year of income. A retention bonus is an additional reward payment derived by a taxpayer in the capacity as an employee ( Dean & Anor v. Federal Commissioner of Taxation (1997) 78 FCR 140; (1997) 37 ATR 52; 97 ATC 4762 ( Dean's Case )). A retention benefit paid under the MSBA 1991 is therefore ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AD of the ITAA 1936 which deals with pay and allowances received by ADF members performing certain overseas duty. Subsection 23AD(1) of the ITAA 1936 provides that the pay and allowances earned by a person serving as a member of the Defence Force are exempt from tax if: Subsection 23AD(2) of the ITAA 1936 provides that the regulations may declare that duty with a specified organisation, in a specified area outside Australia and after a specified day, is eligible duty for the purposes of the exemption. | Detailed Reasoning - Pay and allowances: The retention benefit will fall for consideration under section 23AD of the ITAA 1936 if it falls within the meaning of the term 'pay and allowances'. The term 'pay and allowances' is not defined in section 23AD of the ITAA 1936 or elsewhere, but it may reasonably be construed to refer to salary, wages, bonuses and allowances received by an ADF member in their capacity of an employee. Dean's Case provides authority for the proposition that a retention bonus is salary and wages for tax purposes. In that case, it was decided that a retention bonus was 'in substance and reality' an additional reward for services provided, and was received by the taxpayer in their capacity as an employee. In addition, it was found that the retention bonus was 'principally for the labour' of the taxpayer and therefore were within the definition of 'salary or wages' for tax purposes. As such, we accept that as a retention benefit is salary and wages, it falls within the term 'pay and allowances' for the purposes of section 23AD of the ITAA 1936. | Detailed Reasoning - Earned while certificate in force: A retention bonus is derived at the time it is received ((1958) 9 TBRD Case J20; 7 CTBR (NS) Case 130; and (1958) 9 TBRD Case J60; 8 CTBR (NS) Case 50 ). The fact that the receipt may have to be repaid if certain events subsequently occur does not affect the character of the receipt (Case A59 69 ATC 334; 15 CTBR (NS) Case 34). Therefore, the retention benefit is earned by the taxpayer at the time it is received. While it will usually be the case that section 23AD of the ITAA 1936 will apply to the pay and allowances earned by an ADF member from eligible duty, there is no requirement in section 23AD of the ITAA 1936 that the pay and allowances be connected to that eligible duty. Rather, section 23AD of the ITAA 1936 only requires that the pay and allowances are earned by an ADF member while there is a certificate in place declaring that the member is on eligible duty. At the time the taxpayer received the retention benefit, the relevant certificate was in place declaring that ADF members deployed overseas as part of the particular military operation were on eligible duty. Further, Regulation 7A of the Income Tax Regulations 1936 (the 1936 Regulations) had been amended to reflect the fact that duty with that overseas deployment was eligible duty for the purposes of subsection 23AD(2) of the ITAA 1936. Therefore, the retention benefit received by the taxpayer while serving overseas on eligible duty will be exempt under section 23AD of the ITAA 1936 and will not be assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "11 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 23AD subsection 23AD(1) subsection 23AD(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Defence force members Defence force overseas service Exempt income Income International tax Salary & wages income", "Case_References": "Dean & Anor v. Federal Commissioner of Taxation (1997) 78 FCR 140 (1997) 37 ATR 52 97 ATC 4762", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200480", "Unmatched_Content": "Keywords Defence force members Defence force overseas service Exempt income Income International tax Salary & wages income"}
{"ATO_ID_Number": "ATO ID 2003/510", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of honorarium received by a South African professor visiting Australia", "Issue": "Is the honorarium received by the taxpayer, a resident of South Africa, from an Australian university, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the honorarium received by the taxpayer, a resident of South Africa, from an Australian university is assessable under subsection 6-5(3) of the ITAA 1997, Article 14(2) of Schedule 42 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the honorarium received is not taxable in Australia.", "Facts": "The taxpayer is a resident of South Africa and is not a resident of Australia for Australian income tax purposes. The taxpayer is a teacher and researcher at a South African university. The taxpayer accepted a two week appointment with a university in Australia to undertake teaching and research activities and received an honorarium.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources. The honorarium received is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. The taxpayer is a resident of South Africa, a country with which Australia has entered into a double tax agreement. Therefore, the double tax agreement between Australia and the Republic of South Africa contained in Schedule 42 to the Agreements Act (the South African Agreement) must be considered in determining whether the honorarium received by the taxpayer is taxable in Australia. Section 11ZG of the Agreements Act gives the South African Agreement the force of law in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1997 must be read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions with some limited exceptions (subsection 4(2) of the Agreements Act). Article 14(1) of the South African Agreement provides that income derived by a resident of South Africa in respect of professional services performed in Australia shall be taxable only in South Africa unless the taxpayer has a fixed base regularly available in Australia to perform those services. Article 14(2) of the South African Agreement defines the term 'professional services' to include services performed in the exercise of independent scientific, educational or teaching activities. The honorarium derived by the taxpayer from a university in Australia is in respect of 'professional services' under Article 14(2) of the South African Agreement. Consequently, as the taxpayer is a resident of South Africa for income tax purposes and they do not have a fixed base in Australia to perform their teaching and research activities, Article 14(1) of the South African Agreement applies and the honorarium is not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Academic staff Double tax agreements Honoraria International Tax South Africa", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003510", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Academic staff Double tax agreements Honoraria International Tax South Africa"}
{"ATO_ID_Number": "ATO ID 2003/1010", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt income: church minister 'visiting' Australia", "Issue": "Is income derived by a taxpayer, a member of an overseas religious association, for services rendered as a church minister in Australia, exempt from income tax under paragraph 23(c)(iv) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The income derived by the taxpayer for services rendered as a church minister in Australia is not exempt from income tax under paragraph 23(c)(iv) of the ITAA 1936 as the taxpayer is not 'visiting' Australia.", "Facts": "The taxpayer is a member of an overseas religious association which sends missionaries to Australia. The taxpayer arrived in Australia to minister to the congregation of an Australian church initially for a period of two years. The church later appointed the taxpayer as its minister on a permanent basis. In addition to the taxpayer's duties as a minister of the church, the taxpayer carries out research for planning purposes. The income of the taxpayer consists of donations from overseas churches. These donations support the taxpayer and the taxpayer's ministry work in Australia. The taxpayer entered Australia on a temporary residency visa, and was later granted permanent residency status. The taxpayer intends to stay indefinitely in Australia.", "Reasons_for_Decision": "Summary: Paragraph 23(c)(iv) of the ITAA 1936 provides for the exemption from income tax, income which is derived in the capacity of representative of any society or association established for educational, scientific, religious or philanthropic purposes, by any person visiting Australia in that capacity for the purpose of attending international or Commonwealth conferences or for the purpose of carrying on investigation or research for such society or association. For the exemption to apply, it is necessary, amongst other things, that the representative is 'visiting' Australia. The word 'visiting' is not defined in the income tax provisions. According to the rules governing statutory interpretation, it must take its ordinary meaning. In the New Shorter Oxford English Dictionary 1993, 3rd edn, Oxford Clarendon Press, the word 'visiting' is defined to mean 'the action of visit'. According to that dictionary, the word 'visit' means 'an act of visiting a person; a call on or temporary stay with a person for social, friendly, business or other purposes'. The Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the word 'visit' to mean: 1. to go to see (a person, place etc.) in the way of friendship .....business, curiosity, or the like. 2. to call upon (a person, ...) for social or other purposes. ....4. (in general) to come or go to. Based on the above, it is considered that the word 'visiting' in the context of paragraph 23(c)(iv) of the ITAA 1936 contemplates a person staying in Australia on a short-term or temporary basis, as opposed to staying permanently or an ongoing basis. Having regard to the duration of the taxpayer's stay in Australia and the circumstances of the taxpayer's stay in Australia, including the granting of permanent residency status, the acceptance of the taxpayer as the minister of the church on a permanent basis and the taxpayer's intention to stay indefinitely, it is considered that the taxpayer could not be described as 'visiting' Australia within the ordinary meaning of that word. Further, paragraph 23(c)(iv) of the ITAA 1936 provides the exemption from income tax should the taxpayer's purpose in visiting Australia be to attend prescribed conferences or carry on investigation or research on behalf of certain societies or associations. Whilst representing this religious association in Australia, it is evident that the taxpayer's Australian sourced income is predominantly derived from carrying out ministry work for an Australian church and not from attending prescribed conferences or carrying on investigation or research on behalf of that religious association. Whilst the taxpayer's duties may include carrying out some research activities, it is considered that this activity is incidental to the taxpayer's main purpose of ministry work. As the requirements under paragraph 23(c)(iv) of the ITAA 1936 are not satisfied, the income derived by the taxpayer in Australia is not considered to be the subject of the specific exemption provided in this paragraph. Note: irrespective of the outcome resulting from the application of the provision to this particular case, the word 'exempt' is used in paragraph 23(c)(iv) of the ITAA 1936 with the presumption that, apart from the provisions contained in it, the income in question would fall within other provisions of the Act under which it would be taxable (see Reid v. Federal Commissioner of Taxation (1947) 73 CLR 282; (1947) 8 ATD 255; (1947) 3 AITR 510).", "Date_of_Decision": "8 September 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 23(c)(iv)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income tax general exemption Exempt income", "Case_References": "Reid v. Federal Commissioner of Taxation (1947) 73 CLR 282 (1947) 8 ATD 255 (1947) 3 AITR 510", "Other_References": "The Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW New Shorter Oxford English Dictionary 1993, 3rd edn, Oxford Clarendon Press", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031010", "Unmatched_Content": "Keywords Income tax general exemption Exempt income"}
{"ATO_ID_Number": "ATO ID 2007/125", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages derived by a New Zealand diplomat in Australia", "Issue": "Are salary and wages received by a diplomatic agent in Australia from diplomatic service to the New Zealand Government assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The salary and wages received by a diplomatic agent in Australia from diplomatic service to the New Zealand Government are not assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of New Zealand and an Australian resident taxpayer. The taxpayer is a diplomatic agent. The taxpayer is the holder of a diplomatic passport and performs diplomatic functions in Australia. The taxpayer was posted to Australia for a set period by the New Zealand Government. About twenty months after their diplomatic posting to Australia, the taxpayer decides to stay in Australia permanently. The taxpayer gives three months resignation notice to the employer. The taxpayer receives salary from the employer during their diplomatic posting including the three months of resignation notice period.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes the ordinary income derived by the taxpayer directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are considered to be ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (the New Zealand Agreement). The New Zealand Agreement operates to avoid the double taxation of income received by Australian and New Zealand residents. Article 27 of the New Zealand Agreement deals with diplomatic agents and consular officers and provides that: Nothing in this Agreement shall affect the fiscal privileges of diplomatic agents or consular officers under the general rules of international law or under the provisions of special international agreements. The two international conventions applying to diplomatic agents and consular officials are the Vienna Convention on Diplomatic Relations 1961 (the Convention) which was given the force of law under the Diplomatic Privileges and Immunities Act 1967 (DP&I Act) and the Vienna Convention on Consular Relations 1963 which was given the force of law under the Consular Privileges and Immunities Act 1972 . Article 1(e) of the Convention defines a 'diplomatic agent' as the head of the mission or a member of the diplomatic staff of the mission. Subsection 7(4) of the DP&I Act states that the provisions of the Convention: ...in so far as they provide for the exemption from tax of any income, apply, for the purposes of the application of the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 , to assessments in respect of income of the year of income that commenced on 1 July 1967, and in respect of all income of all subsequent years of income. Article 34 of the Convention provides some of the taxation privileges of a diplomatic agent subject to certain exceptions. Article 34 of the Convention states that: a diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal,... Article 39 of the Convention states that when the functions of a person enjoying privileges and immunities have come to an end, such privileges and immunities shall normally cease at the moment when the person leaves the country, or on expiry of a reasonable period in which to do so, but shall subsist until that time, even in case of armed conflict. Therefore, the taxpayer is entitled to all the privileges under the Convention including the exemption from tax on their salary and wages until their functions have come to an end. The privileges allowed under the Convention will normally cease at the moment when the taxpayer leaves Australia, or on expiry of a reasonable period in which to do so. The taxpayer is entitled to the privileges during the three months resignation notice period as it is considered to be a reasonable period having regard to the terms of their employment contract. The salary and wages received by the taxpayer including the salary received during the resignation notice period will be exempt from Australian income tax through the operation of subsection 7(4) of the DP&I Act. Accordingly, the salary and wages received by a diplomatic agent in Australia, from diplomatic service to the New Zealand Government will not be assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "16 April 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) section 6-15 section 6-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Diplomatic privileges & immunities Double tax agreements Foreign diplomats Foreign government employees Income International law International tax New Zealand Treaties", "Case_References": "", "Other_References": "Diplomatic Privileges and Immunities Act 1967 subsection 7(4) Consular Privileges and Immunities Act 1972 Vienna Convention on Diplomatic Relations 1961 Article 1(e) Article 34 Article 39 Vienna Convention on Consular Relations 1963", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007125", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Diplomatic privileges & immunities Double tax agreements Foreign diplomats Foreign government employees Income International law International tax New Zealand Treaties"}
{"ATO_ID_Number": "ATO ID 2011/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Termination of employment: unused long service leave payments and periods of overseas employment", "Issue": "Is any part of a lump sum payment received on termination of employment for unused long service leave (LSL) exempt from income tax where a part of the payment is attributable to a period when the taxpayer worked overseas?", "Decision": "Yes. The portion of the lump sum payment for unused LSL attributable to the overseas service is exempt from income tax pursuant to subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is an individual who worked overseas for a continuous period of at least 91 days. The taxpayer remained a resident of Australia while working overseas. The taxpayer's service was terminated by the employer after the taxpayer returned to Australia. Upon termination the taxpayer received a lump sum payment for unused LSL from the employer. The taxpayer also worked in Australia for the employer, and the payment for unused LSL related to the total period of employment. The taxpayer's continuous period of foreign service was directly attributable to one of the activities listed in subsection 23AG(1AA) of the ITAA 1936, and therefore subsection 23AG(1AA) does not deny the exemption to the taxpayer. The taxpayer's foreign earnings were not exempt from income tax in the foreign country only because of one or more of the reasons listed in subsection 23AG(2) of the ITAA 1936, and therefore subsection 23AG(2) does not apply to deny an exemption to the taxpayer.", "Reasons_for_Decision": "Summary: Subsection 23AG(1) of the ITAA 1936 provides that foreign earnings are exempt from tax where all of the following requirements are satisfied: 'Foreign earnings' includes income consisting of salary and wages (including payments for LSL), while 'foreign service' includes service in a foreign country in the capacity as an employee (subsection 23AG(7) of the ITAA 1936). As LSL accrues on a daily basis, the portion attributable to the service performed overseas can be separated from the portion attributable to service performed in Australia. Payments for LSL that accrue during a period of foreign service qualify as 'foreign earnings' derived from that foreign service. This will apply regardless of whether a taxpayer takes the LSL during their period of foreign service, takes the LSL after their foreign service has been completed, or does not take the LSL but instead receives a lump sum payment on the termination of their employment for the unused LSL. Providing that the payment (or any part of it) is for LSL that accrued during the period of foreign service, the payment (or the relevant portion of it) is foreign earnings and will be exempt from income tax under subsection 23AG(1) of the ITAA 1936 on condition that all of the other requirements of section 23AG of the ITAA 1936 are satisfied. In this case, all of the requirements of section 23AG of the ITAA 1936 are satisfied, so the portion of the lump sum payment for unused LSL attributable to the overseas service is exempt from income tax under subsection 23AG(1) of the ITAA 1936. The taxation treatment of the portion of the lump sum payment received on termination of employment for unused LSL attributable to service performed in Australia is dealt with in Subdivision 83-B of the Income Tax Assessment Act 1997 . The amount of tax (if any) payable in respect of the remaining, non-exempt, portion of the lump sum payment received on termination of employment for unused LSL, and any other income, is calculated pursuant to subsection 23AG(3) of the ITAA 1936.", "Date_of_Decision": "1 March 2011", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(1) subsection 23AG(1AA) subsection 23AG(2) subsection 23AG(3) subsection 23AG(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/150", "Subject_References": "Foreign income Long service leave Lump sum payments for unused long service leave", "Case_References": "", "Other_References": "", "Business_Line": "Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201129", "Unmatched_Content": "Keywords Foreign income Long service leave Lump sum payments for unused long service leave"}
{"ATO_ID_Number": "ATO ID 2011/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Overseas employment exemption: whether foreign earnings 'generally exempt' from income tax in a foreign country", "Issue": "For paragraph 23AG(2)(c) of the Income Tax Assessment Act 1936 (ITAA 1936), is income derived in the capacity of an employee 'generally exempt from income tax' under the provisions of a law of a foreign country where that foreign law only exempts the income from tax in the foreign country for certain persons delivering certain services?", "Decision": "No. For paragraph 23AG(2)(c) of the ITAA 1936, income derived in the capacity of an employee is not 'generally exempt from income tax' under the provisions of a law of a foreign country where that foreign law only exempts the income from tax in the foreign country for certain persons delivering certain services.", "Facts": "The taxpayer is a natural person who was an Australian resident for income tax purposes during the 2006-07 and 2007-08 income years. In those years the taxpayer derived foreign earnings in the capacity of an employee, performing certain security services in a foreign country for a period of not less than 91 days. Income derived in the capacity of an employee was taxed in that foreign country. However, under the provisions of a law of that foreign country, particular persons who were not normally resident in that country, and who were involved in the supply of humanitarian aid, construction and reconstruction services and security services, were afforded an exemption from tax on their earnings. As a result, the taxpayer's earnings from those services in that foreign country were exempt from tax in that foreign country. This was the sole reason the taxpayer's income was exempt from tax in that foreign country.", "Reasons_for_Decision": "Summary: All section references are to sections of the ITAA 1936. Subsection 23AG(1) provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived will be exempt from tax in Australia. Subsection 23AG(7) provides that 'foreign service' includes service in a foreign country in the capacity as an employee, and 'foreign earnings' includes income consisting of salary and wages. However the exemption under subsection 23AG(1) does not apply if the foreign earnings are exempt from foreign tax 'only because of any of the following' reasons set out in subsection 23AG(2). Paragraph 23AG(2)(c) applies if the income falls into at least one of three categories of income that are, by a provision of the foreign country's law, 'generally exempt' from income tax. The three categories of income are: The categories of income prescribed in paragraph 23AG(2)(c) are not limited to a particular subset of employment, personal services or similar income. Therefore, it is all 'income derived in the capacity of an employee' that falls within the first category of income and, for the purposes of subparagraph 23AG(2)(c)(i), it is this entire category of income that must be 'generally exempt' from income tax under the provisions of a law of the foreign country. The word 'generally' is not defined by the ITAA 1936 or the Income Tax Assessment Act 1997 . Therefore, 'generally' should be construed according to its ordinary meaning, and within the context in which it appears. According to the Macquarie Dictionary , the word 'generally' can be defined as: When applied to the word 'generally' in paragraph 23AG(2)(c), these definitions indicate that the relevant taxpayer's income must be exempt from tax in the foreign country under provisions of a law of the foreign country that give a broad based exemption to income derived in the capacity of an employee (or to income from personal services, or similar income). Consistent with the meanings of 'generally' above, in relation to employment income the exemption must 'usually, commonly or ordinarily' apply to income derived in the capacity of an employee; it must apply for 'the most part' to income derived in that capacity and 'without reference to particular' persons or types of service. Support for this interpretation can be found in the Explanatory Memorandum (EM) to the Taxation Laws Amendment Bill (No. 2) 1991 which introduced the existing subsection 23AG(2). A stated objective of the 1991 amendments was to 'modify to a qualified extent the [then] requirement in section 23AG that foreign earnings not be exempt from income tax in the source country so that, in some circumstance (sic), income that is exempt in the source country will ... also be exempt in Australia' (refer paragraph 1, page 79 of the EM). This wording clearly contemplates that there will be circumstances where income which is exempt in the source country will also be exempt in Australia pursuant to section 23AG. Consistent with this intent, paragraph 23AG(2)(c) makes clear that an exemption under section 23AG may still be available in circumstances where the source country does not provide a general exemption to employment income (or to personal services or similar income). In the present case, income derived in the capacity of an employee is taxed in the foreign country. Although a provision of the foreign country's tax laws exempted from tax the employment earnings derived by certain individuals (such as the taxpayer) from specified services (such as those performed by the taxpayer), the Commissioner considers such an exemption is not a 'general' exemption afforded to income derived in the capacity of an employee (as required by paragraph 23AG(2)(c)). Accordingly, paragraph 23AG(2)(c) does not apply to deny the section 23AG exemption to the earnings of the taxpayer.", "Date_of_Decision": "28 April 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(1) subsection 23AG(1AA) subsection 23AG(2) subsection 23AG(7) paragraph 23AG(2)(c)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2005/14 | Taxation Determination TD 2005/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign source income Exempt income", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Bill (No. 2) 1991", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201136", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2005/14 Taxation Determination TD 2005/15 | Keywords Foreign source income Exempt income"}
{"ATO_ID_Number": "ATO ID 2011/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of allowances received from employment in a foreign country", "Issue": "Are allowances received by an Australian resident taxpayer to cover various expenses related to their employment in a foreign country, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The part of the allowances received by the Australian resident taxpayer in respect of expenses that are attributable to the period that the taxpayer is engaged in foreign service is not assessable under subsection 6-5(2) of the ITAA 1997. It is exempt under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) as it is foreign earnings derived from foreign service. The part of the allowances received by the taxpayer in respect of expenses that are attributable to a period prior to the commencement or after the completion of the foreign service, is not exempt from tax under subsection 23AG(1) of the ITAA 1936 as it is not derived from foreign service.", "Facts": "The taxpayer is an Australian resident for taxation purposes. The taxpayer is employed in a foreign country for a continuous period of not less than 91 days. The taxpayer's foreign service is directly attributable to one of the activities that is listed in subsection 23AG(1AA) of the ITAA 1936. The taxpayer's employment contract provides that their foreign employment begins on their first working day in the foreign country and finishes on their last working day in the foreign country. As part of the overall remuneration package, the taxpayer receives salary and two allowances. The first allowance is a one-off payment paid on moving to the foreign country, to cover expenses of obtaining a passport, transport to airports in Australia for departure to the foreign country, transport from airports in the foreign country on arrival in that country, excess baggage on departure from Australia and purchase of household items for use in the foreign country. The second allowance is a one-off payment paid on moving back to Australia, to cover expenses of transport to airports in the foreign country for departure to Australia, transport from airports in Australia to the taxpayer's home following arrival back in Australia, excess baggage costs on departure from the foreign country and relocation expenses once back in Australia. The taxpayer's employment income is exempt from income tax in the foreign country for a reason other than those listed in subsection 23AG(2) of the ITAA 1936 and therefore subsection 23AG(2) does not apply to the taxpayer's situation.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Allowances are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not included in assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that, where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived from that foreign service will be exempt from tax in Australia. However, subsection 23AG(1AA) of the ITAA 1936 provides that those foreign earnings will not be exempt under section 23AG of the ITAA 1936 unless the foreign service is directly attributable to one of the specific employment activities listed in the subsection. In this instance this requirement is satisfied as the taxpayer's foreign service is directly attributable to one of these activities. 'Foreign service' includes service in a foreign country as an employee and 'foreign earnings' include income consisting of salary, wages, bonuses or allowances (subsection 23AG(7) of the ITAA 1936). To qualify for the exemption it is a requirement that the 'foreign earnings' be derived by a resident of Australia who was 'engaged in foreign service' and whose earnings were 'derived from that foreign service': Chaudhri v. Federal Commissioner of Taxation [2001] FCA 554; 2001 ATC 4214; (2001) 47 ATR 126. That does not mean that the foreign earnings need to be received at the time of engaging in a period of foreign service. The important test is that the foreign earnings need to be attributable to that period of service in a foreign country rather than to a period before or after the period of foreign service. The question of when a taxpayer begins or ceases to be engaged in foreign service is a question of fact to be determined according to the circumstances of each particular case. However, as subsection 23AG(7) of the ITAA 1936 defines the term 'foreign service' to mean service in a foreign country, a taxpayer's foreign service period generally cannot begin or end at a time when the taxpayer is not actually present in the foreign country where the service will be performed. However, the mere presence of the taxpayer in the foreign country does not mean that the taxpayer is engaged in foreign service - the beginning and end of the taxpayer's foreign service period will depend on the terms of the taxpayer's employment. In this instance the taxpayer's foreign employment begins on their first working day in the foreign country and finishes on their last working day in the foreign country. The part of the allowances received by the taxpayer that relates to the purchase of household items for use in the foreign country will be exempt from tax under subsection 23AG(1) of the ITAA 1936. This amount is paid to cover expenditure while the taxpayer is in the foreign country and engaged in a period of foreign service, and is therefore derived from that foreign service. The part of the allowances that relates to obtaining a passport and relocation costs following the taxpayer's return to Australia is not exempt. These amounts are paid to cover expenditure incurred by the taxpayer in Australia prior to engaging in, and after completion of, foreign service and do not qualify for exemption under subsection 23AG(1) of the ITAA 1936. Further, the part of the allowances that relates to transfer costs (such as transport to and from airports and excess baggage costs) also relates to expenses incurred prior to the commencement of, or after the completion of, the taxpayer's foreign service period, and is therefore not exempt.", "Date_of_Decision": "25 May 2011", "Year_of_Income": "Year ended 30 June 2010 and subsequent years", "Legislative_References": "Income Tax Assessment Act 1936 subsection 23AG(1) subsection 23AG(1AA) subsection 23AG(2) subsection 23AG(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Foreign salary & wages International CoE International tax Employee allowances", "Case_References": "Chaudhri v. Federal Commissioner of Taxation [2001] FCA 554 2001 ATC 4214 (2001) 47 ATR 126", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201152", "Unmatched_Content": "Keywords Exempt income Foreign salary & wages International CoE International tax Employee allowances"}
{"ATO_ID_Number": "ATO ID 2010/118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt income: 'defence civilian' deployed outside Australia", "Issue": "Is an APS employee of the Department of Defence deployed outside Australia, who is a 'defence civilian' within the definition of that term in the Defence Force Discipline Act 1982 (DFDA 1982), 'serving as a member of the Defence Force' for the purposes of section 23AD of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is an APS employee of the Department of Defence (a person engaged under the Public Service Act 1999 ). The taxpayer received a deployment order for the purpose of performing an operational role in a specified area outside Australia. For the duration of the deployment the taxpayer was subject to ADF command and control. The taxpayer consented in writing to subject themself to Defence Force discipline during the deployment and had the status of a 'defence civilian' under the DFDA 1982. Under section 3 of the DFDA 1982 'defence civilian' is defined to mean: a person (other than a defence member) who; (a) with the authority of an authorized officer, accompanies a part of the Defence Force that is: (i) outside Australia; or (ii) on operations against the enemy; and And 'defence member' is in turn defined in section 3 to mean: The Department of Defence paid the taxpayer a salary and an operational support allowance for the duration of the deployment.", "Reasons_for_Decision": "Summary: Section 23AD of the ITAA 1936 exempts from tax the pay and allowances earned by persons serving as members of the Defence Force on eligible duty outside Australia. The opening words of subsection 23AD(1) of the ITAA 1936, accordingly, set out the threshold requirement for entitlement to the exemption, namely, that the person must be 'serving as a member of the Defence Force'. The phrase 'member of the Defence Force' is not defined in the ITAA 1936 or in the Income Tax Assessment Act 1997 (ITAA 1997). And the Replacement Explanatory Memorandum which accompanied the Taxation Laws Amendment Bill (No.2) 1993 introducing section 23AD of the ITAA 1936 does not shed much light on its meaning. It relevantly states: Exemption of pay and allowances of Defence Force members performing certain duty Use of the regulations in the future Proposed new section 23AD will exempt from income tax the pay and allowances of ADF personnel who have a certificate from the Chief of Defence Force (CDF) stating that they are on eligible duty (duty as, or under, an attache at an Australian embassy or legation is not eligible for the exemption). The proposed section will serve the same function as existing section 23AC but will enable the Income Tax Regulations to prescribe the service eligible for the concession... (Emphasis added.) But the Explanatory Memorandum which accompanied the Income Tax Assessment Bill 1965 introducing section 23AC of the ITAA 1936, a cognate provision, is more helpful. It relevantly states: Clause 8 : Exemption of Pay and Allowances of Members of the Defence Force serving in Special Areas The purpose of this clause is to provide an exemption from income tax in respect of pay and allowances earned by members of the Defence Force... ... Sub-section (1.) of the proposed section 23AC is the operative provision. It provides that the pay and allowances earned by a member of the Defence Force, i.e ., the Naval Forces, the Military Forces, and the Air Force , during a period of special service are exempt from income tax. (Emphasis added.) It suggests that a 'member of the Defence Force' refers to a member of Australia's Naval, Army and Air Forces. Support for this view is provided by a Taxation Board of Review decision, (1986) 29 CTBR (NS) 379 Case 51 ; Case T39 86 ATC 330 ( Case 51 ). In that decision the Board considered the meaning of the same phrase in section 79B of the ITAA 1936. It unanimously held that a defence civilian is not a member of the Defence Force for the purposes of section 79B. Chairman H.P. Stevens reasoned as follows: 7. The term Defence Force is not defined in the Income Tax Assessment Act and it was the taxpayer's submission that within the terms of the Defence Force Discipline Act he was a \"defence civilian\" - inter alia \"a person (other than a defence member) who (a)... accompanies a part of the Defence Force that is - (i) outside Australia; or (ii) on operations against the enemy\" - and that it was the clear intention that such person is part of the Defence Force. I am unable to agree for I think it is obvious that the term Defence Force - particularly as capitals are used - has not an ordinary meaning but one flowing from the Defence Act . The Defence Force Discipline Act itself constantly uses the term Defence Force and, whilst for certain purposes refers to a person \"being a defence civilian or a defence member\" - inter alia \"a member of the Permanent Naval Forces, the Australian Regular Army, The Regular Army Supplement or the Permanent Air Force\" - it also refers to the Defence Force and to members of the Defence Force in such terms as to indicate that a defence civilian is not a member of the Defence Force. 8. I should add that, even if it could be said a defence civilian was a part of the defence force, there still would be the question of whether he was in fact \"serving\" as a member thereof. As set out in para 5 re \"employed in the service of an Australian force\" the taxpayer was thus \"serving\" as a member of the APS rather than as a member of the Defence Force. In the absence of reasons suggesting otherwise, this same meaning should therefore be given to the same phrase appearing in section 23AD of the ITAA 1936 (see Craig Williamson Pty Ltd v. Barrowcliff [1915] VLR 450 at 452 and Registrar of Titles (WA) v. Franzon (1975) 132 CLR 611 at 618). Expanding on the reasons given above by the Taxation Board of Review in Case 51 , the meaning of the term 'Defence Force' in the Defence Act 1903 (DA 1903) will be relevant in determining the meaning of the phrase 'member of the Defence Force' in section 23AD of the ITAA 1936 (see Federal Commissioner of Taxation v. Imperial Chemical Industries of Australia and New Zealand (1971) 127 CLR 529; (1971) 3 ATR 321; (1971) 72 ATC 4213). Specifically, section 30 of the DA 1903 states: 'The Defence Force' consists of the 'Australian Navy, the Australian Army and the Australian Air Force'. The identical use of capitals in the same phrase in section 23AD of the ITAA 1936 (noted in relation to 79B by the Board decision above), together with the use of the definite article 'the', suggests that the legislature intended that the expression 'the Defence Force' in section 23AD of the ITAA 1936 bear the same meaning it does in the DA 1903. Accordingly, a 'member of the Defence Force' in section 23AD of the ITAA 1936 is confined to those appointed or enlisted as members of the Australian Navy, Army and Air Forces. This interpretation is broadly consistent with the definition of 'defence member' in section 3 of the DFDA 1982. The definition of 'defence civilian' in section 3 of the DFDA 1982, on the other hand, expressly excludes a 'defence member' as defined in that section. The view that a 'defence civilian' is not a member of the Defence Force is reinforced by the use of the words 'accompanies' and 'accompanying' in the definition of 'defence civilian' in section 3 of the DFDA 1982 which indicate that they are distinct from and do not form a part of the Defence Force. As the taxpayer is not appointed or enlisted as a member of the Australian Navy, Army or Air Forces, they are not a 'member of the Defence Force' within subsection 23AD(1) of the ITAA 1936. Furthermore, as the taxpayer serves outside Australia in a civilian capacity as an APS employee, they are not 'serving' as a member of the Defence Force. The taxpayer therefore does not satisfy the threshold condition in subsection 23AD(1) of the ITAA 1936.", "Date_of_Decision": "14 May 2010", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 section 23AC section 23AD subsection 23AD(1) section 79B", "Related_Public_Rulings_and_Determinations": "Income Tax Ruling IT 2380 (withdrawn) | Taxation Ruling TR 95/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International CoE International tax Foreign income Foreign salary & wages Exempt income", "Case_References": "Case 51 (1986) 29 CTBR(NS)", "Other_References": "Explanatory Memorandum to the Income Tax Assessment Bill 1965 Replacement Explanatory Memorandum to the Taxation Laws Amendment Bill (No.2) 1993", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010118", "Unmatched_Content": "Related Public Rulings (including Determinations) Income Tax Ruling IT 2380 (withdrawn) Taxation Ruling TR 95/17 | Keywords International CoE International tax Foreign income Foreign salary & wages Exempt income"}
{"ATO_ID_Number": "ATO ID 2010/179", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Overseas employment exemption: employee engaged by an overseas charitable organisation to provide service in a 'developing country'", "Issue": "Does an employee's foreign service, performed in a developing country for an overseas charitable non-profit organisation, satisfy paragraph 23AG(1AA)(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No, the employee's foreign service does not satisfy paragraph 23AG(1AA)(b) of ITAA 1936 as the employer does not operate a public fund of the type covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "The employee is an Australian resident for taxation purposes. The employee is employed by a charitable non-profit organisation which is based in the United Kingdom. The employee is engaged in foreign service for the charitable organisation. The foreign service was performed in Mali on or after 1 July 2009 for a continuous period of not less than 91 days and the foreign earnings from this foreign service were derived on or after 1 July 2009. Mali is a country declared by the Foreign Affairs Minister to be a developing country for the purposes of the Overseas Aid Gift Deduction Scheme established by the ITAA 1997. The employer does not operate a public fund declared by the Treasurer to be a developing country relief fund covered by item 9.1.1 of the table in subsection 30-80(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 23AG(1) of the ITAA 1936 provides that, where Australian resident individuals are engaged in foreign service for a continuous period of not less than 91 days, foreign earnings derived from this foreign service are exempt from Australian tax. However, new subsection 23AG(1AA) of the ITAA 1936, which took effect from 1 July 2009, provides that those foreign earnings will not be exempt under section 23AG unless the continuous period of foreign service is directly attributable to amongst other things, activities of the taxpayer's employer in operating certain public funds. Subsection 23AG(1AA) of the ITAA 1936 relevantly states: However, those foreign earnings are not exempt from tax under this section unless the continuous period of foreign service is directly attributable to any of the following: ... (b) the activities of the person's employer in operating a public fund covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the Income Tax Assessment Act 1997 (international affairs deductible gift recipients); Subsection 30-80(1) of the ITAA 1997 provides: This table sets out general categories of international affairs recipients. International affairs - General Item Fund, authority or institution Special conditions 9.1.1 a public fund declared by the Treasurer to be a developing country relief fund see section 30-85 9.1.2 a public fund established and maintained by a public benevolent institution solely for providing money for the relief (including relief by way of assistance to re-establish a community) of people in a country other than: (a) Australia; and (b) a country declared by the Foreign Affairs Minister to be a developing country who are in distress as a result of a disaster to which subsection 30-86(1) applies see section 30-86 And sections 30-85 and 30-86 of the ITAA 1997 in turn relevantly provide: 30-85 Developing country relief funds (1) You can deduct a gift that you make to a public fund covered by item 9.1.1 of the table in subsection 30-80(1) only if the declaration is in force at the time you make the gift. (2) The Treasurer may, by notice in the Gazette , declare a public fund to be a developing country relief fund if he or she is satisfied that the fund: ... The Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009 (the 2009 EM), which introduced paragraph 23AG(1AA) of the ITAA 1936 provides some guidance on the meaning of paragraph 23AG(1AA)(b). The relevant paragraphs appear below: 1.23 A person's foreign earnings will be eligible for exemption if they are directly attributable to their employer's activities in operating a public fund covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the ITAA 1997. [Schedule 1, item 1, paragraph 23AG(1AA)(b)] 1.24 Item 9.1.1 of subsection 30-80(1) of the ITAA 1997 applies to a public fund declared by the Treasurer to be a developing country relief fund. Item 9.1.2 of subsection 30-80(1) applies to a public fund operated by a public benevolent institution solely to provide relief to people of a developing country who are in distress as a result of a disaster (a public disaster relief fund). Gifts or donations made to these public funds are tax deductible for income tax purposes to the donor. 1.25 A developing country relief fund is a fund established by an organisation solely for the purpose of providing relief to people of a developing country. The organisation must be an approved organisation as declared by the Minister for Foreign Affairs and the country must be a developing country as declared by the Minister for Foreign Affairs. These conditions are contained in paragraphs 30-85(2)(a) and (b) of the ITAA 1997 respectively. 1.26 A public disaster relief fund is a fund established and operated by a public benevolent institution in response to an event recognised as a disaster by the Minister for Foreign Affairs. The recognition requirement is contained in section 30-86 of the ITAA 1997. 1.27 Paragraph 23AG(1AA)(b) ensures that employees of recognised organisations that undertake aid or charitable activities, that do not form part of Australian ODA, are eligible for exemption on their relevant foreign employment income. ... (Emphasis added.) However, the words emphasised immediately above are at odds with the plain language of item 9.1.2. Specifically, item 9.1.2 refers to a country other than Australia and one declared by the Foreign Affairs Minister to be a 'developing country'. Its wording suggests that it only applies to developed countries. This interpretation is consistent with the heading to section 30-86 of the ITAA 1997 which, as appears above, states that it applies to disaster relief funds in 'developed' countries (see paragraphs 15AB(1)(a) and 15AB(2)(a) of the Acts Interpretation Act 1901 which permit regard to be had to the heading of a provision in order to confirm its ordinary meaning as conveyed by its text). Further support for this interpretation is provided by the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 3) Bill 2006 (the 2006 EM) which introduced item 9.1.2 in subsection 30-80(1) of the ITAA 1997. Relevant paragraphs appear below: 11.6 This measure allows taxpayers to claim an income tax deduction for certain gifts of money or property to the following types of organisations that are endorsed as DGRs: ... • public funds established and maintained by a public benevolent institution solely to provide money to assist in providing relief to people (including assistance to re-establish a community) in distress as a result of declared natural or man-made disasters in a developed country , and public funds established and maintained for charitable purposes solely to provide money for relief of people and re-establishing a community in distress as a result of declared disasters which occur in Australia; Accordingly, the second sentence of paragraph 1.24 of the 2009 EM introducing paragraph 23AG(1AA) of the ITAA 1936 erroneously states that item 9.1.2 of subsection 30-80(1) of the ITAA 1997 applies to a public fund operated to provide relief to people of a 'developing' country. It should state that it applies to a public fund operated to provide relief to people of a 'developed' country instead. As the employee's foreign service was performed in Mali, a country declared by the Foreign Affairs Minister to be a 'developing country', the employer does not operate a public fund to provide relief to the people of a 'developed' country as required by item 9.1.2. Paragraph 23AG(1AA)(b) of the ITAA 1936 is therefore not satisfied and the employee of the overseas charitable organisation is not entitled to claim exemption for the earnings derived from their foreign service in Mali under section 23AG of the ITAA 1936.", "Date_of_Decision": "16 September 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(1) subsection 23AG(1AA) paragraph 23AG(1AA)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Charitable organisations Exempt income Foreign income Income International tax Public funds", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Budget Measures No. 3) Bill 2006 Explanatory Memorandum to the Tax Laws Amendment (2009 Budget Measures No. 1) Bill 2009", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010179", "Unmatched_Content": "30-86 Developed country disaster relief funds | 11.19 DGR status through the disaster relief category is only extended to developed countries, where a developed country is one that has not been declared by the Minister for Foreign Affairs as a developing country . Disasters which occur in countries classified by the Minister for Foreign Affairs as developing countries may be eligible for DGR support under the international affairs DGR general category (section 30-80 of the ITAA 1997). [Schedule 11, item 8, item 9.1.2 in the table in subsection 30-80(1)] | Keywords Charitable organisations Exempt income Foreign income Income International tax Public funds"}
{"ATO_ID_Number": "ATO ID 2009/95", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: assessability of service income received by a non-resident of Australia and East Timor from the Joint Petroleum Development Area", "Issue": "Is income earned by a non-resident taxpayer of both Australia and East Timor from services in the Joint Petroleum Development Area (JPDA) assessable under sub section 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Income earned by a non-resident taxpayer of both Australia and East Timor from services in the JPDA is assessable under subsection 6-5(3) of the ITAA 1997, with a rebate of 90% of the Australian tax payable on that income. The taxpayer may be entitled to a foreign income tax offset in Australia for foreign income tax paid on that income.", "Facts": "The taxpayer is a non-resident of both Australia and East Timor. The taxpayer works for an Australian company in the JPDA.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year, as well as other ordinary income included by a provision on a basis other than having an Australian source. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. Accordingly, for subsection 6-5(3) of the ITAA 1997 to apply, it is necessary to determine whether the income earned by the taxpayer from service in the JPDA is from Australian sources. The Timor Sea between northern Australia and East Timor contains proven petroleum resources in the seabed. Australia and East Timor have competing claims to the resources of this seabed. The Timor Sea Treaty (Treaty) enables Australia and East Timor to jointly develop the petroleum resources of a major part of the seabed of the Timor Sea, defined in Article 3 of the Treaty as the JPDA, pending agreement to a seabed boundary with East Timor. The Treaty was signed between the Government of East Timor and the Government of Australia on 20 May 2002. The Treaty entered into force on 2 April 2003 but is taken to have effect and all of the provisions will apply and be taken to have applied on and from the date of signature, 20 May 2002. Article 13 of the Treaty provides that the JPDA shall be deemed to be, and treated by Australia as part of Australia (and by East Timor as part of East Timor) for the purposes of taxation law related directly or indirectly to: It follows that income earned from service in the JPDA will be sourced in Australia and is, in this case, assessable under subsection 6-5(3) of the ITAA 1997. Article 13(3) of the Taxation Code under the Treaty provides that JDPA income derived by an individual who is not a resident of either Australia or East Timor in respect of employment exercised in the JDPA may be taxed in both Australia and East Timor on 100% of that income. They will then receive a rebate of the reduction percentage of their gross tax. In the case of Australia, the reduction percentage is 90%. In effect, third country residents are taxed in Australia on their total JPDA income, at non-resident rates of tax, with a rebate allowed equal to 90% of the Australian tax payable on their net assessable JPDA income (net assessable JPDA income is assessable JPDA income less allowable deductions relating to that income). Division 770 of the ITAA 1997 outlines the operation of the foreign income tax offset rules. These provisions allow taxpayers to claim relief in the form of a tax offset for foreign income tax paid on an amount included in their assessable income. While the foreign income tax offset mainly applies to Australian resident taxpayers, in limited circumstances where the income of a foreign/non-resident is taxed as assessable income in Australia, they may be able to claim the offset. The main rules governing entitlement to claim the foreign income tax offset are set out in section 770-10 of the ITAA 1997. Subsection 770-10(1) of the ITAA 1997 provides that a taxpayer is entitled to a foreign income tax offset for foreign tax paid in respect of an amount that is included in the taxpayer's assessable income in a year of income. The tax offset has the effect of reducing the Australian tax that would otherwise be payable on the double-taxed amount. The amount of the foreign income tax offset is subject to the foreign income tax offset limit calculated in accordance with section 770-75 of the ITAA 1997. Subsection 770-10(3) of the ITAA 1997 limits the offset so that it does not apply to foreign income tax paid to a foreign country by a taxpayer who is a resident of that country, on amounts sourced outside that country. This means that the taxpayer will not be entitled to a foreign income tax offset in relation to any foreign tax that they pay in their country of residence on the income earned from service in the JPDA. However, a foreign resident will still be entitled to a tax offset for foreign income tax they pay to their country of residence, or in a third country, where the tax is paid on the basis that the source of the income is that country. That is, where the foreign country levies tax on the income because that country is the source, the foreign resident will be entitled to a tax offset where the taxpayer is also assessed on that income in Australia. This means that the taxpayer is entitled to a foreign income tax offset in Australia in relation to income tax paid in East Timor on the income earned from service in the JPDA. Accordingly, the income earned by the taxpayer from service in the JPDA is assessable under subsection 6-5(3) of the ITAA 1997, with a rebate of 90% of the Australian tax payable on that income. In addition, if foreign income tax has been paid in East Timor on that income, a foreign income tax offset will be allowed.", "Date_of_Decision": "20 August 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) Division 770 section 770-10 subsection 770-10(1) subsection 770-10(3) subsection 770-75", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/288", "Subject_References": "International law International tax Timor Sea Zone of Cooperation Salary & wages", "Case_References": "", "Other_References": "Explanatory Memorandum to the Petroleum (Timor Sea Treaty) Bill 2003 Timor Sea Treaty between the Government of Australia and the Government of East Timor, Dili, 20 May 2002 Tax facts. The Timor Sea Treaty: tax changes affecting the Joint Petroleum Development Area", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200995", "Unmatched_Content": "Keywords International law International tax Timor Sea Zone of Cooperation Salary & wages"}
{"ATO_ID_Number": "ATO ID 2007/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of bonus received by an Australian resident working in Saudi Arabia", "Issue": "Is a bonus received by an Australian individual resident taxpayer in relation to employment performed in Saudi Arabia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The bonus payment received by an Australian individual resident taxpayer in relation to service performed in Saudi Arabia is not assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt under section 23AF of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer was employed in Saudi Arabia on a project approved by the Minister for Trade. The taxpayer was employed on this project for a continuous period of more than 91 days. The taxpayer's employer for the approved project is an Australian resident company. After completing work on the project, returning to Australia and recommencing employment with their employer's parent company in Australia, the taxpayer received a bonus in relation to work performed in Saudi Arabia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. A bonus payment is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not included in assessable income. Subsection 23AF(1) of the ITAA 1936 provides that where a taxpayer is engaged on qualifying service on a particular approved project for a continuous period of not less than 91 days, any eligible foreign remuneration derived that is attributable to that service will be exempt from tax. As the project on which the taxpayer was engaged was approved by the Minister for Trade under subsection 23AF(11) of the ITAA 1936, it is an 'approved project' (subsection 23AF(18) of the ITAA 1936). The taxpayer's service is 'qualifying service' as the taxpayer was engaged in the performance of personal services outside Australia in connection with the approved project (subsection 23AF(3) of the ITAA 1936). The taxpayer was engaged in this service for a continuous period of not less than 91 days. Bonus payments are included within the definition of 'eligible foreign remuneration' under subsection 23AF(18) of the ITAA 1936 provided the bonus is: Paragraph 4 of Taxation Ruling IT 2534 provides that a bonus is taken to have been derived for income tax purposes at the time it is paid or otherwise made available to the employee. This is so even where the bonus is with regard to duties that were performed in a previous year of income. Therefore, the taxpayer is taken to have derived the bonus when the taxpayer received it. An eligible contractor means 'a resident of Australia' as defined in subsection 23AF(18) of the ITAA 1936. The taxpayer was a resident of Australia at the time of receiving the bonus, and it was paid to them in their capacity as an employee of an eligible contractor. Although the bonus was received after the taxpayer's period of service on the approved project had ended and after the taxpayer had returned to Australia, it was paid in relation to the taxpayer's service performed in Saudi Arabia and therefore is attributable to that service. As all the elements of subsection 23AF(1) of the ITAA 1936 are met, the bonus will be exempt from tax under subsection 23AF(1) of the ITAA 1936.", "Date_of_Decision": "18 January 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 23AF(1) subsection 23AF(3) subsection 23AF(11) subsection 23AF(18)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2534", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Derived Employee bonuses Exempt income Foreign source income International tax Saudi Arabia", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200726", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2534 | Keywords Derived Employee bonuses Exempt income Foreign source income International tax Saudi Arabia"}
{"ATO_ID_Number": "ATO ID 2006/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received from a New Zealand resident company operating in Australia by a New Zealand resident individual", "Issue": "Is the employment income received by a New Zealand individual resident, working for a New Zealand resident company in Australia, assessable under section 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The employment income received by a New Zealand individual resident, working for a New Zealand resident company in Australia, is not assessable under section 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a New Zealand individual resident and is not a resident of Australia for income tax purposes. The taxpayer is employed by the New Zealand resident company which provides design and drafting services in Australia. The New Zealand resident company contracts with an independent agent in Australia to secure clients requiring these services and does not have a permanent establishment in Australia. The taxpayer is also the co-director and shareholder of the New Zealand company and is present in Australia for less than 183 days to perform the services. The New Zealand company pays the taxpayer salary in connection with the duties carried out in Australia. The taxpayer's salary will be subject to tax in New Zealand.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Salary and wages are ordinary income under subsection 6-5(3) of the ITAA 1997. In determining the liability to tax on employment income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (the New Zealand Agreement). The New Zealand Agreement operates to avoid the double taxation of income received by Australian and New Zealand residents. Article 15(1) of the New Zealand Agreement provides that subject to the provisions of Articles 16, 17, 19 and 20, salaries, wages and other similar remuneration derived by individual who is a resident of New Zealand in respect of an employment shall be taxable only in New Zealand unless the employment is exercised in Australia. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in Australia. Article 15(2) of the New Zealand Agreement provides that in spite of the provisions of paragraph 1, remuneration derived by an individual who is a resident of New Zealand in respect of employment exercised in Australia shall be taxable only in New Zealand if: The facts indicate that all requirements of Article 15(2) of the New Zealand Agreement are satisfied. The taxpayer's Australian sourced income will therefore not be subject to tax in Australia. Accordingly, taxing rights are assigned to New Zealand and the taxpayer's income is not assessable in Australia under section 6-5(3) of the (ITAA 1997).", "Date_of_Decision": "21 December 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assessable income test Directors remuneration Double tax agreements Income tax New Zealand Shareholders", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20067", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Assessable income test Directors remuneration Double tax agreements Income tax New Zealand Shareholders"}
{"ATO_ID_Number": "ATO ID 2005/123", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages received by a Singapore national whilst undergoing training in Australia", "Issue": "Are the salary and wages received by a taxpayer, who is a resident of Singapore and of Australia, from a Singapore Government institution assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The salary and wages received by a taxpayer, who is a resident of Singapore and of Australia, from a Singapore Government institution are not assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Singapore and a resident of Singapore for tax purposes. The taxpayer is also a resident of Australia for income tax purposes. The taxpayer will be present in Australia to attend a training program for approximately 12 months. The taxpayer lives in a rented apartment whilst in Australia. The taxpayer previously lived with their family in Singapore. The taxpayer is employed by a Singapore Government institution. The taxpayer receives salary from the Singapore Government institution whilst undergoing training in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes all the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the year of income. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the Protocol to the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and Singapore Protocol operate to avoid the double taxation of income received by Australian and Singaporean residents. Article 3 of the Singapore Agreement provides tests of residency which are used where the individual would otherwise be a resident of both countries (tie breaker tests). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income. Article 3(2) of the Singapore Agreement provides that where an individual is both a Singapore resident and an Australian resident, the individual shall be treated solely as a Singapore resident using the following tests: The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are undefined. Article 3(2) of the Singapore Agreement provides that any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the domestic laws of each country. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 states that the Commentaries on OECD Model Tax Convention on Income and on Capital (OECD Commentary) provide important guidance on interpretation and application of the OECD Model and will often need to be considered, as a matter of practice, in interpreting double tax agreements, at least where the wording is ambiguous. The OECD Commentary provides that in relation to a 'permanent home': The taxpayer has a permanent home available to them in Singapore and in Australia. The taxpayer also has an habitual abode in Singapore and in Australia. However, as the taxpayer's personal and economic ties are closest to Singapore, the taxpayer is deemed to be a resident of Singapore for the purposes of applying the Singapore Agreement. Article 14(2) of the Singapore Agreement provides that remuneration (other than pensions) paid by the Government of Singapore to any individual for services rendered to that government in the discharge of governmental functions shall be exempt from Australian tax, except where the individual is a resident of Australia and is not a Singapore resident. The salary and wages received by the taxpayer from the Singapore Government institution is exempt from tax as the taxpayer is a resident of Singapore. Accordingly, the salary and wages received by the taxpayer will not be assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "1 July 2004", "Year_of_Income": "Year ended 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/124 | ATO ID 2005/125", "Subject_References": "Double tax agreements Foreign income Singapore International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005123", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Foreign income Singapore International tax"}
{"ATO_ID_Number": "ATO ID 2005/124", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of fellowship income received by a Singapore national whilst undergoing training in Australia", "Issue": "Is the fellowship income from Singapore received by a taxpayer, who is a resident of Singapore and of Australia, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The fellowship income from Singapore received by a taxpayer, who is a resident of Singapore and of Australia, is not assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Singapore and a resident of Singapore for tax purposes. The taxpayer is also a resident of Australia for income tax purposes. The taxpayer will be present in Australia for training for approximately 12 months. The taxpayer lives in a rented apartment whilst in Australia. The taxpayer previously lived with their family in Singapore. The taxpayer is employed by a Singapore government department. The taxpayer receives an award fellowship payment from a Singapore government department whilst training in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes all the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the year of income. Fellowship income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the Protocol to the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and the Singapore Protocol operate to avoid the double taxation of income received by Australian and Singaporean residents. Article 3 of the Singapore Agreement provides tests of residency which are used where the individual would otherwise be a resident of both countries (tie breaker tests). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income. Article 3(2) of the Singapore Agreement provides that where an individual is both a Singapore resident and an Australian resident, the individual shall be treated solely as a Singapore resident using the following tests: The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are undefined. Article 3(2) of the Singapore Agreement provides that any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the domestic laws of each country. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 states that the Commentaries on OECD Model Tax Convention on Income and on Capital (OECD Commentary) provide important guidance on interpretation and application of the OECD Model and will often need to be considered, as a matter of practice, in interpreting double tax agreements, at least where the wording is ambiguous. The OECD Commentary provides that in relation to a 'permanent home': The taxpayer has a permanent home available to them in Singapore and in Australia. The taxpayer also has an habitual abode in Singapore and in Australia. However, as the taxpayer's personal and economic ties are closest to Singapore, the taxpayer is treated as a resident of Singapore for the purposes of applying the Singapore Agreement. Article 15 of the Singapore Agreement provides that when a student or trainee who is a resident of Singapore, or was a resident of Singapore immediately before visiting Australia, and who is present in Australia solely for the purposes of their education or training receives payments from sources outside Australia for the purpose of their maintenance, education or training, those payments will not be taxed in Australia. Article 14(2) of the Singapore Agreement provides remuneration (other than pensions) paid by the Government of Singapore to any individual for services rendered to that Government in the discharge of governmental functions shall be exempt from Australian tax, except where the individual is a resident of Australia and is not a Singapore resident. Article 15 of the Singapore Agreement will not apply as the taxpayer is not a student or a business apprentice or trainee. The fellowship income received by the taxpayer from the Singapore Government department is exempt from tax under Article 14(2) of the Singapore Agreement as the taxpayer is a resident of Singapore and the payment is for services rendered in the discharge of governmental functions. Accordingly, the fellowship income will not be assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "1 July 2004", "Year_of_Income": "Year ended 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/123 | ATO ID 2005/125", "Subject_References": "Scholarships, fellowships & bursaries Double tax agreements Foreign income International tax Singapore", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005124", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Scholarships, fellowships & bursaries Double tax agreements Foreign income International tax Singapore"}
{"ATO_ID_Number": "ATO ID 2005/129", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a research grant from the Danish Government received by a resident for services performed in Australia", "Issue": "Is a research grant received from the Danish Government by a Danish citizen, who is a resident of Australia for income tax purposes, for services performed in Australia assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The research grant received from the Danish Government by a Danish citizen, who is a resident of Australia for income tax purposes, for services performed in Australia is not assessable under subsection 6-5(2) of the ITAA 1997 because Article 19(1) of Schedule 18 to the International Tax Agreements Act 1953 (Agreements Act) makes the research grant assessable only in Denmark.", "Facts": "The taxpayer is a citizen of Denmark. The taxpayer is a resident of Australia for taxation purposes and for the purposes of Schedule 18 to the Agreements Act. The taxpayer receives a research grant from the Danish Government for research undertaken at an Australian University on behalf of the Danish government. The taxpayer became a resident of Australia solely for the purposes of performing the services that are the subject of the research grant. The research work undertaken by the taxpayer is considered by the Danish tax authorities to involve the discharge of governmental functions on behalf of the Danish Government. The taxpayer has received advice from the Danish taxation authorities that the grant is only taxable in Denmark in accordance with Article 19 of the Danish Agreement.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The research grant is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax on Australian foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 18 to the Agreements Act contains the double tax agreement between Australia and the Kingdom of Denmark (the Danish Agreement). The Danish Agreement operates to avoid double taxation of income received by Australian and Danish residents. Article 19(1) of the Danish Agreement provides that remuneration paid by the Danish Government or a political subdivision or local authority of that State to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in Denmark. However, such remuneration shall be taxable only in Australia if the services are rendered in Australia and the recipient is a resident of Australia who: The taxpayer is an Australian resident who is discharging governmental functions on behalf of the Danish Government in Australia and receives a research grant which is paid by the Danish Government. However, as the taxpayer became a resident of Australia solely for the purposes of performing the services, the research grant is taxable only in Denmark and is not taxable in Australia. Accordingly the research grant received by the taxpayer from the Danish Government for services performed in Australia is not assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "22 October 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Denmark International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005129", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Denmark International tax"}
{"ATO_ID_Number": "ATO ID 2005/150", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt foreign service income from accrued leave payment: East Timor", "Issue": "Are payments for operational deployment leave, which accrued while the taxpayer was engaged in foreign service and paid to the taxpayer after returning from foreign service, but while still employed, exempt income under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).", "Decision": "Yes. The payment for operational deployment leave, which accrued while the taxpayer was engaged in foreign service and paid to the taxpayer after returning from foreign service, but while still employed, is exempt income under subsection 23AG(1) of the ITAA 1936.", "Facts": "The taxpayer was engaged in foreign service in East Timor for a continuous period of more than 90 days. While engaged in foreign service in East Timor the taxpayer accrued 75 hours operational deployment leave. The taxpayer took this leave after returning from foreign service but while still employed by the same employer. None of the listed reasons in subsection 23AG(2) of the ITAA 1936 apply.", "Reasons_for_Decision": "Summary: Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service will be exempt from tax in Australia. 'Foreign service' includes service in a foreign country in the capacity as an employee and 'foreign earnings' include income consisting of salary and wages (subsection 23AG(7) of the ITAA 1936). The key words here are 'foreign earnings derived by the person from that foreign service'. The payment of the operational deployment leave qualifies as foreign earnings. However, the relevant payment must be derived by the person from that foreign service. However, that does not mean that the foreign earnings must be derived during the period of foreign service. As operational deployment leave accrues on a daily basis, the portion attributable to the service performed in East Timor can be separated from any portion attributable to service performed in other locations. Therefore, any payment in respect of operational deployment leave which accrued during the period of foreign service but paid to the taxpayer after returning from that foreign service, but while still employed by the same employer, qualifies as 'foreign earnings' from that foreign service. As such, the relevant payment is exempt from income tax under section 23AG of the ITAA 1936 where all the other requirements of section 23AG are met.", "Date_of_Decision": "26 May 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 23AG(1) subsection 23AG(2) subsection 23AG(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income Accrued & unused leave Exempt income", "Case_References": "", "Other_References": "", "Business_Line": "Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005150", "Unmatched_Content": "This ATO ID has been amended to clarify its scope by the inclusion of the Note. | Keywords Foreign income Accrued & unused leave Exempt income"}
{"ATO_ID_Number": "ATO ID 2005/179", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by an Australian resident for service aboard a Swiss ship operated in international waters", "Issue": "Are salary and wages income received by the Australian resident taxpayer from service aboard a Swiss ship operated in international waters assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages income received by the Australian resident taxpayer from service aboard a Swiss ship operated in international waters is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is also a citizen of Australia. The taxpayer is employed by an individual who is a national of Switzerland for a continuous period of not less than 91 days on a privately owned Swiss vessel operated in international waters. The vessel is considered to be a ship in this instance. The taxpayer receives salary and wages income from which no tax is deducted in any other foreign country.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages earned from employment are ordinary income for the purposes of subsection 6-5 of the ITAA 1997 [also refer to subsection 995-1(1) of ITAA 1997]. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income. Subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived from foreign service will be exempt from tax in Australia. Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee and 'foreign earnings' include salary, wages, commission, bonuses or allowances. Paragraph 19 of Taxation Ruling TR 96/15 states that for the purposes of subsection 23AG(1) of the ITAA 1936, service on a foreign ship in international waters does not constitute foreign service as it is not performed in a foreign country ( Chaudhri v. FCT (2001) 109 FCR 416; (2001) 47 ATR 126; (2001) ATC 4212]). In determining liability for Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 15 to the Agreements Act contains the double tax agreement between Australia and Switzerland (the Swiss Agreement). The Swiss Agreement operates to avoid the double taxation of income received by Australian and Swiss residents. Article 15 of the Swiss Agreement provides that salary, wages and other similar remuneration derived by an individual who is a resident of Australia, in respect of an employment, shall be taxable only in Australia, unless the employment is exercised in Switzerland. If the employment is exercised in Switzerland, then the remuneration derived from that employment may be taxed in Switzerland. Further, paragraph (3) of Article 15 provides that the remuneration received in respect of employment exercised aboard a ship or aircraft operated in international traffic by a resident of Switzerland, may be taxed in Switzerland. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting tax treaties. Paragraph 23 states that the phrase 'may be taxed' normally means that the source country has a non-exclusive entitlement to tax the income. However, under normal international tax principles, the other country may also continue to tax its residents on income, wherever sourced, provided it is permissible under domestic law, and the double tax agreement does not explicitly prevent it from doing so. The Swiss Agreement does not explicitly prevent Australia from taxing the taxpayer on this income earned from services aboard a Swiss ship. As the country of residence, Australia has an entitlement to tax salary and wages received by a taxpayer from the Swiss employer under the ITAA 1936 and ITAA 1997. The salary and wages received by the taxpayer in relation to the employment on a Swiss ship in international waters, would not be exempt under subsection 23AG(1) of the ITAA 1936, as the taxpayer has not been engaged in foreign service. The additional criteria - that the taxpayer be engaged for a continuous period of not less than 91 days - need not be considered. Accordingly, the taxpayer's assessable income will include salary and wages received from service aboard the Swiss ship under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "15 June 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(1) subsection 23AG(1AA) subsection 23AG(7) subsection 160AF(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/15 | Taxation Ruling TR 96/15A - Addendum | Taxation Ruling TR 96/15E - Erratum | Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/187 | ATO ID 2003/620 | ATO ID 2003/1007", "Subject_References": "Double tax agreements Exempt income Foreign income Foreign salary and wages International tax Switzerland Ship International waters", "Case_References": "Chaudhri v. FCT (2001) 109 FCR 416 (2001) 47 ATR 126 2001 ATC 4214", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005179", "Unmatched_Content": "This ATO ID has been amended to replace repealed subsection 160AF(1) by subsection 770-10(1). With effect from 1 July 2008 the foreign tax credit system contained in Div 18 of the Income Tax Assessment Act 1936 has been replaced by the foreign income tax offset system contained in Div 770 of the Income Tax Assessment Act 1997 . This ATO ID has been further amended to clarify its scope by the inclusion of the Note. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 96/15 Taxation Ruling TR 96/15A - Addendum Taxation Ruling TR 96/15E - Erratum Taxation Ruling TR 2001/13 | Keywords Double tax agreements Exempt income Foreign income Foreign salary and wages International tax Switzerland Ship International waters"}
{"ATO_ID_Number": "ATO ID 2005/230", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of consulting income received by an Australian resident working for a German company in Australia", "Issue": "Is income derived by the taxpayer, a resident of Australia, for consulting in Australia on behalf of German firms, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived by the taxpayer from consulting on behalf of German firms in Australia is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer intends to earn income from working as an independent consultant. The taxpayer has been approached by a German based company to represent their interests in Australia for a short period of time. The taxpayer will be acting on behalf of the German based company in lobbying Australian companies and the Australian Government. The taxpayer will undertake the independent consultancy work from home. The taxpayer will not have an office in Germany. Remuneration will be paid by the German based company directly into the taxpayer's German bank account. The taxpayer will only be paid for the services provided, and will not be paid if the contract is terminated.", "Reasons_for_Decision": "Summary: Subsection 6-5 (2) of the ITAA 1997 provides that the assessable income of an Australian resident will include ordinary income derived from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, when income is derived from a foreign source, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 9 to the Agreements Act contains the double tax agreement between Australia and Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. Article 13 of the German Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services, or other independent activities of a similar character, shall be taxable only in Australia unless the taxpayer has a fixed base regularly available to them in Germany for the purpose of performing their activities. If the taxpayer has such a fixed base, the income may be taxed in Germany but only so much of it as is attributable to that fixed base. In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 21 ATR 531; 90 ATC 4717 (Thiel), the High Court accepted that the OECD Model Tax Convention on Income and on Capital (the OECD Model) may be relevant to the interpretation of Double Tax Agreements based on the OECD Model. The High Court approved recourse to the OECD Model under Article 32 of the Vienna Convention (see paragraph 102 of Taxation Ruling TR 2001/13). Article 13 of the German Agreement is the same in substance as the former Article 14 of the OECD Model. Paragraph 2 of 'Commentary on Article 14' in the OECD Model defines the concept of professional services to include professional activities of an 'independent' nature. Thus the provision of consulting services by the taxpayer is considered independent personal services for the purposes of article 13 of the German Agreement. Paragraph 4 of 'Commentary on Article 14' in the OECD Model suggests that a fixed base is a centre of activity of a fixed or a permanent nature, and would include a physician's consulting room or the office of an architecture or lawyer. The taxpayer will not have an office or any other business premises in Germany. The taxpayer will derive income from his consultancy. As the taxpayer is a resident of Australia for tax purposes, and does not have a fixed base (such as an office) in Germany, Article 13 of the German Agreement provides that this income will be assessable in Australia, and as a consequence, the consultancy income will not be taxed in Germany. Therefore, the income the taxpayer receives from consulting in Australia will be assessable under subsection 6-5(2) of the ITAA 1997, as the German Agreement provides that Australia has the right to tax that income.", "Date_of_Decision": "28 July 2005", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign source income Germany Independent Personal Services", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 21 ATR 531", "Other_References": "OECD Model Tax Convention on Income and on Capital (Published on 23 October 1997)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005230", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Foreign source income Germany Independent Personal Services"}
{"ATO_ID_Number": "ATO ID 2005/350", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an education allowance received by an Australian resident from the Danish Government", "Issue": "Is the education allowance received by an Australian resident taxpayer from the Danish Government assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The education allowance received by an Australian resident taxpayer from the Danish Government is not assessable under subsection 6-5(2) of the ITAA 1997 as it is exempt income under section 51-10 of the ITAA 1997.", "Facts": "The taxpayer is a Danish citizen. The taxpayer is a resident of Australia for income tax purposes. The taxpayer is undertaking a full-time teaching degree course at a Danish University through the internet. The taxpayer receives an educational allowance from the Danish Government.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The educational allowance is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth Law. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 51-10 of the ITAA 1997, which deals with educational allowances. Section 51-10 of the ITAA 1997 provides an exemption for certain education and training payments. Item 2.1A in the table in section 51-10 of the ITAA 1997 provides that a scholarship, bursary, educational allowance or educational assistance received by a full-time student at a school, college or university is exempt from tax unless the conditions in section 51-35 of the ITAA 1997 apply. Section 51-35 of the ITAA 1997 sets out the various circumstances under which payments to students will not be exempt. None of these circumstances described in section 51-35 of the ITAA 1997 apply to the taxpayer. In determining liability to Australian tax on income received by an Australian resident from a foreign country, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997, so that those Acts are read as one. Schedule 18 to the Agreements Act contains the tax treaty between Australia and the Kingdom of Denmark (the Danish Agreement). The Danish Agreement operates to avoid the double taxation of income received by Australian and Danish residents. Article 20 of the Danish Agreement provides that where a student who is a resident of Australia who is temporarily present in Demark solely for the purpose of their education, receives payments from sources outside Denmark for the purpose of maintenance or education, those payments shall be exempt from tax in Denmark. Article 20 of the Danish Agreement does not apply to the taxpayer as the taxpayer is not temporarily present in Denmark. Article 21 of the Danish Agreement provides that items of income of a resident of Australia which are not expressly mentioned in the Articles of the Danish Agreement shall be taxable only in Australia. However, if such income is derived by a resident of Australia from sources in Denmark, such income may also be taxed in Denmark. As the taxpayer is a full-time student at a university, the educational allowance received by the taxpayer is exempt under section 51-10 of the ITAA 1997. Accordingly, the educational allowance received by the taxpayer is not assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "28 November 2005", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) section 6-20 section 11-5 section 51-10 section 51-35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Denmark Double tax agreements Exempt income Education payments International tax Scholarships, fellowships & bursaries", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005350", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Denmark Double tax agreements Exempt income Education payments International tax Scholarships, fellowships & bursaries"}
{"ATO_ID_Number": "ATO ID 2005/351", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by an Australian resident working in Denmark", "Issue": "Is the employment income received by an Australian resident while studying in Denmark assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The employment income received by an Australian resident while studying in Denmark is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a Danish citizen. The taxpayer is a resident of Australia for income tax purposes. The taxpayer visits Denmark for a period of six weeks at a time for the purpose of study. The taxpayer will be present in Denmark for less than 91 days. The taxpayer receives employment income from Denmark while working as a temporary employee for a Danish employer.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Employment income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income received by an Australian resident, it is necessary to consider not only our income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997, so that those Acts are read as one. Schedule 18 to the Agreements Act contains the tax treaty between Australia and the Kingdom of Denmark (Danish Agreement). The Danish Agreement operates to avoid the double taxation of income received by Australian and Danish residents. Article 15(1) of the Danish Agreement provides that salary and wages and other similar remuneration derived by an individual who is a resident of Australia in respect of an employment, shall be taxable only in Australia unless the employment is exercised in Denmark. If the employment is exercised in Demark, the remuneration may be taxed in Denmark. Article 15(2) of the Danish Agreement provides that remuneration derived by an Australian resident individual in respect of an employment exercised in Denmark shall be taxable only in Australia if: Article 15(2) of the Danish Agreement does not apply to the taxpayer as the remuneration will be paid by a Denmark resident employer. Therefore, Article 15(1) of the Danish Agreement applies and the employment income is assessable under subsection 6-5(2) of the ITAA 1997. Article 23 of the Danish Agreement provides that, subject to the provisions of law of Australia, a credit for Danish tax paid will be allowed against Australian tax payable in respect of that foreign income. The taxpayer has paid foreign tax in respect of that income, profit or gain for which the taxpayer was personally liable. Section 160AF of the ITAA 1936 limits the amount of the foreign tax credit to the lessor of foreign tax paid, or the amount of Australian tax payable on the assessable income, profit or gain. Where foreign tax has been paid in relation to the employment income by the taxpayer, a foreign income tax offset will be allowed.", "Date_of_Decision": "28 November 2005", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 4", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Denmark Double tax agreements Employment income International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005351", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will by replaced by a foreign income tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Denmark Double tax agreements Employment income International tax"}
{"ATO_ID_Number": "ATO ID 2004/288", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived from services in the Joint Petroleum Development Area", "Issue": "Is income earned by an Australian resident taxpayer derived from service in the Joint Petroleum Development Area (JPDA) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Income earned by an Australian resident taxpayer derived from service in the JPDA is assessable under subsection 6-5(2) of the ITAA 1997 and is not exempt from tax under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer is employed in the JPDA for a continuous period of more than 90 days.", "Reasons_for_Decision": "Summary: The Timor Sea between northern Australia and East Timor contains proven petroleum resources in the seabed. Australia and East Timor have competing claims to the resources of this seabed. The Timor Sea Treaty (Treaty) enables Australia and East Timor to jointly develop the petroleum resources of a major part of the seabed of the Timor Sea, defined in Article 3 of the Treaty as the JPDA, pending agreement to a seabed boundary with East Timor. The Treaty was signed between the Government of East Timor and the Government of Australia on 20 May 2002. The Treaty entered into force on 2 April 2003 but is taken to have effect and all of the provisions will apply and be taken to have applied on and from the date of signature, 20 May 2002. Both Australia and East Timor continue to have sovereignty over the area and therefore, for the purposes of Australian law, the area is considered part of Australian territory. Article 2 of the Treaty recognises that the treaty is without prejudice to both Australia's and East Timor's legal claims to the seabed in the Timor Sea. Further, Article 13 of the Treaty provides that the JPDA shall be deemed to be, and treated by Australia as part of Australia (and by East Timor as part of East Timor) for the purposes of taxation law related directly or indirectly to: These terms have been incorporated into Australia's domestic tax legislation via subsection 6AA(1) of the ITAA 1936. Subsection 6AA(1) of the ITAA 1936 relevantly states: For all purposes of this Act related directly or indirectly to: (a) the exploration for minerals in, or the exploitation of the natural resources (being minerals) of: (i) ... (ii) a Petroleum Act offshore area; or ... Subparagraph 6AA(4)(e)(ii) of the ITAA 1936 defines 'Petroleum Act offshore area' to include the JPDA, therefore, the JPDA is to be treated as part of Australia for the purposes of the ITAA 1936. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in 'foreign service' for a continuous period of not less than 91 days, any 'foreign earnings' derived will be exempt from tax in Australia. Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee, and 'foreign earnings' include salary, wages, commission, bonuses or allowances. Section 23AG of the ITAA 1936 is only available to resident taxpayers who derive foreign earnings from service in a foreign country. The area can only be treated as part of a 'foreign country' where it is clearly deemed to be a 'foreign country' for the purposes of section 23AG of the ITAA 1936. As the JPDA is considered to be part of Australia for the purposes of the ITAA 1936 and therefore not a 'foreign country', exemption under section 23AG of the ITAA 1936 cannot apply to earnings derived from service in the JPDA. Accordingly, the income earned by the taxpayer from service in the JPDA is assessable under subsection 6-5(2) of the ITAA 1997 and is not exempt from tax under section 23AG of the ITAA 1936.", "Date_of_Decision": "19 February 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(1) subsection 23AG(7) subsection 6AA(1) subparagraph 6AA(4)(e)(ii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Exempt income Foreign income Foreign salary & wages International law International tax Timor Sea Zone of Cooperation Treaties", "Case_References": "", "Other_References": "Timor Sea Treaty between the Government of Australia and the Government of East Timor, Dili, 20 May 2002.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004288", "Unmatched_Content": "This ATO ID was amended by inserting references to section 6AA of the ITAA 1936, which treats certain offshore areas to be part of Australia for the purposes of that Act. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | ... the provisions of this Act have effect, subject to this section, as if: | Keywords Double tax agreements Exempt income Foreign income Foreign salary & wages International law International tax Timor Sea Zone of Cooperation Treaties"}
{"ATO_ID_Number": "ATO ID 2004/907", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by a dual resident of Australia and Singapore working in Australia for 183 days or less", "Issue": "Is the employment income of a dual resident of Australia and Singapore assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), where the taxpayer is working in Australia for 183 days or less?", "Decision": "No. The employment income of a dual resident of Australia and Singapore is not assessable under subsection 6-5(2) of the ITAA 1997 where the taxpayer is working in Australia for 183 days or less.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is a citizen of Singapore and also a resident of Singapore for the purposes of Singaporean tax. The taxpayer is employed by an Information Technology (IT) company resident in Singapore. The taxpayer receives salary and wages income from their employer to consult on a software development project in Australia for a related Australian company. The taxpayer does not derive any income in Australia through a permanent establishment (PE). The taxpayer owns a home in Singapore but does not own a home in Australia. The taxpayer is present within Australia for a period less than 183 days. The taxpayer pays tax on the salary and wages income in Singapore.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly and indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax of Australian sourced income received by the taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the protocol amending the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and Singapore Protocol operate to avoid the double taxation of income received by Australian and Singapore residents. Article 3(2) of the Singapore Agreement provides the rules where an individual is a resident of Australia and Singapore for tax purposes (the 'tie breaker tests'). The tie breaker tests ensure that the individual is only treated as a resident of one country for the purposes of applying the Singapore Agreement. Article 3(2)(a)(i) provides that an individual shall be treated solely as a resident of Singapore if they have a permanent home available to them in Singapore and do not have a permanent home available to them in Australia. As the taxpayer has a permanent home in Singapore and not in Australia, the taxpayer is considered to be a resident of Singapore under the Singapore Agreement. Article 12 of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services performed in Australia shall be exempt from tax in Australia if all of the following three conditions are met: Therefore, Article 12 will apply to exempt the income that the taxpayer received while working in Australia because:", "Date_of_Decision": "5 November 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 the Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/679", "Subject_References": "Double taxation agreements Singapore International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004907", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double taxation agreements Singapore International tax"}
{"ATO_ID_Number": "ATO ID 2004/908", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by a dual resident of Australia and Singapore working in Australia for more than 183 days", "Issue": "Is the employment income of a dual resident of Australia and Singapore assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), where the taxpayer is working in Australia for more than 183 days?", "Decision": "Yes. The employment income of a dual resident of Australia and Singapore is assessable under subsection 6-5(2) of the ITAA 1997 where the taxpayer is working in Australia for more than 183 days.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is a citizen of Singapore and is also a resident of Singapore for the purposes of Singaporean tax. The taxpayer is employed by an Information Technology (IT) company resident in Singapore. The taxpayer receives salary and wages income from their employer to consult on a software development project in Australia for a related Australian company. The taxpayer does not derive any income in Australia through a permanent establishment (PE). The taxpayer owns a home in Singapore but does not own a home in Australia. The taxpayer is present within Australia for a period of more than 183 days. The taxpayer pays tax on the salary and wages income in Singapore.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly and indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax of Australian sourced income received by the taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the protocol amending the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and Singapore Protocol operate to avoid the double taxation of income received by Australian and Singapore residents. Article 3(2) of the Singapore Agreement provides the rules where an individual is a resident of Australia and Singapore for tax purposes (the 'tie breaker tests'). The tie breaker tests ensure that the individual is only treated as a resident of one country for the purposes of applying the Singapore Agreement. Article 3(2)(a)(i) provides that an individual shall be treated solely as a Singapore resident if they have a permanent home available to them in Singapore and has not a permanent home available to them in Australia. As the taxpayer has a permanent home in Singapore and not in Australia, the taxpayer is considered to be a resident of Singapore under the Singapore Agreement. Subject to Article 12, Article 11(1) of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services shall be taxable in Singapore unless the services are performed or exercised in Australia. If the services are performed or exercised in Australia, the income may be taxed in Australia. Article 12 of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services performed in Australia shall be exempt from tax in Australia if all of the following three conditions are met: Article 12 of the Singapore Agreement does not apply to exempt the income because the taxpayer is present in Australia for a period that exceeds 183 days. Article 18(5) of the Singapore Agreement provides that, subject to the provisions of the laws of Singapore, a credit for any tax payable in Australia will be allowed against Singapore tax payable on income derived from sources in Australia.", "Date_of_Decision": "5 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 the Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/679", "Subject_References": "Double tax agreements Singapore International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004908", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Singapore International tax"}
{"ATO_ID_Number": "ATO ID 2003/344", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived in Austria by an Australian university lecturer and researcher", "Issue": "Is the contract income earned by an Australian lecturer and researcher from a university in Austria assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The contract income earned by the Australian lecturer and researcher from a university in Austria is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer held the position as a lecturer and researcher at an Australian university. The taxpayer accepted a one month contract with a university in Austria to undertake teaching and research activities for a fixed sum of money. The taxpayer did not keep a fixed base in Austria to undertake the teaching and research activities.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. In the event of inconsistent provisions, the Agreements Act overrides the ITAA 1997 (except in some limited situations). Schedule 27 of the Agreements Act contains the double tax agreement between Australia and the Republic of Austria (the Austrian Agreement). The Austrian Agreement operates to avoid double taxation of income received by Australian and Austrian residents. Paragraph (1) of Article 14 of the Austrian Agreement provides that income derived by a resident of Australia in respect of professional services performed in Austria shall be taxable only in Australia unless the taxpayer has a fixed base regularly available in Austria to perform those services. Paragraph (2) of Article 14 of the Austrian Agreement defines the term 'professional services' to include services performed in the exercise of independent scientific, educational or teaching activities. The contract income derived by the taxpayer from a university in Austria is in respect of 'professional services' under paragraph (2) of Article 14 of the Austrian Agreement. As the taxpayer is a resident of Australia for income tax purposes and they do not have a fixed base in Austria to perform their teaching and research activities, the income received from the university in Austria is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "2 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Austria Double tax agreements Foreign income International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003344", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Austria Double tax agreements Foreign income International tax"}
{"ATO_ID_Number": "ATO ID 2003/907", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Foreign Employment Income: meaning of 'foreign service' where employment exercised on an oil rig 40 nautical miles from foreign country but within that country's exclusive economic zone (EEZ)", "Issue": "Is a taxpayer engaged in 'foreign service' for the purposes of subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer works as an employee on an oil rig that is 40 nautical miles offshore from a foreign country but within that country's exclusive economic zone (EEZ)?", "Decision": "Yes. A taxpayer who is employed on an oil rig that is 40 nautical miles offshore from a foreign country but within that country's claimed EEZ is engaged in 'foreign service' for the purposes of subsection 23AG(1) of the ITAA 1936 as it is service in a foreign country as an employee.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is employed on an oil rig that is 40 nautical miles from the coastline of a foreign country. The foreign country has claimed a 200 nautical mile EEZ from the low water mark of its coastline.", "Reasons_for_Decision": "Summary: For a resident taxpayer to be entitled to an exemption under subsection 23AG(1) of the ITAA 1936 they must, amongst other things, be engaged in foreign service. 'Foreign service' is defined under subsection 23AG(7) of the ITAA 1936 and includes service in a foreign country in the capacity of an employee. The taxpayer is working in an EEZ that is claimed by the foreign country. The question is whether that EEZ forms part of a foreign country for the purposes of the definition of 'foreign service'. The expression 'foreign country' is not defined in either sections 6 or 23AG of the ITAA 1936. However, paragraph 22(1)(f) of the Acts Interpretation Act 1901 defines the expression as follows: 22 Meaning of Words In any Act, unless the contrary intention appears: ... (f) Foreign country means any country (whether or not an independent sovereign state) outside Australia and the external Territories Because the word 'country' is not further defined, its meaning is determined on the basis of ordinary principles of statutory interpretation. The ordinary meaning of the word 'country' means the territory over which a political entity exercises its sovereign rights. Under international law, this undisputedly includes the land mass and associated territorial sea of 12 nautical miles from the coastline over which the entity has full sovereign rights. The position is less clear with offshore areas such as an EEZ. Under international law, a political entity that claims an EEZ exercises sovereign rights in relation to specific activities carried on within that zone, most particularly activities that relate to the exploration and exploitation, conservation and management of natural resources (see Article 56 of the United Nations Convention of the Law of the Sea 1982). The meaning of 'country' for the purposes of the definition of 'foreign service' in subsection 23AG(7) of the ITAA 1936 includes service carried out by a person in an EEZ in relation to activities that involve the exercise of sovereign rights by the relevant foreign country. The work performed by the taxpayer as an employee on an oil rig is an activity carried on within the EEZ that involves the exercise of sovereign rights by the relevant foreign country. As such, the taxpayer is engaged in 'foreign service' for the purposes of subsection 23AG(1) of the ITAA 1936. The taxpayer must satisfy all other requirements of section 23AG of the ITAA 1936 before income earned in overseas employment will be exempt from tax in Australia.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 6 section 23AG subsection 23AG(1) subsection 23AG(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income Foreign salary & wages International tax", "Case_References": "", "Other_References": "The United Nations Convention on the Law of the Sea 1982", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003907", "Unmatched_Content": "This ATO ID has been amended to clarify its scope by adding the last sentence and Note. | Keywords Foreign income Foreign salary & wages International tax"}
{"ATO_ID_Number": "ATO ID 2003/1078", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of salary and wages received by a dual resident from a United States company", "Issue": "Are the salary and wages received by a taxpayer, who is both a resident of Australia and the United States (US) for income tax purposes, assessable under subsection 6-5(2) of Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages received by the taxpayer, who is both a resident of Australia and the US for income tax purposes, are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of Australia. The taxpayer is a resident of Australia and the US for income tax purposes. The taxpayer receives salary and wages from a US employer. The taxpayer has a permanent home available to him in Australia and does not have a permanent home available in the US. The taxpayer has spent in excess of 183 days in the US.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the US Protocol amending the US Convention (US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Article 4(2) of the US Convention provides rules (the 'tie-breaker' rules) to ensure that a dual resident individual is treated as a resident of only one of the countries for the purposes of the US Convention. A dual resident individual is an individual who is a resident of both Australia and the US for income tax purposes. Article 4(2)(a) of the US Convention provides that an individual shall be deemed to be a resident of the country in which they have a permanent home. For the purposes of this paragraph, in determining an individual's permanent home, regard shall be given to the place where they dwell with their family. As the taxpayer has a permanent home in Australia but not the US, the taxpayer will be deemed to be a resident of Australia under Article 4(2)(a) of the US Convention. Article 15(1) of the US Convention provides that salary, wages and other similar remuneration derived by an individual who is a resident of Australia in respect of employment shall be taxable only in Australia unless the employment is exercised or the services are performed in the US. If the employment is so exercised or the services so performed, such remuneration as derived from that exercise or performance may be tax in the US. Article 15(2) of the US Convention provides that remuneration derived by an individual who is a resident of Australia in respect of an employment exercised in the US shall be taxable only in Australia if: The taxpayer's salary and wages is paid by an employer who is a resident of the US and the taxpayer is present in the US for periods exceeding 183 days in the taxable year. Therefore, not all the conditions of Article 15(2) are satisfied and the salary and wages can be taxed in Australia and the US. Article 22(2) of the US Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in the US will be allowed against Australian tax paid on income from US sources. Subsection 160AF(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that where the assessable income of a resident contains foreign sourced income and foreign tax has been paid on that income a foreign tax credit will be allowed. The foreign tax credit allowed against Australian income tax is the lesser of : The salary and wages received by the taxpayer are included in their assessable income under subsection 6-5(2) of the ITAA 1997. As foreign tax has been paid in relation to this income, a foreign tax credit will be allowed.", "Date_of_Decision": "26 September 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dual residence Residence in Australia Salary and wages income Unites States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031078", "Unmatched_Content": "This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dual residence Residence in Australia Salary and wages income Unites States"}
{"ATO_ID_Number": "ATO ID 2003/1195", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by a dual resident of Australia and the United States", "Issue": "Is employment income received by a taxpayer who is a resident of Australia and of the United States (US) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) where the taxpayer exercises the duties of their employment wholly outside Australia?", "Decision": "No. The employment income received by a taxpayer who is a resident of Australia and of the US is not assessable under subsection 6-5(2) of ITAA 1997 where the taxpayer exercises the duties of their employment wholly outside Australia.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is also a resident of the US for US taxation purposes. The taxpayer is employed by a company that is a non-resident of Australia. The taxpayer has been employed by the company for many years. The taxpayer's employment is based in the US. The taxpayer's employment does not require them to travel to Australia. The taxpayer receives employment income from their employer in the US. The taxpayer owns residences in Australia and the US which are available to the taxpayer at all times continuously. The taxpayer spends a similar amount of time in Australia and in the US during the year. When the taxpayer returns to Australia, they reside with their partner. The taxpayer has no dependants in Australia. The taxpayer has a family member in the US. The taxpayer maintains an Australian credit union account; an Australian superannuation account and a home loan with an Australian bank. The taxpayer maintains US credit union accounts, US credit card accounts and holds US health insurance. The taxpayer also owns US shares & options.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the US Protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) provides that if an individual is a resident of both Australia and the US, the individual shall be deemed to be a resident of the country: Article 4(2) of the US Convention further provides that in determining an individual's permanent home, regard shall be given to the place where the individual dwells with their family, and in determining the country with which an individual's personal and economic relations are closer, regard shall be given to their citizenship (if the individual is a citizen of one of the countries). The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the US Convention. Article 3(2) of the US Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the US Convention. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer owns residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in the US. In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. As the taxpayer spends approximately the same amount of time at their homes in Australia and the US, the taxpayer has a habitual abode in both countries. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has personal and economic ties with Australia and the US. However, given the longstanding duration of the taxpayer's employment in the US and the fact that the taxpayer is a US citizen, it is considered that the taxpayer's personal and economic ties are closer with the US than with Australia. Accordingly, the taxpayer will be treated as a resident of the US for the purposes of applying the provisions of the US Convention. Article 15(1) of the US Convention provides that salaries, wages and other similar remuneration derived by an individual who is a resident of the US in respect of an employment shall be taxable only in the US unless the employment is exercised in Australia. If the latter applies, the income may also be taxed in Australia, subject to the exception provided in Article 15(2) of the US Convention. As the taxpayer exercises their employment solely in the US, the employment income shall be taxed only in the US. Therefore, the employment income received by a taxpayer who is a resident of Australia and the US is not assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "15 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 94/58 | Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International law Residency Salary & wages income Treaties United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031195", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 94/58 Taxation Ruling TR 2001/13 | Keywords Double tax agreements International law Residency Salary & wages income Treaties United States"}
{"ATO_ID_Number": "ATO ID 2007/205", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of superannuation contributions made in favour of local government councillors", "Issue": "Will amounts paid by a local government council in the form of contributions to a complying superannuation fund that are assessable to the fund under section 295-160 of the Income Tax Assessment Act 1997 (ITAA 1997), represent assessable income of the councillor for the purposes of the ITAA 1997?", "Decision": "No. Amounts paid by a local government council in the form of contributions to a complying superannuation fund that are assessable to the fund under section 295-160 of the ITAA 1997, do not represent assessable income of the councillor for the purposes of the ITAA 1997.", "Facts": "The local government council has entered into an arrangement with its councillors under which the councillors have agreed to forego part of their remuneration in exchange for the local government council making contributions to a complying superannuation fund. The effect of the arrangement is that the amounts paid by the council to the complying superannuation fund are assessable to the fund as 'superannuation benefits for someone else' as set out in section 295-160 of the ITAA 1997. The local government councillor is not carrying on a business in respect of their duties as a councillor.", "Reasons_for_Decision": "Summary: Income from the remuneration arrangement between the local government council and the councillor would normally be assessable under section 6-5 of the ITAA 1997 when it is received by the councillor. It may be taken to have been received under subsection 6-5(4) of the ITAA 1997 where it is otherwise dealt with on behalf of the councillor. However, contributions made to a complying superannuation fund on behalf of the councillor as part of an agreement between the local government council and the councillor will not fall within the ambit of subsection 6-5(4) of the ITAA 1997 because it is accepted that the councillor has agreed to forego part of the remuneration before earning the entitlement to receive that amount as ordinary income. Once it is established that subsection 6-5(4) of the ITAA 1997 does not apply to the arrangement it becomes necessary to consider the application of section 15-2 of the ITAA 1997. In Constable v. Federal Commissioner of Taxation (1952) 86 CLR 402; (1952) 10 ATD 93; (1952) 5 AITR 371 ( Constable ) the obiter comments of the majority of the High Court of Australia were to the effect that the sums contributed by the employer to the fund were not allowed, given or granted to an employee and were therefore not assessable under paragraph 26(e) of the Income Tax Assessment Act 1936 (ITAA 1936), but instead were paid to the administrators of the fund. While the members did not have a vested and indefeasible right to the employer contributions in that case, the court's comments support the view that section 15-2 of the ITAA 1997 (the rewritten version of paragraph 26(e) of the ITAA 1936) does not apply to the making of contributions to a superannuation fund by an employer for the employees' benefit. Since the decision in Constable , the scheme of superannuation and taxation law has been prefaced on the view that a contribution by an employer to a superannuation fund is not the income of the employee. Much of the superannuation guarantee law and income tax law concerning the taxation of superannuation funds would be redundant if employer contributions were assessable income of employees when the contributions were made. It is acknowledged that local government councillors are not employees. However, similarly to the position with employees the contributions made by the local government council represent assessable income of the superannuation fund as a contribution to provide benefits for someone else as set out under section 295-160 of the ITAA 1997. In light of this and the foregoing consideration of the decision in Constable , coupled with the subsequent development of the scheme of taxation of complying superannuation funds, it is considered that the same reasoning as applied to employees in respect to the application of section 15-2 of the ITAA 1997 would apply with equal force to local government councillors in the circumstances set out above.", "Date_of_Decision": "24 October 2007", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(4) section 15-2 section 290-10 section 290-60 section 295-160", "Related_Public_Rulings_and_Determinations": "TR 2001/10", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Local government Superannuation contributions Superannuation contributions for someone else - superannuation fund assessable income", "Case_References": "Constable v. Federal Commissioner of Taxation (1952) 86 CLR 402 (1952) 10 ATD 93 (1952) 5 AITR 371", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007205", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 2001/10 | Keywords Income Local government Superannuation contributions Superannuation contributions for someone else - superannuation fund assessable income"}
{"ATO_ID_Number": "ATO ID 2002/331", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of annual leave loading", "Issue": "Is a salary and wage earner assessable on an amount of annual leave loading under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A salary and wages earner is assessable on an amount of annual leave loading under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is an employee who earns salary and wages. The taxpayer received an amount of annual leave loading during the income year.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts, which is called ordinary income. Remuneration received for personal services in the capacity of employee, such as salary and wages, is considered income according to ordinary concepts. Amounts paid for annual leave including any additional payment for leave loading is also income according to ordinary concepts. Therefore, the amount of annual leave loading is income according to ordinary concepts and is assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "11 October 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Leave bonus Salary Salary and wages income", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002331", "Unmatched_Content": "Keywords Leave bonus Salary Salary and wages income"}
{"ATO_ID_Number": "ATO ID 2004/598", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Valuing an interest in a foreign life policy: exemption for interest of less than $50,000", "Issue": "If an interest in a foreign life policy (FLP) is disposed of part way through the year, is the value of that interest the cost incurred in acquiring the interest for the purposes of section 515 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The value at the end of the year of the interest in the FLP for the purposes of section 515 of the ITAA 1936 is the cost incurred by the taxpayer in acquiring the interest in the FLP.", "Facts": "The taxpayer is a natural person and an Australian resident. The taxpayer took out the FLP before 1993. The policy was a FLP within the meaning of section 482 of the ITAA 1936 and the taxpayer's interest was an interest in the FLP within the meaning of subsection 483(3) of the ITAA 1936. The FLP matured in July 2002 and the taxpayer received a one off payment of $80,000 on maturity. The taxpayer's contributions over the life of the FLP were $50,000. The taxpayer had only one interest in the FLP and neither the taxpayer nor any of the taxpayer's associates have any interests in any other FLPs or in any Foreign Investment Funds (FIFs).", "Reasons_for_Decision": "Summary: Section 515 of the ITAA 1936 provides an exemption that applies to exclude a taxpayer from attributing income that would otherwise be assessable under the FIF Rules contained in Part XI of the ITAA 1936. That exemption applies where the taxpayer is a natural person and the value of the taxpayer's (and any associates) interests in FIFs and FLPs is $50,000 or less. Section 515 of the ITAA 1936 requires several conditions to be fulfilled before the exemption applies: Section 487 of the ITAA 1936 sets out what is a notional accounting period for a FLP. Where an interest in a FLP is disposed of, the notional accounting period is taken to end immediately after the disposal (see subsection 487(8)). Therefore, the taxpayer has an interest in the FLP at the end of the notional accounting period of that FLP and the second condition in section 515 of the ITAA 1936 is satisfied. Paragraph 515(1)(b) of the ITAA 1936 then requires that the value of the all interests in FIFs and the value of all FLPs in which the taxpayer (or associates) had an interest at the end of the relevant notional accounting period must not, at the end of the year of income, exceed $50,000. Subsection 515(2) of the ITAA 1936 then sets out what the value is at the end of the year of the relevant interests for the purposes of paragraph 515(1)(b). The value is the greater of: Where the taxpayer has disposed of their interest in a FLP part way through an income year there is no market value of that interest at the end of the taxpayer's year of income. Therefore, the value for the purposes of paragraph 515(1)(b) of the ITAA 1936 is the cost incurred by the person in acquiring the interest in the FLP.", "Date_of_Decision": "18 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 487 subsection 515(1) subsection 515(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/893", "Subject_References": "Foreign investment funds Foreign life assurance policies Life insurance policies", "Case_References": "", "Other_References": "Foreign Investments Fund Guide 2002 NAT 2130 Chapter 5", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004598", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/3 | Keywords Foreign investment funds Foreign life assurance policies Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2003/289", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Investment Funds - Reduction of disposal consideration where amounts were previously attributed", "Issue": "Does section 613 of the Income Tax Assessment Act 1936 (ITAA 1936) operate to reduce amounts that would otherwise be included in the assessable income of the taxpayer in respect of its share of the realised profits derived by unit trusts from the sale or redemption of the investments in non-exempt Foreign Investment Funds (FIFs) by amounts previously attributed from those FIFs, which have not been distributed.", "Decision": "Yes. Section 613 of the ITAA 1936 will operate to reduce those amounts.", "Facts": "The taxpayer is a company incorporated in Australia and is a unit holder in Australian resident fixed unit trusts. These unit trusts are not: The unit trusts invest in international property trusts and property stocks listed on foreign stock exchanges and in private equity real estate funds, which in turn invest in a diversified portfolio of real estate assets and real estate operating companies. A number of the investments held by the unit trusts are non-exempt FIF interests for the purposes of Part XI of the ITAA 1936. The unit trusts will sell or redeem their investments in the non-exempt FIFs either as a result of turning over their investment portfolio or as a result of the ultimate winding up of the unit trusts. The unit trusts will realise profits when they sell or redeem their investments in the non-exempt FIFs. The FIF income from these investments is calculated using the market value method or the deemed rate of return method. The taxpayer is assessable on its share of the net income of the unit trusts under section 97 of the ITAA 1936 (including its share of gains realised from the sale or redemption of investments in FIFs by the unit trusts). Furthermore, the taxpayer will be required to maintain FIF attribution accounts which will be credited when attribution from the respective FIF occurs (subsection 605(1) of the ITAA 1936). The taxpayer has a surplus in the FIF attribution account maintained by it in respect of the FIF investments which have been sold or redeemed by the unit trusts. The surplus reflects the fact that the taxpayer has previously been assessed on its share of the income of the unit trusts, which includes amounts assessed under the FIF provisions on undistributed FIF income in respect of those FIF investments.", "Reasons_for_Decision": "Summary: When an interest in a FIF entity is disposed of for a profit or gain, that profit or gain will normally be taken into account in the calculation of the taxpayer's assessable income. To avoid double taxation, section 613 of the ITAA 1936 operates to deem the consideration received or the capital proceeds on the disposal of an interest in a FIF entity, to be reduced by any amount previously attributed to a taxpayer that has not been distributed to the taxpayer. This amount cannot exceed the consideration or capital proceeds. When the unit trusts sell or redeem their interests in the non-exempt FIFs for a profit or gain section 613 of the ITAA 1936 will operate to reduce the sale or redemption proceeds. The taxpayer's share of the profit or gain realised from the sale or redemption of investments in non-exempt FIFs by the unit trusts will be reduced under section 613 of the ITAA 1936. Note: The FIF attribution account balance will be reduced by the amount of the FIF attribution surplus that was taken into account in reducing the consideration or capital proceeds (subsection 605(8) of the ITAA 1936).", "Date_of_Decision": "27 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 96A(4) section 97 subsection 605(1) subsection 605(8) section 613 Division 6B Division 6C Part IX Part XI", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign investment funds Disposal of interest in a FIF", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003289", "Unmatched_Content": "Keywords Foreign investment funds Disposal of interest in a FIF"}
{"ATO_ID_Number": "ATO ID 2007/186", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt Income: net exempt income - child care benefit and family tax benefit", "Issue": "Is exempt income consisting of family tax benefit and child care benefit reduced by child related domestic costs and child care costs respectively in determining net exempt income under section 36-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, exempt income consisting of family tax benefit and child care benefit is not reduced by child related domestic costs and child care costs respectively in determining net exempt income under section 36-20 of the ITAA 1997.", "Facts": "During the 2005-06 income year, the taxpayer incurs domestic expenses in caring for children and also incurs fees when children attend formal child care. The taxpayer receives family tax benefit and child care benefit. For the 2005-06 income year, the taxpayer's allowable deductions (other than tax losses of earlier income years) exceeds assessable income.", "Reasons_for_Decision": "Summary: Section 8-5 of the ITAA 1997 allows a deduction from assessable income of an amount that can be deducted under a provision of the Income Tax Assessment Act 1936 (ITAA 1936) or a provision outside of Division 8 of Part 1-3 of the ITAA 1997. Section 12-5 of the ITAA 1997 contains a list of provisions about specific types of deductions. Included in this list is Division 36 of Part 2-5 of the ITAA 1997 which deals with tax losses from earlier income years. Section 36-10 of the ITAA 1997 explains that a tax loss arises in an income year, if a taxpayer's allowable deductions (other than tax losses of earlier income years) exceeds assessable income and net exempt income (worked out under section 36-20 of the ITAA 1997) for that year. Subsection 36-20(1) of the ITAA 1997 provides: 36-20(1) If you are an Australian resident, your net exempt income is the amount by which your total *exempt income from all sources exceeds the total of: Subsection 6-20(1) of the ITAA 1997 explains that an amount of ordinary income or statutory income is exempt income if it is made exempt from income tax by a provision of the ITAA 1936 or ITAA 1997 or another Commonwealth law. Child care benefit and family tax benefit are both exempt from income tax under section 52-150 of the ITAA 1997. The net exempt income of the taxpayer calculated under subsection 36-20(1) of the ITAA 1997 is the amount of the child care benefit and the family tax benefit received for the income year less any losses and outgoings (except capital losses and outgoings) incurred by the taxpayer in deriving the child care benefit and the family tax benefit. The notion of 'losses and outgoings incurred' as used in paragraph 36-20(1)(a) of the ITAA 1997 is used in a similar context in subsection 8-1(1) of the ITAA 1997. Paragraph 36-20(1)(a) is concerned with losses and outgoings incurred in deriving exempt income, whereas subsection 8-1(1) of the ITAA 1997 is concerned with losses or outgoings incurred in gaining or producing assessable income. The authorities on 'losses or outgoings incurred in gaining or producing assessable income' for the purposes of section 8-1 of the ITAA 1997 are of assistance in determining whether losses or outgoings are incurred in deriving exempt income for the purposes of paragraph 36-20(1)(a) of the ITAA 1997. The courts have established that for a loss or outgoing to be deductible under section 8-1 of the ITAA 1997: Taxation Ruling TR 98/9 deals with an analogous issue for section 8-1 of the ITAA 1997 purposes of whether self-education expenses relating to a course of study are deductible in deriving AUSTUDY income. Paragraph 72 of Taxation Ruling TR 98/9 provides: 72. Having regard to the nature of the payment, we believe that self-education expenses relating to a course of study are not relevant and incidental to the derivation of AUSTUDY income. Viewed objectively, self-education expenses are incurred to undertake the course of study. Consequently, the essential character of these expenses is linked to that study. AUSTUDY is in the nature of assistance and the essential nature of the expense relates to the study, not the assistance which may be available as an incident of the study. Child related domestic costs and child care costs are similarly not relevant and incidental to the derivation of family tax benefit and child care benefit respectively. Viewed objectively, child related domestic costs and child care costs are incurred for family purposes and for formal child care. The expenses are not incurred to derive the incidental assistance which is available by way of family tax benefit and child care benefit. Consequently, the essential character of the expenses is not linked to deriving family tax benefit and child care benefit respectively. Therefore, in the circumstances here, child related domestic costs and child care costs are not losses or outgoings incurred in deriving the taxpayer's exempt income and as such are not taken into account in determining the taxpayer's net exempt income under subsection 36-20(1) of the ITAA 1997.", "Date_of_Decision": "27 September 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Income", "Case_References": "Lunney & Hayley v. Commissioner of Taxation (1958) 100 CLR 478 (1958) 11 ATD 404 (1958) 7 AITR 166", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007186", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/9 | Keywords Exempt income Income"}
{"ATO_ID_Number": "ATO ID 2005/255", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of pension income received by a dual resident of Australia and the UK", "Issue": "Is the pension received from the United Kingdom (UK) by a dual resident taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The pension received from the UK by a dual resident taxpayer is not assessable income under subsection 6-5(2) of the ITAA 1997 as it is taxable only in the UK under Article 17(1) of Schedule 1 to the International Tax Agreements Act 1953 (Agreements Act).", "Facts": "The taxpayer is a dual resident of Australia and the UK for income tax purposes. The taxpayer has a permanent home in the UK and Australia and the taxpayer's family resides in the UK. The taxpayer is a citizen of the UK. The taxpayer receives government pension income from the UK while residing in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pensions received by the taxpayer are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the Convention and Notes between Australia and the UK (the 2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 4(3) of the 2003 UK Convention provides the rules where an individual is a resident of Australia and the UK for income tax purposes (the 'tie breaker tests'). The tiebreaker tests ensure that the individual is only treated as a resident of one country for the purposes of applying the 2003 UK Convention. Article 4(3)(a) of the 2003 UK Convention provides that where an individual is a resident of both countries: Though the taxpayer has a permanent home in both Australia and the UK, the taxpayer has closer personal relations with the UK as the taxpayer's family resides in the UK. Therefore the taxpayer will be deemed to be a resident of the UK under Article 4(3)(a) of the 2003 UK Convention. ATO Interpretative Decision 2011/53 contains details of how the centre of vital interests is determined. Article 17(1) of the 2003 UK Convention provides that pensions (including government pensions) paid to a resident of the UK will be taxable only in the UK. Accordingly, the pension received by the taxpayer from the UK, while residing in Australia, is not assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "21 July 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/53", "Subject_References": "Double tax agreements Exempt income Foreign pension income Non resident individuals Prescribed dual resident United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005255", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Exempt income Foreign pension income Non resident individuals Prescribed dual resident United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/191", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Right to tax dividends paid to non-resident company: application of Article 10(7) of the Australia-United States Double Tax Convention", "Issue": "Are dividends received by the taxpayer, a holding company resident in the United States of America (US), from a US resident subsidiary conducting business in Australia through a permanent establishment (PE) in Australia, included in assessable income under paragraph 44(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Under Article 10(7) of the Australia-United States Double Taxation Convention (US Convention), the dividends received by the taxpayer, a US resident holding company, from a US resident subsidiary which conducts business in Australia through a PE, are not subject to tax in Australia.", "Facts": "The taxpayer is a US resident company that is the holding company for a group of wholly-owned US resident subsidiary companies. The taxpayer does not have a PE in Australia. One of the taxpayer's US resident subsidiaries carries on business in Australia through a PE by its participation in a joint venture. The profits derived by this subsidiary from its PE in Australia are paid to the taxpayer as dividends. The taxpayer is legally and beneficially entitled to the dividends paid to it by the subsidiary.", "Reasons_for_Decision": "Summary: Paragraph 44(1)(b) of the ITAA 1936 provides that the assessable income of a non-resident shareholder in a company, whether the company is a resident or a non-resident, includes dividends paid to that shareholder by the company, to the extent to which they are paid out of profits derived by it from sources in Australia. In this respect, paragraph 44(1)(b) operates to include in a shareholder's assessable income the dividends that the taxpayer receives from the company within its group that carries on business in Australia. In determining liability to Australian tax on income derived by the taxpayer, the US Convention contained in Schedules 2 and 2A of the International Tax Agreements Act 1953 (Agreements Act) must also be considered. Subsection 4(1) of the Agreements Act incorporates ITAA 1936 and the Income Tax Assessment Act 1997 (ITAA 1997) into the Agreements Act such that these Acts are read as one. Subsection 4(2) of the Agreements Act provides that the Agreements Act prevails over the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions, except in some limited circumstances that do not apply for present purposes. Article 10(7) of the US Convention provides that, subject to certain exceptions, Australia may not impose any tax on dividends, even if the dividends paid consist wholly or partly of profits or income arising in Australia, where: One of the exceptions contained in Article 10(7) of the US Convention is where the holding in respect of which the dividends are paid, is effectively connected with a PE in Australia. In this case, the taxpayer is not an Australian resident. In addition, the taxpayer is beneficially entitled to the dividends paid to it by a US resident deriving income from a PE in Australia. Accordingly, the dividends that the taxpayer receives are not subject to tax in Australia unless the exception stated above applies. While the profits from which the dividends are paid were derived by the subsidiary through its PE in Australia, the US resident subsidiary paid the dividends to the taxpayer, its US resident parent, not to a PE in Australia. Hence, the taxpayer's holding, in respect of which the dividends were paid, was not effectively connected with a PE in Australia. The exception stated above contained in Article 10(7) does not apply in this case. Article 10(7) of the US Convention is based upon Article 10(5) of the OECD Model. Consequently, the OECD Model and its associated Commentary are important factors in setting the context for Article 10(7) of the US Convention. Paragraph 34 of the Commentary on Article 10 of the OECD Model states: Paragraph 5 rules out the extra-territorial taxation of dividends i.e. the practice by which States tax dividends distributed by a non-resident company solely because the corporate profits from which the distributions are made originated in their territory (for example, realised through a permanent establishment situated therein). There is, of course, no question of extra-territorial taxation when the country of source of the corporate profits taxes the dividends because they are paid to a shareholder who is a resident of that State or to a permanent establishment situated in that State. [emphasis added] Paragraph 34 of the Commentary on Article 10 of the OECD Model is consistent with the position reached above regarding the application of Article 10(7) of the US Convention. Where the exception stated above in Article 10(7) of the US Convention does not apply, Article 10(7) is inconsistent with paragraph 44(1)(b) of the ITAA 1936. By operation of section 4(2) of the Agreements Act, Article 10(7) of the US Convention prevails over paragraph 44(1)(b) of the ITAA 1936. Under Article 10(7) of the US Convention, the dividends received by the taxpayer are not included in its assessable income, notwithstanding paragraph 44(1)(b) of the ITAA 1936. Thus, Australia is prohibited from imposing tax on the dividends that the taxpayer receives from its US resident subsidiary that has a PE in Australia.", "Date_of_Decision": "21 June 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "International Tax Agreements Act 1953 section 4 subsection 4(1) subsection 4(2) section 6 section 6AA Schedule 2, Article 10(7) Schedule 2A, Article 6", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Non resident dividend withholding tax Permanent establishment Treaties Dividends", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital Article 10(5)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005191", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Non resident dividend withholding tax Permanent establishment Treaties Dividends"}
{"ATO_ID_Number": "ATO ID 2005/311", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income derived by a UK resident", "Issue": "Is the interest income received by a taxpayer, a resident of the United Kingdom (UK), assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The interest income received by a taxpayer, a resident of the UK, is not assessable under subsection 6-5(3) of the ITAA 1997 as it is non-assessable non-exempt income under section 128D of Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a resident of the UK and a foreign resident for Australian income tax purposes. The taxpayer derives interest income from Australian sources. Non-resident withholding tax at the rate of 10% was deducted from the interest.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. Subsection 995-1(1) of the ITAA 1997 defines foreign resident to mean a person who is not a resident of Australia for the purposes of the ITAA 1936. Interest income is ordinary income for the purpose subsection 6-5(3) of the ITAA 1997. Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income, then it is not assessable income. Section 6-23 of the ITAA 1997 provides that an amount of ordinary income is non-assessable non-exempt income if a provision of the ITAA 1936 or ITAA 1997 or of another Commonwealth law states that it is not assessable income and is not exempt income. Section 11-55 of the ITAA 1997 provides a list of non-assessable non-exempt income provisions. Included in this list is section 128D of the ITAA 1936 which deals with income subject to withholding tax. Section 128D of the ITAA 1936 provides that interest upon which withholding tax is payable is not assessable income and is not exempt income. Interest withholding tax is payable on interest derived by non-residents under subsection 128B(2) of the ITAA 1936. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 sets the rates of withholding tax on payments to which subsection 128B(2) of the ITAA 1936 applies. The rate of withholding tax on interest paid to non-residents is 10%. However, this liability to Australian withholding tax is subject to any applicable tax treaty provisions contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the UK of Great Britain and Northern Ireland (2003 UK Convention). The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 11(1) of the 2003 UK Convention states that interest arising in Australia and beneficially owned by a resident of the UK may be taxed in the UK. However, under Article 11(2) of the 2003 UK Convention, the interest may also be taxed in Australia, but the tax charged shall not exceed 10% of the gross amount of the interest. The interest received by the taxpayer will be subject to withholding tax at the rate of 10% on the gross amount of interest. The interest income is not assessable income under subsection 6-5(3) of the ITAA 1997 as section 128D of the ITAA 1936 applies. Accordingly, the interest received from Australian sources will not form part of the taxpayer's assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "19 October 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 128D subsection 128B(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/855", "Subject_References": "Interest income International tax Non resident individuals Non resident interest withholding tax PAYG withholding PAYG withholding under dividend, interest & royalty payment category United Kingdom", "Case_References": "", "Other_References": "ATO GUIDE: PAYG withholding from interest, dividends and royalties to non-residents.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005311", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Interest income International tax Non resident individuals Non resident interest withholding tax PAYG withholding PAYG withholding under dividend, interest & royalty payment category United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/127", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian sourced interest income received by a Netherlands resident", "Issue": "Is Australian sourced interest income received by a Netherlands resident taxpayer assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Australian sourced interest income received by a Netherlands resident taxpayer is not assessable under subsection 6-5(3) of the ITAA 1997 as it is exempt under section 128D of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a resident of the Netherlands. The taxpayer receives interest income from Australian sources.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Interest is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. Section 6-15 of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. An amount is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law (subsection 6-20(1) of the ITAA 1997). Section 11-10 of the ITAA 1997 lists provisions about exempt income. Included in this list is section 128D of the ITAA 1936. Section 128D of the ITAA 1936 provides that interest upon which withholding tax is payable shall not be included in assessable income. A non-resident is liable for withholding tax on interest under subsection 128B(2) of the ITAA 1936. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 provides that the rate of withholding tax on interest paid to non residents is generally 10%. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 10 to the Agreements Act contains the agreement between Australia and the Netherlands (the Netherlands Agreement). Schedule 10A to the Agreements Act contains the Second Protocol to the Netherlands Agreement (the Second Protocol). The Netherlands Agreement and the Second Protocol operate to avoid the double taxation of income received by residents of Australia and the Netherlands. Article 11(1) of the Netherlands Agreement states that interest arising in Australia, being interest to which a resident of the Netherlands is beneficially entitled, may be taxed in the Netherlands. Article 11(2) of the Netherlands Agreement states that such interest may be also taxed in Australia and according to the law of Australia, but the tax so charged shall not exceed 10 percent of the gross amount of interest. Therefore, the taxpayer's interest income may be taxed in the Netherlands and in Australia. Subsection 128B(2) of the ITAA 1936 provides that the taxpayer will be subject to 10% withholding tax on the gross amount of interest derived from Australia. As the interest is subject to withholding tax, it is exempt under section 128D of the ITAA 1936. Accordingly, the interest received by the taxpayer from Australian sources that is subject to withholding tax will not form part of their assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "22 January 2004", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) section 6-15 subsection 6-20(1) section 11-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interest income International tax Netherlands Non resident interest withholding tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004127", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Interest income International tax Netherlands Non resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2004/140", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income received by a dual resident of Australia and the United States", "Issue": "Is the interest income of a dual resident of Australia and the United States (US) assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The interest income of a dual resident of Australia and the US is not assessable under subsection 6-5(2) of the ITAA 1997 as they are deemed to be a resident of the US for the purposes of the US double tax Convention.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer's habitual abode and personal and economic ties are in the US. The taxpayer receives interest income from US sources.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the US (the US Convention). The US Convention operates to avoid the double taxation of income received by Australian and US residents. As the taxpayer is a dual resident, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and the US, they shall be deemed to be a resident of the State: As the taxpayer's habitual abode and personal and economic ties are in the US, the taxpayer will be considered a resident of the US under the US Convention. Article 11(1) of the US Convention provides that interest income arising in the US, to which a resident of Australia is beneficially entitled, may be taxed in Australia. As the taxpayer is resident of the US under the US Convention, Article 11(1) does not give Australia any taxing rights on the taxpayer's US sourced interest income. Accordingly, the US sourced interest income received by the dual resident taxpayer does not from part of the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "21 November 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Interest income International law Residency Treaties United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004140", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Interest income International law Residency Treaties United States"}
{"ATO_ID_Number": "ATO ID 2004/141", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividends received by a dual resident of Australia and the United States", "Issue": "Are dividends received by a dual resident of Australia and the United States (US) assessable under paragraph 44(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Dividends received by a dual resident of Australia and the US are not assessable under paragraph 44(1)(a) of the ITAA 1936 as they are deemed to be a resident of the US for the purposes of the US double tax Convention.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer's habitual abode and personal and economic ties are in the US. The taxpayer receives dividends from US sources.", "Reasons_for_Decision": "Summary: Paragraph 44(1)(a) of the ITAA 1936 provides that, subject to certain provisions, the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the Income Tax Assessment Act 1997 (ITAA 1997) so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the US (the US Convention). The US Convention operates to avoid the double taxation of income received by Australian and US residents. As the taxpayer is a dual resident, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and US, they shall be deemed to be a resident of the State: As the taxpayer's habitual abode and personal and economic ties are in the US, the taxpayer will be considered a resident of the US under the US Convention. Article 10(1) of the US Convention provides that dividends paid by a company in the United States, being dividends to which a resident of Australia is beneficially entitled, may be taxed in Australia. As the taxpayer is resident of the US under the US Convention, Article 10(1) does not give Australia any taxing rights on the taxpayer's US sourced dividends. Accordingly, the US sourced dividends received by the dual resident taxpayer does not from part of the taxpayer's assessable income under paragraph 44(1)(a) of the ITAA 1936.", "Date_of_Decision": "21 November 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 44(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income Double tax agreements International law Residency Treaties United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004141", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend income Double tax agreements International law Residency Treaties United States"}
{"ATO_ID_Number": "ATO ID 2004/776", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of royalties received from the United States by a dual resident of Australia and the United States", "Issue": "Are royalties received by a taxpayer who is a dual resident of Australia and the United States (US) from US sources included in the taxpayer's assessable income under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The royalties received by a taxpayer who is a dual resident of Australia and the US from US sources are not included in the taxpayer's assessable income under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer maintains residences in Australia and the US which are available to the taxpayer at all times continuously. The taxpayer spends time in Australia and the US during the year. The taxpayer's personal and economic ties are predominantly in the US. The taxpayer receives royalties from US sources.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is section 15-20 of the ITAA 1997 which deals with royalties. Section 15-20 of the ITAA 1997 provides that the assessable income of a resident taxpayer includes an amount the taxpayer receives as or by way of royalty. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the United States Protocol (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. The US Protocol entered into force in Australia on 13 May 2003 and has effect in respect of income tax other than withholding taxes for any year of income beginning on or after 1 July 2004. For withholding taxes on dividends, interest and royalties, it has effect from 1 July 2003. As the taxpayer is a dual resident of Australia and of the US, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and US, they shall be deemed to be a resident of the State: Article 4(2) of the US Convention further provides that in determining an individual's permanent home, regard shall be given to the place where the individual dwells with their family, and in determining the country with which an individual's personal and economic relations are closer, regard shall be given to their citizenship (if the individual is a citizen of one of the countries). The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the US Convention. Article 3(2) of the US Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the US Convention. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer maintains residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in the US. In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. This is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the taxpayer's circumstances. As the taxpayer and the taxpayer's family spend time at their homes in Australia and the US as part of their usual pattern of activity, the taxpayer has a habitual abode in both countries. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has personal and economic ties with Australia and the US. Coupled with the fact that the taxpayer is a US citizen, it is considered that the taxpayer's personal and economic ties are closer with the US than with Australia. Accordingly, the taxpayer will be treated as a resident of the US for the purposes of applying the provisions of the US Convention. Article 12(1) of the US Convention provides that royalties from sources in the US, being royalties to which a resident of Australia is beneficially entitled, may be taxed in Australia. As the taxpayer is a resident of the US under the US Convention, Article 12(1) does not give Australia any taxing rights over the US sourced royalty income. Accordingly, the US sourced royalty income received by the taxpayer is not included in assessable income under subsection 6-10(4) of the ITAA 1997.", "Date_of_Decision": "8 September 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 6-10 subsection 6-10(4) section 10-5 section 15-20", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International law Resident/residency Royalties Treaties United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004776", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International law Resident/residency Royalties Treaties United States"}
{"ATO_ID_Number": "ATO ID 2002/1088", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of Australia/Germany DTA to a German Investment Fund", "Issue": "Can an investment fund created under the German Investment Company Act claim benefits, under the Australia/Germany double taxation agreement (German tax treaty) as a resident of Germany if Australia treats the fund as a non-resident company and Germany taxes the members of the fund on the income of the fund, rather than the fund itself?", "Decision": "Yes, the investment fund can claim benefits under the German tax treaty to the extent the fund's members are taxable in Germany on income derived through the fund and would be entitled to claim benefits under the German tax treaty if they had derived the income directly.", "Facts": "The investment fund is created under German law and proposes to acquire a number of income producing commercial buildings and expects to derive rental income as well as some interest income in Australia. The income producing buildings will be acquired as a long term investment. The investment fund will not be a resident of Australia. The investment fund is exempt from income tax in Germany (ie, it is treated as a transparent entity) and as a company (ie. a separate taxable entity) for the purposes of Australia's domestic law.", "Reasons_for_Decision": "Summary: The investment fund would not be entitled to claim the benefits of the German tax treaty based on a literal interpretation of the treaty. In this regard, only residents of Germany as defined in Article 4 of the German tax treaty can claim treaty benefits in Australia. In particular, Article 4(1)(b) provides that a person must be subject to an unlimited tax liability in Germany to be treated as a resident of Germany for the purposes of the treaty. The investment fund, however, does not satisfy this \"unlimited tax liability\" requirement because the members of the fund, rather than the fund itself, are taxable in Germany. Paragraphs 2 to 6.7 of the OECD Commentary on Article 1 of the OECD Model Tax Convention, based on outcomes from the OECD's partnership report, indicate that the above literal interpretation of the residence definition in a tax treaty would provide a result inconsistent with the intent of the treaty. Guidance is also provided in the paragraphs on how treaties should be interpreted to resolve this conflict. In particular, paragraph 6.3 of the OECD Commentary on Article 1 states the general principle that: \"...the State of source should take into account, as part of the factual context in which the Convention is to be applied, the way in which an item of income, arising in its jurisdiction, is treated in the jurisdiction of the person claiming the benefits of the Convention as a resident.\" While the above guidance is for partnerships, we consider the underlying reasoning to be applicable in other cases where an entity is regarded as a separate taxable entity in the country of source and as transparent for taxation purposes in the country of residence. Accordingly, taking into account the factual context referred to by the OECD, Australia should provide treaty benefits for income derived by the investment fund to the extent that Germany has allocated the income to fund members who would have been entitled to treaty benefits if they had derived the income directly. The above general principle would not apply, however, if the investment fund were treated as a resident of Australia (paragraph 6.3 of the OECD Commentary on Article 1). The need to interpret tax treaties according to their intent and the importance of taking into account guidance provided in the OECD Commentary is discussed in Taxation Ruling TR2001/13. Based on this interpretative approach, it is considered that the investment fund can claim benefits under the German tax treaty, to the extent the fund's members are taxable in Germany on income derived through the fund and would be entitled to claim benefits under the German tax treaty if they had derived the income directly.", "Date_of_Decision": "19 October 2002", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005", "Legislative_References": "International Tax Agreements Act 1953 section 11", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Germany Double tax agreements", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021088", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Germany Double tax agreements"}
{"ATO_ID_Number": "ATO ID 2002/586", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Does adding an additional investment option to a policy constitute a new policy?", "Issue": "Is a life insurance company entitled to an exemption under section 320-40 of the Income Tax Assessment Act 1997 ('ITAA 1997') if, after 30 June 2000 it changes the terms and conditions of the policy to add an additional investment option?", "Decision": "Yes. A life insurance company is entitled to an exemption under section 320-40 of the ITAA 1997 if, after 30 June 2000 it changes the terms and conditions of the policy to add an additional investment option.", "Facts": "A life insurance policy was entered into before 1 July 2000. The following change was made to the terms and conditions of that policy after 30 June 2000: There was no change made to the fee structure of the policy.", "Reasons_for_Decision": "Summary: Under subsection 320-40(1) of the ITAA 1997 a life insurance company is entitled to an exemption for one-third of specified management fees for contracts made with the company before 1 July 2000. Where there are changes made to a contract (a life insurance policy), the question whether there is the creation of a new contract or variation of an existing contract, is one of fact. Where there is a variation to a contract, the life insurance company will be entitled to an exemption under section 320-40 of the ITAA 1997 for specified management fees. If there is termination of a contract the life insurance company will not be entitled to an exemption under section 320-40 of the ITAA 1997 for specified management fees. In determining whether a contract is a mere variation or a termination, a court will examine the intention of the parties to the contract. In the case of Tallerman and Co Pty Ltd v. Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, Kitto J at 135 stated that: '(A) long line of authorities has committed the law to an acceptance of the doctrine that an agreement which deals with subsisting rights and obligations of the same parties under an earlier contract may vary that contract without terminating it, and that whether it effects a variation on the one hand or a discharge on the other is a question depending upon the intention of the parties as appearing from the new agreement.' A clear intention to bring all obligations to an end must be shown in order to establish a contract is terminated: see Fitzgerald v. Masters (1956) 95 CLR 420 at 431. The addition of an investment option in the terms and conditions of the contract does not create a new policy.", "Date_of_Decision": "26 February 2002", "Year_of_Income": "2002 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 section 320-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/587", "Subject_References": "Management fees income Life assurance income Life assurance", "Case_References": "Tallerman and Co Pty Ltd v. Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002586", "Unmatched_Content": "Keywords Management fees income Life assurance income Life assurance"}
{"ATO_ID_Number": "ATO ID 2002/587", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Does adding a fee rebate to a policy constitute a new policy?", "Issue": "Is a life insurance company entitled to an exemption under section 320-40 of the Income Tax Assessment Act 1997 ('ITAA 1997') if, after 30 June 2000 it changes the terms and conditions of the policy to allow a fee rebate?", "Decision": "Yes. A life insurance company is entitled to an exemption under section 320-40 of the ITAA 1997 if, after 30 June 2000 it changes the terms and conditions of the policy to allow a fee rebate.", "Facts": "A life insurance policy was entered into before 1 July 2000. The following change was made to the terms and conditions of that policy after 30 June 2000: There was no change to the fee structure of the policy.", "Reasons_for_Decision": "Summary: Under subsection 320-40(1) of the ITAA 1997 a life insurance company is entitled to an exemption for one-third of specified management fees for contracts made with the company before 1 July 2000. Where there are changes made to a contract (a life insurance policy), the question whether there is the creation of a new contract or variation of an existing contract, is one of fact. Where there is a variation to a contract the life insurance company will be entitled to an exemption under section 320-40 of the ITAA 1997 for specified management fees. If there is termination of a contract the life insurance company will not be entitled to an exemption under section 320-40 of the ITAA 1997 for specified management fees. In determining whether a contract is a mere variation or a termination, a court will examine the intention of the parties to the contract. In the case of Tallerman and Co Pty Ltd v. Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, Kitto J at 135 stated that: '(A) long line of authorities has committed the law to an acceptance of the doctrine that an agreement which deals with subsisting rights and obligations of the same parties under an earlier contract may vary that contract without terminating it, and that whether it effects a variation on the one hand or a discharge on the other is a question depending upon the intention of the parties as appearing from the new agreement.' A clear intention to bring all obligations to an end must be shown in order to establish a contract is terminated: see Fitzgerald v. Masters (1956) 95 CLR 420 at 431. The addition of a fee rebate to the terms and conditions of the contract does not create a new policy. There is no intention by the parties to terminate the contract.", "Date_of_Decision": "26 February 2002", "Year_of_Income": "2002 and subsequent income years", "Legislative_References": "Income Tax Assessment Act 1997 section 320-40", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/586", "Subject_References": "Management fees income Life assurance income Life assurance", "Case_References": "Tallerman and Co Pty Ltd v. Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002587", "Unmatched_Content": "Keywords Management fees income Life assurance income Life assurance"}
{"ATO_ID_Number": "ATO ID 2011/55", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempt income: 'maintenance payments' from a deceased estate", "Issue": "Is a periodic distribution made from a discretionary trust to an eligible recipient exempt from income tax under item 5.1 of the table in section 51-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A periodic distribution made from a discretionary trust to an eligible recipient is not exempt from income tax under item 5.1 of the table in section 51-30 of the ITAA 1997 as the distribution is not a payment attributable to a payment made by a relevant individual.", "Facts": "The taxpayer is the child of divorced parents. A divorce settlement made in conformance with relevant laws of an international jurisdiction required the taxpayer's father to make monthly maintenance payments to the taxpayer. By court order, the maintenance obligations are binding upon the father's estate. The taxpayer's father settled an inter vivos discretionary trust with the taxpayer as one of the potential beneficiaries. Upon the taxpayer's father's death, the father's estate was transferred to the trustees of the discretionary trust. During the relevant income year, income and capital from the trust was distributed to the taxpayer.", "Reasons_for_Decision": "Summary: Section 51-50 of the ITAA 1997 sets out the conditions under which a periodic payment, in the nature of maintenance, is exempt from income tax under item 5.1 of the table in section 51-30 of the ITAA 1997. Section 51-50 of the ITAA 1997 provides as follows: The positive tests for exemption are therefore contained in paragraphs 51-50(1)(a) and 51-50(1)(b) of the ITAA 1997. That is, paragraph 51-50(1)(a) of the ITAA 1997 exempts a payment made by an individual (the 'maintenance payer') and paragraph 51-50(1)(b) of the ITAA 1997 exempts a payment that is attributable to a payment made by the maintenance payer. [Emphasis added]. A distribution from the trustee of a discretionary trust is clearly not a payment made 'by' an individual being a maintenance payer (paragraph 20 of Taxation Ruling TR 98/4 ). Rather, the entity from whom the payment is made is the trustee of the trust. The requirements of paragraph 51-50(1)(a) of the ITAA 1997 are therefore not satisfied on the present facts. The construction of paragraph 51-50(1)(b) of the ITAA 1997 contemplates that the periodic payment be attributable to an antecedent payment where that payment is made by an individual, being the maintenance payer. For a payment to be 'attributable to' an antecedent payment made by an individual, being the maintenance payer, there must of course be some payment made by the maintenance payer that can be characterised in the relevant sense. The ordinary meaning of the terms 'payment' and 'pay' require the transfer of money, or something in lieu of money, to discharge a debt or obligation ( White v. Elmdene Estates [1960] 1 QB 1; [1959] 2 All ER 605; [1959] 3 WLR 185, The Macquarie Dictionary , 2005, 4th edn, The Macquarie Library Pty Ltd, New South Wales). In jurisdictions with legal systems modelled on laws of the United Kingdom, generally when a person dies testate, their estate 'vests' in an executor. In Australia the devolution of property is governed by state based legislation (see note 1). Upon death of a testator the deceased estate will either vest in the named executor or the appropriate jurisdiction's Public Trustee until a grant of administration permits vesting thereafter to an executor (see note 2). Therefore, the testator's legal ownership of the property is transferred to the executor by operation of succession law, rather than any act of a living legal person. There is therefore no actual payment made by a living legal person unless the succession laws of the relevant jurisdiction deem such a payment to have occurred. Under the succession laws of the jurisdiction in question, no such deeming arises. Further, the vesting of the deceased's property in the executor is not a transfer to discharge a debt or obligation. For these reasons it cannot be said there is any antecedent payment made by the deceased within the meaning contemplated by paragraph 51-50(1)(b) of the ITAA 1997. Accordingly, a distribution from a discretionary trust cannot be said to be attributable to any antecedent 'payment' made by an individual, being the maintenance payer. Paragraph 51-50(3)(a) of the ITAA 1997 also provides for an exclusion to the exemption in circumstances where a maintenance payer has divested themselves of an income-producing asset in order to make the payment. The settlement of property on trust has been held to amount to a divestment of the subject of the settlement by the settlor to the trustee ( Connolly v. Commissioner of Taxation (WA) (1931) 34 WALR 8; (1931) 1 ATD 185). Similarly, the death of a maintenance payer has also been held to divest the deceased of their assets ( Case 109 (1955) 5 CTBR (NS) 651 per Member AC Leslie in the majority; with Chairman JL Burke and Member FC Bock not finding it necessary to consider the point after finding payments from trustees of the estate of a deceased former husband could not be described as payments having been received from the husband). Therefore, in circumstances where a maintenance payer dies, the exception in paragraph 51-50(3)(a) of the ITAA 1997 would also apply to deny an exemption had either of paragraphs 51-50(1)(a) or 51-50(1)(b) of the ITAA 1997 been satisfied. In the present case the taxpayer receives distributions from a discretionary trust. For the reasons explained above, the amount of the distribution is not exempt from income tax under item 5.1 of the table in section 51-30 of the ITAA 1997.", "Date_of_Decision": "5 July 2011", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Administration Act 1903 (WA) section 8", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Income Maintenance payments", "Case_References": "Case 109 (1955) 5 CTBR (NS) 651", "Other_References": "The Macquarie Dictionary, 2005, 4th edn, The Macquarie Library Pty Ltd, New South Wales", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201155", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/4 | Keywords Exempt income Income Maintenance payments"}
{"ATO_ID_Number": "ATO ID 2007/222", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest received from 'tax-free stock'", "Issue": "Is the interest received from stock described as 'tax-free stock', as recorded in the stock registry operated by the Reserve Bank of Australia (RBA), subject to income tax?", "Decision": "No. The registry, which is maintained by the RBA and administered by the Australian Office of Financial Management (AOFM),contains 265 holders of 'tax-free stock', the interest from which is not subject to income tax.", "Facts": "The taxpayer inherited 'tax-free stock'. This stock was originally issued by the States of Victoria and NSW prior to 1 January 1924 on a perpetual basis. In 1931 this stock was converted into Commonwealth loans under the Debt Conversion Act 1931 (Cth) (Debt Act). This stock was not subject to Commonwealth income tax prior to the operation of the Debt Act.", "Reasons_for_Decision": "Summary: Section 3 of the Debt Act provides that 'tax-free securities' are: As the bonds were originally issued by the States of NSW and Victoria and were not subject to Commonwealth income tax, they fall within the definition of 'tax free securities'. These tax-free securities were converted to 'new securities' by section 3 of the Debt Act. Upon this conversion, section 14 of the Debt Act provided that the securities were not to be subject to income tax for the 'original duration of the security'. Subsection 14(4) of the Debt Act provided that the new securities would conform to the conditions of the existing tax-free securities in respect of duration. Since the bonds were issued on a perpetual basis, the new securities continue to be held on the same basis. Section 5 of the Statute Law Revision Act 1973 repealed the Debt Act in 1973. However, section 9 of that Act provided for the continued operation of the Debt Act to the extent of its prior effect. Therefore, the tax free status of the interest receipts from the stock continued. Operating simultaneously was section 3 of the Income Tax Assessment Act 1936 (ITAA 1936) which provided that interest receipts from 'tax-free securities' were not subject to the assessment provisions of the ITAA 1936. Section 3 was repealed in 2006 by item 5 of Schedule 1 to the Repeal of Inoperative Provisions Act 2006 . However, this Act also contains a savings provision in item 10 of Schedule 6. This savings provision when read in conjunction with the objects provision, in item 6 of Schedule 10, allows for the continued operation of section 3 of the ITAA 1936 in the context of the tax free bonds on the registry maintained by the RBA and administered by the AOFM. This continued operation means that the interest receipts will still be tax free despite the repeal of section 3 of the ITAA 1936. Therefore, interest derived from 'tax-free stock' as listed on the registry maintained by the RBA and administered by the AOFM is not assessable income.", "Date_of_Decision": "5 December 2007", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Debt Conversion Act 1931 section 3 section 14 subsection 14(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interest income Income tax Securities", "Case_References": "", "Other_References": "Reserve Bank of Australia stock registry", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007222", "Unmatched_Content": "Keywords Interest income Income tax Securities"}
{"ATO_ID_Number": "ATO ID 2008/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of UK War Widows pension", "Issue": "Is the United Kingdom (UK) War Widows pension received by a taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The UK War Widows pension received by a taxpayer is not assessable income under subsection 6-5(2) of the ITAA 1997 as it is exempt from tax under section 53-20 of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia. The taxpayer's spouse was a member of the UK armed forces who was discharged at the end of the Second World War. The taxpayer's spouse has since died as a result of a condition contracted while a member of the armed forces. The taxpayer receives a War Widows pension from the UK.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it will be excluded from assessable income. Subsection 6-20(1) of the ITAA 1997 specifies that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 of another Commonwealth law. Section 53-20 of the ITAA 1997 provides that payments made by the Government of the United Kingdom are exempt from tax in Australia if the payments are similar to payments under the Veterans' Entitlements Act 1986 that are exempt under Subdivision 52-B of the ITAA 1997; or payments similar to payments that are made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 and are exempt under Subdivision 52-C of the ITAA 1997. Section 52-65 of the ITAA 1997 contains a list of pensions or other payments made under the Veterans' Entitlements Act. Item 10.1 lists pensions for defence-caused death or incapacity as exempt. In determining liability to Australian tax of foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland and the Notes to the agreement (the UK Convention). The UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 17(1) of the UK Convention provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia. The War Widows pension received by the taxpayer from the UK is similar to the pension for defence caused death or incapacity paid under the Veterans' Entitlement Act which is listed as an exempt payment in Subdivision 52-B of the ITAA 1997. Therefore the pension is exempt from tax in Australia under section 53-20 of the ITAA 1997 and does not form part of the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "29 October 2007", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(2) subsection 6-20(1) Subdivision 52-B Subdivision 52-C section 52-65 section 53-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/7", "Subject_References": "Foreign pension income Exempt income Foreign pension Widows pension United Kingdom Veterans payments", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20086", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign pension income Exempt income Foreign pension Widows pension United Kingdom Veterans payments"}
{"ATO_ID_Number": "ATO ID 2008/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of UK War Widows supplementary pension", "Issue": "Is the United Kingdom (UK) War Widows supplementary pension received by a taxpayer assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The UK War Widows supplementary pension received by a taxpayer is not assessable income under subsection 6-5(2) of the ITAA 1997 as it is exempt income under section 53-20 of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia. The taxpayer's spouse was a member of the UK armed forces who was discharged at the end of the Second World War. The taxpayer's spouse has since died as a result of a condition contracted while a member of the armed forces. The taxpayer is entitled to receive a War Widows pension and a War Widows supplementary pension from the UK War Pensions Agency. The War Widows pension is paid to the spouses and children of members of the UK armed forces killed whilst serving in the armed forces or who died later as a result of injury sustained during that service. The War Widows supplementary pension is linked to the War Widows pension entitlement and is payable to widows of UK servicemen whose service terminated before 31 March 1973.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income, it will be excluded from assessable income. Subsection 6-20(1) of the ITAA 1997 specifies that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. Section 53-20 of the ITAA 1997 provides that payments made by the Government of the United Kingdom are exempt from tax in Australia if the payments are similar to payments made under the Veterans' Entitlements Act 1986 that are exempt under Subdivision 52-B of the ITAA 1997 or payments similar to payments that are made because of the Veterans' Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 and are exempt under Subdivision 52-C of the ITAA 1997. Section 52-65 of the ITAA 1997 contains a list of pensions or other payments made under the Veterans' Entitlements Act. Item 10.1 lists pensions for defence-caused death or incapacity as exempt. In determining liability to Australian tax of foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland and the Notes to the agreement (the UK Convention). The UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 17(1) of the UK Convention provides that pensions (including government pensions) and annuities paid to a resident of Australia shall be taxable only in Australia. The War Widows pension the taxpayer received from the UK is similar to the pension for defence-caused death or incapacity paid under the Veterans' Entitlements Act. The Australian pension is listed as an exempt payment in Subdivision 52-B of the ITAA 1997. Therefore, the UK War Widows pension is exempt from tax in Australia under section 53-20 of the ITAA 1997. As the War Widows supplementary pension received by the taxpayer is an additional component of the UK War Widows pension, it is also an exempt payment under Subdivision 52-B of the ITAA 1997 and does not form part of the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "29 October 2007", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(2) subsection 6-20(1) Subdivision 52-B Subdivision 52-C section 52-65 section 53-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/6", "Subject_References": "Exempt income Foreign pension Foreign pension income United Kingdom Veterans payments Widows pensions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20087", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Exempt income Foreign pension Foreign pension income United Kingdom Veterans payments Widows pensions"}
{"ATO_ID_Number": "ATO ID 2007/126", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of a War Time Persecution Pension paid by Austria", "Issue": "Is the taxpayer, a resident of Australia, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) on a war time persecution pension received from Austria?", "Decision": "No. The taxpayer, a resident of Australia, is not assessable under subsection 6-5(2) of the ITAA 1997 on a war time persecution pension received from Austria as it is exempt income under subsection 768-105(1) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia. The taxpayer is entitled to a pension from the Austrian government as a victim of National Socialist (Nazi) persecution during World War II. The payment was not directly or indirectly from any of the taxpayer's associates.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident of Australia includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Pension payments are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. However, subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income it is not assessable income. Section 768-105 of the ITAA 1997 provides an exemption for compensation payments arising out of Second World War. Subsection 768-105(1) of the ITAA 1997 provides that a payment is exempt from income tax if: The taxpayer is an Australian resident when the payment is made. The pension is paid by the Austrian Government to the taxpayer under a law of Austria. The pension was paid as a result of the persecution by the national Socialist regime of Germany during the National Socialist period. The payment was not directly or indirectly from any of the taxpayer's associates. Therefore, the taxpayer's pension falls within the meaning of subsection 768-105(1) of the ITAA 1997 and is exempt from tax in Australia. Accordingly, the pension is not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "22 May 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-15(2) section 768-105 subsection 768-105(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/592 | (withdrawn - date of withdrawal effective from 14 September 2006)", "Subject_References": "Austria Exempt income Foreign pension income International tax Lump sum payments in arrears", "Case_References": "", "Other_References": "", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007126", "Unmatched_Content": "Keywords Austria Exempt income Foreign pension income International tax Lump sum payments in arrears"}
{"ATO_ID_Number": "ATO ID 2003/1065", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Structured Settlement: annuity purchased from a foreign life insurance company", "Issue": "Is the income received under a structured settlement exempt income under Division 54 of the Income Tax Assessment Act 1997 (ITAA 1997) where the structured settlement annuity is purchased from a foreign Life Insurance Company?", "Decision": "No. The income received under this structured settlement will not be exempt income under Division 54 of the ITAA1997 where the structured settlement annuity is purchased from a foreign Life Insurance Company.", "Facts": "A child was born with severe disabilities and has associated learning difficulties. An overseas court awarded damages to the child. The parents decided to emigrate to Australia. The overseas court order was made to enable transfer of the damages to Australia. The court order specifies an amount of damages to be awarded by way of a structured settlement. Under the structured settlement, the defendant proposes to purchase an annuity from a life Insurance company operating only in the country of the court award.", "Reasons_for_Decision": "Summary: Under paragraph 54-10(1)(e) of the ITAA1997, the terms of the settlement must provide for some or all of a lump sum award of compensation or damages to be used by the defendant or the defendants insurer to be paid to, or for the benefit of, the injured person (or to a trustee) in the form of: (paragraph 54-10(1)(e) of the ITAA 1997) The term life insurance company is defined in subsection 995-1(1) of the ITAA 1997 to mean a life insurance company registered under the Life Insurance Act 1995 (LIA). For a company to be registered under the LIA, the Australian Prudential Regulation Authority (APRA) must issue a certificate to the company stating that the company is registered and specifying the date on which it was registered (subsection 21(5) of the LIA) . Where a foreign insurer conducts life insurance business in Australia, an Australian subsidiary may be registered under the LIA. Section 5 of the LIA reads This Act does not apply with respect to State insurance that does not extend beyond the limits of the State concerned. A State insurer is defined in subsection 54-10(2) of the ITAA 1997 as a body that carries on State insurance, within the meaning of paragraph 51(xiv) of the Australian Constitution. Paragraph 51(xiv) provides the Federal Parliament with power to make laws with respect to 'insurance, other than State insurance; also State insurance extending beyond the limits of the State concerned'. The effect of these provisions is that life insurance business is governed by the LIA except where State insurance is carried on within the territorial boundaries of the State concerned. Such insurance is governed by the provisions of the relevant State act or regulations. As a foreign life insurance company conducting business outside Australia is neither registered under the LIA nor a State insurer, an annuity taken out with a foreign life insurance company does not qualify for exemption under Division 54 of the ITAA1997.", "Date_of_Decision": "18 October 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 54-10(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Annuities Exempt Income Foreign Life Insurance Companies Life Insurance Policies Structured Settlements", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031065", "Unmatched_Content": "Keywords Annuities Exempt Income Foreign Life Insurance Companies Life Insurance Policies Structured Settlements"}
{"ATO_ID_Number": "ATO ID 2003/1066", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Structured Settlement: overseas court order - Division 54", "Issue": "Does an overseas court order satisfy the requirements of a court order under Division 54 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The court order satisfies the requirements of a court order under Division 54 of the ITAA 1997.", "Facts": "A child was born with severe disabilities and has associated learning difficulties. An overseas court awarded damages to the child. The parents decided to emigrate to Australia. The overseas court order was made to enable transfer of the damages to Australia. The court order specifies an amount of damages to be awarded by way of a structured settlement.", "Reasons_for_Decision": "Summary: The term 'court order' is not defined in the ITAA 1997, so is given its ordinary meaning. In the context of this case, the word 'court' is defined in The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW as 'a place where justice is administered'. As there is no suggestion that the term is confined to courts established within the boundaries of a particular country, a settlement obtained after the decision of a court in an overseas jurisdiction may fall for consideration under Division 54 of the ITAA 1997. 'Order' is defined in The Macquarie Dictionary as an authoritarian direction, injunction, command, or mandate. The requirement for a structured settlement under paragraph 54-10(1)(d) of the ITAA 1997 is for a written agreement between the parties (whether or not that agreement is approved by an order of a court, or is embodied in a consent order made by a court). The document which has been quoted in part in the facts of this case satisfies this provision.", "Date_of_Decision": "18 October 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 54 paragraph 54-10(1)(d)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Courts Legal Orders", "Case_References": "", "Other_References": "The Macquarie Dictionary 2001 rev. 3rd edn, The Macquarie Library Pty Ltd, NSW Explanatory Memorandum to Taxation Laws Amendment (Structured Settlements and Structured Orders) Act 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031066", "Unmatched_Content": "Keywords Courts Legal Orders"}
{"ATO_ID_Number": "ATO ID 2011/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of section 295-85 of the ITAA 1997: where a complying superannuation fund is a partner in a venture capital limited partnership", "Issue": "Can the modifications in subsection 295-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a venture capital limited partnership when a complying superannuation fund is a partner in the partnership?", "Decision": "Yes, the modifications in subsection 295-85(2) of the ITAA 1997 can apply to a venture capital limited partnership when a complying superannuation fund is a partner in the partnership such that gains flowing to the complying superannuation fund by reason of being a partner are taxed as capital gains.", "Facts": "An incorporated limited partnership was formed and registered as such under the provisions of the Partnership Act 1892 (NSW). The partnership was also registered with Innovation Australia under section 13-1 of the Venture Capital Act 2002 as a venture capital limited partnership (VCLP). Whilst the VCLP is a corporate limited partnership formed with a legal personality separate from its partners, pursuant to subsection 94D(2) of the Income Tax Assessment Act 1936 (ITAA 1936), the VCLP is excluded from the operation of Division 5A of Part III of the ITAA 1936 which deals with certain limited partnerships and is treated as an ordinary partnership under the provisions of Division 5 of Part III of the ITAA 1936 for income tax purposes. A complying superannuation fund (CSF) was a partner in the VCLP. There were also partners which were not CSFs. An asset held by the VCLP was disposed of for more than its cost. The interest of the CSF partner in the asset was a CGT asset in accordance with subsection 108-5(2) of the ITAA 1997. CGT event A1 happened when the asset was disposed of.", "Reasons_for_Decision": "Summary: Subsection 295-85(1) of the ITAA 1997 states that the modifications in subsection 295-85(2) of the ITAA 1997 apply if a CGT event happens involving a CGT asset that was owned by a CSF, a complying approved deposit fund or a pooled superannuation trust just before the time of the event. The modifications in subsection 295-85(2) include that sections 6-5 and 8-1 of the ITAA 1997 do not apply to the CGT event. Subsection 295-85(2) of the ITAA 1997 does not explicitly state that its operation is limited to taxpayers referred to in subsection 295-85(1) of the ITAA 1997. Rather, it merely lists the modifications that apply to the ITAA 1997 and the ITAA 1936 if a CGT event happens to a CGT asset owned by an entity listed in subsection 295-85(1). In the present case the interest the CSF partner has in the asset of the VCLP that is disposed of by the limited partnership is itself a CGT asset. Furthermore the disposal of the VCLP's asset necessarily involves a disposal by the CSF partner of its interest in the asset. As such, disposal of the partnership asset results in a CGT event happening to the CGT asset of the CSF partner. Accordingly, the modifications in subsection 295-85(2) of the ITAA 1997 will apply to the VCLP insofar as the disposal of its asset represents a disposal of the CSF partner's interest in the asset. This view is supported by an examination of the EM to the Taxation Laws Amendment (Venture Capital) Bill 2002. In particular paragraphs 2.20 and 2.21 contain the following discussion of section 304 of the ITAA 1936 (the predecessor to section 295-85 of the ITAA 1997): Capital gains 2.20 Capital gains made on assets held by a VCLP, an AFOF* or a VCMP* will be taxable to a partner in the same way as interests on assets held by an ordinary partnership. For example, as the CGT provisions are the primary code for taxing gains and losses made by superannuation funds, approved deposit funds and pooled superannuation trusts (section 304 of the ITAA 1936 ), gains flowing to any of these entities as a limited partner in a VCLP or AFOF will be taxed as capital gains . [emphasis added] 2.21 Any capital gain or loss on the realisation of assets held by the VCLP or AFOF, including the carried interest distributed by a VCMP, will be taxed according to the partner's tax status. Thus, individuals who are partners in a VCMP will qualify for the CGT discount on the carried interest if they satisfy the other requirements for the discount. (* note AFOF = Australian venture capital fund of funds, VCMP = venture capital management partnership). This illustrates that there was a specific intent for section 304 of the ITAA 1936 (now section 295-85 of the ITAA 1997) to find application in relation to a venture capital limited partnership that had a CSF as a partner. Accordingly, the modifications in subsection 295-85(2) of the ITAA 1997 can apply to a VCLP when a CSF is a partner in the partnership. The effect of this approach is that amounts attributable to the CGT event happening to the CGT asset of the CSF partner are excluded from any amount determined under the provisions listed in subsection 295-85(2) of the ITAA 1997 in relation to the partnership, where the other conditions of section 295-85 of the ITAA 1997 are met. Accordingly, in this case section 6-5 of the ITAA 1997 (being one of the provisions listed in subsection 295-85(2) of the ITAA 1997) will not apply to the partnership in relation to the CSF's interest in the asset. Any gain on disposal in relation to the CSF's interest in the asset will therefore not be taken into account in calculating the net income of the partnership under section 90 of the ITAA 1936, but rather will fall for consideration under the CGT rules at the level of the CSF partner.", "Date_of_Decision": "21 December 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 8-1 subsection 108-5(2) section 295-85 subsection 295-85(1) subsection 295-85(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Complying superannuation funds Partnerships", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Venture Capital) Bill 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20117", "Unmatched_Content": "Keywords Complying superannuation funds Partnerships"}
{"ATO_ID_Number": "ATO ID 2010/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation funds: tax treatment of futures contracts", "Issue": "Where a self managed superannuation fund (SMSF) buys and sells ASX Mini Index Futures Contracts, are the gains and losses determined under the Capital Gains Tax (CGT) provisions?", "Decision": "Yes. Where an SMSF buys and sells ASX Mini Index Futures Contracts, the gains and losses are determined under the CGT provisions.", "Facts": "The taxpayer is an SMSF that is a complying superannuation fund (the Fund). The taxpayer buys and sells ASX Mini Index Futures through a broker. ASX Mini Index Futures are cash settled. On establishment of the contract, the taxpayer pays a small initial margin. Open positions for both buyers and sellers are settled to market each day and subject to variation margins. On closing out or expiry of the contract, a cash settlement amount is calculated by the calculation agent and forwarded to the Australian Clearing House (ACH). The cash settlement amount is calculated using the Opening Price Index Calculation (OPIC) based on the opening prices of the stocks in the Underlying Index on expiry morning. This amount is reduced by the margins payments already made and a net amount is either payable to or receivable by the Fund.", "Reasons_for_Decision": "Summary: The provisions relating to the taxation of complying superannuation funds (including SMSFs) are contained in Division 295 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 295-85 of the ITAA 1997 makes the CGT rules the primary code for determining the tax treatment of the gains or losses generated on the disposal of an asset by a complying superannuation fund. Paragraph 295-85(2)(a) of the ITAA 1997 modifies the normal CGT rules so that a CGT event happening to a CGT asset of the Fund is not affected by the following provisions: An exception to this treatment is contained in paragraph 295-85(3)(b) of the ITAA 1997 for CGT assets of the Fund that are: Therefore, unless a futures contract also falls within one of these exceptions, the CGT provisions will be the only provisions to apply. A futures contract is not a deposit or a loan. Neither is it one of the specifically listed instruments in subparagraph 295-85(3)(b)(i) of the ITAA 1997. The phrase 'other security' in subparagraph 295-85(3)(b)(i) of the ITAA 1997 which is drafted to cover the same instruments as paragraph 159GP(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936), will only cover securities that are generally recognised as debt instruments (Taxation Ruling TR 96/14; ATO Interpretative Decision 2009/110; ATO Interpretative Decision 2009/111). As can be seen by the listed instruments in subparagraph 295-85(3)(b)(i) of the ITAA 1997, securities that are generally recognised as debt instruments are issued by a particular entity and represent a debtor/creditor relationship between that entity and another entity or entities. By contrast, a futures contract is an agreement to buy or sell a specified quantity of something at a specified price on a specified future delivery date. An index futures contract is an agreement to buy or sell the underlying index at maturity. ASX Mini Futures are issued by the ASX, with standardised terms, conditions and pricing calculations set by the ASX. Such a futures contract may be bought or sold as part of a hedging strategy to protect a physical shareholding or to speculate in the movements of the share market or particular market sectors. It is not issued by an entity as part of a financing transaction. Therefore an index futures contract is not a debt instrument and is not considered to be an 'other security' for the purposes of subparagraph 295-85(3)(b)(i) of the ITAA 1997. Subparagraph 295-85(3)(b)(iv) of the ITAA 1997 is broader than subparagraph 295-85(3)(b)(i) of the ITAA 1997. However, like paragraph 159GP(1)(d) of the ITAA 1936 on which it is based, subparagraph 295-85(3)(b)(iv) includes only those contracts that have 'debt-like obligations' (TR 94/16; ATO ID 2009/110; ATO ID 2009/111). While a futures contract is a legally binding agreement creating contractual obligations for both parties, those obligations are not 'debt-like' as required by TR 96/14. An index futures contract is cash settled. Under the contract the Fund may from time to time be called on to pay amounts (i) as margins through the life of the contract and (ii) at the end of the contract via the settlement process. Taxation Determination TD 2006/25 states that margin payments represent contributions of capital set aside to provide for future contingencies rather than being outgoings incurred in meeting contingencies. Therefore, the Fund is not entitled to a deduction for any margin payments made. Being contributions of capital rather than deductible outgoings, the investor's obligation to make such margin payments will not have sufficient 'debt-like' characteristics as required by TR 96/14. As the cash settlement amount paid or received by the Fund is determined based on opening prices of stocks and is passed on net of any previous margin payments, it does not represent a sufficiently 'debt-like' obligation as required by TR 96/14. Therefore an index futures contract will not fall within any of the exclusions in paragraph 295-85(3)(b) of the ITAA 1997. Further, a futures contract is not trading stock (Income Tax Ruling IT 2228). Therefore, the exception for trading stock in subsection 295-85(4) of the ITAA 1997 will not apply. As none of the exceptions in either of subsections 295-85(3) or 295-85(4) of the ITAA 1997 apply, any gains or losses made by the Fund in relation to its dealings in futures contracts will be determined under the CGT provisions.", "Date_of_Decision": "10 November 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 159GP(1) paragraph 159GP(1)(d)", "Related_Public_Rulings_and_Determinations": "Income Tax Ruling IT 2228 | Taxation Ruling TR 96/14 | Taxation Determination TD 2006/25", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/110 | ATO ID 2009/111", "Subject_References": "Capital gains tax Futures Self managed superannuation funds SMSF investments", "Case_References": "", "Other_References": "ASX Introduction to Index Futures and Options ASX Futures Contract Specifications", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20107", "Unmatched_Content": "Related Public Rulings (including Determinations) Income Tax Ruling IT 2228 Taxation Ruling TR 96/14 Taxation Determination TD 2006/25 | Keywords Capital gains tax Futures Self managed superannuation funds SMSF investments"}
{"ATO_ID_Number": "ATO ID 2009/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: tax treatment of losses realised by a complying SMSF on disposal of shares", "Issue": "Have the losses realised by the trustee of the self-managed superannuation fund (SMSF) on the disposal of shares been correctly calculated in accordance with section 295-85 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The losses realised by the trustee of the SMSF on disposal of shares have not been correctly calculated in accordance section 295-85 of the ITAA 1997.", "Facts": "The fund is a complying SMSF The trustee of the fund typically invests in shares for the medium to long term with a view to earning dividend income and capital growth. In the 2007-08 income year, the trustee buys shares in a mining company with no history of making dividend payments. The trustee anticipates that there will be a favourable movement in the price of gold in the near future which will be reflected in an increase in the company's share price. The trustee intends to hold the shares for a short period and make a profit when the shares are sold. However, the gold price falls and the trustee sells the shares at a loss. In the fund's income tax return for the 2007-08 income year, the trustee claims a deduction under section 8-1 of the ITAA 1997 for losses incurred in respect of mining shares sold during the income year on the basis that the shares were purchased for profit by resale and were not intended as a long term investment.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 provides that a loss or outgoing may be deducted from a taxpayer's assessable income to the extent that it is necessarily incurred in gaining or producing the taxpayer's assessable income. Section 295-85 of the ITAA 1997 operates to modify the operation of ordinary income and general deduction provisions so that the capital gains tax (CGT) rules are the primary code for calculating gains or losses realised by complying superannuation entities (including SMSFs) on the disposal of CGT assets. Specifically, subsection 295-85(2) of the ITAA 1997 states that if a CGT event happens to a CGT asset owned by a complying superannuation fund, the following provisions do not apply: A share is a CGT asset as defined in subsection 108-5(1) of the ITAA 1997 and the sale of a share is CGT Event A1 under section 104-5 of the ITAA 1997. Therefore, by the operation of subsection 295-85(2) of the ITAA 1997, any loss realised by the fund on the sale of the shares is determined under the CGT provisions - a loss on the sale of the shares cannot be claimed as a deduction under section 8-1 of the ITAA 1997. Subsection 295-85(3) of the ITAA 1997 provides an exception to this rule. Under subsection 295-85(3) of the ITAA 1997 the provisions referred to in subsection 295-85(2) of the ITAA 1997 can apply to the CGT event if any capital gain or capital loss from the event is attributable to currency exchange rate fluctuations, or if the CGT asset is one listed in paragraph 295-85(3)(b) of the ITAA 1997, namely: The Explanatory Memorandum which accompanied the Tax Laws Amendment (Simplified Superannuation) Bill 2006 introducing section 295-85 of the ITAA 1997 provides that the rule set out in subsection 295-85(2) of the ITAA 1997 does not apply to \"the disposal of a security\". This references the fact that section 295-85 of the ITAA 1997 is a rewrite of section 304 of the Income Tax Assessment Act 1936 (ITAA 1936). Section 304 of the ITAA 1936 similarly operated to provide that the CGT provisions were the primary provisions for determining taxation of the gains and losses of assets disposed of by a complying superannuation fund. As noted in paragraph 3.14 of the Explanatory Memorandum which accompanied the Tax Laws Amendment (Simplified Superannuation) Bill 2006, the rewritten provisions of Division 295 of the ITAA 1997 did not change the law as it previously operated under Part IX of the ITAA 1936. Subsection 303(1) of the ITAA 1936 set out the meanings of terms for the purposes of section 304 of the ITAA 1936, including the definition of 'security'. The definition of 'security' contained in subsection 303(1) of the ITAA 1936 is now contained in paragraph 295-85(3)(b) of the ITAA 1997. The Explanatory Memorandum to the Taxation Laws Amendment (Superannuation) Bill 1989 which introduced sections 303 and 304 of ITAA 1936 states: ... shares do not fall within the definition of security for the purposes of section 304. Consequently, as a share does not fall within the definition of security for the purposes of section 304 of the ITAA 1936, a share does not fall within any of the exclusions in paragraph 295-85(3)(b) of the ITAA 1997. Any loss realised by the fund on the sale of the shares is determined under the CGT provisions - a loss of the sale of the shares cannot be claimed as a deduction under section 8-1 of the ITAA 1997.", "Date_of_Decision": "14 August 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 303 subsection 303(1) section 304", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Complying superannuation funds Deductions & expenses Disposal of shares Income tax Superannuation fund income Taxation of superannuation entities", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment (Superannuation) Bill 1989 Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200992", "Unmatched_Content": "Keywords Capital losses Complying superannuation funds Deductions & expenses Disposal of shares Income tax Superannuation fund income Taxation of superannuation entities"}
{"ATO_ID_Number": "ATO ID 2009/151", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Product: one or two superannuation income streams", "Issue": "Does a superannuation product offered by the trustee of a superannuation fund provide a fund member a single superannuation income stream as defined in subsection 307-70(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the product provides for an agreed level of payments (supported by an investment in a life insurance policy) in the event the assets (other than the life insurance policy) supporting the member's pension are exhausted?", "Decision": "No. The trustee of a superannuation fund is taken to be paying two distinct superannuation income streams as defined in subsection 307-70(1) of the ITAA 1997.", "Facts": "The trustee of a superannuation fund offered its members the option to receive pension benefits determined in the manner set out in sub-subregulation 1.06(9A)(a) of the Superannuation Industry (Supervision) Regulations 1994 (SISR). The trustee offered its members a further option to ensure that a minimum level of payments would continue to be made for the member's lifetime in the event the investments, held for the purpose of supporting the member's pension benefits as determined in the manner set out in sub-subregulation 1.06(9A)(a) of the SISR, were exhausted. The trustee entered into an insurance policy with a life insurance company to cover the trustee's additional obligations to members under this further option. A member chose to receive benefits under both options. The trustee created and maintained an account in respect of the member. The account recorded the trustee's obligation to the member based upon the value of the investments held by the trustee to support its obligation. The account did not include any amount in relation to the option, supported by the life insurance policy, to provide a minimum level of payments for the member's life. However, the trustee reduced the value of the account by the amount of premiums payable on the insurance policy.", "Reasons_for_Decision": "Summary: Under subsection 307-70(1) of the ITAA 1997 a superannuation income stream benefit is a superannuation benefit specified in the Income Tax Assessment Regulations 1997 (ITAR 1997) that is paid from a superannuation income stream. Under subsection 307-70(2) of the ITAA 1997 a superannuation income stream has the meaning given by the ITAR 1997. Regulation 995-1.01 of the ITAR 1997 provides that a 'superannuation income stream' means (among other things) a pension for the purposes of the Superannuation Industry (Supervision) Act 1993 (SISA), in accordance with subregulation 1.06(1) of the SISR. Pensions that satisfy the criteria under sub-subregulations 1.06(9A)(a) or 1.06(9A)(b) of the SISR are pensions under subregulation 1.06(1) of the SISR. Sub-subregulation 1.06(9A)(a) of the SISR applies to \"a pension in relation to which there is an account balance attributable to the beneficiary\". Such a pension is defined to be an account-based pension if it satisfies the requirements of sub-subregulation 1.06(9A)(a) of the SISR. Sub-subregulation 1.06(9A)(a) of the SISR requires the total payments in any year to at least equal the minimum amount calculated under clause 1 of Schedule 7 to the SISR. Clause 1 of Schedule 7 requires a minimum percentage (determined by reference to the member's age) of the member's account balance to be paid each year. Sub-subregulation 1.06(9A)(b) of the SISR applies to a pension for which there is no account balance attributable to the beneficiary. Sub-subregulation 1.06(9A)(b) covers several pension types, one of which is a pension that satisfies the standards of subregulation 1.06(2) of the SISR. That subregulation applies to so-called lifetime pensions. The rules for a lifetime pension must ensure, amongst other things, that the pension is paid at least annually throughout the life of the primary beneficiary (or the life of the primary beneficiary and a reversionary beneficiary) and the size of the payments is fixed (or fixed allowing for some limited variation such as indexation). Sub-subregulations 1.06(9A)(a) and 1.06(9A)(b) of the SISR establish two broad categories of pensions. The Explanatory Statement to the amending regulations that introduced new subregulation 1.06(9A) of the SISR stated: Under the new [pension] standards, income streams effectively fall into two classes - those where there is an account balance attributable to the recipient and those where there is not. The structure of subregulation 1.06(9A) of the SISR makes it clear that a particular pension is meant to be capable of satisfying only one pension type - a pension attributable to an account balance or one of the several pension types that are not attributable to an account balance. A pension must satisfy the requirements of either sub-subregulation 1.06(9A)(a) or 1.06(9A)(b) of the SISR throughout its life. A single pension cannot satisfy one or the other, or purport to satisfy the requirements of both, at different points in time. If a pension is to satisfy sub-subregulation 1.06(9A)(a) of the SISR, it must be attributable to an account balance throughout its life. A hallmark of such a pension is that the account balance accurately measures the fund's liability to a member. Consequently, it would be usual that once an account balance is reduced to nil, the fund's liability to the member ceases. A further hallmark is that the amounts payable to the member are not fixed. The arrangement results in two separate pensions payable to the member. The terms and conditions under which each are payable differ. Prior to the guaranteed pension phase, there is a pension for which there is an account balance. In the guaranteed pension phase, as long as the pension is payable for the member's life it satisfies the requirements of a lifetime pension in relation to which there is no account balance. Under the arrangement, a member initially has a pension in relation to which there is an account balance. When the balance is reduced to nil, and only then, a separate pension becomes payable. That separate pension is one in relation to which there is no account balance. It is also a pension which is not payable until the contingent event triggers payment of the annuity from the life company to the superannuation fund. As these benefits are identified as separate pensions respectively in sub-subregulations 1.06(9A)(a) and 1.06(9A)(b) of the SISR they are separate superannuation income streams as defined in subsection 307-70(1) of the ITAA 1997.", "Date_of_Decision": "18 November 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 320-246 section 320-247 paragraph 320-246(1)(a) paragraph 320-247(1)(a) subsection 307-70(1) subsection 307-200(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2003/14", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/962", "Subject_References": "Superannuation interest", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009151", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2003/14 | Keywords Superannuation interest"}
{"ATO_ID_Number": "ATO ID 2008/161", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation entities: tax offset - no-TFN contributions income - successor fund", "Issue": "Is the trustee of a successor fund entitled to a tax offset under section 295-675 of the Income Tax Assessment Act 1997 (ITAA 1997), for tax payable by the original fund on no-TFN contributions income where the member quotes their tax file number (TFN) to the successor fund?", "Decision": "No. Where the member quotes their TFN to the successor fund the trustee of that fund is not entitled to a tax offset under section 295-675 of the ITAA 1997 for tax payable by the original fund on no-TFN contributions income.", "Facts": "Fund A (the original fund) is to be wound up on 30 June 2008. All the assets and members of Fund A are to be transferred to Fund B (the successor fund) on 30 June 2008. The trustees of Fund A and Fund B are different companies. The members' benefits and rights in Fund B will be equivalent to the benefits and rights they had in Fund A. A number of members of Fund A have not quoted (for superannuation purposes) their TFN to the trustee of Fund A before 30 June 2008. Fund A has received contributions in respect of members who have not quoted their TFN. These contributions will be included in Fund A's assessable income for the year ended 30 June 2008 and will be no-TFN contributions income of Fund A under section 295-610 of the ITAA 1997. Fund A will be liable to pay tax on the no-TFN contributions income for the year ended 30 June 2008. A member who had not quoted their TFN to the trustee of Fund A on or before 30 June 2008 subsequently quotes their TFN to the trustee of Fund B during the year ended 30 June 2009.", "Reasons_for_Decision": "Summary: Where certain conditions are met, subdivision 295-J of the ITAA 1997 entitles a superannuation provider or RSA provider to a tax offset for tax payable on an amount of no-TFN contributions income. Subsection 295-675(1) of the ITAA 1997 states that the provider is entitled to a tax offset for the income years commencing on or after 1 July 2007 for amounts of tax that count toward the offset for the provider. The definition of 'superannuation provider' in subsection 995-1(1) of the ITAA 1997 includes the trustee of a superannuation fund. Section 295-680 of the ITAA 1997 provides that the amount of the tax offset is the total of each amount determined under subsection 295-675(2) of the ITAA 1997 for the current year. Subsection 295-675(2) of the ITAA 1997 states: An amount of tax counts towards the offset for the provider for the current year if: Paragraphs 295-675(2)(a) and (b) of the ITAA 1997 provide that the tax offset is only available to a provider where tax was payable by the provider on an amount of no-TFN contributions income of that fund. In the case of Fund A and Fund B, the tax payable on the no-TFN contributions income was paid by the trustee of Fund A in relation to the no-TFN contribution income of Fund A. Accordingly, the trustee of Fund B cannot satisfy paragraphs 295-675(2)(a) and (b) in relation to the tax payable by the trustee of Fund A in relation to this income. Further, paragraph 295-675(2)(c) of the ITAA 1997 requires that the amount of no-TFN contributions income was a contribution made to the fund for an individual who has quoted their TFN to that provider for the first time during the current year. In the case of the trustee of Fund B, the no-TFN contributions income was not a contribution that was made to Fund B. Accordingly, the trustee of Fund B also cannot satisfy paragraph 295-675(2)(c) of the ITAA 1997. Therefore, the trustee of Fund B will not be entitled to a tax offset in relation to the tax payable by the trustee of Fund A on no-TFN contributions income of Fund A.", "Date_of_Decision": "5 June 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 295-J subsection 295-675(1) subsection 295-675(2) section 295-680 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "No-TFN contributions income - superannuation funds Superannuation Superannuation fund income Tax offset for no-TFN contributions income Taxation of superannuation entities", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008161", "Unmatched_Content": "Keywords No-TFN contributions income - superannuation funds Superannuation Superannuation fund income Tax offset for no-TFN contributions income Taxation of superannuation entities"}
{"ATO_ID_Number": "ATO ID 2004/460", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking Deficit Tax: due date for payment when entity joins consolidated group", "Issue": "Will the franking deficit tax liability become due and payable pursuant to subsection 214-150(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where an entity joining a consolidated group has a franking account debit balance immediately before the joining time?", "Decision": "Yes. The franking deficit tax liability will become due and payable pursuant to subsection 214-150(1) of the ITAA 1997 where an entity joining a consolidated group has a franking account debit balance immediately before the joining time.", "Facts": "The taxpayer's franking account was in deficit at the time when it became a wholly owned subsidiary of a company which intends to form a consolidated group. It is intended that the consolidated group will be formed with a date of effect preceding the date on which the acquisition of shares in the taxpayer was completed. That is, the taxpayer company will be taken to have joined an existing consolidated group.", "Reasons_for_Decision": "Summary: Paragraph 709-60(3)(b) of the ITAA 1997 causes a joining entity to become liable to franking deficit tax where its franking account is in deficit just before the joining time. The joining entity is liable to pay franking deficit tax as if the joining entity's income year had ended just before the joining time. Subsection 214-150(1) of the ITAA 1997 provides that franking tax assessed for a corporate tax entity because of events that have occurred, or are taken to have occurred, during an income year is due and payable on the last day of the month immediately following the end of the income year. Subsection 995-1(1) of the ITAA 1997 provides the basic meaning of income year as given by subsections 4-10(2) and 9-5(2) of the ITAA 1997. According to the definitions provided by subsections 4-10(2) and 9-5(2) of the ITAA 1997, a company's income year will, in general terms, be either the financial year or a substituted accounting period. Therefore, the franking deficit tax liability arising where an entity joining a consolidated group has a franking account debit balance immediately before the joining time becomes due and payable on the last day of the month immediately following the end of the relevant income year under subsection 214-150(1) of the ITAA 1997.", "Date_of_Decision": "5 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 709-60(3)(b) section 214-150(1) section 4-10(2) section 9-5(2) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Franking assessments Franking deficit tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004460", "Unmatched_Content": "Keywords Franking assessments Franking deficit tax"}
{"ATO_ID_Number": "ATO ID 2005/38", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "NZ franking companies and the benchmark rule", "Issue": "Does the payment of a distribution on capital notes that is unfranked represent a breach of the benchmark rule in section 203-25 of the Income Tax Assessment Act 1997 (ITAA 1997), where franked dividends have already been paid in the same franking period?", "Decision": "Yes. As the two payments are made in the same franking period and represent frankable distributions, the benchmark rule requires that they be franked at the benchmark franking percentage.", "Facts": "NZ Co is a New Zealand company that has made an election to enter the Australian imputation system. It has issued capital notes that are classified as debt for New Zealand tax law purposes but are characterised as non-share equity interests for the purpose of Australian tax law. For New Zealand tax purposes, payments on these interests are not frankable, and are deductible. However, for Australian tax law purposes these payments are frankable and are not deductible. NZ Co also has a single class of ordinary shareholders. NZ Co pays a dividend on its ordinary shares franked to 100% with Australian franking credits. NZ Co later makes a payment on the capital notes in the same franking period. However, this distribution has no Australian franking credits attached to it. Both distributions are paid out of retained profits.", "Reasons_for_Decision": "Summary: Subsection 215-1 of the ITAA 1997 provides that the imputation system applies to a non-share equity interest in the same way as it applies to a membership interest. As the capital notes are characterised as non-share equity interests for Australian tax purposes, the imputation system -which includes the benchmark rule - will apply to them in the same way as to ordinary shares. Both the distribution on the ordinary shares and the distribution on the capital notes are frankable distributions under section 202-40 of the ITAA 1997. The benchmark rule in section 203-25 of the ITAA 1997 states that an entity must not make a frankable distribution whose franking percentage differs from the entity's benchmark franking percentage for the franking period in which the distribution is made. The first frankable distribution made in the franking period is the distribution paid on the ordinary shares. This was franked to 100% and sets the benchmark franking percentage for the franking period in accordance with section 203-30 of the ITAA 1997. Therefore, the payment of the unfranked distribution on the capital notes will breach the benchmark rule. The consequences of breaching the benchmark rule are set out in section 203-50 of the ITAA 1997. A debit will arise in NZ Co's franking account under paragraph 203-50(1)(b) of the ITAA 1997 because the distribution on the capital notes will be taken to have been 'under-franked'.", "Date_of_Decision": "27 January 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 202-40 section 203-25 section 203-30 section 203-50 subsection 215-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Underfranked dividends Benchmark franking percentage Frankable distribution Benchmark rule Non-share equity interest", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200538", "Unmatched_Content": "Keywords Underfranked dividends Benchmark franking percentage Frankable distribution Benchmark rule Non-share equity interest"}
{"ATO_ID_Number": "ATO ID 2004/873", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Benchmark Rule: exemption for listed public company", "Issue": "Will the benchmark rule in section 203-25 of Income Tax Assessment Act 1997 (ITAA 1997) apply to a provisional head company of a Multiple Entry Consolidated Group (MEC group) whose parent is a listed public company on a foreign stock exchange?", "Decision": "No. The benchmark rule in section 203-25 of the ITAA 1997 does not apply because the criteria in paragraph 203-20(1)(b) of the ITAA 1997 is satisfied.", "Facts": "Y Company is a public company listed on a foreign stock exchange, a non-resident for Australian income tax purposes and has only one class of share on issue. The foreign stock exchange is listed in Schedule 12 of the Income Tax Regulations 1936. Y Company owns all the shares of X Company. X Company is a 100% subsidiary (within the meaning of section 975-505 of the ITAA 1997) of Y Company. X Company is the provisional head company of the MEC group, effective from 1 April 2003, involving all of the Australian companies. X Company and other group companies have paid dividends, franked at different percentages over the period since 1 April 2003.", "Reasons_for_Decision": "Summary: A corporate tax entity is required by section 203-25 of the ITAA 1997 to frank all frankable distributions made within a particular franking period to the same extent. This is known as the benchmark rule. The objective of the benchmark rule is to ensure that a corporate tax entity does not, in the act of franking distributions made by it, demonstrate a preference for some members at the expense of others. However, the benchmark rule does not apply to a company where each of the criteria in paragraph 203-20(1)(a) of the ITAA 1997 are satisfied. These criteria are as follows: X Company is not a listed public company and so does not satisfy paragraph 203-20(1)(a) of the ITAA 1997. However, an entity that is a 100% subsidiary of an entity that satisfies the conditions in paragraph 203-20(1)(a) of the ITAA 1997 will itself qualify for the benchmark rule exclusion under paragraph 203-20(1)(b) of the ITAA 1997. X Company is, and has been, a 100% subsidiary of Y Company, under section 975-505 of the ITAA 1997, throughout the relevant franking periods. Therefore, the benchmark rule will not apply to X Company if Y Company satisfies the conditions in paragraph 203-20(1)(a) of the ITAA 1997. A listed public company is defined in subsection 995-1(1) of the ITAA 1997, subject to a few exceptions that do not apply in this case, as one whose shares are listed for quotation in the official list of an approved stock exchange. An approved stock exchange is defined in subsection 995-1(1) of the ITAA 1997 by reference to section 470 of the Income Tax Assessment Act 1936 , and is a stock exchange named in regulations made for the purposes of the definition. Schedule 12 of the Income Tax Regulations includes the stock exchange on which Y Company is listed. Therefore, Y Company satisfies the criteria in subparagraph 203-20(1)(a)(i) of the ITAA 1997. Y Company has a single class of membership interest. Consequently, it will not be possible for Y Company to make a distribution on one membership interest to the exclusion of another. Therefore, Y Company satisfies the criteria in subparagraph 203-20(1)(a)(ii) of the ITAA 1997. Y Company, because of residency requirements, will not meet the requirements of paragraph 202-5(a) of the ITAA 1997. Consequently, Y Company will not be able to frank a distribution in respect of one membership interest at a franking percentage that differs from that associated with a distribution on another membership interest as it is an entity that is unable to frank any distributions it makes. Therefore, Y Company satisfies the criteria in subparagraph 203-20(1)(a)(iii) of the ITAA 1997. Accordingly, Y Company is not subject to the benchmark rule. This conclusion is supported by paragraph 203-20(2)(a) of the ITAA 1997 which sets out an example of a case in which a company will not be subject to the benchmark rule. As set out above, Y Company is a listed public company with a single class of membership interest at all times during the relevant franking period. As a 100% subsidiary of Y Company, the benchmark rule will not apply to X Company under paragraph 203-20(1)(b) of the ITAA 1997.", "Date_of_Decision": "1 October 2004", "Year_of_Income": "Year ended 31 March 2004 Year ended 31 March 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 470", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company tax Imputation system", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004873", "Unmatched_Content": "Keywords Company tax Imputation system"}
{"ATO_ID_Number": "ATO ID 2006/330", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Distribution Statements: allocation of franking credit to frankable distribution", "Issue": "Can a public company issue a distribution statement under section 202-75 of the Income Tax Assessment Act 1997 (ITAA 1997) after a frankable distribution is paid?", "Decision": "Yes. Provided the distribution statement evidences the company's decision, if any, to allocate franking credits on or before the date the distribution was made. If the company did not make a decision to allocate franking credits to the distribution, the distribution statement must disclose a franking percentage of zero.", "Facts": "Company A is a public company and an Australian resident for income tax purposes. Company B holds a security interest (the security) in Company A, which Company A treats as a debt interest pursuant to Division 974 of the ITAA 1997. On 1 January 2005, Company A made a payment to Company B in respect of the security. Company A did not issue a distribution statement on or before the date it made the payment. Company A later discovered that the security is in fact an equity interest pursuant to Division 974 of the ITAA 1997, and that the payment to Company B was a frankable distribution.", "Reasons_for_Decision": "Summary: Section 202-5 of the ITAA 1997 sets out when and how an entity franks a distribution. Under paragraph 202-5(c) of the ITAA 1997 the entity must allocate a franking credit to the distribution. Furthermore, under sub-section 202-75(2) of the ITAA 1997 a public company is required to provide distribution statements on or before the day on which it makes the distribution. The combined effect of paragraph 202-5(c) and subsection 202-75(2) of the ITAA 1997 suggests that a public company is required to determine the extent to which it intends franking a distribution prior to making the distribution. Subsections 202-75(4) and 202-75(5) of the ITAA 1997 allow a private company to retrospectively frank a distribution. This concession, however, has not been made to an entity other than a private company and therefore, clearly establishes the legislative intent to prevent a public company from deferring the time of issuing a distribution statement as a mechanism to retrospectively frank. Consequently, a public company is required to determine the extent to which it intends franking a distribution prior to making the distribution. The distribution statement itself merely provides documentary evidence of the decision to allocate franking credits. The distribution statement cannot alter the amount of franking credits the company actually decided to allocate to the distribution. Therefore, a failure to allocate a franking credit to the distribution on or before the distribution is made, and in the absence of sufficient evidence to prove otherwise, means that the distribution is unfranked. In this case, Company A did not allocate any franking credits prior to making the distribution because the distribution was not thought to be a frankable distribution at the time it was made. In a technical sense the company had allocated zero franking credits to the frankable distribution. Company A may issue a distribution statement evidencing the amount of franking credits actually attached to the distribution. Given that no decision was made to allocate franking credits to the distribution, the distribution statement must reflect a franking percentage of zero. The distribution statement must comply with the requirements of section 202-80 of the ITAA 1997. If an entity does not provide the recipients of the distribution with a distribution statement on or before the date of the distribution, it may be guilty of an offence under section 8C of the Taxation Administration Act 1953.", "Date_of_Decision": "9 November 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 202-5 section 202-75 section 202-85 section 203-25 Division 974", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/64 | ATO ID 2005/65", "Subject_References": "Distributions Franking credits Imputation system Unfranked dividends", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006330", "Unmatched_Content": "Remove reference to section 8C of the TAA | Amend reference to sub-section 202-75(2) in first paragraph | Reword first and third paragraphs | Insert second last paragraph to state the requirement of section 202-80 | Insert last paragraph on section 8C of the TAA | Keywords Distributions Franking credits Imputation system Unfranked dividends"}
{"ATO_ID_Number": "ATO ID 2005/64", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Commissioner's Discretion: deferring due date for issuing distribution statements", "Issue": "Will the Commissioner exercise his discretion under subsection 388-55(1) of the Taxation Administration Act 1953 (TAA) to defer the time by which a corporate tax entity must issue a distribution statement?", "Decision": "No. The Commissioner will not exercise his discretion under subsection 388-55(1) of the TAA to defer the time by which a corporate tax entity must issue a distribution statement.", "Facts": "The corporate tax entity is a public trading trust and an Australian resident for income tax purposes. Its first distribution was paid to its unit-holders on 19 March 2004. No distribution statement was issued to unit holders on or before 19 March 2004 because the trustee mistakenly thought the public trading trust was treated as a private company for income tax purposes.", "Reasons_for_Decision": "Summary: Under subsection 202-75(1) of the Income Tax Assessment Act 1997 (ITAA 1997), an entity that makes a frankable distribution must give the recipient a distribution statement. A public company is required to do this on or before the day on which the distribution is made. The public trading trust, which is considered to be a public company for the purposes of the simplified imputation system, has to date not complied with this obligation. Under subsection 388-55(1) of the TAA, the Commissioner 'may defer the time within which an approved form is required to be given to the Commissioner or to another entity'. Under subsection 202-80(2) of the ITAA 1997 the distribution statement is required to be in an approved form, as defined in section 388-50 of the TAA. Subsection 388-55(1) of the TAA refers to an approved form that 'is required to be given' rather than one that was required to have been given. Although the distribution statement has not yet been given, a mistake as to the status of the corporate tax entity is not a sufficient reason and the Commissioner does not consider it appropriate in this instance to exercise his discretion under subsection 388-55(1) of the TAA to retrospectively defer the time within which the distribution statement is required to be given. However, should the entity at a later time provide the relevant distribution statements in the approved form, it will be taken to have complied with its obligations under section 202-75 of the ITAA 1997, albeit at a later time than required.", "Date_of_Decision": "17 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 202-75 section 202-80", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commissioner's discretion Distributions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200564", "Unmatched_Content": "Keywords Commissioner's discretion Distributions"}
{"ATO_ID_Number": "ATO ID 2005/65", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Distribution Statements: allocation of franking credit to frankable distribution", "Issue": "Can a corporate tax entity that is a public company allocate a franking credit to a frankable distribution under section 202-5 of the Income Tax Assessment Act 1997 (ITAA 1997) by issuing a distribution statement after a frankable distribution is paid?", "Decision": "No. A corporate tax entity that is a public company cannot allocate a franking credit to a frankable distribution under section 202-5 of the ITAA 1997 by issuing a distribution statement after a frankable distribution is paid.", "Facts": "Trading trust is a public trading trust that is a corporate tax entity and an Australian resident for income tax purposes. Its first distribution was paid to its unit-holders on 19 March 2004. A distribution statement was not issued to unit holders on or before this date. Trading trust provided evidence that it intended to frank this distribution.", "Reasons_for_Decision": "Summary: Section 202-5 of the ITAA 1997 sets out when and how an entity franks a distribution. Under paragraph 202-5(c) of the ITAA 1997 the entity must allocate a franking credit to the distribution. Furthermore, a public company is required to provide distribution statements on or before the day on which it makes the distribution under section 202-75 of the ITAA 1997. Consequently, an entity is required to determine the extent to which it intends franking a distribution prior to making the distribution. The distribution statement itself merely represents evidence of this decision to allocate franking credits. As in this case there is no distribution statement that has been issued, other evidence must be examined in order to determine the franking intent at the time the distribution was made. Trading trust provided evidence that it intended to frank its March distribution to utilise the surplus in its franking account at the time of the distribution to the fullest extent possible. Therefore, the distribution statement that trading trust issues ought to reflect the earlier decision to allocate franking credits equal to the surplus in its franking account at the time of the distribution, provided this does not result in the franking percentage for a frankable distribution exceeding 100%.", "Date_of_Decision": "17 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 202-5 section 202-75", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Distributions Franked dividends Franking credits Imputation system Partly franked dividends", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200565", "Unmatched_Content": "Keywords Distributions Franked dividends Franking credits Imputation system Partly franked dividends"}
{"ATO_ID_Number": "ATO ID 2006/316", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: franking credits - Taxation consequences on an exempting entity ceasing to be effectively owned by prescribed persons", "Issue": "Will subsection 208-50(2) of the Income Tax Assessment Act 1997 (ITAA 1997) apply so that an exempting entity, which has ceased to be effectively owned by prescribed persons within 12 months of it becoming an exempting entity, not be taken to become a former exempting entity, where that same entity has previously ceased to be an exempting entity (that is it was previously a former exempting entity)?", "Decision": "No. If a corporate tax entity becomes effectively owned by prescribed persons and, within 12 months, there is a change in ownership so that it ceases to be so owned, then that change in ownership does not result in the company becoming a former exempting entity. However, where a corporate tax entity ceases to be an exempting entity on more than one occasion, only the first cessation referred to in subsection 208-50(2) of the ITAA 1997 is ignored. If a former exempting entity becomes an exempting entity, but ceases to be an exempting entity within 12 months, it will again become a former exempting entity.", "Facts": "Company A was incorporated on 1 July 2002 and from this time to 30 September 2003 was effectively owned by prescribed persons for the purposes of Division 208 of the ITAA 1997. As at 30 September 2003 Company A's franking account had a franking surplus of $42,000. Following changes in the shareholding of Company A, the company ceased to be effectively owned by prescribed persons on 1 October 2003. Company A became a former exempting entity for the purposes of Division 208 of the ITAA 1997. Its exempting account was credited with an exempting credit of $42,000, being an amount equal to the surplus in its franking account and its franking account was reduced to nil with a franking debit of $42,000. As at 30 June 2005 Company A had a franking surplus of $15,000 and an exempting surplus of $33,000. Following changes in the shareholding of Company A, the company became effectively owned by prescribed persons on 1 July 2005. Company A became an exempting entity for the purposes of Division 208 of the ITAA 1997. Its franking account was credited with an amount of $33,000 from its exempting account, bringing its franking account to a total of $48,000. As at 14 March 2006, Company A had reduced its franking surplus to $41,000 as a result of a distribution to which $7,000 of franking credits were allocated. Following changes in the shareholding of Company A, the company ceased to be effectively owned by prescribed persons on 15 March 2006. The taxation consequences to this cessation are addressed in the reasons for decision.", "Reasons_for_Decision": "Summary: The franking rules in Part 3-6 of the ITAA 1997 apply from 1 July 2002 onwards. These rules provide limitations in the use of franking credits by exempting entities, with subsection 208-5(1) of the ITAA 1997 providing: An exempting entity is a corporate tax entity that is effectively owned by entities that, either because they are not Australian residents .... , would not be able to fully utilise franking credits on distributions by the corporate tax entity. The primary purpose of Division 208 of the ITAA 1997 is explained in section 6.2 of the Explanatory Memorandum to the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 , as follows: Broadly speaking, these provisions are concerned with limiting franking credits available for trading by: • prescribing that franked distributions paid by corporate tax entities, which are effectively owned by non-residents or tax exempt entities, will provide franking benefits to members in limited circumstances only; and • quarantining the franking surpluses of corporate tax entities which were formerly effectively owned by non-residents or tax exempt entities. This is reflected in section 208-15 of the ITAA 1997, specifically, paragraph (b) which seeks to: Quarantine those credits by moving them into a separate account, called the exempting account, when the entity ceases to be an exempting entity. Section 208-20 of the ITAA 1997 defines an exempting entity, stating: A corporate tax entity is an exempting entity at a particular time if, at that time, the entity is effectively owned by prescribed persons. Subsection 208-40(1) of the ITAA 1997 provides that a company is a prescribed person in relation to another corporate tax entity if the company is a foreign resident. Section 208-25 of the ITAA 1997 states in part that an entity is effectively owned by prescribed persons at a particular time if, at that time, not less than 95% of the accountable membership interests in the entity are held by, or held indirectly for the benefit of, prescribed persons. Therefore, if a foreign resident owns not less than 95% of the ordinary shares of a resident Australian company, the Australian company will be an exempting entity. While section 208-10 of the ITAA 1997 provides the following broad definition of a former exempting entity: When an entity ceases to be an exempting entity, it becomes a former exempting entity. Section 208-50 of the ITAA 1997 provides an exception to this definition of a former exempting entity: 208-50(1) Subject to subsection (2), a corporate tax entity is a former exempting entity if it has, at any time, ceased to be an exempting entity and is not again an exempting entity. 208-50(2) If an entity that, at any time, becomes effectively owned by prescribed persons ceases to be so effectively owned within 12 months after that time, the entity is not taken, by so ceasing, to become a former exempting entity. Where a corporate tax entity ceases to be an exempting entity on more than one occasion, only the cessation referred to in subsection 208-50(2) of the ITAA 1997 is disregarded. If a former exempting entity becomes an exempting entity, but ceases to be an exempting entity within 12 months, it will again become a former exempting entity. This is because there would have been an earlier cessation that did not fall within subsection 208-50(2) of the ITAA 1997 (that is, the cessation that resulted in the entity being a former exempting entity in the first instance). Section 208-110 of the ITAA 1997 provides that each former exempting entity has an exempting account. Item 1 of section 208-115 of the ITAA 1997 sets out when a credit arises in the exempting account of a former exempting entity where the entity has a franking surplus at the time it became a former exempting entity. The item states: Exempting Credits: An amount equal to: in a case not covered by paragraph (b) - the franking surplus; or if the entity has been a former exempting entity at any time within a period of 12 months before its transition - so much of the franking surplus as would have been the entity's exempting surplus had it remained a former exempting entity throughout the period Therefore, if a former exempting entity becomes an exempting entity for less than twelve months, upon its reversion to a former exempting entity, instead of converting the whole of its franking surplus or deficit to an equivalent exempting amount, the company will be able to retain the franking surplus or deficit it would have had if it remained a former exempting entity instead of becoming an exempting entity for the relevant period: the remainder is to be converted to an exempting amount. Applying these provisions to the cessation that occurred on 15 March 2006 (that is Company A ceasing to be effectively owned by prescribed persons): pursuant to subsection 208-50(1) of the ITAA 1997, as at 15 March 2006, Company A ceased to be an exempting entity and became a former exempting entity. Subsection 208-50(2) of the ITAA 1997 will not apply to this cessation as Company A has previously been a former exempting entity. That is, the cessation that occurred on 1 October 2003 and resulted in Company A being a former exempting entity in the first instance did not fall within section 208-50 of the ITAA 1997 as it was longer than 12 months. Despite the fact that subsection 208-50(2) of the ITAA 1997 does not apply, Company A will be able to apply item 1 of section 208-115 of the ITAA 1997. Company A became a former exempting entity on 1 October 2003, and then it became an exempting entity on 1 July 2005 for a period of less than twelve months. Upon its reversion to a former exempting entity on 15 March 2006, Company A will be able to retain its franking surplus as if it remained a former exempting entity for the period from 1 July 2005 to 14 March 2006. Therefore, taking into account the franking debit of $7,000 attributed to the payment of a distribution during the period from 1 July 2005 to 14 March 2006, Company A will have, at 15 March 2006, an exempting surplus of $26,000 and a franking surplus $15,000. These amounts are attributed to the position of Company A as if it had remained a former exempting entity during the period from 1 July 2005 and 14 March 2006.", "Date_of_Decision": "8 November 2006", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 208-5 section 208-10 section 208-15 section 208-20 section 208-25 subsection 208-40(1) section 208-50 section 208-110 section 208-115 (Item 1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Franking Credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006316", "Unmatched_Content": "The entity had a franking surplus at the time it became a former exempting entity (at the time of its transition) | Immediately after its transition | Keywords Franking Credits"}
{"ATO_ID_Number": "ATO ID 2003/1104", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exempting entities: 'accountable membership interests'", "Issue": "Are C Class shares which are beneficially owned by a resident company but subject to a call option which has been exercised by a non-resident company 'accountable membership interests' within the meaning of subsection 208-30(2) of the Income Tax Assessment Act 1997 (ITAA 1997) for the purposes of Division 208 of the ITAA 1997?", "Decision": "No. The C Class Shares are not accountable membership interests within the meaning of subsection 208-30(2) of the ITAA 1997 because they are excluded membership interests under subsection 208-30(3) of the ITAA 1997 due to the exercise of the call option.", "Facts": "An Australian resident company (the Entity) issued three classes of shares (being the A Class Shares, B Class Shares and C Class Shares). The A Class Shares (representing 5% of the share capital) carry 50% of the voting power, an entitlement to appoint 2 members of the Board of Directors, and a right to dividends 'pari passu'. The B Class Shares (representing 1% of the share capital) carry no voting power but have a right to dividends 'pari passu'. The C Class Shares (representing 94% of the share capital) carry 50% voting power, the right to appoint 1 member of the Board of Directors, and a right to dividends 'pari passu'. The C Class Shares were subscribed for by a non-resident company (Non-resident). Non-resident sold the C Class shares to an Australian resident company (Australian Purchaser). However, under the terms of the contract of sale the transfer of the legal title to the C Class Shares was not perfected such that Non-resident remained the registered holder of the C Class shares. Therefore, under Chang v. Registrar of Titles (1976) 137 CLR 177 Non-resident became trustee for Australian Purchaser under a constructive trust resulting from the contract of sale and payment of the Purchase Price. Non-resident was required, under the contract of sale, to deal with or account for any dividends or other distributions accruing to the shares for and on behalf of Australian Purchaser. Immediately after becoming the beneficial owner of the C Class Shares, Australian Purchaser gave Non-resident the right but not the obligation (the Call Option) to purchase the beneficial interest in the C Class Shares for a Settlement Amount equal to the Purchase Price. The Call Option was exercised by Non-resident with the result that upon settlement of the option, in five years time, Non-resident must pay the Settlement Amount to Australian Purchaser. On that date the beneficial interest in the C Class Shares will pass back to Non-resident.", "Reasons_for_Decision": "Summary: Subsection 208-25(1) of the ITAA 1997 provides that an entity is effectively owned by prescribed persons at a particular time if at that time no less than 95% of the accountable membership interests or accountable partial interests in the entity are held by, or held indirectly for the benefit of, prescribed persons. Accountable membership interests are defined in subsection 208-30(2) of the ITAA 1997 as those membership interests that are not excluded membership interests. Accountable partial interests are similarly defined in subsection 208-35(2) of the ITAA 1997 as those partial interests that are not excluded partial interests. Excluded membership interests (or excluded partial interests) are those interests that, having regard to a number of factors listed in subsection 208-30(3) of the ITAA 1997 (or subsection 208-35(3) of the ITAA 1997 for partial interests) including the rights attaching to the interests and any arrangement in respect of those interests, it would be reasonable to conclude that the interest is not relevant in determining whether the entity is effectively owned by prescribed persons because holding the interest does not involve the holder bearing the risks, or result in the accrual to the holder of the opportunities, of ownership of the entity that ordinarily arise from, or ordinarily attach to, the holding of membership interests in the entity. In other words, an interest is excluded if, upon weighing the factors listed in subsection 208-30(3) of the ITAA 1997 (or subsection 208-35(3) of the ITAA 1997), a reasonable person would conclude that the interest does not expose the holder of that interest to the risks and opportunities that ordinarily arise from share ownership. The risks and opportunities that ordinarily arise from share ownership are those that expose the holder of the interest to the performance of the company. Some of the indicia of share ownership include that the holder has a right to dividends in the event the company is profitable and the directors declare them, the holder has voting rights in proportion with his or her interest in the company and that the value of the shares broadly track the performance of the company (that is, the holder is exposed to capital risk). In this case the effect of the contract of sale and call option is that the C Class Shares do not involve either Australian Purchaser or Non-resident bearing the risks or accruing the opportunities of ownership of the Entity that ordinarily attach to share ownership. Although Non-resident is exposed to the capital risk attaching to the interest, it does not benefit from the voting or dividend rights for five years. Similarly, Australian Purchaser does not participate to the same extent in the risks and opportunities of share ownership because the capital risk is borne by Non-resident. Australian Purchaser's capital investment in the Entity is effectively protected by the call option. Therefore, the C Class Shares are excluded membership/partial interests within the meaning of subsections 208-30(3) and 208-35(3) of the ITAA 1997 and therefore not accountable membership/partial interests for the purposes of Division 208 of the ITAA 1997.", "Date_of_Decision": "1 December 2003", "Year_of_Income": "Year ended 30 September 2002 Year ended 30 September 2003 Year ended 30 September 2004 Year ending 30 September 2005 Year ending 30 September 2006 Year ending 30 September 2007", "Legislative_References": "Income Tax Assessment Act 1997 Division 208 subsection 208-30(2) subsection 208-30(3) subsection 208-25(1) subsection 208-35(2) subsection 208-35(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company tax Franking accounts Franking credits Imputation system Call option", "Case_References": "Chang v. Registrar of Titles (1976) 137 CLR 177", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031104", "Unmatched_Content": "Keywords Company tax Franking accounts Franking credits Imputation system Call option"}
{"ATO_ID_Number": "ATO ID 2001/757", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking Accounts - early payment of company tax", "Issue": "Is a company allowed franking credits for the early payment of company tax if it pays its income tax prior to being liquidated?", "Decision": "Yes. A company is allowed franking credits under either former section 160APMG of the Income Tax Assessment Act 1936 (ITAA 1936) or section 205-15 of the Income Tax Assessment Act 1997 (ITAA 1997)for the early payment of its income tax prior to its liquidation.", "Facts": "The taxpayer is a privately owned company with a franking account surplus that had arisen from the payment of income tax and the receipt of franked dividends over many years. The directors want to put the company into voluntary liquidation before the end of the financial year. The directors want to claim an offset for the franking account credits against the final tax liability of the company. The company intends to extinguish all of its liabilities prior to the completion of the liquidation. The company will pay the full amount of its income tax for the current and following financial years by the end of the first quarter of the following financial year.", "Reasons_for_Decision": "Summary: The payment of PAYG instalments does not discharge a company's tax debt. The tax debt is not discharged until the Commissioner actually applies the instalments against the debt. The Commissioner cannot apply instalments against a tax debt until such time as that debt comes into existence, which generally occurs after the completion of the income year. It is the application of the instalments against the tax debt which constitutes payment of that debt. In other words, a debt cannot be discharged until it comes into existence. Where a company is able to ascertain its final tax liability for an income year prior to the end of that income year, the early payment of company tax will give rise to a franking credit in accordance with former section 160APMG of the ITAA 1936 which applies before 1 July 2002 or section 205-15 of the ITAA 1997, which applies on or after 1 July 2002. This is because the debt would have come into existence at the time that the final tax liability was ascertained, even though that liability was ascertained prior to the end of the income year. The liquidator of a company is required, in accordance with section 260-45 of the Taxation Administration Act 1953 , Schedule 1, to notify the Commissioner within 14 days of being appointed liquidator. The Commissioner is then required to notify the liquidator of the amount of tax due and payable by the company. It is at this point in time that the final tax liability of the company is ascertained, and the tax debt comes into existence. When the liquidator pays this amount, the company will then become entitled to the franking credits under either former section 160APMG of the ITAA 1936 or section 205-15 of the ITAA 1997.", "Date_of_Decision": "11 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 160APMG", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Franking credits Liquidation", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001757", "Unmatched_Content": "Include reference to section 205-15 of the ITAA 1997 | Include \"former\" before section 160APMG and \"which applies before 1 July 2002 or section 205-15 of the ITAA 1997, which applies on or after 1 July 2002\" after ITAA 1936. | Include \"under either section 160APMG of the ITAA 1936 or section 205-15 of the ITAA 1997\" after credits. | Insert \" Income Tax Assessment Act 1997 \" and \" section 205-15 \" | Keywords Franking credits Liquidation"}
{"ATO_ID_Number": "ATO ID 2005/363", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking Credits: shareholders' share of income tax liability for a life insurance company - management fee on ordinary policy", "Issue": "In determining the shareholders' share of the income tax liability of a life insurance company for the purposes of Step 1 of the method statement in subsection 219-50(2) of the Income Tax Assessment Act 1997 (ITAA 1997), is it necessary that the income tax liability relates to an amount of assessable income that is attributable to shareholders?", "Decision": "No. In determining the shareholders' share of the income tax liability of a life insurance company for the purposes of Step 1 of the method statement in subsection 219-50(2) of the ITAA 1997, it is not necessary that the income tax liability relates to an amount of assessable income that is attributable to shareholders.", "Facts": "The taxpayer is a life insurance company as defined in subsection 995-1(1) of the ITAA 1997. The ordinary class of taxable income of the taxpayer is $1,000, being investment income in relation to ordinary life insurance policies. The taxpayer charges a fee of $100 in relation to ordinary insurance policies, which it sources from the $1,000 investment income. The $100 is not assessable income of the taxpayer. The income tax liability of the taxpayer is $300. In relation to the investment income, the taxpayer's liability to ordinary policyholders increases by $630, being the $1,000 investment income less the fee of $100 and $270 income tax liability. Accordingly, only $270 of the $300 income tax liability of the company is taken into account in determining the liability of the company to its ordinary policyholders. The net profit of the taxpayer increases by $70, effectively representing the management fee of $100 less income tax of $30.", "Reasons_for_Decision": "Summary: Life insurance companies pay tax on income that can be distributed to shareholders and also on income that is credited to policyholders. Accordingly, Division 219 of the ITAA 1997 contains the principle that franking credits can only arise in relation to that part of the income tax liability of the company that is attributable to shareholders. The shareholders' share of the income tax liability of a life insurance company is defined in Step 1 of the method statement in subsection 219-50(2) of the ITAA 1997 as 'the part of the company's total income tax liability for the income year that is attributable to the company's shareholders'. While the management fee is not included in assessable income of the taxpayer, this is not in itself a conclusive factor in determining whether part of the income tax liability is attributable to shareholders. The management fee is not specifically included in assessable income because of the fee and charge mechanism that is adopted in Division 320 of the ITAA 1997. However, Division 320 is only relevant for determining the taxable income and income tax liability of the taxpayer. Once the income tax liability of the company is determined, the franking credit that arises for a life insurance company in respect of this income tax liability is determined under Division 219 of the ITAA 1997. There is nothing in Division 219 to indicate that this determination is affected by the operation of Division 320 of the ITAA 1997. Division 219 of the ITAA 1997 does not require that an amount of income be assessable in order for a franking credit to arise in relation to the income tax liability that the income creates. Rather, Division 219 adopts the principle that a franking credit will arise where the income tax liability is attributable to shareholders. The fact that Division 219 of the ITAA 1997 adopts this test indicates that the income tax liability of a life insurance company can be attributable to someone other than shareholders, such as the policyholders of the company. Accordingly, Division 219 is not concerned with whether the income tax liability relates to an amount of assessable income, but rather, whether the income tax liability is attributable to either the shareholders or the policyholders of a life insurance company. The taxpayer allocated part of its income tax liability to policyholders when it determined its liability to those policyholders. To the extent that the income tax liability is allocated to policyholders, it is considered to be attributable to those policyholders, rather than to the shareholders of the company. Only that part of the income tax liability that is not allocated to policyholders could be considered to be attributable to shareholders. Given that $270 of the $300 income tax liability is allocated to policyholders, the balance of the liability (being $30) is considered to be attributable to shareholders. The fact that the net profit only increased by $70 in respect of the $100 management fee supports the conclusion that $30 of the income tax liability is attributable to shareholders. There is no requirement under subsection 219-50(2) of the ITAA 1997 that the amount of $30 must relate to assessable income that is attributable to shareholders. Accordingly, $30 of the income tax liability of the taxpayer would be attributable to shareholders for the purposes of Step 1 of the method statement in subsection 219-50(2).", "Date_of_Decision": "12 December 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 219 subsection 219-50(2) Division 320 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Life insurance company Franking credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005363", "Unmatched_Content": "Keywords Life insurance company Franking credits"}
{"ATO_ID_Number": "ATO ID 2008/31", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Parental Company Guarantees and Division 15 of Part III of the Income Tax Assessment Act 1936", "Issue": "Is a guarantee provided by a non-resident parent company, in its capacity as a parent company, to its resident company subsidiary an 'insurance contract' under section 141 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A guarantee provided by a non-resident parent company, in its capacity as a parent company, to its resident company subsidiary is not an 'insurance contract' under section 141 of the ITAA 1936.", "Facts": "ABC is a resident Australian company. ABC is not an insurance company and does not carry on the business of insurance. ABC's parent company is DEF, a non-resident of Australia. ABC raised finance from unrelated finance providers in order to fund its operations in Australia. DEF provided a guarantee to the finance providers. Under the guarantee, DEF agreed that it would meet the obligations of ABC to the finance providers in the event that ABC defaulted on its obligations. ABC paid a fee to DEF in return for DEF providing this guarantee. The guarantee was provided because DEF is the parent company of ABC. The guarantee allowed ABC to obtain finance at a lower interest rate than would be the case without the provision of the guarantee. DEF is not an insurance company and does not carry on a business of insurance. DEF is not in the business of providing guarantees to other companies. The DEF group also comprises other subsidiary companies that operate a number of businesses involving commercial, finance and insurance activities.", "Reasons_for_Decision": "Summary: Division 15 of Part III of the ITAA 1936 includes sections 141 to 143 of the ITAA 1936 which set out certain taxation consequences for insurance with non-residents. Section 141 of the ITAA 1936 defines an 'insurance contract' for the purposes of Division 15 of Part III of the ITAA 1936 as meaning: ... a contract or guarantee whereby liability is undertaken, contingent upon the happening of any specified event, to pay any money or make good any loss or damage, but does not include a contract of life assurance. Section 142 of the ITAA 1936 operates to include an insurance premium under an insurance contract in the assessable income of a non-resident insurer. Section 143 of the ITAA 1936 then deems the non-resident insurer to have derived a taxable income equal to 10% of premiums paid or payable under insurance contracts during the year. In determining whether the guarantee provided by DEF is an insurance contract within the meaning of section 141 of the ITAA 1936, it is necessary to consider the intent of the provision as ascertained from an examination of its history and the accompanying Explanatory Memorandum. Prior to the introduction of the ITAA 1936 the income tax provisions relating to insurance with non-residents were contained in section 28B of the Income Tax Assessment Act 1922 (ITAA 1922). The Explanatory Memorandum to the Income Tax Assessment Bill 1930 makes it clear that the intention of section 28B of the ITAA 1922 was to tax all forms of insurance business (other than life insurance) provided by non-resident insurers. This is confirmed by Clause 14 of the Explanatory Memorandum which stated that section 28B was being inserted to: ...cause income tax to be payable by or on behalf of ex-Australian underwriters such as Lloyd's Insurance Association of London upon an assumed profit of 10 per cent. of all premiums on insurances effected in Australia by or on behalf of that underwriter. As part of the re-write of the taxation law in the 1930s, the principles contained in section 28B of the ITAA 1922 were incorporated into Division 15 of Part III of the ITAA 1936. The Explanatory Memorandum to the Income Tax Assessment Bill 1935 (the Bill for the ITAA 1936) states that section 28B of the ITAA 1922: ... was originally introduced to tax ex-Australian underwriters in respect of Australian business undertaken by them in competition with companies established in Australia. The Explanatory Memorandum to the Income Tax Assessment Bill 1935 also discusses a change in the law that was made to overcome a 'weakness' in section 28B of the ITAA 1922 and then concludes by stating that the 'remaining clauses restate the existing law'. Accordingly, an examination of the Explanatory Memorandums to both Acts confirms that the purpose of Division 15 of Part III of the ITAA 1936 is the same as section 28B of the ITAA 1922. Division 15 of Part III of the ITAA 1936 was amended in 1975 and the Explanatory Memorandum to the Income Tax Assessment Bill 1975 included the following statement about Division 15: The objective of the Division is to secure the imposition of tax on foreign insurance underwriters in respect of business (other than life assurance) undertaken by them in Australia in competition with companies established in Australia. The Explanatory Memorandums therefore confirm that Division 15 of Part III of the ITAA 1936 is intended to apply only to those entities that carry on the business of insurance, other than the business of life insurance. DEF is the corporate head of a group of companies that includes entities that carry on the business of insurance. However, DEF does not carry on the business of insurance. The providing of parental guarantees by DEF to its subsidiaries is not the carrying on of a business of insurance. The courts have confirmed that the provision of a parental guarantee can be for the purpose of enhancing or protecting the parent company's profit yielding structure, rather than being an incident of any business being carried on between the parent and its subsidiaries or associated companies: Bell and Moir Corporation Pty Ltd v. Federal Commissioner of Taxation [1999] FCA 1009; 99 ATC 4738; (1999) 42 ATR 421; Commissioner of Taxation v. Email Ltd [1999] FCA 1177; 99 ATC 4868; (1999) 42 ATR 698. The courts have looked to the relationship between insurance companies and their subsidiaries to determine whether the activities of the subsidiaries were integral to the business of the parent company: GRE Insurance Limited v. Commissioner of Taxation (1992) 34 FCR 160; 92 ATC 4089; (1992) 23 ATR 88 ( GRE Unitraders ); AGC (Investments) Limited v. F C of T 91 ATC 4180; (1991) 21 ATR 1379; CMI Services Pty Limited v. FC of T 89 ATC 4847; (1989) 20 ATR 1152. The relationship between these entities was confined to determining whether the profits on realisation of investments were of a revenue nature. Notwithstanding the relationship between the two entities, the courts made it clear that the two entities were distinct from one another. In GRE Unitraders the Full Court of the Federal Court in finding that the activities of the subsidiary company were integral to the activities of the parent insurance company stated at FCR 166; ATC 4094; ATR 94: [t]hat is not to say that Unitraders should not be considered as a taxpayer in its own right. It was such a taxpayer and its activities should be so considered. This principle applies to DEF and to any subsidiary of it that carried on the business of insurance. DEF does not take on the attributes of the business activities of its subsidiaries for the purposes of Division 15 of Part III of the ITAA 1936. Therefore, the fact that DEF has a subsidiary that is an insurance company does not mean that it is an insurance company for these purposes. Accordingly, the guarantee provided by DEF is not an insurance contract as defined in section 141 of the ITAA 1936 because DEF is not an insurance company and the guarantee was provided by DEF in its capacity as a parent company.", "Date_of_Decision": "25 January 2008", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 Division 15 of Part III section 141 section 142 section 143", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Guarantees Insurance Industry Non resident insurance industry", "Case_References": "Bell and Moir Corp Pty Ltd v. Federal Commissioner of Taxation [1999] FCA 1009 99 ATC 4738", "Other_References": "Income Tax Assessment Bill 1930 Explanatory Memorandum to Income Tax Assessment Bill 1930 Explanatory Memorandum to Income Tax Assessment Bill 1935 Explanatory Memorandum to Income Tax Assessment Bill 1975", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200831", "Unmatched_Content": "Keywords Guarantees Insurance Industry Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2008/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-Resident Insurers: principal office or branch in Australia", "Issue": "Is a non resident insurer with a dependent agent in Australia considered to have a principal office or branch established in Australia for the purposes of section 142 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A non resident insurer with a dependent agent in Australia is not considered to have a principal office or branch established in Australia for the purposes of section 142 of the ITAA 1936.", "Facts": "A syndicate in the Lloyd's insurance market in London provides underwriting for general insurance in Australia. The syndicate members are residents of the United Kingdom. The syndicate does not occupy premises or carry on activities in Australia. The syndicate does not have any employees in Australia. An Australian resident company acts as a cover holder on behalf of the underwriting members of the syndicate. The Australian resident company has a binding authority to write business and conclude contracts on behalf of the underwriting members of the syndicate for contracts of insurance in respect of property. The Australian resident company carries out this function in the capacity as an agent for the underwriting members of the syndicate.", "Reasons_for_Decision": "Summary: Division 15 of Part III of the ITAA 1936 sets out certain taxation consequences for non resident insurers. Prior to the introduction of the ITAA 1936 the income tax provisions relating to non resident insurers were contained in section 28B of the Income Tax Assessment Act 1922 (ITAA 1922). As part of the re-write of the taxation law in the 1930s, the principles contained in section 28B of the ITAA 1922 were incorporated into Division 15 of Part III of the ITAA 1936. Division 15 of Part III of the ITAA 1936 contains section 142 of the ITAA 1936 which includes in the assessable income of the non resident insurance premiums in respect of certain insurance contracts, except where those contracts were made by a principal office or branch. The terms 'principal office' and 'branch' were originally used in section 28B of the ITAA and Division 15 of Part III of the ITAA 1936 however these terms were not defined. As there is no statutory definition of the terms 'principal office' or 'branch' in Division 15 of the ITAA 1936 or else where in the ITAA 1936 and Income Tax Assessment Act 1997 or other related Acts we rely on the common dictionary usage of those words . The Macquarie Dictionary 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines the word 'principal' as 'first or highest in rank importance, value, etc ; chief foremost', and the word 'office' as 'the room or rooms in which clerical work of an industrial or other establishment is done' The term 'principal office' is often interchanged with the term 'head office' or 'main office'. The word 'branch' is defined as 'a local operating division of a company, chain store or the like'. The Explanatory Memorandum (EM) to the Income Tax Assessment Bill 1935 preserves a common usage of the terms themselves. The terms 'principal office' or 'branch' within the EM are referred to in the context of a non-resident insurer who carries on insurance business or transacts insurance business directly either by means of a principal office or a local branch which has been established in Australia and not of insurance business effected through an agent on behalf of the non resident insurer. In the present arrangement, the syndicate does not carry on insurance business or transacts insurance business directly either by means of a principal office or branch which has been established in Australia, other than through the activities undertaken by the Australian resident company as its agent in Australia. Accordingly the syndicate is not considered to have a principal office or branch established in Australia for the purposes of Division 15 of Part III of the ITAA 1936.", "Date_of_Decision": "28 May 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 Division 15 of Part III section 142", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/181 | ATO ID 2008/31", "Subject_References": "Non-resident insurance industry Non-resident insurer Insurance industry", "Case_References": "", "Other_References": "The Macquarie Dictionary 2001, rev.3rd edn, The Macquarie Library Pty Ltd, NSW Income Tax Assessment Bill 1935 Explanatory Memorandum to Income Tax Assessment Bill 1935", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200883", "Unmatched_Content": "Keywords Non-resident insurance industry Non-resident insurer Insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/411", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer: property insurance where the properties covered are situated in Australia and other countries and the geographical location of the properties is not specified in the insurance contract but is known to the insurer", "Issue": "Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract and the location of the properties is not specified in the insurance contract but is known to the insurer?", "Decision": "No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract, and the location of the properties is not specified in the insurance contract but is known to the insurer.", "Facts": "The following facts apply in respect of the insurance contract entered into by a non-resident insurer.", "Reasons_for_Decision": "Summary: Subsection 142(1) of the ITAA 1936 includes certain premiums paid or payable under an insurance contract in the assessable income of a non-resident insurer. Subsection 142(1) of the ITAA 1936 requires that the properties covered by the insurance contract are situated in Australia and does not apply to a premium paid or payable under an insurance contract which provides coverage to properties situated within and outside Australia. As subsection 142(1) of the ITAA 1936 does not provide for apportionment of a premium under an insurance contract there is no authority to attribute part of the premium to the properties situated in Australia. The fact that the location of the properties is not specified in the insurance contract does not affect the application of subsection 142(1) of the ITAA 1936. Subsection 142(1) will not apply where the properties covered by the contract are situated both within and outside Australia. Accordingly, a premium paid or payable under an insurance contract specifically for properties, which are situated both within and outside Australia at the time of making the contract, will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident insurance industry", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004411", "Unmatched_Content": "Keywords Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/412", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer: property insurance where the properties covered are situated in Australia and other countries and the geographical location of the properties is specified in the insurance contract", "Issue": "Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract and the geographical location of the properties is specified in the insurance contract?", "Decision": "No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract and the geographical location of the properties is specified in the insurance contract.", "Facts": "The following facts apply in respect of the insurance contract entered into by a non-resident insurer.", "Reasons_for_Decision": "Summary: Subsection 142(1) of the ITAA 1936 includes certain premiums paid or payable under an insurance contract in the assessable income of a non-resident insurer. Subsection 142(1) of the ITAA 1936 requires that the properties that are covered by the insurance contract are situated in Australia and does not apply to a premium paid or payable under an insurance contract which provides coverage to properties situated within and outside Australia. As subsection 142(1) of the ITAA 1936 does not provide for apportionment of a premium under an insurance contract there is no authority to attribute part of the premium to the properties situated in Australia. The specification of the location of the properties in the insurance contract is considered to be immaterial as ultimately it is the location itself of those properties that is the determinative factor. Accordingly, a premium paid or payable under an insurance contract specifically for properties, which are situated both within and outside Australia at the time of making the contract, will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident insurance industry", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004412", "Unmatched_Content": "Keywords Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/413", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer: liability insurance where the insured event may occur within or outside of Australia", "Issue": "Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia?", "Decision": "No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia.", "Facts": "The following facts apply in respect of the insurance contract entered into by a non-resident insurer.", "Reasons_for_Decision": "Summary: Subsection 142(1) of the ITAA 1936 includes certain premiums paid or payable under an insurance contract in the assessable income of a non-resident insurer. Subsection 142(1) of the ITAA 1936 requires that the insured event is one which can happen only in Australia and does not apply to a premium paid or payable under an insurance contract providing coverage to an event which may occur both within and outside Australia. Accordingly, a premium paid or payable under a policy where the insured event may occur within or outside Australia will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident insurance industry", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004413", "Unmatched_Content": "Keywords Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/414", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer: insurance for Australian properties and a global liability event", "Issue": "Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where an insurance contract covers both properties situated in Australia and a global liability event, and there is no allocation of the premium in respect of the insured properties and the global liability event?", "Decision": "Yes. An insurance premium is assessable under subsection 142(1) of the ITAA 1936 where an insurance contract covers both properties situated in Australia and a global liability event, and there is no allocation of the premium in respect of the insured properties and the global liability event.", "Facts": "The following facts apply in respect of the insurance contract entered into by a non-resident insurer.", "Reasons_for_Decision": "Summary: Subsection 142(1) of the ITAA 1936 includes an insurance premium in the assessable income of the non-resident if: The conditions outlined in subsection 142(1) of the ITAA 1936 are expressed in the alternative by the use of the word 'or'. The application is conditional on only one of the two requirements of subsection 142(1) being met. The satisfaction of either requirement would bring the premium within subsection 142(1) of the ITAA 1936. As Subsection 142(1) of the ITAA 1936 does not provide for apportionment of a premium under an insurance contract, there is no authority to attribute part of the premium to the liability event. Accordingly, a premium paid or payable under a policy where the properties are situated in Australia will be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936, irrespective of the fact that the policy also covers a liability event that may happen within or outside of Australia.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident insurance industry", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004414", "Unmatched_Content": "Keywords Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/415", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer: insurance for an Australian liability event and global properties", "Issue": "Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where an insurance contract covers both a liability event that can only happen in Australia and properties that are situated within and outside of Australia, and there is no allocation of the premium between the liability event and the properties specified in the contract?", "Decision": "Yes. An insurance premium is assessable under subsection 142(1) of the ITAA 1936 where an insurance contract covers both a liability event that can only happen in Australia and properties that are situated within and outside of Australia, and there is no allocation of the premium between the liability event and the properties specified in the contract.", "Facts": "The following facts apply in respect of the insurance contract entered into by a non-resident insurer.", "Reasons_for_Decision": "Summary: Subsection 142(1) of the ITAA 1936 includes an insurance premium in the assessable income of a non-resident insurer if: The conditions outlined in subsection 142(1) of the ITAA 1936 are expressed in the alternative by the use of the word 'or'. The application is conditional on only one of the two requirements being met. The satisfaction of either requirement would bring the premium within subsection 142(1) of the ITAA 1936. As Subsection 142(1) of the ITAA 1936 does not provide for apportionment of a premium under an insurance contract, there is no authority to attribute part of the premium to the properties that are situated outside of Australia. Accordingly, a premium paid or payable on a policy where the insured event can only happen in Australia will be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936, irrespective of the fact that the policy also covers properties that are situated within and outside of Australia.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident insurance industry", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004415", "Unmatched_Content": "Keywords Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/416", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer: insurance for an Australian liability event and an unrelated global liability event", "Issue": "Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where an insurance contract covers a liability event that can only happen in Australia and an unrelated global liability event, and there is no allocation of the premium between these two liability events?", "Decision": "No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insurance contract covers a liability event that can only happen in Australia and an unrelated global liability event and there is no allocation of the premium between these two liability events.", "Facts": "The following facts apply in respect of the insurance contract entered into by a non-resident insurer.", "Reasons_for_Decision": "Summary: Subsection 142(1) of the ITAA 1936 provides that an insurance premium paid to a non-resident insurer is assessable income of the non-resident if the insured event is one which can only happen in Australia. As subsection 142(1) of the ITAA 1936 does not provide for apportionment of the premium, there is no authority to attribute part of the premium to the liability event that can happen within or outside Australia. Accordingly, a premium paid or payable on a policy that covers both an insured event which can only happen in Australia and an insured event that can happen either in or outside Australia will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.", "Date_of_Decision": "13 May 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident insurance industry", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004416", "Unmatched_Content": "Keywords Non resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/910", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: consideration paid by taxpayer to cede outstanding claims liability", "Issue": "Can a general insurance company claim a deduction under section 321-25 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) for the consideration given to cede its outstanding claims liability under a portfolio transfer?", "Decision": "Yes. A general insurance company can claim a deduction under section 321-25 of the ITAA 1936 for the consideration given to cede its outstanding claims liability under a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is done in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. Under the portfolio transfer the taxpayer is required to give consideration to the transferee for assuming the outstanding claims liability under its general insurance policies. The outstanding claims liability is the accounting value, being a proper and reasonable estimate of the present value of the sum of the taxpayer's liability for claims under its general insurance policies and direct settlement costs associated with those claims, increased by a margin for prudence.", "Reasons_for_Decision": "Summary: Under section 321-25 of the ITAA 1936, 'a general insurance company can deduct amounts paid during the year of income in respect of claims under general insurance policies.' The word 'claim', when used in an insurance policy has different meanings depending on the context ( Drayton and Ors v. Martin and Ors (1996) 9 ANZ Insurance Cases 61,322 at 76,590). Generally, the word is defined, amongst other things, as, 'submit a request for payment under an insurance policy' ( The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne). Therefore, a 'claim' entails a policyholder's legal right to be indemnified or compensated by the general insurance company in accordance with the terms of the insurance policy. The cost of meeting the claims is reported by the general insurance company as outstanding claims liability and is measured as the present value of the expected future payments. When the claims are paid or settled a general insurance company is entitled to a deduction under section 321-25 of the ITAA 1936. Under a portfolio transfer the claims cannot be said to be paid or settled as the policyholder is neither indemnified nor compensated. Instead, the consideration is paid to another insurance company to take on the obligation to eventually pay or settle the claims. However, the condition for deductibility under section 321-25 of the ITAA 1936 is not whether the claims have been paid or settled, but rather whether the amount paid is 'in respect of claims under general insurance policies'. The words 'in respect of' which precede 'claims under general insurance policies' were interpreted by the High Court in Technical Products Pty Ltd v. State Government Insurance (Qld) (1989) 167 CLR 45 in the following passage: The words \"in respect of\" have a very wide meaning. Indeed, they have a chameleon-like quality in that they commonly reflect the context in which they appear...That nexus will not, however, exist unless there be some discernible and rational link... Therefore, an amount is paid 'in respect of claims' under general insurance policies, where, in the context in which section 321-25 of the ITAA 1936 appears, there is a sufficient nexus or material connection, and a discernible and rational link, between the amount and claims under general insurance policies. Consideration given to cede the outstanding claims liability is an amount paid 'in respect of' claims under general insurance policies for the reason that it discharges the general insurance company's obligations that arose under the policies of insurance. The fact that the payment is not made directly to, or on behalf of, the policyholders does not mean that the payment assumes a different character (per Gibbs CJ in Federal Commissioner of Taxation v. Foxwood (Tolga) Pty Ltd (1981) 147 CLR 278; 81 ATC 4261; (1981) 11 ATR 859). The amount paid therefore maintains the same character as if it were paid directly to, or on behalf of, the policyholders. Accordingly, the taxpayer is entitled to a deduction under section 321-25 of the ITAA 1936 for the amount paid to the transferee under the portfolio transfer in respect of the outstanding claims liability. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording was slightly altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in the explanatory memorandum, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-25 of the ITAA 1936 should be read as referring to section 321-25 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "Drayton and Ors v. Martin and Ors (1996) 9 ANZ Insurance Cases 61,322", "Other_References": "The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004910", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/911", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: deduction under Division 321 for consideration paid in respect of indirect settlement costs", "Issue": "Can a general insurance company claim a deduction under section 321-25 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) for the indirect claims settlement component of the consideration given to cede its outstanding claims liabilities under a portfolio transfer?", "Decision": "No. A general insurance company cannot claim a deduction under section 321-25 of the ITAA 1936 for the indirect claims settlement component of the consideration given to cede its outstanding claims liabilities under a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. Under the portfolio transfer, the taxpayer is required to give consideration to the transferee for assuming the outstanding claims liability under its general insurance policies as calculated for taxation purposes as well as a payment in respect of indirect claims settlement costs. Indirect claims settlement costs are the general expenses of running and administering a general insurance company's claims department", "Reasons_for_Decision": "Summary: Under section 321-25 of the ITAA 1936, 'a general insurance company can deduct amounts paid during the year of income in respect of claims under general insurance policies.' The word 'claim', when used in an insurance policy has different meanings depending on the context ( Drayton and Ors v. Martin and Ors (1996) 9 ANZ Insurance Cases 61,322 at 76,590). Generally, the word is defined, amongst other things, as, 'submit a request for payment under an insurance policy' ( The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne). Therefore, a 'claim' entails a policyholder's legal right to be indemnified or compensated by the general insurance company in accordance with the terms of the insurance policy. A condition for deductibility under section 321-25 of the ITAA 1936 is that the amount paid must be 'in respect of claims under general insurance policies'. The words 'in respect of' which precede 'claims under general insurance policies' were interpreted by the High Court in Technical Products Pty Ltd v. State Government Insurance (Qld) (1989) 167 CLR 45 in the following passage: The words \"in respect of\" have a very wide meaning. Indeed, they have a chameleon-like quality in that they commonly reflect the context in which they appear...That nexus will not, however, exist unless there be some discernible and rational link... Therefore, an amount is paid 'in respect of claims' under general insurance policies, where, in the context in which section 321-25 of the ITAA 1936 appears, there is a sufficient nexus or material connection, and a discernible and rational link, between the amount and claims under general insurance policies. The consideration paid to the transferee in respect of indirect settlement costs that the transferee expects to incur in settling the liabilities under the policies is not an amount that is paid 'in respect of claims under general insurance policies' of the taxpayer because the consideration is not directly related to a claim under a policy of insurance. Accordingly, the taxpayer cannot claim a deduction under section 321-25 of the ITAA 1936 for the indirect claims settlement component of the consideration given to cede its outstanding claims liabilities under a portfolio transfer. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording was slightly altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in the explanatory memorandum, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-25 of the ITAA 1936 should be read as referring to section 321-25 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "Drayton and Ors v. Martin and Ors (1996) 9 ANZ Insurance Cases 61,322", "Other_References": "The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004911", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/912", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: deduction for consideration paid in respect of indirect settlement costs", "Issue": "Can a general insurance company claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the indirect claims settlement component of the consideration given to cede its outstanding claims liabilities under a portfolio transfer?", "Decision": "Yes. A general insurance company can claim a deduction under section 8-1 of the ITAA 1997 for the indirect claims settlement component of the consideration given to cede its outstanding claims liabilities under a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973 . The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. Under the portfolio transfer, the taxpayer is required to give consideration to the transferee for assuming the outstanding claims liability under its general insurance policies as calculated for taxation purposes as well as a payment in respect of indirect claims settlement costs. Indirect claims settlement costs are the general expenses of running and administering a general insurance company's claims department.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that a loss or outgoing is deductible provided that it is 'necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.' A loss or outgoing is not deductible under section 8-1 of the ITAA 1997 if it is denied under paragraph 8-1(2)(a) of the ITAA 1997 because it is a loss or outgoing of a capital nature. The deductibility of the payment for indirect settlement costs can be determined in light of the High Court's decision in G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 ( Pipecoaters ). In the Pipecoaters decision the court stated: The character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. The character of a payment will 'take the quality of an outgoing of a capital nature or of an outgoing on account of revenue from the cause or the purpose of incurring the expenditure' (Dixon J in Hallstroms Pty Limited v. Federal Commissioner of Taxation (1946) 72 CLR 634 (1946) 8 ATD 190; (1946) 3 AITR 436). Accordingly, the payment for indirect settlement costs takes on the character from the purpose for which the expenditure was incurred. The purpose of the expenditure is to allow the taxpayer to transfer its insurance related liabilities, which are on revenue account. This indicates that the expenditure is of a revenue nature. The nature of a payment as a one off payment does not prejudice treatment as an outgoing on revenue account under section 8-1 of the ITAA 1997 (McTiernan J in Foley Bros Pty Ltd v. FC of T (1965) 13 ATD 474; (1965) 3 AITR 436). Accordingly, the indirect claims settlement component of the consideration paid by the taxpayer to cede its outstanding claims liabilities under a portfolio transfer is deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 31 December 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 21 ATR 1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004912", "Unmatched_Content": "Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/913", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: outstanding claims liability of general insurance company that transfers its liabilities under a portfolio transfer", "Issue": "Does the outstanding claims liability of a general insurance company, determined under section 321-20 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) at the end of a year of income, include a value in respect of liabilities that have been assumed by another general insurance company under a portfolio transfer?", "Decision": "No. The outstanding claims liability of a general insurance company, determined under section 321-20 of the ITAA 1936 at the end of a year of income, does not include a value in respect of liabilities that have been assumed by another general insurance company under a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. Under the portfolio transfer, the taxpayer is required to give consideration to the transferee for assuming the outstanding claims liability under its general insurance policies.", "Reasons_for_Decision": "Summary: The value of the outstanding claims liability represents, as provided for by section 321-20 of the ITAA 1936, the sum of the amounts that it is appropriate for an insurance company to set aside and invest so that the company can meet its: The effect of the transfer of the taxpayer's outstanding claims liability is to discharge its contractual liabilities to policyholders under the general insurance policies by requiring the transferee to meet those liabilities. After the completion of the portfolio transfer, the policyholder will seek to recover under the policy of insurance from the transferee. There will be no requirement for the taxpayer to set aside and invest amounts to meet liabilities for outstanding claims that are the subject of the transfer. Therefore, the 'value of outstanding claims liabilities' for the purposes of section 321-20 of the ITAA 1936 will exclude the value of the liabilities transferred. Accordingly, the outstanding claims liability of the taxpayer under section 321-20 of the ITAA 1936 at the end of a year of income will not include an amount in respect of liabilities that have been assumed by another general insurance company under a portfolio transfer. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Section 321-20 of the ITAA 1997 has, however, been clarified to include reference to section 148(1) of the ITAA 1936, which relates to reinsurance with non-residents. Therefore, from 1 July 2010, all references to Section 321-20 of the ITAA 1936 should be read as referring to Section 321-20 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-20 section 148(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004913", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/914", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: consideration paid by taxpayer for assumption of unearned premium liability", "Issue": "Can a general insurance company claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the consideration paid in respect of its unearned premium liability under a portfolio transfer?", "Decision": "Yes. A general insurance company can claim a deduction under section 8-1 of the ITAA 1997 for the consideration paid in respect of its unearned premium liability under a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973 . The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is done in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. Under the portfolio transfer the taxpayer is required to pay the transferee consideration for assuming its unearned premium liability. The unearned premium liability is the accounting value of the gross premiums received or receivable by a general insurer that have not been recognised as earned at the time of the portfolio transfer.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that a loss or outgoing is deductible provided that 'it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.' A loss or outgoing is not deductible under section 8-1 of the ITAA 1997 if it is denied under paragraph 8-1(2)(a) of the ITAA 1997 because it is a loss or outgoing of a capital nature. In the case of the portfolio transfer, the payment in respect of the unearned premium liability is made so that the taxpayer's obligation to provide insurance cover to policyholders is met. The provision of insurance cover is a normal incident of an insurance company. Applying the principle stated in G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1, the 'advantage sought by the making of the expenditure' is of a revenue nature as the payment is made to discharge an obligation that had arisen in the normal course of the taxpayer's insurance business. Though a portfolio transfer may be undertaken in order to cease insurance operations of the taxpayer it is considered that authorities such as Modern Permanent Building and Investment Society (in liq) v. Federal Commissioner of Taxation (1958) 98 CLR 187; (1958) 11 ATD 438; (1958) 7 AITR 233 and Claire Douglas Peyton v. Federal Commissioner of Taxation (1963) 109 CLR 315; (1963) 13 ATD 133; (1963) 9 AITR 112 do not apply to characterise the payment as capital. The High Court decision in Federal Commissioner of Taxation v. Foxwood (Tolga) Pty Ltd (1981) 147 CLR 278; 81 ATC 4261; (1981) 11 ATR 859 provides authority for the principle that particular expenditure which was incurred in context of a cessation of business may nevertheless be an allowable deduction where it would have been incurred on revenue account if had it been made in the ordinary course of business. In the context of subsection 51(1) of the Income Tax Assessment Act 1936 , the predecessor of section 8-1 of the ITAA 1997, Hill J said in FC of T v. Broken Hill Pty Ltd Company Ltd 2000 ATC 4659; (2000) 45 ATR 507; [2000] FCA 1431: In determining whether an outgoing falls for deductibility under s51(1), it will be critical to determine what the outgoing is paid for. The significance of that question, which is directed to ascertaining the advantage sought to be obtained, is essential to the determination of true characterisation of an outgoing. In the present circumstances, whilst the payment is made against the backdrop of the cessation of the taxpayer's insurance business, the purpose of the expenditure is to discharge the taxpayer's obligation to provide risk cover as required under the insurance contracts. Thus, even though the portfolio transfer was not in the normal course of the taxpayer's business, the amount paid to the transferee will be deductible as it discharges the taxpayer's obligation to provide risk cover under insurance contracts that were entered into in the normal course of its business. Accordingly, the amount the taxpayer paid to the transferee in the portfolio transfer in respect of the unearned premium liability is deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "Modern Permanent Building and Investment Society (In Liquidation) v. Federal Commissioner of Taxation (1958) 98 CLR 187 (1958) 11 ATD 438 (1958) 7 AITR 233", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004914", "Unmatched_Content": "Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/915", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: consideration received by a general insurance company in respect of deferred acquisition costs", "Issue": "Is the consideration received by a general insurance company from another general insurance company under a portfolio transfer in respect of deferred acquisition costs assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of consideration received by a general insurance company from another general insurance company under a portfolio transfer in respect of deferred acquisition costs is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is done in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. The taxpayer, in the course of issuing insurance policies to its policyholders, incurred costs commonly referred to in the industry as acquisition costs. These costs were wholly deductible for taxation purposes in the year they were incurred. However, for accounting purposes, these costs were not wholly expensed but were deferred and recognised as they gave rise to premium revenue. The deferred costs are recorded as an asset by the taxpayer. Under the portfolio transfer, the transferee reimburses the taxpayer for these costs.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 states that 'your income includes income according to ordinary concepts, which is called ordinary income.' The characterisation of the consideration received by the taxpayer will determine whether the amount is assessable under section 6-5 of the ITAA 1997. It is established law that a reimbursement or recoupment of a previously allowed deduction does not necessarily give rise to assessable income ( Federal Commissioner of Taxation v. Rowe (1997) 187 CLR 266; 97 ATC 4317; (1997) 35 ATR 432 and HR Sinclair & Son Pty Ltd v. Federal Commissioner of Taxation (1966) 114 CLR 537; (1966) 14 ATD 194; (1966) 10 AITR 3). Therefore, in determining the assessability of the reimbursement, it is immaterial whether the taxpayer was previously allowed a deduction for the deferred acquisition costs. In Warner Music Australia Pty Limited v. Federal Commissioner of Taxation (1996) 70 FCR 197; 96 ATC 5046; (1996) 34 ATR 171 ( Warner Music ) the taxpayer was refunded an amount of sales tax. The Federal Court held that for an amount to be assessable two requirements must be satisfied: The first involves the question of whether the amount released involved a gain to Warner so as to constitute a profit. The second is whether this profit or gain was on revenue account. In relation to the first requirement, the reimbursement of the deferred acquisition costs is clearly a gain to the taxpayer. In relation to the second requirement, the characterisation of a receipt is determined by examining the receipt in the hands of the recipient. In Warner Music , Hill J stated that an amount will be assessable if it is in respect of an expenditure that is 'intimately connected' with the business even though it is outside the ordinary course of a taxpayer's business. The reimbursement of deferred acquisition costs, whilst not necessarily a frequent aspect of the taxpayer's business, is nevertheless integral to the taxpayer's general insurance business. Accordingly, even though the reimbursement takes place in the context of a cessation of the taxpayer's insurance operation, an infrequent transaction, the reimbursement is regarded as an incident of the taxpayer's business of providing insurance. The reimbursement of the deferred acquisition costs is therefore 'intimately connected' to the ordinary business of the taxpayer. Accordingly, the reimbursement of the deferred acquisition costs by the transferee will be assessable to the taxpayer under section 6-5 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "Federal Commissioner of Taxation v. Rowe (1997) 187 CLR 266 97 ATC 4317 35 ATR 432", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004915", "Unmatched_Content": "Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/916", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: value of unearned premium reserve of a general insurance company that transfers its liabilities under a portfolio transfer", "Issue": "Does the value of the unearned premium reserve of a general insurance company under section 321-60 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) include an amount in relation to risks covered by policies where, under a portfolio transfer, another general insurance company has assumed responsibility to provide the risk cover under the policies?", "Decision": "No. The value of the unearned premium reserve of a general insurance company under section 321-60 of the ITAA 1936 does not include an amount in relation to risks covered by policies where, under a portfolio transfer, another general insurance company has assumed responsibility to provide the risk cover under the policies.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby the whole of its insurance liabilities are to be transferred to another insurance company (the transferee). The taxpayer intends to cease its insurance operation after the portfolio transfer. The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The transferee is also an authorised general insurer under the Insurance Act. Prior to the portfolio transfer, the taxpayer has an obligation to provide insurance cover for the period stipulated in the policies of insurance that it has issued. Under the portfolio transfer, the obligation that remains under the policies of insurance for the unexpired risk period is assumed by the transferee. The taxpayer then has no ongoing obligation to provide insurance cover under the policies.", "Reasons_for_Decision": "Summary: Section 321-60 of the ITAA 1936 defines the value of the unearned premium reserve as the 'net premiums received or receivable by the company in relation to those policies as the company determines, based on proper and reasonable estimates, to relate to risks covered by the policies in respect of later years of income.' The value of the unearned premium reserve is therefore limited to the risk covered by a taxpayer under the policies in subsequent income years. The effect of the portfolio transfer is that the taxpayer no longer has an obligation to provide insurance cover under the policies. Accordingly, none of the net premiums received or receivable by the taxpayer in relation to the policies would relate to risks covered by the taxpayer under the policies. Where a general insurance company ceases to conduct insurance business after a portfolio transfer a proper and reasonable estimate of the unearned premium reserve at the end of the income year would therefore be nil because the obligation to provide insurance cover under the policies is assumed by the transferee. Accordingly, the value of the unearned premium reserve of the taxpayer under section 321-60 of the ITAA 1936 would not include an amount in relation to risks covered by policies where, under a portfolio transfer, another general insurance company has assumed responsibility to provide the risk cover provided under the policies. From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-60 of the ITAA 1936 should be read as referring to Section 321-60 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004916", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/917", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: consideration received in respect of reinsurance recoveries under cancelled reinsurance contract", "Issue": "Is the amount of consideration received by a general insurance company from a reinsurance company in respect of reinsurance recoveries receivable under a reinsurance contract that is cancelled because of a portfolio transfer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of consideration received by a general insurance company from a reinsurance company in respect of recoveries receivable under a reinsurance contract that is cancelled because of a portfolio transfer is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer has a reinsurance contract with a reinsurance company. The purpose of the reinsurance contract is to reduce the taxpayer's exposure to claims liability. The taxpayer, in reducing its risk exposure, paid a reinsurance premium to the reinsurance company for which it received a deduction for the whole of the expenditure incurred. The reinsurance premium is a 'relevant reinsurance premium' as defined under section 321-60 of Schedule 2J of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer entered into a portfolio transfer arrangement with the reinsurance company. Under the terms of the arrangement the reinsurance contract is to be cancelled. The taxpayer intends to cease its insurance operation after the portfolio transfer. The reinsurance company, on cancellation of the reinsurance contract, is required to settle its obligations to the taxpayer and pay out moneys owing under the reinsurance contract. Normally these moneys, commonly referred to in the industry as reinsurance recoveries, would be received by an insurance company when it pays or settles its claims under policies of insurance.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 states that 'your income includes income according to ordinary concepts, which is called ordinary income.' The characterisation of the consideration received by the taxpayer will determine whether the amount is assessable under section 6-5 of the ITAA 1997. In Heavy Minerals Pty Ltd v. Federal Commissioner of Taxation (1966) 115 CLR 512; (1966) 14 ATD 282; (1966) 10 AITR 140, Windeyer J considered the characterisation of the compensation received arising from the cancellation of a contract. In that case, the taxpayer was a mining company that had entered into a contract to supply rutile to an overseas purchaser at an agreed price. The price of rutile fell, and the purchaser compensated the taxpayer for a cancellation of the contract. Windeyer J held that the amount received by the taxpayer was ordinary income. The characterisation of termination payments under a contract was also considered in Allied Mills Industries Pty Ltd v. Federal Commissioner of Taxation (1989) 20 FCR 288; 89 ATC 4365; (1989) 20 ATR 457. In the joint decision of Bowen CJ, Lockhart and Foster JJ it was stated that: Contracts are made to be performed, not terminated, so in one sense the termination of contracts will be outside the ordinary course of business. Yet it is clear that payments upon the termination of contracts may be of an income nature. What is important in characterising the payment is not the fact that it is made as compensation for the termination of the contract, which will often be outside the ordinary course of business, but rather the nature of the contract which generated the payment, and the way in which that contract related to the structure and business of the taxpayer. The fact that the cancellation of the reinsurance contract is a precursor to the taxpayer ceasing its insurance business does not of itself determine the character of the payment received by the taxpayer. Rather, it is the nature of the contract in the taxpayer's business that is the determinative factor. The reinsurance contract was entered into as part of the taxpayer's business operations, and reduced the taxpayer's risk to claims liability. The reinsurance contract is not considered to form part of the taxpayer's capital structure. Upon cancellation of the reinsurance contract the taxpayer received payment which in turn was used to discharge its obligations under its policies of insurance. The payments compensate the taxpayer for amounts that it is expected it would have been paid under the reinsurance contract if the contract had not been cancelled. The payments are therefore of an income nature. Accordingly, the consideration received by the taxpayer in respect of recoveries receivable under a reinsurance contract cancelled under a portfolio transfer is assessable income under section 6-5 of the ITAA 1997. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, the reference to Section 321-60 of the ITAA 1936 should be read as referring to Section 321-60 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 321-60 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry Reinsurance & reinsurers", "Case_References": "Heavy Minerals Pty Ltd v. Federal Commissioner of Taxation (1966) 115 CLR 512 (1966) 14 ATD 282", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004917", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2004/918", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general reinsurance liabilities: receipt of refund of reinsurance premiums under cancelled reinsurance contract", "Issue": "Is the amount of a refund received by a general insurance company from a reinsurance company in respect of reinsurance premiums paid under a reinsurance contract that is cancelled because of a portfolio transfer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of the refund received by a general insurance company from a reinsurance company in respect of reinsurance premiums paid under a reinsurance contract that is cancelled because of a portfolio transfer is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer has a reinsurance contract with a reinsurance company. The purpose of the reinsurance contract is to reduce the taxpayer's exposure to claims liability. The taxpayer, in reducing its risk exposure, paid a reinsurance premium to the reinsurance company for which it received a deduction for the whole of the expenditure incurred. The reinsurance premium is a 'relevant reinsurance premium' as defined under section 321-60 of Schedule 2J of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer entered into a portfolio transfer arrangement with the reinsurance company. Under the terms of the arrangement the reinsurance contract is to be cancelled. The taxpayer intends to cease its insurance operation after the portfolio transfer. The reinsurance company, on cancellation of the reinsurance contract, refunds to the taxpayer that part of the reinsurance premium which relates to the unexpired risk period.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 states that 'your income includes income according to ordinary concepts, which is called ordinary income.' The characterisation of the consideration received by the taxpayer will determine whether the amount is assessable under section 6-5 of the ITAA 1997. In HR Sinclair & Son Pty Ltd v. Federal Commissioner of Taxation (1966) 114 CLR 537; (1966) 14 ATD 194; (1966) 10 AITR 3, the High Court considered whether a refund of royalties paid to the Forest Commission of Victoria should be taken into account in ascertaining the proceeds of the business in the year the refund of royalty was received. The Court held that the refund was assessable because it was directly related to the taxpayer's business operation or in the carrying on of that business operation. Owen J stated: The company's business was that of a saw-mill. It was in that capacity that it paid royalties for timber cut by it for the purpose of its business and it was in that capacity that it received the amount refunded. Similarly in Warner Music Australia Pty Limited v. Federal Commissioner of Taxation (1996) 70 FCR 197; 96 ATC 5046; (1996) 34 ATR 171 ( Warner Music ) the taxpayer was refunded sales tax. The Federal Court held that for a reimbursement or refund to be assessable, two requirements must be satisfied: The first involves the question of whether the amount released involved a gain to Warner so as to constitute a profit. The second is whether this profit or gain was on revenue account. In relation to the first requirement, the refund of the unearned component of the premium is clearly a gain to the taxpayer. In relation to the second requirement, the characterisation of a receipt is determined by examining the receipt in the hands of the recipient. In Warner Music Hill J stated that for a reimbursement or refund to be assessable it must be in respect of an expenditure that is 'intimately connected' with the business. Since the refund is received as an incident of the taxpayer's business of reinsuring some of its risks the refund of the reinsurance premium is 'intimately connected' to the taxpayer's ordinary business and is of a revenue nature. Accordingly, the refund received by the taxpayer in respect of the reinsurance premium as a result of the cancellation of the reinsurance contract is assessable under section 6-5 of the ITAA 1997. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, the reference to Section 321-60 of the ITAA 1936 should be read as referring to Section 321-60 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 321-60 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry Reinsurance & reinsurers", "Case_References": "H. R. Sinclair & Son Pty. Ltd. v. Federal Commissioner of Taxation (1966) 114 CLR 537 (1966) 14 ATD 194 (1966) 10 AITR 3", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004918", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2004/919", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: refund of exchange commissions by taxpayer in respect of cancelled reinsurance contract", "Issue": "Is a refund paid by a general insurance company to a reinsurance company in respect of exchange commissions relating to a reinsurance contract that is cancelled because of a portfolio transfer deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of the refund paid by a general insurance company to a reinsurance company in respect of exchange commissions relating to a reinsurance contract that is cancelled because of a portfolio transfer is deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer has a reinsurance contract with a reinsurance company. The purpose of the reinsurance contract is to reduce the taxpayer's exposure to claims. Because the taxpayer incurred expenses in writing insurance contracts, the reinsurance company previously paid a proportion of the reinsurance premium as an exchange commission to the taxpayer. The taxpayer entered into a portfolio transfer arrangement with the reinsurance company. Under the terms of the arrangement the reinsurance contract is to be cancelled. The taxpayer intends to cease its insurance operation after the portfolio transfer. The taxpayer, on cancellation of the reinsurance contract, refunds that part of the exchange commissions relating to the unexpired portion of the premium to the reinsurance company.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that a loss or outgoing is deductible provided that 'it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.' A loss or outgoing is not deductible under section 8-1 of the ITAA 1997 if it is denied under paragraph 8-1(2)(a) of the ITAA 1997 because it is a loss or outgoing of a capital nature. The deductibility of the reimbursement of the exchange commission can be determined in light of the High Court's decision in G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 ( Pipecoaters ). In the Pipecoaters decision the court stated: The character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. In the context of subsection 51(1) of the Income Tax Assessment Act 1936 , the predecessor of section 8-1 of the ITAA 1997, Hill J said in FC of T v. Broken Hill Pty Ltd Company Ltd 2000 ATC 4659; (2000) 45 ATR 507; [2000] FCA 1431: In determining whether an outgoing falls for deductibility under s51(1), it will be critical to determine what the outgoing is paid for. The significance of that question, which is directed to ascertaining the advantage sought to be obtained, is essential to the determination of true characterisation of an outgoing. The taxpayer had previously received an exchange commission in recognition of costs that it incurred in relation to the policies it reinsured. The exchange commission represents the reinsurance company's contribution to the costs that the taxpayer incurred in writing the business that it reinsured. The amount of exchange commission is determined on the expectation that the reinsurance contract would run for a given period of time. As the reinsurance contract is not going to run its full term, the taxpayer will refund part of the exchange commission that it received from the reinsurer. The refund recognises the fact that the mutual obligations of the taxpayer and the reinsurer under the reinsurance contract will not be performed for the period that was initially agreed. The entering into of reinsurance contracts, and the receipt of exchange commissions, is a normal incident of the business of an insurer. Therefore, where the reinsurance contract will not run for the period that was originally intended, a refund of part of the exchange commissions in relation to that contract is considered to have a revenue character and will be deductible. Accordingly, the consideration paid by the taxpayer in respect of exchange commissions relating to a reinsurance contract that is cancelled because of a portfolio transfer is deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry Reinsurance & reinsurers", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 21 ATR 1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004919", "Unmatched_Content": "Keywords General insurance General insurance industry Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2004/921", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: amount received by taxpayer to assume outstanding claims liability of a general insurance company", "Issue": "Is the amount of consideration received by a general insurance company from another general insurance company to assume an outstanding claims liability under general insurance policies under a portfolio transfer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of consideration received by a general insurance company from another general insurance company to assume an outstanding claims liability under general insurance policies under a portfolio transfer is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is done in accordance with the provisions of the Insurance Act. Under the portfolio transfer, the taxpayer received an amount from the transferor in consideration for the taxpayer assuming the transferor's outstanding claims liability under general insurance policies. The outstanding claims liability is the accounting value, being a proper and reasonable estimate of the present value of the sum of the taxpayer's liability for claims under its general insurance policies and direct settlement costs associated with those claims, increased by a margin for prudence.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 states that 'your income includes income according to ordinary concepts, which is called ordinary income.' The characterisation of the consideration received by the taxpayer will determine whether the amount is assessable under section 6-5 of the ITAA 1997. In Federal Commissioner of Taxation v. Myer Emporium Ltd (1987) 63 CLR 199; 87 ATC 4363; (1987) 18 ATR 693 (Myer Emporium) the High Court identified relevant factors to consider in characterising a receipt: Although it is well settled that a profit or gain made in the ordinary course of carrying on a business constitutes income, it does not follow that a profit or gain made in a transaction entered into otherwise than in the ordinary course of carrying on the taxpayer's business is not income. Because a business is carried on with a view to profit, a gain made in the ordinary course of carrying on the business is invested with the profit-making purpose, thereby stamping the profit with the character of income. But a gain made otherwise than in the ordinary course of carrying on the business which nevertheless arises from a transaction entered into by the taxpayer with the intention or purpose of making a profit or gain may well constitute income. Whether it does depends very much on the circumstances of the case. Generally speaking, however, it may be said that if the circumstances are such as to give rise to the inference that the taxpayer's intention or purpose in entering into the transaction was to make a profit or gain, the profit or gain will be income, notwithstanding that the transaction was extraordinary judged by reference to the ordinary course of the taxpayer's business. The decision in Myer Emporium demonstrates that an amount received by the taxpayer can be income even if it is a gain made otherwise than in the ordinary course of carrying on the taxpayer's business. Accordingly, an amount received in the context of a portfolio transfer may be assessable income, notwithstanding that the portfolio transfer may not be a transaction in the ordinary course of the taxpayer's business. The payment received by the taxpayer in respect of the outstanding claims liability compensates the taxpayer for the assumption of the liability to pay the claims for which the transferor would otherwise have been liable. As a result of the portfolio transfer, the taxpayer is effectively put in the contractual position as if it were the original undertaker of risk under the insurance policies. In G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1 (Pipecoaters) it was also held that '...the scope of the business ...and ... the taxpayer's purpose in engaging in it' is the relevant factor to consider when characterising a receipt as assessable income. Applying the Pipecoaters' decision to the portfolio transfer, the amount received in respect of the outstanding claims liability will be received in the course of the taxpayer's general insurance business which includes receiving compensation in return for assuming insurance risk. Accordingly, the consideration paid to the taxpayer in respect of the outstanding claims liability to assume liabilities under general insurance policies from another general insurance company under the portfolio transfer is assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 21 ATR 1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004921", "Unmatched_Content": "Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/922", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: value of outstanding claims liability of a general insurance company that assumes liabilities under a portfolio transfer", "Issue": "Does the outstanding claims liability of a general insurance company under section 321-20 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) include an amount in respect of the liability for outstanding claims that has been assumed by the general insurance company under a portfolio transfer where the liability has not been discharged by the general insurance company at the end of the year of income?", "Decision": "Yes. The outstanding claims liability of a general insurance company under section 321-20 of the ITAA 1936 does include an amount in respect of the liability for outstanding claims that has been assumed by the general insurance company under a portfolio transfer where the liability has not been discharged by the general insurance company at the end of the year of income.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is completed in accordance with the provisions of the Insurance Act. Under the portfolio transfer, the taxpayer received an amount from the transferor in consideration for the taxpayer assuming the transferor's outstanding claims liability in relation to the transferred policies. The outstanding claims liability represents a proper and reasonable estimate of the present value of the transferor's liabilities for claims under its general insurance policies and direct settlement cost associated with those claims.", "Reasons_for_Decision": "Summary: Section 321-20 of the ITAA 1936 defines the value of the outstanding claims liability as 'the sum of the amounts that...the company determines, based on proper and reasonable estimates, to be appropriate to set aside and invest in order to meet: (i) liabilities for outstanding claims under those policies; and (ii) direct settlement costs associated with those outstanding claims; less....any part of that sum....the company expects to recover under a policy of reinsurance...'. The value of the outstanding claims liability is therefore related to claims to be met by the taxpayer in subsequent income years. The effect of the portfolio transfer on the outstanding claims liability is twofold. Firstly, any outstanding claims liability is taken over by the taxpayer. Secondly, the transferor's outstanding claims liability is effectively discharged. As the taxpayer has assumed liability in respect of the outstanding claims, the taxpayer would be expected to set aside and invest an amount to in order to meet these liabilities and the direct settlement costs associated with the claims. Accordingly, if the liability has not been discharged, the taxpayer's outstanding claims liability at the end of the year of income under section 321-20 of the ITAA 1936 will include an amount in respect of the liabilities that it assumed under the portfolio transfer. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Section 321-20 of the ITAA 1997 has, however, been clarified to include reference to section 148(1) of the ITAA 1936, which relates to reinsurance with non-residents. Therefore, from 1 July 2010, all references to Section 321-20 of the ITAA 1936 should be read as referring to Section 321-20 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-20 section 148(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004922", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/923", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: deduction for payment of claims in respect of assumed outstanding claims liabilities", "Issue": "Can a general insurance company claim a deduction under section 321-25 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) for amounts paid directly relating to the settlement or discharge of claims arising from the assumption of an outstanding claims liability under a portfolio transfer?", "Decision": "Yes. A general insurance company claim a deduction under section 321-25 of the ITAA 1936 for amounts paid directly relating to the settlement or discharge of claims arising from the assumption of an outstanding claims liability under a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The taxpayer subsequently pays an amount to settle or discharge a claim in respect of the assumed outstanding claims liability.", "Reasons_for_Decision": "Summary: Section 321-25 of the ITAA 1936 provides that a general insurance company can deduct amounts paid during the year of income that are in respect of claims under general insurance policies. Amounts paid to settle or discharge claims arising from the assumption of an outstanding claims liability under a portfolio transfer are paid 'in respect of' claims under general insurance policies because the obligation to pay arises under the policies. The fact that the outstanding claims liability was not initially incurred by the taxpayer, but rather was assumed from the transferor, does not alter the outcome that the amounts are paid under a contract of insurance. Accordingly, the taxpayer is entitled to a deduction under section 321-25 of the ITAA 1936 for an amount paid directly relating to the settlement or discharge of claims arising from the assumption of an outstanding claims liability under a portfolio transfer. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording was slightly altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in the explanatory memorandum, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-25 of the ITAA 1936 should be read as referring to section 321-25 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004923", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/924", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: amount received by taxpayer to assume unearned premium liability of a general insurance company", "Issue": "Is the amount of consideration received by a general insurance company from another general insurance company in respect of the unearned premium liability under general insurance policies transferred under a portfolio transfer assessable under section 321-45 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The amount of consideration received by a general insurance company from another general insurance company in respect of the unearned premium liability under general insurance policies transferred under a portfolio transfer is assessable under section 321-45 of the ITAA 1936.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is done in accordance with the provisions of the Insurance Act. Under the portfolio transfer, the transferor paid an amount to the taxpayer in consideration for the taxpayer assuming the transferor's unexpired risk liability under general insurance policies. This is commonly referred to in the insurance industry as the unearned premium liability. The assumption of this liability obligates the taxpayer to provide insurance cover under policies of insurance the subject of the portfolio transfer for the balance of the term of the insurance contract period.", "Reasons_for_Decision": "Summary: Section 321-45 of the ITAA 1936 includes in the assessable income of a general insurance company the gross premiums received or receivable during the income year in respect of general insurance policies. The words 'gross premium' are not defined under the ITAA 1936 or the ITAA 1997 but its commonly understood meaning is consideration for a contract of insurance or assurance. Similarly, the words 'in respect of' are not statutorily defined and their definition is obtained from case law. In Technical Products Pty Ltd v. State Government Insurance (Q) (1989) 167 CLR 45 the High Court interpreted the words 'in respect of' to: ... have a very wide meaning. Indeed, they have a chameleon-like quality in that they commonly reflect the context in which they appear...That nexus will not, however, exist unless there be some discernible and rational link... Under the portfolio transfer arrangement, the transferor is to pay an amount to the taxpayer equating to the accounting value of the unearned component of the original premiums received by the transferor under the policies of insurance. This payment is made to compensate the taxpayer for the assumption of risk it undertakes in providing continuing insurance coverage to the policyholders. A payment to assume risk in relation to a general insurance policy has a direct nexus or connection to the general insurance policy, and is considered to be an amount that is received by the company 'in respect of general insurance policies'. Accordingly, the consideration received by the taxpayer is 'gross premiums ... in respect of general insurance policies' and assessable income under section 321-45 of the ITAA 1936. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording was slightly altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-45 of the ITAA 1936 should be read as referring to Section 321-45 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-45", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "Technical Products Pty. Ltd. v. State Government Insurance Office (Q) (1989) 167 CLR 45", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004924", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/925", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: deduction for amount paid by taxpayer in respect of deferred acquisition costs of a general insurance company", "Issue": "Is a general insurance company entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the consideration paid under a portfolio transfer to another general insurance company in respect of deferred acquisition costs of the other general insurance company?", "Decision": "Yes. The general insurance company is entitled to a deduction under section 8-1 of the ITAA 1997 for the consideration paid under a portfolio transfer to another general insurance company in respect of deferred acquisition costs of the other general insurance company.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is done in accordance with the provisions of the Insurance Act. The transferor, in the course of issuing insurance policies to its policyholders, incurred costs commonly referred to in the industry as 'acquisition costs'. These costs are, for taxation purposes, referred to as 'apportionable issue costs' and were wholly deductible in the year they were incurred. However, for accounting purposes these costs were not wholly expensed but were deferred and recognised as they give rise to premium revenue. The deferred costs are recorded as an asset by the transferor. Under the portfolio transfer, the taxpayer reimburses the transferor for the deferred costs.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that a loss or outgoing is deductible provided that 'it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.' A loss or outgoing is not deductible under section 8-1 of the ITAA 1997 if it is denied under paragraph 8-1(2)(a) of the ITAA 1997 because it is a loss or outgoing of a capital nature. Whether an amount paid is deductible under section 8-1 of the ITAA 1997 is a question of characterisation of the expense. It was held in G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1: The character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. Dixon J, in Hallstroms Pty Ltd v. Federal Commissioner of Taxation (1946) 72 CLR 634; (1946) 8 ATD 190; (1946) 3 AITR 436, held that the characterisation of a loss or outgoing must be considered from a practical and business point of view. Under a portfolio transfer, the payment from the taxpayer to the transferor is made to reimburse the transferor for the deferred acquisition costs it incurred in writing the insurance policies that are transferred to the taxpayer. The advantage sought by the making of the expenditure is to place the taxpayer in the same position as the transferor. That is, the payment is made in recognition of the costs that the taxpayer would have incurred if it had written the policies directly with the policyholders rather than obtaining the policies through the portfolio transfer. The payment is in the nature of a normal expense incurred in the business of providing insurance risk cover to policyholders. This is further supported by the High Court decision of Federal Commissioner of Taxation v. Morgan (1961) 106 CLR 517; (1961) 12 ATD 370; (1961) 8 AITR 421 where a purchaser of a property sought a deduction under subsection 51(1) of the Income Tax Assessment Act 1936 for the amount paid to the vendor of the property in respect of the apportioned rates. The High Court held that the reimbursement of an expense paid by the purchaser was deductible as it is an expense borne by the purchaser. Applying this reasoning to the taxpayer's situation, the expenditure is deductible as it reimburses amounts that would have been normal operating expenses of the taxpayer if they had been incurred directly by the taxpayer. Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for the consideration it paid under a portfolio transfer in respect of deferred acquisition costs of the transferor.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 (1990) 21 ATR1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004925", "Unmatched_Content": "Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/926", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: value of unearned premium reserve of a general insurance company that assumes liabilities under a portfolio transfer", "Issue": "Does the unearned premium reserve of a general insurance company under section 321-60 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) include amounts in respect of policies where, under a portfolio transfer, the general insurance company has assumed the liability to provide insurance cover under the policies?", "Decision": "Yes. The unearned premium reserve of a general insurance company under section 321-60 of the ITAA 1936 does include amounts in respect of policies where, under a portfolio transfer, the general insurance company has assumed the liability to provide insurance cover under the policies.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITA 1997( and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The unearned premium reserve represents the liability that a general insurance company has to provide insurance cover in accordance with the terms of the insurance policies. Under the portfolio transfer, the taxpayer received that part of the gross premiums that relates to the unexpired risk period as consideration for assuming the liability to provide insurance cover under the general insurance policies of the transferor.", "Reasons_for_Decision": "Summary: Section 321-60 of the ITAA 1936 defines the value of the unearned premium reserve as the 'net premiums received or receivable by the company in relation to those policies as the company determines, based on proper and reasonable estimates, to relate to risks covered by the policies in respect of later years of income.' Under the portfolio transfer the taxpayer has accepted, as consideration for assuming the obligation to provide insurance cover for the unexpired risk period, an amount based on the gross premiums previously received or receivable by the transferor. The acceptance of that sum and the undertaking to provide insurance cover is sufficient for the consideration to maintain its characterisation as gross premiums in the hands of the taxpayer. Thus, the consideration comes to be included in the assessable income of the taxpayer under section 321-45 of the ITAA 1936. As the period of risk cover under the policies may extend beyond the year of income in which the portfolio transfer occurred, the taxpayer is required to work out at the end of that income year, in accordance with section 321-60 of the ITAA 1936, the value of its net premiums that relate to risks covered by the policies in respect of later years of income and allocate it to its unearned premium reserve. Accordingly, the taxpayer's unearned premium reserve at the end of the financial year, under section 321-60 of the ITAA 1936, will include the part of the consideration received for assuming the liability to provide insurance cover under the general insurance policies of the transferor that the taxpayer determines, based on proper and reasonable estimates, to relate to risks to be covered in respect of later years of income. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Sections 321-45 and 321-60 of the ITAA 1936 should be read as referring to Sections 321-45 and 321-60 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-45 section 321-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004926", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/927", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: apportionable issue costs of a general insurance company that assumes unearned premium liabilities under a portfolio transfer", "Issue": "Will an amount paid by a general insurance company to another general insurance company under a portfolio transfer in respect of deferred acquisition costs constitute apportionable issue costs for the purposes of working out the net premiums of the general insurance company under section 321-60 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. An amount paid by the general insurance company to another general insurance company under a portfolio transfer in respect of deferred acquisition costs constitutes apportionable issue costs for the purposes of working out the net premiums of the general insurance company under section 321-60 of the ITAA 1936.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITA 1997) and the Insurance Act 1973. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of another general insurance company (the transferor). The portfolio transfer is completed in accordance with the provisions of the Insurance Act. The transferor had previously incurred costs in the course of writing policies of general insurance, the subject of the portfolio transfer. Under the portfolio transfer the taxpayer compensates the transferor for part of those costs, referred to as deferred acquisition costs, by way of a payment to the transferor.", "Reasons_for_Decision": "Summary: Section 321-60 of the ITAA 1936 provides that the value of the unearned premium reserve is so much of the sum of the net premiums received or receivable by the company in relation to general insurance policies issued in the course of carrying on insurance business. Net premiums are defined in section 321-60 as the sum of gross premiums received or receivable and reinsurance commissions received and receivable less the sum of apportionable issue costs and any relevant reinsurance premiums. Apportionable issue costs are defined in section 321-60 of the ITAA 1936 to include so much of the costs incurred by a general insurance company in connection with the issue of the relevant policies as relates to the gross premiums of the general insurance company, and includes: When the taxpayer accepts the transferred portfolio, it pays valuable consideration to the transferor for the benefits associated with the apportionable issue costs that were incurred by the transferor. Though the payment is made to the transferor it is nonetheless an expense which represents all or some of the components characterised as apportionable issue costs identified in section 321-60 of the ITAA 1936. There is no precondition that the costs be incurred by the insurance company that ultimately bears the risk under the policies. For costs to come within the definition of apportionable issue costs it is necessary that there be some relationship with the issue of the policies and derivation of gross premiums. The amount paid by the taxpayer to the transferor in respect of deferred acquisition costs constitutes costs 'incurred by the company in connection with the issue of the relevant policies as relate to gross premiums' and as such will be classified as apportionable issue costs. The taxpayer will have incurred the amount credited to the transferor in respect of deferred acquisition costs. As the payment is a reimbursement of the issue costs incurred by the transferor, it is 'in connection with the issue of the relevant policies.' Accordingly, for the purposes of determining the taxpayer's net premiums under section 321-60 of the ITAA 1936, the amount paid in respect of deferred acquisition costs will constitute apportionable issue costs. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording and format was altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in Chapter 6 of the Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-60 of the ITAA 1936 should be read as referring to Section 321-60 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 995-1 section 321-60", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/928 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004927", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry"}
{"ATO_ID_Number": "ATO ID 2004/928", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: deduction to taxpayer for consideration paid in respect of reinsurance recoveries under cancelled reinsurance contract", "Issue": "Can a general insurance company claim a deduction under section 321-25 of Schedule 2J to the Income Tax Assessment Act 1936 (ITAA 1936) for the consideration paid to another general insurance company because of a portfolio transfer in respect of reinsurance recoveries payable under a reinsurance contract which is subsequently cancelled?", "Decision": "Yes. A general insurance company can claim a deduction under section 321-25 of the ITAA 1936 for the consideration paid to another general insurance company because of a portfolio transfer in respect of reinsurance recoveries payable under a reinsurance contract which is subsequently cancelled.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITA !((&) and the Insurance Act 1973. The taxpayer has a reinsurance contract with another general insurance company (the reinsured). The purpose of the reinsurance contract is to reduce the reinsured's exposure to claims and to be indemnified against some part of the claims. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of the reinsured. As a result, the reinsurance contract between the taxpayer and the reinsured was cancelled. The taxpayer, on cancellation of the reinsurance contract, is required to settle its obligations to the reinsured and pay out moneys owing under the reinsurance contract. Normally these moneys, commonly referred to in the industry as reinsurance recoveries, are not payable until the reinsured's obligation against which it seeks to be indemnified is quantified.", "Reasons_for_Decision": "Summary: Under section 321-25 of the ITAA 1936, 'a general insurance company can deduct amounts paid during the year of income in respect of claims under general insurance policies.' The word 'claim', when used in an insurance policy has different meanings depending on the context ( Drayton and Ors v. Martin and Ors (1996) 9 ANZ Insurance Cases 61,322 at 76,590). Generally, the word is defined, amongst other things, as, 'submit a request for payment under an insurance policy' ( The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne). Therefore, a 'claim' entails a policyholder's legal right to be indemnified or compensated by the general insurance company in accordance with the terms of the insurance policy. The cost of meeting the claims is reported by the general insurance company as outstanding claims liability and is measured as the present value of the expected future payments. The condition for deductibility under section 321-25 of the ITAA 1936 is whether the amount paid is 'in respect of claims under general insurance policies'. The words 'in respect of' which precede 'claims under general insurance policies' were interpreted by the High Court in Technical Products Pty Ltd v. State Government Insurance (Q) (1989) 167 CLR 45 in the following passage: The words \"in respect of\" have a very wide meaning. Indeed, they have a chameleon-like quality in that they commonly reflect the context in which they appear...That nexus will not, however, exist unless there be some discernible and rational link... Therefore, an amount is paid 'in respect of claims' under general insurance policies, where, in the context in which section 321-25 of the ITAA 1936 appears, there is a sufficient nexus or material connection, and a discernible and rational link, between the amount and claims under general insurance policies. When the reinsurance contract is cancelled, the recoveries receivable for the period up to and including the cancellation date are paid to the reinsured. The amount is paid to indemnify the reinsured for the risks that the taxpayer accepted under the insurance contracts. The payment therefore is directly related to claims under general insurance policies and satisfies the test under section 321-25 of the ITAA 1936. Accordingly, the amount paid by the taxpayer to the reinsured is deductible under section 321-25 of the ITAA 1936. | Detailed Reasoning - Application of this ATO ID from 1 July 2010: From 1 July 2010, the Tax Laws Amendment (Transfer of Provisions) Act 2010 repealed Schedule 2J of the ITAA 1936 and rewrote those provisions into Division 321 of the ITAA 1997. The wording was slightly altered to adhere to the drafting approach taken in the ITAA 1997, but as outlined in the explanatory memorandum, there has been no change in meaning of the rewritten provisions. Therefore, from 1 July 2010, all references to Section 321-25 of the ITAA 1936 should be read as referring to section 321-25 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 321-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/929 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry Reinsurance & reinsurers", "Case_References": "Drayton and Ors v. Martin and Ors (1996) 9 ANZ Insurance Cases 61,322", "Other_References": "The Australian Oxford Dictionary, 1999, Oxford University Press, Melbourne Explanatory Memorandum to the Tax Laws Amendment (Transfer of Provisions) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004928", "Unmatched_Content": "This ATO ID has been amended to insert further explanatory paragraphs at the conclusion of the Reasons for Decision. | Keywords General insurance General insurance industry Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2004/929", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: deduction for refund of reinsurance premiums under cancelled reinsurance contract", "Issue": "Can a general insurance company claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a refund of reinsurance premiums to another general insurance company under a reinsurance contract that is cancelled because of a portfolio transfer?", "Decision": "Yes. A general insurance company can claim a deduction under section 8-1 of the ITAA 1997 for a refund of reinsurance premiums to another general insurance company under a reinsurance contract that is cancelled because of a portfolio transfer.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer has a reinsurance contract with another general insurance company (the reinsured). The purpose of the reinsurance contract is to reduce the reinsured's exposure to claims and to be indemnified against some part of the claims. The taxpayer entered into a portfolio transfer arrangement whereby it assumed the insurance liabilities of the reinsured. As a result, the reinsurance contract between the taxpayer and the reinsured was cancelled. The taxpayer, on cancellation of the reinsurance contract, is required to refund that part of the reinsurance premium that it previously received from the reinsured that relates to the unexpired period of the reinsurance contract.", "Reasons_for_Decision": "Summary: Section 8-1 of the ITAA 1997 states that a loss or outgoing is deductible provided that 'it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.' A loss or outgoing is not deductible under section 8-1 of the ITAA 1997 if it is denied under paragraph 8-1(2)(a) of the ITAA 1997 because it is a loss or outgoing of a capital nature. The deductibility of the refund of part of the reinsurance premium can be determined in light of the High Court's decision in G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; 90 ATC 4413; (1990) 21 ATR 1. It was held in that case that: The character of expenditure is ordinarily determined by reference to the nature of the asset acquired or the liability discharged by the making of the expenditure, for the character of the advantage sought by the making of the expenditure is the chief, if not the critical, factor in determining the character of what is paid. In the context of subsection 51(1) of the Income Tax Assessment Act 1936 , the predecessor of section 8-1 of the ITAA 1997, Hill J said in FC of T v. Broken Hill Pty Ltd Company Ltd 2000 ATC 4659; (2000) 45 ATR 507, [2000] FCA 1431 that: In determining whether an outgoing falls for deductibility under s51(1), it will be critical to determine what the outgoing is paid for. The significance of that question, which is directed to ascertaining the advantage sought to be obtained, is essential to the determination of true characterisation of an outgoing. As the reinsurance contract is not going to run its full term, the taxpayer will refund part of the reinsurance premium that it received from the reinsured. The refund recognises the fact the taxpayer will not be providing reinsurance cover for the period that was originally intended. The provision of a service such as reinsurance cover is of a normal incident of the business of a reinsurer. Therefore, where the service will not be provided for the period that was originally intended, a refund of part of the premium in respect of that service is considered to have a revenue character and will be deductible. Accordingly, the taxpayer can claim a deduction under section 8-1 of the ITAA 1997 for the refund of the reinsurance premium under a reinsurance contract that is cancelled.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(a) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/930", "Subject_References": "General insurance General insurance industry Reinsurance & reinsurers", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 21 ATR 1", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004929", "Unmatched_Content": "Keywords General insurance General insurance industry Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2004/930", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Portfolio transfer of general insurance liabilities: receipt of refund of exchange commissions in respect of cancelled reinsurance contract", "Issue": "Is the amount of consideration received by a general insurance company from another general insurance company in respect of exchange commissions relating to a reinsurance contract that is cancelled because of a portfolio transfer assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The amount of consideration received by a general reinsurance company from another general reinsurance company in respect of exchange commissions relating to a reinsurance contract that is cancelled because of a portfolio transfer is assessable under section 6-5 of the ITAA 1997.", "Facts": "The taxpayer is a general insurance company for the purposes of section 995-1 of the ITAA 1997 and the Insurance Act 1973. The taxpayer has a reinsurance contract with another general insurance company (the reinsured). The purpose of the reinsurance contract is to reduce the reinsured's exposure to claims and to be indemnified against some part of the claims. The taxpayer previously paid the reinsured exchange commissions under the reinsurance contract. The exchange commissions were paid by the taxpayer to the reinsured in recognition of the costs that the reinsured had incurred in relation to the reinsurance that was retroceded to the taxpayer. The exchange commission formed a part of the taxpayer's deferred acquisition cost, which is an asset recorded in its accounts. The taxpayer entered into a portfolio transfer arrangement with the reinsured whereby the whole of the reinsured's insurance liabilities are to be assumed. Under the arrangement the reinsurance contract between the taxpayer and the reinsured will cease to have effect and exchange commissions relating to the unexpired portion of the premium are to be refunded to the taxpayer.", "Reasons_for_Decision": "Summary: Section 6-5 of the ITAA 1997 states that 'your assessable income includes income according to ordinary concepts'. The characterisation of the consideration received by the taxpayer will determine whether the amount is assessable income under this section. In H R Sinclair and Son Pty Ltd v. Federal Commissioner of Taxation (1966) 114 CLR 537; (1966) 14 ATD 194; (1966) 10 AITR 3, the High Court considered whether the refund of royalties paid to the Forest Commission of Victoria should be taken into account in ascertaining the proceeds of the business in the year the refund was received. In determining the refund was assessable, Owen J said: The company's business was that of a saw-mill. It was in that capacity that it paid royalties for timber cut by it for the purpose of its business and it was in that capacity that it received that amount refunded. Similarly in Warner Music Australia Pty Limited v. Federal Commissioner of Taxation (1996) FCR 197; 96 ATC 5046; (1996) 34 ATR 171 ( Warner Music ) the taxpayer was refunded sales tax. The Federal Court held that for a reimbursement or refund to be assessable, two requirements must be satisfied: The first involves the question of whether the amount released involved a gain to Warner so as to constitute a profit. The second is whether this profit or gain was on revenue account. In relation to the first requirement, the refund of the exchange commissions is clearly a gain to the taxpayer. In relation to the second requirement, the characterisation of a receipt is determined by examining the receipt in the hands of the recipient. In Warner Music, Hill J stated that for a reimbursement to be assessable it must be in respect of an expenditure that is 'intimately connected' with the business. Since the reimbursement is received as an incident of the taxpayer's business of providing general reinsurance and satisfying some of that reinsurance liability, the reimbursement of the exchange commissions is 'intimately connected' to the taxpayer's ordinary business and is of a revenue nature. Accordingly, the amount of consideration received by the taxpayer, in respect of exchange commissions relating to a reinsurance contract that is cancelled under a portfolio transfer , is assessable under section 6-5 of the ITAA 1997.", "Date_of_Decision": "1 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/910 | ATO ID 2004/911 | ATO ID 2004/912 | ATO ID 2004/913 | ATO ID 2004/914 | ATO ID 2004/915 | ATO ID 2004/916 | ATO ID 2004/917 | ATO ID 2004/918 | ATO ID 2004/919 | ATO ID 2004/920 | ATO ID 2004/921 | ATO ID 2004/922 | ATO ID 2004/923 | ATO ID 2004/924 | ATO ID 2004/925 | ATO ID 2004/926 | ATO ID 2004/927 | ATO ID 2004/928 | ATO ID 2004/929", "Subject_References": "General insurance General insurance industry Reinsurance & reinsurers", "Case_References": "H. R. Sinclair & Son Pty. Ltd. v. Federal Commissioner of Taxation (1966) 114 CLR 537 (1966) 14 ATD 194 (1966) 10 AITR 3", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004930", "Unmatched_Content": "Keywords General insurance General insurance industry Reinsurance & reinsurers"}
{"ATO_ID_Number": "ATO ID 2003/462", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: 'arrangement payments' under a hire purchase agreement", "Issue": "Are 'arrangement payments' made by the notional buyer under the hire purchase agreement deductible under Division 240 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The 'arrangement payments' made by the notional buyer under the hire purchase agreement are not deductible under Division 240 of the ITAA 1997.", "Facts": "The taxpayer entered into an arrangement that was a hire purchase agreement with a finance provider, a Bank, for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The term of the hire purchase agreement was for 60 months. The hire purchase agreement was terminated early. The Bank repossessed the plant and advised the taxpayer of the amount outstanding under the hire purchase agreement. The taxpayer did not extend or renew the agreement nor reacquire the plant. The taxpayer disputed the amount advised as outstanding. Under a negotiated settlement the taxpayer paid the Bank a settlement payment comprised of a payment and the return of the plant.", "Reasons_for_Decision": "Summary: Division 240 of the ITAA 1997 deals with hire purchase agreements as defined in subsection 995-1(1) of the ITAA 1997. The broad scheme of the Division is to treat such hire purchase agreements as a sale of the relevant goods to the hirer (notional buyer) combined with a loan from the supplier (notional seller) to the notional buyer. The taxpayer was the notional buyer and the Bank was the notional seller under the hire purchase agreement (section 240-17 of the ITAA 1997). The hire purchase agreement ended when the plant was repossessed (section 240-75 of the ITAA 1997). Section 240-65 of the ITAA 1997 gives the meaning of 'arrangement payment' as an amount that the notional buyer is required to pay under the hire purchase agreement, but does not include a termination amount. The phrase 'an amount that a notional buyer is required to pay under the arrangement' in section 240-65 of the ITAA 1997 means an amount paid or liable to be paid, under the terms and conditions of the hire purchase agreement, as consideration for the use or the control of use of the property subject to the hire purchase agreement, or as consideration for any other rights in relation to the property. Both the instalments the taxpayer paid prior to repossession and the settlement payment made by the taxpayer in satisfaction of obligations under the hire purchase agreement, are 'arrangement payments' because they are required to be paid under the terms and conditions in the hire purchase agreement, and were not termination amounts. Section 240-55 of the ITAA 1997 provides that a notional buyer cannot deduct arrangement payments it makes under a hire purchase agreement. Arrangement payments are taken into account in calculating notional interest that may be deducted under section 240-50 of the ITAA 1997. Subsection 240-7(4) of the ITAA 1997 also clarifies that the arrangement payments, as actual payments made to the notional seller, are not deductible to the notional buyer. Therefore, the 'arrangement payments' made by the notional buyer under the hire purchase agreement are not deductible under Division 240 of the ITAA 1997.", "Date_of_Decision": "11 June 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2000 Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1997 subsection 240-7(4) section 240-17 section 240-50 section 240-55 section 240-65 section 240-75 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/463 | ATO ID 2003/464", "Subject_References": "Capital Allowances CoE Lease & hire expenses Hire purchase", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003462", "Unmatched_Content": "Keywords Capital Allowances CoE Lease & hire expenses Hire purchase"}
{"ATO_ID_Number": "ATO ID 2003/464", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Allowances: termination amount when a hire purchase agreement ends", "Issue": "Where property the subject of a hire purchase agreement is to be returned to the notional buyer, is the value of the property at the end of the hire purchase agreement included as a termination amount under section 240-78 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The value of the returned property at the end of the hire purchase agreement is included as a termination amount for the purposes of section 240-78 of the ITAA 1997. The value included is the market value of the property at the time when the hire purchase agreement ends.", "Facts": "The taxpayer entered into an arrangement that was a hire purchase agreement with a finance provider, a Bank, for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The term of the hire purchase agreement was for 60 months. The hire purchase agreement was terminated early. The Bank repossessed the plant and advised the taxpayer of the amount outstanding under the hire purchase agreement. The taxpayer did not extend or renew the agreement nor reacquire the plant. The taxpayer disputed the amount advised as outstanding. Under a negotiated settlement the taxpayer paid the Bank a settlement payment which comprised of a payment and the return of the plant.", "Reasons_for_Decision": "Summary: Division 240 of the ITAA 1997 deals with hire purchase agreements as defined in subsection 995-1(1) of the ITAA 1997. The broad scheme of the Division is to treat such hire purchase agreements as a sale of the relevant goods to the hirer (notional buyer) combined with a loan from the supplier (notional seller) to the notional buyer. The taxpayer was the notional buyer and the Bank was the notional seller under the hire purchase agreement (section 240-17 of the ITAA 1997). The hire purchase agreement ended when the plant was repossessed (section 240-75 of the ITAA 1997). Section 240-78 of the ITAA 1997 gives the meaning of termination amount as an amount payable because the hire purchase agreement ends. Where paragraph 240-78(c) of the ITAA 1997 applies, a termination amount includes the market value of the property at the end of the hire purchase agreement. That paragraph covers situations where property is returned to the notional seller as a form of payment towards the outstanding debt when the hire purchase agreement is terminated early, such as pursuant to repossession. It should be noted that paragraph 240-65(b) of the ITAA 1997 provides, that an arrangement payment does not include a termination amount as defined in section 240-78 of the ITAA 1997. Accordingly, the value of the returned property at the end of the hire purchase agreement is included as a termination amount for the purposes of section 240-78 of the ITAA 1997. The value included is the market value of the property at the time when the hire purchase agreement ends.", "Date_of_Decision": "11 June 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2000 Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1997 subsection 240-17 paragraph 240-65(b) subsection 240-75 section 240-78 paragraph 240-78(c) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/462 | ATO ID 2003/463", "Subject_References": "Capital Allowances CoE Hire purchase Lease & hire expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003464", "Unmatched_Content": "Keywords Capital Allowances CoE Hire purchase Lease & hire expenses"}
{"ATO_ID_Number": "ATO ID 2003/1196", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 240: 'notional buyer' under a hire purchase agreement", "Issue": "Would the taxpayer, who entered into a hire purchase arrangement (which included an option to purchase the goods on hire) after 27 February 1998, be treated as the 'notional buyer' of the goods under subsection 240-17(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The taxpayer would be treated under subsection 240-17(2) of the ITAA 1997 as the 'notional buyer' of the goods under the hire purchase agreement to which Division 240 of the ITAA 1997 applies, because the agreement conferred upon the taxpayer a right to use the goods and an option to purchase the goods.", "Facts": "In January 2000, the taxpayer entered into an arrangement with a plant supplier for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The arrangement conferred upon the taxpayer an option to purchase the plant. On the facts of the case, the taxpayer, as notional buyer, would have been the owner or the quasi-owner of the plant on hire if the arrangement had been a sale of the plant, and it was reasonably likely that the option to purchase the plant would be exercised by, or in respect of, the taxpayer. The term of the hire purchase agreement was for 48 months with an option to terminate early. The agreement was terminated at the end of 18 months. The taxpayer acquired the plant at the end of the 18 months.", "Reasons_for_Decision": "Summary: Division 240 of the ITAA 1997 deals with hire purchase agreements (as defined in subsection 995-1(1) of the ITAA 1997) entered into after 27 February 1998. The broad scheme of the Division is to treat such hire purchase agreements as a sale of the relevant goods to the hirer (notional buyer) combined with a loan from the supplier (notional seller) to the notional buyer. A 'hire purchase agreement', as defined in subsection 995-1(1) of the ITAA 1997, means: The hire purchase arrangement entered into by the taxpayer met the paragraph (a) definition of 'hire purchase agreement'. As such, 'prima facie', Division 240 would apply (section 240-10 of the ITAA 1997). The taxpayer was the 'notional buyer' as the taxpayer was a party to the arrangement and under the arrangement, the taxpayer had the right to use the plant on hire (subsection 240-17(2) of the ITAA 1997). Because the taxpayer, as notional buyer, would have been the owner or the quasi-owner of the plant on hire if the arrangement had been a sale of the plant, and it was reasonably likely that the option to purchase the plant would be exercised by or in respect of the taxpayer, both requirements in subsection 240-115(1) of the ITAA 1997 were met under the arrangement. The modifications in section 240-115 of the ITAA 1997 therefore did not apply and the notional buyer was taken to own the plant (subsection 240-20(2) of the ITAA 1997).", "Date_of_Decision": "22 December 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 240-10 section 240-15 section 240-17 subsection 240-20(2) section 240-115 Division 240 subsection 995-1(1) Parts 3-1 Parts 3-3", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/1197 | ATO ID 2003/1198", "Subject_References": "Hire purchase", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031196", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2003/1198", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 240: 'adjustment amount' for the notional buyer under a hire purchase agreement", "Issue": "Would an adjustment amount pursuant to section 240-110 of the Income Tax Assessment Act 1997 (ITAA 1997) be required for the taxpayer, the notional buyer under a hire purchase agreement to which Division 240 of the ITAA 1997 applies, whether or not the option to purchase the relevant goods is exercised by, or in respect of, the taxpayer?", "Decision": "Yes. An adjustment amount pursuant to section 240-110 of the ITAA 1997 would be required for the taxpayer under the hire purchase agreement irrespective of whether the option to purchase the relevant goods is exercised by, or in respect of, the taxpayer.", "Facts": "In January 2000, the taxpayer entered into an arrangement which was a hire purchase agreement with a plant supplier for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The arrangement conferred upon the taxpayer an option to purchase the plant. It was reasonably likely that the option to purchase would be exercised by, or in respect of, the taxpayer. The term of the hire purchase agreement was for 48 months with an option to terminate early. The agreement was terminated at the end of 18 months. The taxpayer acquired the plant at the end of the 18 months.", "Reasons_for_Decision": "Summary: Division 240 of the ITAA 1997 deals with hire purchase agreements (as defined in subsection 995-1(1) of the ITAA 1997) entered into after 27 February 1998. The broad scheme of the Division is to treat such hire purchase agreements as a sale of the relevant goods to the hirer (notional buyer) combined with a loan from the supplier (notional seller) to the notional buyer. Subdivision 240-G of the ITAA 1997 provides for adjustments where the total amount assessed to the notional seller differs from the finance charge worked out at the end of the relevant arrangement for the notional loan (section 240-100 of the ITAA 1997). Any adjustment for the notional seller, as determined under section 240-105 of the ITAA 1997, is to be made in the year of income in which the arrangement ends. An assessable (or deductible) amount for the notional seller will result in a corresponding deductible (or assessable) amount for the notional buyer. The adjustment for the notional buyer is deductible or assessable only to the extent that the notional buyer would, apart from Division 240 of the ITAA 1997, have been entitled to deduct 'arrangement payments' if no part of those payments were capital in nature (section 240-110 of the ITAA 1997). The taxpayer, as the notional buyer under the hire purchase agreement to which Division 240 of the ITAA 1997 applies, would be entitled to deduct 'notional interest' calculated as prescribed by section 240-60 of the ITAA 1997 to the extent that the relevant goods are used for the purposes of producing assessable income. Any subsequent adjustment to the taxpayer's deductible or assessable amount (as the case requires) would be determined pursuant to section 240-110 of the ITAA 1997, whether or not the option to purchase the relevant goods is exercised by, or in respect of, the taxpayer.", "Date_of_Decision": "22 December 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 240-100 section 240-105 section 240-110 subdivision 240-G Division 240 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/462 | ATO ID 2003/1196 | ATO ID 2003/1197", "Subject_References": "Adjustments Hire purchase Lease & hire expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031198", "Unmatched_Content": "Keywords Adjustments Hire purchase Lease & hire expenses"}
{"ATO_ID_Number": "ATO ID 2003/1199", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 240: end of a hire purchase agreement", "Issue": "Does a hire purchase agreement to which Division 240 of the Income Tax Assessment Act 1997 (ITAA 1997) applies, end when the taxpayer extends or renews the agreement?", "Decision": "Yes. A hire purchase agreement to which Division 240 of the ITAA 1997 applies is taken to have ended if it is extended or renewed.", "Facts": "In January 2000, the taxpayer entered into an arrangement which was a hire purchase agreement with a plant supplier for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The arrangement conferred upon the taxpayer an option to purchase the plant. The term of the hire purchase agreement was for 12 months. The agreement was extended or renewed twice, for a period of 12 months and 6 months respectively. The plant was returned to the plant supplier at the end of the 30 months.", "Reasons_for_Decision": "Summary: Division 240 of the ITAA 1997 deals with hire purchase agreements (as defined in subsection 995-1(1) of the ITAA 1997) entered into after 27 February 1998. The broad scheme of the Division is to treat such hire purchase agreements as a sale of the relevant goods to the hirer (notional buyer) combined with a loan from the supplier (notional seller) to the notional buyer. An arrangement to which Division 240 of the ITAA 1997 applies is taken to have ended if, among other things, the arrangement is: Where the hire purchase agreement is extended or renewed, Division 240 of the ITAA 1997 applies as if the original arrangement has ended and the extended arrangement or renewed arrangement is a separate arrangement (subsection 240-80(2) of the ITAA 1997). As the hire purchase agreement entered into by the taxpayer was extended or renewed twice, the agreement is taken to have ended at the end of the initial 12 months. Each extension or renewal constituted a separate arrangement.", "Date_of_Decision": "22 December 2003", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2001 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 subsection 240-75(1) subsection 240-75(2) subsection 240-80(2) Division 240 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Hire purchase", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031199", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2003/441", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Infrastructure Borrowings: Direct and indirect - cancellation of Development Allowance Authority certificate - concessional treatment", "Issue": "Will the concessional treatment provided to the taxpayer by section 159GZZZZE of the Income Tax Assessment Act 1936 (ITAA 1936) be affected by any cancellation by the Development Allowance Authority (DAA) of the Direct Infrastructure Borrowing (DIB) Certificate or the Indirect Infrastructure Borrowing (IIB) Certificate given the terms of subsection 159GZZZZE(1A) of the ITAA 1936?", "Decision": "No. The concessional treatment provided to the taxpayer by section 159GZZZZE of the ITAA 1936 will not be affected by any cancellation by the DAA of the DIB Certificate or the IIB Certificate, given the terms of subsection 159GZZZZE(1A) of the ITAA 1936.", "Facts": "The project company currently holds a certificate from the DAA permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, the taxpayer holds a corresponding certificate from the DAA permitting it to issue IIBs to fund the taxpayer's subscription for the DIBs issued by the project company.", "Reasons_for_Decision": "Summary: In the event of cancellation of a certificate by the DAA, the holder of the certificate is subject to tax in accordance with section 159GZZZZH of the ITAA 1936. Subsection 159GZZZZE(1A) of the ITAA 1936 provides that the non-assessability and non-deductibility of the DIBs and IIBs continues in the event of cancellation of the certificates. Therefore, the concessional treatment provided to the taxpayer will apply under section 159GZZZZE of the ITAA 1936, in the event of the cancellation of the DIB and IIB certificates.", "Date_of_Decision": "31 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 159GZZZZE subsection 159GZZZZE(1A) section 159GZZZZH", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Infrastructure borrowings", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003441", "Unmatched_Content": "Keywords Infrastructure borrowings"}
{"ATO_ID_Number": "ATO ID 2003/442", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Infrastructure Borrowings: Direct and indirect infrastructure borrowings - infrastructure period", "Issue": "For the purpose of determining the amount of any liability to tax pursuant to section 159GZZZZH of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of any year of income in which there is a tax benefit amount, will the infrastructure period be the period from the time the Indirect Infrastructure Borrowing (IIB) was issued by the taxpayer until the time the proceeds of such issue were on-lent by the taxpayer to the project company under the Direct Infrastructure Borrowing (DIB)?", "Decision": "Yes. The infrastructure period for the purpose of determining the amount of any liability to tax pursuant to section 159GZZZZH of the ITAA 1936 will be the period from the time the IIB was issued by the taxpayer until the time the proceeds of such issue were on-lent by the taxpayer to the project company under the DIB.", "Facts": "The project company currently holds a certificate from the Development Allowance Authority (DAA) permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, the taxpayer holds a corresponding certificate from the DAA permitting it to issue IIBs to fund the subscription for the DIBs issued by the project company.", "Reasons_for_Decision": "Summary: The 'infrastructure period' in relation to a cancelled certificate is defined by section 159GZZZZD of the ITAA 1936 to mean the period from the time of the borrowing, to which the certificate applied, until the conditions under section 93R of the Development Allowance Authority Act 1992 would, if the certificate had not been cancelled, have ceased to apply to the holder. The Explanatory Memorandum to the Taxation Laws Amendment (Infrastructure Borrowings) Act 1994 explains that the length of the infrastructure period depends on the type of borrowing. Although the period for DIBs is 25 years from the first use of the asset, for IIBs the period begins at the time of the borrowing and ends when the borrowed money is lent to the direct infrastructure borrower. Accordingly, the infrastructure period will be the period from the time the IIB was issued by the taxpayer, until the time the proceeds were on-lent by the taxpayer to the project company.", "Date_of_Decision": "31 March 2003", "Year_of_Income": "Year ended 30 June 2003.", "Legislative_References": "Income Tax Assessment Act 1936 section 159GZZZZD section 159GZZZZH", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Infrastructure borrowings", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Infrastructure Borrowings) Act 1994", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003442", "Unmatched_Content": "Keywords Infrastructure borrowings"}
{"ATO_ID_Number": "ATO ID 2003/443", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Infrastructure Borrowings: Direct and indirect - infrastructure period - relevant event - first act or omission", "Issue": "Is the 'relevant event' for the purposes of section 159GZZZZH of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to a cancellation of the Indirect Infrastructure Borrowings (IIB) Certificate that is held by the taxpayer, the cancellation by the Development Allowance Authority (the DAA) of the Direct Infrastructure Borrowings (DIB) Certificate and is the amount of the 'Factor' in subsection 159GZZZZH(1) of the ITAA 1936 to be determined accordingly, with the 'Part of the Infrastructure Period after the Act or Omission' commencing from the date of the actual cancellation of the DIB Certificate?", "Decision": "No. The 'relevant event' for the purposes of section 159GZZZZH of the ITAA 1936 in relation to the cancellation of an IIB Certificate is the 'first act or omission' that was a ground relied upon by the DAA for cancelling the certificate and not the DAA's actual cancellation of the DIB Certificate. The 'Factor' in subsection 159GZZZZH(1) of the ITAA 1936 should therefore be calculated having regard to the timing of the occurrence of that act or omission and not the date of the cancellation of the DIB certificate.", "Facts": "The project company currently holds a certificate from the DAA permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, the taxpayer holds a corresponding certificate from the DAA permitting it to issue IIBs to fund the subscription for the DIBs issued by the project company.", "Reasons_for_Decision": "Summary: The definition of 'Factor' in subsection 159GZZZZH(1) of the ITAA 1936 refers to 'the first act or omission that was the ground' for the cancellation. The DAA's actual cancellation of the DIB certificate is not the ' first act or omission' relied on as the ground for cancellation. The 'Factor' in subsection 159GZZZZH(1) of the ITAA 1936 should be calculated having regard to the year of income in which the 'first act or omission' occurred. Accordingly, 'the relevant event' for the purposes of section 159GZZZZH of the ITAA 1936, is the ground relied upon by the DAA that lead to the cancellation of the IIB certificate.", "Date_of_Decision": "31 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 159GZZZZH(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Infrastructure borrowings", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003443", "Unmatched_Content": "Keywords Infrastructure borrowings"}
{"ATO_ID_Number": "ATO ID 2003/444", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Infrastructure borrowings: Direct infrastructure borrowings - anti-avoidance - deferral of deduction for payment to associate", "Issue": "Will the anti-avoidance provision section 82KK of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the taxpayer in relation to the interest paid under a Direct Infrastructure Borrowing (DIB)?", "Decision": "No. As the interest paid by the taxpayer under the DIB will not be deductible because of the operation of subsection 159GZZZZE(1) of the ITAA 1936, the interest will not be subject to section 82KK of the ITAA 1936.", "Facts": "The taxpayer currently holds a certificate from the Development Allowance Authority (DAA) permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, Finance Co holds a corresponding certificate from the DAA permitting it to issue Indirect Infrastructure Bonds (IIBs) to fund the subscription for the DIBs issued by the taxpayer.", "Reasons_for_Decision": "Summary: Section 82KK of the ITAA 1936 applies where there is a timing mismatch in payments to associates so that income is recognised in a later year than the matching deduction. The taxpayer has paid for the construction of the project property with infrastructure borrowings. Subsection 159GZZZZE(1) of the ITAA 1936 provides for non-assessability and non-deductibility of interest paid under an infrastructure borrowing. As a consequence, the anti-avoidance provision of section 82KK of the ITAA 1936 cannot apply to the non-deductible DIB interest payable by the taxpayer.", "Date_of_Decision": "31 March 2003", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 82KK subsection 159GZZZZE(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Tax benefits under tax avoidance schemes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003444", "Unmatched_Content": "Keywords Tax benefits under tax avoidance schemes"}
{"ATO_ID_Number": "ATO ID 2003/445", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Infrastructure borrowings: Direct infrastructure borrowing - anti-avoidance - certain recouped expenditure", "Issue": "Will the anti-avoidance provision section 82KL of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the taxpayer in relation to the interest paid under a Direct Infrastructure Borrowing (DIB)?", "Decision": "No. As the interest paid by the taxpayer under the DIB will not be deductible because of the operation of subsection 159GZZZZE(1) of the ITAA 1936, the interest will not be subject to section 82KL of the ITAA 1936.", "Facts": "The taxpayer currently holds a certificate from the Development Allowance Authority (DAA) permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, Finance Co holds a corresponding certificate from the DAA permitting it to issue Indirect Infrastructure Bonds (IIBs) to fund the subscription for the DIBs issued by the taxpayer.", "Reasons_for_Decision": "Summary: Section 82KL of the ITAA 1936 operates to deny a deduction or part of a deduction otherwise allowable under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer has paid for the construction of the project property with infrastructure borrowings. Subsection 159GZZZZE(1) of the ITAA 1936 provides for non-assessability and non-deductibility of interest paid under an infrastructure borrowing (which could be 'eligible relevant expenditure' under subsection 82KL(1) of the ITAA 1936). As, subsection 159GZZZZE(1) of the ITAA 1936 operates to deny a deduction for the DIB interest payable by the taxpayer, section 82KL of the ITAA 1936 cannot apply as there is no additional benefit in relation to an amount of eligible relevant expenditure incurred by the taxpayer or expected tax saving in relation to that amount of eligible relevant expenditure equal to or greater than the amount of the eligible relevant expenditure.", "Date_of_Decision": "31 March 2003", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 82KL subsection 159GZZZZE(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Tax benefits under tax avoidance schemes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003445", "Unmatched_Content": "This ATO ID has been amended to clarify the reasoning in the Reasons for Decision. | Keywords Tax benefits under tax avoidance schemes"}
{"ATO_ID_Number": "ATO ID 2003/794", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Infrastructure borrowings: direct infrastructure borrowings - anti-avoidance - deductible expense in respect of certain pre-paid outgoings", "Issue": "Will the anti-avoidance provision section 82KJ of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the taxpayer in relation to the interest paid under a Direct Infrastructure Borrowing (DIB)?", "Decision": "No. As the interest paid by the taxpayer under the DIB will not be deductible because of the operation of subsection 159GZZZZE(1) of the ITAA 1936, the interest will not be subject to section 82KJ of the ITAA 1936.", "Facts": "The taxpayer currently holds a certificate from the Development Allowance Authority (DAA) permitting it to issue DIBs with which it financed construction of an infrastructure project. In turn, Finance Co holds a corresponding certificate from the DAA permitting it to issue indirect infrastructure bonds (IIBs) to fund the subscription for the DIBs issued by the taxpayer.", "Reasons_for_Decision": "Summary: Section 82KJ of the ITAA 1936 applies where a taxpayer prepays a deductible expense with the aim of reducing the non-deductible capital amount payable for the acquisition of property. The taxpayer has paid for the construction of the project property with infrastructure borrowings. Subsection 159GZZZZE(1) of the ITAA 1936 provides for non-assessability and non-deductibility of interest paid under an infrastructure borrowing. Section 82KJ of the ITAA 1936 will not apply to this arrangement as the interest payable by the taxpayer under the DIB is non-deductible because of the operation of subsection 159GZZZZE(1) of the ITAA 1936.", "Date_of_Decision": "31 March 2003", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 82KJ subsection 159GZZZZE(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/444 | ATO ID 2003/445", "Subject_References": "Tax benefits under tax avoidance schemes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003794", "Unmatched_Content": "Keywords Tax benefits under tax avoidance schemes"}
{"ATO_ID_Number": "ATO ID 2009/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Small Business Concessions: small business entity test - annual turnover - business carried on part year only", "Issue": "If a taxpayer carries on one business for the whole of an income year and a second business for only part of that same income year, does subsection 328-120(5) of the Income Tax Assessment Act 1997 (ITAA 1997) apply in working out the annual turnover of the taxpayer?", "Decision": "Yes. If a taxpayer carries on one business for the whole of an income year and a second business for only part of that same income year, subsection 328-120(5) of the ITAA 1997 applies in working out the annual turnover of the taxpayer. The provision is not limited to applying only where a taxpayer has ceased to carry on all their businesses.", "Facts": "A taxpayer carries on two businesses, 'Large Business' and 'Small Business'. Early in the current income year the taxpayer disposes of all the capital gains tax (CGT) assets of Large Business and accordingly ceases to carry on Large Business at that time. The taxpayer continues to carry on Small Business for the whole of the income year. The taxpayer carried on both businesses for the whole of the two previous income years. The taxpayer's aggregate turnover for each of the previous two income years was substantially in excess of $2 million. The taxpayer's turnover for the current year (comprising the full-year turnover of Small Business and the part-year turnover of Large Business) was less than $2 million. However, if a reasonable estimate of what the full year turnover of Large Business would be but for its sale was taken into account, the taxpayer's turnover for the current year would be in excess of $2 million. The taxpayer does not satisfy the maximum net asset value test in section 152-15 of the ITAA 1997 at the relevant time and accordingly must determine if they satisfy the alternate '$2 million turnover test' to determine if they qualify for the small business capital gains tax concessions in Division 152 of the ITAA 1997.", "Reasons_for_Decision": "Summary: To qualify for the small business CGT concessions a taxpayer generally must satisfy either the maximum net asset test or be a small business entity (paragraph 152-10(1)(c) of the ITAA 1997). To qualify as a small business entity for an income year a taxpayer must carry on business in that year and satisfy a $2 million aggregated turnover requirement (subsection 152-10(1AA) and section 328-110 of the ITAA 1997). Aggregated turnover for an income year is the sum of the relevant annual turnovers for the year of the taxpayer and certain related entities (excluding certain amounts) (section 328-115 of the ITAA 1997). There are several ways a taxpayer may satisfy the $2 million aggregated turnover requirement. These are, if: If a taxpayer does not carry on a business for the whole of an income year, the taxpayer's annual turnover for the income year must be worked out using a reasonable estimate of what the taxpayer's annual turnover for the income year would be if the taxpayer carried on a business for the whole of the income year (subsection 328-120(5) of the ITAA 1997). On the facts of this case, the taxpayer does not satisfy subparagraph 328-110(1)(b)(i) of the ITAA 1997 as their aggregated turnover for the previous year was not less than $2 million. They are also precluded from satisfying subparagraph 328-110(1)(b)(ii) of the ITAA 1997 because their aggregated turnover for each of the two previous years was $2 million or more. Subsection 328-120(5) of the ITAA 1997 effectively provides for extrapolating the part year turnover of a business to a full year equivalent where that business is not carried on for the whole of an income year. The intent of the provision is to ensure the true size of a business is taken into account in determining whether the $2 million turnover requirement is satisfied. Subsection 328-120(5) of the ITAA 1997 refers to a taxpayer that does not carry on a business for the whole of an income year rather than to a taxpayer that does not carry on any business for the whole of an income year. The reference to 'a business' in subsection 328-120(5) of the ITAA 1997 recognises that a taxpayer may carry on more than one business in an income year and may cease one of those businesses during the year. Accordingly, subsection 328-120(5) of the ITAA 1997 applies to a situation where a taxpayer carries on two or more businesses and ceases to carry on one of those businesses during an income year while still carrying on another business for the whole of the income year. The provision is not limited to applying only where a taxpayer has ceased to carry on all their businesses. A reasonable estimate of what the full year turnover of Large Business would have been must therefore be taken into account in working out the taxpayer's annual turnover for the current year. On this basis, the taxpayer's aggregated turnover for the current year is not less than $2 million and accordingly they do not satisfy subsection 328-110(4) of the ITAA 1997. The taxpayer therefore does not satisfy the $2 million turnover test and hence does not qualify for the small business CGT concessions in Division 152 of the ITAA 1997.", "Date_of_Decision": "12 May 2009", "Year_of_Income": "Year ending 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 Division 152 paragraph 152-10(1)(c) subsection 152-10(1AA) section 152-15 section 328-110 subparagraph 328-110(1)(b)(i) subparagraph 328-110(1)(b)(ii) subsection 328-110(2) subsection 328-110(3) subsection 328-110(4) section 328-115 subsection 328-120(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT small business relief Small business 50% reduction", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200949", "Unmatched_Content": "To include recently enacted subsection 152-10(1AA) of the ITAA 1997 | Updated subsection 152-10(1AA) | Keywords Capital gains tax CGT small business relief Small business 50% reduction"}
{"ATO_ID_Number": "ATO ID 2004/177", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Demutualisation of mutual entities other than insurance companies: continuity of beneficial interest test", "Issue": "Can a mutual entity other than an insurance company satisfy the 'continuity of beneficial interest test' measures under subparagraph 326-60(2)(c)(i) of Schedule 2H of the Income Tax Assessment Act 1936 (ITAA 1936) if the membership history is not taken into account and the entity allocates equal numbers of shares to its existing members on demutualisation?", "Decision": "Yes. The 'continuity of beneficial interest test' measures under subparagraph 326-60(2)(c)(i) of the ITAA 1936 can still be satisfied even if membership history is not taken into account and a mutual entity other than an insurance company allocates equal numbers of shares to its existing members on demutualisation.", "Facts": "A non insurance mutual entity limited by guarantee proposes to demutualise. Each existing member of the entity is given the opportunity to take up shares in the demutualised entity and at least 90% of the shares issued in connection with the demutualisation are issued to existing members. Each member's guarantee is limited to $10. The members pay a once-off joining fee and a monthly administration fee. In addition, metropolitan members pay an annual advertising levy. The fees and levies throughout the entity's history have more than covered its expenses and an accumulated surplus exists on the demutualisation resolution day. The existing members joined the entity at different times so each member's contribution to the entity's accumulated surplus varies. The entity's constituent documents provide that each member has equal membership rights. Also, each existing member has the right to share equally in any surplus after satisfaction of the entity's debts or obligations on winding up. The entity asked whether an equal allocation of shares to its existing members would still satisfy the 'continuity of beneficial interest test' measures as set out in subparagraph 326-60(2)(c)(i) of the ITAA 1936.", "Reasons_for_Decision": "Summary: The 'continuity of beneficial interest test' that must be satisfied under section 326-60 of the ITAA 1936 requires that the accumulated surplus of the mutual entity is allocated or distributed in the form of shares, or cash from the sale of shares to existing members in proportions that broadly accord with any one or more of the three following measures: As the members of the mutual entity joined at different times, their contributions to the entity's accumulated surplus vary. If amounts they contributed to the surplus are proportional with their history of membership, and their periods of membership are taken into account in the allocation of shares or cash from the sale of shares, this would satisfy subparagraph 326-60(2)(c)(i) of the ITAA 1936. However, where it is difficult to ascertain members' contributions to the accumulated surplus from their membership history, the continuity of beneficial interest test could still be satisfied in the allocation of shares to existing members. Other alternatives are to allocate the shares or cash from the sale of shares in quantities that are in proportion to the respective values of the membership rights and/or the respective rights of the members on the entity's winding up. As the mutual entity's constituent documents provide that each member has equal voting rights and each existing member has the right to share the surplus equally on winding up, an equal allocation of shares or cash from the sale of shares would still satisfy the 'continuity of beneficial interest test'. The Explanatory Memorandum to the Taxation Laws Amendment (Demutualisation of Non-insurance Mutual Entities) Bill 1999 provides the following example: The members of a sporting club which is a company limited by guarantee pass a resolution to demutualise. Under the constituent of the sporting club, there are several classes of membership rights. Class A members pay a joining fee of $20 and have access to all the facilities of the club. Class B members pay a joining fee of $10 and have access only to the bar and restaurant facilities. The winding up clause in the club constituent documents provides that, on winding up, any surplus assets are to be transferred to an association with similar objects as the sporting club. On demutualisation, Class A members are issued with 200 shares each and Class B members are issued with 100 shares each. This allocation of shares is in proportions broadly consistent with members' mutual participation because shares have been allocated according to the level of contributions made by members. The example demonstrates that the 'continuity of beneficial interest test' provides flexibility for non insurance demutualising entities to adopt a process most appropriate for their membership. Therefore, the 'continuity of beneficial interest test' will be satisfied without reference to the history of membership if it broadly accords with any one or more of the other measures provided under paragraph 326-60(2)(c) of the ITAA 1936. Note: When all the conditions for its operation are met, Division 326 of the ITAA 1936 ensures that a mutual entity's members receiving shares as a result of the entity's demutualisation are not subject to capital gains tax (CGT) until they dispose of those shares and the cost base for shares issued to members as a result of the entity's demutualisation is specified.", "Date_of_Decision": "17 February 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2H Division 326 subsection 326-60(2) subparagraph 326-60(2)(c)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT demutualisation", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Demutualisation of Non-insurance Mutual Entities) Bill 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004177", "Unmatched_Content": "Keywords CGT demutualisation"}
{"ATO_ID_Number": "ATO ID 2013/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Losses: bearer shares in foreign listed companies - disclosure of beneficial owners", "Issue": "If the names of individual owners of bearer shares in a pooled group are listed but the number of shares held by each member of the group is unknown, have the beneficial owners of those bearer shares been disclosed for the purposes of paragraph 166-255(1)(f) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The beneficial owners of those bearer shares have not been disclosed for the purposes of paragraph 166-255(1)(f) of the ITAA 1997.", "Facts": "Loss Co is wholly owned by a foreign listed company, European Co. Loss Co is an 'eligible Division 166 company' as defined in subsection 995-1(1) of the ITAA 1997. European Co has only bearer shares on issue. The annual report of European Co shows a number of shareholders in a pooled group that own 5% of the company's bearer shares. The names of the individual members of the group are listed, but the number of shares held by each member is not stated. The members of the pooled group are unrelated, other than through the pooled group. The number of shares held by each member of the pooled group is not known to European Co.", "Reasons_for_Decision": "Summary: Section 165-12 of the ITAA 1997 specifies conditions that a company must satisfy in order to deduct a tax loss. Broadly, section 165-12 provides that the company must maintain more than 50% continuity of ownership throughout the ownership test period. This is known as the continuity of ownership test (COT). Division 166 of the ITAA 1997 modifies the way the rules in Division 165 of the ITAA 1997 apply to a widely held company or an eligible Division 166 company. Division 166 was introduced to simplify the application of the COT for these companies by providing tracing rules (such as section 166-255 of the ITAA 1997) that make it unnecessary for them to trace the ultimate owner of shares held by certain intermediaries and small shareholdings. Under subsection 166-255(1) of the ITAA 1997, an indirect stake in the loss company held by way of bearer shares in a foreign listed company that is interposed between the bearer shareholders and the loss company is attributable to a single notional entity at an ownership test time if all the following conditions are satisfied: The term 'disclosed' in paragraph 166-255(1)(f) of the ITAA 1997 is not defined in the legislation. Whether a disclosure has occurred under these provisions is a question of fact, in the context of Divisions 165 and 166 of the ITAA 1997. A disclosure has not occurred where European Co knows that a pooled group collectively are the holders of 5% of the bearer shares, but does not know the individual holdings of the members of that group. The COT requires a loss company to identify the percentage of the voting power, rights to dividends and rights to capital distributions of the loss company held by specific entities at all times during the ownership test period (Division 165) or at the relevant ownership test times in the test period (Division 166). This enables the loss company to trace any changes in the percentages held during the relevant period by those entities, which is crucial in establishing whether or not the loss company has satisfied the COT. The mere identity of the bearer shareholders without knowledge of their individual holdings does not constitute disclosure for the purposes of paragraph 166-255(1)(f) of the ITAA 1997.", "Date_of_Decision": "18 January 2013", "Year_of_Income": "Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 Division 165 section 165-12 Division 166 Subdivision 166-E section 166-255 subsection 166-255(1) paragraph 166-255(1)(f) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "company losses continuity of ownership continuity of ownership test losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20135", "Unmatched_Content": "Keywords company losses continuity of ownership continuity of ownership test losses"}
{"ATO_ID_Number": "ATO ID 2013/65", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax losses: whether company can disregard concessional tracing rules that apply in relation to more than one stake as part of forming the necessary belief for the purposes of the 'no detriment' rule", "Issue": "Does the 'no detriment' rule in section 166-275 of the Income Tax Assessment Act 1997 (ITAA 1997) allow a company to disregard not only a concessional tracing rule that applies in relation to a particular stake but also the same, or a different, concessional tracing rule that applies in relation to one or more other stakes as part of forming the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997?", "Decision": "Yes. In forming the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997, a company is not restricted to only disregarding a concessional tracing rule that applies in relation to a particular stake. The company can also disregard the same, or a different, concessional tracing rule that applies in relation to one or more other stakes.", "Facts": "A Co is an Australian resident company that has been a widely held company, within the meaning of that term in subsection 995-1(1) of the ITAA 1997, since 2002. For each of the income years ended 30 June 2006 to 30 June 2009, A Co incurred tax losses. A Co is seeking to deduct those tax losses for the income year ended 30 June 2012. A Co has not made a choice under section 166-15 of the ITAA 1997 in relation to the income year ended 30 June 2012. As a result, A Co has applied the modifications under Division 166 of the ITAA 1997 for the purposes of determining whether it has met the conditions in section 165-12 of the ITAA 1997 for deducting the tax loss. All of the shares in A Co are ordinary shares which carry equal voting, dividend and capital rights (as there is no difference between these rights, the remainder of this ATO ID refers only to voting rights). During that part of the test period that ran from the commencement of the income year ending 30 June 2006 until December 2009 (the first part of the test period), some of the shares in A Co were held by a widely held company, B Co, with the remainder held by various entities with each of those entities holding stakes that carried rights to less than 10% of the voting power. At each test time during the first part of the test period, B Co held a stake that carried rights to between 10% and 50% of the voting power in A Co apart from one test time where B Co held a stake that carried rights to more than 50% of the voting power. At each test time during the first part of the test period, some of the shares in B Co were held by C Co. C Co is a nominee company and holds its shares in B Co on trust for various beneficiaries. The stake held by C Co at each of these test times carried rights to less than 10% of the voting power in A Co. During late 2009, A Co acquired B Co under a merger. As part of the merger, all of the existing shares in B Co were cancelled and the former shareholders of B Co, including C Co, were issued with new shares in A Co. At each test time during that part of the test period that ran from late 2009 until the end of the income year ending 30 June 2012 (the second part of the test period), some of the shares in A Co were held by entities, including C Co, who previously held shares in B Co at each test time during the first part of the test period. A Co does not meet the conditions in section 165-12 of the ITAA 1997 for deducting the tax losses for the income year ended 30 June 2012 as it does not satisfy the ownership tests in section 166-145 of the ITAA 1997. However A Co wishes to rely on the 'no detriment' rule in section 166-275 of the ITAA 1997 to treat it as having met the conditions in section 165-12 of the ITAA 1997 for deducting the tax losses. A Co considers that it can form the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997 provided it can disregard:", "Reasons_for_Decision": "Summary: The 'no detriment' rule in section 166-275 of the ITAA 1997 applies to treat a company as having met the conditions in section 165-12 of the ITAA 1997 for deducting a tax loss if: As a tracing rule has modified how the ownership tests in section 166-145 of the ITAA 1997 apply to A Co in respect of a voting stake, and as A Co has failed the ownership tests, the first two requirements of the no detriment rule, as set out in paragraphs 166-275(a) and 166-275(b) of the ITAA 1997, have both been satisfied. At issue is therefore whether the third requirement of the no detriment rule, as set out in paragraph 166-275(c) of the ITAA 1997, has been satisfied. On a literal reading, paragraph 166-275(c) of the ITAA 1997 would seem to require a company to identify a particular stake in relation to which a concessional tracing rule has applied and form a belief, on reasonable grounds, that the ownership tests would have been passed had the tracing rule not applied in relation to that particular stake. If this is correct, then paragraph 166-275(c) of the ITAA 1997 would not be satisfied in this case as in order for A Co to form the necessary belief, on reasonable grounds, that the ownership tests would have been passed, it needs to disregard the following concessional tracing rules that applied in relation to the following stakes: The Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005 provides the following guidance on why the 'no detriment' rule was considered necessary: 1.133 The purpose of the tracing rules is to assist a company trace its ownership interests to determine whether it satisfies the COT. However, there may be cases where these rules make it more difficult for a company to satisfy the COT. While the company could choose not to apply the modified COT, that would not allow the company to use any of the tracing rules. 1.134 The modified COT allows a tracing rule to be disregarded in respect of a particular stake if it would cause the company to fail the ownership tests. A company is taken to satisfy the relevant conditions if the company believes on reasonable grounds that it would not fail the conditions if the tracing rule did not apply in respect of that stake. From this extract from the Explanatory Memorandum, it is clear that the purpose of the rule was to ensure that the tracing rules in Subdivision 166-E of the ITAA 1997 do not inadvertently result in the failure of the ownership tests. The tracing rules can result in the failure of the ownership tests not just as a result of a particular tracing rule applying in relation to a particular stake. They can also result in a failure as a result of one tracing rule applying in relation to one stake and the same, or a different, tracing rule applying in relation to one or more other stakes. Therefore, having regard to the purpose of the 'no detriment rule', it is considered that a literal reading of paragraph 166-275(c) of the ITAA 1997 could not have been intended. Instead, it is considered that a broader view was intended that would allow a company to disregard not only a tracing rule that applies in relation to one stake but also the same, or a different, tracing rule that applies in relation to one or more other stakes as part of forming the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997. Support for a broader view in relation to paragraph 166-275(c) of the ITAA 1997 can be found in the example that appears immediately below the provision. Under that example, the listed company is taken to have satisfied the requirements of paragraph 166-275(c) of the ITAA 1997 even though the tracing rule in section 166-225 of the ITAA 1997 applied in relation to nine different stakes. As such, the example confirms that a company can disregard a tracing rule that applies in relation to one stake as well as the same tracing rule that applies in relation to one or more other stakes as part of forming the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997. It is considered that the same outcome would also arise for the company even if a different tracing rule had applied in relation to one of more of the other stakes. Accordingly, in forming the necessary belief on reasonable grounds under paragraph 166-275(c) of the ITAA 1997, A Co can disregard:", "Date_of_Decision": "3 December 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 166 Subdivision 166-E section 165-12 section 166-15 section 166-145 section 166-225 section 166-230 section 166-240 section 166-275 paragraph 166-275(a) paragraph 166-275(b) paragraph 166-275(c) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/14 | ATO ID 2013/66", "Subject_References": "prior year losses company losses continuity of ownership test", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201365", "Unmatched_Content": "Keywords prior year losses company losses continuity of ownership test"}
{"ATO_ID_Number": "ATO ID 2013/66", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax losses: can a company form the necessary belief, on reasonable grounds, for the purposes of the 'no detriment' rule by applying the concessional tracing rules", "Issue": "Can a company satisfy the 'no detriment' rule in section 166-275 of the Income Tax Assessment Act 1997 (ITAA 1997) by applying the concessional tracing rules in Subdivision 166-E of the ITAA 1997 to form the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997?", "Decision": "Yes. A company can form the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997, by applying the concessional tracing rules in Subdivision 166-E of the ITAA 1997.", "Facts": "A Co is an Australian resident company that has been a widely held company, within the meaning of that term in subsection 995-1(1) of the ITAA 1997, since 2002. For each of the income years ended 30 June 2006 to 30 June 2009, A Co incurred tax losses. A Co is seeking to deduct those tax losses for the income year ended 30 June 2012. A Co has not made a choice under section 166-15 of the ITAA 1997 in relation to the income year ended 30 June 2012. As a result, A Co has applied the modifications under Division 166 of the ITAA 1997 for the purposes of determining whether it has met the conditions in section 165-12 of the ITAA 1997 for deducting the tax loss. All of the shares in A Co are ordinary shares which carry equal voting, dividend and capital rights (as there is no difference between these rights, the remainder of this ATO ID refers only to voting rights). During that part of the test period that ran from the commencement of the income year ending 30 June 2006 until late 2009 (the first part of the test period), some of the shares in A Co were held by a widely held company, B Co, with the remainder held by various entities with each of those entities holding stakes that carried rights to less than 10% of the voting power. At each test time during the first part of the test period, B Co held a stake that carried rights to between 10% and 50% of the voting power in A Co apart from one test time where B Co held a stake that carried rights to more than 50% of the voting power. At each test time during the first part of the test period, some of the shares in B Co were held by C Co. C Co is a nominee company and holds its shares in B Co on trust for various beneficiaries. The stake held by C Co at each of these test times carried rights to less than 10% of the voting power in A Co. During late 2009, A Co acquired B Co under a merger. As part of the merger, all of the existing shares in B Co were cancelled and the former shareholders of B Co, including C Co, were issued with new shares in A Co. At each test time during that part of the test period that ran from late 2009 until the end of the income year ending 30 June 2012 (the second part of the test period), some of the shares in A Co were held by entities, including C Co, who previously held sharers in B Co at each test time during the first part of the test period. A Co does not meet the conditions in section 165-12 of the ITAA 1997 for deducting the tax losses for the income year ended 30 June 2012 as the same persons held stakes at each test time in the test period that carried rights to only 48.7% of the voting power in A Co. However A Co wishes to rely upon the 'no detriment' rule in section 166-275 of the ITAA 1997 to treat it as having met the conditions in section 165-12 of the ITAA 1997 for deducting the tax losses. A Co has obtained information that shows that if it disregarded:", "Reasons_for_Decision": "Summary: The 'no detriment' rule in section 166-275 of the ITAA 1997 applies to treat a company as having met the conditions in section 165-12 of the ITAA 1997 for deducting a tax loss if: The concessional tracing rules in Subdivision 166-E of the ITAA 1997 applied during the first part of the test period to treat B Co as a natural person holding a stake at each test time which carried rights to the voting power in A Co. As B Co did not hold any shares in A Co during the second part of the test period, A Co has failed the ownership tests in section 166-145 of the ITAA 1997. As a result, the first two requirements of the no detriment rule, as set out in paragraphs 166-275(a) and (b) of the ITAA 1997, have both been satisfied. At issue is therefore whether the third requirement of the no detriment rule, as set out in paragraph 166-275(c) of the ITAA 1997, has been satisfied. To satisfy the third requirement of the no detriment rule, A Co proposes to turn off the application of the concessional tracing rules in relation to certain stakes and then apply the concessional tracing rule in section 166-230 of the ITAA 1997 at each test time during the test period to attribute to C Co the voting stakes held by the beneficiaries that result from C Co holding its shares on trust for the beneficiaries. Based on information obtained, A Co considers that this will result in the ownership tests being satisfied. However, whether this will result in the third requirement of the no detriment rule being satisfied will depend on whether a company can use one or more of the concessional tracing rules in Subdivision 166-E of the ITAA 1997 to form the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997. The Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005 (the EM) provides the following guidance on how a company is to form the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997: 1.134 The modified COT allows a tracing rule to be disregarded in respect of a particular stake if it would cause the company to fail the ownership tests. A company is taken to satisfy the relevant conditions if the company believes on reasonable grounds that it would not fail the conditions if the tracing rule did not apply in respect of that stake. 1.135 The rule does not prevent other tracing rules potentially applying to the relevant stake or the same tracing rule applying in respect of other stakes. It merely allows tracing rules to be disregarded in these circumstances to the extent that they would cause a failure of the modified COT. 1.136 The company must hold a reasonable belief that it would not fail the tests if the tracing rule did not apply. In most cases a company would be expected to form this view by applying the test for substantial continuity of ownership in the normal way, this is without the use of that tracing rule in respect of the particular stake. However, it is recognised that in some cases, despite its best endeavours, a company may be unable to obtain sufficient information to determine with certainty that it would pass the ownership tests without the tracing rule. In such a case, the modified COT allows a company to draw a conclusion about whether it would satisfy the ownership tests based on any information that it has reasonably been able to obtain. The EM makes it clear in paragraph 1.136 that in most cases, a company would be expected to form the necessary belief by applying the ownership tests in section 166-145 of the ITAA 1997 in the normal way without the use of the tracing rule in respect of the relevant stake. However, the EM also states in paragraph 1.135 that the no detriment rule is not intended to prevent other tracing rules potentially applying to the relevant stake or the same tracing rule applying in respect of other stakes. These two paragraphs in the EM are difficult to reconcile as it is not possible for other tracing rules to potentially apply to the relevant stake if the ownership tests in section 166-145 of the ITAA 1997 are to be applied in the normal way without the use of concessional tracing rules in respect of that stake. However it is considered that the statements in the EM can be reconciled if one takes the view that while a company would be expected to form the necessary belief by applying the ownership tests in section 166-145 of the ITAA 1997 in the normal way in most cases, the no detriment rule does not prevent a company in other cases from forming the necessary belief by applying the concessional tracing rules. Accordingly, A Co can satisfy the no detriment rule in section 166-275 of the ITAA 1997 by applying the concessional tracing rule in section 166-230 of the ITAA 1997 to form the necessary belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997.", "Date_of_Decision": "3 December 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 166 Subdivision 166-E section 165-12 section 166-15 section 166-145 section 166-225 section 166-230 section 166-240 section 166-275 paragraph 166-275(a) paragraph 166-275(b) paragraph 166-275(c) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/14 | ATO ID 2013/65", "Subject_References": "", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201366", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2010/48", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax loss: whether a tax loss which is disallowed following an injection of income is cancelled", "Issue": "Where assessable income or a capital gain has been injected into a company because of an available tax loss, and the Commissioner disallows a deduction for some or all of the tax loss (the excluded loss) pursuant to section 175-10 of the Income Tax Assessment Act 1997 ( ITAA 1997), is the excluded loss cancelled?", "Decision": "No. Section 175-10 of the ITAA 1997 allows the Commissioner to disallow the deduction of the excluded loss for an income year if the requisite conditions are satisfied. However, the excluded loss may be deducted in a future income year, subject to the satisfaction of the special rules applying to company losses, including Division 175 of the ITAA 1997 (section 36-25 of the ITAA 1997).", "Facts": "Company A has a tax loss available from an earlier income year (the loss year) which it is now seeking to deduct. Company A derives an amount of assessable income in the income year that it would not have derived if the tax loss had not been available for deduction. The Commissioner has determined that the 'continuing shareholders' (as defined in subsection 175-10(3) of the ITAA 1997) of Company A do not benefit from the derivation of the injected amount to an extent that is fair and reasonable having regard to their respective rights and interests in Company A. Company A does not satisfy the same business test in respect of the income year. The deduction of the tax loss has been disallowed for the income year pursuant to section 175-10 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 175-5 of the ITAA 1997 states: 175-5(1) This Subdivision [175-A] sets out cases where the Commissioner may disallow some or all of a *tax loss (or of part of a tax loss) ( the excluded loss ) as a deduction in calculating a company's taxable income of an income year after the *loss year. 175-5(2) However, the Commissioner cannot disallow the *excluded loss if the company: (a) fails to meet a condition in section 165-12 (which is about maintaining the same owners) in respect of the *loss year or the income year; but (b) meets the condition in section 165-13 (which is about the company satisfying the same business test) in respect of the income year. The legislative intent of section 175-5 of the ITAA 1997 does not suggest that a tax loss that is disallowed (wholly or partly) as a deduction in an income year is cancelled, and unavailable for deduction in a future income year. Section 175-10 of the ITAA 1997, which provides for the first case where a company derives assessable income or makes a capital gain because of an available tax loss, is likewise focused on the circumstances of an income year, and does not extend to cancel the excluded loss. The tax loss or part thereof can be deducted in a future income year, subject to the satisfaction of the special rules applying to company losses, including Division 175 of the ITAA 1997(section 36-25 of the ITAA 1997).", "Date_of_Decision": "14 January 2010", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 36-25 section 165-12 section 165-13 Division 175 Subdivision 175-A section 175-5 section 175-10 subsection 175-10(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Tax loss Losses Company losses Income injection test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201048", "Unmatched_Content": "Keywords Tax loss Losses Company losses Income injection test"}
{"ATO_ID_Number": "ATO ID 2010/49", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax loss: whether the Commissioner can be prevented from disallowing any part of a tax loss following an injection of income", "Issue": "Where assessable income or a capital gain has been injected into a company because of an available tax loss and the 'continuing shareholders' (as defined in subsection 175-10(3) of the Income Tax Assessment Act 1997 (ITAA 1997)) of the company benefit wholly or mainly from the injected amount, can the Commissioner be prevented from disallowing any part of the deduction of the tax loss pursuant to subsection 175-10(2) of the ITAA 1997?", "Decision": "Yes. The prohibition in subsection 175-10(2) of the ITAA 1997 against the Commissioner disallowing a deduction for a tax loss if the continuing shareholders will benefit from the derivation of the injected income 'to an extent that the Commissioner thinks fair and reasonable having regard to their respective rights and interests in the company' means that in this situation, the Commissioner cannot disallow any part of the deduction of the tax loss.", "Facts": "Company A has a tax loss available from an earlier income year (the loss year) which it is now seeking to deduct. Company A derives an amount of assessable income in the income year that it would not have derived if the tax loss had not been available for deduction. The 'continuing shareholders' (as defined in subsection 175-10(3) of the ITAA 1997) owned shares that carried 70% of the voting power in Company A, and rights to 70% of the dividends and capital distributions of Company A, during the whole of the loss year. The 'continuing shareholders' owned shares that carry 100% of the voting power in Company A, and rights to 100% of the dividends and capital distributions of Company A, during the whole of the income year. For the purposes of the company loss deduction rules, Company A satisfies the conditions of the continuity of ownership test (COT) in section 165-12 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsections 175-10(1) and 175-10(2) of the ITAA 1997 provide: 175-10(1 ) The Commissioner may disallow the *excluded loss if, during the income year, the company *derived assessable income, or a *capital gain accrued to the company, some or all of which (the injected amount) would not have been derived, or would not have accrued, if the excluded loss had not been available to be taken into account for the purposes of: Division 36 (which is about tax losses of earlier years) Division 165 (which is about the income tax consequences of changing ownership or control of a company) Subdivision 375-G (which is about film losses). 175-10(2 ) However, the Commissioner cannot disallow the *excluded loss if the *continuing shareholders will benefit from the derivation or accrual of the *injected amount to an extent that the Commissioner thinks fair and reasonable having regard to their respective rights and interests in the company. * denotes a term defined in section 995-1 of the ITAA 1997 The predecessor to section 175-10 of the ITAA 1997 was paragraph 80DA(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) (expanded upon in subsections 80DA(2) and 80DA(6) of the ITAA 1936). The Explanatory Memorandum (EM) to the Income Tax Assessment Bill 1973, which introduced section 80DA of the ITAA 1936, states that: The effects of the amendments proposed in clauses 8 to 13 will be - (a) to strengthen the [COT] - (ii) by requiring as an additional safeguard that the loss deduction will not be allowable where the benefit of the deduction will flow, to a disproportionate extent , to persons who were not beneficial owners, directly or indirectly, of an interest in the company in the year in which the loss was incurred. This safeguard is contained in the provisions of a new section - section 80DA - which is proposed by clause 11. Section 80DA of the ITAA 1936 was re-written as Division 175 of the ITAA 1997. Chapter 7 of the EM to the Income Tax Assessment Bill 1996 does not indicate any change in the legislative policy of Division 175. Therefore in accordance with section 1-3 of the ITAA 1997, the ideas expressed in paragraph 80DA(1)(a) of the ITAA 1936 are considered to be consistent with section 175-10 of the ITAA 1997. Both subsection 80DA(2) of the ITAA 1936 (for the purposes of applying paragraph 80DA(1)(a) of the ITAA 1936) and subsection 175-10(2) of the ITAA 1997 require the Commissioner to consider the continuing shareholders' 'rights and interests in the company' when determining whether a tax loss is deductible to the company. The 'continuing shareholders' referred to in both subsection 80DA(2) of the ITAA 1936 (for the purposes of applying paragraph 80DA(1)(a) of the ITAA 1936) and subsection 175-10(2) of the ITAA 1997 are defined by both provisions as the persons who have satisfied the three relevant COT conditions in the loss year and the income year. The EM to the Income Tax Assessment Bill 1973 states in relation to subsection 80DA(2) of the ITAA 1936 that it: also provides, however, that paragraph [80DA(1)(a)] will not apply to disallow a loss deduction in a case in which the Commissioner considers that the continuing shareholders in the company will receive a benefit from the company's derivation of the income that is appropriate to their continuing beneficial interest in the company... These different indicia suggest that the purpose of paragraph 80DA(1)(a) of the ITAA 1936 and section 175-10 of the ITAA 1997 is to counter collateral arrangements for the conferral of benefits through income injection schemes involving a company's tax losses. These collateral arrangements might otherwise be veiled by the legal shareholdings (as recorded on the company's share register) demonstrating satisfaction of the COT. In this case, there is no evidence of such a collateral arrangement. The 'continuing shareholders' when the tax losses were incurred will benefit wholly or mainly - quoting from the EM to the Income Tax Assessment Bill 1973 - from the injected amount. Accordingly, if the entire tax loss is deductible to the company, the 'continuing shareholders' will benefit from the derivation of the injected amount to an extent that the Commissioner thinks fair and reasonable having regard to their respective rights and interests in the company. Accordingly, subsection 175-10(2) of the ITAA 1997 prevents the Commissioner from disallowing any part of the deduction for the tax loss available to Company A.", "Date_of_Decision": "14 January 2010", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 1-3 Division 36 Division 165 section 165-12 section 175-10 subsection 175-10(1) subsection 175-10(2) Subdivision 375-G", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income injection test Tax loss Losses Company losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201049", "Unmatched_Content": "The provisions of section 80DA are designed to ensure that deductions for previous years losses are not allowed to a company in circumstances where, although the [ COT ] has been technically satisfied, the benefits from the allowance of the deductions would, in fact, flow wholly or mainly to persons who were not shareholders in the company during the years in which the losses were incurred . The section is mainly intended to ensure the effectiveness of the [COT]... [Emphasis added] | Keywords Income injection test Tax loss Losses Company losses"}
{"ATO_ID_Number": "ATO ID 2010/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - limit on extent that the tax loss can be reflected", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), does the amount of a capital loss made in respect of a CGT event, in relation to an equity interest in the Loss Company, constitute an upper limit on the extent that the particular CGT event may have 'reflected' the tax loss?", "Decision": "No. The CGT event may also further reflect the tax loss through reduced assessable income where the non-inclusion of a capital gain that otherwise would have been made under that event could mean that a lesser or no net capital gain is included in assessable income for an income year.", "Facts": "Loss Company seeks to deduct a tax loss that it had incurred in an earlier income year. The conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied, only because of the operation of the same share or interest rule in section 165-165 of the ITAA 1997. During the relevant 'ownership test period' as defined in subsection 165-12(1) of the ITAA 1997, Company K disposed of a direct equity interest in Loss Company, as defined in subsection 995-1(1) of the ITAA 1997. The disposal resulted in CGT event A1 in section 104-10 of the ITAA 1997 happening. Applying the cost base provisions in Division 110 of the ITAA 1997, the cost base and reduced cost base of that equity interest, as at the time of the CGT event, was $800 The proceeds received by Company K from the disposal were $100. The economic loss that produced the tax loss incurred by Loss Company has also caused a decrease in the market value of Company K's direct equity interest in Loss Company from $1,000 to $100. Company K made a $700 capital loss under subsection 104-10(4) of the ITAA 1997 on the disposal of the equity interest.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: * denotes a term defined in subsection 995-1(1) of the ITAA 1997. As a result of the economic loss that produced the tax loss incurred by Loss Company, the $200 assessable capital gain that Company K would otherwise have made from the disposal of its interest in Loss Company changed to a $700 capital loss. As provided by ATO ID 2003/535, for subsection 165-12(7) of the ITAA 1997 the extent that a tax loss has been reflected is determined by taking into account the combined extent that the tax loss has or will be reflected by way of capital losses, reduced assessable income and deductions. Accordingly, the disposal of Company K's interest in Loss Company fully reflects the tax loss of $900. This is through the $700 capital loss that occurs in the income year of the CGT event, and the $200 reduced assessable income that results, or could result in the future, from the exclusion of the $200 capital gain in working out a net capital gain or net capital loss for the income year under the method statements in sections 102-5 and 102-10 of the ITAA 1997. This is the case even if a single CGT event in relation to an equity interest causes both a capital loss and reduced assessable income", "Date_of_Decision": "1 March 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 102-5 section 102-10 subsection 104-10(4) Division 110 Division 165 subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/535 | ATO ID 2003/1111 (withdrawn)", "Subject_References": "Capital losses Ownership test period Saving rule Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201063", "Unmatched_Content": "Keywords Capital losses Ownership test period Saving rule Tax loss"}
{"ATO_ID_Number": "ATO ID 2009/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Converting excess franking offsets of a Pooled Development Fund to a tax loss", "Issue": "For the purposes of step 2 of the Method Statement in subsection 36-55(2) of the Income Tax Assessment Act 1997 (ITAA 1997), does the reference to 'corporate tax rate' mean 30% for the relevant income years?", "Decision": "Yes. 30% is the applicable tax rate for the purposes of step 2 of the Method Statement in subsection 36-55(2) of the ITAA 1997 for the relevant income years in accordance with the definition of 'corporate tax rate' in subsection 995-1(1) of the ITAA 1997.", "Facts": "The taxpayer is a company that is a Pooled Development Fund (PDF) as defined in subsection 995-1(1) of the ITAA 1997. For the 2006-07 income year, the taxpayer reported a tax loss in its tax return, which was carried forward to subsequent income years. In respect of the 2006-07 income year (the relevant income year), the tax losses resulted from the taxpayer having 'excess franking offsets' as defined in subsection 36-55(1) of the ITAA 1997. The taxpayer has been a PDF since its establishment.", "Reasons_for_Decision": "Summary: Section 36-55 of the ITAA 1997 allows for the conversion of excess franking offsets to a tax loss. To calculate the amount of tax loss, a taxpayer is required to follow the Method Statement under subsection 36-55(2) of the ITAA 1997, which provides: Method Statement When applying step 2 of the Method Statement, the reference to 'corporate tax rate' means 30%, regardless of whether the taxpayer's taxable income is subject to the general corporate tax rate of 30% or a concessional rate of tax for the reasons explained below. | Detailed Reasoning - Application of section 36-55 of the ITAA 1997 to a PDF: Section 36-55 of the ITAA 1997 applies to a PDF because a PDF is a corporate tax entity, as per the definition in subsection 995-1(1) of the ITAA 1997. PDFs are generally taxed at either 15% or 25%, depending on the type of income they derive. This difference in tax rate from the corporate tax rate of 30% raises the issue of whether step 2 in the Method Statement in subsection 36-55(2) of the ITAA 1997 above is referring to 30%, 15% or 25%. 'Corporate tax rate' is defined in subsection 995-1(1) of the ITAA 1997 as: the rate of tax in respect of the taxable income of a company covered by subsection 23(2) of the Income Tax Rates Act 1986. Subsection 23(2) of the Income Tax Rates Act 1986 (ITRA 1986) provides: The rate of tax in respect of the taxable income of a company not being: (a) a life insurance company; or (b) an RSA provider; or (ba) an FHSA provider; or (c) a company to which subsection (4C) or (4D) applies; Therefore, the rate of tax of a company covered by this section is 30%. Accordingly, the plain meaning of the phrase 'corporate tax rate' for the purposes of subsection 36-55(2) of the ITAA 1997 means 30%. In the present context, this plain meaning is supported by the following statements in the Supplementary Explanatory Memorandum (the Supplementary EM) to the Taxation Laws Amendment Bill (No. 5) 2003, which inserted section 36-55 into the ITAA 1997: 5.1 The amendments contained in Schedule 8 will ensure that corporate tax entities are no longer required to use up ('waste') losses that could be deductible in a later year of income against franked dividend (effectively tax-free) income. ... 5.3 Secondly, corporate tax entities will be able to treat a current year loss that would otherwise be used up against franked dividend income as a tax loss for that income year and be able to carry forward the tax loss for consideration as a deduction in a later year of income [emphasis added]. In addition, the Supplementary EM sets out the 'policy objective' of the amendments as follows: 5.65 The overall objective is to ensure that corporate tax entities have the full benefit of deducting current and prior year losses against taxable income. It is important to note that the policy intent of section 36-55 of the ITAA 1997 is not to preserve excess franking offsets, but rather to preserve any loss that would result if the dividend income was quarantined. The reference to excess franking offsets is merely the mechanism to allow for the preservation of these losses. The example below illustrates the 'losses' that section 36-55 of the ITAA 1997 intends to preserve: Example 1 A PDF has other assessable income of $100 and allowable deductions of $200 for an income year. In addition, the PDF receives a fully franked dividend of $70 (with a $30 franking credit attached). All of the assessable income of the PDF is SME assessable income and therefore the PDF's taxable income is subject to tax at 15%. If the dividend income was quarantined, the tax treatment of the PDF would be as follows: Section 36-55 of the ITAA 1997 aims to preserve the above tax loss of $100. Due to the concessional tax rate of the PDF, excess franking offsets result for the PDF. It is not the object of section 36-55 to preserve the above excess franking offset of $15. There is no mechanism in the Tax Acts specifically designed to allow the PDF to recoup this excess franking offset of $15. Accordingly the PDF should be entitled to deduct a tax loss of $100 in the subsequent year of income. Rather than quarantining the dividend income, this $100 tax loss is preserved by section 36-55 of the ITAA 1997 in the following way: Therefore, 'corporate tax rate' means 30% for the relevant income year for the purposes of step 2 of the Method Statement in subsection 36-55(2) of the ITAA 1997, regardless of the tax rate applicable to the taxpayer's taxable income.", "Date_of_Decision": "30 June 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 36-55 subsection 36-55(1) subsection 36-55(2) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Franking credits Tax loss", "Case_References": "", "Other_References": "Supplementary Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 5) 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200962", "Unmatched_Content": "This ATO ID has been amended to include references to paragraph 23(2)(ba) of the Income Tax Rates Act 1986 which has effect from 25 June 2008. | Divide by 'corporate tax rate' | Tax loss to be carried forward | Keywords Franking credits Tax loss"}
{"ATO_ID_Number": "ATO ID 2008/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company Tax Losses: loss company is a 100% subsidiary of more than one listed public company during the test period - whether the former concessional tracing rules apply", "Issue": "Does the former Division 166 of the Income Tax Assessment Act 1997 (ITAA 1997) apply where the loss company was a 100% subsidiary of more than one listed public company during the relevant test period?", "Decision": "No. The loss company must be a 100% subsidiary of the same listed public company at all times during the test period.", "Facts": "Company A has a tax loss for an earlier income year (the loss year) which it seeks to deduct in a later income year. At the start of the loss year, company A was a 100% subsidiary of a listed public company (company B). Subsequently, company A ceased to be a 100% subsidiary of company B and immediately became a 100% subsidiary of another listed public company (company C). Company A remained a 100% subsidiary of company C until the end of the test period. Company B and company C were both listed public companies at all times during the test period. Note: Division 166 of the ITAA 1997 was significantly amended by the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005. The former Division 166 of the ITAA 1997 (former Division 166) applies to company A in accordance with item 170 of Schedule 1 to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act.", "Reasons_for_Decision": "Summary: The former section 166-10 of the ITAA 1997 provided: 166-10(1) This Subdivision [Subdivision 166-A] also modifies the way Subdivision 165-A applies to a company that is not a *listed public company, but only if the conditions in subsections (2) and (3) are met. Note: Subdivision 165-A is about the conditions a company must satisfy before it can deduct a tax loss for an earlier income year. 166-10(2) The company (the subsidiary) must be a *100% subsidiary of another company (the holding company) at all times during a period consisting of: (a) the *loss year of the subsidiary; and (b) the income year of the subsidiary; and (c) any intervening period. The former Division 166 of the ITAA 1997 would only apply if company A satisfied the conditions in the former subsections 166-10(2) and 166-10(3) of the ITAA 1997. The singular expression used in the former subsections 166-10(2) and 166-10(3) of the ITAA 1997 in relation to 'the holding company' and 'a listed public company' indicate that the former Division 166 of the ITAA 1997 would only apply if company A was a 100% subsidiary of the same holding company at all times during the test period consisting of the loss year, the income year and any intervening period. In addition, the holding company had to be a listed public company at all times during the test period. Therefore, the former Division 166 of the ITAA 1997 does not apply to company A as it was not a 100% subsidiary of the same listed public company at all times during the test period. .", "Date_of_Decision": "20 December 2007", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 165-A former Division 166 former Subdivision 166-A former section 166-10 former subsection 166-10(1) former subsection 166-10(2) former subsection 166-10(3) former subsection 166-10(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Wholly owned subsidiary Holding companies Public company Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200812", "Unmatched_Content": "166-10(3) Also, the holding company must be a *listed public company at all times during that period. | *Denotes a term defined in subsection 995-1(1) of the ITAA 1997 | Keywords Wholly owned subsidiary Holding companies Public company Tax loss"}
{"ATO_ID_Number": "ATO ID 2008/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company Tax Losses: loss company during the test period was initially a 100% subsidiary of a listed public company, and then a listed public company itself - whether the former concessional tracing rules apply", "Issue": "Does the former Division 166 of the Income Tax Assessment Act 1997 (ITAA 1997) apply where, during the test period, the loss company was initially a 100% subsidiary of a listed public company, and then became a listed public company itself?", "Decision": "No. The loss company must either be a listed public company, or a 100% subsidiary of a listed public company, at all times during the test period in order for the former Division 166 of the ITAA 1997 to apply.", "Facts": "Company A has a tax loss for an earlier income year (the loss year) which it seeks to deduct in a later income year. At the start of the loss year, company A was a 100% subsidiary of a listed public company (company B). Subsequently, company A itself became a listed public company, and remained a listed public company until the end of the test period. Note: Division 166 of the ITAA 1997 was significantly amended by the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005. The former Division 166 of the ITAA 1997 (former Division 166) applies to company A in accordance with item 170 of Schedule 1 to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act.", "Reasons_for_Decision": "Summary: The former subsection 166-5(1) of the ITAA 1997 provided: 166-5(1) This Subdivision [Subdivision 166-A] modifies the way Subdivision 165-A applies to a company that is a * listed public company at all times during a period (the test period) consisting of the *loss year, the income year and any intervening period. The former section 166-10 of the ITAA 1997 provided: 166-10(1) This Subdivision [Subdivision 166-A] also modifies the way Subdivision 165-A applies to a company that is not a *listed public company, but only if the conditions in subsections (2) and (3) are met. Note: Subdivision 165-A is about the conditions a company must satisfy before it can deduct a tax loss for an earlier income year. 166-10(2) The company (the subsidiary) must be a *100% subsidiary of another company (the holding company) at all times during a period consisting of: (a) the *loss year of the subsidiary; and (b) the income year of the subsidiary; and (c) any intervening period. The former Division 166 of the ITAA 1997 would only apply if company A satisfied the conditions in either the former subsection 166-5(1) or the former subsections 166-10(2) and 166-10(3) of the ITAA 1997. The former subsection 166-5(1) of the ITAA 1997 provided that Subdivision 166-A of the ITAA 1997 would apply where a company was a listed public company at all times during the test period. The former subsection 166-10(2) of the ITAA 1997 provided that Subdivision 166-A of the ITAA 1997 would apply where a company was a 100% subsidiary of the same holding company at all times during the test period. In addition, the former subsection 166-10(3) of the ITAA 1997 provided that the holding company had to be a listed public company at all times during the test period. Company A was not a listed public company, or a 100% subsidiary of the same listed public company, at all times during the test period. Therefore, the former Division 166 of the ITAA 1997 does not apply to company A.", "Date_of_Decision": "20 December 2007", "Year_of_Income": "Year ended 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 165-A former Division 166 former Subdivision 166-A former subsection 166-5(1) former section 166-10 former subsection 166-10(1) former subsection 166-10(2) former subsection 166-10(3) former subsection 166-10(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Wholly owned subsidiary Holding companies Public company Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200813", "Unmatched_Content": "166-10(3) Also, the holding company must be a *listed public company at all times during that period. | *Denotes a term defined in subsection 995-1(1) of the ITAA 1997 | Keywords Wholly owned subsidiary Holding companies Public company Tax loss"}
{"ATO_ID_Number": "ATO ID 2008/14", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company Tax Losses: 'no detriment' exception to concessional tracing rules - can an eligible Division 166 company form a belief on reasonable grounds by applying the former concessional tracing rules", "Issue": "Can an eligible Division 166 company that wishes to rely upon section 166-275 of the Income Tax Assessment Act 1997 (ITAA 1997), so that it does not have to apply one of the concessional tracing rules in Subdivision 166-E of the ITAA 1997, apply the concessional tracing rules in the former Subdivisions 166-F and 166-G of the ITAA 1997 to form a belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997?", "Decision": "No. The concessional tracing rules in the former Subdivisions 166-F and 166-G of the ITAA 1997 are relevant only for the particular legislative scheme of which they formed a part, and cannot be invoked to demonstrate that the eligible Division 166 company has formed a belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997.", "Facts": "Company A has incurred a tax loss in an income year commencing on or after 1 July 2002 and ending before 14 December 2005 (the loss year), which it seeks to deduct in a later income year. At the start of the test period, company A was a 100% subsidiary of a listed public company (company B) within the meaning of the former Division 166 of the ITAA 1997. At a later time in the test period, company A became a 100% subsidiary of a widely held company (company C). Company A remained a 100% subsidiary of company C until the end of the test period. Just after company A became the 100% subsidiary of company C, the same persons owned the same shares and interests in company C as formerly owned shares and interests in company B. In the test period, no shareholder had a voting, dividend or capital stake of 10% or more in either company B or company C. Company A has not made a choice for the income year under section 166-15 of the ITAA 1997. Company A has not made a choice under sub-item 170(2) of Schedule 1 to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005 that the amendments made by that Act do not apply in respect of the tax loss. Therefore, Division 166 of the ITAA 1997 as amended applies to company A's tax loss. When seeking to deduct its tax loss in the income year, company A wishes to apply the concessional tracing rules in the former Subdivisions 166-F and 166-G of the ITAA 1997 to form a belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997.", "Reasons_for_Decision": "Summary: As the 100% subsidiary of a widely held company (company C), company A was an eligible Division 166 company at all times during the income year in which it seeks to deduct the tax loss. The concessional tracing rule in section 166-230 of the ITAA 1997 (indirect stakes of less than 10%) applies to company A. If company A was obliged to apply this rule, it would fail the test for substantial continuity of ownership in subsection 166-5(3) of the ITAA 1997, because during the test period two different top interposed entities would be deemed under subsection 166-230(2) of the ITAA 1997 to have a 100% stake in company A. Section 166-275 of the ITAA 1997 provides: 166-275 A company is taken to have met the conditions in section 165-12, paragraph 165-35(a) or section 165-123, or a changeover time or an alteration time is taken not to have occurred in respect of a company, (as the case requires), if: (a) a *tracing rule modifies how the ownership tests in section 166-145 apply to the tested company in respect of the *voting stake, a *dividend stake or a *capital stake; and (b) the company fails the tests (whether at the time of applying the tracing rule or at another time); and (c) the company believes, on reasonable grounds, that if the tracing rule did not modify how the tests apply to the company in respect of that stake, it would not fail the tests. Under paragraph 166-275(c) of the ITAA 1997, if Company A was to disregard the concessional tracing rule in section 166-230 of the ITAA 1997, it would have to demonstrate that it believes on reasonable grounds that if the rule did not apply, it would not fail the continuity of ownership test in section 165-12 of the ITAA 1997. Under subsection 166-5(3) of the ITAA 1997, company A is taken to have met the conditions in section 165-12 of the ITAA 1997 if there is 'substantial continuity of ownership'. The test for substantial continuity of ownership is provided in section 166-145 of the ITAA 1997. In applying section 166-145 of the ITAA 1997, company A must use the alternative tests in sections 165-150, 165-155 and 165-160 of the ITAA 1997. The alternative tests in these sections can be applied by demonstrating that it is the case, or it is reasonable to assume, that the requirements of each provision are satisfied. In order to form the required belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997, company A cannot apply the concessional tracing rules in the former Subdivisions 166-F and 166-G of the ITAA 1997, as they existed before the significant amendments enacted by the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005. The former Subdivisions 166-F and 166-G are statutory creations that are relevant only for the particular legislative scheme of which they formed a part. The basis upon which company A can form the required belief, on reasonable grounds, under paragraph 166-275(c) of the ITAA 1997, is a question of fact. The Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005 offers the following guidance: 1.136 The company must hold a reasonable belief that it would not fail the tests if the tracing rule did not apply. In most cases a company would be expected to form this view by applying the test for substantial continuity of ownership in the normal way, this is without the use of that tracing rule in respect of the particular stake. However, it is recognised that in some cases, despite its best endeavours, a company may be unable to obtain sufficient information to determine with certainty that it would pass the ownership tests without the tracing rule. In such a case, the modified COT allows a company to draw a conclusion about whether it would satisfy the ownership tests based on any information that it has reasonably been able to obtain. [Schedule 1, item 79, section 166-275]", "Date_of_Decision": "20 December 2007", "Year_of_Income": "Year ended 31 December 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 165-12 section 165-150 section 165-155 section 165-160 subsection 166-5(3) section 166-15 section 166-145 Subdivision 166-E section 166-230 subsection 166-230(2) section 166-275 paragraph 166-275(c) former Subdivision 166-F former Subdivision 166-G", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Wholly owned subsidiary Holding companies Public company Continuity of ownership Tax loss Interposed entities", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200814", "Unmatched_Content": "Denotes a term defined in subsection 995-1(1) of the ITAA 1997 | Keywords Wholly owned subsidiary Holding companies Public company Continuity of ownership Tax loss Interposed entities"}
{"ATO_ID_Number": "ATO ID 2007/106", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax losses: a 'widely held company' that replaces another 'widely held company' for part of the income year - whether a widely held company 'at all times' during the income year", "Issue": "Where a 'widely held company' is replaced during the income year by an interposed 'widely held company' that makes a choice under subsection 124-380(5) of the Income Tax Assessment Act 1997 (ITAA 1997), will the interposed company be a widely held company 'at all times' during the income year for the purposes of Division 166 of the ITAA 1997?", "Decision": "Yes. As a result of the choice under subsection 124-380(5) of the ITAA 1997, the effect of section 703-75 of the ITAA 1997 is that the interposed widely held company is a widely held company at all times during the income year for the purposes of Division 166 of the ITAA 1997.", "Facts": "Company X has a tax loss for an earlier income year. Shares in Company X are listed for quotation in the official list of an approved stock exchange. Company X is the head company of a consolidated group. During an income year in which the tax loss is sought to be deducted, there is a reorganisation under which an interposed holding company (Holding Company) acquires 100% of the shares in Company X. Holding Company makes a choice under subsection 124-380(5) of the ITAA 1997 that the consolidated group is to continue in existence. As a result of the reorganisation, Holding Company becomes the head company of the consolidated group, and its shares are listed for quotation in the official list of an approved stock exchange.", "Reasons_for_Decision": "Summary: A widely held company can recoup its tax losses under Division 166 of the ITAA 1997. Division 166 of the ITAA 1997 contains concessional tracing rules, that make it easier for a company to satisfy the continuity of ownership test in section 165-12 of the ITAA 1997, as modified by the test for substantial continuity of ownership in subsection 166-5(3) of the ITAA 1997. The definition of 'widely held company' in subsection 995-1(1) of the ITAA 1997 includes 'a company, *shares in which (except shares that carry a right to a fixed rate of *dividend) are listed for quotation in the official list of an *approved stock exchange'. Throughout the income year until the time when all of the shares in Company X are disposed of to Holding Company, the shares in Company X are listed for quotation in the official list of an approved stock exchange. As a result of the reorganisation, Holding Company becomes the head company of the consolidated group, and the shares in Holding Company are listed for quotation in the official list of an approved stock exchange. A company that makes a choice under subsection 124-380(5) of the ITAA 1997 to interpose a new head company of the consolidated group is affected by sections 703-65 to 703-80 of the ITAA 1997. Under subsection 703-75(1) of the ITAA 1997, everything that happened in relation to the original company (Company X) before the completion time is taken to have happened in relation to the interposed company (Holding Company) instead of in relation to the original company (Company X). Sections 703-65 to 703-80 of the ITAA 1997 focus on the 'completion time'. Under Subdivision 124-G of the ITAA 1997, this is the time when the interposed company (Holding Company) owns all of the shares in the original company (Company X) just after all of the shareholders in the original company have transferred their shares in the original company. Under subsection 703-75(3) of the ITAA 1997, subsection 703-75(1) of the ITAA 1997 has effect for the head company core purposes. Subsection 701-1(2) of the ITAA 1997 defines the 'head company core purposes' as including 'working out the amount of the head company's liability (if any) for income tax'. The ability of Holding Company (the new head company) to recoup the tax loss under Division 166 of the ITAA 1997 will affect the calculation of Holding Company's liability for income tax. This is one of the head company core purposes. In order to recoup the tax loss under Division 166 of the ITAA 1997, subsection 166-5(1) of the ITAA 1997 requires Holding Company to be a widely held company at all times during the income year in which it seeks to deduct the tax loss. As a result of subsection 703-75(1) of the ITAA 1997, Holding Company is a widely held company, for the purposes of Division 166 of the ITAA 1997, before the completion time, and will be a widely held company for the remainder of the income year. Therefore, Holding Company is a widely held company at all times during the income year.", "Date_of_Decision": "2 March 2007", "Year_of_Income": "Year ended 30 September 2008", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 124-G subsection 124-380(5) section 165-12 Division 166 subsection 166-5(1) subsection 166-5(3) subsection 701-1(2) section 703-65 section 703-75 subsection 703-75(1) subsection 703-75(3) section 703-80 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/107", "Subject_References": "Consolidated group Head company Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007106", "Unmatched_Content": "Keywords Consolidated group Head company Tax loss"}
{"ATO_ID_Number": "ATO ID 2007/107", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax losses: is a 'corporate change' under section 166-175 of the ITAA 1997 taken not to have happened because of the effect of section 703-75 of the ITAA 1997", "Issue": "Where an interposed holding company becomes the owner of another company during an income year, causing a prima facie corporate change under section 166-175 of the Income Tax Assessment Act 1997 (ITAA 1997), is the effect of section 703-75 of the ITAA 1997 that the corporate change is taken not to have happened?", "Decision": "Yes. The effect of section 703-75 of the ITAA 1997 is that the reorganisation which causes the interposed holding company to become the owner of the other company is taken not to give rise to a corporate change under section 166-175 of the ITAA 1997.", "Facts": "Company X has a tax loss for an earlier income year. Company X is the head company of a consolidated group. During an income year in which the tax loss is sought to be deducted, there is a reorganisation under which an interposed holding company (Holding Company) acquires 100% of the shares in Company X. Just after that and in exchange for the shares in Company X, Holding Company issues an identical number of shares in itself to the former shareholders of Company X. The former shareholders of Company X become the shareholders of Holding Company. Holding Company makes a choice under subsection 124-380(5) of the ITAA 1997 that the consolidated group is to continue in existence. As a result of the reorganisation, Holding Company becomes the head company of the consolidated group.", "Reasons_for_Decision": "Summary: The acquisition by Holding Company of 100% of the shares in Company X, and the issuing by Holding Company of an identical number of shares, gives rise to a prima facie 'corporate change' under section 166-175 of the ITAA 1997. Under paragraph 166-5(3)(b) of the ITAA 1997, a company must apply the test for substantial continuity of ownership at the end of each corporate change in the relevant test period. This means that there is an additional testing time. A company that makes a choice under subsection 124-380(5) of the ITAA 1997 to interpose a new head company of the consolidated group is affected by sections 703-65 to 703-80 of the ITAA 1997. Under subsection 703-75(1) of the ITAA 1997, everything that happened in relation to the original head company (Company X) before the time of the reorganisation is taken to have happened in relation to the interposed company (Holding Company) instead of in relation to the original head company (Company X). Under subsection 703-75(3) of the ITAA 1997, subsection 703-75(1) of the ITAA 1997 has this effect for the head company core purposes. Subsection 701-1(2) of the ITAA 1997 defines the 'head company core purposes' as including 'working out the amount of the head company's liability (if any) for income tax'. The ability of Holding Company (the new head company) to recoup the tax loss under Division 166 of the ITAA 1997 will affect the calculation of Holding Company's liability for income tax. This is one of the head company core purposes. Section 166-175 of the ITAA 1997 affects the ability to recoup tax losses, because if a corporate change occurs, it will require Holding Company to apply the test for substantial continuity of ownership at an additional time. If Holding Company is not able to satisfy the test at that time, it may not be able to deduct the tax loss which is relevant to that test period. The effect of subsection 703-75(1) of the ITAA 1997 is that nothing has happened in respect of the shares in Holding Company. The shares are taken to have been owned, just before and just after the reorganisation, by the shareholders of Company X who became the shareholders of Holding Company. The corporate change is thus taken not to have happened.", "Date_of_Decision": "2 March 2007", "Year_of_Income": "Year ended 30 September 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 124-380(5) Division 166 paragraph 166-5(3)(b) section 166-175 subsection 701-1(2) section 703-65 section 703-75 subsection 703-75(1) subsection 703-75(3) section 703-80", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/106", "Subject_References": "Consolidated group Head company Consolidation - continuity of ownership test Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007107", "Unmatched_Content": "Keywords Consolidated group Head company Consolidation - continuity of ownership test Tax loss"}
{"ATO_ID_Number": "ATO ID 2006/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company losses: continuity of ownership test - time of change in ownership of shares", "Issue": "In respect of the sale of a loss company, will the time of change in ownership of shares under the continuity of ownership test (COT) relating to company tax losses in section 165-12 of the Income Tax Assessment Act 1997 (ITAA 1997) necessarily be the same as the time of disposal of shares for capital gains tax (CGT) purposes?", "Decision": "No. A change in ownership for the purposes of COT occurs when there is a change in beneficial ownership of shares. For CGT purposes, a disposal of shares under a contract happens at the time when the contract for disposal is entered into, which may not be the time at which there is a change in beneficial ownership of the shares.", "Facts": "On 1 June 2002, individual X and individual Y entered into a written agreement. The agreement was expressed to be a 'heads of agreement' providing for the sale of a company by individual X to individual Y. The agreement did not specify certain fundamental terms and conditions of the sale but expressed that such terms and conditions would be agreed upon by the parties at a future date and expressed in a subsequent formal sale contract. On 1 November 2002, individual X and individual Z entered into a formal contract that was expressed to have been made pursuant to the agreement of 1 June 2002. The contract of 1 November 2002 contained detailed terms and conditions relating to the sale of the company by Individual X to individual Z, who is an associate of individual Y, but was not a party to the original agreement. The company incurred a tax loss in the 2002-03 income year and it was claimed on behalf of the company that individual Z had been the beneficial owner of shares in the company during the whole of the 2002-03 income year for the purposes of COT under section 165-12 of the ITAA 1997. In this regard, it was claimed that the heads of agreement was the 'source of the obligation to dispose of the shares' in accordance with the High Court decision in Federal Commissioner of Taxation v. Sara Lee Household & Body Care (Aust) Pty Ltd (2000) 201 CLR 520; 2000, ATC 4378; (2000) 44 ATR 370 (the Sara Lee Case ).", "Reasons_for_Decision": "Summary: A company cannot deduct a tax loss in an income year unless it satisfies COT (section 165-12 of the ITAA 1997) or, if cannot satisfy this test, it satisfies the same business test (section 165-13 of the ITAA 1997). The primary test referred to in section 165-12, which would be applicable in the present case, requires that persons must beneficially own shares carrying more than 50% of the relevant rights at all times during the period from the start of the loss year until the end of the income year. Therefore, in the present case, COT could not be satisfied in respect of the tax loss incurred in the 2002-03 income year (the loss year) unless it could be established that individual Z was the beneficial owner of the shares in the company from 1 July 2002 until the end of the income year. The time of change in ownership of shares for the purposes of COT is not necessarily the same as the time of disposal of shares under the CGT rules. Under paragraph 104-10(3)(a) of the ITAA 1997, the time of disposal of a CGT asset under a contract is taken to be the time of entry into the contract. In relation to the CGT rules, it was held in the Sara Lee Case that, where two or more contracts are relevant to a disposal of assets: ...the identification of the contract under which the assets were disposed of, for the purpose of applying s 160U of the ITAA 1936, requires a judgment as to which of the contracts is properly to be seen as the source of the obligation to effect the disposal. However, the identification of the contract that represents the source of the obligation to effect a disposal under the CGT rules is not the basis for determining the time at which there is a change in beneficial ownership of shares for the purposes of COT in respect of tax losses. Other principles will be relevant in this regard, such as whether or not a purchaser under contract can, by way of specific performance, compel a transfer of shares-for example, refer to R v. Australian Broadcasting Tribunal; Ex Parte Hardiman (1980) 144 CLR 13 at 31. The distinction between the time of disposal of an asset for CGT purposes and the time of change in beneficial ownership was, in fact, recognised in the majority judgement in the Sara Lee Case when, in respect of the agreement that was identified as the source of the obligation to effect the disposal, it was stated that it 'did not effect a change in ownership, legal or beneficial, of the assets'. The facts of the present case do not support the view that individual Z was the beneficial owner of shares in the company at any time before 1 November 2002 for the purpose of satisfying COT. Before that date, fundamental terms and conditions of sale had not been agreed and individual Z had not been a party to any agreement in respect of the shares. Therefore, in respect of the sale of a loss company, the time of change in ownership of shares under COT relating to company tax losses in section 165-12 of the ITAA 1997 may not necessarily be the same as the time of disposal of shares for CGT purposes.", "Date_of_Decision": "7 February 2006", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 104-10(3)(a) section 165-12 section 165-13", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT event A1-disposal of CGT asset Time of CGT event Tax loss", "Case_References": "Federal Commissioner of Taxation v. Sara Lee Household & Body Care (Aust) Pty Ltd (2000) 201 CLR 520 2000 ATC 4378 (2000) 44 ATR 370", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200635", "Unmatched_Content": "Keywords CGT event A1-disposal of CGT asset Time of CGT event Tax loss"}
{"ATO_ID_Number": "ATO ID 2006/152", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company losses: continuity of ownership test - inter-entity loss multiplication - whether appropriate to use the non-formula method", "Issue": "Is it appropriate to use the non-formula method in subsection 165-115ZB(6) of the Income Tax Assessment Act 1997 (ITAA 1997) to work out the adjustment amount under section 165-115ZA of the ITAA 1997 where one company (company H) acquires firstly a non-controlling interest, and then a controlling stake in a second company (the loss company), before the loss company is subsequently liquidated and the first company makes a net capital loss that reflects tax losses incurred by the loss company?", "Decision": "Yes. It is appropriate to use the non-formula method in subsection 165-115ZB(6) of the ITAA 1997 to work out the adjustment amount because the net capital loss that is made on liquidation of the loss company reflects the tax losses incurred by the loss company both before and after the time that the first company gained a controlling stake in the loss company.", "Facts": "Company H initially acquires an interest in a second company (loss company) that does not entitle company H to exercise either directly or indirectly, or control the exercise of, more than 50% of the voting power in loss company, or confer the right to receive either directly or indirectly more than 50% of the dividends or distributions of capital of loss company. Company H then acquires a controlling stake in loss company within section 165-115Z of the ITAA 1997. After company H obtains its controlling stake in loss company, a liquidator issues a notice pursuant to section 104-145 of the ITAA 1997 declaring that shares in loss company are worthless. Loss company is a loss company within section 165-115R of the ITAA 1997 at the time that the liquidator issues the notice under section 104-145 of the ITAA 1997. Company H makes a net capital loss on the liquidation of loss company. This net capital loss reflects the tax losses incurred by loss company over the first period when company H has an interest in loss company that is not a controlling stake (the first period) and over the second period when company H has a controlling stake in loss company (the second period).", "Reasons_for_Decision": "Summary: Subsection 165-115ZB(6) of the ITAA 1997 provides that: The adjustment amount to be worked out under this subsection is the amount that is appropriate having regard to: (a) the object of this Subdivision and other matters set out in section 165-115J; and (b) the extent of the affected entity's relevant equity interests or relevant debt interests, as the case may be, in the *loss company immediately before the alteration time; and (c) when, and under what circumstances, the relevant equity interests or relevant debt interests were acquired by the affected entity; and (d) the loss company's overall loss at the alteration time; and (e) the extent to which that overall loss has reduced the market values of the equity or debt; and (f) to prevent double counting, the extent of any adjustments required under this Subdivision because of any application of this Subdivision to another loss company in which the affected entity has a relevant equity interest or relevant debt interest; The declaration by the liquidator under section 104-145 of the ITAA 1997 constitutes an alteration time by virtue of section 165-115N of the ITAA 1997. Company H has a relevant equity interest within section 165-115X of the ITAA 1997 in loss company immediately before the alteration time. As the net capital loss made by company H on liquidation of loss company reflects the tax losses incurred by loss company over both the first period and the second period, it is appropriate to work out the adjustment amount for the purposes of section 165-115ZA of the ITAA 1997 under the non-formula method in subsection 165-115ZB(6) of the ITAA 1997.", "Date_of_Decision": "5 June 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 104-145 section 165-115J section 165-115N section 165-115R section 165-115X section 165-115Z section 165-115ZA subsection 165-115ZB(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cost base adjustments Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006152", "Unmatched_Content": "Reasons for Decision: and the amount so worked out is to be applied in making reductions in an appropriate way. | *denotes a term defined in section 995-1 of the ITAA 1997 | Keywords Cost base adjustments Tax loss"}
{"ATO_ID_Number": "ATO ID 2006/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax loss: whether 'continuing shareholders' include trusts that have made family trust elections", "Issue": "Can a family trust, which is deemed to be a notional entity under section 165-207 of the Income Tax Assessment Act 1997 (ITAA 1997) for company loss recoupment purposes, be a 'continuing shareholder' for the purposes of section 175-10 of the ITAA 1997?", "Decision": "Yes. A 'continuing shareholder' for the purposes of section 175-10 of the ITAA 1997 can include a family trust that is deemed to be a notional entity under section 165-207 of the ITAA 1997.", "Facts": "Company A has a tax loss available to it from an earlier income year (the loss year) which it is now seeking to deduct. Company A derives an amount of assessable income in the income year that it would not have derived if the tax loss had not been available for deduction. The trustees of trust B and C collectively own shares that carry more than 50% of the voting power in company A, and rights to more than 50% of the dividends and capital distributions of company A, during the whole (or the relevant part) of the loss year and during the whole of the income year. Both trust B and C have made family trust elections (FTEs) pursuant to section 272-80 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936). The FTEs are in force for all relevant income years. For the purposes of the company loss recoupment rules, company A meets the conditions of the continuity of ownership test (COT) in section 165-12 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 175-10(3) of the ITAA 1997 provides: 175-10(3) The continuing shareholders are: (a) all of the persons who had *more than 50% of the voting power in the company during the whole (or the relevant part) of the *loss year and during the whole of the income year; and (b) all of the persons who had rights to *more than 50% of the company's dividends during the whole (or the relevant part) of the loss year and during the whole of the income year; and (c) all of the persons who had rights to *more than 50% of the company's capital distributions during the whole (or the relevant part) of the loss year and during the whole of the income year. Therefore the COT in section 165-12 of the ITAA 1997 is used to establish who are the 'continuing shareholders' under subsection 175-10(3) of the ITAA 1997. The COT is expanded upon by the rules in Subdivision 165-D of the ITAA 1997, including section 165-207 of the ITAA 1997. The trustees of trust B and C, both of which have made FTEs that are in force for all relevant income years, each own shares in company A. Therefore, two single notional entities that are persons (being neither companies nor trustees) are taken to own those shares in company A beneficially, in accordance with section 165-207 of the ITAA 1997. The two single notional entities (representing trust B and C) collectively have more than 50% of the voting power in company A, and rights to more than 50% of the dividends and capital distributions of company A, during the whole (or the relevant part) of the loss year and during the whole of the income year. Accordingly, the Commissioner will consider each single notional entity under section 165-207 of the ITAA 1997 to be a 'continuing shareholder' for the purposes of section 175-10 of the ITAA 1997.", "Date_of_Decision": "20 June 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 165-12 Subdivision 165-D section 165-207 section 175-10 subsection 175-10(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Continuity of ownership Family trust election Tax loss Company losses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006157", "Unmatched_Content": "Reasons for Decision: To find out who they were, apply whichever tests are applied in order to determine whether the company can deduct the *tax loss (or the part of the tax loss) in the first place. | See section 165-12 (which is about the company maintaining the same owners). | Division 167 has special rules for working out rights to voting power, dividends and capital distributions in a company whose shares do not all carry the same rights to those matters. | * denotes a term defined in section 995-1 of the ITAA 1997 | Update to include the new note referencing Division 167 at the end of subsection 175-10(3). | Keywords Continuity of ownership Family trust election Tax loss Company losses"}
{"ATO_ID_Number": "ATO ID 2006/258", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company Tax Losses: same business test-whether it applies only to business carried on by a company in Australia", "Issue": "Where a foreign resident company carries on business both in and out of Australia, is the business examined under the same business test (SBT) in section 165-13 of the Income Tax Assessment Act 1997 (ITAA 1997) restricted to the business carried on by the company in Australia?", "Decision": "No. The SBT is applied to the business carried on by the company both in and out of Australia.", "Facts": "A foreign resident company has a tax loss for an earlier income year (the loss year) which it seeks to deduct in a later income year. The company does not satisfy the conditions of section 165-12 of the ITAA 1997 relating to maintenance of the same owners and therefore seeks to satisfy the SBT under section 165-13 of the ITAA 1997. The company carries on business both in and out of Australia at all relevant times.", "Reasons_for_Decision": "Summary: The conditions of the SBT are outlined in Subdivision 165-E of the ITAA 1997. Subsection 165-210 of the ITAA 1997 provides: Section 165-210 of the ITAA 1997 refers to 'the business' carried on by the company and to 'a business of a kind or 'a transaction of a kind'. There are no references in section 165-210 to the tax jurisdiction in which the business is carried on or the transaction is entered into. Further, the business of a foreign resident company conducting activities both in and out of Australia may only be properly ascertained by reference to the company's global activities. Therefore it is concluded that the SBT applies to the business carried on by the company both in and out of Australia.", "Date_of_Decision": "12 September 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 165-12 section 165-13 Subdivision 165-E section 165-210 subsection 165-210(1) subsection 165-210(2) subsection 165-210(3) subsection 165-210(4)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 1999/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Same business test Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006258", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 1999/9 | Keywords Same business test Tax loss"}
{"ATO_ID_Number": "ATO ID 2005/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Continuity of ownership test: listed public company - same people must control the voting power or company must carry on same business", "Issue": "Is a listed public company within Division 166 of the Income Tax Assessment Act 1997 (ITAA 1997) that is seeking to deduct a tax loss, subject to section 165-15 of the ITAA 1997 which requires that the same people must control the voting power, or the company must carry on the same business?", "Decision": "Yes. Subdivision 166-A of the ITAA 1997 does not modify the way section 165-15 of the ITAA 1997 applies to a company that is a listed public company.", "Facts": "The taxpayer, Company S, incurred a tax loss in an earlier income year which it is now seeking to deduct. Company S is a listed public company within Division 166 of the ITAA 1997. Company S meets the conditions in section 165-12 of the ITAA 1997 as modified by Division 166 of the ITAA 1997. Company G and Company H collectively have more than 50% of the voting power and rights to more than 50% of the dividends and capital distributions in respect of Company S at each of the times in the test period referred to in subsection 166-5(2) of the ITAA 1997. In an income year following the loss year, Company H acquires additional shares in Company S. Following this transaction Company H has more than 50% of the shares in Company S.", "Reasons_for_Decision": "Summary: Subsection 166-5(1) of the ITAA 1997 states that Subdivision 166-A of the ITAA 1997 modifies the way Subdivision 165-A of the ITAA 1997 applies to listed public companies within Division 166 of the ITAA 1997. Accordingly, it cannot be said that Subdivision 166-A replaces or denies the application of Subdivision 165-A. Under section 165-10 of the ITAA 1997, a company cannot deduct a tax loss unless it meets either the conditions in section 165-12 of the ITAA 1997 (which is about the company maintaining the same owners) or section 165-13 of the ITAA 1997 (which is about the company carrying on the same business). Even if a company meets the conditions in section 165-12 or section 165-13 of the ITAA 1997, it cannot deduct a tax loss unless it meets the requirements in section 165-15 of the ITAA 1997 that the same people must control the voting power, or the company must carry on the same business. Subdivision 166-A of the ITAA 1997 does not modify the way that section 165-15 of the ITAA 1997 applies to a company that is a listed public company. Accordingly, listed public companies under Division 166 of the ITAA 1997 must meet the requirements in section 165-15. In the terms of the present case, Company S will be subject to section 165-15 of the ITAA 1997 even if it satisfies section 165-12 of the ITAA 1997. Accordingly, Company S would not be able to deduct the tax loss if Company H began to control, or became able to control, the voting power in Company S for the purpose of getting some benefit or advantage in relation to how the ITAA 1997 applies, or getting such a benefit or advantage for someone else, or for purposes including that purpose. However, Company S would be able to deduct the tax loss in these circumstances if it satisfies the same business test.", "Date_of_Decision": "20 December 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 165-A section 165-10 section 165-12 section 165-13 section 165-15 Division 166 Subdivision 166-A subsection 166-5(1) subsection 166-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Prior year losses Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20058", "Unmatched_Content": "Keywords Prior year losses Tax loss"}
{"ATO_ID_Number": "ATO ID 2005/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Continuity of ownership test: listed public company - arrangements affecting beneficial ownership of shares", "Issue": "Is a listed public company within Division 166 of the Income Tax Assessment Act 1997 (ITAA 1997) that is seeking to deduct a tax loss, subject to section 165-180 of the ITAA 1997 where, for the purposes of a test, the Commissioner may treat a person as not having beneficially owned particular shares at a particular time if the conditions in subsections 165-180(2) and 165-180(3) of the ITAA 1997 are met?", "Decision": "Yes. Subsection 166-165(2) of the ITAA 1997 states that section 165-180 of the ITAA 1997 also applies for the purposes of an ownership test in Subdivision 166-D of the ITAA 1997.", "Facts": "The taxpayer, Company S, has a tax loss from an earlier income year which it is seeking to deduct. Company S is a listed public company within Division 166 of the ITAA 1997. Company S meets the conditions in section 165-12 of the ITAA 1997 as modified by Division 166 of the ITAA 1997. Company C and Company D collectively have more than 50% of the voting power in Company S and rights to more than 50% of the dividends and capital distributions of Company S at each of the times in the test period specified in subsection 166-5(2) of the ITAA 1997. In the 2004-05 income year, Company C acquires most of the shares that Company D beneficially owns in Company S. Company D holds on to a small number of shares in Company S following this transaction.", "Reasons_for_Decision": "Summary: Subsection 166-5(1) of the ITAA 1997 states that Subdivision 166-A of the ITAA 1997 modifies the way Subdivision 165-A of the ITAA 1997 applies to listed public companies within Division 166 of the ITAA 1997. Accordingly, it cannot be said that Subdivision 166-A replaces or denies the application of Subdivision 165-A. Under section 165-10 of the ITAA 1997 a company cannot deduct a tax loss unless it meets either the conditions in section 165-12 of the ITAA 1997 (which is about the company maintaining the same owners) or section 165-13 of the ITAA 1997 (which is about the company carrying on the same business). For the purposes of a test, the Commissioner may pursuant to section 165-180 of the ITAA 1997 treat a person as not having beneficially owned particular shares at a particular time if the conditions in subsections 165-180(2) and 165-180(3) are met. Subsection 166-165(2) of the ITAA 1997 states that section 165-180 of the ITAA 1997 also applies for the purposes of an ownership test in Subdivision 166-D of the ITAA 1997. The reference to a 'particular time' in section 165-180 is treated as if it were a reference to the ownership test time provided for in section 166-145 of the ITAA 1997. In the circumstances of the present case, section 165-180 of the ITAA 1997 would apply if it were determined that by virtue of Company D retaining a small number of shares in Company S, an arrangement that meets the conditions specified in subsections 165-180(2) and 165-180(3) had been entered into.", "Date_of_Decision": "20 December 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 165-A section 165-10 section 165-12 section 165-13 section 165-180 subsection 165-180(2) subsection 165-180(3) Division 166 Subdivision 166-A subsection 166-5(1) subsection 166-5(2) Subdivision 166-D section 166-145 subsection 166-165(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Prior year losses Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20059", "Unmatched_Content": "Keywords Prior year losses Tax loss"}
{"ATO_ID_Number": "ATO ID 2005/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax loss: 'person' other than company with tax loss obtains tax benefit in connection with scheme", "Issue": "Can the company that has incurred the 'excluded loss' in terms of section 175-5 of the Income Tax Assessment Act 1997 (ITAA 1997) be a 'person' for the purposes of section 175-15 of the ITAA 1997?", "Decision": "No. A 'person' for the purposes of section 175-15 of the ITAA 1997 means a person other than the company that incurred the 'excluded loss.'", "Facts": "Company S has a tax loss available to it from an earlier income year which it is now seeking to deduct. Company S is a listed public company within Division 166 of the ITAA 1997. Company X and Company Y collectively have more than 50% of the voting power in Company S and rights to more than 50% of the dividends and capital distributions of Company S at the start of the loss year. Subsequently, Company X acquires beneficial ownership of a further parcel of shares in Company S from Company Y. Following this transaction, Company X alone has more than 50% of the voting power in Company S and rights to more than 50% of the dividends and capital distributions of Company S. Company Y continues to hold a minority percentage of the voting power in Company S and a minority percentage of the rights to the dividends and capital distributions of Company S. The preceding transaction is the only trading in shares in Company S by either Company X or Company Y at any time during the test period within section 166-5 of the ITAA 1997. Company S meets the conditions of section 165-12 of the ITAA 1997 as modified by Division 166.", "Reasons_for_Decision": "Summary: Subsections 175-15(1) and 175-15(2) of the ITAA 1997 provide: Section 175-15 Second case: someone else obtains a tax benefit because of tax loss available to company 175-15(1) The Commissioner may disallow the *excluded loss if: (a) a person has obtained or will obtain a tax benefit in connection with a *scheme; and (b) the scheme would not have been entered into or carried out if the excluded loss had not been available to be taken into account for the purposes of: • Division 36 (which is about tax losses of earlier years); • Division 165 (which is about the income tax consequences of changing ownership or control of a company); • Subdivision 375-G (which is about film losses). The heading of section 175-15 of the ITAA 1997 states that section 175-15 will apply where 'someone else' obtains a tax benefit because of a tax loss available to a company. The heading of section 175-15 forms part of the ITAA 1997 by virtue of subsection 950-100(1) of the ITAA 1997. Subsection 175-15(2) of the ITAA 1997 provides that 'the person had a shareholding interest in the company'. Therefore the 'person' for the purposes of section 175-15 cannot be the company that is seeking to deduct a tax loss. Accordingly the Commissioner may only disallow a tax loss under section 175-15 if a person other than the company that incurred the 'excluded loss', has obtained or will obtain a tax benefit in connection with a scheme, and that scheme would not have been entered into or carried out if the tax loss had not been available.", "Date_of_Decision": "20 December 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 Division 36 Division 165 section 165-12 Division 166 section 166-5 section 175-5 section 175-15 subsection 175-15(1) subsection 175-15(2) Subdivision 375-G subsection 950-100(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Prior year losses Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200510", "Unmatched_Content": "*denotes a term defined in subsection 995-1(1) of the ITAA 1997 | Keywords Prior year losses Tax loss"}
{"ATO_ID_Number": "ATO ID 2005/285", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: transfer of part of the tax loss incurred during part of the loss year - income company unable to deduct tax loss in deduction year", "Issue": "Can a company choose to transfer a part of a tax loss that was incurred during a part of the loss year to another company that is a member of the same wholly-owned group, pursuant to Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) as it formerly applied?", "Decision": "No. Section 170-10 of the ITAA 1997 permits a company to transfer the whole or part of its tax loss for the loss year to another company within the same wholly-owned group where certain conditions are met, but this does not allow the company to choose to transfer a part of the loss referable to a particular period in the loss year.", "Facts": "Loss Company and Income Company are both members of the same wholly-owned group at all relevant times within section 170-30 of the ITAA 1997. Loss Company incurs a tax loss during an income year (the loss year). It wishes to transfer an amount of this tax loss to Income Company in a later income year (the deduction year) before the application of transitional rules generally phasing out the group loss transfer provisions. Loss Company has a change of ownership in the loss year but satisfies the same business test in respect of the deduction year. Subdivision 175-A of the ITAA 1997 does not apply to Loss Company in the deduction year. Income Company has a change of ownership in the loss year, at the same time as Loss Company, and fails the same business test in respect of the deduction year. Loss Company seeks to transfer part of the tax loss incurred during a part of the loss year to Income Company. The part of the loss year was the period from when Income Company has a change of ownership to the end of the loss year.", "Reasons_for_Decision": "Summary: Subdivision 170-A of the ITAA 1997, as it operated for income years before the application of transitional rules generally phasing out the group loss transfer provisions, allowed a loss company to transfer a surplus amount of its tax loss to another company if certain conditions in the Subdivision are met. Section 170-10 of the ITAA 1997 provides that a loss company can transfer an amount of its tax loss, as defined, for an income year to an income company if the conditions in Subdivision 170-A are met. The amount transferred can be the whole or part of the tax loss. It is considered that the reference to 'or part' of the tax loss in section 170-10 reflects the fact that the loss company is not required by Subdivision 170-A to transfer the full amount of its available tax loss. It can instead agree to transfer a lesser part of that amount. Furthermore, Subdivision 170-A does not contain any provision that provides a loss company with the right to choose that the transferred amount is in respect of any particular part(s) of the loss year. An amount of tax loss that is transferred to an income company is deemed by subsection 170-15(1) of the ITAA 1997 to be a tax loss incurred by the income company in the loss year. That loss is not deemed to be incurred in respect of any particular part of the loss year but rather the whole of the loss year. Subdivision 170-A contains a number of conditions that restrict the amount of tax loss that the loss company can transfer to the income company. In particular, subsection 170-40(2) of the ITAA 1997 provides that the income company must not be prevented by Division 165 or 175 of the ITAA 1997 from deducting the transferred amount. As Income Company had a change of ownership in the loss year and was not able to satisfy the same business test in respect of the deduction year, Division 165 would prevent Income Company from deducting the transferred amount. Accordingly, Loss Company's tax loss is not available for transfer to Income company for the deduction year as subsection 170-40(2) is not satisfied.", "Date_of_Decision": "6 October 2005", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Division 165 Subdivision 170-A section 170-10 subsection 170-15(1) section 170-30 subsection 170-40(2) Subdivision 175-A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company losses Continuity of ownership test Group company loss transfers Same business test Tax loss", "Case_References": "Keycorp Limited v. Commissioner of Taxation [2007] FCA 41", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005285", "Unmatched_Content": "Keywords Company losses Continuity of ownership test Group company loss transfers Same business test Tax loss"}
{"ATO_ID_Number": "ATO ID 2004/658", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess deductions for mining expenditure - another taxpayer obtains tax benefit because of deductions available to a company", "Issue": "Can excess deductions for mining expenditure brought forward from a previous income year pursuant to former Subdivision 330-F of the Income Tax Assessment Act 1997 (ITAA 1997) be subject to the application of section 175-30 of the ITAA 1997?", "Decision": "Yes. Carry-forward excess deductions for mining expenditure under former Subdivision 330-F of the ITAA 1997 can be subject to the application of section 175-30 of the ITAA 1997.", "Facts": "Company X carried on a business of mineral exploration during the 1997-98 income year and incurred deductible expenditure under former Subdivision 330-A of the ITAA 1997 that exceeded assessable income for that income year. In the 1998-99 income year, the mineral exploration activities of Company X were substantially reduced. During that year, Company X became a beneficiary of Trust Y. Trust Y had no prior association with Company X or its shareholders. Company X received a large distribution from Trust Y in respect of the 1998-99 income year but the excess deductions for mining expenditure brought forward by Company X from the 1997-98 income year were sufficient to offset the amount of the distribution. The shares in Company X were then transferred to the controllers of Trust Y during the 1999-2000 income year.", "Reasons_for_Decision": "Summary: Section 175-30 of the ITAA 1997 is an anti-avoidance provision that, by virtue of subsection 175-30(1), enables the Commissioner to disallow a deduction of a company if a person (other than the company) has obtained or will obtain a tax benefit in connection with a scheme and the scheme would not have been entered into or carried out if the company had not incurred some or all of the expenditure giving rise to the deduction. However, the Commissioner cannot disallow the deduction if the person had a shareholding interest in the company at some time during the income year and the Commissioner considers the tax benefit to be fair and reasonable having regard to that shareholding interest. Section 175-30 supports section 175-15 of the ITAA 1997 which is expressed in broadly similar terms but specifically enables the Commissioner to disallow the deduction of a tax loss in an income year after the loss year. Section 175-15 of the ITAA 1997 cannot be applied in the circumstances of the present case because excess mining expenditure, although deductible in a later year in a similar way to a carry forward tax loss, is not a tax loss as defined in the income tax law. However, section 175-30 of the ITAA 1997 could be applied if the excess mining expenditure represented a deduction for the 1998-99 income year. In this regard, former Subdivision 330-F of the ITAA 1997 provided that total deductions under Subdivision 330-A of the ITAA 1997 could not exceed available assessable income for an income year (former subsection 330-305(2) of the ITAA 1997). It also provided that, in such circumstances, the whole or part of the amount disallowed could be deducted in the next income year for which assessable income was derived (former subsection 330-310(1) of the ITAA 1997). In the present situation, the excess of deductible mining expenditure over assessable income in the 1997-98 income year would not be allowable as a deduction in that income year by reason of former Subdivision 330-F of the ITAA 1997. However, former Subdivision 330-F would make this same excess specifically deductible in the 1998-99 income year. Hence, the excess mining expenditure is a deduction of Company X in the 1998-99 income year for the purposes of section 175-30 of the ITAA 1997 which could be applied if the other conditions in that section are met.", "Date_of_Decision": "30 July 2004", "Year_of_Income": "Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1997 section 175-15 section 175-30 subsection 330-310(1) subsection 330-305(2) Subdivision 330-F Subdivision 330-A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excess deduction rules Mining expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004658", "Unmatched_Content": "Keywords Excess deduction rules Mining expenses"}
{"ATO_ID_Number": "ATO ID 2004/660", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess deductions for mining expenditure - income injected into company because of available deductions", "Issue": "Can excess deductions for mining expenditure brought forward from a previous income year pursuant to former Subdivision 330-F of the Income Tax Assessment Act 1997 (ITAA 1997) be subject to the application of section 175-20 of the ITAA 1997?", "Decision": "Yes. Carry-forward excess deductions for mining expenditure under former Subdivision 330-F of the Income Tax Assessment Act 1997 (ITAA 1997) can be subject to the application of section 175-20 of the ITAA 1997", "Facts": "Company X carried on a business of mineral exploration during the 1997-98 income year and incurred deductible expenditure under former Subdivision 330-A of the ITAA 1997 that exceeded assessable income for that income year. In the 1998-99 income year, the mineral exploration activities of Company X were substantially reduced. During that income year, Company X became a beneficiary of Trust Y. Trust Y had no prior association with Company X or its shareholders. Company X received a large distribution from Trust Y in respect of the 1998-99 income year but the excess deductions for mining expenditure brought forward by Company X from the 1997-98 income year were sufficient to offset the amount of the distribution. The shares in Company X were then transferred to the controllers of Trust Y during the 1999-2000 income year.", "Reasons_for_Decision": "Summary: Section 175-20 of the ITAA 1997 is an anti-avoidance provision that enables the Commissioner to disallow deductions of a company 'for an income year' if the company has derived assessable income or a capital gain in the income year that would not have been derived if the company did not have those deductions. However, the Commissioner cannot disallow the deductions if the continuing shareholders of the company will benefit from the derivation of the income or gain (the 'injected amount') to an extent that the Commissioner thinks fair and reasonable having regard to their respective shareholding interests in the company. Section 175-20 supports section 175-10 of the ITAA 1997 which is expressed in similar terms but specifically enables the Commissioner to disallow the deduction of a tax loss in an income year after the loss year. Section 175-10 of the ITAA 1997 cannot be applied in the circumstances of the present case because excess mining expenditure, although deductible in a later year in a similar way to a carry forward tax loss, is not a tax loss as defined in the income tax law. However, section 175-20 of the ITAA 1997 could be applied if the excess mining expenditure were a deduction 'for an income year', namely the 1998-99 income year. In this regard, former Subdivision 330-F of the ITAA 1997 provided that total deductions under Subdivision 330-A of the ITAA 1997 could not exceed available assessable income for an income year (former subsection 330-305(2) of the ITAA 1997). It also provided that, in such circumstances, the whole or part of the amount disallowed could be deducted in the next income year for which assessable income was derived (former subsection 330-310(1) of the ITAA 1997). In the present situation, the excess of deductible mining expenditure over assessable income in the 1997-98 income year would not be allowable as a deduction in that income year by reason of former Subdivision 330-F of the ITAA 1997. However, former Subdivision 330-F would make this same excess specifically deductible in the 1998-99 income year. Hence, the excess mining expenditure is a deduction of Company X 'for an income year' (the 1998-99 income year) for the purposes of section 175-20 of the ITAA 1997 which could be applied if the other conditions in that section are met.", "Date_of_Decision": "30 July 2004", "Year_of_Income": "Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1997 section 175-10 section 175-20 Subdivision 330-A Subdivision 330-F subsection 330-305(2) subsection 330-310(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excess deduction rules Mining expenses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004660", "Unmatched_Content": "Keywords Excess deduction rules Mining expenses"}
{"ATO_ID_Number": "ATO ID 2004/811", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax losses: deduction for tax loss incurred in an earlier year prior to incorporation", "Issue": "Can an incorporated association claim a deduction under section 36-17 of the Income Tax Assessment Act 1997 (ITAA 1997) for a tax loss incurred in an earlier income year prior to its incorporation under the Associations Incorporations Act 1981 (Qld) (AIA Qld)?", "Decision": "No. The incorporated association cannot claim a deduction for the tax loss under section 36-17 of the ITAA 1997 because it is not the same taxpayer as the unincorporated association that originally incurred that tax loss.", "Facts": "The taxpayer, an unincorporated association, incurs a tax loss. In a subsequent year it converts to an incorporated association under the AIA (Qld). The taxpayer is not an exempt entity under Division 50 of the ITAA 1997.", "Reasons_for_Decision": "Summary: An unincorporated association has no separate or distinct existence apart from its members. It is a voluntary combination of persons with some object or purpose in common (see Kibby v. Registrar of Titles and Another [1999] 1 VR 861; [1998] VSC 148). Hence, an unincorporated association is not an entity at general law. By comparison, an incorporated association is a body corporate and is an entity at law. Ford HAJ, 1990, Principles of Company Law, 5th edn, Butterworths, Australia, p. 3. cites the following description of a body corporate from Kyd's, Treatise on the law of corporations (1793) Vol 1 p 13: a collection of individuals, united in one body, under a special denomination, having perpetual succession under an artificial form, and vested, by the policy of the law, with a capacity of acting, in several respects, as an individual, particularly of taking and granting property, of contracting obligations, of suing and being sued; of enjoying privileges and immunities in common, and of exercising a variety of political rights, more or less extensive, according to the design of it's institution, or powers conferred upon it, either at the time of its creation, or at any subsequent period of its existence. For the purposes of the ITAA 1997, subsection 960-100(1) of ITAA 1997 includes unincorporated associations and body corporates separately within the definition of 'entity'. They are also separately included within the definition of 'company' in section 995-1 of ITAA 1997. The fact that the unincorporated association is a 'company' for income tax purposes and, after incorporation, the incorporated association is also a 'company' for income tax purposes does not make them the same 'company' for the purposes of the ITAA 1997. The legislation under which the incorporation of the taxpayer was effected (the AIA (Qld)), does not provide for the continuation of the same legal entity. These provisions merely set out the effects of incorporation. (Also see ATO Interpretative Decision 2002/808). Therefore, the incorporated association is not the same entity as the unincorporated association. Division 36 of the ITAA 1997 provides for the deduction of tax losses incurred in earlier income years. Section 36-17 of the ITAA 1997 specifies how a corporate tax entity should deduct a loss in a later income year. The section refers to 'the entity's total assessable income' and 'the entity's total deductions'. Accordingly, there is a requirement for the taxpayer that seeks a deduction for a tax loss of an earlier income year, to be the same taxpayer that originally incurred the tax loss. As the incorporated association is not the same legal entity as the unincorporated association (which incurred the tax loss), it is not entitled to a deduction for this tax loss under section 36-17.", "Date_of_Decision": "17 September 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 36 section 36-17 subsection 960-100(1) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/808 | ATO ID 2002/809", "Subject_References": "Associations, organisations & societies Companies Prior year losses Tax loss", "Case_References": "Kibby v. Register of Titles and Another [1999] 1VR 861 [1998] VSC 148", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004811", "Unmatched_Content": "Keywords Associations, organisations & societies Companies Prior year losses Tax loss"}
{"ATO_ID_Number": "ATO ID 2004/949", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax losses: when loss company can only deduct part of the tax loss", "Issue": "Can the 'part of the tax loss' made deductible by subsection 165-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997) be the whole of the tax loss?", "Decision": "Yes. In the particular context of the subsection the term ' part ' can encompass the whole where the whole of the tax loss was in fact incurred by the loss company during the relevant part of the loss year which satisfies the conditions in subsection 165-20(2) of the ITAA 1997.", "Facts": "Loss Company incurred a tax loss in an income year (the loss year). Loss Company is prevented by section 165-10 of the ITAA 1997 from deducting the tax loss in a later income year (the later income year) because of changes in its ownership and business during the loss year. Due to those changes Loss Company was required to calculate its tax loss for the loss year under Subdivision 165-B of the ITAA 1997. Pursuant to section 165-45 of the ITAA 1997 Loss Company was required to divide the loss year into two periods. The first period commenced at the start of the loss year. In respect of that period Loss Company had a notional taxable income under subsection 165-50(2) of the ITAA 1997 of $2,000. The second period commenced immediately after the end of the first period and ended at the end of the loss year. In respect of the second period Loss Company had a notional loss under subsection 165-50(1) of the ITAA 1997 of $3,000. In working out Loss Company's tax loss for the loss year under section 165-70 of the ITAA 1997 no full year deductions or other amounts were required to be taken into account, so the tax loss is $3,000. Based upon the assumption that the relevant ownership test period in subsection 165-12(1) of the ITAA 1997 was from the start of the second period to the end of the later income year, Loss Company sufficiently maintained the same owners such that it would have satisfied section 165-12 of the ITAA 1997 and hence section 165-10 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where section 165-10 of the ITAA 1997 prevents a company from deducting a tax loss, subsection 165-20(1) of the ITAA 1997 provides that it can deduct part of the tax loss that was incurred during a part of the loss year, provided that the necessary conditions in subsection 165-20(2) of the ITAA 1997 are satisfied. Loss Company sufficiently maintained the same owners from the start of the second period to the end of the later year of income, such that section 165-20 of the ITAA 1997 provides that the part of the tax loss that Loss Company incurred in the second period can be deducted. In the present circumstances the excess of Loss Company's deductions over its assessable income during the second period is such that the whole of its $3,000 tax loss was incurred during the relevant part of the loss year and in accordance with section 165-20 of the ITAA 1997 can therefore be deducted. Whilst subsection 165-20(1) of the ITAA 1997 explicitly provides that 'the company can deduct the part of the tax loss ', the use of the term ' part ' in the context of this particular subsection is to be given a broad construction such that it can encompass the whole of the amount of the tax loss and not merely part thereof.", "Date_of_Decision": "16 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 165-10 section 165-12 subsection 165-12(1) section 165-20 subsection 165-20(1) subsection 165-20(2) Subdivision 165-B section 165-45 subsection 165-50(1) subsection 165-50(2) section 165-70", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company losses Continuity of ownership test Same business test Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004949", "Unmatched_Content": "Keywords Company losses Continuity of ownership test Same business test Tax loss"}
{"ATO_ID_Number": "ATO ID 2003/508", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company losses: shares in loss company held by corporate trustee of non-fixed trust - whether shareholders of corporate trustee beneficially own the shares", "Issue": "Are the shareholders of a corporate trustee of a non-fixed trust, that is a discretionary trust, taken to be beneficial owners of shares held by the corporate trustee in a loss company, for the purposes of satisfying the same ownership test under section 165-12 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The shareholders of the corporate trustee (in their capacity as such) are not the legal or beneficial owners of the shares in the loss company.", "Facts": "Loss Company derived assessable income in an income year and wants to claim a deduction for an undeducted tax loss of an earlier income year (the 'loss year'). Loss Company has been wholly owned by the corporate trustee of a discretionary trust from the start of the loss year to the end of the relevant income year. The discretionary trust has not made a family trust election. Subdivision 166-A of the ITAA 1997 does not apply to Loss Company.", "Reasons_for_Decision": "Summary: Loss Company is entitled to claim a deduction for an undeducted tax loss of the loss year, subject to certain conditions, against its assessable income in a subsequent income year under section 36-15 of the ITAA 1997. In section 36-25 of the ITAA 1997, a special rule in Item 2 concerning tax losses of companies provides that a company must satisfy conditions in Subdivision 165-A of the ITAA 1997 in order to deduct a tax loss. Section 165-10 of Subdivision 165-A of the ITAA 1997 provides that a company cannot deduct a tax loss unless it satisfies either section 165-12 or 165-13 of the ITAA 1997. Section 165-12 of the ITAA 1997 provides that a loss company cannot deduct a tax loss unless it satisfies conditions in subsections 165-12(2), (3) and (4) of the ITAA 1997 during the ownership test period. The relevant ownership test period is defined in subsection 165-12(1) of the ITAA 1997 as being the period from the start of the loss year to the end of the income year in which the deduction is claimed. As no company beneficially owned shares in Loss Company at the beginning of the ownership test period the 'alternative test' is not relevant (per subsection 165-12(6) of the ITAA 1997). Accordingly, to satisfy the conditions in subsections 165-12(2), (3) and (4) Loss Company must satisfy the respective 'primary test' in subsections 165-150(1), 165-155(1) and 165-160(1) of the ITAA 1997. Whilst the corporate trustee is the legal owner of the shares in Loss Company, neither it nor its shareholders in their capacity as shareholders in the corporate trustee, are the beneficial owners of those shares. Accordingly, the existence and identification of the shareholders of the corporate trustee is irrelevant for determining whether the Loss Company has satisfied section 165-12 of the ITAA 1997, as the primary tests to be applied in subsections 165-150(1), 165-155(1) and 165-160(1) are all referable to the identification of beneficial owners of shares in the Loss Company. As the relevant trust is a discretionary trust, for the purposes of the tests in Subdivision 165-A it is not possible to trace through that trust arrangement in order to establish the beneficial owners of the shares in the company held by the corporate trustee. Note: In applying Subdivision 165-A of the ITAA 1997 in circumstances where there is ownership of a loss company by non-fixed trusts, the possible application of Subdivision 165-F of the ITAA 1997 should be considered.", "Date_of_Decision": "7 May 2003", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 36-15 section 36-25 Subdivision 165-A subsection 165-12(1) section 165-10 section 165-12 subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(6) section 165-13 subsection 165-150(1) subsection 165-155(1) subsection 165-160(1) Subdivision 165-F Subdivision 166-A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company losses Continuity of ownership Discretionary trusts Prior year losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003508", "Unmatched_Content": "Keywords Company losses Continuity of ownership Discretionary trusts Prior year losses"}
{"ATO_ID_Number": "ATO ID 2003/659", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company losses: test time for same business test when a company has more than one majority change of ownership", "Issue": "Does the test time for a company claiming a prior year tax loss under the same business test (SBT) in section 165-13 of the Income Tax Assessment Act 1997 (ITAA 1997) alter, where the company has undergone a majority ownership change for a second time during the ownership test period?", "Decision": "No. Under section 165-13 of the ITAA 1997, the test time under the SBT for a particular tax loss, is the time the company first had a majority ownership change during the ownership test period and not the time of a subsequent change of majority ownership.", "Facts": "A company incurred a tax loss in Year 1 and underwent a change of majority ownership in Year 2 followed by a second change of majority ownership in Year 3. The company continued to incur tax losses in Years 2 and 3. In Year 4 the company's assessable income exceeded deductions and it sought to deduct part of the tax loss carried forward from Year 1.", "Reasons_for_Decision": "Summary: The SBT in section 165-13 of the ITAA 1997 is an alternative test when a company fails to meet a condition in section 165-12, which is about the company maintaining the same owners during the ownership test period. The ownership test period is the period from the start of the loss year to the end of the income year. If the company satisfies the SBT, it is entitled to claim a deduction for prior year tax losses. The SBT is set out in subsections 165-210(1), (2) and (3) of the ITAA 1997. The SBT compares the business carried on by the company throughout the income year (the same business test period) with the business it carried on immediately before the time when the COT is failed (the test time). The company in this case has undergone two changes of majority ownership during the ownership test period. The test time for the application of the SBT in relation to the Year 1 tax loss is the time in year 2 when the company first had a change of majority ownership and failed the continuity of ownership test. The subsequent change of majority ownership during the ownership test period does not alter the test time for the application of the SBT.", "Date_of_Decision": "27 June 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 165-12 section 165-13 subsection 165-210(1) subsection 165-210(2) subsection 165-210(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Carry forward losses Company losses Continuity of ownership Same business test Test time", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003659", "Unmatched_Content": "Keywords Carry forward losses Company losses Continuity of ownership Same business test Test time"}
{"ATO_ID_Number": "ATO ID 2003/719", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deductibility of loss in a later year of income where taxpayer receives exempt foreign pension", "Issue": "Is the social security pension derived by the Australian resident taxpayer from the United States of America (US) included in the calculation for deducting tax losses in a later year of income under section 36-15 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The US social security pension derived by an Australian resident taxpayer is included in the calculation for deducting of tax losses in a later year of income under section 36-15 of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer receives a social security pension from the US government. The pension is not taxable in Australia under Article 18(2) of Schedule 2 to the International Tax Agreements Act 1953 (the Agreements Act). The taxpayer is not in receipt of any other exempt income other than the social security pension from the US government. The taxpayer's allowable deductions exceed the taxpayer's assessable income and the social security pension from the US government, resulting in a tax loss for the year. The taxpayer carried forward the tax loss to a later year of income. The taxpayer received the social security pension from the US government in that later year of income.", "Reasons_for_Decision": "Summary: Section 8-5 of the ITAA 1997 allows deduction from assessable income an amount that can be deducted under a provision of the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997. Section 12-5 of the ITAA 1997 contains a list of provisions about specific types of deductions. Included in this list is Division 36 which deals with tax losses from earlier income years. Section 36-10 of the ITAA 1997 (contained in Division 36 of the ITAA 1997) provides that a tax loss is incurred in any income year, if a taxpayer's allowable deductions (other than tax losses of earlier income years) exceeds assessable income and net exempt income (worked out under section 36-20 of the ITAA 1997) for that year. Subsection 36-20(1) of the ITAA 1997 provides that the net exempt income of an Australian resident taxpayer is the amount by which the taxpayer's total exempt income (defined in section 6-20 of the ITAA 1997) from all sources (except excluded exempt income defined in subsection 36-20(3) of the ITAA 1997) exceeds the total of: Subsection 36-20(3) of the ITAA 1997 provides that excluded exempt income is exempt income to which any of the provisions of the ITAA 1936 listed therein apply. The US social security pension is not excluded exempt income as it is not covered by any of the provisions listed in subsection 36-20(3) of the ITAA 1997. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income or statutory income is exempt income if it is made exempt from income tax by a provision of the ITAA 1936 or ITAA 1997 or another Commonwealth law. Subsection 6-20(2) states that ordinary income is also exempt income to the extent that the ITAA 1997 excludes it (expressly or by implication) from being assessable income. The social security pension received by the taxpayer from the US government is exempt from tax in Australia under Article 18(2) of Schedule 2 to the Agreements Act and therefore is exempt income for the purposes of subsection 6-20(1) of the ITAA 1997. The net exempt income is calculated under subsection 36-20(1) of the ITAA 1997 after deducting the losses and outgoings incurred by the taxpayer in deriving the pension and the tax payable in the US. Section 36-15 of the ITAA 1997 allows a tax loss for a loss year to be deducted in a later income year in the manner provided by that section. The deduction calculation includes net exempt income of a later income year. The net exempt income received by the taxpayer will therefore be taken into account in working out the tax loss that may be available for the purposes of section 36-10 of the ITAA 1997. Accordingly, the social security pension derived by the Australian resident taxpayer from the US in the later income year is included in the tax loss calculation for that later income year under section 36-15 of the ITAA 1997. Note: if all of the tax loss cannot be deducted, then the undeducted amount is carried forward to the next income year (subsection 36-15(7) of the ITAA 1997.", "Date_of_Decision": "28 July 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-20 subsection 6-20(1) subsection 6-20(2) section 8-5 section 12-5 Division 36 section 36-10 section 36-15 subsection 36-15(7) section 36-20 subsection 36-20(1) subsection 36-20(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/382", "Subject_References": "Foreign pension Foreign pension income International tax United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003719", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign pension Foreign pension income International tax United States"}
{"ATO_ID_Number": "ATO ID 2003/720", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss of earlier income year: disqualifying change of company ownership in loss year - when company can deduct part of a tax loss", "Issue": "Can a company claim a deduction for any part of a tax loss if there was a change in majority ownership of the company during the loss year and the company did not satisfy the same business test for the income year?", "Decision": "Yes. Section 165-20 of the Income Tax Assessment Act 1997 (ITAA 1997) will allow the company to deduct the part of the tax loss incurred during the latter part of the loss year if, assuming that part of the loss year had been treated as the whole of the loss year for the purposes of section 165-10 of the ITAA 1997, the company would have been entitled to deduct the tax loss.", "Facts": "A company incurred a tax loss in a particular year (the loss year). During the loss year, the company embarked upon a share capital raising initiative which resulted in a change of ownership under Division 165 of the ITAA 1997. There was no further change in ownership of the company before the end of the income year. During the income year, the company changed its business and derived taxable income that exceeded the amount of its prior year tax loss.", "Reasons_for_Decision": "Summary: Section 165-20 of the ITAA 1997 is directed at situations where section 165-10 of the ITAA 1997 prevents a company from deducting a tax loss by reason of a change in ownership during the loss year and failure to satisfy the same business test in the income year. In such a situation, section 165-20 allows a deduction for part of a tax loss incurred during the latter part of the loss year if, assuming that part of the loss year had been treated as the whole of the loss year for the purposes of section 165-10, the company would have been entitled to deduct the tax loss. The share capital raising initiative resulted in the company being unable to satisfy the conditions in section 165-12 of the ITAA 1997 (which is about the company maintaining the same owners). Further, as the company commenced a new business in the income year, it was unable to meet the conditions in section 165-13 of the ITAA 1997 (which is about the company carrying on the same business). Therefore, section 165-10 of the ITAA 1997 prevented the company from deducting the tax loss in the income year. However, if the part of the loss year after the share capital raising were treated as the whole of the loss year for the purposes of section 165-10 of the ITAA 1997 (in accordance with the assumption in section 165-20 of the ITAA 1997), the company would be taken to have maintained the same owners on a continuous basis from the deemed start of the loss year (the time of the new share issue) to the end of the year of income. On the basis of this assumption, the company would be entitled to deduct the tax loss. Accordingly, subsection 165-20 enables the company to deduct in the income year the part of the tax loss incurred during the part of the loss year after the new share issue.", "Date_of_Decision": "27 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 165-10 section 165-12 section 165-13 section 165-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Part year issues Prior year losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003720", "Unmatched_Content": "Keywords Part year issues Prior year losses"}
{"ATO_ID_Number": "ATO ID 2003/734", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company Losses- applying a part year net capital loss", "Issue": "Can a company apply any part of a net capital loss made during an earlier income year if there was a change in majority ownership of the company during that income year and the company did not satisfy the same business test for the current income year in which that net capital loss is sought to be applied?", "Decision": "Yes. Subsection 165-96(2) of the Income Tax Assessment Act 1997 (ITAA 1997) will allow the company to apply the part of the net capital loss made during the latter part of the earlier income year if, assuming that latter part of the year had been treated as the whole of the earlier income year for the purposes of applying Subdivision 165-A of the ITAA 1997, that the company would have been entitled to apply the net capital loss in the current income year.", "Facts": "Pursuant to section 102-20 of the ITAA 1997 Company A made the following capital losses and capital gains during the income year ended 30 June 1999: $1 000 on 28 September 1998 $2 000 on 1 December 1998 $4 000 on 5 February 1999 $6 000 on 1 June 1999 $2 500 on 13 November 1998 $3 500 on 22 March 1999 Company A therefore made a net capital loss of $7,000 in respect of the earlier income year ended 30 June 1999. Company A made no capital gains or capital losses in the income years ended 30 June 2000 and 30 June 2001. Company A seeks to apply its net capital loss of $7,000 against a capital gain of $10,000 in the current income year ended 30 June 2002, its only capital gain or loss made during that income year. In applying subsection 165-96(1) of the ITAA 1997, Company A failed to satisfy the conditions in Subdivision 165-A of the ITAA 1997 on the 31 January 1999. However, for the purposes of applying subsection 165-96(2) of the ITAA 1997 it would satisfy those conditions from that date to the end of the current income year ended 30 June 2002.", "Reasons_for_Decision": "Summary: Company A cannot apply its net capital loss in respect of the income year ended 30 June 2002 under subsection 165-96(1) of the ITAA 1997, as it does not satisfy the conditions in Subdivision 165-A of the ITAA 1997 at all times from 1 July 1998 to 30 June 2002. Pursuant to subsection 165-96(2) of the ITAA 1997, Company A can apply in the current income year that part of the net capital loss it made after the disqualifying change in ownership on 31 January 1999. Section 102-20 of the ITAA 1997 provides that a capital gain or capital loss is 'made' at the time of the relevant CGT event. In the relevant part of the earlier income year (i.e. from 31 January 1999 until 30 June 1999) Company A made capital losses totalling $10,000 and a capital gain of $3,500. Therefore $6,500 of Company A's net capital loss of $7,000 that was made in the income year ended 30 June 1999, may be applied against the $10,000 capital gain it made in the current income year ended 30 June 2002. Note that for the purposes of subsection 165-96(2) of the ITAA 1997, the 'part' of the net capital loss can also mean the whole amount of the net capital loss of the earlier income year. This will be the case where the capital gain(s) and the capital loss(s) that feature in the calculation of the net capital loss under section 102-10 of the ITAA 1997 were all made during the relevant latter part of the earlier income year.", "Date_of_Decision": "19 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 165-A section 102-10 section 102-20 subsection 165-96(1) subsection 165-96(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Company losses Entities & taxpayer groups Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003734", "Unmatched_Content": "Keywords Companies Company losses Entities & taxpayer groups Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2003/738", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company losses: company deregistration - incorporation of a new company", "Issue": "Can a company that bears the same characteristics as a company that was deregistered by the Australian Securities and Investments Commission (ASIC) claim deductions for tax losses incurred by the deregistered company?", "Decision": "No. A company that is incorporated with the same fundamental characteristics as a previously deregistered company, is a new company, and therefore, cannot claim deductions for prior year tax losses incurred by the deregistered company.", "Facts": "A company with prior year tax losses ceased its trading activities pursuant to the sale of its business to another entity. The company failed to lodge returns and other documentation with ASIC within the prescribed periods and ASIC deregistered the company in accordance with section 601AB of the Corporations Act 2001. Some time later, the principals of the company decided that the company should reacquire its previous business. The principals initially sought reinstatement of the company by ASIC, but settled on registration of a new company that had the same name, underlying documentation, public officer, directors and shareholders (with the same proportionate shareholdings) as the deregistered company.", "Reasons_for_Decision": "Summary: The deregistration of a company has the effect that the company ceases to exist on deregistration (subsection 601AD(1) of the Corporations Act 2001). ASIC may reinstate the registration of a company with effect that the company is taken to have continued in existence as if it had not been deregistered (section 601AH of the Corporations Act 2001). The registration of a company, so that it may carry on the business previously carried on by the deregistered company, does not serve to reinstate the deregistered company. Instead, it establishes the existence of another company, albeit that it may bear the same characteristics as the deregistered company with the same persons having ownership and control. Subdivision 36-A of the Income Tax Assessment Act 1997 allows a tax loss of an entity to be deducted by that entity in later income years. It does not allow the tax loss to be deducted by another entity. Common ownership and control of the deregistered company and the 'replacement' company do not negate the fact that the companies are separate entities. The replacement company is, therefore, prevented from claiming deductions for tax losses incurred by the deregistered company.", "Date_of_Decision": "19 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Corporations Act 2001 section 601AB section 601AH subsection 601AD(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company deregistration Ownership, interests, control & rights", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003738", "Unmatched_Content": "Keywords Company deregistration Ownership, interests, control & rights"}
{"ATO_ID_Number": "ATO ID 2003/1118", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company loss: deduction for tax loss incurred in an earlier income year by another taxpayer", "Issue": "Can a taxpayer claim a deduction under section 36-15 of the Income Tax Assessment Act 1997 (ITAA 1997) for a tax loss incurred in an earlier income year by another entity that has merged with the taxpayer?", "Decision": "No. Under section 36-15 of the ITAA 1997 the taxpayer seeking a deduction for a tax loss of an earlier income year must be the same taxpayer that originally incurred that tax loss.", "Facts": "Company A and Company B both traded as registered clubs under the Registered Clubs Act 1976 (NSW). Company A incurred a tax loss in an earlier income year. Subsequently Company A and Company B amalgamated to form one registered club. The merger occurred in accordance with subsection 17A(1) of the Registered Clubs Act which provides: 17A(1) In this section, a reference to the amalgamation of 2 or more registered clubs is a reference to an amalgamation to be effected- (a) by the dissolution of those clubs and the formation of a new club (b) by the continuation of one of those clubs and the dissolution of the other club or clubs. The merger was effected by Company A being liquidated and its assets and liabilities being acquired by Company B which continued to carry on the registered club business formerly conducted by Company A.", "Reasons_for_Decision": "Summary: Division 36 of the ITAA 1997 provides for the deduction of tax losses incurred in earlier income years. Section 36-10 of the ITAA 1997 provides that the tax loss for an income year is the excess of deductions over the sum of assessable income and net exempt income. That section uses the expression 'your tax loss' when describing the situation where a taxpayer has such an excess of deductions over the sum of assessable income and net exempt income for a particular income year. Section 36-15 of the ITAA 1997 specifies how a taxpayer should deduct a tax loss in a later income year: Section 36-15 of the ITAA 1997 refers to 'your total assessable income', 'your total deductions' and 'your net exempt income'. Accordingly there is a requirement for the taxpayer that seeks a deduction for a tax loss of an earlier income year, to be the same taxpayer that originally incurred the tax loss. Company A and Company B amalgamated in accordance with subsection 17A(1) of the Registered Clubs Act - as in Case 52/96 96 ATC 498; AAT Case 11,196 33 ATR 1174. The merger was effected by the continuation of Company B and by the dissolution of Company A. Upon amalgamation therefore, Company A ceased to exist as a legal entity. Company B continued as a legal entity, separate and distinct from the dissolved Company A. Company A had a tax loss for an earlier income year. Company B is not entitled to a deduction for this tax loss under section 36-15 of the ITAA 1997 because, as a separate legal entity, it was not the taxpayer that originally incurred the tax loss involved.", "Date_of_Decision": "27 October 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 36 section 36-10 section 36-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Associations, organisations & societies Prior year losses Tax loss", "Case_References": "Case 52/96 96 ATC 498", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031118", "Unmatched_Content": "Keywords Associations, organisations & societies Prior year losses Tax loss"}
{"ATO_ID_Number": "ATO ID 2002/422", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Access to losses in SAP transitional year", "Issue": "Will a taxpayer be entitled to claim a deduction pursuant to Division 36 of the Income Tax Assessment Act 1997 (ITAA 1997) for a three month income year where the tax losses are incurred in earlier years of income, where the special rules in section 36-25 of the ITAA 1997 are satisfied?", "Decision": "Yes. The taxpayer will be entitled to claim a deduction pursuant to Division 36 of the ITAA 1997 for a three month income year where the tax losses are incurred in earlier years of income where the special rules in section 36-25 of the ITAA 1997 are satisfied.", "Facts": "A taxpayer applied for and received approval from the Commissioner to adopt a SAP. The taxpayer agreed to calculate their taxable income or losses for the relevant SAP income year on the basis of the period that is determined to be the SAP transitional year.", "Reasons_for_Decision": "", "Date_of_Decision": "14 September 2001", "Year_of_Income": "Other/Substituted Accounting Period 2000 Other/Substituted Accounting Period 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 4-5 section 36-1 section 36-10 section 165-1 section 170-1 section 175-1 section 975-500 section 975-505", "Related_Public_Rulings_and_Determinations": "IT 2465", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/561 | ATO ID 2002/562", "Subject_References": "Prior year losses Carry forward losses Current year losses Precedent Confirmed significant issue", "Case_References": "Norwich Superannuation Services Pty Ltd v. FC of T 99 ATC 2015 41 ATR 1091", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002422", "Unmatched_Content": "Reason for the Decision: A taxpayer's transitional income tax return is a one-off return that may cover a period either less than or greater than 12 months depending on whether an early balance or late balance SAP is granted. The transitional return commences immediately after the close of the prior income year (the 'old' balance date) and ends on the new SAP balance date. The first full year income tax return will be in lieu of the income year commencing on 1 July and ending on 30 June. | Companies, in order to be members of the same wholly owned group, as that term is defined in section 975-500 of the ITAA 1997, for the whole of the years of income covered by this arrangement, must be members for the whole of the period of the SAP transitional year. | The Commissioner has long standing practices relating to the deductibility of losses carried forward into the transitional return, calculation of losses in the transitional return period, the transfer of losses within the transitional return period and the carrying forward of losses from the transitional period to future years of income. See for example Taxation Ruling IT 2465. | The decision in Norwich Superannuation Services v. FC of T (1998) 99 ATC 2015; 41 ATR 1091 is considered to be correct on its facts in that the losses were unable to be transferred as the loss company was not a group company for the whole of the period as required by section 80G of the Income Tax Assessment Act 1936 (ITAA 1936). The Commissioner's view of the operation of section 80G of the ITAA 1936 is set out at paragraph 12 of IT 2465. Division 170 of the ITAA 1997 applies to the transfer of losses that take place in the 1997-98 and later years of income, and paragraph 12 of IT 2465 applies equally to Division 170 of the ITAA 1997. Provided the applicants are members of the same wholly owned group as described at paragraph 12 of IT 2465, they will be able to transfer their losses under Division 170 of the ITAA 1997. | The practice of preparing transitional tax returns covering a period other than 12 months simply allows for the quantum of the taxable income or loss to be fairly and equitably determined for the purpose of levying income tax for the first SAP year. The transitional tax return is not regarded as altering (extending or reducing) the actual 12 month period of the first SAP year for all purposes of the ITAA 1936 or the ITAA 1997. | Any losses incurred in a transitional period will be available for recoupment by transfer or carry forward subject to full compliance with the usual requirements of the continuity of ownership or same business tests and of the group company rules as the case may be. Such tests are to be satisfied for the full income years concerned and not just the transition period. | Related Public Rulings (including Determinations) IT 2465 | Keywords Prior year losses Carry forward losses Current year losses Precedent Confirmed significant issue"}
{"ATO_ID_Number": "ATO ID 2002/561", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Access to losses in SAP transitional year", "Issue": "", "Decision": "Yes. A taxpayer will be entitled to claim a deduction pursuant to Division 36 of the ITAA 1997 for a three month income year where the tax losses are transferred to it from other companies within the group of companies where the special rules in section 36-25 of the ITAA 1997 and the conditions in Division 170 of the ITAA 1997 are satisfied?", "Facts": "A taxpayer applied for and received approval from the Commissioner to adopt a SAP. The taxpayer agreed to calculate their taxable income or losses for the relevant SAP income year on the basis of the period that is determined to be the SAP transitional year.", "Reasons_for_Decision": "", "Date_of_Decision": "14 September 2001", "Year_of_Income": "Other/Substituted Accounting Period 2000 Other/Substituted Accounting Period 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 4-5 section 36-1 section 36-10 section 165-1 section 170-1 section 175-1 section 975-500 section 975-505", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2465", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/422 | ATO ID 2002/562", "Subject_References": "Prior year losses Carry forward losses Current year losses Precedent Confirmed significant issues", "Case_References": "Norwich Superannuation Services Pty Ltd v. FC of T (1998) 99 ATC 2015 41 ATR 1091", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002561", "Unmatched_Content": "ATO ID issue: Will a taxpayer be entitled to claim a deduction pursuant to Division 36 of the Income Tax Assessment Act 1997 ('ITAA 1997') for a three month income year where the tax losses are transferred to it from other companies within the group of companies where the special rules in section 36-25 of the ITAA 1997 and the conditions in Division 170 of the ITAA 1997 are satisfied? | Reason for the Decision: A taxpayer's transitional income tax return is a one-off return that may cover a period either less than or greater than 12 months depending on whether an early balance or late balance SAP is granted. The transitional return commences immediately after the close of the prior income year (the 'old' balance date) and ends on the new SAP balance date. The first full year income tax return will be in lieu of the income year commencing on 1 July and ending on 30 June. | Companies, in order to be members of the same wholly owned group, as that term is defined in section 975-500 of the ITAA 1997, for the whole of the years of income covered by this arrangement, must be members for the whole of the period of the SAP transitional year. | The Commissioner has long standing practices relating to the deductibility of losses carried forward into the transitional return, calculation of losses in the transitional return period, the transfer of losses within the transitional return period and the carrying forward of losses from the transitional period to future years of income. See for example Taxation Ruling IT 2465. | The decision in Norwich Superannuation Services v FC of T (1998) 99 ATC 2015; 41 ATR 1091 is considered to be correct on its facts in that the losses were unable to be transferred as the loss company was not a group company for the whole of the period as required by section 80G of the Income Tax Assessment Act 1936 (ITAA 1936). The Commissioner's view of the operation of section 80G of the ITAA 1936 is set out at paragraph 12 of IT 2465. Division 170 of the ITAA 1997 applies to the transfer of losses that take place in the 1997-98 and later years of income, and paragraph 12 of IT 2465 applies equally to Division 170 of the ITAA 1997. Provided the applicants are members of the same wholly owned group as described at paragraph 12 of IT 2465, they will be able to transfer their losses under Division 170 of the ITAA 1997. | The practice of preparing transitional tax returns covering a period other than 12 months simply allows for the quantum of the taxable income or loss to be fairly and equitably determined for the purpose of levying income tax for the first SAP year. The transitional tax return is not regarded as altering (extending or reducing) the actual 12 month period of the first SAP year for all purposes of the ITAA 1936 or the ITAA 1997. | Any losses incurred in a transitional period will be available for recoupment by transfer or carry forward subject to full compliance with the usual requirements of the continuity of ownership or same business tests and of the group company rules as the case may be. Such tests are to be satisfied for the full income years concerned and not just the transition period. | Related Public Rulings (including Determinations) Taxation Ruling IT 2465 | Keywords Prior year losses Carry forward losses Current year losses Precedent Confirmed significant issues"}
{"ATO_ID_Number": "ATO ID 2002/562", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Access to losses in SAP transitional year", "Issue": "", "Decision": "Yes. A taxpayer will be entitled to claim a deduction pursuant to Division 36 of the ITAA 1997 in future years of income for tax losses incurred by it during the three month income year where the special rules in section 36-25 of the ITAA 1997 are satisfied?", "Facts": "A taxpayer applied for and received approval from the Commissioner to adopt a SAP. The taxpayer agreed to calculate their taxable income or losses for the relevant SAP income year on the basis of the period that is determined to be the SAP transitional year.", "Reasons_for_Decision": "", "Date_of_Decision": "14 September 2001", "Year_of_Income": "Other/Substituted Accounting Period 2000 Other/Substituted Accounting Period 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 4-5 section 36-1 section 36-10 section 165-1 section 170-1 section 175-1 section 975-500 section 975-505", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2465", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/422 | ATO ID 2002/561", "Subject_References": "Prior year losses Carry forward losses Current year losses Precedent Confirmed significant issues", "Case_References": "Norwich Superannuation Services Pty Ltd v. FC of T (1998) 99 ATC 2015 41 ATR 1091", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002562", "Unmatched_Content": "ATO ID issue: Will a taxpayer be entitled to claim a deduction pursuant to Division 36 of the Income Tax Assessment Act 1997 ( ITAA 1997 ) in future years of income for tax losses incurred by it during the three month income year where the special rules in section 36-25 of the ITAA 1997 are satisfied? | Reason for the Decision: A taxpayer's transitional income tax return is a one-off return that may cover a period either less than or greater than 12 months depending on whether an early balance or late balance SAP is granted. The transitional return commences immediately after the close of the prior income year (the 'old' balance date) and ends on the new SAP balance date. The first full year income tax return will be in lieu of the income year commencing on 1 July and ending on 30 June. | Companies, in order to be members of the same wholly owned group, as that term is defined in section 975-500 of the ITAA 1997, for the whole of the years of income covered by this arrangement, must be members for the whole of the period of the SAP transitional year. | The Commissioner has long standing practices relating to the deductibility of losses carried forward into the transitional return, calculation of losses in the transitional return period, the transfer of losses within the transitional return period and the carrying forward of losses from the transitional period to future years of income. See for example Taxation Ruling IT 2465. | The decision in Norwich Superannuation Services v FC of T (1998) 99 ATC 2015; 41 ATR 1091 is considered to be correct on its facts in that the losses were unable to be transferred as the loss company was not a group company for the whole of the period as required by section 80G of the Income Tax Assessment Act 1936 (ITAA 1936). The Commissioner's view of the operation of section 80G of the ITAA 1936 is set out at paragraph 12 of IT 2465. Division 170 of the ITAA 1997 applies to the transfer of losses that take place in the 1997-98 and later years of income, and paragraph 12 of IT 2465 applies equally to Division 170 of the ITAA 1997. Provided the applicants are members of the same wholly owned group as described at paragraph 12 of IT 2465, they will be able to transfer their losses under Division 170 of the ITAA 1997. | The practice of preparing transitional tax returns covering a period other than 12 months simply allows for the quantum of the taxable income or loss to be fairly and equitably determined for the purpose of levying income tax for the first SAP year. The transitional tax return is not regarded as altering (extending or reducing) the actual 12 month period of the first SAP year for all purposes of the ITAA 1936 or the ITAA 1997. | Any losses incurred in a transitional period will be available for recoupment by transfer or carry forward subject to full compliance with the usual requirements of the continuity of ownership or same business tests and of the group company rules as the case may be. Such tests are to be satisfied for the full income years concerned and not just the transition period. | Related Public Rulings (including Determinations) Taxation Ruling IT 2465 | Keywords Prior year losses Carry forward losses Current year losses Precedent Confirmed significant issues"}
{"ATO_ID_Number": "ATO ID 2002/836", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax benefits from unused company tax losses", "Issue": "Will section 175-15 of the Income Tax Assessment Act 1997 ('ITAA 1997') apply to deny a deduction to a company for losses carried forward against distributions of income received from a discretionary trust that is controlled by the shareholders (individuals) of the company?", "Decision": "No. Pursuant to subsection 175-15(2) of the ITAA 1997, it is considered to be fair and reasonable for the Commissioner to allow a deduction to the company for losses carried forward against distributions of income from a trust which is controlled by the shareholders (individuals) of the company.", "Facts": "All shares of the company have been held equally by two individuals since its incorporation. All shares on issue carry the same rights. The company recently sold its business to a non-related purchaser and presently has carried forward losses. The property from which the company formerly conducted its business is owned by a related discretionary trust (Trust) that is controlled by the same two individuals. This property is now rented to the purchaser of the business and generates the main income of the Trust. The shareholders of the company have been the only beneficiaries of the Trust. The trustee is to distribute all future net income of the Trust to the company which is to claim a deduction for carried forward losses against this income. The existing shareholders rights and interests in the company are to remain unchanged.", "Reasons_for_Decision": "Summary: Subdivision 175-A of the ITAA 1997 contains various anti-avoidance rules relevant to prior year losses. Section 175-15 of the ITAA 1997 outlines the second case for denying a deduction where someone else obtains a tax benefit because of tax loss available to company. Subsection 175-15(1) of the ITAA 1997 enables the Commissioner to disallow a loss where a person has received any tax benefit as a result of a scheme entered into because of the availability of the loss. However, this section does not apply where the person has a shareholding interest in the company at some time during the income year and the Commissioner considers the tax benefit to be fair and reasonable having regard to the shareholding interest [subsection 175-15(2) of the ITAA 1997]. Income will be distributed from the related trust to the company with an offsetting deduction for prior year losses being claimed by the company. There is a tax benefit as this income would otherwise be assessed to the trustee of the trust or to beneficiaries of the trust (at the discretion of the trustee). However, as the primary beneficiaries of the trust have continuously maintained a 100 per cent beneficial ownership of shares in the company since its incorporation and this shareholding interest is to remain the same throughout implementation of the proposal, it follows that the persons who are to gain the tax benefit from the proposal have always been, and will continue to be, the sole beneficial owners of the shares. Accordingly, the tax benefit is fair and reasonable having regard to the shareholding interest. Therefore subsection 175-15 of the ITAA 1997 will not apply to enable the Commissioner to disallow a claim by the company for prior year tax losses.", "Date_of_Decision": "27 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 175A section 175-10 section 175-15 subsection 175-15(1) subsection 175-15(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/845", "Subject_References": "Carry forward losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002836", "Unmatched_Content": "Keywords Carry forward losses"}
{"ATO_ID_Number": "ATO ID 2002/845", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax benefits from unused company tax losses", "Issue": "Will section 175-10 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to deny a deduction to a company for losses carried forward against distributions of income received from a discretionary trust that is controlled by the shareholders (individuals) of the company?", "Decision": "No. Pursuant to subsection 175-10(2) of the ITAA 1997, it is considered to be fair and reasonable for the Commissioner to allow a deduction to the company for losses carried forward against distributions of income from a trust which is controlled by the shareholders (individuals) of the company.", "Facts": "All shares of the company have been held equally by two individuals since its incorporation. All shares on issue carry the same rights. The company recently sold its business to a non-related purchaser and presently has carried forward losses. The property from which the company formerly conducted its business is owned by a related discretionary trust (Trust) that is controlled by the same two individuals. This property is now rented to the purchaser of the business and generates the main income of the Trust. The shareholders of the company have been the only beneficiaries of the Trust. The trustee is to distribute all future net income of the Trust to the company which is to claim a deduction for carried forward losses against this income. The existing shareholders rights and interests in the company are to remain unchanged.", "Reasons_for_Decision": "Summary: Subdivision 175-A of the ITAA 1997 contains various anti-avoidance rules relevant to prior year losses. Section 175-10 of the ITAA 1997 outlines the first case for denying a deduction where income is injected into company because of the available tax loss Subsection 175-10(1) of the ITAA 1997 provides that the Commissioner may disallow a deduction for a prior year tax loss in an income year in which the company derives income which it would not have derived if the loss had not been available. The company has prior year losses and will claim deductions to the extent of these losses against distributions of income from a related trust. However, under subsection 175-10(2) of the ITAA 1997 the Commissioner cannot disallow a deduction for a prior year tax loss if the continuing shareholders will benefit from the derivation of the injected amount to an extent which the Commissioner considers is fair and reasonable. In determining this, the Commissioner must have regard to the continuing shareholders respective rights and interests in the company. There is to be no change in either the shareholders themselves or their 100 per cent continuous holding of shares in the company. The benefit from this injection of income will flow only to persons who were shareholders during the years in which the losses were incurred by the company (i.e., the continuing shareholders). This continuous shareholding is to remain unchanged for the period in which deductions for losses will be claimed. The Commissioner has determined that it is fair and reasonable to accept that the continuing shareholders will benefit from the injection of funds in proportion to their respective rights and interests in the company. Therefore subsection 175-10(1) of the ITAA 1997 cannot apply to enable the Commissioner to disallow a claim by the company for prior year tax losses.", "Date_of_Decision": "27 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 175A section 175-10 subsection 175-10(1) subsection 175-10(2) section 175-15", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/836", "Subject_References": "Carry forward losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002845", "Unmatched_Content": "Keywords Carry forward losses"}
{"ATO_ID_Number": "ATO ID 2003/67", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: greater than 50% interest - partial reacquisition by originating company", "Issue": "Does a further event happen for the purposes of subsection 170-280(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the relevant capital gains tax (CGT) asset is acquired by the originating company and another entity, neither of which acquires a greater than 50% interest in it?", "Decision": "Yes. The originating company and one or more other entities together may acquire interests of greater than 50% in total. Therefore, the word 'or' in the term '...acquired by the originating company or by an entity...' in paragraph 170-280(1)(a) of the ITAA 1997 is used in the conjunctive sense of meaning 'and/or'.", "Facts": "The taxpayer, company P disposed of a CGT asset to its 100% owned subsidiary, company S. The disposal of the CGT asset resulted in CGT event A1 happening for the purposes of subsection 104-10(1) of the ITAA 1997. The capital proceeds were less than the asset's reduced cost base and the taxpayer made a capital loss in accordance with subsection 104-10(4) of the ITAA 1997. Company P and company S were linked at the time of the CGT event for the purposes of subsection 170-260(2) of the ITAA 1997 so that the capital loss was disregarded pursuant to section 170-270 of the ITAA 1997. Company S subsequently disposed of the CGT asset to two other companies, X and Y, who each acquired a 50% interest in it. For the purposes of paragraph 170-275(1)(b) of the ITAA 1997 neither X or Y were, at the time of acquiring their interests in the CGT asset, part of the same linked group as company P, nor a connected entity or an associate of a connected entity. Thus, pursuant to section 170-275 of the ITAA 1997, company P was taken to have made a capital loss equivalent to the capital loss that was previously disregarded pursuant to section 170-270 of the ITAA 1997. Within four years of the disposal by company S, X disposed of its 50% interest in the CGT asset to company P and Y disposed of its 50% interest in the CGT asset to company S. Company P and company S were still linked.", "Reasons_for_Decision": "Summary: Paragraph 170-280(1)(a) of the ITAA 1997 refers to a further event where: '...the asset or a greater than 50% interest in it is acquired by the originating company or by an entity that, at the time of the acquisition, is: (i) a company that is a member of the linked group of which the originating company is a member; or (ii) a connected entity of the originating company; or (iii) an associate of such a connected entity...' [Emphasis added] Where the originating company and another entity(s) that are included by subparagraphs 170-280(1)(a)(i), 170-280(1)(a)(ii) or 170-280(1)(a)(iii) of the ITAA 1997 together acquire interests in the relevant CGT asset of greater than 50% in total at a relevant time, then a further event occurs. Whilst it is possible for the originating company or some other entity to acquire a greater than 50% interest in the relevant CGT asset separately, the originating company and/or one or more other entities together may alternatively acquire interests of greater than 50% in total. Therefore, the word 'or' in the term '...acquired by the originating company or by an entity...' in paragraph 170-280(1)(a) of the ITAA 1997 should be interpreted in the conjunctive sense of meaning 'and/or'. As paragraph 170-280(1)(a) of the ITAA 1997 applies then, pursuant to subsection 170-280(2) of the ITAA 1997, company P is taken not to have made a capital loss at the time of the further event equal to the amount of capital loss that it was taken to have made by subsection 170-275(1) of the ITAA 1997.", "Date_of_Decision": "14 January 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(1) subsection 170-260(2) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(b) paragraph 170-280(1)(a) subsection 170-280(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/116", "Subject_References": "Capital gains tax Capital losses Net capital losses CGT roll-over relief Company losses Deferred capital losses Deferred capital losses and deductions Connected entity Deferral event Disregarded capital loss Further event Linked group Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200367", "Unmatched_Content": "Keywords Capital gains tax Capital losses Net capital losses CGT roll-over relief Company losses Deferred capital losses Deferred capital losses and deductions Connected entity Deferral event Disregarded capital loss Further event Linked group Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/116", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: greater than 50% interest - new event", "Issue": "Does a new event happen for the purposes of subsection 170-275(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the relevant capital gains tax (CGT) asset is acquired by more than one entity, none of which, considered in isolation, acquires a greater than 50% interest in it?", "Decision": "Yes. Where interests in the relevant CGT asset exceeding 50% in total are acquired by more than one entity, that is not excluded by paragraph 170-275(1)(b) of the ITAA 1997, a new event is taken to have occurred.", "Facts": "The taxpayer, company P, disposed of a CGT asset to its 100% owned subsidiary, company S. The disposal of the CGT asset resulted in CGT event A1 happening for the purposes of subsection 104-10(1) of the ITAA 1997. The capital proceeds were less than the asset's reduced cost base and the taxpayer made a capital loss in accordance with subsection 104-10(4) of the ITAA 1997. Company P and company S were linked at the time of the CGT event for the purposes of subsection 170-260(2) of the ITAA 1997 so that the capital loss was disregarded pursuant to section 170-270 of the ITAA 1997. Company S subsequently disposed of the CGT asset to two other companies who each acquired a 50% interest in it. For the purposes of paragraph 170-275(1)(b) of the ITAA 1997 neither of the other companies were, at the time of acquiring their interests in the CGT asset, part of the same linked group as company P, nor a connected entity or an associate of a connected entity.", "Reasons_for_Decision": "Summary: Paragraph 170-275(1)(b) of the ITAA 1997 refers to a new event where: '...the relevant CGT asset, or a greater than 50% interest in it, is acquired by an entity that is none of the following: i) a member of the linked group of which the originating company is a member, ii) a connected entity of the originating company, iii) an associate of such a connected entity...' In applying the singular word 'entity' in paragraph 170-275(1)(b) of the ITAA 1997 it is considered that the word entity should also be construed as 'entities' by regard to paragraph 23(b) of the Acts Interpretation Act 1901 which provides that: 'In any Act, unless the contrary intention appears: (a) ... (b) words in the singular number include the plural...' As paragraph 170-275(1)(b) of the ITAA 1997 applies then, pursuant to subsection 170-275(1) of the ITAA 1997, company P is taken to have made a capital loss at the time of the new event equal to the amount of capital loss that was previously disregarded because of section 170-270 of the ITAA 1997.", "Date_of_Decision": "14 January 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(1) subsection 104-10(4) subsection 170-260(2) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/67", "Subject_References": "Capital losses Net capital losses Capital gains tax CGT roll-over relief Company losses Deferred capital losses Deferred capital losses and deductions Connected entity Deferral event Disregarded capital loss New event Linked group Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003116", "Unmatched_Content": "Keywords Capital losses Net capital losses Capital gains tax CGT roll-over relief Company losses Deferred capital losses Deferred capital losses and deductions Connected entity Deferral event Disregarded capital loss New event Linked group Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/240", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: option granted by a company to acquire shares in it ends", "Issue": "Does Subdivision 170-D of the Income Tax Assessment Act 1997 (ITAA 1997) apply to disregard a capital loss a company made because CGT event C3 (section 104-30) of ITAA 1997 happened in respect of an option granted by the company?", "Decision": "No. Paragraph 170-255(1)(c) of the ITAA 1997 provides that Subdivision 170-D of the ITAA 1997 only applies to disregard a capital loss where a deferral event involves the happening of CGT event A1, B1, D1, D2, D3 or F1, not CGT event C3.", "Facts": "The originating company granted an option to another entity to acquire shares in the originating company. Upon the ending of the option, section 104-30 of the ITAA 1997 provided that CGT event C3 happened to the originating company, resulting in the originating company making a capital loss. Reasons for Decision Subsection 170-255(1) of the ITAA 1997 provides that Subdivision 170-D of the ITAA 1997 will apply if, among other things: For Subdivision 170-D of the ITAA 1997 to apply, paragraphs 170-255(1)(a) to (e) of the ITAA 1997 must be met. The granting of the option by the originating company was a deferral event for the purposes of paragraph 170-255(1)(a) of the ITAA 1997. The deferral event was a CGT event that would have resulted in the originating company making a capital loss for the purposes of subparagraph 170-255(1)(b)(i) of the ITAA 1997. As the deferral event only involved CGT event C3, the condition in paragraph 170-255(1)(c) of the ITAA 1997 is not satisfied. As not all of paragraphs 170-255(1)(a) to (e) of the ITAA 1997 apply, then section 170-270 of Subdivision 170-D of the ITAA 1997 does not apply to disregard the capital loss made by the originating company.", "Reasons_for_Decision": "", "Date_of_Decision": "24 February 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-30 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) paragraph 170-255(1)(b) subparagraph 170-255(1)(b)(i) paragraph 170-255(1)(c) paragraph 170-255(1)(d) paragraph 170-255(1)(e) section 170-270", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Deferred capital losses and deductions Disregarded capital loss Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003240", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Deferred capital losses and deductions Disregarded capital loss Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/311", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant CGT asset changed into a new asset", "Issue": "Where a 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)) changed into a 'new asset' (as defined in paragraph 112-25(1)(b) of the ITAA 1997) can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?", "Decision": "No. The reference to the term 'ceases to exist' in paragraph 170-275(1)(a) of the ITAA 1997 in relation to a relevant CGT asset pertains to the existence of the underlying property or right that constituted the relevant CGT asset and not its status as a particular CGT asset.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a CGT asset to another entity. The disposal of the CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that the originating company would otherwise have been entitled to, was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity changed into a new asset. The new asset is still beneficially owned by the other entity.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' as defined 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. The reference to the 'relevant CGT asset' in paragraph 170-275(1) (a) of the ITAA 1997 focuses on whether the underlying property or right that constituted the relevant CGT asset ceases to exist. The mere changing of a relevant CGT asset into a new CGT asset without the underlying property or right itself ceasing to exist and with no concomitant change in beneficial ownership, does not invoke the operation of paragraph 170-275(1)(a) of the ITAA 1997. Note: The term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997 given in this ATO Interpretative Decision.", "Date_of_Decision": "26 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 112-25 subsection 112-25(1) paragraph 112-25(1)(a) paragraph 112-25(1)(b) subsection 112-25(4) Subdivision 170-D subsection 170-255(1) paragraph 170-255(1)(a) section 170-255 section 170-270 paragraph 170-275(1)(a) subsection 170-275(1) section 170-275 paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/312 | ATO ID 2003/313 | ATO ID 2003/314", "Subject_References": "Capital losses CGT cost base modification-split, changed or merged asset rule Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003311", "Unmatched_Content": "Keywords Capital losses CGT cost base modification-split, changed or merged asset rule Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/312", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant CGT asset split into new assets", "Issue": "Where a 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)) is split into two or more 'new assets' (as defined in paragraph 112-25(1)(a) of the ITAA 1997) can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?", "Decision": "No. The reference to the term 'ceases to exist' in paragraph 170-275(1)(a) of the ITAA 1997 in relation to a relevant CGT asset pertains to the existence of the underlying property or right that constituted the relevant CGT asset and not its status as a particular CGT asset.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a CGT asset to another entity. The disposal of the CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that the originating company would otherwise have been entitled to, was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was split into two new assets. The new assets are still beneficially owned by the other entity.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a new event happens where the relevant CGT asset 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. The reference to the 'relevant CGT asset' in paragraph 170-275(1)(a) of the ITAA 1997 focuses on whether the underlying property or right that constituted the relevant CGT asset ceases to exist. The splitting of a relevant CGT asset two or more new CGT assets without the underlying property or right itself ceasing to exist and with no concomitant change in beneficial ownership, does not invoke the operation of paragraph 170-275(1)(a) of the ITAA 1997. Note: The term ceases to exist in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997 given in this ATO Interpretative Decision.", "Date_of_Decision": "26 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 112-25 subsection 112-25(1) paragraph 112-25(1)(a) Subdivision 170-D subsection 170-255(1) paragraph 170-255(1)(a) section 170-255 section 170-270 paragraph 170-275(1)(a) subsection 170-275(1) section 170-275 paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/311 | ATO ID 2003/313 | ATO ID 2003/314", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003312", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/313", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant CGT asset merged with another CGT asset into a new asset", "Issue": "Where a 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)) is merged with another CGT asset into a 'new asset' (as defined in subsection 112-25(4) of the ITAA 1997) can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?", "Decision": "No. The reference to the term 'ceases to exist' in paragraph 170-275(1)(a) of the ITAA 1997 in relation to a relevant CGT asset pertains to the existence of the underlying property or right that constituted the relevant CGT asset and not its status as a particular CGT asset.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a CGT asset to another entity. The disposal of the CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that the 'originating company' would otherwise have been entitled to was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was merged with another CGT asset into a new asset. The new asset is still beneficially owned by the other entity.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a new event happens where the relevant CGT asset 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. The reference to the 'relevant CGT asset' in paragraph 170-275(1)(a) of the ITAA 1997 focuses on whether the underlying property or right that constituted the relevant CGT asset ceases to exist. The merging of a relevant CGT asset with another CGT asset into a new CGT asset without the underlying property or right itself ceasing to exist and with no concomitant change in beneficial ownership, does not invoke the operation of paragraph 170-275(1)(a) of the ITAA 1997. Note: The term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997 given in this ATO Interpretative Decision.", "Date_of_Decision": "26 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 112-25 subsection 112-25(4) Subdivision 170-D subsection 170-255(1) paragraph 170-255(1)(a) section 170-255 section 170-270 paragraph 170-275(1)(a) subsection 170-275(1) section 170-275 paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/311 | ATO ID 2003/312 | ATO ID 2003/314", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003313", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/314", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: split asset - new event", "Issue": "Where a 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)) is split into two 'new assets' (as defined in paragraph 112-25(1)(a) of the ITAA 1997) can the disposal of one of the new assets cause a new event to happen for the purposes of paragraph 170-275(1)(b) of the ITAA 1997?", "Decision": "Yes. The reference to 'a greater than 50% interest in it' in paragraph 170-275(1)(b) of the ITAA 1997 focuses on the interest in the underlying property or right that constituted the relevant CGT asset.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a CGT asset to another entity. The disposal of the CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that the originating company would otherwise have been entitled to, was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was split into two new assets. The split into two new assets did not involve any change in beneficial ownership of the underlying property that constituted the CGT assets. Pursuant to subsection 112-25(3) of the ITAA 1997, the cost base and reduced cost base of the relevant CGT asset were calculated as being allocated 60% to the first new asset and 40% to the second new asset respectively. The other entity later disposed of the 60% new asset to an unrelated entity that, at the time of acquiring that asset, was none of those mentioned in subparagraphs 170-275(1)(b)(i), (ii) or (iii) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(b) of the ITAA 1997 provides that a new event happens where the relevant CGT asset, or a greater than 50% interest in it, is acquired by an entity that is none of the following: The reference to 'a greater than 50% interest in it' in paragraph 170-275(1)(b) of the ITAA 1997 is focussing upon the interest in the underlying property or right that constituted the relevant CGT asset. The acquisition of the new asset, which constituted a 60% interest in the relevant CGT asset, by an entity that was none of those mentioned in subparagraphs 170-275(1)(b)(i), (ii) or (iii) of the ITAA 1997, results in paragraph 170-275(1)(b) of the ITAA 1997 being satisfied. Consequently, a new event happens for the purposes of subsection 170-275(1) of the ITAA 1997 and the originating company is taken to have made a capital loss equal to the whole of the amount of the capital loss that was disregarded by section 170-270 of the ITAA 1997. Note 1: If, within 4 years after the occurrence of the new event, a 'further event' (as defined in subsection 170-280(1) of the ITAA 1997) occurs, then subsection 170-280(2) of the ITAA 1997 will apply so that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note 2: The term 'a greater than 50% interest in it' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(b) of the ITAA 1997 given in this ATO Interpretative Decision.", "Date_of_Decision": "26 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 112-25 subsection 112-25(1) paragraph 112-25(1)(a) subsection 112-25(3) Subdivision 170-D subsection 170-255(1) paragraph 170-255(1)(a) section 170-255 section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(b) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/311 | ATO ID 2003/312 | ATO ID 2003/313", "Subject_References": "Australian Taxation Office Capital losses Centres of Expertise Deferral event Deferred capital losses Disregarded capital loss Further event Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003314", "Unmatched_Content": "Keywords Australian Taxation Office Capital losses Centres of Expertise Deferral event Deferred capital losses Disregarded capital loss Further event Losses and Capital Gains Tax CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/398", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - part of the relevant CGT asset ceases to exist", "Issue": "Where greater than 50% of the 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)) ceases to exist, can it also be taken that a 'new event' occurs for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?", "Decision": "Yes. Where greater than 50% of the relevant CGT asset ceases to exist then paragraph 170-275(1)(a) of the ITAA 1997 applies as a greater than 50% interest in the relevant CGT asset has ceased to exist.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a CGT asset to another entity. The disposal of the CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that the originating company would otherwise have been entitled to was disregarded under section 170-270 of the ITAA 1997. Subsequently, greater than 50% of the relevant CGT asset acquired by the other entity ceased to exist.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a new event happens where the relevant CGT asset, or a greater than 50% interest in it, 'ceases to exist'. Where greater than 50% of the relevant CGT asset ceases to exist' then a greater than 50% interest in the relevant CGT asset concurrently also ceases to exist, notwithstanding that 100% of the remaining portion of the CGT asset continues to exist. Consequently, a new event happens for the purposes of subsection 170-275(1) of the ITAA 1997, and the originating company is taken to have made a capital loss equal to the amount of the capital loss that was disregarded by section 170-270 of the ITAA 1997. Note: The term 'a greater than 50% interest in it' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997 given in this ATO Interpretative Decision.", "Date_of_Decision": "8 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-D subsection 170-255(1) paragraph 170-255(1)(a) section 170-255 section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Realisation event Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003398", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Realisation event Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/400", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant CGT asset technologically redundant", "Issue": "Where a 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)) is technologically redundant, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?", "Decision": "No. A CGT asset that is still physically in existence but placed in storage by the owner does not cease to exist notwithstanding the fact that it may no longer be used as it has become technologically redundant.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a CGT asset to another entity. The disposal of the CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that the originating company would otherwise have been entitled to was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was considered to be technologically redundant, but kept in storage for emergencies.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997, the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a new event happens where the relevant CGT asset 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. A CGT asset that is still physically in existence but placed in storage by the owner, does not cease to exist, notwithstanding the fact that it may be technologically redundant. Note: The term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997 given in this ATO Interpretative Decision.", "Date_of_Decision": "8 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-D subsection 170-255(1) paragraph 170-255(1)(a) section 170-255 section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Realisation event Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003400", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses New event Originating company Realisation event Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/401", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant CGT asset (an option) is exercised - new event", "Issue": "Where CGT event C2 happens to an option that is exercised, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an option that is exercised it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of an option to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the option was exercised, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where 'the relevant CGT' asset acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant CGT asset, that is, an option, is exercised such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003401", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/402", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant CGT asset (convertible note) is converted - new event", "Issue": "Where CGT event C2 happens to a convertible note that is converted, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to a convertible note that is converted, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a convertible note to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the convertible note was converted, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where a convertible note is converted such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003402", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/410", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset discharged - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is discharged, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is discharged it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was discharged, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is discharged such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003410", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/411", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset released - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is released, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is released it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was released, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is released such that CGT event C2 of the ITAA 1997 happens it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003411", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/412", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset cancelled - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is cancelled, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is cancelled it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was cancelled, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is cancelled such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003412", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/413", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset redeemed - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is redeemed, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is redeemed it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was redeemed, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is redeemed such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003413", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/414", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - destroyed relevant CGT asset - new event", "Issue": "Where CGT event C1 happens to a CGT asset that is destroyed, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C1 happens to a CGT asset that is destroyed it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was destroyed, resulting in CGT event C1 happening under section 104-20 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant CGT asset is destroyed such that CGT event C1 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-20 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003414", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/415", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset abandoned - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is abandoned, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is abandoned it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was abandoned, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is abandoned such that CGT event C2 of the ITAA 1997 happens it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003415", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/416", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset forfeited - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is forfeited, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is forfeited it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was forfeited, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is forfeited such that CGT event C2 of the ITAA 1997 happens it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003416", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/417", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset surrendered - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is surrendered, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is surrendered it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was surrendered, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is surrendered such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003417", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/418", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset expired - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is expired, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is expired it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was expired, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is expired such that CGT event C2 of the ITAA 1997 happens, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003418", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/419", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - relevant (intangible) CGT asset satisfied - new event", "Issue": "Where CGT event C2 happens to an intangible CGT asset that is satisfied, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where CGT event C2 happens to an intangible CGT asset that is satisfied it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An originating company (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant (intangible) CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying. As a consequence, a capital loss that would have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset acquired by the other entity was satisfied, resulting in CGT event C2 happening under section 104-25 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a 'new event' happens where the 'relevant CGT asset' acquired by the other entity 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the relevant (intangible) CGT asset is satisfied such that CGT event C2 of the ITAA 1997 happens it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997. Note that subsection 170-280(1) of the ITAA 1997 may apply if a further event occurs within 4 years. If subsection 170-280(1) of the ITAA 1997 applies the effect of subsection 170-280(2) of the ITAA 1997 is that the originating company will be taken not to have made the capital loss allowed by section 170-275 of the ITAA 1997. Note also that the term 'ceases to exist' in paragraph 170-280(3)(a) of the ITAA 1997 is to be interpreted consistently with the interpretation used in applying paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "11 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 104-25 Subdivision 170-D section 170-255 paragraph 170-255(1)(a) section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2) paragraph 170-280(3)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003419", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses CoE Net capital losses New event Originating company Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/696", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: ceases to exist - lost relevant CGT asset - new event", "Issue": "Where pursuant to section 104-20 of the Income Tax Assessment Act 1997 (ITAA 1997) CGT Event C1 happens to a CGT asset because it is lost, can it also be taken that it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997?", "Decision": "Yes. Where CGT event C1 happens to a CGT asset that is lost it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Facts": "An 'originating company' (as defined in paragraph 170-255(1)(a) of the ITAA 1997) disposed of a relevant CGT asset to another entity. The disposal of the relevant CGT asset resulted in section 170-255 of the ITAA 1997 applying, such that a capital loss that would otherwise have been made by the originating company was disregarded under section 170-270 of the ITAA 1997. Subsequently, the relevant CGT asset was lost, believed stolen, resulting in CGT event C1 happening under section 104-20 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where a capital loss (or a deduction or share of a deduction) has been disregarded under section 170-270 of the ITAA 1997 the originating company is taken to have made an equivalent capital loss where a 'new event' happens under section 170-275 of the ITAA 1997. Paragraph 170-275(1)(a) of the ITAA 1997 provides that a new event happens where the 'relevant CGT asset' (as defined in paragraph 170-275(1)(a) of the ITAA 1997) 'ceases to exist'. The term 'ceases to exist' is not defined in the ITAA 1997 and must be interpreted having regard to the ordinary meaning of that term in the context of Subdivision 170-D of the ITAA 1997. Where the other entity referred to in paragraph 170-255(1)(a) of the ITAA 1997 loses the relevant CGT asset such that CGT event C1 in section 104-20 of the ITAA 1997 occurs, it 'ceases to exist' for the purposes of paragraph 170-275(1)(a) of the ITAA 1997.", "Date_of_Decision": "3 July 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(1) subsection 104-10(4) Subdivision 170-D section 170-270 section 170-275 subsection 170-275(1) paragraph 170-275(1)(a) subsection 170-280(1) subsection 170-280(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Further event Losses and Capital Gains Tax CoE Net capital losses New event Originating company Realisation event Relevant CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003696", "Unmatched_Content": "Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Further event Losses and Capital Gains Tax CoE Net capital losses New event Originating company Realisation event Relevant CGT asset"}
{"ATO_ID_Number": "ATO ID 2003/780", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deferred capital loss or deduction: whether deduction in respect of novation of a financial instrument is to be disregarded", "Issue": "Where a company incurs a deduction in respect of the novation of a financial instrument to another entity that is a member of the same 'linked group', is the deduction to be disregarded under section 170-270 of Subdivision 170-D of the Income Tax Assessment Act 1997 ?", "Decision": "No. As the novation of the financial instrument does not constitute the disposal of a CGT asset under subparagraph 170-255(1)(b)(ii) of the ITAA 1997, the deduction is not disregarded under Subdivision 170-D of the ITAA 1997.", "Facts": "Company X entered into a financial instrument with another party. Company X subsequently novated the financial instrument to another entity. The financial instrument constituted a CGT asset of Company X. As a result of company X's novation of its rights and obligations under the financial instrument to another entity, Company X became entitled to a deduction. The relevant novation agreement provided that the rights and obligations of Company X were discharged and equivalent rights and obligations were created as between the other entity and the other party to the original financial instrument. At the time of the novation (deferral event) the other entity was not a connected entity of Company X under section 170-265 of the ITAA 1997. Company X and the other entity were linked at this time under section 170-260 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Where section 170-255 of the ITAA 1997 applies, a deduction (or capital loss) that would otherwise be allowable to an 'originating company' (Company X) is disregarded pursuant to section 170-270 of the ITAA 1997. For section 170-255 of the ITAA 1997 to apply such that a deduction may be disregarded, then subparagraph 170-255(1)(b)(ii) of the ITAA 1997 must apply as follows: the deferral event would have resulted in the originating company becoming entitled to a deduction in respect of the disposal of a CGT asset or of an interest in a CGT asset; The relevant novation agreement expressly provided that the original financial instrument between Company X and another entity was discharged, and in substitution, a new agreement on identical terms was created between the other entity and the other party to the original financial instrument. As the novation agreement provided that the relevant CGT asset, being the original financial instrument, was discharged, rather than transferred to another entity, then no 'disposal' is taken to have occurred in respect of the CGT asset for the purposes of subparagraph 170-255(1)(b)(ii). Accordingly, Subdivision 170-D of the ITAA 1997 does not operate to disregard the relevant deduction. Note: This ATO Interpretative Decision is only interpreting the operation of Subdivision 170-D of the ITAA 1997 and is not interpreting the circumstances in which a deduction may arise in respect of the novation of a financial instrument.", "Date_of_Decision": "17 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-D section 170-255 subparagraph 170-255(1)(b)(ii) section 170-260 section 170-265 section 170-270", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deferral event Losses CoE Originating company CGT asset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003780", "Unmatched_Content": "Keywords Deferral event Losses CoE Originating company CGT asset"}
{"ATO_ID_Number": "ATO ID 2013/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax losses: transferring a loss for consolidation purposes - choosing not to apply Subdivision 166-A of the Income Tax Assessment Act 1997 - no effect on the head company subsequently using Subdivision 166-A when trying to utilise the transferred loss", "Issue": "If a joining entity (being a widely held company or an eligible Division 166 company) is seeking to transfer a loss to the head company of an income tax consolidated group (including itself) under Subdivision 707-A of the Income Tax Assessment Act 1997 (ITAA 1997), and chooses under section 166-15 of the ITAA 1997 that Subdivision 165-A of the ITAA 1997 is to apply to it for the trial year without the modifications made by Subdivision 166-A of the ITAA 1997, does this choice prevent the head company from applying Subdivision 166-A of the ITAA 1997 in a subsequent income year when the head company seeks to utilise the transferred loss?", "Decision": "No. The choice under section 166-15 of the ITAA 1997 applies on a year by year basis. The joining entity's choice under section 166-15 of the ITAA 1997 that Subdivision 165-A of the ITAA 1997 is to apply to it for the trial year without the modifications made by Subdivision 166-A of the ITAA 1997 is only relevant for the purpose of determining whether the loss can be transferred to the head company of an income tax consolidated group. If the loss is transferred, the joining entity's choice has no effect in a subsequent income year on the ability of the head company to apply Subdivision 166-A of the ITAA 1997 when the head company seeks to utilise the transferred loss.", "Facts": "Loss Company made a tax loss for the income year ending on 30 June 2010. The tax loss was not fully deducted in the income year ending on 30 June 2011. Loss Company became a member of an income tax consolidated group on 1 July 2011 (the joining time). Head Co is the head company of the income tax consolidated group. As part of the process of attempting to transfer the tax loss to Head Co under Subdivision 707-A of the ITAA 1997, Loss Company knows that it failed the continuity of ownership test (COT) in section 165-12 of the ITAA 1997 because Head Co acquired all of the shares in Loss Company from other entities on 1 July 2011. Therefore, Loss Company must apply the same business test (SBT) in section 165-13 of the ITAA 1997. Loss Company was an eligible Division 166 company for an income year consisting of the trial year (1 July 2010 to 1 July 2011). For the purpose of determining whether the loss can be transferred to Head Co at the joining time by satisfying the SBT in respect of the trial year, Loss Company wants to apply Subdivision 165-A of the ITAA 1997 without the modifications made by Subdivision 166-A of the ITAA 1997. However, Loss Company is concerned that making such a choice under section 166-15 of the ITAA 1997 will prevent Head Co from applying Subdivision 166-A of the ITAA 1997 (which contains many concessions) when Head Co seeks to utilise the transferred loss in future income years by actually deducting it against assessable income.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Subdivision 707-A governs whether a loss can be transferred from a joining entity to the head company of a consolidated group (the joined group). Section 707-120 effectively requires the joining entity (Loss Company) to satisfy the COT or the SBT for an income year consisting of the 'trial year'. The trial year for Loss Company is the period from 1 July 2010 to 1 July 2011. As Loss Company made the loss for an income year starting after 30 June 1999, and section 165-13 is relevant to working out (under subsection 707-120(1)) whether the tax loss is transferred from Loss Company to Head Co, section 707-125 operates. It determines the same business test period and the test time, which are essential to applying the SBT in section 165-13. Subsection 707-125(2) is the default provision containing the same business test period and test time for companies joining an income tax consolidated group. However, if Subdivision 166-A would apply to the joining entity (Loss Company) for an income year consisting of the trial year, subsection 707-125(4) provides for a same business test period that is more complicated to determine than the same business test period prescribed by subsection 707-125(2). A joining entity must be a widely held company or an eligible Division 166 company for the income year in which it seeks to deduct a tax loss in order to apply Subdivision 166-A. Loss Company was an eligible Division 166 company for an income year consisting of the trial year, which subsection 707-120(1) deems to be a loss deduction year. Subsection 707-125(4) is worded in mandatory terms: 'If Subdivision 166-A would apply to the joining entity... work out whether the loss is transferred on the basis that...' The Note to subsection 707-125(4) states that a widely held company or an eligible Division 166 company can choose that Subdivision 165-A (which encompasses the SBT) is to apply to it for the income year without the modifications made by Subdivision 166-A. This choice is available under section 166-15. Section 166-15 (in Subdivision 166-A) states: 166-15(1) The company can choose that Subdivision 165-A is to apply to it for the income year without the modifications made by this Subdivision [166-A]. 166-15(2) The company must choose on or before the day it lodges its *income tax return for the income year, or before a later day if the Commissioner allows. Widely held companies and eligible Division 166 companies have the benefit of applying Subdivision 166-A (which triggers the application of Subdivisions 166-D and 166-E). Companies only apply Subdivision 165-A when they seek to deduct a tax loss or (through Subdivision 165-CA) apply a net capital loss. Testing for the transfer of a loss from the joining entity to the head company of the joined group under Subdivision 707-A involves a hypothetical utilisation of the loss in the trial year under the rules in Subdivision 165-A, with certain modifications and on the basis of certain assumptions. For subsection 707-125(4) to be relevant to the transfer of a loss under the SBT, the requirement is that 'Subdivision 166-A would apply to the joining entity'. The Note to subsection 707-125(4) states (emphasis added): Subdivision 166-A applies to widely held companies and eligible Division 166 companies unless they choose that Subdivision 165-A apply to them without the modifications made by Subdivision 166-A . This Note strongly suggests that a joining entity should be able to opt out of Subdivision 166-A for loss transfer testing purposes under Subdivision 707-A. If a joining entity is a company to which Subdivision 166-A would not apply by virtue of having made a choice under section 166-15, subsection 707-125(4) would not be relevant to that joining entity. Subsection 707-125(2) would apply as the default provision. Under section 166-15, companies can choose not to apply the modifications made by Subdivision 166-A on a year by year basis. In one income year where they are applying Subdivision 165-A to determine whether they can deduct some or all of a tax loss or apply some or all of a net capital loss, a company does not have to apply Subdivision 166-A. In a subsequent income year they can apply Subdivision 166-A, even in respect of deducting some of the same tax loss or applying some of the same net capital loss. As testing for the transfer of a loss from the joining entity to the head company of the joined group under Subdivision 707-A involves a hypothetical utilisation of the loss by the joining entity in the trial year, the joining entity's choice under section 166-15 not to apply the modifications made by Subdivision 166-A is only relevant for the trial year. It does not affect any subsequent income year. Once a loss is transferred to the head company of the joined group, section 707-140 provides that, for income years ending after the transfer, the head company is deemed to have made the loss for the income year in which the transfer occurs. This means that only the head company of the joined group is allowed to utilise the loss (unless the loss is transferred to another head company). The joining entity's choice under section 166-15 not to apply the modifications made by Subdivision 166-A for loss transfer testing purposes under Subdivision 707-A is only relevant for the trial year. It does not affect any subsequent income year in respect of the utilisation of any part of the transferred loss.", "Date_of_Decision": "19 November 2012", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 165-A section 165-12 section 165-13 Subdivision 165-CA Subdivision 166-A subsection 166-5(2) section 166-15 subsection 166-15(1) subsection 166-15(2) Subdivision 166-D Subdivision 166-E Subdivision 707-A section 707-120 subsection 707-120(1) section 707-125 subsection 707-125(2) subsection 707-125(4) section 707-140", "Related_Public_Rulings_and_Determinations": "TR 1999/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Loss Same business test Tax loss Transfer", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20137", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 1999/9 | Keywords Consolidation Loss Same business test Tax loss Transfer"}
{"ATO_ID_Number": "ATO ID 2012/64", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax losses: savings rule - deductions and capital losses that 'could occur in future'", "Issue": "In determining the extent to which a tax loss has been reflected in deductions, capital losses, or reduced assessable income for the purposes of applying subsection 166-272(8) of the Income Tax Assessment Act 1997 (ITAA 1997), does the reference to deductions and capital losses that 'could occur in future' mean deductions and capital losses that are affected by the operation of Subdivision 170-D of the ITAA 1997 or another provision with a similar effect?", "Decision": "Yes. The phrase 'could occur in future' in paragraph 166-272(8)(b) of the ITAA 1997 refers to the situation where, as a result of the operation of Subdivision 170-D of the ITAA 1997 or another provision with a similar effect, deductions or capital losses have arisen under, and are recognised by, the income tax legislation, but are not available for utilisation until a particular event occurs in the future.", "Facts": "Loss Company (the tested company under subsection 166-272(8) of the ITAA 1997) made a tax loss in the 2010 income year. Loss Company seeks to deduct all of the tax loss in the 2011 income year. Loss Company fails to satisfy the conditions in section 166-145 of the ITAA 1997 because of the operation of subsection 166-272(2) of the ITAA 1997 (often referred to as the \"same share same interest rule\"). Pursuant to subsection 166-272(1) of the ITAA 1997, a voting stake, a dividend stake and a capital stake in Loss Company is directly held by Company X (the stakeholder), as a widely held company mentioned in section 166-240 of the ITAA 1997. During the relevant 'test period' (as defined in subsection 166-5(2) of ITAA 1997) for the tax loss, Company X disposed of its shares in Loss Company. This caused CGT event A1 under section 104-10 of the ITAA 1997 to happen in relation to direct equity interests (as defined in subsection 995-1(1) of the ITAA 1997) held in Loss Company by Company X. Company X made a capital loss from CGT event A1. No other CGT events happened during the test period in relation to any direct equity interests or indirect equity interests held in Loss Company by any stakeholder mentioned in a provision listed in subsection 166-272(1).", "Reasons_for_Decision": "Summary: Subsection 166-272(8) of the ITAA 1997 provides that if any of the conditions in section 166-145 of the ITAA 1997 have not been satisfied because of the operation of the same share same interest rule in subsection 166-272(2) of the ITAA 1997, those conditions are taken to have been satisfied if: Subsection 166-272(8) of the ITAA 1997 is often referred to as the \"savings rule\". In certain circumstances, it reverses a failure of one or more of the conditions of the modified continuity of ownership test in section 166-145 of the ITAA 1997 where the failure was caused by the same share same interest rule. The application of the savings rule in subsection 166-272(8) of the ITAA 1997 cannot be anticipated before the end of the relevant test period. It is only once the test period has ended that Loss Company can establish with certainty the amount of deductions and capital losses that occurred, or could occur in future, because of the happening of any CGT event in relation to any direct equity interests or indirect equity interests held in Loss Company by any of the stakeholders mentioned in a provision listed in subsection 166-272(1) of the ITAA 1997, or an entity interposed between the stakeholder and Loss Company, during the relevant test period. Once this amount is established, it can be compared with the amount of the tax loss to determine whether less than 50% of the tax loss has been reflected in deductions or capital losses, thus satisfying paragraph 166-272(8)(b) of the ITAA 1997. Any CGT events that happen after the end of the test period are not relevant to the application of the savings rule. The phrase 'could occur in future' in paragraph 166-272(8)(b) of the ITAA 1997 refers to the situation where, as a result of the operation of Subdivision 170-D of the ITAA 1997 or another provision with a similar effect, deductions or capital losses have arisen under, and are recognised by, the income tax legislation, but are not available for deduction against assessable income, or application against current year capital gains or as part of a net capital loss, until a particular event occurs in the future. Paragraph 1.126 of the Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005 states in relation to subsection 166-272(8) of the ITAA 1997: The savings provision will not apply if the loss will be duplicated in the future because of a CGT event during the period. This might occur if a capital loss has been recognised, but deferred by Subdivision 170-D. However, the phrase 'could occur in future' in paragraph 166-272(8)(b) of the ITAA 1997 does not refer to a situation where a roll-over has been chosen by an entity in respect of a CGT event that gave rise to a capital loss.", "Date_of_Decision": "10 July 2012", "Year_of_Income": "Year ended 30 June 2010, Year ended 30 June 2011, Year ended 30 June 2012 and Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 section 104-10 section 165/115E subsection 166-5(2) section 166-145 section 166-240 subsection 166-272(1) subsection 166-272(2) subsection 166-272(8) paragraph 166-272(8)(b) Subdivision 170-D subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/393 | ATO ID 2003/394 | ATO ID 2003/395 | ATO ID 2003/493", "Subject_References": "Tax loss Deferral CGT event 'Could occur in future'", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201264", "Unmatched_Content": "Keywords Tax loss Deferral CGT event 'Could occur in future'"}
{"ATO_ID_Number": "ATO ID 2003/369", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting Tax Loss: Saving Rule - Deduction in respect of interest in loss company allowable in foreign jurisdiction", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), is a tax loss 'reflected' in deductions that may be claimed in a foreign tax jurisdiction in respect of the disposal of any direct or indirect interest in the loss company?", "Decision": "No. To be 'reflected', a deduction in respect of the disposal of an interest in the loss company must be allowed or allowable under the ITAA 1997 or the Income Tax Assessment Act 1936 , as the entitlement to a deduction must happen because of a CGT event.", "Facts": "Loss Company seeks to deduct a tax loss that it incurred in an earlier year of income. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. Company K disposed of an indirect equity interest, as defined in paragraph 165-12(9)(b) of the ITAA 1997, during the relevant ownership test period. The relevant interest disposed of by Company K was not a CGT asset. As a result of the disposal, Company K is not entitled to a deduction under Australian Income Tax law, but is entitled to a tax deduction in a foreign jurisdiction. No CGT event happened in relation to any direct or indirect equity interest in the Loss Company during the ownership test period.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) of the ITAA 1997 is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses, or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. Note: * denotes a term defined in section 995-1 of the ITAA 1997 The deduction that Company K became entitled to in a foreign jurisdiction, because of the disposal of an indirect equity interest in Loss Company, is not taken into account in subsection 165-12(7) of the ITAA 1997 in determining the extent that the tax loss has been reflected, because it did not result from the happening of a CGT event. As no CGT event happened in relation to any direct or indirect equity interest in Loss Company during the ownership test period, more than 50% of the tax loss cannot be reflected for the purposes of subsection 165-12(7) of the ITAA 1997. Accordingly, Loss Company is taken by subsection 165-12(7) of the ITAA 1997 to have satisfied the conditions in 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 and it can therefore, deduct the relevant tax loss unless otherwise precluded by the ITAA 1997.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 The Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Losses Foreign tax laws", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003369", "Unmatched_Content": "This ATO ID was amended by replacing the former paragraph 165-12(7)(b) with the amended paragraph 165-12(7)(b). The date of amendment was 24 September 2007. | Keywords Losses Foreign tax laws"}
{"ATO_ID_Number": "ATO ID 2003/370", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting Tax Loss: Saving Rule - Deduction in respect of equity interest forms part of disposer's tax loss", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), is a deduction in respect of the disposal of an equity interest in a loss company to be taken into account in determining the extent to which a tax loss has been 'reflected', where that deduction forms part of a tax loss of the disposer?", "Decision": "Yes. A loss company's tax loss is 'reflected' in the amount of deduction that is allowed or allowable in relation to the disposal of the equity interest, and is not dependent upon the relevant deduction being utilised by the disposer.", "Facts": "Loss Company seeks to deduct a tax loss that it incurred in an earlier year of income. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. Company K disposed of an indirect equity interest, as defined in paragraph 165-12(9)(b) of the ITAA 1997, during the relevant ownership test period. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a deduction in respect of the disposal of the relevant indirect equity interest. That deduction is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. The deduction forms part of Company K's tax loss for the income year in which the disposal of the interest occurred.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses, or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period Note: * denotes a term defined in section 995-1 of the ITAA 1997. Because the happening of CGT event A1 entitled Company K to the relevant deduction (that is not disregarded), the deduction is to be taken into account in determining the extent to which the tax loss incurred by Loss Company has been reflected. In determining the extent that Loss Company's tax loss has been reflected, regard is to be had to the extent that a disposer's deduction in relation to the disposal of a direct or indirect equity interest in the Loss Company, is greater than it would otherwise have been but for that tax loss being incurred. Unless the disposer's deduction is disregarded under the ITAA 1997 or the Income Tax Assessment Act 1936 it is irrelevant for the purposes of applying subsection 165-12(7) of the ITAA 1997 when the disposer utilises the deduction.", "Date_of_Decision": "27 March 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 The Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/371", "Subject_References": "Losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003370", "Unmatched_Content": "This ATO ID was amended by replacing the former paragraph 165-12(7)(b) with the amended paragraph 165-12(7)(b). The date of amendment was 24 September 2007."}
{"ATO_ID_Number": "ATO ID 2003/371", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting Tax Loss: Saving Rule - Capital loss made by non-resident", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), is a capital loss made by a foreign resident in respect of the disposal of an equity interest in a loss company to be taken into account in determining the extent to which a loss company's tax loss has been 'reflected', where the disposer has no other CGT asset that is taxable Australian property?", "Decision": "Yes. A loss company's tax loss is reflected in the amount of capital loss that is allowed in relation to the disposal of the equity interest, and is not dependent upon the relevant capital loss being applied by the disposer.", "Facts": "Loss Company seeks to deduct a tax loss that it had incurred in an earlier income year. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period Company K, a foreign resident, disposed of an indirect equity interest, as defined in subsection 995-1(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a capital loss in respect of the disposal of the relevant indirect equity interest. That capital loss is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. Company K made no other capital gains or capital losses in the disposal year of income. Company K has no other CGT that is taxable Australia property as defined in section 855-15 of the ITAA 1997, that may result in an assessable capital gain.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4)of the ITAA 1997 is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses, or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. Note: * denotes a term defined in section 995-1 of the ITAA 1997. Because the happening of CGT event A1 entitled Company K to the relevant capital loss (that is not disregarded), the capital loss is to be taken into account in determining the extent to which the tax loss incurred by Loss Company has been reflected. In applying subsection 165-12(7) of the ITAA 1997, it is irrelevant that Company K may or may not make capital gains in the future against which the relevant capital loss may be applied.", "Date_of_Decision": "27 March 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) paragraph 165-12(9)(b) section 165-165 Subdivision 170-D section 855-15 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/370", "Subject_References": "Losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003371", "Unmatched_Content": "This ATO ID was amended by replacing the former paragraph 165-12(7)(b) with the amended paragraph 165-12(7)(b). The date of amendment was 24 September 2007. References to the former Division 136 of the ITAA 1997 have been updated to reflect Division 855 of the ITAA 1997 which was inserted with effect from 12 December 2006."}
{"ATO_ID_Number": "ATO ID 2003/381", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting Tax Loss: Saving Rule - More than one tax loss being deducted", "Issue": "If a loss company seeks to deduct tax losses from two loss years in the one income year, is the extent of reflection for the purposes of subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997) determined separately for each tax loss?", "Decision": "Yes. Each tax loss that a company seeks to deduct under section 36-17 of the ITAA 1997 is separately considered under Subdivision 165-A of the ITAA 1997, including, where relevant, subsection 165-12(7) of the ITAA 1997.", "Facts": "Loss Company seeks to deduct tax losses from two earlier loss years in the one income year. Both tax losses cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997 as an individual, R, disposed of an indirect equity interest in Loss Company (as defined in subsection 995-1(1) of the ITAA 1997). The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, individual R became entitled to a capital loss in the disposal year, in respect of the disposal of the relevant indirect equity interest. That capital loss is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. No other CGT event happened, in relation to direct or indirect equity interests in the Loss Company in the respective ownership test period for each tax loss, as identified under subsection 165-12(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. Note: * denotes a term defined in section 995-1 of the ITAA 1997. As Subdivision 165-A of the ITAA 1997 is separately applied to each tax loss that Loss Company seeks to deduct under section 36-17 of the ITAA 1997, the tax loss contemplated by subsection 165-12(7) of the ITAA 1997 is the relevant tax loss being separately considered under Subdivision 165-A of the ITAA 1997, and not the total amount of all the tax losses from different loss years that Loss Company may seek to deduct in the one income year.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 36-17 subsection 104-10(2) Subdivision 165-A Subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subdivision 170D subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003381", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007"}
{"ATO_ID_Number": "ATO ID 2003/390", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting Tax Loss: saving rule - equity interest owned by an individual", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), are CGT events in respect of equity interests held by individuals taken into account in determining the extent that a Loss company's tax loss has been 'reflected'?", "Decision": "Yes. The definition of direct or indirect equity interests in subsection 995-1(1) of the ITAA 1997 does not exclude from the operation of subsection 165-12(7) of the ITAA 1997 direct or indirect equity interests on the basis that they are owned by individuals.", "Facts": "Loss Company seeks to deduct a tax loss that it had incurred in an earlier income year. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period, an individual 'D' disposed of an indirect equity interest in the Loss Company, as defined in subsection 995-1(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, individual D became entitled to a capital loss in respect of the disposal of the relevant indirect equity interest in the Loss Company.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in section 995-1(1) of the ITAA 1997. For the purposes of applying subsection 165-12(7) of the ITAA 1997, the terms 'direct equity interests' and 'indirect equity interests' are defined in subsection 995-1(1) of the ITAA 1997 as follows: As the above definitions do not exclude equity interests owned by individuals, D's indirect equity interest in Loss Company that was subject to a CGT event in the relevant ownership test period, must be taken into account in determining the extent that Loss Company's tax loss has been reflected. [HISTORY: This ATO ID has been amended to include the (*) asterisk when reference is made in subsection 165-12(7) of the ITAA 1997 to direct equity interests and indirect equity interests having been made defined terms under subsection 995-1(1) of ITAA 1997. The amendment also removes from the ATO ID any reference to subsection 165-12(9) of the ITAA 1997 repealed by the Tax Laws Amendment (2007 Measures No 4) Act 2007 with effect from 24 September 2007.]", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) section 165-12 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Prior year losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003390", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007 | Keywords Accumulated tax losses Prior year losses"}
{"ATO_ID_Number": "ATO ID 2003/391", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - reflected effects on direct and indirect equity interests to be combined", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), is the 'less than 50% of the tax loss' test to be done separately for indirect equity interests, and direct equity interests, in determining the extent that a loss company's tax loss has been 'reflected'.", "Decision": "No. A condition in subsection 165-12(2), (3) or (4) of the ITAA 1997 will only be taken by subsection 165-12(7) of the ITAA 1997 to have been satisfied where less than 50% of a tax loss has been reflected in indirect equity interests and direct equity interests combined, not separately.", "Facts": "Loss Company seeks to deduct a tax loss that it had incurred in an earlier income year. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period Company K disposed of an indirect equity interest, as defined in subsection 995-1(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a capital loss in respect of the disposal of the relevant indirect equity interest. Company K's capital loss reflected 30% of Loss Company's tax loss. During the relevant ownership test period, Company R disposed of a direct equity interest, as defined in subsection 9951(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company R became entitled to a capital loss in respect of the disposal of the relevant direct equity interest. Company R's capital loss reflected 40% of Loss Company's tax loss. Neither Company K's nor Company R's capital loss is taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. In applying the 'less than 50%' test in subsection 165-12(7) of the ITAA 1997, the extent that Loss Company's tax loss has been reflected is ascertained by determining the extent of reflection in indirect equity interests and direct equity interests. As 70% of Loss company's tax loss has been reflected, subsection 165-12(7) of the ITAA 1997 will not deem that Loss Company has satisfied the conditions in subsections 165-12(2), (3) or (4) of the ITAA 1997. Accordingly, Loss Company cannot deduct the relevant tax loss under section 165-12 of the ITAA 1997.", "Date_of_Decision": "28 March 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) section 165-12 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Capital gains tax Capital losses CGT event A1 - disposal of a CGT asset CGT events Companies Deductions & expenses Entities & taxpayer groups Group companies Group companies loss transfers Group companies transfers Losses Prior year losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003391", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Accumulated tax losses Capital gains tax Capital losses CGT event A1 - disposal of a CGT asset CGT events Companies Deductions & expenses Entities & taxpayer groups Group companies Group companies loss transfers Group companies transfers Losses Prior year losses"}
{"ATO_ID_Number": "ATO ID 2003/393", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - capital loss in respect of equity interest rolled-over under Subdivision 126-B", "Issue": "In determining the extent that a tax loss has been 'reflected' for the purposes of applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), is a capital loss in relation to an indirect equity interest in the loss company that is rolled-over under Subdivision 126-B of the ITAA 1997 during the relevant ownership test period, to be taken into account?", "Decision": "No. The roll-over of a capital loss under subsection 126-60(1) of the ITAA 1997 does not result in a capital loss that has, or could in future, be reflected for the purposes of applying subsection 165-12(7) of the ITAA 1997.", "Facts": "Loss Company seeks to deduct a tax loss in the year of income ended 30 June 2001 that it made in an earlier income year. The tax loss cannot be deducted as the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period, as defined in subsection 165-12(1) of the ITAA 1997, Company K disposed of an indirect equity interest in Loss Company, as defined in subsection 995-1(1) of the ITAA 1997, to Company R. That disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a capital loss in the disposal year in respect of the disposal of the relevant indirect equity interest. That capital loss was rolled over under Subdivision 126-B of the ITAA 1997. As a consequence, subsection 126-60(1) of the ITAA 1997 provided that the capital loss was disregarded.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. As the capital loss that Company K made in respect of the disposal of an indirect interest in Loss Company was permanently disregarded under subsection 126-60(1) of the ITAA 1997, it is not to be taken into account in determining the extent that the tax loss has been reflected for the purposes of applying subsection 165-12(7) of the ITAA 1997, as there is no capital loss that 'could occur in future'. Instead, pursuant to subsection 126-60(2) of the ITAA 1997, a consequence of the roll-over was that the cost base and reduced cost base of the relevant shares (indirect equity interest) acquired by recipient company (Company R) were both deemed to have the same first element as they had in the hands of the originating company (Company K). For a capital loss to 'could occur in future' it must, as with subsection 170-270(1) of Subdivision 170-D of the ITAA 1997, only be deemed to be temporarily disregarded until the happening of a future event, as is the case with section 170-275 of the ITAA 1997.", "Date_of_Decision": "22 April 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) Subdivision 126-B subsection 126-60(1) subsection 126-60(2) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-D subsection 170-270(1) section 170-275 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses Originating company", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003393", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses Originating company"}
{"ATO_ID_Number": "ATO ID 2003/394", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - capital loss in respect of equity interest no longer disregarded under Subdivision 170-D", "Issue": "In determining the extent that a tax loss has been reflected for the purposes of applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), is a capital loss in relation to an indirect equity interest in the loss company that is taken to be made under section 170-275 of Subdivision 170-D of the ITAA 1997 during the relevant ownership test period, to be taken into account?", "Decision": "No. Only the associated capital loss that was disregarded under subsection 170-270(1) of the ITAA 1997 is to be taken into account in applying subsection 165-12(7) of the ITAA 1997.", "Facts": "Loss Company seeks to deduct a tax loss that it has made in an earlier income year. The tax loss cannot be deducted as the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period, as defined in subsection 165-12(1) of the ITAA 1997, Company K disposed of an indirect equity interest in Loss Company, as defined in subsection 995-1(1) of the ITAA 1997, to Company R. That disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a capital loss in the disposal year in respect of the disposal of the relevant indirect equity interest. That capital loss was disregarded under subsection 170-270(1) of Subdivision 170-D of the ITAA 1997. Subsequently, during the ownership test period, Company R disposed of the same indirect equity interest in Loss Company which resulted in section 170-275 of the ITAA 1997 applying, such that Company K as originating company, was then taken to have made a capital loss at that time equivalent to that disregarded capital loss.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. The capital loss that Company K was taken to have made under section 170-275 of the ITAA 1997 is not taken into account in determining the extent that the tax loss has been 'reflected' for the purposes of applying subsection 165-12(7) of the ITAA 1997 as the associated capital loss that was disregarded under subsection 170-270(1) of the ITAA 1997 is to be taken into account. (Refer ATO ID 2003/395). Note: Had the capital loss that was disregarded under subsection 170-270(1) of the ITAA 1997, pre-dated the ownership test period, the capital loss that Company K was taken to have made under section 170-275 would still not be taken into account in applying subsection 165-12(7) of the ITAA 1997.", "Date_of_Decision": "17 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-D subsection 170-270(1) section 170-275 Subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/395", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses Originating company", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003394", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses Originating company"}
{"ATO_ID_Number": "ATO ID 2003/395", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - capital loss in respect of equity interest disregarded under Subdivision 170-D", "Issue": "In determining the extent that a tax loss has been reflected for the purposes of applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), is a capital loss in respect of a CGT event in relation to an indirect equity interest in the loss company taken into account where it is disregarded under Subdivision 170-D of the ITAA 1997?", "Decision": "Yes. Subsection 165-12(7) of the ITAA 1997 takes into account capital losses that 'could occur in future' because of the happening of a CGT event in the relevant ownership test period.", "Facts": "Loss Company seeks to deduct a tax loss that it has made in an earlier income year. The tax loss cannot be deducted as the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. In the relevant ownership test period, as defined in subsection 165-12(1) of the ITAA 1997, Company K disposed of an indirect equity interest in Loss Company, as defined in subsection 995-1(1) of the ITAA 1997 to Company R. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a capital loss in the disposal year in respect of the disposal of the relevant indirect equity interest. That capital loss was disregarded under subsection 170-270(1) of Subdivision 170-D of the ITAA 1997. In respect of that disregarded capital loss, there were no subsequent consequences in the ownership test period for Company K as 'originating company' that resulted in section 170-275 of the ITAA 1997 applying, such that it was taken to have made a capital loss equivalent to that disregarded capital loss.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. The capital loss that Company K had disregarded under subsection 170-270(1) of the ITAA 1997 in respect of an indirect equity interest in Loss Company, is to be taken into account in determining the extent that the tax loss that Loss Company seeks to deduct has been reflected for the purposes of applying subsection 165-12(7) of the ITAA 1997. Company K 'could in future' become entitled to an equivalent capital loss under section 170-275 of the ITAA 1997, to the capital loss that was disregarded under subsection 170-270(1) of the ITAA 1997. That possible future entitlement to an equivalent capital loss, directly results from the happening of the CGT event in which Company K disposed of an indirect equity interest in Loss Company to Company R, during the ownership test period.", "Date_of_Decision": "17 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-D subsection 170-270(1) section 170-275 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/394", "Subject_References": "Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses Originating company", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003395", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Capital losses Deferral event Deferred capital losses Disregarded capital loss Losses and Capital Gains Tax CoE Net capital losses Originating company"}
{"ATO_ID_Number": "ATO ID 2003/397", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - tax loss includes taxation concession", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), is the accelerated component of a taxation deduction allowed in the calculation of the loss company's tax loss, to be taken into account in determining the extent that a capital loss made in respect of the disposal of an equity interest in the loss company, has reflected the tax loss?", "Decision": "No. To the extent that a taxation deduction allowed in the calculation of the loss company's tax loss exceeds the decline in economic value in the loss year of the relevant item, the accelerated component of the deduction is not 'reflected', as it would not have increased the relevant capital loss.", "Facts": "Loss Company seeks to deduct a tax loss that it incurred in an earlier year of income. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. The calculation of Loss Company's tax loss includes a taxation concession, to the extent that a taxation deduction in respect of an item is greater than the item's decline in economic value, during the relevant loss year. Company K disposed of an indirect equity interest in the Loss Company during the relevant ownership test period. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K made a capital loss in respect of the disposal of the indirect equity interest in the Loss Company. That capital loss is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in section 995-1 of the ITAA 1997. In determining the extent that a loss company's tax loss has been reflected, regard is to be had to the extent that a disposer's capital loss, in relation to the disposal of a direct or indirect equity interest in the loss company, is greater than it would otherwise have been, but for that tax loss being incurred. To the extent that the taxation deduction allowed in the calculation of Loss Company's tax loss exceeds the decline in economic value in the loss year of the relevant item, the accelerated component of the deduction would not have increased the capital loss made in respect of the disposal of Company K's equity interest in Loss Company, and is therefore not 'reflected' to that extent. [HISTORY: This ATOID has been amended to include the (*) asterisk in subsection 165-12(7) that is a minor amendment to the provisions providing useful interpretation with reference to direct equity interests and indirect equity interests by making them defined terms under section 995-1 of ITAA 1997]. The amendment also removes from the ATO ID any reference to subsection 165-12(9) repealed by the Tax Laws Amendment (2007 Measures No 4) Act 2007 with effect from 24 September 2007.]", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 section 995-1 Subdivision 170-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Prior year losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003397", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007 | Keywords Accumulated tax losses Prior year losses"}
{"ATO_ID_Number": "ATO ID 2003/493", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Meaning of tax loss: 'Saving Rule'- Part of tax loss deducted in an earlier income year", "Issue": "Where a loss company seeks to deduct the undeducted amount of a tax loss, is the relevant 'tax loss' for the purposes of subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997) that undeducted amount?", "Decision": "No. In satisfying the 'less than 50% of the tax loss' requirement in subsection 165-12(7) of the ITAA 1997, the relevant tax loss is the loss company's tax loss as calculated under section 36-10 of the ITAA 1997 and not any lesser undeducted amount thereof.", "Facts": "In the relevant loss year, Loss Company incurred a tax loss of $100 under section 36-10 of the ITAA 1997. In the first succeeding income year after the loss year, Loss Company was able to deduct $60 of the $100 tax loss amount carried forward. In the second succeeding income year after the loss year, Loss Company was not able to satisfy the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 due to the operation of the 'same share same interest rule' in section 165-165 of the ITAA 1997. Loss company was able to deduct the undeducted tax loss amount of $40 carried forward if the requirements of subsection 165-12(7) of the ITAA 1997 (the 'saving rule') were met, enabling the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 to be treated as having been satisfied.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied, only because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct interests or *indirect equity interests in the company during the *ownership test period. * denotes a term defined in subsection 995-1(1) of the ITAA 1997 In satisfying the 'less than 50% of the tax loss' requirement in subsection 165-12(7) of the ITAA 1997, the relevant tax loss is the Loss Company's tax loss as calculated under section 36-10 of the ITAA 1997, that is $100, and not the undeducted $40 amount thereof. [HISTORY: This ATOID has been amended to include the (*) asterisk in subsection 165-12(7) that is a minor amendment to the provisions providing useful interpretation with reference to direct equity interests and indirect equity interests by making them defined terms under subsection 995-1(1) of ITAA 1997 with effect from 24 September 2007.]", "Date_of_Decision": "22 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 36-10 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003493", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007"}
{"ATO_ID_Number": "ATO ID 2003/500", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - indirect equity interest subject to two CGT events in the ownership test period", "Issue": "Where two separate CGT events happen in relation to an indirect equity interest in a loss company during the relevant ownership test period (but after the loss year) is a capital loss from the second CGT event taken into account in determining the extent to which the loss company's tax loss has been 'reflected' for the purposes of applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997) if no roll-over occurred in relation to the first CGT event?", "Decision": "No. As the first CGT event in relation to the indirect equity interest in the loss company happened after the end of the loss year, and was not subject to a roll-over, the amount of capital loss resulting from the happening of the second CGT event to that interest, is unaffected by the tax loss and therefore cannot have reflected it.", "Facts": "Loss Company seeks to deduct a tax loss that it made in an earlier income year. The tax loss cannot be deducted as the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period, as defined in subsection 165-12(1) of the ITAA 1997, an indirect equity interest in Loss Company was subject to the happening of two separate CGT events after the end of the loss year. The first CGT event happened when Company K disposed of the indirect equity interest to Company R, resulting in a capital loss under subsection 104-10(4) of the ITAA 1997 because of CGT event A1. The second CGT event happened when Company R disposed of the same interest to Individual D, resulting in a capital loss under subsection 104-10(4) of the ITAA 1997, again because of CGT event A1. Neither capital loss was subject to a roll-over or disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. As a result of Loss Company having incurred the relevant tax loss, Company K made a greater capital loss than it otherwise would have.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: \"the company has information from which it would be reasonable to assume that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period.\" *denotes a term defined in subsection 995-1(1) of the ITAA 1997 As the first CGT event in relation to the indirect equity interest was not subject to a roll-over or otherwise disregarded, the capital loss made by Company K will reflect Loss Company's tax loss as the capital loss is more than it otherwise would have been because of the tax loss. The calculation of the capital loss made by Company R from the happening of the second CGT event is unaffected by the relevant tax loss. [HISTORY: This ATO ID has been amended to include the (*) asterisk when reference is made in subsection 165-12(7) to direct equity interests and indirect equity interests having been made defined terms under subsection 995-1(1) of ITAA 1997. The amendment also removes from the ATO ID any reference to subsection 165-12(9) of the ITAA 1997 repealed by the Tax Laws Amendment (2007 Measures No 4) Act 2007 with effect from 24 September 2007.]", "Date_of_Decision": "8 May 2003", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(4) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 section 995-1 Subdivision 170-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Losses and Capital Gains Tax CoE Net capital losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003500", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Capital losses Losses and Capital Gains Tax CoE Net capital losses"}
{"ATO_ID_Number": "ATO ID 2003/502", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Meaning of tax loss: 'saving rule'- loss not restricted to amounts deducted in the income year", "Issue": "Where a loss company has transferred part of its tax loss under Subdivision 170-A of the Income Tax Assessment 1997 (ITAA 1997) is the relevant 'tax loss' for the purposes of applying subsection 165-12(7) of the ITAA 1997 to the loss company, that part of the tax loss not transferred that is seeks to deduct in the income year?", "Decision": "No. The relevant tax loss figure is the whole of the tax loss that was not transferred under Subdivision 170-A of the ITAA 1997 and not just the part sought to be deducted in the relevant income year.", "Facts": "In the relevant loss year, Loss Company incurred a tax loss of $100 under section 36-10 of the ITAA 1997. In the first succeeding income year after the loss year, Loss Company could not deduct all or part of the $100 tax loss carried forward and transferred an amount of $70 under Subdivision 170-A of the ITAA 1997. In the second succeeding income year after the loss year, Loss Company was not able to satisfy the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 because of the operation of the 'same share same interest rule' in section 165-165 of the ITAA 1997. Loss Company was not able to deduct a part of the $30 tax loss carried forward unless the requirements of subsection 165-12(7) of the ITAA 1997 (the 'saving rule') were met, enabling the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 to be treated as having been satisfied.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied, only because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997 In satisfying the 'less than 50% of the tax loss' arrangement in subsection 165-12(7) of the ITAA 1997, the relevant tax loss amount is the Loss Company's tax loss as defined in section 36-10 of the ITAA 1997. Pursuant to subsection 170-20(2) of the ITAA 1997, the Loss Company can no longer deduct the amount of tax loss transferred under Subdivision 170-A of the ITAA 1997 and it is taken not to have incurred the tax loss to the extent of that amount. The relevant tax loss figure to be taken into account in satisfying the 'less than 50% of the tax loss' requirement in subsection 165-12(7) of the ITAA 1997 is the amount of tax loss not transferred, that is $30, and not just the amount sought to be deducted by the Loss Company in the particular income year.", "Date_of_Decision": "7 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 section 36-10 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-A subsection 170-20(2) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003502", "Unmatched_Content": "[HISTORY: This ATOID has been amended to include the (*) asterisk in subsection 165-12(7) that is a minor amendment to the provisions providing useful interpretation with reference to direct interests and indirect equity interests by making them defined terms under section 995 of ITAA 1997]."}
{"ATO_ID_Number": "ATO ID 2003/534", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - reduced capital gain made during ownership test period due to agreement involving payment of a contingent amount", "Issue": "Is the happening of CGT event C2 under section 104-25 of the Income Tax Assessment Act 1997 (ITAA 1997) resulting from the disposal of a direct equity interest in a loss company, to be taken into account in applying subsection 165-12(7) of the ITAA 1997 where the disposal agreement involved payment of a contingent and unascertainable amount?", "Decision": "No. The contractual right to receive that contingent amount was the relevant CGT asset involved in the happening of CGT event C2 under section 104-25 of the ITAA 1997, and not an equity interest in the loss company, as required by subsection 165-12(7) of the ITAA 1997.", "Facts": "Loss Company seeks to deduct in an income year (the income year) a tax loss that it had incurred in an earlier income year (the loss year). Company K disposed of shares (the shares) in Loss Company to Company R at the beginning of the loss year. The shares constituted a direct equity interest in Loss Company for the purposes of paragraph 165-12(9)(a) of the ITAA 1997. Loss Company failed the continuity of ownership test in section 165-12 of the ITAA 1997 as the conditions in subsections 165-12(2), (3) and (4) were not satisfied, only because of the operation of section 165-165 of the ITAA 1997. The disposal resulted in CGT event A1 happening and Company K made a capital loss under subsection 104-10(2) of the ITAA 1997. Pursuant to the contract for the disposal of the shares, Company R undertook to pay two amounts to Company K. The first amount was a fixed amount (the lump sum) that Company R immediately paid upon the execution of the contract. The second contracted amount was a contingent and then unascertainable amount (the contingent amount) that was potentially payable at a specified time (the specified time) and was made referable to the market value of shares in Loss Company as at the specified time. Under subsection 116-20(1) of the ITAA 1997, the capital proceeds in respect of CGT event A1 was the total of the lump sum and the then market value of the contingent amount. The contractual right to receive the contingent amount is property, and a CGT asset in the hands of Company K. The receipt of the contingent amount at the specified time resulted in CGT event C2 happening under section 104-25 of the ITAA 1997, during the relevant ownership test period. The lump sum and the resultant contingent amount in respect of CGT event C2 were less than they otherwise would have been because Loss Company had incurred the relevant tax loss that it now seeks to deduct.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. The relevant CGT asset involved in the CGT event C2 was not an equity interest in Loss Company, as required by subsection 165-12(7) of the ITAA 1997, but rather the contractual right to the contingent amount. Accordingly, the reduced gain that Company K made upon the happening of CGT event C2 is not taken into account in determining the extent that the tax loss has been reflected for the purposes of subsection 165-12(7) of the ITAA 1997. [HISTORY: This ATO ID has been amended to include the (*) asterisk when reference is made to subsection 165-12(7) of the ITAA 1997 that is a minor amendment to the provisions providing useful interpretation with reference to direct equity interests and indirect equity interests by making them defined terms under subsection 995-1(1) of the ITAA 1997. The amendment also removes from the ATO ID any reference to subsection 165-12(9) of the ITAA 1997 repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007 and any reference to Taxation Ruling TR 93/15 withdrawn with effect from 17 October 2007.]", "Date_of_Decision": "5 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) section 104-25 section 116-20 section 165-12 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital losses Company losses Continuity of ownership Saving rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003534", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Capital losses Company losses Continuity of ownership Saving rule"}
{"ATO_ID_Number": "ATO ID 2003/535", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - whether 'reflected' effects of capital losses, deductions and reduced assessable Income considered separately", "Issue": "In determining the extent that a tax loss has been 'reflected' for the purposes of applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), are capital losses, deductions and reduced assessable income in respect of CGT events in relation to direct and indirect equity interests considered separately?", "Decision": "No. The extent of reflection is referable to the total amount of duplication in relation to the tax loss that has or could in future occur by way of capital losses, deductions and/or reduced assessable income, because of the happening of CGT events in relation to equity interests in the loss company in the ownership test period.", "Facts": "Loss Company seeks to deduct a tax loss that it has made in an earlier income year. The tax loss cannot be deducted as the conditions in subsections165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied only because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period, as defined in subsection 165-12(1) of the ITAA 1997, three indirect equity interests in Loss Company, were subject to the happening of separate CGT events after the end of the loss year. Firstly, as a result of the happening of CGT event A1 Company K became entitled under subsection 104-10(4) of the ITAA 1997 to a capital loss. That capital loss reflected 30% of the tax loss. Secondly, Company R as a result of the happening of CGT event A1 incurred a deduction that was greater than it otherwise would have been but for Loss Company having incurred the tax loss. The deduction reflected 20% of the tax loss. Thirdly, Individual D as a result of the happening of CGT event A1 made a capital gain under subsection 104-10(4) of the ITAA 1997 that was less than it otherwise would have been but for Loss Company having incurred the tax loss. The reduced assessable income reflected 25% of the tax loss. The capital loss, deduction and capital gain were not subject to a roll-over or disregarded under Subdivision 170-D of the ITAA 1997 or any other provision.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. * denotes a term defined in subsection 995-1(1) of the ITAA 1997 The term 'deductions, capital losses or reduced assessable income' in subsection 165-12(7) of the ITAA 1997 is to be interpreted in a conjunctive sense as meaning 'deductions and/or capital losses and/or reduced assessable income'. Accordingly, as 75% of the tax loss has been reflected, subsection 165-12(7) will not deem the conditions in subsections 165-12(2) to (4) (inclusive) of the ITAA 1997 to be satisfied in this instance.", "Date_of_Decision": "13 May 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(4) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-D Section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Capital losses Net capital losses Prior year losses Saving rule Losses & CGT CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003535", "Unmatched_Content": "[HISTORY: This ATO ID has been amended to include the (*) asterisk in subsection 165-12(7) that is a minor amendment to the provisions providing useful interpretation with reference to direct interests and indirect equity interests by making them defined terms under section 995 of ITAA 1997. The amendment also removes from the ATO ID any reference to subsection 165-12(9) repealed by Act 143 of 2007 with effect from 24 September 2007]. | Keywords Accumulated tax losses Capital losses Net capital losses Prior year losses Saving rule Losses & CGT CoE"}
{"ATO_ID_Number": "ATO ID 2003/536", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - capital loss unable to be applied", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997) is a capital loss in respect of the disposal of an equity interest in the loss company to be taken into account in determining the extent that a loss company's tax loss has been 'reflected' where the disposer, a company, is unable to apply the capital loss?", "Decision": "Yes. A loss company's tax loss is reflected in the amount of capital loss that is made in relation to the disposal of the equity interest and is not dependent upon the capacity of the disposer to apply that capital loss.", "Facts": "Loss Company seeks to deduct a tax loss that it had incurred in an earlier income year. The tax loss cannot be deducted as the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period as defined in subsection 165-12(1) of the ITAA 1997, Company K disposed of an indirect equity interest, as defined in subsection 995-1(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a capital loss in respect of the disposal of the relevant indirect equity interest. That capital loss is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. However, Company K cannot apply that capital loss because it is unable to satisfy the relevant continuity of ownership or same business tests in Division 165 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. * denotes a term defined in subsection 995-1(1) of the ITAA 1997. Because the happening of CGT event A1 entitled Company K to the relevant capital loss, that is not disregarded, the capital loss is to be taken into account in determining the extent to which the tax loss incurred by Loss Company has been reflected. In applying subsection 165-12(7) of the ITAA 1997 it is irrelevant that Company K is unable to apply its capital loss.", "Date_of_Decision": "13 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 165-12(1) Division 165 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Capital losses Net capital losses Prior year losses Saving rule Losses & CGT CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003536", "Unmatched_Content": "This ATO ID has been amended to clarify legislative changes repealed by the Tax Laws Amendment (2007 Measures No 4) Act of 2007 with effect from 24 September 2007. | Keywords Accumulated tax losses Capital losses Net capital losses Prior year losses Saving rule Losses & CGT CoE"}
{"ATO_ID_Number": "ATO ID 2003/537", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss - saving rule - subvention payment for previous loss transfer", "Issue": "In determining the extent that a tax loss has been reflected for the purposes of applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), is the value of a subvention payment received by a loss company for transferring part of a tax loss taken into account?", "Decision": "No. As the transferred amount of tax loss that gave rise to the subvention payment is deemed by subsection 170-20(2) of the ITAA 1997 not to have been incurred by the loss company, any associated subvention payment is therefore not related to the defined tax loss that is being considered by subsection 165-12(7) of the ITAA 1997.", "Facts": "Loss Company incurred a $100 tax loss as calculated under subsection 36-10(4) of the ITAA 1997 in respect of the relevant loss year. In the subsequent income year Loss Company transferred $60 of the tax loss under Subdivision 170-A of the ITAA 1997. Loss Company received $18 of subvention payment because of that loss transfer. Loss Company seeks to deduct the remaining $40 tax loss in a later income year. The $40 tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied because of the operation of section 165-165 of the ITAA 1997. In the relevant ownership test period, as defined in subsection 165-12(1) of the ITAA 1997, an individual R disposed of an indirect equity interest, as defined in subsection 995-(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, individual R became entitled to a capital loss in the disposal year in respect of the disposal of the relevant indirect equity interest. That capital loss is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or * indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. The $18 subvention payment that Loss Company received from transferring the $60 amount of tax loss is not related to the $40 of remaining tax loss that Loss Company now seeks to deduct and therefore cannot be taken into account in determining the extent that the $40 tax loss has been reflected for the purposes of applying subsection 165-12(7) of the ITAA 1997. The $60 tax loss transferred by Loss Company is no longer deemed to have been incurred by it because of the operation of subsection 170-20(2) of the ITAA 1997.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) paragraph 165-12(9)(b) section 165-165 Subdivision 170-A subsection 170-20(2) Subdivision 170-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT event A1-disposal of a CGT asset Dealings & transactions Group company loss transfers Losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003537", "Unmatched_Content": "Keywords Capital gains tax CGT event A1-disposal of a CGT asset Dealings & transactions Group company loss transfers Losses"}
{"ATO_ID_Number": "ATO ID 2003/601", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss - saving rule - deduction in respect of equity interest transferred to another group company", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), is a deduction in respect of the disposal of an equity interest in the loss company to be taken into account in determining the extent that a loss company's tax loss has been 'reflected', where the disposer has transferred the relevant deduction to another group company as part of a tax loss transferred under Subdivision 170-A of the ITAA 1997?", "Decision": "Yes. A loss company's tax loss is reflected in the amount of deduction that is allowed or allowable in relation to the disposal of the equity interest and is not dependent upon the relevant deduction being utilised by the disposer.", "Facts": "Loss Company seeks to deduct a tax loss in its 2002 income year that it had incurred in its 2001 income year. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied, only because of the operation of section 165-165 of the ITAA 1997. During the 2001 income year, Company K disposed of an indirect equity interest in Loss Company, as defined in subsection 995-1(1) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. Because of the happening of CGT event A1, Company K became entitled to a deduction in the 2001 income year in respect of the disposal of the relevant indirect equity interest. That deduction is not taken to be disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. Company K incurred a tax loss in the 2001 income year, all of which it transferred under Subdivision 170-A of the ITAA 1997 to another group company, that is, Company R, for a deduction year that was also the 2001 income year.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. Because the happening of CGT event A1 entitled Company K to the relevant deduction that is not disregarded, the deduction is to be taken into account in determining the extent to which the tax loss incurred by Loss Company has been reflected. In determining the extent that Loss Company's tax loss has been reflected, regard is to be had to the extent that a disposer's deduction in relation to the disposal of a direct or indirect equity interest in Loss Company is greater than it would otherwise have been, but for that tax loss being incurred. Pursuant to subsection 170-20(2) of the ITAA 1997, Company K is taken not to have incurred the tax loss it made in the disposal year. Instead, that tax loss is taken by subsection 170-10(2) to be a tax loss incurred by Company R. Subsection 170-15(2) further provides that Company R is taken to have incurred the transferred tax loss in its 2000 income year. Under subsection 165-12(1) of the ITAA 1997, the relevant ownership test period in respect of the tax loss which Company K seeks to deduct, is the start of its 2001 loss year to the end of the 2002 income in which it seeks to deduct the tax loss. The question then arises as to whether Loss Company's tax loss can be reflected in a deduction in respect of the disposal of an equity interest that, pursuant to subsection 170-15(2) of the ITAA 1997, is deemed to have been incurred by Company R in an income year that precedes the relevant ownership test period. As the relevant deduction arose because of a CGT event that happened in the ownership test period, it is to be taken into account in subsection 165-12(7) of the ITAA 1997 in determining the extent that Loss Company's tax loss has been reflected.", "Date_of_Decision": "23 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 36-10(3) subsection 104-10(2) subsection 165-12(1) subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 subsection 170-10(2) subsection 170-15(2) subsection 170-20(2) Subdivision 170-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Capital gains tax CGT event A1 - disposal of a CGT asset Dealings & transactions Deductions & expenses Losses Prior year losses Saving Rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003601", "Unmatched_Content": "This ATO ID was amended by replacing the reference to subsection 165-12(9) of the ITAA 1997 with a reference to section 995-1 of the ITAA 1997. | Keywords Accumulated tax losses Capital gains tax CGT event A1 - disposal of a CGT asset Dealings & transactions Deductions & expenses Losses Prior year losses Saving Rule"}
{"ATO_ID_Number": "ATO ID 2003/697", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - deduction incurred in loss year but partly accrued before loss year", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997), where an expense was partly accrued prior to a loss year, but was not deductible until the loss year, is that accrued part taken into account in determining the extent that the loss company's tax loss has been reflected in the capital loss, because of the happening of a CGT event from the disposal of an indirect equity interest in the loss company?", "Decision": "Yes. Where a CGT event in relation to an equity interest has reflected a tax loss, it is irrelevant when an expense was accrued that gave rise to a deduction included in the loss company's tax loss.", "Facts": "Loss Company seeks to deduct a tax loss that it incurred in an earlier income year ('loss year'). The tax loss cannot be deducted under the continuity of ownership test in section 165-12 of the ITAA 1997 as the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) thereof are not satisfied, only because of the operation of section 165-165 of the ITAA 1997. The calculation of Loss Company's tax loss for the loss year includes an expense ('the deduction') that was partly accrued prior to the loss year, but was not deductible until the loss year when it was incurred. A quarter of that deduction constituted an accrued expense as at immediately prior to the start of the loss year. Company K disposed of an indirect equity interest in Loss Company during the ownership test period. That disposal resulted in CGT event A1 ('the CGT event') happening under subsection 104-10(2) of the ITAA 1997 such that Company K made a capital loss. The capital loss is not disregarded under Subdivision 170-D of the ITAA 1997 or any other provision. There had been no earlier CGT event happened in relation to that equity interest. The capital proceeds (see definition in section 116-20) that Company K received in respect of the CGT event were less than they otherwise would have been because of the economic loss that Loss Company suffered in relation to the deduction. That economic loss was referable to the whole of the deduction. As the capital proceeds were less than they otherwise would have been, Company K therefore made an increased capital loss because of the tax loss.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied because of the operation of section 165-165 of the ITAA 1997 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any *direct equity interests or *indirect equity interests in the company during the *ownership test period. * denotes a term defined in subsection 995-1(1) of the ITAA 1997. To the extent that Company K made an increased capital loss as a result of the deduction which formed part of Loss Company's tax loss, that deduction has therefore resulted in the tax loss being 'reflected'. It is irrelevant for present purposes when the expense giving rise to the deduction was accrued. Note: Where an earlier CGT event(s) has happened in relation to the same equity interest, that earlier CGT event may have affected the extent that the tax loss has been reflected in relation to the relevant CGT now being considered.", "Date_of_Decision": "26 June 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) section 116-20 section 165-12 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) section 165-165 Subdivision 170-D subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company losses Continuity of ownership Saving rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003697", "Unmatched_Content": "Keywords Company losses Continuity of ownership Saving rule"}
{"ATO_ID_Number": "ATO ID 2003/781", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - disregarded capital loss from disposal of a pre-CGT equity interest", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment 1997 (ITAA 1997) is a tax loss 'reflected' in respect of a capital loss that is disregarded because the asset was acquired before 20 September 1985?", "Decision": "No. For a tax loss to be reflected in a capital loss in respect of a direct or indirect equity interest the capital loss must be allowed or allowable under the ITAA 1997 or the Income Tax Assessment Act 1936 .", "Facts": "Loss Company seeks to deduct a tax loss that it incurred in an earlier year of income. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied, only because of the operation of section 165-165. Company K disposed of an indirect equity interest, as defined in paragraph 165-12(9)(b) of the ITAA 1997, during the relevant ownership test period. The disposal resulted in CGT event A1 happening under subsection 104-10(2). As the relevant interest disposed of by Company K was acquired by it before 20 September 1985, the capital loss made by it was disregarded under subsection 104-10(5) of the ITAA 1997. No other CGT event happened in relation to any direct or indirect equity interest in Loss Company during the ownership test period.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied, only because of the operation of section 165-165 that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any direct or indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997 As the capital loss made by Company K in respect of the disposal of its equity interest is disregarded such that it is not recognised under Australian Income Tax law, the disposal is not taken to have reflected the tax loss incurred by Loss Company. As no other CGT event happened in relation to any direct or indirect equity interest in Loss Company during the ownership test period, more than 50% of the tax loss cannot be reflected for the purposes of subsection 165-12(7) of the ITAA 1997. Accordingly, Loss Company is taken by subsection 165-12(7) of the ITAA 1997 to have satisfied the conditions in 165-12(2), 165-12(3) and 165-12(4) and it can therefore deduct the relevant tax loss, unless otherwise precluded by the ITAA 1997.", "Date_of_Decision": "17 July 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 the Act", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Tax loss Saving rule", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003781", "Unmatched_Content": "Keywords Tax loss Saving rule"}
{"ATO_ID_Number": "ATO ID 2003/847", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deducting tax loss: saving rule - capital", "Issue": "In applying subsection 165-12(7) of the Income Tax Assessment Act 1997 (ITAA 1997), is a capital loss that is disregarded because the relevant asset was acquired before 20 September 1985, to be taken into account in determining the extent that a loss company's tax loss has been 'reflected'.", "Decision": "No. Where a capital loss is permanently disregarded pursuant to subsection 104-10(5) of the ITAA 1997 that capital loss will not cause duplication of the loss company's tax loss.", "Facts": "Loss Company seeks to deduct a tax loss that it had incurred in an earlier income year. The tax loss cannot be deducted as the conditions in subsection 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 are not satisfied, only because of the operation of section 165-165 of the ITAA 1997. During the relevant ownership test period, Company K disposed of an indirect equity interest, as defined in paragraph 165-12(9)(b) of the ITAA 1997. The disposal resulted in CGT event A1 happening under subsection 104-10(2) of the ITAA 1997. The capital loss that Company K would otherwise have made in respect of the disposal of its indirect equity interest, was disregarded under subsection 104-10(5) of the ITAA 1997, as the interest was acquired before 20 September 1985. During the relevant ownership test period, no other CGT event happened in relation to any equity interest in Loss Company.", "Reasons_for_Decision": "Summary: Subsection 165-12(7) of the ITAA 1997 provides that where a condition in subsection 165-12(2), 165-12(3) or 165-12(4) is not satisfied, only because of the operation of section 165-165 of the ITAA 1997, that the condition can be taken as being satisfied where: the company has information from which it would be reasonable to conclude that less than 50% of the *tax loss has been reflected in deductions, capital losses or reduced assessable income, that occurred, or could occur in future, because of the happening of any *CGT event in relation to any direct or indirect equity interests in the company during the *ownership test period. *denotes a term defined in subsection 995-1(1) of the ITAA 1997. As the capital loss that otherwise would have been made by Company K is permanently disregarded because of the operation of subsection 104-10(5) of the ITAA 1997, the CGT event in respect of Company K's indirect equity interest in Loss Company will not cause loss duplication of Loss Company's tax loss. As no other CGT event occurred in the relevant ownership test period in relation to equity interests in Loss Company, there has been no duplication of Loss Company's tax loss. Accordingly subsection 165-12(7) provides that the conditions in subsections 165-12(2), 165-12(3) and 165-12(4) of the ITAA 1997 that were not satisfied, only because of section 165-165 of the ITAA 1997, are taken to have been satisfied.", "Date_of_Decision": "1 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 104-10(2) subsection 104-10(5) section 165-12 subsection 165-12(2) subsection 165-12(3) subsection 165-12(4) subsection 165-12(7) paragraph 165-12(9)(b) section 165-165", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accumulated tax losses Capital gains tax Capital losses CGT event A1-disposal of a CGT asset CGT events Companies Deductions & expenses Entities & taxpayer groups Group companies Group company loss transfers Group company transfers Losses Prior year losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003847", "Unmatched_Content": "Keywords Accumulated tax losses Capital gains tax Capital losses CGT event A1-disposal of a CGT asset CGT events Companies Deductions & expenses Entities & taxpayer groups Group companies Group company loss transfers Group company transfers Losses Prior year losses"}
{"ATO_ID_Number": "ATO ID 2006/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers-the amount of the net capital loss specified in the written agreement", "Issue": "Can a loss company and a gain company agree to transfer the combined amount of the net capital losses for two or more capital loss years in a written agreement entered into under section 170-150 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The amount of the net capital loss that must be specified in a written agreement pursuant to paragraph 170-150(2)(b) of the ITAA 1997 is the net capital loss that is worked out for the one capital loss year only, and cannot be the combined amount of the net capital losses that is worked out for two or more capital loss years.", "Facts": "Loss Company and Gain Company are both members of the same wholly-owned group at all relevant times within section 170-130 of the ITAA 1997. Loss Company makes a net capital loss for an income year (the first capital loss year) and a further net capital loss for a later income year (the second capital loss year). Loss Company wishes to transfer the net capital losses for both the first capital loss year and the second capital loss year to Gain Company in the application year. The application year does not start after 30 June 2003. Loss Company and Gain Company enter into a written agreement for the transfer of a net capital loss in the application year purportedly pursuant to section 170-150 of the ITAA 1997. The amount of the net capital loss specified in the written agreement is the combined amount of the net capital losses for the first capital loss year and the second capital loss year.", "Reasons_for_Decision": "Summary: Subsection 170-150(2) of the ITAA 1997 lists the conditions for a valid written agreement to transfer a net capital loss. Paragraph 170-150(2)(b) of the ITAA 1997 states that a written agreement must specify the amount of the net capital loss being transferred. Section 995-1 of the ITAA 1997 defines 'net capital loss' as having the meaning given by sections 102-10 of the ITAA 1997 and 165-114 of the ITAA 1997 and affected by section 701-30 of the ITAA 1997. Both section 102-10 and section 165-114 of the ITAA 1997 refer to the working out of a net capital loss for the income year. Therefore, from the definition of 'net capital loss', it follows that the amount of the net capital loss that must be specified in a written agreement is the net capital loss that is worked out for the one capital loss year only, and not the combined amount of the net capital losses that is worked out for two or more capital loss years.", "Date_of_Decision": "7 February 2006", "Year_of_Income": "Year ended 31 December 1999", "Legislative_References": "Income Tax Assessment Act 1997 section 102-10 section 165-114 section 170-130 section 170-150 subsection 170-150(2) paragraph 170-150(2)(b) section 701-30 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax Capital losses Net capital losses Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200641", "Unmatched_Content": "Keywords Capital gains tax Capital losses Net capital losses Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2004/556", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfer: income company must be resident throughout the deduction year", "Issue": "Does subsection 170-40(1) of the Income Tax Assessment Act 1997 (ITAA 1997) require an income company to be an Australian resident throughout the deduction year before it can enter into an agreement to transfer a tax loss under Subdivision 170-A of the ITAA 1997?", "Decision": "Yes. An income company that is an Australian resident for only part of the deduction year may not enter into an agreement with another member of the same wholly-owned group to transfer a tax loss under Subdivision 170-A of the ITAA 1997.", "Facts": "Loss company incurred a tax loss in the 2002-03 income year that it wished to transfer to Income company under Subdivision 170-A of the ITAA 1997 in that income year (the deduction year). Income company and Loss company were members of the same wholly-owned group under section 170-30 of the ITAA 1997 at all times during the 2002-03 income year. At the start of the 2002-03 income year Income company was not an Australian resident under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Income company subsequently became an Australian resident during the 2002-03 income year and continued as an Australian resident until the end of that income year. Income company was not a prescribed dual resident company under subsection 6(1) of the ITAA 1936 at any time during the 2002-03 income year. All other requirements of Subdivision 170-A of the ITAA 1997 were satisfied.", "Reasons_for_Decision": "Summary: Subsection 170-40(1) of the ITAA 1997 provides that an income company must be an Australian resident and not a prescribed dual resident. Paragraph 80G(6)(b) of the ITAA 1936, which was the predecessor of subsection 170-40(1) of the ITAA 1997, requires the income company to be a resident and not a prescribed dual resident in the income year. Section 1-3 of the ITAA 1997 provides that where an idea in the ITAA 1936 appears to have been expressed in a different form of words under the ITAA 1997 for the purposes of clarity or simplicity, the ideas are not to be taken to be different just because of the different form of words. Paragraph 36 of Taxation Ruling IT 2465 states in relation to paragraphs 80G(6)(a) and 80G(6)(b) of the ITAA 1936 that: The right to a deduction for a loss may be transferred from a loss company to an income company, where the relevant group relationship exists, only where the loss company was a resident as defined in subsection 6(1) of the Assessment Act in the year of income in which the loss was incurred and the income company is a resident in the year of income in which the right is to be transferred - paragraphs 80G(6)(a) and (b). Where, in a year of income, a resident company has incurred a loss, the right to a deduction for that loss will, subject to the other requirements of sections 80G being met, be transferable to any group company that is a resident in the year in which the loss is to be transferred. The residence of the loss company in a year of transfer that is subsequent to the loss year will not be relevant. Neither will the residence of the income company in a loss year (or any other year) preceding that in which the loss is to be transferred. Paragraph 24 of Taxation Ruling TR 98/12 states in relation to the issue of residence in respect of the transfer of company losses: The loss company must be a resident in the year of income in which the loss is incurred whilst the income company must be a resident in the year of income in respect of which the loss is transferred (subsection 80G(6) (subsections 170-35(1) and 170-40(1)). It is considered that under subsection 170-40(1) of the ITAA 1997 the income company must be an Australian resident throughout the deduction year. If it was intended that an income company only needs to be a resident for part of the year of income (deduction year), it is reasonable to expect that the legislation would have so provided. As Income company was an Australian resident for only part of the deduction year, it is not able to enter into a loss transfer agreement with Loss company.", "Date_of_Decision": "29 June 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-A section 170-30 subsection 170-35(1) subsection 170-40(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2465 | Taxation Ruling TR 98/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004556", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2465 Taxation Ruling TR 98/12 | Keywords Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2004/723", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transfer of tax losses from a company limited by shares to a company limited by shares and guarantee", "Issue": "Can the continuity of ownership test, found in section 165-12 of the Income Tax Assessment Act 1997 (ITAA 1997) be applied to a company limited by shares and guarantee?", "Decision": "Yes. The continuity of ownership test, found in section 165-12 of the ITAA 1997, can be applied to a company limited by shares and guarantee.", "Facts": "B Co was a company limited by shares and guarantee. B Co had never issued shares. It owned 100% of the shares in a subsidiary company, A Co Pty Limited. B Co demutualised on 30 June of the relevant income year. For the relevant income year for B Co, there was continuity of membership of 50% or more for the period 1 July to 29 June. The shares issued as a consequence of the demutualisation did not materially alter this position. The notice of assessment in relation to B Co for a certain year of income showed an amount of taxable income. B Co requested an amendment to its assessment, for the year of income to utilise a loss transferred from A Co, which would reduce taxable income by the amount of that loss. Throughout the relevant year there was 50% or more continuity of the underlying ownership of both B Co and A Co.", "Reasons_for_Decision": "Summary: Section 170-5 of the ITAA 1997 outlines certain basic principles for transferring tax losses. Subsection 170-5(4) of the ITAA 1997 provides that neither the loss company nor the income company must be prevented from deducting the loss by Divisions 165 or 175 of the ITAA 1997. On the basis of the particular facts of the case, and in accordance with long established ATO administrative practices, it is considered that Division 165 of the ITAA 1997 did not prevent B Co from deducting its own carry forward losses. Consequently, the two companies are able to make an agreement for the transfer of an amount of loss from A Co to B Co.", "Date_of_Decision": "12 August 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 165-12 section 165-13 section 170-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Continuity of ownership test Group company loss transfers Same business test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004723", "Unmatched_Content": "Keywords Continuity of ownership test Group company loss transfers Same business test"}
{"ATO_ID_Number": "ATO ID 2003/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers - loss company inactive during deduction year", "Issue": "Can a prior year tax loss be transferred between two companies in the same wholly-owned group, pursuant to Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997), if the loss company was inactive during the income year of the transfer (the 'deduction year')?", "Decision": "Yes. A prior year tax loss can be transferred if the loss company was inactive during the income year of the transfer (the 'deduction year') because the loss company meets the requirement of being in existence during the deduction year in accordance with subsections 170-30(1) and former subsection 975-100(1) of the ITAA 1997.", "Facts": "A holding company and its subsidiary company are Australian residents. The subsidiary company has been a 100 per cent subsidiary of the holding company since incorporation of the subsidiary company prior to 1 July 1998. The subsidiary had surplus carry forward tax losses at the conclusion of the income year ended 30 June 2001. On the first day of the income year ended 30 June 2002, the holding company combined all of the activities of the subsidiary company with its own to leave the subsidiary inactive, but not in liquidation, for the remainder of that income year. The holding company made a profit in that income year.", "Reasons_for_Decision": "Summary: Subdivision 170-A of the ITAA 1997 allows for the transfer of tax losses within wholly-owned company groups if certain conditions are met. One of the conditions for the transfer of losses is that both the loss company and the income company must be in existence during at least part of each of the loss year, the deduction year and any intervening year (subsection 170-30(1) of the ITAA 1997). The phrase 'in existence' is defined in former subsection 975-100(1) of the ITAA 1997 as follows: A company is in existence if: Thus, the subsidiary company in this case is considered to be in existence during the deduction year since it has not been dissolved. Accordingly, the subsidiary company is able to transfer surplus tax losses to the holding company (provided the other conditions for transferring a tax loss in Subdivision 170-A are met).", "Date_of_Decision": "11 November 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-A subsection 170-30(1) Section 975-100 subsection 975-100(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/19 | ATO ID 2003/21 | ATO ID 2003/22 | ATO ID 2003/23", "Subject_References": "Group company loss transfers Carry forward losses Losses Losses CoE", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200318", "Unmatched_Content": "Keywords Group company loss transfers Carry forward losses Losses Losses CoE"}
{"ATO_ID_Number": "ATO ID 2003/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: - income company unable to utilise whole of transferred amount", "Issue": "Can an 'income' company that is unable to fully utilise a tax loss transferred to it under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997), as a result of a subsequent adjustment to its assessable income, retain the excess amount of the loss for later use?", "Decision": "No. Under Subdivision 170-A of the ITAA 1997, the amount transferred under a loss transfer agreement cannot exceed the maximum amount of loss that the income company can utilise in the deduction year. If the written agreement specifies a greater amount, only the maximum amount that can be utilised by the income company in the deduction year is taken to have been transferred.", "Facts": "Two companies are Australian residents and have been members of the same wholly owned group of companies since before 1 July 1998. They satisfied the requirements to enable them to enter into a loss transfer agreement under which the loss company agreed to transfer an amount of tax loss incurred in the 2001 income year to the income company in respect of its 2002 income year. The amount transferred reduced the taxable income of the income company to nil. Subsequent to the making of this agreement, the income company requested an adjustment to its 2002 income tax return to reduce its assessable income. After the adjustment the income company would be unable to utilise the whole of the loss amount specified in the loss transfer agreement.", "Reasons_for_Decision": "Summary: Subdivision 170-A of the ITAA 1997 allows for the transfer of tax losses between members of a wholly owned group of companies. An agreement to transfer a loss under Subdivision 170-A of the ITAA 1997 is effective when the conditions laid down within the Subdivision have been satisfied. In particular, to transfer a tax loss in a particular year, two group companies must make a written loss transfer agreement under section 170-50 of the ITAA 1997 specifying the amount of the tax loss being transferred. The amount transferred cannot exceed the amount the income company can claim as a deduction for the year of transfer (subsection 170-45(2) of the ITAA 1997). With the subsequent reduction in assessable income of the income company for the 2002 income year, the amount specified in the written transfer agreement will exceed the amount which the income company can claim as a deduction. In these circumstances, section 170-65 of the ITAA 1997 operates as an adjusting mechanism whereby the amount specified in the agreement is taken to be the revised amount which the income company can use. This becomes the maximum amount which the loss company can transfer. Accordingly, where the income of the income company is reduced after an effective loss transfer agreement is made, there can be no excess tax loss available to the income company. The excess tax loss will effectively revert to the loss company.", "Date_of_Decision": "18 November 2002", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 170-1 section 170-45 paragraph 170-50(2)(d) section 170-65", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/12", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/18 | ATO ID 2003/19 | ATO ID 2003/21 | ATO ID 2003/23", "Subject_References": "Group company transfers Group company loss transfers Extension of time", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200322", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/12 | Keywords Group company transfers Group company loss transfers Extension of time"}
{"ATO_ID_Number": "ATO ID 2003/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: transfer of parts of a tax loss to multiple companies", "Issue": "Can a loss company with a surplus tax loss, transfer parts of that loss to more than one income company within the same wholly-owned group under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997) where the conditions for transfer in the Subdivision are otherwise satisfied?", "Decision": "Yes. Subdivision 170-A of the ITAA 1997 allows a loss company to transfer parts of a tax loss to more than one income company within the same wholly-owned group to the extent of the total amount of loss available for transfer and where the conditions for transfer in the Subdivision are otherwise satisfied.", "Facts": "Company L (the 'loss company') has a surplus tax loss which was incurred in an income year commencing after 30 June 1998. Three related companies (the 'income companies') have derived assessable income in a later income year. All four companies are resident companies and have been members of the same wholly-owned group of companies since before 1 July 1998. None of the four companies are prescribed dual resident companies.", "Reasons_for_Decision": "Summary: Subsection 170-10(1) of the ITAA 1997 operates to allow a loss company to transfer an amount of its tax loss to an income company within the same wholly-owned group where conditions for transfer in Subdivision 170-A are satisfied. Subsection 170-10(2) provides a level of flexibility such that the amount transferred can be the whole or part of the tax loss. The Commissioner affirms in Taxation Ruling TR 1998/12 that different parts of a loss may be transferred to a number of income companies within a group, to the extent of the total amount of loss available for transfer. Accordingly, if the conditions of Subdivision 170-A of the ITAA 1997 are met, the loss company can transfer parts of its tax loss to the three income companies in respect of the later income year to the extent of the total amount of loss available for transfer.", "Date_of_Decision": "13 November 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-A subsection 170-10(1) subsection 170-10(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/12", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/18 | ATO ID 2003/19 | ATO ID 2003/21 | ATO ID 2003/22", "Subject_References": "Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200323", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/12 | Keywords Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2003/349", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: change in ownership of holding company - loss company fails to satisfy the same business test", "Issue": "Can a loss company and income company make an agreement to transfer a prior year tax loss, under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997), if there was a change in majority ownership of their holding company, followed by a change in the business of the loss company, during the deduction year?", "Decision": "No. Any agreement made by the two companies to transfer the prior year tax loss will be ineffective, because the loss company has not satisfied the tests in Subdivision 165-A (relating to continuity of ownership and same business) as required under subsection 170-35(3) of the ITAA 1997.", "Facts": "The loss company incurred a tax loss in an income year (the 'loss year'). The income company derived assessable income in a later income year (the 'deduction year'). The loss company and income company have been 100% subsidiaries of their holding company since before the loss year. During the deduction year, there was a change in majority ownership of the holding company. Subsequently, in the deduction year, the loss company substantially changed its business.", "Reasons_for_Decision": "Summary: Subdivision 170-A of the ITAA 1997 operates to allow a loss company to transfer an amount of its tax loss to an income company within the same wholly-owned group, if the conditions for transfer in the Subdivision are satisfied. One of the conditions for transfer is contained in subsection 170-35(3) of the ITAA 1997, which requires that Subdivision 165-A of the ITAA 1997 would not have prevented the loss company from deducting the tax loss in the deduction year, if it had had enough assessable income to offset the tax loss. Subdivision 165-A of the ITAA 1997 sets out the conditions that a company must satisfy in order to deduct a tax loss of an earlier income year. A company is not entitled to deduct the tax loss unless it satisfies the continuity of ownership test. Failing that, the company must instead satisfy the same business test. The loss company has not satisfied the continuity of ownership test under section 165-12 of the ITAA 1997, as a result of the change in beneficial ownership of the holding company during the ownership test period. The loss company has also not satisfied the same business test under section 165-13 of the ITAA 1997 following its change of business in the deduction year. It follows that the loss company has not satisfied the conditions for transfer as prescribed under subsection 170-35(3) of the ITAA 1997, and any agreement to transfer the tax loss to the income company will be ineffective.", "Date_of_Decision": "28 January 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-A subsection 170-35(3) Subdivision 165-A section 165-12 section 165-13", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/350", "Subject_References": "Continuity of business Continuity of ownership Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003349", "Unmatched_Content": "Keywords Continuity of business Continuity of ownership Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2003/350", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: change in ownership of holding company - income company fails to satisfy the same business test", "Issue": "Can a loss company and income company make an agreement to transfer a prior year tax loss, under Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997), if there was a change in majority ownership of their holding company, followed by a change in the business of the income company, during the deduction year?", "Decision": "No. Any agreement made by the two companies to transfer the prior year tax loss will be ineffective, because the income company has not satisfied the tests in Division 165 (relating to continuity of ownership and same business) as required under subsection 170-40(2) of the ITAA 1997.", "Facts": "The loss company incurred a tax loss in an income year (the 'loss year'). The income company derived assessable income in a later income year (the 'deduction year'). The loss company and income company have been 100% subsidiaries of their holding company since before the loss year. During the deduction year, there was a change in majority ownership of the holding company. Subsequently, in the deduction year, the income company substantially changed its business.", "Reasons_for_Decision": "Summary: Subdivision 170-A of the ITAA 1997 operates to allow a loss company to transfer an amount of its tax loss to an income company within the same wholly-owned group if the conditions for transfer in the Subdivision are satisfied. Under subsection 170-15(1) of the ITAA 1997, the effect of transferring a prior year tax loss is that it is taken to be a tax loss incurred by the income company in the loss year. One of the conditions for transfer is contained in subsection 170-40(2) of the ITAA 1997, which requires that the income company must not be prevented by Division 165 of the ITAA 1997 from deducting the transferred loss in the deduction year. Division 165 of the ITAA 1997 deals with the income tax consequences of changing ownership of a company. More relevant to the present case, Subdivision 165-A of the ITAA 1997 sets out the conditions that a company must satisfy in order to deduct a tax loss of an earlier year. A company is not entitled to deduct the loss unless it satisfies the continuity of ownership test. Failing that, the company must instead satisfy the same business test. The income company has not satisfied the continuity of ownership test under section 165-12 of the ITAA 1997, as a result of the change in beneficial ownership of the holding company during the ownership test period. The income company has also not satisfied the same business test under section 165-13 of the ITAA 1997 following its change of business in the deduction year. It follows that the income company has not satisfied the conditions for transfer as prescribed under subsection 170-40(2) of the ITAA 1997, and any agreement to transfer the tax loss to the income company will be ineffective.", "Date_of_Decision": "19 February 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 170-A subsection 170-15(1) subsection 170-40(2) Division 165 Subdivision 165-A section 165-12 section 165-13", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/349", "Subject_References": "Continuity of business Continuity of ownership Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003350", "Unmatched_Content": "Keywords Continuity of business Continuity of ownership Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2003/367", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: effect of redeemable preference shares on wholly-owned company groups", "Issue": "Will two companies be members of the same wholly-owned group, for the purpose of transferring tax losses, if one company owns all the shares in the other company, except for a small number of redeemable preference shares which are owned by a third party under a financing arrangement?", "Decision": "No. The ownership of redeemable preference shares by a third party is sufficient to compromise the 100% subsidiary relationship required for the companies to be members of the same wholly-owned group under Subdivision 975-W of the Income Tax Assessment Act 1997 (ITAA 1997).", "Facts": "A holding company owns 100% of the ordinary shares in a subsidiary company. Both companies are Australian residents. The subsidiary company issued redeemable preference shares to a non-group third party pursuant to a financing arrangement. The value of this arrangement represented a small percentage of the capital value of the subsidiary company. All conditions relevant to the valid issue of the redeemable preference shares were satisfied. No other classes of shares are on issue.", "Reasons_for_Decision": "Summary: For the subsidiary company to be a member of the same wholly-owned group as its holding company, it must be a 100% subsidiary of the holding company: paragraph 975-500(a) of the ITAA 1997. To be a 100% subsidiary of the holding company, all of the issued shares in the subsidiary company must be beneficially owned by the holding company (and/or other 100% subsidiaries of the holding company)(subsection 975-505(1) of the ITAA 1997). In this case, the subsidiary company has pursued a financing arrangement that resulted in the issue of redeemable preference shares to a third party. These redeemable preference shares are a recognised class of shares and represent a small percentage of the capital of the company. Although all of the ordinary shares on issue are owned by the holding company, this shareholding represents less than 100% of the shares on issue by the subsidiary company. As the redeemable preference shares in the subsidiary company are beneficially owned by a third party, the subsidiary company cannot be a 100% subsidiary of the holding company. It follows that the companies are not members of the same wholly-owned group and, therefore, cannot enter into a loss transfer agreement.", "Date_of_Decision": "7 April 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 975-500(a) subsection 975-505(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Group company loss transfers Underlying ownership & interests", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003367", "Unmatched_Content": "Keywords Group company loss transfers Underlying ownership & interests"}
{"ATO_ID_Number": "ATO ID 2003/782", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company loss transfers: loss year and deduction year the same - application of Division 165 to income company", "Issue": "Where a loss company incurs and then transfers a loss of the same income year, does the income company need to satisfy Division 165 of the Income Tax Assessment Act 1997 (ITAA 1997) from the start of the income year before the loss year in which the income company is deemed to have incurred the loss?", "Decision": "No. Subsection 170-40(2) of the ITAA 1997 expressly provides that Division 165 of the ITAA 1997 does not apply to the income company if the loss year and the deduction year are the same.", "Facts": "Loss Company incurs a loss in the current year (the loss year). The public officers of Loss Company and Income Company enter into a valid loss transfer agreement under Division 170 of the ITAA 1997 to transfer that loss. Income Company was not a member of the same wholly owned group for the whole of the income year before the loss year. The business of Income Company was substantially changed during the income year before the loss year, consequently, Income Company does not satisfy Division 165 of the ITAA 1997 from the start of the income year before the loss year.", "Reasons_for_Decision": "Summary: Where an amount of tax loss is transferred ('the transferred amount') and the loss year and the deduction year are the same, subsection 170-15(2) of the ITAA 1997 provides that the transferred amount is deemed to be incurred by the income company in the income year immediately before the loss year. This deeming rule in subsection 170-15(2) of the ITAA 1997 is necessary as Division 36 of the ITAA 1997 only permits the deduction of a tax loss where that loss is incurred in an 'earlier' income year. To ensure that subsection 170-15(2) of the ITAA 1997 does not inappropriately apply Division 165 of the ITAA 1997 in respect of the deduction claimed by the income company for the transferred amount, subsection 170-40(2) of the ITAA 1997 expressly provides that Division 165 does not apply in such circumstances. Subsection 80G(14) of the Income Tax Assessment Act 1936 (ITAA 1936) is the equivalent operative provision to subsection 170-40(2) of the ITAA 1997. The Explanatory Memorandum to the Income Tax Assessment Amendment Bill (No. 4) 1984 stated that: ... sub-section 80G(14) will ensure that the prior year loss provisions are not brought into account inappropriately because of the mechanism for loss transfer established by sub-paragraph (6)(d)(ii) where a loss is to be transferred in the year in which it is incurred. Accordingly, in such a case, sub-section 80G(14) will effectively exclude the application of relevant prior year loss provisions to both the loss company (paragraph (a)) and the income company (paragraph (b)). The legislative intent behind the enactment of subsection 80G(14) of the ITAA 1936 was to over-ride the deeming effect of subsection 80G(6) of the ITAA 1936. The Explanatory Memorandum to the Income Tax Assessment Bill 1996, of which Subdivision 170-A was part, signalled no change to the law with the equivalent provision subsection 170-40(2). Given the absence of any contrary legislative intention, section 1-3 of the ITAA 1997 will confer the intent of subsection 80G(14) of the ITAA 1936 upon subsection 170-40(2) of the ITAA 1997.", "Date_of_Decision": "21 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subparagraph 80G(6)(d)(ii) subsection 80G(14)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Group companies Group company loss transfers", "Case_References": "", "Other_References": "Explanatory Memorandum to the Income Tax Assessment Bill 1996", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003782", "Unmatched_Content": "Keywords Companies Group companies Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2003/783", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company loss transfers: loss transfer agreements - subsequent agreement to transfer tax loss in an earlier income year than previously transferred", "Issue": "Where members of the same wholly owned company group enter into a valid loss transfer agreement in accordance with Subdivision 170-A of the Income Tax Assessment Act 1997 (ITAA 1997), can those same members enter into a subsequent agreement to transfer the same loss in an earlier income year?", "Decision": "No. A specific consequence of a valid transfer of an amount of a tax loss under Subdivision 170-A of the ITAA 1997 is that the loss company is taken never to have incurred that loss once it has been validly transferred.", "Facts": "Loss Company and Income Company enter into a valid loss transfer agreement under Subdivision 170-A of the ITAA 1997 to transfer a tax loss in the deduction year. The loss was incurred by Loss Company in an earlier income year (the loss year). Income Company subsequently determines that it had additional assessable income in an income year between the loss year and deduction year (the intervening income year). The public officers of Income Company and Loss Company propose to enter into a subsequent loss transfer agreement that transfers the loss previously transferred in the deduction year in the intervening income year.", "Reasons_for_Decision": "Summary: Subdivision 170-A provides the legislative basis to permit the transfer of tax losses between members of the same wholly-owned group of companies where certain conditions are satisfied. Specific consequences of a valid transfer of an amount of a tax loss are: Taxation Ruling TR 98/12 at paragraph 11 states that: ... subsections 80G(6) and (12) (section 170-15 and subsection 170-20(2)) operate to deem an agreed amount of loss to have been incurred by the income company and not to have been incurred by the loss company at the time a valid transfer document is executed. This means that the relevant amount of loss is no longer available to be dealt with by the loss company. Accordingly, any subsequent loss transfer agreement made by the loss company to transfer an amount of tax loss that has been validly transferred is ineffective, as that tax loss is no longer available to the loss company for it to transfer.", "Date_of_Decision": "21 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 80G(6) subsection 80G(12)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Group companies Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003783", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/12 | Keywords Companies Group companies Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2003/1047", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Group company loss transfers: wholly-owned group test", "Issue": "Will two companies be members of the same wholly-owned group during the whole of the period specified in subsection 170-30(2) of the Income Tax Assessment Act 1997 (ITAA 1997) if they satisfy the test in paragraph (b) of section 975-500 of the ITAA 1997 for part of that period, and satisfy the test in paragraph (a) of section 975-500 for the remainder of the period?", "Decision": "Yes. Two companies will be members of the same wholly-owned group during the whole of the period specified in subsection 170-30(2) of the ITAA 1997 if both are subsidiaries of a particular third company at all times during part of that period (in terms of paragraph (b) of section 975-500 of the ITAA 1997) and one is a subsidiary of the other for the remainder of the period (in terms of paragraph (a) of section 975-500 of the ITAA 1997).", "Facts": "Loss Company made a tax loss in Year 1. Income Company derived assessable income in Year 2. Loss Company and Income Company were direct 100% subsidiaries of Holding Company from before the commencement of Year 1 until a point of time during Year 2 when Holding Company transferred all of its shares in Income Company to Loss Company. At a later time during Year 2, Holding Company transferred its shares in Loss Company to New Holding Company. However, Income Company remained a 100% subsidiary of Loss Company until after the end of Year 2.", "Reasons_for_Decision": "Summary: Section 975-500 of the ITAA 1997, in terms of its tests in paragraphs (a) and (b), provides two bases upon which two companies can be taken to be members of the same wholly-owned group. One involves two companies, namely the loss company and the income company. The other involves three companies, namely the loss company, the income company, and the third company as parent. Subsection 170-30(2) of the ITAA 1997 provides that, for the purpose of transferring a tax loss, two companies must be members of the same wholly-owned group at all times during the period spanning the loss year, the deduction year and any intervening year. As section 975-500 of the ITAA 1997 provides two bases upon which the two companies can be taken to be members of the same wholly-group group, it follows that if one of those bases is satisfied for part of the period specified in subsection 170-30(2) of the ITAA 1997 and the other is satisfied for the remainder of the period, then the companies will be members of the same wholly-owned group at all times during that period. There is no limitation under subsection 170-30(2) or section 975-500 of the ITAA 1997 to the effect that a loss company and an income company can only be members of the same wholly-owned group for the whole of the period specified in subsection 170-30(2) if they satisfy one basis for grouping (paragraph 975-500(a) of the ITAA 1997) for the whole of the relevant period or the other basis (paragraph 975-500(b) of the ITAA 1997) for the whole of the relevant period . Therefore, Loss Company may transfer its loss in respect of Year 1 to Income Company in respect of its Year 2 if both companies satisfy the conditions for transfer in Subdivision 170-A of the ITAA 1997. The conditions include sections 170-35 and 170-40 of the ITAA 1997 which will require both companies to satisfy the same business test as a result of the sale of the shares in Loss Company to New Holding Company.", "Date_of_Decision": "07 October 2003", "Year_of_Income": "Period from 1 January 2002 to 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 170-30(2) section 170-35 section 170-40 section 975-500 paragraph 975-500(a) paragraph 975-500(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Group company loss transfers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031047", "Unmatched_Content": "Keywords Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2002/835", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transfer of Losses", "Issue": "Does subsection 170-30(2) of the Income Tax Assessment Act 1997 ('ITAA 1997') contemplate two subsidiary companies to have been members of the same 'wholly-owned group' during the whole income year where those companies become wholly owned subsidiaries of a new 'holding company' during that income year where that 'holding company' and the previous 'holding company' are unrelated to each other?", "Decision": "No. Subsection 170-30(2) of the ITAA 1997 does not contemplate companies to have been members of the same 'wholly-owned group' during the whole income year where the two subsidiary companies became wholly owned subsidiaries of a new 'holding company'.", "Facts": "There was a change in the 'holding company' for two companies that hitherto had been members of the same 'wholly-owned group' at all prior times during the income year. The change in 'holding company' occurred on the last day of the income year. For the remainder of the income year, the subsidiary companies had the same 'holding company'. However, that 'holding company' was different and unrelated to the former 'holding company'.", "Reasons_for_Decision": "Summary: Subsection 170-30(2) of the ITAA 1997 requires the 'loss company' and the 'income company' to be members of the same 'wholly-owned group' during the whole or part of the relevant income years [ie. the 'loss year', the 'deduction year' and any intervening income year(s)] when both companies were in existence. For present purposes, the 'loss year' and the 'deduction year' are identical. According to section 975-500 of the ITAA 1997, for two companies to be members of the same 'wholly-owned group' it must be that: Section 975-500 of the ITAA 1997 itself only determines if a 'loss company' and an 'income company' are members of a 'wholly-owned group' at a point in time and not for a certain period of time . Note that section 975-500 of the ITAA 1997 contemplates membership of a 'wholly-owned group', and not of the 'same wholly-owned group'. A 'wholly-owned group', however constituted at a particular point in time, would logically have to be the 'same' 'wholly-owned group' at that time. However, at a later point in time it is quite possible, regardless of whether paragraph 975-500(a) of the ITAA 1997 or paragraph 975-500(b) of the ITAA 1997 applies, for two companies to be members of a 'wholly-owned group' where one of the original two companies has been replaced by another company that is, at that later time, the 'other company' in paragraph 975-500(a) of the ITAA 1997 or the 'same third company' in paragraph 975-500(b) of the ITAA 1997. The 'wholly-owned group', at least from the perspective of the member companies, would be the 'same' but only by reference to the particular point in time when a snapshot is taken of their relationship as members of the same 'wholly-owned group', to recall the opening line of section 975-500 of the ITAA 1997. The word 'same' is neither part of a statutorily defined expression nor defined in its own right for the purposes of Subdivision 170-A of the ITAA 1997 and Subdivision 975-W of the ITAA 1997. The relevant general law principles of statutory interpretation come into play. These are discussed in, for instance, ' Statutory Interpretation in Australia ' by D.C. Pearce and R.S. Geddes (5th edition, Butterworths, 2001) at paragraphs 4.6 - 4.15, pages 93 - 102. We consider that the word 'same', in the context of Subdivision 170-A of the ITAA 1997 and Subdivision 975W of the ITAA 1997, is neither a 'legal technical word' nor a 'non-legal technical word'. That is, 'same' has neither a particular legal meaning or a meaning that accords with 'commercial or trade usage'. Therefore it is to be understood according to its 'ordinary everyday' or 'general usage' meaning. That meaning appears in the Macquarie Dictionary . It was submitted that the context in which that meaning is to be understood is in determining the relationship between the 'loss company' and the 'income company' and whether, 'as between each other [they] are members of the same group during the relevant period.' Subsection 170-30(2) of the ITAA 1997 draws from the concept of members of the same 'wholly-owned group' in section 975-500 of the ITAA 1997. Unlike section 975-500 of the ITAA 1997, however, subsection 170-30(2) of the ITAA 1997 requires that the identified 'wholly-owned group' is the 'same' for a particular period of time rather than at a particular point of time. Specifically, it contemplates that the 'loss company' and the 'income company' must be members of the same 'wholly-owned group' during the whole or part of the relevant income years when both companies were in existence. The income year ended 30 June 2000 was both the 'loss year' and the 'deduction year'. The subsidiaries were in existence for the whole of that income year. Therefore it is necessary for them to be able to show that they were members of the same 'wholly-owned group' for the whole of that income year (our emphases). At all times prior to 2.00 p.m. on the last day of the 2000 income year, the subsidiaries were members of the same 'wholly-owned group' for the purposes of section 975-500 of the ITAA 1997. This is on the basis that, not being a '100% subsidiary' of the other for the purposes of paragraph 975-500(a) of the ITAA 1997, each company would need to show that it was a '100% subsidiary' of 'the same third company' for the purposes of paragraph 975-500(b) of the ITAA 1997. At all times subsequent to 2.00 p.m. on the last day of the 2000 income year the subsidiaries were members of the same 'wholly-owned group' for the purposes of section 975-500 of the ITAA 1997. This is on the basis that, again, not being a '100% subsidiary' of the other for the purposes of paragraph 975-500(a) of the ITAA 1997, each company would need to show that it was a '100% subsidiary' of 'the same third company' for the purposes of paragraph 975-500(b) of the ITAA 1997. However, we consider that the 'wholly-owned group' of which the taxpayers were members prior to 2 p.m. on the last day of the 2000 income year is different from the 'wholly-owned group' of which those companies were identified members after that time. This flows from the fact that the respective holding companies were unrelated to each other. Subsection 170-30(2) of the ITAA 1997 requires, in this context, that in order for the taxpayers to have been members of the same 'wholly-owned group' during the whole of the 2000 income year it would have been necessary for 'the same third company' to have been the same 'holding company' (as that expression is defined in section 975-505 of the ITAA 1997) at all times during that income year. (our emphases in italics) But this was not so. Finally, in determining whether a group relationship exists between two companies, paragraph 27 of Taxation Ruling TR 98/12 states that: 'the focus is clearly on the actual relationship between the 'loss company' and the 'income company'.' Paragraph 27 of TR 98/12 simply states when that relationship must exist, ie. during the whole of the 'loss year', the 'deduction year' and any intervening year. It does not explain how that relationship is to be demonstrated. That is shown in paragraph 28 of TR 98/12 which states the position that is presently relevant to the taxpayer, namely that 'both must be wholly owned subsidiaries of the same company' [whether 'wholly-owned' be manifest directly or indirectly via another '100% subsidiary' of that same (holding) company]. Accordingly, we conclude that the taxpayers were not members of the same 'wholly-owned group' during the whole of the 2000 income year as required by subsection 170-30(2) of the ITAA 1997.", "Date_of_Decision": "26 April 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1997 section 170-30 subsection 170-30(1) subsection 170-30(2) subsection 975-505(1) paragraph 975-500(a) paragraph 975-500(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/12 | Taxation Ruling TR 2000/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Group company loss transfers", "Case_References": "", "Other_References": "Statutory Interpretation in Australia' by D. C. Pearce and R.S. Geddes (5th edition, Butterworths, 2001) at paragraphs 4.6 - 4.15, pages 93 - 102", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002835", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/12 Taxation Ruling TR 2000/15 | Keywords Group company loss transfers"}
{"ATO_ID_Number": "ATO ID 2014/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Family Trust Election: individual specified in election is deceased when election made", "Issue": "Are the requirements of subsection 272-80(3) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) met if the trustee of a trust specifies an individual in a family trust election (FTE) who is deceased at the time of making the election?", "Decision": "No, the individual specified in the FTE must be alive at the time the trustee of the trust makes the election for subsection 272-80(3) of Schedule 2F to the ITAA 1936 to be satisfied.", "Facts": "The trustee of the X Family Trust proposes to make an FTE specifying Mr X as the individual whose family group would be taken into account in relation to the election. The 2007 income year is to be the specified income year. Mr X is deceased.", "Reasons_for_Decision": "Summary: A trust is a family trust at any time when an FTE is in force (section 272-75 of Schedule 2F to the ITAA 1936). The requirements for making an FTE are set out in section 272-80 of Schedule 2F to the ITAA 1936. Subsection 272-80(3) of Schedule 2F to the ITAA 1936 requires that the trustee of the trust specify an individual whose family group will be taken into account in relation to the election. It is not clear from the wording of subsection 272-80(3) of Schedule 2F to the ITAA 1936 if the individual specified by the trustee can include someone who is deceased at that time. 'Individual' is not defined in the ITAA 1936. The term is defined in section 2B of the Acts Interpretation Act 1901 to mean a 'natural person'. The Macquarie Dictionary (Online) defines a natural person as an 'individual human being (as opposed to an artificial person)'. There is no contrary intention discernible from the terms of section 272-80 of Schedule 2F to the ITAA 1936 or its surrounding context that 'individual' means other than a natural person. However, the definition can be seen as simply distinguishing legal persons according to how they have come into existence - naturally or by law. We consider that the reference to 'individual' in subsection 272-80(3) of Schedule 2F to the ITAA 1936 should be interpreted having regard to its ordinary meaning in the context in which it is used. The Macquarie Dictionary (Online) defines 'individual', when used as a noun, as '7. a single human being, as distinguished from a group'. Having regard to the terms of section 272-80 of Schedule 2F to the ITAA 1936 and its surrounding context, we consider that 'individual' means a living human being. Amendments to the definition of 'family' in section 272-95 in Schedule 2F to the ITAA 1936 (contained in Tax Laws Amendment (2007 Measures No. 4) Act 2007 ) confirm this to be the correct interpretative approach. The amendments include as a family member any lineal descendant of a child, nephew or niece of the specified individual or the individual's spouse. As the individual specified in an FTE forms the point of reference for defining the family group, the size of the group could increase exponentially if a trustee were able to specify a deceased person. This would create the potential for the family group to be sufficiently large such that integrity measures, such as the family trust distribution tax which taxes distributions made outside of the family group, could be circumvented. Accordingly, the trustee of the X Family Trust must specify an individual who is alive at the time of making the FTE in order for the election to be valid. Note: the death of an individual specified in an FTE of a family trust does not prevent any other trust, company or partnership from making an interposed entity election (IEE) to be included in the individual's family group. This is because the nature of an IEE is different from an FTE - it is the family trust to which the IEE relates and the individual specified for the purposes of that trust's FTE that is relevant for an IEE.", "Date_of_Decision": "5 February 2014", "Year_of_Income": "Years ended 30 June 2006 to 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 272-75 section 272-80 subsection 272-80(3) section 272-95", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Family group Family trusts Family trust election Specified individual Interposed entity election", "Case_References": "", "Other_References": "The Macquarie Dictionary Online", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20143", "Unmatched_Content": "Keywords Family group Family trusts Family trust election Specified individual Interposed entity election"}
{"ATO_ID_Number": "ATO ID 2013/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interposed Entity Elections: trust in respect of which the relevant Family Trust Election was made ceases to exist", "Issue": "Is an interposed entity election (IEE) still in force under subsection 272-85(6A) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) if the trust in respect of which the relevant family trust election (FTE) was made ceases to exist?", "Decision": "Yes, an IEE for a company is still in force under subsection 272-85(6A) of Schedule 2F to the ITAA 1936 despite the trust in respect of which the relevant FTE was made, ceasing to exist.", "Facts": "A discretionary trust had a valid FTE in force just prior to the trust being vested. The FTE was not revoked. A company had an IEE in force so that it was included in the family group of the discretionary trust. The IEE was not revoked at anytime before the vesting of the trust. The trust vested distributing all capital and income of the trust.", "Reasons_for_Decision": "Summary: Subsection 272-85(1) of Schedule 2F to the ITAA 1936 allows a company to make an election to be included in the family group of the individual specified in the FTE. Such an election is in force at all times after the election commencement time if it is not revoked (paragraph 272-85(6A)(a) of Schedule 2F to the ITAA 1936). An IEE is generally irrevocable. An IEE can only be revoked in the limited situation where the entity was, or becomes, a member of the family group of the individual specified in the FTE (otherwise than by reason of the IEE) and subject to the four year rule in subsection 272-85(5C) of Schedule 2F to the ITAA 1936 (subsection 272-85(5A) of Schedule 2F to the ITAA 1936). This does not apply in the facts disclosed above. Furthermore, it is taken to be revoked where the FTE of the trust (to which the IEE of the company relates) is revoked pursuant to subsection 272-85(5B) of Schedule 2F to the ITAA 1936. (A trustee of a discretionary trust can only revoke an FTE where: (1) the FTE has not been utilised to recoup tax losses, claim deductions or access franking credits that would not have been claimable without the FTE in place (paragraphs 272-80(6A)(a), 272-80(6A)(b) and 272-80(6A)(c) of Schedule 2F to the ITAA 1936); and (2) the four year rule in subsection 272-80(6B) of Schedule 2F to the ITAA 1936 is met.) The trustee of the trust with the FTE did not revoke the FTE therefore the requirements of subsection 272-85(5B) of Schedule 2F to the ITAA 1936 are not met. As the requirements for revocation have not been satisfied, the IEE for the company remains in force at all times after its commencement time and will continue to remain in force after the trust with the FTE has vested. A family trust distribution tax liability will arise where the company makes a distribution outside the family group (see section 271-30 of Schedule 2F to the ITAA 1936).", "Date_of_Decision": "11 December 2012", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 271-30 section 272-80 subsection 272-80(6B) paragraph 272-80(6A)(a) paragraph 272-80(6A)(b) paragraph 272-80(6A)(c) subsection 272-85(1) subsection 272-85(5B) subsection 272-85(5C) paragraph 272-85(6A)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Family trust distribution tax Family trust election Family trusts Interposed entity election Trust loss tests", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201321", "Unmatched_Content": "Keywords Family trust distribution tax Family trust election Family trusts Interposed entity election Trust loss tests"}
{"ATO_ID_Number": "ATO ID 2008/73", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Test individual and amendments to FTE legislation", "Issue": "Does subsection 272-80(11) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) prevent the trustee of a trust making a family trust election (FTE) in respect of that trust after an FTE previously made in respect of the trust has been revoked?", "Decision": "Yes. Subsection 272-80(11) of Schedule 2F to the ITAA 1936 will prevent the trustee of a trust making an FTE in respect of that trust.", "Facts": "X Trust is a fixed trust for the purposes of section 272-65 of Schedule 2F to the ITAA 1936. The trustee of X Trust made an FTE specifying the 2000-01 year of income. During the 2004-05 year of income all of the fixed entitlements in X Trust were sold and the trustee decided to revoke the FTE in accordance with subsection 272-80(6) of Schedule 2F to the ITAA 1936. Consequently, the trustee lodged an FTE revocation with X Trust's 2004-05 income tax return. The trustee would like to make an FTE specifying the 2007-08 year of income.", "Reasons_for_Decision": "Summary: Subsection 272-80(11) of Schedule 2F to the ITAA 1936 provides that, 'the trustee must not make more than one election under this section in relation to the trust'. In this case the X Trust had previously made an FTE. However, this FTE was revoked in accordance with subsection 272-80(6) of Schedule 2F to the ITAA 1936. According to subsection 272-80(11) of Schedule 2F to the ITAA 1936 no more than one FTE can be made in relation to a trust. Therefore, the trustee is prevented from making a further FTE.", "Date_of_Decision": "7 May 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 272-65 Schedule 2F subsection 272-80(6) Schedule 2F subsection 272-80(11)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Family trust election Family trust election revocation Family trusts Fixed trusts Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200873", "Unmatched_Content": "Minor grammatical correction | Keywords Family trust election Family trust election revocation Family trusts Fixed trusts Trusts"}
{"ATO_ID_Number": "ATO ID 2007/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust Losses: control test - whether a group begins to control a trust after the death of an individual", "Issue": "Does a 'group' begin to control a trust for the purposes of section 267-45 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) immediately after the death of the individual who was a co-director of the trustee company and the co-appointor and co-guardian of the trust?", "Decision": "No. Provided the death of the individual does not trigger the materialisation of a 'new' group that begins to control the trust directly or indirectly.", "Facts": "Since the establishment of the trust, Trustee Company Pty Ltd (Trustee Co), as the trustee of a non-fixed trust, had three directors: A, B and C. Those same individuals acted as the appointors and guardians of the trust. The shareholders of Trustee Co throughout the test period have been X and Y. Shareholders have the power to appoint and remove directors. Decisions by the directors of Trustee Co are on the basis of a majority vote, in accordance with the Constitution of Trustee Co. Decisions by the appointors and guardians of the trust require unanimous agreement under the Trust Deed of the trust. The three individuals A, B and C did not at any time constitute a 'group' for the purposes of paragraphs 269-95(5)(b) and 269-95(5)(c) of Schedule 2F to the ITAA 1936 because none of them were associates under section 318 of the ITAA 1936. During the 2005-06 income year, C died and was not replaced as a director of Trustee Co. The Trust Deed permits the trust to continue with only two appointors and two guardians, so the deceased was also not replaced in those offices. Prior to the death of C, neither A, B or C satisfied any of the control conditions in subsection 269-95(1) of Schedule 2F to the ITAA 1936 in their respective capacities as directors, appointors or guardians. This was due to the inability of the individuals to achieve either a majority vote or a unanimous vote (as the case required) in their own right. The trust is seeking to deduct a prior year tax loss in the 2005-06 income year.", "Reasons_for_Decision": "Summary: Section 267-45 of Schedule 2F to the ITAA 1936 provides that a group must not begin to control the trust directly or indirectly during the test period. A group controls a non-fixed trust pursuant to subsection 269-95(1) of Schedule 2F to the ITAA 1936. The individuals A, B and C each constituted a separate group, as a person, in accordance with paragraph 269-95(5)(a) of Schedule 2F to the ITAA 1936, up until the death of C. After the death of C, the remaining two 'groups' (A and B as persons in their roles as directors, appointors and guardians) arguably have altered capacities in their respective individual roles. For example, the voting arrangements as directors of Trustee Co now require both A and B to unanimously agree to all decisions, rather than the previous situation where a majority of any two (of the three) directors could have made decisions. However, as neither A nor B can achieve either a majority vote or a unanimous vote (as the case requires) by themselves, no group begins to control the trust during the test period and section 267-45 of Schedule 2F to the ITAA 1936 will not apply.", "Date_of_Decision": "14 March 2007", "Year_of_Income": "30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 318 Schedule 2F section 267-45 section 269-95 subsection 269-95(1) subsection 269-95(5) paragraph 269-95(5)(a) paragraph 269-95(5)(b) paragraph 269-95(5)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Change in control Control of a non-fixed trust Control test Deductions & expenses Losses Trust loss tests Trust losses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200759", "Unmatched_Content": "Insert the word 'new' before 'group' | Correct minor grammatical errors | Keywords Change in control Control of a non-fixed trust Control test Deductions & expenses Losses Trust loss tests Trust losses"}
{"ATO_ID_Number": "ATO ID 2007/90", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust Losses: unlisted very widely held trust - all of the trust's units must carry the same rights under paragraph 272-120(1)(c) of Schedule 2F to the ITAA 1936", "Issue": "Where a trust seeks to be classified as an 'unlisted very widely held trust' pursuant to subparagraph 266-150(2)(a)(iii) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936), are all of the trust's units required to carry the same rights throughout the entire 'test period' for the purposes of paragraph 272-120(1)(c) of Schedule 2F of the ITAA 1936?", "Decision": "Yes. The requirement in paragraph 272-120(1)(c) of Schedule 2F to the ITAA 1936 that 'all of its units carry the same rights' means that all of the trust's units must carry the same rights at all times throughout the test period.", "Facts": "Trust A has tax losses available to it from the Loss Year which it is seeking to deduct in the Income Year. At the beginning of the Loss Year, the units of Trust A comprised Ordinary Units and Special Units. Different rights were attached to these two classes of units. The Special Units were later redeemed during the Loss Year.", "Reasons_for_Decision": "Summary: Section 272-120 of Schedule 2F to the ITAA 1936 establishes the rules for a trust to be classified as an 'unlisted very widely held trust'. One of the requirements, under paragraph 272-120(1)(c) of Schedule 2F to the ITAA 1936, is that 'all of its units carry the same rights'. The 'test period' for a trust that is, at all times, an unlisted very widely held trust, and that seeks to deduct a tax loss from an earlier year is set out in subparagraph 266-150(2)(a)(iii) of Schedule 2F to the ITAA 1936. For Trust A, the 'test period' runs from the beginning of the Loss Year until the end of the Income Year. In order to satisfy paragraph 272-120(1)(c) of Schedule 2F to the ITAA 1936, all of the units of Trust A must carry the same rights throughout this test period. The existence of both Ordinary Units and Special Units during part of the Loss Year means that all of the units of Trust A did not carry the same rights throughout the test period.", "Date_of_Decision": "24 April 2007", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subparagraph 266-150(2)(a)(iii) of Schedule 2F section 272-120 of Schedule 2F paragraph 272-120(1)(c) of Schedule 2F", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fixed trusts Unit trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200790", "Unmatched_Content": "Keywords Fixed trusts Unit trusts"}
{"ATO_ID_Number": "ATO ID 2006/279", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax :Trust losses - fixed entitlement - beneficiaries of a deceased estate", "Issue": "Do the residuary beneficiaries of a deceased estate have fixed entitlements to all of the income and capital of the estate, for the purpose of determining whether the trust constituted by the estate is a fixed trust under section 272-65 of Schedule 2F to the Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The terms of the Will governing the disposition of the property in the deceased estate confer fixed entitlements to all of the income and capital of the estate upon the residuary beneficiaries.", "Facts": "The Will of a testator governs the disposition of the property in their estate. The Will does not expressly create a testamentary trust. Under the Will, a bequest was made to an individual. This bequest has been satisfied, and the individual has no other interest in the estate. The residue of the estate is equally divided between a class of persons. Part of the property that is subject to this residuary clause is still under the legal control of the executors of the estate, as authorised by the Will. Tax losses have been incurred by the estate. A Family Trust Election has not been made in respect of the trust constituted by the estate.", "Reasons_for_Decision": "Summary: A 'fixed trust' is defined in section 272-65 of Schedule 2F to the ITAA 1936. That definition provides that: A trust is a fixed trust if persons have fixed entitlements to all of the income and capital of the trust. Subsection 272-5(1) of Schedule 2F to the ITAA 1936 defines a fixed entitlement in a trust: If, under a trust instrument, a beneficiary has a vested and indefeasible interest in a share of income of the trust that the trust derives from time to time, or of the capital of the trust, the beneficiary has a fixed entitlement to that share of the income or capital. The term 'vested and indefeasible' is not defined in the taxation legislation. However, the ordinary meaning of the term is provided by the general law, which is reflected in paragraphs 13.3 to 13.9 of the Explanatory Memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997. The residuary beneficiaries have a vested interest in the income and capital of the estate. They each have a present right to future enjoyment of their equal share of the income and capital. The interest of the residuary beneficiaries in the income and capital of the estate is indefeasible. There is no condition in the trust instrument, the Will, by which any of the residuary beneficiaries could lose their interest in the estate. The individual to whom the bequest was made has no other interest in the estate, as their bequest has been satisfied. This bequest does not affect the determination of whether the trust constituted by the estate is a fixed trust. The interests of the residuary beneficiaries are the only interests that are relevant. As all of the residuary beneficiaries have a vested and indefeasible interest in a share of the income and capital of the estate, they all have a fixed entitlement to a share of the income and capital of the estate, in accordance with subsection 272-5(1) of Schedule 2F to the ITAA 1936. Therefore, as persons have fixed entitlements to all of the income and capital of the estate, the trust constituted by the estate is a fixed trust under section 272-65 of Schedule 2F to the ITAA 1936.", "Date_of_Decision": "26 September 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(1) section 272-65", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2622", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deceased estates Fixed entitlements Fixed trusts Trust losses Indefeasible right to use", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006279", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2622 | Keywords Deceased estates Fixed entitlements Fixed trusts Trust losses Indefeasible right to use"}
{"ATO_ID_Number": "ATO ID 2006/317", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust Losses: unlisted widely held trust - whether classification affected by a higher level trust", "Issue": "Does a trust have to be wholly owned, directly or indirectly, by another trust in order to satisfy section 272-127 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Fixed entitlements to all of the income and capital of a trust must be held, directly or indirectly, by another trust in order to meet the requirement in paragraph 272-127(1)(b) of Schedule 2F to the ITAA 1936.", "Facts": "Trust A is classified as an unlisted widely held trust under section 272-110 of Schedule 2F to the ITAA 1936. Trust A has issued 1 million units, which comprise all of the fixed entitlements to the income and capital of the trust. All but one of the units are owned by Trust B. The remaining unit is owned by Trust C. Trust B and Trust C are trusts whose units are listed for quotation on the Australian Stock Exchange. Both trusts are classified as listed widely held trusts under section 272-115 of Schedule 2F to the ITAA 1936. Trust A wishes to be classified as a listed widely held trust, pursuant to section 272-127 of Schedule 2F to the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 272-127 of Schedule 2F to the ITAA 1936 provides that the classification of a trust can be affected by a trust of a 'higher level'. Subsection 272-127(1) of Schedule 2F to the ITAA 1936 states: If: (a) apart from this Subdivision, a trust is an unlisted widely held trust, an unlisted very widely held trust or a wholesale widely held trust; and (b) each of one or more trusts of a higher level (see subsection (3)) has, directly or indirectly, fixed entitlements to all of the income and capital of the trust; the trust is instead a trust of the same kind (see subsection (2)) as the trust of the highest level. For the purposes of subsection 272-127(3) of Schedule 2F to the ITAA 1936, a listed widely held trust is a trust of a higher level to an unlisted widely held trust. One of the requirements that must be met before section 272-127 of Schedule 2F to the ITAA 1936 can be applied is contained in paragraph 272-127(1)(b). This is that 'each of one or more trusts of a higher level (see subsection (3)) has, directly or indirectly, fixed entitlements to all of the income and capital of the trust'. The requirement in paragraph 272-127(1)(b) of Schedule 2F to the ITAA 1936 means that there must be at least one trust (of a 'higher level') that owns all of the fixed entitlements of a lower level trust (whether directly or indirectly), in order for the lower level trust to be classified as a trust of the same kind as the trust of the highest level. This is confirmed in paragraphs 13.91 and 13.92 of the Explanatory Memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997. As no trust has, directly or indirectly, fixed entitlements to 100% of the income and capital of Trust A, paragraph 272-127(1)(b) of Schedule 2F to the ITAA 1936 is not satisfied. As a result, Trust A is not able to take advantage of section 272-127 of Schedule 2F to the ITAA 1936.", "Date_of_Decision": "11 October 2006", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 272-110 section 272-115 section 272-127 paragraph 272-127(1)(b) subsection 272-127(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fixed entitlements Widely held trust", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 Decision Impact Statement DIS as Trustee for the ConnectEast Investment Trust 2 VID 347 ConnectEast Management Ltd v. FC of T [2009] FCAFC 22", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006317", "Unmatched_Content": "This ATO ID has been amended to add, as related references, the decision of the Full Federal Court in ConnectEast Management Ltd v FC of T [2009] FCAFC 22 and the Decision Impact Statement for that case. | Keywords Fixed entitlements Widely held trust"}
{"ATO_ID_Number": "ATO ID 2005/276", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust Losses - Control Test - Resignation of one director of corporate trustee", "Issue": "Does a group begin to control a non-fixed trust for the purposes of section 267-45 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) where a person ceases directorship of the corporate trustee but continues to control the trust as part of the original group?", "Decision": "No. Provided the cessation of directorship does not trigger the materialisation of a 'new' group that begins to control the trust directly or indirectly.", "Facts": "A and B are the joint directors of the corporate trustee of a non-fixed trust. As directors of the trustee company, A and B comprise the 'group' that controls the trust as defined by subsection 269-95(1) of Schedule 2F to the ITAA 1936 immediately prior to the test period. During the test period, B resigns directorship of the trustee company leaving A as the sole director. B continues to exercise the same amount of control of the trust before and after ceasing directorship of the corporate trustee. The control of the trust by the group remains unchanged in every aspect, notwithstanding this, the validity of the trust is preserved.", "Reasons_for_Decision": "Summary: Section 267-45 of Schedule 2F to the ITAA 1936 provides that a group must not begin to control the trust directly or indirectly during the test period (from the beginning of the loss year until the end of the income year). A group controls a non-fixed trust pursuant to subsection 269-95(1) of Schedule 2F to the ITAA 1936. Group is defined in subsection 269-95(5) of Schedule 2F to the ITAA 1936 as a person, or a person and one or more associates, or two or more associates of a person. As B continues to exercise the same amount of control of the trust before and after ceasing directorship of the corporate trustee, a group as defined by subsection 269-95(5) of Schedule 2F to the ITAA 1936, which differs from the original group, has not formed upon the resignation of B. Accordingly, no group begins to control the trust during the test period and section 267-45 of Schedule 2F to the ITAA 1936 will not apply.", "Date_of_Decision": "4 October 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 267-45 section 269-95 subsection 269-95(1) subsection 269-95(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Change in control Control of a non fixed trust test Trust loss tests Trust losses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005276", "Unmatched_Content": "Change reference to section 269-95 to 267-45 of Schedule 2F to the ITAA 1936 | Remove reference to subsection 269-95(1) in the third paragraph | Remove references to subsection 269-95(1) and reword the last sentence in the last paragraph | Keywords Change in control Control of a non fixed trust test Trust loss tests Trust losses"}
{"ATO_ID_Number": "ATO ID 2004/162", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trusts: liability for Family Trust Distribution Tax", "Issue": "Is the trustee of a family trust liable for Family Trust Distribution Tax (FTDT) pursuant to section 271-15 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) on a payment made in respect of the redemption of units, where the amount paid exceeds the value of any consideration given in return?", "Decision": "Yes. The trustee of a family trust is liable for FTDT pursuant to Division 271 of Schedule 2F to the ITAA 1936 to the extent that the payment made in respect of the redemption exceeds the value of any consideration given in return.", "Facts": "The trust is a unit trust. The trustee of the trust has made a Family Trust Election (FTE) which is in force. One of the unit holders is a superannuation fund. The superannuation fund has not made an interposed entity election. The superannuation fund is not a member of the family group of the individual specified in the FTE of the unit trust pursuant to subsection 272-90(5) of Schedule 2F to the ITAA 1936. The trustee of the unit trust redeemed all the units held by the superannuation fund, at a value which exceeds the market value of the units at the time of redemption. The payment is not a distribution under section 272-45 of Schedule 2F to the ITAA 1936. The payment is a distribution of capital.", "Reasons_for_Decision": "Summary: The redemption of units in a unit trust would be a distribution pursuant to subsection 272-60(1) of Schedule 2F to the ITAA 1936. Section 272-60 gives an extended meaning of distributions of income and capital. 272-60(1) [Entity not covered] A company, partnership or trust (an entity) also distributes income or capital to a person in circumstances not covered by section 272-45, 272-50 or 272-55 if it: (a) pays (including by way of a loan) or credits money of the entity to the person, or reinvests such money for the person; or (b) transfers property of the entity to, or allows use of property of the entity by, the person; or (c) deals with money or property of the entity for or on behalf of the person or as the person directs; or (d) applies money or property of the entity for the benefit of the person; or (e) extinguishes, forgives, releases or waives a debt or other liability owed by the person to the entity. Subsection 272-60(2) of Schedule 2F to the ITAA 1936 limits the amount of the distribution on which FTDT is liable to be paid, to the amount that exceeds the amount or value of any consideration given in return. In this case the market value of the units at the time of the redemption is the amount regarded as being the value of any consideration. The distribution, on which FTDT is liable, is the amount by which the amount paid for the redemption of the units exceeds the market value of those units. Where the distribution is equal to or less than the market value of the units, there is no FTDT payable by the trustee of the trust on the distribution to the superannuation fund in relation to that redemption of units.", "Date_of_Decision": "30 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F, section 271-15 Schedule 2F, section 272-45 Schedule 2F, section 272-60 Schedule 2F, subsection 272-60(1) Schedule 2F, subsection 272-60(2) Schedule 2F, subsection 272-90(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Family trusts Trust losses Unit trusts Superannuation funds Interposed entity election Family trust distribution tax Family trust election", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004162", "Unmatched_Content": "Remove reference to Division 271 of the ITAA 1936 and include section 271-15 of the ITAA 1936. | Related ATO Interpretation Decisions | Remove Related ATO Interpretative Decisions and reference to ATO ID 2002/746. | Remove reference to Capital Gains Tax. | Keywords Family trusts Trust losses Unit trusts Superannuation funds Interposed entity election Family trust distribution tax Family trust election"}
{"ATO_ID_Number": "ATO ID 2004/649", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust Losses: non-fixed trusts control test - replacement group - family", "Issue": "For the purposes of subparagraph 269-95(2)(c)(ii) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) where a person, who is a member of the replacement group, begins to control a trust because of the death of an individual, does that person have to be a member of the family of the individual who died, at the time the individual died?", "Decision": "No, subparagraph 269-95(2)(c)(ii) of Schedule 2F to the ITAA 1936 requires the replacement group to consist of members of the individual's family at the time the replacement group begins to control the trust.", "Facts": "The trust is a non-fixed trust. The trustee of the trust has not made a family trust election pursuant to section 272-80 of Schedule 2F to the ITAA 1936. The trustees of the trust were Mr and Mrs T. The trust incurred tax losses in the 2003 income year that are to be recouped in the 2004 income year. For the purposes of subsection 269-95(1) of Schedule 2F to the ITAA 1936, a group consisting solely of Mr and Mrs T controlled the trust continuously from the beginning of the 2001 income year until Mr T died on 1 February 2004, and consequently ceased to control the trust pursuant to paragraph 269-95(2)(a) of Schedule 2F to the ITAA 1936 at the time of death. Mr X was appointed as a trustee on 1 June 2004. The replacement group who controlled the trust from 1 June 2004 consisted of Mrs T and Mr X. Because of the death of Mr T, Mrs T controlled the trust in the interim period after the date of death until Mr X was appointed as trustee. Mr X was unrelated to Mr T up until he married the daughter of Mr and Mrs T on 1 May 2004. In accordance with paragraph 269-95(2)(e) of Schedule 2F to the ITAA 1936 the beneficiaries of the trust immediately before the original group ceased to control the trust are the same beneficiaries of the trust immediately after the replacement group begins to control the trust.", "Reasons_for_Decision": "Summary: Section 267-45 of Schedule 2F to the ITAA 1936 provides that a group must not begin to control the trust directly or indirectly during the period from the beginning of the loss year until the end of the income year. Due to the death of Mr T, a group consisting of Mrs T and Mr X (the replacement group) began to control the trust from 1 June 2004. This would ordinarily cause the control test to be failed unless subsection 269-95(2) of Schedule 2F to the ITAA 1936 operated to provide otherwise. If the conditions in subsection 269-95(2) of Schedule 2F to the ITAA 1936 are satisfied upon a change in control of the trust, the replacement group is taken to have controlled the trust from the time the original group (Mr and Mrs T) began to control the trust. Broadly, the trust must have the same beneficiaries immediately before the original group ceased to control the trust and immediately after the replacement group began to control the trust; subparagraph 269-95(2)(e) of Schedule 2F to the ITAA 1936. The original group must have ceased control and the replacement group began to control the trust, only because of the death of the individual. Subparagraph 269-95(2)(c)(ii) of Schedule 2F to the ITAA 1936 also requires the replacement group to consist of one or more members of the individual's family, as defined by section 272-95 of Schedule 2F to the ITAA 1936, together with all of the persons who were members of the original group, other than the individual who died. Further to the requirement in paragraph 269-95(2)(b) of Schedule 2F to the ITAA 1936 that the replacement group 'begins to control the trust', the status of the (replacement) person as a family member (of the deceased individual) in subparagraph 269-95(2)(c)(ii) of Schedule 2F to the ITAA 1936, is determined as at the time they begin to control the trust rather than at the time of death of the individual. (see Note) Mr X is a member of Mr T's family via the marriage to Mr T's daughter on 1 May 2004, as the definition of family under subsection 272-95(b) of Schedule 2F to the ITAA 1936 includes a spouse of a child of the individual. Even though Mr X was not a member of Mr T's family at the time Mr T died, Mr X was a member of his family at the time the replacement group began to control the trust at 1 June 2004. The replacement group consists of Mr X and Mrs T for the purposes of subparagraph 269-95(2)(c)(ii) of Schedule 2F to the ITAA 1936. In conjunction with the other facts stated above, this satisfies the requirements of subsection 269-95(2) of Schedule 2F to the ITAA 1936 so that the consequences are that subsection 269-95(3) of Schedule 2F to the ITAA 1936 applies to deem the replacement group to have controlled the trust from the time the original group (Mr and Mrs T) began to control the trust. Subparagraph 269-95(3)(c) also operates to disregard the interim period that only Mrs T controlled the trust after the death of Mr T, and until the appointment of Mr X as a trustee. This provides that the control test, pursuant to section 269-95 of Schedule 2F to the ITAA 1936, will not prevent the deduction for the tax losses in the 2004 income year. However, the trust must consider all the tests at subsection 267-20(2) and Division 270 of Schedule 2F to the ITAA 1936 in order to deduct its prior year losses.", "Date_of_Decision": "13 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Schedule 2F section 267-45 subsection 269-95(1) paragraph 269-95(2)(a) paragraph 269-95(2)(b) paragraph 269-95(2)(c) subparagraph 269-95(2)(c)(ii) paragraph 269-95(2)(d) paragraph 269-95(2)(e) section 272-80 section 272-95 paragraph 272-95(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Change in control Control of a non-fixed trust test Family members Trust losses", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004649", "Unmatched_Content": "'non-fixed trusts' added to the title of the ATO ID to better reflect the contents of the ATO ID | Amendments to clarify content of the ATO ID | Keywords Change in control Control of a non-fixed trust test Family members Trust losses"}
{"ATO_ID_Number": "ATO ID 2004/859", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Family Trust Distribution Tax: franking credits", "Issue": "Is the trustee of a family trust, which is liable for Family Trust Distribution Tax (FTDT) pursuant to Division 271 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) on a distribution to a beneficiary, able to use franking credits associated with that distribution to offset the FTDT?", "Decision": "No. The trustee of a family trust cannot use franking credits associated with a distribution which is subject to FTDT.", "Facts": "The trustee of a family discretionary trust elected to be a family trust in its tax return for the year ended 30 June 2000 to ensure the beneficiaries would be qualified persons in respect of Division 1A of Part IIIAA of the ITAA 1936. During the year ended 30 June 2003, the trustee resolved to distribute $1,000 of its income to a distant relative who is not part of the family as defined in section 272-95 of Schedule 2F to the ITAA 1936. Franking credits of $60 were attached to the distribution. This represented the relative's proportionate share of the total franking credits included in the assessable income of the trust for the year ended 30 June 2003. Because the distribution was made to a beneficiary outside the family, the trustee is liable to FTDT pursuant to section 271-15 of Schedule 2F to the ITAA 1936. The FTDT was paid by the trustee.", "Reasons_for_Decision": "Summary: Subsection 207-35(4) of the Income Tax Assessment Act 1997 (ITAA 1997) ensures that a beneficiary of a trust, the trustee of which is neither a corporate tax entity nor a trustee of a complying superannuation entity, is assessed on any franking credits that are associated with a franked distribution that flows indirectly to the beneficiary as defined in subsection 207-50(3) of the ITAA 1997. A beneficiary is then entitled to a tax offset equal to the amount of the franking credits, through the operation of section 207-45 of ITAA 1997. Where a trustee is liable for FTDT, section 271-105 of Schedule 2F to the ITAA 1936 will reduce the amount to be included in the assessable income of a beneficiary of the trust in accordance with the formula prescribed in subsection 271-105(2). Once the FTDT is fully paid, the whole amount is excluded from the assessable income of the beneficiary. Subsection 207-50(3) of the ITAA 1997 ensures that, once the liability to the FTDT has been paid, a franked distribution does not flow indirectly to the beneficiary. This means that subsection 207-35(4) of the ITAA 1997 does not include the associated franking credits in assessable income and any entitlement the beneficiary may have otherwise had to those credits under section 207-45 of the ITAA 1997, is not available. As with the beneficiary, the trustee is not assessable on the franking credits and is not entitled to a tax offset associated with those franking credits once the liability to the FTDT has been paid. This is because a franked distribution does not flow indirectly to the trustee as defined in subsection 207-50(4) of the ITAA 1997.", "Date_of_Decision": "25 October 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Division 1A of Part IIIAA section 271-15, Schedule 2F section 272-95, Schedule 2F section 271-105, Schedule 2F subsection 271-105(2), Schedule 2F", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Family trust distribution tax Family trusts Franking credits Trust distributions Trustees", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004859", "Unmatched_Content": "Change reference to Subsection 207-35(3) of the Income Tax Assessment Act 1997 to reflect amendment to legislation | Include reference to Subsection 207-35(4) of the Income Tax Assessment Act 1997 | Keywords Family trust distribution tax Family trusts Franking credits Trust distributions Trustees"}
{"ATO_ID_Number": "ATO ID 2003/695", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust losses - scheme to take advantage of deductions (income injection test) - prior year losses", "Issue": "Can the income injection test, pursuant to Division 270 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936), apply to tax losses where the loss year is prior to the date the scheme commenced?", "Decision": "Yes. The income injection test pursuant to Division 270 of Schedule 2F to the ITAA 1936 can apply to tax losses where the loss year is prior to the date the scheme commenced.", "Facts": "The trust is a non-fixed trust. The trustee of the trust has not made a family trust election pursuant to section 272-80 of Schedule 2F to the ITAA 1936. For the purposes of subsection 270-10(1) of Schedule 2F to the ITAA 1936, the relevant scheme was identified as commencing on 1 July 2001. The trust has a prior year tax loss relating to the income year ended 30 June 1997. The trust is not prevented, by the other tests prescribed in section 267-20 of Schedule 2F to the ITAA 1936, from deducting the prior year tax loss, nor is the trust an excepted trust. The other conditions prescribed in paragraphs 270-10(1)(b) and (c) of Schedule 2F to the ITAA 1936 are satisfied.", "Reasons_for_Decision": "Summary: The requirement of paragraph 270-10(1)(a) of Schedule 2F to the ITAA 1936 is that 'a deduction is allowable to a trust for the income year'. Section 36-15 of the Income Tax Assessment Act 1997 (ITAA 1997) determines how tax losses of earlier income years are to be deducted. Subsection 36-15(2) states: If your total assessable income for the later income year exceeds your total deductions (other than *tax losses), you deduct the tax loss from that excess. * denotes a term defined in subsection 995-1(1) of the ITAA 1997. For the income injection test to apply, there must be an allowable deduction to a trust for the income year pursuant to paragraph 270-10(1)(a) of Schedule 2F to the ITAA 1936. The prior year tax loss is an allowable deduction, pursuant to subsection 36-15(2) of the ITAA 1997, in the income year. Consequently the income injection test can apply to tax losses where the loss year is prior to the date the scheme commenced.", "Date_of_Decision": "25 June 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 267-20 Division 270 subsection 270-10(1) paragraph 270-10(1)(a) section 272-80", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income injection test Losses and Capital Gains Tax CoE Non fixed trusts Prior year losses Trust loss tests Trust losses Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003695", "Unmatched_Content": "Keywords Income injection test Losses and Capital Gains Tax CoE Non fixed trusts Prior year losses Trust loss tests Trust losses Trusts"}
{"ATO_ID_Number": "ATO ID 2002/676", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust - members fixed entitlement to all the income and capital of a superannuation fund.", "Issue": "Do the members of the superannuation fund have fixed entitlements to all the income and capital of the fund under subsection 272-5(1) of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The members of the superannuation do not have fixed entitlements to all the income and capital of the fund under subsection 272-5(1) of Schedule 2F to the ITAA 1936.", "Facts": "The superannuation fund is a complying superannuation fund with only two members, a husband and wife. The directors of the trustee company of the superannuation fund are the husband and wife. Under a clause of the superannuation fund trust deed there are conditions under which a member shall forfeit entitlement to any benefit entitlement and the trustee has discretion to pay or apply any amounts that have been forfeited and held in the forfeiture account. When winding up the fund under a clause of the superannuation fund trust deed, the trustee may pay the following benefits in the following order to the extent that the assets of the fund permit:", "Reasons_for_Decision": "Summary: Fixed entitlement to a share of income or capital is defined in subdivision 272-A of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936). If, under a trust instrument, a beneficiary has a vested and indefeasible interest in a share of income of the trust that the trust derives from time to time, or of the capital of the trust, the beneficiary has a 'fixed entitlement' to that share of the income or capital. The explanatory memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 in relation to the fixed entitlement to income or capital of a trust explains that: A person has a vested interest in something if the person has a present right relating to the thing. Stated simply, a vested interest is one that is bound to take effect in possession at some point in time. A vested interest is to be contrasted with a 'contingent' interest, which may never fall into possession. If an interest of a beneficiary in income or capital is the subject of a condition precedent, so that an event must occur before the interest becomes vested, the beneficiary does not have a vested interest to the income or capital since such an interest is instead 'contingent' upon the event occurring. Because vested interests include future interests, a person can have a vested interest in a thing even though the person's actual possession and enjoyment of the thing is delayed until some time in the future. A vested interest is indefeasible where, in effect, it is not able to be lost. A vested interest is defeasible where it is subject to a condition subsequent that may lead to the entitlement being divested. A condition subsequent is an event that could occur after the interest is vested that would result in the entitlement being defeated, for example, on the occurrence of an event or the exercise of a power. For example, where a beneficiary's vested interest is able to be taken away by the exercise of a power by the trustee or any other person, the interest will not be a fixed entitlement. Where the trustee exercises a power to accumulate income or capital of the trust in accordance with the trust deed, the accumulation does not result in a beneficiary's interest being taken away or defeased as long as the beneficiary nevertheless remains entitled at some future time to enjoy his or her share of the income or capital which has been accumulated. The members of the superannuation fund are not considered to have a vested and indefeasible interest in all of the income and capital of the fund as the trust deed provides for the following: Therefore, as the members of the superannuation fund do not have a vested and indefeasible interest in all the capital of the fund, they do not have a fixed entitlement to all the income and capital of the fund.", "Date_of_Decision": "1 May 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Subdivision 272-A of Schedule 2F subsection 272-5(1) of Schedule 2F", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Trusts Superannuation funds Fixed entitlements Vested and indefeasible interest", "Case_References": "", "Other_References": "Explanatory memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002676", "Unmatched_Content": "Included legislative reference to subsection 272-5(1) of Schedule 2F to the ITAA 1936 Removed legislative reference to subsection 272-90(5) of Schedule 2F to the ITAA 1936 | Included reference to the explanatory memorandum to the Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997 | Included reference to subsection 272-5(1) of Schedule 2F to the ITAA 1936 Removed reference to subsection 272-90(5) of Schedule 2F to the ITAA 1936 | Removed reference to withdrawn ATO ID | Removed and added keywords | Keywords Trusts Superannuation funds Fixed entitlements Vested and indefeasible interest"}
{"ATO_ID_Number": "ATO ID 2011/90", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: meaning of 'discount' in section 230-165 of the Income Tax Assessment Act 1997", "Issue": "Will an amount reflecting the difference between the consideration paid for acquiring a portfolio of loans and the face value of the portfolio be a 'discount' for the purposes of section 230-165 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where the consideration paid for acquiring a portfolio of loans is less than the face value of the portfolio, this is a discount for the purposes of section 230-165 of the ITAA 1997.", "Facts": "The taxpayer is a financial institution which has made a valid election under section 230-150 of the ITAA 1997. The taxpayer subsequently acquired a portfolio of similar loans from another company. Gains and losses from these loans will be brought to account under the accruals tax timing methodology in Subdivision 230-B of the ITAA 1997. The consideration paid for acquiring the portfolio was less than the outstanding principal of the loans in the portfolio at the time of acquisition (that is, the face value or nominal value of the loan book). The difference between the face value of the portfolio at the time of acquisition and the consideration paid is calculated by reference to the portfolio as a whole, rather than being attributable to particular financial arrangements within the portfolio. The difference between the face value of the portfolio at the time of acquisition and the consideration paid is not considered to be significant relative to the overall gain/loss from the portfolio.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Section 230-165 essentially requires the identification of any discount or premium which arises from the acquisition of a portfolio of similar financial arrangements in order that, to the extent that a gain or loss from a financial arrangement within that portfolio is attributable to the discount or premium (the 'premium/discount gain or loss'), it may accrue over the expected life of the portfolio. The 'discount' which is to be spread under section 230-165 is not a defined term for the purposes of Division 230. Although section 995-1 does address the term 'discount', this is in the specific context of the value shifting provisions and is not intended to apply to the term as it appears in Division 230. The term is addressed in the Explanatory Memorandum (EM) to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008. Paragraph 4.155 of the EM states: A portfolio of loans purchased for an amount less than its face value may represent a portfolio discount to which the modified accruals rule may also apply. Similarly, Example 7.2 in the EM refers to the 'discount to face value' of a promissory note which is brought to account according to Subdivision 230-B. However Example 4.6 in the EM (albeit referring to a premium rather than a discount) identifies a premium as the difference between the consideration for the portfolio and its market value (in terms of net present value) at the time of acquisition. The Macquarie Dictionary includes in the definition of 'discount': '...any deduction from the nominal value.' Where it is open to do so, particularly where the meaning of a term is ambiguous, provisions are to be construed in a way that is 'consistent with the language and purpose of all the provisions of the statute' ( Project Blue Sky Inc & Others v. Australian Broadcasting Authority (1998) 194 CLR 355 at 381). A fundamental aspect of Division 230 is that traditional taxation of gross receipts and outgoings is replaced with the taxation of a net gain or loss made from a financial arrangement. Although not specifically defined, it is clear from the structure and operation of Division 230 that the concept of a gain or loss connotes the appropriate offsetting of the costs (broadly financial benefits provided) against proceeds (broadly, financial benefits received) (EM paragraphs 3.3 to 3.9, 3.20, 3.32, 3.33, 4.126, 4.127, among others). A gain or loss is to be calculated in nominal terms (as indicated by subsections 230-70(1) and 230-75(1), and the EM at paragraphs 3.20, 3.58, 3.60 and 4.143). Except as provided for under sections 230-60 and 230-505, a financial benefit under a financial arrangement is also to be measured in nominal rather than net present value terms - that is, its value at the time it is (or is to be) provided (EM paragraphs 3.20, 3.58, 3.59, 4.6 and 4.7). Where applicable, sections 230-150 and 230-165 overlay the ordinary accruals rules in Subdivision 230-B, to apply specific treatment for portfolio premiums and discounts (see subsection 230-165(5)). To the extent that a gain or loss under the accruals method arises in part from a premium or discount, paragraph 230-165(2)(a) treats that part of the gain or loss attributable to the discount or premium to be a particular gain or loss to which the accruals method applies. To the extent that the gain or loss does not arise from the premium or discount, it will be treated as a separate gain or loss from the financial arrangement to which the accruals method applies. It is consistent with the structure of Division 230 to calculate the discount or premium which arises due to the acquisition of the entire portfolio (rather than being attributable to any specific financial arrangement within that portfolio) in the same manner that a gain or loss referrable to an individual financial arrangement would ordinarily be calculated. That is the net gain or loss in nominal terms is determined by comparing the difference between the outgoings (consideration paid) and receipts (principal outstanding at the time of acquisition). This is consistent with the ordinary meaning of 'discount', and the references in paragraph 4.155 and Example 7.2 in the EM. In Brooks & Anor v. Federal Commissioner of Taxation [2000] FCA 721; 2000 ATC 4362 at 4376; (2000) 44 ATR 352, the full Federal Court noted 'there have been cases where the law as stated in the Explanatory Memorandum has been held to be wrong.' To the extent that Example 4.6 in the EM is inconsistent with other statements in the EM and the structure of Division 230 as set out above, the example is not considered to accurately reflect the law.", "Date_of_Decision": "24 October 2011", "Year_of_Income": "Year ended 30 September 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 230-60 subsection 230-70(1) subsection 230-75(1) section 230-150 section 230-165 subsection 230-165(5) paragraph 230-165(2)(a) section 230-505 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income tax Taxation of Financial Arrangements CoE", "Case_References": "Project Blue Sky Inc & Others v Australian Broadcasting Authority (1998) 194 CLR 355", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201190", "Unmatched_Content": "Keywords Income tax Taxation of Financial Arrangements CoE"}
{"ATO_ID_Number": "ATO ID 2011/91", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: meaning of 'premium' in section 230-165 of the Income Tax Assessment Act 1997", "Issue": "Will an amount reflecting the difference between the consideration paid for acquiring a portfolio of loans and the face value of the portfolio be a 'premium' for the purposes of section 230-165 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where the consideration paid for acquiring a portfolio of loans is greater than the face value of the portfolio, this is a premium for the purposes of section 230-165 of the ITAA 1997.", "Facts": "The taxpayer is a financial institution which has made a valid election under section 230-150 of the ITAA 1997. The taxpayer subsequently acquired a portfolio of similar loans from another company. Gains and losses from these loans will be brought to account under the accruals tax timing methodology in Subdivision 230-B of the ITAA 1997. The consideration paid for acquiring the portfolio was greater than the outstanding principal of the loans in the portfolio at the time of acquisition (that is, the face value or nominal value of the loan book). The difference between the face value of the portfolio at the time of acquisition and the consideration paid is calculated with reference to the portfolio as a whole, rather than being attributable to particular financial arrangements within the portfolio. The difference between the face value of the portfolio at the time of acquisition and the consideration paid is not considered to be significant relative to the overall gain/loss from the portfolio.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Section 230-165 essentially requires the identification of any discount or premium which arises from the acquisition of a portfolio of similar financial arrangements in order that, to the extent that a gain or loss from a financial arrangement within that portfolio is attributable to the discount or premium (the 'premium/discount gain or loss'), it may accrue over the expected life of the portfolio. The 'premium' which is to be spread under section 230-165 is not a defined term for the purposes of Division 230. The Macquarie Dictionary includes in the definition of 'premium': '...a sum above the nominal or par value of a thing.' This can be contrasted its definition of 'discount', being: '...any deduction from the nominal value.' Where it is open to do so, particularly where the meaning of a term is ambiguous, provisions are to be construed in a way that is 'consistent with the language and purpose of all the provisions of the statute' ( Project Blue Sky Inc & Others v Australian Broadcasting Authority (1998) 194 CLR 355 at 381). A fundamental aspect of Division 230 is that traditional taxation of gross receipts and outgoings is replaced with the taxation of a net gain or loss made from a financial arrangement. Although not specifically defined, it is clear from the structure and operation of Division 230 that the concept of a gain or loss connotes the appropriate offsetting of the costs (broadly financial benefits provided) against proceeds (broadly, financial benefits received) (Explanatory Memorandum (EM) to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 paragraphs 3.3 to 3.9, 3.20, 3.32, 3.33, 4.126, 4.127, among others). A gain or loss is to be calculated in nominal terms (as indicated by subsections 230-70(1) and 230-75(1), and the EM at paragraphs 3.20, 3.58, 3.60 and 4.143). Except as provided for under sections 230-60 and 230-505, a financial benefit under a financial arrangement is also to be measured in nominal rather than net present value terms - that is, its value at the time it is (or is to be) provided (EM paragraphs 3.20, 3.58, 3.59, 4.6 and 4.7). Where applicable, sections 230-150 and 230-165 overlay the ordinary accruals rules in Subdivision 230-B, to apply specific treatment for portfolio premiums and discounts (see subsection 230-165(5)). To the extent that a gain or loss under the accruals method arises in part from a premium or discount, paragraph 230-165(2)(a) treats that part of the gain or loss attributable to the discount or premium to be a particular gain or loss to which the accruals method applies. To the extent that the gain or loss does not arise from the premium or discount, it will be treated as a separate gain or loss from the financial arrangement to which the accruals method applies. The term 'premium' in paragraphs 230-165(1)(d) and 230-165(2)(a) appears as an alternative, or in contrast, to the term 'discount'. To the extent that a discount constitutes a gain from the acquisition of an entire portfolio, it follows that a premium should therefore constitute a loss. It is consistent with the structure of Division 230 to calculate the discount or premium which arises due to the acquisition of the entire portfolio (rather than being attributable to any specific financial arrangement within that portfolio) in the same manner that a gain or loss referrable to an individual financial arrangement would ordinarily be calculated. That is the net gain or loss in nominal terms is determined by comparing the difference between the outgoings (consideration paid) and receipts (principal outstanding at the time of acquisition). In determining a 'discount', an approach which offsets the cost of a portfolio against its face value is consistent with the statement in paragraph 4.155 of the EM: 'A portfolio of loans purchased for an amount less than its face value may represent a portfolio discount to which the modified accruals rule may also apply.' The same approach is therefore appropriate in determining a 'premium'. Example 4.6 in the EM identifies a premium as the difference between the consideration for the portfolio and its market value (in terms of net present value) at the time of acquisition. This appears to be inconsistent with the ordinary meaning of the term in the context of financial arrangements, the overall approach of Division 230 in determining a gain or loss, and the approach to determining a gain from a portfolio discount under section 230-165. In Brooks & Anor v FC of T 2000 ATC 4362 at 4376, the full Federal Court noted 'there have been cases where the law as stated in the Explanatory Memorandum has been held to be wrong.' To the extent that Example 4.6 in the EM is inconsistent with other statements in the EM and the structure of Division 230 as set out above, the example is not considered to accurately reflect the law.", "Date_of_Decision": "24 October 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 section 230-60 subsection 230-70(1) subsection 230-75(1) Subdivision 230-B section 230-150 section 230-165 subsection 230-165(1)(d) paragraph 230-165(2)(a) subsection 230-165(5) section 230-505", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income tax Taxation of Financial Arrangements (CoE)", "Case_References": "Project Blue Sky Inc & Others v Australian Broadcasting Authority (1998) 194 CLR 355", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 The Macquarie Dictionary, 5th Edn, The Macquarie Library Pty Ltd, NSW, 2009", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201191", "Unmatched_Content": "Keywords Income tax Taxation of Financial Arrangements (CoE)"}
{"ATO_ID_Number": "ATO ID 2010/127", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: choosing to spread an overall gain or loss as a series of particular gains or losses", "Issue": "Does paragraph 230-110(2)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) prevent a taxpayer from being able to spread a sufficiently certain 'overall' gain or loss from a financial arrangement as a series of sufficiently certain 'particular' gains and losses pursuant to a choice available under subsection 230-130(2) of the ITAA 1997?", "Decision": "No. Paragraph 230-110(2)(b) does not prevent the taxpayer from spreading a sufficiently certain overall gain or loss from a financial arrangement as if it were a series of particular gains and losses pursuant to a choice available under subsection 230-130(2) of the ITAA 1997. As a result of making this choice, the taxpayer can spread the gain or loss from the financial arrangement over the period to which the gain or loss relates in accordance with subsection 230-130(3) of the ITAA 1997.", "Facts": "A company (the borrower) is a special purpose vehicle created to finance a specific project. The borrower enters into a syndicated loan facility agreement with arms length parties (lenders) to fund the specific project. The borrower determines that it has a sufficiently certain overall gain or loss arising from the syndicated loan facility as defined by section 230-105 of the ITAA 1997 at the start of the arrangement. The borrower seeks to make the choice under subsection 230-130(2) of the ITAA 1997 to spread the overall gain or loss in accordance with subsection 230-130(3) of the ITAA 1997 as a series of particular gains and losses over the period to which they relate.", "Reasons_for_Decision": "Summary: The accruals and the realisation methods under Subdivision 230-B of the ITAA 1997 are the default methods which apply to financial arrangements that are not subject to any of the elective tax timing methods of Division 230 of the ITAA 1997. The accruals method in Subdivision 230-B of the ITAA 1997 applies broadly to sufficiently certain gains and losses made from a financial arrangement. A gain or loss that is brought to account under the accruals method can either be an overall gain or loss under section 230-105 of the ITAA 1997 (where the gain or loss is sufficiently certain at the time the taxpayer starts to have the arrangement) or a gain or loss at a particular time (particular gain or loss) under section 230-110 of the ITAA 1997, but it cannot be both. Paragraph 230-110(2)(b) of the ITAA 1997 provides that a financial benefit that has already been taken into account in working out the amount of a sufficiently certain overall gain or loss is to be disregarded in working out whether you have a particular gain or loss. In this way, there is a strict demarcation between the identity of overall gains and losses and particular gains and losses. Section 230-130 of the ITAA 1997 sets out rules to determine the period over which gains and losses that are subject to the accruals method are to be spread. For overall gains and losses, the general rule for determining the period is set out in subsection 230-130(1) of the ITAA 1997, which is the life of the arrangement. The exception to this rule is set out in subsection 230-130(2) of the ITAA 1997 which states: In applying paragraph 230-130(2)(a) and subsection 230-130(3) of the ITAA 1997 it is necessary to consider subsection 230-110(1) of the ITAA 1997. In applying subsection 230-110(1) of the ITAA 1997 to work out whether you have a sufficiently certain gain or loss at a particular time, it is on first appearance necessary to consider paragraph 230-110(2)(b) of the ITAA 1997. This has the effect that to the extent to which financial benefits have been considered in determining if there is an overall gain or loss, particular gains and losses cannot also arise with respect to the same financial benefits. Paragraph 230-110(2)(b) ensures that there is no double counting of financial benefits provided or received under the financial arrangement. However, the statutory context of subsection 230-130(2) of the ITAA 1997 when read together with subsection 230-130(3) of the ITAA 1997 evinces a clear intention to allow taxpayers to choose to spread an overall gain or loss as if it were a series of particular gains and losses. To be excluded from determining a series of particular gains or losses because of the inability to have regard to the financial benefits that have already been taken into account in working out the overall gain or loss would in this context defeat the clear purpose of subsection 230-130(2) and render that subsection nugatory. Accordingly, the reference to a 'sufficiently certain gain or loss ... under subsection 110(1)' in subsection 230-130(3) of the ITAA 1997 does not also import the requirements of subsection 230-110(2) of the ITAA 1997 when applied for the purposes of determining the relevant period over which to spread gains and losses under subsection 230-130(2) of the ITAA 1997. Where a taxpayer satisfies the conditions in paragraphs 230-130(2)(a) and 230-130(2)(b) of the ITAA 1997, the period over which the particular gains and losses are to be spread is the period to which the gain or loss relates. In determining the period, regard must be had to the pricing, terms and conditions of the arrangement (see subsection 230-130(3) of the ITAA 1997). The start of the period and end of the period is determined under subsections 230-130(4) to 230-130(5) of the ITAA 1997.", "Date_of_Decision": "1 June 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 230-105 section 230-110 subsection 230-110(1) paragraph 230-110(2)(b) section 230-115 section 230-130 subsection 230-130(1) subsection 230-130(2) paragraph 230-130(2)(a) subsection 230-130(3) subsection 230-130(4) subsection 230-130(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2009/115", "Subject_References": "Taxation of Financial Arrangements (TOFA) Accruals method Sufficiently certain Financial benefit", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010127", "Unmatched_Content": "Keywords Taxation of Financial Arrangements (TOFA) Accruals method Sufficiently certain Financial benefit"}
{"ATO_ID_Number": "ATO ID 2010/166", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of Financial Arrangements: applicable functional currency election, application of the special rule about translation and particular gains and losses under Subdivision 230-B of the Income Tax Assessment Act 1997", "Issue": "At the time the applicable functional currency election takes effect, does the taxpayer have a particular gain or loss that it will make from the financial arrangement under the accruals method in Subdivision 230-B of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. At the time the applicable functional currency election takes effect, the taxpayer does not have a particular gain or loss that it will make from the financial arrangement under the accruals method in Subdivision 230-B of the ITAA 1997.", "Facts": "The taxpayer is the head company of a consolidated group with effect from 1 July 2002. The taxpayer is an Australian resident for tax purposes The taxpayer has been preparing its financial statements in United States dollars (USD) and has made a functional currency choice under Item 1 of subsection 960-60(1) of the ITAA 1997 to use USD as its applicable functional currency, with effect from 1 July 2010. The taxpayer entered into a loan agreement prior to the time of making the functional currency choice. The loan is denominated in USD. The loan is repayable on 30 June 2011 and, as at 1 July 2010, the entire balance of the loan remained outstanding. The loan is a financial arrangement for the purposes of Division 230 of the ITAA 1997. The taxpayer made an election under sub item 104(2) of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to bring existing financial arrangements into Division 230 of the ITAA 1997 from 1 July 2010. The taxpayer has not elected to apply any of the elective tax timing methods in Division 230 of the ITAA 1997 to its financial arrangements.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. The accruals method will apply to a particular gain or loss that: Subsections 960-80(1) and 960-85(1) provide that all amounts that are not in the taxpayer's applicable functional currency and are attributable to an event that took place before the applicable functional currency election took effect will be translated to the taxpayer's applicable functional currency for the purpose of determining its taxable income or loss. For the purposes of applying the translation rules in subsection 960-80(1), elements in the calculation of another amount, are first translated to the applicable functional currency before the other amount is calculated (unless the amount is a special accrual amount) (subsection 960-80(4)). Generally, a gain or loss from a financial arrangement is calculated by comparing the financial benefits received to the financial benefits provided. Therefore, financial benefits will generally be elements in the calculation of another amount (that is, a gain or loss) for the purposes of subsection 960-80(1). Accordingly, the financial benefits that are used to calculate any gains or losses under the financial arrangement will be translated to the taxpayer's applicable functional currency before the gain or loss is calculated The right to receive the funds and the obligation to provide the funds are financial benefits that arose when the taxpayer entered into the financial arrangement. As these financial benefits will be taken into account to calculate the gain or loss from the financial arrangement, the two-step translation rule in subsection 960-85(1) may apply to these financial benefits. The translation rule in subsection 960-85(1) applies where: As the right to receive the funds is a financial benefit that is attributable to an event that happened in a prior year, the special translation rule in subsection 960-85(1) will apply if this amount is required to be translated to the applicable functional currency under subsection 960-80(1). Similarly as the obligation to provide the funds is a financial benefit that is attributable to a prior year event, the special translation rule will also apply to this amount if it is required to be translated to the applicable functional currency. The financial benefits under the financial arrangement meet the definition of an 'amount' for the purposes of subsection 960-80(1). Furthermore, the receipt of the funds and the obligation to repay the funds in the future are pre-choice amounts that are already in existence at the time the applicable functional currency choice is made and are directly relevant to determining the taxpayer's assessable income or allowable deductions in later income year(s). Accordingly, the right to receive the borrowed funds and the obligation to provide the borrowed funds are financial benefits that will be subject to the special translation rule in subsection 960-85(1) as they are: The effect of subsection 960-85(1) is to 'reset' the tax value of the financial benefit received and the value of the financial benefit comprising the obligation to provide funds under the financial arrangement for future income years for the purposes of the Act. When the applicable functional currency election starts to apply on 1 July 2010, the financial benefits comprising the receipt of the borrowed funds and the obligation to repay the funds will be sufficiently certain for the purposes of subsection 230-115(2) as, at that time, both financial benefits will be translated to the taxpayer's applicable functional currency pursuant to the two step translation process in subsection 960-85(1). For the purposes of determining whether there is a particular gain or loss under subsection 230-110(1), the apportionment rule in section 230-75 needs to be considered. As the financial benefit received by the taxpayer under the financial arrangement is reasonably attributable to the obligation to provide funds, the amount of the gain or loss under section 230-75 is nil. This is because, at 1 July 2010, the value of the amount received and the value of the obligation to provide an amount are equal due to the resetting of the values under the two-step translation process in subsection 960-85(1). Accordingly, there is no particular gain or loss (at that time) that the taxpayer will make from the financial arrangement to which the accruals method in Subdivision 230-B can apply (refer to subparagraph 230-100(3)(b)(ii)).", "Date_of_Decision": "10 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 Subdivision 230-B section 230-75 subparagraph 230-100(3)(b)(i) subparagraph 230-100(3)(b)(ii) subsection 230-110(1) subsection 230-115(2) subsection 960-60(1) subsection 960-80(1) subsection 960-80(4) subsection 960-85(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/43 | ATO ID 2010/44", "Subject_References": "Taxation of Financial Arrangements CoE Applicable functional currency Losses", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010166", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Taxation of Financial Arrangements CoE Applicable functional currency Losses"}
{"ATO_ID_Number": "ATO ID 2012/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: pre-joining history and TOFA balancing adjustment", "Issue": "Are amounts included in an entity's assessable income, or allowed as a deduction, under Division 230 of the Income Tax Assessment Act 1997 (ITAA 1997) from a financial arrangement asset prior to the entity joining a consolidated group taken into account in working out the balancing adjustment under section 230-445 of the ITAA 1997 on cessation of the financial arrangement?", "Decision": "No. Under subsection 701-55(5A) of the ITAA 1997, the financial arrangement is deemed to have been acquired by the head company of the consolidated group at the joining time for the purposes of applying Division 230 of the ITAA 1997. In working out the balancing adjustment under section 230-445 of the ITAA 1997, any prior history for the financial arrangement is disregarded as a result of the deemed acquisition in subsection 701-55(5A) of the ITAA 1997.", "Facts": "A Co (which is not a member of a consolidated group) provided a financial benefit of $100,000 to acquire a financial arrangement (an asset) on 1 July 2011. A Co elected to use the fair value method to account for gains and losses from the financial arrangement. A Co included $5,000 in its assessable income in the 2011-12 income year, being the gain from the financial arrangement under the fair value method in Division 230 of the ITAA 1997. On 1 July 2012 A Co joined a consolidated group whose head company is H Co. The tax cost setting amount for the financial arrangement asset was $105,000. The 'Division 230 starting value' at the joining time was also $105,000. A Co remains in the consolidated group during the remaining term of the financial arrangement. The financial arrangement ceases on 30 June 2013. The financial benefits received by H Co on cessation are $110,000.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Division 230 is about the tax treatment of gains and losses from financial arrangements. Where an entity joins a consolidated group with an asset to which Division 230 will apply, subsection 701-55(5A) has application. Under subsection 701-55(5A), Division 230 applies to the financial arrangement asset as if the asset were acquired at the joining time for a payment equal to either: Subdivision 230-G provides that a balancing adjustment is made under the Subdivision if certain events happen, including the cessation of a financial arrangement. The balancing adjustment is worked out under the method statement in subsection 230-445(1). Under the single entity rule in subsection 701-1(1), H Co will be taken to be the holder of the financial arrangement from the joining time onwards because A Co is treated as being part of H Co whilst it is a subsidiary member of H Co's consolidated group. H Co will need to consider the following steps in the method statement in working out the balancing adjustment on cessation of the financial arrangement on 30 June 2013: Step 1(a) - financial benefits received Step 2(a) - financial benefits provided Step 2(b) - amounts included in H Co's assessable income as gains from the financial arrangement because of circumstances that have occurred before the cessation Under the entry history rule in section 701-5, everything that happened in relation to A Co before it became a subsidiary member of the H Co consolidated group is taken to have happened in relation to H Co. The entry history rule applies in working out H Co's income tax liability after the joining time which includes the balancing adjustment under Subdivision 230-G. However, the deemed acquisition of a financial arrangement asset at the joining time under subsection 701-55(5A) will affect the history that would normally be inherited by a head company under the entry history rule. (Note 1 to section 701-5 points out that other provisions of Part 3-90 may affect the tax history that is inherited.) As a consequence of subsection 701-55(5A), the head company's tax history for the asset is refreshed at the joining time for the purposes of applying Division 230. Therefore step 2(b) in the method statement in subsection 230-445(1) (and step 1(b) in regard to amounts deducted) only applies for amounts included in the head company's assessable income after the joining time. As H Co is taken to have acquired the financial arrangement on 1 July 2012, it cannot have an amount included in assessable income as a gain from the financial arrangement for the 2011-12 income year. Also, with the financial arrangement ceasing before the end of the 2012-13 income year, H Co will not include any amount in assessable income from the financial arrangement for that income year. Therefore the step 2(b) amount would be nil in this case. H Co will have a balancing adjustment of $5,000 to be included in its assessable income for the 2012-13 income year calculated as follows: $110,000 financial benefits received (Step 1(a)) less $105,000 financial benefits provided (deemed payment under subsection 701-55(5A)) (Step 2(a))", "Date_of_Decision": "8 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 Subdivision 230-G section 230-445 subsection 230-445(1) subsection 701-1(1) section 701-5 Part 3-90 subsection 701-55(5A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2012/42", "Subject_References": "Acquisition of assets Balancing adjustment Cessation Consolidated group Consolidation - assets Consolidation - joining Division 230 taxation of financial arrangements Financial arrangement Inherited history rules Joining entity Joining time Method statement Single entity rule Subsidiary member of a consolidated group Tax cost is set Tax cost setting amount", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201241", "Unmatched_Content": "Keywords Acquisition of assets Balancing adjustment Cessation Consolidated group Consolidation - assets Consolidation - joining Division 230 taxation of financial arrangements Financial arrangement Inherited history rules Joining entity Joining time Method statement Single entity rule Subsidiary member of a consolidated group Tax cost is set Tax cost setting amount"}
{"ATO_ID_Number": "ATO ID 2012/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: inherited TOFA transitional balancing adjustment and cessation of financial arrangement", "Issue": "Where: are the inherited TBA amounts taken into account in working out the balancing adjustment for the head company under section 230-445 of the ITAA 1997 on cessation of the financial arrangement?", "Decision": "No. The inherited TBA amounts are not taken into account in working out the balancing adjustment under section 230-445 of the ITAA 1997. Under subsection 701-55(5A) of the ITAA 1997 the financial arrangement is deemed to have been acquired by the head company of the consolidated group at the joining time for the purposes of applying Division 230 of the ITAA 1997.", "Facts": "A Co (which is not a member of a consolidated group) acquired a financial arrangement (an asset) for $400,000 on 1 July 2009. The taxation of financial arrangements (TOFA) rules in Division 230 of the ITAA 1997 applied to A Co from 1 July 2010. A Co made an election, under sub-item 104(2) of Schedule 1 to the TOFA Act, to apply Division 230 of the ITAA 1997 to its existing financial arrangements. As a result a TBA of $20,000 (to be included in assessable income) was worked out. The TBA is attributable to the financial arrangement. In accordance with sub-item 104(17) of Schedule 1 to the TOFA Act the TBA is to be spread evenly over 4 income years. A Co included $5,000 in its assessable income in income year ended 30 June 2011 being the first portion of the TBA. On 1 July 2011 A Co joined a consolidated group whose head company is H Co. The tax cost setting amount for the financial arrangement asset was $440,000. The 'Division 230 starting value' at the joining time was also $440,000. H Co inherited the final three portions of the TBA under the entry history rule in section 701-5 of the ITAA 1997. H Co included the following amounts in its assessable income for income year ended 30 June 2012 in respect of the financial arrangement: A Co remains in the consolidated group during the remaining term of the financial arrangement. The financial arrangement ceases on 30 June 2013. The financial benefits received by H Co on cessation are $480,000.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Division 230 is about the tax treatment of gains and losses from financial arrangements. Where an entity joins a consolidated group with an asset to which Division 230 will apply, subsection 701-55(5A) has application. Under subsection 701-55(5A), Division 230 applies to the financial arrangement asset as if the asset were acquired at the joining time for a payment equal to either: Subdivision 230-G provides that a balancing adjustment is made under the Subdivision if certain events happen including the cessation of a financial arrangement. The balancing adjustment is worked out under the method statement in subsection 230-445(1). Under the single entity rule in subsection 701-1(1), H Co will be taken to be the holder of the financial arrangement from the joining time onwards because A Co is treated as being part of H Co whilst it is a subsidiary member of H Co's consolidated group. H Co will need to consider the following steps in the method statement in working out the Subdivision 230-G balancing adjustment on cessation of the financial arrangement on 30 June 2013: Step 1(a) - financial benefits received. Step 2(a) - financial benefits provided (which is the deemed payment under subsection 701-55(5A) in this case). Step 2(b) - amounts included in H Co's assessable income as gains from the financial arrangement because of circumstances that have occurred before the cessation. Step 2(d) - amounts included in H Co's assessable income after cessation because of a TBA to the extent to which those amounts are attributable to the financial arrangement. As H Co is taken to have acquired the financial arrangement on 1 July 2011 for the purposes of Division 230, it will not have any TBA amounts attributable to that financial arrangement when applying provisions in Division 230 including the balancing adjustment in Subdivision 230-G. This is because the deemed acquisition in subsection 701-55(5A) severs the connection between the TBA amounts and the financial arrangement that is taken to have been acquired by H Co at the joining time. Only gains (or losses) made after the joining time are relevant for purposes of calculating the balancing adjustment for the head company in these circumstances. Therefore it is necessary to exclude the inherited TBA amounts at both step 2(b) and step 2(d) of the method statement. H Co will have a Subdivision 230-G balancing adjustment of $20,000 to be included in its assessable income for income year ended 30 June 2013 calculated as follows: $480,000 financial benefits received (Step 1(a)) less $440,000 financial benefits provided (Step 2(a)) less $20,000 gain included in assessable income under the fair value method (step 2(b)) Although the deemed acquisition in subsection 701-55(5A) severs the connection between the TBA amounts and the financial arrangement that is taken to have been acquired by H Co at the joining time, the remaining TBA amounts still need to be included in H Co's assessable income. The creation of the TBA amount and the obligation to spread it over four years is something that happened to A Co. As a consequence of the entry history rule in section 701-5, H Co is required to include the remaining TBA amounts in its assessable income. Under Division 230, H Co includes $40,000 in its assessable income comprising the $20,000 gain made in income year ending 30 June 2012 and the $20,000 Subdivision 230-G balancing adjustment. The inherited TBA amounts of $15,000, that are to be included in H Co's assessable income, relate to gains made on the financial arrangement by A Co prior to the joining time. It is the 4 year spreading rule that causes H Co to be assessable on those TBA amounts.", "Date_of_Decision": "8 May 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 Subdivision 230-G section 230-445 subsection 230-445(1) subsection 701-1(1) section 701-5 subsection 701-55(5A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2012/41", "Subject_References": "Acquisition of assets Balancing adjustment Cessation Consolidation Consolidated group Consolidation - assets Consolidation - joining Division 230 taxation of financial arrangements Financial arrangement Head company Inherited history rules Joining entity Joining time Method statement Single entity rule Subsidiary member of a consolidated group Tax cost is set Tax cost setting amount Transitional election", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201242", "Unmatched_Content": "Keywords Acquisition of assets Balancing adjustment Cessation Consolidation Consolidated group Consolidation - assets Consolidation - joining Division 230 taxation of financial arrangements Financial arrangement Head company Inherited history rules Joining entity Joining time Method statement Single entity rule Subsidiary member of a consolidated group Tax cost is set Tax cost setting amount Transitional election"}
{"ATO_ID_Number": "ATO ID 2012/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Consolidation: allocable cost amount and the TOFA transitional balancing adjustment", "Issue": "Where: in calculating the entry allocable cost amount (ACA) under section 705-60 of the ITAA 1997, does the step 7 calculation in section 705-115 of the ITAA 1997 include an amount in respect of the inherited TBA deductions?", "Decision": "Yes. The step 7 calculation in section 705-115 of the ITAA 1997 includes an amount in respect of the inherited TBA deductions in calculating the ACA under section 705-60 of the ITAA 1997.", "Facts": "A Co (who is not a member of a consolidated group) acquired financial arrangements before 1 July 2010. The taxation of financial arrangements (TOFA) rules in Division 230 of the ITAA 1997 applied to A Co from 1 July 2010. A Co made an election, under sub-item 104(2) of Schedule 1 to the TOFA Act, to apply Division 230 of the ITAA 1997, from 1 July 2010, to its existing financial arrangements. As a result, A Co had amounts it could deduct in respect of the TBA. H Co, a head company of a consolidated group, acquired 100% of the membership interests in A Co on 1 July 2011. At that time, A Co became a subsidiary member of the consolidated group. Under the entry history rule in section 701-5 of the ITAA 1997, H Co inherited the amounts to be deducted after the joining time in respect of the TBA.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997. Section 705-115 contains the rules for working out the amount (the step 7 amount) that is subtracted at step 7 in calculating the ACA for a joining entity under section 705-60. The step 7 amount concerns certain deductions that the head company becomes entitled to. The purpose of step 7 is to prevent the joined group from getting benefits from both higher tax cost setting amounts for the joining entity's assets and the deductions inherited by the head company. Step 7 includes deductions covered by subsection 705-115(2) which are any deductions to which the head company becomes entitled to under the entry history rule in section 701-5, other than deductions for expenditure: The inherited TBA deductions in question come within the deductions covered by subsection 705-115(2) and none of the exclusions contained in the subsection apply. Subsection 705-115(1) makes a distinction between 'owned deductions' and 'acquired deductions'. In essence, owned deductions are deductions covered by subsection 705-115(2) that accrued to the joined group and acquired deductions are deductions covered by subsection 705-115(2) other than owned deductions. As H Co did not own any membership interests in A Co before the joining time on 1 July 2011, the inherited TBA deductions are acquired deductions. Consequently, under the formula in subsection 705-115(1), the step 7 amount is calculated by multiplying the inherited TBA deductions by the corporate tax rate.", "Date_of_Decision": "8 May 2012", "Year_of_Income": "Income Year Ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 110-40 Division 230 subsection 701-1(1) section 701-5 Subdivision 705-A section 705-60 section 705-115 subsection 705-115(1) subsection 705-115(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Consolidated group Consolidation - joining Head company Joining entity Joining time Allocable cost amount Inherited history rules Acquired deductions Inherited deductions Tax cost setting amount Division 230 Taxation of financial arrangement Financial arrangement Transitional election Balancing adjustment", "Case_References": "", "Other_References": "", "Business_Line": "Consolidation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201243", "Unmatched_Content": "Keywords Consolidation Consolidated group Consolidation - joining Head company Joining entity Joining time Allocable cost amount Inherited history rules Acquired deductions Inherited deductions Tax cost setting amount Division 230 Taxation of financial arrangement Financial arrangement Transitional election Balancing adjustment"}
{"ATO_ID_Number": "ATO ID 2010/168", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of Financial Arrangements: hierarchy of provisions and the balancing adjustment in Subdivision 230-G", "Issue": "For the purposes of subsection 230-40(2) of the Income Tax Assessment Act 1997 (ITAA 1997), will a sufficiently certain gain or loss made from a financial arrangement that is allocated to an interval which ends at the same time the financial arrangement ceases, be included in a taxpayer's assessable income or allowed as a deduction under section 230-15 of the ITAA 1997 by the balancing adjustment method in Subdivision 230-G of the ITAA 1997?", "Decision": "Yes. The part of the sufficiently certain gain or loss which is allocated to an interval which ends at the same time that the financial arrangement ceases will be brought to account under the balancing adjustment method pursuant to subsection 230-40(2) of the ITAA 1997.", "Facts": "The taxpayer is the head company of a consolidated group with effect from 1 July 2002. The taxpayer is an Australian resident for tax purposes. On 1 July 2010, the taxpayer entered into a loan which is a financial arrangement for the purposes of Division 230 of the ITAA 1997. Interest is payable under the loan at a fixed rate monthly in arrears and the loan principal is repayable on 30 June 2012. Division 230 of the ITAA 1997 applies to the taxpayer from 1 July 2010 as the taxpayer has not elected to apply Division 230 to its financial arrangements from 1 July 2009. The taxpayer has also not elected to use any of the elective tax timing methods under Division 230. The accruals method in Subdivision 230-B of the ITAA 1997 will apply to the loan as all the financial benefits under the loan financial arrangement are sufficiently certain. The taxpayer uses monthly intervals to allocate gains and losses from its financial arrangements.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Under section 230-105, there is a sufficiently certain overall loss from the financial arrangement. (Note; the analysis is equally applicable to an overall gain from a financial arrangement and/or particular gains and losses). The overall loss will be spread over a period of time under subsection 230-130(1). Generally, the period over which the loss is to be spread is the period that starts when you start to have the arrangement and ends when you cease to have the arrangement. The loss will be spread over the period using the compounding accruals method or a method that reasonably approximates that method; subsection 230-135(1). The loss must be allocated to intervals that are the same length and do not exceed 12 months under the compounding accruals method. However, the first and last interval may be shorter than the other intervals. Generally, the loss allocated to that interval will be an allowable deduction under section 230-15 when it is allocated. The taxpayer uses monthly intervals to allocate parts of the overall loss from the loan. Therefore, some of the overall loss will have been allowed as a deduction to the taxpayer under section 230-15 before the loan ceases on 30 June 2012. Subsection 230-40(2) provides that where the balancing adjustment is applied to take into account a gain or loss, that gain or loss cannot be taken into account under the accruals method. Under the accruals method parts of the sufficiently certain loss made under the loan will be allocated to monthly intervals. Where part of the overall loss is allocated to an interval, the taxpayer will be taken to have made that part of the loss for the purposes of section 230-15 when it is allocated (refer to subsection 230-170(1)). Therefore, if an interval ends before the balancing adjustment occurs that part of the loss allocated to that interval will be allowable as a deduction under section 230-15 prior to the balancing adjustment occurring. Gains and losses previously included in assessable income and allowable as a deduction under section 230-15 are not included in the gain or loss calculated under the method statement in subsection 230-445(1). Therefore, these amounts are not included in any gain or loss made when the balancing adjustment occurs. Accordingly, that part of the sufficiently certain overall loss which is allocated to an interval which ends before the balancing adjustment occurs will be brought to account under the accruals method, while that part of the sufficiently certain overall loss which is allocated to an interval which ends at the same time that the balancing adjustment happens will be brought to account under the balancing adjustment.", "Date_of_Decision": "10 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 Subdivision 230-B section 230-15 subsection 230-40(2) section 230-105 subsection 230-130(1) subsection 230-135(1) subsection 230-170(1) subsection 230-445(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Taxation of Financial Arrangements CoE Balancing adjustments Losses", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010168", "Unmatched_Content": "Keywords Taxation of Financial Arrangements CoE Balancing adjustments Losses"}
{"ATO_ID_Number": "ATO ID 2010/180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: definition of a special accrual amount and the balancing adjustment in Subdivision 230-G", "Issue": "Is the balancing adjustment made under the method statement in subsection 230-445(1) of the Income Tax Assessment Act 1997 (ITAA 1997) a special accrual amount?", "Decision": "No. The balancing adjustment made under subsection 230-445(1) of the ITAA 1997 will not be a special accrual amount.", "Facts": "The taxpayer is the head company of a consolidated group with effect from 1 July 2002. The taxpayer is an Australian resident for tax purposes. The taxpayer has been preparing its financial statements in USD and has made a functional currency choice under Item 1 of subsection 960-60(1) of the ITAA 1997 to use USD as its applicable functional currency, with effect from 1 July 2010. The taxpayer entered into a loan agreement prior to the time of making the functional currency choice. The loan is denominated in USD. The loan is repayable on 30 June 2011. The loan is a financial arrangement for the purposes of Division 230 of the ITAA 1997. The taxpayer made an election under sub item 104(2) of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 to bring existing financial arrangements into Division 230 of the ITAA 1997 from 1 July 2010. The taxpayer has not elected to apply any of the elective tax timing methods in Division 230 of the ITAA 1997 to its financial arrangements.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. The effect of making an applicable functional currency choice is that amounts that are attributable to a time prior to the making of the choice, and that are elements in the calculation of an amount that is included in assessable income or allowable as a deduction in income years after making the choice, have to be translated to the applicable functional currency. This requirement is subject to a qualification if the amount being calculated is a special accrual amount. Under paragraph 230-435(1)(b), a balancing adjustment is made when the loan is repaid as all of the taxpayer's rights and obligations under the financial arrangement will cease. The method statement in subsection 230-445(1) is used to calculate any additional amount of a gain or loss (if any) that the taxpayer will be taken to have made as a balancing adjustment. If the balancing adjustment meets the definition of a special accrual amount, the elements that make up the balancing adjustment will not be translated prior to calculation of the amount; refer to subsection 960-80(4). Rather, the amount of the balancing adjustment will itself be translated after it is calculated; refer to subsection 960-80(5). Paragraph 995-1(1)(aa) defines a special accrual amount as (amongst other things): ...an amount that is included in assessable income, or an amount that is a deduction from assessable income under...Subdivision 230-A of this Act...if the accruals method provided for in Subdivision 230-B of this Act is applied to take account of the gain or loss concerned, and all of the financial benefits provided and received under the financial arrangement concerned are denominated in a particular foreign currency. Paragraph 995-1(1)(ba) provides that a special accrual amount is also: ...an amount that is included in assessable income, or an amount that is a deduction from assessable income under...Division 230 (other than Subdivision 230-B) of this Act... Under Division 230, there are two assessing provisions: Not all gains and losses assessed under section 230-15 will fall within the scope of paragraph 995-1(1)(aa) as the paragraph only applies where the gain or loss is taken into account under the accruals method in Subdivision 230-B. Therefore, gains and losses taken into account under the other tax timing methods in Division 230 and the balancing adjustment under Subdivision 230-G will not be a special accrual amount under paragraph 995-1(1)(aa). Prima facie, a gain or loss taken into account under the balancing adjustment falls within the scope of the definition of a special accrual amount in paragraph 995-1(1)(ba). The concept of a special accrual amount is intended to overcome possible anomalies that could arise if every element in the calculation of a net amount on a foreign currency transaction (under the Divisions listed in the definition) had to first be translated to Australian currency (thereby allowing possible deferral of gains and losses on foreign currency transactions). The legislative intent for having special accrual amounts is to address this mischief by allowing taxpayers to calculate the net amount on a foreign currency transaction without first having to translate the elements involved in the calculation to Australian dollars. This enables an appropriate accrual of gains and losses over the life of the arrangement. However, the need for a balancing adjustment to be a special accrual amount is not present in this context as the method statement in subsection 230-445(1) does not calculate a net amount which is then spread over a period of time. Rather, it calculates an additional amount which is brought to account at the time the financial arrangement ends to ensure the correct amount of gain or loss is brought to account under the financial arrangement. The High Court, in CIC Insurance Ltd v. Bankstown Football Club (1997) 187 CLR 384 at 408, stated : [T]he modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses \"context\" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy... [I]f the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent. When paragraph 995-1(1)(aa) is read as a part of the exhaustive list in the definition of a special accrual amount, it is reasonable to take the view that it was intended to comprehensively identify the amounts assessed and deducted under section 230-15 of which would constitute special accrual amounts. It follows from this view that paragraph 995-1(1)(ba) can only apply to gains and losses which are assessable or deductible under another assessing provision in Division 230; namely section 230-495. Therefore, reading paragraph 995-1(1)(ba) in light of the context of the exhaustive definition of a special accrual amount and the mischief the legislation is intended to address, it is considered that an additional gain or loss taken into account as a balancing adjustment (which is itself assessable under section 230-15) does not satisfy the requirements of paragraph 995-1(1)(ba). Accordingly, the elements in the calculation of the balancing adjustment will be translated to the taxpayer's applicable functional currency before the balancing adjustment is calculated under subsection 230-445(1).", "Date_of_Decision": "27 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 230-15 paragraph 230-435(1)(b) subsection 230-445(1) section 230-495 subsection 960-80(1) subsection 960-80(4) subsection 960-80(5) paragraph 995-1(1)(aa) paragraph 995-1(1)(ba)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Taxation of Financial Arrangements CoE Balancing adjustment calculation Special accrual amount Applicable functional currency Balancing adjustment gains Losses Foreign currency", "Case_References": "CIC Insurance Ltd v Bankstown Football Club (1997) 187 CLR 384", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010180", "Unmatched_Content": "Keywords Taxation of Financial Arrangements CoE Balancing adjustment calculation Special accrual amount Applicable functional currency Balancing adjustment gains Losses Foreign currency"}
{"ATO_ID_Number": "ATO ID 2012/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: timing of deductions under subsection 230-15(4A) of the Income Tax Assessment Act 1997", "Issue": "Does subsection 230-15(4A) of the Income Tax Assessment Act 1997 (ITAA 1997) determine the timing of deductions in respect of a loss that is a dividend on a redeemable preference share (RPS) which is a debt interest under Division 974 of the ITAA 1997?", "Decision": "No. The timing of deductions in respect of a loss that is a dividend on a debt interest is not determined by subsection 230-15(4A) of the ITAA 1997.", "Facts": "The taxpayer is a company which has issued a RPS. The RPS is characterised as a debt interest for the purposes of Division 974 of the ITAA 1997. The RPS is a financial arrangement as defined in section 230-45 of the ITAA 1997. The terms of the RPS allow a non-cumulative dividend to be paid each year. All financial arrangements of the taxpayer are subject to Division 230 of the ITAA 1997. The taxpayer has not elected into any of the elective tax timing methods in Division 230 of the ITAA 1997.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Generally, the deductibility of a loss made from a financial arrangement to which Division 230 applies is determined under subsection 230-15(2). This general test which examines the nexus between the loss and income producing processes is modified by subsections 230-15(4) to 230-15(6). Subsection 230-15(4A) requires the identification of a dividend on a debt interest that gives rise to a loss. Whether or not a loss is made from a financial arrangement for an income year is determined under a method contained in Subdivisions 230-B to 230-G, and not under Subdivision 230-A. Subdivision 230-A contains among other things rules about whether a loss that is made is deductible. Where the future provision of financial benefits gives rise to a dividend on a debt interest and satisfies the substantive requirements of Subdivision 230-B (accruals/realisation method) such that there is a loss that can be accrued, then it must be considered whether or not that loss is deductible. In this respect, subsections 230-15(4) to 230-15(6) are relevant to the question of deductibility, and not to the identification of the loss itself. The Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 notes at paragraph 3.74: ...section 25-85 of the ITAA specifically provides for deductibility in respect of dividends...the effect of section 25-85 is reflected in subsections 230-15(4) to (6). The Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No.4) Bill 2010 notes at paragraphs 3.34 and 3.35: Subsection 230-15(4) is intended to broadly reflect the effect of section 25-85 in respect of financial benefits provided or received under financial arrangements that are debt interests. However, there have been doubts raised as to whether legal form dividends from debt interests can be deductible under Division 230, given the absence of a rule that replicates subsection 25-85(3). Subsection 25-85(3) allows for deductibility of such dividends in certain circumstances. Accordingly, this Schedule inserts a new subsection 230-15(4A) to allow, under certain conditions, for the deductibility of a dividend... Subsection 25-85(1) deals with a return that an entity 'pays or provides' on a debt interest and subsection 25-85(3) refers to the circumstance where the 'return is a dividend'. Subsection 25-85(3) ensures that a dividend that an entity pays or provides on a debt interest can be deductible to the extent it would be deductible under section 8-1 if certain assumptions were made. Paragraph 25-85(3)(a) specifically fixes payment as the point in time at which a dividend is incurred for the purposes of the test in section 8-1, and therefore the timing of the deduction (see ATO ID 2006/102). Subsection 230-15(4A) also sets out specific treatment for a dividend on a debt interest to the extent that the dividend would be deductible under subsection 230-15(2) if certain assumptions were made. However, notably subsection 230-15(4A) does not contain the words 'pays or provides'. Furthermore, subsection 230-15(2), unlike section 8-1, does not rely on a loss or outgoing being 'incurred' as part of the general test of deductibility. Rather for the purposes of the general test of deductibility under subsection 230-15(2) the requirement is, among other things, that you 'make' the loss. As such, the passage in paragraph 230-15(4A)(a): '...[if] the payment of the amount of the dividend were the incurring of...interest' cannot be said to fix the point in time of the deduction under subsection 230-15(4A) and can be distinguished from the relationship between section 8-1 and paragraph 25-85(3)(a). Therefore the timing of deductions under subsection 230-15(4A) will be determined in accordance with the applicable tax timing methodologies outside Subdivision 230-A.", "Date_of_Decision": "19 March 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 25-85 subsection 25-85(1) subsection 25-85(3) paragraph 25-85(3)(a) Division 230 Subdivision 230-A subsection 230-15(2) subsection 230-15(4) subsection 230-15(4A) paragraph 230-15(4A)(a) subsection 230-15(5) subsection 230-15(6) section 230-45 Subdivision 230-B Subdivision 230-C Subdivision 230-D Subdivision 230-E Subdivision 230-F Subdivision 230-G Division 974", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/102", "Subject_References": "Income tax Taxation of Financial Arrangements CoE", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No.4) Bill 2010", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201220", "Unmatched_Content": "Keywords Income tax Taxation of Financial Arrangements CoE"}
{"ATO_ID_Number": "ATO ID 2010/134", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: identification of an arrangement - facility agreement - single arrangements", "Issue": "Will the rights and obligations under a Senior Debt Facility Agreement, comprising a Construction Loan Facility (CLF) and a Term Loan Facility (TLF), form a single arrangement under subsection 230-55(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rights and obligations under the Senior Debt Facility Agreement (the 'facility agreement') comprising the CLF and the TLF will form a single arrangement under subsection 230-55(4) of the ITAA 1997.", "Facts": "A company (the borrower) is a special purpose vehicle created to finance a specific project. The borrower enters into a syndicated loan facility agreement with an arms length party (the lender) to fund the project. The facility agreement comprises two tranches; the CLF and TLF. The terms and conditions of the CLF and TLF are contained in a single contractual agreement. The CLF is available for a set period from the beginning of the project to fund certain costs associated with the project. At the end of that period, the CLF is repaid by conversion to the TLF, which then amortises according to the repayment schedule with final repayment being made on the last repayment date. Interest is applied at an agreed rate on the outstanding balance under either the CLF or the TLF. Draw downs under the facility agreement are made by the borrower making a valid request to the lender. The lender will advance funds upon receipt of a valid request. ( Note : this ATO ID does not deal with whether the draw downs that are made pursuant to the facility agreement are themselves separate arrangements or constitute a single arrangement together with the facility agreement under subsection 230-55(4) of the ITAA 1997. The aggregation of a facility agreement and draw downs made pursuant to a facility agreement in a particular fact pattern is considered in ATO ID 2009/115).", "Reasons_for_Decision": "Summary: The facility agreement creates rights to receive and obligations to provide financial benefits for the lender and the borrower that are contingent upon the borrower making a valid request for a draw down. Under section 230-85 of the ITAA 1997, rights and obligations subject to a contingency are treated as rights and obligations for the purposes of Division 230 of the ITAA 1997. Under subsection 230-55(4) of the ITAA 1997, regard is to be had to a range of factors in order to determine whether the arrangement comprises certain additional rights and obligations or is limited to only some of those rights and obligations. The combination of various rights and obligations under subsection 230-55(4) is an objective enquiry, the purpose of which is to identify the correct 'unit of taxation' in the context of Division 230 of the ITAA 1997. Subsection 230-55(4) of the ITAA 1997 states that whether a number of rights and/or obligations are themselves an arrangement or are 2 or more separate arrangements is a question of fact and degree that you determine having regard to the following: Having regard to the matters contained in subsection 230-55(4) of the ITAA 1997, it is considered that the rights and obligations under the facility agreement, comprising the CLF and TLF, will together constitute one arrangement and will not constitute separate arrangements. This conclusion is reached having regard to the following matters. The terms of the CLF and the TLF are contained in a single contractual agreement, which contains the essential terms and conditions of the facility agreement. A contract will often define the boundaries of an arrangement, especially where the form of the contract is consistent with its substance; refer to paragraph 2.47 of the Explanatory Memorandum to the Taxation Laws Amendment (Taxation of Financial Arrangements) Bill 2008. The legal form of the facility agreement reflects the economic substance. The facility agreement is offered by the lender as a financing package comprising the CLF and TLF for the specific purpose of financing the project. It would be commercially understood by the parties that the borrower will have, as a result of the proposed exercise and performance of its rights and obligations under the facility agreement (comprising the CLF and TLF), a continuing obligation to pay the balance of the facility agreement. Similarly, the liability to interest is calculated at a single rate on the outstanding balance under either the CLF or TLF. Importantly, the CLF is to be repaid at the end of its term by conversion to the TLF. That is, the draw downs made pursuant to the TLF can only be used for the specific purpose of repaying the outstanding balance of the CLF. Further, the repayment of the CLF by conversion to the TLF occurs automatically without the need to redeem, redraw or deliver any draw down notice. This further evidences the integrated and interrelated nature of the CLF and TLF. Aggregating the CLF and the TLF into a single arrangement (the facility agreement) is consistent with the objects of Division 230 of the ITAA 1997 as it aligns the tax treatment of the arrangement with the commercial recognition of gains and losses from the transaction. Accordingly, it is considered that the rights and obligations under the facility agreement comprising the CLF and TLF should be aggregated to form a single arrangement for the purposes of subsection 230-55(4) of the ITAA 1997. Whether or not the facility agreement is a financial arrangement will depend upon whether it satisfies the definition of a 'financial arrangement' in subsection 230-45(1) of the ITAA 1997.", "Date_of_Decision": "28 June 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 230-45(1) subsection 230-55(4) section 230-85", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2009/115", "Subject_References": "Arrangement Facility agreements", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010134", "Unmatched_Content": "Keywords Arrangement Facility agreements"}
{"ATO_ID_Number": "ATO ID 2010/216", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: entitlement to a foreign income tax offset - foreign dividend derived by a beneficiary of a trust estate", "Issue": "Is a taxpayer that is a beneficiary in a trust estate entitled to a foreign income tax offset under section 770-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for foreign income tax imposed on a dividend paid to the trust estate, where the taxpayer is subject to Division 230 of the ITAA 1997 in respect of their interest in the trust estate?", "Decision": "Yes. The taxpayer is entitled to a foreign income tax offset for the year ended 30 June 2011 as the taxpayer is taken to have paid the foreign income tax in respect of an amount included in the taxpayer's assessable income under section 230-15 of the ITAA 1997.", "Facts": "As part of its trading businesses, the taxpayer invests in listed and unlisted shares and trust units. The taxpayer, a company, is subject to Division 230 of the ITAA 1997 and has made the election to use the fair value method. The requirements specified in section 230-210 of the ITAA 1997 are met by the taxpayer. On 1 December 2010 the taxpayer purchases 100 units in B Trust for $100 per unit. B Trust is an Australian resident unit trust, the units in which are listed on the ASX. Under the B Trust trust deed, unitholders have a present entitlement to all income of the trust at the end of each financial year. B Trust receives a foreign dividend in May 2011. The taxpayer accounts for the units in B Trust as fair value through profit or loss. In practice, this means that the units are valued at the end of each month according to the listed value of the units at that time. Distributions are recognised in the profit or loss when declared. The taxpayer is a late balancer and uses a 30 September year end for accounting and tax purposes. B Trust uses a 30 June year end. In August 2011, a final distribution relating to the financial year ended 30 June 2011 is declared of $4.80 per unit. In October 2011 the taxpayer receives the distribution. The fair value of the units at 30 September 2011 is $120. The distribution received on the B Trust units, is made up as follows:", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless specified otherwise. Section 230-15 includes in an entity's assessable income a gain from a financial arrangement. Where an entity chooses to make a fair value election under Subdivision 230-C, gains and losses in respect of the entity's financial arrangements will be determined by what the accounting standards referred to in paragraph 230-210(2)(a) require to be recognised in the profit or loss from assets and liabilities that are subject to fair value treatment (paragraph 230-230(1)(a)). The accounting standards referred to in paragraph 230-210(2)(a) are those standards which a financial report is prepared in accordance with. Where the accounting standards require that a fair value measurement though profit or loss be used to determine accounting profits or losses from financial arrangements for an income year, these gains and losses shall be used to determine the taxpayer's gain or loss for an income year from those financial arrangements. In addition, where the accounting standards require revenue to be recognised through profit or loss on financial arrangements for an income year, any revenue recognised will also be used to determine the taxpayer's gain or loss for an income year from those financial arrangements. In this case the taxpayer has, for the purposes of applying paragraph 230-230(1)(a), recognised in their profit or loss from the units in B Trust gains consisting of the fair value increase of $2000 and the declared distribution of $480. Therefore, these amounts are included in the taxpayer's assessable income under section 230-15 for the income year ending 30 September 2011. The taxpayer's entitlement to claim a foreign income tax offset for foreign income tax imposed on the foreign dividend included in the distribution from B Trust is determined in accordance with subsection 770-10(1), which provides: 770-10(1) You are entitled to a *tax offset for an income year for *foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year. Note 1: The offset is for the income year in which your assessable income included an amount in respect of which you paid foreign income tax - even if you paid the foreign income tax in another income year. Where a taxpayer has not actually paid foreign income tax, the Act can apply to the taxpayer as if it had paid an amount of foreign income tax (section 770-130). In particular, under subsection 770-130(3), a taxpayer will be taken to have paid foreign income tax in respect of an amount included in the taxpayer's ordinary or statutory income (a 'taxed amount') to the extent that: In these circumstances, the foreign income tax is the dividend withholding tax imposed on the dividend paid to the trust and the taxed amount is the gain determined under Division 230 consisting of the trust distribution which includes the taxpayer's share of the dividend. Therefore to satisfy section 770-130, it is necessary to determine whether the taxed amount is taken, because of section 6B of the ITAA 1936, to be attributable to the dividend paid to the trustee. Subsection 6B(1) of the ITAA 1936 provides: For the purposes of this Act, an amount of income derived by a person, not being a dividend paid by a company to the person as a shareholder in the company, shall be deemed to be attributable to a dividend: a) if the person derived the amount of income by reason of being the beneficial owner of the share in respect of which the dividend was paid; or b) if the person derived the amount of income as a beneficiary in a trust estate and the amount of income can be attributed, directly or indirectly, to the dividend or to an amount that is deemed, by an application of successive applications of this subsection, to be an amount of income attributable to the dividend. For paragraph 6B(1)(b) of the ITAA 1936 to apply: In this case, notwithstanding that the trust distribution is assessable under Division 230, the amount included in the taxpayer's assessable income is an amount of income derived by the taxpayer as a beneficiary in a trust estate. The trust distribution is not simply a value reflected in the movement of the price of the units. The distribution is recognised separately as an item of income being a share of the trust income and includes the share of the dividend received by the trustee. This part of the distribution is clearly attributable to the dividend for the purposes of paragraph 6B(1)(b) of the ITAA 1936. Therefore paragraph 770-130(3)(a) is satisfied. Paragraphs 770-130(3)(b) and (c) are also satisfied because the amount of foreign income tax has been paid in respect of the dividend and the gain is less than it would have been if that tax had not been paid. Given that the requirements of subsection 770-130(3) are satisfied, the taxpayer will be taken to have paid foreign income tax in respect of the amount derived by the taxpayer which represents the foreign dividend. Accordingly, the taxpayer is entitled to a foreign income tax offset under subsection 770-10(1) for foreign income tax paid in respect of the amount included in the taxpayer's assessable income under section 230-15.", "Date_of_Decision": "23 November 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6B(1) paragraph 6B(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign dividend withholding tax Trust distributions", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010216", "Unmatched_Content": "Taxable Income per Trust statement | Keywords Foreign dividend withholding tax Trust distributions"}
{"ATO_ID_Number": "ATO ID 2009/115", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: identification of arrangement - facility agreement", "Issue": "Will the rights and obligations under a facility agreement form a single arrangement under subsection 230-55(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The rights and obligations under a facility agreement will form a single arrangement under subsection 230-55(4) of the ITAA 1997. The rights and obligations in respect of each draw down under the facility agreement will not constitute separate arrangements.", "Facts": "A company (the borrower) enters into a syndicated loan facility agreement with an arms length party (the lender). The borrower is a special purpose vehicle created to finance a specific project. The lender will commit to advance funds up to an agreed credit limit provided certain pre-requisites are met. These include the completion and service by the borrower to the lender of a valid notice of draw down stating, amongst other things, the amount to be drawn down and the term required. The timing and the amount of each draw down is set out in, and occurs under, a pre-determined draw down schedule. The borrower intends to draw down the full amount available under the facility for the specific purpose of funding the project. The first draw down will occur shortly after the facility becomes available. The borrower will pay a commercial rate of interest which is applied to the balance of the funds drawn down that remain outstanding from time to time under the facility. The loan facility agreement itself will terminate in five years and each draw down will be required to be repaid on the basis of a common amortisation schedule and must be fully repaid within five years. Each successful notice of draw down imports the terms and conditions contained in the facility agreement.", "Reasons_for_Decision": "Summary: In order to determine whether Division 230 of the ITAA 1997 applies to certain rights and obligations, those rights and obligations need to be tested to see if they meet the definition of a financial arrangement in subsection 230-45(1) of the ITAA 1997. The identification of a financial arrangement is in turn dependent on the identification of the parameters of the arrangement as determined by subsection 230-55(4) of the ITAA 1997. Whether a number of rights and/or obligations form an arrangement or are two or more separate arrangements is a question of fact and degree. Division 230 of the ITAA 1997 relies on the broad definition of an arrangement under subsection 995-1(1) of the ITAA 1997. Division 230 also provides additional guidance as to which specific rights and obligations should be combined to form the relevant arrangement to be tested for the purposes of the Division. A contract will often define the boundaries of an arrangement, especially where the form of the contract is consistent with its substance. Relevantly, paragraph 2.47 of the Explanatory Memorandum to the Taxation Laws Amendment (Taxation of Financial Arrangements) Bill 2008 states: \"The various rights and obligations subsisting under a contract will typically constitute the relevant arrangement for the purposes of Division 230. That is, the contract is typically viewed on a 'stand alone' basis. In this context, the contract is neither aggregated with another contract (or contracts), nor disaggregated into component parts, when determining the relevant arrangement to be considered under Division 230.\" However, section 230-55 of the ITAA 1997 is not limited by the form of a single contract in the identification of an arrangement. Specifically, under subsection 230-55(4) of the ITAA 1997 regard is to be had to a range of factors in order to determine whether the arrangement comprises other additional rights and obligations or is limited to only some of those rights and obligations. The combination of various rights and obligations under subsection 230-55(4) is an objective enquiry, the purpose of which is to identify the correct 'unit of taxation' in the context of Division 230 of the ITAA 1997. The issue that arises in respect of a facility agreement is how the various rights and obligations are combined under subsection 230-55(4) of the ITAA 1997 to form an arrangement and whether or not the draw downs made under the facility agreement form individual arrangements in their own right. Subsection 230-55(4) of the ITAA 1997 states that whether a number of rights and/or obligations form an arrangement or are two or more separate arrangements is a question of fact and degree that you determine having regard to the following: The facility agreement creates contingent rights to receive and obligations to provide financial benefits for the lender and the borrower. Under section 230-85 of the ITAA 1997, rights and obligations subject to a contingency are treated as rights and obligations for the purposes of Division 230 of the ITAA 1997. When each drawn down is made, rights and obligations that are not subject to a contingency exist between the lender and the borrower. These include, for the lender, an obligation to provide financial benefits (advances of funds) and rights to receive financial benefits (repayment of principal and interest). For the borrower it has, in respect of each draw down, a right to receive financial benefits (the right to receive the principal amount under the draw down request) and obligations to provide financial benefits (the obligations to make principal and interest payments). Having regard to the factors in subsection 230-55(4) of the ITAA 1997, it is appropriate to consider the rights and obligations comprising the facility agreement as constituting a single arrangement. Therefore, the rights and obligations in respect of each individual draw down are not considered to constitute separate arrangements in their own right. Specifically, the facility agreement is entered into to finance a project and the parties intend that all of the funds available under the facility agreement will be utilised. The first draw down will occur within a short timeframe after the facility becomes available and subsequent draw downs will occur under a pre-determined draw down schedule which directly relates to the borrower's financial obligations under the project. The amounts drawn down under the facility are repaid on the basis of a common amortisation schedule, that is, amounts drawn down form an overall outstanding balance owing by the borrower and interest is calculated on that overall outstanding balance. Commercially this indicates that the facility agreement and the draw downs made under it are regarded as a series of rights and obligations that form a whole. These circumstances, together with the purpose and intention of the parties, indicate that the rights and obligations under the facility agreement comprise a single arrangement. The rights and obligations in respect of each draw down should not be considered as individual arrangements. Whether or not the facility agreement is a financial arrangement will depend upon whether it satisfies the definition of 'financial arrangement' in subsection 230-45(1) of the ITAA 1997.", "Date_of_Decision": "6 October 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 230-45(1) section 230-55 subsection 230-55(4) section 230-85 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Arrangement Facility agreement", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009115", "Unmatched_Content": "Keywords Arrangement Facility agreement"}
{"ATO_ID_Number": "ATO ID 2009/142", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of Financial Arrangements: financial arrangement - is a forward purchase contract 'cash settlable' under paragraph 230-45(2)(e) of the Income Tax Assessment Act 1997", "Issue": "Does a forward purchase contract under which a taxpayer receives physical delivery of a commodity and which incorporates a 'dealer's margin' meet the definition of 'cash settlable' under paragraph 230-45(2)(e) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The words 'you deal with the right or obligation, or with similar rights or obligations' in paragraph 230-45(2)(e) of the ITAA 1997 require that a taxpayer must deal with the rights and/or obligations in relation to the commodity rather than deal with the commodity itself. The fact that the taxpayer receives a dealer's margin so described is not relevant because the taxpayer does not deal with the rights and/or obligations themselves in order to generate a profit from a dealer's margin.", "Facts": "The taxpayer's operation includes entering into a forward purchase contract with a supplier to procure a commodity. The calculation of the purchase price incorporates a fixed amount known as a 'dealer's margin'. The date of the agreement is usually up to three years before the date of delivery. The taxpayer will then enter into a forward sale contract with a buyer to sell the same commodity. The date of the agreement is usually up to one and a half years before the date that the commodity is expected to be received from the supplier. At all times, the taxpayer will receive physical delivery of the commodity from the supplier under the forward purchase contract before delivering the same to the buyer under the forward sale contract.", "Reasons_for_Decision": "Summary: Division 230 of the ITAA 1997 applies to financial arrangements. For the purposes of this analysis it is considered that, having regard to the factors in subsection 230-55(4) of the ITAA 1997, the forward purchase contract will constitute a single arrangement. A 'financial arrangement' is defined in subsection 995-1(1) of the ITAA 1997 by reference to sections 230-45 to 230-55 of the ITAA 1997. Specifically, paragraphs 230-45(1)(a) and (b) of the ITAA 1997 state that you have a financial arrangement, if you have, under an arrangement, a cash settlable legal or equitable right to receive a financial benefit or an obligation to provide a financial benefit. Whether a right to receive or obligation to provide a financial benefit is cash settlable is specified in subsection 230-45(2) of the ITAA 1997. Relevantly, paragraph 230-45(2)(a) of the ITAA 1997 states that 'a right you have to receive, or an obligation you have to provide, a financial benefit is cash settlable if...the benefit is money or a money equivalent'. Paragraph 230-45(2)(e) of the ITAA 1997 further provides that 'a right you have to receive, or an obligation you have to provide, a financial benefit is cash settlable if, and only if, you deal with the right or obligation, or with similar rights or obligations, in order to generate a profit from short-term fluctuations in price, from a dealer's margin, or from both...' Under the forward purchase contract, the taxpayer has a right to receive the commodity from the supplier and an obligation to pay the contracted price. Both the commodity and the contracted price satisfy the definition of financial benefit (defined in subsection 955-1(1) of the ITAA 1997 by reference to subsection 974-160(1) of the ITAA 1997 as, amongst other things, 'anything of economic value'). It is then relevant to consider whether the right to receive the commodity and the obligation to pay the contracted price are a cash settlable right and obligation as defined in subsection 230-45(2) of the ITAA 1997. The taxpayer's obligation to pay the contracted price under the forward purchase contract satisfies the definition of cash settlable pursuant to paragraph 230-45(2)(a) of the ITAA 1997 as the obligation is in relation to a financial benefit that is a sum of money. However, the taxpayer's right to receive the commodity from the supplier under the forward purchase contract will not satisfy paragraph 230-45(2)(a) of the ITAA 1997. The right to receive the commodity under the forward purchase contract is not money or a money equivalent as defined. The issue is whether the right to receive the commodity satisfies the requirements of paragraph 230-45(2)(e) of the ITAA 1997 on the basis that, under the forward purchase contract, the taxpayer deals with the right in order to generate a profit from short-term fluctuations in price, from a 'dealer's margin', or from both. The phrase 'deal with the right or obligation' is not defined; therefore it will take its ordinary meaning. The phrase clearly requires you to deal with the 'right or obligation' rather than deal with the commodity itself. In order to satisfy the requirements of paragraph 230-45(2)(e) of the ITAA 1997, what has to be dealt with in the relevant sense is the actual right(s) and obligation(s) themselves, that is, the intangible right(s) and obligation(s), as distinct from the physical piece of property represented by the commodity. This interpretation is consistent with paragraph 2 81 of the Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 which states: The sort of dealer's margin in view in paragraph 230-45(2)(e) of the ITAA 1997 is a reference to the sort of margin that someone who deals in the right or obligation has, rather than to the sort of margin that someone who deals in the commodity itself has. In this case, the taxpayer is not dealing in the relevant right to the commodity itself in order to generate a profit. That there is an amount which is called a 'dealer's margin', paid as part of a transaction dealing in 'the commodity' to generate a profit, does not satisfy paragraph 230-45(2)(e) of the ITAA 1997. Accordingly, the financial benefit constituted by the taxpayer's right to receive the commodity under the forward purchase contract does not meet the definition of 'cash settlable' under paragraph 230-45(2)(e).", "Date_of_Decision": "16 November 2009", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 230-45 paragraph 230-45(1)(a) paragraph 230-45(1)(b) subsection 230-45(2) paragraph 230-45(2)(a) paragraph 230-45(2)(e) section 230-50 section 230-55 subsection 230-55(4) subsection 974-160(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/115", "Subject_References": "", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009142", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2014/25", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of financial arrangements: is a deposit a guarantee or indemnity subject to section 230-460", "Issue": "Is a term deposit provided as security for a performance bond a right or obligation under a guarantee or indemnity subject to the exception in subsection 230-460(8) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The term deposit is not a guarantee or indemnity in terms of subsection 230-460(8) of ITAA 1997.", "Facts": "The taxpayer was required by the relevant state government to lodge a satisfactory bond before approval to commence mining operations could be given. The bond must be in the form of a guarantee or indemnity issued by an approved third party financial institution. The bond is a contract between the state government and the third party financial institution acceptable to the Minister. The bond provides the state government with security should the taxpayer fail to meet agreed upon environmental obligations. In the event of taxpayer default, the agreed sum will be forfeited by the financial institution to the state government. The financial institution requires a term deposit from the taxpayer to secure the bond. The taxpayer has a right to receive interest from the term deposit until the term deposit has been returned or forfeited. The bond and term deposit are separate contracts and each has its own legal rights and obligations. They are separate financial arrangements under subsection 230-55(4) of the ITAA 1997. The taxpayer is subject to Division 230 on a mandatory basis as the taxpayer has an aggregated turnover in excess of $100 million.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1997 unless otherwise indicated. Division 230 deals with the tax treatment of gains and losses from financial arrangements. Section 230-15 broadly provides that gains and losses from 'financial arrangements' are assessable / deductible from assessable income. Subsection 230-460(1) provides that Division 230 does not apply to gains and losses from a financial arrangement for any income year to the extent that the rights and/or obligations under the arrangement are the subject of an exception under section 230-460. Subsection 230-460(8) provides an exception for a 'right or obligation under a guarantee or indemnity' (subject to certain exceptions). The Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008 (Cth) notes at paragraph 2.168: What is meant by a 'guarantee' or an 'indemnity' takes on its ordinary meaning to include a promise to answer for the debt or default of another, or to make good a loss suffered through a third party. Generally: '... A guarantee is essentially a promise to answer for the debt, default or miscarriage of another and it does not include as such the case of a person incurring an additional liability in respect of a sum of money for which he is already liable.' [1] Bank of New South Wales v. Permanent Trustee Co of New South Wales Ltd (1943) 68 CLR 1 (Bank of NSW case) , concerns a person who, being under a liability as guarantor, gave a mortgage to secure the payment of money under the guarantee. At issue was whether the obligation fell within a debt moratorium. In the course of his reasons for decision, Latham CJ stated, at 11, that: 'A person cannot guarantee the payment of money by himself. He may undertake an additional obligation to pay money which he is already bound to pay, but that added obligation cannot be described as a guarantee.' In this case the financial institution has promised the state government it will answer for default of the taxpayer to meet agreed upon environmental obligations. Upon default, the financial institution will pay the Minister an agreed sum. The arrangement between financial institution and the state government has created rights and obligations under a guarantee or indemnity. The arrangement between the financial institution and taxpayer whereby the taxpayer provides a term deposit to secure the bond provides security for the guarantee created by the financial institution. The deposit is held by the financial institution to secure the guarantee or indemnity against the performance of the taxpayer's obligations under the contract. If the taxpayer fails to perform the obligations the deposit is at risk of forfeiture. It is returned to the taxpayer upon performance of obligations. In terms of Bank of NSW, the deposit is not a 'guarantee' but is rather 'an additional obligation to pay money...' Therefore as the deposit is not a guarantee or indemnity it would be subject to taxation of financial arrangements rules as it meets the definition of a financial arrangement pursuant to section 230-45.", "Date_of_Decision": "12 May 2014", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 Division 230 section 230-15 section 230-45 subsection 230-55(4) section 230-460 subsection 230-460(1) subsection 230-460(8)", "Related_Public_Rulings_and_Determinations": "TR 2012/4 | TR 96/23", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Financial institution deposits Guarantees Indemnity Taxation of financial arrangements", "Case_References": "Bank of New South Wales v Permanent Trustee Co of New South Wales Ltd (1943) 68 CLR 1 (1943) 17 ALJ 186 [1943] HCA 27", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2008", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201425", "Unmatched_Content": "Add \"section 230-460\" under Income Tax Assessment Act 1997. | Related ATO Interpretative Decisions | ATO ID 2002/958 was withdrawn on 22 April 2016. | Related Public Rulings (including Determinations) TR 2012/4 TR 96/23 | Keywords Financial institution deposits Guarantees Indemnity Taxation of financial arrangements"}
{"ATO_ID_Number": "ATO ID 2009/143", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Taxation of Financial Arrangements: financial arrangements - offsetting contracts - requirements under subsection 230-530(4) of the Income Tax Assessment Act 1997", "Issue": "Where a taxpayer's forward purchase contract and forward sale contract in respect of a commodity do not satisfy the definition of 'financial arrangement' under section 230-45 of the Income Tax Assessment Act 1997 (ITAA 1997), will the contracts meet the requirements of subsection 230-530(4) of the ITAA 1997 if the taxpayer deals in the commodity through the performance of offsetting contracts?", "Decision": "Yes. Division 230 of the ITAA 1997 will apply to the forward purchase contract and forward sale contract as if each arrangement constituted a financial arrangement under subsection 230-530(4) of the ITAA 1997.", "Facts": "The taxpayer's operation includes entering into a forward purchase contract with a supplier to procure a commodity. The taxpayer will then enter into a forward sale contract with a buyer to sell the same commodity. At all times, the taxpayer will receive physical delivery of the commodity from the supplier under the forward purchase which is then sorted and stored. The taxpayer does not alter or modify the commodity before it is delivered to a buyer under the terms of the forward sale contract.", "Reasons_for_Decision": "Summary: Division 230 of the ITAA 1997 applies to financial arrangements as defined. The forward purchase and forward sale contracts do not meet the definition of a financial arrangement under paragraph 230-45(2) of the ITAA 1997 because the taxpayer's right to receive the commodity from the supplier (under the forward purchase contract) and the taxpayer's obligation to provide the commodity to the buyer (under the forward sale contract) are not a cash settlable right and obligation. Neither the forward purchase contract nor the forward sale contract meet the definition of a financial arrangement under section 230-50 of the ITAA 1997. However, Subdivision 230-J of the ITAA 1997 extends the operation of Division 230 to arrangements that fall within it. The provisions within section 230-530 of Division 230 of the ITAA 1997 commence with the words 'This Division also applies to...'. Accordingly, for arrangements that satisfy the requirements in section 230-530 of the ITAA 1997, Division 230 of the ITAA 1997 will apply to those arrangements 'as if' each arrangement constituted a financial arrangement. The phrase 'as if' takes on its ordinary meaning which requires that an imaginary state of affairs be treated as real, that is, that a particular circumstance be considered as something else without altering what it actually is. Therefore Subdivision 230-J of the ITAA 1997 treats each of the arrangements described in subsections 230-530(1) to (4) of the ITAA 1997 as meeting the definition of a financial arrangement, provided that each of the requirements contained within any one of the subsections are satisfied. Relevantly, subsection 250-530(4) of the ITAA 1997 is concerned with offsetting commodity contracts. Specifically, subsection 230-530(4) applies to a contract to which the taxpayer is a party as if the contract were a financial arrangement if the circumstances outlined in paragraphs 230-530(4)(a) to (e) are satisfied. Each of these paragraphs is considered below. Paragraph 230-530(4)(a) of the ITAA 1997 provides: You have a right to receive or an obligation to provide a commodity under the contract The taxpayer has a right to receive (under the forward purchase contract) and an obligation to provide (under the forward sale contract) a commodity. Accordingly, this paragraph is satisfied in respect of both the forward purchase contract and the forward sale contract. Paragraph 230-530(4)(b) of the ITAA 1997 provides: You have a practice of dealing in the commodity through the performance of offsetting contracts to receive and provide the commodity The application of this paragraph necessitates an understanding of the phrase 'the performance of offsetting contracts'. As the phrase is not defined it takes its ordinary meaning. The Macquarie Online Dictionary (2001) advises that 'offset' means: The context suggests that the offsetting is as to receipt and provision of the commodity. The contracts to receive and provide the commodity need not be part of the same arrangement, but together must provide an offsetting function across the duration of the contracts. Here, the taxpayer's business is to enter into forward purchases and sales of the commodity so as to make a profit from the difference in prices. Accordingly this paragraph is satisfied. Paragraph 230-530(4)(b) of the ITAA 1997 does not use the term 'arrangement'; if the provisions of subsection 230-530(4) are met then the offsetting contracts are taken to be 'financial arrangement(s)' and Division 230 of the ITAA 1997 will apply to them. This means that each contract becomes a financial arrangement for the purposes of Division 230. Accordingly this paragraph is satisfied in respect of both the forward purchase contract and forward sale contract. Paragraph 230-530(4)(c) of the ITAA 1997 provides: You do not have, as your sole or dominant purpose for entering into the contract, the purpose of receiving or delivering the commodity as part of your expected purchase, sale or usage requirements The High Court in the case of Federal Commissioner of Taxation v. Spotless Services Ltd & Anor (1996) 186 CLR 404; 96 ATC 5201; 34 ATR 183 described 'dominant purpose' in its ordinary meaning as 'that purpose which was the ruling, prevailing, or most influential purpose...'. Paragraph 230-530(4)(c) of the ITAA 1997 must be read in the context of paragraph 230-530(4)(b) of the ITAA 1997. Absent this context, entering into offsetting contracts to receive and provide the commodity might be understood to be 'receiving or delivering the commodity as part of your expected purchase [or] sale [or usage] ... requirements'. The word usage refers to the using, treatment or employment of the commodity which is different to the act of dealing. This term suggests some form of processing which uses the article and involves the alteration of the article into something else. Therefore, a purpose of what might be called 'mere dealing' in a commodity by the entry into offsetting contracts will not prevent the satisfaction of paragraph 230-530(4)(c) of the ITAA 1997. But a sole or dominant purpose of trading by otherwise receiving, delivering or using the commodity will. The requirement in this paragraph is satisfied as the taxpayer does not have a sole or dominant purpose of using the commodity; all that is intended is to offset the contracts to make a profit. Paragraphs 230-530(4)(d) and (e) of the ITAA 1997 deal with the taxpayer's specific circumstances in relation to the application of the fair value and financial reports elections and the accounting standards. These requirements are both able to be satisfied in this case. Accordingly, as each of the paragraphs in subsection 230-530(4) of the ITAA 1997 are satisfied, Division 230 of the ITAA 1997 applies to the forward purchase contract and forward sale contract as if each were a 'financial arrangement'.", "Date_of_Decision": "20 November 2009", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 230-45 subsection 230-45(2) section 230-50 section 230-530 subsection 230-530(4) paragraph 230-530(4)(a) paragraph 230-530(4)(b) paragraph 230-530(4)(c) paragraph 230-530(4)(d) paragraph 230-530(4)(e)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/115 | ATO ID 2009/142", "Subject_References": "Arrangement Forward contracts", "Case_References": "Federal Commissioner of Taxation v. Spotless Services Ltd & Anor (1996) 186 CLR 404 (1996) 96 ATC 5201 (1996) 34 ATR 183", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009143", "Unmatched_Content": "Keywords Arrangement Forward contracts"}
{"ATO_ID_Number": "ATO ID 2013/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: United States Umbrella Partnership Real Estate Investment Trust arrangement and management investment trusts", "Issue": "Is a United States Limited Partnership (US LP) that is a member of an Australian trust and operating in an 'umbrella partnership real estate investment trust' (UPREIT) arrangement, an entity that is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the Taxation Administration Act 1953 (TAA) (repealed and replaced with section 275-20 of the Income Tax Assessment Act 1997 (ITAA 1997) effective 1 July 2016).", "Decision": "Yes. The US LP that is a member of an Australian trust and operating in an UPREIT arrangement is an entity that is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the TAA.", "Facts": "US LP was formed as a limited partnership under the Delaware Revised Uniform Limited Partnership Act (DRULP Act), an Act made by the legislature of the State of Delaware in the US. US LP is governed by the terms of the DRULP Act and the Limited Partnership Agreement (LP Agreement), an agreement established pursuant to the DRULP Act. The partners of US LP make capital contributions in exchange for units in the partnership. A 'unit' in US LP provides the partner with a share in US LP's interests, based on the class of unit as prescribed in the LP Agreement. US LP has one General Partner and 2,000 unrelated Limited Partners. The General Partner owns 98% of the partnership units in US LP, while the remaining 2% of the partnership units are held by the Limited Partners. The General Partner of US LP is a US Real Estate Investment Trust (US REIT). US REIT is formed under the Corporations and Associations of the Annotated Code of Maryland (the MD Code) of the State of Maryland in the US and qualifies as a REIT under the US Internal Revenue Code 1986 (the US IRC). US LP is an operating partnership as part of an UPREIT arrangement with US REIT. As part of the UPREIT arrangement between US LP and US REIT, the LP Agreement provides that the business conducted by US LP shall be limited to and conducted in such a manner as to permit the US REIT (as it's General Partner) at all times to be classified as a REIT. To ensure US REIT maintains its REIT status, the UPREIT arrangement with US LP involves the following conditions: The LP Agreement provides that all management powers over the business and affairs of US LP are and shall be exclusively vested in the US REIT and that no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the partnership. US REIT has formally delegated the day to day control of the operations of US LP to the Board of Directors of US REIT. The US REIT Board of Directors has oversight over the operation of US LP in accordance with the MD Code, but it has delegated its day to day responsibilities to the employees of US LP by exercising the delegation power it has under the LP Agreement. The employees of US LP manage and control all the facets of the day to day operations of US LP. These employees are not partners of US LP and they have not made any contributions to US LP as consideration to acquire rights to benefits produced by US LP.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA (repealed and replaced with section 275-10 of the ITAA 1997 effective 1 July 2016) deals with the Pay As You Go withholding obligations for distributions of managed investment trust income to foreign residents. Under subsection 12-400(1) of Schedule 1 to the TAA, there are various conditions that need to be considered in order to determine whether a particular trust is a managed investment trust in relation to an income year. Paragraph 12-400(1)(f) includes the requirement that the trust must satisfy the widely-held requirements in section 12-402 of Schedule 1 to the TAA. As part of the 'widely held requirements' contained in section 12-402 of Schedule 1 to the TAA for certain managed investment trusts, subsection 12-402(3) of Schedule 1 to the TAA lists certain widely-held entities, whose participation interest in the trust are multiplied by 50 to provide a 'notional number' of members of the trust under subsection 12-402(2) of Schedule 1 to the TAA. This, in turn, is used to determine whether the trust then satisfies the widely-held requirements in subsection 12-402(1) of Schedule 1 to the TAA. Paragraph 12-402(3)(e) of Schedule 1 to the TAA specifies: an entity: (i) that is recognised under a *foreign law as being used for collective investment by pooling the contributions of its members as consideration to acquire rights to benefits produced by the entity; and (ii) that has at least 50 members; and (iii) the contributing members of which do not have day-to-day control over the entity's operation. According to the Revised Explanatory Memorandum (EM) to the Tax Laws Amendment (2010 Measures No 3) Bill 2010 (TLAB (No 3) Bill 2010), which introduced the former wording of paragraph 12-402(3)(e) of Schedule 1 to the TAA upon which the current wording is based, the provision targets: ... a foreign collective investment vehicle, which is an entity with at least 50 members that is recognised under a foreign law as being used for collective investment where the member contributions are pooled together in exchange for rights to the benefits produced by the entity and where members do not have day-to-day control over the operation of the entity. Therefore, US LP must satisfy each of the following requirements: | Detailed Reasoning - Recognised under a foreign law as being used for collective investment: The first requirement is that US LP must be recognised under a foreign law as an entity which is used for collective investment. US LP is established under, and governed by the provisions of, the DRULP Act. There are also several restrictions placed on US LP under the LP Agreement, which is established pursuant to the DRULP Act. A 'foreign law' is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as a law of a foreign country. Accordingly, the DRULP Act, which is law of a foreign country (namely, the US), is a foreign law for the purposes of paragraph 12-402(3)(e) of Schedule 1 to the TAA. Therefore, for the purposes of applying paragraph 12-402(3)(e) of Schedule 1 to the TAA, US LP is an entity that is 'recognised' under a foreign law, namely the DRULP Act and the LP Agreement established pursuant to the DRULP Act. The DRULP Act requires that the limited partnership is formed by two or more persons and that it may carry on any lawful business, purpose or activity, whether or not for profit. The DRULP Act itself does not, therefore, require that a Delaware limited partnership be involved in 'collective investment'. However, US LP is an 'operating partnership' within an UPREIT arrangement involving US REIT. As part of this arrangement, US LP must operate the business so as to ensure that US REIT maintains its status as a REIT under the US IRC. To this end, the LP Agreement provides that the business conducted by US LP shall be limited to and conducted in such a manner as to permit the US REIT (as it's General Partner) at all times to be classified as a REIT. The UPREIT arrangement also involves US LP, as the operating partnership: Furthermore, US REIT is the sole General Partner of US LP and cannot directly or indirectly own any other significant assets other than the partnership units in US LP. In addition, no person other than US REIT may own more than 4.9% by value of US LP interests. These conditions of the UPREIT arrangement indicate that, in effect, US LP is carrying on the substance of the real estate investment business of US REIT. Although the DRULP Act allows US LP to engage in non-investment activities in which a REIT cannot engage, the LP Agreement made pursuant to the DRULP Act prohibits the US LP from engaging in any activities that is inconsistent with US REIT's status as a REIT. Furthermore, the LP Agreement outlines the rights, entitlements and obligations of its partners in a fashion that is consistent with a collective investment vehicle. Accordingly, in the context of its role as an operating partnership within the UPREIT arrangement with US REIT, US LP is recognised under a foreign law as being used for collective investment for the purposes of paragraph 12-402(3)(e) of Schedule 1 to the TAA. | Detailed Reasoning - Pooling of contributions as consideration to acquire rights to benefits produced by the entity: The capital contributions of the partners to US LP are made in exchange for limited partnership units (for the limited partners) and general partnership units (for US REIT as the general partner). A 'partnership unit' in US LP provides the partner with a share in the partnership's interest, based on the class of unit as prescribed in the LP Agreement. Accordingly, the requirement in paragraph 12-402(3)(e) of Schedule 1 to the TAA that there is a pooling of contributions as consideration to acquire rights to benefits produced by US LP is satisfied. | Detailed Reasoning - Must have at least 50 members: US REIT owns 98% of the partnership units in US LP, while the remaining partnership units are held by approximately 2,000 unrelated third parties. US LP therefore has at least 50 members. | Detailed Reasoning - The contributing members of the entity do not have day to day control over the operation of the entity: The LP Agreement provides that all management powers over the business and affairs of US LP are and shall be exclusively vested in the US REIT (as the General Partner) and that no Limited Partner shall have any right to participate in or exercise control or management power over the business and affairs of the partnership. However, US REIT has formally delegated the day to day control of the operations of US LP to the Board of Directors of US REIT. The Board of Directors has oversight over the operation of US LP in accordance with the MD Code, but it has delegated its day to day responsibilities to the employees of US LP by exercising the powers it has under the LP Agreement. The employees of US LP manage and control all the facets of the day to day operations of US LP. These employees are not partners of US LP and they have not made any contributions to US LP. As none of the employees of US LP have made any contributions to US LP and do not have any interest in the Partnership, the contributing members of US LP do not have day to day control over the operation of the entity for the purposes of paragraph 12-402(3)(e) of Schedule 1 to the TAA. | Detailed Reasoning - Conclusion: US LP, in its capacity as an operating partnership within an UPREIT arrangement, is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the TAA. Indeed, as noted at paragraph 5.79 of the Revised EM to TLAB (No 3) Bill 2010, paragraph 12-402(3)(e) of Schedule 1 to the TAA is intended to 'capture foreign collective investment vehicles, such as US real estate investment trusts'. Although US LP itself is not a REIT, it effectively operates as one within the UPREIT arrangement with US REIT, conducting its business as the operating partnership to ensure that US REIT maintains its status as a REIT under the US IRC. Accordingly, it is consistent with the policy intention of the provision that US LP, in its capacity as a operating partnership within an UPREIT structure with US REIT, is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the TAA.", "Date_of_Decision": "21 December 2012", "Year_of_Income": "Year ending 30 June 2013", "Legislative_References": "Taxation Administration Act 1953 Schedule 1, subsection 12-402(1) Schedule 1, paragraph 12-402(1)(f) Schedule 1, subsection 12-402(3) Schedule 1, paragraph 12-402(3)(e)", "Related_Public_Rulings_and_Determinations": "ATO ID 2010/143", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Collective investment vehicles Investment trusts Limited partnerships PAYG withholding United States", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No 3) Bill 2010", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20133", "Unmatched_Content": "Inserted new legislative reference (section 275-10) | Inserted new legislative reference (section 275-20) | Related Public Rulings (including Determinations) ATO ID 2010/143 | Keywords Collective investment vehicles Investment trusts Limited partnerships PAYG withholding United States"}
{"ATO_ID_Number": "ATO ID 2011/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Irish Investment Limited Partnerships and managed investment trusts", "Issue": "Is an Irish Investment Limited Partnership (Irish ILP) that is a member of an Australian Trust, an entity that is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)?", "Decision": "Yes. The Irish ILP that is a member of an Australian Trust is an entity that is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953.", "Facts": "The Irish ILP is authorised as an 'investment limited partnership' by the Central Bank of Ireland pursuant to the provisions of the Republic of Ireland's Investment Limited Partnerships Act 1994 . According to Regulatory Notices made by the Irish Financial Services Regulatory Authority (a division of the Central Bank of Ireland), an authorised Irish ILP is recognised as a 'collective investment scheme'. Pursuant to the Irish ILP's Partnership Agreement, the principal business of the Irish ILP is the investment of its funds in real or personal property of whatever kind, including securities, and wherever located. The Irish ILP consists of one General Partner and at least 50 Limited Partners. The General Partner is an Irish private limited company. For a commercial fee, the General Partner manages the day-to-day operation of the Irish ILP, including all investment and administrative decisions. To assist in the day-to-day operation of the Irish ILP, the General Partner delegates some of the day-to-day activities to a Management Company and an Administrator, neither of which have any interest in the Irish ILP. The General Partner does not provide any capital contribution to the Irish ILP and does not have any interest in the Irish ILP's investment proceeds. The Limited Partners are investors that have each acquired an interest in the Irish ILP by making a minimum capital contribution as required in the Irish ILP's Partnership Agreement. The Limited Partners are entitled to the Irish ILP's investment proceeds, in accordance with their share of the interest in the partnership. No Limited Partner takes part in, or has control over, the day-to-day operation of the Irish ILP and no Limited Partner has the right to choose which investments made by the Irish ILP they will participate in. All contributions made by the Limited Partners are entrusted for safekeeping to a Custodian appointed by the General Partner.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA 1953 deals with Pay As You Go withholding obligations for distributions of managed investment trust income. As part of the 'widely-held requirements' for certain management investment trusts, subsection 12-402(3) of Schedule 1 to the TAA 1953 specifies certain widely-held entities whose participation interests in the trust are multiplied by 50 to provide a 'notional number' of members of the trust. This, in turn, is used to determine whether the trust then satisfies the widely-held requirements in subsection 12-402(1) of Schedule 1 to the TAA 1953. Paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 specifies the following type of entity: an entity that is recognised under a *foreign law as being used for collective investment by means of pooling the contributions of at least 50 members of the entity as consideration to acquire rights to benefits produced by the entity, if the members of the entity do not have day-to-day control over the operation of the entity. According to the Revised Explanatory Memorandum (EM) to the Tax Laws Amendment (2010 Measures No 3) Bill 2010 (TLAB (No 3) Bill 2010), paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 targets: ... a foreign collective investment vehicle, which is an entity with at least 50 members that is recognised under a foreign law as being used for collective investment where the member contributions are pooled together in exchange for rights to the benefits produced by the entity and where members do not have day-to-day control over the operation of the entity. ... (paragraph 5.79 of the Revised EM to the TLAB (No 3) Bill 2010). Therefore, the Irish ILP must be recognised under a foreign law as being used for collective investment and the entity itself must also satisfy the remaining three requirements of paragraph 12-402(3)(e). That is, the Irish ILP must: | Detailed Reasoning - 'recognised under a foreign law as being used for collective investment': The first requirement involves the entity being recognised under a foreign law as an entity which is used for collective investment. The Irish ILP is authorised as an investment limited partnership by the Central Bank of Ireland in accordance with the provisions of Ireland's Investment Limited Partnerships Act 1994 . To achieve its status as an Irish investment limited partnership under the Investment Limited Partnerships Act 1994 (Ireland), the entity must: Furthermore, pursuant to Regulatory Notices issued by the Irish Financial Services Regulatory Authority, investment limited partnerships are recognised as collective investment schemes. A 'foreign law' is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 as a law of a foreign country. The Investment Limited Partnership Act 1994 is a law of the Republic of Ireland and is accordingly a 'foreign law' for the purposes of paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953. Therefore, as an authorised investment limited partnership that is recognised as a collective investment scheme under the Irish law, the Irish ILP is recognised under a foreign law as being used for collective investment. | Detailed Reasoning - 'pooling of contributions of at least 50 members of the entity': Paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 requires that the entity pool the contributions of at least 50 members. The contributions made by all of the Limited Partners of the Irish ILP are entrusted for safekeeping to the Custodian, in accordance with the requirements of the Irish law. The Limited Partners then do not, under the Partnership Agreement, have the right to choose which of the investments made by the Irish ILP they can participate in. The contributions are therefore 'pooled'. As there are more than 50 Limited Partners of the Irish ILP, this requirement that there is a pooling of contributions of at least 50 member of the entity in paragraph 12-402(3)(e) of the Schedule 1 to the TAA 1953 is satisfied. | Detailed Reasoning - 'as consideration to acquire rights to benefits produced by the entity': Paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 requires there be consideration from the 50 or more members of the entity to acquire rights to benefits produced by the entity. This requirement is satisfied as each Limited Partner provides a capital contribution to the Irish ILP and receives their share of the ILP's investment proceeds based on the amount of their contribution. | Detailed Reasoning - 'members of the entity do not have day-to-day control over the operation of the entity': The final requirement in paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 is that the members of the entity do not have day-to-day control over the operation of the entity. This requirement has its origins in the previous formulation of paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 which referred to the definition of 'managed investment scheme' in section 9 of the Corporations Act 2001 . Context and legislative history demonstrate that this requirement, in conjunction with the aforementioned requirements, is intended to encapsulate entities where the members (essentially the investors) do not have day-to-day control over their investment but where that function is 'handed-over' and performed by a professional manager. That is, the requirement delineates between investments where control of the collective funds is vested in the group of investors and where control is vested in an entity who manages the funds on behalf of the group. The organisation and management of the Irish ILP in this arrangement meets the latter description. The Limited Partners, the investors, do not have day-to-day control over their investments, the investment decisions of the Irish ILP or the daily management of the Irish ILP. It is only the General Partner, as assisted by the Management Company and the Administrator, that has control. | Detailed Reasoning - Conclusion: As each of the elements are satisfied in relation to the Irish ILP, the Irish ILP is an entity covered by paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953.", "Date_of_Decision": "16 December 2010", "Year_of_Income": "Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013 Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Collective investment vehicles Investment trusts PAYG withholding Republic of Ireland", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No 3) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20114", "Unmatched_Content": "Keywords Collective investment vehicles Investment trusts PAYG withholding Republic of Ireland"}
{"ATO_ID_Number": "ATO ID 2010/32", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "German Kommanditgesellschaft and managed investment trusts: are limited partners 'members'?", "Issue": "Are the limited partners of a German Kommanditgesellschaft (KG), that is a unitholder in an Australian trust, 'members' of the Australian trust for the purposes of sub-item 3(b) in paragraph 12-400(1)(b) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)?", "Decision": "No. The limited partners of a German KG, that is a unitholder in an Australian trust, are not 'members' of the Australian trust for the purposes of sub-item 3(b) in paragraph 12-400(1)(b) of Schedule 1 to the TAA 1953.", "Facts": "There are 1,000 limited partners in the German KG and one General Partner. All the limited partners are individuals who are residents of Germany for German tax law purposes. The German KG is one of two registered unitholders of an Australian unit trust (the Australian Trust). The other registered unitholder in the Australian Trust is a company that is a resident of Germany (the German Company). The two units are held separately by the German KG and the German Company. The German KG is registered in Germany and is formed under the laws of Germany. The German KG is treated as a limited partnership for German tax law purposes. The partnership agreement of the German KG is executed in Germany in accordance with the German Commercial Code and is governed by German commercial and taxation law. Under the German Commercial Code and the partnership agreement for the German KG: The German KG is a limited partnership as defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). The German KG is not a foreign hybrid limited partnership as defined in subsection 830-10(1) of the ITAA 1997 because it is not a controlled foreign company as defined in section 340 of the Income Tax Assessment Act 1936 (ITAA 1936). The German KG is treated as a corporate limited partnership under Division 5A of Part III of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA 1953 deals with Pay As You Go withholding obligations for distributions of managed investment trust income. Under subsection 12-400(1) of Schedule 1 to the TAA 1953, there are various conditions that need to be considered in order to determine whether a particular trust is a managed investment trust in relation to an income year. One of the conditions that must be satisfied in the context of the facts of this case is that under sub-item 3(b) of the table in paragraph 12-400(1)(b) of Schedule 1 to the TAA 1953, the trust must have at least 50 members (ignoring objects of the trust) at the time the trustee makes the first fund payment in relation to the income year. Under subsection 995-1(1) of ITAA 1997, the term 'member' in relation to an entity has the meaning given by section 960-130 of the ITAA 1997. Item 3 of the table in subsection 960-130(1) of the ITAA 1997 provides that a member of a trust includes a unitholder of the trust. Therefore, for the purposes of subsection 12-400(1) of Schedule 1 to the TAA 1953, the 'members' of the Australian Trust are the unitholders in the Australian Trust. The only two registered unitholders of the Australian Trust are the German KG and the German Company. Subsection 960-130(2) of the ITAA 1997 provides that 'if 2 or more entities jointly hold interests or rights that give rise to membership of another entity, each of them is a member of the other entity'. The 'interests or rights that give rise to membership' of the Australian Trust in this case are the interest or rights that give rise to being a unitholder in the Australian Trust. The German KG and the German Company are the two unitholders of the Australian Trust. The German KG does not jointly hold its unit in the Australian Trust with the limited partners of the German KG. The partnership agreement for the German KG provides that the limited partners jointly hold the interests and assets held by the German KG, with each limited partner having an interest in the undivided whole of the assets of the German KG. The interest or rights that the limited partners have as joint holders of the assets of the German KG, however, is not the same as the interest or rights that the German KG has as unitholder of the Australian Trust. As unitholder, the German KG (through the General Partner) has the right to deal with the unit. For example, the German KG has the right to sell the unit. The limited partners in the German KG do not individually have the right to deal with the unit in the Australian Trust. The German Commercial Code and the partnership agreement exclude the limited partners from the day-to-day management activities of the German KG. Furthermore, each limited partner cannot sell their share in a single asset held by the German KG and therefore they have no right to sell their share of the German KG's unit holding. The interests or rights of the limited partners under the German Commercial Code are restricted to financial participation, with a right to a distribution of profits and losses of the German KG. This includes income generated from the unit holding in the Australian Trust. Accordingly the limited partners do not have the interest or rights that give rise to being a unitholder in the Australian Trust for the purposes of subsection 960-130(2) of the ITAA 1997. Only the registered unitholders, the German KG and the German company, hold such interests or rights in this case. Therefore, the limited partners of the KG are not 'members' of the Australian Trust. As such, the Australian Trust has less than 50 members for the purposes of sub-item 3(b) of paragraph 12-400(1)(b) of Schedule 1 to the TAA 1953.", "Date_of_Decision": "27 October 2009", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013 Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 section 830-10 paragraph 830-10(1) subsection 995-1(1) subsection 960-130(1) subsection 960-130(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/47 | ATO ID 2010/33", "Subject_References": "Germany Investment trusts Limited partnerships PAYG withholding", "Case_References": "", "Other_References": "Peltzer, M and Voight, E, German Commercial Code: German-English Text with an Introduction in English, 5th Revised Edition, 2003, Verlag Dr.Otto Schmidt Köln, Germany.", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201032", "Unmatched_Content": "Keywords Germany Investment trusts Limited partnerships PAYG withholding"}
{"ATO_ID_Number": "ATO ID 2010/143", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "United States real estate investment trusts and managed investment trusts", "Issue": "Is the taxpayer, a United States (US) Real Estate Investment Trust (REIT) that is a member of an Australian Trust, an entity that is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) for the purposes of determining the number of members of the Australian Trust in paragraph 12-402(1A)(b) of Schedule 1 to the TAA 1953?", "Decision": "Yes, the taxpayer, a US REIT that is a member of an Australian Trust, is an entity that is covered by the requirements of paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 for the purposes of determining the number of members of the Australian Trust in paragraph 12-402(1A)(b) of Schedule 1 to the TAA 1953.", "Facts": "The taxpayer (US REIT) is formed under the Corporations and Associations Article of the Annotated Code of Maryland (the MD Code) of the State of Maryland in the US. US REIT also qualifies as a REIT under the US Internal Revenue Code 1986 (US IRC). US REIT is governed by the provisions of the MD Code and the US IRC as well as the terms of its Declaration of Trust. US REIT owns 100% of the units in a Maryland Real Estate Investment Trust (Maryland REIT). Maryland REIT is also formed under, and is governed by, the MD Code . Maryland REIT fails to qualify as a REIT under the US IRC. The Declaration of Trust of US REIT states that the shares in the REIT will be validly issued by the REIT upon receipt of full consideration for which they have been issued. US REIT and Maryland REIT are the only two 'members' of an Australian Trust as defined in subsection 960-130(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The units in the Australian Trust are not listed on the Australian stock exchange. US REIT has a 'MIT participation interest' in the Australian Trust of 100% for the purposes of paragraph 12-404(1)(c) of Schedule 1 to the TAA 1953. The trustee of the Australian Trust is an Australian resident. The Australian Trust is not a trading trust covered by subsection 12-400(2) of Schedule 1 to the TAA 1953. A substantial portion of the investment management activities carried out in relation to the Australian Trust are carried out in Australia in accordance with paragraph 12-400(1)(c) of Schedule 1 to the TAA 1953. The Australian Trust is a managed investment scheme within the meaning of section 9 of the Corporations Act 2001. The Australian Trust is not covered by section 12-401 of Schedule 1 to the TAA 1953 (trusts with wholesale membership). The Australian Trust is registered under section 601EB of the Corporations Act 2001. The Australian Trust satisfies the closely-held restrictions in subsection 12-402B(1) of Schedule 1 to the TAA 1953.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA 1953 deals with Pay As You Go withholding obligations for distributions of managed investment trust income. Under subsection 12-400(1) of Schedule 1 to the TAA 1953, there are various conditions that need to be considered in order to determine whether a particular trust is a managed investment trust in relation to an income year. Based on the facts, the Australian Trust satisfies the conditions in paragraphs 12-400(1)(a) to (e) and paragraph 12-400(1)(g) of Schedule 1 to the TAA 1953, while paragraph 12-400(1)(h) is not relevant for present purposes. In relation to paragraph 12-400(1)(f), the applicable requirement is subparagraph 12-400(1)(f)(ii), which requires that where the Australian Trust is registered under section 601EB of the Corporations Act 2001 and is not covered by section 12-401, it must satisfy either or both of the widely-held requirements in subsections 12-402(1A) and 12-402A(1) of Schedule 1 to the TAA 1953. Subsection 12-402(1A) of Schedule 1 to the TAA 1953 sets out the conditions that must be satisfied in the context of the facts of this case. Paragraph 12-402(1A)(a) requires that the units in the Australian Trust are listed for quotation in the official list of an approved stock exchange in Australia or, alternatively, paragraph 12-402(1A)(b) requires that the trust has at least 50 members. As units in the Australian Trust are not listed on the Australian stock exchange, it is necessary to consider whether it has at least 50 members. Subsection 12-402(2) of Schedule 1 to the TAA 1953 outlines the methodology for determining the number of members of the trust for the purposes of paragraph 12-402(1A)(b) of Schedule 1 to the TAA 1953. Relevantly, it is necessary to work out the 'MIT participation interest' in the trust of members that are entities covered by subsection 12-402(3) and multiply it by 50 and then add that number to the number of members that are entities that are not covered by subsection 12-402(3). In the context of the facts of the case, paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 is the applicable paragraph to determine whether US REIT and Maryland REIT, as members of Australian Trust, are entities covered by subsection 12-402(3) for the purposes of subsection 12-402(2) of Schedule 1 to the TAA 1953. Paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 includes: an entity that is recognised under a foreign law as being used for collective investment by means of pooling the contributions of at least 50 members of the entity as consideration to acquire rights to benefits produced by the entity, if the members of the entity do not have day-to-day control over the operation of the entity. According to the Revised Explanatory Memorandum (EM) to the Tax Laws Amendment (2010 Measures No 3) Bill 2010 (TLAB (No 3) Bill 2010), paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 targets: ... a foreign collective investment vehicle, which is an entity with at least 50 members that is recognised under a foreign law as being used for collective investment where the member contributions are pooled together in exchange for rights to the benefits produced by the entity and where members do not have day-to-day control over the operation of the entity. ... (paragraph 5.79 of the Revised EM to the TLAB (No 3) Bill 2010). Therefore, the REITs must be recognised under a foreign law as being used for collective investment and the entity itself must also satisfy the remaining three requirements of subsection 12-402(3)(e) of Schedule 1 to the TAA 1953. That is, US REIT and Maryland REIT must involve: | Detailed Reasoning - 'recognised under a foreign law as being used for collective investment': The first requirement involves the entity being recognised under a foreign law as an entity which is used for collective investment. Both US REIT and Maryland REIT were formed in the US State of Maryland under the MD Code and, accordingly, the MD Code is the relevant foreign law for the purposes of paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953. Section 8-103(b) of the MD Code provides that: To the extent any provision of this title is contrary to or inconsistent with sections 856 through 858 of the Internal Revenue Code [of the US] or the regulations adopted under those sections, the latter shall prevail as to any real estate investment trust qualifying under those sections and regulations. Therefore, sections 856 to 858 of the US IRC must be considered alongside the MD Code when considering whether the foreign law recognises US REIT as being used for collective investment for the purposes of paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953. As Maryland REIT does not qualify under the US IRC, only the MD Code is the relevant foreign law in relation to Maryland REIT. Section 8-101 of the MD Code defines a REIT as: an unincorporated business trust or association formed under this title which property is acquired, held, managed, administered, controlled, invested, or disposed of for the benefit and profit of any person who may become a shareholder. This definition contemplates a profit-making purpose of the entity for the benefit of more than one person (the shareholders), which indicates a recognition by the MD Code that the entity is being used for collective investment. The US IRC does not contain any provision that is inconsistent with the profit-making intention of a REIT. Furthermore, the collective nature of the entity is supported by section 856(a)(5) of the US IRC, which requires that the beneficial ownership of a REIT is held by 100 or more persons. Therefore, both US REIT and Maryland REIT are recognised under a foreign law as being used for collective investment. | Detailed Reasoning - 'pooling of contributions of at least 50 members of the entity': Paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 requires that the entity pool the contributions of at least 50 members. A 'share' is defined in section 8-101 of the MD Code as a transferable unit of beneficial interest in a REIT. While the MD Code does not contain a requirement as to the number of shareholders necessary for a REIT, section 856(a)(5) of the US IRC requires these shares to be owned by 100 or more persons. The MD Code definitions of a REIT and share in a REIT, together with the numbers of shareholders required under the US IRC, are consistent with the notion of pooling of contributions of at least 50 members as required under paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953. Therefore, as US REIT qualifies as a REIT under the US IRC, there is a pooling of the contributions of at least 50 members of the entity. However, as Maryland REIT is wholly owned by US REIT and therefore has only one member (and accordingly fails to qualify as a REIT under the US IRC), it fails the requirement that it have at least 50 members. Maryland REIT is therefore not an entity covered by paragraph 12-401(3)(e) of Schedule 1 to the TAA 1953. | Detailed Reasoning - 'as consideration to acquire rights to benefits produced by the entity': Paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 requires there be consideration from the 50 or more members of the entity to acquire rights to benefits produced by the entity. The US REIT Declaration of Trust states that the shares in the REIT will be validly issued by the REIT upon receipt of full consideration for which they have been issued. Therefore, US REIT satisfies the condition under paragraph 12-402(3)(e) that contributions are made as consideration to acquire rights to benefits produced by US REIT. | Detailed Reasoning - 'members of the entity do not have day-to-day control over the operation of the entity': The final requirement in paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953 is that the members of the entity do not have day-to-day control over the operation of the entity. Sections 8-202 and 8-301 of the MD Code provides for the election of trustees at least every third year at an annual meeting of shareholders. Further, section 856(a)(1) of the US IRC requires a REIT to be managed by its trustees or directors. Therefore, the members of US REIT do not have day-to-day control over the operation of the entity. US REIT therefore satisfies this final requirement of paragraph 12-402(3)(e). | Detailed Reasoning - Conclusion: As each of the elements are satisfied in relation to US REIT, US REIT is an entity covered by paragraph 12-402(3)(e) of Schedule 1 to the TAA 1953. However, Maryland REIT, being wholly owned by US REIT and therefore having only one member, is not an entity covered by paragraph 12-402(3)(e).", "Date_of_Decision": "9 August 2010", "Year_of_Income": "Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013 Year ended 30 June 2014 Year ended 30 June 2015", "Legislative_References": "Corporations Act 2001 section 9 section 601EB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Collective investment vehicles Investment trusts PAYG withholding United States", "Case_References": "", "Other_References": "Revised Explanatory Memorandum to the Tax Laws Amendment (2010 Measures No 3) Bill 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010143", "Unmatched_Content": "Keywords Collective investment vehicles Investment trusts PAYG withholding United States"}
{"ATO_ID_Number": "ATO ID 2012/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: ultimate beneficiary - deductions", "Issue": "Where the trustee of a closely held trust (the head trust ) resolves in relation to the income year ended 30 June 2006 to make a trustee of another closely held trust (the interposed trust ) presently entitled to all of the income of the head trust, is the trustee of the interposed trust an ultimate beneficiary for the purposes of former section 102UE of Division 6D of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of the whole or part of a share of the net income of the head trust where:", "Decision": "No. Under one approach available under the former Division 6D of the ITAA 1936, it would be concluded that the trustee of the interposed trust was not an ultimate beneficiary for the purposes of section 102UE of the ITAA 1936 with respect to the share. Rather, there was only one ultimate beneficiary being the individual presently entitled to all of the income of the interposed trust. However, the Commissioner accepts an approach equally available under the former Division 6D of the ITAA 1936 would lead to the conclusion that the trustee of the interposed trust was an ultimate beneficiary for the purposes of section 102UE of the ITAA 1936 to the extent of the allowable deductions that did not exceed the share of the net income of the head trust included in the assessable income of the interposed trust, with the individual being the ultimate beneficiary with respect to the remainder of the net income of the head trust.", "Facts": "Trust A (the head trust) is a closely held trust. The income of Trust A is $200, which also equals its net income for the purposes of section 95 of the ITAA 1936. Trust B (the interposed trust) is also a closely held trust. The trustee of Trust B is presently entitled to 100% of the income of Trust A and, therefore, includes the same share of the net income of Trust A in its assessable income under subsection 97(1) of the ITAA 1936 (that is, $200). Trust B has no other assessable income. Trust B has allowable deductions, the total value of which ($50) is less than the trust's assessable income. The deed to Trust B defines the income of the trust estate as being equal to the trust's net income for the purposes of section 95 of the ITAA 1936 (that is, $150). Beneficiary A (an individual) is presently entitled to 100% of the income of Trust B. These facts are illustrated in the diagram above.", "Reasons_for_Decision": "Summary: All references are to the ITAA 1936. Where a share of the net income of a closely held trust (as defined in section 102UC) was included under section 97 in the assessable income of a trustee beneficiary (as defined in section 102UD), Division 6D required the trustee of the closely held trust to provide the Commissioner with a correct UB statement containing the information set out in subsection 102UG(3) (specifically information about the 'ultimate beneficiaries' in respect of that share). Failure to provide a correct UB statement exposed the members of the trustee group (as defined in subsection 102UK(3)) jointly and severally to a liability to pay ultimate beneficiary non-disclosure tax (subsection 102UK(2)). Further, to the extent that there was no ultimate beneficiary with respect to a whole or a part of the share, the members of the trustee group were jointly and severally liable to pay ultimate beneficiary non-disclosure tax (subsection 102UM(2)). Section 102UE defined the circumstances in which a person was an 'ultimate beneficiary' for the purposes of Division 6D in respect of the share or a part of the share (called a 'head trust amount' for the purposes of Division 6D). In particular, a person was an ultimate beneficiary if one of the tests in subsections (2), (3) or (4) of that section was satisfied. If the whole of the share of Trust A's net income included in the assessable income of Trust B was considered under section 102UE, subsection 102UE(2) had the effect that the individual beneficiary of Trust B was the ultimate beneficiary in respect of that whole share (that is, $200). Specifically, paragraph 102UE(2)(b) was satisfied because: However, the wording of section 102UE also enables an ultimate beneficiary to be determined in respect of a 'part' of the net income of the relevant closely held trust. If the various parts of the net income of Trust A included in the assessable income of Trust B are considered under section 102UE, namely a part that is fully absorbed by deductions in the calculation of Trust B's net income ($50), and the remainder ($150), then: the individual is an ultimate beneficiary under subsection 102UE(2) as to the amount of the net income of Trust A included in the assessable income of Trust B to which they are presently entitled (that is, $150); and the trustee of Trust B is an ultimate beneficiary under subsection 102UE(4) as to the amount absorbed by deductions in the calculation of its net income. For the purposes of satisfying section 102UG, the Commissioner accepts that the trustee of a closely held trust would make a correct UB statement if the statement is prepared on the basis of either approach.", "Date_of_Decision": "7 September 2012", "Year_of_Income": "Year ended 2005-06", "Legislative_References": "Income Tax Assessment Act 1936 section 95 subsection 97(1) Division 6D former section 102UC former section 102UD former section 102UE former subsection 102UE(2) former paragraph 102UE(2)(b) former subsection 102UE(3) former subsection 102UE(4) former paragraph 102UF(a) former section 102UG former subsection 102UG(3) former subsection 102UJ(1) former subsection 102UK(2) former subsection 102UK(3) former subsection 102UM(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/82", "Subject_References": "Trusts Closely held trusts Ultimate beneficiary Correct UB statement Ultimate beneficiary non-disclosure", "Case_References": "Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation [2010] HCA 10 (2012) 75 ATR 1 2010 ATC 20-170", "Other_References": "", "Business_Line": "OCTC Tax Counsel Network", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201281", "Unmatched_Content": "Keywords Trusts Closely held trusts Ultimate beneficiary Correct UB statement Ultimate beneficiary non-disclosure"}
{"ATO_ID_Number": "ATO ID 2012/82", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: ultimate beneficiary - circular distributions", "Issue": "Where the trustee of a closely held trust (the head trust ) resolves in relation to the income year ended 30 June 2006 to make a trustee of another closely held trust (the interposed trust ) presently entitled to all of the income of the head trust, is the trustee of the interposed trust an ultimate beneficiary for the purposes of former section 102UE of Division 6D of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of the whole or part of a share of the net income of the head trust where:", "Decision": "Yes. Under one approach available under the former Division 6D of the ITAA 1936, it would be concluded that the trustee of the interposed trust is an ultimate beneficiary for the purposes of section 102UE of the ITAA 1936 to the extent of the allowable deductions that did not exceed the share of the net income of the head trust included in the assessable income of the interposed trust. Under this approach the application of 102UM falls to be considered only in relation to the remainder of the net income of the head trust.", "Facts": "Trust A (the head trust) is a closely held trust. The income of Trust A is $200, which also equals its net income for the purposes of section 95 of the ITAA 1936. Trust B (the interposed trust) is also a closely held trust. The trustee of Trust B is presently entitled to 100% of the income of Trust A and, therefore, includes the same share of the net income of Trust A in its assessable income under subsection 97(1) of the ITAA 1936 (that is, $200). Trust B has no other assessable income. Trust B has allowable deductions, the total value of which ($50) is less than the trust's assessable income. The deed to Trust B defines the income of the trust estate as being equal to the trust's net income for the purposes of section 95 of the ITAA 1936 (that is, $150). The trustee of Trust A is presently entitled to 100% of the income of Trust B. These facts are illustrated in the diagram above.", "Reasons_for_Decision": "Summary: All references are to the ITAA 1936. Where a share of the net income of a closely held trust (as defined in section 102UC) was included under section 97 in the assessable income of a trustee beneficiary (as defined in section 102UD), Division 6D required the trustee of the closely held trust to provide the Commissioner with a correct UB statement containing the information set out in subsection 102UG(3) (specifically, information about the 'ultimate beneficiaries' in respect of that share). Failure to provide a correct UB statement exposed the members of the trustee group (as defined in subsection 102UK(3)) jointly and severally to a liability to pay ultimate beneficiary non-disclosure tax by reason of subsection 102UK(2). Further, to the extent that there was no ultimate beneficiary with respect to a whole or a part of the share, the members of the trustee group were jointly and severally liable to pay ultimate beneficiary non-disclosure tax by reason of subsection 102UM(2). Section 102UE defined the circumstances in which a person was an 'ultimate beneficiary' for the purposes of Division 6D in respect of the share or a part of the share (called a 'head trust amount' for the purposes of Division 6D). In particular, a person was an ultimate beneficiary if one of the tests in subsections (2), (3) or (4) of that section was satisfied. Section 102UE enables an ultimate beneficiary to be determined in respect of the whole or 'a part' of the share of the net income of the relevant closely held trust. If the various parts of the net income of Trust A included in the assessable income of Trust B are considered under section 102UE, namely a part that is fully absorbed by deductions in the calculation of Trust B's net income ($50), and the remainder ($150), then: This means that the possible application of section 102UM falls to be considered only in relation to the remainder of the net income of Trust A rather than the whole of the net income of that trust as would be the case were it instead to be concluded that the trustee beneficiary was not an ultimate beneficiary in respect of any of the net income of Trust A.", "Date_of_Decision": "7 September 2012", "Year_of_Income": "Year ended 2005-06", "Legislative_References": "Income Tax Assessment Act 1936 section 95 subsection 97(1) Division 6D former section 102UC former section 102UD former section 102UE former subsection 102UE(2) former subsection 102UE(3) former subsection 102UE(4) former subsection 102UG(3) former subsection 102UK(2) former subsection 102UK(3) former section 102UM former subsection 102UM(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/81", "Subject_References": "Trusts Closely held trusts Ultimate beneficiary Correct UB statement Ultimate beneficiary non-disclosure", "Case_References": "", "Other_References": "", "Business_Line": "OCTC Tax Council Network", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201282", "Unmatched_Content": "Keywords Trusts Closely held trusts Ultimate beneficiary Correct UB statement Ultimate beneficiary non-disclosure"}
{"ATO_ID_Number": "ATO ID 2011/70", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Managed Investment Trust: withholding rate under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953", "Issue": "If the trustee of a managed investment trust (MIT) with a substituted accounting period that ends on 31 December in lieu of the year of income ending on the following 30 June, makes a fund payment during August 2011 to a unit holder with an address in the Republic of Singapore, is the amount the trustee is required to withhold under section 12-385 of Schedule 1 to the Taxation Administration Act 1953 (TAA) calculated at 7.5% of that fund payment?", "Decision": "Yes the amount the trustee is required to withhold from the fund payment which relates to that income year is 7.5% of the fund payment.", "Facts": "A trust is a MIT within the meaning of that term in section 12-400 of Schedule 1 to the TAA. The MIT has a substituted accounting period that ends on 31 December in lieu of the year of income ending on the following 30 June. The MIT makes two fund payments within the meaning of that term in section 12-405 of Schedule 1 to the TAA to each of its beneficiaries in relation to each income year - an interim payment in August and a final payment in February. In relation to its 2011-12 income year, the trustee of the MIT makes the first fund payment on 31 August 2011. The trustee must withhold from the fund payment under subsections 12-385(2) and 12-385(3) of Schedule 1 to the TAA at the rate of 7.5% if the recipient has an address or place for payment in an information exchange country and at the rate of 30% in all other cases. At the time the fund payment is made, one of the unit holders in the MIT is a resident of the Republic of Singapore. The unit holder has provided an address in the Republic of Singapore to the trustee of the MIT which the trustee of the MIT has kept in its records.", "Reasons_for_Decision": "Summary: Under subsections 12-385(2) and 12-385(3) of Schedule 1 to the TAA, the trustee of the MIT withholds at the rate of 7.5% from the fund payment made to the unit holder with the address in the Republic of Singapore provided that country is an information exchange country. For fund payments prior to 1 October 2017, the list of information exchange countries was provided in subregulation 44E(2) of the Taxation Administration Regulations 1976 . The Republic of Singapore was added to the list of information exchange countries by the Taxation Administration Amending Regulations 2011 (No. 3) . Item 4 of the Amending Regulations also provided that: 'The amendment made by Schedule 1 applies in relation to a fund payment (within the meaning given by section 12 405 of Schedule 1 to the Taxation Administration Act 1953 ) made in relation to the net income of a trust that was derived on or after 1 July 2011.' Therefore, whether the trustee of the MIT can withhold from the fund payment made on 31 August 2011 at the rate of 7.5% hinges on whether the fund payment is considered to be made in relation to net income of the MIT that was derived on or after 1 July 2011. A question arises as to whether the reference in item 4 of the Amending Regulations to 'net income' is necessarily to the net income for an income year or whether it could be read as meaning different items or 'heads' of income themselves derived at various times throughout an income year, each net of relevant expenses. Several factors tend to suggest that the reference to 'net income' is intended to mean a singular net income for an entire income year. Firstly, item 4 of the Amending Regulations refers to a 'fund payment' (within the meaning given by section 12-405 of Schedule 1 to the TAA) made in relation to 'the net income of a trust'. A fund payment as so defined considers what is expected to be the 'net income of the trust for the income year'. In this context, 'net income' has the same meaning as it is given in subsection 95(1) of the Income Tax Assessment Act 1936 (as a result of subsection 3AA(2) of the TAA and subsection 995-1(1) of the Income Tax Assessment Act 1997 ). The net income of a trust estate as defined in section 95 can only be calculated as at the end of an income year, as it is only at that time that it is possible to determine all the assessable income and allowable deductions of the trust for that year. Item 4 of the Amending Regulations specifically deals with fund payments as defined, so the subsequent reference in that item to 'the' net income is necessarily to the same amount referred to in the definition of fund payment. Secondly, the reference in item 4 of the Amending Regulations to 'the net income' of the trust suggests that there is only one net income to be calculated for an income year, not several individual amounts throughout an income year. Notwithstanding this, if the reference to 'net income' in item 4 of the Amending Regulations was instead intended to be a reference to different items or 'heads' of income themselves derived at various times throughout an income year net of relevant expenses, it might be expected that these amounts would also be determined at year end. This is because the trust may have one or more general expenses that would be allocable against all such heads of income, a proper reckoning of which could not be done until all such expenses for the year were known. For all of these reasons, it is considered that for the purpose of item 4 of the Amending Regulations, the net income of a trust is derived at the end of the relevant income year. As the fund payment made by the MIT on 31 August 2011 is made in relation to the MIT's 2011-12 income year which ends on 31 December 2011, the fund payment is made in relation to the net income of the MIT that is derived on 31 December 2011. As a result, the trustee of the MIT should withhold from the fund payment at the rate of 7.5%.", "Date_of_Decision": "22 August 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subsection 95(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201170", "Unmatched_Content": "Reasons for decision, legislative reference | Update legislative reference - to note Taxation Administration Regulations 1976, Taxation Administration Amendment Regulations 2011 (No. 3) and s12-400 of the Taxation Administration Act 1953 have subsequently been repealed."}
{"ATO_ID_Number": "ATO ID 2010/211", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Section 99B: receipt of trust income not previously subject to tax", "Issue": "For the purpose of paragraph 99B(2)(d) of the Income Tax Assessment Act 1936 (ITAA 1936), is an amount taken to be 'included in the assessable income of any taxpayer' under section 102AAZD of the ITAA 1936 even though the taxpayer has not included the amount in their income tax return?", "Decision": "Yes. The amount is taken to be included in the assessable income of the taxpayer under section 102AAZD of the ITAA 1936 even though the amount has not been included in the taxpayer's tax return for the purpose of paragraph 99B(2)(d) of the ITAA 1936.", "Facts": "A resident of Australia was appointed as a beneficiary of a non-resident discretionary trust and received a distribution from the trust in an income year. The trust had no net income as defined under section 95 of the ITAA 1936 for the current income year. The amount was distributed out of foreign source income derived by the non-resident trust in a prior year which was assessable to a transferor of the trust under section 102AAZD of the ITAA 1936 (section 102AAZD amount). The transferor did not return the section 102AAZD amount in their income tax return in the prior year. The Commissioner is out of time to amend. Sections 96B and 96C of the ITAA 1936 did not apply because there was no other beneficiary that had an interest in the non-resident trust at any time.", "Reasons_for_Decision": "Summary: Subsection 99B(1) of the ITAA 1936 includes as assessable income of a beneficiary an amount paid to or applied for the benefit of the beneficiary of a trust estate. However, paragraph 99B(2)(d) of the ITAA 1936 excludes an amount 'that is or has been included in the assessable income of any taxpayer (other than a company) under section 102AAZD'. An amount is assessable under section 102AAZD of the ITAA 1936 even though it was not included in the income tax return of the transferor and the Commissioner is out of time to amend the taxpayer's assessment. The amount is therefore excluded from being assessed to the beneficiary under subsection 99B(1) of the ITAA 1936 by paragraph 99B(2)(d) of the ITAA 1936.", "Date_of_Decision": "17 November 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 95 section 96B section 96C section 97 subsection 99B(1) paragraph 99B(2)(d) section 102AAZD", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/155 | ATO ID 2008/156", "Subject_References": "International tax Trusts Trust distributions Non resident trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010211", "Unmatched_Content": "Keywords International tax Trusts Trust distributions Non resident trusts"}
{"ATO_ID_Number": "ATO ID 2006/234", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Public Unit Trust: Commissioner's discretion", "Issue": "In the fact situation described below will the Commissioner exercise the discretion under subsection 102G(4) of the Income Tax Assessment Act 1936 (ITAA 1936) to deem a trust which is closely held for a preliminary period to be a public unit trust for the purposes of section 128FA of the ITAA 1936?", "Decision": "Yes. Notwithstanding the trust is not initially a public unit trust under section 128FA of the ITAA 1936, the Commissioner will exercise the discretion under subsection 102G(4) of the ITAA 1936, to treat it as a public unit trust.", "Facts": "A trust was set up for the purpose of raising debt and equity funding via an initial public offering (IPO). For a preliminary period of approximately two months, the trust was established with nominal units held by less than 20 unit-holders. During this time, the trust prepared for the IPO and did not carry on any business and held nominal assets. The initial nominal unit-holders were not exposed to any material economic risk or benefit from their unit-holding. As part of the IPO process, an offer was made to the public to subscribe for or purchase units in the trust. The trustee of the trust then issued investors with units, loan notes and/ or instalment receipts. Under the terms of the loan notes, investors were paid interest. Some of these investors were non residents. Once the instruments were listed on the Australian Stock Exchange (ASX), they were widely held. That is, after the initial two month period, the units were held by a minimum of 50 people. Under the terms of the trust, the trustee could not distribute 75% or more of trust moneys to 20 people or less. In addition, the trustee could not vary the rights of the unit holders such that 75% or more of trust moneys could be distributed to 20 people or less.", "Reasons_for_Decision": "Summary: To obtain a withholding tax exemption under section 128FA of the ITAA 1936, the interest paid in relation to a debenture or debt interest must be paid to a non resident by the trustee of an 'eligible unit trust'. Under subsection 128FA(8) of the ITAA 1936, an 'eligible unit trust' includes a 'public unit trust'. The requirements for a unit trust to be considered a public unit trust are set out in section 102G of the ITAA 1936. Upon completion of its preparatory activities and commencement of the IPO process, the trust satisfied the relevant conditions of being a 'public unit trust' in subsection 102G(1) of the ITAA 1936. That is, the units were listed on the ASX, they were offered to the public and they were held by at least 50 people. However, prior to the IPO, the trust was closely held for approximately two months. Subsection 102G(3) of the ITAA 1936 provides that a unit trust that would be a public unit trust in relation to a year of income shall be deemed not to be a public unit trust, if the following occurred: at any time during the income year, 20 people or less held or had the right to acquire a unit / units in the unit trust and this entitled the holder(s) thereof to at least 75% of the beneficial interests in the income or the property of the unit trust. Thus under subsection 102G(3) of the ITAA 1936, the trust would not be considered a public unit trust. However, subsection 102G(3) is subject to the overriding provisions of subsections 102G(4) and 102G(6) of the ITAA 1936. Subsection 102G(4) of the ITAA 1936 contains a discretion that enables the Commissioner to treat a unit trust as a public unit trust. Where the unit trust has the real character of a public unit trust, but was closely held for a short time during the income year, the Commissioner needs to consider the length of time that the trust was closely held as well as any other matters which he determines are relevant, before deeming the trust a public unit trust. In this situation, the trust did have the character of a public unit trust, because: Subsection 102G(6) of the ITAA 1936 deems a unit trust not to be a public unit trust where at least 75% of the income or property of the trust is paid or credited to, or is able to be paid or credited to, 20 people or less, notwithstanding that those people might not hold 75% or more of the units in the trust. As the trust could not distribute more than 75% of moneys to 20 people or less, and the trust could not vary the rights of the unit-holders to distribute 75% of moneys or trust property to 20 people or less, subsection 102G(6) of the ITAA 1936 did not apply. In these circumstances, it is deemed reasonable by the Commissioner to treat the trust as a public unit trust under the provisions of subsection 102G(4) of the ITAA 1936. As such, the trust is deemed to be a public unit trust in relation to the relevant year of income and would fall for consideration as such for the purposes of section 128FA of the ITAA 1936. Thus interest paid or credited to non resident unit holders will be exempt from withholding tax.", "Date_of_Decision": "23 August 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 102G(1) subsection 102G(3) subsection 102G(4) subsection 102G(6) subsection 128FA(8)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Acquisition of unit trust units Closely held trusts Commissioner's discretion Entities & taxpayer groups Non resident individuals Non resident interest withholding tax Trust income Trusts Widely held trusts", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006234", "Unmatched_Content": "Keywords Acquisition of unit trust units Closely held trusts Commissioner's discretion Entities & taxpayer groups Non resident individuals Non resident interest withholding tax Trust income Trusts Widely held trusts"}
{"ATO_ID_Number": "ATO ID 2011/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of section 99B of the Income Tax Assessment Act 1936 when accumulated foreign source income is paid to an Australian resident beneficiary who was a non-resident when the trustee derived the income", "Issue": "Does section 99B of the Income Tax Assessment Act 1936 (ITAA 1936) include in the assessable income of an Australian resident beneficiary an amount that is paid to the beneficiary by the trustee of a non-resident trust estate which is entirely attributable to foreign source income that was derived by the trustee during a period when the beneficiary was a non-resident?", "Decision": "Yes. The amount paid to the beneficiary is included in the beneficiary's assessable income under section 99B of the ITAA 1936 because the beneficiary was an Australian resident at a time during the year of income in which the payment was made.", "Facts": "The taxpayer is an individual who is a beneficiary of a non-resident trust estate. For each of the income years in the period starting on 1 July 1998 and ending on 30 June 2001, the trustee derived foreign source interest income which was accumulated and formed part of the corpus of the trust estate. The taxpayer was a non-resident of Australia in respect of the entire period during which the interest was derived by the trust. However, the taxpayer became an Australian resident during the income year ended 30 June 2002. The trustee paid an amount to the beneficiary during the income year ended 30 June 2002 which was wholly attributable to the accumulated foreign source income. At the time of the payment the beneficiary was an Australian resident.", "Reasons_for_Decision": "Summary: Subsection 99B(1) of the ITAA 1936 applies where an amount of trust property is paid to, or applied for the benefit of, a beneficiary during an income year and the beneficiary is a resident at any time during that income year. Where these conditions are satisfied, the amount is included in the assessable income of the beneficiary. However, subsection 99B(1) of the ITAA 1936 is qualified by subsection 99B(2) of the ITAA 1936 which broadly reduces the amount included in the assessable income of the beneficiary to the extent that it represents: In this case, the conditions in subsection 99B(1) of the ITAA 1936 are satisfied as the taxpayer has received an amount of trust property during an income year in which the taxpayer was a resident. The trust property paid to the resident beneficiary is attributable to foreign source interest derived by the trust. As interest income would have been assessable had it been derived by a resident taxpayer, and as the interest income has not been included in the assessable income of the beneficiary under section 97 of the ITAA 1936 or been assessed to either the trustee of the trust or the trustee of another trust under Division 6 of Part III of the ITAA 1936, none of the exclusions in subsection 99B(2) of the ITAA 1936 applies to reduce the amount included in the assessable income of the beneficiary. A question arises however whether the non-resident status of the beneficiary for the period in which the interest was derived by the trust estate in any way alters the outcome under the provision. It is clear from the language of section 99B of the ITAA 1936, and by inference from subsection 102AAM(5) of the ITAA 1936, that there is no apportionment of the amount included in assessable income by reference to the residency status of the beneficiary as at the time the income was derived by the trust. Rather, the only explicit condition concerning residency is that the beneficiary be a resident at some time during the year of income in which the trust property is paid to them or applied for their benefit. Since the beneficiary satisfies the residency requirement during the relevant year of income and as none of the exclusions in subsection 99B(2) of the ITAA 1936 applies, the entire amount of the payment is included in the beneficiary's assessable income under subsection 99B(1) of the ITAA 1936.", "Date_of_Decision": "9 November 2011", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Division 6 subsection 99B(1) subsection 99B(2) subsection 102AAM(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Residence in Australia Non resident trusts Trust distributions", "Case_References": "", "Other_References": "", "Business_Line": "Tax Counsel Network", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201193", "Unmatched_Content": "Keywords Residence in Australia Non resident trusts Trust distributions"}
{"ATO_ID_Number": "ATO ID 2007/166", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of trust distributions to non-resident beneficiaries", "Issue": "Is the trustee of a widely held Australian resident unit trust which carries on a business of funds management in Australia through a permanent establishment (PE) in Australia, assessed and liable to pay tax under subsection 98(3) of the Income Tax Assessment Act 1936 (ITAA 1936) in respect of the income of the trust estate which is not attributable to sources in Australia and to which the trust's New Zealand resident beneficiaries are presently entitled?", "Decision": "No. Subsection 98(3) of the ITAA 1936 do not apply to the income of the trust estate to which the trust's New Zealand resident beneficiaries are presently entitled and which is not attributable to sources in Australia. Furthermore, section 3AA of the International Tax Agreements Act 1953 (Agreements Act) ensures that the source of the trust estate's funds management income remains attributable to sources outside Australia.", "Facts": "The trust estate is an Australian resident trust estate for the purposes of subsection 95(2) of the ITAA 1936. The resident trust estate is a 'widely held unit trust' as defined in section 272-105 in Schedule 2F of the ITAA 1936 and is also a 'managed investment scheme' as defined in section 9 of the Corporations Act 2001 . The trustee of the widely held Australian resident unit trust carries on a business of funds management activities in Australia by investing in shares in overseas listed entities, units in an Australian unit trust deriving income from overseas commodity funds, overseas currency swap contracts and overseas exchange rate contracts. The income derived by the trustee of the trust estate from conducting its funds management activities in Australia is income attributable to sources outside of Australia. The management and administration of the trust estate is undertaken at a place in Australia by personnel employed by the trust estate. The place of management and administration in Australia constitutes a PE in accordance with the principles of Article 5 of the tax treaty between Australia and New Zealand (New Zealand Agreement) contained in Schedule 4 of the Agreements Act. All the beneficiaries of the trust estate are New Zealand resident individuals or companies. Each beneficiary is presently entitled for the purposes of subsection 98(2A) of the ITAA 1936 and beneficially entitled for the purposes of Article 7(7) of the New Zealand Agreement to their respective share of the net income of the trust estate.", "Reasons_for_Decision": "Summary: For the purposes of this case, subsection 98(2A) of the ITAA 1936 provides that where a non-resident beneficiary is presently entitled to a share of the income of the trust estate, the trustee is assessed and liable to pay tax under subsection 98(3) of the ITAA 1936 in respect of so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia. Accordingly, as the beneficiaries' share of the income of the trust is from sources outside Australia, subsections 98(2A) and 98(3) of the ITAA 1936 do not apply. In determining the New Zealand resident beneficiaries' liability to Australian tax, it is necessary to consider not only the Australian income tax laws but also the New Zealand Agreement. Section 4 of the Agreements Act incorporates the ITAA 1936 and the Income Tax Assessment Act 1997 (ITAA 1997) into the Agreements Act so that all those Acts are read as one. The Agreements Act effectively prevails over the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except for limited situations not relevant for present purposes). Article 7(1) of the New Zealand Agreement provides that the profits of an enterprise of New Zealand may be taxed in Australia if the enterprise carries on business in Australia through a PE in Australia, but only the profits attributable to that PE. Article 7(7) of the New Zealand Agreement states: Where: (a) a resident of a Contracting State is beneficially entitled... to a share of the business profits of an enterprise carried on in the other Contracting State by the trustee of a trust...; and (b) in relation to that enterprise, that trustee would, in accordance with the principles of Article 5, have a permanent establishment in that other State, the enterprise carried on by the trustee shall be deemed to be a business carried on in the other State by that resident through a permanent establishment situated in that other State and that share of business profits shall be attributed to that permanent establishment. As the beneficiaries are beneficially entitled to their share of the income of the trust estate and the trustee has a PE in Australia, Article 7(7) of the New Zealand Agreement is satisfied. Accordingly, the enterprise carried on by the trustee in Australia is deemed to be a business carried on in Australia by the New Zealand resident beneficiaries through a PE in Australia and their share of the income of the trust estate is attributable to that PE. Where Australia has a right to tax the profits of an enterprise of New Zealand under Article 7(1) of the New Zealand Agreement, Article 23(1) of the New Zealand Agreement (the source of income article) provides that income, profits or gains derived by a resident of New Zealand which, under certain Articles including Article 7 of the New Zealand Agreement, may be taxed in Australia shall, for the purposes of the law in Australia relating to its tax, be deemed to be income from sources in Australia. However, subsection 3AA(2) of the Agreements Act provides that the source of income Articles in Australia's tax treaties including for present purposes Article 23(1) of the New Zealand Agreement do not apply to a beneficiary of a widely held unit trust in determining whether the funds management income of the beneficiary is attributable to sources in Australia for the purposes of the ITAA 1936 and ITAA 1997 if: Paragraph 3AA(4)(a) of the Agreements Act defines funds management activities as activities carried on by a 'managed investment scheme' (as defined by section 9 of the Corporations Act) that is a widely held unit trust. The trustee's activities constitute funds management activities as paragraph 3AA(4)(a) is satisfied in the present case. Subsection 3AA(1) of the Agreements Act applies as the beneficiaries are residents of New Zealand, a country with which Australia has a double tax agreement (paragraph 3AA(1)(a) of the Agreements Act) and they are presently entitled to a share of the income of a widely held unit trust derived from the carrying on by the trustee of funds management activities through a PE in Australia (subparagraph 3AA(1)(b)(i) of the Agreements Act). Accordingly, as subsection 3AA(1) of the Agreements Act applies, Article 23(1) of the New Zealand Agreement does not apply to the funds management activities income of the New Zealand resident beneficiaries (subsection 3AA(2) of the Agreements Act). Consequently, the funds management income that is derived by the trustee from sources outside Australia continues to be income from sources outside Australia for the purposes of the ITAA 1936 and the ITAA 1997. Therefore, although Australia has a taxing right under Article 7(1) of the New Zealand Agreement to tax the funds management income derived by the trustee from sources outside Australia, subsection 98(3) of the ITAA 1936 does not apply to assess the trustee on the funds management income of the trust; in this case, all of the net income of the trust estate.", "Date_of_Decision": "12 July 2007", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 95(2) subsection 98(2A) subsection 98(3) section 272-105", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign source income International tax Non resident beneficiaries Permanent establishment Treaties Trusts", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007166", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign source income International tax Non resident beneficiaries Permanent establishment Treaties Trusts"}
{"ATO_ID_Number": "ATO ID 2008/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transferor trusts: attribution of income to deceased transferor", "Issue": "Can income of a non-resident trust estate be attributed under section 102AAZD of the Income Tax Assessment Act 1936 (ITAA 1936) to a natural person in the year of income of their death?", "Decision": "Yes, income of a non-resident trust estate can be attributed under section 102AAZD of the ITAA 1936 to a natural person who is an attributable taxpayer in the year of income of their death.", "Facts": "A natural person (the taxpayer) otherwise meets all of the conditions to be an attributable taxpayer (within the meaning of section 102AAT of the ITAA 1936) in relation to a non-resident trust estate but dies part-way through a financial year (for illustrative purposes, assume that the taxpayer died on 30 September). The taxpayer was a resident from before the start of their current year of income until the time of their death. The non-resident trust estate's year of income is from 1 January to 31 December.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1936. Attributable taxpayer Section 102AAT states that an entity is an attributable taxpayer in relation to a year of income of the entity if the entity meets the conditions set out in that section. 'Entity' is defined in section 102AAB as including 'any other person'. The taxpayer, being a natural person, is an 'entity' up until the time of their death (the taxpayer is not an entity for the period of time from their death to the end of the financial year, or in subsequent years). A reference to a 'year of income' would normally be a reference to the period from 1 July to 30 June (see definition of 'year of income' in subsection 6(1)). However, this is subject to a contrary intention. The transferor trust provisions are intended to 'apply only where that income was derived during the lifetime of the transferor. Income derived after...death...will be assessed, subject to additional tax, on distribution to any resident beneficiary' (Department of Treasury 1989, Taxation of foreign source income: an information paper, Australian Government Publishing Service, Canberra, paragraph 10.39). Moreover, there are no timing rules which require the 'attributable taxpayer' test to be applied at a particular time during a year of income. Contextually, that is because the factors which determine whether a person is an attributable taxpayer are largely historical (for example, sub-subparagraphs 102AAT(1)(a)(i)(C) to (F) and 102AAT(1)(a)(ii)(B) to (D)) or require satisfaction or failure only at some time during the year of income (sub-subparagraphs 102AAT(1)(a)(i)(A) and (B) and 102AAT(1)(a)(ii)(A)). Having regard to this context, it is concluded that where the taxpayer dies during a financial year, the reference to a 'year of income of the entity' in section 102AAT refers to the period of time from 1 July to the time of death. This position also aligns with the approach taken in respect of deceased taxpayers more generally, that is, their final income tax return is for the period that runs from 1 July until date of death. Accordingly, as the person is an entity during the year of income of their death and otherwise meets the rest of the conditions prescribed by the provision, they are an attributable taxpayer in relation to the year of income of the non-resident trust estate. Attribution of income to the taxpayer For income to be attributed to an attributable taxpayer, subsection 102AAZD(1) provides that the taxpayer must be an Australian resident for some of their current year of income, and some of the non-resident trust estate's year of income must occur during the taxpayer's current year of income. The reference to the 'taxpayer's current year of income' in subsection 102AAZD(1) also refers to the period from 1 July until the time of death for the same reasons as those discussed above in relation to the meaning of 'year of income of the entity'. As the taxpayer was resident during their current year of income (from 1 July until 30 September) and the trust's year of income overlapped with the taxpayer's year of income (also from 1 July until 30 September), an amount may be included in the taxpayer's assessable income for the current year of income. Amount included in assessable income Subsection 102AAZD(1) determines the amount that is included in the assessable income of the taxpayer, based on whether the taxpayer is an Australian resident for all or only some of their current year of income. The taxpayer was resident for the whole of their current year of income (1 July until 30 September). When a taxpayer is resident for the whole of their current year of income, paragraph 102AAZD(1)(d) provides that the amount to be attributed to the taxpayer is the 'notional attributable income'. Notional attributable income Subsection 102AAZD(2) defines 'notional attributable income'. As the years of income of the trust and the taxpayer do not begin at the same time, paragraph 102AAZD(2)(b) provides that the notional attributable income is calculated using the following formula: Attributable income x (Days in overlapping period / Days in trust's year of income) where: Attributable income means the attributable income of the trust estate of the trust's year of income; Days in overlapping period means the number of whole days in the trust's year of income that occurred during the taxpayer's current year of income; Days in trust's year of income means the number of whole days in the trust's year of income. For illustrative purposes, assume that the attributable income of the trust estate of the trust's year of income is $1,000,000 (calculated in accordance with section 102AAU). The number of days in the overlapping period is the number of days in the trust's year of income that occurred during the taxpayer's year of income. That is, the number of days from 1 July 2006 to 29 September 2006: 91 days. There are 365 days in the trust's year of income. Therefore the notional attributable income is: = $1,000,000 x 91 / 365= $249,315 (rounded) As the taxpayer is a resident for the whole of the income year, the amount included in the taxpayer's assessable income pursuant to section 102AAZD is $249,315, the notional attributable income.", "Date_of_Decision": "13 December 2007", "Year_of_Income": "Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 102AAB section 102AAT section 102AAU section 102AAZD", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/10", "Subject_References": "Deceased estates Executors Non resident trusts Trusts", "Case_References": "", "Other_References": "Department of Treasury 1989, Taxation of foreign source income: an information paper, Australian Government Publishing Service, Canberra", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20089", "Unmatched_Content": "minor changes to wording for clarity | Keywords Deceased estates Executors Non resident trusts Trusts"}
{"ATO_ID_Number": "ATO ID 2008/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transferor trusts: attribution of income to executor of estate of deceased transferor", "Issue": "Can income of a non-resident trust estate be attributed under section 102AAZD of the Income Tax Assessment Act 1936 (ITAA 1936) to a trustee of the deceased estate of a natural person who was an attributable taxpayer in relation to a non-resident trust estate, in the year of the person's death?", "Decision": "No, the income of a non-resident trust estate cannot be attributed under section 102AAZD of the ITAA 1936 to the trustee of the deceased estate (the executor) of a person who transferred property or services to a non-resident trust, because the executor is not an attributable taxpayer.", "Facts": "A natural person (the taxpayer) was an attributable taxpayer in relation to a non-resident trust estate in a particular year of income. The taxpayer died part way through the financial year (1 July to 30 June).", "Reasons_for_Decision": "Summary: An entity is an attributable taxpayer in relation to a year of income if the entity has transferred property or services to a non-resident trust (sub-subparagraph 102AAT(1)(a)(i)(C) or sub-subparagraph 102AAT(1)(a)(ii)(B) of the ITAA 1936). The executor of the estate of a deceased attributable taxpayer is generally not an attributable taxpayer unless the executor has transferred property or services to a non-resident trust estate through the exercise of a power of appointment or of a discretion by the executor. There are no 'successor' rules for the case of the death of a natural person who has transferred property or services. That is, no provision deems an executor to be an attributable taxpayer when a previous transfer of property or services was made by the deceased taxpayer. In the absence of 'successor' rules, the executor of the deceased estate, having a separate legal personality to the taxpayer, cannot be subject to attribution by virtue of a previous transfer of property or services by the taxpayer.", "Date_of_Decision": "13 December 2007", "Year_of_Income": "Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 102AAT section 102AAZD", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/9", "Subject_References": "Deceased estates Executors Non resident trusts Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200810", "Unmatched_Content": "Insert 'estate' after 'non-resident trust' | Change to consistent use of past tense | Reword second paragraph for clarity | Keywords Deceased estates Executors Non resident trusts Trusts"}
{"ATO_ID_Number": "ATO ID 2002/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income: Trustee of a Trust with a Non-Resident Beneficiary (Interest income)", "Issue": "Whether the taxpayer, a trustee of a trust who is liable to be assessed for tax in respect of a non-resident beneficiary under section 98 of the Income Tax Assessment Act 1936 (ITAA 1936), should include in their assessable income an amount distributed to the non-resident beneficiary as interest, where withholding tax is payable on the interest.", "Decision": "No, the amount distributed to the non-resident beneficiary as interest, where withholding tax is payable on the interest, is excluded from the assessable income of the taxpayer trustee under section 128D of the ITAA 1936.", "Facts": "The taxpayer, a trustee of a trust, distributes an amount of interest to a non-resident beneficiary of the trust. The trustee withholds and pays the withholding tax on the interest. The trustee is liable for tax in respect of the non-resident beneficiary.", "Reasons_for_Decision": "Summary: Section 128D of the ITAA 1936 excludes from assessable income certain income on which withholding tax is payable. Under subsection 128B(2) of the ITAA 1936 there is a liability to withholding tax by the trustee, on income consisting of interest paid to a non-resident, and under subsection 128C(1) of the ITAA 1936, the withholding tax is due and payable by the trustee. The amount distributed to the non-resident beneficiary as interest is excluded from the assessable income of the trustee under section 128D of the ITAA 1936, as withholding tax is payable on the interest income.", "Date_of_Decision": "4 January 2002", "Year_of_Income": "Year ended 30 June 1999", "Legislative_References": "Income Tax Assessment Act 1936 section 98 subsection 128B(2) subsection 128C(1) section 128D", "Related_Public_Rulings_and_Determinations": "IT 2680", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/94", "Subject_References": "Non-resident beneficiaries Non-resident interest withholding tax Trusts Trust beneficiaries Trust distributions Distributions to non-residents", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200293", "Unmatched_Content": "Include reference to section 98 | Related Public Rulings (including Determinations) | Include reference to IT2680 | Related ATO Interpretive Decisions | Include reference to ATO ID 2002/94 | Format and minor grammatical changes | Related Public Rulings (including Determinations) IT 2680 | Keywords Non-resident beneficiaries Non-resident interest withholding tax Trusts Trust beneficiaries Trust distributions Distributions to non-residents"}
{"ATO_ID_Number": "ATO ID 2007/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transferor trusts: Division 6AAA", "Issue": "Does section 102AAZD of the Income Tax Assessment Act 1936 (ITAA 1936) apply to a resident company that transfers property or services to an employee loyalty fund managed and administered by a Dutch Stichting?", "Decision": "Yes. Section 102AAZD of the ITAA 1936 applies to include the notional attributable income of the employee loyalty fund (the trust estate) in the assessable income of the resident company (the company).", "Facts": "The Stichting was created in the Netherlands to operate an employee loyalty fund (the Fund) for certain employees of the resident company. The purpose of the Fund is to provide incentives and benefits to eligible employees or their dependants. An Agreement between the Stichting and the company was entered into for this purpose. The Stichting agreed with the company to administer and manage the Fund in accordance with the terms and conditions of the Agreement. The company carries on a business of manufacturing. In the 2001 and 2002 income years, the company made a contribution in cash to the Fund. The amount of the contribution is made at the discretion of the company. Contributions made by the company cease to be the property of the company and in no event does any part of the contributions revert to the company. The contributions are legally owned by the Stichting. The company nominates certain employees to participate in the Fund. On nomination each employee must submit an Application Form to the Stichting in order to be eligible to participate. On that form, the employees agree to be bound by the terms and conditions of the Agreement and acknowledge that where they meet certain criteria, they are entitled to benefits from the Fund. They also nominate beneficiaries to receive any benefit entitlement. Each participant has an indeterminate entitlement to benefit from the Fund, until such time as the Stichting determines the amount of the benefit under the terms of the Agreement. The Agreement is governed by the law of the Netherlands. A Stichting has a legal personality.", "Reasons_for_Decision": "Summary: Broadly, the object of Division 6AAA of the ITAA 1936 is to tax residents who have transferred property or services to certain non-resident trust estates, on an accruals basis, where the transfer is not an arm's length transaction ordinarily carried on by the transferor, or where the transferor is in a position to control the trust estate. Section 102AAZD of the ITAA 1936 includes in the assessable income of an attributable taxpayer the notional attributable income of a trust estate to which the taxpayer has transferred property or services. For section 102AAZD of the ITAA 1936 to apply, there must be an attributable taxpayer in relation to a trust estate. Section 102AAT of the ITAA 1936 sets out the conditions required to be satisfied for there to be an attributable taxpayer in relation to a trust estate. Central to section 102AAT is the existence of a trust estate. | Detailed Reasoning - Is there a 'trust estate' for the purposes of Division 6AAA?: 'Trust estate' is not defined in the ITAA 1936 or Income Tax Assessment Act 1997 (ITAA 1997). French J in Harmer & Ors v. Federal Commissioner of Taxation (1989) 20 ATR 1461; 89 ATC 5180 stated that a trust 'is notably a definition of a relationship by reference to obligations'. He went on to state that the four essential elements of a trust are: Having regard to the Agreement, all four elements are present so as to give rise to a trust relationship between the Stichting and the employees entitled to benefits from the Fund. The Stichting has ownership and possession of the trust property and is the trustee. The trust property consists of the contributions made by the company to the Fund. The beneficiaries are the employees admitted to the Fund. The dependants of the employees are also another class of potential beneficiaries. The terms of the Agreement impose on the trustee a personal obligation to deal with the trust property for the benefit of the beneficiaries. Having regard to the relationship between the Stichting, the company and employees (as determined by the Agreement), there is an express intention that the Stichting hold the property not exclusively for itself, but subject to an equitable obligation and therefore the relationship constitutes an express trust. | Detailed Reasoning - Is the company an attributable taxpayer in relation to the trust estate?: The company is an attributable taxpayer in relation to the trust estate because the requirements of subparagraph 102AAT(1)(a)(i) of the ITAA 1936 are met. Sub-subparagraph 102AAT(1)(a)(i)(A) of the ITAA 1936 is satisfied because the trust estate is a discretionary trust. The Agreement confers wide discretionary powers to the Stichting in relation to the employee's entitlements. Sub-subparagraph 102AAT(1)(a)(i)(B) of the ITAA 1936 is satisfied because the estate was not a unit trust and therefore a 'public unit trust' as defined in section 102AAB of the ITAA 1936. The beneficial interest is also not widely held. Sub-subparagraph 102AAT(1)(a)(i)(C) of the ITAA 1936 is satisfied because the company has transferred property (being contributions of money) to the trust estate. Sub-subparagraph 102AAT(1)(a)(i)(D) of the ITAA 1936 is satisfied because the transfer, although made in the company's ordinary course of business (manufacturing), was not a transfer of property manufactured by the company. Sub-subparagraphs 102AAT(1)(a)(i)(E) and (F) of the ITAA 1936 are not applicable. Having satisfied the requirements of section 102AAT of the ITAA 1936, the company is an attributable taxpayer in relation to the trust estate. As a result, section 102AAZD of the ITAA 1936 will include the 'notional attributable income' of the trust estate (as determined under subsection 102AAZD(2)) in the company's assessable income.", "Date_of_Decision": "19 February 2007", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 102AAZD(1) subsection 102AAZD(2) section 102AAT sub-subparagraph 102AAT(1)(a)(i)(A) sub-subparagraph 102AAT(1)(a)(i)(B) sub-subparagraph 102AAT(1)(a)(i)(C) sub-subparagraph 102AAT(1)(a)(i)(D) sub-subparagraph 102AAT(1)(a)(i)(E) sub-subparagraph 102AAT(1)(a)(i)(F)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Discretionary trusts Entities & taxpayer groups Foreign attributable income Foreign income International tax Netherlands Non resident entities Non resident trusts Trustees Trusts", "Case_References": "Harmer v. Federal Commissioner of Taxation (1989) 91 ALR 550 20 ATR 1461 89 ATC 5180", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200742", "Unmatched_Content": "Replace 'Netherlands Stichting' with 'Dutch Stichting' | Cite all sub-subparagraphs 102AAT(1)(a)(i)(A) to (F) | Add references to sub-subparagraphs 102AAT(1)(a)(i)(E) and (F) | Keywords Discretionary trusts Entities & taxpayer groups Foreign attributable income Foreign income International tax Netherlands Non resident entities Non resident trusts Trustees Trusts"}
{"ATO_ID_Number": "ATO ID 2007/108", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Residency: foreign trust income - temporary resident", "Issue": "Is the receipt by a temporary resident of Australian sourced income distributed from a trust estate resident in the United Kingdom (UK) to be included in the temporary resident's assessable income?", "Decision": "Yes. The receipt by a temporary resident of Australian sourced income distributed from a trust estate resident in the UK is to be included in the temporary resident's assessable income.", "Facts": "The taxpayer is a resident of Australia for the purposes of Australian tax and for the purposes of the Convention between the Government of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains (Canberra, 21 August 2003) - [2003] ATS 22 (the UK convention). The taxpayer is also a 'temporary resident' of Australia as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The taxpayer is a life tenant and sole income beneficiary of a UK resident trust estate created under a will. The taxpayer is presently entitled to a share of trust income and is not under any legal disability. The UK resident trust receives Australian sourced income, which it in turn distributes to the taxpayer after the deduction of relevant expenses. The Australian sourced income is interest income.", "Reasons_for_Decision": "Summary: Sections 6-5(2) and 6-10(4) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary or statutory income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Section 10-5 of the ITAA 1997 lists the provisions in respect of statutory income. Relevantly included in this list is section 97 of the Income Tax Assessment Act 1936 (ITAA 1936) which provides that where a beneficiary of a trust estate is presently entitled to a share of the net income of the trust estate, the assessable income of the beneficiary shall include so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident. Subdivision 768-R of the ITAA 1997 provides an exemption for most foreign income derived by temporary residents of Australia. The exemption for temporary residents is succinctly explained by the following references to the Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006. Paragraph 1.23 explains as follows: This Bill makes ordinary income derived from a foreign source during the period the taxpayer is a temporary resident non-assessable non-exempt income. This measure also applies to all statutory income that has a source other than Australia, including amounts otherwise attributable from a foreign company or a foreign trust, on which the taxpayer would otherwise be taxed. This extends to amounts derived through partnerships and trusts but not to amounts derived by other taxable entities (e.g., not where a trustee is taxable under section 99 or 99A of the Income Tax Assessment Act 1936 (ITAA 1936)). There is no exemption for Australian source income. Specifically, section 768-910 of the ITAA 1997 provides that statutory income derived by a temporary resident from a foreign source (other than a net capital gain which is covered by section 768-915 of the ITAA 1997) is non-assessable non-exempt income and therefore not subject to tax. Section 6B(2) of the ITAA 1936 deems an amount of income derived by a person as a beneficiary in a trust estate to be income attributable to interest income if the amount can be attributed directly or indirectly to interest income. Further, subsection 6B(2A) of the ITAA 1936 deems income to be derived from a particular source if it is attributable by virtue of subsection 6B(2) to interest income derived from that source, in this instance Australia. Accordingly, for Australian tax purposes, the distribution consisting of income that is attributable to Australian sourced interest income retains its character as Australian sourced interest income when it is distributed to the taxpayer. It follows that the distribution of Australian sourced income by the UK trust to the taxpayer remains assessable income of the taxpayer. However given the income is derived through a UK resident trust it is necessary to consider whether Australia's taxing rights are restricted by the application of the UK convention. Article 11 of the UK convention deals with interest arising in one Contracting State that is beneficially owned by a resident of the other Contracting State. In this instance the trust income consists of interest arising in Australia. Further, the taxpayer is the beneficial owner of that interest because they are the sole income beneficiary of the trust and are presently entitled to the trust income. Given the taxpayer is also a resident of Australia for the purposes of the UK convention, the beneficial owner of the interest income is a resident of the same Contracting State as that in which the interest arises. Therefore, Article 11 of the UK convention does not deal with the interest income in this case. Article 20 of the UK convention covers income that is not dealt with in the foregoing Articles of the convention. Article 20.1 provides that such income, wherever arising, that is beneficially owned by a resident of a Contracting States shall be taxable only in that State. Therefore, in this case Article 20 allocates Australia the sole taxing right over the trust income beneficially owned by the taxpayer. In summary, the taxpayer's share of the UK trust income that is attributable to Australian sources will constitute assessable income pursuant to section 6-10 of the ITAA 1997 because the 'temporary resident exemption' provided by section 768-910 of the ITAA 1997 does not apply to Australian sourced income.", "Date_of_Decision": "19 April 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6B(2) subsection 6B(2A) section 96B section 96C section 97 section 97(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2006/161", "Subject_References": "Double tax agreements Foreign source income Foreign trust measures International tax Temporary resident Treaties Trust distributions United Kingdom", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (2006 Measures No. 1) Bill 2006 UK convention [2003] ATS 22 UK convention [2003] ATS 22, Article 11 UK convention [2003] ATS 22, Article 20", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007108", "Unmatched_Content": "Delete the reference to 'pension income' in the Title | Format and minor grammatical changes | Facts added to clarify the type of income sourced in Australia | Remove references to the repealed Foreign Investment Funds provisions and sections 96B and 96C of the Income Tax Assessment Act 1936 | Delete the reference to 'foreign tax credits' | Delete the reference to the related Public Ruling TR 92/13 that has been withdrawn | Delete notes 2 & 3 as they are no longer relevant | Updated legislative references | Related ATO Interpretative Decisions | Delete the reference to the related ATO ID 2004/297 that has been withdrawn | Keywords Double tax agreements Foreign source income Foreign trust measures International tax Temporary resident Treaties Trust distributions United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/145", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: tax exempt beneficiary and reimbursement agreement", "Issue": "Is a trustee of a family trust liable to be assessed under section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) as a consequence of the application of section 100A of the ITAA 1936, where trust income is distributed to a tax exempt beneficiary of the trust, in return for services provided by the tax exempt beneficiary to another beneficiary or an associate?", "Decision": "Yes. The trustee is liable to be assessed under section 99A of the ITAA 1936 where trust income is distributed to a tax exempt beneficiary of the family trust, pursuant to a reimbursement agreement as defined in section 100A of the ITAA 1936.", "Facts": "The family trust which derives its income exclusively from interest and dividends was established for the maintenance, education and advancement of family members. The discretionary beneficiaries of the trust include family members and any school, college or university which the beneficiaries attend. The trustee entered into an arrangement with a school attended by some of the family trust's beneficiaries. The school agreed to accept distributions from the family trust in lieu of the equivalent annual fees and other educational costs payable to the school during the year of income. The school is exempt from income tax under Item 1.4 of the Table in section 50-5 of the Income Tax Assessment Act 1997.", "Reasons_for_Decision": "Summary: Section 100A of the ITAA 1936 provides that where a beneficiary of a trust estate who is not under a legal disability, is presently entitled to trust income, and that present entitlement is linked either directly or indirectly to a reimbursement agreement, the beneficiary is deemed not to be presently entitled to the income. Trust distributions which fall within section 100A of the ITAA 1936 are assessed to the trustee under section 99A of the ITAA 1936. Subsection 100A(7) of the ITAA 1936 defines a reimbursement agreement to include, ...the payment of money or the transfer of property to, or the provision of services or other benefits for, a person or persons other than the beneficiary or the beneficiary and another person or persons. Further, the term 'agreement' is defined in subsection 100A(13) of the ITAA 1936 to include any agreement, arrangement or understanding, whether formal or informal, express or implied, and either enforceable or unenforceable. However, the term does not include any agreement entered into in the course of ordinary family or commercial dealings. In Federal Commissioner of Taxation v. Prestige Motors Pty Ltd (1998) 82 FCR 195; 98 ATC 4241; (1998) 38 ATR 568, the court said that the wording of the exclusion in subsection 100A(13) was derived from the judgment of Lord Denning in Newton & Ors v Federal Commissioner of Taxation(1958) 98 CLR 1; (1958) 11 ATD 442; (1958) 7 AITR 298, which referred to the application of section 260 of the ITAA 1936, as follows: In order to bring the arrangement within the section one must be able to predicate of it, by looking at the overt acts by which it was implemented, that it was implemented in that particular way so as to avoid tax. If one has to acknowledge that the transactions are capable of explanation by reference to ordinary business or family dealing, the arrangement does not come within the section. In this case the school which provides educational services to family members has become presently entitled to trust income, arising from the agreement with the trustee to accept discretionary trust distributions, in lieu of payments for school fees and other educational expenses. It is considered that this arrangement goes beyond ordinary family or commercial dealings and is a reimbursement agreement as defined in subsection 100A(7) of the ITAA 1936. However, the definition of a reimbursement agreement in subsection 100A(7) of the ITAA 1936 is also subject to a purpose test which is outlined in subsections 100A(8) and 100A(9) of the ITAA 1936. Those subsections require that one of the purposes for which the reimbursement agreement was entered into by any of the parties to the agreement, must be the reduction or elimination of a tax liability that would have existed had the reimbursement agreement not been entered into. If no trust distributions had been made to the school under this arrangement, one or more of the family beneficiaries or the trustee would have been liable for tax on the total net income of the trust. Therefore, it is considered that the arrangement was entered into at least partly for the purpose of reducing the tax liability of family beneficiaries or the trustee. Thus, it is concluded that the distribution by the trustee, of trust income to the school under the arrangement, was a consequence of a reimbursement agreement as defined. Accordingly, section 100A of the ITAA 1936 will apply to the above arrangement and due to the operation of subsection 100A(4) of the ITAA 1936 the trustee will be assessed on the trust income distributed to the school under section 99A of the ITAA 1936.", "Date_of_Decision": "23 May 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 99A section 100A subsection 100A(4) subsection 100A(7) subsection 100A(8) subsection 100A(9) subsection 100A(13) section 260", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Present entitlement School fees & levies Tax avoidance Trust distributions Trust income Trust reimbursement agreements", "Case_References": "Federal Commissioner of Taxation v. Prestige Motors Pty Ltd (1998) 82 FCR 195 98 ATC 4241 38 ATR 568", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005145", "Unmatched_Content": "Substitute reference to paragraph 23(e) ITAA 1936 to section 50-5 ITAA 1997 | Correct quote from Lord Denning and citations Add reference to subsection 100A(4) in the last paragraph | Add reference to 100A(4) ITAA 1936 and 50-5 ITAA 1997 | Keywords Present entitlement School fees & levies Tax avoidance Trust distributions Trust income Trust reimbursement agreements"}
{"ATO_ID_Number": "ATO ID 2005/359", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: whether a trustee payment is attributable to an amount that is an unrealised gain", "Issue": "Is a trustee payment, made to discharge a present entitlement to an amount representing the proceeds from disposal of a trust investment, attributable to an amount that is an 'unrealised gain' within the meaning of paragraph 109XA(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A trustee payment, made to discharge a present entitlement to an amount representing the proceeds from disposal of a trust investment, is not attributable to an amount that is an 'unrealised gain' within the meaning of paragraph 109XA(1)(b) of the ITAA 1936.", "Facts": "The taxpayer is a beneficiary of a discretionary trust (Trust A) and also a shareholder of a private company. In income year Y1 (which is later than the income year including 12 December 2002) the private company is presently entitled to an amount from the net income of Trust A. This amount is not paid before the earlier of the due date for lodgment and date of lodgment of the trust's income tax return for that income year. During the course of the Y1 income year Trust A sells units in a unit trust for market value consideration to a family trust of which the taxpayer is a beneficiary (Trust B). The consideration on sale is a debt due to Trust A by Trust B. The trustee of Trust A is empowered by the trust deed of Trust A to declare present entitlement in favour of the taxpayer for an amount representing the proceeds on sale of the units in the unit trust. In the Y1 income year, the trustee declares present entitlement in favour of the taxpayer for the amount of the proceeds from sale of the units in the unit trust, and then makes payment to the taxpayer discharging that present entitlement.", "Reasons_for_Decision": "Summary: Subdivision EA deems certain payments, loans or forgiven debts (made on or after 12 December 2002) by a trustee of a trust estate to a shareholder (or associate) of a private company, to be included in their assessable income as if it were a dividend, where the private company is presently entitled to an amount from the net income of the trust estate, and that amount has not been fully paid out before the 'lodgment day'. The 'lodgment day' is the earlier of the due date for lodgment and date of lodgment of the trust's tax return for the income year in which the payment, loan or debt forgiveness occurs. For a trustee payment to be included in assessable income under section 109XB of the ITAA 1936, it must meet the requirements of subsection 109XA(1) of the ITAA 1936 which provides as follows: The word 'attributable' is not defined for the purposes of subsection 109XA(1) of the ITAA 1936 and therefore adopts its ordinary meaning. The New Shorter Oxford English Dictionary, ( 1993, 4th edn, The Clarendon Press, Oxford) defines 'attributable' as: attributable a . able to be attributed to , owing to Similarly, in Hartley v. Hartley [1986] 2 NZLR 64 at 75 Somers J held 'attributable' to mean: owing to or produced by A present entitlement will be attributable to an amount that is an 'unrealised gain', within the meaning of paragraph 109XA(1)(b) the ITAA 1936, where the trust deed empowers the trustee to declare present entitlement to an amount representing the 'unrealised gain', and the trustee has declared present entitlement to that amount. For the purposes of paragraph 109XA(1)(b) of the ITAA 1936 'unrealised gain' is defined in subsection 109XA(7) of the ITAA 1936 as: In this section: unrealised gain , in relation to a trust estate and an actual payment, means any unrealised gain, whether of a capital or income nature, but does not include an unrealised gain to the extent that it has been or would be included in assessable income of the trust, apart from this Division, for: (a) a year of income before the year in which the actual payment was made; or (b) the year in which the actual payment was made; or (c) the year of income following the year in which the actual payment was made. Subsection 109XA(7) of the ITAA 1936 carves out certain payments which are otherwise included in assessable income (within certain timeframes) and clarifies that both capital and income 'unrealised gains' are included. Apart from these matters, the phrase 'unrealised gain' is not defined for the purposes of Subdivision EA of the ITAA 1936 and adopts its ordinary meaning. The Macquarie Dictionary (3rd edition, 2001, The Macquarie Library, Australia) defines the words 'realise' and 'gain' in the relevant context as follows: realise ... 6. to bring as proceeds, as from a sale; the goods realised $1000. The ordinary meaning of the phrase 'realised gain' is therefore to have a profit or advantage that has materialised in the form of proceeds from a sale. The High Court in Read v. Commonwealth (1988) 167 CLR 57 at 66 expressed a similar meaning in distinguishing between a realised and unrealised gain of a capital nature where it was said: A capital gain is realised when an item of capital which has increased in value is ventured, either in whole or in part, in a transaction which returns that increase in value. The 'cash' and 'accrual' methods of accounting, however, recognise proceeds of sale at different times. The cash method recognises the proceeds when physical payment is received ( Brent v. FC of T (1971) 125 CLR 418 at 429; 71 ATC 4195 at 4200; (1971) 2 ATR 563 at 571) whereas the accruals method recognises the proceeds when it constitutes a recoverable debt ( Henderson v. FC of T (1970) 119 CLR 612; 70 ATC 4016; (1970) 1 ATR 596 and Barratt & Ors v. FC of T (1992) 23 ATR 339 at 344; 92 ATC 4275 at 4280). The Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 1) Bill 2004 provides at paragraph 8.13: For the purposes of these rules, realisation will be taken to have occurred when a gain converts into a recoverable debt. The meaning of the phrase 'unrealised gain' can be summarised as: A gain is unrealised when an item which has increased in value has not been ventured, either in whole or in part, in a transaction to obtain a return that reflects that increase in value; or has been ventured into such a transaction but the return is yet to convert into a recoverable debt. In these circumstances, the trustee of Trust A has declared present entitlement to an amount in accordance with the trust deed and a payment has been made discharging that present entitlement. The amount to which present entitlement has been declared is attributable to a realised gain, rather than an unrealised gain, as it represents the proceeds on sale of the units in the unit trust, and those proceeds constitute a recoverable debt. Therefore, the payment discharging the present entitlement does not trigger subsection 109XA(1) of the ITAA 1936, and an amount is not required to be included in assessable income of the taxpayer because of the payment.", "Date_of_Decision": "27 October 2005", "Year_of_Income": "30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 Subdivision EA section 109XA subsection 109XA(1) paragraph 109XA(1)(b) subsection 109XA(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Trustee payments Division 7A Subdivision EA Dividends", "Case_References": "Hartley v. Hartley (1986) 2 NZLR 64", "Other_References": "Explanatory Memorandum Tax Laws Amendment (2004 Measures No. 1) Bill 2004 The Macquarie Dictionary 3rd edn, 2001 The Macquarie Library, Australia. The New Shorter Oxford English Dictionary 1993, 4th edn, The Clarendon Press, Oxford.", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005359", "Unmatched_Content": "Keywords Deemed dividends Trustee payments Division 7A Subdivision EA Dividends"}
{"ATO_ID_Number": "ATO ID 2004/66", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of payment of accumulated foreign-source income of a non resident trust to a resident taxpayer", "Issue": "Is the resident taxpayer assessable on the payment of accumulated foreign-source income of a non-resident trust under section 99B of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The resident taxpayer is assessable on the payment of accumulated foreign-source income of a non-resident trust under section 99B of the ITAA 1936.", "Facts": "The taxpayer was a resident of Australia during the year of income. The taxpayer was presently entitled to a share of the foreign-source income of the non-resident trust prior to becoming a resident of Australia. This income was accumulated in the trust and the taxpayer was subsequently paid several amounts from this accumulation after the taxpayer became a resident of Australia. These amounts had not previously been subject to tax in Australia. These amounts are amounts that would be included in assessable income of a resident taxpayer if they were derived by that resident taxpayer. Subsection 99B(1) of the ITAA 1936 provides that where, during a year of income, a beneficiary who was a resident at any time during the year is paid a distribution from a trust, or has an amount of trust property applied for their benefit, that amount is to be included in the assessable income of the beneficiary. Subsection 99B(2) of the ITAA 1936 modifies the rule in subsection 99B(1) and has the effect that the amount to be included in assessable income under subsection (1) is not to include any amount that represents either:- The amounts paid to the resident taxpayer beneficiary represent trust income of a class which is taxable in Australia, but which has not previously been subject to Australian tax in the hands of either the beneficiary or the trustee. None of the exclusions in subsection 99B(2) apply. Therefore, the amounts are assessable to the beneficiary under subsection 99B of the ITAA 1936.", "Reasons_for_Decision": "", "Date_of_Decision": "14 January 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 99B subsection 99B(1) subsection 99B(2) section 97 section 98 section 99 section 99A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 96/12 | Taxation Ruling TR 2003/9 | Taxation Ruling TR 2003/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Residence in Australia Non residents trust Trust distributions", "Case_References": "Traknew Holdings Pty Ltd v. Federal Commissioner of Taxation (1991) 21 ATR 1478 91 ATC 4272", "Other_References": "Explanatory Memorandum to Income Tax Assessment Amendment Bill (No. 5) 1978", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200466", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 96/12 Taxation Ruling TR 2003/9 Taxation Ruling TR 2003/6 | Keywords Residence in Australia Non residents trust Trust distributions"}
{"ATO_ID_Number": "ATO ID 2004/799", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of distributions received by an Australian resident from a United Kingdom unit trust", "Issue": "Are distributions received by an Australian resident taxpayer from a United Kingdom (UK) unit trust, assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The distributions received by an Australian resident taxpayer from a UK unit trust are assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer holds an interest in a UK unit trust. The taxpayer elected to have distributions issued by the trust automatically reinvested back into the trust. The value of the taxpayer's interest in the unit trust is less than $50,000.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that an Australian resident taxpayer's income includes ordinary income derived during the income year from all sources, whether in or out of Australia. A distribution from a unit trust is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-5(4) of the ITAA 1997 provides that a taxpayer derives an amount of ordinary income when the amount is received, or when it is dealt with in any way on the taxpayer's behalf or as the taxpayer directs. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the double tax convention between Australia and the UK of Great Britain and Northern Ireland (the UK Convention). Schedule 1A to the Agreements Act contains the UK Protocol. The UK Convention and the UK Protocol operate to avoid the double taxation of income received by Australian and UK residents. Article 20 of the UK Convention deals with the taxation of income not addressed by the other Articles of the Convention. Article 20 of the UK Convention gives Australia a taxing right on the distribution from a unit trust which is derived from a UK source. Therefore, the distributions received by the taxpayer from the unit trust are assessable income in Australia under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "23 September 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-5(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/917 | ATO ID 2001/647", "Subject_References": "Dividend reinvestment Double tax agreements Foreign tax credits Unit trust distributions United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004799", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend reinvestment Double tax agreements Foreign tax credits Unit trust distributions United Kingdom"}
{"ATO_ID_Number": "ATO ID 2003/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trust income - assessability of employer contributions to an Income Protection and Portable Sickness Benefit Fund", "Issue": "Is the taxpayer, a trustee, assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) on contributions received from participating employers to an Income Protection and Portable Sickness Benefit Fund (the fund)?", "Decision": "No. The taxpayer is not assessable under section 6-5 of ITAA 1997 on contributions received from participating employers to the fund.", "Facts": "As a result of an Enterprise Bargaining Agreement the fund was established. The fund is a trust. The taxpayer is the trustee of that trust. The purpose of the fund is to establish a scheme under which employees in an industry may be insured for the provision of income protection and portable sick leave. The fund uses the contributions made by participating employers to purchase these insurance policies. All claims against these policies are paid directly to the employees. On termination of the fund, any surplus is to be paid to an income protection or portable sick leave insurance scheme with purposes similar to those of the fund.", "Reasons_for_Decision": "Summary: Subsection 6-5(1) of the ITAA 1997 provides that a taxpayer's assessable income includes income according to ordinary concepts (ordinary income). Whether the employers' contributions are assessable income of the fund under section 6-5 of the ITAA 1997 depends on whether they represent income according to ordinary concepts. In Scott v. Federal Commissioner of Taxation (1966) 10 AITR 367; (1966) 117 CLR 514; (1966) 14 ATD 286 Windeyer J stated that : 'Whether or not a particular receipt is income depends upon its quality in the hands of the recipient.' In G.P. International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124; (1990) 21 ATR 1; 90 ATC 4413 the High Court considered the following factors were important in determining the nature of a receipt: 'To determine whether a receipt is of an income or a capital nature, various factors may be relevant. Sometimes, the character of receipts will be revealed most clearly by their periodicity, regularity or recurrence; sometimes, by the character of a right or thing disposed of in exchange for the receipt; sometimes by the scope of the transaction, venture or business in or by reason of which money is received and by the recipient's purpose in engaging in the transaction, venture or business.' The purpose of receiving the employers' contributions is solely to establish the scheme under which employees in that industry may be insured. As such, the payments in the hands of the taxpayer are of a capital nature as they represent the corpus of the trust. Accordingly, the employers' contributions are not assessable income under section 6-5 of the ITAA 1997.", "Date_of_Decision": "15 November 2002", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Trust income", "Case_References": "G P International Pipecoaters Pty Ltd v. Federal Commissioner of Taxation (1990) 170 CLR 124 90 ATC 4413 (1990) 21 ATR 1", "Other_References": "", "Business_Line": "Business and Personal Tax Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200342", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2003/161", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trusts: Exempt beneficiary and the application of section 99A", "Issue": "Does section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the income of a trust to which a beneficiary is presently entitled when the beneficiary is exempt from income tax?", "Decision": "No. Section 99A of the ITAA 1936 does not apply to the income of a trust to which a beneficiary is presently entitled when the beneficiary is exempt from income tax.", "Facts": "A trust is established for the benefit of a sole beneficiary. The beneficiary has a vested and indefeasible interest in all of the income of the trust for an accounting period, regardless of whether or not the trustee determines to distribute it. The beneficiary is exempt from income tax pursuant to Division 50 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Reasons_for_Decision": "Summary: Under section 99A of the ITAA 1936, the trustee of a trust estate is assessed on that part of the net income of the trust estate that is not included in the assessable income of a beneficiary in pursuance of section 97 of the ITAA 1936. Section 97 of the ITAA 1936 provides that a resident beneficiary shall include in their assessable income all the income of a trust estate to which they are presently entitled. As the beneficiary has a vested and indefeasible interest in all of the income of the trust, the beneficiary is presently entitled to all of the income of the trust estate and must include it in their assessable income. If an exempt entity is covered by section 50-5 of the ITAA 1997, section 50-1 of the ITAA 1997 applies to exempt the ordinary and statutory income (that is, assessable income) of that entity from income tax. As all of the trust income is first included in assessable income of the beneficiary under section 97 of the ITAA 1936, before becoming exempt income by virtue of section 50-1 of the ITAA 1997, there is no part of the income of the trust estate to which section 99A of the ITAA 1936 will apply.", "Date_of_Decision": "20 December 2002", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 97 section 99A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/242", "Subject_References": "Exempt entities Exempt income Present entitlement Trust distributions", "Case_References": "", "Other_References": "", "Business_Line": "Business and Personal Tax Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003161", "Unmatched_Content": "Keywords Exempt entities Exempt income Present entitlement Trust distributions"}
{"ATO_ID_Number": "ATO ID 2003/842", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Refund of tax on foreign sourced income to non-resident beneficiary", "Issue": "Is the non-resident beneficiary of a resident trust entitled to a refund under subsection 99D(1) of the Income Tax Assessment Act 1936 (ITAA 1936) of the tax paid by the trustee of a resident trust estate on foreign source income which was included in the calculation of the net income of the resident trust estate?", "Decision": "Yes. The non-resident beneficiary of a resident trust estate is entitled to a refund under subsection 99D(1) of the ITAA 1936 of the tax paid by the trustee of a resident trust estate on foreign source income which was included in the calculation of the net income of the resident trust estate.", "Facts": "The taxpayer is a non-resident beneficiary of a resident trust estate. The resident trust estate's net income for the year included income and other gains on disposal of assets attributable to sources out of Australia. The trustee of the trust estate pays the tax liability assessed based on the net income of the trust under subsection 99(2) of the ITAA 1936. The trustee of the trust estate distributes the income of trust to the taxpayer. The taxpayer requests in writing for a refund of the tax paid by the trustee in respect of the net income attributable to sources out of Australia. The distributed income is not part of any 'reimbursement agreement' arrangements that are subject to section 100A of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 99D of the ITAA 1936 allows a non-resident beneficiary in a resident trust estate to obtain a refund of any Australian tax paid by the trustee of a resident trust estate if certain conditions are satisfied. Paragraphs 99D(1)(a) to 99D(1)(c) of the ITAA 1936 provide that an application may be made by the beneficiary of the resident trust estate for a refund of tax under the following circumstances: Paragraph 99D(1)(e) of the ITAA 1936 provides that the beneficiary is also required to satisfy the Commissioner of Taxation that the whole or a part of the distributed amount: As the taxpayer satisfies all the requirements of subsection 99D(1) of the ITAA 1936, the taxpayer is entitled to a refund of tax paid by the trustee of the resident trust estate on foreign source income which was included in the calculation of the net income of the resident trust estate.", "Date_of_Decision": "11 August 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 99(2) subsection 99(3) subsection 99A(4) subsection 99A(4A) section 99D paragraph 99D(1)(e) section 100A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income Distributions to non residents Non resident beneficiaries", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003842", "Unmatched_Content": "Keywords Foreign income Distributions to non residents Non resident beneficiaries"}
{"ATO_ID_Number": "ATO ID 2001/647", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income - Reinvestment of Unit Trust Distributions", "Issue": "Has the taxpayer derived assessable income, pursuant to sections 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), in respect of a unit trust distribution that was automatically reinvested on the taxpayer's instructions into additional units in the unit trust?", "Decision": "Yes. The taxpayer derived assessable income in respect of a unit trust distribution that was automatically reinvested into additional units in the unit trust. The income was applied or dealt with as the taxpayer directed.", "Facts": "The taxpayer, an Australian resident, invested in a unit trust. The unit trust paid regular distributions to the taxpayer during the income year. The distribution consisted of income in the form of interest and dividends. In accordance with the taxpayer's instructions, the net amount distributed was automatically reinvested into additional units in the unit trust. Each time a distribution was made, the trust unit holder received a statement which disclosed the amount of the trust distribution and the number of additional units acquired by the taxpayer from the income distribution. After the end of the income year, the taxpayer received a trust unit holder statement with details of the net amount distributed, tax credit (if any), imputation credits (if any) and gross assessable income paid to the taxpayer during the preceding income year.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly from all sources during the income year. An example of ordinary income is interest income . Subsection 6-5(4) of the ITAA 1997 states that a taxpayer derives an amount of ordinary income when the amount is: The taxpayer receives a trust distribution consisting of ordinary income. The taxpayer acquires additional units in the unit trust from the proceeds of the distribution from the trust. Accordingly, when the taxpayer directs the trustee of the unit trust to reinvest the taxpayer's distribution into additional units in the unit trust, the taxpayer is taken to have received the trust distribution during the relevant year and derived assessable income pursuant to sections 6-5 of the ITAA 1997.", "Date_of_Decision": "5 September 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2) subsection 6-5(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "dividend unit trust distributions reinvestment", "Case_References": "", "Other_References": "", "Business_Line": "Business and Personal Taxes", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001647", "Unmatched_Content": "Keywords dividend unit trust distributions reinvestment"}
{"ATO_ID_Number": "ATO ID 2011/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading trust: meaning of 'control' and 'affairs or operations' of another person", "Issue": "Is a unit trust a 'trading trust' under paragraph 102N(1)(b) of the Income Tax Assessment Act 1936 (ITAA 1936) where the trustee of the unit trust holds a veto power over matters that go to the structure, scope and management of X Co's business?", "Decision": "Yes. The trustee's power of veto over matters that go to the structure, scope and management of X Co's business constitutes control, or the ability to control, directly or indirectly, the affairs or operations of X Co in respect of the carrying on by X Co of its trading business for the purposes of paragraph 102N(1)(b) of the ITAA 1936.", "Facts": "The trustee of a public unit trust (the 'PUT') and three co-investors (collectively 'the members') incorporated a private company, X Co. Each member, including the trustee, held 25% of the shares, and thereby voting rights, in X Co. X Co carried on a trading business for the relevant year of income. Pursuant to an agreement between the members, the Board of Directors of X Co cannot undertake any action specified in the agreement as a 'Shareholder Matter' without approval by at least 80% of the members. The Shareholder Matters go to the structure, scope and management of X Co's business and encompass matters which pertain to X Co's capital structure, shareholders' rights, corporate governance as well as business scope and strategic direction. As a consequence of the trustee's holding 25% of the voting rights in X Co, the trustee can effectively block the 80% approval threshold being met in respect of any of the Shareholder Matters.", "Reasons_for_Decision": "Summary: Division 6C of the ITAA 1936 governs the way the income of certain unit trusts is treated for tax purposes and applies to a unit trust that is 'public trading trust'. Paragraph 102N(1)(b) of the ITAA 1936 provides that a unit trust will be a \"trading trust\" if, at any time during the year of income, the trustee: ... controlled, or was able to control, directly or indirectly, the affairs or operations of another person in respect of the carrying on by that other person of a trading business. The word 'control' or 'controlled' is not defined for the purposes of Division 6C of the ITAA 1936 and accordingly must be construed by reference to its natural meaning refined by the context within which the provision is intended to operate. In that regard, it is helpful to revisit Parliament's intention in enacting paragraph 102N(1)(b), discerned from the Explanatory Memorandum ('EM') to Taxation Laws Amendment Bill (No. 4) 1985 which comments as follows: Paragraph (b) of section 102N is a safeguarding provision against arrangements to circumvent the operation of Division 6C by having activities that would constitute a trading business of a public unit trust carried on by an associated entity. By taking income from the associate in the form of eligible investment income, the trust could otherwise ensure that the relevant trust did not qualify as a trading business and so avoid the operation of Division 6C. Given that paragraph 102N(1)(b) of the ITAA 1936 is a safeguarding provision, the concept of 'control' and its variants which determine the provision's application should be given the wide meaning which accords with its intention and not be constrained by conventional notions of corporate control. The Australian Oxford Dictionary (1999), Oxford University Press, Melbourne defines the word 'control' as (i) the power of directing, command; (ii) the power of restraining, especially self-restraint; and (iii) a means of restraint; a check. Plainly, the concept of exercising control includes both the positive aspect of directing or commanding and the negative aspect of restraining. Whereas one might ordinarily reflect on control of a company in terms of its Board of Directors ultimately answerable to a majority vote by shareholders, it is a perspective which does not accommodate the notion of negative control and, in turn, would narrow the scope intended by Parliament for the operation of paragraph 102N(1)(b) of the ITAA 1936. In Re The News Corporation Ltd and Others (1987) 70 ALR 419, Bowen CJ held that a 'power of veto is a power to restrain, and hence to control.' The statement by Bowen CJ, was made and meant, on its face and in its context, as a statement of general principle. Arguably, a view could be taken that no one shareholder, in effect, controls the Shareholder Matters because the ability to block a resolution is available to each of the other shareholders with 20% or more of the voting power in X Co. However, this view focuses on the positive aspect of control and disregards the negative aspect. The distinction between the two was highlighted by Mahoney JA in North Sydney Brick & Tile v. Darval & Anor (1986) 10 ACLR 837 at 844, where he said: The part that a shareholder plays in the restrictions imposed by these articles is, in a sense, negative rather than positive: they empower him to prevent ... but do not authorise him to permit... But a power to prevent, in this sense, may constitute a power to control within the section. [Emphasis added] Under the agreement, the trustee holds the power, presently exercisable, to restrain the Board of Directors from undertaking an action listed as a Shareholder Matter. That power is a form of 'control' in the negative sense. In other words, irrespective of the status of any other shareholder, any matter listed as a Shareholder Matter is blocked if the trustee exercises its power of veto, that is, negative 'control'. Therefore the trustee effectively controls or is effectively able to control the matters comprising the Shareholder Matters. Paragraph 102N(1)(b) of the ITAA 1936 requires that the trustee of the PUT controlled, or was able to control, directly or indirectly, the 'affairs' or 'operations' of X Co in respect of the carrying on by X Co of a trading business. The terms 'affairs' and 'operations' are not defined in the Tax Act. On ordinary concepts, the 'affairs' of a person includes their business and internal affairs: Re National Foods Ltd (Nos 1 and 2 ) (2005) 54 ACSR 80 at 55. In the context of a company, Winn J in R v. Board of Trade, ex parte St Martin Preserving Co Ltd [1964] 2 All ER 561 at 568, said: ... the phrase \"affairs of the company\" comprises all its business affairs, interests or transactions, all its investment or other property interests, all its profits and losses, and its goodwill. The term 'operations', on the other hand, is explained in the singular in the Australian Oxford Dictionary (1999), Oxford University Press, Melbourne as (i) an action, or process or method of working or operating; (ii) an active process, a discharge of a function; and (iii) a piece of work, especially one in series. Thus, the word 'operations' has a narrower meaning than 'affairs' and would sit more comfortably as a reference to the day-to-day business of the company rather than its business structure. However, the concept of 'affairs' may include 'operations'. Pursuant to the agreement between the members (referred to above), the trustee controls or is able to control the matters comprising the Shareholder Matters. The breadth of the Shareholder Matters effectively delivers pervasive control of the affairs and operations of X Co to the trustee via its negative 'control'. In addition, the Shareholder Matters concern matters that ordinarily fall within the responsibility of the Board of Directors independent of shareholder involvement and as such would be readily acknowledged as being 'in respect of' and indeed integral to X Co's carrying on of its trading business. Under these circumstances, the trustee, as a practical matter of fact, has by its power of veto, the ability to control, directly or indirectly, the affairs or operations of X Co in respect of the carrying on by X Co of its trading business. Accordingly, the PUT will be a trading trust under paragraph 102N(1)(b) of the ITAA 1936.", "Date_of_Decision": "4 August 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 Division 6C paragraph 102N(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/162", "Subject_References": "Trading trusts Trusts Unit trusts Public trading trusts", "Case_References": "Re The News Corporation Ltd and Others (1987) 70 ALR 419", "Other_References": "Australian Oxford Dictionary (1999), Oxford University Press, Melbourne", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201111", "Unmatched_Content": "Keywords Trading trusts Trusts Unit trusts Public trading trusts"}
{"ATO_ID_Number": "ATO ID 2010/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Eligible investment business: loan - Division 6C of the Income Tax Assessment Act 1936", "Issue": "Whether a participating loan provided by a managed investment scheme (MIS) is a 'loan' for the purposes of the definition of 'eligible investment business' in subparagraph 102M(b)(i) of Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936).", "Decision": "No, the participating loan is not a 'loan' for the purposes of the definition of 'eligible investment business' in subparagraph 102M(b)(i) of the ITAA 1936.", "Facts": "Investors will subscribe for units in a unit trust which is also a MIS for the purposes of section 9 of the Corporations Act 2001 . The MIS will use the subscription monies, together with external borrowings, to provide what is called a participating loan to an unrelated entity (entity X). Entity X will use the funding provided by the MIS under the participating loan to acquire a number of new residential properties which will be rented to tenants at arm's length. The funding provided by the MIS under the participating loan will represent a percentage of the cost to be incurred by entity X in acquiring all residential properties. The participating loan provided by the MIS to entity X will have the following features: The concept of 'adjusted net sales value' is a defined term under the participating loan agreement and represents an agreed valuation of all the residential properties at the end of this term. Under the participating loan agreement, the 'adjusted net sales value' will be determined on the basis that all properties are fully and properly maintained during the ten year term.", "Reasons_for_Decision": "Summary: Subparagraph 102M(b)(i) of the ITAA 1936 provides: In this Division, unless the contrary intention appears: ' eligible investment business' means one or more of: (a) ...; or (b) investing or trading in any or all of the following: (i) secured or unsecured loans (including deposits with a bank or other financial institution); (ii) ... ; (iii) ... ; (xiii) any similar financial instruments; or The word 'loan' is not a defined term in Division 6C of the ITAA 1936. Accordingly, the question of whether the participating loan is properly characterised as a loan will need to be determined by reference to its ordinary meaning. The Macquarie Dictionary , 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'loan' as follows: ...something lent or furnished on condition of being returned, especially a sum of money lent at interest Butterworths Concise Australian Legal Dictionary , 2004, 3rd edn, LexisNexis, NSW defines a 'loan' as: An advance of money; the provision of credit; the payment of an amount on behalf or at the request of a person where there is an obligation to repay the amount; or a transaction which in substance affects a loan of money. Judicial decisions suggest a similar interpretation. The decision in Inland Revenue Commissioners v. Rowntree and Co. Ltd [1948] 1 All ER 482 provides that for a facility to be characterised as a loan there must exist the legal relation of lender and borrower which gives rise to a loan of money in return for which there is a promise to repay. In Re Securitibank Ltd (No.2 ) [1978] 2 NZLR 136, Richardson J stated at 167 that: ... the essence of a loan of money is payment of a sum on condition that at some future time an equivalent amount will be repaid. Sackville and Lehane JJ in Federal Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 72 FCR 300; (1997) 34 ATR 635; (1997) 97 ATC 4151 noted that: a loan involves an obligation on the borrower to repay the sum borrowed. The Commissioner is of the opinion that the above definitions and case law provides the following understanding of the ordinary meaning of the word 'loan' for the purposes of subparagraph 102M(b)(i) of the ITAA 1936 and is succinctly expressed by the definition of 'loan' found in Joseph, C 1989, Chitty on Contracts , 26th edn, Sweet & Maxwell, London (at page 3574): A contract of loan of money is a contract whereby one person lends or agrees to lend a sum of money to another, in consideration of a promise express or implied to repay that sum on demand, or at a fixed or determinable future time, or conditionally upon an event which is bound to happen, with or without interest. Under the arrangement, the MIS will provide entity X with the participating loan to assist with entity X's acquisition of residential properties, whereby entity X will be required to pay the MIS the amount due and payable under the participating loan agreement at the end of a ten year term. The amount due and payable will be equal to 80% of the 'adjusted net sales value' of all the residential properties. The concept of 'adjusted net sales value' is a defined term under the participating loan agreement and represents an agreed valuation of all the residential properties at the end of this term. Under the participating loan agreement, the 'adjusted net sales value' will be determined on the basis that all properties are fully and properly maintained during the ten year term. Due to the possible favourable or unfavourable movements in the 'adjusted net sales value' of a property over the term of a loan, the amount ultimately paid by entity X to the MIS under the participating loan agreement may be greater than or less than the amount initially provided by the MIS to entity X. More importantly, the amount ultimately paid by entity X to the MIS under the participating loan agreement is not calculated by any reference to the amount of what is initially provided by the MIS to entity X. Therefore, under the terms of the participating loan agreement there is no repayment to the MIS by entity X of a sum borrowed. Accordingly, in these circumstances there is no loan within the meaning of subparagraph 102M(b)(i) of the ITAA 1936 of the definition of 'eligible investment business' within section 102M of the ITAA 1936.", "Date_of_Decision": "23 December 2009", "Year_of_Income": "30 June 2009 30 June 2010 30 June 2011 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subparagraph 102M(b)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/17", "Subject_References": "Public trading trusts Eligible investment business Borrowings & loans Financial instruments Securities", "Case_References": "Inland Revenue Commissioners v Rowntree and Co Ltd [1948] 1 All ER 482", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW. Butterworths Concise Australian Legal Dictionary, 2004, 3rd edn, LexisNexis, NSW. Joseph, C 1989, Chitty on Contracts, 26th edn, Sweet & Maxwell, London.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201016", "Unmatched_Content": "Keywords Public trading trusts Eligible investment business Borrowings & loans Financial instruments Securities"}
{"ATO_ID_Number": "ATO ID 2010/17", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Eligible investment business: 'other security' - Division 6C of the Income Tax Assessment Act 1936", "Issue": "Whether a participating loan provided by a managed investment scheme (MIS) is among 'other securities' for the purposes of the definition of 'eligible investment business' in subparagraph 102M(b)(ii) of Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The participating loan is among 'other securities' for the purposes of the definition of 'eligible investment business' in subparagraph 102M(b)(ii) of the ITAA 1936.", "Facts": "Investors will subscribe for units in a unit trust which is also a (MIS) for the purposes of section 9 of the Corporations Act 2001 . The MIS will use the subscription monies, together with external borrowings, to provide what is called a participating loan to an unrelated entity (entity X). Entity X will use the funding provided by the MIS under the participating loan to acquire a number of new residential properties which will be rented to tenants at arms-length. The funding provided by the MIS under the participating loan will represent a percentage of the cost to be incurred by entity X in acquiring all residential properties. The participating loan provided by the MIS to entity X will have the following features: The concept of 'adjusted net sales value' is a defined term under the participating loan agreement and represents an agreed valuation of all the residential properties at the end of this term. Under the participating loan agreement, the 'adjusted net sales value' will be determined on the basis that all properties are fully and properly maintained during the ten year term.", "Reasons_for_Decision": "Summary: Subparagraph 102M(b)(ii) to the ITAA 1936 provides that: In this Division, unless the contrary intention appears: ' eligible investment business' means one or more of: (a) ...; or (b) investing or trading in any or all of the following: (i) ...; (ii) bonds, debentures, stock or other securities; (iii) ...; (iv) ...; (xiii) any similar financial instruments; or The term '...other securities' is not a defined term in Division 6C of the ITAA 1936, and accordingly, the question of whether the participating loan is properly characterised as within '...other securities' will need to be determined by reference to its ordinary meaning. The precise wording of subparagraph 102M(b)(ii) of the ITAA 1936 is bonds, debentures, stock or other securities. The Commissioner's view of the ordinary meaning of 'security' is found in the interpretation of the statutory definition of 'security' in paragraph 159GP(1)(a) of the ITAA 1936. That paragraph provides: \" security \" means: - (a) stock, a bond, debenture, certificate of entitlement, bill of exchange, promissory note or other security; Although the wording of subparagraph 102M(b)(ii) of the ITAA 1936 is not exactly the same as that used in paragraph 159GP(1)(a) of the ITAA 1936, the list of securities mentioned in paragraph 159GP(1)(a) does mention all the securities in subparagraph 102M(b)(ii). The Commissioner's views in this regard are set out in Taxation Ruling 'TR 96/14 Income Tax: Traditional Securities'. Specifically, the following interpretation is provided there: The Commissioner's views in TR 96/14 do not limit traditional securities to those which are for the repayment of a loan but includes securities for the payment of other amounts. With respect to the participating loan, an obligation is imposed upon entity X at the time of entering into the participating loan agreement to make a future payment to the MIS. The participating loan secures a claim by the MIS for an amount which is determined upon redemption of the participating loan and the payment of which is secured by mortgages held by the MIS over the residential properties. Accordingly, the participating loan meets the ordinary meaning of 'security', being an instrument which evidences and secures an obligation on the part of the issuer (entity X) to pay an amount to the holder (the MIS) upon maturity/termination of the instrument. The fact that the amount ultimately paid cannot be calculated until the maturity date, and is referenced to the anticipated net sales value of the residential properties, does not alter this view. The MIS provided the participating loan as a matter of purely commercial judgment and in the reasonable expectation of achieving an overall gain from the payment due under the participating loan agreement. The Commissioner is of the view that when the MIS provides the participating loan it invests in 'other securities' for the purposes of subparagraph 102M(b)(ii) of the ITAA 1936.", "Date_of_Decision": "23 December 2009", "Year_of_Income": "30 June 2009 30 June 2010 30 June 2011 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subparagraph 102M(b)(ii) paragraph 159GP(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/16", "Subject_References": "Public trading trusts Eligible investment business Securities", "Case_References": "", "Other_References": "Taxation Ruling 96/14 Income Tax: Traditional Securities", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201017", "Unmatched_Content": "Keywords Public trading trusts Eligible investment business Securities"}
{"ATO_ID_Number": "ATO ID 2010/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Entity specific matters: trusts- whether a Managed Investment Scheme is a Unit Trust for the purposes of Division 6C of Part III of the Income Tax Assessment Act 1936", "Issue": "Is the taxpayer, the Responsible Entity (RE) of a Managed Investment Scheme (MIS), a trustee of a unit trust for the purposes of the application of Division 6C of Part III of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The taxpayer, the RE of a MIS, is to be characterised as a trustee of a unit trust as the beneficial interest in the trust is held in units, the common reference to fractions of the whole of an identified interest.", "Facts": "The RE is registered as such under the Corporations Act 2001 and is the appointed RE for a trust in which each individual beneficial interest in the trust is expressed as a fraction of the beneficial interest of all such interests collectively in the whole beneficial interest. The Constitution of the Trust consists of deed poll establishing a trust and which provides for the redemption of any individual unit in the unit trust in very limited circumstances.", "Reasons_for_Decision": "Summary: There is no definition of a unit trust for the purposes of Division 6C of Part III of the ITAA 1936. The joint judgment of the High Court in CPT Custodians Pty Limited v. Commissioner of State Revenue [2005] HCA 53 at paragraph 15 stated, '\"unit trust\", like \"discretionary trust\", in the absence of an applicable statutory definition, does not have a constant, fixed normative meaning'. There is however a consistent approach to what constitutes a unit trust which can be found in authoritative works. This definition reiterates the concept that the beneficial interest of the trust is held in 'units'. Units are expressed and defined as part of the whole beneficial interest of the trust (or in some circumstances of the whole beneficial interest of a particular kind). Other than this 'unit trusts' are, like all other trusts, subject to the terms of the impressed or stated trust and to the application of the law of trusts. The consistency of this approach can be viewed from the following extracts from commentators on the subject. Ford : Principles of the Law of Trusts Loose-Leaf Service 2006 at [1690] states: The expression \"unit trust\" is a term of convenience and not a term of art capable of having legal consequences. Its only significance is as a label for a trust under the terms of which the benefit to beneficiaries is divided into units. Such a trust does not attract rules different from those that apply to trusts in which the beneficial interest is not so divided. For example, the question whether beneficiaries under a unit trust have an equitable proprietary interest in trust property depends on the terms of the trust, as in the case of any other trust, on the terms of the particular trust: CPT Custodians Pty Limited v Commissioner of State Revenue (2005) 221 ALR 196: 70 ALJR 1724; [2005] HCA 53. JD Heydon MJ Lemming, Jacob's Law of Trusts in Australia , LexisNexis Butterworths 7th Edition 2006 at [310] Units trusts are an extension into the field of commerce of the typical family trust (where settlors transfer property to a trustee on trust for their children in equal shares). ... In the case of unit trust, the scheme property is divided into a large number of units, which may, subject to their terms, be issued redeemed and traded publicly and privately . (Emphasis added) Robert l. Pritchard, Chapter 18 'Unincorporated Joint Ventures', The Law of Public Company Finance , ed Austin and Vann, The Law Book Company Ltd 1986, p 397 (ii) A unit trust is a variation of the ordinary trust. Its distinguishing feature is that the beneficial interest in the trust property is divided into units which may be independently dealt with by the holders. H.A.J. Ford, Chapter 15 'Public Unit Trusts', The Law of Public Company Finance , ed Austin and Vann, The Law Book Company Ltd 1986, p 400 The Unit Holder as a Beneficial Owner ... But in a unit trust the trustee's ownership of the property of the enterprise is not beneficial ownership. The beneficial interest is in the unit holders in fractions proportional to the number of units held by each of them. Under the terms of the deed, as usually drawn, a unit does not confer any interest in any particular part of the trust fund or any particular investment but only such interest in the trust fund as a whole as is conferred on a unit under the deed. Features which may be found in some commercial unit trusts include rights of unit holders to have their units redeemed by the trustee (generally on payment of an amount worked out by reference to the unitholder's beneficial interest in the value of the trust assets reduced by outstanding trust liabilities, perhaps with a discount or adjustment of some kind). Another feature often found is a right in the trustee to issue additional units for subscription (again generally for subscription of an amount per unit worked out by reference to a present unit's share value of the trust assets reduced by outstanding trust liabilities, and perhaps with a discount or adjustment of some kind). Such features are not inherent in a trust being a unit trust for the purposes of considering the application of Division 6C of the ITAA 1936. However legislative intervention may make these or other features mandatory in a particular jurisdiction if the unit trust is not to be liable to be wound up, or if offences by the management or promotion of the trust are not to be committed. Such legislative intervention does not alter the general approach to identifying a unit trust, where no specific definition applies to the term. Accordingly, where beneficiaries are made entitled to a share of a beneficial interest under a trust, such as an interest in the income and capital, or in either one of these, and which entitlement is measured by reference to a fixed standard of measurement howsoever described (for example a percentage or a fraction or a fixed formula), then whether or not the deed itself labels the interests 'units' the beneficial interest have been unitised and the trust would be a 'unit trust' for the purpose of considering the application of Division 6C of the ITAA 1936. As one example where the phrase 'pro-rata' is used in specifying the relative interests of beneficiaries then this will mean the interest of the beneficiary of the trust will be identified as a proportion of, or share of, the whole of a beneficial interest (or class of interest) and in most occasions of this nature the holder of the beneficial interest will be a unit holder and the trust will be a unit trust.", "Date_of_Decision": "17 April 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 102R", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Unit trusts", "Case_References": "CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) [2005] HCA 53 (2005) 224 CLR 98 2005 ATC 4925 (2005) 60 ATR 371", "Other_References": "JD Heydon MJ Lemming, Jacob's Law of Trusts in Australia, LexisNexis Butterworths 7th Edition 2006 Ford: Principles of the Law of Trusts Loose-Leaf Service 2006 Ford, 'Public Unit Trusts', The Law of Public Company Finance, ed Austin and Vann, The Law Book Company Ltd 1986 Pritchard, 'Unincorporated Joint Ventures', The Law of Public Company Finance, ed Austin and Vann, The Law Book Company Ltd 1986", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201057", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2010/128", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Unit trust investing in land for the purpose, or primarily for the purpose of rent", "Issue": "Whether a unit trust is investing in land for the purpose, or primarily for the purpose of rent under Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936) notwithstanding realisation gains made during the term of the investment.", "Decision": "Yes, the unit trust will still be investing in land for the purpose, or primarily for the purpose of rent under Division 6C of the ITAA 1936.", "Facts": "A corporation has created an investment for specific investors with a minimum commitment obligation of $XX million each. The investment will be conducted through a unit trust which will also be a managed investment scheme regulated under the Corporations Law 2001. The unit trust will have a life of Y years, with an option to extend the trust for a further period in specific circumstances. At the end of the investment term, the trustee will wind-up the unit trust and realise the investment properties and derive realisation gains. The capital of the settled trust is from the investor's subscription for units, and applied by the trustee for the acquisition of the investment portfolio. The trustee's mandate is to acquire quality commercial office and retail shopping properties within a specific investment strategy. The trustee must comply with the 'investment period' where the acquisition of the investment properties must be within the first 12 months of the trust. For example, the characteristics for the investment properties require long-term quality tenants underpinned by secure income streams, leases that provide for fixed rental increases and potential increases in capital values. The investors expect an 'Equity Multiple' in excess of 1.5 times the amount of their initial invested capital (comprising a return of investment, net operating profit and realisation profit). The trustee has forecasted an Equity Multiple of 1.84 times the initial investment. The trustee has forecasted that nominal profits from rent over the term of the investment to constitute 91% of the investment returns if capital values of the invested properties remain stable. If capital values increase, this percentage changes to 61% of the return being derived from rent. Furthermore, the trustee has forecasted an 'Internal Rate of Return' (IRR) from the use of investor capital of 13% to 15% per annum. This overall rate is dependant on rental income from the acquired investment properties of at least 9.5% with the remainder constituted by a return of 3.5% to 5.5% from appreciation of capital values.", "Reasons_for_Decision": "Summary: Where a public unit trust is engaged in activities that is a 'trading business' it will be a 'trading trust' and therefore a 'public trading trust' under Division 6C of the ITAA 1936 and treated as a company for income tax purposes. Pursuant to paragraph 102N(1)(a) of the ITAA 1936, a unit trust is a 'trading trust' if at any time in relation to a year of income, the trustee of the unit trust '...carried on a trading business'. Section 102M of the ITAA 1936 defines that phrase to mean a '...business that does not consist wholly of eligible investment business'. The section in turn defines 'eligible investment business' to mean inter alia one or more of: The ordinary meaning of the word 'primarily' as used within the section is taken to be 'principally' or 'chief' and can be interpreted to mean 'predominant' in the context of appraising whether an asset has been used for a 'predominant' purpose: Speedo Knitting Mills Pty Ltd v. Commonwealth of Australia [1981] 37 ALR 417 per Justice Woodward at pages 428-429. The test applied is whether the characterisation of the investment in land is predominantly for the purpose of deriving income from rent. The trustee's forecast of the investment return to the investors from the acquired properties that will be held almost continuously for the duration of the trust, is based on a high degree of the rental income being more certain. This is because the rent, rather than any realisation gains is critical to enable the trustee to meet the forecasted return to the investors. This is expressed by reference to the forecasted IRR and the equity multiple expected by the trustee and also the investors. The high degree of certainty of expected rent is consistent with a predominant purpose of the trustee investing in land to derive income from rent: cf. London Australia Investment Co. Ltd v. Federal Commissioner of Taxation (1977) 138 CLR 106; (1977) 7 ATR 757; 77 ATC 4398, per Justice Gibbs at CLR 117. That purpose is also confirmed by the investment strategy of the trustee in acquiring retail and office properties which will indicate the source and character of the forecast return on investment, that is, largely rental income (for example a fixed year term, single use of capital, no switching of investment by the trustee). Moreover, the character and certainty of the investment return is an outcome of the investment structure. Objectively appraised, the structure of the investment is predominantly designed, principally and in-chief to derive rental income for the trustee from the investments in land. Therefore, the expectation of any gains on the disposal of the investments by the trustee as one of the purposes of this transaction is limited such that the trustee will not be conducting a 'trading business' during the relevant years of income, and will not be a 'trading trust' for the purpose of subsection 102N(1) of the ITAA 1936.", "Date_of_Decision": "2 June 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 section 102N section 102M", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Income Public trading trusts Trust income", "Case_References": "Speedo Knitting Mills Pty Ltd v Commonwealth of Australia [1981] 37 ALR 417", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010128", "Unmatched_Content": "Keywords Income Public trading trusts Trust income"}
{"ATO_ID_Number": "ATO ID 2008/1", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Equity Mortgage Agreements: Division 6C of the Income Tax Assessment Act 1936", "Issue": "Are the Equity Mortgage Agreements to be entered into between a Unit Trust and various Home Owners 'other securities' for the purposes of subparagraph 102M(b)(ii) of the Income Tax Assessment Act 1936 (ITAA 1936).", "Decision": "Yes. The Equity Mortgage Agreements when entered into between a Unit Trust and Home Owners will be 'other securities' for the purposes of subparagraph 102M(b)(ii) of the ITAA 1936.", "Facts": "The Unit Trust will enter into a number of contracts described as Equity Mortgage Agreements (EMAs) with Home Owners. An EMA involves the issue of a financial instrument by the Home Owner to the Unit Trust and the subsequent redemption of that financial instrument by the Home Owner. Description of the Unit Trust The Unit Trust's assets will consist mainly of the EMAs. The Unit Trust will predominantly derive its net income from activities associated with the EMAs in each income year in which EMAs exist. Description of Home Owners Home Owners will be natural persons who own property or who are in the process of acquiring property that will be their main or principal residence. Description of the Equity Mortgage Agreements (EMAs) The EMA is an instrument issued by a Home Owner (as issuer) to the Unit Trust (as holder) in consideration for the payment of money by the Unit Trust. The Home Owner also grants a registrable mortgage over their property ('the property') to secure all moneys that may become due and payable under the EMA. The Unit Trust does not acquire an ownership interest in the Home Owner's property, nor will it have any right of occupancy. The Home Owner will have the sole right to occupy the property and will have a right to sell the property to a third party at any time during the term of the EMA. The amount to be paid by the Home Owner to the Unit Trust under the terms of the EMA will depend on the notional value of the property at a particular redemption time (or times where applicable if partial redemptions occur) in the future. At the expiry of the agreed term or upon the sale of the property to a third party, the Home Owner must redeem the EMA from the Unit Trust. Any gains or losses for both the Home Owner and the Unit Trust will arise from the change in the market value of the property, as measured between the date the Unit Trust subscribes for the EMA and the date on which the Home Owner redeems it. The value of the property on the date the Home Owner redeems (or partially redeems) the EMA will determine the redemption amount. Under the EMA, the Unit Trust will outlay an initial amount to the Home Owner which will result in the Unit Trust acquiring a specified entitlement to be paid an amount upon redemption (the 'redemption amount') which is expressed as a notional proportion of the then value of the property. That redemption amount will be determined where a Home Owner seeks to redeem the security (in part or in full) under either an Early Repayment (Call) Option or the exercise of a Final Repayment (Put) Option. The redemption amount to be paid by the Home Owner to the Unit Trust will be calculated by reference to a percentage of the property's value as at the date of the contract. This percentage is called the 'Notional Equity Interest' (the 'NEI') in the property. If the Home Owner does not redeem some or all of the EMA, the percentage of the sales proceeds realised on the sale of the property to a third party, or the amount which the Home Owner must pay to the Unit Trust, will be determined by reference to the NEI of the Unit Trust in the property. Requirement to redeem A Home Owner may choose various terms for the maturity of the EMA. If the property remains unsold at the end of the agreed term, the Home Owner must redeem the EMA. The Home Owner must also redeem the EMA in the event of a sale of the Property or if the terms of the EMA are breached. On final redemption, the Home Owner will become indebted to the Unit Trust in respect of an amount due under the EMA. The amount to be paid on redemption of the EMA will change over time and is to be calculated by reference to the appraised market value of the property over that period. On redemption of the EMA, the amount that the Home Owner is required to pay the Unit Trust will become a debt due from the Home Owner if unpaid. Interest will accrue in respect of this debt liability until discharged. Early repayment option A Home Owner may reduce the Unit Trust's entitlement based on the NEI by redeeming part of the EMA through the exercise of an early repayment option. The Home Owner may redeem the EMA (in part or in full) prior to the maturity date. Similarly, any amount(s) which the Home Owner is required to pay the Unit Trust upon early redemption of the EMA will become a debt due to the Unit Trust if unpaid.", "Reasons_for_Decision": "Summary: Section 102M of the ITAA 1936 defines the operative terms for the interpretation and application of Division 6C of the ITAA 1936 in respect to the income of certain public unit trusts. Division 6C treats certain trusts described as 'public trading trusts' as companies, by taxing the trustees of such trusts at the company rate. A trust is a 'public trading trust' within Division 6C of the ITAA 1936 if it satisfies four requirements (section 102R of the ITAA 1936): In this case, the Unit Trust will satisfy the requirements outlined in (1), (3) and (4). | Detailed Reasoning - Trading Trust: A unit trust is a 'trading trust' pursuant to section 102N of the ITAA 1936 if: The Unit Trust does not satisfy requirement (2) so it remains to be considered whether the Unit Trust conducts a 'trading business'. A 'trading business' is any business that does not consist wholly of 'eligible investment business' which is defined within section 102M of the ITAA 1936 to mean either or both of: (emphasis added): If the activities of the Unit Trust consist wholly of an 'eligible investment business', then it will not be conducting a 'trading business' and will not be subject to Division 6C of the ITAA 1936. | Detailed Reasoning - Eligible investment business: The meaning given to the phrases 'eligible investment business' and 'trading business' is assisted by the Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1985 (the 'EM') which introduced Division 6C into the ITAA 1936. 'Eligible investment business' is a term used in the definition of 'trading business' for the purpose of specifying the type of activities that can be conducted by a trustee of a unit trust without causing the trust to be taken to be a 'trading trust' for the purposes of Division 6C.of the ITAA 1936. For this purpose, an 'eligible investment business' means an activity consisting of either or both of - The term 'trading business' is also defined in section 102M of the ITAA 1936 to mean any business other than 'eligible investment business'. By the operation of this section, and in conjunction with those definitions, a unit trust will be a 'trading trust' in a year of income if it carries on any activity other than the business of investing in land or in an interest in land for rental purposes, or of investing or trading in shares, bonds, securities and such like, or a business consisting of a combination of those activities. Furthermore, the EM states a unit trust which generally satisfies the tests to be treated other than as a trading trust, because it is predominantly carrying on an eligible investment business, will not be taken to be a trading trust merely because it receives income from activities incidental to its main purpose that do not constitute the carrying on of a business. Where a public unit trust conducts activities that are merely incidental to its predominant activity/activities (consisting of activities that meet the 'eligible investment business' definition), this will not, of itself, cause the public unit trust to be considered a 'trading trust'. This interpretation is adopted in Taxation Determination TD 98/4. However, if those activities are more than merely incidental to the eligible investment business activities of the public unit trust and so are activities of the public unit trust in their own right then no such concession is afforded: see ATO ID 2003/73. | Detailed Reasoning - Whether the mortgage is an investment in land: Under the EMA, the Unit Trust does not acquire any legal or equitable ownership interest in the estate of land which is the real property of the Home Owner. However, the amount to be repaid by the Home Owner to the Unit Trust as a redemption payment is calculated on the Unit Trust's notional interest in that real property. In the context of investing in land, section 102M of Division 6C of the ITAA 1936 defines 'land' to 'include an interest in land'. The verb 'include' indicates a legislative intention for the word 'land' to have a wide construction, including situations where somewhat less than full legal title is acquired. In addition to the ordinary meaning of that phrase, a Legal Dictionary meaning of 'interest in land' is: Any legal or equitable estate in land, or restriction on the use of the land, or any other right, charge, power, or privilege over or in connection with land... More technically, a property right in land that is not an estate... In respect of the registrable mortgage granted to the Unit Trust in respect of the real property a Legal Dictionary meaning of 'mortgage' is: A lender's interest in land, secured over the land of the borrower, including a charge on property for the purpose of securing money or money's worth Prima facie, a mortgage may be considered to be an 'interest in land' in applying paragraph 102M(a) of the ITAA 1936, which provides as follows: The Unit Trust will not derive any rent under the EMA or otherwise under the arrangement, so if the Unit Trust is to invest in land as an activity in its own right the Unit Trust would have a 'trading business' and so its investment activity would not consist wholly of 'eligible investment business'. Notwithstanding the Unit Trust's holding of the EMAs, the grant of the mortgage by the Home Owner represents an incidental activity that merely acts as securing the payment obligations that may arise under the EMA. The mortgage is considered to complement the primary activity of the Unit Trust which is holding EMAs in order to obtain payments producing expected gains upon their redemption, but not to amount to a primary activity in its own right. Accordingly, the presence of a mortgage in the EMA to secure those payments will not, of itself, cause the Unit Trust to be considered to be conducting a 'trading business' of investing in land other than primarily for the purpose of deriving rent. | Detailed Reasoning - Whether an EMA falls within 'other security' for the purposes of subparagraph 102M(b)(ii) of the ITAA 1936: The word 'security' (or specifically the term 'other securities') is not defined within Division 6C of the ITAA 1936, and therefore is to be given its ordinary meaning. | Detailed Reasoning - Ordinary meaning of 'security': Paragraph 102M(b)(ii) of the ITAA 1936 states in full bonds, debentures, stock or other securities. The Commissioner's view of the ordinary meaning of 'security' may be found in the interpretation of the statutory definition of 'security' in paragraph 159GP(1)(a) of the ITAA 1936. That paragraph provides: \"security\" means: - (a) stock, a bond, debenture, certificate of entitlement, bill of exchange, promissory note or other security;... Subparagraph 102M(b)(ii) of the ITAA 1936 is not dissimilar to paragraph 159GP(1)(a) of the ITAA 1936 except that the list of securities identified in paragraph 159GP(1)(a) includes all the securities in subparagraph 102M(b)(ii). The Commissioner's views in this regard are set out in Taxation Ruling TR 96/14. Specifically, the Commissioner has ruled that in respect to paragraph 159GP(1)(a) of the ITAA 1936 the definition of 'security': With respect to the EMA, a fundamental and mandatory financial element will exist - the imposition of a present existing liability upon the Home Owner at the time of entering into the EMA to make a future payment to the Unit Trust. The amount to be paid will be determined at that future time and will be calculated according to agreed procedures and formulae contained in the EMA. This can be contrasted to the obligation to repay a loan or advance and to pay interest and costs in relation to the loan or advance. The fact that the precise amount is not initially known or cannot be calculated until the maturity date, because it is dependent on variables only known and determined at that date, does not change the reasoning. As the EMA will not result in the Unit Trust acquiring an ownership interest in land and is more akin to a financial instrument which evidences and secures an obligation on the part of the Home Owner (issuer) to pay an amount to the Unit Trust (holder) during the term of the instrument or at maturity, confirms that the EMA will also satisfy the definition of 'security' within paragraph 159GP(1)(a) of the ITAA 1936. The fact that the amount to be ultimately paid is referenced to a notional value of the Unit Trust's interest in the Home Owner's property does not alter the reasoning. The EMA is a 'security' because it will secure a claim by the Unit Trust for an amount which is determined on redemption of the EMA and the payment of which will be secured by the mortgage granted by Home Owner's to the Unit Trust. Accordingly, it is considered the EMA will meet the normal definition of a security, being an instrument which evidences and secures an obligation on the part of the issuer (the Home Owner) to pay an amount to the holder (Unit Trust) during the term of the instrument or at its maturity. Therefore, the EMA will be a security encompassed within the phrase 'other securities' for the purposes of subparagraph 102M(b)(ii) of the ITAA 1936.", "Date_of_Decision": "12 October 2007", "Year_of_Income": "30 June 2008 30 June 2009 30 June 2010 30 June 2011 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 section 102M section 102N section 102R subsection 159GP(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 98/4 | Taxation Ruling TR 96/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Eligible investment business Public trading trusts Securities Trading trusts", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Law Amendment Bill (No. 4) 1985 Butterworths Concise Australian Legal Dictionary (2nd Ed).", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20081", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 98/4 Taxation Ruling TR 96/14 | Keywords Eligible investment business Public trading trusts Securities Trading trusts"}
{"ATO_ID_Number": "ATO ID 2006/233", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Is a non stock membership interest an investment in a 'similar financial instrument' when applying the 'eligible investment business' test in the Public Trading Trust rules?", "Issue": "Will an investment in full or associate membership interests in the Board of Trade of the City of Chicago Incorporated (Chicago Board of Trade) by a public unit trust constitute an investment in a 'similar financial instrument' for the purposes of section 102M of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The investment will constitute an investment in a 'similar financial instrument' and will meet the definition of an 'eligible investment business' in section 102M of the ITAA 1936. Division 6C of the ITAA 1936 treats certain trusts known as 'public trading trusts' as companies. In particular, the trustees of such trusts are taxed at the company rate and distributions to equity holders are taxed on the same basis as dividends. A trust is a public trading trust, and therefore subject to Division 6C of the ITAA 1936 if it satisfies four requirements (section 102R of the ITAA 1936): Where these conditions are satisfied, the trust is a public trading trust and is subject to tax on its net income at the company tax rate. A unit trust is a trading trust if it carries on a trading business or controls or is able to control, directly or indirectly, a trading business carried on by another person (section 102N of the ITAA 1936). A 'trading business' is any business that does not consist wholly of 'eligible investment business' (section 102M of the ITAA 1936). Division 6C of the ITAA 1936 does not apply to widely held trusts where all the business of the trust relates to an 'eligible investment business'. 'Eligible investment business' is defined (section 102M of the ITAA 1936) to mean one or more of: If the activities of the taxpayer consist wholly of an 'eligible investment business', then the taxpayer will not be conducting a trading business and will be excluded from the provisions of Division 6C of the ITAA 1936. Accordingly, tax will be paid by the beneficiaries upon distribution of income at their respective rates of tax applicable and not by the taxpayer at the corporate tax rate. Investment in Chicago Board of Trade The Chicago Board of Trade (CBOT) is a US resident entity incorporated in the state of Delaware. CBOT is a member owned, non stock, not for profit organisation. Both full and associate membership interests in CBOT confer rights in respect of voting, dissolution and trading privileges. Generally, full membership will confer a right to vote, a share in the proceeds from dissolution and entitlement to trade as principal or broker in all listed contracts. Associate membership confers a one-sixth right of a full membership interest in respect of voting and dissolution and entitlement to trade as principal or broker in certain prescribed listed contracts. Returns on the investment in CBOT membership interests may be via: As the CBOT is a non-stock corporation, it is not possible to invest in it via a share or stock in legal form acquisition. Accordingly, the proposed investment would not fall under the 'shares in a company' part of the definition of 'eligible investment business' (subparagraph 102M(b)(iii) of the ITAA 1936). It is necessary to determine whether or not such activities will fall within the 'any similar financial instrument' part of the definition of 'eligible investment business' (subparagraph 102M(b)(xiii) of the ITAA 1936). 'Membership interest' in an entity is defined in subsection 995-1(1) of Income Tax Assessment Act 1997 (ITAA 1997) to have the meaning given by section 960-135 of the ITAA 1997. In relation to a company, section 960-130 of the ITAA 1997 lists a member as 'a member of the company or a stockholder in the company'. Section 960-135 of the ITAA 1997 equates a membership interest in an entity to an interest in the entity or a right in relation to the entity for the member of that entity. 'Shares' is defined in section 6 of the ITAA 1936 (and subsection 995-1(1) of the ITAA 1997) to mean shares (a share) in the capital of the company and includes stock. 'Company' is defined in section 6 of the ITAA 1936 (and subsection 995-1(1) of the ITAA 1997) to include all bodies or associations corporate or unincorporated, but does not include partnerships or non-entity joint ventures. CBOT, being an incorporated entity, would fall within the definition of a company. Each membership interest investment in CBOT allows for a share in the proceeds on dissolution of the entity (company) and therefore, represents a right to a share in the capital of the entity (company). It is arguable that a membership interest is ostensibly the same as a legal form share on the basis of entitlement to a share in the capital of a company. On this line of reasoning, an acquisition of a membership interest in CBOT would fall within the definition of 'eligible investment business' within the 'shares in a company' part of that definition (subparagraph 102M(b)(iii) of the ITAA 1936). Nevertheless, it is submitted that the better view would be to limit this legal analysis to the 'any similar financial instrument' part of the definition. The Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1988 addresses what 'any similar financial instrument' actually means: The reference to 'any similar financial instruments' in subparagraph 102M(b)(xiii) is intended to obviate the need for further amendments to the term 'eligible investment business if further acceptable variants of existing financial instruments are developed. A public unit trust will therefore be able to trade or invest in new financial instruments and not be treated as a public trading trust provided that the new financial instrument invested in or traded in is similar to any of the types of financial instruments referred to in the proposed expanded definition of 'eligible investment business'. The Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1985, introducing Division 6C of the ITAA 1936 mentions, inter alia, that: A unit trust will come within the scope of the proposed amendments if, at any time during a year of income, it operates a trade or business and is also a \"public unit trust\". Public unit trusts of the more traditional kind the business of which is to invest in land or interest in land for rental purposes, in equities or securities or a combination of these, will not be affected. If it is considered that a membership interest in a company is not the same as a legal form share/stock in a company then, for the reasons expressed above, it can be argued that such an interest is a close equivalent or, at least, that a membership interest is an acceptable variant of or similar to an existing prescribed financial instruments (that is, legal form share or stock). Accordingly, on the basis of the comments in the Explanatory Memorandum, a membership interest acquisition in CBOT would fall within the 'any similar financial instrument' part of the definition of 'eligible investment business'. Furthermore, the acquisition of the membership interest parallels the more traditional kind of investment activity such as an investment in equities or securities. This is because the fund envisages a return on the investment by way of a gain on the realisation of the investment, or by leasing out the right to trade associated with the membership interest. Therefore the fund will be investing in membership interests in CBOT in its capacity of a public unit trust and its investing activities fall within the requirements of section 102M of the ITAA 1936 because it is carrying on an 'eligible investment business'.", "Facts": "", "Reasons_for_Decision": "Summary: Division 6C of the ITAA 1936 treats certain trusts known as 'public trading trusts' as companies. In particular, the trustees of such trusts are taxed at the company rate and distributions to equity holders are taxed on the same basis as dividends. A trust is a public trading trust, and therefore subject to Division 6C of the ITAA 1936 if it satisfies four requirements (section 102R of the ITAA 1936): Where these conditions are satisfied, the trust is a public trading trust and is subject to tax on its net income at the company tax rate. A unit trust is a trading trust if it carries on a trading business or controls or is able to control, directly or indirectly, a trading business carried on by another person (section 102N of the ITAA 1936). A 'trading business' is any business that does not consist wholly of 'eligible investment business' (section 102M of the ITAA 1936). Division 6C of the ITAA 1936 does not apply to widely held trusts where all the business of the trust relates to an 'eligible investment business'. 'Eligible investment business' is defined (section 102M of the ITAA 1936) to mean one or more of: If the activities of the taxpayer consist wholly of an 'eligible investment business', then the taxpayer will not be conducting a trading business and will be excluded from the provisions of Division 6C of the ITAA 1936. Accordingly, tax will be paid by the beneficiaries upon distribution of income at their respective rates of tax applicable and not by the taxpayer at the corporate tax rate. | Detailed Reasoning - Investment in Chicago Board of Trade: The Chicago Board of Trade (CBOT) is a US resident entity incorporated in the state of Delaware. CBOT is a member owned, non stock, not for profit organisation. Both full and associate membership interests in CBOT confer rights in respect of voting, dissolution and trading privileges. Generally, full membership will confer a right to vote, a share in the proceeds from dissolution and entitlement to trade as principal or broker in all listed contracts. Associate membership confers a one-sixth right of a full membership interest in respect of voting and dissolution and entitlement to trade as principal or broker in certain prescribed listed contracts. Returns on the investment in CBOT membership interests may be via: As the CBOT is a non-stock corporation, it is not possible to invest in it via a share or stock in legal form acquisition. Accordingly, the proposed investment would not fall under the 'shares in a company' part of the definition of 'eligible investment business' (subparagraph 102M(b)(iii) of the ITAA 1936). It is necessary to determine whether or not such activities will fall within the 'any similar financial instrument' part of the definition of 'eligible investment business' (subparagraph 102M(b)(xiii) of the ITAA 1936). 'Membership interest' in an entity is defined in subsection 995-1(1) of Income Tax Assessment Act 1997 (ITAA 1997) to have the meaning given by section 960-135 of the ITAA 1997. In relation to a company, section 960-130 of the ITAA 1997 lists a member as 'a member of the company or a stockholder in the company'. Section 960-135 of the ITAA 1997 equates a membership interest in an entity to an interest in the entity or a right in relation to the entity for the member of that entity. 'Shares' is defined in section 6 of the ITAA 1936 (and subsection 995-1(1) of the ITAA 1997) to mean shares (a share) in the capital of the company and includes stock. 'Company' is defined in section 6 of the ITAA 1936 (and subsection 995-1(1) of the ITAA 1997) to include all bodies or associations corporate or unincorporated, but does not include partnerships or non-entity joint ventures. CBOT, being an incorporated entity, would fall within the definition of a company. Each membership interest investment in CBOT allows for a share in the proceeds on dissolution of the entity (company) and therefore, represents a right to a share in the capital of the entity (company). It is arguable that a membership interest is ostensibly the same as a legal form share on the basis of entitlement to a share in the capital of a company. On this line of reasoning, an acquisition of a membership interest in CBOT would fall within the definition of 'eligible investment business' within the 'shares in a company' part of that definition (subparagraph 102M(b)(iii) of the ITAA 1936). Nevertheless, it is submitted that the better view would be to limit this legal analysis to the 'any similar financial instrument' part of the definition. The Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1988 addresses what 'any similar financial instrument' actually means: The reference to 'any similar financial instruments' in subparagraph 102M(b)(xiii) is intended to obviate the need for further amendments to the term 'eligible investment business if further acceptable variants of existing financial instruments are developed. A public unit trust will therefore be able to trade or invest in new financial instruments and not be treated as a public trading trust provided that the new financial instrument invested in or traded in is similar to any of the types of financial instruments referred to in the proposed expanded definition of 'eligible investment business'. The Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1985, introducing Division 6C of the ITAA 1936 mentions, inter alia, that: A unit trust will come within the scope of the proposed amendments if, at any time during a year of income, it operates a trade or business and is also a \"public unit trust\". Public unit trusts of the more traditional kind the business of which is to invest in land or interest in land for rental purposes, in equities or securities or a combination of these, will not be affected. If it is considered that a membership interest in a company is not the same as a legal form share/stock in a company then, for the reasons expressed above, it can be argued that such an interest is a close equivalent or, at least, that a membership interest is an acceptable variant of or similar to an existing prescribed financial instruments (that is, legal form share or stock). Accordingly, on the basis of the comments in the Explanatory Memorandum, a membership interest acquisition in CBOT would fall within the 'any similar financial instrument' part of the definition of 'eligible investment business'. Furthermore, the acquisition of the membership interest parallels the more traditional kind of investment activity such as an investment in equities or securities. This is because the fund envisages a return on the investment by way of a gain on the realisation of the investment, or by leasing out the right to trade associated with the membership interest. Therefore the fund will be investing in membership interests in CBOT in its capacity of a public unit trust and its investing activities fall within the requirements of section 102M of the ITAA 1936 because it is carrying on an 'eligible investment business'.", "Date_of_Decision": "13 December 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 102M section 102R section 102N section 102P", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Banking, finance & securities Eligible investment business Financial asset investors Financial services industry Public trading trusts Trading trusts", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1985 Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1988", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006233", "Unmatched_Content": "This ATO ID has been amended to reflect amendments made to Section 102M of the Income Tax Assessment Act 1936. | Keywords Banking, finance & securities Eligible investment business Financial asset investors Financial services industry Public trading trusts Trading trusts"}
{"ATO_ID_Number": "ATO ID 2003/73", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Trading trust: Trading Business - Eligible Investment Business", "Issue": "Is a resident unit trust deriving income from rent and the provision of secretarial services, a 'trading trust' for the purposes of section 102N of Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A resident unit trust deriving income from rent and the provision of secretarial services, is a 'trading trust' for the purposes of section 102N of Division 6C of the ITAA 1936.", "Facts": "A resident unit trust, carries on a business which consists of leasing premises from a third party, providing these premises as fitted out premises for rent, and providing secretarial services to the tenants of these premises. The trust derives its income from renting the premises, and from the provision of secretarial services to the tenants. The income derived from the provision of secretarial services to tenants represents approximately 25% of the total income derived by the trust each year.", "Reasons_for_Decision": "Summary: Division 6C of the ITAA 1936 is concerned with the income of certain public trading trusts. Section 102N of the ITAA 1936 defines what is meant by a 'trading trust' for the purposes of Division 6C of the ITAA 1936. A 'trading trust' is defined to include a unit trust that carries on a 'trading business' at any time during the year of income (paragraph 102N(a) of the ITAA 1936). Section 102M of the ITAA 1936 defines 'trading business' to mean a business which does not consist wholly of 'eligible investment business'. The term 'eligible investment business' is also defined in section 102M of the ITAA 1936 and includes 'investing in land for the purpose, or primarily for the purpose, of deriving rent'. The provision of secretarial services to tenants is an activity distinct from, and not properly part of, the 'eligible investment business' of investing in land for the purpose, or primarily for the purpose, of deriving rent. Therefore, the business of the trust does not consist wholly of 'eligible investment business'. Therefore the trust is carrying on a 'trading business' for the purposes of section 102M of the ITAA 1936. Accordingly the resident unit trust is a 'trading trust' under section 102N for the purposes of Division 6C of the ITAA 1936.", "Date_of_Decision": "11 December 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Division 6C section 102M section 102N paragraph 102N(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Eligible investment business Public trading trusts Trading trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200373", "Unmatched_Content": "Keywords Eligible investment business Public trading trusts Trading trusts"}
{"ATO_ID_Number": "ATO ID 2003/162", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Public Trading Trust - meaning of control", "Issue": "Does the power of veto give a trustee control or the ability to control, directly or indirectly, the affairs or operations of another person in respect of the carrying on by that other person of a trading business for the purpose of paragraph 102N(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The power of veto does give a trustee control or the ability to control, directly or indirectly, the affairs or operations of another person in respect of the carrying on by that other person of a trading business for the purpose of paragraph 102N(b) of the ITAA 1936.", "Facts": "The taxpayer is the trustee of a public unit trust. A unit trust acquired a shareholding in a private company. The private company was carrying on a trading business. Under an agreement between the shareholders of the private company, written consent must be obtained from the trustee before the company can take certain actions in relation to the business. In particular, the trustee's consent is necessary for any decision which will change how the company operates it's business. The agreement takes precedence over the company's constitution in the event of any inconsistency.", "Reasons_for_Decision": "Summary: Paragraph 102N(b) of the ITAA 1936 provides that: For the purposes of this Division, a unit trust is a trading trust in relation to a year of income if, at any time during the year of income, the trustee: ...; or controlled, or was able to control, directly or indirectly, the affairs or operations of another person in respect of the carrying on by that other person of a trading business. There is no definition of the terms 'controlled' or 'able to control' in Division 6C of the ITAA 1936. The Macquarie Dictionary , Revised 3rd Edition, 2001, defines 'control' as '1. to exercise restraint or direction over; dominate, command. 2. to hold in check; curb'. In Re Application of News Corp Ltd (1987) 15 FCR 227 the Federal Court was concerned with the meaning of the phrase 'being in a position to exercise control directly or indirectly of a company' for the purposes of subsections 90G(1) and 92D(1) of the Broadcasting and Television Act 1942 . Bowen CJ, with whom Lockhart J agreed, said (at FCR 242-3) It was argued that a power of veto does not constitute control in the relevant sense. Control, it was said, exists only where there is a power to get one's own will. I do not agree that the concept of control is so limited. The Oxford English Dictionary defines \"control\" as to \"exercise restraint or direction\". A power to veto is a power to restrain, and hence control. In this case, the agreement effectively gives the trustee the power of veto over decisions in relation to the operation of the company's business. This is a power to restrain and comes within the ordinary meaning of 'control'. Paragraph 102N(b) of the ITAA 1936 requires control '...in respect of the carrying on by that other person of a trading business' Normally the carrying on of a company's business is controlled by the directors ( Federal Commissioner of Taxation v. Commonwealth Aluminium Corp Ltd (1980) 143 CLR 646; 80 ATC 4371; (1980) 11 ATR 42). However, the agreement takes precedence over the constitution of the company and requires that the directors must obtain the approval of the taxpayer before making key decisions in relation to the operation of the business. In these circumstances the taxpayer has control in respect of the carrying on, by the company, of their business for the purposes of paragraph 102N(b) of the ITAA 1936.", "Date_of_Decision": "20 February 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 102N(b) Division 6C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Eligible investment business Entities & taxpayer groups Public trading trusts Trading trusts Trusts Unit trusts", "Case_References": "Re Application of News Corp Ltd (1987) 15 FCR 227", "Other_References": "Macquarie Dictionary, Revised 3rd Edition, 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003162", "Unmatched_Content": "Keywords Eligible investment business Entities & taxpayer groups Public trading trusts Trading trusts Trusts Unit trusts"}
{"ATO_ID_Number": "ATO ID 2002/242", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fixed trust operated by a local government entity", "Issue": "Is a fixed trust operated by a local government entity a unit trust for the purposes of Division 6C of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A fixed trust operated by a local government entity is not a unit trust and therefore the provisions of Division 6C of the ITAA 1936 do not apply.", "Facts": "The local government entity is a tax exempt entity under section 50-25, item 5.1 of the Income Tax Assessment Act 1997 (ITAA 1997). The local government entity proposes to establish a trust in order to separate the ownership and management of an investment portfolio from its other assets so as to better manage the portfolio. The trustee of the proposed trust will be a private company. The trustee will be the owner of the assets of the proposed trust. The local government entity will be the only investor in the proposed trust. It will also be the sole beneficiary of the proposed trust and will have a vested indefeasible interest in both the income and capital of the proposed trust. The local government entity will not have the right to sell down or transfer its interest in the proposed trust until such time as it calls for the trust to be wound up.", "Reasons_for_Decision": "Summary: A unit trust is a trust in which the ownership is divided into a number of units which are held by the beneficiaries. However, the only beneficiary of the proposed trust is the local government entity. The main criteria for the existence of a unit trust (i.e., unitholders with fractional interests) will not be present. Therefore, the proposed trust will not a unit trust but, rather, would be a fixed trust. Division 6C of the ITAA 1936 only applies to a unit trust. The trust proposed by the local government entity will not be a unit trust. Consequently, Division 6C will not apply to any income that the proposed trust may earn.", "Date_of_Decision": "30 January 2002", "Year_of_Income": "Year ending 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Division 6C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Unit trusts Property trusts Trading trusts Public trading trusts Tax exempt entity", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002242", "Unmatched_Content": "Keywords Unit trusts Property trusts Trading trusts Public trading trusts Tax exempt entity"}
{"ATO_ID_Number": "ATO ID 2001/50", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption from income tax: Whether a Resident Unit Trust is a Trading Trust", "Issue": "Whether a resident unit trust entering into securities lending transactions is a trading trust for the purposes of section 102N of Division 6C of the Income Tax Assessment Act 1936 .", "Decision": "The resident unit trust is not a trading trust for the purposes of section 102N of the Income Tax Assessment Act 1936 .", "Facts": "The resident unit trust enters into securities lending transactions of a type to which section 26BC of the Income Tax Assessment Act 1936 applies. The resident unit trust enters into no other types of arrangements.", "Reasons_for_Decision": "Summary: Division 6C of the Income Tax Assessment Act 1936 is concerned with income of certain public trading trusts. Paragraph 102N(a) of the Income Tax Assessment Act 1936 defines what is meant by a 'trading trust' for the purposes of Division 6C of the Income Tax Assessment Act 1936 . A 'trading trust' is defined to include a unit trust that carries on a 'trading business' at any time during the year of income. Section 102M of the Income Tax Assessment Act 1936 defines 'trading business' to mean a business which does not consist wholly of eligible investment business. The term 'eligible investment business' is itself defined in section 102M of the Income Tax Assessment Act 1936 to include investing or trading in: bonds, debentures, stock or other securities (subparagraph (ii)), shares in a company (subparagraph (iii)), a right or option in respect of such a security or share (subparagraph (xii)), and/or any similar financial instruments (subparagraph (xiii)). Entering into securities lending arrangements constitutes 'eligible investment business' under subparagraph (ii), (iii) or (xiii) of the definition of eligible investment business contained in section 102M of the Income Tax Assessment Act 1936 , the term trading having a broader meaning than merely buying and selling. As the resident unit trust is not in any other business except 'eligible investment business' it is not carrying on a 'trading business' for the purposes of Division 6C of the Income Tax Assessment Act 1936 .", "Date_of_Decision": "23 July 1998", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 102M paragraph 102N(a) Division 6C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Public trading trusts Securities lending arrangements Securities transactions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200150", "Unmatched_Content": "Keywords Public trading trusts Securities lending arrangements Securities transactions"}
{"ATO_ID_Number": "ATO ID 2008/125", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of section 121 of the Income Tax Assessment Act 1936 to a company formed for purpose of providing a financial assurance to a government authority", "Issue": "Is a company that was formed for the purpose of providing a financial assurance to a government authority in order to satisfy conditions attached to a licence essential to another company's business an 'association of persons formed for the purpose of insuring those persons' for the purposes of subsection 121(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A company that was formed for the purpose of providing a financial assurance to a government authority in order to satisfy conditions attached to a licence essential to another company's business is not an 'association of persons formed for the purpose of insuring those persons' for the purposes of subsection 121(1) of the ITAA 1936.", "Facts": "A company (ABC) conducts a business on a purpose designed site. An integral part of ABC's business is the maintenance of a licence from a government authority to carry on that business. In order for ABC to maintain the licence, ABC must provide the government authority with a financial assurance in respect of the licence. The financial assurance is intended to provide a guarantee that, amongst other things, certain remedial costs in respect of ABC's business are not borne by the community. The financial assurance can be satisfied by ABC subscribing capital to a fund in conjunction with other companies that are also required to provide a financial assurance to the government authority. ABC and other companies required to provide a financial assurance to the government authority incorporated and subscribed funds into a new company (DEF) in order to provide the financial assurance. This capital subscription took the form of ABC and the other companies subscribing for shares in DEF upon its establishment and also on a quarterly basis until the fund reached the maximum amount required by the government authority. The amount of capital that must be subscribed by ABC is determined by reference to the output produced by ABC's business and the expected remediation costs in relation to the business of ABC. ABC is expected to fund any remedial action from its own resources and not from the financial assurance fund. That is, DEF will not use the money in the fund to carry out remedial action on behalf of ABC unless ABC fails to carry out that action itself. In these circumstances, DEF can either undertake the remedial work itself or arrange for the remedial work to be done. The government authority is also able to claim against DEF for reimbursement if the government authority is required to undertake remedial action.", "Reasons_for_Decision": "Summary: Section 121 of the ITAA 1936 provides that a mutual insurance association is taken to be a company carrying on the business of insurance if it is 'an association of persons formed for the purpose of insuring those persons against loss, damage or risk of any kind'. The expression 'formed for the purpose of insuring those persons' refers to both the purpose for which the taxpayer was established and the activities of the taxpayer ( Cronulla Sutherland Leagues Club Ltd v. Federal Commissioner of Taxation (1990) 23 FCR 82; 90 ATC 4215; (1990) 21 ATR 300). The ITAA 1936 does not define the term 'insuring those persons'. In Taxation Ruling IT 2663 insurance is described as a contract under which an insurer undertakes a liability, contingent on the happening of any specified event, to indemnify an insured for an agreed money value of any loss or damage. 'An association of persons formed for the purpose of insuring those persons' under section 121 of the ITAA 1936 should therefore be read as a reference to an association that undertakes insurance liabilities. In Medical Defence Union Ltd v. Department of Trade [1979] 2 All ER 421, Megarry V-C cited with approval the judgement of Channell J in Prudential Insurance Company v. Commissioners of Inland Revenue [1904] 2 KB 658 ( Prudential ). Megarry J. stated that in order for an association to undertake insurance liabilities it is important to establish that in return for consideration, a benefit is secured upon the happening of a certain event. In considering whether in return for consideration a benefit has been secured upon the happening of a certain event, Channell J makes it clear in Prudential that it is important to look at the contract as a whole to determine whether there is a contract of insurance. In the present case the consideration provided is in the form of ABC subscribing for shares upon the establishment of DEF, and then on a quarterly basis until the financial assurance fund reaches its required funding level. The question is therefore whether ABC, in return for its contributions to the financial assurance fund, is secured against pecuniary loss if it is called upon to undertake remedial action in relation to its business activity. As ABC is required to pay for any remedial action from its own financial resources and not from the financial assurance fund, it is considered that ABC is not secured against pecuniary loss if remedial action is required. The financial assurance fund will only be drawn upon if ABC fails to carry out that action itself. In this case, either DEF will undertake the remedial work itself (or arrange for the remedial work to be done) or DEF will reimburse the government authority if the government authority is required to undertake remedial action. Therefore, it could be said that the risk still remains with ABC. The main purpose of establishing the financial assurance fund is to allow ABC to meet the requirements of the government authority and to maintain the licence to carry out its business operations. It is not the intention of ABC to insure its own risks and ABC will not receive any benefit from DEF if ABC is required to undertake remedial action. Rather, it is the government authority that will receive the benefit from the financial assurance fund upon the happening of the event of remedial action not being undertaken by ABC. Accordingly, DEF is not an association of persons formed for the purpose of insuring those persons against loss, damage or risk of any kind for the purposes of subsection 121(1) of the ITAA 1936.", "Date_of_Decision": "19 September 2008", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 121 subsection 121(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2663", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "General insurance Insurance income Mutual insurance associations", "Case_References": "Cronulla Sutherland Leagues Club Limited v. Federal Commissioner of Taxation (1990) 23 FCR 82 (1990) 21 ATR 300 90 ATC 4215", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008125", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2663 | Keywords General insurance Insurance income Mutual insurance associations"}
{"ATO_ID_Number": "ATO ID 2005/98", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: application of section 121 of the Income Tax Assessment Act 1936 to a mutual discretionary fund", "Issue": "Will contributions received by a mutual discretionary fund from its members be included in its assessable income under section 121 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Contributions received by a mutual discretionary fund from its members will not be included in its assessable income under section 121 of the ITAA 1936.", "Facts": "The taxpayer is a mutual discretionary fund. Such a fund is a mutual association where members have rights to be granted certain types of assistance at the sole and absolute discretion of the taxpayer. The taxpayer receives contributions from its members (who belong to an industry group) by way of fees. These amounts are paid into the taxpayer's common fund. The contributions are received for a common purpose which includes the purpose of making grants of assistance to the members at the taxpayer's sole and absolute discretion ('discretionary assistance'). The taxpayer is not an insurer under the Insurance Act 1973 (Cth) (Insurance Act). The taxpayer has an agreement in place with an insurance company (non-member third party) to insure itself against losses arising from the making of grants of discretionary assistance.", "Reasons_for_Decision": "Summary: Where the principle of mutuality applies, the effect is that generally, contributions by way of fees and subscriptions received from members for the provision of mutual services will not be included in a mutual association's assessable income. However, section 121 of the ITAA 1936 requires that, if certain conditions are met, mutual insurance associations must include premiums received from members and non-members in assessable income. Section 121 of the ITAA 1936 states : The question of the amounts to be included in the taxpayer's assessable income under section 121 of the ITAA 1936 will, firstly, depend upon whether the taxpayer is 'an association of purposes formed for the purposes of insuring those persons' and, secondly, whether the relevant amounts are 'premiums'. The effect of section 121 of the ITAA 1936 is twofold. Firstly, it deems 'an association of purposes formed for the purposes of insuring those person'; that is, a 'mutual insurance association' to be carrying on the business of insurance thereby allowing access to deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for amounts incurred in carrying on the business of insurance, which would not have been allowable deductions under the principle of mutuality. Secondly, it includes all premiums received by such an association in assessable income. The expression 'formed for the purpose of insuring ...persons' refers to the purpose for which the taxpayer was established and the purpose for which it is currently conducted; Cronulla Sutherland Leagues Club Ltd v FCT (1990) 23 FCR 82; 90 ATC 4215; 21 ATR 300. The ITAA 1997 does not contain a definition of this expression, nor a definition of insurance. The meaning of the expression 'insuring persons' is consistent with the definition of 'insurance business' found in section 3 of the Insurance Act. This section defines 'insurance business' to mean: ...the business of undertaking liability, by way of insurance (including reinsurance), in respect of any loss or damage, including liability to pay damages or compensation, contingent upon the happening of a specified event, and includes any business incidental to insurance business. 'An association of persons formed for the purpose of insuring those persons' under section 121 of the ITAA 1936 should therefore be read as a reference to an association that undertakes insurance liabilities. The issue is whether in making grants of discretionary assistance the taxpayer is undertaking insurance liabilities by way of insurance. In Medical Defence Union Ltd v. Department of Trade [1979] 2 All ER 421 ( Medical Defence Union) the Court found, after considering the principles established in Prudential Insurance Co v. Inland Revenue Comrs (1904) 2 KB 658 (that is, that an insurance contract necessarily involved a relationship of indemnity) that the rights that members had to grants of discretionary assistance fell short of a contractual relationship of insurance. The members' right to grants was at the sole and absolute discretion of Medical Defence Union Ltd, whereas a contract of insurance affords insured persons with the right of indemnification upon the occurrence of an insured event. This principle was applied in Australia by Yeldham J. in Oswald v Bailey & Anor (No 1) (1986) ANZ Insurance Cases 60-704. Yeldham J. expressed the view that, on the basis of the decision in Medical Defence Union , the constitution of NSW Medical Defence Union, a mutual discretionary fund which provided its members with similar rights to the UK Medical Defence Union, did not afford members with contractual relationships of insurance. As the taxpayer does not undertake insurance liabilities by way of insurance, it cannot be 'an association of persons formed for the purpose of insuring those persons' within the meaning of subsection 121(1) of the ITAA 1936. Subsection 121(2) requires that 'premiums' received by an association from its members and non-members be included in assessable income. The ITAA 1997 does not contain a definition of the term 'premium.' 'Premium' has been defined by the courts as 'the consideration given by the insured to the insurer in return for the latter's promise to insure the risks specified in the contract'; Lewis v. Norwich Union Fire Insurance Co (1916) App D [Sth African Appellate Court] 509 at 519. In Royal & Sun Alliance Insurance Australia Ltd v. Commissioner of State Revenu e [2002] VSC 345 Byrne J. stated that: 'a premium is the price paid for insurance cover.' The contributions received by the taxpayer are not 'premiums' as the fees paid by members are not consideration given by the members to an insurer in return for an insurer's promise to insure the risks specified in an insurance contract. Accordingly subsection 121(2) of the ITAA 1936 cannot apply to the contributions received by the taxpayer and these contributions will not be included in assessable income. As the taxpayer is not 'an association formed for the purpose of insuring persons' subsection 121(1) of the ITAA 1936 does not apply to it. However, even if the taxpayer did meet this definition, no contributions received by it from its members would be included in its assessable income under subsection 121(2) of the ITAA 1936 as these amounts are not 'premiums.' Accordingly, section 121 of the ITAA 1936 will not apply to contributions received by the taxpayer from its members.", "Date_of_Decision": "24 March 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 121 subsection 121(1) subsection 121(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Association income Income Insurance & insurance industry Insurance industry Mutual insurance associations Mutuality principle Non exempt income of exempt entities", "Case_References": "Cronulla Sutherland Leagues Club Limited v. Commissioner of Taxation (1990) 23 FCR 82 90 ATC 4215 (1989) 21 ATR 300", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200598", "Unmatched_Content": "Keywords Association income Income Insurance & insurance industry Insurance industry Mutual insurance associations Mutuality principle Non exempt income of exempt entities"}
{"ATO_ID_Number": "ATO ID 2003/478", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Friendly Society Funeral Policy - dissatisfaction with investment earnings", "Issue": "Can the Tax Office authorise a friendly society to pay out benefits under a 'funeral policy', as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), before the insured person's death, where a person takes out a funeral policy and later decides they are not satisfied with the investment earnings on the policy?", "Decision": "No. The Tax Office has no authority to authorise a friendly society to pay out the benefits of a funeral policy before the death of the insured person.", "Facts": "A person takes out a funeral policy for their funeral expenses with a friendly society. The friendly society's benefit fund rules have no provision for payment of benefits under a funeral policy, other than on the death of the insured person. Becoming dissatisfied with the earnings on the policy, the insured applies to the friendly society for payout of the policy benefits. The friendly society advises that this is not possible and suggests that the policy holder make further representation to the Tax Office.", "Reasons_for_Decision": "Summary: The definition of 'funeral policy' in subsection 995-1(1) of the ITAA 1997 is a life insurance policy issued by a friendly society for the sole purpose of providing benefits to pay for the funeral of the insured person. Amounts derived by friendly societies for funeral policies issued before 1 January 2003 are exempt from taxation, provided the policies have this sole purpose. To ensure that the sole purpose of these funeral policies is maintained, friendly society funeral policy benefit fund rules usually include the following or similar conditions: Benefit funds of friendly societies are constituted by rules. The rules constitute the terms of the contract between the society and individual policy holders. As entitlement to benefits under a funeral policy is occasioned by the death of the insured person, if benefit fund rules for funeral policies included provision for payment of benefits other than on the death of the insured person, the sole purpose of the policies would be lost. The Tax Office has no authority to authorise a friendly society to refund the amount invested in a funeral policy before the death of the insured person.", "Date_of_Decision": "8 April 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003478", "Unmatched_Content": "Keywords Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2003/479", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Friendly Society Funeral Policy - permanent departure overseas of policyholder", "Issue": "Can the Tax Office authorise a friendly society to pay out benefits under a funeral policy, as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), before the insured person's death if they made arrangements for their funeral in Australia and subsequently decide to emigrate permanently?", "Decision": "No. The Tax Office has no authority to authorise a friendly society to pay out any benefits of a funeral policy before the death of the insured person even if they made arrangements for their funeral in Australia and subsequently decide to emigrate permanently.", "Facts": "An Australian resident takes out a funeral policy. The friendly society's benefit fund rules have no provision for payment of benefits under a funeral policy other than on the death of the insured person. Several years later the insured decides to emigrate permanently. As their funeral is therefore unlikely to take place in Australia, they apply to the friendly society for refund of their funeral policy. The friendly society advises that the policy does not require that the funeral takes place in Australia and that if the proceeds of their policy are to be refunded, this will have to be authorised by the Tax Office.", "Reasons_for_Decision": "Summary: The definition of 'funeral policy' in subsection 995-1(1) of the ITAA 1997 is a life insurance policy issued by a friendly society for the sole purpose of providing benefits to pay for the funeral of the insured person. Amounts derived by friendly societies for funeral policies issued before 1 January 2003 are exempt from taxation, provided the policies have this sole purpose. To ensure that the sole purpose of these funeral policies is maintained, friendly society funeral policy benefit fund rules usually include the following or similar conditions: Benefit funds of friendly societies are constituted by rules. The rules constitute the terms of the contract between the society and individual policy holders. As entitlement to benefits under a funeral policy is occasioned by the death of the insured person, if benefit fund rules for funeral policies included provision for payment of benefits or surrender of the policy in whole or in part, other than on the death of the insured person, the sole purpose of the policies would be lost. The Tax Office has no authority to authorise a friendly society to refund the amount invested in a funeral policy before the death of the insured person. In these circumstances the friendly society and the policyholder could make arrangements for the payment of their policy proceeds where their funeral finally takes place.", "Date_of_Decision": "8 April 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003479", "Unmatched_Content": "Keywords Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2003/480", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Friendly Society Funeral Policy - serious financial difficulties", "Issue": "Can the Tax Office authorise a friendly society to pay out benefits under a 'funeral policy', as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), before the insured person's death, where a person takes out a funeral policy and later finds themselves in financial difficulties?", "Decision": "No. The Tax Office has no authority to authorise a friendly society to pay out any benefits of a funeral policy before the death of the person insured, even if they later find themselves in financial difficulties after taking out a funeral policy.", "Facts": "A person whose sole source of income is the age pension, takes out a funeral policy to fund their funeral expenses. The friendly society's benefit fund rules have no provision for payment of benefits under a funeral policy other than on the death of the insured person. Some years later the insured requires medical treatment and finds they can receive this earlier as a private patient. To fund their treatment they apply to their friendly society for a payout of the benefit under the funeral policy. The friendly society advises the member that if the proceeds of their policy are to be paid out prior to death this will have to be authorised by the Tax Office.", "Reasons_for_Decision": "Summary: The definition of 'funeral policy' in subsection 995-1(1) of the ITAA 1997 is a life insurance policy issued by a friendly society for the sole purpose of providing benefits to pay for the funeral of the insured person. [emphasis added] Amounts derived by friendly societies for funeral policies issued before 1 January 2003 are exempt from taxation, provided the policies have this sole purpose. To ensure that the sole purpose of these funeral policies is maintained, friendly society funeral policy benefit fund rules usually include the following or similar conditions: Benefit funds of friendly societies are constituted by rules. The rules constitute the terms of the contract between the society and individual policy holders. As entitlement to benefits under a funeral policy is occasioned by the death of the insured person, if benefit fund rules for funeral policies included provision for payment of benefits other than on the death of the insured person, the sole purpose of the policies would be lost. The Tax Office has no authority to authorise a friendly society to refund the amount invested in a funeral policy before the death of the insured person.", "Date_of_Decision": "8 April 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003480", "Unmatched_Content": "Keywords Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2003/481", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Friendly Society Funeral Policy - change in funeral arrangements from burial to cremation", "Issue": "Can the Tax Office authorise a friendly society to pay out any benefits of a 'funeral policy', as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), resulting from a reduction in the expected cost of funeral arrangements under the policy before the insured person's death, if they have specified arrangements for their funeral which they later vary?", "Decision": "No. The Tax Office has no authority to authorise a friendly society to pay out any benefits of a funeral policy before the death of the insured person, even if the insured person varies their funeral arrangements resulting in a reduction in the cost of the funeral.", "Facts": "A person takes out a funeral policy for their funeral expenses with a friendly society. For their funeral arrangements the insured specifies burial. The friendly society's benefit fund rules have no provision for payment of benefits under a funeral policy other than on the death of the insured person. Later, finding themselves in financial difficulty, the insured ascertains that if they vary their funeral arrangements from burial to cremation, this would result in a reduction of the funeral costs of $2,000. The friendly society agrees to the change of arrangements under the policy, but informs the policyholder that a refund of the difference in the cost of the arrangements would have to be authorised by the Tax Office.", "Reasons_for_Decision": "Summary: The definition of 'funeral policy' in subsection 995-1(1) of the ITAA 1997 is a life insurance policy issued by a friendly society for the sole purpose of providing benefits to pay for the funeral of the insured person. Amounts derived by friendly societies for funeral policies issued before 1 January 2003 are exempt from taxation, provided the policies have this sole purpose. To ensure that the sole purpose of these funeral policies is maintained, friendly society funeral policy benefit fund rules usually include the following or similar conditions: Benefit funds of friendly societies are constituted by rules. The rules constitute the terms of the contract between the society and individual policy holders. As entitlement to benefits under a funeral policy is occasioned by the death of the insured person, if benefit fund rules for funeral policies included provision for payment of benefits other than on the death of the insured person, the sole purpose of the policies would be lost. The Tax Office has no authority to authorise a friendly society to refund the amount invested in a funeral policy before the death of the insured person.", "Date_of_Decision": "8 April 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003481", "Unmatched_Content": "Keywords Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2003/482", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Friendly Society Funeral Policy - funeral benefits for deceased spouse", "Issue": "Can the Tax Office authorise a friendly society to pay out a surviving spouse's benefits from their 'funeral policy', as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997), for the funeral expenses of their deceased spouse?", "Decision": "No. The Tax Office has no authority to authorise a friendly society to pay out the benefits of a funeral policy before the death of the insured person.", "Facts": "A married couple, John and Betty, each took out a funeral policy from a friendly society. John was the insured person under his policy and Betty the insured person under hers. The friendly society's benefit fund rules have no provision for payment of benefits under a funeral policy other than on the death of the insured person. Both policies had balances of $1,000 at the time of John's death. John's funeral expenses totalled $9,000 and benefits of $1,000 were paid from his policy. Betty requested that the friendly society also apply her policy benefits for John's funeral expenses. The friendly society advised that this might be possible if they have approval from the Tax Office.", "Reasons_for_Decision": "Summary: Benefit funds of friendly societies are constituted by rules. The rules constitute the terms of the contract between the society and individual policy holders. If the benefit fund rules have no provision for payment of benefits under a funeral policy other than on the death of the insured person, the Tax Office has no authority to authorise a friendly society to refund or pay out the amount invested in a funeral policy before the death of the insured person.", "Date_of_Decision": "8 April 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003482", "Unmatched_Content": "Keywords Friendly society Friendly society bonds Funeral bonds Insurance & insurance industry Life insurance policies"}
{"ATO_ID_Number": "ATO ID 2007/104", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by an Australian resident performing independent personal services for an Italian entity", "Issue": "Is income derived by an Australian resident taxpayer, from performing freelance journalism in Australia for an Italian radio station, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Income derived by an Australian resident taxpayer from freelance journalism performed in Australia for an Italian radio station is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer is a freelance journalist reporting news items from Australia to a radio station in Italy. The taxpayer is not under any employment contract with the Italian radio station. The editors of the Italian radio station contact the taxpayer in Australia to request reports on any news from Australia to broadcast in their news bulletin or current affairs programs.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The amounts paid to the taxpayer are ordinary income for the purposes of subsection 6-5(2). However, in determining the liability to Australian tax it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act) that exists between Australia and Italy. Section 4 of the Agreements Act incorporates the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one with the Agreements Act. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in specified situations). Schedule 21 to the Agreements Act contains the Australia - Italy Double Taxation Convention (the Italian Convention). The Italian Convention operates to avoid the double taxation of income received by Australian and Italian residents. Article 14(1) of the Italian Convention provides that income derived by an individual who is a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia unless the taxpayer has a fixed base regularly available to him in Italy for the purpose of performing his activities. If the taxpayer has such a fixed base, the income may be taxed in Italy but only so much of it as is attributable to that fixed base. Article 14(2) of the Italian Convention defines the term 'professional services' as including independent scientific, literary, artistic, educational or teaching activities, as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. This is an inclusive definition, and thus is not limited to the specific examples provided. Moreover, because the Article also applies to 'other independent activities of a similar character', its scope extends to activities that are of an 'independent' nature and which are similar in character to the professional services listed in Article 14(2) of the Italian Convention. Activities will be considered 'independent' for the purposes of Article 14 of the Italian Convention where they are provided outside a formal employment arrangement, that is, not in the capacity of an employee of the recipient of the services. This interpretation is consistent with the Explanatory Memorandum to the Italian Convention which explains that remuneration derived as an employee is subject to another Article of the Convention and is not covered by Article 14. It is also supported by the Commentary on the previous OECD Model Article 14 (deleted from the OECD Model on 29 April 2000) which explained, at paragraph 1, that the Article did not apply to professional services performed in employment. The taxpayer is a freelance journalist and the services provided by the taxpayer to the Italian radio station are provided in this capacity and not as an employee of the Italian radio station. The provision of freelance journalism services is similar in character to the professional services listed in Article 14(2) of the Italian Convention in that journalism is also an occupation which requires specific qualifications or a high level of skill and experience to perform the relevant functions. The freelance journalism services provided by the taxpayer, therefore, fall within the scope of Article 14 of the Italian Convention as 'professional services or other independent activities of a similar character'. As the taxpayer performs these services from Australia and not from any fixed base available to him in Italy, Australia is allocated the sole taxing right over the income derived from the services under Article 14(1) of the Italian Convention. Accordingly, the income is included in the assessable income of the taxpayer under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "14 June 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 ITAA36", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Italy International tax Treaties Professional services sector", "Case_References": "", "Other_References": "Explanatory Memorandum to the Income Tax (International Agreements) Amendment Bill 1983 (Explanatory Memorandum to the Italian Convention) OECD Committee on Fiscal Affairs for the Organisation for Economic Co-operation and Development, Model Tax Convention on Income and Capital, Paris, as adopted by the Committee and published on November 1, 1997.", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007104", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Italy International tax Treaties Professional services sector"}
{"ATO_ID_Number": "ATO ID 2004/383", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by a non-resident from sales of merchandise at performance venues in Australia", "Issue": "Is the income received by the taxpayer, a resident in the United States of America (US), from the sale of merchandise at performance venues in Australia assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the income received by the US resident taxpayer from the sales of merchandise at performance venues in Australia is assessable under subsection 6-5(3) of the ITAA 1997, Article 7 of Schedule 2 of the International Tax Agreements Act 1953 (the Agreements Act) applies and the income is not assessable in Australia.", "Facts": "The taxpayer company is a resident of the US and is not a resident of Australia for income tax purposes. The main business of the taxpayer is in providing entertainment at various venues. The taxpayer also earns income in Australia from the sale of merchandise during and after the performance depicting characters featured in the performance. The performances are conducted over a period of six weeks at different locations in Australia. The performances undertaken at each location last only for a few days. The merchandise sold at the performance venues is manufactured by an unrelated Australian resident entity under the terms of a Licence and Distribution Agreement with the taxpayer. Under the terms of the Licence and Distribution Agreement, the taxpayer has appointed the Australian manufacturer as its exclusive agent for the development, manufacture, distribution and sale of the merchandise within the territory which includes Australia. It was also agreed that the Australian manufacturer will at all times act as an independent contractor and will not represent in any manner whatsoever as an agent for the taxpayer. The merchandise for sale at the performance venues is purchased by the taxpayer from the Australian manufacturer. The merchandise is sold at the performance venues by venue personnel who are not employed by the taxpayer. The taxpayer does not have any employees, office, factory or a workshop in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources. The income received by the taxpayer from the sale of merchandise at performance venues in Australia is ordinary income under subsection 6-5(3) of the ITAA 1997. In determining the liability to Australian tax on Australian sourced income received by a non resident, it is necessary to consider not only the Australian income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Article 7 of the US Convention governs the taxation of business profits derived by a resident of the US from sources in Australia. Under Article 7 of the US Convention, the business profits of an enterprise of the US shall be taxable only in the US unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 5(1) of the US Convention as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model Tax Convention on Income and on Capital explains that the definition of permanent establishment contains the following requirements: The taxpayer's business does not have any permanent establishment in Australia for the purposes of Article 5(1) of the US Convention as the taxpayer has no premises, distinct place of business or employees in Australia. Article 5(4)(a) of the US Convention states that an enterprise will be deemed to have a permanent establishment in Australia if an enterprise carries on business through a person who has the authority to conclude contracts in Australia on behalf of the enterprise, and habitually exercises that authority, unless the activities are limited to those mentioned in Article 5(3) of the US Convention. Article 5(5) states that an enterprise shall not be deemed to have a permanent establishment merely because that enterprise carries on business in the other State through an agent of independent status where that agent is acting in the ordinary course of his business as an agent of independent status. Article 5(4) of the US Convention will not apply as the Australian resident entity that manufactures and distributes the merchandise has no authority to conclude contracts in Australia on behalf of the taxpayer's business and does not habitually exercise any such authority. The income received by the taxpayer from the sale of merchandise to Australian customers at various performance venues in Australia is not assessable as the taxpayer's business does not have a permanent establishment in Australia. The income is consequently not taxable under subsection 6-5(3) of the ITAA 1997 by virtue of the overriding effect of Article 7 of the US Convention.", "Date_of_Decision": "18 March 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/382 | ATO ID 2004/384", "Subject_References": "Double tax agreements Income International tax Non resident companies Permanent establishment Profits United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004383", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Income International tax Non resident companies Permanent establishment Profits United States"}
{"ATO_ID_Number": "ATO ID 2004/384", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by a US resident company where the sole director and shareholder is present in Australia", "Issue": "Is the income received by a taxpayer company, a resident of the United States of America (US), from the sale of merchandise at performance venues in Australia, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) if the sole director and shareholder of the taxpayer company is present in Australia at the time of the sale of the merchandise?", "Decision": "No. The income received by a taxpayer company, a resident of the US, from the sale of merchandise at performance venues in Australia is not assessable under subsection 6-5(3) of the ITAA 1997 where the sole director and shareholder of the taxpayer company is present in Australia at the time of the sale of the merchandise.", "Facts": "The taxpayer company is a resident of the US and is not a resident of Australia for income tax purposes. The main income earning activity of the taxpayer is producing entertainment. The taxpayer also earns income in Australia from the sale of merchandise during and after the performance depicting characters from the performance. The performances are conducted at different locations in Australia for a limited period. The merchandise depicting characters from the performance is sold at stands set up at the performance venues by the venue staff. The taxpayer's sole director and shareholder is present in Australia to conduct the performance during the time of sale of the merchandise. The taxpayer does not have any employees, an office, a factory or a workshop in Australia.", "Reasons_for_Decision": "Summary: Section 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources. The income derived by the taxpayer from the sale of merchandise to Australian consumers is ordinary income under subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 2 to the Agreements Act contains the convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Article 7 of the US Convention governs the taxation of business profits derived from Australia by a resident of the US. Under Article 7, the business profits of an enterprise of the US shall be taxable only in the US unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 5(1) of the US Convention as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5(2) of the US Convention contains a list of examples each of which can be regarded as constituting a permanent establishment such as a place of management. In discussing the operation of Article 5 of the US Convention, paragraph 4 of Taxation Ruling IT 2324 refers to the earlier US Convention where the term 'permanent establishment' was defined to include 'a management'. Based on that definition, where the principal performer who was also a majority shareholder and director of the company was present in Australia, the approach was taken that the company had a management present in Australia and therefore a permanent establishment in Australia. Paragraph 5 of IT 2324 states that this approach is no longer applicable under Article 5(1) of the revised US Convention. The revised US Convention states that a permanent establishment means a 'fixed place of business through which the business of an enterprise is wholly or partly carried on'. IT 2324 states that two things follow from the revised US Convention: The taxpayer's business does not have a permanent establishment in Australia as there is no fixed place of business through which the business of the enterprise is wholly or partly carried on for the purposes of Article 5(1) of the US Convention. The presence of the sole director and shareholder in Australia during the time of sale of merchandise will not itself constitute a 'place of management' under Article 5(2) of the US Convention. As the taxpayer's business does not have a permanent establishment in Australia, the income will not be assessable under subsection 6-5(3) if the ITAA 1997 through the overriding effect of Article 7 of the US Convention.", "Date_of_Decision": "18 March 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2324", "Related_ATO_Interpretative_Decisions": "2004/382 | 2004/383", "Subject_References": "Company directors Double tax agreements Non resident companies Permanent establishment Shareholders United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004384", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2324 | Keywords Company directors Double tax agreements Non resident companies Permanent establishment Shareholders United States"}
{"ATO_ID_Number": "ATO ID 2004/560", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by a non-resident company from a tour of performers in Australia", "Issue": "Is income derived by the taxpayer, a non-resident company, from on-stage performances whilst on tour in Australia assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997).", "Decision": "Yes. Income derived by the taxpayer, a non-resident company, from on-stage performances whilst on tour in Australia is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The company is a non-resident for Australian taxation purposes. The non-resident company presented on-stage performances to the public at venues in Australia in the relevant year. The non-resident company received amounts and derived income from the conduct of those on-stage performances. In order that the non-resident company can conduct the performances, it employs individual performers. The non-resident company also employs other staff it requires. These include, for example, lighting, stage and production staff as well as management and other ancillary staff.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The International Tax Agreements Act 1953 (the Agreements Act) must be considered to determine whether Australia has a taxing right in respect of the income derived in Australia by the non-resident company. Subsection 4(1) of the Agreements Act incorporates the Agreements Act with both the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. The Agreements Act gives the relevant double tax agreement (the Agreement), contained in a Schedule to the Agreements Act, the force of law in Australia. Paragraph 2 of the Entertainers Article of the Agreement provides that, where income in respect of the personal activities of an entertainer as such accrues not to that entertainer but to another person, that income may be taxed in the State in which the activities are exercised. The General Definitions Article of the Agreement provides that the term 'person' included a company. The income generating activity of the company is the presentation of on-stage performances to the public. Completion of each performance requires that exercise of particular skills and expertise of the individual performers. There is a direct link between the derivation of the income in Australia by the company and the performances undertaken by the company's performers in Australia. Accordingly, the income of the company is derived in Australia as a direct result of the personal activities of the performers in their capacity as performers. The article also provides that taxing rights in the country in which the activities are exercised exist notwithstanding the business profits, independent personal services and dependent personal services Articles of the Agreement. The High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531 ( Thiel ) accepted that the OECD Model Tax Convention official Commentaries may be relevant to the interpretation of Double Tax Agreements based on the OECD Model Tax Convention. In Thiel , the OECD Model Tax Convention and Commentaries were approved as a supplementary means of interpretation to which recourse may be had under Article 32 of the Vienna Convention on the Law of Treaties. Article 17(2) of the OECD Model Tax Convention is on substantially the same terms as the corresponding article in the relevant Agreement. For present purposes, paragraph 11 of the Commentary on Article 17 of the OECD Model Tax Convention states that: In relation to the second point above, subsection 3(2) of the Agreements Act provides that references in the Agreement to profits of an activity or business are references to the taxable income derived from that activity or business. Similarly, the amount of the 'profit element accruing from the performances in Australia' is considered to be a reference to the non-resident company's taxable income from said performances. Reference to the most recently published update of the OECD Model Tax Convention and Commentary is consistent with paragraphs 107-108 of Taxation Ruling TR 2001/13. The non-resident company is constituted as a legal entity and employs a team, troupe or company of performers that present the on-stage performances. The income from performances accrues to the legal entity. On the basis of what is stated above, paragraph 2 of the Entertainers Article of the Agreement gives Australia the right to tax the non-resident company's income derived from on-stage performances undertaken in Australia. The Source of Income Article of the relevant Agreement provides that, for present purposes, income derived by a non-resident which may be taxed in Australia under the Entertainers Article of that Agreement shall be deemed to be income from sources in Australia for the purposes of Australian tax law. Accordingly, income derived by the non-resident company from on-stage performances undertaken in Australia have an Australian source. As a result, the income accruing to the company from performances undertaken in Australia is assessable income in Australia under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "8 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Entertainers Entertainment industry International tax Non resident companies", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "OECD Model Tax Convention on Income and Capital Commentary on the Model Tax Convention on Income and Capital - OECD January 2003 Vienna Convention on the Law of Treaties", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004560", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Entertainers Entertainment industry International tax Non resident companies"}
{"ATO_ID_Number": "ATO ID 2002/874", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "International tax : Preparation Fees paid to non-resident entertainers", "Issue": "Does the 'Entertainers Article' of the Australian Double Tax Agreements (DTAs) - as incorporated into Australian law by the various Schedules of the International Tax Agreements Act 1953 - allow Australia a taxing right on payments made to visiting entertainers specifically for 'preparing' for a role, where the preparation is carried out in another country prior to the entertainer's arrival in Australia?", "Decision": "Yes. The 'Entertainers Article' provides a taxing right in circumstances where a payment is made to entertainers exclusively or predominantly for them to prepare for a performance in Australia and the payment is conditional upon them attending and performing in Australia.", "Facts": "Various non-resident entertainers such as opera singers, musicians, conductors and film actors are regularly engaged by Australian promoters such as opera companies, symphony orchestra companies, or film producers to perform in Australia. The contracts or negotiations to engage those entertainers are usually arranged up to two years prior to the actual date of performance in Australia. The fees which are negotiated in consideration of the entertainer's engagement, include payments made to the entertainer specifically to prepare for a part or a role in Australia, even though the preparation may be carried out in another country prior to the entertainer's arrival in Australia. This payment (so called 'preparation fee') is often calculated as a percentage of the gross payment for the Australian engagement. The percentage can vary according to the entertainer's stature and demand in the industry. The preparation is exclusively or predominantly for the purposes of the performance or entertainment activities in Australia. The payment of the preparation fee is conditional upon the actual performance taking place.", "Reasons_for_Decision": "Summary: Australia's DTAs are international agreements that have been negotiated between Australia and other countries. The primary role of a DTA is to avoid double taxation. One mechanism for doing this is to distribute or allocate taxing rights between those countries that are parties to the DTA. The Article in DTAs relevant to the taxation of visiting entertainers is the 'Entertainers Article'. The following example from Article 17 of the Australia/Vietnam DTA is typical of most 'Entertainers Article' in Australian DTAs: '(1)...income derived by entertainers (such as theatrical, motion picture, radio or television artistes and musicians and athletes) from their personal activities as such may be taxed in the Contracting State in which these activities are exercised .' [Emphasis added] The term 'derived' in this context is a broad term that gives the 'Entertainers Article' coverage beyond merely fees for actual appearances. If the payment for the preparation is made exclusively for the purposes of the performance or other entertainment activities in Australia, those fees constitute part of the entertainer's assessable income derived from those activities. It is not important that the preparation is carried out in a country other than Australia as there is a direct link between the performance and the income. Where the entertainment activities to which the preparation relates are exercised in Australia, preparation fees for those activities are income 'derived' from the activities exercised in Australia within the meaning of the 'Entertainers Article'. The fact that the preparation fees are paid on the condition that the primary activities are exercised in Australia, demonstrates that the fees are derived from, and integrally connected with, the activities exercised in Australia and that those activities are the real source of the income.", "Date_of_Decision": "14 August 2002", "Year_of_Income": "", "Legislative_References": "International Tax Agreements Act 1953 Schedule 38, Article 17", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Entertainers Prepayments Double tax agreements", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002874", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Entertainers Prepayments Double tax agreements"}
{"ATO_ID_Number": "ATO ID 2010/149", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Primary production: assessable primary production income - dividends", "Issue": "Are the dividends received from shares acquired by the taxpayer under the compulsory share acquisition scheme assessable primary production income as defined under subsection 392-80(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The dividends received from shares acquired by the taxpayer under the compulsory share acquisition scheme are assessable primary production income as defined under subsection 392-80(2) of the ITAA 1997 because there is a close and direct relationship between the dividends received and the primary production business.", "Facts": "The taxpayer, who is an individual, carries on a primary production business and is a member of a dairy co-operative. The taxpayer is required to hold a minimum number of shares in the co-operative and is required to acquire additional shares based on the quantity of dairy products supplied to the co-operative, subject to the maximum number of shares allowed to be held by any one member. The number of shares the taxpayer holds in the co-operative is as a direct result of the quantity of dairy products supplied to the co-operative. The shares are unable to be traded as it is a requirement of the co-operative that the taxpayer holds the shares in order to continue to supply dairy products to the co-operative. During the income year, the taxpayer received a dividend distribution calculated based on the number of shares held.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997 unless otherwise stated.) A taxpayer's assessable primary production income for an income year is the amount of their basic assessable income for the income year that 'was *derived from, or resulted from, your carrying on a *primary production business' (subsection 392-80(2)). The Income Tax legislation does not provide guidance as to when an amount was derived from, or results from, your carrying on a primary production business. However, the Explanatory Memorandum to the Income Tax Assessment Amendment Bill (No. 2) 1978, which first used the words 'assessable primary production income' in the corresponding provision in the Income Tax Assessment Act 1936 (ITAA 1936), indicates that the relationship between the income and the primary production business is to be close and direct rather than indirect or remote. The definition of 'assessable primary production income' in the corresponding provision in the ITAA 1936 uses the phrase 'in consequence of the carrying on of a business of primary production'. In AAT Case 6254, AAT Case X82 21 ATR 3708; 90 ATC 599, Dr Gerber observed: The term \"in consequence of \" connotes causality - in this case whether the interest was \"caused\" to be derived as the \"predominant\" or \"proximate\" or \"direct\" result of the carrying on of the business of primary production. This is a question of fact. In this case, it is considered that purchasing shares in the co-operative is a direct consequence of carrying on the taxpayer's business. This is because the taxpayer is required to hold a minimum number of shares, and to continue to purchase shares in the co-operative (based on the quantity of milk supplied), in order to supply dairy products to the co-operative. The number of shares the taxpayer holds in the co-operative is a direct result of the quantity of dairy products supplied to the co-operative. As the dividends received were calculated by direct reference to the number of shares held by the taxpayer in the co-operative, this constitutes a close and direct relationship between the dividends received and the taxpayer's primary production business of production and supply of dairy products. That is, the reason for receiving the dividends is as a direct result of carrying on of the primary production business. Therefore, the relationship between the dividends received and the carrying on of the primary production business is such that the dividends are '*derived from, or resulted from, your carrying on a *primary production business' (subsection 392-80(2)). The dividends received from shares acquired by the taxpayer under the compulsory share acquisition scheme are assessable primary production income as defined under subsection 392-80(2) because there is a close and direct relationship between the dividends received and the primary production business.", "Date_of_Decision": "15 July 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 392-80(2)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2008/16", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/773", "Subject_References": "Primary production income", "Case_References": "AAT Case 6254, AAT Case X82 21 ATR 3708 90 ATC 599", "Other_References": "Explanatory Memorandum to the Income Tax Assessment Amendment Bill (No. 2) 1978", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010149", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2008/16 | Keywords Primary production income"}
{"ATO_ID_Number": "ATO ID 2003/170", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income: entry payment by retirement village resident - repayment within 12 months contingent on finding new resident", "Issue": "Is the amount paid by a resident upon entry to a retirement village included under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) in the assessable income of the taxpayer, the retirement village operator, when the amount is fully repayable within 12 months of the resident's departure or earlier if a new resident is found?", "Decision": "No. The amount paid by a resident upon entry to a retirement village is not included under section 6-5 of the ITAA 1997 in the assessable income of the taxpayer, the retirement village operator, as the amount is fully repayable within 12 months whether a new resident is found or not and is therefore treated as a loan.", "Facts": "The taxpayer operates a retirement village. Upon entry to the village the resident signed a resident's agreement with the taxpayer. The resident's agreement provides that:", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. Taxation Ruling TR 2002/14 gives the Commissioner's view on the treatment of income for retirement village operators. In some circumstances an amount paid to a retirement village operator for a right to occupy a unit will be treated as an assessable lease premium (paragraph 25 of TR 2002/14). However, in other circumstances the amount is fully repayable to the resident on termination of the lease or right to occupy. In this case the amount payable by the resident is treated as a loan (paragraph 27 of TR 2002/14). Paragraph 28 of TR 2002/14 states that the receipt and repayment of the loan made by the residents are on capital account. As the resident's agreement specifies that the amount is fully refundable, if the resident leaves the village, the amount paid by the resident can be characterised as a loan. However paragraph 29 of TR 2002/14 goes on to explain that a loan amount, even though it may be described as an 'interest-free loan' or a 'security deposit', may be regarded as a lease premium and therefore included in assessable income under subsection 6-5(2) of the ITAA 1997 if the repayment of the loan is contingent upon a new resident being found. In this case the repayment of the loan is, for the initial 12 month period, contingent upon a new resident being found. However the loan is required to be repaid at the expiry of 12 months regardless of whether a new resident has been found. In these circumstances the amount is not considered to lose it's character as a loan and will not be treated as a lease premium. Accordingly the amount paid by residents is treated as a loan and is not included in the retirement village operator's assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "11 March 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/14", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lease incentives Retirement villages", "Case_References": "", "Other_References": "", "Business_Line": "Small Business / Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003170", "Unmatched_Content": "Updated business line from Private Groups and High Wealth Individuals to Small Business / Individual Taxpayers | Related Public Rulings (including Determinations) Taxation Ruling TR 2002/14 | Keywords Lease incentives Retirement villages"}
{"ATO_ID_Number": "ATO ID 2012/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Mining information and taxable Australian real property", "Issue": "Whether 'taxable Australian real property' in section 855-20 of the Income Tax Assessment Act 1997 (ITAA 1997) includes mining information obtained through exploration expenditure?", "Decision": "No. The mining information is not a capital gains tax asset and as such cannot be 'taxable Australian real property' under section 855-20 of the ITAA 1997.", "Facts": "After 19 September 1985, the taxpayer, a foreign resident, acquired membership interests in Australian resident company A equal to 20% of the total paid-up share capital of Australian resident company A. Australian resident company A carries on mining operations in Australia, including exploration or prospecting for minerals or quarry materials situated in Australia. In the course of carrying on its business, Australian resident company A incurred expenditure on exploration activities in Australia which produced mining information. That mining information contributed to the intellectual capital or know-how associated with the company's mining operations. In 2007-08 income year, the foreign resident disposed of membership interests in Australian resident company A equal to 15% of the total paid-up share capital of Australian resident company A ('the 2008 disposal').", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) A capital gain or capital loss made by a foreign resident from a CGT event is disregarded under subsection 855-10(1) if the CGT event happens in relation to a CGT asset that is not 'taxable Australian property'. What constitutes 'taxable Australian property' is set out in section 855-15. A CGT asset that is: Subsection 855-25(1) provides that a membership interest is an 'indirect Australian real property interest' when a CGT event happens in relation to the membership interest if the interest passes: The foreign resident's membership interests in Australian resident company A pass the principal asset test in section 855-30 at the time of the 2008 disposal if the sum of the market values at that time of Australian resident company A's 'taxable Australian real property' exceeds the sum of the market values at that time of its assets that are not 'taxable Australian real property'. Pursuant to section 855-20, a CGT asset is 'taxable Australian real property' if it is: Therefore, a CGT asset must exist for section 855-20 to apply. Section 108-5 provides that a CGT asset is any kind of property or a legal or equitable right that is not property. In the present case, Australian resident company A undertook exploration expenditure that produced mining information. Mining, quarrying or prospecting information is not a CGT asset and so cannot be 'taxable Australian real property' under section 855-20. It is not a CGT asset because it is not property or a legal or equitable right that is not property; it is akin to 'know-how' (see Taxation Ruling TR 1998/3 - Income tax : treatment of receipts for dealing with or disclosing mining, quarrying or prospecting information , particularly paragraphs 4 and 20, and Taxation Determination TD 2000/33 - Income tax : capital gains : is know-how a CGT asset ?). Further, mining, quarrying or prospecting information is something separate from any mining, quarrying or prospecting right to which paragraph 855-20(b) might apply. Mining, quarrying or prospecting information does not attach to, or form part of, the mining, quarrying or prospecting right (see TR 98/3, particularly paragraphs 27, 28 and 83). Indeed, the separateness of mining, quarrying or prospecting information from a mining, quarrying or prospecting right to which the information relates is reinforced by the recognition under Division 40 of them as separate depreciating assets (see, for example, subsection 40-30(2)). Consequently, when determining in the present case if the foreign resident's membership interests in Australian resident company A pass the principal asset test in section 855-30 at the time of the 2008 disposal, the market value of the mining information is not included in the sum of the market values at that time of Australian resident company A's assets that are taxable Australian real property.", "Date_of_Decision": "27 February 2012", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 subsection 40-30(2) Division 855 section 855-20 section 855-30", "Related_Public_Rulings_and_Determinations": "Tax Determination TD 2000/33 | Taxation Ruling TR 1998/3", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains Non-resident Mining information", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201213", "Unmatched_Content": "Related Public Rulings (including Determinations) Tax Determination TD 2000/33 Taxation Ruling TR 1998/3 | Keywords Capital gains Non-resident Mining information"}
{"ATO_ID_Number": "ATO ID 2012/14", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital Gains Tax: non-TARP assets and the principal asset test in Division 855", "Issue": "What is an 'asset' of an entity for the purposes of the principal asset test in section 855-30 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "An 'asset' of an entity for the purposes of the principal asset test in section 855-30 of the ITAA 1997 is anything recognised in commerce and business as having economic value to the entity at the time of the relevant capital gains tax event for which a purchaser of the entity's membership interests would be willing to pay.", "Facts": "The taxpayer, a foreign resident, owns 50% of the shares in Australian resident company A. Australian resident company A owns 100% of the shares in Australian resident company B. Australian resident company A lent a sum of money to Australian resident company B, under an inter-corporate loan agreement. As a result, Australian resident company A acquired an enforceable right to receive payment of money under the loan agreement. Australian resident company A holds an inter-corporate receivable, consisting of funds lent to Australian resident company B under the inter-corporate loan agreement. Australian resident company B holds, among other things, cash received under the inter-corporate loan agreement with Australian resident company A. The foreign resident taxpayer disposed of 20% of its shares in Australian resident company A and made a capital gain on that disposal.", "Reasons_for_Decision": "Summary: (All legislative references are to the ITAA 1997) Whether a membership interest held by an entity in another entity passes the principal asset test at the time the relevant CGT event happens in relation to the membership interest is part of determining whether the membership interest is an 'indirect Australian real property interest' at that time: see paragraph 855-25(1)(b). An 'indirect Australian real property interest' is one of the categories of CGT assets that are 'taxable Australian property' (see section 855-15). A capital gain or capital loss that a foreign resident, or the trustee of a foreign trust for CGT purposes, makes from a CGT event that happens in relation to a CGT asset that is 'taxable Australian property' is not disregarded under subsection 855-10(1). The purpose of the principal asset test in section 855-30 is to define when an entity's underlying value is principally derived from Australian real property (subsection 855-30(1)). Subsection 855-30(2) provides that a membership interest held by the holding entity in the test entity passes the principal asset test if the sum of the market values of the test entity's 'assets' that are taxable Australian real property exceeds the sum of the market values of its 'assets' that are not taxable Australian real property. Subsection 855-30(3) provides that for the purposes of subsection (2), treat an asset of an entity (the 'first entity') that is a membership interest in another entity (the 'other entity') as if it were instead the following two assets: The market value of the TARP asset and the non-TARP asset are worked out according to the table in subsection 855-30(4). Columns 3 and 4 of item 2 of that table refer to the market values of 'assets' of the other entity. The term 'assets' used in the principal asset test in section 855-30 is not defined. Accordingly, the term takes its ordinary meaning relevant to the context. The Macquarie Dictionary (4th edition) gives several alternative meanings of the term 'assets': In the context of section 855-30, the term 'assets' is considered to carry its ordinary commercial or business meaning. Accordingly, in the context of the principal asset test in section 855-30, an asset of an entity is anything recognised in commerce and business as having economic value to the entity at the time of the relevant CGT event for which a purchaser of the entity's membership interests would be willing to pay. An entity's business or commercial assets are those which a prudent vendor and purchaser would identify as having value when setting the price for sale of a membership interest in the entity. These assets would also come within the scope of a due diligence examination undertaken on behalf of a prudent purchaser of such an entity. The purchaser of the membership interests would usually require warranties from the vendor to be included in the sale agreement in respect of the state and existence of the entity's commercial and business assets that comprise the underlying value of the membership interests being acquired. Accordingly, in the context of the principal asset test in section 855-30, 'assets' of an entity include such things as assets not recognised under accounting standards, items of trading stock, traditional and qualifying securities, depreciating assets and the entity's information assets, provided the thing is identified as a business or commercial asset that has economic value to the entity at the time of the relevant CGT event for which a purchaser of the entity's membership interests would be willing to pay. This broad meaning of 'assets' in the context of section 855-30 is supported by: The reference to 'market values' of the entity's assets suggests the identification of things capable of having a market value, that is things recognised in commerce and business as having economic value to the entity at the time of the relevant CGT event for which a purchaser of the entity's membership interests would be willing to pay. If an asset in the context of section 855-30 is identified, it must be determined whether for the purposes of that section the asset's market value should be disregarded under subsection 855-30(5). Subsection 855-30(5) provides that for the purposes of section 855-30, disregard the market value of any asset acquired by the test entity, or by any other entity, if the acquisition was done for a purpose (other than an incidental purpose) that included ensuring that a membership interest in any entity would not pass the principal asset test. Examples of factors that may be appropriate to take into account in relation to the objective test in subsection 855-30(5) are discussed in Practice Statement Law Administration PS LA 2005/24: Application of General Anti-Avoidance Rules . In the present case, Australian resident company A acquired an enforceable right to the payment of money under an inter-corporate loan agreement. The inter-corporate loan is considered to be something recognised in commerce and business as having economic value to Australian resident company A at the time of the CGT event relating to the foreign resident's disposal of shares in Australian resident company A, for which a purchaser of Australian resident company A's membership interests would be willing to pay. Accordingly, the inter-corporate loan is considered to be an asset of Australian resident company A for the purposes of the principal asset test in section 855-30. However, its market value would be disregarded for the purposes of the principal asset test if subsection 855-30(5) applies. Further, the cash received under the inter-corporate loan from Australian resident company A is considered to be something recognised in commerce and business as having economic value to Australian resident company B at the time of the CGT event relating to the foreign resident's disposal of shares in Australian resident company A, for which a purchaser of Australian resident company B's membership interests would be willing to pay. Accordingly, the cash is considered to be an asset of Australian resident company B for the purposes of the principal asset test in section 855-30. However, its market value would be disregarded for the purposes of the principal asset test if subsection 855-30(5) applies.", "Date_of_Decision": "27 February 2012", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 855-10(1) section 855-15 paragraph 855-25(1)(b) section 855-30 subsection 855-30(1) subsection 855-30(2) subsection 855-30(3) subsection 855-30(4) subsection 855-30(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains", "Case_References": "", "Other_References": "Practice Statement Law Administration PS LA 2005/24", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201214", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2004/13"}
{"ATO_ID_Number": "ATO ID 2012/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency: requirement for a foreign resident to use the applicable functional currency to work out the amount of a capital gain or capital loss on indirect Australian real property interests.", "Issue": "For the purposes of subsection 960-61(2) of Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997), does the word 'must' as contained in that subsection require a foreign resident to use the applicable functional currency to work out the amount of a capital gain or capital loss, (if any) as derived from a CGT event in relation to a CGT asset that is an indirect Australian real property interest?", "Decision": "Yes. For the purposes of subsection 960-61(2) of the ITAA 1997, the word 'must' as contained in that subsection does require a foreign resident to use the applicable functional currency to work out the amount of a capital gain or capital loss, (if any) as derived from a CGT event in relation to a CGT asset that is an indirect Australian real property interest.", "Facts": "The taxpayer is a foreign resident company incorporated and resident in an overseas country, which holds a CGT asset that is an indirect Australian real property interest as defined in section 855-25 of the ITAA 1997. The foreign resident company sold its indirect Australian real property interest resulting in the company making a capital gain from a CGT event. For the purposes of section 855-10(1) of the ITAA 1997 the capital gain is not to be disregarded, as an indirect Australian real property interest is taxable Australian property (per item 2 of the table in section 855-15 of the ITAA 1997). The sole or predominant currency in which the foreign resident company kept its accounts at the time of the CGT event was a currency other than Australian currency.", "Reasons_for_Decision": "Detailed Reasoning - Background to section 960-61 of Subdivision 960-D of the ITAA 1997: Section 960-61 of the ITAA 1997 provides that a foreign resident 'must' use the applicable functional currency to work out the amount of a capital gain or capital loss where a CGT event happens in relation to a CGT asset that is an indirect Australian real property interest: if, at the time of the CGT event, the foreign resident keeps its accounts (solely or predominantly) in a currency other than Australian currency. Section 960-61 of the ITAA 1997 states: Section 960-61 Functional currency for calculating capital gains and losses on indirect Australian real property interests 960-61(1) of the ITAA 1997 subsection (2) applies if: (a) you are a foreign resident; and (b) a *CGT event happens in relation to a *CGT asset that is an *indirect Australian real property interest for you; and (c) the sole or predominant currency in which you keep your accounts at the time of the CGT event is a currency other than Australian currency. Section 960-61 of the ITAA 1997 was introduced at the same time as Division 855 of the ITAA 1997 and Subdivision 960-GP of the ITAA 1997 to alleviate compliance costs for foreign residents that realise a capital gain or capital loss on indirect Australian real property interests by directing them to use their applicable functional currency. The Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 4) Bill 2006 (Cth) which inserted Division 855 and Subdivision 960-GP into the ITAA 1997 stated that: What is an indirect real property interest ? 4.30 An indirect Australian real property interest concept has been introduced to strengthen Australia's foreign resident CGT tax base. This ensures that the disposal of an interest in Australian real property is subject to Australian CGT regardless of whether the interest is held directly or indirectly. There are certain conditions to be met in applying the indirect Australian real property interest concept that are intended to reduce compliance costs for foreign residents, while maintaining consistency with Australia's taxing rights under tax treaty practice. This lessens the distorting effect that differing CGT consequences can have on business structures chosen to invest into Australia. ... 4.115 A foreign resident will be able to use the applicable functional currency to calculate the capital gain or capital loss. In order to reduce compliance costs, a foreign resident will not have to make an election to do so. [Schedule 4, items 97 to 99, section 960-61, subsection 960-70(3) and the table in subsection 960-80(1)] | Detailed Reasoning - Is the word 'must' used in an imperative/mandatory or directory/permissive sense?: Ordinarily the word 'must' as contained in subsection 960-61(2) of the ITAA 1997 is used in an imperative sense (that is to indicate a command, obligation, duty, necessity or inevitability, something which is a mandatory or compulsory requirement, prescribing the course to be followed). 'Must is a word of absolute obligation ... It is not merely directory'; Posner v. Collector for Inter-State Destitute Persons (Victoria ) (1947) 74 CLR 461 at 490, per Williams J. 'Prima facie the use of the word \"must\" is intended to be emphatic and to indicate that there is a positive obligation on those affected by the provisions to comply strictly with them'; Deputy Commissioner of Taxation v. Comcorp Australia Ltd . 70 FCR 356; (1996) 14 ACLC 1616; (1996) 21 ACSR 590, per Sheppard J. Consistent with this, in Kosovich v. Mancini (1982) 31 SASR 272 at 275, Millhouse J noted that: It seems to me that \"must be determined\" imposes an obligation which cannot be regarded as directory only. I have looked both in the dictionary and in Maxwell. The appropriate meaning of \"must\" in the Shorter Oxford English Dictionary is: \"expressing necessity: Am (is are) obliged or required to; have (has) to; it is necessary that (I, you, he, it, etcetera) should\". \"In ordinary usage, \"may\" is permissive and \"must\" is imperative\" ( Maxwell on Interpretation of Statutes, 12th ed . ( 1969) p. 324 ). ... If the wish of Parliament had been to make the subsection directory it could easily have done so by using the word \"may\" instead of the word \"must\". As well, one would then have expected the phrase in ( b ) \" when so determined\" to have been \" if so determined\". Effect should be given to what is to be assumed was a conscious use by Parliament of the word \"must\" rather than \"may\". Likewise, Batt J in Re Dalton (1995) 120 FLR 408 at 411 (affirmed by Goldberg J in Carter v. Commissioner of Taxation (2001) 109 FCR 215; 2001 ATC 4260; (2001) 47 ATR 133 and Ryan J in Krampel Newman Partners Pty. Ltd. v. Commissioner of Taxation (2001) 113 FCR 306; 2001 ATC 4473; (2001) 47 ATR 526); observed that: For the reasons which I gave in Keller and Conrad v. City of Sandringham and Ors (unreported, 21 July 1995) the word \"must\" is, in my view, the word of most insistent obligation in the English language, and is, if anything, stronger than the word \"shall\". Batt J had earlier held in Keller, Hans & Conrad, Doris v. City of Sandringham & Ors [Bayside City Council] [1996] 1 VR 356; (1995) 8 VAR 377, that: In my judgment, the time requirement in s 8(2) is mandatory, not directory. I rely both upon the general considerations concerning the Act referred to by Beach J and King J in the cases cited earlier and particularly upon the use of the word \"must\". The use of that word is to be contrasted with the use earlier in the subsection of the word \"may\". The word \"must\" is, in my view, the word of most insistent obligation in the English language. The relevant meaning of it is that given in sense II 3, in the Oxford English Dictionary (2nd ed), where it is described as \"expressing necessity\" in the senses of \"is obliged or required to; has to; it is necessary that\". In the Macquarie Dictionary (revised edition) the relevant meaning is that in sense 1, namely, \"to be bound by some imperative requirement\". In CT Onions, Modern English Syntax, para 131 it is stated that \"must\" expresses \"necessity and obligation\". Quirk and Ors, A Comprehensive Grammar of English Language, para 4-51 and para 4-54 describes it as a modal verb denoting obligation or compulsion. Relevantly, according to the authors' schema, it is a verb of intrinsic and committed modality denoting obligation or compulsion. In Kathleen Ethel Adams and Veteran's Review Board [1992] AATA 281; (1992) 16 AAR 307; the Administrative Appeals Tribunal noted that: 25. The use of the word \"must\" indicates that the provisions are mandatory and not directory. Words alone, of course, will not necessarily categorise statutory injunctions. The courts consider the true effect of the legislation in an endeavour to determine whether a provision is to be regarded as mandatory or obligatory on the one hand, or discretionary or directory on the other. ... 27. Prima facie, affirmative words impose a duty whereas permissive words indicate a discretion. ... The applicant carries the burden of showing that the word \"must\" has a meaning apparently contrary to its grammatical effect. In my view, it has not been demonstrated in this case. As \"prima facie ... permissive or facultative expressions operate according to their ordinary natural meaning\" ( Finance Facilities Pty Limited v. Federal Commissioner of Taxation 127 CLR 106 at 138) so also the opposite inference applies where an element of obligation is imported into the statute by the words used. Subsequently, in Re Rodda and Principal Member, Veterans' Review Board , (2005) 88 ALD 188; [2005] AATA 655; BC200508600 (affirmed by - Rodda v. Repatriation Commission (2006) 156 FCR 227, 93 ALD 541, [2006] FCA 1689, [2007] ALMD 4057); the Administrative Appeals Tribunal quoted the above extracts from the decision in Adams adding that: [12] Counsel for the respondent submitted that the reasoning in Adams , above, is no longer persuasive, having been overtaken by the decision of the High Court in Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355; 153 ALR 490; [1998] HCA 28. [13] In that decision the High Court expressed agreement with the New South Wales Court of Appeal in Tasker v Fullwood [1978] 1 NSWLR 20 ( Tasker ), which criticised the use of a distinction between directory and mandatory requirements in legislation and embraced instead posing the question of whether it was a purpose of the legislation that an act done in breach of the provisions should be invalid. The High Court said at CLR 390-1; ALR 517 that in identifying the purpose \"regard must be held to 'the language of the relevant provision and the scope and object of the whole statute'\". The majority also held (at CLR 389; ALR 515): The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition. | Detailed Reasoning - Consideration: [19] I am mindful of the decision in Adams , above, which has, as yet, not been disturbed by this tribunal and which, if followed, would lead me to affirm the decision under review. [20] However, the application of the principles in Tasker , above, yields, in my view, a similar result. [21] Turning first to the language of the provisions, the repeated use of the word \"must\" in both ss 155AA and 155AC cannot be ignored. In any hierarchy of terms available to be used, that word is the most affirmative. The word \"must\" has a strong grammatical effect - an effect that is stronger than a range of other words that might have been used in the provisions - e.g. shall, will. I must be mindful of the \"fair meaning of its language\". In Ozone Manufacturing Pty. Ltd. v. Deputy Commissioner of Taxation [2006] SASC 91; (2006) 62 ATR 142 at paragraph 35, Debelle J stated that: 35 The word \"must\" is, generally speaking, a word of obligation. It has been described as \"a word of absolute obligation\" in Posner v. Collector for Interstate Destitute Persons (Victoria ) (1946) 74 CLR 461 per Williams J at 490; Chun Wang v. Minister for Immigration & Multicultural Affairs (1997) 71 FCR 386 at 391. It was called \"a word of imperative obligation\" in R v. Garner [1994] 1 VR 400 at 402. In certain contexts, it might have a directory as distinct from a mandatory operation, a distinction which has been criticised as elusive: Tasker v. Fullwood [1978] 1 NSWLR 20 at 23-24, affirmed in Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355 at [93]. Plainly, the question whether \"must\" is a word of obligation and, if it is, the force of the obligation will depend on the statutory context and the nature of the obligation in the context in which the obligation is to be performed. In this context, the word \"must\" can only be reasonably understood to mean that it imposes an obligation upon the Commissioner to pay to a taxpayer any amount due to the taxpayer under a taxation law. | Detailed Reasoning - Context, language, scope and object of the statute: Applying the common law cited above, an imperative or mandatory construction (as opposed to a permissive or enabling construction) of the word 'must' in subsection 960-61(2) of the ITAA 1997 is correct, unless an absurdity, inconvenient consequence or improbable intention would result from such a construction (per Dixon J in Re Davis (1947) 75 CLR 409). Much will depend on the context in which the word is used (see Director of Public Prosecutions v. George [2008] SASC 330 at paragraphs 186-187, 191). Hence, 'each statute, rule or regulation must be looked at in the light of its own language and of its particular scope and object'; per Hope JA in Hatton v. Beaumont [1977] 2 NSWLR 211. 'The only true guide to the statutory intention is to be found in the language of the relevant provision and the scope and object of the whole statute'; per Tasker v Fullwood [1978] 1 NSWLR 20. In the Full High Court decision in Finance Facilities Pty. Ltd. v. Federal Commissioner of Taxation (1971) 127 CLR 106; (1971) 2 ATR 573; 71 ATC 4225, Windeyer J stated that: The question, which comes back to the words \"may allow\", is not to be solved by concentrating on the word \"may\" apart from its context. Still less is the question answered by saying that \"may\" here means \"shall\". While Parliament uses the English language the word \"may\" in a statute means may. ... This does not depend on the abstract meaning of the word \"may\" but of whether the particular context of words and circumstances make it not only an empowering word but indicate circumstances in which the power is to be exercised - so that in those events the \"may\" becomes a \"must\". Illustrative cases go back to 1693: R. v. Barlow , Carth. 293. Today it is enough to cite Julius v. The Lord Bishop of Oxford (1879), 5 App. Cas. 214; and add in this Court Ward v. Williams (1955), 92 C.L.R. 496 at pp. 505-506. (See also Commissioner of State Revenue (Vic ) . v Royal Insurance Australia Ltd . [1994] HCA 61; 94 ATC 4960; (1994) 182 CLR 51 and Cumins v. DC of T 2007 ATC 5459; (2007) 68 ATR 39.) 'However, if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning', per Gibbs CJ in Cooper Brookes (Wollongong) Pty. Limited v. Federal Commissioner of Taxation 81 ATC 4292; 11 ATR 949. As the High Court stated per Hayne, Heydon, Crennan and Kiefel JJ in Alcan (NT) Alumina Pty. Ltd. v. Commissioner of Territory Revenue (NT ) [2009] HCA 41; 2009 ATC 20-134: 47. ... the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy. | Detailed Reasoning - Statutory context of subsection 960-61(2) of the ITAA 1997: The language used in subsection 960-70(3A) of the ITAA 1997 and item 6 of subsection 960-80(1) of Subdivision 960-D of the ITAA 1997 is relevant in providing the statutory context of subsection 960-61(2) of the ITAA 1997, as they were introduced into the Subdivision together. Subsection 960-70(3A) of the ITAA 1997 states: If subsection 960-61(2) of the ITAA 1997 applies, your applicable functional currency for the purposes of that subsection is the sole or predominant currency in which you keep your accounts at the time of the * CGT event. Item 6 of subsection 960-80(1) of the ITAA 1997 states: Item 6 of subsection 960-80(1) of the ITAA 1997 confirms that where a foreign resident makes a capital gain or capital loss from a CGT event in relation to an indirect Australian real property interest, the amount of the capital gain or capital loss is required to be worked out in the applicable functional currency - with amounts not in the applicable functional currency having to be translated into the applicable functional currency. Hence, an imperative interpretation fulfils both the stated purpose of parliament, the statutory context of subsection 960-61(2) of the ITAA 1997 and the ordinary meaning of the words used. No absurdity, inconvenient consequence or improbability results from an imperative construction of subsection 960-61(2) of the ITAA 1997. Consequently, there is nothing to necessitate an alternative construction of the words. The use of the word 'must' in subsection 960-61(2) of the ITAA 1997 is a confirmation that the procedures set forth in section 960-61 of the ITAA 1997 (and item 6 of subsection 960-80(1) of the ITAA 1997) are to be followed strictly; see Lend Lease Real Estate Investments Ltd. v. GPT Re Ltd . [2006] NSWCA 207 at paragraph 40, per Spigelman CJ. Accordingly, the foreign resident company is required under subsection 960-61(2) of the ITAA 1997 to work out its capital gain from the disposal of a CGT asset that is an indirect Australian real property interest, using its applicable functional currency as defined in subsection 960-70(3A) of the ITAA 1997.", "Date_of_Decision": "30 April 2012", "Year_of_Income": "year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 855 subsection 855-10(1) section 855-15, Table Item 2 section 855-25 section 960-61 subsection 960-61(2) subsection 960-70(3A) subsection 960-80(1), Table Item 6 subdivision 960-GP subdivision 960-D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/29", "Subject_References": "Applicable functional currency Capital Gains Tax Functional currency Functional currency choice International Tax Non Resident Entities Statutory Interpretation", "Case_References": "Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41 2009 ATC 20-134 (2009) 73 ATR 256", "Other_References": "P. St. J Langan, (1969) Maxwell on Interpretation of Statutes, 12th edition Explanatory Memorandum to Tax Laws Amendment (2006 Measures No. 4) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201235", "Unmatched_Content": "960-61(2) You must use the *applicable functional currency to work out the amount of your *capital gain or *capital loss (if any). | (a) you are a * foreign resident who makes a *capital gain or *capital loss from a *CGT event in relation to an asset that is an * indirect Australian real property interest; and | (a) first, for the purpose of working out, for the income year, the amount of your capital gain or capital loss from the CGT event, an amount that is not in the applicable functional currency is to be translated into the applicable functional currency; and | (b) you are required by subsection 960-61(2) to work out the amount of your capital gain or capital loss in the * applicable functional currency. | (b) second, the amount of the capital gain or capital loss is to be translated into Australian currency. | Keywords Applicable functional currency Capital Gains Tax Functional currency Functional currency choice International Tax Non Resident Entities Statutory Interpretation"}
{"ATO_ID_Number": "ATO ID 2013/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Conduit foreign income: impairment of shares in a foreign company that paid a non-portfolio dividend", "Issue": "Is an impairment loss included in the income statement of an Australian company an 'expense reasonably related' to a dividend received from the company's wholly owned foreign company for the purposes of subsection 802-30(5) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. An impairment loss included in the income statement of an Australian company is an 'expense reasonably related' to the dividend received from the wholly owned foreign company for the purposes of subsection 802-30(5) of the ITAA 1997.", "Facts": "The taxpayer (Aus Co) is an Australian resident company for Australian income tax purposes. Aus Co acquired 100% of the shares in a foreign resident company (For Co). These shares are accounted for at cost in Aus Co's income statement as allowed by Australian Accounting Standard AASB 127 'Consolidated and Separate Financial Statements', subject to impairment under Australian Accounting Standard AASB 136 'Impairment of Assets' (AASB 136). Immediately after the acquisition, For Co paid a dividend to Aus Co. This dividend was paid following the sale of assets held by For Co prior to the date of acquisition. This dividend payment substantially reduced the value of the shares in For Co and led to an impairment of these shares in accordance with AASB 136. The dividend income and the impairment loss were recognised in Aus Co's income statement for the relevant period. For Australian income tax purposes the dividend paid by For Co is non-assessable non-exempt pursuant to section 23AJ of the Income Tax Assessment Act 1936 (ITAA 1936) (the section 23AJ dividend). Aus Co cannot deduct the impairment loss from its assessable income.", "Reasons_for_Decision": "Summary: Calculation of Conduit Foreign Income (CFI) The amount of an entity's CFI at a particular point in time is calculated in accordance with sections 802-30 to 802-55 of the ITAA 1997. The amount of foreign source income that will be included in an entity's CFI is calculated in accordance with subsections 802-30(1) through to 802-30(7) of the ITAA 1997. Subsection 802-30(1) of the ITAA 1997 includes in the calculation of an entity's CFI the amount of ordinary income and statutory income derived by the entity that has been, is or will be included in an income statement or similar statement of the entity or of another entity and that would not be included in the entity's assessable income if the entity were a foreign resident at the relevant time. Subsection 802-30(2) of the ITAA 1997 reduces the subsection 802-30(1) amount by any part of that amount that is, or will be included in the entity's assessable income. The section 23AJ dividend received by Aus Co is included in its income statement and will be included in the calculation of Aus Co's CFI under subsection 802-30(1) of the ITAA 1997. As the section 23AJ dividend will not be included in Aus Co's assessable income, the amount of the dividend will not be reduced by operation of subsection 802-30(2) of the ITAA 1997. Subsections 802-30(3) and (4) do not apply. Subsection 802-30(5) of the ITAA 1997 requires that the amount remaining after the application of subsections 802-30(1) - (4) of the ITAA 1997 be reduced by 'any of the entity's expenses that are reasonably related to that amount, except expenses the entity has deducted or can deduct under this Act'. It is therefore necessary to determine whether Aus Co has any 'expenses' which are 'reasonably related' to the dividend it has received from For Co. Meaning of the term 'expenses' in subsection 802-30(5) The term 'expenses' is not defined in the legislation. Therefore, the term is interpreted to have its ordinary meaning in the context of the legislative provision in which it appears (see for example Project Blue Sky v. ABA [1998] HCA 28, at paragraph 69, and Stevens v. Kabushiki Kaisha Sony Computer Entertainment [2005] HCA 58 at paragraph 124). The specified rationale for subsection 802-30(5) of the ITAA 1997 is to ensure that the amount included in an entity's CFI represents an amount actually available for distribution. In explaining this, paragraph 5.49 of the Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005 (the EM) states that the expenses to be included are those expenses that would 'normally' be taken into account in preparing the entity's income statement. That paragraph further provides: Expenses should reduce the amount of conduit foreign income because the profit available for distribution that is sourced from foreign income is reduced. Correctly reducing the amount of conduit foreign income prevents other types of income being distributed as an unfranked distribution declared to be conduit foreign income. In identifying the amount to be included in the calculation of an entity's CFI, subsection 802-30(1) of the ITAA 1997 relies on a combination of tax and accounting concepts, but ultimately requires that the amount will be included in an income statement or similar statement of the entity. Thus, the EM, in reference to this latter condition in subsection 802-30(1) provides at paragraph 5.24: This condition is based on accounting concepts and is used as a mechanism to restrict conduit foreign income to amounts of distributable profits. It is appropriate to use accounting concepts because these determine the actual amounts a company may distribute. Thus, the intent of the CFI calculation is to arrive at the amount of net foreign income that is available for distribution, availability being determined by the accounting profit. Therefore, although there is no explicit reference to an income statement in connection with the term 'expenses' in subsection 802-30(5) of the ITAA 1997, consideration of the context of the subsection makes it appropriate to refer to the expenses recorded on the income statement or similar statement of an entity. An impairment loss is an expense recognised on an income statement. AASB 136 provides that if the 'recoverable amount' of an asset is less than its 'carrying amount', the carrying amount of that asset shall be reduced to its recoverable amount. This reduction is referred to as an 'impairment loss' (see paragraph 59 of AASB 136). That reduction appears on the income statement as an expense and operates to reduce the accounting profit. Therefore the impairment loss recorded against the carrying amount of the shares in For Co will be an expense for the purposes of subsection 802-30(5) of the ITAA 1997. Since the impairment loss is an expense under subsection 802-30(5) of the ITAA 1997 that cannot be deducted under any provision of the Act, the next step is to determine whether the impairment loss is 'reasonably related' to the section 23AJ dividend received by Aus Co. Meaning of the term 'reasonably related' in subsection 802-30(5) The term 'reasonably related' was considered by the High Court in Airservices Australia v. Canadian Airlines International Ltd (1999) 202 CLR 133. McHugh J said, at paragraph 245: The concept of \"reasonableness\" is a category of indeterminate reference. Its application in a given factual situation cannot depend upon a logical formulation... The requirement that the charges be reasonably related to the expenses as described above at least requires that there be some rational relationship between the charges and the expenses. But once this rather low threshold is met, the degree of closeness of the relationship which is required in order for the statutory requirement to be satisfied cannot be described in the abstract. It depends on the application, to the circumstances of a particular case, of the fact-value complex that the word \"reasonably\" invokes. Important in that assessment are the purposes or objects of [the Act]. Whether the impairment loss (the expense) is reasonably related to CFI will therefore depend on the circumstances in which it was required to be recognised. In the present case the dividend paid by For Co is paid out of profits realised upon the sale of assets it held prior to its acquisition by Aus Co. The payment of the dividend resulted in a reduction of the carrying amount of the shares in For Co to its recoverable value such that, in accordance with AASB 136, Aus Co was required to recognise an impairment loss in its income statement. There is therefore a rational relationship between the impairment loss (the expense) and the section 23AJ dividend. Moreover, as the expense would not have been recognised but for the payment of the dividend, impacting on Aus Co's reported profit, that relationship is reasonable both in terms of the degree of connection between the expense and the dividend and in the context of a provision directed at ascertaining net foreign income available for distribution. Therefore, given the particular factual circumstances of the case being considered, the impairment loss, being a relevant expense, is considered to be reasonably related to the section 23AJ dividend received from For Co, and will be included in the calculation of Aus Co's CFI under subsection 802-30(5) of the ITAA 1997. This means the amount of foreign source income included in Aus Co's CFI pursuant to subsection 802-30(6) will reflect a reduction by the amount of the impairment loss.", "Date_of_Decision": "18 January 2013", "Year_of_Income": "year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 802-30 subsection 802-30(1) subsection 802-30(2) subsection 802-30(3) subsection 802-30(4) subsection 802-30(5) subsection 802-30(6) subsection 802-30(7) section 802-35 section 802-40 section 802-45 section 802-50 section 802-55", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Conduit foreign income Dividend Expense Impairment", "Case_References": "Airservices Australia v Canadian Airlines International Ltd (2000) 202 CLR 133 [1999] HCA 62 (2000) 43 ATR 246", "Other_References": "Australian Accounting Standard AASB 127 Australian Accounting Standard AASB 136 Explanatory Memorandum to the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Bill 2005", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20136", "Unmatched_Content": "Keywords Conduit foreign income Dividend Expense Impairment"}
{"ATO_ID_Number": "ATO ID 2009/82", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Life Assurance Company: calculation of passive income - ceases to carry on life assurance business before the end of the statutory accounting period", "Issue": "Can the passive income of a life assurance company be calculated under subsection 446(2) of the Income Tax Assessment Act 1936 (ITAA 1936) where it ceases to carry on life assurance business before the end of the statutory accounting period?", "Decision": "Yes. The passive income of a life assurance company can be calculated under subsection 446(2) of the ITAA 1936 where it ceases to carry on life assurance business before the end of the statutory accounting period.", "Facts": "The taxpayer is carrying on business as a life assurance company in Australia. The taxpayer owns all the shares in a company located in a foreign country which also carries on business as a life assurance company (foreign life assurance company) in that foreign country. The foreign life assurance company is a controlled foreign company (CFC) under section 340 of the ITAA 1936. The foreign life assurance company ceased its life assurance business before the end of the statutory accounting period by transferring its entire life assurance business to another company. The foreign life assurance company was subsequently deregistered after the statutory accounting period ended.", "Reasons_for_Decision": "Summary: Subsection 446(1) of the ITAA 1936 defines 'passive income' of a company of a statutory accounting period for the purpose of the active income test under Part X of the ITAA 1936. Special rules are contained in subsection 446(2) of the ITAA 1936 which provide concessional treatment to Australian taxpayers who are shareholders of foreign life assurance companies which are CFC's. The concessional treatment reduces the amount of passive income that may be attributed to those shareholders under Part X of the ITAA 1936. The Explanatory Memorandum amending subsection 446(2) of the ITAA 1936 stated that the intention of the legislation was to: ...exclude from a company's passive income only the income derived on assets that are referable to insurance policies owned by non-residents that are not related to the company. .............. In the case of life assurance companies, the formula contained in subsection 446(2) reduces the passive income of a life assurance CFC by the proportion of its calculated liabilities that relate to policies owned by unrelated non-residents. ........... Thus, only the passive income derived from assets that are employed to meet the calculated liabilities of policy holders who are associates of the company or Australian residents is passive income for the purposes of Part X of the Act. Subsection 446(2) of the ITAA 1936 requires that the passive income of a life assurance company of a statutory accounting period be calculated using the formula given in the subsection. Section 319 of the ITAA 1936 defines the statutory accounting period of a company as each period of 12 months. On that basis, passive income of the company needs to be calculated on a 12 month basis if the company is in existence for the 12 months. In this case, the company ceased its business before the end of the statutory accounting period and therefore does not satisfy the 12 month requirement. However, the formula in subsection 446(2) of the ITAA 1936 is silent on the calculation of the passive income where the period is less than 12 months. The 'concessional treatment' provided under subsection 446(2) of the ITAA 1936 reduces the amount of passive income that may be attributed to the shareholders under the CFC legislation. The policy intention of the subsection can only be achieved in this case by applying the formula to the period when the company has carried on a life assurance business notwithstanding the fact that the statutory accounting period is less than 12 months. The Commissioner considers that based on the legislative intention which is reflected in the Explanatory Memorandum, the passive income of the life assurance company should be given the 'concessional treatment' provided under the subsection 446(2) where the company ceased its life assurance business before the end of the statutory accounting period. Accordingly, the passive income of the foreign life assurance company can be calculated under subsection 446(2) of the ITAA 1936 where it ceases to carry on the life assurance business before the end of the statutory accounting period.", "Date_of_Decision": "13 July 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 section 319 section 340 subsection 446(1) subsection 446(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Controlled foreign companies Foreign active income test International tax Passive foreign income Life Assurance", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Act (No. 1) 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200982", "Unmatched_Content": "Keywords Controlled foreign companies Foreign active income test International tax Passive foreign income Life Assurance"}
{"ATO_ID_Number": "ATO ID 2011/89", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency: translation requirements for a depreciating asset where an entity withdraws its 'applicable functional currency' choice", "Issue": "Is the 'adjustable value' amount of a depreciating asset subject to the diminishing value method (DMV) under section 40-70 of the Income Tax Assessment Act 1997 (ITAA 1997), required to be translated from the currency that was the 'applicable functional currency' into Australian currency (AUD) under section 960-50 of Subdivision 960-C of the ITAA 1997 - immediately after the time the 'applicable functional currency' choice ceases to have effect and based on the relevant exchange rate at that time?", "Decision": "Yes. Where an 'applicable functional currency' choice ceases to have effect, the 'adjustable value' amount of a depreciating asset subject to the DMV is required to be translated into AUD under section 960-50 of the ITAA 1997 - immediately after the time the 'applicable functional currency' choice ceases to have effect and based on the relevant exchange rate at that time. It is this 'adjustable value' amount translated into AUD that will represent the 'opening adjustable value' of the depreciating asset in order to determine the decline in value of the depreciating asset using the DMV for the following income year.", "Facts": "The entity is an Australian resident who is required to prepare financial reports under section 292 of the Corporations Act 2001 (CA 2001). The entity chose the 'United States dollar' (USD) to be its 'applicable functional currency' pursuant to item 1 of the table in subsection 960-60(1) of Subdivision 960-D of the ITAA 1997, with the choice taking effect from 1 July 2003. Accordingly, the entity was required to translate all of its 'pre-choice' amounts into USD on 1 July 2003, under the two step translation rule in item 1 of subsection 960-85(1) of Subdivision 960-D of the ITAA 1997. These 'pre-choice' amounts were amounts attributable to an event that happened, or a state of affairs that came into existence, at a time before the functional currency choice took effect, that is, before 1 July 2003. Included in these amounts translated into USD was the 'adjustable value' amount of a depreciating asset (using the DMV to work out the decline in value) as at 30 June 2003. Subsequent to the effective time of the functional currency choice, the entity translated all amounts that were denominated in a currency other than USD into its 'applicable functional currency' of USD, under item 1 of subsection 960-80(1) of Subdivision 960-D of the ITAA 1997. Hence, as at 31 December 2010, all of the entity's amounts for income tax purposes were either denominated in, or else have been translated into, USD. The entity will withdraw the USD as its 'applicable functional currency' choice in writing pursuant to subsections 960-90(1) and 960-90(2) of the ITAA 1997, no later than 31 December 2010. This withdrawal will take effect from 1 January 2011 pursuant to paragraph 960-60(3)(a) and item 1 of subsection 960-90(1) of Subdivision 960-D of the ITAA 1997. The entity has not made a choice under subsection 960-60(1) of Subdivision 960-D of the ITAA 1997 to use another foreign currency as its 'applicable functional currency'. From 1 January 2011, the entity will keep its 'accounts' within the meaning of section 960-70 of Subdivision 960-D of the ITAA 1997, in AUD.", "Reasons_for_Decision": "Summary: The effect of a withdrawal of the 'applicable functional currency' choice under section 960-90 of Subdivision 960-D where no choice to use another 'applicable functional currency' has been made. The entity has withdrawn its 'applicable functional currency choice' with effect from 1 January 2011. At this time, all of the entity's amounts for income tax purposes will be in USD and hence will all be amounts in a 'foreign currency'. The functional currency translation rules contained in section 960-80 and section 960-85 of Subdivision 960-D of the ITAA 1997 cannot be used on or after 1 January 2011 (being the effective time of the withdrawal of the functional currency choice). Subsection 960-50(1) of Subdivision 960-C of the ITAA 1997 requires that, for the purposes of this Act, an amount in a 'foreign currency' is to be translated into Australian currency. Central to the operation of section 960-50 of the ITAA 1997 is a 'transaction, event or thing that involves an amount in a foreign currency', occurring on or after the 'applicable commencement date' within the meaning of Division 775 of the ITAA 1997. Specifically, section 960-55 of Subdivision 960-C of the ITAA 1997 provides that section 960-50 of the ITAA 1997 applies to an 'event' that involves an 'amount in a foreign currency' and occurs on or after the 'applicable commencement date' (in this case on or after 1 July 2003). The withdrawal by the entity of its functional currency choice under subsection 960-90(1) of Subdivision 960-D of the ITAA 1997 constitutes an 'event' that involves an amount in a 'foreign currency' (USD). Hence, the requirements stipulated in section 960-55 of the ITAA 1997 are met. Therefore, once the withdrawal of the functional currency choice has taken effect, the entity must immediately begin to use the core foreign currency translation rules contained in section 960-50 of the ITAA 1997. It follows that all of the entity's amounts for income tax purposes as at 1 January 2011 must be translated from USD to AUD, in accordance with the translation rules contained in section 960-50 of the ITAA 1997 (including subsection 960-50(6)). | Detailed Reasoning - Special translation rules in subsection 960-50(6) of Subdivision 960-C (as modified by the Amended Regulations): Subsection 960-50(6) of Subdivision 960-C of the ITAA 1997 sets out the special translation rules, (as modified by the by the Income Tax Assessment Amendment Regulations 2005 (No. 2) (the Amended Regulations), refer to subsection 960-50(7) of the ITAA 1997). Notably, Regulation 960-50.01 adds item 11A to the table in subsection 960-50(6) of the ITAA 1997, which specifies that an amount (other than an amount of a receipt or a payment) to which none of the above items applies is to be translated into Australian currency at an exchange rate that is reasonable having regard to the circumstances. | Detailed Reasoning - Translation principles outlined in Taxation Ruling TR 2007/5: Although Taxation Ruling TR 2007/5 primarily considers the operation of sections 960-80 and 960-85 of Subdivision 960-D of the ITAA 1997 (which deal with translations to the 'applicable functional currency'), many of the principles outlined in TR 2007/5 are useful for the purposes of section 960-50 of the ITAA 1997 (including for translations from the foreign currency that was the 'applicable functional currency' to AUD). Notably, paragraph 23 and footnote 24 of TR 2007/5 draw attention to subsection 960-80(6) of the ITAA 1997, which requires that, when translating an amount from a foreign currency into the entity's 'applicable functional currency', the special translation rules in subsection 960-50(6) (as modified by the Amended Regulations) apply as if every reference to Australian currency was a reference to the 'applicable functional currency'. Further, in general, the translations that are required under subsection 960-50(1) of the ITAA 1997 as a result of the withdrawal of an 'applicable functional currency' choice, are equivalent to the translations required under section 960-85 of the ITAA 1997 upon the making of an initial (or subsequent) 'applicable functional currency' choice. While section 960-85 stipulates a two step translation process - for all post 30 June 2003 amounts where a previous functional currency choice has not been made, the first step of the two step translation process under section 960-85 will have, in effect, already taken place under section 960-50 of Subdivision 960-C of the ITAA 1997. In essence, the first step of the two step translation process under section 960-85 of the ITAA 1997 has effect only where an amount has not been translated to Australian currency in a way that accords with Subdivision 960-C of the ITAA 1997 (and therefore with section 960-85). An example would be traditional securities acquired before 1 July 2003 (when the general conversion rule was contained in former subsection 20(1) of the Income Tax Assessment Act 1936 (ITAA 1936)) and which were still on hand at the effective time of a functional currency choice. See Example 2 at paragraphs 54-62 of TR 2007/5. Hence, in practice, only the second step of the two step translation process under section 960-85 of the ITAA 1997 will generally be of any real effect. This is highlighted in paragraphs 103 to 107 of TR 2007/5. See also paragraphs 136 and 145 to 147 of TR 2007/5. Taxation Ruling TR 2007/5 also specifically considers the treatment of depreciating assets using the DMV in the context of the 'applicable functional currency' translation rules in section 960-85 of Subdivision 960-D of the ITAA 1997. TR 2007/5 notes that: Depreciating assets 121. This may be contrasted with the calculation of a deduction for decline in value of a depreciating asset using the 'diminishing value method' under section 40-70 - where the asset has been acquired by an entity in an income year in which Australian currency was the required unit of account for income tax purposes. Where such an entity subsequently chooses to use the 'applicable functional currency' to work out its taxable income or tax loss, the application of the two step translation in section 960-85 potentially becomes an issue. 122. The first step of the calculation of the decline in value deduction under subsection 40-70(1) is to work out the 'base value'. This is defined in the subsection (for a year after the income year in which the asset's 'start time' occurs), as 'the sum of its *opening adjustable value for that year and any amount included in the second element of its cost for that year'. 123. As previously noted, subsection 40-85(2) prescribes that the 'opening adjustable value' of a depreciating asset for the current year will be its 'adjustable value 'at the end of the previous income year'. 124. Under subsection 40-85(1) the 'adjustable value' at the end of the previous income year, (assuming that the asset has prior to that time, been in use or installed ready for use), is the 'adjustable value' at the start of the previous income year plus any 'second element of cost' amount for that year - and less the decline in value for that (previous income) year. 125. Subsection 40-85(2) then applies again to say that the 'adjustable value' at the start of the previous income year, was the asset's 'adjustable value' at the end of the income year before the previous income year, and so on. 126. As a result, a strict application of the 'elements rule' in subsection 960-80(4) would lead back to the amount identified in paragraph 40-85(1)(a), being the 'adjustable value' of the depreciating asset at the time when it had not yet been used or installed ready for use - that is, its cost. 127. Based on the above it can be seen that what is the relevant amount and 'event time' for the purposes of section 960-85 in this case, will depend on how far back to extend the operation of the 'elements rule' - that is, whether to extend its operation back only to an identification of the first element for the previous year, or back further to the cost of the asset. 128. The correct approach under section 960-85 is to identify the 'amount' that is most relevant to the calculation of the appropriate annual net amount - and translate that 'amount' to the 'applicable functional currency'. The most obvious and practical application of the 'elements rule' in a case of this nature then, is to extend it back only so far as the identification of the 'adjustable value' of the asset at the end of the previous year - as this is the latest amount relevant to the calculation of the decline in value deduction not arising in the year the 'applicable functional currency' choice is to take effect. 129. The question then arises as to what 'event or state of affairs' the relevant amount of 'adjustable value' is 'attributable to'. The amount has its origins in sections 40-70 and 40-85, and is mainly a statutory concept. It is appropriate to examine those provisions to identify the most relevant 'event or state of affairs' which has caused the amount. 130. It is considered that the fact that the statutory description of the amount is one that relates to the monetary value for decline in value purposes at the end of the previous year, is a telling pointer in support of identifying that time as the 'event time', for the purposes of section 960-85. 131. Accordingly, in such a case, the operation of the two step translation in section 960-85 would mean: (a) the closing 'adjustable value' of the asset at the end of the previous income year in Australian currency is translated to Australian currency on a one to one basis; and then (b) that amount is translated to the 'applicable functional currency' at the exchange rate applying at the beginning of the current year, being the time the choice to use this currency takes effect. The appropriate translation treatment for the 'adjustable value' of a depreciating asset using the DMV where there is a withdrawal of 'applicable functional currency' choice under section 960-90 of Subdivision 960-D and no choice to use another 'applicable functional currency' has been made As mentioned previously, the 'amounts' in the accounts as at 31 December 2010 include an amount representing the 'adjustable value' of a depreciating asset using the DMV. Like all other foreign currency denominated amounts, this 'adjustable value' amount must be translated from (the previous 'applicable functional currency' of) USD to AUD for income tax purposes, under section 960-50 of Subdivision 960-C. Applying the principles outlined in TR 2007/5 means that the 'adjustable value' amount of the depreciating asset subject to the DMV in USD at the end of the previous year would be required to be translated to AUD at the relevant exchange rate applying at that time, being the time the choice to use the 'applicable functional currency' ceases to have effect. The 'adjustable value' of the depreciating asset in USD as at 31 December 2010, upon translation to AUD, will become the 'opening adjustable value' of the depreciating asset in AUD as at 1 January 2011. | Detailed Reasoning - Accounting Standard AASB 121 - change in functional currency: The above approach is consistent with Accounting Standard AASB 121 The Effects of Changes in Foreign Exchange Rates , which applies to annual reporting periods beginning on or after 1 January 2005. Paragraphs 35 and 37 of Accounting Standard AASB 121 provide that: Change in Functional Currency 35 When there is a change in an entity's functional currency, the entity shall apply the translation procedures applicable to the new functional currency prospectively from the date of the change . ... 37 The effect of a change in functional currency is accounted for prospectively. In other words, an entity translates all items into the new functional currency using the exchange rate at the date of the change. The resulting translated amounts for non-monetary items are treated as their historical cost. In this regard, the withdrawal by the entity of its 'applicable functional currency' choice while making no choice to use another 'applicable functional currency', is equivalent to a change in the entity's functional currency for income tax purposes from USD to AUD.", "Date_of_Decision": "21 September 2011", "Year_of_Income": "30 June 2012", "Legislative_References": "Corporations Act 2001 section 292", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/222", "Subject_References": "Accounts Applicable functional currency Functional currency choice Functional currency translation", "Case_References": "", "Other_References": "Accounting Standard AASB 121", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201189", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Accounts Applicable functional currency Functional currency choice Functional currency translation"}
{"ATO_ID_Number": "ATO ID 2010/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Classification of a Korean Hapja Hoesa for Australian income tax purposes", "Issue": "Is the Korean Hapja Hoesa a company pursuant to the definition within section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The Korean Hapja Hoesa is a company within the meaning of section 995-1 of the ITAA 1997.", "Facts": "The Hapja Hoesa is a legal form of corporation, which may be established under the Korean Commercial Act (Commercial Act). The Hapja Hoesa is also a private equity fund which is regulated by the Korean Indirect Investment Asset Management Business Act (IIAMBA). In essence, the Hapja Hoesa is an unlimited investment specialty vehicle that is established for the purpose of investing the assets of the entity into the shares or equity of other entities - with the purpose of increasing the value of such entities through participation in the management of the entities or improving the business structure or control structure of the entities. The Hapja Hoesa may be used only for private equity investment purposes. Currently under Korean legislation, a Hapja Hoesa has the following features: The articles of incorporation of this particular Hapja Hoesa include the following terms:", "Reasons_for_Decision": "Summary: 'Company' is defined in section 995-1 of the ITAA 1997 as: but does not include a partnership or a non-entity joint venture. As the term 'body corporate' is not defined in Australia's income tax legislation, the ordinary meaning of the term applies. The Butterworths Concise Australian Legal Dictionary Second edition defines a body corporate as 'an artificial legal entity having separate legal personality'. Being an entity that was created by registration, and that has separate legal personality, the Hapja Hoesa is a 'body corporate'. Consequently, it will be a company under paragraph (a) of the definition of 'company' in section 995-1 of the ITAA 1997, providing that it is not also a partnership. Section 995-1 of the ITAA 1997 defines 'partnership' as: The Hapja Hoesa has some features commonly associated with a partnership, and some features associated with a company. The following features favour characterisation of this particular Hapja Hoesa as a company. The features which favour characterisation of this Hapja Hoesa as a partnership include: The predominance of characteristics favours classification as a company rather than a partnership. Further, as the Hapja Hoesa does not have partners who carry on its business or who receive income jointly, it is not a partnership for the purpose of the definition of 'partnership' or 'company' in section 995-1 of the ITAA 1997. As the Hapja Hoesa is a body corporate and not a partnership, it follows that it is a company within the meaning of section 995-1 of the ITAA 1997.", "Date_of_Decision": "28 January 2010", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bodies corporate Companies International tax Korea Partnerships Foreign hybrids Foreign hybrid limited partnership Foreign hybrid company", "Case_References": "", "Other_References": "Butterworths Concise Australian Legal Dictionary Second edition Commercial Act (Korea) Indirect Investment Asset Management Business Act (Korea)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201027", "Unmatched_Content": "Keywords Bodies corporate Companies International tax Korea Partnerships Foreign hybrids Foreign hybrid limited partnership Foreign hybrid company"}
{"ATO_ID_Number": "ATO ID 2010/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign hybrid company: US limited liability company", "Issue": "Can a single member Limited Liability Company (LLC) formed in the United States of America (US) be a foreign hybrid company under Division 830 of the Income Tax Assessment Act 1997 ( ITAA 1997) and therefore be treated as a partnership for income tax purposes?", "Decision": "Yes. A single member US LLC can be a foreign hybrid company under Division 830 of the ITAA 1997 and is therefore treated as a partnership for income tax purposes.", "Facts": "Foreign Co is a LLC formed in the US and has a sole member. Foreign Co is a 'company' as defined in subsection 995-1(1) of the ITAA 1997. Foreign Co is not a resident of any foreign country for the purposes of paragraph 830-15(1)(b) of the ITAA 1997. Foreign Co is not an Australian resident for tax purposes at any time during the income year. Disregarding Division 830 of the ITAA 1997, in relation to the same income year of another taxpayer (the taxpayer), Foreign Co is a CFC (within the meaning of Part X of the Income Tax Assessment Act 1936) at the end of a statutory accounting period (within the meaning of Part X) that ends in the income year. Disregarding Division 830 of the ITAA 1997, the taxpayer is an attributable taxpayer (within the meaning of Part X) in relation to Foreign Co at the end of the statutory accounting period (within the meaning of Part X) with an attribution percentage greater than nil. Foreign Co is not treated as a partnership for US income tax purposes. Foreign Co has not elected to be treated as a corporation for US income tax purposes. At all times during the income year Foreign Co is an eligible entity that is disregarded as an entity separate from its owner for US income tax purposes. A reference to 'the Acts' is a reference to those as stated in the definition of 'this Act' in subsection 995-1(1) of the ITAA 1997.", "Reasons_for_Decision": "Summary: Division 830 of the ITAA 1997 provides for foreign hybrids, that are treated as flow-through entities for the purposes of foreign tax, but treated as companies for Australian income tax purposes, to be treated as partnerships for the purposes of the Acts (section 830-1 of the ITAA 1997). The expression 'foreign hybrid' is defined in section 830-5 of the ITAA 1997 to mean a foreign hybrid limited partnership or a foreign hybrid company. Paragraphs 830-15(1)(a) to (d) of the ITAA 1997 set out the requirements for a company to qualify as a foreign hybrid company. It states that: A company is a foreign hybrid company in relation to an income year if: (a) at all times during the income year when the company is in existence, the partnership treatment requirements for the income year in subsection (2) or (3) are satisfied; and (b) at no time during the income year is the company, for the purposes of a law of any foreign country that imposes *foreign income tax (except *credit absorption tax or *unitary tax) on entities because they are residents of the foreign country, a resident of that country; and (c) at no time during the income year is the company an Australian resident; and (d) disregarding this Division, in relation to the same income year of another taxpayer: (i) the company is a *CFC at the end of a *statutory accounting period that ends in the income year; and (ii) at the end of the statutory accounting period, the taxpayer is an *attributable taxpayer in relation to the CFC with an *attribution percentage greater than nil. According to paragraph 830-15(2)(a) of the ITAA 1997, Foreign Co being a US LLC has to satisfy the 'partnership treatment requirements' in subsection 830-15(2). Subsection 830-15(2) of the ITAA 1997 states: For the purposes of paragraph (1)(a), the partnership treatment requirements are satisfied if: (a) the company was formed in the United States of America; and (b) for the purposes of the law of that country relating to *foreign income tax (except *credit absorption tax or *unitary tax) imposed by that country, the company is a limited liability company that: i. is treated as a partnership; or ii. is an eligible entity that is disregarded as an entity separate from its owner. Foreign Co was formed in the US and having only one member it is not treated as a partnership for US federal tax purposes. However, certain US LLCs (including single member LLCs) can be treated as a disregarded entity separate from their owner(s) for tax purposes in the US. This means that the members are subject to tax on the LLCs income and the LLC itself is disregarded or ignored for US tax purposes. Therefore, it is possible for a single member LLC to satisfy the partnership requirement under subparagraph 830-15(2)(b)(ii) of the ITAA 1997. In this case, Foreign Co has not elected to be treated as a corporation, it is treated as an eligible entity that is disregarded as an entity separate from its owner for US tax purposes. Therefore, Foreign Co has satisfied the partnership treatment requirement in paragraph 830-15(1)(a) of the ITAA 1997. Paragraph 830-15(1)(b) of the ITAA 1997 is also satisfied as Foreign Co at no time during the income year is a resident of a foreign country for the purposes of a law of that country that imposes foreign income tax (except credit absorption tax or unitary tax) on entities because they are residents of the country. Paragraph 830-15(1)(c) of the ITAA 1997 is also satisfied as Foreign Co is not an Australian resident at any time during the income year. Disregarding Division 830 of the ITAA 1997, the requirements of subparagraphs 830-15(d)(i) and (ii) of the ITAA 1997 are also satisfied. Foreign Co has satisfied all the requirements in subsection 830-15(1) of the ITAA 1997 and is therefore regarded as a foreign hybrid company. Section 830-20 of the ITAA 1997 provides that if a company is a foreign hybrid company in relation to an income year it is treated as a partnership for the purposes of the income tax law. The partners in the partnership are the shareholders in the company (section 830-25 of the ITAA 1997). According to the Explanatory Memorandum to Taxation Laws Amendment Act (No. 1) 2004 ( the legislation which introduced Division 830 of the ITAA 1997) a shareholder includes a member of a US LLC. Accordingly, Foreign Co is treated as a partnership for the purposes of the Acts as modified by Subdivisions 830-B to 830-D of the ITAA 1997 and the single member of Foreign Co is treated as a partner in the partnership.", "Date_of_Decision": "24 March 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 770-15 section 830-1 section 830-5 subsection 830-15(1) subsection 830-15(2) section 830-20 section 830-25 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign hybrid company Foreign hybrids Partnerships International tax", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Act (No. 1) 2004", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201077", "Unmatched_Content": "(The terms with an asterisk are defined in section 770-15 of the ITAA 1997.) | Keywords Foreign hybrid company Foreign hybrids Partnerships International tax"}
{"ATO_ID_Number": "ATO ID 2008/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled Foreign Companies: attribution of foreign income to Australian entity with de facto control of foreign entity - no direct or indirect attribution interest in that entity", "Issue": "Is income attributable under section 456 of the Income Tax Assessment Act 1936 (ITAA 1936) to a resident company that exercises de facto control over a foreign company where the resident company does not have either a direct attribution interest in the foreign company under section 356 of the ITAA 1936 or an indirect attribution interest in the foreign company under section 357 of the ITAA 1936?", "Decision": "No. Income will not be attributable under section 456 of the ITAA 1936 to a resident company that exercises de facto control over a foreign company where the resident company does not have either a direct attribution interest in the foreign company under section 356 of the ITAA 1936 or an indirect attribution interest in the foreign company under section 357 of the ITAA 1936.", "Facts": "The taxpayer is a resident Australian company for Australian tax purposes. The foreign company is not treated as a resident of Australia. The taxpayer does not have either a direct attribution interest in the foreign company under section 356 of the ITAA 1936 or an indirect attribution interest in the foreign company under section 357 of the ITAA 1936. The taxpayer exercises de facto control over the foreign company.", "Reasons_for_Decision": "Summary: Section 456 of the ITAA 1936 will attribute income where a Controlled Foreign Company (CFC) has attributable income in respect of an attributable taxpayer based on the attributable taxpayer's attribution percentage of the attributable income. As the taxpayer is an Australian entity that exercises de facto control over the foreign company, the foreign company is a CFC within the meaning of paragraph 340(c) of the ITAA 1936. Subsection 361(1) of the ITAA 1936 states that an entity will be an attributable taxpayer in relation to a CFC where the entity: The 'associate-inclusive' control interest held by an entity is defined in section 349 of the ITAA 1936. It includes the direct control interest held by such entity. Section 350 of the ITAA 1936 defines what is a direct control interest in a company. Subsection 350(6) of the ITAA 1936 states: If, at a particular time, a company is controlled by a group of 5 or fewer Australian entities, either alone or together with associates (whether or not any associate is also an Australian entity), each Australian entity in that group of 5 or fewer holds a direct control interest in the company equal to 100%. As the taxpayer is an Australian entity that exercises de facto control over the foreign company, it is taken to have a 100% direct control interest in that company by virtue of subsection 350(6) of the ITAA 1936. Accordingly, it has an associate-inclusive control interest of 100% in the foreign company (which is a CFC). Therefore, the taxpayer will be an attributable taxpayer within the meaning of paragraph 361(1)(a) of the ITAA 1936. The attribution percentage of an attributable taxpayer is the sum of the direct and indirect attribution interests held by the taxpayer in the CFC pursuant to section 362 of the ITAA 1936. As the taxpayer does not have any direct nor indirect attribution interest in the foreign company, the taxpayer's attribution percentage in the CFC will be nil. As noted above, in order to attribute income under section 456 of the ITAA 1936 it is necessary for a CFC to have attributable income in respect of an attributable taxpayer based on the attributable taxpayer's attribution percentage of the attributable income. The foreign company is a CFC and the taxpayer is an attributable taxpayer. However, as the taxpayer's attribution percentage is nil, it will not have any income attributed to it under section 456 of the ITAA 1936.", "Date_of_Decision": "28 August 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 336(c) paragraph 340(c) section 349 section 350 section 352 subsection 361(1) section 362 section 456", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign attributable income Controlled foreign companies Foreign hybrid company", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20085", "Unmatched_Content": "Keywords Foreign attributable income Controlled foreign companies Foreign hybrid company"}
{"ATO_ID_Number": "ATO ID 2006/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign hybrid rules: treatment of foreign hybrid company as a partnership", "Issue": "Is a taxpayer, being an Australian company, liable to be assessed on an amount of franked non-share dividend paid to a United States (US) limited liability company (LLC) in circumstances where Division 830 of Income Tax Assessment Act 1997 (ITAA 1997) applies?", "Decision": "Yes. A taxpayer, being an Australian company, is liable to be assessed on its share of franked non-share dividend paid to an US LLC in circumstances where Division 830 of the ITAA 1997 applies.", "Facts": "A LLC is formed in the US. The LLC elects to be treated as a partnership under US taxation law. The LLC is not treated as a resident for the purposes of the tax laws of any foreign country. It is also not an Australian resident at any time during an income year. The taxpayer, being an Australian resident company, is a member of the US LLC and controls all the voting rights in the US LLC. The LLC receives a fully franked non-share dividend from an Australian resident company.", "Reasons_for_Decision": "Summary: Section 830-20 of the ITAA 1997 provides that a foreign hybrid company is treated as a partnership for Australian tax purposes. Subsection 830-15(1) of the ITAA 1997 sets out the requirements for a foreign hybrid company: A company is a foreign hybrid company in relation to an income year if: (a) at all times during the income year when the company is in existence, the partnership treatment requirements for the income year in subsection (2) or (3) are satisfied; and (b) at no time during the income year is the company, for the purposes of a law of any foreign country that imposes *foreign tax on entities because they are residents of the foreign country, a resident of that country; and (c) at no time during the income year is the company an Australian resident; and (d) disregarding this Division, in relation to the same income year of another taxpayer: (i) the company is a *CFC at the end of a *statutory accounting period that ends in the income year; and (ii) at the end of the statutory accounting period, the taxpayer is an *attributable taxpayer in relation to the CFC with an *attribution percentage greater than nil. In the present case, paragraph 830-15(1)(a) of the ITAA 1997 is satisfied because subsection 830-15(2) of the ITAA 1997 is satisfied. Subsection 830-15(2) requires that a company, being a LLC formed in the US, be treated as a partnership for US tax purposes. The LLC in this case was formed in the US and has elected to be treated as a partnership for US tax purposes. Paragraph 830-15(1)(b) of the ITAA 1997 is satisfied because the LLC is not treated as a resident for the purposes of the tax laws of any foreign country. Paragraph 830-15(1)(c) of the ITAA 1997 is satisfied because the LLC is not an Australian resident at any time during an income year. Paragraph 830-15(1)(d) of the ITAA 1997 is satisfied because the LLC is a CFC and the taxpayer is an attributable taxpayer of the LLC under Part X of Income Tax Assessment Act 1936 (ITAA 1936) with an attributable percentage of 100%. The LLC is a CFC under paragraphs 340(a) and 340(c) of the ITAA 1936 because the taxpayer controlled all the voting rights in the LLC. This control gave the taxpayer 100% direct control interest (section 350 of the ITAA 1936) and 100% direct attribution interest (section 356 of the ITAA 1936) in the LLC. The result is that the taxpayer's associate-inclusive control interest is 100% (section 349 of the ITAA 1936), making the LLC a CFC and the taxpayer an attributable taxpayer under section 361 of the ITAA 1936. The taxpayer's attribution percentage in this case is 100%, being its direct attribution interest (section 362 of the ITAA 1936). Having satisfied subsection 830-15(1) of the ITAA 1997, the LLC is a foreign hybrid company and will be treated as a partnership under section 830-20 of the ITAA 1997. The partnership provisions in Division 5 of Part III of the ITAA 1936 will apply to the LLC. The LLC will have to calculate its net income under section 90 of the ITAA 1936 , including amounts under Division 207 of the ITAA 1997. The taxpayer, being a member of the LLC, is deemed to be a partner of the partnership (section 830-25 of the ITAA 1997) and will have an interest in the partnership's net income equal to its entitlement to the profit of the LLC (section 830-30 of the ITAA 1997). Thus the taxpayer must include as assessable income its share of the LLC's net partnership income (section 92 of the ITAA 1936) including amounts under Division 207 of the ITAA 1997. The relevant share is determined by the percentage of the taxpayer's entitlement to the LLC's profit (section 830-30 of the ITAA 1997).", "Date_of_Decision": "23 November 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 90 section 92 section 340 section 349 section 350 section 356 section 361 section 362", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Control test Controlled foreign companies Foreign hybrids Franking credits International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200618", "Unmatched_Content": "Keywords Control test Controlled foreign companies Foreign hybrids Franking credits International tax"}
{"ATO_ID_Number": "ATO ID 2006/149", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Classification of a Bermudan Exempted Limited Partnership for Australian income tax purposes", "Issue": "Is a Bermudan exempted limited partnership a corporate limited partnership under Division 5A of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A Bermudan exempted limited partnership is a corporate limited partnership under Division 5A of the ITAA 1936.", "Facts": "A Bermudan exempted limited partnership formed under the Bermuda Exempted Partnerships Act 1992 , is subject to the laws and regulations of Bermuda. The relevant Limited Partnership Agreement (LPA) provides for one partner to be the General Partner and the other partners to be Limited Partners. The limited partnership was formed in an income year later than the 1995-96 income years by the General Partner and the Initial Limited Partner. The partnership was established for the purpose of investing in real estate and real estate related assets.", "Reasons_for_Decision": "Summary: The definition of a partnership in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) includes a limited partnership. A limited partnership is further defined in section 995-1 of the ITAA 1997 as: Therefore, an association of persons in receipt of ordinary income may be a limited partnership provided the liability of at least one person is limited. Other definitions in section 995-1 of the ITAA 1997 refer to the liability of the partners. A General Partner is a partner of a limited partnership whose liability in relation to the partnership is unlimited. A Limited Partner is a partner whose liability in relation to the partnership is limited. As the LPA provides for one partner to be the General Partner and the other partners to be Limited Partners, the Bermudan Exempted Limited Partnership will be a limited partnership. A 'corporate limited partnership' however, is separately defined in Division 5A of the ITAA 1936 so that such an entity is treated as a company for Australian income tax purposes. A 'corporate limited partnership' is defined in section 94D of the ITAA 1936 to include limited partnerships formed in the 1995-96 or later years of income, but subsection 94D(2) of the ITAA 1936 specifically excludes a VCLP, AFOF or venture capital management partnership. In this context a VCLP is a Venture Capital Limited Partnership and AFOF means an Australian Venture Capital Fund of Funds. A VCLP is defined by reference to the Venture Capital Act 2002 . The Bermudan Exempted Limited Partnership will not be excluded from the definition of a corporate limited partnership as subsection 9-1(1) of the Venture Capital Act requires of a VCLP that: The Bermudan Exempted Limited Partnership is not established under Australian law, but instead under Bermudan law which is not a listed country nor a country prescribed in the regulations of the Venture Capital Act. Therefore, the Bermudan Exempted Limited Partnership will not be a VCLP. Similar problems exist with the Bermudan Exempted Limited Partnership being either an AFOF or a venture capital management partnership. A limited partnership may not be either an AFOF or a venture capital management partnership without being an Australian resident. The Bermudan Exempted Limited Partnership is not an Australian resident. Therefore, the Bermudan Exempted Limited Partnership is a limited partnership which is not excluded from the definition of corporate limited partnership because of subsection 94D(2) of the ITAA 1936. A limited partnership can also be a foreign hybrid entity (for example, a foreign hybrid limited partnership) under Division 830 of the ITAA 1997. A limited partnership that is a foreign hybrid limited partnership is excluded from being a corporate limited partnership via subsection 94D(4) of the ITAA 1936. A 'foreign hybrid limited partnership' is defined in section 830-10 of the ITAA 1997. Paragraph 830-10(1)(b) of the ITAA 1997 requires that foreign tax must be imposed under the law of the foreign country on the partners, not the partnership. Bermuda as the foreign country in question does not impose any tax on income, profits, dividends or wealth. Therefore, Bermuda does not impose tax on the partners and as a result, this paragraph will not be satisfied. Also, paragraph 830-10(1)(e) of the ITAA 1997 requires that the limited partnership be a controlled foreign company (CFC) at the end of a statutory accounting period and that at the end of the statutory accounting period, there is a taxpayer that is an attributable taxpayer in relation to the CFC with an attribution percentage greater than nil. In situations where a Bermudan Exempted Limited Partnership fails to be a CFC, then the partnership will also fail to satisfy the requirements of paragraph 830-10(1)(e) of the ITAA 1997. Therefore, as the Bermudan Exempted Limited Partnership fails to satisfy the requirements of paragraph 830-10(1)(b) of the ITAA 1997, and where it is not a CFC it will neither satisfy paragraph 830-10(1)(e) of the ITAA 1997, then as a result it will fail to satisfy the definition of a 'foreign hybrid limited partnership' in subsection 830-10(1) of the ITAA 1997. Therefore, it would not be excluded from being a corporate limited partnership pursuant to subsection 94D(4) of the ITAA 1936. Consequently, the Bermudan Exempted Limited Partnership: In conclusion, the Bermudan Exempted Limited Partnership will be a 'corporate limited partnership' for Australian income tax purposes as per the definition in section 94D of the ITAA 1936.", "Date_of_Decision": "18 May 2006", "Year_of_Income": "Year ending 30 September 2006", "Legislative_References": "Income Tax Assessment Act 1936 Division 5A section 94D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Bermuda Controlled foreign companies Foreign hybrid limited partnership Foreign hybrids International tax Limited partnerships Ownership, interests, control & rights Tracing of ownership & interests", "Case_References": "", "Other_References": "The Limited Partnership Act 1883 (Bermuda) The Exempted Partnerships Act 1992 (Bermuda) The Partnership Act 1902 (Bermuda)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006149", "Unmatched_Content": "Keywords Bermuda Controlled foreign companies Foreign hybrid limited partnership Foreign hybrids International tax Limited partnerships Ownership, interests, control & rights Tracing of ownership & interests"}
{"ATO_ID_Number": "ATO ID 2006/180", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Controlled Foreign Companies: cost base of assets owned by the CFC when it first becomes an eligible CFC", "Issue": "Will a controlled foreign companies (CFC's) commencing day under section 406 of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to an attributable taxpayer be the first day that the attributable taxpayer acquires a controlling interest in a CFC that was already an eligible CFC?", "Decision": "No. The CFC's commencing day under section 406 of the ITAA 1936 is the first day the CFC became an eligible CFC or 30 June 1990 whichever is the later.", "Facts": "A foreign company is a CFC and an Australian resident company (A Co) is an attributable taxpayer in relation to that CFC. Subsequently, another Australian resident company (B Co) acquires a controlling interest in the CFC and becomes an attributable taxpayer in relation to that CFC.", "Reasons_for_Decision": "Summary: Section 406 of the ITAA 1936 sets out what day the 'commencing day' is for a CFC. This is relevant to calculating the cost base of the CFC's assets when applying the capital gains tax rules to calculate the CFC's attributable income. Section 406 of the ITAA 1936 provides, as relevant, that 'in calculating the attributable income of the eligible CFC, the eligible CFC's commencing day is' either 30 June 1990 or 'the first day after 30 June 1990 at the end of which the eligible CFC was a CFC' whichever is the later. At issue is whether, when calculating the attributable income in relation to an attributable taxpayer, a CFC's commencing day is the first day on which the foreign company becomes an eligible CFC or whether it is the first day on which the attributable taxpayer becomes an attributable taxpayer in relation to the CFC. Section 381 of the ITAA 1936 provides that, where at the end of a statutory accounting period of a company, the company is a CFC and there are one or more attributable taxpayers in relation to the company, the attributable income of the company is calculated separately for each attributable taxpayer. The company is called the 'eligible CFC'. So, to be an 'eligible CFC', the company must be a CFC and there must be one or more attributable taxpayers (within the meaning of section 361 of the ITAA 1936) in relation to it. Section 406 of the ITAA 1936 provides that the commencing day is the first day on which the CFC becomes an eligible CFC or 30 June 1990, whichever is the later. To be an eligible CFC, section 381 of the ITAA 1936 states that there must be one or more attributable taxpayers in relation to the CFC at the end of a statutory accounting period. The CFC is then an eligible CFC. Under the terms of section 381, once there are one or more attributable taxpayers in relation to a CFC, the CFC is then an eligible CFC. Once the CFC is an eligible CFC for the purposes of section 381, the commencing day under section 406 is the first day on which the CFC becomes an eligible CFC or 30 June 1990, whichever is the later. Therefore, the commencing day under section 406 of the ITAA 1936 is the first day the foreign company becomes a CFC and there is an attributable taxpayer in relation to that CFC, even though B Co was not an attributable taxpayer is the in relation to the CFC at that time. The cost base of the assets owned by the CFC at the end of that day is, under section 412 of the ITAA 1936, the greater of the market value at the end of that day or the cost base on that day.", "Date_of_Decision": "20 July 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 406 section 412 section 361 section 381", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Controlled foreign companies International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006180", "Unmatched_Content": "Keywords Controlled foreign companies International tax"}
{"ATO_ID_Number": "ATO ID 2006/181", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disposal of Goodwill: tainted asset", "Issue": "Is goodwill a tainted asset for the purposes of Part X of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Goodwill is not a tainted asset for the purposes of Part X of the ITAA 1936.", "Facts": "An Australian resident company is an attributable taxpayer in relation to two controlled foreign companies (CFC). One of the CFCs disposes of goodwill to the other CFC.", "Reasons_for_Decision": "Summary: Section 317 of the ITAA 1936 contains an exhaustive definition of the term 'tainted asset'. Paragraph (c) of that definition excludes assets that are 'used solely in carrying on a business'. The term 'used solely in carrying on a business' is not defined for the purposes of section 317 of the ITAA 1936. Accordingly, the ordinary meaning applies. The word 'sole' is defined in the Macquarie Concise Dictionary to mean 'only'. Therefore, to come within paragraph 317(3)(c) of the ITAA 1936, goodwill must be used only in carrying on a business. In FC of T v. Murry 98 ATC 4,585; (1998) 39 ATR 129 the majority of the Full High Court held that goodwill 'is a right or privilege that is inseparable from the conduct of the business' (ATR at 137; ATC at 4,591). Isaacs J in Bacchus Marsh Concentrated Milk Co Ltd (in liq) v. Joseph Nathan & Co Ltd (1919) 26 CLR 410 also stated: Goodwill is property but, as such, is inseparable from a particular \"business\" in the sense of a particular going concern. It is an asset of that business, and enhances its value. Goodwill is inseparable from a business and cannot be used other than in connection with a business. In terms of the section 317 of the ITAA 1936, goodwill is used solely in carrying on a business and is not therefore a tainted asset.", "Date_of_Decision": "20 July 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 317", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Controlled foreign companies International tax", "Case_References": "FC of T v. Murry 98 ATC 4585 (1998) 39 ATR 129", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006181", "Unmatched_Content": "Keywords Controlled foreign companies International tax"}
{"ATO_ID_Number": "ATO ID 2006/331", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Hybrid Company: UK limited liability partnership", "Issue": "Is a United Kingdom (UK) limited liability partnership (UK LLP) incorporated under the UK Limited Liability Partnerships Act 2000 (UK LLP Act) a foreign hybrid company within the meaning of section 830-15 of Division 830 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "During income years ending on 30 June 2006 or earlier, a UK LLP incorporated under the UK LLP Act was not a foreign hybrid company within the meaning of section 830-15 of Division 830 of the ITAA 1997, because no regulations with regard to UK LLPs were in force. Accordingly, the requirements in paragraph 830-15(3)(c) of Division 830 of the ITAA 1997 were not met. During income years beginning on or after 1 July 2006, a UK LLP incorporated under the UK LLP Act is a foreign hybrid company within the meaning of section 830-15 of Division 830 of the ITAA 1997.", "Facts": "The UK LLP Act created a separate legal entity called the UK limited liability partnership (UK LLP). Since 6 April 2001, it has been possible to incorporate such a UK LLP in England, Scotland and Wales. The relevant law in relation to UK LLPs is the UK LLP Act and the UK Limited Liability Partnership Regulations 2001 (the LLP Regulations), which apply parts of the UK Companies Act 1985 (Companies Act) and the UK Insolvency Act 1986 (Insolvency Act) to UK LLPs. The UK Company Directors Disqualification Act 1986 (Company Directors Disqualification Act) is also applied with some modification to UK LLPs, by the LLP Regulations. The UK LLP Act describes a UK LLP as a body corporate with a legal personality separate from that of its members, which is formed by being incorporated under that Act (refer to subsection 1(2) of the UK LLP Act). Subsection 1(5) of the UK LLP Act provides that the law as it relates to partnerships does not apply to UK LLPs. Subsection 4(1) of the UK LLP Act states that, upon the incorporation of a UK LLP, its members are the persons who subscribe their names to the incorporation document. Subsection 6(1) of the UK LLP Act provides that every member of a UK LLP is the agent of the UK LLP. Thus, a UK LLP is a body corporate created by law, being a separate legal entity from its members; having legal capacity, powers and liabilities distinct from those of its members, as well as having perpetual succession. A UK LLP is not a partnership and does not have partners, only members who control and manage the UK LLP. Members of a UK LLP do not have joint and several liability for the acts of other members of the UK LLP. When a UK LLP enters into a contract it binds itself and not its members. A UK LLP is treated as a body corporate for all purposes unless specifically provided by legislation. The one such treatment is for UK tax purposes (refer to sections 10 and 11 of the LLP Act) which has the effect of taxing a UK LLP as a partnership. The distinction for UK Tax purposes is achieved by specific amendments to the UK Income and Corporation Taxes Act 1988 , the UK Taxation of Chargeable Gains Act 1992 and also the UK Inheritance Tax Act 1984 .", "Reasons_for_Decision": "Summary: A UK LLP is a body corporate and hence, a company for Australian taxation purposes. To be a foreign hybrid company within the meaning of section 830-15 of Division 830 of the ITAA 1997, a company is required to meet, at all times during the year it was in existence, the requirements of subsection 830-15(2) of the ITAA 1997 if it was formed in the USA, or subsection 830-15(3) of the ITAA 1997 if it was formed in any foreign country (which may include the USA). In the case of a UK LLP subsection 830-15(2) of the ITAA 1997 is inapplicable. However, as England, Scotland and Wales are all foreign countries, the first condition (that is, in paragraph 830-15(3)(a) of the ITAA 1997) is satisfied and so subsection 830-15(3) of the ITAA 1997 may potentially apply. A UK LLP will satisfy the second condition in subsection 830-15(3) of the ITAA 1997 for being a foreign hybrid company if, for the purposes of the laws of England, Scotland and Wales relating to foreign tax imposed by those countries, the UK LLP is treated as a partnership (refer to paragraph 830-15(3)(b) of the ITAA 1997). As noted above, a UK LLP is treated as a partnership rather than a corporate entity, for UK income tax purposes. Thus, the provisions of paragraph 830-15(3)(b) are satisfied. A UK LLP will satisfy the third condition contained in subsection 830-15(3) of the ITAA 1997 for being a foreign hybrid company, if regulations are in force setting out requirements to be satisfied by a company and the UK LLP satisfies those requirements (refer to paragraph 830-15(3)(c) of the ITAA 1997). However subsection 830-15(4) of the ITAA 1997 does not allow regulations for this purpose to apply for any income year before the one in which the regulations are made. Regulation 830-15.01 of the Income Tax Assessment Regulations 1997 was introduced with effect from 27 June 2007 and therefore applies to income years beginning on or after 1 July 2006. Prior to this date no regulations were in force. Regulation 830-15.01 provides that, for the purposes of paragraph 830-15(3)(c) of the ITAA 1997, it is a requirement for a company in relation to an income year that the company be a limited liability partnership for the purposes of the UK LLP Act. It follows that for:", "Date_of_Decision": "6 December 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 830-15 subsection 830-15(2) subsection 830-15(3) paragraph 830-15(3)(a) paragraph 830-15(3)(b) paragraph 830-15(3)(c) subsection 830-15(4) Division 830 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/31", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/332", "Subject_References": "Body corporate Companies Foreign hybrid company Legal person Limited partnerships Foreign limited partnership Partnerships", "Case_References": "", "Other_References": "Offshore Investment, Issue No. 122, December 2001/ January 2002 - 'Limited Liability Partnership a new legal entity' Offshore Investment, Issue No. 131, November 2002 - 'Tax transparencies in the UK' Income Tax Assessment Regulations 1997, Regulation 830-15.01", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006331", "Unmatched_Content": "History: This ATO ID was amended to take into account Regulation 830-15.01 of the Income Tax Assessment Regulations 1997. The Regulation was introduced with effect from 27 June 2007 and applies to income years beginning on or after 1 July 2006. | Related Public Rulings (including Determinations) Taxation Determination TD 2004/31 | Keywords Body corporate Companies Foreign hybrid company Legal person Limited partnerships Foreign limited partnership Partnerships"}
{"ATO_ID_Number": "ATO ID 2006/332", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Hybrid Limited Partnership: UK limited liability partnership", "Issue": "Is a United Kingdom (UK) limited liability partnership (UK LLP) incorporated under the UK Limited Liability Partnerships Act 2000 (UK LLP Act) a foreign hybrid limited partnership within the meaning of subsection 830-10(1) of Division 830 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A UK LLP incorporated under the UK LLP Act is not a foreign hybrid limited partnership within the meaning of subsection 830-10(1) of Division 830 of the ITAA 1997, because it is not a limited partnership as defined in subsection 995-1(1) of the ITAA 1997.", "Facts": "The UK LLP Act created a separate legal entity called the UK limited liability partnership (UK LLP). The relevant law in relation to UK LLPs is the UK LLP Act and the UK LLP Regulations 2001 (the LLP Regulations); which apply parts of the UK Companies Act 1985 (Companies Act) and the UK Insolvency Act 1986 (Insolvency Act) to LLPs. The UK Company Directors Disqualification Act 1986 (Company Directors Disqualification Act) is also applied with some modification to UK LLPs, by the LLP Regulations. The UK LLP Act describes a UK LLP as a body corporate with a legal personality separate from that of its members, which is formed by being incorporated under that Act (refer to subsection 1(2) of the UK LLP Act). Subsection 1(5) of the UK LLP Act provides that the law as it relates to partnerships does not apply to UK LLPs. Subsection 4(1) of the UK LLP Act states that, upon the incorporation of a UK LLP, its members are the persons who subscribe their names to the incorporation document. Subsection 6(1) of the UK LLP Act provides that every member of a UK LLP is the agent of the UK LLP. Thus, a UK LLP is a body corporate created by law, being a separate legal entity from its members; having legal capacity, powers and liabilities distinct from those of its members, as well as having perpetual succession. A UK LLP is not a partnership and does not have partners, only members who control and manage the UK LLP. Members of a UK LLP do not have joint and several liability for the acts of other members of the UK LLP. When a UK LLP enters into a contract it binds itself and not its members. A UK LLP is treated as body corporate for all purposes unless specifically provided by legislation. The one such treatment is for UK tax purposes (refer to sections 10 and 11 of the LLP Act) which has the effect of taxing a UK LLP as a partnership. The distinction for UK Tax purposes is achieved by specific amendments to the UK Income and Corporation Taxes Act 1988 , the UK Taxation of Chargeable Gains Act 1992 and also the UK Inheritance Tax Act 1984 .", "Reasons_for_Decision": "Summary: For a limited partnership to be a foreign hybrid limited partnership it must satisfy all of the requirements of section 830-10 of Division 830 of the ITAA 1997. The term 'limited partnership' is a defined term. Subsection 995-1(1) of the ITAA 1997 provides that limited partnership means: 'Company' is defined in subsection 995-1(1) of the ITAA 1997 to mean: A UK LLP is a body corporate and hence, for Australian taxation purposes, is a company. The definition of limited partnership in subsection 995-1(1) of the ITAA 1997 excludes a company. Further, a UK LLP is not 'an association of persons ... carrying on business as partners or in receipt of ordinary or statutory income jointly'. A UK LLP is a legal person which carries on business and derives income itself. Based on the definition in subsection 995-1(1) of the ITAA 1997, a UK LLP is not a limited partnership within the meaning of subsection 830-10(1) of the ITAA 1997. It follows that a UK LLP cannot be a foreign hybrid limited partnership for the purposes of section 830-10 of Division 830 of the ITAA 1997.", "Date_of_Decision": "6 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 830-10 subsection 830-10(1) Division 830 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2004/31", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Body corporate Companies Foreign hybrids Foreign hybrid limited partnership Limited partnerships Foreign hybrid limited partnerships Partnerships", "Case_References": "", "Other_References": "Offshore Investment, Issue No. 122, December 2001/ January 2002 - 'Limited Liability Partnership a new legal entity' Offshore Investment, Issue No. 131, November 2002 - 'Tax transparencies in the UK' UK Limited Liability Partnerships Act 2000", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006332", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 2004/31 | Keywords Body corporate Companies Foreign hybrids Foreign hybrid limited partnership Limited partnerships Foreign hybrid limited partnerships Partnerships"}
{"ATO_ID_Number": "ATO ID 2006/334", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Classification of a United Kingdom limited partnership for Australian income tax purposes", "Issue": "Is a United Kingdom limited partnership (UKLP) formed under the United Kingdom Limited Partnerships Act 1907 a foreign hybrid limited partnership under Division 830 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A United Kingdom limited partnership formed under the United Kingdom Limited Partnerships Act 1907 is a foreign hybrid limited partnership under Division 830 of the ITAA 1997.", "Facts": "A partnership (UKLP) is formed under the United Kingdom Limited Partnerships Act 1907 and governed by the Partnership Act 1890. It is subject to the laws and regulations of the United Kingdom. The UKLP is a resident of the United Kingdom. United Kingdom imposes tax on the partners and not on the UKLP. The UKLP is a limited partnership as defined in section 995-1 of the ITAA 1997. No other foreign country taxes the UKLP as a resident entity. The UKLP is a controlled foreign company (CFC) in relation to an Australian taxpayer and the Australian taxpayer is an attributable taxpayer with an attributable percentage of greater than nil in relation to the CFC.", "Reasons_for_Decision": "Summary: Subsection 830-10(1) of the ITAA 1997 provides that a limited partnership is a foreign hybrid limited partnership in relation to an income year if: In the present case, the UKLP is a limited partnership formed in the United Kingdom and so satisfies paragraph 830-10(1)(a) of the ITAA 1997. Paragraph 830-10(1)(b) of the ITAA 1997 is satisfied because the United Kingdom taxes the profits of the limited partnership on the partners and not the limited partnership. The Explanatory Memorandum to Taxation Laws Amendment Act (No. 1) 2004, which inserted Division 830 of the ITAA 1997, states that paragraph 830-10(1)(c) of the ITAA 1997: requires that if there is another foreign country (apart from the country of formation) which taxes the limited partnership as a resident entity, it will not qualify as a foreign hybrid. No other foreign country taxes the limited partnership as a resident entity so paragraph 830-10(1)(c) of the ITAA 1997 is satisfied. Paragraph 830-10(1)(d) of the ITAA 1997 is satisfied because the limited partnership is a resident of the United Kingdom and is not an Australian resident at any time during the income year. Paragraph 830-10(1)(e) of the ITAA 1997 is satisfied because, disregarding section 94D(5) of the Income Tax Assessment Act 1936 , the limited partnership is a CFC in relation to an Australian taxpayer and the Australian taxpayer is an attributable taxpayer with an attributable percentage of greater than nil in relation to the CFC. As a result of satisfying all the requirements of subsection 830-10(1) of the ITAA 1997, the UKLP will be a 'foreign hybrid limited partnership' for the purposes of section 830-10 of the ITAA 1997.", "Date_of_Decision": "25 October 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 94D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/149", "Subject_References": "United Kingdom Controlled foreign companies Foreign hybrid limited partnership Foreign hybrids International tax Limited partnerships", "Case_References": "", "Other_References": "The Limited Partnership Act 1907 (United Kingdom) The Partnership Act 1890 (United Kingdom) Taxation Laws Amendment Act (No. 1) 2004", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006334", "Unmatched_Content": "Keywords United Kingdom Controlled foreign companies Foreign hybrid limited partnership Foreign hybrids International tax Limited partnerships"}
{"ATO_ID_Number": "ATO ID 2011/73", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Definition of public company: company controlled by a Government or public body - meaning of 'Government'", "Issue": "Is a company in which a foreign government has a controlling interest on the last day of the income year a public company for that income year under subparagraph 103A(2)(d)(iv) of the Income Tax Assessment Act 1936 (ITAA 1936) for the purposes of Division 7 of Part III of the ITAA 1936?", "Decision": "Yes. A company in which a foreign government has a controlling interest on the last day of the income year is, for the purposes of Division 7 of Part III of the ITAA 1936, a public company for that income year under subparagraph 103A(2)(d)(iv) of the ITAA 1936 as the term 'Government' in subparagraph 103A(2)(d)(iv) includes a foreign government.", "Facts": "The taxpayer is an Australian resident company for tax purposes. A foreign government has a controlling interest in the company on the last day of the income year for the purposes of subparagraph 103A(2)(d)(iv) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Division 7 of Part III of the ITAA 1936 draws a distinction, for the purposes of that Division, between public companies and private companies. Subsection 103A(1) of the ITAA 1936 provides the definition of 'private company' and states that, for the purposes of Division 7 of Part III of the ITAA 1936, a company is a private company in relation to an income year if the company is not a public company for that year. Subsection 103A(2) of the ITAA 1936 states that, subject to the succeeding provisions of section 103A (which are not relevant in this case), a company will be a public company for the purposes of subsection 103A(1) if it falls within any of the categories listed in subsection 103A(2). Paragraph 103A(2)(d) of the ITAA 1936 relevantly stipulates that a company will be a public company if: It has been suggested that the placement of the words 'referred to in subparagraph (iii)' in subparagraph 103A(2)(d)(iv) of the ITAA 1936 above gives rise to an ambiguity, and consequently, to alternative and conflicting interpretations. One view is that a company will be a public company under subparagraph 103A(2)(d)(iv) of the ITAA 1936 where the company is: Under this interpretation, the meaning of 'Government' is contingent upon the scope of subparagraph 103A(2)(d)(iii) of the ITAA 1936. The alternative interpretation is that a company will be a public company under subparagraph 103A(2)(d)(iv) of the ITAA 1936 where the company is: Whether the term 'Government' in subparagraph 103A(2)(d)(iv) of the ITAA 1936 includes a foreign government is somewhat dependent on which of these interpretations is correct. As explained below, the legislative context and the policy behind subparagraph 103A(2)(d)(iv) of the ITAA 1936 lends support to the alternative interpretation. | Detailed Reasoning - Connection with subparagraph 103A(2)(d)(iii): Subparagraph 103A(2)(d)(iii) of the ITAA 1936 refers to 'a body constituted by a law of the Commonwealth or of a State or Territory and established for public purposes ...'. While the reference to a law of the Commonwealth, State or Territory is relevant to the constitution of that body, it is the actual body that is the subject of the provision. It cannot be said that subparagraph 103A(2)(d)(iii) of the ITAA 1936 in fact makes reference to any 'Government'. Consequently, if subparagraph 103A(2)(d)(iv) meant 'a company in which a Government...referred to in subparagraph (iii) had a controlling interest', that part of subparagraph 103A(2)(d)(iv) would have no effect. The Explanatory Memorandum (EM) to the Income Tax and Social Services Contribution Assessment Bill (No. 3) 1964, which introduced subsection 103A(2) of the ITAA 1936, provides some clarification on this point. It states: Paragraph (d) lists a number of other classes of companies that may qualify as public companies without the necessity of satisfying the test of stock exchange listing. They are - (iii) a body constituted by a law of the Commonwealth, a State or a Territory of the Commonwealth and established for public purposes (not being a company within the meaning of a law relating to companies); (iv) a company in which a Government or a body established for public purposes has a controlling interest; The EM to the Income Tax and Social Services Contribution Assessment Bill (No. 3) 1964 avoids the ambiguity that arises in the legislation as a result of the inclusion and placement of the words 'referred to in subparagraph (iii)'. That EM treats the words 'a body established for public purposes' as synonymous with 'a body referred to in subparagraph (iii)'. It seems clear from the wording of item (iv) of that EM that the words 'referred to in subparagraph (iii)' in subparagraph 103A(2)(d)(iv) of the ITAA 1936 relate only to a body established for public purposes, and do not relate to the word 'Government'. Accordingly, in establishing whether a company in which a Government has a controlling interest is a public company, it is not necessary to consider subparagraph 103A(2)(d)(iii) of the ITAA 1936. | Detailed Reasoning - Whether 'Government' includes a foreign government: As there is no definition of 'Government' or 'government' in either Division 7 of Part III of the ITAA 1936, subsection 6(1) of the ITAA 1936, section 995-1 of the Income Tax Assessment Act 1997 or the Acts Interpretation Act 1901 , the ordinary meaning of the term must be used. The Macquarie Dictionary defines 'government' as 'the governing body of persons in a state, community, etc; the executive power; the administration ...' As this definition does not exclude a foreign government, 'Government' as used in subparagraph 103A(2)(d)(iv) of the ITAA 1936 can include a foreign government. This conclusion is supported by a number of EMs to Bills which introduced amendments to Division 7 of Part III of the ITAA 1936, including the EM to the Income Tax Assessment Bill (No. 3) 1972, which refers to the distinction between private and public companies and describes public companies as 'very broadly, those in which there is substantial public interest'. Where a government (whether it be an Australian or foreign government) has a controlling interest in a company, the company will be one in which there is substantial public interest. As the meaning of 'Government' in subparagraph 103A(2)(d)(iv) of the ITAA 1936 extends to a foreign government, a company in which a foreign government has a controlling interest on the last day of the income year is, for the purposes of Division 7 of Part III of the ITAA 1936, a public company for that year of income under subparagraph 103A(2)(d)(iv).", "Date_of_Decision": "7 September 2011", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) Division 7 of Part III section 103A subsection 103A(1) subsection 103A(2) paragraph 103A(2)(d) subparagraph 103A(2)(d)(iii) subparagraph 103A(2)(d)(iv)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/74", "Subject_References": "Private companies Public companies", "Case_References": "", "Other_References": "Explanatory Memorandum to the Income Tax and Social Services Contribution Assessment Bill (No. 3) 1964 Explanatory Memorandum to the Income Tax Assessment Bill (No. 3) 1972 The Macquarie Dictionary, 5th Edn, The Macquarie Library Pty Ltd, NSW, 2009.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201173", "Unmatched_Content": "Keywords Private companies Public companies"}
{"ATO_ID_Number": "ATO ID 2011/74", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Definition of 'public company': company controlled by a Government - tracing an interest held through a chain of subsidiaries", "Issue": "Can an interest in a company amount to a 'controlling interest' for the purpose of subparagraph 103A(2)(d)(iv) of the Income Tax Assessment Act 1936 (ITAA 1936) where the interest is held indirectly through a chain of subsidiary companies?", "Decision": "Yes. An interest in a company can amount to a 'controlling interest' for the purpose of subparagraph 103A(2)(d)(iv) of the ITAA 1936 where the interest is held indirectly through a chain of subsidiary companies.", "Facts": "The taxpayer, Company D, is an Australian resident company for tax purposes. A government owns shares in Company A, which owns shares in Company B. Company B owns shares in Company C, which owns shares in Company D.", "Reasons_for_Decision": "Summary: Division 7 of Part III of the ITAA 1936 draws a distinction, for the purposes of that Division, between public companies and private companies. Subsection 103A(1) of the ITAA 1936 provides the definition of 'private company' and states that, for the purposes of Division 7 of Part III of the ITAA 1936, a company is a private company in relation to an income year if the company is not a public company for that year. Subsection 103A(2) of the ITAA 1936 states that, subject to the succeeding provisions of section 103A (which are not relevant in this case), a company will be a public company for the purposes of subsection 103A(1) if it falls within any of the categories listed in subsection 103A(2). Paragraph 103A(2)(d) of the ITAA 1936 relevantly stipulates that a company will be a public company if: The term 'controlling interest' is not defined in Australia's income tax legislation. It therefore takes its ordinary meaning. The High Court has considered the term 'controlling interest' in the context of other provisions of the income tax legislation and concluded that the ordinary meaning of the term can include an interest held through a chain of subsidiary companies. In Mendes v. Commissioner of Probate Duties (Victoria ) (1967) 122 CLR 152 at 162 Kitto J stated: ...a company A, which by virtue of its voting power in a general meeting of company B controls that company, has a controlling interest in company C if company B holds the majority of votes in the general meeting of company C. Mason J in Kolotex Hosiery (Australia) Pty. Ltd. v. Federal Commissioner of Taxation (1973) 130 CLR 64 adopted that statement of Kitto J and said at 78: It is now beyond question that company A has a controlling interest in company C if, having control of company B, it has the majority voting power in company C by means of the votes attaching to its shares in company C and those attaching to the shares held in company C by company B. It is consistent with this approach to say that a parent company has a controlling interest in another company, its sub-subsidiary, even though it holds no shares in the sub-subsidiary, provided that it controls the majority in voting power in its subsidiary which in turn controls the majority voting power in the sub-subsidiary. This tracing approach to determine whether a controlling interest exists was also applied in Cooper Brookes (Wollongong) Pty. Limited v. Federal Commissioner of Taxation (1981) 147 CLR 297 where Aickin J stated at 326: The ordinary meaning of \"controlling interest'' in a company includes the interest of a holding company not only in its direct subsidiaries but in all companies in a chain of subsidiaries, however long. The same is true of each subsidiary in the chain in respect of all subsidiaries below it... Subsequently, a number of Explanatory Memoranda demonstrate that the ordinary meaning of the term 'controlling interest' includes interests held directly and interests held through a chain of subsidiary companies, where those interests are sufficient to amount to a controlling interest. For instance, the controlled foreign companies provisions in Part X of the ITAA 1936 and the thin capitalisation provisions in Division 820 of the Income Tax Assessment Act 1997 relate to control of other entities, and they apply to interests which are held directly as well as interests which are held indirectly through chains of interposed entities. Although the term 'controlling interest' does not appear in the relevant legislation, the related Explanatory Memoranda use that term to refer to all interests which are the subject of those provisions. For example, the Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 8) 1999 provides the following explanation of the controlled foreign companies (CFC) regime: 1.9 The CFC measures require Australian taxpayers to pay tax, on a current year basis, on income or gains earned by foreign companies in which they have a controlling interest, even though the income or gains have not yet been derived by the taxpayers... Since the ordinary meaning of the term 'controlling interest' can include an interest held through a chain of subsidiaries, any interest that the government holds in Company D through the chain of subsidiary companies can amount to a 'controlling interest' for the purpose of subparagraph 103A(2)(d)(iv) of the ITAA 1936. However, to satisfy subparagraph 103A(2)(d)(iv), the interest held through the chain of subsidiary companies must also be sufficient to amount to a controlling interest and that control must be held by the government on the last day of the year of income.", "Date_of_Decision": "7 September 2011", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 Division 7 of Part III section 103A subsection 103A(1) subsection 103A(2) paragraph 103A(2)(d) subparagraph 103A(2)(d)(iv) Part X", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/73", "Subject_References": "Control of a company Public companies", "Case_References": "Kolotex Hosiery (Australia) Pty Ltd v Federal Commissioner of Taxation (1973) 130 CLR 64 (1973) 73 ATC 4094 (1973) 4 ATR 24", "Other_References": "House of Representatives Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 8) 1999 House of Representatives Explanatory Memorandum to the New International Tax Arrangements Bill 2003 House of Representatives Explanatory Memorandum to the New International Tax Arrangements (Participation Exemption and Other Measures) Bill 2004 House of Representatives Explanatory Memorandum to the New Business Tax System (Thin Capitalisation) Bill 2001", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201174", "Unmatched_Content": "Keywords Control of a company Public companies"}
{"ATO_ID_Number": "ATO ID 2008/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "A cell in a protected cell company formed in Guernsey and the controlled foreign company measures", "Issue": "Will an individual 'cell' in a protected cell company incorporated under Guernsey law, in respect of which a taxpayer subscribes for redeemable preference shares (RPS), be a controlled foreign company (CFC) for the purposes of section 340 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. An individual cell in a Guernsey protected cell company, in respect of which a taxpayer subscribes for RPS, will not be a CFC for the purposes of section 340 of the ITAA 1936.", "Facts": "An Australian resident taxpayer subscribes for redeemable preference shares (RPS) in respect of a relevant individual cell in a Guernsey protected cell company (protected cell company). The protected cell company is a limited liability company incorporated under Guernsey's Protected Cell Companies Ordinance 1997 (as amended by Ordinance No.V of 1997; by No. XV of 1998; by No. XXI of 2005) (the PCC Ordinance) and registered under the provisions of The Companies (Guernsey) Law 1994 (as amended). The protected cell company may form one or more cells.", "Reasons_for_Decision": "Summary: Section 340 of the ITAA 1936 provides that a company is a CFC at a particular time if, at that time, the company is a resident of a listed country or of an unlisted country and satisfies one of the three control tests contained therein. Whether a cell in a protected cell company is a CFC for the purposes of section 340 of the ITAA 1936 requires the determination of whether a cell in a protected cell company constitutes a company. The term 'company' is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to mean: The term 'body corporate' is not defined in the ITAA 1936 or the ITAA 1997. The Commissioner has considered the meaning of the term 'body corporate' in Miscellaneous Taxation MT 2006/1 - The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number (ABN). Paragraph 30 of MT 2006/1 states that the term 'body corporate' has the following meaning: 'Body Corporate' is not a defined term. The term takes its meaning from the general law. 'Body corporate' is a general term to describe an artificial entity having separate legal existence. A body corporate has the ability to continue in existence indefinitely and to keep its identity regardless of changes to its membership. It also has the power to act, hold property, enter into legal contract, sue and be sued in its own name, just as a natural person can. The protected cell company is incorporated under the PCC Ordinance and registered under the provisions of the Companies (Guernsey) Law 1994 (as amended). By virtue of section 1(2) of the PCC Ordinance, the protected cell company itself is a legal person and is therefore a 'body corporate' for the purposes of paragraph (a) of the definition of 'company' in subsection 995-1(1) of the ITAA 1997. The taxpayer will become a shareholder in the protected cell company by subscribing for RPS in respect of a particular cell in the protected cell company, and therefore becomes a member of a 'body corporate'. The taxpayer will not become a member of any other 'company', as that term is defined in subsection 995-1(1) of the ITAA 1997, within the protected cell company through the subscription of RPS in the protected cell company. Accordingly, the protected cell company itself is a 'company' as that term is defined in subsection 995-1(1) of the ITAA 1997. Each individual cell in the protected cell company is not a company under subsection 995-1(1) of the ITAA 1997 and therefore cannot be a CFC for the purposes of section 340 of the ITAA 1936.", "Date_of_Decision": "16 January 2008", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Miscellaneous Taxation Ruling MT 2006/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Controlled foreign companies Guernsey International tax", "Case_References": "", "Other_References": "Protected Cell Companies (Guernsey) Ordinance 1997 subsection 1(2) The Companies (Guernsey) Law 1994", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200823", "Unmatched_Content": "*denotes a term defined in subsection 995-1(1) of the ITAA 1997 | Related Public Rulings (including Determinations) Miscellaneous Taxation Ruling MT 2006/1 | Keywords Controlled foreign companies Guernsey International tax"}
{"ATO_ID_Number": "ATO ID 2014/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Canadian Convention - Article 15(2)(c): Deductibility of employees' remuneration in determining the taxable profits of the deemed Australian permanent establishment of a non-resident employer", "Issue": "For the purpose of determining under Article 15 of the Convention between Australia and Canada for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [1981] ATS 14 (the Canadian Convention) Australia's right to tax the remuneration of a Canadian resident employee working in Australia, is the remuneration deductible in determining the taxable profits of the deemed permanent establishment (PE) of the employee's Canadian resident employer?", "Decision": "Yes. For the purpose of determining Australia's taxing rights under Article 15 of the Canadian Convention, the remuneration is deductible in determining the taxable profits of the deemed PE of the Canadian employer because the payment of the remuneration is attributable to the deemed PE under Article 7 of the Canadian Convention.", "Facts": "A Canadian resident employer (CanCo) employed a Canadian resident employee under terms requiring the employee to exercise his employment in Australia, working for CanCo's Australian subsidiary (AusCo) for approximately four months (the agreed period) in the income year. AusCo has a contract with an Australian entity to provide essential services in the agreed period using substantial equipment (Essential Services Agreement). AusCo did not have the substantial equipment and its own employees to carry out the contract. AusCo entered into an agreement with CanCo to lease from CanCo its substantial equipment during the agreed period (Equipment Lease Agreement). AusCo also entered into a separate service agreement with CanCo for the secondment of CanCo's employees, including the Canadian resident employee, to operate and maintain the equipment during the agreed period (Service Agreement). AusCo pays CanCo a service fee under the Service Agreement and lease fees under the Equipment Lease Agreement. The Canadian resident employee follows instructions given by CanCo and reports daily to CanCo during his secondment to AusCo. CanCo continues to pay the remuneration of the employee, including the cost of workers' compensation, benefits, and entitlements, and deducts income tax and remits the amounts to the Canada Revenue Agency.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident includes their ordinary income derived directly or indirectly from all Australian sources during the income year. The ultimate issue is whether Australia has a taxing right over the remuneration the Canadian employer paid to the non-resident Canadian employee. This involves considering not only the domestic income tax laws but also any applicable tax treaty as defined in section 3AAA or section 3AAB of the International Tax Agreements Act 1953 (Agreements Act). Subsection 4(1) of the Agreements Act incorporates the Income Tax Assessment Act 1936 and the ITAA 1997 so that those Acts are read as one with the Agreements Act. Subsection 4(2) of the Agreements Act provides that the Agreements Act will prevail (except for some limited provisions) where there are inconsistent provisions between the relevant Acts. Section 6A of the Agreements Act gives effect to the Canadian Convention and must be used in determining the source of income derived by the Canadian resident employer and the Canadian employee. Under Article 15(1) of the Canadian Convention, Australia has the right to tax the remuneration of the Canadian resident employee as their employment is exercised in Australia subject to Article 15(2). Article 15(2) of the Canadian Convention provides that the remuneration derived by an individual who is a resident of Canada in respect of employment exercised in Australia shall be taxable only in Canada if all of the following requirements have been met: In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531 ( Thiel ), the High Court accepted that the OECD Model Taxation Convention's official Commentaries (the OECD Commentary) may be relevant to the interpretation of Double Tax Agreements based on the OECD Model Tax Convention on Income and on Capital. In Thiel , the High Court approved recourse to the OECD Model Tax Convention and Commentaries under Article 32 of the Vienna Convention on the Law of Treaties (see paragraph 90 of the Taxation Ruling TR 2001/13). Paragraph 6.2 of the OECD Commentary on Article 15 (the relevant terms of which are substantially identical to those of Article 15 of the Canadian Convention) states that: the object and purpose of subparagraphs b) and c) of paragraph 2 are to avoid the source taxation of short-term employments to the extent that the employment income is not allowed as a deductible expense in the State of source because the employer is not taxable in that State as he neither is a resident nor has a permanent establishment therein. Paragraph 7 of the OECD Commentary on Article 15 provides that the exemption in Article 15(2): ... is given on condition that the remuneration is not borne by that permanent establishment. The phrase \"borne by\" must be interpreted in the light of the underlying purpose of subparagraph c) of the Article, which is to ensure that the exception provided for in paragraph 2 does not apply to remuneration that could give rise to a deduction, having regard to the principles of Article 7 and the nature of the remuneration, in computing the profits of a permanent establishment situated in the State in which the employment is exercised. Paragraph 7.1 of the OECD Commentary on Article 15 further elaborates that: the fact that the employer has, or has not, actually claimed a deduction for the remuneration in computing the profits attributable to the permanent establishment is not necessarily conclusive since the proper test is whether any deduction otherwise available with respect to that remuneration should be taken into account in determining the profits attributable to the permanent establishment. In this case, it is considered that although the Equipment Lease Agreement and the Service Agreement are separate legal agreements they are interdependent in their operation. Article 7(1) of the Canadian Convention provides that the profits of an enterprise of one of the Contracting States shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a PE situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to that PE. Article 7(3) of the Canadian Convention provides that: in the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses of the enterprise, being expenses which are incurred for the purposes of the permanent establishment ... Article 5(4)(b) of the Canadian Convention deems an enterprise to have a PE in one of the Contracting States and to carry on business through that PE if substantial equipment is being used in that State by, for or under contract with the enterprise other than in connection with a building site or construction, installation or assembly project of the enterprise. Within the meaning of Articles 5 and 7 of the Canadian Convention, the fact that CanCo leases and operates substantial equipment in Australia, means that CanCo has a deemed PE in Australia through which it carries on business in Australia. The profits of CanCo from the Equipment Lease Agreement and the Service Agreement are profits attributable to the business that CanCo is deemed to carry on in Australia through its deemed PE in Australia, and are profits that are therefore taxable in Australia. The business profits of CanCo from the provision of employees under the Service Agreement are also considered attributable under Article 7 of the Canadian Convention to the deemed PE. The remuneration of the Canadian resident employee in the agreed period is income derived in respect of the employee's employment exercised in Australia. It is also an expense CanCo incurred in fulfilling its obligations under the Service Agreement to supply personnel to operate and maintain the substantial equipment. Under Article 7(3) of the Canadian Convention that expense is an allowable deduction in determining the profits of CanCo's deemed PE in Australia. By reason of Article 22(1) of the Canadian Convention the business profits of CanCo which under Article 7 are taxable by Australia are deemed to have an Australian source. Accordingly, CanCo is assessable on those profits, as having an Australian source, under subsection 6-5(3) of the ITAA 1997. Paragraph 8-1(1)(a) of the ITAA 1997 allows a deduction from assessable income for any loss or outgoing that is incurred in gaining or producing assessable income. The remuneration CanCo paid the Canadian resident employee in respect of his employment exercised in Australia is thus deductible under section 8-1. Since the remuneration of the Canadian employee is deductible under section 8-1 of the ITAA 1997 in determining the taxable profits of the deemed PE of CanCo, the requirement in Article 15(2)(c) of the Canadian Convention that the remuneration is not deductible has not been met. Accordingly, Australia has the right to tax the remuneration of the Canadian resident employee working in Australia.", "Date_of_Decision": "16 May 2014", "Year_of_Income": "Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3) section 8-1 paragraph 8-1(1)(a)", "Related_Public_Rulings_and_Determinations": "TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "double tax agreements international law international tax permanent establishment substantial equipment treaties", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "Canadian Convention [1981] ATS 14 Article 5 Article 5(4)(b) Article 7 Article 7(1) Article 7(3) Article 15(1) Article 15(2) Article 15(2)(c) Article 22(1) OECD Model Tax Convention on Income and on Capital OECD Commentaries on the Articles of the Model Tax Convention Vienna Convention on the Law of Treaties Article 32", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201420", "Unmatched_Content": "Formatting and punctuation | Legislative reference corrected | Related Public Rulings (including Determinations) TR 2001/13 | Keywords double tax agreements international law international tax permanent establishment substantial equipment treaties"}
{"ATO_ID_Number": "ATO ID 2013/28", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Japanese Special Income Tax for Reconstruction and Article 2 of the Japanese Double Tax Convention", "Issue": "For the purposes of Article 2(2) of the Japanese convention (the Convention between Australia and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [2008] ATS 21), is the Japanese Special Income Tax for Reconstruction 'substantially similar' to the 'existing taxes' referred to in Article 2(1)(a) of the Japanese convention?", "Decision": "Yes. The Special Income Tax for Reconstruction is 'substantially similar' to the Japanese Income Tax which, under Article 2(1)(a)(i), is a tax to which the Japanese convention applies.", "Facts": "The Special Income Tax for Reconstruction is a tax introduced by the Government of Japan through The Act on the Special Measures Concerning Securing Financial Resources Necessary for Implementing Measures for Reconstruction in Response to the Great East Japan Earthquake (the Act). Article 8 of the Act states that residents and non-residents that are required to pay income tax under the Income Tax Act are required to pay the Special Income Tax for Reconstruction. Article 9 of the Act states that the Special Income Tax for Reconstruction is levied on the Base Amount of Income Tax of each calendar year from 2013 to 2037. Article 10 of the Act states: \"Base Amount of Income Tax\" means the amount of Income Tax described below for persons described below. (i) Resident except non-permanent resident: the amount of Income Tax regarding the income stated on Article 7.1(i) of the Income Tax Act calculated by the laws regarding Income Tax (ii) Non-permanent resident: the amount of Income Tax regarding the income stated on Article 7.1(ii) of the Income Tax Act calculated by the laws regarding Income Tax (iii) Non-resident: the amount of Income Tax regarding the income stated on Article 7.1(iii) of the Income Tax Act calculated by the laws regarding Income Tax Article 13 of the Act sets the amount of Special Income Tax for Reconstruction for an individual as being a specified percentage rate of the Base Amount of Income Tax for each calendar year.", "Reasons_for_Decision": "Summary: Article 2(1)(a) of the Japanese Convention lists the Japanese existing taxes to which the Japanese Convention applies as follows: For present purposes, Article 2(2) of the Japanese Convention provides that the Japanese Convention also applies to any identical or substantially similar Japanese taxes imposed after the date the Japanese Convention was signed in addition to, or in place of, the existing taxes referred to in Article 2(1)(a). The term 'substantially similar' is not defined in the Japanese Convention. Article 3(2) of the Japanese Convention provides for present purposes that unless the context otherwise requires, any term not defined in the Convention shall have the meaning which it has at that time under Australian law (as Australia is applying the Japanese Convention) concerning the taxes to which the Convention applies. Also, any meaning under Australian tax law shall prevail over the meaning given to the term under other Australian law. As 'substantially similar' is not defined in Australian statute or common law, guidance may be drawn from the ordinary meaning of the term. In this regard, Article 31(1) of the Vienna Convention on the Law of Treaties (the Vienna Convention) as set out at paragraph 97 of Taxation Ruling TR 2001/13 provides that a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. The Macquarie Dictionary defines the word 'similar' as: having likeness or resemblance, especially in a general way. The meanings in the Macquarie Dictionary of the adjective 'substantial' of which 'substantially' is the adverb include the following: 1. of a corporeal or material nature; real or actual. ... 4. being such with respect to essentials: two stories in substantial agreement. ... 7. relating to the substance, matter, or material of a thing. ... 8. of or relating to the essence of a thing, essential, material, or important. ... In the present context, the Commissioner considers the meaning of the term 'substantially similar' is that the relevant tax has a material likeness or resemblance to the taxes listed in Article 2 having regard to the essential elements of the taxes. The essence of the approach in Virgin Holdings SA v. Federal Commissioner of Taxation [2008] FCA 1503; 2008 ATC 20-051; (2008) 70 ATR 478 (Virgin Holdings SA) in establishing whether the capital gains tax introduced under Part IIIA of the Income Tax Assessment Act 1936 (ITAA 1936) after the signing of the Swiss agreement ( Agreement between Australia and Switzerland for the Avoidance of Double Taxation with respect to Taxes on Income, and Protocol [1981] ATS 5) is a 'substantially similar' tax to the Australian income tax for the purposes of Article 2(2) of the Swiss Agreement was that Edmonds J: In considering the same issue in the context of Article 1(2) of the United Kingdom 1967 agreement ( Agreement between the Government of the Commonwealth of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains [1968] ATS 9), Lindgren J in Undershaft No 1 v. Federal Commissioner of Taxation [2009] FCA 41; 2009 ATC 20-091 concluded: 131. In my view, the only assumption to be made for the purposes of Art 1(2) is that the Pt IIIA regime tax is not within the expressions \"the Commonwealth income tax\" and I am not to go further and make any assumptions as to the reason. The Pt IIIA regime tax can then be seen to be substantially similar to the remaining tax for which the ITAA 1936 provided, if for no other reason than because other kinds of capital gains remain included in a taxpayer's assessable income. Similar to Edmonds J in Virgin Holdings SA , Lindgren J considered that a taxpayer's assessable income included capital gains at points before and after the entry into force of the United Kingdom 1967 agreement. Also, the approach of Klaus Vogel in his book Klaus Vogel on Double Taxation Conventions 3rd ed., Kluwer law International, 1997 at page 157, paragraph 53 (also quoted with approval by Kelly J of the Irish High Court in Kinsella v Revenue Commissioners [2007] IEHC 250) is consistent with the approach used in the cases above: What is necessary is a comprehensive comparison of the tax laws' constituent elements. In such a comparison, the new tax under review, rather than being compared merely with a solitary older one (to which it will always be similar in some respects and different in others), should be considered with reference to all types of taxes historically developed within the State in question - and of States with related legal systems - in order to determine which of such traditional taxes comes closest to the new tax (Vogel/Walter, supra m.no. 1, Rdnr. 102-106). Whether a tax is 'substantially similar' to another can, consequently, not be decided otherwise than against the background of the entire tax system... From the approaches above, a comparison of the essential elements of the Special Income Tax for Reconstruction with the existing income tax regime show that the Special Income Tax for Reconstruction is a tax: Accordingly, the Commissioner considers that, as the Special Income Tax for Reconstruction imposed by the Government of Japan has a material likeness or resemblance to the existing Income Tax, it is a 'substantially similar' tax to the 'existing taxes' in Japan for the purposes of Article 2(2) of the Japanese Convention.", "Date_of_Decision": "7 May 2013", "Year_of_Income": "Years ending 2013 to 2018", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "double tax agreements international tax tax treaties and other agreements Japan", "Case_References": "Virgin Holdings SA v. Federal Commissioner of Taxation [2008] FCA 1503 2008 ATC 20-051 (2008) 70 ATR 478", "Other_References": "Japanese Convention [2008] ATS 21 Swiss Agreement and Protocol [1981] ATS 5 United Kingdom Convention [2003] ATS 22 The Act on the Special Measures Concerning Securing Financial Resources necessary for Implementing Measures for Reconstruction in response to the Great East Japan Earthquake. The Macquarie Dictionary Online, 2009, 5th edition, Macquarie Dictionary Publishers Pty Ltd Klaus V 1997, Klaus Vogel on Double Taxation Conventions 3rd ed., Kluwer law International, p. 157.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201328", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords double tax agreements international tax tax treaties and other agreements Japan"}
{"ATO_ID_Number": "ATO ID 2013/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Japanese Special Corporation Tax for Reconstruction and Article 2 of the Japanese Double Tax Convention", "Issue": "For the purposes of Article 2(2) of the Japanese convention (the Convention between Australia and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [2008] ATS 21), is the Japanese Special Corporation Tax for Reconstruction 'substantially similar' to the 'existing taxes' referred to in Article 2(1)(a) of the Japanese convention?", "Decision": "Yes. The Special Corporation Tax for Reconstruction is 'substantially similar' to the Japanese Corporation Tax which, under Article 2(1)(a)(ii) of the Japanese Convention, is a tax to which the Japanese Convention applies.", "Facts": "The Special Corporation Tax for Reconstruction is a tax introduced by the Government of Japan through The Act on the Special Measures Concerning Securing Financial Resources Necessary for Implementing Measures for Reconstruction in Response to the Great East Japan Earthquake (the Act). Article 40 of the Act states that the Special Corporation Tax for Reconstruction is levied between 1 April 2012 and 31 March 2015. Article 42 of the Act states that corporations are required to pay Special Corporation Tax for Reconstruction. Article 43 of the Act states that the Special Corporation Tax for Reconstruction is levied on the Base Amount of Corporation Tax of each taxable fiscal year. Article 44 of the Act states: \"Base Amount of Corporation Tax\" means the amount as described below for the persons described below: (i) Corporation except Consolidated Parent Corporation: the amount of Corporation tax regarding the income of each fiscal year which is the tax base of Corporation Tax calculated by the laws regarding Corporation Tax (ii) Consolidated Parent Corporation: the amount of Corporation tax regarding the consolidated income of each fiscal year which is the tax base of Corporation Tax calculated by the laws regarding Corporation Tax Article 47 of the Act states: Article 48 of the Act sets the amount of Special Corporation Tax for Reconstruction as being a specified percentage rate of the Amount of Tax Base Corporation Tax for each fiscal year.", "Reasons_for_Decision": "Summary: Article 2(1)(a) of the Japanese Convention states that the existing taxes to which the Japanese Convention applies in the case of Japan are: For present purposes, Article 2(2) of the Japanese Convention provides that the Japanese Convention also applies to any identical or substantially similar Japanese taxes imposed after the date the Japanese Convention was signed in addition to, or in place of, the existing taxes referred to in Article 2(1)(a). The term 'substantially similar' is not defined in the Japanese Convention. Article 3(2) of the Japanese Convention provides for present purposes that unless the context otherwise requires, any term not defined in the Convention shall have the meaning which it has at that time under Australian law (as Australia is applying the Japanese Convention) concerning the taxes to which the Convention applies. Also, any meaning under Australian tax law shall prevail over the meaning given to the term under other Australian law. As 'substantially similar' is not defined in Australian statute or common law, guidance may be drawn from the ordinary meaning of the term. In this regard, Article 31(1) of the Vienna Convention on the Law of Treaties (the Vienna Convention) as set out at paragraph 97 of Taxation Ruling TR 2001/13 provides that a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. The Macquarie Dictionary defines the word 'similar' as: having likeness or resemblance, especially in a general way. The meanings in the Macquarie Dictionary of the adjective 'substantial' of which 'substantially' is the adverb include the following: 1. of a corporeal or material nature; real or actual. ... 4. being such with respect to essentials: two stories in substantial agreement. ... 7. relating to the substance, matter, or material of a thing. ... 8. of or relating to the essence of a thing, essential, material, or important. ... In the present context, the Commissioner considers the meaning of the term 'substantially similar' is that the relevant tax has a material likeness or resemblance to the taxes listed in Article 2 having regard to the essential elements of the taxes. The essence of the approach in Virgin Holdings SA v. Federal Commissioner of Taxation [2008] FCA 1503; 2008 ATC 20-051; (2008) 70 ATR 478 (Virgin Holdings SA) in establishing whether the capital gains tax introduced under Part IIIA of the Income Tax Assessment Act 1936 (ITAA 1936) after the signing of the Swiss agreement (Agreement between Australia and Switzerland for the Avoidance of Double Taxation with respect to Taxes on Income, and Protocol [1981] ATS 5) is a 'substantially similar' tax to the Australian income tax for the purposes of Article 2(2) of the Swiss Agreement was that Edmonds J: In considering the same issue in the context of Article 1(2) of the United Kingdom 1967 agreement (Agreement between the Government of the Commonwealth of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains [1968] ATS 9), Lindgren J in Undershaft No 1 v. Federal Commissioner of Taxation [2009] FCA 41; 2009 ATC 20-091 concluded: 131. In my view, the only assumption to be made for the purposes of Art 1(2) is that the Pt IIIA regime tax is not within the expressions \"the Commonwealth income tax\" and I am not to go further and make any assumptions as to the reason. The Pt IIIA regime tax can then be seen to be substantially similar to the remaining tax for which the ITAA 1936 provided, if for no other reason than because other kinds of capital gains remain included in a taxpayer's assessable income. Similar to Edmonds J in Virgin Holdings SA, Lindgren J considered that a taxpayer's assessable income included capital gains at points before and after the entry into force of the United Kingdom 1967 agreement. Also, the approach of Klaus Vogel in his book Klaus Vogel on Double Taxation Conventions 3rd ed., Kluwer law International, 1997 at page 157, paragraph 53 (also quoted with approval by Kelly J of the Irish High Court in Kinsella v Revenue Commissioners [2007] IEHC 250) is consistent with the approach used in the cases above: What is necessary is a comprehensive comparison of the tax laws' constituent elements. In such a comparison, the new tax under review, rather than being compared merely with a solitary older one (to which it will always be similar in some respects and different in others), should be considered with reference to all types of taxes historically developed within the State in question - and of States with related legal systems - in order to determine which of such traditional taxes comes closest to the new tax (Vogel/Walter, supra m.no. 1, Rdnr. 102-106). Whether a tax is 'substantially similar' to another can, consequently, not be decided otherwise than against the background of the entire tax system... From the approaches above, a comparison of the essential elements of the Special Corporation Tax for Reconstruction with the existing corporation tax regime show that the Special Corporation Tax for Reconstruction is a tax: Accordingly, the Commissioner considers that, as the Special Corporation Tax for Reconstruction imposed by the Government of Japan has a material likeness or resemblance to the existing Corporation Tax, it is a 'substantially similar' tax to the 'existing taxes' in Japan for the purposes of Article 2(2) of the Japanese Convention.", "Date_of_Decision": "7 May 2013", "Year_of_Income": "Years ending 2012 to 2015", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "double tax agreements international tax tax treaties and other agreements Japan", "Case_References": "Virgin Holdings SA v. Federal Commissioner of Taxation [2008] FCA 1503 2008 ATC 20-051 (2008) 70 ATR 478", "Other_References": "Japanese Convention [2008] ATS 21 Swiss Agreement and Protocol [1981] ATS 5 United Kingdom Convention [2003] ATS 22 The Act on the Special Measures Concerning Securing Financial Resources necessary for Implementing Measures for Reconstruction in response to the Great East Japan Earthquake. The Macquarie Dictionary Online, 2009, 5th edition, Macquarie Dictionary Publishers Pty Ltd Klaus V 1997, Klaus Vogel on Double Taxation Conventions 3rd ed., Kluwer law International, p. 157.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201329", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords double tax agreements international tax tax treaties and other agreements Japan"}
{"ATO_ID_Number": "ATO ID 2012/2", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Irish Universal Social Charge and Article 2 of the Irish Double Tax Agreement", "Issue": "Is the Universal Social Charge imposed by the Government of Ireland a 'substantially similar' tax to the existing taxes in Ireland under Article 2(2) of the Agreement between the Government of Australia and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains [1983] ATS 25 (the Irish Agreement)?", "Decision": "Yes. The Universal Social Charge imposed by the Government of Ireland is a 'substantially similar' tax to the existing taxes in Ireland under Article 2(2) of the Irish Agreement.", "Facts": "Universal Social Charge (USC) The USC was introduced by the Government of Ireland through amendments under the Finance Act 2011 to the Taxes Consolidation Act 1997 (TCA). Subsection 531AM(1) of the TCA imposes the USC with effect from 1 January 2011. Generally, resident individuals of Ireland are liable to pay the USC if their gross income exceeds a certain threshold. Non resident individuals of Ireland are also liable to pay the USC on income sourced from Ireland. The USC is generally calculated based on the gross income of the individual by applying the progressive rates after any relief for certain losses and capital allowances, but before pension contributions. The USC is payable by an individual taxpayer as part of their annual tax assessment in addition to Irish 'income tax'. The USC is a separate charge to income tax and there are no deductions or credits due against it. Excess or unused tax credits cannot be used to reduce an individual's liability to the USC. Subsections 531AS(1) and 531AT(1) of the TCA provides that the USC payable is due and payable in all respects as if it were an amount of income tax due and payable under the Income Tax Acts. Subsections 531AS(3) and 531AT(2) of the TCA have the effect that the USC may be stated in one sum with the amount of income tax contained in any computation of, or any assessment to, income tax made by or on such individual. Irish Income Tax The Irish income tax is imposed by the Government of Ireland under the TCA. All individuals who are resident in Ireland for tax purposes are liable to pay Irish income tax on their total world-wide income. Non resident individuals who are not ordinarily resident and domiciled in Ireland are liable to income tax on their Irish sourced income. There is no statutory definition of the word 'income' under the Irish income tax legislation. Under the Irish income tax law, the tax payable by an individual for an income tax year requires the ascertainment of the individual's 'total income' for the year. The term 'total income' is defined in subsection 3(1) of the TCA as 'total income from all sources as estimated in accordance with the Income Tax Acts'. The individual's 'taxable income' is determined by deducting certain allowances or reliefs from the total income. The Irish income tax payable for the year is then calculated by applying the appropriate income tax rates to the 'taxable income' of the individual taxpayer.", "Reasons_for_Decision": "Summary: Article 2(1)(b) of the Irish Agreement states that the existing taxes to which the Irish Agreement applies in the case of Ireland are: Article 2(2) of the Irish Agreement provides that the Irish Agreement also applies to any identical or 'substantially similar' taxes imposed after the date the Irish Agreement was signed in addition to, or in place of the existing taxes. The term 'substantially similar' is not defined in the Irish Agreement. Article 3(3) of the Irish Agreement provides that unless the context otherwise requires, any term not defined in the Agreement shall have the meaning which it has under the law of the State relating to the taxes to which the Agreement applies. Taxation Ruling TR 2001/13 'Income tax: Interpreting Australia's Double Tax Agreements' states in paragraph 72 that when a term in a tax treaty is not defined in the tax treaty, reference is therefore to be made to the meaning of the term for the purposes of the domestic tax laws of the country applying the tax treaty, unless the context otherwise requires. Further, paragraph 64 of TR 2001/13 states that in interpreting undefined terms in a tax treaty, the domestic law meaning for this purpose may, for Australia, be the statute-defined meaning, or where there is no relevant statutory definition, the 'common law' meaning of the term. As 'substantially similar' is not defined in Australia's domestic tax law provisions, guidance may be drawn from the ordinary meaning of the term. The Macquarie Dictionary defines the word 'similar' as: having likeness or resemblance, especially in a general way. The meanings in the Macquarie Dictionary of the adjective 'substantial' of which 'substantially' is the adverb include the following: In the present context, the Commissioner considers the meaning of the term 'substantially similar' is that the relevant tax has a material likeness or resemblance to the taxes listed in Article 2 taking into account the essential elements of the taxes such as the base upon which it is imposed and manner of computation. This view accords with the approach taken by Klaus Vogel in his book on Klaus Vogel et al, Klaus Vogel on Double Taxation Conventions 3rd ed., Kluwer law International, 1997 at 157 (also quoted with approval by Kelly J of the Irish High Court in Kinsella v Revenue Commissioners [2007] IEHC 250): 'What is necessary is a comprehensive comparison of the tax laws' constituent elements. In such a comparison, the new tax under review, rather than being compared merely with a solitary older one (to which it will always be similar in some respects and different in others), should be considered with reference to all types of taxes historically developed within the State in question - and of States with related legal systems - in order to determine which of such traditional taxes comes closest to the new tax ( Vogel / Walter , supra m.no.1, Rdnr. 102-106). Whether a tax is 'substantially similar' to another can, consequently, not be decided otherwise than against the background of the entire tax system. This is consistent with the approach taken by Edmonds J in Virgin Holdings SA v. Federal Commissioner of Taxation [2008] FCA 1503; 2008 ATC 20-051; (2008) 70 ATR 478 (Virgin Holdings SA). In establishing whether the capital gains tax introduced under Part IIIA of the Income Tax Assessment Act 1936 (ITAA 1936) after the signing of Australia's tax treaty with Switzerland (the Swiss Agreement) is a 'substantially similar' tax to the Australian income tax for the purposes of Article 2(2) of the Swiss Agreement, Edmonds J stated: Where a tax on capital gains is effected, as it has been in this country, by the inclusion of the capital gains, or some figure computed there from, in the tax base upon which income tax is imposed on an annual basis, I have great difficulty in comprehending why the tax on the capital gain is not substantially similar, if not identical, to the income tax on the tax base not including the capital gain or the figure computed there from... Second, if the tax with respect to which the tax on capital gains is being compared for similarity, also taxes capital gains, albeit depending on circumstances (s 25A) and time (s 26AAA) of acquisition, the more readily will a conclusion of substantial similarity be reached... In essence Edmonds J: In considering the same question as that stated above in Virgin Holdings SA in the context of Article 1(2) of the 1967 tax treaty between Australia and the United Kingdom, Lindgren J in Undershaft No 1 v. Federal Commissioner of Taxation [2009] FCA 41; 2009 ATC 20-091 concluded: 131. In my view, the only assumption to be made for the purposes of Art 1(2) is that the Pt IIIA regime tax is not within the expressions \"the Commonwealth income tax\" and I am not to go further and make any assumptions as to the reason. The Pt IIIA regime tax can then be seen to be substantially similar to the remaining tax for which the ITAA 1936 provided, if for no other reason than because other kinds of capital gains remain included in a taxpayer's assessable income. Following the approach used in the above cases, a comparison of the essential elements of the USC with the existing income tax regime show that: Although there are certain differences between the Irish income tax and the USC, including the applicable tax rates, the available deductions and exemptions, the Commissioner considers that the USC is 'substantially similar' to the Irish income tax as both are taxes imposed by the Government of Ireland, under the TCA, in respect of income derived by individuals. Accordingly, the Commissioner considers that the USC imposed by the Government of Ireland is a 'substantially similar' tax to the existing taxes in Ireland for the purposes of Article 2(2) of the Irish Agreement.", "Date_of_Decision": "13 December 2011", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/24", "Subject_References": "Double tax agreements International tax Treaties Republic of Ireland", "Case_References": "Virgin Holdings SA v Federal Commissioner of Taxation [2008] FCA 1503 2008 ATC 20-051 (2008) 70 ATR 478", "Other_References": "Irish Agreement [1983] ATS 25 Article 2 Article 2(1) Article 2(2) Finance Act 2011 (Ireland) Taxes Consolidation Act 1997 (Ireland) The Macquarie Dictionary, 2009, 5th edition, Macquarie Dictionary Publishers Pty Ltd.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20122", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Treaties Republic of Ireland"}
{"ATO_ID_Number": "ATO ID 2012/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dual resident of Australia and Malaysia: permanent home available", "Issue": "Is a home in Australia owned by the taxpayer, a dual resident, a 'permanent home available to him' for the purposes of Article 4.2(a) of the Malaysian agreement ( Agreement between the Government of Australia and the Government of Malaysia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [1981] ATS 15) where the taxpayer entered into a two year fixed term lease agreement with another person in respect of that home while he worked in Malaysia?", "Decision": "No. The taxpayer's home in Australia is not 'available to him' for the purposes of Article 4.2(a) of the Malaysian agreement for the term of the lease agreement.", "Facts": "At all material times, the taxpayer owns a house in Western Australia. After living in that house and working in Australia, the taxpayer contracts with his employer to work in Malaysia for a period of two years. At that time, the taxpayer anticipates that he will return to live in Australia when his employment contract ends. Under Article 4.1 of the Malaysian agreement, the taxpayer is a resident of Australia and Malaysia for the purposes of Australian and Malaysian tax respectively (a 'dual resident') for the two year period the taxpayer works in Malaysia. Prior to travelling to Malaysia, the taxpayer leases his house in Australia to another person for a fixed term of two years ('the lease period'), the same period of time the taxpayer expects to be in Malaysia. The terms of the lease agreement are subject to the Residential Tenancy Act 1987 (WA). For the term of the lease agreement:", "Reasons_for_Decision": "Summary: Article 4.2(a) of the Malaysian agreement provides that a dual resident shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him. The term 'permanent home available to him' in Article 4.2(a) is not defined in the Malaysian agreement. Article 3.3 of the Malaysian agreement provides for present purposes that, in Australia applying the agreement, any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under Australian law. Neither the composite phrase 'permanent home available to him' nor any part of that phrase is, relevantly, defined in Australian law. The Australian Oxford Dictionary, 2004, rev. 2nd edn, Oxford University Press , defines available as \"capable of being used; at one's disposal.\" In the present case, the taxpayer has a home in Australia and he continued to own that home while he was living and working overseas. From the above, the lease agreement does not contain any conditions that allow the taxpayer, as lessor, to terminate the agreement and force the tenant from the home without due notice or process under the Residential Tenancy Act 1987 (WA). Applying the ordinary meaning to the present case, the taxpayer is not able to occupy his home at any time during the lease period. In this sense, the taxpayer is not capable of using the home in this way nor, in the same sense, is it at the taxpayer's disposal. Accordingly, based on the rights of the lessee under the lease agreement and the RTA, the Commissioner considers that the taxpayer's home is not 'available to him' for the term of the lease agreement for the purposes of Article 4.2(a). This result is also consistent with the concept of the 'permanence' of the home set out in paragraphs 12 and 13 of the Commentary on Article 4 of the OECD Model which state: '12. Subparagraph a) means, therefore, that in the application of the Convention ...it is considered that the residence is that place where the individual owns or possesses a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be a short duration. 13. As regards the concept of home, it should be observed that any form of home may be taken into account (house or apartment belonging to or rented by the individual, rented furnished room). But the permanence of the house is essential; this means that the individual has arranged to have the dwelling available to him at all times continuously, and not occasionally for the purpose of a stay which, owing to the reasons for it, is necessarily of short duration (travel for pleasure, business travel, educational travel, attending a course at a school, etcetera.).' In the present case, the taxpayer's home does not satisfy the notion of permanence as described in paragraph 13 above in that, for the period of the lease agreement, the taxpayer has not 'arranged to have the dwelling available to him at all times continuously'. Therefore, the home is not 'available to him' for the term of the lease agreement for the purposes of Article 4.2(a) of the Malaysian agreement.", "Date_of_Decision": "9 November 2012", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "International Tax Agreements Amendment Act (No 1) 2011 Article 3.3 Article 4.1 Article 4.2(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Treaties Tax Treaties and other agreements Dual residence International tax Residence in Australia Residence of individuals Malaysia", "Case_References": "", "Other_References": "Malaysia Agreement [1981] ATS 15 Australian Oxford Dictionary, 2004, rev. 2nd edn, Oxford University Press Commentary on Article 4 of the OECD Model Tax Convention on Income and on Capital as at 22 July 2010", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201293", "Unmatched_Content": "Keywords Double tax agreements Treaties Tax Treaties and other agreements Dual residence International tax Residence in Australia Residence of individuals Malaysia"}
{"ATO_ID_Number": "ATO ID 2011/14", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dividend withholding tax: dividend paid by an Australian resident company to a New Zealand Limited Partnership", "Issue": "Is a New Zealand resident company, which is a limited partner with a 77 per cent interest in a New Zealand limited partnership (NZLP) that owns shares carrying 49 per cent of the voting power in an Australian resident company paying dividends, a company that 'holds directly' at least 10 per cent of the voting power in the Australian company paying dividends for the purposes of Article 10.2(a) of the tax treaty between Australia and New Zealand (2009 NZ Convention)?", "Decision": "No. In these circumstances, the New Zealand resident is not a company that 'holds directly' at least 10 per cent of the voting power in the Australian resident company paying the dividends for the purposes of Article 10.2(a) of the 2009 NZ Convention.", "Facts": "The taxpayer is a company and a resident of New Zealand for the purposes of New Zealand's tax law and the 2009 NZ Convention. The taxpayer is a non-resident as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer is a limited partner with a 77 per cent interest in a NZLP formed under New Zealand's Limited Partnerships Act 2008 . NZLP is a separate legal person pursuant to section 11 of New Zealand's Limited Partnerships Act 2008 . NZLP is registered as the owner of 49 per cent of the shares in ACo, a company that is a resident of Australia for the purposes of Australia's tax law and the 2009 NZ Convention. Voting power in ACo is attached to the shares in ACo and NZLP's shares in ACo carry the right to exercise 49 per cent of the voting power in ACo. ACo paid an unfranked dividend to NZLP. For the purposes of Article 10 of the 2009 NZ Convention, the taxpayer is the 'beneficial owner' of the proportion of the dividends that ACo pays to NZLP representing the taxpayer's partnership interest in NZLP.", "Reasons_for_Decision": "Summary: Subject to certain exceptions, withholding tax is payable under section 128B of the ITAA 1936 on dividends paid by an Australian resident company and derived by a non-resident. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 sets the rate of withholding tax on such dividends at 30 per cent. In the present case, liability to Australian withholding tax is subject to the provisions of the 2009 NZ Convention contained in Schedule 4 to the International Tax Agreements Act 1953 . Article 10.2(a) of the 2009 NZ Convention provides for present purposes that dividends paid by an Australian resident company, being dividends beneficially owned by a New Zealand resident, may be taxed in Australia according to the laws of Australia. However, the tax so charged shall not exceed 5 per cent of the gross amount of the dividends if 'the beneficial owner of those dividends is a company which holds directly at least 10 per cent of the voting power in the company paying the dividends'. As the taxpayer is a company that beneficially owns a proportion of the dividends paid by ACo (an Australian resident company), it is necessary to determine whether it 'holds directly at least 10 per cent of the voting power' in ACo. The phrase 'holds directly' is not defined in the 2009 NZ Convention. Article 3.3 relevantly provides that any term not defined in the 2009 NZ Convention shall take its meaning under the domestic laws concerning the taxes to which the Convention applies of the country applying the treaty, unless the context otherwise requires. For Australia, the domestic law meaning may be the statute-defined meaning or, where there is no relevant statutory definition, the common law meaning of the term (see Taxation Ruling TR 2001 / 13 , paragraphs 63 to 71). There are no relevant statutory definitions of the phrase 'holds directly'. It is therefore necessary to consider the meaning of the phrase under the common law. Consistent with the decision in Dalgety Downs Pastoral Co Pty Ltd v. Federal Commissioner of Taxation (1952) 86 CLR 335; (1952) 10 ATD 55; (1952) 5 AITR 386 ( Dalgety Downs ), where the High Court considered the phrase 'beneficially held', the proper construction of the phrase 'holds directly' involves a consideration of the meaning of each of the component words in that phrase. In the present case, the voting power in ACo is attached to the shares in ACo. Therefore, in order to determine whether the taxpayer 'holds' the requisite voting power it is necessary to determine whether the taxpayer holds the shares in ACo. A number of judicial decisions support the view that the use of the word 'holds' in connection with shares refers to legal ownership according to the share register. In Dalgety Downs , the High Court considered the word 'holds' in the context of legislation requiring that shares in a company be 'beneficially held'. In the course of their judgment Webb, Fullagar and Kitto JJ stated (at CLR 341-342): Indeed it is not too much to say that the verb \"hold\" and its variants, when used in relation to shares in companies, normally refers to the legal ownership of the shares according to the register of members. ... Before a different meaning is accepted, some justification must be found in the context, or the subject-matter. No such justification is provided by the fact that \"held\" is modified by the adverb \"beneficially\". This word serves more naturally the purpose of excluding the case of a holding for the benefit of others than the purpose of so broadening the meaning of the word \"held\" beyond the particular significance which it normally has in relation to shares as to make it equivalent to \"owned\" in the most general sense of that word. The Court in Dalgety Downs relied partly on the earlier decision in Avon Downs Pty Ltd v. Federal Commissioner of Taxation (1949) 78 CLR 353; (1949) 9 ATD 5; (1949) 4 AITR 195, where Dixon J stated (at CLR 364) in relation to a provision requiring that certain shares of a company carrying voting power be 'beneficially held': [The provision] is concerned with voting. Its purpose is both to exclude nominees from the enumeration of voting power and to take in those who are members of the company and vote independently of control. There is therefore every reason to treat the provision as using the terminology of company law with the meaning attached to it in company law. More recently, the majority of the High Court in Federal Commissioner of Taxation v. Linter Textiles Australia Ltd (in liq ) (2005) 220 CLR 592; [2005] HCA 20; 2005 ATC 4255; (2005) 59 ATR 177 held that '[w]hen used in relation to companies, \"hold\" normally refers to legal ownership established by reference to the register of members' (at CLR 604). Accordingly, for the purposes of Australian tax law, in order to hold shares in a company an entity must be the legal owner of those shares as established by reference to the register of members. Article 10.2(a) of the 2009 NZ Convention requires that the requisite percentage of voting power be held 'directly'. The term 'directly' is not subject to any relevant Australian judicial consideration and therefore the term takes its ordinary meaning. Based on the Macquarie Dictionary (2009, 5th edition), the ordinary meaning of 'directly' relevantly includes 'in a direct line, way, or manner ...'. The word 'direct' in turn includes the meaning '... without intervening agency ...'. Therefore in the context of Article 10.2(a), the adverb 'directly' confirms that the word 'holds' should not be given a broader meaning than it has under the Australian law in relation to shares. The word 'directly' excludes cases where the requisite voting power is held indirectly through an interposed entity. Accordingly, the composite phrase 'holds directly' in Article 10.2(a) means legally owns without intervening agency. For an entity to 'hold directly' the voting power that is attached to shares in a company paying dividends for the purposes of Article 10.2(a) of the 2009 NZ Convention, it must be the legal owner of the shares with no intervening agency or interposed entity between the entity and the shares carrying the voting power. That is, Article 10.2(a) does not permit voting power to be traced through an interposed entity. Moreover, this conclusion is reinforced by paragraph 10 of the Commentary to Article 10 (Dividends) of the 2010 OECD Model Tax Convention which states that, for the purposes of Article 10.2, a company must 'own directly' the relevant holding in the other company. This is consistent with the Australian tax law meaning of 'hold' that requires legal ownership of shares as established by reference to the register of members. In the present case, NZLP is a separate legal person that is registered as the owner of 49 per cent of the shares in ACo that carry the right to exercise 49 per cent of the voting power in ACo. Therefore, it is NZLP that 'holds directly' that voting power in ACo. The taxpayer does not legally own the shares carrying the voting power in ACo and, as a result, it does not 'hold directly' any voting power in ACo, regardless of its 77 per cent interest in NZLP as a limited partner. Accordingly, the taxpayer is not a company that 'holds directly at least 10 per cent of the voting power' in ACo for the purposes of Article 10.2(a) of the 2009 NZ Convention.", "Date_of_Decision": "10 February 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 128B", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/12 | ATO ID 2011/13", "Subject_References": "New Zealand Double tax agreements Non resident dividend withholding tax Limited partnerships OECD Voting power", "Case_References": "Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation (1952) 86 CLR 335 (1952) 10 ATD 55 (1952) 5 AITR 386", "Other_References": "The Macquarie Dictionary, 2009, 5th Edition, The Macquarie Dictionary Publishers Pty Ltd 2010 OECD Model Tax Convention on Income and on Capital 2010 OECD Commentaries on the Articles of the Model Tax Convention", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201114", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords New Zealand Double tax agreements Non resident dividend withholding tax Limited partnerships OECD Voting power"}
{"ATO_ID_Number": "ATO ID 2010/68", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Lump sum payments received by a foreign resident as arrears of past periodic payments and the Pension Article of the Italian Convention", "Issue": "Does Article 18, the Pensions and Annuities Article (the Pension Article) of the tax convention between Australia and the Republic of Italy (the Italian Convention), apply to lump sum payments received by a resident of Italy as arrears of past periodic payments under section 44 or section 45 of the Transport Accident Act 1986 (Vic ) (TAA 1986)?", "Decision": "Yes. The Pension Article of the Italian Convention applies to lump sum payments received by a resident of Italy as arrears of past periodic payments under section 44 or section 45 of the TAA 1986.", "Facts": "The taxpayer is a foreign resident for Australian tax purposes and a resident of Italy for the purposes of the Italian Convention. The taxpayer received a lump sum payment from Australia. The lump sum payment represents arrears of periodic loss of earnings payments from Australia as a result of injury suffered in a transport accident in the State of Victoria. The lump sum payment comprised weekly statutory compensation payments made by the Victorian Transport Accident Commission (TAC) under section 44 or section 45 of the TAA 1986 for loss of income due to the injury, which should have been paid periodically over a period of time.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident includes ordinary income derived directly or indirectly from Australian sources. The loss of earnings payments are ordinary income for the purpose of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax in respect of Australian sourced income received by a foreign resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 21 of the Agreements Act contains the Italian Convention. The Italian Convention operates to avoid double taxation of income received by residents of Australia and residents of Italy. Article 18(1) of the Italian Convention provides that pensions (including government pensions) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. Therefore, pensions paid from Australia to a resident of Italy shall be taxable only in Italy. Article 3(3) of the Italian Convention provides that any term not defined in the Convention shall, unless the context otherwise requires, have the meaning which it has under the laws of that Contracting State relating to the taxes to which this Convention applies. The term 'pension' is not defined in the Italian Convention or in Australia's domestic taxation law. Taxation Determination TD 93/151 discusses the meaning of a 'pension' for tax treaty purposes in the context of workers compensation payments. Paragraph 1 of TD 93/151 states that a 'pension' is defined in The Macquarie Dictionary , as: '1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. an allowance or annuity.' The meaning of the term 'pension' was also considered by Hill J. in the Federal Court in Tubemakers of Australia Ltd v. Federal Commissioner of Taxation 93 ATC 4207; (1993) 25 ATR 183 ( Tubemakers ). His Honour concluded that the essential characteristic of a 'pension' is periodic payments. The loss of earnings payments made under section 44 or section 45 of the TAA 1986 have the essential characteristic of a 'pension' as per Hill J. in Tubemakers and fall within The Macquarie Dictionary definition of 'pension' as they are fixed periodic payments made in consideration of injury or loss sustained. In the present case, an amount made to the taxpayer as a lump sum representing arrears of unpaid periodic loss of earnings payments by the TAC under section 44 or section 45 of the TAA 1986 is also a 'pension' for the purposes of the Pension Article of the Italian Convention. This is because the lump sum amount represents the aggregate of past loss of earnings payments that should have been made on a periodic basis over a particular period of time. Therefore, the Pension Article applies to give Italy, as the country of residence of the taxpayer, sole taxing rights over the compensation payment.", "Date_of_Decision": "4 March 2010", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/151", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/178 | ATO ID 2008/145", "Subject_References": "Double tax agreements Italy International tax Lump sum payments", "Case_References": "Tubemakers of Australia Ltd v Federal Commissioner of Taxation 93 ATC 4207 25 ATR 183", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW.", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201068", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination TD 93/151 | Keywords Double tax agreements Italy International tax Lump sum payments"}
{"ATO_ID_Number": "ATO ID 2010/188", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Treaty benefits: United States limited liability company disregarded as an entity separate from its owner", "Issue": "Is a limited liability company incorporated in the United States (US LLC) that has a single owner and is disregarded as an entity separate from its owner, a 'resident of the United States' within the meaning of Article 4(1)(b) of the Australia - US Double Taxation Convention (US Convention)?", "Decision": "No. The US LLC is not a resident of the US within the meaning of Article 4(1)(b). However, the single owner, where the single owner of the US LLC is a resident of the US within the meaning of Article 4(1)(b), will receive relevant treaty benefits in respect of income derived by the LLC subject to it satisfying any other applicable requirements in the US Convention.", "Facts": "The LLC is a company with a single owner incorporated under US state law. It is 'disregarded as an entity separate from its owner' for US federal tax purposes under Treasury Regulations, Subchapter F, sec. 301.7701-3(b)(ii). The LLC does not, therefore, pay US tax itself. Rather, it is treated as part of the owner for the purposes of US domestic tax law. The single owner is a corporation and has been certified by the US as a resident of the US for the purposes of US tax on a Form 6166 issued by the Internal Revenue Service. The LLC is a company under Australian tax law.", "Reasons_for_Decision": "Summary: Article 4(1)(b)(i) of the US Convention states that a person is a resident of the US if the person is a 'United States corporation'. Article 3(1)(g)(i) of the US Convention defines the term 'United States corporation' as: ... a corporation which, under United States law relating to United States tax, is a domestic corporation or an unincorporated entity treated as a domestic corporation, and which is not, under the law of Australia relating to Australian tax, a resident of Australia; Treasury Regulations, Subchapter F, sec. 301.7701-2(a) provides: A business entity with only one owner is classified as a corporation or is disregarded; if the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch or division of the owner. [ emphasis added ] As the LLC is disregarded, it is not a corporation for the purposes of US tax law nor, therefore, a 'United States corporation' for the purposes of Article 4(1)(b)(i) of the US Convention. The LLC is not a resident under Article 4(1)(b)(i). Article 4(1)(b)(iii) of the US Convention includes as a resident: Any other person (except a corporation or unincorporated entity treated as a corporation for United States tax purposes) resident in the United States for the purposes of its tax... The form 6166 makes it clear that it is the single owner who is resident in the United States for the purposes of its tax, not the LLC. As such, the LLC is not a resident under Article 4(1)(b)(iii) of the US Convention and is not, therefore, a resident of the US for the purposes of the Convention. From a US perspective, the LLC and the single owner are treated as the one taxpayer. Where the single owner is a resident of the US for the purposes of its tax, the single owner is entitled to treaty benefits in respect of income derived by the LLC subject to it satisfying any other applicable requirements in the US Convention for it to do so.", "Date_of_Decision": "16 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2 Article 3(1)(g) Schedule 2 Article 4(1)(b)(i) Schedule 2 Article 4(1)(b)(iii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements United States Limited liability International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010188", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements United States Limited liability International tax"}
{"ATO_ID_Number": "ATO ID 2010/189", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax: United States limited liability company owned by an exempt United States pension fund", "Issue": "Does Article 11(3)(a) of the Australia - United States Double Taxation Convention (US Convention) apply to interest income derived by a limited liability company incorporated in the United States (US LLC), that is owned by an exempt US pension fund set up by a US local government body for the purpose of providing retirement, survivor and disability benefits to local government employees?", "Decision": "No. Article 11(3)(a) of the US Convention does not apply to the interest income. The pension fund is not 'one of the Contracting States ... a political or administrative sub-division or local authority thereof, or ... any other body exercising governmental functions' for the purposes of Article 11(3)(a). Accordingly, the interest income is subject to interest withholding tax in Australia.", "Facts": "The LLC is a company with a single owner incorporated under US state law. It is 'disregarded as an entity separate from its owner' for US federal tax purposes under Treasury Regulations Subchapter F, sec. 301.7701-3(b)(ii). The LLC does not, therefore, pay US tax itself. Rather, it is treated as part of the owner for the purposes of US domestic tax law. The LLC distributes all of its income to a US pension fund. The pension fund was set up by a US local government body for the purpose of providing retirement, survivor and disability benefits to local government employees. The pension fund is exempt from tax in the US under US law. The pension fund is a resident of the US for the purposes of US tax and the US Convention. The LLC is a company under Australian domestic tax law. The LLC derives interest income from Australia.", "Reasons_for_Decision": "Summary: Interest withholding tax is payable under subsection 128B(5) of the Income Tax Assessment Act 1936 (ITAA 1936) on interest derived by non-residents that falls within subsection 128B(2) of the ITAA 1936. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 sets the rate of withholding tax on interest payments to non-residents to which subsection 128B(2) of the ITAA 1936 applies at 10%. This liability to Australian withholding tax is subject to any applicable tax treaty provisions in the US Convention contained in Schedules 2 and 2A of the International Tax Agreements Act 1953 (Agreements Act). As established in ATO ID 2010/188, the LLC is not a resident of the US for the purposes of the US Convention because it is an entity disregarded as separate from its owner. However, the pension fund, as the single owner, is a resident under Article 4(1)(b)(iii) of the US Convention and is therefore entitled to treaty benefits, subject to the pension fund satisfying any other applicable requirements in the US Convention. Article 11(3)(a) of the US Convention provides that Australia may not tax interest derived by the US or by a political or administrative subdivision or a local authority or by any other body exercising governmental functions in the US, or by a bank performing central banking functions in the US. If the pension fund is one of the types of bodies listed in Article 11(3)(a) that is exercising governmental functions, Australia is therefore prevented from taxing interest that is paid to the LLC. In relation to Article 11(3)(a) of the US Convention, the phrase 'any other body exercising governmental functions' is not defined. Article 3(2) of the US Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning it has under the law relating to taxes of the country applying the US Convention. Australian domestic tax law does not statutorily define what governmental functions are. Taxation Ruling TR 2005/8 interprets the terms 'governmental functions' and 'in discharge of governmental functions' in the Government Service Article (Article 19) of the US Convention but is of no real assistance in interpreting the different terminology in Article 11. The meaning given to those terms in TR 2005/8 reflects subsequent practice and the context in which those terms are used; that of a person being paid wages etcetera, by government 'for labour or personal services as an employee'. Therefore, in determining the meaning for Article 11 of the US Convention purposes, it is necessary to examine the words of the provision itself ( Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531). The term 'any other body exercising governmental functions' in Article 11(3)(a) of the US Convention in concert with the other types of bodies listed indicates that denial of the taxing right in Article 11(3)(a) is limited to bodies exercising government functions, being those that are identifiable as being government or that are a statutory authority (that is, an entity of public character created by the laws of a Contracting State in which no other person other than the State itself, or a subdivision thereof, has an interest). Despite the pension fund being set up by a local government to benefit government employees, the fund itself is not identifiable as a body of government in the US or a statutory authority there nor set up to benefit only a body of government. Accordingly, Article 11(3)(a) of the US Convention will not apply. As there is no inconsistency for the purposes of subsection 4(2) of the Agreements Act between the application of the Article 11(3)(a) of the US Convention and subsections 128B(2) and 128B(5) of the ITAA 1936, the interest income is subject to interest withholding tax.", "Date_of_Decision": "16 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128B(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 2005/8", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/188", "Subject_References": "Double tax agreements United States Limited liability Withholding tax exemptions International tax Non resident entities Non resident interest withholding tax", "Case_References": "Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010189", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 2005/8 | Keywords Double tax agreements United States Limited liability Withholding tax exemptions International tax Non resident entities Non resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2010/190", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent establishment: supervisory activity as part of an installation project - UK resident", "Issue": "Is the enterprise of the taxpayer, a United Kingdom (UK) resident company and subsidiary of a corporate group, deemed to have a permanent establishment (PE) and to carry on business through that PE under Article 5.3(a) of Schedule 1 to the International Tax Agreements Act 1953 (the 2003 UK Convention), where it supplies a component of major equipment and supervises its installation over two months as part of a 3 year installation project undertaken by an Australian resident company which is also a subsidiary in the same corporate group?", "Decision": "Yes. In these circumstances, the enterprise of the taxpayer is deemed to have a PE and to carry on business through that PE under Article 5.3(a) of the 2003 UK Convention.", "Facts": "The taxpayer is a subsidiary company in a corporate group and is a resident of the UK for the purposes of the 2003 UK Convention under Article 4.1(a) of that Convention. The taxpayer conducts an enterprise in Australia. The taxpayer does not have a PE in Australia under Article 5.1 of the 2003 UK Convention. ACo is a resident of Australia for the purposes of the 2003 UK Convention under Article 4.1(b) of that Convention and has the same parent company as the taxpayer. ACo has contracted with one of its customers to supply and install major equipment in Australia. The activities conducted by ACo under the contract with its customer are considered to be an 'installation project' for the purposes of Article 5.3(a) of the 2003 UK Convention. The installation project takes 3 years to complete. Under a subcontract with ACo, the taxpayer supplies a component part of the major equipment required for completion of the installation project and sends an employee to Australia for two months to supervise the installation and integration of the part. The activity conducted by the taxpayer under the subcontract is 'supervisory activity' for the purposes of Article 5.3(a) of the 2003 UK Convention. The supervisory activity undertaken by the taxpayer's enterprise is one stage of ACo's installation project. The activity of the taxpayer's enterprise is conducted concurrently with the activities of ACo.", "Reasons_for_Decision": "Summary: Article 5.3(a) of the 2003 UK Convention provides that an enterprise is deemed to have a PE in Australia and to carry on business through that PE if it: but only if that site, project or activity lasts for more than 12 months. | Detailed Reasoning - Duration of Activity: To determine the duration of an enterprise's activity under Article 5.3(a), Article 5.4(a) of the 2003 UK Convention requires that the time period during which the enterprise conducts those activities in Australia is aggregated with the time period(s) during which activities connected with those activities are carried on in Australia by its associate. Article 5.4(b) provides that the period during which two associated enterprises are carrying on concurrent activities is only counted once. | Detailed Reasoning - 'associated': Article 5.4(c)(ii) of the 2003 UK Convention provides that an enterprise shall be deemed to be 'associated' with another enterprise if both are controlled directly or indirectly by a third person or persons. As ACo and the taxpayer have the same parent company, Article 5.4(c)(ii) deems the taxpayer's enterprise to be 'associated with' ACo's enterprise for the purposes of Article 5 of the 2003 UK Convention. | Detailed Reasoning - 'connected': The term 'connected' is not defined in the 2003 UK Convention, nor in Australia's domestic taxation legislation. The ordinary meaning of the term 'connect', based on the Macquarie Dictionary definition, is 'to bind or fasten together, join, unite, link; to associate or attach'. As the supervisory activity in Australia of the taxpayer' enterprise is one part of the project undertaken by ACo in Australia, the supervisory activity falls within the ordinary meaning of the term in that it is joined, united, linked or attached to ACo's installation project. Paragraph 1.58 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003 states that 'activities will be regarded as being connected where, for example, different stages of a single project are carried out by different subsidiaries within a group of companies'. In the present case, the taxpayer's enterprise completes one stage of ACo's installation project; one that is different to the stages completed by ACo. Accordingly, the activities of the taxpayer's enterprise in Australia are 'connected with the activities carried on in that State by its associate' for the purposes of Article 5.4(a) of the 2003 UK Convention. | Detailed Reasoning - Determining the duration of activities: Applying Article 5.4(a) of the 2003 UK Convention, the three year period during which ACo undertakes the installation project is aggregated with the two month period during which the taxpayer conducts its supervisory activity. However, under Article 5.4(b), the period during which the taxpayer's and ACo's enterprise carry on activities concurrently means that the duration of the taxpayer's activity for the purposes of Article 5.3(a) is determined as being 3 years; a period that 'lasts more than 12 months' for Article 5.3(a) purposes. As the taxpayer's enterprise has conducted 'supervisory activity' in Australia that is connected with ACo's installation project, and that activity lasts longer than 12 months, the conditions for the operation Article 5.3(a) of the 2003 UK Convention have been satisfied. Accordingly, Article 5.3(a) deems the taxpayer's enterprise to have a PE in Australia and to carry on business through that PE.", "Date_of_Decision": "21 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "International Tax Agreements Act 1953 Schedule 1 Article 4.1(a) Article 5.1 Article 5.3(a) Article 5.4 Article 5.4(a) Article 5.4(b) Article 5.4(c)(ii) Article 7", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Permanent establishment United Kingdom", "Case_References": "", "Other_References": "Macquarie Dictionary, 2009, 5th edition, The Macquarie Dictionary Publishers Pty Ltd Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010190", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Permanent establishment United Kingdom"}
{"ATO_ID_Number": "ATO ID 2010/204", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign income - non-assessable and non-exempt: substantial equipment permanent establishment in a listed country", "Issue": "For what periods of time in each income year will the taxpayer, an Australian resident company, have a permanent establishment (PE) in a listed country for the purposes of subsection 23AH(2) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer derives income from leasing substantial equipment that is used in New Zealand for part of that year and in other countries at other times?", "Decision": "For the purposes of subsection 23AH(2) of the ITAA 1936, the taxpayer will have a PE in a listed country at any time in an income year where one or more of the items of substantial equipment are being used in New Zealand for the purposes of Article 5.4(c) of the 1995 New Zealand Agreement. The taxpayer does not have a PE in New Zealand for the period(s) of time in an income year where none of the substantial equipment is being used in New Zealand.", "Facts": "The taxpayer is a company that is a resident of Australia for income tax purposes. The taxpayer, as a sublessor, leases a number of items of equipment (leased equipment) to a New Zealand resident under a bareboat lease agreement entered into in New Zealand. The only presence of the taxpayer in New Zealand is that of the leased equipment. The leased equipment is 'substantial equipment' for the purposes of Article 5.4(c) of the tax treaty between Australia and New Zealand signed on 27 January 1995 as modified by the Protocol signed on 15 November 2005 (the 1995 New Zealand Agreement). The sublessee operates the leased equipment in New Zealand for part of each income year and in other countries at other times in that year. The sublessee makes regular premium payments to the taxpayer from New Zealand in accordance with the terms of the bareboat lease agreement. As the sublessor, the taxpayer derives income from the receipt of bareboat lease premiums. This income is not from 'the operation of ships or aircraft in international traffic' nor from 'things that are ancillary to that operation' for the purposes of subsection 23AH(14A) of the ITAA 1936. New Zealand is a listed country for the purpose of subsection 23AH(2) of the ITAA 1936 by virtue of subsections 23AH(15) and 320(1) of the ITAA 1936 and Schedule 10 of the Income Tax Regulations 1936.", "Reasons_for_Decision": "Summary: Subsection 23AH(2) of the ITAA 1936 provides that, subject to other parts of section 23AH of the ITAA 1936, foreign income derived by a company, at a time when the company is a resident in carrying on a business, at or through a PE of the company in a listed country or unlisted country is not assessable income, and is not exempt income, of the company. From the facts stated above, subsection 23AH(14A) of the ITAA 1936 does not apply in the present case so as to exclude subsection 23AH(2) of the ITAA 1936 from having application. In order to determine whether the taxpayer has a PE in New Zealand for the purposes of subsection 23AH(2) of the ITAA 1936, the definition of the term 'permanent establishment' or 'PE' in subsection 23AH(15) of the ITAA 1936 provides for present purposes that, in section 23AH of the ITAA 1936, the term has the same meaning as in the 1995 New Zealand Agreement, the applicable tax treaty in force for the income years stated below. Article 5.4(c) of the 1995 New Zealand Agreement provides, amongst other things, that an enterprise is deemed to have a PE in a Contracting State if 'substantial equipment is being used in that State by, for or under contract with the enterprise'. From the facts stated above, the leased equipment is substantial equipment for the purposes of Article 5.4(c). The term 'used' in Article 5.4(c) of the 1995 New Zealand Agreement is not defined. Article 3.3 of the 1995 New Zealand Agreement provides that the term takes its meaning from the tax law of the State applying the treaty, unless the context otherwise requires. In McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) 142 FCR 134; 2005 ATC 4398; (2005) 59 ATR 358 ( McDermott's Case ) where Article 4(3)(b) of the Singapore Agreement was considered, the Full Federal Court stated at paragraph 39 that 'the relevant use might, but need not be, use by the Australian enterprise' (the lessee of the barges in that case). 'All that is required is that there be a use within Australia ...'. This indicates that the wording of the provision is to be interpreted as stating that the relevant use be within a particular Contracting State by the lessor, the lessee or both. At paragraph 71, the Full Federal Court concluded that the leased equipment in that case was used either by the enterprise of the lessor or by the lessee under contract with the enterprise of the lessor. Apart from the inclusion of the words 'trade or' and 'in that other Contracting State' in Article 4(3)(b) of the Singapore Agreement, Article 5.4(c) of the 1995 New Zealand Agreement is on the same terms as Article 4(3)(b) of the Singapore Agreement. The differences above are not material for present purposes. Accordingly, the meaning of the term 'is being used' in Article 5.4(c) of the 1995 New Zealand Agreement is the same as the meaning of the term adopted for the purposes of Article 4(3)(b) of the Singapore Agreement in McDermott's Case . Therefore, in the present case, the substantial equipment is being used either by the taxpayer ('the company' for the purposes of subsection 23AH(2) of the ITAA 1936), as the sublessor of the leased equipment, or by the sublessee. The Full Federal Court in McDermott's Case concluded at paragraph 53 of its judgment that 'the deeming provision of Article 4(3)(b) operates without a time limit'. Similarly, there is no minimum time period specified in Article 5.4(c) of the 1995 New Zealand Agreement for which the leased equipment must be used before a deemed PE can arise. The term 'in that State' in Article 5.4(c) of the 1995 New Zealand Agreement refers to the term 'Contracting State', which is defined in Article 3.1(e) of the 1995 New Zealand Agreement to mean New Zealand or Australia, as the context requires. In the present context, both these terms refer to New Zealand as defined in Article 3.1(a)(i) of the 1995 New Zealand Agreement. The term 'substantial equipment' encompasses in the present case the leased equipment both in the singular and plural sense (see paragraphs 104 and 134 - 135 of Taxation Ruling TR 2007/10). From this, the deeming of the enterprise of the taxpayer to have a PE in New Zealand under Article 5.4(c) of the 1995 New Zealand Agreement will occur at any time where one or more of the leased equipment are, in the relevant sense, being used 'in that State' (New Zealand). This can be when one or more items of the leased equipment are present in New Zealand. On the other hand, the taxpayer does not have a PE in New Zealand for the period(s) of time in an income year where none of the substantial equipment is being used in New Zealand by, or under contract with, the taxpayer's enterprise for the purposes of Article 5.4(c) of the 1995 New Zealand Agreement. The requirement in Article 5.4(c) that the use be 'in that State' is not satisfied at such times. This is consistent with the result in example 10 at paragraphs 75 - 77 of TR 2007/10. Accordingly, for the period(s) of time the enterprise of the taxpayer has a PE under Article 5.4(c) of the 1995 New Zealand Agreement, the taxpayer has a PE in New Zealand for the purposes of subsection 23AH(2) of the ITAA 1936 by operation of subsection 23AH(15) of the ITAA 1936.", "Date_of_Decision": "28 October 2010", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 23AH subsection 23AH(2) subsection 23AH(14A) subsection 23AH(15) subsection 320(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/10", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/158", "Subject_References": "Foreign income Double tax agreements New Zealand International law International tax Listed countries Permanent establishment Substantial equipment Listed countries", "Case_References": "McDermott Industries (Aust) Pty Ltd v Commissioner of Taxation (2005) 142 FCR 134 2005 ATC 4398 (2005) 59 ATR 358", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010204", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/10 | Keywords Foreign income Double tax agreements New Zealand International law International tax Listed countries Permanent establishment Substantial equipment Listed countries"}
{"ATO_ID_Number": "ATO ID 2009/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Classification of German Trade Tax as Federal Foreign Tax", "Issue": "Is German Trade Tax a 'federal foreign tax' for the purposes of paragraph (a) of the definition of 'tax law' in section 317 of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. German Trade Tax is a 'federal foreign tax' for the purposes of paragraph (a) of the definition of 'tax law' in section 317 of the ITAA 1936.", "Facts": "The German Trade Tax (GTT) is imposed by a federal statute of the Federal Republic of Germany (Germany) called the Gewerbesteuergesetz (GewStG). The GewStG applies to businesses carried on in Germany and is not restricted to any particular German State or municipality. The tax base of the GTT is similar to the federal corporate and personal income tax of Germany, and applies to the entity's world-wide income with additions and deductions imposed by the GewStG. The GewStG sets the minimum tax rate of the GTT. All taxpayers engaged in business must lodge a trade tax return with Germany's federal tax office, which calculates a trade tax assessment base and issues an assessment notice to the taxpayer. Any exemption from the GTT applies to all eligible taxpayers in Germany irrespective of location. The GewStG is included in all of Germany's double tax agreements.", "Reasons_for_Decision": "Summary: Paragraph (a) of the section 317 of the ITAA 1936 definition of 'tax law' in relation to a listed country or an unlisted country provides that: The term 'foreign tax' as used in section 317 of the ITAA 1936 takes its meaning from subsection 6AB(2) of the ITAA 1936. Subsection 6AB(2) of the ITAA 1936 provides that: A reference in this Act to foreign tax is a reference to tax imposed by a law of a foreign country, being: The GTT is imposed by the GewStG, which is a law of Germany's Federal Parliament. As per section 320 of the ITAA 1936, Part 1 of Schedule 10 to the Income Tax Regulations 1936 provides that Germany is a 'listed country'. As such, the GTT is a tax imposed by a law of a listed country. The GTT is also subject to an agreement having the force of law under the International Tax Agreements Act 1953 (Agreements Act). Article 2(b) of the German double tax agreement (DTA) within Schedule 9 to the Agreements Act provides that the German DTA applies to trade tax in Germany. Accordingly, the GTT is a 'foreign tax'. However, it is necessary to consider whether the GTT is a 'federal foreign tax' for the purposes of section 317 of the ITAA 1936. The Commissioner considers the following features of the GTT system are relevant when considering if it is a federal foreign tax: As the GTT is a tax based on a law that relates to Germany as a whole, the GTT is a federal foreign tax and not a 'municipal foreign tax' or a 'State foreign tax' under paragraph (a) of the section 317 of the ITAA 1936 definition of tax law. Accordingly, the GewStG is a 'tax law' for the purposes of section 317 of the ITAA 1936.", "Date_of_Decision": "25 February 2009", "Year_of_Income": "Year ending 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 Subsection 6AB(2) Section 317", "Related_Public_Rulings_and_Determinations": "Tax Determination TD 2004/31", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign tax laws German", "Case_References": "", "Other_References": "Voelker D and Bodewaldt B, 'Trade Tax' in Voelker D, Bott K & Wolff F, eds, German Tax and Business Law (London: Sweet & Maxwell, 2005), 6001 - 6012. Schmitz M and Wagnet G, 'Germany' in CCH Australia Limited, International Master Tax Guide 2008/09 (Sydney: CCH Australia, 5th ed, 2008), 569 - 644. Amann R, ed, German Tax Guide (The Hague: Kluwer Law International, 2001).", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200923", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | the law of the listed country or the unlisted country that imposes the federal foreign tax. | but does not include a unitary tax or a credit absorption tax. | Related Public Rulings (including Determinations) Tax Determination TD 2004/31 | Keywords Foreign tax laws German"}
{"ATO_ID_Number": "ATO ID 2009/116", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Remuneration or other income for personal (including professional) services in relation to the tax treaty with Singapore", "Issue": "Is income derived by the taxpayer from conducting finance training courses in Singapore 'remuneration or other income for personal (including professional) services' for the purposes of Article 2(1)(k)(iii) of the tax treaty between Australia and Singapore contained in Schedule 5, as amended by Schedule 5A, to the International Tax Agreements Act 1953 (the Singapore Agreement)?", "Decision": "No. The income derived by the taxpayer from conducting finance training courses in Singapore is not 'remuneration or other income for personal (including professional) services' for the purposes of Article 2(1)(k)(iii) of the Singapore Agreement.", "Facts": "The taxpayer is a resident company for Australian income tax purposes and is treated solely as an Australian resident under the Singapore Agreement. The taxpayer is carrying on a business of globally providing services to the project finance sector. The taxpayer's business includes conducting finance training courses in Singapore. The taxpayer derives income from conducting the finance training courses in Singapore (Singapore course fee income).", "Reasons_for_Decision": "Summary: The income generated by the taxpayer is business income that is covered by Article 5 (the business profits article) and the exclusion in Article 2(1)(k)(iii) of the Singapore Agreement does not operate to take it out of this article. Specifically, Article 2(1)(k)(iii) of the Singapore Agreement excludes 'remuneration or other income for personal (including professional) services' from, relevantly, the 'profits of an Australian enterprise' for the purposes of Article 5 of the Singapore Agreement. | Detailed Reasoning - Function of Article 2(1)(k)(iii) of the Singapore Agreement: Same words used in Articles 11 and 12 of the Singapore Agreement Although not in the exact sequence, the very words 'remuneration or other income for personal (including professional) services' are used in Articles 11 and 12 of the Singapore Agreement - these articles apply to 'remuneration or other income' derived by individuals in respect of 'personal (including professional) services' (see Articles 11(1) and 12(1) of the Singapore Agreement). The specific choice (or adoption) of these same words in Article 2(1)(k)(iii) of the Singapore Agreement is unlikely to be accidental. That is, it is likely to be deliberate and suggests that the provision is only concerned with ensuring that the category of income dealt with in Articles 11 and 12 is excluded from Article 5 (business profits article) of the Singapore Agreement. Furthermore, it would be curious if the particular words used in one Article of the Singapore Agreement (Article 11) had a different meaning in another Article (Article 2(1)(k)(iii) of the Singapore Agreement) and were used for a quite different purpose - used in a provision to perform the function of a substantial carve-out to Article 5 of the Singapore Agreement. It is more likely that words have the same, or a consistent, meaning throughout the entire Singapore Agreement. Use of word 'remuneration' and Article 12(2) and 12(3) of the Singapore Agreement The use of the word 'remuneration' to describe a sub-category of enterprise profits appears inapposite. It seems inapt to speak of an enterprise being in receipt of 'remuneration'. The word is not defined in the Singapore Agreement and does not have a fixed technical meaning under Australian domestic law. In the Butterworths Australian Legal Dictionary , 'remuneration' is relevantly defined as follows: Payment, reward, or recompense for services rendered: Chalmers v Commonwealth (1946) 73 CLR 19. Remuneration is a quid prop quo; the consideration a person receives in exchange for his or her service, generally in the form of wages or salaries: R v Postmaster General [1876] 1 QBD 658. In Chalmers v. Commonwealth (1946) 73 CLR 19 at 37, Williams J stated that the 'ordinary meaning of remuneration is pay for services rendered'. Accordingly, as the term is generally used to describe receipts by an individual from employment or provision of independent personal services, it seems an awkward use of language to have it describe an excluded sub-category of business profits. Furthermore, contrary to a construction that payments for personal services are 'excluded' from the profits of an enterprise under Article 2(1)(k)(iii), Article 12(3) of the Singapore Agreement specifically contemplates 'inclusion' in the profits of an enterprise 'contracts or obligations to provide' the 'services of public entertainers' (see Article 12(2) of the Singapore Agreement which defines these). Additionally, Article 12 of the Singapore Agreement specifically draws a clear distinction between 'remuneration' and 'profits of an enterprise' - Article 12(2) is expressed to apply to the 'remuneration or other income' of individual public entertainers, whereas Article 12(3) is expressed to separately apply to the 'profits' of enterprises 'arising from ... contracts' providing the 'services of public entertainers'. Adjoining subparagraphs Additionally, the majority of the other subparagraphs in Article 2(1)(k) of the Singapore Agreement play a technical reconciliation role, specifically: The origins of this specific provision can be traced back to Article 5(7)(b) of the original UK Agreement of 1967 (now superseded by the 2003 United Kingdom Convention and Notes), a provision in the business profits article which read as follows: The term \"industrial or commercial profits\" means income derived by an enterprise from the conduct of a trade or business, including income derived by an enterprise from the furnishing of services of employees or other personnel, but it does not include - (a) dividends, interest, royalties (as defined in Articles 8, 9 and 10) or rents other than dividends, interest, royalties or rents effectively connected with a trade or business carried on through a permanent establishment which an enterprise of one of the territories has in the other territory; or (b) remuneration for personal (including professional) services; or (c) income arising from, or in relation to, contracts or obligations to provide the services of public entertainers or athletes referred to in Article 13. In the notes on Article 5(7)(b) in the explanatory memorandum to the UK Agreement of 1967 it relevantly states: The term [industrial or commercial profits] will not include - • dividends, interest, royalties or rents not effectively connected with a trade or business carried on through a permanent establishment; • remuneration for personal ( including professional ) services ; • income derived from, or in relation to, the furnishing of the services of public entertainers or athletes. The above indicates that Article 5(7)(b) of the UK Agreement of 1967 is merely a technical reconciliation provision, designed to confirm that the income falling within Articles 11 and 12 is not dealt with under the business profits article. It seems unlikely that the terms of Article 5(7)(b) would have been picked up and transposed into the Singapore Agreement in Article 2(1)(k)(iii) but intended to have a substantially different meaning and therefore operation. Explanatory memorandum to the Singapore Agreement The following notes on Article 2(1)(k)(iii) of the Singapore Agreement in the explanatory memorandum also indicate that this provision is merely a technical reconciliation provision: 'Profits of a Singapore enterprise' and 'profits of an Australian enterprise': Article 5 of the agreement provides for the taxation of business profits of an Australian or Singapore enterprise. These profits, which are described as 'industrial or commercial profits' in other agreements are to be taxed only in the country of residence, except where the profits are attributable to a permanent establishment (as defined in article 4) in the other country. The definition defines 'profits' for these purposes as meaning, broadly, business profits, as distinct from remuneration for personal services or investment income such as dividends, interest or royalties or rents . The term includes, however, dividends, interest or royalties that are effectively connected with a trade or business carried on through a permanent establishment (emphasis added). Explanatory memorandum to the Japanese Agreement of 1969 Also the explanatory memorandum to the Japanese Agreement of 1969, which was passed at the same time as the Singapore Agreement, is consistent with the above. The Japanese Agreement of 1969 contains an equivalent provision, Article 4(5)(c), which excludes from the 'industrial or commercial profits' of an enterprise 'remuneration for personal (including professional) services'. The following paragraph on Article 4(5) in the explanatory memorandum to the Japanese Agreement of 1969 (at pages 13-14) also indicates that Article 4(5)(c) is merely a reconciliation provision: Paragraph 5 of the article defines the term 'industrial or commercial profits' as meaning profits derived from the conduct of a trade or business. Dividends, interest, rents or royalties that are effectively connected with a trade or business, carried on through a permanent establishment are treated as 'industrial or commercial profits'. However, such income not so connected is specifically excluded from the term, as is income from operation of ships or aircraft and remuneration for personal (including professional) services. Other articles govern the taxation of the excluded classes of income (emphasis added). Conclusion Based on the above text, context and history of Article 2(1)(k)(iii) of the Singapore Agreement it is considered that this subparagraph is merely a technical reconciliation provision designed to confirm that the income derived by individuals falling within Articles 11 and 12 is not dealt with under Article 5 (business profits article) of the Singapore Agreement. | Detailed Reasoning - Singapore course fee income derived by the taxpayer: The income derived by the taxpayer from conducting finance training courses in Singapore is not income derived by individuals falling within Articles 11 and 12 of the Singapore Agreement. Therefore, as Article 2(1)(k)(iii) of the Singapore Agreement operates as a technical reconciliation provision, the Singapore course fee income is not 'remuneration or other income for personal (including professional) services' for the purposes of this subparagraph. Accordingly, Article 2(1)(k)(iii) of the Singapore Agreement does not exclude the Singapore course fee income from the profits of the taxpayer's Australian enterprise for the purposes of Article 5 (business profits article) of the Singapore Agreement.", "Date_of_Decision": "7 October 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "International Tax Agreements Act 1953 Former Schedule 1, paragraph 5(7) Former Schedule 1, subparagraph 5(7)(b) Schedule 5, Article 2 Schedule 5, subparagraph 2(1)(k) Schedule 5, subparagraph 2(1)(k)(iii) Schedule 5, Article 5 Schedule 5, Article 11 Schedule 5, Article 12 Former Schedule 6, former paragraph 4(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Business income Double tax agreements International tax Singapore", "Case_References": "Chalmers v Commonwealth (1946) 73 CLR 19", "Other_References": "Butterworths Australian Legal Dictionary Explanatory Memorandum to the Income Tax (International Agreements) Bill 1969 (Explanatory Memorandum to the Singapore and Japanese Agreement of 1969) Explanatory Memorandum to the Income Tax (International Agreements) Bill 1968 (Explanatory Memorandum to the UK Agreement of 1967)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009116", "Unmatched_Content": "This ATOID has been amended to clarify the references to the Japanese Agreements of 1969. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Articles 8, 9 and 10 deal with the taxation of dividends, interest and royalties while the taxation of remuneration for personal and professional services is dealt with in articles 11 and 12 . Income derived from, or in relation to, the furnishing of the services of public entertainers and athletes may be taxed in the country of source whether or not the particular enterprise has a permanent establishment in that country. Although income derived from the operation of ships or aircraft is 'industrial or commercial profits' the application of this article to income of that kind is governed by paragraph (9) (emphasis added). | Note added at the end for clarity. | Keywords Business income Double tax agreements International tax Singapore"}
{"ATO_ID_Number": "ATO ID 2009/158", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of Article 4(5)(d) of the Australia: Japan tax treaty - permanent establishment in Singapore of a Japanese resident company", "Issue": "Is a permanent establishment in Singapore of the taxpayer, a Japanese resident company, an 'entity' for the purposes of subparagraph (d)(i) of Article 4(5) of the tax treaty between Australia and Japan contained in Schedule 6 to the International Tax Agreements Act 1953 (the 2008 Japanese Convention)?", "Decision": "No. The taxpayer's permanent establishment is not an entity for the purposes of subparagraph (d)(i) of Article 4(5) of the 2008 Japanese Convention.", "Facts": "The taxpayer is a company that is a resident of Japan for the purposes of the laws of Japan and the 2008 Japanese Convention. The taxpayer also conducts an enterprise through a permanent establishment in Singapore. The taxpayer entered into an arrangement with an Australian resident company through its enterprise at the permanent establishment in Singapore. The enterprise conducted at the permanent establishment derives income, profits or gains from this arrangement after 1 July 2009.", "Reasons_for_Decision": "Summary: Paragraph (d) of Article 4(5) provides that, for the purposes of the 2008 Japanese Convention, an item of income, profits or gains derived from a Contracting State through an entity that is organised in a state other than the Contracting States and is treated as income, profits or gains of the entity under the laws of the other Contracting State will not be eligible for the benefits of the treaty. In the present case, Australia is the country referred to as the 'Contracting State' and Japan 'the other Contracting State' in paragraph (d) of Article 4(5). The term 'entity' is not defined in the 2008 Japanese Convention. Article 3(2) of the 2008 Japanese Convention provides that, unless the context requires otherwise, any term not defined in the 2008 Japanese Convention shall have the domestic law meaning at that time under the law of the Contracting State applying that tax treaty, with a meaning under domestic tax law prevailing over a meaning of a term under other law. The definition of the term 'entity' in section 960-100 of the Income Tax Assessment Act 1997 (ITAA 1997) is not a meaning of that term that can be adopted in the 2008 Japanese Convention as the context in which the term is used in Article 4(5) of the 2008 Japanese Convention requires otherwise. Even though the term is defined in Australia's tax laws and used numerous times in tax and other Australian law, the definition of the term in section 960-100 of the ITAA 1997 and the meaning of the term in other Australian laws reflects an Australian domestic tax or other law setting and excludes what could be an 'entity' under Japanese law. For the purposes of the present case only and paragraph (d) of Article 4(5) in particular, the Commissioner considers that the term 'entity' refers to the structures or organisations used in Australia and Japan to conduct an enterprise or business. A permanent establishment has, for the purposes of the 2008 Japanese Convention, the meaning set out in the Permanent Establishment Article (Article 5) of that tax treaty. Under Article 5(1), a permanent establishment means 'a fixed place of business through which the business of the enterprise is wholly or partly carried on'. Taxation Ruling TR 2001/13 provides the Commissioner's views on interpreting tax treaties. Paragraph 104 of TR 2001/13 provides that the 'OECD Model Tax Convention on Income and on Capital' and its associated Commentary will often need to be considered in interpreting tax treaties. While the other parts of Article 5 of the 2008 Japanese Convention provide additional examples or specifications on what is or is not a permanent establishment, paragraph 2 of the Commentary on Article 5 of the OECD Model, upon which Article 5(1) of the 2008 Japanese Convention is based, states: Paragraph 1 gives a general definition of the term \"permanent establishment\" which brings out the essential characteristics of a permanent establishment in the sense of the Convention, a distinct \"situs\", a \"fixed place of business\". In applying this meaning of permanent establishment in the present case, the Commissioner considers that the permanent establishment in Singapore of the taxpayer is merely the fixed place at which the enterprise conducted by the taxpayer carries on its business in whole or in part. In light of this meaning, the question arises as to whether the enterprise conducted by the taxpayer is the entity for the purposes of paragraph (d) of Article 4(5) of the 2008 Japanese Convention. In Thiel v. Federal Commissioner of Taxation 90 ATC 4717, the majority judgment of Mason C.J., Brennan and Gaudron JJ stated in relation to the first sentence of paragraph 4 of the Commentary on Article 3 of the OECD Model Tax Convention on Income and on Capital (OECD Model) that:: This statement plainly recognises that an activity, as well as a framework within which activities are engaged in, may constitute an ''enterprise'' for the purposes of the Agreement. Moreover, we agree with Sheppard J. in thinking that an enterprise \"may consist of an activity or activities and be comprised of one or more transactions provided they were entered into for business or commercial purposes'': (1988) 21 F.C.R. 122 at p. 146. Article 7, especially the heading ''Business Profits'', supports the notion that one or more transactions entered into for business or commercial purposes is an enterprise for the purposes of the Agreement. Because there are differences in the meaning of permanent establishment in the 2008 Japanese Convention compared with the meaning of 'entity' stated above, the Commissioner considers that the permanent establishment in Singapore is not of itself an entity for the purposes of paragraph (d) of Article 4(5). The same applies in respect of the enterprise the taxpayer conducts, whether the activities performed in Singapore are so performed within the enterprise or constitute the enterprise itself (see paragraph 4 of the Commentary on Article 3 of the OECD Model). In the present case, the Commissioner considers that the entity for purposes of paragraph (d) of Article 4(5) is the taxpayer, the Japanese resident company.", "Date_of_Decision": "2 October 2009", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "International Tax Agreements Act 1953 Schedule 6 - Article 3 Schedule 6 - Article 4 Schedule 6 - Article 5", "Related_Public_Rulings_and_Determinations": "TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International law International tax Japan Permanent establishment Treaties", "Case_References": "Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338 (1990) 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "OECD Model Tax Convention on Income and on Capital Condensed Version, 17 July 2008", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009158", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) TR 2001/13 | Keywords Double tax agreements International law International tax Japan Permanent establishment Treaties"}
{"ATO_ID_Number": "ATO ID 2008/62", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: application of the business profits article to a Dutch Stichting that is a unitholder in an Irish Common Contractual Fund", "Issue": "Does Australia have the right to tax Australian sourced business profits that a Dutch Stichting (Stichting) receives as a unitholder in an Irish Common Contractual Fund (CCF), under Article 7 of Schedule 10 of the International Tax Agreements Act 1953 (the Netherlands Agreement)?", "Decision": "No. Australia does not have the right to tax the Australian source business profits the Stichting receives as a unitholder in a CCF under Article 7 of the Netherlands Agreement.", "Facts": "The Stichting is a legal entity incorporated in the Netherlands. The Stichting is a pension fund whose sole purpose is to provide superannuation benefits for non-resident persons upon retirement or death. The Stichting is exempt from income tax in the Netherlands under the tax laws of the Netherlands. The Stichting has received a declaration from the Netherlands Inspector of Tax Administration to the effect that it is a resident of Netherlands for tax treaty purposes. The Stichting is not a resident of Australia for the purposes of Australian tax. The Stichting does not carry on business through a permanent establishment in Australia. The Stichting is the only unitholder in an Irish CCF. Irish CCFs are regulated by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (the Regulations). According to the Regulations a CCF is a contractual arrangement under which participants participate in the co-ownership of assets. The CCF is not a resident of Ireland or Australia for the purposes of the tax treaty between Australia and Ireland. The CCF receives Australian source business profits from investing the funds of the CCF. The CCF does not carry on business through a permanent establishment in Australia. The relationship between the manager and custodian of the CCF and the Stichting is considered a trust relationship for Australian tax purposes. The manager and custodian are the trustees, and the Stichting is the beneficiary.", "Reasons_for_Decision": "Summary: Article 7(1) of the Netherlands Agreement states: The profits of an enterprise of one of the States shall be taxable only in that State unless the enterprise carries on business in the other State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to that permanent establishment. (emphasis added) An 'enterprise of one of the States' is defined in Article 3(1)(j) of the Netherlands Agreement, which states: the terms ''enterprise of one of the States'' and ''enterprise of the other State'' mean an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of the Netherlands , as the context requires; (emphasis added) The concept of residency is defined in Article 4 of the Netherlands Agreement. In particular, Article 4(1) of the Netherlands Agreement states: For the purposes of this Agreement, a person is a resident of one of the States- (a) in the case of Australia, subject to paragraph (2), if the person is a resident of Australia for the purposes of Australian tax; and (b) in the case of the Netherlands, if the person is a resident of the Netherlands for the purposes of Netherlands tax but not if he is liable to tax in the Netherlands in respect only of income from sources therein. (emphasis added) Accordingly, for Article 7(1) of the Netherlands Agreement to apply to the Australian sourced business profits derived by the Stichting, the Stichting must be: for the purposes of the Netherlands Agreement. Is the Stichting a 'person' for the purposes of the Netherlands Agreement? Article 3(1)(d) of the Netherlands Agreement defines the term 'person' to mean 'an individual, a company and any other body of persons'. The term 'company' is defined in Article 3(1)(e) of the Netherlands Agreement to mean 'any body corporate or any entity which is assimilated to a body corporate for tax purposes'. The term 'body corporate' is not defined for the purposes of the Netherlands Agreement, and in accordance with Article 3(3) of the Netherlands Agreement, the term takes its meaning from the tax laws of Australia unless the context otherwise requires. As there is no definition of the term 'body corporate' under Australia's domestic tax law provisions, the ordinary meaning of the term applies as per tax treaty interpretation principles contained in Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements. The Butterworths Concise Australian Legal Dictionary Second edition defines a body corporate as 'an artificial legal entity having separate legal personality'. According to Article 285 of Book 2 of the Netherlands Civil Law Code : A Stichting is a legal personality created by a legal Act. It has no members and is created to achieve the objectives as defined in its Articles. As the Stichting is created under Netherlands law and has a legal personality under Netherlands law, it should be recognised as a legal entity in Australia in accordance with the principle in Chaff and Hay Acquisition Committee v. Hemphill (1947) 74 CLR 375 ( Chaff's Case ). In Chaff's Case , it was found by the High Court that a committee constituted in South Australia under the Chaff and Hay (Acquisition) Act 1944 (SA) was a legal entity despite not being incorporated under South Australian law. Chief Justice Latham found that as the committee was a legal entity in South Australia as distinct from the legal personalities of the natural persons who constitute it, then it is by comity recognised as a legal entity elsewhere. His Honour went on to state (at 384-5) that the same principle applied to the recognition of bodies created by foreign law which have the rights and liabilities distinct from those of the natural persons who constitute them. Justice Starke J further stated (at 388) that 'recognition is given in the case of companies or artificial persons which have come into existence in countries whose law of incorporation is based on principles different from those of England and Australia'. This principle is also recognised in the Foreign Corporations (Application of Laws) Act 1989. This Act applies in determining a question arising under Australian law where it is necessary to determine the question by reference to a system of law other than Australian law. Section 7(2) provides that any question relating to whether a body or person has been validly incorporated in a place outside Australia is to be determined by reference to the law applied by the people in that place. As the Stichting is a legal entity created by legal authority in the Netherlands to achieve certain purposes, the Stichting has the features of a body corporate under the ordinary meaning of the term. As such, the Stichting is a 'person' for the purposes of the Netherlands Agreement. Is the Stichting a resident of the Netherlands for the purposes of the Netherlands Agreement? Article 4(1)(b) of the Netherlands Agreement requires that the person must be a resident for the purposes of Netherlands tax but must not be liable to tax in the Netherlands in respect only of income from sources therein. The Stichting here has received a declaration from the Netherlands Inspector of Tax Administration to the effect that it is a resident of Netherlands for tax treaty purposes. The Stichting therefore satisfies this requirement. Is the Stichting an enterprise for the purposes of the Netherlands Agreement? The High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; (1990) 21 ATR 531; 90 ATC 4717 considered the meaning of the expression 'the profits of an enterprise of one of the contracting states' in the Business Profits Article of the tax treaty between Australia and Switzerland. Chief Justice Mason and Justices Brennan and Gaudron stated: this statement recognises that an activity, as well as a framework within which activities are engaged in, may constitute an \"enterprise\" for the purposes of the Agreement. Moreover, we agree with Sheppard J. in thinking that an enterprise \"may consist of an activity or activities and be comprised of one or more transactions provided they were entered into for business or commercial purposes\": (1988) 21 F.C.R. 122 at p. 146.\" In carrying out the activities of a pension fund, the Stichting is considered to constitute an enterprise as the activities it conducts are entered into for business or commercial purposes. Conclusion Accordingly all the necessary elements of Article 7(1) of the Netherlands Agreement are satisfied by the Stichting in order for the taxing rights of the Netherlands and Australia to be determined under Article 7(1) of the Netherlands Agreement. The Stichting does not have a permanent establishment in Australia and Article 7(1) of the Netherlands Agreement provides a residence-only taxing right to the Netherlands over the business profits of the Stichting. Accordingly, Australia, as the country of source of the business profits, does not have a right to tax the business profits under the Netherlands Agreement.", "Date_of_Decision": "21 April 2008", "Year_of_Income": "Years ended 30 June 2007 Years ended 30 June 2008 Years ended 30 June 2009 Years ended 30 June 2010 Years ended 30 June 2011", "Legislative_References": "International Tax Agreements Act 1953 Article 7 of Schedule 10 Article 3 of Schedule 10 Article 4(1) of Schedule 10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/61 | ATO ID 2008/63", "Subject_References": "Entities & taxpayer groups International tax Non resident entities Trust distributions Trustees Trusts", "Case_References": "Chaff and Hay Acquisition Committee v Hemphill (1947) 74 CLR 375", "Other_References": "European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 Dutch State Secretary of Finance - Resolution IFZ93/874 dated 1 September 1993 Butterworths Concise Australian Legal Dictionary, Second edition Model Tax Convention on Income and Capital (Condensed Version 2005) Article 285 of Book 2 of the Netherlands Civil Law Code Foreign Corporations (Application of Laws) Act 1989 Section 7(2)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200862", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Entities & taxpayer groups International tax Non resident entities Trust distributions Trustees Trusts"}
{"ATO_ID_Number": "ATO ID 2008/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable Income: Irish Common Contractual Fund - residency for the purposes of the Irish Agreement", "Issue": "Is an Irish Common Contractual Fund (CCF) a resident of Ireland for the purposes of Schedule 20 of the International Tax Agreements Act 1953 (the Irish Agreement)?", "Decision": "No. The CCF is not a resident of Ireland for the purposes of the Irish Agreement.", "Facts": "The CCF is not a legal entity in Ireland and is not subject to tax in Ireland. It acts as a pooled investment vehicle for the assets of pension funds and invests these assets on behalf of those funds. Irish CCF's are regulated by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (the Regulations). According to the Regulations a CCF is a contractual arrangement under which participants participate in the co-ownership of assets. The CCF receives Australian sourced income from investing the funds of the CCF. The CCF is not a resident of Australia for the purposes of Australian tax.", "Reasons_for_Decision": "Summary: Article 4(1)(b) of the Irish Agreement provides that a person will be a resident of Ireland if they are: liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature but not if he is liable to tax in Ireland in respect only of income from sources therein. Even though the trustees of the CCF in their non-trustee capacity may be residents of Ireland for the purposes of the Irish treaty, it is the residency status of the trustees in their capacity's as trustees of the CCF that is relevant for the purposes of the treaty. The trustees of the CCF do not satisfy the residency definition in the Irish Agreement as they are not liable to tax in Ireland on income they receive in their capacity as trustees of the CCF. Furthermore, there is no tax imposed at the level of the CCF in Ireland as it is treated as a flow-through vehicle for Irish tax purposes. This approach follows the one taken in Taxation Ruling TR 2005/14 Income Tax: Application of the Australia/New Zealand Double Tax Agreement to New Zealand Resident Trustees of New Zealand Foreign Trusts. Paragraph 7 and 8 of TR 2005/14 states: 7. For the purposes of determining residency under the NZ Agreement of a trustee of a New Zealand Foreign Trust, the relevant person is the trustee (and not the trust). 8. Article 4(2) of the NZ Agreement provides that a person is not a resident of a Contracting State where they are liable to tax in that State in respect of income from sources in that State only. It is considered that in applying Article 4(2) to these trustees we look to how they are taxed on trust income in their capacity as trustees in New Zealand. How the trustee may be taxed in respect of income derived in their non-trustee capacity is not considered relevant to this issue. As a result, the CCF is not a resident of Ireland for the purposes of the Irish Agreement.", "Date_of_Decision": "21 April 2008", "Year_of_Income": "Years ended 30 June 2007 Years ended 30 June 2008 Years ended 30 June 2009 Years ended 30 June 2010 Years ended 30 June 2011", "Legislative_References": "International Tax Agreements Act 1953 Schedule 20 - Article 4", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/14", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/61 | ATO ID 2008/62", "Subject_References": "Entities & taxpayer groups International tax Non resident entities Trustees Trusts Resident/residency", "Case_References": "", "Other_References": "European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200863", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2005/14 | Keywords Entities & taxpayer groups International tax Non resident entities Trustees Trusts Resident/residency"}
{"ATO_ID_Number": "ATO ID 2008/145", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Periodic compensation payments received by a non-resident individual and the Pension Article of the UK Convention", "Issue": "Does Article 17, the Pensions and annuities Article (the Pension Article) of the 2003 United Kingdom Convention and Notes (the UK Convention), apply to loss of earnings payments made under section 44 or section 45 of the Transport Accident Act 1986 (Vic) (TAA 1986) or under similar legislation in other Australian States and Territories, to an individual UK resident?", "Decision": "Yes. The Pension Article of the UK Convention applies to loss of earnings payments made under section 44 or section 45 of the TAA 1986 or under similar legislation in other Australian States and Territories, to the individual UK resident.", "Facts": "A non-resident individual (the taxpayer) who is a UK resident for the purposes of the UK Convention, received loss of earnings payments from Australia as a result of injury suffered in a transport accident in the State of Victoria. The payments comprised weekly statutory compensation payments made by the Victorian Transport Accident Commission (TAC) under section 44 or section 45 of the TAA 1986 for loss of income due to the injury. The payments are calculated by reference to the recipient's pre-accident earnings. Similar statutory compensation payments are made in other Australian States and Territories under statutory provisions similar to the TAA 1986.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from Australian sources. The loss of earnings payments are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to Australian tax in respect of Australian sourced income received by a non-resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreement Act 1953 (the Agreements Act). Schedule 1 of the Agreements Act contains the UK Convention (the double tax treaty between Australia and the United Kingdom). Article 17(1) of the UK Convention provides that pensions (including government pensions) and annuities paid to a resident of a Contracting State shall be taxable only in that State. Therefore, pensions paid from Australia to an individual who is a resident of the UK shall be taxable only in the UK. Article 3(3) of the UK Convention provides that any term not defined in the Convention shall, unless the context requires otherwise, have the meaning it has under the domestic laws in respect of the taxes to which the Convention applies. The term 'pension' is not defined in the UK Convention or in Australia's domestic taxation law. Taxation Determination TD 93/151 discusses the meaning of a 'pension' for tax treaty purposes in the context of workers compensation payments. Paragraph 1 of TD 93/151 states that a 'pension' is defined in The Macquarie Dictionary , 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW as: '1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc. 2. an allowance or annuity.' The meaning of the term 'pension' was also considered by Hill J. in the Federal Court in Tubemakers of Australia Ltd v. Federal Commissioner of Taxation 93 ATC 4207; (1993) 25 ATR 183 ( Tubermakers ). His Honour concluded that the essential characteristic of a 'pension' is periodic payments. The loss of earnings payments made under section 44 or section 45 of the TAA 1986 have the essential characteristic of a 'pension' as per Hill J. in Tubemakers and fall within the Macquarie dictionary definition of 'pension' as they are fixed periodic payments made in consideration of injury or loss sustained. Accordingly, the periodic compensation payments made to the taxpayer by the TAC under section 44 or section 45 are a 'pension' for the purposes of the Pension Article of the UK Convention. Therefore, the Pension Article applies to give the UK, as the country of residence of the taxpayer, sole taxing rights over the compensation payments.", "Date_of_Decision": "29 October 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination 93/151", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/27 | ATO ID 2007/49", "Subject_References": "Double tax agreements International tax Periodical sickness or accident compensation payments", "Case_References": "Tubemakers of Australia Ltd v. Federal Commissioner of Taxation 93 ATC 4207 (1993) 25 ATR 183", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008145", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Determination 93/151 | Keywords Double tax agreements International tax Periodical sickness or accident compensation payments"}
{"ATO_ID_Number": "ATO ID 2008/151", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: United Kingdom double tax agreement - trust income", "Issue": "Is income derived by a United Kingdom (UK) entity from an Australian theatrical production carried out by an Australian resident company (Ausco) as trustee, assessable under the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The income derived by the UK entity will be assessable to Ausco (as trustee) under subsection 98(3) of the ITAA 1936. The income will also be assessable to the UK entity as a beneficiary under section 98A of the ITAA 1936, but a deduction is allowed against the income tax assessed to the UK entity for the tax paid by Ausco as trustee.", "Facts": "The UK entity is a resident of the UK for tax purposes. The UK entity enters into a contract with Ausco to invest funds in a theatrical production (the production) in Australia. Ausco carries on the business of staging the production in Australia. The production is staged in an Australian theatre for at least 6 months. Ausco acts as trustee for the UK entity. The UK entity is presently entitled to a share of the net profits derived from the production.", "Reasons_for_Decision": "Summary: In determining liability to Australian tax, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 1 of the Agreements Act contains the UK Convention respectively between Australia and the UK. The UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Where the UK Convention gives Australia the right to tax an amount, Article 21 will deem the amount to have an Australian source for the purposes of the ITAA 1936 and Income Tax Assessment Act 1997 (ITAA 1997). Accordingly, it is necessary to turn to the application of the UK Convention. It should be noted that section 4 of the Agreements Act provides that the ITAA 1936 and ITAA 1997 will have no application if Australia does not have taxing rights under the relevant Convention. Article 7 of the UK Convention provides that the business profits of a UK enterprise shall be taxable only in the UK unless the enterprise carries on business in Australia through a permanent establishment (PE) situated in Australia. For the income derived by the UK entity to be taxable in Australia, it is necessary to establish that the UK entity is an enterprise that carries on business in Australia through a PE. By entering into the contract to invest in the production, the UK entity has an enterprise within the meaning of that word as considered by the High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; (1990) 90 ATC 4717; (1990) 21 ATR 531. As to whether a business is being carried on in Australia through a PE, subsection 3(11) of the Agreements Act is relevant. For subsection 3(11) to apply, the following requirements must be satisfied: In the present case, the first requirement is satisfied because the UK entity is a beneficiary who is presently entitled under a trust. The second requirement is satisfied because the UK beneficiary is a resident of the UK. Australia has concluded a tax treaty with the UK. The third requirement is satisfied because Ausco as trustee derives business income from staging a play in an Australian theatre for 6 months which amounts to a PE. The term 'permanent establishment' in subsection 3(11) of the Agreements Act takes its meaning from the UK Convention (see subsection 3(12) of the Agreements Act). Article 5(1) of the UK Convention defines a PE to mean a fixed place through which the business of an enterprise is carried on. Taxation Ruling TR 2002/5 considered what is a place at or through which a person carries on any business for the purposes of the PE definition in subsection 6(1) of the ITAA 1936. The discussion in TR 2002/5 applies equally to the meaning of PE under Article 5(1) of the UK Convention because the subsection 6(1) definition of PE is based on the concept of PE used in Australia's tax treaties (paragraph 9 of TR 2002/5). Under the principles discussed in TR 2002/5 in respect of temporal and geographic permanence of a PE, Ausco has a PE as it stages the production in a theatre for 6 months. The fourth requirement is satisfied because the income to which the UK entity is presently entitled has the character of business profits by the operation of subsection 3(4) of the Agreements Act. The subsection deems the UK entity which is presently entitled to trust income to derive that trust income, which is income from carrying on the business of theatrical production. Subsection 3(11) of the Agreements Act is therefore satisfied and has the effect of deeming the business conducted by the trustee to be a business carried on by the UK entity through a PE in Australia. The UK entity's share of the income is also deemed to be attributable to that PE. As a result, Article 7 of the UK Convention applies to give Australia the right to tax the business profits to which the UK entity is presently entitled to under the trust. Article 21 of the UK Convention also operates to deem the income to be sourced in Australia. The UK entity will be presently entitled to trust income when it receives or has the right to receive an amount of net profit pursuant to the contract. As the UK entity is a non-resident at the end of the year of income, Ausco, as trustee is liable to be taxed upon the UK entity's share of the trust income that is deemed by Article 21 of the UK Convention to be sourced in Australia (subsection 98(3) of the ITAA 1936). Subsection 98(3) of the ITAA 1936 applies to assess Ausco as the trustee. Section 98A of the ITAA 1936 also assesses an amount to the UK entity as beneficiary, however, a deduction is allowed for the tax paid by Ausco as trustee against the income tax assessed to UK entity.", "Date_of_Decision": "17 November 2008", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 98(3) subsection 98A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Arts, media & entertainment sector Business income Double tax agreements International tax Permanent establishment Present entitlement Treaties Trust income Trustees Trusts", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 (1990) 90 ATC 4707 (1990) 21 ATR 531", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008151", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2002/5 | Keywords Arts, media & entertainment sector Business income Double tax agreements International tax Permanent establishment Present entitlement Treaties Trust income Trustees Trusts"}
{"ATO_ID_Number": "ATO ID 2008/152", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income: United States double tax agreement - trust income", "Issue": "Is income derived by a United States (US) entity from an Australian theatrical production carried out by an Australian resident company (Ausco) as trustee, assessable under the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The income derived by the US entity will be assessable to Ausco (as trustee) under subsection 98(3) of the ITAA 1936. The income will also be assessable to the US entity as a beneficiary under section 98A of the ITAA 1936, but a deduction is allowed against the income tax assessed to the US entity for the tax paid by Ausco as trustee.", "Facts": "The US entity is a resident of the US for tax purposes. The US entity enters into a contract with Ausco to invest funds in a theatrical production (the production) in Australia. Ausco carries on the business of staging the production in Australia. The production is staged in an Australian theatre for at least 6 months. Ausco acts as trustee for the US entity. The US entity is beneficially entitled to a share of the net profits derived from the production. The US entity is also presently entitled to a share of the net profits derived from the production.", "Reasons_for_Decision": "Summary: In determining liability to Australian tax, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 2 and 2A of the Agreements Act contains the US Convention and Protocol respectively between Australia and the US. The US Convention and Protocol operate to avoid the double taxation of income received by Australian and US residents. Where the US Convention gives Australia the right to tax an amount, Article 27(1)(a) will deem the amount to have an Australian source for the purposes of the ITAA 1936 and Income Tax Assessment Act 1997 (ITAA 1997). Accordingly, it is necessary to refer to the application of the US Convention and Protocol. It should be noted that section 4 of the Agreements Act provides that the ITAA 1936 and ITAA 1997 will have no application if Australia does not have taxing rights under the relevant Convention. Article 7 of the US Convention provides that the business profits of a US enterprise shall be taxable only in the US unless the enterprise carries on business in Australia through a permanent establishment (PE) situated in Australia. For the income derived by the US entity to be taxable in Australia, it is necessary to establish that the US entity is an enterprise that carries on business in Australia through a PE. By entering into the contract to invest in the theatrical production, the US entity has an enterprise in accordance with the meaning of that word as considered by the High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; (1990) 90 ATC 4717; (1990) 21 ATR 531. As to whether a business is being carried on in Australia by the US entity through a PE, Article 7(9) of the US Convention is relevant. For Article 7(9) to apply, the following requirements must be satisfied: In the present case, the first requirement is satisfied because the US entity is a resident of the US and is beneficially entitled to a share of the business profits carried on by Ausco as trustee. The second requirement is satisfied because Ausco derives business profits from staging a play in an Australian theatre for 6 months which amounts to a PE. Article 5(1) of the US Convention defines a permanent establishment to mean a fixed place through which the business of an enterprise is carried on. Taxation Ruling TR 2002/5 considered what is a place at or through which a person carries on any business for the purposes of the PE definition in subsection 6(1) of the ITAA 1936. The discussion in TR 2002/5 applies equally to the meaning of PE under Article 5(1) of the US Convention because the subsection 6(1) definition is based on the concept of PE used in Australia's tax treaties (paragraph 9 of TR 2002/5). Under the principles discussed in TR 2002/5 in respect of temporal and geographic permanence of a PE, Ausco has a PE as it stages the production in a theatre for 6 months. Article 7(9) of the US Convention is satisfied and has the effect of deeming the enterprise carried on by the trustee to be a business carried on by the US entity through a PE in Australia. The US entity's share of business profits is also deemed to be attributed to that PE. The income to which the US entity is beneficially entitled will have the character of business profits because subsection 3(4) of the Agreements Act deems the US entity which is presently entitled to trust income to derive that trust income, which is income from carrying on the business of theatrical production. As a result, Article 7 of the US Convention applies to give Australia the right to tax the business profits to which the US entity is beneficially entitled to under the trust. Article 27(1)(a) of the US Convention also operates to deem the income to be sourced in Australia. The US entity will be presently entitled to trust income when it receives or has the right to receive an amount of net profit pursuant to the contract. As the US entity is a non-resident at the end of the year of income, Ausco as trustee is liable to be taxed upon the US entity's share of the trust income that is deemed by Article 27 of the US Convention to be sourced in Australia (subsection 98(3) of the ITAA 1936). Subsection 98(3) of the ITAA 1936 applies to assess Ausco as the trustee. Section 98A of the ITAA 1936 also assesses an amount to the US entity as beneficiary, however, a deduction is allowed for the tax paid by Ausco as trustee against the income tax assessed to the US entity.", "Date_of_Decision": "17 November 2008", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 98(3) subsection 98A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Arts, media & entertainment sector Business income Double tax agreements International tax Permanent establishment Treaties Trust income Trustees Trusts", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 (1990) 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008152", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2002/5 | Keywords Arts, media & entertainment sector Business income Double tax agreements International tax Permanent establishment Treaties Trust income Trustees Trusts"}
{"ATO_ID_Number": "ATO ID 2007/20", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "United States Convention: whether packing machines are 'substantial equipment'", "Issue": "Are packing machines 'substantial equipment' for the purposes of Article 5(4)(b) of Schedule 2 of the International Tax Agreements Act 1953 (the US Convention)?", "Decision": "No. The packing machines are not 'substantial equipment' for the purposes of Article 5(4)(b) of the US Convention.", "Facts": "The taxpayer is a non-resident for Australian income tax purposes and is a resident enterprise of the United States under the US Convention. The taxpayer leases packing machines and associated equipment to Australian resident lessees who use the equipment in Australia. The taxpayer leases approximately 45 packing machines and 220 attachments to approximately 25 to 30 Australian lessees. The 'attachments' are associated but separate units of equipment forming an integral part of the overall packing machine. A packing machine has the approximate dimensions of 4 x 3 x 3 metres, and an 'attachment' to the packing machine has approximate dimensions of 75 x 100 x 30 centimetres. The replacement cost of a packing machine is approximately USD 25,000 and the replacement cost of an 'attachment' is approximately USD 2,000.", "Reasons_for_Decision": "Summary: Article 5(4)(b) of the US Convention deems a US enterprise to have a permanent establishment in Australia if the US enterprise maintains substantial equipment for rental or other purposes within Australia (excluding equipment let under a hire-purchase agreement) for a period of more than 12 months. The term substantial equipment is not defined in the US Convention. Paragraphs 105 to 108 of Taxation Ruling TR 2006/D8, however, explain the meaning of 'equipment' in Article 5(4)(b) of the US Convention and in particular that the term will include items of machinery. Therefore, the packing machines and attachments are clearly items of 'equipment'. Paragraph 109 of TR 2006/D8 states that the relevant meanings of 'substantial' in the Macquarie Dictionary , 2001, 5 th edn, The Macquarie Library Pty Ltd, NSW are: Paragraph 112 of TR 2006/D8 states that whether equipment is 'substantial' is a question of fact and degree to be determined: Accordingly, based on the ordinary meaning of the term, the relevant case law ( McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) 142 FCR 134; 2005 ATC 4398; (2005) 59 ATR 358 ( McDermott ); Tillmanns Butcheries Pty Ltd v. Australian Meat Industry Employees' Union (1979) 42 FLR 331; Case H106 (1957) 8 TBRD 484; (1957) 7 CTBR (NS) Case 98 ( Case H106 )), and the guidance at paragraphs 1.61 to 1.64 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003 incorporating the 2003 Convention between Australia and the United Kingdom of Great Britain and Northern Ireland (the 2003 UK Convention), the Commissioner considers that the following factors are relevant in determining whether equipment is 'substantial': The common characteristic of the examples of substantial equipment in McDermott and at paragraph 1.63 of the Explanatory Memorandum to the 2003 UK Convention is the size of the equipment. The Commissioner therefore considers that size is the key factor and has greater weight in determining whether equipment is 'substantial'. If an item of equipment is sufficiently large in size, it will be 'substantial' in an absolute sense. In such instances, this factor alone will be decisive and further consideration of any of the other factors is not necessary. As the nature of the 'substantial equipment' test in paragraph 112 of TR 2006/D8 is one of fact and degree, determined on balance according to individual facts and circumstances, the Commissioner considers that the factors listed above, other than size, are not of themselves determinative. Each of these factors needs to be considered with the others, having regard to all the facts and circumstances of the particular case. This is consistent with the analysis in Case H106 , where the Board of Review used more than one of the factors stated above to find that the equipment in question in that case was substantial. Where there are a number of items of equipment that are not large enough individually to be substantial in an absolute sense, the Commissioner considers that the size of the items collectively and the quantity can only be considered if the items of equipment are part of a unified process. This arises from the context in which the term 'substantial' appears in the provision; that is, it is part of the expression 'substantial equipment' as opposed to 'a substantial amount of equipment'. Value is a relevant factor in determining if equipment is substantial on two levels; firstly, in the sense of its cost (as per the ordinary meaning of the term) and, secondly, in the sense of its value creating potential. In relation to the latter, paragraph 1.62 of the Explanatory Memorandum to the 2003 UK Convention refers to high value activities involved in the development of natural resources. Equipment may be so valuable that it may be considered substantial in an absolute sense. For example, in Number 630 v. Minister of National Revenue (1959) 59 DTC 300, tunnelling equipment costing $600,000 was considered to be substantial equipment purely on the basis of its cost alone. However, it is not possible to set a precise monetary threshold in relation to cost that will be appropriate for all cases. Importance as a relevant factor is reflected in Case H106 where Mr Fletcher, the Chairman of the Board: The meaning of 'substantial' is relative and in the case where the machinery required is not extensive, and the whole is involved, it is 'substantial'. The statement above from Case H106 , the ordinary meaning of the term 'substantial', and the context in which the term is used, indicate that the sense in which importance is relevant is where the equipment is core to the enterprise conducting its income producing or value creating activity, or to it creating its product in a particular country. The dimensions of an individual packing machine and an associated attachment are each not large enough in size to be considered substantial in an absolute sense. As a packing machine and an attachment operate as part of the one unified process in the overall packing process undertaken by each Australian lessee, the two individual machines can be considered collectively to determine if they are substantial. The collective size of a packing machine and attachment is not, however, large enough to be considered substantial in an absolute sense. In considering the two machines collectively, their replacement cost would be USD 27,000. On the second aspect of value, it is unlikely that this packing industry would be considered a high profit creating industry. As the Australian lessees also undertake other activities which involve a number of other types of processing equipment in their business, it is considered these packing machines are not 'core' pieces of equipment. No one individual factor in this particular case is decisive and, on balance, the factors present are insufficient to conclude that this equipment is 'substantial' equipment for the purposes of the US Convention.", "Date_of_Decision": "17 January 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2, Article 5(4)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2006/D8", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/337 | ATO ID 2006/314", "Subject_References": "Double tax agreements International law International tax Leasing Permanent establishment Substantial equipment Treaties", "Case_References": "McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) 142 FCR 134 2005 ATC 4398 (2005) 59 ATR 358", "Other_References": "The Macquarie Dictionary, 2001, 5th Edition, The Macquarie Library Pty Ltd, NSW OECD Committee on Fiscal Affairs for the Organisation for Economic Co-operation and Development, Model Tax Convention on Income and Capital, Paris, Condensed Version 15 July 2005 Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003 (the Explanatory Memorandum to the 2003 UK Convention)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200720", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2006/D8 | Keywords Double tax agreements International law International tax Leasing Permanent establishment Substantial equipment Treaties"}
{"ATO_ID_Number": "ATO ID 2006/198", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent Establishment: installation of plant as part of a project where the period is greater than 12 months - UK resident", "Issue": "Does the installation of plant as part of a project by a United Kingdom (UK) resident taxpayer constitute a 'permanent establishment' in Australia within the meaning of that term in Article 5 of Schedule 1 to the International Tax Agreements Act 1953 (the United Kingdom Convention)?", "Decision": "Yes. The installation of plant as part of a project by the UK resident taxpayer will constitute a 'permanent establishment' in Australia within the meaning of that term in Article 5 of the United Kingdom Convention.", "Facts": "The taxpayer is a foreign resident company incorporated in the UK. The taxpayer has entered into a contract with an Australian company for the installation of plant and other works as part of a project located in Australia. The period of the contract is greater than twelve months. The taxpayer has entered into a subcontracting agreement with an unrelated Australian company to provide for the installation of plant and other works as detailed in the subcontracting agreement. The taxpayer will provide a UK resident project director and engineers who will to oversee the installation of the project, as required.", "Reasons_for_Decision": "Summary: The term permanent establishment is defined in Article 5(1) of the United Kingdom Convention as a 'fixed place' of business through which the business of an enterprise is wholly or partly carried out. Article 5(3)(a) of the United Kingdom Convention states that an enterprise shall be deemed to have a permanent establishment in Australia and to carry on business through that permanent establishment if it has a building site or construction or installation project in Australia, or it undertakes a supervisory or consultancy activity in Australia connected with such a site or project, but only if that site, project or activity last more than 12 months. According to the facts, the taxpayer has entered into an agreement with an Australian company for the installation of plant as part of a larger project. Further to this the taxpayer has also entered into an agreement with an unrelated Australian company for the subcontracting of such works. In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531, the High Court accepted that the OECD Model and the Commentaries on the Articles of the OECD Model (the OECD Commentary) may be relevant to the interpretation of tax treaties based on the OECD Model. The High Court approved recourse to the OECD Model and the OECD Commentary under Article 32 of the Vienna Convention (see paragraph 102 of Taxation Ruling TR 2001/13). Unless specified otherwise, references to the OECD Model and Commentary are to the version published on 15 July 2005. Paragraph 16 to 20 of the OECD Commentary on Article 5 of the OECD Model discusses situations where a building site or construction or installation project constitutes a permanent establishment where that building site or construction or installation project lasts more than 12 months. Paragraph 17 of the OECD Commentary explains that the term 'installation project' is not restricted to an installation related to a construction project; it also includes the installation of new equipment, such as a complex machine, in an existing building or outdoors. It is considered that the installation of plant and other works constitutes an installation project. The contract entered into with the subcontractor to undertake the work outlined in the agreement would not preclude it from the operation of Article 5(3)(a) of the United Kingdom Convention. Paragraph 19 of the OECD commentary indicates that if a general contractor has undertaken the performance of a comprehensive project, subcontracts part of that project to other enterprises (subcontractors), the period spent by a subcontractor working on the building site must be considered as being time spent by the general contractor on the building project. This particular statement implies that the use of subcontractors by the taxpayer would not preclude the taxpayer from having an installation project.", "Date_of_Decision": "26 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "International Tax Agreements Act 1953 Schedule 1 Schedule 1, Article 5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/850", "Subject_References": "Double tax agreements International tax Permanent establishment", "Case_References": "Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "2005 OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006198", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling 2001/13 | Keywords Double tax agreements International tax Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2009/2", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "The term 'unrelated' for the purposes of Article 11(3)(b) of the US Convention: where a company as the holder of redeemable preference shares has majority voting rights in relation to specified events", "Issue": "Is a taxpayer (Aus Co), which is an Australian resident payer of dividends on redeemable preference shares (RPS), 'unrelated' to a US resident financial institution (US Co) for the purposes of Article 11(3)(b) of the United States Convention (US Convention) in Schedules 2 and 2A of the International Tax Agreements Act 1953 (the Agreements Act) where, contingent upon specified events occurring that involves compliance with the terms of the RPS, the director of Aus Co appointed by US Co (in its capacity as the holder of the RPS) has majority voting rights on Aus Co's board of directors only in relation to the specified events?", "Decision": "Yes. Aus Co is unrelated to US Co for the purposes of Article 11(3)(b) of the US Convention notwithstanding that upon the specified events occurring, the director of Aus Co appointed by US Co has majority voting rights on Aus Co's board of directors in relation to those specified events.", "Facts": "Aus Co is an Australia resident company and participates in a particular financing arrangement with a US resident company, US Co, in order to obtain funds at a lower cost for the group of companies of which Aus Co is a member. US Co is a financial institution for the purposes of Article 11(3)(b) of the US Convention. Aus Co issues RPS to another member of its group of companies referred to above. Those RPS are then immediately transferred by that member to US Co. The rights of US Co attaching to the RPS include: Aus Co makes dividend payments to US Co, the beneficial owner of the dividends, in respect of the RPS held by US Co. Where specified events occur involving compliance with the terms of the RPS issued to US Co, the director appointed by US Co has five votes on the board of Aus Co (with a quorum constituted by the one director appointed by US Co) but only with respect to any decision or resolution to rectify the specified event. These specified events include where Aus Co:", "Reasons_for_Decision": "Summary: Article 11(3) of the US Convention provides that Australia shall not tax interest arising in Australia where a US resident financial institution is beneficially entitled to that interest (and satisfies other conditions). Article 3(2) of the US Convention provides that any term not defined will have the meaning given under the laws of Australia relating to the taxes to which the Convention applies, unless the context otherwise requires. The term 'unrelated' is not defined in the US Convention or in Australian domestic tax law. Paragraph 109 of Taxation Ruling TR 2005/5 states that the term 'unrelated' takes its meaning from the context in which it appears. Taxation Ruling TR 2005/5 states at paragraphs 30, 112 and 114 respectively: 30. The term 'unrelated' means that there is no ownership or control based relationship between the payer of the interest and the financial institution, under which one party is able to exert sufficient influence over the activities of the other party. ... 112. ... the requirement of being 'unrelated' is contextually similar to a non-associate relationship whereby the relationship is not capable of affecting the dealings between the financial institution and the payer. Taking this factor into account, the Commissioner would consider that a financial institution will be unrelated to the interest payer where, in considering the level of participation in the ownership or control of either the financial institution or the Australian payer by the other party, it can be concluded that neither party is able to exert sufficient influence over the other party. 114. ...redeemable preference shares (RPS) usually contain restricted voting and profit participation rights and are often used as a form of finance, being in substance economically similar to a loan. In such cases, where the holder of the RPS ordinarily has limited power to direct the activities of the company in general meetings and no other factors exist affecting the relationship, it would be reasonable to conclude that the RPS holder does not sufficiently influence the issuing entity so that the parties are treated as being unrelated. The issue raised in the present case is whether Aus Co and US Co have an ownership or control based relationship arising from the arrangement whereby one party is able to exert sufficient influence over the activities of the other party. Since US Co has relevantly restricted voting and profit participation rights, the RPS fit the description in paragraph 114 of TR 2005/5. The director appointed by US Co controls Aus Co's board of directors only in the occurrence of specified events involving compliance with the terms of the RPS issued to US Co. The limited circumstances in which the director appointed by US Co can utilise controlling voting power does not constitute the ability to direct Aus Co's actions in a general sense. Therefore, pursuant to paragraph 114 of TR 2005/5, it can be concluded that Aus Co and US Co are 'unrelated' within the meaning of Article 11(3)(b) of the US Convention.", "Date_of_Decision": "25 November 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2 Schedule 2, Article 11 Schedule 2, Article 11(3) Schedule 2, Article 11(3)(b) Schedule 2, Article 3(2) Schedule 2A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt interest Double tax agreements Interest income International tax Treaties United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20092", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2005/5 | Keywords Debt interest Double tax agreements Interest income International tax Treaties United States"}
{"ATO_ID_Number": "ATO ID 2008/3", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividends under Article 10.3 of the UK Convention: determination made under Article 10.3(c) of the UK Convention.", "Issue": "Under Article 10.3 of the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland contained in Schedule 1 to the International Tax Agreements Act 1953 (the UK Convention), are unfranked dividends paid by an Australian resident subsidiary to the taxpayer, a United Kingdom (UK) resident company, not taxed in Australia where the taxpayer has owned all the shares of the Australian resident subsidiary since 1990 and the Australian competent authority has made a determination under Article 10.3(c) of the UK Convention?", "Decision": "Yes. Unfranked dividends paid by the Australian resident subsidiary to the taxpayer are not taxed in Australia where the taxpayer has owned shares representing 80 per cent or more of the voting power of the Australian resident subsidiary for a 12 month period ending on the date of the dividend is declared, Article 10.3(a) or (b) of the UK Convention are not satisfied and the Australian competent authority has made a determination under Article 10.3(c) of the UK Convention.", "Facts": "The taxpayer is a UK resident company. One of the taxpayer's wholly-owned subsidiaries is an Australian resident. The taxpayer has held and continues to hold its investment in its Australian resident subsidiary since 1990. All the shares in the taxpayer were held by a UK resident company the shares of which have been listed on the London Stock Exchange since 1993. In 2000, another UK resident company that was a wholly owned subsidiary of a company, the shares of which are listed on Country A Stock Exchange acquired all the shares of the UK resident listed company The taxpayer continued to own all the shares in the Australian resident company. During the income year, the Australian resident company paid unfranked dividends to the taxpayer, which is the company that is beneficially entitled to and the beneficial owner of the dividends. The Australian competent authority has determined under Article 10.3(c) of the UK Convention and in accordance with Australian law, that the establishment, acquisition or maintenance of the taxpayer and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the UK Convention.", "Reasons_for_Decision": "Summary: Article 10.3(c) of the UK Convention provides that dividends paid by a company that is a resident of Australia shall not be taxed in Australia if: In the present case, the taxpayer: Furthermore, the Australian competent authority has made a determination under Article 10.3(c) of the UK Convention. Accordingly, the taxpayer satisfies the requirements of Article 10.3 of the UK Convention. The unfranked dividends paid by the Australian resident subsidiary to the taxpayer will not be subject to tax in Australia.", "Date_of_Decision": "12 December 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 1, Article 10.3 Schedule 1, Article 10.3(a) Schedule 1, Article 10.3(b) Schedule 1, Article 10.3(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/4", "Subject_References": "Double tax agreements International tax Non resident dividend withholding tax Unfranked dividends United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20083", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Non resident dividend withholding tax Unfranked dividends United Kingdom"}
{"ATO_ID_Number": "ATO ID 2008/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Obtaining of treaty benefits under UK Convention", "Issue": "For the purposes of Article 10.3(c) of the tax treaty between Australia and the United Kingdom (the UK Convention) contained in Schedule 1 to the International Tax Agreements Act 1953, did the establishment, acquisition or maintenance of the taxpayer, a United Kingdom (UK) resident company, and the conduct of its operations not have as one of its principal purposes the obtaining of benefits under the UK Convention?", "Decision": "Yes. The establishment, acquisition or maintenance of the taxpayer and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the UK Convention.", "Facts": "The taxpayer is a UK resident company. One of the taxpayer's wholly-owned subsidiaries is an Australian resident. The taxpayer has held and continues to hold its investment in its Australian resident subsidiary since 1990. All the shares in the taxpayer were held by a UK resident company that was listed on the London Stock Exchange since 1993. In 2000, another UK resident company that was a wholly owned subsidiary of a listed company on the Country A Stock Exchange, acquired all the shares of the UK company listed on the London Stock Exchange. The taxpayer continued to own all the shares in the Australian resident company.", "Reasons_for_Decision": "Summary: Article 10.3(c) of the UK Convention provides that a UK resident company that does not meet the conditions in Article 10.3(a) or (b) shall, nevertheless, be granted benefits of the UK Convention if the Australian competent authority determines, in accordance with Australian law, that the establishment, acquisition or maintenance of the UK resident and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the UK Convention. Whether the elements of Article 10.3(c) of the UK Convention are satisfied is to be determined in accordance with the broad principles of treaty interpretation (see Taxation Ruling TR 2001/13: Income Tax: Interpreting Australia's Double Tax Agreements). The UK Convention does not have any direct references to the interpretation to be given to Article 10.3(c) or any of its elements, nor does the directly relevant extrinsic material provide any insight into its interpretation, both in respect of the provision itself and in the context of the UK Convention as a whole. The matters upon which a competent authority makes a determination under Article 10.3(c) are the same as those matters as stated in Article 16(5) of the tax treaty between Australia and the United States of America (the US Convention). Notwithstanding the differences in the two Articles of the respective tax treaties, both provisions are similar. Where the conditions for the application of the relevant provision are met, they allow a resident of a relevant tax treaty country to nevertheless obtain certain tax treaty benefits in respect of dividends that might otherwise not be available. For these reasons, the Commissioner considers that, in cases involving dividends, the meaning to be given to the matters upon which a competent authority makes a determination under Article 10.3(c) of the UK Convention is the same as that arising from the matters in Article 16(5) of the US Convention. Consistent with the approach taken in paragraph 2.112 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill (No 1) 2002, the Commissioner considers that Article 10.3(c) of the UK Convention recognises that there may be cases where significant participation by third country residents in an enterprise resident in one of the treaty countries may be warranted by sound business practice or long-standing business structures and does not necessarily indicate a treaty shopping motive. The taxpayer company was established prior to the UK Convention coming into force and has held shares in the Australian resident subsidiary company since that time. The subsidiary formed part of the business structure of the group and there is no evidence pointing to treaty shopping as being one of the motives for establishing the taxpayer company The taxpayer's investment in the Australian resident subsidiary was made to facilitate the conduct in Australia of the business of the taxpayer's group. There is no evidence indicating that the purpose behind maintaining the taxpayer or the conduct of its operations is to obtain benefits under the UK Convention Accordingly, for the purposes of Article 10.3(c) of the UK Convention, the establishment, acquisition or maintenance of the taxpayer and the conduct of the taxpayer's operations, did not have as one of its principal purposes the obtaining of benefits under the UK Convention.", "Date_of_Decision": "12 December 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 1, Article 10.3 Schedule 1, Article 10.3(a) Schedule 1, Article 10.3(b) Schedule 1, Article 10.3(c) Schedule 2, Article 16(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/3", "Subject_References": "Double tax agreements International tax Non resident dividend withholding tax Unfranked dividends United Kingdom United States", "Case_References": "", "Other_References": "Explanatory Memorandum to the International Tax Agreements Amendment Bill (No 1) 2002", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20084", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements International tax Non resident dividend withholding tax Unfranked dividends United Kingdom United States"}
{"ATO_ID_Number": "ATO ID 2007/172", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax: dividends paid in respect of redeemable preference shares - rate of withholding tax determined under the United States Convention", "Issue": "Pursuant to the terms of the Double Tax Convention entered into between Australia and the United States (US Convention), should the rate of withholding tax applicable to dividend payments in respect of redeemable preference shares (RPS) made after 1 July 2003 and prior to 5 December 2003, be determined in accordance with Article 10 (Dividends) of the US Convention?", "Decision": "Yes. Although the dividend payments in respect of the RPS are characterised as returns on a 'debt interest' under domestic law, Article 10 (Dividends) of the US Convention applies to determine the rate of withholding tax on dividends paid in respect of the RPS after 1 July 2003 and before 5 December 2003. Note that subsection 3(2A) of the International Tax Agreements Act 1953 (Agreements Act) only became effective on 5 December 2003. Subsection 3(2A) provides that a reference in a double tax agreement to 'income from shares, or to income from other rights participating in profits', does not apply to an amount that is 'a return on a debt interest (as defined in Subdivision 974-B of the Income Tax Assessment Act 1997 )'.", "Facts": "The taxpayer is an Australian resident company. In November 2003, the taxpayer company declared and paid dividends on RPS. The recipient of these dividends was a United States resident company. The United States resident company, which is a qualified person by reason of Article 16(2)(c) of the US Convention, owns shares representing 100% of the voting power of the taxpayer, and owned those shares for more than 12 months prior to the date the dividend was declared. The RPS constitute a 'debt interest' under the debt and equity rules in Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997) and are non-equity shares for income tax purposes (see the definition of 'non-equity share' in section 995-1 of the ITAA 1997).", "Reasons_for_Decision": "Summary: For the purposes of Division 11A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936), 'interest' is defined to include 'an amount...that is a dividend paid in respect of a non-equity share' (paragraph 128A(1AB)(d) of the ITAA 1936). Consequently, the dividends paid in respect of the RPS will be treated as income derived by a non-resident that consists of 'interest' to which section 128B of the ITAA 1936 applies. The taxpayer company's obligation to withhold is therefore, prima facie , determined by section 12-245 of Schedule 1 to the Taxation Administration Act 1953 (TAA). Section 12-245 of the TAA imposes an obligation on an entity to withhold an amount from interest (within the meaning of Division 11A of the ITAA 1936) it pays to a recipient who has an address outside Australia. The rate of withholding determined under regulation 41 of the Taxation Administration Regulations 1976 is 10% of the amount of the interest. However, in determining liability to Australian tax on Australian sourced income derived by a non-resident, it is necessary to consider not only the domestic income tax laws, but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the US Convention, which operates to avoid double taxation of income to which the Convention applies, that is received by Australian or United States residents. Article 11(1) of the US Convention provides that interest arising in Australia, being interest to which a resident of the United States is beneficially entitled, may be taxed in the United States. Article 11(2) of the US Convention provides that such interest may also be taxed in Australia, but the tax so charged shall not exceed 10 percent of the gross amount of the interest. Article 11(5) of the US Convention defines the term 'interest' in Article 11 of the US Convention to include: income which is subjected to the same taxation treatment as income from money lent by the law of the Contracting State in which the income arises. Returns on the RPS, being non-equity shares, are included in the paragraph 128A(1AB)(d) of the ITAA 1936 definition of 'interest' and are subjected to the same taxation treatment as other amounts of interest in Australia. The returns on the RPS therefore satisfy the definition of 'interest' in Article 11 of the US Convention. However, Article 11(5) of the US Convention also provides that 'Income dealt with in Article 10 (Dividends) ... shall not be regarded as interest for the purposes of this Article'. Article 10(6) of the US Convention provides that the term 'dividends' as used in Article 10 of the US Convention means: income from shares, as well as other amounts which are subjected to the same taxation treatment as income from shares by the law of the State of which the company making the distribution is a resident for the purposes of its tax. The returns on the RPS are treated as interest under Australian domestic law. However, the RPS are shares, albeit non-equity shares, such that the returns satisfy the definition of 'dividends' in Article 10(6) of the US Convention, being 'income from shares'. Although the returns on the RPS also satisfy the definition of 'interest' in Article 11(5) of the US Convention, the latter sentence in Article 11(5) applies to limit the returns to the scope of Article 10 of the US Convention when determining the respective taxing rights between Australia and the United States in respect of the returns. Accordingly, withholding tax imposed under section 128B of the ITAA 1936 is limited by paragraphs (2) and (3) of Article 10 of the US Convention. Article 10(1) of the US Convention provides that dividends paid by a company that is a resident of Australia, being dividends to which a resident of the United States is beneficially entitled, may be taxed in the United States. Article 10(2) of the US Convention provides that such dividends may also be taxed in Australia, at a rate dependent on the percentage of voting power that the recipient of the dividend holds in the company paying the dividend. However, Article 10(3) of the US Convention provides that dividends may not be taxed in Australia if: ...the person who is beneficially entitled to the dividends is a company that is a resident of the other Contracting State that has owned shares representing 80 percent or more of the voting power of the company paying the dividends for a 12-month period ending on the date the dividend is declared and: (a) is a qualified person by reason of sub-paragraph (c) of paragraph (2) of Article 16 (Limitation on Benefits); or (b) is entitled to benefits with respect to the dividends under paragraph (5) of that Article. The requirements of Article 10(3) of the US Convention are met, such that the returns on the RPS, being dividends for the purposes of Article 10 of the US Convention, may not be taxed in Australia. The resident taxpayer is therefore not required to withhold any tax in respect of the dividends on the RPS which were paid to the US resident company in November 2003.", "Date_of_Decision": "20 August 2007", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-15(1) subsection 974-70(1) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/527 | ATO ID 2003/529 | ATO ID 2003/530", "Subject_References": "Debt interest Double tax agreements Dividend income Interest income International tax Non-equity share Non resident interest withholding tax Non resident dividend withholding tax Redeemable preference shares United States Withholding taxes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007172", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Debt interest Double tax agreements Dividend income Interest income International tax Non-equity share Non resident interest withholding tax Non resident dividend withholding tax Redeemable preference shares United States Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2007/223", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption from withholding tax under Article 10 of the 2003 UK Convention", "Issue": "Is Article 10(3)(b) of the tax treaty between Australia and the United Kingdom (the UK Convention) contained in Schedule 1 to the International Tax Agreement Act 1953 (Agreements Act) satisfied where the United Kingdom (UK) company, which is the beneficial owner of the unfranked dividend paid by an Australian company, is indirectly less than 100% owned by one or more companies whose principal class of shares are listed and regularly traded on a recognised stock exchange?", "Decision": "No. Article 10(3)(b) of the UK Convention is not satisfied where the UK company, which is the beneficial owner of the unfranked dividend, is indirectly less than 100% owned by one or more companies whose principal class of shares are listed and regularly traded on a recognised stock exchange.", "Facts": "An Australian resident company (Aus Co) pays an unfranked dividend to a UK resident company (UK Co), the beneficial owner of the dividend. UK Co has owned 100% of the voting power in Aus Co for a period of more than 12 months on the date the dividend is declared by Aus Co. UK Co is wholly owned by a UK Limited Partnership which was formed under the UK Limited Liability Partnerships Act 2000 . The partnership has two partners - UK Partner Co 1 and UK Partner Co 2. UK Partner Co 1, a UK resident company that owns 70% of the UK Limited Partnership, has its principal and only class of shares listed and regularly traded on the London Stock Exchange. UK Partner Co 2, a UK resident company that owns 30% of the UK Limited Partnership, is wholly owned by a Japanese resident company whose principal and only class of shares are regularly traded on the Tokyo Stock Exchange.", "Reasons_for_Decision": "Summary: Article 10 of the UK Convention provides that certain cross-border inter-corporate dividends flowing between Australia and the UK are either: UK Co would normally be subject to 5% tax in Australia as its voting power in Aus Co is 100%. However, Article 10(3) of the UK Convention states that: Notwithstanding the provisions of paragraph 2 of this Article, dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident if the beneficial owner of the dividends is a company that is a resident of the other Contracting State that has owned shares representing 80 per cent or more of the voting power of the company paying the dividends for a 12 month period ending on the date the dividend is declared and the company that is the beneficial owner of the dividends: Article 3(1)(o) of the UK Convention defines 'recognised stock exchange' to mean: As UK Partner Co, which owns 70% of the limited partnership, has its principal class of shares listed on the London Stock Exchange, the requirement of 'recognised stock exchange' is satisfied. The term 'owned' is not defined in Article 10 or Article 3 of the UK Convention. Article 3(3) of the UK Convention provides that where a term is not defined therein, unless the context requires otherwise, it should be given its meaning under the tax law of the country in which the treaty is being applied. Further, any meaning under the applicable tax laws of the country prevails over a meaning given to the term under other laws of that State. The term 'owned' is not defined in either Income Tax Assessment Act 1936 or Income Tax Assessment Act 1997 . Therefore, a careful scrutiny of both the context and the domestic law is required in interpreting the term (paragraph 74 of Taxation Ruling TR 2001/13). The term 'owned' has been considered in a number of cases. The general indicia for ownership of an asset were considered by the Full Federal Court in Bellinz Pty Ltd & Others v. Federal Commissioner of Taxation (1998) 84 FCR 154; 98 ATC 4634; (1998) 39 ATR 198. The joint judgment of Hill, Sundberg and Goldberg JJ followed Mason J in Forestry Commissioner of New South Wales v. Stefanetto (1976) 133 CLR 507 at 518, and held the meaning of owned 'must be ascertained in the light of the context in which the word is used'. Their Honours also quoted Halsbury's Laws of England 4th edition Vol 35 at paragraphs 1127 and 1128 which states: Ownership consists of innumerable rights over property, for example the rights of exclusive enjoyment, of destruction, alteration and alienation, and of maintaining and recovering possession of the property from all other persons. Those rights are conceived not as separately existing, but as merged in one general right of ownership ... Ownership is nevertheless divisible to some extent ... prima facie an owner is entitled to possession or to recover possession of his goods against all the world. The Full Federal Court relied on Union Trustee Co of Australia Ltd v. Federal Commissioner of Land Tax (1915) 20 CLR 526 at 530 for the proposition that the prima facie meaning of the word, subject to context, is the 'entire dominion of the thing said to be owned'. In considering the context in which the term 'owned' is used in the UK Convention, it is noted that elsewhere in Article 10 of the UK Convention where a percentage of less than 100 is permitted, the exact percentage is specified (for example, 80% in relation to voting power in Article 10(3) of the UK Convention). The fact that no such specific percentage is stated in relation to Article 10(3)(b) of the UK Convention further supports the view that 100% ownership is required. As UK Limited Partnership is only 70% owned by a company whose principal class of shares is listed and regularly traded on a recognised stock exchange, UK Co does not satisfy Article 10(3)(b) of the UK Convention.", "Date_of_Decision": "30 November 2007", "Year_of_Income": "Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 The Act", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Franked dividends United Kingdom Wholly owned", "Case_References": "Bellinz Pty Ltd & Others v. Federal Commissioner of Taxation (1998) 84 FCR 154 98 ATC 4634", "Other_References": "Halsbury's laws of England, 4th edition Vol 35", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007223", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Franked dividends United Kingdom Wholly owned"}
{"ATO_ID_Number": "ATO ID 2006/69", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividends received from shares held in Netherlands companies", "Issue": "Are the dividends received from shares held in Netherlands companies by a resident taxpayer assessable income under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The dividends received from shares held in Netherlands companies by a resident taxpayer are assessable income under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer owns shares in a number of companies which are resident in the Netherlands. The taxpayer receives dividends from these shares from which Netherlands withholding tax was deducted.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends. Subsection 44(1) of the ITAA 1936 provides that the assessable income of a resident shareholder of a company (whether the company is a resident or a non resident) shall include dividends paid by the company out of profits derived by it from any source. In determining liability to Australian tax on foreign source income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 10 to the Agreements Act contains the tax treaty and the protocol between Australia and the Kingdom of the Netherlands (Netherlands Agreement). Schedule 10A to the Agreement Act contains the Second Protocol to the Netherlands Agreement (Second Protocol). The Netherlands Agreement and the Protocols operate to avoid the double taxation of income received by Australian and Netherlands residents. Article 10(1) of the Netherlands Agreement provides that dividends paid by a Netherlands company to a resident of Australia may be taxed in Australia. Article 10(2) of the Netherlands Agreement provides that the dividends may also be taxed in the Netherlands but that the rate of tax is not to exceed 15% of the gross amount of the dividends. Article 23(1) of the Netherlands Agreement provides that, subject to the provisions of the law of Australia, a credit for any tax paid in the Netherlands will be allowed against Australian tax payable on income from Netherlands sources. Paragraph 5 of the Protocol of the Netherlands Agreement at paragraph (5) states that where income derived by a resident of Australia under Article 10 of the Netherlands Agreement may be taxed in the Netherlands, such income shall be deemed to be income from sources in the Netherlands for the purposes of Article 23(1) of the Netherlands Agreement. The dividends received by the taxpayer from Netherlands form part of their assessable income under subsection 6-10(4) of the ITAA 1997. As foreign tax has been paid in relation to this income a foreign tax credit will be allowed. If the Netherlands tax paid on the dividends is less than the Australian tax that will be payable, the taxpayer will be entitled to a full credit for the Netherlands tax paid.", "Date_of_Decision": "27 February 2006", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 44(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income Double tax agreements Foreign income Foreign tax credits Netherlands", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200669", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will be replaced by a foreign tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend income Double tax agreements Foreign income Foreign tax credits Netherlands"}
{"ATO_ID_Number": "ATO ID 2005/71", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividends received by Australian resident from the United Kingdom", "Issue": "Are dividends received by an Australian resident individual from the United Kingdom (UK) assessable under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Dividends received by an Australian resident individual from the UK are assessable under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer will be a resident of Australia for the 2004-05 income year. The taxpayer will receive dividends from UK sources. The dividends will be taxed at the rate of 10% in the UK.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident taxpayer includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about what constitutes assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends. Paragraph 44(1)(a) of the ITAA 1936 provides that, subject to certain provisions, the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 1 to the Agreements Act contains the tax treaty between Australia and the United Kingdom of Great Britain and Northern Ireland and the Notes to the agreement (2003 UK Convention). The 2003 UK Convention operates to avoid double taxation of income received by Australian and UK residents. In the case of Australia, the 2003 UK Convention has effect in relation to income or gains of any year of income beginning on or after 1 July 2004. Article 10(1) of the 2003 UK Convention provides that dividends paid by a UK company, being dividends beneficially owned by a resident of Australia, may be taxed in Australia. Article 10(2) of the 2003 UK Convention provides that the dividends may also be taxed in the UK, however the tax charged shall not exceed: As the taxpayer is an Australian resident individual in receipt of dividends from a UK company, the dividends may be taxed in Australia and in the UK. However, the tax payable in the UK is limited to a maximum of 15% of the gross amount of the dividends. Article 22(1)(a) of the 2003 UK Convention provides that a credit against Australian tax payable shall be allowed for UK tax paid (in accordance with the law of Australia) where tax has been paid under UK law and in accordance with the 2003 UK Convention. As the taxpayer is an Australian resident, the dividend income received from the UK forms part of their assessable income under subsection 6-10(4) of the ITAA 1997. Where UK tax is paid in relation to the dividend income, a foreign tax credit will be allowed. However, the amount of UK tax that may be considered for a credit under the foreign tax credit provisions is limited to 15% of the gross amount of the dividend.", "Date_of_Decision": "28 January 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 44(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income Double tax agreements Foreign income International tax United Kingdom", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200571", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will by replaced by a foreign tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend income Double tax agreements Foreign income International tax United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/138", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividend income from a private company in Germany received by an Australian resident", "Issue": "Are the dividends paid from a private company resident in the Federal Republic of Germany (Germany) received by an Australian resident taxpayer, assessable under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The dividends paid from a private company resident in Germany received by an Australian resident taxpayer are assessable under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer owns shares in a family trading company which is incorporated and managed in Germany. The company declares a dividend to its shareholders. The taxpayer receives the dividend from the company after paying a 15 per cent withholding tax in Germany.", "Reasons_for_Decision": "Summary: Subsection 6-10(4) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes statutory income from all sources, whether in or out of Australia. Section 10-5 of the ITAA 1997 lists those provisions about assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends. Subsection 44(1) of the ITAA 1936 provides that the assessable income of a resident shareholder of a company (whether the company is a resident or a non resident) shall include dividends paid by the company out of profits derived by it from any source. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 9 to the Agreements Act contains the double tax agreement and the protocol between Australia and the Federal Republic of Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. Article 10(2) of the German Agreement provides that dividends paid by a company which is subject to unlimited tax liability in Germany, to a resident of Australia, may be taxed in Germany but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. Article 10(3) of the German Agreement defines the term 'dividends' to mean income from shares, and other income assimilated to income from shares, by the taxation law of the country of which the company making the distribution is a resident. Article 22(1) of the German Agreement provides that, subject to the provisions of the law of Australia, a credit for German tax paid will be allowed against Australian tax payable on income from German sources. Accordingly, as the dividend income received by the Australian resident taxpayer from a company resident in Germany is assessable under subsection 6-10(4) of the ITAA 1997, the taxpayer will be entitled to a foreign tax credit for the German tax paid.", "Date_of_Decision": "15 March 2005", "Year_of_Income": "Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 44(1) subsection 160AF(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividends Foreign income Foreign tax credits Germany International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005138", "Unmatched_Content": "Note: This ATO ID has been amended to remove references to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system is replaced by the foreign income tax offset system This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividends Foreign income Foreign tax credits Germany International tax"}
{"ATO_ID_Number": "ATO ID 2004/348", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividend income sourced in the United States (US) received by an Australian resident individual", "Issue": "Are US sourced dividends received by an Australian resident individual assessable under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. US sourced dividends received by an Australian resident individual are assessable under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer receives dividends from US sources.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable income by another provision. The assessable income of an Australian resident taxpayer includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends. Paragraph 44(1)(a) of the ITAA 1936 provides that, subject to certain provisions, the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax agreement between Australia and the US (US Convention). The US Convention operates to avoid double taxation of income received by Australian and US residents. Article 10(1) of the US Convention provides that dividends paid by a US company, being dividends to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 10(2) of the US Convention provides that the dividends paid by a US company may also be taxed in the US, according to the law of the US. However, the tax shall not exceed 15 per cent of the gross amount of the dividend. Article 22(2) of the US Convention provides that a credit against Australian tax for tax paid in the US shall be allowed (in accordance with the law of Australia) where tax has been paid under US law and in accordance with the US Convention. As the taxpayer is a resident of Australia, the dividend income forms part of their assessable income under subsection 6-10(4) of the ITAA 1997. If US tax is paid in relation to this dividend income, a foreign tax credit will be allowed.", "Date_of_Decision": "6 April 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 44(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income Double tax agreements Foreign income United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004348", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend income Double tax agreements Foreign income United States"}
{"ATO_ID_Number": "ATO ID 2004/708", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividend received from Sweden by an Australian resident individual", "Issue": "Are Swedish sourced dividends received by a resident individual assessable under subsection 6-10(4) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Dividends sourced in Sweden received by a resident individual are assessable under subsection 6-10(4) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for taxation purposes. The taxpayer receives dividends from Swedish sources.", "Reasons_for_Decision": "Summary: Section 6-10 of the ITAA 1997 provides that a taxpayer's assessable income includes statutory income amounts that are not ordinary income but are included in assessable in by another provision. The assessable income of an Australian resident taxpayer, includes statutory income from all sources, whether in or out of Australia (subsection 6-10(4) of the ITAA 1997). Section 10-5 of the ITAA 1997 lists the provisions about assessable income. Included in this list is subsection 44(1) of the Income Tax Assessment Act 1936 (ITAA 1936) which deals with dividends. Paragraph 44(1)(a) of the ITAA 1936 provides that, subject to certain provisions, the assessable income of an Australian resident taxpayer, who is a shareholder of a company (whether the company is a resident or non-resident), includes dividends paid to the taxpayer by the company out of profits derived by it from any source. In determining liability to Australian tax of foreign sourced income received by a resident it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 17 to the Agreements Act contains the tax treaty between Australia and Sweden (Swedish Agreement). The Swedish Agreement operates to avoid double taxation of income received by Australian and Swedish residents. Article 10(1) of the Swedish Agreement provides that dividends paid by a company that is a resident of Sweden, being dividends to which a resident of Australia is beneficially entitled, may be taxed in Australia. Article 10(2) of the Swedish Agreement provides that such dividends may be taxed in Sweden, and according to the law of Sweden, but the tax shall not exceed 15 per cent of the gross amount of the dividends. Article 24(1) of the Swedish Agreement provides that a credit against Australian tax for tax paid in Sweden shall be allowed (in accordance with the law of Australia) where Swedish tax has been paid in accordance with the Swedish Agreement. However, in the case of a dividend, no credit is allowable for tax paid in respect of the profits out of which the dividend is paid. As the taxpayer is a resident of Australia, the dividend income forms part of their assessable income under subsection 6-10(4) of the ITAA 1997. If Swedish tax is paid in relation to this dividend income, a foreign tax credit will be allowed.", "Date_of_Decision": "9 August 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 44(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Dividend income Double tax agreements Foreign income Sweden", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004708", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Dividend income Double tax agreements Foreign income Sweden"}
{"ATO_ID_Number": "ATO ID 2004/863", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian dividend income received by a UK resident company - beneficial ownership of shares - 80% test", "Issue": "Can a UK resident company satisfy the 80% voting power requirement contained in Article 10(3) of Schedule 1 to the International Agreements Act 1953 (Agreements Act), if it is the beneficial owner of the shares in an Australian resident company through a trust?", "Decision": "Yes. A UK resident company satisfies the 80% voting power requirement contained in Article 10(3) of Schedule 1 to the Agreements Act if it is the beneficial owner of the shares in an Australian resident company through a trust.", "Facts": "A UK resident company is the beneficial owner of all the shares in an Australian resident company through a trust. The Australian company is to be liquidated. It will then distribute unfranked dividends, in respect of which the UK company is beneficially entitled, to the trustee of the trust. The trustee of the trust will then distribute the unfranked dividends to the UK company.", "Reasons_for_Decision": "Summary: Schedule 1 to the Agreements Act contains the double tax agreement between Australia and the United Kingdom of Great Britain and Northern Ireland (the 2003 UK Convention) and 2003 United Kingdom Notes. The 2003 UK Convention operates to avoid the double taxation of income received by Australian and UK residents. Article 10(3) of the 2003 UK Convention provides that dividends shall not be taxed in Australia where, amongst other things, the beneficial owner of the dividends is a UK resident company that has owned shares representing 80 per cent or more of the voting power of the company paying the dividends, for a 12 month period ending on the date the dividend is declared. At issue is whether the requirement that the UK company must have 'owned shares' has been satisfied given that a trustee, rather than the UK company, has legal ownership of the shares. The UK company's beneficial ownership through a trust, of shares representing 80% or more of the voting power of the company paying the dividends, falls within the meaning of the term 'owned shares' in Article 10(3) of the 2003 UK Convention because, when reading the term 'owned' in conjunction with the previous reference to beneficial ownership in Article 10(3), the term 'owned' in this context refers to beneficial ownership where the beneficial owner of the shares differs from the legal one. By contrast, Article 10(2) of the 2003 UK Convention provides for a reduction in the rate of withholding tax where the beneficial owner of the dividends is a company which holds directly at least 10% of the voting power in the company paying the dividends. Here, the beneficial owner must hold the requisite percentage of the voting power in the company paying the dividends 'directly'. The use of the words 'holds directly' in Article 10(2)(a) is supportive of the above interpretation of the term 'owned shares' in that, had 'legal' ownership of shares been a requirement of Article 10(3) of the 2003 UK Convention, the Article could have specified this. Therefore, given the context of the use of the term and the absence of an express requirement for the voting power to be held 'directly', beneficial ownership of shares in the paying company are 'shares owned' for the purposes of Article 10(3) of the 2003 UK Convention.", "Date_of_Decision": "15 October 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "International Tax Agreements Act 1953 Schedule 1, Article 10(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Treaties Dividends Unfranked dividends Withholding tax Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004863", "Unmatched_Content": "Income tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Treaties Dividends Unfranked dividends Withholding tax Trusts"}
{"ATO_ID_Number": "ATO ID 2003/932", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax: entitlement to reduced treaty rate for unfranked dividends passing through an entity that is a resident of a non treaty country", "Issue": "Will the taxpayer, an entity which is resident in a treaty country and which is beneficially entitled to unfranked dividends from Australian companies, be subject to withholding tax under subsection 128B(4) of the Income Tax Assessment Act 1936 (ITAA 1936) on those dividends at the rate stipulated in the double tax agreement (DTA) that Australia has with that treaty country, when those dividends pass through an arm's length interposed entity that is not a resident of a treaty country?", "Decision": "Yes. Even though the withholding tax rate for the purposes of subsection 128B(4) of the ITAA 1936 would have been 30%, section 17A of the International Tax Agreements Act 1953 (Agreements Act) operates to limit the withholding tax rate to that stipulated in the DTA. The reduction in the rate of withholding tax will occur because only the taxpayer (not the interposed entity) is beneficially entitled to the dividends and the taxpayer is a resident of a country to which Australia has entered a double tax agreement (DTA).", "Facts": "The taxpayer, a non-resident entity, has invested in Australian company shares through an arm's length entity in a third country. The taxpayer is beneficially entitled to unfranked dividends. The taxpayer is a resident of a country with which Australia has a DTA. The investment vehicle is not a resident of a country with which Australia has a DTA. The investment vehicle is treated as a 'look through' entity and is not taxed on the dividends. The investment vehicle is not beneficially entitled to the unfranked dividends.", "Reasons_for_Decision": "Summary: Subsection 128B(1) of the ITAA 1936 provides that, subject to certain exclusions, section 128B of the ITAA 1936 will apply to income derived by a non-resident that consists of a dividend paid by an Australian resident company (franked dividends are specifically excluded from the operation of section 128B by paragraph 128B(3)(ga) of the ITAA 1936). Subsection 128B(4) of the ITAA 1936 provides that a person who derives dividend income to which section 128B of the ITAA 1936 applies, is liable to pay withholding tax on that dividend income. The withholding tax rate applicable is generally 30% of the dividend amount (section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 ). Unfranked dividends derived by the taxpayer from Australian resident companies are therefore subject to withholding tax. However, in determining liability to Australian tax on Australian source income derived by a non-resident, it is necessary to consider not only the income tax laws but also any applicable DTA contained in the Agreements Act . Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the Income Tax Assessment Act 1997 (ITAA 1997) so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). The Article in the DTA that deals with dividends provides that dividends derived from an Australian resident company which are beneficially owned by a resident of the foreign country may be taxed in Australia, but the tax is not to exceed 15% of the gross amount of the dividends. As the taxpayer beneficially owns the dividends, the Article in the DTA will apply, notwithstanding that the dividends flow through an interposed arm's length entity. Subsection 17A(1) of the Agreements Act further provides that the amount of withholding tax imposed shall not exceed the tax limit specified in the DTA, if a limit is so specified. Therefore, section 4 of the Agreements Act will operate to override the general rate of withholding tax that would apply under subsection 128B(4) of the ITAA 1936. Accordingly, the unfranked dividends derived by the taxpayer are subject to withholding tax under subsection 128B(4) of the ITAA 1936. The rate of withholding tax that will apply to the dividends will be limited to 15% even though the dividends pass through an interposed arm's length entity that is not a resident of a treaty country because only the taxpayer beneficially owns the dividends.", "Date_of_Decision": "10 September 2003", "Year_of_Income": "Period 1 July 1995 to 31 March 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 128B subsection 128B(1) subsection 128B(4) paragraph 128B(3)(ga) section 128D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Non resident dividend withholding tax Passive investment income Conduit income or flow through income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003932", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Non resident dividend withholding tax Passive investment income Conduit income or flow through income"}
{"ATO_ID_Number": "ATO ID 2007/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income received by an Australian resident from independent personal services in Vietnam", "Issue": "Is the income received by an Australian resident taxpayer from independent personal services performed in Vietnam assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Income received by a taxpayer from independent personal services performed in Vietnam is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer provided short-term consultancy services in Vietnam. The income received by the taxpayer was not subject to tax in Vietnam.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of an Australian resident includes the ordinary income derived from all sources, whether in or out of Australia, during the income year. Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining the liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997, so that those Acts are read as one. In the event of inconsistent provisions, the Agreements Act overrides the ITAA 1936 and ITAA 1997. Article 14(1) of the Vietnamese Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia unless a fixed base is regularly available to the individual in Vietnam for the purpose of performing the individual's activities. If such a fixed based is available to the individual, the income may be taxed in Vietnam but only so much of it as is attributable to the activities exercised from that fixed base. It is considered that the contract income derived by the taxpayer in Vietnam constitutes 'professional services' as defined under Article 14(2) of the Vietnamese Agreement. As the taxpayer is a resident of Australia for Australian income tax purposes, professional services income derived by the taxpayer in Vietnam shall be taxable in Australia pursuant to Article 14(1) of the Vietnamese Agreement. Accordingly, the income derived by the Australian resident taxpayer as a short-term consultant in Vietnam is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "14 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income International tax International Law Vietnam", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200746", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign income International tax International Law Vietnam"}
{"ATO_ID_Number": "ATO ID 2007/105", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of consulting income from China received by a resident taxpayer", "Issue": "Is the income received by an Australian resident taxpayer from independent consulting services performed in China assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income received by a taxpayer from independent consulting services performed in China is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer provides short-term independent consultancy services in China in a specialised field. The income received by the taxpayer will not be subject to tax in China. The taxpayer will be in China for less than 183 days in any consecutive 12 month period.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that assessable income of an Australian resident includes the ordinary income derived from all sources, whether in or out of Australia, during the income year. Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining the liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and the ITAA 1997, so that those Acts are read as one. Schedule 28 to the Agreements Act contains the tax treaty between Australia and the People's Republic of China (the Chinese Agreement). The Chinese Agreement operates to avoid the double taxation of income received by Australian and Chinese residents. Article 14(1) of the Chinese Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia except in one of the following circumstances: Article 14(2) of the Chinese Agreement provides that the term 'professional services' includes especially those performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants. The consultancy income derived by the taxpayer in China constitutes 'professional services' income under Article 14(2) of the Chinese Agreement. As the taxpayer is a resident of Australia for income tax purposes, the 'professional services' income derived by the taxpayer in China will be taxable in Australia pursuant to Article 14(1) of the Chinese Agreement. Accordingly, the consultancy income derived by the Australian resident taxpayer as a short-term consultant in China is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "10 May 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 ITAA 1936", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "China Double tax agreements Foreign income International tax Personal services income", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007105", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords China Double tax agreements Foreign income International tax Personal services income"}
{"ATO_ID_Number": "ATO ID 2006/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessablility of income derived by an Australian resident performing independent personal services in Germany", "Issue": "Is income derived by an Australian resident taxpayer from independent personal services performed in Germany assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Income derived by a taxpayer from independent personal services performed in Germany is assessable under subsection 6-5(2) of the ITAA 1997. However, there may be an entitlement to claim a foreign tax credit in Australia where German tax has been paid.", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer left Australia and commenced performing independent personal services in Germany. The taxpayer has no employment contracts with any of the clients that work is performed for. The taxpayer's work is undertaken in a room in a rented share house which the taxpayer also resides in.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. However, in determining any liability to Australian tax it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act) that exists between Australia and Germany. Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 9 to the Agreements Act contains the tax treaty between Australia and the Federal Republic of Germany (the German Agreement). The German Agreement operates to avoid the double taxation of income received by Australian and German residents. Article 13 of the German Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services, or other independent activities of a similar character, shall be taxable only in Australia unless the taxpayer has a fixed base regularly available to them in Germany for the purpose of performing their activities. If the taxpayer has such a fixed base, the income may also be taxed in Germany but only so much of it as is attributable to that fixed base. The taxpayer is performing independent personal services within Article 13 of the German Agreement. To assist in the interpretation of the German Agreement reference is made to Taxation Ruling TR 2001/13 - Income tax: Interpreting Australia's Double Tax Agreements. Under this ruling, regard may be had to the OECD Model Tax Convention on Income and on Capital (the OECD Model) and the Commentaries on the Articles of the OECD Model (the OECD Commentary) including any subsequent revisions to that OECD Commentary to assist in the interpretation of double tax agreements. This approach was also accepted by the High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531 ( Thiel ) (see paragraph 102 of Taxation Ruling TR 2001/13). Unless specified otherwise, references to the OECD Model and OECD Commentary are to the version published on 28 January 2003. Article 13 of the German Agreement is the same in substance as the former Article 14 of the OECD Model published on 23 October 1997. Paragraph 3 of the OECD Commentary published on 23 October 1997 on Article 14 stated that 'the provisions of the Article were similar to those for business profits and rest in fact on the same principles as those of Article 7' of the OECD Model concerning the taxation of business profits. Moreover, 'the provisions of Article 7 and the Commentary thereon could therefore be used as guidance for interpreting and applying Article 14'. Article 7 of the OECD Model permits the source country to tax the profits of an enterprise where that enterprise carries on business through a permanent establishment in that country. Article 5 of the OECD Model defines permanent establishment to be 'a fixed place of business through which the business of an enterprise is wholly or partly carried on'. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model explains that this definition provides three conditions necessary for a permanent establishment to exist: Paragraph 4 of the OECD Commentary on Article 5 of the OECD Model notes that the term 'place of business' covers any premises, facilities or installations used for carrying on the business whether or not they are used exclusively for that purpose. Paragraph 4 also notes that a place of business may exist where no premises are available or required for carrying on the business of the enterprise and it simply has a certain amount of space at its disposal. It is immaterial whether the premises, facilities or installations are owned or rented by the enterprise or are otherwise at its disposal. Paragraph 6 of the OECD Commentary on Article 5 of the OECD Model suggests that a permanent establishment can be deemed to exist only if the place of business has a certain degree of permanency and is not of a purely temporary nature. A place of business may, however, constitute a permanent establishment even though it exists, in practice, for a very short period of time because the nature of the business is such that it will only be carried on for that short period of time. Paragraph 6 of the OECD Commentary on Article 5 of the OECD Model further provides that 'experience has shown that permanent establishments have normally not been considered to exist in situations where a business has been carried on in a country through a place of business that was maintained for less than six months'. This is also the approach generally taken by the Commissioner as set out in Taxation Ruling TR 2002/5. Paragraph 33 of TR 2002/5 states that 'Whether temporal permanence exists is a matter of fact and degree. However, as a guide, if a business operates at or through a place continuously for six months or more that place will be temporally permanent'. However, paragraph 34 of TR 2002/5 also notes that in some situations a period of less than six months may be sufficient to lead to the conclusion that temporal permanence exists. The independent personal services are conducted in a room in rented premises, which is also a place of business of the taxpayer, that room is fixed geographically, and the taxpayer has been conducting those services for a considerable period of time and there is an intention to continue those services (that is, there is temporal permanence), the taxpayer satisfies the requirements for having a permanent establishment in Germany and therefore a fixed base for the purposes of Article 13 of the German Agreement. Accordingly, Germany has a right to tax this income, but only so much of it as is attributable to that fixed base. As the taxpayer is a resident of Australia for Australian income tax purposes the income derived by the taxpayer from the independent personal services in Germany is subject to Australian income tax under subsection 6-5(2) of the ITAA 1997 as Article 13 of the German Agreement permits Australia to tax this income. In circumstances where tax is paid in Germany, then a foreign tax credit may be available in Australia. Article 22(1) of the German Agreement provides that, subject to the provisions of the law of Australia, a credit for German tax paid will be allowed against Australian tax payable on income from German sources.", "Date_of_Decision": "21 December 2005", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign source income Germany International tax Permanent establishment Resident/residency Treaties", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "OECD Model Tax Convention on Income and on Capital (Published on 23 October 1997) OECD Model Tax Convention on Income and on Capital (Published on 28 January 2003)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200610", "Unmatched_Content": "This ATO ID has been amended by inserting the word 'also' before the words 'may be taxed in Germany' in order to clarify that Article 13 of the German Agreement allows both Australia and Germany to tax the income. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 2002/5 | Keywords Double tax agreements Foreign source income Germany International tax Permanent establishment Resident/residency Treaties"}
{"ATO_ID_Number": "ATO ID 2006/108", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of professional services income received by dual resident of Australia and Singapore in the Joint Petroleum Development Area", "Issue": "Is the income received by a taxpayer, who is a dual resident of Australia and of Singapore, for professional services performed in the Joint Petroleum Development Area (JPDA), assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income received by a taxpayer, who is a dual resident of Australia and of Singapore, for professional services performed in the JPDA are assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer is also a resident of Singapore for Singapore tax purposes. The taxpayer is an individual who has been contracted by an Australian company, on behalf of another Australian company, to provide professional services in the JPDA. Neither Australian company is a resident of Singapore. The taxpayer is not an employee of either Australian company. The taxpayer worked on the mainland of Australia and in the JPDA for a period spanning two Australian income years. In each year, the taxpayer was present in Australia for less than 183 days. The taxpayer has homes in Australia and in Singapore which are available for the taxpayer's permanent use throughout the period of their presence in Australia. The taxpayer has an habitual abode in Australia and in Singapore throughout the period of their presence in Australia. The taxpayer's personal and economic ties are closer with Singapore than with Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes the ordinary income derived by the taxpayer directly or indirectly from all sources, whether in or out of Australia, during the income year. Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the agreement between Australia and Singapore (Singapore Agreement). As the taxpayer is a dual resident, it is necessary to consider the tie breaker rules in the Singapore Agreement. Article 3(2) of the Singapore Agreement sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the Singapore Agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 3(2) of the Singapore Agreement provides that if an individual is a resident of both Australia and Singapore: The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the Singapore Agreement. Article 2(4) of the Singapore Agreement provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the Singapore Agreement. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has a permanent home and a habitual abode in both countries during the period of presence in Australia. Therefore, as the taxpayer's personal and economic ties are closer with Singapore than with Australia, the taxpayer will be treated as a resident of Singapore for the purposes of applying the provisions of the Singapore Agreement. Article 11 of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services shall be subject to tax only in Singapore unless the services are performed or exercised in Australia. If the services are so performed or exercised such remuneration or other income as is derived therefrom shall be deemed to have a source in, and may be taxed in, Australia. However, Article 12 of the Singapore Agreement provides that the remuneration shall be exempt from tax in Australia if - The taxpayer performed their services for an Australian resident company in mainland Australia and in the JPDA over two Australian income years. In both years, the taxpayer was present in Australia for less than 183 days. As Article 12(b) of the Singapore Agreement is not satisfied, Article 12 of the Singapore Agreement will not apply. As the taxpayer performs their services in Australia, the income received by the taxpayer for those services may be taxed in Australia under Article 11 of the Singapore Agreement. The remuneration may also be taxed by Singapore. In addition to the Singapore Agreement, the provisions of the Timor Sea Treaty (Treaty) (which is contained in Schedule 1 to the Petroleum (Timor Sea Treaty) Act 2003 ) must also be considered in determining the taxpayer's liability to Australian tax. The Timor Sea between northern Australia and East Timor contains proven petroleum resources in the seabed. Australia and East Timor have competing claims to the resources of this seabed. The Treaty enables Australia and East Timor to jointly develop the petroleum resources of a major part of the seabed of the Timor Sea, defined in Article 3 of the Treaty as the JPDA, pending agreement to a seabed boundary with East Timor. The Treaty was signed between the Government of East Timor and the Government of Australia on 20 May 2002. The Treaty entered into force on 2 April 2003 but is taken to have effect and all of the provisions will apply and be taken to have applied on and from the date of signature, 20 May 2002. Both Australia and East Timor continue to have sovereignty over the area and therefore, for the purposes of Australian law, the area is considered part of Australian territory. Article 2 of the Treaty recognises that the treaty is without prejudice to both Australia's and East Timor's legal claims to the seabed in the Timor Sea. Further, Article 13 of the Treaty provides that the JPDA shall be deemed to be, and treated by Australia, as part of Australia (and by East Timor as part of East Timor) for the purposes of taxation law related directly or indirectly to: Therefore, the JPDA is treated by Australia as part of Australia's maritime zones under the arrangements. Annex G to the treaty sets out the taxation arrangements for income earned in the JPDA. Article 12(1) in Annex G of the Treaty provides that income derived by an individual who is a resident of Australia in respect of professional services, or other independent activities of a similar character, performed in the JPDA may be taxed in Australia and East Timor as reduced by the reduction percentage. In the case of Australia, the reduction percentage is 90% and for East Timor the reduction percentage is 10% (see Article 1 of the Treaty). Article 12(2) in Annex G of the Treaty provides that notwithstanding the above, Australia may tax its residents on such income without reduction. In such a case, Australia will provide a tax offset against the tax payable on that income by the individual for the tax paid in East Timor. Australia's practice is to tax Australian resident taxpayers on 100% of their JPDA income under subsection 6-5(2) of the ITAA 1997 and to give a tax offset for East Timor tax paid on 90% of this income. Therefore, the income received by the taxpayer, who is a dual resident of Australia and of Singapore, for professional services performed in the JPDA are assessable under subsection 6-5(2) of the ITAA 1997. Subsections 136AA(1) and 136AA(4) of the ITAA 1936 define an 'area covered by an international tax sharing treaty' as an area covered by an agreement between Australia and another country under which Australia and the other country share tax revenues from activities undertaken in that area. The JPDA is an area covered by an international tax sharing treaty. Therefore, the taxpayer is entitled to a foreign tax credit for tax paid in East Timor on income derived from duties performed in the JPDA.", "Date_of_Decision": "9 November 2005", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 136AA(1) subsection 136AA(4)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Exempt income Foreign income International law International tax Timor Sea Zone of Cooperation Treaties", "Case_References": "", "Other_References": "Timor Sea Treaty between the Government of Australia and the Government of East Timor, Dili, 20 May 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006108", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will by replaced by a foreign tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Exempt income Foreign income International law International tax Timor Sea Zone of Cooperation Treaties"}
{"ATO_ID_Number": "ATO ID 2006/140", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of contract income earned by a resident taxpayer from an organisation based in Indonesia", "Issue": "Is income derived by a resident Australian taxpayer, contracted to provide consultancy services to an organisation in Indonesia, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income received by a resident Australian taxpayer, contracted to provide consultancy services to an organisation in Indonesia, is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for tax purposes. The taxpayer has been contracted by an organisation in Indonesia to provide consultancy services as a technical expert for a period of six months. The taxpayer is a fixed term contractor and not an employee of the Indonesian organisation. The taxpayer will be undertaking work from their base in Australia and travel to Indonesia and South East Asia when required. The taxpayer will not be required to relocate in view of the short term nature of their engagement and will not take any breaks during the period of the contract.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. However, in determining any liability to Australian tax it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act) that exists between Australia and Indonesia Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and the ITAA 1997 where there are inconsistent provisions (except in some limited situations). Schedule 37 to the Agreements Act contains the tax treaty between Australia and Indonesia (the Indonesian Agreement). The Indonesian Agreement operates to avoid the double taxation of income received by Australian and Indonesian residents. Article 14 of the Indonesian Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services, or other independent activities of a similar character, shall be taxable only in Australia unless the taxpayer Has a fixed base regularly available to them in Indonesia for the purpose of performing their activities. If the taxpayer has such a fixed base, the income may be taxed in Indonesia but only so much of it as is attributable to that fixed base. The individual is present in Indonesia for a period or periods exceeding 120 days in any period of 12 months, in that case, so much of the income as is derived from the individuals activities in Indonesia also may be taxed in Indonesia. To assist in the interpretation of the Indonesian Agreement, reference is made to Taxation Ruling TR 2001/13 - Income tax: Interpreting Australia's Double Tax Agreements. Under this ruling, regard may be had to the OECD Model Tax Convention on Income and on Capital (the OECD Model) and the Commentaries on the Articles of the OECD Model (the OECD Commentary) including any subsequent revisions to that OECD Commentary to assist in the interpretation of double tax agreements. This approach was also accepted by the High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531, the High Court accepted that the OECD Model and the Commentaries on the Articles of the OECD Model (the OECD Commentary) may be relevant to the interpretation of tax treaties based on the OECD Model. The High Court approved recourse to the OECD Model and the OECD Commentary under Article 32 of the Vienna Convention (see paragraph 102 of Taxation Ruling TR 2001/13). Unless specified otherwise, references to the OECD Model and Commentary are to the version published on 15 July 2005. Article 14 of the Indonesian Agreement is the same in substance as the former Article 14 of the OECD Model published on 23 October 1997. Paragraph 2 of 'Commentary on Article 14' in the OECD Model defines the concept of professional services to include professional activities of an 'independent' nature. Thus the provision of consulting services by the taxpayer is considered independent personal services for the purposes of Article 14 of the Indonesian Agreement. Paragraph 4 of 'Commentary on Article 14' in the OECD Model suggests that a fixed base is a centre of activity of a fixed or a permanent nature, and would include a physician's consulting room or the office of an architect or lawyer. The taxpayer will not have an office or any other business premises in Indonesia. The taxpayer will derive income from their consultancy. As the taxpayer is a resident of Australia for tax purposes, and does not have a fixed base (such as an office) in Indonesia, Article 14 of the Indonesian Agreement provides that this income will be assessable in Australia, and as a consequence, the consultancy income will not be taxed in Indonesia. Therefore, the income the taxpayer receives from consulting in Australia will be assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "23 May 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/230", "Subject_References": "Double tax agreements Foreign income Indonesia International law International tax Treaties", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "OECD Model Tax Convention on Income and on Capital (Published on 15 July 2005)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006140", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Foreign income Indonesia International law International tax Treaties"}
{"ATO_ID_Number": "ATO ID 2005/282", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived in Denmark by an Australian academic", "Issue": "Is the income derived by an Australian academic from a Research Institute in Denmark assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived by an Australian academic from a Research Institute in Denmark is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for Australian income tax purposes. The taxpayer held the position as a lecturer and researcher at an Australian University. The taxpayer entered into a contract with a Research Institute in Demark to undertake a Research Project in a particular field in which the taxpayer was recognised as a leading expert. The Commissioner, having examined the terms of the contract between the taxpayer and the Research Institute in Denmark determined that the taxpayer was engaged as an independent contractor, and not an employee of the Research Institute. During the currency of his engagement in Denmark, the Research Institute provided the taxpayer with an office furnished with a computer and desk. The taxpayer was also supplied with computer software and stationery.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. In determining the liability to Australian tax of foreign sourced income, it is necessary to consider not only the provisions of the Income Tax Assessment Act 1936 and the ITAA 1997, (together 'the Assessment Act'), but also any applicable Agreements contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Assessment Act so that those Acts are read as one. In the event of inconsistent provisions, the Agreements Act overrides the Assessment Act (except in some limited situations). Schedule 18 of the Agreements Act contains the Agreement between the Governments of Australia and the Government of the Kingdom of Denmark (the Danish Agreement). The Danish Agreement operates, amongst other things, to avoid the double taxation of income received by persons who are residents of either or both of Australia or Denmark. Paragraph (1) of Article 14 of the Danish Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia unless that individual has a fixed base regularly available to him or her in Denmark for the purpose of performing those services. If such a fixed base is available to the individual, the income may also be taxed in Denmark but only so much of it as is attributable to activities exercised from that fixed base. Pursuant to Article 23 of the Danish Agreement, Danish tax paid under the law of Denmark in accordance with the Danish Agreement in respect of income derived by an Australian resident from sources in Denmark shall be allowed as a credit against Australian tax payable in respect of that income. However, this is subject to the provisions of the laws of Australia, which may limit the amount of the credit. Paragraph (2) of Article 14 of the Danish Agreement defines the term 'professional services' to include, amongst other things, services performed in the exercise of independent scientific, educational or teaching activities. The income derived by the taxpayer from the Research Institute in Denmark is in respect of 'professional services' for the purposes of paragraph (2) of Article 14 of the Danish Agreement. As the taxpayer is a resident of Australia for Australian income tax purposes, the professional services income derived by the taxpayer from the Research Institute in Denmark is subject to Australian income tax under subsection 6-5(2) of the ITAA 1997. In accordance with Article 23 of the Danish Agreement, and subject to Australian domestic tax laws governing the entitlement of an Australian resident taxpayer to foreign tax credits, Danish tax paid under the Danish Agreement in respect of the professional services income derived by the taxpayer from the Research Institute in Denmark shall be allowed as a credit against the Australian income tax payable in respect of that income.", "Date_of_Decision": "28 September 2005", "Year_of_Income": "Year ended 30 June 2002 Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Denmark Double tax agreements Double tax relief Employment relationship Foreign income Foreign salary & wages International law International tax Large Business & International Residence in Australia Salary & wages income Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005282", "Unmatched_Content": "This ATO ID has been amended in order to clarify the ATO view. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Denmark Double tax agreements Double tax relief Employment relationship Foreign income Foreign salary & wages International law International tax Large Business & International Residence in Australia Salary & wages income Treaties"}
{"ATO_ID_Number": "ATO ID 2004/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income earned by a resident of Australia in Kiribati", "Issue": "Is the income earned by an Australian resident taxpayer, while working in Kiribati, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income earned by an Australian resident taxpayer, while working in Kiribati, is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer does contract work in Kiribati as a freelance economist. A fixed base was regularly available to the taxpayer while working in Kiribati. The taxpayer earned in excess of AUD8,000 while working in Kiribati. The taxpayer was in Kiribati in excess of 90 days in the year of income. The taxpayer intends to return to Australia on completion of the project in Kiribati.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Contract income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax of foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 34 to the Agreement Act contains the double tax agreement between Australia and the Republic of Kiribati (the Kiribati Agreement). The Kiribati Agreement operates to avoid double taxation of income received by Australian and Kiribati residents. Article 14(1) of the Kiribati Agreement provides that income derived by an individual who is a resident of Australia in respect of professional services or independent activities of a similar character shall be taxable only in Australia unless: Article 14(3) of the Kiribati Agreement states that the term 'professional services' includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentist and accountants. Income earned as a freelance economist in Kiribati is considered to be in respect of 'professional services'. A fixed base was regularly available to the taxpayer while working in Kiribati. The taxpayer earned in excess of AUD8,000 while working in Kiribati. The taxpayer was in Kiribati in excess of 90 days in the year of income. All conditions of Article 14(1) of the Kiribati Agreement have been satisfied. Accordingly the income may be taxed in Australia and Kiribati. Article 23(1) of the Kiribati Agreement provides, subject to the provisions of the law in Australia, a credit for any tax paid in Kiribati will be allowed against Australian tax paid on income from Kiribati. Accordingly, the income earned by an Australian resident taxpayer, while working in Kiribati, is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "28 November 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income Foreign tax credits International tax Kiribati Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200479", "Unmatched_Content": "This ATO ID has been amended to remove references in the Note part of the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will by replaced by a foreign tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Foreign income Foreign tax credits International tax Kiribati Treaties"}
{"ATO_ID_Number": "ATO ID 2004/299", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income from Fiji by a resident for professional services performed wholly in Australia for Fijian entity", "Issue": "Is income earned by an Australian resident taxpayer, who is contracted by an entity in Fiji to provide professional services to the entity and who works remotely from Australia, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income earned by an Australian resident taxpayer, who is contracted by an entity in Fiji to provide professional services to the entity and who works remotely from Australia, is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer has a contract with an entity in Fiji to provide professional services to the entity. The taxpayer will provide their services wholly in Australia. The taxpayer is not an employee of the entity in Fiji. The taxpayer will receive a fee for their professional services from the entity in Fiji.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Income earned in respect of professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to tax on Australian sourced income paid to a taxpayer by an entity of a foreign country, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 32 to the Agreements Act contains the double tax agreement between Australia and Fiji (the Fijian Agreement). The Fijian Agreement operates to avoid the double taxation of income received by Australian and Fijian residents. Article 14(1) of the Fijian Agreement provides that income derived by a resident of Australia in respect of professional services or other independent activities of a similar character shall be taxable only in Australia. However, if such an individual: so much of that income derived by the individual may be taxed in Fiji. Article 14(3) of the Fijian Agreement provides that 'professional services' includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities, as well as in the exercise of independent activities of physicians, engineers, architects, dentists and accountants. Although the results of the taxpayer's work are exploited in Fiji, the taxpayer provides their professional services wholly from Australia and does not perform any activities in Fiji. Accordingly, none of the paragraphs in Article 14(1) of the Fijian Agreement apply. Therefore, the income received by the taxpayer is taxable only in Australia under Article 14(1) of the Fijian Agreement. As the taxpayer is a resident of Australia for income tax purposes, the income received by the taxpayer from the provision of professional services to a Fijian entity is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "16 March 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Fiji Income International tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004299", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Fiji Income International tax"}
{"ATO_ID_Number": "ATO ID 2004/775", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of consultancy income received by a dual resident of Australia and the United States", "Issue": "Is consultancy income received by a taxpayer who is a dual resident of Australia and the United States (US) from independent personal services performed in Australia for a US organisation included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Consultancy income received by a taxpayer who is a dual resident of Australia and the US from independent personal services performed in Australia for a US organisation are included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer is present in Australia for more than 183 days in the relevant Australian year of income. The taxpayer maintains residences in Australia and the US which are available to the taxpayer at all times continuously. The taxpayer spends time in Australia and the US during the year. The taxpayer's personal and economic ties are predominantly in the US. The taxpayer receives consultancy income from independent personal services performed for a US organisation. The taxpayer is not an employee of the US organisation. The taxpayer performs their services in Australia.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Consultancy fees are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the United States Protocol (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. The US Protocol entered into force in Australia on 13 May 2003 and has effect in respect of income tax other than withholding taxes for any year of income beginning on or after 1 July 2004. For withholding taxes on dividends, interest and royalties, it has effect from 1 July 2003. As the taxpayer is a dual resident of Australia and of the US, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and US, they shall be deemed to be a resident of the State: Article 4(2) of the US Convention further provides that in determining an individual's permanent home, regard shall be given to the place where the individual dwells with their family, and in determining the country with which an individual's personal and economic relations are closer, regard shall be given to their citizenship (if the individual is a citizen of one of the countries). The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the US Convention. Article 3(2) of the US Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the US Convention. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer maintains residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in the US. In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. This is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the taxpayer's circumstances. As the taxpayer and the taxpayer's family spend time at their homes in Australia and the US as part of their usual pattern of activity, the taxpayer has a habitual abode in both countries. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has personal and economic ties with Australia and the US. Coupled with the fact that the taxpayer is a US citizen, it is considered that the taxpayer's personal and economic ties are closer with the US than with Australia. Accordingly, the taxpayer will be treated as a resident of the US for the purposes of applying the provisions of the US Convention. Article 14(1) of the US Convention provides that income derived by an individual who is a resident of the US from the performance of personal services in an independent capacity shall be taxable only in the US unless such services are performed in Australia and: As the taxpayer performs the services in Australia and is present in Australia for more than 183 days in the Australian year of income, the income may be taxed in the US and in Australia. Therefore, the consultancy income received by the taxpayer who is a resident of Australia and the US is assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "8 September 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consultancy fee income Double tax agreements International law Resident/residency Treaties United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004775", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Consultancy fee income Double tax agreements International law Resident/residency Treaties United States"}
{"ATO_ID_Number": "ATO ID 2003/372", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of consultancy fees received by a Canadian expert for services provided to a government authority in Australia", "Issue": "Are the consultancy fees received by a taxpayer, an expert from Canada in a discipline of science, for professional services provided in Australia to an Australian government authority assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the consultancy fees received by a taxpayer, an expert from Canada in a discipline of science, for professional services provided in Australia to an Australian government authority would be assessable under subsection 6-5(3) of the ITAA 1997, Article 14 of Schedule 3 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the consultancy fees are not taxable in Australia.", "Facts": "The taxpayer is a resident of Canada and a non resident of Australia for income tax purposes. The taxpayer is an expert in a discipline of science. The taxpayer enters into two separate contracts to provide consultancy services in the area of their expertise to a government authority in Australia. Under the terms of the contracts, the taxpayer is required, within a short timeframe, to conduct and review research on a number of issues with maps and diagrams and prepare reports. While present in Australia, the taxpayer spends most of their time on fieldwork. The taxpayer keeps no fixed base in Australia to perform the terms of the two contracts. The taxpayer receives consultancy fees from the government authority pursuant to the terms of the contracts.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. In determining liability to Australian tax on income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that both Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited situations). Schedule 3 to the Agreements Act contains the convention between Australia and Canada (the Canadian Convention). Schedule 3A of the Agreements Act contains the protocol amending the Canadian Convention (the Canadian Protocol). The Canadian Convention and Canadian Protocol operate to avoid the double taxation of income received by Australian and Canadian residents. Paragraph (1) of Article 14 of the Canadian Convention provides that income derived by an individual who is a resident of Canada in respect of professional services or other independent activities of a similar character will be taxable only in Canada unless a fixed base is regularly available to that individual in Australia for the purpose of performing the activities. If the individual has such a fixed base in Australia, the income attributable to activities exercised from that fixed base may be taxed in Australia. Paragraph (2) of Article 14 of the Canadian Convention defines 'professional services' to include services performed in the exercise of independent scientific activities. The consultancy fees received by the taxpayer from an Australian government authority are in respect of 'professional services' under paragraph (2) of Article 14 of the Canadian Convention. Consequently, as the taxpayer is a resident of Canada with no fixed base regularly available in Australia for the purpose of performing the professional services activities, Article 14 of the Canadian Convention applies and the consultancy fees are not taxable in Australia. The consultancy fees received by the taxpayer from the Australian government authority will therefore not be assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "5 May 2003", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Canada Double tax agreements Exempt income International tax Residence of individuals", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003372", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Canada Double tax agreements Exempt income International tax Residence of individuals"}
{"ATO_ID_Number": "ATO ID 2003/619", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of professional services income earned by Australian resident in Papua New Guinea", "Issue": "Is the income received by the taxpayer, a resident of Australia, earned as legal counsel in the Independent State of Papua New Guinea (PNG), assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income received by the taxpayer, a resident of Australia, earned as legal counsel in PNG is assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer earned income as legal counsel practicing in PNG. The fee received by the taxpayer was paid by a resident of PNG. The fee received by the taxpayer exceeded $A8,000.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The fee received by the taxpayer is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign source income it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 29 to the Agreements Act contains the double tax agreement between Australia and PNG (the PNG Agreement). The PNG Agreement operates to avoid the double taxation of income received by Australian and PNG residents. Article 14(1) provides that income derived by a resident of Australia in respect of professional services performed in PNG shall be taxable only in Australia unless: In these circumstances, the income may be subject to tax in PNG, but only so much as is attributable to activities undertaken in PNG. Article 14(2) of the PNG Agreement states that the term 'professional services' includes services performed in the exercise of independent scientific, literary, artistic, educational or teaching activities as well as in the exercise of the independent activities of physicians, lawyers, engineers, architects, dentists and accountants . Fees earned as legal counsel in PNG are considered to be in respect of 'professional services'. As the fee received by the taxpayer exceeded $A8,000, the fee may be taxed by Australia and by PNG under Article 14(1) of the PNG Agreement. Article 23(1) of the PNG Agreement provides, subject to the provisions of the law in Australia, a credit for any tax paid in PNG will be allowed against Australian tax paid on income from PNG. As the taxpayer is a resident of Australia for income tax purposes, the fee received by the taxpayer earned as legal counsel in the PNG is assessable under subsection 6-5(2) of the ITAA 1997. The taxpayer will be entitled to a foreign tax credit for PNG tax paid on that income.", "Date_of_Decision": "11 July 2003", "Year_of_Income": "Year ended 30 June 1997", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Legal fees Papua New Guinea Personal services income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003619", "Unmatched_Content": "This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Legal fees Papua New Guinea Personal services income"}
{"ATO_ID_Number": "ATO ID 2003/679", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of personal services income derived in Singapore by resident taxpayer", "Issue": "Is the income derived by a resident taxpayer, while working as a jockey in Singapore, assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived by a resident taxpayer, while working as a jockey in Singapore, is assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) and the income is not exempt under subsection 23AG(1) of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a resident of Australia for income tax purposes. The taxpayer is engaged as a jockey in Singapore by a racing club for more than 90 days. The taxpayer receives fees and race winnings from Singapore. The taxpayer pays tax on the income in Singapore. The taxpayer is not in receipt of any salary and wages from Singapore.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Fees and race winnings are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the ITAA 1997 lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived will be exempt from tax in Australia. Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee, and 'foreign earnings' to mean income consisting of earnings, salary, wages, commission, bonuses or allowances. In determining liability to tax to foreign sourced income received by a resident taxpayer, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 5 to the Agreements Act contains the double tax agreement between Australia and the Republic of Singapore (the Singapore Agreement). Schedule 5A to the Agreements Act contains the protocol amending the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and Singapore Protocol operate to avoid the double taxation of income received by Australian and Singapore residents. Article 11(1) of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Australia in respect of personal (including professional) services shall be taxable in Australia unless the services are performed or exercised in Singapore. If the services are performed or exercised in Singapore, the income may be taxed in Singapore. Article 18(1) of the Singapore Agreement (substituted by Singapore Protocol) provides that, subject to the provisions of the law of Australia, a credit for any tax paid in Singapore will be allowed against Australian tax payable on income derived from sources in Singapore. The fees and race winnings derived by the taxpayer as a jockey from Singapore are not exempt from tax under subsection 23AG(1) of the ITAA 1936 as the taxpayer has not been engaged in 'foreign service' as defined under subsection 23AG(7) of the ITAA 1936 because they are not an employee. As the taxpayer is a resident of Australia for income tax purposes, Article 11(1) of the Singapore Agreement applies. Accordingly, the fees and race winnings derived by the taxpayer from Singapore will form part of their assessable income under subsection 6-5(2) of the ITAA 1997. The taxpayer will be entitled to a foreign tax credit for Singapore tax paid on that income.", "Date_of_Decision": "15 July 2003", "Year_of_Income": "Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG section 23AG(1) section 23AG(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double taxation agreements Singapore International tax Foreign income Foreign tax credits", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003679", "Unmatched_Content": "This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double taxation agreements Singapore International tax Foreign income Foreign tax credits"}
{"ATO_ID_Number": "ATO ID 2013/58", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax: Australian interest income paid to a single owner United States limited liability company disregarded as an entity separate from its owner", "Issue": "Can Article 11(3)(b) of the Convention between the Government of Australia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income [1983] ATS 16 and Protocol [2003] ATS 14 (the US Convention) apply to Australian interest income paid to a single owner US limited liability company (LLC) incorporated in the United States that:", "Decision": "Yes. In these circumstances Article 11(3)(b) of the US Convention can apply to the interest income paid to the LLC providing all the other requirements in Article 11 are satisfied.", "Facts": "The LLC derives the majority of its income from raising debt finance in the financial markets and using those funds in carrying on a business of providing finance, and is a financial institution for the purpose of Article 11(3)(b) of the US Convention. The LLC has not elected to be treated as a corporation for US income tax purposes. The LLC is 'disregarded as an entity separate from its owner' for US federal tax purposes under US Treasury Regulations, Subchapter F, § 301.7701-3(b)(ii). US Treasury Regulations, Subchapter F, § 301.7701-2(a) provides that, if an entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner. For US federal tax purposes the LLC's income and expenses are aggregated with the other income and expenses of its owner and the owner is taxed in the US as a resident of the US. The single owner of the LLC is a resident of the US for the purposes of the US Convention. The single owner undertakes no other activities.", "Reasons_for_Decision": "Summary: Article 11(3)(b) of the US Convention states that: (3) Notwithstanding paragraph (2), interest arising in one of the Contracting States to which a resident of the other Contracting State is beneficially entitled may not be taxed in the first-mentioned State if: ... (b) the interest is derived by a financial institution which is unrelated to and dealing wholly independently with the payer. For the purposes of this Article, the term 'financial institution' means a bank or other enterprise substantially deriving its profits by raising debt finance in the financial markets or by taking deposits at interest and using those funds in carrying on a business of providing finance. (emphasis added) For the reasons set out in ATO ID 2010/188, a disregarded LLC is not a resident of the US for the purposes of the US Convention. Further, TR 2005/5 states at paragraph 36: It is the US or UK resident that is beneficially entitled to the interest that must meet the requirements of the Article. The term 'resident' in Article 11 derives its meaning from Articles 1, 3 and 4 of the Conventions. The effect of the definition of 'resident' in the Conventions in the case of corporate groups is that it refers to a particular company within the company group. As a corporate group is not a resident for the purposes of Article 11, the attributes of that Article cannot apply to it. Rather, it is the particular company that is beneficially entitled to the interest that must meet the requirements of Article 11(3), including the requirement to be a financial institution. | Detailed Reasoning - The object and purpose of Article 11(3)(b) of the US Convention: Paragraph 94 of Taxation Ruling TR 2001/13 comments, in relation to the interpretation of tax treaties, that: ... the rules of construction will not be as detailed and rigid as they might be if the courts were to interpret domestic legislation or domestic instrumentsF72, and gaps, imprecision and ambiguities should be accepted as sometimes inevitable in such a text, and to some extent accommodated or 'smoothed over' in a way that addresses the context and meets the object and purpose of the DTA. Article 11(3)(b) of the US Convention was introduced by the International Tax Agreements Amendment Bill (No. 1) 2002. The House of Representatives Explanatory Memorandum to that Bill explains the purpose of Article 11(3)(b) as follows: 2.46 The exemption for interest paid to financial institutions reflects that the current 10% rate on gross interest can be excessive given their cost of funds. Paragraphs 7.1 and 7.7 of the Commentary on Article 11 of the OECD Model Tax Convention expand on the reason for including an Article such as Article 11(3)(b) to prevent taxation by the source country. In short, source country taxation on the interest derived by a financial institution is likely to constitute an obstacle to international trade, because source country taxation is generally based on gross interest and does not take into account the borrowing costs. Where, because of domestic tax laws, the taxing point is shifted from one entity to another, such that the entity which is the financial institution is not taxed but another entity, a resident for treaty purposes, is taxed, it is consistent with the object and purpose of the above exemption to allow the exemption to apply to the interest income paid to the financial institution in appropriate circumstances. | Detailed Reasoning - US treatment of the interest paid to the LLC: Under US tax law, where an entity is disregarded, 'its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner' (see US Treasury Regulations, Subchapter F, § 301.7701-2(a)). The IRS Instructions for the LLC Reference Guide Sheet further state '[a] though the LLC may be disregarded as a separate entity, it is not disregarded as an activity of its sole owner. Rather, the disregarded LLC's activities are treated as the activities of the owner.' In dealing with the inherent difficulties associated with the differing treatment of partnerships in different countries, paragraph 6.3 of the OECD Commentary on Article 1 of the OECD Model Tax Convention states the following principle: ... the State of source should take into account, as part of the factual context in which the treaty is to be applied, the way in which an item of income, arising in its jurisdiction is treated in the jurisdiction of the person claiming the benefits of the Convention as a resident. This comment relates to partnerships. However, the principle is also applicable to a US LLC, which under Australian tax law is treated as a taxable entity (a company), while the US, for US tax law purposes, disregards the LLC and instead treats the activities of the LLC as the activities of the owner and imposes tax on the owner accordingly. Thus, in applying the US Convention, Australia should take into account the US treatment of the interest paid to the LLC. Where it is necessary to do so in order to give effect to the object and purpose of a treaty, Australia may give due recognition to the fact that under US tax law, the activities and income of the LLC are treated as the activities and income of the US resident owner. Hence, where: it can be accepted that the interest income is income to which a resident of the US is beneficially entitled and is derived by financial institution for the purposes of Article 11(3)(b). Therefore, subject to the other requirements in Article 11 also being met, the interest income is not taxable in Australia. This treatment accords with the object and purpose of the exemption from tax in Article 11(3)(b) and is consistent with paragraph 36 of TR 2005/5 as, giving recognition to the US tax law treatment, the resident of the US satisfies the requirements of the Article.", "Date_of_Decision": "5 October 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "TR 2001/13 | TR 2005/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/188", "Subject_References": "international tax treaties interest income withholding taxes non-resident companies non-resident interest withholding tax", "Case_References": "", "Other_References": "US Convention [1983] ATS 16 US Convention [1983] ATS 16, Article 4(1)(b) US Convention [1983] ATS 16, Article 11(3)(b) Protocol amending the US Convention [2003] ATS 14 House of Representatives Explanatory Memorandum to the International Tax Agreements Amendment Bill (No. 1) 2002 2010 OECD Commentaries on the Articles of the Model Tax Convention US Treasury Regulations Subchapter F, § 301.7701-2(a) US Treasury Regulations Subchapter F, § 301.7701-3(b)(ii)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201358", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 2001/13 TR 2005/5 | Keywords international tax treaties interest income withholding taxes non-resident companies non-resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2011/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax: interest arising in Australia paid to a New Zealand Limited Partnership - 'derived'", "Issue": "Is the taxpayer's share (proportionate to its partnership interest as a limited partner in a New Zealand Limited Partnership (NZLP)) of interest arising in Australia and paid to NZLP, 'derived' by the taxpayer for the purposes of Article 11.3(a) of the tax treaty between Australia and New Zealand (2009 NZ Convention)?", "Decision": "Yes. The taxpayer's share of interest arising in Australia and paid to NZLP is derived by the taxpayer for the purposes of Article 11.3(a) of the 2009 NZ Convention.", "Facts": "The taxpayer is a resident of New Zealand for the purposes of New Zealand's tax law and the 2009 NZ Convention. The taxpayer is a non-resident as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer is a limited partner of NZLP, formed under New Zealand's Limited Partnerships Act 2008 . Interest arising in Australia is paid to NZLP. For the purposes of New Zealand's tax law, interest paid to NZLP is allocated to its limited partners in proportion to their interest in the partnership and they are taxed on that proportion accordingly. That is, the limited partners are liable to tax on that interest income. The taxpayer is the 'beneficial owner' of a proportion of the interest paid to NZLP for the purposes of Article 11 of the 2009 NZ Convention. The proportion is based on the taxpayer's partnership interest in NZLP. The taxpayer is a government investment fund for the purposes of Article 11.3(a) of the 2009 NZ Convention.", "Reasons_for_Decision": "Summary: Subject to certain exceptions, interest withholding tax is payable under subsection 128B(5) of the ITAA 1936 on interest derived by non-residents that falls within subsection 128B(2) of the ITAA 1936. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 sets the rate of withholding tax on such interest at 10 per cent. In the present case, liability to Australian withholding tax is subject to the provisions of the 2009 NZ Convention contained in Schedule 4 to the International Tax Agreements Act 1953 . Article 11 of the 2009 NZ Convention deals with interest. Relevantly, Article 11.3(a) of the 2009 NZ Convention provides that interest arising in Australia and beneficially owned by a resident of New Zealand may not be taxed in Australia if the interest is 'derived by a Contracting State or by a political sub-division or a local authority thereof (including a government investment fund)'. Accordingly, as the taxpayer is the beneficial owner of its share of the interest arising in Australia and also a government investment fund, it is necessary to determine whether the interest is 'derived' by the taxpayer for the purposes of Article 11.3(a) of the 2009 NZ Convention. The interest income that is paid to NZLP is allocated to the limited partners in proportion to their interest in the partnership, and is taxed in New Zealand as the income of the limited partners (rather than as the income of NZLP). In this regard, Article 1.2 of the 2009 NZ Convention is relevant. It states: In the case of an item of income (including profits or gains) derived by or through a person that is fiscally transparent with respect to that item of income under the laws of either State, such item shall be considered to be derived by a resident of a State to the extent that the item is treated for the purposes of the taxation law of such State as the income of a resident. Therefore, in order to determine whether Article 1.2 applies, it is necessary to establish whether NZLP is 'fiscally transparent' under the laws of New Zealand with respect to the relevant interest income, given that the taxpayer is a New Zealand resident for the purposes of the 2009 NZ Convention. The Explanatory Memorandum to the International Tax Agreements Amendment Bill (No.2) 2009 (EM) provides that, for the purposes of applying Article 1.2, it is irrelevant whether the source country (in this case Australia) also views NZLP as fiscally transparent. The phrase 'fiscally transparent' is not defined for the purposes of the 2009 NZ Convention. However the phrase is used in the Commentary to the OECD Model Tax Convention on Income and on Capital to include partnerships that are 'ignored for tax purposes and the individual partners are taxed on their respective share of the partnership's income' (paragraph 3 of the 2010 OECD Commentary on Article 1). The EM also provides guidance in relation to the phrase 'fiscally transparent' that is consistent with the OECD Commentary, and elaborates on what Article 1.2 of the 2009 NZ Convention is intended to achieve. It relevantly provides that: 2.8 Paragraph 2 addresses special issues arising in relation to income that is derived by or through entities, such as certain partnerships and trusts, that are fiscally transparent with respect to that income; that is, where the participants in the entity are liable to tax on the income, rather than the entity itself. The provision is intended to apply where one or more fiscally transparent entities is interposed between the income and the participant who is ultimately liable to tax on the income. 2.9 ... The intention of paragraph 2 is to ensure that treaty benefits are available to residents who are participants in these entities where income derived through such entities is allocated to those members for tax purposes... Therefore, it is clear from the paragraphs quoted above that, in respect of interest income, NZLP is a fiscally transparent entity under the laws of New Zealand. That is, the income 'flows through' to the limited partners in proportion to their partnership interest and they are liable to tax in New Zealand on that income. Paragraph 2.16 of the EM confirms that, in this situation, where income is derived from sources in Australia through an entity organised and treated as fiscally transparent in New Zealand: ... treaty residents who participate in the [fiscally transparent entity] will be eligible for treaty benefits in respect of items of income (including profits or gains) derived from the source country through that entity, to the extent that the other country treats the income as 'flowed-through' to those participants. Resident participants in the entity will be treated as having derived the income directly and may be entitled to treaty benefits... Accordingly, as the taxpayer is a limited partner in NZLP and is ultimately liable to tax in New Zealand on its share of the relevant interest that is paid to NZLP, Article 1.2 applies to treat the taxpayer as having derived that income for the purposes of Article 11.3(a) of the 2009 NZ Convention. This ensures that the benefit under Article 11.3(a) is available to the taxpayer in relation to its share of the interest even though NZLP is interposed between the taxpayer and the source of the interest.", "Date_of_Decision": "10 February 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 128B(2) subsection 128B(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/14 | ATO ID 2011/13", "Subject_References": "New Zealand Double tax agreements Non resident interest withholding tax Limited partnerships Derived", "Case_References": "", "Other_References": "2010 OECD Model Tax Convention on Income and on Capital 2010 OECD Commentaries on the Articles of the Model Tax Convention Explanatory Memorandum to the International Agreements Amendment Bill (No. 2) 2009", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201112", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords New Zealand Double tax agreements Non resident interest withholding tax Limited partnerships Derived"}
{"ATO_ID_Number": "ATO ID 2011/13", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax: interest arising in Australia paid to a New Zealand Limited Partnership - 'beneficially owned'", "Issue": "Is the taxpayer's share (proportionate to its partnership interest as a limited partner in a New Zealand Limited Partnership (NZLP)) of interest arising in Australia and paid to NZLP, 'beneficially owned' by the taxpayer for the purposes of Article 11.3 of the tax treaty between Australia and New Zealand (2009 NZ Convention)?", "Decision": "Yes. The taxpayer's share of interest arising in Australia and paid to NZLP is 'beneficially owned' by the taxpayer for the purposes of Article 11.3 of the 2009 NZ Convention.", "Facts": "The taxpayer is a resident of New Zealand for the purposes of New Zealand's tax law and the 2009 NZ Convention. The taxpayer is a non-resident as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer is a limited partner of NZLP, formed under New Zealand's Limited Partnerships Act 2008 . Interest arising in Australia is paid to NZLP. For the purposes of New Zealand's tax law, interest paid to NZLP is allocated to its limited partners in proportion to their interest in the partnership and they are taxed on that proportion accordingly. That is, the limited partners are liable to tax on that interest income.", "Reasons_for_Decision": "Summary: Subject to certain exceptions, interest withholding tax is payable under subsection 128B(5) of the ITAA 1936 on interest derived by non-residents that falls within subsection 128B(2) of the ITAA 1936. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 sets the rate of withholding tax on such interest at 10 per cent. In the present case, liability to Australian withholding tax is subject to the provisions of the 2009 NZ Convention contained in Schedule 4 to the International Tax Agreements Act 1953 . Article 11 of the 2009 NZ Convention deals with interest. Relevantly, Article 11.3 of the 2009 NZ Convention provides that interest arising in Australia and 'beneficially owned' by a resident of New Zealand may not be taxed in Australia in certain circumstances. Therefore, it is necessary to determine whether the taxpayer's share of the interest income is 'beneficially owned' by the taxpayer for the purposes of Article 11.3 of the 2009 NZ Convention. The term 'beneficially owned' is not defined in the 2009 NZ Convention. Article 3.3 relevantly provides that any term not defined in the 2009 NZ Convention shall take its meaning under the domestic laws of the country applying the treaty, unless the context otherwise requires. Relevant context for the purposes of interpreting an Australian tax treaty includes the Commentaries on the OECD Model Tax Convention on Income and on Capital (the OECD Commentary). Paragraph 104 of Taxation Ruling TR 2001 / 13 states that the OECD Commentary provides important guidance on interpretation and application of the OECD Model Tax Convention and will often need to be considered as a matter of practice, in interpreting tax treaties, at least where the wording is ambiguous. Paragraph 9 of the 2010 OECD Commentary on Article 11 of the Model Tax Convention states: ... The term 'beneficial owner' is not used in a narrow technical sense, rather, it should be understood in its context and in light of the object and purposes of the Convention, including avoiding double taxation and the prevention of fiscal evasion and avoidance. In the wider tax treaty context, the OECD Report titled The Application of the OECD Model Tax Convention on Partnerships (OECD Partnership Report) provides further guidance on the meaning of 'beneficial ownership' in relation to fiscally transparent partnerships. Paragraph 61 of the OECD Partnership Report states that where partners of a partnership are liable to tax in the country of residence on items of income, that income should be considered to be paid to the partners 'who should also be considered to be the beneficial owners of such income as these are the persons liable to tax on such income' in the country of residence. This approach 'is more likely to ensure that the benefits of the Convention accrue to the persons who are liable to tax on the income' and is consistent with the general object and purposes of the Convention of avoiding double taxation and preventing fiscal evasion and avoidance. In the case of the 2009 NZ Convention, the conclusion that the partners of a fiscally transparent partnership should be regarded as the 'beneficial owners' of items of income on which they are liable to tax is further reinforced by the inclusion of Article 1.2 which provides: In the case of an item of income (including profits or gains) derived by or through a person that is fiscally transparent with respect to that item of income under the laws of either State, such item shall be considered to be derived by a resident of a State to the extent that the item is treated for the purposes of the taxation law of such State as the income of a resident. Paragraph 2.9 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill (No.2) 2009 provides that: .... The intention of paragraph 2 is to ensure that treaty benefits are available to residents who are participants in these entities where income derived through such entities is allocated to those members for tax purposes. It would be inconsistent with this purpose to adopt an interpretation of 'beneficial ownership' that denies treaty benefits to the partners of a fiscally transparent partnership. For the purposes of the tax law of New Zealand in the present circumstances, a share of the interest paid to NZLP is allocated to the taxpayer in proportion to its interest in the partnership and the taxpayer is taxed on that income. Accordingly, for the purposes of Article 11.3 of the 2009 NZ Convention, the taxpayer is the beneficial owner of its share of the interest that is paid to NZLP on which it is liable to tax in New Zealand.", "Date_of_Decision": "10 February 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 128B(2) subsection 128B(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/12 | ATO ID 2011/14", "Subject_References": "New Zealand Double tax agreements Non resident interest withholding tax Limited partnerships OECD", "Case_References": "", "Other_References": "2010 OECD Model Tax Convention on Income and on Capital 2010 OECD Commentaries on the Articles of the Model Tax Convention The Application of the OECD Model Tax Convention to Partnerships (adopted by the OECD Committee on Fiscal Affairs on 20 January 1999) Explanatory Memorandum to the International Tax Agreements Amendment Bill (No.2) 2009", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201113", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords New Zealand Double tax agreements Non resident interest withholding tax Limited partnerships OECD"}
{"ATO_ID_Number": "ATO ID 2007/2", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Distributions treated as interest - are they 'determined with reference to profits' under Article 11(9)(a) of the United States Convention", "Issue": "Where the taxpayer, a United States (US) resident company, receives distributions treated as interest from an Australian resident corporate limited partnership (the CLP) in which the taxpayer has a redeemable limited partnership interest, is the interest paid by the CLP to the taxpayer 'determined with reference to the profits of the issuer' for the purposes of Article 11(9) of Schedule 2 of the International Tax Agreements Act 1953 (Agreements Act) as amended by Schedule 2A of the Agreements Act (the US Convention)?", "Decision": "Yes. The amounts that are treated as interest and paid by the CLP to the taxpayer, a US resident company that holds redeemable partnership interests in it, will be amounts that are 'determined with reference to the profits' of the CLP pursuant to Article 11(9) of the US Convention.", "Facts": "The taxpayer is a US resident company and a 'financial institution' for the purposes of Article 11(3)(b) of the US Convention. Under a financing arrangement, the taxpayer provided funding to an Australian resident corporate limited partnership (CLP1) in return for a redeemable limited partnership interest (RLPI) in CLP1 issued under its partnership deed. Those funds have ultimately been used by another Australian resident CLP (CLP2) of which CLP1 has a general partnership interest. (The taxpayer also has a limited partnership interest in CLP2 issued under a separate partnership deed). CLP2 invests in floating interest bearing deposits, fixed rate loans and other interest bearing assets. The taxpayer's RLPI in CLP1 is classified as debt for the purposes of Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997). The after-tax income of CLP2 is to be distributed CLP1 on its general partnership interest (and to the taxpayer on its limited partnership interest). The first-mentioned Australian resident CLP1 will in turn make distributions to the taxpayer on its RLPI in CLP1 and to another entity not relevant for present purposes. The partnership deed of the CLP1 provides that the taxpayer (the holder of the RLPI in CLP1) is primarily entitled to the portion of the adjusted net income of CLP1 equal to the RLPI distribution amount for each distribution period, the period for determining entitlement to receive distributions. The RLPI distribution amount for each distribution period is calculated by applying the agreed rate (the 90 day Bank Bill Swap Rate less a fixed margin or spread) to the capital contributed by the taxpayer under its RLPI in CLP1; that is, the capital contributed multiplied by the agreed rate. The adjusted net income of CLP1 is CLP1's net income excluding amounts in respect of certain realised gains or losses on particular assets. In addition, where the adjusted net income of CLP1 for a distribution period exceeds the aggregate of the amounts to which the partners are primarily entitled; the taxpayer is also entitled to such excess as reflects the proportion of its primary entitlement relative to the total primary entitlements. Where the amount to which the partners are primarily entitled is greater than the adjusted net income for a distribution period, each entitled partner receives the amount of the adjusted net income that is in the proportion to the amount the taxpayer is primarily entitled to relative to the total.", "Reasons_for_Decision": "Summary: Article 11(9) of the US Convention relevantly provides that: Notwithstanding the provisions of paragraphs (1), (2), (3) and (4): (a) interest that is paid by a resident of one of the Contracting States and that is determined with reference to the profits of the issuer or of one of its associated enterprises, as defined in sub-paragraph (a) or (b) of paragraph (1) of Article 9 (Associated Enterprises), being interest to which a resident of the other State is beneficially entitled, also may be taxed in the Contracting State in which it arises, and according to the laws of that State, at a rate not exceeding 15 percent of the gross amount of the interest. Central to the operation of Article 11(9) of the US Convention in this case is the meaning of 'interest that ... is determined with reference to the profits of the issuer'. | Detailed Reasoning - 'Profits': Subsection 3(2) of the Agreements Act states that a reference to profits of an activity or business is a reference to taxable income derived from that activity or business. The Explanatory Memorandum to the Agreements Act states that the purpose of subsection 3(2) of the Agreements Act is to permit references to profits in the agreements to be construed as references to taxable income and that the provision is required because the Australian law imposes tax upon taxable income and not upon profits as such. Subsection 995-1(1) of the ITAA 1997 refers to section 4-15 of the ITAA 1997 for the definition of taxable income, being assessable income less deductions. The reference to profits in subsection 3(2) of the Agreements Act is qualified to where the context in the Agreements Act so permits. Taxation Ruling TR 2001/12 states at paragraph 114: ...the ATO considers the purpose of subsection 3(2) of the Agreements Act is not to define the term profits as used in the treaties. The legislative history and related explanatory material demonstrate this subsection is strictly a mechanism to implement a treaty term which is foreign to Australia's taxation laws within the technical language of Australia's domestic legislation - rather than as an aid in defining a tax treaty term. Confirming this purpose, subsection 3(2) is drafted to apply 'in relation to Australian tax' - not in relation to the agreement. As subsection 3(2) of the Agreements Act does not assist in defining the term 'profits' for the purposes of the agreements and as the term 'profits' is not otherwise defined in the Agreements Act or the US Convention, regard may be had to its meaning under Australian domestic tax law unless the context otherwise requires (see Article 3(2) of the US Convention). 'Profits' are not defined in the Income Tax Assessment Act 1936 or the ITAA 1997. In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531 (Thiel), where the central question was the interpretation to be given to the term in the Swiss Agreement corresponding to 'business profits of an enterprise' in Article 7 of the US Convention, Mason, Brennan and Gaudron JJ held: Article 3(2) provides no assistance in ascertaining the meaning of the words ''enterprise'' or ''profits'' because these words have no particular or established meaning under the laws relating to Australian income tax which is relevant to the outcome of the question for decision. That question must be resolved by reference to the Agreement itself and any extrinsic materials which may properly be considered. The same can be said for the question at issue in this case. In the context of interpreting the phrase 'substantially deriving its profits' in Article 11(3)(b) of the US Convention to determine if an enterprise other than a bank is a financial institution, paragraph 101 of Taxation Ruling TR 2005/5 states that 'profits' takes on an accounting meaning. Thus, 'profits' can be measured according to a range of acceptable accounting indicators of profits, including gross profit, net operating income or operating profit. Given the link between Article 11(9) and Article 11(3)(b) of the US Convention in the chapeau to Article 11(9) and in the absence of any extrinsic material substantiating that a different interpretation of the term 'profits' applies for the purposes of Article 11(9), the 'profits of the issuer' in Article 11(9) are the profits of CLP1 across the range of generally acceptable indicators of profits ascertained according to generally accepted accounting principles. Accordingly, 'profits' in Article 11(9) of the US Convention is a reference to profits in the broad sense. It is not restricted to one particular measure of the term. To construe the term more narrowly to one particular measure leads to manifest absurdity of result. In this regard, the profits would not necessarily be ascertainable without knowing the distribution amount treated as interest and the distribution amount treated as interest is not able to be determined without knowledge of the amount of adjusted net income. 'Determined with reference to profits' The phrase 'determined with reference to profits' is not defined in the US Protocol, the US Convention, Australian domestic tax law or Australian common law. There is no provision in the OECD Model Tax Convention corresponding to Article 11(9) of the OECD Model. The US Department of Treasury Technical Explanation of the Protocol between the US and Australia refers to Article 7 of the Protocol which replaces Article 11 (Interest) of the US Convention and states that paragraph (9) provides two anti-abuse exceptions to paragraphs (1), (2), (3) and (4) and that sub-paragraph (a) applies to so-called 'contingent interest'. The same is said in the Technical Explanation to the United States Model Income Tax Convention of September 20, 1996, as regards Article 11(5) of that Model and in the explanation of the Protocol prepared by the United States Congress Joint Committee on Taxation dated March 3, 2003. Article 11(9) of the US Convention is focussed on interest which, for present purposes, includes the distribution amounts treated as interest under Division 974 of the ITAA 1997 and Article 11(5) of the US Convention, paid by a resident of one contracting State to a resident of another that is determined by reference to the profits of the issuer or associated enterprise. Except to the extent that Article 11(9) is an integrity measure, the above references are of limited assistance in ascertaining meaning of the term in its bilateral treaty context as against its context for the purposes of the United States. The reference to Article 11(5) of the US Convention is to a differently worded provision and 'contingent interest' in the latter reference is explained by way of restatement of the wording of the provision. Paragraph 2.54 of the Explanatory Memorandum to International Tax Amendment Bill (No. 1) 2002 substitutes the word 'calculated' for 'determined' and states that the source country taxing right that applies on the application of Article 7(9) equates with the rate that generally applies to dividends. The phrase 'with reference to' has meanings in the Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW of 'concerning; with regard to'. For the above reasons and from the ordinary meaning of the words in the treaty, 'interest ... determined by reference to the profits of the issuer' in Article 11(9) of the US Convention means that the amount of the distributions are calculated or ascertained having regard to the profits in the broad sense of the issuer. In the present case, the term 'adjusted net income' is included in the formula in the partnership deed for the calculation of the distribution amounts. Also, where the net income does not equal the RLP Interest Distribution Amount, the amount the taxpayer will receive is the RLP Interest Distribution amount adjusted according to whether the adjusted net income of CLP1 is more or less than the RLP Interest Distribution Amount. From the terms of the partnership deed, the determination of the distribution amount is contingent upon the amount of profits of the issuer. In this way, the partnership deed refers to, or has regard to, the profits of CLP1 in calculating the entire distribution amount to be paid to the taxpayer. This and the wording of Article 11(9) of the US Convention itself indicate that apportionment is not possible. Furthermore, given the terms of the partnership deed, any treatment of the distribution amount in accounting records as an expense is not determinative or relevant to the question at issue. Accordingly, the distribution made to the US financial institution is determined with reference to the profits of CLP1 within the meaning of Article 11(9) of the US Convention.", "Date_of_Decision": "21 December 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2 Article 11(3) Schedule 2 Article 11(5) Schedule 2 Article 11(9) subsection 3(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Financial institutions Foreign banks International tax Non resident companies Non resident interest withholding tax Profits Treaties United States", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "Explanatory Memorandum to International Tax Amendment Bill (No. 1) 2002 The United States Model Income Tax Convention of September 20, 1996, Technical Explanation The US Department of Treasury Technical Explanation of the Protocol between the US and Australia Explanation of the Protocol between the US and Australia, United States Congress Joint Committee on Taxation, March 3, 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20072", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/12 | Keywords Double tax agreements Financial institutions Foreign banks International tax Non resident companies Non resident interest withholding tax Profits Treaties United States"}
{"ATO_ID_Number": "ATO ID 2006/128", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "The application of the Business Profits Article in relation to the Interest Article in the double tax convention between Australia and New Zealand (the New Zealand Agreement)", "Issue": "Does Australia have the right under the Double Tax Convention between Australia and New Zealand (the New Zealand Convention) to tax interest income paid by an Australian resident to another Australian resident who derives the income in carrying on a business at or through a permanent establishment in New Zealand?", "Decision": "Yes. Australia has the right under the New Zealand Convention to tax interest income paid by an Australian resident to another Australian resident who derives the income in carrying on a business at or through a permanent establishment in New Zealand.", "Facts": "The taxpayer is a company incorporated in Australia and is a resident under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The taxpayer is also a resident of New Zealand under New Zealand tax law. The taxpayer's place of effective management is in New Zealand and is deemed to be a resident of New Zealand for the purposes of the New Zealand Convention. The taxpayer carries on a business of lending money in New Zealand. The taxpayer's activities in New Zealand amount to a permanent establishment under subsection 6(1) of the ITAA 1936. The taxpayer is paid interest income by Australian resident borrowers. The taxpayer's activities in Australia do not amount to a permanent establishment under the New Zealand Convention. The interest income is derived in the course of carrying on the business in New Zealand.", "Reasons_for_Decision": "Summary: The Commissioner, in Taxation Ruling TR 98/17, accepts that where the tie-breaker test in a double tax agreement provides that a dual resident be treated solely as a resident of the treaty partner country for the purposes of the agreement, Australian resident status is not lost for purposes of the general operation of the domestic law. However the terms of the relevant double tax agreement should be referred to when determining tax liability. Subsection 128B(2A) of the ITAA 1936 provides that where a resident pays another resident interest income, withholding tax will apply if the recipient derives that interest in carrying on a business at or through a permanent establishment outside of Australia. In the present case, the terms of subsection 128B(2A) are satisfied because interest was paid by Australian residents to the taxpayer (who remains a resident for the purposes of the general operation of the domestic law) who derived the interest through its New Zealand permanent establishment. However in determining the taxpayer's liability under subsection 128B(2A) of the ITAA 1936, it is necessary to consider the New Zealand Convention contained in Schedule 4 of the International Tax Agreements Act 1953 (the Agreements Act). In interpreting the wording of the Convention, the Commissioner accepts in Taxation Ruling TR 2001/13 that it is appropriate to have reference to the OECD Commentary on the Model Tax Convention on Income and Capital (Condensed Version 2010) (the OECD Commentary). Article 7 of the New Zealand Convention gives the right to tax business profits to the country of residence, unless the profits are attributable to a permanent establishment, in which case the country where the permanent establishment is situated may tax. In the present case, the taxpayer has derived interest business income. The taxpayer is also deemed to be a New Zealand resident for the purposes of the New Zealand Convention and does not have a permanent establishment in Australia. Accordingly, under Article 7, only New Zealand may tax the interest income. However Article 11 of the New Zealand Convention deals specifically with interest income. It provides that the country where interest arises may also tax the interest income provided that the tax is not more than 10% of the gross amount. Article 11(7) further provides that interest is deemed to arise in the Contracting State where the payer is a resident. In the present case, interest is paid by Australian residents and arises in Australia. Accordingly, under Article 11, Australia may tax the interest income. In resolving whether the terms of Article 7 or Article 11 prevail, it is necessary to consider Article 7(5) of the New Zealand Convention, which provides: 5. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article The OECD Commentary, in dealing with the tiebreaker provision between the business profits article and the specific income article (Model Article 7(4)), states that: 74. ...it has therefore been decided to include a rule of interpretation that ensures that Articles applicable to specific categories of income will have priority over Article 7. It follows from this rule that Article 7 will be applicable to business profits which do not belong to categories of income covered by these other Article s... This paragraph indicates that where business income belongs in an article covered by a specific category of income (for example, interest or dividends), that article will have priority over the business profits article. The OECD Commentary goes on to state that: 74. ...This rule does not, however, govern the manner in which the income will be classified for the purposes of domestic law; thus, if a Contracting State may tax an item of income pursuant to other Articles of this Convention, that State may, for its own domestic tax purposes, characterise such income as it wishes ( i.e. as business profits or as a specific category of income) provided that the tax treatment of that item of income is in accordance with the provisions of this Convention. This suggests that Australia can tax interest income although this is subject to any limitation imposed by the relevant specific income article contained in the New Zealand Convention. In this case, Article 11(2) of the New Zealand Convention imposes a limit of 10% of the gross amount. Pursuant to Article 7(5), the terms of Article 11 will prevail. Therefore Australia has the right to tax the interest income earned by the taxpayer. Accordingly subsection 128B(2A) can operate to impose withholding tax of 10% on the interest income paid by Australian borrowers to the taxpayer.", "Date_of_Decision": "13 April 2006", "Year_of_Income": "Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 128B (2A)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 1998/17", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax New Zealand Permanent establishment Dual residency", "Case_References": "", "Other_References": "OECD Commentary on the Model Tax Convention on Income and Capital (Condensed Version 2010)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006128", "Unmatched_Content": "This ATO ID was amended by replacing the references to paragraphs (8) of Article 7 and (5) of Article 11 to the tax treaty between Australian and New Zealand with paragraphs (5) of Article 7 and (7) of Article 11 contained in the new tax treaty which took effect from 19 March 2010 and updating the reference to the OECD Commentary on the Model Tax Convention on income and on capital (Condensed version 2005) with the Condensed version of 2010 This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 1998/17 | Keywords Double tax agreements International tax New Zealand Permanent establishment Dual residency"}
{"ATO_ID_Number": "ATO ID 2005/260", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption from Interest Withholding Tax: US resident - providing finance", "Issue": "Is the taxpayer, a United States (US) resident, 'providing finance' within the meaning of Article 11(3)(b) of Schedule 2 of the International Tax Agreements Act 1953 (Agreements Act) as amended by Schedule 2A of the US Protocol (the US Convention) (and thereby exempt from interest withholding tax on Australian-sourced interest) where its business activities involve the purchase of established loans or debt instruments (receivables) from an originating entity or other holder under a securitisation arrangement?", "Decision": "Yes. Where the entity purchases such receivables under a securitisation arrangement, the activity will be considered to be 'providing finance' within the meaning of Article 11(3)(b) of the US Convention.", "Facts": "The taxpayer is a resident of the US within the meaning of the US Convention. The taxpayer is not a bank for the purposes of Article 11(3)(b) of the US Convention. The taxpayer is carrying on a business. The taxpayer substantially derives its profits by issuing commercial paper to investors in the financial markets and using those funds: The taxpayer meets all other requirements for the application of Article 11(3)(b) of the US Convention and the interest arising in Australia is not effectively connected with a permanent establishment nor paid as part of a back to back loan arrangement.", "Reasons_for_Decision": "Summary: The term 'providing finance', as it appears in Article 11(3)(b) of the US Convention, is not specifically defined in the treaty. As such, it takes on its domestic law meaning (see Article 3(2) of the US Convention). The term 'providing finance' within the meaning of Article 11(3)(b) of the US Convention is considered in Taxation Ruling TR 2005/5 and is broadly defined at paragraph 22. Having regard to the treaty context in which the term 'providing finance' appears, it is considered that the purchase of an established loan or debt instrument (receivable) from an originating entity or other holder under a typical securitisation arrangement falls within the meaning of 'providing finance' under Article 11(3)(b) of the US Convention. Hence, the taxpayer substantially derives its profits by raising debt finance in the finance markets and using those funds to carry on a business of providing finance. Given that the taxpayer meets all other conditions for the operation of Article 11(3)(b) of the US Convention and the interest arising in Australia is not effectively connected with a permanent establishment nor paid as part of an arrangement involving back to back loans, Australia has no taxing rights under Article 11(3) of the US Convention in respect of Australian-sourced interest paid to the taxpayer. As there is an inconsistency between the effective exemption provided for under Article 11(3) of the US Convention and subsection 128B(2) of the Income Tax Assessment Act 1936 which prima facie subjects interest derived by a non-resident to withholding tax, the Agreements Act prevails.", "Date_of_Decision": "23 August 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 128B", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2005/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International finance International tax Non resident interest withholding tax Treaties United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005260", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2005/5 | Keywords Double tax agreements International finance International tax Non resident interest withholding tax Treaties United States"}
{"ATO_ID_Number": "ATO ID 2005/355", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax: Exemption from interest withholding tax for a German bank undertaking central bank activities", "Issue": "Is the taxpayer, a State owned bank in Germany, exempt from interest withholding tax for interest derived in Australia due to the application of paragraph 9 of the Protocol to the tax treaty between Australia and Germany (German Protocol)?", "Decision": "No. The taxpayer, a State owned bank in Germany, is not exempt from interest withholding tax for interest derived in Australia due to the application of paragraph 9 of the German Protocol.", "Facts": "The taxpayer, a State owned bank in Germany, intends to invest in interest bearing investments in Australia. The investments will be of an ordinary commercial nature. The bank's funds are not limited to state funds but also include funds from corporate and private clients. The bank is not the central bank of Germany but does perform some central banking activities. The remaining activities undertaken are standard commercial banking activities.", "Reasons_for_Decision": "Summary: Paragraph 9 of the German Protocol provides exemptions from interest derived by the Government of Germany, another body exercising governmental functions, and by a bank performing central banking functions. Further, the interest is only exempt where it is derived by a body exercising governmental functions or by a bank performing central banking functions. 'Governmental functions' is not defined in the German Protocol but, as the context of this paragraph is to provide an exemption for sovereign immunity, the term 'governmental functions' must be interpreted to reflect this intention. In interpreting what activities are entitled to this immunity, there is general acceptance that a state is not entitled to claim immunity with respect to trading or commercial activities ( Reid v. Republic of Nauru [1993] 1 VR 251). Consequently, an activity will not be considered to be a governmental function where it is of a commercial nature. Notwithstanding that the bank may undertake other governmental functions, where the activity that generates the interest is a commercial activity, the exemption under the German Protocol will not be available. When determining whether a particular activity constitutes the exercise of governmental functions, it is necessary to examine the nature of the activity conducted by the foreign government or its instrumentality. Whether an operation or activity is commercial in nature will depend on the facts of each particular case. The taxpayer is engaged in commercial activities and interest derived from those commercial activities would not be considered to be derived in exercising government functions. The term, 'central banking functions', is also not defined within the German Protocol. The context of this term is explained in the Explanatory Memorandum. It states that the purpose of the exemption is to exempt interest received by its central bank. As the State bank is not the central bank of Germany the interest is not exempt. Therefore, the taxpayer is not exempt from interest withholding tax for interest derived in Australia due to the application of paragraph 9 of the German Protocol.", "Date_of_Decision": "3 November 2005", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "International Tax Agreements Act 1953 Schedule 9 paragraph 9", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/45", "Subject_References": "Germany International tax Non resident interest withholding tax Tax Treaties", "Case_References": "Reid v. Rebublic of Nauru [1993] 1 VR 251", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005355", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Germany International tax Non resident interest withholding tax Tax Treaties"}
{"ATO_ID_Number": "ATO ID 2007/177", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Obtaining of treaty benefits under US Convention", "Issue": "For the purposes of Article 16(5) of the tax treaty between Australia and the United States of America (the US Convention) contained in Schedules 2 and 2A to the International Tax Agreements Act 1953 , did the establishment, acquisition or maintenance of the taxpayer, a United States (US) resident company, and the conduct of its operations not have as one of its principal purposes the obtaining of benefits under the US Convention?", "Decision": "Yes. The establishment, acquisition or maintenance of the taxpayer and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the US Convention.", "Facts": "The taxpayer is a US resident company that is a holding company of a company group. One of the taxpayer's subsidiaries is an Australian resident company. The taxpayer is not a qualified person for the purposes of the Limitation of Benefits Article (Article 16) of the US Convention. The taxpayer was incorporated in the US several years before the US Convention entered into force and has been maintained as a holding company since its incorporation. The taxpayer's investment in the Australian resident subsidiary was made to facilitate the conduct in Australia of the business of the taxpayer's group. The conduct of the taxpayer's operations includes its on-going investment in its Australian subsidiary. The taxpayer's group provided certain business services. For a number of years, the taxpayer has held its investment in its Australian subsidiary which provided those business services to Australian customers and still continues to do so.", "Reasons_for_Decision": "Summary: Article 16(5) of the US Convention provides that a US resident that is not a qualified person under Article 16(2) of the US Convention shall, nevertheless, be granted benefits of the US Convention if the Australian competent authority determines, in accordance with Australian law, that the establishment, acquisition or maintenance of the US resident and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the US Convention. Paragraph 2.112 of the Explanatory Memorandum to the International Tax Agreements Amendment Bill (No 1) 2002 states that the discretion in Article 16(5) of the US Convention recognises that there may be cases where significant participation by third country residents in an enterprise resident in one of the treaty countries may be warranted by sound business practice or long-standing business structures and does not necessarily indicate a treaty shopping motive. Similarly, there may also be cases where significant participation by a resident of one Contracting State in an enterprise resident in the other State may be warranted by the same things as stated above and not necessarily indicate a treaty shopping motive. The taxpayer company was established prior to the US Convention coming into force and has held shares in the Australian resident subsidiary company since that time. The subsidiary formed part of the business structure of the group and there is no evidence pointing to treaty shopping as being one of the motives for establishing the taxpayer company. The taxpayer's investment in the Australian resident subsidiary was made to facilitate the conduct in Australia of the business of the taxpayer's group. There is no evidence indicating that the purpose behind maintaining the taxpayer or the conduct of its operations is to obtain benefits under the US Convention. Accordingly, for the purposes of Article 16(5) of the US Convention, the establishment, acquisition or maintenance of the taxpayer and the conduct of the taxpayer's operations, did not have as one of its principal purposes the obtaining of benefits under the US Convention.", "Date_of_Decision": "30 August 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2 Schedule 2A Schedule 2, Article 16(2) Schedule 2, Article 16(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International law Non resident dividend withholding tax Unfranked dividends United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007177", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International law Non resident dividend withholding tax Unfranked dividends United States"}
{"ATO_ID_Number": "ATO ID 2007/178", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of dividends under Article 10(3) of the US Convention - determination made under Article 16(5) of the US Convention", "Issue": "Are unfranked dividends paid by an Australian resident subsidiary to the taxpayer, a United States (US) resident company, not taxed in Australia under Article 10(3) of the tax treaty between Australia and the United States of America (the US Convention) contained in Schedules 2 and 2A to the International Tax Agreements Act 1953 where the Australian competent authority determined under Article 16(5) of the US Convention that the taxpayer shall obtain tax treaty benefits?", "Decision": "Yes. Unfranked dividends paid by the Australian resident subsidiary to the taxpayer are not taxed in Australia where the Australian competent authority has made a determination under Article 16(5) of the US Convention that the taxpayer shall obtain tax treaty benefits.", "Facts": "The taxpayer is a US resident company. The taxpayer was incorporated before the US Convention entered into force and has owned all of the shares of an Australian resident company since that time. The taxpayer is beneficially (and legally) entitled to any dividends paid by its Australian resident subsidiary. The Australian resident company paid unfranked dividends to the taxpayer during the income year. The taxpayer is not a qualified person for the purposes of the Limitation of Benefits Article (Article 16) of the US Convention. The Australian competent authority has determined under Article 16(5) of the US Convention that the taxpayer shall obtain the benefits of the US Convention.", "Reasons_for_Decision": "Summary: Article 10(3) of the US Convention provides that dividends paid by a company that is a resident of Australia shall not be taxed in Australia if the person who is beneficially entitled to the dividends is a company that is a resident of the US that has owned shares representing 80% or more of the voting power of the company paying the dividends for a 12 month period ending on the date the dividend is declared and: Article 16(5) of the US Convention provides that a resident of the US that does not meet the requirements of Article 16(2) of the US Convention shall, nevertheless, be granted benefits of the US Convention if the Australian competent authority determines, in accordance with the law of Australia, that the establishment, acquisition or maintenance of such person and the conduct of its operations did not have as one of its principal purposes the obtaining of benefits under the US Convention. As the Australian competent authority has determined in accordance with Article 16(5) of the US Convention that the taxpayer shall be granted benefits of the US Convention, the conditions for Article 10(3) of the US Convention to apply in the present case have been satisfied. Accordingly, the unfranked dividends paid by the Australian resident subsidiary to the taxpayer will not be subject to tax in Australia.", "Date_of_Decision": "30 August 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2 Schedule 2A Schedule 2, Article 10(3) Schedule 2, Article 16(2)(c) Schedule 2, Article 16(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International law International tax Non resident dividend withholding tax Unfranked dividends United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007178", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International law International tax Non resident dividend withholding tax Unfranked dividends United States"}
{"ATO_ID_Number": "ATO ID 2006/120", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of the Limitation on Benefits Article of the US Convention", "Issue": "Is a United States (US) resident company entitled to treaty benefits under Article 16(3) (the Limitation on Benefits Article) of the Australia - United States Double Taxation Convention (the US Convention)?", "Decision": "Yes. The taxpayer is entitled to claim treaty benefits under Article 16(3) of the US Convention.", "Facts": "The taxpayer is a US resident company which is a member of a large wholly owned foreign banking group. Under a financing arrangement, the taxpayer will provide funding to an Australian resident corporate limited partnership. Those funds are ultimately used to invest in Australian interest bearing deposits, fixed rate loans and other interest bearing assets in return for redeemable limited partnership interests issued under a Partnership Deed. The taxpayer does not conduct a banking business in the US and it does not carry on any activities at or through a permanent establishment in Australia. The taxpayer is not a 'qualified person' within the meaning of Article 16(2) of the US Convention.", "Reasons_for_Decision": "Summary: Schedule 2 to the International Tax Agreements Act 1953 contains the tax treaty between Australia and the United States (the US Convention). Schedule 2A of the Agreements Act contains the protocol amending the United States Convention (the United States Protocol). The United States Agreement and United States Protocol operate to avoid double taxation of income received by Australian and United States residents. Article 16 of the US Convention is designed to prevent persons of third countries from using companies or other entities resident in either Australia or the US to inappropriately access treaty benefits conferred by the US Convention. Treaty benefits will generally only be available for 'qualified persons' specified in Article 16(2). However, other persons may also qualify for treaty benefits, under Article 16(3). Under Article 16(3), the taxpayer will be able to meet an exception to the qualified person rule where it is engaged in the 'active conduct of a trade or business' in the US and that active conduct of a trade or business is 'substantial' in comparison to the trade or business activity conducted in Australia. The taxpayer may also look to persons connected with it to establish whether it is engaged in active conduct of a trade or business. Active conduct of a trade or business is not defined in the US Convention. However, Article 16(3)(a) notes that the active conduct of a trade or business does not include the business of making or managing investments for the resident's own account, unless those activities are banking, insurance or securities activities carried on by a bank, insurance company or a registered, licensed or authorised securities dealer. Under Article 16(3)(c) of the US Convention a person will be connected to the taxpayer if the person holds at least half of the aggregate vote and value of the company's shares or of the beneficial equity interest in the company. Each person in a group of entities that share 50% common ownership held directly or indirectly by a head entity are also to be treated as connected. As the taxpayer is wholly owned by other entities in the foreign banking group, the activities of these entities are relevant in determining whether the taxpayer is engaged in active conduct of trade or business. Although the taxpayer is not a bank and does not conduct an active business in the US, the persons connected to it are entities that actively conduct banking activities in the US and elsewhere. Accordingly, the taxpayer will be considered to be engaged in active conduct of trade or business in the US for the purposes of Article 16(3). A further condition for satisfying Article 16(3), based upon on all the facts and circumstances, is whether the active conduct of a trade or business in the US by the taxpayer, together with its connected persons, is 'substantial' in comparison to the trade or business activities conducted in Australia. As the value of gross assets held by the banking group in the US is significant in comparison to the gross value of the assets held in Australia, the activities in the US are considered substantial. As the requirements of Article 16(3) have been met, the benefits of the US Convention will be granted.", "Date_of_Decision": "20 April 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2-Article 11(3) Schedule 2-Article 16(2) Schedule 2-Article 16(3)(a) Schedule 2-Article 16(3)(b) Schedule 2-Article 16(3)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign banks International tax Non resident companies Residence of companies Treaties United States", "Case_References": "", "Other_References": "Explanatory Memorandum to the International Tax Agreements Amendment Bill (No 1) 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006120", "Unmatched_Content": "Income tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign banks International tax Non resident companies Residence of companies Treaties United States"}
{"ATO_ID_Number": "ATO ID 2006/306", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed permanent establishment: natural resource processing plant - substantial equipment - Article 5(4)(b) of the Swiss Agreement", "Issue": "Does the use of substantial equipment in Australia by an Australian resident company, to process and then supply natural resources exclusively to a Swiss enterprise, constitute a deemed permanent establishment in Australia under Article 5(4)(b) of Schedule 15 of the International Tax Agreements Act 1953 (the Swiss Agreement)?", "Decision": "Yes. The taxpayer, a Swiss enterprise, has a deemed permanent establishment in Australia under Article 5(4)(b) of the Swiss Agreement.", "Facts": "The taxpayer is a resident enterprise of Switzerland for the purposes of the Swiss Agreement. A non-resident company [related to the taxpayer] entered into a contractual arrangement with an Australian company under which the Australian company acknowledged they were constructing a natural resource processing plant and were obliged to supply all the natural resources processed at the plant to the non-resident company. The non-resident company's rights under this contract were ultimately assigned to the Swiss enterprise. The processing plant is located in Australia and constitutes 'substantial equipment' for the purposes of Article 5(4)(b) of the Swiss Agreement. The Australian resident owns the processing plant (the 'substantial equipment') and has used the substantial equipment in Australia for a period of more than twelve months for the purpose of processing the natural resource.", "Reasons_for_Decision": "Summary: The Swiss Agreement operates to avoid the double taxation of income received by Australian and Swiss residents. Article 15(4)(b) of the Swiss Agreement deems a Swiss enterprise to have a permanent establishment in Australia if substantial equipment is being used in Australia for more than twelve months by, for or under contract with the enterprise in exploration for, or extraction of natural resource, or in activities connected with such exploration or exploitation. In accordance with the Full Federal Court decision in McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) 142 FCR 134; [2005] FCAFC 67 (the McDermott decision), the taxpayer will have a deemed permanent establishment in Australia if the substantial equipment is being used in Australia to process natural resources by: The taxpayer is not using the substantial equipment 'itself' in the sense referred to in the McDermott decision, because it is not physically using the equipment, nor is it deriving rental income from the equipment as owner or lessor of the equipment. Paragraph 63 of the McDermott decision states: ...It is difficult to conclude that the \"for\" part of the expression was intended to be limited to cover use under supervision, whether or not such use might be comprehended within it. The most obvious set of facts falling within the second alternative would be where the other person referred to uses the equipment for the benefit of the enterprise. The person using the equipment could, although need not, be a subcontractor. The arrangement in place between the taxpayer [being the assignee of the rights under the contract] and the Australian company, involves the Australian company acknowledging that it was constructing the substantial equipment in Australia, and being contractually obliged to supply the entire quantity of the natural resources processed by the substantial equipment, to the taxpayer. The only reason the equipment exists and is used in Australia is to meet the requirements and purposes of the taxpayer and, as such, the Australian company is considered to be using the substantial equipment 'for' the benefit of the taxpayer. Substantial equipment is therefore being used in Australia for more than 12 months by the Australian company 'for' the taxpayer in the exploitation of natural resources. As a result, the taxpayer is deemed to have a permanent establishment in Australia under Article 5(4)(b) of the Swiss Agreement.", "Date_of_Decision": "17 October 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "International Tax Agreements Act 1953 Schedule 15-Article 5(3) Schedule 15-Article 5(4)(b)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2006/D8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Non resident companies Permanent establishment Switzerland Treaties", "Case_References": "McDermott Industries (Aust) Pty Ltd v. Commissioner of Taxation (2005) 142 FCR 134 [2005] FCAFC 67 2005 ATC 4398 (2005) 59 ATR 358", "Other_References": "OECD Committee on Fiscal Affairs for the Organisation for Economic Co-operation and Development, Model Tax Convention on Income and Capital, Paris, Condensed Version 15 July 2005.", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006306", "Unmatched_Content": "Income tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2006/D8 | Keywords Double tax agreements International tax Non resident companies Permanent establishment Switzerland Treaties"}
{"ATO_ID_Number": "ATO ID 2006/309", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent establishment: UK Convention and subsection 3(11A) of the Agreements Act - sublicensing of broadcasting and apparatus licences", "Issue": "Does a taxpayer, as licensor of a broadcasting licence and an apparatus licence, have a permanent establishment in Australia for the purposes of Article 5 of Schedule 1 of the International Tax Agreements Act 1953 (the UK Convention)?", "Decision": "No. A taxpayer, as licensor of a broadcasting licence and an apparatus licence, does not have a permanent establishment in Australia for the purposes of Article 5 of the UK Convention.", "Facts": "The taxpayer is a resident of the UK for the purposes of the UK Convention. The taxpayer owns a Broadcasting Licence and an Apparatus Licence. The Broadcasting Licence is issued under sections 36 and 38 of the Broadcasting Services Act 1992. The Apparatus Licence is issued under section 102 of Part 3.3 of the Radiocommunications Act 1992. The taxpayer entered into an agreement with an Australian resident, under which the Australian resident agreed to pay an annual fee to the taxpayer in return for the exclusive use of the Broadcasting Licence and the Apparatus Licence. The taxpayer has a registered office in Australia, but does not carry on its business through that office nor through any other premises in Australia. The taxpayer does not own, maintain, or have access to, any facilities, equipment or physical infrastructure for transmission or broadcasting radio in Australia. Articles 5(4) to 5(8) of the UK Convention do not apply to the taxpayer.", "Reasons_for_Decision": "Summary: The UK Convention operates to avoid the double taxation of income received by Australian and United Kingdom residents. The term 'permanent establishment' is defined in Article 5(1) of the UK Convention as a 'fixed place of business through which the business of an enterprise is wholly or partly carried on'. As this provision of the UK Convention is identical to Article 5(1) of the OECD Model Tax Convention, it is appropriate to consider the guidance in the OECD Commentary on Article 5(1) in interpreting this provision. This interpretative approach is consistent with statements of the High Court in Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; (1990) 21 ATR 531; 90 ATC 4717, as well as paragraph 104 of Taxation Ruling TR 2001/13. Paragraph 4 of the OECD Commentary on Article 5(1) explains, in relation to one of the requisite characteristics of a permanent establishment, that a 'place of business' covers any premises, facilities or installations used for carrying on business of the enterprise, and that a place of business may also exist where the enterprise simply has a certain amount of space at its disposal. The taxpayer does not have any premises in Australia, nor does it have any amount of space at its disposal in Australia, that it uses to carry on its business. The taxpayer therefore does not have a place of business in Australia through which it carries on its business and consequently does not have a permanent establishment in Australia under Article 5(1) of the UK Convention. The taxpayer is also not deemed to have a permanent establishment in Australia under Article 5(3) of the UK Convention. In particular, the taxpayer does not have a deemed permanent establishment under Article 5(3)(b) of the UK Convention because the taxpayer does not have any substantial equipment that is present in Australia for rental or other purposes. Subsection 3(11A) of the International Tax Agreements Act 1953 (Agreements Act) deems a licensee of a spectrum licence, who is a resident of a tax treaty partner country, to have a permanent establishment in Australia for the purposes of the tax treaty in which the licensee is a resident for treaty purposes where they derive income from operating radiofrequency devices or from authorising others to operate such devices. A spectrum licence is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as having the meaning given by section 5 of the Radiocommunications Act 1992. A spectrum licence is defined under section 5 of the Radiocommunications Act 1992 to mean a spectrum licence issued under Part 3.2 of the Radiocommunications Act 1992. As the Broadcasting Licence and the Apparatus licence owned by the taxpayer are not issued under Part 3.2 of the Radiocommunications Act 1992, they are not spectrum licenses for the purposes of the Radiocommunications Act 1992, or for the purposes of subsection 3(11A) of the Agreements Act. Consequently, subsection 3(11A) of the Agreements Act does not apply to the taxpayer, as the taxpayer is not a licensee of a spectrum licence. Accordingly, subsection 3(11A) of the Agreements Act does not deem the taxpayer to have a permanent establishment in Australia for the purposes of Article 5 of the UK Convention.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 subsection 3(11A) Schedule 1, Article 5", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 2006/D8", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/307 | ATO ID 2006/308", "Subject_References": "Double tax agreements International tax Permanent establishment Spectrum licences Treaties United Kingdom", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 (1990) 21 ATR 531 90 ATC 4717", "Other_References": "OECD Committee on Fiscal Affairs for the Organisation for Economic Co-operation and Development, Model Tax Convention on Income and Capital, Paris, Condensed Version 15 July 2005", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006309", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 2006/D8 | Keywords Double tax agreements International tax Permanent establishment Spectrum licences Treaties United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent Establishment of a non-resident entity with employees in Australia", "Issue": "Is income derived in Australia by a Singapore resident company assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997).", "Decision": "No. The income of a Singapore resident company derived in Australia is not assessable under subsection 6-5(3) of the ITAA 1997 in the absence of a permanent establishment of the company in Australia.", "Facts": "The taxpayer company is a resident of Singapore for taxation purposes. The company rents space in a warehouse facility in Australia. The facility is used solely to store spare equipment used when undertaking the operations of the entity. This facility is not used as an office to conduct normal business activities such as administration, marketing or design. The entity has one employee in Australia. That employee does not have the authority to enter into contracts on behalf of the Singaporean company, does not have an office and performs work solely at client's premises. The Australian employee and other employees from Singapore spend between two and eight weeks at the offices of clients undertaking installation projects and move between sites within the offices of clients.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly and indirectly from all Australian sources during the income year. The International Tax Agreements Act 1953 (Agreements Act) must be considered to determine whether Australia has a taxing right in respect of the income derived in Australia by the non-resident company. Subsection 4(1) of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 and the ITAA 1997 so that those Acts are read as one. The Agreements Act gives the relevant double tax agreement, contained in a Schedule to the Agreement Act, the force of law in Australia. Schedule 5 to the Agreements Act contains the double tax agreement between Singapore and Australia (the Singapore Agreement). Schedule 5A to the Agreements Act contains the protocol amending the Singapore Agreement (the Singapore Protocol). The Singapore Agreement and the Singapore Protocol operate to avoid the double taxation of income received by Australian and Singaporean residents. In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531 ( Theil ), the High Court accepted that the OECD Model Taxation Convention's official Commentaries (the OECD Commentary) may be relevant to the interpretation of Double Tax Agreements based on the OECD Model Tax Convention on Income and on Capital (the OECD Model). In Theil the High Court approved recourse to the OECD Model and Commentaries under Article 32 of the Vienna Convention (see paragraph 90 of Taxation Ruling TR 2001/13). Under Article 5 of the Singapore Agreement, the profits of a Singaporean resident entity shall be taxable only in Singapore unless the enterprise carries on a business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 4(1) of the Singapore Agreement as a 'fixed place of business through which the business of an enterprise is wholly or partly carried on'. Article 4(4)(a) of the Singapore Agreement states that an enterprise shall not be deemed to have a permanent establishment merely by reason of the use of facilities solely for the purpose of storage or display of goods or merchandise belonging to the enterprise. Article 4(4)(b) of the Singapore Agreement states that an enterprise shall not be deemed to have a permanent establishment merely by reason of maintaining a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage or display. The taxpayer rents space in a warehousing facility solely for the storage of equipment to support activities undertaken in Australia. The warehousing facility does not constitute a permanent establishment as it is maintained merely for the storage of a stock of goods belonging to the Singaporean resident. Article 4(5) of the Singapore Agreement provides that a permanent establishment may exist where a Singaporean enterprise carries on a business in Australia through a person (other than an independent agent) who has authority to conclude contracts on behalf of that enterprise and habitually exercise that authority in Australia. The non-resident entity has an employee based in Australia. The functions undertaken by the employee are to support project implementation and marketing. The employee of the enterprise in Australia does not have the authority to enter into contracts on behalf of the non-resident entity. The employee does not perform any work from the warehouse or other facilities provided by the non-resident entity. Projects are undertaken from the premises of clients. The employee is providing dependent personal services to the Singaporean entity in Australia. As such the employee does not constitute a permanent establishment of the Singaporean entity in Australia. Paragraphs 4.2 to 4.5 of the OECD Commentary on Article 5 of the OECD Model, on which Article 5 of the Singapore Agreement is based, discuss situations in which the premises of a third party enterprise can constitute a permanent establishment due to the presence of a representative of a non-resident enterprise at those premises. The examples provided include the long term provision of office space to employees of one entity in the headquarters of another or a painter spending the majority of time in the same building undertaking the most important functions of the painting business. The employees of the non-resident entity visit the offices of the clients and spend between two and eight weeks at those premises. The employee moves around within the premises to undertake the installation projects on different equipment. They are not identified with any particular location within the premises. The Singaporean entity does not have a permanent establishment in the premises of their clients as the employees do not spend sufficient time in a specific geographic location to constitute a permanent establishment. Due to the application of Article 5 of the Singapore Agreement, in the absence of a permanent establishment of the Singaporean company in Australia, Australia does not have a taxing right over the income received by the Singaporean entity from the operations of the company in Australia. As such that income is not assessable in Australia under section 6-5(3) of the ITAA 1997.", "Date_of_Decision": "17 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Permanent establishment Singapore International tax", "Case_References": "Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338 90 ATC 4717 (1990) 21 ATR 531", "Other_References": "OECD Model Tax Convention on Income and on Capital OECD Commentary on the Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200524", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Permanent establishment Singapore International tax"}
{"ATO_ID_Number": "ATO ID 2005/132", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income of a Canadian resident entity with an employee in Australia", "Issue": "Is the income derived in Australia by a Canadian resident company assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived in Australia by a Canadian resident company is assessable under subsection 6-5(3) of the ITAA 1997 as the entity has a permanent establishment in Australia.", "Facts": "The taxpayer is a Canadian incorporated company and is a resident of Canada for income tax purposes. The taxpayer leases floor space in a warehouse in Australia where it stores stock in order to have it readily available to be sold at trade shows. The taxpayer also maintains a rented office in Australia. The office is administered by one employee on a full-time basis. The Australian office of the taxpayer is used as a place where invoices are administered and payments from customers are received, as well as coordinating the delivery of goods and spare parts from the warehouse to customers. Customer payments are banked into the taxpayer's bank account by the employee. The taxpayer receives income from sale of goods and spare parts.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The income from sale of goods and spare parts is ordinary income for the purpose of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 3 to the Agreements Act contains the convention between Australia and Canada (the Canadian Convention). Schedule 3A to the Agreements Act contains the protocol amending the Canadian Convention (Canadian Protocol). The Canadian Convention and the Canadian Protocol operate to avoid the double taxation of income received by Australian and Canadian residents. Article 7(1) of the Canadian Convention provides that the business profits of a Canadian enterprise shall be only taxable in Canada unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. If the enterprise carries on or has carried on business through a permanent establishment, the profits of the enterprise may be taxed in Australia, but only so much of them as is attributable to that permanent establishment. The term 'permanent establishment' is defined in Article 5(1) of the Canadian Convention as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5(2) of the Canadian Convention contains a list of examples each of which can be regarded as constituting a permanent establishment such as a place of management, an office, a branch, a factory or a workshop. Article 5(3) of the Canadian Convention provides that an enterprise shall not be deemed to have a permanent establishment merely by reason of: Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 states that the Commentaries on OECD Model Tax Convention on Income and on Capital (OECD Commentary) provide important guidance on interpretation and application of the OECD Model and will often need to be considered, as a matter of practice, in interpreting double tax agreements, at least where the wording is ambiguous. Paragraph 25 of the OECD Commentary on Article 5 of the OECD Model states that a permanent establishment could also be constituted if an enterprise maintains a fixed place of business in order to supply spare parts to customers for the machinery supplied to such customers, or to maintain or repair such machinery, as this goes beyond the pure delivery mentioned in Article 5(3). The warehouse floor space leased where stock is stored in order to have it readily available to be sold at trade shows would not be deemed to be a permanent establishment under Article 5(3)(a) and (b) of the Canadian Agreement, if that was the only activity carried on in Australia by the taxpayer. However, the taxpayer's activities go beyond those mentioned in Article 5(3) of the Canadian Convention. The taxpayer has a fixed place of business in Australia under Article 5(1) and 5(2) of the Canadian Convention taking into account: As the taxpayer has a permanent establishment in Australia, Article 7(1) of the Canadian Convention applies and the business profits of the taxpayer will be taxable in Australia, but only so much as attributable to that permanent establishment. Accordingly, the income derived in Australia by the taxpayer is assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "7 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Canada Double tax agreements International Tax Permanent establishment", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005132", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Canada Double tax agreements International Tax Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2005/289", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by a New Zealand resident company", "Issue": "Is the income derived by a New Zealand resident company, from the sale of company products in Australia, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA1997)?", "Decision": "Yes. The income derived by a New Zealand resident company from the sale of company products in Australia attributable to the permanent establishment is assessable under subsection 6-5(3) of the ITAA 1997 as the taxpayer is carrying on the business through a permanent establishment situated in Australia.", "Facts": "The taxpayer company is a resident of New Zealand and is not a resident of Australia for income tax purposes. The taxpayer sells the company products to unrelated parties in Australia. The sales orders are taken by two sales employees who email the orders to New Zealand for approval. The employees receive bonus payments per quarter based on average sales over the period. The employees act as the contact person for the company in Australia in their respective locations and have undertaken this for a number of years. The employees are provided with a vehicle, computer, telephone and a fax machine. The employees communicate with the company head office through phone, email or by fax. The company does not own or rent any premises in Australia. However, the employees use a room of their house as an office to deal with the company business. The company has an Australian bank account. The products are despatched directly to the customers from New Zealand, or through a warehouse in Australia managed by a third party.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non-resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year, and other ordinary income that a provision includes as assessable income on some basis other than having an Australian source. The income derived from sale of company products is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (the New Zealand Agreement). The New Zealand Agreement operates to avoid the double taxation of income received by Australian and New Zealand residents. Under Article 7 of the New Zealand Agreement, the business profits of an enterprise of New Zealand shall be only taxable in the New Zealand unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 5(1) of the New Zealand Agreement as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The United States Tax Court held that a well-known author's home office was their fixed place of business through which the business of an enterprise was carried on and that office therefore was a permanent establishment ( Georeges Simenon v. Commissioner of Internal Revenue (1965) 44 TC 820). The taxpayer's business has a permanent establishment in Australia under Article 5(1) of the New Zealand Agreement, as the taxpayer is carrying on a business in Australia through a fixed place, being the home of the employees, and as the employees have been operating from their homes for a number of years, the required degree of temporal permanence is met. As it has been established that the taxpayer is carrying on the business through a permanent establishment situated in Australia under Article 5(1), the deeming provision within Article 5(7) of the New Zealand Agreement does not need to be considered. Article 5(6)(a) of the New Zealand Agreement provides that an enterprise shall not be deemed to have a permanent establishment merely by reason of the use of facilities solely for the purpose of storage, display or delivery of goods belonging to the enterprise. Even though that taxpayer's business uses a warehouse for the purpose of storage, Article 5(6)(a) of the New Zealand Agreement has no application as the taxpayer's business is operated from the employees' home. Consequently, Article 7 of the New Zealand Agreement applies, and the profit of the business, so much of them as is attributable to that permanent establishment, is taxable in Australia. The income from the sale of the company products attributable to the permanent establishment is therefore assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "8 September 2005", "Year_of_Income": "Year ended 30 June 2005 Year ending 30 June 2006 Year ending 30 June 2007 Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax New Zealand Permanent establishment", "Case_References": "Georges Simenon v. Commissioner of Internal Revenue (1965) 44 TC 820", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005289", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax New Zealand Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2004/42", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by a Netherlands resident from the design and construction of a facility in Australia", "Issue": "Is the income derived by a Netherlands resident taxpayer from the design and construction of a facility in Australia assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived by a Netherlands resident taxpayer from the design and construction of a facility in Australia is assessable under subsection 6- 5(3) of the ITAA 1997. Facts The taxpayer is a resident of the Netherlands and a non-resident of Australia for income tax purposes. The taxpayer entered into an agreement with an Australian resident taxpayer. Under the terms of the agreement, the taxpayer agreed to design and construct a facility in Australia. The taxpayer used substantial equipment in Australia for a period of more than 12 months. The taxpayer's business is carried on through a permanent establishment situated in Australia. The taxpayer sub-contracted the work for the design and construction of the facility to an unrelated entity. The taxpayer received a fixed sum from the Australian resident taxpayer for the performance of the terms of the agreement. Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The income from the design and construction of the facility in Australia is ordinary income derived from Australian sources for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 10 to the Agreements Act contains the agreement between Australia and the Kingdom of the Netherlands (the Netherlands Agreement) and the Protocol to that agreement. The Netherlands Agreement and the Protocol operate to avoid the double taxation of income received by Australian and Netherlands residents. Article 7 of the Netherlands Agreement provides that the profits of an enterprise of the Netherlands will be taxable only in the Netherlands unless the enterprise carries on business in Australia through a permanent establishment situated therein. The term 'permanent establishment' is defined in Article 5 of the Netherlands Agreement. Article 5(1) of the Netherlands Agreement provides that the term permanent establishment means a fixed place of business in which the business of the enterprise is wholly or partly carried on. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model Tax Convention explains that the definition of permanent establishment contains the following requirements: The profits from the design and construction of the facility in Australia are taxable in Australia under Article 7 of the Netherlands Agreement as the taxpayer carries on business in Australia through a permanent establishment situated in Australia under Article 5(1) of the Netherlands Agreement. Accordingly, the income derived by a Netherlands resident taxpayer from the design and construction of a facility in Australia is assessable under subsection 6-5(3) of the ITAA 1997 through the operation of Article 7 and Article 5(1) of the Netherlands Agreement.", "Facts": "", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The income from the design and construction of the facility in Australia is ordinary income derived from Australian sources for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 10 to the Agreements Act contains the agreement between Australia and the Kingdom of the Netherlands (the Netherlands Agreement) and the Protocol to that agreement. The Netherlands Agreement and the Protocol operate to avoid the double taxation of income received by Australian and Netherlands residents. Article 7 of the Netherlands Agreement provides that the profits of an enterprise of the Netherlands will be taxable only in the Netherlands unless the enterprise carries on business in Australia through a permanent establishment situated therein. The term 'permanent establishment' is defined in Article 5 of the Netherlands Agreement. Article 5(1) of the Netherlands Agreement provides that the term permanent establishment means a fixed place of business in which the business of the enterprise is wholly or partly carried on. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model Tax Convention explains that the definition of permanent establishment contains the following requirements: The profits from the design and construction of the facility in Australia are taxable in Australia under Article 7 of the Netherlands Agreement as the taxpayer carries on business in Australia through a permanent establishment situated in Australia under Article 5(1) of the Netherlands Agreement. Accordingly, the income derived by a Netherlands resident taxpayer from the design and construction of a facility in Australia is assessable under subsection 6-5(3) of the ITAA 1997 through the operation of Article 7 and Article 5(1) of the Netherlands Agreement.", "Date_of_Decision": "5 January 2004", "Year_of_Income": "Year ended 31 December 2003 Year ending 31 December 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004-41", "Subject_References": "Double tax agreements Netherlands Permanent Establishment", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and Capital - Commentary", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200442", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Netherlands Permanent Establishment"}
{"ATO_ID_Number": "ATO ID 2004/602", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent establishment: non-resident - services provided by resident subsidiary - no authority to bind non-resident", "Issue": "Is a non-resident company deemed to have a permanent establishment in Australia when services are provided to it by an Australian resident subsidiary company, which does not have the authority to conclude contracts in a manner binding on the non-resident company?", "Decision": "No. A non-resident company that receives services provided by an Australian resident subsidiary company is not deemed to have a permanent establishment in Australia, if the Australian company does not have the authority to conclude contracts in a manner binding on the non-resident company.", "Facts": "A non resident company enters a service arrangement with an Australian resident subsidiary company. The services involve the Australian company providing prospective clients with advice on products available from the non-resident company. Clients are then referred to the non-resident company to purchase the product directly from overseas.", "Reasons_for_Decision": "Summary: In general, Australia does not tax the profits of an enterprise resident in a country with which it has a double tax agreement unless the enterprise carries on business through a permanent establishment in Australia. The question of whether a non-resident enterprise has a permanent establishment in Australia is a question of fact and degree, which must be determined by reference to the individual circumstances of each case. A fixed place of business of an enterprise through which its business is wholly or partly carried on will generally constitute a permanent establishment. However, if a non-resident enterprise does not conduct activities itself through a fixed place of business in Australia, it may still, in some circumstances, be 'deemed' to carry on business through a permanent establishment, either under the provisions in the domestic law or under specific articles of the relevant DTA (See Unisys Corp v. FC of T (2002) 2002 ATC 5146; (2002) 51 ATR 386 ( Unisys Corp) and Case 23/93 93 ATC 288; AAT Case 8775 (1993) 26 ATR 1056). For a non-resident enterprise to be deemed to have a permanent establishment in Australia, the 'Permanent Establishment' Article of a double tax agreement generally requires four conditions to be satisfied. Therefore, for a non-resident enterprise to be deemed to have a permanent establishment in Australia, not only must the non-resident enterprise have a person acting for them in Australia, that person must have the authority to conclude contracts in a manner that is binding on the non-resident enterprise. Further, the mere possession of the requisite authority is not enough; it must also be exercised regularly or habitually. (See Unisys Corp ). The non-resident company does not have a permanent establishment in Australia because: Accordingly, the non resident company does not have a permanent establishment within Australia for the purposes of the double tax agreement.", "Date_of_Decision": "28 May 2004", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "International Tax Agreements Act 1953 The Act", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Amendment of assessments Deductions & expenses Double tax agreements Income International law International tax Permanent establishment Tax administration Tax assessments Treaties", "Case_References": "Unisys Corp v. FC of T 2002 ATC 5146 (2002) 51 ATR 386", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004602", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Amendment of assessments Deductions & expenses Double tax agreements Income International law International tax Permanent establishment Tax administration Tax assessments Treaties"}
{"ATO_ID_Number": "ATO ID 2004/931", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by a US entity - permanent establishment", "Issue": "Is income derived by the taxpayer, an entity which is resident in the United States of America (US), from ordering and distributing activity carried out by its Australian subsidiary, assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The income derived by the taxpayer, an entity which is resident in the US, from ordering and distributing activity carried out by its Australian subsidiary, is not assessable under subsection 6-5(3) of the ITAA 1997 as the taxpayer is not carrying on a business through a permanent establishment in Australia.", "Facts": "The taxpayer is a resident entity of the US and a non-resident of Australia for income tax purposes. The taxpayer markets consumer goods worldwide through a direct marketing system. The taxpayer has established a wholly owned subsidiary in Australia whose primary function is to sell its products as wholesale to Australian distributors. The taxpayer has registered for GST purposes in Australia, forming a GST group with its Australian subsidiary. The taxpayer has non resident affiliates which manufacture some of its products. It also purchases products from third party manufacturers in Australia. On receipt of an electronic order from the Australian subsidiary, the taxpayer prepares a purchase order to third party manufacturers in Australia and directs them to deliver the products to different locations in Australia. For convenience, the Australian subsidiary prints out and faxes the purchase order on behalf of the taxpayer to the third party manufacturers. The third party Australian manufacturer delivers the products directly to the Australian subsidiary and invoices the taxpayer. The Australian subsidiary notifies the taxpayer when the products are delivered. The taxpayer sends an invoice to the Australian subsidiary for the products delivered and pays the third party manufacturer. The prices for products charged by the taxpayer to the Australian subsidiary comply with the arm's length principle for related party dealings. The products sold to the Australian subsidiary are not subject to further processing by the subsidiary before being on-sold to its distributors. The taxpayer plays no further role and assumes no other risks with respect to sales by the Australian subsidiary to its distributors. The subsidiary does not perform any other functions for the taxpayer. It provides the usual reports to the taxpayer which are normally required of subsidiaries. The taxpayer does not have an office, a factory or a workshop in Australia. The taxpayer does not have a dependent agent who has the authority to conclude contracts on its behalf in Australia. The taxpayer uses the address of its Australian subsidiary as its contact address for GST purposes.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for limited provisions). Schedule 2 and 2A to the Agreements Act contains the convention between Australia and the US (USA Convention) and the protocol amending the USA Convention (US Protocol). Under Article 7 of the USA Convention, the business profits of a US enterprise shall be taxable only in the US unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 5(1) of the USA Convention as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5(2) of the USA Convention contains a list of examples, each of which can be regarded as constituting a permanent establishment, such as a place of management, an office, a branch, a factory or a workshop. Article 5(3)(d) of the USA Convention provides that an enterprise shall not be regarded as having a permanent establishment solely as a result of maintaining of fixed place of business for the purpose of purchasing goods or merchandise. Article 5(4) of the USA Convention identifies circumstances where a permanent establishment will be deemed to exist. Article 5(4)(a) of the USA Convention provides that an enterprise of the US will be deemed to have a permanent establishment in Australia if the enterprise carries on business in Australia through a person (other than an independent agent) who has authority to conclude contracts on behalf of the enterprise and habitually exercises that authority in Australia. Article 5(4)(d) of the USA Convention provides that an enterprise of the US will be deemed to have a permanent establishment in Australia where it Article 5(6) of the USA Convention provides that control of one company by another does not of itself mean that either company is a permanent establishment of the other. The taxpayer does not have a place of business in Australia (such as premises or equipment) with a certain degree of permanence through which it wholly or partly carries on its business for the purpose of Article 5(1) of the USA Convention. Although the taxpayer has a subsidiary in Australia and uses the address of the subsidiary as a place of contact for GST registration purposes, it does not have a place of management, an office, a branch, a factory or a workshop in Australia to come within definition of the term 'permanent establishment' under Article 5(2) of the USA Convention. Article 5(4)(a) of the USA Convention will not apply as the taxpayer does not have a dependent agent who has authority to conclude contracts on its behalf and habitually exercises that authority in Australia. The Australian subsidiary is not considered as a dependant agent as it has no authority to conclude contracts on behalf of the taxpayer. Article 5(4)(d) of the USA Convention will not apply as the products which are purchased by the taxpayer from third party manufacturers and subsequently sold to its subsidiary are not subject to substantial processing by the subsidiary before being on-sold. Consequently, Article 7 of the USA Convention applies and the income is not taxable in Australia as the taxpayer is not carrying on its business through a permanent establishment in Australia. The income is therefore not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "2 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/889", "Subject_References": "Double tax agreements Exempt income Permanent establishment United States", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004931", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Exempt income Permanent establishment United States"}
{"ATO_ID_Number": "ATO ID 2003/382", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of business income derived by an Australian resident attributable to a New Zealand permanent establishment", "Issue": "Does the farming income that is attributable to the carrying on of a business through a permanent establishment situated in New Zealand form part of an Australian resident taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The farming income that is attributable to the carrying on of a business through a permanent establishment situated in New Zealand forms part of an Australian resident taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer carried on a business of farming on an agricultural property located in New Zealand. The taxpayer derived income from the business.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. As the taxpayer is a resident of Australia, the business income forms part of their assessable income under subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 4 to the Agreements Act contains the double tax convention between Australia and New Zealand (the NZ Convention). The NZ Convention operates to avoid the double taxation of income received by Australian and New Zealand residents. Paragraph (1) of Article 7 of the NZ Convention provides that the profits of an Australian enterprise shall be taxable only in Australia unless the enterprise carries on business in New Zealand through a permanent establishment situated in New Zealand. If the enterprise carries on business in New Zealand through a permanent establishment situated in New Zealand, the profits of the enterprise may be taxed in New Zealand but only so much of it as is attributable to that permanent establishment. Paragraph (1) of Article 5 of the NZ Convention defines a permanent establishment as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Subparagraph (2)(g) of Article 5 of the NZ Convention specifically includes an agricultural, pastoral or forestry property in the definition of a permanent establishment. As the farming business was carried on through an agricultural property located in New Zealand, the business satisfies the requirements of a permanent establishment under subparagraph (2)(g) of Article 5 of the NZ Convention. Therefore, the profits of the business attributable to the permanent establishment situated in New Zealand may be taxed in New Zealand under paragraph (1) of Article 7 of the NZ Agreement. Paragraph (1) of Article 23 of the New Zealand Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in New Zealand will be allowed against Australian tax payable on income from New Zealand sources. As the taxpayer is a resident of Australia for income tax purposes, the taxpayer's assessable income includes the farming income derived from the permanent establishment in New Zealand under subsection 6-5(2) of the ITAA 1997. The taxpayer will be entitled to a foreign tax credit for New Zealand tax paid on that income.", "Date_of_Decision": "7 May 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign tax credits Foreign income Business income New Zealand", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003382", "Unmatched_Content": "This ATO ID was amended by replacing the reference to paragraph (2) of Article 24 to the tax treaty between Australian and New Zealand with paragraph (1) of Article 23 contained in the new tax treaty which took effect from 19 March 2010. This ATOID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system will be replaced by the foreign tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign tax credits Foreign income Business income New Zealand"}
{"ATO_ID_Number": "ATO ID 2002/850", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent Establishment", "Issue": "Whether a foreign company has a Permanent Establishment in Australia.", "Decision": "The foreign company does have a permanent establishment in Australia under Australian income tax laws.", "Facts": "", "Reasons_for_Decision": "Summary: In order for the foreign company, to be required to pay income tax in Australia under the provisions of subsection 3-5(1) of the Income Tax Assessment Act 1997 , the Commissioner must consider the provisions of the International Agreements Act 1953 and in particular the Article concerning Business Profits of the relevant Double Tax Agreement (the Treaty). Under the provisions of the Business Profits Article, any profits arising shall not be taxable in Australia unless the enterprise carries on business through a permanent establishment (PE) situated in Australia. A threshold issue for the Commissioner to consider, therefore, is whether or not the foreign company, in fulfilling its terms of the contracts, entered into with a third party, is operating through a PE in Australia. For the purposes of the Treaty the term permanent establishment has been defined as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The term has been given a wide meaning and would include a place of management, a branch, an office, a factory, a workshop, etc and would also include a building site or a construction, installation or assembly project, only if it exists for more than twelve months. In light of the facts provided by the foreign company in respect of the contracts for the project, it is considered by the Commissioner that the foreign company has a PE in Australia. As the head contractor for the project, the foreign company bears the ultimate legal obligation and risk regarding performance of the project work in Australia, ie the foreign company has undertaken the performance of a comprehensive project that has a construction and installation period greatly in excess of twelve months. It is considered by the Commissioner that it is irrelevant whether or not the foreign company itself performs any activities in Australia in connection with the project or undertakes the project work or subcontracts the work to others, either wholly or partly. The commentary to the 1977 OECD Model Convention states that: 'If an enterprise (general contractor) which has undertaken the performance of a comprehensive project, subcontracts parts of such a project to other enterprises (subcontractors), the period spent by a subcontractor working on a building site must be considered as time spent by the general contractor on the building project.' It is therefore considered that there is no requirement that the construction or installation project be directly carried out by the foreign company.", "Date_of_Decision": "2 July 2002", "Year_of_Income": "Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1997 subsection 3-5(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Permanent establishment", "Case_References": "", "Other_References": "1977 OECD Model Convention Introductory Commentary", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002850", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2003/889", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by an entity resident in the US from an Australian state government department", "Issue": "Is the training income derived by the non-resident taxpayer, an entity resident in the United States of America (US), for services provided to an Australian state government department assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Even though the training income derived by the non-resident taxpayer , an entity resident in the US, for services provided to an Australian state government department would be assessable under subsection 6-5(3) of the ITAA 1997, Article 7 of Schedule 2 to the International Tax Agreements Act 1953 (the Agreements Act) applies and the income is not taxable in Australia.", "Facts": "The taxpayer is a US resident entity and a non resident of Australia for income tax purposes. The taxpayer provides specialist training at various locations in Australia under the terms of two separate agreements executed with a state government department. No negotiations took place on the first contract which was signed in the US. A director of the entity signed the second contract in Australia after protracted negotiations. The training was provided in Australia by a director of the taxpayer entity. While present in Australia, the director of the entity did not own, lease or have available for use any fixed premises in Australia for the provision of training. The state government department allowed the director to carry out the training in the department's own training rooms. The rooms were not dedicated for the exclusive use of the director. The director used a mobile phone and a laptop computer for the provision of training. The accommodation used by the director in Australia neither had a sign advertising the name of the entity or advertised to the public as the director's office nor it was listed in the telephone book as the entity's office. The taxpayer received fees for the provision of the specialist training.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The income derived from the provision of training is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for limited provisions). Schedule 2 to the Agreements Act contains the convention between Australia and the US (the US Convention). Schedule 2A contains the protocol amending the US Convention (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. Under Article 7 of the US Convention, the business profits of an enterprise of the US shall be only taxable in the US unless the enterprise carries on business in Australia through a permanent establishment situated in Australia. The term 'permanent establishment' is defined in Article 5(1) of the US Convention as a fixed place of business through which the business of an enterprise is wholly or partly carried on. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model Tax Convention explains that the definition of permanent establishment contains the following requirements: Article 5(2) of the US Convention contains a list of examples each of which can be regarded as constituting a permanent establishment such as a place of management, an office, a branch, a factory or a workshop. Article 5(4) of the US Convention provides that an enterprise of the US is deemed to have a permanent establishment in Australia if the enterprise carries on business in Australia through a person (other than an independent agent) who has authority to conclude contracts on behalf of the enterprise and habitually exercises that authority in Australia. Paragraph 32 of the OECD Commentary on Article 5 of the OECD Model Tax Convention states that: ... paragraph 5 [OECD Model Tax Convention] proceeds on the basis that only persons having the authority to conclude contracts can lead to a permanent establishment for the enterprise maintaining them. In such case the person has sufficient authority to bind the enterprise's participation in the business activity in the State concerned. The use of the term 'permanent establishment' in this context presupposes, of course, that that person makes use of this authority repeatedly and not merely in isolated cases. See also the analysis of Gzell J in Unisys Corporation v. FC of T 2002 ATC 5146; (2002) 51 ATR 386. The taxpayer had no permanent establishment for the purpose of Article 5(1) of the US Convention as the director of the US entity provided short term training sessions at a number of different venues in Australia. Also, the taxpayer did not keep any fixed place of business (such as premises or equipment) in a specific geographical location with some degree of permanence. As the taxpayer did not keep a place of management, an office, a branch, a factory or a workshop, no permanent establishment existed as contained in the list of examples in Article 5(2) of the US Convention. Even though the director of the entity is a dependent agent who has authority to enter into contracts on behalf of the entity, the limited number of contracts concluded in Australia leads to the view that the director did not habitually exercise the authority in Australia for the purpose of Article 5(4) of the US Convention to deem a permanent establishment in Australia. Consequently, Article 7 of the US Convention applies and the training income is not taxable in Australia. The training income is therefore not assessable under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "8 August 2003", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/886 | ATO ID 2003/887 | ATO ID 2003/888", "Subject_References": "Exempt income Double tax agreements Permanent establishment Staff training expenses United States", "Case_References": "Unisys Corporation v. FC of T 2002 ATC 5146 (2002) 51 ATR 386", "Other_References": "OECD Model Tax Convention on Income and on capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003889", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Exempt income Double tax agreements Permanent establishment Staff training expenses United States"}
{"ATO_ID_Number": "ATO ID 2009/138", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Managed investment trust withholding rate under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953", "Issue": "Can a trustee of a managed investment trust which makes a fund payment under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953 (TAA) to a resident of Japan, reduce the withholding rate from 22.5% prescribed by that Subdivision to 15% because of Article 10 of Schedule 6 to the International Tax Agreements Act 1953 (Japanese Convention)?", "Decision": "No, the trustee of a managed investment trust cannot reduce the withholding rate from 22.5% to 15% because of Article 10 of the Japanese Convention because withholding at 22.5% does not conflict with Australia's obligations under the Japanese Convention.", "Facts": "MIT is a managed investment trust as defined in section 12-400 of Schedule 1 to the TAA in relation to its first income year starting on or after 1 July 2008. MIT carries on a business consisting of investment in real property for the main purpose of deriving rent. A resident of Japan (the investor) invests in MIT. The investor provides an address in Japan to the trustee of MIT, which the trustee keeps in its records. The trustee of MIT makes a fund payment as defined in subsection 12-405(1) of Schedule 1 to the TAA to the investor in relation to the first income year starting on or after 1 July 2008. The distribution is made on or after 1 January 2009. The investor beneficially owns the distribution.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA governs the withholding obligations of the trustee of a managed investment trust that makes a distribution to outside of Australia. Subsection 12-385(1) of Schedule 1 to the TAA provides that a trustee of a trust that is a managed investment trust in relation to an income year that makes a fund payment in relation to that income year to an entity covered by section 12-410 of Schedule 1 to the TAA must withhold an amount from the payment. The trustee of MIT will have to withhold if the investor is an entity covered by section 12-410 of Schedule 1 to the TAA. An entity (the recipient) is covered by subsection 12-410(1) of Schedule 1 to the TAA if, according to any record that is in the payer's possession, or is kept or maintained on the payer's behalf, the recipient has an address outside Australia; or if the payer is authorised to make the payment to a place outside Australia. The investor has provided an address in Japan to the trustee of MIT. As the trustee of MIT is making a fund payment to the investor who is an entity covered by section 12-410 of Schedule 1 to the TAA, the trustee must withhold an amount from the payment. The trustee must withhold 22.5% of the fund payment in relation to the first income year starting on or after 1 July 2008, if the address provided or place for payment of the recipient is in an information exchange country, pursuant to subsections 12-385(2) and 12-385(3) of Schedule 1 to the TAA. An information exchange country is a country specified in the Taxation Administration Regulations 1976. Japan is listed in the Taxation Administration Regulations 1976 regulation 44E as an information exchange country. The fund payment is made in relation to MIT's first income year starting on or after 1 July 2008. Therefore the trustee is required to withhold at the rate of 22.5%. In determining liability to Australian tax for residents of another country, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Subsection 4(1) of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the Income Tax Assessment Act 1997 (ITAA 1997) so that those Acts are read as one. Schedule 6 to the Agreements Act contains the Japanese Convention. It is necessary to determine whether the Japanese Convention affects the rate of withholding by the trustee of MIT. Article 10(7) of the Japanese Convention limits the right of Australia to tax the gross distributions of income, profits or gains made to Japanese residents that have a portfolio interest in Australian Real Estate Investment Trusts (REITs) to a rate of 15%. For the purposes of Article 10(7) of the Japanese Convention, 'REIT' means a managed investment trust created or organised under the laws of Australia which carries on a business consisting of investment, directly or indirectly, in real property for the main purpose of deriving rent. MIT is, therefore, a REIT for the purposes of the Japanese Convention. The investor is a resident of Japan and beneficially owns the distribution made by MIT in relation to MIT's first income year starting on or after 1 July 2008. The Japanese Convention applies to withholding tax on income derived on or after 1 January 2009. Therefore, Australia's right to tax the investor's gross distribution of income, profits or gains on or after 1 January 2009 is limited to 15%. Subsection 4(2) of the Agreements Act provides that the Agreements Act has effect notwithstanding any inconsistency contained in the ITAA 1936 (except for Part IVA of the ITAA 1936), the ITAA 1997 or an Act imposing Australian tax. In the present case, the withholding obligations of the trustee of MIT are imposed by the TAA, and not by the ITAA 1936 or the ITAA 1997. Further, the TAA is not an Act 'imposing' Australian tax; rather it is an Act that provides for the administration of certain Acts relating to taxation. Therefore any inconsistency between the Agreements Act and the TAA is not subject to subsection 4(2) of the Agreements Act, because that subsection does not apply to the TAA. It is nevertheless necessary to consider, as a matter of ordinary statutory interpretation, how each provision is construed when read in the context of the other. The obligation on the trustee of a managed investment trust to withhold at 22.5% pursuant to Subdivision 12-H of Schedule 1 to the TAA does not determine the tax liability of the ultimate foreign beneficiary of a fund payment. Taxation is imposed on the ultimate foreign beneficiary of the fund payment by the Income Tax (Managed Investment Trust Transitional) Act 2008 and on the amount determined under Subdivision 840-M of the Income Tax (Transitional Provisions) Act 1997 . The ultimate foreign beneficiary of a fund payment is entitled to a refund of any amount withheld that is in excess of their liability calculated in accordance with Article 10(7) of the Japanese Convention. It is therefore possible for the trustee of a managed investment trust to withhold at a rate of 22.5% without Australia breaching its obligation under the Japanese Convention to impose tax at a rate not exceeding 15%. Therefore, the requirement under Subdivision 12-H of Schedule 1 to the TAA does not conflict with the 15% tax rate limit on gross distributions by REITs. Further, this interpretation aligns with the purposes of Subdivision 12-H of Schedule 1 to the TAA as it ensures withholding at a rate that covers the foreign residents' tax liability. Withholding at a lower rate may result in the foreign resident having a liability in excess of the amount withheld. This is because the 15% rate in the Japanese Convention applies to the gross distribution of income, profits or gains, some of which may be taxed at a lower rate (for example, interest income of foreign residents is taxed at 10%) or not taxed (for example, foreign source income), and therefore taxing the fund payment at 22.5% may still result in the effective rate of tax on the gross distribution being equal to or less than 15%. Accordingly, the trustee of MIT cannot reduce the withholding rate from 22.5% prescribed by Subdivision 12-H of Schedule 1 to the TAA to 15% because of Article 10 of the Japanese Convention.", "Date_of_Decision": "11 November 2009", "Year_of_Income": "First income year starting on or after 1 July 2008", "Legislative_References": "Income Tax Assessment Act 1936 Part IVA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Distributions to non residents Japan Investment trusts Trustees Withholding taxes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009138", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Distributions to non residents Japan Investment trusts Trustees Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2009/139", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Custodians' managed investment trust withholding rate under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953", "Issue": "Can a custodian that makes a payment (a part of which is reasonably attributable to a fund payment under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953 (TAA)) to a resident of Japan, reduce the withholding rate from 22.5% (prescribed by that Subdivision) to 15% because of Article 10 of Schedule 6 to the International Tax Agreements Act 1953 (Japanese Convention)?", "Decision": "No, a custodian cannot reduce the withholding rate from 22.5% to 15% because of Article 10 of the Japanese Convention because withholding at 22.5% does not conflict with Australia's obligations under the Japanese Convention.", "Facts": "Custodial Services Co is a custodian within the meaning of subsection 12-390(9) of Schedule 1 to the TAA. Global Custodian, a resident of Japan, approaches Custodial Services Co to invest funds in Australia. Global Custodian acts on behalf of its client (the Japanese client), who is also a Japanese resident. Global Custodian provides an address in Japan to Custodial Services Co and Custodial Services Co keeps the address in its records. Custodial Services Co invests in a managed investment trust (MIT) as directed by Global Custodian. MIT is a managed investment trust as defined in section 12-400 of Schedule 1 to the TAA in relation to its first income year starting on or after 1 July 2008. MIT carries on a business consisting of investment in real property for the main purpose of deriving rent. The trustee of MIT makes a fund payment as defined in subsection 12-405(1) of Schedule 1 to the TAA to Custodial Services Co in relation to MIT's first income year starting on or after 1 July 2008. The distribution is made on or after 1 January 2009. MIT provides a notice to Custodial Services Co in respect of the fund payment. The notice is in accordance with section 12-395 of Schedule 1 to the TAA. Custodial Services Co distributes all of the income received from MIT, including a payment reasonably attributable to the fund payment from MIT, to Global Custodian (the recipient). The Japanese client beneficially owns the distribution.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA governs the withholding obligations of custodians making payments to outside of Australia where all or part of a payment is attributable to a fund payment made by a trustee of a managed investment trust. Subsection 12-390(1) of Schedule 1 to the TAA provides that a custodian that makes a payment to an entity covered by section 12-410 of Schedule 1 to the TAA, must withhold an amount from the payment if: An entity (the recipient) is covered by subsection 12-410(1) of Schedule 1 to the TAA if, according to any record that is in the payer's possession, or is kept or maintained on the payer's behalf, the recipient has an address outside Australia; or if the payer is authorised to make the payment to a place outside Australia. The recipient, Global Custodian, has provided an address in Japan. Custodial Services Co makes a payment to Global Custodian, part of which is attributable to the fund payment from MIT. Custodial Services Co is given a notice, in accordance with section 12-395 of Schedule 1 to the TAA, by MIT in respect of the payment. Global Custodian is an entity covered by section 12-410 of Schedule 1 to the TAA. Therefore Custodial Services Co must withhold an amount from the payment. Custodial Services Co must withhold 22.5% of the part which is attributable to the fund payment in relation to MIT's first income year starting on or after 1 July 2008 if the address provided or place for payment of the recipient is in an information exchange country, pursuant to subsections 12-390(2) and 12-390(3) of Schedule 1 to the TAA. An information exchange country is a country specified in the Taxation Administration Regulations 1976. Japan is listed in the Taxation Administration Regulations 1976 regulation 44E as an information exchange country. The payment made by Custodial Services Co to Global Custodian is made in relation to MIT's first income year starting on or after 1 July 2008. Therefore, the custodian is required to withhold at the rate of 22.5%. In determining liability to Australian tax for residents of another country, it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Subsection 4(1) of the Agreements Act incorporates the Income Tax Assessment Act 1936 (ITAA 1936) and the Income Tax Assessment Act 1997 (ITAA 1997) with the Agreements Act so that those Acts are read as one. Schedule 6 to the Agreements Act contains the Japanese Convention. It is necessary to determine whether the Japanese Convention affects the rate of withholding by Custodial Services Co. Article 10(7) of the Japanese Convention limits the right of Australia to tax the gross distributions of income, profits or gains made to Japanese residents that have a portfolio interest in an Australian Real Estate Investment Trust (REIT) to a rate of 15%. For the purposes of Article 10(7) of the Japanese Convention, 'REIT' means a managed investment trust created or organised under the laws of Australia which carries on a business consisting of investment, directly or indirectly, in real property for the main purpose of deriving rent. MIT is, therefore, a REIT for the purposes of the Japanese Convention. The Japanese client is a resident of Japan and beneficially owns the distribution that is reasonably attributable to the fund payment made by MIT in relation to MIT's first income year starting on or after 1 July 2008. The Japanese Convention applies to withholding tax on income derived on or after 1 January 2009. Therefore, Australia's right to tax the Japanese client's gross distribution of income, profits or gains on or after 1 January 2009 is limited to 15%. Subsection 4(2) of the Agreements Act provides that the Agreements Act has effect notwithstanding any inconsistency contained in the ITAA 1936 (except for Part IVA of the ITAA 1936), the ITAA 1997 or an Act imposing Australian tax. In the present case, the withholding obligations of the trustee of MIT are imposed by the TAA, and not by the ITAA 1936 or the ITAA 1997. Further, the TAA is not an Act 'imposing' Australian tax; rather it is an Act that provides for the administration of certain Acts relating to taxation. Therefore any inconsistency between the Agreements Act and the TAA is not subject to subsection 4(2) of the Agreements Act, because that subsection does not apply to the TAA. It is nevertheless necessary to consider, as a matter of ordinary statutory interpretation, how each provision is construed when read in the context of the other. The obligation on the custodian to withhold at 22.5% pursuant to Subdivision 12-H of Schedule 1 to the TAA does not determine the tax liability of the ultimate foreign beneficiary of a fund payment. Taxation is imposed on the ultimate foreign beneficiary of the fund payment by the Income Tax (Managed Investment Trust Transitional) Act 2008 and on the amount determined under Subdivision 840-M of the Income Tax (Transitional Provisions) Act 1997 . The ultimate foreign beneficiary of a fund payment is entitled to a refund of any amount withheld that is in excess of their liability calculated in accordance with Article 10(7) of the Japanese Convention. It is therefore possible for a custodian to withhold at a rate of 22.5% without Australia breaching its obligation under the Japanese Convention to impose tax at a rate not exceeding 15%. Therefore, the requirement under Subdivision 12-H of Schedule 1 to the TAA does not conflict with the 15% tax rate limit on gross distributions by REITs. Further, this interpretation aligns with the purposes of Subdivision 12-H of Schedule 1 to the TAA as it ensures withholding at a rate that covers the foreign residents' tax liability. Withholding at a lower rate may result in the foreign resident having a liability in excess of the amount withheld. This is because the 15% rate in the Japanese Convention applies to the gross distribution of income, profits or gains, some of which may be taxed at a lower rate (for example, interest income of foreign residents is taxed at 10%) or not taxed (for example, foreign source income), and therefore taxing the fund payment at 22.5% may still result in the effective rate of tax on the gross distribution being equal to or less than 15%. Accordingly, Custodial Services Co cannot reduce the withholding rate from 22.5% (prescribed by Subdivision 12-H of Schedule 1 to the TAA) to 15% because of Article 10 of the Japanese Convention.", "Date_of_Decision": "11 November 2009", "Year_of_Income": "First income year starting on or after 1 July 2008", "Legislative_References": "Income Tax Assessment Act 1936 Part IVA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Distributions to non residents Japan Investment trusts Trustees Withholding taxes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009139", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Distributions to non residents Japan Investment trusts Trustees Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2006/107", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of employment income received by dual resident of Australia and Singapore in the Joint Petroleum Development Area", "Issue": "Are the salary and wages received by a taxpayer, who is a dual resident of Australia and of Singapore, for employment performed in the Joint Petroleum Development Area (JPDA), assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The salary and wages received by a taxpayer, who is a dual resident of Australia and of Singapore, for employment performed in the JPDA are assessable under subsection 6-5(2) of the ITAA 1997. Facts The taxpayer is an Australian resident for income tax purposes. The taxpayer is also a resident of Singapore for Singapore tax purposes. The taxpayer is an individual who has been employed by an Australian company, on behalf of another Australian company, to work in the JPDA. Neither Australian company is a resident of Singapore. The taxpayer worked on the mainland of Australia and in the JPDA for a period spanning two Australian financial years. In each year, the taxpayer was present in Australia for less than 183 days. The taxpayer has homes in Australia and in Singapore which are available for the taxpayer's permanent use throughout the period of their presence in Australia. The taxpayer has an habitual abode in Australia and in Singapore throughout the period of their presence in Australia. The taxpayer's personal and economic ties are closer with Singapore than with Australia. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes the ordinary income derived by the taxpayer directly or indirectly from all sources, whether in or out of Australia, during the income year. Employment income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the Income Tax Assessment Act 1936 (ITAA 1997) lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in 'foreign service' for a continuous period of not less than 91 days, any 'foreign earnings' derived will be exempt from tax in Australia. Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee, and 'foreign earnings' include salary, wages, commission, bonuses or allowances. Section 23AG of the ITAA 1936 is only available to resident taxpayers who derive foreign earnings from service in a foreign country. The area can only be treated as part of a 'foreign country' where it is clearly deemed to be a 'foreign country' for the purposes of section 23AG of the ITAA 1936. The Timor Sea between northern Australia and East Timor contains proven petroleum resources in the seabed. Australia and East Timor have competing claims to the resources of this seabed. The Timor Sea Treaty (Treaty) (which is contained in Schedule 1 to the Petroleum (Timor Sea Treaty) Act 2003 ) enables Australia and East Timor to jointly develop the petroleum resources of a major part of the seabed of the Timor Sea, defined in Article 3 of the Treaty as the JPDA, pending agreement to a seabed boundary with East Timor. The Treaty was signed between the Government of East Timor and the Government of Australia on 20 May 2002. The Treaty entered into force on 2 April 2003 but is taken to have effect and all of the provisions will apply and be taken to have applied on and from the date of signature, 20 May 2002. Both Australia and East Timor continue to have sovereignty over the area and therefore, for the purposes of Australian law, the area is considered part of Australian territory. Article 2 of the Treaty recognises that the treaty is without prejudice to both Australia's and East Timor's legal claims to the seabed in the Timor Sea. Further, Article 13 of the Treaty provides that the JPDA shall be deemed to be, and treated by Australia as part of Australia (and by East Timor as part of East Timor) for the purposes of taxation law related directly or indirectly to: Therefore, the JPDA is treated by Australia as part of Australia's maritime zones under the arrangements. Therefore, as the JPDA is not a 'foreign country', exemption under section 23AG of the ITAA 1936 cannot therefore apply to earnings derived from service in the JPDA. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the agreement between Australia and Singapore (Singapore Agreement). As the taxpayer is a dual resident, it is necessary to consider the tie breaker rules in the Singapore Agreement. Article 3(2) of the Singapore Agreement sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the Singapore Agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 3(2) of the Singapore Agreement provides that if an individual is a resident of both Australia and Singapore: The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the Singapore Agreement. Article 2(4) of the Singapore Agreement provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the Singapore Agreement. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has a permanent home and a habitual abode in both countries during the period of presence in Australia. Therefore, as the taxpayer's personal and economic ties are closer with Singapore than with Australia, the taxpayer will be treated as a resident of Singapore for the purposes of applying the provisions of the Singapore Agreement. Article 11 of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services shall be subject to tax only in Singapore unless the services are performed or exercised in Australia. If the services are so performed or exercised such remuneration or other income as is derived therefrom shall be deemed to have a source in, and may be taxed in, Australia. However, Article 12 of the Singapore Agreement provides that the remuneration shall be exempt from tax in Australia if - The taxpayer performed their employment for an Australian resident company in mainland Australia and in the JPDA over two Australian financial years. In both years, the taxpayer was present in Australia for less than 183 days. However, as Article 12(b) of the Singapore Agreement is not satisfied, Article 12 will not apply. As the taxpayer performs their services in Australia (including the JPDA), the income received by the taxpayer for those services may be taxed in Australia under Article 11 of the Singapore Agreement. The salary and wages may also be taxed by Singapore. In addition to the Singapore Agreement, the provisions of the Treaty must also be considered in determining the taxpayer's liability to Australian tax. Annex G to the Treaty sets out the taxation arrangements for income earned in the JPDA. Article 13(1) in Annex G of the Treaty provides that income derived by an individual who is a resident of Australia in respect of employment exercised in the JPDA may be taxed in Australia and East Timor as reduced by the reduction percentage. In the case of Australia, the reduction percentage is 90% and for East Timor the reduction percentage is 10% (see Article 1 of the Treaty). Article 13(2) in Annex G of the Treaty provides that notwithstanding the above, Australia may tax its residents on such income without reduction. In such a case, Australia will provide a tax offset against the tax payable on that income by the individual for the tax paid in East Timor. Australia's practice is to tax Australian resident taxpayers on 100% of their JPDA income under subsection 6-5(2) of the ITAA 1997 and to give a tax offset for East Timor tax paid on 90% of this income. Therefore, the salary and wages received by the taxpayer, who is a dual resident of Australia and of Singapore, for employment performed in the JPDA are assessable under subsection 6-5(2) of the ITAA 1997. Subsections 136AA(1) and (4) of the ITAA 1936 define an 'area covered by an international tax sharing treaty' as an area covered by an agreement between Australia and another country under which Australia and the other country share tax revenues from activities undertaken in that area. The JPDA is an area covered by an international tax sharing treaty. Therefore, the taxpayer is entitled to a foreign tax credit for tax paid in East Timor on income derived from duties performed in the JPDA.", "Facts": "", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident taxpayer includes the ordinary income derived by the taxpayer directly or indirectly from all sources, whether in or out of Australia, during the income year. Employment income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 6-15(2) of the ITAA 1997 provides that if an amount is exempt income then it is not assessable income. Section 11-15 of the Income Tax Assessment Act 1936 (ITAA 1997) lists those provisions dealing with income which may be exempt. Included in this list is section 23AG of the ITAA 1936 which deals with overseas employment income. Subsection 23AG(1) of the ITAA 1936 provides that where a resident taxpayer is engaged in 'foreign service' for a continuous period of not less than 91 days, any 'foreign earnings' derived will be exempt from tax in Australia. Subsection 23AG(7) of the ITAA 1936 defines 'foreign service' as service in a foreign country as the holder of an office or in the capacity of an employee, and 'foreign earnings' include salary, wages, commission, bonuses or allowances. Section 23AG of the ITAA 1936 is only available to resident taxpayers who derive foreign earnings from service in a foreign country. The area can only be treated as part of a 'foreign country' where it is clearly deemed to be a 'foreign country' for the purposes of section 23AG of the ITAA 1936. The Timor Sea between northern Australia and East Timor contains proven petroleum resources in the seabed. Australia and East Timor have competing claims to the resources of this seabed. The Timor Sea Treaty (Treaty) (which is contained in Schedule 1 to the Petroleum (Timor Sea Treaty) Act 2003 ) enables Australia and East Timor to jointly develop the petroleum resources of a major part of the seabed of the Timor Sea, defined in Article 3 of the Treaty as the JPDA, pending agreement to a seabed boundary with East Timor. The Treaty was signed between the Government of East Timor and the Government of Australia on 20 May 2002. The Treaty entered into force on 2 April 2003 but is taken to have effect and all of the provisions will apply and be taken to have applied on and from the date of signature, 20 May 2002. Both Australia and East Timor continue to have sovereignty over the area and therefore, for the purposes of Australian law, the area is considered part of Australian territory. Article 2 of the Treaty recognises that the treaty is without prejudice to both Australia's and East Timor's legal claims to the seabed in the Timor Sea. Further, Article 13 of the Treaty provides that the JPDA shall be deemed to be, and treated by Australia as part of Australia (and by East Timor as part of East Timor) for the purposes of taxation law related directly or indirectly to: Therefore, the JPDA is treated by Australia as part of Australia's maritime zones under the arrangements. Therefore, as the JPDA is not a 'foreign country', exemption under section 23AG of the ITAA 1936 cannot therefore apply to earnings derived from service in the JPDA. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 5 to the Agreements Act contains the agreement between Australia and Singapore (Singapore Agreement). As the taxpayer is a dual resident, it is necessary to consider the tie breaker rules in the Singapore Agreement. Article 3(2) of the Singapore Agreement sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the Singapore Agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 3(2) of the Singapore Agreement provides that if an individual is a resident of both Australia and Singapore: The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the Singapore Agreement. Article 2(4) of the Singapore Agreement provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the Singapore Agreement. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has a permanent home and a habitual abode in both countries during the period of presence in Australia. Therefore, as the taxpayer's personal and economic ties are closer with Singapore than with Australia, the taxpayer will be treated as a resident of Singapore for the purposes of applying the provisions of the Singapore Agreement. Article 11 of the Singapore Agreement provides that remuneration or other income derived by an individual who is a resident of Singapore in respect of personal (including professional) services shall be subject to tax only in Singapore unless the services are performed or exercised in Australia. If the services are so performed or exercised such remuneration or other income as is derived therefrom shall be deemed to have a source in, and may be taxed in, Australia. However, Article 12 of the Singapore Agreement provides that the remuneration shall be exempt from tax in Australia if - The taxpayer performed their employment for an Australian resident company in mainland Australia and in the JPDA over two Australian financial years. In both years, the taxpayer was present in Australia for less than 183 days. However, as Article 12(b) of the Singapore Agreement is not satisfied, Article 12 will not apply. As the taxpayer performs their services in Australia (including the JPDA), the income received by the taxpayer for those services may be taxed in Australia under Article 11 of the Singapore Agreement. The salary and wages may also be taxed by Singapore. In addition to the Singapore Agreement, the provisions of the Treaty must also be considered in determining the taxpayer's liability to Australian tax. Annex G to the Treaty sets out the taxation arrangements for income earned in the JPDA. Article 13(1) in Annex G of the Treaty provides that income derived by an individual who is a resident of Australia in respect of employment exercised in the JPDA may be taxed in Australia and East Timor as reduced by the reduction percentage. In the case of Australia, the reduction percentage is 90% and for East Timor the reduction percentage is 10% (see Article 1 of the Treaty). Article 13(2) in Annex G of the Treaty provides that notwithstanding the above, Australia may tax its residents on such income without reduction. In such a case, Australia will provide a tax offset against the tax payable on that income by the individual for the tax paid in East Timor. Australia's practice is to tax Australian resident taxpayers on 100% of their JPDA income under subsection 6-5(2) of the ITAA 1997 and to give a tax offset for East Timor tax paid on 90% of this income. Therefore, the salary and wages received by the taxpayer, who is a dual resident of Australia and of Singapore, for employment performed in the JPDA are assessable under subsection 6-5(2) of the ITAA 1997. Subsections 136AA(1) and (4) of the ITAA 1936 define an 'area covered by an international tax sharing treaty' as an area covered by an agreement between Australia and another country under which Australia and the other country share tax revenues from activities undertaken in that area. The JPDA is an area covered by an international tax sharing treaty. Therefore, the taxpayer is entitled to a foreign tax credit for tax paid in East Timor on income derived from duties performed in the JPDA.", "Date_of_Decision": "9 November 2005", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(1) subsection 23AG(7) subsection 136AA(1) subsection 136AA(4)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/288", "Subject_References": "Double tax agreements Exempt income Foreign income Foreign salary & wages International law International tax Timor Sea Zone of Cooperation Treaties", "Case_References": "", "Other_References": "Timor Sea Treaty between the Government of Australia and the Government of East Timor, Dili, 20 May 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006107", "Unmatched_Content": "This ATO ID has been amended to remove references in the Reasons for Decision to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit will by replaced by a foreign tax offset. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Double tax agreements Exempt income Foreign income Foreign salary & wages International law International tax Timor Sea Zone of Cooperation Treaties"}
{"ATO_ID_Number": "ATO ID 2005/73", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by an Australian resident company from the provision of services in South Korea", "Issue": "Is the income derived from the provision of services in South Korea by an Australian resident company (being incorporated in Australia) which has its central management and control in South Korea assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The income derived from the provision of services in South Korea by an Australian resident company (being incorporated in Australia) which has its central management and control in South Korea is not assessable under subsection 6-5(2) of the ITAA 1997.", "Facts": "The company is incorporated in Australia. The same person is both the sole shareholder and director of the company. The shareholder/director will be located in Korea for the period during which the services are being performed by the company in South Korea (the relevant period). During the relevant period, all general and directors meetings including the development of corporate policies will take place in South Korea. The shareholder/director will carry out all management and other day-to-day business activities of the company in South Korea. The services which the company is required to provide will be performed by the shareholder/director for and on behalf of the company. The company is taxed on its worldwide income in South Korea.", "Reasons_for_Decision": "Summary: Income derived from the provision of services in South Korea by a company resident in Australia is generally ordinary income under subsection 6-5(2) of the ITAA 1997. The term 'resident' in subsection 995-1(1) of the ITAA 1997 has the same meaning as the definition of 'resident' in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). In terms of that definition, a company which has been incorporated in Australia is a resident of Australia for the purposes of the Australian domestic income tax law. If a company has been incorporated in Australia, the company continues to be regarded as an Australian resident even if the central management and control of the company is exercised outside Australia. Similarly, such a company continues to be regarded as an Australian resident for the purposes of the Australian domestic income tax law even if it is also treated as a resident of some other country. The company in this case is incorporated in Australia and therefore it is considered to be a resident of Australia. In the present case, all general and directors meetings including the development of corporate policies take place in South Korea. The shareholder/director carries out all the management and other day-to-day business activities of the company in South Korea. Therefore, the central management and control of the company is considered to be situated in South Korea. This makes the company a resident of South Korea as well as Australia. Therefore, the company would be a dual resident as it would be considered to be a resident of both Australia and South Korea. In determining liability to tax on income received by a dual resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for limited provisions). Schedule 22 to the Agreements Act contains the convention between Australia and the Republic of Korea (the Korean Convention). The Korean Convention operates to avoid the double taxation of income received by Australian and Korean residents. In particular, when applying the Korean Convention to a dual resident, it is necessary to consider the effect of the tie-breaker provision contained in Article 4(4) of the Korean Convention. This clause applies where the company is both a resident of Australia and South Korea and is liable to income tax on its world wide income in both Australia and South Korea. In the present case, as set out above, the company is both a resident of Australia and South Korea and is liable to taxation on its worldwide income in both countries. In these circumstances, the tie-breaker provision deems the dual resident taxpayer, for the purposes of the Korean Convention, to be a treaty resident of the country where the company's place of 'effective management' is situated. 'Effective management' has a similar meaning to 'central management and control'. Paragraph 22 of the OECD Commentary on Article 4 of the OECD Model Tax Convention explains that the tie-breaker test attaches importance to the place where the company is actually managed. In the present case, the same person is both the sole shareholder and director of the company. All the general and directors meetings are held in South Korea and the management decisions including those relating to the day-to-day business activities of the company are also made in South Korea. It is considered that, for these reasons, the place of 'effective management' (which has a meaning similar to 'central management and control) of the company is situated in South Korea making the company a treaty resident of South Korea for the purposes of the Korean Convention. Accordingly, the company is a prescribed dual resident in accordance with the definition in paragraph (a) of subsection 6(1) of the ITAA 1936. It is therefore concluded that the income derived from the services provided in South Korea by the Australian resident company which has its central management and control in South Korea is not assessable under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "6 September 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2004/D7", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Double tax agreements Dual residence South Korea", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200573", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2004/D7 | Keywords Exempt income Double tax agreements Dual residence South Korea"}
{"ATO_ID_Number": "ATO ID 2004/774", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of directors fees received from a US company by a dual resident of Australia and the US", "Issue": "Are director's fees received by a taxpayer who is a dual resident of Australia and the United States (US) from services performed in the US as a director of a US company included in the taxpayer's assessable income under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The director's fees received by a taxpayer who is a dual resident of Australia and the US from services performed in the US as a director of a US company are not included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.", "Facts": "The taxpayer is a citizen of the US. The taxpayer is a resident of Australia for taxation purposes. The taxpayer is a resident of the US for taxation purposes. The taxpayer maintains residences in Australia and the US which are available to the taxpayer at all times continuously. The taxpayer spends time in Australia and the US during the year. The taxpayer's personal and economic ties are predominantly in the US. The taxpayer receives director's fees from services performed as a director of a US company. The taxpayer performs their duties as a director in the US.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Director's fees are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the US (the US Convention). Schedule 2A to the Agreements Act contains the United States Protocol (the US Protocol). The US Convention and the US Protocol operate to avoid the double taxation of income received by Australian and US residents. The US Protocol entered into force in Australia on 13 May 2003 and has effect in respect of income tax other than withholding taxes for any year of income beginning on or after 1 July 2004. For withholding taxes on dividends, interest and royalties, it has effect from 1 July 2003. As the taxpayer is a dual resident of Australia and of the US, it is necessary to consider the tie breaker rules in the US Convention. Article 4(2) of the US Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the US Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article 4(2) of the US Convention provides that if an individual is a resident of both Australia and US, they shall be deemed to be a resident of the State: Article 4(2) of the US Convention further provides that in determining an individual's permanent home, regard shall be given to the place where the individual dwells with their family, and in determining the country with which an individual's personal and economic relations are closer, regard shall be given to their citizenship (if the individual is a citizen of one of the countries). The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the US Convention. Article 3(2) of the US Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the US Convention. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. The OECD Commentary provides that in relation to a 'permanent home': As the taxpayer maintains residences in both countries which are available at all times continuously for the taxpayer's permanent use, the taxpayer has a permanent home in Australia and in the US. In relation to a habitual abode, the OECD Commentary provides that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the residence in each country is habitual and to also determine the intervals at which the stays take place. This is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the taxpayer's circumstances. As the taxpayer and the taxpayer's family spend time at their homes in Australia and the US as part of their usual pattern of activity, the taxpayer has a habitual abode in both countries. In relation to a taxpayer's personal and economic relations, the OECD Commentary provides that regard should be had to factors such as family and social relations, occupation, political, cultural or other activities and place of business. The taxpayer has personal and economic ties with Australia and the US. Coupled with the fact that the taxpayer is a US citizen, it is considered that the taxpayer's personal and economic ties are closer with the US than with Australia. Accordingly, the taxpayer will be treated as a resident of the US for the purposes of applying the provisions of the US Convention. The US Convention does not contain a specific Article dealing with director's fees. Article 21 of the US Convention deals with income not dealt with in other Articles of the US Convention. Article 21(1) of the US Convention provides that items of income of a resident of the US, wherever arising, not dealt with in the foregoing Articles of the US Convention shall be taxable only in the US. However, Article 21(3) of the US Convention provides that notwithstanding Article 21(1), items of income of a resident of the US from sources in Australia may also be taxed in Australia. As the director's fees received by the taxpayer are derived from services wholly performed in the US for a US company, they do not have an Australian source and accordingly are taxable only in the US. Accordingly, the director's fees received by the taxpayer are not included in assessable income under subsection 6-5(2) of the ITAA 1997.", "Date_of_Decision": "8 September 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Directors' fees income Double tax agreements International law Resident/residency Treaties United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004774", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Directors' fees income Double tax agreements International law Resident/residency Treaties United States"}
{"ATO_ID_Number": "ATO ID 2007/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of Article 12(3)(c) of the Korean Convention where an amount is paid for the surrender of data licensing rights", "Issue": "Is a payment from the taxpayer to a Korean company X, for the surrender of data licensing rights, a 'royalty' under Article 12(3)(c) of Schedule 22 to the International Tax Agreements Act 1953 (Agreements Act)?", "Decision": "No. A payment from the taxpayer to company X for the surrender of data licensing rights is not a royalty under Article 12(3)(c) of Schedule 22 to the Agreements Act.", "Facts": "The taxpayer is an Australian resident company. Company X and Y are residents of Korea for taxation purposes. Y is the owner of the data licensing rights. Company X and Y entered into a rights agreement under which company X was granted the data licensing rights. Later, company X entered into a surrender agreement with the taxpayer under which company X agreed to surrender the data licensing rights for the payment of a fixed sum by the taxpayer to company X. The taxpayer also entered into a license agreement with Y to acquire the data licensing rights. Y did not receive any payment from the taxpayer or from company X for entering into that agreement. The data licensing rights acquired by the taxpayer from Y under the license agreement relate to the exclusive right to distribute any form of electronic catalogue containing information on the products to dealers worldwide. Company X, Y and the taxpayer are unrelated and were dealing with each other on arms length terms.", "Reasons_for_Decision": "Summary: Schedule 22 to the Agreements Act contains the tax treaty between Australia and the Republic of Korea (the Korean Convention). The Korean Convention operates to avoid the double taxation of income received by Australian and Korean residents. Article 12 of the Korean Convention deals with the taxation of royalties. Article 12(3)(c) of the Korean Convention provides that the term 'royalties' in this Article means payments or credits, whether periodical or not, and however described or computed, to the extent to which they are made as consideration for the supply of scientific, technical, industrial or commercial knowledge or information. It is considered that the payment to company X is not a payment 'made as consideration for the supply of scientific, technical, industrial or commercial knowledge or information' for the purposes of Article 12(3)(c) of the definition of 'royalties' because it was made to induce company X to surrender the data licensing rights which company X had obtained from Y. Although the payment to company X and the surrender of the data licensing rights by company X made it possible for the taxpayer to acquire the data licensing rights from Y, the payment itself is not a royalty as it was not made to the owner of the data licensing rights to acquire those rights but was paid to a third party as compensation for the surrender of the rights company X had obtained from Y. It is considered that there is a presumption in the definition of 'royalties' in Article 12(3)(c) of the Korean Convention that a payment made as consideration 'for the supply of .... commercial knowledge or information' must be made to the owner of the commercial knowledge or information to constitute a royalty. Y did not receive any part of the payment made by the taxpayer to company X for the surrender of the data licensing rights. Furthermore, the consideration was not paid to another person or otherwise applied or dealt with at the direction of Y. The entire payment remained with company X and no part of the payment passed to the owner of the data licensing rights, Y. Accordingly, the payment made by the taxpayer to company X does not fall within the definition of royalties under Article 12(3)(c) of the Korean Convention.", "Date_of_Decision": "30 November 2006", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "International Tax Agreements Act 1953 Schedule 22 Schedule 22, Article 12 Schedule 22, Article 12(3)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/4", "Subject_References": "Double tax agreements International tax Korea Non resident royalty withholding tax Royalty income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20075", "Unmatched_Content": "Income Tax: This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Korea Non resident royalty withholding tax Royalty income"}
{"ATO_ID_Number": "ATO ID 2006/308", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Definition of royalties: UK Convention - payments for use of broadcasting and apparatus licences", "Issue": "Are payments made for the exclusive right to use a broadcasting licence and an apparatus licence 'royalties' under Article 12 of Schedule 1 of the International Tax Agreements Act 1953 (the UK Convention)?", "Decision": "No. Payments for the exclusive right to use a broadcasting licence and an apparatus licence are not royalties under Article 12 of the UK Convention.", "Facts": "An owner of a Broadcasting Licence and an Apparatus Licence (the Licensor Entity) entered into an agreement with another entity (the Licensee) for the exclusive right to use the two licenses for a certain period of time. The Licensee is required to pay an annual fee to the Licensor Entity for the use of both of the licenses. The fee is calculated as a percentage of the gross earnings of the Licensee for the 12 month period. The Broadcasting Licence is issued under sections 36 and 38 of the Broadcasting Services Act 1992. The Apparatus Licence is issued under section 102 of Part 3.3 of the Radiocommunications Act 1992.", "Reasons_for_Decision": "Summary: The UK Convention operates to avoid the double taxation of income received by Australian and United Kingdom residents. Article 12(3) of the UK Convention contains an exhaustive definition of the term 'royalties' for the purposes of Article 12. In particular, Article 12(3)(d)(ii) defines a royalty to mean: ...payments ... made as consideration for the use or right to use ...films or audio tapes or disks, or any other means of image or sound reproduction or transmission for use in connection with television, radio or other broadcasting. This part of the definition extends the definition of royalties beyond that of the OECD Model Tax Convention definition of royalties in Article 12. The wording of this provision reflects an amalgamation of the wording used in the domestic law definition of royalties in paragraphs (db), (dc) and (e) in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The Explanatory Memorandum to the UK Convention explains at paragraph 1.154 that the provision includes: Payments for the use of video or audio disks or any other means of image or sound reproduction or for transmission for use in connection with television, radio or other broadcasting (e.g. satellite and Internet broadcasting). The provision, therefore, covers the more traditional as well as newer forms of technology used for image or sound reproduction or transmission. Like the relevant paragraphs of the domestic law definition of a royalty, this provision relates to payments for the use of sound 'content', such as songs or programs, used in radio broadcasting. In respect of that part of the payment that relates to the Broadcasting Licence, the Licensee is paying for an exclusive right to use the Broadcasting Licence, and the underlying right conferred by that licence to use a specific band of radiofrequency spectrum. The payment does not relate to the right to use sound content. Therefore, the payment for the use of the Broadcasting Licence does not fall within the definition of royalties under Article 12(3)(d)(ii) of the UK Convention, and is not a royalty for the purposes of Article 12 of the UK Convention. The part of the payment that relates to the use of the Apparatus Licence also does not fall within the definition of royalties under Article 12(3) of the UK Convention. The Licensee is paying for the exclusive right to use the Apparatus Licence, and the underlying right conferred by that licence for the authorisation to operate one or more specified radio communication devices. This payment does not fall within any of the paragraphs of Article 12(3) of the UK Convention. Consideration of whether the payment could be an 'industrial, commercial or scientific equipment royalty' is not necessary as this type of royalty is not included in the definition of royalties in Article 12(3) of the UK Convention. The Explanatory Memorandum makes this clear at paragraph 1.155 when it explains that these types of royalties were removed from the definition under the new UK Convention.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "International Tax Agreements Act 1953 Schedule 1, Article 12", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/307 | ATO ID 2006/309", "Subject_References": "Double tax agreements Radio broadcasting Royalty article Spectrum licences Treaties United Kingdom", "Case_References": "", "Other_References": "OECD Committee on Fiscal Affairs for the Organisation for Economic Co-operation and Development, Model Tax Convention on Income and Capital, Paris, Condensed Version 15 July 2005 Explanatory Memorandum to the International Tax Agreements Amendment Bill 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006308", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Radio broadcasting Royalty article Spectrum licences Treaties United Kingdom"}
{"ATO_ID_Number": "ATO ID 2004/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of income derived by a Netherlands resident from the transporting of goods by ship within Australian territorial waters", "Issue": "Is the income derived by a Netherlands resident taxpayer from the transporting of goods by ship within Australian territorial waters assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The income derived by a Netherlands resident taxpayer from the transporting of goods by ship within Australian territorial waters is assessable under subsection 6-5(3) of the ITAA 1997.", "Facts": "The taxpayer is a resident of the Netherlands and a non-resident of Australia for income tax purposes. The taxpayer entered into an agreement with an Australian resident taxpayer. Under the terms of the agreement, the taxpayer agreed to load goods to a ship, transport and unload the goods to locations within the territorial waters of Australia. The taxpayer sub-contracted the work for the loading of goods into the ship to another unrelated entity. The taxpayer received a fixed sum from the Australian resident taxpayer for the performance of the terms of the agreement.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. The income from the transporting of goods using a ship within Australian territorial waters is ordinary income derived from Australian sources for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non resident, it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that those Acts are read as one. The Agreements Act effectively overrides the ITAA 1997 where there are inconsistent provisions (except for some limited provisions). Schedule 10 to the Agreements Act contains the agreement between Australia and the Kingdom of the Netherlands (the Netherlands Agreement) and the Protocol to that agreement. The Netherlands Agreement and the Protocol operate to avoid the double taxation of income received by Australian and Netherlands residents. Article 8(1) of the Netherlands Agreement provides that the profits from the operations of ships or aircraft derived by a resident of the Netherlands will be taxable only in the Netherlands. However, Article 8(2) of the Netherlands Agreement provides that the profits may be taxed in Australia if they are profits from the operation of ships or aircraft confined solely to places within Australia. Article 8(4) of the Netherlands Agreement provides that profits derived from the carriage of goods or merchandise shipped in Australia for discharge at another place in Australia shall be treated as profits from the operation of ships confined solely to places within Australia. Under Article 8(5) of the Netherlands Agreement, the amount upon which tax is payable on the profits from the operation of the ships under Article 8(2) of the Netherlands Agreement will not exceed 5 per cent of the amount paid or payable in respect of the carriage of goods or merchandise. Article 3(1) of the Netherlands Agreement defines the term 'Australia' when used in a geographical sense to include any area adjacent to the territorial limits of Australia consistently with international law, a law of Australia or of a State dealing with the exploitation of any of the natural resources. The taxpayer profits from the loading, transporting and unloading of goods by ship within Australian territorial waters. These are profits from the 'operation of ships' confined solely to places within Australia under Article 8(2) of the Netherlands Agreement. The amount upon which tax is payable, on the profits from these activities in Australia, will not exceed 5 per cent of the amount paid or payable in respect of the carriage of materials under Article 8(5) of the Netherlands Agreement. Accordingly, the income derived by a Netherlands resident taxpayer from the loading, transporting and unloading of goods by ship within Australian territorial waters is assessable under subsection 6-5(3) of the ITAA 1997 as Article 8(2) of the Netherlands Agreement applies.", "Date_of_Decision": "5 January 2004", "Year_of_Income": "Year ended 31 December 2003 Year ending 31 December 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004-42", "Subject_References": "Double tax agreements Netherlands Shipping", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200441", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Netherlands Shipping"}
{"ATO_ID_Number": "ATO ID 2004/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Ship agency commission fees derived by a Danish taxpayer in Australia", "Issue": "Are ship agency commission fees derived by the Australian branch of a Danish company covered by Article 8 of Schedule 18 to the International Agreements Act 1953 (the Agreements Act), such that these fees are only taxable in Denmark?", "Decision": "No. The ship agency commission fees derived by the Australian branch of a Danish company are not covered by Article 8 of Schedule 18 to the Agreements Act.", "Facts": "A Danish company is a holding company of a group of companies that own and operate shipping fleets. The holding company also has a branch office in Australia. This branch office is a commission agent. It arranges for exporters to move their cargoes on ships which are operated by other group companies. The branch office receives commission fees for organising these arrangements. The branch office is regarded as a 'permanent establishment' in Australia.", "Reasons_for_Decision": "Summary: Schedule 18 to the Agreements Act contains the double tax agreement between Australia and Denmark (the Danish Agreement). The Danish Agreement operates to avoid double taxation of income received by Australian and Danish residents. Article 8 of the Danish Agreement deals with the treatment of profits from shipping and air transport. This Article provides that the profits from the operation of ships or aircraft derived by a resident of Denmark will be taxable only in Denmark unless the profits from the operation of the ships or aircraft are confined solely to places within Australia. Profits derived from the carriage of passengers, livestock, mail, goods or merchandise by ships or aircraft are treated as profits from the operations of ships or aircraft. The Danish company is a holding company and not a ship operating company accordingly, Article 8 of the Danish Agreement does not apply. Therefore, the ship agency commission fees derived by the Australian branch of a Danish company are not covered by Article 8 of the Danish agreement. Note: Article 7 of the Danish Agreement provides that business profits are taxable only in Denmark unless the profits are attributable to a 'permanent establishment' in Australia. As the branch office is a 'permanent establishment' in Australia as defined in Article 5 of the Danish Agreement, the profits from the ship agency commission fees may be taxed in Australia under Article 7 of the Danish Agreement.", "Date_of_Decision": "23 December 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "International Agreements Act 1953 section 4 Schedule 18 Schedule 18, Article 5 Schedule 18, Article 7 Schedule 18, Article 8", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commission income Denmark Permanent establishment Shipping income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004111", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 | Keywords Commission income Denmark Permanent establishment Shipping income"}
{"ATO_ID_Number": "ATO ID 2010/43", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: initial exchange of currency under a cross-currency interest rate swap", "Issue": "Is the initial exchange of payments made in a cross currency interest rate (CCIR) swap subject to the two step translation under section 960-85 of the Income Tax Assessment Act 1997 (ITAA 1997), where the CCIR swap is entered into before the effective time of a functional currency choice under item 1 of subsection 960-60(1) of the ITAA 1997?", "Decision": "No, the initial exchange of payments made in a CCIR swap is not subject to the two step translation under section 960-85 of the ITAA 1997, where the CCIR swap is entered into before the effective time of a functional currency choice under item 1 of subsection 960-60(1) of the ITAA 1997.", "Facts": "AustCo is the head company of a consolidated group. AustCo has been preparing its financial statements in USD and is intending to make a functional currency choice to use USD with effect from 1 July 2010 under item 1 of subsection 960-60(1) of the ITAA 1997. AustCo has not previously chosen to use a non-AUD 'applicable functional currency'. AustCoFinance, a member of the tax consolidation group, enters into a CCIR swap with USCoHoldings, which is not a member of the tax consolidated group. The initial exchange occurred on 20 June 2003 whereby AustCoFinance pays a USD amount and receives an AUD amount from USCoHoldings. The re-exchange will occur on 31 December 2012 whereby AusCoFinance will pay back the AUD amount to USCoHoldings who will in turn repay the USD amount.", "Reasons_for_Decision": "Summary: Section 960-85 of the ITAA 1997 states: Special rule about translation - events that happened before the current choice took effect Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 960-85(1) If: (a) as the result of a choice (the current choice ) made by you under item 1 of the table in subsection 960-60(1), subsection 960-80(1) requires that an amount be translated to the *applicable functional currency; and (b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the event time ) before the current choice took effect; Taxation Ruling TR 2007/5 'Income tax: functional currency - when is an amount not in the \"applicable functional currency\"?' (TR 2007/5) makes the following statements about the scope and operation of section 960-85 of the ITAA 1997: 26. The two step translation rule in section 960-85 applies only to relevant 'pre-choice' amounts - that is those 'pre-choice' amounts that are directly relevant to determining an entity's tax relevant net amount and so need to be translated into the 'applicable functional currency'. ... 33. Section 960-85 is concerned with amounts which are 'attributable to an event that happened or a state of affairs that came into existence' in a prior year, (a 'prior year event'), being a year in which the use of the 'applicable functional currency' did not occur. ... 87. ... section 960-85 applies to amounts that are either relevant amounts or elements in the calculation of relevant amounts for the purposes of subsection 960-80(1) (see paragraphs 960-85(1)(a) and (2)(a)). These are amounts that therefore feature under subsection 960-80(1) in the working out of the particular annual net amount, such as taxable income or a tax loss. 91. The primary purpose of section 960-85 can thus be summarised as one of translating amounts that require conversion from the previous unit of account, being either Australian currency or any previous 'applicable functional currency', to the current 'applicable functional currency' ... 112. Where an amount to which section 960-85 potentially applies involves mainly a statutory concept, it is necessary to examine the income tax provision(s) giving rise to the existence of this amount, in order to determine whether there is a relevant 'event time', for the purposes of section 960-85. TR 2007/5 emphasises that section 960-85 of the ITAA 1997 applies only to relevant 'pre-choice' amounts (being amounts attributable to events that happened or states of affairs that came into existence before the effective time of a functional currency choice). Section 960-85 of the ITAA 1997 is essentially targeting amounts in existence at the effective time of the functional currency choice, which are elements in, or are amounts included in, the calculation of assessable income and allowable deductions for post functional currency choice income years. Where amounts of income and deductions have been included in the calculation of taxable income or a tax loss in an income year prior to the effective time of choice - and have no effect on the calculation of taxable income or tax loss in a 'post-choice' year - they are not (in this sense) 'in existence' at the time of choice and are not, in any case, relevant amounts. To put it another way, generally (exceptions would be trading stock on hand or a Division 36 of the ITAA 1997 loss) section 960-85 of the ITAA 1997 does not apply to amounts that have been included in the calculation of taxable income in a 'pre-choice' year of income because: With regard to the initial exchange of payments, there was a potential impact on taxable income calculated at the time of the actual event by comparing the contemporaneous cash flows. On entering into the swap, the taxpayer had an obligation to pay an amount of foreign currency being USD, in return for receiving AUD on the same day. The foreign exchange gain or loss made on the disposal of foreign currency (that is, on the disposal of USD) on 20 June 2003 was determined by reference to the tax cost of that currency (denominated in AUD) and the amount received for that currency (denominated in AUD). However, this was a 'nil amount' - as the swap took into account the spot rate of AUD/USD on 20 June 2003, to determine the AUD and USD amounts. The relevant point is that the legal rights and obligations under the initial exchange of payments were not created in exchange for the legal rights and obligations under the final exchange of payments. Rather, the initial exchange of payments on 20 June 2003 created legal rights and obligations only in respect of that initial exchange. Likewise, the final exchange of payments will create legal rights and obligations on 31 December 2012 only in respect of that final exchange. The amount of any gain or loss on the final exchange on 31 December 2012 will be worked out simply by comparing the actual AUD and USD amounts exchanged on that date. Accordingly, the initial exchange of payments had no future ongoing tax significance. Further, there was an amount (even though it was a nil amount) relevant to the calculation of taxable income in the year ended 30 June 2003. Therefore, there is no amount in relation to the initial exchange of payments that will be 'in existence' at the effective time of the functional currency choice and which can potentially be subject to translation under section 960-85.", "Date_of_Decision": "20 January 2010", "Year_of_Income": "Year ending 30 June 2010 Year ending 30 June 2011 Year ending 30 June 2012 Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 subsection 960-80(1) section 960-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/322 | ATO ID 2005/323 | ATO ID 2006/105", "Subject_References": "Applicable functional currency Interest rate swaps Currency swaps Functional currency choice", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201043", "Unmatched_Content": "at the event time, no previous choice made by you under item 1 of the table in subsection 960-60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Applicable functional currency Interest rate swaps Currency swaps Functional currency choice"}
{"ATO_ID_Number": "ATO ID 2010/44", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: re-exchange of currency under a cross-currency interest rate swap agreement", "Issue": "Is the re-exchange of currency under a cross currency interest rate (CCIR) swap agreement which occurs after the effective date of a functional currency choice, subject to the two step translation under section 960-85 of the Income Tax Assessment Act 1997 (ITAA 1997), where the CCIR swap agreement was entered into before the effective date of the functional currency choice made under item 1 of subsection 960-60(1) of the ITAA 1997?", "Decision": "No, the re-exchange of currency under a CCIR swap agreement which occurs after the effective date of a functional currency choice, is not subject to the two step translation under section 960-85 of the ITAA 1997, where the CCIR swap agreement was entered into before the effective date of the functional currency choice.", "Facts": "AustCo is the head company of a consolidated group. AustCo has been preparing its financial statements in USD and is intending to make a functional currency choice to use USD with effect from 1 July 2010 under item 1 of subsection 960-60(1) of the ITAA 1997. AustCo has not previously chosen to use a non-AUD 'applicable functional currency'. AustCoFinance, a member of the tax consolidation group, enters into a CCIR swap agreement with USCoHoldings, which is not a member of the tax consolidated group. The initial exchange occurred on 20 June 2003 whereby AustCoFinance pays a USD amount and receives an AUD amount from USCoHoldings. The re-exchange will occur on 31 December 2012 whereby AustCoFinance will pay back the AUD amount to USCoHoldings who will in turn repay the USD amount.", "Reasons_for_Decision": "Summary: Section 960-85 of the ITAA 1997 states: Section 960-85 Special rule about translation - events that happened before the current choice took effect Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 960-85(1) If: (a) as the result of a choice (the current choice ) made by you under item 1 of the table in subsection 960-60(1), subsection 960-80(1) requires that an amount be translated to the *applicable functional currency; and (b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the event time ) before the current choice took effect; Taxation Ruling TR 2007/5 'Income tax: functional currency - when is an amount not in the \"applicable functional currency\"?' (TR 2007/5) states at paragraphs 26, 33 and 37 that: 26. The two step translation rule in section 960-85 applies only to relevant 'pre-choice' amounts - that is those 'pre-choice' amounts that are directly relevant to determining an entity's tax relevant net amount and so need to be translated into the 'applicable functional currency'.' 33. Section 960-85 is concerned with amounts which are 'attributable to an event that happened, or a state of affairs that came into existence in a prior year', (a 'prior year event'), being a year in which the use of the 'applicable functional currency' did not occur.. 37. A requirement for section 960-85 to apply is that an amount is 'attributable to' an event or a 'state of affairs' that predates the time the choice to use the 'applicable functional currency' takes effect. TR 2007/5 emphasises that section 960-85 of the ITAA 1997 applies only to an event or state of affairs that took place in a year of income prior to the effective time of a functional currency choice. This is abundantly clear from the wording in the legislation. It is equally clear, therefore, that section 960-85 has no application to an event that happens or a state of affairs that comes into existence after a change to (or a change of) functional currency. The entry into the CCIR swap agreement requires both parties to exchange currencies at two points in time, an initial exchange on 20 June 2003, with the exchange being reversed on 31 December 2012. The re-exchange which occurs on 31 December 2012, whereby AustCoFinance will pay back the AUD amount to USCoHoldings who will in turn repay the USD amount, will not be subject to translation under section 960-85 of the ITAA 1997 as the events that arise on these transactions occur after the functional currency choice took effect. The AUD denominated amount on re-exchange will, however, be subject to the single step translation contained in subsection 960-80(1) of the ITAA 1997, as it is not in the applicable functional currency. Section 960-85 of the ITAA 1997 has no application to a 'post-choice' amount, event or state of affairs. The re-exchange between AustCoFinance and USCoHoldings is an event that occurs following the effective date of the functional currency choice and so gives rise to a post functional currency choice amount. As such, the amount is not subject to the two step translation under subsection 960-85(1) of the ITAA 1997.", "Date_of_Decision": "20 January 2010", "Year_of_Income": "Year ending 30 June 2010 Year ending 30 June 2011 Year ending 30 June 2012 Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 subsection 960-80(1) section 960-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Applicable functional currency Interest rate swaps Currency swaps Functional currency choice", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201044", "Unmatched_Content": "at the event time, no previous choice made by you under item 1 of the table in subsection 960-60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. ... | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Applicable functional currency Interest rate swaps Currency swaps Functional currency choice"}
{"ATO_ID_Number": "ATO ID 2010/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: amounts borrowed/lent in a non-AUD currency which later becomes the 'applicable functional currency'", "Issue": "Where amounts have been borrowed/lent in a non-AUD currency which later becomes the 'applicable functional currency', is the principal amount outstanding at the effective time of the functional currency choice an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, where amounts have been borrowed/lent in a non-AUD currency which later becomes the 'applicable functional currency', the principal amount outstanding at the effective time of the functional currency choice is an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the ITAA 1997.", "Facts": "The taxpayer is the head company of a consolidated group with effect from 1 July 2002. The taxpayer has been preparing its financial statements in USD and is intending to make a functional currency choice under Item 1 of subsection 960-60(1) of the ITAA 1997 to use USD, with effect from 1 July 2010. The taxpayer has not previously chosen to use a non-AUD 'applicable functional currency'. The taxpayer has entered into various loan agreements prior to the effective time of the functional currency choice under which it assumed various obligations. Some of these loan agreements were denominated in USD.", "Reasons_for_Decision": "Summary: Section 960-85 Special rule about translation - events that happened before the current choice took effect Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 960-85(1) If: (a) as the result of a choice (the current choice ) made by you under item 1 of the table in subsection 960-60(1), subsection 960-80(1) requires that an amount be translated to the *applicable functional currency; and (b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the event time ) before the current choice took effect; Taxation Ruling TR 2007/5 'Income tax: functional currency - when is an amount not in the 'applicable functional currency'?' states at paragraphs 32-34 and 101 that: 32. ... An 'amount' is not in the 'applicable functional currency' for the purposes of section 960-85, where the provisions within Subdivision 960-D have not previously recognised it as such. 33. Section 960-85 is concerned with amounts which are 'attributable to an event that happened or a state of affairs that came into existence' in a prior year, (a 'prior year event'), being a year in which the use of the 'applicable functional currency' did not occur. The concept of 'applicable functional currency' in this respect is purely an income tax law one. In the absence of a valid choice under subsection 960-60(1) to use this currency, there is no 'applicable functional currency' and the appropriate currency required to be used for income tax purposes is Australian currency. 34. It is considered that amounts which are 'attributable to' a 'prior year event' in a year in which the use of the 'applicable functional currency' did not apply, are thereby amounts which are not in the 'applicable functional currency'. This is so even where the amounts (or their elements), are denominated in the relevant source in the non-Australian currency that subsequently becomes the 'applicable functional currency'. 101. ... under the scheme of Subdivision 960-D, there cannot exist prior to the time of application of section 960-80, any amounts in the 'applicable functional currency', notwithstanding what the position may have been (say) for accounting purposes. This is because the 'applicable functional currency' is a statutory concept under section 960-70 which cannot have applied before this time. It follows that where loans were taken out or made in USD prior to the USD being chosen as the 'applicable functional currency', the amount of principal outstanding in USD as at the effective date of the functional currency choice is an amount that is not in the 'applicable functional currency'. This is because there is no 'applicable functional currency' (and hence can be no amount in the 'applicable functional currency') for income tax purposes, prior to the effective time of a functional currency choice. In a practical sense, if the loan is a post 30 June 2003 loan, the USD amount will have already been translated to Australian dollars pursuant to subsection 960-50(1) of Subdivision 960-C of the ITAA 1997. This means that the first step of the two step translation under section 960-85 of the ITAA 1997 will have already happened (see also former section 103-20 of the ITAA 1997 with regard to pre 1 July 2003 CGT amounts). The amount of principal in USD, which is outstanding at the effective time of a functional currency choice, is both a 'pre choice' amount that is attributable to a 'prior year event' and also a 'relevant amount' with potential ongoing tax significance. In particular, it is also an amount that is not in the 'applicable functional currency' and so is subject to translation under section 960-85 of the ITAA 1997 - even where the 'applicable functional currency' subsequently chosen is USD.", "Date_of_Decision": "4 March 2010", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 960-C subsection 960-50(1) Subdivision 960-D subsection 960-60(1) section 960-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Applicable functional currency Functional currency Functional currency choice Borrowings & loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201059", "Unmatched_Content": "at the event time, no previous choice made by you under item 1 of the table in subsection 960-60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Applicable functional currency Functional currency Functional currency choice Borrowings & loans"}
{"ATO_ID_Number": "ATO ID 2010/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: amounts borrowed/lent in a non-AUD currency other than the one which later becomes the 'applicable functional currency'", "Issue": "Where amounts have been borrowed/lent in a non-AUD currency other than the one which later becomes the 'applicable functional currency', is the amount of principal outstanding at the effective time of the functional currency choice an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes, where amounts have been borrowed/lent in a non-AUD currency other than the one which later becomes the 'applicable functional currency', the principal amount outstanding at the effective time of the functional currency choice is an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the ITAA 1997?", "Facts": "The taxpayer is the head company of a consolidated group. The taxpayer has been preparing its financial statements in USD and is intending to make a functional currency choice under Item 1 of subsection 960-60(1) of the ITAA 1997 to use USD, with effect from 1 July 2010. They have not previously chosen to use a non-AUD 'applicable functional currency'. The taxpayer has entered into various loan agreements prior to the effective time of the functional currency choice under which it assumed various obligations. Some of these loan agreements were denominated in CAD/Euro.", "Reasons_for_Decision": "Summary: Section 960-85 Special rule about translation - events that happened before the current choice took effect Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 960-85(1 ) If: (a) as the result of a choice (the current choice ) made by you under item 1 of the table in subsection 960-60(1), subsection 960-80(1) requires that an amount be translated to the *applicable functional currency; and (b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the event time ) before the current choice took effect; Taxation Ruling TR 2007/5 'Income tax: functional currency - when is an amount not in the 'applicable functional currency'?' states at paragraphs 26, 33 and 37 that - 26. The two step translation rule in section 960-85 applies only to relevant 'pre-choice' amounts - that is those 'pre-choice' amounts that are directly relevant to determining an entity's tax relevant net amount and so need to be translated into the 'applicable functional currency'. 33. Section 960-85 is concerned with amounts which are 'attributable to an event that happened or a state of affairs that came into existence' in a prior year, (a 'prior year event'), being a year in which the use of the 'applicable functional currency' did not occur. The concept of 'applicable functional currency' in this respect is purely an income tax law one. In the absence of a valid choice under subsection 960-60(1) to use this currency, there is no 'applicable functional currency' and the appropriate currency required to be used for income tax purposes is Australian currency. 37. A requirement for section 960-85 to apply is that an amount is 'attributable to' an event or a 'state of affairs' that predates the time the choice to use the 'applicable functional currency' takes effect. Such an amount will be attributable in this sense where there is a sufficient causal connection between it and the relevant event or 'state of affairs'. Section 960-85 of the ITAA 1997 is essentially targeting amounts in existence at the effective time of a functional currency choice, which are elements in, or are amounts included in, the calculation of assessable income and allowable deductions for post functional currency choice income years. The amount of non-AUD principal borrowed or lent that is outstanding at the effective time of the functional currency choice, is clearly an amount in existence at that time. It is also an amount 'attributable to' a pre-choice event or state of affairs (essentially being attributable to a number of events that happened, such as the taking out or making of the initial loan and the making or receiving of loan repayments). Further, the amount of non-AUD principal outstanding at the effective time of the functional currency choice is an amount which will be an element in the calculation of assessable income and allowable deductions in post functional currency choice years, for example under Division 775 of the ITAA 1997. Accordingly, the two step translation under section 960-85 of the ITAA 1997 will apply to the amount of principal denominated in CAD/Euro that is outstanding at the effective time of the functional currency choice. In a practical sense, if the loan is a post 30 June 2003 loan, the non-AUD amount will have already been translated to Australian dollars pursuant to subsection 960-50(1) of Subdivision 960-C of the ITAA 1997. This means that the first step of the two step translation under section 960-85 will have already happened (see also former section 103-20 of the ITAA 1997 with regard to pre 1 July 2003 CGT amounts). The amount of principal denominated in a non-AUD currency other than the one which later becomes the 'applicable functional currency', and which is outstanding at the effective time of the functional currency choice , is both a 'pre choice' amount that is attributable to a 'prior year event' and also a 'relevant amount' with ongoing tax significance. In addition, it is an amount that is not in the 'applicable functional currency' and so is subject to the two step translation under section 960-85 of the ITAA 1997.", "Date_of_Decision": "2 march 2010", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 Division 775 Subdivision 960-C Subsection 960-50(1) Subdivision 960-D Subsection 960-60(1) Section 960-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Applicable functional currency Event time Functional currency Functional currency choice Borrowings & loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201060", "Unmatched_Content": "at the event time, no previous choice made by you under item 1 of the table in subsection 960-60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Applicable functional currency Event time Functional currency Functional currency choice Borrowings & loans"}
{"ATO_ID_Number": "ATO ID 2010/70", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: repayment of principal amounts on loans denominated in a non-AUD currency which later becomes the 'applicable functional currency'", "Issue": "Is a repayment of a principal amount, which occurs after the effective date of a functional currency choice, on a loan denominated in the non-AUD currency which later becomes the 'applicable functional currency', an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, a repayment of a principal amount, which occurs after the effective date of a functional currency choice, on a loan denominated in the non-AUD currency which later becomes the 'applicable functional currency', is not an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the ITAA 1997.", "Facts": "The taxpayer is the head company of a consolidated group. The taxpayer has been preparing its financial statements in USD and is intending to make a functional currency choice under Item 1 of subsection 960-60(1) of the ITAA 1997 to use USD, with effect from 1 July 2010. The taxpayer has not previously chosen to use a non-AUD 'applicable functional currency'. The taxpayer entered into various loan agreements prior to any functional currency choice under which it assumed various obligations. Some of these loans agreements were denominated in USD.", "Reasons_for_Decision": "Summary: Section 960-85 Special rule about translation - events that happened before the current choice took effect Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 960-85(1 ) If : (a) as the result of a choice (the current choice ) made by you under item 1 of the table in subsection 960-60(1), subsection 960-80(1) requires that an amount be translated to the *applicable functional currency; and (b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the event time ) before the current choice took effect; Taxation Ruling TR 2007/5 'Income tax: functional currency - when is an amount not in the 'applicable functional currency'?' (TR 2007/5) states at paragraphs 26, 33, 34, 37 and 91 that 26. The two step translation rule in section 960-85 applies only to relevant 'pre-choice' amounts - that is those 'pre-choice' amounts that are directly relevant to determining an entity's tax relevant net amount and so need to be translated into the 'applicable functional currency'. 33. Section 960-85 is concerned with amounts which are 'attributable to an event that happened, or a state of affairs that came into existence in a prior year', (a 'prior year event'), being a year in which the use of the 'applicable functional currency' did not occur. The concept of 'applicable functional currency' in this respect is purely an income tax law one. In the absence of a valid choice under subsection 960-60(1) to use this currency, there is no 'applicable functional currency' and the appropriate currency required to be used for income tax purposes is Australian currency. 34. It is considered that amounts which are 'attributable to' a 'prior year event' in a year in which the use of the 'applicable functional currency' did not apply, are thereby amounts which are not in the 'applicable functional currency'. This is so even where the amounts (or their elements), are denominated in the relevant source in the non-Australian currency that subsequently becomes the 'applicable functional currency'. 37. A requirement for section 960-85 to apply is that an amount is 'attributable to' an event or a 'state of affairs' that predates the time the choice to use the 'applicable functional currency' takes effect. Such an amount will be attributable in this sense where there is a sufficient causal connection between it and the relevant event or 'state of affairs'. 91. The primary purpose of section 960-85 can thus be summarised as one of translating amounts that require conversion from the previous unit of account, being either Australian currency or any previous 'applicable functional currency', to the current 'applicable functional currency' - in a way that recognises any exchange rate fluctuation between the old unit of account and the new one. TR 2007/5 emphasises that section 960-85 of the ITAA 1997 applies only to an event or state of affairs that took place in a year of income prior to the effective time of a functional currency choice. Therefore, section 960-85 has no application to an event that happens or a state of affairs that comes into existence after a change to (or a change of) functional currency. Section 960-85 of the ITAA 1997 is essentially targeting relevant amounts in existence, and events that have already happened, at the effective time of a functional currency choice. That is, elements in the calculation of post choice amounts of assessable income and allowable deductions, that are 'attributable to an event that happened, or a state of affairs that came into existence at a time before the current choice took effect', are the amounts that are targeted by section 960-85. In effect, section 960-85 of the ITAA 1997 takes a 'snapshot' of these amounts at one point in time (the effective time of the functional currency choice) - being the date of transition to the 'applicable functional currency'. These amounts are then translated to the 'applicable functional currency' under the two step translation process. It is important to note that, after this point in time, section 960-85 has no further application - unless there is a subsequent change in the 'applicable functional currency'. The amounts (elements) subject to translation under section 960-85 of the ITAA 1997 are generally either assets such as borrowing expenses (a prepaid expense for income tax purposes), depreciating assets, CGT assets, trading stock on hand, traditional securities, etcetera, or liabilities such as the amount of principal outstanding on a loan received. The post functional currency choice repayment of principal amounts, on loans denominated in the non-AUD currency which later becomes the 'applicable functional currency', are all events that occur following the effective time of the functional currency choice. They are all 'post-choice' events and so give rise to post functional currency choice amounts. As such, these repayments of principal are clearly not subject to the two step translation under subsection 960-85(1) of the ITAA 1997. In any case, the ' post -choice' principal repayments of loans denominated in the non-AUD currency (USD) which later becomes the 'applicable functional currency' - will all be repayments of amounts that are now in the 'applicable functional currency' (of USD). Thus, these repayments of principal cannot be subject to translation under either subsection 960-80(1) of the ITAA 1997 or section 960-85 of the ITAA 1997. In contrast, the principal loan balance in the non-AUD currency which later becomes the 'applicable functional currency' (USD), and which is outstanding at the effective time of the functional currency choice, is an amount that is not in the 'applicable functional currency'; refer again to paragraphs 33-34 of TR 2007/5. This is also the case if the principal loan balance has been translated to AUD for income tax purposes prior to the effective time of the functional currency choice, that is, pursuant to subsection 960-50(1) of Subdivision 960-C of the ITAA 1997. Further, the amount of the principal loan balance outstanding at the effective time of the functional currency choice is clearly an amount 'attributable to an event that happened, or a state of affairs that came into existence', prior to the effective time of the functional currency choice - unlike the USD repayments of principal made after this time. | Detailed Reasoning - Conclusion: A repayment of a principal amount, which occurs after the effective date of a functional currency choice, on loans denominated in the non-AUD currency which later becomes the 'applicable functional currency', is not an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the ITAA 1997.", "Date_of_Decision": "2 March 2010", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 960-C subsection 960-50(1) Subdivision 960-D subsection 960-60(1) subsection 960-80(1) section 960-85 subsection 960-85(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/59 | ATO ID 2010/60 | ATO ID 2010/71", "Subject_References": "Applicable functional currency Functional currency Functional currency choice Borrowings & loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201070", "Unmatched_Content": "at the event time, no previous choice made by you under item 1 of the table in subsection 960-60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Applicable functional currency Functional currency Functional currency choice Borrowings & loans"}
{"ATO_ID_Number": "ATO ID 2010/71", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Functional currency choice: repayment of principal amounts on loans denominated in a non-AUD currency other than the one which later becomes the 'applicable functional currency'", "Issue": "Is a repayment of a principal amount, which occurs after the effective date of a functional currency choice, on a loan denominated in a non-AUD currency other than the one which later becomes the 'applicable functional currency', an amount that needs to be translated under the two step translation in section 960-85 of Subdivision 960-D of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No, a repayment of a principal amount, which occurs after the effective date of a functional currency choice, on a loan denominated in a non-AUD currency other than the one which later becomes the 'applicable functional currency', is not an amount that needs to be translated under the two step translation in section 960-85 of Subsection 960-D of the ITAA 1997.", "Facts": "The taxpayer is the head company of a consolidated group. The taxpayer has been preparing its financial statements in USD and is intending to make a functional currency choice under Item 1 of subsection 960-60(1) of the ITAA 1997 to use USD, with effect from 1 July 2010. They have not previously chosen to use a non-AUD 'applicable functional currency'. The taxpayer entered into various loan agreements prior to any functional currency choice under which it assumed various obligations. Some of these loan agreements were denominated in CAD/Euro.", "Reasons_for_Decision": "Summary: Section 960-85 Special rule about translation - events that happened before the current choice took effect Australian resident required to prepare financial reports under section 292 of the Corporations Act 2001 960-85(1 ) If : (a) as the result of a choice (the current choice ) made by you under item 1 of the table in subsection 960-60(1), subsection 960-80(1) requires that an amount be translated to the *applicable functional currency; and (b) the amount is attributable to an event that happened, or a state of affairs that came into existence, at a time (the event time ) before the current choice took effect; Taxation Ruling TR 2007/5 'Income tax: functional currency - when is an amount not in the 'applicable functional currency'?' states at paragraphs 26, 33, 37 and 108 that 26. The two step translation rule in section 960-85 applies only to relevant 'pre-choice' amounts - that is those 'pre-choice' amounts that are directly relevant to determining an entity's tax relevant net amount and so need to be translated into the 'applicable functional currency'. 33. Section 960-85 is concerned with amounts which are 'attributable to an event that happened or a state of affairs that came into existence' in a prior year, (a 'prior year event'), being a year in which the use of the 'applicable functional currency' did not occur. .... 37. A requirement for section 960-85 to apply is that an amount is 'attributable to' an event or a 'state of affairs' that predates the time the choice to use the 'applicable functional currency' takes effect. Such an amount will be attributable in this sense where there is a sufficient causal connection between it and the relevant event or 'state of affairs'. 108. An amount that features, for the purposes of subsection 960-80(1), in the calculation of one of the annual net amounts to which the subsection refers, will not be affected by section 960-85 unless it is also 'attributable to' an 'event or a state of affairs' (the 'event time'), which has taken place before the time the choice to use the 'applicable functional currency' takes effect. TR 2007/5 emphasises that section 960-85 of the ITAA 1997 applies only to an event or state of affairs that took place in a year of income prior to the effective time of a functional currency choice. Therefore, section 960-85 has no application to an event that happens or a state of affairs that comes into existence after a change to (or a change of) functional currency. Section 960-85 of the ITAA 1997 is essentially targeting relevant amounts in existence, and events that have already happened, at the effective time of a functional currency choice. That is, elements in the calculation of post choice amounts of assessable income and allowable deductions, that are 'attributable to an event that happened, or a state of affairs that came into existence at a time before the current choice took effect', are the amounts that are targeted by section 960-85. In effect, section 960-85 of the ITAA 1997 takes a 'snapshot' of these amounts at one point in time (the effective time of the functional currency choice) - being the date of transition to the 'applicable functional currency'. These amounts are then translated to the 'applicable functional currency' under the two step translation process. It is important to note that, after this point in time, section 960-85 has no further application - unless there is a subsequent change in the 'applicable functional currency'. The amounts (elements) subject to translation under section 960-85 of the ITAA 1997 are generally either assets such as borrowing expenses (a prepaid expense for income tax purposes), depreciating assets, CGT assets, trading stock on hand, traditional securities, etcetera, or liabilities such as the amount of principal outstanding on a loan received. Any repayments of principal made in CAD/Euro after the effective time of the functional currency choice to make USD the 'applicable functional currency', are all 'post-choice' events which give rise to post functional currency choice amounts. These repayments of principal are not attributable to a 'pre-choice' event or state of affairs in the sense required by section 960-85 of the ITAA 1997, as they were not made before the effective time of the functional currency choice. As indicated above, the one point in time for the operation of section 960-85 of the ITAA 1997 has passed. The only translation rules that are relevant following the effective time of the functional currency choice are the translation rules contained in section 960-80 of the ITAA 1997. The repayments of principal in CAD/Euro made after the effective time of the functional currency choice will be subject to translation to USD under subsection 960-80(1) of the ITAA 1997, as these repayments (denominated in CAD/Euro) will be amounts that are not in the 'applicable functional currency' of USD. In contrast, the principal loan balance in CAD/Euro outstanding at the effective time of the functional currency choice is an amount that is 'attributable to' an 'event that happened, or a state of affairs that came into existence' prior to the time of the effective functional currency choice - and so is subject to translation under section 960-85 of the ITAA 1997. The principal loan balance outstanding in CAD/Euro may be 'attributable to' a number of events that have happened (that is, the taking out of the loan and the making of several principal repayments) and so is perhaps more appropriately described as a 'pre-choice state of affairs'. Either way, the principal loan balance outstanding in CAD/Euro is a 'pre-choice' amount which is subject to translation under section 960-85 of the ITAA 1997. | Detailed Reasoning - Conclusion: A repayment of a principal amount, which occurs after the effective date of a functional currency choice, on a loan in a non-AUD currency other than the one which later becomes the 'applicable functional currency', is not an amount that is attributable to a 'pre-choice' event or state of affairs for the purposes of the two step translation in section 960-85 of Subdivision 960-D of the ITAA 1997.", "Date_of_Decision": "2 March 2010", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 Subdivision 960-D subsection 960-60(1) section 960-80 subsection 960-80(1) section 960-85", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2007/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/59 | ATO ID 2010/60 | ATO ID 2010-70", "Subject_References": "Applicable functional currency Functional currency Functional currency choice Borrowings & loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201071", "Unmatched_Content": "at the event time, no previous choice made by you under item 1 of the table in subsection 960-60(1) was in effect | the amount is to be translated first to Australian currency at the exchange rate applicable at the event time, and then to the *applicable functional currency at the exchange rate applicable when the current choice took effect. | Related Public Rulings (including Determinations) Taxation Ruling TR 2007/5 | Keywords Applicable functional currency Functional currency Functional currency choice Borrowings & loans"}
{"ATO_ID_Number": "ATO ID 2012/70", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax on interest received by a US Limited Liability Company", "Issue": "Is a United States Limited Liability Company (US LLC) with Australian resident members liable to pay interest withholding tax pursuant to subsection 128B(5) of the Income Tax Assessment Act 1936 (ITAA 1936) on interest received from an Australian resident company?", "Decision": "No. A US LLC with Australian resident members is not liable to pay interest withholding tax pursuant to subsection 128B(5) of the ITAA 1936 on interest received from an Australian resident company.", "Facts": "US LLC is a limited liability company (LLC) established under the US State of Delaware's Limited Liability Company Act (Del.). US LLC is not a resident of Australia. The only members of US LLC are two Australian resident companies. US LLC has elected to be treated as a partnership for the purposes of US tax law. US LLC is a foreign hybrid company under section 830-15 of the Income Tax Assessment Act 1997 (ITAA 1997). US LLC receives interest income from an Australian resident company. The interest has an Australian source, for the purposes of both Australian and US tax law. Subsection 128B(2A) of the ITAA 1936 does not apply in this case as the US LLC carries on its business itself; that is its members do not carry on the business as partners.", "Reasons_for_Decision": "Detailed Reasoning - Interest paid to non-residents and to certain other persons (withholding tax): A 'non-resident' is liable to pay withholding tax under subsection 128B(5) of the ITAA 1936 if the 'non-resident' derives income that consists of interest and the requirements of subsection 128B(2) of the ITAA 1936 are satisfied in relation to that income. Subsection 128B(2) of the ITAA 1936 provides that: Subject to subsection (3), this section ... applies to income that: (a) is derived ... by a non-resident; and (b) consists of interest that: (i) is paid to the non-resident ... . 'Non-resident' is defined in subsection 6(1) of the ITAA 1936 to mean 'a person who is not a resident of Australia'. Thus, subsections 128B(2) and 128B(5) of the ITAA 1936, in conjunction with the definition of 'non-resident' in subsection 6(1) of the ITAA 1936, provide that interest that is both derived by and paid to 'a person who is not a resident of Australia', will be subject to interest withholding tax if the other requirements of subsection 128B(2) of the ITAA 1936 are satisfied. 'Person' is defined in subsection 6(1) of the ITAA 1936 to have the same meaning as in the ITAA 1997, that is to include a company. US LLC is 'a person who is not a resident of Australia'. As a company it is clearly a 'person' - and it is also not an Australian resident. At first instance, then (that is disregarding Division 830 of the ITAA 1997 - Foreign hybrids), it seems that US LLC may have a liability to pay interest withholding tax under subsection 128B(5) of the ITAA 1936, on the interest received. | Detailed Reasoning - Subdivision 830-B of the ITAA 1997 - Extension of normal partnership provisions to foreign hybrid companies: However, US LLC is a foreign hybrid company as defined in section 830-15 of the ITAA 1997. Section 830-20 of the ITAA 1997 provides that: 830-20 Treatment of company as a partnership 830-20 If a company is a *foreign hybrid company in relation to an income year, the *foreign hybrid tax provisions apply as if the company were a partnership, and for that purpose the following provisions of this Subdivision have effect. Section 830-20 of the ITAA 1997 treats a foreign hybrid company 'as if the company were a partnership' for most Australian income tax purposes. Additionally, section 830-25 of the ITAA 1997 provides that the shareholders (members) in the foreign hybrid company are the partners in the partnership. Subdivision 830-B of the ITAA 1997 thereby extends the list of arrangements that fall within the definition of 'partnership' in subsection 995-1(1) of the ITAA 1997 (and therefore subsection 6(1) of the ITAA 1936) - for the purpose of securing for foreign hybrid companies the method of taxation that applies to other partnerships. Note that Subdivision 830-B of the ITAA 1997 does not deem a foreign hybrid company (like US LLC) to satisfy any or all of the requirements of the definition of 'partnership' in subsection 995-1(1) of the ITAA 1997 - such as 'an association of persons ... carrying on business as partners or in receipt of ... income jointly' - where the first limb of the definition refers to a partnership under general law, and the second limb is a statutory extension of the term. (Partnerships which satisfy the second limb of this definition, that is partnerships for tax purposes only, are referred to as 'tax law partnerships' in this ATO ID.) Fisher J in FCT v. Comber 86 ATC 4171 at 4177; (1986) 10 FCR 88 at 96; 64 ALR 451 at 458, explained the limited effect of deeming provisions as follows: In my opinion deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to ( Ex parte Walton (1881) 17 Ch D 746 per James LJ at 756). It is improper in my view to extend by implication the express application of such a statutory fiction. Furthermore, Subdivision 830-B of the ITAA 1997 does not deem a foreign hybrid company to have any of the attributes of a general law partnership (for example mutual agency relationship), other than those that are specifically provided by Division 830 of the ITAA 1997. See, for example, sections 830-30 and 830-35 of the ITAA 1997. In AAT Case 12/95 ; AAT Case 10 , 079 ; (1995) 95 ATC 175 at 181; (1995) 30 ATR 1169 at 1175, the Tribunal Members considered the purpose and effect of the second limb of the definition of 'partnership'. Their joint judgement stated that: 21. The Tribunal is of the view that the purpose of the definition of \"partnership\" as it appears in section 6(1) of the Act is the application to arrangements answering that description of Division 5 of Part III of the Act and, in the circumstances of this reference, particularly sections 90, 91 and 92. Against that background, and here the words of Fisher J are repeated, the deeming provisions are required by their nature to be construed strictly and only for the purpose for which they are resorted to and it is improper to extend by implication the express application of such a statutory fiction. This fiction does not, in our opinion, cloak an arrangement of the kind now being contemplated with the additional refinements of partnership assets and liabilities and partners capital accounts. ... Similarly, the purpose and effect of Subdivision 830-B of the ITAA 1997 is only that the foreign hybrid tax provisions referred to in section 830-20 of the ITAA 1997 apply as if US LLC were a tax law partnership and its members partners in this partnership. Importantly, subsection 995-1(1) of the ITAA 1997 defines foreign hybrid tax provisions to include the partnership provisions in Division 5 of Part III of the ITAA 1936. | Detailed Reasoning - Division 5 of Part III of the ITAA 1936 - Partnerships: Division 5 of Part III of the ITAA 1936 will therefore apply to US LLC (as a tax law partnership) and to its members (as the partners in the partnership), subject to the special rules in Division 830 of the ITAA 1997. As noted above, by virtue of sections 830-20 and 830-25 of the ITAA 1997, US LLC is a partnership for the purposes of sections 90 to 92 of the ITAA 1936 - while each of the Australian resident members of US LLC are partners in the US LLC partnership for the purpose of section 92 of the ITAA 1936. The provisions of Division 5 of Part III of the ITAA 1936 establish the rules for income tax purposes by which a partner's individual interest in the 'net income' or 'partnership loss' of a partnership is determined. The general structure of Division 5 of Part III of the ITAA 1936 is that the 'net income' of (or 'partnership loss' incurred by) a partnership is firstly determined (under section 90 of the ITAA 1936) - with the calculation being similar to that for an individual in calculating its taxable income or tax loss. Accordingly, US LLC will have to calculate its 'net income' under section 90 of the ITAA 1936. Section 90 of the ITAA 1936 provides that the 'net income' or 'partnership loss' of a partnership is calculated by subtracting certain allowable deductions from the assessable income of the partnership 'as if the partnership were a taxpayer' - thereby treating the partnership as if it was a separate entity or distinct commercial operation (in effect, a hypothetical taxpayer), for some taxation purposes. See Goods and Services Tax Ruling GSTR 2003/13 at paragraphs 22-24; Rowe v. Federal Commissioner of Taxation (1982) ATC 4243; (1982) 60 FLR 475; 13 ATR 110 (at 111) and the decision by Beaumont J in Federal Commissioner of Taxation v. McDonald 87 ATC 4541 (at 4550); (1987) 15 FCR 172; 18 ATR 957. Thus, Division 5 of Part III of the ITAA 1936, for taxation accounting purposes, but not so as to impose any liability upon the partnership to tax, treats a partnership as an entity separate from its members; see Federal Commissioner of Taxation v. Galland 86 ATC 4885 per Mason and Wilson JJ at 4887; (1986) 61 ALJR 69; (1986) 162 CLR 408; (1986) 68 ALR 403; (1986) 18 ATR 33. Division 5 of Part III of the ITAA 1936 does not override the general law principle that an ordinary or general law partnership is not a separate entity - that is that such a partnership has no legal personality and is not distinguishable from the persons composing it. In this regard, Taxation Ruling TR 2005/7 notes that: 15. A partnership is not a legal entity with its own personality and existence separate and distinct from the partners ( Rose v. FC of T (1951) 84 CLR 118) and the ITAA 1936 does not modify this principle for the purposes of the income tax law. Hence, Division 5 of Part III of the ITAA 1936 does not cause either a general law partnership, a foreign hybrid company such as US LLC or any other tax law partnership to be subject to tax in its own right, either by way of assessment or withholding. Nor does the fact that US LLC is a separate legal entity from its members, affect the manner in which Division 5 of Part III of the ITAA 1936 operates in relation to income received by US LLC. | Detailed Reasoning - Section 92 of the ITAA 1936 - Income and deductions of partner: Whether a partnership (including a foreign hybrid ) is a general law partnership or a tax law partnership, section 92 of the ITAA 1936 provides the same result for all partners. That is, each partner's individual share or interest in the 'net income' or 'partnership loss' of the partnership, as determined in accordance with section 90 of the ITAA 1936, is included in the assessable income or allowable deductions of the partner. As the full High Court observed in Rose v. F.C. of T (1951) 84 C.L.R. 118 (at page 124); 25 ALJ 625; 9 ATD 334: Division 5 of Part III, which deals with partnerships, is based upon the view that the collective income earned by the partnership belongs according to their shares to the partners regardless of its liberation from the funds of the partnership, that is, its actual distribution. While in Federal Commissioner of Taxation v. Everett 78 ATC 4595; (1978) 9 ATR 211; (1978) 38 FLR 26; Fisher J noted that: Division 5 of Pt. III of the Act has particular reference to partnerships and its consequence is to place a taxpayer who is in partnership in an exceptional situation qua his partnership income. Whereas under sec. 25 of the Act it is provided that his assessable income includes his gross income derived directly or indirectly from all sources, yet by virtue of Div. 5 his assessable income is directed to include his individual interest not in the gross income but in the net income of the partnership. Specifically, under subsection 92(1) of the ITAA 1936, the individual interest of a partner in the 'net income' of a partnership is included in the assessable income of the partner. Likewise, subsection 92(2) of the ITAA 1936 provides that, subject to section 830-45 of the ITAA 1997, a partner's individual interest in the 'partnership loss' from a partnership will be an allowable deduction. With the members of US LLC being treated under Division 830 of the ITAA 1997 as if they are 'partners' in the US LLC 'partnership', sections 90 and 92 of the ITAA 1936 ensure that only the individual interest (per section 830-30 of the ITAA 1997) of these partners in the 'net income' of US LLC is liable to taxation. | Detailed Reasoning - Conclusion: Division 5 of the ITAA 1936 reflects the basic legal principle that the profits or net income of a general law partnership are the profits or net income of those who constitute it. Section 92 of the ITAA 1936 ensures that this is also effectively the result for all tax law partnerships. This includes where a non-resident company (such as US LLC) that qualifies as a foreign hybrid company under section 830-15 of the ITAA 1997, is thereby treated for income tax purposes as if it were a partnership - with each shareholder in the company being treated as a partner - by sections 830-20 and 830-25 of the ITAA 1997 respectively. The interest that US LLC receives from the Australian resident company is assessable income of the US LLC 'partnership' and is accordingly included in the partnership's 'net income' as defined in section 90 of the ITAA 1936. A partner's assessable income includes its interest in the 'net income' of the partnership by reason of sections 90 and 92 of the ITAA 1936. As Fisher J stated in Federal Commissioner of Taxation v. Everett 78 ATC 4595 at 4618; (1978) 9 ATR 211; (1978) 38 FLR 26: a taxpayer partner ... derives assessable income upon the ascertainment of the net income of the partnership for the year of income. Hence, the partners of US LLC derive assessable income under section 92 of the ITAA 1936, upon the ascertainment of both the 'net income' of the partnership for the year of income and the partner's individual interest therein. At this time, the Australian resident 'partners' of US LLC will clearly have derived 'income that ... consists of interest' - which is to be considered for the purposes of subsection 128B(2) of the ITAA 1936. As these 'partners' are not non-residents, subsection 128B(2) of the ITAA 1936 has no application and no interest withholding tax will be imposed under subsection 128B(5) of the ITAA 1936. Section 128D of the ITAA 1936 will thus have no operation and the interest income will be included in the assessable income of the Australian resident 'partners', as part of the individual interest of these partners in the 'net income' of the US LLC 'partnership', under section 92 of the ITAA 1936. | Detailed Reasoning - The effect of the US convention: In determining the liability of an Australian resident to Australian tax on international transactions, it is necessary to also consider the applicable tax treaty or other agreement defined in section 3AAA or 3AAB of the International Tax Agreements Act 1953 . The relevant agreement in this case is the Convention between the Government of Australia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income [1983] ATS 16 (the US convention). The US convention will not affect the outcomes in this case. As US LLC is a fiscally transparent in the US, any US income tax is imposed at the level of the members of US LLC. A fiscally transparent entity is an entity that is taxed on a look-through basis, such that the participants in the entity are liable to tax on the income or profit derived by the entity, rather than the entity itself. Since US LLC qualifies as a foreign hybrid company under Division 830 of the ITAA 1997, the Australian resident members of US LLC are treated as partners in a partnership under Australian income tax law, thereby ensuring alignment of tax treatment of the interest income under the laws of both countries. See paragraph 5 and paragraphs 73-79 of Taxation Ruling TR 2009/6. The interest income received by US LLC is treated for Australian (and US) tax law purposes as Australian sourced income of Australian residents (being the members of US LLC), and the US convention does not disturb Australia's taxing right.", "Date_of_Decision": "20 August 2012", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 Subsection 6(1) Section 90 Section 92 Subsection 92(1) Subsection 92(2) Subsection 128B(1A) Subsection 128B(2) Subsection 128B(2A) Subsection 128B(5) Section 128D", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2235 | Taxation Ruling IT 2501 | Taxation Ruling IT 2540 | Taxation Ruling IT 2608 | Taxation Ruling TR 93/32 | Taxation Ruling TR 94/8 | Taxation Ruling TR 95/25 | Taxation Ruling TR 2005/7 | Taxation Ruling TR 2009/6 | Goods and Services Tax Ruling GSTR 2004/6 | Goods and Services Tax Ruling GSTR 2003/13 | Taxation Determination TD 2002/24 | Taxation Determination TD 2009/20", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/18 | ATO ID 2009/135 | ATO ID 2011/35 | ATO ID 2010/93 | ATO ID 2010/94", "Subject_References": "International tax Foreign hybrid company Withholding taxes Non resident interest withholding tax Partnerships Partnership income Other references United States convention [1983] ATC 16", "Case_References": "AAT Case 12/95 AAT Case 10,079 (1995) 95 ATC 175 (1995) 30 ATR 1169", "Other_References": "US convention [1983] ATS 16", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201270", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2235 Taxation Ruling IT 2501 Taxation Ruling IT 2540 Taxation Ruling IT 2608 Taxation Ruling TR 93/32 Taxation Ruling TR 94/8 Taxation Ruling TR 95/25 Taxation Ruling TR 2005/7 Taxation Ruling TR 2009/6 Goods and Services Tax Ruling GSTR 2004/6 Goods and Services Tax Ruling GSTR 2003/13 Taxation Determination TD 2002/24 Taxation Determination TD 2009/20 | Keywords International tax Foreign hybrid company Withholding taxes Non resident interest withholding tax Partnerships Partnership income Other references United States convention [1983] ATC 16"}
{"ATO_ID_Number": "ATO ID 2008/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Hybrid Limited Partnership: Delaware Limited Partnership", "Issue": "Can a limited partnership, formed in the United States, under the Delaware Revised Uniform Limited Partnership Act (Del.) (DRULPA) be a foreign hybrid limited partnership within the meaning of subsection 830-10(1) of Division 830 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A limited partnership formed under the DRULPA can be a foreign hybrid limited partnership within the meaning of subsection 830-10(1) of Division 830 of the ITAA 1997 as it is a 'limited partnership' within the meaning of section 995-1 of the ITAA 1997.", "Facts": "Limited partnerships (LP) in Delaware are governed by the DRULPA which forms Chapter 17 of Title 6 to the Delaware Code. Section 17-1105 of the DRULPA provides that 'in any case not provided for' reference may also be made to the Delaware Revised Uniform Partnership Act (DRUPA) which forms Chapter 15 of Title 6 to the Delaware Code. An LP is formed under the DRULPA by executing a certificate of limited partnership. Under the Delaware legislation, an LP has the following features: The partners to the LP have executed a partnership agreement (LP Agreement) which includes the following terms: The LP was not formed solely for the purposes of becoming a venture capital limited partnership, a fund of funds or venture capital management partnership (VCMP).", "Reasons_for_Decision": "Summary: For a limited partnership to be a foreign hybrid limited partnership, it must satisfy all of the requirements in section 830-10 of the ITAA 1997, including meeting the definition of 'limited partnership'. 'Limited partnership' is defined, as relevant, in section 995-1 of the ITAA 1997 to mean: As each limited partner's liability is limited under the LP agreement, the LP will be a limited partnership if it is 'an association of persons (other than a company) carrying on business as partners or in receipt of ordinary income or statutory income jointly'. An LP formed under the DRULPA has features both commonly associated with a business carried on by partners as partners and with a company. In particular, while separate legal entity status is more commonly associated with companies, (for example see Rose v. Federal Commissioner of Taxation (1951) 84 CLR 118, (1951) 9 ATD 334, (1951) 5 AITR 197) this feature of itself does not necessarily lead to characterisation as a company. Rather, the question remains as to whether the business is being carried on by the relevant persons as partners (as opposed to by the separate legal entity on its own behalf) (see for example Major (Inspector of Taxes) v. Brodie & Another [1998] STC 491, at 498.) In this particular case there are a number of features which favour characterisation of the LP as a partnership. These include: The business is organised and conducted more in line with how a partnership operates than a company and the profits, as they arise, belong to the partners indicating that it is the partners carrying on the business and not the separate legal entity. Therefore, despite the fact that the partnership has separate legal status, the predominance of characteristics favours classification as a partnership. As such the LP is a 'limited partnership' within the meaning of section 995-1 of the ITAA 1997. Providing the remaining conditions in section 830-10 of the ITAA 1997 are met, the LP may therefore be a 'foreign hybrid limited partnership'.", "Date_of_Decision": "16 April 2004", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 Division 830 section 830-10 subsection 830-10(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Foreign hybrid limited partnership Limited partnerships", "Case_References": "Rose v. Federal Commissioner of Taxation (1951) 84 CLR 118 (1951) 9 ATD 334 (1951) 5 AITR 197", "Other_References": "Delaware Revised Uniform Limited Partnership Act (Del.) Delaware Revised Uniform Partnership Act (Del.)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200880", "Unmatched_Content": "Keywords Companies Foreign hybrid limited partnership Limited partnerships"}
{"ATO_ID_Number": "ATO ID 2007/47", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Classification of a German Kommanditgesellschaft for Australian income tax purposes", "Issue": "Is the German Kommanditgesellschaft (KG) a foreign hybrid limited partnership for the purposes of subsection 830-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A German KG is a foreign hybrid limited partnership for the purposes of subsection 830-10(1) of the ITAA 1997.", "Facts": "German investors hold their interests in an Australian fund (the fund) through a German KG. The German investors own their interests in the German KG through a nominee company which holds the interests on behalf of the investors. The constitution of the German KG is executed in Germany in accordance with the German Commercial Code and will be governed by German commercial and tax law. The German KG is registered in Germany. The German KG has a general partner and two limited partners (a managing limited partner and the nominee company). They are all German resident limited liability companies. The activities, management and control of the German KG lie solely with the general partner and the managing limited partner. The German KG's sole activity is passive investment in the fund. Accordingly, the German KG is not an Australian resident. The German KG is not taxed in any country as a resident. The German KG is a limited partnership as defined in section 995-1 of the ITAA 1997. The German KG is not subject to any German tax, including the German trade tax (Gewerbesteuer). The partners are liable to German income tax in respect of their share of taxable income of the KG. The trustee of the fund, an Australian taxpayer, holds a call option over the German investors' interests in the German KG, with the exception of the managing limited partner's interest in the German KG which is approximately 1% of the total interest. The call option is exercisable at the end of a specified period of time.", "Reasons_for_Decision": "Summary: Subsection 830-10(1) of the ITAA 1997 provides that a limited partnership is a foreign hybrid limited partnership in relation to an income year if: In the present case, paragraph 830-10(1)(a) of the ITAA 1997 is satisfied because the German KG is a limited partnership whose constitution is executed in Germany and is therefore formed in Germany. Paragraph 830-10(1)(b) of the ITAA 1997 is satisfied because the German KG is not subject to German tax and Germany taxes the profits of the limited partnership on the partners and not the limited partnership. The Explanatory Memorandum to Taxation Laws Amendment Act (No. 1) 2004 , which inserted Division 830 of the ITAA 1997, states that paragraph 830-10(1)(c) of the ITAA 1997: requires that if there is another foreign country (apart from the country of formation) which taxes the limited partnership as a resident entity, it will not qualify as a foreign hybrid. The German KG's central management and control lie with its general and managing limited partners, which are both German resident limited liability companies. It is also formed in Germany and registered in Germany. Its sole activity is passive investment in the fund. The German KG is not taxed in any country as a resident. Accordingly paragraphs 830-10(1)(c) and 830-10(1)(d) of the ITAA 1997 are satisfied. Controlled foreign company Paragraph 340(a) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a company is a CFC at a particular time if, at the time, there is a group of five or fewer Australian 1% entities the aggregate of whose associate-inclusive control interests in the company is not less than 50%. Australian 1% entity is defined in section 317 of the ITAA 1936 to mean an Australian entity whose associate-inclusive control interest in the company or trust is at least 1%. The term 'Australian entity' is defined in section 336 of the ITAA 1936 and includes an Australian trust. As the fund is an Australian trust within the meaning of section 338 of the ITAA 1936, it is an Australian entity. Associate-inclusive control interest in a company includes direct control interests held by an entity in the company (section 349 of the ITAA 1936). Direct control interest includes the percentage of the total paid-up capital of the company that an entity is entitled to acquire at the time (subsection 350(1) of the ITAA 1936). 'Entitled to acquire' is defined in section 322 of the ITAA 1936 to include an absolute entitlement to acquire because of the exercise of an option. Paragraph 25 of Taxation Ruling TR 2002/3 states that a date-deferred type call option constitutes an absolute entitlement to acquire. The Australian entity (that is, the fund) holds a date-deferred type call option to acquire all the German investors' interest in the German KG with the exception of the managing limited partner's interest which is approximately 1%. Therefore, the Australian entity is entitled to acquire close to 100% of the total paid-up share capital of the German KG. Accordingly, the Australian entity has an associate-inclusive control interest of close to 100% in the German KG. Therefore, disregarding subsection 94D(5) of the ITAA 1936, the German KG is a CFC in relation to the Australian entity as the Australian entity is an Australian 1% entity which has an associate-inclusive control interest of 50% or more in the German KG by virtue of the call option. Attributable taxpayer Paragraph 361(1)(a) of the ITAA 1936 defines an entity to be an attributable taxpayer in relation to a CFC if, at the time, the entity has an associate-inclusive control interest of at least 10% in the CFC. As the Australian entity has close to 100% associate-inclusive control interest in the German KG, it is an attributable taxpayer in relation to the German KG under section 361 of the ITAA 1936. Attribution percentage of greater than nil Section 362 of the ITAA 1936 defines attribution percentage to be the aggregate of both direct and indirect attribution interests in the CFC by the taxpayer at a particular time. A direct attribution interest in a CFC at a particular time includes the percentage of the total paid-up share capital of the CFC that the entity is entitled to acquire (section 356 of the ITAA 1936). As discussed above, the Australian taxpayer has an absolute entitlement to acquire close to 100% of the total paid-up share capital of the German KG by virtue of the call option. Accordingly, under section 362 the Australian taxpayer is an attributable taxpayer with an attribution percentage of greater than nil in relation to the German KG. Therefore, paragraph 830-10(1)(e) of the ITAA 1997 is satisfied because, disregarding subsection 94D(5) of the ITAA 1936, the limited partnership is a CFC in relation to an Australian taxpayer and the Australian taxpayer is an attributable taxpayer with an attribution percentage of greater than nil in relation to the CFC. Accordingly, as all the requirements of subsection 830-10(1) of the ITAA 1997 are satisfied, the German KG is a foreign hybrid limited partnership for the purposes of subsection 830-10(1) of the ITAA 1997.", "Date_of_Decision": "2 March 2007", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 94D(5) section 317 section 322 section 336 section 338 paragraph 340(a) section 349 subsection 350(1) section 356 section 361 section 362", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/3", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/149", "Subject_References": "Controlled foreign companies Foreign hybrid limited partnership Foreign hybrids International tax Limited partnerships", "Case_References": "", "Other_References": "Taxation Laws Amendment Act (No.1) 2004", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200747", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2002/3 | Keywords Controlled foreign companies Foreign hybrid limited partnership Foreign hybrids International tax Limited partnerships"}
{"ATO_ID_Number": "ATO ID 2003/1027", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Whether a foreign government can be characterised as a 'company' where it owns an Australian resident company that carries on commercial activities in Australia", "Issue": "Can a foreign government be characterised as a 'company' for the purposes of subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where it has ultimate ownership of an Australian resident company that carries on commercial activities in Australia?", "Decision": "Yes. A foreign government can be characterised as a 'company' for the purposes of subsection 995-1(1) of the ITAA 1997 where it has ultimate ownership of an Australian resident company that carries on commercial activities in Australia.", "Facts": "A foreign government has ultimate ownership of an Australian resident company which carries on commercial activities in Australia. The government's interest is held by a government minister acting as a trustee.", "Reasons_for_Decision": "Summary: A 'company' is defined in subsection 995-1(1) of the ITAA 1997 to mean a body corporate or any other unincorporated association or body of persons but does not include a partnership or a non-entity joint venture. A 'body corporate' is not defined in the ITAA 1997 or the Income Tax Assessment Act 1936 and therefore takes its ordinary meaning. The Oxford English Dictionary 1989, 2nd edn, Clarendon Press, Oxford defines 'body corporate' to mean 'an artificial \"person\" created by legal authority for certain ends; a corporation; commonly a corporation aggregate, but also applied to a corporation sole'. The term 'government', of itself, has no reliable technical meaning. In order to ascribe a meaningful characterisation to the term one must look to the context in which it is used (see Ryder v. Foley (1906) 6 CLR 422 at pp. 423-433 per Griffith CJ). In the majority of matters in which government acts in an executive capacity it does so through ministers, or their equivalent, who operate as a corporation sole, i.e. an incorporated series of successive persons, so that the minister and their successors have continuous corporate personality (see Hubbard Association of Scientologists International v. The Attorney General for the State of Victoria [1976] VR 119 ( Hubbard Association's Case ). The judgment of Gowans J in the Hubbard Association's Case discusses, among other things, the two fundamental types of corporation: corporation sole; and corporation aggregate. The former is constituted in one person and the latter in a group of persons, but they have in common the characteristic of perpetual succession which distinguishes the corporation from the person or persons who from time to time constitute it. Speaking generally, whilst government ministers ordinarily operate in their official capacity as corporations sole it is also the case that 'government' in its wider executive capacity can be regarded as exhibiting the characteristics of a corporation aggregate in that it consists of a number of persons united together in one society preserved by a succession of members. In the present case, in the circumstances in which the shares in question are held, the minister and the Government would hold the shares as a repository with corporate characteristics of sufficient significance to conclude that the government would satisfy the definition of 'company' in subsection 995-1(1) of the ITAA 1997. Note: in identifying various 'entities', section 960-100 of the ITAA 1997 makes separate reference to the terms 'body corporate' and 'body politic'. The fact that the two terms are mentioned separately does not preclude a reconciliation of the meaning of these terms for the purposes of the Act. It appears that bodies politic may be constituted as bodies corporate in certain circumstances in order to engage in the multifarious activities of executive government. Nevertheless, even if it were to be accepted that these terms are mutually exclusive it is tenable to conclude that the capacity in which the minister and the government hold the investment in the shareholding is consistent with their acting in the nature of a corporation rather than simply in the nature of a body politic.", "Date_of_Decision": "15 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1) section 960-100", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company tax Government & government business enterprises", "Case_References": "Hubbard Association of Scientologists International v. The Attorney General for the State of Victoria [1976] VR 119", "Other_References": "The Oxford English Dictionary 1989, 2nd edn, Clarendon Press, Oxford", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031027", "Unmatched_Content": "Keywords Company tax Government & government business enterprises"}
{"ATO_ID_Number": "ATO ID 2004/909", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Entity classification of an investment fund created and operating under the German Investment Company Act", "Issue": "Can an investment fund created and operating under German legislation, (the German Investment Company Act), be regarded as a company under section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for taxation law purposes in Australia?", "Decision": "Yes. An investment fund created and operating under the German Investment Company Act, would be regarded as a company under section 995-1 of the ITAA 1997 for taxation law purposes in Australia", "Facts": "An investment fund created under German law, (the German Investment Company Act), proposes to undertake income producing activities in Australia. The fund will be a non resident of Australia and is prohibited from offering participation in the fund outside of Germany. The fund will not have a permanent establishment in Australia and its investors are non residents of Australia. The investment fund is exempt from income tax in Germany and is treated as a flow through entity.", "Reasons_for_Decision": "Summary: A company for Australian tax purposes is defined in section 995-1 of the ITAA 1997. Section 995-1 defines a company to mean: but does not include a partnership or a non-entity joint venture. The definition of a company is sufficiently broad to encompass an entity incorporated and operating under the provisions of the German Investment Company Act. The definition could include entities that would not normally be considered to be a company such as unincorporated bodies and associations. The fund comes within the scope and ambit of the definition. Therefore, an investment fund created and operating under the German Investment Company Act would be regarded as a company under section 995-1 of the ITAA 1997.", "Date_of_Decision": "4 November 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Incorporation", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004909", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Incorporation"}
{"ATO_ID_Number": "ATO ID 2013/53", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: Commissioner's discretion under paragraph 775-80(3)(c) of the ITAA 1997 to allow a longer period to elect out of the short term rules", "Issue": "Can the Commissioner exercise the discretion under paragraph 775-80(3)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow a taxpayer that was not in existence at the start of the applicable commencement date, and that did not come into existence within 90 days after the start of the applicable commencement date, a longer period to choose not to have sections 775-70 and 775-75 of the ITAA 1997 (the short term rules) apply to the taxpayer?", "Decision": "No. Paragraph 775-80(3)(c) of the ITAA 1997 does not empower the Commissioner to exercise the discretion to allow a longer period for the taxpayer to choose not to have the short term rules apply to it.", "Facts": "The taxpayer is an Australian resident company. The taxpayer's applicable commencement date, under section 775-155 of the ITAA 1997, is 1 July 2003. The taxpayer was not in existence at the start of the applicable commencement date or within 90 days after the start of the applicable commencement date. The taxpayer does not wish to have sections 775-70 and 775-75 of the ITAA 1997 apply to it.", "Reasons_for_Decision": "Summary: Sections 775-70 and 775-75 of the ITAA 1997 (the short term rules) are an exception to the general rule under Division 775 of the ITAA 1997 that forex realisation gains are included in assessable income, and forex realisation losses are deductible. Where the short term rules apply, forex realisation gains and losses on the acquisition or disposal of certain CGT assets and depreciating assets are integrated into the tax treatment of, or draw their character from, the asset to which those gains and losses relate. Under subsection 775-80(1) of the ITAA 1997, taxpayers may make a written, irrevocable choice not to have the short term rules apply to them. Subsection 775-80(3) of the ITAA 1997 specifies when the choice under subsection 775-80(1) of the ITAA 1997 must be made. It states: 775-80(3) A choice must be made: (a) if the taxpayer was in existence at the start of the applicable commencement date: (i) within 90 days after the applicable commencement date; or (ii) within 30 days after the commencement of this subsection; The longer period mentioned in paragraph 775-80(3)(c) of the ITAA 1997 is a reference to the 90 or 30 day periods of time within which a choice must be made to elect out of the short term rules under subparagraphs 775-80(3)(a)(i) or (ii) and subparagraphs 775-80(3)(b)(i) or (ii) of the ITAA 1997. Those periods apply only in relation to entities that were in existence at the start of the applicable commencement date or that came into existence within 90 days after the start of the applicable commencement date. Under paragraph 775-80(3)(c) of the ITAA 1997, the Commissioner can allow a longer period of time to make the choice than the 90 or 30 day periods prescribed, but only for entities that were in existence at the start of the applicable commencement date or that came into existence within 90 days after the start of the applicable commencement date. Paragraph 775-80(3)(c) of the ITAA 1997 does not allow the Commissioner to modify the substantive law by extending eligibility to make the choice under section 775-80 of the ITAA 1997 to entities that do not otherwise qualify. Paragraph 775-80(3)(c) of the ITAA 1997 does not therefore empower the Commissioner to allow a longer period for a choice to be made for entities that were not in existence at the start of the applicable commencement date or that did not come into existence within 90 days after the start of the applicable commencement date.", "Date_of_Decision": "17 September 2013", "Year_of_Income": "Year ended 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Division 775 Section 775-70 Section 775-75 Subsection 775-80(1) Paragraph 775-80(3)(a) Subparagraph 775-80(3)(a)(i) Subparagraph 775-80(3)(a)(ii) Paragraph 775-80(3)(b) Subparagraph 775-80(3)(b)(i) Subparagraph 775-80(3)(b)(ii) Paragraph 775-80(3)(c) Section 775-155", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commissioner's discretion Foreign exchange gains and losses Forex realisation gain Forex realisation loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201353", "Unmatched_Content": "Keywords Commissioner's discretion Foreign exchange gains and losses Forex realisation gain Forex realisation loss"}
{"ATO_ID_Number": "ATO ID 2010/186", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex): forex realisation gain on discharge of foreign currency denominated loan", "Issue": "Can a forex realisation gain made on the discharge of a foreign currency denominated loan to a foreign subsidiary be non-assessable non-exempt income of the taxpayer under section 775-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A forex realisation gain arising from the discharge of a foreign currency denominated loan advanced in the course of gaining or producing non-assessable non-exempt income is non-assessable non-exempt income under section 775-25 of the ITAA 1997.", "Facts": "Aust Co is an Australian resident company and the head company of a tax consolidated group. Foreign Co is a wholly owned foreign subsidiary of Aust Co. Aust Co made a foreign currency denominated inter-company loan to its wholly owned subsidiary Foreign Co to enable it to finance the acquisition of all the shares in a foreign resident operating company (foreign shares). The loan was interest free and repayable on demand. Foreign Co discharged the inter-company loan by issuing shares to Aust Co. Aust Co made a forex realisation gain under section 775-45 of the ITAA 1997 when the inter-company loan was discharged.", "Reasons_for_Decision": "Summary: Section 775-25 of the ITAA 1997 provides that a forex realisation gain made is non-assessable non-exempt income to the extent that, if it had instead been a forex realisation loss, it would have been made in gaining or producing non-assessable non-exempt income. The section therefore directs an enquiry to be made into the nexus between a hypothetical forex realisation loss and the gaining or producing of non-assessable non-exempt income. To determine the link or nexus between a forex realisation loss that could arise on a complete or partial repayment of the borrowings, and what it is 'made in gaining or producing', the purpose for, or use to which, the taxpayer put those borrowings must be considered. A loss or outgoing that is incidental and relevant to the gaining or production of assessable income will satisfy the nexus test (see, for example, W Nevill & Co v. Federal Commissioner of Taxation (1937) 56 CLR 290; (1937) 4 ATD 187; (1937) 1 AITR 67, Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 8 ATD 431; (1949) 4 AITR 236 ( Ronpibon Tin )). In Federal Commissioner of Taxation v. Smith (1981) 147 CLR 578; (1981) 11 ATR 538; (1981) 81 ATC 4114, the High Court observed at CLR 585-586: What is incidental and relevant in the sense mentioned falls to be determined not by reference to the certainty or likelihood of the outgoing resulting in the generation of income but to its nature and character and generally to its connection with the operations which more directly gain or produce the assessable income. It is not necessary that the relevant income be produced in the year in which a loss or outgoing is incurred. In Ronpibon Tin , at CLR 57, the Court said that the required nexus is also established if the occasion of the loss or outgoing can be found in whatever would be expected to produce assessable income. In Federal Commissioner of Taxation v. Total Holdings (Australia) Pty Ltd [1979] FCA 30; 79 ATC 4279; (1979) 9 ATR 885, the taxpayer borrowed funds at interest to on-lend interest free to a subsidiary. It was held that the taxpayer was entitled to deduct the interest expenditure as its activities were designed to render the subsidiary profitable and promote the generation of assessable income by it and subsequently the derivation of assessable dividends by the taxpayer. Whether the hypothetical forex realisation loss made by Aust Co on the discharge of the inter-company loan is made in gaining or producing non-assessable non-exempt income will depend on the nature of the connection between that loss and the expected production of that income. It requires a consideration of all the facts and circumstances, including the nature of the connection between the making of the inter-company loan and the relevant income earning activities of Aust Co. The inter-company loan was on interest free terms. It was incapable of producing assessable income by way of interest for Aust Co. While discharge of the loan itself was capable of giving rise to a forex realisation gain, or loss, the purpose of advancing the loan was to enable Foreign Co to fund the acquisition of the foreign shares, thereby promoting the profitability of Foreign Co and the potential derivation of dividend income by Aust Co. Any dividends payable by Foreign Co would be non-assessable non-exempt income in the hands of Aust Co under section 768-5 of the ITAA 1997. In these circumstances it is considered there is sufficient nexus between a hypothetical forex realisation loss arising on the discharge of the inter-company loan and the generation of divided income that would be non-assessable non-exempt. Accordingly, a forex realisation gain, had it been a loss, would have been made in the course of gaining or producing non-assessable non-exempt income and will therefore be non-assessable non-exempt income under section 775-25 of the ITAA 1997.", "Date_of_Decision": "10 September 2010", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 768-5 section 775-25 section 775-45", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Borrowings & loans Foreign currency Forex realisation gain Forex realisation loss Hedging Non-assessable non-exempt income", "Case_References": "Ronpibon Tin NL and Tongkah Compound NL v Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 8 ATD 431 (1949) 4 AITR 236", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010186", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Replaced \"23AJ of the Income Tax Assessment Act 1936\" with \"768-5 of the ITAA 1997\". | Keywords Borrowings & loans Foreign currency Forex realisation gain Forex realisation loss Hedging Non-assessable non-exempt income"}
{"ATO_ID_Number": "ATO ID 2010/212", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex): forex realisation gain on cessation of a foreign currency swap", "Issue": "Will a forex realisation gain made on the cessation of a foreign currency swap (FX swap) entered into in the course of a non-assessable non-exempt income producing activity, be non-assessable non-exempt income of the taxpayer under section 775-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A forex realisation gain arising from the cessation of a FX swap will be non-assessable non-exempt income under section 775-25 of the ITAA 1997 where that FX swap is integral to the making of a loan advanced in gaining or producing non-assessable non-exempt income.", "Facts": "Aust Co is an Australian resident company. Foreign Co is a wholly owned foreign subsidiary of Aust Co. Aust Co made an interest-free US dollar (USD) denominated inter-company loan to Foreign Co to enable it to finance the acquisition of all the shares in another foreign resident company. To fund the loan to Foreign Co, Aust Co took out a short-term Australian dollar (AUD) denominated borrowing with a third party lender and exchanged the borrowed funds for USD under the first leg of a FX swap. Aust Co subsequently refinanced the AUD borrowing by taking out a separate USD denominated borrowing, exchanging the borrowed funds for AUD under the second leg of the FX swap and applying the AUD funds it acquired under the FX swap to discharge the original AUD borrowing. The delivery of USD under the FX swap gave rise to a forex realisation gain under section 775-55 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 775-25 of the ITAA 1997 provides that a forex realisation gain made is non-assessable non-exempt income to the extent that, if it had instead been a forex realisation loss, it would have been made in gaining or producing non-assessable non-exempt income. The section therefore directs an enquiry to be made into the nexus between a hypothetical forex realisation loss and the gaining or producing of non-assessable non-exempt income. To determine the link or nexus between a forex realisation loss arising on cessation of a FX swap, and whether it is 'made in gaining or producing' a particular type of income, it is necessary to consider the purpose of entering into the FX swap. A loss or outgoing that is incidental and relevant to the gaining or production of assessable income will satisfy the nexus test (see, for example, W Nevill & Co v. Federal Commissioner of Taxation (1937) 56 CLR 290; 4 ATD 187; 1 AITR 67, Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 8 ATD 431; 4 AITR 236 ( Ronpibon Tin )). In Federal Commissioner of Taxation v. Smith (1980-1981) 147 CLR 578; 11 ATR 538; 81 ATC 4114 the High Court observed, at CLR 585-586: What is incidental and relevant in the sense mentioned falls to be determined not by reference to the certainty or likelihood of the outgoing resulting in the generation of income but to its nature and character and generally to its connection with the operations which more directly gain or produce the assessable income. It is not necessary that the relevant income be produced in the year in which a loss or outgoing is incurred. In Ronpibon Tin , at CLR 57, the Court said that the required nexus is also established if the occasion of the loss or outgoing can be found in whatever would be expected to produce assessable income. In Federal Commissioner of Taxation v. Total Holdings (Australia) Pty Ltd [1979] FCA 30; 79 ATC 4279; (1979) 9 ATR 885 the taxpayer borrowed funds at interest to on-lend interest free to a subsidiary. It was held that the taxpayer was entitled to deduct the interest expenditure as its activities were designed to render the subsidiary profitable and promote the generation of assessable income by it and subsequently the derivation of assessable dividends by the taxpayer. Whether the hypothetical forex realisation loss made by Aust Co on cessation of the FX swap is made in gaining or producing non-assessable non-exempt income will depend on the nature of the connection between that loss and the expected production of that income. It requires a consideration of all the facts and circumstances, including the nature of the connection between the making of the inter-company loan and the relevant income earning activities of Aust Co. The USD acquired by Aust Co under the first leg of the FX swap were advanced to Foreign Co through an interest free inter-company loan. The inter-company loan was incapable of producing assessable income by way of interest for Aust Co. While the FX swap itself was capable of producing a forex realisation gain or loss, the FX swap was not entered into for speculative purposes. Aust Co entered into the FX swap to convert the AUD proceeds from the original borrowing into USD to enable it to make the loan to Foreign Co in the currency required to fund the acquisition of the shares. Furthermore, the FX swap kept Aust Co safe from the risk that, in refinancing, it would need to borrow a greater amount in USD to discharge the original AUD borrowing. Accordingly, the FX swap was an integral part of the funding arrangements designed to promote the profitability of Foreign Co and the potential derivation of dividend income by Aust Co. Any dividends payable by Foreign Co would be non-assessable non-exempt income in the hands of Aust Co under section 768-5 of the ITAA 1997. In these circumstances it is considered there is a sufficient nexus between a hypothetical forex realisation loss on the cessation of the FX swap and the generation of dividend income that would be non-assessable non-exempt. Accordingly, the forex realisation gain made on cessation of the FX swap is non-assessable non-exempt income under section 775-25 of the ITAA 1997.", "Date_of_Decision": "7 April 2010", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 section 768-5 section 775-25 section 775-55", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/186", "Subject_References": "Currency swaps Forex realisation gain Forex realisation loss Hedging Non-assessable non-exempt income", "Case_References": "W Nevill & Co v Federal Commissioner of Taxation (1937) 56 CLR 290 4 ATD 187 1 AITR 67", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010212", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Replaced \"23AJ of the Income Tax Assessment Act 1936 \" with \"768-5 of the ITAA 1997\". | Keywords Currency swaps Forex realisation gain Forex realisation loss Hedging Non-assessable non-exempt income"}
{"ATO_ID_Number": "ATO ID 2007/196", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange losses: loss incurred upon closing forward contract", "Issue": "Can a loss that is incurred by an ADI (authorised deposit-taking institution) upon the close of a foreign currency forward contract entered into in relation to an amount of forecast earnings of a foreign subsidiary, be deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A loss incurred by an ADI upon the close of a foreign currency forward contract entered into in relation to an amount of forecast earnings of a foreign subsidiary, can be deductible under section 8-1 of the ITAA 1997.", "Facts": "The taxpayer is an ADI as defined in subsection 995-1 of the ITAA 1997. It holds a 100% interest in a foreign subsidiary from which it regularly receives foreign currency denominated dividend income. The foreign subsidiary in turn holds a 100% interest in Company A, a foreign subsidiary that operates profitably in that foreign country. The dividend income received by the taxpayer is non-assessable non-exempt (NANE) income under section 23AJ of the Income Tax Assessment Act 1936 . The taxpayer's hedging strategy provides that foreign currency exposure can be hedged where there is a strong view that the foreign currency is either under or over valued in comparison with the Australian dollar (A$). The taxpayer formed the view that the foreign currency was overvalued and would depreciate against the A$ over the course of the income year. The taxpayer was required to prepare consolidated financial statements. A depreciating foreign currency would have resulted in lower reported earnings in A$ for the group because of the need to restate the earnings of Company A. In order to offset this anticipated decline in its A$ reported earnings, the taxpayer entered into a number of foreign currency forward contracts with a third party. The contracts hedged 80% of the remaining forecast earnings of Company A. All contracts were closed out by the end of the income year. The taxpayer anticipated making revenue profits from entering into these contracts. The taxpayer realised revenue gains and losses upon closing out the foreign currency forward contracts. The gains were returned as assessable income.", "Reasons_for_Decision": "Summary: Section 775-170 of the ITAA 1997 specifically exempts an ADI from the operation of Division 775 of the ITAA 1997. Therefore, the question of whether the foreign exchange losses are deductible is to be determined under section 8-1 of the ITAA 1997. Section 8-1 of the ITAA 1997 allows a deduction for losses or outgoings to the extent that they are incurred in gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. However, paragraph 8-1(2)(c) of the ITAA 1997 denies a deduction for a loss or outgoing to the extent that it is incurred in relation to the gaining or producing of NANE income. Section 8-1 of the ITAA 1997 requires an identification of the income producing activities of the taxpayer with which the hedging loss might be connected. In this case, it is the entry into the forward contracts (themselves capable of yielding assessable income) and the activities that give rise to NANE dividends. As a general proposition, whether a loss or outgoing is incurred in gaining or producing assessable income will depend upon it being incidental and relevant to the income-producing activity of the taxpayer - see, for example, Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431 ( Ronpibon Tin ). In Ronpibon Tin, the High Court stated that 'the words \"incurred in gaining or producing the assessable income\" mean in the course of gaining or producing such income.' And further: ... to come within the initial part of the sub-section it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income. The question of whether or not a particular loss satisfies the positive limb of section 8-1 of the ITAA 1997 is a question of fact and degree. In Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 6 AITR 379; (1956) 11 ATD 147, the High Court explained that in deciding whether or not a loss was incidental and relevant to an income-producing activity it is necessary to look at its 'connection with the operations which more directly gain or produce the assessable income.' The purpose of entering into the contracts was to hedge the translation of foreign currency denominated revenue where there was a risk of lower reported A$ income. This risk arose from the possibility that the foreign currency would not remain strong in relation to the A$ during the earnings period. Each forward contract was capable of producing a gain or a loss. The occasion for the loss was the entry into a contract that was expected to produce a gain that would be included in the assessable income of the taxpayer. The entry into the forward contracts themselves is the income producing activity with which the hedging loss finds a direct connection. Although the entry into the contracts took place against the background of a subsidiary carrying on activities that produce earnings that might eventually be received as NANE income by the taxpayer, they were not entered into in respect of known or expected dividends. They were entered into in respect of a proportion of forecast earnings of Company A and do not bear any real relationship to the dividends ultimately received from those operations. In these circumstances, the connection that the losses have with the operations that more directly produce the NANE income is too remote to come within paragraph 8-1(2)(c) of the ITAA 1997. The losses are wholly deductible under section 8-1 of the ITAA 1997.", "Date_of_Decision": "7 September 2007", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 8-1 paragraph 8-1(2)(c) section 775-170", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Currency hedging transactions Deductions & expenses Foreign currency Foreign exchange losses Forward sales Hedging Losses Non-assessable non-exempt income Producing assessable income", "Case_References": "Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 (1949) 4 AITR 236", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007196", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Currency hedging transactions Deductions & expenses Foreign currency Foreign exchange losses Forward sales Hedging Losses Non-assessable non-exempt income Producing assessable income"}
{"ATO_ID_Number": "ATO ID 2006/104", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: operation of Division 775 where the head company of a consolidated group is an ADI", "Issue": "Is a consolidated group exempt from the operation of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997) where the head company of the consolidated group is an ADI (authorised deposit-taking institution)?", "Decision": "Yes. Division 775 of the ITAA 1997 will not apply to a consolidated group where the head company of the consolidated group is an ADI.", "Facts": "The taxpayer is an ADI as defined in subsection 995-1(1) of the ITAA 1997 and the head company of a consolidated group.", "Reasons_for_Decision": "Summary: Generally Division 775 of the ITAA 1997 applies to forex realisation gains and losses made by taxpayers in relation to transactions entered into after 1 July 2003. However, section 775-170 of the ITAA 1997 exempts forex realisation gains and losses made by ADIs from the operation of Division 775 of the ITAA 1997. Under the consolidation regime, when a consolidated group is formed, the group is treated as a single entity for income tax purposes under section 701-1 of the ITAA 1997. This means that, on joining a consolidated group, the subsidiary members lose their individual income tax identities and are treated as parts of the head company of the consolidated group (rather than as separate entities) for the purposes of determining the head company's income tax liability or loss. Where a consolidated group exists and the head company is an ADI, the exemption under section 775-170 of the ITAA 1997 applies to that taxpayer. In this case, the head company is the taxpayer for considering the application of the exemption. Accordingly, Division 775 of the ITAA 1997 will not apply to the consolidated group as the head company is an ADI.", "Date_of_Decision": "29 March 2006", "Year_of_Income": "Year ended 30 September 2006", "Legislative_References": "Income Tax Assessment Act 1997 Division 775 section 701-1 section 775-170 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/106", "Subject_References": "Consolidated group Consolidation Financial institutions Foreign exchange gains and losses Single entity Single entity rule", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006104", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Consolidated group Consolidation Financial institutions Foreign exchange gains and losses Single entity Single entity rule"}
{"ATO_ID_Number": "ATO ID 2006/105", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses on payment of foreign currency on the re-exchange of currencies under a foreign exchange swap contract", "Issue": "Will forex realisation event 4 (FRE 4) happen under subsection 775-55(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where a payment of foreign currency is made on the re-exchange of currencies under a foreign exchange swap contract (FX swap)?", "Decision": "Yes. FRE 4 will happen under subsection 775-55(1) of the ITAA 1997 where a payment of foreign currency is made on the re-exchange of currencies under a FX swap.", "Facts": "The taxpayer entered into a business transaction where it will receive an amount of United States dollars (USD) on a future date. The taxpayer enters into a FX swap on 31 March 2006 to hedge the business transaction against adverse movements in the Australian dollar (AUD)/USD exchange rates. Under the terms of the swap, the taxpayer initially exchanged AUD for USD at an agreed exchange rate on 31 March 2006. The taxpayer will re-exchange the USD for AUD on 30 March 2007, at a rate agreed upon when the FX swap was entered into.", "Reasons_for_Decision": "Summary: Under the FX swap the taxpayer has an obligation to pay foreign currency in return for receiving an amount of AUD on the re-exchange of currencies on 30 March 2007. Under subsection 775-55(1) of the ITAA 1997, FRE 4 happens if an entity ceases to have the obligation to pay foreign currency. Subsection 775-55(2) of the ITAA 1997 provides that FRE 4 happens when the entity ceases to have the obligation. The obligation to pay foreign currency will cease when the USD amount is paid on the re-exchange of currencies under the FX swap on 30 March 2007. Subsection 775-55(3) of the ITAA 1997 provides that a forex realisation gain is made if the amount paid in respect of FRE 4 happening falls short of the proceeds of assuming the obligation at the tax recognition time. In this instance, the proceeds of assuming the obligation under section 775-95 of the ITAA 1997 is the money the taxpayer will receive for incurring the obligation, that is the AUD the taxpayer will receive for the USD under the swap. The 'tax recognition time' is essentially when an event occurs which creates tax consequences. Where the obligation is incurred in return for receiving an amount of AUD, the tax recognition time is when the AUD is received (item 8 of subsection 775-55(7) of the ITAA 1997). A forex realisation loss is made under subsection 775-55(5) of the ITAA 1997 if the amount paid in respect of FRE 4 happening exceeds the proceeds of assuming the obligation as determined at the tax recognition time. The amount paid in respect of FRE 4 happening is converted to AUD using the spot rate applicable on the date the payment is made (item 11 of the table in subsection 960-50(6) of the ITAA 1997). The amount of forex realisation gain or loss is so much of the shortfall or excess that is attributable to a currency exchange rate effect. A currency exchange rate effect is defined in subsection 775-105(1) of the ITAA 1997. It is described as any currency exchange rate fluctuation or as the difference between an expressly or implicitly agreed currency exchange rate for a future time and the actual currency exchange rate at that time. Subsections 775-15(1) and 775-30(1) of the ITAA 1997 respectively provide that any forex realisation gain or loss is included in the calculation of taxable income in the income year in which FRE 4 happens. That is, in the 2006-07 income year.", "Date_of_Decision": "29 March 2006", "Year_of_Income": "Year ended 30 June 2006 Year ending 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-15(1) subsection 775-30(1) subsection 775-55(1) subsection 775-55(2) subsection 775-55(3) subsection 775-55(5) subsection 775-55(7) section 775-95 subsection 775-105(1) subsection 960-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/322 | ATO ID 2005/323", "Subject_References": "Assuming an obligation Currency exchange rate Currency swaps Financial derivatives Foreign currency Foreign exchange gains and losses Forex realisation event Forex realisation gain Forex realisation loss Hedging Swaps Tax recognition time", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006105", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | In line with decision to include a generic exclusion at the start of the ATOIDs that are impacted on by TOFA. | Keywords Assuming an obligation Currency exchange rate Currency swaps Financial derivatives Foreign currency Foreign exchange gains and losses Forex realisation event Forex realisation gain Forex realisation loss Hedging Swaps Tax recognition time"}
{"ATO_ID_Number": "ATO ID 2006/123", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of foreign exchange (forex) provisions to a facility agreement where the lender is under no obligation to rollover amount", "Issue": "Does a forex realisation event 4 (FRE 4) happen when a lender rolls over a loan when it is under no obligation to do so?", "Decision": "Yes, forex realisation event 4 happens when a lender rolls over a loan when it is not under any obligation to do so.", "Facts": "Before its 'applicable commencement date' (ACD) under Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997), the taxpayer received a foreign currency loan pursuant to a loan facility agreement it had with a lender. The loan is due to be repaid after 90 days, on a date which falls after the taxpayer's ACD. According to the loan facility agreement, two days prior to the date a loan is due to be repaid the taxpayer may request that the loan be rolled-over, in which case the loan is deemed to be repaid on the day it is due, and immediately re-advanced to the taxpayer. However, the lender is not obliged to roll-over the loan. After the ACD, the taxpayer requests a roll-over in accordance with the loan facility agreement and the loan is rolled over as requested.", "Reasons_for_Decision": "Summary: Section 775-15 of the ITAA 1997 provides that the assessable income for an income year of a taxpayer includes a forex realisation gain made as a result of a forex realisation event that happens during that income year. Similarly, section 775-30 of the ITAA 1997 provides that a forex realisation loss which results from a forex realisation event during the income year is deductible. Under section 775-55 of the ITAA 1997, FRE 4 happens when certain obligations to pay foreign currency cease, including obligations incurred in return for receiving an amount of foreign currency (paragraph 775-55(1)(b)(ix) of the ITAA 1997). The term 'obligation' was intended by Parliament to have its ordinary legal meaning: Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No.1) 2003 (Cth) (which introduced Division 775 into the ITAA 1997) at paragraph 2.108. This meaning includes an obligation imposed by a contract and implies that an obligation to pay foreign currency may be discharged by a further agreement between parties to the contract which imposed the obligation. The express exemption for facility agreements in section 775-195 of the ITAA 1997 suggests that an FRE 4 occurs when an individual liability under an eligible security is 'rolled over', and is consistent with the view that the roll-over of a loan discharges an existing obligation and creates a new obligation for the purposes of section 775-55 of the ITAA 1997. While some members of the High Court in KD Morris & Sons Pty Ltd (in liquidation) v. Bank of Queensland (1980) 146 CLR 165 and the Full Federal Court in Commissioner of Taxation v Energy Resources of Australia Ltd (1994) 54 FCR 25; 1994 ATC 4923; (1994) 29 ATR 553 regarded the repayment and re-advance of a security by way of roll-over as merely a continuation of an existing obligation, in both cases the judges concerned formed their views based on the legally binding obligation which was imposed on the financier in question to roll-over securities: (1979-1980) 146 CLR 165 at 175; (1994) 54 FCR 25 at 72 respectively. If a lender rolls over a loan when it is under no obligation to do so, a FRE 4 occurs and the borrower incurs a new obligation to pay foreign currency for the purposes of section 775-55 of the ITAA 1997.", "Date_of_Decision": "2 May 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 775-55 section 775-15 section 775-30 section 775-55 section 775-195", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/124 | ATO ID 2004/857", "Subject_References": "Foreign exchange gains and losses Forex realisation event Facility agreement", "Case_References": "K D Morris & Sons Pty Ltd (in liq) v. Bank of Queensland Ltd (1980) 30 ALR 321 [1980] CLC 40-648 (1980) 146 CLR 165 (1980) 54 ALJR 424 (1980) 5 ACLR 144", "Other_References": "Explanatory Memorandum to the New Business Tax System (Taxation of Financial Arrangements) Bill (No.1) 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006123", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Foreign exchange gains and losses Forex realisation event Facility agreement"}
{"ATO_ID_Number": "ATO ID 2006/293", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: rights to receive foreign currency created or acquired in return for a third party paying an amount of foreign currency for your benefit", "Issue": "Does forex realisation event 2 occur when you withdraw an amount that was previously deposited by an agent, at your direction, into your foreign currency denominated investment account?", "Decision": "Yes. Forex realisation event 2 does occur when you withdraw an amount that was previously deposited by an agent, at your direction, into your foreign currency denominated investment account.", "Facts": "The taxpayer maintained a United Kingdom (UK) pound sterling investment account in the UK (the foreign currency bank account). The taxpayer sold a property it owned in the UK and instructed their solicitor to deposit the proceeds from the sale of the property into the foreign currency bank account. The taxpayer subsequently withdrew the balance from that account, converted into Australian dollars, and deposited the amount withdrawn into an Australian dollar denominated bank account in Australia.", "Reasons_for_Decision": "Summary: Forex realisation event 2 happens when a taxpayer ceases to have a right, or part of a right, to receive foreign currency, and the right or the part of the right is created or acquired in return for the taxpayer paying an amount of Australian currency or foreign currency (see paragraph 775-45(1)(a) and subparagraph 775-45(1)(b)(iii) of the Income Tax Assessment Act 1997 (ITAA 1997)). The relationship between banker and customer in respect of a bank account is that of debtor and creditor ( Foley v. Hill and Ors (1848) 2 HL Cas 28; [1843-60] All ER Rep 16). Thus, when a customer deposits money into a bank account the customer acquires contractual rights as a creditor of the bank. Similarly, when an amount is withdrawn from a bank account, some or all of these previously acquired rights are extinguished or satisfied. The taxpayer therefore has the right to receive the balance standing to the credit of their foreign currency bank account (a right to receive a certain amount of foreign currency). This right to receive foreign currency is a relevant right within the terms of subparagraph 775-45(1)(b)(iii) of the ITAA 1997 if it can be said to have been acquired in return for the taxpayer paying or agreeing to pay an amount of Australian currency or foreign currency. The funds were deposited by the taxpayer's agent, at the taxpayer's direction, into the foreign currency bank account. As a general rule of law, what a person may do him or herself, the person may do by an agent unless a statute requires a person to execute an act personally ( JM Christie v. Permewan Wright & Co (1904) 1 CLR 693 at 700; Jackson & Co v. Napper (1887) 35 Ch D 162). There is nothing that specifically limits subparagraph 775-45(1)(b)(iii) of the ITAA 1997 to rights to receive foreign currency created or acquired in return for you personally paying an amount of Australian currency or foreign currency. Therefore, under general principles, rights created or acquired in return for a payment of an amount of foreign currency made by your agent also fall within the terms of the subparagraph. In the context of this subparagraph, any payment made by a third party for and on the taxpayer's account and with the taxpayer's prior authority or subsequent ratification may be regarded as payment by the taxpayer ( Simpson v. Eggington (1855) 10 Exch 845; Belshaw v. Bush (1851) 11 CB 191; James v. Isaacs (1852) 12 CB 791; Smith v. Cox [1940] 2 KB 558). Where relevant, the third party payment may be ratified by acquiescence ( Lapraik v. Burrows (The Australia) (1859) 13 Moo PCC 132 at 158; 15 ER 50 at 60). Therefore the total balance of the foreign currency bank account may be regarded as a right to receive foreign currency created or acquired in return for the taxpayer paying an amount of foreign currency. The taxpayer's right to receive foreign currency ceased and forex realisation event 2 happened (pursuant to 775-45(1) of the ITAA 1997) when the taxpayer withdrew the balance of the foreign currency bank account.", "Date_of_Decision": "20 October 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 775-45", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/855", "Subject_References": "Foreign currency Foreign exchange gains and losses Forex realisation event", "Case_References": "Belshaw v. Bush (1851) 11 CB 191", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006293", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Foreign currency Foreign exchange gains and losses Forex realisation event"}
{"ATO_ID_Number": "ATO ID 2006/320", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: bank account opened before 19 February 1986", "Issue": "Are forex realisation gains and losses made as a result of the withdrawal of funds deposited on or after 1 July 2003 into a foreign currency denominated bank account opened before 19 February 1986 brought to account for the purposes of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Forex realisation gains and losses made as a result of the withdrawal of funds from a foreign currency denominated bank account opened before 19 February 1986 are taken into account in determining taxable income but only to the extent that they are made as a result of the withdrawal of funds deposited on or after 1 July 2003.", "Facts": "An Australian resident taxpayer opened a foreign currency denominated bank account (foreign account) prior to 19 February 1986. The foreign account pays interest and it has always had a credit balance. It has been primarily used to pay business expenses and deposit proceeds from the sale of shares. The taxpayer's applicable commencement date under section 775-155 of the ITAA 1997 is 1 July 2003. The taxpayer has not made a transitional election under section 775-150 of the ITAA 1997. Any forex realisation gains or losses made as a result of the withdrawal of funds from the foreign account were not of a private or domestic nature.", "Reasons_for_Decision": "Summary: A forex realisation gain or loss is made when a forex realisation event happens. Subsection 775-45(1) of the ITAA 1997 provides that forex realisation event 2 (FRE 2) happens if an entity ceases to have a right, or part of a right, to receive foreign currency which is created or acquired in return for paying an amount of Australian currency or foreign currency. Subsection 775-45(2) of the ITAA 1997 provides that the time of FRE 2 is when the right or part of the right ceases. The relationship between banker and customer in respect of a bank account is that of debtor and creditor: Foley v. Hill and Ors (1848) 2 HL Cas 28; [1843-60] All ER Rep 16. Thus, when a customer deposits money into a bank account the customer acquires contractual rights as a creditor of the bank. Similarly, when an amount is withdrawn from a bank account some or all of these previously acquired rights are extinguished or satisfied. This does not mean that each deposit made by a customer represents a new contract. Rather, the nature of the contractual relationship remains constant. That is, there is a single chose in action in respect of the customer's right to be repaid the amount previously deposited: Hart (Inspector of Taxes) v. Sangster [1957] 1 Ch 329; [1957] 2 All ER 208; [1984] AC 580. The taxpayer's right to receive the balance standing to the credit of their foreign account is a relevant right within the terms of subparagraph 775-45(1)(b)(iii) of the ITAA 1997. Pursuant to subsection 775-45(2) of the ITAA 1997, FRE 2 happens when the taxpayer withdraws the credit balance of the foreign account or any part of it. As the taxpayer did not make a transitional election under section 775-150 of the ITAA 1997, subparagraph 775-165(2)(a)(i) of the ITAA 1997 operates to disregard any forex realisation gains or losses made as a result of FRE 2 happening to a right or part of a right acquired before the applicable commencement date. To the extent the balance standing to the credit of the foreign account consists of deposits made before 1 July 2003, this part of the right was be acquired before the applicable commencement date and any forex realisation gain or loss made upon a withdrawal of these funds is disregarded pursuant to subparagraph 775-165(2)(a)(i) of the ITAA 1997. Because currency within a bank account is 'fungible', there is difficulty in identifying which particular units of currency are withdrawn from the foreign account at the time of withdrawal. However, to determine which withdrawals relate to deposits made on or after 1 July 2003, subsection 775-145(1) of the ITAA 1997 provides that a first-in first-out ordering rule be applied to determine from which deposits a particular withdrawal is made.", "Date_of_Decision": "20 November 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-45(1) subparagraph 775-45(1)(b)(iii) subsection 775-45(2) subsection 775-145(1) subsection 775-150 subsection 775-155 subparagraph 775-165(2)(a)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/855", "Subject_References": "Bank accounts Banking, finance & securities Foreign currency Foreign currency rights Foreign exchange gains and losses Forex realisation event Forex realisation gain Forex realisation loss Fungible rights and obligations Transitional election", "Case_References": "Foley v Hill and Ors (1848) 2 HL Cas 28 [1843-60] All ER Rep 16", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006320", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Bank accounts Banking, finance & securities Foreign currency Foreign currency rights Foreign exchange gains and losses Forex realisation event Forex realisation gain Forex realisation loss Fungible rights and obligations Transitional election"}
{"ATO_ID_Number": "ATO ID 2005/318", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: effect on holder of lapsed foreign currency denominated call option", "Issue": "Is a forex realisation loss made under subsection 775-45(5) of the Income Tax Assessment Act 1997 (ITAA 1997) when a foreign currency denominated call option a taxpayer has acquired lapses?", "Decision": "Yes. A forex realisation loss is made under subsection 775-45(5) of the ITAA 1997 when a foreign currency denominated call option a taxpayer has acquired lapses.", "Facts": "The taxpayer entered into a business transaction requiring it to pay United States dollars (USD) at a future date. As part of a hedging strategy to protect against adverse movements in the Australian dollar (AUD)/USD exchange rates, the taxpayer acquired a twelve month USD call option which gave it the right, but not the obligation, to buy a predetermined amount of USD in exchange for a predetermined amount of AUD. The taxpayer paid a premium of AUD 75,000 on acquiring the option. The USD call option had an expiry date of 31 May 2005. Due to unfavourable movements in exchange rates, the taxpayer did not exercise its rights under the option. The rights and obligations under the option continued to subsist until the option lapsed on 31 May 2005.", "Reasons_for_Decision": "Summary: On purchasing the option, the taxpayer acquired a right to receive an amount of foreign currency in return for it agreeing to pay AUD. Subsection 775-135(2) of the ITAA 1997 provides that a 'right to receive foreign currency' includes a right subject to a contingency. Under subsection 775-45(1) of the ITAA 1997, forex realisation event 2 (FRE 2) happens if an entity ceases to have a right to receive foreign currency. Subsection 775-45(2) of the ITAA 1997 provides that FRE 2 happens when an entity ceases to have the right. The taxpayer ceased to have the right to receive foreign currency when the option lapsed. The taxpayer made a forex realisation loss under subsection 775-45(5) of the ITAA 1997 as the option expired without having been exercised and, immediately before FRE 2 happened, the taxpayer was capable of exercising the option. The forex realisation loss is the AUD 75,000 paid by the taxpayer in respect of acquiring the option (the premium paid). The taxpayer is entitled to claim a deduction under subsection 775-30(1) of the ITAA 1997 for this loss in the income year ending 30 June 2005.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-30(1) subsection 775-45(1) subsection 775-45(2) subsection 775-45(5) subsection 775-135(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/319", "Subject_References": "Call options Financial derivatives Foreign currency Foreign currency rights Foreign exchange gains and losses Forex realisation event Forex realisation loss Hedging", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005318", "Unmatched_Content": "Keywords Call options Financial derivatives Foreign currency Foreign currency rights Foreign exchange gains and losses Forex realisation event Forex realisation loss Hedging"}
{"ATO_ID_Number": "ATO ID 2005/319", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: effect on grantor of lapsed foreign currency denominated call option", "Issue": "Is a forex realisation gain made under subsection 775-55(4) of the Income Tax Assessment Act 1997 (ITAA 1997) when a foreign currency denominated call option a taxpayer has granted lapses?", "Decision": "Yes. A forex realisation gain is made under subsection 775-55(4) of the ITAA 1997 when a foreign currency denominated call option a taxpayer has granted lapses.", "Facts": "The taxpayer entered into a business transaction requiring it to pay United Sates dollars (USD) at a future date. As part of a hedging strategy to protect against adverse movements in the Australian dollar (AUD)/USD exchange rates, the taxpayer sold a twelve month USD call option which gave it the obligation (if the buyer exercised the option) to sell a predetermined amount of USD in exchange for a predetermined amount of AUD. The taxpayer received a premium of AUD 40,000 on granting the option. The USD call option had an expiry date of 31 May 2005. Due to unfavourable movements in exchange rates, the option holder did not exercise its rights under the option. The rights and obligations under the option continued to subsist until the option lapsed on 31 May 2005.", "Reasons_for_Decision": "Summary: On granting the option, the taxpayer had an obligation to pay foreign currency incurred in return for it acquiring a right to receive AUD. Subsection 775-140(2) of the ITAA 1997 provides that an 'obligation to pay foreign currency' includes an obligation subject to a contingency. Under subsection 775-55(1) of the ITAA 1997, forex realisation event 4 (FRE 4) happens if an entity ceases to have the obligation to pay foreign currency. Subsection 775-55(2) of the ITAA 1997 provides that FRE 4 happens when an entity ceases to have the obligation. The taxpayer ceased to have the obligation to pay foreign currency when the option lapsed. The taxpayer made a forex realisation gain under subsection 775-55(4) of the ITAA 1997, as the option expired without having been exercised and, immediately before FRE 4 happened, had the option been exercised the taxpayer would have been obliged to pay the foreign currency. The forex realisation gain is the AUD 40,000 received by the taxpayer for granting the option (the premium received). This gain is included in the taxpayer's assessable income under subsection 775-15(1) of the ITAA 1997 in the income year ended 30 June 2005.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-15(1) subsection 775-55(1) subsection 775-55(2) subsection 775-55(4) subsection 775-140(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/318", "Subject_References": "Call options Financial derivatives Foreign currency Foreign currency obligations Foreign exchange gains and losses Forex realisation event Forex realisation gain Hedging", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005319", "Unmatched_Content": "Keywords Call options Financial derivatives Foreign currency Foreign currency obligations Foreign exchange gains and losses Forex realisation event Forex realisation gain Hedging"}
{"ATO_ID_Number": "ATO ID 2005/320", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: tax consequences of certain short-term forex realisation gains or losses", "Issue": "Do sections 775-70 or 775-75 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to forex realisation gains or losses made under derivative contracts used to hedge the cost of a depreciating asset acquired under a purchase agreement?", "Decision": "No. Sections 775-70 or 775-75 of the ITAA 1997 do not apply to forex realisation gains or losses made under derivative contracts used to hedge the cost of a depreciating asset acquired under a purchase agreement.", "Facts": "The taxpayer entered into a purchase agreement to acquire a depreciating asset that has a price denominated in a foreign currency. In order to protect against the risk of adverse exchange rate fluctuations, and provide the foreign currency required to acquire the asset, the taxpayer entered into derivative contracts to hedge the Australian dollar (AUD) cost of the depreciating asset. The cost of the depreciating asset was hedged from the time of entering into the purchase agreement, up to the time of final payment. The taxpayer made forex realisation gains and forex realisation losses from hedging the acquisition cost of the depreciating asset.", "Reasons_for_Decision": "Summary: Subsections 775-70(1) and 775-75(1) of the ITAA 1997 provide exceptions to the general principle in sections 775-15 and 775-30 of the ITAA 1997 that forex realisation gains or losses are treated on revenue account. One exception applies to certain forex realisation gains or losses that occur where an obligation to pay foreign currency was incurred in return for a taxpayer starting to hold a depreciating asset. The holder of a depreciating asset for these purposes is worked out under Division 40 of the ITAA 1997. Any forex realisation gains or losses made in these circumstances are applied against the asset's cost or opening adjustable value. This recognises that the forex realisation gain or loss is closely related to the character of the gain or loss made on the depreciating asset. The derivative contracts entered into are used to hedge the acquisition cost of the depreciating asset. The right to receive the foreign currency at settlement under the contracts was acquired in return for the taxpayer agreeing to pay an amount of Australian currency. This is not a right which is relevant for the purposes of the short term rules in subsections 775-70(1) and 775-75(1) of the ITAA 1997. The forex realisation gains and losses under the derivative contracts will not be applied against the depreciating asset's cost or opening adjustable value. They will be brought to account as assessable income and allowable deductions under sections 775-15 and 775-30 of the ITAA 1997.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 775-15 section 775-30 section 775-70 subsection 775-70(1) section 775-75 subsection 775-75(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assignment of rights & entitlements Financial derivatives Foreign exchange gains and losses Forex realisation gain Forex realisation loss Hedging Hold a depreciating asset", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005320", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated 'sections' to 'subsections' in third paragraph | Keywords Assignment of rights & entitlements Financial derivatives Foreign exchange gains and losses Forex realisation gain Forex realisation loss Hedging Hold a depreciating asset"}
{"ATO_ID_Number": "ATO ID 2005/321", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: acquisition of foreign currency under a forward exchange contract", "Issue": "Does forex realisation event 2 (FRE 2) happen under subsection 775-45(1) of the Income Tax Assessment Act 1997 (ITAA 1997) when foreign currency is acquired under a forward exchange contract?", "Decision": "Yes. FRE 2 will happen under subsection 775-45(1) of the ITAA 1997 when foreign currency is acquired under a forward exchange contract.", "Facts": "The taxpayer entered into a business transaction requiring it to pay United States dollars (USD) at a future date. As part of a hedging strategy to protect against adverse movements in the Australian dollar (AUD)/USD exchange rates, the taxpayer entered into a forward exchange contract on 1 November 2004, under which it would receive USD 1,000,000 at an agreed exchange rate of AUD 1.00 = USD 0.7400 on 1 June 2005. On 1 June 2005 the forward exchange contract was settled by the taxpayer paying AUD 1,351,351 in return for receiving USD 1,000,000. The actual exchange rate on that date was AUD 1.00 = USD 0.7600 giving the USD received an equivalent value of AUD 1,315,789.", "Reasons_for_Decision": "Summary: On entering into the forward exchange contract, the taxpayer acquired a right to receive an amount of foreign currency in return for it agreeing to pay AUD. Under subsection 775-45(1) of the ITAA 1997, FRE 2 happens if an entity ceases to have a right to receive foreign currency. Subsection 775-45(2) of the ITAA 1997 provides that FRE 2 happens when the entity ceases to have the right. The taxpayer ceased to have the right to receive foreign currency when it acquired the USD 1,000,000 on 1 June 2005. A forex realisation loss is made under subsection 775-45(4) of the ITAA 1997 if the AUD equivalent of the amount received in respect of FRE 2 happening falls short of the forex cost base of the right as determined at the tax recognition time. In this instance, the forex cost base under section 775-85 of the ITAA 1997 is the money the taxpayer is required to pay for acquiring the right. That is the AUD1,351,351 the taxpayer paid for the USD1,000,000. The 'tax recognition time' is essentially when an event occurs which creates tax consequences. Item 4 of subsection 775-45(7) of the ITAA 1997 provides that for a right acquired in return for agreeing to pay AUD, the tax recognition time is when the amount is paid. Subsection 775-45(4) of the ITAA 1997 provides that the forex realisation loss is the amount of shortfall attributable to a currency exchange rate effect. A 'currency exchange rate effect' is defined in subsection 775-105(1) of the ITAA 1997. It is described as any currency exchange rate fluctuation, or as the difference between an expressly or implicitly agreed currency exchange rate for a future time, and the actual currency exchange rate at that time. The AUD equivalent of the USD 1,000,000 received by the taxpayer on 1 June 2005 is $1,315,789. This is the AUD equivalent value of the USD converted using the spot rate on the day the amount is received (item 11 of the table in subsection 960-50(6) of the ITAA 1997). The AUD equivalent of the amount the taxpayer is required to pay, as set by the forward exchange contract, is $1,351,351. The taxpayer has made a forex realisation loss under subsection 775-45(4) of the ITAA 1997 of $35,562, as the amount the taxpayer received fell short of the forex cost base of the right. The shortfall is attributable to a currency exchange rate effect and is deductible from assessable income pursuant to subsection 775-30(1) of the ITAA 1997 in the income year in which FRE 2 happens, being the year ended 30 June 2005.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-30(1) subsection 775-45(1) subsection 775-45(2) subsection 775-45(4) subsection 775-45(7) section 775-85 subsection 775-105(1) subsection 960-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Currency exchange rate Financial derivatives Foreign currency Foreign currency rights Foreign exchange gains and losses Forex cost base Forex realisation event Forex realisation loss Forward rate agreements Hedging Tax recognition time", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005321", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Keywords Currency exchange rate Financial derivatives Foreign currency Foreign currency rights Foreign exchange gains and losses Forex cost base Forex realisation event Forex realisation loss Forward rate agreements Hedging Tax recognition time"}
{"ATO_ID_Number": "ATO ID 2005/322", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: initial exchange of currency under a foreign exchange swap contract", "Issue": "Will forex realisation event 4 (FRE 4) happen under subsection 775-55(1) of the Income Tax Assessment Act 1997 (ITAA 1997) on the initial exchange of currency under a foreign exchange swap contract (FX swap), where the agreed rate under the swap and the spot rate are the same?", "Decision": "Yes. FRE 4 happens under subsection 775-55(1) of the ITAA 1997 on the initial exchange of currency under a FX swap where the agreed rate under the swap and the spot rate are the same. However, no forex realisation gain or loss is made as there is no currency exchange rate effect.", "Facts": "The taxpayer entered into a business transaction requiring it to pay United States dollars (USD) at a future date. As part of a hedging strategy to protect against adverse movements in the Australian dollars (AUD)/USD exchange rates, the taxpayer entered into a FX swap on 30 May 2005. Under the terms of the swap, the taxpayer exchanged USD for AUD at an agreed exchange rate on the contract date. The AUD is then re-exchanged for USD at an agreed exchange rate at a future date. The initial exchange is agreed to be at the spot rate on 30 May 2005. To effect the initial exchange, the taxpayer arranged for USD to be acquired and transferred to the counterparty to the FX swap via electronic transfer on the same day. The acquisition and disposal of USD under the initial exchange took place at the same spot rate.", "Reasons_for_Decision": "Summary: On entering into the FX swap the taxpayer had an obligation to pay an amount of foreign currency incurred in return for it receiving AUD. Under subsection 775-55(1) of the ITAA 1997, FRE 4 happens if an entity ceases to have an obligation to pay foreign currency. Subsection 775-55(2) of the ITAA 1997 provides that FRE 4 happens when the entity ceases to have the obligation. The taxpayer ceased to have the obligation to pay foreign currency when it paid the USD on 30 May 2005 and received AUD in exchange. Subsection 775-55(3) of the ITAA 1997 provides that a forex realisation gain is made if the amount paid in respect of FRE 4 happening, falls short of the proceeds of assuming the obligation at the tax recognition time. In this instance, the proceeds of assuming the obligation under section 775-95 of the ITAA 1997 is the money the taxpayer received for incurring the obligation, that is the AUD the taxpayer received in exchange for the USD under the swap. The 'tax recognition time' is essentially when an event occurs which creates tax consequences. Item 8 of subsection 775-55(7) of the ITAA 1997 provides that for an obligation incurred in return for receiving AUD, the tax recognition time is when the AUD is received. A forex realisation loss is made under subsection 775-55(5) of the ITAA 1997 if the amount paid in respect of FRE 4 happening exceeds the proceeds of assuming the obligation as determined at the tax recognition time. The amount paid in respect of FRE 4 happening is converted to AUD using the spot rate applicable on the date the payment is made (item 11 of the table in subsection 960-50(6) of the ITAA 1997). The amount of forex realisation gain or loss is so much of the shortfall or excess that is attributable to a currency exchange rate effect. A currency exchange rate effect is defined in subsection 775-105(1) of the ITAA 1997. It is described as any currency exchange rate fluctuation, or as the difference between an expressly or implicitly agreed currency exchange rate for a future time and the actual currency exchange rate at that time. Although the taxpayer ceases to have an obligation to pay foreign currency at the time of the initial exchange resulting in FRE 4 happening, no forex realisation gain or loss is made as there is no currency exchange rate effect. The AUD value of the USD paid by the taxpayer was equal to the value of assuming the proceeds of the obligation. This is because the agreed rate under the swap was equal to the spot rate on 30 May 2005 when the initial exchange of currencies took place.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-55(1) subsection 775-55(2) subsection 775-55(3) subsection 775-55(5) subsection 775-55(7) section 775-95 subsection 775-105(1) subsection 960-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/322", "Subject_References": "Assuming an obligation Currency exchange rate Currency swaps Financial derivatives Foreign currency Foreign currency obligations Foreign exchange gains and losses Forex realisation event Forex realisation gain Forex realisation loss Swaps Tax recognition time", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005322", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Related ATO Interpretative Decisions | Replace ATO ID 2005/322 with ATO ID 2005/323 | Include 'of the ITAA 1997' after Subsection 775-55(2) in second paragraph. | Keywords Assuming an obligation Currency exchange rate Currency swaps Financial derivatives Foreign currency Foreign currency obligations Foreign exchange gains and losses Forex realisation event Forex realisation gain Forex realisation loss Swaps Tax recognition time"}
{"ATO_ID_Number": "ATO ID 2005/323", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: re-exchange of currency under a foreign exchange swap contract", "Issue": "Will forex realisation event 2 (FRE 2) happen under subsection 775-45(1) of the Income Tax Assessment Act 1997 (ITAA 1997) on the receipt of foreign currency when currencies are re-exchanged under a foreign exchange swap contract (FX swap)?", "Decision": "Yes. FRE 2 will happen under subsection 775-45(1) of the ITAA 1997 on the receipt of foreign currency when currencies are re-exchanged under a FX swap.", "Facts": "The taxpayer entered into a business transaction requiring it to pay United States dollars (USD) at a future date. As part of a hedging strategy to protect against adverse movements in the Australian dollar (AUD)/USD exchange rates, the taxpayer entered into a FX swap on 30 May 2005. Under the terms of the FX swap, the taxpayer initially exchanged USD for AUD on 30 May 2005 at an agreed exchange rate. On 20 June 2005 the taxpayer then re-exchanged the AUD for USD at a rate agreed upon when the FX swap was entered into.", "Reasons_for_Decision": "Summary: Under the FX swap the taxpayer had a right to receive an amount of foreign currency which was created in return for it agreeing to pay an amount of AUD. Under subsection 775-45(1) of the ITAA 1997 FRE 2 happens if an entity ceases to have a right to receive foreign currency. Subsection 775-45(2) provides that FRE 2 happens when the entity ceases to have the right. The taxpayer ceased to have the right to receive foreign currency when it paid AUD in exchange for USD on 20 June 2005. Subsection 775-45(3) of the ITAA 1997 provides that a forex realisation gain is made if the AUD equivalent of the amount received in respect of FRE 2 happening exceeds the forex cost base of the right as determined at the tax recognition time. In this instance, the forex cost base under section 775-85 of the ITAA 1997 is the money the taxpayer is required to pay for acquiring the right. That is, the AUD the taxpayer paid for the USD it exchanged on 20 June 2005. The 'tax recognition time' is essentially when an event occurs which creates tax consequences. Item 4 of subsection 775-45(7) of the ITAA 1997 provides that for a right created in return for agreeing to pay AUD, the tax recognition time is when the amount is paid. Subsection 775-45(4) of the ITAA 1997 provides that a forex realisation loss is made if the AUD equivalent of the amount received in respect of FRE 2 happening falls short of the AUD equivalent of the amount the entity was entitled to receive as determined at the tax recognition time. The amount received is converted to AUD using the spot rate applicable on the date of receipt (item 11 of the table in subsection 960-50(6) of the ITAA 1997). The amount of forex realisation gain or loss is so much of the excess or shortfall that is attributable to a currency exchange rate effect. A 'currency exchange rate' effect is defined in subsection 775-105(1) of the ITAA 1997. It is described as any currency exchange rate fluctuation, or as the difference between an expressly or implicitly agreed currency exchange rate for a future time, and the actual currency exchange rate at that time. Subsections 775-15(1) and 775-30(1) of the ITAA 1997 respectively provide that any forex realisation gain or loss is included in the calculation of taxable income in the income year in which FRE 2 happens. That is, in the income year ended 30 June 2005.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-15(1) subsection 775-30(1) subsection 775-45(1) subsection 775-45(2) subsection 775-45(3) subsection 775-45(4) subsection 775-45(7) section 775-85 subsection 775-105(1) subsection 960-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/322", "Subject_References": "Currency exchange rate Currency swaps Financial derivatives Foreign currency Foreign currency rights Foreign exchange gains and losses Forex cost base Forex realisation event Forex realisation gain Forex realisation loss Hedging Tax recognition time", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005323", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | There was an amendment to section 775-15 | There was a referencing error to the ITAA 1997 | Keywords Currency exchange rate Currency swaps Financial derivatives Foreign currency Foreign currency rights Foreign exchange gains and losses Forex cost base Forex realisation event Forex realisation gain Forex realisation loss Hedging Tax recognition time"}
{"ATO_ID_Number": "ATO ID 2005/324", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: delivery of currency under a foreign currency spot contract", "Issue": "Does forex realisation event 4 (FRE 4) happen under subsection 775-55(1) of the Income Tax Assessment Act 1997 (ITAA 1997) when a taxpayer delivers foreign currency under a foreign currency spot contract (spot FX deal)?", "Decision": "Yes. FRE 4 will happen under subsection 775-55(1) of the ITAA 1997 when a taxpayer delivers foreign currency under a spot FX deal.", "Facts": "The taxpayer entered into a business transaction requiring it to pay United States dollars (USD) at a future date. On 28 June 2005, the taxpayer entered into a spot FX deal to economically close out an earlier foreign exchange swap contract it had entered into as part of a hedging strategy to fix the Australian dollar (AUD) cost of the transaction. Under the terms of the spot FX deal, the taxpayer contracted to sell USD 1,000,000 on 28 June 2005 for the agreed amount of AUD 1,300,898 with settlement of the transaction to take place on 30 June 2005. The actual exchange rate on 30 June 2005 was AUD 1.00 = USD 0.7680, giving the USD received and paid an equivalent value of AUD 1,302,083. On 30 June 2005, the taxpayer settled the spot FX deal by electronic transfer of the USD to the counterparty's bank account. The taxpayer recognises gains and losses under spot FX deals in its accounting records.", "Reasons_for_Decision": "Summary: On entering into the spot FX deal, the taxpayer had an obligation to pay an amount of foreign currency incurred in return for acquiring a right to receive AUD. Under subsection 775-55(1) of the ITAA 1997, FRE 4 happens if an entity ceases to have an obligation to pay foreign currency. Subsection 775-55(2) provides that FRE 4 happens when the entity ceases to have the obligation. The taxpayer ceased to have the obligation to pay foreign currency when it paid the USD on 30 June 2005 and received AUD 1,300,898 in exchange. Subsection 775-55(5) of the ITAA 1997 provides that a forex realisation loss is made if the amount paid in respect of FRE 4 happening exceeds the proceeds of assuming the obligation at the tax recognition time. In this instance the proceeds of assuming the obligation under section 775-95 of the ITAA 1997 is the money the taxpayer received for incurring the obligation. The taxpayer works out the Australian dollar value of the USD amount paid using the spot rate applicable on the date the USD amount is paid (item 11 of the table in subsection 960-50(6) of the ITAA 1997). The 'tax recognition time' is essentially when an event occurs which creates tax consequences. Item 8 of subsection 775-55(7) of the ITAA 1997 provides that for an obligation incurred in return for acquiring a right to receive AUD, the tax recognition time is when the AUD is received. The forex realisation loss is so much of the excess that is attributable to a currency exchange rate effect. A 'currency exchange rate' effect is defined in subsection 775-105(1) of the ITAA 1997. It is described as any currency exchange rate fluctuation or as the difference between an expressly or implicitly agreed currency exchange rate for a future time and the actual currency exchange rate at that time. The taxpayer has made a forex realisation loss under subsection 775-55(5) of the ITAA 1997 of AUD 1,185. It is attributable to a currency exchange rate effect and is deductible from assessable income pursuant to subsection 775-30(1) of the ITAA 1997 in the income year in which FRE 4 happens being the year ended 30 June 2005.", "Date_of_Decision": "11 November 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 subsection 775-30(1) subsection 775-55(1) subsection 775-55(2) subsection 775-55(5) subsection 775-55(7) subsection 775-105(1) subsection 960-50(6)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Assuming an obligation Currency exchange rate Currency swaps Disposal of foreign currency Financial derivatives Foreign currency Foreign currency obligations Foreign exchange gains and losses Forex realisation event Forex realisation loss Hedging Swaps Tax recognition time", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005324", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Inserted \"Income Tax Assessment Act 1997 (ITAA 1997)\". | Keywords Assuming an obligation Currency exchange rate Currency swaps Disposal of foreign currency Financial derivatives Foreign currency Foreign currency obligations Foreign exchange gains and losses Forex realisation event Forex realisation loss Hedging Swaps Tax recognition time"}
{"ATO_ID_Number": "ATO ID 2004/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Can there be more than one retranslation period in an income year for a qualifying forex account?", "Issue": "Can there be more than one retranslation period under Subdivision 775E of the Income Tax Assessment Act 1997 (ITAA 1997) for a qualifying forex account in one income year?", "Decision": "Yes. There can be more than one retranslation period under Subdivision 775E of the ITAA 1997 in one income year for a qualifying forex account.", "Facts": "On 1 July 2004 an entity elects to have the retranslation rules in Subdivision 775-E of the ITAA 1997 apply to an account that is a Qualifying Forex Account (QFA), as defined at subsection 995-1(1) of the ITAA 1997. For accounting purposes the entity undertakes retranslation activities on a monthly basis and wishes to have the tax retranslation periods aligned with the accounting periods.", "Reasons_for_Decision": "Summary: In determining whether an entity can have multiple retranslation periods in a single income year it is necessary to consider the following: Paragraph 775-285(1)(b) of the ITAA 1997 defines a retranslation period to be a continuous period consisting of an income year or a particular part of an income year during which a choice to retranslate a QFA was in effect. So a retranslation period can be for a continuous part of an income year. Subsection 775-270(3) of the ITAA 1997 provides that a taxpayer's choice continues in effect until: Where a retranslation choice in relation to one or more QFAs is made and that choice remains in effect for successive retranslation periods, the retranslation period will cease at the end of each period (income year or particular part of income year) and a new retranslation period will commence immediately after the end of the previous period. The opening balance of the new period will be translated using the same exchange rate that is used to translate the closing balance of the previous period (paragraph 775-285(9)(b) of the ITAA 1997). Where a taxpayer wishes to translate on a monthly basis, the taxpayer may do so provided the choice continues in effect under section 775-270(3). Accordingly, there can be more than one retranslation period in one income year for a qualifying forex account under Subdivision 775E of the ITAA 1997. Therefore provided a taxpayer remains eligible for a retranslation choice and does not withdraw that choice it will continue to be in place. Section 775-275 of the ITAA 1997 allows the withdrawal in writing of the retranslation choice. Withdrawing a choice does not preclude the taxpayer from making a fresh choice in the future for retranslation treatment in relation to the same account or accounts.", "Date_of_Decision": "9 February 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1) Subdivision 775-E subsection 775-270(3) paragraph 775-270(3)(a) paragraph 775-270(3)(b) paragraph 775-270(3)(c) section 775-275 section 775-285 paragraph 775-285(1)(b) paragraph 775-285(9)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Retranslation period Retranslation election Qualifying forex account", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004157", "Unmatched_Content": "Alterations to paragraphs | Part year retranslation period | Withdrawing an election and making a fresh election | Include reference to subsection 775-270(3) and paragraphs 775-285(1)(b) and 775-285(9)(b) of the ITAA 1997. | Keywords Retranslation period Retranslation election Qualifying forex account"}
{"ATO_ID_Number": "ATO ID 2004/158", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Roll-over relief: multi currency facility agreements", "Issue": "Can an agreement to obtain finance in more than one foreign currency be a 'facility agreement' for the purposes of section 775-185 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. An agreement which enables finance to be obtained in more than one foreign currency cannot be a 'facility agreement' for the purposes of section 775-185 of the ITAA 1997.", "Facts": "An entity enters into an agreement with XYZ Bank whereby the entity has the right to issue 90-day discounted bills of exchange with the economic effect of raising US dollars and UK pounds.", "Reasons_for_Decision": "Summary: Section 775-185 of the ITAA 1997 provides that: A facility agreement is an agreement between an entity (the 'first entity') and another entity or entities under which: (a) the first entity has a right to issue eligible securities; and (b) an entity or entities must acquire the securities; From the facts provided, the agreement between the entity and XYZ Bank allows the entity to issue discounted bills of exchange denominated in more than one foreign currency (namely US dollars and UK pounds). For there to be a 'facility agreement', section 775-185 of the ITAA 1997 requires that the economic effect of the agreement enables the relevant entity to obtain finance in 'a particular foreign currency'. In other words, for an agreement to be characterised as a facility agreement, all eligible securities issued under the agreement must have the economic effect of raising funds in the same foreign currency. Therefore, as the agreement enables finance to be obtained in more than one foreign currency, it cannot be a 'facility agreement' within section 775-185 of the ITAA 1997.", "Date_of_Decision": "9 February 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 775-185", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Facility agreements Foreign exchange gains and losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004158", "Unmatched_Content": "Keywords Facility agreements Foreign exchange gains and losses"}
{"ATO_ID_Number": "ATO ID 2004/472", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Exchange (Forex): timing of translation of foreign income that is non-assessable non-exempt income into Australian currency", "Issue": "Where an Australian resident taxpayer derives ordinary income denominated in a foreign currency that is non-assessable non-exempt (NANE) income, when must that NANE income be translated into Australian currency (Australian dollars) under section 960-50 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The taxpayer must translate the NANE income into Australian dollars at the exchange rate prevailing at the earlier of when the NANE income is derived or received.", "Facts": "An Australian resident taxpayer derives ordinary income that is denominated in a foreign currency from various sources overseas. That income is also NANE income. The taxpayer accounts for income and deductions on an accruals basis.", "Reasons_for_Decision": "Summary: As an Australian resident, the taxpayer is assessable on its ordinary income derived from all sources (subsection 6-5(2) of the ITAA 1997). The foreign income derived is income according to ordinary concepts, and is thus ordinary income (subsection 6-5(1) of the ITAA 1997). The Australian resident's income falls within the list of NANE income categories in section 11-55 of the ITAA 1997. Thus the income is ordinary income that is non-assessable non-exempt income (section 6-23 of the ITAA 1997). Subsection 960-50(1) and paragraph 960-50(2)(a) of the ITAA 1997 requires amounts of ordinary income denominated in a foreign currency to be translated into Australian dollars. Item 6 of subsection 960-50(6) requires ordinary income to be translated into Australian dollars at the exchange rate prevailing at the earlier of when the amount is received or when it is derived. As the taxpayer accounts for income on an accruals basis, the taxpayer is required to translate the NANE income into Australian dollars at the exchange rate prevailing at the time it is derived, unless it receives the income prior to this time. If the NANE income is received prior to being derived, it is to be translated into Australian dollars at the exchange rate prevailing at the time it is received.", "Date_of_Decision": "31 May 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 section 6-23 section 11-55 section 960-50", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign currency translation Foreign exchange gains and losses", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004472", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Foreign currency translation Foreign exchange gains and losses"}
{"ATO_ID_Number": "ATO ID 2004/571", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Exchange (Forex): Forex realisation gain on repayment of borrowings to acquire non-portfolio dividend", "Issue": "Will any foreign exchange (forex) realisation gain made on the repayment of borrowings used to acquire shares in certain foreign companies, be non-assessable non-exempt income under section 775-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A forex realisation gain made on the repayment of borrowings used to acquire shares in certain foreign companies will be non-assessable non-exempt income under section 775-25 of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident company. The taxpayer acquired certain foreign companies. These foreign companies will pay non-portfolio dividends, as defined in section 317 of Part X of the Income Tax Assessment Act 1936 (ITAA 1936), that are non-assessable non-exempt income (as defined in section 6-23 of the ITAA 1997) to the taxpayer. To partly fund the acquisition of these companies, the taxpayer entered into an agreement to borrow foreign currency. The agreement comprises an obligation to repay amounts borrowed, and to pay interest on the borrowings to the financier. Amounts borrowed by the taxpayer under the agreement (the borrowings) were only used to acquire shares in the foreign companies.", "Reasons_for_Decision": "Summary: Forex realisation event 4 occurs when the obligation to pay the borrowings is discharged by way of payment. Under the borrowing agreement, the taxpayer received foreign currency. In return for receipt of this foreign currency, the taxpayer incurred an obligation to repay foreign currency to the financier. When the taxpayer repays all or part of the borrowings, its obligation to pay foreign currency to the financier will cease to the extent of that repayment. Since the taxpayer's obligation to repay foreign currency was incurred in return for receiving an amount of foreign currency, forex realisation event 4 (FRE 4) will happen each time the taxpayer repays some or all of the borrowings (paragraph 775-55(1)(a) and subparagraph 775-55(1)(b)(ix) of the ITAA 1997 apply). FRE 4 will happen at the time of each repayment, pursuant to subsection 775-55(2). Whether a FRE 4 arising on a repayment of some or all of the borrowings, gives rise to a forex realisation gain (under subsection 775-55(3) of the ITAA 1997) or a forex realisation loss (under subsection 775-55(5)), requires a comparison to be made between: and Where the amount in paragraph (a) above falls short of the amount in paragraph (b) above, so much of that shortfall that is attributable to a currency exchange rate effect (as defined in section 775-105 of the ITAA 1997), is a forex realisation gain of the taxpayer (pursuant to subsection 775-55(3) of the ITAA 1997). A forex realisation gain made by the taxpayer under FRE 4 on a complete or partial repayment of the borrowings will be non-assessable non-exempt income to the taxpayer if, had it been a forex realisation loss, it would have been made in gaining or producing non-assessable non-exempt income (section 775-25 of the ITAA 1997). To determine the link or nexus between a forex realisation loss that could arise on a complete or partial repayment of the borrowings, and what it is 'made in gaining or producing', the purpose for, or use to which, the taxpayer put those borrowings must be considered (see Fletcher v. Federal Commissioner of Taxation (1991) 173 CLR 1; 91 ATC 4950; (1991) 22 ATR 613, Kidston Goldmines Ltd v. Federal Commissioner of Taxation (1991) 30 FCR 77; 91 ATC 4538; (1991) 22 ATR 168). This is because the taxpayer only incurred the obligation in relation to which any forex realisation loss arises (the obligation to repay the borrowings) in return for receiving the amount of those borrowings. The taxpayer used the borrowings to acquire shares in the foreign companies. The shares which the taxpayer acquired, like those considered in Federal Commissioner of Taxation v. Total Holdings (Australia) Pty Ltd 79 ATC 4279; (1979) 9 ATR 885, are inherently capable of generating income (see in particular Lockhart J at ATC 4282-4284; ATR 890). The taxpayer will be paid non-portfolio dividends from its shareholdings in the foreign companies. Non-portfolio dividends paid to the taxpayer from the foreign companies will be non-assessable non-exempt income of the taxpayer under either: (Note that any dividends paid by the foreign companies will be treated as first paid from profits that have been attributed to the taxpayer, and then from other profits.) Therefore, the borrowings will be used in gaining or producing non-assessable, non-exempt income of the taxpayer. John Fairfax & Sons Pty Ltd v. Federal Commissioner of Taxation (1959) 101 CLR 30; (1959) 11 ATD 510; (1959) 7 AITR 346 tells us that an outgoing can be incurred in gaining or producing income despite being an outgoing of a capital nature. A repayment of the borrowings, while itself an obligation of a capital nature, is an outgoing that the taxpayer will incur in gaining or producing non-assessable, non-exempt income. Any forex realisation loss arising on a complete or partial repayment of the borrowings will similarly be made by the taxpayer in gaining or producing non-assessable non-exempt income. Therefore, pursuant to section 775-25 of the ITAA 1997, any forex realisation gain made by the taxpayer on a complete or partial repayment of the borrowings to the financier will be treated as non-assessable non-exempt income.", "Date_of_Decision": "4 June 2004", "Year_of_Income": "Year ended 30 June 2004.", "Legislative_References": "Income Tax Assessment Act 1936 section 23AI section 23AJ section 317", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/572", "Subject_References": "Foreign exchange gains and losses Forex realisation event Forex realisation gain International loans Non portfolio foreign income", "Case_References": "Federal Commissioner of Taxation v. Total Holdings (Australia) Pty Ltd 79 ATC 4279 (1979) 9 ATR 885", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004571", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Foreign exchange gains and losses Forex realisation event Forex realisation gain International loans Non portfolio foreign income"}
{"ATO_ID_Number": "ATO ID 2004/572", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Exchange (Forex): Forex realisation loss on repayment of borrowings to acquire non-portfolio dividend", "Issue": "Will any foreign exchange (forex) realisation loss made on the repayment of borrowings used to acquire shares in certain foreign companies, be disregarded under subsection 775-35(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A forex realisation loss made on the repayment of borrowings used to acquire shares in certain foreign companies will be disregarded under subsection 775-35(2) of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident company. The taxpayer acquired certain foreign companies. These foreign companies will pay non-portfolio dividends, as defined in section 317 of Part X of the Income Tax Assessment Act 1936 (ITAA 1936), that are non-assessable non-exempt income (as defined in section 6-23 of the ITAA 1997) to the taxpayer. To partly fund the acquisition of these companies, the taxpayer entered into an agreement to borrow foreign currency. The agreement comprises an obligation to repay amounts borrowed and to pay interest on the borrowings to a financier. Amounts borrowed by the taxpayer under the agreement (the borrowings) were only used to acquire shares in the foreign companies.", "Reasons_for_Decision": "Summary: Forex realisation event 4 occurs when the obligation to pay the borrowings is discharged by way of payment. Under the borrowing agreement, the taxpayer received foreign currency. In return for receipt of this foreign currency, the taxpayer incurred an obligation to repay foreign currency to the financier. When the taxpayer repays all or part of the borrowings, its obligation to pay foreign currency to the financier will cease to the extent of that repayment. Since the taxpayer's obligation to repay foreign currency was incurred in return for receiving an amount of foreign currency, forex realisation event 4 (FRE 4) will happen each time the taxpayer repays some or all of the borrowings (paragraph 775-55(1)(a) and subparagraph 775-55(1)(b)(ix) of the ITAA 1997 apply). FRE 4 will happen at the time of each repayment, pursuant to subsection 775-55(2). Whether a FRE 4 arising on a repayment of some or all of the borrowings, gives rise to a forex realisation gain (under subsection 775-55(3) of the ITAA 1997) or a forex realisation loss (under subsection 775-55(5)), requires a comparison to be made between: and Where the amount in paragraph (a) above exceeds the amount in paragraph (b) above, so much of that excess that is attributable to a currency exchange rate effect (as defined in section 775-105 of the ITAA 1997), is a forex realisation loss of the taxpayer (pursuant to subsection 775-55(5) of the ITAA 1997). A forex realisation loss made by the taxpayer under FRE 4 on a complete or partial repayment of the borrowings will be disregarded under subsection 775-35(2) of the ITAA 1997 to the extent that: The forex realisation loss must satisfy the condition that it is 'made in gaining or producing exempt income or non-assessable non-exempt income' (pursuant to paragraph 775-35(2)(a) of the ITAA 1997). This is the first limb of the test in subsection 775-35(2). To determine the link or nexus between a forex realisation loss that arises on a complete or partial repayment of the borrowings, and what it is 'made in gaining or producing', the purpose for, or use to which, the taxpayer put those borrowings must be considered (see Fletcher v. Federal Commissioner of Taxation (1991) 173 CLR 1; 91 ATC 4950; (1991) 22 ATR 613, Kidston Goldmines Ltd v. Federal Commissioner of Taxation (1991) 30 FCR 77; 91 ATC 4538; (1991) 22 ATR 168). This is because the taxpayer only incurred the obligation in relation to which any forex realisation loss arises (the obligation to repay the borrowings) in return for receiving the amount of those borrowings. The taxpayer used the borrowings to acquire shares in the foreign companies. The shares which the taxpayer acquired, like those considered in Federal Commissioner of Taxation v. Total Holdings (Australia) Pty Ltd 79 ATC 4279; (1979) 9 ATR 885 , are inherently capable of generating income (see in particular Lockhart J at ATC 4282-4284; ATR 890). The taxpayer will only be paid non-portfolio dividends that are non-assessable non-exempt income from its shareholdings in the foreign companies. Non-portfolio dividends paid to the taxpayer from the foreign companies will be non-assessable non-exempt income of the taxpayer under either: (Note that any dividends paid by the foreign companies will be treated as first paid from profits that have been attributed to the taxpayer, and then from other profits.) Therefore, the borrowings will be used in gaining or producing non-assessable, non-exempt income of the taxpayer. John Fairfax & Sons Pty Ltd v. Federal Commissioner of Taxation (1959) 101 CLR 30; (1959) 11 ATD 510; (1959) 7 AITR 346 tells us that an outgoing can be incurred in gaining or producing income despite being an outgoing of a capital nature. A repayment of the borrowings, while itself an obligation of a capital nature, is an outgoing the taxpayer will incur in gaining or producing non-assessable non-exempt income. Any forex realisation loss arising on a complete or partial repayment of the borrowings will similarly be made by the taxpayer in gaining or producing non-assessable non-exempt income, satisfying the nexus requirement in paragraph 775-35(2)(a) of the ITAA 1997. A forex loss made in gaining or producing non-assessable non-exempt income must also satisfy the second limb of subsection 775-35(2) of the ITAA 1997, to be disregarded. Paragraph 775-35(2)(b) requires that the obligation, or part of the obligation, (in this case, to repay the borrowings), should not give rise to a deduction. As the obligation to repay borrowings used to acquire shares in the foreign companies is capital in nature, it will not give rise to a general deduction under section 8-1 of the ITAA 1997 (paragraph 8-1(2)(a) applies). Nor will a specific statutory deduction arise from the taxpayer's obligation to repay the borrowings. In particular, section 25-90 of the ITAA 1997 will not apply to allow the taxpayer a deduction in relation to its obligation to repay the borrowings, as this obligation is to repay the principal amount of a loan, which is not interest or in the nature of interest as required by paragraph 25-90(c) (see also the definition of debt deduction in paragraph 820-40 (1)(a) of the ITAA 1997). As the obligation to repay the borrowings does not give rise to a deduction, paragraph 775-35(2)(b) of the ITAA 1997 is satisfied. As both limbs of subsection 775-35(2) of the ITAA 1997 are satisfied, any forex realisation loss arising when the obligation to repay the borrowings is discharged in full or in part, will therefore be disregarded.", "Date_of_Decision": "4 June 2004", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 23AI section 23AJ section 317", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/571", "Subject_References": "Foreign exchange gains and losses Forex realisation event Forex realisation loss International loans Non portfolio foreign income", "Case_References": "Federal Commissioner of Taxation v. Total Holdings (Australia) Pty Ltd 79 ATC 4279 (1979) 9 ATR 885", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004572", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Foreign exchange gains and losses Forex realisation event Forex realisation loss International loans Non portfolio foreign income"}
{"ATO_ID_Number": "ATO ID 2004/854", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Translation of foreign currency denominated interest where bank account opened between 19 February 1986 and 1 July 2003", "Issue": "What exchange rate should be used to translate foreign currency denominated interest income credited after 1 July 2003 to an account opened before that time, where the taxpayer accounts on a cash basis?", "Decision": "Foreign currency denominated interest income credited after 1 July 2003 to an account opened before that time should be translated at the exchange rate prevailing at the time it is credited to the account, where the taxpayer accounts on a cash basis.", "Facts": "The taxpayer has held a foreign currency denominated bank account (foreign account) which pays interest since 1998. The taxpayer accounts on a cash basis. The taxpayer's applicable commencement date under section 775-155 of the Income Tax Assessment Act 1997 (ITAA 1997), is 1 July 2003.", "Reasons_for_Decision": "Summary: When interest is credited to the taxpayer's foreign account, the bank's obligation to pay or credit the taxpayer this amount is satisfied, and the taxpayer's corresponding right to receive (or be credited) this amount of foreign currency from the bank ceases. Forex realisation event 2 will happen when the taxpayer's right to receive interest ceases, as it is a right to receive ordinary income (see subsections 775-45(1) and 775-45(2) of the ITAA 1997). However, as the taxpayer derives interest income at the same time it is credited to the foreign account (and their right to receive it ceases), there will be no currency exchange rate effect as defined in section 775-105 of the ITAA 1997. This means the taxpayer will not make a forex realisation gain or loss upon forex realisation event 2 happening when interest is credited to the foreign account. This means that despite the taxpayer's right to receive interest arising under an eligible contract entered into before 1 July 2003 (see ATO ID 2004/855), subsection 775-165(2) of the ITAA 1997 will have no application. Accordingly, the taxpayer's right to receive interest on their foreign account is not a right covered by that subsection. This means that the translation rules in section 960-50 of the ITAA 1997 will apply despite the taxpayer's right to receive interest being a right that arises under an eligible contract entered into before 1 July 2003 (see paragraph 960-55(2)(c) of the ITAA 1997). The interest amounts credited to the taxpayer's foreign account are amounts of ordinary income from the taxpayer's perspective. Item 6 in the table in subsection 960-50(6) of the ITAA 1997 provides that an amount of ordinary income denominated in a foreign currency must be translated to Australian currency at the earlier of when it is received or derived. The taxpayer derives their interest income at the time it is credited into their foreign account. Accordingly, the taxpayer must translate each amount of interest credited to the foreign account after 1 July 2003, into Australian currency at the exchange rate applicable at the time the account is credited.", "Date_of_Decision": "22 October 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 775 subsection 775-45(1) subsection 775-45(2) section 775-105 section 775-155 subsection 775-165(2) section 960-50 subsection 960-50(6) paragraph 960-55(2)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/855", "Subject_References": "Banking, finance & securities Foreign currency translation Foreign exchange rates", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004854", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Banking, finance & securities Foreign currency translation Foreign exchange rates"}
{"ATO_ID_Number": "ATO ID 2004/855", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign exchange (forex) gains and losses: bank account opened between 19 February 1986 and 1 July 2003", "Issue": "Are forex realisation gains and losses made in respect of a foreign currency denominated bank account opened between 19 February 1986 and the applicable commencement date of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997) disregarded for the purposes of Division 775?", "Decision": "Yes, forex realisation gains and losses made in respect of a bank account opened between 19 February 1986 and the applicable commencement date of Division 775 of the ITAA 1997 are disregarded for the purposes of Division 775. A gain or loss may however be taken into account under other provisions of the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997.", "Facts": "The taxpayer has held a foreign currency denominated savings account (foreign account) since 1998. The foreign account pays interest and has always had a credit balance. The taxpayer's applicable commencement date under section 775-155 of the ITAA 1997 is 1 July 2003. The taxpayer has not made a transitional election under section 775-150 of the ITAA 1997.", "Reasons_for_Decision": "Summary: The relationship between banker and customer in respect of a bank account is that of debtor and creditor: Foley v . Hill and Ors (1848) 2 HL Cas 28; [1843-60] All ER Rep 16. Thus, when a customer deposits money into a bank account the customer acquires contractual rights as a creditor of the bank. Similarly, when an amount is withdrawn from a bank account some or all of these previously acquired rights are extinguished or satisfied. This does not mean that each deposit made by a customer represents a new contract. Rather, the nature of the contractual relationship remains constant. That is, there is a single chose in action in respect of the customer's right to be repaid the amount previously deposited: Hart (Inspector of Taxes) v. Sangster [1957] 1 Ch 329; [1957] 2 All ER 208; Alcom v. Republic of Colombia [1984] AC 580. The taxpayer therefore has the right to receive the balance standing to the credit of their foreign account (a right to receive a certain amount of foreign currency). This right to receive foreign currency is a relevant right within the terms of subparagraph 775-45(1)(b)(iii) of the ITAA 1997. A part of this right will cease if the taxpayer directs that money be withdrawn or transferred out of the foreign account. Upon this right, or part of this right ceasing, a forex realisation event 2 will happen (pursuant to subsection 775-45(1) of the ITAA 1997). A forex realisation gain or loss may be made as a result of a forex realisation event 2 happening on a withdrawal transfer or payment out of the foreign account (pursuant to subsections 775-45(3) and (5) of the ITAA 1997). Subparagraph 775-165(2)(a)(ii) of the ITAA 1997 operates to disregard forex gains or losses made as a result of forex realisation event 1, 2 or 5 happening to a right or part of a right that 'arose under an eligible contract (within the meaning of the former Division 3B of Part III of the ITAA 1936) that was entered into before the applicable commencement date', provided the taxpayer has not made a transitional election under section 775-150 of the ITAA 1997. Under Division 3B of Part III of the ITAA 1936, an 'eligible contract' is defined by subsection 82V(1) of the ITAA 1936 as: Subsection 82V(1) of the ITAA 1936 also provides that 'commencing day' means 19 February 1986. Accordingly, as the taxpayer's foreign account was opened after 19 February 1986, it is an eligible contract within the meaning of Division 3B of Part III of the ITAA 1936. Whether or not the taxpayer's right to be paid the amount standing to the credit of their foreign account 'arose under' their foreign account contract (the eligible contract), will depend on the meaning given to the phrase in the context of section 775-165 of the ITAA 1997. In FC of T v. Energy Resources of Australia Ltd 94 ATC 4923; (1994) 29 ATR 553 (the ERA Case ), Gummow J and Hill J discussed the meaning of 'under an eligible contract'. Gummow J at 4943 stated: In ordinary parlance, to speak of a gain being made \"under\" an eligible contract suggests that the gain was made in exercise of a right or discharge of an obligation conferred or imposed, as the case may be, by the terms of the eligible contract. In the ERA Case Hill J noted at 4956 that in Elmslie & Ors v. FC of T 93 ATC 4964; (1993) 26 ATR 611 Wilcox J held that the relevant contract under which relevant assets were acquired was the immediately empowering contract rather than a more remote source of authority. Wilcox J considered that the relevant contract was not that which envisaged or provided for the relevant acquisition, but rather had to be the means by which the asset was actually acquired. In N. Joachimson v. Swiss Bank Corporation [1921] All ER 92; [1921] 3 KB 110 Atkin LJ (at All ER 100; KB 127) noted that there is only one contract between the bank and its customer. While the making of deposits with a bank may create a credit balance, the banking contract confers on the customer the right to be repaid that balance. Accordingly, rights conferred by the terms of the taxpayer's eligible contract (their foreign account) properly arise 'under' that contract. The rights arising upon the making of a deposit into the foreign account will have arisen under the foreign account contract, which is an eligible contract. As the foreign account is an eligible contract entered into before 1 July 2003 and the taxpayer has not made a transitional election, any forex realisation gains or losses made by the taxpayer as a result of forex realisation event 2 happening upon a withdrawal, transfer or payment out of the foreign account will be disregarded (see subsection 775-165(2) of the ITAA 1997). Note however that gains or losses may still be taken into account under other provisions of the ITAA 1936 or the ITAA 1997 as a result of a withdrawal from such a foreign account.", "Date_of_Decision": "22 October 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Division 3B of Part III (Repealed by Act No. 133 of 2003) subsection 82V(1) (Repealed by Act No. 133 of 2003)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/551", "Subject_References": "Banking, finance & securities Foreign exchange gains and losses Forex realisation event", "Case_References": "Alcom v. Republic of Colombia [1984] AC 580", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004855", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Minor grammatical changes | Format and minor grammatical changes | In line with decision to include a generic exclusion at the start of the ATOIDs that are impacted on by TOFA. | Keywords Banking, finance & securities Foreign exchange gains and losses Forex realisation event"}
{"ATO_ID_Number": "ATO ID 2004/857", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Application of the foreign exchange (forex) provisions to a loan entered into before 1 July 2003", "Issue": "Is a forex realisation gain or loss made under forex realisation event 4 upon repayment of the principal under a foreign currency denominated loan that was entered into before 1 July 2003 taken into account for the purposes of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A forex realisation gain or loss made under forex realisation event 4 upon the repayment of a foreign currency denominated loan entered into before 1 July 2003 will be disregarded for the purposes of Division 775 pursuant to subsection 775-165(4) of the ITAA 1997. A gain or loss may however be taken into account under other provisions of the Income Tax Assessment Act 1936 (ITAA 1936) or the ITAA 1997.", "Facts": "The taxpayer took out a loan in UK pounds in January 1997 to fund the purchase of the taxpayer's principal residence. In July 2004 the taxpayer repaid the loan by way of full repayment of the foreign currency principal outstanding on the loan. There was no extension or variation made to the loan contract between the taxpayer's 'applicable commencement date' as defined in section 775-155 of the ITAA 1997 and the time the loan was repaid. At the time of repayment, the taxpayer made a forex realisation loss under forex realisation event 4. The taxpayer's income year commences on 1 July 2003. The taxpayer did not make a transitional election under section 775-150 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Forex realisation event 4 happens when a taxpayer ceases to have an obligation, or part of an obligation, to pay foreign currency. For forex realisation event 4 to happen the relevant obligation must cease and the obligation must fall within one of the categories listed in paragraph 775-55(1)(b) of the ITAA 1997. In this particular case, the obligation falls within subparagraph 775-55(1)(b)(ix) - an obligation incurred in return for receiving an amount of foreign currency (that is, the principal amount of the loan). When the taxpayer redeemed the loan, that obligation ceased by way of payment. On redemption the taxpayer made a forex realisation loss as a result of forex realisation event 4 happening. Subsection 775-165(4) of the ITAA 1997 operates to disregard forex losses (or gains) made as a result of forex realisation event 3 or 4 happening to an obligation or part of an obligation if: In this case the taxpayer's applicable commencement date was 1 July 2003. The obligation to repay the principal was incurred in January 1997, by way of entering into the loan agreement. Therefore, the obligation to pay foreign currency was incurred prior to the taxpayer's applicable commencement date of 1 July 2003. Additionally, the taxpayer had not made an election under section 775-150 of the ITAA 1997 to have Division 775 apply to their foreign currency denominated transactions that were in existence at 1 July 2003. As such, the forex realisation loss made by the taxpayer under forex realisation event 4 will be disregarded for the purposes of Division 775 under subsection 775-165(4) of the ITAA 1997. Note however that a loss may be deductible under other provisions of the ITAA 1936 or the ITAA 1997.", "Date_of_Decision": "15 September 2004", "Year_of_Income": "Year ending 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 775-55 subparagraph 775-55(1)(b)(ix) section 775-150 section 775-155 subsection 775-165(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign exchange gains and losses Applicable commencement date Foreign currency obligations", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004857", "Unmatched_Content": "Remove previous amendment history reference - now incorporated into History Table. | Include reference to section 775-155 of the ITAA 1997. | Additional wording added to improve clarity. | Keywords Foreign exchange gains and losses Applicable commencement date Foreign currency obligations"}
{"ATO_ID_Number": "ATO ID 2014/32", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Is a term deposit a qualifying forex account?", "Issue": "Is a term deposit account a qualifying forex account for the purposes of Division 775 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A term deposit is not a qualifying forex account for the purposes of Division 775 of the ITAA 1997.", "Facts": "The taxpayer is an Australian resident for income tax purposes. The taxpayer opened a term deposit account on 17 December 2003 in New Zealand with a New Zealand bank. The account is denominated in New Zealand currency. The taxpayer deposited NZD20,000 into the account for a period of six months at an interest rate of 3%. Under the terms of the account with the bank, the money cannot be withdrawn within the six months without incurring a financial penalty.", "Reasons_for_Decision": "Summary: A 'qualifying forex account' means an account that is denominated in a particular foreign currency and either has the primary purpose of facilitating transactions or is a credit card account (subsection 995-1(1) of the ITAA 1997). The taxpayer's account is denominated in a foreign currency (New Zealand currency), and is maintained in a foreign country with a New Zealand bank. However, it is not a credit card account and does not have the primary purpose of facilitating transactions. The primary purpose of the account is to hold the taxpayer's money with the bank as an investment for a period of time and not to facilitate transactions. Therefore, the account is not a qualifying forex account under Division 775 of the ITAA 1997.", "Date_of_Decision": "1 October 2014", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 995-1(1) Subdivision 775-D Subdivision 775-E", "Related_Public_Rulings_and_Determinations": "ATO ID 2004/156 (Withdrawn)", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign exchange gains and losses Qualifying forex account", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201432", "Unmatched_Content": "Related Public Rulings (including Determinations) ATO ID 2004/156 (Withdrawn) | Keywords Foreign exchange gains and losses Qualifying forex account"}
{"ATO_ID_Number": "ATO ID 2009/75", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Income Tax Offset: New Zealand government superannuation pension", "Issue": "Is the taxpayer entitled to a foreign income tax offset under Division 770 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to a pension received from the New Zealand (NZ) Government Superannuation Fund?", "Decision": "No. The taxpayer is not entitled to a foreign income tax offset under Division 770 of the ITAA 1997 in relation to the pension received from the NZ Government Superannuation Fund because they have not paid foreign income tax on the income.", "Facts": "The taxpayer is an Australian resident for taxation purposes. The taxpayer is retired and receives a NZ Government Superannuation Pension. The NZ Government Superannuation Fund Amendment Act 1990 amended the NZ Government Superannuation Fund Act 1956 reducing existing allowances and annuities. The allowance received is now called a Free of Tax Annual Allowance. The Free of Tax Annual Allowance is reduced by the amount referred to as the Free of Tax Reduction. The Free of Tax Reduction is an amount calculated in accordance with the formula in section 4 of the NZ Government Superannuation Fund Amendment Act 1990. The Free of Tax Annual Allowance is non-assessable in NZ. The Free of Tax Annual Allowance is assessable in Australia under section 6-5 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 770-10(1) of the ITAA 1997 states that you are entitled to a tax offset for an income year for foreign income tax, if you paid it in respect of an amount that is included in your assessable income for the year. Subsection 770-15(1) of the ITAA 1997 defines 'foreign income tax' as follows: Foreign income tax means tax that: (a) is imposed by a law other than an Australian law; and (b) is: (i) tax on income; or (ii) tax on profits or gains, whether of an income or capital nature; or (iii) any other tax, being a tax that is subject to an agreement having the force of law under the International Tax Agreements Act 1953. The taxpayer's Free of Tax Reduction is calculated by reference to the amount of NZ tax that would otherwise have been payable on the Free of Tax Annual Allowance, and the formula as set out in section 4 of the NZ Government Superannuation Fund Amendment Act 1990. The Free of Tax Reduction is the amount by which the Free of Tax Annual Allowance is reduced. In HWE Jones v. FC of T 98 ATC 2263; (1998) 40 ATR 1048 ( Jones ), the Administrative Appeals Tribunal (AAT) considered the status of a reduction calculated pursuant to section 4 of the NZ Government Superannuation Fund Amendment Act 1990, and concluded that it was not a tax. In the judgment, the AAT stated at paragraph 16: So in the instant case, instead of the government paying the pensions and then taxing them, the transfer payment is avoided by reducing the pensions accordingly and not taxing the reduced pension. Accordingly, the Free of Tax reduction is not a tax, nor is it a tax imposed by NZ law. Consequently, it is not a 'foreign income tax' for the purposes of subsection 770-15(1) of the ITAA 1997. As a result, the taxpayer is not entitled to a foreign income tax offset under subsection 770-10(1) of the ITAA 1997 on the pension paid from the NZ Government Superannuation Fund. Further, the note to subsection 770-15(1) of the ITAA 1997 states that where a foreign jurisdiction has a tax treaty with Australia having the force of law under the International Tax Agreements Act 1953 (Agreements Act), foreign income tax includes only tax which has been correctly imposed in accordance with that tax treaty. In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one with the Agreements Act. Schedule 4 to the Agreements Act contains the tax treaty between Australia and NZ (the NZ Convention). Article 23(1) of the NZ Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in NZ under NZ law and in accordance with the NZ Convention will be allowed against Australian tax payable on income from NZ sources. As the Free of Tax Annual Allowance received is non-assessable in NZ, there has been no NZ tax paid under the law of NZ. Article 18(1) of the NZ Convention provides that pensions paid to a resident of Australia shall be taxable only in Australia. Hence, the pension received from the NZ Government Superannuation Fund cannot be taxed in NZ under the NZ Convention. Consequently, even if it were recognised that the taxpayer had paid tax in NZ in respect of the pension received, such tax would not have been paid in accordance with the NZ Convention. The AAT reached this conclusion in Jones at paragraph 20 which stated: ... if, to the contrary, it was found that the applicant was personally liable for income tax paid in New Zealand on the pension then that would appear to be contrary to the provisions of Article 19.1 of the Australia-New Zealand double tax treaty, the remedy, if any, being found in Article 25, the competent authority provision of that treaty. The taxpayer has not paid any NZ tax on the Free of Tax Annual Allowance. Further, had the taxpayer paid NZ tax on the allowance, that tax would not be foreign income tax as defined in subsection 770-15(1) of the ITAA 1997. As the taxpayer has not paid foreign income tax on the Free of Tax Annual Allowance, the taxpayer is not entitled to a foreign income tax offset under Division 770 of the ITAA 1997 in respect of that income.", "Date_of_Decision": "17 July 2009", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 Division 770 subsection 770-10(1) subsection 770-15(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign pension International tax New Zealand Treaties", "Case_References": "HWE Jones v FC of T 98 ATC 2263 (1998) 40 ATR 1048", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200975", "Unmatched_Content": "This ATO ID has been amended by replacing the reference to paragraphs (2) of Article 24 and (1) of Article 19 to the tax treaty between Australian and New Zealand with paragraphs (1) of Article 23 and (1) of Article 18 contained in the new tax treaty which took effect from 19 March 2010. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Note: Foreign income tax includes only that which has been correctly imposed in accordance with the relevant foreign law or, where the foreign jurisdiction has a tax treaty with Australia (having the force of law under the International Tax Agreements Act 1953), has been correctly imposed in accordance with that tax treaty. | Keywords Double tax agreements Foreign pension International tax New Zealand Treaties"}
{"ATO_ID_Number": "ATO ID 2010/201", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of interest income from a New Zealand income equalisation account", "Issue": "When is interest income on a deposit in a New Zealand income equalisation account assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Interest income on a deposit in a New Zealand income equalisation account is assessable under subsection 6-5(2) of the ITAA 1997 in the income year in which it is credited to the taxpayer's New Zealand income equalisation account.", "Facts": "The taxpayer is a resident of Australia. The taxpayer is a primary producer who carries on a forestry business in New Zealand. The taxpayer is a participant in a New Zealand income equalisation scheme (NZ IES). The NZ IES is a form of forward tax averaging in New Zealand, designed to enable primary producers to even out the effects of fluctuating incomes on their tax liabilities over a period of five years. Under the NZ IES, a taxpayer who derives income from forestry may deposit amounts from that income into a New Zealand income equalisation account, and may apply to withdraw amounts from the account. The taxpayer derived income from the forestry business in New Zealand in a previous income year, and deposited a portion of that income into an income equalisation account. On 31 March of the current income year, interest accrues in the taxpayer's income equalisation account. The taxpayer does not withdraw the interest from their account in the current income year. For New Zealand tax purposes, the interest is not assessable income in the current year. It will be assessable income in a future income year when it is withdrawn from the account.", "Reasons_for_Decision": "Summary: Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources in or out of Australia during the income year. Interest is ordinary income (see for example ATO ID 2001/610). In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Schedule 4 to the Agreements Act contains the tax treaty between Australia and New Zealand (New Zealand Convention). The New Zealand Convention operates to avoid the double taxation of income received by Australian and New Zealand residents. Article 11(1) of the New Zealand Convention provides that interest arising in New Zealand and beneficially owned by a resident of Australia may be taxed in Australia. As the New Zealand Convention does not disturb Australia's right to tax the interest, the taxpayer's assessable income will include the interest income in the year in which it is derived. Paragraph 26 of Taxation Ruling TR 98/1 Income Tax : determination of income ; receipts versus earnings , explains that many taxpayers derive income in the income year in which it is received, and that others derive income in the income year it is earned. Paragraph 47 of TR 98/1 explains that interest is usually derived when it is received or credited. (The ruling provides some circumstances where this is not the case but those circumstances are not relevant to the present case). Subsection 6-5(4) of the ITAA 1997 provides that in working out whether an amount of ordinary income has been derived by a person, and (if so) when, the person is taken to have received the amount as soon as it is applied or dealt with in any way on their behalf or as they direct. In the present case, the taxpayer's New Zealand income equalisation account is credited with interest on 31 March of the current income year. When the interest is credited to the account, it is considered to have been applied on the taxpayer's behalf because the account is held for their benefit. The taxpayer received the interest, and therefore has derived the interest, at the time that it is credited to their account. Australia's farm management deposit scheme in Division 393 of the ITAA 1997 does not apply to treat the interest as if it is derived when it is withdrawn, and there are no provisions in Australia's income tax legislation which treat the interest as if it was derived at any time other than the time when it is credited to the taxpayer's New Zealand income equalisation account. Accordingly, for the purpose of subsection 6-5(2) of the ITAA 1997, the interest income is derived at the time that it is credited to the taxpayer's New Zealand income equalisation account, and the interest is included in assessable income under subsection 6-5(2) of the ITAA 1997 in the income year in which it is derived.", "Date_of_Decision": "21 October 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 subsection 6-5(2) subsection 6-5(4) Division 393", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/610 | ATO ID 2010/200 | ATO ID 2010/202 | ATO ID 2010/203", "Subject_References": "Foreign Income Interest income Income tax Income equalisation deposits scheme", "Case_References": "", "Other_References": "", "Business_Line": "Individuals & Small Business", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010201", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 98/1 | Keywords Foreign Income Interest income Income tax Income equalisation deposits scheme"}
{"ATO_ID_Number": "ATO ID 2011/35", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent Establishment of a US Limited Liability Company", "Issue": "Is the taxpayer's share of business income, derived through a US permanent establishment of a US Limited Liability Company that is a foreign hybrid company for Australian income tax purposes, non-assessable non-exempt income of the taxpayer under section 23AH of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The taxpayer's share of business income, derived through a US permanent establishment of a US Limited Liability Company that is treated as a foreign hybrid for Australian income tax purposes, is non-assessable non-exempt income under section 23AH of the ITAA 1936.", "Facts": "The taxpayer company is a resident for Australian income tax purposes and is not a US resident under the US tax law. The taxpayer is not a trustee of a trust. The taxpayer holds 50% of the shares and 50% of the voting rights in a US Limited Liability Company (US LLC). The US LLC is a limited liability company that was formed in the US and has elected to be treated as a partnership for the purposes of US tax law. The US LLC conducts its business operations in the US through (a fixed place of business being) an office in the US. The only income the US LLC derives is from producing and selling audiovisual materials to unrelated customers in the US. These profits are foreign income for the purposes of subsection 23AH(15) of the ITAA 1936. The income of the US LLC is neither adjusted tainted income nor eligible designated concession income. The US LLC is a foreign hybrid company under section 830-15 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Reasons_for_Decision": "Summary: The objects of section 23AH of the ITAA 1936 are stated in subsection 23AH(1) as follows: The operative provision is in subsection 23AH(2) of the ITAA 1936, which provides: Subject to this section, foreign income derived by a company, at a time when the company is a resident in carrying on a business, at or through a PE of the company in a listed country or unlisted country is not assessable income, and is not exempt income, of the company. Therefore, for subsection 23AH(2) of the ITAA 1936 to apply, the taxpayer must be a resident company that: As the profits of the US LLC are 'foreign income' and the US is a 'listed country' as defined in subsection 23AH(15) of the ITAA 1936, it is necessary to determine whether the taxpayer derives its share of that foreign income of the US LLC in carrying on a business at or through a PE for the purposes of subsection 23AH(2). Section 830-20 of the ITAA 1997 provides that the 'foreign hybrid tax provisions', which include section 23AH of the ITAA 1936, apply to the US LLC, a foreign hybrid company, as if that company were a partnership (a defined term). Section 830-25 then provides that the taxpayer, as a shareholder in the US LLC, is a partner in a partnership. It is important to note that the purpose of the subsection 995-1(1) of the ITAA 1997 definition of partnership is to identify the types of arrangements to which the taxation treatment set out in Division 5 of Part III of the ITAA 1936 then applies. That is, the definition is merely serving to secure a particular taxing result. That definition includes arrangements that would qualify as general law partnerships and also includes arrangements that would not so qualify. Merely by being brought within the term 'partnership' as it is used in the tax law does not imbue the arrangement with all the characteristics of a general law partnership and no assumption or deeming is required to achieve the intended result of taxation under Division 5 (see for example AAT Case 12/95 95 ATC 175 at 181; 10,079 (1995) 30 ATR 1169 at 1175, Re Commissioner of Taxation v. Peter Joseph Walsh and Beatrice Joan Walsh As Trustees of Lisa Marie Walsh Trust [1983] FCA 132; 83 ATC 4415 at 4436; (1983) 14 ATR 399 per Fitzgerald J and Taxation Ruling TR 95/25 paragraphs 8-11 and 37). The effect of section 830-20 of the ITAA 1997, therefore, is that the specified income tax provisions apply 'as if' the US LLC were a (tax law) partnership; that is, the section serves only to extend the list of arrangements that fall within the definition of 'partnership' in subsection 995-1(1) of the ITAA 1997 for the purpose of securing a method of taxation in respect of foreign hybrid companies that applies to other tax law partnerships. Thus, section 830-20 of the ITAA 1997 does not deem the US LLC to satisfy any or all of the requirements of the definition of 'partnership' in subsection 995-1(1) of the ITAA 1997. In particular, it does not serve to deem the US LLC to be 'an association of persons carrying on business as partners' nor does it require any fictional assumption that the US LLC and its shareholders have all the characteristics and relationships of a general law partnership. It follows, therefore, that while it may be considered that a partner in a general law partnership has a PE where the partnership has a PE because of the nature of the partnership relationship (see paragraph 3.12 of Taxation Ruling TR 2001/11, Johnston v. Commissioner of Internal Revenue (United States), (1955) 24 T.C. 920, Donroy, Ltd. v. United States (1962) 301 F.2d 200 and Unger v. Commissioner of Internal Revenue (1991) 936 F.2d 1316,1319), the same conclusion does not follow where the entity is treated 'as if' it were a (tax law) partnership only to secure taxation as a partnership. Whether or not the shareholder in the US LLC, treated as a partner in a partnership for tax purposes, carries on the business of the US LLC through the PE of the US LLC will depend on the facts. In this case there is no evidence that the taxpayer does anything more than hold shares in the US LLC. Accordingly, the taxpayer will not prima facie satisfy subsection 23AH(2) of the ITAA 1936, as its share of the income of the LLC is not income derived by the taxpayer in carrying on a business. | Detailed Reasoning - Application of subsection 23AH(10): For the purposes of section 23AH of the ITAA 1936, subsection 23AH(10) provides that: This section applies to any indirect interest (through one or more partnerships or trust estates) of a company in foreign income derived by a partnership or trustee through a PE of the partnership or trustee in a listed country or unlisted country as if that indirect interest were foreign income derived by the company through a PE of the company in that country. Therefore, subsection 23AH(10) of the ITAA 1936 will apply if: | Detailed Reasoning - Indirect interest in foreign income through the US LLC: As the US LLC is treated as a partnership for the purposes of section 23AH of the ITAA 1936, and the taxpayer is a partner of the partnership, the taxpayer has an indirect interest, through the US LLC, in foreign income derived by a partnership within the meaning of subsection 23AH(10) of the ITAA 1936. | Detailed Reasoning - US LLC derives foreign income at or through a PE: The US LLC derives the foreign income from operations conducted through an office in the US. A 'PE' is defined in subsection 23AH(15) of the ITAA 1936 as having either the same meaning as in an applicable double tax agreement, or the meaning given by subsection 6(1) of the ITAA 1936, as the context requires. In the present case, the applicable agreement is the USA Convention in Schedule 2 to the International Tax Agreements Act 1953 (Agreements Act). Article 5 of the USA Convention provides the relevant definition of a PE. Article 5(1) provides that the term PE means a 'fixed place of business through which the business of an enterprise is wholly or partly carried on'. As the US LLC carries on business of selling audiovisual materials to unrelated customers through a fixed place of business (an office) in the US, it has a PE in the US for the purposes of Article 5 of the USA Convention. Therefore, the foreign income derived by the US LLC through the PE will be derived by a 'partnership' through a PE of the partnership in a listed country for the purposes of subsection 23AH(10) of the ITAA 1936. Accordingly, as the taxpayer has an indirect interest in foreign income derived by a partnership, and that partnership derived the foreign income at or through a PE, subsection 23AH(10) of the ITAA 1936 is satisfied and subsection 23AH(2) of the ITAA 1936 will apply as if the taxpayer's indirect interest in the US LLC's foreign income is itself foreign income derived by the taxpayer at or through a PE of the taxpayer in the US. | Detailed Reasoning - Carrying on business through that PE: Subsection 23AH(2) of the ITAA 1936 also requires that the taxpayer has derived foreign income in 'carrying on a business' at or through the PE. Although subsection 23AH(10) of the ITAA 1936 deems the taxpayer to derive income at or through a PE of the US LLC, it does not explicitly deem the taxpayer to carry on business through that PE. However, paragraph 23AH(1)(c) of the ITAA 1936 provides that the interposition of a partnership or trust between a resident company and a PE should not prevent the exemption from applying in circumstances where it would apply if the PE was held directly by the resident company. Accordingly, where the partnership has derived foreign income in carrying on a business at or through a PE, subsection 23AH(10) of the ITAA 1936 has the effect that section 23AH applies as though the resident company was placed in the shoes of the partnership. In the present case, the partnership (US LLC) is carrying on business through a fixed place of business. Because the dual conditions of 'carrying on a business' and 'through a fixed place' are present, the definition of PE as contained in Article 5(1) of the US Convention is satisfied. As such, the business carried on by the US LLC at or through the PE is treated as if the taxpayer is carrying on that business at or through that PE by virtue of subsection 23AH(10) of the ITAA 1936. This interpretation accords with the intention as expressed in paragraph 2.39 of the EM to the New International Tax Arrangements (Participation Exemption and Other Measures) Bill 2004, which introduced the current version of section 23AH of the ITAA 1936: The general principle is that the amounts that are included in assessable income of a resident company are the amounts that would have been included had the business of the permanent establishment been carried on directly by the resident company taking into account the company's actual portion of the income. Further, the net income of a trust or partnership in relation to a resident company will not include the permanent establishment income that would not have been assessable nor exempt income if the company had derived that permanent establishment income directly. The EM to the Taxation Laws Amendment Bill (No. 7) 2003 also suggests that this treatment was intended to apply where companies derive income indirectly from a PE via an interposed foreign hybrid entity. Although the EM does not refer directly to subsection 23AH(10) of the ITAA 1936, it deals with the operation of subsection 23AH(11) which extends the operation of subsection 23AH(3) in respect of capital gains and losses to indirect interests in capital gains and losses made in relation to a partnership or trust asset in carrying on a business through a PE. In this regard, paragraphs 9.49 and 9.50 of that EM, in discussing the operation of section 830-75 of the ITAA 1997, indicate that section 23AH of the ITAA 1936 is intended to apply to taxpayers making a capital gain or loss indirectly via an interest in a foreign hybrid: 9.49 ... In this case, the capital gain will be treated for the purposes of section 23AH and Part X of the ITAA 1936 as having been subject to tax in a listed country when the deemed disposal took place. Subject to the other conditions in section 23AH being met, any capital gain made by an Australian company member of the foreign hybrid will be exempt from Australian tax at that time. Any capital loss will be ignored in the same circumstances. ... 9.50 Where there is an actual disposal of some or all of an existing partner's/member's interest in the foreign hybrid resulting in a capital gain, and the gain is subject to tax in a listed country, the capital gain under Australian law will be treated as being subject to tax in the listed country at that time. This again may result in the gain being exempt, or a loss ignored, under section 23AH ... . Accordingly, the Commissioner is satisfied that the effect of subsection 23AH(10) of the ITAA 1936 in this case is to deem the taxpayer to have derived foreign income in carrying on business at or through a PE for the purpose of subsection 23AH(2) of the ITAA 1936. | Detailed Reasoning - Conclusion: The business income derived by the taxpayer indirectly through a PE of the US LLC, which is treated as foreign hybrid for Australian income tax purposes, will be non-assessable non-exempt income of the taxpayer under subsection 23AH(2) of the ITAA 1936.", "Date_of_Decision": "20 May 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 23AH subsection 23AH(1) paragraph 23AH(1)(c) subsection 23AH(2) subsection 23AH(3) subsection 23AH(5) subsection 23AH(10) subsection 23AH(11) subsection 23AH(15) Part III, Division 5 Part X", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/25 | Taxation Ruling TR 2001/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign hybrid company Foreign hybrids International tax Non-assessable non-exempt income Partnerships Permanent establishment Statutory interpretation", "Case_References": "AAT Case 12/95 AAT Case 10,079 (1995) 95 ATC 175 (1995) 30 ATR 1169", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201135", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 95/25 Taxation Ruling TR 2001/11 | Keywords Foreign hybrid company Foreign hybrids International tax Non-assessable non-exempt income Partnerships Permanent establishment Statutory interpretation"}
{"ATO_ID_Number": "ATO ID 2010/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Section 23AH of the Income Tax Assessment Act 1936 and drilling rig deployed outside the exclusive economic zone (EEZ) of a foreign country", "Issue": "Are the fees derived by the taxpayer, an Australian resident company, from the timecharter party of a drilling rig to a foreign resident company, 'not assessable income and not exempt income' (NANE income) under subsection 23AH(2) of the Income Tax Assessment Act 1936 (ITAA 1936) where the drilling rig is deployed outside the EEZ of a foreign country?", "Decision": "No. The fees derived by the taxpayer from the timecharter party of a drilling rig to a foreign resident company, is not NANE income under subsection 23AH(2) of the ITAA 1936 where the drilling rig is deployed outside the EEZ of a foreign country.", "Facts": "The taxpayer is a company that is a resident of Australia for income tax purposes (within the meaning of the ITAA 1936 and Income Tax Assessment Act 1997 (ITAA 1997) and Australia's various tax treaties being Schedules to the International Tax Agreements Act 1953 ). The taxpayer is the owner of oil drilling rigs and enters into timecharter party agreements as described by Taxation Ruling TR 2003/2. That is, the essence of the arrangement is one where the taxpayer renders a service to the company chartering the oil rig. The companies chartering the oil drilling rigs are non-residents for income tax purposes. In accordance with the timecharter party agreement, the taxpayer operates the drilling rig within and without the EEZ of foreign countries. Where the drilling rig is operated within the EEZ of a foreign country, the foreign country is a 'listed or unlisted country' for the purposes of Part X of the ITAA 1936. Governments of foreign countries are able to tax income derived from activities conducted within their EEZ. The drilling rigs are heavy or substantial equipment for income tax purposes. For the purposes of section 23AH of the ITAA 1936, the drilling rig is a 'permanent establishment' (PE) at or through which the taxpayer carries on business. None of the specific exceptions listed within the subsections of section 23AH of the ITAA 1936 apply in this case.", "Reasons_for_Decision": "Summary: Division 6 of the ITAA 1997 provides that an Australian resident's assessable income includes ordinary and statutory income derived from all sources whether in or out of Australia. Pursuant to section 6-23 of the ITAA 1997, an amount of income will be NANE income where a provision of the Act has that effect. Section 23AH of the ITAA 1936 is one such provision which states that certain income is NANE. Subsection 23AH(2) of the ITAA 1936 provides that, subject to other parts of section 23AH of the ITAA 1936, foreign income derived by a resident company in carrying on business at or through a PE in a listed or unlisted country is NANE income. The definition of 'foreign income' in subsection 23AH(15) of the ITAA 1936 states that 'foreign income' includes an amount that: The Commissioner takes the view that the source of the income derived from timecharter party oil drilling activities is where the services are performed ( Commissioner of Taxation (NSW) v. Cam & Sons Ltd (1936) 36 SR (NSW) 544; (1936) 4 ATD 32, French v. Federal Commissioner of Taxation (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76, Cliffs International Inc v. FCT (1985) 85 ATC 4374; 16 ATR 601). In Chaudhri v. Federal Commissioner of Taxation [2001] FCA 554; (2001) 24 ATC 4214; (2001) 47 ATR 126 ( Chaudhri ), the Full Federal Court of Australia in interpreting the meaning of foreign country in the context of section 23AG of the ITAA 1936 concluded as follows: In our opinion, s 23AG(3) does suggest that whatever the word \"country\" may mean it contemplates some unit, to use a neutral word, capable of imposing a law of income tax - or in other words, a political entity or, perhaps, part of a political entity. ... that the word \"country\" was intended by Parliament to encompass a political entity capable of at least taxing income derived there. Further: Ultimately, we think that we should return to the ordinary English use of the word \"country\" in the context of that being a place where personal service such as employment may be engaged in and where income may be derived. In that context, ordinary usage would not suggest that the high seas, or for that matter some parts of them, were in a composite sense to be regarded as a country, or for that matter a series of countries. Rather the ordinary meaning of the expression 'foreign country' in modern usage looks to a political entity, be that a tract of land, a district, or a group of islands. It does not extend to an ocean or region of the sea. The Commissioner considers that the Court's reasoning in Chaudhri would equally apply to interpreting section 23AH of the ITAA 1936. Although part of an ocean or sea would not ordinarily be a country, as the government of a foreign country is able to tax income derived from activities conducted inside its exclusive economic zone, the EEZ forms part of that foreign country. As a consequence, during the time in which the taxpayer deploys the drilling rig inside the EEZ of a foreign country, the PE is in a listed or unlisted country. Where the taxpayer is performing services from within the EEZ of a listed or unlisted country, the income derived will be 'foreign income' pursuant to subsection 23AH(15) of the ITAA 1936. As none of the exceptions in section 23AH of the ITAA 1936 apply, it follows that the income derived by the PE will be NANE income pursuant to subsection 23AH(2) of the ITAA 1936. Conversely, when the taxpayer deploys a drilling rig outside the EEZ of the foreign country or any other country, neither the foreign country nor any other country is capable of taxing the income derived there. Therefore, the resulting PE is not in a foreign country, and thus not in a listed country or unlisted country for the purposes of section 23AH of the ITAA 1936. Accordingly, the income derived by the taxpayer during the time in which a drilling rig is located outside the EEZ of any foreign country is not NANE income pursuant to subsection 23AH(2) of the ITAA 1936. Where under a single timecharter party contract, the taxpayer has more than one PE which derives income partly within and also partly without a foreign country's EEZ, the contract receipts will need to be apportioned accordingly (refer to Taxation Ruling TR 2001/11, in particular paragraph 3.64 and following) .", "Date_of_Decision": "16 February 2010", "Year_of_Income": "Year ending 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 23AG subsection 23AG(3) section 23AH subsection 23AH(2) subsection 23AH(15)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/11 | Taxation Ruling TR 2003/2", "Related_ATO_Interpretative_Decisions": "ATOID 2003/907", "Subject_References": "Foreign income International law International tax Listed countries Offshore petroleum industry Permanent establishment Ship chartering Substantial equipment Unlisted countries", "Case_References": "Chaudhri v Federal Commissioner of Taxation [2001] FCA 554 2001 ATC 4214 47 ATR 126", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201046", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/11 Taxation Ruling TR 2003/2 | Keywords Foreign income International law International tax Listed countries Offshore petroleum industry Permanent establishment Ship chartering Substantial equipment Unlisted countries"}
{"ATO_ID_Number": "ATO ID 2005/307", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-assessable non-exempt income: periodic payments received under a swap arrangement", "Issue": "Will the periodic payments received by the taxpayer, an Australian resident company, from a Swap Counterparty under a swap arrangement be non-assessable income, non-exempt income under section 23AH of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The periodic payments received by the taxpayer, an Australian resident company, from a Swap Counterparty under a swap arrangement will be non-assessable income, non-exempt income under section 23AH of the ITAA 1936.", "Facts": "The taxpayer is an Australian resident company that carries on business at or through a permanent establishment (or branch office) in New Zealand. The taxpayer capitalised its New Zealand branch office with Australian Dollar (AUD) funds. The New Zealand branch office of the taxpayer arranged, negotiated and executed a currency swap (the Swap) with an unrelated third party to swap the AUD amount for the equivalent New Zealand Dollar (NZD) amount at the relevant spot rate. The contract was not entered into in Australia and negotiations did not take place in Australia. The Swap Counterparty is not a resident of Australia and did not enter into the swap contract in the course of carrying on any business in Australia. Periodically, the New Zealand branch office will pay amounts equal to the NZD bank bill rate applied to the Swap Counterparty and will receive amounts equal to the AUD bank bill rate. From time to time, the New Zealand branch office will repatriate these AUD amounts to its Australian head office, the taxpayer.", "Reasons_for_Decision": "Summary: Subsection 23AH(1) of the ITAA 1936 states that one of the objects of section 23AH is to ensure that active foreign branch income derived by an Australian resident company, is not assessable income or exempt income of the company. Subsection 23AH(2) of the ITAA 1936 provides: Subject to this section, foreign income derived by a company, at a time when the company is a resident in carrying on a business, at or through a PE of the company in a listed country or unlisted country is not assessable income, and is not exempt income, of the company. The periodic payments received by the New Zealand branch from the Swap Counterparty will be non-assessable, non-exempt income of the Australian resident company under section 23AH of the ITAA 1936 if all of the requirements, set out in subsection 23AH(2), are satisfied and are not excluded from the operation of subsection 23AH(2) by subsection 23AH(5). The requirements of subsection 23AH(2) are as follows: As New Zealand is a listed country pursuant to Part 1 of Schedule 10 of the Income Tax Regulations 1936, column 4 of item 209 of Part 2 of Schedule 9 of the Regulations provides that only 'capital gains in respect of tainted assets' that are 'not subject to tax in New Zealand in a tax accounting period' will be DCI in relation to a listed country as defined in subsection 23AH(15) with reference to Part X of the ITAA 1936. The periodic payments that will be received by the New Zealand branch under the swap arrangement will be of an income nature not capital, and will not constitute DCI and therefore will not constitute EDCI. Accordingly, subsection 23AH(5) of the ITAA 1936 will not apply to exclude such amounts of foreign income from the operation of subsection 23AH(2). Based on the facts set out above, the periodic payments received by the New Zealand branch from the Swap Counterparty will not be assessable income or exempt income of the Australian resident company under section 23AH of the ITAA 1936, because all the requirements for the application of subsection 23AH(2) are satisfied and subsection 23AH(5) does not apply to exclude such amounts of foreign income from the operation of subsection 23AH(2) of the ITAA 1936.", "Date_of_Decision": "8 August 2005", "Year_of_Income": "Year ended 30 September 2005 Year ended 30 September 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 23AH subsection 23AH(1) subsection 23AH(2) subsection 23AH(5) section 317", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2050 | Taxation Ruling IT 2682", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Foreign income International tax Non-assessable non-exempt income Permanent establishment", "Case_References": "Nathan v. Federal Commissioner of Taxation (1918) 25 CLR 183", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005307", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2050 Taxation Ruling IT 2682 | Keywords Foreign income International tax Non-assessable non-exempt income Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2010/94", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign income tax offsets: distributions from a USA Corporate Limited Partnership to a foreign hybrid limited partnership - section 770-10 of the ITAA 1997", "Issue": "Is a taxpayer that is a member of a United States of America (US) Limited Partnership (LP) entitled to a foreign income tax offset under section 770-10 of the Income Tax Assessment Act 1997 (ITAA 1997) for tax imposed by the US on the taxpayer's share of the profits of the LP where:", "Decision": "Yes. The taxpayer is entitled to a foreign income tax offset under section 770-10 of the ITAA 1997 for tax imposed by the US on the taxpayer's share of the profits of the LP to the extent that LP's assessable income does not include an amount under section 529 of the ITAA 1936.", "Facts": "The taxpayer, the trustee of an Australian resident superannuation fund, invests in a US LP, which was formed in the US. The LP is a foreign hybrid limited partnership according to section 830-10 of the ITAA 1997. The LP is therefore treated as a partnership for Australian tax law purposes. The LP's only investment is in CLP, also formed in the US. The only income derived by the LP is from the investment in the CLP. Disregarding section 485AA of the ITAA 1936, the LP's investment in the CLP is a foreign investment fund (FIF) interest. The CLP is a corporate limited partnership within the meaning of subsection 94D of the ITAA 1936, and is therefore treated as a company for Australian tax law purposes, pursuant to Division 5A of the ITAA 1936. The CLP is not a foreign hybrid limited partnership within the meaning of section 830-10 of the ITAA 1997 as the LP has not made an election under section 485AA of the ITAA 1936. The CLP invests in various assets that give rise to income derived from sources in the US. As both the LP and the CLP are taxed as partnerships under US tax law, neither pays US tax itself, that is, both are fiscally transparent. Instead, the US imposes tax on the partners in respect of their share of the income, profits or gains of the partnership. At the end of each accounting period, the whole of CLP's partnership profits are either distributed to the partners or credited to the partner's capital account. The same occurs in respect of LP's partnership profits. As the partners are not resident in the US, the LP is obliged to withhold US tax from the partner's share of the net income of the partnership (whether distributed or not). The rate of withholding depends on the character of the income in the hands of the partner under US tax law and the USA Convention contained in Schedule 2 to the International Tax Agreements Act 1953 (the USA Convention).", "Reasons_for_Decision": "Summary: LP, a foreign hybrid limited partnership, is treated as an Australian partnership pursuant to section 472 of the ITAA 1936 as it has at least one resident partner (the taxpayer). As LP has not made an election under section 485AA of the ITAA 1936 in respect of CLP, CLP is treated as a company. Therefore, for the purposes of calculating LP's net income under section 90 of the ITAA 1936, LP is treated as having an interest in a foreign investment fund (FIF) (see sections 485 and 485A of the ITAA 1936). None of the exemptions in Division 2 - 14 of Part XI of the ITAA 1936 apply. Thus, subject to section 530 of the ITAA 1936, the LP would include the relevant attributable income in their assessable income under section 529 of the ITAA 1936. This would result in the taxpayer being denied a foreign income tax offset for foreign income tax withheld by CLP as the conditions in section 770-135 of the ITAA 1997 have not been met (see paragraph 15 of Taxation Ruling TR 2009/6). However, the profits of the CLP that are either distributed to the LP or credited to the LP's capital account are treated as dividend income and are included in the net income of the LP under section 44 of the ITAA 1936. This results in an attribution account payment to LP from CLP (see combined effect of section 94J, section 94L and paragraph 603(1)(a) of the ITAA 1936) and any amount otherwise attributable to LP under section 529 of the ITAA 1936 is reduced by the amount of the attribution account payment under section 530 of the ITAA 1936. The relevant assessing provision when calculating LP's assessable income is section 44 (and not section 529). To the extent of this attribution account payment, the taxpayer's entitlement to claim a foreign income tax offset is therefore determined in accordance with subsection 770-10(1) of the ITAA 1997, which provides: 770-10(1) You are entitled to a *tax offset for an income year for *foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year. Note 1: The offset is for the income year in which your assessable income included an amount in respect of which you paid foreign income tax - even if you paid the foreign income tax in another year. As explained above, where the partnership profits are either distributed or credited to the partner's capital account, Australian tax law deems the CLP to have paid a dividend to the LP under sections 94L or 94M of the ITAA 1936. As the LP is treated as a partnership for Australian tax law purposes, such dividends are included in the LP's net income pursuant to section 90 of the ITAA 1936. This is because if the LP was itself a resident taxpayer, the dividends would be included in its assessable income under section 44 of the ITAA 1936. Accordingly, the taxpayer will then include in assessable income its interest in the net income of the LP, pursuant to section 92 of the ITAA 1936. Under US tax law, tax is imposed on the taxpayer's share of the partnership profits calculated for US tax purposes. US tax law treats the CLP as a partnership, rather than a company, such that the amount included in LP's partnership profits for US tax purposes is a share of the partnership profits of CLP, rather than a deemed dividend. The LP is required to remit income tax on behalf of the taxpayer, in respect of the taxpayer's share of the partnership income for US tax purposes. Section 770-130 of the ITAA 1997 applies to treat a taxpayer as having paid foreign income tax, in circumstances where the tax is actually paid by someone else. It provides: 770-130(1) This Act applies to you as if you had paid an amount of *foreign income tax in respect of an amount (a taxed amount ) that is all or part of an amount included in your *ordinary income or *statutory income if you are covered by subsection (2) or (3) for an amount of foreign income tax paid in respect of the taxed amount. 770-130(2) You are covered by this subsection for an amount of *foreign income tax paid in respect of a taxed amount if that foreign income tax has been paid in respect of the taxed amount by another entity under an *arrangement with you or under the law relating to the foreign income tax. Example: You are a partner in a partnership and the partnership pays foreign income tax on the partnership income. Although the foreign tax is payable by the LP under US tax law (rather than by the taxpayer), such tax has been paid in respect of the same amount that is included in the taxpayer's assessable income under section 92 of the ITAA 1936. That is, the taxpayer has borne the economic burden of that tax as it has been paid in respect of an amount included in the taxpayer's assessable income. Accordingly, section 770-130 of the ITAA 1997 will deem the taxpayer to have paid the foreign tax. As the taxpayer is taken to have paid foreign income tax in respect of an amount included in its assessable income, the taxpayer is entitled to a foreign income tax offset under section 770-10 of the ITAA 1997. The amount of the offset will be the amount of foreign income tax paid, subject to the taxpayer's foreign income tax offset limit worked out under section 770-75 of the ITAA 1997. In determining the availability of a foreign income tax offset it is also necessary to consider the USA Convention contained in Schedule 2 to the International Tax Agreements Act 1953 (Agreements Act). Subsection 4(1) of the Agreements Act provides that the ITAA 1936 and the ITAA 1997 must be read as one with the Agreements Act. Article 22(2) of the USA Convention provides that where US tax has been imposed in respect of US-sourced income in accordance with the USA Convention, a credit against Australian tax payable on that income will be allowed. As the LP and the CLP are treated as 'flow-through' entities under US tax law, any treaty benefits are applied at the level of the partner and not the LP by the US for the purposes of applying the US convention. The income that flows through the CLP and the LP to the partner retains its character in the hands of that person for the purposes of US tax law. Therefore, the extent to which the US exercises its source country taxing right under the Convention will be determined by the character of that income (for example tax on interest income shall not exceed 10% under Article 11 of the US Convention). However, Australia, as the country of residence of the taxpayer, treats the relevant income taxed by the US under the Convention as dividend income paid by the CLP to which the taxpayer is beneficially entitled as a partner in the LP. This difference in treatment of income as between the State of source (US) and the State of residence of the taxpayer (Australia) is commonly referred to as a Conflict of Qualification. Where the difference in treatment is solely referable to differences in the respective domestic laws of the State of source and the State of residence of the taxpayer, it is considered that the State of source has taxed in accordance with the Convention and that the State of residence of the taxpayer is obliged to provide relief in accordance with Article 22(2) (see paragraphs 32 1 to 32 3 of the 2005 OECD Commentary on Article 23A and 23B. The Commissioner's view expressed at paragraph 104 of Taxation Ruling TR 2001/13 is that the OECD Model Tax Convention and Commentary may be considered in interpreting double tax agreements). To the extent that the US has taxed the income in accordance with the Convention, as interpreted by it as the State of source, Australia is obliged to provide relief in respect of such tax in accordance with the machinery provisions for the granting of a foreign income tax offset under section 770-10 of the ITAA 1997. Accordingly, the taxpayer will be entitled to a foreign income tax offset for US taxes paid in respect of its share of the partnership income of LP, even though, for Australian tax law purposes, the taxpayer's share of the partnership profits is calculated on the basis that the LP has derived a dividend. The foreign income tax offset will be allowable in the income year in which the partnership income is assessable, whether the foreign tax was paid in the same, or an earlier, income year.", "Date_of_Decision": "15 April 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 770-10 subsection 770-10(1) section 770-130 section 770-135 section 830-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 2009/6", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/80", "Subject_References": "Companies Complying superannuation funds Double tax agreements Foreign hybrid limited partnership Foreign hybrids Foreign income Foreign investment funds International tax Interposed partnerships Limited partnerships Partnership income", "Case_References": "", "Other_References": "OECD Commentary on the Model Tax Convention on Income and on Capital (Condensed Version 2005)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201094", "Unmatched_Content": "This ATO ID has been amended to correct references in the Title and Decision from foreign tax credits to foreign income tax offsets. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 2009/6 | Keywords Companies Complying superannuation funds Double tax agreements Foreign hybrid limited partnership Foreign hybrids Foreign income Foreign investment funds International tax Interposed partnerships Limited partnerships Partnership income"}
{"ATO_ID_Number": "ATO ID 2010/175", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign income tax offset: entitlement where foreign capital gain is only partly assessable in Australia", "Issue": "Where a resident of Australia pays foreign income tax on the whole of a foreign capital gain which is only partly assessable in Australia, does only a proportionate share of the foreign income tax count towards the foreign income tax offset under subsection 770-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Where a resident of Australia pays foreign income tax on the whole of a foreign capital gain which is only partly assessable in Australia, only a proportionate share of the foreign income tax counts towards the foreign income tax offset under subsection 770-10(1) of the ITAA 1997.", "Facts": "The taxpayer is an individual and a resident of Australia. The taxpayer realised a capital gain in a foreign country and paid foreign tax on the whole of this gain in the foreign country. Only 50% of the gain is assessable in Australia because the taxpayer is entitled to the capital gains tax (CGT) discount under Division 115 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 770-10(1) of the ITAA 1997 provides the basic entitlement rule for the foreign income tax offset and states: You are entitled to a tax offset for an income year for foreign income tax. An amount of foreign income tax counts towards the tax offset for the year if you paid it in respect of an amount that is all or part of an amount included in your assessable income for the year. Subsection 770-10(1) of the ITAA 1997 uses the phrase 'in respect of' to link the foreign income tax with an amount included in the taxpayer's assessable income. The phrase 'in respect of' was considered in the case Workers' Compensation Board of Queensland v. Technical Products Pty Ltd 165 CLR 642; 81 ALR 260. In a joint judgement Deane, Dawson and Toohey JJ said the following about this phrase: The phrase gathers meaning from the context in which it appears and it is that context which will determine the matters to which it extends. Subsection 770-5(1) of the ITAA 1997 provides relevant context by explaining the object of Division 770 as follows: The object of this Division is to relieve double taxation where: (a) you have paid foreign tax on amounts included in your assessable income; and (b) you would, apart from this Division, pay Australian tax on the same amounts. The references in the objects provision to relieving 'double taxation' and 'amounts included in your assessable income' demonstrate that, where a taxpayer pays foreign tax on the whole of a capital gain but only a portion of that gain is assessable in Australia, the purpose of Division 770 is to only provide a foreign income tax offset for the portion of the gain that is included in assessable income and thus subject to taxation in both Australia and the foreign country (that is, double taxation). This can be described as an 'apportionment approach' to the allowance of a foreign income tax offset. Such an approach is also consistent with the approach explained in Note 2 to subsection 770-10(1) of the ITAA 1997 which states: If the foreign income tax has been paid on an amount that is part non-assessable non-exempt income and part assessable income for you for the income year, only a proportionate share of the foreign income tax (the share that corresponds to the part that is assessable income) will count towards the tax offset (excluding the operation of subsection (2)). While Note 2 is non-operative material, it is relevant context as it is provided to help understand provisions (see sections 2-35 and 2-45 of the ITAA 1997). Accordingly, Note 2 is further contextual support for the view that the words used in subsection 770-10(1) of the ITAA 1997 were intended to require apportionment of the foreign income tax paid when only part of an amount that is subject to foreign income tax is included in Australian assessable income. The foreign income tax offset provisions in the ITAA 1997 were introduced by the Tax Laws Amendment (2007 Measures No. 4) Bill 2007. Paragraph 1.18 of the Explanatory Memorandum accompanying the Bill summarises the new law, in part, as follows: Taxpayers will be entitled to a non-refundable tax offset for foreign income tax paid on an amount included in assessable income (a 'double-taxed amount'). This offset effectively reduces the potential Australian tax that would be payable on double-taxed amounts. This statement also confirms that a foreign income tax offset will only be allowed on an amount that is included in assessable income in Australia and subject to double taxation. The Explanatory Memorandum also makes many other references to a foreign income tax offset being limited to amounts included in assessable income and subject to double taxation. However, there is one statement in the Explanatory Memorandum which is inconsistent with these references. Example 1.20 at paragraph 1.150 of the Explanatory Memorandum states: The taxpayer is entitled to an offset for the lesser of the foreign tax paid ($39,000) and the Australian tax payable in respect of the foreign net capital gain that is included in assessable income (even though only part of the capital gain on foreign asset D is included in the taxpayer's net capital gain). In this example, the amount of Australian tax ($37,500) on the $125,000 net capital gain is less than the foreign tax paid ($39,000) on the foreign capital gain of $130,000. The above statement in Example 1.20 implies that if the foreign tax on the whole of the foreign capital gain had been less than the Australian tax on the net capital gain, the whole of the foreign tax would have been allowed as a foreign income tax offset even though only part of the gain was included in assessable income in Australia and subject to double taxation. That is, it implies that in such circumstances there would not have been an apportionment of the foreign tax paid in calculating the allowable foreign income tax offset. Accordingly, this statement in Example 1.20 is inconsistent with the rest of the Explanatory Memorandum. In Federal Commissioner of Taxation v. Myer Stores Ltd 98 ATC 4384; (1998) 38 ATR 447, Hill J suggested that a paragraph of an Explanatory Memorandum may have been incorrect, and stated: While no doubt it is appropriate, perhaps generally essential, to have regard to the explanatory memorandum either where there is ambiguity or to confirm the ordinary meaning of the words or indeed to determine the mischief for which a particular statutory provision has been enacted, the explanatory memorandum cannot control the meaning of words used by the legislature. Similarly, in Deputy Federal Commissioner of Taxation v. PM Developments Pty Ltd [2008] FCA 1886; 2008 ATC 20-078; (2008) 70 ATR 741, Logan J stated that an assertion in an Explanatory Memorandum 'is not a substitute for the language employed by the Parliament in the Bill as enacted'. Then, in relation to the Explanatory Memorandum that he was considering, Logan J concluded that a particular paragraph was not completely correct. The Commissioner's view is that the statement above from Example 1.20 in the Explanatory Memorandum is not consistent with the words and purpose of the legislation and accordingly should be disregarded as relevant context to the extent that it implies that an apportionment approach would not apply to the allowance of a foreign income tax offset in such circumstances. The rest of the Explanatory Memorandum, in particular, paragraph 1.18 and other similar passages are still considered to be relevant contextual guidance because they are consistent with the words and purpose of the legislation and they consistently confirm that the meaning of the phrase 'in respect of an amount that is all or part of an amount included in your assessable income for the year' in subsection 770-10(1) of the ITAA 1997 requires an apportionment approach. Consequently, where a resident of Australia pays foreign income tax on the whole of a foreign capital gain but only 50% of the gain is included in the assessable income of the taxpayer in Australia because the taxpayer is entitled to the CGT discount, only 50% of the foreign income tax counts towards the foreign income tax offset under subsection 770-10(1) of the ITAA 1997.", "Date_of_Decision": "17 September 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 2-35 section 2-45 Division 102 Division 115 Division 152 Division 770 subsection 770-5(1) subsection 770-10(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2009/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Foreign income Foreign tax credits Capital gains tax CGT small business relief Active asset Capital losses CGT 50% individual discount", "Case_References": "Workers' Compensation Board of Queensland v Technical Products Pty Ltd 165 CLR 642 81 ALR 260", "Other_References": "Tax Laws Amendment (2007 Measures No. 4) Bill 2007", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010175", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2009/6 | Keywords International tax Foreign income Foreign tax credits Capital gains tax CGT small business relief Active asset Capital losses CGT 50% individual discount"}
{"ATO_ID_Number": "ATO ID 2008/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign income tax offset: New Zealand National Provident Fund pension", "Issue": "Is the taxpayer entitled to a foreign income tax offset under subsection 770-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) in respect of a pension received from a New Zealand (NZ) National Provident Fund (the Fund)?", "Decision": "No. The taxpayer is not entitled to a foreign income tax offset under subsection 770-10(1) of the ITAA 1997 in relation to the pension received from the Fund because the taxpayer has not paid foreign income tax.", "Facts": "The taxpayer is an Australian resident for taxation purposes. The taxpayer receives a pension from the Fund after 1 July 2008. The pension received is non-assessable in NZ. The Fund is taxed on its investment earnings in NZ. The pension is assessable in Australia under section 6-5 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Subsection 770-10(1) of the ITAA 1997 provides that a taxpayer is entitled to a foreign income tax offset for foreign income tax the taxpayer paid on an amount included in assessable income. Subsection 770-15(1) of the ITAA 1997 defines 'foreign income tax' as tax imposed by a law other than an Australian law, and is: Subsections 770-130(1) and 770-130(2) of the ITAA 1997 provide that a taxpayer is still treated as having paid foreign income tax where the foreign income tax is paid by someone else under an arrangement or under the law relating to the foreign income tax. For these subsections to apply there must be a nexus between the payment of the foreign income tax and the tax liability of the taxpayer. In this case, the Fund is liable to tax in its own right. As the foreign income tax paid by the Fund does not relate to a tax liability of the taxpayer, the taxpayer is not entitled to a foreign income tax offset under subsection 770-10(1) of the ITAA 1997. Paragraph 1.105 of the Explanatory Memorandum to the Tax Laws Amendment (2007 Measures No. 4) Act 2007 , which introduced the foreign income tax offset rules, states: A taxpayer in receipt of a foreign pension from a foreign superannuation fund will also not satisfy the nexus in respect of any foreign income tax paid by the foreign superannuation fund on its income. In determining liability to Australian tax on foreign sourced income received by a resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. Section 4 of the Agreements Act incorporates that Act with the ITAA 1997 so that the ITAA 1997 is read as one with the Agreements Act. Schedule 4 to the Agreements Act contains the double tax agreement between Australia and NZ (the NZ Convention). Article 23(1) of the NZ Convention provides that, subject to the provisions of the law of Australia, a credit for any tax paid in NZ under NZ law and in accordance with the NZ Agreement will be allowed against Australian tax payable on income from NZ sources. No NZ tax has been paid by the taxpayer under the law of NZ. Article 18(1) of the NZ Convention provides that pensions paid to a resident of Australia shall be taxable only in Australia. The fact that the Fund is liable to tax in NZ on its income does not affect the application of Article 18(1). Hence, the pension received by the taxpayer from the Fund is taxable only in Australia. Even if it were recognised that the taxpayer had paid tax in NZ in respect of the pension received, such tax would not have been paid in accordance with the NZ Convention. Therefore, Article 23(1) of the NZ Convention does not apply to oblige Australia to provide credit relief in respect of the pension received by the taxpayer.", "Date_of_Decision": "6 August 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 6-5 subsection 770-10(1) subsection 770-15(1) subsection 770-130(1) subsection 770-130(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign pension Foreign income tax offsets International law International tax New Zealand Treaties", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2007 Measures No. 4) Act 2007", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008135", "Unmatched_Content": "This ATO ID has been amended by replacing the references to paragraph (2) of Article 24 and paragraph (1) of Article 19 to the tax treaty between Australian and New Zealand with paragraph (1) of Article 23 and paragraph (1) of Article 18 contained in the new tax treaty which took effect from 19 March 2010. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Foreign pension Foreign income tax offsets International law International tax New Zealand Treaties"}
{"ATO_ID_Number": "ATO ID 2004/282", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Exemption with progression: work related expenses relating to exempt foreign employment income", "Issue": "Are work related expenses incurred by a resident taxpayer that relate wholly to salary and wage income which is exempt under section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936) taken into account in working out 'notional gross tax' and 'notional gross taxable income' under subsection 23AG(3) of the ITAA 1936?", "Decision": "Yes. Work related expenses incurred by a resident taxpayer that relate wholly to salary and wage income which is exempt under section 23AG of the ITAA 1936 are taken into account in working out 'notional gross tax' and 'notional gross taxable income' under subsection 23AG(3) of the ITAA 1936.", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer worked overseas as an employee. The taxpayer received salary and wages in relation to their work overseas. The salary and wages are exempt under section 23AG of the ITAA 1936. The taxpayer incurred work related expenses in relation to their employment. The work related expenses do not relate to the taxpayer's income earning activities in Australia. The expenses would have been deductible under section 8-1 and section 40-25 of the Income Tax Assessment Act 1997 (ITAA 1997) had the salary and wages not been exempt.", "Reasons_for_Decision": "Summary: Subsection 23AG(3) of the ITAA 1936 provides that where the income of a taxpayer of a year of income consists of an amount that is exempt from tax under section 23AG (the 'exempt amount') and other income, the amount of tax (if any) payable in respect of the other income is calculated using the formula: (Notional gross tax / Notional gross taxable income) * Other taxable income \"Notional gross tax\" means the number of whole dollars in the amount of income tax that would be assessed under this Act in respect of the taxpayer's taxable income of the year of income if: \"Notional gross taxable income\" means the number of whole dollars in the amount that would have been the taxpayer's taxable income of the year of income if the exempt amount were not exempt income. Central to the meaning of these two terms is the calculation of an amount that would have been the taxpayer's taxable income of the year of income if the exempt amount were not exempt income. The term 'taxable income' is defined in subsection 6(1) of the ITAA 1936 to have the same meaning as in the ITAA 1997. Subsection 995-1(1) of the ITAA 1997 defines taxable income as having the meaning given by section 4-15 of the ITAA 1997. Section 4-15 of the ITAA 1997 states that taxable income is assessable income less deductions. Subsection 995-1(1) of the ITAA 1997 defines a deduction as an amount that you can deduct. The term 'deduct' is further defined by subsection 995-1(1) of the ITAA 1997 as having the meaning given by sections 8-1 and 8-5 of the ITAA 1997. Section 8-1 of the ITAA 1997 states that you can deduct from your assessable income any loss or outgoing to the extent that: Section 8-5 of the ITAA 1997 further provides that you can deduct from your assessable income an amount that a provision of the ITAA 1997 (outside Division 8 of the ITAA 1997) allows you to deduct. Subsection 40-25(1) of the ITAA 1997 states that you can deduct an amount equal to the decline in value for an income year (as worked out under this Division) of a depreciating asset that you held for any time during the year. Subsection 40-25(2) of the ITAA 1997 states that you must reduce the deduction by the part of the asset's decline in value that is attributable to your use of the asset, or your having it installed ready for use, for a purpose other than a taxable purpose. Paragraph 40-25(7)(a) of the ITAA 1997 states that a taxable purpose is the purpose of producing assessable income. Section 6-15(2) of the ITAA 1997 states that if an amount is exempt income, it is not assessable income. The taxpayer has incurred expenses that cannot be deducted under section 8-1 and section 40-25 of the ITAA 1997 as the expenses wholly relate to the production of income that is exempt under section 23AG of the ITAA 1936. However, those expenses would have been deductible had the taxpayer's salary and wages been assessable income under subsection 6-5(2) of the ITAA 1997. Accordingly, the expenses may be deducted from the taxpayer's exempt salary and wages to determine the taxpayer's 'notional gross taxable income' and 'notional gross tax' for the purposes of working out the tax payable on the taxpayer's other assessable income under subsection 23AG(3) of the ITAA 1997.", "Date_of_Decision": "19 January 2004", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 23AG subsection 23AG(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Exempt income Foreign income Foreign income deductions Foreign salary & wages International tax Salary & wages expenses Salary & wages income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004282", "Unmatched_Content": "This ATO ID has been amended to clarify its scope by the inclusion of the last sentence and Note. | Keywords Exempt income Foreign income Foreign income deductions Foreign salary & wages International tax Salary & wages expenses Salary & wages income"}
{"ATO_ID_Number": "ATO ID 2004/314", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of amounts paid or payable to a non-resident for the carriage of goods shipped in Australia", "Issue": "Is 5% of the amount paid or payable to a non-resident company for the carriage of goods in Australia, included in the company's taxable income under section 129 of the Income Tax Assessment Act 1936 (ITAA 1936) where it enters into a voyage charterparty with a non-resident ship owner and then subsequently enters into a voyage charterparty with an Australian resident shipper?", "Decision": "Yes. As the non-resident company is the charterer of the ship that has the carriage of goods in Australia (not the ship owner), 5% of the amount paid or payable is deemed to be taxable income of the non-resident company under section 129 of the ITAA 1936.", "Facts": "The non-resident company entered into a voyage charterparty with a non-resident ship owner and then entered into a voyage charterparty with an Australian resident shipper. The non-resident company does not have a principal place of business in Australia. The freight charged by the non-resident company to the Australian resident for the carriage of goods shipped in Australia is the same as the freight charged by the owner to the non-resident company.", "Reasons_for_Decision": "Summary: Section 129 of ITAA 1936 provides that 5% of an amount paid or payable for the carriage of certain items by ship is deemed to be included in the taxable income of a ship owner or charterer if the following conditions are satisfied: In the situation where a non-resident shipowner is carrying items of an Australian shipper under a bill of lading or under a voyage charterparty, it is the shipowner who must include 5% of the amount for the carriage of the items in their taxable income. However, where the ship is under a charterparty to another non-resident when items are shipped in Australia, the non-resident charterer is the person who must include 5% of the amount for the carriage of the items in their taxable income. Accordingly, as the non-resident company is the charterer of the ship that has carriage of goods shipped in Australia, it must include 5% of the amount that is paid or payable for the carriage of those goods in their taxable income under section 129 of the ITAA 1936.", "Date_of_Decision": "12 December 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 129", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2003/2 | Taxation Determination TD 93/89", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Ship chartering Shipping", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004314", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2003/2 Taxation Determination TD 93/89 | Keywords Ship chartering Shipping"}
{"ATO_ID_Number": "ATO ID 2013/39", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore banking unit: investment made with an offshore person or a non-resident", "Issue": "Where an offshore banking unit [1] (OBU) purchases investments on behalf of an offshore person, who is the entity that is referred to in the terms 'making ... with' in subsection 121D(6) of the Income Tax Assessment Act 1936 (ITAA 1936) and 'made with' in paragraph 121D(6A)(c) of the ITAA 1936?", "Decision": "The entity that is referred to in the terms 'making ... with' in subsection 121D(6) of the ITAA 1936 and 'made with' in paragraph 121D(6A)(c) of the ITAA 1936 is the other party (that is the counterparty) to the transaction.", "Facts": "An Australian OBU, which is a resident member of a multinational group, provides investment management services to a non-resident member of the group. That group member is an offshore person as defined in section 121E of the ITAA 1936. The OBU purchases and manages various types of investments on behalf of the offshore person. This includes purchases of shares, derivatives (including futures and options) and other securities through foreign exchanges.", "Reasons_for_Decision": "Summary: Subsection 121D(6) of the ITAA 1936 states in part: For the purposes of paragraph (1)(e), an investment activity is making ... an investment with an offshore person ... (emphasis added) Subsection 121D(6A) of the ITAA 1936 states in part: For the purposes of paragraph (1)(e), an investment activity is also the managing by an OBU of a portfolio investment ... where: ... (c) the portfolio investment was made with a non-resident (except to the extent that making the investment consisted of making a loan or purchasing an Australian thing); and ... (emphasis added) Since subsections 121D(6) and (6A) both apply to investments, this ATO ID applies only where assets are acquired as investments. ATO ID 2004/962 discusses the distinction between assets which are acquired as investments and assets which do not amount to investments because they are acquired for other purposes. Subsection 121D(6) of the ITAA 1936 refers to making an investment with an offshore person, while paragraph 121D(6A)(c) of the ITAA 1936 refers to an investment made with a non-resident. This raises the question of whether the terms 'making ... with' and 'made with' refer to an entity being the previous holder of the investment, or to an entity such as the exchange through which the investment was acquired, or to the issuer of the investment, or to some other person. 'Making ... an investment with' and 'an investment made with' are not defined in the legislation. However, we consider that the terms are so similar that they both have the same meaning. Subsection 126D(6) of the ITAA 1936 was introduced by the Taxation Laws Amendment Bill (No. 4) 1992. The Senate Replacement Explanatory Memorandum for that Bill states in part: To be an 'OB activity': ... the other party to the transaction must be an ''offshore person'' ... (emphasis added) Subsection 121D(6A) of the ITAA 1936 was introduced by the Taxation Laws Amendment Bill (No. 2) 1996. The House of Representatives Explanatory Memorandum for that Bill says in part: 1.38,Similarly, the restriction that when making an investment on behalf of an offshore person the other party to the transaction must be a non-resident who does not have a permanent establishment in Australia is removed in new subsection 121D(6A) . OBUs will be able to purchase Australian assets from or make loans to both residents and non-residents (whether or not they have a permanent establishment in Australia). [New paragraph 121D(6A)(c)] (Emphasis added) Hence the entity that an investment is made with, for the purpose of subsections 121D(6) and 121D(6A) of the ITAA 1936, is the other party (that is, the counterparty) to the transaction. | Detailed Reasoning - Real property: In the case of an investment in real property, the other party to the transaction is the vendor of the property. Hence in relation to an investment in real property, the terms 'making ... with' and 'made with' refer to the vendor. | Detailed Reasoning - Fixed deposits: For investments such as fixed deposits, the other party to the transaction is the bank or other entity with which the deposit is made, so the terms 'making ... with' and 'made with' refer to that entity. | Detailed Reasoning - Loans: In the case of loans made by an OBU, the other party to the transaction is the borrower, and 'making ... with' and 'made with' refer to the borrower. | Detailed Reasoning - Securities: In relation to shares or other types of securities which can be traded on an exchange, there are two distinct points at which the securities can be purchased - firstly in the primary market where securities are created and sold by the issuer, and secondly in the secondary market where investors buy and sell securities that were previously issued in the primary market. We consider that the terms 'making ... with' and 'made with' were intended to refer to the seller of the investments, as the seller is the other party to the transaction. | Detailed Reasoning - Securities - primary market: In the primary market (for example, when a company undertakes an Initial Public Offering) the transaction takes place between the issuer (the company) and the investor. In this case, the issuer of the securities is the seller of the investment and the other party to the transaction. Thus, in the case of shares or other securities purchased by an OBU in the primary market, 'made with' and 'making ... with' refer to the issuer of the shares or other securities. | Detailed Reasoning - Exchange traded securities - secondary market: Where investments, including shares, debentures, units in unit trusts, futures and options etc., are traded on an exchange, the transactions are made between the buyers and sellers. Other parties may be involved in the transactions, for example, exchange participants, exchanges, and clearing houses. However, these parties act on behalf of, or as intermediaries between, the buyer and the seller. Whenever an investment is traded on an exchange, the other party to the transaction, for the purpose of subsections 121D(6) and 121D(6A) of the ITAA 1936, is the seller or buyer on the other side of the trade. However, in practice, a buyer (including an OBU buyer) generally does not know the identity of the seller, and so could not know whether the seller is an offshore person or a non-resident. For this reason, we will accept that when an investment is acquired through a foreign stock exchange or a foreign futures exchange or foreign options exchange, an investment is made with an offshore person for the purpose of subsection 121D(6) of the ITAA 1936 - unless either the OBU or the offshore person for whose benefit the security is purchased, is aware or might reasonably be expected to be aware, that the seller of the security is not an offshore person. Similarly, we will accept that when an investment is acquired through a foreign exchange, an investment is made with a non-resident for the purpose of subsection 121D(6A) of the ITAA 1936 - unless either the OBU or the non-resident for whose benefit the security is purchased, is aware or might reasonably be expected to be aware, that the seller of the security is not a non-resident. | Detailed Reasoning - Over the counter trades: Finally, and in contrast with the exchange trading of investments, 'over-the-counter' (OTC) or 'off-exchange' trading is the negotiation and trading of such investments privately and directly between buyers and sellers, rather than through a centralised institution such an exchange. Here the terms 'making ... with' and 'made with' refer to the other party (the counterparty) to the OTC transaction.", "Date_of_Decision": "20 May 2013", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 subsection 121D(6) subsection 121D(6A) paragraph 121D(6A)(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/962", "Subject_References": "International tax Offshore banking Offshore banking units Offshore banking activities", "Case_References": "", "Other_References": "Senate Replacement Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 4) 1992 House of Representatives Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 2) 1996", "Business_Line": "Technical Leadership Group, LB&I", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201339", "Unmatched_Content": "Date of effect 13 September 2021 | Keywords International tax Offshore banking Offshore banking units Offshore banking activities"}
{"ATO_ID_Number": "ATO ID 2011/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore banking units: trading activity", "Issue": "Does the execution of 'Non-Deliverable Forward' contracts (NDFs), which constitute executory contracts satisfied by financial settlement, constitute trading in currency or rights in respect of currency under paragraphs 121D(4)(e) or 121D(4)(ea) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. NDFs do not constitute trading in currency or rights in respect of currency under paragraphs 121D(4)(e) or 121D(4)(ea) of the ITAA 1936.", "Facts": "An offshore banking unit (OBU), as part of its foreign exchange business, enters into NDFs with Australian resident and non-resident counterparties. The NDFs are executory contracts performed by financial or cash settlement of amounts payable by the parties to the contract. The amounts payable by the parties to the contract are determined in accordance with an agreed 'fixing rate' which includes or reflects an agreed exchange rate for particular currencies. Accordingly, the parties to the NDF do not perform their contractual obligations by delivery of the currency. The OBU agrees to pay any amount payable by the OBU upon settlement under the NDFs in a particular currency. The execution and settlement of the NDFs satisfies section 121EA of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 121D of the ITAA 1936 lists the type of activities that qualify as an offshore banking activity (OB activity) for the purpose of determining offshore banking income of an OBU [1] under Division 9A. Paragraph 121D(1)(c) of the ITAA 1936 states that a 'trading activity' is an OB activity if it meets the requirements of subsection 121D(4). Paragraphs 121D(4)(e) and (ea) of the ITAA 1936 refer to 'trading in currency' or 'trading in rights in respect of currency' as being a trading activity in certain circumstances. 'Trading' is not defined in the ITAA 1936 but section 121ED provides that a person (the trader) is said to trade with another person in a thing if: 'Trading' as a verb has its root word in 'trade' which according to the Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01 means 'a purchase, sale or exchange' of a thing. Section 121ED of the ITAA 1936 refers to an acquisition or purchase of a thing for the purpose of trading in the thing, or a sale in the course of trading a thing. In the context of paragraphs 121D(4)(e) and (ea) of the ITAA 1936, the thing is currency or rights in respect of currency. NDFs may be transacted in the course of, or in connection with, the OBU's foreign exchange business. Profits made by the OBU under the NDF contracts are assessable as ordinary business income ( Californian Copper Syndicate v. Harris (Surveyor of Taxes ) (1904) 5 TC 159) or as income from isolated business transactions entered with the intent to make profit ( Myer Emporium v. Federal Commissioner of Taxation (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693). However, this does not make NDF transactions trading activities. Trade is not synonymous with business because not all business involves a trade: per Menzies J Hornsby Shire Council v. Salmar Holdings Pty Ltd [1972] 46 ALJR 291 at 292. NDFs are called 'forward' contracts but are not agreements under which different types of currencies are agreed to be delivered or exchanged. The observations of Lord Templeman about interest rate swap in Hazell v. Hammersmith and Fulham London Borough Council and Ors [1991] All ER 545 are relevant to NDFs. His Lordship observed: The transactions were undertaken in the hope that the burden of interest payable in respect of the borrowings...would be mitigated by profits from swap contracts whereby the council successfully forecast movements in interest rates (at 550). The fact remains a swap transaction depends for its success on interest rates rising or falling in conformity with the expectation of the [swap party] at the date of the swap (at 552). ...a parallel contract does not in fact replace the interest under the original borrowing and the swap (at 553). The NDFs are aleatory contracts satisfied by a financial receivable or payable. They fit the description of wagering contracts in Carlill v. The Carbolic Smoke Ball Company [1892] QBD 484: ... according to my view, a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties. It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract (per Hawkins J at 490-491). NDFs do not satisfy paragraphs 121D(4)(e) or (ea) of the ITAA 1936 because there is no trade in currency or trade in rights in respect of currency. Further, although the calculation of the amounts payable under the NDFs reflects a currency exchange rate agreed between the parties to the contract, the contract does not confer 'rights in respect of' the designated currency. The phrase 'in respect of' is capable of having a wide meaning depending on its context: per Deane, Dawson, Toohey JJ at Workers' Compensation Board (Qld) v. Technical Products Pty Ltd (1988) 165 CLR 642 at 653. But the connection with the underlying subject must not be 'too remote': Harris v. Federal Commissioner of Taxation (2002) 125 FCR 46; (2001) 50 ATR 410; 2002 ATC 4659 at 4674. NDFs do not create rights 'in respect' of the designated currency in the requisite sense. Rather, the NDF is executed by a payment or a receivable determined by reference, inter alia, to an agreed currency exchange rate. As NDFs do not give rise to rights in respect of the designated currency, they cannot constitute 'trading in rights in respect of' the designated currency for the purpose of paragraphs 121D(4)(e) and 121D(4)(ea) of the ITAA 1936.", "Date_of_Decision": "23 February 2011", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 121D(1) subsection 121D(4) paragraph 121D(4)(e) paragraph 121D(4)(ea) section 121EA section 121ED", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Forward contracts Offshore banking units Foreign currency Foreign currency rights International transactions", "Case_References": "Californian Copper Syndicate v Harris (Surveyor of Taxes) (1904) 5 TC 159", "Other_References": "Macquarie Dictionary [Multimedia], version 5.0.0, 01/10/01", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201127", "Unmatched_Content": "Date of effect 13 September 2021. | Keywords Forward contracts Offshore banking units Foreign currency Foreign currency rights International transactions"}
{"ATO_ID_Number": "ATO ID 2008/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore Banking Units: Application of paragraph 128AE(2)(ba) to wholly owned non-bank subsidiaries of non-bank OBUs", "Issue": "Is a taxpayer, in which all of the equity interests are beneficially owned by an offshore banking unit [1] (OBU) that is not an authorised deposit-taking institution (ADI) for the purposes of the Banking Act 1959, eligible to be declared to be an OBU under paragraph 128AE(2)(ba) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A taxpayer, in which all of the equity interests are beneficially owned by an OBU that is not an ADI for the purposes of the Banking Act, is eligible to be declared to be an OBU under paragraph 128AE(2)(ba) of the ITAA 1936.", "Facts": "The taxpayer is a company that is a resident of Australia for tax purposes. The taxpayer has made an application for declaration as an OBU under paragraph 128AE(2)(ba) of the ITAA 1936. The taxpayer's main business is obtaining financing on a commercial basis from third parties and providing financing on a commercial basis to third parties, including offshore related parties. All of the equity interests in the taxpayer are beneficially owned by an Australian resident company that, under paragraph 128AE(2)(f) of the ITAA 1936, the Treasurer had previously determined, in writing, to be an OBU under subsection 128AE(2AA) of the ITAA 1936. The taxpayer and its parent company are not ADIs for the purposes of the Banking Act. The Australian parent company is not appropriately authorised to carry on business as a dealer in foreign exchange.", "Reasons_for_Decision": "Summary: Paragraph (ba) of subsection 128AE(2) of the ITAA 1936 provides that: The Treasurer may, by notice published in the Gazette, declare a person being: a company in which all of the equity interests are beneficially owned by an offshore banking unit (other than one to which paragraph (c) applies); ... to be an offshore banking unit for the purposes of this Division. Taxation Laws Amendment Act (No.4) 1992 inserted paragraph 128AE(2)(ba) in subsection 128AE(2) of the ITAA 1936 effective from 21 December 1992. The Replacement Explanatory Memorandum to Taxation Laws Amendment Bill (No.4) 1992 stated: Under the previous law the only entities that can be registered as OBUs are savings and trading banks as defined by subsection 5(1) of the Banking Act 1959, State Banks and other financial institutions which the Treasurer is satisfied are appropriately authorised to deal in foreign exchange... An amendment to subsection 128AE(2) will extend the range of entities which can be registered as an OBU to include a wholly owned subsidiary of a bank which is already registered as an OBU. Subsidiaries will also be able to be registered as OBU as long as all the shares are beneficially owned by an OBU which is a bank. Subsequently , Taxation Laws Amendment Act (No.2) 1999 inserted paragraphs (d), (e) and (f) in subsection 128AE(2) of the ITAA 1936, effective from 2 July 1998, which extended the categories of persons eligible to apply for OBU status to certain persons that were not ADIs. This was done in order to facilitate greater non-bank competition for offshore business. In particular, paragraph 128AE(2)(f) provides that the Treasurer may determine, in writing, a company to be an OBU under subsection 128AE(2AA) of the ITAA 1936. Accordingly, from 2 July 1998, paragraph 128AE(2)(ba) of the ITAA 1936 can apply to a company in which all of the equity interests are beneficially owned by an OBU that is not an ADI. The following three conditions must be satisfied in order for a person to be declared to be an OBU under paragraph 128AE(2)(ba) of the ITAA 1936: The three conditions set out above are satisfied in this case for the following reasons: As all the conditions set out in paragraph (ba) of subsection 128AE(2) of the ITAA 1936 are satisfied in this case, the taxpayer is eligible to be declared to be an OBU under that paragraph.", "Date_of_Decision": "1 November 2007", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128AE(2) paragraph 128AE(2)(ba) paragraph 128AE(2)(c) paragraph 128AE(2)(f) subsection 128AE(2AA)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/134", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Offshore banking Offshore banking activities Offshore banking units Banks Financial institutions International tax", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Bill (No.4) 1992", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20088", "Unmatched_Content": "Date of effect 13 September 2021 | Related Public Rulings (including Determinations) Taxation Determination TD 93/134 | Keywords Offshore banking Offshore banking activities Offshore banking units Banks Financial institutions International tax"}
{"ATO_ID_Number": "ATO ID 2008/70", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore Banking Units: Application of paragraph 128AE(2)(d) to the head company of a consolidated group", "Issue": "Is the head company of a consolidated group, which is treated as if it were a life insurance company pursuant to section 713-505 of the Income Tax Assessment Act 1997 (ITAA 1997), eligible to be declared to be an offshore banking unit (OBU) under paragraph 128AE(2)(d) of Division 11A of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The head company of a consolidated group, which is treated as if it were a life insurance company pursuant to section 713-505 of the ITAA 1997, is not eligible to be declared to be an OBU under paragraph 128AE(2)(d) of Division 11A of the ITAA 1936.", "Facts": "H Co is the head company of a consolidated group. H Co is not a life insurance company registered under the Life Insurance Act 1995 . Sub Co, which is a subsidiary member of the consolidated group, is a life insurance company registered under the Life Insurance Act.", "Reasons_for_Decision": "Summary: Section 713-505 of the ITAA 1997 provides that: This Act, and the Income Tax Rates Act 1986 , apply to the *head company of a *consolidated group as if it were a *life insurance company for an income year if one or more life insurance companies are *subsidiary members of the group at any time during that year. * denotes a term defined in section 995-1 of the ITAA 1997 Section 713-505 of the ITAA 1997 applies to H Co (as head company of the consolidated group) because Sub Co (being a subsidiary member of the consolidated group) is a life insurance company. Paragraph 128AE (2)(d) of Division 11A of the ITAA 1936 provides that: The Treasurer may, by notice published in the Gazette, declare a person being: ... (d) a life insurance company registered under the Life Insurance Act 1995; ... to be an offshore banking unit for the purposes of this Division. Paragraph 128AE(2)(d) of the ITAA 1936 expressly requires that the relevant person must actually be a life insurance company registered under the Life Insurance Act to be eligible for declaration as an OBU. H Co does not satisfy the requirements of paragraph 128AE(2)(d) of the ITAA 1936 as it is not a life insurance company registered under the Life Insurance Act. Therefore H Co is not eligible for declaration as an OBU pursuant to paragraph 128AE(2)(d).", "Date_of_Decision": "7 May 2008", "Year_of_Income": "Year ending 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 713-505", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Consolidation Head company Life insurance company Offshore banking units", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200870", "Unmatched_Content": "Date of effect 13 September 2021 | Keywords Consolidation Head company Life insurance company Offshore banking units"}
{"ATO_ID_Number": "ATO ID 2004/962", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore Banking Units: Investment Activity", "Issue": "Does the making of financial derivative contracts by a company, which has applied to become an Offshore Banking Unit (OBU), as broker on behalf of offshore persons with other offshore persons qualify as an investment activity for the purposes of subsection 121D(6) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes, if it is successful in obtaining the OBU status and only in circumstances where the broker's client has entered into the financial derivatives contract with an expectation to receive income or make a gain. Accordingly, where the broker is unable to determine such a purpose on the part of its client, the activity is unlikely to qualify.", "Facts": "The company is an Australian resident company and has applied to the Treasurer to be declared an OBU. It is proposed that interest rate derivative broking activities be conducted by the OBU. The financial brokerage services encompass the facilitation of foreign currency interest rate based derivative contracts (such as over-the-counter (OTC) foreign currency interest rate swaps and foreign currency interest rate options) as broker for and between non-residents of Australia who are not acting through an Australian permanent establishment. The financial derivative contracts between the offshore parties are documented as standard International Swap Dealers Association (ISDA) agreements. In essence, the broking activities encompass the acting as intermediary between the offshore counterparties entering into financial derivative contracts.", "Reasons_for_Decision": "Summary: Section 121D of the ITAA 1936 sets out the circumstances in which a transaction entered into by an OBU [1] is an offshore banking (OB) activity. Only income derived by an OBU from an OB activity is taxed concessionally under Division 9A of the ITAA 1936. For an activity engaged in by an OBU to be an OB activity, three conditions must be satisfied: Investment activity is defined in subsection 121D(6) of the ITAA 1936 as follows: For the purposes of paragraph (1)(e), an \"investment activity\" is making (but not managing), as broker or agent for, or trustee for the benefit of, an offshore person to whom paragraph 121E(a) applies, an investment with an offshore person to whom that paragraph applies, where: (a) the currency in which the investment is made is not Australian currency; and (b) if the investment involves the purchase of any thing: (i) if the thing is a share in a company - the company is a non-resident company; or (ii) if the thing is a unit in a unit trust - the unit trust is a non-resident trust; or (iii) if the thing is land or a building - the land or building is not in Australia; or (iv) in any other case - the thing is located outside Australia. Investment activity, within the meaning of subsection 121D (6) of the ITAA 1936, means making (as broker, agent or trustee for the benefit of an offshore person) an investment with an offshore person. The investment must be made in non-Australian currency. The investors must be non residents. If the investment involves the purchase of something, it must be something which is not in Australia. The OBU must be acting in the capacity of a broker, agent or trustee in making the investment for the benefit of an offshore person; it must not be acting on its own behalf According to the facts provided, the company will be conducting financial brokerage services which will include the facilitation of foreign currency interest rate based derivative contracts (OTC foreign currency interest rate swaps and foreign currency interest rate options) as broker for and between non-residents of Australia. These activities encompass the acting as intermediary between the counterparties entering into the derivative contracts which will be denominated in foreign currency. Any Australian currency denominated contracts will be recorded as a non-OBU activity. The company satisfies the requirements that it must deal in foreign currency and act in the capacity of a broker on behalf of offshore persons, but the question arises whether entering into derivative contracts (the foreign currency interest rate swaps and foreign interest rate options) constitutes investment for the purposes of 121D (6) of the ITAA 1936. In general, an interest rate swap involves two parties exchanging interest payment streams based on a notional principal over a period of time in the same currency. The interest payment streams are determined by applying a rate of interest to the notional principal and each party's payment is calculated by reference to a different rate of interest. An interest rate option is an option over an instrument such as a bond, giving the buyer, in return for the payment of a premium, the right (but not the obligation) to buy (if a call option) or to sell (if a put option) the given bond at a specified price on or before a specified date. This means that entering into such arrangements creates contractual rights which constitute a chose in action which in turn is an asset. The company has reached similar conclusions to this point but further contends that the derivatives represent assets and therefore the acquisition of such assets is an investment for subsection 121D (6) of the ITAA 1936 purposes. The view taken by the ATO is that not all acquisitions of such assets amount to investment. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW provides the ordinary meaning of the term investment as 'the investing of money or capital in order to secure profitable returns, especially interest or income.' The definition encompasses the notion that there is an expectation of profit or income. Not all derivative contracts are entered into to receive income or to make a gain since derivatives also serve a risk management function as a hedge or cheaper means of financing for certain transactions undertaken by businesses. If the interest rate derivatives are being used as a risk management technique or as a means of obtaining lower cost of financing by the company's clients then it may be said that the entering into such contracts is not an investment. On the other hand if the interest rate derivative contracts were entered into to manage portfolios; for trading, speculation or creating exposure to a particular position in the market(s) or for arbitrage to take advantage of pricing anomalies in financial markets, it could be argued that there was an expectation of receiving an income or making a gain and such derivatives could amount to investment. Therefore, in the Tax Office's view, the facilitation of foreign currency interest rate based derivative contracts (OTC foreign currency interest rate swaps and foreign currency interest rate options) as broker may be making an 'investment' for the purposes of 121D (6) of the ITAA 1936 in certain situations. Those situations will depend on the factual circumstances of each client indicating the purpose served by these contracts. That is, entered into to receive income or to manage risk or to reduce cost of capital. It is considered that the intent to receive income or to make profit is a necessary element for the making of an 'investment' with respect to the provisions of 121D (6) of the ITAA 1936.", "Date_of_Decision": "29 November 2004", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 121D subsection 121D(6) section 121EA", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/133", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Offshore banking Offshore banking activities Offshore banking units", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Bill (No. 4) 1992 Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004962", "Unmatched_Content": "Date of effect 13 September 2021 | Related Public Rulings (including Determinations) Taxation Determination TD 93/133 | Keywords International tax Offshore banking Offshore banking activities Offshore banking units"}
{"ATO_ID_Number": "ATO ID 2003/75", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore Banking Unit: Investment advice on behalf of a foreign permanent establishment of an Australian resident", "Issue": "Can the management of a portfolio investment provided for the benefit of a foreign permanent establishment of an Australian resident, constitute an 'advisory activity' in terms of subsection 121D(7) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The portfolio investment management for a permanent establishment of an Australian resident is not an 'advisory activity' for the purposes of subsection 121D(7) of the ITAA 1936 as the advice is not made to an 'offshore person' but rather on behalf of, an 'offshore person'.", "Facts": "The taxpayer is an Australia resident company and an Offshore Banking Unit (OBU). The taxpayer acts as a responsible entity or manager for a number of Australian resident, publicly offered unit trusts. Some of these trusts invest solely in foreign assets, in non-Australian currency. One of the responsibilities of the taxpayer as fund manager for non-resident investors is to provide investment advice in accordance with the approved mandate which includes analysis and stock selection through to the activity of buying and selling equities on behalf of the investors. One of the investors in the unit trusts is a foreign branch of an Australian resident company.", "Reasons_for_Decision": "Summary: Subsection 121D(7) of the ITAA 1936 provides the meaning of 'advisory activity' for the purposes of qualifying as an offshore banking (OB) activity under paragraph 121D(1)(f) of the ITAA 1936. In addition, to qualify as an OB activity, it must be done by the OBU [1] (subsection 121D(1) of the ITAA 1936). An 'advisory activity' is defined under subsection 121D(7) of the ITAA 1936 to be the giving of investment or other financial advice to an offshore person. However, where the advice relates to the making of a particular investment, the investment must be of a kind that is referred to in subsection 121D(6) of the ITAA 1936. Subsection 121D(6) of the ITAA 1936 provides that an 'investment activity' is the making (but not managing), as a broker or agent for, or trustee for the benefit of, an offshore person to whom paragraph 121E(a) of the ITAA 1936 applies. In addition, the investment is not made in Australian currency; and if it involves the purchase of any thing, that it is either a share of a non-resident company, a unit in a non-resident trust or a thing not located in Australia. 'Offshore person' is defined in section 121E of the ITAA 1936 to include: The foreign branch of the Australian resident company is a permanent establishment of the company and is a 'resident of Australia' for the purposes of the definition of that term in subsection 6(1) of the ITAA 1936. The foreign branch would therefore qualify as an 'offshore person' under paragraph 121E(b) but not paragraph 121E(a) of the ITAA 1936. Subsection 121D(7) of the ITAA 1936 states the type of advice to be provided is 'investment or other financial advice'. The advice must be provided to an offshore person. The taxpayer's role and responsibilities as fund manager for non-resident investors consists of (amongst other things) providing investment advice in accordance with the approved mandate which includes analysis and stock selection through to the activity of buying and selling equities on behalf of the investors. This is providing investment advice on behalf of an offshore person and not to an offshore person as required by subsection 121D(7) of the ITAA 1936. Accordingly, as the advice is made on behalf of, and not to the foreign branch, it does not qualify as an OB 'advisory activity' for the purposes of subsection 121D(7) of the ITAA 1936. Note: Portfolio investment management as an OB activity is provided for under subsection 121D(6A) of the ITAA 1936. However, this activity is restricted to non-residents and therefore does not apply to the taxpayer.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "Other/Substituted Accounting Period 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 121D(1) paragraph 121D(1)(f) subsection 121D(6) subsection 121D(6A) subsection 121D(7) section 121E paragraph 121E(a) paragraph 121E(b)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/133 | Taxation Determination TD 93/207", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Offshore banking Offshore banking units Offshore banking activities Unit trusts Investment trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200375", "Unmatched_Content": "Date of effect 13 September 2021 | Related Public Rulings (including Determinations) Taxation Determination TD 93/133 Taxation Determination TD 93/207 | Keywords Offshore banking Offshore banking units Offshore banking activities Unit trusts Investment trusts"}
{"ATO_ID_Number": "ATO ID 2003/76", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Offshore Banking Unit: Apportioning trust management fees from portfolio investment activity", "Issue": "Can an offshore banking unit (OBU) apportion the fees received from managing a portfolio investment between offshore banking income and non-offshore banking income for the purposes of subsection 121D(6A) of the Income Tax Assessment Act 1936 (ITAA 1936) where there are Australian resident and non-resident investors in an Australian resident unit trust holding foreign assets bought from non-residents with non-Australian currency?", "Decision": "Yes. The OBU can apportion the fees received from managing a portfolio investment between offshore banking income and non-offshore banking income for the purposes of subsection 121D(6A) of the ITAA 1936 if the OBU maintains full control over the making of portfolio investments.", "Facts": "The taxpayer is an Australian resident company and an offshore banking unit. The taxpayer acts as a responsible entity or manager for a number of Australian resident, publicly offered unit trusts. Some of these trusts invest solely in foreign assets bought with non-Australian currency from non-residents. Both Australian resident investors and non-resident investors hold units in the trusts. The taxpayer keeps a registry of unit holders which identifies their residency status. The taxpayer can differentiate between fees earned in relation to non-residents and fees earned in relation to residents. The taxpayer can differentiate between fees earned relating to investments before OBU status was granted and fees earned relating to investments after OBU status was granted. The trust instrument grants the taxpayer all the powers in respect of the trust that is possible under the law as though the taxpayer were the absolute owner of the assets and acting in its personal capacity. The trust instrument permits the taxpayer to appoint an agent to act on its behalf to perform any act or exercise any discretion within the taxpayer's power. Where an agent is appointed to act on the taxpayer's behalf as fund manager, the agent is permitted to buy and sell investments only. The taxpayer maintains full control and management over the making of investments. The trust instrument permits the taxpayer to keep separate accounts and allocate income, deductions or credits to particular unit holders.", "Reasons_for_Decision": "Summary: Subsection 121D(6A) of the ITAA 1936 defines the conditions necessary for portfolio investment activity to qualify as an offshore banking (OB) activity for the purposes of paragraph 121D(1)(e) of the ITAA 1936. In addition, to qualify as an OB activity, it must be done by the OBU [1] (subsection 121D(1) of the ITAA 1936). To be an OB activity, the activity of an Australian resident OBU must be carried on in Australia (paragraph 121EA(a) of the ITAA 1936). The key tests for the first condition are contained in paragraph 121D(6A)(a) of the ITAA 1936: Subsection 121DA(1) of the ITAA 1936 provides that a 'portfolio investment' is an investment that an OBU manages under a contract or trust instrument as broker, an agent or custodian for, or trustee for the benefit of, a non-resident. Taxation Determination TD 93/207 at paragraph 3 addresses the issue where an OBU acts as a fund manager for a trust with offshore investors. TD 93/207 concludes that it is immaterial whether the trust has an Australian trustee so long as the requirements of subsection 121D(6) of the ITAA 1936 are met. Subsection 121D(6) of the ITAA 1936 provides that an 'investment activity' is the making (but not managing), as a broker or agent for, or trustee for the benefit of, an offshore person to whom paragraph 121E(a) of the ITAA 1936 applies. In addition, the investment is not made in Australian currency; and if it involves the purchase of anything, that it is either a share of a non-resident company, a unit in a non-resident trust or a thing not located in Australia. The taxpayer is a single responsible entity (i.e. a fund manager and trustee) if the fund is a registered scheme. The taxpayer is a trustee if the fund is not a registered scheme. The powers of the taxpayer lie within the meaning of portfolio investment as defined by subsection 121DA(1) of the ITAA 1936 since the taxpayer as trustee would manage the assets of the fund for the benefit of non-residents (even though the trustee is a resident itself). Hence key tests (1) and (2) for paragraph 121D(6A)(a) of the ITAA 1936 are satisfied where the taxpayer acts as single responsible entity or trustee for a fund for the benefit of non-residents only. Resident investors are not included within the meaning of 'portfolio investment'. If another entity were appointed as agent for the taxpayer, the agent would be administering the fund's assets for the resident taxpayer. However, in reality, the agent is administering the fund's assets as agent ultimately for the benefit of the unit holders, both residents and non-residents, who are the beneficiaries of the trust. The taxpayer (as OBU) must maintain full control over the actions of the agent and the taxpayer must continue to manage the portfolio investment. This interpretation gives effect to Parliament's intent for the OBU legislation to bring financial business onshore that would normally remain offshore. Hence key tests (1) and (2) for paragraph 121D(6A)(a) of the ITAA 1936 would also be satisfied where the taxpayer appoints an agent to act as administrator for the fund. The second condition contained in paragraph 121D(6A)(b) of the ITAA 1936 requires the portfolio investment to be made by an OBU. 'Made' should not be restricted to merely buying and selling investments. It should be given a wider meaning. Where the taxpayer (an OBU) is the single responsible entity (or trustee if an unregistered scheme) for a fund without an agent appointed to act on its behalf, then subsection 121D(6A)(b) of the ITAA 1936 is satisfied. Where an agent is appointed to act on the taxpayer's behalf as fund manager, subsection 121D(6A)(b) of the ITAA 1936 would only be satisfied where the taxpayer maintained full control and management over the making of portfolio investments. The taxpayer (as OBU) must have facilitated the making of the portfolio investment (i.e. performed the investment analysis, investment selection and authorised the investment's sale or purchase). The agent would be permitted to buy and sell investments provided the taxpayer had the final decision whether to proceed with or stop any portfolio investment sale or purchase. Taxation Determination TD 93/133, at paragraph 3, makes it clear that: To be an 'OB activity' the transaction must be made by an OBU. Section 128AE states that trading and savings banks, State banks, other financial institutions and wholly owned subsidiaries of banks which are OBUs may be registered as OBUs. Therefore, where the transaction is entered into before registration as an OBU, the activity is not an OB activity and income from that activity does not get the concessional rate of tax. It also follows that transactions entered into before registration cannot subsequently become OB activities when the entity is registered as an OBU. Thus only transactions entered into after the taxpayer had been declared an OBU would satisfy the requirements of paragraph 121D(6A)(b) of the ITAA 1936. The taxpayer keeps a registry of unit holders which identifies their residency status. The taxpayer can differentiate between fees earned in relation to non-residents and fees earned in relation to residents. Furthermore, the taxpayer can differentiate between fees earned relating to investments before OBU status was granted and fees earned relating to investments after OBU status was granted. The trust instrument permits the taxpayer to keep separate accounts and allocate income, deductions or credits to particular unit holders. Under these circumstances, the proportion of management fees that relates to managing a portfolio investment received from a trust that relates to non-resident investors can be identified and treated as OB income. The taxpayer can therefore apportion the income between OB and non-OB activities for the purposes of subsection 121D(6A) of the ITAA 1936 where the unit trusts hold foreign assets bought with non-Australian currency from non-residents.", "Date_of_Decision": "26 November 2002", "Year_of_Income": "Other/Substituted Accounting Period 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 121D(1) paragraph 121D(1)(e) subsection 121D(6) subsection 121D(6A) paragraph 121D(6A)(a) paragraph 121D(6A)(b) subsection 121DA(1) paragraph 121E(a) paragraph 121EA(a)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 93/133 | Taxation Determination TD 93/207", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Offshore banking Offshore banking units Offshore banking activities Unit trusts Investment trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200376", "Unmatched_Content": "Date of effect 13 September 2021 | Related Public Rulings (including Determinations) Taxation Determination TD 93/133 Taxation Determination TD 93/207 | Keywords Offshore banking Offshore banking units Offshore banking activities Unit trusts Investment trusts"}
{"ATO_ID_Number": "ATO ID 2013/59", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income derived by non-resident insurer", "Issue": "Is the amount of a premium paid or payable to a non-resident insurer under an insurance contract assessable under section 142 of the Income Tax Assessment Act 1936 (ITAA 1936) where the premium has been determined after taking into account amounts such as stamp duty that are payable by the insurer in relation to the insurance contract?", "Decision": "Yes. The amount of a premium paid or payable to a non-resident insurer under an insurance contract is assessable under section 142 of the ITAA 1936 where the premium has been determined after taking into account amounts such as stamp duty that are payable by the insurer in relation to the insurance contract.", "Facts": "AusCo is an Australian Financial Services Licence holder licensed to deal in, arrange and issue general insurance products. AusCo entered into an agreement with ForCo, a non-resident insurer. The agreement authorises AusCo to provide premium quotations and bind insurance contracts on behalf of ForCo with Australian residents. AusCo will act as agent for ForCo for the purpose of collecting, processing and receiving premiums from insureds. AusCo will use part of the premiums to pay all taxes, levies and stamp duties that are payable by ForCo in relation to the insurance contracts to the appropriate authorities on behalf of ForCo. AusCo will pass on to ForCo the balance of the premiums, after retaining any commission to which it is entitled to under the Agreement. AusCo entered into an insurance contract on behalf of ForCo. Stamp duty was payable by ForCo under the relevant stamp duty legislation. The premium charged by ForCo was calculated taking into account the stamp duty that was payable by ForCo. AusCo collected the premium from the insured. AusCo paid the stamp duty, and also other applicable charges and levies that were payable by ForCo in relation to the premium, from the premium received. AusCo then deducted the commission it was entitled to under its agreement with ForCo before paying the balance of the premium to ForCo.", "Reasons_for_Decision": "Summary: Section 142 of the ITAA 1936 includes certain premiums that are paid or payable to a non-resident insurer in the assessable income of the insurer. The word 'premium' is not defined for the purposes of section 142 of the ITAA 1936 and should be interpreted having regard to its ordinary meaning in the context in which it is used ( Project Blue Sky Inc and Others v. Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382; (1998) 153 ALR 490 at 509; [1998] HCA 28 at 69-70). The ordinary meaning of the word 'premium' was discussed in Commissioner of State Revenue (Vic) v. Royal and Sun Alliance Insurance Australia Ltd [2003] VSCA 177; (2003) 54 ATR 339; 2003 ATC 4998 (the Royal and Sun case). The issue in this case was whether the premiums and gross premiums for the purposes of the relevant part of the Stamps Act 1958 (Vic) should include that part of the premium that was charged to cover the GST payable by the insurer in relation to the insurance policies. The Court found that the word premium, as it appeared in the context of that Act, bore its ordinary meaning which was: [27]... the consideration, usually in the form of a monetary obligation, paid or payable by the insured for the grant or renewal of insurance cover or of other rights under a policy of insurance. An insured party pays a premium to the insurer in exchange for the insurer's assumption of the insured's risk upon the happening of some event ( Prudential Insurance Co v. Inland Revenue Commissioners [1904] 2 KB 658 at 663). The composition of the premium amount is determined by the insurer and is a reflection of the selling price of the insurance. Additionally, though a premium may have numerous components, it is the total amount of the consideration the insured is required to pay to secure the grant or renewal of the insurance cover. That is, the premium is a required payment for an insurance policy to have effect. In the Royal and Sun case, Ormiston JA concluded that notwithstanding that the insurer had separately designated in its policies an amount in relation to the GST it had to pay itself in relation to the policy, the total amount payable by the insured under the policy for the insurance cover formed part of the 'premium' or 'gross premiums' for the purposes of the Stamps Act 1958 (Vic). In reaching this conclusion, Ormiston JA observed that: [28]...the artifice of designating some of the consideration as fire services levy, stamp duty or GST, though acceptable in practice (and indeed in law), could not detract from the fact that the cover would not be granted unless the whole of the stipulated sums had been paid, whether called premiums, GST or whatever ... The total amount to be paid was (and still is) in fact the premium, unless by law it can be otherwise characterised or understood. The ordinary meaning of an insurance premium therefore encompasses everything that must be paid by the insured to the insurer for the insurance cover, regardless of whether the amount payable is divided into a number of parts on the insurance policy. The total amount of the premium that AusCo collects from the insured on behalf of ForCo will therefore be the premium paid or payable under the contract for the purposes of section 142 of the ITAA 1936. This includes that part of the premium that is used to pay expenses such as stamp duty on behalf of ForCo. Where the conditions of section 142 are met, the full amount of the premium will therefore be assessable under that provision. This can be contrasted with the situation where stamp duty is levied on the insured and not the insurer and the insurer did not include a component in relation to the 'stamp duty' in the premium that it charged the insured. In this situation the payment of the stamp duty by the insured would not be a premium that was paid or payable to the insurer within the ordinary meaning of the word premium.", "Date_of_Decision": "12 November 2013", "Year_of_Income": "Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1936 section 142", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "general insurance insurance industry general insurance industry insurance income international tax insurance brokers & agents insurance industry non-resident insurance industry", "Case_References": "Project Blue Sky Inc and Others v. Australian Broadcasting Authority (1998) 194 CLR 355 (1998) 153 ALR 490 [1998] HCA 28", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201359", "Unmatched_Content": "Keywords general insurance insurance industry general insurance industry insurance income international tax insurance brokers & agents insurance industry non-resident insurance industry"}
{"ATO_ID_Number": "ATO ID 2014/29", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessable income of a non-resident subcontracting activities to an Australian resident", "Issue": "", "Decision": "", "Facts": "", "Reasons_for_Decision": "", "Date_of_Decision": "1 September 2014", "Year_of_Income": "", "Legislative_References": "", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201429", "Unmatched_Content": "Income Tax: This ATO ID has been removed from the database due to privacy concerns."}
{"ATO_ID_Number": "ATO ID 2007/143", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Permanent Establishment: resident of India - business activities", "Issue": "Whether the taxpayer has a Permanent Establishment in Australia pursuant to Article 5 of Schedule 35 to the International Agreements Act 1953 (Agreements Act)?", "Decision": "No. The taxpayer does not have a Permanent Establishment in Australia pursuant to Article 5 of Schedule 35 to the Agreements Act.", "Facts": "The taxpayer company is a resident of India and a non-resident of Australia for Australian income tax and tax treaty purposes. The taxpayer is part of an Indian business group (the Indian business group). The taxpayer entered into a long term contract with an unrelated Australian resident company (the customer) for the supply of goods not connected to the exploration or exploitation of natural resources. Under the contract, the taxpayer is obligated to undertake all costs of transporting the goods to Australia and storing those goods in Australia until the time that the goods are requested by the customer. The title of goods passes in Australia when the goods are delivered to the customer and it is at this point that the taxpayer recognises the sale of the goods as income. The customer will remit payments to the taxpayer in India periodically on the basis of the goods delivered. Activities associated with fulfilling the contract, for example, invoicing, administration and so on are performed by the taxpayer in India. The taxpayer has no employees or agents permanently present in Australia for the purpose of the contract. The taxpayer has no office or branch in Australia. Nor will it own any other property or assets (including bank accounts) in Australia. Further the taxpayer will not use any substantial equipment in Australia for the purpose of this contract or otherwise. The taxpayer entered into an agreement with a Third Party Logistics (TPL) supplier to provide support services. The TPL provider is a resident of India and a related company, also being part of the Indian business group. The taxpayer manufactures the goods in India and makes them available at its factory in India for the TPL provider. The TPL provider arranges for the collection of the goods from the taxpayer's factory and the transportation of the goods to Australia. The TPL provider is responsible for performing all the supply chain activities in Australia on behalf of the taxpayer. For example, the TPL provider contracts with independent unrelated parties in Australia to effect the transportation and storage of the goods in Australia. The warehouse used to store the goods until they are despatched to the customer is owned by an unrelated independent third party. All functions performed by or on behalf of the taxpayer in Australia are pursuant to contracts with third parties with the exception of some minor repairs. The presence of the taxpayer's personnel in Australia to perform repairs will not cumulatively exceed 90 days in any 12 month period. Other than the above, the taxpayer, or the TPL provider on behalf of the taxpayer, does not perform any services in Australia pursuant to this contract. The taxpayer's relationship with the TPL provider in respect of this contract can be summarised as follows: The taxpayer has also appointed an unrelated independent individual to liaise with the customer. The liaison person will report on quality issues raised by the customer. The liaison person is not an employee of the taxpayer but is engaged on a contract basis with the taxpayer. The liaison person does not operate wholly or exclusively on behalf of the taxpayer and will charge for his services on a similar scale to what he charges other companies for whom he performs a comparable role. The liaison person may not procure any orders for the taxpayer and has no authority to contract on behalf of the taxpayer or to otherwise bind the taxpayer. Also the liaison person is not authorised to release the goods to the customer or to perform other roles carried out by the TPL provider.", "Reasons_for_Decision": "Summary: Schedule 35 to the Agreements Act contains the tax treaty between Australia and the Republic of India (the Indian Agreement). Relevantly Article 5 of the Indian Agreement defines the term Permanent Establishment (PE). Article 5(1) of the Indian Agreement contains the general definition of a PE which is as follows: for the purposes of this agreement, the term \"permanent establishment\" means a fixed place of business through which the business of an enterprise is wholly or partly carried on Article 5(2) of the Indian Agreement further illustrates the general definition by providing listed facilities that are included in the definition. For example, at subparagraph (a): a place of management Taxation Ruling TR 2001/13 at paragraphs 101 to 105 explains the Commissioner's view that the OECD Model Tax Convention and Commentaries are relevant to interpreting Australia's tax treaties. Paragraph 2 of the OECD Commentary on Article 5 of the OECD Model Tax Convention explains that the general definition of a PE contains the following conditions: The taxpayer does not have any facilities listed in Article 5(2) of the Indian Agreement, or more importantly a fixed place of business within the general definition as provided by Article 5(1) of the Indian Agreement. Notwithstanding, the latter paragraphs of Article 5 of the Indian Agreement which can deem an enterprise to have a permanent establishment must also be considered to resolve the question. On the above facts, Article 5(3) of the Indian Agreement has no application. Article 5(4) of the Indian Agreement provides a list of exceptions to the definition which relevantly includes that an enterprise will not be deemed to have a PE merely because it has the use of facilities solely for the purpose of the storage of goods and/or maintains stock for the purpose of storage. Article 5(5) of the Indian Agreement deems there to be a PE, in certain circumstances, where a person, other than an agent of independent status to whom Article 5(6) of the Indian Agreement applies, acts on behalf of the enterprise. However, Article 5(6) of the Indian Agreement provides that an enterprise shall not be deemed to have a PE merely because it carries out business in the other state through an agent of independent status where that person is acting in the ordinary course of that person's business. Potentially the only relevant circumstance for the purposes of Article 5(5) of the Indian Agreement in respect of the activities of the TPL provider is at subparagraph (b) which is as follows: the person has no such authority [to conclude contracts on behalf of the enterprise], but habitually maintains in that State a stock of goods or merchandise from which the person regularly delivers goods or merchandise on behalf of the enterprise. However because the TPL provider is an independent agent acting in the ordinary course of its business in accordance with Article 5(6) of the Indian Agreement, Article 5(5)(b) of the Indian Agreement will not deem the taxpayer to have a PE in Australia. On the facts, Article 5(5) of the Indian Agreement has no application in respect of the liaison person but notwithstanding; Article 5(6) of the Indian Agreement would apply because the liaison person is an independent agent acting in the ordinary course of his own business. Article 5(7) of the Indian Agreement makes it clear that even if the taxpayer controls the TPL provider who is carrying out business in Australia, this will not in itself result in a PE for the taxpayer in Australia. In summary therefore, the taxpayer does not have a permanent establishment in Australia pursuant to Article 5 of Schedule 35 to the Agreements Act.", "Date_of_Decision": "12 June 2007", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "International Tax Agreements Act 1953 Schedule 35 Schedule 35, Article 5 Schedule 35, Article 5(1) Schedule 35, Article 5(2) Schedule 35, Article 5(3) Schedule 35, Article 5(4) Schedule 35, Article 5(5) Schedule 35, Article 5(6) Schedule 35, Article 5(7)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2001/13 | Taxation Ruling TR 2002/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements India International tax Non resident companies Permanent establishment", "Case_References": "", "Other_References": "Commentary on Article 5 of the OECD Model Tax Convention on Income and on Capital, 2005 version", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007143", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling TR 2001/13 Taxation Ruling TR 2002/5 | Keywords Double tax agreements India International tax Non resident companies Permanent establishment"}
{"ATO_ID_Number": "ATO ID 2003/973", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt deduction: interest paid on convertible notes", "Issue": "Are periodic payments made by the company on convertible notes a debt deduction within the meaning of subsection 820-40(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The payments made by the company constitute a debt deduction as they are a cost incurred that satisfies:", "Facts": "An Australian resident company has raised capital by issuing unsecured notes (notes). The notes were issued on the following terms: The issue of the notes gives rise to a debt interest under Division 974 of the ITAA 1997. The capital raised by the notes is applied by the company in the refinancing of funds employed in the company's business.", "Reasons_for_Decision": "Summary: A debt deduction is defined by subsection 995-1(1) of the ITAA 1997 as having the meaning given by section 820-40 of the ITAA 1997. Under section 820-40 of the ITAA 1997 a debt deduction of an entity for an income year includes a cost incurred that is: and which would be, apart from the operation of Division 820 of the ITAA 1997, deductible for the year of income. There is not a general definition of 'interest' in the ITAA 1997. In considering its ordinary meaning, interest was described by Rowlatt J in Bennett v. Ogston (HM Inspector of Taxes) (1930) 15 TC 374 at 379 as being 'payment by time for the use of money'. The payments made by the company are compensation for the delay in repayment of the consideration for the acquisition of the preference shares and as such are considered to be interest payments. Apart from Division 820 of the ITAA 1997 (about Thin Capitalisation) the payment of interest on funds employed in the business of the company, or in the refinancing of such funds, would be deductible under section 8-1 of the ITAA 1997. For these reasons, the periodic payments made by the company on convertible notes are a debt deduction within the meaning of subsection 820-40(1) of the ITAA 1997.", "Date_of_Decision": "9 October 2003", "Year_of_Income": "Year ending 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 820-40 subsection 820-40(1) subparagraph 820-40(1)(a)(i) paragraph 820-40(1)(b) subsection 995-1(1) section 8-1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 95/25", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt interest Debt equity borderline", "Case_References": "Bennett v. Ogston (HM Inspector of Taxes) (1930) 15 TC 374", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003973", "Unmatched_Content": "Under the new thin capitalisation rules: | ADIs, securitisation vehicles and certain special purpose entities are excluded from the debt deduction creation rules. | Entities that are Australian plantation forestry entities are excluded from the new rules. For these entities, the previous rules will continue to apply. | Related Public Rulings (including Determinations) Taxation Ruling TR 95/25 | Keywords Debt interest Debt equity borderline"}
{"ATO_ID_Number": "ATO ID 2010/86", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Thin capitalisation rules: risk-weighted assets - non-banking members", "Issue": "Does the head company of a consolidated group classified as an 'outward investing entity (ADI)' have to include the assets and other risk exposures of the non-banking members of the group in determining the amount of its 'risk-weighted assets' for Step 1 of section 820-310 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The head company of a consolidated group classified as an 'outward investing entity (ADI)' has to include the assets and other risk exposures of the non-banking members of the group in determining the amount of its 'risk-weighted assets' for Step 1 of section 820-310 of the ITAA 1997.", "Facts": "A company is the head company of an income tax consolidated group. The consolidated group includes an Australian Authorised Deposit-Taking Institution (ADI) for the purposes of the Banking Act 1959 . The head company is classified under subsection 820-583(7) of the ITAA 1997 as an 'outward investing entity (ADI)' for the purposes of applying Division 820 of the ITAA 1997. The head company's consolidated group includes non-banking members that are excluded from the 'Level 2' group of the ADI that are subject to Tier 1 capital requirements under the prudential standards determined by the Australian Prudential Regulation Authority ( APRA ) under section 11AF of the Banking Act 1959 .", "Reasons_for_Decision": "Summary: The head company of a consolidated group or MEC group is subject to the thin capitalisation rules in Subdivision 820-D of the ITAA 1997 if it is classified as an 'outward investing entity (ADI)' under subdivisions 820-EA, 820-FA or 820-FB of the ITAA 1997 (as applicable). The application of relevant provisions in Division 820 of the ITAA 1997 is for a 'head company core purpose', within the meaning of section 701-1 of the ITAA 1997, since it is necessary to determine a taxpayer's allowable deductions in order to determine its liability for income tax (see sections 4-10 and 4-15 of the ITAA 1997). Accordingly, all the subsidiary members of a consolidated group are 'taken ... to be parts of the head company' for the purpose of determining the amount of 'the average value ... of all the risk-weighted assets of [the head company]' in Step 1 of the 'Method statement' in section 820-310 of the ITAA 1997. 'Risk-weighted assets' is defined in subsection 995-1(1) of the ITAA 1997 as: the sum of the entity's risk exposures that the entity has at that time, as is determined in accordance with: (a) if the entity is [an Australian resident that is not foreign controlled] - the *prudential standards. 'Prudential standards' is defined in subsection 995-1(1) of the ITAA 1997 as: the prudential standards determined by *APRA and in force under section 11AF of the Banking Act 1959 . Australian Prudential Standard (APS) 110 is a prudential standard determined by APRA and in force under section 11AF of the Banking Act 1959 . Paragraph 14 of APS 110 states: An ADI [as defined in paragraph 4 to be the Level 2 ADI group] is subject to a prudential capital ratio ( PCR ) as determined by APRA. Subject to paragraphs 15 and 16, an ADI's PCR is eight percent of its total risk-weighted assets, half of which must be held in the form of Tier 1 capital. An ADI must, at all times, maintain a risk-based capital ratio, in excess of its PCR. For the definition of total risk-weighted assets and risk-based capital ratio, refer to Attachment D. [bolding not added] Paragraph 3 of Attachment D to APS 110 states: Under the risk-based capital adequacy framework, an ADI's capital adequacy is measured by means of a risk-based capital ratio calculated by dividing its capital base by its total risk-weighted assets. That is: Risk-based capital ratio = capital base / total risk-weighted assets [bolding not added]. Paragraph 6 of Attachment D to APS 110 states: An ADI's total risk-weighted assets is calculated as the sum of: (a) risk-weighted on-balance sheet and off-balance sheet assets determined in accordance with Prudential Standard APS 112 Capital Adequacy : Standardised Approach to Credit Risk ; (b) risk-weighted assets determined under APS 113 Capital Adequacy : Internal Ratings-based Approach to Credit Risk ; (c) 12.5 times the sum of the capital charges determined under Prudential Standards APS 114 Capital Adequacy : Standardised Approach to Operational Risk, APS 115 Capital Adequacy : Advanced Measurement Approaches to Operational Risk and APS 116 Capital Adequacy : Market Risk and APS 117; and (d) risk-weighted assets determined under APS 120. [bolding not added] Accordingly, the risk-weighted assets amount for assets held by a head company and its subsidiary members are determined in accordance with the method in APS 112, except only for the following assets: Paragraphs 11 and 12 of APS 112 state: 11. An ADI's total risk-weighted on-balance sheet assets (for the purpose of assessing its credit risk capital requirement) must equal the sum of the risk-weighted amounts of each on-balance sheet asset. 12. The risk-weighted amount of an on-balance sheet asset is determined by multiplying its current book value (including accrued interest or revaluations, and net of any specific provision or associated depreciation) by the relevant risk-weight in Attachment A. ... Items 18 to 23 of Attachment A to APS 112 state that the risk weighting to be assigned to the classes of assets (that are not monetary claims covered by the previous items) are: The relevant legislative context to section 820-310 of the ITAA 1997 discloses that it is expressly contemplated, and intended, that the amount of 'risk-weighted assets' can be determined for any, and all, of the assets of a taxpayer which is treated as an 'outward investing entity (ADI)', irrespective of whether the taxpayer is subject to Tier 1 capital adequacy regulation by APRA under APS 110 and the Banking Act 1959 . That relevant legislative context includes: Accordingly, the amount of 'risk-weighted assets' for the purpose of Step 1 of the Method statement in section 820-310 of the ITAA 1997 is the sum of the amounts determined in accordance with APRA's method (in paragraph 6 of Attachment D to APS 110) for determining an ADI's 'total risk-weighted assets'. This interpretation of 'risk-weighted assets' in section 820-310 not only accords with the express intent of the legislature discerned from the relevant legislative context of section 820-310, as referred to above, it also reflects a natural reading of the words of the definition in subsection 995-1(1) of the ITAA 1997, namely: the sum of the entity's risk exposures ...at that time, as is determined in accordance with [APRA's prudential standards]. This interpretation is also consistent with the relevant statements in the Explanatory Memorandum to New Business Tax System (Thin Capitalisation) Act 2001 : 5.9 The thin capitalisation rules applying to ADIs are based on the methodology of the capital adequacy requirements prescribed by APRA. Under the capital adequacy regime, the ADIs assets are risk weighted, so those assets that have higher risk (such as loans to corporate entities) require more capital than assets that have low risk (such as government bonds). APRA may also require a specific amount of capital to be held for certain assets, such as goodwill and investments in life and general insurance subsidiaries. 5.10 Similarly, the thin capitalisation rules for ADIs will use risk-adjusted assets rather than book values of assets to calculate the safe harbour minimum capital amount and the worldwide capital amount, and will require additional capital to be held against certain Australian assets. It is noted that, if the amount of 'risk-weighted assets' in Step 1 of the Method statement in section 820-310 of the ITAA 1997 only included the amount determined under paragraph 6 of Attachment D to APS 110 in the course of meeting the taxpayer's (or the taxpayer's subsidiary members') Tier 1 capital requirements under the Banking Act 1959 , this would result in the unintended consequence that the operations of the non-banking members of the consolidated group are effectively exempted from any thin capitalisation limit under Division 820 of the ITAA 1997.", "Date_of_Decision": "30 March 2010", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 4-10 section 4-15 section 701-1 section 820-310 section 820-430 subsection 820-583(7) section 820-588 section 820-597 section 820-599 subsection 820-609(1) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2010/87", "Subject_References": "Banking & finance segment Consolidation Financial services industry regulation & supervision International tax Outward investing entity Single entity rule Thin capitalisation", "Case_References": "", "Other_References": "Australian Prudential Standards APS 110 Australian Prudential Standards APS 112 Australian Prudential Standards APS 113 Australian Prudential Standards APS 116 Australian Prudential Standards APS 120 Explanatory Memorandum to New Business Tax System (Thin Capitalisation) Bill 2001", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201086", "Unmatched_Content": "18. Investments in premises, plant and equipment and all other fixed assets. | 19. Claims on all fixed assets under operating leases. | 20. Equity exposures (as defined in paragraphs 47 to 50 of APS 113) that are not deducted from capital and that are listed on a recognised exchange. | 21. Equity exposures (as defined in paragraphs 47 to 50 of APS 113) that are not deducted from capital and that are not listed on a recognised exchange. | 22.Margin lending against listed instruments on recognised exchanges. | 23. All other assets and claims not specified elsewhere. | Keywords Banking & finance segment Consolidation Financial services industry regulation & supervision International tax Outward investing entity Single entity rule Thin capitalisation"}
{"ATO_ID_Number": "ATO ID 2010/87", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Thin capitalisation rules: Tier 1 prudential capital deductions - non-banking members", "Issue": "Does the head company of a consolidated group classified as an 'outward investing entity (ADI)' have to calculate, and include, in Step 3 of section 820-310 of the Income Tax Assessment Act 1997 (ITAA 1997), the 'average value ... of ... the tier 1 prudential capital deductions' of the non-banking members of the consolidated group?", "Decision": "Yes. The head company of a consolidated group classified as an 'outward investing entity (ADI)' has to calculate, and include, in Step 3 of section 820-310 of the ITAA 1997, the 'average value ... of ... the tier 1 prudential capital deductions' for the assets of the non-banking members of the consolidated group.", "Facts": "A company is the head company of an income tax consolidated group. The consolidated group includes an Australian Authorised Deposit-Taking Institution (ADI) for the purposes of the Banking Act 1959 . The head company is classified under subsection 820-583(7) of the ITAA 1997 as an 'outward investing entity (ADI)' for the purposes of applying Division 820 of the ITAA 1997. The head company's consolidated group includes non-banking members that are excluded from the 'Level 2' group of the ADI that are subject to Tier 1 capital requirements under the prudential standards determined by the Australian Prudential Regulation Authority ( APRA ) under section 11AF of the Banking Act 1959 .", "Reasons_for_Decision": "Summary: The head company of a consolidated group or MEC group is subject to the thin capitalisation rules in Subdivision 820-D of the ITAA 1997 if it is classified as an 'outward investing entity (ADI)' under subdivisions 820-EA, 820-FA or 820-FB of the ITAA 1997 (as applicable). The application of provisions in Division 820 of the ITAA 1997 is for a 'head company core purpose', within the meaning of section 701-1 of the ITAA 1997, as it is necessary to determine a taxpayer's allowable deductions in order to determine its liability for income tax (see sections 4-10 and 4-15 of the ITAA 1997). Accordingly, all the subsidiary members of a consolidated group are 'taken ... to be parts of the head company' for the purpose of determining the 'average value ... of all the *tier 1 prudential capital deductions for the [head company]' in Step 3 of the 'Method statement' in section 820-310 of the ITAA 1997. 'Tier 1 prudential capital deduction' is defined in subsection 995-1(1) of the ITAA 1997 as: the amounts that must be deducted in the calculation of the eligible tier 1 capital of the entity (within the meaning of the *prudential standards) ... in accordance with the prudential standards in force at that time. 'Prudential standards' is defined in subsection 995-1(1) of the ITAA 1997 as: the prudential standards determined by *APRA and in force under section 11AF of the Banking Act 1959 . Australian Prudential Standard (APS) 111 is a prudential standard determined by APRA and in force under section 11AF of the Banking Act 1959 . Paragraphs 39 to 49 of APS 111 provide for 100% or 50% of the value of specified kinds of assets to be subtracted in determining the amount of Tier 1 capital of an ADI. For example, paragraphs 39 and 41 of APS 111 state: 39. For the purposes of calculating its Level 1 capital base, an ADI must deduct the following items from Tier 1 capital...: (a) any identified impairment of an asset [not already taken into account in the P&L]...; (b) [net] deferred tax assets ... (h) goodwill, and any other intangible assets arising on an acquisition ...[etc.]... 41. The following items are to be deducted 50 per cent from Tier 1 capital and 50 per cent from Tier 2 capital: (a) equity exposures ... in other ADIs ...[etc.] The relevant legislative context to section 820-310 of the ITAA 1997 discloses that it is expressly contemplated, and intended, that the amount of 'risk-weighted assets' in Step 1, and correspondingly, the amount of 'tier 1 prudential capital deductions' in Step 3, can be determined for any, and all, of the assets of a taxpayer treated as an 'outward investing entity (ADI)', irrespective of whether the taxpayer is subject to Tier 1 capital adequacy regulation by APRA under APS 110 and the Banking Act 1959 . That relevant legislative context includes: It follows that the amount of 'risk-weighted assets' for the purpose of Step 1 of the Method statement in section 820-310 of the ITAA 1997 is the sum of the amounts determined in accordance with APRA's method (in paragraph 6 of Attachment D to APS 110) for determining an ADI's 'total risk-weighted assets'. It similarly follows that the 'average value ... of all the *tier 1 prudential capital deductions for the [head company]', in Step 3 of the Method statement in section 820-310 is intended to include the amounts determined under APRA's method (in paragraphs 39 to 49 of APS 111) for subtracting the value of certain kinds of assets from the amount of Tier 1 capital for the purpose of the minimum capital requirements in paragraph 14 of APS 110. Note: assets subtracted in calculating Tier 1 capital are excluded from the calculation of 'total risk-weighted assets': refer paragraph 50 of APS 111. This interpretation of the 'average value ... of all the *tier 1 prudential capital deductions for the [head company]' in Step 3 of section 820-310 of the ITAA 1997 not only accords with the intent of the legislature discerned from the relevant legislative context of section 820-310, as referred to above, it also reflects a natural reading of the words of the definition in subsection 995-1(1) of the ITAA 1997, namely: the amounts that must be deducted in the calculation of the eligible tier 1 capital of the [head company] ... (within the meaning of the *prudential standards) ... in accordance with the prudential standards in force at that time. This interpretation is also consistent with the relevant statements in the Explanatory Memorandum to New Business Tax System (Thin Capitalisation) Act 2001 : 5.9 The thin capitalisation rules applying to ADIs are based on the methodology of the capital adequacy requirements prescribed by APRA. Under the capital adequacy regime, the ADIs assets are risk weighted, so those assets that have higher risk (such as loans to corporate entities) require more capital than assets that have low risk (such as government bonds). APRA may also require a specific amount of capital to be held for certain assets, such as goodwill and investments in life and general insurance subsidiaries. 5.10 Similarly, the thin capitalisation rules for ADIs will use risk-adjusted assets rather than book values of assets to calculate the safe harbour minimum capital amount and the worldwide capital amount, and will require additional capital to be held against certain Australian assets. ... What are prudential capital deductions ? 5.38 Prudential capital deductions include Tier 1 prudential capital deductions and deductions from total capital as defined in the prudential standard APS111 Capital Adequacy : Measurement of Capital . Deductions from total capital include investments in other ADIs outside the bank group, non-operating holding companies, non-consolidated subsidiaries and associates. ... What are Tier 1 prudential capital deductions ? 5.39 Tier 1 prudential capital deductions are amounts that must be deducted in calculating the eligible Tier 1 capital as defined in the prudential standards. These deductions include goodwill, other intangibles assets, future income tax benefits, equity and other capital investments in associated lenders [sic] mortgage insurers. In the final step of the method statement, any Tier 1 prudential capital deductions attributable to foreign branches or subsidiaries are not added on because they are not a part of the bank's Australian operations. [ Schedule 2, item 67, definition of ' Tier 1 prudential capital deduction' in subsection 995 - 1(1) ] It is noted that, if the amount of 'tier 1 prudential capital deductions for the [head company]' in Step 3 of the Method statement in section 820-310 of the ITAA 1997 only included amounts which the banking members (if any) of the consolidated group had to deduct in determining their Tier 1 capital under the Banking Act 1959 , this would result in the unintended consequence that the non-banking members of the consolidated group would be subject to a significantly more favourable thin capitalisation limit under Division 820 of the ITAA 1997 than the banking members.", "Date_of_Decision": "30 March 2010", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 section 4-10 section 4-15 section 701-1 section 820-310 section 820-430 subsection 820-583(7) section 820-588 section 820-597 section 820-599 subsection 820-609(1) section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/86", "Subject_References": "Banking & finance segment Consolidation Financial services industry regulation & supervision International tax Outward investing entity Single entity rule Thin capitalisation", "Case_References": "", "Other_References": "Australian Prudential Standards APS 110 Australian Prudential Standards APS 111 Explanatory Memorandum to New Business Tax System (Thin Capitalisation) Bill 2001", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201087", "Unmatched_Content": "Keywords Banking & finance segment Consolidation Financial services industry regulation & supervision International tax Outward investing entity Single entity rule Thin capitalisation"}
{"ATO_ID_Number": "ATO ID 2005/252", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Thin Capitalisation: safe harbour capital amount of an outward investing entity", "Issue": "Will the 'eligible collateral' as per the Guidance Note AGN 112.1 'Risk Weighted On-Balance Sheet Credit Exposures' (the Note) issued by Australian Prudential Regulation Authority (APRA) be included in the calculation of the safe harbour capital amount of an outward investing entity (ADI)?", "Decision": "Yes. The 'eligible collateral' as per the Note be included in the calculation of the safe harbour capital amount of an ADI.", "Facts": "The taxpayer is a company that is a resident of Australia. The taxpayer has a resident subsidiary company in Australia. The taxpayer and its subsidiary are consolidated for tax purposes. The risk-weighted assets of the consolidated group consist of ordinary shares and redeemable preference shares in the subsidiary company. There is 'eligible collateral' on the redeemable preference shares.", "Reasons_for_Decision": "Summary: Subdivision 820-D (sections 820-300 to 820-330) of the Income Tax Assessment Act 1997 (ITAA 1997) sets out the Thin Capitalisation rule for ADI. Paragraph 820-300(1)(b) of the ITAA 1997 disallows all or a part of each debt deduction of an entity for an income year (to the extent that it is not attributable to an overseas permanent establishment of the entity) if, for that year, the entity's adjusted average equity capital is less than the entity's minimum capital amount. Adjusted average equity capital is defined in subsection 820-300(3) of the ITAA 1997. Subsection 820-300(3) states that The entity's adjusted average equity capital for an income year is: (a) the average value, for that year, of all the ADI equity capital of the entity (other than ADI equity capital attributable to its overseas permanent establishments); minus (b) the average value, for that year, of all the controlled foreign entity equity of the entity (other than controlled foreign entity equity attributable to its overseas permanent establishments). Section 820-305 of the ITAA 1997 states The entity' s minimum capital amount for an income year is the least of the following amounts: (a) the safe harbour capital amount; (b) the arm's length capital amount; (c) the worldwide capital amount. ADI equity capital is defined in subsection 995-1(1) of the ITAA 1997. It states: ADI equity capital of an entity at a particular time means the total of the following: (a) all the entity's equity capital at that time; and (b) the total value of all the debt interests issued by the entity that satisfy all of the following: (i) at that time, the interests are on issue and have been on issue for 90 days or more; (ii) none of the interests gives rise to any cost, at any time, that is covered by paragraph 820-40(1)(a). Controlled foreign entity equity is defined in section 820-890 of the ITAA 1997. The safe harbour capital amount of an ADI is calculated in accordance with the method statement sets out in section 820-310 of the ITAA 1997. The method statement is as follows: If a resident company falls into the category of an ADI then it is subject to the provisions for ADI under Subdivision 820-D of the ITAA 1997. Under the definition section in section 995-1 of the ITAA 1997 risk weighted assets are determined in accordance with the prudential standards set by the APRA. APRA standard APS112 'Capital Adequacy: Credit Risk' aims to ensure that all locally incorporated ADIs adopt a uniform approach to the measurement of their on- and off-balance sheet credit exposures for capital adequacy purposes. Paragraph 6 of APS112 provides that 'Although the primary determinant of the risk weight of a particular on- or off-balance sheet transaction is the nature of the underlying counterparty, APRA recognises qualifying collateral (e.g. cash, securities issued by recognised entities and residential mortgages)......' The Note issued by APRA provides guidance on what APRA considers 'eligible collateral'. For the purpose of applying the Note in the present context, 'qualifying collateral' and 'eligible collateral' are identical. Paragraph 8(b) of the Note includes securities issued by governments in OECD countries as on-balance sheet credit exposure. In attachment A to the Note, risk weightings are allocated to various on-balance sheet assets. Claims secured against securities issued by central and state governments in OECD countries are allocated a risk weighting of zero. Accordingly, to the extent that the 'eligible collateral' is secured against the government securities the risk weighting of the redeemable preference shares will be zero. The 'eligible collateral' as per the Note will be included in the calculation of the safe harbour capital amount of an ADI.", "Date_of_Decision": "1 September 2005", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011 Year ended 30 June 2012 Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1997 section 820-310 section 995-1 section 820-890 paragraph 820-40(1)(a) paragraph 820-40(1)(b) section 820-300 section 820-305", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Safe harbour capital amount Thin capitalisation", "Case_References": "", "Other_References": "The Guidance Note AGN112.1 'Risk Weighted On-Balance Sheet Credit Exposures' APRA Standard APS112 'Capital Adequacy: Credit Risk' The Guidance Note AGN111.1 (Tier 1 Capital) The Guidance Note AGN111.2 (Tier 2 Capital)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005252", "Unmatched_Content": "A debt interest is treated as having satisfied subparagraph (b)(i) at that time if it was on issue at that time, and the total period for which it remains on issue is 90 days or more.\" | Keywords Safe harbour capital amount Thin capitalisation"}
{"ATO_ID_Number": "ATO ID 2002/942", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Thin Capitalisation", "Issue": "For the purpose of calculating the attributable safe harbour excess amount in section 820-920(4) of the Income Tax Assessment Act 1997 ('ITAA 1997'), can a Step 1 amount, which is zero, when reduced by a negative adjusted average debt amount give rise to a positive Step 2 amount?", "Decision": "Yes. For the purpose of calculating the attributable safe harbour excess amount in section 820-920(4) of the ITAA 1997, a Step 1 amount, which is zero, when reduced by a negative adjusted average debt amount can give rise to a positive Step 2 amount.", "Facts": "Entity A has debt capital of $5m. Entity A holds 100% of the equity in Entity B. Entity B has equity of $5m and has not issued any debt interests. Entity B has lent $5m to associates entities in Australia. These entities are associate entities under a combination of the operation of sections 820-905(1)(b) and 820-905(3A) of the ITAA 1997.", "Reasons_for_Decision": "Summary: The safe harbour debt amount for Entity A is the result of the following method statement: | Detailed Reasoning - Sub-section 820-920(2) of the ITAA 1997 Associate entity excess amount (from step 6 of section 820-195 of the ITAA 1997): For all steps in this subsection, Entity B is the associate entity. The associate entity excess amount is calculated by applying the method statement in subsection 820-920(2). The attributable safe harbour excess amount is calculated by applying the method statement in sub-section (4). For all steps in this subsection, Entity B is the associate entity. The method statement follows a mathematical approach. For example, in subsection 820-920(4) of the ITAA 1997, Step 3 of the method statement requires that the amount be 'multiplied' and at Step 4 that it be 'divided'. Following a mathematical approach, the term 'reduce' can be interpreted to mean 'subtract'. In applying the method statement in sub-section 820-920(4) of the ITAA 1997, where an amount is to be 'reduced' by a negative amount the result is a positive amount.", "Date_of_Decision": "13 August 2002", "Year_of_Income": "Year ending 31 December 2002", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 820-I subsection 820-195 subsection 820-920(2) subsection 820-920(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Thin capitalisation Safe harbour gearing ratio Safe harbour debt amount Attributable safe harbour excess amount", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002942", "Unmatched_Content": "Under the new thin capitalisation rules: | ADIs, securitisation vehicles and certain special purpose entities are excluded from the debt deduction creation rules. | Entities that are Australian plantation forestry entities are excluded from the new rules. For these entities, the previous rules will continue to apply. | Step 1. Average value of all the assets of the entity | Step 2. Reduce the result of Step 1 by the average value of all associate entity debt of the entity | Step 3. Reduce the result of Step 2 by the average value of all associate entity equity of the entity | Step 4. Reduce the result of Step 3 by the average value of all the non-debt liabilities of the entity | Step 5. Multiply the result of Step 4 by 3/4 | Step 6. Add to the result the average value of the entity's associate entity excess amount ( see below) | Step 1. Work out the premium excess amount (from subsection(3)) for an associate entity. | Step 2. Add to the result of Step 1 the attributable safe harbour excess amount (subsection (4)) for that associate entity (see explanation below). | Step 3. Apply Steps 1 and 2 to all such associate entities. The result of this step is the associate entity excess amount. | Step 1. Work out the safe harbour debt amount of the associate entity. | Step 2. Reduce the result of Step 1 by the value of the adjusted average debt of the associate entity. | Step 3. Multiply the result of Step 2 by the sum of: | (a) the value of all the equity capital of the associate entity that is attributable to the relevant entity; and ... | Step 4. Divide the result of Step 3 by the sum of: | (a) the value of all the equity capital of the associate entity; and ... | The result of this Step is the attributable safe harbour >excess amount | Keywords Thin capitalisation Safe harbour gearing ratio Safe harbour debt amount Attributable safe harbour excess amount"}
{"ATO_ID_Number": "ATO ID 2004/760", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Private company held as an investment by a superannuation fund: discretion to treat as public company", "Issue": "Will the Commissioner exercise his discretion under subsection 103A(5) of the Income Tax Assessment Act 1936 (ITAA 1936) to treat a private company, which is held as an investment by a superannuation fund, as a public company?", "Decision": "No. The Commissioner will not exercise his discretion under subsection 103A(5) of ITAA 1936 to treat the private company, which is held as an investment by a superannuation fund, as a public company.", "Facts": "The taxpayer is a private company for income tax purposes. The taxpayer is not listed on the Australian Stock Exchange as it does not satisfy the tests prescribed by the Australian Stock Exchange for listing. The corporate trustee of a complying superannuation fund held all of the interest in the taxpayer. The superannuation fund has 350,000 members. Each member has a contingent interest in the fund.", "Reasons_for_Decision": "Summary: Subsection 103A(5) of the ITAA 1936 provides the Commissioner with a discretion to treat a private company as a public company for income tax purposes even though the company does not satisfy one or more of the prescribed tests contained in section 103A of the ITAA 1936. The principle features of a public company are: Furthermore, the subsidiary of a public company is treated as a public company. In April 1965, Public Information Bulletin No 3 (PIB No 3) was issued to give some guidance as to how the Commissioner's discretionary powers under section 103A of the ITAA 1936 would be exercised. In relation to an unlisted company, PIB No 3 stated: ... the discretionary power to treat such a company as a public company will be exercised where the company satisfies the tests for listing prescribed by the stock exchanges now operating in Australian capital cities but, for reasons unconnected with income tax, does not wish to have its shares listed. A provision in the articles of association of a company that the directors may refuse to register a transfer of shares will not generally be an obstacle to the exercise of the discretionary power. Subsection 103A(5) of the ITAA 1936 lists certain specific factors that need to be taken into account when determining whether or not the discretion should be exercised. Regard must be had to the following factors: Whilst a company with several hundred shareholders and a paid up capital of $20 million would generally be more likely to be accepted as a public company than a company with 30 shareholders and a small amount of paid up capital, there is no specific quantum of shareholders or paid up capital that is required to have the discretion exercised. Rather, regard must be made to the overall position of the company. The main question to be considered when exercising the discretion is whether the company reasonably falls within the general concept of a public company. In this instance, the company is not considered to fall within the general concept of a public company. Furthermore, the Commissioner will not exercise his discretion to treat the private company as a public company because: Therefore the Commissioner will not exercise his discretion under subsection 103A(5) of the ITAA 1936 to treat the private company as a public company.", "Date_of_Decision": "7 April 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 103A subsection 103A(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Commissioner's discretion Private companies Public companies", "Case_References": "Re Coram; Ex parte Official Trustee in Bankruptcy v. Inglis (1992) 36 FCR 250 (1992)109 ALR 353", "Other_References": "Public Information Bulletin No 3", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004760", "Unmatched_Content": "Please note: This ATO ID was withdrawn in error on 25 October 2004. This error was corrected on 27 October 2004 and this ATO ID has been current since its release | Keywords Commissioner's discretion Private companies Public companies"}
{"ATO_ID_Number": "ATO ID 2002/238", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessment of minor beneficiary's share of the net trust income", "Issue": "Are both the trustee and the minor beneficiary assessable on a minor beneficiary's share of the net trust income under subsection 98(1) and subsection 100(1) of the Income Tax Assessment Act 1936 (ITAA 1936) respectively?", "Decision": "Yes, both the trustee and minor beneficiary are assessable on the minor beneficiary's share of the net trust income under subsection 98(1) and subsection 100(1) of the ITAA 1936 respectively.", "Facts": "A beneficiary, who was 16 years of age at the end of the income year, was presently entitled to a share of trust income from an Australian resident trust. The beneficiary also received income from other sources.", "Reasons_for_Decision": "Summary: Subsection 98(1) of the ITAA 1936 provides that where a beneficiary who is under a legal disability is presently entitled to a share of trust income, the trustee is assessed and liable to pay tax on that share in respect of: As the beneficiary was less than 18 years of age (a minor) and, therefore, under a legal disability at the end of the income year, the trustee is assessable on the beneficiary's share of the net trust income under subsection 98(1). In addition, subsection 100(1) of the ITAA 1936 provides that the minor beneficiary is also assessable on their share of the net trust income because the beneficiary was in receipt of income from other sources. A credit for the tax payable by the trustee, in respect of the beneficiary's share of the net trust income, is allowed to the beneficiary under subsection 100(2) of the ITAA 1936.", "Date_of_Decision": "21 January 2002", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1936 subsection 98(1) subsection 100(1) subsection 100(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal disability Minor beneficiaries Trusts Trust beneficiaries Trust income Trust distributions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002238", "Unmatched_Content": "Issue, Decision and Reasons for Decision | Keywords Legal disability Minor beneficiaries Trusts Trust beneficiaries Trust income Trust distributions"}
{"ATO_ID_Number": "ATO ID 2015/16", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking debits: refund of income tax - refund of a film tax offset", "Issue": "Is a refund resulting from a film tax offset 'a return to the entity of an amount paid or applied to satisfy the entity's liability to pay income tax' for the purposes of subparagraph 205-35(1)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. A refund resulting from a film tax offset is not 'a return to the entity of an amount paid or applied to satisfy the entity's liability to pay income tax' for the purposes of subparagraph 205-35(1)(b)(i) of the ITAA 1997.", "Facts": "The entity is an Australian private company that operates in the film industry. In the income year, the entity was entitled to the film tax offset, pursuant to Division 376 of the ITAA 1997. The amount of the film tax offset exceeds the entity's tax on taxable income. The entity operates a franking account.", "Reasons_for_Decision": "Summary: Subparagraph 205-35(1)(b)(i) of the ITAA 1997 requires that, for an entity to 'receive a refund of income tax', a refund of an amount, or an application of a credit, must represent a return to the entity of an amount paid or applied to satisfy the entity's liability to pay income tax. Accordingly, it is necessary to determine whether the entity's income tax refund, which results from the entitlement to a film tax offset under Division 376 of the ITAA 1997, is an amount paid to satisfy the entity's liability to pay income tax. Division 376 of the ITAA 1997 outlines a number of tax offsets in relation to Australian expenditure incurred in making films that an entity may be entitled to (film tax offsets). Item 20 of the table in section 67-23 of the ITAA 1997 states that a film tax offset is subject to the refundable tax offset rules. Item 40 of the table in section 63-10 of the ITAA 1997 allows a refund for any remaining amount of a tax offset that is subject to the refundable tax offset rules in Division 67 of the ITAA 1997. Step 3 of the method statement in subsection 4-10(3) of the ITAA 1997 defines tax offsets as amounts that reduce the amount of income tax an entity is required to pay. Step 4 of the method statement in subsection 4-10(3) of the ITAA 1997 states that tax offsets are subtracted from an entity's basic income tax liability. An entity's income tax liability (to be differentiated from an entity's basic income tax liability determined at Step 2 of the method statement) is calculated after tax offsets have been subtracted. As the entity's entitlement to a film tax offset exceeds its tax on taxable income, the refundable tax offset rules allow the entity to receive a refund of the remaining amount of the film tax offset. The refund as a result of the film tax offset arises by operation of item 40 of the table in section 63-10 of the ITAA 1997. The refund of the film tax offset is not a payment made by the entity to satisfy its tax liability. As a result, the refund of the film tax offset cannot be said to be a return to the entity of an amount that was paid. In addition, the refund of the film tax offset cannot be considered to be a return of an amount applied to satisfy the entity's liability for income tax. This is because the entity's liability for income tax is determined after tax offsets are subtracted from its basic income tax liability. Consequently, a refund resulting from a film tax offset is not 'a return to the entity of an amount paid or applied to satisfy the entity's liability to pay income tax' for the purposes of subparagraph 205-35(1)(b)(i) of the ITAA 1997.", "Date_of_Decision": "22 May 2015", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 subsection 4-10(3) section 63-10 section 67-23 subsection 205-35(1) Division 376", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Film tax offset Franking accounts Franking debits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201516", "Unmatched_Content": "Keywords Film tax offset Franking accounts Franking debits"}
{"ATO_ID_Number": "ATO ID 2011/75", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Allowance of credit for tax paid in Papua New Guinea, against Australian tax payable, including the Medicare Levy", "Issue": "Does Article 23(1) of the Papua New Guinea agreement set out in Australian Treaty Series 1989 No. 37 (the PNG agreement) together with subsection 3(10) of the International Tax Agreements Act 1953 (the Agreements Act) require Australia to allow a credit for tax paid in Papua New Guinea (PNG), against Australian tax payable, including the Medicare levy?", "Decision": "Yes. Article 23(1) of the PNG agreement together with subsection 3(10) of the Agreements Act requires Australia to allow a credit for tax paid in PNG, against Australian tax payable, including the Medicare levy.", "Facts": "The taxpayer is a resident of Australia for tax purposes. The taxpayer paid an amount of foreign income tax under the law of PNG on income derived from sources in PNG. The PNG sourced income on which the foreign income tax was paid was included in the taxpayer's assessable income for Australian tax purposes. The amount of foreign tax paid in PNG exceeded the taxpayer's Australian tax payable (excluding the Medicare levy).", "Reasons_for_Decision": "Summary: The taxpayer is an Australian resident who paid tax in PNG under the law of PNG in respect of PNG sourced income that was also subject to tax in Australia. In determining whether a credit is allowable for foreign tax paid against Australian tax payable it is necessary to consider not only the income tax laws but also any applicable double tax agreement. The PNG agreement is given the force of law domestically under section 5 of the Agreements Act and is applicable to the taxpayer. Subsection 4(1) of the Agreements Act states that the Assessment Act is incorporated and to be read as one with the Agreements Act. Where inconsistencies exist, the Agreements Act will prevail (except for some limited provisions). Article 23(1) of the PNG agreement titled Methods of Elimination of Double Taxation states that: Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Papua New Guinea tax paid ...in respect of income derived by a person who is a resident of Australia from sources in Papua New Guinea shall be allowed as a credit against Australian tax payable in respect of that income. Although Article 23(1) of the PNG agreement makes it clear that Australian residents with PNG sourced income are entitled to apply PNG tax paid (in respect of that income) as a credit against their Australian tax payable in respect of that income, it does not stipulate whether 'Australian tax payable' includes the Medicare Levy. It is subsection 3(10) of the Agreements Act which clearly states that: For the purposes of this Act, Medicare levy shall be deemed to be income tax and to be imposed as such and, unless the contrary intention appears, references to income tax or tax shall be construed accordingly. The general principle in Article 23(1) of the PNG agreement, together with subsection 3(10) of the Agreements Act, therefore, entitles an Australian resident taxpayer to a credit for PNG tax paid on PNG sourced income to reduce their income tax liability (which includes the Medicare Levy).", "Date_of_Decision": "7 September 2011", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "International Tax Agreements Act 1953 subsection 3(10) subsection 4(1) section 5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Foreign tax credits Medicare levy", "Case_References": "", "Other_References": "Papua New Guinea agreement [1989] ATS 37, Article 23(1)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201175", "Unmatched_Content": "Keywords Double tax agreements Foreign tax credits Medicare levy"}
{"ATO_ID_Number": "ATO ID 2010/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign tax credits: distributions from a USA Corporate Limited Partnership to a foreign hybrid limited partnership - section 160AF of the ITAA 1936", "Issue": "Is a taxpayer that is a member of a United States of America (US) Limited Partnership (LP) entitled to a foreign tax credit under section 160AF of the Income Tax Assessment Act 1936 (ITAA 1936) for tax imposed by the US on the taxpayer's share of the profits of the LP, where:", "Decision": "Yes. The taxpayer is entitled to a foreign tax credit under section 160AF of the ITAA 1936 for tax imposed by the US on the taxpayer's share of the profits of the LP, to the extent LP's assessable income does not include an amount under section 529 of the ITAA 1936.", "Facts": "The taxpayer, the trustee of an Australian resident superannuation fund, invests in a US LP, which was formed in the US. The LP is a foreign hybrid limited partnership according to section 830-10 of the ITAA 1997. The LP is therefore treated as a partnership for Australian tax law purposes. The LP's only investment is in CLP, also formed in the US. The only income derived by the LP is from the investment in the CLP. Disregarding section 485AA of the ITAA 1936, the LP's investment in the CLP is a foreign investment fund (FIF) interest. The CLP is a corporate limited partnership within the meaning of subsection 94D of the ITAA 1936, and is therefore treated as a company for Australian tax law purposes, pursuant to Division 5A of the ITAA 1936. The CLP is not a foreign hybrid limited partnership within the meaning of section 830-10 of the ITAA 1997 as the LP has not made an election under section 485AA of the ITAA 1936. The CLP invests in various assets that give rise to income derived from sources in the US. As both the LP and the CLP are taxed as partnerships under US tax law, neither pays US tax itself, that is, both are fiscally transparent. Instead, the US imposes tax on the partners in respect of their share of the income, profits or gains of the partnership. At the end of each accounting period, the whole of CLP's partnership profits are either distributed to the partners or credited to the partner's capital account. The same occurs in respect of LP's partnership profits. As the partners are not resident in the US, the LP is obliged to withhold US tax from the partner's share of the net income of the partnership (whether distributed or not). The rate of withholding depends on the character of the income in the hands of the partner under US tax law and the USA Convention contained in Schedule 2 to the International Tax Agreements Act 1953 (the USA Convention). The profits of the CLP that are either distributed to the LP or credited to the LP's capital account are treated as dividend income and are included in the net income of the LP under section 44 of the ITAA 1936. The taxpayer's assessable income includes its interest in the net income of the LP under section 92 of the ITAA 1936.", "Reasons_for_Decision": "Summary: Entitlement to claim a foreign tax credit is determined in accordance with subsection 160AF(1) of the ITAA 1936, which provides: 160AF(1) If: (a) the assessable income of a year of income of a resident taxpayer includes: (i) income that is foreign income; or (ii) income, or a profit or gain, that is derived from a source in an area covered by an international tax sharing treaty to the extent to which that income, profit or gain is taxed in Australia; and Where the partnership profits are either distributed or credited to the partner's capital account, Australian tax law deems the CLP to have paid a dividend to the LP under sections 94L or 94M of the ITAA 1936. As the LP is treated as a partnership for Australian tax law purposes, such dividends are included in the LP's net income pursuant to section 90 of the ITAA 1936. This is because if the LP was itself a resident taxpayer, the dividends would be included in its assessable income under section 44 of the ITAA 1936. The taxpayer will then include in assessable income its interest in the net income of the LP, pursuant to section 92 of the ITAA 1936. (Note: while LP is treated as having an interest in a FIF, the deemed payment of a dividend to LP and inclusion in its net income under section 90 of the ITAA 1936 results in an attribution account payment under paragraph 603(1)(a) of the ITAA 1936. This means that any income that would otherwise be included in LP's net income under section 529 of the ITAA 1936 is reduced by the amount of the attribution account payment under section 530 of the ITAA 1936. To the extent of the reduction, the relevant assessing provision when calculating LP's assessable income is therefore section 44, not section 529.) As the LP's net income consists of deemed dividends paid by the CLP out of profits derived from sources in the US, the taxpayer's assessable income will include foreign income, such that paragraph 160AF(1)(a) of the ITAA 1936 is satisfied. Under US tax law, tax is imposed on the taxpayer's share of the partnership profits calculated for US tax purposes. US tax law treats the CLP as a partnership, rather than a company, such that the amount included in LP's partnership profits for US tax purposes is a share of the partnership profits of CLP, rather than a deemed dividend. The LP is required to remit income tax on behalf of the taxpayer, in respect of the taxpayer's share of the partnership income for US tax purposes. This tax has been paid in respect of the same income that is subject to tax in the hands of the taxpayer under section 92 of the ITAA 1936. Although the foreign tax is payable by the LP, the taxpayer has borne the economic burden of that tax insofar as the tax has been paid in respect of an amount included in the taxpayer's assessable income. Accordingly, subsection 6AB(3) of the ITAA 1936 operates to deem the taxpayer to have peen personally liable for and to have paid that foreign tax (as noted above, because the profits of CLP are included in LP's net income under section 44 of the ITAA 1936, and not under section 529 of the ITAA 1936, subsection 6AB(3A) of the ITAA 1936 is not applicable). Paragraphs 160AF(1)(b) and 160AF(1)(c) of the ITAA 1936 are therefore satisfied. As the taxpayer's assessable income includes foreign income and the taxpayer is taken to have paid and been personally liable for foreign tax in respect of that foreign income, the requirements in section 160AF of the ITAA 1936 are satisfied, such that the taxpayer is entitled to a foreign tax credit. The amount of the credit is the lesser of the foreign tax paid or the Australian tax payable in respect of that foreign income (paragraphs 160AF(1)(d) and (e) of the ITAA 1936). In determining the availability of a foreign tax credit it is also necessary to consider the USA Convention contained in Schedule 2 to the International Tax Agreements Act 1953 (Agreements Act). Subsection 4(1) of the Agreements Act provides that the ITAA 1936 and the ITAA 1997 must be read as one with the Agreements Act. Article 22(2) of the USA Convention provides that where US tax has been imposed in respect of US-sourced income in accordance with the USA Convention, a credit against Australian tax payable on that income will be allowed. As the LP and the CLP are treated as 'flow-through' entities under US tax law, any treaty benefits are applied at the level of the partner and not the LP by the US for the purposes of applying the US convention. As the income that flows through the CLP and the LP to the partner retains its character in the hands of that person for the purposes of US tax law, the extent to which the US exercises its source country taxing right under the Convention will be determined by the character of that income (for example tax on interest income shall not exceed 10% under Article 11 of the US Convention). However, Australia, as the country of residence of the taxpayer, treats the relevant income taxed by the US under the Convention as dividend income paid by the CLP to which the taxpayer is beneficially entitled as a partner in the LP. This difference in treatment of income as between the State of source (US) and the State of residence of the taxpayer (Australia) is commonly referred to as a Conflict of Qualification. Where the difference in treatment is solely referable to differences in the respective domestic laws of the State of source and the State of residence of the taxpayer, it is considered that the State of source has taxed in accordance with the Convention and that the State of residence of the taxpayer is obliged to provide relief in accordance with Article 22(2) (see paragraphs 32.1 to 32.3 of the OECD Commentary on Article 23A and 23B. The Commissioner's view expressed at paragraph 104 of Taxation Ruling TR 2001/13 is that the OECD Model Taxation Convention may be considered in interpreting double tax agreements). Accordingly, the taxpayer will be entitled to a foreign tax credit for US taxes paid in respect of its share of the partnership income of LP, even though, for Australian tax law purposes, the taxpayer's share of the partnership profits is calculated on the basis that the LP has derived a dividend. The foreign tax credit will be allowable in the income year in which the partnership income is assessable, whether the foreign tax was paid in the same, or an earlier, income year.", "Date_of_Decision": "15 April 2010", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 section 830-10", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2445 | Taxation Ruling IT 2527 | Taxation Ruling TR 2001/13 | Taxation Ruling TR 2009/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Double tax agreements Foreign hybrid limited partnership Foreign hybrids Foreign income Foreign investment funds Foreign tax credits Interposed partnerships Limited partnerships Partnership income", "Case_References": "", "Other_References": "OECD Commentary on the Model Tax Convention on Income and on Capital (Condensed Version 2005)", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201093", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | the taxpayer is, subject to this Act, entitled to a credit of: | Related Public Rulings (including Determinations) Taxation Ruling IT 2445 Taxation Ruling IT 2527 Taxation Ruling TR 2001/13 Taxation Ruling TR 2009/6 | Keywords Companies Double tax agreements Foreign hybrid limited partnership Foreign hybrids Foreign income Foreign investment funds Foreign tax credits Interposed partnerships Limited partnerships Partnership income"}
{"ATO_ID_Number": "ATO ID 2008/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign tax credit: capital gain from the sale of asset situated in the USA by a dual resident of Australia and the USA", "Issue": "Is Australia obliged to provide credit relief pursuant to Article 22 of the Double Tax Agreement between Australia and the United States of America (USA Convention) for the tax paid in the USA on the capital gain made from the sale of units in a limited partnership by an Australian resident?", "Decision": "No. Australia is not obliged to provide credit relief pursuant to Article 22 of the USA Convention for the tax paid in the USA on the capital gain made from the sale of units in a limited partnership by an Australian resident.", "Facts": "The taxpayer is a citizen of the USA and, on this basis, a resident of the USA for taxation purposes. The taxpayer was a resident of Australia for taxation purposes. The taxpayer's habitual abode and personal and economic ties were predominantly in Australia during the period. The taxpayer sold units in a limited partnership situated in the USA and paid tax in the USA on the capital gain solely based on the US citizenship. The taxpayer, as an Australian resident, was also assessed in Australia on this capital gain.", "Reasons_for_Decision": "Summary: Subsection 770-10(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where the assessable income of a resident contains foreign income and foreign tax has been paid on that income, a foreign income tax offset will be allowed. In determining Australia's obligation to provide credit relief under its domestic law for foreign taxes paid on foreign income, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates the Agreements Act with the Income Tax Assessment Act 1936 (ITAA 1936) and ITAA 1997 so that those Acts are read as one. Schedule 2 to the Agreements Act contains the double tax convention between Australia and the USA (USA Convention). Schedule 2A to the Agreements Act contains the United States Protocol (US Protocol). The USA Convention and the US Protocol operates to avoid the double taxation of income received by Australian and US residents. The taxpayer was a resident of Australia. The taxpayer was a citizen of the USA and, on this basis, also a resident of the USA. As the taxpayer's habitual abode and personal and economic ties were predominantly in Australia, the taxpayer will be treated as a resident of Australia for the purposes of applying the provisions of the USA Convention. The taxpayer disposed of units in a limited partnership in the USA and realised a capital gain. The capital gain made from the sale of units in a limited partnership situated in the USA is not dealt with in any article of the USA Convention, including the Business Profits Article 7, the Alienation of Property Article 13 or the Other Income Article 21. Paragraph 3 of Article 1 of the USA Convention provides that, notwithstanding any provision of this Convention, with some exceptions that are not relevant to this case, a Contracting State may tax its residents and individuals electing under its domestic law to be taxed as residents of that State, and by reason of citizenship may tax its citizens, as if the USA Convention had not entered into force. Accordingly, the capital gain made from the sale of units in a limited partnership situated in the USA has been taxed by the US solely on the basis of citizenship under the USA Convention. Australia, as the country of residence of the taxpayer, also has a taxing right under the USA Convention and has taxed the gain under the capital gain tax provisions. Article 22(2) of the USA Convention provides that United States tax paid under the law of the United States and in accordance with this Convention in respect of income derived from sources in the United States by a person who, under Australian law relating to Australian tax, is a resident of Australia shall be allowed as a credit against Australian tax payable in respect of the income. However, the Article specifically excludes, for the purposes of such credit, United States tax imposed in accordance with paragraph 3 of Article 1 solely by reason of citizenship. Article 22(4) of the USA Convention states that for computing United States tax, where the United States citizen is a resident of Australia, the United States shall allow as a credit against United States tax the income tax paid to Australia after the credit referred to in paragraph (2). Accordingly, Australia is not obliged to provide credit relief pursuant to Article 22 of the USA Convention for the tax paid in the USA on the capital gain made from the sale of units in a limited partnership by an Australian resident.", "Date_of_Decision": "4 April 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 770-10(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2562", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/173", "Subject_References": "Double tax agreements Foreign income tax offset United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200857", "Unmatched_Content": "This ATO ID has been amended to replace the repealed subsection 160AF(1) by subsection 770-10(1). The term 'foreign tax credit' is also replaced by 'foreign income tax offset'. With effect from 1 July 2008 the foreign tax credit system contained in Div 18 of the Income Tax Assessment Act 1936 has been replaced by the foreign income tax offset system contained in Div 770 of the Income Tax Assessment Act 1997 . This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Related Public Rulings (including Determinations) Taxation Ruling IT 2562 | Keywords Double tax agreements Foreign income tax offset United States"}
{"ATO_ID_Number": "ATO ID 2007/173", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Employee Share Options: foreign tax credit relief to an Australian resident taxpayer where an employee share option benefit is taxed by the United States", "Issue": "Is Australia obliged to provide credit relief pursuant to Article 22 of the tax treaty between Australia and the United States of America (US Convention) contained in Schedule 2 to the International Tax Agreements Act 1953 (Agreements Act) to an Australian resident taxpayer where:", "Decision": "Yes. Australia is required to provide credit relief in accordance with Article 22 of the US Convention as the employee share option gain relates to a period of employment exercised wholly within the US and the US is entitled to tax the whole of the employee share option gain under Article 15 of the US Convention.", "Facts": "While the taxpayer was a resident of the US, the taxpayer was granted employee share options in a US public company. The taxpayer subsequently relocated to Australia and became an Australian resident. The taxpayer continued to work for an associate of the US Company in Australia until they exercised the options. The shares acquired as a result of the options were disposed of immediately. The employee share options were granted in January of each year based on the employee's performance over the prior financial year. While the options required a three year holding period prior to vesting, there were no other conditions attached to the employee share options. Accordingly, it is accepted that the employee share options were granted as a reward for past service which was exercised entirely in the US.", "Reasons_for_Decision": "Summary: Article 15 of the US Convention provides that salaries, wages and other similar remuneration derived by a resident of Australia in respect of an employment shall be taxed only in Australia unless the employment is exercised in the US. If the employment is exercised in the US, such remuneration may be taxed in the US. The employee share options fall within the definition of 'salaries, wages or other similar remuneration' for the purposes of Article 15 of the US Convention. This view is consistent with paragraph 2.1 of the Commentary on Article 15 of the OECD Model Tax Convention on Income and on Capital (OECD Commentary). The OECD Commentary further explains at paragraph 12.2 on Article 15 that taxing rights under that Article can be exercised by the source country in respect of an employee share option gain up to the time of exercise of the option. As the US has sought to tax only that part of the employee share option gain up to the time of exercise, the extent of its taxing rights under the treaty is governed by Article 15. The OECD Commentary also provides guidance on the extent to which source country taxing rights can be exercised pursuant to Article 15. It states at paragraph 12.6 that: The determination of whether and to what extent an employee stock-option is derived from employment exercised in a particular State must be done in each case on the basis of all the relevant facts and circumstances, including the contractual conditions associated with that option ... Paragraph 12.11 of the OECD Commentary further explains that options should only be considered to relate to services rendered before the time when it is granted to the extent that such grant is intended to reward the provision of services for a specific period. As the options were awarded on the basis of the taxpayer's prior service, it is considered that the period of employment for which the option relates occurred solely in the US, notwithstanding that the options were exercised in Australia. Accordingly, as the whole employment period is in the US, the US has source country taxing rights under Article 15 of the US Convention in respect of the employee share option gain up to the time of exercise. As the source country taxing rights in respect of the gain on the employee share option has been correctly exercised in accordance with the US Convention, Australia, as the country of residence of the taxpayer, is required to provide credit relief in accordance with Article 22 of the US Convention. Article 22(2) of the US Convention provides that a credit (in accordance with Australian tax law) against Australian tax payable in respect of income derived by a resident taxpayer shall be allowed where such income is derived from sources in the US and has been taxed under US law and in accordance with the US Convention. As the gain on the employee share option has been correctly taxed by the US under the US Convention, and Australia has also taxed the gain under the capital gains tax provisions, the taxpayer is entitled to relief under Article 22 of the US Convention.", "Date_of_Decision": "28 August 2007", "Year_of_Income": "Year ended 30 June 2000", "Legislative_References": "International Tax Agreements Act 1953 Schedule 2, Article 15 Schedule 2, Article 22(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/174", "Subject_References": "Double tax agreements Employee share schemes & options Foreign tax credits United States", "Case_References": "", "Other_References": "OECD Model Tax Convention on Income and on Capital", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007173", "Unmatched_Content": "Income Tax: Note: This ATO ID has been amended to remove references to repealed legislation dealing with foreign tax credit rules. With effect from 1 July 2008 the foreign tax credit system is replaced by the foreign income tax offset system. This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Employee share schemes & options Foreign tax credits United States"}
{"ATO_ID_Number": "ATO ID 2002/602", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "The 45-day holding period rule - scrip for scrip takeover", "Issue": "Does section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) apply to imputation credits attached to dividends received by the taxpayer for shares acquired in a scrip for scrip takeover?", "Decision": "Yes, section 160APHO of the ITAA 1936 does apply to imputation credits attached to dividends received by the taxpayer for shares acquired in a scrip for scrip takeover.", "Facts": "The taxpayer purchased shares in a company prior to 1 July 1997. The company was taken over by another company after 1 July 1997. The shares held in the original company were ordinary shares. The takeover company issued ordinary shares, after 1 July 1997, to shareholders on a one-for-one basis to effect the takeover.", "Reasons_for_Decision": "Summary: Division 1A of Part IIIAA of the ITAA 1936 determines when a taxpayer will qualify for franking credits in respect of dividends derived. There is no specific provision within that Division that deems the acquisition date of shares in a scrip-for-scrip takeover to be the date of purchase of the original shares. The requirements of Section 160APHO of the ITAA 1936 will therefore apply to the imputation credits attached to dividends received for shares in the takeover company issued in place of the original shares.", "Date_of_Decision": "12 March 2002", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHO", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/603 | ATO ID 2003/1105 | ATO ID 2003/1108", "Subject_References": "Scrip dividends Imputation credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002602", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Related ATO Interpretative Decisions | Minor amendment to formatting | Inserted note regarding repealed section 160APHO of the ITAA 1936 | Keywords Scrip dividends Imputation credits"}
{"ATO_ID_Number": "ATO ID 2002/604", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "45-day holding period rule - 'materially diminished' risks", "Issue": "For the purposes of subsection 160APHM(2) of the Income Tax Assessment Act 1936 (ITAA 1936), do the beneficiaries of a discretionary trust have 'materially diminished' risks in respect of their interests in the shares held by the trust?", "Decision": "Yes, for the purposes of subsection 160APHM(2) of the ITAA 1936 the beneficiaries of a discretionary trust do have \"materially diminished\" risks in respect of their interests in the shares held by the trust.", "Facts": "The trust is a discretionary trust. The beneficiaries do not have vested and indefeasible interests. The trustee purchased shares in the year 2000. The trustee has not entered into an option or any other derivative in relation to these shares. Franked dividends were paid on these shares.", "Reasons_for_Decision": "Summary: To qualify for franking benefits a taxpayer must be a 'qualified person': as per section 160 APHO of Division 1A of Part IIIAA of the ITAA 1936 and hold the shares or interest in shares at risk for the minimum 'qualifying period'. Section 160APHO requires shares or interests in shares to be held at risk for 45 days (90 days for preference shares). However, days where the taxpayer has materially diminished risks of loss or opportunities for gain in respect of shares or interests in shares are not taken into account (subsection 160APHO(3)). There is a material diminution of risk if the taxpayer's net position is less than 30% (subsection 160APHM(2)). The net position is calculated by adding the sum of the taxpayer's long positions (+deltas) and the sum of the taxpayer's short positions (-deltas) (subsection 160APHJ(5)). In calculating a discretionary beneficiary's net position in the interest in the shares held by the trust, long and short positions are determined by an actual financial calculation or a deeming provision (subsection 160APHG(3) and subsections 160APHL(5)(8)(9)(10) and (11)). Subsection 160APHL(7) would deem the beneficiary's long position with a delta of +1. However, subsection 160APHL(10) would deem a short position with a delta of -1. The net position would be zero. Zero is less than 30% and so there is a material diminution of risk within subsection 160APHM(2).", "Date_of_Decision": "14 December 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHO subsection 160APHG(3) subsection 160APHJ(5) subsection 160APHL(5) subsection 160APHL(7) subsection 160APHL(8) subsection 160APHL(9) subsection 160APHL(10) subsection 160APHL(11) subsection 160APHM(2) subsection 160APHO(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Imputation system Discretionary trusts Trusts Shares Family trust election Imputation credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002604", "Unmatched_Content": "Keywords Imputation system Discretionary trusts Trusts Shares Family trust election Imputation credits"}
{"ATO_ID_Number": "ATO ID 2005/93", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Related payments rule: SPI Futures contracts", "Issue": "Does the notional payment under a written SPI Futures contract in respect of a portfolio of Australian shares held by a taxpayer, give rise to a related payment under section 160APHN of the Income Tax Assessment Act 1936 (ITAA 1936) if the risk exposure of the physical investment portfolio (or any part) is greater than 0.3 at all times?", "Decision": "No. A notional payment made in connection with a SPI Futures contract will not be a related payment under section 160APHN of the ITAA 1936, where there is not a sufficiently close correlation between the physical shares in the portfolio (or any part) and the shares reflected in the SPI.", "Facts": "The taxpayer proposes to write SPI Futures contracts to balance the risk profile of its total investment portfolio which comprises a diverse range of asset classes including Australian shares. The taxpayer will not employ any other risk reduction strategies. The investment portfolio is outsourced to investment managers, who seek to outperform either the S&P/ASX 200 Accumulation Index or the S&P/ASX 300 Accumulation Index by investing in a subset of the stocks included in the indices. The investment managers do not seek to reflect or replicate the share price index. The delta of the taxpayer's total investment portfolio, as well as the investment portfolios managed by each manager, will at all times be 0.3 or greater. There is no part of the taxpayer's physical investment portfolio (even across investment managers) that can be said to closely correspond to the shares reflected in the SPI Futures contract.", "Reasons_for_Decision": "Summary: Part 3-6 of the Income Tax Assessment Act 1997 (ITAA 1997) contains the imputation provisions. To be eligible for franking benefits under the imputation system, paragraph 207-145(1)(a) of the ITAA 1997 states that the entity receiving the franked distribution must be a 'qualified person' for the purposes of Division 1A of Part IIIAA of the ITAA 1936. Generally, a taxpayer is a qualified person if they have held their ordinary shares at risk for 45 days in a particular period. There is a more stringent test that must be satisfied where a taxpayer makes a related payment. | Detailed Reasoning - Related payments: A related payment is any arrangement whereby the taxpayer or an associate of the taxpayer passes on the benefit of a dividend or distribution to another party. Under subsections 160APHN(2) and (3) of the ITAA 1936, a related payment will be taken to have been made where an amount is calculated by reference to, is equal to or approximates the amount of the dividend or distribution credited or notionally credited (explained below) to a party to the arrangement. The effect of subsection 160APHN(6) of the ITAA 1936 is that a notional crediting is taken to have occurred where the extent of a person's obligation under an arrangement, such as a futures contract, is determined by a formula which is calculated by reference to the amount of the dividend. | Detailed Reasoning - SPI Futures contracts: The taxpayer's investment strategy will include the use of SPI Futures contracts to balance the risk profile of its total investment portfolio. Purchasing an SPI Futures contract provides an investor with an exposure to Australia's top 200 companies (a long position). Conversely, the writing of a futures contract has the effect of hedging the taxpayer's long position attributable to the holding of the physical stocks, resulting in an offsetting short position. The pricing of an SPI Futures contract is based upon the value of the index at a particular time, adjusted downward to reflect a reduction in the index as a result of shares going ex-dividend over the course of the contract. As the consideration received in respect of the sale of the futures contract is influenced by dividends that may be received in respect of the physical portfolio of shares represented on the index, a related payment under paragraph 160APHN(3)(b) of the ITAA 1936 will be taken to have been made if it can be demonstrated that a close correlation exists between the shares comprising the index, and the physical holding. This is supported by paragraph 4.105 of the Explanatory Memorandum to Taxation Laws Amendment Act (No. 2) 1999. Therefore, the larger the absolute value of a derivative's delta in relation to a share, the greater will be its sensitivity or correlation to any movement in the price of the underlying share. Accordingly, the larger the absolute value of the delta, the closer will be the correlation between the underlying physical shares and the shares represented in the SPI Futures contract. Having regard to the net delta of the taxpayer's total investment portfolio (as well as the investment portfolios managed by each manager), the extent of the divergence between the shares represented by the index and the physical holding (or any part of it), and all the surrounding circumstances, there is no related payment in respect of the SPI Futures contract. This conclusion is consistent with the Explanatory Memorandum to Taxation Laws Amendment Act (No. 2) 1999, at paragraph 4.104, which suggests that a material diminution in risk amounts to a sufficiently close correlation and when accompanied by the passing of the benefit (as defined in subsection 160APHN(3) of the ITAA 1936) associated with a dividend, would constitute a related payment. This conclusion is reliant on the exposure being constantly measured.", "Date_of_Decision": "24 February 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHN subsection 160APHN(2) subsection 160APHN(3) subsection 160APHN(6) section 160APHO", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Financial derivatives Franking credits Futures Imputation system", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Act (No.2) 1999", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200593", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | Keywords Financial derivatives Franking credits Futures Imputation system"}
{"ATO_ID_Number": "ATO ID 2005/172", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking of Dividends: holding period and related payments - unit trust - qualified person", "Issue": "Is a unitholder in a unit trust whose trust deed permits the issue of new units at the trustee's discretion and at a price determined by the trustee, a qualified person for the purposes of paragraph 207-150(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to dividends that flow indirectly where the trustee has held the shares at risk for more than 45 days in the absence of a family trust election?", "Decision": "No. The unit holder will not be taken to have held their interest in the shares at risk.", "Facts": "A non-widely held unit trust has two existing unit holders. Both unitholders have held their units since the start of the relevant income year. Under the trust deed the trustee can determine the issue of new units and the price at which the units are to issue. The trustee acquired shares during the income year and has held those shares at risk for more than 45 days. A distribution attributable to franked dividend income was distributed to the two unit holders in the income year. Neither the trustee nor the beneficiary has any other positions in respect of the shares or the interest in the shares. Neither the trustee nor the beneficiary nor any associate of the trustee or of the beneficiary has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend.", "Reasons_for_Decision": "Summary: Relevantly, paragraph 207-150(1)(a) of the ITAA 1997 denies a tax offset if the entity to whom a franked distribution flows indirectly is not a qualified person in relation to the distribution for the purposes of Division 1A of Part IIIAA of the Income Tax Assessment Act 1936 (ITAA 1936) (as in force on 30 June 2002). The beneficiaries of a trust, including beneficiaries of a unit trust, are taken under subsection 160APHG(3) of the ITAA 1936 to acquire, hold or dispose of a interest in shares when the trustee acquires, holds or disposes of those shares. The unitholders are taken to hold an interest in the shares. Section 160APHL of the ITAA 1936 will apply as the shares were acquired after 31 December 1997. Subsection 160APHL(7) of the ITAA 1936 attributes a delta of +1 to the interest in the shares held by a beneficiary of a non-widely held trust as determined under subsection 160APHL(5) of the ITAA 1936. Unless there is a family trust election in place (or exceptions relating to deceased estates or employee share schemes are satisfied), subsection 160APHL(10) of the ITAA 1936 attributes additional positions to the beneficiary. It gives rise to a short position equal to the beneficiary's long position determined under subsection 160APHL(7) of the ITAA 1936 and a long position equal to so much of the taxpayer's interest in the trust holding as is a fixed interest. For the purposes of subsection 160APHL(10), the beneficiary's interest in the trust holding will be taken to be a fixed interest to the extent that the interest represents a vested and indefeasible interest in so much of the corpus of the trust as is comprised by the trust holding. In this case, the unitholder will have a long position with a delta of +1 under subsection 160APHL(7) of the ITAA 1936 and a short position with a delta of -1 under subsection 160APHL(10) of the ITAA 1936. In the absence of any other long positions, this will leave the unit holder with a net position of zero and a materially diminished risk of loss or opportunity for gain in accordance with subsection 160APHM(2) of the ITAA 1936. However, a long position will arise in respect of the unit holder's interest in the trust holding as is a fixed interest to the extent that the interest is constituted by an indefeasible vested interest in so much of the corpus of the trust as is comprised by the trust holding. In the present circumstances where the trustee may at its discretion issue further units at a price determined by the trustee, the interest will under subsection 160APHL(12) of the ITAA 1936 be taken to be defeasible if the issue of new units has the effect of materially reducing the value of the relevant interest. However, where the issue is conducted in accordance with subsection 160APHL(13) of the ITAA 1936, no material reduction in the value of the interest will be taken to have occurred and the interest will not be taken to be defeasible. However, as the trustee is at liberty to determine the issue price of any new units that may be issued, subsection 160APHL(13) will not apply should the trustee determine the issue price of the units in contravention of the requirements of subsection 160APHL(13). Consequently, the unit holder will have no additional long position and therefore will not be a qualified person in relation to the dividend paid on the shares.", "Date_of_Decision": "14 June 2005", "Year_of_Income": "Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 paragraph 207-150(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Imputation system Franked dividends Franking credits Trust beneficiaries Unit trusts Dividend income Imputation credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005172", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | Keywords Imputation system Franked dividends Franking credits Trust beneficiaries Unit trusts Dividend income Imputation credits"}
{"ATO_ID_Number": "ATO ID 2004/344", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Holding period and related payment: small shareholder exemption", "Issue": "Will an individual who holds shares or an interest in shares in respect of which franked dividends were paid during the relevant year of income, qualify for the small shareholder exemption under section 160APHT of the Income Tax Assessment Act 1936 (ITAA 1936) if the shares were not held at risk for the requisite 45 days?", "Decision": "Yes. Pursuant to subsection 160APHT(1) of the ITAA 1936, where the total franking credits do not exceed $5,000, an individual will be entitled to the benefit of franking credits whether or not the shares or the relevant interest in shares had been held at risk for the requisite period of time, provided:", "Facts": "The individual has 1000 DEF Ltd shares acquired on 12 July 1998. These shares became ex-dividend on 13 May 2002 paying a fully franked dividend of $0.70 per share on 25 May 2002. The total dividend received was $700 and the franking credit was $300. The individual acquired 50 RST Ltd shares on 10 March 2002 and sold those shares on 8 April 2002. The shares became ex-dividend on 15 March 2002 paying a fully franked dividend of $7.00 per share on 12 April 2002. The total dividend was $350 and the franking credit was $150. The individual is also a beneficiary of a non-fixed trust where there are no fixed entitlements to income or capital of the trust. The trust was settled on 1 July 1998 and the individual has been a beneficiary since the trust was settled. The individual was made presently entitled to income of the trust for the 2001-02 income year and is required to include, in their tax return, their share of the net income of the trust, being $2000 which included $1800 of franking credits. The trustee acquired the shares resulting in franking credits attached to the distribution on 10 May 1999 and 1 July 2001. The trustee of the trust was a qualified person in relation to all the shares it acquired. The trustee of the trust did not make a family trust election. The individual or an associate of the individual did not make, is not under an obligation to make and is not likely to make a related payment in respect of any dividend or distribution received.", "Reasons_for_Decision": "Summary: Section 160APHT of the ITAA 1936 refers to the small shareholder exemption. The small shareholder exemption treats a taxpayer that is an individual as a qualified person in relation to all dividends paid on shares that the taxpayer held or held an interest in during the relevant year of income, where the total of the associated franking rebates does not exceed $5000. However, in accordance with subsection 160APHT(2) of the ITAA 1936 the individual will not be a qualified person in relation to a particular dividend where the individual, or an associate has made, is under an obligation to make, or is likely to make a related payment in respect of the dividend or distribution attributable to the dividend. The facts reveal franking credits passing indirectly through a trust to the individual as well as franking credits attached to dividends on shares held directly by the taxpayer. There are no related payments made by the individual or an associate of the individual in relation to any of these dividends or distributions. Therefore, all the above-mentioned franking credits are taken into account in determining whether the small shareholder exemption applies to the individual in respect of the 2001-02 income year. Therefore, in determining the taxpayer's entitlement to franking credits under section 160APHT of the ITAA 1936, it would not be necessary to consider if the relevant shares or interests in shares were held at risk for the requisite period or whether the relevant family trust elections were made. However, pursuant to subsection 160APHU(1) of the ITAA 1936, if a trustee of a trust is not a qualified person in relation to a dividend, then no beneficiary of the trust is a qualified person in relation to the dividend. Subsection 160APHU(1) makes it clear that this rule must be satisfied despite any other provision of Subdivision B of Division 1A of Part IIIAA of the ITAA 1936 (except for subsection 160APHH(6) of the ITAA 1936). However, based upon the relevant facts, the trustee of the trust was a qualified person in relation to all of the abovementioned dividends paid on the shares. The total franking rebates from all sources, direct and indirect would be $2,250 ($300 + $150 + $1,800). As these amounts do not exceed the $5,000 threshold for the 2001-02 income year, the individual is a qualified person in accordance with section 160APHT of the ITAA 1936 in relation to all the dividends paid during that year. Therefore, the taxpayer will be entitled to franking rebates of $2,250 in respect of the 2001-02 income year under section 160APHT of the ITAA 1936.", "Date_of_Decision": "19 April 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHN section 160APHO section 160APHT section 160APHU", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Discretionary trusts Dividend income Franked dividends Franking credits Imputation credits Imputation system Individual shareholder dividend rebates Shareholders Shares Trust beneficiaries Trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004344", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | Keywords Discretionary trusts Dividend income Franked dividends Franking credits Imputation credits Imputation system Individual shareholder dividend rebates Shareholders Shares Trust beneficiaries Trusts"}
{"ATO_ID_Number": "ATO ID 2003/1105", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking of dividends: holding period and related payments - qualified person - no family trust election", "Issue": "Is a beneficiary of a non-fixed trust a qualified person under section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to a dividend paid on ordinary shares acquired by the trustee post 31 December 1997 and held at risk for 45 days where the trustee has not made a family trust election?", "Decision": "No. The beneficiary will not be a qualified person under section 160APHO of the ITAA 1936 in relation to the dividend as the failure by the trustee to make a family trust election would result in the beneficiary's risk of loss or opportunity for gain being materially diminished.", "Facts": "An individual beneficiary claimed $6,200 in franking credits on a distribution of franked dividends on ordinary shares acquired by the trustee of a non-fixed trust on 16 January 2002. The trustee held the shares at risk from the date of purchase to the end of April 2002. The trustee has not made a family trust election. Neither the trustee nor any associate of the trustee has made, is under an obligation to make, or is likely to make, a related payment in respect of the dividend. The beneficiary did not acquire any independent positions in relation to the shares.", "Reasons_for_Decision": "Summary: As a non-fixed trust, the trust would constitute a non-widely held trust. A beneficiary of a non-widely held trust is taken to acquire, hold and dispose of an interest in shares held by the trust when the trustee acquires, holds and disposes of shares or an interest in shares (sub-section 160APHG(3) of the ITAA 1936). If a beneficiary of a non-widely held trust is to be a qualified person under section 160APHO of the ITAA 1936, they must hold their interest at risk for not less than 45 days during the primary qualification period where no related payments have been made. A beneficiary's interest in the trust holding is determined under section 160APHL of the ITAA 1936. Under sub-section 160APHL(5), the beneficiary of a trust is taken to have an interest in the trust holding that is determined in proportion to their entitlement to the relevant dividend income. Sub-section 160APHL(7) attributes a long position with a delta of +1 in respect of that interest. However, where the trustee has not made a family trust election, this long position will be negated and a further long position created to reflect any fixed interest the beneficiary may hold in the trust holding. (paragraph 160APHL(10)(a)). The beneficiary will be taken to have a fixed interest where they have an indefeasible vested interest in the corpus of the trust. Consequently, in the absence of a family trust election as well as a vested and indefeasible interest in the corpus of the trust, a beneficiary would experience a material diminution in the risk of loss or opportunity for gain in respect of their interest in the trust holding and will not be taken to have held their interest at risk for the requisite period. Therefore, the beneficiary of a non-fixed trust will not be a qualified person under section 160APHO of the ITAA 1936 in relation to the dividend paid where the trustee has not made a family trust election.", "Date_of_Decision": "27 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHL section 160APHO subsection 160APHG(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031105", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Amended to correct typographical errors."}
{"ATO_ID_Number": "ATO ID 2003/1106", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking of dividends: holding period rule and related payments rule - trustee of a trust - interest in corpus", "Issue": "Will a beneficiary that holds an interest in the corpus of a trust, that is in receipt of franked distributions, be entitled to tax offsets under Division 207 of the Income Tax Assessment Act 1997 (ITAA 1997) on distributions flowing through to the beneficiary, if the trustee has not made a family trust election?", "Decision": "No. The beneficiary will not be entitled to the benefit of tax offsets under Division 207 of the ITAA 1997, if they do not hold an indefeasible vested interest in the corpus of the trust.", "Facts": "The trustee of a non-widely held discretionary trust holds an extensive portfolio of shares. The income of the trust consists primarily of dividends from these shares. Having held the shares at risk for a period of at least 90 days, the trustee is a qualified person. The terms of the trust deed permits the creation of other interests under the trust. The trustee has not made a family trust election.", "Reasons_for_Decision": "Summary: Under subsection 160APHG(3) of the Income Tax Assessment Act 1936 (ITAA 1936), a beneficiary of a non-widely held trust is taken to acquire, hold and dispose of an interest in shares held by a trust when the trustee acquires, holds or disposes of shares or an interest in shares. Consequently, a beneficiary of a discretionary trust will be taken to hold an interest in the shares while the trustee holds the shares. Pursuant to subsection 160APHL(5) of the ITAA 1936, a beneficiary's interest in shares held by the trustee of a non widely held trust will be determined in proportion to the beneficiary's share of the dividend income derived by the trust. According to subsection 160APHL(7), that beneficiary's interest is a long position with a delta of +1 in relation to itself. However, pursuant to subsection 160APHL(10) of the ITAA 1936, where the trust is not: the beneficiary has a short position equal to the long position under subsection 160APHL(7) and a long position equal to so much of the beneficiary's interest in the trust holding as is a fixed interest. Subsection 160APHL(11) defines a fixed interest as a vested and indefeasible interest. As the trustee of the discretionary trust has not made, nor intends to make, a family trust election under Subdivision 272-D of Schedule 2F to the ITAA 1936, subsection 160APHL(10) of the ITAA 1936 will give rise to a short position equal to the long position that arose under subsection 160APHL(7) of the ITAA 1936. However, as the beneficiary's interest in the corpus will not be taken to be indefeasible on account of the fact that the trust deed permits the creation of other interests which may defease the beneficiary's interest in the corpus of the trust, no further long position will arise. Consequently, the beneficiary cannot be said to enjoy a fixed interest in the corpus of the trust, and a material diminution in the beneficiary's risk of loss or opportunity for gain would arise.", "Date_of_Decision": "27 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHG section 160APHL section 160APH0 Schedule 2F", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Imputation credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031106", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | Keywords Imputation credits"}
{"ATO_ID_Number": "ATO ID 2003/1108", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking of dividends: holding period and related payments - qualified person - family trust election", "Issue": "Is a beneficiary of a non-fixed trust in respect of which a family trust election has been made, a qualified person under section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to dividends paid on ordinary shares acquired by the trustee post 31 December 1997 where the trustee has not held the shares at risk for 45 days.", "Decision": "No. The beneficiary of the non-fixed trust in respect of which a family trust election has been made is not a qualified person under section 160APHO of the ITAA 1936 in relation to the dividends.", "Facts": "The trustee acquired the ordinary shares at the end of January 2002 and sold the shares in June 2002. Franked dividends with attached franking credits of $5,490 were paid to the trustee and distributed to a beneficiary during the 2001-02 income year. The trustee had materially diminished risk in respect of each day the shares were held. Neither the trustee nor an associate of the trustee has made, is likely to make or is under an obligation to make a related payment in respect of the dividends paid.", "Reasons_for_Decision": "Summary: For a beneficiary to be a qualified person under section 160APHO of the ITAA 1936 in relation to an interest in shares on which a dividend has been paid, the beneficiary must have held the interest at risk for at least 45 days during the primary qualification period. The beneficiary is taken under sub-section 160APHG(3) of the ITAA 1936 to hold an interest in the shares while the trustee holds the shares. As a non-fixed trust, the trust will be considered a non-widely held trust. If a beneficiary of a non-widely held trust is to be a qualified person, the trustee must also be a qualified person. Having not held the shares at risk for 45 days, the trustee will not be considered a qualified person in relation to the dividend. Consequently, the beneficiary will also not be a qualified person in relation to the dividend (section 160 APHU(1) of the ITAA 1936). Therefore, the beneficiary of the non-fixed trust is not a qualified person under section 160APHO of the ITAA 1936 in relation to the dividends paid where the trustee has not held the shares at risk for 45 days.", "Date_of_Decision": "27 November 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHG section 160APHO section 160APHU", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Imputation system Franked dividends Trust beneficiaries Discretionary trusts Imputation credits Franking credits Dividend income", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031108", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | Keywords Imputation system Franked dividends Trust beneficiaries Discretionary trusts Imputation credits Franking credits Dividend income"}
{"ATO_ID_Number": "ATO ID 2003/1191", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Holding period rule and related payments rule: qualified person - deceased estate", "Issue": "Is a beneficiary of a deceased estate a qualified person under section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to a dividend paid to the beneficiary by the executor during the period of administration of the deceased estate.", "Decision": "Yes. As the beneficiary of the deceased estate held the interest in the shares at risk and the executor was a qualified person, the beneficiary will also be taken to be a qualified person.", "Facts": "On 22 May 2002, the executor of a deceased estate established that sufficient monies existed in the estate to meet expenses and distributed a dividend received by the estate to a beneficiary before the estate was fully administered. The shares were acquired by the deceased on 15 April 2000. The executor was a qualified person in relation to the dividend.", "Reasons_for_Decision": "Summary: Since the shares were acquired by the deceased after 31 December 1997, section 160APHL of the ITAA 1936 will apply. By virtue of section 160APHH(4) of the ITAA 1936, the executor will also be taken to have acquired the shares on 15 April 2000, the day on which the deceased acquired the shares. The beneficiary's interest in the relevant shares held by the executor of the deceased estate will be determined under sub-section 160APHL(5) of the ITAA 1936. Sub-section 160APHL(7) provides for the taxpayer's interest determined under section 160APHL(5) to have a long position with a delta of plus one in relation to itself. As the trust is a deceased estate, under paragraph (b) of sub-section 160APHL(10) of the ITAA 1936 the beneficiary of the trust will not be taken to have acquired either a short position equal to the beneficiary's long position under sub-section 160APHL(7) or a long position equal to so much of the taxpayer's interest in the trust holding as is a fixed interest. Consequently, in the absence of any other long or short positions, the beneficiary will be taken to have held the relevant interest in the shares at risk and would be a qualified person in relation to the distribution made by the executor.", "Date_of_Decision": "27 November 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHH section 160APHL section 160APHO", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Franked dividends Deceased estates Trust beneficiaries Dividend income Shares Imputation credits", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031191", "Unmatched_Content": "Though Part IIIAA of the Income Tax Assessment Act 1936 ceased to have application from 1 July 2002, it is necessary to have regard to the rules in Division 1A of the former Part IIIAA in determining whether an entity is a qualified person for the purpose of the new rules contained in the Simplified Imputation System in respect of a franked distribution made directly or indirectly to the entity on or after 1 July 2002. | Keywords Franked dividends Deceased estates Trust beneficiaries Dividend income Shares Imputation credits"}
{"ATO_ID_Number": "ATO ID 2004/685", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company tax losses: choice to deduct tax loss must not create excess franking offsets", "Issue": "Where a corporate tax entity has a tax loss, can the entity choose to deduct an amount of that tax loss under section 36-17 of the Income Tax Assessment Act 1997 (ITAA 1997) that would give rise to an amount of excess franking offsets?", "Decision": "No. Paragraph 36-17(5)(b) of the ITAA 1997 provides that a corporate tax entity that, disregarding the tax loss, would not have an amount of excess franking offsets for an income year, must not choose to deduct an amount of tax loss that would result in the entity having an amount of excess franking offsets for that income year.", "Facts": "Company A incurred a tax loss of $20,000 for the 2002-03 income year. For the 2003-04 income year, Company A derives total assessable income of $30,000, including franked distribution of $14,000, franking credit of $6,000 and other assessable income of $10,000. Company A does not derive any net exempt income and has no allowable deductions. Company A seeks to deduct this tax loss of $20,000 for the 2003-04 income year.", "Reasons_for_Decision": "Summary: Subsection 36-17(2) of the ITAA 1997 provides a corporate tax entity with a choice as to the undeducted amount of tax loss (if any) to be deducted. If the entity has net exempt income, subsection 36-17(3) of the ITAA 1997 provides that the entity has a choice as to the undeducted amount of tax loss (if any) to be deducted after firstly deducting the tax loss from the net exempt income. Subsection 36-17(5) of the ITAA 1997 further provides: 36-17(5) The choice that the entity has under subsection (2) or (3) for the later income year is subject to both of the following: (a) the entity must choose a nil amount if, disregarding the *tax loss and other tax losses of the entity, the entity would have an amount of *excess franking offsets for that year; (b) if, disregarding the tax losses and other tax losses of the entity, the entity would not have an amount of excess franking offsets for that year - the entity must not choose an amount that would result in the entity having an amount of excess franking offsets for that year. Paragraph 36-17(5)(a) of the ITAA 1997 does not apply to Company A for the 2003-04 income year, as Company A would not have an amount of excess franking offsets under section 36-55 of the ITAA 1997 if the tax loss of $20,000 was disregarded. If Company A chooses to deduct the full amount of the tax loss of $20,000, it would have an amount of excess franking offsets of $3,000, calculated under section 36-55 of the ITAA 1997 as follows: $6,000 - (($30,000-$20,000) x 30%). Company A therefore cannot choose to deduct the full amount of tax loss because of paragraph 36-17(5)(b) of the ITAA 1997. Alternatively if Company A chooses to deduct $10,000 of the tax loss, it would not have an amount of excess franking offsets under section 36-55 of the ITAA 1997: $6,000- (($30,000-$10,000) x 30%) = $nil. In accordance with paragraph 36-17(5)(b) of the ITAA 1997, Company A can choose to deduct $10,000 of the tax loss for the 2003-04 income year.", "Date_of_Decision": "11 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 36-17 subsection 36-17(5) paragraph 36-17(5)(a) paragraph 36-17(5)(b) section 36-55", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Carry forward losses Tax loss", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004685", "Unmatched_Content": "Keywords Carry forward losses Tax loss"}
{"ATO_ID_Number": "ATO ID 2004/837", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax: Allocation of a franking credit to a distribution", "Issue": "Will the decision to allocate a franking credit to a distribution by a corporate tax entity, pursuant to section 202-5 of the Income Tax Assessment Act 1997 (ITAA 1997), give rise to a franking debit in the franking account at that time?", "Decision": "No. The decision to allocate a franking credit to a distribution by a corporate tax entity, pursuant to section 202-5 of the ITAA 1997, will not give rise to a franking debit in the franking account. Pursuant to Item 1 of the table in subsection 205-30(1) of the ITAA 1997, a debit to the franking account arises when the actual payment of the distribution is made.", "Facts": "A corporate tax entity decides on 1 September 2002 to pay a fully franked dividend of $7,000, allocating a $3,000 franking credit, to its shareholders. On 2 July 2003, the corporate tax entity pays the distribution to its shareholders.", "Reasons_for_Decision": "Summary: Section 202-5 of the ITAA 1997 states that an entity franks a distribution if the following conditions are satisfied: The mechanism by which an entity allocates a franking credit is determined by the entity. However, the decision to allocate a franking credit, without actual payment of the distribution, does not in itself give rise to a franking debit in the franking account. Item 1 of the table in subsection 205-30(1) of the ITAA 1997 states that if the entity franks a distribution, a debit equal to the amount of the franking credit allocated to the distribution arises on the day on which the distribution is made. On the facts of this case, the entity's decision to allocate a franking credit of $3,000 on the distribution on 1 September 2002 does not give rise to a franking debit in the franking account at that time. When the payment of the distribution is made on 2 July 2003, the decision to allocate a franking credit of $3,000 to the distribution is given effect and only then does a franking debit entry arise in the franking account.", "Date_of_Decision": "14 October 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 202-5 subsection 205-30(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company tax Franking accounts Franking debits Imputation system", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004837", "Unmatched_Content": "Decision Reasons for decision Legislative reference | Corrected legislative reference to subsection 205-30(1) of the ITAA 1997 | Keywords Company tax Franking accounts Franking debits Imputation system"}
{"ATO_ID_Number": "ATO ID 2003/1200", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Insurance policy: refund of imputation credits", "Issue": "If a taxpayer receives income from a friendly society insurance bond, are they entitled to a refund of imputation credits under section 67-25 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. If a taxpayer receives income from a friendly society insurance bond, they are not entitled to a refund of imputation credits under section 67-25 of the ITAA 1997.", "Facts": "A taxpayer invested in a friendly society insurance bond and has held it for more than 10 years. The friendly society pays tax on the investment income received on the bond and, after holding the bond for more than 10 years, the taxpayer does not pay tax on the income they received from the bond as it is tax paid.", "Reasons_for_Decision": "Summary: Taxpayers who are eligible for imputation credits on dividends paid on or after 1 July 2000 are entitled to a refund of excess imputation credits if the credits exceed their tax payable. Imputation credits may only be claimed on frankable dividends. Section 160APA of the Income Tax Assessment Act 1936 (ITAA 1936) defines 'frankable dividend' to include a dividend within the meaning of section 6 of the ITAA 1936. Subsection 6(1) of the ITAA 1936 definition of 'dividend' in paragraph (f) of the definition excludes a reversionary bonus on a policy of life assurance from the definition. Under subsection 26AH(6) of the ITAA 1936, reversionary bonuses received under a life assurance policy with a date of commencement of risk after 7 December 1983 are assessable only if the policy has been held for less than 10 years. Unlike annual bonuses, reversionary bonuses are paid on maturity, forfeiture or surrender of life assurance policies. The friendly society insurance bond is considered to be a life assurance policy and the income received on this policy is considered to be a reversionary bonus. As they are excluded from subsection 6(1) of the ITAA 1936 definition of dividends, reversionary bonuses are not eligible for imputation credits.", "Date_of_Decision": "22 December 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 67-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Friendly societies Friendly society bonds Imputation system Insurance & insurance industry Insurance bonds Life insurance policies Refund of imputation credits", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031200", "Unmatched_Content": "This ATOID has equal application to section 202-40 of the Income Tax Assessment Act 1997. All reference to section 160APA of the Income Tax Assessment Act 1936 should therefore be taken as including reference to section 202-40. The changes made to section 67-25 of Income Tax Assessment Act 1997, will not affect the meaning and application of this particular ATOID on its facts. | Keywords Friendly societies Friendly society bonds Imputation system Insurance & insurance industry Insurance bonds Life insurance policies Refund of imputation credits"}
{"ATO_ID_Number": "ATO ID 2002/122", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Beneficiary's (life tenant's) entitlement to franking credits", "Issue": "Is the taxpayer, who is a life tenant of a testamentary trust, entitled to the benefit of franking credits, under section 207-45 of the Income Tax Assessment Act 1997 (ITAA 1997), which are attributable to shares acquired by the trust post 31 December 1997 and distributed from that trust?", "Decision": "No. The taxpayer, a life tenant of a testamentary trust created under a last will and testament is not entitled to the benefit of franking credits, under section 207-45 of the ITAA 1997, which are attributable to shares acquired by the trust post 31 December 1997 and distributed from that trust.", "Facts": "The taxpayer is a life tenant of a testamentary trust created, as a result of a last will and testament. The trust holds as investments, shares in various companies from which franked dividends are received. The taxpayer, as a beneficiary, is entitled to a share of the income of the trust. The taxpayer has no entitlement to the corpus of the trust. The taxpayer has received dividends during the year of income from a number of sources. The franking credits attached to these dividends exceed $5,000.", "Reasons_for_Decision": "Summary: Under former subsection 160APHL(10) of the ITAA 1936, and more particularly paragraph (b) the testamentary trust is not a trust merely because of a reference to executors and administrators as contained in paragraph (a) of the definition of a trustee in subsection 6(1) of the ITAA 1936. Thus, former subsection 160APHL(10) of the ITAA 1936 will give rise to a short position equal to the long position that arose under former subsection 160APHL(7) of the ITAA 1936, which will in effect cancel the long position arising under former subsection 160APHL(7) of the ITAA 1936. Furthermore, where the taxpayer's interest in the trust holding is a fixed interest, it would also give rise to a corresponding long position. However, this will not occur in the present situation, as under former subsection 160APHL(11) of the ITAA 1936, a fixed interest will only arise where there is a vested and indefeasible interest in the corpus of the trust, which the taxpayer does not have. Therefore, the taxpayer is left with a nil net position. This will, under former subsection 160APHM(2) of the ITAA 1936, constitute a material diminution in the taxpayer's risk of loss or opportunity for gain. Consequently, on this basis, the taxpayer will be denied entitlement to the benefit of franking credits. As the taxpayer's income included dividends with franking credits attached, in excess of $5,000 the small shareholder exemption available under former section 160APHT of the ITAA 1936 does not apply.", "Date_of_Decision": "14 December 2001", "Year_of_Income": "Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 160APHL subsection 160APHM(2) section 160APHT", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Imputation system Imputation credits Testamentary trusts", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002122", "Unmatched_Content": "Update legislative references through out the document. | Keywords Imputation system Imputation credits Testamentary trusts"}
{"ATO_ID_Number": "ATO ID 2001/609", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dividends & Imputation Credits - dividends received by an employer and paid to an employee", "Issue": "Is the taxpayer entitled to imputation credits under section 160AQU of the Income Tax Assessment Act 1936 (ITAA 1936) for dividends received by their employer and then paid to them in their capacity as an employee?", "Decision": "No, the taxpayer is not entitled to imputation credits under section 160AQU of the ITAA 1936 for dividends received by their employer and then paid to them in their capacity as employee.", "Facts": "The taxpayer's employer is a shareholder in several companies listed on the Australian Stock Exchange and receives dividends from these companies. The taxpayer's employer directed payment of the dividends to the taxpayer in lieu of, or as a substituted method of, remuneration for the taxpayer's services as an employee.", "Reasons_for_Decision": "Summary: A franked dividend is a dividend paid or credited to a shareholder by an Australian resident company from profits that have had Australian company tax paid on them (sections 160APA and 160AQF of the ITAA 1936). A shareholder who receives a franked dividend is required to include in their assessable income an extra amount under section 160AQT of the ITAA 1936. The extra amount is equivalent to the amount of company tax attributable to the dividend. The shareholder is then entitled to claim that amount as an imputation credit under section 160AQU of the ITAA 1936. To be eligible to receive dividends and the associated imputation credits from a company, a taxpayer must have a shareholding interest in the capital of the company and be listed on the share register of the company. It is the employer, not the employee, who is registered as a shareholder. It is the employer who is entitled to receive dividends and use the imputation credits received. Any dividend passed on from the employer to the taxpayer in their capacity as an employee loses its character as a dividend. Any amounts received by the taxpayer as remuneration for their services as an employee would be regarded as income in the nature of salary or wages and assessable to them under section 6-5 of the Income Tax Assessment Act 1997 . The taxpayer is therefore not entitled to any imputation credits under section 160AQU of the ITAA 1936.", "Date_of_Decision": "19 July 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 160APA section 160AQF section 160AQT section 160AQU", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Franked dividends Dividend income Imputation credits Shareholder", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001609", "Unmatched_Content": "Keywords Franked dividends Dividend income Imputation credits Shareholder"}
{"ATO_ID_Number": "ATO ID 2002/449", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Company Tax - Section 46 Dividend Rebate: Eligibility for dividends rebate of dividends paid by a subsidiary to its parent", "Issue": "For the purposes of subsection 46F(3) of the Income Tax Assessment Act 1936 (ITAA 1936) in relation to dividends paid by a wholly-owned subsidiary to its parent in a particular financial year, is the parent company a group company in relation to the subsidiary if the subsidiary became wholly-owned two-and-a-half months before the start of that financial year and had an extended balancing period of 15 months ending at the end of the financial year to align its substituted accounting period with its parent's income year?", "Decision": "Yes, the parent company is a group company in relation to the subsidiary in relation to dividends paid during the particular financial year (i.e., from 1 July to 30 June) for the purposes of subsection 46F(3) of the ITAA 1936 (assuming the tests in subsection 160AFE(3) of the ITAA 1936 are satisfied from the time the subsidiary is acquired until the end of that financial year). Therefore subsection 46F(2) of the ITAA 1936 (which, among other things, denies the inter-corporate dividend rebate for unfranked dividends) is inapplicable to dividends paid by the subsidiary to the parent company during the financial year.", "Facts": "The parent company acquired the wholly-owned subsidiary two-and-a-half months before the start of the financial year. Before that time the subsidiary had a substituted accounting period ending on 31 March in lieu of the following 30 June. To align the subsidiary's income year with that of its parent's, the Commissioner allowed the subsidiary a 15 month period in which to balance from 1 April of the calendar year in which it was acquired until 30 June of the following year (i.e. the end of the relevant financial year). The subsidiary was a subsidiary company within the meaning of subsection 160AFE(3) of the ITAA 1936 from the time it was acquired.", "Reasons_for_Decision": "Summary: Subsection 46F(3) applies if a shareholder is a group company in relation to the dividend-paying company 'in relation to the year of income in which the dividend is paid' (subsection 46F(1) provides that 'group company' has the same meaning as in section 160AFE). Although the subsidiary was allowed a 15 month balancing period to align its income year with its parent's, Norwich Superannuation Services v. FCT 99 ATC 2,015 supports the view that this 15 month period is not an income year for the purposes of subsection 46F(3) of the ITAA 1936. In this case the relevant income year in respect of which the parent company must be a group company in relation to its subsidiary is the 12 month period from 1 July of the year in which it is acquired until 30 June of the following year (i.e. the financial year). During this period the grouping rules in section 160AFE of the ITAA 1936 are satisfied, and therefore the companies are group companies for the purposes of subsection 46F(3).", "Date_of_Decision": "30 November 2001", "Year_of_Income": "Corporate Shareholder Dividend Rebates", "Legislative_References": "Income Tax Assessment Act 1936 section 46 subsection 46(2) subsection 46F(2) subsection 46F(3) subsection 160AFE(2) subsection 160AFE(3) subsection 160AFE(4) subsection 160AFE(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Unfranked Dividends Group Companies Dividend Rebates", "Case_References": "Norwich Superannuation Services c FCT 41 ATR 1091", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002449", "Unmatched_Content": "Keywords Unfranked Dividends Group Companies Dividend Rebates"}
{"ATO_ID_Number": "ATO ID 2004/758", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Tax Offset for a low income taxpayer who is a dependant of a member of the US Armed Forces in Australia", "Issue": "Is the taxpayer, a dependent of a United States (US) Armed Forces member and to whom subsection 23AA(3) of the Income Tax Assessment Act 1936 (ITAA 1936) applies, entitled to claim the tax offset for certain low income taxpayers available under section 159N of the ITAA 1936?", "Decision": "Yes. The taxpayer, a dependent of a US Armed Forces member and to whom subsection 23AA(3) of the ITAA 1936 applies, is entitled to claim the tax offset for certain low income taxpayers available under section 159N of the ITAA 1936 where their taxable income is below the relevant threshold.", "Facts": "The taxpayer is living in Australia with their spouse. The taxpayer is the spouse of a member of the US Armed Forces who is serving in Australia under the agreement between the Australian Government and the US Government concerning the status of US Armed Forces in Australia (Forces Agreement). Apart from the operation of subsection 23AA(3) of the ITAA 1936 the taxpayer would be a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936. The taxpayer's taxable income is less than the relevant threshold for the purposes of section 159N of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 23AA of the ITAA 1936 gives legislative effect to certain provisions relating to income tax contained in various agreements Australia has entered into with the US Government, including the Forces Agreement. Under the Forces Agreement, Australia agreed to exempt the pay of members of the US Armed Forces in Australia. As the pay and allowances of Armed Forces members of any foreign government who are serving in Australia is generally exempt under Item 5 of section 842-105 of the Income Tax Assessment Act 1997 (ITAA 1997), section 23AA ensures that the foreign source income of members of the US Armed Forces and their dependants is exempt from Australian income tax. Section 23AA achieves this purpose by deeming the persons covered by the relevant agreements and their dependants to be non-residents of Australia for income tax purposes. Specifically, subsection 23AA(3) of the ITAA 1936 applies where a person: Subsection 23AA(3) of the ITAA 1936 provides that for the purposes of the ITAA 1936, other than Subdivision A of Division 17, the person is deemed to be a non-resident of Australia during that period, and that period is disregarded in determining whether the person is a resident of Australia at any other time. The taxpayers' spouse is in Australia for prescribed purposes as the spouse is in Australia to carry out activities pursuant to the Forces Agreement, and the taxpayer is a dependant of their spouse (subsection 23AA(1) of the ITAA 1936). Accordingly, the taxpayer is deemed to be a non-resident of Australia for income tax purposes for the period they are present in Australia under subsection 23AA(3) of the ITAA 1936. However, this treatment does not apply for the purposes of eligibility for concessional tax offsets provided in Subdivision A of Division 17 of the ITAA 1936. Section 159N of the ITAA 1936 provides a tax offset to a resident taxpayer whose taxable income is less than the relevant threshold. Section 159N of the ITAA 1936 is set out in Subdivision A of Division 17 of the ITAA 1936. Accordingly, as the taxpayer is not deemed under subsection 23AA(3) of the ITAA 1936 to be a non-resident of Australia for the purposes of section 159N, and their taxable income is less than the relevant threshold contained in section 159N, they are entitled to the tax offset for certain low income taxpayers.", "Date_of_Decision": "3 August 2004", "Year_of_Income": "Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 23AA subsection 23AA(1) subsection 23AA(3) section 159N", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Residence of individuals Concessional tax offsets Tax offset for low income taxpayers", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004758", "Unmatched_Content": "Keywords Residence of individuals Concessional tax offsets Tax offset for low income taxpayers"}
{"ATO_ID_Number": "ATO ID 2009/146", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "National Rental Affordability Scheme (NRAS)", "Issue": "Does a dwelling owner who leases their dwelling to an entity have an entitlement to the NRAS tax offset under section 380-10 of the Income Tax Assessment Act (ITAA 1997) (applicable to non-entity joint ventures) if the entity subleases the dwelling?", "Decision": "No. The Commissioner considers that the dwelling owner does not have an entitlement to the NRAS tax offset as the dwelling owner does not derive NRAS rent.", "Facts": "A non-entity joint venture (NEJV) is established that includes at least two parties, the dwelling owner and the manager of the NEJV. The manager of the NEJV applies to the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to participate in the NRAS and effectively represents the parties to the NEJV. The manager of the NEJV is the approved participant and receives the NRAS allocation in respect of the rental dwelling. The dwelling owner enters into a head lease with the manager of the NEJV and receives rent from the manager of the NEJV under the head lease. The manager of the NEJV then enters into a sublease with NRAS eligible tenants (being low to moderate income households) and the manager of the NEJV receives rent from the eligible tenants under the sublease.", "Reasons_for_Decision": "Summary: To be able to claim the NRAS tax offset, a party to an NEJV needs to: The Commissioner is of the view that in the context in which the expression 'has' is used in paragraph 380-10(1)(a) of the ITAA 1997, it means 'has derived'. This is because the other relevant provisions, namely subsections 380-10(3) and 380-10(4) of the ITAA 1997, operate on the basis of NRAS rent being 'derived' by an entity. Also, paragraph 1.14 of the Explanatory Memorandum to the Bill (National Rental Affordability Scheme (Consequential Amendments) Bill 2008) introducing the relevant provisions strongly supports this view. Note that if this view is incorrect and 'has' is to be given a broader meaning than 'derive', then the use of 'derive' in the calculation provision of subsection 380-10(4) of the ITAA 1997 will nevertheless ensure that the amount of NRAS tax offset for anyone who does not derive NRAS rent will be nil. What is NRAS rent ? NRAS rent is defined in subsection 995-1(1) of the ITAA 1997 as, 'rent derived from a rental dwelling under the National Rental Affordability Scheme for an income year'. To analyse what is NRAS rent, the definition can be broken into the following elements: Based on the established principles of derivation, the Commissioner is satisfied that in the arrangement outlined above, both the dwelling owner and the manager of the NEJV derive rent. The dwelling owner derives rent under the head lease and the manager of the NEJV derives rent under the sublease. That is, both the dwelling owner and the manager of the NEJV derive rent which is sufficient to satisfy the first element of the definition of NRAS rent. To satisfy the second element, NRAS rent must be derived 'from a rental dwelling'. In both the head lease and sublease the source of the rent derived is the rental dwelling because it is the consideration for the lease over that dwelling. Therefore it seems clear that the NRAS rent is derived 'from a rental dwelling'. The third element of the definition is the most important one for present purposes, namely that the rent is derived 'under the NRAS'. To determine whether rent is derived 'under' the NRAS it is necessary to consider what the NRAS is. What is the NRAS ? The NRAS is defined in subsection 995-1(1) of the ITAA 1997 as having the same meaning as in the National Rental Affordability Scheme Act 2008 (NRAS Act). Therefore in determining if the NRAS rent is derived 'under' the NRAS, it is necessary to have regard to the meaning of the NRAS under the NRAS Act. NRAS is defined in section 4 of the NRAS Act as the scheme prescribed for the purposes of section 5. Section 5 of the NRAS Act states: Making the National Rental Affordability Scheme To further the objects of this Act, the regulations must prescribe a Scheme (the National Rental Affordability Scheme) about the following matters: (a) the approval of participants (approved participants) by the Secretary; (b) the approval of rental dwellings by the Secretary; (c) providing incentives to an approved participant if certain conditions are satisfied; As section 5 refers to the 'objects of this Act', the object section of the NRAS Act is of further assistance for the purpose of interpreting 'under the NRAS'. Section 3 of the NRAS Act states: Object The object of this Act is to encourage large-scale investment in housing by offering an incentive to participants in the National Rental Affordability Scheme so as to: (a) increase the supply of affordable rental dwellings; and (b) reduce rental costs for low and moderate income households. The meaning of 'under the NRAS' needs to be considered with reference to the definition of the NRAS as constructed by sections 3, 4 and 5 of the NRAS Act. Taking into account these provisions, the Commissioner is of the view that the key elements of the NRAS include approved participants, approved rental dwellings, the process by which the Secretary of Housing approves them and the provision of incentives to approved participants. These key elements need to be considered in the context of the object of the scheme to increase the supply of affordable housing and reduce rental costs of low-moderate income earners. The facts of the outlined arrangement need to be considered to determine whether the rent derived 'under' the NRAS is: Is the rent derived by the manager of the NEJV under the NRAS ? First, consider the involvement of the manager of the NEJV. The manager of the NEJV is the approved participant. The manager of the NEJV applies to be part of the NRAS. The manager of the NEJV receives the NRAS allocation in respect of the approved rental dwellings. The manager of the NEJV is responsible for lodging the statement of compliance under the NRAS. The manager of the NEJV is the legal entity which FaHCSIA deals with under the NRAS, and importantly, the manager of the NEJV under the sublease directly enters into a legal relationship with the tenants and provides the approved rental dwelling to a low-moderate income household to reduce their rental costs. Furthermore, the manager of the NEJV is the entity that is provided with a certificate (for all intents and purposes, the incentive referred to in paragraph 5(c) of the NRAS Act) in the name of the NEJV in accordance with regulation 29 of the National Rental Affordability Scheme Regulations 2008. Considering the extent to which the manager of the NEJV participates in the key elements of the NRAS, the Commissioner is of the view that the rent derived by the manager of the NEJV under the sublease is clearly rent derived under the NRAS. That is, the rent derived by the manager of the NEJV under the sublease is correctly characterised as 'rent derived from a rental dwelling under the NRAS'. Is the rent derived by the dwelling owner under the NRAS ? Now, consider the involvement of the dwelling owner. The dwelling owner is not the approved participant under the NRAS. FaHCSIA do not associate the dwelling owner with an approved rental dwelling under the NRAS. That is, FaHCSIA do not have knowledge of the dwelling owner or their connection with a particular approved rental dwelling under the NRAS and do not have any dealings with them. Importantly, nor does a dwelling owner directly provide the approved rental dwelling to a low-moderate income household to reduce their rental costs or enter into a legal relationship with those tenants. Rather the dwelling owner enters into a legal relationship with the manager of the NEJV only, and provides the rental dwelling to the manager of the NEJV only. The question is whether the dwelling owner also derives rent 'under' the NRAS. The Commissioner is of the view that, because none of the dealings by the dwelling owner is specifically recognised by the NRAS Act and, in particular, the lack of a direct connection between the dwelling owner and the NRAS eligible tenant, the rent paid under the head lease is not derived under the NRAS.", "Date_of_Decision": "27 November 2009", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1997 Division 380 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Derived Rebates and offsets Rental property", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009146", "Unmatched_Content": "Note: This ATO ID contains a view in respect of section 380-10 of the Income Tax Assessment Act 1997 as it operated prior to amendments introduced by the Tax Law Amendment (2011 Measures No. 5) Act 2011 . It was amended by Act No 62 of 2011 which introduced the concepts of an NRAS consortium, applicable to NRAS rent derived during the 2009-10 NRAS year or later NRAS years. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Added subsection 995-1(1) under Income Tax Assessment Act 1997 . | Keywords Derived Rebates and offsets Rental property"}
{"ATO_ID_Number": "ATO ID 2004/713", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Private Health Insurance tax offset: premium for cover in another income year", "Issue": "Is the taxpayer entitled to the 30% private health insurance tax offset under section 61-335 of the Income Tax Assessment Act 1997 (ITAA 1997) for a premium, or in respect of a premium, paid under an appropriate private health insurance policy which covers the taxpayer for an income year other than the current year?", "Decision": "Yes. The taxpayer is entitled to the 30% private health insurance tax offset under section 61-335 of the ITAA 1997 for a premium, or in respect of a premium, paid under an appropriate private health insurance policy which covers the taxpayer for an income year other than the current year.", "Facts": "During the 2003-04 income year, the taxpayer paid a monthly premium for health cover under an appropriate private health insurance policy within the meaning of the Private Health Insurance Incentives Act 1998 (PHIIA 1998). In June 2004 the taxpayer paid an advance premium under the above policy providing private health cover for the taxpayer over the following twelve months. On the taxpayer's private health insurance statement for the 2003-04 income year, the advance premium was included in the total premium paid during the above year. Under section 61-340 of the ITAA 1997 the taxpayer would obtain a greater tax offset when it was calculated on 30% of the total premium paid during the 2003-04 income year.", "Reasons_for_Decision": "Summary: Section 61-335 of the ITAA 1997 allows a taxpayer a tax offset in respect to premiums paid for an appropriate private health insurance policy within the meaning of the PHIIA 1998. Section 61-340 of the ITAA 1997 outlines how the tax offset is to be calculated for the 1999 and later income years. The 30% private health insurance tax offset is calculated on the amount of the premium, or on the amount in respect of a premium, paid by the taxpayer, or by the taxpayer's employer as a fringe benefit, under the policy for the 1999 and later income years (section 61-340 of the ITAA 1997). Paragraph 5.7 of the Explanatory Memorandum (EM) to the Private Health Insurance Incentives Bill 1998 states that where; an individual pays a premium for cover in respect of more than one income year or parts of more than one income year the offset will be calculated by reference to the total amount of the premium paid for that cover. An offset will be allowed in an income year even where the amount is in respect of cover for that income year and/or any other income year. In these circumstances, the successive application of the calculation provisions in new section 61-340 may be required to calculate the actual offset amount in an assessment for an income year. In this case the taxpayer has paid for a premium in respect of an appropriate private health insurance policy under the PHIIA 1998 during the 2003-04 income year. Part of the total premium paid by the taxpayer also provided cover for the following income year. According to the above EM, the intent of section 61-340 of the ITAA 1997 is to allow the 30% private health insurance tax offset on the total premium paid for cover in an income year, irrespective of whether the premium provides cover for any other income year. Under section 61-340 of the ITAA 1997 the taxpayer's allowable private health insurance tax offset for the 2003-04 income year is based on 30% of the total premium paid in that year.", "Date_of_Decision": "12 August 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 section 61-335 section 61-340", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "30% Private Health Insurance Rebate Private health insurance offsets Private health insurance incentives", "Case_References": "", "Other_References": "Explanatory Memorandum to the Private Health Insurance Incentives Bill 1998", "Business_Line": "Small Business/Individual Taxpayers", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004713", "Unmatched_Content": "Keywords 30% Private Health Insurance Rebate Private health insurance offsets Private health insurance incentives"}
{"ATO_ID_Number": "ATO ID 2015/4", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: Research and Development: Disposal of research & development results", "Issue": "Does the R&D disposal of results provision in section 355-410 of the Income Tax Assessment Act 1997 (ITAA 1997) contemplate apportioning an amount received by an R&D entity where the amount comprises of payment for results from research and development (R&D) and non-R&D activities?", "Decision": "Yes. Section 355-410 of the ITAA 1997 is only concerned with bringing to account the disposal proceeds for the results for which an R&D entity is entitled to a tax offset under Division 355 of the ITAA 1997 and not the disposal proceeds in respect of the other non-R&D results.", "Facts": "The taxpayer is an R&D entity within the meaning of section 355-35 of the ITAA 1997. The taxpayer incurs R&D expenditure on various Innovation Projects and claims the tax offset under section 355-100 of the ITAA 1997. The taxpayer also undertakes Innovation Projects for which it is not entitled to any tax offset under section 355-100 of the ITAA 1997. The taxpayer owns the intellectual property (IP) [1] developed or related to all of these Innovation Projects. Company A and the taxpayer enter into a Licence Agreement in respect of the taxpayers Innovation Project IP pursuant to which Coy A makes a buy-in payment of $1 million to the taxpayer. This payment is for the grant of an exclusive, perpetual, royalty free, fully paid up licence by the taxpayer to Company A allowing Company A to access the results of the taxpayer's Innovation Project activities and use and exploit the Innovation Project IP owned by the taxpayer and identified in a schedule to the Licence Agreement. The Innovation Project IP that is the subject Licence Agreement (as identified in a schedule to the Licence Agreement) includes those that were developed from the taxpayer's R&D activities for which a tax offset was claimed under section 355-100 of the ITAA 1997 and those developed from activities for which the taxpayer had no tax offset entitlement under that section. The Licence Agreement also attaches a specific value to each Innovation Project IP identified in the schedule to the Licence Agreement. The values disclose that $900,000 of the $1 million buy-in payment related to Innovation Project IP developed as a result of R&D activities for which the taxpayer was entitled to the tax offset under section 355-100 of the ITAA 1997. The remaining $100,000 related to Innovation Project IP developed from other activities in respect of which the taxpayer had no tax offset entitlement under section 355-100 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 355-410 of the ITAA 1997 is an integrity provision which corresponds to the former integrity rules in subsections 73B(27A), 73B(27B) and 73B(27C) of the Income Tax Assessment Act 1936. The role of these provisions is to ensure statutory revenue treatment for amounts received by an R&D entity relating to the results of R&D activities, including from the granting of rights to the results by way of licensing. Section 355-410 operates to include certain amounts (referred to as 'results amounts') an R&D entity receives or is entitled to receive in an income year in the R&D entity's assessable income for that year. The results amounts are set out in paragraph 355-410(1)(b) of the ITAA 1997: (i) an amount for the results of any of the R&D activities; (ii) an amount from granting access to, or the right to use, any of those results; (iii) an amount attributable to the R&D entity having incurred the expenditure, including an amount it is entitled to receive regardless of the results of the R&D activities; (iv) an amount attributable to the R&D asset being used for the purpose mentioned in subparagraph (a)(ii), including an amount the R&D entity is entitled to receive regardless of the results of the R&D activities; (v) an amount from *disposing of a *CGT asset, or from granting a right to occupy or use a CGT asset, where the disposal or grant resulted in another person acquiring a right to access or use any of those results. Where an R&D entity receives a lump sum for the results from R&D and non-R&D activities, the entire lump sum will not be subject to section 355-410 of the ITAA 1997 simply because a part of it should be subject to it. In such a case section 355-410 of the ITAA 1997 is only concerned with bringing to account the proceeds in respect of the results for which the R&D entity is entitled to a tax offset under Division 355 of the ITAA 1997. Support for this view can be found in the decision of the Full Court of the Supreme Court of New South Wales in Bambro (No. 2) Pty Ltd v. Commissioner of Stamp Duties (1963) 63 SR (NSW) 522. In that case, under an agreement for the sale of land, the purchaser agreed to buy the land for a fixed sum, after which the vendor agreed to erect a number of buildings for an additional sum the purchaser was required to pay. The purchaser was entitled to withhold payment of the balance of the purchase price for the land until the buildings were completed. The Full Court held that even though the sale of the land and the erection of the buildings were dependent upon each other and formed one entire bargain or transaction, separate prices were agreed for the both events and the building was to commence after the land was transferred. Accordingly, the agreement to transfer the land and the agreement to build were considered to be separate or distinct 'matters' for the purposes of levying stamp duty. Similarly, where the disposal or right to access the results of R&D activities and non-R&D activities are conveyed under a single agreement for a lump sum payment, they need to be considered as separate matters for the purposes of applying section 355-410 of the ITAA 1997. Only the portion of the lump sum attributable to the disposal of the R&D results will be included as assessable income under section 355-410 of the ITAA 1997 as a results amount. It will be a question of fact as to what portion of a composite lump sum received is attributable to the disposal of R&D results, having regard to the terms of the relevant contract or agreement. The method to be adopted in any particular case must be 'fair and reasonable' in all the circumstances (Ronpibon Tin NL and Tongkah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47 at 59; [1949] HCA 15 at paragraph 18; Adelaide Racing Club Inc v. Federal Commissioner of Taxation (1964) 114 CLR 517 at 526; [1964] HCA 57 at paragraph 16). There may be more than one fair and reasonable basis for apportionment of the amount attributable to R&D and non-R&D activities. The Commissioner will accept the method adopted provided it is fair and reasonable, and applied consistently. In the present case, the taxpayer and Company A identified in the Licencing Agreement the value of the results from the R&D activities and non-R&D activities, with $900,000 of the buy-in payment being attributable to the results from R&D activities. The taxpayer is therefore required to account for $900,000 as a 'results amount' under section 355-410 of the ITAA 1997 in the income year it received the buy-in payment.", "Date_of_Decision": "21 January 2015", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 355-35 section 355-100 section 355-410", "Related_Public_Rulings_and_Determinations": "TR 2012/3 | GSTR 2001/8", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development tax incentive Research & development tax offset Capital gains tax CGT event A1-disposal of a CGT asset CGT events D1-D3 - bringing into existence a CGT asset", "Case_References": "Bambro (No. 2) Pty Ltd v. Commissioner of Stamp Duties (1963) 63 SR (NSW) 522 [1964] NSWR 183 (1963) 80 WN (NSW) 1142", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20154", "Unmatched_Content": "*denotes a term defined in section 995-1 of the Income Tax Assessment Act 1997. | Related Public Rulings (including Determinations) TR 2012/3 GSTR 2001/8 | Keywords Research & development tax incentive Research & development tax offset Capital gains tax CGT event A1-disposal of a CGT asset CGT events D1-D3 - bringing into existence a CGT asset"}
{"ATO_ID_Number": "ATO ID 2015/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: Research and Development: Disposal of research & development results and future payments", "Issue": "Does the disposal of research and development (R&D) results provision in section 355-410 of the Income Tax Assessment Act 1997 (ITAA 1997) include amounts from the licensing of intellectual property (IP) payable in the future, subject to achieving future development and sales milestones?", "Decision": "Yes. The disposal of R&D results provision in section 355-410 of the ITAA 1997 includes amounts from the licensing of IP payable in the future. These include payments that are referrable to future development of the IP and upon achieving specified sales targets once the IP is fully developed.", "Facts": "The taxpayer is an R&D entity within the meaning of section 355-35 of the ITAA 1997. The taxpayer undertakes a new R&D project to develop a particular product, incurs R&D expenditure and claims the tax offset under section 355-100 of the ITAA 1997. The taxpayer is the legal and economic owner of the IP related to the product. In order to manufacture and commercialise the product, further R&D and testing is required. To facilitate this, and in accordance with the taxpayer's business model, the taxpayer licenses the IP relating to the product to an overseas related entity. The overseas related entity is specifically formed to advance the development of the product and ultimately its sale. Under the terms of the licence agreement, the overseas related entity is granted an exclusive right to the product IP and any information, knowledge, patents, techniques, inventions, improvements and/or discoveries related to the product. The agreement also provides the overseas related entity with the exclusive right to develop, manufacture, make, use, import, sell, market, distribute or otherwise commercialise the product globally, for the term of the agreement. The licence agreement stipulates, among other things, the following fees payable to the taxpayer by the overseas related entity: Each of the above payments is conditional on meeting certain specified milestones or targets at a future point in time (which may or may not eventuate).", "Reasons_for_Decision": "Summary: Section 355-410 of the ITAA 1997 is an integrity provision which corresponds to the former integrity rules in subsections 73B(27A), 73B(27B) and 73B(27C) of the Income Tax Assessment Act 1936. The role of these provisions is to ensure statutory revenue treatment for amounts received, or entitled to be received, by an R&D entity relating to the results of R&D activities, including amounts from the granting of rights to the results by way of licensing. Section 355-410 of the ITAA 1997 operates to include certain amounts (referred to as 'results amounts') an R&D entity receives or is entitled to receive in an income year in the R&D entity's assessable income for that year. The results amounts are set out in paragraph 355-410(1)(b) of the ITAA 1997, and comprise of: | Detailed Reasoning - The Development Milestone Payments: The Development Milestone Payments are payments the taxpayer is entitled to receive upon the achievement of each milestone and are consideration for the grant of the right to use the R&D results (namely, the IP and any related information, know-how etc. associated with the product) conveyed under the licence agreement. The taxpayer is therefore required to include these payments in its assessable income under section 355-410 of the ITAA 1997 in the income year in which the milestones are achieved by the overseas related entity and the taxpayer becomes entitled to the payments. This view is supported by ATO ID 2004/568 which considers, among other things, when a taxpayer becomes entitled to receive a Government grant or recoupment in the R&D context. The ATO ID relevantly states: The ordinary meaning of 'becoming entitled to receive an amount' is that there is an absolute or unconditional entitlement to receive the amount... ATO ID 2004/568 goes on to consider the ordinary dictionary meaning of 'entitle', noting that it means 'to qualify for, to furnish with proper grounds for seeking or claiming'. Consistent with the above interpretation of the term 'entitled to receive', the taxpayer, as licensor, becomes entitled to the Development Milestone Payments upon the licensee (overseas related entity) achieving each Development Milestone as specified in the licence agreement. | Detailed Reasoning - The Sales Milestone Payments: Unlike the Development Milestone Payments, the Sales Milestone Payments do not directly relate to the granting of the licence to access the R&D results (namely, the product IP and any related know-how). They are however payments required to be made by the licensee (overseas related entity) to the licensor (taxpayer) for the continued use of the R&D results, subject to the successful development of these R&D results by the licensee. Accordingly these amounts fall within the scope of section 355-410 of the ITAA 1997 as a 'results amount' because they are amounts from the granting of the right to use the R&D results. It is clear from the words in section 355-410 of the ITAA 1997 that for its operation, what is required is for the R&D entity to be entitled to the notional deduction and tax offset in respect of the expenditure incurred in developing the R&D results. Once this condition is met, the provision operates to assess the entire amount received (or entitled to be received) by the R&D entity, on disposal or licensing of those results, as an R&D 'results amount.' Section 355-410 of the ITAA 1997 does not put a time limit on how long, or the manner in which, the R&D results should be used. All that is required is that the amount is received (or entitled to be received): The terms 'for' and 'from' in section 355-410 of the ITAA 1997 are sufficiently broad to encompass payments the licensor is entitled to receive from the continued use of the R&D results by the licensee, consistent with the licensing agreement terms and conditions. The taxpayer is entitled to receive the Sales Milestone Payments upon the achievement of each Sales Milestone by the overseas related entity. Therefore, the taxpayer is required to include in its assessable income, under section 355-410 of the ITAA 1997, the Sales Milestone Payments in the income year in which the overseas related entity achieves each Sales Milestone, consistent with the view in ATO ID 2004/568 discussed earlier. | Detailed Reasoning - Royalties: The royalties payable are assessable as R&D 'results amounts' under section 355-410 of the ITAA 1997 for the same reasons as the Sales Milestone Payments discussed above. They are payments by the licensee to the licensor for the continued use of the R&D results, irrespective of the capacity in which those results are being used. The royalties will be assessable to the taxpayer under section 355-410 of the ITAA 1997 in the income year in which the taxpayer becomes entitled to receive those payments, in accordance with the view in ATO ID 2004/568 discussed earlier.", "Date_of_Decision": "31 January 2015", "Year_of_Income": "For income years commencing on or after 1 July 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 355-35 section 355-100 section 355-410", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/568", "Subject_References": "Research & development tax incentive Research & development tax offset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20155", "Unmatched_Content": "Keywords Research & development tax incentive Research & development tax offset"}
{"ATO_ID_Number": "ATO ID 2015/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: Carry forward R&D tax offsets at joining time for a consolidated group", "Issue": "Can the head company of a consolidated group access the non-refundable carry forward R&D tax offsets available to a joining entity at the joining time?", "Decision": "Yes. The head company of a consolidated group can access the non-refundable carry forward R&D tax offsets available to the joining entity at the joining time. In order to apply the carry forward tax offset after the joining time, the head company will need to overcome the limitations in section 65-40 of the Income Tax Assessment Act 1997 (ITAA 1997). These include satisfying either the continuity of ownership test or the same business test under Subdivision 165-A of the ITAA 1997.", "Facts": "An R&D entity has been accessing the R&D non-refundable tax offset under Division 355 of the ITAA 1997 over successive years. It has carried forward the unused portion of the tax offset amounts in line with the tax offset carry forward rules in Division 65 of the ITAA 1997. The R&D entity is subsequently acquired by an unrelated consolidated group, so that it now becomes a wholly-owned subsidiary member of that group. The head company of the consolidated group conducts business that is substantially different to the business of the R&D entity prior to the joining time.", "Reasons_for_Decision": "Summary: Non-refundable R&D tax offsets are covered by item 35 in the table in subsection 63-10(1) of the ITAA 1997, which states in relation to any unutilised portion (excess): You may carry it forward to a later income year (under Division 65). Division 65 of the ITAA 1997 sets out the conditions for carrying forward excess tax offsets to later income years. One of the limitations is that the same rules that prevent a company from utilising certain prior year losses (i.e. those found in Subdivision 165-A of the ITAA 1997) also prevent an R&D entity from applying tax offsets that have been carried forward. This is specified in section 65-40 of the ITAA 1997. Where an R&D entity with carried forward unutilised R&D tax offset joins a consolidated group, what happens to the tax offset is largely governed by core rules applying to consolidated groups found in Division 701 of the ITAA 1997. The single entity rule in subsection 701-1(1) of the ITAA 1997 states: If an entity is a *subsidiary member of a *consolidated group for any period, it and any other subsidiary member of the group are taken for the purposes covered by subsections (2) and (3) [head company and entity core purposes respectively] to be parts of the *head company of the group, rather than separate entities, during that period. *denotes a term defined in section 995-1 of the ITAA 1997. The entry history rule in section 701-5 of the ITAA 1997 stipulates: For the head company core purposes in relation to the period after the entity becomes a *subsidiary member of the group, everything that happened in relation to it before it became a subsidiary member is taken to have happened in relation to the *head company. *denotes a term defined in section 995-1 of the ITAA 1997. Subsection 701-1(2) of the ITAA 1997 addresses the head company core purposes and is essentially concerned with working out the head company's income tax liability. One of the steps in working out this liability involves taking into account any carried forward tax offsets which ultimately reduces any liability the head company is required to pay. Thus, working out whether the head company is entitled to access the non-refundable carry forward R&D tax offset is something that falls within the head company core purposes. By virtue of the entry history rule, the R&D entity that is entitled under Division 65 of the ITAA 1997 to carry forward any excess R&D tax offset amount, and which subsequently joins a consolidated group as a subsidiary member, effectively transfers this entitlement to the head company. This is the intent and effect of the entry history rule in section 701-5 of the ITAA 1997, which deems any acts and transactions of the R&D entity prior to the joining time to have been experienced by the head company once the R&D entity joins the consolidated group. Whether the head company can use the carry forward R&D tax offset to reduce its income tax liability is subject to the head company overcoming the limitations set out in section 65-40 of the ITAA 1997. That is, in order to apply the tax offset, the head company must satisfy the continuity of ownership test in section 165-12 ITAA 1997 or in the alternative, the same business test in section 165-13 ITAA 1997. In the present case, as the head company of the consolidated group conducts business that is substantially different to the business of the R&D entity prior to the joining time, the head company may not be able to overcome the limitations set out in section 65-40 of the ITAA 1997.", "Date_of_Decision": "12 December 2013", "Year_of_Income": "For income years commencing on or after 1 July 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 63-10 section 65-40 Subdivision 165-A section 165-12 section 165-13 Division 355 Division 701 section 701-1 subsection 701-1(1) section 701-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research and development tax offset Consolidation Consolidation - joining Consolidation - continuity of ownership test Consolidation - same business test", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20156", "Unmatched_Content": "Keywords Research and development tax offset Consolidation Consolidation - joining Consolidation - continuity of ownership test Consolidation - same business test"}
{"ATO_ID_Number": "ATO ID 2013/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development - tax incentive - combination of exempt entities", "Issue": "Will Item 2 of the table in subsection 355-100(1) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a company when two or more exempt entities who are not affiliates, together beneficially own interests in the company carrying more than 50% of the voting rights or rights to a distribution of income or capital?", "Decision": "Yes. Item 2 of the table in subsection 355-100(1) of the ITAA 1997 will apply to the company where two or more exempt entities, irrespective of their relationship, beneficially own interests in the company carrying more than 50% of the voting rights or rights to a distribution of income or capital.", "Facts": "The shareholders of the company include a number of tax exempt entities. Individually, no single tax exempt entity holds more than a 50% shareholding. Together, the total shareholdings of the tax exempt entities exceed 50%. The shares carry with them voting rights and rights to distributions of income or capital. The company incurs research and development expenditure during the income year and claims the tax offset under section 355-100 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Generally, where an R&D entity has engaged in registered R&D activities, subsection 355-100(1) of the ITAA 1997 allows the entity to claim an R&D tax offset at one of two specified rates. Which rate is applicable depends on certain circumstances as detailed in the table in subsection 355-100(1). One of the circumstances in the table in subsection 355-100(1) is Item 2, which applies when: an *exempt entity, or combination of exempt entities, would control the *R&D entity in a way described in section 328-125 (connected entities) if: (a) references in section 328-125 to 40% were references to 50%; and (b) subsection 328-125(6) were ignored. Note that subsection 328-125(1) provides that an entity is 'connected with' another entity if either entity controls the other entity in a way described in section 328-125 - or both entities are controlled in that way by the same third entity (see paragraph 8 of Taxation Determination TD 2006/68). Subsection 328-125(2) then sets out how an entity controls another entity 'in a way described in section 328-125', in providing that: An entity (the first entity ) controls another entity if the first entity, its *affiliates, or the first entity together with its affiliates: ... (b) if the other entity is a company - beneficially own, or have the right to acquire the beneficial ownership of, *equity interests in the company that carry between them the right to exercise, or control the exercise of, a percentage (the control percentage ) that is at least 40% of the voting power in the company. Broadly, a company will be controlled by another entity within the meaning of section 328-125, if that other entity, its affiliates, or that other entity together with its affiliates, beneficially own, or have the right to beneficially own shares in the company which carry the right to at least 40% of: Under section 328-125, a shareholder of a company will be aggregated with another shareholder if it is an 'affiliate' of the other shareholder. The meaning of 'affiliate' is provided by section 328-130. The aggregation of shareholdings in 328-125 therefore depends on a certain relationship between the shareholders. Multiple shareholders will be included in the test as long as there is one identified shareholder to which each of the other shareholders have the required relationship. A shareholder of a company will not be included in the section 328-125 control test if it is not an affiliate of another requisite shareholder. Item 2 in the table in subsection 355-100(1) adopts the control test in section 328-125 with some modifications. Firstly the threshold is increased to 50% (up from 40%). Secondly the requirement for control by an exempt entity is extended to include control by a 'combination of exempt entities'. Combination of Exempt Entities 'Combination of exempt entities' is not defined in the ITAA 1997. The High Court stated (per Hayne, Heydon, Crennan and Kiefel JJ) in Alcan (NT) Alumina Pty Ltd v. Commissioner of Territory Revenue (NT) (2009) 239 CLR 27; 2009 ATC 20-134 at 47: \"...the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.\" In consideration of the text itself, The Concise Oxford Dictionary , 1987, rev. 7th edn, Oxford University Press, Melbourne, defines 'combination' as a: \"...combined state (in combination with); combined set of things or persons ....group of things chosen from a larger number without regard to their arrangement...\" The Macquarie Dictionary (1997) defines 'combination' to mean '1. the act of combining. 2. the state of being combined. 3. a number of things combined.' 'Combine' is defined in The Macquarie Dictionary (1997) to include 'to bring or join into a close union or whole; unite; associate; coalesce.' Webster's Third New International Dictionary gives the meaning of 'combination' as: \"the result or product of combining: a union or aggregate made of combining one thing with another.\" In Gunn v. Canada (F.C.A.), 2006 FCA 281, [2007] 3 F.C.R. 57 it was stated that: \"a combination ... in ordinary language implies an addition or aggregation.\" These definitions make no reference to a relationship between the things combined and so suggest 'combination' should be interpreted as a singular state. A strict reading of the text using these definitions indicates that, once a set of entities are combined, further enquiry into the existence of any relationship is not required. Indeed, in the US antitrust decisions of Gates v. Hooper (1897) 90 Tex. 563 [39 S.W. 1079]; Hitchcock v. Anthony (6th Cir. 1897) 83 Fed. 779; Padgitt v. Lone Star Gas Co ., 213 S.W.2d 133, (Tex.Civ.App. 1948); and State of California ex rel. Van de Kamp v. Texaco, Inc . (1988) 46 Cal. 3d 1147 [252 Cal. Rptr. 221, 762 P.2d 385]; the courts held that (in this particular context), the word 'combination' applied only to entities that combined in the sense of uniting or associating their otherwise independent, separate and competing status. 'It is aimed at combinations between parties who, having each a separate business with no interest or concern in that of the other, join together to restrict the output or enhance the prices of goods'; Hitchcock v. Anthony (6th Cir. 1897) 83 Fed. 779. See also State v. Fairbanks-Morse & Co ., 246 S.W.2d 647, 658-59 (Tex.Civ.App.--Dallas 1952; and Hood v. Tenneco Texas Life Insurance Co ., 739 F.2d 1012, 1019 (5th Cir. 1984). Furthermore, if Parliament had intended the words 'a combination of exempt entities' to require an exempt entity to be an affiliate of another exempt entity in order for the two to be combined, that objective would have been achieved by section 328-125 without the inclusion of those words in Item 2 of the table in subsection 355-100(1). Parliament's inclusion of the words 'a combination of exempt entities' supports the view that there was intent for those words to have an effect and serve a purpose. Given the definition and interpretation of the words used, this supports the view that Parliament did not intend for there to be a requirement as to a relationship between combined exempt entities. In adopting the control test 'in a way described in section 328-125 (connected entities)', Item 2 of the table in subsection 355-100(1) does not require that the (at least) 50% control threshold must be satisfied only by a combination of 'connected' exempt entities. Therefore, exempt entities that are not affiliates of each other are collectively capable of being 'a combination of exempt entities' under subsection 355-100(1) of the ITAA 1997. The combined shareholdings of the company by the exempt entities exceed 50%. These shareholdings carry the right to more than 50% of the voting power in the company and also the right to receive a percentage of at least 50% of any distribution of income or capital. Accordingly, Item 2 of the table in subsection 355-100(1) of the ITAA 1997 will apply to the company.", "Date_of_Decision": "31 October 2012", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 328-125 section 328-130 subsection 355-100(1)", "Related_Public_Rulings_and_Determinations": "TD 2006/68", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/145", "Subject_References": "Deductions & expenses Grouped entities for research and development Grouped taxpayers for R&D - affiliates Grouped taxpayers for R&D - control Rebates and offsets Research & development expenses Research & development incremental tax", "Case_References": "Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41 (2009) 239 CLR 27 2009 ATC 20-134 73 ATR 256", "Other_References": "The Concise Oxford Dictionary, 1987, rev. 7th edn, Oxford University Press, Melbourne The Macquarie Dictionary (1997) Webster's Third New International Dictionary", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201311", "Unmatched_Content": "Related Public Rulings (including Determinations) TD 2006/68 | Keywords Deductions & expenses Grouped entities for research and development Grouped taxpayers for R&D - affiliates Grouped taxpayers for R&D - control Rebates and offsets Research & development expenses Research & development incremental tax"}
{"ATO_ID_Number": "ATO ID 2013/12", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: transitional substituted accounting period (SAP) access to research and development tax incentive", "Issue": "Is a transitional substituted accounting period (SAP) of less than 12 months that commences on or after 1 July 2011, for which an assessment is issued under section 168 of the Income Tax Assessment Act 1936 (ITAA 1936), an 'income year' to which Part 1 of Schedule 4 of the Tax Laws Amendment (Research and Development) Act 2011 (the R&D Act) applies, for the purposes of Division 355 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. A transitional SAP year of less than 12 months is treated as an 'income year' for the purpose of an assessment under section 168 of the ITAA 1936. Where such a transitional SAP year commences on or after 1 July 2011, it will satisfy paragraph (a) of Part 1 of Schedule 4 to the R&D Act and will fall within the scope of Division 355 of the ITAA 1997.", "Facts": "The taxpayer applies for and is granted approval from the Commissioner, under section 18 of the ITAA 1936, to change its accounting period end from 30 June to 31 December for the 2012 income year onwards. To facilitate the change in accounting period, it is granted a transitional SAP year of 1 July 2011 to 31 December 2011, in lieu of the 2012 income year. The taxpayer is an R&D entity within the meaning of section 355-35 of the ITAA 1997. During the period 1 July 2011 to 31 December 2011, the taxpayer incurs expenditure on registered research and development (R&D) activities. The taxpayer includes a claim for the R&D tax incentive under Division 355 of the ITAA 1997 in its 2012 transitional SAP company tax return. The taxpayer is issued an assessment for its 2012 transitional SAP year under section 168 of the ITAA 1936.", "Reasons_for_Decision": "Summary: The R&D tax incentive was introduced by the R&D Act and the enacted provisions were added to the ITAA 1997, principally in Division 355. Part 1 of Schedule 4 to the R&D Act outlines when the R&D tax incentive commences to apply, and relevantly states: For the purposes of Division 355 of ITAA 1997, 'income year' is defined in subsection 995-1(1) of the ITAA 1997 as essentially having the same meaning as given by subsections 4-10(2) and 9-5(2) of the ITAA 1997. The definition also explains that where an entity adopts an accounting period in lieu of a particular income year, a reference to 'income year' in the ITAA 1997 includes the adopted accounting period. Note 1 of this definition clarifies that the Commissioner can allow an accounting period to end on a day other than 30 June, and points to section 18 of the ITAA 1936. Subsections 4-10(2) and 9-5(2) of the ITAA 1997 relevantly provide that the 'income year' is the same as the 'financial year', except if the taxpayer has an accounting period that is not the same as the financial year in which case each such accounting period is an income year (see paragraphs 4-10(2)(b) and 9-5(2)(b) of the ITAA 1997). Section 18 of the ITAA 1936 allows a taxpayer, with leave of the Commissioner, to adopt an accounting period, being a 12-month period ending on some date other than 30 June. If this is the case, each subsequent accounting period will also end on the corresponding date of that year, unless some other date is adopted with leave of the Commissioner. This process is explained in detail in Law Administration Practice Statement PS LA 2007/21 Substituted Accounting Periods (SAPs ). Thus, the starting point, for the purposes of determining the start and end dates of a SAP year (a period of 12 months), is the end of the relevant accounting period. So, for an entity that has adopted a SAP ending on 31 December in lieu of 30 June, the SAP year will be 12 months ending on 31 December, namely 1 January to 31 December. This is confirmed by example 4 in paragraph 39 of PS LA 2007/21, which illustrates the transition to a 31 December end date: Example 4 - early December SAP | Detailed Reasoning - Transitional SAP returns: In order to avoid double taxation of the 'common period' (the overlap between the ordinary income year end date of 30 June and the SAP year end date) the Commissioner calls forth a transitional SAP return for this common period. This period can be less than or greater than 12 months, depending on the end date of the taxpayer's SAP. The power to call forth a transitional SAP return is found in sections 162 and 163 of the ITAA 1936. The Commissioner is able to make an assessment for this period under section 168 of the ITAA 1936, called a 'special assessment'. The practice of preparing transitional tax returns covering a period other than 12 months simply allows for the quantum of the taxable income or loss to be fairly and equitably determined for the purpose of levying income tax for the first SAP year. The transitional tax return is not regarded as altering (extending or reducing) the actual 12-month period of the first SAP year for all purposes of the ITAA 1936 or the ITAA 1997. It is also not regarded as an 'accounting period' or an 'income year' for the purposes of the ITAA 1936 or the ITAA 1997, as these periods are required to be 12 months in duration. However, where the Commissioner makes a special assessment under section 168 of the ITAA 1936 for a transitional period other than 12 months, this assessment is taken to be for an 'income year' that begins and ends at the start and end of the transitional period respectively. This is by virtue of the operation of subsection 168(2) of the ITAA 1936, which provides that a special assessment under subsection 168(1) of the ITAA 1936 for a period less than 12 months is to be made 'as if the beginning and end of that period were the beginning and end respectively of the income year'. This is explained in Norwich Superannuation Services Pty Ltd v. FC of T (1998) 41 ATR 1091; 99 ATC 2015 at ATR 1095; ATC 2019: Section 168 does not deem the period of less than a year as a year of income but treats that period for the purpose of an assessment and for that purpose only \"as if\" it began and ended in a year of income. Therefore, where there is an assessment, by virtue of section 168 of the ITAA 1938, for a transitional SAP period of less than 12 months that commences on or after 1 July 2011, the beginning of that 'income year' is the beginning of the transitional SAP period for which that assessment is issued, even though the assessment is for a period less than 12 months. This is the effect of subsection 168(2) of the ITAA 1936. It deems the assessment for the transitional SAP year to be an assessment for the relevant 'income year'. In the case of the taxpayer with a transitional SAP period of 1 July 2011 to 31 December 2011, the special assessment under section 168 for this period will be in lieu of the 2012 income year. For the purposes of paragraph (a) of Part 1 of Schedule 4 to the R&D Act, this assessment will be for an income year that commenced on or after 1 July 2011, namely the 2012 income year. In general, an R&D entity with a transitional SAP period of less than 12 months commencing on or after 1 July 2011 will be expected to have an assessment for this transitional period under section 168 of the ITAA 1936. The existence of this assessment will bring such an entity within the ambit of paragraph (a) of Part 1 of Schedule 4 to the R&D Act. It will therefore be entitled to access to the R&D tax incentive in Division 355 of the ITAA 1997.", "Date_of_Decision": "6 November 2012", "Year_of_Income": "For income years commencing on or after 1 July 2011", "Legislative_References": "Income Tax Assessment Act 1997 subsection 4-10(2) subsection 9-5(2) Division 355 section 355-35 subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "TR 2011/5", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/973", "Subject_References": "Research and development tax incentive Substituted accounting period Transitional & changeover arrangements", "Case_References": "Norwich Superannuation Services Pty Ltd v FC of T (1998) 41 ATR 1091 99 ATC 2015", "Other_References": "PS LA 2007/21", "Business_Line": "Innovation Group - Large Business & International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201312", "Unmatched_Content": "Related Public Rulings (including Determinations) TR 2011/5 | Keywords Research and development tax incentive Substituted accounting period Transitional & changeover arrangements"}
{"ATO_ID_Number": "ATO ID 2012/89", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Research and Development: feedstock adjustments - creation of a prototype", "Issue": "Does a 'feedstock adjustment' arise under section 355-465 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to expenditure incurred by an 'Research and Development (R&D) entity' in creating a prototype which is a depreciating asset, but not one used in acquiring or producing any 'feedstock inputs'?", "Decision": "No. A feedstock adjustment does not arise under section 355-465 of the ITAA 1997 where an R&D entity incurs expenditure on constructing a prototype which is a tangible depreciating asset, where that asset is not used in acquiring or producing any 'feedstock inputs'. Feedstock adjustments depend, among other conditions, on the R&D entity obtaining a tax offset under section 355-100 of the ITAA 1997 for an income year, but only for certain kinds of notional deductions covered by Division 355 of the ITAA 1997. A notional deduction for the decline in value of a depreciating asset which is not used in acquiring or producing any feedstock inputs is not one of these kinds, and so section 355-465 of the ITAA 1997 does not apply.", "Facts": "The taxpayer is an R&D entity within the meaning of section 355-35 of the ITAA 1997. In an income year to which section 355-100 of the ITAA 1997 applies it incurs expenditure on constructing a prototype. This expenditure is included in the 'cost' of the prototype, as a tangible depreciating asset, for the purposes of Division 40 of the ITAA 1997. The construction of the prototype involves transforming or processing various goods or materials during the conduct of certain registered R&D activities. It does not include any component relating to expenditure incurred on any energy input directly into the transformation or processing. The prototype is then held and used by the R&D entity in conducting one or more further registered R&D activities, but not in acquiring or producing any 'feedstock inputs'. The R&D entity obtains a tax offset under section 355-100 of the ITAA 1997 for the income year, for a notional deduction under section 355-305 of the ITAA 1997 relating to this use of the prototype in conducting registered R&D activities.", "Reasons_for_Decision": "Summary: (All legislative references are to the Income Tax Assessment Act 1997 , unless stated otherwise) Division 355 allows certain taxpayers (being an R&D entity within the meaning of section 355-35) a tax offset based on prescribed percentages of the total of the notional deductions they are entitled to under seven specific sections in the Division, including section 355-205 (R&D expenditure) and section 355-305 (decline in value of R&D assets). Subsection 355-205(1) allows an R&D entity to notionally deduct expenses incurred on R&D activities, where the conditions of that subsection are met. This is subject to section 355-225 (excluded expenditure): see subsection 355-205(2). Paragraph 355-225(1)(b) specifically excludes expenditure included in the cost of a tangible depreciating asset for the purposes of Division 40 from being deductible under section 355-205. As note 2 of subsection 355-225(1) identifies, the decline in value of this tangible depreciating asset may be notionally deductible under section 355-305. Section 355-305 allows an R&D entity to notionally deduct the decline in value of a tangible depreciating asset that falls within the scope of Division 40, where it is held and used by it for the purpose of conducting one or more registered R&D activities, and the conditions of section 355-305 are met. The expenditure incurred on constructing the prototype is expenditure that falls within the scope of Division 40 and meets the conditions of section 355-305. Therefore the R&D entity can claim, under section 355-305, a notional deduction for the income year equal to the amount of the decline in value of the prototype. In certain circumstances, the R&D entity may be liable to a 'feedstock adjustment' under Subdivision 355-H where the prototype is then held and used by the R&D entity in conducting one or more further registered R&D activities. Where a 'feedstock adjustment' occurs, an amount is included in the R&D entitys' assessable income as calculated under subsection 355-465(2). Subsection 355-465(1) specifies three conditions that must be met before an R&D entity is liable to a 'feedstock adjustment': In this case, the first condition is met as the components used to construct the prototype are the 'feedstock inputs', the construction involves transforming or processing those feedstock inputs during R&D activities, and the prototype is the tangible 'feedstock output' produced from those activities. With regard to the second condition, it might be argued that paragraph (a) is met in relation to the construction expenditure, on the basis that the amount notionally deducted under section 355-305 is 'for' this expenditure. However, for paragraph (a) to apply the 'expenditure' referred to here must be the expenditure on acquiring or producing the goods or materials, namely the 'feedstock inputs' under the first condition. Though the R&D entity obtains a tax offset under section 355-100 in relation to the prototype, it is not for 'the expenditure' under section 355-205 but rather for the 'decline in value' of the tangible depreciating asset under section 355-305, of which such expenditure forms part of the cost. As paragraph 355-225(1)(b) excludes expenditure which is included in the cost of a tangible depreciating asset for the purposes of Division 40 from being deductible under section 355-205, the expenditure does not satisfy paragraph (a). This is consistent with such expenditure being intended to be covered, where applicable, by section 355-305, which allows a notional deduction for the decline in value of the asset. Paragraph (b) of the second condition does not apply as the construction expenditure does not include any expenditure incurred on any energy input directly into the transformation or processing conducted in creating the prototype. Paragraph (c) of the second condition is also not met. Although the R&D entity in this case does notionally deduct an amount for the decline in value of the prototype, the prototype is not used in acquiring or producing any 'feedstock inputs'. Therefore, as the R&D entity has not met all three conditions of subsection 355-465(1), its expenditure on the prototype will not of itself trigger any feedstock adjustment under section 355-465.", "Date_of_Decision": "23 October 2012", "Year_of_Income": "year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 Division 40 Division 355 section 355-35 section 355-100 section 355-205 subsection 355-205(1) subsection 355-205(2) section 355-225 subsection 355-225(1) paragraph 355-225(1)(b) section 355-305 Subdivision 355-H section 355-465 subsection 355-465(1) subsection 355-465(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Research & development feedstock expenditure Research & development tax offset Depreciating assets", "Case_References": "", "Other_References": "", "Business_Line": "Innovation Group - Large Business & International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201289", "Unmatched_Content": "Keywords Research & development feedstock expenditure Research & development tax offset Depreciating assets"}
{"ATO_ID_Number": "ATO ID 2004/759", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Zone Tax Offset and dependant of a US Forces member", "Issue": "Is the taxpayer, a dependent of a United States (US) Armed Forces member and to whom subsection 23AA(3) of the Income Tax Assessment Act 1936 (ITAA 1936) applies, entitled to claim the zone tax offset under section 79A of the ITAA 1936?", "Decision": "Yes. The taxpayer, a dependent of a US Armed Forces member and to whom subsection 23AA(3) of the ITAA 1936 applies, is entitled to claim the zone tax offset under section 79A of the ITAA 1936, as the taxpayer resided in a prescribed area for a period of more than 182 days.", "Facts": "The taxpayer is living in Australia with their spouse. The taxpayer resided in a prescribed area for more than 182 days during the income year. The taxpayer is the spouse of a member of the US Armed Forces who is serving in Australia under the agreement between the Australian Government and the US Government concerning the Status of US Armed Forces in Australia (the Forces Agreement). Apart from the operation of subsection 23AA(3) of the ITAA 1936, the taxpayer would be a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 23AA of the ITAA 1936 gives legislative effect to certain provisions relating to income tax contained in various agreements Australia has entered into with the US Government, including the Forces Agreement. Under the Forces Agreement, Australia agreed to exempt the pay of members of the US Armed Forces in Australia. As the pay and allowances of Armed Forces members of any foreign government who are serving in Australia are generally exempt under section 23(u) of the ITAA 1936, section 23AA ensures that the foreign source income of members of the US Armed Forces and their dependants is exempt from Australian income tax. Section 23AA achieves this purpose by deeming the members and their dependants to be non-residents of Australia for income tax purposes. Specifically, subsection 23AA(3) of the ITAA 1936 applies where a person: Subsection 23AA(3) of the ITAA 1936 provides that for the purposes of the ITAA 1936, other than Subdivision A of Division 17, the person is deemed to be a non-resident of Australia during that period and that period is disregarded in determining whether the person is a resident of Australia at any other time. The taxpayers' spouse is in Australia for prescribed purposes as the spouse is in Australia to carry out activities pursuant to the Forces Agreement, and the taxpayer is a dependant of their spouse (subsection 23AA(1) of the ITAA 1936). Accordingly, the taxpayer is deemed to be a non-resident of Australia for income tax purposes for the period they are present in Australia under subsection 23AA(3) of the ITAA 1936. Section 79A of the ITAA 1936 provides that residents of prescribed areas are granted an income tax concession in recognition of the disadvantages to which they are subject because of the uncongenial climatic conditions, isolation and high cost of living in comparison to other areas of Australia. In order to be eligible for the zone tax offset a taxpayer must satisfy one of the residency tests contained in subsection 79A(3B) of the ITAA 1936. Generally, the tests require the taxpayer to reside in, or actually be present in, a zone area for more than one half of the income year. However, the test of where an individual resides for the purposes of section 79A is based on the ordinary meaning of that term and is not the same as the residence tests set out in subsection 6(1) of the ITAA 1936 (see paragraphs 4 to 10 and 47 to 53 of Taxation Ruling TR 94/27). In the context of section 79A, a resident of a prescribed area refers to a person who is residing, or has actually been present in, a particular area for a period of more than 182 days. Accordingly, the fact that the taxpayer is deemed to be a non-resident of Australia under subsection 23AA(3) of the ITAA 1936 does not disqualify the taxpayer from being a resident of a prescribed area for the purposes of section 79A. Therefore, as the taxpayer resided in a particular zone for a period of more than 182 days they are entitled to claim the Zone Tax Offset.", "Date_of_Decision": "3 August 2004", "Year_of_Income": "Year ended 30 June 1998 Year ended 30 June 1999 Year ended 30 June 2000 Year ended 30 June 2001 Year ending 30 June 2002 Year ending 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 6(1) section 23AA subsection 23AA(1) subsection 23AA(3) section 79A subsection 79A(3B)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 94/27", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Residence of individuals Zone tax offset", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004759", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 94/27 | Keywords Residence of individuals Zone tax offset"}
{"ATO_ID_Number": "ATO ID 2006/312", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum Resources Rent Tax: deductibility of legal expenses", "Issue": "Can legal expenses incurred by a taxpayer which are associated with an ongoing dispute between its joint venture partner and another company over a liability to pay private overriding royalties in respect of a production field be claimed as deductible expenditure pursuant to section 38 of the Petroleum Resources Rent Tax Assessment Act 1987 (PRRTAA)?", "Decision": "No. The legal expenses incurred by the taxpayer are not deductible pursuant to section 38 of the Act in calculating petroleum resource rent tax.", "Facts": "The taxpayer is in the business of oil and gas production which is subject to petroleum resources rent tax. A royalty agreement was entered into between a joint venturer of the taxpayer in relation to a particular area and another company (company A) which company A asserts requires the payment of an 'overriding royalty' on the gross value of production in respect of petroleum production from that area. The taxpayer's joint venturer disputes it is liable for royalty payments in relation to the particular production field which it claims does not fall within the defined area for the royalty agreement. The taxpayer was not a party to the royalty agreement and it has no legal obligations under that agreement. The taxpayer is obliged under the terms of certain arrangements entered into with its joint venture partner to pay certain amounts which would have the effect of reimbursing its joint venture partner for part of any 'overriding royalty' amount payable to company A on production from the particular production field under the royalty agreement, proportionately to the taxpayer's share of the production from the particular area. The taxpayer and its joint venturer have incurred extensive legal costs in denying the joint venturer's liability.", "Reasons_for_Decision": "Summary: In order for the legal costs to be deductible as general project expenditure under section 38 of the PRRTAA they would have to be payments liable to be made in carrying on or providing the operations, facilities and other things comprising the petroleum project. Subsection 19(4) of the PRRTAA outlines for the purposes of the Act what is meant by a reference to the operations, facilities and other things comprising the project. These legal costs in relation to liability to contribute to payments of a kind known as private override royalty payments liable to be made by a person and liability for which is disputed would not be payments for operations and facilities and other things comprising a petroleum project as referred to in subsection 19(4) of the PRRTAA. The legal costs incurred by the taxpayer are associated with an ongoing dispute between company A and the taxpayer's joint venture partner over the joint venturer's liability to pay an overriding royalty in respect of a production field. The agreement under which the royalty may arise does not include any aspects which indicate the facilitation of the joint venturers' project for the production of petroleum from the production field. The agreement was no more than antecedent to the carrying on or providing of those operations, facilities and other things comprising a petroleum project, if it has any relationship to them at all. The subsequent legal costs in contesting the override royalty claims are neither precedent to nor otherwise part of the costs of carrying on or providing the operations, facilities and other things constituting the project activities for recovery and qualifying related activities in relation to petroleum from the petroleum project. The connection between those costs and any possible royalty is not sufficient to make those legal costs part of the expenditure deductible in calculating petroleum resource rent tax for the production field. Accordingly, the legal expenses incurred by the taxpayer are not deductible under section 38 of the PRRTAA.", "Date_of_Decision": "25 August 2006", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Petroleum Resources Rent Tax Assessment Act 1987 section 19 section 38 section 44", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Legal expenses Private override royalty payments Petroleum Resources Rent Tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006312", "Unmatched_Content": "Keywords Legal expenses Private override royalty payments Petroleum Resources Rent Tax"}
{"ATO_ID_Number": "ATO ID 2005/111", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum Resource Rent Tax - Hedging expenses (gains and losses)", "Issue": "Are hedging expenses (gains and losses) taken into account for Petroleum Resource Rent Tax (PRRT) purposes?", "Decision": "No. The hedging expenses are not 'expenses payable' by the taxpayer 'in relation to the sale' of any petroleum or marketable petroleum commodity (MPC) as per section 24(1) of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA). The hedge expenses are not deductible expenditure under the PRRTAA. All deductible expenditure must be either 'general project expenditure' under section 38, 'exploration expenditure' under section 37, or 'closing-down expenditure' under section 39. Hedge expenses cannot be any of these.", "Facts": "The taxpayer is a joint venture participant in a number of offshore petroleum projects which are subject to Petroleum Resource Rent Tax. The taxpayer produces both oil and gas from these fields. Gas is generally sold on long term contracts resulting in less volatility in the sales price. Oil however, is sold on a spot basis resulting in more volatility in the sales price. The taxpayer actively hedges a specified percentage of future oil sales to attempt to limit these fluctuations. The taxpayer has in place a policy on the maximum level of production that is to be hedged taking account of the time at which the hedging takes place. Hedging involves entry into contracts based on the present and future price of oil that will produce a gain to the taxpayer if oil prices fall from a specified price; some hedges require a fixed initial cost, others produce a loss to the taxpayer so far as oil prices rise, and still others combine cost or loss features. Where the contracts are entered into on a scale no greater than that of the taxpayer's likely sales of oil and gas in the production period, their gains and their costs or losses will limit the taxpayer's overall risk in relation to changes in the price of oil and gas over the production period. So that risk is hedged to the extent that it is limited.", "Reasons_for_Decision": "Summary: Hedging expenses are not taken into account for PRRT purposes under section 24 of the PRRTAA as reductions to consideration receivable for the sale of petroleum or marketable petroleum commodities in an arm's length transaction. Broadly, under section 24, the sale price brought to account for PRRT purposes is the gross consideration receivable less any expenses payable by the person in relation to the sale. If sold at less than arm's length, the assessable receipts under section 57 of the PRRTAA will be taken to be the amount of receipts expected if the transaction had been at arm's length. Any losses on the hedging contracts do not affect the consideration receivable by the taxpayer when it sells petroleum or marketable petroleum commodities. Nor do such losses alter the costs of that sale. The consideration is not set by reference to the hedging contracts; and if the taxpayer actually sells no petroleum or MPCs the hedging contracts will still produce the same result. As hedges, the contracts produce a result which runs counter to the effect of changes in the price of petroleum or MPCs on the actual sale of the petroleum or MPCs; but they do not change the consideration for or costs of the actual sale. Hedging expenses are not deductible under section 38 of the PRRTAA as they do not fall within the definition of general project expenditure. Nor can they be deductible under section 37 or 39 of the PRRTAA as they do not fall within the definition of exploration expenditure or closing down expenditure.", "Date_of_Decision": "17 March 2005", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 section 24 section 37 section 38 section 39 section 57", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Hedging expenses Assessable petroleum receipts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005111", "Unmatched_Content": "Keywords Hedging expenses Assessable petroleum receipts"}
{"ATO_ID_Number": "ATO ID 2013/48", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum Resource Rent Tax: petroleum project - entitlement to receive receipts from the sale of petroleum", "Issue": "Does the entity hold an interest in, or in relation to, a petroleum project under subsection 4A(1) of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA) when it receives a right, under a production payment arrangement, to receive a share of receipts from another entity's sale of petroleum [1] from the petroleum project?", "Decision": "No. The entity does not hold an interest in, or in relation to, a petroleum project under subsection 4A(1) of the PRRTAA when it receives a right, under a production payment arrangement, to receive a share of receipts from another entity's sale of petroleum from the petroleum project. For the purposes of subsection 4A(1) of the PRRTAA, an entity holds an interest in, or in relation to, a petroleum project, if the entity owns and is entitled to sell the petroleum from the project.", "Facts": "The entity enters into a production payment arrangement (PPA) with another entity, the petroleum company, under which:", "Reasons_for_Decision": "Summary: Subsection 4A(1) of the PRRTAA provides that for the purposes of the PRRTAA, a person holds an interest in, or in relation to, a petroleum project at a particular time if the person was, at that time, entitled to receive receipts from the sale of petroleum, or of a marketable petroleum commodity (MPC) produced from petroleum, recovered from the production licence area in relation to the petroleum project. Where an entity has a right to receive a share of receipts from another entity's sale of petroleum, a question arises as to whether the entity is ' entitled to receive receipts from the sale of petroleum recovered from the production licence area in relation to the petroleum project ' for the purposes of subsection 4A(1) of the PRRTAA. To answer this question, it is appropriate to consider what is meant by the expression ' entitled to receive receipts from the sale of petroleum recovered from the production licence area in relation to the petroleum project' . One possible interpretation (the first interpretation) is that an entity is entitled to receive receipts from the sale of petroleum if the entity's receipts are triggered by the sale of petroleum recovered from the production licence area in relation to the petroleum project. Under this interpretation, if the entity is entitled to receive a share of receipts from another entity's sale of petroleum recovered from a production licence area in relation to the petroleum project, the entity would hold an interest in, or in relation to, a petroleum project under subsection 4A(1) of the PRRTAA because its receipts are triggered by the sale of petroleum recovered from the production licence area in relation to the petroleum project. It is irrelevant that the entity did not own the petroleum that was the subject of the sale and, therefore, not entitled to sell the petroleum to the buyer. Another possible interpretation (the second interpretation) is that an entity is only entitled to receive receipts from the sale of petroleum if the entity owned the petroleum from the project that was the subject of the sale and is entitled to sell that petroleum. Under this interpretation, an entity that is entitled to a right to receive a share of receipts from another entity's sale of petroleum recovered from a production licence area in relation to the petroleum project, but did not have any right to own or sell the petroleum that was subject to the sale, would not hold an interest in, or in relation to, a petroleum project under subsection 4A(1) of the PRRTAA. To determine which of these two views is correct it is necessary to examine the context and purpose of subsection 4A(1) of the PRRTAA. The Explanatory Memorandum to the Petroleum Resource Rent Tax Assessment Amendment Bill 2011 (EM) in paragraph 5.18 explains who holds an interest in a petroleum project: A person holds an interest in a petroleum project at a particular time if they are entitled to receipts from the sale of petroleum, or marketable petroleum commodities produced from petroleum, recovered from the production licence area in relation to the project... Example 5.2 of the EM makes it clear that an entity can hold an interest in, or in relation to, a petroleum project without being a registered holder of the underlying production licence. The entity is a holder of an interest in, or in relation to, the petroleum project if it is entitled to receive receipts from the sale of petroleum produced from the project. Examples 5.1, 5.3 and 5.4 of the EM provide further insight on the entitlement to receive receipts from the sale of petroleum produced from the petroleum project. Example 5.1 of the EM states: Prior to the transfer, Afterthought Petroleum Company holds an interest in the project as it is entitled to all of the assessable receipts derived from the project up to that time. Reddot is not an interest holder as they are not entitled to assessable receipts from the sale of petroleum produced by the project. Example 5.3 of the EM states: While Drillbit is the registered holder of the tenement, they are not the holder of an interest as they are not entitled to sell the petroleum produced and receive assessable receipts arising from that sale. Example 5.4 of the EM states: Ilex holds an interest in the project as they are entitled to receive assessable petroleum receipts from the sale of the project petroleum. These EM examples make it clear that a reference to the entitlement to receive receipts from the sale of petroleum for the purposes of determining whether an entity holds an interest in a petroleum project, is a reference to the entitlement to receive assessable receipts (including assessable petroleum receipts) derived from the project. Section 23 of the PRRTAA defines assessable receipts as the total of specified kinds of receipts, including assessable petroleum receipts derived by a person in a financial year in relation to a petroleum project. Where petroleum, or any MPC produced from petroleum, from a project is sold, section 24 of the PRRTAA provides that assessable petroleum receipts derived by a person in relation to a petroleum project is a reference to the consideration receivable, less any expenses payable, by the person in relation to the sale. The Full Federal Court in Esso Australia Resources Pty Ltd v. Commissioner of Taxation (2011) 199 FCR 226 at 283 explains that the focus of section 24 of the PRRTAA is explicitly upon the consideration receivable by the seller in order to entitle the buyer to a transfer of the agreed quantity of the commodity, that is the petroleum or MPC. This explanation makes two important points about 'consideration receivable by the person in relation to a sale'. Firstly, the 'person' in the expression 'consideration receivable by the person in relation to a sale' refers to the seller of the commodity. That is, only the seller of the commodity can receive consideration in relation to the sale of the commodity and consequently, only the seller of the commodity can derive assessable petroleum receipts. Secondly, a person can only be a seller of the commodity if it is entitled to sell or transfer title in the commodity to the buyer. It follows that assessable petroleum receipts can only be derived by the person who owned the commodity that is the subject of the sale. The examples in the EM and the wording of section 24 of the PRRTAA make it clear that the second interpretation is preferred. That is, an entity is entitled to receive receipts from the sale of petroleum and therefore holds an interest in a petroleum project, if the entity is entitled to assessable receipts derived from the project. This is because it owns the petroleum recovered from the project that is subject to the sale, is entitled to sell the petroleum from that project and is entitled to the consideration receivable in relation to that sale. Under the PPA in this case, the entity has a right to receive a share of receipts from the sale of petroleum made by the petroleum company in relation to the project. However, the PPA does not give the entity the right to the petroleum nor the right to sell that petroleum. Accordingly, any share of receipts the entity receives under the PPA from the petroleum company's sale of petroleum is not consideration receivable in relation to the sale and would therefore not be assessable petroleum receipts of the entity. As the entity is not entitled to receive assessable receipts derived from the project, the entity does not hold an interest in, or in relation to, the petroleum project under subsection 4A(1) of the PRRTAA. Note 1: In this case, all of the receipts from the petroleum company's sale of petroleum recovered from the petroleum project are consideration receivable by the petroleum company in relation to the sale and, under section 24 of the PRRTAA, are assessable petroleum receipts derived by the petroleum company. This is because the petroleum company owns and is entitled to sell that petroleum . Note 2: Where an entity is entitled to a share of petroleum, or any MPC produced from petroleum from a petroleum project with a right to sell it and receive consideration from that sale, then the entity will hold an interest in, or in relation to, a petroleum project under subsection 4A(1 ) of the PRRTAA .", "Date_of_Decision": "5 September 2013", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 subsection 4A(1) section 23 section 24", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2506", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "PRRT assessable receipts PRRT assessable petroleum receipts PRRT petroleum projects Petroleum resource rent tax", "Case_References": "Esso Australia Resource Pty Ltd v. Commissioner of Taxation (2011) 199 FCR 226 [2011] FCAFC 154", "Other_References": "Explanatory Memorandum to the Petroleum Resource Rent Tax Assessment Amendment Bill 2011", "Business_Line": "Resource Rent Tax, CS&C", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201348", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2506 | Keywords PRRT assessable receipts PRRT assessable petroleum receipts PRRT petroleum projects Petroleum resource rent tax"}
{"ATO_ID_Number": "ATO ID 2005/135", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum Resource Rent Tax: losses incurred under forward contracts - year ended 30 June 2004", "Issue": "Can a taxpayer claim losses incurred under forward contracts for differences in the price of petroleum to reduce the 'assessable petroleum receipts' derived by the taxpayer pursuant to section 24 of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA) on the basis that the losses are expenses payable by the taxpayer in relation to the sale of petroleum?", "Decision": "No. The losses incurred are not 'expenses payable' by the taxpayer 'in relation to the sale' of any petroleum or marketable petroleum commodity (MPC) as per subsection 24(1) of the PRRTAA.", "Facts": "The taxpayer is involved in petroleum projects which are subject to Petroleum Resource Rent Tax (PRRT). The taxpayer entered into arm's length forward contracts with another party. The contracts do not involve the physical delivery of oil. The terms of the contract are that the parties undertake to pay the difference between an initial set price and a price payable which is calculated under a formula, with reference to average prices, on a pre-determined close-out date. Where the market price on the close-out date is greater than that fixed in the contract, the taxpayer is required to pay an amount to the other party based on the difference. Any amounts so paid are a loss to the taxpayer. The taxpayer contends that the forward contracts for differences were entered into as hedges, that produce countervailing effects to the effect of any change in the price of oil between the time the taxpayer commits to production and the time the taxpayer sells the oil.", "Reasons_for_Decision": "Summary: Losses are not taken into account for PRRT purposes under section 24 of the PRRTAA as reductions to consideration receivable for the sale of petroleum or marketable petroleum commodity's in an arm's length transaction. Broadly, under section 24 of the PRRTAA, the sale price brought to account for PRRT purposes is the gross consideration receivable less any expenses payable by the person in relation to the sale. If sold at less than arm's length, the assessable receipts will be taken under section 57 of the PRRTAA to be the amount of receipts expected if the transaction had been at arm's length. Any losses on the forward contracts for differences do not affect the consideration receivable by the taxpayer when it sells oil or the costs of that sale. That consideration is not set by reference to the difference contracts; and if the taxpayer actually sells no oil the difference contracts will still produce the same result. Even if the forward contracts for differences are entered into as hedges, they do not affect the consideration for or the costs of sale of oil. As hedges, they produce a result which runs counter to the effect of changes in the price of oil on the actual sale of oil; but they do not change the consideration for or costs of the actual sale of oil.", "Date_of_Decision": "4 May 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 section 24 section 57", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Losses Incurred PRRT assessable petroleum receipts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005135", "Unmatched_Content": "Keywords Losses Incurred PRRT assessable petroleum receipts"}
{"ATO_ID_Number": "ATO ID 2005/136", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum Resource Rent Tax: gains derived under forward contracts - year ended 30 June 2004", "Issue": "Can a taxpayer include gains derived under forward contracts for the settlement of differences to increase the 'assessable petroleum receipts' derived by the taxpayer pursuant to section 24 of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA) on the basis that the gains are derived by the taxpayer in relation to the sale of petroleum?", "Decision": "No. The gains derived are not 'consideration' 'in relation to the sale' of petroleum or marketable petroleum commodity (MPC) as per subsection 24(1) of the PRRTAA.", "Facts": "The taxpayer is involved in petroleum projects which are subject to Petroleum Resource Rent Tax (PRRT). The taxpayer entered into arm's length forward contracts with another party. The contracts do not involve the physical delivery of oil. The terms of the contract are that the parties undertake to pay the difference between an initial set price and a price payable which is calculated under a formula, with reference to average prices, on a pre-determined close-out date. Where the market price on the close-out date is less than that fixed in the contract, the other party is required to pay the taxpayer the difference between the two. Any such amounts are a gain to the taxpayer. The taxpayer contends that the forward contracts for differences were entered into as hedges, that produce countervailing effects to the effect of any change in the price of oil between the time the taxpayer commits to production and the time the taxpayer sells the oil.", "Reasons_for_Decision": "Summary: The gains are not consideration for the sale of petroleum brought to account under section 24 of the PRRTAA as the gains do not come from any actual sale of petroleum which may take place but are gains in relation to the movement in the price of oil. Broadly, under section 24 of the PRRTAA, the sale price brought to account for PRRT purposes is the gross consideration receivable from the sale of petroleum or petroleum products less any expenses payable by the person in relation to the sale. If sold at less than arm's length, the assessable receipts will be taken under section 57 of the PRRTAA to be the amount of receipts expected if the transaction had been at arm's length. Any gains on the forward contracts for differences do not affect the consideration receivable by the taxpayer when it sells oil or the costs of that sale. That consideration is not set by reference to the difference contracts; and if the taxpayer actually sells no oil the difference contracts will still produce the same result. Even if the forward contracts for differences are entered into as hedges, they do not affect the consideration for or the costs of sale of oil. As hedges, they produce a result which runs counter to the effect of changes in the price of oil on the actual sale of oil; but they do not change the consideration for or costs of the actual sale of oil.", "Date_of_Decision": "4 May 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 section 24 section 57", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Derived PRRT assessable petroleum receipts Hedging Forward contracts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005136", "Unmatched_Content": "Keywords Derived PRRT assessable petroleum receipts Hedging Forward contracts"}
{"ATO_ID_Number": "ATO ID 2005/137", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Petroleum Resource Rent Tax: deductibility of selling expenses - put option premiums", "Issue": "Can a taxpayer claim premiums paid on put option transactions to reduce 'assessable petroleum receipts' pursuant to paragraph 24(1)(a) of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA)?", "Decision": "No. Premiums paid on put option transactions are not 'expenses payable' by the taxpayer 'in relation to the sale' of any petroleum or marketable petroleum commodity as per paragraph 24(1)(a) of the PRRTAA.", "Facts": "The taxpayer is in the business of oil and gas production which is subject to Petroleum Resource Rent Tax (PRRT). All crude oil lifted from the oil field is sold on a spot basis. Perhaps to hedge or to limit price fluctuations, the taxpayer entered into a series of put option contracts. No crude oil is sold by exercising the put options, and none is sold to a party to those contracts.", "Reasons_for_Decision": "Summary: Premium expenses and losses from these put option transactions are not taken into account for PRRT purposes under section 24 of the PRRTAA as reductions to consideration receivable for the sale of petroleum or marketable petroleum commodities in an arm's length transaction. Broadly, under section 24, the sale price brought to account for PRRT purposes is the gross consideration receivable less any expenses payable by the person in relation to the sale. Any premium expenses in relation to put option contracts under which no petroleum is actually sold do not affect the consideration receivable by the taxpayer when it sells petroleum or marketable petroleum commodities, nor do such expenses add to the costs of that sale. The consideration receivable for the sale of petroleum or marketable petroleum commodities is not set by reference to the put option contracts; and if the taxpayer actually sells no petroleum or marketable petroleum commodities the premium paid on the put option contract will still have been incurred. The put option contracts produce a result which may run counter to the effect of changes in the price of petroleum or marketable petroleum commodities over the period between entry into the put options and their realisation or expiry, at which time there may be the actual sale of petroleum or marketable petroleum commodities; but the put options do not change the consideration for or costs of the actual sale of petroleum or marketable petroleum commodities.", "Date_of_Decision": "6 May 2005", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 section 24 paragraph 24(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Put option PRRT assessable petroleum receipts Petroleum resource rent tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005137", "Unmatched_Content": "Keywords Put option PRRT assessable petroleum receipts Petroleum resource rent tax"}
{"ATO_ID_Number": "ATO ID 2007/96", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transferability of exploration expenditure: project interest transferred from common owner to common acquirer", "Issue": "Group company A holds an interest in an exploration permit and a production licence. If these interests are transferred to group company B, is the transferability of the exploration petroleum resource rent tax (PRRT) credits from the exploration permit to the production licence preserved?", "Decision": "No. If group company B acquires interests in both the exploration permit and the production licence from group company A, the transferability of the exploration PRRT credits from the exploration permit to the production licence would not be preserved.", "Facts": "Group company A became a member of the company group prior to 1 July 2006. It had incurred exploration expenditure in relation to the exploration permit prior to this date. Prior to transferring its interests to group company B, group company A is able to transfer exploration PRRT credits from the exploration permit to the production licence in which it holds an interest. Group company B intends acquiring interests in the exploration permit and the production licence from group company A after 1 July 2006.", "Reasons_for_Decision": "Summary: Sections 45A and 45B of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA) allow the transfer of exploration PRRT credits by a person to a petroleum project owned by the person and a group company respectively. These transfers are subject to meeting the continuity of ownership tests prescribed in clauses 22 and 31 respectively of the Schedule (the Schedule) to the PRRTAA. The test prescribed in clause 22 of the Schedule requires the person to hold an interest in the transferring entity (exploration permit) and the receiving project (production licence) from the start of the financial year in which the expenditure was incurred to the end of the transfer year (the test period). Group company A is able to transfer exploration PRRT credits under section 45A of the PRRTAA because it meets the continuity of ownership test prescribed in clause 22. However, after the proposed transfer, group company B would fail the ownership test in clause 22 as it did not hold an interest in both the transferring entity and the receiving project for part of the test period. Clause 31 of the Schedule would not apply to this situation as clause 31 of the Schedule applies to the transfer of exploration PRRT credits from one group company (loss company) that holds an interest in the transferring entity to another group company (profit company) that holds an interest in the receiving project.", "Date_of_Decision": "28 February 2007", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 section 2B section 41 section 45A section 45B section 48 section 48A Schedule, Part 1, Clause 1 Schedule, Part 1, Clause 2 Schedule, Part 1, Clause 3 Schedule, Part 2 Schedule, Part 3 Schedule, Part 4 Schedule, Part 5, Clause 19 Schedule, Part 5, Clause 20 Schedule, Part 5, Clause 21 Schedule, Part 5, Clause 22 Schedule, Part 5, Clause 23 Schedule, Part 5, Clause 24 Schedule, Part 5, Clause 25 Schedule, Part 5, Clause 26 Schedule, Part 6, Clause 27 Schedule, Part 6, Clause 28 Schedule, Part 6, Clause 29 Schedule, Part 6, Clause 30 Schedule, Part 6, Clause 31 Schedule, Part 6, Clause 32 Schedule, Part 6, Clause 33 Schedule, Part 6, Clause 34 Schedule, Part 6, Clause 35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/97", "Subject_References": "Continuity of ownership Group companies Petroleum resource rent tax PRRT exploration expenditure PRRT transferable exploration expenditure", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200796", "Unmatched_Content": "Keywords Continuity of ownership Group companies Petroleum resource rent tax PRRT exploration expenditure PRRT transferable exploration expenditure"}
{"ATO_ID_Number": "ATO ID 2007/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transferability of exploration expenditure: project interest transferred from common owner to group member", "Issue": "Can group company A that is able to transfer exploration petroleum resource rent tax (PRRT) credits from an exploration permit to a production licence under section 45A of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRTAA) transfer its interests in the production licence to group company B and still preserve the transferability of exploration PRRT credits?", "Decision": "Yes. If the interest currently held by group company A in the production licence is transferred to group company B, the transferability of the exploration PRRT credits from the exploration permit held by group company A to the production licence held by group company B would be preserved.", "Facts": "Group company A became a member of the company group prior to 1 July 2006. It had incurred exploration expenditure in relation to an exploration permit prior to this date. Group company A is able to transfer exploration PRRT credits from the exploration permit to a production licence in which it holds an interest. Group company A intends transferring its interest in the production licence to group company B after 1 July 2006.", "Reasons_for_Decision": "Summary: Sections 45A and 45B of the PRRTAA allow the transfer of exploration PRRT credits by a person to a petroleum project owned by the person and a group company respectively. These transfers are subject to meeting the continuity of ownership tests prescribed in clauses 22 and 31 respectively of the Schedule (the Schedule) to the PRRTAA. The test prescribed in clause 22 of the Schedule requires a person to hold an interest in the transferring entity (exploration permit) and the receiving project (production licence) from the start of the financial year in which the expenditure was incurred to the end of the transfer year. Prior to group company A transferring its interest in the production licence to group company B, it is able to transfer exploration PRRT credits because it meets the continuity of ownership test. However, after the proposed transfer of its interest, clause 22 would not apply because group company A would not hold an interest in the receiving project. The test prescribed in clause 31 of the Schedule requires a group company (loss company) to hold an interest in the transferring entity (exploration permits) and another group company (profit company) to hold an interest in the receiving project (production licence) at the transfer time. The test conditions are fulfilled if: Group company A will be able to transfer exploration PRRT credits from the exploration permit to the production licence as group company A held an interest in the exploration permit and the production licence (now held by group company B) for part of the test period and two group companies (group company A and group company B) held an interest in the exploration permit and the production licence for the remaining part of the test period (including at the end of the transfer year). The transferability of pre 1 July 2006 expenditure under clause 31 is also subject to additional conditions prescribed in the Petroleum Resource Rent Tax Assessment Amendment Act 2006 (PRRT Amendment Act) which amended clause 31 of the Schedule for the financial years that start on or after 1 July 2006. The following conditions apply to the transfer of pre 1 July 2006 expenditure to receiving projects whose start date was prior to 1 July 2006: As discussed above, the conditions in the amended clause 31 of the Schedule would be met. If the transfer were to take place at the end of the transfer year starting on 1 July 2005, the transfer would have taken place under clause 22 of the Schedule. The old clause 31 would not have applied. Therefore, it could not have prevented the transfer.", "Date_of_Decision": "28 February 2007", "Year_of_Income": "Year ending 30 June 2006", "Legislative_References": "Petroleum Resource Rent Tax Assessment Act 1987 section 2B section 41 section 45A section 45B section 48 section 48A Schedule, Part 1, Clause 1 Schedule, Part 1, Clause 2 Schedule, Part 1, Clause 3 Schedule, Part 2 Schedule, Part 3 Schedule, Part 4 Schedule, Part 5, Clause 19 Schedule, Part 5, Clause 20 Schedule, Part 5, Clause 21 Schedule, Part 5, Clause 22 Schedule, Part 5, Clause 23 Schedule, Part 5, Clause 24 Schedule, Part 5, Clause 25 Schedule, Part 5, Clause 26 Schedule, Part 6, Clause 27 Schedule, Part 6, Clause 28 Schedule, Part 6, Clause 29 Schedule, Part 6, Clause 30 Schedule, Part 6, Clause 31 Schedule, Part 6, Clause 32 Schedule, Part 6, Clause 33 Schedule, Part 6, Clause 34 Schedule, Part 6, Clause 35", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/96", "Subject_References": "Continuity of ownership Group companies Petroleum resource rent tax PRRT exploration expenditure PRRT transferable exploration expenditure", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200797", "Unmatched_Content": "Keywords Continuity of ownership Group companies Petroleum resource rent tax PRRT exploration expenditure PRRT transferable exploration expenditure"}
{"ATO_ID_Number": "ATO ID 2010/112", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reportable employer superannuation contributions: additional superannuation contributions made by employer", "Issue": "If an employer makes additional superannuation contributions to cover the cost of premiums for insurance cover for an employee because the employee chooses, by default or otherwise, a superannuation fund to which the employer makes superannuation contributions for the employee, will the additional contributions be Reportable Employer Superannuation Contributions (RESCs) as defined in subsection 16-182(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA)?", "Decision": "Yes, the additional contributions made by the employer due to the choice of superannuation fund made by the employee meet the definition of RESCs contained in subsection 16-182(1) of Schedule 1 to the TAA.", "Facts": "An employer has a preferred superannuation provider which is their employer nominated fund (default fund). This is the fund that the employer will make superannuation contributions to if the employee does not choose a different fund. If the employee either chooses the employer nominated fund, or does not choose another superannuation fund, the employer will make additional superannuation contributions to cover the cost of insurance premiums deducted from the employee's superannuation account. The premiums are charged to the employee's superannuation account by the employer nominated fund to provide the employee with group life and total and permanent disability insurance cover. The employer will therefore contribute a greater amount than the minimum superannuation guarantee amount required under the Superannuation Guarantee (Administration) Act 1992 (SGAA). The amount of the premium charged to the employee's superannuation account by the employer nominated fund for this insurance cover is negotiated between the employer and the superannuation provider. The employee may increase the level of insurance cover, but any additional costs are charged to the employee's superannuation account and are not reflected in an increased contribution by the employer. If the employee chooses to reduce the level of cover, the contributions made by the employer to the employer nominated fund for that employee will be reduced by the same amount as the reduced insurance premium charged to the employee's superannuation account. The employee's salary is not reduced as a result of the employer making these additional contributions. In addition, if the employee chooses to cancel or reduce the insurance cover provided by the employer nominated fund, their salary is not increased. However the employer's superannuation contributions for that employee would be reduced. The employee's salary is also not increased if they choose an alternate superannuation fund to receive the employer's contributions. If the employee chooses to have the employer make superannuation contributions to another fund, the employer will not increase the contributions to cover the amount of premiums charged to the employee's account to provide any insurance cover by the superannuation fund (if it is offered by that fund), and will only contribute the minimum amount required to ensure that the employer is not subject to a superannuation guarantee charge under the SGAA.", "Reasons_for_Decision": "Summary: Section 16-182 of Schedule 1 to the TAA provides a definition of a RESC. 16-182(1) A reportable employer superannuation contribution, for an individual for an income year, is an amount that has been, is, or will be contributed in respect of the income year: (a) by an employer of the individual, or an *associate of the employer, for the individual's benefit; and (b) to a *superannuation fund or an *RSA; to the extent that either or both of the following paragraphs apply: (c) the individual has or has had, or might reasonably be expected to have or have had, the capacity to influence the size of the amount; (d) the individual has or has had, or might reasonably be expected to have or have had, the capacity to influence the way the amount was, is or will be contributed so that his or her assessable income is reduced. This means that, in the simplest case, if a superannuation contribution is made by an employer to a superannuation fund, and the employee has the capacity to influence either the way the contribution is made or the size of the contribution, it will be a RESC to the extent that the employee has had influence. However, in accordance with subsection 16-182(2) of Schedule 1 to the TAA, a contribution will not be a RESC if it is paid from an employee's assessable income, notwithstanding that the employee may have the capacity to influence the amount of the contribution. For example personal contributions that the employee directs the employer to make to a superannuation fund on their behalf from their after-tax (net) pay. In order to be a RESC it is necessary that the payment made to the fund is a contribution. Taxation Ruling TR 2010/1 Income Tax: Superannuation Contributions states that in the superannuation context, a contribution is anything of value that increases the capital of a superannuation fund provided by a person whose purpose is to benefit one or more particular members of the fund or all of the members in general. Amounts that the employer is not required to make under law may also not be RESC, provided the employee does not and could not influence the amount. For instance, if the employer is required to contribute amounts in accordance with an industrial award or an agreement it has with all employees, they will not be RESC as the individual employee cannot influence the amount of the contribution, as contained in subsection 16-182(5) of Schedule 1 to the TAA. In this case, the payment made to the employer nominated fund by the employer will be a contribution, including the additional payment made to cover the insurance premium, as the payment will increase the capital of the fund and is made by the employer for the benefit of the employee member of the fund. In accordance with Part 3A of the SGAA, most employees can elect which superannuation fund they wish their employer to make superannuation contributions to for them. If the employee doesn't make a choice, the employer contributions will be made to the employer nominated fund (also known as the default fund). Contributions made by the employer for the benefit of the employee will be made to the employer nominated fund if the employee either chooses that fund or does not exercise their right to choose another superannuation fund. Therefore the amount of the additional contribution made in order to cover the cost of the insurance premium will only be made by the employer if the employee chooses the employer nominated fund, or does not exercise their right to choose another superannuation fund. It is each individual employee who makes the decision whether the contributions are made to the employer nominated fund, or an alternative fund chosen by the employee. That decision made by the employee influences the amount of contributions made by the employer on the employee's behalf. If the employee chooses a different superannuation fund, the contributions made by the employer will be a lower amount as the employer only pays additional superannuation contributions to cover the cost of insurance premiums in the employer nominated fund. Although the level of insurance coverage is negotiated between the employer nominated fund and employer, and will apply uniformly to all employees, each individual employee has the capacity to influence the size of the contribution through their choice of fund. Therefore, by either choosing the employer nominated fund, or by not choosing another superannuation fund, the employee influences whether the additional contribution is made by the employer. Accordingly the additional contributions are RESCs, to the extent that the total contribution is greater than the amount the employer is required to make otherwise. In addition, in the event the employee chooses the employer nominated fund, they also have the capacity to influence the size of the contribution by decreasing their level of insurance cover. Upon doing so, the employer is then able to reduce the amount of their additional superannuation contributions to cover the insurance premium by the corresponding amount. As a result, the employee has the capacity to influence the size of the amount of the contribution. This satisfies the other condition of a contribution being a RESC contained in subsection 16-182(1) of Schedule 1 to the TAA. These additional contributions are not excluded under subsection 16-182(2) of Schedule 1 to the TAA as they are not included in the employee's assessable income. However, the amount of the contribution made in order to ensure that the employer will not have a superannuation guarantee charge liability under the SGAA will not be RESC as the employee has no influence over that amount of the contribution. Employees should consider contributions may result in an individual exceeding their relevant contributions cap for the income year. Note: Since the above decision was made, amendments have been made to Part 3A of the Superannuation Guarantee (Administration) Act 1992. Stapled fund rules were inserted into the choice of fund requirements and are effective from 1 November 2021. Further information on the stapled fund rules can be located at www.ato.gov.au .", "Date_of_Decision": "5 February 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Taxation Administration Act 1953 subsection 16-182(1) of Schedule 1 subsection 16-182(2) of Schedule 1 subsection 16-182(5) of Schedule 1", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2010/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions Employer superannuation contributions", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010112", "Unmatched_Content": "16-182(2) However, an amount is not a reportable employer superannuation contribution to the extent that it is included in the individual's assessable income for the income year. | Note to Reasons for Decision | Note added to advise of new superannuation choice of fund requirements since decision was made. | Related Public Rulings (including Determinations) Taxation Ruling TR 2010/1 | Keywords Superannuation contributions Employer superannuation contributions"}
{"ATO_ID_Number": "ATO ID 2005/120", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Choice of superannuation fund: Contributions made under or in accordance with a State award", "Issue": "Will a contribution made to a superannuation fund, as specified under or in accordance with a superannuation clause contained in a State industrial award, meet the choice of superannuation fund requirements in subsection 32C(8) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "Yes. A contribution made to a superannuation fund as specified under or in accordance with a superannuation clause contained in State industrial award, where the superannuation clause creates a separate and enforceable legal obligation, will meet the choice of superannuation fund requirements in subsection 32C(8) of the SGAA.", "Facts": "The employee is employed under a State industrial award (the award). The award contains a superannuation clause which states that federal legislation such as the SGAA governs the superannuation rights and obligations of the parties to the award. The superannuation clause further states that superannuation contributions must be made to one of several superannuation funds listed in the award, or to a fund that complies with the legislation that governs the superannuation rights and obligations of the parties.", "Reasons_for_Decision": "Summary: The choice of fund requirements in the SGAA require employers to give eligible employees the right to choose which complying superannuation fund or retirement savings account will receive their superannuation guarantee (SG) contributions. There are some circumstances in which an employer will not be required to offer choice to an employee. For example, an employer will not be required to offer choice to an employee where the employer is making contributions to a fund for the benefit of the employee under, or in accordance with, a State industrial award. A contribution can be made under, or in accordance with, a State industrial award if there is a superannuation clause in the award which creates a separate and enforceable legal obligation. The making of a contribution which satisfies this obligation will meet the choice of superannuation fund requirements. Mere reference to superannuation in the award which does not require the employer to do anything will not satisfy the requirements of subsection 32C(8) of the SGAA In the circumstances of this case, the employee is employed under a State industrial award. The award contains a superannuation clause which states that federal legislation such as the SGAA governs the superannuation rights and obligations of the parties to the award. The award further states that superannuation contributions must be made to one of several superannuation funds listed in the award, or to a fund that complies with the legislation that governs the superannuation rights and obligations of the parties. In this situation, where the employer actually makes a contribution to a superannuation fund so listed under the superannuation clause in the award, or to one which complies with the requirements of the relevant legislation, the contributions will be regarded as having been made under, or in accordance with, the State industrial award which satisfies the requirements of subsection 32C(8). Employers making such contributions will not be required to offer choice to those relevant employees in accordance with paragraph 32NA(2)(a). Note: Since the above decision was made, amendments have been made to Part 3A of the Superannuation Guarantee (Administration) Act 1992. Stapled fund rules were inserted into the choice of fund requirements and are effective from 1 November 2021. Further information on the stapled fund rules can be located at www.ato.gov.au .", "Date_of_Decision": "23 April 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 32C subsection 32C(8) paragraph 32NA(2)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions for employees Superannuation guarantee contributions", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005120", "Unmatched_Content": "This ATO ID has been amended in the Facts and Reasons for Decision to clarify the description of the application of subsection 32C(8) of the Superannuation Guarantee (Administration) Act 1992 on the relevant State industrial award. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Note to Reasons for Decision | Note added to advise of new superannuation choice of fund requirements since decision was made. | Decision, Reason for Decision, Keywords | Keywords Superannuation contributions for employees Superannuation guarantee contributions"}
{"ATO_ID_Number": "ATO ID 2015/18", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation - Superannuation Guarantee Scheme: Benefit Certificates", "Issue": "If an employee is not included in a class of employees specified in a benefit certificate for a defined benefit superannuation scheme, can the employer use that scheme to satisfy the employer's obligations for that employee under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "No. The employee must be included in a class of employees specified in the benefit certificate, for contributions made by an employer on behalf of that employee to the defined benefit superannuation scheme to satisfy the employer's obligations for that employee under the SGAA.", "Facts": "A defined benefit superannuation scheme (the DB scheme) has a benefit certificate in effect that specifies the minimum requisite benefit provided for members of the scheme. The benefit certificate states that a benefit consists of the sum of three components: The benefit certificate states that only the accumulation benefit component of the benefit is provided for all members in a class of membership. Under the rules of the scheme, employer contributions to the accumulation benefit equate to the rate of the superannuation guarantee charge (SGC). However, this employer does not pay contributions to the DB scheme in respect of an employee for the accumulation benefit component (that is stated in the benefit certificate to be provided in respect of all members in a class of membership). It follows that the employee is not in a class of membership to which the benefit certificate relates. Instead, the employer makes contributions to a completely separate accumulation scheme for the employee and the level of contributions is less than the rate of the SGC. The employer also makes a small contribution to the DB scheme in respect of the employee's voluntary contributions. Together, the total contributions made by the employer roughly equate to the rate of the SGC.", "Reasons_for_Decision": "Summary: Employers who do not provide the prescribed minimum level of superannuation support for each quarter for their employees are liable to pay a superannuation guarantee (SG) charge. This is imposed on the employer's SG shortfall for a quarter (section 16 of the SGAA). The SG shortfall for a quarter is worked out by adding the total of the employer's: The formula for working out an employer's individual SG shortfall for an employee for a quarter is contained in subsection 19(1) of the SGAA. Included in the formula is a charge percentage for an employer for a quarter. The charge percentage is the number specified in the table in subsection 19(2) of the SGAA (paragraph 19(1)(a) of the SGAA). That table sets out the charge percentages for the year starting on 1 July 2013 to the year starting on 1 July 2025 (inclusive). For example, the charge percentage for the year starting on 1 July 2014 is 9.5%. However a charge percentage may be reduced in respect of an employee under either or both of sections 22 and 23 of the SGAA (paragraph 19(1)(b) of the SGAA). The reduction of a charge percentage for an employer for a quarter to nil for each employee will result in the employer having a nil individual SG shortfall for each employee for the quarter and a nil liability for SG charge for that quarter. Section 22 of the SGAA is relevant to the present case as it applies in relation to defined benefit superannuation schemes (subsection 22(1) of the SGAA). Under subsection 22(2) of the SGAA if: (a) a benefit certificate in relation to one or more complying superannuation schemes has effect for the whole or part of a quarter; and (b) a scheme in relation to which the certificate has effect is operating for the benefit of a person as an employee of an employer; and (c) the certificate specifies a figure as the notional employer contribution rate in relation to a class of employees (being a class that includes the employee referred to in paragraph (b)) as members of the scheme or schemes (as the case may be); the charge percentage for the employer in respect of an employee in the class for the quarter is reduced by an amount worked out using the formula set out in that subsection. Subsection 10(1) of the SGAA defines 'benefit certificate' as follows: A benefit certificate is a certificate by an actuary relating to one or more specified defined benefit superannuation schemes and specifying the rate, expressed as a percentage, that is, in the opinion of the actuary, the notional employer contribution rate, in relation to a specified class of employees (being members of the scheme or schemes, as the case may be), of an employer who is a contributor under the scheme or schemes (as the case may be) for the benefit of an employee in that class. The expression 'notional employer contribution rate' is defined in subsection 10(2) of the SGAA a follows: The notional employer contribution rate, in relation to a class of employees specified in a benefit certificate relating to one or more defined benefit superannuation schemes, is the contribution rate required to meet the expected long-term cost, to an employer who contributes to the scheme or schemes for the benefit of employees in the class, of the minimum benefits accruing in respect of all employees in the class from the date of effect of the benefit certificate onwards. Regulation 5 of the Superannuation Guarantee (Administration) Regulations 1993 (SGAR) provides for how the notional employer contribution rate for a class of employees in a defined benefit superannuation scheme who are being provided with an accumulation benefit in respect of their minimum requisite benefit should be calculated, as follows: If, in relation to a class of employees who are members of a defined benefit superannuation scheme: (a) the minimum requisite benefit in respect of each employee in that class is calculated as an accumulation of employer contributions; and (b) the employer contribution rate used in that calculation is the same for each employee in the class; The expression 'minimum requisite benefit' is defined in regulation 2 of the SGAR as having the same meaning as in the Superannuation Industry (Supervision) Regulations 1994 (SISR). Subregulation 1.03(1) of the SISR provides: minimum requisite benefit, in relation to a member, means the benefit certified by an actuary in a relevant benefit certificate as the minimum benefit in respect of the member. Minimum benefits for a member of a defined benefit superannuation scheme are defined relevantly under paragraph 5.04(3)(a) of the SISR as: (3) If the fund is a defined benefit fund, the member's minimum benefits are as follows: (a) if the member belongs to a class of employees in relation to which a relevant benefit certificate applies, the amount of the member's minimum requisite benefit. Further guidance on the determination of minimum requisite benefits, notional employer contribution rates and the preparation of benefit certificates, is provided for actuaries under mandatory Professional Standard PS403 issued by the Institute of Actuaries of Australia. Subregulation 3(2) of the SGAR provides relevantly: A benefit certificate must: ... (b) specify, or identify by reference to the governing rules of each scheme to which the certificate relates, the minimum requisite benefit; and (c) specify: (i) the notional employer contribution rate in relation to each scheme, or combination of schemes, to which the certificate relates; and (ii) the class of members of the scheme or schemes to which the notional employer contribution rate relates. For an employer to use contributions made to a defined benefit superannuation scheme to satisfy the employer's superannuation guarantee obligations in respect of a particular employee, the following conditions must be satisfied: 1. the defined benefit superannuation scheme must have in place a valid benefit certificate prepared by an actuary; and 2. the benefit certificate must cover the class of employee containing the particular employee and 'identify by reference to the governing rules of each scheme to which the certificate relates, the minimum requisite benefit' provided for that class of employee. A benefit certificate does not have to cover all classes of employee in a defined benefit superannuation scheme. If a class of employees is not covered by a valid benefit certificate, the employer cannot use benefits provided from that defined benefit superannuation scheme to meet the employer's superannuation guarantee obligations under subsection 22(2) of the SGAA. The minimum requisite benefit for a class of employees must be described in the benefit certificate, if necessary by reference to the governing rules of the scheme, for the certificate to be in effect for that class of employees, to satisfy subregulation 3(2) of the SGAR. In the present case the employer does not pay contributions to the DB scheme in respect of the employee for the accumulation component of the benefit that is stated in the benefit certificate to be provided in respect of 'all members' in a class of membership. The employee is not provided with the component of the benefit that is stated in the benefit certificate to be provided in respect of 'all members' in a class of membership. Therefore the employee is not contained in the class of members specified in that benefit certificate. In this case the DB scheme does not have a benefit certificate in effect for a class of employees containing that employee and the benefit certificate does not satisfy subregulation 3(2) of the SGAR for that employee. The employer cannot use contributions to the DB scheme to reduce the superannuation guarantee charge percentage payable for that employee to any extent, even if the employer has paid other contributions to the DB scheme for the employee.", "Date_of_Decision": "22 June 2015", "Year_of_Income": "1 July 2008 onwards", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 subsection 10(1) subsection 10(2) subsection 22(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation guarantee scheme Superannuation guarantee charge Defined benefit superannuation funds Benefit certificate", "Case_References": "", "Other_References": "Professional Standard PS 403", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201518", "Unmatched_Content": "the notional employer contribution rate in relation to the class is that employer contribution rate. | Keywords Superannuation guarantee scheme Superannuation guarantee charge Defined benefit superannuation funds Benefit certificate"}
{"ATO_ID_Number": "ATO ID 2015/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation guarantee: work done outside Australia", "Issue": "Is work done at sea at a location which satisfies all of the following: 'work done outside Australia' for the purpose of subsection 27(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "Yes. Work done at sea at such a location is 'work done outside Australia' for the purpose of subsection 27(1) of the SGAA.", "Facts": "The employee is not a resident of Australia. The employee is employed by a company which is not a resident of Australia. The employee's work is done at sea more than 12 nautical miles from the territorial sea baseline of Australia. The employee's work is done at sea more than 12 nautical miles from the territorial sea baseline of following Territories: The employee's work is not done in the JPDA or an offshore area for the purpose of the Offshore Petroleum and Greenhouse Gas Storage Act 2006. The salary or wages paid to the employee do not relate to employment covered by a certificate under section 15C of the SGAA (concerning International Social Security Agreements).", "Reasons_for_Decision": "Summary: Subsection 27(1) of the SGAA provides that certain salary or wages are not to be taken into account for the purpose of making a calculation under section 19 of the SGAA (concerning individual superannuation guarantee shortfalls). The expression 'work done outside Australia' is used in paragraphs 27(1)(b) and 27(1)(c) of the SGAA. Paragraph 27(1)(b) of the SGAA relevantly refers to: (b) salary or wages paid to an employee who is not a resident of Australia for work done outside Australia (except to the extent that the salary or wages relate to employment covered by a certificate under section 15C) | Detailed Reasoning - What constitutes 'Australia' in the relevant context?: Under section 4 of the SGAA the application of that Act extends to every external Territory referred to in the definition of Australia. Australia, when used in a geographical sense, is defined in section 6(1) of the SGAA, as having the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). The ITAA 1997, in section 960-505 defines Australia as: Territories (1) Australia, when used in a geographical sense, includes each of the following: (a) Norfolk Island; (b) the Coral Sea Islands Territory; (c) the Territory of Ashmore and Cartier Islands; (d) the Territory of Christmas Island; (e) the Territory of Cocos (Keeling) Islands; (f) the Territory of Heard Island and the McDonald Islands. A note to the above definition in section 960-505 of the ITAA 1997 refers the reader to section 15B of the Acts Interpretation Act 1901 (AIA). Subsection 15B(1) of the AIA provides: An Act is taken to have effect in, and in relation to, the coastal sea of Australia as if that coastal sea were part of Australia. Subsection 15B(2) of the AIA provides: A reference in an Act to Australia, or to the Commonwealth, is taken to include a reference to the coastal sea of Australia. Subsection 15B(3) of the AIA provides: An Act that is in force in an external Territory is taken to have effect in, and in relation to, the coastal sea of the Territory as if that coastal sea were part of the Territory. Subsection 15B(3A) of the AIA provides: A reference in an Act to all or any of the external Territories (whether or not one or more particular Territories are referred to) is taken to include a reference to the coastal sea of any Territory to which the reference relates. Accordingly, 'Australia' in the phrase 'work done outside Australia' as used in subsection 27(1) of the SGAA includes the coastal sea of Australia and the coastal sea of each of its Territories. Note that prior to 1 July 2016, the SGAA included sub-paragraphs 27(1)(b)(ii) and 27(1)(c)(ii) of the SGAA, which stated that when the work done in Norfolk Island is undertaken by an employee who is a resident of Norfolk Island or for an employer who is a resident of Norfolk Island, superannuation guarantee obligations will not apply in respect of salary or wages paid to the employee for that work. [1] | Detailed Reasoning - Meaning of 'coastal sea': Paragraph 15B(4)(a) of the AIA provides that, in section 15B, 'coastal sea' in relation to Australia, means: and includes the airspace over, and the sea-bed and subsoil beneath, any such sea. Similarly, paragraph 15B(4)(b) of the AIA provides that, in section 15B, 'coastal sea' in relation to an external Territory, means: and includes the airspace over, and the sea-bed and subsoil beneath, any such sea. Section 2B of the AIA defines 'territorial sea' as having the same meaning as in the Seas and Submerged Lands Act 1973 (SSLA). Subsection 3(1) of the SSLA, in part, defines 'territorial sea' as having the same meaning as in Articles 3 and 4 of the United Nations Convention on the Law of the Sea held at Montego Bay on 10 December 1982 (the Convention). Articles 3 and 4 of Section 2 of Part II of the Convention (as contained in the Schedule to the SSLA) read respectively: Breadth of the territorial sea Every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention. Outer limit of the territorial sea The outer limit of the territorial sea is the line every point of which is at a distance from the nearest point of the baseline equal to the breadth of the territorial sea. Consistent with the right set out in Article 3, and pursuant to a power to do so set out in section 7 of the SSLA, the Governor-General made a proclamation declaring the outer limit of the territorial sea to be 12 nautical miles seaward of that territorial sea baseline (see Proclamation in Gazette No. S 297, Tuesday 13 November 1990). In some cases, the outer limit of the territorial sea is less than 12 nautical miles from the territorial sea baseline, due to the close proximity of two countries e.g. Australia and Papua New Guinea (Australian Treaty Series 1985 No 4 - Treaty between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, including the area known as Torres Strait, and Related Matters). | Detailed Reasoning - Offshore areas: The extension of the definition of Australia in subsection 960-505(2) of the ITAA 1997, to the offshore areas of the JPDA and the offshore area for the purposes of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 provides that the SGAA has effect as if these offshore areas were part of Australia. A note to the definition in section 960-505(2) indicates that the offshore areas include all things located in those areas, including all installations and structures such as oil and gas rigs. These areas also extend to the airspace over, and the sea-bed and subsoil beneath those areas. A further note to section 950-505(2), makes it clear that the offshore area and the JPDA include the exclusive economic zone (EEZ) and the continental shelf of Australia (continental shelf). The SSLA defines the terms 'exclusive economic zone' and 'continental shelf' as having the same meaning as the relevant provisions of the Convention. The outer limit of the EEZ is 200 nautical miles seaward of that of the territorial sea baselines (see Proclamation in Gazette No. S 290, Friday 29 July 1994). The continental shelf is largely coextensive with the EEZ although the continental shelf extends beyond 200 nautical miles in some areas. The outer limits of both the EEZ and continental shelf are less than 200 nautical miles in some areas (for example between Australia and Papua New Guinea where they are limited by treaty). Paragraph 27(1)(ca) of the SGAA also states that when the work in the JPDA is undertaken by an employee who is not an Australian resident, superannuation guarantee obligations will not apply in respect of salary or wages paid to the employee for that work. | Detailed Reasoning - Conclusion: In the phrase 'work done outside Australia' as used in subsection 27(1) of the SGAA, 'Australia' is used in a geographical sense and extends to the outer limits of Australia's 'coastal sea'. Further, 'Australia' in that phrase also includes the territories of Norfolk Island, the Coral Sea Territory, the Territory of Ashmore and Cartier Islands, the Territory of Cocos (Keeling) Islands, the Territory of Christmas Island, the Territory of Heard Island and the McDonald Islands and the 'coastal sea' of each of those Territories. It also includes the offshore areas. Work done outside those areas is 'work done outside of Australia' for the purposes of subsection 27(1) of the SGAA. As a result, the salary or wages paid to the employee in this case is for 'work done outside of Australia' and so are not taken into account for the purpose of making a calculation under section 19 of the SGAA, due to the operation of paragraph 27(1)(b) of the SGAA.", "Date_of_Decision": "29 July 2015", "Year_of_Income": "For the financial year ending 30 June 2016 and later years", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 4 section 6 section 15C section 19 section 27 subsection 27(1) paragraph 27(1)(b) paragraph 27(1)(c) paragraph 27(1)(ca)", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 2009/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/907 | ATO ID 2010/46", "Subject_References": "Australian offshore areas Superannuation guarantee charge Superannuation guarantee scheme", "Case_References": "", "Other_References": "Explanatory Memorandum to the Petroleum (Timor Sea Treaty) (Consequential Amendments) Bill 2003 United Nations Convention on the Law of the Sea (Montego Bay, 10 December 1982) Australian Treaty Series 1985 No 4 - Treaty between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, including the area known as Torres Strait, and Related Matters Proclamation in Gazette No. S 297, Tuesday 13 November 1990 - outer limit of territorial sea Proclamation in Gazette No. S 290, Friday 29 July 1994 - outer limit of exclusive economic zone", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201524", "Unmatched_Content": "Clarification of offshore areas | Clarified areas which are within Australia. | Updated financial year to '2016'. | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 2009/2 | Keywords Australian offshore areas Superannuation guarantee charge Superannuation guarantee scheme"}
{"ATO_ID_Number": "ATO ID 2006/336", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: USA Agreement on social security - certificate of coverage - non-resident for income tax purposes", "Issue": "Can a taxpayer who is not a resident for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936) be covered by Schedule 13 to the Social Security (International Agreements) Act 1999 (SSIAA), such that they are eligible for employer support under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "Yes. A taxpayer who is not a resident for the purposes of the ITAA 1936 can be covered by Schedule 13 to the SSIAA, such that they are eligible for employer support under the SGAA.", "Facts": "The taxpayer is an Australian citizen who had previously resided in Australia. The taxpayer was sent to the United States of America (USA) by their employer, to work in one of the related entities of the employer on a temporary assignment for a period of less than five years. The employer applied for and was granted a Certificate of coverage (Coc) by the Tax Office, authorising the employer to continue to make payments under the SGAA, while the employee worked for the related entity in the USA. The employer made payments under the SGAA on behalf of the taxpayer, for the period covered by the Coc. The taxpayer subsequently made an application for a private ruling under the former Pt IVAA of the Taxation Administration Act 1953 and was issued with a ruling that they would be liable for taxation as a non-resident as defined in subsection 6(1) of the ITAA 1936, during the period covered by the Coc.", "Reasons_for_Decision": "Summary: Schedule 13 to the SSIAA, contains the agreement between Australia and the USA (USA Agreement). Article 3 of the USA Agreement covers the personal scope of the agreement and indicates the agreement applies to any person who: (a) is or has been an Australian resident; or (b) is or has been subject to the laws of Australia. The term 'Australian resident' is not defined within the SSIAA itself. Section 3 of the SSIAA contains the provision relating to interpretation and states at subsection 3(1) of the SSIAA: Unless a contrary intention appears, an expression that is used in the Social Security Act 1991 has the same meaning, when used in this Act, as in the Social Security Act 1991. Paragraph 1(e) of Article 1 of the USA Agreement defines 'laws' to mean those applying to social security (specified in subparagraph 1(b)(i) of Article 2), except in relation to Part II of the USA Agreement where it only applies to superannuation guarantee (specified in subparagraph 1(b)(ii) of Article 2). Part I of the USA Agreement outlines the scope of the agreement for both countries, and includes several definitions relating to the USA Agreement. As the definitions are contained in Part I of the USA Agreement, the relevant laws are those applying to social security. As required by subsection 3(1) of the SSIAA, since there is no intention to the contrary, the definition of 'Australian resident' for the purpose of the SSIAA should have the same meaning as expressed in the Social Security Act 1991 . An 'Australian resident' is defined in subsection 7(2) of the Social Security Act as: a person who (a) resides in Australia; and (b) is one of the following: (i) an Australian citizen (ii) the holder of a permanent visa (iii) a special category visa holder who is a protected SCV holder. The term 'resides' has a similar meaning under both the social security provisions and the ITAA 1936. As the taxpayer is a citizen of Australia and has previously resided in Australia they satisfy the personal scope of the USA Agreement under Article 3. The fact that this taxpayer is not currently a resident under the ITAA 1936 is not relevant for the purposes of determining whether they are covered under Part II of the USA Agreement. The calculation of SG shortfall does not arise in this case, as the employer had made the required payments in relation to the employee under the SGAA. | Detailed Reasoning - History:: This ATO ID was amended to reflect the changes to paragraph 27(1)(b) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and the introduction of section 15C of the SGAA. The amendments came into effect on 15 March 2007. The amendments to this ATO ID do not affect the answer to the issue raised in this ATO ID. Date of amendment of ATO ID: 21 January 2011.", "Date_of_Decision": "12 December 2006", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident individuals Residence of individuals Residents departing Australia Social security agreements Superannuation Superannuation contributions Superannuation guarantee scheme United States", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006336", "Unmatched_Content": "Keywords Non resident individuals Residence of individuals Residents departing Australia Social security agreements Superannuation Superannuation contributions Superannuation guarantee scheme United States"}
{"ATO_ID_Number": "ATO ID 2005/33", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: long service leave payments from a worker entitlement fund", "Issue": "Will either the worker entitlement fund or employer have an obligation under the Superannuation Guarantee (Administration) Act 1992 (SGAA) to make superannuation contributions on long service leave payments made to an individual from the fund?", "Decision": "Neither the worker entitlement fund nor the employer will have an obligation under the SGAA to make superannuation contributions on long service leave payments made to an individual from the fund. This is because:", "Facts": "The worker entitlement fund was created for building and construction workers, who by nature of the industry, rarely complete ten years service with one employer to become eligible for long service leave. Under the worker entitlement fund, workers can accrue long service leave credits with different employers. Employers make contributions to the fund for the provision of the employees' long service leave. Once the required credits have been accrued, the employees are entitled to receive a payment from the fund. Employers are not liable to pay any of the long service leave payments to an employee when on long service leave. Nor does the fund pay the entitlement to the employer to forward to the employee. The employee is not employed by the worker entitlement fund.", "Reasons_for_Decision": "Summary: Does the fund have an obligation to make superannuation contributions on the leave service leave payments made to the individuals? An obligation under the SGAA to make superannuation contributions for the benefit of an individual will only arise where an employer/employee relationship exists. Section 12 of the SGAA defines the term the employee for the purposes of the SGAA. The definition includes those individuals who are common law employees and extends to those individuals who are or may not be common law employees (for example, contractors employed under a contract wholly or principally for their labour). At common law, the relationship between an employer and employee is a contractual one, or otherwise known as a contract of employment. The ordinary meaning of employee has been the subject of a significant amount of judicial consideration. The cases have discussed a number of indicators that may be applied in determining whether an individual is a common law employee. For example, where an individual is subject to the control and direction of the paying entity, this would indicate that the individual is a common law employee. If it is considered that the relationship at common law is one of principal and independent contractor or the determination of the status of the worker is unclear, the extended definition of employee in the SGAA must be considered. In the circumstances of this case, the individuals receiving the long service leave payments from the worker entitlement fund have no contractual relationship with the fund. The role of the fund is to provide a particular service for the employees working within the building and construction industry, which is the collection and disbursement of long service leave entitlements. The individuals are not performing any work or providing services or labour to the fund. The workers are not receiving any consideration or remuneration from the fund in return for the performance of work or the provision of labour or services. None of the indicators that are relevant in determining whether an individual is a common law employee are present. The individuals are not employees of the fund. Accordingly, the fund will not have an obligation under the SGAA to make superannuation contributions on the long service leave payments made by the fund to the individuals. Does the employer have an obligation to make superannuation contributions on the long service leave payments made by the fund? Section 5 of the Superannuation Guarantee Charge Act 1992 (SGCA) imposes a Superannuation Guarantee Charge (SGC) on an employer's superannuation guarantee shortfall in a quarter where insufficient superannuation guarantee contributions have been made for an employee. Sections 22 and 23 of the SGAA specify the method for reducing an employer's liability to the SGC. By making contributions to a complying superannuation fund, equal to a set percentage of the employee's notional earnings base, the employer may reduce the liability to the SGC to nil. In order to receive such contributions, the employee must receive a payment or earnings for work undertaken. Ordinary Time Earning (OTE) is the standard earnings base which is used to calculate the amount against which an employer is required to calculate the contributions necessary to satisfy their superannuation obligations in respect of their eligible employees. OTE is defined in subsection 6(1) of the SGAA and does include long service leave payments except for lump sum payments of unused long service leave on termination of employment. In relation to the facts of this case, the employees have not received a payment (in respect of their earnings base for ordinary hours worked) from the employer. As no payment has been made by the employer to the employee for the accrued long service leave, the employer has no obligation to provide superannuation guarantee contributions on the long service leave payments.", "Date_of_Decision": "22 July 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 12 subsection 6(1) section 22 section 23", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 2005/1 | Superannuation Guarantee Ruling SGR 2005/2 | Superannuation Guarantee Ruling SGR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200533", "Unmatched_Content": "As a consequence of amendments to the SGAA which apply from 1 July 2008, the amount against which an employer calculates the contribution necessary to meet their superannuation guarantee obligations in respect of an employee is standardised to OTE for all employees. | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 2005/1 Superannuation Guarantee Ruling SGR 2005/2 Superannuation Guarantee Ruling SGR 2009/2"}
{"ATO_ID_Number": "ATO ID 2005/53", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee Scheme and scholarships", "Issue": "Does the entity, an Australian University, have an obligation under the Superannuation Guarantee (Administration) Act 1992 (SGAA) to make superannuation contributions on 'industry based learning scholarships' paid by the entity to students?", "Decision": "An entity does not have an obligation under the SGAA to make superannuation contributions on 'industry based learning scholarships' paid by it to students.", "Facts": "Scholarships (industry based learning scholarships) are offered by the entity, an Australian University, to full-time students who are enrolled at the University and undertaking a course of study within the relevant faculty. There are certain conditions that must be satisfied by a student of the University in order for the student to be eligible for a scholarship. One of those conditions is that the student must undertake training within the industry relevant to the student's coursework. The scholarship, which is paid by the University to the student, is funded by the relevant industry-based organisation. Each student awarded a scholarship is to undertake a placement with the industry-based organisation for a prescribed time period. The industry-based organisation is under no obligation to employ any student either during the scholarship or after its completion. The stipend of the scholarship is paid fortnightly to the student by the University in his or her capacity as a student. The payments made under the scholarship are not made on the condition that the student will become an employee of either the University or the industry-based organisation. The industry based organisation does not make any direct payments to the student.", "Reasons_for_Decision": "Summary: An obligation to make contributions under the SGAA arises when there is an employer-employee relationship within the meaning of the SGAA. The terms 'employer' and 'employee' are defined in section 12 of the SGAA. Relevantly, subsection 12(1) of the SGAA states that 'employer' and 'employee' have their ordinary meaning. At general law, the relationship between an employer and an employee is a contractual one, or otherwise known as a 'contract of employment'. Ordinarily, an employer is a person or entity that engages another to perform work or provide services or labour under the contract. The person who performs the work or provides the services or labour is otherwise known as the employee. The consideration or remuneration that the employee receives for working under such a contractual arrangement is generally referred to as 'salary or wages'. Subsection 12(3) of the SGAA extends the definition of employee to include a person who receives payment under a contract wholly or principally for labour. In the circumstances of this case, the relevant students enrolled at the University are engaged in a course of study with the University on a full-time basis. Some of the students undertaking this course of study may be eligible for a scholarship. Each student awarded a scholarship must undertake a work placement of a certain duration with an organisation in the industry relevant to the student's coursework. The stipend of the scholarship is paid to the student by the University in his or her capacity as a student. There is no evidence that the students are engaged in employment with the University nor is it a condition of the scholarship that a student engages in employment with the University. Having regard to these facts, it is considered that there is no employer/employee relationship between the University and students who are offered a scholarship. The awarding of the scholarship does not alter the status of the student into that of an employee of the University. The student is not performing any work or services for the University under a contract of employment nor are they working under a contract wholly or principally for their labour. The payments under the scholarship relate solely to the student's course of study and do not constitute salary or wages. Accordingly, the University will not have an obligation under the SGAA to make superannuation guarantee contributions on the scholarship awarded to the students.", "Date_of_Decision": "1 September 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 subsection 12(1) subsection 12(3)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling 2023/4", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Scholarships, fellowships & bursaries Superannuation guarantee scheme", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200553", "Unmatched_Content": "Related Public Rulings (including Determinations) | Replaced reference to SGR 2005/1 with reference to TR 2023/4 | Updated to meet accessibility and style requirements | Related Public Rulings (including Determinations) Taxation Ruling 2023/4 | Keywords Scholarships, fellowships & bursaries Superannuation guarantee scheme"}
{"ATO_ID_Number": "ATO ID 2010/113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation guarantee: ordinary time earnings and payment in lieu of a flex credit under a certified agreement", "Issue": "Is a payment in lieu of a flex credit to employees under the terms of a certified agreement considered 'ordinary time earnings' (OTE), as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "No. The payment in lieu of a flex credit to employees under the terms of a certified agreement is not considered OTE as defined in subsection 6(1) of the SGAA as the amount is not in respect of the employees' 'ordinary hours of work'.", "Facts": "The entity has a certified agreement (the Agreement) applicable for non-ongoing employees and sets out the employer's superannuation obligations. The Agreement offers non-ongoing employees the opportunity to cash out a maximum of five hours flex credit at the end of a settlement period to salary, paid at single time rates. The Agreement specifies that 'the span of hours during which employees may work their ordinary hours of duty is 7.30am to 6.30pm, Monday to Friday'. A flex credit is defined in the Agreement as the accumulation of flex time in excess of working hours (74 hours and 10 minutes) over a settlement period. The working hours for a settlement period of 74 hours and 10 minutes represents 10 working days of 7 hours and 25 minutes. The Agreement defines a settlement period for the purposes of flex credit and flex debit as follows: For the purposes of flex credit and flex debit there is a two week settlement period commencing on a payday Thursday and ceasing on a Wednesday.", "Reasons_for_Decision": "Summary: Section 16 of the SGAA states that the superannuation guarantee charge (SGC) imposed on an employer's superannuation guarantee shortfall for a quarter is payable by the employer. An employer can avoid a liability to the SGC by making superannuation contributions at a specified percentage* of each of their eligible employee's 'ordinary time earnings' by the quarterly cut-off dates in the SGAA. Under subsection 6(1) of the SGAA, the term 'ordinary time earnings' in relation to an employee means earnings in respect of ordinary hours of work (other than certain lump sum payments made to the employee on termination of employment) and earnings consisting of over-award payments, shift-loading or commission. Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' , explains at paragraph 13 that an employee's 'ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment. It also states at paragraph 25 that 'all amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work'. In this case the employee's OTE would be his or her earnings in respect of the ordinary hours of work which are, according to the Agreement, up to 74 hours and 10 minutes accrued between 7.30am to 6.30pm, Monday to Friday over a two week settlement period. Payments in respect of hours worked outside this span of hours or in excess of the 74 hours and 10 minutes would not be OTE. Lump sum arrears payments of unused leave or salary or wages otherwise than on termination of employment are normally OTE according to paragraph 36 of SGR 2009/2. However, earnings that are referrable to overtime or other hours that are not ordinary hours of work are not OTE, even if the lump sum payments were on termination. The Agreement states that a flex credit is the accumulation of flex time in excess of the working hours for the settlement period (that is, 74 hours and 10 minutes). This means that additional time worked on a daily basis, that is, more than 7 hours and 25 minutes, would not necessarily represent a 'flex credit' or time worked outside 'ordinary hours of work'. A flex credit therefore only accumulates once an employee has worked their normal working hours for the settlement period. It is only at the conclusion of the full settlement period that the excess time becomes a 'flex credit'. This means that a payment in lieu of flex credit would represent an amount paid for work performed in excess of, or in addition to, an employee's normal working hours for a settlement period, and therefore would not be 'in respect of' ordinary hours of work. Therefore, a payment to employees covered by the terms of this Agreement in respect of flex credit would not be considered to be OTE as defined in subsection 6(1) of the SGAA. *From 1 July 2014 the SG rate increased to 9.5%. It is proposed that this percentage will rise gradually until it reaches 12%.", "Date_of_Decision": "3 May 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 subsection 6(1) section 16", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation guarantee charge Superannuation guarantee scheme Accrued & unused leave Awards and industrial agreements Non permanent employees", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010113", "Unmatched_Content": "Inserted note regarding current Superannuation Guarantee rate of 9.5% and proposal to increase to 12%. | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 2009/2 | Keywords Superannuation guarantee charge Superannuation guarantee scheme Accrued & unused leave Awards and industrial agreements Non permanent employees"}
{"ATO_ID_Number": "ATO ID 2015/9", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee Scheme: attributed personal services income", "Issue": "Does attributed personal services income attract superannuation guarantee (SG) obligations on the part of the relevant personal services entity?", "Decision": "No, except for salary or wages that are paid in the year of income but which are reported as attributed personal services income because they were paid more than 14 days after the end of the Pay-As-You-Go (PAYG) payment period in which the relevant amount was derived as income of the personal services entity.", "Facts": "The taxpayer is a personal services entity. A person (the personal services provider) working on behalf of the taxpayer has attributed personal services income in respect of the taxpayer in respect of the year ended 2014. The worker is an employee of the taxpayer for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA).", "Reasons_for_Decision": "Detailed Reasoning - Attributed Personal Services Income: Part 2-42 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with personal services income (PSI). Subsection 84-5(1) of the ITAA 1997 defines PSI as: Your ordinary income or statutory income, or the ordinary income or statutory income of any other entity is your personal services income if the income is mainly a reward for your personal efforts or skills (or would mainly be such a reward if it was your income). A personal services entity is a company, partnership or trust whose income includes the PSI of one or more individuals. In certain circumstances, under section 86-15 of the ITAA 1997, an amount of income derived by a personal services entity from the personal services (principal work) provided by an individual may be included in the assessable income of the individual. These amounts (referred to as attributed amounts) are excluded from the assessable income and exempt income of the personal services entity under section 86-30 of the ITAA 1997. Attributed amounts do not include personal services income paid promptly by the personal services entity to the individual, as an employee, as salary or wages. The payment must be made before the end of the 14th day after the relevant PAYG payment period to be considered a 'prompt' payment. These payments are deductible to the personal services entity and therefore reduce the amount that would otherwise be attributable personal services income (due to the operation of subsection 86-15(4) of the ITAA 1997). However, the treatment of salary or wages that are paid to the personal services provider more than 14 days after the end of a PAYG payment period in which the amount became ordinary or statutory income of the personal services entity is different. These amounts are not included as salary or wages on a personal services provider's tax return, but are instead reported as attributed personal services income. | Detailed Reasoning - Superannuation Guarantee: The obligation to make superannuation contributions (and therefore prevent incurring the SG Charge (SGC)) hinges upon the receipt by an employee of a payment in return for work or services. 'Employee' for these purposes is defined in section 12 of the SGAA. The term has its ordinary meaning, but subsections 12(2) to 12(10) of the SGAA list a number of further persons who are also treated as employees. If the worker (the personal services provider) was not an employee of the personal services entity for the purposes of the SGAA, then the personal services entity would not have an obligation to make superannuation contributions on behalf of the worker under the SGAA. The SG system works by imposing the SGC on an employer's SG shortfall, in respect of individual eligible employees, for a given quarter. The employer's SG shortfall in respect of an employee may be reduced where the employer makes superannuation contributions for the employee. To reduce the shortfall to nil, contributions that are equal to the amount given by multiplying the 'charge percentage' by the employee's 'ordinary time earnings' would need to be made. The 'charge percentage' for the quarter ended 30 June 2014 is 9.25%. From 1 July 2014, this percentage increases to 9.5% and will continue to rise gradually until it reaches 12%. 'Ordinary time earnings' (OTE) is defined in subsection 6(1) of the SGAA as follows: ordinary time earnings, in relation to an employee, means: (a) the total of: (i) earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment: (A) a payment in lieu of unused sick leave; (B) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and As it has already been established that the worker was an employee, the issue in this case is whether attributed personal services income can be considered to be 'earnings in respect of ordinary hours of work'. | Detailed Reasoning - Is attributed personal services income 'earnings in respect of ordinary hours of work'?: 'Earnings in respect of ordinary hours of work' carries with it the notion of receipt. The word 'earnings' is defined in Superannuation Guarantee Ruling SGR 2009/2 as: 12. An employee's 'earnings', for the purpose of the definition of OTE, is the remuneration paid to the employee as a reward for the employee's services. The practical effect for superannuation guarantee purposes is that the expression 'earnings' means 'salary or wages'. Therefore, if the Commissioner cannot be satisfied that a payment has occurred, the attributed amount cannot be considered as ordinary time earnings. There can be no argument that attributed personal services income relates to the performance of work (otherwise it couldn't be personal services income). However, generally, there is no actual payment of the attributed amounts to the personal services provider. If there is no payment, the attributed amount cannot be considered to be earnings in respect of ordinary hours of work. An exception arises where the personal services income includes an amount of salary or wages paid more than 14 days after the end of a PAYG payment period in which the amount became ordinary or statutory income of the personal services entity (i.e. salary or wages paid too late for the purposes of subsection 86-15(4) of the ITAA 1997). In such a situation, the money has been received by the personal services provider as salary or wages, but under section 86-15 of the ITAA 1997 the amount is still included as attributed personal services income. Where an amount is included in assessable income under both the ordinary and statutory income rules, the terms of the provision that includes it as statutory income prevail unless it is stated otherwise (section 6-25 of the ITAA 1997). | Detailed Reasoning - Conclusion: Attributed personal services income will not generally give rise to an SG obligation. This is because the amounts of attributed personal services income are generally not paid to the personal services provider and the obligation to provide superannuation support under the SGAA hinges upon the notion of receipt of payment for work. However, where the personal services provider is in receipt of salary or wages, and the payment is made after the end of the 14th day after the PAYG payment period, under subsection 86-15(4) of the ITAA 1997, this amount is treated as attributed personal services income. This will still give rise to an SG obligation, as the payment is considered to be 'earnings in respect of ordinary hours of work' in relation to an employee under the definition of ordinary time earnings.", "Date_of_Decision": "15 September 2014", "Year_of_Income": "1 July 2009 and later", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 6(1) 12 19", "Related_Public_Rulings_and_Determinations": "SGR 2009/2 | TR 2003/6", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation guarantee charge Alienated personal services payments", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20159", "Unmatched_Content": "Related Public Rulings (including Determinations) SGR 2009/2 TR 2003/6 | Keywords Superannuation guarantee charge Alienated personal services payments"}
{"ATO_ID_Number": "ATO ID 2014/31", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: Payment of salary and wages after the death of an employee to the deceased estate", "Issue": "Will the employer have an individual superannuation guarantee shortfall under section 19(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) where an amount of salary and wages owing to an employee at the time of their death is paid by the employer to the deceased estate of the employee and the employer does not make sufficient superannuation contributions in respect of the payment by the relevant quarterly cut-off date?", "Decision": "Yes. In the above circumstances the employer will have an individual superannuation guarantee shortfall under section 19(1) of the SGAA.", "Facts": "An employee dies on 10 April 2008. Accrued salary or wages for the fortnightly pay period 1 April to 14 April 2008 is unpaid at time of death. Pay day is the 14 April 2008. The employer pays salary or wages accrued for the period 1 April to 10 April to the executor of the deceased estate of the employee on 18 April. The employer does not make superannuation contributions to a complying superannuation fund for this employee for the 1 April to 30 June quarter.", "Reasons_for_Decision": "Summary: Subsection 19(1) of the SGAA sets out the formula for the calculation of an employer's individual SG shortfall for an employee for a quarter. The shortfall is calculated by reference to the total salary or wages paid by the employer to the employee for the quarter. Section 15B of the SGAA (applicable after 1 January 2006) extends the application of section 19 of the SGAA to treat former employees as employees. It operates to ensure that the employer will have an individual SG shortfall in respect of salary and wages paid to a former employee if they do not provide a sufficient level of superannuation support by the prescribed time. The SGAA does not define former employee. Therefore, the term takes its ordinary meaning. The Macquarie Dictionary Online defines former as 'past', or 'preceding in time', or 'having held a particular office in the past'. Employee takes its ordinary meaning under section 12 of the SGAA. It is therefore possible for a deceased employee to meet the common law meaning of former employee. Subdivision 290-B of the Income Tax Assessment Act 1997 (ITAA 1997) contains provisions relating to the deductibility of superannuation contributions made by employers. Section 290-60 provides for a deduction to the employer for contributions made to a complying superannuation fund for the purpose of providing superannuation benefits for their employee when the contribution is made. Section 290-85 modifies section 290-60 by extending its application to a contribution an employer makes which reduces their SG charge percentage under sections 22 or 23 of the SGAA in respect of another person because of section 15B of the SGAA. The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 which inserted Subdivision 290-B into the ITAA 1997 states the following: Contributions for former employees 1.36 The general deduction rules outlined above are modified in certain circumstances for contributions made for former employees. 1.37 Superannuation contributions for former employees would ordinarily not be deductible because a condition for deductibility is that the contribution is made at a time when the individual is an employee. However, contributions for former employees that reduce an employer's SG charge percentage (that is, to meet an SG obligation) will continue to be deductible provided the other conditions for deductibility are present. [Schedule 1, item 1, section 290 - 85] .......... 1.39 Deductions will also be available for superannuation contributions made after the death of an employee in the above circumstances (ie, to satisfy an SG obligation or under a salary sacrifice arrangement). Accordingly for the purposes of section 290-85 of the ITAA 1997, a former employee includes a deceased employee. As section 290-85 specifically refers to section 15B of the SGAA, by extension, a deceased employee must fall within the meaning of former employee in section 15B of the SGAA. On the current facts, the reference in section 15B of the SGAA to salary and wages paid to a former employee, in the case where the former employee is a deceased employee, must be a reference to the salary and wages paid to the deceased employee's legal personal representative or to the deceased estate (as they are unable to be paid to the deceased employee). Accordingly, section 15B of the SGAA extends the reference to salary and wages paid by the employer to the employee in the formula in subsection 19(1) of the SGAA to include salary and wages paid after the death of an employee to the deceased estate. If the employer fails to make sufficient superannuation contributions in respect of the payment, the employer will have an individual superannuation guarantee shortfall for the quarter in which the salary or wages were paid. Such an interpretation is entirely consistent with the object of the SGAA. A construction of the provisions which results in an outcome whereby payments of accrued salary and wages paid after the death of an employee are not included when calculating whether the employer has an SG shortfall in relation to the deceased employee would be incongruous with the policy intent of the SGAA. It is also important to remember that subregulation 7.04(6) of the Superannuation Industry (Supervision) Regulations 1994 (SISR) allows a superannuation fund to accept a delayed contribution for an employee after the employee's death. Where a fund is unwilling or unable to accept contributions after the death of an employee, for example because they have already closed the member account, the employer may make a payment, equal to the amount of the contribution, directly to the deceased employee's personal legal representative. Such a payment is treated as a contribution to a complying superannuation fund for the benefit of the employee by virtue of subsection 23(9A) of the SGAA.", "Date_of_Decision": "16 October 2014", "Year_of_Income": "Year ending 30 June 2015", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 15B section 19 subsection 19(1) section 22 section 23 subsection 23(9A)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Contributions for former employees Contributions for employees - allowable deductions Superannuation contributions Superannuation contributions for employees Superannuation guarantee charge Superannuation guarantee shortfalls", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201431", "Unmatched_Content": "Add Superannuation Guarantee | Include reference to subregulation 7.04(6) of the SISR Include reference to section 23(9A) of the SGAA | Keywords Contributions for former employees Contributions for employees - allowable deductions Superannuation contributions Superannuation contributions for employees Superannuation guarantee charge Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2008/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: liability of company for superannuation guarantee charge in respect of a dividend paid by a liquidator for unpaid salary or wages", "Issue": "Where a dividend is paid out of the assets of a company in liquidation by the liquidator to a former employee of the company in respect of a debt for unpaid salary or wages owed by that company to the former employee, is the company in liquidation liable to the superannuation guarantee charge (SGC) under the Superannuation Guarantee (Administration) Act 1992 (SGAA) where the liquidator does not make superannuation contributions in respect of the dividend payment by the relevant quarterly cut-off date?", "Decision": "Yes. Where a dividend is paid out of the assets of the company in liquidation by the liquidator to a former employee of the company in respect of a debt for unpaid salary or wages owed by that company to the former employee, the company in liquidation is liable to the SGC under the SGAA where the liquidator does not make superannuation contributions in respect of the dividend payment by the relevant quarterly cut-off date.", "Facts": "The company was placed into liquidation. The effect of the liquidation was the termination of the employment of an employee of the taxpayer. At the date of liquidation, the taxpayer owed the employee an amount for unpaid wages. The employee lodged a proof of debt with the liquidators of the company for the wages owed. The proof of debt was admitted by the liquidators. On the same day a cheque was drawn on account of the company (in liquidation) for the wages payable to the employee. The payment was made in partial payment of the liability of the company to pay the wages owing to the employee at the date of liquidation. It was calculated on a pro rata basis, having regard to other liabilities of the company. No superannuation contributions were made in respect of the dividend payment by the liquidators.", "Reasons_for_Decision": "Summary: An employer will have a liability to the SGC for a quarter under the SGAA if they do not make sufficient superannuation contributions for the benefit of their eligible employees to a complying superannuation fund or retirement savings account by the relevant quarterly cut-off dates. The SGC is imposed on an employer's superannuation guarantee shortfall (SG shortfall) for a quarter. Subsection 19(1) of the SGAA sets out the formula for the calculation of an employer's individual SG shortfall for an employee for a quarter. The shortfall is calculated by reference to the total salary or wages paid by the employer to the employee for the quarter. If an employer makes a payment to an employee which does not constitute salary or wages or if the payment does constitute salary or wages but it is not paid by the employer (or is not paid 'on behalf of' the employer within the meaning of subsection 6(3) of the SGAA) to the employee, subsection 19(1) of the SGAA will have no application and the employer will not have a liability to the SGC. The definition of salary or wages for the purposes of the SGAA is contained in section 11. A payment that falls within the ordinary meaning of salary or wages will constitute 'salary or wages' under section 11. If the payment does not fall within the ordinary meaning of the term, it will constitute 'salary or wages' for the purposes of the SGAA if the payment falls within the extended definition of 'salary or wages' in paragraphs 11(1)(a) to (e) of the SGAA. In Deputy Commissioner of Taxation v. Applied Design Development Pty Ltd (In Liq) [2002] FCA 205; (2002) 2002 ATC 4193; (2002) 49 ATR 196 ( Applied Design ), the Federal Court held that a priority payment, made under paragraph 556(1)(e) of the Corporations Act 2001 (Corporations Act) to a former employee who had proved a debt for wages, retained its character as salary or wages within the ordinary meaning of that term and was therefore salary or wages for the purposes of section 12-35 of Schedule 1 to the Taxation Administration Act 1953 . The Court looked to the fact that the consideration for the payment (of the dividend) was the services rendered by the former employee to the company prior to its liquidation. It was held that the nature of the payment remained unaltered by the liquidation process. Since the definition of salary or wages in the SGAA relies in part on its common law meaning, the payment of a dividend would also constitute salary or wages for the purposes of the SGAA. Subsection 12(1) of the SGAA provides that the terms 'employer' and 'employee' have their ordinary (that is, common law) meanings. For the purposes of the SGAA, subsections 12(2) to (11) expand the meaning of those terms and make particular provision to avoid doubt as to the status of certain persons. Further, section 15B of the SGAA ensures that a former employee is treated as an employee of their former employer for the purposes of calculating the individual SG shortfall under subsection 19(1) of the SGAA. Normally, where a company has entered into liquidation, the contract of employment between an employee and the company being wound up is terminated on the commencement of the winding up (section 558 of the Corporations Act; Re General Rolling Stock Co; Chapman's Case (1866) LR 1 Eq 346). As a result, the employer/employee relationship between the company and the employee ceases to exist once a winding up order has been made. A liquidator, in applying the company's property in discharging the company's liabilities, is acting as agent for the company - see Re Farrow's Bank Ltd [1921] 2 Ch 164 and Linter Textiles Australia Ltd (in liquidation) v. Commissioner of Taxation [2002] FCA 1089; (2002) 2002 ATC 4785; (2002) 50 ATR 548. Accordingly, any act done by the liquidator as an agent of the company is an act of the company. Therefore, where a liquidator pays a dividend to a former employee in respect of a debt for unpaid salary or wages, this is an act of the company. In terms of the SGAA, this means that it is a payment of salary or wages 'by' the employer to the employee (taking into account the operation of section 15B of the SGAA). Since the dividend payment constitutes salary or wages for the purposes of the SGAA and is paid by the employer to the employee, the company in the circumstances of this case does have a liability for the individual SG shortfall in respect of the employee under subsection 19(1) of the SGAA and consequently, the SGC, as sufficient superannuation contributions were not made by the liquidator, in respect of the payment, by the relevant quarterly cut-off date. The company can avoid a liability to the SGC by the liquidator making the required superannuation contributions to a complying superannuation fund or retirement savings account by the cut off date for the quarter in which the dividend is paid to the former employee.", "Date_of_Decision": "23 January 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 subsection 6(3) section 11 paragraph 11(1)(a) paragraph 11(1)(b) paragraph 11(1)(ba) paragraph 11(1)(c) paragraph 11(1)(d) paragraph 11(1)(e) subsection 12(1) subsection 12(2) subsection 12(3) subsection 12(4) subsection 12(5) subsection 12(6) subsection 12(7) subsection 12(8) subsection 12(9) subsection 12(9A) subsection 12(10) subsection 12(11) section 15B subsection 19(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/25 | ATO ID 2008/27 | ATO ID 2008/28", "Subject_References": "Employees Liquidation Superannuation guarantee charge Superannuation guarantee shortfalls", "Case_References": "Deputy Commissioner of Taxation v. Applied Design Development Pty Ltd (In Liq) [2002] FCA 205 (2002) 2002 ATC 4193 (2002) 49 ATR 196", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200826", "Unmatched_Content": "Keywords Employees Liquidation Superannuation guarantee charge Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2006/6", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "SGC and settlement payment", "Issue": "Does a payment of a court-ordered settlement by an employer to an employee on termination of employment of the employee, relieve the employer of the obligation to pay the superannuation guarantee charge (SGC) to the Australian Tax Office (ATO)?", "Decision": "No. The payment of a court-ordered settlement by an employer to an employee on termination of employment of the employee does not relieve the employer of the obligation to pay the SGC to the ATO.", "Facts": "The employee was paid salary or wages during their period of employment. The employer did not provide any superannuation support for the employee for a particular year. The employee's employment was subsequently terminated. The terms of the settlement state that the employee had to waive any rights they may have in respect of or in connection with their employment with this employer. The settlement payment covers all claims and contemplated claims the employee may have in respect of wages, entitlements, taxes and other costs of whatsoever nature arising from their employment. There was a court settlement whereby the employee was paid a lump sum on termination of employment. The employer contends that they do not have to pay the SGC to the ATO because of the settlement.", "Reasons_for_Decision": "Summary: Under the Superannuation Guarantee (Administration) Act 1992 (SGAA), all employers can make sufficient superannuation contributions to a complying superannuation fund or retirement savings account for the benefit of their eligible employees by the prescribed due dates in the SGAA to avoid having to pay the SGC to the Tax Office. Prior to 1 July 2003, those contributions were required to have been made by 28 July following the end of the financial year. From 1 July 2003, those contributions must be made on a quarterly basis, that is, by the 28th day following the end of the relevant quarter. The SGC is a debt owed by the employer to the Commonwealth, not to the employee. Where payments are not made to a superannuation provider by the prescribed due dates in the SGAA or are paid after the due date, the SGC is still required to be paid to the ATO. Therefore, even if there has been a settlement between the employer and the employee, the terms of which waive any rights the employee may have in respect of or in connection with their employment, the SGC is still required to be paid to the ATO. Note: Paragraph 70 of Superannuation Guarantee Ruling SGR 2009/2 provides that if the settlement payment was a non-dissected lump sum it would not count towards salary and wages or SGC.", "Date_of_Decision": "21 November 2003", "Year_of_Income": "", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 SGAA", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 2009/2 paragraph 70", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation Guarantee Charge", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20066", "Unmatched_Content": "Added note to include reference to SGR 2009/2 and identify that non-dissected payments are not salary and wages or SGC. | Related public rulings (including determinations) | Include reference to SGR 2009/2 | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 2009/2 paragraph 70 | Keywords Superannuation Guarantee Charge"}
{"ATO_ID_Number": "ATO ID 2006/153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: payments of salary or wages to former employees", "Issue": "Will the employer have an individual superannuation guarantee shortfall under subsection 19(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) in respect of a payment of salary or wages to a former employee if the employer does not make sufficient superannuation contributions in respect of the payment by the cut off date for the quarter?", "Decision": "Yes. The employer will have an individual superannuation guarantee shortfall under subsection 19(1) of the SGAA in respect of a payment of salary or wages to a former employee if the employer does not make sufficient superannuation contributions in respect of the payment by the cut off date for the quarter.", "Facts": "The taxpayer ceased employment with the entity (the former employer) on 30 June 2005. The entity paid the taxpayer a bonus payment in September 2005. The bonus is performance based and relates to the taxpayer's employment with the entity in the 2004-05 income year.", "Reasons_for_Decision": "Summary: An employer's individual superannuation guarantee shortfall for an employee for a quarter is the amount worked out using the formula in subsection 19(1) of the SGAA. The shortfall is calculated by reference to the total salary or wages paid by the employer to the employee for the quarter. An employer will have an individual superannuation guarantee shortfall for an employee under subsection 19(1) if the employer has not made sufficient superannuation contributions under either or both sections 22 and 23 of the SGAA to reduce the employer's charge percentage to nil in respect of the employee for the quarter. For periods up until 1 January 2006, there were conflicting views as to whether the formula in subsection 19(1) of the SGAA applied to capture payments of salary or wages by an employer to a former employee. It was argued by some that subsection 19(1) had no operation in relation to former employees as the provision required the existence of a current employment relationship at the time of the payment. The Tax Office view is that, having regard to the context, scope and purpose of subsection 19(1), the better view of the law is that the provision did apply to payments of salary or wages by an employer to a former employee. Provided it is established that the payment arises from and has a clear link to an employer/employer relationship and has the character of salary or wages (as defined in the SGAA), subsection 19(1) will apply notwithstanding the fact that a current employment relationship does not exist at the time of the payment. In the circumstances of this case, the taxpayer ceased work as an employee with the entity on 30 June 2005. The taxpayer received a performance based bonus payment from the entity in September 2005 which related to the taxpayer's employment with the entity in the 2004-05 income year. A bonus that relates to employment constitutes salary or wages for the purposes of the SGAA (paragraph 12 of Superannuation Guarantee Ruling SGR 94/5). Because the bonus arises from and is clearly linked to the former employee's employment, the entity was therefore required to make sufficient superannuation contributions in respect of the payment to avoid having an individual superannuation guarantee shortfall under subsection 19(1) of the SGAA. If the employer fails to make sufficient superannuation contributions in respect of the payment the employer will have an individual superannuation guarantee shortfall for the quarter in which the salary or wages was paid in. For payments of salary or wages by an employer to a former employee on or after 1 January 2006, section 15B of the SGAA operates to put beyond doubt that the employer will have an individual superannuation guarantee shortfall in respect of the former employee under subsection 19(1) of the SGAA if they do not make sufficient contributions in respect of the payment by the cut off date for the quarter.", "Date_of_Decision": "6 June 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 15B subsection 19(1) section 22 section 23", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 94/5", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions for employees Superannuation guarantee shortfalls", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006153", "Unmatched_Content": "This ATO ID was amended by replacing the references to paragraph 12 of SGR 94/5 with paragraph 66 of SGR 2009/2 which was effective from 01 July 2009. | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 94/5 | Keywords Superannuation contributions for employees Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2006/321", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee Charge (SGC): two employment contracts", "Issue": "Where there are two contracts of employment which exist simultaneously between an employer and an employee, will the employer have an obligation under each contract to make sufficient superannuation contributions to avoid a liability to the superannuation guarantee charge (SGC) in respect of the employee under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "Yes, where there are two contracts of employment which exist simultaneously between an employer and an employee, the employer will have an obligation under each contract to make sufficient superannuation contributions to avoid a liability to the SGC in respect of the employee under the SGAA. If the employer makes sufficient superannuation contributions to reduce the employer's charge percentage to nil under one contract but fails to make sufficient contributions to reduce their charge percentage to nil under the other contract, the employer will have a liability to the SGC.", "Facts": "The taxpayer was employed as a part-time administrative assistant with the employer. A contract of employment governed this engagement. During the taxpayer's period of employment with the employer as a part-time administrative assistant, the taxpayer was also engaged as a casual teacher with the employer. A separate contract of employment governed this engagement. Two different certified agreements applied at various stages of the taxpayer's employment in the part-time administrative position. A certified agreement also applied to the taxpayer in the casual teaching position. This agreement was different to the certified agreements which applied to the taxpayer's employment as a part-time administrative assistant. In relation to the taxpayer's employment as a part-time administrative assistant with the employer, the relevant state law required the employer to make superannuation contributions to a defined benefit superannuation scheme. The employer obtained the requisite benefit certificate under section 22 of the SGAA in relation to the defined benefit superannuation scheme for the quarters in question. In relation to the taxpayer's casual teaching position with the employer, neither the contract of employment nor the certified agreement required the employer to make superannuation contributions for the taxpayer. The employer made contributions to an accumulation fund, at the rate of 9% of the taxpayer's ordinary time earnings from the taxpayer's casual teaching position for those months in which the taxpayer was paid more than $450 in a month for their casual work.", "Reasons_for_Decision": "Summary: Under the SGAA, an employer will have a liability to the SGC if the employer does not reduce its charge percentage to nil in respect of an employee. The employer can reduce its charge percentage to nil and therefore avoid a liability to the SGC by making sufficient superannuation contributions to a complying superannuation fund or retirement savings account (RSA) by the relevant cut-off dates in the SGAA. Where an employer makes a contribution to a defined benefit superannuation scheme in respect of an employee, the employer's charge percentage in respect of the employee is reduced under section 22 of the SGAA. The reduction is calculated by reference to the notional employer contribution rate (NECR) specified on the benefit certificate obtained by the employer in relation to the scheme. Where an employer makes a contribution to an RSA or a fund other than a defined benefit superannuation scheme in respect of an employee, the employer's charge percentage in respect of the employee is reduced under section 23 of the SGAA. The SGAA defines 'employer' and 'employee' in section 12. The definition relies in part on the common law meaning of those terms (subsection 12(1) of the SGAA). The common law relationship between an employer and an employee is contractual. In the majority of situations, there will only be a single contract of employment between an employer and an employee. However, it is possible that there can be two or more contracts of employment existing simultaneously between an employer and an employee. In Queensland Independent Education Union of Employees AND Moreton Bay College [2002] QIRC 161; 171 QGIG 329, it was held by the Queensland Industrial Relations Commission that an employer and an employee are not precluded from entering into two separate contracts of employment which operate concurrently, provided that the work performed under those contracts of employment is not regulated by the same award or industrial instrument. In the context of the SGAA, the view that there can be two or more contracts of employment existing simultaneously between an employer and an employee means that where such a situation exists, the employer will have a separate obligation under each contract to reduce their charge percentage to nil under the SGAA to avoid a liability to the SGC. If the employer makes sufficient superannuation contributions to reduce the employer's charge percentage to nil under one contract but fails to make sufficient contributions to reduce their charge percentage to nil under the other contract, the employer will have a liability to the SGC. In the circumstances of this case, the employee was engaged by the employer as a part-time administrative assistant. A contract of employment governed this engagement. The employee was also engaged as a casual teacher with the employer. A separate contract of employment governed this engagement. The employee was thus employed under two separate contracts of employment with the employer. The work performed under those contracts was not regulated by the same industrial instrument. Rather, different certified agreements applied to the different positions. Since the contract of employment between the employee and the employer in relation to the part-time administrative position is separate to the contract of employment governing the casual teaching position, the employer will have a separate obligation under each contract to make contributions to avoid a liability to the SGC under the SGAA. In relation to the part-time administrative position, the employer was required by the relevant state law to provide superannuation support for the employee to a defined benefit superannuation scheme. The employer obtained the relevant benefit certificate in relation to the defined benefit scheme. Provided that the NECR is sufficient to reduce the employer's charge percentage to nil under section 22 of the SGAA, the employer will not have a liability to the SGC under the contract of employment which governs the employee's part-time administrative position. In relation to the contract of employment which governed the employee's casual teaching position, the employer did not have an obligation under the contract or under the relevant certified agreement to make superannuation contributions for the benefit of the employee. Notwithstanding the lack of such an obligation, the employer is still required to make contributions in order to avoid a liability to the SGC under the SGAA in respect of the employee's casual teaching position. Any contributions made in respect of the casual teaching position must be calculated by reference to 'ordinary time earnings' and will reduce the employer's charge percentage under subsection 23(5) of the SGAA. By virtue of subsection 27(2) of the SGAA, there will be no requirement to make contributions where the employee is paid salary or wages of less than $450 in a month in respect of the casual teaching position.", "Date_of_Decision": "10 November 2006", "Year_of_Income": "30 June 2006", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 12 subsection 12(1) section 22 section 23 subsection 23(5) subsection 27(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Defined benefit superannuation funds Employees SGC benefit certificate Superannuation contributions Superannuation guarantee charge", "Case_References": "Queensland Independent Education Union of Employees AND Moreton Bay College (aka QIEU v. Morton Bay College) [2002] QIRC 161 171 QGIG 329", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006321", "Unmatched_Content": "Keywords Defined benefit superannuation funds Employees SGC benefit certificate Superannuation contributions Superannuation guarantee charge"}
{"ATO_ID_Number": "ATO ID 2007/199", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation guarantee: existing employee elections after 30 June 2007", "Issue": "Will an employer who has received an election from an employee prior to 30 June 2007 under subsection 19(4) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) (repealed as of 1 July 2007), and who, pursuant to that election does not make any contributions for a quarter commencing after 30 June 2007 for the benefit of the employee, have an individual superannuation guarantee shortfall for the employee for a quarter?", "Decision": "No, the employer has a right to protection from the superannuation guarantee charge once an employee makes an election under subsection 19(4) of the SGAA for the quarter in which the election is made and all later quarters. This right is preserved notwithstanding that the law conferring this right is repealed, and provides protection to the employer for the duration of the employment contract.", "Facts": "In 2005 an employee reached their pension reasonable benefit limit (RBL). As a result the employee made an election under subsection 19(4) of the SGAA that the employer should not be liable to the superannuation guarantee charge in respect of that employee from that quarter and for all later quarters. The employer, pursuant to that election, did not make any contributions for the benefit of the employee for a quarter commencing after 30 June 2007. The employee is still engaged by the employer after 1 July 2007 under the same employment contract. From 1 July 2007 super simplification changes have removed RBLs. Consequently, subsections 19(4) to 19(7) of the SGAA, which deal with employee elections to forgo superannuation contributions because the pension RBL has been reached, were also repealed from 1 July 2007 by item 350 of Schedule 1 to the Superannuation Legislation (Amendment) Simplification Act 2007 (SLASA).", "Reasons_for_Decision": "Summary: Prior to 1 July 2007, if an employee had benefits in complying superannuation funds in excess of their pension RBL, the employee could make an election under section 19(4) of the SGAA (repealed as of 1 July 2007). The effect of the election was that the employer no longer had an obligation to provide superannuation guarantee support for the employee for the quarter in which the election was made and for all later quarters. Although, the employer could still choose to make superannuation guarantee contributions on behalf of the employee. From 1 July 2007, item 350 of Schedule 1 to the SLASA repeals subsections 19(4) to 19(7) of the SGAA. Existing rights are not affected by repeal unless a contrary intention is shown. This is clear from paragraph 8(c) of the Acts Interpretation Act 1901 which states: Where an Act repeals in the whole or in part a former Act, then unless the contrary intention appears the repeal shall not: ... (c) affect any right privilege obligation or liability acquired accrued or incurred under any Act so repealed; ... The Explanatory Memorandum for the Superannuation Legislation Amendment (Simplification) Bill 2007 does not support a contrary intention. At paragraph 2.7 it states: Currently, employees with accumulated superannuation entitlements in excess of the pension RBL may elect not to receive superannuation contributions from their employers. As RBLs are abolished, from 1 July 2007, these elections will no longer be able to be made. As these elections were irrevocable, existing elections will remain in force. In Statutory Interpretation in Australia , 6th edition, Pearce and Geddes explain the effect of paragraph 8(c) of the Acts Interpretation Act 1901 . At page 21 they say: The section refers to a right that has accrued; hence it is necessary to establish that the right that is claimed to be preserved is a real one and not one that is still in abstracto: Abbott v Minister for Lands [1895] AC 425. As was pointed out in that case, the repeal of any Act must affect 'rights' in the general sense as the law will henceforward be different from what it was. If the Interpretation Act section were to preserve these \"rights\" the effect of the repeal would be rendered nugatory. Channell J in Starey v Graham [1899] 1 QB 406 at 411 put it that a right acquired \"means some specific right which in one way or another has been acquired by an individual, and which some persons have got and others have not got\". In this case, it is clear that the employer, having received a notice given under subsection 19(4) of the SGAA, acquired a real right, one that others did not acquire. The right ensured that the employer was not liable for the superannuation guarantee charge if it did not make superannuation contributions on behalf of the particular employee for the quarter in which the election was made and for all later quarters. Therefore, the repeal of subsections 19(4) to 19(7) of the SGAA from 1 July 2007 does not affect the existing protection the employer has if it does not make superannuation contributions on behalf of the employee after 1 July 2007. This protection will last until the employment contract under which the employee conferred the right ceases. While the employer is protected if it does not provide superannuation guarantee support for the employee, the employer may choose to make superannuation contributions on behalf of the employee and claim a deduction for this amount. The employer and employee may also choose to renegotiate their employment contract having regard to the repeal of subsections 19(4) to 19(7) of the SGAA.", "Date_of_Decision": "18 September 2007", "Year_of_Income": "30 June 2008", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 subsection 19(4) subsection 19(5) subsection 19(6) subsection 19(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Employer superannuation contributions Superannuation Superannuation guarantee charge", "Case_References": "", "Other_References": "Paragraph 2.7 of the Explanatory Memorandum for the Superannuation Legislation Amendment (Simplification) Bill 2007 Pearce, DC and Geddes, RS 2006, Statutory Interpretation in Australia, 6th edn, Butterworths, Chatswood NSW, pp. 201.", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007199", "Unmatched_Content": "Keywords Employer superannuation contributions Superannuation Superannuation guarantee charge"}
{"ATO_ID_Number": "ATO ID 2002/309", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee Scheme: Superannuation Guarantee Charge", "Issue": "Can the Commissioner remit any components of the Superannuation Guarantee Charge (SGC)?", "Decision": "No, the Commissioner cannot waive any components of the SGC as there is no discretion available in the Superannuation Guarantee (Administration) Act 1992 (SGAA).", "Facts": "The taxpayer is an employer who made insufficient superannuation contributions to a complying superannuation fund for its employees in relation to a year of income. As a result, the employer is liable to pay SGC in relation to the year of income.", "Reasons_for_Decision": "", "Date_of_Decision": "19 July 2001", "Year_of_Income": "", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 Section 16 Section 17 Section 19 Section 31 Section 32", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation guarantee charge Superannuation guarantee penalties Superannuation guarantee shortfalls", "Case_References": "AAT Case 12,229; Jarra Hills Pty Ltd v. Federal Commissioner of Taxation 37 ATR 1022 97 ATC 2132", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002309", "Unmatched_Content": "Reason for Decision: Section 16 of the SGAA states that the SGC imposed on an employer's superannuation guarantee shortfall for a year must be paid by the employer. This shortfall is defined under section 17 of the SGAA. The shortfall consists of three components. | Where a shortfall exists, there is no discretion in the SGAA for the Commissioner to remit or waive any part of the SGC. This was considered in Jarra Hills Pty Ltd v. FC of T 37 ATR 1022, 97 ATC 2132. It was held that there was no provision in the legislation giving a discretion to either the Commissioner or Tribunal to reduce or remit the SGC. Therefore the Commissioner has no power to remit any components of the SGC. | Keywords Superannuation guarantee charge Superannuation guarantee penalties Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2008/89", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess concessional contributions tax: notional taxed contributions - non-accruing member", "Issue": "Is a defined benefit fund member a non-accruing member of the superannuation fund for the whole of the financial year where the member has a benefit entitlement in the fund, but no employer-provided benefits have accrued to the member and the rules of the fund provide that the member's benefit is to increase at the same rate at which their final average salary (on which the member's benefit is based) increases?", "Decision": "Yes. For the purposes of paragraph 292-170.04(3)(b) of the Income Tax Assessment Regulations 1997 (ITAR 1997), the defined benefit fund member is a non-accruing member of the fund for the whole financial year.", "Facts": "Upon retirement, a defined benefit fund member will be entitled to receive a defined benefit pension equal to 2% of their final average salary (FAS) for each year of service up to age 65, subject to a maximum of 60% of their FAS. The member's FAS is calculated as the average of their annual salaries over the three years prior to leaving employment. The member joined the defined benefit fund at age 30 and reached their maximum accrued pension (that is, 60% of FAS) at age 60 after 30 years of service. The member has remained in service with the same employer after reaching age 60, but has not accrued any further pension multiple since reaching 30 years of service with the employer. The member's defined benefit on leaving employment will be a pension of 60% of FAS, where FAS is calculated at the date of leaving employment. Due to an increasing annual salary, the member's FAS has increased each year since reaching age 60. However, the member's accrued pension multiple has not increased since reaching 30 years of service. During the whole financial year(s) occurring after the completion of the 30th year of service until leaving employment, no employer-provided benefits accrue to the member for the whole of those financial year(s).", "Reasons_for_Decision": "Summary: Notional taxed contributions are the contributions which are used to determine the amount of concessional contributions in respect of a person's defined benefit interest for excess concessional contributions tax. Regulation 292-170.04 of the ITAR 1997 sets out circumstances in which the amount of the notional taxed contributions for a financial year in respect of the defined benefit interest of a member of a superannuation fund is nil. The circumstance addressed in subregulation 292-170.04(3) of the ITAR 1997 requires, amongst other criteria, that the member be a non-accruing member of the fund for the whole of the financial year. In effect, paragraph 292-170.04(5)(a) of the ITAR 1997 and subparagraph 292-170.04(5)(b)(iv) of the ITAR 1997 combine to read: ... a defined benefit member of a superannuation fund is a non-accruing member of the fund for the whole of a financial year if, for the whole of the financial year...the member has a benefit entitlement in the fund, but no employer-provided benefits have accrued to the member; and...the rules of the fund provide that the benefit:...is to increase at the rate (if any) at which the salary on which the member's benefit is based increases... For the purposes of subparagraph 292-170.04(5)(b)(iv) of the ITAR 1997, it is accepted that the term 'salary' extends to final average salary. In the case at hand, the member has a benefit entitlement in the fund but no employer-provided benefits have accrued to the member, and the fund rules provide that the member's benefit is to increase at the rate at which the final average salary on which the member's benefit is based increases. Therefore the member is a non-accruing member of the fund.", "Date_of_Decision": "5 May 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Regulations 1997 regulation 292-170.04 subregulation 292-170.04(3) paragraph 292-170.04(3)(b) paragraph 292-170.04(5)(a) subparagraph 292-170.04(5)(b)(iv)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Concessional contributions Defined benefit superannuation funds Employer sponsored superannuation funds Excess concessional contributions Superannuation Superannuation excess contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200889", "Unmatched_Content": "Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997. | Keywords Concessional contributions Defined benefit superannuation funds Employer sponsored superannuation funds Excess concessional contributions Superannuation Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2008/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess concessional contributions tax: notional taxed contributions - exercise of a discretion under Part 4 of Schedule 1A to the ITAR 1997", "Issue": "Is a choice made by a defined benefit member between a lump sum or pension benefit considered to be the exercise of a discretion as referred to in Part 4 of Schedule 1A to the Income Tax Assessment Regulations 1997 (ITAR 1997)?", "Decision": "No. The choice made by the member is not considered to be the exercise of a discretion as referred to in Part 4 of Schedule 1A to the ITAR 1997. Therefore W is equal to zero in the formula for working out the total amount of notional taxed contributions for the financial year in section 1.8 of Part 1 of Schedule 1A to the ITAR 1997.", "Facts": "The member was an accruing member of a defined benefit superannuation fund. Upon retirement, the member had a choice of receiving either a lump sum payment or a superannuation pension. The member retired and chose to receive a lump sum payment.", "Reasons_for_Decision": "Summary: Section 1.8 of Part 1 of Schedule 1A to the ITAR 1997 sets out the standard method for working out the total amount of notional taxed contributions for an accruing member of a defined benefit fund for a financial year as being: T + (1.2 × (W + X + Y + Z)) where W is an amount worked out on advice from an actuary under Part 4 of Schedule 1A of the ITAR 1997. Part 4 of Schedule 1A to the ITAR 1997 deals with situations involving the exercise of a discretion to pay a benefit (in certain circumstances) which is greater than the benefit assumed in calculating the new entrant rate under Part 2 of Schedule 1A of the ITAR 1997. The Commissioner's view is that the choice made by the member (that is, in choosing the type of benefit they receive) does not constitute the exercise of a discretion for the purposes of Part 4 of Schedule 1A to the ITAR 1997. Part 4 of Schedule 1A to the ITAR 1997 therefore does not apply to the case at hand, and item 'W' equals zero in section 1.8 of Part 1 of Schedule 1A to the ITAR 1997. Furthermore, under Part 2 of Schedule 1A to the ITAR 1997, the new entrant rate is calculated using the present value of the fund benefit payable on voluntary exit of the fund. Under subsection 2.1(5) of Part 2 of Schedule 1A the present value of the fund benefit is to be calculated having regard to the rules and practice of the fund including (amongst other things) member options. The Commissioner considers the take up rate of a member option to choose between a pension and a lump sum would be a member option that would have been regarded in calculating the present value of the fund benefit used in calculating the new entrant rate.", "Date_of_Decision": "3 June 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Regulations 1997 section 1.8 of Part 1 of Schedule 1A Part 2 of Schedule 1A subsection 2.1(5) of Part 2 of Schedule 1A Part 4 of Schedule 1A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Concessional contributions Concessional contributions cap Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200897", "Unmatched_Content": "Keywords Concessional contributions Concessional contributions cap Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2008/162", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess Contributions Tax: notional taxed contributions - PSS Defined Benefit Interest", "Issue": "In determining a person's concessional contributions under section 291-165 of the Income Tax Assessment Act 1997 (ITAA 1997) for a financial year, is the person's notional taxed contributions in respect of their interest in the Public Sector Superannuation Scheme (PSS) equal to the employer productivity contributions made for them to the fund in the financial year?", "Decision": "Yes. A person's notional taxed contributions in respect of their interest in the PSS is equal to the employer's productivity contributions made for them to the fund for the financial year.", "Facts": "The taxpayer is a member of the PSS. The PSS is a defined benefit scheme. The taxpayer has employer contributions made to an accumulation interest in another superannuation fund under a salary sacrifice arrangement.", "Reasons_for_Decision": "Summary: Section 291-25 of the ITAA 1997 sets out the amount of concessional contributions for a person for a financial year. Generally, a contribution will be a concessional contribution if: Subsection 291-25(3) of the ITAA 1997 also includes an amount as a concessional contribution where it is allocated to a member by the superannuation provider for the year in accordance with conditions specified in the regulations. Subdivision 291-C of the ITAA 1997 modifies the meaning of concessional contributions as it relates to defined benefit interests. According to section 291-165 of the ITAA 1997, the amount of an individual's concessional contributions for a financial year is the sum of: Members of the PSS are entitled to a defined benefit from the fund. The defined benefit is partially met by contributions made into the fund in respect of the member and earnings on those contributions. The member's own contributions and employer productivity contributions are made to the fund in respect of the member. The PSS allocates earnings on these contributions. The PSS refers to the member's own contributions and earnings on those contributions as the member component. The PSS refers to the employer productivity contributions and the earnings on those contributions as the productivity component. The balance of a member's benefit, determined at the time of leaving the fund or commencement of an income stream is met by payments directly from the consolidated revenue. This is known as the unfunded portion of the benefit. The PSS refers to it as the employer-financed component. A member's interest in the PSS is a defined benefit interest, therefore under paragraph 291-165(b) of the ITAA 1997, the amount of a person's concessional contributions for the financial year will include their notional taxed contributions in respect of their defined benefit interest in the PSS for the financial year. Notional taxed contributions are amounts specified under section 291-170 of the ITAA 1997. Subsection 291-170(1) of the ITAA 1997 provides that a person's 'notional taxed contributions' for a financial year in respect of a defined benefit interest has the meaning given in the regulations. Subsection 291-170(2) of the ITAA 1997 indicates that the regulations made for determining a person's notional taxed contributions may also provide the method for calculating the amount of notional taxed contributions. For superannuation funds with five or more defined benefit members, such as the PSS, subregulation 292-170.02(2) of the Income Tax Assessment Regulations 1997 (ITAR 1997) specifies that the notional taxed contributions are contributions determined by the trustee to be notional taxed contributions, using the method set out in Schedule 1A to the ITAR 1997. The relevant method for the PSS is contained in section 1.6 of Schedule 1A to the ITAR 1997. It provides: 1.6 Standard method for working out amount of notional taxed contributions in respect of a benefit category for an accruing member of the benefit category if the fund benefit is wholly sourced from an accumulation of contributions made in respect of the member If the fund benefit is wholly sourced from an accumulation of concessional contributions made to a superannuation fund in respect of a member or earnings on such contributions, or an accumulation of member contributions or earnings on such contributions, the amount of notional taxed contributions for an accruing member for a financial year is the amount of concessional contributions made to the superannuation fund in respect of the member during the financial year. Section 1.5 of Schedule 1A to the ITAR 1997 explains that a 'fund benefit' as referred to in section 1.6 of Schedule 1A to the ITAR 1997 is that part of a defined benefit interest which is sourced from contributions made into a superannuation fund or earnings on such contributions. In the case of the PSS, the fund benefit consists of the member's own contributions, the employer productivity contributions and the earnings on those contributions (that is, the member component and the productivity component). As the amount paid from consolidated revenue - the employer-financed component - is not sourced from an accumulation of contributions made in respect of the member, it is not part of the fund benefit. Section 1.6 of Schedule 1A to the ITAR 1997 applies because the fund benefit is wholly sourced from an accumulation of contributions made in respect of the member. Therefore, in accordance with section 1.6, the amount of notional taxed contributions is the amount of concessional contributions made to the PSS in respect of the member during the financial year. The concessional contributions are the contributions made in respect of the member and included in the assessable income of the superannuation provider but not specifically excluded under paragraph 291-25(2)(c) of the ITAA 1997. In the PSS this is the employer productivity contributions (member contributions are non-concessional contributions). Consequently, the notional taxed contributions in respect of a person's interest in the PSS is equal to the amount of the employer productivity contributions made in a financial year. In this case, the taxpayer's total concessional contributions for the financial year are the sum of the employer contributions made under the salary sacrifice arrangement to the accumulation interest for the financial year and the employer productivity contributions made to the PSS for the financial year.", "Date_of_Decision": "2 September 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subdivision 291-C section 291-25 subsection 291-25(2) paragraph 291-25(2)(c) subsection 291-25(3) section 291-165 paragraph 291-165(a) paragraph 291-165(b) section 291-170", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Concessional contributions Defined Benefit interests - non-concessional contributions Excess non-concessional contributions Superannuation excess contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008162", "Unmatched_Content": "Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997. | Keywords Concessional contributions Defined Benefit interests - non-concessional contributions Excess non-concessional contributions Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2015/21", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "ECT: concessional contributions - reserve", "Issue": "When determining the amount of a person's concessional contributions covered under subsection 291-25(3) of the Income Tax Assessment Act 1997 (ITAA 1997) is the self-insurance reserve maintained by the trustee of a particular fund a 'reserve' for the purpose of subregulation 292-25.01(4) of the Income Tax Assessment Regulations 1997 (ITAR 1997)?", "Decision": "Yes. In determining the amount of a person's concessional contributions covered under subsection 291-25(3) of the ITAA 1997 the self-insurance reserve maintained by the trustee of the fund is a 'reserve' for the purpose of subregulation 292-25.01(4) [1] of the ITAR 1997.", "Facts": "The fund is a complying superannuation fund. Each member of the fund has an accumulation account to which employer and member contributions are required to be made in accordance with the rules of the fund. The trust deed of the fund authorises the trustee to pay specified benefits (called the 'disability payments' in this Interpretative Decision) if a member is temporarily or permanently disabled such that the member is unable to work. Further, the deed provides that a member is entitled to death, resignation, or retirement benefits (called the 'end benefits') that are not adversely affected by any period of non-service during which the member receives disability payments. The complying superannuation fund does not hold insurance policies to fund either the disability payments or to fund the end benefits of a member who is disabled. Instead, the fund self-insures against these liabilities. To finance the self-insurance the fund's deed authorises the trustee to deduct a monthly insurance charge from each member's account. A corresponding amount is recorded in an account identified as the self-insurance reserve. The fund's financial reports recognise the self-insurance reserve as a reserve. The amount in the self-insurance reserve is used to meet current disability liabilities and to cover liabilities that may arise from the happening of insured events in the future. While a member is in receipt of disability payments no employer or member contributions are made to the account of the member. However each month the trustee credits an amount to the account of a member who is receiving disability payments. The amount is equal to the contributions that both the member and the member's employer were required to make immediately before the member's disability arose. The crediting of those amounts to the member's account ensures the trustee complies with its obligation to ensure the member's end benefits are not adversely affected by any period of non-service during which they receive disability payments. Each amount is allocated from the self-insurance reserve. In accordance with the deed, disability payments are made directly from the self-insurance reserve to members who have suffered a disability. These payments have no effect on the member's account.", "Reasons_for_Decision": "Summary: Subsection 291-25(1) of the ITAA 1997 provides that a person's concessional contributions for a financial year is the sum of each contribution covered under subsection 291-25(2) of the ITAA 1997 and each amount covered under subsection 291-25(3) of the ITAA 1997. Subsection 291-25(3) of the ITAA 1997 includes in a person's concessional contributions an amount in a complying superannuation plan that is allocated for the person in accordance with the conditions specified in the regulations. The relevant regulation is regulation 292-25.01 of the ITAR 1997. Subregulation 292-25.01(4) of the ITAR 1997 provides that an amount allocated from a reserve is treated as being allocated in a way covered by subsection 291-25(3) of the ITAA 1997 unless an exclusion in subregulation 292-25.01(4) of the ITAR 1997 applies. There is no definition of 'reserve' in the ITAA 1997 or the ITAR 1997. The meaning of 'reserve' for the purposes of regulation 292-25.01 of the ITAR 1997 is to be determined by reference to its ordinary meaning, the context in which the word is used in that regulation and the purpose for which the regulation was enacted. (See Project Blue Sky Inc v. Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28) According to the Macquarie Dictionary, 3rd edition 1998 a 'reserve (noun)' is 'an amount of capital retained by a company to meet contingencies, or for any other purpose to which the profits of the company may be profitably applied... something reserved, as for some purpose or contingency; a store or stock'. The Australian Prudential Regulation Authority (APRA) has issued Prudential Practice Guide SPG 222: Management of reserves (SPG 222) which discusses the use of reserves in superannuation entities for the purposes of complying with Superannuation Industry (Supervision) Act 1993 (SISA) and Superannuation Industry (Supervision) Regulations 1994 (SISR). It describes reserves as monies which form part of the net assets of the fund and which have been set aside for a clearly stated purpose. It lists the most common types of reserves as operational risk reserves, self-insurance reserves and investment reserves. However, SPG 222 also states that while reserves in superannuation funds are monies that have not been allocated to members not all unallocated monies are reserves. It states that unallocated monies that are not reserves include suspense accounts used to record contributions and roll-overs pending allocation to members. The meaning of 'reserves' for the purposes of SISA was discussed in Re VBN and APRA (No 5) [2006] AATA 710 by Deputy President Forgie and Senior Member Pascoe of the AAT. In a joint decision they considered at paragraph 442 that the word 'reserves' in section 115 of the SISA did not have a specialised meaning that differs from its ordinary English meaning. They observed that both standard and specialist dictionaries gave consistent meanings that conveyed the notion of 'actual monetary funds or assets' that were 'put aside to meet future contingencies and demands'. Therefore, for the purposes of subregulation 292-25.01(4) of the ITAR 1997, 'reserve' includes an amount set aside from the amounts allocated to particular members to be used for a certain purpose or on the happening of a certain event. However, there is evidence that 'reserve' as used in subregulation 292-25.01(4) of the ITAR 1997 is intended to have a broader meaning than that. For example, the Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No. 3) refers to employer contributions that are accepted into a reserve prior to allocation to a member in compliance with Division 7.2 of the SISR. That is, what the Explanatory Statement refers to as a reserve is characterised in the Prudential Practice Guide SPG 222 as a suspense account used to record contributions pending their allocation to members. Further, subregulation 292-25.01(4) of the ITAR 1997 was amended by Income Tax Assessment Amendment Regulations 2007 (No. 6) to include 'other than an amount that is covered by subregulation (2)' so that the exclusions in subregulation 292-25.01(4) would not apply to contributions allocated under Division 7.2 of the SISR. That is, for the purpose of regulation 292-25.01 of the ITAR 1997, contributions received by the fund, but not yet allocated to the member under Division 7.2 of the SISR, were considered to represent a reserve. The Explanatory Statement to the amending regulations stated that without the amendment the exclusions under subregulation 292-25.01(4) could apply to the contributions that are required to be allocated to a member under Division 7.2 of the SISR. According to section 291-5 of the ITAA 1997 the object of Division 291 of the ITAA 1997 is to ensure, in relation to concessional contributions, the amount of concessionally taxed superannuation benefits a person receives results from contributions that have been made gradually over the course of the person's life. Unless specifically excluded, contributions made by or on behalf of an individual are intended to be counted as either concessional contributions or non-concessional contributions depending on whether the contribution is included in the fund's assessable income. In addition, other amounts allocated to a member may also be included in the definitions of concessional contributions and non-concessional contributions by virtue of regulations (see subsection 291-25(3) and paragraph 292-90(4)(a) of the ITAA 1997). Paragraph 1.66 of the Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006 states that additional amounts allocated to an individual are included in concessional contributions to ensure the integrity of the concessional contributions cap. Amounts allocated to an individual by a superannuation provider in excess of 'an amount that reasonably reflects the contributions made by, or on behalf of, the individual and investment earnings in relation to the individual's superannuation interest' are included in concessional contributions. In the Commissioner's view 'reserve' as used in regulation 292-25.01 of the ITAR 1997 should be given a broad meaning to maintain the integrity of the contributions caps. This is consistent with the purpose of Division 291 of the ITAA 1997 and the wording of regulation 292-25.01 of the ITAR 1997, in particular the express link made from subregulation 292-25.01(4) of the ITAR 1997 to subregulation 292-25.01(2) of the ITAR 1997. It is also consistent with the statements about excess contributions tax and allocations at paragraphs 1.61 to 1.68 of the Explanatory Memorandum to Tax Laws Amendment (Simplified Superannuation) Bill 2006 and in the Explanatory Statements to Income Tax Assessment Amendment Regulations 2007 (No. 3) and Income Tax Assessment Amendment Regulations 2007 (No. 6). It is not necessary to decide the precise scope of the meaning of 'reserve' as used in subregulation 292-25.01(4) of the ITAR 1997 to answer the question in this Interpretative Decision. In this case, the self-insurance reserve is a 'reserve' for the purpose of subregulation 292-25.01(4) of the ITAR 1997. It comprises amounts that are set aside from the amounts allocated to the accounts of the members. The amounts set aside are used for particular purposes, being to fund the member's end benefits and to pay the disability benefits. This conclusion does not rely upon the fact that the reserve was created by deducting amounts from the accounts of members. The process by which any amount is set aside is not central to determining if there is a reserve. It follows that allocations by the trustee from the self-insurance reserve to a member's account are allocations from a reserve for the purposes of subregulation 292-25.01(4) of the ITAR 1997.", "Date_of_Decision": "17 June 2015", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Division 291 section 291-5 subsection 291-25(1) subsection 291-25(2) subsection 291-25(3) paragraph 292-90(4)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excess concessional contributions Concessional contributions", "Case_References": "Re VBN and APRA (No 5) [2006] AATA 710", "Other_References": "Prudential Practice Guide SPG 222: Management of reserves, Australian Prudential Regulation Authority Macquarie Dictionary 3rd edition 1998 Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No. 3) Explanatory Statement to Income Tax Assessment Amendment Regulations 2007 (No. 6) Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201521", "Unmatched_Content": "Keywords Excess concessional contributions Concessional contributions"}
{"ATO_ID_Number": "ATO ID 2015/22", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "ECT: concessional contributions - allocation from 'pension reserve account' supporting 'complying lifetime pension'", "Issue": "Where a member of a self managed superannuation fund (SMSF) commutes a 'complying lifetime pension' payable to them, will the member have concessional contributions for a financial year if the trustees of the fund:", "Decision": "Yes. In those circumstances the member will have concessional contributions equal to the amount allocated to the member from the 'pension reserve account'.", "Facts": "Details of the complying lifetime pension payable to the member A SMSF has two members. On 1 July 2008, one of those members commenced an indexed pension that was payable for their life and, on their death, for their spouse's life. That pension satisfied the requirements of subregulation 1.06(2) of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). In this ATO Interpretative Decision, such a pension is called a 'complying lifetime pension'. The complying lifetime pension was commenced using $1.3 million of the value of the relevant member's interest in the fund. A further $200,000 was retained in the fund to accumulate for the benefit of the relevant member and was not an amount supporting any pension. No other complying lifetime pension has ever been payable to any member of the fund. Rules of the fund Relevant rules of the fund when the complying lifetime pension commenced included: The trustees' resolutions in relation to the complying lifetime pension In accepting the relevant member's application to commence the complying lifetime pension, the trustees resolved to establish: The relevant member was informed of those resolutions on 1 July 2008. Subsequently on the same day, a further resolution was made by the trustees in relation to the complying lifetime pension. The trustees resolved to establish a pension reserve account in accordance with fund rules to guarantee the payment of amounts required by the terms of the complying lifetime pension. The pension reserve account is to be used to provide the trustees with reserve assets in the event the funds invested perform poorly and the actuary is of the opinion that the reserves should be credited to fund the relevant member's complying lifetime pension. Accounting for the complying lifetime pension The fund's actuary advised that the sum of $1.3 million could be used to provide an indexed pension equal to $59,500 in the first year, with indexation of 3% per annum for the lives of the relevant member and their spouse. At the commencement of the complying lifetime pension, the actuary made an estimate of the value of the pension (the best estimate) which the trustees recorded in an account designated as the 'pension account'. The actuary's best estimate of the value of the complying lifetime pension was $920,000. The balance of the $1.3 million with which the pension was commenced was recorded in an account designated the 'pension reserve account'. However, the actuary indicated to the trustees that the balance of that account, being $380,000, comprised an investment adequacy amount of $210,000, a mortality amount of $60,000 and a surplus amount of $110,000. At the end of each year, the total value of the assets in the fund is calculated and the value of each of the accounts held for a member as an accumulation account, or account-based pension account is subtracted from that total. The remainder is treated as relating to the complying lifetime pension. An amount equal to the actuary's best estimate of the value of the complying lifetime pension is recorded as the value of the complying lifetime pension account. The remaining value of the fund is recorded as the value of the pension reserve account but is also split between an investment adequacy amount, a mortality amount and a surplus amount (if any). The complying lifetime pension paid has at all times satisfied the requirements of subregulation 1.06(2) of the SIS Regulations. Commutation of the complying lifetime pension On 30 June 2014, the relevant member applied to commute the complying lifetime pension by having the balance of the: At 30 June 2014, on the advice of an actuary, the trustees of the fund had recorded the balance of the relevant member's complying lifetime pension account as $1.2 million and the pension reserve account as $450,000, comprising an investment adequacy amount of $170,000, a mortality amount of $90,000 and a surplus amount of $190,000. Together the balance of the two accounts equalled $1.65 million. On 1 July 2014, the trustees commuted the complying lifetime pension as requested by the relevant member. The trustees treated the balance of the complying lifetime pension account ($1.2 million) as the amount of the superannuation lump sum resulting from the commutation. That amount was transferred for the relevant member to commence the market linked pension. The balance of the pension reserve account ($450,000) was allocated to the relevant member and used by them to commence an account-based pension.", "Reasons_for_Decision": "Detailed Reasoning - Outline of relevant excess contributions tax (ECT) provisions: Subsection 291-25(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a person's concessional contributions for a financial year is the sum of each contribution covered under subsection 291-25(2) of the ITAA 1997 and each amount covered under subsection 291-25(3) of the ITAA 1997. Subsection 291-25(3) of the ITAA 1997 includes in a person's concessional contributions for a financial year an amount in a complying superannuation plan that is allocated for the person for the year in accordance with the conditions specified in the regulations. The relevant regulation is regulation 292-25.01 [1] of the Income Tax Assessment Regulations 1997 (ITAR 1997). Subregulation 292-25.01(4) of the ITAR 1997 provides that an amount allocated from a reserve is treated as being allocated in a way covered by subsection 291-25(3) of the ITAA 1997 unless an exclusion in subregulation 292-25.01(4) applies. Relevantly, paragraph 292-25.01(4)(b) of the ITAR 1997 excepts an amount that is allocated from a reserve if: | Detailed Reasoning - Meaning of ' reserve': There is no definition of 'reserve' in the ITAA 1997 or the ITAR 1997. In ATO ID 2015/21, the Commissioner concluded that 'reserve' as used in regulation 292-25.01 of the ITAR 1997 has a broad meaning and includes an amount set aside from the amounts allocated to particular members to be used for a certain purpose or on the happening of a certain event. | Detailed Reasoning - Reserve in this case?: In the Commissioner's view, the effect of the trustees' resolutions in relation to the complying lifetime pension and the fund's accounting for that pension is that the two, apparently separate accounts - the complying lifetime pension account and the pension reserve account - operate in effect as a single account. Further, together the two accounts comprise an amount that is available to the trustee, not the member, to satisfy the trustee's liability to pay the complying lifetime pension. In the Commissioner's view, the complying lifetime pension account and pension reserve account together represent a reserve (for the purposes of regulation 292-25.01 of the ITAR 1997) to guarantee the complying lifetime pension payments for the term of the complying lifetime pension. | Detailed Reasoning - Use of the reserve: If an amount allocated from a reserve is not to be treated as a concessional contribution by reason of paragraph 292-25.01(4)(b) of the ITAR 1997, subparagraph 292-25.01(4)(b)(i) of the ITAR 1997 requires the reserve to be 'used solely for the purpose of enabling the fund to discharge all or part of its liabilities ... in respect of superannuation income stream benefits that are payable by the fund at that time'. The complying lifetime pension is a 'superannuation income stream' as defined in regulation 995-1.01 of the ITAR 1997. In this case the fund rules and the trustees' resolution authorised the trustee to establish and operate reserves, and to apply an amount standing in a reserve for the provision of the complying lifetime pension to the relevant member. Further, the trustee's resolution in relation to the complying lifetime pension made it clear that while ever there was a complying lifetime pension payable to the relevant member or their beneficiary, the trustee was restricted to applying the reserve to that purpose only. Further still, in this case there is no evidence that either the complying lifetime pension account or pension reserve account has been used for any purpose other than to pay the complying lifetime pension. | Detailed Reasoning - Commutation of the income stream: If an amount allocated from a reserve is not to be treated as a concessional contribution by reason of paragraph 292-25.01(4)(b) of the ITAR 1997, one of the sub-subparagraphs of subparagraph 292-25.01(4)(b)(ii) of the ITAR 1997 must also be met. In this case sub-subparagraph 292-25.01(4)(b)(ii)(B) of the ITAR 1997 is relevant and requires that 'on the commutation of the income stream ... the amount is allocated to the recipient of the income stream, to commence another income stream, as soon as practicable'. Subparagraph 1.06(2)(e)(iii) of the SIS Regulations provides that a complying lifetime pension may be commuted if the superannuation lump sum resulting from the commutation is transferred directly for the purpose of purchasing another income stream of a type specified in that subparagraph. A market linked pension is one of those specified types of income stream, but an account-based pension is not. Regulation 6.17C of the SIS Regulations provides that if a regulated superannuation fund provides a pension under the rules of subregulation 1.06(2) of the SIS Regulations, the trustee must not allow the pension to be commuted except in accordance with that subregulation. Regulation 6.17C of the SIS Regulations ensures that the only type of pension which may be commenced by applying the amount arising from the commutation of a complying lifetime pension is another complying lifetime pension or another kind of 'complying' pension. 'Complying' pensions are those that satisfy the requirements of subregulation 1.06(2), subregulation 1.06(7) or subregulation 1.06(8) of the SIS Regulations. This requirement is also reflected in subregulation 1.06(1B) of the SIS Regulations which allows the trustees of a fund to commence a new market linked pension after 20 September 2007 only if certain conditions are met. One of those conditions is that the new market linked pension meets the requirements of both subregulation 1.06(8) and subregulation 1.06(9A) of the SIS Regulations. There is nothing in subregulations 1.06(1B) or (2) of the SIS Regulations that allows a trustee to apply the amount arising from the commutation of a complying lifetime pension to commence a pension that meets only the requirements of subregulation 1.06(9A) of the SIS Regulations (to be an account-based pension). | Detailed Reasoning - Applying the paragraph 292-25.01(4)(b) exception: As it is the Commissioner's view that the complying lifetime pension account and pension reserve account together represent a reserve for the purposes of regulation 292-25.01 of the ITAR 1997, an amount allocated from either of the two accounts may satisfy sub-subparagraph 292-25.01(4)(b)(ii)(B) of the ITAR 1997. Therefore, where: it is the Commissioner's view that the requirements in sub-subparagraph 292-25.01(4)(b)(ii)(B) of the ITAR 1997 would be satisfied. However, where an amount allocated either from the complying lifetime pension account or the pension reserve account is applied to commence a pension for the relevant member that meets only the requirements of subregulation 1.06(9A) of the SIS Regulations (to be an account-based pension), that amount cannot be said to be allocated 'on the commutation of' the complying lifetime pension. Use of an amount supporting the complying lifetime pension in that way is contrary to the requirements of subregulation 1.06(1B), subparagraph 1.06(2)(e)(iii) and regulation 6.17C of the SIS Regulations. Being contrary to those regulations, such an allocation would not satisfy sub-subparagraph 292-25.01(4)(b)(ii)(B) of the ITAR 1997. | Detailed Reasoning - Conclusion: Accordingly on 1 July 2014, as the trustees commuted the complying lifetime pension using the whole of the amount in the complying lifetime pension account ($1.2m) to commence the market linked pension, that amount was not a concessional contribution pursuant to subregulation 292-25.01(4) of the ITAR 1997. However, the exclusion in paragraph 292-25.01(4)(b) of the ITAR 1997 does not apply to an allocation from either the complying lifetime pension account or pension reserve account to commence an account-based pension for the member for the reasons set out above.", "Date_of_Decision": "17 June 2015", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Income Tax Assessment Act 1997 Division 291 subsection 291-25(1) subsection 291-25(2) subsection 291-25(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2015/21 | ATO ID 2012/32 (withdrawn)", "Subject_References": "Excess concessional contributions Concessional contributions Superannuation Annuities & superannuation pensions Market linked income stream Superannuation pensions", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201522", "Unmatched_Content": "Keywords Excess concessional contributions Concessional contributions Superannuation Annuities & superannuation pensions Market linked income stream Superannuation pensions"}
{"ATO_ID_Number": "ATO ID 2008/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person receiving a defined benefit pension", "Issue": "Is a person who is receiving a defined benefit pension from a defined benefit superannuation fund a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the Income Tax Assessment Regulations 1997 (ITAR 1997)?", "Decision": "Yes. A member who is receiving a defined benefit pension from a defined benefit superannuation fund is a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the ITAR 1997.", "Facts": "The XYZ defined benefit superannuation fund has 52 members. During the 2007-08 income year, four of the members are accruing defined benefit entitlements in the fund. The remaining 48 members received defined benefit pensions from the fund during the 2007-08 income year. The XYZ fund has asked whether the notional taxed contributions for its members should be determined using Schedule 1A of the ITAR 1997.", "Reasons_for_Decision": "Summary: Notional taxed contributions are the contributions which are used to determine the amount of concessional contributions in respect of a person's defined benefit interest for excess concessional contributions tax. Regulation 292-170.02 of the ITAR 1997 sets out when Schedule 1A of the ITAR 1997 is to be used to determine the amount of notional taxed contributions for the purposes of subsection 292-170(1) of the Income Tax Assessment Act 1997 (ITAA 1997). One of the requirements is that the superannuation fund has 5 or more defined benefit members. There is no definition of 'defined benefit member' in regulation 292-170.02 of the ITAR 1997. However, the term is defined in regulation 995-1.01 of the ITAR 1997. This definition does not include anything to suggest that a fund member in receipt of a defined benefit pension should be excluded from the definition. It is noted that there is a definition of 'defined benefit member' in subsection 3.6(2B) of the 'New entrant age' section of Part 3 of Schedule 1A, and that definition excludes members that are receiving only pension benefits from the fund, and those that have deferred their benefit entitlement in the fund. That definition applies only for the purposes of section 3.6 of Part 3 of Schedule 1A of the ITAR 1997. The specific exclusion of these members indicates that members in receipt of a defined benefit pension from the fund are meant to be included as defined benefit members for other purposes. The XYZ defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom are receiving pensions has more than 5 defined benefit members. Accordingly, the XYZ defined benefit fund must use Schedule 1A of the ITAR 1997 to determine the notional taxed contributions for the members of the fund.", "Date_of_Decision": "1 May 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 291-170(1) subsection 292-170(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/78 | ATO ID 2008/79", "Subject_References": "Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200877", "Unmatched_Content": "Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997. | Keywords Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2008/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person entitled to a deferred benefit", "Issue": "Is a person who is entitled to a deferred benefit from a defined benefit superannuation fund a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the Income Tax Assessment Regulations 1997 (ITAR 1997)?", "Decision": "Yes. A person who is entitled to a deferred benefit from a defined benefit superannuation fund is a 'defined benefit member' for the purposes of regulation 292-170.02 of the ITAR 1997.", "Facts": "The MNO defined benefit superannuation fund has 52 members. During the 2007-08 income year, four of the members were accruing defined benefit entitlements in the fund. The remaining 48 members have left the employment of the employer sponsor of the fund. None of them have reached normal retirement age and they have each elected to defer their benefits in the MNO fund. Their benefit in the MNO fund will be paid sometime in the future. The MNO fund has asked whether the notional taxed contributions for its members should be determined using Schedule 1A of the ITAR 1997.", "Reasons_for_Decision": "Summary: Notional taxed contributions are the contributions which are used to determine the amount of concessional contributions in respect of a person's defined benefit interest for excess concessional contributions tax. Regulation 292-170.02 of the ITAR 1997 sets out when Schedule 1A of the ITAR 1997 is to be used to determine the amount of notional taxed contributions for the purposes of subsection 291-170(1) of the Income Tax Assessment Act 1997 (ITAA 1997). One of the requirements is that the superannuation fund has 5 or more defined benefit members. There is no definition of 'defined benefit member' in regulation 292-170.02 of the ITAR 1997. However, the term is defined in regulation 995-1.01 of the ITAR 1997. This definition does not include anything to suggest that a fund member with deferred benefits should be excluded from the definition. It is noted that there is a definition of 'defined benefit member' in subsection 3.6(2B) of the 'New entrant age' section of Part 3 of Schedule 1A of the ITAR 1997, and that definition excludes members that are receiving only pension benefits from the fund, and those that have deferred their benefit entitlement in the fund. That definition applies only for the purposes of section 3.6 of Part 3 of Schedule 1A of the ITAR 1997. The specific exclusion of these members indicates that deferred benefit members are meant to be included as defined benefit members for other purposes. The MNO defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom have deferred their benefit in the fund has more than 5 defined benefit members. Accordingly, the MNO defined benefit fund must use Schedule 1A of the ITAR 1997 to determine the notional taxed contributions for the members of the fund.", "Date_of_Decision": "1 May 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 291-170(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/77 | ATO ID 2008/79", "Subject_References": "Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200878", "Unmatched_Content": "Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997. | Keywords Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2008/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess Contributions Tax: notional taxed contributions - meaning of defined benefit member - person not accruing benefits", "Issue": "Is a person who is entitled to a defined benefit from a defined benefit superannuation fund but is currently not accruing further defined benefits, a 'defined benefit member' of the fund for the purposes of regulation 292-170.02 of the Income Tax Assessment Regulations 1997 (ITAR 1997)?", "Decision": "Yes. A member who is entitled to a defined benefit from a defined benefit superannuation fund but is currently not accruing further defined benefits, is a defined benefit member of the fund for the purposes of regulation 292-170.02 of the ITAR 1997.", "Facts": "The WXY defined benefit superannuation fund has 52 members. During the 2007-08 income year, four of the members are accruing defined benefit entitlements in the fund. The remaining 48 members are entitled to defined benefits from the fund but for the 2007-08 income year did not accrue further defined benefits. These members have all reached the maximum benefit entitlement under the rules of the fund. The fund has asked whether the notional taxed contributions for its members should be determined using Schedule 1A of the ITAR 1997.", "Reasons_for_Decision": "Summary: Notional taxed contributions are the contributions which are used to determine the amount of concessional contributions in respect of a person's defined benefit interest for excess concessional contributions tax. Regulation 292-170.02 of the ITAR 1997 sets out when Schedule 1A of the ITAR 1997 is to be used to determine the amount of notional taxed contributions for the purposes of subsection 291-170(1) of the Income Tax Assessment Act 1997 (ITAA 1997). One of the requirements is that the superannuation fund has 5 or more defined benefit members. There is no definition of 'defined benefit member' in regulation 292-170.02 of the ITAR 1997. However the term is defined in regulation 995-1.01 of the ITAR 1997. The definition does not include anything to suggest that a member who is entitled to a defined benefit from the fund even where they are not currently accruing further defined benefits should be excluded. The WXY defined benefit fund which has 52 members, 4 of whom are accruing benefits and 48 of whom are not accruing further defined benefits in the fund has more than 5 defined benefit members. Accordingly, the WXY defined benefit fund must use Schedule 1A of the ITAR 1997 to determine the notional taxed contributions for the members of the fund.", "Date_of_Decision": "1 May 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1997 subsection 291-170(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/77 | ATO ID 2008/78", "Subject_References": "Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200879", "Unmatched_Content": "Section 292-170 of the ITAA 1997 has been repealed with effect from 1 July 2013 as part of the repeal of the excess contributions tax. Saving provisions contained in Subdivision 291-C of the ITAA 1997 ensure the continuing application of the excess concessional contributions tax system for the 2012-13 and prior financial years, despite the repeal of former section 292-170 of the ITAA 1997. | Keywords Concessional contributions Defined benefit superannuation funds Excess concessional contributions Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2010/104", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess contributions tax: restitution of a 'mistaken' contribution", "Issue": "Will the Commissioner include the full amount of a personal contribution of $500,000 made by an individual in the individual's non-concessional contributions under section 292-90 of the Income Tax Assessment Act 1997 (ITAA 1997), even though the trustee that received the contribution subsequently repaid $200,000 of it in purported restitution of a payment made for mistake?", "Decision": "Yes, the full amount of the $500,000 personal contribution will be included in the person's non-concessional contributions under section 292-90 of the ITAA 1997 even though part of it was returned.", "Facts": "An individual under the age of 65 made the following personal contributions to a complying superannuation fund: The contributions made in January and June 2007 were made after the individual obtained financial advice confirming that he was able to contribute $1 million by 30 June 2007. The individual made the contributions voluntarily to obtain superannuation benefits for his retirement. He was not under any legal obligation to make the contributions, nor did he believe he was under any legal obligation to make them. The individual did not deduct any of these personal contributions, nor did he at any time intend to deduct any part of these personal contributions. The fund's trustees reported personal contributions of $1.2 million for the individual in the fund's Member Contributions Statement for the year ended 30 June 2007. In October 2008 the individual requested the trustees return $200,000 of the $500,000 personal contribution made on 10 June 2007 on the ground that this portion of the contribution was made under a mistake. He asserted to the fund trustees that his mistake was that he was unaware of the exact dates between which the relevant non-concessional contributions totalling $1 million could be made. That is, he effectively asserted he was unaware his August 2006 contribution would be counted towards the $1 million non-concessional contributions cap. The trustee decided the individual would have contributed only $300,000 of his June 2007 contribution but for his mistake and paid him $200,000 purportedly under the law of restitution for mistake. The fund adjusted the member's account by reducing the June 2007 contribution to $300,000 and amended their Member Contributions Statement to report $1 million personal contributions for the individual for the 2007 year.", "Reasons_for_Decision": "Detailed Reasoning - Treatment of the contributions: Each of the three personal contributions made by the individual in the transitional financial year (section 292-80 of the Income Tax (Transitional Provisions) Act 1997 provides that the period 10 May 2006 to 30 June 2007 is treated as a financial year for the purposes of section 292-90 of the ITAA 1997 (among other provisions)) 10 May 2006 to 30 June 2007 were to provide superannuation benefits for the individual and were correctly accepted in accordance with subregulation 7.04(1) of Superannuation Industry (Supervision) Regulations 1994 (SISR). Each of the three personal contributions made by the individual in the transitional financial year were non-concessional contributions as defined in subsection 292-90(2) of the ITAA 1997. The contributions were not assessable income of the fund as they were not covered by a valid and acknowledged notice of intent to deduct (see section 274 of the Income Tax Assessment Act 1936 and section 295-190 of the ITAA 1997), and these contributions were not specifically excluded from being non-concessional contributions by paragraph 292-90(2)(c) or subsection 292-90(3) of the ITAA 1997. | Detailed Reasoning - Restitution for mistake: The High Court in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 at 40; (1992) 175 CLR 353 at 374; (1992) 109 ALR 57 at 73-74 ( David Securities case ) said that no distinction should be made between a mistake of law and a mistake of fact as a ground for restitution provided the mistake caused the payment. The majority judgment expressed the view that adopting a principle founded firmly on the policy that the law wishes to uphold bargains and enforce compromises freely entered into, would be more accurate and equitable than defining mistake as a supposition that a particular fact is true ( David Securities case at HCA 44, CLR 374, ALR 74-75). The majority of the High Court in the David Securities case did not identify the applicable test of causation, however, it is suggested that to establish that the mistake was a cause of the payment, the plaintiff would need to establish that the payment would not have been made if he had known of his mistake at the time of the payment (Erbacher S, Australian Restitution Law , 2nd ed. Cavendish Publishing, Australia, 2002, p 103). The grounds for restitution for mistake concentrate on the principle of unjust enrichment which concerns whether it would be unjust for the recipient to retain the enrichment. It is prima facie unjust for the recipient to retain an enrichment conferred because of mistake, regardless of whether the mistake is a mistake of law or fact ( David Securities case at CLR 376-377). However, the payer's prima facie right of recovery may be rebutted to the extent that circumstances have removed any unjust enrichment (Mason & Carter, Restitution Law in Australia , 2nd ed, Lexis Nexis Butterworths, Australia, 2008 at [401]). A court will find that the recipient may justly retain a mistaken payment if any one of several defences applies in a particular case (see David Securities case at HCA 48, CLR 376, ALR 76). Unjust enrichment based on the ground of mistake has been considered in the Australian superannuation context in one case in the Supreme Court of New South Wales and one Superannuation Complaints Tribunal case. In Personalised Transport Services Pty Ltd v. AMP Superannuation Ltd and Anor [2006] NSWSC 5 ( Personalised Transport case ), the company paid superannuation contributions to AMP in the mistaken belief that the company had a legal obligation to make superannuation guarantee contributions on behalf of certain drivers who were independent contractors. If it did not make the payments the company believed that it would be subject to the Superannuation Guarantee charge. In a claim by the company for recovery of a significant proportion (but not all of) the payments to the superannuation fund, Barrett J agreed that the payments in question were made by the company in the mistaken belief that the company would be liable for the charge if it did not. The mistake of law by the company caused the payment to be made and the enrichment of the fund. Barrett J found that there was 'an enrichment of the fund ... or more precisely, the relevant drivers for whose benefit moneys were paid into the fund' (see paragraph 13 of the judgement). A case for restitution was also established where the trustee of a superannuation fund was not the intended recipient of a payment from a member in Superannuation Complaints Determination D06-07\\129 (SCT case). In the SCT case , the complainant intended to pay $1,000 rent to his landlord's real estate agent. Instead the complainant mistakenly paid $1,000 to his own superannuation fund. This was a payment made under a mistake of fact, the fact being the identity of the payee. The Australian Prudential Regulatory Authority (APRA) has also acknowledged that unjust enrichment, and a prima facie case for restitution, occurs where the trustee of a superannuation fund is the recipient of an amount greater than was intended, for example, because of a clerical, transcription or arithmetic error (see Superannuation Circular No II.B.1 Payments to Standard Employer-Sponsors ). The circumstances of the individual in this case are very different from those in the Personalised Transport case . The individual did not make the contribution in the mistaken belief he was required to do so. There was no legal obligation for the individual to make the payment. The circumstances of this individual are also different from those in the SCT case as the superannuation fund was the intended recipient of the payment. The individual obtained the benefit of increased superannuation entitlements for himself. That was the natural and probable consequence of his actions as discussed in Taxation Ruling TR 2010/1 Income tax : superannuation contributions (see paragraphs 7 and 129 to 131). The individual's circumstances are also different from those contemplated by APRA in that the fund received exactly the amount the individual intended to contribute. In this case, the individual claims that he made a mistake in making the contribution as he was unaware that this amount would count towards the relevant non-concessional contributions cap. The trustee refunded the claimed mistaken contribution purportedly under the law of restitution. It is the Commissioner's view that in this case the individual formed an intention to make a superannuation contribution of a certain amount to the fund and gave effect to that intention by making a contribution of that amount. The fund was the intended recipient of the amount and the individual obtained the expected superannuation benefits. The individual was not mistaken in the sense that he thought he was required to make a contribution. In the circumstances of this case, there was a contribution (as discussed in TR 2010/1), and it would not have been unjust for the trustee of the fund to retain the contribution. The individual made $1.2m non-concessional contributions for the transitional financial year. Having concluded that the individual had excess non-concessional contributions, a question arises as to whether the Commissioner would exercise the discretion in section 292-465 of the ITAA 1997 to disregard the amount returned to the individual. That is an administrative decision the Commissioner must make if the individual applies for the discretion after receiving an assessment of excess contributions tax. It is not the subject matter of this interpretive decision.", "Date_of_Decision": "27 April 2010", "Year_of_Income": "10 May 2006 to Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 section 274", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2010/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Complying superannuation funds Contributions returned Contributions standards Excess non-concessional contributions Non-concessional contributions Restitution", "Case_References": "David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 175 CLR 353 (1992) 109 ALR 57 24 ATR 125 92 ATC 4658", "Other_References": "Superannuation Complaints Determination D06-07\\129", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010104", "Unmatched_Content": "Amount of contribution ($) | Related Public Rulings (including Determinations) Taxation Ruling TR 2010/1 | Keywords Complying superannuation funds Contributions returned Contributions standards Excess non-concessional contributions Non-concessional contributions Restitution"}
{"ATO_ID_Number": "ATO ID 2008/142", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Excess contributions tax: non-concessional contributions - personal injury payment - contribution to fund within 90 days of receiving a payment from Public Trustee (NSW)", "Issue": "In this case, does the 90 day period a person is allowed by subparagraph 292-95(1)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) to make a non-concessional superannuation contribution from a court ordered personal injuries payment, commence when a payment is made to the person by the Public Trustee (NSW)?", "Decision": "No. The 90 day period commenced when the payment was made to the Public Trustee (NSW).", "Facts": "The taxpayer was injured in a car accident as a child. In 2002, the taxpayer was awarded damages pursuant to a court order and these were paid into court. A short time later the damages sum less statutory repayments was paid to the Public Trustee (NSW) to be held in trust for the taxpayer. Some of the money was used by the Public Trustee to pay for the taxpayer's care, education and housing. In 2008, the taxpayer attained 18 years. The Public Trustee (NSW) has ascertained that the taxpayer is capable of managing his own affairs and will now pay the balance of the damages award to the taxpayer. The taxpayer proposes to contribute some of the money to a superannuation fund and has sought advice from the Tax Office as to whether the amount can be excluded from the non-concessional contributions cap under subparagraph 292-90(2)(c)(ii) and section 292-95 of the ITAA 1997.", "Reasons_for_Decision": "Summary: The combined effect of subparagraphs 292-90(2)(c)(ii) and 292-95(1)(b)(i) of the ITAA 1997 is to ensure that a contribution made from a person's personal injury damages is excluded from the person's non-concessional contributions. This means that a person can contribute the proceeds of a personal injuries settlement or court order to superannuation without breaching the non-concessional contributions cap. However, to exclude a contribution made from the proceeds of a court ordered damages payment, paragraph 292-95(1)(b) of the ITAA 1997 requires the contribution to be made within 90 days of the later of the day: The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 described this requirement as follows: 1.96 The contribution must be made to a superannuation fund within 90 days of the payment being received or the structured settlement or order coming in effect, whichever is later. [Schedule 1, item 1, paragraph 292-95(1)(b)] In this case, no superannuation contribution had been made within 90 days of the court order. Furthermore, no superannuation contribution had been made within 90 days of the amount being paid into court. However, while the intent of paragraph 292-95(1)(b) of the ITAA 1997 is to limit the time between the court order or receipt of the payment, and the making of the contribution, the 'day of receipt of the payment' is not necessarily limited to the day on which the money is originally paid into court. This is because money is often required to be paid into court before being paid out to persons such as the Public Trustee or the Protective Commissioner as manager of a person's estate. It is therefore considered that the day of receipt of the payment referred to in subparagraph 292-95(1)(b)(i) of the ITAA 1997 is the day upon which the person who is entitled to the payment under the court order or settlement receives the payment. The person who is entitled to the payment includes an injured person's legal personal representative. In this case, paragraph 4(c) of the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW), which was the legislation applying at the time, required that the damages paid into court be paid out to the Public Trustee (NSW) to hold on behalf of a minor. Had the taxpayer been considered a person of unsound mind, the damages would have been paid to the manager of his or her estate. Section 5 of the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW), required the Public Trustee (NSW) to hold and apply the money for the maintenance and education or otherwise for the benefit of the minor. Note 1: the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW) was repealed by Schedule 4 to the Civil Procedure Act 2005 (NSW) with effect from 15 August 2005. Sections 77, 78 and 79 of that Act contain provisions similar in effect to section 5 of the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW). Subsection 12(1) of the Public Trustee Act 1913 (NSW) states that, among other roles, the Public Trustee can be appointed and act under that name as a trustee, as financial manager of the estate of a managed person, or as guardian or receiver of the estate of a minor. Note 2: the Public Trustee Act 1913 (NSW) was repealed by section 4 of the NSW Trustee and Guardian Act 2009 (No.49) with effect from 1 July 2009. Section 11 of that Act contains provisions similar in effect to section 12 of the Public Trustee Act 1913 (NSW). In their publication A Guide for Trusts, A Guide for Parents and Carers , the Public Trustee (NSW) states: A Trustee takes responsibility for managing the funds awarded to the person by the Court, generally until the person turns 18 years of age. ...Fund's may be released for the person's benefit while the Trust continues. This is generally until a child turns 18 years, but can continue if a person is not able to look after their own affairs. In the current case the funds were held on trust by the Public Trustee (NSW) for the taxpayer. The possession of trust property by a trustee is, in equity, the possession of trust property by the beneficiary. Paragraph 5 of Taxation Ruling IT 316 (Minor beneficiaries: Court or damages trusts) states: By the very nature of court trusts a minor beneficiary has an absolute indefeasible interest vested in possession both as to the capital and the income. He is under a disability in as much as the Supreme Court Acts prevent him from getting the money until he reaches his majority. For the purposes of subparagraph 292-95(1)(b)(i) of the ITAA 1997 'the day of receipt of the payment from which the contribution is made' is the day the court paid the money to the Public Trustee who, as the taxpayer's legal personal representative, was the person entitled to receive the payment pursuant to the relevant legislation that existed at the time. Therefore, a contribution made now from the money paid to the taxpayer by the Public Trustee (NSW) cannot be excluded from non-concessional contributions under subparagraph 292-90(2)(c)(ii) of the ITAA 1997.", "Date_of_Decision": "19 September 2008", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 292-90 paragraph 292-90(2)(c) section 292-95 paragraph 292-95(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/224", "Subject_References": "Non-concessional contributions Non-concessional contributions - personal injury payments Superannuation contributions Superannuation excess contributions tax", "Case_References": "", "Other_References": "Paragraph 1.96 of the Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 A Guide for Trusts, A Guide for Parents and Carers (www.tag.nsw.gov.au)", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008142", "Unmatched_Content": "The Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW) was repealed by Schedule 4 to the Civil Procedure Act 2005 (NSW) with effect from 15 August 2005. Sections 77, 78 and 79 of that Act contain provisions similar in effect to section 5 of the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW). The Public Trustee Act 1913 (NSW) was repealed by section 4 of the NSW Trustee and Guardian Act 2009 (No 49) with effect from 1 July 2009. Section 11 of that Act contains provisions similar in effect to section 12 of the Public Trustee Act 1913 (NSW). | Keywords Non-concessional contributions Non-concessional contributions - personal injury payments Superannuation contributions Superannuation excess contributions tax"}
{"ATO_ID_Number": "ATO ID 2008/113", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Transfer from foreign superannuation fund to complying superannuation fund", "Issue": "Does the amount vested for the purposes of subparagraph 305-75(3)(a)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) take into account an under-funding penalty that would have applied at the time the taxpayer became an Australian resident if the taxpayer had chosen to transfer their benefit to an eligible scheme at that time?", "Decision": "No. The amount vested for the purposes of subparagraph 305-75(3)(a)(i) of the ITAA 1997 is calculated without regard to the under-funding penalty that would have applied at the time the taxpayer became an Australian resident.", "Facts": "The taxpayer arrived in Australia from the United Kingdom (UK) in September 2004 and became an Australian resident for taxation purposes. While in the UK, the taxpayer was a member of a UK 'final salary' superannuation fund (UK Fund), which is a foreign superannuation fund as defined in subsection 995-1(1) of the ITAA 1997. Under the relevant UK law, the taxpayer was entitled to a cash equivalent transfer value (CETV) benefit before reaching the age of 65. The CETV amount could be taken as an alternative to a pension benefit provided that it was paid to another eligible scheme. An amount of CETV was calculated soon after September 2004 at the taxpayer's request. As the UK fund did not have sufficient funds with which to meet its expected liabilities at that time (that is, it was under-funded), it advised that a reduced CETV amount would apply (an under-funding penalty) to any transfer at that time. However, the taxpayer elected not to transfer his CETV benefit in 2004. Instead, the CETV benefit was transferred in September 2007. As at September 2007, the UK Fund had resolved its under-funding problem and, hence, there was no reduction of the CETV benefit actually transferred to Australia.", "Reasons_for_Decision": "Summary: When a taxpayer receives a lump sum from a foreign superannuation fund more than 6 months after becoming a resident for income tax purposes but became a resident after the start of the period to which the lump sum relates, the part of the lump sum which relates to 'applicable fund earnings' is included in the taxpayer's assessable income and must be determined. 'Applicable fund earnings' for the purposes of section 305-70 of the ITAA 1997 are worked out under section 305-75 of the ITAA 1997. In particular, subparagraph 305-75(3)(a)(i) of the ITAA 1997 requires the amount in the fund that was vested in you just before the day you first became a resident to be determined. The term 'vested' is not defined in Division 305 or in the ITAA 1997 more generally. The Butterworths Australian Legal Dictionary has no definition for 'vested' but has definitions for related terms such as 'vest', 'vested in possession', 'vested interest' and 'vesting'. The meaning given to the term 'vesting' relates solely to the superannuation context. It is defined as follows: A provision within an employer-sponsored superannuation fund, entitling a fund member to part or all of the employer's contributions which have been paid in on the member's behalf, upon leaving. This vesting occurs either immediately, after a specified number of years, or progressively over the years, increasing the size of a departure benefit. However, a resignation with full vesting often remains less than the benefit received on retirement, death or disablement. Two meanings are given for the term 'vest'. One relates to the meaning for property law purposes. The other states: To effectively transfer legal ownership, rights or powers to another or place property in the possession or control of another; when a legal right or interest accrues to a person on the happening of the contingency or condition precedent to its vesting such as lapse of time or determination of a prior interest. The ordinary meaning of the term 'vest' as found in the Macquarie Dictionary contains two meanings. Only the first of these two meanings can be seen to be relevant. That states: Settled or secured in the possession of a person or persons, as a complete or fixed right, an interest sometimes possessory, sometimes future, which has a substance because of its relative certainty. The ordinary meaning of 'vested' accords with the meaning of 'vest' in the Australian Legal Dictionary which refers to a legal right or interest accruing. The amount vested in a person represents an amount to which the person is entitled or, put another way, an amount that has accrued to the person. As at September 2004, the taxpayer had, in effect, three options available. As the transfer in September 2004 did not occur, it can only be seen as a notional set of circumstances. By staying with the UK Fund the taxpayer could take the pension benefit or transfer to an eligible scheme when the funding situation of the UK fund improved as in fact did occur. In view of that, the CETV in September 2004 without taking the under-funding penalty into account is the relevant amount and is the value of the best possible benefit available to the taxpayer at that time. The CETV can be seen as the amount 'derived' or that 'had accrued' at that point in time given that no amount was actually transferred at that time. In view of the above the amount that is vested just before the taxpayer became an Australian resident in these circumstances is the amount of the CETV. The under-funding penalty is not taken into account.", "Date_of_Decision": "2 July 2008", "Year_of_Income": "Year ended 2007-08", "Legislative_References": "Income Tax Assessment Act 1997 section 305-70 subsection 305-75(3) paragraph 305-75(3)(a) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lump sum - superannuation benefits Superannuation benefits Superannuation benefits from foreign superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008113", "Unmatched_Content": "Keywords Lump sum - superannuation benefits Superannuation benefits Superannuation benefits from foreign superannuation funds"}
{"ATO_ID_Number": "ATO ID 2010/76", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation benefits: deduction for insurance - increase in the untaxed element", "Issue": "Does section 307-290 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to a lump sum superannuation death benefit in relation to which a deduction under sections 295-465 or 295-470 of the ITAA 1997 has not been, and will not be, claimed in the income year in which the benefit is paid but was claimed in an earlier income year?", "Decision": "Yes. Section 307-290 of the ITAA 1997 applies to a lump sum superannuation death benefit where a deduction under sections 295-465 or 295-470 of the ITAA 1997 has been, or is to be, claimed in any income year.", "Facts": "An individual commenced working in 1995 and became a member of a superannuation fund at the same time. The member had a single accumulation interest in the superannuation fund. At the time of joining the fund the member authorised the trustee to obtain life insurance for the member. A portion of the trustee's premium was charged to the member's interest for each financial year from 1995 to 2009. The superannuation fund claimed a deduction for insurance premiums in relation to the member under section 279 of the Income Tax Assessment Act 1936 (ITAA 1936) for the 1995-96 to 2006-07 income years. The superannuation fund claimed a deduction under section 295-465 of the ITAA 1997, for insurance premiums in relation to the member for the 2007-08 income year. The member died in January 2009. On 30 June 2009 the superannuation fund paid out a superannuation death benefit lump sum. The lump sum superannuation death benefit included the proceeds of a claim payable under the life insurance policy. No deduction has been, or is to be, claimed for the 2008-09 income year under section 295-465 or 295-470 of the ITAA 1997.", "Reasons_for_Decision": "Summary: Section 307-290 of the ITAA 1997 applies to include an element untaxed in the fund of the taxable component of a lump sum superannuation death benefit, when a superannuation fund has claimed, or intends to claim, a deduction under section 295-465 or 295-470 of the ITAA 1997. As Note 2 to subsection 307-290(1) of the ITAA 1997 states, section 307-290 of the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997) provides that, for the purposes of section 307-290 of the ITAA 1997, a deduction made under former section 279 or 279B of the ITAA 1936 is to be treated as having been made under section 295-465 or 295-470 of the ITAA 1997 instead. The ordinary meaning of the words 'a deduction has been, or is to be, claimed' in subsection 307-290(1) of the ITAA 1997, is not that a deduction must have been made in every income year for life insurance linked to the member's superannuation interest. Nor is it necessary for a deduction to be, or have been, claimed in relation to the particular year in which the superannuation lump sum death benefit is payable. Rather, the ordinary meaning of the words will be satisfied if a deduction has been, or is to be claimed, in relation to the benefit in any year of income. This view is consistent with the operation of subsection 27AB(3) of the ITAA 1936 on which section 307-290 of the ITAA 1997 is based. The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 does not indicate any intention to alter the operation of the law from subsection 27AB(3) of the ITAA 1936. An untaxed element was calculated under subsection 27AB(3) of the ITAA 1936 if the relevant deduction had been claimed 'in any year'. Therefore, it does not matter that the fund did not claim a deduction under section 295-465 of the ITAA 1997 in the 2008-09 income year. The fund did claim a deduction under section 279 of the ITAA 1936 and section 295-465 of the ITAA 1997 in relation to the member in prior years. So section 307-290 of the ITAA 1997 applies to include an element untaxed in the fund in the taxable component of the lump sum superannuation death benefit.", "Date_of_Decision": "19 March 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 section 295-465 section 295-470 section 307-290", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Death benefits - superannuation benefits Insurance Superannuation Superannuation benefits Superannuation fund expenses Superannuation funds - death or disability premiums", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201076", "Unmatched_Content": "Keywords Death benefits - superannuation benefits Insurance Superannuation Superannuation benefits Superannuation fund expenses Superannuation funds - death or disability premiums"}
{"ATO_ID_Number": "ATO ID 2009/145", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation benefits: CSS indexed pension partially funded by a roll-over", "Issue": "Will the taxable component of a standard indexed pension to be paid to a member of the Commonwealth Superannuation Scheme (CSS) include an element taxed in the fund when the employer component of a transfer value originating in a taxed fund is paid to the Commonwealth?", "Decision": "Yes, the taxable component of a standard indexed pension to be paid to a member of the CSS will include an element taxed in the fund when the employer component of a transfer value originating in a taxed fund is paid to the Commonwealth.", "Facts": "A taxpayer rolled over a total of $100,000 during the 2004-05 and 2005-06 income years to the CSS, which is administered by ComSuper. The roll-overs were from complying superannuation funds (which were not constitutionally protected funds (CPFs)). The roll-overs included employer components of $87,000. The standard indexed pension of the taxpayer on retirement paid from CSS is based on a formula which depends on the total length of contributory service. Where a roll-over to CSS includes an employer component, the member can elect to have the roll-over amount treated as a transfer value. The employer component of the transfer value can be transferred to the Consolidated Revenue Fund (CRF). This increases the period of contributory service which counts towards the value of the indexed pension. In this case the taxpayer made this election and the employer component of $87,000 was transferred to the CRF in return for an additional period of contributory service. The rest of the transfer value will be paid to the taxpayer on retirement as other benefits which are not the subject matter of this ATO ID.", "Reasons_for_Decision": "Summary: Subsection 307-200(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that regulations may specify that a superannuation interest can be treated as two or more superannuation interests in certain circumstances. Subsection 307-200(3) of the ITAA 1997 provides that the regulations may also specify a way of treating a superannuation interest in relation to the element taxed in the fund and the element untaxed in the fund. Regulation 307-200.03 of the Income Tax Assessment Regulations (ITAR 1997) deals with the circumstances in which an interest in a public sector superannuation scheme is to be treated as two or more superannuation interests. Under subsection 995-1(1) of the ITAA 1997 a 'public sector superannuation scheme' has the same meaning as in the Superannuation Industry (Supervision) Act 1993 (SIS Act). Under subsection 10(1) of the SIS Act a 'public sector superannuation scheme' includes a scheme for the payment of superannuation, retirement or death benefits established under the law of the Commonwealth. The CSS is established under the Superannuation Act 1976 , being a law of the Commonwealth. Sub-subregulation 307-200.03(2)(a) of the ITAR 1997 provides that if the superannuation benefit to be paid is sourced partly from contributions made into a public sector superannuation scheme or earnings on those contributions and partly from one or more other sources it is to be treated as two superannuation interests. The Commissioner considers that if the origin of part of an indexed pension, so far as the superannuation scheme is concerned, is contributions to the scheme from accruals in other taxed funds, then that part of the pension should be treated as sourced from those contributions. This differs from the case where contributions that are made during employment with the Commonwealth partly fund an additional non-indexed pension or the lump sum commutation of that pension. While the standard indexed pension will all be paid from consolidated revenue, the Commissioner considers that the pension is sourced partly from contributions made into the scheme (the employer component of $87,000) which was converted into a credit of additional contributory service. The fact that sub-subregulation 307-200.03(2)(a) of the ITAR 1997 allows for contributions or earnings as a source is taken to indicate that the contributions made into the scheme need not give rise to earnings in the scheme. Therefore, while sub-subregulation 307-200.03(3)(a) allows for the possibility of contributions and earnings as a source it does not require that the source necessarily be contributions that can produce earnings in the fund. Subregulation 307-200.03(2) of the ITAR 1997 requires that the interest supporting the standard indexed pension payable to the taxpayer be treated as two separate interests. Under subregulation 307-200.03(3) of the ITAR 1997, the two interests of the taxpayer are: Section 307-210 of the ITAA 1997 provides that the tax free component of a superannuation interest includes the contributions segment and the crystallised segment. Under section 307-215 of the ITAA 1997 the taxable component of a superannuation interest is the value of the interest less the tax free component of the interest. Subsection 307-295(2) of the ITAA 1997 provides that if a superannuation benefit is not sourced to any extent from contributions made into a superannuation fund or earnings on such contributions, the benefit will consist wholly of an element untaxed in the fund. The remainder interest does not have a crystallised segment in accordance with subsection 307-225(3) of the ITAA 1997. Therefore all benefits paid from the remainder interest will consist of an element untaxed in the fund in accordance with subsection 307-295(2) of the ITAA 1997. For the contributions interest, if the crystallised segment was not determined as at 30 June 2007, the components of the crystallised segment of this interest will need to be determined by ComSuper in accordance with section 307-225 of the ITAA 1997. There could be a crystallised segment if the taxpayer had a pre-July 83 component. This could be the case if the taxpayer had any pre-July 83 service in accordance with paragraph 307-225(2)(e) of the ITAA 1997. The taxable component of the contributions interest is the total interest less any tax free component. It will be necessary to determine the proportions of each indexed pension payment that is paid from the contributions interest and the remainder interest. To calculate the proportions of each indexed pension payment paid from the two interests, it will be necessary for the total value of the two interests supporting the indexed pension to be determined as at the commencement date of the pension, as required by paragraph 307-125(3)(a) of the ITAA 1997. The method of valuing the combination of the two interests supporting the indexed pension payable to the taxpayer is set out in regulation 307-205.02B of the ITAR 1997 and is: The proportion of each benefit paid from each interest will then be determined using the following method: The proportion of each indexed pension payment that is paid from the remainder interest will consist of element untaxed in the fund only. The proportion of each indexed pension payment that is paid from the contributions interest will comprise a taxable component made up of an element taxed in the fund or that taxable component and a tax free component. According to the proportioning rule in section 307-125 of the ITAA 1997, when a superannuation income stream benefit is paid from a superannuation interest the benefit will include tax free and taxable components calculated in the same proportion that these components make up the total value of the superannuation interest. Therefore, the proportion of each indexed pension payment that is paid from the contributions interest must be divided between the tax free component (if any) and the element taxed in the fund in the same ratio as in the contributions interest at the commencement date of the indexed pension, where the ratios are as follows: (crystallised segment / $87,000) [1 - (crystallised segment / $87,000)]", "Date_of_Decision": "25 November 2009", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 307-125 paragraph 307-125(3)(a) subsection 307-200(1) subsection 307-200(3) section 307-210 section 307-215 section 307-225 paragraph 307-225(2)(e) subsection 307-225(3) subsection 307-295(2) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Taxable component of superannuation benefits Element taxed in the fund Income stream - superannuation benefits Roll-overs - superannuation benefits", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009145", "Unmatched_Content": "Keywords Taxable component of superannuation benefits Element taxed in the fund Income stream - superannuation benefits Roll-overs - superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2015/17", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax: complying superannuation fund: deduction for future liability to pay death benefits- section 295-470 of the Income Tax Assessment Act 1997", "Issue": "Can a trustee of a complying superannuation fund make a choice under subsection 295-465(4) of the Income Tax Assessment Act 1997 (ITAA 1997) to claim a deduction under section 295-470 of the ITAA 1997 instead, after the death of an insured fund member?", "Decision": "Yes. A valid choice can be made under subsection 295-465(4) of the ITAA 1997 by the trustee after the death of the insured fund member.", "Facts": "The corporate trustee of a complying superannuation fund (the trustee) had claimed deductions for life insurance premiums for income years prior to the 2011-2012 income year in accordance with the requirements of section 295-465 of the ITAA 1997. In the 2011-2012 income year an insured fund member died. The deceased member was employed up until their date of death. The trustee received a life insurance payout in the 2011-2012 income year after the death of the member. The trustee paid a superannuation death benefit in the 2011-2012 income year in consequence of the termination of the member's employment to dependants of the deceased member. Minutes of a meeting of the directors of the trustee held after the death of the insured member recorded that the trustee made a choice to claim a deduction for an amount under section 295-470 for the 2011-2012 income year, and not for an amount under section 295-465.", "Reasons_for_Decision": "Summary: Subsection 295-465(1) of the ITAA 1997 relevantly allows a complying superannuation fund to deduct a proportion of the premiums paid for life insurance policies that cover the fund's liabilities to pay superannuation death benefits to fund members. Paragraph 295-460(a) of the ITAA 1997 stipulates that section 295-465 applies to a superannuation death benefit. Subsection 295-465(4) of the ITAA 1997 gives the trustee of a complying superannuation fund the choice not to deduct amounts for an income year under section 295-465 but to deduct amounts based on the fund's future liability to pay the benefits under section 295-470 of the ITAA 1997 instead.' Section 295-465 of the ITAA 1997 does not prescribe time limits within which a trustee must make a choice to claim a deduction under section 295-470 of the ITAA 1997. There is no express stipulation that the choice under subsection 295-465(4) of the ITAA 1997 must be made prior to a member's death. Division 295 of the ITAA 1997 was introduced as part of the re-write of the superannuation laws from Part IX of the Income Tax assessment Act 1936 (ITAA 1936) into the ITAA 1997, with effect from 1 July 2007. Prior to the re-write, the deductibility of costs for meeting a superannuation fund's liability to provide death benefits to fund members, and the associated 'election' (as it was then referred to), were governed by former sections 279 and 279B of the ITAA 1936, and the definition of 'death or disability benefit' in subsection 267(1) of the ITAA 1936. Prior to the re-write, subsections 279(4) to (6) of the ITAA 1936 set out the requirements for making the 'election'. Repealed subsection 279(4) of the ITAA 1936 disallowed a deduction for death and disability insurance premiums if the trustee elected that subsection 279(4) of the ITAA 1936 did not apply to the trustee in relation to that year of income. Previous subsection 279(5) of the ITAA 1936 stated that unless the Commissioner determines otherwise, the trustee is taken to have made an election under subsection 279(4) in the ITAA 1936 in respect of the next succeeding year of income. Subsection 279(6) of the ITAA 1936 stated that an election by the trustee must be made on or before the date of lodgment of the return of income of the trustee for the year of income to which the election relates, or before such later date as the Commissioner allows. The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 (the Bill), that introduced Division 295 of the ITAA 1997 indicated that there was no intention to alter the operation of the law under Part IX of the ITAA 1936 except to extend the choice to deduct an amount for the self-employed. In the absence of any express provision in the law or clear legislative intention to the contrary, an interpretation of the law that reflects the policy under the ITAA 1936 is preferred. Based on repealed subsection 279(6) of the ITAA 1936, it would generally be expected that the trustee of the superannuation fund would make a choice under subsection 295-465(4) of the ITAA 1997 on or before the time the fund lodges its income tax return for the relevant year to which the choice relates (or before such later date as the Commissioner allows for lodgment of the fund's return). There is no requirement in the law for the trustee of a complying superannuation fund to make a choice under subsection 295-465(4) of the ITAA 1997 prior to the death of the insured fund member.", "Date_of_Decision": "31 July 2013", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 subsection 295-465(4) section 295-470", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Death benefits - superannuation benefits Insurance Superannuation Superannuation benefits Superannuation funds - death or disability premiums", "Case_References": "", "Other_References": "Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201517", "Unmatched_Content": "Keywords Death benefits - superannuation benefits Insurance Superannuation Superannuation benefits Superannuation funds - death or disability premiums"}
{"ATO_ID_Number": "ATO ID 2012/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation lump sum paid from foreign superannuation fund to complying superannuation fund: revocation or variation of choice to include amount of 'applicable fund earnings' in assessable income of fund", "Issue": "Can an individual's choice to include all or part of their 'applicable fund earnings' in the assessable income of a complying superannuation fund under section 305-80 of the Income Tax Assessment Act 1997 (ITAA 1997) be revoked or varied once it is made?", "Decision": "No. An individual's choice to include all or part of their 'applicable fund earnings' in the assessable income of a complying superannuation fund under section 305-80 of the ITAA 1997 is binding and cannot be revoked or varied once it is made.", "Facts": "The individual is a member of an Australian superannuation fund that is a complying superannuation fund. The individual was born overseas and contributed to a foreign superannuation fund under the rules of the overseas country. The individual immigrated to Australia and became an Australian resident for tax purposes. More than six months after becoming an Australian resident, the foreign superannuation fund paid a superannuation lump sum directly to the complying superannuation fund, and, as a result, the individual no longer had an interest in the foreign superannuation fund. The superannuation lump sum included an amount of 'applicable fund earnings' as worked out under subsection 305-75(3) of the ITAA 1997. The 'applicable fund earnings' would ordinarily have been included in the individual's assessable income in the income year in which the individual was taken to receive the superannuation lump sum and taxed at their marginal rate of tax. However, the individual made a written choice under section 305-80 of the ITAA 1997 to include all of their 'applicable fund earnings' in the assessable income of the complying superannuation fund. The individual did not include the amount specified in the choice in their tax return for the income year in which the individual was taken to receive the superannuation lump sum. The amount was included in the assessable income of the complying superannuation fund in the income year in which the superannuation lump sum was transferred to the fund. The individual now seeks to revoke their choice and be assessed on the amount.", "Reasons_for_Decision": "Summary: Division 305 of the ITAA 1997 sets out the tax treatment of superannuation benefits received by individuals from non-complying superannuation plans. Subdivision 305-B of the ITAA 1997 deals specifically with superannuation lump sums from foreign superannuation funds. Section 305-70 of the ITAA 1997 applies to superannuation lump sums received by an individual from a foreign superannuation fund more than six months after the individual either becomes an Australian resident or terminates their foreign employment. In accordance with subsection 305-70(2) of the ITAA 1997, an individual who receives a superannuation lump sum from a foreign superannuation fund must include in their assessable income, so much of the lump sum as is equal to: The assessable portion is subject to tax at the individual's marginal rate of tax. The remainder of the lump sum is not assessable income and is not exempt income. Where a person becomes an Australian resident after the start of the period to which the lump sum relates (but before they received it) the amount of their 'applicable fund earnings' is worked out using the method in subsection 305-75(3) of the ITAA 1997. In general terms, it is the earnings that have accrued to the individual in the foreign superannuation fund since the individual became an Australian resident. Under subsection 305-80(2) of the ITAA 1997, an individual can choose to have all or part of their 'applicable fund earnings' as worked out under section 305-75 of the ITAA 1997 included in the assessable income of the complying superannuation plan. The choice can only be made if the conditions in subsection 305-80(1) of the ITAA 1997 are satisfied. In summary, the whole of the lump sum (that the individual is taken to receive under section 307-15 of the ITAA 1997) must be paid directly from the foreign superannuation fund into the complying superannuation fund and the individual can no longer have an interest in the foreign superannuation fund immediately after it is paid. Subsection 305-80(3) of the ITAA 1997 states that the choice must be in writing and must comply with the requirements (if any) specified in the Income Tax Assessment Regulations 1997. To date, no regulations have been made for this purpose. The amount specified in a choice made under section 305-80 of the ITAA 1997 is included in the assessable income of the complying superannuation fund in the income year in which the transfer happens, in accordance with subsections 295-200(2) and 295-200(3) of the ITAA 1997. Section 305-80 of the ITAA 1997 does not expressly state whether or not a person's choice to include all or part of their 'applicable fund earnings' in the assessable income of the complying superannuation fund can be revoked or varied once it is made. There are many provisions in the income tax law that allow taxpayers to make certain 'choices', which affect their taxable income. As a general rule, once a 'choice' is made it is binding and cannot be revoked or withdrawn, unless this is specifically provided for in the relevant tax Act. This rule is a reflection of the common law principles relating to 'election', which have also been adopted in the taxation context. At common law, an election between alternative and inconsistent rights or courses of action, once knowingly and unequivocally made (either by words or action) is binding on the party who made it and cannot be revoked or changed ( Scarf v. Jardine (1882) 7 App. Cas. 345; Motor Oil Hellas (Corinth) Refineries SA v. Shipping Corporation of India (The Kanchenjunga ) [1990] 1 Lloyd's Rep. 391; Sargent v. ASL Developments Ltd (1974) 131 CLR 634; The Commonwealth of Australia v. Verwayen (1990) 170 CLR 394 ( Verwayen )). In the High Court decision of Verwayen , Brennan J at page 421 explained the doctrine of 'election' in the following way: Election consists in a choice between rights which the person making the election knows he possesses and which are alternative and inconsistent rights: Evans v. Bartlam [1937] 2 All ER 646 at 652, 653; Tropical Traders Ltd v. Goonan (1964) 111 CLR 41 at 55; Kammins Ballrooms Co Ltd v. Zenith Investments (Torquay) Ltd [1971] AC 850 at 883...An election is binding on the party who makes it once it is made overtly - or, at all events, not later than on the communication of the election to the party or parties affected thereby: Newbon v. City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 at 733; Scarf v. Jardine (1882) 7 App Cas 345 at 360-1. It is binding whether or not others who are affected by the election have acted in reliance on it... The common law principles described in Verwayen were adopted by the Administrative Appeals Tribunal in McGrory v. Federal Commissioner of Taxation [2004] AATA 609 ( McGrory ). In that case, the Tribunal was required to consider whether a taxpayer could revoke an election made under former section 139E of the Income Tax Assessment Act 1936 (ITAA 1936) to include the discount received on certain employee share options in their assessable income in the year the options were acquired. The issue arose following a decision by the Commissioner to disallow the taxpayer's objection to their income tax assessment for the relevant year on the basis that the election could not be revoked once it was made, and he had no discretion in the matter. In support of their application for a review of the decision, the taxpayer submitted that the power to make the election carried with it the implied power to revoke it. Alternatively, they argued that subsection 33(3) of the Acts Interpretation Act 1901 (AIA) provided the relevant power. The Commissioner, having regard to other election provisions in the law, maintained the view that if revocation were possible, 'one would expect to see some reference to such right in the legislation, the explanatory memorandum or the second reading speech'. Affirming the decision to disallow the objection, the Tribunal held that it would be inconsistent with the notion of an election, being a choice between alternative courses of action, to allow revocation in circumstances where the legislation did not provide for it. Furthermore, subsection 33(3) of the AIA had no application to an instrument made by a taxpayer in the exercise of a choice between alternative courses of action having different tax consequences, as it did not involve an exercise of power by the taxpayer. Senior Member Lindsay confirmed the position at general law that an election between alternative and inconsistent courses of action is binding, referring at paragraph 19 to the comments made by Brennan J in Verwayen. In the absence of express provision in the ITAA 1997 for the election to be revoked, he went on to consider whether a power of revocation could otherwise be implied, having regard to the scheme of the provisions, other election provisions in the income tax law and the contentions raised by the parties. Senior Member Lindsay concluded at paragraph 23: The election is made in the knowledge that it anticipates future events and circumstances which may or may not happen or turn out to be favourable. To allow revocation by objection at some point in the future would permit an elector to enjoy the benefit of hindsight. It would be inconsistent with the notion of an election being a choice between two alternative courses of action. I accept the submission that if such an outcome were intended, there would be express provision for it in the legislation. Consistent with the decision in McGrory and the principles at common law, it is the Commissioner's view that an individual's choice to include all or part of their 'applicable fund earnings' in the assessable income of a complying superannuation fund under section 305-80 of the ITAA 1997 cannot be revoked or varied once it is made. By making a choice under section 305-80 of the ITAA 1997, an individual is choosing between alternative and inconsistent courses of action, each carrying a different tax consequence: The ITAA 1997 does not make express provision for the choice to be revoked or varied. Nor can such a right be implied from the context of the legislative scheme, or by having regard to the Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 2) Bill 2004, which inserted the election into former section 27CAA of the ITAA 1936. Subdivision 305-B of the ITAA 1997 is intended to replicate the effect of section 27CAA of the ITAA 1936. It would be inconsistent with the concept of an election, being a choice between two alternative courses of action, to allow revocation or variation in circumstances where the ITAA 1997 does not provide for it. Accordingly, an individual is bound by a choice under section 305-80 of the ITAA 1997 and cannot revoke or vary the choice once it is made. Adopting this approach is consistent with the general rule that applies to the making of choices throughout the income tax law and promotes certainty and fairness for the complying superannuation fund whose tax obligations are directly affected by it.", "Date_of_Decision": "28 March 2012", "Year_of_Income": "Year ending 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1936 former section 27CAA former section 139E", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation Superannuation benefits Lump sum - superannuation benefits Superannuation benefits from foreign superannuation funds Taxpayer elections", "Case_References": "Scarf v Jardine (1882) 7 App Cas 345 [1881-5] All ER Rep 651", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201227", "Unmatched_Content": "Keywords Superannuation Superannuation benefits Lump sum - superannuation benefits Superannuation benefits from foreign superannuation funds Taxpayer elections"}
{"ATO_ID_Number": "ATO ID 2011/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Payment of death benefit to former stepchild: meaning of 'child' and 'dependant'", "Issue": "Is a person a 'stepchild' of a member of a self managed superannuation fund and therefore a 'dependant' of the member under regulation 6.22 of the Superannuation Industry (Supervision) Regulations 1994 (SISR), if the legal marriage of the person's natural parent to the member has ended?", "Decision": "No. A person ceases to be a 'stepchild' for the purposes of being a 'dependant' of the member under regulation 6.22 of the SISR, when the legal marriage of their natural parent to the member ends.", "Facts": "A member (M) of a self managed superannuation fund was legally married to P. P is the natural parent of S, who was born while P was married to another person. The marriage of M and P ended in divorce. M has died. M did not formally adopt the child S under any state or territory law. The trustee of the fund must determine whether S is a dependant of M because S has been a 'stepchild' of M.", "Reasons_for_Decision": "Summary: Regulation 6.22 of the SISR specifies the range of persons in whose favour the benefits of a member of a regulated superannuation fund may be cashed after the member's death. Subject to limited exceptions, subregulation 6.22(2) of the SISR provides that death benefits must be cashed in favour of a member's legal personal representative and/or one or more of the member's dependants. Subregulation 6.22(3) of the SISR allows death benefits to be cashed in favour of another individual if, after making reasonable enquiries, the fund trustee is not able to find either a legal personal representative or a dependant of the member. The term 'dependant' is not defined in the SISR and is therefore given the same meaning as in the Superannuation Industry (Supervision) Act 1993 (SISA), pursuant to paragraph 13(1)(b) of the Legislation Act 2003 . Subsection 10(1) of the SISA defines 'dependant', in relation to a person, as including 'the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship'. As the definition of 'dependant' is an inclusive one, it also covers a 'dependant' within the ordinary meaning of the word, including someone who is financially dependent on a person ( Malek v. FC of T 99 ATC 2294; (1999) 42 ATR 1203; [1999] AATA 678. Subsection 10(1) of the SISA defines the meaning of 'child' in relation to a person, as including: The term 'stepchild' is not defined in the SISA or the SISR and is therefore given its ordinary or 'common law' meaning, having regard to the context in which it appears. The Macquarie Dictionary defines 'stepchild' as 'a child of a husband or wife by a former union'. Similarly, the Australian Oxford Dictionary describes it as meaning 'a child of one's husband or wife by a previous marriage'. However, it is not clear from these definitions whether a child remains a stepchild of a person after that person's relationship with the child's natural parent ends. At common law, a child ceases to be stepchild of a step-parent when the relationship between the child's natural parent and the step-parent ends, that is, on the death of the natural parent or the divorce of the natural parent from the step-parent. This position originated in the case of Re Burt [1988] 1 Qd R 23 (Re Burt) and has been followed in a number of judicial decisions including Re Marstella [1989] 1 Qd R 638, 12 Fam LR 787, Basterfield v. Gay [1994] TasSC 120, (1994) Tas R 293 and Re Monckton [1995] QCA 321, [1996] 2 Qd R 174). In Re Burt , the Queensland Court of Appeal was required to consider the meaning of 'stepchild' under the Succession Act 1967-1977 (Qld), for the purposes of determining whether the natural children of a deceased parent were eligible to apply for family provision out of the estate of that parent's former spouse. Overturning the decision at first instance (and overruling the cases of Re Nielsen [1968] Qd R 221 and Re Trackson [1967] Qd R 124), the Court held that the relationship of stepchild and step-parent does not subsist after the termination of the marriage which creates it, whether by divorce or death. That is, the step-relationship only exists while the natural parent is married to the step-parent. In this case, McPherson J observed at page 25 that the definition of 'stepchild' in the Act, being 'a child by a former marriage of the deceased's husband or wife', did not expressly include a child by a former marriage of that person's former husband or wife. Following an examination of the meaning given to 'stepchild' in other legal contexts, his Honour concluded at pages 27 to 28 that the term has a natural or ordinary meaning and 'the relationship it connotes is ordinarily regarded as coming to an end on the termination of the marriage that gave rise to it'. Consistent with other provisions of the Act, the definition was therefore only intended to include those children whose natural parent was still married to the deceased at the time of death. In the same case, Andrews CJ, expressed the following view at page 24: I am satisfied that the relationship of affinity between step-parent and stepchild which comes into being with the marriage of the child's natural parent with the step-parent depends for its continued existence upon the continuity of that marriage and that it ceases with the termination of that marriage whether by death or divorce. Similarly, Thomas J said at page 32: The status of stepchild, as ordinarily understood, does not apply to the case in which the natural parent has been divorced from the step-parent and probably does not survive the death of the natural parent. The Superannuation Complaints Tribunal has followed the common law position when dealing with complaints relating to the payment of death benefits. For example, in Superannuation Complaints Tribunal Determination D04-05\\186 the Tribunal made a determination setting aside the decision of a trustee to pay a member's death benefit to the children of a deceased person's former spouse. The Tribunal held that it was bound by the common law view that a stepchild relationship ends on the death of a natural parent. As the children ceased to be the 'stepchildren' of the member on the death of their natural parent, they were not 'dependants' of the member when they died. Similarly, in Superannuation Complaints Tribunal Determination D99-2000\\082 the Tribunal set aside the decision of a trustee to pay a member's death benefit to the child of a former spouse on the basis that the child ceased to be a 'stepchild' and a 'dependant' of the member when the child's natural parent was divorced from the member. Consistent with this approach, it is the Commissioner's view that the relationship of stepchild to step-parent is severed when the marriage between the natural parent and the step-parent ends, that is, on the death of the natural parent or on the divorce of the natural parent from the step-parent. Accordingly, an individual does not continue to be a 'stepchild' and a 'child' of a member within the meaning of subsection 10(1) of the SISA, for the purposes of being a 'dependant' of the member under regulation 6.22 of the SISR, if the marriage of their natural parent to the member ends, on death or divorce, before the death of the member. Furthermore, having regard to the construction of the definition of 'child' in subsection 10(1) of the SISA, the Commissioner considers that the term 'stepchild' in paragraph (a) is only used in relation to individuals who are legally married. This is because paragraph (b) of the definition, which refers to 'a child of the person's spouse', would apply to a child of a natural parent in a defacto relationship. Therefore, the trustee in this case cannot treat S as a stepchild of M for the purposes of identifying M's dependants.", "Date_of_Decision": "6 September 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 10(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds Death benefits - superannuation benefits Dependants Stepchildren Children", "Case_References": "Re Burt [1988] 1 Qd R 23", "Other_References": "Superannuation Complaints Tribunal Determination D04-05\\186 Superannuation Complaints Tribunal Determination D99-2000\\082 The Australian Oxford Dictionary, 2004, 2nd edn, Oxford University Press, Oxford Reference Online The Macquarie Dictionary (Online), 2009, 5th edn, Macquarie Dictionary Publishers Pty Ltd", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201177", "Unmatched_Content": "Reasons for Decision, Paragraph 4 | Legislation name change - Legislative Instruments Act 2003 renamed Legislation Act 2003 | Legislative References, Reference 2 | Keywords Self managed superannuation funds Death benefits - superannuation benefits Dependants Stepchildren Children"}
{"ATO_ID_Number": "ATO ID 2011/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation: death benefits dependant - former spouse - same sex relationship", "Issue": "Is the taxpayer who, prior to the 2008-2009 income year, lived with a now deceased superannuation fund member on a genuine domestic basis in a relationship as a same sex couple, a 'former spouse' of the deceased in terms of paragraph 302-195(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) for the purposes of determining the taxation treatment of a superannuation death benefit received by the taxpayer because of the death of the member during the 2010-2011 income year?", "Decision": "Yes. Although the definition of 'spouse' was only amended to include same sex couples subsequent to the relationship ceasing, the taxpayer is a 'former spouse' of the deceased superannuation fund member in terms of paragraph 302-195(1)(a) of the ITAA 1997.", "Facts": "A superannuation fund member died in the 2010-2011 income year. The taxpayer received a superannuation death benefit from the deceased's superannuation fund during the 2010-2011 income year. The taxpayer and the deceased, although not legally married, lived together on a genuine domestic basis in a relationship as a same sex couple for a number of years prior to their relationship ceasing in the 2003 year.", "Reasons_for_Decision": "Summary: Concessional taxation arrangements apply to the payment of a superannuation death benefit to a person who is a 'death benefits dependant' of the person who has died. The meaning of 'death benefits dependant' is set out in section 302-195 of the ITAA 1997. Paragraph 302-195(1)(a) of the ITAA 1997 provides that a death benefits dependant, of a person who has died, includes the deceased person's 'former spouse'. Prior to the 2008-2009 income year same sex relationships were not recognised in the definition of 'spouse' when determining if a person was a death benefits dependant. Specifically for the 2008-2009 income year, the definition of 'death benefits dependant' in paragraphs 302-195 (1)(a) and 302-195(1)(b) of the ITAA 1997 were replaced with paragraphs 302-195A(2)(a) and 302-195A(2)(b) of the Income Tax (Transitional Provisions) Act 1997 respectively. Relevantly, paragraph 302-195A(2)(a) of the Income Tax (Transitional Provisions Act) 1997 provided that persons in same sex relationships could be a spouse or former spouse for the death benefits dependant definition. In the following year the definition of spouse in section 995-1 of the ITAA 1997 was amended to recognise same sex relationships. Whether an individual is the 'former spouse' of a superannuation fund member for the purposes of paragraph 302-195(1)(a) of the ITAA 1997 is determined by reference to the definition of 'spouse' applying at the time the death benefit was received. In this regard, the definition of spouse in section 995-1 of the ITAA relevantly states: spouse of an individual includes: ... (b) another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. As the taxpayer had lived with the now deceased superannuation fund member on a genuine domestic basis in a relationship as a couple for a period up until 2003 the taxpayer was, under the definition above, the 'spouse' of the deceased during that period. Consequently, in determining whether an individual is a 'former spouse' within the meaning of paragraph 302-195(1)(a) of the ITAA 1997 the meaning of the term 'former' needs to be considered. As the word 'former' is not a defined term it takes its ordinary meaning in the context of the legislative provision. The Macquarie Dictionary, 2013, 6th edn, The Macquarie Library Pty Ltd, NSW relevantly, defines former as 'preceding in time; prior or earlier' and 'having held a particular office in the past: a former president'. With this in mind, and in the context of paragraph 302-195(1)(a) of the ITAA 1997, an individual is a deceased person's 'former spouse' if that individual was the spouse of the deceased sometime in the past. In the present case, the events that would, in the 2010-2011 income year, include the individual within the term 'former spouse' occurred prior to the enactment of amendments which included same sex relationships within the definition of 'spouse'. As the amended definition of spouse had not been enacted at the time of the relationship, the question arises as to whether the fact that the relationship occurred can be taken into account when determining whether the taxpayer falls within the meaning of 'former spouse'. In this regard, it is a common law principle that, unless otherwise indicated by the legislature, amending legislation will have prospective effect only and not apply to facts or events that have already occurred to create new rights or obligations in relation to those facts or events ( Maxwell v. Murphy (1957) 96 CLR 261; Fisher v. Hebburn Ltd (1960) 105 CLR 188). In drafting the changes to the definition of 'spouse' as it applies to paragraph 302-195(1)(a) of the ITAA 1997, the legislature has not put any constraints on the period to which the new definition operates. Consequently, in determining whether an individual is a 'former spouse', the legislature permits that a conclusion be formed based upon the facts relating to events that occurred prior to the operation of the amended definition of 'spouse'. In regard to the application of legislation to past events, Pearce, DC and Geddes, RS, 2014, Statutory Interpretation in Australia, 8th Edn, Butterworths, Chatswood NSW at page 399 states: It is important when considering the question of retrospectivity to draw a distinction between legislation having a prior effect on past events and legislation basing future action on past events. Jordan CJ contrasted these circumstances in Coleman v Shell Co of Australia Ltd (1943) 45 SR (NSW) 27 at 31: ... as regards any matter or transaction, if events have occurred prior to the passing of the Act which have brought into existence particular rights or liabilities in respect of that matter or transaction, it would be giving a retrospective operation to the Act to treat it as intended to alter those rights or liabilities, but it would not be giving it a retrospective operation to treat it as governing the future operation of the matter or transaction as regards the creation of further particular rights or liabilities. In the case of Re a Solicitor's Clerk [1957] 1 WLR 1219 a solicitor's clerk was convicted on charges of larceny but, pursuant to the law applied at that time, no order could be made to prevent the clerk from being employed as a solicitor's clerk. Subsequent to the clerk's conviction, legislation was passed to allow such an order to be made. The court held that although this was legislation that had future application only, the clerk's disqualification from employment was permissible because the disqualification applied in the future. This was so even though the events which led to the disqualification occurred prior to the enabling legislation's operation. Likewise in this case, applying the amended legislation to facts that occurred prior to the introduction of the amended definition of 'spouse' does not involve a retrospective operation of the law but rather the future operation of the law with a reference to facts relating to past events. Accordingly, the taxpayer is a 'former spouse' for the purposes of paragraph 302-195(1)(a) of the ITAA 1997 and consequently a 'death benefits dependant' pursuant to section 302-195 of the ITAA 1997.", "Date_of_Decision": "7 October 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Income Tax Assessment Act 1997 section 995-1 section 302-195 subsection 302-195(1) paragraph 302-195(1)(a) paragraph 302-195(1)(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Death benefits dependent Former spouse Same sex relationship Superannuation", "Case_References": "Fisher v. Hebburn Ltd (1960) 105 CLR 188", "Other_References": "Pearce, DC and Geddes, RS, 2014, Statutory Interpretation in Australia, 8th Edn, Butterworths, Chatswood NSW. P. 399. The Macquarie Dictionary, 2013, 6th edn, The Macquarie Library Pty Ltd, NSW.", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201183", "Unmatched_Content": "Keywords Death benefits dependent Former spouse Same sex relationship Superannuation"}
{"ATO_ID_Number": "ATO ID 2011/64", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Benefits: public sector superannuation scheme superannuation lump sum element untaxed in the fund", "Issue": "Will the element untaxed in the fund of a superannuation lump sum benefit paid to a member of a public sector superannuation scheme be reduced if the member makes an undeducted personal contribution to the scheme before the lump sum benefit is paid?", "Decision": "No. The contribution will not reduce the element untaxed in the fund of the superannuation lump sum benefit paid to the member.", "Facts": "An individual is a member of a public sector superannuation scheme for which the benefits are sourced partly from contributions to the scheme and earnings on those contributions and partly from another source (the consolidated revenue fund). Their service period of 30 years includes 6 years of service prior to 1 July 1983. The individual's superannuation interest is valued at $100,000. The interest has a contributions segment of $20,000. There is an additional $5,000 of assessable contributions and earnings. The remaining $75,000 is to be funded from consolidated revenue. The individual is entitled to receive a superannuation lump sum from the scheme. The individual is contemplating making a $20,000 undeducted contribution to increase their lump sum. This has been suggested as a strategy to increase the tax free component of the superannuation lump sum and to reduce the element untaxed in the fund.", "Reasons_for_Decision": "Summary: Unless otherwise excluded, section 307-125 of the Income Tax Assessment Act 1997 (ITAA 1997) requires the tax free component and the taxable component of a superannuation lump sum (being a superannuation benefit) to reflect the same proportions those components make up of the superannuation interest from which the superannuation lump sum is paid. Where certain conditions are met, section 307-150 of the ITAA 1997 modifies the components of a superannuation lump sum paid from a superannuation interest that existed before 1 July 2007. Where the superannuation lump sum includes an element untaxed in the fund, subsection 307-150(3) of the ITAA 1997 increases the tax free component of the superannuation lump sum and decreases the element untaxed in the fund by the amount determined under subsection 307-150(4) of the ITAA 1997. Subsection 307-200(1) of the ITAA 1997 provides that, in the circumstances specified in the Income Tax Assessment Regulations 1997 (ITAR 1997), a superannuation interest is to be treated as two or more interests in the way specified in the ITAR 1997. Subsection 307-200(3) of the ITAA 1997 provides that the ITAR 1997 may also specify a way of treating a superannuation interest in relation to the element taxed in the fund and the element untaxed in the fund. Subsection 307-200(4) of the ITAA 1997 states the ITAR 1997 may also specify a way of allocating an amount relating to a superannuation interest that is treated as two or more interests. Regulation 307-200.03 of the ITAR 1997 provides when an interest in a public sector superannuation scheme is to be treated as two or more superannuation interests. Paragraph 307-200.03(2)(a) of the ITAR 1997 provides that if the superannuation benefit to be paid is sourced partly from contributions made to a public sector superannuation scheme or earnings on those contributions and partly from one or more other sources the interest is to be treated as two superannuation interests - the 'two interest rule'. Subregulation 307-200.03(3) of the ITAR 1997 provides that the two superannuation interests are: As a result, for the purposes of Division 307 of the ITAA 1997, each benefit paid from the scheme is taken to be paid from the two separate interests. Further, if a superannuation lump sum is paid from an interest that is treated as two interests for the purposes of Division 307 of the ITAA 1997, the payment must be treated as the payment of two superannuation lump sums. The Explanatory Statement (ES) to Income Tax Assessment Regulations 2007 (No.2) (SLI No.90 of 2007) which inserted regulation 307-200.03 into the ITAR 1997 confirms this division of one superannuation interest into two interests. It further demonstrates that in splitting the interest into two interests, the intention is also to allocate the tax free component and the element taxed into one interest, and the element untaxed into another interest. It states: ...where a contributor has a superannuation interest that includes a tax free component and a taxable component that consists of an element taxed in the fund and an element untaxed in the fund, the tax free component and the element taxed in the fund is treated as one superannuation interest. The element untaxed in the fund is treated as a separate, second, superannuation interest. Section 307-210 of the ITAA 1997 provides, consistent with the purpose of the 'two interest rule' as explained in the ES to SLI No.90 of 2007, the 'contributions interest' will comprise a tax free component consisting of a contributions segment and possibly a crystallised segment. Section 307-215 of the ITAA 1997 provides the taxable component is the difference between the value of the 'contributions interest' and the tax free component of the 'contributions interest'. The taxable component of the 'contributions interest' consists solely of element taxed in the fund. As the 'remainder interest' in the public sector superannuation scheme is fully unfunded (no 'last minute contributions' were made to the scheme) section 307-210 of the ITAA 1997 ensures it contains no contributions segment. Further, subsection 307-225(3) of the ITAA 1997 ensures the remainder interest can have no crystallised segment. Hence, the 'remainder interest' has no tax free component prior to the possible application of section 307-150 of the ITAA 1997. Under section 307-215 of the ITAA 1997, the full value of the 'remainder interest' is taxable component. Consistent with the intent of the 'two interest rule', the taxable component of the 'remainder interest' comprises entirely untaxed element as it contains no amounts that have been contributed to the scheme and, specifically, no amounts that have been included in the taxable income of the fund within the scheme. Therefore, before making any further contribution, the member's interests in the public sector superannuation scheme are: For the purposes of Division 307 of the ITAA 1997 a payment from the scheme would consist of two superannuation lump sum payments. Section 307-150 of the ITAA 1997 can only apply to the superannuation lump sum paid from the 'remainder interest' as that is the only interest that includes an element untaxed in the fund. The amount calculated under subsection 307-150(4) of the ITAA 1997 is: Original tax free component and untaxed element * [Number of days in the service period for the lump sum that occurred before 1 July 1983 / Number of days in the service period for the lump sum] 0 + $75,000 * [6 years* /30 years] = $15,000 * Note: Years have been used instead of days for the sake of simplicity. Subsection 307-150(3) of the ITAA 1997 requires the tax free component of the superannuation lump sum paid from the 'remainder interest' to be increased by $15,000 and the element untaxed in the fund to be reduced by $15,000. As a result the following superannuation lump sum payments would be made: However, if the member makes the $20,000 undeducted personal contribution before any benefit is paid, the interests would be: Section 307-150 of the ITAA 1997 only applies to the superannuation lump sum paid from the 'remainder interest'. As the 'remainder interest' has not changed the amount calculated under subsection 307-150(4) of the ITAA 1997 remains $15,000 and the following superannuation lump sum payments would be: The contribution has no effect on the calculation of the element untaxed in the fund.", "Date_of_Decision": "", "Year_of_Income": "30 June 2011", "Legislative_References": "Income Tax Assessment Act 1997 section 307-125 section 307-150 subsection 307-150(3) subsection 307-150(4) subsection 307-200(1) subsection 307-200(3) subsection 307-200(4) section 307-210 section 307-215 subsection 307-225(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/145", "Subject_References": "Taxable component of superannuation benefits Element taxed in the fund Element untaxed in the fund", "Case_References": "", "Other_References": "Explanatory Statement to Income Tax Assessment Regulations 2007 (No. 2) (SLI No.90 of 2007)", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201164", "Unmatched_Content": "Clarification of separation under 'two interest rule' | Corrected references to section 307-215 and subsection 307-225(3) of the ITAA 1997 | Keywords Taxable component of superannuation benefits Element taxed in the fund Element untaxed in the fund"}
{"ATO_ID_Number": "ATO ID 2015/11", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation: meaning of 'Legally Qualified Medical Practitioners'", "Issue": "What is meant by the term 'legally qualified medical practitioners' within the definition of 'disability superannuation benefit' in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "The term 'legally qualified medical practitioners', within the definition of 'disability superannuation benefit' in subsection 995-1(1) of ITAA 1997, is not a defined term in taxation legislation. The Commissioner relies on its ordinary meaning and takes the view that 'legally qualified medical practitioners' are persons who have general or specialist registration with the Medical Board of Australia (MBA).", "Facts": "A superannuation fund member has applied to the fund trustee, under the permanent incapacity condition of release, to receive a superannuation lump sum benefit. In working out the tax to be withheld from the payment of the superannuation lump sum, [1] the trustee needs to consider whether the benefit paid will be a 'disability superannuation benefit' for the purposes of section 307-145 of the ITAA 1997. The term 'disability superannuation benefit' in subsection 307-145(1) of the ITAA 1997 is defined in subsection 995-1(1) of that Act as follows: disability superannuation benefit means a *superannuation benefit if: (a) the benefit is paid to an individual because he or she suffers from ill-health (whether physical or mental); and (b) 2 legally qualified medical practitioners have certified that, because of the ill-health, it is unlikely that the individual can ever be *gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience or training. The member's application includes certification from two health practitioners. Each certification states that, due to ill health, it is unlikely that the member can ever be gainfully employed in a capacity for which she is reasonably qualified because of education, experience or training. The health practitioners are not medical doctors.", "Reasons_for_Decision": "Summary: The Commissioner considers that in this context the term 'legally qualified medical practitioners' should be construed as referring to those who are legally qualified under the relevant legislation to practice medicine in Australia: see Re VBI and Federal Commissioner of Taxation (Case 9/2005) [2005] AATA 683; 2005 ATC 193 ; (2005) 52 ATR 1197 at ATC 196. [2] The relevant law governing who is qualified to practice medicine in Australia is the Health Practitioner Regulation National Law (the National Law) in force in each state and territory of Australia. [3] Section 5 of the National Law [4] defines the term 'medical practitioner' as follows: medical practitioner means a person who is registered under this Law in the medical profession. The medical profession is but one health profession recognised under the National Law. Other health professions include Chinese medicine, chiropractic, dental, nursing and midwifery, pharmacy and psychology. [5] Section 113 of the National Law states that; a person must not use a title of a health profession unless they are registered in that profession. Only members of the medical profession can use the title of medical practitioner. Section 31 of the National Law establishes a number of National Health Practitioner Boards (National Boards). The Medical Board of Australia (MBA) is the National Board for the medical profession. Section 35 of the National Law lists the functions of National Boards - one of these being the registration of suitably qualified and competent persons in each health profession. Under subsection 40(3) of the National Law, each National Board must publish registration standards, codes or guidelines on its website. There are six categories of registration for health professionals under Part 7 of the National Law: Each type of registration, as it relates to the medical profession, is described on the MBA's internet site and is covered by registration standards, codes and guidelines. In a Statement dated 14 March 2012 the MBA provided guidelines for registration which stated relevantly: As the primary purpose of registration is to protect the public, medical practitioners should be registered if they have any direct clinical contact with patients or provide treatment or opinion about individuals. The requirement in paragraph (b) of the definition of 'disability superannuation benefit', for 2 legally qualified medical practitioners to provide certification about individuals, involves providing an opinion about those individuals. It is the Commissioner's view that persons who have general or specialist registration with the MBA are legally qualified medical practitioners for the purposes of the definition of 'disability superannuation benefit'. Also, for a benefit to be a disability superannuation benefit, certification must have been provided by 2 medical practitioners as opposed to other types of health practitioners.", "Date_of_Decision": "6 March 2015", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1997 section 307-145 subsection 307-145(1) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/108 | ATO ID 2009/109", "Subject_References": "Disability Superannuation benefits Lump sum - superannuation benefits Member benefits - superannuation benefits Health sector Health professionals Medical practitioners", "Case_References": "Re VBI and Federal Commissioner of Taxation (Case 9/2005) [2005] AATA 683 2005 ATC 193 (2005) 52 ATR 1197", "Other_References": "", "Business_Line": "SPR", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201511", "Unmatched_Content": "Keywords Disability Superannuation benefits Lump sum - superannuation benefits Member benefits - superannuation benefits Health sector Health professionals Medical practitioners"}
{"ATO_ID_Number": "ATO ID 2015/19", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disability superannuation benefit: medical certificates", "Issue": "Can medical certificates supplied by an individual in relation to a particular superannuation lump sum, satisfy the requirements of paragraph (b) of the definition of 'disability superannuation benefit' in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to later superannuation lump sums paid to the individual by the same superannuation fund?", "Decision": "Yes. The medical certificates can satisfy the certification requirements in paragraph (b) of the disability superannuation benefit definition and can be used for later superannuation lump sums paid to the member by the same superannuation fund.", "Facts": "In November 2007, a member of a complying superannuation fund is paid a superannuation benefit on the basis of having satisfied the permanent incapacity condition of release. The member is less than preservation age throughout the financial year in which the benefit is paid. Two medical practitioners have certified that the member is incapable of ever being gainfully employed in a capacity for which the member is reasonably qualified because of education, training or experience. These certificates are presented to the fund before the trustee pays the benefit. Three subsequent superannuation lump sums are paid in the same financial year; the last payment being made in April 2008.", "Reasons_for_Decision": "Summary: Paragraph (b) of the definition of 'disability superannuation benefit' in subsection 995-1(1) of the ITAA 1997 requires that 2 legally qualified medical practitioners have certified that, because of the ill-health, it is unlikely that the individual can ever be gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience or training. This medical certification requirement is similar to the one that was contained in former section 27G of the Income Tax Assessment Act 1936 (ITAA 1936) which dealt with invalidity payments. Invalidity payments can be seen as the precursor to disability superannuation benefits under the ITAA 1997. An amount could only qualify as an invalidity payment when paid to an individual in consequence of the termination of his or her employment. Disability superannuation benefits can be received by someone who was self-employed. The Federal Court decision of Federal Commissioner of Taxation v. Pitcher [2005] FCA 1154; 2005 ATC 4813; (2005) 60 ATR 424 (Pitcher's case), which looked at former section 27G of the ITAA 1936, offers some guidance as to the medical certification requirement. Ryan J in Pitcher's case, by way of obiter, stated that the medical certificates must have issued when the payment fell to be characterised as an invalidity payment, that is, when the Commissioner assessed the payment to tax. He noted that they need not be obtained before the relevant payment. He observed that because the certificates need only be obtained before the Commissioner's assessment to tax, the possibility can exist that the taxpayer has, at that time, by training or education undertaken after the former employment was terminated, qualified for employment in a capacity which was not available when the earlier termination occurred. Ryan J clarified that it is the medical practitioners and not the Commissioner who must be satisfied of the individual's capacity to be employed in the future. However, he cautioned that the Commissioner can determine, as a question of fact, whether a particular certificate properly satisfies the test of incapacity that is now restated in the definition of disability superannuation benefit. More than one implication can be drawn from the obiter of Ryan J in Pitcher's case. First, a particular certificate could relate to one or more payments made before the certificate issued. Secondly, as the certificate should be obtained before the Commissioner's assessment, it would usually be reasonable to rely on a certificate given in relation to one superannuation lump sum in determining whether a later superannuation lump sum paid by the same superannuation fund is a disability superannuation benefit. The Administrative Appeals Tribunal decision of Sills v. Federal Commissioner of Taxation [2010] AATA 843; 2010 ATC 10-164; (2010) 80 ATR 908 (Sills' case), which looked at former section 27G of the ITAA 1936 and section 82-150 of the ITAA 1997, also provides guidance as to the medical certification requirement. Sills' case considered the obiter of Ryan J in Pitcher's case. The Tribunal reiterated that it is the medical practitioners who must be satisfied that, because of the ill-health of the individual, it is unlikely that the taxpayer can ever be gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience or training; not the Commissioner or the Tribunal. The Tribunal reaffirmed the possibility that a taxpayer may, by subsequent training or education after the termination of the former employment, become qualified for employment in a capacity not available when the earlier termination occurred. Moreover, the Tribunal held that the subsections in question did not impose additional requirements upon medical practitioners to set out the evidence upon which the medical certificates were based, provided the medical certificates properly answered the questions raised by the relevant legislation. Accordingly, it is the Commissioner's view that medical certificates supplied in relation to a particular superannuation lump sum can, for the purposes of section 307-145 of the ITAA 1997, be used in relation to later superannuation lump sums provided the superannuation lump sums are paid over a short period of time (in this case November 2007 for the first and April 2008 for the last) and there is no evidence to suggest that the individual's circumstances have changed in some relevant way.", "Date_of_Decision": "30 June 2015", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 27G", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lump sum - superannuation benefits Superannuation benefits Tax free component of superannuation benefits Disability superannuation benefit Medical certificates", "Case_References": "Federal Commissioner of Taxation v. Pitcher [2005] FCA 1154 (2005) 2005 ATC 4813 (2005) 60 ATR 424", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201519", "Unmatched_Content": "Keywords Lump sum - superannuation benefits Superannuation benefits Tax free component of superannuation benefits Disability superannuation benefit Medical certificates"}
{"ATO_ID_Number": "ATO ID 2009/109", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disability superannuation benefit", "Issue": "Can a superannuation lump sum be a disability superannuation benefit as defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) even if it is not paid to the member of the fund under the permanent incapacity condition of release in the Superannuation Industry (Supervision) Regulations 1994 (SIS regulations)?", "Decision": "Yes. A superannuation lump sum can be a disability superannuation benefit even if it is not paid under the permanent incapacity condition of release of the SIS regulations.", "Facts": "A member of a complying superannuation fund receives four superannuation lump sum benefits from the fund during one income year. The member is below preservation age throughout the income year. The member's benefits in the fund are all preserved benefits. The fund's rules authorise the trustee to pay a benefit to a member who suffers ill-health (whether physical or mental), providing other regulatory requirements are met. The fund's rules also authorise the trustee to pay a member their unrestricted non-preserved benefits at any time. The member satisfies the permanent incapacity condition of release Two medical practitioners have certified that the member is incapable of ever being gainfully employed in a capacity for which the member is reasonably qualified because of education, training or experience. These certificates are presented to the fund before the trustee makes a payment. The trustee pays the member a superannuation lump sum in November 2007. This benefit is a disability superannuation benefit. No investment earnings accrue or are allocated after the payment in November 2007. Three subsequent superannuation lump sums are paid in the same financial year, the last payment being made in April 2008.", "Reasons_for_Decision": "Summary: Paragraph (a) of the definition of 'disability superannuation benefit' in subsection 995-1(1) of the ITAA 1997 requires that a superannuation benefit is paid to a person because he or she suffers from ill-health (whether physical or mental). In Human Rights and Equal Opportunity Commission v. Mount Isa Mines Ltd [1993] FCA 535; (1993) 46 FCR 301; (1993) 118 ALR 80; (1993) 51 IR 364 Lockhart J stated: In my opinion the phrase \"by reason of\" in s. 5(1) of the SD Act should be interpreted as meaning \"because of\", \"due to\", \"based on\" or words of similar import which bring something about or cause it to occur. The phrase implies a relationship of cause and effect between the sex (or characteristic of the kind mentioned in s. 5(1)(b) or (c)) of the aggrieved person and the less favourable treatment by the discriminator of that person. In the context of paragraph (a) of the definition of 'disability superannuation benefit' in subsection 995-1(1) of the ITAA 1997, there must be a causal connection between the ill-health and the payment of the superannuation benefit. As a result of suffering from ill-health the person is paid the benefit. Some support for this is also provided by the decision in Federal Commissioner of Taxation v. Scully [2000] HCA 6; (2000) 201 CLR 148; 2000 ATC 4111; 43 ATR 718 ( Scully's case). In Scully's case the High Court had to determine whether an invalidity superannuation benefit was an eligible termination payment (ETP) or whether it fell within the ETP exclusion for consideration of a capital nature for, or in respect of, personal injury. The High Court considered that by the use of the word 'payment', as distinct from 'consideration', a 'rational connection' or factual causation would be enough. This can be seen to accord with the dictionary meaning of the phrase 'because of'. The Macquarie Dictionary , 2001, rev 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'because of' as meaning 'by reason of' and 'on account of'. As stated in subsection 307-5(1) of the ITAA 1997, a superannuation benefit is a payment described in the table. Column 2 of item 1 of that table refers to a superannuation fund payment as a payment to you from a superannuation fund because you are a fund member. Section 307-65 of the ITAA 1997 provides a meaning for the term 'superannuation lump sum'. This payment is a superannuation benefit that is not a superannuation income stream benefit. Retail Employees Superannuation Pty Ltd v. Crocker [2001] FCA 1330; 48 ATR 359 involved a claim a member made upon a superannuation fund for benefits payable upon total and permanent disablement. It was an appeal from a decision of the Superannuation Complaints Tribunal (SCT). According to Allsop J the task of the SCT was to form a view, from the perspective of the trustee or insurer, as to whether the decision of either was (recognising the overriding framework given by the governing rules and policy terms, respectively) unfair or unreasonable. In reaching their decision the High Court in Scully's case also had regard to the rules of the fund. These decisions support an approach based on looking at a fund's rules to determine why a benefit was paid. Under the SIS regulations voluntary cashing of preserved benefits and restricted non-preserved benefits may only occur on or after the satisfaction by the member of a condition of release (COR). But there is nothing in the income tax law definition of disability superannuation benefit that requires the benefit to be paid under a particular COR. It is a question of fact, to be determined objectively, whether a particular superannuation benefit is paid because of a member's ill-health. Satisfaction of a particular COR, such as the permanent incapacity COR, would be a relevant fact to consider, and could in some circumstances in itself be sufficient for it to be said that payments are made because of a member's ill-health. According to subregulation 6.01(2) of the SIS regulations a 'condition of release' is a COR specified in column 2 of Schedule 1 and subject to regulation 6.01B a member of a fund is taken to have satisfied a COR if the event specified in that condition has occurred in relation to that member. The term 'cashing restriction' is also defined in the subregulation. It means a cashing restriction specified in column 3 of the item in Schedule 1 that mentions the COR. CORs do not apply to unrestricted non-preserved benefits (UNPBs) as is made clear by subregulation 6.20(1) of the SIS regulations which states that a member's unrestricted non-preserved benefits may be cashed at any time. Subregulation 6.12(1) of the SIS regulations provides that: Items 103 and 203 in Schedule 1 to the SIS regulations deal with the permanent incapacity COR. This particular COR has a 'nil' cashing restriction. Permanent incapacity is defined in regulation 1.03C as: \".. a member of a superannuation fund or an approved deposit fund is taken to be suffering permanent incapacity if a trustee of the fund is reasonably satisfied that the member's ill-health (whether physical or mental) makes it unlikely that the member will engage in gainful employment for which the member is reasonably qualified by education, training or experience.\" This definition is effective from 1 July 2013. A payment made as a result of satisfying the permanent incapacity COR is therefore clearly a payment made to a person because he or she suffers from ill-health (whether physical or mental). Once the permanent incapacity COR is satisfied, the member's benefits in the fund were converted from preserved benefits to UNPBs. This occurred prior to the payment of the first superannuation lump sum in November 2007. As no earnings accrued to the member's account after payment of that benefit, the member did not need to satisfy any COR to obtain payment of the remaining benefits in the fund. As the rules of the fund permitted payment of UNPBs at any time the member had to simply apply for payment. On one view, no later payments could be said to be connected to the member satisfying the COR, and that a separate basis would need to be found for saying that the payments were made because of the member's ill-health. However, subregulation 6.18(3)(b)(i) of the SIS regulations provides preserved benefits may be cashed as one or more lump sums when the COR that has been satisfied has a 'nil' cashing restriction. That is, the provision specifically contemplates a person's benefits may be paid as a series of lump sum benefits in relation to a particular COR. As the last of the superannuation lump sums was paid 5 months after the first lump sum paid in November 2007 each of the later lump sums could be seen as one of a series of lump sums that were paid in relation to the member satisfying the permanent incapacity COR. As the payments in this case were only UNPBs because of the permanent incapacity COR being satisfied there is a rational connection or the necessary causation between the COR being satisfied and each of the later superannuation lump sums being paid, and hence from the member's ill-health to each payment. Ill-health led to the permanent incapacity COR being satisfied and this in turn resulted in the member's benefits becoming UNPBs. These lump sums would not otherwise have been paid if it were not for the fund trustee being satisfied of the member's permanent incapacity or ill-health. In this instance the later superannuation lump sums were made because the member suffers from ill-health. These lump sums are thus capable of being disability superannuation benefits.", "Date_of_Decision": "9 September 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 27G", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lump sum - superannuation benefits", "Case_References": "Human Rights and Equal Opportunity Commission v Mount Isa Mines Ltd [1993] FCA 535 (1993) 46 FCR 301 (1993) 118 ALR 80 (1993) 51 IR 364", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009109", "Unmatched_Content": "Please note: This ATO ID was withdrawn in error on 6 May 2011. This error was corrected on 16 May 2011 and this ATO ID has been current since its release This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | The definition of permanent incapacity in subregulation 6.01(2) has been repealed and replaced to include reference to current definition of permanent incapacity. | Keywords Lump sum - superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2009/125", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Disability superannuation benefit: roll-over - commencement of an account-based pension", "Issue": "Is there a transfer for the purposes of subsection 307-5(8) of the Income Tax Assessment Act 1997 (ITAA 1997) and therefore a roll-over superannuation benefit when a member of a complying superannuation fund decides to commence an account-based pension?", "Decision": "No. The commencement of the account-based pension is not treated as a payment for the purposes of subsection 307-5(8) of the ITAA 1997 and accordingly there is no roll-over superannuation benefit.", "Facts": "A member of a complying superannuation fund has an accumulation account. The member has no other superannuation interest in the superannuation fund. The member suffers ill-health and has ceased work. The member, being less than preservation age, applies to receive a benefit from the fund on the basis that the member has satisfied the permanent incapacity condition of release. The trustee is satisfied that the member suffers ill-health and is unlikely to engage in gainful employment for which the member is reasonably qualified by education, experience or training. Two medical practitioners have certified that the member is incapable of ever being gainfully employed in a capacity for which the member is reasonably qualified because of education, experience or training. The member elects to be paid an account-based pension using the entire balance of the accumulation amount. The fund trustee commences to pay an account-based pension to the member and 'transfers' the assets supporting the member's pension to the fund's segregated current pension assets.", "Reasons_for_Decision": "Summary: Section 307-145 of the ITAA 1997 applies to increase the tax free component of a superannuation lump sum that is a disability superannuation benefit payable to a member of a superannuation fund. Some funds are maintained with distinct 'sub-funds' that separately comprise the assets representing the interests of the members in accumulation phase (the 'accumulation sub-fund') and the interests of the members receiving superannuation income stream benefits (the 'pension sub-fund'). The 'pension sub-fund' represents the fund's segregated current pension assets. The Commissioner has been asked if a superannuation lump sum should be taken to be paid to the member under subsection 307-5(8) of the ITAA 1997 where a member's benefits are 'transferred' from the 'accumulation sub-fund' to the 'pension sub-fund' in facilitating the commencement of an account-based pension to the member. If this 'transfer' is considered the payment of a superannuation lump sum then section 307-145 of the ITAA 1997 could be applied to increase the tax free component of that superannuation lump sum. However, as explained in the paragraphs that follow there is no payment of a superannuation lump sum in these particular circumstances. Subsection 307-5(8) of the ITAA 1997 applies when an amount is transferred from one superannuation interest to another superannuation interest within the same superannuation plan. In such a case, the transfer is treated as a payment in determining whether the transfer is a superannuation benefit or a roll-over superannuation benefit. When subsection 307-5(8) of the ITAA 1997 applies, it can operate in conjunction with sections 307-5, 307-15 and 306-10 of the ITAA 1997 to treat the transferred amount as a superannuation benefit and also a roll-over superannuation benefit. This is known colloquially as an internal roll-over. The expression internal roll-over is not defined for the purposes of Division 307 of the ITAA 1997. However, it is clear from the wording in subsection 307-5(8) of the ITAA 1997 that an internal roll-over is dependent on the concept of a superannuation interest which is used in the ITAA 1997. This represents a departure from former Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936 (ITAA 1936), in which the expression internal roll-over amount was defined by reference to highly specific sets of circumstances. Those provisions therefore can provide little guidance in determining what an internal roll-over is for the purposes of the ITAA 1997. Merely commencing a superannuation pension from an existing superannuation interest does not involve a transfer of benefits between superannuation interests. A pension payable on permanent disability is merely one of a range of benefits payable from the member's superannuation interest. While in this case there may be, for accounting purposes, a segregation of the assets supporting the member's interest, the member does not have two separate interests in the superannuation fund between which anything can be said to be transferred. This is borne out by the AAT's decision in Case 18/97, AAT Case 11,709 (1997) 35 ATR 1074; 97 ATC 227. In that case the taxpayer elected to be paid a pension from the fund in accordance with the provisions of the fund's trust deed. This involved her accumulated credit being applied by the Trustee towards providing a pension. It was argued that the accumulated credit could be classified as an eligible termination payment or ETP (as defined in former subsection 27A(1) of the ITAA 1936) and that this ETP was rolled back into the same fund. It should be noted that this pre-dated the amendments relating to internal roll-overs which applied to certain payments made on or after 1 July 2001. The AAT held that there was no ETP that was rolled-over back into the fund. Regulation 307-200.05 of the Income Tax Assessment Regulations 1997 provides that an amount that supports a superannuation income stream is always to be treated as a separate superannuation interest. This regulation applies to ensure that an interest supporting a superannuation income stream is kept separate from any other interest a member has in a fund. It does not operate to treat the superannuation income stream interest as a separate interest from the interest in which the member's benefits accumulated. It has no application when there is no other superannuation interest as in this case when the superannuation pension paid by the fund trustee is the only superannuation interest. In view of the above there is no transfer of benefits between superannuation interests within the same superannuation plan which can be treated as a superannuation lump sum to which section 307-145 of the ITAA 1997 can be applied.", "Date_of_Decision": "27 October 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 27A(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Lump sum - superannuation benefits Roll-overs - superannuation benefits Superannuation interest Tax free component of superannuation benefits", "Case_References": "Case 18/97, AAT Case 11,709 (1997) 35 ATR 1074 97 ATC 227", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009125", "Unmatched_Content": "Keywords Lump sum - superannuation benefits Roll-overs - superannuation benefits Superannuation interest Tax free component of superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2015/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign currency translation rules in working out 'applicable fund earnings' under section 305-75 of the ITAA 1997", "Issue": "What is the correct rule for translating foreign currency into Australian dollars (AUD) for the purposes of working out an individual's 'applicable fund earnings' in relation to a superannuation lump sum under section 305-75 of the Income Tax Assessment Act 1997 (ITAA 1997) when an individual receives a superannuation lump sum from a foreign superannuation fund to which section 305-70 of the ITAA 1997 applies?", "Decision": "For the purposes of working out your 'applicable fund earnings' in relation to a superannuation lump sum under section 305-75 of the ITAA 1997, the correct rule for translating foreign currency into AUD is the rule described in Item 11A of the table in subsection 960-50(6) of the ITAA 1997. In the circumstances of this case, each amount in a foreign currency that is an element in the calculation of your 'applicable fund earnings' is to be translated to AUD at the exchange rate applicable at the time of receipt of the relevant superannuation lump sum.", "Facts": "An individual, who was a resident of the United Kingdom (UK), held an interest in a UK superannuation fund (the UK fund). The UK fund is a foreign superannuation fund, as defined in subsection 995-1(1) of the ITAA 1997, to which paragraph 305-55(1)(b) of the ITAA 1997 refers. The individual became an Australian resident, as defined in subsection 995-1(1) of the ITAA 1997, on 13 May 2008. The individual has at all times since 13 May 2008 remained an Australian resident. Contributions were made to the UK fund for the individual before, but not after, the individual became an Australian resident. No amount has ever been transferred to the UK fund from another foreign superannuation fund in respect of the individual. Just before 13 May 2008 the amount in the UK fund that was vested in the individual was 58,880 British Pounds (GBP). The UK fund paid a superannuation lump sum ('the relevant superannuation lump sum') to the individual's Australian superannuation fund on 1 April 2014. That was the only lump sum ever to be paid from the UK fund in respect of the individual. The individual had no superannuation interest in the UK fund after the relevant superannuation lump sum was paid. The payment was received by the individual's Australian superannuation fund on 1 April 2014. On 1 April 2014 when the UK fund paid that lump sum the amount in that fund vested in the individual was GBP 73,450. The exchange rate on 1 April 2014 when the lump sum was received was AUD/GBP 0.5766. The individual has not made a choice under section 305-80 of the ITAA 1997 for any part of their 'applicable fund earnings' in relation to the relevant superannuation lump sum to be included in the assessable income of the Australian superannuation fund which received that lump sum rather than in the individual's assessable income.", "Reasons_for_Decision": "Detailed Reasoning - Applicable fund earnings: Section 305-70 of the ITAA 1997 applies to a superannuation lump sum you receive from a foreign superannuation fund if you are an Australian resident when you receive the lump sum and sections 305-60 and 305-65 of the ITAA 1997 do not apply to the lump sum: subsection 305-70(1) of the ITAA 1997. The section applies to a superannuation lump sum you are treated as receiving by section 307-15 of the ITAA 1997 because it is made (a) for your benefit, or (b) to another person or to an entity at your direction or request. Where section 305-70 of the ITAA 1997 applies, you include in your assessable income so much of the lump sum (excluding any part of the lump sum that is paid into another foreign superannuation fund) as equals your 'applicable fund earnings' (less any part of your applicable fund earnings covered by a choice under section 305-80 of the ITAA 1997): subsections 305-70(2) and (4) of the ITAA 1997. The amount of a person's 'applicable fund earnings' in relation to a superannuation lump sum to which section 305-70 of the ITAA 1997 applies is worked out under section 305-75 of the ITAA 1997. In essence, the amount of applicable fund earnings in relation to a superannuation lump sum to which section 305-70 applies is the part of the lump sum that is attributable to earnings that have accrued to the individual in the foreign superannuation fund during the period the individual is an Australian resident. The reference to so much of the lump sum in subsection 305-70(2) of the ITAA 1997 means that, to determine the amount included in the assessable income of the individual in this case under that subsection, a comparison must be made between the amount of the relevant superannuation lump sum and the amount of the individual's applicable fund earnings in relation to that lump sum. The amount of the individual's applicable fund earnings in relation to the relevant superannuation lump sum is worked out under subsection 305-75(3) of the ITAA 1997, rather than subsection 305-75(2) of the ITAA 1997, in this case. This is because the individual became an Australian resident after the start of the period to which the relevant superannuation lump sum relates. The application of that subsection in this case results in the amount of the individual's applicable fund earnings in relation to the relevant superannuation lump sum being the amount in the UK fund that was vested in the individual at the time of the lump sum payment minus the amount in the UK fund that was vested in the individual just before the day they became an Australia resident. (There are additional steps in the method statement set out in subsection 305-75(3) of the ITAA 1997, but they are either not applicable or of no consequence in this case.) | Detailed Reasoning - Translation rules: For the purposes of the ITAA 1997, subsection 960-50(1) of the ITAA 1997 provides that an amount in a foreign currency is to be translated into Australian currency. Subsection 960-50(4) of the ITAA 1997 provides that in applying section 960-50 of the ITAA 1997: (a) first, translate any amounts that are elements in the calculation of other amounts (except 'special accrual amounts'); and (b) then, calculate the other amounts. (The exception for 'special accrual amounts', as defined in subsection 995-1(1) of the ITAA 1997, is not relevant in the present context.) The table in subsection 960-50(6) of the ITAA 1997 sets out the translation rules. Item 11 in that table applies to the translation of the amount of the relevant superannuation lump sum received. Item 11 applies to an amount of a receipt or payment, where none of the earlier items of the table apply. The only earlier item in that table of potential application - item 7 - deals with the translation of an amount of statutory income (other than an amount included in assessable income under Division 102 of the ITAA 1997). That item is not relevant here because the amount of the superannuation lump sum is not itself statutory income. Pursuant to item 11, the amount of the relevant superannuation lump sum is to be translated to Australia currency at the exchange rate applicable at the time of its receipt. Item 11A in that table, which is inserted into the table by subregulation 960-50.01(1) of the Income Tax Assessment Regulations 1997 , applies to amounts used in the method statements set out in to subsections 305-75(2) and (3) of the ITAA 1997 to work out an individual's applicable fund earnings in relation to a superannuation lump sum. Item 11A applies to an amount (other than an amount of a receipt or a payment) to which none of the earlier items of the table apply. Again, item 7 of the table is not relevant here because the relevant amounts to be translated are elements in the calculation of another amount (applicable fund earnings), which itself is an element in the calculation of a statutory income amount, as opposed to being statutory income themselves. Amounts used in the method statements set out in subsections 305-75(2) and 305-75(3) of the ITAA 1997 are not receipts or payments. Item 11A requires that an amount to which it applies is to be translated into Australian currency at an exchange rate that is reasonable having regard to the circumstances. The Commissioner considers that, in the circumstances of this case, the exchange rate at which it is reasonable to translate amounts used in the method statements set out in subsections 305-75(2) and (3) of the ITAA 1997 into Australian currency is the exchange rate applicable at the time of receipt of the relevant superannuation lump sum given that, as mentioned above: | Detailed Reasoning - Conclusion: As mentioned above, the application of subsection 305-75(3) of the ITAA 1997 in this case results in the amount of the individual's applicable fund earnings in relation to the relevant superannuation lump sum being the amount in the UK fund that was vested in the individual at the time of the lump sum payment minus the amount in the UK fund that was vested in the individual just before the day they became an Australia resident. The amount in the UK fund that was vested in the individual when the relevant superannuation lump sum was paid (before any deduction for foreign income tax - see paragraph 305-75(3)(b) of the ITAA 1997) as translated into AUD on the day of receipt of that lump sum is: GBP 73,450 ÷ 0.5766 = AUD 127,384 The amount in the UK fund that was vested in the individual just before the day they became an Australian resident (see subparagraph 305-75(3)(a)(i) of the ITAA 1997) as translated into AUD on the day of receipt of the relevant superannuation lump sum is: GBP 58,880 ÷ 0.5766 = AUD 102,115 Therefore, the amount of the individual's applicable fund earnings in relation to the relevant superannuation lump sum is: AUD 127,384 - AUD 102,115 = AUD 25,269", "Date_of_Decision": "11 December 2014", "Year_of_Income": "2014-15", "Legislative_References": "Income Tax Assessment Act 1997 Division 102 paragraph 305-55(1)(b) section 305-60 section 305-65 section 305-70 subsection 305-70(1) subsection 305-70(2) subsection 305-70(4) section 305-75 subsection 305-75(2) subsection 305-75(3) subparagraph 305-75(3)(a)(i) paragraph 305-75(3)(b) section 305-80 section 307-15 section 960-50 subsection 960-50(1) subsection 960-50(4) subsection 960-50(6) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2009/124 | ATO ID 2012/48 | ATO ID 2012/49", "Subject_References": "Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds Applicable fund earnings Foreign currency exchange", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20157", "Unmatched_Content": "Keywords Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds Applicable fund earnings Foreign currency exchange"}
{"ATO_ID_Number": "ATO ID 2009/124", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Lump sums received from foreign superannuation funds by Australian residents: relevant periods under subsection 305-75(3) of the ITAA 1997", "Issue": "When calculating the amount of 'applicable fund earnings' under subsection 305-75(3) of the Income Tax Assessment Act 1997 (ITAA 1997), is 'the period' in paragraph 305-75(3)(c) of the ITAA 1997 the same as 'the period to which the lump sum relates' elsewhere in subsection 305-75(3) and in subsection 305-75(2) of the ITAA 1997?", "Decision": "No. 'The period' in paragraph 305-75(3)(c) of the ITAA 1997 commences on the date, during the period to which the lump sum relates, on which the member first became an Australian resident. The period ceases when the foreign superannuation lump sum is paid.", "Facts": "The member joined the foreign superannuation fund on 1/01/1999 - they are not an Australian resident. The member moved to Australia and becomes an Australian resident on 01/07/2007. The value of the member's account with the foreign superannuation fund just before the day they first became an Australian resident is $5,500. The member left the country and ceased to be an Australian resident on 1/01/2008. The member then returned to Australia and became an Australia resident again on 01/07/2008. The member was paid a lump sum of $6,500 from the foreign superannuation fund on 30/06/2009. Since 01/07/2007, there have been no contributions made to the foreign superannuation fund, and no amounts have been transferred into the foreign superannuation fund from other funds.", "Reasons_for_Decision": "Summary: Section 305-70 of the ITAA 1997 generally provides that an Australian resident taxpayer who receives a lump sum from a foreign superannuation fund more than six months after becoming an Australian resident must include the 'applicable fund earnings' of the lump sum in their assessable income. 'Applicable fund earnings' for this purpose are worked out under section 305-75 of the ITAA 1997. In particular, subsection 305-75(3) of the ITAA 1997 is used to calculate applicable fund earnings where the taxpayer became an Australian resident after the start of the period to which the lump sum relates. Paragraph 305-75(3)(c) of the ITAA 1997 requires the amount derived from the application of paragraphs 305-75(3)(a) and 305-75(3)(b) of the ITAA 1997 to be multiplied by the proportion of the total days during the period when the taxpayer was an Australian resident. This requires identification of the nature of 'the period'. Two interpretations of 'the period' referred to in paragraph 305-75(3)(c) of the ITAA 1997 are possible. One is that it is the same as 'the period to which the lump sum relates', that is, the period during which the total lump sum accrued. The other is that it is the period, within 'the period to which the lump sum relates', commencing on the day on which the person first became an Australian resident and ceasing on the day the lump sum is paid. As two interpretations of 'the period' are possible, these words need to be interpreted with reference to the intention of the whole provision. Subsection 305-75(3) of the ITAA 1997 is a rewrite of former subsection 27CAA(1) of the Income Tax Assessment Act 1936 (ITAA 1936). Section 27CAA of the ITAA 1936 was amended in 2004 to include a proportion of days of Australian residency to accommodate persons who may have several periods of residency in Australia during the period to which the lump sum relates. It is clear from the Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No 2) Bill 2004 that the intention of section 27CAA of the ITAA 1936 was to tax earnings that accrued only while the taxpayer was an Australian resident. Paragraphs 9.30 to 9.32 of the Explanatory Memorandum explain that the insertion of the proportion of days ensures that where a taxpayer moves in and out of Australian residency, the amount that would otherwise be assessable under section 27CAA of the ITAA 1936 is adjusted so that 'the assessable amount, is only what accrued during periods of residency since the individual first became resident'. The formula in subsection 27CAA(1) of the ITAA 1936 included multiplying earnings by a proportion of Australian resident days within a period of 'total days'. The 'total days' were defined as the number of days from the 'relevant day' to the day on which the superannuation lump sum was paid. The 'relevant day' was defined as the later of the day on which the taxpayer became a member of the paying fund (the foreign superannuation fund) and the taxpayer's first day of Australian residency during the period to which the payment related. The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006, which introduced section 305-75 of the ITAA 1997, states that the existing tax treatment of superannuation benefits paid from non-complying superannuation plans would be maintained. Specifically, paragraph 2.86 states that 'superannuation lump sum benefits paid from \"foreign superannuation funds\" continue to be taxed on the earnings while the person was an Australian resident.' To achieve this policy outcome, when applying the proportion in paragraph 305-75(3)(c) of the ITAA 1997, 'the period' must commence on the day within the period to which the lump sum relates on which the taxpayer first became a resident of Australia, and conclude when the lump sum is paid. By using paragraph 305-75(3)(c) of the ITAA 1997 in the formula, the residency proportion of that period, the formula will adjust or maintain the earnings amount calculated at paragraphs 305-75(3)(a) and 305-75(3)(b) of the ITAA 1997 so that it will represent the proportion of earnings attributable to the taxpayer's period(s) of Australian residency. In this case, 'the period to which the lump sum relates', for the purposes of subsection 305-75(3) of the ITAA 1997, is from 1/01/1999 to 30/06/2009. However, 'the period', for the purposes of paragraph 305-75(3)(c) of the ITAA 1997, is from 01/07/2007 to 30/06/2009. During 'the period' the superannuation lump sum increased by $1000. The Australian resident days for the taxpayer are from 01/07/2007 to 01/01/2008 and 01/07/2008 to 30/06/2009. Therefore, the applicable fund earnings are: $1000 × 548/730 = $750.70 The taxpayer needs to include $750.70 as part of their assessable income.", "Date_of_Decision": "12 October 2009", "Year_of_Income": "Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 section 27CAA subsection 27CAA(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009124", "Unmatched_Content": "Keywords Superannuation Superannuation benefits Superannuation benefits from foreign superannuation funds"}
{"ATO_ID_Number": "ATO ID 2007/195", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Government co-contributions: do trust beneficiaries have business income?", "Issue": "Is a beneficiary's share of the net income of a trust estate that carries on a business included in the beneficiary's income from carrying on a business for the purposes of subparagraph 6(1)(b)(ii) of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 (Co-contributions Act)?", "Decision": "No. A beneficiary's share of the net income of a trust estate is not included in the beneficiary's income from carrying on a business for the purposes of subparagraph 6(1)(b)(ii) of the Co-contributions Act.", "Facts": "An individual is the trustee of a trust as well as one of the beneficiaries of the trust. As the trustee, the individual carries on a business. The individual does not engage in any activities covered under subsection 6(2) of the Co-contributions Act. The individual, in their personal capacity, makes a contribution to a complying superannuation fund. The individual, as a beneficiary of the trust, has received a distribution of income from the trust.", "Reasons_for_Decision": "Summary: A person, who makes a contribution to a complying superannuation fund or retirement savings account for their own benefit, or for the benefit of their dependants in the case of their own death may be eligible under section 6 of the Co-contributions Act to receive a superannuation co-contribution payable by the Government. A criterion contained within paragraph 6(1)(b) of the Act is that 10% or more of the person's total income for the income year must be attributable to either or both of the following: A person can be a beneficiary of a trust, the trustee of which carries on a business. Where that happens there is a question as to whether the person's share of the net income of the trust is income attributable to the person carrying on a business. Since the decision of Starke J in the High Court of Australia case Doherty v. Federal Commissioner of Taxation (1933) 48 CLR 1; 2 ATD 272 ( Doherty's case ), it has been accepted that the beneficiaries of a trust that carries on a business are not themselves carrying on a business. This is so even where a beneficiary is also one of the trustees of the trust, as happened in that case. In Doherty's case , the High Court of Australia was asked to determine whether the taxpayer, and the other beneficiaries of the deceased estate, could deduct a loss incurred by the estate against their other (non-trust) income. Although the taxpayer was, together with a company, the trustee of the deceased estate, the issue was whether the beneficiaries were carrying on a business. Starke J noted that the taxpayer did not carry on the business in her individual capacity. He concluded that the beneficiaries did not carry on the business either at law or in equity, and could not be treated as if they had carried it on. Consequently, the person's share of the net income of the trust estate is not income from carrying on a business for the purposes of subparagraph 6(1)(b)(ii) of the Co-contributions Act.", "Date_of_Decision": "19 October 2007", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Superannuation (Government Co-contribution for Low Income Earners) Act 2003 section 6 paragraph 6(1)(b) subparagraph 6(1)(b)(ii) subsection 6(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions Superannuation government co-contribution", "Case_References": "Doherty v. Federal Commissioner of Taxation (1933) 48 CLR 1 2 ATD 272", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007195", "Unmatched_Content": "The Facts and Reasons for Decision of this ATO ID have been amended to clarify the description of the operation of paragraph 6(1)(b) of the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 | Keywords Superannuation contributions Superannuation government co-contribution"}
{"ATO_ID_Number": "ATO ID 2014/27", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation contributions tax - contributions and surcharge liability", "Issue": "Are payments made by a member to their unfunded defined benefits provider in respect of surcharge payable under the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCTA) to be regarded as contributions made to obtain superannuation benefits?", "Decision": "No. The member payments are made to the provider under subsection 16(7) of the SCTA for the purpose of reducing the amount by which the member's surcharge debt account is in debit and are not contributions made by the member to the provider for the purpose of obtaining superannuation benefits.", "Facts": "The fund is an unfunded defined benefits provider. The members can make payments to the fund in respect of the superannuation contributions surcharge payable. This is permitted by the fund's governing rules which allow the members to make such payments in respect of the surcharge payable in respect of the contributor (the member).", "Reasons_for_Decision": "Summary: Section 16 of the SCTA makes provision for the deferment of the liability of an unfunded defined benefits provider to pay surcharge assessed as payable on a member's surchargeable contributions for a financial year. The unfunded defined benefits provider is required to keep a surcharge debt account for each member and debit the account for surcharge assessed to be payable on the member's surchargeable contributions. If the member's account is in debit at the end of a financial year, the provider is required to debit the account for interest. Subsection 16(7) of the SCTA operates to allow a member to make payments to the provider for the purpose of reducing the amount by which their surcharge debt account is in debit. A specific subsection of the fund's governing rules allows a contributor '...to pay amounts to the fund in respect of the superannuation contributions surcharge payable in respect of the contributor.' A member payment received by the fund provider pursuant to subsection 16(7) of the SCTA, and permitted by the specific subsection of the fund's governing rules, is an amount paid to the fund for surcharge payable in respect of the contributor. The provider is required to forward the payment to the Commissioner of Taxation. Accordingly, the payment does not take on the characteristics of a contribution to obtain superannuation benefits but is clearly a payment made to reduce the balance of the member's surcharge debt account. In addition, the fund's governing rules require the fund to refund to the member, any such payments that are received which are in excess of the member's surcharge debt account. This means the excess payments do not result in additional pension benefits and do not remain in the fund. Accordingly, the amounts are not contributions to obtain superannuation benefits but are member payments specifically made to the fund pursuant to subsection 16(7) of the SCTA to reduce surcharge payable in respect of the member's surchargeable contributions.", "Date_of_Decision": "15 August 2014", "Year_of_Income": "Year ending 30 June 2014", "Legislative_References": "Superannuation Contributions Tax (Assessment and Collection) Act 1997 section 16 subsection 16(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "superannuation contributions superannuation contributions surcharge", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201427", "Unmatched_Content": "Keywords superannuation contributions superannuation contributions surcharge"}
{"ATO_ID_Number": "ATO ID 2006/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Contributions Surcharge: constitutionally protected superannuation funds and interest on overpayment", "Issue": "Is the taxpayer, a member of a constitutionally protected superannuation fund (CPF), entitled to interest on overpayment under Part IIE of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (IOP Act) in relation to a payment made in respect of a superannuation contributions tax (surcharge) assessment which was later amended, resulting in a lower surcharge liability?", "Decision": "No. No interest is payable under Part IIE of the IOP Act in this case.", "Facts": "In accordance with section 14 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (SCT(CP) Act ), in February 2003 the Commissioner of Taxation issued a surcharge assessment for the year ended 30 June 2002 in respect of the surchargeable contributions of the CPF member. The resulting surcharge liability was debited to the surcharge debt account for the member under subsection 15(3) of the SCT(CP) Act. Under subsection 15(9) of the SCT(CP) Act, the member made a payment to the Commissioner in order to reduce to nil the debit balance of the surcharge debt account. In November 2003, the Commissioner amended the surcharge assessment for the year ended 30 June 2002, reducing the surcharge liability for that year. As a result, the member became entitled to a refund of the difference between the amount already paid and the amended (lower) surcharge liability. No benefits had been payable to the member by the CPF, no 'splittable payments' were payable, and the CPF did not cease to be a CPF at any time before the amended assessment was issued.", "Reasons_for_Decision": "Summary: Part IIE of the IOP Act provides for the payment of interest by the Commissioner on an overpayment of surcharge where an assessment made under the SCT(CP) Act is amended to reduce the surcharge liability. In particular, section 8V of the IOP Act states: If: (a) an assessment is made under the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 in respect of a person's liability to pay superannuation contributions surcharge; and (b) the person has paid the assessed amount of the surcharge; and (c) the assessment is amended (otherwise than under section 16 of that Act) reducing the liability of the person to pay surcharge; The period in which interest is payable is determined by section 8W of the IOP Act which states: The interest is payable for the period that: (a) started on the later of the following days: (i) the day on which the amount of the surcharge was paid; (ii) the day by which the amount of the surcharge was required to be paid; and Section 15 of the SCT(CP) Act prescribes the timing in which the surcharge liability becomes payable in respect of the surchargeable contributions of a member of a CPF. This section is significant for interpreting the phrase 'the day by which the amount of the surcharge was required to be paid' as used in subparagraph 8W(a)(ii) of the IOP Act. Importantly, section 15 of the SCT(CP) Act makes provision for the deferral of surcharge liability. Subsection 15(8) provides that the liability is not required to be paid until three months after the date of issue of a notice given by the Commissioner under subsection 15(7). Subsection 15(7) of the SCT(CP) Act states that the Commissioner must give the CPF member a notice, stating that the member is liable to pay an amount of surcharge, if a member becomes liable to pay an amount due to: None of the above scenarios had occurred before the amended surcharge assessment issued in November 2003. For the purposes of subparagraph 8W(a)(ii) of the IOP Act, the day by which the surcharge is required to be paid is three months after the date of issue of a notice given under subsection 15(7) of the SCT (CP) Act. While the member paid an amount to reduce the surcharge debt account, section 8W of the IOP Act states that the period for which interest is paid starts on the later date of when the surcharge was paid or the day by which the amount of the surcharge was required to be paid. Due to the operation of section 8W of the IOP Act, as the required payment date did not occur before the day on which the assessment was amended, there is no period for which interest is payable.", "Date_of_Decision": "24 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 section 14 section 15 subsection 15(3) subsection 15(6) subsection 15(6AA) subsection 15(6A) subsection 15(7) subsection 15(8) subsection 15(9)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/279", "Subject_References": "Superannuation Superannuation contributions surcharge Superannuation contributions tax Interest on overpayment Constitutionally Protected Superannuation Funds Amendment of assessment", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20065", "Unmatched_Content": "interest is payable by the Commissioner to the person in accordance with this Part on the amount by which the surcharge payable by the person under the amended assessment is less than the surcharge that was paid by the person under the assessment that was amended. | Keywords Superannuation Superannuation contributions surcharge Superannuation contributions tax Interest on overpayment Constitutionally Protected Superannuation Funds Amendment of assessment"}
{"ATO_ID_Number": "ATO ID 2005/279", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Contributions Surcharge - unfunded defined benefit schemes and interest on overpayment", "Issue": "Is the taxpayer, a member of an unfunded defined benefits superannuation scheme (UDB Scheme), entitled to interest on overpayment under Part IIC of the Taxation (Interest on Overpayments and Early Payments) Act 1983 (IOP Act) in relation to a payment made in respect of a superannuation contributions tax (surcharge) assessment which was later amended, resulting in a lower surcharge liability?", "Decision": "No. No interest is payable under Part IIC of the IOP Act in this case.", "Facts": "In accordance with section 15 of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCT Act), in February 2003 the Commissioner of Taxation issued a surcharge assessment for the 2001-02 income year in respect of the surchargeable contributions of the UDB Scheme member. The resulting surcharge liability was debited to a surcharge debt account for the member under subsection 16(3) of the SCT Act. Under subsection 16(7) of the SCT Act, the member made a payment to the UDB Scheme in order to reduce the debit balance of the surcharge debt account. In November 2003, the Commissioner amended the surcharge assessment for the 2001-02 income year, reducing the surcharge liability for that year. As a result, the member became entitled to a refund of the difference between the amount already paid and the amended (lower) surcharge liability. No 'splittable payments' were payable and no benefits had been payable to the member by the UDB Scheme before the amended assessment was issued.", "Reasons_for_Decision": "Summary: Part IIC of the IOP Act provides for the payment of interest by the Commissioner on an overpayment of surcharge where an assessment made under the SCT Act is amended to reduce the surcharge liability. In particular, section 8M of the IOP Act states: If: (a) an assessment is made under the Superannuation Contributions Tax (Assessment and Collection) Act 1997 in respect of a person's liability to pay superannuation contributions surcharge or an advance instalment; and (b) the person has paid the assessed amount of the surcharge or instalment; and (c) the assessment is amended (otherwise than under section 18 of that Act) reducing the liability of the person to pay surcharge or the instalment; interest is payable by the Commissioner to the person in accordance with this Part on the amount by which the surcharge or instalment payable by the person under the amended assessment is less than the surcharge or instalment that was paid by the person under the assessment that was amended. The period in which interest is payable is determined by section 8N of the IOP Act which states: The interest is payable for the period that: (a) started on the later of the following days: (i) the day on which the amount of the surcharge or advance instalment was paid; (ii) the day by which the amount of the surcharge or advance instalment was required to be paid; and Section 16 of the SCT Act prescribes the timing in which the surcharge liability becomes payable in respect of the surchargeable contributions of a member of a UDB Scheme. This section is significant for interpreting the phrase 'the day by which the amount of the surcharge ... was required to be paid' as used in subparagraph 8N(a)(ii) of the IOP Act. Importantly, section 16 of the SCT Act makes provision for the deferral of surcharge liability. In summary, the liability is not required to be paid until one month after: For the purposes of subparagraph 8N(a)(ii) of the IOP Act, this is also the day on which the surcharge was required to be paid. Neither of the above scenarios had occurred before the amended surcharge assessment issued in November 2003. Due the operation of section 8N of the IOP Act, as the required payment date did not occur before the day on which the assessment was amended, there is no period for which interest is payable.", "Date_of_Decision": "11 February 2004", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Superannuation Contribution Tax (Assessment and Collection) Act 1997 section 15 section 16 subsection 16(3) subsection 16(6) subsection 16(6A) subsection 16(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Interest on overpayment Superannuation contributions surcharge Superannuation contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005279", "Unmatched_Content": "Keywords Interest on overpayment Superannuation contributions surcharge Superannuation contributions tax"}
{"ATO_ID_Number": "ATO ID 2003/830", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Contributions Surcharge - apportioning the surcharge liability of a deceased member of a Constitutionally Protected Fund to the member's beneficiaries", "Issue": "Can the surcharge debt be apportioned by the trustee of the super fund amongst two or more beneficiaries of a deceased member?", "Decision": "No, a surcharge debt can not be apportioned by the trustee of the super fund amongst two or more beneficiaries of a deceased member. Any surcharge liability payable would be assessed to the deceased member's estate. The trustee/executor of the estate would then distribute the remaining superannuation proceeds in accordance with the deceased's will.", "Facts": "A member of a Constitutionally Protected Fund (CPF) dies during the current year of income. He has surchargeable contributions reported by his CPF for the current year as well as a previous year of income. There is more than one spouse (ie one legal spouse and one defacto) to whom the superannuation fund will pay benefits on the death of the member.", "Reasons_for_Decision": "Summary: Section 11 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (SCT(CPF)A&C Act) provides that it is the member who is liable to pay the surcharge. The Commissioner will assess a member for any surcharge liability for all financial years prior to the financial year in which the member dies. The assessed liability will be a debt of the member and the Commissioner will seek to recover from the member or the member's estate where the member has died without paying the surcharge liability. The cap would also apply. If a member dies 'in office', the fund would report in line with subsection 15(6) of the SCT(CPF)A&C Act. The Commissioner would take this into account when calculating the amount required to be paid. The notice under subsection 15(7) of the SCT(CPF)A&C Act would be sent to the trustee/executor of the estate of the member. There will be no liability on a surviving beneficiary (or beneficiaries) as there is no provision in the law to shift the surcharge liability to a beneficiary. However, there may be issues if the member's estate is distributed without taking account of the surcharge liability - in cases such as this, the Commissioner may have a claim against the trustee/executor of the deceased estate.", "Date_of_Decision": "8 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Superannuation Contribution Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 Section 11 Subsection 15(6) Subsection 15(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Constitutionally protected superannuation funds Superannuation contributions surcharge Superannuation contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003830", "Unmatched_Content": "Keywords Constitutionally protected superannuation funds Superannuation contributions surcharge Superannuation contributions tax"}
{"ATO_ID_Number": "ATO ID 2003/831", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Contributions Surcharge - surcharge liability upon death of a member of a Constitutionally Protected Fund", "Issue": "Does a surcharge liability still exist in respect of a deceased member of a Constitutionally Protected Fund (CPF)?", "Decision": "Yes, surcharge is payable in respect of a deceased member of a CPF, except for the financial year in which the member dies (or later years)", "Facts": "A member of a Constitutionally Protected Fund dies during the current year of income. He has surchargeable contributions reported by his CPF for the current year as well as a previous year of income.", "Reasons_for_Decision": "Summary: Section 11 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (SCT(CPF)A&C Act) provides that it is the member who is liable to pay the surcharge. The section also provides that surcharge is not payable on surchargeable contributions in the financial year in which a member dies, or in future years. The Commissioner will assess a member for any surcharge liability for all financial years prior to the financial year in which the member dies. The assessments may issue after the date of death (if, for example, the Commissioner could not determine adjusted taxable income because the member's income tax returns may not be lodged until after the date of death). The assessed liability will be a debt of the member and the Commissioner will seek to recover from the member or the member's estate where the member has died without paying the surcharge liability. The cap would also apply. If a member dies 'in office', the fund would report in line with subsection 15(6) of the SCT(CPF)A&C Act. The Commissioner would take this into account when calculating the amount required to be paid. The notice under subsection 15(7) of the SCT(CPF)A&C Act would be sent to the trustee/executor of the estate of the member.", "Date_of_Decision": "8 September 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Superannuation Contribution Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 Section 11 Subsection 15(6) Subsection 15(7)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Constitutionally protected superannuation funds Superannuation contributions surcharge Superannuation contributions tax", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003831", "Unmatched_Content": "Keywords Constitutionally protected superannuation funds Superannuation contributions surcharge Superannuation contributions tax"}
{"ATO_ID_Number": "ATO ID 2011/80", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Unclaimed money: no contact between fund and member", "Issue": "For the purposes of paragraph 12(1)(d) of the Superannuation (Unclaimed Money and Lost Members) Act 1999 , where no contact has ever been made between the superannuation provider (fund) and the member, and five years have passed since the member joined the fund, does such a situation satisfy the requirement that a period of five years has passed since the fund last had contact with the member?", "Decision": "Yes. The first requirement of paragraph 12(1)(d) of the Superannuation (Unclaimed Money and Lost Members) Act 1999 is satisfied where there has been no contact between the fund and the member within the last five years.", "Facts": "The fund is a default fund into which an employer makes superannuation guarantee contributions for the benefit of employees. In a number of situations, no contact has ever taken place between the fund and some employee members.", "Reasons_for_Decision": "Summary: Subsection 12(1) reads: An amount payable to a member of a fund is taken to be unclaimed money if: (a) the member has reached the eligibility age; and.... (c) the superannuation provider has not received an amount in respect of the member (and, in the case of a defined benefits superannuation scheme, no benefit has accrued in respect of the member) within the last 2 years; and (d) after the end of a period of 5 years since the superannuation provider last had contact with the member, the provider has been unable to contact the member again after making reasonable efforts. A literal interpretation of the first requirement within paragraph 12(1)(d) would result in a conclusion that where no contact has been made between the fund and a particular member, no amount payable to that member can be treated as unclaimed money under subsection 12(1). Such a result would clearly be in conflict with the aim of the Act, being to reunite people with their superannuation, as explained in the Explanatory Memorandum to the Superannuation (Unclaimed Money and Lost Members) Bill 1999. In this regard, subsection 15AA(1) of the Acts Interpretation Act 1901 advises: In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object. In general terms, the focus of unclaimed money is not on the contact between a fund and a member. On the contrary, it is the absence of such contact that is the purpose for subsection 12(1). For this reason, a purposive approach is taken in interpreting this provision, with the conclusion that a five year period without contact - regardless of whether any previous contact had occurred - will meet the first requirement within paragraph 12(1)(d). This interpretation is consistent with the purposive approach outlined in paragraphs 10 to 12 of ATO Practice Statement Law Administration PSLA 2003/3 'Precedential ATO view' concerning 'interpretive issues'.", "Date_of_Decision": "14 September 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Acts Interpretation Act 1901 section 15AA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Member benefits - superannuation benefits", "Case_References": "", "Other_References": "Explanatory Memorandum to Superannuation (Unclaimed Money and Lost Members) Bill 1999 PSLA 2003/3", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201180", "Unmatched_Content": "Keywords Member benefits - superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2014/7", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Keeping money and other assets separate from those of other parties", "Issue": "Has a contravention of section 34 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where a Self Managed Superannuation Fund (SMSF) shares a bank account with related unit trusts?", "Decision": "Yes, an SMSF must open and maintain its own bank account, as it is required to keep its assets and money separate from that of other entities.", "Facts": "The trustees of the SMSF are members of a family. The fund has a standard employer-sponsor and all the trustees work for the standard employer-sponsor in various capacities. There are several unit trusts owned and operated by the SMSF and/or the trustees. The trustees have stated that, for administrative simplicity and cost savings, unit trusts jointly owned by the SMSF and trustees as well as unit trusts owned solely by the SMSF all operate using the one bank account. The account is held in the name of the SMSF.", "Reasons_for_Decision": "Summary: Subsection 31(1) of the SISA provides for the regulations to prescribe standards applicable to the operation of regulated superannuation funds (which includes a complying SMSF) and to trustees of those funds. Subsection 34(1) of the SISA requires each trustee of a superannuation entity to ensure that the operating standards are complied with at all times. A failure to do this is considered to be an offence under subsection 34(2) of SISA. Regulation 4.09A of the Superannuation Industry (Supervision) Regulations 1994 (SISR) states that for the purposes of subsection 31(1) of the SISA, a trustee of an SMSF must keep the money and other assets of the fund separate from any money and assets respectively: The unit trusts are associates of the standard employer-sponsor of the fund in accordance with section 12 of the SISA. Keeping all of the unit trusts' money in the SMSF's bank account, including those trusts jointly owned by the SMSF, is not in line with the requirements of regulation 4.09A of the SISR and therefore constitutes a contravention under subsection 34(1) of the SISA. Note: While this ATO ID looks specifically at bank accounts, the principles of regulation 4.09A of the SISR apply to all types of assets, including shares, units in a trust and other property.", "Date_of_Decision": "11 February 2014", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 12 section 31 subsection 31(1) section 34 subsection 34(1) subsection 34(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SIS standards SMSF investments", "Case_References": "", "Other_References": "Factsheet: Self-managed super funds - key messages for trustees Booklet: Setting up a self-managed super fund Booklet: Running a self-managed super fund", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20147", "Unmatched_Content": "Keywords Self managed superannuation funds SIS standards SMSF investments"}
{"ATO_ID_Number": "ATO ID 2007/57", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Funds: contracts for differences (CFDs) - fund assets deposited with CFD provider - charge over fund assets", "Issue": "Has a trustee of a self managed superannuation fund (SMSF) contravened the Superannuation Industry (Supervision) Act 1993 (SISA) by depositing fund assets with a CFD provider as security in relation to the fund's obligations to pay margins?", "Decision": "Yes. The trustee of an SMSF has contravened subsection 34(1) of the SISA as it has breached the prohibition against trustees giving a charge over, or in relation to, fund assets.", "Facts": "CFDs are synthetic financial products that enable the investor to access the price movement in shares and other instruments such as stock indices, stock options, currencies and futures contracts without owning the underlying product. When a CFD is opened the investor pays a deposit and may be required to make additional margin payments to cover running losses on open positions. CFDs have a leveraging effect with consequent exposure to potentially large gains and losses stemming from exposure to short term financial risk in relation to a relatively small deposit. The trustee of an SMSF has invested in CFDs. The investment is in accordance with the fund's investment strategy as required under paragraph 52(2)(f) of the SISA and regulation 4.09 of the Superannuation Industry (Supervision) Regulations 1994 (SISR). Under a separate written agreement with the CFD provider, the trustee has deposited fund assets with the provider as security in relation to the trustee's obligations to pay margins. The terms of the agreement set out the circumstances under which the assets will be realised.", "Reasons_for_Decision": "Summary: No provision of the SISA or the SISR specifically prohibits trustees of SMSFs from investing in CFDs. The requirement to pay a deposit and meet margin calls in relation to the CFD does not represent borrowing by the trustee; they are rather contractual liabilities to make payments if and when required and are not repayments ( Prime Wheat Association Ltd v. Chief Commissioner of Stamp Duties (NSW) 97 ATC 5015; (1997) 37 ATR 479). Investing in the CFD did not therefore contravene the prohibition on borrowing in section 67 of the SISA. The obligations in relation to CFDs are distinguished from margin lending through a broker's margin account in relation to the purchase of shares by an SMSF, which does represent a prohibited borrowing under the SISA. The operation of the CFD bank account and the obligation to pay deposits and margins does not create a charge over any assets of the fund. The parties are relying on the contract and not on any security interest to be created by the contract ( White v. Conroy (1921) 21 SR (NSW) 257; (1921) 38 WN (NSW) 63, Berrington v. Evans (1839) 3 Y & C Ex 384; 160 ER 73). Under the CFD, the monies in the CFD bank account are the property of the CFD provider and the fund (investor) has no beneficial interest in the account. However the trustee and the CFD provider entered into a separate written agreement under which fund assets were deposited with the CFD provider in fulfilment of the fund's obligation to pay margins. Regulation 13.14 of the SISR prohibits trustees from giving a charge over, or in relation to, an asset of the fund. This regulation is an operating standard for regulated superannuation funds under section 31 of the SISA. Subsection 34(1) of the SISA requires that the operating standards are complied with at all times. The terms of the agreement stated the circumstances in which the fund's assets would be realised, and showed an intention to create a charge over the assets. By entering into the agreement with the CFD provider the trustee has contravened subsection 34(1) of the SISA. Regulation 13.15A of the SISR, which allows trustees to give a charge over fund assets in relation to options and futures contracts in accordance with the rules of an approved body, and in accordance with the fund's derivatives risk statement, does not apply. A CFD is not an options contract or a futures contract, and the charge was not given in relation to the rules of an approved body. The trustee has therefore contravened regulation 13.14 of the SISR and consequently subsection 34(1) of the SISA.", "Date_of_Decision": "9 March 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 31 subsection 34(1) paragraph 52(2)(f) section 67", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/56 | ATO ID 2007/58", "Subject_References": "Superannuation Self managed superannuation funds SMSF borrowings SMSF charge over assets SMSF investment strategy SIS covenants", "Case_References": "Prime Wheat Association Ltd v. Chief Commissioner of Stamp Duties (NSW) 97 ATC 5015 (1997) 37 ATR 479", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200757", "Unmatched_Content": "Include reference to section 31; subsection 34(1) and paragraph 52(2)(f) of the SISA. | Keywords Superannuation Self managed superannuation funds SMSF borrowings SMSF charge over assets SMSF investment strategy SIS covenants"}
{"ATO_ID_Number": "ATO ID 2011/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: waiver of disqualified person status - meaning of 'serious dishonest conduct'", "Issue": "Is the offence committed by the member of the superannuation fund an offence involving 'serious dishonest conduct' for the purposes of section 126B of the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes. The offence committed by the member of the superannuation fund is an offence involving 'serious dishonest conduct' for the purposes of section 126B of the SISA.", "Facts": "The member is a disqualified person within the meaning of subparagraph 120(1)(a)(i) of the SISA because he was convicted of an offence against the Commonwealth, being an offence in respect of dishonest conduct. Under paragraph 20(1)(b) of the Crimes Act 1914 (Crimes Act), the judge sentenced the member to imprisonment for a period that was more than two years, but ordered that he be released after he had served a specified period of his sentence upon giving security. The period of time that he spent in prison was less than two years.", "Reasons_for_Decision": "Summary: An individual who is a disqualified person because he or she was convicted of an offence in respect of dishonest conduct may apply to the Commissioner for a declaration waiving his or her status as a disqualified person provided the offence was not one involving serious dishonest conduct. Under paragraph 126B(2)(a) of the SISA, an offence involves serious dishonest conduct if 'the penalty actually imposed for the offence is a term of imprisonment of at least 2 years'. An order under paragraph 20(1)(b) of the Crimes Act is called a 'recognisance release order' (see definition of 'recognisance release order' under section 16 of the Crimes Act). A recognisance release order enables a sentencing court to impose a term of imprisonment on the offender but to direct, by order, that the offender be released after a specified period upon the person giving security. The order for release is part of a composite sentence and operates as a qualification or condition upon the sentence of imprisonment imposed ( Drake v. Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409 ( Drake ) at 416). In Drake , the Full Court of the Federal Court considered a recognisance release order in relation to a provision of the Migration Act 1958 . This provision stated that the Minister could order the deportation of a non-citizen 'convicted in Australia of any...offence for which he has been sentenced to imprisonment for one year or longer...' The Full Court stated that the words of the provision must be construed in the context of the section in which they appear. Because the making of a deportation order can involve drastic interference with the liberty of an individual, the powers conferred upon the Minister by the section should be strictly construed. In this context they argued that the fact that the magistrate directed that the plaintiff be released upon recognisance after having served three months did not alter the fact that the magistrate determined that the appropriate sentence to be imposed for the offence was a term of imprisonment of one year ( Drake at FLR 418). Section 126B (and associated provisions) was inserted into the SISA to allow the Commissioner to waive the disqualified person requirements for a trustee if he believes that the individual is highly unlikely to be a prudential risk to a superannuation entity; for example, an individual whose only offence was a minor offence involving dishonesty, such as shoplifting, 20 years ago (Explanatory Memorandum for the Superannuation Industry (Supervision) Legislation Amendment Bill 1995, schedule 4, item 52). An individual is not eligible to apply for a waiver unless the offence that he or she has committed meets the conditions at subsection 126B(2) of the SISA. Other factors, such as the length of time since committing the offence, are only considered by the Commissioner if the individual is eligible to apply (subsection 126D(1A) of the SISA). Hence, the gravity of the offence is the most important factor in determining if an individual is a prudential risk to a superannuation fund. In this context, the phrase 'penalty actually imposed for the offence' for the purposes of paragraph 126B(2)(a) of the SISA means the term of imprisonment that the court considers to be appropriate for the offence rather than the actual period of time that the offender spends in prison. The use of the word 'actually' is not inconsistent with this interpretation. We consider that the word is inserted in the phrase in order to convey the real or actual penalty that the sentencing court imposed on the offender as distinct from the maximum penalty that could have been imposed under the penalty provision attached to that offence. It does not refer to the actual period of time that the offender spends in prison. In this case, the sentencing court considered a term of imprisonment of more than two years to be the appropriate penalty to be imposed for the offence irrespective of the court's direction that the member be released upon recognisance. Thus the penalty actually imposed for the offence was a term of imprisonment of more than two years. The offence committed by the member of the superannuation fund was an offence involving 'serious dishonest conduct' for the purposes of section 126B of the SISA.", "Date_of_Decision": "8 March 2011", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 126B subsection 126B(2) subsection 126D(1A) subparagraph 120(1)(a)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "", "Case_References": "Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409", "Other_References": "Explanatory Memorandum for the Superannuation Industry (Supervision) Legislation Amendment Bill 1995, schedule 4, item 52", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201124", "Unmatched_Content": "Inserted references to subsection 126D(1A) of the SISA and section 16 of the Crimes Act 1914."}
{"ATO_ID_Number": "ATO ID 2011/81", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation funds: meaning of 'give a charge' under regulation 13.14 of the Superannuation Industry (Supervision) Regulations 1994", "Issue": "Does the trustee of a self managed superannuation fund (SMSF) 'give a charge' for the purposes of regulation 13.14 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) if the trustee purchases an asset subject to a charge that was established before the trustee purchased the asset?", "Decision": "No. The trustee of an SMSF does not 'give a charge' for the purposes of regulation 13.14 of the SISR if the trustee purchases an asset subject to a charge that was established before the trustee purchased the asset.", "Facts": "An SMSF trustee acquires real property from an unrelated party. At the time of purchase, the trustee is aware that the property is subject to a charge in favour of another unrelated party. The property remains subject to the charge after it is acquired by the SMSF trustee.", "Reasons_for_Decision": "Summary: Subsection 31(1) of the Superannuation Industry (Supervision) Act 1993 (SISA) provides for the regulations to prescribe standards applicable to the operation of regulated superannuation funds and to trustees of those funds. Subsection 34(1) of the SISA requires a trustee of a superannuation entity to ensure that the operating standards are complied with at all times. Regulation 13.14 of the SISR relevantly states: For the purposes of subsections 31(1) and 32(1) of the Act, it is a standard applicable to the operation of regulated superannuation funds and approved deposit funds that ... the trustee of a fund must not give a charge over, or in relation to, an asset of the fund. 'Give' is not defined in SISR or SISA. Accordingly, the ordinary meaning of the word understood in its context must be considered. According to the Australian Oxford Dictionary (2nd edition, 2004, Oxford University Press) relevant meanings of 'give' include: transfer the possession of freely; hand over as a present; transfer the ownership of, with or without actual delivery; confer; grant; allot; assign. The verb 'give' has characteristics of positive action. In International Art Holdings Pty Ltd (admin apptd) & ors v. Adams & ors ([2011] NSWSC 164), the Supreme Court of New South Wales held that regulation 13.14 of the SISR does not prevent a court from imposing an equitable lien or statutory lien over artwork owned by an SMSF to secure an administrator's expenses in determining competing claims. The Court (at paragraph 96) distinguished the imposition of a charge or lien by the trustee of a fund, from a situation where a court imposes an equitable lien or a statutory lien arises as a matter of law. The Court said there was no basis on which it might be said that the trustee had allowed the creation of a charge over the assets of the fund. The Explanatory Statement accompanying the introduction of the SISR gives no explanatory detail in relation to regulation 13.14. However, differences in the language used in regulations 13.12, 13.13 and 13.14 of the SISR, which were introduced together, support the view that regulation 13.14 is intended to apply to the creation of a charge by the fund trustee as distinct from the trustee recognising an existing charge on acquiring an asset. Subregulation 13.13(1) of the SISR, concerning a charge over or in relation of a member's benefits, relevantly states: the trustee of a fund must not recognise, or in any way encourage or sanction, a charge over, or in relation to a member's benefits. Regulation 13.11 of the SISR provides that 'recognise includes act on or give effect to'. Regulation 13.12 of the SISR, concerning assignment of a superannuation interest, is worded similarly to subregulation 13.13(1) of the SISR. Both are in contrast to regulation 13.14 of the SISR which prohibits only that the superannuation trustee must not 'give a charge'. The ordinary meaning of the word 'give', and the difference in wording between regulations 13.12, 13.13 and 13.14 of the SISR, indicate that the phrase 'give a charge' in regulation 13.14 requires a trustee, by some positive action, to create a charge and not merely recognise (including act on or give effect to) a previously established charge.", "Date_of_Decision": "20 October 2011", "Year_of_Income": "Year ended 30 June 2012", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 31(1) subsection 32(1) subsection 34(1) subsection 52(2) paragraph 52(2)(f) section 62 section 65 section 109", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF charge over assets", "Case_References": "International Art Holdings Pty Ltd (admin apptd) & ors v. Adams & ors [2011] NSWSC 164", "Other_References": "The Australian Oxford Dictionary, 2nd edition, 2004, Oxford University Press", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201181", "Unmatched_Content": "Keywords Self managed superannuation funds SMSF charge over assets"}
{"ATO_ID_Number": "ATO ID 2014/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Fund - Loan to a property trust", "Issue": "Will a loan from a Self Managed Superannuation Fund (SMSF) to a Property Trust be treated as an in-house asset?", "Decision": "A loan from a SMSF to a Property Trust will not be treated as an in-house asset if the Property Trust is neither a related trust (a trust controlled by a member or a standard employer sponsor of the SMSF) nor a related party of the SMSF.", "Facts": "A SMSF made a loan to a Property Trust. A related party of the SMSF (a Unit Trust) holds less than 10% of the issued units in the Property Trust. The Unit Trust has as members of the class of general beneficiaries, members of the SMSF. The loan was made under a commercial loan agreement.", "Reasons_for_Decision": "Summary: Subsection 65(1) of the Superannuation Industry (Supervision) Act 1993 (SISA) states that the trustee or an investment manager of a regulated superannuation fund must not lend money of the fund to a member or a relative of a member of the fund. A 'relative', as defined in subsection 10(1) of the SISA, includes only natural persons. As the Property Trust is not a natural person, subsection 65(1) of the SISA does not prohibit the SMSF from making the loan. The meaning of an in-house asset is defined by subsection 71(1) of the SISA to include 'a loan to, ... a related party of the fund, ...' A related party of the superannuation fund, as defined in subsection 10(1) of the SISA, is a member of the fund, a standard employer sponsor of the fund, or a Part 8 associate of either of those entities. The Property Trust is neither a member of the SMSF nor a standard employer sponsor of the SMSF. However, the Property Trust may be a Part 8 associate of a member of the SMSF. The relationship between the parties involved requires analysis. In particular, it needs to be determined if the trustees of the Property Trust or any of the other unit holders of the Property Trust are Part 8 associates of the individual members of the SMSF. Part 8 associates of individuals are listed in section 70B of the SISA. The relevant Part 8 associates will be any relative of the individual members of the SMSF, other fund members and trustees of trusts that are controlled by the individual members of the SMSF. According to subsection 70E(2) of the SISA, a trust is controlled by an entity, for the purposes of section 70B of the SISA if: A group is defined in subsection 70E(3) of the SISA to mean: The Property Trust to whom the loan was made is not a Part 8 associate of the SMSF because the SMSF and its related parties hold less than 10% unit holdings in the Property Trust and have no other control over the Property Trust. Accordingly the loan has not been made to a related party and therefore does not meet the definition of an in-house asset. The SMSF would be able to lend the money to the Property Trust provided this investment is in line with the investment strategy of the SMSF.", "Date_of_Decision": "15 July 2014", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 10(1) subsection 65(1) section 70B section 70E subsection 70E(2) subsection 70E(3) subsection 71(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/697 | is replaced by this decision.", "Subject_References": "self managed superannuation funds SMSF investments SMSF loans SMSF part 8 associate SMSF related parties superannuation fund in house assets", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201423", "Unmatched_Content": "Keywords self managed superannuation funds SMSF investments SMSF loans SMSF part 8 associate SMSF related parties superannuation fund in house assets"}
{"ATO_ID_Number": "ATO ID 2012/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Fund: in-house assets - additional investment in a related trust - trust borrowings outstanding at 28 June 2000 not increased and were discharged prior to additional investment", "Issue": "Will subparagraph 71(1)(j)(ii) of the Superannuation Industry (Supervision) Act 1993 (SISA) apply to an additional investment in a related unit trust by a self managed superannuation fund (SMSF) where section 71A of the SISA applies to the SMSF's original investment in the unit trust, the trustee of the unit trust did not borrow any additional money after 28 June 2000 and all borrowings were discharged before the additional investment was made?", "Decision": "Yes. Subparagraph 71(1)(j)(ii) of the SISA will apply to the additional investment because the requirements of Superannuation Industry (Supervision) Regulations 1994 (SISR) regulation 13.22C are met.", "Facts": "An SMSF acquired units in a related unit trust prior to 12 August 1999. These trust units continue to be held by the SMSF. On 28 June 2000 the trustee of the unit trust had an amount of outstanding borrowings. The trustee of the unit trust did not borrow any further money after 28 June 2000 and later discharged all outstanding borrowings. Subsequent to the trustee of the unit trust repaying all outstanding borrowings the SMSF acquired additional units in the unit trust. Neither section 71D nor section 71E of the SISA applies to the additional investment.", "Reasons_for_Decision": "Summary: Subsection 71(1) of the SISA sets out the basic meaning of in-house asset. An investment in a related company or a related unit trust is included as an in-house asset. Subparagraph 71(1)(j)(ii) of the SISA excludes certain assets specified in the regulations (regulations 13.22B and 13.22C in Division 13.3A of the SISR) from the meaning of in-house asset. By virtue of subregulation 13.22B(1) of the SISR, regulation 13.22B applies to an investment in a related company or related unit trust which was made before 28 June 2000, being the date Division 13.3A commenced. By virtue of subregulation 13.22C(1) of the SISR, regulation 13.22C applies to an investment in a related company or related unit trust made on or after 28 June 2000. It is relevant to note that regulations 13.22B and 13.22C of the SISR apply regardless of whether the shares or units satisfy the requirements contained in subregulations 13.22B(2) or 13.22C(2) of the SISR or whether they are excluded from being in-house assets under another provision of the Act. The application of regulations 13.22B and 13.22C of the SISR to an asset are subject to regulation 13.22D of the SISR. If any of the events set out in subregulation 13.22D(1) of the SISR happen in respect of an asset to which regulations 13.22B or 13.22C apply, regulations 13.22B and 13.22C cease to apply to all current and future investments in that company or unit trust. Of particular relevance is subparagraph 13.22D(1)(c)(i) of the SISR which applies where the company or unit trust borrows money. Subregulation 13.22D(1) of the SISR applies to events which happen on or after 28 June 2000. For this reason the borrowing made prior to 28 June 2000 will not trigger the operation of regulation 13.22D of the SISR notwithstanding that it was not discharged prior to 28 June 2000. As the additional units in the unit trust were acquired on or after 28 June 2000 and an event in regulation 13.22D of the SISR has not occurred, regulation 13.22C of the SISR applies to these new units. Paragraph 13.22C(2)(e) of the SISR requires that the unit trust does not have outstanding borrowings when the trust units were acquired by the SMSF. This requirement is satisfied in the present case because the borrowings were discharged in full before the units were acquired. On the basis that the other paragraphs of subregulation 13.22C(2) of the SISR are also satisfied and that none of the events listed in subregulation 13.22D(1) of the SISR has occurred since 28 June 2000, the new units in the trust are excluded from being in-house assets of the SMSF under subparagraph 71(1)(j)(ii) of the SISA. Whilst regulation 13.22B of the SISR would not exclude the original units in the trust acquired prior to 12 August 1999 from being in-house assets because of the borrowing which existed on 28 June 2000, section 71A of the SISA still applies to exclude those units from the definition of in-house asset.", "Date_of_Decision": "29 May 2012", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 71D section 71E subsection 71(1) subparagraph 71(1)(j)(ii) section 71A", "Related_Public_Rulings_and_Determinations": "SMSFR 2009/4 | SMSFD 2008/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/53", "Subject_References": "Superannuation Retirement income entities Self managed superannuation funds SMSF investments Superannuation fund in house assets SMSF related parties", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201252", "Unmatched_Content": "Related Public Rulings (including Determinations) SMSFR 2009/4 SMSFD 2008/1 | Keywords Superannuation Retirement income entities Self managed superannuation funds SMSF investments Superannuation fund in house assets SMSF related parties"}
{"ATO_ID_Number": "ATO ID 2012/53", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Fund: in-house assets - additional investment in a related trust - trust borrowings at 28 June 2000 increased and discharged prior to additional investment in the related trust", "Issue": "Will subparagraph 71(1)(j)(ii) of the Superannuation Industry (Supervision) Act 1993 (SISA) apply to an additional investment in a related unit trust by a self managed superannuation fund (SMSF) where section 71A of the SISA applies to the SMSF's original investment in the unit trust, the trustee of the unit trust borrowed additional money after 28 June 2000 and the total borrowings were discharged before the SMSF acquired the additional trust units?", "Decision": "No. Subparagraph 71(1)(j)(ii) of the SISA will not apply because Superannuation Industry (Supervision) Regulations 1994 (SISR) regulation 13.22C will not apply to the additional units.", "Facts": "An SMSF acquired units in a related unit trust prior to 12 August 1999. These trust units continue to be held by the SMSF. By the application of section 71A of the SISA these units are not in-house assets. On 28 June 2000 the trustee of the unit trust had an amount of outstanding borrowings. After 28 June 2000 the trustee of the unit trust made additional borrowings. All borrowings of the trustee of the unit trust were subsequently repaid. Subsequent to the trustee of the unit trust repaying all outstanding borrowings the SMSF acquired additional units in the unit trust. Neither section 71D nor section 71E of the SISA applies to the additional investment.", "Reasons_for_Decision": "Summary: Subsection 71(1) of the SISA sets out the basic meaning of in-house asset. An investment in a related company or a related unit trust is included as an in-house asset. Subparagraph 71(1)(j)(ii) of the SISA excludes certain assets specified in the regulations (regulations 13.22B and 13.22C in Division 13.3A SISR) from the meaning of in-house asset. By virtue of subregulation 13.22B(1) of the SISR, regulation 13.22B applies to an investment in a related company or related unit trust which was made before 28 June 2000, being the date Division 13.3A commenced. By virtue of subregulation 13.22C(1) of the SISR, regulation 13.22C applies to an investment in a related company or related unit trust made on or after 28 June 2000. It is relevant to note that regulations 13.22B and 13.22C of the SISR apply regardless of whether the shares or units satisfy the requirements contained in subregulations 13.22B(2) or 13.22C(2) of the SISR or whether they are excluded from being in-house assets under another provision of the Act. The application of regulations 13.22B and 13.22C of the SISR to an asset are subject to regulation 13.22D of the SISR. If any of the events set out in subregulation 13.22D(1) of the SISR happen in respect of an asset to which regulations 13.22B or 13.22C apply, regulations 13.22B and 13.22C cease to apply to all current and future investments in that company or unit trust. Of particular relevance is subparagraph 13.22D(1)(c)(i) of the SISR which applies where the company or unit trust borrows money. Subregulation 13.22D(1) of the SISR applies to events which happen on or after 28 June 2000. For this reason the borrowing made prior to 28 June 2000 will not trigger the operation of regulation 13.22D of the SISR notwithstanding that it was not discharged prior to 28 June 2000. When the trustee of the unit trust borrowed money after 28 June 2000, the event set out in subparagraph 13.22D(1)(c)(i) of the SISR happened in relation to the original units in the related unit trust to which regulation 13.22B of the SISR applied. Consequently, regulation 13.22B ceased to apply to the SMSF's original investment in the unit trust at that time. In addition, subregulation 13.22D(3) of the SISR has the effect of excluding any other investments in the unit trust from the application of regulation 13.22C of the SISR. As subregulation 13.22C of the SISR does not apply to the acquisition of additional units in the unit trust, those units will not be excluded from being in-house assets by subparagraph 71(1)(j)(ii) of the SISA. Notwithstanding that regulation 13.22B of the SISR no longer applies to the SMSF's original investment in the unit trust, section 71A of the SISA continues to apply to exclude those units from the definition of in-house asset.", "Date_of_Decision": "29 May 2012", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 71(1) subparagraph 71(1)(j)(ii) section 71A section 71D section 71E", "Related_Public_Rulings_and_Determinations": "SMSFR 2009/4 | SMSFD 2008/1", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/52", "Subject_References": "Superannuation Retirement income entities Self managed superannuation funds SMSF investments Superannuation fund in house assets SMSF related parties", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201253", "Unmatched_Content": "Related Public Rulings (including Determinations) SMSFR 2009/4 SMSFD 2008/1 | Keywords Superannuation Retirement income entities Self managed superannuation funds SMSF investments Superannuation fund in house assets SMSF related parties"}
{"ATO_ID_Number": "ATO ID 2008/51", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: Division 13.3A of SIS Regulations - interest in another entity - units in a unit trust", "Issue": "When a related unit trust of a self managed superannuation fund (SMSF) has assets including units in a unit trust, will the related trust have an interest in another entity for the purposes of Division 13.3A of the Superannuation Industry (Supervision) Regulations 1994 (SISR)?", "Decision": "Yes. The related unit trust has invested in a unit trust and therefore has an interest in another entity for the purposes of Division 13.3A of the SISR.", "Facts": "An SMSF invests in a unit trust that is a related trust in accordance with section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA). The related trust has assets which include units in a unit trust that is not related to the SMSF.", "Reasons_for_Decision": "Summary: Subsection 71(1) of the SISA gives the basic meaning of in-house assets of a superannuation fund. It includes an investment in a related party and a related trust of the fund. Paragraph 71(1)(j) of the SISA states that the term in-house asset does not include certain assets specified in the regulations. Division 13.3A of the SISR says that an asset of a fund that is an investment in a related company or unit trust will not be included as an in-house asset provided that certain requirements are met. Regulation 13.22B of the SISR sets out the requirements for such an investment acquired before the commencement of the Division and regulation 13.22C of the SISR sets out the requirements for such an investment acquired on or after the commencement of the Division. If any of the events listed in regulation 13.22D of the SISR happens, then regulations 13.22B or 13.22C of the SISR will cease to apply and the investments will not be excluded from the in-house assets of the SMSF. Subparagraphs 13.22B(2)(f)(i) and 13.22C(2)(f)(i) of the SISR require that the assets of the related company or unit trust do not include an interest in another entity. Subparagraph 13.22D(1)(b)(i) of the SISR states that regulations 13.22B or 13.22C of the SISR will cease to apply if an interest in another entity becomes an asset of the company or unit trust. The term 'interest' is not defined in the SISA. The Australian Oxford Dictionary (2002, Oxford University Press, Melbourne) defines interest as: ...a financial stake (in an undertaking etc.) ...a legal concern, title or right (in property) The Macquarie Dictionary ([Multimedia], version 5.0.0, 1/10/01) defines interest as: The Courts have held that holders of units in a unit trust may have an equitable proprietary interest in the underlying assets of the trust ( Charles v. Federal Commissioner of Taxation (1954) 90 CLR 598; (1954) 10 ATD 328; (1954) 6 AITR 85, Lock v. Commissioner of Taxation (2003) 129 FCR 1; (2003) 52 ATR 575; [2003] FCA 309) although this may not always be the case depending on the terms of the trust deed ( CPT Custodian Pty Ltd v. Commissioner of State Revenue (Vic) [2005] HCA 53; (2005) 224 CLR 98; 2005 ATC 4925; (2005) 60 ATR 371). Therefore the particular type of interest a unit holder has in a unit trust will depend on the trust deed. The Courts have held that the meaning of 'interest' must be inferred from its context in the legislation ( Gartside and Another v. Inland Revenue Commissioners [1968] 1 All ER 121, Leedale v. Lewis [1982] 3 All ER 808). The Explanatory Statement (ES) to the Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 2) which amended the SISR to include Division 13.3A of the SISR provides the context for the phrase 'interest in another entity' in subparagraphs 13.22B(2)(f)(i), 13.22C(2)(f)(i) and 13.22D(1)(b)(i) of the SISR. The ES gives the purpose of the regulations: The purpose of this Division is to provide an exception to the definition of in-house asset (under subparagraph 71(1)(j)(ii) of the SIS Act) to allow a small superannuation fund to jointly own business real property with related parties of the fund (through a company or unit trust). The Regulation Impact Statement in the ES provides further background to the purpose of the regulations: ...some funds may prefer to hold joint investments in business real property through a company or trust. This would enable changes in ownership to take place by the sale of shares or units, rather than transferring direct ownership of the real property. Some submissions received during consultation advocated that the exception should apply to a related company or trust that undertakes a wider range of activities, such as investing in other entities that a superannuation fund could invest in. However, this would go beyond the objective of the exception, which is to provide a means of jointly holding business real property. Superannuation funds can hold interests in other entities directly. From the ES it is clear that Division 13.3A of the SISR was not intended to apply to related companies or unit trusts of SMSFs where the company or trust has investments in other entities. In the context set by the ES an 'interest in another entity' in Division 13.3A of the SISR is as an 'investment' in another entity. The Courts have considered the ordinarily understood meaning of 'investment' as the laying of money in the acquisition of some species of property from which profit or interest is expected ( Inland Revenue Commissioners v. Rolls-Royce Limited [1944] 2 All ER 340 at 341-342, Re Fraser; Ex Parte The Public Trustee as Manager of the Estate of Fraser [2000] WASC 36 at paragraph 16). Therefore, regardless of the particular type of interest created by the unit trust deed, the related trust or company has invested in the unit trust by acquiring the units. Accordingly the related company or unit trust has an 'interest in another entity' for the purpose of Division 13.3A of the SISR.", "Date_of_Decision": "20 March 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 10 subsection 71(1) Paragraph 71(1)(j)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/52", "Subject_References": "SMSF related parties Superannuation fund in house assets", "Case_References": "Gartside and Another v. Inland Revenue Commissioners [1968] 1 AllER 121", "Other_References": "Explanatory Statement to the Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 2) Australian Oxford Dictionary 2002, Oxford University Press, Melbourne Macquarie Dictionary [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200851", "Unmatched_Content": "Keywords SMSF related parties Superannuation fund in house assets"}
{"ATO_ID_Number": "ATO ID 2008/52", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: Division 13.3A of SIS Regulations - interest in another entity - listed company shares", "Issue": "When a related unit trust of a self managed superannuation fund (SMSF) has assets including shares in a listed company, will the related unit trust have an interest in another entity for the purposes of Division 13.3A of the Superannuation Industry (Supervision) Regulations 1994 (SISR)?", "Decision": "Yes. A share in a listed security is an interest in that company and therefore an interest in another entity for the purposes of Division 13.3A of the SISR.", "Facts": "An SMSF invests in a unit trust that is a related trust in accordance with section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA). The related trust has assets which include shares in a public company listed on the Australian stock exchange.", "Reasons_for_Decision": "Summary: Subsection 71(1) of the SISA gives the basic meaning of in-house assets of a superannuation fund. It includes an investment in a related party and a related trust of the fund. Paragraph 71(1)(j) of the SISA states that the term in-house asset does not include certain assets specified in the regulations. Division 13.3A of the SISR says that an asset of a fund that is an investment in a related company or unit trust will not be included as an in-house asset provided that certain requirements are met. Regulation 13.22B of the SISR sets out the requirements for such an investment acquired before the commencement of the division and regulation 13.22C of the SISR sets out the requirements for such an investment acquired on or after the commencement of the Division. If any of the events listed in regulation 13.22D of the SISR happens, then regulations 13.22B or 13.22C of the SISR will cease to apply and the investments will not be excluded from the in-house assets of the SMSF. Subparagraphs 13.22B(2)(f)(i) and 13.22C(2)(f)(i) of the SISR require that the assets of the related company or unit trust do not include an interest in another entity. Subparagraph 13.22D(1)(b)(i) of the SISR states that regulations 13.22B or 13.22C of the SISR will cease to apply if an interest in another entity becomes an asset of the company or unit trust. The term 'interest' is not defined in the SISA. The Australian Oxford Dictionary (2002, Oxford University Press, Melbourne) defines interest as: ...a financial stake (in an undertaking etc.) ...a legal concern, title or right (in property) The Macquarie Dictionary ([Multimedia], version 5.0.0, 1/10/01) defines interest as: The Courts have held that the meaning of 'interest' must be inferred from its context in the legislation ( Gartside and Another v. Inland Revenue Commissioners [1968] 1 All ER 121, Leedale v. Lewis [1982] 3 All ER 808). The Explanatory Statement to the Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 2) (ES) which amended the SISR to include Division 13.3A of the SISR provides the context for the phrase 'interest in another entity' in subparagraphs 13.22B(2)(f)(i), 13.22C(2)(f)(i) and 13.22D(1)(b)(i) of the SISR. The ES gives the purpose of the regulations: The purpose of this Division is to provide an exception to the definition of in-house asset (under subparagraph 71(1)(j)(ii) of the SIS Act) to allow a small superannuation fund to jointly own business real property with related parties of the fund (through a company or unit trust). The Regulation Impact Statement in the ES provides further background to the purpose of the regulations: ...some funds may prefer to hold joint investments in business real property through a company or trust. This would enable changes in ownership to take place by the sale of shares or units, rather than transferring direct ownership of the real property. Some submissions received during consultation advocated that the exception should apply to a related company or trust that undertakes a wider range of activities, such as investing in other entities that a superannuation fund could invest in. However, this would go beyond the objective of the exception, which is to provide a means of jointly holding business real property. Superannuation funds can hold interests in other entities directly. From the ES it is clear that Division 13.3A of the SISR was not intended to apply to related companies or unit trusts of SMSFs where the company or trust has investments in other entities. In the context set by the ES an 'interest in another entity' in Division 13.3A of the SISR is as an 'investment' in another entity. The Courts have considered the ordinarily understood meaning of 'investment' as the laying of money in the acquisition of some species of property from which profit or interest is expected ( Inland Revenue Commissioners v. Rolls-Royce Limited [1944] 2 All ER 340 at 341-342, Re Fraser; Ex Parte The Public Trustee as Manager of the Estate of Fraser [2000] WASC 36 at paragraph 16). In the case Pilmer v. The Duke Group Limited (in liq) [2001] HCA 31; 207 CLR 165, reference was made to the definition of a share in a company which is used most commonly by the Courts: Next, it is important to understand the nature of a share in the capital of a company. Once issued, a share comprises \"a collection of rights and obligations relating to an interest in a company of an economic and proprietary character, but not constituting a debt\". It is, according to the classic description of Farwell J in Borland's Trustee v Steel Brothers & Co Limited: \"the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with [the relevant corporations legislation].\" A share in a company is accepted by the Courts as being an interest in that company and the acquisition of a share is an investment in that company. Accordingly a share in a company is an 'interest in another entity' for the purpose of Division 13.3A of the SISR.", "Date_of_Decision": "20 March 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 10 subsection 71(1) Paragraph 71(1)(j)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/51", "Subject_References": "SMSF listed securities SMSF related parties Superannuation fund in house assets", "Case_References": "Borland's Trustee v Steel Brothers & Co Limited [1901] 1 Ch 279", "Other_References": "Explanatory Statement to the Superannuation Industry (Supervision) Amendment Regulations 2000 (No. 2) Australian Oxford Dictionary 2002, Oxford University Press, Melbourne Macquarie Dictionary [Multimedia], version 5.0.0, 1/10/01", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200852", "Unmatched_Content": "Keywords SMSF listed securities SMSF related parties Superannuation fund in house assets"}
{"ATO_ID_Number": "ATO ID 2006/220", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Retirement Income Entities: additional investment by self managed superannuation fund in a related trust", "Issue": "Is an additional investment in a related trust by a Self Managed Superannuation Fund (SMSF) after 11 August 1999 an in-house asset of the SMSF as defined in subsection 71(1) of the Supervision Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes. The additional investment by an SMSF is an 'in-house asset' as defined in subsection 71(1) of SISA.", "Facts": "The SMSF and related trust were established before 11 August 1999 where the SMSF is the sole beneficiary of the trust. Both trusts have the same corporate trustee. The related trust purchased and paid a deposit for real property 'off the plan' prior to 11 August 1999. The SMSF received further units in the related trust after 11 August 1999 after making an additional investment in the related trust. The related trust intended to sell the property before settlement but was unable to find buyer. It then borrowed money to settle the purchase after subsequent issue of units to the SMSF. The property is leased at arms length to an unrelated third party.", "Reasons_for_Decision": "Summary: Subsection 71(1) of SISA provides that an in-house asset of a superannuation fund includes investments in a related trust. Section 71A of SISA exempts such an investment from being an in-house asset if it was acquired before 11 August 1999. An investment is also exempted if it was acquired after 11 August 1999, but where that acquisition was made under a contract that was entered into before that date. In both circumstances the investment must not have been an in-house asset under the former rules. In this case, the fund had an investment as at 11 August 1999. The exception under section 71A of SISA applies to this investment, meaning it is not an in-house asset. The fund made an additional investment in the related trust after 11 August 1999 and was issued with further units. The exception under section 71A of the SISA does not apply to the additional investment. Further investments in the related trust after 11 August 1999 that are not in line with a contract entered into before that date will be treated as in-house assets unless specifically excluded by sections 71D or 71E of SISA and made before the end of 30 June 2009. The additional units were not acquired through a reinvestment of trust distributions. The exception under section 71D of SISA does not apply. The investment by the related trust was not geared as at 11 August 1999 and there is no evidence of an election to apply section 71E of SISA to the investment in the related trust. Therefore, the section 71E exception also does not apply. The additional investment in the related trust after 11 August 1999 is therefore an in-house asset under the rules contained in section 71 of SISA.", "Date_of_Decision": "24 October 2001", "Year_of_Income": "Year ended 30 June 2001", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 71 subsection 71(1) paragraph 71A(1)(a) section 71D section 71E", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/388 | ATO ID 2012/52 | ATO ID 2012/53", "Subject_References": "Complying superannuation funds Self managed superannuation funds SMSF related parties Superannuation fund in house assets", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006220", "Unmatched_Content": "Related ATO Interpretative Decisions | Reference to a withdrawn ATO ID updated | Siebel/TDMS Reference Number | Keywords Complying superannuation funds Self managed superannuation funds SMSF related parties Superannuation fund in house assets"}
{"ATO_ID_Number": "ATO ID 2002/388", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Retirement income entities: In-House Assets and leasing property from a Unit Trust.", "Issue": "Has a contravention of section 71 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where the member/s of a Self Managed Superannuation Fund (SMSF) lease a residential property from a unit trust which is a related party or related trust of the SMSF?", "Decision": "No, the members leasing of a residential property from a unit trust related to an SMSF would not cause the fund to contravene the in-house asset rules as set out in section 71 of the SISA.", "Facts": "The SMSF has two members. Persons associated with the SMSF established a unit trust prior to 11 August 1999. At all times, all the units in the unit trust have been held by the trustee for the SMSF. The unit trust has a residential property as one of its investments. The residential property was funded in part by borrowings by the trustee of the unit trust. The members of the SMSF wish to lease the property for themselves and pay a market rate for the lease.", "Reasons_for_Decision": "Summary: An in-house asset of a superannuation fund includes, '...an asset of the fund subject to a lease or lease arrangement between the trustee of the fund and a related party of the fund...' - subsection 71(1) of the SISA. A lease arrangement involving members (in their capacity as members and not as trustees) of an SMSF (as lessees) leasing residential property from the unit trust does not fall within the definition of an in-house asset. This is because the asset involved is that of the unit trust and not an asset of the SMSF. The SISA places no restrictions on the members of the SMSF tenanting the residential property of the unit trust provided the SMSF's investment in the unit trust is consistent with its investment strategy and the unit trust is conducting its dealings with SMSF members on an arms length basis. However, the lease agreement would need to be entered into and maintained on an arm's length basis. Further the SMSF's ongoing investment in the unit trust would need to be continually reviewed against the investment strategy of the fund. Dealings between the unit trust and members of the SMSF will need to be on an arms length basis to avoid a contravention of the implied investment covenant in paragraph 52(2)(f) of the SISA.", "Date_of_Decision": "6 September 2001", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 Paragraph 52(2)(f) Section 71 Subsection 71(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF investments Superannuation fund in house assets SMSF related parties", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002388", "Unmatched_Content": "Keywords Self managed superannuation funds SMSF investments Superannuation fund in house assets SMSF related parties"}
{"ATO_ID_Number": "ATO ID 2010/169", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: limited recourse borrowing arrangement - refinancing", "Issue": "Can a self managed superannuation fund (SMSF) trustee that entered into a limited recourse borrowing arrangement before 7 July 2010, refinance the arrangement on or after that date without contravening the general borrowing prohibition in subsection 67(1) of the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes, provided", "Facts": "An SMSF trustee entered into a limited recourse borrowing arrangement to acquire an asset (the underlying asset) on 15 June 2009. The arrangement met the requirements of former subsection 67(4A) of the SISA. The SMSF trustee refinanced the borrowing with a new lender on 15 July 2010. The money borrowed from the new lender was used to extinguish the first arrangement and substitute the refinanced borrowing arrangement over the underlying asset. The refinanced limited recourse borrowing arrangement otherwise meets the requirements of section 67A of the SISA. The underlying asset was transferred directly to another holding trust, the trustee of which is an associate of the new lender.", "Reasons_for_Decision": "Summary: Regulated superannuation funds are generally prohibited from borrowing money or maintaining a borrowing of money by subsection 67(1) of the SISA unless the borrowing satisfies one of the exceptions provided for by section 67 of the SISA. One such exception is provided for by subsection 67(4A) of the SISA (applying to limited recourse borrowing arrangements entered into before 7 July 2010). Another exception is provided for by section 67A if the SISA (applying to limited recourse borrowing arrangements entered into on or after 7 July 2010) For the purposes of section 67 of the SISA, a refinanced limited recourse borrowing arrangement is regarded as a new arrangement entered into at the time of refinancing. In this case The question to be considered is whether using the money borrowed from the new lender to extinguish the previous arrangement and substitute the refinanced arrangement over the underlying asset means that the borrowed money 'is or has been applied for the acquisition of a single acquirable asset' as required in paragraph 67A(1)(a) of the SISA. Subparagraph 67A(1)(a)(ii) specifically includes money applied to refinance a borrowing over a previous limited recourse borrowing arrangement that met the requirements of the SISA and in relation to a single acquirable asset (and no other acquirable asset). 'Apply' is relevantly defined in the Macquarie Dictionary ( Macquarie Dictionary on CD-ROM Version 5.0.0 01/10/01 ) as follows: The Commissioner accepts that the money borrowed from the new borrower is or has been applied for the acquisition of the underlying asset if it is applied for the purpose of acquiring that asset. Whether the money has been applied for the required purpose in a particular case is a question of fact resolved by a consideration of all of the circumstances. In this case the previous limited recourse borrowing arrangement for the acquisition of an asset was brought to an end and substituted by another limited recourse borrowing arrangement over the same asset. All of the money borrowed from the new lender was necessarily expended to bring about that change. On the facts the refinancing served no other purpose. The requirements of section 67A of the SISA in respect of the refinanced limited recourse borrowing arrangement are satisfied. Placing an existing fund asset into a limited recourse borrowing arrangement where the asset is subject to a charge would contravene the operating standards, specifically the requirement in regulation 13.14 of the Superannuation Industry (Supervision) Regulations 1994 that an SMSF trustee cannot give a charge over or in relation to an asset of the fund. In this case the underlying asset was transferred directly to the new holding trust, and not temporarily acquired by the SMSF trustee, so the refinanced arrangement is not over an asset that the SMSF trustee had already acquired.", "Date_of_Decision": "20 July 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 67(1) former subsection 67(4A) section 67A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF borrowings SMSF charge over assets", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010169", "Unmatched_Content": "Keywords Self managed superannuation funds SMSF borrowings SMSF charge over assets"}
{"ATO_ID_Number": "ATO ID 2010/170", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: limited recourse borrowing arrangement - third party guarantee", "Issue": "Can a borrowing by the self managed superannuation fund (SMSF) trustee satisfy the requirements of former subsection 67(4A) of the Superannuation Industry (Supervision) Act 1993 (SISA) where a related party of the SMSF has given the lender a personal guarantee as part of the arrangement?", "Decision": "Yes, a borrowing arrangement that includes a guarantee to the lender by a related party of the SMSF can satisfy the requirements of former subsection 67(4A) of the SISA.", "Facts": "An SMSF trustee has borrowed money from a financial institution in order to acquire an asset under a limited recourse borrowing arrangement. The arrangement was entered into on 18 June 2009. A member of the SMSF has given the bank a personal guarantee in respect of the borrowing that may be called upon by the bank in the event of a default on the borrowing. In the event of a default on the borrowing the rights of the lender against the SMSF trustee are limited to rights relating to the asset being acquired. In addition, the lender can call on the guarantee of the member. The arrangement otherwise satisfies the requirements of former paragraphs 67(4A)(a) to (e) of the SISA.", "Reasons_for_Decision": "Summary: Regulated superannuation funds are generally prohibited from borrowing money or maintaining a borrowing of money, by subsection 67(1) of the SISA, unless the borrowing satisfies one of the exceptions provided for by section 67 of the SISA. One such exception is provided for by former subsection 67(4A) of the SISA (applying to limited recourse borrowing arrangements entered into before 7 July 2010). In order to satisfy former subsection 67(4A) of the SISA, the limited recourse borrowing arrangement must meet the following requirements set out in former paragraphs 67(4A)(a) to (e) of the SISA: Unless varied by the express terms of the guarantee, then in the event of a call on the guarantee resulting in a payment by the guarantor to the lender, a guarantor will generally have rights at common law and in equity against the principal debtor (the SMSF trustee) to recover amounts paid in satisfaction of the obligations under the guarantee. This may include interest and costs and in some circumstances, damages. The recourse of the guarantor is therefore not necessarily restricted to the asset which is the subject of the arrangement. The rights of the guarantor are not rights of the lender against the SMSF trustee for the purposes of former paragraphs 67(4A)(d) and (e) of the SISA. The rights of the guarantor do not cause the arrangement to fail to meet the requirements of former subsection 67(4A). | Detailed Reasoning - Guarantor's rights now must be limited: However, limited recourse borrowing arrangements entered into by SMSF trustees on or after 7 July 2010 must meet the requirements of section 67A of the SISA. Arrangements involving guarantees will not meet these requirements unless the rights of the guarantor against the SMSF trustee are limited to rights relating to the asset which is the subject of the arrangement. One way in which the rights of a guarantor may be excluded or limited is by the express terms of the guarantee.", "Date_of_Decision": "30 June 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 67(1) former subsection 67(4A) section 67A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF borrowings", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010170", "Unmatched_Content": "Correct typographical error and subheading. Improve flow of reasoning in final paragraph. | Keywords Self managed superannuation funds SMSF borrowings"}
{"ATO_ID_Number": "ATO ID 2010/172", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self-managed superannuation fund: limited recourse borrowing arrangement - joint investors", "Issue": "Did the trustees of two self-managed superannuation funds (SMSFs) who jointly borrowed under a limited recourse borrowing arrangement involving a single holding trust, contravene subsection 67(1) of the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes, because the arrangement, entered into before 7 July 2010, did not meet the requirements of former subsection 67(4A) of the SISA.", "Facts": "The corporate trustees of two SMSFs jointly borrowed money under a limited recourse borrowing arrangement. The arrangement was entered into on 15 June 2009. Under the arrangement, legal title to a residential property is acquired by the trustee of a holding trust from a party that is not related to either SMSF using the money provided from the SMSF trustees. The property is leased to a party not related to either of the SMSFs. The property is mortgaged to the lender. Each SMSF trustee is an equal beneficiary of the holding trust and is entitled to an equal share of the income of the trust. Each SMSF trustee has repayment obligations. It is a term of the arrangement that in the event of a default by either of the SMSF trustees the arrangement is terminated. On termination the property is sold with any excess proceeds, after meeting the obligations to the lender and other costs of the arrangement, returned to the investors. The lender has no recourse other than to the real property in the arrangement. On completion of the arrangement (repayment of the borrowing), the SMSF trustees acquire joint legal title to the real property held as tenants in common.", "Reasons_for_Decision": "Summary: Regulated superannuation funds are generally prohibited from borrowing money or maintaining a borrowing of money by subsection 67(1) of the SISA unless the borrowing satisfies one of the exceptions provided for by section 67 of the SISA. One such exception is provided for by former subsection 67(4A) of the SISA (applying to limited recourse borrowing arrangements entered into before 7 July 2010). Former subsection 67(4A) of the SISA requires an arrangement with a structure that meets the conditions listed in former paragraphs 67(4A)(a) to (e) of the SISA. Former paragraphs 67(4A)(a) and (b) require that under the arrangement the original asset or its replacement is held on trust and that the SMSF trustee must have acquired a beneficial interest in that asset. Former paragraph 67(4A)(c) of the SISA further requires that the SMSF trustee must have the right to acquire legal ownership of that asset on making one or more payments. This requires a structure where the investor has an interest through the holding trust in the trust asset ultimately to be acquired by the SMSF trustee under the arrangement. In this particular arrangement, the asset held by the holding trust is sole title to the residential property. However, the asset that the SMSF trustee intends ultimately to acquire is a partial interest in that residential property, namely an interest as tenant in common with the other SMSF investor. The arrangement fails to meet the test in former paragraphs 67(4A)(a) and (b) of the SISA because the interest ultimately to be acquired as a tenant in common with the other SMSF trustee is not the same interest that is acquired and held on trust by the holding trust trustee. The arrangement also fails to meet the requirements of former paragraph 67(4A)(c) of the SISA because the SMSF trustee does not have a right to acquire sole legal ownership of the asset held in the holding trust (whole property) on making one or more payments. Rather, the SMSF trustee has a right, contingent on repayment of the borrowings by both investors, to acquire legal ownership of a partial interest in the property held as tenants in common with the other investor. The decision would be the same under section 67A of the SISA for an arrangement entered into on or after 7 July 2010.", "Date_of_Decision": "15 July 2010", "Year_of_Income": "Year ended 30June 2009", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 67(1) former subsection 67(4A) section 67A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF borrowings", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010172", "Unmatched_Content": "Amend wording to better reflect the wording within the legislation | Keywords Self managed superannuation funds SMSF borrowings"}
{"ATO_ID_Number": "ATO ID 2010/184", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: limited recourse borrowing arrangement - capitalisation of interest", "Issue": "Can interest on a limited recourse borrowing arrangement entered into by a self managed superannuation fund (SMSF) trustee before 7 July 2010 be capitalised without contravening the general prohibition on borrowing in subsection 67(1) of the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes. If the limited recourse borrowing arrangement otherwise meets the requirements of former subsection 67(4A) of the SISA then interest on the borrowing can be capitalised without contravening subsection 67(1) of the SISA.", "Facts": "An SMSF trustee has entered into a limited recourse borrowing arrangement under former subsection 67(4A) of the SISA (applying to arrangements entered into before 7 July 2010). The arrangement is to borrow to acquire real property from an unrelated party. The arrangement was entered into on 1 June 2009. Under the terms of the arrangement, provided the ratio of the amount outstanding to the lender to the market value of the real property is within a stipulated maximum as at a review date, the SMSF investor is permitted to elect to capitalise the interest on the borrowing for the relevant period. In these circumstances the interest liability for the period and associated charges are capitalised by a drawdown on the lending facility. The lender's rights of recourse in respect of capitalised amounts remain limited to the real property held in the holding trust. The arrangement otherwise meets the requirements of former paragraphs 67(4A)(a) to 67(4A)(e) of the SISA.", "Reasons_for_Decision": "Summary: Regulated superannuation funds are generally prohibited from borrowing money or maintaining a borrowing of money, by subsection 67(1) of the SISA, unless the borrowing satisfies one of the exceptions provided for by section 67 of the SISA. One such exception is provided for by former subsection 67(4A) of the SISA (applying to limited recourse borrowing arrangements entered into before 7 July 2010). In order to satisfy former subsection 67(4A) of the SISA the limited recourse borrowing arrangement must meet the following requirements set out in former paragraphs 67(4A)(a) to 67(4A)(e) of the SISA: A drawdown to capitalise interest is a new borrowing under the terms of the arrangement, see Self Managed Superannuation Funds Ruling SMSFR 2009/2 at paragraph 93: 93. The Commissioner also considers that each drawdown of funds from a loan facility or similar arrangement constitutes a separate borrowing, even if the facility or arrangement makes provision for redraws arising from earlier repayments. Each drawdown under the arrangement must meet the requirement in former paragraph 67(4A)(a) of the SISA that the money borrowed is applied for the acquisition of the real property being acquired by the SMSF trustee under the arrangement. A relevant meaning of 'apply' in The Macquarie Dictionary , [Multimedia], Version 5.0.0, 01/10/01 is: to devote to some specific purpose: to apply a sum of money to pay a debt. The Commissioner accepts that the drawdown representing the capitalisation is for the purpose of acquiring the asset under the limited recourse borrowing arrangement. That is, the requirement in former paragraph 67(4A)(a) of the SISA is met in respect of the drawdown if the amount capitalised is a cost related solely to the original borrowing under an arrangement that otherwise meets the requirements of former paragraphs 67(4A)(a) to 67(4A)(e) of the SISA. In this case all other aspects of the arrangement continue to meet the requirements of former paragraphs 67(4A)(b) to 67(4A)(e) of the SISA at all times.", "Date_of_Decision": "30 June 2010", "Year_of_Income": "Year ended 30June 2009", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 67(1) former subsection 67(4A)", "Related_Public_Rulings_and_Determinations": "Self Managed Superannuation Funds Ruling SMSFR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF borrowings", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010184", "Unmatched_Content": "Amend wording to correct error in SMSFR reference | Related Public Rulings (including Determinations) Self Managed Superannuation Funds Ruling SMSFR 2009/2 | Keywords Self managed superannuation funds SMSF borrowings"}
{"ATO_ID_Number": "ATO ID 2010/185", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation fund: limited recourse borrowing arrangement - charge", "Issue": "If the trustee of the holding trust in a limited recourse borrowing arrangement grants a charge over the asset in the holding trust in favour of a person other than the lender under the arrangement, does that result in the trustee of the self managed superannuation fund (SMSF) contravening subsection 67(1) of the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes because the arrangement, which was entered into on or after 7 July 2010, fails to meet requirements of section 67A of the SISA.", "Facts": "The trustees of an SMSF enter into a borrowing arrangement on 15 July 2010. Under the terms of the arrangement, a corporate trustee of a holding trust will acquire a residential property from a party unrelated to the SMSF. The trustees (that is, members) of the SMSF will be the directors of the corporate trustee of the holding trust. To facilitate the acquisition one member of the fund borrows money from a financial institution and on-lends the money to the SMSF for investment into the holding trust. Under the terms of the arrangement the corporate trustee of the holding trust holds the residential property on trust for the SMSF subject to a charge in favour of the financial institution to secure the loan to the member.", "Reasons_for_Decision": "Summary: Regulated superannuation funds are generally prohibited from borrowing money or maintaining a borrowing of money by subsection 67(1) of the SISA unless the borrowing satisfies one of the exceptions provided for by section 67 of the SISA. One such exception is provided for by section 67A of the SISA (applying to limited recourse borrowing arrangements entered into on or after 7 July 2010). As this arrangement was entered into on 15 July 2010 the requirements of section 67A of the SISA apply. Paragraph 67A(1)(f) of the SISA requires that the asset being acquired under the arrangement must not be subject to a charge other than in relation to the borrowing by the SMSF trustee. The charge is granted to secure the borrowing by the member from the financial institution, rather than the borrowing by the SMSF trustee from the member. Therefore, the arrangement in this case fails the requirement of paragraph 67A(1)(f) of the SISA.", "Date_of_Decision": "20 July 2010", "Year_of_Income": "Year ended 30June 2011", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 67(1) former subsection 67(4A) section 67A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF borrowings SMSF charge over assets", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010185", "Unmatched_Content": "Keywords Self managed superannuation funds SMSF borrowings SMSF charge over assets"}
{"ATO_ID_Number": "ATO ID 2007/56", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Funds: contracts for differences (CFDs) - no fund assets deposited with CFD provider", "Issue": "Has a trustee of a self managed superannuation fund (SMSF) contravened the Superannuation Industry (Supervision) Act 1993 (SISA) by investing in CFDs?", "Decision": "No. The trustee of an SMSF has not contravened the SISA by investing in CFDs where they have not deposited fund assets with the CFD provider.", "Facts": "CFDs are synthetic financial products that enable the investor to access the price movement in shares and other instruments such as stock indices, stock options, currencies and futures contracts without owning the underlying product. When a CFD is opened the investor pays a deposit into a CFD bank account and may be required to make additional margin payments to cover running losses on open positions. CFDs have a leveraging effect with consequent exposure to potentially large gains and losses stemming from exposure to short term financial risk in relation to a relatively small deposit. The trustee of an SMSF has invested in CFDs. The investment is for hedging purposes in accordance with the fund's investment strategy. Under the product disclosure statement the CFD provider may, under a related agreement, permit an investor to deposit assets with the provider as security against their obligations to pay deposits or margins. The trustee has not entered into any such agreement and has not granted a charge over any fund assets in relation to the obligations to make payments under the CFD.", "Reasons_for_Decision": "Summary: No provision of the SISA or the Superannuation Industry (Supervision) Regulations 1994 (SISR) specifically prohibits trustees of SMSFs from investing in CFDs. There is no loan between the CFD provider and the SMSF trustee and therefore no contravention of the prohibition on borrowing by trustees in section 67 of the SISA. The requirement to pay a deposit and meet margin calls does not represent borrowing, they are rather contractual liabilities to make payments if and when required and are not repayments ( Prime Wheat Association Ltd v. Chief Commissioner of Stamp Duties (NSW) 97 ATC 5015; (1997) 37 ATR 479). The obligations in relation to CFDs are distinguished from margin lending through a broker's margin account in relation to the purchase of shares by an SMSF, which does represent a prohibited borrowing under the SISA. The operation of the CFD bank account and the obligation to pay deposits and margins does not create a charge over any assets of the fund. The parties are relying on the contract and not on any security interest to be created by the contract ( White v. Conroy (1921) 21 SR (NSW) 257; (1921) 38 WN (NSW) 63, Berrington v. Evans (1839) 3 Y & C Ex 384; 160 ER 73). Under the CFD, the monies in the CFD bank account are the property of the CFD provider and the fund (investor) has no beneficial interest in the account. (Trustees need to examine individual product disclosure statements and contracts to ensure that there is no charge made over an asset as prohibited in regulation 13.14 of the SISR and that all requirements of the SISR and SISA are adhered to.) The trustee has not entered into any collateral agreement to the CFD that places a charge over any asset of the fund. The investment is in accordance with the fund's investment strategy as required under paragraph 52(2)(f) of the SISA and regulation 4.09 of the SISR.", "Date_of_Decision": "9 March 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 67 section 52", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/57 | ATO ID 2007/58", "Subject_References": "Superannuation Self managed superannuation funds SMSF borrowings SMSF charge over assets SMSF investment strategy SIS covenants", "Case_References": "Prime Wheat Association Ltd v. Chief Commissioner of Stamp Duties (NSW) 97 ATC 5015 37 ATR 479", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200756", "Unmatched_Content": "Keywords Superannuation Self managed superannuation funds SMSF borrowings SMSF charge over assets SMSF investment strategy SIS covenants"}
{"ATO_ID_Number": "ATO ID 2007/58", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self Managed Superannuation Fund: trustee using a margin account for fund investments in listed shares", "Issue": "Has a trustee of a self managed superannuation fund (SMSF) that operated a margin account to purchase listed shares contravened the Superannuation Industry (Supervision) Act 1993 (SISA)?", "Decision": "Yes. The trustee of an SMSF that operated a margin account to purchase listed shares has contravened the SISA as they have borrowed money and granted a charge over shares that are assets of the fund.", "Facts": "In relation to shares, a margin account with a broker is an account through which shares can be purchased for a combination of cash and a loan (margin lending). The portfolio of shares is used as security for the margin lending facility. An SMSF trustee maintained a margin account with a broker's clearing house. The margin balance continued over a period of time at different monetary levels depending on the value of shares on hand.", "Reasons_for_Decision": "Summary: Subsection 67(1) of the SISA prohibits a trustee of an SMSF from borrowing money or maintaining an existing borrowing of money. There are limited exceptions to the general prohibition available under subsections 67(2), 67(2A) and 67(3) of the SISA. Operating the margin account does not fall within any of the exceptions. The trustee has therefore contravened subsection 67(1) of the SISA. Regulation 13.14 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) is a prescribed operating standard for regulated superannuation funds under section 31 of the SISA. Subsection 34(1) of the SISA requires that the operating standards are complied with at all times. Regulation 13.14 of the SISR prohibits a trustee of an SMSF giving a charge over, or in relation to, an asset of the superannuation fund. Regulation 13.14 of the SISR is subject to regulation 13.15A of the SISR which permits a trustee to give a charge in relation to certain options and futures contracts in order to comply with the rules of an approved body (for example the Australian Securities Exchange) provided the investment is in accordance with the fund's derivatives risk statement. Shares held as assets of the fund were provided as security for the loan taken out to purchase such shares and this represented a charge over some of the assets of the SMSF. This arrangement does not fall within the exception provided for in regulation 13.15A of the SISR. The trustee has therefore contravened regulation 13.14 of the SISR and consequently subsection 34(1) of the SISA.", "Date_of_Decision": "9 March 2007", "Year_of_Income": "30 June 2007", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 31 section 34(1) section 67 section 67(1) section 67(2) section 67(2A) section 67(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/56 | ATO ID 2007/57", "Subject_References": "Self managed superannuation funds SMSF borrowings SMSF breach of compliance SMSF charge over assets SMSF investments", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200758", "Unmatched_Content": "Related ATO Interpretative Decisions | Remove ATO ID 2007/58 and insert ATO ID 2007/57 | Keywords Self managed superannuation funds SMSF borrowings SMSF breach of compliance SMSF charge over assets SMSF investments"}
{"ATO_ID_Number": "ATO ID 2015/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed super fund: Life insurance - Buy sell agreement - financial assistance - sole purpose", "Issue": "Does a self managed superannuation fund (SMSF) contravene section 62 and paragraph 65(1)(b) of the Superannuation Industry (Supervision) Act 1993 (SISA) by purchasing a life insurance policy over the life of a member of the SMSF where the purchase is a condition and consequence of a buy-sell agreement the member has entered into with his brother as co-owners of their business?", "Decision": "Yes. The trustee will contravene section 62 and paragraph 65(1) (b) of the SISA by purchasing a life insurance policy over the life of a member of the SMSF where the purchase of the policy is a condition and consequence of a buy-sell agreement the member has entered into with his brother as co-owners of their business.", "Facts": "A member of an SMSF (the Member) and his brother run a business through a company in which they are the only two shareholders (the company). The SMSF's only other member is the Member's spouse. The SMSF has a corporate trustee (the Trustee). The Member and his brother enter into a buy-sell agreement (the agreement). The terms of the agreement require: The intended effect of the buy-sell agreement is the acquisition of the Member's shareholding in the company, on the death of the Member, by the Member's brother for no personal outlay by the Member's brother. The Fund would not have otherwise purchased the policy.", "Reasons_for_Decision": "Summary: The SMSF's purchase of the life insurance policy in accordance with the term of the buy-sell agreement does not accord with the sole purpose requirements of section 62 of the SISA The sole purpose test in section 62 of the SISA prohibits trustees from maintaining an SMSF for purposes other than for the provision of benefits specified in subsection 62(1) of the SISA. The core purposes specified in that subsection essentially relate to providing retirement or death benefits for, or in relation to, SMSF members: subsection 62(1)(a) of the SISA. The SMSF can also maintain the fund for one or more of these purposes and other specified ancillary purposes, which relate to the provision of benefits on the cessation of a member's employment and other death benefits and approved benefits not specified under the core purposes: subsection 62(1)(b) of the SISA. Paragraph 6 of SMSFR 2008/2 [1] states that an SMSF must be maintained in a manner that complies with the sole purpose test at all times while the SMSF is in existence. This extends to all activities undertaken by the SMSF during its life cycle, including accepting contributions and acquiring and investing fund assets. Paragraphs 7 to 8 of SMSFR 2008/2 go on to state the sole purpose test requires exclusivity of purpose. However, the test may still be satisfied where an SMSF provides benefits other than those specified in subsection 62(1) of the SISA, if those benefits are considered incidental, remote or insignificant. In any particular case, all the facts and circumstances associated with the maintenance of the SMSF are relevant in deciding if the trustee has complied with the sole purpose test. Paragraph 16 of SMSFR 2008/2 further states the test 'requires a holistic assessment of all of the circumstances associated with the maintenance of an SMSF', and is 'particularly concerned with how a SMSF trustee came to make an investment or undertake an activity, which is likely to vary from trustee to trustee'. The presence of certain factors may weigh in favour of a conclusion that in providing certain benefits, an SMSF is not being maintained in accordance with section 62 of the SISA. This includes (but is not limited to) instances where: In this particular case, although subsection 62(1) of the SISA expressly allows an SMSF to be maintained for the provision of death benefits, the manner and circumstances in which the SMSF came to hold the insurance policy in question (as part and only because of the underlying buy-sell agreement), leads to the conclusion that the additional benefits sought by the parties in entering into the agreement cannot be regarded as being merely incidental to the core retirement income purposes of the SMSF. The agreement is a major component of the Member's and his brother's company succession management. Having the policy held in the SMSF enables the Member's brother to gain total ownership and control of the company after the Member's death without personally incurring any expenditure. Presumably, there exists no impediment to having the policy purchased or held outside of the SMSF (say, by the company or by the Member's brother). However, the SMSF has been utilised by an external agreement to which the SMSF is not a party in an arrangement which effectively relieves the Member's brother from having to provide money to pay the premiums on the policy and, in the event of the Member's death, from having to fund the purchase of the Member's share of the company. It is clear the SMSF acts as a conduit under the agreement. The SMSF is required to use contributions made to it in a manner that may not accord with its investment strategy. The SMSF is essentially directed to invest contributions made to it in an asset it may not otherwise choose to hold (with resulting potential financial detriment to the SMSF as it is not able to invest contributions made to it that objectively would provide an overall higher return). As it were, the agreement was entered into with a specific purpose of obtaining a particular significant, albeit indirect, benefit to the Member's brother. This immediate benefit to a related party (who is not a member) of the SMSF cannot be described as something that is incidental, remote or insignificant provided to the members of the Fund (paragraph 120 of SMSFR 2008/2). It is noted that the Member's spouse (the SMSF's other member) could have received the insurance proceeds without giving up any rights in relation to the Member's share of the company had the policy been acquired by the SMSF independently and not subject to the agreement. Two factors support the above-stated position. First, the calculation of the insured amount is not in any way based on the future needs of the Member's spouse, but is based on a valuation of the Member's share of the company. Secondly, what the Member's spouse receives from this agreement, whilst ostensibly a death benefit payment from the SMSF, is in substance compensation for the spouse's expected inheritance from the Member's share of the company. From this, it is arguable that the contributions received by the SMSF to enable the premium payments were never intended to produce retirement benefits. The collateral benefit to the (non-member) surviving brother is at least equal to what is being characterised as a future death benefit payment to the Member's spouse. This is a sought-for benefit that certainly isn't a mere incidental benefit. There is a deliberateness and purposefulness to this course of action which is difficult to reconcile with the underlying intention of the sole purpose requirements under section 62. Having regard to all the facts and circumstances of the arrangement-most significantly, that the policy would not be purchased at all if it cannot be purchased by the SMSF in accordance with the terms of the agreement-leads to the conclusion that, in purchasing and holding the policy, the SMSF is not being maintained in accordance with the sole purpose requirements of section 62 of the SISA. | Detailed Reasoning - Provision of financial assistance to the Member's brother: Paragraph 65(1)(b) of the SISA prohibits a SMSF trustee or investment manager from assisting a member or relative of a member using SMSF resources and therefore providing financial assistance in contravention of section 65 of the SISA. Subsection 10(1) of the SISA defines a 'relative' to include the brother of such a member of the fund. In the Commissioner's view, financial assistance is given to a SMSF's member, or relative of a member, if some aid or help or benefit is given to that person whether or not such assistance was requested. A trustee or investment manager of an SMSF contravenes paragraph 65(1)(b) by satisfying, or taking on, a financial obligation of a member or relative of a member. An objective assessment of the substance of the relevant arrangement is required in determining whether such financial assistance has been given by the SMSF (paragraphs 7 and 46 to 54 of SMSFR 2008/1). [2] In this instance, the terms of the agreement allow the Member's brother to obtain total ownership and control of the company upon the Member's death without the need to pay any consideration either in the way of insurance premiums or as a direct sum to the Member's widow for her expected inherited share of the company. The agreement operates so as to compel the SMSF to convert a portion of its cash assets into another asset, the policy. Money is not leaving the SMSF but is merely converted into another asset. However, as noted at paragraphs 66 to 71 of SMSFR 2008/1, the Commissioner adopts the principle that an absence in the reduction in the SMSF's net assets does not preclude a finding that financial assistance has been given using the resources of the SMSF. Applying the above stated principles to the facts and circumstances of this particular case, it is concluded that the arrangement as stipulated under the agreement will also constitute the provision of financial assistance to the Member's brother in breach of paragraph 65(1)(b).", "Date_of_Decision": "5 March 2015", "Year_of_Income": "2013 14 financial year", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 10 section 65 paragraph 65(1)(b) section 62 subsection 62(1) paragraph 62(1)(a) paragraph 62(1)(b)", "Related_Public_Rulings_and_Determinations": "Self Managed Superannuation Funds Ruling SMSFR 2008/1 | Self Managed Superannuation Funds Ruling SMSFR 2008/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Buy sell agreement Death benefits - superannuation benefits Self managed superannuation fund SMSF financial assistance SMSF related parties Sole purpose Sole purpose - incidental benefits Superannuation", "Case_References": "Case 43/95 95 ATC 374 (1995) 31 ATR 1067", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201510", "Unmatched_Content": "Related Public Rulings (including Determinations) Self Managed Superannuation Funds Ruling SMSFR 2008/1 Self Managed Superannuation Funds Ruling SMSFR 2008/2 | Keywords Buy sell agreement Death benefits - superannuation benefits Self managed superannuation fund SMSF financial assistance SMSF related parties Sole purpose Sole purpose - incidental benefits Superannuation"}
{"ATO_ID_Number": "ATO ID 2003/711", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Retirement income entity - loan to a partnership", "Issue": "Has a contravention of section 65 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) occurred when a self managed superannuation fund (SMSF) made a loan to a partnership?", "Decision": "Yes. A contravention of section 65 of the SIS Act has occurred when a SMSF made a loan to a partnership.", "Facts": "A SMSF made a loan to a partnership. The partners of the partnership are members of the SMSF.", "Reasons_for_Decision": "Summary: Section 65 of the SIS Act prohibits a SMSF from lending money, or giving financial assistance, to a member of the fund or a relative of a member of the fund. A partnership does not have a separate legal identity; rather it is two or more persons carrying on a business in common. As the partners of the partnership were members of the SMSF the loan to the partnership was actually a loan to the members of the SMSF. Such a loan contravened section 65 of the SIS Act.", "Date_of_Decision": "28 May 2001", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 Section 65", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Regulated superannuation fund Loan Partnership", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003711", "Unmatched_Content": "Keywords Regulated superannuation fund Loan Partnership"}
{"ATO_ID_Number": "ATO ID 2002/516", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Retirement income entities - Fund money deposited in member's bank account", "Issue": "Has a contravention of section 65 of the Superannuation Industry (Supervision) Act 1993 (SISA) occurred where money payable to the self managed superannuation fund (SMSF) was unintentionally deposited into the trustee's personal bank account?", "Decision": "No. A contravention of section 65 of SISA will have occurred if the trustee intended to borrow the money for his or her personal use.", "Facts": "A share broker, accustomed to receiving instructions from the trustee in both, his personal capacity, as well as in his capacity as trustee of an SMSF, inadvertently made all cheques payable to the member. The cheques were deposited into the trustee's personal bank account. The cheques were due to be paid to the SMSF and not to the trustee in his personal capacity. The trustee has on several occasions, deposited money belonging to the SMSF into his personal bank account.", "Reasons_for_Decision": "Summary: Section 65 of SISA prohibits the trustee of a regulated superannuation fund from lending money to a member of the fund or a relative of a member of the fund. However paragraph 52(2)(g) of SISA places trustees under a covenant to keep the money and other assets of the superannuation fund separate to those of the trustee personally (among others). A breach of a covenant may result in an action for loss or damage that occurred as a result of the contravention.", "Date_of_Decision": "27 July 2001", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 Section 65 Paragraph 52(2)(g)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF loans SMSF trustee SIS covenants", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002516", "Unmatched_Content": "Keywords Self managed superannuation funds SMSF loans SMSF trustee SIS covenants"}
{"ATO_ID_Number": "ATO ID 2011/84", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation funds: scheme to avoid the prohibition on acquiring assets from related parties", "Issue": "Does the anti-avoidance provision in subsection 66(3) of the Superannuation Industry (Supervision) Act 1993 (SISA), apply to the participants of an arrangement that is structured so that it avoids the prohibition on the acquisition assets from a related party of the self managed superannuation fund (SMSF) under subsection 66(1) of the SISA?", "Decision": "Yes. Considering the arrangement as a whole, it is structured with the intention that the acquisition by the SMSF of units in a unit trust from a party that is not a related party to the SMSF, avoids the prohibition (in subsection 66(1) of the SISA) of the SMSF acquiring assets from a related party. The parties to the arrangement may be liable to prosecution and may be guilty of an offence under subsection 66(4) of the SISA.", "Facts": "An entity has established an arrangement (the trade exchange) that facilitates the provision of goods and services through barter transactions between its members. Members who participate in the arrangement become entitled to receive credits in the form of 'trade dollars' for the goods or services they provide. The entity acts as a third party record keeper, using the 'trade dollars' to monitor the value of cashless barter transactions. A trustee of a unit trust is a member of a trade exchange. The trustee of the unit trust is empowered by the trust deed to accept a mixture of trade dollars and Australian currency as consideration for the issue of units in the trust. That is, another member of the trade exchange can purchase a unit for X dollars in Australian currency and Y trade dollars, the permitted ratio being set by the trustee of the unit trust according to particular criteria. The unit trust invests in income producing assets using both trade dollars and Australian currency. Distributions to unit holders can be made in a mixture of trade dollars and Australian currency. The units in the unit trust are not 'listed securities' as defined in subsection 66(5) of the SISA. The trustee of the unit trust has indicated that it is prepared to enter into an arrangement with a company that is a member of the trade exchange and the trustee of an SMSF that has as a member an employee of that company. The trustee of the unit trust is not a related party of the SMSF, nor is the unit trust a related trust of the SMSF. The company is a related party of the SMSF because a member of the SMSF together with her relatives have a majority voting interest in the company in accordance with the definition of 'related party' in subsection 10(1) of the SISA and the meaning of 'Part 8 associate of an individual' in section 70B of the SISA. The parties to the arrangement have agreed to take the following steps: Step 1: the company purchases a number of units in the unit trust (P units) using the prescribed ratio of Australian currency and trade dollars (say X dollars and Y trade dollars). Step 2: the company contributes an equivalent amount in Australian currency as an employer superannuation contribution to the SMSF (X + Y dollars) with a view to claiming a tax deduction for the contribution. Step 3: the SMSF uses the amount of the contribution (X + Y dollars) to purchase P units from the unit trust. Step 4: the unit trust redeems the units owned by the company for the same amount of Australian currency (X + Y dollars). The net result of the arrangement is that: The company has also made a superannuation contribution for which it intends to claim an income tax deduction of $(X + Y).", "Reasons_for_Decision": "Summary: Subsection 66(1) of the SISA provides that: Subject to subsection (2), a trustee or an investment manager of a regulated superannuation fund must not intentionally acquire an asset from a related party of the fund. Subsection 66(2) of the SISA provides for a number of exceptions to the general rule as follows: Subsection 66(5) of the SISA provides that: acquire an asset does not include accept money. As stated in the facts, the units in the unit trust are not listed securities and none of the other exceptions in subsection 66(2) of the SISA apply. Self managed Superannuation Funds Ruling SMSFR 2010/1: the application of subsection 66(1) of the Superannuation industry (Supervision) Act 1993 to the acquisition of an asset by a self managed superannuation fund from a related party (SMSFR 2010/1) gives the Commissioner's views on the application of subsection 66(1) of the SISA. SMSFR 2010/1 states that for the purposes of section 66 of the SISA 'acquiring an asset' includes accepting a contribution of an asset (paragraph 13). Paragraph 28 of SMSFR 2010/1 also makes it clear that trade dollars are not 'money': 28. It is the Commissioner's view that collectable banknotes or coins, or trade dollars or barter credits, are not money for the purposes of section 66. The acquisition of collectable banknotes or coins, or trade dollars or barter credits, is the acquisition of an asset other than money. The acquisition of such assets by a trustee or investment manager from a related party contravenes subsection 66(1). It follows that if the SMSF had acquired trade dollars or units in the unit trust from the company (which is a related party), then the trustee of the SMSF would contravene subsection 66(1) of the SISA. This would be the case whether the assets were purchased or accepted as a contribution from the company. Subsection 66(3) of the SISA is an anti-avoidance provision that applies to ensure a scheme is not carried out to prevent the application of subsection 66(1) of the SISA: 66(3) Prohibition of avoidance schemes. A person must not enter into, commence to carry out, or carry out a scheme if the person entered into, commenced to carry out, or carried out the scheme or any part of the scheme with the intention that: 'Scheme' is defined to have a wide meaning in subsection 66(5) of the SISA: scheme means: When we look to see if there is a contravention of subsection 66(3) of the SISA we look at the scheme as a whole and just not at isolated transactions within the scheme. Lock v. FCT [2003] FCA 309; (2003) 52 ATR 575 ( Lock) concerned a scheme for superannuation funds to acquire all of the units in a unit trust that had previously acquired land from persons who became members of the funds (at the time of the relevant transactions, subsection 66(1) of the SISA prohibited acquisitions from members or their relatives and did not apply more broadly to acquisitions form related parties).: Goldberg J said at paragraphs 74-75: 74 The applicants' submission that at the time they sold the pieces of land they were not members or trustees of the respective Funds must be considered by reference to the scheme as a whole. Section 66(3) does not focus on particular transactions at particular points of time but rather contemplates consideration of a continuum, a sequence of events, a course of action, a course of conduct. The proscription in s 66(3) is against a person entering into, commencing to carry out, or carrying out, a scheme with the intention that the scheme would result or be likely to result in the acquisition specified in subpara (a) of s 66(3). One does not look at the scheme only at the time the applicants became trustees of each of the Funds or only at the time at which the Funds were respectively constituted. Rather one looks at past, current and prospective acts, circumstances and conduct to determine whether there is a conjoining or coincidence of the relevant intention and an aspect or integer of the scheme at any particular point or points of time with the result that it can be established that there is an acquisition from a relevant person which would avoid the application of s 66(1) to the fund. The proscription is not only against entering into a scheme or commencing to carry it out; it also extends to carrying out a scheme or any part of it. 75 Thus a person who does not have any role in the entering into, or the commencement, of the carrying out of a scheme will be brought within s 66(3) if at a later point of the scheme the person participates in the carrying out of the scheme or any part of it, with the relevant intention contemplated by subparas (a) and (b) of s 66(3). From the documentation concerning the arrangement in this case it can be concluded that a scheme was entered into by the parties, commencing with the purchase by the company of units in the unit trust using a mixture of cash and trade dollars and concluding with the redemption of those same units for cash with the intention of avoiding the application of subsection 66(1) of the SISA to the fund. The arrangement in this case clearly contemplates two different entities acquiring units in the unit trust - first the company and then the SMSF. The relationship between the trustee and unit holder is a connection between the two parties. Therefore, the trustee of the unit trust has a connection with each unit holder including the company. The acquisition by the SMSF of the units from the trustee of the unit trust under the scheme is, therefore, an acquisition of an asset from a person (the trustee of the unit trust) who has a connection with a related party of the fund as the company is a related party of the fund for the purposes of subsection 66(3) of the SISA. But for the scheme there would have been a prohibited acquisition of an asset from the company (either a contribution of trade dollars to the SMSF so that it could acquire units from the unit trust using a mixture of Australian currency and trade dollars, or the sale or contribution of the units to the SMSF by the company after the company had acquired the units using a mixture of Australian currency and trade dollars). The participants in the scheme may be liable to prosecution for an offence under subsection 66(4) of the SISA and if found guilty, the contravention is punishable on conviction by imprisonment for a term not exceeding one year The Crimes Act 1914 set out some general rules applying to penalties, including a mechanism for converting a term of imprisonment into a pecuniary penalty in the case of both natural persons and corporations.. A trustee of an SMSF who commits an offence under the SISA also puts at risk the complying status of the SMSF for tax purposes. In addition to the adverse tax consequences for the SMSF, a contribution to a non-complying superannuation fund is not tax deductible (section 290-75 of the Income Tax Assessment Act 1997 ).", "Date_of_Decision": "18 August 2011", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 section 66", "Related_Public_Rulings_and_Determinations": "Self managed Superannuation Funds Ruling SMSFR 2010/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self managed superannuation funds SMSF acquisition of assets", "Case_References": "Lock v. FCT [2003] FCA 309 (2003) 52 ATR 575", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201184", "Unmatched_Content": "Related Public Rulings (including Determinations) Self managed Superannuation Funds Ruling SMSFR 2010/1 | Keywords Self managed superannuation funds SMSF acquisition of assets"}
{"ATO_ID_Number": "ATO ID 2010/162", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed Superannuation Fund: limited recourse borrowing arrangement - borrowing from a related party on terms favourable to the self managed superannuation fund", "Issue": "Does a self-managed superannuation fund (SMSF) trustee contravene section 109 of the Superannuation Industry (Supervision) Act 1993 (SISA) if it borrows money from a related party of the SMSF under a limited recourse borrowing arrangement on terms favourable to the SMSF?", "Decision": "No. The terms cannot be more favourable to the related party than would have been the case had the parties been dealing at arm's length, but there is no contravention of section 109 of the SISA if the terms are more favourable to the SMSF.", "Facts": "An SMSF trustee has entered into a limited recourse borrowing arrangement on 1 June 2009. The arrangement meets the requirements of former subsection 67(4A) of the SISA. The arrangement is to acquire an income producing asset for the SMSF. The lender under the borrowing arrangement is a related party of the SMSF. The interest rate imposed under the borrowing arrangement is lower than the rate that would be available to the SMSF from an arm's length lender for an otherwise similar loan. Apart from the interest rate charged, the borrowing is on arm's length terms and conditions and is supported by appropriate documentation and record keeping.", "Reasons_for_Decision": "Summary: 'Invest' is defined in subsection 10(1) of the SISA to mean applying assets in any way, or making a contract, for the purpose of gaining interest, income, profit or gain. When entering into the limited recourse borrowing arrangement the SMSF trustee is investing for the purposes of section 109 of the SISA. Subsection 109(1) of the SISA imposes requirements with respect to relevant transactions for investments made by SMSFs. In particular paragraph 109(1)(b) of the SISA applies where the parties to the transaction are not dealing with each other at arm's length. The provision requires that the terms and conditions of the transaction must not be more favourable to the other party than would be reasonably expected if the parties were dealing with each other at arm's length. Borrowing money under the limited recourse borrowing arrangement is a transaction entered into in the course of making an investment by the SMSF. It is therefore a transaction to which paragraph 109(1)(b) of the SISA applies where the parties are not dealing with each other at arm's length. It is expected that establishing the arrangement, including establishing the borrowing, would be documented and conducted in a business-like manner in the same way as an arrangement when dealing with an arm's length lender. In this case, the interest rate imposed under the borrowing arrangement is lower than the rate that would be available to the SMSF trustee from an arm's length lender for an otherwise similar loan. This indicates that the parties are not dealing at arm's length in respect of the borrowing arrangement. However, given that the terms of the borrowing arrangement are more favourable to the SMSF trustee than the other party there is no contravention of paragraph 109(1)(b) by entering into this arrangement. Subsection 109(1A) of the SISA applies to dealings with parties that are not at arm's length, during the term of the investment to ensure that the investments are maintained on an arm's length basis. Subsection 109(1A) of the SISA applies after an investment to which paragraph 109(1)(b) applies has commenced and is interpreted in that context. As a result provided the dealing is not more favourable to the other party than would be expected had the parties been at arm's length then the provision will not be contravened.", "Date_of_Decision": "9 September 2010", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 10(1) former subsection 67(4A) subsection 109(1) subsection 109(1A)", "Related_Public_Rulings_and_Determinations": "Self-Managed Superannuation Funds Ruling SMSFR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self-managed superannuation funds SMSF borrowings", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010162", "Unmatched_Content": "This ATO ID was amended to clarify that paragraph 109(1)(b) of the SISA requires the dealing, rather than the relationship between the parties, to be at arm's length. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Amended to clarify that paragraph 109(1)(b) of the SISA requires the dealing, rather than the relationship between the parties, to be at arm's length. | Related Public Rulings (including Determinations) Self-Managed Superannuation Funds Ruling SMSFR 2009/2 | Keywords Self-managed superannuation funds SMSF borrowings"}
{"ATO_ID_Number": "ATO ID 2015/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation: Member's benefits in a regulated superannuation fund must be 'cashed' upon death by being paid - mere journal entries insufficient", "Issue": "Where the benefits of a deceased member of a self-managed superannuation fund (SMSF) are to be paid as a lump sum to the deceased member's spouse, will the benefits be considered 'cashed' for the purposes of regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SISR) if the amount of the benefits is simply debited from the deceased member's account and credited to the account of the spouse by way of journal entry in the fund's accounts?", "Decision": "No. Simply debiting the amount of the deceased member's benefits from the deceased member's account and crediting the account of the spouse with that amount by way of journal entry in the accounts of the SMSF does not constitute a 'payment', and therefore a 'cashing', of the deceased member's benefits as a lump sum to the spouse.", "Facts": "A regulated superannuation fund, being an SMSF, had two members, one of whom has died. The members were married to each other. The trustees of the SMSF have resolved to pay the deceased member's benefits to the spouse of the deceased member (the spouse) as a lump sum. This resolution is consistent with the governing rules of the fund and the SISR. The trustees of the SMSF propose to 'pay' the lump sum by debiting the amount of the deceased member's benefits from the deceased member's account and crediting the account of the spouse with that amount by way of journal entry in the accounts of the fund. The spouse has no present liability to pay an amount to the SMSF.", "Reasons_for_Decision": "Summary: Part 6 of the SISR contains the 'payment standards' that apply to all regulated superannuation funds, and fund trustees, when paying a member's benefits in the fund. Division 6.2 of the SISR sets out the general rules governing the payment of such benefits. In broad terms, a member's benefits in a regulated superannuation fund can only be paid in one of the ways described in regulation 6.17 (in Division 6.2) of the SISR, that is, paid by being cashed, rolled over or transferred, or allotted as required by that regulation. Subparagraph 6.17(2)(a)(i) of the SISR specifically states that a member's benefits in a regulated superannuation fund may be 'paid' by being 'cashed' in accordance with Division 6.3 of the SISR. Division 6.3 of the SISR contains the rules for the cashing of a member's benefits in a regulated superannuation fund. Relevant in this context, regulation 6.21 of Division 6.3 of the SISR sets out the compulsory cashing requirements that apply on the death of a member. Subregulation 6.21(1) of the SISR provides that a member's benefits in a regulated superannuation fund must be 'cashed' as soon as practicable after the death of the member (unless, as is not the case here, the benefits are rolled over as soon as practicable for immediate 'cashing', in accordance with subregulation 6.21(3) of the SISR). Subregulation 6.21(2) of SISR goes on to prescribe the form in which the benefits may be cashed for the purposes of regulation 6.21 of SISR, subject to the additional restrictions in subregulations 6.21(2A) and (2B) of the SISR. In accordance with paragraph 6.21(2)(a) of the SISR, the benefits may be paid by being cashed as a single lump sum (or an interim and final lump sum). Relevantly in this case, subregulation 6.22(2) of the SISR permits such benefits to be paid in favour of a 'dependant' of the member (which, as defined in subsection 10(1) of the Superannuation Industry (Supervision) Act 1993 (SISA), includes a member's 'spouse'). The term 'cashed' is not defined in Part 6 of the SISR. However, by virtue of subregulation 6.01(1) of the SISR, it has the same meaning as the defined term in Part 5 of the SISR. Subregulation 5.01(1) in Part 5 of the SISR simply states that 'cashed' means cashed in accordance with Division 6.3 of the SISR. As 'cashed' is not otherwise defined for the purposes of the SISR and/or the SISA, the term is therefore given its ordinary meaning, having regard to the context and purpose of the provision in which it appears. The Macquarie Dictionary (6th Edition) relevantly defines the verb 'cash' as meaning 'to give or obtain cash for (a cheque, etc)'. Similarly, the Australian Oxford Dictionary (2nd Edition) describes it as meaning 'to give or obtain cash for (a note, cheque etc.)'. Having regard to the legislative scheme of Part 6 of the SISR, which contains the 'payment standards' that apply to the operation of all regulated superannuation funds and expressly provides that a member's benefits in a fund may be 'cashed by being paid', it is clear that the term 'cashed' as it is used in the SISR involves the 'payment' of a member's benefits. Furthermore, it is implied from the context in which the term 'cashed' appears in the SISR that in order for a member's benefits in a fund to be considered 'cashed' for the purposes of the SISR, including regulation 6.21 of the SISR, they need to be paid out of the superannuation system, not just moved within the system by being rolled over, transferred or allotted, as referred to in regulation 6.17 of the SISR. Self Managed Superannuation Funds Determination SMSFD 2011/1, which discusses 'cashing' in the context of benefits payable with a cheque or promissory note, confirms at paragraph 21 that: For the purposes of Division 6.3 of the SISR, 'cashing' involves a 'member's benefits in a fund' being 'paid'. This indicates that cashing involves an SMSF making a payment which reduces the member's benefits in the fund. The determination goes on to state at paragraph 22 that cashing involves an actual distribution of benefits from the fund. It follows that, in this case, for the deceased member's benefits in the fund to be considered 'cashed' as a lump sum to the spouse, there must be a 'payment' of the member's benefits in the fund to the spouse. It is well-established at common law that a 'payment' of money can be effected by way of agreed set-off between two parties, where those parties each have a presently existing liability or legal obligation to the other for a certain monetary amount immediately payable, and they agree to set off the liabilities against each other. In such circumstances, journal entries in the books of account of the parties to the transaction may record the payment of money from one party to the other by the agreed set-off. There does not have to be an actual exchange of monies between the parties in such circumstances. This general law principle of payment by 'set-off' has its foundation in the case of Re Harmony and Montague Tin & Copper Mining (1873) LR 8 Ch App 407 (Spargo's case). The principle in Spargo's case is not confined to the company law setting in which it was decided (East Finchley Pty Ltd v. Federal Commissioner of Taxation 89 ATC 5280; (1989) 20 ATR 1623). The case has been applied, and cited with approval, in a number of cases in the Australian taxation and superannuation context (for example, Federal Commissioner of Taxation v. Steeves Agnew & Co (Vict) Pty Ltd (1951) 82 CLR 408; [1951] HCA 26, Lend Lease Corporation Ltd v. Federal Commissioner of Taxation 90 ATC 4401; (1990) 21 ATR 402, Federal Commissioner of Taxation v. P Iori & Sons Pty Ltd (1987) 15 FCR 363; 87 ATC 4775; (1987) 19 ATR 201, Jarrett v. Perpetual Trustee Co Ltd (2007) 64 ACSR 552 and Case 18/97 97 ATC 227 (Case 18/97). These decisions make it clear that for the principle in Spargo's case to apply, there must be a mutuality of presently existing liabilities or obligations for a certain monetary amount immediately payable in existence between the relevant parties. For example, in Case 18/97, a member of a superannuation fund, who elected to apply their lump sum entitlement (being an amount equal to their 'accumulated credit' as defined in the fund's trust deed and comprised solely of deductible employer contributions) to the provision of a pension, argued before the Administrative Appeals Tribunal that there was an undeducted purchase price in relation to their pension. In deciding that there was no undeducted purchase price, the Tribunal held that the election to be paid a pension did not involve a 'set-off' of one obligation against another of the type referred to in Spargo's case. At the relevant point in time, there was only one obligation, being the trustee's obligation to provide the member with their 'accumulated credit'. The election caused the trustee to substitute one obligation (to pay a pension) for another pre-existing obligation (to pay a lump sum). The principle in Spargo's case had no application as there was never in existence two concurrent and present obligations that could be offset against each other. In this case, the spouse is, under the terms of the trustee's resolution, entitled to be paid the deceased member's benefits as a lump sum. The resolution therefore gives rise to a present liability to pay an amount owing to the spouse. However, the spouse has no present liability to pay an amount to the trustees. Accordingly, there is no mutuality of liabilities of the type in respect of which the principle in Spargo's case may apply that may be set-off against each other by agreement, so as to effect payment by that agreed set-off. Simply debiting the amount of the deceased member's benefits from the deceased member's account and crediting the account of the spouse with that amount by way of journal entry in the accounts of the SMSF does not constitute a 'payment', and therefore a 'cashing', of the deceased member's benefits as a lump sum to the spouse. For the deceased member's benefits in the SMSF to be considered 'cashed' as a lump sum to the spouse for the purposes of regulation 6.21 of the SISR, the benefits must actually be 'paid' by being 'cashed' to the spouse, as required by regulation 6.17 of the SISR.", "Date_of_Decision": "5 August 2015", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 subsection 10(1)", "Related_Public_Rulings_and_Determinations": "Self Managed Superannuation Funds Determination SMSFD 2011/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Death benefits - superannuation benefits Lump sum - superannuation benefits Lump sum superannuation payments Self-managed superannuation funds SIS payment standards Superannuation Superannuation benefits", "Case_References": "Re Harmony and Montague Tin & Copper Mining [1873] 8 Ch App LR 407", "Other_References": "Australian Oxford Dictionary 2nd Edition 2004 Macquarie Dictionary 6th Edition 2013", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201523", "Unmatched_Content": "Related Public Rulings (including Determinations) Self Managed Superannuation Funds Determination SMSFD 2011/1 | Keywords Death benefits - superannuation benefits Lump sum - superannuation benefits Lump sum superannuation payments Self-managed superannuation funds SIS payment standards Superannuation Superannuation benefits"}
{"ATO_ID_Number": "ATO ID 2010/139", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Self managed superannuation funds: Subparagraph 17A(3)(b)(i) of the Superannuation Industry (Supervision) Act 1993 - tribunal appointed administrator of the plenary estate of a person with a mental disability.", "Issue": "Where a member of a self managed superannuation fund (SMSF) is under a legal disability due to mental incapacity, can an administrator appointed by a State or Territory administration tribunal to manage the plenary estate of the member be a trustee of the SMSF in place of that member under subparagraph 17A(3)(b)(i) of the Superannuation Industry (Supervision) Act 1993 ( SISA) [1] ?", "Decision": "Yes, where a State or Territory administrative tribunal appoints an administrator to manage the estate of a person with a mental disability, that administrator will be a legal personal representative of that member who is under a legal disability. Consequently, under subparagraph 17A(3)(b)(i) the administrator can be appointed as a trustee of the superannuation fund in place of that member, enabling the fund to be an SMSF notwithstanding that one of the members is not a trustee of the superannuation fund.", "Facts": "The superannuation fund was established with 3 members, one of whom is an adult but under a legal disability due to mental incapacity. The relevant State Administration Tribunal has appointed the two other members of the superannuation fund as joint guardians and administrators of the plenary estate of the member with the mental incapacity in accordance with the relevant Act (Guardianship and Administration). The two members of the superannuation fund who are not under a legal disability are appointed as trustees and the fund satisfies all of the requirements of the definition of an SMSF in subsection 17A(1) other than the requirement that all members of the fund are trustees of the fund.", "Reasons_for_Decision": "Summary: Subsection 17A(1) sets out the meaning of 'self managed superannuation fund' for superannuation funds with more than one member. Relevantly, subparagraph 17A(1)(d)(i) requires that each member is a trustee of the superannuation fund. In this case, one member is unable to fulfil the role of trustee due to a mental incapacity. As a result, the superannuation fund does not satisfy the requirements of the definition of an SMSF under subsection 17A(1). Subsection 17A(3) provides some exceptions to the general trustee rules in subsection 17A(1). In particular, subparagraph 17A(3)(b)(i) provides for a legal personal representative to be a trustee in place of a member who is under a legal disability. The term 'legal personal representative' is relevantly defined in subsection 10(1) as: Legal personal representative means ... the trustee of the estate of a person under a legal disability .... The term 'trustee' is defined in Butterworths Australian Legal Dictionary as: A person to whom property is conveyed, devised, or bequeathed in a trust for another (the beneficiary)... The Guardianship and Administration Act only provides for orders appointing administrators to manage the estate of a person. They do not provide for the vesting of the assets into the hands of trustees to hold on trust. Clearly therefore, the appointed administrators would not normally be considered to be trustees of the estate of the protected person with the result that, on a strict interpretation of the provision, the person would not be considered to be a legal personal representative for the purposes of the SISA. However, subsection 10(1) commences with the words: In this Act, unless the contrary intention appears... Further, section 15AA of the Acts Interpretation Act 1901 provides statutory authority for favouring an interpretation of a provision that promotes the purpose or object of the legislation to one that would not. The policy underlying subparagraph 17A(3)(b)(i) is set out in the Explanatory Memorandum (EM) to the Superannuation Legislation Amendment Bill (No. 3) 1999 which states: A fund will also remain a self managed superannuation fund when a member of a fund is under a legal disability, or the legal personal representative has an enduring power of attorney in respect of a member, and the legal personal representative of the member is a trustee of the fund, or a director of a body corporate that is a trustee of the fund, in place of the member of the fund (new paragraph 17A(3)(b)). The relevant State or Territory Acts governing the granting of orders in respect to the management of the affairs of people who are deemed unable to handle their own affairs forms part of the context in which subparagraph 17A(3)(b)(i) operates. In the relevant state, the legislation enacted for this specific purpose does not vest the assets of a person with a disability in the hands of a trustee but rather empowers an administrator to deal with those assets on their behalf. Similar Acts operate in other States and Territories which also provide for the appointment of administrators or managers of the estates of people who are considered to be unable to manage their own affairs. In light of this, it appears that the normal approach in the situation where someone suffers from a mental incapacity which is sufficient for them to be deemed unable to manage their own affairs, is for the appointment of a manager or administrator rather than the vesting of the assets of the person into the hands of a trustee for their benefit. In this context, it appears unlikely that subparagraph 17A(3)(b)(i) was intended to only apply to situations where a trust over the estate of the person under a legal disability has been specifically created rather than the more common situation where an administrator or manager is appointed under State or Territory guardianship law. Such an interpretation would render the subparagraph ineffective for the majority of the people for whom the exception appears to have been specifically provided. As a result, it is apparent that the definition of a legal personal representative in subsection 10(1) is not intended to limit the application of subparagraph 17A(3)(b)(i). Consequently, it is the Commissioner's view that an administrator or manager of the estate of a person appointed under State or Territory guardianship legislation is able to be a trustee of an SMSF in place of that person under subparagraph 17A(1)(3)(b)(i).", "Date_of_Decision": "5 July 2010", "Year_of_Income": "", "Legislative_References": "Superannuation Industry (Supervision) Act 1993 Subsection 10(1) Subsection 17A(1) Subparagraph 17A(3)(b)(i)", "Related_Public_Rulings_and_Determinations": "SMSFR 2010/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Self Managed Superannuation Funds Legal Disabilities Administration", "Case_References": "", "Other_References": "Butterworths Australian Legal Dictionary", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010139", "Unmatched_Content": "Related Public Rulings (including Determinations) SMSFR 2010/2 | Keywords Self Managed Superannuation Funds Legal Disabilities Administration"}
{"ATO_ID_Number": "ATO ID 2002/418", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Contributions Tax: relief from assessed surcharge liability and interest imposed on a member's surcharge debt account", "Issue": "Does the Commissioner of Taxation (Commissioner) have any discretion under the provisions of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 (SCTA), to change or provide relief from the surcharge liability calculated in the member's assessment or any applicable interest on the member's surcharge debt account?", "Decision": "No. The Commissioner has no discretion under the provisions of the SCTA to change or grant relief from a tax liability that has been correctly calculated or waive any applicable interest on the member's surcharge debt account.", "Facts": "The member's provider is an unfunded defined benefits provider and reported surchargeable contributions for the member for the relevant financial year. The Commissioner calculated the member's adjusted taxable income (ATI) for the financial year to include the surchargeable contributions reported by the provider for the financial year. The Commissioner issued a superannuation contributions surcharge assessment in respect of the surchargeable contributions reported for the relevant financial year. The member sought relief from the surcharge liability raised and any accrued interest on their surcharge debt account on the basis that they believed the surcharge was levied retrospectively on their preserved benefit.", "Reasons_for_Decision": "Summary: The Commissioner is required to administer the superannuation contributions surcharge legislation in accordance with the provisions of the SCTA. The surcharge is payable on surchargeable contributions where a member's ATI exceeds the surcharge threshold for the financial year. ATI is generally defined as the member's taxable income plus the total amount of the member's surchargeable contributions for the financial year, less certain employer lump sum termination payments. The surcharge liability in respect of the member has been correctly calculated based on the information reported by the superannuation provider. The surcharge has not been levied retrospectively, as the member's employer did make superannuation contributions into their fund for the relevant financial year. Subsection 16(1) of the SCTA 'makes provision for the deferment of the liability of a superannuation (unfunded defined benefits) provider to pay surcharge on the surchargeable contributions of a member of the relevant unfunded defined benefits superannuation scheme, and for interest to accrue on the deferred amount.' Subsection 16(2) of the SCTA requires the provider to keep a surcharge debt account for each member to record any surcharge that is assessed for each financial year. The provider is also required to debit the account for interest on any debit balance in the account as at 30 June each year under subsection 16(4) of the SCTA. A member may voluntarily make payments, at any time, to reduce their surcharge debt account. It is the superannuation provider that administers the debt account and debits any interest accrued as required under the SCTA. The Commissioner has no discretion to waive any interest that may be debited by the provider on a surcharge debt account under the provisions of the surcharge legislation.", "Date_of_Decision": "09 August 2001", "Year_of_Income": "Year ended 30 June 1997", "Legislative_References": "Superannuation Contributions Tax (Assessment and Collection) Act 1997 section 15 subsection 16(1) subsection 16(2) subsection 16(4) section 43", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions tax Superannuation provider - defined benefits Surchargeable contributions Defined benefits superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002418", "Unmatched_Content": "Keywords Superannuation contributions tax Superannuation provider - defined benefits Surchargeable contributions Defined benefits superannuation funds"}
{"ATO_ID_Number": "ATO ID 2001/538", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation contributions surcharge - surchargeable contributions for the member of constitutionally protected superannuation fund", "Issue": "Was the superannuation contributions surcharge assessment for the member for the financial year correctly based on the surchargeable contributions reported by the superannuation provider, in accordance with the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (SCT (CP) Act).", "Decision": "Yes. The superannuation contributions tax assessment for the member for the financial year was correctly based on the surchargeable contributions reported by the superannuation provider, in accordance with the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (SCT(CP)A)?", "Facts": "The superannuation provider is a superannuation (unfunded defined benefits) provider and a constitutionally protected superannuation fund as defined by section 38 of the SCT(CP)A. The superannuation provider reported to the Commissioner an amount of surchargeable contributions for the member for the financial year. The Commissioner issued a superannuation contributions surcharge assessment to the member for the financial year. The Commissioner calculated the member's adjusted taxable income for the financial year to include the total surchargeable contributions reported by the superannuation provider for the year.", "Reasons_for_Decision": "Summary: Under the provisions of the SCT(CP)A, constitutionally protected superannuation funds are certain superannuation providers which are listed in regulation 177 and schedule 14 to the Income Tax Regulations. Section 12 of the SCT(CP)A and the Income Tax Assessment Act 1936 requires constitutionally protected funds which are superannuation providers to report to the Commissioner after the end of the financial year statements in respect of each person who was a member of the fund including the member's surchargeable contributions. Under subsection 9(4) of the SCT(CP)A the surchargeable contributions for a financial year for a member of defined benefits superannuation scheme are the amounts that constitute the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, the member of the financial year. These amounts are calculated by using the formula provided in subsection 9(6) of the SCT(CP)A. For each financial year in which a member has surchargeable contributions, section 14 of the SCT(CP)A requires the Commissioner to calculate the member's adjusted taxable income. Section 38 of the SCT(CP)A states that 'adjusted taxable income' has the same meaning as in the Superannuation Contributions Tax (Assessment And Collection) Act 1997 . The adjusted taxable income includes the member's taxable income plus their surchargeable contributions for the financial year. If the adjusted taxable income exceeds the surcharge threshold, the Commissioner must make an assessment of surcharge. In the case of a constitutionally protected fund, the surcharge liability rests with the member (section 11 of the SCT(CP)A). Under section 15 of the SCT(CP)A, the surcharge is payable at the time when the benefits become payable. Until such time, the Commissioner must keep a surcharge debt account to record any surcharge that is assessed for the member for each financial year. The Commissioner must also calculate interest on the balance of the member's surcharge debt account on 30 June each year. Interest is calculated at the 10 year Treasury bond rate. The member may arrange for early payments on a voluntary basis towards their surcharge debt account at any time. The Commissioner is then required to credit the payment to the member's surcharge debt account. The Commissioner received a statement from the provider in respect of the member for the financial year. The provider reported surchargeable contributions in respect of the member. The surcharge assessment issued to the member was based on the surchargeable contributions as reported to the Commissioner. If the provider reports a change to the surchargeable contributions previously reported, the Commissioner will re-calculate the member's adjusted taxable income. Under section 17 of the SCT(CP)A , the Commissioner may amend the assessments to take into account the change to the surchargeable contributions that were used to calculate the member's adjusted taxable income.", "Date_of_Decision": "1 August 2001", "Year_of_Income": "", "Legislative_References": "Superannuation Contributions Tax (Members Of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997 subsection 9(4) subsection 9(6) section 12 section 14 section 15 section 38", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Defined benefit superannuation funds Adjusted taxable income Superannuation contributions surcharge Constitutionally protected superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2001538", "Unmatched_Content": "Keywords Defined benefit superannuation funds Adjusted taxable income Superannuation contributions surcharge Constitutionally protected superannuation funds"}
{"ATO_ID_Number": "ATO ID 2003/731", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed Dividend: debtors included in distributable surplus where private company accounts on a cash basis", "Issue": "Are the debtors of a private company, as recorded in invoices, cashbooks and accounting software, included in the company's assets (according to the company's accounting records) under subsection 109Y(2) of the Income Tax Assessment Act 1936 (ITAA 1936), where the company accounts on a cash basis?", "Decision": "Yes. The debtors of a private company, as recorded in invoices, cashbooks and accounting software, are included in the company's assets (according to the company's accounting records) under subsection 109Y(2) of the ITAA 1936, where the company accounts on a cash basis.", "Facts": "The taxpayer is a private company which carries on a business. Whenever a sale is made, the taxpayer issues an invoice. When an invoice is paid, the taxpayer records the payment in its cashbook. The taxpayer uses the cash basis of accounting which means that it does not record debtors in its journal until cash is received. The taxpayer can manually work out its debtors by comparing its invoices to its cashbook. The taxpayer can also use accounting software to work out its debtors.", "Reasons_for_Decision": "Summary: A private company's distributable surplus for a year of income is worked out using the formula in subsection 109Y(2) of the ITAA 1936: Net assets - Non-commercial loans - Paid-up share value - Repayments of non-commercial loans 'Net assets' means the amount by which the private company's assets (according to the company's accounting records) exceed the sum of its present legal obligations to persons other than the company and various provisions (according to the company's accounting records - subsection 109Y(2) of the ITAA 1936). 'Accounting records' are not defined for the purposes of Division 7A of the ITAA 1936 (section 109ZD of the ITAA 1936) or generally for the purposes of the ITAA 1936 (subsection 6(1)) or the Income Tax Assessment Act 1997 (ITAA 1997) (section 995-1 of the ITAA 1997). However section 160ZZV of the ITAA 1936 defines accounting records for the purposes of Part IIIB of the ITAA 1936 as including 'invoices, receipts, vouchers and other documents of prime entry'. In Van Reesema v. Flavel (1992) 57 SASR 590 the Court found that the ordinary meaning of accounting records includes various books of prime entry such as the cashbook, journal and ledgers. In Caratti v. The Queen (2000) 22 WAR 527; (2000) 45 ATR 305 'farm books', which contained monthly wages and fuel analyses of a company, were found to be accounting records within any ordinary meaning of the term. A cash receipts journal and debtors' ledger are accounting records ( McKay and Tax Agents Board (Tas), Re (1994) 28 ATR 1186; 94 ATC 2057. Records of debtors and creditors are included in books of account (In Re Crimmins (1956) 18 ABC 53). Accordingly, the debtors of the taxpayer, which are recorded in invoices, cashbooks and accounting software, would be included in the taxpayer's assets (according to the taxpayer's accounting records) for the purposes of working out the taxpayer's distributable surplus under section 109Y of the ITAA 1936.", "Date_of_Decision": "17 July 2003", "Year_of_Income": "30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 109Y section 109ZD section 160ZZV", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Accounting records Cash basis accounting Companies Deemed dividends Dividend income Invoices Private companies Private company distributions", "Case_References": "Van Reesema v. Flavel (1992) 57 SASR 590", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003731", "Unmatched_Content": "Keywords Accounting records Cash basis accounting Companies Deemed dividends Dividend income Invoices Private companies Private company distributions"}
{"ATO_ID_Number": "ATO ID 2013/36", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: capital component of shortfall in minimum yearly repayment and the 'Amount of the loan not repaid by the end of the previous year of income' in the formula for the minimum yearly repayment in section 109E of the Income Tax Assessment Act 1936", "Issue": "Where a shortfall in a minimum yearly repayment gives rise to a deemed dividend under section 109E of the Income Tax Assessment Act 1936 (ITAA 1936), does the capital component of the shortfall reduce the 'Amount of the loan not repaid by the end of the previous year of income' in the formula in subsection 109E(6) of the ITAA 1936 when calculating the minimum yearly loan repayment for the subsequent income year?", "Decision": "No. Where a shortfall in a minimum yearly repayment gives rise to a deemed dividend under section 109E of the ITAA 1936, the capital component of the shortfall does not reduce the 'Amount of the loan not repaid by the end of the previous year of income' in the formula in subsection 109E(6) of the ITAA 1936 when calculating the minimum yearly loan repayment for the subsequent income year", "Facts": "During the 2008-09 income year a private company made an unsecured loan to the taxpayer, an individual and the company's sole shareholder. The loan was made under a complying section 109N of the ITAA 1936 agreement, with a maximum term of 7 years and with interest payable equal to the benchmark interest rate for each income year. No repayment was made on the loan for the income year ended 30 June 2010 and a deemed dividend arose under section 109E of the ITAA 1936.", "Reasons_for_Decision": "Summary: A private company is taken to pay a dividend under subsection 109E(1) of the ITAA 1936 to an entity at the end of one of the private company's years of income (the current year) if: The amount of the dividend is taken to be the amount of the shortfall as mentioned in paragraph 109E(1)(c), subject to section 109Y of the ITAA 1936 (subsection 109E(2) of the ITAA 1936). Section 109Y of the ITAA 1936 caps the amount of the dividend to the private company's distributable surplus. The minimum yearly repayment is worked out using the formula in subsection 109E(6) of the ITAA 1936 or the amount worked out under the regulations, if they provide for working it out. As the regulations do not provide for working out the minimum yearly repayment the amount is worked out using the formula which is: If the private company is taken to have paid a dividend at 30 June 2010 then it could be argued that the part of the amalgamated loan that has been deemed to be a dividend should be excluded from the 'Amount of the loan not repaid by the end of the previous year of income' in the formula when working out the minimum yearly repayment for the 2010-11 income year. However, the law does not provide for that reduction or exclusion. The minimum yearly repayment formula is affected only by the amount of the loan not repaid, the interest rate and the remaining term of the loan. In this case there have been no repayments of any of the constituent loans that make up the amalgamated loan and therefore no repayment of the amalgamated loan (subsection 109E(4) of the ITAA 1936). There are therefore no payments in the 2009-10 income year which reduce the amount of the loan not repaid by the end of the previous year of income. The Explanatory Memorandum to Tax Laws Amendment (2007 Measures No. 3) Bill 2007 sets out in paragraphs 1.20 and 1.21 the options available to the private company and shareholder (or their associates). The available options are that the amount of the shortfall should either be repaid or forgiven or the company could use section 109ZC of the ITAA 1936. Paragraphs 1.20 and 1.21 state: 1.20 Where minimum yearly repayments have not been made and a deemed dividend arises, the shareholder or the associate will still have the shortfall amount as an outstanding debt with the private company. The shareholder can either make the shortfall payment or ask the company to forgive that amount of the debt. The debt forgiveness of this amount would not trigger a deemed dividend as a result of the new subsections 109G(3A) and (3B). [Schedule 1, items 4, 5 and 9, paragraph 109E(1)(c) and subsection 109E(2) of the ITAA 1936] 1.21 Alternatively, the company could use section 109ZC. A later dividend could be declared and used to offset the deemed dividend (with the agreement of the shareholder). The later dividend will not be included in the shareholder's assessable income to the extent it is unfranked. Note (1): unpaid interest which forms part of a minimum yearly repayment shortfall in terms of subsection 109E(2) of the ITAA 1936 should not be added to the closing balance of the constituent loan for the applicable income year . Note (2): In cases where a deemed dividend is the result of an honest mistake or inadvertent omission, taxpayers can apply to the Commissioner to exercise his discretion under section 109RB to either disregard the Division 7A result or allow the deemed dividend to be franked. In making a decision the Commissioner must have regard to the factors listed in subsection 109RB(3) of the ITAA 1936 and may make a decision subject to conditions .", "Date_of_Decision": "21 June 2013", "Year_of_Income": "Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 109E subsection 109E(1) subsection 109E(2) subsection 109E(4) subsection 109E(5) subsection 109E(6) subsection 109G(3A) subsection 109G(3B) section 109N section 109Q section 109RB subsection 109RB(3) section 109ZC", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2011/8", "Subject_References": "Companies Deemed dividends Shortfalls Shareholder loans", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2007 Measures No. 3) Bill 2007", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201336", "Unmatched_Content": "current year's benchmark interest rate is the benchmark interest rate for the year of income for which the minimum yearly repayment is being worked out. | remaining term is the difference between: | rounded up to the next higher whole number if the difference is not already a whole number. | Align wording with sections 109E(1) and 109E(2) of the ITAA 1936. | Remove double reference to subsection 109E(6) of the ITAA 1936 and replace with reference to subsection 109E(5) of the ITAA 1936 . Include reference to subsection 109RB(3) of the ITAA 1936. | Keywords Companies Deemed dividends Shortfalls Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2012/60", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax Division 7A: application of section 109D of the Income Tax Assessment Act 1936 to a loan made in an income year where the loan agreement put in place in the following income year amounts to an agreement for a new loan", "Issue": "If a private company makes a loan in an income year (the original loan) and, in the following income year (and before the relevant lodgment day) puts in place a written loan agreement which amounts to a new loan, does section 109D of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the original loan in the income year in which the original loan is made?", "Decision": "Yes. If a private company makes a loan in an income year (the original loan) and, in the following income year (and before the relevant lodgment day) puts in place a written loan agreement which amounts to a new loan, section 109D of the ITAA 1936 applies to the original loan in the income year in which the original loan is made.", "Facts": "During the 2011-12 income year, a private company (ABC Pty Ltd) made an unsecured loan to an individual taxpayer who was the company's sole shareholder (the \"original loan\"). In the 2012-13 income year, but before the private company's lodgment day for the 2011-12 income year, the private company puts in place a written loan agreement the elements of which satisfy the criteria in paragraphs 109N(1)(b) of the ITAA 1936 and 109N(1)(c) of the ITAA 1936 (relating to the rate of interest payable on the loan and the term of the loan). The written agreement evidences a clear intention that ABC Pty Ltd and the individual intend the written agreement to be the making of a new replacement loan. It is agreed that the liability of ABC Pty Ltd, to advance further monies under the new loan agreement, is set-off by the liability of the individual, to repay monies under the original agreement.", "Reasons_for_Decision": "Summary: All references are to the ITAA 1936 unless otherwise indicated. The making of a loan by a private company to a shareholder or an associate of the shareholder is treated as the payment of a dividend in the circumstances outlined in section 109D. However, section 109N prevents a private company from being taken to pay a dividend under section 109D if, before the private company's lodgment day for the year of income (subsection 109N(1)): Such written agreement is commonly referred to as a 'complying loan agreement' or a 'section 109N loan agreement'. The making of a complying loan agreement may, as a matter of contract law, either: (a) merely elucidate the terms of an existing loan agreement, (b) vary the terms of an existing loan agreement, or (c) amount to the making of a new loan. Whether or not, in a particular case, the making of a complying loan agreement amounts to a new loan, or is a variation or mere elucidation of the terms of an existing loan, is a question of fact to be determined by reference to all of the circumstances (ATO ID 2012/61 discusses the consequences of a mere elucidation or variation). As a matter of ordinary contract law, in order to bring a loan agreement to an end, the borrower's obligation to repay must be discharged. Commonly, this might be achieved by: in accordance with the rule in Re Harmony and Montague Tin and Copper Mining Company (1873) LR 8 Ch App 407 (Spargo's Case ). Commonly, the necessary mutual agreement might be found as an express term in the replacement agreement; If the original loan agreement is not brought to an end, any further agreement intended to be a replacement loan may result in no further loan being made in the sense contemplated by subsection 109D(4). In such cases the further agreement may only amount to a mere variation of the original agreement or alternatively stand as an executory contract. In cases where a mutual set off is effected, the discharge amounts to a repayment for Division 7A purposes ( FCT v. Rozman 2010 ATC 20-171). In such circumstances, section 109R may apply. Section 109R is intended to prevent shareholders or their associates from avoiding the operation of Division 7A by temporarily repaying a loan. Broadly, a payment must be disregarded if it is reasonable to conclude, having regard to all of the circumstances, that the borrower intended to obtain a loan or loans from the private company of a total amount similar to or more than the payment (paragraph 109R(2)(a)). Further, a payment must also be disregarded if the new loan or loans are made to the borrower before the borrower makes the payment to the company and it is reasonable to conclude the loan or loans were obtained in order to make the payment (paragraph 109R(2)(b)). As the written agreement put in place between ABC Pty Ltd and the individual in the 2012-13 income year amounts to a new loan, the original loan is taken to have been repaid at the time the new loan was put in place. However, section 109R operates to disregard the repayment for the purposes of section 109D. Therefore, as the terms of the original loan were not put in writing before the private company's lodgment day for the 2011-12 income year, and that loan is not taken to be repaid because of section 109R, ABC Pty Ltd is taken to pay a dividend to the individual at the end of the 2011-12 income year (subsection 109D(1)). The amount of the deemed dividend is, subject to section 109Y (relating to the company's distributable surplus). As the putting in place of the complying loan agreement amounts to a new loan between ABC Pty Ltd and the individual, an amalgamated loan is, for the purposes of Division 7A of Part III, taken to be made in the 2012-13 income year (subsection 109E(3)). Section 109E may apply to the amalgamated loan in the 2013-14 and later income years.", "Date_of_Decision": "10 July 2012", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A section 109D subsection 109D(1) subsection 109D(1AA) subsection 109D(4) section 109E subsection 109E(3) section 109N subsection 109N(1) paragraph 109N(1)(b) paragraph 109N(1)(c) subsection 109N(3) section 109R paragraph 109R(2)(a) paragraph 109R(2)(b) section 109RB subsection 109RB(3) section 109Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/61", "Subject_References": "Companies Deemed dividends Private companies Shareholder loans", "Case_References": "Re Harmony and Montague Tin and Copper Mining Company (1873) LR 8 Ch App 407 [1861-73] All ER Rep 261", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201260", "Unmatched_Content": "Keywords Companies Deemed dividends Private companies Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2012/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income Tax Division 7A: income year in which an amalgamated loan is taken to be made when written loan agreement put in place after the end of the year of income in which loan(s) made but before lodgment day", "Issue": "If a private company makes a loan in an income year and, in respect of the loan, in the following income year (and before the relevant lodgment day) puts in place an agreement that satisfies the criteria in section 109N of the Income Tax Assessment Act 1936 (ITAA 1936), is the income year in which an amalgamated loan is taken to be made (for the purposes of section 109E of the ITAA 1936) the income year in which the complying loan agreement is put in place?", "Decision": "No. If a private company makes a loan in an income year and, in respect of the loan, in the following income year (and before the relevant lodgment day) puts in place an agreement that satisfies the criteria in section 109N of the ITAA 1936, the income year in which an amalgamated loan is taken to be made (for the purposes of section 109E of the ITAA 1936) is the income year in which the loan is made. The putting in place of a complying loan agreement, in respect of a loan, does not alter the date on which the loan was made.", "Facts": "During the 2011-12 income year, a private company (ABC Pty Ltd) made an unsecured loan to an individual taxpayer who was the company's sole shareholder. In the 2012-13 income year, but before the private company's lodgment day for the 2011-12 income year, the private company puts in place, in respect of the loan, an agreement that satisfies the criteria in subsection 109N(1) of the ITAA 1936 (a \"complying loan agreement\"). The putting in place of the complying loan agreement merely elucidates the terms of the agreement made in the 2011-12 income year, it does not amount to a new loan between the private company and the individual.", "Reasons_for_Decision": "Summary: All references are to the ITAA 1936 unless otherwise indicated. A private company is taken to pay a dividend to an entity at the end of an income year (the current year), if an amalgamated loan made in an earlier income year is not repaid by the end of the current year, and the amount paid to the private company in relation to the amalgamated loan during the current year is less than the minimum yearly repayment worked out under subsection 109E(5) (section 109E). For the purposes of Division 7A of Part III, an amalgamated loan is taken to have been made during an income year if a private company makes a constituent loan or loans to an entity during the income year each of which (subsection 109E(3)): Section 109N prevents a private company from being taken to pay a dividend under section 109D where, before the private company's lodgment day for the year of income (subsection 109N(1)): Such written agreement is commonly referred to as a 'complying loan agreement' or a 'section 109N loan agreement'. It has been suggested that an amalgamated loan is taken to have been made during the income year in which a private company reduces the terms of the loan to writing to satisfy the criteria in subsection 109N(1). For the purposes of Division 7A of Part III a loan is made at the time the amount of the loan is paid to the entity by way of loan or anything described in subsection 109D(3) (subsection 109D(4)). Therefore, the income year in which an amalgamated loan is made is the income year in which \"the loan\", to which paragraph 109N(1)(a) refers, is made. The making of a complying loan agreement may, as a matter of contract law, either: (a) merely elucidate the terms of an existing loan agreement, (b) vary the terms of an existing loan agreement, or (c) amount to the making of a new loan. Whether or not, in a particular case, the making of a complying loan agreement is a mere elucidation or variation of the terms of an existing loan, or amounts to a new loan, is a question of fact to be determined by reference to all of the circumstances. An elucidation of the terms of a contract merely expresses more accurately the original intention of the parties. By way of contrast, a variation alters the terms of the contract. Variation involves changes that do not go to the root of the contract or alter the substance of the original agreement ( British & Beningtons Ltd v. North West Cachar Tea Co Ltd [1923] AC 48). The principles relating to variation of contract are well established. In FCT v. Sara Lee Household & Body Care (Aust) Pty Ltd (2000) 201 CLR 520, the majority stated (533 [22]): When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. Their Honours went on to refer to the judgment of Taylor J in Tallerman & Co Pty Ltd v. Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 who stated (144): It is firmly established by a long line of cases ... that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement. The result of variation is that the original contract remains in force, with only some of its terms being altered. By contrast, in circumstances where the terms of a subsequent contract are entirely inconsistent with a first contact, or go to the very root of the first contract, the first contract may be impliedly discharged by abandonment (British & Beningtons Ltd v. North West Cachar Tea Co Ltd [1923] AC 48) (see ATO ID 2012/60 which discusses the consequences where a complying loan agreement amounts to a new loan). In circumstances where the making of a complying loan agreement merely elucidates the terms of an existing loan, the amalgamated loan is taken to be made, for the purposes of Division 7A of Part III, in the income year in which the amount is paid to the entity by way of loan or anything described in subsection 109D(3). That is, in such circumstances, the putting in place of a complying loan agreement does not change the date of the loan in respect of which the agreement was made. Accordingly, as the putting in place of the complying loan agreement between ABC Pty Ltd and the individual merely elucidates the terms of an existing loan, the loan is, for the purposes of Division 7A of Part III, taken to be made in the 2011-12 income year.", "Date_of_Decision": "10 July 2012", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A section 109D subsection 109D(3) subsection 109D(4) section 109E subsection 109E(5) section 109N subsection 109N(1) paragraph 109N(1)(a) subsection 109N(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2012/60", "Subject_References": "Deemed dividends Private companies Shareholder loans", "Case_References": "British & Beningtons Ltd v North West Cachar Tea Co Ltd [1923] AC 48", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201261", "Unmatched_Content": "Minor grammatical error corrected | Minor citation error corrected | Keywords Deemed dividends Private companies Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2012/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Income tax Division 7A: operation of section 109F of the Income Tax Assessment Act 1936 to forgiveness of amalgamated loan debt by a private company to a shareholders estate while it is in administration", "Issue": "Does section 109F of the Income Tax Assessment Act 1936 (ITAA 1936) operate to deem a private company to have paid a dividend to a deceased's legal personal representative in circumstances where a private company is taken to have made an amalgamated loan to a shareholder who dies before the amalgamated loan is repaid, and the private company forgives the loan while the shareholder's estate is in administration?", "Decision": "Yes, section 109F of the ITAA 1936 operates to deem a private company to have paid a dividend to a deceased's legal personal representative in circumstances where a private company is taken to have made an amalgamated loan to a shareholder who dies before the amalgamated loan is repaid, and the private company forgives that loan while the shareholder's estate is in administration.", "Facts": "The individual was a resident of New South Wales. The individual was a shareholder and director of a private company. During the 2008-09 income year the private company made a loan to the shareholder. The loan was subject to a written loan agreement that satisfied the requirements of section 109N of the ITAA 1936. The shareholder made the required minimum yearly payments since the loan was made. The shareholder died solvent during the 2011-12 income year. The shareholder's will nominate an executor (legal personal representative) to administer the shareholder's estate. Before 30 June 2012, the Supreme Court of New South Wales gives the nominated legal personal representative a Grant of Probate to administer to deceased's estate. During the 2012-13 income year, during administration of the deceased's estate, the private company forgives the loan owed to it by the shareholder.", "Reasons_for_Decision": "Summary: All references are to the ITAA 1936 unless otherwise indicated . For the purposes of Division 7A of Part III, an amalgamated loan is taken to have been made during an income year if a private company makes a constituent loan, or loans, to an entity during the income year which: Because the loan made by the private company to the shareholder satisfied the conditions in subsection 109E(3), it is taken to be an amalgamated loan for the purposes of Division 7A of Part III. Repayments made in respect of the loan are taken to be repayments made in relation to the amalgamated loan (subsection 109E(4)). Under subsection 109F(1) a private company is taken to pay a dividend to an entity at the end of the private company's year of income if all or part of a debt the entity owed the private company is forgiven in that year and either: If a private company forgives an amount of debt resulting from a constituent loan taken into account in working out the amount of an amalgamated loan under subsection 109E(3), the private company is taken to forgive the same amount of debt resulting from the amalgamated loan (subsection 109F(7)). Under subsection 109F(2) the amount of the dividend is equal to the amount of debt forgiven, subject to the private company's distributable surplus as calculated under section 109Y. Following the Grant of Probate of the individual's will, section 44 of the Probate and Administration Act 1898 (NSW ) deems all real and personal property of the deceased (including title to the shares) to have passed to and become vested in the executor as from the death of the individual. The deceased's property (including title to the shares) is held absolutely by the legal personal representative for the duration of the administration of the shareholder's estate ( Official Receiver In Bankruptcy v. Schultz [ 1990 ] HCA 45 ; ( 1990) 170 CLR 306 ). Following the Grant of Probate, the legal personal representative immediately assumes liability to pay the deceased's debts (including the debt owed by the deceased to the private company (the amalgamated loan)) (Certoma, GL 2010, The Law of Succession in New South Wales , 4th edn Thomson Reuters, Sydney, p. 304). As the title to the shares in the private company passed to the deceased's legal personal representative upon the death, the legal personal representative is the relevant shareholder for the purposes of paragraph 109F(1)(a). By forgiving the debt owed by the legal personal representative shareholder, the private company is taken to have paid a dividend to the legal personal representative shareholder in the 2012-13 income year.", "Date_of_Decision": "11 September 2012", "Year_of_Income": "Year ending 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A section 109D section 109E subsection 109E(3) subsection 109E(4) subsection 109E(7) section 109F subsection 109F(1) Paragraph 109F(1)(a) subsection 109F(2) subsection 109F(7) subsection 109G(3A) subsection 109G(3B) section 109N section 109Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Debt forgiveness Deceased estates Deemed dividends Private companies Shareholder loans", "Case_References": "Official Receiver In Bankruptcy v Schultz [1990] HCA 45 (1990) 170 CLR 306", "Other_References": "Certoma, GL 2010, The Law of Succession in New South Wales, 4th edn Thomson Reuters, Sydney, p. 304", "Business_Line": "", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201277", "Unmatched_Content": "Keywords Companies Debt forgiveness Deceased estates Deemed dividends Private companies Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2010/82", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: the first minimum yearly repayment - loan repayments made before the company's lodgment day for the previous year of income", "Issue": "Where a private company is taken to have made an amalgamated loan to an entity in a year of income, are loan repayments made to the company after the end of the year of income but before its lodgment day for that year of income included in 'the amount (if any) paid to the private company during the current year in relation to the amalgamated loan' for the purposes of paragraph 109E(1)(c) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The payments made after the end of the year of income but before the lodgment day for the private company's year of income are included in 'the amount (if any) paid to the private company during the current year in relation to the amalgamated loan' for the purposes of paragraph 109E(1)(c) of the ITAA 1936.", "Facts": "During the 2008-09 income year a private company made loans of $50,000 and $25,000 to a shareholder. The loans were made under written loan agreements that complied with the criteria set out in section 109N of the ITAA 1936. Both loans are unsecured loans and have a term of 7 years with interest rates set at the benchmark interest rate prescribed by subsection 109N(2) of the ITAA 1936. On the 31 August 2009 the shareholder made a repayment of $20,000 on the $50,000 loan. On 30 May 2010 the shareholder paid the private company a further $8,000, being a $4,000 payment in respect of each loan. No other repayments were made during the 2009-10 income year. The private company's lodgment day for its 2008-09 income tax return was 15 May 2010 and the return was lodged on that date.", "Reasons_for_Decision": "Summary: An amalgamated loan is defined in subsection 109E(3) of the ITAA 1936. That subsection also sets out how the amount of the amalgamated loan is determined and provides: For the purposes of this Division, a private company is taken to make a loan (the amalgamated loan ) to a single entity during a year of income if the private company makes one or more loans ( constituent loans ) to the entity during the year, each of which: (a) is not fully repaid before the lodgment day for the year; and (b) would cause the company to be taken under section 109D to pay a dividend to the entity at the end of the year, apart from section 109N; and (c) has the same maximum term for the purposes of that section. 'Lodgment day' for a private company's year of income is defined in subsection 109D(6) of the ITAA 1936 to be the earlier of the due date for lodgment and the date of lodgment of the return of income. In the present case there are two constituent loans which form the amalgamated loan. As only so much of these loans as have not been repaid before the lodgment day forms part of the amalgamated loan (that is, repayments made before lodgment day are taken into account in determining the amount of the amalgamated loan), the amount of the amalgamated loan is $55,000 ($50,000 + $25,000 - $20,000). Subsection 109E(5) of the ITAA 1936 provides that the minimum yearly repayment for an amalgamated loan for a year of income is the amount worked out using the formula in subsection 109E(6) of the ITAA 1936 unless it is worked out under the regulations (if they provide for working it out). The formula in subsection 109E(6) of the ITAA 1936 is: In the context of section 109E of the ITAA 1936, the reference to 'loan' in the subsection 109E(6) of the ITAA 1936 formula must be a reference to the 'amalgamated loan'. As already noted, the quantum is determined at the private company's lodgment day for the year in which the constituent loans were made. In the present case, the quantum is determined at 15 May 2010. The apparent tension in terms of whether an amalgamated loan can have an 'amount of loan not repaid by the end of the previous year of income' when calculating the initial minimum yearly repayment, is resolved by subsection 109E(3) of the ITAA 1936. That subsection amongst other things treats the amalgamated loan as having been made during the income year in which the constituent loans were made. It must follow that the quantum at the end of that income year is the amount subsection 109E(3) tells us it is, which is determined at the private company's lodgment day. In the present case, this means the amount of the amalgamated loan not repaid by the end of the 2008-09 income year is $55,000. The benchmark interest rate for the 2009-10 income year is 5.75%. This means the minimum yearly repayment for the 2009-10 income year calculated in accordance with the subsection 109E(6) of the ITAA 1936 formula is $9,765.05. Before a private company can be taken to pay a dividend under section 109E of the ITAA 1936 in respect of an amalgamated loan, the four conditions in subsection 109E(1) of the ITAA 1936 must be satisfied. The third condition in paragraph 109E(1)(c) of the ITAA 1936 is as follows: The phrase 'in relation to' has been considered by the High Court on a number of occasions, Kiefel J recently observing in Kennon v. Spry [2008] HCA 56 at 315: The expression \"in relation to\" is of wide and general import and should not be read down in the absence of some compelling reason for doing so. ... [T]he words are prima facie broad and designed to catch things which have a sufficient nexus to the subject. The question of nexus is dependent upon statutory context. In First Provincial Building Society Ltd v. Federal Commissioner of Taxation (1995) 56 FCR 320; 95 ATC 4145; (1995) 30 ATR 207, Hill J considered the phrase 'in relation to' within the context of former paragraph 26(g) of the ITAA 1936, which concerned bounties or subsidies received in or 'in relation to' the carrying on of a business. Hill J considered the words 'in relation to' in that context included a relationship that may either be direct or indirect, provided that the relationship consisted of a real connection, but that a merely remote relationship was insufficient (at ATC 4155; ATR 218). In the context of paragraph 109E(1)(c) of the ITAA 1936, the phrase 'in relation to' is not expressly constrained and in terms of the amalgamated loan taken to have been made during the 2008-09 income year, includes all repayments made during the 2009-10 income year including those made prior to the private company's lodgment day for the 2008-09 year. This construction is supported by a plain reading of subsection 109E(4) of the ITAA 1936 which provides: For the purposes of this Division, a payment made to the private company in relation to a constituent loan in a year of income after the one in which the constituent loan was made is taken to be a payment in relation to the amalgamated loan that takes account of the constituent loan. In the present case the minimum yearly repayment of the amalgamated loan worked out under subsection 109E(5) of the ITAA 1936 is $9,765.05, and the repayments contemplated by paragraph 109E(1)(c) of the ITAA 1936 for the 2009-10 income year total $28,000. Subsection 109E(2) of the ITAA 1936 then provides as follows: The amount of the dividend is taken to be the amount of the shortfall mentioned in paragraph (1)(c), subject to section 109Y. Note: Section 109Y limits the total amount of dividends taken to have been paid by a private company under this Division to the company's distributable surplus. Therefore in the circumstances here, given $28,000 exceeds $9,765.05, there is no relevant shortfall and therefore no deemed dividend arises for the 2009-10 income year under subsection 109E(1) of the ITAA 1936.", "Date_of_Decision": "8 April 2010", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 26(g) section 109D subsection 109D(6) section 109E subsection 109E(1) paragraph 109E(1)(c) subsection 109E(2) subsection 109E(3) subsection 109E(4) subsection 109E(5) subsection 109E(6) section 109N subsection 109N(2) section 109Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Shareholder loans", "Case_References": "First Provincial Building Society Ltd v Federal Commissioner of Taxation (1995) 56 FCR 320 (1995) 30 ATR 207 95 ATC 4145", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201082", "Unmatched_Content": "The amount of the amalgamated loan is the sum of the amounts of the constituent loans that have not been repaid before the lodgment day for the year of income in which the amalgamated loan is made. | Keywords Deemed dividends Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2010/206", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed dividends: written loan agreement - no repayments before the private company's lodgment day for the income year in which the loan is made", "Issue": "Is a private company taken under section 109D or section 109E of Division 7A of Part III (Division 7A) of the Income Tax Assessment Act 1936 (ITAA 1936) to pay a dividend in the income year in which a loan to a shareholder was made where:", "Decision": "No. Where the criteria in section 109N of the ITAA 1936 are met, neither section 109D nor section 109E of the ITAA 1936 operate to treat an amount as a dividend for the income year in which the loan was made, even if the taxpayer makes no repayments in respect of the loan before the private company's lodgment day for that income year.", "Facts": "During the 2009-10 income year, a private company made an unsecured loan to the taxpayer, an individual, and the company's sole shareholder. As at the private company's lodgment day for the 2009-10 income year, no repayments had been made. The private company did not make any other loans to the taxpayer during the 2009-10 income year. The loan was made under a written agreement, with a maximum term of 7 years and with a minimum rate of interest payable equal to the benchmark interest rate for the year. The loan from the private company to the taxpayer satisfies the requirements of section 109N of the ITAA 1936.", "Reasons_for_Decision": "Summary: A private company is taken to pay a dividend under subsection 109D(1) of the ITAA 1936 at the end of its income year if: Subdivision D of Division 7A of the ITAA 1936 contains a number of exclusions to the application of subsection 109D(1) of the ITAA 1936. Section 109N of Subdivision D prevents a private company from being taken to pay a dividend where: Neither section 109N nor section 109E of the ITAA 1936 requires any repayment to be made before the private company's lodgment day for the year in which the loan is made. Where the required minimum yearly repayment is not made for a subsequent year and the loan meets the definition of an 'amalgamated loan', section 109E of the ITAA 1936 may operate to treat the shortfall in the minimum yearly repayment as a dividend. However, where the criteria in section 109N of the ITAA 1936 are met, neither section 109D nor section 109E of the ITAA 1936 causes any amount to be treated as a deemed dividend for the income year in which the loan is made. This is regardless of whether or not the taxpayer makes any repayments to the private company in respect of the loan before the private company's lodgment day for that income year.", "Date_of_Decision": "2 November 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A section 109D subsection 109D(1) section 109N subsection 109N(1) subsection 109N(3) section 109E", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/97 | ATO ID 2010/82", "Subject_References": "Companies Shareholder loans Private company distributions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010206", "Unmatched_Content": "Related ATO Interpretative Decisions | Keywords Companies Shareholder loans Private company distributions"}
{"ATO_ID_Number": "ATO ID 2007/215", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: mortgage over a Crown lease and no registration in accordance with State law", "Issue": "Can a mortgage over a Crown lease in the State of Victoria which is ineligible for registration with Lands Victoria, and not otherwise registered in accordance with a Victorian statute, satisfy the requirements of subparagraph 109N(3)(a)(i) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A mortgage over a Crown lease in the State of Victoria which is ineligible for registration with Lands Victoria, and not otherwise registered in accordance with a Victorian statute, does not satisfy the requirements of subparagraph 109N(3)(a)(i) of the ITAA 1936.", "Facts": "In the income year, a private company loaned the taxpayer a sum of $1,000,000 which was secured by a mortgage over a Crown lease held by the taxpayer over land in the State of Victoria. The taxpayer is a shareholder of the private company. The mortgage is ineligible for registration with Lands Victoria, as administrator of the Transfer of Land Act 1958 (Vic) , because a proper survey of the Crown land has never been undertaken. The Victorian statute which governs the Crown lease over this portion of land does not require any register of mortgages be maintained by the responsible regulatory body.", "Reasons_for_Decision": "Summary: A private company is taken to pay a dividend to a shareholder under subsection 109D(1) of the ITAA 1936 if the private company makes a loan to a shareholder during the income year, the loan is not fully repaid by the private company's lodgment day for that income year, and subdivision D of Division 7A of Part III of the ITAA 1936 does not prevent the private company from being taken to pay a dividend. Subsection 109N(1) of the ITAA 1936 prevents a private company from being taken to pay a dividend under section 109D of the ITAA 1936 if the loan is put under a written agreement before the private company's lodgment day for the income year in which the loan is made, the rate of interest payable on the loan equals or exceeds the benchmark interest rate, and the term of the loan does not exceed the 'maximum term' for that kind of loan. Subsection 109N(3) of the ITAA 1936 defines the 'maximum term' as: The words 'registered' and 'accordance' in subparagraph 109N(3)(a)(i) of the ITAA 1936 are not defined and therefore adopt their ordinary meanings. The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW provides the following definitions in the relevant context: registered \"1. recorded, as in a register or book;\" accordance \"1. agreement; conformity.\" The phrase, 'registered in accordance with a law of a State or Territory' therefore literally means: recorded in a register in conformity with a law of a State or Territory. Division 7A of the ITAA 1936 was inserted by Taxation Laws Amendment Act (No. 3) 1998 . The Explanatory Memorandum to Taxation Laws Amendment Bill (No. 3) 1998 does not indicate subparagraph 109N(3)(a)(i) of the ITAA 1936 should be read narrowly to restrict qualifying registration to cases under a deeds registration statute or Torrens statute of a State or Territory. Hence, if registration is required under another statute, such as one which governs administration of a Crown lease then that registration may satisfy the requirements of subparagraph 109N(3)(a)(i) of the ITAA 1936. However, in the present case, the statute governing administration of the Crown lease does not require any register of mortgages be maintained by the responsible regulatory body. Therefore, in the circumstances here, the mortgage over the Crown lease is not registered in accordance with a law of a State or Territory as required by subparagraph 109N(3)(a)(i) of the ITAA 1936. Therefore, the maximum term of the loan under paragraph 109N(1)(c) of the ITAA 1936 is seven years. This means that if the loan is put under a written agreement before the private company's lodgment day, specifying both a rate of interest which equals or exceeds the benchmark interest rate, and a maximum term of seven years, the loan will be an excluded loan under Subdivision D of Division 7A of Part III of the ITAA 1936, and no deemed dividend will arise under section 109D of the ITAA 1936 for the income year in which the loan is made.", "Date_of_Decision": "19 November 2007", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 109D subsection 109D(1) Subdivision D of Division 7A of Part III subsection 109N(1) paragraph 109N(1)(c) subsection 109N(3) subparagraph 109N(3)(a)(i)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Private company distributions", "Case_References": "", "Other_References": "The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007215", "Unmatched_Content": "Sentence addition to add clarity | Correct reference to subsection 109N(3)(a)(ii) of the ITAA 1936 | Keywords Deemed dividends Private company distributions"}
{"ATO_ID_Number": "ATO ID 2006/188", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dividends: return of capital - application of section 45B", "Issue": "Can the Commissioner make a determination under subsection 45B(3) of the Income Tax Assessment Act 1936 (ITAA 1936) that section 45C of the ITAA 1936 applies to treat the amount of the return of capital as an unfranked dividend paid out of the profits of the company?", "Decision": "Yes. The Commissioner may make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies to treat the amount of the capital return as an unfranked dividend, paid out of the profits of the company.", "Facts": "The company purchased a group of assets prior to 1985. The company recently sold one of those assets and made a significant profit on the sale. The asset was never used in the business. After making a profit from the sale of the asset, the company made a capital return to its shareholders by debiting its share capital account. Many of the company's shareholders hold pre-CGT shares. The company has been profitable for a number of years. The company's franking policy has been to pay dividends to its shareholders to the extent it can fully frank those dividends. It always paid sufficient dividends to exhaust its franking credits. The company has significant assets on its balance sheet. Despite this, the company distributed the majority of its paid-up share capital under the capital return. The company also has significant retained profits.", "Reasons_for_Decision": "Summary: The purpose of section 45B of the ITAA 1936 is to ensure that relevant amounts are treated as dividends for taxation purposes if: This ATO Interpretative Decision is concerned only with part (b) of this purpose. Subsection 45B(2) of the ITAA 1936 sets out the conditions under which section 45B of the ITAA 1936 applies. With regard to payments made in substitution for dividends, this section applies if: The distribution of the amount referred to in the Facts is a 'scheme' within the broad meaning of that term, for the purposes of section 45B of the ITAA 1936. As the distribution is debited against the company's share capital account, there is a provision of a capital benefit for the purposes of subsection 45B(5) of the ITAA 1936. A further requirement of subsection 45B(2) of the ITAA 1936 is that a taxpayer (the relevant taxpayer) must obtain a tax benefit, as defined in subsection 45B(9) of the ITAA 1936. Shareholders would obtain a tax benefit, within the meaning of subsection 45B(9) of the ITAA 1936, as the amount of tax payable from the treatment of a return of capital distribution under the capital gains and losses provisions would, apart from the operation of 45B, be less than the amount that would be payable if the distribution had instead been a dividend. Subsection 45B(8) of the ITAA 1936 sets out circumstances that are relevant in determining whether, in relation to the scheme, any person has more than an incidental purpose of enabling a taxpayer to obtain a tax benefit. Paragraph 45B(8)(a) of the ITAA 1936 refers to the extent to which the distribution is attributable to the profits of the company. Although the distribution is made out of the share capital account, it reflects the profit on the sale of the asset in question. The amount distributed does not reflect the amount invested in that asset when it was purchased. Paragraph 45B(8)(b) of the ITAA 1936 refers to the pattern of distributions. The company's dividend policy is to pay dividends to the extent that it has available franking credits to fully frank those dividends. Accordingly, if this distribution were a special dividend, the company would not be able to frank it. Paragraphs 45B(8)(c) to (g) of the ITAA 1936 concern the particular tax status of shareholders. Many of the company's shareholders hold pre-CGT shares. Paragraph 45B(8)(h) of the ITAA 1936 requires a comparison of the respective interests held by shareholders after the distribution. The distribution is made proportionally to all shareholders, and their interest in the company remains unchanged after the distribution. Having regard to the relevant circumstances of the scheme, it can be concluded that the scheme was entered into for more than an incidental purpose of enabling the relevant taxpayers to obtain a tax benefit. Accordingly subsection 45B(3) of the ITAA 1936 permits the Commissioner to make a determination that section 45C of the ITAA 1936 applies to treat the distribution as an unfranked dividend paid out of the profits of the company.", "Date_of_Decision": "28 June 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 45B subsection 45B(1) paragraph 45B(1)(a) paragraph 45B(1)(b) subsection 45B(2) subsection 45B(3) subsection 45B(5) subsection 45B(8) paragraph 45B(8)(a) paragraph 45B(8)(b) paragraph 45B(8)(c) paragraph 45B(8)(g) paragraph 45B(8)(h) section 45C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/654 | ATO ID 2004/881", "Subject_References": "Capital benefit Capital reductions Deemed dividends Return of capital on shares Share capital", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006188", "Unmatched_Content": "Keywords Capital benefit Capital reductions Deemed dividends Return of capital on shares Share capital"}
{"ATO_ID_Number": "ATO ID 2005/58", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: meaning of 'net income' in section 109XA", "Issue": "Is the accounting income of the trust estate its 'net income' for the purposes of subsection 109XA(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The accounting income of the trust estate determined by the trustee in accordance with the trust deed and applicable accounting standards is the 'net income' of the trust estate for the purposes of subsection 109XA(1) of the ITAA 1936.", "Facts": "ABC Pty Ltd a private company is presently entitled to $1,000 of accounting income of the XYZ trust estate determined by the trustee in accordance with the trust deed and applicable accounting standards that remains unpaid. The trustee of the XYZ trust estate creates a present entitlement to an unrealised gain to the taxpayer a shareholder of ABC Pty Ltd of $500. The trustee makes a payment of $200 to the taxpayer reducing the taxpayer's present entitlement to the unrealised gain. The whole of the amount to which ABC Pty Ltd is presently entitled is not paid to the private company before the earlier of the due date for lodgment and the date of lodgment of the trustee's income tax return for the XYZ trust estate for the income year.", "Reasons_for_Decision": "Summary: Subdivision EA of Division 7A of Part III of the ITAA 1936 (Subdivision EA) came into effect from 12 December 2002 and replaced section 109UB of the ITAA 1936. The amendments in subdivision EA generally apply to payments or loans made, or debts forgiven on or after 12 December 2002. Broadly speaking, the new rules in Subdivision EA deem certain payments, loans, or forgiven debts by a trustee of a trust estate to a shareholder (or their associate) of a private company to be included in their assessable income as if it were a dividend where the private company is presently entitled to an amount from the net income of the trust estate and that amount has not been fully paid out. Under subsection 109XA(1) of the ITAA 1936 the new rules apply to a payment: where the private company is presently entitled to an amount from the 'net income' of the trust estate: The payment and the amount of the deemed dividend (if any) is subject to the rules in Subdivision EA contained in other provisions in section 109XA of the ITAA 1936 and in section 109XB of the ITAA 1936. These rules include the application of the remainder of Division 7A of Part III of the ITAA 1936 as modified under section 109XC of the ITAA 1936. 'Net income' in subsection 109XA(1) of the ITAA 1936 is not expressly defined for the purposes of Subdivision EA or Division 7A of Part III of the ITAA 1936 and therefore the phrase adopts its ordinary meaning as conveyed by the words of the phrase having regard to its context and the purpose or object of the legislation ( CIC Insurance Ltd v. Bankstown Football Club Ltd (1997) 187 CLR 384; Commissioner of Taxation v. Linter Textiles Australia Ltd (in liq) (2003) 129 FCR 42); 2003 ATC 4458; (2003) 52 ATR 502). Under paragraph 15AB(1)(a) of the Acts Interpretation Act 1901 consideration may be given to extrinsic material such as the Explanatory Memorandum to the legislation introducing Subdivision EA to confirm the ordinary meaning of the phrase. The literal meaning of the phrase 'net income' is indicated by the definition of its terms in The Macquarie Dictionary , 2003, rev. 3rd edn, The Macquarie Library, NSW in the relevant context: Section 109XA and Subdivision EA are embodied in Division 7A of Part III of the ITAA 1936 which seeks to treat private company distributions of profits in the form of payments, loans, or forgiven debts as deemed dividends. Under Subdivision EA and the remainder of Division 7A of Part III of the ITAA 1936 the amount of any deemed dividend is limited to the distributable surplus of the private company as determined from the private company's accounting records under section 109Y of the ITAA 1936. Therefore the ordinary meaning of the phrase 'net income' in the context of subsection 109XA(1) of the ITAA 1936 is the accounting income or the income less expenses of the trust for the income year as determined by the trustee in accordance with the trust deed and applicable accounting standards. Confirmation is provided in the Explanatory Memorandum to the Tax Laws Amendment (2004 Measures No. 1) Act 2004 in the examples of the operation of section 109XA of the ITAA 1936. In all the examples it is stated that the private company has a present entitlement to an amount of 'accounting income' of a trust estate that remains unrepaid. In the circumstances here, the taxpayer is a shareholder of a private company ABC Pty Ltd which is presently entitled to an amount from the accounting income of the XYZ trust estate as determined by the trustee in accordance with the trust deed and applicable accounting standards. Therefore at the time the trustee of XYZ trust estate makes a payment of $200 reducing the taxpayer's present entitlement to an unrealised gain from the trust estate, a private company of which the taxpayer is a shareholder is presently entitled to an amount from the net income of the trust estate for the purposes of subsection 109XA(1) of the ITAA 1936. The whole of that amount to which ABC Pty Ltd is presently entitled is not paid to the private company before the earlier of the due date for lodgment and the date of lodgment of the trustee's income tax return for the trust for the income year. Therefore by virtue of subsection 109XA(1) of the ITAA 1936 the payment of $200 is subject to Subdivision EA and the modified application of the remainder of Division 7A of Part III the ITAA 1936. With the result that the payment may be a deemed dividend included in the assessable income of the taxpayer for the income year subject to the distributable surplus of the private company.", "Date_of_Decision": "2 February 2005", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A of Part III Subdivision EA section 109UB section 109XA subsection 109XA(1) section 109XB section 109XC section 109Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Dividend income Shareholder payments", "Case_References": "CIC Insurance Ltd v. Bankstown Football Club Ltd (1997) 187 CLR 384", "Other_References": "The Macquarie Dictionary, 2003, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200558", "Unmatched_Content": "exclusive of deductions, ultimate; final; after all calculations have been made, or all additions and subtractions have had their effect; net income, profits, or the like. | the returns that come in periodically, especially annually, from one's work, property, business, etc.; revenue; receipts; something that comes in. | Keywords Deemed dividends Dividend income Shareholder payments"}
{"ATO_ID_Number": "ATO ID 2005/297", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: multiple Subdivision EA loans and section 109Y", "Issue": "Where in an income year, a trustee makes loans to different shareholders (or associates) of a private company beneficiary with unpaid present entitlement, and section 109XB of Subdivision EA of Division 7A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) operates on more than one loan, can there be a proportionate reduction of the section 109XB assessable amounts because of the operation of subsection 109XB(2) of the ITAA 1936?", "Decision": "Yes. Where in an income year, a trustee makes loans to different shareholders (or associates) of a private company beneficiary with unpaid present entitlement, and section 109XB of the ITAA 1936 operates on more than one loan, there may be a proportionate reduction in the respective section 109XB assessable amounts because of the operation of subsection 109XB(2).", "Facts": "For the income year, a private company is a beneficiary of a trust which has unpaid present entitlement to net income of $100,000 as at the earlier of the due date for lodgement and date of lodgement of the trust's income tax return for that income year. During the income year, the trustee made five $100,000 loans to different shareholders of the private company. None of the five loans were repaid or put on a commercial footing by the 'lodgement day' or otherwise constituted excluded loans because of Subdivision D of Division 7A of Part III of the ITAA 1936. There is no reduction under subsection 109XA(4) of the ITAA 1936 in respect of any of the loans for the purposes of applying section 109XB of the ITAA 1936. But for subsection 109XB(2) of the ITAA 1936, the section 109XB assessable amount for each loan would be $100,000. The private company's distributable surplus for the income year is $100,000.", "Reasons_for_Decision": "Summary: Subdivision EA of Division 7A of Part III of the ITAA 1936 came into effect from 12 December 2002 and replaced section 109UB of the ITAA 1936. Broadly speaking, Subdivision EA of the ITAA 1936 deems certain payments, loans or forgiven debts by a trustee of a trust estate to a shareholder (or associate) of a private company to be included in the shareholder's (or associate's) assessable income as if they were a dividend where the private company is presently entitled to an amount from the net income of the trust estate and that amount has not been fully paid out by the 'lodgement day'. The 'lodgement day' is the earlier of the due date for lodgement and date of lodgement of the trust's tax return for the income year in which the payment, loan or debt forgiveness occurs. Subsection 109XA(2) of the ITAA 1936 is the relevant provision that applies to trustee loans. It causes section 109XB of the ITAA 1936 to apply where: a trustee makes a loan (the 'actual transaction') to a shareholder or an associate of a shareholder of a private company (except a shareholder or associate that is a company); and (i) the company is presently entitled to an amount from the net income of the trust estate at the time the loan takes place and that amount has not been paid to the company before the 'lodgement day'; or (ii) the company becomes presently entitled to an amount from the net income of the trust estate after the loan takes place but before the 'lodgement day' and the whole of the amount has not been paid to the company before the 'lodgement day'. The construction of subsection 109XA(2) of the ITAA 1936 means it is triggered in respect of each discrete loan. The provision is not concerned with whether other loans have been made by the trustee in the income year or whether those loans have been repaid or put on a commercial footing by the 'lodgement day'. A loan is put on a commercial footing if it is put under a written agreement satisfying the minimum interest and maximum term criteria set out in section 109N of Subdivision D of Division 7A of Part III of the ITAA 1936. Section 109XB of the ITAA 1936 provides as follows: 109XB Amounts included in assessable income (1) An amount is included as if it were a dividend, in the assessable income of the shareholder or associate referred to in subsection 109XA(1), (2) or (3) if: (a) had the actual transaction been done by a private company (the notional company); and (b) had the shareholder or associate been a shareholder of the notional company at the time the actual transaction took place; Section 109XB of the ITAA 1936 therefore also applies separately to each loan (being the 'actual transaction') and is not concerned with other loans that have been repaid or put on a commercial footing by the 'lodgement day'. Section 109XC of the ITAA 1936 includes some general and specific modifications to the Division 7A rules that apply to private company loans. Subsection 109XC(7) of the ITAA 1936 modifies the application of section 109Y of the ITAA 1936 for the purposes of applying subsection 109XB(2) of the ITAA 1936. This in effect allows for the amount included in the shareholder's (or associate's) assessable income under section 109XB of the ITAA 1936 to be determined having regard to the distributable surplus rules contained in section 109Y. A private company's distributable surplus is calculated under subsection 109Y(2) of the ITAA 1936 and the formula for determining any reduction in the amount treated as a dividend is contained in subsection 109Y(3) of the ITAA 1936. Subsection 109Y(3) of the ITAA 1936 provides: The amount of a dividend that a private company is taken under this Division to pay is worked out using the formula: Provisional dividend x (distributable surplus for the year of income / Total of provisional dividends) where: provisional dividend is the amount of the dividend that the private company would be taken to pay apart from this section. Total of provisional dividends is the sum of all the dividends the private company is taken under this Division to pay at the end of the year of income apart from this section. Provisional dividend x (distributable surplus for the year of income / Total of provisional dividends) Where trustee loans are made to different shareholders (or their associates) of the private company in the same income year and the aggregate of those loans exceeds the private company's distributable surplus, the 'Division 7A amount' for each shareholder (or their associate) is proportionately reduced so the total does not exceed the private company's distributable surplus. This is because of the combined operation of subsection 109XB(2) of the ITAA 1936, subsection 109XC(7) and subsection 109Y(3) of the ITAA 1936. In the circumstances here, the provisional dividend in respect of each loan is $100,000, the total of provisional dividends is $500,000 and the private company's distributable surplus for the income year is $100,000. Therefore, the amount required to be included in the assessable income of each shareholder under section 109XB of the ITAA 1936 is $20,000 calculated as follows: 100,000 x (100,000 / 500,000) = $20,000. 100,000 x (100,000 / 500,000) = $20,000. The assessable amount under section 109XB of the ITAA 1936 for each shareholder is therefore proportionately reduced so the total does not exceed the distributable surplus of the private company with the unpaid present entitlement.", "Date_of_Decision": "7 October 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A Subdivision D Subdivision EA section 109Y subsection 109XA(2) subsection 109XA(4) section 109XB subsection 109XB(1) subsection 109XB(2) section 109XC subsection 109XC(7) subsection 109Y(2) subsection 109Y(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/298 | ATO ID 2005/299", "Subject_References": "Borrowings & loans Deemed dividends Trusts Private companies", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005297", "Unmatched_Content": "Keywords Borrowings & loans Deemed dividends Trusts Private companies"}
{"ATO_ID_Number": "ATO ID 2005/298", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: multiple trustee loans and section 109XB", "Issue": "Can section 109XB of the Income Tax Assessment Act 1936 (ITAA 1936) deem loans made by a trustee to different shareholders (or associates) of a beneficiary private company with unpaid present entitlements (UPEs) as an assessable amount where any loans equal to the amount of the UPE are neither repaid nor converted into a complying loan agreement by the 'lodgment day'?", "Decision": "Yes. Where a trustee makes loans to different shareholders (or associates) of a beneficiary private company that has a UPE, any loans neither repaid nor converted into a complying loan agreement by the 'lodgment day' may give rise to an assessable amount under section 109XB of the ITAA 1936.", "Facts": "A private company is a beneficiary of a trust which has a UPE to net income of $100,000 as at the 'lodgment day'. During the income year, the trustee made five $100,000 loans to different shareholders of the company. One of the loans was converted into a complying loan agreement by the 'lodgment day'. The remaining loans ( other loans ) are not excluded loans captured under Subdivision D of Division 7A to Part III of the ITAA 1936 and were not fully repaid by the 'lodgment day'. There is no reduction under subsection 109XA(4) of the ITAA 1936 in respect of any of the loans for the purposes of applying section 109XB of the ITAA 1936.", "Reasons_for_Decision": "Summary: Subdivision EA of Division 7A of the ITAA 1936 deems certain payments, loans or debt forgiveness made by a trustee of a trust estate to a shareholder (or an associate of the shareholder) of a private company as a dividend where the private company: All references to the 'lodgment day' mean the earlier of: With respect to loans made by trustees to private company beneficiaries, subsection 109XA(2) of the ITAA 1936 provides that: As subsection 109XA(2) of the ITAA 1936 refers to 'a loan', it is triggered in respect of each separate loan. Further, this provision operates despite other loans being made by the trustee in the income year even where those loans have been repaid or converted into a complying loan under section 109N of the ITAA 1936 by the 'lodgment day'. Section 109XB of the ITAA 1936 provides that: Similarly to the application of subsection 109XA(2) of the ITAA 1936, section 109XB of the ITAA 1936 applies to each 'actual transaction'. Therefore, it will operate with respect to each loan. Section 109D of the ITAA 1936 provides that: Relevantly here, the loan that has been converted to a complying loan agreement will not give rise to an assessable amount under section 109XB of the ITAA 1936 and will not be deemed to be a dividend pursuant to section 109D of the ITAA 1936. The other loans were not repaid by the lodgment day and were not converted into complying loans. Therefore, the other loans will be deemed to be dividends under section 109D of the ITAA 1936. Further, section 109XB of the ITAA 1936 will give rise to assessable amounts with respect to the other loans.", "Date_of_Decision": "7 October 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Part III Division 7A Subdivision D Subdivision EA section 109D paragraph 109D(1)(b) paragraph 109D(1)(c) section 109N section 109XA subsection 109XA(2) subsection 109XA(4) section 109XB subsection 109XB(2) section 109Y", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/297 | ATO ID 2005/299", "Subject_References": "Borrowings and loans Deemed dividends Trusts Private companies", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005298", "Unmatched_Content": "Question reworded for clarity. | Decision reworded for clarity. | Reasons for Decision refined for clarity. | Ordered alphanumerically. | Keywords Borrowings and loans Deemed dividends Trusts Private companies"}
{"ATO_ID_Number": "ATO ID 2005/299", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: multiple trustee loans and subsection 109XA(4)", "Issue": "Where in an income year, a trustee makes loans to different shareholders (or associates) of a private company beneficiary with unpaid present entitlement, do any of the loans give rise to 'previous transactions' for the purposes of applying subsection 109XA(4) of Subdivision EA of Division 7A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) in that same income year?", "Decision": "No. Where in an income year, a trustee makes loans to different shareholders (or associates) of a private company beneficiary with unpaid present entitlement, none of the loans give rise to 'previous transactions' for the purposes of applying subsection 109XA(4) of the ITAA 1936 in that same income year.", "Facts": "For the income year, a private company is a beneficiary of a trust which has unpaid present entitlement to net income of $100,000 as at the earlier of the due date for lodgement and date of lodgement of the trust's income tax return for that income year. During the income year, the trustee made five $100,000 loans to different shareholders of the private company. None of the five loans were repaid or put on a commercial footing by the 'lodgement day' or otherwise constituted an excluded loan because of Subdivision D of Division 7A of Part III of the ITAA 1936. No amount has been:", "Reasons_for_Decision": "Summary: Subdivision EA of Division 7A of Part III of the ITAA 1936 came into effect from 12 December 2002 and replaced section 109UB of the ITAA 1936. Broadly speaking, Subdivision EA of the ITAA 1936 deems certain payments, loans or forgiven debts by a trustee of a trust estate to a shareholder (or associate) of a private company to be included in the shareholder's (or associate's) assessable income as if they were a dividend where the private company is presently entitled to an amount from the net income of the trust estate and that amount has not been fully paid out by the 'lodgement day'. The 'lodgement day' is the earlier of the due date for lodgement and date of lodgement of the trust's tax return for the income year in which the payment, loan or debt forgiveness occurs. Subsection 109XA(2) of the ITAA 1936 is the provision that applies to trustee loans. It causes section 109XB of the ITAA 1936 to apply where: a trustee makes a loan (the 'actual transaction') to a shareholder or an associate of a shareholder of a private company (except a shareholder or associate that is a company); and (i) the company is presently entitled to an amount from the net income of the trust estate at the time the loan takes place and that amount has not been paid to the company before the 'lodgement day'; or (ii) the company becomes presently entitled to an amount from the net income of the trust estate after the loan takes place but before the 'lodgement day' and the whole of the amount has not been paid to the company before the 'lodgement day'. The amount of the 'actual transaction' to which section 109XB of the ITAA 1936 applies may be reduced by subsection 109XA(4) of the ITAA 1936 which limits the amount of the 'actual transaction' to the unpaid present entitlement, and as applicable, reduces it further by the sum of: Where a trustee makes one or more loans in an income year, the point in time when subsection 109XA(2) of the ITAA 1936 is triggered, and therefore when it may be said there is an application of Subdivision EA of the ITAA 1936, is when it may be ascertained the unpaid present entitlement has not been fully paid out. That point in time will be the same for each loan as it will be at the conclusion of 'lodgement day' that the matter may be decided. This means that it cannot be said in respect of any of the loans that one has triggered Subdivision EA before another and therefore subsection 109XA(4) of the ITAA 1936 cannot operate to reduce any particular loan by reason of Subdivision EA having already applied to another loan in the same income year. Therefore, in the circumstances here, none of the trustee loans made in the income year cause a reduction in the amount of the 'actual transaction' in respect of any of the other loans for the purposes of applying section 109XB of the ITAA 1936. Further, the absence in an earlier income year of an application from either Subdivision EA or section 109UB of the ITAA 1936, in relation to the unpaid present entitlement, means there is no operation from subsection 109XA(4) of the ITAA 1936 to reduce the amounts of the respective 'actual transactions'. This means in each case that section 109XB of the ITAA 1936 may cause an amount to be included in assessable income of the applicable shareholder subject to the private company's distributable surplus.", "Date_of_Decision": "7 October 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A Subdivision D Subdivision EA section 109UB subsection 109XA(2) subsection 109XA(4) section 109XB", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2005/297 | ATO ID 2005/298", "Subject_References": "Borrowings & loans Deemed dividends Trusts Private companies", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005299", "Unmatched_Content": "Keywords Borrowings & loans Deemed dividends Trusts Private companies"}
{"ATO_ID_Number": "ATO ID 2003/459", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed Dividend: liquidator's loan not treated as a dividend", "Issue": "Is a loan made to a shareholder in the course of a members' voluntary winding-up of a private company by a liquidator taken to be a dividend under subsection 109D(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The private company is not taken to pay a dividend under subsection 109D(1) of the ITAA 1936 in relation to a loan made by a liquidator in the course of winding-up the company.", "Facts": "The taxpayer is a shareholder of the private company which is a proprietary company. The private company is solvent and resolves by special resolution during the 2001-02 income year that it be wound up voluntarily. The private company held a general meeting and appointed a liquidator for the purpose of winding-up the company. The liquidator is not a registered liquidator. The liquidator made a loan to the taxpayer six months after the special resolution but still within the 2001-02 income year. No interest is payable in relation to the loan. The taxpayer did not fully repay the loan by the end of the 2001-02 income year.", "Reasons_for_Decision": "Summary: Under subsection 109D(1) of the ITAA 1936 an amount lent by a private company to a shareholder during the current year is taken to be a dividend if the loan is not fully repaid by the end of the current year, and Subdivision D of the ITAA 1936 does not prevent the private company from being taken to pay a dividend. Subdivision D of Division 7A of the ITAA 1936 sets out rules about payments and loans that are not treated as dividends. The loan to the taxpayer is not excluded under section 109N of the ITAA 1936 from being taken to be a dividend under section 109D of the ITAA 1936 as the rate of interest payable on the loan is nil. Section 109NA of the ITAA 1936 provides that a private company is not taken under subsection 109D(1) of the ITAA 1936 to pay a dividend because of a loan made in the course of the winding-up of the company by a liquidator. The note to section 109NA of the ITAA 1936 highlights that if such a loan is not fully repaid by the end of the following year of income, the company will be taken to have paid a dividend under subsection 109D(1A) of the ITAA 1936. In a members' voluntary winding up, the company in general meeting must appoint a liquidator (section 495 of the Corporations Act 2001 ). In a members' voluntary winding up of a proprietary company the liquidator does not need to be a registered liquidator (subsection 532(4) of the Corporations Act). A loan will be accepted as a 'loan made in the course of the winding-up of the company by a liquidator' when it is made after the winding-up is taken to have begun under the Corporations Act. For a voluntary winding-up this is generally taken to be on the day on which the company passed the special resolution resolving that it be wound up voluntarily (section 513B of the Corporations Act). The liquidator of the private company made a loan to the taxpayer after the winding up of the company began. Section 109NA of the ITAA 1936 is satisfied since the loan was made to the taxpayer by the liquidator in the course of winding-up the company. Accordingly, the private company is not taken to have paid a dividend to the taxpayer for the 2001-02 income year under subsection 109D(1) of the ITAA 1936.", "Date_of_Decision": "2 April 2003", "Year_of_Income": "30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 Division 7A Subdivision D section 109D section 109N section 109NA", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Dividend income Private company distributions Shareholders Shareholder loans Liquidation Winding up", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003459", "Unmatched_Content": "Keywords Deemed dividends Dividend income Private company distributions Shareholders Shareholder loans Liquidation Winding up"}
{"ATO_ID_Number": "ATO ID 2003/588", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A - loan in the ordinary course of business from a private company to an associated partnership treated as dividends", "Issue": "Does section 109M of the Income Tax Assessment Act 1936 (ITAA 1936) apply in respect of a loan made by a private company to an associated partnership where no similar loans are made to parties at arm's length?", "Decision": "No. Section 109M of the ITAA 1936 will not apply in respect of the loan made by the private company to the associated partnership where no similar loans are made to parties at arm's length. As no loans have been made by the private company to other parties at arm's length, the requirements of paragraph 109M(b) of the ITAA 1936 have not been satisfied.", "Facts": "The shareholders and directors of the private company are also the partners in a partnership. The private company and the partnership had a loan agreement and entered into a new loan agreement on similar terms. In previous years, the private company has made advances and loans to the partnership. The private company does not carry on any other business activity. The private company has not made any similar loans to arm's length parties or entities.", "Reasons_for_Decision": "Summary: The making of a loan by a private company to a shareholder or an associate of the shareholder is treated as the payment of a dividend in the circumstances outlined in section 109D of the ITAA 1936. However, section 109M of the ITAA 1936 provides that such a loan is not taken to be the payment of a dividend for the purposes of section 109D if the loan meets the two requirements set out in section 109M. Both these requirements need to be satisfied for section 109M to have application. The two requirements of section 109M are discussed below: (a) Ordinary course of the private company's business Paragraph 109M(a) of the ITAA 1936 requires a loan to have been made in the ordinary course of the private company's business and not in the ordinary course of business in general. As the private company is carrying on a business of making advances to the partnership, the loan will have been made in the ordinary course of the private company's business and therefore meets the requirement in paragraph 109M(a). (b) Usual terms on which the private company makes similar loans to parties at arm's length Paragraph 109M(b) of the ITAA 1936 requires consideration of whether there are, or have been, similar loans made to parties at arm's length. If so, a comparison of the terms of loans made to parties at arm's length is required to determine if the loans are similar. Parties will be at arm's length if neither party is able to exercise any control or influence over the other ( Australian Trade Commission v WA Meat Exports Pty Ltd (1987) 75 ALR 287). The private company and the partnership are associated parties (that is, not at arm's length) under section 318 of the ITAA 1936. Section 109M of the ITAA 1936 only applies in circumstances where there are loans made by a private company to parties at arm's length. If loans are only made to parties not at arm's length (even though such loans may be made on arm's length terms), paragraph 109M(b) is not satisfied. Instances where multiple loans by a private company are provided within a group to a number of entities would also fail to satisfy paragraph 109M(b), as such loans would not be made at arm's length. The private company has only ever made loans to the associated partnership. The private company has not provided loans to any other entity or party. As the private company and the partnership are associated entities and there are no similar loans made to parties at arm's length, the requirements of paragraph 109M(b) have not been satisfied. As only one paragraph of section 109M of the ITAA 1936 has been satisfied, section 109M will not apply to the loan made by the private company to the associated partnership. Consequently, section 109D of the ITAA 1936 will apply to the proposed loan.", "Date_of_Decision": "23 January 2003", "Year_of_Income": "Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005 Year ending 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 109D section 109M section 318 paragraph 109M(b) paragraph 109M(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Private company distributions Deemed dividends Associated persons Shareholder loans Associate entity", "Case_References": "Australian Trade Commission v WA Meat Exports Pty Ltd (1987) 75 ALR 287", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003588", "Unmatched_Content": "Additional words included to cover the applicability of paragraph 109M(b) of the ITAA 1936 in instances where multiple loans are provided within a group to a number of entities. | Keywords Private company distributions Deemed dividends Associated persons Shareholder loans Associate entity"}
{"ATO_ID_Number": "ATO ID 2003/812", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: Partly paid shares issued to a private company shareholder", "Issue": "Is a private company taken under subsection 109D(1) of the Income Tax Assessment Act 1936 (ITAA 1936) to have paid a dividend to the shareholder in relation to partly paid shares issued during the 2001-02 income year, upon which no calls have been made?", "Decision": "No. The partly paid shares, upon which no calls have been made, are not considered to be a 'loan' and so the private company is not taken under subsection 109D(1) of the ITAA 1936, to have paid a dividend to the shareholder as at 30 June 2002.", "Facts": "During the 2001-02 income year, a private company issued shares to a director shareholder. The total issue price was $5,000 and the shares were partly paid by the shareholder on issue to the amount of $1,000. The company did not make any calls on the shares during the 2001-02 income year.", "Reasons_for_Decision": "Summary: A private company is taken under subsection 109D(1) of the ITAA 1936 to pay a dividend at the end of its income year if the private company makes a loan to a shareholder during the income year, the loan is not fully repaid by the end of that income year, and subdivision D of Division 7A of Part III of the ITAA 1936 does not prevent the private company from being taken to pay a dividend. Subsection 109D(3) of the ITAA 1936 defines a 'loan', for the purposes of Division 7A, to include an advance of money, a provision of credit or any other form of financial accommodation, or a transaction which in substance effects a loan of money. The shareholder in this case is liable under subsection 254M(1) and section 516 of the Corporations Act 2001 to pay calls on the partly paid shares up to the unpaid amount of the total issue price of the shares. However, the shareholder is not liable to pay this amount until the directors make a call or the company is wound up. Neither event has happened during the 2001-02 income year. As such, the shareholder does not owe the private company any money and the transaction cannot be described as a 'loan' as defined by subsection 109D(3) of the ITAA 1936. Therefore, the private company is not taken under subsection 109D(1) of the ITAA 1936 to have paid the shareholder a dividend as at 30 June 2002.", "Date_of_Decision": "15 July 2003", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 109D(1) subsection 109D(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed dividends Private companies Shareholder loans Shares", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003812", "Unmatched_Content": "References to subsection 109D(4) corrected to 109D(3) | Reference to subsection 109D(4) corrected to 109D(3) | Keywords Deemed dividends Private companies Shareholder loans Shares"}
{"ATO_ID_Number": "ATO ID 2003/838", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed dividend: Loan to another company in its capacity as trustee of a unit trust - application of section 109K", "Issue": "Is a loan excluded under section 109K of the Income Tax Assessment Act 1936 (ITAA 1936) from being taken to be a dividend under section 109D of the ITAA 1936 where a company in its capacity as trustee of a unit trust, receives the loan from a private company?", "Decision": "No. A loan is not excluded under section 109K of the ITAA 1936 from being taken to be a dividend under section 109D of the ITAA 1936 where a company in its capacity as trustee of a unit trust, receives the loan from a private company.", "Facts": "Company X and Y are private companies. Company X owns all of the shares in Company Y. Company Y is the trustee of the Z Unit Trust. All of the shares in Company X are owned equally by two natural persons. The same natural persons own all of the units in the Z Unit Trust. Company X makes a loan to Company Y as trustee for the Z Unit Trust on 10 April 2003. The loan was not repaid by 30 June 2003. The loan was not made under a written agreement.", "Reasons_for_Decision": "Summary: Subsection 109D(1) of the ITAA 1936 provides that a private company is taken to pay a dividend to a shareholder or their associate at the end of the private company's year of income if the private company makes a loan to the shareholder or their associate during the year which is not fully repaid by the end of the year, and Subdivision D of Division 7A of the ITAA 1936 does not apply. The shareholders of Company X are two natural persons. Under paragraph 318(1)(d) of the ITAA 1936, the associates of a natural person include the trustee of a trust where the person benefits under the trust. Paragraph 318(6)(a) of the ITAA 1936 states that a reference to an entity benefiting under a trust means that the entity has benefited, or, is capable of benefiting under the trust. As the natural persons are capable of benefiting under the trust, Company Y will be an associate of the natural persons. Subdivision D of Division 7A of the ITAA 1936 sets out loans that are not treated as dividends. Under section 109K of the ITAA 1936, a private company is not taken to pay a dividend under section 109D of the ITAA 1936 because of a loan it makes to another company. The note to section 109K of the ITAA 1936 states that this exclusion does not apply to a loan which is made to a company in its capacity as trustee, and refers to section 109ZE of the ITAA 1936. Section 109ZE of the ITAA 1936 states that the rules in section 960-100 of the Income Tax Assessment Act 1997 (ITAA 1997) about entities apply to Division 7A of the ITAA 1936. Subsection 960-100(3) of the ITAA 1997 states that a legal person can have a number of different capacities and in each of those capacities, the person is taken to be a different entity. Subsection 960-100(4) of the ITAA 1997 provides that if a provision refers to an entity of a particular kind, it refers to that entity in its capacity as that kind of entity, not to that entity in any other capacity. For example, a provision that refers to a company does not cover a company in its capacity as trustee, unless it also refers to a trustee. Section 109K of the ITAA 1936 applies only to loans made to a company in its capacity as a company and not as trustee. In this case, Company X made the loan to Company Y in its capacity as trustee. Therefore, section 109K of the ITAA 1936 will not apply to exclude the loan from being taken to be a dividend. Accordingly, Company X may be taken under section 109D of the ITAA 1936 to pay a dividend to Company Y as trustee of the Z Unit Trust on 30 June 2003.", "Date_of_Decision": "7 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 109D subsection 109D(1) section 109K section 109ZE paragraph 318(1)(d) subsection 318(6) Subdivision D of Division 7A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/839 | ATO ID 2003/840", "Subject_References": "Associate Companies Deemed dividends Shareholder loans", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003838", "Unmatched_Content": "Change \"subsection 318(1) to \"paragraph 318(1)(d) under Income Tax Assessment Act 1936. | Add \"Subdivision D of Division 7A\" under Income Tax Assessment Act 1936. | Delete \"of Subdivision D\" in paragraph 3. | Siebel/TDMS Reference Number | Insert '3' at the end of the existing reference number to correct reference. | Keywords Associate Companies Deemed dividends Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2003/839", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed dividend: Loan to another company in its capacity as trustee of a unit trust - loan provider owns all units in the trust - application of section 109K", "Issue": "Is a loan excluded under section 109K of the Income Tax Assessment Act 1936 (ITAA 1936) from being taken to be a dividend under section 109D of the ITAA 1936 where a company, in it's capacity as trustee of a unit trust, receives the loan from a private company which owns all of the units in the trust?", "Decision": "No. A loan is not excluded under 109K of the ITAA 1936 from being taken to be a dividend under section 109D of the ITAA 1936 where a company, in it's capacity as trustee of a unit trust, receives the loan from a private company which owns all of the units in the trust.", "Facts": "Company X and Y are private companies. Company X owns all of the shares in Company Y. Company Y is the trustee of the Z Unit Trust. All of the shares in Company X are owned equally by two natural persons. Company X owns all of the units in the Z Unit Trust. Company X, Company Y and the Z Unit Trust are not part of a consolidated group. Company X makes a loan to Company Y as trustee for the Z Unit Trust on 10 April 2003. The loan was not repaid by 30 June 2003. The loan was not made under a written agreement.", "Reasons_for_Decision": "Summary: Subsection 109D(1) of the ITAA 1936 provides that a private company is taken to pay a dividend to a shareholder or their associate at the end of the private company's year of income if the private company makes a loan to the shareholder or their associate during the year which is not fully repaid by the end of the year, and Subdivision D of Division 7A of the ITAA 1936 does not apply. The shareholders of Company X are two natural persons. Under paragraph 318(1)(d) of the ITAA 1936, the associates of a natural person include the trustee of a trust where the individual, or an associate of the individual, benefits under the trust. Under subsection 318(6) of the ITAA 1936, a reference to an entity benefiting under a trust means that the entity has benefited or is capable of benefiting under the trust, either directly or through interposed companies, partnerships or trusts. Company X owns all of the units in the Z Unit Trust and the natural persons own all the shares in Company X. Therefore the natural persons are capable of benefiting under the trust indirectly through Company X. Therefore, Company Y, as trustee of the Z Unit Trust, is an associate of the natural persons. Subdivision D of Division 7A of the ITAA 1936 sets out loans that are not treated as dividends. Under section 109K of the ITAA 1936, a private company is not taken to pay a dividend under section 109D of the ITAA 1936 because of a loan it makes to another company. The note to section 109K of the ITAA 1936 states that this exclusion does not apply to a loan to a company in its capacity as trustee and refers to section 109ZE of the ITAA 1936. Section 109ZE of the ITAA 1936 states that the rules in section 960-100 of the ITAA 1997 about entities, apply to Division 7A of the ITAA 1936. Subsection 960-100(3) of the ITAA 1997 states that a legal person can have a number of different capacities in which they do things, and in each of those capacities, the person is taken to be a different entity. Subsection 960-100(4) of the ITAA 1997 provides that if a provision refers to an entity of a particular kind, it refers to that entity in its capacity as that kind of entity, not to that entity in any other capacity. For example, a provision that refers to a company does not cover a company in its capacity as trustee, unless it also refers to a trustee. Section 109K of the ITAA 1936 applies only to a company in its capacity as a company and not in its capacity as trustee. Company X makes the loan to Y as trustee. Therefore, section 109K of the ITAA 1936 will not apply to exclude the loan from being taken to be a dividend. Accordingly, Company X may be taken under section 109D of the ITAA 1936 to pay a dividend to Company Y as trustee of the Z Unit Trust on 30 June 2003.", "Date_of_Decision": "29 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 109D subsection 109D(1) section 109K section 109ZE paragraph 318(1)(d) subsection 318(6) Subdivision D of Division 7A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/838 | ATO ID 2003/840", "Subject_References": "Associate Companies Deemed dividends Shareholder loans", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003839", "Unmatched_Content": "Change \"subsection 318(1)\" to \"paragraph 318(1)(d)\" under Income Tax Assessment Act 1936. | Add \"Subdivision D of Division 7A\" under Income Tax Assessment Act 1936. | Delete \"of Subdivision D\" in paragraph 3. | Change from \"3 April 2014\" to \"22 November 2016\". | Keywords Associate Companies Deemed dividends Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2003/840", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed dividend: Loan to another company in its capacity as trustee of a discretionary trust - application of section 109K", "Issue": "Is a loan excluded under section 109K of the Income Tax Assessment Act 1936 (ITAA 1936) from being taken to be a dividend under section 109D of the ITAA 1936 where a company, in its capacity as trustee of a discretionary trust, receives the loan from a private company?", "Decision": "No. A loan is not excluded under section 109K of the ITAA 1936 from being taken to be a dividend under section 109D of the ITAA 1936 where a company, in its capacity as trustee of a discretionary trust, receives the loan from a private company.", "Facts": "Company X and Company Y are private companies. The Q Family Trust is a discretionary trust. Company X owns all of the shares in Company Y. Company Y is the trustee of the Q Family Trust. The beneficiaries of the Q Family Trust are two natural persons. The natural persons also own all of the shares in Company X. Company X makes a loan to Company Y as trustee for the Q Family Trust on 10 April 2003. The loan was not repaid by 30 June 2003. The loan was not made under a written agreement.", "Reasons_for_Decision": "Summary: Subsection 109D(1) of the ITAA 1936 provides that a private company is taken to pay a dividend to a shareholder or their associate at the end of the private company's year of income if the private company makes a loan to the shareholder or their associate during the year which is not fully repaid by the end of the year, and Subdivision D of Division 7A of the ITAA 1936 does not apply. The shareholders of Company X are two natural persons. Under paragraph 318(1)(d) of the ITAA 1936, the associates of a natural person include the trustee of a trust where the person benefits under the trust. Paragraph 318(6)(a) of the ITAA 1936 states that a reference to an entity benefiting under a trust means that the entity has benefited, or, is capable of benefiting under the trust. As the natural persons are persons capable of benefiting under the trust, Company Y will be an associate of the natural persons. Subdivision D of Division 7A of the ITAA 1936 sets out loans that are not treated as dividends. Under section 109K of the ITAA 1936, a private company is not taken to pay a dividend under section 109D of the ITAA 1936 because of a loan it makes to another company. The note to section 109K of the ITAA 1936 states that this exclusion does not apply to a loan which is made to a company in its capacity as trustee, and refers to section 109ZE of the ITAA 1936. Section 109ZE of the ITAA 1936 states that the rules in section 960-100 of the Income Tax Assessment Act 1997 (ITAA 1997) about entities apply to Division 7A of the ITAA 1936. Subsection 960-100(3) of the ITAA 1997 states that a legal person can have a number of different capacities and in each of those capacities, the person is taken to be a different entity. Subsection 960-100(4) of the ITAA 1997 provides that if a provision refers to an entity of a particular kind, it refers to that entity in its capacity as that kind of entity, not to that entity in any other capacity. For example, a provision that refers to a company does not cover a company in its capacity as trustee, unless it also refers to a trustee. Section 109K of the ITAA 1936 applies only to loans made to a company in its capacity as a company and not as trustee. In this case, Company X made the loan to Company Y in its capacity as trustee. Therefore, section 109K of the ITAA 1936 will not apply to exclude the loan from being taken to be a dividend. Accordingly, Company X may be taken under section 109D of the ITAA 1936 to pay a dividend to Company Y as trustee of the Q Family Trust on 30 June 2003.", "Date_of_Decision": "29 August 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 section 109D subsection 109D(1) section 109K section 109ZE paragraph 318(1)(d) paragraph 318(6)(a) Subdivision D of Division 7A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/838 | ATO ID 2003/839", "Subject_References": "Associate Companies Deemed dividends Shareholder loans", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003840", "Unmatched_Content": "Change \"subsection 318(1)\" to \"paragraph 318(1)(d)\" under Income Tax Assessment Act 1936. | Change \"subsection 318(6)\" to \"paragraph 318(6)(a)\" under Income Tax Assessment Act 1936. | Add \"Subdivision D of Division 7A\" under Income Tax Assessment Act 1936. | Delete \"of Subdivision D\" in paragraph 3. | Change from \"3 April 2014\" to \"22 November 2016\". | Keywords Associate Companies Deemed dividends Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2002/741", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Amalgamated Loans and executors of deceased estates", "Issue": "Is a private company taken, under section 109E of the Income Tax Assessment Act 1936 (ITAA 1936), to have paid a dividend to the taxpayer, the executor of the deceased estate of a shareholder in the company, in respect of a loan the company made to the shareholder before he died?", "Decision": "No. The private company is not taken to have paid a dividend to the taxpayer, the executor of the deceased estate of the shareholder.", "Facts": "Under a written agreement entered into in the income year ended 30 June 1998 by the private company and one of its shareholders, the private company made a loan to that shareholder. The written agreement met the criteria concerning minimum interest rate and maximum term contained in section 109N of the ITAA 1936. The loan is an amalgamated loan for the purposes of subsection 109E(3) of the ITAA 1936. The shareholder died during the income year ended 30 June 1999, before any repayments were due to be made under the agreement. No repayments in relation to the loan were made in the 1998 to 2001 income years by either the shareholder or the executor of his deceased estate.", "Reasons_for_Decision": "Summary: Subsection 109E (1) of the ITAA 1936 states: 'A private company is taken to pay a dividend to an entity at the end of one of the private company's year of income (the \"current year\") if: (i) the private company made an amalgamated loan to the entity in an earlier year of income...' [emphasis added] The entity to whom the private company is taken to have paid the dividend must be the same entity to whom the private company made the amalgamated loan. For subsection 109E(1) of the ITAA 1936 to apply, the private company must have made the loan to the executor of the deceased estate. Accordingly, as the private company made the loan to the shareholder, the executor of the shareholder's deceased estate is not treated as having received a deemed dividend in respect of the amalgamated loan.", "Date_of_Decision": "26 June 2002", "Year_of_Income": "30 June 1999, 30 June 2000, 30 June 2001", "Legislative_References": "Income Tax Assessment Act 1936 section 109E section 109N", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Private company distributions Deemed dividends Shareholder loans", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002741", "Unmatched_Content": "Keywords Private company distributions Deemed dividends Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2011/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 7A: Interest component of shortfall in minimum yearly repayment and section 109D of the ITAA 1936", "Issue": "Where a shortfall in a minimum yearly repayment gives rise to a deemed dividend under section 109E of the Income Tax Assessment Act 1936 (ITAA 1936), can a deemed dividend also arise under section 109D of the ITAA 1936 in respect of the proportion of the shortfall comprising unpaid interest?", "Decision": "No. Where a shortfall in a minimum yearly repayment gives rise to a deemed dividend under section 109E of the ITAA 1936, a deemed dividend does not also arise under section 109D of the ITAA 1936 in respect of the proportion of the shortfall comprising unpaid interest.", "Facts": "During the 2008-09 income year a private company made an unsecured loan to the taxpayer, an individual and the company's sole shareholder. The loan was made under a complying section 109N of the ITAA 1936 agreement, with a maximum term of 7 years and with interest payable equal to the benchmark interest rate for each income year. No repayment was made on the loan for the income year ended 30 June 2010 and a deemed dividend arose under section 109E of the ITAA 1936.", "Reasons_for_Decision": "", "Date_of_Decision": "31 December 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 section 109D subsection 109D(1) subsection 109D(3) section 109E subsection 109E(1) subsection 109E(2) subsection 109E(5) subsection 109E(6) section 109N subsection 109N(1) subsection 109N(3)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 2022/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Companies Deemed dividends Shortfalls Shareholder loans", "Case_References": "Commissioner of Taxation v Radilo Enterprises Pty Ltd [1997] FCA 22 72 FCR 300 97 ATC 4151 34 ATR 635", "Other_References": "", "Business_Line": "Private Wealth", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20118", "Unmatched_Content": "Reason for Decision: A private company may be taken to pay a dividend to an entity at the end of one of the private companies years of income under subsection 109D(1) of the ITAA 1936 where: | Subdivision D of Division 7A of the ITAA 1936 contains a number of exclusions to the application of subsection 109D(1) of the ITAA 1936. Section 109N of Subdivision D prevents a private company from being taken to pay a dividend where: | Where a loan is put under a complying section 109N of the ITAA 1936 loan agreement by the private company's lodgment day for the income year in which the loan is made, a deemed dividend does not arise in the year the loan is made but rather in each future year in which the minimum yearly repayment under section 109E is not made by the end of the income year. | Subsection 109E(5) of the ITAA 1936 provides that the minimum yearly repayment for an amalgamated loan for a year of income is the amount worked out using the formula in subsection 109E(6) of the ITAA 1936, unless it is worked out under the regulations (if they provide for working it out). The effect of this formula is that the amount of the minimum yearly repayment comprises both principal and interest. | Therefore, where the minimum yearly repayment is not made for an income year, and a deemed dividend arises under subsection 109E(1) of the ITAA 1936, the amount of the deemed dividend will correspond in part to the non-payment of principal due under the contract of loan and in part to the non-payment of interest. | Subsection 109D(3) of the ITAA 1936 provides that for the purposes of Division 7A, a loan includes: | The phrase 'provision of credit' involves allowing time to pay a debt (including by granting a right to defer payment of a debt). A loan itself amounts to the provision of credit (see, for example, the decision of the High Court in Herbert v R [1] where lending money, which necessarily involved allowing time for it to be repaid, was held to be the provision of credit). The provision of credit extends to allowing time to pay any debt, not just that arising under a loan agreement, as is evident from the judgments in Herbert v R | The following principles for interpreting the phrase 'any other form of financial accommodation' are set out in paragraph 62 of Taxation Determination TD 2022/11 Income tax: Division 7A: when will an unpaid present entitlement or amount held on sub-trust become the provision of 'financial accommodation'? : | The non-payment of interest under a consensual agreement between the private company and shareholder (or their associate) may satisfy the requirements of either (i) 'a provision of credit' or (ii) 'any other form of financial accommodation'. | The non-payment of interest may involve the private company 'allowing time to pay a debt including by granting a right to defer payment of a debt', where the debt is the interest due and payable. In such cases, there may be 'provision of credit' in terms of section 109D of the ITAA 1936. | The non-payment of interest may also involve the private company conferring a benefit on the shareholder (or their associate) in not calling for (or enforcing payment of) interest contractually due and payable. In such cases, there may be financial accommodation in terms of subsection 109D(3) of the ITAA 1936. | The non-payment of interest contractually due under a complying section 109N of the ITAA 1936 loan agreement, may therefore amount to a loan within the meaning of subsection 109D(3) of the ITAA 1936. | However, the generalia specialibus non derogant rule provides that the specific provision overrides the general, and it is not within the statutory scheme of Division 7A for the same underlying amount to be treated as a deemed dividend twice. | The specific provision within Division 7A of the ITAA 1936 aimed at treating non-payment of interest on a complying section 109N of the ITAA 1936 loan agreement as a deemed dividend is subsection 109E(1) of the ITAA 1936. | Therefore, in the circumstances here, subsection 109E(1) of the ITAA 1936 prevails over subsection 109D(1) of the ITAA 1936, meaning only the minimum yearly repayment shortfall in terms of subsection 109E(2) of the ITAA 1936 may give rise to a deemed dividend under Division 7A of the ITAA 1936. | This version was published on 10 August 2022, with effect from 13 July 2022. | Related Public Rulings (including Determinations) Taxation Determination TD 2022/11 | Keywords Companies Deemed dividends Shortfalls Shareholder loans"}
{"ATO_ID_Number": "ATO ID 2003/97", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed dividends - deemed minimum yearly repayment", "Issue": "Where a loan agreement deems the minimum yearly repayment for the current year to be made to the company, will this constitute an amount 'paid to the private company' under paragraph 109E(1)(c) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. The minimum yearly repayment deemed to be paid under the loan agreement does not constitute an amount 'paid to the private company' under paragraph 109E(1)(c) of ITAA 1936.", "Facts": "During the 2006-07 year of income a private company made an unsecured loan to the taxpayer, an individual and the company's sole shareholder. At the private company's lodgment day for the 2006-07 income year, the loan was not fully repaid. The private company did not make any other loans to the taxpayer during the 2006-07 income year. The loan was made under a written agreement, with a maximum term of 7 years and with a minimum rate of interest payable equal to the benchmark interest rate for the year. The written agreement in relation to the loan provides, amongst other things, that: The taxpayer did not make any repayments in respect of the loan in the 2007-08 income year.", "Reasons_for_Decision": "Summary: Section 109E of the ITAA 1936 operates to treat an amount as a dividend where the minimum repayment on the loan is not made. A loan by a private company to a shareholder is an amalgamated loan for the purposes of section 109E if: In this case, the loan meets the definition of an amalgamated loan (see subsection 109E(3) of the ITAA 1936). Subsections 109E(1) and 109E(2) provide that the shortfall in respect of a minimum yearly repayment is treated as a dividend at the end of the private company's current income year if certain circumstances exist. The private company must have made an amalgamated loan, the loan is not fully repaid and the full minimum yearly repayment has not been made. With regard to the last requirement paragraph 109E(1)(c) states: 'the amount (if any) paid to the private company during the current year in relation to the amalgamated loan falls short of the minimum yearly repayment of the amalgamated loan worked out under subsection (5) for the current year,... (emphasis added) To ascertain whether the deemed repayment constitutes an amount 'paid to the private company' for the purposes of paragraph 109E(1)(c) of the ITAA 1936 it is necessary to look at the meaning of the phrase 'paid to the private company'. The phrase 'paid to the private company' is to be given its ordinary meaning. The ordinary meaning of 'paid to the private company ' is used in the context of the repayment of loans. Accordingly, it means the repaying to the company of an amount already borrowed and/or the transfer of money from the debtor to the creditor, that is, the discharge of all or part of the debt or obligation. Where the taxpayer does not repay an amount equal to the minimum yearly repayment by the required date, the terms of the agreement provide: This is inconsistent with the ordinary meaning of 'paid to the private company'. Accordingly, the payment deemed to have been made in the 2007-08 income year under the terms of the agreement, does not constitute an amount 'paid to the private company' for the purposes of paragraph 109E(1)(c) of the ITAA 1936.", "Date_of_Decision": "4 December 2001", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 109E subsection 109E(1) paragraph 109E(1)(c) subsection 109E(2) subsection 109E(3) section 109N", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2010/206", "Subject_References": "Companies Shareholder loans Private company distributions", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200397", "Unmatched_Content": "This ATO ID was edited to reflect amendments to section 109E of the Income Tax Assessment Act 1936 effective 1 July 2006. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Related ATO Interpretative Decisions | Keywords Companies Shareholder loans Private company distributions"}
{"ATO_ID_Number": "ATO ID 2004/210", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Capital gains tax: direct value shift - active participant in scheme", "Issue": "Is a taxpayer who is issued shares at a discount, in a company of which they are a director, an active participant in the scheme to issue the shares for the purposes of subsection 725-65(2) of the Income Tax Assessment Act 1997 (ITAA 1997), even though the shares were issued at the instigation of the entity that controls the company?", "Decision": "Yes. It is considered that the taxpayer in this case is an active participant in the scheme under subsection 725-65(2) of the ITAA 1997, as the taxpayer had a direct knowledge of the scheme and, as a director of the company, was involved in the decision to issue the additional shares in the company.", "Facts": "A company has two shareholders and two directors. The taxpayer is a shareholder and a director of the company and owns some shares in the company. The other shareholder is also a director of the company and owns the majority of shares in the company. The taxpayer and the majority shareholder are not associates. In the 2004 income year, the company issued additional shares to the taxpayer at a discount to market value. The additional shares were issued to the taxpayer, as the majority shareholder wished to take a less active role in the company and wanted to encourage the taxpayer to take a more active role in the management of the company. The taxpayer had knowledge of this scheme and as a director of the company was involved in the decision to issue the additional shares in the company. As a result of the issue of additional shares, a direct value shift within the meaning of the term in section 725-145 of the ITAA 1997 happened. The sum of the decreases in market value of all the down interests because of the direct value shift is more than $150,000.", "Reasons_for_Decision": "Summary: An entity will be an active participant in a scheme under subsection 725-65(2) of the ITAA 1997 if: As the company in this case had only two shareholders and the taxpayer had an up interest issued to it at a discount, the taxpayer will be an active participant in the scheme if it actively participated in, or directly facilitated, the entering into or carrying out of the scheme. The Explanatory Memorandum (the EM) to the Bill which became the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002 provides guidance on the circumstances where an entity is considered to have actively participated in, or directly facilitated, the entering into or carrying out of a scheme. Paragraphs 11.124 and 11.125 of the EM provide: 11.124 Generally the existence of a common purpose or agreement between the parties to a scheme will result in the active participation test being satisfied. However, this is not a prerequisite. 11.125 Typically, actions such as voting for a value shift proposal, or arranging for economic benefits to be provided under a scheme, will be actions that amount to active participation in the scheme. These are actions that promote the performance of the scheme. In this case, the additional shares in the company have been issued as part of a plan for the majority shareholder to take a less active role in the company, and to encourage the taxpayer to take a more active role in the management of the company. The taxpayer had knowledge of the scheme and the reasons why it was undertaken. As a director of the company, the taxpayer was involved in the decision to issue more shares in the company. For these reasons, it is considered that the taxpayer is an active participant in the scheme.", "Date_of_Decision": "5 February 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 subsection 725-65(2) section 725-145", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT share value shifting arrangements", "Case_References": "", "Other_References": "Explanatory Memorandum to the Bill that became the New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Act 2002", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004210", "Unmatched_Content": "Keywords Capital gains tax CGT share value shifting arrangements"}
{"ATO_ID_Number": "ATO ID 2003/890", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Direct value shifting: shares issued at a premium", "Issue": "Do the direct value shifting provisions in Division 725 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the issue of new shares at a premium to market value?", "Decision": "No. The direct value shifting provisions in Division 725 of the ITAA 1997 do not apply to the issue of new shares at a premium to market value because no interests in the company have decreased in value.", "Facts": "A company has two shareholders B and C. At 30 June 2002 each shareholder owned 50% of the issued shares in the company. After 30 June 2002, the company entered into an arrangement in which shares were issued at a premium to market value to shareholder B.", "Reasons_for_Decision": "Summary: Where a direct value shift (DVS) occurs that has consequences under Division 725 of the ITAA 1997, the rules in the Division apply to modify the adjustable values of affected interests to take account of material changes in market value that are attributable to the DVS. The rules in Division 725 may also generate a capital gain on those interests that have decreased in market value as a result of the DVS. Division 725 of the ITAA 1997 can only apply to a scheme if there is a DVS as defined under section 725-145 of the ITAA 1997. A DVS will occur when: The company has raised additional capital by issuing shares at a premium to market value to shareholder B. This has increased the market value of both shareholders' existing shares. The market value of the newly-issued shares at all times was the same as the market value of the other shares in the company and has not decreased. Therefore, a DVS has not occurred under section 725-145 of the ITAA 1997 because there has not been a decrease in the market value of any interests in the company. The issue of shares at a premium to market value is not subject to the consequences in Division 725 of the ITAA 1997.", "Date_of_Decision": "17 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 725 section 725-145", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets CGT share value shifting arrangements Share premiums", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003890", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT share value shifting arrangements Share premiums"}
{"ATO_ID_Number": "ATO ID 2003/891", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Indirect value shifting: land transferred at cost", "Issue": "Does the exclusion from the indirect value shifting rules in section 727-220 of the Income Tax Assessment Act 1997 (ITAA 1997) (for the transfer of an asset for at least its cost) apply, when land is transferred at cost and the cost is more than the market value of the land?", "Decision": "No. The exclusion in section 727-220 of the ITAA 1997 does not apply when land is transferred for more than its market value, because value does not shift from the transferor of the land to the transferee.", "Facts": "Company C controls both company G and company L. There is no entity that controls company C. A non arm's length transaction was entered into after 30 June 2002 under which company G transferred land held on capital account to company L for $10 million. At the time when company G transferred it to company L, the land's cost base was $10 million and its market value was $8 million. All of company C's interests in company G were acquired before company G acquired the land that was transferred. Company C is the only affected owner (under Division 727 of the ITAA 1997) of company G.", "Reasons_for_Decision": "Summary: An indirect value shift (IVS) may have consequences under section 727-100 of the ITAA 1997 when the losing entity is a company or trust, the losing and gaining entity are controlled by the same entity or they have common owners and they were not dealing at arm's length in providing some of the benefits. If an IVS has consequences, it may result in the reduction of realised losses or gains, or in adjustments to the tax values of interests in the entities that have gained or lost value as a result of the IVS. Pursuant to section 727-150 of the ITAA 1997 there will be an IVS when the market value of economic benefits provided by one entity (the losing entity) to another entity (the gaining entity) exceeds the market value of benefits provided by the gaining entity in connection with a scheme. The benefits provided by the losing entity are referred to as the 'greater benefits.' An IVS will have no consequences under section 727-220 of the ITAA 1997 if the following requirements are satisfied: If section 727-220 of the ITAA 1997 were to apply in this case, the IVS would have no consequences for company C's equity interests held in company L and company G. In this transaction, company L (the losing entity) has provided $10 million consideration (the greater benefits) to company G (the gaining entity) for land valued at $8 million (the lesser benefits). Section 727-220 would not apply in relation to the transfer of the land, because the 'greater benefits' do not consist of the losing entity transferring land to the gaining entity. The exclusion in section 727-220 does not apply to the transfer of the land for more than its market value, because value has not shifted from the transferor of the land to the transferee. As a result, the IVS will be covered by Subdivision 727-F of the ITAA 1997 if no other exclusion applies.", "Date_of_Decision": "17 September 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 727 Subdivision 727-F section 727-100 section 727-150 section 727-220", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT exemptions CGT share value shifting arrangements", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003891", "Unmatched_Content": "Keywords Capital gains tax CGT exemptions CGT share value shifting arrangements"}
{"ATO_ID_Number": "ATO ID 2003/892", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Direct value shifting: options issued at a discount to market value", "Issue": "When options to acquire additional shares were issued to the shareholder at less than their market value, was the direct value shift (DVS) from the shareholder's existing shares a neutral value shift for the shareholder under section 725-220 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. Section 725-220 of the ITAA 1997 only requires that the sum of discounts received by a shareholder on the issue of the options be equal to the sum of market value decreases for that shareholder's shares.", "Facts": "A company has two shareholders, company N and company E. As a result of an arrangement entered into after 30 June 2002, the company issued options at a discount to market value to both shareholders. The effect of issuing the options at a discount was a reduction in the market value of the existing shares of $100,000 for each shareholder. The total discount received by each shareholder was $100,000. There is a DVS and both shareholders are affected by the direct value shifting rules.", "Reasons_for_Decision": "Summary: Where a direct value shift (DVS) occurs that has consequences under Division 725 of the ITAA 1997, the rules in the Division apply to modify the adjustable values of affected interests to take account of material changes in market value that are attributable to the DVS. The rules in Division 725 may also generate a capital gain on those interests that have decreased in market value as a result of the DVS. Pursuant to section 725-220 of the ITAA 1997 there will be a neutral DVS if the total decrease in market value of an entity's interests that have decreased in value as a result of the DVS (down interests) is equal to the sum of: There is no requirement for any of the interests to be of the same kind. If section 725-220 of the ITAA 1997 applies to a shareholder under the arrangement, then the consequences provided for in Division 725 apply to that shareholder as if the DVS were only from their down interests (shares) to their up interests (options). These consequences are set out in Subdivisions 725-D to 725-F. The DVS from the issue of the options has resulted in the $100,000 fall in market value of each shareholder's shares and a discount of $100,000 was given on the issue of options to each shareholder. The total decrease in market value of each shareholder's down interests was equal to the total discounts given on the issue of their up interests. The issue of the options was a neutral shift under section 725-220 for each shareholder in the company because the total decrease in market value of their shares was equal to the total discounts given on the issue of their options. There is no requirement for the interests to be of the same kind.", "Date_of_Decision": "29 August 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 725 Subdivision 725-D Subdivision 725-E Subdivision 725-F section 725-220", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital gains tax CGT assets CGT share value shifting arrangements", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003892", "Unmatched_Content": "Keywords Capital gains tax CGT assets CGT share value shifting arrangements"}
{"ATO_ID_Number": "ATO ID 2004/179", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Fixed maximum fee as a factor in determining control under section 51AD", "Issue": "Will a payment still be a 'fixed maximum fee' for the purpose of paragraph 19 of Taxation Ruling IT 2602 in determining whether there is control of the use of property by an end-user under subparagraph 51AD(4)(b)(ii) of the Income Tax Assessment Act 1936 (ITAA 1936), where payments are made on a 'take or pay' basis and the contract provides for a reduction in the payments where the contracted capacity is unavailable?", "Decision": "Yes. A payment will still be a 'fixed maximum fee' for the purpose of paragraph 19 of IT 2602 in determining whether there is control of the use of property by an end-user, where payments are made on a 'take or pay' basis and the contract provides for a reduction in the payments where the contracted capacity is unavailable.", "Facts": "The arrangement involved property owned and used by the taxpayer in the provision of a service of conveying energy for a tax exempt entity ('the end-user'). The end-user determined whether or not it wished the energy to be conveyed. Payments from the end-user to the taxpayer for the service were made on a take or pay basis as they were not based on whether the energy was actually conveyed but on the capacity of the property at any time to carry the volume of contracted energy. The arrangement imposed a reduction on the payments from the end-user to the taxpayer where the contracted capacity was not met. All of the capacity of the property to convey energy was allocated for the use of the end-user and the taxpayer was unable to use the property to convey energy for any entity other than the end-user.", "Reasons_for_Decision": "Summary: Subparagraph 51AD(4)(b)(ii) of the ITAA 1936 operates in relation to property acquired or constructed by a taxpayer that is used wholly or partly in the carriage, transmission or delivery of goods, or in the provision of services where a body whose income is exempt from tax ('the end-user') has effective control of the use of the property. Taxation Ruling IT 2602 provides that the question of control may require an examination of the whole commercial arrangement, including the financial arrangements, surrounding the ownership and operation of the property. Paragraph 19 of IT 2602 states that an arrangement for the payment of a fixed maximum fee would effectively limit the commercial benefits which can flow from the operation of the property by the taxpayer and might suggest the end-user rather than the taxpayer would seek to control the day-to-day operation of the property. Payments that are made on a take or pay basis where the payments from the end-user provide the required return to the taxpayer from the use of the property, without recourse to material income from third parties, will constitute a fixed maximum fee for the purpose of paragraph 19 of IT 2602. The fact that payments from the end-user under the arrangement were dependent upon the contracted service being provided, and that the payments would be reduced if the contracted capacity was not provided, was not a factor in determining whether the payments constituted a fixed maximum fee within the context of paragraph 19 of IT 2602.", "Date_of_Decision": "6 February 2004", "Year_of_Income": "Year ended 31 March 2003", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 51AD(4)(b) subparagraph 51AD(4)(b)(ii)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2602 | Taxation Ruling TR 96/22", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/932", "Subject_References": "Ownership, interests, control & rights Non recourse loans", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004179", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2602 Taxation Ruling TR 96/22 | Keywords Ownership, interests, control & rights Non recourse loans"}
{"ATO_ID_Number": "ATO ID 2014/10", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Entitlements to franking credits in an employee remuneration arrangement: Commissioner's discretion", "Issue": "Is the conclusion that a beneficiary of a unit trust cannot satisfy the qualification period in the former section 160APHO of the Income Tax Assessment Act 1936 (ITAA 1936) a relevant matter for the Commissioner to consider in exercising the discretion to treat the unit holder's interest as vested and indefeasible under former paragraph 160APHL(14)(c) of the ITAA 1936?", "Decision": "No. The conclusion that a beneficiary of a unit trust cannot satisfy the qualification period in former section 160APHO of the ITAA 1936 is not a relevant matter for the Commissioner to consider in exercising the discretion to treat the unit holder's interest as vested and indefeasible under former paragraph 160APHL(14)(c) of the ITAA 1936.", "Facts": "Contributions are made by an employer to an employee remuneration arrangement that operates through a unit trust. The trustee of the unit trust provides a non-recourse interest free loan to the employee. The employee uses the loan to acquire units in the trust. No repayment of the loan is required until cancellation of the units. The trustee uses the funds that have been contributed by the employee to acquire shares in the employer and these shares are held on trust for the unit holder. The issue price of each unit is the market value of the share allocated to that unit. The unit holder is entitled to receive, in proportion to their unit holding, income distributions, including franked dividends received by the trustee on allocated shares. The unit holder has a cancellation entitlement when the units are cancelled. The cancellation entitlement includes a choice of receiving an in specie distribution of shares or a payment of cash equal to the market value of the shares. However, any cancellation entitlement will be first offset against any amount outstanding on the interest free non-recourse loan. Where the cancellation entitlement is insufficient to cover the amount that is outstanding on the loan, the trustee will accept the cancellation entitlement in full and final satisfaction of the amount outstanding on the loan. The unit holder has received more than $5000 in imputation credits and the arrangement is not an employee share scheme under Division 83A of the Income Tax Assessment Act 1997 (ITAA 1997). The employee does not hold any further interest with respect to the shares other than the interest held as beneficiary of the unit trust and does not have a vested and indefeasible interest in the corpus of the trust. As such, the unit holder will not be a qualified person for the purposes of Division 1A of former Part IIIAA of the ITAA 1936 unless the discretion in former subsection 160APHL(14) of the ITAA 1936 is exercised in the unit holder's favour.", "Reasons_for_Decision": "Summary: A beneficiary of a trust is only entitled to the tax offset under section 207-45 of the Income Tax Assessment Act 1997 (ITAA 1997) if that beneficiary is a qualified person for the purposes of Division 1A of former Part IIIAA of the ITAA 1936 (the Division) in relation to the distribution - paragraph 207-150(1)(a) of the ITAA 1997. The intent of the Division is to ensure that the benefit of a franked distribution is only available to the true economic owner of a share, that is, the entity which is sufficiently exposed to the risks of loss and the opportunities for gain associated with share ownership. The Division seeks to prevent taxpayers who have limited exposure to those risks and opportunities from obtaining access to franking credits. In this regard paragraph 4.6 of the Explanatory Memorandum to the Tax Laws Amendment Bill (No. 2) 1999 ( the EM ) states: One of the underlying principles of the imputation system is that the benefits of imputation should only be available to the true economic owners of shares, and only to the extent that those taxpayers are able to use the franking credits themselves: a degree of wastage of franking credits is an intended feature of the imputation system. Where there is a trust that is not widely held, and a beneficiary does not have a vested and indefeasible interest in the corpus of the trust, the Commissioner of Taxation may exercise the discretion in former subsection 160APHL(14) of the ITAA 1936 to treat the interest as being vested and indefeasible. In exercising this discretion, former paragraph 160APHL(14)(c) of the ITAA 1936 sets out the matters to which the Commissioner of Taxation should have regard: When the Commissioner is exercising the discretion in former subsection 160APHL(14) of the ITAA 1936, the fact that a taxpayer will not otherwise be able to satisfy the qualification period in former section 160APHO of the ITAA 1936 is not a relevant matter under former paragraph 160APHL(14)(c) of the ITAA 1936. The Commissioner's discretion becomes relevant because the requirements of former section 160APHO of the ITAA 1936 have not been met but whether the discretion should be exercised depends on separate considerations. Whether the discretion will be exercised in a taxpayer's favour is dependent on an examination of the circumstances so as to understand where the true economic ownership of the shares is held. In considering the factors set out in former paragraph 160APHL(14)(c) of the ITAA 1936, the unit holder may not be sufficiently exposed to the risk of loss or opportunity for gain in respect of their shares due to: Consistent with the intent of the imputation system, the Commissioner will not exercise the discretion in former subsection 160APHL(14) of the ITAA 1936 to treat the interest as being vested and indefeasible where the employee is not sufficiently exposed to the risk of loss or opportunity for gain. The employee will consequently not have a vested and indefeasible interest, will not be a qualified person for the purposes of Division 1A of former Part IIIAA of the ITAA 1936 (the Division) in relation to the distribution, and will not be entitled to a tax offset under section 207-45 ITAA 1997.", "Date_of_Decision": "27 February 2014", "Year_of_Income": "Year ended 30 June 2013", "Legislative_References": "Income Tax Assessment Act 1936 Division 1A subsection 160APHL(14) paragraph 160APHL(14)(c) section 160APHO", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Company tax Imputation system Franking Accounts Franking Credits Employee Share Trusts", "Case_References": "", "Other_References": "Explanatory memorandum to the Taxation Laws Amendment Bill (No. 2) 1999", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201410", "Unmatched_Content": "Keywords Company tax Imputation system Franking Accounts Franking Credits Employee Share Trusts"}
{"ATO_ID_Number": "ATO ID 2012/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Holding period rule", "Issue": "In determining whether a Fund has a materially diminished risk of loss or opportunity for gain in respect of a particular share, can the Fund deconstruct the SPI 200 Futures contracts in order to determine its net position in respect of the particular share?", "Decision": "Yes.", "Facts": "A particular Fund has a long investment in shares in ABC Pty Ltd, a public listed company included in the ASX 200 index. During its period of ownership, the Fund receives a franked dividend from ABC Pty Ltd. As part of its investment strategy, the Fund enters into short positions in respect of the ASX 200 through SPI 200 Futures contracts. No associates of the Fund hold a position in ABC shares under an arrangement with the Fund.", "Reasons_for_Decision": "Summary: A taxpayer's 'net position' is determined by reference to its long and short positions. Former subsection 160APHJ(2) of the Income Tax Assessment Act 1936 (ITAA1936) provides that a position in relation to shares or an interest in shares is anything that has a 'delta' in relation to the shares or interest. The 'net position' of the Fund in relation to the ABC shares is defined in former subsection 160APHJ(5)of the ITAA 1936 as the sum of the Fund's long positions in the shares (calculated on the basis of their delta) and short positions in the shares (also calculated on the basis of their delta). Pursuant to former subsection 160APHJ(4) of the ITAA 1936, a long position in relation to shares, or an interest in shares, is a position that has a positive delta in relation to the shares or interest. For example, the purchase of ABC shares viewed in isolation would have a delta of +1. Pursuant to former subsection 160APHJ(3) of the ITAA 1936, a short position in relation to shares, or an interest in shares is a position that has a negative delta in relation to the shares or interest. It is stated that there are no associates of the Fund which held ABC shares under an arrangement with the Fund. Therefore, the issue of whether an associate of the Fund, pursuant to former subsection 160APHJ(9) of the ITAA 1936, has a short position or an interest in relation to ABC shares is not relevant. Former subsection 160APHJ(2) of the ITAA 1936 defines a 'position' in relation to shares as anything that has a delta in relation to the shares and includes a non exhaustive list of potential positions. In this instance, the position is the short sale of SPI Futures Contracts. 'Delta' is a financial concept that measures the relative change in the price of an option or other derivative for a given small change in the price of the underlying asset. The concept of delta is not defined in the tax legislation, but former subsection 160APHM(3) of the ITAA 1936 provides by way of example that an option to sell a share with a delta of minus 0.5 in relation to the share reduces the risks of loss and opportunities for gain by 50%. Former subsection 160APHJ(2) of the ITAA 1936 lists some examples of positions which, because they relate to \"substantially similar or related property\", will have a delta in relation to the underlying shares held by the taxpayer. Substantially similar or related property is considered to refer to property sufficiently similar to the underlying shares so as to exhibit a correlation in price movements. This correlation is between shares, interests in shares or property that the taxpayer is connected to. In defining the scope of this correlation it is essential to restrict the analysis to factors that are not too remote. The SPI Futures contract is an instrument that is not too remote because the SPI Futures contract is made up of many stocks, including ABC shares. Therefore, the holding necessary to take into account when determining the net position of the Fund in relation to the ABC shares, is the short position taken on the ABC shares through the SPI Futures contracts. | Detailed Reasoning - Section 160APHO of the ITAA 1936: For the purposes of the 'holding period' rule pursuant to subsection 160APHO of the ITAA 1936, where neither a taxpayer nor an associate of the taxpayer has made, is under an obligation to make, or is likely to make a related payment in respect of the dividend, the taxpayer will be a qualified person if the shares are held 'at risk' for at least 45 days (for ordinary shares) or 90 days (in the case of preference shares). Where the taxpayer has made, is under an obligation to make, or is likely to make a related payment in respect of the dividend, the relevant qualification period will be the secondary qualification period. As no related payments have been made, the relevant primary qualification period, defined in section 160APHD of the ITAA 1936 will be the period commencing on the day after the day on which the taxpayer acquired the shares or interest, and ending on the 45th day after the day on which the shares or interests become ex-dividend. Pursuant to subsection 160APHO(2) of the ITAA 1936, a taxpayer is taken to have 'materially diminished' the risks of loss or opportunities for gain on a particular day in respect of shares held by the taxpayer or in respect of an interest in shares held by the taxpayer, if the taxpayer's 'net position' on that day in relation to the shares or interest in shares has less than 30% of those risks or opportunities. The facts presented above shows that the Fund's net position is comprised of the long stock position in ABC shares (on which dividends are received) and the short position on the SPI Futures contract. | Detailed Reasoning - The methodology: The Fund has formulated a methodology for establishing whether the fund has materially diminished its risk of loss or opportunities for gain in respect of the ABC shares. Essentially, the SPI futures contract is deconstructed into its open (short) component stock positions. The net position of a particular stock is then determined by offsetting the decomposed component of the SPI futures contract relating to the stock against the +1 delta of the particular share. If the net position is greater than 30%, it is concluded that all of those particular shares are held sufficiently 'at risk' during the qualification period. Because the net long/short position calculated in accordance with the methodology is greater than 30%, it can be concluded that during the qualification period, the Fund has not materially diminished its risk of loss or opportunities for gain in respect to its holdings of ABC shares. Consequently, the Fund will be eligible for a tax offset in respect of the franking credits attached to the dividends on the ABC shares.", "Date_of_Decision": "2 April 2012", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 160APHJ(2) section 160APHJ(3) section 160APHJ(4) section 160APHJ(5) section 160APHJ(9) section 160APHO(2) section 160APHD section 160APHM(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Holding period rule", "Case_References": "", "Other_References": "", "Business_Line": "Finance & Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201224", "Unmatched_Content": "Keywords Holding period rule"}
{"ATO_ID_Number": "ATO ID 2011/96", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Last-in first-out rule: meaning of related securities", "Issue": "Do shares held by a connected company that fail the holding period rule from the perspective of the connected company constitute related securities for the purposes of the Last-In First-Out ('LIFO') rules in former section 160APHI of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. Such shares would not constitute related securities for the purposes of former subsection 160APHI(2) of the ITAA 1936.", "Facts": "Company A holds shares in Company X that entitled Company A to a dividend. Company A disposes of the shares in Company X after receipt of the dividend. Company A would be a qualified person in respect of the dividend received for the purposes of former Division 1A of the ITAA 1936. Company B also holds shares in Company X that entitled Company B to a dividend. Company B also disposes of the shares in Company X after receipt of the dividend. However, company B would not be a qualified person in respect of the dividend received for the purposes of former Division 1A of the ITAA 1936. Company A and B are both companies in the same wholly owned group in that they have the same ultimate holding company.", "Reasons_for_Decision": "Summary: Former section 160APHI of the ITAA 1936 provides the legislative basis for the operation of a LIFO rule in determining the period for which shares are taken to have been held during a qualification period. In general terms, the provision provides for all shares held by a person (the primary securities) to be grouped together with substantially identical shares held by connected persons (the related securities) in determining the period of ownership, with disposals of shares from this group taken to be on a last-in first-out basis. The rationale for this treatment is provided at paragraph 4.39 of the Explanatory Memorandum to Taxation Laws Amendment Bill (No. 2) 1999 which provides as follows: 'LIFO prevents circumvention of the holding period rule by taxpayers with portfolios of old shares buying new shares and selling old shares, as well as providing tax neutrality in a decision whether to make economically equivalent disposals of particular parcels of shares.' However, the LIFO treatment does not extend to all shares. As is made clear at paragraph 4 .48 of the Explanatory Memorandum 'There will be no double counting of disposals of securities. Therefore, if the disposal of a security triggers the holding period rule in relation to that security, it will not also trigger a disposal of another security, even if it is related.' For the shares in Company X held by Company A, the restriction on double counting is achieved by former subsection 160APHI(7) of the ITAA 1936. This provides that the LIFO rule would not apply to disposals of shares by Company A in circumstances where company A would not be regarded as a qualified person in respect of the shares by failing the holding period rule. However, from the perspective of Company A, it is also necessary to consider shares held by connected persons to see if these shares are also subject to the LIFO rules which could potentially alter the period for which Company A is considered to have held its Company X shares. In order for the LIFO treatment to extend to the Company X shares held by Company B, it would be necessary for such shares to be related securities for the purposes of former subsection 160APHI(2) of the ITAA 1936. Where the connected person holding a substantially identical security is a company, one of the requirements for the substantially identical security to be regarded as a related security is that the substantially identical security gives rise to a 'rebateable dividend'. The term 'rebateable dividend' is defined for these purposes in former section 160APHD of the ITAA 1936 as a dividend for which the taxpayer is entitled to a rebate under section 46 or section 46A. Further, former subsection 46(2B) of the ITAA 1936 provides that a shareholder is not entitled to a rebate pursuant to former section 46 unless the shareholder is a qualified person in respect of the dividend. As Company B is not a qualified person in respect of the dividend it receives from Company X, the shares in Company X it holds would not be related securities for the purposes of former section 160APHI of the ITAA 1936. As such, they would not be included in the group of securities subject to the LIFO rule from the perspective of Company A.", "Date_of_Decision": "3 December 2010", "Year_of_Income": "Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 46 subsection 46(2B) Division 1A section 160APHD section 160APHI subsection 160APHI(2) subsection 160APHI(7)", "Related_Public_Rulings_and_Determinations": "TD 2007/11", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Qualified Person", "Case_References": "", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Bill (No. 2) 1999", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201196", "Unmatched_Content": "Correction of 'in' to 'is' | Related Public Rulings (including Determinations) TD 2007/11 | Keywords Qualified Person"}
{"ATO_ID_Number": "ATO ID 2009/136", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Convertible Debentures and Tainted Share Capital Accounts", "Issue": "Will the conversion of convertible debentures held by a Head company of a tax consolidated group in its subsidiary members into ordinary shares constitute a transfer to the share capital accounts of those subsidiary members for the purposes of section 197-5 of the Income Tax Assessment Act 1997 (ITAA 1997)", "Decision": "No. The conversion of convertible debentures will not constitute a transfer to the share capital account of either subsidiary member for the purposes of section 197-5 of the ITAA 1997.", "Facts": "Company A is the Head company of a tax consolidated group with wholly owned subsidiary members being Company B and Company C. All companies are Australian resident companies. Company A (the debenture holder) holds convertible debentures which were issued by Company B and Company C (the issuers) before the formation of the tax consolidated group. For accounting purposes, the convertible debentures are classified as equity. The terms and conditions require the issuer to first redeem the debentures. The redemption proceeds are then applied as the consideration for the issue price of the ordinary shares to be held by the former debenture holder. The following journal entries will record the redemption of the debentures and conversion by the issue of ordinary shares in the financial accounts of each of the issuers:", "Reasons_for_Decision": "Summary: Division 197 of Part 3-5 of the ITAA 1997 was inserted by the Tax Laws Amendment (2006 Measures No.3) Bill 2006; New Business Tax System (Untainting Tax) Bill 2006 (TLA No.3). The Explanatory Memorandum to the Bills (the 2006 EM) stated in Chapter 4 that Schedule 4 of the Bill amended the ITAA 1997 to ensure that a company's share capital account will become tainted if it transfers certain amounts to that account. The share capital tainting provisions are integrity rules designed to prevent a company from disguising a distribution of profits as a tax-preferred capital distribution by transferring profits into its share capital account and subsequently making distributions from that account. The 2006 EM also states at paragraph 4 5 that a company's share capital account will become tainted if it transfers an amount to its share capital account from any other account. | Detailed Reasoning - What constitutes a transfer of an amount to the share capital account?: Section 197-5 of the ITAA 1997 provides as follows: The expression 'transferred amount' is not defined within Division 197 or section 995-1 of the ITAA 1997 and reference must therefore be made to its ordinary meaning in the first instance. The Macquarie Dictionary does not define the meaning of the compound expression 'transferred amount'. However, the Macquarie Dictionary does define 'transfer' as: and 'amount' as: While not determinative, these definitions suggest a 'transferred amount' in the context of section 197-5 of the ITAA 1997 may mean in its broadest sense the record of the movement of any quantity of money to a company's share capital from any other of the company's accounts. However, the meaning of the expression 'transferred amount' is also discussed in the 2006 EM which explains the policy and operation of Division 197 within the ITAA 1997. The 2006 EM states the following and provides an example at paragraph 4 12 to 4 13: When is an amount transferred from one account to another account? 4.12 An amount is transferred from one account to another where that amount is moved from one account to another. This, in turn, requires the balance of the first account to be reduced, while the balance of the second account is increased by the same amount. 4.13 An amount is not transferred from one account to another where the particular accounting entries result in the balances of both accounts increasing in size. Accordingly, an accounting entry of the form 'debit asset, credit share capital account' does not represent a transfer in the relevant sense . Furthermore, a transfer to the share capital account will not arise if an expense account is debited at the same time that the share capital account is credited ( emphasis added ). Example 4.1 A company has a retained profits reserve balance of $1,000 at the beginning of the 2006-07 income year. The company issues $100 in shares on 1 September 2006 to an individual as consideration for services rendered. The share issue is accounted for by debiting the expense account by $100 and crediting the share capital account by $100. The company does not derive any income nor does it incur any other expenses during the income year. At the end of the income year, the balance of the expense account ($100 debit) will be transferred to the profit and loss account. On closure of its profit and loss account a $100 debit will be made to the company's retained profits reserve. The company's retained profits reserve is reduced by the net loss ($100) incurred over the income year, not directly by the expense itself. Therefore, no amount has been transferred from the company's retained profits reserve to its share capital account. The accounting journal entry that will credit the increase of the share capital account upon conversion of the convertible debentures by the issue of ordinary shares will be associated with an increase in a receivable (asset) account. This accounting journal entry will result in the balance of both accounts increasing in size. Within the context of paragraphs 4 11 to 4 13 of the 2006 EM, this accounting journal entry by the subsidiary members will not be a transfer in the relevant sense as it will result in both accounts increasing in size. Accordingly, the redemption and conversion of the convertible debentures to ordinary shares will not constitute a transfer of an amount in the relevant sense to the share capital account for the purposes of section 197-5 of the ITAA 1997. As such, the redemption and conversion of the convertible debentures will not cause the share capital accounts of the subsidiary members to become tainted for the purposes of Division 197 of the ITAA 1997.", "Date_of_Decision": "6 November 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1997 section 197-5 section 995-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debentures Tainted share capital account", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (2006 Measures No.3) Bill 2006; New Business Tax System (Untainting Tax) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009136", "Unmatched_Content": "Dr Convertible Debentures (equity) | (Being the redemption of convertible debentures) | (Being the subscription for ordinary shares) | (Being the application of redemption proceeds against amount payable for shares) | Keywords Debentures Tainted share capital account"}
{"ATO_ID_Number": "ATO ID 2006/31", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Franking Credits: CGT roll-over relief and its interaction with the date of acquisition for imputation purposes - qualified person - family trust election", "Issue": "If a trustee of a discretionary trust elects to apply the capital gains tax (CGT) roll-over provisions of Subdivision 122-A of the Income Tax Assessment Act 1997 (ITAA 1997) to deem the acquisition date of newly issued shares to be pre-20 September 1985, will the new shares be deemed to have been acquired before 20 September 1985 for the purposes of the imputation rules, in particular, the 'holding period' and 'related payment' rules contained in Division 1A of Part IIIAA of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. If a trustee of a discretionary trust elects to obtain the CGT roll-over available under Subdivision 122-A of the ITAA 1997 to deem the acquisition date of newly issued shares to be pre 20 September 1985, then the new shares will not be deemed to have been acquired before 20 September 1985 for the purposes of the imputation rules. For the purposes of the imputation rules, the trustee of the discretionary trust will be taken to have acquired the newly issued shares on the date of acquisition. This occurred post 1 July 1997. Therefore, in respect of dividends paid on the newly issued shares, the beneficiaries of the trust will not, in the absence of any other long or short positions, be a 'qualified person' under Division 1A of Part IIIA of the ITAA 1936 unless the trustee makes a family trust election.", "Facts": "Discretionary trust A holds 100% of the shares in company B and company C. These shares were acquired before 20 September 1985. Consequently, distributions in respect of them were not subject to the holding period rules contained in Division 1A of the Part IIIA of the ITAA 1936. In June 2003, discretionary trust A transferred its shares in company C to company B in exchange for newly issued shares in company B. Following the transfer, discretionary trust A owns 100% of the shares in company B and company C becomes a wholly owned subsidiary of company B. This was done to facilitate entry into the consolidations regime. Discretionary trust A elected to obtain the CGT roll-over available under Subdivision 122-A of the ITAA 1997 in respect of the transfer of shares to company B. Beneficiary D is a beneficiary of discretionary trust A. Beneficiary D will receive distributions of franked dividends from the trust in the 2003-04 to 2007-08 income years. The franking credits attached to the dividends exceed $5,000.", "Reasons_for_Decision": "Summary: The CGT roll-over is found in Subdivision 122-A of the ITAA 1997. If an individual or a trustee of a trust transfers a CGT asset (for example a share) to a company in which the individual or trustee holds all the shares, and the market value of the asset transferred and the market value of the share issued by the transferee are substantially the same, then any capital gain on the disposal of the asset to the company is disregarded. Moreover, if the asset has been acquired before 20 September 1985, then the share the trustee receives in exchange are also taken to have been acquired before 20 September 1985. Section 995-1 of the ITAA 1997 provides a definition of the term 'acquire' in the context of a CGT asset: Acquire: The effect of the words 'in the capacity as a CGT asset', is to restrict the relevance of the acquisition date of a CGT asset, including deemed acquisitions dates as determined under Division 109 of the ITAA 1997 and provisions listed in Subdivision 109B of the ITAA 1997 to circumstances in which the taxpayer deals with an asset in its capacity as a CGT asset. The present circumstance is listed at item 6 of the table contained in section 109-55 of the ITAA 1997. Consequently, the acquisition date deemed in respect of the newly issued shares to trust A is relevant purely in the context of CGT consequences. It is not intended to extend to the share's treatment for imputation purposes or any other purpose outside the CGT provisions. Division 1A of Part IIIAA of the ITAA 1936 generally applies to shares and interests in shares acquired on or after 1 July 1997. New shares were issued by company B to trust A pursuant to the establishment of the current structure in June 2003. An underlying principle of the imputation system is to ensure that the benefits of imputation are only available to the true economic owners of shares and only to the extent that those taxpayers are able to utilise those benefits. Section 160APHH of the ITAA 1936 provides some special rules relating to the date of acquisition or disposal for imputation purposes, outlining several circumstances where a taxpayer may be taken to acquire or dispose of shares at a time other than the actual time of acquisition or disposal. However, neither this section nor any other provision within Division 1A of Part IIIAA of the ITAA 1936 deems the acquisition date of shares issued post 1 July 1997 as consideration in respect of the disposal of pre-CGT shares to have a pre-CGT acquisition date. Therefore, in the absence of a specific provision that deems shares issued post 1 July 1997 as consideration in respect of the disposal of pre-CGT shares to have a pre-CGT acquisition date, the shares issued to trust A as consideration for the transfer to it of pre-CGT shares will be taken to have been issued at that time.", "Date_of_Decision": "29 November 2005", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1997 section 122-55 section 995-1 section 109-55", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "CGT roll-over relief Family trust election", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200631", "Unmatched_Content": "Keywords CGT roll-over relief Family trust election"}
{"ATO_ID_Number": "ATO ID 2005/31", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Streaming of franking credits: distribution to only one class of shareholder", "Issue": "Will the Commissioner make a determination under paragraph 204-30(3)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) where Company B pays franked dividends to its A-class shareholder to the exclusion of its ordinary shareholder?", "Decision": "No, the Commissioner will not make a determination under paragraph 204-30(3)(c) of the ITAA 1997 where it cannot be shown that the A class shareholder would derive a greater benefit from franking credits than the ordinary shareholder.", "Facts": "Company B is an Australian resident company with two shareholders, X and Y. X owns all the ordinary shares and Y owns an A class share in the company. They are both natural persons and Australian residents for taxation purposes. There have been no distributions made to X or Y since the company was incorporated. Company B wishes to pay a franked dividend to its A class shareholder only. The holder of the ordinary shares is not going to be provided with any other benefits (including loans) in lieu of the franked distribution to be paid to the holder of the A class share. X and Y are the only shareholders of the company. There are no other shares on issue.", "Reasons_for_Decision": "Summary: Section 204-30 of the ITAA1997 was introduced as a specific anti-avoidance provision to apply where a company streams dividends so as to provide franking credit benefits to shareholders who benefit most, in preference to other shareholders. As a resident recipient of a franked distribution from Company B, Y will be required to gross-up the distribution under section 207-20(1) of the ITAA 1997 and be entitled to a tax offset under section 207-20(2). Consequently, upon receipt of the distribution, Y will be taken to have received an imputation benefit under paragraph 204-30(6)(a) of the ITAA 1997. Subsections 204-30(7) and 204-30(8) of the ITAA 1997 list instances in which a member of an entity will be taken to derive a greater benefit from franking credits than another member of the entity. Of the factors listed in section 204-30(8) of the ITAA 1997 only those listed in paragraphs (a), (b) and (c) will be of relevance in the context of distributions to shareholders that are natural persons. As X and Y are natural persons and Australian residents, their residential status will not in itself confer greater benefits upon one to the exclusion of the other. Furthermore, as they will both be entitled to tax offsets in the event of receiving a franked distribution, one will not secure a greater benefit than the other from franking, on account of their entitlement to an offset. Consequently paragraphs (a) and (b) will not distinguish between X and Y insofar as the ability of one to secure a greater benefit from franking than the other is concerned. Paragraph (c) of section 204-30(8) of the ITAA 1997 examines whether a distribution is being directed towards one member in preference to another based upon the member's ability to derive a greater benefit from the associated tax offset. As an example, the Explanatory Memorandum for the New Business Tax System (Imputation) Bill 2002 cites a corporate tax entity that is not entitled to a refund of excess imputation credits. While the introduction of the loss wastage measures reduces the circumstances in which excess franking credits are wasted, the focus of paragraph (c) is on instances where one member's tax profile limits the value of a tax offset to them. However, both X and Y are entitled to refunds of excess imputation credits and consequently are able to utilize tax offsets associated with distributions to the same extent. To the extent that the amount of tax payable as a result of the distribution is less than the tax offset associated with the distribution, they will both be entitled to a refund equal to the excess. Accordingly, it cannot be said that the entity has directed distributions in such a manner as to confer greater benefits from franking upon a member that is able to derive a greater benefit from franking credits to the exclusion of a member that is unable to do so. Consequently, the Commissioner will not make a determination under paragraph 204-30(3)(c)of the ITAA 1997 where Company B pays franked dividends to it's A-class shareholder to the exclusion of its ordinary shareholder.", "Date_of_Decision": "20 December 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1997 section 204-30 section 207-20", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/622", "Subject_References": "Dividend streaming arrangements Franked dividends Imputation system Shareholders", "Case_References": "", "Other_References": "Explanatory Memorandum to the New Business Tax System (Imputation) Bill 2002", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200531", "Unmatched_Content": "This ATO ID has been amended to improve clarity. | Keywords Dividend streaming arrangements Franked dividends Imputation system Shareholders"}
{"ATO_ID_Number": "ATO ID 2004/881", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Proposed share capital reduction by a property developer", "Issue": "Does section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) apply such that the Commissioner is able to make a determination under subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies to treat the amount of the return of capital as an unfranked dividend paid out of the profits of the company?", "Decision": "No. Section 45B of the ITAA 1936 will not apply in respect of the return of capital and the distribution will not be treated as a dividend for income tax purposes.", "Facts": "The company is a single purpose entity - its sole purpose being to acquire, develop and sell a particular parcel of land as a residential subdivision. The company initially borrowed money to purchase the land. It then raised equity through the issue of shares at $1 each and used those funds to repay the loan. Approximately 50% of the company's developed lots have now been sold and settled. The directors of the company intend that, as profits emerge from the subdivision and sale of resultant lots, dividends would be paid to the shareholders. The company's dividend history demonstrates that virtually all realised profits have been distributed. The directors also intend that as capital is released from the sale of the land over the life of the project it would be progressively returned to the shareholders. The company proposes a return of capital to shareholders, being approximately 30% of the shareholders' initial investment of 30 cents per share.", "Reasons_for_Decision": "Summary: Section 45B of the ITAA 1936 does not apply because not all the conditions in subsection 45B(2) of the ITAA 1936 are satisfied. Subsection 45B(2) of the ITAA 1936 sets out the conditions under which section 45B of the ITAA 1936 applies. This section applies if: The distribution is a 'scheme' within the broad meaning of that term, for the purposes of section 45B of the ITAA 1936. The meaning of 'provided with a capital benefit' is found in subsection 45B(5) of the ITAA 1936. A person is provided with a capital benefit if: As the distribution will be debited against the company's share capital account, there will be a provision of a capital benefit as defined by subsection 45B(5) of the ITAA 1936. A further requirement of subsection 45B(2) of the ITAA 1936 is that a taxpayer (the relevant taxpayer) must obtain a tax benefit. The relevant taxpayer need not be the person who is provided with the capital benefit. Obtaining a tax benefit is defined in subsection 45B(9) of the ITAA 1936 to mean circumstances where the amount of tax payable, or any other amount payable under the income tax law by the relevant taxpayer would, apart from this section, be less than the amount that would have been payable, or would be payable at a later time than it would have been payable, if the capital benefit had been a dividend. Shareholders will obtain a tax benefit, within the meaning of subsection 45B(9) of the ITAA 1936, as the amount of tax payable from treatment of a return of capital distribution under the capital gains and losses provisions would, apart from the operation of section 45B of the ITAA 1936, be less than the amount that would be payable if the distribution had instead been a dividend. Although there is a scheme under which shareholders are provided with a capital benefit and would obtain a tax benefit, it is not considered that the scheme was entered into, or carried out, for a more than incidental purpose of enabling shareholders to obtain the tax benefit. Subsection 45B(8) of the ITAA 1936 sets out circumstances that are relevant to determining whether any person has the requisite degree of purpose of enabling a taxpayer to obtain a tax benefit. Paragraph 45B(8)(a) of the ITAA 1936 refers to the extent to which the distribution is attributable to the profits of the company. The distribution would be attributable to capital because the proportion of the land (that constitutes the business structure of the company) that has been developed and sold is greater than the proportion of contributed equity being returned, that is, 50% of the total number of lots expected to be developed have been sold and settled as compared to 30% of contributed equity being returned. Also, the company has a history of regularly distributing virtually all its profits as dividends. These circumstances indicate that enabling shareholders to obtain a tax benefit is no more than an incidental purpose of entering into, or carrying out, the scheme. The Commissioner will not make a determination in terms of subsection 45B(3) of the ITAA 1936 that section 45C of the ITAA 1936 applies in relation to the capital benefit.", "Date_of_Decision": "3 November 2004", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 45B section 45C", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/652", "Subject_References": "Capital reductions Share capital", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004881", "Unmatched_Content": "Keywords Capital reductions Share capital"}
{"ATO_ID_Number": "ATO ID 2004/318", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Reduction in a shareholder's equity interest by the way of share buy-back: section 45A does not apply", "Issue": "Will the return of capital to a shareholder whose equity interest is reduced trigger the application of section 45A of the Income Tax Assessment Act 1936 (ITAA 1936) to enable the Commissioner to treat the distribution as a dividend for income tax purposes?", "Decision": "No. Section 45A of the ITAA 1936 will not apply to a shareholder whose equity interest in the company is reduced.", "Facts": "Company A is equally owned by family companies B and C. Both companies B and C are Australian resident companies. Most of the company A shares were issued pre-CGT, that is, before 20 September 1985. The original owner of shares in company B died and ownership of the shares passed to that shareholder's children. Company A is now primarily operated and managed by persons associated with company C. The shareholders in company B wish to reduce company B's equity interest in company A. Company A proposes to undertake a selective share buy-back of almost all the shares held by company B at the price of $3.85 per share. A nominal shareholding is to be retained by company B. The buy-back is to consist entirely of pre-CGT shares. The buy-back consideration is to be debited to the share capital account at $2 per share (the original subscription price) with the remaining balance of $1.85 debited against retained profits. Company A has confirmed that there have not been any transfers to share capital account that would constitute to the tainting of the share capital account for the purposes of Division 7B of Part IIIAA of the ITAA 1936.", "Reasons_for_Decision": "Summary: Section 45A of the ITAA 1936 applies in circumstances where capital benefits are streamed to certain shareholders who derive a greater benefit from the receipt of capital (the advantaged shareholders) and it is reasonable to assume that the other shareholders (the disadvantaged shareholders) have received or would receive dividends. By distributing share capital as part of the buy-back consideration, the company will provide one shareholder with a 'capital benefit', as defined in paragraph 45A(3)(b) of ITAA 1936. However, there is nothing in the proposed arrangement to indicate that there is a 'streaming' of capital benefits to one shareholder and dividends to the other shareholder. Therefore, section 45A of the ITAA 1936 does not apply to treat the proposed return of capital as a dividend.", "Date_of_Decision": "29 October 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 45A", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2002/857", "Subject_References": "Share capital Capital reduction", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004318", "Unmatched_Content": "Retrospective tax law changes have effect for a period before the date of enactment once the legislation is passed. See Administrative treatment of retrospective legislation . | Keywords Share capital Capital reduction"}
{"ATO_ID_Number": "ATO ID 2003/486", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Selective capital reduction: application of section 45B", "Issue": "Will section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) apply to treat as a dividend any part of the selective reduction of capital undertaken to restructure the shareholdings in a company?", "Decision": "No. Section 45B of the ITAA 1936 will not apply to treat any part of the selective capital reduction as a dividend. Although there is a scheme that provides a capital benefit to a person, and a person obtains a tax benefit under the scheme, it cannot be concluded that any person who enters into or carries out the proposed selective capital reduction does so for a more than incidental purpose of enabling a taxpayer to obtain a tax benefit.", "Facts": "All the dividend-bearing shares in a company resident in Australia are held in equal proportion by a number of 'principals' or their associated entities. The principals are also employed by the company. The principals have reached agreement with an unrelated company to acquire their shares in the company. The principals have recognised that there are differences in the price considered appropriate for the sale of their respective shares in the company. To facilitate the takeover, a restructuring of the shareholdings is needed to even out differences in the value of the shares. In order to alter their shareholdings in the agreed proportions, the principals agreed to restructure their shareholdings through a selective capital reduction. The shareholders' equity in the company currently consists entirely of capital subscribed either as paid-up capital or share premium. All profits generated by the company have been distributed as dividends to the shareholders. Distributions to shareholders whose shares are cancelled will consist of amounts equal to the amount paid-up together with any former share premium contributed at the time of subscription for the shares to be cancelled.", "Reasons_for_Decision": "Summary: A purpose of section 45B of the ITAA 1936 is to ensure that amounts paid in substitution for dividends are treated as unfrankable dividends for income tax purposes. Section 45B of the ITAA 1936 applies if there is a 'scheme' under which: The selective capital reduction is a 'scheme' contemplated by section 45B of the ITAA 1936. To the extent the amount paid to the shareholders whose shares are cancelled under the selective capital reduction is not a dividend, it will be a distribution of share capital. That distribution would constitute the 'provision of a capital benefit' to the shareholders. The shares to be cancelled were all acquired after 19 September 1985. As capital gains tax treatment ordinarily results in less tax payable than an equivalent distribution consisting of dividend income, the requirement that there must be a person who would 'obtain a tax benefit' under the scheme would be satisfied. It cannot be concluded that any person who enters into or carries out this selective capital reduction does so for a more than incidental purpose of enabling a taxpayer to 'obtain a tax benefit' having regard to:", "Date_of_Decision": "9 December 2002", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 Section 45B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Capital benefit Capital reductions Deemed dividends Return of capital on shares", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003486", "Unmatched_Content": "Keywords Capital benefit Capital reductions Deemed dividends Return of capital on shares"}
{"ATO_ID_Number": "ATO ID 2002/788", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Cash payment to shareholder: Application of section 45B", "Issue": "Would section 45B of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the payment by a company (S) to its non-resident 100% parent company (P)?", "Decision": "Section 45B of the ITAA 1936 would apply to the payment. The Commissioner would make a determination under subsection 45B(3) that section 45C applies.", "Facts": "1. S was incorporated in Australia several years ago. It is a 100% subsidiary of a non-resident company, P. 2. S was originally established to acquire an interest in a mining tenement (the Project). Substantially all funds raised by S in its year first year of operation were expended in carrying out exploration and development activities. 3. As the Project generated cash flow from production, S wished to reduce its debt and equity, to reduce its interest cost in Australia and manage its debt and equity ratio appropriately. S decided to make a return of capital payment of part of its paid up capital to P, and to repay part of its debt obligations. The equity payment would be funded from excess cash funds on hand which originated from normal sales. 4. S had accounting profits for its first two years, and it expects a profit also for the current year. However, for income tax purposes no taxable income has been derived for the first two years, so no income tax has been paid to date. 5. There were no material sales of assets by S in the relevant periods.", "Reasons_for_Decision": "Summary: All legislative references are to the ITAA 1936 unless otherwise indicated. Paragraph 45B(1)(b) states the purpose of Section 45B is that relevant amounts are treated as dividends for taxation purposes if certain payments, allocations and distributions are made in substitution for dividends. Subsection 45B(3) allows the Commissioner to make a determination that section 45C applies. Section 45C treats such payments as unfrankable dividends in the hands of the shareholder. Under subsection 45B(2), for section 45B to apply, the following circumstances must be present: Under paragraph 45B(5)(b) the provision of a \"capital benefit\" includes the distribution of share capital to a shareholder, so circumstance (a) above is satisfied. Under subsection 45B(9), a \"tax benefit\" is obtained from capital benefits if the amount of tax payable by the relevant taxpayer would, apart from this section, be less than the amount that would have been payable if the capital benefit had been a dividend. This test would be satisfied for the partial return of capital payment by S to P as the capital return payment by S would not be taxable to P because the payment would be excluded from the subsection 6(1) definition of \"dividend\" by paragraph (d) of the definition. However, if the payment is a dividend then withholding tax would be payable by S, as P is a non-resident company, and any dividends paid now would be unfranked as S has not paid any income tax to date. Therefore, there would be a \"tax benefit\" in respect of that dividend payment and the test in paragraph 45B(2)(b) would be satisfied. Paragraph 45B(2)(c) sets out an objective purpose test, having regard to \"the relevant circumstances of the scheme\" (under which the capital benefit is provided). The test is not satisfied if the purpose (of obtaining a tax benefit) is only incidental, but this purpose does not have to be the dominant purpose of the scheme. Subsection 45B(8) lists circumstances which are relevant in determining whether any person has the purpose (of enabling a taxpayer to obtain a tax benefit). Paragraph (a) of subsection 45B(8) refers to the extent to which the distribution is attributable to the profits of the company. S had accounting profits for its first two operating years, and now expects to have a surplus for the current year. The payment by S to P is effectively distributing profits. As the payment also confers a tax advantage, this suggests that S had the purpose of enabling a taxpayer to obtain a tax benefit. S has stated that its intention in making the payment had nothing to do with distributing profits, as it had initially forecast a loss from the Project. However, S did have accounting profits for the previous two years, and it expects a profit for the current year. In addition, S has advised that the payment would be funded from excess cash funds on hand which have originated from normal sales, which suggests that retained earnings would be the source of the payment. S has also stated that substantially all its equity and borrowed funds raised in its first year of operations were incurred in carrying out exploration and development activities. This does not indicate that surplus capital was available for return to P. In addition, there has been no significant change to S's business structure such as major asset sales; instead there has been normal trading. In these circumstances, a return of capital payment in cash would be considered to have been taken out of retained earnings. Even if the directors take the view that there is too much equity (capital and retained earnings) to be usefully employed, this merely means that an earlier decision to re-invest profits is now to be reversed. Based on the above, the payment by S to P can be attributed to profits. Paragraph (b) of subsection 45B(8) refers to the \"pattern of distributions of dividends, bonus shares and returns of capital or share premium\" as a relevant circumstance. This circumstance is not relevant in this case as S is a recently incorporated company which has not previously paid any dividends. Paragraph (c) relates to the availability of capital losses for the \"relevant taxpayer\" (S). S does not have any capital losses available, therefore this factor is not relevant. Paragraph (d) has no application as no shares in S were acquired pre-CGT. Paragraph (e) is relevant from the perspective that S is a resident company of Australia for income tax purposes, but P is not. If P was a resident company there would be no dividend withholding tax on any unfranked dividend paid to it by S. As P is a non-resident, this means that there is tax benefit for S in returning capital as opposed to paying an unfranked dividend on which withholding tax would be payable. Paragraph (f) is satisfied because the cost base of the shares in S held by P is significantly greater than the amount of the capital return. Paragraph (g) is not relevant to the case at hand as S is not a private company, as it is a subsidiary of a public company. Paragraph (h) requires a comparison of the interest held in S by P after the distribution, and the interest which would have been held if an equivalent dividend had been paid instead, to see if the interests have been changed. There can be no change in the relative interests of shareholders as P is the only shareholder of S. Paragraph (i) does not apply as the distribution will be in cash rather than in the form of shares. Paragraph (j) concerns an increase in the value of a share and its later disposal. This paragraph is not relevant as there is no indication of any change in the rights of S's shares, or that these shares will increase in value. Taking into account all the \"relevant circumstances\" it is concluded that section 45B would apply to the arrangement. Accordingly the factors in subparagraphs 177D(b)(i) to (viii) have not been separately considered.", "Date_of_Decision": "27 March 2002", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 45B subsection 45B(1) paragraph 45B(2)(b) paragraph 45B(2)(c) subsection 45B(3) paragraph 45B(5)(b) subsection 45B(8) subsection 45B(9) section 45C subsection 177D(b)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Return of capital on shares Capital reductions Deemed dividends Dividend income", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002788", "Unmatched_Content": "This ATO ID has been amended to update legislative references and revise expression in its reasons for decision. | Keywords Return of capital on shares Capital reductions Deemed dividends Dividend income"}
{"ATO_ID_Number": "ATO ID 2011/5", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine equalisation tax: grape wine product and the addition of the flavour of an alcoholic beverage", "Issue": "Is a cosmopolitan flavour, (being the flavour of a recognised alcoholic cocktail) the flavour of an alcoholic beverage for the purposes of regulation 31-3.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations)?", "Decision": "Yes. A cosmopolitan flavour is the flavour of an alcoholic beverage for the purposes of regulation 31-3.01 of the WET Regulations.", "Facts": "An entity manufactures alcoholic beverages by adding flavours to wine. One of the flavours is a cosmopolitan flavour. A cosmopolitan cocktail is a cocktail consisting of vodka, Triple Sec, cranberry juice, and fresh-squeezed lime juice or sweetened lime juice. The cosmopolitan flavour does not contain alcohol.", "Reasons_for_Decision": "Summary: A grape wine product is defined at section 31-3 of the A New Tax System (Wine Equalisation Tax) Act 1999 as follows: Grape wine product is a beverage that: The regulation for grape wine products is regulation 31-3.01 of the WET Regulations which states: The requirement for consideration is whether the cosmopolitan flavour is the flavour of an alcoholic beverage as per subregulation 31-3.01(2) of the WET Regulations. The provision is wide and looks at whether a flavour is that of an alcoholic beverage (other than wine). A cosmopolitan is a well known cocktail. Cocktails generally are mixtures of various spirits and or liqueurs and other substances. Cocktails containing alcohol are alcoholic beverages. A cosmopolitan is a cocktail made from vodka, Triple Sec, cranberry juice, and fresh-squeezed lime juice or sweetened lime juice. Vodka and Triple Sec both contain alcohol therefore a cosmopolitan is an alcoholic beverage. Subregulation 31-03.01 of the WET Regulations is not directed at alcoholic beverages themselves, it is directed at flavours of alcoholic beverages. Even if a flavour itself does not contain any alcohol, it is a flavour of an alcoholic beverage if it imparts the flavour of an alcoholic beverage (other than wine). The cosmopolitan flavour imparts the flavour of a cosmopolitan cocktail which is an alcoholic beverage that is not wine, therefore a cosmopolitan flavour is the flavour of an alcoholic beverage for the purposes of regulation 31- 3.01 of the WET Regulations.", "Date_of_Decision": "21 December 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 Subdivision 31-A section 31-1 section 31-3 paragraph 31-1(1)(a) paragraph 31-1(1)(b)", "Related_Public_Rulings_and_Determinations": "Wine Equalisation Tax Ruling WETR 2009/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Excise Excise CoE Wine Wine equalisation tax Ready to drink excise Alcohol excise Other excisable beverage Grape wine products", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20115", "Unmatched_Content": "Related Public Rulings (including Determinations) Wine Equalisation Tax Ruling WETR 2009/1 | Keywords Excise Excise CoE Wine Wine equalisation tax Ready to drink excise Alcohol excise Other excisable beverage Grape wine products"}
{"ATO_ID_Number": "ATO ID 2011/92", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine equalisation tax: addition of unfermented grape juice to grape wine", "Issue": "Is a beverage, a grape wine, as defined in section 31-2 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act), if it is a product consisting of:", "Decision": "No, a beverage is not a grape wine, as defined in section 31-2 of the WET Act, if it is a product consisting of:", "Facts": "Low sugar grape juice is the product of either: Low sugar grape juice is added to a grape wine. The blend is then fortified by the addition of grape spirit. The percentages by volume of the constituents in the finished beverage are: The finished beverage is 22% alcohol by volume.", "Reasons_for_Decision": "Summary: Section 31-2 of the WET Act defines grape wine as: Regulation 31-2.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 (WET Regulations) states: For paragraph 31-8(1)(a) of the Act, a beverage mentioned in paragraph 31-2(1)(a) of the Act must not contain more than 22% by volume of ethyl alcohol. The product in question meets the requirement of regulation 31-2.01 of the WET Regulations. Paragraph 31-2(1)(a) of the WET Act refers to the 'complete or partial fermentation of fresh grapes, or products derived solely from fresh grapes'. A literal reading of the provision would mean that no unfermented grape juice could be present for a product to meet the definition. Further, other than grape spirit and brandy, the definition is silent on whether or not grape wine may include things other than fresh grapes or products derived solely from fresh grapes that have been fermented to an extent. A literal and narrow reading would mean that only grape spirit and brandy can be added to the fermented fresh grapes or products derived solely from fresh grapes. The current section 31-2 of the WET Act was included in the WET Act under the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 . Relevantly paragraph 1.236 of the Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999 states: Grape wine will cover traditional products such as table wine, sparkling wine and grape wines fortified by the addition of grape spirit and brandy. The Commissioner is aware that the Australian New Zealand Food Standards Code (Food Standards), Standard 4.5.1 - Wine Production Requirements allows for additives to be used in the production of grape wine. While not directly relevant to the WET Act, Standard 4.5.1 is instructive in relation to what is seen as traditional products. Applying a literal reading to the definition such that nothing can be added to the fermented fresh grapes or products derived solely from fresh grapes would seem to result in many traditional products not meeting the definition of grape wine. Therefore, a preferred view is that additives, which are a normal part of the production of wine, may be present in the product. The Commissioner does not seek to determine compliance with the Food Standards but notes that grape juice is an allowable additive in the production of wine. Therefore grape juice (including concentrated grape juice) could be allowed as an additive. It needs to be determined whether or not low sugar grape juice used in the production of the beverage is consistent with the normal production of wine. The final beverage consists of 60% by volume of a product known as low sugar grape juice. The percentage of low sugar grape juice is so large that the beverage is not considered to be a product of the complete or partial fermentation of fresh grapes or products derived solely from fresh grapes to which permissible additives have been added. As such, the beverage is not a grape wine for the purposes of section 31-2 of the WET Act.", "Date_of_Decision": "8 November 2011", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 31-2 paragraph 31-2(1)(a)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2007/192 | ATO ID 2009/15", "Subject_References": "Grape wine", "Case_References": "", "Other_References": "Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999 Australian New Zealand Food Standard Code Standard 4.5.1 - Wine Production Requirements (Australia only)", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201192", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2009/15", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine Equalisation Tax: cider manufacture - adding sugar to apple juice prior to fermentation", "Issue": "Does adding cane sugar to apple juice prior to the fermentation of that apple juice prevent the resulting beverage from being 'cider' as defined in section 31-5 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?", "Decision": "No. Adding cane sugar to apple juice prior to the fermentation of that apple juice will not prevent the resulting beverage product from being 'cider' as defined in section 31-5 of the WET Act provided that the amount of sugar added does not change the character of the beverage such that it can no longer be described as the product of apples or pears.", "Facts": "An entity uses apple juice that is extracted from apples, or combines apple juice concentrate, apple juice condensate and water to produce reconstituted apple juice. The reconstituted apple juice which is the product of combining apple juice concentrate, apple juice condensate and water in the appropriate proportions is apple juice for the purposes of paragraph 31-5(a) of the WET Act. The entity adds sugar to the apple juice or reconstituted apple juice, which is then fermented.", "Reasons_for_Decision": "Summary: Unless stated otherwise, all references in these reasons for decision are to the WET Act. Section 31-5 defines 'cider or perry' to mean a beverage that: A plain reading of the phrase 'is the product of the complete or partial fermentation of the juice or must of apples or pears', as set out in paragraph 31-5(a) is open to both a narrow or broad interpretation. A narrow interpretation of paragraph 31-5(a) is that it is referring to the fermentation of only the juice or must of apples or pears. Under such an interpretation, if sugar was added, to any extent, prior to the fermentation of the apples or pears the resulting beverage would not satisfy paragraph 31-5(a) and would not meet the definition of cider or perry. However, taking into account the context and underlying intent of the relevant provisions it is considered appropriate that that provision be afforded a broad interpretation. The definition of cider or perry as set out in section 31-5 was incorporated into the WET Act by the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 (ANTS Amendment Act), which also added and/or amended the definitions for grape wine, grape wine product, fruit or vegetable wine, mead and sake. Prior to these definitions being incorporated into the WET Act by the ANTS Amendment Act the concept of wine and cider and so on was not exhaustively defined in the WET Act and an essential character test applied in determining whether a beverage was wine, or cider and so on for the purposes of the provisions. The essential character test referred to was established by the Courts in cases such as Thomson Australian Holdings Pty Ltd v. Federal Commissioner of Taxation (1988) 20 FCR 85; 88 ATC 4916; (1988) 19 ATR 1896 (Thomson Australian Holdings) and FC of T v. Rotary Offset Press Pty Ltd 71 ATC 4170; (1971) 2 ATR 411. Davies J. said in Thomson Australian Holdings: ...the task of the court is to determine the essential character of the goods, what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are... Consequently prior to the ANTS Amendment Act it was necessary to consider the basic nature of a beverage and its objective identification in order to determine whether or not it was wine or cider and so on for the purposes of the WET Act. Therefore, in accordance with the legislation prior to its amendment, a beverage that exhibited the basic nature of cider and could be objectively identified as cider would not have been precluded from the operation of the WET Act regardless of whether or not sugar had been added prior to, or subsequent to the fermentation of apple juice or must. Paragraph 1.231 the Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999 (EM) refers to the addition and/or amendment of the definitions referred to above and states: Item 231 inserts a new more comprehensive definition of wine. The new definition provides certainty as to the types of products that will be covered by the WET. Subdivision 31-A makes it clear that the WET extends to fruit or vegetable wines and grape wine products such as wine cocktails, flavoured wines and 'Irish style' cream drinks. A minimum and maximum alcohol band is specified for grape wine products and fruit or vegetable wines to prevent 'designer drinks' and pre-mixed alcoholic products, commonly referred to as 'ready-to-drink', containing less than 8% alcohol, and low strength spirits from accessing the WET. A separate definition for cider has been included to ensure that traditional cider is included in the WET. This does not indicate any intention on the part of the legislature to in anyway exclude cider products, such as those to which sugar had been added prior to fermentation, or other products that would have, prior to the amendments, been subject to the WET legislation. Furthermore, paragraph 1.239 of the EM states: Cider and perry will cover traditional cider and perry products. There is no further explanation of what would be a traditional cider or perry product. Available information indicates that some cider manufacturing techniques both within Australia and outside of Australia, involve the addition of sugar prior to, or during the fermentation process. Therefore it is likely that adopting an interpretation of paragraph 31-5(a) that excludes the addition of sugar prior to the fermentation of the apple or pears would result in some 'traditional cider and perry products' being excluded from WET, contrary to the underlying intent suggested by the EM. When considering the addition of sugar to cider it is also necessary to refer to paragraph 31-5(c). Paragraph 31-5(c) precludes the addition, at any time, of any liquor or substance (other than water or the juice or must of apples or pears) that gives colour or flavour. The Commissioner's view is that the addition of sugar to cider does not constitute the addition of flavour. As such, it is accepted that paragraph 31-5(a) requires that the product is result of the complete or partial fermentation of the juice or must of apples or pears. The addition of other substances that does not add flavour, such as sugar, prior to fermentation of the apples and pears is not precluded provided that the end product is still the product of apples or pears that is, it is still the result of the complete or partial fermentation of apples or pears. Accordingly, the addition of sugar prior to the fermentation of the apples or pears would not preclude the resulting beverage from being cider or perry so long as sugar was not added to such an extent that it was no longer the product of partially or completely fermented apples or pears.", "Date_of_Decision": "12 March 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 31-5 paragraph 31-5(a) paragraph 31-5(c)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/951", "Subject_References": "Cider Wine equalisation tax", "Case_References": "FC of T v. Rotary Offset Press Pty Ltd 71 ATC 4170 (1971) 2 ATR 411", "Other_References": "Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200915", "Unmatched_Content": "Keywords Cider Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2009/41", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Molecular filtration and wine", "Issue": "Is a beverage produced by subjecting grape wine, as defined in section 31-2 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act), to a molecular filtration alcohol reduction process, grape wine for the purposes of section 31-2?", "Decision": "Yes. A beverage produced by subjecting grape wine to a molecular filtration alcohol reduction process is grape wine provided it still meets the requirements of the definition in section 31-2 of the WET Act.", "Facts": "A beverage that meets the definition of grape wine and contains 15.4% alcohol by volume is subjected to a molecular filtration process that separates the wine into two streams of differing composition. The first stream, the retentate, contains alcohol, flavour and aroma compounds. The second stream, the permeate, contains water, alcohol and acetic acid. The ratio of retentate to permeate is 80-20. The alcohol content of both the retentate and the permeate is approximately 15% alcohol by volume. The permeate is subjected to a distillation process that removes the alcohol. The de-alcoholised permeate contains less that 0.1% alcohol by volume. The de-alcoholised permeate is recombined with the retentate. The beverage after it has been processed is approximately 13.8% alcohol by volume.", "Reasons_for_Decision": "Summary: Subsection 31-1(1) of the WET Act defines wine as any of the following: Subsection 31-1(2) of the WET Act provides that wine does not include beverages that do not contain more than 1.15% by volume of ethyl alcohol. Regulation 31-2.01 of the A New Tax System (Wine Equalisation Tax) Regulations 2000 provides that 'grape wine' must not contain more the 22% by volume of ethyl alcohol. The finished product in this case contains 13.8% ethyl alcohol by volume. Each product listed in subsection 31-1(1) of the WET Act is further defined. Grape wine is defined in section 31-2 of the WET Act to be a beverage that: The definition of 'grape wine' is silent on the processes (other than fermentation) required to make wine. Taking a narrow interpretation of the provision it could be said that as any process (other than fermentation) is not specifically allowed a beverage produced using a molecular filtration alcohol reduction process would not meet the definition. However, taking into account the context and underlying intent of the relevant provisions it is considered appropriate that the provision be afforded a broad interpretation. The current definition of 'grape wine' as set out in section 31-2 was incorporated into the WET Act by the A New Tax System (Indirect Tax and Consequential Amendments) Act 1999 (ANTS Amendment Act), which also amended the definition of 'wine' to include grape wine, grape wine product, fruit or vegetable wine, mead and sake and inserted specific definitions for grape wine product, fruit or vegetable wine, mead and sake. Prior to these definitions being incorporated into the WET Act, the concept of 'wine' was not exhaustively defined in the WET Act and an essential character test applied in determining whether a beverage was 'wine' for the purposes of the provisions. 'Grape wine' was defined in the WET Act prior to the amendment, however, the definition contained a note that indicated that the reason for the inclusion of the definition of 'grape wine' was to allow a choice in working out the 'notional wholesale selling price' under Subdivision 9-B of the WET Act. The previous definition of 'grape wine' was also silent on the type of processes used in this case. The essential character test referred to was established by the Courts in the cases such as Thomson Australian Holdings Pty Ltd v. Commissioner of Taxation (1988) 20 FCR 85; 88 ATC 4916; (1988) 19 ATR 1896 (Thomson Australian Holdings) and FC of T v. Rotary Offset Press Pty Ltd 71 ATC 4170; (1971) 2 ATR 411. Davies J. said in Thomson Australian Holdings: ...the task of the court is to determine the essential character of the goods, what essentially the goods are, not some characteristic that the goods might have. Essential character derives from the basic nature of the goods, from what they are... Consequently prior to the ANTS Amendment Act it was necessary to consider the basic nature of a beverage and its objective identification in order to determine whether or not it was a wine or cider and so on for the purposes of the WET Act. Therefore, in accordance with the legislation prior to its amendment, a beverage that exhibited the basic nature of grape wine and could be objectively identified as grape wine would not have been precluded from the operation of the WET Act regardless of whether or not it was subjected to alcohol content reduction by this process of molecular filtration. Furthermore, the amendments do not indicate any intention on the part of the legislature to in anyway subsequently exclude products that would have, prior to the amendments, been subject to the WET legislation. The purpose of the amendments is to make it clear that the WET Act extends to grape wine, grape wine product (e.g. certain wine cocktails), fruit or vegetable wine, mead and sake. In this case, grape wine is separated into its constituent parts and then recombined but with some alcohol removed. Nothing is added that was not previously a constituent of the original grape wine. The finished product has all the essential characteristics of the original grape wine such as the flavour and aroma compounds from the original grape wine. As a consequence a beverage produced by subjecting grape wine to a molecular filtration alcohol reduction process is a 'grape wine' for the purposes of the WET Act provided it retains the essential character of grape wine.", "Date_of_Decision": "10 June 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 subdivision 9-B subsection 31-1(1) subsection 31-1(2) section 31-2 paragraph 31-2(1)(a) section 31-5", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATOID 2009/15", "Subject_References": "WET taxable value Wine equalisation tax", "Case_References": "Thomson Australian Holdings Pty Ltd v Commissioner of Taxation - ( 23 November 1988) 20 FCR 85 88 ATC 4916 19 ATR 1896", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200941", "Unmatched_Content": "Keywords WET taxable value Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2007/192", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "The product of distillation", "Issue": "Is a beverage 'grape wine' as defined in section 31-2 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) if it is manufactured by combining, in the stated ratios:", "Decision": "No. A beverage is not 'grape wine' as defined in section 31-2 of the WET Act if it is manufactured by combining, in the stated ratios:", "Facts": "A grape wine is made by the complete or partial fermentation of fresh grapes. Other grape wine is passed through a reverse osmosis apparatus and thereby split into two portions, the permeate, which consists mostly of water, and the retentate. Both the permeate and the retentate contain alcohol. Both are the product of the complete or partial fermentation of grapes or products derived solely from grapes. The permeate is passed though a still. The products of the distillation process are an alcohol rich distillate and a zero alcohol distillate. The zero alcohol distillate and grape spirit are added to the grape wine. The grape wine comprises 30% of the final formulation. The grape spirit added to the wine is either 40% alcohol by volume (a/v) or 96% a/v. The volume of grape spirit added ranges from 40% to 45% of the final formulation for the 40% a/v spirit and between 15% and 20% for the 96% a/v grape spirit. The zero alcohol distillate added to the grape wine comprises between 25% and 30% where the lower strength grape spirit is used and between 50% and 55% where the higher strength grape spirit is used. The grape wine comprises 30% of the final formulation. The final beverage has an alcohol strength not more than 22% a/v.", "Reasons_for_Decision": "Summary: Section 31-2 of the WET Act defines grape wine as follows: The Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999, which inserted the definition of 'grape wine' as it now exists in the WET Act, says, at paragraph 1.236: Grape wine will cover traditional products such as table wine, sparkling wine and grape wines fortified by the addition of grape spirit or brandy or both grape spirit and brandy. The regulation covering grape wine is regulation 31-2.01 which states: For paragraph 31-8(1)(a) of the Act, a beverage mentioned in paragraph 31-2(1)(a) of the Act must not contain more than 22% by volume of ethyl alcohol. The beverage has a strength of not more than 22% a/v and therefore satisfies this regulation. Both brandy and grape spirit are the result of the distillation of wine made from grapes. Having gone through distillation, neither brandy nor grape spirit meet the definition of 'grape wine'. This is confirmed by the wording of subsection 31-2(2) WET Act which allows brandy or grape spirit to be added to grape wine. If brandy or grape spirit were themselves grape wine then this provision is unnecessary. Similarly, distilling the permeate of the reverse osmosis filtration process results in two streams neither of which are grape wine. The two streams are zero alcohol distillate and an alcohol rich distillate. They have lost the character of the original permeate and are no longer the product of the complete or partial fermentation of grapes, rather they are the product of distillation. When these various components are combined the final beverage comprises the following constituents in the stated ratios - grape wine 30%, grape spirit (15 to 45%) and zero alcohol distillate (25 to 55%). The different ratios are dependent upon the strength of the grape spirit. Regardless of the various strengths of the grape spirit the grape wine component of the final beverage remains 30%. The definition of grape wine provides that a product does not cease to be grape wine merely because brandy or grape spirit has been added to grape wine. In this case we do not consider that grape spirit has been merely added to grape wine. A product that is only 30% grape wine is not grape wine to which other things have been added. This is consistent with the Explanatory Memorandum a as a beverage of this nature is not a traditional wine product. Furthermore the zero alcohol distillate added is neither grape spirit nor brandy, substances that are explicitly allowed to be added to grape wine. The addition of this product of distillation means the beverage does not meet the definition of grape wine. Consequently in this case a beverage that is manufactured by combining grape wine, grape spirit and zero alcohol distillate extracted from grape wine via reverse osmosis and distillation is not 'grape wine' as defined in section 31-2 of the WET Act.", "Date_of_Decision": "18 October 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 31-2", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Grape wine", "Case_References": "", "Other_References": "Explanatory Memorandum to the A New Tax System (Indirect Tax and Consequential Amendments) Bill 1999", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007192", "Unmatched_Content": ""}
{"ATO_ID_Number": "ATO ID 2006/88", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine Equalisation Tax: quoting ground", "Issue": "Is wine purchased for laboratory analysis as part of a research project used as a material in manufacture or other treatment or processing for the purposes of paragraph 13-5(1)(c) of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?", "Decision": "No. Wine purchased for laboratory analysis as part of a research project is not used as a material in manufacture or other treatment or processing for the purposes of paragraph 13-5(1)(c) of the WET Act.", "Facts": "Samples of bottled and cask wine are purchased for the purpose of conducting research analysis to assess the presence and level of a particular chemical in the wine.", "Reasons_for_Decision": "Summary: Paragraph 13-5(1)(c) of the WET Act provides that an entity is entitled to quote its ABN for a dealing with wine if, at the time of quoting, the entity has the intention of: ... (c) using the wine as a material in *manufacture or other treatment or processing, whether or not it relates to or results in other wine... The term 'manufacture' is defined in section 33-1 of the WET Act to include: (a) production (b) combining parts or ingredients so as to form an article or substance that is commercially distinct from the parts or ingredients (c) applying foodstuffs as a process in preparing them for human consumption but does not include any prescribed combination of parts or ingredients. On the above definition, using the wine for laboratory analysis as part of a research project is not use as a material in manufacture. The question then, is whether wine purchased for laboratory analysis as part of a research project is used as, '...a material in...other treatment or processing'. The terms 'treatment' or 'processing' are not defined in the legislation and therefore take on their ordinary meaning. The Macquarie Dictionary , 2001,rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'treatment' to mean, '...subjection to some agent or action', and 'process' is defined as: 1. a systemic series of actions directed to some end... 2. a continuous action, operation, or series of changes taking place in a definite manner... ... In the Sales Tax case FC of T v. Hamersley Iron Pty Ltd 80 ATC 4509; (1980) 11 ATR 302; 81 ATC 4582; (1981) 12 ATR 429 in the Supreme Court of Victoria, it was held that 'treatment' should be given its ordinary meaning and, as to 'process' Gobbo J stated at first instance that: Process as a noun is defined as follows: 'A continuous and regular action or succession of actions taking place or carried on in a definite manner, and leading to the accomplishment of some result; a continuous operation or series of operations.' As a verb it is defined as follows: 'To subject or treat by a special process.' The Shorter Oxford Dictionary defines process as follows: 'A continuous action or succession of actions taking place or carried on in a definite manner; a continuous operation or series of operations; a particular method of operation in any manufacture.' The relevant meaning in the section edition of Webster's New International Dictionary is: 'To subject (esp. raw material) to a process of manufacture, development, preparation for the market; to convert into marketable form.' The normal use of the verb process is exemplified as follows - to process milk by pasteurising, to process grain by milling and to process cotton by spinning. These meanings all suggest that a change in nature form or condition is effected. I am disposed to the view that even in processing some change must result if this procedure is to be regarded as a process. It could be argued that where laboratory analysis of the wine involves treating it in a way such that the wine is separated into its constituent elements, this constitutes treating or processing the wine in accordance with the ordinary meaning of the words 'treatment' or 'process'. However, in the context of paragraph 13-5(1)(c) of the WET Act, the wine must be used as, '...a material in...other treatment or processing...' Since the legislation provides that the wine must be used as a material 'in' other treatment or processing, this implies that the wine must be used in the treatment or processing of another distinct thing, as opposed to the wine itself being treated or processed. Therefore, research analysis of wine does not constitute use as a material in manufacture or other treatment or processing for the purposes of paragraph 13-5(1)(c) of the WET Act.", "Date_of_Decision": "20 March 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 13-5 subsection 13-5(1) section 33-1 paragraph 13-5(1)(c)", "Related_Public_Rulings_and_Determinations": "Wine Equalisation Tax Ruling 2004/1", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Treatment EGCS processing Wine equalisation tax", "Case_References": "FC of T v. Hamersley Iron Pty Ltd 80 ATC 4509 (1980) 11 ATR 302", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200688", "Unmatched_Content": "Related Public Rulings (including Determinations) Wine Equalisation Tax Ruling 2004/1 | Keywords Treatment EGCS processing Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2006/183", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Definition of mead for the purposes of the A New Tax System (Wine Equalisation Tax) Act 1999", "Issue": "Can water, yeast cultures, diammonium phosphate, thiamine, tartaric acid and sucrose be used in the manufacture of a beverage that is 'mead' for the purposes of section 31-1 in A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?", "Decision": "Yes. Water, yeast cultures, diammonium phosphate, thiamine, tartaric acid and sucrose can be used in the manufacture of a beverage that is 'mead' for the purposes of section 31-1 of the WET Act.", "Facts": "A manufacturer of mead uses various ingredients including water, yeast cultures, diammonium phosphate, thiamine, tartaric acid and sucrose.", "Reasons_for_Decision": "Summary: Mead is defined in section 31-6 of the WET Act as a beverage that contains more than 1.15% by volume of ethyl alcohol and: The A New Tax System (Wine Equalisation Tax) Regulations 2000 (the Regulations) specify that for the purposes of paragraph (c) of the above definition certain ingredients may be added to mead even though they give colour or flavour. The Regulations also specify when these ingredients may be added. The Regulations provide that: Water, yeast cultures, diammonium phosphate, thiamine, tartaric acid and sucrose are not considered to give colour or flavour when added to mead. Accordingly, these ingredients may be added without affecting the ability of the beverage to satisfy the definition of mead. Each of these ingredients is considered below: Accordingly, water, yeast cultures, diammonium phosphate, thiamine, tartaric acid and sucrose can be used in the manufacture of a beverage that is 'mead' for the purposes of section 31-1 of the WET Act.", "Date_of_Decision": "21 March 2006", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 31-1 section 31-6", "Related_Public_Rulings_and_Determinations": "Wine Equalisation Tax Ruling WETR 2009/1 | Wine Equalisation Tax Ruling WETR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Alcohol Excise Mead Wine Wine equalisation tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006183", "Unmatched_Content": "Legislative References, Related Public Rulings | Updated WET rulings references. | Related Public Rulings (including Determinations) Wine Equalisation Tax Ruling WETR 2009/1 Wine Equalisation Tax Ruling WETR 2009/2 | Keywords Alcohol Excise Mead Wine Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2003/951", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Addition of sugar to fruit wine", "Issue": "Does the addition of sugar to fruit wine constitute the addition of a flavour and thereby prevent the beverage from being 'fruit or vegetable wine' as defined in section 31-4 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?", "Decision": "No. The addition of sugar to fruit wine does not constitute the addition of a flavour, and therefore does not prevent the beverage from being 'fruit or vegetable wine' as defined in section 31-4 of the WET Act.", "Facts": "A base wine is produced from the fermentation of fruit (other than grapes). To increase the sweetness of the wine a sugar syrup made from caster sugar is added to the wine.", "Reasons_for_Decision": "Summary: In the production of wine, the naturally occurring sugars in the fruit are converted to alcohol. This process is known as fermentation. The amount of naturally occurring sugar in fruit can be measured and this is usually expressed in units of Baume. A higher Baume measurement signifies a higher sugar content. The Baume for fruits used in the manufacture of fruit wine is much lower than the Baume for grapes. Because of the low sugar content in fruit used in producing fruit wine, most, if not all of the naturally occurring sugar may be used in the fermentation process. This will cause the resulting fruit wine to lack sweetness. Accordingly, it is common practice to add sugar to fruit wine to raise the sugar content and thus its sweetness. The definition of a 'fruit or vegetable wine' in the WET Act requires the beverage to be the product of the complete or partial fermentation of the juice or must of fruit or vegetables, or products derived solely from fruit or vegetables. Other conditions must also be satisfied which include the requirement that no liquor or substance can be added that gives colour or flavour, other than grape spirit or neutral spirit. If sugar is considered to be a flavour for the purpose of the fruit or vegetable wine definition, then 'fruit or vegetable wine' that has had sugar added will not be subject to WET. These products will be subject to excise duty. The term 'flavour' is not defined in the WET Act and therefore takes on its ordinary meaning. The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW provides the following meaning: flavour 1. taste, especially a characteristic taste, or a noticeable element in the taste, of a thing 2. a flavouring substance or extract 3. the characteristic quality of a thing 4. a particular quality noticeable in a thing flavouring something that gives flavour, a substance or preparation used to give a particular flavour to food or drink taste 1. to try the flavour or quality of (something) by taking some into the mouth.... 3. to perceive to distinguish the flavour of.... 9. to perceive or distinguish the flavour of anything. Given the above definitions of flavour, flavouring and taste, sugar may be considered to be a flavour. However, in view of the context in which sugar is being used, the term 'flavour' should be considered in relation to the wine industry. In the wine industry wine is generally depicted by its type and style. Type distinguishes wines with significant differences in terms of the general description or characteristics of the wine. For example, wine is red or white, dry or sweet, high or low percentage of alcohol, sparkling or still, fortified or non-fortified. The style of the wine is determined by factors such as its aroma, flavours and whether the wine is light, medium or heavy. These styles can be influenced by any number of different factors such as the type of grape used or blend of grapes, the location at which the grapes were grown, the type of oak used (if the wine is matured in oak), the influence of the wine maker, etc. Wines that fall into a particular type can be produced in a number of different styles. Flavours that make up the wine style are determined by the type of fruit used. These flavours are extracted from the flavour compounds present in the juice and skins of the fruit. It is thus evident that in the wine industry, the sweetness of a wine is not part of the flavour description of the wine (i.e. the style). Sweetness determines the type of wine rather than the style of the wine. Sugar is also referred to separately from flavourings in the Food Standards Code. Standard A6 refers to flavourings and flavour enhancers whereas Standard K1 refers to sugar and related products. The Food Standards also detail the substances that may be added to various alcoholic products. Sugar and flavourings are listed separately where both can be added to the product. As the wine industry does not recognise that sugar contributes to the flavour of wine and taking into account the differentiation between sugar and flavour in the Food Standards Code, it is considered that sugar is not a substance that gives flavour within the terms of the definition of a 'fruit or vegetable wine'. Accordingly, sugar added to a fruit or vegetable wine will not preclude the wine from being subject to WET provided the other conditions for classifying wine as a 'fruit or vegetable wine' are met.", "Date_of_Decision": "9 September 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 31-4", "Related_Public_Rulings_and_Determinations": "Wine Equalisation Tax Ruling WETR 2009/1 | Wine Equalisation Tax Ruling WETR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Fruit wine Wine Wine equalisation tax", "Case_References": "", "Other_References": "The Macquarie Dictionary, 2001, 3rd edn, The Macquarie Library Pty Ltd, NSW", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003951", "Unmatched_Content": "Updated WET rulings references. | Related Public Rulings (including Determinations) Wine Equalisation Tax Ruling WETR 2009/1 Wine Equalisation Tax Ruling WETR 2009/2 | Keywords Fruit wine Wine Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2009/98", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Producer rebate: pooling of grapes from which wine is manufactured", "Issue": "Is an investor in a wine statutory Managed Investment Scheme (MIS) the producer, as defined in section 33-1 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act), of the wine, if the investor's grapes are pooled with those of other investors and the pooled grapes are manufactured into grape wine?", "Decision": "No. An investor in a wine statutory MIS is not the producer, as defined in section 33-1 of the WET Act, of the wine, where the investor's grapes are pooled with those of other investors and the pooled grapes are then manufactured into grape wine.", "Facts": "An entity invests in a wine MIS. Under the MIS agreement each entity leases a vinelot in a specific location and with contractual rights in regard to the ownership of the grapes grown thereon. The entity's grapes are pooled with other investors' grapes (and grapes purchased from elsewhere if required) and the investors' agent arranges for the grapes to be manufactured into grape wine under contract. The investors' agent arranges for the sale of the wine on behalf of all the investors. Each year, the investor is credited with a proportion of the wine that results from the overall project. Each investor's proportion is determined in accordance with the area of vinelots they have leased. As wine is sold, the quantity of wine credited to each investor is proportionately reduced. If in a particular year not all of the wine is sold, each grower carries over a proportion of the collective wine as their trading stock. The grape wine is rebatable wine.", "Reasons_for_Decision": "Summary: Subsection 19-5(1) of the WET Act provides: The entitlement to the producer rebate is subject to certain other factors that are not relevant to this issue. 'Producer' (of rebatable wine) is defined in section 33-1 of the WET Act as: producer , of *rebatable wine, means an entity that *manufactures the wine, or supplies to another entity the grapes, other fruit, vegetables or honey from which the wine is manufactured. In the wine MIS, the grapes from all the vinelots leased by investors are pooled before being manufactured into wine. Where necessary the grapes harvested from the vinelots are supplemented by purchased grapes. The question that needs to be answered is whether a quantity of the resulting wine, allocated to an investor in proportion to the area of vinelots they lease, can be said to be the wine that was manufactured from the grapes supplied. When the relevant part of the definition of producer is read in conjunction with subsection 19-5(1) of the WET Act the following is the result: You are entitled to a *producer rebate for *rebatable wine for a *financial year if you are the entity that supplies to another entity the grapes from which the wine is manufactured and: ... The wine that is being referred to is the wine that resulted from the grapes that were supplied. This is further emphasised when paragraphs 19-5(1)(a) and 19-5(1)(b) of the WET Act are considered. These paragraphs both use the definite article 'the', so it is not indeterminate wine that is being referred to, rather it is specifically the wine that was manufactured from the grapes supplied. It follows that, in order to be eligible for a producer rebate, the investor must have provided the grapes that were used to manufacture the actual wine upon which the investor was liable to pay wine tax (or would have been liable to pay wine tax in the absence of quoting). In the case of the wine MIS the grapes from an individual investor are not separated from other grapes. All the grapes are pooled together and wine is produced. The actual wine that resulted from a particular investor's grapes is not able to be identified. The investor does not meet the definition of producer because there is no wine that can be identified as the specific wine manufactured from the specific grapes supplied by the investor. Additionally, any wine tax payable by the investor (or any wine tax that would have been payable by the investor had the purchaser not quoted) is based on their allocation of a proportion of the wine made from the collective grapes pooled from all the vinelots. Therefore, it cannot be established that the wine sold by a particular investor was manufactured from grapes supplied by that investor. Therefore, an investor in a wine statutory MIS is not the producer of the wine where the investor's grapes are pooled with those of other investors and the pooled grapes are then manufactured into grape wine.", "Date_of_Decision": "26 August 2009", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 subsection 19-5(1) paragraph 19-5(1)(a) paragraph 19-5(1)(b) section 33-1", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Wine equalisation tax WET producer rebate", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200998", "Unmatched_Content": "Keywords Wine equalisation tax WET producer rebate"}
{"ATO_ID_Number": "ATO ID 2010/152", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine Equalisation Tax: effect of principle of mutuality on sales by clubs and associations", "Issue": "In determining whether a club or association that supplies wine to its members in return for payment is making a 'sale' for the purposes of section 33-1 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act), is it relevant to consider the principle of mutuality?", "Decision": "No. The principle of mutuality is not relevant in determining whether a club or association that supplies wine to its members in return for payment is making a 'sale' for the purposes of section 33-1 of the WET Act.", "Facts": "A retailer sells wine to a club or association (the club). The club then provides the wine to its members and collects payment in accordance with an existing pricing schedule that was determined by the club. The retailer and the club are both registered for goods and services tax (GST) purposes.", "Reasons_for_Decision": "Summary: Under Division 5 of the WET Act, liability for wine tax centres around the concept of an assessable dealing. An assessable dealing is defined in section 33-1 of the WET Act as any dealing covered by the Assessable Dealings Table (the Table), which is provided for under section 5-5 of the WET Act. The most common types of assessable dealing, as set out in items 1 & 2 of the Table, involve wholesale sales. Item 2 is particularly relevant to the facts set out above and covers a wholesale sale by an entity that is not the manufacturer of the wine. Section 33-1 of the WET Act provides that a wholesale sale is: ...a sale to an entity that purchases for the purpose of resale, but does not include a sale of wine from stock in a retail store (or retail section of a store) to make up for a temporary shortage of stock of the purchaser, if the wine is of a kind that: (a) is usually *manufactured by the purchaser; or (b) is usually purchased by the purchaser for resale. From the retailer's perspective, if their sales of wine to the Club are properly categorised as wholesale sales, item 2 of the Table will be applicable (Division 7 of the WET Act sets out a number of circumstances under which assessable dealings are exempt from wine tax. However, none of the circumstances are applicable in this instance). It is therefore relevant to consider whether the retailer is making a sale of wine to the club where the club has the purpose of on-selling the wine to its members, or whether the retailer is effectively making sales of wine to the club for consumption. If the former, then the sale by the retailer is a wholesale sale. If the latter, the sale is a retail sale. It is clear that the club has purchased the wine for the purpose of providing it to its members in return for payment as set out in a payment schedule determined by the club. It follows that if the provision of this wine by the club to its members can be considered a sale, then the sale of wine by the retailer to the club will constitute a wholesale sale. The WET Act provides little guidance as to the meaning of the term 'sale' in the context of the WET legislation. Section 33-1 of the WET Act provides that the term sale includes 'barter or exchange'. Paragraphs 92-96 of WETR 2009/1 discuss the meaning of the term 'sale' for the purposes of the WET Act. After considering the inclusive definition of sale in section 33-1, and the relevance of State and Territory sale of goods legislation, the Ruling concludes in paragraph 96 that: ...In broad terms, a sale of wine occurs for the purposes of the WET Act when ownership is transferred from one person (the seller) to another (the purchaser) for a 'price'. The Australian Oxford Dictionary , 2nd edn, 2004, Oxford University Press, Melbourne, similarly defines the term 'sale' as: 1 . the exchange of a commodity for money etc; an act or instance of selling... Therefore, it is clear that, to be a sale for the purposes of the WET Act, the provision of wine to a club or association member by the club or association must involve the transfer of ownership from one person (the club or association) to another (the individual member) for a price. The WET Act and the GST Act provide a number of express linkages in terms of definitions and concepts. For example, Assessable Dealing AD1b refers to a wholesale sale by an 'entity'. The term entity is defined in section 33-1 of the WET Act as having the meaning given in section 195-1 of the GST Act, which in turn relies on the meaning in Division 184 of the same Act. Section 184 of the GST Act distinguishes between 'individuals' and 'any other unincorporated association or body of persons'. The same distinction is therefore applicable for WET. Similarly, the term 'price', under the WET Act, is given the same meaning as section 9-75 of the GST Act, which provides: Price is the sum of: (a) so far as the *consideration for the supply is consideration expressed as an amount of *money-the amount (without any discount for the amount of GST (if any) payable on the supply); and (b) so far as the consideration is not consideration expressed as an amount of money-the *GST inclusive market value of that consideration. The term 'consideration' is defined in section 195-1 of the GST Act and refers to the application of section 9-15. Relevantly subsection 9-15(1) provides that consideration includes: Subsection 9-15(2B) of the GST Act expressly provides that payments made by a member of a body to that body will be 'consideration' for the purposes of that Act. For the avoidance of doubt, the fact that the supplier is an entity of which the *recipient of the supply is a member, or that the supplier is an entity that only makes supplies to its members, does not prevent the payment, act or forbearance from being consideration . [Emphasis added] It follows that payments by a member of a body to that body for the supply of wine will constitute consideration, and therefore the price of the wine from a GST perspective. Given the reliance in the WET Act on the GST definition of price, it follows that payments by the member to the club for the wine constitute the 'price' of the wine for WET purposes. The other necessary element of a 'sale' is that there is a transfer of ownership in the relevant property. Where wine is made available by a club to its members for a price, the wine legally becomes the property of the member. Therefore this requirement is satisfied. A common law principle that can affect the taxation implications of dealings between a club and its members is the principle of mutuality. This principle recognises that receipts from transactions between a club and its members are not assessable income for the purposes of income tax legislation. The question arises as to whether the principle of mutuality can apply to the provision of wine by a club to its members and result in the supply of wine not being considered a sale (in the context of the WET Act). The principle of mutuality was discussed by the High Court in Bohemians Club v. Acting FCT (1918) 24 CLR 334 which provided: ...A man is not the source of his own income, though in another sense his exertions may be so described. A man's income consists of moneys derived from sources outside of himself... Taxation Determination 93/194 provides the following discussion on the application of the principle of mutuality in the context of income tax: 1. A licensed club is only assessable on trading income which relates to non-members and on income received from sources outside its general trading activities. This is due to the principle of mutuality that recognises that any surplus arising from contributions to a common fund created and controlled by people for a common purpose is not income. ( Bohemians Club v Acting FCT (1918) 24 CLR 334; Sydney Water Board Employees Credit Union v FCT (1973) 73 ATC 4129; (1973) 4 ATR 157; (1968) 18 TBRD Case T55 .) The principle of mutuality has been established in the context of income tax. There are fundamental differences however between the income tax legislation and the WET legislation. Income tax is concerned with an entity's assessable income in any given income year. The income tax approach necessitates a focus on the nature or character of a receipt to determine whether or not it forms part of an entity's assessable income for the relevant income year. In contrast to the income tax approach, the WET legislation is concerned with transactions (dealings) with wine, and it is the nature of a particular transaction (dealing) with the wine that determines whether or not it is subject to WET. The principle of mutuality does not deny the existence of transactions between a club and its members (for example a sale of goods to a club member), and similarly does not deny the existence of receipts arising from those transactions. It simply provides that the nature of the receipts arising from transactions between a club and its members means that they do not have the character of 'income' and do not form part of the club's assessable income. Therefore, the principle of mutuality cannot affect a transfer of ownership, for consideration, between two parties. As stated above, the principle of mutuality is only relevant to the determination of the character of a receipt arising from the relevant transaction (dealing); therefore it does not impact on whether there is a sale of wine by a club to its members. Given the meaning of the term 'sale' in the context of the WET Act involves the transfer of ownership of property for a price, and these elements are satisfied, the supply of wine from a club to its members in return for payment is a 'sale' for the purposes of section 33-1 of the WET Act (it follows that the retailer is making a wholesale sale of the wine to the club). The principle of mutuality does not affect this conclusion.", "Date_of_Decision": "12 August 2010", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 Division 5 section 5-5 AD1a of the Table in section 5-5 AD1b of the Table in section 5-5 Division 7 section 33-1", "Related_Public_Rulings_and_Determinations": "WETR 2009/1 | TD 93/194", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Mutuality principle Wine equalisation tax", "Case_References": "Bohemians Club v Acting FCT (1918) 24 CLR 334", "Other_References": "Australian Oxford Dictionary, 2nd edn, 2004, Oxford University Press, Melbourne", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010152", "Unmatched_Content": "Reasons for decsion Legislative References | Updated for the changes in the appropriations legislation which involved the repealing of 9-15(3) of the GST Act and replacing it with section 9-17 of the GST Act. This change was included in the \"Tax and Superannuation laws Amendment (2012 Measures No:1) Bill: 2012 | Related Public Rulings (including Determinations) WETR 2009/1 TD 93/194 | Keywords Mutuality principle Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2007/221", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine Equalisation Tax: imported wine and gift containers - taxable value", "Issue": "Where bottles of wine and presentation tubes and boxes (gift containers) are imported in the same consignment (but packed separately) and classified as wine in accordance with the classification rules in Schedule 2 to the Customs Tariff Act 1995, does the value of the gift containers form part of the taxable value of the wine for the purposes of Division 9 of the A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act)?", "Decision": "No, where bottles of wine and gift containers are imported in the same consignment (but packed separately) and classified as wine in accordance with the classification rules in Schedule 2 to the Customs Tariff Act, the value of the gift containers does not form part of the taxable value of the wine for the purposes of Division 9 of the WET Act.", "Facts": "An entity is an importer of wine and is registered for GST. The entity imports bottles of wine with associated gift containers. During transportation the items are separately packed within the same consignment. The cost of the bottles of wine and the cost of the gift containers are separately itemised on the invoice for the imported goods. The Australian Customs Service (Customs) has determined that the bottles of wine and associated gift containers are both classified under article 2204.21.20 (grape wine) of Schedule 3 to the Customs Tariff Act. The entity makes a local entry of wine for the purposes of section 5-30 of the WET Act.", "Reasons_for_Decision": "Summary: Subsection 9-5(1) of the WET Act provides that the general rules for calculating the taxable value of a taxable dealing are set out in the Assessable Dealings Table (the Table). The Table is in section 5-5 of the WET Act and lists all the assessable dealings that are subject to wine tax. Where an entity makes a local entry of wine, the relevant assessable dealing is AD10 in the Assessable Dealings Table. The normal taxable value specified in the table for AD10 is 'the *GST importation value'. Section 33-1 of the WET Act provides that the 'GST importation value' of a local entry is an amount equal to the value of a taxable importation for GST purposes, disregarding any wine tax payable included in that value. The basic rules for determining the value of a taxable importation for GST purposes are in section 13-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Subsection 13-20(2) provides that the value of a taxable importation is the sum of: 'Customs value' is defined in the GST Act in section 195-1 as the customs value of the goods for the purposes of Division 2 of Part VIII of the Customs Act 1901 (Customs Act). Therefore, the taxable value for the purposes of wine tax hinges upon the customs value for the purposes of the Customs Act. In this case, Customs (in accordance with the rules for classifying goods in Schedule 2 to the Customs Tariff Act) has classified both the imported bottles of wine and the gift containers to the tariff classification applicable to wine. This has the effect of applying the rate of customs duty relevant to wine to the gift containers. The question arising at this point is whether this classification has a consequence in determining taxable value for wine tax purposes. As explained above, column 5 of AD10 specifies that the normal taxable value of a local entry is to be determined from the GST importation value. The first two elements of the definition of GST importation value refer to the customs value of the goods and the cost of international transport of the goods. In the context of wine tax, the goods are the wine. This interpretation is supported by the overview to the wine tax legislation in section 2-1 of the WET Act. Section 2-1 states: '...The wine tax is a single stage tax applying (in most cases) to dealings in wine...' Section 2-5 of the WET Act also supports this interpretation. Section 2-5 states: '...The broad aim of the wine tax law is to tax the last wholesale sale of wine...' Subsection 23-5(1) of the WET Act, which sets out how wine tax on customs dealings is to be paid, also focuses on the 'wine' and provides that wine tax on customs dealings is to be paid to the Commonwealth at the same time that customs duty is payable on the wine in question. Therefore, in the context of wine tax, the focus is on the goods being the wine. The mere fact that Customs has classified both the wine and the gift containers to the tariff classification applicable to wine does not mean that the gift containers are themselves wine. It follows that the wine has a certain customs value, and the gift containers have their own separate customs value. Therefore, in calculating the normal taxable value of the wine, the following amounts are not included: Although the normal taxable value of the wine does not include the above amounts, it must be ascertained whether there are any specific provisions within the WET Act that serve to include the value of the gift containers in the taxable value of the wine. Subdivision 9-C of the WET Act provides for amounts to be added to the taxable value of wine in certain circumstances. One circumstance, set out in section 9-65 of the WET Act, is where a container is associated with wine that is the subject of a taxable dealing. The term 'container' is defined in section 33-1 of the WET Act as: The emphasised words play a critical role, leading to the construction that the wine (the contents) must be either in the packaging or secured by the packaging in order for the packaging to constitute a container for the purposes of section 9-65 of the WET Act. Neither applies in this case, as at the time of importation, the bottles of wine are neither packed in, nor secured by the gift containers. Thus the gift containers do not satisfy the definition of container provided by section 33-1 of the WET Act and therefore section 9-65 of the WET Act does not apply. Accordingly, the value of the gift containers does not form part of the normal taxable value of the wine, and nor is there any legislative mechanism via which the value of the gift containers is included in the taxable value of the wine. It follows that the taxable value of wine does not include the customs value of gift containers that are packed separately from the wine.", "Date_of_Decision": "30 November 2007", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 (WET Act) section 2-1 section 2-5 section 5-5 section 5-30 Division 9 subsection 9-5(1) subdivision 9C section 9-65 subsection 23-5(1) section 33-1", "Related_Public_Rulings_and_Determinations": "GSTR 2003/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "WET taxable value Wine Wine equalisation tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007221", "Unmatched_Content": "Reason for Decision, Related Public Rulings | Updated references and added note. | Related Public Rulings (including Determinations) GSTR 2003/15 | Keywords WET taxable value Wine Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2004/46", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Wine Equalisation Tax: taxable value - arm's length value of transaction", "Issue": "Is 50% of the retailer's retail price (including Wine Equalisation Tax (WET) and Goods and Services Tax (GST)) an acceptable arm's length price for wine for the purposes of section 27-10 of the A New Tax System (Wine Equalisation Tax) Act 1999 where a manufacturer of wine sells exclusively to a retailer and the manufacturer and the retailer are not dealing with each other at arm's length in relation to the transaction?", "Decision": "Yes. 50% of the retailer's retail price (including WET and GST) is an acceptable arm's length price for wine for the purposes of section 27-10 of the WET Act where a manufacturer of wine sells exclusively to a related retailer and the manufacturer and the retailer are not dealing with each other at arm's length in relation to the transaction. However, if the actual price charged (excluding WET and GST) by the manufacturer to the related retailer is equal to or more than 50% of the retailer's retail price (including WET and GST) then the price charged is acceptable as the arm's length price and no alteration to the WET liability under section 27-10 is necessary.", "Facts": "A manufacturer of wine sells exclusively to a related retailer and the sale is considered to be a non-arm's length transaction.", "Reasons_for_Decision": "Summary: A manufacturer selling wine by retail is required to pay WET based on a taxable value equivalent to the notional wholesale selling price of the wine (assessable dealing AD2a in the Assessable Dealings Table in section 5-5 of the WET Act). Where the manufacturer sells exclusively by retail, the notional wholesale price must be determined by reference to the half retail price method (section 9-25 and section 9-30 of the WET Act). Under the half retail price method the notional wholesale selling price is 50% of the price of the sale (including WET and GST). This means that a manufacturer selling exclusively by retail is required to pay WET on a taxable value of 50% of the retail price (including WET and GST). A manufacturer selling wine to a retailer is required to pay WET on the price (excluding WET and GST) for which the manufacturer sells the wine (assessable dealing AD1a in the Assessable Dealings Table in section 5-5 of the WET Act). Thus a manufacturer who interposes a retailer between themselves and the final customer and sells to the retailer at a price which is less than 50% of the retail price (including WET and GST) would pay less WET than if they sold the wine by retail. Where parties to a sale of wine are not dealing with each other at arm's length and this affects the price of the wine, section 27-10 of the WET Act requires the WET liability to be calculated on a taxable value which reflects the price for which the wine could reasonably be expected to have been sold under an arm's length transaction. Accordingly, if sales by the manufacturer to the interposed retailer are considered to be non-arm's length transactions, the manufacturer's liability to WET is required to be calculated as if the sales had occurred at arm's length. Because WET would have been calculated on 50% of the retail price (including WET and GST) of the wine if the retailer had not been interposed, this value represents an acceptable arm's length price (excluding WET and GST) for non-arm's length sales by the manufacturer to the related retailer. However, if the actual price charged (excluding WET and GST) by the manufacturer to the related retailer is equal to or more than 50% of the retailer's retail price (including WET and GST) then the price charged is acceptable as the arm's length price and no alteration to the WET liability under section 27-10 of the WET Act is necessary.", "Date_of_Decision": "14 January 2004", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 27-10 section 5-5 section 9-25", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Grape wine WET taxable value Wine Wine equalisation tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200446", "Unmatched_Content": "Keywords Grape wine WET taxable value Wine Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2003/952", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "GST and amount for a permit included in price charged to customer for the supply of services", "Issue": "Is the entire fee collected by the entity, a supplier of services, consideration for a taxable supply it makes under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), where the fee:", "Decision": "No, the entire fee collected by the entity is not consideration for a taxable supply it makes under section 9-5 of the GST Act, where the fee includes an amount for a permit that the customer is legally required to obtain and that is listed in the Treasurer's Determination made for the purposes of Division 81 of the GST Act. The amount for the permit is not consideration for the entity's taxable supply of services to the customer.", "Facts": "The entity is a supplier of services. The entity makes a taxable supply of its services to a customer under section 9-5 of the GST Act. As part of this supply the entity, on behalf of the customer, obtains a permit that the customer is legally required to obtain from the relevant authorities. The permit is issued in the name of the entity's customer. The permit is listed in the Treasurer's Determination made for the purposes of Division 81 of the GST Act (Treasurer's Determination). The relevant authority does not apply goods and services tax (GST) to the amount charged for the permit. In its total fee to the customer the entity includes the fee for the permit and the costs incurred in the provision of its services. These items are separately identified on the invoice given to the customer. The entity is registered for GST.", "Reasons_for_Decision": "Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: The entity is making a taxable supply of services to its customer for consideration under section 9-5 of the GST Act. However, it needs to be established whether the entire fee charged by the entity is consideration for its supply. Under section 9-15 of the GST Act, consideration includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything. The total fee paid by the customer includes amounts for the permit and costs incurred in providing the services. These items are separately identified on the invoice given to the customer. The payment for the cost incurred to perform the services is connected with the entity's supply of services and is therefore consideration. However, it needs to be determined whether the part of the fee that is for the permit is also consideration for the entity's supply. That is, is the customer paying the entity for its services or is it paying the relevant authority for the permit. The customer is legally required to obtain the permit, which is issued by the relevant authority in the customer's name. Therefore, the supply of the permit is made by the relevant authority to the entity's customer and not to the entity. When the entity pays for the permit it is acting as a paying agent for its customer. Paragraph 49 of Goods and Services Tax Ruling GSTR 2000/37 outlines the GST consequences where one entity, a solicitor, acts as a paying agent for a client and on charges the amount paid: If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. This example is similar to the entity's arrangement. The entity, in its capacity as paying agent for its customer, pays the relevant authority for the permit. The permit to which the payment relates is supplied by the relevant authority to the customer, not to the entity. Therefore, the amount paid by the customer to the entity for the permit is a reimbursement, which forms no part of the consideration payable to the entity for the supply of services. As such, the entire fee collected by the entity is not consideration for its taxable supply under section 9-5 of the GST Act, where the fee includes an amount for a permit that the customer is legally required to obtain and that is listed in the Treasurer's Determination. The amount for the permit is not consideration for the entity's supply of services to the customer. Note 1: As the portion of the fee that is for the permit is not consideration for the entity's supply to the customer, the entity does not include this amount when calculating the GST payable on the supply under section 9-70 of the GST Act. Note 2: Where an entity personally incurs the Australian tax, fee or charge that is listed in the Treasurer's Determination and then on-charges it to its customer, the amount on-charged for the tax, fee or charge is part of the consideration for the entity's supply. In this situation the tax, fee or charge loses its character as a tax, fee or charge for the purposes of the Treasurer's Determination and becomes a business cost of the entity's enterprise. Refer to ATO ID 2001/133.", "Date_of_Decision": "3 December 2001", "Year_of_Income": "", "Legislative_References": "A New Tax System (Goods and Services Tax) Act 1999 section 9-15 section 9-70 Division 81", "Related_Public_Rulings_and_Determinations": "GSTR 2000/37", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/133 | ATO ID 2002/877", "Subject_References": "Goods and services tax GST payment of taxes State & local government taxes GST supplies and acquisitions GST consideration Taxable supply", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003952", "Unmatched_Content": "With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. | Related Public Rulings (including Determinations) GSTR 2000/37 | Keywords Goods and services tax GST payment of taxes State & local government taxes GST supplies and acquisitions GST consideration Taxable supply"}
{"ATO_ID_Number": "ATO ID 2003/992", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Administrator's Liability to wine equalisation tax (WET)", "Issue": "Is an administrator appointed to a company liable for wine equalisation tax (WET) when they receive consideration for an assessable dealing with wine which took place before their appointment?", "Decision": "No. An administrator appointed to a company is not liable for WET when they receive consideration for an assessable dealing with wine which took place before their appointment.", "Facts": "An administrator is appointed to a company and is registered for GST in this capacity. The administrator receives payments relating to taxable assessable dealings made by the company prior to their appointment.", "Reasons_for_Decision": "Summary: The broad aim of the A New Tax System (Wine Equalisation Tax) Act 1999 (the WET Act) is to impose WET on dealings with wine in Australia. Dealings which attract WET are called 'assessable dealings' and WET is imposed unless an exemption applies. The Assessable Dealings Table in section 5-5 of the WET Act sets out all the assessable dealings that can be subject to WET. Section 5-5(2) specifies that if an entity is registered or required to be registered for GST, and the time of an assessable dealing is on or after 1 July 2000, and no exemption applies, then: Accordingly, if a company has a taxable assessable dealing with wine and the time of the dealing specified in column 4 of the table of assessable dealings is before the time an administrator was appointed, the liability for WET rests with the company and not with the administrator. This will be so even where the administrator receives payment from a debtor relating to a sale of wine which took place before their appointment.", "Date_of_Decision": "28 October 2003", "Year_of_Income": "", "Legislative_References": "A New Tax System (Wine Equalisation Tax) Act 1999 section 5-1 section 5-5 section 21-5", "Related_Public_Rulings_and_Determinations": "Wine Equalisation Tax Ruling WETR 2009/1 | Wine Equalisation Tax Ruling WETR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Wine equalisation tax", "Case_References": "", "Other_References": "", "Business_Line": "Indirect Tax", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003992", "Unmatched_Content": "Excise: With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated WET rulings references. | Related Public Rulings (including Determinations) Wine Equalisation Tax Ruling WETR 2009/1 Wine Equalisation Tax Ruling WETR 2009/2 | Keywords Wine equalisation tax"}
{"ATO_ID_Number": "ATO ID 2009/77", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dividends: non-share dividends and interest - superannuation fund for foreign residents - withholding tax", "Issue": "Are dividends, non-share dividends and interest paid to the taxpayer, the trustee of a superannuation fund for foreign residents, income to which paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936) applies?", "Decision": "Yes. The dividend, non-share dividend and interest income derived by the taxpayer in its capacity as the trustee of a superannuation fund for foreign residents is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies.", "Facts": "The taxpayer is a 'non-resident' as defined in subsection 6(1) of the ITAA 1936. The taxpayer is the trustee of a superannuation fund (the fund). The fund was established in the taxpayer's country of residence and is a superannuation fund for foreign residents as defined in section 118-520 of the Income Tax Assessment Act 1997 (ITAA 1997). In its capacity as trustee of the fund, the taxpayer received income in the 2007-08 income year that consisted of dividends and non-share dividends paid by Australian resident companies and interest. Within the last three years, the taxing authority in the country of residence of the taxpayer has certified that the fund is exempt from income tax in that country.", "Reasons_for_Decision": "Summary: Paragraph 128B(3)(jb) of the ITAA 1936 excludes certain income from being subject to withholding tax where that income: The definition of the term 'non-resident' in subsection 6(1) of the ITAA 1936 states that, unless contrary intention appears, a non-resident is a 'person who is not a resident of Australia'. The definition of 'person' in subsection 6(1) provides that the term 'person' includes a company. Subsection 128A(10) of the ITAA 1936 provides that, for the purposes of Division 11A of the ITAA 1936, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident at a particular time if, and only if, the fund is a foreign superannuation fund at that time. Applying the definition of 'non-resident' as stated in subsection 6(1) of the ITAA 1936 to the phrase 'a non-resident that is a superannuation fund for foreign residents' in subparagraph 128B(3)(jb)(i) of the ITAA 1936 means that the subparagraph can not be satisfied where the superannuation fund for foreign residents is a trust. This is because the trust is not a 'person' as defined. In such circumstances, subparagraph 128B(3)(jb) of the ITAA 1936 will not operate to exclude the relevant types of income of such a fund from being subject to withholding tax. This result is inconsistent with paragraph 128B(3)(jb) of the ITAA 1936 in a withholding tax context achieving a similar purpose to that of former paragraph 23(jb) of the ITAA 1936. Before being rewritten into paragraph 128B(3)(jb), former paragraph 23(jb) exempted interest and dividends of foreign superannuation funds. (See paragraph 2.110 of the Explanatory Memorandum to the Tax Laws Amendment (Repeal of Inoperative Provisions) Bill 2006). Furthermore, the phrase 'a non-resident that is a superannuation fund for foreign residents' is inconsistent with subsection 128A(10) of the ITAA 1936 for present purposes treating the trustee of a superannuation fund as a non-resident. The term 'foreign superannuation fund' is defined in subsection 995-1(1) of the ITAA 1997 as being a superannuation fund that is not an Australian superannuation fund. Paragraph 295-95(2)(b) of the ITAA 1997 provides that for a superannuation fund to be an 'Australian superannuation fund' at a particular time, the fund must have its central management and control ordinarily in Australia. Subparagraph 118-520(1)(a)(ii) and paragraph 118-520(1)(d) of the ITAA 1997 provides for present purposes that a fund is a 'superannuation fund for foreign residents' at a particular time if the fund is a superannuation fund and its central management and control is carried on outside Australia by entities, none of whom is an Australian resident. Accordingly, the fund cannot be an Australian superannuation fund. Subsection 128A(10) of the ITAA 1936 applies to the taxpayer because the fund is a 'superannuation fund for foreign residents' and is also a 'foreign superannuation fund'. Given that subsection 128A(10) of the ITAA 1936 treats the trustee to be the non-resident, the Commissioner considers that, where a superannuation fund for foreign residents is a trust, the phrase 'a non-resident that is a superannuation fund for foreign residents' is for the purposes of subparagraph 128B(3)(jb)(i) of the ITAA 1936 a reference to a non-resident that is the person acting in its capacity as the trustee of a superannuation fund for foreign residents. Accordingly, the Commissioner accepts that the taxpayer is 'a non-resident that is a superannuation fund for foreign residents' for the purposes subparagraph 128B(3)(jb)(i) of the ITAA 1936. As the dividend, non-share dividend and interest income was received by the taxpayer in its capacity as the trustee of the fund, the Commissioner accepts that, for the purposes of subparagraph 128B(3)(jb)(i) of the ITAA 1936 and for the reasons stated above, the income of the fund is derived by a non-resident that is a superannuation fund for foreign residents. As the income derived is dividends and non-share dividends paid by companies that are Australian residents and interest, it is income of the type specified in subparagraph 128B(3)(jb)(ii) of the ITAA 1936. Given that the taxing authority in the country of residence of the taxpayer has provided relevant certification of the fund being exempt in its country of residence, the Commissioner accepts that, for the purposes of subparagraph 128B(3)(jb)(iii) of the ITAA 1936, the income of the fund that satisfies subparagraphs 128B(3)(jb)(i) and 128B(3)(jb)(ii) of the ITAA 1936 is exempt from income tax in the country in which the taxpayer resides. Therefore, for the reasons stated above, the dividend and interest income of the fund is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies.", "Date_of_Decision": "13 July 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) paragraph 23(jb) (repealed as from 14 September 2006) subsection 128A(10) section 128B paragraph 128B(3)(jb) subparagraph 128B(3)(jb)(i) subparagraph 128B(3)(jb)(ii) subparagraph 128B(3)(jb)(iii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/320 | ATO ID 2001/334", "Subject_References": "Withholding tax exemptions Dividend income Non resident dividend withholding tax Interest income Non resident interest withholding tax Superannuation funds Non resident superannuation funds", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (Repeal of Inoperative Provisions) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200977", "Unmatched_Content": "Keywords Withholding tax exemptions Dividend income Non resident dividend withholding tax Interest income Non resident interest withholding tax Superannuation funds Non resident superannuation funds"}
{"ATO_ID_Number": "ATO ID 2005/83", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding tax: dividends - US parent of Australian company - 80% test", "Issue": "Are dividends paid from an Australian resident company to a United States resident company subject to withholding tax under subsection 128B(1) of the Income Tax Assessment Act 1936 (ITAA 1936), where the United States company owns shares representing 80% or more of the voting power of the Australian company?", "Decision": "No. Withholding tax does not apply to the dividends under Article 10 of the United States Convention contained in Schedules 2 and 2A of the International Tax Agreements Act 1953 (Agreements Act).", "Facts": "A US resident company acquired 100% of the issued shares in an Australian resident company on 1 September 2003. The US resident company's principal class of shares are listed on the New York Stock Exchange (NYSE) and are regularly traded. The Australian resident company intends to pay a dividend after 1 September 2004. It is expected that the principal class of shares in the company receiving the dividends will be regularly traded.", "Reasons_for_Decision": "Summary: Pursuant to subsection 128B(1) of the ITAA 1936, a liability to withholding tax will apply to income that is derived by a non-resident that consists of a dividend paid by a company that is a resident. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the Agreements Act. The taxpayer is a resident of the United States, a country with which Australia has entered into a double tax agreement. Therefore, the double tax agreement between Australia and the United States and the protocols to that agreement contained in Schedule 2A of the Agreements Act must be considered in determining whether the dividends received by the taxpayer are taxable in Australia. Article 10(2) of the US Convention provides that dividends paid by a company resident in Australia being dividends to which a resident of the US is beneficially entitled, may be taxed in Australia. However, Article 10(3) provides that dividends shall not be taxed in Australia if the person who is beneficially entitled to the dividends is a company that is a resident of the US that has owned shares representing 80 percent or more of the voting power of the company paying the dividends for a 12-month period ending on the date the dividend is declared and: A person is a 'qualified person' for a taxable year pursuant to sub-paragraph (c)(i) of paragraph (2) of Article 16 if it is a company and the principal class of its shares is listed on a recognised stock exchange specified in sub-paragraph (a) or (b) of paragraph (6) of this Article and is regularly traded on one or more recognised stock exchanges. Under sub-paragraph (a) of paragraph (6) of Article 16 a 'recognised stock exchange' includes 'any stock exchange registered with the U.S. Securities and Exchange Commission as a national securities exchange under the U.S. Securities Exchange Act of 1934 '. The US resident company's principal class of shares is listed on the NYSE, which is registered with the U.S. Securities and Exchange Commission, and the shares are currently regularly traded (and it is expected they will be regularly traded in future) on that exchange. Therefore sub-paragraph (a) of paragraph (3) of Article 10 is satisfied. At the time the dividend is declared, the US company owns 100% of the shares representing 80% or more of the voting power of the Australian company for the 12-month period ending on the date the dividend is declared. Therefore, Article 10(3) applies, and Australia has no taxing right in respect of the dividend under the US double tax agreement. As a result, the dividend is not subject to withholding tax under section 128B.", "Date_of_Decision": "24 February 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128B(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements International tax Treaties Dividends Withholding tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200583", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements International tax Treaties Dividends Withholding tax"}
{"ATO_ID_Number": "ATO ID 2005/151", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax: dividend paid from a dual resident company to its UK parent company", "Issue": "Are unfranked dividends paid by a company that is a dual resident of Australia and the United Kingdom (UK), to a UK resident company (the taxpayer) subject to withholding tax under subsection 128B(1) of the Income Tax Assessment Act 1936 (ITAA 1936), where the taxpayer owns shares representing more than 80% of the voting power of the dual resident company?", "Decision": "No. Unfranked dividends paid by a company that is a dual resident of Australia and the UK, to the taxpayer is not subject to withholding tax under subsection 128B(1) of the ITAA 1936, where the taxpayer owns shares representing more than 80% of the voting power of the dual resident company.", "Facts": "The taxpayer is a listed company resident of the UK and a non-resident of Australia for income tax purposes. The taxpayer owns 100% of the issued shares in a company that is both a resident of Australia and resident of the UK (the dual resident company). The dual resident company is incorporated in Australia but has its place of effective management in the UK. The taxpayer receives unfranked dividends from the dual resident company.", "Reasons_for_Decision": "Summary: Pursuant to section 128B of the ITAA 1936, a liability to withholding tax will apply to income that is derived by a non-resident that consists of unfranked dividends paid by a company that is a resident. In determining liability to Australian tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable tax convention contained in the International Tax Agreements Act 1953 (Agreements Act). The taxpayer is a resident of the UK, a country with which Australia has entered into a tax convention. Therefore, the Tax Convention between Australia and the United Kingdom of Great Britain and Northern Ireland and 2003 United Kingdom Notes (the 2003 UK Convention), contained in Schedule 1 of the Agreements Act, must be considered in determining whether the dividend income derived by the taxpayer is taxable in Australia. Subsection 4(1) of the Agreements Act provides that the ITAA 1936 must be read as one with the Agreements Act. By virtue of subsection 4(2) of the Agreements Act, the Agreements Act effectively overrides the ITAA 1936 where there are inconsistent provisions. Article 4(4) of the 2003 UK Convention stipulates that for the purposes of the 2003 UK Convention a company that is resident of both Australia and the UK will be deemed to be a resident in the country where its place of effective management is situated. As the dual resident company paying the dividends has its place of effective management in the UK, it is deemed to be a UK resident for the purposes of the 2003 UK Convention. Article 10(1) of the 2003 UK Convention provides that dividends derived by the taxpayer from an Australian resident company for the purpose of its tax, may be taxed in the UK. Article 10(2) of the 2003 UK Convention further provides that Australia may also tax the relevant dividends but this rate shall not exceed 5% if the taxpayer owns more than 10% in the company paying the dividends. In all other cases the rate of tax shall not exceed 15%. Notwithstanding Article 10(2), Article 10(3) of the 2003 UK Convention specifies that where a listed company receiving the dividends owns 80% of the company paying the dividends, for a 12 month period, the dividends shall not be taxed in the Contracting State of which the company paying the dividends is a resident. The phrase, 'for the purposes of its tax' is contained in Article 10(1) and 10(2) of the 2003 UK Convention and ensures that where dividends are paid by a dual resident company, that is deemed a resident of the UK under the 2003 UK Convention, Australia still has a taxing right on these payments. Article 10(3) of the 2003 UK Convention does not contain the phrase 'for the purposes of its tax' after the reference to 'the Contracting State of which the company paying the dividend is a resident'. Article 10(3) of the 2003 UK Convention, however, is still inextricably linked to Article 10(2) of the 2003 UK Convention in that it focuses on the limitation of Australia's source country taxing rights. As Article 10(3) restricts Australia's source country taxation rights based on the attributes of the taxpayer, not on the company paying the dividend, it is consistent with the context of the Article for the words, 'for the purposes of its tax,' to be implied when reading the reference to 'the company paying the dividends is a resident.' This conforms with the Explanatory Memorandum to the International Tax Agreements Bill 2003 that states that: No tax will be payable in the source country on dividends where a company that is the beneficial owner and is resident in the other country: • holds 80% or more of the voting power of the company paying the dividends; and • satisfies a 12 month holding requirement at the time the dividend in relation to the shares on which the dividend is payable. (Paragraph 1.109) Furthermore, if the phrase was not implied, a payment made by a dual resident company, that had its effective management in the UK, would be treated as being a payment from one UK resident to another UK resident and therefore Article 10(3) of the 2003 UK Convention would not apply. As a consequence, the payment would instead be subject to tax at a rate of 5% under Article 10(2)(a) of the 2003 UK Convention. As there is an inconsistency between the exemption provided for under Article 10(3) of the 2003 UK Convention, contained in Schedule 1 of the Agreements Act and subsection 128B(1) of the ITAA 1936 which prima facie subjects dividends derived by a non-resident to withholding tax, the Agreements Act prevails. Accordingly, the unfranked dividends paid to the taxpayer are not subject to dividend withholding tax under subsection 128B(1) of the ITAA 1936.", "Date_of_Decision": "26 May 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 section 128B subsection 128B(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Non resident dividend withholding tax United Kingdom", "Case_References": "", "Other_References": "Explanatory Memorandum to the International Tax Agreements Bill 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005151", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Non resident dividend withholding tax United Kingdom"}
{"ATO_ID_Number": "ATO ID 2005/305", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding tax: deduction from consideration paid for qualifying securities when first brought on shore", "Issue": "When a qualifying security with no Australian connection is brought on shore, does section 128AA of the Income Tax Assessment Act 1936 (ITAA 1936) apply to deem the growth in value to be interest subject to withholding tax?", "Decision": "No. Section 128AA of the ITAA 1936 does not apply to deem the growth in value to be interest subject to withholding tax.", "Facts": "The bank is a foreign global banking group which carries on activities in Australia through a branch which is a permanent establishment. This branch is also an Offshore Banking Unit (OBU) for the purposes of Division 9A of Part III of the ITAA 1936. The group conducts global bond trading activities through a non-resident subsidiary. It is proposed to transfer some bond trading activities to the Australian branch. Some of these bonds were issued by non-residents and constitute 'qualifying securities' for the purposes of section 128AA of the ITAA 1936. The non-resident subsidiary transfers this trading portfolio to its Australian branch OBU. The OBU will continue trading activities, buying and selling bonds in the ordinary course of business in future.", "Reasons_for_Decision": "Summary: The liability for interest withholding tax is determined by virtue of section 128B of the ITAA 1936. Subsection 128B(2) of the ITAA 1936 generally applies where there is a flow of interest from an Australian resident or non-resident Australian permanent establishment (PE) to a non-resident. Section 128AA of the ITAA 1936 deems the accrued interest or increase in value of the qualifying security incorporated into the purchase price of the transferee to be interest, as provided in subsection 128AA(1): 128AA(1) Where: (a) a person transfers a qualifying security; and (b) the transfer price of the security exceeds the issue price or, where the security has been partially redeemed, the reduced issue price of the security, Section 128AA of the ITAA 1936, introduced in 1986 as an anti-avoidance measure, was designed to prevent non-residents disposing of Australian qualifying securities before their maturity date, so that the accrued interest was converted into a business profit, thus avoiding the deduction of interest withholding tax by the Australian resident (or non resident Australian PE) issuer. These changes to the withholding tax legislation were introduced into Parliament by Taxation Laws Amendment Bill (No 2) 1986 and Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill 1986. The scope of section 128AA is addressed in the Explanatory Memorandum (EM) and the Second Reading Speech of the Bill on 4 June 1986 which states: Interest Withholding Tax I turn now to the proposal also announced by the Treasurer in December 1984 to strengthen the interest withholding tax provisions of the income tax law. In recent years, there has been a move away from the more conventional means by which overseas finance is provided. This has been with the aim of avoiding the non-resident lender's liability to Australian withholding tax. Some of the arrangements involve the use of discounted and other deferred interest securities, including capital-indexed securities of the kind I have just spoken about. A typical arrangement involves securities which, instead of being held by a non-resident until redemption - at which time withholding tax would apply to the payment of the discount or deferred interest - are sold to a resident just prior to maturity. This means that, while the resident purchaser is usually liable to tax on the excess of the redemption price over the purchase price, the balance of the discount, which effectively passes to the non-resident as part of the proceeds from the sale of the security, is not subject to withholding tax. Further, the arrangements are often structured so that the profit has an ex-Australian source. In these cases the profit derived by the non-resident cannot be taxed by assessment. The proposed amendments will overcome this avoidance technique by ensuring that the tax will apply to the difference between the sale price of the security and its issue price. [emphasis added] This transfer of bonds from the non-resident subsidiary of a foreign banking group to its Australian branch OBU [1] is not the kind of arrangement which the above amendment was designed to address. This is because the bonds in question have had no connection with Australia until they were transferred to the Australian branch in this transaction. The contemporary principle of statutory interpretation is that it is necessary to consider legislation in its context (per Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance v. Bankstown Football Club Ltd (1997) 187 CLR 384 at p408 .....that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses \"context\" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy (47). Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v. Butler Pollnow Pty Ltd (48), if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent (49). Section 128AA of the ITAA 1936 is an anti-avoidance measure and therefore should be interpreted with reference to the broader legislative scheme and the mischief it was intended to overcome (see also Chief Executive Officer of Customs v. Adelaide Brighton Cement Ltd (2004) 139 FCR 147; [2004] FCAFC 183; (2004) 56 ATR 267). Section 128AA of the ITAA 1936 is intended to ensure that a particular arrangement, or form of an arrangement does not escape withholding tax. In setting the context and ambit of the provision, both the EM and Second Reading Speech draw a comparison with the situation where the non-resident held the security until maturity. In this context, the section is directed towards preserving the proper operation of the interest withholding tax rules in the face of arrangements intended to take certain securities outside the Division before a liability is crystallised. In each arrangement it will be necessary to examine all the facts and circumstances to determine whether section 128AA of the ITAA 1936 appropriately applies, having regard to its purpose and object. The Commissioner is satisfied that section 128AA does not extend to the arrangement in question, as, unlike the arrangement described in the second reading speech (above) there is no transaction to which interest withholding tax should apply until the Australian branch acquires the bonds issued by the non-residents, which were held until then by non-residents. Therefore, it is only at the time when the securities are first brought on shore that any liability to tax arises. Any liability which does arise will relate only to income derived from that time.", "Date_of_Decision": "6 October 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 Division 11A of Part III section 128AA section 128B section 128GB section 128F(1B)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident interest withholding tax Offshore banking activities", "Case_References": "CIC Insurance v. Bankstown Football Club Ltd (1997) 187 CLR 384", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 2) of 1986 (Cth) Explanatory Memorandum to the Income Tax (Securities and Agreements) (Withholding Tax Recoupment) Bill of 1986 (Cth) Explanatory Memorandum to Taxation Laws Amendment Act (No 1) 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005305", "Unmatched_Content": "Date of effect 13 September 2021 | Keywords Non resident interest withholding tax Offshore banking activities"}
{"ATO_ID_Number": "ATO ID 2002/1085", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Foreign Dividend Account Declaration Percentage", "Issue": "Whether preference shares that carry no fixed entitlement to dividends are to be regarded as ordinary shares for the purposes of sub-section 128TC(3) of the Income Tax Assessment Act 1936 ?", "Decision": "No. Preference shares that carry no fixed entitlement to dividends are not regarded as ordinary shares for the purposes of sub-section 128TC(3) of the Income Tax Assessment Act 1936.", "Facts": "1. The company is an Australian resident taxpayer. 2. The company has two classes of shares; ordinary shares and preference shares. 3. The preference shares have the following characteristics: 4. The preference shares and the ordinary shares on issue are held by resident and non-resident shareholders. 5. The company has a carry-forward Foreign Dividend Account (FDA) surplus. 6. The company wishes to pay dividends on both the ordinary shares and preferred limited voting ordinary shares. 7. Within each class of share, the dividend per share is proposed to be the same for both resident and non-resident shareholders. 8. The company wishes to be able to utilise its FDA surplus by making an FDA declaration percentage of up to 100% in relation to future dividend payments COMMENCEMENT OF ARRANGEMENT: 1 July 2001", "Reasons_for_Decision": "Summary: The ordinary meaning of the expression \"preference share\" suggests that a preference share carries a preferred dividend or capital right. The issued preference shares in question have an entitlement to dividends in priority to other shares. The Explanatory Memorandum to Taxation Laws Amendment Act (No 3) 1994 states the following in relation to the \"calculation value for dividend purposes\": 'The \"calculation value for dividend purposes\" of a share is the amount that represents the shareholder's capital contribution against which a dividend would ordinarily be compared to calculate the rate of return. For ordinary shares, it is the nominal value of the shares. For preference shares, it could include an amount in addition to the paid-up value of the share. The additional amount could include a premium paid on subscription or the amount payable on redemption of the share.' There is no requirement that the rate of return of the dividends or the \"calculation value for dividend purposes\" be a fixed amount. Sub-section 128TC(3) merely requires the \"calculation value for dividend purposes\" to be the amount that is ordinarily used to calculate the rate of return on the shares. The use of the words \"ordinarily be compared to calculate the rate of return\" envisages that the \"calculation value for dividend purposes\" and rate of return may vary from time to time.", "Date_of_Decision": "24 July 2002", "Year_of_Income": "Year ended 30 June 2002", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128TC(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Withholding tax exemptions Preference shares Precedent Foreign dividend withholding tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20021085", "Unmatched_Content": "Keywords Withholding tax exemptions Preference shares Precedent Foreign dividend withholding tax"}
{"ATO_ID_Number": "ATO ID 2009/67", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation fund for foreign residents", "Issue": "Is the retirement plan a 'superannuation fund for foreign residents' for the purposes of paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The retirement plan is a 'superannuation fund for foreign residents' for the purposes of paragraph 128B(3)(jb) of the ITAA 1936.", "Facts": "The Plan was established in a country outside Australia. The purpose of the Plan is to provide participating employees with retirement and disability benefits. Benefits are paid when an employee ceases employment after reaching retirement age (defined in the plan as age 60), satisfies certain service requirements or because of death or total and permanent disability. The Plan will also pay out benefits when participating employees reach age 70, whether or not they have ceased employment. The Plan was established, and is maintained only to provide such benefits for individuals who are not Australian residents. The amounts held in the Plan are not used for any purposes other than providing benefits to participants, former participants and their beneficiaries under the Plan and paying the reasonable expenses of administering the Plan. Contributions are being made into the Plan by the sponsoring employer of the Plan. Those contributions are invested by the trustee of the Plan with any gains being credited to the accounts of the members of the Plan. The Plan's central management and control is carried on outside Australia by entities none of whom is an Australian resident. It is the intention and expectation that the Plan will be continued indefinitely. The Plan is not one for which an amount has been set aside, or to which an amount has been paid, by a taxpayer that is an amount that has been allowed or is allowable as a deduction or rebate under any section of the ITAA 1936 or the Income Tax Assessment Act 1997 (ITAA 1997).", "Reasons_for_Decision": "Summary: Paragraph 128B(3)(jb) of the ITAA 1936 exempts interest and dividend (including non-share dividend) income derived by a non-resident that is a 'superannuation fund for foreign residents'. Subsection 995-1(1) of the ITAA 1997 provides that 'superannuation fund for foreign residents' has the meaning given by section 118-520 of the ITAA 1997. A fund is a 'superannuation fund for foreign residents' at a time under section 118-520 of the ITAA 1997 if: Under subsection 118-520(2) of the ITAA 1997, a fund is not a 'superannuation fund for foreign residents' if: The first question to consider in determining whether the Plan is a 'superannuation fund for foreign residents' within the meaning of section 118-520 of the ITAA 1997 is whether the Plan is a 'fund'. The term 'fund' is not defined in either the ITAA 1997 or the ITAA 1936. Therefore, it should be given its ordinary meaning subject to the context in which it appears and having regard to any relevant case law authorities. The Australian Oxford Dictionary , 2004, Oxford University Press, Melbourne defines the term 'fund' as 1 a permanent stock of something ready to be drawn upon... 2 a stock of money, especially one set apart for a purpose. In Scott v. FC of T (No 2) (1966) 14 ATD 333; (1966) 10 AITR 290 ( Scott ), Windeyer J expressed the view that 'fund' in the context of 'superannuation fund' ordinarily meant 'money (or investments) set aside and invested, the surplus income therefrom being capitalised'. Windeyer J's views in Scott were cited with approval by Hill J in Walstern Pty Ltd v. Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423 who stated that 'for present purposes, the point is the need for \"money\" or \"other property\" to constitute a fund'. In the current circumstances, contributions are being made into the Plan by the sponsoring employer of the Plan. The contributions are then being invested by the trustee of the Plan with any gains being credited to the accounts of the members of the Plan. Therefore the Plan is a 'fund'. The term 'indefinitely continuing fund' in subparagraph (a)(i) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997 is not defined. The Australian Oxford Dictionary defines 'indefinite' as 1 vague, undefined. 2 unlimited... and 'indefinitely' as 1 for an unlimited time... 2 in an indefinite manner. In the current circumstances, there is no clause in the trust deed of the Plan which requires the Plan to be terminated or wound up after a specified period. It is stated in the deed that it is the intention and expectation that the Plan will be continued indefinitely. The plan is thus an 'indefinitely continuing fund' within the meaning of subparagraph (a)(i) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997. None of the four descriptors 'provident', 'benefit', 'superannuation' or 'retirement fund' in subparagraph (a)(ii) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997 are defined. The terms have, however, been the subject of judicial consideration. The courts have held that for a fund to be a 'provident, benefit, superannuation or retirement fund', the fund's sole purpose must be to provide superannuation benefits, that is, benefits to a member upon the member reaching a prescribed age or upon their retirement, death or other cessation of employment ( Scott v. FC of T (No 2) (1966) 14 ATD 333; (1966) 10 AITR 290, per Windeyer J; Mahony v. FC of T (1967) 14 ATD 519, per Kitto J; Walstern Pty Ltd v. Commissioner of Taxation (2003) 138 FCR 1; 2003 ATC 5076; (2003) 54 ATR 423, per Hill J and Cameron Brae Pty Ltd v. Federal Commissioner of Taxation (2007) 161 FCR 468; 2007 ATC 4936; (2007) 67 ATR 178, per Stone and Allsop JJ). Having regard to the terms of the deed of the Plan, it is considered that the Plan is a 'provident, benefit, superannuation or retirement fund' as that phrase has been interpreted by the relevant authorities. The sole purpose of the Plan is the provision of benefits to, or in respect of, participating employees who: Therefore, the Plan satisfies subparagraph (a)(ii) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997. According to a statement provided by the trustee of the Plan, the Plan: Therefore, the Plan satisfies paragraphs 118-520(1)(b), 118-520(1)(c) and 118-520(1)(d) of the definition of 'superannuation fund for foreign residents' in section 118-520 of the ITAA 1997. The trustee of the Plan has also stated that no amount paid to the fund or set aside for the fund has been or can be deducted under the ITAA 1936 or the ITAA 1997. The trustee has also stated that a tax offset has not been allowed or is allowable for such an amount. Therefore, subsection 118-520(2) of the ITAA 1997 has no application. Accordingly, the Plan is a 'superannuation fund for foreign residents' within the meaning of subsection 118-520 of the ITAA 1997. It is therefore a 'superannuation fund for foreign residents' for the purposes of paragraph 128B(3)(jb) of the ITAA 1936.", "Date_of_Decision": "6 July 2009", "Year_of_Income": "Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009 Year ended 30 June 2010 Year ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 128B(3)(jb)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation funds Non resident superannuation funds Withholding taxes", "Case_References": "Cameron Brae Pty Ltd v Federal Commissioner of Taxation (2007) 161 FCR 468 2007 ATC 4936 (2007) 67 ATR 178", "Other_References": "The Australian Oxford Dictionary, 2004, Oxford University Press, Melbourne", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200967", "Unmatched_Content": "Keywords Superannuation funds Non resident superannuation funds Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2009/79", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Dividends: non-share dividends and interest - foreign superannuation fund - withholding tax", "Issue": "Are dividends, non-share dividends and interest received in the 2006-07 income year by the taxpayer, the trustee of a foreign superannuation fund, income to which paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936) applies?", "Decision": "Yes. The dividend, non-share dividend and interest income received by the taxpayer in its capacity as the trustee of a foreign superannuation fund is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies.", "Facts": "The taxpayer is a 'non-resident' as defined in subsection 6(1) of the ITAA 1936. The taxpayer is the trustee of a superannuation fund (the fund). The fund was established in the taxpayer's country of residence and is a foreign superannuation fund as defined in section 118-520 of the Income Tax Assessment Act 1997 (ITAA 1997) as enacted prior to its amendment as part of Tax Laws Amendment (Simplified Superannuation) Act 2007. In its capacity as trustee of the fund, the taxpayer received income in the 2006-07 income year that consisted of dividends and non-share dividends paid by Australian resident companies and interest. Within the last three years, the taxing authority in the country of residence of the taxpayer has certified that the fund is exempt from income tax in that country.", "Reasons_for_Decision": "Summary: Paragraph 128B(3)(jb) of the ITAA 1936 as enacted prior to its amendment as part of the Superannuation Legislation Amendment (Simplification) Act 2007 , excluded certain income from being subject to withholding tax where that income: In relation to the term 'non-resident' in subparagraph 128B(3)(jb)(i) of the ITAA 1936, the definition of the term in subsection 6(1) of the ITAA 1936 states that, unless contrary intention appears, a non-resident is a 'person who is not a resident of Australia'. The definition of 'person' in subsection 6(1) provides that the term 'person' includes a company. Subsection 128A(10) of the ITAA 1936 as enacted prior to its amendment as part of the Superannuation Legislation Amendment (Simplification) Act 2007 , provided that, for the purposes of Division 11A of the ITAA 1936, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident at a particular time if, and only if, the fund is a non-resident superannuation fund at that time. Applying the definition of 'non-resident' as stated in subsection 6(1) of the ITAA 1936 to the phrase 'a non-resident that is a foreign superannuation fund' in subparagraph 128B(3)(jb)(i) of the ITAA 1936 means that the subparagraph can not be satisfied where the foreign superannuation fund is a trust. This is because the trust is not a 'person' as defined. In such circumstances, subparagraph 128B(3)(jb) of the ITAA 1936 will not operate to exclude the relevant types of income of such a fund from being subject to withholding tax. This result is inconsistent with paragraph 128B(3)(jb) of the ITAA 1936 in a withholding tax context achieving a similar purpose to that of former paragraph 23(jb) of the ITAA 1936. Before being rewritten into paragraph 128B(3)(jb), former paragraph 23(jb) exempted interest and dividends of foreign superannuation funds. (See paragraph 2.110 of the Explanatory Memorandum to the Tax Laws Amendment (Repeal of Inoperative Provisions) Bill 2006). Furthermore, the phrase 'a non-resident that is a foreign superannuation fund' is inconsistent with subsection 128A(10) of the ITAA 1936 for present purposes treating the trustee of a superannuation fund as a non-resident. Subsection 118-520(1) of the ITAA 1997 as enacted prior to its amendment as part of the Tax Laws Amendment (Simplified Superannuation) Act provided that a fund is a foreign superannuation fund at a time if: unless any of the exceptions in subsection 118-520(2) of the ITAA 1997 apply. See also note below. Given that, as stated above, the fund is a foreign superannuation fund, none of the exceptions in subsection 118-520(2) of the ITAA 1997 apply. Former subsection 6E(2) of the ITAA 1936 as enacted prior to its repeal applicable to the 2007-08 and subsequent income years as part of the Superannuation Legislation Amendment (Simplification) Act 2007 , provided that, for the purposes of the ITAA 1936, a fund is a non-resident superannuation fund at a particular time if, and only if, the fund: Former subsection 6E(1) of the ITAA 1936 as enacted prior to its repeal applicable to the 2007-08 and subsequent income years as part of the Superannuation Legislation Amendment (Simplification) Act 2007 provided that, for the purposes of the ITAA 1936, a fund is a resident superannuation fund at a particular time only if all the conditions in the section are satisfied. One of the conditions in former subsection 6E(1) of the ITAA 1936 requires that the fund was established in Australia. The fund was established in a foreign country and is a foreign superannuation fund for the purposes of section 118-520 of the ITAA 1997 as enacted prior to its amendment as part of the Tax Laws Amendment (Simplified Superannuation) Act. Therefore, as former paragraphs 6E(2)(a) and 6E(2)(b) of the ITAA 1936 are satisfied in the present case, the fund is a non-resident superannuation fund as defined, not a 'resident superannuation fund'. In light of the above, subsection 128A(10) of the ITAA 1936 applies to the taxpayer because the fund is a 'foreign superannuation fund' and is also a 'non-resident superannuation fund'. Given that subsection 128A(10) of the ITAA 1936 treats the trustee to be the non-resident, the Commissioner considers that, where a foreign superannuation fund is a trust, the phrase 'a non-resident that is a foreign superannuation fund' is for the purposes of subparagraph 128B(3)(jb)(i) of the ITAA 1936 a reference to a non-resident that is the person acting in its capacity as the trustee of a foreign superannuation fund. Accordingly, the Commissioner accepts that the taxpayer is 'a non-resident that is a foreign superannuation fund' for the purposes subparagraph 128B(3)(jb)(i) of the ITAA 1936. As the dividend, non-share dividend and interest income was received by the taxpayer in its capacity as the trustee of the fund, the Commissioner accepts that, for the purposes of subparagraph 128B(3)(jb)(i) of the ITAA 1936 and for the reasons stated above, the income of the fund is derived by a non-resident that is a foreign superannuation fund. As the income derived is dividends and non-share dividends paid by companies that are Australian residents and interest, it is income of the type specified in subparagraph 128B(3)(jb)(ii) of the ITAA 1936. Given that the taxing authority in the country of residence of the taxpayer has provided relevant certification of the fund being exempt in its country of residence, the Commissioner accepts that, for the purposes of subparagraph 128B(3)(jb)(iii) of the ITAA 1936, the income of the fund that satisfies subparagraphs 128B(3)(jb)(i) and 128B(3)(jb)(ii) of the ITAA 1936 is exempt from income tax in the country in which the taxpayer resides. Therefore, for the reasons stated above, the dividend and interest income of the fund is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies.", "Date_of_Decision": "13 July 2009", "Year_of_Income": "Year ended 30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 6E (repealed as of 15 March 2007) subsection 6E(1) (repealed as of 15 March 2007) subsection 6E(2) (repealed as of 15 March 2007) paragraph 23(jb) (repealed as of 14 September 2006) subsection 128A(10) (amended as of 15 March 2007) section 128B paragraph 128B(3)(jb) (amended as at 14 September 2006 to 30 June 2007) subparagraph 128B(3)(jb)(i) (amended as at 14 September 2006 to 30 June 2007) subparagraph 128B(3)(jb)(ii) subparagraph 128B(3)(jb)(iii)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/320 | ATO ID 2001/334", "Subject_References": "Dividend income Interest income Non resident dividend withholding tax Non resident interest withholding tax Non resident superannuation funds Superannuation funds Withholding tax exemptions", "Case_References": "", "Other_References": "Explanatory Memorandum to Tax Laws Amendment (Repeal of Inoperative Provisions) Bill 2006", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200979", "Unmatched_Content": "Keywords Dividend income Interest income Non resident dividend withholding tax Non resident interest withholding tax Non resident superannuation funds Superannuation funds Withholding tax exemptions"}
{"ATO_ID_Number": "ATO ID 2008/61", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax Exemption: interest and dividends paid by an Australian resident and received by a Dutch Stichting as unitholder in an Irish Common Contractual Fund", "Issue": "Does a Dutch Stichting (Stichting) 'derive' interest and dividend income paid by Australian residents and received by the Stichting as a unitholder in an Irish Common Contractual Fund (CCF) for the purposes of the withholding tax exemption in paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The interest and dividend income is derived by the Stichting for the purposes of paragraph 128B(3)(jb) of the ITAA 1936.", "Facts": "The Stichting is a legal entity incorporated in the Netherlands. The Stichting is a non-resident for the purposes of paragraph 128B(3)(jb) of the ITAA 1936. The Stichting is a 'foreign superannuation fund' and a 'superannuation fund for foreign residents' for the purposes of paragraph 128B(3)(jb) of the ITAA 1936. The Stichting resides in the Netherlands and is exempt from income tax in the Netherlands. The Stichting is the only unitholder in an Irish CCF. Irish CCFs are regulated by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (the Regulations). According to the Regulations a CCF is a contractual arrangement under which participants participate in the co-ownership of assets. The CCF is not a legal entity in Ireland and is not subject to tax in Ireland. The CCF acts as a pooled investment vehicle for the assets of various pension funds and invests these assets on behalf of those funds. The CCF is established under a deed between the manager (an Irish company), custodian (an Irish company) and the unitholder. The assets of the CCF are managed and administered by the manager in the interests of the unitholder in the CCF. The manager generally holds legal title to the assets. The manager appoints the custodian as the fiduciary of the CCF under a custody agreement. The custodian holds and safeguards the assets of the CCF for the account and benefit of the unitholder in accordance with the deed and the custody agreement. In some cases, the custodian also holds legal title to the assets of the CCF. In dealing in the assets of the CCF, the deed requires the manager and custodian to act consistent with the best interests of the unitholder. The CCF receives interest and dividends from companies resident in Australia as a result of investing the assets of the CCF. The Stichting, as a unitholder in the CCF, is entitled to receive the income of the CCF as it arises. Under the deed, the Stichting is beneficially entitled to a proportion of the underlying assets of the CCF in accordance with its unit holding.", "Reasons_for_Decision": "Summary: Section 128B of Division 11A of the ITAA 1936 imposes withholding tax on payment of dividends, interest and royalties made by Australian residents to non-residents. Subsection 128B(3) of the ITAA 1936 lists certain types of income to which withholding tax under section 128B of the ITAA 1936 does not apply. In particular, paragraph 128B(3)(jb) of the ITAA 1936 provides an exclusion from withholding tax for certain superannuation funds for foreign residents. Although, the interest and dividend income is initially received by the manager and/or custodian of the CCF before it is paid to the Stichting, under subsection 128A(3) of the ITAA 1936, the Stichting will be deemed to derive the income for the purposes of Division 11A of the ITAA 1936 where the relationship between the CCF and the Stichting is a trust relationship. Subsection 128A(3) of the ITAA 1936 states: For the purposes of this Division, a beneficiary who is presently entitled to a dividend, to interest or to a royalty included in the income of a trust estate shall be deemed to have derived income consisting of that dividend, interest or royalty at the time when he became so entitled. Is the relationship between the CCF and the Stichting a trust for the purposes of subsection 128A(3) of the ITAA 1936? The term 'trust estate' is not defined in the ITAA 1936 or Income Tax Assessment Act 1997 (ITAA 1997). Whether the interest and dividend income forms part of a trust estate, therefore, depends on whether a trust exists in accordance with guidance provided by the Courts. Justice French in Harmer & Ors v. FC of T 89 ATC 5180; (1989) 20 ATR 1461 stated that a trust 'is notably a definition of a relationship by reference to obligations'. His Honour went on to state that the four essential elements of a trust are: All four elements of a trust are present in the relationship between the manager, custodian and the unitholder of the CCF. The manager of the CCF, and in some cases the custodian, holds legal title to the assets of the CCF. The assets are not held by the manager and the custodian for their own benefit, but rather the deed obliges the manager and custodian to deal with the assets of the CCF on behalf of and in the best interests of the unitholder in the CCF. Accordingly, both the manager and the custodian are acting in a trustee capacity with respect to the assets of the CCF, being the trust property which initially arose from the unitholder's contributions to the CCF. A unitholder is beneficially entitled to a proportion of the underlying assets of the CCF in accordance with their unit holding and receives income from the investment of the CCF assets by the manager and/or custodian as it arises. Therefore, the relationship between the manager, custodian and the unitholder constitutes a trust relationship. Accordingly, the income received by the manager and/or custodian of the CCF is income of a trust estate for the purposes of subsection 128A(3) of the ITAA 1936. Under the terms of the deed, income of the CCF accrues to the unitholder as it arises. Accordingly, the Stichting would have a present legal right to demand and receive payment of the income and therefore, would be presently entitled to the interest and dividend income received by the CCF. The requirements of subsection 128A(3) of the ITAA 1936 are therefore satisfied, and the Stichting is deemed to have derived the interest and dividend income at the time when it became presently entitled to the income. As all elements of paragraph 128B(3)(jb) of the ITAA 1936 are satisfied by the Stichting, the interest and dividend income derived by the Stichting is exempt from withholding tax under s128B of the ITAA 1936. As a result, the income is also considered not assessable income and not exempt income of the Stichting under section 128D of the ITAA 1936.", "Date_of_Decision": "21 April 2008", "Year_of_Income": "Years ended 30 June 2007 Years ended 30 June 2008 Years ended 30 June 2009 Years ended 30 June 2010 Years ended 30 June 2011", "Legislative_References": "Income Tax Assessment Act 1936 section 128B subsection 128A(3) Paragraph 128B(3)(jb) section 128D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/62 | ATO ID 2008/63", "Subject_References": "Entities & taxpayer groups International tax Non resident dividend withholding tax Non resident entities Non resident interest withholding tax Trust distributions Trustees Trusts Withholding tax exemptions Withholding taxes", "Case_References": "Harmer & Ors v. FC of T 89 ATC 5180 (1989) 20 ATR 1461", "Other_References": "European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200861", "Unmatched_Content": "Keywords Entities & taxpayer groups International tax Non resident dividend withholding tax Non resident entities Non resident interest withholding tax Trust distributions Trustees Trusts Withholding tax exemptions Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2006/195", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest Withholding Tax Exemption: novation of revolving credit facility - public offer test", "Issue": "Will the issue of a debt interest arising through the novation of an existing debt interest under a revolving credit facility satisfy the public offer test under paragraph 128F(3)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) where the existing debt interests issued under the facility satisfy the public offer test?", "Decision": "Yes. The issue of a debt interest arising through the novation of an existing debt interest under a revolving credit facility will satisfy the public offer test under paragraph 128F(3)(a) of the ITAA 1936 where the existing debt interests issued under the facility satisfy the public offer test.", "Facts": "A borrower company (borrower) intends to enter into a 'revolving credit facility' (the facility). The borrower will approach more than ten independent banks to request them to form a syndicate to lend funds to the borrower. The lenders will commit to advance funds up to their agreed limit. The terms of the agreement will provide for a three year revolving credit facility, involving: A new bank (transferee bank) can join the syndicate where a lender wishes to subsequently transfer their rights, benefit and obligations under the revolving credit facility via novation to the transferee. The borrower will be a resident of Australia both at the time it issues the debt interests under the facility and at the time interest is paid under the facility. The lenders and transferee banks will be non-residents of Australia for the purposes of sub-section 6(1) of the ITAA 1936. It will not be known nor suspected by the borrower that there is any direct or indirect association between the borrower, the lenders and transferee banks, at the time of the offer and the time of issue of each debt interest under the facility agreement. The original offer to the revolving credit facility will satisfy the public offer test under paragraph 128F(3)(a) of the ITAA 1936.", "Reasons_for_Decision": "Summary: Paragraph 128F(3)(a) of the ITAA 1936 provides that the public offer test will be satisfied if the issue by the company resulted from the debenture or debt interest being offered for issue to at least 10 persons, each of whom: To satisfy the public offer test, it is necessary that the issue of debentures or debt interest must have 'resulted from' the debenture or debt interest being 'offered for issue'. Tax Determination TD 1999/8 states that subsection 128F(3) of the ITAA 1936 will be administered on the basis that a debenture will be taken to have 'resulted from' being 'offered for issue' if the debenture otherwise satisfies one of the paragraphs set out in subsection 128F(3). This TD notes that a strict interpretation would not sit comfortably with actual market practice. Therefore the subsection was to be administered on a basis that where debentures were issued to investors who may not have been aware of the debenture announcement or debentures were issued as a result of a reverse enquiry made to the borrower by the investor could still meet the public offer test. To satisfy the public offer test there still needs to be some nexus between the offer and the issue. There is, however, no requirement, within subsection 128F(3), that there has to be a separate offer for each issue of debentures or debt interests. Novation according to Windeyer J in Olsson v. Dyson (1969) 120 CLR 365, at p 388 is: the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligations of the old contract: if the new contract is to be fully effective to give enforceable rights or obligations to a third person, he, the third person, must be a party to the novated contract... In that sense \"novation\" means simply a new contract standing in the place of the old While the novation of the loan from a lender to a transferee bank will constitute the issuing of a new debt interest under paragraph 128F(a) of the ITAA 1936, the novation still arises from the original credit facility. As the transfer of the loan under the novation provisions of the facility agreement is based on the original offer documentation, the issue of a debt interest will be taken to have 'resulted from' the debt interest being 'offered for issue'. As such, a transfer under the facility agreement would satisfy the public offer test under paragraph 128F(3)(a) of the ITAA 1936.", "Date_of_Decision": "26 July 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 128F(1) subsection 128F(3) paragraph 128F(3)(a) subsection 128F(6)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/8 | Taxation Determination TD 1999/9 | Taxation Determination TD 1999/24", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debt interest Non resident interest withholding tax Withholding tax exemptions", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Act (No 2) 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006195", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 1999/8 Taxation Determination TD 1999/9 Taxation Determination TD 1999/24 | Keywords Debt interest Non resident interest withholding tax Withholding tax exemptions"}
{"ATO_ID_Number": "ATO ID 2006/231", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest Withholding Tax Exemption: revolving credit facility - public offer test", "Issue": "Will the issue of a debt interest arising under a revolving credit facility satisfy the public offer test under paragraph 128F(3)(a) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The issue of a debt interest arising under a revolving credit facility will satisfy the public offer test under paragraph 128F(3)(a) of the ITAA 1936.", "Facts": "A borrower company (borrower) intends to enter into a 'revolving credit facility' (the facility). The borrower will approach more than ten independent banks (lenders) to request them to form a syndicate to lend funds to the borrower. The lenders will commit to advance funds up to their agreed limit. The terms of the agreement will provide for a three year revolving credit facility, involving: The borrower will be a resident of Australia both at the time it issues the debt interests under the facility and at the time interest is paid under the facility. The lenders are non-residents of Australia for the purposes of sub-section 6(1) ITAA of the 1936. It is not 'known nor suspected' by the borrower (subparagraph 128F(3)(a)(ii)) that there is any direct or indirect association between the borrower and the lenders, and between the lenders themselves at the time of the offer and the time of issue of each debt interest under the facility agreement.", "Reasons_for_Decision": "Summary: Paragraph 128F(3)(a) of the ITAA 1936 provides that the public offer test will be satisfied if the issue by the company resulted from the debenture or debt interest being offered for issue to at least 10 persons, each of whom: To satisfy the public offer test, it is necessary that the issue of debentures or debt interest must have 'resulted from' the debenture or debt interest being 'offered for issue'. In relation to the requirement of debentures being offered for issue, Taxation Determination TD 1999/24 explains that the term 'offer' in the introductory words of subsection 128F(3) of the ITAA 1936 is not limited to meaning 'offer' in the context of a contractual offer, but includes invitations or inducements to potential investors to make offers. The proposed offer to participate in the facility agreement made by the borrower to the lenders will therefore constitute an offer. The second requirement is that issue of the debt interest must have resulted from this offer. The creation of the revolving credit facility means that a debt interest will be issued by the borrower each time the borrower makes an advance. The question then is, whether the debt interests that are issued over a period of time under this facility result from the initial offer. Taxation Determination TD 1999/8 states that subsection 128F(3) of the ITAA 1936 will be administered on the basis that a debenture will be taken to have 'resulted from' being 'offered for issue' if the debenture otherwise satisfies one of the paragraphs set out in subsection 128F(3) of the ITAA 1936. This tax determination notes that a strict interpretation would not sit comfortably with actual market practice. Therefore the subsection was to be administered on the basis that where debentures were issued to investors who may not have been aware of the debenture announcement, or debentures were issued as a result of a reverse enquiry made to the borrower by the investor, these debentures could still meet the public offer test. To satisfy the public offer test, there still needs to be some nexus between the offer and the issue. There is, however, no requirement, within subsection 128F(3) of the ITAA 1936, that there has to be a separate offer for each issue of debentures or debt interests. As the offer of the facility agreement will commit the lenders to advance funds in accordance with the terms of the agreement, the debt interests that are subsequently issued will be connected with the initial offer. Accordingly, the issue of the debt interests will result from the offer for the purposes of paragraph 128F(3)(a) of the ITAA 1936. Since the borrower will offer the facility to at least ten financial institutions that will be in the business of providing finance, and the financial institutions will not be known nor suspected by the borrower to be associates of the borrower nor associates of each other, and the lenders have subsequently entered into this agreement, the issue of the debt interests arising out of the credit facility to these financial institutions will satisfy the public offer test under paragraph 128F(3)(a) of the ITAA 1936.", "Date_of_Decision": "16 August 2006", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) subsection 128F(1) subsection 128F(3) paragraph 128F(3)(a) subsection 128F(6)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/8 | Taxation Determination TD 1999/9 | Taxation Determination TD 1999/24", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/195", "Subject_References": "Debt interest Non resident interest withholding tax Withholding tax exemptions", "Case_References": "", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Act (No 2) 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006231", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 1999/8 Taxation Determination TD 1999/9 Taxation Determination TD 1999/24 | Keywords Debt interest Non resident interest withholding tax Withholding tax exemptions"}
{"ATO_ID_Number": "ATO ID 2006/272", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest Withholding Tax Exemption: Certificates of Deposit - public offer test", "Issue": "Does the issue of Certificates of Deposits by an Australian resident company to non-resident investors satisfy the public offer test set out in paragraph 128F(3)(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Certificates of Deposits, issued by an Australian resident company to non-resident investors, will satisfy the public offer test set out in paragraph 128F(3)(b) of the ITAA 1936.", "Facts": "An Australian resident company will offer Certificates of Deposit to non-resident retail customers. The Certificates of Deposit are debt interests for the purposes of section 128F of the ITAA 1936. The Certificates of Deposit will be offered by the Australian resident company through publicly available information services such as product brochures, posters and its website. The Australian resident company will offer Certificates of Deposit to at least 100 persons, being non-resident investors, who have acquired debentures or debt interests from the Australian resident company in the past, or who have acquired debentures or debt interests from a bank, financial institution, broker or other financial intermediary in the past, or who are likely to be interested in acquiring debentures or debt interests. The terms of the Certificate of Deposit may vary due to negotiations between the Australian resident company and the customer, but will be based on the original offer by the Australian resident company. All non-resident retail customers who invest in a Certificate of Deposit will receive a certificate from the Australian resident company showing the original investment amount, the maturity amount and the interest rate. Holders can add to their investment either by acquiring a new Certificate of Deposit or adding to their original investment upon maturity. The Certificates of Deposit will automatically be reinvested at maturity for a further term equal to the previous term, unless the customer notifies the Australian resident company in writing. The Certificates of Deposit can be transferred at any time during the term of the deposit with the prior approval of the Australian resident company. Holders cannot transfer the Certificates of Deposit to the Australian resident company.", "Reasons_for_Decision": "Summary: Paragraph 128F(3)(b) of the ITAA 1936 provides that the public offer test will be satisfied if the issue of a debenture or debt interest by the company resulted from the debenture or debt interest being offered for issue to at least 100 persons whom it was reasonable for the company to have regarded as either: The introductory words to subsection 128F(3) of the ITAA 1936 state that the issue of a debenture or debt interest by a company satisfies the public offer test if the issue resulted from the debenture or debt interest being offered for issue. Taxation Determination TD 1999/24 explains that the term 'offer' in the introductory words of subsection (3) is not limited to meaning 'offer' in the context of a contractual offer, but includes invitations or inducements to potential investors to make offers. It is considered that the provision of the publicly available information by the Australian resident company is an 'invitation to treat' and will constitute an offer for the purposes of subsection 128F(3). Paragraph 5.39 of the Explanatory Memorandum (EM) to the Taxation Laws Amendment Act (No. 2) 1997 , which introduced subsection 128F(3), states the public offer test may be satisfied by an issuer of debentures sending letters to persons who it may reasonably regard as having acquired debentures from time to time. The EM also states that offers made to persons who have not previously purchased debentures from a stock broker, but whom the broker has reason to believe may be interested in acquiring debentures or other securities, will be counted for the purposes of the public offer test. The methods adopted by the Australian resident company to offer the issue of Certificates of Deposit to at least 100 persons, being non-resident investors, include a marketing campaign to existing customers, information on their website and other marketing campaigns. This ensures that the Australian resident company has a reasonable basis to regard the recipients of these offers as either having acquired debentures or debt interests in the past, or being likely to be interested in acquiring debentures or debt interests. By using these approaches it is considered the Australian resident company will satisfy the requirements under subparagraphs 128F(3)(b)(i) and (ii) of the ITAA 1936. To satisfy the public offer test in subsection 128F(3), it is also necessary for the debt interest to have 'resulted from' this offer. Taxation Determination TD 1999/8 states: ......subsection 128F(3) will be administered on the basis that a debenture will be taken to have 'resulted from' being 'offered for issue' if the debenture otherwise satisfies one of the paragraphs in subsection (3). Although TD 1999/8 deals with a debenture, it is equally relevant to debt interest. The debt interest will be taken to have 'resulted from' being 'offered for issue' for the purposes of subsection 128F(3) as it satisfies paragraph 128F(3)(b). Further, it is clear that there is an issue of the Certificates of Deposit. Taxation Determination TD 1999/9 states (in relation to a repealed provision but still relevant in this context): The term 'issue' was discussed in Taxation Ruling IT 2652 in relation to the withholding tax exemption previously available for debentures under the old section 128F, which operated prior to 1 January 1996. That Ruling, which dealt with debentures issued outside Australia by a non-resident agent, pointed out that the term 'issue' was not defined for the purposes of the withholding tax provisions and, therefore, its ordinary meaning must be adopted. This is still the position. In discussing an agreement to issue debentures in Levy v. Abercorris Slate and Slab Company (1887) 37 Ch 260, Chitty J of the Chancery Division stated at 264:' \"issued\" is not a technical term, it is a mercantile term well understood; \"issue\" here means the delivery over by the company to the person who has the charge'. These Certificates of Deposit have been put out or delivered for use and hence are issued. The additional investments by the non-resident customers, either through acquiring new certificates or by adding to their original investment upon maturity, could mean that a new debt interest will be issued by the Australian resident company. There is no requirement in subsection 128F(3) that there be a separate offer for each issue of debentures or debt interests to the same non-resident investors in order for any subsequent debt interest to satisfy the public offer test. In such cases any subsequent debt interest which results from the original offer would be regarded as having the necessary connection between that debt interest and the original offer. Any new Certificate of Deposit that is acquired or further funds provided by non-resident investors at maturity has this necessary connection and will result from the original offer. Accordingly, the issue of the Certificates of Deposit satisfies the public offer test set out in paragraph 128F(3)(b) of the ITAA 1936 through the proposed arrangement to offer Certificates of Deposit to non-resident investors.", "Date_of_Decision": "31 August 2006", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 section 128F subsection 128F(3) paragraph 128F(3)(b) subparagraph 128F(3)(b)(i) subparagraph 128F(3)(b)(ii)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling IT 2652 | Taxation Determination TD 1999/8 | Taxation Determination TD 1999/9 | Taxation Determination TD 1999/24", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/273 | ATO ID 2006/274", "Subject_References": "Debt interest Financial institution deposits International tax", "Case_References": "", "Other_References": "Explanatory Memorandum (EM) to the Taxation Laws Amendment Act (No. 2) 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006272", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling IT 2652 Taxation Determination TD 1999/8 Taxation Determination TD 1999/9 Taxation Determination TD 1999/24 | Keywords Debt interest Financial institution deposits International tax"}
{"ATO_ID_Number": "ATO ID 2006/274", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Division 974: Section 128F - meaning of 'debt interest'", "Issue": "Does the term 'debt interest' in section 128F of the Income Tax Assessment Act 1936 (ITAA 1936) mean 'debt interest' as defined in Subdivision 974-B of Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "Yes. The term 'debt interest' in section 128F of the ITAA 1936 means 'debt interest' as defined in Subdivision 974-B of Division 974 of the ITAA 1997.", "Facts": "An Australian resident company issues a debt interest to a non-resident investor.", "Reasons_for_Decision": "Summary: Section 128F provides that Division 11A of the ITAA 1936 does not apply to interest paid on certain publicly offered company debentures or debt interests that satisfy all of the requirements set out in subsection 128F(1). The term 'debt interest' is not defined in section 128F of the ITAA 1936. However, subsection 6(1) of the ITAA 1936 states that 'debt interest' has the same meaning as in the ITAA 1997, and, subsection 995-1(1) of the ITAA 1997 defines 'debt interest' as having the meaning given by Subdivision 974-B of Division 974 of the ITAA 1997. Accordingly, the term 'debt interest' in section 128F of the ITAA 1936 means 'debt interest' as defined in Subdivision 974-B of Division 974 of the ITAA 1997.", "Date_of_Decision": "16 August 2006", "Year_of_Income": "30 June 2007", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 128F subsection 128F(1) subsection 128F(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2006/272 | ATO ID 2006/273", "Subject_References": "Debt interest International tax", "Case_References": "", "Other_References": "", "Business_Line": "International Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006274", "Unmatched_Content": "Keywords Debt interest International tax"}
{"ATO_ID_Number": "ATO ID 2004/627", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest on debentures issued by a limited partnership and the definition of a 'company' for the purposes of the interest withholding tax exemption", "Issue": "Does a limited partnership that is also a 'corporate limited partnership' satisfy the definition of 'company' for the purposes of the interest withholding tax exemption in subsection 128F(2) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A limited partnership that is also a 'corporate limited partnership' satisfies the definition of 'company' for the purposes of the interest withholding tax exemption in subsection 128F(2) of the ITAA 1936.", "Facts": "LP is a limited partnership that was established in Australia after 19 August 1992 by partnership deed and is registered in accordance with the relevant State Government's legislation governing partnerships. LP is also a 'corporate limited partnership' within the meaning of that term in section 94D of the ITAA 1936. LP proposes to raise funds by issuing certain debentures offshore and has requested the Commissioner to confirm that the requirements of the subsection 128F(2) of the ITAA 1936 exemption from interest withholding tax will be met by the anticipated issue, in particular, that LP is a 'company' for the purposes of that subsection. It is assumed for present purposes that apart from the question whether LP is a 'company' for the purposes of subsection 128F(2) of the ITAA 1936, all other relevant requirements for the exemption will be met.", "Reasons_for_Decision": "Summary: Subsection 128F(2) of the ITAA 1936 exempts from withholding tax the interest paid in respect of certain publicly offered debentures. One of the conditions of the exemption is that the interest is paid by a 'company' (subsections 128F(1) and 128F(1A)). In ITAA 1936, unless the contrary intention appears, 'company includes all bodies or associations corporate or unincorporated, but does not include partnerships or non-entity joint ventures' (emphasis added) (subsection 6(1) of the ITAA 1936.) In ITAA 1936, unless the contrary intention appears, 'partnership' means 'an association of persons carrying business as partners, or in receipt of income jointly, but does not include a company'; and 'limited partnership' means 'a partnership where the liability of at least one of the partners is limited'. In terms of these definitions LP would apart from section 94K of the ITAA 1936 (see below) be both a 'partnership' and a 'limited partnership', not a 'company'. However Division 5A of the ITAA 1936 modifies these definitions by extending the definition of company to include certain limited partnerships. The object of the Division is, indeed, to provide for certain limited partnerships to be treated as companies for tax purposes (section 94A of the ITAA 1936). For the purposes of Division 5A of the ITAA 1936 a limited partnership is a 'corporate limited partnership' in relation to an income year of the partnership if it satisfies section 94D of the ITAA 1936. That section is automatically satisfied in the case of a limited partnership formed on or after 19 August 1992. As LP was established after 19 August 1992 this section is satisfied (paragraph 94D(1)(b)). Section 94H of the ITAA 1936 provides, further, that if a partnership is a corporate limited partnership in relation to a year of income the 'income tax law' has effect, in relation to the partnership and in relation to the year of income, subject to the changes set out in Subdivision C of Division 5A of the ITAA 1936. The term 'income tax law', as used in the division, is defined in section 94B of the ITAA 1936 to relevantly include the ITAA 1936. Subdivision C of the ITAA 1936 comprises sections 94H to 94Y of the ITAA 1936 inclusive. Section 94J of the ITAA 1936, in particular, relevantly states that '[a] reference in the income tax law ... to a company or a body corporate includes a reference to [a corporate limited] partnership', while section 94K of the ITAA 1936 provides that '[a] reference in the income tax law to a partnership does not include a reference to [a corporate limited] partnership'. Thus, by virtue of the provisions of Division 5A of the ITAA 1936 a reference in section 128F of the ITAA 1936 to a 'company' is taken to include a reference to a corporate limited partnership. Accordingly, LP, a corporate limited partnership for Division 5A purposes, is a 'company' and not a partnership for the purposes of section 128F.", "Date_of_Decision": "15 July 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 94B section 94D section 94H section 94J section 94K section 128F subsection 128F(1) subsection 128F(1A) subsection 128F(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Debentures Limited partnerships Loan securities Withholding tax exemptions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004627", "Unmatched_Content": "Keywords Debentures Limited partnerships Loan securities Withholding tax exemptions"}
{"ATO_ID_Number": "ATO ID 2004/717", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding tax exemption: interest paid inside Australia after 2 July 1998 on debentures issued outside Australia on or before 2 July 1998", "Issue": "Where interest is paid to a foreign noteholder after 2 July 1998 on a debenture issued on or before that date, must the interest be paid outside Australia for it to qualify under subsection 128F(2) of the Income Tax Assessment Act 1936 (ITAA 1936) for exemption from withholding tax?", "Decision": "Yes. Where interest is paid to a foreign noteholder after 2 July 1998 on a debenture issued on or before that date, the interest must be paid outside Australia for it to qualify under subsection 128F(2) of the ITAA 1936 for exemption from withholding tax.", "Facts": "Prior to 2 July 1998, an Australian resident company issued debentures outside Australia to non-resident institutional investors. The debenture issue satisfied the public offer test in subsection 128F(3) of the ITAA 1936, and in all other respects up to that date, the interest payments on the debentures met the requirements of the subsection 128F(2) of the ITAA 1936 exemption from withholding tax, including the requirement in paragraph 128F(1)(d) of the ITAA 1936 that the interest be paid outside Australia. After 2 July 1998, the original terms of the debenture issue were re-negotiated on terms whereby certain amounts of interest were paid inside Australia. Reasons for Decision Subsection 128F(2) of the ITAA 1936 confers an exemption from withholding tax on interest paid on certain publicly offered debentures. The subsection provides that withholding tax is not payable under Division 11A in respect of 'interest to which [section 128F] applies'. Relevantly, subsection 128F(1) of the ITAA 1936 specifies circumstances where section 128F applies to interest. Prior to its amendment on 16 July 1999 by Taxation Laws Amendment Act (No. 2) 1999 (93 of 1999) (TLAA (No 2) 1999), subsection 128F(1) read: This section applies to interest paid by a company in respect of a debenture if: By item 27 of Schedule 1 to the TLAA (No 2) 1999, paragraphs (c) and (d) of subsection 128F(1) of the ITAA 1936 were repealed. The question arises as to how the amendment applies, if at all, to interest paid on debentures that issued before the amendment. Sub-item 39(1) of Schedule 1 to the TLAA (No 2) 1999 provides that, 'Subject to this item, the amendments made by this Schedule apply in relation to transactions entered into after 2 July 1998'. Sub-item 39(5) provides specifically that, 'The amendments made by items 27 to 32 apply to debentures issued after 2 July 1998'. Thus, sub-item 39(5) of Schedule 1 to the TLAA (No 2) 1999 makes it clear that the repeal of paragraph 128F(1)(d) of the ITAA 1936 applies only to debentures issued after 2 July 1998, not on or before that date. In other words, where a debenture has been issued on or before 2 July 1998, the interest withholding tax exemption requirement in paragraph (d) continues to apply: interest paid on such debenture after 2 July 1998 must be paid outside Australia if it is to qualify for the withholding tax exemption in subsection 128F(2) of the ITAA 1936.", "Reasons_for_Decision": "", "Date_of_Decision": "17 August 2004", "Year_of_Income": "Year ended 30 June 2000 Year ended 30 June 2001 Year ended 30 June 2002 Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 128F(1)(c) paragraph 128F(1)(d) subsection 128F(2) subsection 128F(3)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "International tax Non resident interest withholding tax Withholding tax exemptions Withholding taxes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004717", "Unmatched_Content": "Keywords International tax Non resident interest withholding tax Withholding tax exemptions Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2004/761", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest on debentures issued by a limited liability partnership and the meaning of 'resident of Australia' for the purposes of the interest withholding tax exemption", "Issue": "Is a limited partnership that is formed in Australia, and is also a 'corporate limited partnership', a 'resident of Australia' for the purposes of the interest withholding tax exemption in subsection 128F(2) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. A limited partnership that is formed in Australia and is also a 'corporate limited partnership' is a 'resident of Australia' for the purposes of the interest withholding tax exemption in subsection 128F(2) of the ITAA 1936.", "Facts": "LP is a limited partnership that was established in Australia by partnership deed and is registered in accordance with the relevant State Government's legislation governing partnerships. LP is also a 'corporate limited partnership' within the meaning of that term in section 94D of the ITAA 1936. LP proposes to raise funds by issuing certain loan notes offshore and has requested the Commissioner to confirm that the requirements of the subsection 128F(2) of the ITAA 1936 exemption from interest withholding tax will be met by the anticipated issue, in particular, that LP is a 'resident of Australia' as required under subsection 128F(1). It is assumed for present purposes that, apart from the question whether LP is a 'resident of Australia' for the purposes of the exemption in subsection 128F(2) of the ITAA 1936, all other relevant requirements for the exemption will be met.", "Reasons_for_Decision": "Summary: Subsection 128F(2) of the ITAA 1936 exempts from withholding tax, interest paid in respect of certain publicly offered debentures. Relevantly, the exemption applies to interest paid by a company in respect of a debenture if the company was a 'resident of Australia' when it issued the debenture and is a 'resident of Australia' when the interest is paid (paragraphs 128F(1)(a) and 128F(1)(b) of the ITAA 1936). Division 5A of the ITAA 1936 provides for certain limited partnerships to be treated as companies for tax purposes. For the purposes of the Division a limited partnership is a 'corporate limited partnership', in relation to a year of income of the partnership, if it satisfies section 94D of the ITAA 1936. LP satisfies section 94D. Section 94H of the ITAA 1936 provides that if a partnership is a corporate limited partnership in relation to a year of income the 'income tax law' has effect, in relation to the partnership and in relation to the year of income, subject to the changes set out in Subdivision C of Division 5A of the ITAA 1936. The term 'income tax law', as used in the division, is defined in section 94B to include the ITAA 1936. Subdivision C of Division 5A of the ITAA 1936 comprises sections 94H to 94Y (inclusive) of the ITAA 1936. Section 94J of the ITAA 1936 has the effect of including a 'corporate limited partnership' in any reference, in the income tax law, to a company or to a body corporate (other than the definitions of 'dividend' and 'resident' or 'resident of Australia', in section 6 of the ITAA 1936). Section 94T of the ITAA 1936 deals with residence of a corporate limited partnership and relevantly provides that for the purposes of the income tax law a corporate limited partnership is a 'resident of Australia' if and only if the partnership was formed in Australia (paragraph 94T(e)). LP is a corporate limited partnership and was formed in Australia. Accordingly, by virtue of the provisions of Division 5A of the ITAA 1936, LP is a company that is a resident of Australia for the purposes of the interest withholding tax exemption in subsection 128F(2) of the ITAA 1936.", "Date_of_Decision": "9 September 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 section 94B section 94D section 94H section 94J section 94T section 128F subsection 128F(1) subsection 128F(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2004/627", "Subject_References": "Debentures Limited partnerships Loan securities Withholding tax exemptions", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2004761", "Unmatched_Content": "Keywords Debentures Limited partnerships Loan securities Withholding tax exemptions"}
{"ATO_ID_Number": "ATO ID 2003/583", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax Exemption: Interest on notes - public offer test", "Issue": "Is the company entitled to an exemption from withholding tax under section 128F of the Income Tax Assessment Act 1936 (ITAA 1936) for interest on notes issued by the company?", "Decision": "Yes. The company is entitled to an exemption from withholding tax under section 128F of the ITAA 1936 for interest on notes issued by the company as the company was a resident of Australia when the notes were issued and interest paid, and the company also satisfied one of the public offer tests.", "Facts": "The company is an Australian resident company. The company appointed an overseas bank to act as manager for a note issue. The manager identified and invited in excess of 10 financial institutions to participate in the note issue. Each financial institution is in the business of providing finance and is not an associate of the company. A subscription and issue agreement governs the note issue. The notes are debentures in registered form. The interest on the notes is at market floating rate based on LIBOR plus a margin. Notes were issued to several financiers.", "Reasons_for_Decision": "Summary: Section 128F of the ITAA 1936 exempts from withholding tax, interest on certain publicly offered debentures. Subsection 128F(1) of the ITAA 1936 states that withholding tax is not payable on interest paid by a company in respect of a debenture if: 'Debenture' is defined in subsection 128F(9) of the ITAA 1936 as including a promissory note or a bill of exchange, in addition to the instruments mentioned in the definition of debenture contained in subsection 6(1) of the ITAA 1936. Subsection 6(1) of the ITAA 1936 defines 'debenture' as including 'debenture stock, bonds, notes and any other securities of the company, whether constituting a charge on the assets of the company or not'. The notes are therefore debentures for the purposes of section 128F of the ITAA 1936. Paragraph 128F(1)(a) of the ITAA 1936 requires the resident company to have 'issued' the debenture. The Explanatory Memorandum to Taxation Laws Amendment Act (No 2) 1997 (EM), which introduced amendments to section 128F of the ITAA 1936, discusses the term in the context of repealed paragraph 128F(1)(c) of the ITAA 1936. The EM cites Chitty J in Levy v. Abercorris Slate and Slab Company (1887) 37 Ch D 260, in which he states at 264: \"issued\" is not a technical term, it is a mercantile term well understood; \"issue\" here means the delivery over by the company to the person who has the charge. The EM further states that although the term 'issue' is not defined in the proposed legislation, the term will be taken to mean 'to put out or deliver debentures to subscribers or purchasers in an offshore market'. The company has effectively 'issued' the debentures (notes). The company is an Australian resident company and has continued to be a resident of Australia when the interest was paid. Accordingly, the residency requirements in section 128F of the ITAA 1936 are also satisfied. Subsection 128F(3) of the ITAA 1936 contains five public offer tests. One of these tests or a further test contained in subsection 128F(4) of the ITAA 1936 must be satisfied in order for the company to obtain the withholding tax exemption. The first public offer test is contained in paragraph 128F(3)(a) of the ITAA 1936 which provides that the test will be satisfied if the issue resulting from the debenture being offered for issue is to at least 10 persons, each of whom: The EM states that if the Australian company offers its debentures to 10 banks or pensions funds operating in an overseas financial market, the public offer test will be satisfied. The company offered the notes to at least 10 financial institutions that were in the business of providing finance. Further, the financial institutions are not associates of the company and the source of the loan monies was from overseas. The first public offer test is therefore satisfied. Accordingly, as the residency requirements and public offer test are satisfied for the interest on the notes paid by the company, the withholding tax exemption under section 128F of the ITAA 1936 will apply to that interest.", "Date_of_Decision": "25 March 2003", "Year_of_Income": "Year ended 30 June 2003 Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) section 128F subsection 128F(1) paragraph 128F(1)(a) subsection 128F(3) paragraph 128F(3)(a) subsection 128F(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident interest withholding tax Withholding tax exemptions", "Case_References": "Levy v. Abercorris Slate and Slab Company (1887) 37 Ch D 260", "Other_References": "Explanatory Memorandum to Taxation Laws Amendment Act (No 2) 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003583", "Unmatched_Content": "Keywords Non resident interest withholding tax Withholding tax exemptions"}
{"ATO_ID_Number": "ATO ID 2003/604", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax Exemption: Interest in respect of debentures that are retired or cancelled", "Issue": "Will an Australian company be entitled to an exemption from withholding tax under subsection 128F(2) of the Income Tax Assessment Act 1936 (ITAA1936), on interest in circumstances where its foreign subsidiary, having issued debentures in terms that satisfy subsection 128F(8) of the ITAA 1936, later retires or cancels those debentures or part thereof?", "Decision": "No. The Australian company will not be entitled to an exemption from withholding tax under subsection 128F(2) of the ITAA 1936 on interest paid after the debentures are retired or cancelled, as the interest will not be paid 'in respect of a debenture' since the debentures will no longer exist.", "Facts": "An Australian company plans to make an issue of qualifying debentures through its United States of America (US) subsidiary. That subsidiary will issue commercial paper denominated in US dollars (USD) to third parties in the US. It will then convert the proceeds to Australian dollars (AUD) and on-lend the proceeds to the Australian parent. The subsidiary will thus need to consider its foreign exchange exposure, generated by the ongoing differential between the USD borrowings and the AUD repayments. As one part of its strategy to manage the exposure of adverse currency movements, the US subsidiary proposes that it may reduce the level of commercial paper on issue. This would involve retirement or cancellation of some of the debentures, or some part thereof, in the US. The company will satisfy the residency and public offer test requirements of subsection 128F(1) of the ITAA 1936. The company will also satisfy the requirements of subsection 128F(8) of the ITAA 1936 for debentures issued through non-resident subsidiaries.", "Reasons_for_Decision": "Summary: Section 128F of the ITAA 1936 exempts from withholding tax, interest on certain publicly offered debentures. Subsection 128F(1) of the ITAA 1936 states that withholding tax is not payable on interest paid by a company 'in respect of a debenture' if: To qualify for the exemption, the interest payment must be made 'in respect of a debenture'. Where the foreign subsidiary company retires or cancels a debenture, or part thereof, the debenture will no longer be on issue. If a debenture is no longer on issue, interest cannot be paid 'in respect of' that debenture. The relative component of the interest payable by the Australian company to its foreign subsidiary is, as a consequence of the retirement or cancellation, no longer in respect of that debenture. Accordingly, the Australian company will not be entitled to a withholding tax exemption under subsection 128F(2) of the ITAA 1936 on interest payments where the underlying debentures have been cancelled or retired.", "Date_of_Decision": "8 July 2003", "Year_of_Income": "Substituted accounting period ending 31 December 2003 Substituted accounting period ending 31 December 2004 Substituted accounting period ending 31 December 2005 Substituted accounting period ending 31 December 2006 Substituted accounting period ending 31 December 2007 Substituted accounting period ending 31 December 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 128F subsection 128F(1) subsection 128F(2) subsection 128F(3) subsection 128F(4)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Banking, finance & securities Debentures Financial instruments Securities", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003604", "Unmatched_Content": "Keywords Banking, finance & securities Debentures Financial instruments Securities"}
{"ATO_ID_Number": "ATO ID 2003/1124", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding tax exemption: interest on global bearer notes issued by an undisclosed Australian principal through an offshore agent", "Issue": "Is an Australian resident company (Aust Co) that issues global bearer notes (Notes) as an undisclosed principal through an offshore agent, regarded as having 'issued the debenture' for the purposes of paragraph 128F(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. Aust Co will be regarded as having issued the debenture for the purposes of paragraph 128F(1)(a) of the ITAA 1936 provided there is evidence that the non-resident is acting as an agent and within the scope of its authority.", "Facts": "Aust Co will enter into an agency agreement with Offshore Limited (OSL) wherein OSL will act as its agent to sell Notes on its behalf. The agency agreement and board minutes of Aust Co provide sufficient evidence of an actual or usual agency relationship between Aust Co and OSL. The Notes are to be bearer notes and are to be issued as global bearer notes by OSL as agent on behalf of Aust Co. They will be governed by the laws of an overseas jurisdiction. The global bearer notes are required to be deposited with a common depository for an overseas clearing system. Aust Co indemnifies OSL in respect of any expenses incurred in its capacity as agent for Aust Co and in respect of any Notes issued as agent of Aust Co.", "Reasons_for_Decision": "Summary: Section 128F of the ITAA 1936 exempts from withholding tax, interest on certain publicly offered debentures. Subsection 128F(1) of the ITAA 1936 states that withholding tax is not payable on interest paid by a company 'in respect of a debenture' if: Paragraph 128F(1)(a) of the ITAA 1936 requires the resident company to have 'issued' the debenture. The term 'issued' is not defined for the purposes of the withholding tax provisions in Division 11A of the ITAA 1936 and therefore its ordinary meaning must be adopted. In Levy v. Abercorris Slate and Slab Company (1887) 37 Ch D 260, Chitty J of the Chancery Division stated at p 264 that: \"Issued\" is not a technical term, it is a mercantile term well understood; \"issued\" here means the delivery over by the company to the person who has the charge ... Taxation Determination TD 1999/9 refers to this definition and states at paragraph 4: The ordinary meaning of the word 'issue' according to The Macquarie Dictionary is 'to put out: deliver for use, sale, etc.; put into circulation'. To put out or deliver debentures to subscribers in an offshore market, is to 'issue' the debentures for the purposes of paragraph 128F(1)(c) irrespective of where supporting documentation may have been signed. Whilst OSL issues the Notes by physically putting them into circulation, it does so as undisclosed agent for Aust Co. The agency law doctrine of undisclosed principal states that generally in these circumstances the principal can sue and be sued in its own name on a contract entered into on its behalf by an agent so long as the agent was acting within the scope of its actual authority or (perhaps) within the authority usually confided to an agent of that character ( International Harvester Co of Australia Pty Ltd v. Carrigans Hazeldene Pastoral Co [1958] 100 CLR 644; Siu Yin Kwan v. Eastern Insurance Co. Ltd. [1994] 2 AC 199; CC NSW Pty Ltd (in liq) v. FC of T 35 ATR 316; 97 ATC 4123; Reynolds, FMB 2001, Bowstead and Reynolds on agency , 17th edn, Sweet & Maxwell, London, paragraph 8072 and Chitty J 2003, Chitty on contracts , 28th edn, Sweet & Maxwell, London, paragraph 32-062). In other words, provided the agent has actual or (perhaps) usual authority and the principal's rights to sue and be sued are not inconsistent with the terms of the contract, the actions of the agent are considered to be those of the principal. Is this sufficient to make Aust Co the issuer? Debentures may be issued in either of two forms: In this situation, the non-resident agent would be considered to be acting on its own behalf unless the agent disclosed on the face of the note or bill that it was issuing the note or bill on behalf of the Australian company (the principal). Unless such disclosure is made, the Australian company would not be considered to have issued the debentures in terms of paragraph 128F(1)(a) of the ITAA 1936. Provided that: the actions of the agent would be considered to be those of the Australian company (the undisclosed principal). The Australian company would be considered in these circumstances to have issued the debenture in terms of paragraph 128F(1)(a) of the ITAA 1936. The facts in this case stipulate that the Notes are global bearer notes subject to the rules of the overseas clearing house and are thus neither bills of exchange nor promissory notes. There is evidence of the required agency relationship between Aust Co and OSL in the agency agreement and board minutes of Aust Co. Aust Co will therefore be regarded as having issued the debenture for the purposes of paragraph 128F(1)(a) of the ITAA 1936.", "Date_of_Decision": "20 November 2003", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1936 Division 11A section 128F subsection 128F(1) paragraph 128F(1)(a) subsection 128F(3) subsection 128F(4)", "Related_Public_Rulings_and_Determinations": "Taxation Determination TD 1999/9", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Banking, finance & securities Bills of exchange Debentures Financial instruments Non resident interest withholding tax Promissory notes Securities Withholding taxes", "Case_References": "Levy v. Abercorris Slate and Slab Company (1887) 37 Ch D 260", "Other_References": "Reynolds, FMB 2001, Bowstead and Reynolds on agency, 17th edn, Sweet & Maxwell, London Chitty J 2003, Chitty on contracts , 28th edn, Sweet & Maxwell, London", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20031124", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Determination TD 1999/9 | Keywords Banking, finance & securities Bills of exchange Debentures Financial instruments Non resident interest withholding tax Promissory notes Securities Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2009/78", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Non-assessable and Non-exempt Income - Dividends: non-share dividends and interest of a superannuation fund for foreign residents", "Issue": "Is income to which paragraph 128B(3)(jb) of the Income Tax Assessment Act 1936 (ITAA 1936) applies, not assessable and not exempt income under section 128D of the ITAA 1936?", "Decision": "Yes. Income to which paragraph 128B(3)(jb) of the ITAA 1936 applies is not assessable and not exempt income under section 128D of the ITAA 1936.", "Facts": "The taxpayer is a 'non-resident' as defined in subsection 6(1) of the ITAA 1936. The taxpayer is the trustee of a superannuation fund (the fund). The fund was established in the taxpayer's country of residence and is a superannuation fund for foreign residents under section 118-520 of the Income Tax Assessment Act 1997 (ITAA 1997) and a 'foreign superannuation fund' under the definition of that term in subsection 995-1(1) of the ITAA 1997. In its capacity as the trustee of the fund, the taxpayer derived income in the 2007-08 income year consisting of dividends and non-share dividends paid by Australian resident companies and interest. The income derived by the taxpayer is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies.", "Reasons_for_Decision": "Summary: For present purposes, section 128D of the ITAA 1936 provides that income upon which withholding tax would, but for certain provisions including paragraph 128B(3)(jb) of the ITAA 1936, be payable, is not assessable income and is not exempt income of a person. The definition of 'person' in subsection 6(1) of the ITAA 1936 provides that, unless the contrary intention appears, the term 'person' includes a company. The definition of the term 'non-resident' in subsection 6(1) states that, unless contrary intention appears, a non-resident is a 'person who is not a resident of Australia'. Subsection 128A(10) of the ITAA 1936 provides that, for the purposes of Division 11A of the ITAA 1936, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident at a particular time if, and only if, the fund is a foreign superannuation fund at that time. Given that subsection 128A(10) of the ITAA 1936 treats the trustee to be the non-resident for the purposes of Division 11A of the ITAA 1936, the trustee of a provident, benefit, superannuation or retirement fund is a non-resident and, therefore, 'a person' for the purposes of section 128D of the ITAA 1936. Subsections 128B(4) and 128B(5) of the ITAA 1936 provide that a person who derives income to which section 128B of the ITAA 1936 applies is liable to pay dividend and interest withholding tax on the dividends and interest it derives. Paragraph 128AAA(1)(c) of the ITAA 1936 provides that Division 11A of Part III of the ITAA 1936 applies to non-share dividends in the same way as it applies to dividends. Disregarding any application of paragraph 128B(3)(jb) of the ITAA 1936, the taxpayer would be liable to pay tax under subsections 128B(4) and 128B(5). However, because the dividends, non-share dividends and interest derived by the taxpayer is income to which paragraph 128B(3)(jb) of the ITAA 1936 applies, that income is excluded from being income that is subject to withholding tax by the operation of this paragraph. Therefore, the dividend and interest income received by the taxpayer is income upon which withholding tax would, but for paragraph 128B(3)(jb) of the ITAA 1936, be payable under subsections 128B(4) and 128B(5) of the ITAA 1936. Accordingly, this income is not assessable and not exempt income of the taxpayer under section 128D of the ITAA 1936.", "Date_of_Decision": "13 July 2009", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 Division 11A of Part III subsection 6(1) subsection 128A(10) paragraph 128AAA(1)(c) section 128B paragraph 128B(3)(jb) subsection 128B(4) subsection 128B(5) section 128D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2001/320 | ATO ID 2001/334", "Subject_References": "Withholding tax exemptions Dividend income Non resident dividend withholding tax Non resident interest withholding tax Non-assessable non-exempt income Superannuation funds Non resident superannuation funds", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200978", "Unmatched_Content": "Keywords Withholding tax exemptions Dividend income Non resident dividend withholding tax Non resident interest withholding tax Non-assessable non-exempt income Superannuation funds Non resident superannuation funds"}
{"ATO_ID_Number": "ATO ID 2010/133", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax: Commitment Fee payable on the undrawn balance of funds available under a credit facility", "Issue": "Is a Commitment Fee, payable on the undrawn balance of funds available under a credit facility, 'interest' or 'an amount in the nature of interest' for the purpose of subsection 128A(1AB) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No, the Commitment Fee is not interest, or an amount in the nature of interest, for the purpose of subsection 128A(1AB) of the ITAA 1936 because it is not, in substance or in form, compensation or consideration payable in respect of keeping a person out of the use and enjoyment of a principal sum.", "Facts": "Pursuant to an overarching agreement, a resident borrower is able to borrow amounts from a non-resident lender up to a maximum aggregate amount (the Commitment). The Commitment is, for a period of 10 years from the date of the agreement, available to be drawn down from time to time by way of separate loans. To obtain a loan under the agreement the borrower is required to give notice to the lender requesting an advance. The lender's obligation to make each advance is subject to conditions precedent which are specified in the agreement. An arm's length rate of interest is payable by the borrower on each loan made under the agreement. The borrower is also required to pay an arm's length fee called a 'Commitment Fee' in the agreement. The Commitment Fee is payable in exchange for the Commitment. The Commitment Fee is computed as a percentage per annum of the daily balance of the undrawn amount of the Commitment. The Commitment Fee is payable for a 10 year period beginning on the date of the agreement, that is, the period during which the Commitment is available to be drawn down. The lender is not required to, and does not, set aside any funds to meet the Commitment in the event that the borrower requests a loan or loans under the agreement.", "Reasons_for_Decision": "Summary: Unless otherwise stated, all legislative references are references to the ITAA 1936. Broadly, a non-resident person is liable under Division 11A to pay withholding tax if they derive income that consists of 'interest' paid by a resident. The question therefore arises as to whether the Commitment Fee, paid by the resident borrower and derived by the non-resident lender, constitutes interest. Subsection 128A(1AB) provides an expanded definition of 'interest' for the purposes of Division 11A. It relevantly provides that interest includes an amount that is in the nature of interest, or an amount to the extent that it could reasonably be regarded as having being converted into a form that is in substitution for interest. However the word 'interest' is not otherwise defined by the Act and it is therefore necessary to have regard to common law to determine whether an amount is, in the first instance, 'interest'. There are numerous cases which consider the meaning of 'interest'. In Federal Commissioner of Taxation v. The Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363; 18 ATR 693 ( Myer Emporium ), the High Court stated (at CLR 218): ...Interest is regarded as flowing from the principal sum ( Federal Wharf Co. Ltd v. DFCT (1930) 44 CLR 24 at 28) and to be compensation to the lender for being kept out of the use and enjoyment of the principal sum: Riches v. Westminster Bank Limited (1947) AC 390 at 400... In the context of interest withholding tax, the Full Federal Court in Federal Commissioner of Taxation v. Century Yuasa Batteries Pty Ltd (1998) 82 FCR 288; 38 ATR 442; 98 ATC 4380, referred to Myer Emporium and stated (at FCR 291) that the ordinary meaning of 'interest': ...is the return, consideration or compensation for the use or retention by one person of a sum of money belonging to, or owed to, another, and that interest must be referable to a principal. A common feature of these definitions is that in order for a payment to be interest, it must be paid in respect of keeping a person out of the use and enjoyment of a principal sum. It must be paid in respect of an amount of money which the person can require to be repaid either upon demand or at a fixed date. Although the Commitment Fee payable by the borrower is a percentage per unit of time calculated by reference to a principal sum (namely the undrawn balance of the Commitment), it is not payable as consideration or compensation for (or calculated by reference to) amounts actually advanced and in relation to which a liability to repay exists. Rather, the Commitment Fee is a separate charge payable to keep a line of credit open. Importantly it is payable even though that credit is not being used at that particular time (and it is only payable on that part of the credit which is not being used). Furthermore the lender is not put out of the use and enjoyment of a sum of money. Accordingly, the Commitment Fee is not payable for the actual use of any sum of money or conversely for keeping another person out of the use of any sum of money. Therefore it is not 'interest' within the ordinary meaning of that word. As mentioned above, subsection 128A(1AB) contains an expanded definition of interest. Paragraphs 128A(1AB)(a) and (b) are potentially relevant to the Commitment Fee. Paragraph 128A(1AB)(a) provides that interest includes an amount that is in the nature of interest. 'In the nature of' is a phrase used extensively in statute and case law. In the context of Division 11A its purpose is to give an appropriate extension to the concept of 'interest' which is critical to one of the heads of withholding tax liability. In Century Yuasa Batteries Pty Ltd v. Federal Commissioner of Taxation (1997) 73 FCR 528; 35 ATR 394; 97 ATC 4299 (at FCR 548), Cooper J said in relation to the precursor to paragraph 128A(1AB)(a): In my view, for a payment to fall within the extended definition under s 128A(1) in the context of the withholding tax provisions of ITAA it must have the character of a return or profit to the lender for the use of money advanced to the borrower howsoever calculated or ascertained. For example, the difference between the \"extended credit price\" and the cash price under consideration in Re Rouse ; South Australian Gas Co v Official Receiver , in my opinion would fall within the extended definition in s 128A(1) of the ITAA. The Full Court expressly agreed with this view on appeal. The meaning of 'in the nature of' was also considered in Federal Commissioner of Taxation v. Consolidated Press Holdings Limited (No 1 ) (1999) 91 FCR 524; 99 ATC 4945; 42 ATR 575. In that case the Court had to decide whether there was a scheme that was 'by way of or in the nature of dividend stripping' for the purposes of subparagraph 177E(1)(a)(i). In a joint judgment, French, Sackville and Sundberg JJ stated (at FCR 566): The use of the words \"by way of or in the nature of\" suggests that variations from the paradigm will not necessarily result in the scheme being excluded from the first limb, provided it retains the central characteristics of a dividend stripping scheme. It is considered therefore that paragraph 128A(1AB)(a) is aimed at amounts that are in substance interest but which may not otherwise fall within the ordinary meaning of interest. To be in the nature of interest an amount must have the character of compensation or consideration payable in respect of keeping a person out of the use and enjoyment of a principal sum. The Commitment Fee is not considered to be 'in the nature of' interest because it does not possess one of the essential qualities which gives interest its character. As explained above it is not, in substance or form, compensation or consideration payable in respect of keeping a person out of the use and enjoyment of a principal sum. Furthermore the payment cannot be reasonably regarded as having being 'converted into a form that is in substitution for interest' for the purposes of paragraph 128A(1AB)(b). There is no suggestion that the Commitment Fee is payable in substitution for an amount payable to compensate the lender for being kept out of the use and enjoyment of money. This is covered by a separate charge payable at an arm's length rate and described as 'interest' in the Credit Agreement. Accordingly the Commitment Fee will not be interest, an amount in the nature of interest or regarded as having been converted into a form that is in substitution for interest, for the purpose of subsection 128A(1AB) of the ITAA 1936.", "Date_of_Decision": "28 June 2010", "Year_of_Income": "Year ended 30 June 2010", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128A(1AB) paragraph 128A(1AB)(a) paragraph 128A(1AB)(b) subsection 128B(5)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 93/27 | Taxation Ruling TR 2002/15 | Taxation Ruling TR 2002/16", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/153", "Subject_References": "Withholding taxes Interest income Non resident entities Non resident interest withholding tax", "Case_References": "Federal Commissioner of Taxation v The Myer Emporium Ltd (1987) 163 CLR 199 87 ATC 4363 18 ATR 693", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2010133", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 93/27 Taxation Ruling TR 2002/15 Taxation Ruling TR 2002/16 | Keywords Withholding taxes Interest income Non resident entities Non resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2009/154", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Interest withholding tax - in substitution for interest", "Issue": "Is a payment on a convertible security 'interest' within the extended definition in paragraph 128A(1AB)(b) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No. A payment on a convertible security is not 'interest' within the extended definition in paragraph 128A(1AB)(b) of the ITAA 1936 because the convertible security is not a loan and therefore the payment cannot be 'in substitution' for interest.", "Facts": "An Australian entity issues convertible securities (securities). Each security carries an entitlement to payment of 10% per annum on the face value of the security. A security holder has the right to exchange the securities for interests in the entity, but has only a contingent right to redeem the face value of securities. The securities rank below all debts of the Australian entity. The securities are redeemable at the option of the Australian entity.", "Reasons_for_Decision": "Summary: For the purposes of Division 11A of the ITAA 1936, 'interest' includes an amount 'to the extent that it could reasonably be regarded as having been converted into a form that is in substitution for interest' (paragraph 128A(1AB)(b) of the ITAA 1936). 'Converted into a form that is in substitution for interest' entails postulating on reasonable grounds that the amount was 'instead of' interest. This requires that the amount is in substance and effect the same as the interest for which it was substituted. In order for a payment to be in substitution for interest, it must have been possible for 'interest', in the ordinary sense of the word, to have been paid. Interest is, in essence, compensation to a lender for being kept out of the use and enjoyment of a principal sum ( Federal Commissioner of Taxation v. The Myer Emporium Ltd (1987) 163 CLR 199; 87 ATC 4363; (1987) 18 ATR 693). In order for a payment to be interest, it must be paid in respect of keeping a person out of the use and enjoyment of a principle sum. It must be paid in respect of an amount of money which the person can require to be repaid either upon demand or at a fixed date; that is, a debt. The ATO view on the nature of a loan is contained in Taxation Ruling TR 2002/15. The following excerpts of that ruling explain the consequences of contingency on and subordination of the obligation to repay an amount. 65. The critical question then is whether there is a debt in existence prior to the happening of the contingencies and subject to the terms and conditions of the notes, or whether the obligation to repay Moneys Owing is merely contingent. 66. An analogous situation arises with a guarantor's right of indemnity. Before payment by the guarantor, the right is subject to contingencies, namely the default by the debtor then a request for payment by the creditor. 67. The Court of Appeal in Re A Debtor [1937] 1 All ER 1 confirmed a long line of authority supporting the proposition that the debt due to the guarantor by the debtor under the implied contract does not arise until the guarantor has been called on to pay, and does pay, the creditor under the guarantee. Greene LJ commented at 8: 'The implied undertaking to indemnify is an undertaking to reimburse the guarantor upon the happening of a contingency, viz., payment by the guarantor to the creditor, and until that contingency happens, there is no debt.' 68. In the case of a Note, on one view there is no debt until a contingency occurs, being an event of default (such as the insolvency of the Issuer), or a liquidation event. 69. Another view is that there is no debt at all. Upon winding-up, the Holders' rights are subordinated until all claims of senior creditors are paid in full. The Holders may never receive the full face value of the Notes. In fact, the Holders do not have a right to sue for the sum due as a debt but may merely have a contractual right to enforce their claims behind those of the senior creditors. The securities do not give the security holder a right to recover the face value of the securities from the Australian entity, other than in limited circumstances. Further, the right to recover the face value of the security is subordinated to all debts of the Australian entity. As a result of the contingency and the subordination of the right to repayment, the securities do not give rise to a debt. As the securities do not give rise to a debt, it is not possible for interest to have been paid on the securities. Therefore, the payments that are made on the securities cannot have been made in substitution for interest.", "Date_of_Decision": "3 December 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 paragraph 128A(1AB)(b) Division 11A", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/15", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Deemed interest Interest income Non resident interest withholding tax Withholding taxes", "Case_References": "Federal Commissioner of Taxation v The Myer Emporium Ltd (1987) 163 CLR 199 87 ATC 4363 (1987) 18 ATR 693", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009154", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2002/15 | Keywords Deemed interest Interest income Non resident interest withholding tax Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2008/153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding tax: lump sum amount payable by the Administrator of an Australian resident company to non-resident Note holders", "Issue": "Is a lump sum amount (the Make Whole Amount), payable to non-resident Note holders by the Administrator of an Australian resident company under the terms of the Note Purchase Agreement, subject to withholding tax under section 128B of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. The Make Whole Amount, payable to non-resident Note holders by the Administrator of an Australian resident company under the terms of the Note Purchase Agreement, is subject to withholding tax under section 128B of the ITAA 1936.", "Facts": "The taxpayer is an Australian resident company that is currently under administration. The taxpayer issued Notes to foreign investors under a Note Purchase Agreement (the Agreement). The appointment of Joint and Several Administrators to the taxpayer company constituted an Event of Default under the terms of the Agreement. Upon the occurrence of the abovementioned Event of Default, all the Notes became immediately due and payable on that date. Consequently, the entire unpaid principal amount, all accrued and unpaid interest thereon and an additional lump sum amount (the Make Whole Amount) became due and payable immediately in accordance with the terms of the Agreement. Essentially, the Make Whole Amount is a lump sum equal to the excess of the discounted value of the remaining interest payments payable during the remaining term of the Notes on the outstanding principal amount. The Agreement provides that in the event Notes are prepaid or are accelerated as a result of an Event of Default, the additional lump sum amount is intended as compensation to the Note holders for the deprivation of such right under such circumstances. The Agreement also provides that any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any additional lump sum amount owing in respect of the Notes shall bear interest at the Default Rate payable when interest payments on said Notes are payable.", "Reasons_for_Decision": "Summary: Income that is derived by a non-resident and consists of interest that is paid by a person who is a resident, is subject to withholding tax under subparagraph 128B(2)(b)(i) of the ITAA 1936. Subsection 128A(1AB) of the ITAA 1936 defines interest to include, among other things, an amount: As the term 'interest' is not comprehensively defined for the purposes of Division 11A of the ITAA 1936, it is therefore necessary to have regard to the nature of interest at common law. Interest is in essence compensation to a lender for being kept out of the use and enjoyment of the principal sum ( Federal Commissioner of Taxation v. The Myer Emporium Ltd (1987) 163 CLR 199; (1987) 18 ATR 693; (1987) 87 ATC 4363). It is an amount that is calculated by reference to a principal sum and by reference to time ( Federal Wharf Co Ltd v. Deputy Commissioner of Taxation (1930) 44 CLR 24 at 28; per Cooper J in Century Yuasa Batteries Pty Ltd v. Federal Commissioner of Taxation (1997) 73 FCR 528; 97 ATC 4299; (1997) 35 ATR 394). Taxation Rulings TR 93/27 (paragraphs 24-30) and TR 2002/15 (paragraphs 53-56), which provide guidance on the nature of interest, state that the following requirements must normally be satisfied for a payment to be treated as interest: The Full Federal Court in Federal Commissioner of Taxation v. Century Yuasa Batteries Pty Ltd (1998) 82 FCR 288; 98 ATC 4380; (1998) 38 ATR 442 held that an amount is not in the nature of interest if it was not calculated by reference to a principal sum. The Court also said an amount is in the nature of interest if it in essence fits the description of the ordinary meaning of interest but is not called interest. An example is the discount on a security (see subsection 128A(1AC) of the ITAA 1936). Subsection 128A(1AD) of the ITAA 1936 provides an example of an amount that is in substitution for interest. That subsection 'has the effect of deeming that lump sum payments made instead of payments of interest are amounts in substitution for accrued interest and are, therefore, interest for the purposes of the withholding tax provisions' (paragraph 2.65 of Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 2) 1997). The Make Whole Amount payable to foreign Note holders by the Administrator of the Australian resident company under the terms the Agreement is in the nature of interest or in substitution for interest for the purposes of subsection 128A(1AB) of the ITAA 1936 as: Although the Make Whole Amount is not called or characterised as 'interest' under the terms of the Agreement, it comes within the extended meaning of interest for the purposes of subsection 128A(1AB) of the ITAA 1936 as it is an amount that is calculated by reference to a principal sum and by reference to time. Accordingly, the Make Whole Amount payable to foreign Note holders by the Administrator of the Australian resident company is subject to withholding tax under section 128B of the ITAA 1936.", "Date_of_Decision": "6 November 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 128B subsection 128A(1AB) subsection 128A(1AC) subsection 128A(1AD)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2002/15 | Taxation Ruling TR 93/27", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non resident individuals Withholding taxes International tax", "Case_References": "Federal Commissioner of Taxation v. The Myer Emporium Ltd (1987) 163 CLR 199 (1987) 18 ATR 693</ 87 ATC 4363", "Other_References": "Explanatory Memorandum to the Taxation Laws Amendment Bill (No. 2) 1997", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008153", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 2002/15 Taxation Ruling TR 93/27 | Keywords Non resident individuals Withholding taxes International tax"}
{"ATO_ID_Number": "ATO ID 2007/23", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of an Australian sourced interest income received by a Sri Lankan resident", "Issue": "Is interest paid by an Australian bank to a Sri Lankan resident assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. Interest paid by an Australian bank to a Sri Lankan resident is not assessable under subsection 6-5(3) of the ITAA 1997 as it is non-assessable non-exempt income under section 128D of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a Sri Lankan resident and is not an Australian resident. The taxpayer received interest from an Australian bank who is a resident of Australia. Non resident withholding tax was withheld from the taxpayer's bank interest.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year. Interest derived by the taxpayer is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. Subsection 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income then it is not assessable income. An amount is non-assessable non-exempt income if a provision of the ITAA 1997 or another Commonwealth law states that it is not assessable income and not exempt income (section 6-23 of the ITAA 1997). Section 11-55 of the ITAA 1997 lists provisions about non-assessable non-exempt income. Included in this list is section 128D of the ITAA 1936. Section 128D of the ITAA 1936 provides that interest upon which withholding tax is payable is not assessable income and is not exempt income. A non-resident receiving interest paid by an Australian resident is liable for withholding tax on interest under subsections 128B(2) and 128B(5) of the ITAA 1936. Section 7 of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 provides that the rate of withholding tax on interest paid to non-residents is 10%. In determining liability to tax on income received by a foreign resident, it is also necessary to consider any applicable tax treaty contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and ITAA 1997 so that those Acts are read as one. Schedule 31 to the Agreements Act contains the double tax agreement between Australia and Democratic Socialist Republic of Sri Lanka (the Sri Lankan Agreement). Article 11 of the Sri Lankan Agreement deals with interest income. Article 11(1) of the Sri Lankan Agreement provides that interest arising in Australia to which a Sri Lankan resident is beneficially entitled, may be taxed in Sri Lanka. Article 11(2) of the Sri Lankan Agreement provides that interest arising in Australia may also be taxed in Australia but the tax shall not exceed 10% of the gross amount. Article 11(5) of the Sri Lankan Agreement provides that interest arises in the place where the payer resides. In the present case, the interest income is paid by an Australian resident bank and so arises in Australia. As explained above, Article 11(2) of the Sri Lankan Agreement allows Australia to tax that income. The interest is subject to 10% withholding tax and is non-assessable non-exempt income under section 128D of the ITAA 1936. Accordingly, the interest received by the taxpayer from an Australian resident bank is subject to withholding tax will not form part of their assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "4 January 2007", "Year_of_Income": "Year ended 30 June 2005 Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 section 128B section 128D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Interest income International CoE Non resident individuals Non resident interest withholding tax Sri Lanka", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200723", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Interest income International CoE Non resident individuals Non resident interest withholding tax Sri Lanka"}
{"ATO_ID_Number": "ATO ID 2007/157", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding Tax: income that is equivalent to the payment of interest on a loan", "Issue": "Can a fixed rate of dividend paid on a preference share be reasonably regarded as 'equivalent to the payment of interest on a loan' for the purposes of subsection 128B(3A) of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "Yes. When regard is had to the matters set out in subsection 128B(3C) of the ITAA 1936, a fixed rate of dividend paid on a preference share may reasonably be regarded as equivalent to the payment of interest on a loan.", "Facts": "On 1 July 2003 Z Co, a foreign resident company, subscribed $10 million to purchase 50% of the units in Y Trust, an Australian resident trust. Y Trust subscribed for preference shares in W Co. There is a non-arm's length relationship between W Co and Y Trust. Y Trust has no other assets. The terms of the Y Trust units issued to Z Co are that they must be redeemed within eight years of issuance at the original issue price. Thus, Z Co will get back its original subscription price of $10 million for the units in Y Trust. On each determination date a unit holder is presently entitled to distributable income, on a pro rata basis according to the number of units held. The preference shares in W Co held by Y Trust carry an annual fixed 5% rate of dividend based upon the sum subscribed for the shares. The rate of dividend was determined at the subscription time. The preference shares in W Co are debt interests for the purposes of Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997). W Co pays franked dividends to Y Trust. Y Trust subsequently makes distributions to Z Co.", "Reasons_for_Decision": "Summary: Subdivision A of Division 11 of Part III of the ITAA 1936 applies to dividends paid to non-residents. Subsection 128A(3) of the ITAA 1936 provides, to the extent relevant, that a beneficiary who is presently entitled to a dividend included in the income of a trust estate is deemed to have derived dividend income at the time of entitlement. Whilst withholding tax is generally imposed on dividends paid by a resident company to a non-resident, subparagraph 128B(3)(ga)(i) of the ITAA 1936 excludes from withholding tax franked dividends. Subsection 128B(3A) of the ITAA 1936 provides that this exclusion does not apply to a dividend which, inter alia , 'may reasonably be regarded as equivalent to the payment of interest on a loan'. Subsection 128B(3C) of the ITAA 1936 states: In determining for the purposes of subsection (3A) the extent (if any) to which an amount may reasonably be regarded as equivalent to the payment of interest on a loan, regard is to be had to: (a) the way in which the amount was calculated; and (b) the conditions applying to the payment or application of the amount; and (c) any other relevant matters. Subsections 128B(3A) to 128B(3C) of the ITAA 1936, and the now repealed section 45ZA, of the ITAA 1936 were inserted by Taxation Laws Amendment Act (No. 2) 1999 . All these provisions were part of a legislative scheme designed to treat dividends which were in the nature of interest as interest. The paragraphs of the Explanatory Memorandum (EM) to Taxation Laws Amendment Bill (No. 2) 1999 discussing former section 45ZA are relevant to understanding the requirements of subsection 128B(3C). Paragraph 7.13 of the EM explains that anything which has the commercial effect of providing a borrower with the use of capital for a term may be equivalent to a loan. In the present case, the Y Trust units issued to Z Co are to be redeemed in eight years at the original issue price. This obligation to repay is considered equivalent to a loan. In Federal Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 72 FCR 300; 97 ATC 4151; (1997) 34 ATR 635 ( Radilo ), the Full Federal Court considered the question of whether a dividend paid on a non-redeemable, non-cumulative converting preference share was a debt dividend. In determining this issue, the court considered whether the dividend could be reasonably regarded as equivalent to the payment of interest on a loan for the purposes of paragraph 46D(2)(c) of the ITAA 1936. In their joint judgment, Sackville and Lehane JJ said: A loan involves an obligation on the borrower to repay the sum borrowed. The matter is put this way by Dr Pannam: A loan of money may be defined, in general terms, as a simple contract whereby one person ('the lender') pays or agrees to pay a sum of money in consideration of a promise by another person ('the borrower') to repay the money upon demand or at a fixed date. The promise of repayment may or may not be coupled with a promise to pay interest on the money so paid. The essence of the transaction is the promise of repayment. ... In Radilo , it was held that there was no relationship of lender and borrower. Nor was there anything present that could be regarded as equivalent to such a relationship existing. However, the present case can be distinguished. Here, there is a promise that the subscribed monies will be repaid in full. It is considered that this promise of repayment is sufficient to draw a conclusion that the payment may reasonably be regarded as equivalent to the payment of interest on a loan . Having concluded the arrangement is analogous to a loan, it must be determined whether the dividend distributed is equivalent to interest on the loan. Paragraph 7.21 of the EM discusses whether a distribution is equivalent to the payment of interest on a loan. It states: For example, if the distributed amount is calculated as a percentage of the sum subscribed for the interest of the ... beneficiary in the trust ... at a rate fixed at the time of subscription, so that the manner of calculation of the distributed amount corresponds with the calculation of interest, that would be a factor pointing clearly to equivalence to the payment of interest. ... Thus if a taxpayer subscribed money to a unit trust, and was entitled after 5 years to have his units redeemed for the amount subscribed (or bought at an equivalent price), and in the interim to receive distributions consisting of dividends at a certain rate with respect to the amount subscribed, it would be concluded that the distributed amount was equivalent to interest on a loan. In the present case the dividend from W Co is fixed at 5% per annum of the sum subscribed for the shares. The amount of annual dividend lacks any relationship to the profits of W Co, but rather corresponds to a calculation of interest payable. The manner in which the amount of dividend was calculated and paid is considered equivalent to that adopted in the payment of interest on a loan. The payment of the dividend is made at regular periods throughout the term of the arrangement. The dividend from W Co is paid to Y Trust and then distributed to Z Co. Z Co knows from the outset of the arrangement how much each distribution will be during the period that it holds the units in Y Trust. Accordingly the distribution is akin to the payment of interest on a loan. Having regard to the fact that the amount of $10 million subscribed for the units in Y Trust must be repaid within eight years, the manner in which the amount is calculated and the conditions and other matters applying to the payment of the dividend, it is considered the dividend may reasonably be regarded as equivalent to the payment of interest on a loan. Accordingly subparagraph 128B(3)(ga)(i) of the ITAA 1936 will not apply to exclude the dividend amount from the withholding tax provisions.", "Date_of_Decision": "5 July 2007", "Year_of_Income": "", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128A(3) subparagraph 128B(3)(ga)(i) subsection 128B(3A) subsection 128B(3B) subsection 128B(3C)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Withholding taxes", "Case_References": "Federal Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 72 FCR 300 97 ATC 4151 (1997) 34 ATR 635", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2007157", "Unmatched_Content": "Keywords Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2005/241", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Assessability of Australian sourced interest income received by a resident of the Philippines", "Issue": "Is the Australian sourced interest income received by a resident of the Philippines assessable under subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997)?", "Decision": "No. The Australian sourced interest income received by a resident of the Philippines is not assessable under subsection 6-5(3) of the ITAA 1997 as it is exempt from tax under section 128D of the Income Tax Assessment Act 1936 (ITAA 1936).", "Facts": "The taxpayer is a resident of the Philippines for income tax purposes. The taxpayer is a non resident of Australia for income tax purposes. The taxpayer receives interest income from Australian sources.", "Reasons_for_Decision": "Summary: Subsection 6-5(3) of the ITAA 1997 provides that a non resident's assessable income includes ordinary income derived directly or indirectly from Australian sources, during the income year. Interest income is ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. Section 6-15(3) of the ITAA 1997 provides that if an amount is non-assessable non-exempt income then it is not assessable income. Section 11-55 of the ITAA 1997 provides a list of non-assessable non-exempt income provisions. Included in this list is section 128D of the ITAA 1936. Section 128D of the ITAA 1936 provides that interest upon which withholding tax is payable shall not be included in assessable income. Interest withholding tax is payable on interest derived by non-residents under subsection 128B(2) of the ITAA 1936. In determining liability to Australian tax on foreign sourced income it is necessary to consider not only the income tax laws, but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (Agreements Act). Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that those Acts are read as one. Schedule 14 to the Agreements Act contains the tax treaty between Australia and the Republic of the Philippines (the Philippine Agreement). The Philippine Agreement operates to avoid double taxation of income received by Australian and Philippine residents. Article 11(1) of the Philippine Agreement provides that interest income arising in Australia to which a resident of the Philippines is beneficially entitled, may be taxed in the Philippines. Article 11(2) of the Philippine Agreement provides that such interest income may be taxed in Australia, but the tax so charged shall not exceed 15 per cent of the gross amount of the interest. The interest income will be subject to withholding tax at the rate of 10% on the gross amount of interest derived in Australia. The interest income received by the non resident taxpayer is not assessable under subsection 6-5(3) of the ITAA 1997 as section 128D of the ITAA 1936 applies. Accordingly, the interest income from Australian sources will not form part of the taxpayer's assessable income under subsection 6-5(3) of the ITAA 1997.", "Date_of_Decision": "4 August 2005", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128B(2) section 128D", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Interest income International tax Non resident interest withholding tax Philippines Withholding taxes", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005241", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Interest income International tax Non resident interest withholding tax Philippines Withholding taxes"}
{"ATO_ID_Number": "ATO ID 2005/263", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed interest in respect of a hire purchase agreement for non-resident interest withholding tax purposes", "Issue": "Where both Division 240 of the Income Tax Assessment Act 1997 (ITAA 1997) and section 128AC of the Income Tax Assessment Act 1936 (ITAA 1936) apply to an arrangement entered into by the taxpayer, is the notional interest for an arrangement payment determined under Division 240 relevant for determining the notional interest for an attributable agreement payment for the purposes of the interest withholding tax provision in section 128AC?", "Decision": "No. The notional payments determined under Division 240 of the ITAA 1997 would not be relevant for the purposes of section 128AC of the ITAA 1936. The implicit interest component of actual rental payments made, or liable to be made, under the hire purchase agreement will be determined according to the requirements of section 128AC.", "Facts": "The taxpayer is a resident of Australia for tax purposes. In July 2003, the taxpayer entered into an agreement with a non-resident plant supplier for plant used by the taxpayer in carrying on a business for the purpose of producing assessable income. The agreement conferred upon the taxpayer a right to use and possess the plant, and an option to purchase the plant at the end of the term of the agreement. On the facts of the case: The plant supplier has an address outside Australia.", "Reasons_for_Decision": "Summary: In the present case both Division 240 of the ITAA 1997 and section 128AC of the ITAA 1936 applied to the arrangement between the taxpayer and the non-resident plant supplier. Division 240 of the ITAA 1997 has no effect for the purposes of Division 11A of Part III of the ITAA 1936 (paragraph 240-15(b) of the ITAA 1997). Hence, the implicit interest component of actual rental payments made, or liable to be made, under the hire purchase agreement would be determined according to the requirements of section 128AC of the ITAA 1936.", "Date_of_Decision": "7 December 2004", "Year_of_Income": "Year ended 30 June 2004", "Legislative_References": "Income Tax Assessment Act 1997 Division 240 paragraph 240-15(b) subsection 995-1(1)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 98/21", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Cross border leasing Hire purchase Lease & hire income Non resident interest withholding tax", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2005263", "Unmatched_Content": "Related Public Rulings (including Determinations) Taxation Ruling TR 98/21 | Keywords Cross border leasing Hire purchase Lease & hire income Non resident interest withholding tax"}
{"ATO_ID_Number": "ATO ID 2003/528", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt and Equity Financing: rate of withholding tax on a return on a debt interest under Division 974", "Issue": "Is the taxpayer, a non-resident company, liable for withholding tax on Australian-sourced dividends at a rate of 10% if the dividends constitute a return on a debt interest?", "Decision": "Yes. The taxpayer is liable for withholding tax at a rate of 10%, on Australian-sourced dividends that constitute a return on a debt interest.", "Facts": "The taxpayer is a non-resident company. During 2002, the taxpayer company received dividends on redeemable preference shares (RPS) from a resident company. The terms of the RPS are such that the shares give rise to a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997).", "Reasons_for_Decision": "Summary: Liability to non-resident withholding tax on interest and dividends is determined by Division 11A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936). Section 128B of the ITAA 1936 deals with liability to withholding tax. Subsections 128B(2) and 128B(5) provide that subject to certain exceptions listed in subsection 128B(3), a non-resident is liable to withholding tax on income consisting of interest that is paid to the non-resident by a resident person and is not an outgoing solely incurred by that person in carrying on business in a country outside Australia at or through a permanent establishment of that person in that country. For the purposes of Division 11A of the ITAA 1936, 'interest' is defined to include 'an amount...that is a dividend paid in respect of a non-equity share' (paragraph 128A(1AB)(d)). The term 'non-equity share' is defined as a share that is not an equity interest in the company. As the RPS issued by the resident company constitute a debt interest under Division 974 of the ITAA 1997, they are not an equity interest (paragraph 974-70(1)(b)). The RPS are non-equity shares for income tax purposes. Therefore, RPS dividends will be income derived by a non-resident that consists of interest to which section 128B applies of the ITAA 1936. The taxpayer company is therefore liable to pay tax on the dividends at the rate which applies to interest income under subsection 128B(5) of the ITAA 1936. Paragraph 7(b) of the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 provides that this rate is 10%. The taxpayer company's liability under these income tax provisions is not affected by any articles in the applicable Double Tax Agreement.", "Date_of_Decision": "16 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1997 subsection 974-70(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/527 | ATO ID 2003/529 | ATO ID 2003/530", "Subject_References": "Debt equity borderline Redeemable preference share Non-resident interest withholding tax Non-equity share", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003528", "Unmatched_Content": "This ATO ID does not take account of the effect of Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 that implements Stages 3 and 4 of the reforms to the taxation of financial arrangements (TOFA 3 and 4). | Keywords Debt equity borderline Redeemable preference share Non-resident interest withholding tax Non-equity share"}
{"ATO_ID_Number": "ATO ID 2003/530", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Debt and Equity Financing: liability to withholding tax on a return on a debt interest under Division 974", "Issue": "Does the liability to withholding tax arise in respect of dividends, on redeemable preference shares which are classed as a debt interest under Division 974 of the Income Tax Assessment Act 1997 (ITAA 1997), arise at the time the dividend is paid or deemed to have been paid?", "Decision": "Yes. For non-resident withholding tax purposes, dividends on redeemable preferences shares which are classed as a debt interest are treated as interest. The liability to withholding tax therefore arises at the time the dividend is paid, or is reinvested, accumulated, capitalised, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the dividend recipient, or as the recipient directs.", "Facts": "The taxpayer is a non-resident company. During 2002, the taxpayer company received dividends on redeemable preference shares ('RPS'). The RPS constitute a debt interest under Division 974 of the ITAA 1997 and are therefore, non-equity shares for income tax purposes.", "Reasons_for_Decision": "Summary: Liability to non-resident withholding tax on interest and dividends is determined by Division 11A of Part III of the Income Tax Assessment Act 1936 (ITAA 1936). For the purposes of Division 11A of the ITAA 1936, 'interest' is defined to include 'an amount...that is a dividend paid in respect of a non-equity share' (paragraph 128A(1AB)(d) of the ITAA 1936). Consequently, the RPS dividends will be treated as income derived by a non-resident that consists of interest to which section 128B of the ITAA 1936 applies. The time at which the non-resident company becomes liable for withholding tax on the RPS dividends is at the time it is both derived by and paid to the non-resident company (subsections 128B(2) and 128B(5) of the ITAA 1936). Subsection 128A(2) of the ITAA 1936 provides that an amount of interest is deemed to have been paid if it is '...reinvested, accumulated, capitalised, carried to any reserve, sinking fund or insurance fund however designated, or otherwise dealt with on behalf of the other person or as the other person directs'. Therefore, for non-resident withholding tax purposes, dividends on redeemable preferences shares which are classed as a debt interest are treated as interest and the liability to withholding tax therefore, arises at the time the dividend is paid.", "Date_of_Decision": "16 April 2003", "Year_of_Income": "Year ended 30 June 2003", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128A(1AB) subsection 128A(2) subsection 128B(2) subsection 128B(5)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/527 | ATO ID 2003/528 | ATO ID 2003/529", "Subject_References": "Debt equity borderline Redeemable preference share Non-resident interest withholding tax Non-equity share", "Case_References": "", "Other_References": "", "Business_Line": "Finance and Investment Centre of Expertise", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2003530", "Unmatched_Content": "Keywords Debt equity borderline Redeemable preference share Non-resident interest withholding tax Non-equity share"}
{"ATO_ID_Number": "ATO ID 2010/89", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Whether non-resident royalty withholding tax is based on the GST inclusive or GST exclusive amount paid in respect of royalties", "Issue": "Where section 12-280 of Schedule 1 to the Taxation Administration Act 1953 (TAA) requires an entity to withhold an amount from a payment that it makes to a non-resident in respect of royalties, is the withholding based on the GST inclusive or GST exclusive amount of the payment?", "Decision": "Where section 12-280 of Schedule 1 to the TAA requires an entity to withhold an amount from a payment that it makes to a non-resident in relation to royalties, the withholding is based on the GST inclusive amount of the payment.", "Facts": "A resident entity, AusCo, makes payments to ForCo, a non-resident. The payments include amounts which are royalties within the meaning in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) and for the purposes of Australia's various tax treaties. ForCo is registered for goods and services tax (GST) in Australia pursuant to Division 23 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The payments from AusCo are for goods and services which are taxable supplies within the meaning of section 9-5 of the GST Act. The contractual agreement between the parties specifies the payment of a base amount calculated by reference to the use made by AusCo of the rights granted to it by ForCo without the addition of GST (the GST exclusive amount). The contract also includes a 'GST clause' that provides (where applicable), an amount for GST will be added which is calculated on the base or GST exclusive amount resulting in final payments that are GST inclusive.", "Reasons_for_Decision": "Summary: Section 12-280 of Schedule 1 to the TAA imposes a withholding obligation in respect of royalty payments. However no withholding is required from a royalty payment where no withholding tax is payable pursuant to Division 11A of the ITAA 1936 (section 12-300 of Schedule 1 to the TAA). Subsections 128B(2B) and 128B(2C) in Division 11A of the ITAA 1936 relate to royalty withholding tax. Whilst they cover different circumstances they only apply where the recipient derives income that consists of a royalty. By virtue of subsection 128A(1AA) of the ITAA 1936, income includes a royalty. Relevantly, a royalty is defined in subsection 6(1) of the ITAA 1936 as: ... any amount paid or credited, however described or computed, and whether the payment or credit is periodical or not, to the extent to which it is paid or credited, as the case may be, as consideration for : ...(emphasis added) any of the items specified in paragraphs (a) to (f) of that definition. 'Consideration' is not defined in the ITAA 1936 or the Income Tax Assessment Act 1997 (ITAA 1997) but when used to identify 'income', as it is in the definition of 'royalty', it refers to the total amount paid or credited in respect of a specified item. The notion of consideration in the context of stamp duty on insurance premiums was discussed by the Victorian Supreme Court of Appeal in Commissioner of State of Revenue v. Royal and Sun Alliance Insurance Australia Ltd [2003] VSCA 177; 2003 ATC 4998; (2003) 54 ATR 339 (the Sun Alliance case ). In that case, the issue was whether the words 'premiums' and 'gross premiums', for the purposes of determining Victorian state stamp duty, should be treated as including the amount payable in respect of the GST. Ormiston JA stated at paragraphs 27-28: 27. As ordinarily understood, a premium is the consideration, usually in the form of a monetary obligation, paid or payable by the insured for the grant or renewal of insurance cover or of other rights under a policy of insurance ........ ... 28. Moreover the artifice of designating some of the consideration as fire services levy, stamp duty or GST, though acceptable in practice (and indeed in law), could not detract from the fact that cover would not be granted unless the whole of the stipulated sums had been paid, whether called premiums, GST or whatever. The insured was denied any right to claim under the policy unless the total was paid timeously. The total amount to be paid was (and still is) in fact the premium, unless by law it can otherwise be characterised or understood. In other words, consideration for goods or services comprises everything that must be paid to the deliverer, regardless of its description. The term 'consideration' is defined in section 195-1 of the GST Act and refers to the application of section 9-15. Relevantly subsection 9-15(1) provides that consideration includes: Subsection 9-15(2) of the GST Act further provides that consideration includes payments made voluntarily and payments made by persons other than the recipient of the supply. Section 9-75 of the GST Act provides a formula for calculating the 'value of a taxable supply' for the purposes of imposing the GST which section 9-70 of the GST Act sets at the rate of 10%. Essentially the value of a taxable supply is ten elevenths of 'price', where price is the sum of: It follows that GST is a part of the consideration derived by an entity for making a 'taxable supply'. However, the liability for GST falls on the supplier and not the recipient of the taxable supply. Accordingly, whether or not GST is separately invoiced to the purchaser, it is plain that what the recipient pays the supplier is all 'consideration' for the goods or services supplied. By the operation of the GST Act, in particular Division 11, and depending on whether the purchaser of the taxable supply acquires the supply in the course of its business, that part of the consideration paid for the supply that is economically speaking GST may be converted into an 'input tax credit' for offset against the purchaser's own GST liability as a supplier of taxable supplies. The effect of the GST Act in this regard however does not compromise the character of the outlay as consideration for a taxable supply. Note that section 17-5 of the ITAA 1997 provides that an amount that relates to GST payable on a taxable supply is non-assessable and non-exempt income of the entity making the supply. This statutory removal of the GST element of the consideration payable for a taxable supply from assessable income would suggest that all of the consideration, including that part designated to compensate for the supplier's GST liability, constitutes income of the supplier. The provisions of the GST Act, together with their complement at section 17-5 of the ITAA 1997, and the decision in the Sun Alliance case , all point to the GST component of a payment being income which is part of the consideration for a taxable supply. In these circumstances, there is no reason to infer that the charging provision of subsection 128B(5A) of the ITAA 1936 that imposes income tax on royalties does not apply to the whole of the royalty, including the amount identified as GST payable by the supplier of the item for which the royalty is paid. Therefore royalty withholding tax is imposed on the GST inclusive amount of any royalty payments and the payer should withhold accordingly. By way of an example, if the supply granted by ForCo to AusCo results in a base amount of $100 payable under the contract; by virtue of the GST clause, an amount of $10 GST would be added to this sum making the total consideration $110. Royalty withholding tax and the associated withholding obligation would be imposed in respect of this GST inclusive amount ($110) of the payment at the relevant rate.", "Date_of_Decision": "31 March 2010", "Year_of_Income": "Year ended 30 June 2004 Year ended 30 June 2005 Year ended 30 June 2006 Year ended 30 June 2007 Year ended 30 June 2008 Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1936 subsection 6(1) Division 11A subsection 128A(1AA) subsection 128B(2B) subsection 128B(2C) subsection 128B(5A)", "Related_Public_Rulings_and_Determinations": "Taxation Ruling TR 2006/12", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Goods and services tax Non resident royalty withholding tax Royalty income GST consideration Income International tax Withholding & Indirect Taxes", "Case_References": "Commissioner of State Revenue v Royal and Sun Alliance Insurance Australia Ltd [2003] VSCA 177 2003 ATC 4998 (2003) 54 ATR 339", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201089", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Reasons for decsion Legislative References | Updated for the changes in the appropriations legislation which involved the repealing of 9-15(3) of the GST Act and replacing it with section 9-17 of the GST Act. This change was included in the \"Tax and Superannuation laws Amendment (2012 Measures No:1) Bill: 2012 | Related Public Rulings (including Determinations) Taxation Ruling TR 2006/12 | Keywords Goods and services tax Non resident royalty withholding tax Royalty income GST consideration Income International tax Withholding & Indirect Taxes"}
{"ATO_ID_Number": "ATO ID 2008/140", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Royalty withholding tax: lease payments to United States tax treaty resident for hiring substantial equipment - royalty withholding tax", "Issue": "Are lease payments made by an Australian resident company to a United States (US) resident company for the hire of substantial equipment subject to royalty withholding tax under section 128B of the Income Tax Assessment Act 1936 (ITAA 1936)?", "Decision": "No, these lease payments are not subject to royalty withholding tax under the ITAA 1936.", "Facts": "The taxpayer is a US resident for the purposes of the tax treaty between Australia and the United States (the US Convention). The taxpayer leases substantial equipment to a company that is resident of Australia for the purposes of the US Convention. The paramount purpose of the lease is for the hire, not the purchase, of the equipment. The substantial equipment is equipment of an industrial nature. The taxpayer receives lease payments from the Australian company in accordance with the lease agreement.", "Reasons_for_Decision": "Summary: Under subsection 6(1) of the ITAA 1936, the definition of 'royalty' or 'royalties' includes payments for 'the use of, or right to use, any industrial, commercial or scientific equipment'. The definition of royalty in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) takes its meaning from the definition in the ITAA 1936. The payments made by the Australian company to the taxpayer pursuant to the lease agreement are royalties for the purposes of the ITAA 1936 and ITAA 1997 as they are payments made by the Australian company for the right to use industrial equipment. With effect from 1 July 2003 for withholding taxes, the definition of 'royalties' in the Royalties Article of the US Convention (Article 12(4)) does not include 'payments for the use of or the right to use industrial, commercial or scientific equipment' Accordingly, the equipment lease payments are not 'royalties' for the purposes of Article 12(4) of the US Convention. Subparagraph 17A(5)(b) of the International Tax Agreements Act 1953 (the Agreements Act) provides that section 128B of the ITAA 1936 (which deals with liability to withholding tax) does not apply to payments that are royalties for the purposes of the Assessment Act (that is the ITAA 1936 and the ITAA 1997) where a tax treaty does not treat the payments as royalties. Therefore, as the equipment lease payments made by the Australian company to the taxpayer are not royalties for the purposes of Article 12(4) of the US Convention, the Convention does not treat those payments as royalties for the purposes of paragraph 17A(5)(b) of the Agreements Act. Accordingly, subsection 17A(5) of the Agreements Act applies and payments for the lease of industrial equipment made after 30 June 2003 are not subject to royalty withholding tax.", "Date_of_Decision": "18 January 2008", "Year_of_Income": "Year ended 31 March 2008", "Legislative_References": "Income Tax Assessment Act 1936 section 6(1) section 128B", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Double tax agreements Equipment royalties International tax Non resident royalty withholding tax Royalties Royalty article Treaties", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2008140", "Unmatched_Content": "This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions. Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series . The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953. | Keywords Double tax agreements Equipment royalties International tax Non resident royalty withholding tax Royalties Royalty article Treaties"}
{"ATO_ID_Number": "ATO ID 2006/305", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Withholding tax obligation: royalty paid to an Australian agent of a non-resident licensor", "Issue": "Is an Australian entity acting as agent for a non-resident licensor required, under section 12-285 of Schedule 1 to the Taxation Administration Act 1953 (TAA), to withhold tax from royalty payments it receives in Australia on behalf of the non-resident licensor?", "Decision": "Yes. The Australian entity acting as agent for a non-resident licensor is required, under section 12-285 of Schedule 1 to the TAA, to withhold tax from royalty payments it receives in Australia on behalf of the non-resident licensor.", "Facts": "Under an intellectual property agreement, a non-resident licensor grants a licence to a licensee resident in Australia. Under the agreement the non-resident licensor nominates an Australian resident entity as agent to perform various commercial and managerial responsibilities on the non-resident licensor's behalf in Australia. Pursuant to the agreement the licensee, in carrying on its business in Australia, makes royalty payments to the Australian resident entity which receives the payments in Australia as agent for the non-resident licensor. The payments are royalties for purposes of the Income Tax Assessment Act 1936 (ITAA 1936) and the relevant double tax agreement allows tax to be withheld in Australia.", "Reasons_for_Decision": "Summary: Under subsection 128B(2B) of the ITAA 1936 royalties derived by a non-resident are subject to withholding tax unless an exemption applies. Withholding tax applies where the royalties are paid by a resident, except where they are outgoings wholly incurred by the payer in carrying on a business outside Australia at or through a permanent establishment of the resident outside Australia. Section 12-280 of Schedule 1 to the TAA provides that 'payers' of royalties are required to withhold tax if: Subsection 12-285(1) of Schedule 1 to the TAA provides that that an entity that 'receives' a payment of a royalty must withhold an amount from the payment if the entity is a person in Australia or an Australian government agency; and the foreign resident is or becomes entitled: Section 12-280 of Schedule 1 to the TAA and section 12-285 of Schedule 1 to the TAA are designed to apply to different situations. It is not intended that both the payer and the entity that receives the payment must withhold. Therefore, the question at issue is whether the licensee (the payer of the royalty) or the Australian resident agent (the recipient of the payment) is required to withhold. The Australian resident agent is an entity in Australia that receives the royalty payments. It follows that section 12-285 of Schedule 1 to the TAA is the relevant provision. Therefore, it is the Australian resident agent that is required to withhold tax from the royalty payments it receives on behalf of the non-resident licensor. Section 12-280 of Schedule 1 to the TAA is intended to apply where the entity actually receiving the royalty payment is outside Australia or has an address outside Australia. Under the facts here, the entity actually receiving the payment is an entity in Australia - the Australian resident acting as agent in Australia for the non-resident licensor. It follows that the licensee (the payer) is not required to withhold under section 12-280 of Schedule 1 to the TAA.", "Date_of_Decision": "31 October 2006", "Year_of_Income": "Year ended 30 June 2006", "Legislative_References": "Income Tax Assessment Act 1936 subsection 128B(2B)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non-resident entities Non-resident royalty withholding tax PAYG system PAYG withholding PAYG withholding under dividend, interest & royalty payment category", "Case_References": "", "Other_References": "Fact Sheet - PAYG withholding from interest, dividends and royalties to non-residents", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006305", "Unmatched_Content": "Minor grammatical and spelling corrections | Keywords Non-resident entities Non-resident royalty withholding tax PAYG system PAYG withholding PAYG withholding under dividend, interest & royalty payment category"}
{"ATO_ID_Number": "ATO ID 2012/8", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Deemed quotation of tax file number in respect of distribution from investment body to non-resident investor: section 202EE of the ITAA 1936", "Issue": "When subsection 202EE(1) of the Income Tax Assessment Act 1936 (ITAA 1936) deems a non-resident beneficiary of a managed investment trust to have quoted their tax file number in relation to certain investments in the trust, does the deeming apply in respect of a distribution from the trustee of the trust at a particular time, or does it also apply to all future distributions from the trustee of the trust?", "Decision": "When subsection 202EE(1) of the ITAA 1936 deems a non-resident beneficiary of a managed investment trust to have quoted their tax file number in relation to certain investments in the trust, the deeming will only apply in respect of distributions from the trustee of the trust at a particular point in time. The subsection does not deem the tax file number to have been quoted in relation to future distributions from the trustee of the trust in connection with the investment.", "Facts": "A non-resident beneficiary receives a distribution from the trustee of a managed investment trust at a particular time in connection with an investment that it holds in the trust. The investment is one to which Part VA of the ITAA 1936 applies. The distribution from the trustee of the managed investment trust to the non-resident beneficiary represents income derived from the investment. The trustee of the managed investment trust expects to make future distributions from the trust to the non-resident beneficiary in connection with the investment in the trust. The trustee of the managed investment trust is required to withhold an amount under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953 (TAA) from the distribution. The trustee expects to have the same withholding obligations in relation to its future distributions to the non-resident beneficiary.", "Reasons_for_Decision": "Summary: Sections 12-140 and 12-145 of Schedule 1 to the TAA create a withholding obligation where an entity does not quote their tax file number in relation to certain investments. This withholding obligation operates as a compliance mechanism to ensure that payments of investments that are likely to be assessable in Australia are traceable via the entity's tax file number. Withholding will not be required where: Section 202EE of the ITAA 1936 deems a non-resident to have quoted its tax file number in certain situations. Subsection 202EE(1) of the ITAA 1936 relevantly provides: For the purposes of this Part, where: (a) a non-resident is an investor in relation to an investment to which this Part applies; and (b) at a particular time, the investment body pays an amount to the non-resident by way of income derived from the investment; The use of the terms 'at a particular time' and 'at that time' in subsection 202EE(1) of the ITAA 1936 indicates that subsection 202EE(1) is concerned with a distribution at a particular time rather than deeming the tax file number to have been quoted for the life of the investment. In comparison, subsection 202DB(1) of the ITAA 1936 provides for the quotation of a person's tax file number to an investment body for an investment. It uses the term 'in connection with the investment' without a reference to timing. This suggests that the tax file number applies for the life of the investment. If subsection 202EE(1) of the ITAA 1936 operates so as to treat a tax file number to be quoted for the life of the investment, it would just refer simply to the investment, as is the case in subsection 202DB(1) of the ITAA 1936. It would not contain references to the terms like 'at a particular time, the investment body pays an amount to the non-resident' and 'in connection with the investment at that time'. Therefore, subsection 202EE(1) of the ITAA 1936 treats a non-resident beneficiary of a managed investment trust to have quoted their tax file number in relation to certain investments in the trust only at the particular time of a distribution from the trustee of the trust. The subsection does not apply to future distributions from the trustee of the trust in connection with the investment. The criteria in subsection 202EE(1) of the ITAA 1936 therefore need to be considered at the time of each distribution to the non-resident to determine whether the non-resident is deemed to have quoted a tax file number.", "Date_of_Decision": "23 January 2012", "Year_of_Income": "Year ending 30 June 2012 and future income years", "Legislative_References": "Income Tax Assessment Act 1936 subsection 202DB(1) subsection 202EE(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Non-resident beneficiaries Tax file number", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID20128", "Unmatched_Content": "the non-resident is taken to have quoted the non-resident's tax file number in connection with the investment at that time if: | Keywords Non-resident beneficiaries Tax file number"}
{"ATO_ID_Number": "ATO ID 2013/63", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Managed Investment Trust Withholding Tax: withholding rate under Subdivision 12-H of Schedule 1 to the Taxation Administration Act 1953 for non-custodians with different income year to the MIT", "Issue": "If the trustee of an Australian resident trust makes a foreign resident beneficiary, who is a resident of an information exchange country, entitled to an amount that is reasonably attributable to a fund payment the trust received from a managed investment trust (MIT), does the trustee calculate the amount it is required to withhold using the rate in paragraph 12-390(6)(a) of Schedule 1 to the Taxation Administration Act 1953 (TAA) that corresponds to the resident trust's income year in which the beneficiary's entitlement arises?", "Decision": "No. The amount that the trustee of an Australian resident trust is required to withhold from a fund payment it receives from the MIT and to which the foreign resident's entitlement is reasonably attributable, is calculated by reference to the withholding rate in paragraph 12-390(6)(a) of Schedule 1 to the TAA that corresponds to the income year of the MIT to which the fund payment relates.", "Facts": "An Australian resident trust (Trust X) invests in a trust that is a MIT as defined in section 12-400 of Schedule 1 to the TAA (repealed and replaced with section 275-10 of the Income Tax Assessment Act 1997 (ITAA) 1997)). The MIT makes a fund payment within the meaning of that term in section 12-405 of Schedule 1 to the TAA to Trust X. The MIT provides Trust X with a notice in respect of the fund payment pursuant to section 12-395 of Schedule 1 to the TAA. The notice specifies that the payment relates to the MIT's 2009 income year. The MIT's 2009 income year commenced on 1 July 2008. Trust X has a substituted accounting period that ends on 31 March in lieu of the income year ending on the following 30 June. In its 2010 income year, the trustee of Trust X makes a foreign resident beneficiary entitled to an amount that is reasonably attributable to the fund payment that it received from the MIT. The foreign resident is liable to pay MIT withholding tax in respect of the entitlement and is a resident of an information exchange country. Trust X is not a MIT or a custodian. Trust X calculated the amount it was required to withhold as a result of the foreign resident's entitlement at the rate of 15%. This was on the basis that the rate of withholding was worked out by reference to the trust's income year in which the foreign resident's entitlement, and therefore the withholding obligation, arose.", "Reasons_for_Decision": "Summary: Subdivision 12-H of Schedule 1 to the TAA governs the withholding obligations of custodians and other entities making payments outside of Australia where all or part of a payment is attributable to a fund payment received from a MIT. Pursuant to subsection 12-390(4) of Schedule 1 to the TAA, an entity that is not a MIT or a custodian must withhold an amount from a payment it receives if: The amount that the entity is required to withhold is the attributable amount multiplied by the applicable withholding rate: subsection 12-390(5) of Schedule 1 to the TAA. The applicable withholding rate is worked out under subsection 12-390(6) of Schedule 1 to the TAA according to whether the recipient is resident in a jurisdiction with which Australia has effective exchange of information for taxation matters. As the trustee of Trust X has made the foreign resident beneficiary entitled to an amount that is reasonably attributable to a fund payment it received from the MIT and which is covered by a notice under section 12-395 of Schedule 1 to the TAA, the trustee is required to withhold an amount from that payment. Further, as the beneficiary is a resident of an information exchange country, the rate of withholding is calculated in accordance with paragraph 12-390(6)(a) of Schedule 1 to the TAA. In determining the appropriate withholding rate, an issue arises as to whether the 'income year' referred to in paragraph 12-390(6)(a) in Schedule 1 to the TAA is the income year in which the withholding obligation arises for Trust X (i.e. in the 2010 income year of Trust X when the foreign resident's entitlement to the attributable amount arises) or if it is a reference to the income year of the MIT to which the fund payment relates (the 2009 income year). This is relevant as the rate of withholding tax is 22.5% for income years commencing on or after 1 July 2008 and 15% for the following income year. It is considered that the income year referred to in paragraph 12-390(6)(a) of Schedule 1 to the TAA is the income year of the MIT to which the fund payment relates. The expression 'in relation to' is used in paragraph 12-390(6)(a) of Schedule 1 to the TAA to require a relationship between the income year and a fund payment. The nature of that connection is to be determined from its statutory context. Relevantly, one of the requirements for a withholding obligation to arise under subsection 12-390(4) of Schedule 1 to the TAA is that Trust X receives all or part of a payment that is covered by a notice or information under section 12-395 of Schedule 1 to the TAA. Section 12-395 of Schedule 1 to the TAA requires a MIT to give to the recipient of a fund payment a notice (or publish details of the payment on a website for at least 5 years) that contains sufficient information about the payment to allow the recipient to accurately discharge its withholding obligations. To that end, the notice must include: As the notice provided to Trust X is a source of its obligation to withhold, it follows that the 'income year' referred to in paragraph 12-390(6)(a) of Schedule 1 to the TAA that determines the applicable rate of withholding, must refer to the income year of the MIT to which the fund payment relates as found in the notice. Therefore, the trustee of Trust X is required to withhold at the rate of 22.5% being the withholding rate in paragraph 12-390(6)(a) of Schedule 1 to the TAA that corresponds to the 2009 income year of the MIT to which the fund payment relates. This interpretation promotes the objectives of the MIT withholding provisions by ensuring that foreign resident investors do not obtain different after-tax outcomes according to whether they invest in a MIT directly or via one or more intermediaries.", "Date_of_Decision": "6 November 2013", "Year_of_Income": "Year ended 30 June 2009 Year ended 30 June 2010", "Legislative_References": "Taxation Administration Act 1953 Schedule 1 Subdivision 12-H section 12-385 subsection 12-390(4) subsection 12-390(5) subsection 12-390(6) paragraph 12-390(6)(a) section 12-395 subsection 12-395(1) section 12-400 section 12-405 ITAA 1997 275-10", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "distribution to non residents managed investment trusts investment trusts withholding taxes", "Case_References": "", "Other_References": "", "Business_Line": "Private Groups and High Wealth Individuals", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201363", "Unmatched_Content": "Inserted new legislative reference - section 275-10. | Keywords distribution to non residents managed investment trusts investment trusts withholding taxes"}
{"ATO_ID_Number": "ATO ID 2009/155", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Beneficiary of a managed investment trust", "Issue": "Is the recipient of a fund payment liable to pay managed investment trust withholding tax under subsection 840-805(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the recipient participated in a capital raising arrangement under a specific capital instrument?", "Decision": "Yes. The recipient of a fund payment is liable to pay managed investment trust withholding tax under subsection 840-805(1) of the ITAA 1997 where the recipient participated in a capital raising arrangement under a specific capital instrument where the terms of the instrument result in the recipient being a beneficiary of the managed investment trust.", "Facts": "A foreign resident (the investor) contributed funds to an Australian unit trust under a capital raising instrument. The investor contributed the funds on their own behalf, and not as trustee of another trust. The capital raising instrument carries an entitlement to payment of 10% per annum on the face value of the security and payment is at the absolute discretion of the payer. Under the terms of the capital raising instrument, the investor has a beneficial interest in the trust. The investor is paid the first payment in relation to the current income year. The payment is a fund payment as defined in subsection 12-405(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA) in relation to the current income year. At the time that the payment is made:", "Reasons_for_Decision": "Summary: A person is liable to pay managed investment trust withholding tax under subsection 840-805(1) of the ITAA 1997 where subsection 840-805(2) of the ITAA 1997 is satisfied. The requirements of subsection 840-805(2) are: The investor is paid an amount by the unit trust in relation to the current income year. Unit trust is a managed investment trust in relation to the current income year because, at the time that the payment is made: The payment is a fund payment in relation to the current income year. The investor is a foreign resident when they are paid the amount. The investor is a beneficiary of the unit trust. The investor is paid the amount in respect of the capital raising instruments which gives rise to the beneficial interest in the trust; therefore the investor is a beneficiary in respect of the amount paid. The investor is not paid the amount in the capacity of trustee of another trust. As all of the requirements of subsection 840-805(2) of the ITAA 1997 are met, the investor is liable to pay managed investment trust withholding tax on the payment under subsection 840-805(1) of the ITAA 1997.", "Date_of_Decision": "3 December 2009", "Year_of_Income": "Year ended 30 June 2009", "Legislative_References": "Income Tax Assessment Act 1997 subsection 840-805(1) subsection 840-805(2)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Beneficiaries Investment trusts", "Case_References": "", "Other_References": "", "Business_Line": "Public Groups and International", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2009155", "Unmatched_Content": "Keywords Beneficiaries Investment trusts"}
{"ATO_ID_Number": "ATO ID 2006/153", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: payments of salary or wages to former employees", "Issue": "Will the employer have an individual superannuation guarantee shortfall under subsection 19(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) in respect of a payment of salary or wages to a former employee if the employer does not make sufficient superannuation contributions in respect of the payment by the cut off date for the quarter?", "Decision": "Yes. The employer will have an individual superannuation guarantee shortfall under subsection 19(1) of the SGAA in respect of a payment of salary or wages to a former employee if the employer does not make sufficient superannuation contributions in respect of the payment by the cut off date for the quarter.", "Facts": "The taxpayer ceased employment with the entity (the former employer) on 30 June 2005. The entity paid the taxpayer a bonus payment in September 2005. The bonus is performance based and relates to the taxpayer's employment with the entity in the 2004-05 income year.", "Reasons_for_Decision": "Summary: An employer's individual superannuation guarantee shortfall for an employee for a quarter is the amount worked out using the formula in subsection 19(1) of the SGAA. The shortfall is calculated by reference to the total salary or wages paid by the employer to the employee for the quarter. An employer will have an individual superannuation guarantee shortfall for an employee under subsection 19(1) if the employer has not made sufficient superannuation contributions under either or both sections 22 and 23 of the SGAA to reduce the employer's charge percentage to nil in respect of the employee for the quarter. For periods up until 1 January 2006, there were conflicting views as to whether the formula in subsection 19(1) of the SGAA applied to capture payments of salary or wages by an employer to a former employee. It was argued by some that subsection 19(1) had no operation in relation to former employees as the provision required the existence of a current employment relationship at the time of the payment. The Tax Office view is that, having regard to the context, scope and purpose of subsection 19(1), the better view of the law is that the provision did apply to payments of salary or wages by an employer to a former employee. Provided it is established that the payment arises from and has a clear link to an employer/employer relationship and has the character of salary or wages (as defined in the SGAA), subsection 19(1) will apply notwithstanding the fact that a current employment relationship does not exist at the time of the payment. In the circumstances of this case, the taxpayer ceased work as an employee with the entity on 30 June 2005. The taxpayer received a performance based bonus payment from the entity in September 2005 which related to the taxpayer's employment with the entity in the 2004-05 income year. A bonus that relates to employment constitutes salary or wages for the purposes of the SGAA (paragraph 12 of Superannuation Guarantee Ruling SGR 94/5, which was later replaced by Superannuation Guarantee Ruling SGR 2009/2). [1] Because the bonus arises from and is clearly linked to the former employee's employment, the entity was therefore required to make sufficient superannuation contributions in respect of the payment to avoid having an individual superannuation guarantee shortfall under subsection 19(1) of the SGAA. If the employer fails to make sufficient superannuation contributions in respect of the payment the employer will have an individual superannuation guarantee shortfall for the quarter in which the salary or wages was paid in. For payments of salary or wages by an employer to a former employee on or after 1 January 2006, section 15B of the SGAA operates to put beyond doubt that the employer will have an individual superannuation guarantee shortfall in respect of the former employee under subsection 19(1) of the SGAA if they do not make sufficient contributions in respect of the payment by the cut off date for the quarter.", "Date_of_Decision": "6 June 2006", "Year_of_Income": "Year ended 30 June 2005", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 15B subsection 19(1) section 22 section 23", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 94/5 | Superannuation Guarantee Ruling SGR 2009/2", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation contributions for employees Superannuation guarantee shortfalls", "Case_References": "", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": false, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2006153/00001", "Unmatched_Content": "This Decision sets out our view for quarters ending before 1 July 2026. It does not address changes to the law after this time. Our view in relation to periods ending on or after 1 July 2026 is set out in Draft Law Companion Ruling LCR 2026/D3 - Payday Super: calculation and assessment of the superannuation guarantee charge . This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Updated to limit the application of the Practice Statement to periods ending before 1 July 2026 in light of the amendments made to the SGAA by the Treasury Laws Amendment (Payday Superannuation) Act 2025 . | Updated to reflect the replacement of SGR 94/5 with SGR 2009/2 and include a footnote noting that the Decision will not be further updated to address changes to advice products and the law after 30 June 2026 as it ceases to apply after that date. | Add note to indicate that references to paragraph 12 of SGR 94/5 were replaced with paragraph 66 of SGR 2009/2 which was effective from 01 July 2009. | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 94/5 Superannuation Guarantee Ruling SGR 2009/2 | Keywords Superannuation contributions for employees Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2002/309", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee Scheme: Superannuation Guarantee Charge", "Issue": "Can the Commissioner remit any components of the Superannuation Guarantee Charge (SGC)?", "Decision": "No, the Commissioner cannot waive any components of the SGC as there is no discretion available in the Superannuation Guarantee (Administration) Act 1992 (SGAA).", "Facts": "The taxpayer is an employer who made insufficient superannuation contributions to a complying superannuation fund for its employees in relation to a year of income. As a result, the employer is liable to pay SGC in relation to the year of income.", "Reasons_for_Decision": "", "Date_of_Decision": "19 July 2001", "Year_of_Income": "", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 Section 16 Section 17 Section 19 Section 31 Section 32", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "", "Subject_References": "Superannuation guarantee charge Superannuation guarantee penalties Superannuation guarantee shortfalls", "Case_References": "AAT Case 12,229; Jarra Hills Pty Ltd v. Federal Commissioner of Taxation 37 ATR 1022 97 ATC 2132", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": true, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID2002309/00001", "Unmatched_Content": "ATO ID 2002/309 is withdrawn with effect from 1 July 2026. It continues to apply to periods ending before this day. From 1 July 2026, the provisions of the Superannuation Guarantee (Administration) Act 1992 addressed in the Decision will be substantially amended by the Treasury Laws Amendment (Payday Superannuation) Act 2025 . To the extent that the views set out in the Decision remain relevant to the amended legislation, they have been incorporated into draft Law Companion Ruling LCR 2026/D3 Payday Super: calculation and assessment of the superannuation guarantee charge . This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Reason for Decision: Section 16 of the SGAA states that the SGC imposed on an employer's superannuation guarantee shortfall for a year must be paid by the employer. This shortfall is defined under section 17 of the SGAA. The shortfall consists of three components. | Where a shortfall exists, there is no discretion in the SGAA for the Commissioner to remit or waive any part of the SGC. This was considered in Jarra Hills Pty Ltd v. FC of T 37 ATR 1022, 97 ATC 2132. It was held that there was no provision in the legislation giving a discretion to either the Commissioner or Tribunal to reduce or remit the SGC. Therefore the Commissioner has no power to remit any components of the SGC. | Keywords Superannuation guarantee charge Superannuation guarantee penalties Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2008/26", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation Guarantee: liability of company for superannuation guarantee charge in respect of a dividend paid by a liquidator for unpaid salary or wages", "Issue": "Where a dividend is paid out of the assets of a company in liquidation by the liquidator to a former employee of the company in respect of a debt for unpaid salary or wages owed by that company to the former employee, is the company in liquidation liable to the superannuation guarantee charge (SGC) under the Superannuation Guarantee (Administration) Act 1992 (SGAA) where the liquidator does not make superannuation contributions in respect of the dividend payment by the relevant quarterly cut-off date?", "Decision": "Yes. Where a dividend is paid out of the assets of the company in liquidation by the liquidator to a former employee of the company in respect of a debt for unpaid salary or wages owed by that company to the former employee, the company in liquidation is liable to the SGC under the SGAA where the liquidator does not make superannuation contributions in respect of the dividend payment by the relevant quarterly cut-off date.", "Facts": "The company was placed into liquidation. The effect of the liquidation was the termination of the employment of an employee of the taxpayer. At the date of liquidation, the taxpayer owed the employee an amount for unpaid wages. The employee lodged a proof of debt with the liquidators of the company for the wages owed. The proof of debt was admitted by the liquidators. On the same day a cheque was drawn on account of the company (in liquidation) for the wages payable to the employee. The payment was made in partial payment of the liability of the company to pay the wages owing to the employee at the date of liquidation. It was calculated on a pro rata basis, having regard to other liabilities of the company. No superannuation contributions were made in respect of the dividend payment by the liquidators.", "Reasons_for_Decision": "Summary: An employer will have a liability to the SGC for a quarter under the SGAA if they do not make sufficient superannuation contributions for the benefit of their eligible employees to a complying superannuation fund or retirement savings account by the relevant quarterly cut-off dates. The SGC is imposed on an employer's superannuation guarantee shortfall (SG shortfall) for a quarter. Subsection 19(1) of the SGAA sets out the formula for the calculation of an employer's individual SG shortfall for an employee for a quarter. The shortfall is calculated by reference to the total salary or wages paid by the employer to the employee for the quarter. If an employer makes a payment to an employee which does not constitute salary or wages or if the payment does constitute salary or wages but it is not paid by the employer (or is not paid 'on behalf of' the employer within the meaning of subsection 6(3) of the SGAA) to the employee, subsection 19(1) of the SGAA will have no application and the employer will not have a liability to the SGC. The definition of salary or wages for the purposes of the SGAA is contained in section 11. A payment that falls within the ordinary meaning of salary or wages will constitute 'salary or wages' under section 11. If the payment does not fall within the ordinary meaning of the term, it will constitute 'salary or wages' for the purposes of the SGAA if the payment falls within the extended definition of 'salary or wages' in paragraphs 11(1)(a) to (e) of the SGAA. In Deputy Commissioner of Taxation v. Applied Design Development Pty Ltd (In Liq) [2002] FCA 205; (2002) 2002 ATC 4193; (2002) 49 ATR 196 ( Applied Design ), the Federal Court held that a priority payment, made under paragraph 556(1)(e) of the Corporations Act 2001 (Corporations Act) to a former employee who had proved a debt for wages, retained its character as salary or wages within the ordinary meaning of that term and was therefore salary or wages for the purposes of section 12-35 of Schedule 1 to the Taxation Administration Act 1953 . The Court looked to the fact that the consideration for the payment (of the dividend) was the services rendered by the former employee to the company prior to its liquidation. It was held that the nature of the payment remained unaltered by the liquidation process. Since the definition of salary or wages in the SGAA relies in part on its common law meaning, the payment of a dividend would also constitute salary or wages for the purposes of the SGAA. Subsection 12(1) of the SGAA provides that the terms 'employer' and 'employee' have their ordinary (that is, common law) meanings. For the purposes of the SGAA, subsections 12(2) to (11) expand the meaning of those terms and make particular provision to avoid doubt as to the status of certain persons. Further, section 15B of the SGAA ensures that a former employee is treated as an employee of their former employer for the purposes of calculating the individual SG shortfall under subsection 19(1) of the SGAA. Normally, where a company has entered into liquidation, the contract of employment between an employee and the company being wound up is terminated on the commencement of the winding up (section 558 of the Corporations Act; Re General Rolling Stock Co; Chapman's Case (1866) LR 1 Eq 346). As a result, the employer/employee relationship between the company and the employee ceases to exist once a winding up order has been made. A liquidator, in applying the company's property in discharging the company's liabilities, is acting as agent for the company - see Re Farrow's Bank Ltd [1921] 2 Ch 164 and Linter Textiles Australia Ltd (in liquidation) v. Commissioner of Taxation [2002] FCA 1089; (2002) 2002 ATC 4785; (2002) 50 ATR 548. Accordingly, any act done by the liquidator as an agent of the company is an act of the company. Therefore, where a liquidator pays a dividend to a former employee in respect of a debt for unpaid salary or wages, this is an act of the company. In terms of the SGAA, this means that it is a payment of salary or wages 'by' the employer to the employee (taking into account the operation of section 15B of the SGAA). Since the dividend payment constitutes salary or wages for the purposes of the SGAA and is paid by the employer to the employee, the company in the circumstances of this case does have a liability for the individual SG shortfall in respect of the employee under subsection 19(1) of the SGAA and consequently, the SGC, as sufficient superannuation contributions were not made by the liquidator, in respect of the payment, by the relevant quarterly cut-off date. The company can avoid a liability to the SGC by the liquidator making the required superannuation contributions to a complying superannuation fund or retirement savings account by the cut off date for the quarter in which the dividend is paid to the former employee.", "Date_of_Decision": "23 January 2008", "Year_of_Income": "Year ended 30 June 2008", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 subsection 6(3) section 11 paragraph 11(1)(a) paragraph 11(1)(b) paragraph 11(1)(ba) paragraph 11(1)(c) paragraph 11(1)(d) paragraph 11(1)(e) subsection 12(1) subsection 12(2) subsection 12(3) subsection 12(4) subsection 12(5) subsection 12(6) subsection 12(7) subsection 12(8) subsection 12(9) subsection 12(9A) subsection 12(10) subsection 12(11) section 15B subsection 19(1)", "Related_Public_Rulings_and_Determinations": "", "Related_ATO_Interpretative_Decisions": "ATO ID 2008/25 | ATO ID 2008/27 | ATO ID 2008/28", "Subject_References": "Employees Liquidation Superannuation guarantee charge Superannuation guarantee shortfalls", "Case_References": "Deputy Commissioner of Taxation v. Applied Design Development Pty Ltd (In Liq) [2002] FCA 205 (2002) 2002 ATC 4193 (2002) 49 ATR 196", "Other_References": "", "Business_Line": "Superannuation", "Is_Archived": true, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID200826/00001", "Unmatched_Content": "ATO ID 2008/26 is withdrawn with effect from 1 July 2026. It continues to apply to periods ending before this day. From 1 July 2026, the provisions of the Superannuation Guarantee (Administration) Act 1992 addressed in the Decision will be substantially amended by the Treasury Laws Amendment (Payday Superannuation) Act 2025 . To the extent that the views set out in the Decision remain relevant to the amended legislation, they have been incorporated into draft Law Companion Ruling LCR 2026/D1 Payday Super: qualifying earnings . This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Keywords Employees Liquidation Superannuation guarantee charge Superannuation guarantee shortfalls"}
{"ATO_ID_Number": "ATO ID 2015/24", "Status": "CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision. This ATOID provides you with the following level of protection: If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.", "Title": "Superannuation guarantee: work done outside Australia", "Issue": "Is work done at sea at a location which satisfies all of the following: 'work done outside Australia' for the purpose of subsection 27(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?", "Decision": "Yes. Work done at sea at such a location is 'work done outside Australia' for the purpose of subsection 27(1) of the SGAA.", "Facts": "The employee is not a resident of Australia. The employee is employed by a company which is not a resident of Australia. The employee's work is done at sea more than 12 nautical miles from the territorial sea baseline of Australia. The employee's work is done at sea more than 12 nautical miles from the territorial sea baseline of following Territories: The employee's work is not done in the JPDA or an offshore area for the purpose of the Offshore Petroleum and Greenhouse Gas Storage Act 2006. The salary or wages paid to the employee do not relate to employment covered by a certificate under section 15C of the SGAA (concerning International Social Security Agreements).", "Reasons_for_Decision": "Summary: Subsection 27(1) of the SGAA provides that certain salary or wages are not to be taken into account for the purpose of making a calculation under section 19 of the SGAA (concerning individual superannuation guarantee shortfalls). The expression 'work done outside Australia' is used in paragraphs 27(1)(b) and 27(1)(c) of the SGAA. Paragraph 27(1)(b) of the SGAA relevantly refers to: (b) salary or wages paid to an employee who is not a resident of Australia for work done outside Australia (except to the extent that the salary or wages relate to employment covered by a certificate under section 15C) | Detailed Reasoning - What constitutes 'Australia' in the relevant context?: Under section 4 of the SGAA the application of that Act extends to every external Territory referred to in the definition of Australia. Australia, when used in a geographical sense, is defined in section 6(1) of the SGAA, as having the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). The ITAA 1997, in section 960-505 defines Australia as: Territories (1) Australia, when used in a geographical sense, includes each of the following: (a) Norfolk Island; (b) the Coral Sea Islands Territory; (c) the Territory of Ashmore and Cartier Islands; (d) the Territory of Christmas Island; (e) the Territory of Cocos (Keeling) Islands; (f) the Territory of Heard Island and the McDonald Islands. A note to the above definition in section 960-505 of the ITAA 1997 refers the reader to section 15B of the Acts Interpretation Act 1901 (AIA). Subsection 15B(1) of the AIA provides: An Act is taken to have effect in, and in relation to, the coastal sea of Australia as if that coastal sea were part of Australia. Subsection 15B(2) of the AIA provides: A reference in an Act to Australia, or to the Commonwealth, is taken to include a reference to the coastal sea of Australia. Subsection 15B(3) of the AIA provides: An Act that is in force in an external Territory is taken to have effect in, and in relation to, the coastal sea of the Territory as if that coastal sea were part of the Territory. Subsection 15B(3A) of the AIA provides: A reference in an Act to all or any of the external Territories (whether or not one or more particular Territories are referred to) is taken to include a reference to the coastal sea of any Territory to which the reference relates. Accordingly, 'Australia' in the phrase 'work done outside Australia' as used in subsection 27(1) of the SGAA includes the coastal sea of Australia and the coastal sea of each of its Territories. Note that prior to 1 July 2016, the SGAA included sub-paragraphs 27(1)(b)(ii) and 27(1)(c)(ii) of the SGAA, which stated that when the work done in Norfolk Island is undertaken by an employee who is a resident of Norfolk Island or for an employer who is a resident of Norfolk Island, superannuation guarantee obligations will not apply in respect of salary or wages paid to the employee for that work. [1] | Detailed Reasoning - Meaning of 'coastal sea': Paragraph 15B(4)(a) of the AIA provides that, in section 15B, 'coastal sea' in relation to Australia, means: and includes the airspace over, and the sea-bed and subsoil beneath, any such sea. Similarly, paragraph 15B(4)(b) of the AIA provides that, in section 15B, 'coastal sea' in relation to an external Territory, means: and includes the airspace over, and the sea-bed and subsoil beneath, any such sea. Section 2B of the AIA defines 'territorial sea' as having the same meaning as in the Seas and Submerged Lands Act 1973 (SSLA). Subsection 3(1) of the SSLA, in part, defines 'territorial sea' as having the same meaning as in Articles 3 and 4 of the United Nations Convention on the Law of the Sea held at Montego Bay on 10 December 1982 (the Convention). Articles 3 and 4 of Section 2 of Part II of the Convention (as contained in the Schedule to the SSLA) read respectively: Breadth of the territorial sea Every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention. Outer limit of the territorial sea The outer limit of the territorial sea is the line every point of which is at a distance from the nearest point of the baseline equal to the breadth of the territorial sea. Consistent with the right set out in Article 3, and pursuant to a power to do so set out in section 7 of the SSLA, the Governor-General made a proclamation declaring the outer limit of the territorial sea to be 12 nautical miles seaward of that territorial sea baseline (see Proclamation in Gazette No. S 297, Tuesday 13 November 1990). In some cases, the outer limit of the territorial sea is less than 12 nautical miles from the territorial sea baseline, due to the close proximity of two countries e.g. Australia and Papua New Guinea (Australian Treaty Series 1985 No 4 - Treaty between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, including the area known as Torres Strait, and Related Matters). | Detailed Reasoning - Offshore areas: The extension of the definition of Australia in subsection 960-505(2) of the ITAA 1997, to the offshore areas of the JPDA and the offshore area for the purposes of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 provides that the SGAA has effect as if these offshore areas were part of Australia. A note to the definition in section 960-505(2) indicates that the offshore areas include all things located in those areas, including all installations and structures such as oil and gas rigs. These areas also extend to the airspace over, and the sea-bed and subsoil beneath those areas. A further note to section 950-505(2), makes it clear that the offshore area and the JPDA include the exclusive economic zone (EEZ) and the continental shelf of Australia (continental shelf). The SSLA defines the terms 'exclusive economic zone' and 'continental shelf' as having the same meaning as the relevant provisions of the Convention. The outer limit of the EEZ is 200 nautical miles seaward of that of the territorial sea baselines (see Proclamation in Gazette No. S 290, Friday 29 July 1994). The continental shelf is largely coextensive with the EEZ although the continental shelf extends beyond 200 nautical miles in some areas. The outer limits of both the EEZ and continental shelf are less than 200 nautical miles in some areas (for example between Australia and Papua New Guinea where they are limited by treaty). Paragraph 27(1)(ca) of the SGAA also states that when the work in the JPDA is undertaken by an employee who is not an Australian resident, superannuation guarantee obligations will not apply in respect of salary or wages paid to the employee for that work. | Detailed Reasoning - Conclusion: In the phrase 'work done outside Australia' as used in subsection 27(1) of the SGAA, 'Australia' is used in a geographical sense and extends to the outer limits of Australia's 'coastal sea'. Further, 'Australia' in that phrase also includes the territories of Norfolk Island, the Coral Sea Territory, the Territory of Ashmore and Cartier Islands, the Territory of Cocos (Keeling) Islands, the Territory of Christmas Island, the Territory of Heard Island and the McDonald Islands and the 'coastal sea' of each of those Territories. It also includes the offshore areas. Work done outside those areas is 'work done outside of Australia' for the purposes of subsection 27(1) of the SGAA. As a result, the salary or wages paid to the employee in this case is for 'work done outside of Australia' and so are not taken into account for the purpose of making a calculation under section 19 of the SGAA, due to the operation of paragraph 27(1)(b) of the SGAA.", "Date_of_Decision": "29 July 2015", "Year_of_Income": "For the financial year ending 30 June 2016 and later years", "Legislative_References": "Superannuation Guarantee (Administration) Act 1992 section 4 section 6 section 15C section 19 section 27 subsection 27(1) paragraph 27(1)(b) paragraph 27(1)(c) paragraph 27(1)(ca)", "Related_Public_Rulings_and_Determinations": "Superannuation Guarantee Ruling SGR 2009/2", "Related_ATO_Interpretative_Decisions": "ATO ID 2003/907 | ATO ID 2010/46", "Subject_References": "Australian offshore areas Superannuation guarantee charge Superannuation guarantee scheme", "Case_References": "", "Other_References": "Explanatory Memorandum to the Petroleum (Timor Sea Treaty) (Consequential Amendments) Bill 2003 United Nations Convention on the Law of the Sea (Montego Bay, 10 December 1982) Australian Treaty Series 1985 No 4 - Treaty between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, including the area known as Torres Strait, and Related Matters Proclamation in Gazette No. S 297, Tuesday 13 November 1990 - outer limit of territorial sea Proclamation in Gazette No. S 290, Friday 29 July 1994 - outer limit of exclusive economic zone", "Business_Line": "Superannuation", "Is_Archived": true, "Source_URL": "https://www.ato.gov.au/law/view/document?docid=AID/AID201524/00001", "Unmatched_Content": "ATO ID 2015/24 is withdrawn with effect from 1 July 2026. It continues to apply to periods ending before this day. From 1 July 2026, section 27 of the Superannuation Guarantee (Administration) Act 1992 , which is the subject of this Decision, will be repealed and the relevant exclusions moved to the Superannuation Guarantee (Administration) Regulations 2018 . To the extent that the views set out in this Decision remain relevant to the amended legislation and regulations, they have been incorporated into draft Law Companion Ruling LCR 2026/D1 Payday Super: qualifying earnings . This document incorporates revisions made since original publication. View its history and amending notices, if applicable. | Clarification of offshore areas | Clarified areas which are within Australia. | Updated financial year to '2016'. | Related Public Rulings (including Determinations) Superannuation Guarantee Ruling SGR 2009/2 | Keywords Australian offshore areas Superannuation guarantee charge Superannuation guarantee scheme"}